AMER.L Regulatory News (AMER)

9 April 2019

Amerisur Resources Plc 

("Amerisur" or the "Company")

Final Results for the year ended 31 December 2018

Unlocking Potential, Strengthening Value

Highlights:

Financial

· Strong financial performance in 2018 driven by production growth and higher oil prices, with netbacks of $43/bbl (average realised oil price of $64.8/bbl)

· Significant revenue growth of 28% to $108.2m (2017: $84.7m)

· Adjusted EBITDA increased by 72% to $34.0m (2017: $19.8m)

· Robust cash position of $44.1m* and zero debt (2017: $41.3m)

· Strong growth in operating profit to $11.0m (2017: $0.3m)

*Includes restricted cash

Production and OBA

· 2018 average production increased 10% to 5,356 BOPD (100% oil)

· FY18 OBA throughput average of 4,113 BOPD, with maximum throughput of 6,540 BOPD

· Average cash transport costs per barrel reduced further to $3.5 (2017: $3.9)

· Delivery of Chiritza pumping station increasing Amerisur's capacity right within the Petroamazonas pipeline system to a minimum of 9,000 BOPD

· Continued diversification of production base from two to three fields following further exploration success at CPO-5

· 1P reserves up 27.8% to 17.82 MMBO and 2P reserves up 23.6% to 25.59 MMBO

· Optimisation of production at Platanillo continued post year end, with further workovers planned across Platanillo

· Q1 2019 production averaged 4,600 BOPD

Exploration and appraisal

· Transformational farm-out deal signed with Occidental Andina LLC ("Oxy"), with Oxy delivering a $93.25m exploration and appraisal programme in the Putumayo, including five carried wells

· Exploration success at Indico on CPO-5 in December adding significant reserves and production

· Acquired 100% Operated working interest in the Putumayo 14 block

· Post period end, acquired the remaining 50% working interest in Putumayo 8 for $19.1m 

Corporate

· Board strengthened with the appointment of Elodie Grant Goodey as an independent Non-executive Director with Corporate Social Responsibility experience  

Outlook

· Fully-funded work programme of around $35m, with up to ten exploration and development wells planned across CPO-5 and the Putumayo targeting gross prospective resources of 145 MMBO

· Wholly owned OBA offers further growth potential with the export of third-party crude expected to begin in the coming months  

Giles Clarke, Chairman of Amerisur, commented:

"2018 was a year of great achievement for Amerisur. We increased reserves significantly; we entered into a farm-out agreement with Oxy in the Putumayo, which will deliver a $93.25m exploration and appraisal campaign; we made a discovery at Indico-1X on CPO-5 from which we are now producing, taking the number of producing fields to three; we made a profit and generated free cash flow; and we exited the year in a strong financial position with $44.1 million of cash and no debt.

"The Board looks forward to 2019 full of confidence. Production is growing and we have a fully-funded work programme of up to ten wells across CPO-5 in the Llanos Basin and the Putumayo, targeting 145 MMBO of resources."

ENDS

Enquiries:

About Amerisur Resources:

Amerisur Resources is an experienced Colombian Operator with an extensive, strategic acreage position in the underexplored Putumayo with Occidental Petroleum ("Oxy") and a strategic acreage position in Llanos in CPO-5 with ONGC. Amerisur is the 100% owner and operator of the OBA pipeline, a key piece of strategic, cross-border export infrastructure delivering oil from the Putumayo in Colombia into Ecuador. Amerisur produces from three fields, Platanillo in the Putumayo with Mariposa and Indico in the Llanos basin that together generate cash flow to fund its work programme. Amerisur has recently announced a potentially transformational result at Indico-1, which significantly exceeded expectations - 283 feet gross, 209 feet net oil column without an oil-water-contact.

Technical Standard

These assessments are made in accordance with the standard defined in the SPE/WPC Petroleum Resources Management System (2007).

Competent Person

Technical information in this announcement has been reviewed by John Wardle Ph.D., the Company's Chief Executive. John Wardle has 33 years' experience in the industry, having worked for BP, Britoil, Emerald Energy and Pebercan, and is a trained drilling engineer.

Chairman's Statement

Overview of the year

During 2018, we delivered another robust financial performance following a number of operational and corporate successes across our two core regions in Colombia, the Putumayo and CPO-5 in the Llanos basin. Our successes included our transformational farm-out to Oxy, which will see Oxy fund a $93.25m exploration and appraisal programme, including five carried wells, between 2019 and 2021 across four blocks in the Putumayo, in parallel to our existing drilling programme. We delivered an exceptional drilling result at Indico-1X on the CPO-5 block and completed the Chiritza re-pumping station on time and to budget. We also extended our portfolio in the Putumayo by the acquisition of the Put-14 block and increased our 2P reserves by 23.6% compared to the prior year (from 20.70 MMBO to 25.59 MMBO working interest reserves). We further strengthened and refreshed our Board, ensuring the Company is well positioned for the future.

Our 2018 capex spend was lower than anticipated given delivery of our drilling programme in the Putumayo was delayed due to social problems related to the peace process, and adverse weather conditions delayed drilling at CPO-5 in H1.

In the latter half of the year, we made a strong start to our fully funded drilling programme and, as a result of our continued success at CPO-5, we delivered full year average production of 5,356 BOPD across our two fields, adding a third field, Indico-1X at the end of the year. The promising results seen on the CPO-5 block prompted the commencement of a fully funded augmented drilling programme targeting 49.3 MMBO from up to five additional wells to determine the prospectivity of the area.

People, Board and corporate governance

I would like to thank both Amerisur's management and the in-country team who have worked tirelessly over the year. The Board continues to recognise the great benefit in maintaining high standards of corporate governance and I am pleased to report that best practice is embedded in the Company. In 2018, we continued our Board refreshment programme, achieved full compliance with the Quoted Companies Alliance Code for our website disclosure and appointed a new auditor following a competitive tender process.

As part of our Board refreshment, we looked to appoint a Director with corporate social responsibility and developing world experience in the natural resources industry and I was delighted to welcome Elodie Grant Goodey to the Board as an independent Non-executive Director in October. Elodie has extensive experience in social performance and global stakeholder engagement programmes and spent 17 years at BP, latterly as the Head of Societal Issues and Stakeholder Engagement. Elodie sits on the Remuneration Committee.

During the period, we were informed by Stephen Foss of his intention to step down from the Board, with effect from 1 February 2019. I would like to thank Stephen for his service to Amerisur and the major contribution he made to improving corporate governance during that time. I also thank Dr Douglas Ellenor for his advice and counsel over the last ten years, as his retirement from the Board took effect on 31 December 2018. Following these changes, our refreshed Board includes four high calibre independent Non-Executive Directors with experience in International E&P, Audit, M&A and Corporate Responsibility, all of which are invaluable to the Company.

Political and social developments

We are committed to supporting Colombia in its transition towards peace following the signing of the historic deal in 2016, with the FARC guerrilla group now largely demobilised. Amerisur remains an ardent supporter of this process, given our investment in the region for more than a decade, and continues to play a valuable role in establishing social programmes within communities in the Putumayo. There has been a particular focus on implementing sustainable alternative farming programmes, as part of the Government's "Sustitución de Cultivos Ilícitos - illegal crop substitution programme", verified by the United Nations. These programmes equip local farmers with the necessary resources and expertise to transition to more profitable, socially desirable and sustainable crops. Alongside this, our activities focused on community empowerment, supporting local education, assisting with sustainable productive projects with good agricultural and environmental practices, strengthening institutional structures and management and strengthening opportunities for recreation, sport and culture.

Amerisur remains focused on conducting its operations in a safe and responsible manner, particularly in light of the sensitive operating environment. Our approach to sustainability is focused on integrating the Company's projects and operations with the local environment, and environmental protection and conservation continue to be important to us.

The new Government which took power in August 2018, led by President Ivan Duque, has launched an ambitious programme of social and economic development, while fully supporting the continued development of the peace process. Particular emphasis has been laid upon the expansion of the hydrocarbons industry in Colombia. This has resulted in the recent launch by Agencia Nacional de Hidrocarburos ("ANH") of a new licensing system for future blocks with new opportunities which the Company is reviewing. In addition, considerable resources have been assigned to the solution of social issues in oil production and exploration areas. During the year, Colombia became the 37th member of the OECD.

Dividend

While it remains Amerisur's aim to pay a dividend once sustainable production is being delivered from multiple fields, the Board is not recommending a dividend for the year ended 31 December 2018. Reinvesting our cash flow in exploration activity and maintaining a strong balance sheet remain a priority for us as we enter this exciting period of drilling.

Returns to shareholders are regularly discussed by the Board and remain a goal for the future.

Shareholders will see from the AGM resolutions that we are seeking approval to restructure our reserves to facilitate distributions.

Outlook

We continue to be guided by our core value of capital discipline, shown by our strong cash balance, and are focused on continuing to unlock the potential of our extensive portfolio, built at low cost during the downturn, to deliver shareholder value.

We are confident that in 2019 our fully funded work programme across CPO-5 and the Putumayo targeting gross prospective resources of 145 MMBO has the potential to deliver considerable exploration successes and, in turn, strong production growth with low upfront capex, albeit with any drilling activity, there may be some potential challenges. This includes up to a further five wells planned at CPO-5, a licence which management is confident has significant resource potential given the production profile and exploration success to date. Alongside this, our wholly-owned OBA pipeline continues to offer further growth potential through the export of both our own oil and third party crude.

2019 looks set to be an exciting year for Amerisur and the Board looks to the future with confidence.

Giles Clarke

Chairman

9 April 2019

Chief Executive Officer's Statement

Introduction

2018 was a positive year for Amerisur as we forged excellent partnerships and delivered some strong drilling results. During the year, we realised significant success at CPO-5 in the Llanos Basin, alongside ONGC. Our second oil discovery at the end of the year at Indico-1X, alongside the continued strong performance of the Mariposa-1 discovery meant that we entered 2019 with a busy drilling campaign targeting gross prospective resources of 49.3 MMBO on that block, with the objective of proving up the exciting LS3 play at CPO-5.

In 2018, our focused, low-cost acquisition strategy carried out during the downturn generated further significant value for our shareholders delivering net benefits of more than $350m to date. During the period, we successfully continued to consolidate our acreage position around our wholly-owned OBA through the acquisition of Put-14 and increased working interest in Mecaya, building an attractive portfolio of assets capable of attracting a farm-in partner of Oxy's calibre. Oxy will fund a $93.25m exploration and appraisal programme over the next three years, including five carried wells in the Putumayo, with a transport capacity agreed in the OBA for the evacuation of oil from these blocks, with a commercial tariff charged for Oxy's share. This once again demonstrated the value of our OBA pipeline as an export route. The delivery of the Chiritza re-pumping station on time and to budget, which increases Amerisur's capacity right to a minimum of 9,000 BOPD, following successful negotiations with Petroamazonas earlier in the year, was therefore a timely milestone for the Company and acts as a floor for the transport of our own and potentially third party crude. As at the end of Q1 2019, we are in the final stages of obtaining certification as an oil transport company and expect third party transport to begin in the coming months.

Alongside this, we maintained a solid and diverse production base of 5,356 BOPD average annual production across three fields, delivering healthy cash flow, revenues of $108.2m, adjusted EBITDA of $34.0m (2017: $19.8m), positive operating profits for the year of $11.0m (2017: $0.3m) and profit before tax of $8.4m (2017: $0.4m). Year-end total cash was $44.1m (2017: $41.3m). Our strong operating margins delivered through our OBA pipeline and low-cost production enabled us to achieve cash netbacks of $43 per barrel (at an average $64.8/bbl selling price).

We remain committed to operating in a safe and responsible manner and our approach to sustainability is key, as we respect both our surrounding environment and the local communities.

Exploration success

Amerisur continues to focus on its extensive acreage position, with approximately 912 MMBO unrisked prospective gross resources (mid-case as at 31 December 2018) across the highly attractive, underexplored Putumayo and the prolific Llanos basins. While exploration activity in 2018 was lower than expected due to a number of factors beyond our control, including local weather and social related issues, the Company looks set to become one of the more active explorers in Colombia in 2019. In the first half of 2018, we progressed our preparations at the different well locations (Platanillo and CPO-5) to ensure that, on receipt of regulatory and environmental approvals and weather and social issues permitting, we could commence drilling without further delay. In the second half of 2018, we commenced our low-cost drilling campaign with Pintadillo-1, targeting the N sand. While the N sand was unsuccessful, potential hydrocarbon bearing reservoirs were confirmed in the U and the T sands. Production results indicate the well is located on the flank of those structures and we are reviewing the potential for further wells or a side track at Pintadillo.

At Put-12 and Put-9 we successfully acquired approximately 43km of seismic data over the Coendu prospect, with two of the six lines located within Put-9. The seismic has now been processed and is being interpreted prior to finalisation of the first Coendu drilling location which is shared between Put-12 and Put-9 and is on track to spud in Q4 2019.

2018 was capped off by an excellent result at Indico-1X in CPO-5, with initial analysis indicating a 283ft gross, 209ft net, oil column in the LS3 formation. The scale of success at Indico-1X opens up a significant low-risk potential in structures between Mariposa and Indico fields, within the LS3 play. Indico-1X is currently producing under an extension of the short-term test ("STT") programme granted by ANH, while the application for the Long-Term Test ("LTT") is being processed. At the beginning of April 2019, Indico-1X is producing 4,932 BOPD at 46/64" choke, while Mariposa-1 continues to produce at a stable rate of 3,150 BOPD.

We also spudded Calao-1X, an exploration well on the CPO-5 block, at the beginning of February. This well was drilled from the Indico-1X location to evaluate the potential for trapping outside the Indico structure. However, no hydrocarbon potential was identified, with our analysis indicating that the formation was encountered deeper than prognosis and the well was located in an area without closure. The well has the potential to be used as a water disposal well in the future. Amerisur and the Operator are currently integrating the results of this well into the general geophysical model while reviewing the model applied for the well Pavo Real-1.

Reserves and resources

Following receipt of an independent reserves report for the Platanillo and Mecaya fields undertaken by Petrotech Engineering Ltd, and the CPO-5 block undertaken by McDaniel and Associates Consultants Ltd as at 31 December 2018, using the standards set by the Oil and Gas Reserves Committee of the Society of Petroleum Engineers, certified 1P (proven) working interest field reserves were 17.82 MMBO (2017: 13.94 MMBO) and 2P (proven and probable) working interest reserves were 25.59 MMBO (2017: 20.70 MMBO). Total production from the Platanillo field during 2018 was 1.61 MMBO and total 2018 production from the CPO-5 block (Mariposa and Indico fields) was 1.15 MMBO. 

This represents an increase of 27.8% in 1P and 23.6% in 2P reserves over year end 2017, and is due to the drilling success in the CPO-5 block previously reported.

Source: Petrotech Engineering LTD., Reserves Audit at 31 December 2018; McDaniel and Associates Consultants Ltd., Reserves Audit at 31 December 2018

Diverse, healthy production base

Amerisur's exploration is supported by a stable and increasingly diverse production base with Group production for 2018 averaging 5,356 BOPD. This includes production from both Platanillo, Mariposa-1, which came on stream in November 2017, and Indico-1X, with average cash opex and transport costs per barrel of $21.8 (2017: $18.6).

Our low-cost, high netback production at Platanillo averaged 4,410 BOPD (2017: 4,756 BOPD), with a peak of 6,174 BOPD. Production was reflective of reduced exploration activity in the area, a number of workovers, the ongoing treatment and maintenance programme and a reduction in certain key wells. The remedial workovers were successful, with a workover completed at Platanillo-8 post period end, increasing stable production by 820 BOPD. Further interventions are planned on Platanillo-22, Platanillo-21, Platanillo-2 and Platanillo-7, as part of the normal maintenance and optimisation operations in the Platanillo field. In addition, a new well, Platanillo-26, will be drilled this year from Pad 3N. Going forward our focus is to maintain production at the mature Platanillo field at 3-4,000 BOPD plateau, while accessing further upside on a discretionary and risk-balanced basis.

Production throughput through the OBA averaged 4,113 BOPD in the period, with a peak of 6,540 BOPD. OBA throughput was lower in Q4 2018 owing to the phasing of the Government's royalty barrels, which are collected at the Platanillo wellhead and transported by road. The Government elected to take delivery of its annual quota of royalty barrels disproportionally in Q4, leading to lower utilisation of the OBA in this period. Total gross investment in the OBA was $24.3m and, as of March 2019, it has delivered $34.2m in savings through the reduction in transport costs from $14.90/bbl to $3.50/bbl. At the beginning of the year, we brought negotiations with Petroamazonas to a successful conclusion with the signing of the "Second Cooperation Agreement for the Use of the Oil Pipeline Network of the Amazonian District (RODA)", bringing Amerisur's guaranteed minimum carrying capacity through the OBA to a total of 9,000 BOPD (previously 5,000 BOPD) in return for the building and commissioning of the Chiritza repumping station. Construction was completed on budget and ahead of schedule. Increasing the throughput of this low-cost route to commercialisation is an important objective and we are awaiting the approval of the Ministry of Mines and Energy in order to begin the purchase and shipping of third party crude via the OBA, which is expected in H1 2019.

Following exploration success at our third field, Indico, total production from CPO-5 reached over 1.275m barrels of oil at the end of 2018 and average Q1 2019 production was 1,600 BOPD net.

We have an exciting programme of exploration and appraisal opportunities planned for 2019, with a potential 10 well programme targeting up to 49.3 MMBO gross in CPO-5 and a further 102.3 MMBO in the Putumayo.

Transformational farm-out

We successfully consolidated our strategic position in the Putumayo on attractive terms for our shareholders during the period. In July 2018, we signed a farm-in agreement for 100% Operated working interest in the Put-14 block adding additional prospective acreage to our Terecay-Tacacho play fairway. Under the terms of the farm-in agreement, Gulfsands made a contribution to Consulta Previa (Prior Consultation) and operational costs of $1.25m. Additionally, Gulfsands also transferred the required guarantee for the Phase 1 work programme in favour of Amerisur in the amount of $1m. There was no consideration payable from Amerisur to Gulfsands. This was followed in November 2018 by our acquisition of the outstanding working interest in the Mecaya contract in exchange for a small cash payment and a royalty, bringing the Company to 100% working interest holder and Operator.

These deals paved the way for our transformational farm-out agreement with Oxy for the farm-out of a 50% interest across Put-9, Terecay, Tacacho and Mecaya. In return, Oxy will fund a $93.25m exploration and appraisal programme between 2019 and 2021 including 85% of the total planned 2D seismic cost expenditure of $65m and 100% of the $38m planned drilling programme. This was a momentous milestone for the Company and we are delighted to be working with a company whose outstanding technical team has a great understanding of the geological and operating environment. In addition, the companies agreed to a committed transport capacity in the OBA for the transport of oil from these blocks with a commercial tariff charged for Oxy's share.

Put-8 Acquisition

Post period end Amerisur exercised its right of first refusal to acquire the remaining 50% working interest in the Put-8 block from Vetra (subject to ANH approval). The consideration was $19.1 million.

2019 drilling programme

Amerisur is set to ramp up drilling in 2019, with up to ten wells planned, together with two potential side tracks in Platanillo. Given the potential of the CPO-5 block, a fully funded drilling programme is now underway to determine the prospectivity of the area within the LS3 play. In addition, Sol and Aguila are both planned for 2019, with CPO-5 drilling activities targeting 49.3 MMBO. Despite the drilling result from Calao-1X, CPO-5 still has a 66.6% exploration success rate.

In the Putumayo, drilling of the first of up to three wells on the Coendu structure (Put-9 and Put-12) and spudding of Miraparriba-1 on Put-8 are both expected in the second half of the year. This includes our fully carried work programme with Oxy.

Outlook

Amerisur entered 2019 with; a robust balance sheet, a low-cost production base, an extensive prospective portfolio, strong major partners and a fully funded exploration and appraisal programme. With our experienced and committed management and operational team focused on executing our busy work programme, Amerisur has a solid platform from which to deliver future reserves, resources and production growth and exploration success and in turn further shareholder value.

John Wardle

Chief Executive Officer

9 April 2019

Financial Review

¹ Adjusted EBITDA: Earnings before interest, tax, depreciation and impairment adjusted to exclude share option charges.

² Sales revenue per barrel less cash lifting, water disposal and transportation costs.

³ Average cash lifting costs is cost of sales less depreciation, transport costs, oil stock movements, high prices tariff and other non-lifting related costs divided by gross production.

Business performance

Revenue for the period of $108.2m increased compared to the same period in 2017 due to a combination of higher group production levels and average oil prices. As a result, we achieved an adjusted EBITDA for the period of $34.0m compared to $19.8m for 2017.

Revenue in 2017 has been restated for the adoption of the new revenue standard "IFRS 15" by $7.3m in relation to royalties no longer being presented gross within revenue. An equal and opposite adjustment has been made to cost of sales. See Note 2 for further details.

Production and commodity prices

Average daily production was 5,356 BOPD in 2018, a 10.3% increase on 2017. Production from the Platanillo field was impacted by well maintenance and workovers but this was offset by the increased production from CPO-5. Peak daily production in the year from the Platanillo field was 6,175 barrels.

Our working interest production in the CPO-5 Mariposa-1 well totalled 341,000 barrels, an average of 946 BOPD. This steady and consistent production, which generated $15.1m in revenue in 2018, was able to offset the overall reduction in Platanillo production.

Average realised sales prices for the year were up by 29.6% to $64.8 per barrel, compared to $50.0 in 2017.

Operating costs

Cost of sales comprises cost of operations, transport costs, inventory movement, high prices tariffs and depreciation. Cost of sales was $77.5m for 2018 compared to $66.7m for 2017 (as restated for the impact of the adoption of IFRS 15). The increase is principally due to higher production costs in line with increased activity, higher high price tariff charges and the impact of maintenance and workovers.

Depreciation expense in relation to D&P assets of $16.2m includes a full year charge for the CPO-5 field of $1.2m. In spite of lower Platanillo production, the charge is higher compared to 2017 due to a higher depletion rate per barrel caused by the change in estimates of 2P reserves and future capital expenditure requirements in the 2018 reserves report.

Transport costs in 2018 have continued to decrease further and were $3.5 per barrel in 2018 (2017: $3.9 per barrel). This movement is due to higher volumes transported through the OBA pipeline and the impact of CPO-5 production that is sold direct from the wellhead.

Average cash lifting costs per barrel in 2018 increased to $18.3 (2017: $14.7) largely due to the impact of maintenance related production variations during the period in the Platanillo field increasing fixed costs per barrel. However, improved selling prices resulted in operating netback increasing from $31.4 per barrel in 2017 to $43.0 per barrel in 2018.

Administrative expenses were $18.2m during the period, which include corporate overheads, community and social investment costs and share based payments. The increase of $1.7m against the comparative period is largely due to increases in payroll costs, community and social investment costs and other general inflationary increases.

Finance and similar charges of $0.5m were significantly lower than in the same period in 2017. This is due to finance charges for the RBL facility paid up to September 2017 when it was cancelled.

Finance income of $0.5m relates to bank interest receivable from cash in higher interest deposit accounts.

Adverse movements in the Colombian Peso, Paraguayan Guarani and British Pound against the US Dollar caused foreign exchange losses of $2.6m on the translation of local currency transactions and balances into US Dollars.

Taxation

The Group has a current tax charge for the period of $1.9m (2017: $1.0m) and a deferred tax charge of $4.9m (2017: credit of $12.5m) The high effective tax rate of 81.2% in 2018 is largely due to significant foreign exchange differences arising on the translation of the local tax computations, which are prepared in Colombian Peso, to US Dollars. Deferred tax assets of $7.6m have been recognised in relation to the tax losses in AEC and PDSA, which are expected to be fully utilised against future profits in 2019 and 2020. There are significant unused tax losses in the UK for which no deferred tax asset has been recognised.

Cash and funding

At the year end, the Group's cash position (inclusive of restricted cash deposits) was $44.1m (2017: $41.3m).

During the period, the Group entered into a prepayment and offtake agreement with Shell Western Supply and Trading Limited ("Shell"). Under the terms of the agreements Shell purchases 100% of the Group's oil production exported through the OBA and provides a prepayment facility of up to $35m.

2018 generated strong operating cash flows largely as a result of higher oil prices and consistent production from CPO-5, which alongside existing cash resources, have fully funded the 2018 capital expenditure, the Chiritza pumping station upgrade and the other maintenance and workover programmes in the year. The Group remains focused on efficient cost management in its operations. 

Capital expenditure

The Group has incurred total capital expenditure of $17.1m during the period, principally relating to the drilling of Pintadillo-1 in the Platanillo field, Indico in CPO-5 and seismic in Put-9 and Put-12.

Other balance sheet items

Included within trade and other receivables is a VAT receivable of $19.5m from the Colombian tax authorities. Post year end, an application has been submitted to the tax authorities to reclaim $15m of these funds. Trade and other payables have remained consistent overall but include an increase reflecting an increase in deferred income arising from a prepayment from Shell, offset by a reduction in trade and other payables.

Prior period adjustments

A balance sheet reclassification has been made between opening Intangible and D&P assets, trade and other payables and deferred tax. In addition, certain adjustments have been made to share based payments and the deferred tax charge.

Dividends

The Directors will not be recommending payment of a dividend although the dividend policy is kept under regular review.

At the current time, the business does not have sufficient distributable reserves to pay a dividend.

The Directors will be proposing a resolution at the forthcoming AGM to reorganise the Company's capital in order to create distributable reserves to enable the payment of a dividend in the future.

Going concern

The Group monitors its liquidity risk throughout the year to ensure it has access to sufficient funds to meet forecast cash requirements. Cash forecasts are regularly produced based on the Group's latest production and expenditure forecasts and latest estimates of future commodity prices. Accordingly, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future, which is considered to be at least twelve months from the signing of the Annual Report. The Directors continue to adopt the going concern basis of accounting in preparing these consolidated financial statements.

Nick Harrison

Chief Financial Officer

9 April 2019 

Glossary