25 Jun 2015 07:00
Independent Resources plc | ||
("Independent Resources" or the "Company" or the "Group) | ||
Audited results for the year ended 31 December 2014 | ||
Highlights | ||
• Formalisation of appointment as operator of Ksar Hadada licence | ||
• Ksar Hadada farm-out process commenced | ||
• Rationalisation of Italian portfolio and cost base | ||
• Positive Italian legislative developments ahead of Rivara court processes | ||
• Equity fundraising of £1.75 million of new capital during the year with further capital of £0.80 million raised since year end | ||
• Progress continuing on portfolio of potential investments in producing assets | ||
Key financials | ||
• Operating loss on continuing activities of £1.57 million (2013: £3.04 million) | ||
• Loss from discontinued Ribolla coal bed methane operations of £4.91 million (2013: £ Nil) | ||
• Loss for the year of £6.48 million (2013: £3.34 million) | ||
• Cash at year end of £0.42 million (2013: £0.66 million) | ||
• Cash at 24 June 2015 of £0.46 million | ||
Chairman's statement | ||
Introduction | ||
The year ended 31 December 2014 saw Independent Resources continue to progress its operational and | ||
geographical transformation into a mainstream E&P company focused on North Africa. | ||
Formal approval of Independent Resources' appointment as operator of the Ksar Hadada licence was eventually | ||
obtained in August 2014 and since then we have conducted an extensive technical review of the licence | ||
prospectivity in preparation for the farm-out process which began in the fourth quarter. | ||
We have continued to rationalise our Italian operations. Our conscious decision not to pursue coal bed methane | ||
opportunities in Tuscany led to an impairment charge in relation to our historical investment. Since the year end, | ||
arrangements have been completed for the closure of the Group's technical office in Rome and the termination of all | ||
Italian contracts of employment. | ||
During 2014, our objective of acquiring an interest in a producing asset in North Africa on reasonable terms was | ||
frustrated, not least by the volatility of underlying oil prices since the Autumn of 2014 which increased the potential | ||
risk of entering into a transaction which may not have been in the best long-term interests of shareholders. | ||
We believe that following the fall in oil prices, the environment is now more attractive for IRG as a potential acquirer | ||
and we continue to examine a number of opportunities and to progress discussions with potential financial partners. | ||
Ksar Hadada | ||
In August 2014, we received formal confirmation from the Consultative Committee on Hydrocarbons ("CCH") in | ||
Tunisia that our application for an extension to the Ksar Hadada permit ("KH") and to become the operator had | ||
been approved. | ||
Our increased operating interest of 86.345 per cent. has provided the potential to attract an investment partner to | ||
fund the work programme and still allow IRG to retain a meaningful future working interest in the permit. | ||
During 2014, we commissioned a revised competent person report on the licence from Blackwatch Petroleum | ||
Services which estimated prospective resources of 108 million BOE at Ksar Hadada. | ||
The Tunisian approvals process was unfortunately very slow during 2014 and no CCH meetings were held from late | ||
2013 until August 2014 causing major delays with many oil and gas projects in Tunisia. In recognition of the | ||
original delay in approval in 2014, the licence period for Ksar Hadada was extended by the CCH from 16 April 2016 | ||
to 7 August 2016. The extension period represents the second renewal of the licence and therefore Independent | ||
Resources (Ksar Hadada) Limited may still, if necessary, seek an additional one-year extension of the licence until | ||
7 August 2017. | ||
Since CCH approval was granted, IRG has agreed and executed a new joint operating agreement with its partners; | ||
agreed a work plan and budget to fulfil the minimum work programme obligations with ETAP and completed | ||
preparation for the 3D seismic survey. | ||
In the last quarter of 2014 we entered into a process to farm out part of our stake in Ksar Hadada to a third party | ||
and that process is still ongoing. While the speed of this process has understandably been influenced by the | ||
volatility of oil prices and the changing political and security situation in Tunisia and across North Africa, the | ||
licence remains economically viable at prices substantially below today's prices and we remain in discussions with | ||
a number of parties regarding investment. | ||
Rivara | ||
We continue to await the commencement of Administrative court proceedings in relation to Rivara as we contest | ||
the positions taken in 2012 by the Emilia-Romagna region and the Ministry of Economic Development. | ||
If the future court process can be navigated successfully, despite its protracted nature, the general environment in | ||
Italy now appears to be becoming more positive for a project of this kind. Legislative change proposed by the | ||
Renzi administration as part of its 'Unlock Italy' agenda specifically identifies new gas storage capacity as | ||
strategically important and also seeks to amend the permit approval process to lessen the involvement of regional | ||
governments. | ||
Fiume Bruna and Casoni (Ribolla Basin CBM assets) | ||
In light of significant uncertainty over the potential to develop the Ribolla basin coal bed methane opportunities and | ||
the availability of capital to do so we took the decision at the time of preparation of the interim accounts to impair | ||
the value of the historical investment in Fiume Bruna and Casoni and the goodwill associated with the historical | ||
acquisition of Independent Energy Solutions srl. | ||
All attempts to farm-out these assets have ultimately not been successful and therefore as licence commitments | ||
could not be met, the licences were not renewed and have now been formally relinquished. | ||
The combined impairment events resulted in a charge to the statement of comprehensive income in this financial | ||
year of £4.55m. | ||
Board changes | ||
Since the publication of our last accounts, our commercial director Owain Franks has joined the board as an | ||
executive director. In January 2015 we welcomed Martin Miller to the board as a non-executive director. Martin | ||
brings with him a wealth of technical expertise and we will value his input tremendously. | ||
I would like to take this opportunity to thank Roberto Bencini, who resigned as a director in January 2015, for his | ||
considerable efforts on the Company's behalf and wish him well for the future. | ||
Having served on the board as a non-executive director since the admission of the Company to AIM in 2005, Alan | ||
Thomas our non-executive director has indicated a desire to step down from the board following the forthcoming | ||
Annual General Meeting and we expect to announce his replacement imminently. On behalf of my fellow directors, | ||
I would like to thank Alan for his invaluable contribution over the last ten years. | ||
Financial review | ||
The Group made a loss of £6.48 million during 2014 (2013: £3.34 million). | ||
After excluding the impairment charge in respect of Ribolla of £4.55 million, the residual loss was comprised of | ||
£1.74 million in operational and administrative costs, including discontinued operations, (2013: £1.34 million) and | ||
£0.23 million in professional fees and diligence costs related to potential acquisitions (2013: £0.27 million). The | ||
increased administrative costs this year reflect the effect of a full year's UK head office costs and increased costs | ||
arising from operatorship of the Ksar Hadada licence. Following the reduction in scale of the group's administrative | ||
presence in Italy, the charge for the group for 2015 is expected to be significantly lower. | ||
The results for 2013 also included a £1.51 million charge related to the restructuring of the Group's interest in | ||
Rivara Gas Storage. | ||
Consolidated net assets at 31 December 2014 were £5.41 million (2013: £10.92 million). The book value of past | ||
investment in relation to Fiume Bruna and Casoni of approximately £4.10 million was impaired in full during 2014. | ||
At 31 December 2014, the consolidated balance sheet included approximately £5.24 million of past investment | ||
in relation to group's Italian gas storage project at Rivara. Pending resolution of the legal proceedings the carrying | ||
value of Rivara has not been impaired. | ||
Cash used in continuing operations totalled £1.63 million (2013: £0.37 million generated) after adjustments for non-cash | ||
items with capital expenditures incurred during the year limited to £0.22 million (2013: £0.22 million). | ||
There was £0.42 million of available cash at 31 December 2014 (2013: £0.66 million). Gross equity capital of £0.8m was raised | ||
since year end through a placing of ordinary shares. Group cash balances at 24 June 2015 were £0.46 million. | ||
Going concern | ||
The financial information for the year to 31 December 2014 has been prepared assuming the group will continue as a going | ||
concern. Under the going concern assumption, an entity is ordinarily viewed as continuing in business for the foreseeable | ||
future with neither the intention nor the necessity of liquidation, ceasing trading or seeking protection from creditors pursuant to | ||
laws or regulations. | ||
The assessment has been made based on the group's anticipated activities which have been included in the financial forecast | ||
for the years 2015 and 2016. Included in these forecasts is the result of the recent placing which provided approximately £800,000 | ||
before expenses. As a result of this additional fund raising the group can continue with its proposed activities. | ||
Whilst the directors remain acutely cost conscious and value focused the group will still need to attract additional funding in forthcoming | ||
months to continue in operation and to cover its share of work programme costs in relation to Ksar Hadada. Accordingly, the directors | ||
continue to explore all forms of potential fundraising at both a corporate and asset level. We continue to keep operating costs | ||
to a minimum and to use in-house resource and expertise to assess new opportunities and minimise professional | ||
fees payable to third parties. | ||
Cash is tightly managed and the closure of the Italian office will result in a significant reduction in the Group's overheads | ||
to a currently anticipated level of approximately £1.30 million per annum. In addition, in recent months the board | ||
as a demonstration of commitment to the future success of the Company have foregone receipt of salaries and fees | ||
in cash in favour of share based remuneration. In relation to Ksar Hadada, management's intention remains to secure a | ||
farm-in or investment partner to cover programme costs. | ||
Based on the above, the directors have formed a judgment that the going concern basis should be adopted in preparing the | ||
financial statements. | ||
Should the group be unable to continue trading, adjustments would have to be made to reduce the value of the assets | ||
to their recoverable amounts, to provide for further liabilities which might arise and to classify fixed assets as current. | ||
Business development | ||
A number of possible transactions are actively being pursued and we expect to report further in due course. We | ||
have submitted formal offers on two opportunities and await developments. | ||
The investment environment in our industry has been altered by the drop in oil prices over the last nine months. | ||
This decline has ultimately led to a decrease in the costs of services and asset values and heightened the need for | ||
companies to prioritise the use of capital. Many projects will by necessity become non-core for the current owners | ||
and will be made available for sale. IRG continues to see this as an attractive time to acquire and exploit | ||
development and appraisal assets. | ||
Egypt remains our primary country of focus. It represents an established oil province with good commercial terms | ||
and our management team has significant in country operational experience. We believe that the application of a | ||
western approach to production management and proper technical and commercial analysis can make a real | ||
difference to asset performance. | ||
We thank shareholders for their patience and hope to make further announcements about Ksar Hadada and our | ||
investment pipeline in due course. | ||
Grayson Nash | ||
Non-executive Chairman | ||
For more information, please visit www.ir-plc.com or contact: | ||
Greg Coleman | Independent Resources plc | 020 3367 1134 |
Phil Davies | Charles Stanley Securities | 020 7149 6942 |
(Nominated Adviser & Joint Broker) | ||
Oliver Stansfield | Brandon Hill Capital | 020 3463 5000 |
Alex Walker | (Joint Broker) | |
Jonathan Evans | ||
Simon Hudson | Tavistock Communications | 020 7920 3150 |
Independent Resources plc | ||||||
Consolidated statement of comprehensive income | ||||||
Year ended 31 December 2014 | ||||||
Notes | Year to 31 December 2014 | Period to 31 December 2013 | ||||
Continuing operations | £ | £ | ||||
Revenue | - | - | ||||
Cost of sales | - | - | ||||
Gross profit | - | - | ||||
Administrative expenses | (1,613,026) | (1,531,735) | ||||
Other operating income | 42,509 | - | ||||
Reorganisation of Rivara Gas Storage srl | 3 | - | (1,511,722) | |||
Operating loss | (1,570,517) | (3,043,457) | ||||
Financial income | 2,183 | 2,455 | ||||
Financial expense | (4,394) | (2,998) | ||||
Loss before tax from continuing operations | (1,572,728) | (3,044,000) | ||||
Taxation | 5 | - | - | |||
Loss for the year from continuing operations | (1,572,728) | (3,044,000) | ||||
Discontinued operations | ||||||
Loss after taxation for the year from | ||||||
discontinued operations | 4 | (4,907,737) | (297,338) | |||
Loss for the year | (6,480,465) | (3,341,338) | ||||
Other comprehensive income: | ||||||
Items that will or may be reclassified to profit | ||||||
or loss in subsequent periods (net of tax) | ||||||
Exchange difference on translating foreign operations | (650,799) | 704,123 | ||||
Total comprehensive loss for the year | (7,131,264) | (2,637,215) | ||||
Loss attributable to: | ||||||
Owners of the parent | (6,480,465) | (3,350,702) | ||||
Non-controlling interests | - | 9,364 | ||||
(6,480,465) | (3,341,338) | |||||
Total comprehensive loss attributable to: | ||||||
Owners of the parent | (7,131,264) | (2,664,623) | ||||
Non-controlling interests | - | 27,408 | ||||
(7,131,264) | (2,637,215) | |||||
Loss per share (pence) | 6 | |||||
Basic | (8.3) | (7.3) | ||||
Diluted | (8.3) | (7.3) | ||||
Loss per share (pence) for continuing operations | ||||||
Basic | (2.0) | (6.6) | ||||
Diluted | (2.0) | (6.6) | ||||
Independent Resources plc | |||||||
Consolidated statement of financial position | |||||||
As at 31 December 2014 | |||||||
Notes | 31 December 2014 | 31 December 2013 | |||||
£ | £ | ||||||
Non-current assets | |||||||
Property, plant and equipment | 13,016 | 19,883 | |||||
Goodwill | 7 | - | 450,766 | ||||
Other intangible assets | 8 | 5,603,152 | 10,128,364 | ||||
5,616,168 | 10,599,013 | ||||||
Current assets | |||||||
Other receivables | 206,027 | 464,850 | |||||
Cash and cash equivalents | 425,909 | 663,117 | |||||
631,936 | 1,127,967 | ||||||
Assets held for distribution | 4 | 47,683 | - | ||||
679,619 | 1,127,967 | ||||||
Current liabilities | |||||||
Trade and other payables | (609,010) | (807,505) | |||||
Liabilities directly associated with the | |||||||
assets held for distribution | 4 | (279,989) | - | ||||
(888,999) | (807,505) | ||||||
Net current assets | (209,380) | 320,462 | |||||
Net assets | 5,406,788 | 10,919,475 | |||||
Equity attributable to equity holders of the parent | |||||||
Share capital | 9 | 1,051,434 | 458,369 | ||||
Share premium | 10 | 16,302,050 | 15,287,351 | ||||
Share option reserve | 25,776 | 418,919 | |||||
Foreign currency translation reserve | (39,564) | 611,235 | |||||
Retained earnings | (11,932,908) | (5,856,399) | |||||
Total equity | 5,406,788 | 10,919,475 | |||||
Independent Resources plc | ||||||||
Statement of changes in equity | ||||||||
Year ended 31 December 2014 | ||||||||
Retained | Share | Share | Share | Foreign | Total | Non- | Total | |
earnings | capital | premium | option | currency | controlling | equity | ||
reserve | translation | interests | ||||||
reserve | ||||||||
£ | £ | £ | £ | £ | £ | £ | £ | |
Consolidated | ||||||||
1 October 2012 | (3,766,319) | 458,369 | 15,287,351 | 264,717 | (74,844) | 12,169,274 | 1,172,302 | 13,341,576 |
Loss for the period | (3,350,702) | - | - | - | - | (3,350,702) | 9,364 | (3,341,338) |
Exchange differences | - | - | - | - | 686,079 | 686,079 | 18,044 | 704,123 |
Total comprehensive loss for the period | (3,350,702) | - | - | - | 686,079 | (2,664,623) | 27,408 | (2,637,215) |
Share options lapsed | 60,912 | - | - | (60,912) | - | - | - | - |
Share-based payments | - | - | - | 215,114 | - | 215,114 | - | 215,114 |
Non-controlling interest acquired by group | 1,199,710 | - | - | - | - | 1,199,710 | (1,199,710) | - |
31 December 2013 | (5,856,399) | 458,369 | 15,287,351 | 418,919 | 611,235 | 10,919,475 | - | 10,919,475 |
1 January 2014 | (5,856,399) | 458,369 | 15,287,351 | 418,919 | 611,235 | 10,919,475 | - | 10,919,475 |
Loss for the year | (6,480,465) | - | - | - | - | (6,480,465) | - | (6,480,465) |
Exchange differences | - | - | - | - | (650,799) | (650,799) | - | (650,799) |
Total comprehensive loss for the year | (6,480,465) | - | - | - | (650,799) | (7,131,264) | - | (7,131,264) |
New shares issued | - | 593,065 | 1,186,129 | - | - | 1,779,194 | - | 1,779,194 |
Share issue costs | - | - | (171,430) | - | - | (171,430) | - | (171,430) |
Share options lapsed | 403,956 | - | - | (403,956) | - | - | - | - |
Share-based payments | - | - | - | 10,813 | - | 10,813 | - | 10,813 |
Non-controlling interest acquired by group | - | - | - | - | - | - | - | - |
31 December 2014 | (11,932,908) | 1,051,434 | 16,302,050 | 25,776 | (39,564) | 5,406,788 | - | 5,406,788 |
Independent Resources plc | |||||||||||||||||||||||||||||||
Consolidated statement of cash flows | |||||||||||||||||||||||||||||||
Year ended 31 December 2014 | |||||||||||||||||||||||||||||||
Year to 31 December 2014 | Period to 31 December 2013 | ||||||||||||||||||||||||||||||
£ | £ | ||||||||||||||||||||||||||||||
Cash flows from operating activities | |||||||||||||||||||||||||||||||
Loss before taxation from continuing operations | (1,572,728) | (3,044,000) | |||||||||||||||||||||||||||||
Loss before taxation from discontinued operations | (4,907,737) | (297,338) | |||||||||||||||||||||||||||||
(6,480,465) | (3,341,338) | ||||||||||||||||||||||||||||||
Adjustments for: | |||||||||||||||||||||||||||||||
Depreciation of property, plant and equipment | 10,724 | 10,818 | |||||||||||||||||||||||||||||
Impairment of intangible assets and goodwill | 4,547,705 | - | |||||||||||||||||||||||||||||
Share-based payments | 10,813 | 215,114 | |||||||||||||||||||||||||||||
Financial income | (2,183) | (2,455) | |||||||||||||||||||||||||||||
Financial expense | 4,394 | 2,998 | |||||||||||||||||||||||||||||
(1,909,012) | (3,114,863) | ||||||||||||||||||||||||||||||
Decrease in other receivables | 218,331 | 3,433,381 | |||||||||||||||||||||||||||||
Increase/(decrease) in trade and other payables | 81,494 | (153,166) | |||||||||||||||||||||||||||||
Cash (used in)/from operations | (1,609,187) | 165,352 | |||||||||||||||||||||||||||||
Income taxes received | - | - | |||||||||||||||||||||||||||||
Net cash (used in)/from operating activities | (1,609,187) | 165,352 | |||||||||||||||||||||||||||||
Cash flows from investing activities | |||||||||||||||||||||||||||||||
Interest received | 2,183 | 2,455 | |||||||||||||||||||||||||||||
Interest paid | (4,394) | (2,998) | |||||||||||||||||||||||||||||
Proceeds on disposal of property, plant and equipment | - | 1,495 | |||||||||||||||||||||||||||||
Purchase of intangible assets | (219,512) | (222,913) | |||||||||||||||||||||||||||||
Purchases of property, plant and equipment | (14,062) | (10,060) | |||||||||||||||||||||||||||||
Net cash used in investing activities | (235,785) | (232,021) | |||||||||||||||||||||||||||||
Cash flows from financing activities | |||||||||||||||||||||||||||||||
Issue of share capital | 1,779,194 | - | |||||||||||||||||||||||||||||
Share issue costs | (171,430) | - | |||||||||||||||||||||||||||||
Net cash from financing activities | 1,607,764 | - | |||||||||||||||||||||||||||||
Net decrease in cash and cash equivalents | (237,208) | (66,669) | |||||||||||||||||||||||||||||
Cash and cash equivalents at 1 January 2014 | 663,117 | 729,786 | |||||||||||||||||||||||||||||
Cash and cash equivalents at 31 December 2014 | 425,909 | 663,117 | |||||||||||||||||||||||||||||
1 | Basis of preparation | ||||||||||||||||||||||||||||||
The company's functional currency is the Euro, and presentational currency is Great British Pounds Sterling. | |||||||||||||||||||||||||||||||
The financial information has been prepared in accordance with International Financial Reporting Standards | |||||||||||||||||||||||||||||||
("IFRS"), IFRIC interpretations and with those parts of the Companies Act 2006 applicable to companies preparing | |||||||||||||||||||||||||||||||
their accounts under IFRS, as adopted by the European Union, and the Companies Act 2006. The financial | |||||||||||||||||||||||||||||||
information has been prepared under the historical cost convention, as modified by revaluations of financial assets | |||||||||||||||||||||||||||||||
and financial liabilities at fair value through the statement of comprehensive income. Details of the accounting | |||||||||||||||||||||||||||||||
policies applied are set out in the financial statements for the period ended 31 December 2013 and have not | |||||||||||||||||||||||||||||||
changed for the year ended 31 December 2014. | |||||||||||||||||||||||||||||||
The financial information set out in this announcement does not constitute audited financial statements for the year | |||||||||||||||||||||||||||||||
ended 31 December 2014. The financial information for the period ended 31 December 2013 is derived from the | |||||||||||||||||||||||||||||||
statutory accounts for that period which have been delivered to the Registrar of Companies. The auditors reported on | |||||||||||||||||||||||||||||||
those accounts: their report was unqualified but did include an emphasis of matter regarding the ongoing status of | |||||||||||||||||||||||||||||||
the Rivara project. | |||||||||||||||||||||||||||||||
The financial information for the year ended 31 December 2014 is derived from the financial statements, but does not | |||||||||||||||||||||||||||||||
constitute the group's financial statements. The company's auditors have reported on the statutory financial | |||||||||||||||||||||||||||||||
statements for the year ended 31 December 2014 and their report is unqualified, but, with the following emphases of | |||||||||||||||||||||||||||||||
matter: | |||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||
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2. | Business segments | ||||||||||||||||||||||||||||||
The group has adopted IFRS 8 Operating segments. Per IFRS 8, operating segments are based on internal reports | |||||||||||||||||||||||||||||||
about components of the group, which are regularly reviewed and used by the Board of Directors being the Chief | |||||||||||||||||||||||||||||||
Operating Decision Maker ("CODM") for strategic decision making and resource allocation, in order to allocate | |||||||||||||||||||||||||||||||
resources to the segment and to assess its performance. The group's reportable operating segments are as follows: | |||||||||||||||||||||||||||||||
a. | Parent company | ||||||||||||||||||||||||||||||
b. | Rivara | ||||||||||||||||||||||||||||||
c. | Ksar Hadada | ||||||||||||||||||||||||||||||
The previously reported segment of Ribolla Basin CBM assets has been classified as a discontinued operation and has been | |||||||||||||||||||||||||||||||
excluded from the analysis below. | |||||||||||||||||||||||||||||||
The CODM monitors the operating results of each segment for the purpose of performance assessments and | |||||||||||||||||||||||||||||||
making decisions on resource allocation. Performance is based on assessing progress made on projects and | |||||||||||||||||||||||||||||||
the management of resources used. Segment assets and liabilities are presented inclusive of inter-segment | |||||||||||||||||||||||||||||||
balances. | |||||||||||||||||||||||||||||||
The group did not generate any revenue during the year to 31 December 2014 nor in the period to 31 December 2013. | |||||||||||||||||||||||||||||||
Information regarding each of the operations of each reportable segment within continuing operations is included in | |||||||||||||||||||||||||||||||
the following table. | |||||||||||||||||||||||||||||||
Parent | Rivara | Ksar Hadada | Consolidation | Total | |||||||||||||||||||||||||||
company | |||||||||||||||||||||||||||||||
£ | £ | £ | £ | £ | |||||||||||||||||||||||||||
Year to 31 December 2014 | |||||||||||||||||||||||||||||||
Interest revenue | 139,184 | 12,633 | - | (149,634) | 2,183 | ||||||||||||||||||||||||||
Interest expense | - | (68,168) | - | 63,774 | (4,394) | ||||||||||||||||||||||||||
Depreciation | 2,816 | 40 | - | - | 2,856 | ||||||||||||||||||||||||||
Impairment of | |||||||||||||||||||||||||||||||
intangible assets | - | - | - | - | - | ||||||||||||||||||||||||||
Income tax | - | - | - | - | - | ||||||||||||||||||||||||||
Loss for the year | |||||||||||||||||||||||||||||||
before taxation | (9,398,072) | (198,236) | (129,676) | 8,153,256 | (1,572,728) | ||||||||||||||||||||||||||
Assets | 4,378,459 | 6,955,152 | 374,451 | (5,459,958) | 6,248,104 | ||||||||||||||||||||||||||
Liabilities | (544,028) | (3,003,712) | (890,749) | 3,829,479 | (609,010) | ||||||||||||||||||||||||||
Period to 31 December 2013 | |||||||||||||||||||||||||||||||
Interest revenue | 155,807 | 40,133 | - | (193,485) | 2,455 | ||||||||||||||||||||||||||
Interest expense | (121) | (111,370) | - | 108,493 | (2,998) | ||||||||||||||||||||||||||
Depreciation | - | 1,241 | - | - | 1,241 | ||||||||||||||||||||||||||
Impairment of | |||||||||||||||||||||||||||||||
intangible assets | - | - | - | - | - | ||||||||||||||||||||||||||
Income tax | - | - | - | - | - | ||||||||||||||||||||||||||
Loss for the | |||||||||||||||||||||||||||||||
period before taxation | (789,605) | (1,744,075) | (61,511) | (448,809) | (3,044,000) | ||||||||||||||||||||||||||
Assets | 12,128,214 | 8,242,367 | 235,604 | (8,879,205) | 11,726,980 | ||||||||||||||||||||||||||
Liabilities | (514,288) | (3,810,637) | (622,226) | 4,139,646 | (807,505) | ||||||||||||||||||||||||||
The geographical split of non-current assets arises as follows: | |||||||||||||||||||||||||||||||
United | Overseas | Total | |||||||||||||||||||||||||||||
Kingdom | |||||||||||||||||||||||||||||||
£ | £ | £ | |||||||||||||||||||||||||||||
31 December 2014 | |||||||||||||||||||||||||||||||
Intangible assets | - | 5,603,152 | 5,603,152 | ||||||||||||||||||||||||||||
Goodwill | - | - | - | ||||||||||||||||||||||||||||
Property, plant and equipment | 12,968 | 48 | 13,016 | ||||||||||||||||||||||||||||
31 December 2013 | |||||||||||||||||||||||||||||||
Intangible assets | - | 10,128,364 | 10,128,364 | ||||||||||||||||||||||||||||
Goodwill | - | 450,766 | 450,766 | ||||||||||||||||||||||||||||
Property, plant and equipment | 1,852 | 18,031 | 19,883 | ||||||||||||||||||||||||||||
3. | Exceptional items | ||||||||||||||||||||||||||||||
Reorganisation of Rivara Gas Storage srl (previously named ERG Rivara Storage srl) | |||||||||||||||||||||||||||||||
On 22 November 2012 the company completed negotiations with the third party which held a non-controlling interest in | |||||||||||||||||||||||||||||||
ERG Rivara Storage srl in order to bring back into full control of the group the valuable Rivara gas storage project. The | |||||||||||||||||||||||||||||||
following reorganisation took place: | |||||||||||||||||||||||||||||||
• | The non-controlling interest paid €1,400,000 (£1,182,432) for part settlement of the amount it owed in respect of share capital issued by ERG Rivara Storage srl; | ||||||||||||||||||||||||||||||
• | The non-controlling interest waived amounts owed by ERG Rivara Storage srl totalling €357,027 (£301,543); | ||||||||||||||||||||||||||||||
• | ERG Rivara Storage srl cancelled the remaining amount due to it by the non-controlling interest of €3,531,001 (£2,982,265) in relation to unpaid share capital and cancelled shares to this value. This amount had previously been discounted by £1,169,000. | ||||||||||||||||||||||||||||||
• | The non-controlling interest transferred its entire shareholding in ERG Rivara Storage srl to Independent Gas Management srl for €1 (£1); and | ||||||||||||||||||||||||||||||
• | ERG Rivara Storage srl changed its name to Rivara Gas Storage srl. | ||||||||||||||||||||||||||||||
The amount recognised in the consolidated statement of comprehensive income for the year is calculated as follows: | |||||||||||||||||||||||||||||||
Year to 31 December 2014 | Period to 31 December 2013 | ||||||||||||||||||||||||||||||
£ | £ | ||||||||||||||||||||||||||||||
Cancellation of amount due from non-controlling interest | |||||||||||||||||||||||||||||||
(pre discounting adjustment) | - | 2,982,265 | |||||||||||||||||||||||||||||
Discounting adjustment reversed | - | (1,169,000) | |||||||||||||||||||||||||||||
Amount due to non-controlling interest waived | - | (301,543) | |||||||||||||||||||||||||||||
Loss on reorganisation | - | 1,511,722 | |||||||||||||||||||||||||||||
4. | Discontinued operations | |||
The group was unable to find an investment partner for the coal bed methane opportunities at Fiume Bruna and Casoni, | ||||
in Italy, therefore, these opportunities will no longer be pursued. As a result the directors decided, prior to the year end, to | ||||
significantly reduce its activities in Italy and to discontinue the activities within Independent Energy Solutions srl which | ||||
dealt solely with these opportunities. With Independent Energy Solutions srl classified as discontinued operations, the | ||||
Ribolla Basin CBM assets segment is no longer presented in the segment note. The results of Independent Energy | ||||
Solutions srl, incorporating consolidation adjustments, are presented below: | ||||
Year to 31 December 2014 | Period to 31 December 2013 | |||
£ | £ | |||
Revenue | - | - | ||
Administrative expenses | (360,916) | (300,214) | ||
Operating loss before impairment | (360,916) | (300,214) | ||
Impairment of the historic cost and carrying value of intangible | ||||
assets | (4,096,939) | - | ||
Impairment of goodwill arising on acquisition of Independent Energy | ||||
Solutions srl - consolidation adjustment | (450,766) | - | ||
Operating loss after impairment | (4,908,621) | (300,214) | ||
Financial income | 884 | 2,876 | ||
Financial expense | - | - | ||
Loss on ordinary activities before taxation | (4,907,737) | (297,338) | ||
Taxation | - | - | ||
Loss for the year from discontinued operations | (4,907,737) | (297,338) | ||
The major classes of assets and liabilities of Independent Energy Solutions srl classified as held for distribution to equity | ||||
holders of the parent as at 31 December 2014 are as follows: | ||||
31 December 2014 | 31 December 2013 | |||
£ | £ | |||
Assets | ||||
Intangible assets - fully impaired | - | - | ||
Property, plant and equipment | 9,026 | - | ||
Other receivables | 22,008 | - | ||
Cash and cash equivalents | 16,649 | - | ||
Assets held for distribution | 47,683 | - | ||
Liabilities | ||||
Trade and other payables | (279,989) | - | ||
Liabilities directly associated with the assets held for distribution | (279,989) | - | ||
Net assets directly associated with disposal group | (232,306) | - | ||
The net cash flows incurred by Independent Energy Solutions srl are as follows: | ||||
Year to 31 December 2014 | Period to 31 December 2013 | |||
£ | £ | |||
Operating | 25,297 | 128,568 | ||
Investing | (61,737) | (118,329) | ||
Financing | - | - | ||
Net cash (outflow)/inflow | (36,440) | 10,239 |
Loss per share (pence) | ||||
Year to 31 December 2014 | Period to 31 December 2013 | |||
Basic, loss for the year from discontinued operations | (6.3) | (0.7) | ||
Diluted, loss for the year from discontinued operations | (6.3) | (0.7) | ||
Immediately before the classification of Independent Energy Solutions srl as discontinued operations, the recoverable | ||||
amount was estimated for certain items of property, plant and equipment and no impairment was identified. No adjustment | ||||
has been made to reduce the carrying amount of the assets in the disposal group to their fair value less costs to distribute. | ||||
Immediately before the classification of Independent Energy Solutions srl as discontinued operations, the recoverable | ||||
amount was estimated for the company's intangible assets and these were impaired in full. | ||||
5. | Taxation | |||
Year to 31 December 2014 | Period to 31 December 2013 | |||
£ | £ | |||
Tax on profit on ordinary activities | ||||
Taxation charged based on profits for the period | ||||
UK corporation tax based on the results for the period | - | - | ||
Total tax expense in income statement | - | - | ||
Reconciliation of the tax expense | ||||
The tax assessed for the year is different from the standard rate of corporation tax in the UK (21.5%). The | ||||
differences are explained below: | ||||
Year to 31 December 2014 | Period to 31 December 2013 | |||
£ | £ | |||
Loss on ordinary activities before taxation | (1,572,728) | (3,044,000) | ||
Loss on ordinary activities multiplied by standard rate | ||||
of corporation tax in the UK of 21.5% (2013: 23.4%) | (338,136) | (712,296) | ||
Effects of: | ||||
Expenses disallowed for tax purposes | 2,540 | 50,337 | ||
Deferred tax not provided - tax losses carried forward | 335,596 | 661,959 | ||
Total current tax | - | - | ||
The group has tax losses available to be carried forward in certain subsidiaries and the parent. With anticipated | ||||
substantial lead times for the group's projects, and the possibility that these may therefore expire before their use, it is | ||||
not considered appropriate to anticipate an asset value for them. |
6. | Loss per share | |||
The calculation of basic and diluted loss per share at 31 December 2014 was based on the loss attributable | ||||
to ordinary shareholders of £6,480,465. The weighted average number of ordinary shares outstanding during | ||||
the year ending 31 December 2014 and the effect of the potentially dilutive ordinary shares to be issued are | ||||
shown below. | ||||
Year to 31 December 2014 | Period to 31 December 2013 | |||
£ | £ | |||
Net loss for the year | (6,480,465) | (3,350,702) | ||
Basic weighted average ordinary shares | ||||
in issue during the year | 77,683,625 | 45,836,867 | ||
Diluted weighted average ordinary shares | ||||
in issue during the year | 77,683,625 | 45,836,867 | ||
Loss per share (pence) | ||||
Basic | (8.3) |
| (7.3) | |
Diluted | (8.3) | (7.3) | ||
In accordance with IAS 33 and as the average share price in the year is lower than the exercise price, the share options | ||||
do not have a dilutive impact on earnings per share for the year ending 31 December 2014. |
7. | Goodwill (group) | |||||
Goodwill | ||||||
£ | ||||||
31 December 2014 | ||||||
Cost | ||||||
1 January 2014 and 31 December 2014 | 450,766 | |||||
Impairment | ||||||
1 January 2014 | - | |||||
Impairment charge for the year | 450,766 | |||||
31 December 2014 | 450,766 | |||||
Carrying amount | ||||||
31 December 2014 | - | |||||
31 December 2013 | 450,766 | |||||
31 December 2013 | ||||||
Cost | ||||||
1 October 2012 and 31 December 2013 | 450,766 | |||||
Carrying amount | ||||||
31 December 2013 | 450,766 | |||||
30 September 2012 | 450,766 | |||||
The goodwill arises as a result of the acquisition of Independent Energy Solutions srl which contains the Ribolla project. | ||||||
The group was unable to find an investment partner for the coal bed methane opportunities at Fiume Bruna and Casoni, | ||||||
in Italy, therefore, these opportunities will no longer be pursued. As a result the directors have decided that the carrying | ||||||
value of the goodwill is not recoverable and have fully provided against this in the current year. | ||||||
8. | Other intangible assets (group) | |||||
Development and exploration | ||||||
Rivara gas | Ribolla Basin | Ksar Hadada | Total | |||
storage | CBM assets | exploration | ||||
facility | acreage | |||||
£ | £ | £ | £ | |||
31 December 2014 | ||||||
Cost | ||||||
1 January 2014 | 5,584,997 | 4,316,859 | 1,307,337 | 11,209,193 | ||
Exchange differences | (365,374) | (282,411) | - | (647,785) | ||
Additions | 19,730 | 62,491 | 137,291 | 219,512 | ||
31 December 2014 | 5,239,353 | 4,096,939 | 1,444,628 | 10,780,920 | ||
Impairment | ||||||
1 January 2014 | - | - | 1,080,829 | 1,080,829 | ||
Impairment charge for the year | - | 4,096,939 | - | 4,096,939 | ||
31 December 2014 | - | 4,096,939 | 1,080,829 | 5,177,768 | ||
Carrying amount | ||||||
31 December 2014 | 5,239,353 | - | 363,799 | 5,603,152 | ||
31 December 2013 | 5,584,997 | 4,316,859 | 226,508 | 10,128,364 | ||
31 December 2013 | ||||||
Cost | ||||||
1 October 2012 | 5,236,000 | 4,013,233 | 1,297,709 | 10,546,942 | ||
Exchange differences | 248,709 | 190,629 | - | 439,338 | ||
Additions | 100,288 | 112,997 | 9,628 | 222,913 | ||
31 December 2013 | 5,584,997 | 4,316,859 | 1,307,337 | 11,209,193 | ||
Impairment | ||||||
1 October 2012 | - | - | 1,080,829 | 1,080,829 | ||
Impairment charge for the period | - | - | - | - | ||
31 December 2013 | - | - | 1,080,829 | 1,080,829 | ||
Carrying amount | ||||||
31 December 2013 | 5,584,997 | 4,316,859 | 226,508 | 10,128,364 | ||
30 September 2012 | 5,236,000 | 4,013,233 | 216,880 | 9,466,113 | ||
The primary intangible assets are all internally generated. | ||||||
For the purpose of impairment testing of intangible assets, recoverable amounts have been determined based | ||||||
upon the value in use of the group's three projects. | ||||||
Ribolla Basin CBM assets | ||||||
The group was unable to find an investment partner for the coal bed methane opportunities at Fiume Bruna and Casoni, | ||||||
in Italy, therefore, these opportunities will no longer be pursued. As a result the directors have decided that the carrying | ||||||
value of the intangible asset is not recoverable and have fully provided against this in the current year. | ||||||
Ksar Hadada exploration permit | ||||||
Through a wholly owned subsidiary, the Group owns a 86.345% working interest in the Ksar Hadada exploration | ||||||
permit onshore Tunisia. The Group and its partners in the licence expect drilling activity in the licence to commence in 2016. | ||||||
The Group is actively searching for a farm-in partner to fund seismic appraisal and drilling. If a commercial discovery is made | ||||||
through drilling then a production licence with a 30 year duration can be obtained. Management's evaluation of the commercial | ||||||
terms of the related production sharing contract confirm that the project remains economic at current oil prices and at a substantial | ||||||
discount thereto and indicate a net present value significantly in excess of the value of the related intangible assets. | ||||||
Rivara gas storage facility | ||||||
Despite the expected delay, a review of the latest management information and projections shows a net present value | ||||||
significantly in excess of assets and liabilities relating to the project. The main assumptions indicate that no significant | ||||||
change has arisen on these calculations which would materially impact on the group. | ||||||
The continuing analysis and testing of technical data continues to indicate that the project is feasible. | ||||||
The group continues to work towards, and is confident of, obtaining all the necessary approvals from regulatory | ||||||
authorities. The group anticipates being able to raise the necessary finance to continue to develop the projects. | ||||||
Value in use | ||||||
Value in use has been calculated separately for the group's Rivara gas storage facility. Cash flows are projected for | ||||||
the periods up to the date that the project is expected to become commercially operational and from then until | ||||||
operations are expected to cease, based upon management's expectations. These dates depend on a number of variables, | ||||||
including the project's technical feasibility, regulatory approval, forecast revenue prices and the associated development | ||||||
and operational costs. | ||||||
The project is expected to generate revenue after five to nine years and to continue doing so for a further 35 | ||||||
years. The directors consider that projections calculated for a period greater than five years are justified as the | ||||||
project is still in a development stage. | ||||||
Key assumptions used in value in use calculations | ||||||
The key assumptions used in the value in use calculations for the intangible assets are the expected storage and | ||||||
useable capacity of the Rivara project, costs of plant and infrastructure, expected revenue prices (specifically gas | ||||||
prices), expected operational costs, appropriate discount rates and foreign exchange rates. | ||||||
Management's assessment of the technical and commercial viability of the project is supported by the evaluation work | ||||||
undertaken by appropriately qualified persons. | ||||||
Management has assessed the project's individual net present values and thereby impairment on a variety of | ||||||
bases and assumptions using, where appropriate, a number of discount rates. The impairment tests are | ||||||
particularly sensitive to changes in the key assumptions, and changes to these assumptions could result in | ||||||
impairment; however, all of the varying bases indicate a net present value significantly in excess of the value of | ||||||
the intangible assets. | ||||||
Foreign exchange rates have been based on external market forecasts, after considering long-term market | ||||||
expectations and the countries in which the group operates. | ||||||
The key assumptions used in the value in use calculations are as follows: | ||||||
Assumption | Sensitivity | |||||
factor * | ||||||
Rivara gas storage facility: | ||||||
Growth rate | 2.0% | +568.29% | ||||
Discount rate | 8.0% | +78.23% | ||||
Capital expenditure | - | 185.89% | ||||
The growth rates are considered to cover increases resulting from inflation and regulatory changes. | ||||||
* The sensitivity factor is the percentage change in each specific assumption which would, on its own, result in the net present | ||||||
value equal to the carrying value of the intangible asset in the accounts. | ||||||
The discount rates used vary depending on the nature of the projects and the anticipated stability and longevity of expected | ||||||
cash flows. | ||||||
Potential impairment of the Rivara project | ||||||
The Group holds a 100% interest in Rivara Gas Storage srl. Intangible assets include an amount of £5,239,000 with | ||||||
respect to project expenditure. The regional council, Regione Emilia Romagna, where the project is located is currently | ||||||
denying authorisation for project development. However authorisation has been granted by the national government. As a | ||||||
result Rivara Gas Storage srl has appealed against this decision to the Emilia Romagna Administrative Court | ||||||
and this appeal is due to be heard in the second half of 2015. | ||||||
In the event that Rivara Gas Storage srl's appeal was to be unsuccessful, there may be an indication of impairment of the | ||||||
capitalised expenditure which could significantly reduce the carrying value of this asset. | ||||||
9. | Share capital | ||||||
31 December 2014 | 31 December 2013 | ||||||
Group | Company | Group | Company | ||||
£ | £ | £ | £ | ||||
Issued, called up and fully paid | |||||||
105,143,330 (2013: 45,836,867) | |||||||
ordinary shares of 1p | |||||||
1 January 2014 | 458,369 | 458,369 | 458,369 | 458,369 | |||
Equity shares issued | 593,065 | 593,065 | - | - | |||
31 December 2014 | 1,051,434 | 1,051,434 | 458,369 | 458,369 | |||
Since the enactment of the Companies Act 2006 and the resulting changes to the articles of association of the company, the | |||||||
company is no longer required to maintain an authorised share capital. | |||||||
The holders of ordinary shares are entitled to receive dividends from time to time and are entitled to one vote per | |||||||
share at meetings of the company. | |||||||
On 19 June 2014, a further 59,306,463 ordinary shares of 1p were issued at a placing price of 3p each giving rise to a | |||||||
share premium of £1,186,129. | |||||||
10. | Share premium account | ||||
31 December 2014 | 31 December 2013 | ||||
Group | Company | Group | Company | ||
£ | £ | £ | £ | ||
1 January 2014 | 15,287,351 | 15,287,351 | 15,287,351 | 15,287,351 | |
Premium arising on issue of equity shares | 1,186,129 | 1,186,129 | - | - | |
Transaction costs | (171,430) | (171,430) | - | - | |
31 December 2014 | 16,302,050 | 16,302,050 | 15,287,351 | 15,287,351 |
11. | Share-based payments | ||||||
The share option scheme, which was adopted by the company on 25 November 2005, was established to reward and | |||||||
incentivise the executive management team for delivering share price growth. The share option scheme is administered | |||||||
by the Remuneration Committee. | |||||||
One-off options of 16,667 granted to A R H Thomas in recognition of his contribution at the time of the company's AIM | |||||||
admission remained exercisable at the year end. | |||||||
On 4 March 2013 the company issued 200,000 share options to W G Coleman upon his appointment to the board as | |||||||
chief executive officer. | |||||||
On 10 October 2014 the company issued 4,205,734 share options in total to the directors, key management personnel and | |||||||
their service companies as follows: | |||||||
Individual | Number of options granted | ||||||
W G Coleman (director) | 2,628,583 | ||||||
O P T Franks (director) | 525,717 | ||||||
F P McCole (key management personnel) | 525,717 | ||||||
Rocky Mountain Limited (company controlled | 525,717 | ||||||
by B Hepp, key management personnel) | |||||||
4,205,734 | |||||||
Details of the tranches of share options outstanding at the year end are as follows: | |||||||
Date of grant | 01/01/2014 Number of options | Issued/ lapsed in the period | 31/12/2014 Number of options | Date from which options may be first exercised | Lapse date | Exercise Price per option | |
4/03/2013 | 200,000 | - | 200,000 | 4/03/2013 | 3/03/2023 | 1p | |
10/10/2014 | - | 4,205,734 | 4,205,734 | 10/10/2015 | 10/10/2024 | 3p | |
The options outstanding at the end of the year have a weighted average remaining contractual life of 1 year for the options | |||||||
issued on 4 March 2013 and 2.75 years for the options issued on 10 October 2014. | |||||||
The fair values of the options granted on 4 March 2013 were calculated using the Black-Scholes option pricing model. The | |||||||
inputs into the model were as follows: | |||||||
Weighted average share price | 10.62p | ||||||
Weighted average exercise price | 1p | ||||||
Expected volatility | 92.00% | ||||||
Expected life | 10 years | ||||||
Risk free rate | 2.10% | ||||||
Expected dividend yield | Nil | ||||||
The fair values of the options granted on 10 October 2014 were calculated using the Black-Scholes option pricing model. The | |||||||
inputs into the model were as follows: | |||||||
Weighted average share price | 2.12p | ||||||
Weighted average exercise price | 3p | ||||||
Expected volatility | 85.00% | ||||||
Expected life | 10 years | ||||||
Risk free rate | 2.22% | ||||||
Expected dividend yield | Nil | ||||||
The average fair value of share options granted in the year was 1.716p each. | |||||||
The outstanding share options are not subject to any share-performance related vesting conditions but vesting is conditional | |||||||
upon continuity of service. | |||||||
The expected volatility was determined with reference to the company's share price since it was admitted for trading | |||||||
on AIM in December 2005. 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 group recognised total expenses of £10,813 (2013: £215,114) related to equity-settled, share-based payment | |||||||
transactions during the year. Of the amount recognised in the current year £Nil (2013: £20,573) related to the options issued to | |||||||
W G Coleman, as detailed above, the value of which has been recognised in full as they could be exercised immediately. | |||||||
A deferred taxation asset has not been recognised in relation to the charge for share-based payments due to the availability | |||||||
of tax losses available to be carried forward. |