Last checked at 28 May 2009 07:00
Borders & Southern Petroleum plc
Preliminary Results for the 12 months ended
31 December 2008
Borders & Southern Petroleum plc (or "the Company") (AIM: BOR) is pleased to announce its preliminary results for the 12 months to 31 December 2008.
Highlights
Completed 3D seismic acquisition and processing
Completed the interpretation of the fast track and fully processed data
Integrated 3D interpretation into regional evaluation
Compiled ranked prospect inventory
In a position to define drilling locations
Concluded benthic sampling programme
Progressing Environmental Impact Assessment
Cash balance as at 31 December 2008 was US$19.5 million
Harry Dobson, Chairman of Borders & Southern, commented "We believe that our extensive technical programme has allowed us to define a robust, high value prospect inventory. We now intend to seek partners for our South Falkland Basin licenses and we are optimistic that other companies will share our positive views on the high prospectivity"
For further information please visit www.bordersandsouthern.com or contact:
| Howard Obee | Simon Hudson |
| Borders & Southern Petroleum plc | Tavistock Communications |
| Tel: 020 7661 9348 | Tel: 020 7920 3150 |
| Katherine Roe | Guy Wilkes |
| Panmure Gordon (UK) Limited | Ocean Equities |
| Tel: 020 7459 3600 | Tel: 020 77864370 |
Chairman's Statement
Activity in 2008 has seen the Company focus on its technical objectives. During this period we have completed the acquisition and processing of a large 3D survey and finalised its interpretation. The results of this work have yielded what we believe to be a very attractive and exciting prospect inventory.
Against a challenging economic background, the Company, whilst experiencing a decrease in value along with market trends, has performed well relative to its peer group of AIM listed Exploration & Production Companies. We also have a strong cash balance.
During the period we have witnessed the oil price decline from $147 per barrel down to around $35 per barrel. Recently the oil price has showed signs of recovery with prices approaching $60 per barrel again. However, it should be noted that our projects in the Falkland Islands are likely to be commercial at the $35 level.
Whilst we cannot impact the external environment, we can influence the technical evaluation by the correct choice of data acquisition and the areas we select in which to collect the data. In this regard, the Board of Directors considers that it has been very successful. Multiple, high quality, large volume prospects have been defined, many of which are supported by geophysical attributes of the type we had hoped for at the onset of the exploration programme.
With the completion of the main phase of 3D seismic interpretation there will be no further requirement for additional data acquisition prior to drilling a well. We are now in a position to define drilling locations on our prioritised prospects. As we have previously reported, the first two high-graded prospects are Darwin and Stebbing.
As we look forward, technical work will continue but our energy will be placed into bringing a partner into the licences to help fund the wells. Given the scale and quality of the prospect inventory we are optimistic that we can attract a credible partner.
Chief Executive's Review
The technical programme undertaken in 2008 involved the acquisition, processing and interpretation of 1,492 sq km of 3D seismic data. The 3D data has been fully integrated into our regional evaluation so that we now have a comprehensive understanding of the South Falkland Basin. As a result, not only have we been able to define a high quality multi-billion barrel (recoverable) prospect inventory, but also identify those play types within the basin that we think are most likely to deliver success.
As previously reported, the step change in understanding from 2D to 3D seismic data has been dramatic and justifies the size and expenditure of the 3D survey. Prospect sizes are large (up to 150 sq km of mapped structural closure) and display important geophysical attributes that help reduce the risk. These include seismic amplitude conformance to structure, flat spot and AVO anomalies, along with gas hydrates located above prospects. We interpret these seismic attributes to indicate that the structures have received a hydrocarbon charge.
Individual prospect volumes in some cases exceed 1 billion barrels of recoverable oil. The previously reported Darwin and Stebbing prospects have P50 recoverable oil volumes of 300 million and 710 million barrels respectively. Additional stacked reservoirs on the same structures could increase these numbers. These prospects represent different play types and have been prioritised due to the chance of success rather than size.
Whilst the exploration drilling programme will target high-graded oil prospects, each prospect has also been considered as a gas case. If gas was the only outcome, and we consider it unlikely, then the prospect gas volumes would be sufficient to justify an LNG development. Individual prospect volumes can exceed (P50) 5 trillion cubic feet of recoverable gas.
Aside from producing a ranked prospect Inventory we have conducted a benthic sampling programme, one of the key requirements for the Environmental Impact Assessment (EIA). The operations were completed efficiently and the analysis is currently underway. Once the EIA has been submitted and approved we will be ready to drill and should the opportunity arise will be able to share in a combined drilling operation with other operators in the area.
Whilst the Company has a strong cash balance it does not have sufficient funds to execute a two well programme. Given the economic climate the Board has decided the best way to finance our wells is to seek a partner. Within the coming months we will further discussions with third parties and will report later in the year. Given the strength of the prospect inventory, scale of opportunity and the quality of the geophysical attributes, the Board is confident of securing a competent partner.
Borders & Southern Petroleum Plc
Consolidated Income Statement for the Year Ended 31 December 2008
| Continuing operations | 2008 $ | 2007 $ | |||||||
| Administrative expenses | (1,287,544) | (1,715,392) | |||||||
| Loss from operations | (1,287,544) | (1,715,392) | |||||||
| Finance income Finance expense - foreign exchange losses | 986,177 (4,426,533) | 1,379,691 - | |||||||
| Loss before tax | (4,727,900) | (335,701) | |||||||
| Income tax expense | - | - | |||||||
| Loss for the year | (4,727,900) | (335,701) | |||||||
| Loss per share - basic and diluted (see note 2) | (2.43) cents | (0.23) cents | |||||||
| 2008 | 2007 | ||||||||||||
| $ | $ | $ | $ | ||||||||||
| Assets Non-current assets | |||||||||||||
| Property, plant and equipment | 14,929 | 7,749 | |||||||||||
| Intangible assets | 36,040,860 | 23,155,802 | |||||||||||
| Total non-current assets | 36,055,789 | 23,163,551 | |||||||||||
| Current assets | |||||||||||||
| Trade and other receivables | 251,788 | 313,400 | |||||||||||
| Other financial assets | 9,950,668 | - | |||||||||||
| Cash and cash equivalents | 9,522,035 | 39,064,938 | |||||||||||
| Total current assets | 19,724,491 | 39,378,338 | |||||||||||
| Total assets | 55,780,280 | 62,541,889 | |||||||||||
| Liabilities Current liabilities Trade and other payables | (194,770) | (2,309,741) | |||||||||||
| Total net assets | 55,585,510 | 60,232,148 | |||||||||||
| Capital and reserves | |||||||||||||
| Share capital | 3,867,741 | 3,867,741 | |||||||||||
| Share premium reserve | 57,906,686 | 57,906,686 | |||||||||||
| Other reserves | 209,409 | 108,032 | |||||||||||
| Retained earnings | (6,381,930) | (1,654,030) | |||||||||||
| Foreign currency reserve | (16,396) | 3,719 | |||||||||||
| Total equity | 55,585,510 | 60,232,148 | |||||||||||
| Share capital $ | Share premium reserve $ | Other reserves $ | Foreign currency reserve $ | Retained earnings $ | Total $ | |||||||||
| Balance at 1 January 2007 brought forward | 2,541,173 | 21,018,756 | 30,209 | - | (1,318,330) | 22,271,808 | ||||||||
| Loss for the year and total recognised income and expense for the year | - | - | - | - | (335,700) | (335,700) | ||||||||
| Issue of share capital | 1,326,568 | 36,887,930 | - | - | - | 38,214,498 | ||||||||
| Recognition of share based payments | - | - | 77,823 | - | - | 77,823 | ||||||||
| Foreign exchange on change in presentation currency | - | - | - | 3,719 | - | 3,719 | ||||||||
| Balance at 31 December 2007 | 3,867,741 | 57,906,686 | 108,032 | 3,719 | (1,654,030) | 60,232,148 | ||||||||
| Loss for the year and total recognised income and expense for the year | - | - | - | - | (4,727,900) | (4,727,900) | ||||||||
| Recognition of share based payments | - | - | 101,377 | - | - | 101,377 | ||||||||
| Foreign exchange on change in functional currency | - | - | - | (20,115) | - | (20,115) | ||||||||
| Balance at 31 December 2008 | 3,867,741 | 57,906,686 | 209,409 | (16,396) | (6,381,930) | 55,585,510 | ||||||||
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 reserve | Amount subscribed for share capital in excess of nominal value. |
| Other reserves | Fair value of options issued. |
| Presentation currency reserve | Differences arising on change of presentation and functional currency to $. |
| Retained earnings | Cumulative net gains and losses recognised in the consolidated income statement. |
| 2008 | 2007 | ||||||||||||||
| $ | $ | $ | $ | ||||||||||||
| Cash flow from operating activities | |||||||||||||||
| Loss before tax | (4,727,901) | (335,700) | |||||||||||||
| Adjustments for: | |||||||||||||||
| Depreciation | 9,850 | 16,074 | |||||||||||||
| Exploration and evaluation expenditure transferred to income statement | - | 5,054 | |||||||||||||
| Share-based payment | 101,377 | 77,823 | |||||||||||||
| Finance income | (986,177) | (1,379,691) | |||||||||||||
| Finance expense | 4,426,533 | - | |||||||||||||
| Foreign exchange differences | (20,116) | - | |||||||||||||
| Cash flows from operating activities before changes in working capital | (1,196,434) | (1,616,440) | |||||||||||||
| Decrease/(increase) in trade and other receivables | 65,881 | (7,576) | |||||||||||||
| (Decrease)/increase in trade and other payables | (2,114,973) | 2,178,754 | |||||||||||||
| Net cash (outflow)/inflow from operating activities | (3,245,526) | 554,738 | |||||||||||||
| Cash flows used in investing activities | |||||||||||||||
| Interest received | 981,913 | 1,343,856 | |||||||||||||
| Purchase of other financial assets | (9,950,668) | - | |||||||||||||
| Purchase of intangible assets | (12,885,059) | (19,902,084) | |||||||||||||
| Purchase of property, plant and equipment | (17,030) | (3,543) | |||||||||||||
| Net cash used in investing activities | (21,870,844) | (18,561,771) | |||||||||||||
| Cash flows from financing activities | |||||||||||||||
| Proceeds from issue of shares and share options (net of issue costs) | - |
| 38,214,498 | ||||||||||||
| Net cash from financing activities | - | 38,214,498 | |||||||||||||
| Net (decrease)/ increase in cash and cash equivalents | (25,116,370) | 20,207,463 | |||||||||||||
| Cash and cash equivalents at the beginning of the year Exchange (loss)/gain on cash and cash equivalents | 39,064,938 (4,426,533) | 18,847,347 10,128 - | |||||||||||||
| Cash and cash equivalents at the end of the year | 9,522,035 | 39,064,938 | |||||||||||||
| Group and company | 2008 $ | 2007 $ | |
| Cash available on demand | 584,285 | 741,614 | |
| Cash on deposit | 8,937,750 | 38,323,324 | |
| Total | 9,522,035 | 39,064,938 |
Cash and cash equivalents consist of cash at bank on demand and balances on deposit with an original maturity of three months or less.
1 Basis of preparation
The Group financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards (IFRS's and IFRIC Interpretations) issued by the International Accounting Standards Board (IASB) as endorsed for use in the EU and those parts of the Companies Act 1985 and 2006 that are applicable to companies that prepare their financial statements under IFRS.
The financial information for the years ended 31 December 2008 and 31 December 2007 does not constitute the company's statutory financial statements but is extracted from the audited accounts for those years. The 31 December 2007 accounts have been delivered to the Registrar of Companies. The 31 December 2008 accounts will be delivered to Companies House within the statutory filing deadline. The auditors have reported on those accounts; their reports were unqualified and did not contain statements under Section 498 (2) or (3) of the Companies Act 2006.
2 Loss per share
The calculation of the basic 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 $4,727,900 (2007 - $335,701) and the weighted average number of shares in issue for the year was 194,344,170 (2007 - 144,351,668).
3 Potentially dilutive share options
At 31 December 2008 there were options over 1,000,000 shares outstanding which are potentially dilutive (2007 - 700,000). For the majority of the options their exercise price is greater than the weighted average share price during the year and it would not be advantageous of the holders to exercise these, therefore these options have been excluded from the calculation of diluted EPS. As a result the diluted earnings per share is not materially different to the basic earnings per share.