Jersey Oil&gas Regulatory News (JOG)

Trap Oil Group plc

FINAL RESULTS FOR THE PERIOD ENDED 31 DECEMBER 2011

Trap Oil Group plc ("Trapoil" or the "Company" and, together with its subsidiaries, the "Group") (AIM: TRAP) the independent oil and gas exploration and appraisal company focused on the UK Continental Shelf ("UKCS") region of the North Sea, is pleased to announce its audited results for the period ended 31 December 2011.

A transformational year - geared for accelerated growth.

Highlights:

·; Successful IPO on AIM raising £60m (before expenses) to build Trapoil into a focused mid cap oil and gas business

·; Acquisition of Reach Oil & Gas Limited ("Reach") for £30m securing a significant exploration portfolio

·; Farm-in for 10 per cent. of the promising Orchid prospect from Summit Petroleum Limited ("Summit Petroleum")

·; Successful farm-out of Kew asset to JX Nippon Exploration and Production (U.K.) Limited ("JX Nippon") and Centrica North Sea Oil Limited ("Centrica") receiving £2.75m cash at completion and retaining a 20 per cent. carried interest

·; Strongly positioned for growth from exploration drilling programme in 2012. Orchid exploration well spudded in early March 2012 being the first well in the planned programme

·; Lybster development proceeding cautiously following reserves downgrade

·; Post year end:

o Agreed to sell Lacewing prospect to ConocoPhillips (U.K.) Limited ("ConocoPhillips") for £1m in cash

o Agreement to acquire a 15 per cent. working interest in the Athena oil field from Dyas UK Limited ("Dyas"), subject to Department of Energy and Climate Change ("DECC") and partners' approvals, for £34.5m, providing strong projected cash flows and high anticipated levels of tax synergy

Outlook:

·; First production from Athena scheduled for Q2 2012 with an anticipated initial production rate, estimated by Trapoil's management, of approximately 10,000bopd, rising to 18,000bopd (2,700bopd net to Trapoil)

·; Active management of our asset portfolio via continued divestments, acquisitions and swaps to create shareholder value

·; Delivery of growth through our anticipated exploration drilling programme in 2012

·; Actively build our 2013 exploration drilling programme

·; Utilise the cash generated from production assets to fund further exploration activities

Mark Groves Gidney, Chief Executive Officer of Trapoil, commented:"Trapoil was a very different business a year ago and the fulfilment of our principal IPO objectives within the last year has significantly transformed the Company into a major North Sea player. With a dynamic exploration programme ahead of us and imminent production, we are well placed for accelerated growth and further development."

Enquiries:

ChAIRMAN's STATEMENT

Introduction

I am pleased to report on the Company's maiden final results for the period ended 31 December 2011. Our first year as an AIM quoted company has seen substantial progress with management working diligently to transform the Company into a full cycle exploration, appraisal, development and production business, delivering on the principal objectives set at the time of our IPO in March 2011. The Group's corporate transactions have transformed the business through astute acquisitions and the careful management of our existing asset portfolio. Alongside these achievements, we have continued to focus on providing effective services to our major North Sea partners, securing both carried and working interests in exploration ventures and providing valuable income for the Company.

In July 2011 we successfully acquired Reach. This provided us with a sizeable and diversified portfolio of assets with exploration upside and a small near-term development. The Reach acquisition afforded us the opportunity to increase our equity interest in the promising Orchid prospect, which is currently being drilled with our joint venture partners Summit Petroleum Limited, Valiant Exploration Limited and Atlantic Petroleum UK Limited. November 2011 saw the successful farm-out of our Kew asset to JX Nippon and Centrica, for which we received £2.75m in cash and retained a 20 per cent. carried interest. Shortly after the year end, we agreed to sell our interest in the Lacewing prospect, a difficult, high temperature, high pressure ("HTHP") play involving an expensive well for £1m to ConocoPhillips. As part of the on-going strategic management of our portfolio we are continuously evaluating how best to extract value from our portfolio.

More recently, on 19 March 2012, we announced our entry into a sale and purchase agreement to acquire a 15 per cent. working interest in the Athena oil field from Dyas. Once completed, this acquisition will secure production and provide effective tax synergies to our investment programme over the near term. The Company has established a dynamic exploration programme backed by projected strong cash flows from producing assets, fulfilling its principal IPO objectives set one year ago.

Strategic Objectives

Trapoil is an ambitious Company with a clear and focused strategy. The management team has delivered encouraging initial success against a background of continued global economic uncertainty. They are motivated to deliver results and outcomes in line with a clear set of corporate objectives:

·; Drilling out the planned exploration well programme in 2012

·; Minimising risk exposure while actively building a high impact drilling programme for 2013

·; Continued proactive management of our existing exploration portfolio

·; Taking part in, and delivering results from DECC's 27th Licensing Round

·; Further effective use of our seismic data licence in place with CGGVeritas Services (UK) Ltd ("CGGV") to discover and secure additional attractive UKCS exploration and appraisal assets

·; Remaining well funded to maintain flexibility to take advantage of opportunities as they arise

People

As previously announced, in May 2011, we welcomed David Kemp and Martin David to the Board as Finance Director and Technical Director respectively. David was previously Vice President Finance of Technip SA, a world leader in project management, engineering and construction for the energy industry. Martin joined from Suncor, where he was Exploration Director for North West Europe.

I would like to take the opportunity to thank my fellow Board members for their constructive and positive input during the year and everyone else at Trapoil for their hard work and dedication. These results are undoubtedly due to the skill and commitment of our employees; we continue to look to build our team which we recognise is a key part of our future growth and development.

Finally, we look forward to building on our successes of the last year and to generating further value and growth for our shareholders.

Kevin Watts

Non-Executive Chairman

22 March 2012

Chief Executive OFFICER's Report

I am delighted to report on a highly successful first year as a publicly quoted company having fulfilled our principal IPO promises to our shareholders. It is particularly pleasing that in the course of the last twelve months we have put in place one of the most active drilling programmes in the UKCS and have secured imminent production, bringing with it projected strong cash flows for the business. Our ultimate ambition is to build a sizeable mid-cap oil and gas exploration, appraisal, development and production business with a significant portfolio of assets through the discovery and exploitation of oil and gas reserves.

Unlocking potential - creating value through our drilling programme

Achieving value added growth will undoubtedly be driven by success with the drill-bit and we eagerly await the imminent results of Orchid, our first well for 2012. We are confident that through the drill-bit we will find hydrocarbons during the current financial year.

An exciting drilling programme for 2012 has been established; with wells (in addition to Orchid) planned at Magnolia, Romeo, Crazy Horse, Scotney and finally, in the Inner Moray Firth at Knockinnon and Burrigill. The latter two wells are at the end of the year and are the subject of environmental permitting which may cause some slippage. In all but Orchid and Crazy Horse we are fully carried and in the two named wells we are partially carried. Our portfolio is balanced between risk and reward skewed towards value creation. We believe that the upside potential of our exploration portfolio is a key factor in building Trapoil into a leading explorer in the UKCS. 

2011- Our IPO and delivery of our promises

Our IPO on AIM in March 2011 was delivered against a challenging macroeconomic environment and the team successfully raised a total of £60m gross. The IPO was the largest oil and gas fundraising in the first quarter of 2011 and second largest of the year, which reflects the market turmoil that existed during the last year. We were pleased to have secured these new funds at a time of significant political turmoil; Tunisia had just undergone a change of regime and Libya had erupted into a civil war. Key to the success of our IPO was the support of several well renowned institutional investors from the UK and Switzerland and we thank them for their continued support through some very difficult market conditions. Our stated principal objectives at the time of our IPO were to establish a strong drilling campaign for 2012 and beyond and to gain, via a production purchase, a level of sustainability through cash flow generation and tax efficiency. I am pleased to report that all of these key goals have been achieved.

Drilling programme

Following our IPO, we quickly secured, via a farm-in, an interest in the Summit Petroleum operated Orchid exploration well which was swiftly followed by the acquisition of Reach in July 2011. This substantial acquisition doubled our exploration portfolio, securing four additional near term opportunities. With the recent sale of our Lacewing asset, we now have a seven well programme planned for 2012.

The farm-out of our Kew prospect to JX Nippon and Centrica in November 2011, secured us an exciting opportunity for 2013 and beyond. In this transaction, Trapoil received £2.75m in cash and retained a 20 per cent. carried interest in a future well. The Group does not intend to be active in HTHP wells due to the associated high costs, and the divestment of equity in our Kew and Lacewing assets was an important part of our prudent portfolio management.

Throughout the year, we have remained focused on being a technically driven company and we place considerable emphasis on our strong expertise, combined with access to our 'best in class' seismic data via CGGV. Our established business model of securing carried interests in attractive drilling opportunities has now been enhanced by the ability to take additional working interests which allows us to participate in farm-ins as well as being a more proactive partner to Suncor Energy U.K. Limited ("Suncor") and Norwegian Energy Company UK Limited ("Noreco").

Production delivers anticipated strong cash flows

In achieving our objective of securing cash flows and maximising tax synergy, emphasis has always been placed on subsea production with a leased Floating Production, Storage and Offloading ("FPSO") export facility, to avoid significant abandonment liabilities and the associated restrictive guarantees or setting aside of capital. Equally, due to the considerable fiscal uncertainties around abandonment, we will not be involved in Petroleum Revenue Tax paying fields. In addition, we have avoided being drawn into auction processes, which can be both time consuming and ultimately a waste of our resources. Our focus has instead been on creating opportunities where we have limited competition and are able to negotiate acceptable terms on a one-to-one basis.

Throughout 2011, we have worked on several production opportunities against a rising oil price in Q2 and Q3 and inflated vendor expectations in light of a rising forward price curve. By Q4, the oil price and futures prices had flattened enabling us to become more competitive. We were therefore pleased to announce on 19 March 2012 that we had signed a Sale and Purchase Agreement to acquire 15 per cent. of the Athena oil field from Dyas. This corporate transaction is anticipated by our management team to yield an initial 10,000bopd rising to 18,000bopd (2,700bopd net to Trapoil) when on stream and has been secured at a competitive market price using conservative reserve estimates. This level of anticipated production provides us with a high level of tax synergy and, together with the tax losses acquired from Dyas, should provide strong, post tax cash flows for our exploration drilling programme for several years to come.

The Company also notes that, Caithness Oil Limited, the operator of the Company's Lybster development, has recently downgraded its estimate of recoverable reserves for this block. As a result, development will now proceed more cautiously and plans have been revised to bring the well into production using a temporary facility to gather more reservoir data in Q2 2012. While this is disappointing, it is not of significance to the Company's current or future prospects. Trapoil's 20 per cent. interest in this minor onshore discovery was acquired as part of the acquisition of Reach in July 2011.

Outlook for 2012 - Building on our achievements

Going forward, it is essential that we build on our existing drill ready opportunities and ensure that we carefully manage the inherent risks in drilling against our anticipated cash flows.

We will continue to actively manage our existing portfolio and will endeavour to secure several farm-outs in 2012 to enable drilling to take place on suitable prospects in 2013. We will continue to seek to add to our portfolio through DECC's licensing rounds including the currently active 27th Licensing Round, and further farm-ins. We were delighted to secure two new licences in late December 2011, as the delayed 26th Licensing Round results were formally confirmed by DECC following completion of their environmental assessments.

The anticipated cash flows generated from production at Athena throughout 2012 will enable us to pursue new drilling opportunities. Taking into account tax synergies against our exploration portfolio, we believe that we will ultimately make an attractive return from our acquisition of a 15 per cent. working interest in Athena, which serves to justify our business plan as set out at the time of our IPO.

We will seek to assume operatorship on certain assets where we believe we can either add value or protect value. This forms part of our drive to become a sizeable mid-cap company and we believe Trapoil is now well positioned to achieve this objective in the short to medium term.

Mark Groves Gidney

Chief Executive Officer

22 March 2012Finance Director's Report

The year ended 31 December 2011 was a defining year, with the Group, inter alia, successfully listing on AIM in March 2011,and acquiring Reach in July 2011. The Group ended the year with approximately £32.4m of cash resources. More recently, the Group signed a sale and purchase agreement to acquire a 15 per cent. working interest in the Athena oil field, the latter being subject only to DECC approval and partners' consent. Our existing cash resources, together with the anticipated cash flow to be generated from Athena ensure the Group is well funded to execute its proposed 2012 drilling programme, which commenced recently with the spudding of Orchid.

Fundraising

The AIM flotation in March 2011 raised £60m for the Group, before flotation expenses. We are pleased to count several blue chip institutions amongst our shareholder base. As at 31 December 2011, these included Henderson, JP Morgan, Capital, Elliot, Blackrock, Standard Life, Och Ziff and Lombard Odier.

Cash and Capital Expenditure

As at 31 December 2011, the Group held cash resources of approximately £32.4m. The Group has an active exploration drilling programme for 2012. The Group will incur no capital costs for the majority of these wells, with such expenditure being met by its partners under carried interest agreements. At present, the Group is budgeting capital expenditure for 2012 before acquisitions of approximately £8m.

During the year, the Group successfully secured farm-in partners for its Kew prospect. In addition to retaining a carried interest, the Group received £2.75m of cash. Subsequent to the year end, the Group agreed to sell its interest in Licence P.1181, containing the Lacewing prospect, to ConocoPhillips for a consideration of £1m in cash. The net proceeds from both of these transactions will be applied to general corporate purposes.

On 19 March 2012, the Company announced that through its subsidiary it had signed a conditional sale and purchase agreement to acquire a 15 per cent. interest in the Athena oilfield. A payment of £3m was paid on signature of the sale and purchase agreement, with a further £21m being payable on completion of the acquisition for an initial 10 per cent. interest, currently expected to occur in mid-2012. The balance of £10.5m is due by 31 October 2012 to acquire a further 5 per cent. interest. The effective balancing payment is currently estimated by Trapoil's management to be a lower figure, due to the receipt of Trapoil's anticipated share of post completion net cash flows from Athena to the end of October 2012 plus interest payable to Dyas, such that the estimated effective net acquisition cost is £26.9m. Tax allowances of £12m will also be transferred to the Company from Dyas, serving to reduce the overall effective acquisition cost. The total consideration payable will be satisfied from the Company's existing cash resources and projected income from Athena.

It is anticipated that the field will deliver strong cash flows in 2012 with initial production scheduled for Q2 2012. This cash flow generation will be largely sheltered from tax due to a combination of tax allowances acquired as part of the transaction, past group losses and investments in 2012. Together with our existing cash resources, these cash flows will ensure the Group will be fully funded to execute its 2012 capital expenditure programme.

The acquisition of this interest in Athena will, in time, enable the Group, should it wish, to secure debt funding thereby bringing greater financial flexibility to the Group.

Income Statement

The Group recorded a Loss After Tax of £4.5m (2010: £0.4m) in line with management's expectations. This loss primarily represents technical and employment costs incurred in order to progress and develop our portfolio.

Revenue of £0.8m (2010: £1.3m) was generated from our partnering arrangements with Suncor and Noreco. This does not include any success fee from the delayed 26th Licensing Round awards, announced by DECC in late December 2011. Cost of Sales of £0.8m (2010: £0.3m) were incurred in supporting our assets and delivering opportunities to our partners. Administrative expenses of £4.5m (2010: £1.3m) included £1.4m of share option costs and certain of our IPO expenses. After deduction of Net Finance Charges of £0.1m (2010: £0.1m), a Loss Before Tax of £4.5m (2010: £0.4m) was recorded. As the Group is not currently tax paying, the Loss Before Tax is equivalent to the Loss After Tax.

Balance Sheet

During 2011, the Group made investments of £32.7m. In July 2011, the Group acquired Reach for £30.4m including costs delivering a mature exploration portfolio with a number of drilling opportunities. In addition, £2.3m was spent progressing our existing portfolio, principally through seismic, well planning and survey activity.

Net Current Assets increased by £31.8m compared to 2010, largely reflecting the funds raised from the IPO less investments made in 2011. Non Current Liabilities, representing amounts owing to CGGV for seismic data acquired and other interest bearing loans, reduced by £1.7m from 2010. Payments are made to CGGV when the Group successfully utilises its licensed data and receives applicable success fees from its partners.

Funding and Outlook

In a very difficult financial environment, the Group remains well funded to execute its planned 2012 drilling programme. The acquisition of an interest in Athena is a significant use of our cash resources but, in time, the anticipated production income will further strengthen our corporate liquidity and enable us to expand our available sources of finance.

David Kemp

Finance Director

22 March 2012

GROUP INCOME STATEMENT

FOR THE PERIOD ENDED 31 DECEMBER 2011

No separate statement of comprehensive income has been presented as all such gains and losses have been dealt with in the consolidated income statement.

GROUP STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2011

The financial statements were approved by the Board of Directors and authorised for issue on 21 March 2012 . They were signed on its behalf by David M Kemp - Finance Director.

GROUP STATEMENT OF CHANGES IN EQUITY

FOR THE PERIOD ENDED 31 DECEMBER 2011

GROUP STATEMENT OF CASH FLOWS

FOR THE PERIOD ENDED 31 DECEMBER 2011

CASH AND CASH EQUIVALENTS

The amounts disclosed in the statement of cash flows in respect of cash and cash equivalents are in respect of these statements of financial position amounts:

NOTES TO THE GROUP FINANCIAL INFORMATION

FOR THE PERIOD ENDED 31 DECEMBER 2011

1. The consolidated financial information set out above does not constitute the Company's statutory financial statements for the period ended 31 December 2011 or the year ended 31 December 2010. The consolidated financial information for the year ended 31 December 2010 is derived from the statutory financial statements for that year that have been approved by the Board of Directors. The consolidated financial information for the period ended 31 December 2011 is derived from the financial statements for 2011 prepared using the historical cost convention, on a going concern basis and in accordance with IFRS as adopted by the European Union. The auditors have reported on the 2011 financial statements and their report was unqualified. The financial statements are yet to be delivered to the Registrar of Companies but will be delivered to the Registrar of Companies and filed at Companies House following the Company's forthcoming annual general meeting. The principal accounting policies used in preparing the final results announcement are those that the Company has applied in its financial statements for the period ended 31 December 2011 and are unchanged from those disclosed in the Company's Annual Report and Financial Statements for the year ended 31 December 2010.

2. Trap Oil Group plc was incorporated and registered on 24 January 2011. On 11 March 2011, a new holding company structure became effective by way of a share for share exchange between the shareholders of Predator Oil Ltd (the previous holding company) and Trap Oil Group plc (the new holding company) and the Group became Trap Oil Group plc.

As a consequence of this reorganisation the results of Trap Oil Group plc (the "Group") for the period ended 31 December 2011 comprise the results of Predator Oil Limited for the 12 months ended 31 December 2011 consolidated with those of Trap Oil Group plc from 11 March 2011. The comparative figures for the year ended 31 December 2010 are those of the Group headed by Predator Oil Limited.

3. During the year, Trap Oil Group plc underwent an Initial Public Offering (IPO) in which it raised £55,533,639 net in additional capital. In addition, the Company issued new shares in the amount of £1,132,067 to redeem the shareholder loan notes, and satisfy the accrued interest thereon held by the shareholders of Predator Oil Limited.

4. During the year, Trap Oil Group plc purchased Reach Oil & Gas Limited, a group of three companies holding a number of exploration licences on the UK Continental Shelf. The purchase of this group of companies has been treated as an asset purchase as set out in IFRS 3 Business Combinations. Therefore, the consideration paid has been allocated across the licences held by the group of companies. As part of the consideration for the purchase of Reach Oil & Gas Limited, the Group issued 23,203,402 new ordinary shares to the previous owners of Reach Oil & Gas Limited.

5. No dividend is proposed.

6. Basic loss per share (EPS) is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year.

Diluted loss per share is calculated using the weighted average number of shares adjusted to assume the conversion of all dilutive potential ordinary shares. As a loss was recorded for the current period and prior year the issue of potential ordinary shares would have been anti-dilutive in both years.

7. Included in Non Current Liabilities - Trade and Other Payables of the Group is £3,000,000 and capitalised interest of £291,099 which relates to the consideration paid for the CGGV data licence which has been capitalised under Intangible Assets. The term of the licence is 8 years and the final liability is due on expiry of the licence, being August 2016. On each and every success fee that is earned by the Group from using the data obtained under the licence, £300,000 - £350,000 becomes due immediately. Any balance remaining when the licence expires is due on that date and shall attract interest at a rate of LIBOR plus 1% per annum.

8. Post balance sheet events:

On 6 January 2012 the Group announced that it had agreed to sell the Group's 10 per cent. working interest in its Lacewing asset (P.1181, Block 23/22b) to ConocoPhillips (U.K.) Limited for a consideration of £1m in cash. 

On 19 March 2012, the Group announced that its subsidiary had entered into a conditional Sale and Purchase Agreement to acquire a 15% working interest in the Athena oil field from Dyas UK Limited for a consideration of £34.5m.

9. Copies of the Company's full Annual Report and Financial Statements are expected to be posted to shareholders in due course and, once posted, will also be made available to download from the Company's website at www.trapoil.com.

The Annual Report and Financial Statements will also be made available for inspection at the Company's head office at 4 Park Place, St James's, Mayfair, London, SW1A 1LP during normal business hours on any weekday. Trap Oil Group plc is registered in England and Wales with registration number 7503957. The registered office is at 10 The Triangle, NG2 Business Park, Nottingham, NG2 1AE.