Last checked at 17 Jun 2016 07:00
Lansdowne Oil & Gas plc
Preliminary Results for the year ended 31 December 2015
17th June 2016
Lansdowne Oil & Gas ("Lansdowne" or "the Company") is pleased to announce its unaudited preliminary results, for the year ended 31 December 2015. Lansdowne is an upstream oil and gas company, focused on exploration and appraisal activities in the North Celtic Sea Basin, off the south coast of Ireland. The Company has targeted the Irish offshore shelf areas close to existing operating infrastructure for exploration, as these provide shallow water (generally less than 100 metres), and relatively low drilling costs and the Directors believe that these factors, combined with favourable fiscal terms, have the potential to deliver high value reserves.
Operational highlights
· The Midleton exploration well (49/11-3), located on Standard Exploration Licence (SEL) 4/07, in which the Company holds a 20% interest, found gas in good quality reservoir sands in the Lower Cretaceous Greensand formation. However, the volumes were not considered commercial.
· A two-year extension to the first phase of SEL 1/11 (Lansdowne 20%), which contains the Barryroe oilfield, was secured to July 2017. A two-year extension to the second phase to July 2019 was also secured.
· Providence Resources continued its farm-out efforts on behalf of the partners in the Barryroe oil field (Lansdowne 20%) and has also held discussions with a contractor alliance.
Financial
· Cash balances at 31 December 2015 of £0.32 million (2014: £0.28 million).
· Operating expenses for the year were £1.05 million (2014: £1.30 million).
· Loss for the year after tax of £15.10 million (including an impairment charge of £14.95 million) (2014: loss £1.32 million).
· Loss per share of 10.2 pence (2014: loss 0.9 pence).
Post-balance sheet events · In April 2016, a judgement was handed down by the Court of Appeal overturning an earlier ruling against Transocean in a dispute with Providence Resources. Lansdowne is liable for 20% of the amounts payable by Providence as a result of this decision. · In order to satisfy these obligations and to meet its working capital requirements, in June 2016 the Company has today agreed to issue 210 million shares at 1p each to raise £2.1 million before expenses. For further information please contact: | |
Lansdowne Oil & Gas plc Steve Boldy Richard Slape
| +353 1 495 9259 |
Cantor Fitzgerald Europe Sarah Wharry David Porter | +44 (0)20 7894 7000
|
Results for the year ended 31 December 2015
Chairman's Statement
Introduction
The depressed oil and gas prices that prevailed through 2015 made life extremely difficult for small oil and gas exploration and production companies like Lansdowne. With capital expenditure budgets cut dramatically across the industry, the strategy that Lansdowne has followed of farming-out for the drilling phase, having acquired 3D seismic and high graded prospects, proved to be extremely challenging. Furthermore, the potential to access new funds via the equity capital markets was very limited.
Nevertheless, in March of 2015 the Company secured £2.9 million of additional funding. This was to satisfy Lansdowne's share of certain costs associated with litigation between Providence Resources and Transocean in relation to the drilling of the 48/24-10z well in 2011/12 and also for ongoing working capital requirements. Of this, £1.04 million came from a placing of new shares, while £1.86 million came from the issuance of a senior secured loan note to our largest shareholder, LC Capital Master Fund.
Operations
The Midleton exploration well (49/11-3), located on Standard Exploration Licence (SEL) 4/07, in which the Company holds a 20% interest, commenced in July and was completed in August. The well was drilled by PSE Seven Heads Limited, a wholly owned subsidiary of PSE Kinsale Energy Limited ("Kinsale Energy") under a farm-out agreement whereby Kinsale Energy funded 100% of the costs of the well. The well found good quality reservoir sands in the targeted Lower Cretaceous Greensand and Upper Wealden formations and gas was discovered in the former. Unfortunately, the volumes were not considered commercial and the well was plugged and abandoned.
Despite our best efforts, we were unable to secure a farminee to drill our Amergin (SEL 5/08) or our Rosscarbery (SEL 5/07) prospects and, as Lansdowne was not able to demonstrate that drilling would be achieved in 2016, these licences lapsed from 31 December 2015.
The lack of success in our exploration portfolio renders our 20% in SEL 1/11, containing the Barryroe oilfield, even more important. In November 2015, a two year extension was secured for the first phase of SEL 1/11, to July 2017 as well as an extension of the term of the second phase to July 2019. The areal extent of SEL 1/11 was also increased by 118km² to accommodate mapped potential extensions of the Barryroe accumulation.
Providence Resources has continued a farm-out process on behalf of the Barryroe partnership and has also held discussions with a contractor alliance. Barryroe, with independently estimated 2C resources of 339 MMBOE, is located some 70km offshore in shallow water (c.100m) offers a significant potential prize. With combined capital and operating costs estimated at c.$30/bbl, we believe the economics remain robust even in the low oil price environment that has prevailed over the last 18 months.
Financial results
The Group recorded a loss after tax of £15.10 million for the year ended 31 December 2015 compared to a loss of after tax of £1.32 million for the year ended 31 December 2014. The loss recorded in 2015 was struck after writing-off £14.95 million previously capitalised in respect of the Amergin, Midleton, and Rosscarbery licences.
Group operating expenses for 2015 were £1.05 million, compared to £1.30 million for 2014, while net finance expense for the year was £0.13 million versus £0.02 million in 2014.
Total equity attributable to the ordinary shareholders of the Group has decreased to £10.40 million as at 31 December 2015 from £24.40 million as at 31 December 2014.
Cash balances of £0.32 million (2014: £0.28 million) were held at the end of the financial year.
Post-balance sheet events
On 13th April 2016, a judgment was handed down by the Court of Appeal overturning an earlier ruling against Transocean in a dispute with Providence Resources about certain spread costs. On the basis of this issued judgment, Lansdowne has made a provision for its net share of the amount in its Financial Accounts for the year ending 31 December 2015.
The case related to amounts claimed by Transocean against Providence regarding the use of the semi-submersible drilling unit, the Arctic III, in 2011/12 on the Barryroe oilfield, offshore Ireland. The total claim, which was made by Transocean in 2012, amounted to approximately US$19 million. Providence, in defence of its position, counterclaimed against Transocean. The Hon. Mr Justice Popplewell, in his judgment of 19 December 2014 in the Commercial Court in London, found that Transocean was in breach of contract for failing to maintain various parts of its sub-sea equipment and that Transocean was not, therefore, entitled to the full amount claimed. The ruling also supported Providence's position that Providence was entitled to set off certain spread costs against Transocean's claim.
As previously announced, Transocean sought and was granted the right to appeal one aspect of Mr Justice Popplewell's judgment. This specifically related to Providence's right of set off and the appeal turned on the Court's interpretation of the wording of the consequential loss clause in the rig contract. The appeal was heard in March 2016.
The financial implications of the Court of Appeal's judgment will result in the payment of approximately US$7 million (excluding interest and costs) to Transocean by the Barryroe partners. In line with its working interest in the field, Lansdowne is liable for 20% of this amount (c.US$1.4 million) and of any amounts to be paid in future.
In order to satisfy its obligations under the Barryroe Joint Operating Agreement and to meet its on-going working capital requirements, on 17th June 2016 the Company announced that it had agreed to issue 210 million new shares at 1p each to raise £2.1 million before expenses. In addition, Lansdowne renegotiated the terms of its loan note with LC Capital Master Fund. This is now repayable on 30th June 2017 rather than 9th September 2016 and the coupon has been reduced from 10% per annum to 5% per annum. Furthermore, LC Capital Master Fund agreed to convert £930,000 of the amount outstanding into equity at 1p/share.
Outlook
The Court of Appeal ruling delivered a real body blow at what was already a difficult time for your company. However, we continue to recognise that great value can be created in Barryroe, particularly in the rising oil price environment that now seems to be taking hold. Therefore, after gaining access to new funds to secure our interest in the Barryroe Joint Venture, we are looking to the future with optimism.
John Greenall
Chairman
Lansdowne Oil & Gas plc
Unaudited Consolidated Statement of Financial Position
As at 31 December 2015
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| 2015 | 2014 |
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| Unaudited | Audited |
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| Note | £'000 | £'000 |
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Assets |
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Non- current assets |
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Intangible assets | 4 | 14,335 | 27,151 |
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Current Assets |
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Trade and other receivables |
| 92 | 197 |
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Cash at bank and on hand |
| 320 | 276 |
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| 412 | 473 |
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Total Assets |
| 14,747 | 27,624 |
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Equity and Liabilities
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Shareholders' Equity |
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Share capital | 5 | 8,087 | 7,027 |
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Share premium |
| 25,247 | 25,273 |
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Currency translation reserve |
| 59 | 59 |
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Share-based payment reserve |
| 923 | 894 |
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Accumulated deficit |
| (23,950) | (8,876) |
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Total Equity
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| 10,366 | 24,377 | |||
Non-Current Liabilities |
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Provisions for liabilities Deferred tax liability
Current Liabilities Shareholder loan Trade and other payables
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| 240 -
1,968 2,173
| 217 1,052
- 1,978
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| ------- | ------- |
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Total Liabilities |
| 4,381 | 3,247 |
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Total Equity and Liabilities |
| 14,747 | 27,624 |
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Lansdowne Oil & Gas plc
Unaudited Consolidated Income Statement
For the year ended 31 December 2015
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| 2015 | 2014 |
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| Unaudited | Audited |
| Note | £'000 | £'000 |
Administrative expenses |
| (1,048) | (1,302) |
Impairment of intangible assets |
| (14,949) | - |
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Operating loss |
| (15,997) | (1,302) |
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Finance costs |
| (129) | (21) |
Finance income |
| - | 3 |
Loss for the year before tax |
| (16,126) | (1,320) |
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Income tax credit |
| 1,052 | - |
Loss for the year |
| (15,074) | (1,320) |
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Loss per share (pence): |
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Basic loss per ordinary share | 3 | (10.2p) | (0.9p) |
Diluted loss per ordinary share | 3 | (10.2p) | (0.9p) |
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The results for the period all arise on continuing operations
Lansdowne Oil & Gas plc
Unaudited Consolidated Statement of Comprehensive Income
For the year ended 31 December 2015
| 2015 £'000
| 2014 £'000
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Loss for the year | (15,074) | (1,320) |
Items that may be reclassified to profit and loss account |
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Currency translation differences | - | 3 |
Total comprehensive loss for the year | (15,074) | (1,317) |
Lansdowne Oil & Gas plc
Unaudited Consolidated Statement of Changes in Equity
For the year ended 31 December 2015
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Share capital £'000 |
Share premium £'000 | Share basedpayment Reserve £'000 |
Currency translation reserves £'000 |
Accumulated deficit £'000 |
Total equity £'000 |
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At 1 January 2014 | 7,027 | 25,273 | 803 | 56 | (7,556) | 25,603 |
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Loss for the financial year | - | - | - | - | (1,320) | (1,320) |
Currency translation difference | - | - | - | 3 | - | 3 |
Total comprehensive loss for the year | - | - | - | 3 | (1,320) | (1,317) |
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Share based payments charge | - | - | 91 | - | - | 91 |
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At 31 December 2014 | 7,027 | 25,273 | 894 | 59 | (8,876) | 24,377 |
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At 1 January 2015 | 7,027 | 25,273 | 894 | 59 | (8,876) | 24,377 |
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Loss for the financial year | - | - | - | - | (15,074) | (15,074) |
Total comprehensive loss for the year | - | - | - | - | (15,074) | (15,074) |
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Share based payments charge | - | - | 29 | - |
| 29 |
Issue of new shares | 1,060 | - | - | - |
| 1,060 |
Cost of share issues | - | (26) | - | - |
| (26) |
At 31 December 2015 | 8,087 | 25,247 | 923 | 59 | (23,950) | 10,366 |
Lansdowne Oil & Gas plc
Unaudited Consolidated Statement of Cash Flows
For the year ended 31 December 2015
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Note |
2015 |
2014 |
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| Unaudited | Audited |
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| £'000 | £'000 |
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Cash flows from operating activities |
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Loss for the year |
| (15,074) | (1,320) |
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Adjustment for: |
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Impairment of assets |
| 14,949 | - |
Foreign exchange gains |
| - | 5 |
Interest receivable and similar income |
| - | (3) |
Interest payable and similar charges |
| 127 | 21 |
Equity settled share-based payment expenses |
| 29 | 91 |
Tax credit |
| (1,052) | - |
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Decrease/(increase) in trade and other receivables |
| 105 | (51) |
Increase/(decrease) in trade and other payables |
| 196 | (1,014) |
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Net cash used in operating activities |
| (720) | (2,271) |
Cash flows from investing activities |
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Acquisition of intangible exploration assets |
| (2,133) | 66 |
Interest received |
| - | 3 |
Net cash from investing activities |
| (2,133) | 69 |
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Cash flows from financing activities |
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Proceeds from issue of shares |
| 1,034 | - |
Proceeds from borrowing |
| 1,863 | - |
Net cash from financing activities |
| 2,897 |
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Net increase/(decrease) in cash and cash equivalents |
| 44 | (2,202) |
Cash and cash equivalents at beginning of year |
| 276 | 2,478 |
Cash and cash equivalents at end of year |
| 320 | 276 |
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Lansdowne Oil & Gas plc
Notes to the Financial Information
For the year ended 31 December 2015
1. Basis of presentation
The consolidated financial statements are presented in Sterling, the Group's functional currency, and all values are rounded to the nearest thousand (£000) except where otherwise indicated.
The Directors have prepared the financial statements on the going concern basis which assumes that the Group will continue in operational existence for at least twelve months from the date of the approval of these financial statements as described below.
The Directors have carried out a detailed assessment of the Group's current and prospective exploration activity, its relationship with the holder of its loan note, and the cash flow projections for the period to 30 June 2016. The following represent the key assumptions underpinning the cash flow projections:
Barryroe farm out
The Directors remain confident that, with the positive results from the seismic surveys and the successful Barryroe well test, as well as the level of interest shown by potential partners in the prospect, they will be able to conclude a farm out deal(s) on attractive commercial terms which will provide sufficient resources for the Group to continue with the development of the licences it holds.
Other options
Should a farm out deal not be concluded in relation to Barryroe, the Directors believe that the Group has a number of available funding options; while the Group's primary aim is to conclude the ongoing farm out campaign with a view to attracting industry partners to drill wells, the Group also has the option of issuing new equity, and, as stated in the post balance sheet event note, the Group has announced today that it has agreed to issue 210 million shares to raise £2.10 million before costs by way of a placing with new and existing shareholders.
The Directors have considered the various matters set out above and have concluded that these assumptions are affected by material uncertainties that may cast significant doubt on the ability of the Group to continue as going concerns and that they may therefore be unable to realise assets and discharge liabilities in the normal course of business. Nevertheless, having considered the assumptions underlying the Group's cash flow projections, the directors have a reasonable expectation that the Group will have sufficient cash resources available to meet their liabilities for at least 12 months from the date of approval of these financial statements.
It is on this basis that the directors consider it appropriate to prepare the financial statements on a going concern basis. These financial statements do not include any adjustment that would result from the going concern basis of preparation being inappropriate.
2. Segmental reporting
The Group has one reportable operating and geographic segment, which is the exploration for oil and gas reserves in Ireland. All operations are classified as continuing and currently no revenue is generated from the operating segment.
3. Loss per ordinary share
The loss for the year was wholly from continuing operations.
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| 2015 | 2014 |
Loss per share arising from continuing operations attributable to the equity holders of the Group |
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- basic and diluted | (10.2) | (0.9) |
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The calculations were based on the following information.
| £'000 | £'000 |
Loss for the year attributable to equity holders | (15,074) | (1,320) |
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Weighted average number of ordinary shares in issue |
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- basic and diluted | 157,698,252 | 140,540,159 |
For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. The Group has one class of potential ordinary shares being share options. As a loss was recorded for both 2015 and 2014, potentially issuable shares would have been antidilutive. The number of potentially issuable shares at 31 December 2015 is 165,007,665 (2014: 143,306,029).
4. Intangible assets
Group | Exploration / appraisal assets |
Cost | £'000 |
At 1 January 2014 | 27,217 |
Additions, net of reimbursement from partners | (66) |
At 31 December 2014 | 27,151 |
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Cost |
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At 1 January 2015 | 27,151 |
Additions | 2,133 |
Disposals | (14,949) |
At 31 December 2015 | 14,335 |
Oil and gas project expenditures, all of which relate to Ireland, including geological, geophysical and seismic costs, are accumulated as intangible fixed assets prior to the determination of commercial reserves.
As a result of their annual review, the Directors have impaired capitalised exploration expenditure relating to all licence areas excluding Barryroe in full, as they no longer meet the recognised criteria of IFRS 6, 'Exploration for and Evaluation of Mineral Resourses'.
5. Share capital and premium- Group
| Number of shares (thousands) | Ordinary shares £'000 | Share premium £'000 |
Total £'000 |
At 1 January 2015 | 140,540 | 7,027 | 25,273 | 32,300 |
Issued in year | 21,202 | 1,060 | - | 1,060 |
Share issue costs | - | - | (26) | (26) |
At 31 December 2015 | 161,742 | 8,087 | 25,247 | 33,334 |
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6. Accounts
Copies of the annual accounts for the year ended 31 December 2015 will be sent to shareholders shortly and will be available from the Group's office at 6 Northbrook Road, Ranelagh, Dublin 6, Ireland and the Group's website www.lansdowneoilandgas.com.
Notes to Editors
About Lansdowne
Lansdowne Oil & Gas (LOGP.LN) is a North Celtic Sea focussed, oil and gas exploration company quoted on the AIM market and headquartered in Dublin. Lansdowne's acreage holdings include a 20% stake in SEL 1/11, which contains the Barryroe oil field.
For more information on Lansdowne, please refer to www.lansdowneoilandgas.com