TIDMUKOG
RNS Number : 2303Q
UK Oil & Gas Investments PLC
26 February 2016
UK Oil & Gas Investments PLC
("UKOG" or the "Company")
Final Results
For the year ended 30 September 2015
UK Oil & Gas Investments PLC (London AIM and ISDX: UKOG)
announces its audited results for the year ended 30 September 2015.
The full results will shortly be made available on the Company's
website: www.ukogplc.com, and are intended to be posted to
shareholders at the end of next week.
For further information, please contact:
UK Oil & Gas Investments PLC
Stephen Sanderson / Jason Berry Tel: 020 7440 0640
WH Ireland (Nominated Adviser and Broker)
James Joyce / Mark Leonard Tel: 020 7220 1666
Square 1 Consulting (Public Relations)
David Bick / Brian Alexander Tel: 020 7929 5599
CHAIRMAN'S STATEMENT (INCORPORATING THE STRATEGIC REPORT)
FOR THE YEAR ENDED 30 SEPTEMBER 2015
I am pleased to present the annual report and accounts for UK
Oil & Gas Investments PLC and its subsidiaries ("Group" or
"UKOG") for the year ended 30 September 2015. Some of the key
highlights are summarised below:
-- Truly ground-breaking initial results from Horse Hill. UKOG
will now seek new regulatory permissions to conduct a long term
production test.
-- Farmed in to the highly-promising Holmwood licence for an
initial 20% interest, increasing to 30%.
-- The Oil and Gas Authority offered UKOG and its partners the
PEDL331 Isle of Wight onshore licence.
-- UKOG completed its acquisition of three UK subsidiaries of Northern Petroleum Plc.
-- UKOG currently has 21.3 million barrels of net attributable
P50 Contingent and Prospective Resources, not including Horse Hill
nor the Isle of Wight.
This has been a significant period for UKOG where our key
investments and assets have shown substantial progress towards
realising their full economic potential. Much of the progress has
come from the intense effort by the technical team and the related
investment in cutting edge science and technology by our investee
companies. These technical efforts also provided the basis for key
further acquisitions during the period.
UKOG further increased its interest in the Weald Basin Horse
Hill licences through further acquisitions of shares in the Horse
Hill operator, Horse Hill Developments Ltd ("HHDL"). Subsequent to
the period end we announced that regulatory consents were in place
in order to carry out flow testing of the Horse Hill-1 ("HH-1") oil
discovery. Testing of three zones in the HH-1 well commenced on 08
February 2016.
Of great significance to UKOG is the recent news that the
initial HH-1 flow test within the Lower Kimmeridge limestone was a
success beyond our expectations. The sustained natural flow rates
exceeding 450 barrels per day, of dry, 40 degrees API oil, were
obtained from the Lower Kimmeridge limestone over a 3-day period
without significant pressure depletion. I had the privilege to
witness the first two 170-barrel road tanker oil-exports leave for
the refinery, a major milestone for UKOG. The far higher than
expected sustained natural flow rates demonstrate that commercial
flow rates are achievable from this rock even using a vertical
well.
I should stress that this was a truly ground-breaking operation,
as this was the first ever test of this rock unit in the United
Kingdom. The results have proven our new geological concept that
light, sweet, moveable oil exists within the Kimmeridge section in
the Weald Basin. This update provides further confidence in the
estimates of possible recovery factors from the significant tight
oil in place ("OIP") within the Kimmeridge of our licences,
previously reported from Nutech and Schlumberger's studies
undertaken last year.
Simply put, the flow test accelerates the Horse Hill Kimmeridge
project and the Kimmeridge within our other interests in the Weald
Basin, from geological concept to a potentially viable commercial
project.
HHDL now plan to obtain new regulatory permissions to return as
soon as practicable to the HH-1 site to conduct a long term
production test. This will likely utilise a horizontal side-track
well to potentially further improve the flow rates seen to date,
and to establish the likely volume of recoverable oil per well.
As a result of the findings of the HH-1 well and the
comprehensive technical studies carried out by experts such as
Nutech and Schlumberger, UKOG's investee companies are in a
vanguard position in developing the Kimmeridge play over our
licences and the wider Weald Basin.
In order to exploit the knowledge gained and commercial
advantage from HH-1, UKOG farmed in to the highly promising
Holmwood licence, immediately to the west of Horse Hill, for an
initial 20% interest, increasing this interest to 30% after the
reporting period. This asset now forms a further key piece of
UKOG's core Weald Kimmeridge and Portland growth strategy. The
acreage contains a Horse Hill Portland look-alike prospect plus the
continuation of the now proven Kimmeridge limestone oil play. We
will use our key recent knowledge to maximise the benefit from the
Holmwood-1 exploration well which is planned to be drilled in late
2016 or early 2017.
During the reporting period UKOG applied for one large licence
on the Isle of Wight which contained similar potential and plays to
our existing P1916 licence and core assets in the Weald. The Oil
and Gas Authority ("OGA") offered UKOG and its partners the PEDL331
licence onshore Isle of Wight after the reporting period in
December 2015.
UKOG had proactively commissioned a recoverable resources
analysis of PEDL331 prior to the licence offer and was thus able to
report in January 2016 that the licence contained a potentially
significant undeveloped oil discovery plus two look-alike undrilled
conventional oil prospects. The addition of this licence is very
material for the Group as it increased UKOG's net P50 Contingent
Resources within conventional reservoirs by a factor of three to
almost 14 million barrels recoverable ("MMBBL"). The Group's
overall net recoverable resources increased five-fold to 21.3
million barrels with the addition of the licence.
Early in the reporting period, UKOG completed its acquisition of
three UK subsidiaries of Northern Petroleum Plc ("NOP") and has
further consolidated these investments during the reporting
period.
The Markwells Wood oil discovery, acquired in the NOP
transaction, was the subject of the Group's first operated
Competent Person's Report in September 2015, adding substantive net
Contingent Resources to our recoverable resource base. More
importantly, we are now preparing a Field Development Plan and the
necessary regulatory permissions in order to develop the field
utilising horizontal wells and new non-massive fracking based
reservoir stimulation technology that does not involve massive
hydraulic fracturing ("fracking").
As of 1 January 2014, together with UKOG's indirect interest in
the Brockham and Lidsey oil fields, UKOG had estimated net
attributable P50 reserves of 91,954 barrels of oil (see Table 1
below).
At the time of writing, UKOG also has 21.3 million barrels
("MMbbl") of net attributable P50 Contingent and Prospective
Resources (see Table 2 below). Table 2 does not include any net
resources for Horse Hill, pending the completion of flow testing,
nor does it include net resources for the Isle of Wight P1916 M
prospect.
Gross unrisked OIP for UKOG's licence interests are shown in
Table 3. These OIP volumes are dominated by the tight OIP estimated
for the Horse Hill licences. Two independent estimates of OIP, of
similar magnitudes, were completed by specialist companies Nutech
and Schlumberger. UKOG is now currently completing flow testing of
three separate intervals within the Horse Hill-1 oil discovery
well.
UKOG's UK EXPLORATION, DEVELOPMENT AND PRODUCTION PORTFOLIO
Note: As noted in the Group's previous announcements, all
estimated OIP volumes in this report announcement should not be
construed as Contingent Resources, Prospective Resources or
Reserves.
Horse Hill Developments Limited ("HHDL"), Licences PEDL137 and
PEDL246, Weald Basin
-- Preliminary results of the HH-1 well were announced on 24
October 2014, 5 November 2014 and 17 December 2014, stating that an
oil discovery was made in the Upper Portland Sandstone, with oil
shows and elevated gas readings in the underlying Kimmeridge shales
and limestones.
-- In March 2015, in two separate transactions, UKOG increased
its direct interest in HHDL by a further 10%, from 20% to 30% for
total consideration of GBP932,000 (in cash and shares). Together
with UKOG's indirect interest in HHDL via Angus Energy, UKOG's
economic interest in the Horse Hill licences is now 19.96%.
-- On 18 March 2015 and 9 April 2015, UKOG announced that
further well analysis, by UKOG and by Nutech had determined that
the well data implied an OIP volume of 158 MMbbl per square mile
within a 653 feet aggregate pay section, primarily within three
limestones and interbedded shales of the Kimmeridge, and the shales
of the Oxford and Lias sections. Approximately 72% of OIP, or 114
MMbbl, lies within the Upper Jurassic Kimmeridge interbedded
limestone and shale sequence.
-- On 13 May 2015, UKOG announced that the OGA had granted a
one-year extension to the PEDL137 exploration period to 30
September 2016. The PEDL137 licence provides for a potential
Production Period of 19 years.
-- On 5 June 2015, UKOG announced that Schlumberger's
independent review of OIP at the HH-1 discovery is 271.4 MMbbl per
square mile.
(MORE TO FOLLOW) Dow Jones Newswires
February 26, 2016 02:01 ET (07:01 GMT)
-- On 18 June 2015, UKOG announced that Nutech calculated that
the total Jurassic shale plus tight conventional reservoir section
contained in the 55 square miles of UKOG's two Horse Hill licences
(PEDL137 and PEDL246) is a Best Estimate, or P50, OIP of 9,245
MMbbl. The most significant OIP within the Jurassic section is
contained within the shales and tight conventional reservoir
limestone sequences of the Kimmeridge, with a calculated Best
Estimate, or P50, total Kimmeridge OIP of 5,230 MMbbl.
-- On 26 August, UKOG announced that Schlumberger calculated a
mean OIP in the two Horse Hill licences of 10,993 MMbbl.
-- On 5(th) October, UKOG announced the results of a conceptual
Weald Kimmeridge Limestone tight oil development study by Xodus.
This showed that future developments could respect the rural beauty
and way of life of the locality by putting wellheads and pumps
below ground level and controlling production to minimise HGV
impact on local road infrastructure.
-- On 21 October 2015, UKOG announced that Nutech had calculated
a gross tight OIP of 15,700 MMbbl in UKOG's eight licences in the
Weald Basin. Nutech calculated that 124,000 MMbbl of tight OIP was
contained in their 1,261 square mile study area in the Weald
Basin.
-- On 4 January 2016, UKOG announced that all regulatory
consents were in place for HHDL to carry out flow testing of the
Horse Hill-1 oil discovery.
-- On 16 and 17 February 2016, UKOG announced the results of two
flow test on the Lower Kimmeridge Limestone;
-- Flow commenced at around 10.00am GMT on 15 February at an
initial instantaneous rate in excess of 700 barrels per day using a
1-inch choke, in an approximate mix of 50:50 oil to water. The well
was then choked back to 32/64 inches resulting in a steady early
oil rate in excess of 463 barrels of oil per day over a further
7.3-hour period, in an approximate mix of over 99% oil and less
than 1% water.
-- UKOG announced that flow re-commenced at around 07.45 am GMT
on 16 February at a steady oil rate in excess of 456 barrels of dry
oil per day over a further 9.5-hour period using a smaller
28/64-inch choke in order to further stabilise the flow.
-- Flow test operations will now move to the shallower Upper
Kimmeridge limestone and Portland sandstone zones at approximately
840 and 615 metres below ground level, respectively, once the Lower
Kimmeridge testing is completed.
Holmwood Licence (PEDL143)
-- On 29 June 2015, UKOG announced that it had executed a
farm-in for a 20% interest in the Holmwood licence.
-- The Holmwood licence lies immediately west of the Horse Hill
licence PEDL137, to the south of the Brockham oil field. UKOG sees
exploration prospectivity very similar to Horse Hill in the
Holmwood licence. The licence contains a well define Portland
sandstone look-alike to the Horse Hill and Collendean Farm oil
discoveries. In addition, Nutech calculated that the Kimmeridge
limestone play, now proven by HH-1, extends over the entire licence
together with the underlying Kimmeridge, Oxford Clay and Lias
limestone and shale tight oil plays. The Holmwood well will test
the Portland and Kimmeridge objectives and be drilled in the late
winter of 2016/17.
-- On 23 September 2015, UKOG announced that Surrey County
Council had given planning permission for the drilling of the
Holmwood-1 exploration well.
-- On 23 November 2015, UKOG announced that it had executed a
second farm-in to Holmwood, bringing UKOG's licence interest to
30%.
Isle of Wight, P1916 and PEDL331
-- On 28 October 2014, UKOG jointly applied for an approximately
200 km(2) onshore Isle of Wight licence (UKOG 65%), adjacent to the
offshore Isle of Wight licence (P1916), proposing a firm
exploration well and seismic, as part of the UK's 14(th) Landward
Licence Round ("14(th) Round").
-- After the reporting period, in December 2015, OGA offered
this onshore Isle of Wight licence (PEDL331) to UKOG and its
co-venturers.
-- In January 2016, UKOG announced the results of an indpendent
volumetric analysis by Xodus Group ("Xodus") of the Arreton-2 oil
discovery ("Arreton Main") and the adjacent low-risk Arreton North
and South Prospects ("Arreton Prospects"). Gross P50 OIP of 219
MMbbl was estimated for Arreton Main and the Arreton Prospects.
Xodus estimated net P50 Contingent Resources of 10.2 MMbbl for
Arreton Main, and net P50 Prospective Resources of 6.8 MMbbl for
the Arreton Prospects.
-- The offer of PEDL 331 will permit the M prospect to be
drilled from an onshore location. Preliminary meetings to discuss
the M prospect and Arreton-3 well sites and regulatory permitting
were held with the Isle of Wight Local Planning Authority in summer
2015.
-- On 25 March 2015, UKOG announced that within P1916, the main
prospective Portland limestone and Triassic Sherwood sandstone
reservoir objectives in the undrilled "M Prospect" contained
potential unrisked OIP volumes of 40 MMbbl and 76.5 MMbbl
respectively. A gas only case for the Triassic Sherwood estimated a
potential gross gas in place ("GIP") volume of 197 billion standard
cubic feet of gas ("bcf"). An independent review of recoverable
prospective resources by Xodus is nearing completion.
-- On 15 June 2015, the Board announced a one-year extension to
the P1916 offshore Isle of Wight licence.
Markwells Wood Oil Field and Baxters Copse Oil Discovery
-- As announced in February and March 2015, UKOG, via two
separate transactions, increased its working interest in the
PEDL126 Markwells Wood to 100%.
-- On 13 May 2015, UKOG announced that OGA had granted one-year
extensions to the exploration period of the PEDL126 Markwells Wood
and PEDL233 Baxters Copse licences.
-- On 14 September 2015, UKOG announced that a Competent Person
Report ("CPR") by Xodus had calculated P50 net Contingent Resources
for the Markwells Wood oil field of 1.25 MMbbl.
-- On 16 October 2015, UKOG announced that the Markwells Wood
Planning Permission had been extended until 30 September 2016.
-- The commercial prospectivity of the Baxters Copse oil
discovery is still under technical evaluation by the Company and
the operator IGas Energy Plc ("IGas").
UKOG (GB) Limited, UKOG Weald Limited and UKOG Solent Limited-
Horndean and Avington Producing Oil Fields
-- UKOG completed its Northern Petroleum Plc ("NOP") acquisition on 17 October 2014.
-- The NOP companies were re-named UKOG (GB) Limited, UKOG Weald
Limited and UKOG Solent Limited.
-- Five UK licences were acquired from NOP, four onshore and one
offshore, all located in the South of England.
-- Four assets are in the Weald Basin, one in the analogous Wessex-Purbeck-Wight Basin.
-- The assets include the Horndean onshore producing oil field
(UKOG (GB) interest 10%) and Avington onshore producing oil field
(UKOG (GB) interest 5%), an offshore Isle of Wight exploration
licence (UKOG Solent interest 77.5%) and the Baxters Copse (UKOG
Weald interest 50%) and Markwells Wood (UKOG (GB) interest 100%)
onshore Jurassic Great Oolite oil discoveries.
-- Horndean and Avington continued stable oil production throughout the period.
Lidsey and Brockham Producing Oil Fields: Angus Energy Limited
("Angus Energy")
-- UKOG has a 6% share ownership of Angus Energy, which operates
and produces oil from both the Lidsey and Brockham oil fields in
the Weald Basin.
-- The Brockham field is the closest analogous Portland
sandstone producing oil field to the Horse Hill-1 Portland
sandstone discovery. Lidsey produces from the same Great Oolite
limestone reservoir as UKOG's Horndean and Avington oil fields and
the Markwells Wood and Baxter's Copse oil discoveries.
-- Angus Energy is a 12% owner of HHDL. Angus Energy reduced its
ownership in HHDL down from 40% during the reporting period and
subsequent to the year end reduced its ownership from 17% to
12%.
-- Angus Energy plans to drill a side-track at Brockham and a new well at Lidsey.
NEXT PERIOD
In the next twelve-month period the Directors expect to see a
number of positive developments for the Group.
-- HHDL expects to complete the two remaining flow tests of the
Horse Hill well operation in the Upper Kimmeridge limestone and
Portland sandstone. We plan to return to the well to conduct a long
term production test and horizontal sidetrack well, to establish
the most likely expected recoverable volume of oil from the well.
Preparations are now underway to submit the necessary documentation
to acquire the regulatory permissions to proceed towards further
appraisal and development of one or more zones of the well. These
permissions will include the capability for additional phases of
development drilling.
-- UKOG is well advanced in the construction of a Field
Development Plan for the Markwells Wood oil discovery (UKOG 100%
and Operator). This will likely be completed and submitted to the
OGA by June 2016. Planning permission will also be sought from the
South Downs National Park Authority before end 2016.
-- UKOG will finalise the onshore Isle of Wight licence
(PEDL331, UKOG 65%) with OGA, following the 14th Round award.
-- UKOG will continue with well design and preliminary
regulatory steps necessary to drill an appraisal well on the
Arreton Main oil discovery in PEDL331 (UKOG 65%) and an exploration
well on the M Prospect in P1916 offshore Isle of Wight (UKOG 77.5%
and Operator).
-- UKOG is considering drilling an appraisal well on the Baxters
Copse discovery (IGas 50% Operator, UKOG 50%).
-- New production wells are being planned on two of Angus
Energy's producing licences (Lidsey and Brockham).
-- UKOG plans to continue to expand its licence position in the
UK onshore, particularly in its core Weald Basin tight-oil plays,
with additional exploration, development and production
investments. The UK onshore continues to be an attractive buyer's
market for assets given the Company's cash position.
(MORE TO FOLLOW) Dow Jones Newswires
February 26, 2016 02:01 ET (07:01 GMT)
Your Board of Directors will continue to seek out further
attractive investments in line with the UKOG's investment
strategy.
UKOG RESERVES, RESOURCES AND OIL IN PLACE
Table 1 shows gross and net reserves (effective 1 January 2014)
for UKOG's four producing fields
Table 1: UKOG's Producing Fields, Gross and Net Reserves
Asset Licence UKOG's Gross Reserves Net Reserves Source,
Interest (MMbbl) (bbl) (1) Date
---------- --------- --------- ------------------------- -------------------------- ----------------
P90 P50 P10 P90 P50 P10
---------- --------- --------- ------- ------- ------- ------- ------- -------- ----------------
IGas/Senergy,
Horndean PL211 10% 0.717 0.856 1.143 71,700 85,600 114,300 July 2014
---------- --------- --------- ------- ------- ------- ------- ------- -------- ----------------
IGas/Senergy,
Avington PEDL070 5% 0.040 0.063 0.125 2,000 3,150 6,250 July 2014
---------- --------- --------- ------- ------- ------- ------- ------- -------- ----------------
Angus/RPS,
March
Lidsey PL241 4.2% 0.0127 0.0360 0.0547 533 1,512 2,297 2014
---------- --------- --------- ------- ------- ------- ------- ------- -------- ----------------
Angus/RPS,
March
Brockham PL234 3.6% 0.0179 0.0470 0.1015 644 1,692 3,654 2014
--------- --------- ------- ------- ------- ------- ------- -------- ----------------
TOTALS 74,878 91,954 126,501
--------------------- ------- ------- --------
Note:
1. UKOG net share. NB:
units are barrels, not
MMbbl.
Table 2 shows unrisked gross and net resources for UKOG's four
oil discoveries and three exploration prospects.
Table 2: UKOG's Unrisked Gross and Net Resources
Asset Licence UKOG's Gross Resources Net Resources Source,
Interest (MMbbl) (MMbbl) (1) Date
---------------- ---------- ---------- -------------------- ---------------------- --------------
P90 P50 P10 P90 P50 P10
---------------- --------- ---------- ----- ----- ------ ------ ------ ------ --------------
Xodus,
Markwells September
Wood (2) PEDL126 100% 0.63 1.25 2.71 0.63 1.25 2.71 2015
---------------- ---------- ---------- ----- ----- ------ ------ ------ ------ --------------
Holmwood Europa/ERCE,
(3) PEDL143 20% 0.81 3.36 12.51 0.16 0.67 2.50 June 2012
---------------- ---------- ---------- ----- ----- ------ ------ ------ ------ --------------
Baxters IGas/Senergy,
Copse (2) PEDL233 50% 3.11 4.67 6.23 1.56 2.34 3.11 July 2014
---------------- ---------- ---------- ----- ----- ------ ------ ------ ------ --------------
Xodus,
Arreton January
Main (2) PEDL331 65% 9.9 15.7 24.10 6.4 10.2 15.7 2016
------ ------ ------
Arreton Xodus,
Prospects January
(3) PEDL331 65% 4.0 10.5 21.60 2.6 6.8 14.0 2016
------ ------ ------
Angus/RPS,
Lidsey (2) PL241 4.2% 0.20 0.41 0.62 0.01 0.02 0.03 March 2014
---------------- ---------- ---------- ----- ----- ------ ------ ------ ------ --------------
TOTALS 11.39 21.30 38.06
---------------------------- ------ ------ ------
Note:
1. UKOG net
share.
2. Contingent
Resources.
3. Prospective
Resources.
Table 3 shows unrisked gross OIP for all of UKOG's current 11
licences.
Table 3: UKOG Unrisked Gross OIP
Asset Licence UKOG's OIP (MMbbl) Source, Date
Interest or GIIP (bcf)
---------------- ----------- ---------- -------------------------- ------------------
Low Best High
---------------- ---------- ---------- ------- -------- ------- -----------------
Offshore
Isle of Wight
- M Prospect UKOG, March
Oil P1916 77.5% 37.4 106.6 239.2 2015
------------------
Offshore
Isle of Wight
- M Prospect UKOG, March
Gas (1) P1916 77.5% 56.8 184 426 2015
---------------- ----------- ---------- ------- -------- ------- ------------------
Onshore Isle Xodus, January
of Wight PEDL331 65.0% 144 219 322 2016
---------------- ----------- ---------- ------- -------- ------- ------------------
Markwells Xodus, September
Wood PEDL126 100% 32.7 45.6 61.8 2015
---------------- ----------- ---------- ------- -------- ------- ------------------
Europa/ERCE,
Holmwood PEDL143 20% 3.83 15.38 55.38 June 2012
---------------- ----------- ---------- ------- -------- ------- ------------------
Northern/RPS,
Horndean PL211 10% 27.4 56.1 110.2 Feb 2010
---------------- ----------- ---------- ------- -------- ------- ------------------
IGas/Senergy,
Avington PEDL070 5% 25.3 59.1 110.3 July 2014
---------------- ----------- ---------- ------- -------- ------- ------------------
IGas/Senergy,
Baxters Copse PEDL233 50% N/A 51.9 N/A July 2014
---------------- ----------- ---------- ------- -------- ------- ------------------
Horse Hill PEDL137/ Xodus, May
U Portland 246 20.163% 14.3 21.0 30.4 2015
---------------- ----------- ---------- ------- -------- ------- ------------------
Horse Hill PEDL137/ Nutech, June
Tight Oil 246 20.163% 3,131 9,245 17,519 2015
---------------- ----------- ---------- ------- -------- ------- ------------------
Horse Hill PEDL137/ Schlumberger,
Tight Oil 246 20.163% N/A 10,993 N/A August 2015
---------------- ----------- ---------- ------- -------- ------- ------------------
Angus/RPS,
Lidsey PL241 4.2% 7.5 9.5 11.9 March 2014
---------------- ----------- ---------- ------- -------- ------- ------------------
Angus/RPS,
Brockham PL234 3.6% 1.9 3.6 5.8 March 2014
---------------- ----------- ---------- ------- -------- ------- ------------------
Notes:
1. M Prospect
GIIP figure.
MANAGEMENT APPOINTMENTS
UKOG announced the appointment of Stephen Sanderson as its CEO
on 27 January 2015 and as Executive Chairman on 8 July 2015. Matt
Cartwright was appointed as the Company's COO on 18 September 2015.
Kiran Morzaria was appointed as the Company's Finance Director
subsequent to the period end on the 23 October 2015
RESULTS FOR THE PERIOD
(MORE TO FOLLOW) Dow Jones Newswires
February 26, 2016 02:01 ET (07:01 GMT)
Loss on ordinary activities of the Group after taxation amounted
to GBP1,695,000 (2014: Loss GBP907,000). The increase in losses are
mainly attributable to uncapitalised consultant, legal and due
diligence costs associated with the acquisition and development of
the Group's investments and assets, particularly within its core
Weald Basin Portland and Kimmeridge tight oil licences and the new
Isle of Wight portfolio.
Net cash out flow from operating activities was GBP1,058,000
(2014: GBP1,207,000). The Group invested GBP3,657,000 (2014:
1,570,000). The majority of these investments were associated with
expenditures on exploration and evaluation of assets and
acquisitions of subsidiaries.
The Group has funded these investments, acquisitions and
operating costs via financing activities which raised GBP8,323,000
during the period (2014: GBP3,759,000). The large majority of this
funding has been sourced through the issue of new ordinary
shares.
At the end of the period the Group had GBP4,590,000 (GBP982,000)
in cash and cash equivalents. Along with its non-current and other
current assets the consolidated total assets were GBP11,581,000
(2014: GBP4,148,000). Total liabilities increased to GBP799,000
(2014: 496,000). This increase in liabilities is attributable to
the provisions made by the Group in relation to its share of the
decommissioning liabilities in respect of the currently producing
Horndean and Avington fields plus the drilling sites at Markwell's
Wood and Havant.
OUTLOOK
The Board recognises that this is an exciting period for the
Company as it continues to maximise value from its existing
investments. The board will seek to further capitalise upon its
vanguard position in the new and exciting Weald Basin plays
recently proven by the first HH-1 flow test. The Board believes
that current low oil prices combined with the Company's technical
and financial strength provide an ideal opportunity to
significantly expand the Company's acreage position. We shall
evaluate and seek additional investments as opportunities
arise.
The Board would like to take this opportunity to thank our
shareholders for their continued support and I look forward to
reporting further progress over the next period and beyond.
Stephen Sanderson
Executive Chairman & Chief Executive Officer
Qualified Person's Statement:
Stephen Sanderson, UKOG's Executive Chairman, who has over 35
years of relevant experience in the oil industry, has approved the
information contained in this announcement. Mr Sanderson is a
Fellow of the Geological Society of London and is an active member
of the American Association of Petroleum
Geologists.
DIRECTORS
FOR THE YEAR ENDED 30 SEPTEMBER 2015
Stephen Sanderson, Executive Chairman and Chief Executive
Officer
Stephen Sanderson joined UK Oil & Gas Investments PLC in
September 2014 and was appointed Executive Chairman and Chief
Executive in July 2015. A highly-experienced petroleum geologist,
oil industry veteran and upstream energy business leader, with over
30 years operating experience, Stephen is a proven oil finder and
has been instrumental in the discovery of more than 10 commercial
conventional fields, including the Norwegian Smorbuk-Midgaard field
complex. Stephen held a variety of senior management roles for ARCO
(which was acquired by BP in 2000), Wintershall AG (a subsidiary of
German chemical giant BASF) and three junior start-ups. He created
and ran successful new exploration businesses in Africa, Europe and
South America. He has significant technical and commercial
expertise in the petroleum systems of Africa, the North Sea,
Norway, onshore UK & Europe, South America, the South Atlantic,
Middle East, Asia, India, Australia and the USA. He is a graduate
and Associate of the Royal School of Mines, Imperial College,
London, a Fellow of the Geological Society of London and a member
of the American Association of Petroleum Geologists. He served for
four years in the British Army and TAVR as a platoon commander,
serving in the UK and Berlin.
Kiran Morzaria, Finance Director (appointed 23 October 2015)
Mr Morzaria holds a Bachelor of Engineering (Industrial Geology)
from the Camborne School of Mines and an MBA (Finance) from CASS
Business School. He has extensive experience in the mineral
resource industry working in both operational and management roles.
Mr. Morzaria spent the first four years of his career in
exploration, mining and civil engineering. He then obtained his MBA
and became the Finance Director of Vatukoula Gold Mines Plc. He has
served as a director of a number of public companies in both an
executive and non-executive capacity, he is a non-executive
director of Bacanora Minerals Ltd, European Metals Holdings Ltd and
the Chief Executive Officer for Rare Earth Minerals plc.
Jason Berry, Executive Director
Jason Berry joined UK Oil & Gas Investments PLC as an
Executive Director in August 2014. He has extensive experience
operating in global public markets having spent approximately 20
years working in the financial services sector in London. Highly
experienced in raising capital for listed Companies and Sales
Trading, Jason was Director of Dawnay Day Investment Banking
Limited and was involved in the successful buy out of the business
which now trades as Hobart Capital Markets Limited. Currently Jason
serves as a Non-Executive Director Polemos Plc. He holds a BA
(Honours) in European Business Studies.
REPORT OF THE DIRECTORS
The Directors present their annual report together with the
audited consolidated financial statements of the Group for the Year
Ended 30 September 2015.
Principal Activity and Business Review
The principal activity of the Group and the Company is that of
an investment holding company to acquire a diverse portfolio of
direct and indirect interests in exploration, development and
production oil and gas assets which are based in the UK.
Results and Dividends
Loss on ordinary activities of the Group after taxation amounted
to GBP1,695,000 (2014: Loss GBP907,000). The Directors do not
recommend the payment of a dividend (2014: GBPnil). The Company has
no plans to adopt a dividend policy in the immediate future.
Principal Risks and Uncertainties
The principal risks and uncertainties facing the Group involve
the ability to secure funding in order to finance the acquisition
and exploitation of oil and gas assets and fluctuating commodity
prices.
In addition, the amount and quality of the Group's oil and gas
resources and the related costs of extraction and production
represent a significant risk to the Group.
Financial Risk Management Objectives and Policies
The Group's principal financial instruments are available for
sale assets, trade receivables, trade payables and cash at bank,
and borrowings. The main purpose of these financial instruments is
to fund the Group's operations.
It is, and has been throughout the period under review, the
Group's policy that no trading in financial instruments shall be
undertaken. The main risk arising from the Group's financial
instruments is liquidity risk. The Board reviews and agrees
policies for managing this risk and this is summarised below.
Liquidity Risk
The Group's objective is to maintain a balance between
continuity of funding and flexibility through the use of equity and
its cash resources. Further details of this are provided in the
principal accounting policies, headed 'going concern'.
Key Performance Indicators
Due to the current status of the Group, the Board has not
identified any performance indicators as key.
Future Developments
Future developments are outlined in the Chairman's Statement and
Strategic Report.
Going Concern
The Directors note the substantial losses that the Group has
made for the year ended 30 September 2015. The Directors have
prepared cash flow forecasts for the period ending 28 February 2017
which take account of the current cost and operational structure of
the Group.
The cost structure of the Group comprises a high proportion of
discretionary spend and therefore in the event that cash flows
become constrained, costs can be quickly reduced to enable the
Group to operate within its available funding.
These forecasts demonstrate that the Group has sufficient cash
funds available to allow it to continue in business for a period of
at least twelve months from the date of approval of these financial
statements. Accordingly, the financial statements have been
prepared on a going concern basis.
Events After the Reporting Period
Events after the Reporting Period are outlined in Note 25 to the
Financial Statements.
Corporate Governance
Audit and Remuneration Committees have been established and in
each case comprise Directors Jason Berry and Kiran Morzaria, with
Jason Berry as Chairman.
The role of the Remuneration Committee is to review the
performance of the executive Directors and to set the scale and
structure of their remuneration, including bonus arrangements. The
Remuneration Committee also administers and establishes performance
targets for the Group's employee share schemes and executive
incentive schemes for key management. In exercising this role, the
terms of reference of the Remuneration Committee require it to
comply with the Code of Best Practice published in the Combined
Code.
The Audit Committee is responsible for making recommendations to
the Board on the appointment of the auditors and the audit fee, and
receives and reviews reports from management and the Company's
auditors on the internal control systems in use throughout the
Group and its accounting policies.
Suppliers' Payment Policy
The Group's policy is to agree terms and conditions with
suppliers in advance; payment is then made in accordance with the
agreement provided the supplier has met the terms and conditions.
Suppliers are typically paid within 30 days of issue of
invoice.
Charitable Contributions
During the year the Group made charitable donations amounting to
GBPNil (2014 - GBPNil).
Substantial Shareholdings
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As at 11 February 2016, the Company had been notified of the
following substantial shareholdings in the ordinary share
capital:
Number of Ordinary
Shares Holding %
----------------------- ------------------- ----------
TD Direct Investing
Nominees (Europe)
Ltd 191,838,833 9.45
Barclayshare Nominees
Ltd 178,210,748 8.78
HSDL Nominees Ltd 160,723,350 7.92
Hargreaves Lansdown
(Nominees) Ltd 151,766,218 7.48
HSBC Client Holdings
Nominee (UK) Ltd 112,843,780 5.56
Hargreaves Lansdown
(Nominees) Ltd 95,366,579 4.70
Hargreaves Lansdown
(Nominees) Ltd 94,076,594 4.63
HSDL Nominees Ltd 85,750,035 4.22
Vidacos Nominees Ltd 76,997,918 3.79
TD Direct Investing
Nominees (Europe)
Ltd 69,957,786 3.45
Directors
The Directors who held office during the year and up to the date
of this report are given below:
Current Board
Stephen Sanderson (Executive Chairman) (appointed 8 July
2015)
Jason Berry (Executive Director)
Kiran Morzaria (Finance Director) (appointed 23 October
2015)
Previous Directors
David Lenigas (resigned 8 July 2015)
Donald Strang (resigned 23 October 2015)
Stephen Sanderson and Jason Berry, hold fully vested options
over 25,000,000 and 10,000,000 ordinary shares each (total options
held by directors is 35,000,000) which are exercisable at 0.4p and
1.15p each up until 31 December 2017, and 22 August 2019,
respectively.
Auditor
A resolution to reappoint Chapman Davis LLP as auditor will be
proposed at the forthcoming Annual General Meeting ("AGM").
Annual General Meeting
Notice of the forthcoming Annual General Meeting will be
enclosed separately.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the annual report
and financial statements in accordance with applicable law and
regulations.
Company law requires the directors to prepare consolidated
financial statements for each financial year. The Directors have
prepared the consolidated accounts in accordance with International
Financial Reporting Standards as adopted by the EU ("adopted
IFRS"). The consolidated financial statements are required by law
to give a true and fair view of the state of affairs of the Group
and Company and of the profit or loss for that period. In preparing
these financial statements, the Directors are required to:
-- Select suitable accounting policies and then apply them consistently;
-- Make judgements and estimates that are reasonable and prudent;
-- State whether applicable IFRS's have been followed, subject
to any material departures disclosed and explained in the financial
statements; and
-- Prepare the consolidated financial statements on the going
concern basis unless it is inappropriate to presume that the Group
will continue in business.
The Directors are responsible for keeping adequate accounting
records, which disclose with reasonable accuracy at any time the
financial position of the Group and to enable them to ensure that
the consolidated financial statements comply with the Companies Act
2006. They are also responsible for safeguarding the assets of the
Group and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. The Company's website is maintained in
accordance with AIM Rule 26.
Legislation in the United Kingdom governing the preparation and
dissemination of consolidated financial statements may differ from
legislation in other jurisdictions.
Statement as to Disclosure of Information to the Auditor
As at the date of this report the serving directors confirm
that:
-- So far as each director is aware, there is no relevant audit
information of which the Group's auditors are unaware, and
-- they have taken all the steps that they ought to have taken
as directors' in order to make themselves aware of any relevant
audit information and to establish that the Group's auditor are
aware of that information.
REPORT OF THE INDEPENDENT AUDITOR TO THE MEMBERS OF UK OIL &
GAS INVESTMENTS PLC
We have audited the Group and Parent Company financial
statements of UK Oil & Gas Investments PLC for the year ended
30 September 2015, which comprise the Consolidated Statement of
Comprehensive Income, the Consolidate Statement of Financial
Position, the Company Statement of Financial Position the
Consolidated Statement of Cash Flows, Company Statement of Cash
Flows, the Consolidated Statement of Changes in Equity, the Company
Statement of Changes in Equity and the related notes. The financial
reporting framework that has been applied in their preparation is
applicable law and International Financial Reporting Standards as
adopted by the EU ("adopted IFRS").
This report is made solely to the Company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
Company's members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the Company and the Company's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
Respective Responsibilities of Directors and Auditors
As explained more fully in the Directors' Responsibilities
Statement, the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true
and fair view. Our responsibility is to audit and express an
opinion on the financial statements in accordance with applicable
law and International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board's
(APB's) Ethical Standards for Auditors.
Scope of the Audit of the Financial Statements
A description of the scope of an audit of financial statements
is provided on the APB's website at
www.frc.org.uk/apb/scope/private.cfm.
Opinion on the Financial Statements
In our opinion the financial statements:
-- Give a true and fair view of the state of the Group and
Company's affairs as at 30 September 2015 and of the Group's loss
for the year then ended;
-- Have been properly prepared in accordance with International
Financial Reporting Standards as adopted by the EU; and
-- Have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on Other Matter Prescribed by the Companies Act 2006
In our opinion the information given in the Directors' Report
for the financial year for which the financial statements are
prepared is consistent with the financial statements.
Matters on Which We are Required to Report by Exception
We have nothing to report in respect of the following matters
where the Companies Act 2006 requires us to report to you if, in
our opinion:
-- Adequate accounting records have not been kept, or returns
adequate for our audit have not been received from branches not
visited by us; or
-- The financial statements are not in agreement with the accounting records and returns; or
-- Certain disclosures of directors' remuneration specified by law are not made; or
-- We have not received all the information and explanations we require for our audit.
Keith Fulton
Senior Statutory Auditor
for and on behalf of Chapman Davis LLP
Statutory Auditor, Chartered Accountants
London
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR YEAR ENDED 30 SEPTEMBER 2015
Notes 2015 2014
GBP'000 GBP'000
--------------------------------------- ------ -------- --------
Revenue 3 240 7
Cost of sales (146) -
Gross profit 94 7
--------------------------------------- ------ -------- --------
Operating expenses
Administrative expenses (1,192) (544)
Foreign exchange (loss) (49) -
Depletion & impairment expense 10 (82) -
Share based payments expense 22 (378) (351)
Operating (loss) 4 (1,607) (888)
--------------------------------------- ------ -------- --------
Gain/(loss) on settlements
of derivative financial instrument 62 (18)
Share of associate loss 12 (69) -
Finance costs 6 (81) -
--------------------------------------- ------ -------- --------
(Loss) before taxation (1,695) (906)
--------------------------------------- ------ -------- --------
Taxation 7 - -
--------------------------------------- ------ -------- --------
(Loss) for the year attributable
to equity holders of the parent (1,695) (906)
--------------------------------------- ------ -------- --------
Other comprehensive income
Transfer to income statement (44) -
Gain on revaluation of derivative
financial instrument - 44
--------------------------------------- ------ -------- --------
Other comprehensive income
net of taxation (44) 44
Total comprehensive loss attributable
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to equity holders of the parent (1,739) (862)
--------------------------------------- ------ -------- --------
(Loss) per share
--------------------------------------- ------ -------- --------
Pence Pence
Basic and diluted 8 (0.10) (0.11)
--------------------------------------- ------ -------- --------
The accompanying accounting policies and notes form an integral
part of these financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 SEPTEMBER 2015
Notes 2015 2014
GBP'000 GBP'000
--------------------------------- ------ --------- ---------
Assets
Non-current assets
Exploration & evaluation
assets 9 1,309 -
Oil & Gas properties 10 1,566 -
Investment in associate 12 2,063 -
Available for sale investments 13 368 1,568
--------------------------------- ------ --------- ---------
Total non-current assets 5,306 1,568
--------------------------------- ------ --------- ---------
Current assets
Inventory 14 2 -
Trade and other receivables 15 1,683 1,414
Derivative financial instrument 16 - 184
Cash and cash equivalents 17 4,590 982
--------------------------------- ------ --------- ---------
Total current assets 6,275 2,580
--------------------------------- ------ --------- ---------
Total Assets 11,581 4,148
--------------------------------- ------ --------- ---------
Current liabilities
Trade and other payables 18 (329) (496)
Borrowings 19 (111) -
--------------------------------- ------ --------- ---------
Total current liabilities (440) (496)
--------------------------------- ------ --------- ---------
Non-current Liabilities
Provisions 20 (359) -
--------------------------------- ------ --------- ---------
Total non-current liabilities (359) -
--------------------------------- ------ --------- ---------
Total liabilities (799) (496)
--------------------------------- ------ --------- ---------
Net Assets 10,782 3,652
--------------------------------- ------ --------- ---------
Shareholders' Equity
Share capital 21 11,787 11,726
Share premium account 31,622 23,192
Revaluation Reserve - 44
Share based payment reserve 659 351
Accumulated losses (33,286) (31,661)
--------------------------------- ------ --------- ---------
Total shareholders' equity 10,782 3,652
--------------------------------- ------ --------- ---------
These financial statements were approved by the Board of
Directors on 25 February 2016 and are signed on its behalf by:
Stephen Sanderson Jason Berry
Director Director
The accompanying accounting policies and notes form an integral
part of these financial statements.
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 30 SEPTEMBER 2015
Notes 2015 2014
GBP'000 GBP'000
------------------------------------ ------ --------- ---------
Assets
Non-current assets
Exploration & evaluation assets 9 662 -
Investment in subsidiary companies 11 1,512 -
Investment in associate 12 2,063 -
Available for sale investments 13 368 1,568
------------------------------------ ------ --------- ---------
Total non-current assets 4,605 1,568
------------------------------------ ------ --------- ---------
Current assets
Trade and other receivables 15 2,120 1,414
Derivative financial instrument 16 - 184
Cash and cash equivalents 17 4,461 982
------------------------------------ ------ --------- ---------
Total current assets 6,581 2,580
------------------------------------ ------ --------- ---------
Total Assets 11,186 4,148
------------------------------------ ------ --------- ---------
Current liabilities
Trade and other payables 18 (313) (496)
Borrowings 19 (111) -
------------------------------------ ------ --------- ---------
Total Current Liabilities (424) (496)
------------------------------------ ------ --------- ---------
Total liabilities (424) (496)
------------------------------------ ------ --------- ---------
Net Assets 10,762 3,652
------------------------------------ ------ --------- ---------
Shareholders' Equity
Share capital 21 11,787 11,726
Share premium account 31,622 23,192
Share Based Payment Reserve 659 351
Revalaution Reserve - 44
Accumulated losses (33,306) (31,661)
------------------------------------ ------ --------- ---------
Total shareholders' equity 10,762 3,652
------------------------------------ ------ --------- ---------
These financial statements were approved by the Board of
Directors on 25 February 2016 and are signed on its behalf by:
Stephen Sanderson Jason Berry
Director Director
The accompanying accounting policies and notes form an integral
part of these financial statements.
CONSOLDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 SEPTEMBER 2015
Share
based
Share Share payment Revaluation Accumulated
capital premium reserve reserve losses Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ --------- --------- --------- ------------ ------------ ---------
Balance at 1 October 2013 11,595 19,039 866 - (31,621) (121)
Loss for the year - - - - (906) (906)
Other comprehensive income
- Gain on revaluation of
derivative financial instrument - - - 44 - 44
Total comprehensive income - - - 44 (906) (862)
------------------------------------ --------- --------- --------- ------------ ------------ ---------
Issue of shares 131 4,365 - - - 4,496
Cost of share issue - (212) - - - (212)
Share options expired - - (866) - 866 -
Share based payments - - 351 - - 351
Balance at 30 September
2014 11,726 23,192 351 44 (31,661) 3,652
------------------------------------ --------- --------- --------- ------------ ------------ ---------
Loss for the year - - - - (1,695) (1,695)
Other comprehensive income
- Transfer to income statement - - - (44) - (44)
Total comprehensive income - - - (44) (1,695) (1,739)
------------------------------------ --------- --------- --------- ------------ ------------ ---------
Issue of shares 61 8,922 - - - 8,983
Cost of share issue - (492) - - - (492)
Share options exercised - - (70) - 70 -
Share based payments - - 378 - - 378
Balance at 30 September
2015 11,787 31,622 659 - (33,286) 10,782
------------------------------------ --------- --------- --------- ------------ ------------ ---------
COMPANY STATEMENT OF CHANGES IN EQUITY
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FOR THE YEAR ENDED 30 SEPTEMBER 2015
Share
based
Share Share payment Revaluation Accumulated
capital premium reserve reserve losses Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ --------- --------- --------- ------------ ------------ ---------
Balance at 1 October 2013 11,595 19,039 866 - (31,621) (121)
Loss for the year - - - - (906) (906)
Other comprehensive income
- Gain on revaluation of
derivative financial instrument - - - 44 - 44
Total comprehensive income - - - 44 (906) (862)
------------------------------------ --------- --------- --------- ------------ ------------ ---------
Issue of shares 131 4,365 - - - 4,496
Cost of share issue - (212) - - - (212)
Share options expired - - (866) - 866 -
Share based payments - - 351 - - 351
Balance at 30 September
2014 11,726 23,192 351 44 (31,661) 3,652
------------------------------------ --------- --------- --------- ------------ ------------ ---------
Loss for the year - - - - (1,715) (1,715)
Other comprehensive income
- Transfer to income statement - - - (44) - (44)
Total comprehensive income - - - (44) (1,715) (1,759)
------------------------------------ --------- --------- --------- ------------ ------------ ---------
Issue of shares 61 8,922 - - - 8,922
Cost of share issue - (492) - - - (492)
Share options exercised - - (70) - 70 -
Share based payments - - 378 - - 378
Balance at 30 September
2015 11,787 31,622 659 - (33,306) 10,762
------------------------------------ --------- --------- --------- ------------ ------------ ---------
CONSOLIDATED STATEMENT OF CASH FLOW
FOR THE YEAR ENDED 30 SEPTEMBER 2015
Year ended Year ended
30 September 30 September
2015 2014
GBP'000 GBP'000
Cash flow from operating activities
Loss from operations (1,607) (889)
Foreign currency losses 48 -
Other non-cash income & expenses (52) -
Depletion & impairment 82 -
Share based payment charge 378 351
(Increase) in inventories (2) -
Decrease/(increase) in trade
and other receivables 262 (1,044)
(Decrease)/increase in trade
and other payables (167) 375
--------------------------------------- ------------- -------------
Net cash (outflow) from operating
activities (1,058) (1,207)
--------------------------------------- ------------- -------------
Cash flows from investing activities
Expenditures on exploration
& evaluation assets (1,013) -
Expenditures on oil & gas properties (40) -
Payments to acquire available
for sale investments (580) (1,200)
Loans advanced to investee
companies (531) (370)
Acquisition of subsidiaries,
net of cash acquired (1,493) -
-------------------------------------- ------------- -------------
Net cash (outflow) from investing
activities (3,657) (1,570)
--------------------------------------- ------------- -------------
Cash flows from financing activities
Proceeds from issue of share
capital 8,630 4,129
Share issue costs (492) (212)
Proceeds from loan & borrowings 622 -
Repayments of loan & borrowings (557) -
Finance costs paid (81) -
Payments to acquire derivative
financial instrument - (250)
Receipts from settlements of
financial instrument 201 92
--------------------------------------- ------------- -------------
Net cash inflow from financing
activities 8,323 3,759
--------------------------------------- ------------- -------------
Net change in cash and cash
equivalents 3,608 982
Cash and cash equivalents at
beginning of period 982 -
Cash and cash equivalents at
end of period 4,590 982
--------------------------------------- ------------- -------------
COMPANY STATEMENT OF CASH FLOW
FOR THE YEAR ENDED 30 SEPTEMBER 2015
Year ended Year ended
30 September 30 September
2015 2014
GBP'000 GBP'000
Cash flow from operating activities
(Loss) from operations (1,627) (889)
Foreign currency losses 48 -
Share based payment charge 378 351
Decrease/(increase) in trade
and other receivables 277 (1,044)
(Decrease)/increase in trade
and other payables (183) 375
--------------------------------------- ------------- -------------
Net cash (outflow) from operating
activities (1,107) (1,207)
--------------------------------------- ------------- -------------
Cash flows from investing activities
Expenditures on exploration
& evaluation assets (662) -
Payments for acquisition of
subsidiaries (1,512) -
Payments to acquire available
for sale investments (580) (1,200)
Loans advanced to investee
companies (531) (370)
Loan advanced to subsidiary (452) -
-------------------------------------- ------------- -------------
Net cash (outflow) from investing
activities (3,737) (1,570)
--------------------------------------- ------------- -------------
Cash flows from financing activities
Proceeds from issue of share
capital 8,630 4,129
Share issue costs (492) (212)
Proceeds from loan & borrowings 622 -
Repayments of loan & borrowings (557) -
Finance costs paid (81) -
Payments to acquire derivative
financial instrument - (250)
Receipts from settlements of
financial instrument 201 92
--------------------------------------- ------------- -------------
Net cash inflow from financing
activities 8,323 3,759
--------------------------------------- ------------- -------------
Net change in cash and cash
equivalents 3,479 982
Cash and cash equivalents at
beginning of period 982 -
Cash and cash equivalents at
end of period 4,461 982
--------------------------------------- ------------- -------------
NOTES TO THE FINANCIAL STATEMENTS
1. Principal Accounting Policies
Basis of Preparation
UK Oil and Gas Investments PLC is a company incorporated in the
United Kingdom. The Company's shares are listed on the AIM market
of the London Stock Exchange.
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February 26, 2016 02:01 ET (07:01 GMT)
The Company's Investing Policy is to invest in and/or acquire
companies and/or projects within the natural resources sector with
potential for growth. The Company will also consider opportunities
in other sectors as they arise if the Board considers that there is
an opportunity to generate potential value for Shareholders. Where
appropriate, the Board may seek to invest in businesses where it
may add its expertise to the management of the business and utilise
its industry relationships.
The geographical focus will primarily be in regions in the world
where the Board considers that valuable opportunities exist and
potential returns can be achieved. The Board has identified United
Kingdom as the current Company's focus. The Company's interests in
an investment and/or acquisition may range from a minority position
to full ownership and may comprise one investment or multiple
investments. The investments may be in either quoted or unquoted
companies; be made by direct acquisitions or farm-ins; and may be
in companies, partnerships, earn-in joint ventures, debt or other
loan structures, joint ventures or direct or indirect interests in
assets or projects. The Board may focus on investments where
intrinsic value may be achieved from the restructuring of
investments or merger of complementary businesses.
The Board expects that investments will typically be held for
the medium to long term, although short term disposal of assets
cannot be ruled out if there is an opportunity to generate a
potentially attractive return for Shareholders. The Board will
place no minimum or maximum limit on the length of time that any
investment may be held. The Company may be both an active and a
passive investor depending on the nature of the individual
investment. There is no limit on the number of projects in which
the Company may invest, and the Company's financial resources may
be invested in a number of propositions or in just one investment,
which may be deemed to be a reverse takeover under the AIM Rules.
The Board intends to mitigate risk by appropriate due diligence and
transaction analysis. Any transaction constituting a reverse
takeover under the AIM Rules will also require Shareholder
approval. The Board considers that as investments are made, and new
promising investment opportunities arise, further funding of the
Company may also be required.
Where the Company builds a portfolio of related assets it is
possible that there may be cross holdings between such assets.
Investments in early stage assets are expected to be mainly in the
form of equity, with debt potentially being raised later to fund
the development of such assets. Investments in later stage assets
are more likely to include an element of debt to equity gearing.
The Board may also offer New Ordinary Shares by way of
consideration as well as cash, thereby helping to preserve the
Company's cash for working capital and as a reserve against
unforeseen contingencies including, for example, delays in
collecting accounts receivable, unexpected changes in the economic
environment and operational problems. Investments may be made in
all types of assets and there will be no investment restrictions on
the type of investment that the Company might make nor the type of
opportunity that may be considered. The Company may consider
possible opportunities anywhere in the world.
The Board will conduct initial due diligence appraisals of
potential business or projects and, where they believe further
investigation is warranted, intend to appoint appropriately
qualified persons to assist. The Board believes its expertise will
enable it to determine quickly which opportunities could be viable
and so progress quickly to formal due diligence. The Company will
not have a separate investment manager.
The initial focus of the Company will be the achievement of
capital growth for Shareholders and therefore the Company will only
consider the payment of dividends as and when it is appropriate to
do so. As such, it is not possible at this stage to give an
indication of the likely level or timing of any future dividends.
To the extent that any dividends are paid they will be paid in
accordance with any applicable laws and the regulations to which
the Company is subject. The amount of the dividends paid to
Shareholders will fluctuate according to the levels of profits
earned by the Company and will be dependent on sufficient
distributable reserves being available to the Company.
The Consolidated Financial Statements are for the year ended 30
September 2015 and have been prepared under the historical cost
convention and in accordance with International Financial Reporting
Standards as adopted by the EU ("adopted IFRS"). These Consolidated
Financial Statements (the "Financial Statements") have been
prepared and approved by the Directors on 25 February 2016 and
signed on their behalf by Stephen Sanderson and Jason Berry.
The accounting policies have been applied consistently
throughout the preparation of these Financial Statements, and the
financial report is presented in Pound Sterling (GBP) and all
values are rounded to the nearest thousand pounds (GBP'000) unless
otherwise stated.
New standards, amendments and interpretations adopted by the
Company
No new and/or revised Standards and Interpretations have been
required to be adopted, and/or are applicable in the current year
by/to the Group and/or Company, as standards, amendments and
interpretations which are effective for the financial year
beginning on 1 October 2014 are not material to the Company.
New standards, amendments and interpretations not yet
adopted
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
for the year presented:
- IFRS 9 in respect of Financial Instruments which will be
effective for the accounting periods beginning on or after 1
January 2018.
- IFRS 14 in respect of Regulatory Deferral Accounts which will
be effective for accounting periods beginning on or after 1 January
2016.
- IFRS 15 in respect of Revenue from Contracts with Customers
which will be effective for accounting periods beginning on or
after 1 January 2017.
- Amendments to IFRS 10, IFRS 12 and IAS 28 in respect of the
application of the consolidation exemption to investment entities
which will be effective for accounting periods beginning on or
after 1 January 2016.
- Amendments to IFRS 10 and IAS 28 in respect of the treatment
of a Sale or Contribution of Assets between an Investor and its
Associate or Joint Venture which will be effective for accounting
periods beginning on or after 1 January 2016.
- Amendments to IFRS 11 in respect of Accounting for
Acquisitions of Interest in Joint Operations which will be
effective for accounting periods beginning on or after 1 January
2016.
- Amendments to IAS 1 in respect of determining what information
to disclose in annual financial statements which will be effective
for accounting periods beginning on or after 1 January 2016.
- Amendments to IAS 16 and IAS 38 in respect of Clarification of
Acceptable Methods of Depreciation and Amortisation which will be
effective for accounting periods beginning on or after 1 January
2016.
- Amendments to IAS 16 and IAS 41 in respect of Bearer Plants
which will be effective for accounting periods beginning on or
after 1 January 2016.
- Amendments to IAS 27 to allow entities to use the equity
method to account for investments in subsidiaries, joint ventures
and associates which will be effective for accounting periods
beginning 1 January 2016.
- Annual improvements to IFRS's which will be effective for
accounting periods beginning on or after 1 January 2016 as
follows:
o IFRS 5 - Changes in methods of disposal
o IFRS 7 - Servicing contracts
o IFRS 7 - Applicability of the amendments to IFRS 7 to
condensed interim financial statements
o IAS 19 - Discount rate: Regional market issue
o IAS 34 - Disclosure of information "elsewhere in the interim
financial report"
There are no other IFRSs or IFRIC interpretations that are not
yet effective that would be expected to have a material impact on
the Group and/or Company.
Basis of consolidation
The consolidated financial information incorporates the
financial statements of the Company and its subsidiaries (the
"Group"). Control is achieved where the Group is exposed, or has
rights, to variable returns from its involvement with the investee
and has the ability to affect those returns through its power over
the investee.
Inter-company transactions, balances and unrealised gains on
transactions between Group companies are eliminated; unrealised
losses are also eliminated unless the transaction provides evidence
of an impairment of the asset transferred.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring the accounting policies used in
line with those used by the Group.
Business combinations
Business combinations are accounted for using the acquisition
method. The consideration for acquisition is measured at the fair
values of assets given, liabilities incurred or assumed, and equity
instruments issued by the Company in order to obtain control of the
acquiree (at the date of exchange). Costs incurred in connection
with the acquisition are recognised in profit or loss as incurred.
Where a business combination is achieved in stages, previously held
interests in the acquiree are re-measured to fair value at the
acquisition date (date the Group obtains control) and the resulting
gain or loss, is recognised in profit or loss. Adjustments are made
to fair values to bring the accounting policies of acquired
businesses into alignment with those of the group. The costs of
integrating and reorganising acquired businesses are charged to the
post acquisition profit or loss where applicable.
Revenue
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Revenue is measured by reference to the fair value of
consideration received or receivable by the Group for services
provided, excluding VAT and trade discounts. Revenue is credited to
the Income Statement in the period it is deemed to be earned.
Revenue from the sale of oil and petroleum products is
recognised when the significant risks and rewards of ownership have
been transferred, which is considered to occur when title passes to
the customer. This generally occurs when the product is physically
transferred into a vessel, pipe or other delivery mechanism.
Revenue from the production of oil, in which the Group has an
interest with other producers, is recognised based on the Group's
working interest and the terms of the relevant production sharing
contracts. Differences between oil lifted and sold and the Group's
share of production are not significant.
Finance Income and Costs
Finance income and costs are reported on an accruals basis.
Oil & Gas properties ("OGP"), Exploration & Evaluation
assets
Oil and natural gas exploration, evaluation and development
expenditure is accounted for using the successful efforts method of
accounting.
(i) Pre-licence costs
Pre-licence costs are expensed in the period in which they are
incurred.
(ii) Licence and property acquisition costs
Exploration licence and leasehold property acquisition costs are
capitalised in intangible assets. Licence costs paid in connection
with a right to explore in an existing exploration area are
capitalised and amortised over the term of the permit.
Licence and property acquisition costs are reviewed at each
reporting date to confirm that there is no indication that the
carrying amount exceeds the recoverable amount. This review
includes confirming that exploration drilling is still under way or
firmly planned, or that it has been determined, or work is under
way to determine that the discovery is economically viable based on
a range of technical and commercial considerations and that
sufficient progress is being made on establishing development plans
and timing.
If no future activity is planned or the licence has been
relinquished or has expired, the carrying value of the licence and
property acquisition costs are written off through the statement of
profit or loss and other comprehensive income. Upon recognition of
proved reserves and internal approval for development, the relevant
expenditure is transferred to oil and gas properties.
(iii) Exploration and evaluation costs
Exploration and evaluation activity involves the search for
hydrocarbon resources, the determination of technical feasibility
and the assessment of commercial viability of an identified
resource.
Once the legal right to explore has been acquired, costs
directly associated with an exploration well are capitalised as
exploration and evaluation intangible assets until the drilling of
the well is complete and the results have been evaluated. These
costs include directly attributable employee remuneration,
materials and fuel used, rig costs and payments made to
contractors.
If no potentially commercial hydrocarbons are discovered, the
exploration asset is written off through the statement of profit or
loss and other comprehensive income as a dry hole. If extractable
hydrocarbons are found and, subject to further appraisal activity
(e.g., the drilling of additional wells), it is probable that they
can be commercially developed, the costs continue to be carried as
an intangible asset while sufficient/continued progress is made in
assessing the commerciality of the hydrocarbons. Costs directly
associated with appraisal activity undertaken to determine the
size, characteristics and commercial potential of a reservoir
following the initial discovery of hydrocarbons, including the
costs of appraisal wells where hydrocarbons were not found, are
initially capitalised as an intangible asset.
All such capitalised costs are subject to technical, commercial
and management review, as well as review for indicators of
impairment at least once a year. This is to confirm the continued
intent to develop or otherwise extract value from the discovery.
When this is no longer the case, the costs are written off through
the statement of profit or loss and other comprehensive income.
When proved reserves of oil and natural gas are identified and
development is sanctioned by management, the relevant capitalised
expenditure is first assessed for impairment and (if required) any
impairment loss is recognised, then the remaining balance is
transferred to oil and gas properties. Other than licence costs, no
amortisation is charged during the exploration and evaluation
phase.
(iv) Development costs
Expenditure on the construction, installation or completion of
infrastructure facilities such as platforms, pipelines and the
drilling of development wells, including unsuccessful development
or delineation wells, is capitalised within oil and gas
properties.
Oil and gas properties and other property, plant and
equipment
(i) Initial recognition
Oil and gas properties and other property, plant and equipment
are stated at cost, less accumulated depreciation and accumulated
impairment losses.
The initial cost of an asset comprises its purchase price or
construction cost, any costs directly attributable to bringing the
asset into operation, the initial estimate of the decommissioning
obligation and, for qualifying assets (where relevant), borrowing
costs. The purchase price or construction cost is the aggregate
amount paid and the fair value of any other consideration given to
acquire the asset. The capitalised value of a finance lease is also
included within property, plant and equipment.
When a development project moves into the production stage, the
capitalisation of certain construction/development costs ceases,
and costs are either regarded as part of the cost of inventory or
expensed, except for costs which qualify for capitalisation
relating to oil and gas property asset additions, improvements or
new developments.
(ii) Depreciation/amortisation
Oil and gas properties are depreciated/amortised on a
unit-of-production basis over the total proved developed and
undeveloped reserves of the field concerned, except in the case of
assets whose useful life is shorter than the lifetime of the field,
in which case the straight-line method is applied. Rights and
concessions are depleted on the unit-of-production basis over the
total proved developed and undeveloped reserves of the relevant
area.
The unit-of-production rate calculation for the
depreciation/amortisation of field development costs takes into
account expenditures incurred to date, together with sanctioned
future development expenditure. Other property, plant and equipment
are generally depreciated on a straight-line basis over their
estimated useful lives, which is generally 20 years for refineries,
and major inspection costs are amortised over three to five years,
which represents the estimated period before the next planned major
inspection. Property, plant and equipment held under finance leases
are depreciated over the shorter of lease term and estimated useful
life. An item of property, plant and equipment and any significant
part initially recognised is derecognised upon disposal or when no
future economic benefits are expected from its use or disposal. Any
gain or loss arising on derecognition of the asset (calculated as
the difference between the net disposal proceeds and the carrying
amount of the asset) is included in the statement of profit or loss
and other comprehensive income when the asset is derecognised.
The asset's residual values, useful lives and methods of
depreciation/amortisation are reviewed at each reporting period and
adjusted prospectively, if appropriate.
(ii) Major maintenance, inspection and repairs
Expenditure on major maintenance refits, inspections or repairs
comprises the cost of replacement assets or parts of assets,
inspection costs and overhaul costs. Where an asset, or part of an
asset that was separately depreciated and is now written off is
replaced and it is probable that future economic benefits
associated with the item will flow to the Group, the expenditure is
capitalised. Where part of the asset replaced was not separately
considered as a component and therefore not depreciated separately,
the replacement value is used to estimate the carrying amount of
the replaced asset(s) and is immediately written off. Inspection
costs associated with major maintenance programmes are capitalised
and amortised over the period to the next inspection. All other
day-to-day repairs and maintenance costs are expensed as
incurred.
Provision for rehabilitation / Decommissioning Liability
The Group recognises a decommissioning liability where it has a
present legal or constructive obligation as a result of past
events, and it is probable that an outflow of resources will be
required to settle the obligation, and a reliable estimate of the
amount of obligation can be made.
The obligation generally arises when the asset is installed or
the ground/environment is disturbed at the field location. When the
liability is initially recognised, the present value of the
estimated costs is capitalised by increasing the carrying amount of
the related oil and gas assets to the extent that it was incurred
by the development/construction of the field. Any decommissioning
obligations that arise through the production of inventory are
expensed when the inventory item is recognised in cost of goods
sold.
Changes in the estimated timing or cost of decommissioning are
dealt with prospectively by recording an adjustment to the
provision and a corresponding adjustment to oil and gas assets.
Any reduction in the decommissioning liability and, therefore,
any deduction from the asset to which it relates, may not exceed
the carrying amount of that asset. If it does, any excess over the
carrying value is taken immediately to the statement of profit or
loss and other comprehensive income.
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If the change in estimate results in an increase in the
decommissioning liability and, therefore, an addition to the
carrying value of the asset, the Group considers whether this is an
indication of impairment of the asset as a whole, and if so, tests
for impairment. If, for mature fields, the estimate for the revised
value of oil and gas assets net of decommissioning provisions
exceeds the recoverable value, that portion of the increase is
charged directly to expense. Over time, the discounted liability is
increased for the change in present value based on the discount
rate that reflects current market assessments and the risks
specific to the liability. The periodic unwinding of the discount
is recognised in the statement of profit or loss and other
comprehensive income as a finance cost. The Company recognises
neither the deferred tax asset in respect of the temporary
difference on the decommissioning liability nor the corresponding
deferred tax liability in respect of the temporary difference on a
decommissioning asset.
Taxation
Current tax is the tax currently payable based on taxable profit
for the year.
Deferred income taxes are calculated using the liability method
on temporary differences. Deferred tax is generally provided on the
difference between the carrying amounts of assets and liabilities
and their tax bases. However, deferred tax is not provided on the
initial recognition of goodwill, nor on the initial recognition of
an asset or liability unless the related transaction is a business
combination or affects tax or accounting profit. Deferred tax on
temporary differences associated with shares in subsidiaries and
joint ventures is not provided if reversal of these temporary
differences can be controlled by the Company and it is probable
that reversal will not occur in the foreseeable future. In
addition, tax losses available to be carried forward as well as
other income tax credits to the Company are assessed for
recognition as deferred tax assets.
Deferred tax liabilities are provided in full, with no
discounting. Deferred tax assets are recognised to the extent that
it is probable that the underlying deductible temporary differences
will be able to be offset against future taxable income. Current
and deferred tax assets and liabilities are calculated at tax rates
that are expected to apply to their respective period of
realisation, provided they are enacted or substantively enacted at
the balance sheet date.
Changes in deferred tax assets or liabilities are recognised as
a component of tax expense in the income statement, except where
they relate to items that are charged or credited directly to
equity in which case the related deferred tax is also charged or
credited directly to equity.
Financial Assets
Financial assets are divided into the following categories:
loans and receivables and available-for-sale financial assets.
Financial assets are assigned to the different categories by
management on initial recognition, depending on the purpose for
which they were acquired, and are recognised when the Group becomes
party to contractual arrangements. Both loans and receivables and
available for sale financial assets are initially recorded at fair
value.
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. Trade, most other receivables and cash and cash equivalents
fall into this category of financial assets. Loans and receivables
are measured subsequent to initial recognition at amortised cost
using the effective interest method, less provision for impairment.
Any change in their value through impairment or reversal of
impairment is recognised in the income statement.
Provision against trade receivables is made when there is
objective evidence that the Group will not be able to collect all
amounts due to it in accordance with the original terms of those
receivables. The amount of the write-down is determined as the
difference between the asset's carrying amount and the present
value of estimated future cash flows.
A financial asset is derecognised only where the contractual
rights to the cash flows from the asset expire or the financial
asset is transferred and that transfer qualifies for derecognition.
A financial asset is transferred if the contractual rights to
receive the cash flows of the asset have been transferred or the
Group retains the contractual rights to receive the cash flows of
the asset but assumes a contractual obligation to pay the cash
flows to one or more recipients. A financial asset that is
transferred qualifies for derecognition if the Group transfers
substantially all the risks and rewards of ownership of the asset,
or if the Group neither retains nor transfers substantially all the
risks and rewards of ownership but does transfer control of that
asset.
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
16, 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.
Financial Liabilities
Financial liabilities are obligations to pay cash or other
financial assets and are recognised when the Group becomes a party
to the contractual provisions of the instrument.
All financial liabilities initially recognised at fair value
less transaction costs and thereafter carried at amortised cost
using the effective interest method, with interest-related charges
recognised as an expense in finance cost in the income statement. A
financial liability is derecognised only when the obligation is
extinguished, that is, when the obligation is discharged or
cancelled or expires.
Borrowing costs
Where funds are borrowed specifically to finance a project, the
amount capitalised represents the actual borrowing costs incurred.
Where surplus funds are available for a short term from funds
borrowed specifically to finance a project, the income generated
from the temporary investment of such amounts is also capitalised
and deducted from the total capitalised borrowing costs. Where the
funds used to finance a project form part of general borrowings,
the amount capitalised is calculated using a weighted average of
rates applicable to relevant general borrowings of the Group during
the period.
All other borrowing costs are recognised in the statement of
profit or loss and other comprehensive income in the period in
which they are incurred.
Even though exploration and evaluation assets can be qualifying
assets, generally, they do not meet the 'probable economic
benefits' test and also are rarely debt funded. Any related
borrowing costs incurred during this phase are generally recognised
in the statement of profit or loss and other comprehensive income
in the period in which they are incurred.
Inventories
Inventories are stated at the lower of cost and net realisable
value. The cost of materials is the purchase cost, determined on
first-in, first-out basis. The cost of crude oil and refined
products is the purchase cost, the cost of refining, including the
appropriate proportion of depreciation, depletion and amortisation
and overheads based on normal operating capacity, determined on a
weighted average basis. The net realisable value of crude oil and
refined products is based on the estimated selling price in the
ordinary course of business, less the estimated costs of completion
and the estimated costs necessary to make the sale.
Cash and Cash Equivalents
Cash and cash equivalents comprise cash on hand and demand
deposits, together with other short-term, highly liquid investments
that are readily convertible into known amounts of cash and which
are subject to an insignificant risk of changes in value.
Share-Based Payments
The Group operates a number of equity-settled, share-based
compensation plans, under which the entity receives services from
employees as consideration for equity instruments (options) of the
Company. The fair value of the employee services received in
exchange for the grant of the options is recognised as an expense.
The total amount to be expensed is determined by reference to the
fair value of the options granted:
-- Including any market performance conditions;
-- Excluding the impact of any service and non-market
performance vesting conditions (for example, profitability or sales
growth targets, or remaining an employee of the entity over a
specified time period; and
-- Including the impact of any non-vesting conditions (for
example, the requirement for employees to save).
Non-market vesting conditions are included in assumptions about
the number of options that are expected to vest. The total expense
is recognised over the vesting period, which is the period over
which all of the specified vesting conditions are to be
satisfied.
In addition, in some circumstances, employees may provide
services in advance of the grant date, and therefore the grant-date
fair value is estimated for the purposes of recognising the expense
during the period between service commencement period and grant
date.
At the end of each reporting period, the entity revises its
estimates of the number of options that are expected to vest based
on the non-market vesting conditions. It recognises the impact of
the revision to original estimates, if any, in profit or loss, with
a corresponding adjustment to equity.
When the options are exercised, the Company issues new shares.
The proceeds received, net of any directly attributable transaction
costs, are credited to share capital (nominal value) and share
premium.
Equity
Equity comprises the following:
"Share capital" representing the nominal value of equity
shares.
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"Share premium" representing the excess over nominal value of
the fair value of consideration received for equity shares, net of
expenses of the share issue.
"Share based payment reserve" represents 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.
"Revaluation reserve" represents the unrealised gain or loss on
fair/market value movement on available for sale investments,
derivative financial instruments and other assets which are valued
at their fair value at the balance sheet date.
"Retained earnings" represents retained profits and
(losses).
Foreign Currencies
Transactions in foreign currencies are translated at the
exchange rate ruling at the date of the transaction. Monetary
assets and liabilities in foreign currencies are translated at the
rates of exchange ruling at the balance sheet date. Non-monetary
items that are measured at historical cost in a foreign currency
are translated at the exchange rate at the date of the transaction.
Non-monetary items that are measured at fair value in a foreign
currency are translated using the exchange rates at the date when
the fair value was determined. Any exchange differences arising on
the settlement of monetary items or on translating monetary items
at rates different from those at which they were initially recorded
are recognised in the profit or loss in the period in which they
arise. Exchange differences on non-monetary items are recognised in
other comprehensive income to the extent that they relate to a gain
or loss on that non-monetary item taken to other comprehensive
income, otherwise such gains and losses are recognised in the
income statement.
The Group and Company's functional currency and presentational
currency is Sterling.
Significant accounting judgements, estimates and assumptions
The preparation of the Group's consolidated financial statements
requires management to make judgements, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and
liabilities, and the accompanying disclosures, and the disclosure
of contingent liabilities at the date of the consolidated financial
statements. Estimates and assumptions are continuously evaluated
and are based on management's experience and other factors,
including expectations of future events that are believed to be
reasonable under the circumstances. Uncertainty about these
assumptions and estimates could result in outcomes that require a
material adjustment to the carrying amount of assets or liabilities
affected in future periods.
In particular, the Group has identified the following areas
where significant judgements, estimates and assumptions are
required. Further information on each of these areas and how they
impact the various accounting policies are described below and also
in the relevant notes to the financial statements.
Changes in estimates are accounted for prospectively.
(i) Judgements
In the process of applying the Group's accounting policies,
management has made the following judgements, which have the most
significant effect on the amounts recognised in the consolidated
financial statements:
(a) Contingencies
Contingent liabilities may arise from the ordinary course of
business in relation to claims against the Group, including legal,
contractor, land access and other claims. By their nature,
contingencies will be resolved only when one or more uncertain
future events occur or fail to occur. The assessment of the
existence, and potential quantum, of contingencies inherently
involves the exercise of significant judgement and the use of
estimates regarding the outcome of future events.
(ii) Estimates and assumptions
The key assumptions concerning the future and other key sources
of estimation uncertainty at the reporting date that have a
significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year,
are described below. The Group based its assumptions and estimates
on parameters available when the consolidated financial statements
were prepared. Existing circumstances and assumptions about future
developments, however, may change due to market change or
circumstances arising beyond the control of the Group. Such changes
are reflected in the assumptions when they occur.
(a) Hydrocarbon reserve and resource estimates
Hydrocarbon reserves are estimates of the amount of hydrocarbons
that can be economically and legally extracted from the Group's oil
and gas properties. The Group estimates its commercial reserves and
resources based on information compiled by appropriately qualified
persons relating to the geological and technical data on the size,
depth, shape and grade of the hydrocarbon body and suitable
production techniques and recovery rates. Commercial reserves are
determined using estimates of oil and gas in place, recovery
factors and future commodity prices, the latter having an impact on
the total amount of recoverable reserves and the proportion of the
gross reserves which are attributable to the host government under
the terms of the Production-Sharing Agreements. Future development
costs are estimated using assumptions as to the number of wells
required to produce the commercial reserves, the cost of such wells
and associated production facilities, and other capital costs. The
current long-term Brent oil price assumption used in the estimation
of commercial reserves is US$80/bbl. The carrying amount of oil and
gas development and production assets at 31 December 2015 is shown
in Note 12.
The Group estimates and reports hydrocarbon reserves in line
with the principles contained in the SPE Petroleum Resources
Management Reporting System (PRMS) framework. As the economic
assumptions used may change and as additional geological
information is obtained during the operation of a field, estimates
of recoverable reserves may change. Such changes may impact the
Group's reported financial position and results, which include:
-- The carrying value of exploration and evaluation assets; oil
and gas properties; property, plant and equipment; and goodwill may
be affected due to changes in estimated future cash flows
-- Depreciation and amortisation charges in the statement of
profit or loss and other comprehensive income may change where such
charges are determined using the Units of Production (UOP) method,
or where the useful life of the related assets change
-- Provisions for decommissioning may require revision - where
changes to the reserve estimates affect expectations about when
such activities will occur and the associated cost of these
activities
-- The recognition and carrying value of deferred tax assets may
change due to changes in the judgements regarding the existence of
such assets and in estimates of the likely recovery of such
assets
(b) Exploration and evaluation expenditures
The application of the Group's accounting policy for exploration
and evaluation expenditure requires judgement to determine whether
future economic benefits are likely, from future either
exploitation or sale, or whether activities have not reached a
stage which permits a reasonable assessment of the existence of
reserves. The determination of reserves and resources is itself an
estimation process that involves varying degrees of uncertainty
depending on how the resources are classified. These estimates
directly impact when the Group defers exploration and evaluation
expenditure. The deferral policy requires management to make
certain estimates and assumptions about future events and
circumstances, in particular, whether an economically viable
extraction operation can be established. Any such estimates and
assumptions may change as new information becomes available. If,
after expenditure is capitalised, information becomes available
suggesting that the recovery of the expenditure is unlikely, the
relevant capitalised amount is written off in the statement of
profit or loss and other comprehensive income in the period when
the new information becomes available.
(c) Units of production (UOP) depreciation of oil and gas assets
Oil and gas properties are depreciated using the UOP method over
total proved developed and undeveloped hydrocarbon reserves. This
results in a depreciation/amortisation charge proportional to the
depletion of the anticipated remaining production from the
field.
(c) Units of production (UOP) depreciation of oil and gas
assets
The life of each item, which is assessed at least annually, has
regard to both its physical life limitations and present
assessments of economically recoverable reserves of the field at
which the asset is located. These calculations require the use of
estimates and assumptions, including the amount of recoverable
reserves and estimates of future capital expenditure. The
calculation of the UOP rate of depreciation/amortisation will be
impacted to the extent that actual production in the future is
different from current forecast production based on total proved
reserves, or future capital expenditure estimates change. Changes
to proved reserves could arise due to changes in the factors or
assumptions used in estimating reserves, including:
-- The effect on proved reserves of differences between actual
commodity prices and commodity price assumptions
-- Unforeseen operational issues
(d) Recoverability of oil and gas assets
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The Group assesses each asset or cash generating unit (CGU)
(excluding goodwill, which is assessed annually regardless of
indicators) each reporting period to determine whether any
indication of impairment exists. Where an indicator of impairment
exists, a formal estimate of the recoverable amount is made, which
is considered to be the higher of the fair value less costs of
disposal (FVLCD) and value in use (VIU). The assessments require
the use of estimates and assumptions such as long-term oil prices
(considering current and historical prices, price trends and
related factors), discount rates, operating costs, future capital
requirements, decommissioning costs, exploration potential,
reserves (see (a) Hydrocarbon reserves and resource estimates
above) and operating performance (which includes production and
sales volumes). These estimates and assumptions are subject to risk
and uncertainty. Therefore, there is a possibility that changes in
circumstances will impact these projections, which may impact the
recoverable amount of assets and/or CGUs.
Information on how fair value is determined by the Group
follows.
(e) Decommissioning costs
Decommissioning costs will be incurred by the Group at the end
of the operating life of some of the Group's facilities and
properties. The Group assesses its decommissioning provision at
each reporting date. The ultimate decommissioning costs are
uncertain and cost estimates can vary in response to many factors,
including changes to relevant legal requirements, the emergence of
new restoration techniques or experience at other production sites.
The expected timing, extent and amount of expenditure may also
change - for example, in response to changes in reserves or changes
in laws and regulations or their interpretation.
Therefore, significant estimates and assumptions are made in
determining the provision for decommissioning.
As a result, there could be significant adjustments to the
provisions established which would affect future financial
results.
External valuers may be used to assist with the assessment of
future decommissioning costs. The involvement of external valuers
is determined on a case by case basis, taking into account factors
such as the expected gross cost or timing of abandonment, and is
approved by the Company's Audit Committee. Selection criteria
include market knowledge, reputation, independence and whether
professional standards are maintained. The provision at reporting
date represents management's best estimate of the present value of
the future decommissioning costs required
(f) Fair value measurement
The Group measures financial instruments, such as derivatives,
at fair value at each balance sheet date. From time to time, the
fair values of non-financial assets and liabilities are required to
be determined, e.g., when the entity acquires a business, or where
an entity measures the recoverable amount of an asset or
cash-generating unit (CGU) at FVLCD.
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date.
The fair value of an asset or a liability is measured using the
assumptions that market participants would use when pricing the
asset or liability, assuming that market participants act in their
economic best interest.
A fair value measurement of a non-financial asset takes into
account a market participant's ability to generate economic
benefits by using the asset in its highest and best use or by
selling it to another market participant that would use the asset
in its highest and best use.
The Group uses valuation techniques that are appropriate in the
circumstances and for which sufficient data are available to
measure fair value, maximising the use of relevant observable
inputs and minimising the use of unobservable inputs. From time to
time external valuers are used to assess FVLCD of the Group's
non-financial assets. Involvement of external valuers is decided
upon by the valuation committee after discussion with and approval
by the Company's Audit Committee. Selection criteria include market
knowledge, reputation, independence and whether professional
standards are maintained. Valuers are normally rotated every three
years. The valuation committee decides, after discussions with the
Group's external valuers, which valuation techniques and inputs to
use for each case.
Changes in estimates and assumptions about these inputs could
affect the reported fair value.
Going Concern
The Directors noted the losses that the Group has made for the
Year Ended 30 September 2015. The Directors have prepared cash flow
forecasts for the period ending 28 February 2017 which take account
of the current cost and operational structure of the Group.
The cost structure of the Group comprises a high proportion of
discretionary spend and therefore in the event that cash flows
become constrained, costs can be quickly reduced to enable the
Group to operate within its available funding.
These forecasts demonstrate that the Group has sufficient cash
funds available to allow it to continue in business for a period of
at least twelve months from the date of approval of these financial
statements. Accordingly, the financial statements have been
prepared on a going concern basis.
It is the prime responsibility of the Board to ensure the Group
remains a going concern. At 30 September 2015 the Company had cash
and cash equivalents of GBP4,590,000 and borrowings of GBP111,000.
The Company has minimal contractual expenditure commitments and the
Board considers the present funds sufficient to maintain the
working capital of the Company for a period of at least 12 months
from the date of signing the Annual Report and Financial
Statements. For these reasons the Directors adopt the going concern
basis in the preparation of the Financial Statements.
1. Business Combinations
On 19 October 2014 through UK Oil and Gas Investments Plc, the
Group acquired 100 per cent of the entire issued share capital of
Northern Petroleum (GB) Limited, NP Weald Limited and NP Solent
Limited. The companies were re-named UKOG (GB) Limited, UKOG Weald
Limited and UKOG Solent Limited.
Through the business combination the Group acquired the
following assets:
-- The Horndean (UKOG 10%) and Avington (UKOG 5%) onshore
producing oil fields, producing around 20 barrels of oil per day
("bopd") net to UKOG; both fields are operated by IGas.
-- Offshore Isle of Wight exploration licence, P1916 (UKOG 77.5%
and operator), containing the significant, drill-ready M prospect,
with primary targets in the Jurassic Upper Portland Limestone and
Triassic Sherwood sandstone.
-- The Baxters Copse (UKOG 50%, IGas operator, PEDL233) and
Markwells Wood (UK 100% and operator, PEDL126) onshore oil
discoveries.
The assets and liabilities arising on the day of the acquisition
are as follows:
Northern
Petroleum NP
(GB) NP Weald Solent
Limited Limited Limited Total
Fair Fair Fair Fair
Value Value Value Value
--------------------------------------- ----------- --------- --------- --------
GBP'000 GBP'000 GBP'000 GBP'000
Intangible Assets: Exploration
Costs - 264 32 296
Tangible Assets: Oil Properties 1,609 - - 1,609
Cash and cash equivalents 19 - - 19
Trade and other receivables 78 1 14 93
Other current assets 1 - - 1
Trade and Other Payables (101) - (46) (147)
Provisions (282) (77) - (359)
Net identifiable assets/(liabilities)
acquired at fair value 1,324 188 - 1,512
Goodwill on purchase - - - -
--------------------------------------- ----------- --------- --------- --------
Total consideration 1,324 188 - 1,512
--------------------------------------- ----------- --------- --------- --------
Total cash outflow on the
acquisition is as follows:
Cash paid 1,512
Net cash acquired with
the subsidiaries (19)
--------
Net consolidated cash flow 1,493
--------
2. Segment Reporting
All of the Group's assets and operations are located in the
United Kingdom. For management purposes, the Group is organised
into business units based on the main types of activities and has
three reportable segments, as follows:
-- Oil exploration and production segment: includes producing business activities
-- Oil exploration and evaluation: includes non-producing activities.
-- Head Office, corporate and administrative, including parent company activities.
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The Board of Directors monitors the operating results of its
business units separately for the purpose of making decisions about
resource allocation and performance assessment. Segment performance
is evaluated based on operating profit or loss and is measured
consistently with operating profit or loss in the consolidated
financial statements. However, the Group's financing (including
finance costs and finance income) and income taxes are managed on a
group basis and are not allocated to operating segments.
The accounting policies used by the Group in reporting segments
internally are the same as those used in the financial
statements.
In the previous year to 30 September 2014, the Company was
operating as a single UK based segment with a single primary
activity to invest in businesses so as to generate a return for the
shareholders. The revenue from this segment, generated from
management services in the UK, was GBP7,000 during that year. As
such no comparative segment information is considered useful to
disclose.
Subject to further acquisitions and/or disposals, the Group
expects to further review its segmental information during the
forthcoming financial year, as it begins to see the full impact of
its acquisitions and/or disposals.
Oil production Oil exploration Corporate
Group & exploration & evaluation & Administrative Consolidated
Year ended 30 September GBP'000 GBP'000 GBP'000 GBP'000
2015
------------------------- --------------- ---------------- ------------------ -------------
Revenue
External Customers 240 - - 240
------------------------- --------------- ---------------- ------------------ -------------
Total revenue 240 - - 240
------------------------- --------------- ---------------- ------------------ -------------
Results
Depletion & impairment (82) - - (82)
Share of associates
loss - (69) - (69)
Profit/(loss) before&
after taxation 37 (84) (1,648) (1,695)
------------------------- --------------- ---------------- ------------------ -------------
Segment assets 1,907 4,078 5,596 11,581
------------------------- --------------- ---------------- ------------------ -------------
Segment liabilities (297) (78) (424) (799)
------------------------- --------------- ---------------- ------------------ -------------
Other disclosures;
Investment in associate - 352 - 352
Investment in available
for sale investments - 580 - 580
Capital expenditure
(1) 251 802 - 1,053
------------------------- --------------- ---------------- ------------------ -------------
(1) Capital expenditure consists of capitalised exploration
expenditure, development expenditure, additions to oil & gas
properties and to other intangible assets including expenditure on
assets from the acquisition of subsidiaries.
3. Operating Loss
2015 2014
Group GBP'000 GBP'000
----------------------------- -------- --------
Operating (loss) is stated
after charging:
- Directors remuneration 628 472
- Employee Benefit Trust
charge - 13
- Auditors' remuneration
Audit-related assurance
services 25 14
Other compliance services - -
Tax compliance - -
- Depletion & impairment
of oil & gas properties 82 -
------------------------------ -------- --------
4. Directors and Employees
The Company employs the services of 3 Directors (2014: 3).
Remuneration in respect of these executive and non-executive
Directors was:
2015 2014
Group GBP000 GBP000
Employment costs, including Directors,
during the year:
Wages and salaries 34 52
Consultancy fees 594 188
Share based payments - 232
628 472
------- -------
Average number of persons, including No. No.
executive Directors employed
Administration 3 3
------- -------
3 3
------- -------
Directors' remuneration GBP000 GBP000
Emoluments 628 470
------- -------
No. No.
Number of Directors in money purchase - -
pension schemes
------- -------
The amounts set out above include remuneration in respect of the
directors' are as follows:
2015 2014
GBP'000 GBP'000
David Lenigas (resigned 8 July
2015) 170 142
Donald Strang 245 142
Jason Berry 162 118
Stephen Sanderson (appointed 8
July 2015) 51 -
David Wither (resigned 30 June
2014) - 70
Total Directors Emoluments 628 472
-------- --------
5. Finance costs
2015 2014
Group GBP'000 GBP'000
Loan interest 35 -
Loan arrangement fee 46 -
Total finance costs 81 -
-------- --------
6. Income Tax
There is no tax credit on the loss for the current or prior
year. The tax assessed for the year differs from the standard rate
of corporation tax in the UK as follows:
2015 2014
Group GBP'000 GBP'000
------------------------------------ --------- ---------
Loss for the year before
tax (1,695) (907)
Tax rate 20/21% 21/23%
-------------------------------------- --------- ---------
Expected tax credit (348) (200)
Differences between capital
allowances and depreciation - -
Expenses not deductible
for tax purposes 78 77
Future income tax benefit
not brought to account 270 123
-------------------------------------- --------- ---------
Actual tax expense - -
-------------------------------------- --------- ---------
No deferred tax asset has been recognised because
there is uncertainty of the timing of suitable
future profits against which they can be recovered.
7. Loss per Share
The calculation of the basic loss per share is calculated by
dividing the consolidated loss attributable to the equity holders
of the Company by the weighted average number of ordinary shares in
issue during the year.
2015 2014
Group GBP'000 GBP'000
(Loss) attributable to ordinary
shareholders (1,695) (907)
------------------------------------- -------------- ------------
Number Number
Weighted average number of ordinary
shares for
calculating basic loss per share 1,770,767,449 841,904,149
------------------------------------- -------------- ------------
Pence Pence
Basic and diluted loss per share (0.10) (0.11)
------------------------------------- -------------- ------------
As inclusion of the potential ordinary shares would result in a
decrease in the earnings per share they are considered to be
anti-dilutive, as such, a diluted earnings per share is not
included.
8. Exploration & evaluation assets
Group Company
GBP'000 GBP'000
-------------------------------------- -------- --------
Cost & Net Book Value
At 1 October 2013 & at 30 September
2014 - -
On Acquisition of Northern Petroleum
Companies 296 -
Additions 1,013 662
Net Book Value At 30 September
2015 1,309 662
-------------------------------------- -------- --------
During the year, there has been no impairment charged, or
required to be. The Directors have assessed the fair value of the
exploration & evaluation assets as at 30 September 2015, and
have concluded at this time there is no requirement to impair and
reduce the carrying value whilst they continue to explore and
assess these licence areas, further to the detail below.
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Exploration and evaluation activity involves the search for
hydrocarbon resources, the determination of technical feasibility
and the assessment of commercial viability of an identified
resource. The additions during the year reflect the multiple
acquisitions and associated exploration and evaluation activities.
As this point the Company is still assessing the potential of these
assets, and will continue to develop and evaluate these assets in
the coming year. Since the acquisition date there has been no
material changes to the Licence areas. The directors therefore
consider that no impairment is required at 30 September 2015.
9. Oil & gas properties
Group
GBP'000
-------------------------------------- --------
Cost
At 1 October 2013 & at 30 September
2014 -
On Acquisition of Northern Petroleum
Companies 1,608
Additions 40
At 30 September 2015 1,648
--------------------------------------- --------
Depletion & impairment
At 1 October 2013 & at 30 September
2014 -
Depletion charge (82)
At 30 September 2015 (82)
--------------------------------------- --------
Net Book Value
At 30 September 2014 -
-------------------------------------- --------
At 30 September 2015 1,566
--------------------------------------- --------
Impairment review
The Oil & Gas properties comprise the assets acquired as a
result of the acquisition of the Northern Petroleum Companies, in
particular the Horndean and Avington oil fields. The Directors have
carried out an impairment review as at 30 September 2015, and
determined that an impairment charge is not currently required. The
Directors based this assessment on continuing production from
Horndean and in the case of Avington the operational optimisation
that is ongoing to improve operational efficiencies.
10. Investment in Subsidiaries
Company 2015 2014
GBP'000 GBP'000
------------------------- -------- --------
Cost and net book amount
At 1 October - -
Additions in the year 1,512 -
At 30 September 1,512 -
------------------------- -------- --------
The Company as at 30 September 2014 had no interest in any
subsidiary companies. The Company acquired on 19 October 2014, the
following subsidiary companies, as detailed in the Business
Combination Note 2, and hold more than 50 per cent of the share
capital of the following companies as at 30 September 2015:
Country Proportion Functional Nature of
Company of Registration held Currency business
UKOG (GB) Limited UK 100% GBGBP Oil production
UKOG Solent Limited UK 100% GBGBP Oil exploration
UKOG Weald Limited UK 100% GBGBP Oil exploration
11. Investment in Associate
Group & Company 2015 2014
GBP'000 GBP'000
----------------------------------- -------- --------
Carrying Value as at 1 October - -
Re-classification from available
for sale investments 1,780
Equity additions at cost 352 -
Share of associates loss for
the year (69) -
Carrying value as at 30 September 2,063 -
----------------------------------- -------- --------
On 19 December 2013, the Company completed the acquisition of a
7.5% shareholding in Horse Hill Developments Ltd ("Horse Hill") , a
company incorporated and resident in the UK, with farm in interests
in the Weald Basin UK, for exploration and production of petroleum
under licence within the Horse Field , for a cash consideration of
GBP450,000. On 12 August 2014, the Company acquired an additional
12.5% interest in Horse Hill for a further cash consideration of
GBP750,000, thus increasing the Company's holding to 20%.
On 6 March 2015, the Company acquired a further 8% interest in
Horse Hill for a cash consideration of GBP580,000, thus increasing
the Company's holding to 28%. At this point the interest was deemed
to qualify as that of an associate company and the investment
re-classified from this date. A further 2% holding was acquired on
12 March 2015, for GBP352,000 payable by the issue of 44million
Ordinary Shares in UK Oil & Gas Investments PLC, at a price of
0.8pence per share. This acquisition took the Company's interest in
Horse Hill to a 30% shareholding.
Details of the Group & Company's associate
at 30 September 2015 are as follows:
Name Place Proportion Date associate Reporting Principal
of Incorporation held interest Date of activities
acquired associate
Horse Hill UK 30.0% 06/03/15 31/12/15 Oil exploration
Developments
Ltd
Summarised financial information for the Group
& Company's associate, where made publicly
available, as at 30 September 2015 is given
below:
For the period ended As at 30
30 September 2015 September
2015
Revenue (Loss) Total other Assets Liabilities
GBP'000 GBP'000 comprehensive GBP'000 GBP'000
income
GBP'000
Horse Hill
Developments
Ltd - (300) - 6,861 (3,589)
-------------------- -------------------- ----------- --------------- ----------- ------------------
12. Available for Sale Investments
Group & Company 2015 2014
GBP'000 GBP'000
----------------------------------- -------- --------
Investment in unlisted securities
Valuation at 1 October 1,568 -
Additions at cost 580 1,568
Re-classification of investment
to associate (1,780) -
Valuation at 30 September 368 1,568
----------------------------------- -------- --------
On 19 December 2013, the Company completed the acquisition of a
7.5% shareholding in Horse Hill Developments Ltd ("Horse Hill") , a
company incorporated and resident in the UK, with farm in interests
in the Weald Basin UK, for exploration and production of petroleum
under licence within the Horse Field , for a cash consideration of
GBP450,000. On 12 August 2014, the Company acquired an additional
12.5% interest in Horse Hill for a further cash consideration of
GBP750,000, thus increasing the Company's holding to 20%.
On 16 May 2014, the Company completed the acquisition of a
strategic 6% shareholding in Angus Energy Ltd, a company
incorporated in Scotland and resident in the UK, for a
consideration of GBP368,000, payable by the issue of 46million
shares in the Company.
On 6 March 2015, the Company acquired a further 8% interest in
Horse Hill for a cash consideration of GBP580,000, thus increasing
the Company's holding to 28%. At this point the interest was deemed
to qualify as that of an associate company and the investment
re-classified from this date
Horse Hill Development Ltd and Angus Energy Ltd are not listed
on any stock exchange.
13. Inventory
2015 2014
Group GBP'000 GBP'000
------------------------ -------- --------
Inventories - Crude Oil 2 -
Total 2 -
------------------------ -------- --------
14. Trade and Other Receivables
Group Company
2015 2014 2015 2014
Current trade and other receivables GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- --------
Trade debtors 26 6 26 6
Other debtors 609 787 609 787
Loans to related parties
(see Note 26) 901 370 901 370
Loans to subsidiary companies - - 452 -
Prepayments and accrued income 147 251 132 251
------------------------------------- -------- -------- -------- --------
Total 1,683 1,414 2,120 1,414
------------------------------------- -------- -------- -------- --------
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The directors consider that the carrying amount of trade and
other receivables approximates to their fair value.
16. Derivative Financial Instrument
Group & Company 2015 2014
Equity Swap Agreement GBP'000 GBP'000
--------------------------------------- -------- --------
Fair value at 1 October 184 -
Cost of equity swap arrangement - 250
Settled during the year (201) (92)
Gain/(loss) on settled instalments 61 (18)
Transfer to income statement (44) -
Fair value adjustment at 30 September - 44
Fair value carried forward at
30 September - 184
--------------------------------------- -------- --------
On 13 December 2013 the Company announced that it had entered
into an equity swap agreement ("the Equity Swap Agreement") with
YAGM over 62,499,996 of the Subscription Shares ("the Swap
Shares"). In return for a payment by the Company to YAGM of
GBP250,000, twelve monthly settlement payments in respect of such
payment 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 (as defined in the Equity Swap Agreement)
of the Company's ordinary shares in any month and a 'benchmark
price' that is 10% above the Subscription Price of 0.8p. 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.
By 30 September 2014, 26,041,665 shares had been closed out for
net proceeds of GBP92,000 which resulted in a loss of GBP18,000
against the benchmark price, taken to the income statement. The
remaining balance was fair valued at 30 September 2014, resulting
in a fair uplift adjustment based on the benchmark price and
formula of the arrangement, with the unrealised gain credited to
revaluation reserve and highlighted in other comprehensive
income.
The Company agreed to close out the equity swap agreement on 27
October 2014, for a single final payment of GBP201,250, resulting
in a gain above the benchmark price of GBP61,250. No further equity
swap arrangements were made during the year to 30 September
2015.
17. Cash and Cash Equivalents
Group Company
2015 2014 2015 2014
GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- --------
Cash at bank and in hand 4,590 982 4,461 982
Total 4,590 982 4,461 982
-------------------------- -------- -------- -------- --------
18. Trade and Other Payables
Group Company
2015 2014 2015 2014
Current trade and other payables GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- --------
Trade creditors 117 102 101 102
Accruals and deferred income 212 394 212 394
---------------------------------- -------- -------- -------- --------
Total 329 496 313 496
---------------------------------- -------- -------- -------- --------
The directors consider that the carrying amount of trade and
other payables approximates to their fair value.
19. Borrowings
Group Company
2015 2014 2015 2014
GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- --------
YAGM Debt facility 111 - 111 -
Total 111 - 111 -
-------------------- -------- -------- -------- --------
The Company entered into an unsecured US$10 million debt
facility to be provided by YA Global Master SPV Ltd ("YAGM") on 28
October 2014 to fund further investment in the UK oil and gas
sector in accordance with the Company's investing policy (the "YAGM
Facility") The facility is available to the Company for three years
from the date of the agreement. Any drawdowns by the Company under
the YAGM Facility are to be repaid in twelve equal monthly amounts
("Monthly Repayment Amount") and carry an annual interest rate of
10 per cent.
UKOG is entitled to pay the Monthly Repayments Amounts either in
cash, or at the Company's sole election, by means of conversion of
the Monthly Repayment Amount into new ordinary shares, to be issued
at a conversion price equal to 95% of the average of the lowest 5
daily volume weighted average prices ("VWAP") during the 15 trading
days prior to the scheduled repayment date. All drawdowns under the
YAGM Facility are subject to the prior approval of YAGM.
The Company drew down US$1 million under the YAGM Facility on
signing the agreement, which is repayable at the rate of US$83,333
per month on or before 1 November 2015, together with accrued
interest. This drawdown has been repaid in full after the year
end.
20. Provisions - Decommissioning
2015 2014
Group GBP'000 GBP'000
---------------------------------------- -------- --------
As at 1 October - -
Acquired on acquisition of subsidiaries 359 -
As at 30 September 359 -
---------------------------------------- -------- --------
The amount provided at 30 September 2015 represents the Group's
share of decommissioning liabilities in respect of the producing
Horndean and Avington fields, and the Markwell's Wood and Havant
drilling sites.
The Company makes full provision for the future cost of
decommissioning oil production facilities and pipelines on a
discounted basis on the installation of those facilities. The
decommissioning provision represents the present value of
decommissioning costs relating to oil and gas properties. At this
point in time it is uncertain as to when some of these
decommissioning costs will occur given current plans by the Company
which may change when operations cease. Therefore the Directors
have taken a conservative approach and not discounted these values.
These provisions have been created based on the Company's internal
estimates. Assumptions based on the current economic environment
have been made, which management believes are a reasonable basis
upon which to estimate the future liability. These estimates are
reviewed regularly to take into account any material changes to the
assumptions. However, actual decommissioning costs will ultimately
depend upon future market prices for the necessary decommissioning
works required that will reflect market conditions at the relevant
time. Furthermore, the timing of decommissioning is likely to
depend on when the fields cease to produce at economically viable
rates. This, in turn, will depend upon future oil and gas prices,
which are inherently uncertain.
21. Share Capital
Ordinary Shares Number
of ordinary Nominal Total
shares Value Value
GBP GBP'000
Issued at 30 September
2013 1,107,117,869 0.001 1,107
Capital Reorganisation
on 25 November 2013 (see
(1) below);
- Sub-division into deferred
shares of 0.001p 109,604,669,031 0.00001 1,096,047
- Sub-division into ordinary
shares of 0.001p 1,107,117,869 0.00001 11
Consolidation on 10:1
basis, A ordinary shares
of 0.01p each 110,711,787 0.0001 11
A Ordinary shares carried
forward at 25 November
2013 110,711,787 0.0001 11
On 25 November 2013,
placing for cash at 0.03p
per share 500,000,000 0.0001 50
On 5 December 2013, placing
for cash at 0.3p per
share 66,666,666 0.0001 7
On 16 December 2013,
placing for cash at 0.8p
per share 130,000,000 0.0001 13
On 6 January 2014, conversion
of B ordinary shares
at 0.01p per share 18,390 0.0001 -
On 3 February 2014, issue
of shares at 0.8p per
share for acquisition 46,000,000 0.0001 4
On 28 May 2014, placing
for cash at 0.3p per
share 233,333,333 0.0001 23
On 27 June 2014, warrants
exercised at 0.35p per
share 6,499,999 0.0001 1
On 25 July 2014, placing
for cash at 1p per share 200,000,000 0.0001 20
On 13 August 2014, warrants
exercised at 0.35p per
share 833,333 0.0001 -
On 29 September 2014,
issue for cash at 0.01p
per share 129,000,000 0.0001 13
---------------- ---------- ----------
Issued at 30 September
2014 1,423,063,508 0.0001 142
On 15 October 2014, placing
for cash at 1.2p per
share 166,666,667 0.0001 17
On 28 November 2014,
warrants exercised at
0.35p per share 59,333,334 0.0001 6
On 13 March 2015, issue
of shares at 0.8p per
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February 26, 2016 02:01 ET (07:01 GMT)
share for acquisition 44,000,000 0.0001 4
On 17 April 2015, exercise
of warrants and options
at 0.4p, & 1.48p per
share 70,553,844 0.0001 7
On 10 June 2015, placing
for cash at 2.25p per
share 266,666,667 0.0001 27
---------------- ---------- ----------
Issued at 30 September
2015 2,030,284,020 0.0001 203
---------------- ---------- ----------
(1) On 25 November 2013, at a General Meeting the shareholders
approved a capital reorganisation. The existing ordinary shares of
0.1p were subdivided into one A ordinary share of 0.001p each and
99 deferred shares of 0.001p. These 0.001p A ordinary shares were
then each consolidated into 0.01p A ordinary shares on an 10:1
basis. The rights attached to the new A ordinary shares are in all
material aspects the same as the rights attaching to the existing A
ordinary shares. In addition the B ordinary shares were also
subdivided and consolidated on the same basis as the A ordinary
shares into 0.01p B Ordinary shares and deferred shares of
0.001p.
(2) On 31 March 2014, A ordinary shares were re-designated as
Ordinary shares from that date, and remained in all material
aspects the same as the rights which previously attached to the A
ordinary shares.
B Ordinary Shares
At 1 October 2013, there were 183,902 B ordinary shares in
issue, post the General Meeting of 25 November 2013 capital
reorganisation, there were 18,390 B ordinary shares in issue, which
were converted to A ordinary shares on 6 January 2014. After the
conversion this class of share was subsequently cancelled.
Deferred shares
At 1 October 2013, there were 10,487,624,769 deferred shares of
0.1p in issue. Post the General Meeting of 25 November 2013 capital
reorganisation, and the resultant conversion and subdivisions by
way of relating to the A ordinary and B ordinary shares, the
existing 0.1p deferred shares were subdivided into 0.001p deferred
shares totalling 1,048,762,476,900. As a result of the
reorganisation of the A and B ordinary shares, a further
109,604,669,031 and 18,206,298 deferred shares of 0.001p were
issued. These deferred shares do not carry voting rights.
Total Ordinary and Deferred Shares
The issued share capital as at 30 September 2015 is as
follows:
Number Nominal Total Value
of shares Value GBP'000
GBP
Ordinary shares 2,030,284,020 0.0001 203
Deferred shares 1,158,385,352,229 0.00001 11,584
------------
11,787
============
Share Options
During the year 100 million options were granted (2014: 70
million).
As at 30 September 2015 the
options in issue were:
Options
Exercise price Expiry date in issue
30 September
2015
---------------------------- ------------ -------------
31 December
0.4p 2017 100,000,000
28 November
0.4p 2020 42,500,000
22 August
1.15p 2019 10,000,000
152,500,000
---------------------------- ------------ -------------
17.5 million options were exercised and no options were
cancelled during the year (2014: nil).
No options lapsed during the year (2014: 82,970,045
options).
Warrants
As at 30 September 2014, 59,333,334 warrants were in issue, all
of these warrants were exercised on 28 November 2014, at 0.35p per
share.
No warrants lapsed during the year. (2014: 5 million
warrants).
On 28 October 2014, 13,053,844 warrants with an exercise price
of 1.48p were issued, and on 20 November 2014, 40,000,000 warrants
with an exercise price of 0.4p were issued. All of these warrants
issued during the year were exercised on 17 April 2015.
A further 26,666,667 warrants were issued on 10 June 2015, with
an exercise price of 2.25p and expiry date of 10 June 2018. These
warrants remain the only warrants outstanding as at 30 September
2015.
Employee Benefit Trust
The Company established on 29 September 2014, an employee
benefit trust called the UK Oil & Gas Employee Benefit Trust
("EBT") to implement the use of the Company's existing share
incentive plan over 10% of the Company's issued share capital from
time to time in as efficient a manner as possible for the
beneficiaries of that plan. The EBT is a discretionary trust for
the benefit of directors, employees and consultants of the
Company.
Accordingly, the trustees of the EBT subscribed for 129,000,000
new ordinary shares of 0.01p each in the Company, at par value per
share at an aggregate cost to the Company of GBP12,900, such shares
representing 9.07% of the existing issued share capital of the
Company (at that date). The shares held in the EBT are intended to
be used to satisfy future awards made by the Company's Remuneration
Committee under the share incentive scheme.
No further issue of ordinary shares was made to the EBT during
the year ended 30 September 2015.
22. Share-Based Payments
Details of share options and warrants granted during the year to
Directors & consultants over the ordinary shares are as
follows:
At Issued Exercised At Exercise Date
from
1 October during during 30 September price which Expiry
2014 the the 2015 exercisable date
year year
No. No. No. No. GBP
Share options millions millions millions millions
Donald
Strang 10 - - 10 0.0040 28/11/2013 28/11/2020
David Lenigas 10 - - 10 0.0040 28/11/2013 28/11/2020
Jason Berry 10 - - 10 0.0115 22/08/2014 22/08/2019
Stephen
Sanderson - 25 - 25 0.0040 21/01/2015 31/12/2017
30 - - 30
Consultants 40 - (17.5) 22.5 0.0040 28/11/2013 28/11/2020
Consultants - 75 - 75 0.0040 21/01/2015 31/12/2017
---------- --------- ---------- -------------
70 100 (17.5) 152.5
---------- --------- ---------- -------------
The share price range during the year was GBP0.0035 to GBP0.0310
(2014 - GBP0.0006 to GBP0.0170).
The disclosure of Weighted Average Exercise Prices, and Weighted
Average Contractual Life analysis is not viewed as informative
because of the minimal variation of options currently in issue, and
therefore has accordingly not been disclosed.
For those options granted where IFRS 2 "Share-Based Payment" is
applicable, the fair values were calculated using the Black-Scholes
model. The inputs into the model were as follows:
Risk free Share price Expected Share price
rate volatility life at date
of grant
28 November
2013 2.3% 248.6% 7 years GBP0.0040
22 August
2014 2.3% 248.6% 5 years GBP0.0112
21 January
2015 2.3% 251.4% 2.95 years GBP0.0039
Expected volatility was determined by calculating the historical
volatility of the Company's share price for 12 months prior to the
date of grant. The expected life used in the model has been
adjusted, based on management's best estimate, for the effects of
non-transferability, exercise restrictions and behavioural
considerations.
The Company recognised total expenses of GBP378,000 (2014:
GBP351,000) relating to equity-settled share-based payment
transactions during the year, and GBP70,000 (2014: GBP866,000) was
transferred via equity to retained earnings on the exercising or
lapse of options during the year.
23. Financial Instruments and Risk Analysis
Financial Assets by Category
The IAS 39 categories of financial asset included in the balance
sheet and the headings in which they are included are as
follows:
Current assets - Group 2015 2014
GBP000 GBP000
Inventory 2 -
Loans and receivables 1,683 1,414
Derivative financial instrument - 184
Cash and cash equivalents 4,590 982
------- -------
6,275 2,580
------- -------
Financial Liabilities by Category
The IAS 39 categories of financial liability included in the
balance sheet and the headings in which they are included are as
follows:
Current liabilities - Group
Financial liabilities measured
at amortised cost 440 496
---- ----
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