Predator Oil Regulatory News (PRD)

Predator Oil and Gas Holdings Plc

('Predator' or 'the Company' or 'the Group')

Annual Report and Financial Statements for the Year Ended 31 December 2018 

Predator Oil and Gas Holdings Plc, the Jersey-based Oil and Gas Company, with a portfolio of attractive upstream gas assets adjacent to European gas infrastructure entry points is pleased to announce its audited annual report and financial statements for the year ended 31 December 2018 ("2018 Report"), extracts of which are set out below.

The Company's 2018 Report is being posted to shareholders. Copies of the Annual Financial Report will shortly be available to download from the Company's website at www.predatoroilandgas.com.

The financial information set out below does not constitute the Company's statutory accounts for the year ending 31 December 2018.

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) 596/2014

Key Activities in 2018

· Developed a portfolio of high impact oil and gas assets in the Republic of Trinidad and Ireland

· Negotiated Petroleum Agreement for onshore Morocco

· Established potential for production and cash flow from Trinidad in the near and medium term

· Developed Pilot C02 EOR operational plan in Trinidad, put together by the Company. with Heritage, FRAM, Environmental Monitoring Authority, Ministry and Massy Gas Products which potentially forms the template for all future onshore C02 EOR operations

· Progressed offshore Ireland and Morocco to maintain exposure to high potential, transformational gas acreage by initiating the acquisition of assets at low cost prior to rising gas prices and renewed concerns over security of gas supply

· Generated project economic models to support the strategy for early monetisation in a success case of the Company's strategic focus on gas assets around existing mature infrastructure offshore Ireland and onshore Morocco

· Equity funds raised on IPO ensured the Company was fully-funded for near-term operations with the medium-term strategy of completing farmouts and M & A transactions being progressed through technical studies to de-risk future capital requirements using the Company's material licence positions and proprietary knowledge to secure acceptable financial terms

· Group structure established suitable for potential M & A and farmout transactions to reflect the diversified portfolio of near-term production; exploration and appraisal, and exploration in different geographic regions with different fiscal terms

Share Price Performance and Capital Raising

At the time of listing in May 2018 the Company's share price was 2.8p, but by the end of the year it had increased by 190% to 8.13p. On Listing a placing of 46,428,600 shares at 2.8p raised gross proceeds of £1.3 million. The funds raised have been or will be used in support of the Company's 2018/19 work programmes, primarily in Trinidad. We are very grateful for the support shown to the Company in the fundraising by our existing shareholders and of course subsequently by our new shareholders who we welcome to the Company.

Highlights of Financial Results for 2018 

· Loss from operations of £0.792 million (2017: Loss of £0.448 million).

· Cash balance at period end of 2018 £0.973 million (2017: £0.521 million).

For further information please contact:

CHAIRMAN'S STATEMENT

I am pleased to present the 2018 financial results for the year and a detailed summary of our activities during the year and into the early months of 2019.

Following four very difficult years for the oil and gas sector, arising from the sharp decline in oil prices in particular, there had been a subsequent reduction in exploration activity, availability of capital and a severe contraction in the size of the potential farmout market.

More significantly, there is also a growing sector awareness that the Fossil Fuel Industry must adapt quickly to address growing global concerns regarding C02 emissions and climate change that result from an over-reliance on fossil fuels as a source of primary energy to support economic development.

In developing the Company's asset portfolio during 2018 the strategic focus has been on building a responsible fossil fuel exploration and production business.

Predator's focus on gas reflects the fact that gas has lower C02 emissions than oil and is a relatively flexible fossil fuel, being more widely available and affordable and with multiple potential roles in the energy transition towards a greater dependence on renewable energy.

Cash flows have increased in the industry during 2018 and the sharp decline in operating costs attributed to the fall in the price of oil has now allowed the industry to focus on replacing reserves and identifying new business growth opportunities through exploration, appraisal and near-term development. Gas assets with credible technical merits and a clear pathway to monetisation close to existing infrastructure are potentially an attractive proposition and compatible with the sector backdrop outlined above.

The global energy consumption mix is still dominated by fossil fuel energy and to reduce this reliance requires a considerable period of time and large amounts of capital investment in renewable energy projects whilst sustaining economic development to pay for such investments.

Natural gas continues to play a key role in Ireland's energy system providing approximately 30% of the country's primary energy needs. In 2018 50% of Ireland's electricity was powered by natural gas, and despite significant investment in and contributions from renewable energy Ireland presently remains one of the worst C02 polluters per capita within the European Union.

In Morocco 80.4% of thermal electricity generating capacity is based on coal with minor fuel oil, which results in high levels of C02 emissions.

By seeking to explore for and develop indigenous gas in Ireland and Morocco Predator seeks to make a small but practical contribution to the role gas has in decarbonising the living environment, whilst still maintaining the security and cost effectiveness of energy supply, which is critical to sustaining economic development.

In Trinidad Predator, through its Pilot C02 Enhanced Oil Recovery project, is seeking to utilise some C02 emissions from one of Trinidad's ammonia plants which would otherwise be vented into the atmosphere. A significant proportion of the C02 utilised in the Pilot will be sequestrated in the ground. The potential for upscaling enhanced oil production using C02 injection within Trinidad's large inventory of mature oil fields may potentially provide further business development opportunities.

Predator was formed during the year to consolidate the acquisition of an existing non-operated, potentially revenue-generating, business opportunity in Trinidad and an operated exploration and appraisal portfolio offshore Ireland. During the year progress was made on adding an exploration project onshore Morocco. A successful public listing raised £1.3 million of capital primarily to develop the Trinidad project. Predator's public listing was the first by a junior oil and gas company in 2018.

Trinidad is a core asset in the Predator portfolio as it offers the potential for early cash flow from production revenues with which to provide medium-term contributions to Predator's balance sheet. During the year the emphasis has been on prudently moving the project scope from infill drilling to enhancing oil recoveries and production rates using C02 injection, a process widely used to good effect in the United States. Commercial rationale for this was based upon reducing the quantum of capital investment per barrel of oil

produced and the payback time on investment, whilst increasing forecast production rates per well. Securing exclusivity to the C02 supply was an important primary objective in order to have the opportunity to be in the prime position to upscale C02 EOR operations after a potentially successful Pilot.

During the year Predator has applied for Successor Authorisations in Ireland, one of which has subsequently been granted in 2019, and developed its business model for these gas assets. Ireland has proved to be a challenging environment over the recent years for executing projects in a timely manner. The completion of the sale of the Corrib gas field combined with a new drive to reduce C02 emissions to avoid EU fines and to improve security of gas supply has potentially created the conditions to re-energise the gas sector to possibly create a changed environment for potentially substantive transactions for gas assets proximal to existing infrastructure with rapidly developing capacity ullage. Predator is well-placed to exploit such an opportunity for business development using our management team, which has considerable transaction experience in Ireland.

Morocco is becoming an exciting addition to the portfolio of gas projects and offers a high-quality opportunity for low capital investment in drilling close to existing under-utilised gas infrastructure. The level of general interest already shown in this asset, which was screened and selected based on our management's long history of involvement in operations and farm-out activity in Morocco, is very encouraging. Morocco is set to become an additional pillar supporting Predator's business growth potential during 2019 and is consistent with current sector sentiments in relation to gas and the environment.

Recognising the changing environment in which we operate, your Board and management's most recent strategic review has concluded that Predator must focus the majority of its cash resources on executing and developing its short-term production capability in Trinidad whilst maintaining in good standing an attractive portfolio of material high quality gas assets to facilitate de-risking the financing thereof through farmouts and potential M & A transactions.

Predator will continue to operate with a very small management team with specialist knowledge and experience and a track record in executing and delivering projects to the highest possible standards and for the benefit of the Company and its shareholders.

We have a robust Board experienced in many diverse aspects of the corporate business of a public company and all of whom make important contributions to the Board's deliberations to provide diligent oversight of Predator's business. Collectively we strive to meet the best corporate governance standards and maintain a strong commitment to judiciously developing the business of the Company in line with shareholder expectations.

The outcome to Brexit in 2019 may pose significant new challenges in terms of creating instability in the financial markets and currency exchange rate fluctuations, reducing access to UK-based oil field services, and in creating conditions liable to weaken investor sentiment and decision-making processes. The Company has some protection in that it does not operate in the United Kingdom and is intending to generate revenues in United States dollars from production in Trinidad. However, whilst Brexit remains unresolved uncertainty will persist and possible outcomes cannot be predicted with confidence.

In conclusion I am encouraged by our achievements to date over a short period of time in developing a portfolio of material assets, each of which could potentially transform the Company in its own right. Predator has performed well on the Standard Listing segment of the Official List on the Main Market of the London Stock Exchange during 2018. At year end our share price was 190% higher than our IPO price without shareholder dilution, out-performing the AIM All-Share Chart for 2018. I look forward to reporting on our progress in the coming year.

Finally, I would like to thank our management team for their diligence and hard work during the year. The commitment and support of my fellow Board members is also very much appreciated.

Sarah Cope

Chairman

30 April 2019

Events Since Year End

Operational

Near-Term Production Projects

Inniss-Trinity C02 EOR Pilot Project, Onshore Trinidad

- Approval received from Heritage Petroleum Ltd for the Pilot CO2 EOR Project conditional on EMA and Ministry permits and consents

- Option to purchase FRAM extended to 31 December 2019

- Exclusivity period for CO2 gas supply from Massy Gas Products Ltd extended to 31 May 2019, subject to finalising C02 Gas Sales Contract

- New CPR specific to C02 EOR operations commissioned

Near-Term Exploration Projects

Guercif Petroleum Agreement ("PA") Onshore Morocco

- Bank Guarantee arranged

- Guercif PA formally signed on 19 March 2019

- Rig selection discussions ongoing

- Planning for Environmental Impact Assessment commenced

- CPR for Guercif commissioned

Medium Term Exploration and Appraisal Projects

Corrib South Licensing Option 16/26 Slyne Basin, Atlantic Margin Ireland

- Farmout and M & A activity progressing whilst waiting on award of Frontier Exploration Licence

Ram Head Licensing Option 16/30 Celtic Sea Basin, Ireland

- New CPR incorporating new reservoir engineering data commissioned

- Potential synergies with the decommissioning of the Kinsale facilities being investigated with other interested parties

- Award of 12-month extension to the Ram Head Licensing Option 16/30 received and accepted on 10 April 2019

Financial

On 15 February 2019 £1,500,000 was raised in the form of convertible loan notes. The loan notes carry no coupon, are repayable at a premium of 5% and a fee of 10% of the principal amount. The loan notes are convertible at the election of the lender at 90% of the volume weighted average share price. The term of the loan notes is two years. The lender Arato Global Opportunities Limited, also agreed to make available an additional £250,000 on the same terms. The lender was issued with 2,083,333 warrants at an exercise price of 12p with a vesting period of two years. Novum Securities Limited, the arranger of the convertible loan notes, was issued with 2,000,000 in warrants on the same terms.

On 12 April,2019 following the receipt of notice from Arato Global Opportunities Limited for the conversion of £150,000 of the Loan Note, issued on 15 February 2019, 1,966,888 New Ordinary Shares were allotted and issued. Following the issue of such 1,966,888 New Ordinary Shares, the Company's issued share capital was 102,104,038 shares of no par value, each with one vote per share (and no such shares are held in treasury). The total number of voting rights was therefore 102,104,038 following said issue of shares.

Cash balance of £0.922 million in the Group as at 30April 2019 annual report date

Notes to the financial statements

For the year ended 31 December 2018

1. Segmental analysis

The Group operates in one business segment, the exploration, appraisal and development of oil and gas assets. The Group has interests in three geographical segments being Africa (Morocco), Europe (Ireland) and the Caribbean (Trinidad and Tobago)

The Group's operations are reviewed by the Board (which is considered to be the Chief Operating Decision Maker ('CODM')) and split between oil and gas exploration and development and administration and corporate costs.

Exploration and development is reported to the CODM only on the basis of those costs incurred directly on projects..

Administration and corporate costs are further reviewed on the basis of spend across the Group.

Decisions are made about where to allocate cash resources based on the status of each project and according to the Group's strategy to develop the projects. Each project, if taken into commercial development, has the potential to be a separate operating segment. Operating segments are disclosed below on the basis of the split between exploration and development and administration and corporate.

There are no non-current assets held in the Group's country of domicile, being the Jersey Isles (2017: £nil).

2. Group loss from operations

3. Auditor's remuneration

4 Taxation

 No deferred tax asset or liability has been recognised as the Standard Jersey corporate tax rate is 0%

5 Personnel

Four Directors at the end of the period have share options receivable under long term incentive schemes. The highest paid Director received an amount of £98,200 (2017: nil). The Group does not have employees. All personnel are engaged under consultancy contracts as service providers

6 Earnings per share

7 Loss for the financial year

The Group has adopted the exemption in terms of Companies (Jersey) law 1991 and has not presented its own income statement in these financial statements.

8 Property, plant and equipment

Fixed Assets

9 Investments in subsidiaries

The principal subsidiaries of Predator Oil and Gas Holdings Plc, all of which are included in these consolidated Annual Financial Statements, are as follows:

The registered address of all of the Group's companies is at 3rd Floor, Standard Bank House, 47-49 La Motte Street, Jersey, JE2 4SZ, Channel Islands.

10 Trade and other receivables

Prepayments in 2018 are in respect of an insurance premium paid in advance and are expensed within 60 days. There are no material differences between the fair value of trade and other receivables and their carrying value at the year end.

11 Trade and other payables

All payables are required to be settled within 30days.

12 Financial instruments - risk management

Significant accounting policies

Details of the significant accounting policies in respect of financial instruments are disclosed on pages 51 to 56 of the annual report. The Group's financial instruments comprise cash and items arising directly from its operations such as other receivables, trade payables and loans.

Financial risk management

The Board seeks to minimise its exposure to financial risk by reviewing and agreeing policies for managing each financial risk and monitoring them on a regular basis. No formal policies have been put in place in order to hedge the Group's activities to the exposure to currency risk or interest risk; however, the Board will consider this periodically. A foreign exchange hedge was entered into during the year whereby Sterling £ was converted to United States $.

The Group is exposed through its operations to the following financial risks:

• Credit risk

• Market risk (includes cash flow interest rate risk and foreign currency risk)

• Liquidity risk

The policy for each of the above risks is described in more detail below.

The principal financial instruments used by the Group, from which financial instruments risk arises are as follow:

• Receivables

• Cash and cash equivalents

• Trade and other payables (excluding other taxes and social security) and loans

The table below sets out the carrying value of all financial instruments by category and where applicable shows the valuation level used to determine the fair value at each reporting date. The fair value of all financial assets and financial liabilities is not materially different to the book value.

Credit risk

Financial assets, which potentially subject the Group to concentrations of credit risk, consist principally of cash, short-term deposits and other receivables. Cash balances are all held at recognised financial institutions. Other receivables are presented net of allowances for doubtful receivables. Other receivables currently form an insignificant part of the Group's business and therefore the credit risks associated with them are also insignificant to the Group as a whole.

The Group has a credit risk in respect of inter-company loans to subsidiaries. The Company is owed £196,830 by its subsidiaries. The recoverability of these balances is dependent on the commercial viability of the exploration activities undertaken by the respective subsidiary companies. The credit risk of these loans is managed as the directors constantly monitor and assess the viability and quality of the respective subsidiary's investments in intangible oil & gas assets.

Maximum exposure to credit risk

The Group's maximum exposure to credit risk by category of financial instrument is shown in the table below:

The holding company's maximum exposure to credit risk by class of financial instrument is shown in the table below:

Market risk

Cash flow interest rate risk

The Group has adopted a non-speculative policy on managing interest rate risk. Only approved financial institutions with sound capital bases are used to borrow funds and for the investments of surplus funds.

The Group seeks to obtain a favourable interest rate on its cash balances through the use of bank deposits. The Group's bank ceased paying interest on cash balances during the year, therefore the Group is not currently affected by interest rate changes. At 31December,2018, the Group had a cash balance of £0.973 million (2017: £0.521 million) which was made up as follows:

At the reporting date, the Group had a cash balance of £0.922million

The Group had no interest bearing debts at the current year end

Foreign currency risk

Foreign exchange risk is inherent in the Group's activities and is accepted as such. The majority of the Group's expenses are denominated in Sterling and therefore foreign currency exchange risk arises where any balance is held, or costs incurred, in currencies other than Sterling. At 31 December 2018 and 31 December 2017, the currency exposure of the Group was as follows:

The effect of a 10% strengthening of Sterling against the US dollar at the reporting date, all other variables held constant, would have resulted in increasing post tax losses by £51,800 (2017:£nil ). Conversely the effect of a 10% weakening of Sterling against the US dollar at the reporting date, all other variables held constant, would have resulted in decreasing post tax losses by £51,800 (2017:£nil)

Liquidity risk

Any borrowing facilities are negotiated with approved financial institutions at acceptable interest rates. All assets and liabilities are at fixed and floating interest rate. The Group seeks to manage its financial risk to ensure that sufficient liquidity is available to meet the foreseeable needs both in the short and long term. See also references to Going Concern disclosures in the Strategic Report on pages 6 and 10.

Capital

The objective of the directors is to maximise shareholder returns and minimise risks by keeping a reasonable balance between debt and equity. At 31December 2018 the Group had no debt

13 Share Capital

* Details of the shares issued during the year are as shown in the table below and in the Statement of Changes of Equity on shown above

14 Share based payments

Equity - settled share based payments

Warrant and Share option expense

The Group operates a share option plan for directors. Details of share options granted in the year to 31 December 2018 are noted below.

On 24 May 2018 both Paul Griffiths and Ron Pilbeam were granted share options each of 4,005,486 exercisable at £0.028 each and Steve Staley and Sarah Cope were granted share options each of 1,001,370 exercisable at £0.028 each

The options are subject to the following vesting conditions:

Each option shall lapse 5 years after the date on which it vests, assuming it is not exercised before then and no event occurs to cause it to lapse early. The Black Scholes model has been used to fair value the options, the inputs into the model were as follows

Grant date 24 May, 2018

Share price £0.028

Exercise price £0.028

Term 5 years

Expected volatility 400%

Expected dividend yield 0%

Risk free rate 0.80%

Fair value per option £0.028

The total fair value of the options: £54,519

Expected volatility was determined by reference to the Company's share price since admission to the Standard List of the London Stock Exchange and the year end. The risk free rate is based on the UK three year bond yield.

On 24 May 2018 the Company's granted 2,231,248 warrants to Novum Securities Limited and 160,714 warrants to Optiva Securities Limited in consideration of services provided to the Company pursuant to the terms of the Placing Agreement and conditional upon admission becoming effective. The warrants may be exercised at £0.028 each in whole or in part at any time and from time to time from the date of their grant until the third anniversary of admission.

The Black Scholes model has been used to fair value the warrants, the inputs into the model were as follows

Grant date 24 May, 2018

Share price £0.028

Exercise price £0.028

Term 3 years

Expected volatility 60%

Expected dividend yield 0%

Risk free rate 0.80%

Fair value per warrant £0.0113

Total fair value of warrants £27,051

15 Reserves

Details of the nature and purpose of each reserve within owners' equity are provided below:

· Share capital represents the nominal value each of the shares in issue.

· The Other Reserves are included in the Consolidated Statement of Changes in Equity and in the Consolidated Statement of Financial Position and represent the accumulated balance of share benefit charges recognised in respect of share options and warrants granted by the Company, less transfers to retained losses in respect of options exercised or lapsed.

· The Retained Deficit Reserve represents the cumulative net gains and losses recognised in the Group's statement of comprehensive income.

· The Reconstruction Reserve arose through the acquisition of Predator Oil & Gas Ventures Limited. This entity was under common control and therefore merger accounting was adopted.

16 Related party transactions

Directors and key management emoluments are disclosed note 5 and in the Remuneration report. 

Paul Griffiths holds 44,773,293 ordinary shares, 44.7% (43.8% as at the reporting date) of the issued share capital in the Company, and is the Group's controlling shareholder

17 Acquisition of Predator Oil & Gas Ventures Limited

18 Contingent liabilities and capital commitments

The Group had at the reporting date no capital commitments or contingent liabilities

19 Litigation

The Group is not involved in any litigation

20 Events after the reporting date

1. A licence was awarded to Predator Gas Ventures Limited by ONHYM on 20March 2019 for the exploitation of Guercif Moulouya Tortonian Prospect in Northern Morocco

2. On 15 February, 2019 £1,500,000 gross, was raised in the form of convertible loan notes to progress inter alia the Guercif licence. The loan notes carry no coupon, are repayable at a premium of 5% and a fee of 10% of the principal amount. The loan notes are convertible at the election of the lender at 90% of the volume weighted average share price ruling on the preceding two trading days. The term of the loan notes is two years. The lender, Arato Global Opportunities Limited, also agreed to make available an additional £250,000 on the same terms. The lender was issued with 2,083,333 warrants at an exercise price of 12p with a vesting period of two years. Novum Securities Limited, the arranger of the convertible loan notes, was issued with 2,000,000 in warrants on the same terms.

3. On 12 April,2019 following the receipt of notice from Arato Global Opportunities limited for the conversion of £150,000 of the Loan Note, issued on 15 February 2019, 1,966,888 New Ordinary Shares were allotted and issued. Following the issue of such 1,966,888 New Ordinary Shares, the Company's issued share capital was 102,104,038 shares of no par value, each with one vote per share (and no such shares are held in treasury). The total number of voting rights was therefore 102,104,038 following said issue of shares.

4. On 10 April 2019 the Company announced its acceptance of a one year extension of the term of the Licensing Option 16/30 ("LO 16/30")('Ram Head') to 30 November 2019 subject to the carrying out of the work programme agreed with the Department of Communications, Climate Action and Environment, the conditions that are attached to Licensing Option 16/30 and the Licensing Terms for Offshore Oil and Gas Exploration and Development and Production 2007 respectively.