Last checked at 3 Apr 2017 07:00
3 April 2017
Borders & Southern Petroleum plc
("Borders & Southern" or "the Company")
Unaudited Results for the 12 month period ended 31 December 2016
Borders & Southern (AIM: BOR), the London based independent oil and gas exploration company with assets offshore the Falkland Islands, announces preliminary unaudited results for the year ending 31 December 2016.
2016 Highlights
· Farm-out process is on-going.
· Maturation of the prospect inventory.
· Break-even oil price for a phased Darwin FPSO development is $40 per barrel.
· Administrative expenses - 2016: $1.74 million (2015: $1.97 million).
· Cash balance at 31 December 2016: $9.65 million (2015: $14.0 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
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Panmure Gordon (UK) Limited Adam James / Atholl Tweedie Tel: 020 7886 2500
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Tavistock Simon Hudson 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 statement 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
Throughout 2016 we maintained a disciplined budget, whilst strengthening our technical and commercial case and continuing with our efforts to farm-out the Company's Falkland Islands project.
The year-end cash balance of $9.65 million (31 December 2015: $14 million) was impacted by significant changes in the US Dollar-Sterling exchange rate. Most of the Company's funds are held in Sterling to reflect its ongoing expenditures. The drop in the value of the pound, resulted in a nearly $2 million reduction in the reported cash balance and increased the loss by the same amount. The 2016 Administrative expense of $1.74 million, comparing favourably against the previous year ($1.97 million in 2015), partially reflects the impact of the exchange rate.
Borders & Southern's objective is to be a successful explorer, finding hydrocarbons and monetising them for the benefit of all its shareholders and stakeholders. The first stage was realised in 2012 when we announced a significant, liquids rich, gas condensate discovery (Darwin). Subsequent technical analysis proved the scale of the discovery. Management's current un-risked P50 Best Estimate resource is 3.5 tcf of wet gas in place with 360 million barrels of recoverable condensate.
The second stage, of monetising the discovery, has been slower in achievement as competent partners are sought to help fund Darwin's appraisal and development. Our ability to deliver on this has been impacted by the 2014 fall in oil price and the dramatic reduction in capital expenditure by the industry in the subsequent period. During the last year, the oil price has made a modest recovery, underpinned by OPEC's agreed cuts in production. As a response, many of the large and mid-sized companies, who have spent the last couple of years reducing their costs and strengthening their balance sheets, are now considering growth objectives again. This gives us grounds for optimism that we can complete a successful farm-out and get back to an operational phase and the appraisal drilling.
We believe that the Darwin discovery and its surrounding exploration portfolio compares very favourably with other global opportunities. Our technical and commercial work during 2016 was directed to test our project's commercial competitiveness. Through facilities engineering studies and reservoir modelling we demonstrated that the break-even oil price for an initial 270 million barrel FPSO phased Darwin development would be $40 per barrel. If the 25% contingency included within the estimated $1.36 billion capex is reduced, through more detailed engineering work, the break-even oil price would be appreciably lower. The attractive economics are largely influenced by the Falkland Islands Government's fiscal terms and the requirement for only a limited number of development wells due to the laterally continuous, high quality reservoir and extremely mobile hydrocarbon phase.
Over the last few years global exploration success rates have decreased significantly. Discovery volumes have been skewed towards dry gas, with new large liquids finds being relatively scarce. In this context, the Darwin condensate is an important resource. Through meticulous technical and commercial work, we have continued to take risk out of the project, to enhance its attractiveness to third parties. At the same time, we have matured the Company's exciting prospect inventory, which provides significant scope to add to the discovered volumes. As previously reported, Management's un-risked P50 Best Estimate recoverable resource for near-field prospects (not including Darwin) - those located within a 15km radius of the discovery well - exceed 1 billion barrels. Many of these prospects are supported by seismic amplitude anomalies and are considered by Management to be relatively low risk.
The largest prospect within the near-field inventory and the current most likely candidate for an exploration well, following Darwin appraisal, is Sulivan. Stratigraphically older than the Darwin reservoir, in a section not yet penetrated by a well, the prospect is defined by a strong seismic amplitude anomaly measuring 120 square kilometres. The AVO response is very similar to that associated with the Darwin discovery. If this anomaly does represent another gas condensate accumulation, then Management's un-risked P50 Best Estimate volumes comprise 5.6 tcf of gas in place with 473 million barrels of recoverable condensate.
In addition to the near-field prospects, significant exploration potential exists in the rest of the Company's acreage in a range of structural and stratigraphic prospects. The scale and quality of the prospect inventory will provide considerable growth options for the Company in years to come. But in the near term, we will maintain our capital discipline during this extended period of low oil price and continue to refine and advance our technical understanding of the sub-surface. However, the principal focus remains the farm-out and attracting funds for the appraisal of Darwin.
Howard Obee
31 March 2017
Unaudited consolidated statement of comprehensive income
for the year ended 31 December 2016
2016 $000 | 2015 $000 | |||
Administrative expenses | (1,744) | (1,968) | ||
Loss from operations | (1,744) | (1,968) | ||
Finance income Finance expense | 30 (1,890) | 47 (679) | ||
Loss before tax | (3,604) | (2,600) | ||
Tax expense | - | - | ||
Loss for the year and total comprehensive loss for the year attributable to owners of the parent | (3,604) | (2,600) | ||
Basic and diluted loss per share (see note 3) | (0.74) cents | (0.54) cents |
Unaudited consolidated statement of financial position
as at 31 December 2016
2016
| 2015
| |||
$000 | $000 | $000 | $000 | |
Assets Non-current assets | ||||
Property, plant and equipment | 12 | 10 | ||
Intangible assets | 290,381 | 289,590 | ||
Total non-current assets | 290,393 | 289,600 | ||
Current assets | ||||
Other receivables | 1,166 | 297 | ||
Cash and cash equivalents | 9,645 | 14,011 | ||
Total current assets | 10,811 | 14,308 | ||
Total assets | 301,205 | 303,908 | ||
Liabilities Current liabilities | ||||
Trade and other payables | (1,135) | (283) | ||
Total net assets | 300,069 | 303,625 | ||
Equity | ||||
Share capital | 8,530 | 8,530 | ||
Share premium | 308,602 | 308,602 | ||
Other reserves | 2,418 | 2,370 | ||
Retained deficit | (19,465) | (15,861) | ||
Foreign currency reserve | (16) | (16) | ||
Total equity
| 300,069 | 303,625 | ||
Unaudited consolidated statement of changes in equity
for the year ended 31 December 2016
Share capital
$000 | Share Premium
$000 | Other reserves
$000 | Retained deficit
$000 | Foreign currency reserve $000 | Total
$000 | |
Balance at 1 January 2015 | 8,530 | 308,602 | 2,280 | (13,261) | (16) | 306,135 |
Loss and total comprehensive loss for the year | - | - | - | (2,600) | - | (2,600) |
Share based expense | - | - | 90 | - | - | 90 |
Balance at 31 December 2015 | 8,530 | 308,602 | 2,370 | (15,861) | (16) | 303,625 |
Loss and total comprehensive loss for the year | - | - | - | (3,604) | - | (3,604) |
Share based expense | - | - | 48 | - | - | 48 |
Balance at 31 December 2016 | 8,530 | 308,602 | 2,418 | (19,465) | (16) | 300,069 |
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. |
Unaudited consolidated statement of cash flows
for the year ended 31 December 2016
2016 | 2015 | |||
$000 | $000 | $000 | $000 | |
Cash flow from operating activities | ||||
Loss before tax | (3,604) | (2,600) | ||
Adjustments for: | ||||
Depreciation | 1 | 1 | ||
Share-based payment | 48 | 90 | ||
Net finance expense | 1,860 | 632 | ||
Realised foreign exchange gains/(losses) | 25 | (8) | ||
Cash flows from operating activities before changes in working capital | (1,670) | (1,885) | ||
Decrease/(increase) in other receivables | (869) | 32 | ||
Increase in trade and other payables | 852 | 33 | ||
Tax paid | - | - | ||
Net cash outflows from operating activities | (1,687) | (1,820) | ||
Cash flows used in investing activities | ||||
Interest received | 30 | 47 | ||
Purchase of intangible assets | (819) | (773) | ||
Proceeds from disposal of intangible assets | - | 1,149 | ||
Net cash from/(used) in investing activities | (761) | 423 | ||
Cash flows from financing | ||||
Net decrease in cash and cash equivalents | (2,506) | (1,397) | ||
Cash and cash equivalents at the beginning of the year | 14,011 | 16,079 | ||
Exchange loss on cash and cash equivalents | (1,915) | (671) | ||
Cash and cash equivalents at the end of the year | 9,645 | 14,011 | ||
Accounting policies
1. Basis of preparation
The financial information set out above does not constitute the company's statutory accounts for 2015 or 2016. Statutory accounts for the year 31 December 2015 have been reported on by the Independent Auditors. The Auditors' Report for the year ended 31 December 2015 was unqualified, did not include references to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.
The results for 2016 are unaudited. Statutory accounts for the year ended 31 December 2016 will be finalised based on the information presented in this announcement. The independent Auditors' Report will be based on those statutory accounts once they are complete.
Statutory accounts for the year ended 31 December 2015 have been filed with the Registrar of Companies. The statutory accounts for the year ended 31 December 2016, prepared under International Financial Reporting Standards as adopted by the European union (IFRS), will be delivered to the Registrar in due course.
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 $3.6 million (2015 - loss $2.6 million) and the weighted average number of shares in issue for the year was 484.1 million (2015 - 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 (2015 - 6.15 million) potentially dilutive ordinary shares being the share options.
4. Subsequent Date Events
There were no subsequent events requiring disclosure
-ends-