TIDMECO
RNS Number : 0846W
Eco (Atlantic) Oil and Gas Ltd.
30 July 2018
30 July 2018
ECO (ATLANTIC) OIL & GAS LTD.
("Eco Atlantic", "Company" or, together with its subsidiaries,
the "Group")
Audited Results For The Year Ended 31 March 2018
Eco (Atlantic) Oil & Gas Ltd. (AIM: ECO, TSX-V: EOG), the
oil and gas exploration company with licences in highly prospective
regions in South America and Africa, is pleased to announce its
audited results for the financial year ended 31 March 2018 and
provide a corporate and operational update.
Year End Corporate Highlights:
-- Through the Company's subsidiary, Eco Atlantic (Guyana) Inc.
("Eco Guyana"), Eco Atlantic entered into an option agreement that
provides Total E&P Activités Pétrolières SA, (a wholly owned
subsidiary of Total SA) ("Total"), with an option to acquire a 25%
Working Interest in the Orinduik Block (the "Total Option"). Total
paid US$1 million for the option. Total has 120 days from the date
of receipt of the final processing report of the 2,550 km(2) 3D
seismic survey completed on the Block in September 2017 to exercise
the option in return for a US$12.5 million cash payment to Eco
Guyana.
-- On 13 November 2017, the Company entered into an agreement
with Africa Oil Corp. ("AOC") whereby AOC subscribed for 29,200,000
shares in the Company for gross proceeds of CAD$14 million (the
"Subscription").
-- The Company and AOC also entered into a Strategic Alliance
Agreement to identify potential new projects to add to the
Company's portfolio. The completion of the Subscription, associated
share issuance and transfer of funds was completed on 16 November
2017. AOC CEO, Keith Hill, joined the Company's Board as a
Non-Executive Director shortly after the completion of the
transferred funds.
-- On 22 February 2018, the Company was recognised as a 2018 TSX
Venture 50(TM) company, an annual ranking of top-performing
companies on the TSX Venture Exchange (the "TSX-V") over the last
year. The TSX Venture 50(TM) comprises of the top 10 companies
listed on the TSX-V in each of the five major industry sectors -
mining, oil & gas, clean technology & life sciences,
diversified industries and technology - based on a ranking formula
with equal weighting given to return on investment, market
capitalisation, growth, trading volume and analyst coverage. All
data was as of December 31, 2017.
-- On 20 February 2018, the Company entered into two share
purchase agreements to acquire the minority interests in Eco
Guyana, consisting of 6% of the outstanding shares for a cash
payment of US$200,000 and the issuance of 1,700,384 common shares.
Following completion of the transaction, Eco Guyana became a wholly
owned subsidiary of the Company.
Year End Operational Highlights:
-- Guyana
o Following the completion of the 2,550 km(2) 3D seismic survey
on the Orinduik Block, offshore Guyana, the Company has progressed
well with both processing and interpretation.
o On 18 January 2018, Eco and its partner Tullow Oil entered
Phase Two of the Initial Period under the Petroleum Agreement and
Prospecting License for the Orinduik Block, offshore Guyana.
o Upon each stage of the 3D seismic processing and
interpretation, Eco has cooperated with Total and, significantly,
all of this data to date has been transferred to Total's
exploration team. The remaining data and final report will be
provided to Total in the coming month, triggering the commencement
of the 120-day review period under the terms of the Total option.
Once the final report has been provided to Total, an update will be
provided to shareholders.
o Eco and Tullow Oil have approved the initial budgeting for
Environmental Permitting and Drilling Engineering and are actively
interpreting the data to identify drilling targets.
o On 23 July 2018 and following the recent Longtail discovery,
Exxon Mobil updated the recoverable oil estimates on the
neighbouring Stabroek Block offshore Guyana, to be over 4 billion
barrels
-- Namibia
o The Company, as Operator of the Cooper Block, offshore
Namibia, has published a public notice for Environmental Clearance
Certificate (ECC) for drilling an exploration well on the Block, a
key clearance step required ahead of potential drilling on the
Block.
o On 25 June 2018, the Company, as Operator of the Tamar Block,
was granted a one-year extension to the First Exploration period to
March 2019 for PEL 50 (Tamar), located in the 22,500 km(2) Walvis
Oil Basin in North Central Namibia, by the Namibia Ministry of
Mines and Energy.
o The Company will be paying close attention to the results of
the two wells which are scheduled to be drilled during Q3 and Q4
2018 on PEL 37 and PEL 71 in the Walvis Basin. The results of these
wells will add a significant amount of information to the overall
understanding of the petroleum system in the Basin, including the
blocks held by the Company.
-- New Ventures
o In line with the Company's strategy, Eco is actively
identifying, evaluating and negotiating additional project
opportunities.
Year End Financial Highlights:
-- Total assets of CAD$16.7 million as at 31 March 2018, up from
CAD$8.8 million at 31 March 2017.
-- Total Equity of CAD$16.0 million as at 31 March 2018, up from
CAD$8.0 million as at 31 March 2017.
-- Cash on hand of CAD$14.3 million as at 31 March 2018, up from
CAD$6.1 million as at 31 March 2017.
-- Income of CAD$1.3 million for the year ended 31 March 2018,
primarily from the Total Option (see above).
Gil Holzman, President and Chief Executive Officer of Eco
Atlantic, commented:
"Our year ended 31 March 2018 has produced our best financial
results yet. We have succeeded in significantly strengthening our
balance sheet over the last two years, starting with our AIM IPO
back in February 2017, followed by the receipt of US$1 million from
Total as payment for an option to farm-in to our Orinduik Block,
the completion of the CAD$14 million private placement with Africa
Oil Corp. and the exercise of options and broker warrants, which
injected a further CAD$840,000 into our cash reserves. In parallel,
we have dedicated significant effort towards advancing our
portfolio assets, including progressing various exploration
programs.
"With numerous significant discoveries made by ExxonMobil in the
neighbouring Stabroek Block totalling over 4 Billion barrels of
oil, and having completed a significant 3D seismic programme on our
Orinduik Block offshore Guyana, we find ourselves in a prime
position. Eco are currently in the final stages of the
interpretation process and have been actively cooperating with
Total in respect of their farm-in option for the Orinduik Block. We
are confident that Total will exercise this option, which would add
a further US$12.5 million to our balance sheet and introduce a
super major as our partner.
"Positive progress has also been made in Namibia as we look to
push ahead with our drilling plans on the Opsrey Lead in the Cooper
Block, while steadily developing our other three blocks; Guy, Tamar
and Sharon. The recently granted extension for our licence on the
Tamar Block shows the close cooperation that we have with the
Namibian government and we are delighted by their continued
support. Activity in the region, particularly in the Walvis Basin
where we hold four prospective licences, has increased remarkably
over the past year and we continue to keep a close eye on nearby
developments.
"As we advance all of our existing licenses, we are also
assessing new opportunities in frontier regions to potentially
build on our already strong portfolio of assets and which fit Eco's
strategy of developing underexplored prospective areas of
interest.
"Having achieved our objectives that we set out at the beginning
of the financial year, I would like to take this opportunity to
thank our management team for all their hard work and for the loyal
support from our shareholders for what has been a momentous year
for the Company."
The Company's audited financial results for the year ended 31
March 2018, together with Management's Discussion and Analysis as
at 31 March 2018, are available to download on the Company's
website at www.ecooilandgas.com and on Sedar at www.sedar.com.
The following are the Company's Balance Sheet, Income
Statements, Cash Flow Statement and selected notes from the audited
Financial Statements. All amounts are in Canadian Dollars, unless
otherwise stated.
Independent Auditors' Report
To the Shareholders of Eco (Atlantic) Oil & Gas Ltd.:
Report on the Consolidated Financial Statements
We have audited the accompanying consolidated financial
statements of Eco (Atlantic) Oil & Gas Ltd., which comprise the
consolidated statements of financial position as at March 31, 2018
and 2017, and the consolidated statements of operations and
comprehensive loss, equity, and cash flows for the years then
ended, and a summary of significant accounting policies and other
explanatory information.
Management's Responsibility for the Consolidated Financial
Statements
Management is responsible for the preparation and fair
presentation of these consolidated financial statements in
accordance with International Financial Reporting Standards
("IFRS"), and for such internal control as management determines is
necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to
fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. We conducted
our audits in accordance with Canadian generally accepted auditing
standards. Those standards require that we comply with ethical
requirements and plan and perform the audits to obtain reasonable
assurance about whether the consolidated financial statements are
free from material misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on the auditor's
judgment, including the assessment of the risks of material
misstatement of the consolidated financial statements, whether due
to fraud or error. In making those risk assessments, the auditor
considers internal controls relevant to the entity's preparation
and fair presentation of the consolidated financial statements in
order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity's internal control. An audit also
includes evaluating the appropriateness of accounting policies used
and the reasonableness of accounting estimates made by management,
as well as evaluating the overall presentation of the consolidated
financial statements.
We believe that the audit evidence we have obtained in our
audits is sufficient and appropriate to provide a basis for our
audit opinion on the consolidated financial statements.
Opinion
In our opinion, the consolidated financial statements present
fairly, in all material respects, the financial position of Eco
(Atlantic) Oil & Gas Ltd. as at March 31, 2018 and 2017, and
its financial performance and its cash flows for the years then
ended in accordance with International Financial Reporting
Standards.
Chartered Professional Accountants
Licensed Public Accountants
Mississauga, Ontario
July 25, 2018
Consolidated Statements of Financial Position
March 31, March 31,
------------------------------------------------------
2018 2017
------------------------------------------------------ --------------------- ---------------------------------
Assets
Current assets
Cash and cash equivalents $ 14,316,042 $ 6,088,567
Short-term investments (Note 5) 74,818 49,818
Government receivable 23,626 26,609
Accounts receivable and prepaid expenses
(Note 6) 832,322 1,100,491
------------------------------------------------------ --------------------- ---------------------------------
15,246,808 7,265,485
Petroleum and natural gas licenses (Note
7) 1,489,971 1,489,971
Total Assets $ 16,736,779 $ 8,755,456
------------------------------------------------------ --------------------- ---------------------------------
Liabilities
Current liabilities
Accounts payable and accrued liabilities
(Note 8) $ 521,537 $ 630,761
Advances from and amounts owing to license
partners, net 209,487 169,868
731,024 800,629
Equity
Share capital (Note 9) 43,813,254 26,961,675
Shares to be issued (Note 9) 1,139,257 -
Restricted Share Units reserve (Note
9) 70,393 184,029
Warrants (Note 10) 167,931 237,267
Stock options (Note 11) 2,979,367 2,985,732
Non-controlling interest (55,065) (76,288)
Accumulated deficit (32,109,382) (22,337,588)
------------------------------------------------------ --------------------- ---------------------------------
Total Equity 16,005,755 7,954,827
------------------------------------------------------ --------------------- ---------------------------------
Total Liabilities and Equity $ 16,736,779 $ 8,755,456
------------------------------------------------------ --------------------- ---------------------------------
Consolidated Statements of Operations and Comprehensive Loss
Years ended
March 31,
-----------------------------------------
2018 2017
-------------------- -------------------
Revenue
Income from option agreement (Note 7(ii)(v)) $ 1,248,000 $ -
Interest income 85,620 15,820
-------------------- -------------------
1,333,620 15,820
Operating expenses:
Compensation costs (Note 8) 672,410 483,458
Professional fees 402,135 286,717
Operating costs (Notes 17) 5,249,425 2,169,940
General and administrative costs (Note
18) 887,146 385,568
Share-based compensation (Notes 8, 9
and 11) 2,512,244 730,171
Foreign exchange (income) loss (33,226) 5,025
Total expenses 9,690,134 4,060,879
Net loss and comprehensive loss from
continuing operations (8,356,514) (4,045,059)
Discontinued operations income (Note
19) - 488,473
Net loss and comprehensive loss $ (8,356,514) $ (3,556,586)
==================== ===================
Net comprehensive loss attributed to:
Equity holders of the parent $ (8,182,233) $ (3,548,621)
Non-controlling interests (174,281) (7,965)
-------------------- -------------------
$ (8,356,514) $ (3,556,586)
==================== ===================
Basic and diluted net income (loss)
per share from continuing operations
(Note 20) $ (0.06) $ (0.05)
Basic and diluted net income (loss)
per share from discontinuing operations
(Note 20) - 0.01
-------------------- -------------------
Basic and diluted net loss per share
attributable to equity holders of the
parent (Note 20) $ (0.06) $ (0.04)
==================== ===================
Weighted average number of ordinary
shares used in computing basic and diluted
net loss per share 132,545,535 87,906,110
==================== ===================
Consolidated Statements of Equity
Number Capital Shares Restricted Warrants Stock Deficit Non-controlling Total
of Shares $ to be Share $ Options $ Interest Equity
$ issued Units $ $ $
$ $
---------------- ---------------------- -------------------- ----------------- ------------------ ------------------ ----------------- ---------------------- ----------------- -----------------
Balance, March
31, 2016 85,044,025 20,838,056 176,580 216,114 - 2,400,735 (18,788,967) (68,323) 4,774,195
Cancellation of - - - - - - -
shares (1,823,500) -
Shares
repurchase - (338,257) - - - - - - (338,257)
Shares issued
on vesting of
Restricted
Share
Units 708,700 136,079 - (136,079) - - - - -
Shares issued
on vesting of
Restricted
Share
Units 216,736 41,180 - 3,420 - - - - 44,600
Non-vested
Restricted
Share Units - - - 100,574 - - - - 100,574
Proceeds from
shares issued
on listing on
AIM, net 32,900,498 6,108,037 - - 237,267 - - - 6,345,304
Extension of
Stock
options - - - - - 416,324 - - 416,324
Stock options
expensed - - - - - 168,673 - - 168,673
Shares issued
from Pan
African
Oil
Amalgamation 1,203,374 176,580 (176,580) - - - - - -
Net loss for
the
year - - - - - - (3,548,621) (7,965) (3,556,586)
-----------------
Balance, March
31, 2017 118,249,833 26,961,675 - 184,029 237,267 2,985,732 (22,337,588) (76,288) 7,954,827
Shares issued
on vesting of
Restricted
Share
Units (Note
9(i)) 7,482,500 2,584,954 - (113,636) - - - - 2,471,318
Shares issued
for Services
(Note
9(vii) 62,500 17,500 - - - - - - 17,500
Cancellation of - - - - - -
shares (Note
9(viii)) (262,500) - -
Shares issued
in private
placement
(Note 9(iv)) 29,200,000 13,286,682 - - - - - - 13,286,682
Issuance of
warrants
(Note 10(i)) - (969) - - 969 - - - -
Purchase of
minority
interest (Note
9(vii)) - 1,139,257 - - - (1,589,561) 195,504 (254,800)
Exercise of
stock
options 1,200,000 407,291 - - - (47,291) - - 360,000
Exercise of
warrants 1,562,500 556,121 - - (70,305) - - - 485,816
Stock options
expensed (Note
11) - - - - - 40,926 - - 40,926
Net loss for
the
year - - - - - - (8,182,233) (174,281) (8,356,514)
Balance, March
31, 2018 157,494,833 43,813,254 1,139,257 70,393 167,931 2,979,367 (32,109,382) (55,065) 16,005,755
---------------- ---------------------- -------------------- ----------------- ------------------ ------------------ ----------------- ---------------------- ----------------- -----------------
Consolidated Statements of Cash Flows
Years ended
March 31,
----------------------------------
2018 2017
------------------ --------------
Cash flow from operating activities
Net loss from continued operations $ (8,356,514) $ (4,045,059)
Net loss from discontinued operations - 488,473
Items not affecting cash:
Share-based compensation 2,512,244 730,171
Shares issued for services 17,500 -
Depreciation - 1,101
Changes in non--cash working capital:
Government receivable 2,983 (3,325)
Accounts payable and accrued liabilities (109,224) (2,730,542)
Accounts receivable and prepaid
expenses 268,169 (477,633)
Advance from and amounts owing to
license
partners 39,619 (340,835)
---------------------------------------------- ------------------ --------------
(5,625,223) (6,377,649)
---------------------------------------------- ------------------ --------------
Net change in non-cash working capital
items relating to discontinued operations - 1,333,427
Cash flow from investing activities
Purchase of minority interest in (254,800) -
subsidiary
Short-term investments (25,000) 50,182
---------------------------------------------- ------------------ --------------
(279,800) 50,182
---------------------------------------------- ------------------ --------------
Net change in investment activities
relating to discontinued operations - 1,612,382
Cash flow from financing activities
Net proceeds from Brokered Private 13,286,682 -
Placement
Proceeds from the exercise of stock 360,000 -
options
Proceeds from the exercise of warrants 485,816 -
Net proceeds from AIM listing - 6,345,304
Share repurchases - (338,257)
---------------------------------------------- ------------------ --------------
14,132,498 6,007,047
---------------------------------------------- ------------------ --------------
Increase in cash and cash equivalents 8,227,475 2,625,389
Cash and cash equivalents, beginning
of year 6,088,567 3,463,178
---------------------------------------------- ------------------ --------------
Cash and cash equivalents, end of
year $ 14,316,042 $ 6,088,567
---------------------------------------------- ------------------ --------------
1. Nature of Operations
The Company's business is to identify, acquire, explore and
develop petroleum, natural gas, and shale gas properties. The
Company primarily operates in the Co-Operative Republic of Guyana
("Guyana") and the Republic of Namibia ("Namibia"). The head office
of the Company is located at 181 Bay Street, Suite 320, Toronto,
ON, Canada, M5J 2T3.
As used herein, the term "Company" means individually and
collectively, as the context may require, Eco (Atlantic) Oil and
Gas Ltd. and its subsidiaries.
These consolidated financial statements were approved by the
Board of Directors of the Company on July 25, 2018.
2. Basis of Preparation
The consolidated financial statements of the Company have been
prepared on a historical cost basis with the exception of certain
financial instruments that are measured at fair value. Historical
cost is generally based on the fair value of the consideration
given in exchange for assets.
3. Summary of Significant Accounting Policies
Statement of compliance
The Company applies International Financial Reporting Standards
as issued by the International Accounting Standards Board ("IASB")
and interpretations issued by the IFRS Interpretations Committee
("IFRIC").
The policies applied in these consolidated financial statements
are based on IFRS issued and outstanding as of March 31, 2018.
The significant accounting policies followed by the Company are
summarized as follows:
Basis of consolidation
These consolidated financial statements include the accounts of
the Company and its directly and indirectly owned subsidiaries, as
follows:
Subsidiary Ownership
---------------------------------------------- ---------
Eco (BVI) Oil & Gas Ltd. ("EBVI") 100%
Eco (Barbados) Oil & Gas Holdings Ltd.
("EBARB") 100%
Eco Namibia Oil & Gas (Barbados) Ltd.
("ENBARB") 100%
Eco Oil and Gas (Namibia) (Pty) Ltd. ("EOGN") 100%
Eco Oil and Gas Services (Pty) Ltd. ("EOGS") 100%
Eco Atlantic Holdings Ltd. 100%
Pan African Oil Namibia Holdings (Pty)
Ltd. ("PAO Holdings") 100%
Pan African Oil Namibia (Pty) Ltd. ("PAO
Namibia") 90%
Eco Atlantic Guyana Offshore Inc. 100%
Eco (Atlantic) Guyana Inc. (*) ("Eco Guyana") 100%
On October 21, 2016, the Company sold its wholly owned
subsidiary, Eco Atlantic (Ghana) Ltd. (Note 19).
(*) See Subsequent Events note 21.
Foreign currencies
The functional and presentation currency of the Company and its
subsidiaries is the Canadian dollar.
Transactions in currencies other than the functional currency
are recorded at the rates of exchange prevailing at the dates of
transactions. At the end of each reporting period, monetary assets
and liabilities that are denominated in foreign currencies are
translated at the rates prevailing at that time. Non--monetary
items that are measured in terms of historical cost in a foreign
currency are not retranslated. Exchange gains and losses are
recognized in profit or loss.
Financial instruments
Financial instruments are required to be classified as one of
the following: held-to-maturity; loans and receivables; fair value
through profit or loss; available-for-sale or other financial
liabilities.
The Company's financial instruments include cash and cash
equivalents, short-term investments, accounts receivable, accounts
payable and accrued liabilities and advances from and amounts owing
to license partners. The Company designated its cash and cash
equivalents and short-term investments as fair value through profit
or loss. The Company designated its accounts receivable as loans
and receivables, accounts payable and accrued liabilities and
advances from and amounts owing to license partners as other
financial liabilities, all of which are measured at amortized
cost.
Fair value through profit or loss financial assets are measured
at fair value, with gains and losses recognized in operations.
Financial assets held-to-maturity, loans and receivables and other
financial liabilities are measured at amortized cost.
Available-for-sale financial assets are measured at fair value with
unrealized gains and losses recognized in other comprehensive
loss.
The fair value of a financial instrument is the amount of
consideration that would be agreed upon in an arm's length
transaction between knowledgeable, willing parties who are under no
compulsion to act. The fair value of a financial instrument on
initial recognition is the transaction price, which is the fair
value of the consideration given or received. Subsequent to initial
recognition, the fair value of a financial instrument that is
quoted in active markets is based on the bid price for a financial
asset held and the offer price for a financial liability. When an
independent price is not available, fair value is determined by
using a valuation which refers to observable market data. Such a
valuation technique includes comparisons with a similar financial
instrument where an observable market price, discounted cash flow
analysis, option pricing models and other valuation techniques
commonly used by market participants exist.
Exploration and evaluation assets and expenditures
i) Expenditures
For oil and gas prospects not commercially viable and
financially feasible, the Company expenses exploration and
evaluation expenditures as incurred. Exploration and evaluation
expenditures include acquisition costs of oil and gas prospects,
property option payments and evaluation activities. Exploration and
evaluation expenditures are capitalized only when associated with a
business combination or asset acquisition or the Company can
demonstrate that these expenditures meet the criteria of an
identifiable intangible asset.
Once a project has been established as commercially viable and
technically feasible, related development expenditures are
capitalized. This includes costs incurred in preparing the site for
production operations. Capitalization ceases when the oil and
natural gas reserves are capable of commercial production, with the
exception of development costs that give rise to a future
benefit.
ii) Depletion and depreciation
Capitalized costs related to each cost center from which there
is production will be depleted using the unit--of--production
method based on proven petroleum and natural gas reserves, as
determined by independent consulting engineers.
iii) Farm-out arrangements
The Company, as farmor, accounts for the farm-out arrangements
as follows; the farmor does not record any expenditure made by the
farmee on its behalf, and recognizes its expenditures under
farm-out arrangements in respect of its own interest when the costs
are incurred. Any cash consideration received as reimbursements of
expenditures incurred in prior years and is recorded as income from
farm-out agreements in profit or loss. Any cash consideration
received as reimbursements of expenditures incurred in the current
year is offset against related expenditures in operating costs and
general and administrative costs in profit or loss. Any cash
consideration received in advance of underlying expenditures is
capitalized to advance from license partners until the applicable
expenditures have been incurred, at which point the recovery is
transferred to income from farm-out agreements in profit or loss.
Any cash received without an underlying commitment to incur
expenditures is recorded as income from farm-out agreements in
profit or loss.
iv) Impairment
At the end of each reporting period, the Company reviews the
carrying amounts of its non--financial assets with finite lives, to
determine whether there are facts and circumstances which suggest
that the carrying amount exceeds the recoverable amount. Where such
an indication exists, the recoverable amount of the asset is
estimated in order to determine the extent of the impairment loss.
The recoverable amount is the higher of an asset's fair value, less
cost to sell or its value in use. In addition, long--lived assets
that are not amortized are subject to an annual impairment
assessment.
v) Asset retirement obligations
Asset retirement obligations are measured at the present value
of the expenditure expected to be incurred using a risk--free
discount rate. The associated asset retirement cost is capitalized
as part of the cost of the related long--lived asset. Changes in
the estimated obligation resulting from revisions to estimated
timing, amount of cash flows, or changes in the discount rate are
recognized as a change in the asset retirement obligation and the
related asset retirement cost. Increases in asset retirement
obligations resulting from the passage of time are recorded as
accretion of asset retirement obligation in the consolidated
statement of operations as a financial cost. Actual expenditures
incurred are charged against the accumulated asset retirement
obligation as incurred.
The Company currently does not have any asset retirement
obligations.
Income taxes
Income tax expense consists of current and deferred tax expense.
Current and deferred tax are recognized in profit or loss except to
the extent that they related to items recognized in equity or other
comprehensive income.
Current tax is recognized and measured at the amount expected to
be recovered from or payable to the taxation authorities based on
the income tax rates enacted or substantively enacted at the end of
the reporting period and includes any adjustment to taxes payable
in respect of previous years.
Deferred tax is recognized on any temporary differences between
the carrying amounts of assets and liabilities in the consolidated
financial statements and the corresponding tax bases used in the
computation of taxable earnings. Deferred tax assets and
liabilities are measured at the tax rates that are expected to
apply in the period when the asset is realized and liability is
settled. The effect of a change in the enacted or substantively
enacted tax rates is recognized in net earnings and comprehensive
income or in equity depending on the item to which the adjustment
relates.
Deferred tax assets are recognized to the extent future recovery
is probable. At each reporting period end, deferred tax assets are
reduced to the extent that it is no longer probable that sufficient
taxable earnings will be available to allow all or part of the
asset to be recovered.
Revenue recognition
Revenue from the sale of petroleum and natural gas is recognized
when the risks and rewards of ownership pass to the purchaser,
including delivery of the product, the selling price is fixed or
determinable and collection is reasonably assured. Oil and natural
gas royalty revenue is recognized when received.
Loss per share
Basic loss per share is computed based on the weighted average
number of common shares outstanding during the year. In calculating
the diluted loss per share, the weighted average number of common
shares outstanding assumes that the proceeds to be received on the
exercise of dilutive share options and warrants are used to
repurchase common shares at the average market price during the
year.
Segment reporting
The Company operates in one segment, the oil and gas business
and conducts its operations in Namibia and Guyana with its head
office in Canada. Substantially all the Company's oil and gas
assets are located in Namibia and Guyana.
Significant accounting judgments and estimates
The preparation of the consolidated financial statements using
accounting policies consistent with IFRS requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and
liabilities, the reported amounts of revenues and expenses and to
exercise judgment in the process of applying the accounting
policies.
Critical accounting estimates
Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognized
prospectively from the period in which the estimates are revised.
The following are the key estimate and assumption uncertainties,
considered by management.
i) Impairment of assets
When there are indications that an asset may be impaired, the
Company is required to estimate the asset's recoverable amount. The
recoverable amount is the greater of value in use and fair value
less costs to sell. Determining the value in use requires the
Company to estimate expected future cash flows associated with the
assets and a suitable discount rate in order to calculate present
value.
4. Future Accounting and Reporting Changes
The IASB issued new standards and amendments which are not yet
effective.
IFRS 9, Financial Instruments ("IFRS 9") was initially issued by
the IASB on November 12, 2009 and issued in its completed version
in July 2014, and will replace IAS 39, "Financial Instruments:
Recognition and Measurement" ("IAS 39"). IFRS 9 replaces the
multiple rules in IAS 39 with a single approach to determine
whether a financial asset is measured at amortized cost or fair
value and a new mixed measurement model for debt instruments having
only two categories: amortized cost and fair value. The approach in
IFRS 9 is based on how an entity manages its financial instruments
in the context of its business model and the contractual cash flow
characteristics of the financial assets. The new standard also
requires a single impairment method to be used, replacing the
multiple impairment methods in IAS 39. IFRS 9 is effective for
financial years beginning on or after January 1, 2018. The Company
is currently assessing the effects of IFRS 9 and intends to adopt
IFRS 9 on its effective date.
IFRS 15, Revenue from Contracts with Customers ("IFRS 15") was
issued by the IASB in May 2014 and clarifies the principles for
recognizing revenue from contracts with customers. IFRS 15 will
result in enhanced disclosures about revenue, provide guidance for
transactions that were not previously addressed comprehensively
(i.e. service revenue and contract modifications) and improve
guidance for multiple-element arrangements. IFRS 15 is effective
for periods beginning on or after January 1, 2018 and is to be
applied retrospectively. The Company's assessment of IFRS 15 has
determined that there will not be a significant impact to the
consolidated financial statements as a result of the adoption of
this standard.
IFRS 16, Leases ("IFRS 16") was issued by the IASB in January
2016 and specifies how an IFRS reporter will recognize, measure,
present and disclose leases. The standard provides a single lessee
accounting model, requiring lessees to recognize assets and
liabilities for all leases unless the lease term is 12 months or
less or the underlying asset has a low value. Lessors continue to
classify leases as operating or finance, with IFRS 16's approach to
lessor accounting substantially unchanged from its predecessor, IAS
17. An entity applies IFRS 16 for annual periods beginning on or
after January 1, 2019. Earlier application is permitted if IFRS 15
Revenue from Contracts with Customers has also been applied. A
lessee shall either apply IFRS 16 with full retrospective effect or
alternatively not restate comparative information but recognize the
cumulative effect of initially applying IFRS 16 as an adjustment to
opening equity at the date of initial application. The Company is
currently assessing the effects of IFRS 16 and intends to adopt
IFRS 16 on its effective date.
5. Short-term Investments
The Company's short-term investments comprise interest bearing
deposits with its primary bank of $74,818 (March 31, 2017 -
$49,818), which are held as collateral for credit-card lines of
credit.
6. Accounts receivable and prepaid expenses
Included in accounts receivable and prepaid expenses is a
receivable amounting to $767,428 (US$576,580) in respect of the
sale of the Company's Ghana operations, which took place during the
year ended March 31, 2017.
7. Petroleum and Natural Gas Licenses
Balance Impairment, Sale Balance
April 1, and March 31,
2017 Additions Abandonment 2018
Licenses $ 1,489,971 $ (-) $ (-) $ 1,489,971
Balance Impairment, Sale Balance
April 1, and March 31,
2016 Additions Abandonment 2017
Licenses $ 3,102,353 $ (-) $ (1,612,382) $ 1,489,971
(i) The oil and gas interests of the Company are located both
offshore in Guyana and offshore in Namibia.
(ii) Guyana
i. The Guyana License is located in the Orinduik block, offshore
Guyana. The Orinduik block is situated in shallow water, 170
kilometers offshore Guyana in the Suriname Guyana basin and is
located in close proximity to the recent Exxon "Lisa" and "Payara"
discoveries.
ii. In accordance with the Guyana Petroleum Agreement, Eco
Guyana holds a 40% working interest in the Guyana Licenses and
Tullow Oil plc ("Tullow") holds the remaining 60% interest. Under
the Guyana Petroleum Agreement, Tullow will act as operator.
iii. On June 8, 2017, in light of recent discoveries in the
region by other petroleum explorers and the advancement of the
interpretation of the Orinduik Block the results of which were
encouraging to the Company, Tullow and the Company approved a circa
2,550 km(2) seismic survey on the Company's Orinduik Block. Tullow
carried US$1,250,000 of the Company's share of costs of the 3D
survey.
iv. On June 18, 2017, the Company and Tullow elected to enter
into Phase Two of the Initial Exploration Period, which runs for
four years from January 2016, pursuant to the terms of the Guyana
Petroleum Agreement. The work commitment under Phase Two requires
the acquisition of at least a minimum of 1,000 square kilometers of
3D seismic on the Orinduik Block. This has already been completed
and exceeded during Phase One when the Block partners completed a
2,550 square kilometers survey in September 2017. As such, there is
no further 3D seismic in Phase Two of the Initial Period.
v. On September 26, 2017, the Company's subsidiary, Eco Guyana,
entered into an option agreement that provides Total E&P
Activités Pétrolières, (a wholly owned subsidiary of Total SA)
("Total") with an option to acquire a 25% Working Interest in the
Orinduik Block from Eco Guyana (the "Option"). Pursuant to the
Option Agreement, Total made an immediate payment of US$1 million
for the Option (the "Option Fee") to Farm-in to the Orinduik Block
for an additional payment in cash of US$12.5 million to earn the
25% Working Interest. The Option is exercisable within 120 days
from delivery to Total of the processed 3D seismic and final report
thereto. The survey acquisition was completed on September 5, 2017
and processing is expected to be fully completed in August
2018.
vi. On February 20, 2018, the Company entered into two share
purchase agreements (collectively, the "Purchase Agreements") to
purchase the minority interests in Eco Guyana, consisting of 6% of
the outstanding shares of Eco Guyana (the "Minority Shares"). As
consideration for the acquisition of the Minority Shares the
Company agreed to pay a cash consideration in the amount of
US$200,000 payable in two equal tranches (the first upon closing of
the Purchase Agreements (the "Closing") and the second 60 days
after Closing); and issue a total of 1,700,384 common shares (the
"Consideration Shares"). The Consideration Shares are subject to a
lock up arrangement, with 1/3 being released on Closing; 1/3 being
released 91 days after Closing; and the remaining balance being
released 181 days after Closing. Upon Closing, the Company will own
100% of Eco Guyana. As of March 31, 2018, the Company paid the
first instalment of US$100,000. See also Subsequent Events note
21(i).
As at March 31, 2018, the outstanding Exploration Activities and
the aggregate expenditure as estimated by management based on
current costs for the Guyana License for is as follows:
Exploration Activities(1) Expenditure Company's Company's
current share of
share of Expenditure
Expenditure(2) should Total
exercise
their Option
(US$) (US$)
(US$)
By January 2023
* 1(st) renewal period - Drill one exploration well
(contingent) 35,000,000 14,000,000 5,250,000
------------ ---------------- --------------
By January 2026
* 2(nd) renewal period - Drill one exploration well
(contingent) 35,000,000 14,000,000 5,250,000
------------ ---------------- --------------
Total 70,000,000 28,000,000 10,500,000
------------ ---------------- --------------
Notes:
(1) Exploration Activities are not currently committed and cost
estimates are based on management estimates for the costs if the
relevant Exploration Activity was to be undertaken as at the date
of this document.
(2) Assuming Company's working interest remains at 40%.
(iii) Namibia
i. The Company holds four offshore petroleum licenses in the
Republic of Namibia being petroleum exploration license number 0030
(the "Cooper License"), petroleum exploration license number 0033
(the "Sharon License"), petroleum exploration license number 0034
(the "Guy Licenses", together with the Sharon License and the
Cooper License, the "ECO Offshore Licenses"), and petroleum
exploration license number 0050 (the "Tamar License").
(iv) The Cooper License
i. The Cooper License covers approximately 5,000 square
kilometers and is located in license area 2012A offshore in the
economical waters of Namibia (the "Cooper Block"). The Company
holds a 32.5% working interest in the Cooper License, NAMCOR holds
a 10% working interest (carried by the Company and Tullow
collectively), AziNam Ltd. ("AziNam"), holds a 32.5% working
interest, and Tullow Namibia Limited, a wholly owned subsidiary of
Tullow Oil plc ("Tullow"), holds a 25% working interest. AziNam and
Tullow proportionally carry NAMCOR's working interest during the
exploration period.
Pursuant to the Company's original farmout agreement with Tullow
(the "Tullow Farmout Agreement"), if Tullow elects to participate
in the drilling of an exploration well on the Cooper Block, Tullow
will acquire an additional 15% working interest in the Cooper
License from Eco and Azinam, will carry (capped at $18.17 million)
the Company's share of costs to drill the exploration well and will
reimburse the Company for 17.14% of its past costs (the "Second
Transfer"); such terms were subsequently updated in January 2017 as
set out below. There is no guarantee that the Second Transfer will
be completed.
ii. On November 27, 2017, India's ONGC Videsh, announced that it
is acquiring a 15% working interest in the Cooper license from
Tullow. The transaction is subject to the approval of the
Ministry.
(iv) The Cooper License (continued)
iii. On April 15, 2016, the Ministry approved the entering of
the next phase of the Cooper License which has been extended into
the first Renewal Phase, which on October 16, 2017, was extended by
the Ministry to March 2019. The Second Renewal phase is until March
2021. The Ministry also waived the relinquishment requirement (as
stipulated in the Petroleum Agreement), and the partners will
continue the exploration work on the entire block area.
iv. On November 2, 2017, the Company released its Public Notice
for Environmental Clearance Certificate (ECC) for drilling of an
exploration well within its Osprey Lead on the Block.
v. As of March 31, 2018, the outstanding Exploration Activities
and the aggregate expenditure as estimated by management based on
current costs for the Cooper License is as follows:
Exploration Activities(1) Expenditure Company's
share of
(US$) Expenditure
(US$)(2)
By March 31, 2020
* After interpretation of 3D survey, drill exploratory 35,000,000 2,250,000
well 500,000 125,000
* Offtake/production engineering
------------ ----------------
By March 31, 2021
* Complete and interpret a 500 square kilometers 3D
seismic survey 1,400,000 350,000
------------ ----------------
Total 36,900,000 2,725,000
------------ ----------------
Notes:
(1) Exploration Activities are not currently committed
and cost estimates are based on management estimates for
the costs if the relevant Exploration Activity was to be
undertaken as at the date of this document.
(2) These numbers assume that the Second Transfer will
be completed and the Company's working interest will be
25%. There is no guarantee that the Second Transfer will
be completed. If the Second Transfer is not completed,
the Company's share of the Expenditure will be 63.9%.
(v) The Sharon License
i. The Sharon License covers 5,000 square kilometers and is
located in license area 2213A and 2213B offshore in the economical
waters of Namibia (the "Sharon Blocks"). The Company holds a 60%
working interest in the Sharon License, NAMCOR holds a 10% carried
interest (by the Company), and AziNam holds a 30% interest. The
Company and AziNam proportionally carry NAMCOR's working interest
during the exploration period.
ii. On April 15, 2016, the Ministry approved the entering the
next phase of the Sharon License, which has been extended into the
first Renewal Phase, which on October 16, 2017, was extended by the
Ministry to March 2019. The Second Renewal phase is until March
2020. The Ministry further approved the Company's request to
terminate 50% of its licensing obligation corresponding with the
relinquishment of 50% of the acreage in the license which was a
requirement of the Petroleum Agreement. This relinquishment
pertains to the eastern half of the Sharon Block. The Company
considers this shallow section non-prospective.
iii. As of March 31, 2018, the outstanding Exploration
Activities and the aggregate expenditure as estimated by management
based on current costs for the Sharon License is as follows:
Exploration Activities(1) Expenditure Company's
share of
(US$) Expenditure
(US$)
By March 31, 2020 8,000,000 5,280,000
* Complete and interpret a 1,00 square kilometers 3D Completed
seismic survey
* Resource assessment and production assessment has
been completed
------------ -------------
By March 31, 2021
* Assuming a target has been defined after
interpretation of 3D survey, drill exploratory well
35,000,000 23,100,000
* Offtake/production engineering 500,000 333,500
------------ -------------
By March 31, 2021
* Complete and interpret a 500 square kilometers 3D
seismic survey 1,400,000 933,800
------------ -------------
Total 44,900,000 29,647,300
------------ -------------
Notes:
(1) Exploration Activities are not currently committed and cost
estimates are based on management estimates for the costs if the
relevant Exploration Activity was to be undertaken as at the date
of this document.
(vi) The Guy License
i. The Guy License covers 5,000 square kilometers and is located
in license area 2111B and 2211A offshore in the economical waters
of Namibia (the "Guy Block"). The Company holds a 50% working
interest in the Guy License, NAMCOR holds a 10% carried interest
(by the Company) and AziNam holds a 40% interest. The Company and
AziNam proportionally carries NAMCOR's working interest during the
exploration period. As of July 1, 2015, AziNam assumed the role of
operator with respect to the Guy License. The Company and AziNam
proportionally carry NAMCOR's working interest during the
exploration period.
ii. On May 12, 2016, the Ministry approved the entering the next
phase of the Guy License, which has been extended into the first
Renewal Phase, which on October 16, 2017, was extended by the
Ministry to March 2019. The Second Renewal phase is until March
2020. The Ministry further approved the Company's request to
terminate 50% of its licensing obligation corresponding with the
relinquishment of 50% of the acreage in the license which was a
requirement of the Petroleum Act. This relinquishment pertains to
the western portion of the Guy block in the ultra-deep section that
the Company and its operating partner, AziNam, consider
non-prospective.
iii. As of March 31, 2018, the outstanding Exploration
Activities and the aggregate expenditure as estimated by management
based on current costs for the Guy License is as follows:
Exploration Activities(1) Expenditure Company's
(US$) share of
Expenditure
(US$)
By March 31, 2021 35,000,000 19,460,000
* Assuming a target has been defined after 500,000 278,000
interpretation of 3D survey, drill exploratory well
* Offtake/production engineering
------------ -------------
By March 31, 2021
* Complete and interpret a 500 square kilometers 3D
seismic survey 1,400,000 778,400
------------ -------------
Total 36,900,000 20,516,400
------------ -------------
Notes:
(1) Exploration Activities are not currently committed and cost
estimates are based on management estimates for the costs if the
relevant Exploration Activity was to be undertaken as at the date
of this document.
(vii) The Tamar License
i. The Tamar License covers approximately 7,500 square
kilometres and is located in license areas 2211B and 2311A offshore
in the economical waters of the Republic of Namibia. PAO Namibia
holds an 80% working interest in the Tamar License (the Company's
net interest is 72% due to its 90% ownership of PAO Namibia),
Spectrum Geo Ltd. holds a 10% working interest, and NAMCOR holds a
10% working interest.
ii. On June 25, 2018, the Company received a one-year extension
to March 20, 2019 for the First Renewal Period from the Petroleum
Commissioner of the Republic of Namibia.
iii. As of March 31, 2018, the outstanding Exploration
Activities and the aggregate expenditure as
estimated by management based on current costs for the Tamar License is as follows:
Exploration Activities(1)(2) Expenditure Company's
(US$) share of
Expenditure
(US$)
By October 28, 2020
* Complete and interpret 250 kilometers(2) 3D seismic
survey
* Evaluation of farm-out and relinquishment of part
(original 25%) or all of the Tamar Block 1,040,000 1,040,000
------------ -------------
By October 28, 2021
* Drill exploratory well (subject to identifying a
target and the availability of adequate drilling
rigs) 35,000,000 35,000,000
------------ -------------
Total 36,040,000 36,040,000
------------ -------------
Notes:
(1) Exploration Activities are not currently committed and cost
estimates are based on management estimates for the costs if the
relevant Exploration Activity was to be undertaken as at the date
of this document.
8. Related Party Transactions and Balances and Director Remuneration
The following are the expenses incurred with related parties for
the years ended March 31, 2018 and 2017 and the balances owing as
of March 31, 2018 and 2017:
(i) As of March 31, 2018:
Amounts
Option owing at
Directors Consulting Share based March 31,
Fees Fees based awards awards Total 2018
Executive
Directors
Gil Holzman
- CEO $ - $ 406,340 $ 621,100 $ - $ 1,027,440 $ 36,103
Colin
Kinley -
COO
(*) - 483,268 621,100 - 1,104,368 41,261
Alan
Friedman -
Executive
Vice
President - 120,000 133,700 - 253,700 10,000
Gadi Levin
-
Financial
Director - 109,072 177,700 - 286,772 10,000
Non
Executive
Directors
Moshe
Peterberg
-
Chairman
of the
board 91,702 - 339,600 - 431,302 27,077
Derek
Linfield
(**) 47,556 - - 29,730 77,286 -
Keith Hill
(***) 18,000 - - - 18,000 9,000
Peter Nicol 47,556 - 199,700 - 247,256 14,485
Helmut
Angula 24,000 - - - 24,000 24,000
Officers
Alan
Rootenberg
-
CFO 18,000 - - 18,000 1,500
Total $228,814 $ 1,136,680 $ 2,092,900 $ 29,730 $ 3,488,124 $ 173,426
------------ -------------- ----------------- ----------------- -------------- ------------------ ------------------
(*) Included in Consulting fees are to Mr. Kinley is $231,066 of
fees paid for technical services provided by a Company controlled
by Mr. Kinley.
(**) Mr. Linfield resigned as a director on December 29,
2017.
(***) Mr. Hill was appointed as a director on December 29,
2017.
(ii) As of March 31, 2017:
Amounts
Option owing at
Directors Consulting Share based March 31,
Fees Fees based awards awards Total 2017
Executive
Directors
Gil Holzman
-
CEO $ - $ 320,948 $ 11,521 $140,040 $ 472,509 $ 24,840
Colin
Kinley
- COO - 237,769 95,485 66,421 399,675 32,000
Alan
Friedman
-
Executive
Vice
President - 120,000 3,420 75,187 198,607 10,000
Gadi Levin
-
Financial
Director - 25,920 2,660 - 28,580 8,640
Non
Executive
Directors
Moshe
Peterberg
- Chairman
of
the board 90,665 - 11,210 54,804 156,679 21,981
Derek
Linfield
(**) 13,360 - - - 13,360 -
Peter Nicol 24,779 - 7,600 30,271 62,650 -
Helmut
Angula 18,000 - 3,420 24,801 46,221 -
Officers
Alan
Rootenberg
- CFO 18,000 - 24,801 42,801 1,500
Total $ 146,804 $722,637 $ 135,316 $ 416,324 $1,421,081 $ 98,961
------------ -------------- ----------------- ----------------- -------------- ------------------ ------------------
9. Share Capital
Authorized: Unlimited Common Shares
Restricted Share
Common Shares Amount Shares to be issued Units Reserve
Issued $ $ $
----------------------------------------------------- --------- --------------- ----------- -------------------- -------------------
Balance, March 31, 2016 85,044,025 20,838,056 176,580 216,114
Repurchase and cancellation of Shares (i) (1,823,500) (338,257) - -
Shares issued on vesting of Restricted Share Units
From March 23, 2016 (ii)(a) 708,700 136,079 - (136,079)
From August 5, 2016 (ii)(b) 216,736 41,180 - 3,420
From November 28, 2016 (ii)(c) - - - 100,574
Shares issued in AIM listing (iii) 32,900,498 6,108,037 - -
Pan African Oil Amalgamation shares issued (iv) 1,203,374 176,580 (176,580) -
Balance, March 31, 2017 118,249,833 26,961,675 - 184,029
Shares issued on vesting of Restricted Share Units
From March 23, 2016 (v)(a)1 433,600 95,392 - (95,392)
From November 24, 2017 (v)(a)2 400,000 88,000 - (5,182)
From June 8, 2017 (vi) 3,400,000 1,016,600 - 29,900
From November 24, 2017 (vi)(a) 3,050,000 1,342,000 - -
From November 24, 2017 (vi)(b) 198,900 42,962 - (42,962)
Shares issued for services (vii) 62,500 17,500 - -
Cancellation of shares (viii) (262,500) - - -
Shares issued in a brokered private placement (ix) 29,200,000 13,286,682 - -
Exercise of warrants (x) 1,562,500 556,121 - -
Exercise of stock options (xi) 1,200,000 407,291 - -
Purchase of minority interest in subsidiary (xii) - - 1,139,257 -
Issuance of warrants 10(i) - (969) - -
----------------------------------------------------- --------- --------------- ----------- -------------------- -------------------
Balance, March 31, 2018 157,494,833 43,813,254 1,139,257 70,393
----------------------------------------------------- --------- --------------- ----------- -------------------- -------------------
(i) On February 20, 2015, the Company's Board of Directors
authorized a share repurchase program (the "2015 Issuer Bid") of up
to 10 percent of the Company's outstanding common shares through a
normal course issuer bid (up to 6,171,724 common shares) ("ECO
Share Repurchase Program"). Shares could be repurchased from time
to time on the open market commencing March 2, 2015 through March
1, 2016, or such earlier time as the Issuer Bid is completed or
terminated at the option of the Company, at prevailing market
prices. The timing and amount of purchases under the program are
dependent upon the availability and alternative uses of capital,
market conditions, and applicable Canadian regulations and other
factors. On March 10, 2016, the Company announced that is had
received an additional Exchange approval for its intended normal
course issuer bid (the "2016 Issuer Bid"). Under the terms of the
2016 Issuer Bid, the Company may acquire up to 6,491,870 Common
Shares from time to time in accordance with Exchange procedures,
representing approximately 10% of the total number of the Common
Shares held by public shareholders as at the date of the Exchange
approval.
As at March 31, 2017, the Company repurchased a total of
8,454,000, of which 8,191,500 have been cancelled. The Company held
shares, as of March 31, 2017, valued at $52,805 (March 31, 2016 -
$29,937) in treasury.
(ii) During the year ended March 31, 2017, the Company issued the following RSU's:
a. 708,700 of the 1,002,600 RSU's, granted on March 23, 2016
were issued, and the fair value of those RSU's ($136,079) were
released from Shares to be Issued in the Statement of Equity to
Contributed Surplus.
b. On August 5, 2016, 234,736 RSU's were granted to certain
directors, officers and consultants of the Company. The RSU's
vested immediately on the grant date. These RSU's had a fair value
of $0.19 per unit based on the volume weighted average market price
of the Common Shares for the five preceding days before the grant
date. The total fair value of the RSU's amounted to $44,600. As
18,000 underlying shares, have not yet been issued, $41,180 was
recognized as share-based compensation expense for the year ended
March 31, 2017 and $3,420 has been recorded as shares to be issued
the Statement of Equity as at March 31, 2017.
c. On November 28, 2016, 833,600 RSU's were granted to certain
officers and consultants of the Company. These RSU's had a fair
value of $0.22 per unit based on the volume weighted average market
price of the Common Shares for the five preceding days before the
grant date. The total fair value of the RSU's amounted to
$183,392.
1. 433,600 RSU's vested immediately on the grant date, however,
as of March 31, 2017, these shares have not been issued. As such,
$95,392 was recognized as share-based compensation expense for the
year ended March 31, 2017 with a corresponding credit to Shares to
be issued in the Statement of Equity.
2. 400,000 RSU's will vest upon the achievement of certain
milestones and expire on November 27, 2026. Management estimates
that there is currently a 100% probability that the milestone will
be achieved, and as such, the fair value of the RSU's was charged
to share-based compensation over the vesting period of the RSU.
$5,182 was recognized as share-based compensation expense for the
year ended March 31, 2017 with a corresponding credit to Shares to
be issued in the Statement of Equity.
(iii) On February 8, 2017, the Company completed an admission
and listing on the AIM market of the London Stock Exchange ("AIM").
The Company raised $8,390,250 (GBP5,085,000) before expenses by
placing 31,781,250 new Common Shares (the "UK Placing") with
investors at a placing price of GBP0.16 per share ($0.265 per share
(the "Placing Price") (the "Placing"). AIM listing expenses
including, cash expenses, comprising primarily commissions and
professional fees in the amount of $2,044,946 and the fair value of
warrants issued to brokers' (see Note 11) in the amount of
$237,267.
In addition to securities issued pursuant to the UK Placing,
common shares and warrants were issued to the UK advisors in
relation to the Company's Admission to AIM in the aggregate amount
of 812,500 common shares and 3,702,935 warrants and one Canadian
service provider subscribed for 306,748 common shares at CDN$0.26
per share for total cash consideration of $79,754. The exercise
period for the warrants includes 12, 24, and 30 months and the
related exercise prices are 17.6, 19.2 and 16 pence per share,
respectively ($0.29, $0.32 and $0.27 per share, respectively)
("Broker Warrants").
The fair value of the warrants was $237,267 (Note 10).
Gross proceeds, less issuance costs paid in cash (including
payments to the UK Advisors of GBP215,000 ($356,126) and cash
commissions of GBP256,950 ($425,612)) and less the total fair value
of the Broker Warrants were charged against share capital in the
statement of equity.
All common shares being issued by the Company pursuant to this
offering will be freely transferable outside of Canada, however
these shares are subject to a four-month restricted hold period in
Canada which will prevent such common shares from being resold in
Canada, through a Canadian exchange or otherwise, during the
restricted period without an exemption from the Canadian prospectus
requirement.
(iv) In connection with the Amalgamation completed on January
28, 2015, the Company authorized for issuance 18,830,738 Common
Shares. In order to obtain their Common Shares in the Company,
former shareholders of Pan African Oil ("PAO") were required to
surrender for cancellation the certificates representing their PAO
shares (the "Certificates"). As at March 31, 2017, 17,972,764
shares were issued to former PAO shareholders.
(v) During the year ended March 31, 2018, the following shares
were issued as a result of vested Restricted Share Units:
a. On November 28, 2016, the Company issued 833,660 RSU's.
433,600 RSU's vested immediately, and 400,000 were to vest upon the
achievement of certain milestones:
1. On May 4, 2017, shares in respect of 433,600 of the 833,600
RSU's, which had vested immediately, were issued, and the fair
value of those RSU's ($95,932) were released from Restricted Share
Unit Reserve in the Statement of Equity to Contributed Surplus.
2. On November 24, 2017, the milestones in respect of the
400,000 RSU's were achieved and shares in respect of these 400,000
RSU's were issued. The total fair value of these RSU's amounted to
$88,000 which was charged to share-based compensation with a
corresponding credit to Share Capital in the Statement of
Equity.
(vi) On June 8, 2017, 3,500,000 RSU's were granted to certain
directors, officers and consultants of the Company as compensation
and success fees in relation with the AIM admission and Company's
portfolio and operational developments. The RSU's vested
immediately on the grant date. These RSU's had a fair value
$1,046,500 ($0.299 per unit) based on the volume weighted average
market price of the Common Shares for the five preceding days
before the grant date and was charged to Share based Compensation
in the Statements of Operations and Comprehensive Loss. On November
24, 2017, 3,400,000 were issued and 100,000 remain outstanding.
$1,016,600 was charged to Share Capital and $29,900 (representing
the fair value of the remaining 100,000 shares) was charged to
Restricted Share Units in the Statement of Equity.
a. On November 24, 2017, 3,050,000 RSU's were granted to certain
directors, officers and consultants of the Company as compensation
and success fees in relation with the Brokered Private Placement.
The RSU's vested immediately on the grant date and 3,050,000 shares
of the Company were issued immediately. These RSU's had a fair
value $1,342,000 ($0.44 per unit) based on the volume weighted
average market price of the Common Shares for the five preceding
days before the grant date and was charged to Share based
Compensation in the Statements of Operations and Comprehensive Loss
with a credit to Share Capital in the Statement of Equity.
d. In addition, on November 24, 2017, the Company issued 198,000
shares in respect of RSU's that were granted on March 30, 2016. The
total fair value of the RSU' amounted to $42,962.
(vii) On June 28, 2017, the Company granted 62,500 shares to a
UK consultant for services provided. The fair value of the shares
on the grant date was $17,500.
(viii) On August 4, 2017, the Company cancelled 262,500 shares
that had been repurchased during the year ended March 31, 2107
under the terms of the its intended normal course issuer bid (the
"2016 Issuer Bid"), in which the Company was allowed to acquire up
to 6,491,870 Common Shares from time to time in accordance with
Exchange procedures, representing approximately 10% of the total
number of the Common Shares held by public shareholders as at the
date of the Exchange approval. As of August 4, 2017, all the shares
purchased under the 2016 Issuer Bid have now been cancelled.
(ix) On November 16, 2017 the Company completed a brokered
private placement with Africa Oil Corp ("AOC") resulting in gross
proceeds of $14 million (the "AOC Brokered Private Placement"). The
AOC Brokered Private Placement involved the sale of 29,200,000
shares in the Company at a price of $0.48 per share. Net proceeds
were $13,286,682 after deducting a cash commission in the amount of
$588,096 to the brokers and other expenses of $52,801.
(x) In February 2018, 1,562,500 warrants were exercised at
GBP0.176 ($0.31) per warrant into 1,562,500 shares of the Company
for a gross consideration of $485,815 (GBP274,912).
(xi) On January 19, 2018, 1,200,000 options were exercise at
$0.30 per option into 1,200,000 shares of the Company for gross
consideration of $360,000.
(xii) As disclosed in note 7(ii), on February 20, 2018, the
Company entered into Purchase Agreements to purchase the Minority
Shares in Eco Guyana. As part of the consideration for the
acquisition of the Minority Shares the Company agreed issue a total
of 1,700,384 common shares. As the shares were not issued by March
31, 2018, the Company recorded a credit to Shares to be Issued in
the Statement of Changes in Equity in the amount of $1,139,257
being that fair value of the shares at the date of the Purchase
Agreements, and a corresponding charge to accumulated deficit.
10. Warrants
A summary of warrants outstanding at March 31, 2018 was as
follows:
Weighted Average Exercise Price
Number of Warrants ($)
--------------------------------------- ------------------- --------------------------------
Balance, April 1, 2015 4,937,341 1.00
Expiry of warrants (4,937,341) 1.00
-------------------
Balance, March 31, 2016 - -
Granted during the AIM listing (i) 3,702,935 0.29
---------------------------------------- ------------------- --------------------------------
Balance, March 31, 2017 3,702,935 0.29
Granted (ii) 17,813 0.29
Exercised (see Note 9(ix))) (1,562,500) 0.29
Balance, March 31, 2018 2,158,248 0.29
---------------------------------------- ------------------- --------------------------------
(i) On February 8, 2017, the Company issued 3,702,935 warrants
to three brokers as part of the Placing (Note 9 (iv)). The warrants
were valued at $237,267 at the time of issuance. The Black-Scholes
option pricing model was used to measure the warrant with the
following assumptions:
Brandon Strand Hanson Peterhouse
Hill
Number of Warrants 975,750 1,164,685 1,562,500
Exercise price GBP 0.192 GBP 0.160 GBP 0.176
(GBP)(*)
Exercise price
CDN $ 0.32 $ 0.27 $ 0.29
Expected life 2 years 2.5 years 1 years
Risk-free interest
rate 0.75% 0.75% 0.75%
Dividend yield 0.00% 0.00% 0.00%
Foreign exchange
rate (GBP/CAD) 1.649 1.649 1.649
Expected volatility 54.50% 54.61% 51.83%
(ii) On June 1, 2017, as a result of the increase to the
proceeds of the UK placing associated with the Company's admission
to AIM, and in accordance with the Company's contractual
obligations to Strand Hanson Limited, an additional 17,813 warrants
were issued to Strand Hanson Limited. These warrants are issued on
the same terms as those set out in the Admission Document dated
February 2, 2017. These warrants were valued at $969, on the same
assumptions as (i) above.
(iii) As of March 31, 2018, outstanding warrants were as
follows:
Number Exercisable
of Exercise At Expiry
Warrants Price March 31, Date
(*) 2018
---------- ----------- ------------ -----------------
975,750 $ 0.35 975,750 February 8, 2019
1,182,498 $ 0.29 1,182,498 August 7, 2019
2,158,248 2,158,248
---------- ------------
(*) The exercise price of these warrants is denominated in
British Pounds and was translated to Canadian Dollars in the table
above using the exchange rate as of March 31, 2018.
11. Stock Options
The Company maintains a stock option plan (the "Plan") for the
directors, officers, consultants and employees of the Company and
its subsidiary companies. The maximum number of options issuable
under the Plan shall be equal to ten percent (10%) of the
outstanding shares of the Company less the aggregate number of
shares reserved for issuance or issuable under any other security
based compensation arrangement of the Company.
A summary of the status of the Plan as at March 31, 2018 and
changes during the year is as follows:
Number of stock options Weighted average exercise Remaining contractual life -
price years
$
---------------------------- ----------------------- ----------------------------- -----------------------------
Balance, March 31, 2016 9,123,400 0.53 1.76
Cancelled (1,098,000) 1.21 -
Expired (155,400) 0.59 -
Balance, March 31, 2017 7,870,000 0.30 4.15
Granted (i) 250,000 0.36
Exercised (see Note 9 (xi)) (1,200,000) 0.30
Balance, March 31, 2018 6,920,000 0.302 4.15
----------------------------- ----------------------- ----------------------------- -----------------------------
(i) On June 8, 2017, 250,000 options were issued to a director.
These options are exercisable for a maximum period of five years
from the date of the grant and vest as to one third on grant date
and one third on each anniversary date of the grant for the
following two years. The fair value of the options granted was
estimated at $35,677 using the Black-Scholes option pricing model,
using the following assumptions: Expected option life 5 years;
Volatility 62.67%; Risk-free interest rate 1.28%; Dividend yield
0%.
(ii) Share-based compensation expense is recognized over the
vesting period of options. During the year ended March 31, 2018,
share-based compensation of $35,744 (March 31, 2017 - $168,673) was
recognized based on options vesting during the year.
(iii) As at March 31, 2018, 6,753,333 options were exercisable
(March 31, 2017 - 7,653,333).
12. Income Taxes
The reconciliation of the combined Canadian federal and
provincial statutory income tax rate of 26.5% (2017 - 26.5%) to the
effective rate is as follows:
March 31, March 31,
2018 2017
$ $
----------------------------------------------- ------------ ------------
Net loss before recovery of income
taxes (8,182,233) (3,556,586)
Expected income tax recovery (2,168,292) (942,495)
Difference in foreign tax rates 170,465 (177,188)
Tax rate changes and other adjustments (236,979) (828,782)
Non-deductible expenses 689,090 (331,862)
Discontinued operations - 653,122
Change in tax benefits not recognized 1,545,716 1,627,205
----------------------------------------------- ------------ ------------
Income tax recovery reflected in the - -
statements of operations and comprehensive
loss
----------------------------------------------- ------------ ------------
Unrecognized Deferred Tax Assets
Deferred taxes are provided as a result of temporary differences
that arise due to the differences between the income tax values and
the carrying amount of assets and liabilities. Deferred tax assets
have not been recognized in respect of the following deductible
temporary differences:
March 31, 2018 March 31, 2017
$ $
---------------------------------------------------------------- --------------- ---------------
Deferred Tax Assets
Non-capital losses - Canada 7,520,067 4,507,823
Non-capital losses - Namibia 8,222,267 7,682,221
Non-capital loses - Guyana - 199,621
Share issue and financing costs 1,739,685 1,635,957
Resource pools - Petroleum, natural gas and shale gas property 4,510,985 848,464
Other deductible temporary difference 41,221 257,518
The Canadian non-capital loss carry forwards expire as noted in
the table below. The remaining deductible temporary differences may
be carried forward indefinitely. Deferred tax assets have not been
recognized in respect of these items because it is not probable
that future taxable profit will be available against which the
group can utilize the benefit therefrom.
The Company's Canadian non-capital loss carry forwards expire as
follows:
2031 $ 96,680
2032 845,268
2033 1,471,522
2034 1,265,598
2037 1,750,118
2038 2,090,881
----------- ----------
$ 7,520,067
---------- ----------
13. Asset Retirement Obligations ("ARO")
The Company is legally required to restore its properties to
their original condition. Estimated future site restoration costs
will be based upon engineering estimates of the anticipated method
and the extent of site restoration required in accordance with
current legislation and industry practices in the various locations
in which the Company has properties.
As of March 31, 2018 and 2017, the Company did not operate any
properties, accordingly, no ARO was required.
14. Capital Management
The Company considers its capital structure to consist of share
capital, deficit and reserves. The Company manages its capital
structure and makes adjustments to it, in order to have the funds
available to support the acquisition, exploration and development
of its licenses. The Board of Directors does not establish
quantitative return on capital criteria for management, but rather
relies on the expertise of the Company's management to sustain
future development of the business.
The Company is a exploration stage entity; as such the Company
is dependent on external equity financing to fund its activities.
In order to carry out the planned exploration and pay for
administrative costs, the Company will spend its existing working
capital and raise additional amounts as needed. Management reviews
its capital management approach on an ongoing basis and believes
that this approach, given the relative size of the Company, is
reasonable.
There were no changes in the Company's approach to capital
management during the year ended March 31, 2018. Neither the
Company nor its subsidiaries are subject to externally imposed
capital requirements.
The Company's objective when managing capital is to safeguard
the Company's ability to continue as a going concern. The Company's
ability to raise future capital is subject to uncertainty and the
inability to raise such capital may have an adverse impact over the
Company's ability to continue as a going concern (Note 2).
15. Risk Management
a) Credit risk
The Company's credit risk is primarily attributable to
short-term investments and amounts receivable. The Company has no
significant concentration of credit risk arising from operations.
Short-term investments consist of deposits with Schedule 1 banks,
from which management believes the risk of loss to be remote.
Amounts receivable consist of advances to suppliers and harmonized
sales tax due from the Federal Government of Canada. Government
receivable consists of value added tax due from the Namibian
government which has been collected subsequent to year end.
Management believes that the credit risk concentration with respect
to amounts receivable is remote. The Company does not hold any
non-bank asset backed commercial paper.
b) Interest rate risk
The Company has cash balances, cash on deposit and no interest
bearing debt. It does not have a material exposure to this
risk.
c) Liquidity risk
The Company ensures, as far as possible, that it will have
sufficient liquidity to meet its liabilities when due, without
incurring unacceptable losses or harm to the Company's
reputation.
As at March 31, 2018, the Company had cash and cash equivalents
and on deposit of $14,316,042. (March 31, 2017 - $6,088,567),
short-term investments of $74,818 (March 31, 2017 - $49,818) and
other receivables of $832,322 (March 31, 2017 - $1,100,491) to
settle current liabilities of $731,024 (March 31, 2017 -
$800,629).
The Company utilizes authorization for expenditures to further
manage capital expenditures and attempts to match its payment cycle
with available cash resources. Accounts payable and accrued
liabilities at March 31, 2018 all have contractual maturities of
less than 90 days and are subject to normal trade terms.
The Company is dependent on obtaining financing to complete
development, and upon future profitable operations from the
licenses or profitable proceeds from their disposition.
The Company has commitments related to its petroleum and natural
gas licenses as described in Note 7.
d) Foreign currency risk
The Company is exposed to foreign currency fluctuations on its
operations in Namibia, which are denominated in Namibian dollars.
Sensitivity to a plus or minus 10% change in rates would not have a
significant effect on the net income (loss) of the Company, given
the Company's minimal assets and liabilities designated in Namibian
dollars as at March 31, 2018.
16. Commitments
Licenses
The Company is committed to meeting all of the conditions of its
licenses including annual lease renewal or extension fees as
needed.
The Company submitted work plans for the development of the
Namibian licenses, see Note 7 for details.
17. Operating Costs
Operating costs consist of the following:
Year ended
March 31,
--------------------------------------
2018 2017
------------------- -----------------
Exploration data acquisition and interpretation
and technical consulting $ 4,564,015 $ 2,281,364
Exploration license fees 402,992 173,817
Travel 314,666 232,615
Recovered under JOAs (32,248) (517,856)
$ 5,249,425 $ 2,169,940
=================== =================
18. General and Administrative Costs
General and administrative costs consist of the following:
Year ended
March 31,
2018 2017
-------------------- ------------------
Occupancy and office expenses $ 52,133 $ 82,332
Travel expenses 125,438 132,348
Public company costs 645,387 113,103
Insurance 57,734 59,566
Financial services 22,964 10,875
Advertising and communication 1,562 8,515
Depreciation - 1,101
Recovered under JOAs (18,072) (22,272)
$ 887,146 $ 385,568
==================== ==================
19. Discontinued Operations
a) On July 29, 2014, the Company, through its wholly-owned
subsidiary, Eco Atlantic (Ghana) Ltd. ("Eco Ghana"), acquired a
50.51% interest in the Deepwater Cape Three Points West Block,
located in the Tano Cape Three Points Basin, offshore Ghana (the
"Ghana Block"). The parties to the GPA include the Company, the
Ghana National Petroleum Company ("GNPC"), GNPC Exploration and
Production Company Limited ("GNPCEPCL"), A-Z Petroleum Products
Ghana Limited ("A-Z"), and PetroGulf Limited ("PetroGulf").
b) On November 21, 2016, the Company received the necessary
approvals from GNPC and GNPC Exploration and Production Company to
execute a Share Purchase and Sale Agreement (the "Ghana Agreement")
to which the Company sold its total interest in Eco Ghana to
PetroGulf for proceeds of $1 USD. Pursuant to the Ghana Agreement,
the Company is entitled to receive US$576,580 as reimbursement for
past operating expenditures owed to the company on the Ghana Block
("Ghana Reimbursement"). As a result of the Ghana Agreement, the
Company will have no remaining obligations in Ghana, and in the
Ghana Block, specifically, as PetroGulf has fully assumed all
obligations of Eco Ghana. As of the date hereof, the Ghana
Reimbursement has not been received.
c) The carrying value of Eco Ghana was ($853,362) at the date of
sale. Proceeds on the sale were $1 USD ($1 CDN) resulting in a gain
on disposition of $853,361.
d) The Company's operating results from discontinued operations
in Eco Atlantic (Ghana) Ltd. are summarized as follows:
Year Ended
March 31,
2017
-------------------------
Revenues
Operator Fees $ 11,804
Expenses
Professional Fees 131,517
Operating costs 225,781
General and administrative costs 19,708
Foreign exchange (314)
Pre-tax operating loss from discontinued
operations $ (364,888)
Income tax on operations -
Operating loss from discontinued operations $ (364,888)
Gain of sale of operations 853,361
Profit (loss) on sale of discontinued
operations $ 488,473
20. Earnings per Share
The Company's 6,920,000 (March 31, 2017 - 7,870,000) options and
2,158,248 (March 31, 2017 - 3,702,935) warrants have been excluded
from the calculation of dilutive earnings per share as their
inclusion would be antidilutive.
21. Subsequent Events
(i) On June 1, 2018, the Company issued the all of the tranches
of the Consideration Shares in respect of the Purchase Agreements
to acquire the Minority Shares of Eco Guyana. See Note 7(ii).
**ENDS**
For more information, please visit www.ecooilandgas.com or
contact the following:
Eco Atlantic Oil and Gas +1 (416) 250 1955
Gil Holzman, CEO
Colin Kinley, COO
Alan Friedman, VP
Strand Hanson Limited (Financial & Nominated
Adviser) +44 (0) 20 7409 3494
James Harris
Rory Murphy
James Bellman
Brandon Hill Capital Limited (Joint Broker) +44 (0) 20 3463 5000
Oliver Stansfield
Jonathan Evans
Robert Beenstock
Pareto Securities Limited (Joint Broker) +44 (0) 20 7786 4370
Soren Clausen +44 (0) 20 7786 4382
Davide Finelli +44 (0) 20 7786 4398
Matilda Mäkitalo +44 (0) 20 7786 4375
Peterhouse Corporate Finance +44 (0) 20 7469 0930
Eran Zucker
Blytheweigh (PR) +44 (0) 20 7138 3204
Tim Blythe
Simon Woods
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014.
Notes to editors
Eco Atlantic is a TSX-V and AIM listed Oil & Gas exploration
and production Company with interests in Guyana and Namibia where
significant oil discoveries have been made.
The Group aims to deliver material value for its stakeholders
through oil exploration, appraisal and development activities in
stable emerging markets, in partnership with major oil companies,
including Tullow, ONGC, Total (optional) and AziNam.
In Guyana, Eco Guyana holds a 40%(1) working interest alongside
Tullow Oil (60%) in the 1,800 km(2) Orinduik Block in the shallow
water of the prospective Suriname Guyana basin. The Orinduik Block
is adjacent and updip to the deep-water Liza Field and Snoek,
Payara, Pacora, Turbot and Longtail Discoveries, recently
discovered by ExxonMobil and Hess, which is estimated to contain in
excess of 3.7 billion barrels of oil equivalent, making it one of a
handful of billion-barrel discoveries in the last half-decade.
In Namibia, the Company holds interests in four offshore
petroleum licences totaling approximately 25,000km(2) with over 2.3
billion barrels of prospective P50 resources in the Walvis and
Lüderitz Basins. These four licences, Cooper, Guy, Sharon and Tamar
are being developed alongside partners, which include Tullow Oil,
AziNam and NAMCOR. Drilling activity in Namibia is set to gather
pace in 2018 and 2019, with a few wells confirmed to be spud on
Tullow PEL 037 and Chariot Central Blocks. The Company has applied
for a drilling permit on its Cooper (Operator) Block.
(1) Total E&P Activités Pétrolières, (a wholly owned
subsidiary of Total SA) ("Total") has purchased an option from Eco
to acquire a 25% Working Interest in the Orinduik Block for and
additional US$12.5 million.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR LLFITDEIAFIT
(END) Dow Jones Newswires
July 30, 2018 02:01 ET (06:01 GMT)
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