Last checked at 4 Apr 2018 07:00
4 April 2018
Borders & Southern Petroleum plc
("Borders & Southern" or "the Company")
Audited Results for the 12 month period ended 31 December 2017
Borders & Southern (AIM: BOR), the London based independent oil and gas exploration company with assets offshore the Falkland Islands, announces its audited results for the year ending 31 December 2017. Full copies of the Company's Annual Report and Accounts, including the Company Overview, Chairman's Statement, Remuneration Committee Report, Directors' Report, Auditor's Report and full Financial Statements, will be available on the Company's website later today.
2017 Highlights
· An independent resource assessment produced an un-risked best estimate for total recoverable liquids (condensate and LPGs) of 462 million barrels with peak liquids production of 91,100 bbl/d.
· Company estimates new break-even oil price for a Darwin FPSO development of mid-$30s per barrel.
· Farm-out process is actively on-going.
· Administrative expenses for 2017: $1.73 million (2016 - $1.74 million).
· Cash balance at 31 December 2017: $8.25 million (2016 - $9.65 million); no debt.
For further information please visit www.bordersandsouthern.com or contact:
Borders & Southern Petroleum plc Howard Obee, Chief Executive Tel: 020 7661 9348
|
Panmure Gordon (UK) Limited Adam James / Atholl Tweedie Tel: 020 7886 2500
|
Tavistock Simon Hudson / Barney Hayward Tel: 020 7920 3150 |
The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.
Notes:
Borders & Southern Petroleum plc is an oil & gas exploration company listed on the London Stock Exchange AIM (BOR). The Company operates and has a 100% interest in three Production Licences in the South Falkland Basin covering an area of nearly 10,000 square kilometres. The Company has acquired 2,517 square kilometres of 3D seismic and drilled two exploration wells, making a significant gas condensate discovery with its first well.
The technical aspects of this announcement have been reviewed, verified and approved by Dr Howard Obee in accordance with the Guidance Note for Mining, Oil and Gas Companies, issued by the London Stock Exchange in respect of AIM companies. Dr Obee is a petroleum geologist with more than 30 year's relevant experience. He is a Fellow of the Geological Society and member of the American Association of Petroleum Geologists and the Petroleum Exploration Society of Great Britain.
Chief Executive's Statement
We entered 2018 with a strong balance sheet and no debt. Our cash balance at the end of 2017 was $8.25 million. The majority of our funds are held in sterling, so we have benefited from the pound's recovery during the year. Capital discipline has been maintained, reflected in a slightly lower administrative expenditure than the previous year, $1.7 million. As the Company is still not generating revenue, the loss after tax on operations for the year was $1.2 million (2016 - $3.6 million loss).
Our prime focus throughout the year has been to secure partners and funding to progress the Darwin project. Achieving this goal continues to be challenging. Despite the progressive increase in oil price from mid-2017, the industry has not returned to significant investment in conventional oil and gas projects. Furthermore, analysts have predicted that global spending on exploration and appraisal will decrease in 2018, as it has done for the last few years. Notwithstanding the challenges posed by the industry's investment climate, we have still been actively talking to companies about our project.
To enhance our efforts, we commissioned an independent evaluation of the Darwin East and West structures. As reported in February 2018, Gaffney, Cline and Associates (GCA) provided an independent resource assessment of the two fault blocks. Their un-risked best estimate for total recoverable liquids (condensate and LPGs) is 462 million barrels, produced into a single FPSO over 25 years. The peak combined liquids production was modelled at 91,100 bbl/day.
The rate of production has a significant impact on the project economics. Our previous economic models have been based on peak condensate production of 56,000 bbl/day. The impact of producing more condensate, along with additional LPG, sooner, is to lower the break-even oil price. Assuming the combined development of Darwin East and West, using six production wells and four gas injection wells, a leased FPSO and capex of $1.8 billion (including 25% contingency), the Company estimates the break-even oil price to be in the mid-30's dollars per barrel. Based on a $65 per barrel oil price, the project pay back would be within two/three years. As mentioned on other occasions, the positive economics are grounded in the attractive fiscal terms offered by the Falkland Islands Government and the high quality reservoir which does not require a large number of development wells.
The commercial attractiveness of the project is compelling, but we still require further drilling to prove up the resource estimates and confirm the deliverability of the reservoir. Our current plan is to drill a well on Darwin West with a possible side-track. This would provide two penetrations of the main reservoir and would test additional reservoir intervals, fluid contacts and investigate the possibility of an oil rim. Darwin West has very similar seismic characteristics and attributes as Darwin East. The independent assessment of the geological chance of success of finding hydrocarbons in Darwin West is 0.81. We consider that a well drilled on Darwin West would be very low risk.
Our outlook for 2018 is optimistic. The independent evaluation has reaffirmed our confidence in the quality of the Darwin discovery. Globally, there have been very few large conventional liquid discoveries made in recent years. We believe that on a commercial basis, Darwin stands out. We will maintain our focus on securing partners and funding for the next phase of operations. If the oil price remains at the current level, then the chance of success will be enhanced. Additionally, we will continue with technical work to increase our understanding of the sub-surface and further improve the attractiveness of the project.
Howard Obee
3 April 2018
Consolidated statement of comprehensive income
for the year ended 31 December 2017
| 2017 $000 |
| 2016 $000 |
Administrative expenses | (1,734) |
| (1,744) |
Loss from operations | (1,734) |
| (1,744) |
Finance income Finance expense | 542 - |
| 30 (1,890) |
Loss before tax | (1,192) |
| (3,604) |
Tax expense | - |
| - |
Loss for the year and total comprehensive loss for the year attributable to owners of the parent | (1,192) |
| (3,604) |
|
|
|
|
Basic and diluted loss per share (see note 3) | (0.25) cents |
| (0.74) cents |
Consolidated statement of financial position
as at 31 December 2017
| 2017 |
| 2016 |
|
| $000 | $000 | $000 | $000 |
Assets Non-current assets Property, plant and equipment |
|
11 |
|
12 |
Intangible assets |
| 290,826 |
| 290,381 |
Total non-current assets |
| 290,837 |
| 290,393 |
Current assets Other receivables |
440 |
|
1,167 |
|
Cash and cash equivalents | 8,251 |
| 9,645 |
|
Total current assets |
| 8,691 |
| 10,812 |
Total assets |
| 299,528 |
| 301,205 |
Liabilities Current liabilities Trade and other payables |
|
(633) |
|
(1,136) |
Total net assets |
| 298,895 |
| 300,069 |
Equity Share capital |
|
8,530 |
|
8,530 |
Share premium |
| 308,602 |
| 308,602 |
Other reserves |
| 1,773 |
| 2,418 |
Retained deficit |
| (19,994) |
| (19,465) |
Foreign currency reserve |
| (16) |
| (16) |
Total equity |
| 298,895 |
| 300,069 |
Consolidated statement of changes in equity
for the year ended 31 December 2017
| Share capital
$000 | Share Premium
$000 | Other reserves
$000 | Retained deficit
$000 | Foreign currency reserve $000 | Total
$000 |
|
|
|
|
|
|
|
Balance at 1 January 2016 | 8,530 | 308,602 | 2,370 | (15,861) | (16) | 303,625 |
Loss and total comprehensive loss for the year | - | - | - | (3,604) | - | (3,604) |
Recognition of share based payments | - | - | 48 | - | - | 48 |
Balance at 31 December 2016 | 8,530 | 308,602 | 2,418 | (19,465) | (16) | 300,069 |
Loss and total comprehensive loss for the year | - | - | - | (1,192) | - | (1,192) |
Expiry of share options | - | - | (663) | 663 | - | - |
Recognition of share based payments | - | - | 18 | - | - | 18 |
Balance at 31 December 2017 | 8,530 | 308,602 | 1,773 | (19,994) | (16) | 298,895 |
The following describes the nature and purpose of each reserve within owners' equity:
Reserve | Description and purpose |
Share capital | This represents the nominal value of shares issued. |
Share premium | Amount subscribed for share capital in excess of nominal value. |
Other reserves | Fair value of options issued. |
Retained deficit | Cumulative net gains and losses recognised in the Consolidated Statement of Comprehensive Income. |
Foreign currency reserve | Differences arising on change of presentation and functional currency to US Dollars. |
Consolidated statement of cash flows
for the year ended 31 December 2017
|
2017 |
|
2016 |
|
| $000 | $000 | $000 | $000 |
Cash flow from operating activities Loss before tax |
|
(1,192) |
|
(3,604) |
Adjustments for: Depreciation |
|
1 |
|
1 |
Share-based payment |
| 18 |
| 48 |
Net finance costs Net finance income |
| - (542) |
| 1,860 - |
Realised foreign exchange gains |
| (17) |
| 25 |
Cash flows from operating activities before changes in working capital |
|
(1,732) |
|
(1,670) |
Decrease/(increase) in other receivables |
| 728 |
| (476) |
Decrease/(increase) in trade and other payables Tax paid |
| (503) - |
| 29 - |
Net cash outflow from operating activities Cash flows used in investing activities Interest received |
11 | (1,507) |
30 | (2,117) |
Purchase of intangible assets | (445) |
| (849) |
|
Proceed from disposal intangible assets Net cash used in investing activities | - |
(434) | 430 |
(389) |
Cash flows from financing Proceeds from issue of shares Cash flows from financing activities |
- |
- |
- |
- |
Net decrease in cash and cash equivalents |
| (1,941) |
| (2,506) |
Cash and cash equivalents at the beginning of the year |
| 9,645 |
| 14,011 |
Exchange gain/(loss) on cash and cash equivalents |
| 547 |
| (1,860) |
Cash and cash equivalents at the end of the year |
| 8,251 |
| 9,645 |
Notes
1. Accounting policies
Basis of preparation
The financial information for the year ended 31 December 2017 set out in this announcement does not constitute the Company's statutory accounts. These financial statements included in the announcement have been extracted from the Group annual financial statements for the year ended 31 December 2017. The financial statements have been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards adopted for use in the European Union. However, this announcement does not itself contain sufficient information to comply with IFRS.
The auditor has issued its opinion on the Group's financial statements for the year ended 31 December 2017 which is unmodified and is available for inspection at the Company's registered address and will be posted to the Group's website.
2. Going concern
The Directors believe that the Company has sufficient funds, with contingency, to meet its current commitments with excess funds expected to be sufficient to fund ongoing operations for the foreseeable future. Therefore, this financial information has been prepared on a going concern basis.
3. Basic and dilutive loss per share
The calculation of the basic and dilutive loss per share is based on the loss attributable to ordinary shareholders divided by the weighted average number of shares in issue during the year. The loss for the financial year for the group was $1.2 million (2016 - loss $3.6 million) and the weighted average number of shares in issue for the year was 484.1 million (2016 - 484.1 million). During the year the potential ordinary shares are anti-dilutive and therefore diluted loss per share has not been calculated. At the statement of financial position date, there were 7.05 million (2016 - 7.05 million) potentially dilutive ordinary shares being the share options.
4. Subsequent Date Events
There were no subsequent events requiring disclosure
-ends-