TIDMBOIL
RNS Number : 2213L
Baron Oil PLC
29 April 2020
Market Abuse Regulation (MAR) Disclosure
Certain information contained in this announcement would have
been deemed inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014 until the release of this
announcement.
29 April 2020
Baron Oil Plc
("Baron Oil" or "the Company")
Final Results for the Year Ended 31 December 2019
Baron Oil Plc (AIM:BOIL), the AIM-quoted oil and gas exploration
and production company focused on opportunities in SE Asia, Latin
America and the UK, is pleased to announce its audited financial
results for the year ended 31 December 2019.
Operations
Chuditch PSC: The award in November of the TL-SO-19-16
Production Sharing Contract ("Chuditch PSC"), offshore Democratic
Republic of Timor-Leste, marks a major step forward for the
Company. Shell's internal analyses following the drilling of the
Chuditch-1 discovery in 1999, indicate a Mean Gas Initially in
Place (GIIP) for the surrounding group of prospects in the Chuditch
PSC of 2,320 BCF, considered by Baron to be low-risk GIIP Pmean
Prospective Resources (but not SPE PRMS compliant). Baron has an
indirect interest of 25% in the Chuditch PSC, held through its
shareholding in SundaGas (Timor-Leste Sahul) Pte. Ltd.
Block XXI: The Company continues to pursue efforts to drill the
El Barco-3X well in Peru, including introducing a partner. However,
plans for drilling are currently halted by COVID-19 issues, with
strict movement restrictions including the inability to visit the
site. Baron has a 100% interest.
Inner Moray Firth (UK): Initial subsurface work on Licence
P2478, which contains the large Dunrobin and smaller Golspie
prospects, is under review and further seismic reprocessing is
planned. Licences P2470 and P2235 have been relinquished. Baron has
a 15% interest in the Inner Moray Firth.
Dorset (UK): The latest analysis of the Colter South Prospect
(on Licence P1918), in which oil was found during 2019, indicates
that a further appraisal well is required to define the resources
before development can be planned. The current oil price collapse
and short remaining duration of the Licence mean efforts to bring
in a new drilling partner are now unlikely to succeed. Hence, under
IFRS6, the entire carrying amount for Colter has been impaired. The
status of PEDL330 and PEDL345 onshore Licences, lying to the south
of Wytch Farm oilfield, continue to be reviewed in light of the
current business environment. Baron has an 8% interest in the
Dorset Licences.
Financials
-- Net result for the year was a loss before taxation of
GBP1,674,000 (2018: loss of GBP3,280,000)
-- Loss after taxation attributable to shareholders was
GBP1,674,000 (2018: loss of GBP2,495,000)
-- Exploration and evaluation expenditure of GBP1,207,000 (2018: GBP1,592,000)
-- IFRS6 intangible asset impairment charge of GBP1,047,000,
mainly relating to P1918 Colter (2018: IFRS6 charge of GBP1,360,000
relating to Block XXI, Peru)
-- Administration expenditure for the year was GBP442,000 (2018: GBP549,000), a 20% reduction
-- The end of year free cash balance was GBP347,000 (2018:
GBP1,709,000). Excluding the proceeds of a share placing in June
2019 amounting to GBP440,000 gross (GBP408,000 net), the overall
cash outflow during the year amounted to GBP1,770,000.
-- In Q1 2020, the Company undertook a further capital raise of
GBP2.5m gross (GBP2.3m net) at 0.1p per share.
The Company intends to hold its AGM in June 2020 and the Notice
of Annual General Meeting to that effect will be sent to
Shareholders in due course.
Competent Person's Statement
Pursuant to the requirements of the AIM Rules for Companies, the
technical information and resource reporting contained in this
announcement has been reviewed by Dr Malcolm Butler BSc, PhD, FGS,
Executive Chairman of the Company. Dr Butler has more than 45
years' experience as a petroleum geologist. He has compiled, read
and approved the technical disclosure in this regulatory
announcement. The technical disclosures in this announcement comply
with the Society of Petroleum Engineers ' standard, except as
stated.
Commenting on the results, Malcolm Butler, Executive Chairman,
said:
"The final award of the Chuditch PSC was a great result for your
Company and marks a step-change in Baron's asset base. However, our
industry is currently faced with the dual global impact of
significantly lower oil prices and the rapid spread of the COVID-19
virus. While Baron is not insulated from the oil price shock, it
should be noted that the Company's assets are all in the
pre-cashflow exploration phase and, following the award of the
Chuditch PSC, are now heavily weighted towards gas where regional
markets play a much greater role in pricing.
In Timor-Leste, there is no obligation to drill before 2022 and
any commercial production is unlikely to be achieved before 2025.
There are no plans to fund drilling in the UK for the foreseeable
future. In both cases, work on these projects over the next 12
months is desk and computer-based and should not be affected by
current movement restrictions, although gaining access to the
necessary data is being delayed.
As regards the El Barco-3X well in Peru, it is unclear how much
local oil companies' appetite for drilling will be affected by oil
price movements and although it is unlikely that local gas prices
in this part of Peru will be affected by the drop in oil prices, it
is impossible to predict the effects on short term gas demand of a
COVID-19 related recession.
Critically for shareholders, following our GBP2.5m (gross) fund
raise in Q1 2020, our proposed work programme for 2020 and into
2021 is funded."
For further information, please contact:
Baron Oil Plc +44 (0)20 7117 2849
Dr Malcolm Butler, Executive Chairman
Andy Yeo, Managing Director
SP Angel Corporate Finance LLP +44 (0)20 3470 0470
Nominated Adviser and Joint Broker
Stuart Gledhill, Caroline Rowe
Turner Pope Investments (TPI) Limited +44 (0)20 3657 0050
Joint Broker
Andy Thacker, Zoe Alexander
CHAIRMAN'S STATEMENT & OPERATIONS REPORT
Financial and Financial Results
The net result for the year was a loss before taxation of
GBP1,674,000, which compares to a loss of GBP3,280,000 for the
preceding financial year; the loss after taxation attributable to
Baron Oil shareholders was GBP1,674,000, compared to a loss of
GBP2,495,000 in the preceding year.
Turnover for the year was GBPnil (2018: GBPnil), there being no
sales activity during the period.
Exploration and evaluation expenditure written off included in
the Income Statement amounts to GBP160,000. This arises from
expenditure of GBP133,000 in Peru on Block XXI, GBP42,000 in costs
regarding the South East Asia Joint Study Agreement with SundaGas
prior to the award of the TL-SO-19-16 Production Sharing Contract
in November 2019, minor pre-licence expenditures of GBP9,000
relating to the UK Offshore 31(st) Licensing Round and technical
consultancy, less GBP24,000 recovered in respect of 2018
exploration activities in Licence P2235 (Wick).
On the Colter prospect (licence P1918), wells 98/11a-6 and its
sidetrack 98/11a-6z were drilled in February and March 2019 at a
total cost to Baron of GBP996,000. GBP376,000 had been invoiced
during 2018 in respect of preparations for the drilling of the well
and had previously been treated as a prepayment. Including other
licence costs, total expenditure in the year was GBP1,042,000,
which was capitalised to give a total intangible asset value of
GBP1,108,000. The initial evaluation of the well results indicated
that the Colter South Prospect had the potential to contain
commercial quantities of oil and the licence was therefore
continued into its second term in February 2020. However,
re-evaluation of the geophysical information, the failure of
attempts to bring in an additional partner, and, most recently, the
precipitous drop in oil prices in March 2020 has led to a further
reassessment of the economic case, increasing the likelihood that
the licence will be relinquished before expiry of the Second Term
of the licence on 31 January 2021. IFRS6 (the relevant accounting
standard) states that an asset should be impaired if there is a
prospect of a licence coming to an end in the near future, which
for the purposes of this Annual Report would be the next 12 months.
On this basis, the decision has now been taken to impair the entire
carrying amount for Colter of GBP1,108,000.There was a small
reduction in the provision relating to Peru Block XXI of GBP61,000
due to exchange rate fluctuations, leading to a total net cost of
impairment amounting to GBP1,047,000.
In Colombia, the liquidation of Inversiones Petroleras de
Colombia SAS ("Invepetrol"), in which the Company held a 50%
interest, was completed on 2 October 2019, with no further
liability to the Company.
Administration expenditure for the year was GBP442,000, compared
to GBP549,000 in the preceding year, excluding the effects of
exchange rate movements. Directors and employee costs amounted to
GBP258,000, listing compliance and other professional fees
GBP133,000 and other overheads GBP51,000. During the year, the
directors agreed to a temporary reduction in their contracted
salaries which resulted in cost savings of GBP89,000.
We saw a modest strengthening of the Pound Sterling against the
US Dollar and, with the majority of the group's assets being
denominated in US dollars, this has given rise to a loss of
GBP41,000. This compares with a gain of GBP130,000 in the preceding
year, when the Pound Sterling showed relative weakness against the
US Dollar.
At the end of the financial year, free cash reserves of the
Group had decreased to GBP347,000 from a level at the preceding
year end of GBP1,709,000. Excluding the proceeds of a share placing
in June 2019 amounting to GBP440,000 gross (GBP408,000 net of
costs), the overall cash outflow amounted to GBP1,770,000,
consisting of GBP1,207,000 in respect of exploration and evaluation
activity and GBP563,000 operating cash outflow. In Q1 2020, the
Company undertook a further capital raise with a new ordinary share
Placing of GBP2,500,000 gross (GBP2,306,000 net).
The Group continues to pursue a conservative view of its asset
impairment policy, giving it a Balance Sheet that consists largely
of net current assets and what it considers to be a realistic value
for its exploration assets. Given limited cash resources, the Board
will take a prudent approach in entering into new capital
expenditures beyond those expected to be committed to existing
ventures.
Report On Operations
Introduction
The directors are pleased to report the success of SundaGas
Pte.Ltd. in gaining the award of the TL-SO-19-16 Production Sharing
Contract in Timor-Leste. As shareholders will be aware, this
follows an application made in early 2016, during the period of the
Joint Study Agreement between Baron and SundaGas. Baron now holds a
33.33% interest in SundaGas (Timor-Leste Sahul) Pte.Ltd, whichgives
it an indirect interest of 25% in a substantial gas discovery. The
Company continues to pursue efforts to drill the El Barco-3X well
on Block XXI in Peru in 2020. As announced during the year, Baron
participated in the drilling of two vertical wells and a sidetrack
in offshore UK waters. Although oil was encountered in Triassic
Sherwood Sandstones on the Colter South Prospect by well 98/11a-06,
the results of subsequent analysis indicate that a further
appraisal well must be drilled before Colter South can be moved
towards development. Efforts to bring in a new partner to
participate in the necessary additional work have been unsuccessful
so far and the recent precipitous drop in oil prices makes it
unlikely that such work can be carried out before the expiry of the
current licence term in January 2021.
It is difficult to predict what effect the COVID-19 pandemic
will have on operations planned for 2020 but it is already clear
that drilling activities will suffer significant delays, which will
impact plans for Peru Block XXI. In addition, it is impossible to
predict the effects on short term gas demand in Peru and longer
term gas demand in Southeast Asia of a potential global
recession.
Southeast Asia: Timor-Leste Tl-S0-19-16 Psc (Baron 25%,
Effective)
The award in November 2019 to a subsidiary of SundaGas Pte.Ltd.
of the TL-SO-19-16 Production Sharing Contract (the "Chuditch
PSC"), offshore Democratic Republic of Timor-Leste, marks a major
step forward for the Company. Baron supported the original
application for a PSC in this area made by the SundaGas group in
October 2016, which gave it the right to an interest in the
subsequent award. A Shareholders' Agreement ("SHA") has been
executed with SundaGas Resources Pte. Ltd ("SundaGas") governing
the operation of SundaGas (Timor-Leste Sahul) Pte.Ltd ("SundaGas
TLS"), in which Baron now has a 33.33% shareholding and SundaGas
retains 66.67%. The sole asset of SundaGas TLS is its 100%
shareholding in SundaGas Banda Unipessoal Lda., Operator of the
Chuditch PSC, in which it holds a 75% interest.
The SHA contains provisions typical of an agreement of this
nature including, but not limited to, mutual undertakings, the
right to appoint one of the three directors of SundaGas TLS and
certain shareholder rights protections.
Under the terms of the Carry Agreement, executed between
SundaGas and Baron on 27(th) January 2020, and the SHA, US$521,149
was paid to SundaGas on 21(st) April 2020 to reimburse Baron's
33.33% share of costs incurred since the Chuditch PSC was signed on
8 November 2019. This amount includes Baron's 33.33% share of the
$1,000,000 Bank Guarantee and the subscription for 3,333 shares in
SundaGas TLS, representing 33.33% of the issued share capital of
that company. Baron now plans to maintain its interest by
continuing to pay 33.33% of the costs incurred on the Chuditch PSC
through additional investment into SundaGas TLS. The Company's
33.33% interest in SundaGas TLS equates to an indirect 25% interest
in the Chuditch PSC after accounting for the 25% carried interest
of the Timor-Leste state company. Information has been derived from
publicly released reports on the area, prepared by Shell
Development (Australia) Pty. Ltd. ("Shell") in 1998 and 2001 after
the drilling of the discovery well Chuditch-1. These indicate that
the well, drilled in 64 metres water depth in a total of 25 days
for US$8 million, encountered a 25m gas column in Jurassic Plover
Formation reservoir sandstones on the flank of a large faulted
structure. The reports include estimated ranges of gas in place and
recovery factors derived from Shell's internal analyses and, whilst
not compliant with the 2018 SPE PRMS Prospective Resources
standard, are considered to be a valid indication of the potential
for the Chuditch gas accumulation.
The key Shell estimates for the combined Chuditch, Chuditch
North and Chuditch South closures ("Greater Chuditch") tested by
Chuditch-1 within the area of the PSC are:
1. Estimated Mean Gas in Place (GIIP) of 2,320 BCF, considered
by Baron to be Pmean Prospective Resources;
2. Gas recovery factors in the range of 55% to 75%, leading
Baron to estimate Mean Recoverable Gas of 1,276 to 1,740 BCF,
considered by Baron to be recoverable Pmean Prospective
Resources;
3. Risks associated with trap, reservoir and charge for the
Greater Chuditch closure considered to be zero (that is, the
Geological Chance of Success is 100%), with remaining uncertainty
around in place and recoverable volumes.
Further information is available on the Company's website (
www.baronoilplc.com ) and a glossary of terms is included at the
end of the report.
SundaGas has put in place the $1 million Performance Guarantee
Bond and is moving forward with the initial agreed work programme
commitment to reprocess existing 2D and 3D seismic data over the
PSC area. Subject to satisfactory results from the reprocessing,
the subsequent commitment is for a well to be drilled in the third
year of the Initial Term of the Chuditch PSC.
Peru Onshore Block XXI (Baron Oil 100%)
The Company continues to strive to drill on Block XXI, in the
Sechura Basin of northern Peru. An experienced local operator with
onshore drilling capacity is available and together we are looking
at funding options which, subject to local community approval,
should see the El Barco-3X well drilled in 2020. However, plans for
drilling are currently halted by COVID-19 issues, with strict
movement restrictions and the inability to visit the site. It is
unclear how much our proposed partner's appetite for drilling will
be affected by this and by oil price movements. Gas production in
this part of Peru is sold at a price determined by local
industries. Although it is unlikely that local gas prices will be
greatly affected by the drop in oil prices, it is impossible to
predict the effects on short term gas demand in Peru of a potential
global recession.
Gold Oil Peru SAC ("GOP"), Baron's Peruvian subsidiary,
currently operates Block XXI with 100% interest but it is likely
that the interest will reduce to between 50% and 70% on farming out
to bring in a new partner.
The well is planned to be drilled to a total depth of 1,850
metres to test a prospect for which Baron estimates unrisked
recoverable SPE-PRMS-compliant Prospective Resources (2U-P50) of 14
BCF of gas from the shallower Mancora Sand target, with a 55%
Chance of Geological Success, and 8.5 MMBBLS, with associated gas
and a 27% Chance of Geological Success, from the higher-risk
fractured Amotape Basement. This Basement structure may be larger
than presently mapped because it extends beyond the edge of
existing 2D seismic data.
The current estimated cost of site preparation and drilling of
El Barco-3X is US$1.2 million. The proposed location is
approximately 19 kilometres east of the Pan-American Highway and
only 1.5 kilometres from the Oleoducto Nor Peruano, the oil
pipeline that crosses the Andes from the Amazon Basin and runs to
the coast at Bayovar.
The Block is in the fifth and last exploration phase with
approximately 6 months left in which to drill once Force Majeure is
lifted, which will occur when access details are agreed with the
local community. Once the well is drilled, the Company has an
agreement in principle with PeruPetro that Baron will have the
option of a three-year extension. Under the terms of the current
period, GOP is entitled to the return of its US$160,000 government
performance bond if the well is drilled.
United Kingdom Offshore Licences P2470 And P2478 (Baron 15%)
Baron Oil and its partners were formally awarded these two new
licences in the Inner Moray Firth area of the North Sea by the UK
Oil & Gas Authority in September 2019, following the UK 31st
Offshore Licensing Round. These Innovate Licences are held by
Corallian Energy Limited ("Corallian") (Operator, with 45%), Upland
Resources (UK Onshore) Limited (40%) and Baron (15%).
Licence P2478, over blocks 12/27c, 17/5, 18/1 and 18/2, contains
the Dunrobin prospect which consists of three large shallow
Jurassic rotated fault blocks that are mapped mostly on 3D seismic
data within a single culmination with Direct Hydrocarbon
Indicators. The lowest closing contour covers 40 square kilometres
and Corallian estimates the prospect to have Pmean Prospective
Resources of 172 mmboe, with upside potential of c. 400 mmboe
(P10). These resource estimates are non-SPE-PRMS compliant
recoverable Prospective Resources for the Jurassic sands primary
target. . Additional Pmean Prospective Resources of 23.5 mmboe are
estimated by Corallian for the smaller Golspie Prospect also
contained within the licence. Both prospects are already defined by
existing 3D seismic and reprocessing of these data, together with
supporting 2D seismic, is underway.
Licence P2470 includes blocks 11/23, 11/24c and 11/25b,
surrounding the Wick Prospect, on which Baron Oil participated in
the dry Wick Well (11/24b-4) at the beginning of 2019. These blocks
were applied for before the results of 11/24b-4 were known and,
although they contain the small Knockinnon oil discovery and
several small prospects, they have been downgraded by the Wick well
result. The modest work commitment on this licence consists of a
small volume of 3D seismic reprocessing, which has now been
completed. The results of such work were not encouraging and the
Licence was relinquished with effect from 31(st) March 2020.
Former Licence P2235, on which the unsuccessful Wick Well was
drilled, was relinquished at the end of Q3 2019.
United Kingdom Offshore Licence P1918 (Colter) (Baron 8%)
The Colter area lies in UKCS Licence P1918 in Poole Bay,
immediately southeast of the Wytch Farm oilfield, which has been
developed from onshore facilities. The Colter well (98/11a-06) and
its sidetrack (98/11a-06z) were drilled in February and March 2019
and indicated the presence of an oil accumulation with commercial
potential in the Colter South Prospect within P1918. Efforts since
then have been concentrated on Colter South, where a review of the
seismic data and mapping was undertaken in an attempt to improve
the subsurface imaging of this complex area. Although the Operator,
Corallian Energy Limited, estimated nonSPE-PRMS compliant Pmean
recoverable Prospective Resources of 16 mmboe in the Colter South
Prospect (1.2 mmboe net to Baron), it has become clear that an
additional vertical appraisal well is necessary before any plans
can be made for development.
The P1918 group has elected to proceed into the Second Term of
the Licence, expiring on 31 January 2021, and has simultaneously
reduced the Licence area to incorporate only that acreage
surrounding the Colter and Colter South Prospects. The Joint
Venture participants have been seeking an additional partner to
help fund the drilling of the required vertical well and thereafter
to move it forward into development. However, given the short time
frame to expiry of the licence and the current oil price situation
it is considered unlikely that this can take place before the
Second Term expires. On this basis, the directors have elected to
impair costs previously capitalised in respect of 98/11a-06 and
98/11a-06z.
United Kingdom Onshore Licences PEDL330 & PEDL345 (Baron
8%)
PEDL330 and PEDL345 are onshore Licences, lying to the south of
Wytch Farm oilfield. PEDL345 includes a major part of the Purbeck
Prospect, which is being evaluated. However, the combination of the
current low oil price and the environmental issues associated with
drilling in this coastal area of Dorset has led the directors to
conclude that it will be difficult for drilling to take place
before these licences expire in July 2021.
Conclusions
Baron is currently faced with the dual global impact of
significantly lower oil prices and the rapid spread of the COVID-19
virus. While we are not insulated from the oil price shock, it
should be noted that the Company's assets are all in the
pre-cashflow exploration phase and, following the award of the
Chuditch PSC, are now heavily weighted towards gas where regional
markets play a much greater role in pricing.
There is no obligation to drill before 2022 in Timor-Leste and
there are no plans to fund drilling in the UK in the foreseeable
future. In both cases, planned work for at least the next 12 months
is desk and computer-based and should not be affected by current
movement restrictions, although gaining access to the necessary
data is being delayed. As regards the El Barco-3X well in Peru,
plans for drilling are currently halted by strict movement
restrictions and the inability to visit the site. It is unclear how
much our proposed partner's appetite for drilling will be affected
by oil price movements. Although it is unlikely that local gas
prices in this part of Peru will be affected by the drop in oil
prices, it is impossible to predict the effects on short term gas
demand in Peru. Moreover, the impact on longer term gas demand and
the currently depressed regional gas prices in Southeast Asia from
a steep economic recession brought on by the COVID-19 pandemic
remains to be seen.
Following our GBP2.5m (gross) fund raise in February 2020, our
proposed work programme for 2020 and into 2021 is funded. The
majority of the funds are planned to be used to pay Baron's share
of the ongoing TL-SO-19-16 PSC ("Chuditch PSC") work programme and
the drilling of the onshore El Barco-3X well in Peru.
Once the global economic outlook becomes clearer, we look
forward to progressing the drilling of El Barco-3X and moving
forward with the Timor-Leste project, which has the potential to
make a step-change in the value of your Company .
This has been a stressful period that has required intense
effort by our small team and I would like to record my particular
thanks to Andy Yeo for the long hours he has put in to maintain and
strengthen the Company's financial capability.
CONSOLIDATED INCOME STATEMENT FOR THE YEARED 31 DECEMBER
2019
Notes 2019 2018
GBP'000 GBP'000
Revenue - -
Cost of sales - -
Gross profit - -
Exploration and evaluation expenditure (160) (1,526)
Intangible asset impairment 11 (1,047) (1,360)
Receivables impairment 3 16 (54)
Administration expenses (442) (549)
(Loss)/profit on exchange 3 (41) 130
Other operating Income 4 - 83
Operating loss 3 (1,674) (3,276)
Finance cost 6 (1) (10)
Finance income 6 1 6
Loss on ordinary activities
before taxation (1,674) (3,280)
Income tax credit/(expense) 7 - 785
Loss on ordinary activities
after taxation (1,674) (2,495)
Dividends - -
Loss for the year (1,674) (2,495)
------------------------------------------ ------ --------------------------- -------------------------------
Loss on ordinary activities
after taxation is attributable
to:
Equity shareholders (1,674) (2,495)
Non-controlling interests - -
Loss for the year (1,674) (2,495)
------------------------------------------ ------ --------------------------- -------------------------------
Earnings per ordinary share -
continuing 9
Basic (0.099p) (0.181p)
Diluted (0.099p) (0.181p)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE
YEARED 31 DECEMBER 2019
Notes 2019 2018
GBP'000 GBP'000
Loss on ordinary activities after
taxation attributable to the parent (1,674) (2,495)
Other comprehensive income:
Exchange difference on translating
foreign operations (69) (11)
Total comprehensive income for
the year (1,743) (2,506)
------------------------------------------ ------- -------- --------
Total comprehensive income attributable
to
Owners of the parent (1,743) (2,506)
---------------------------------------------------- -------- --------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER
2019
Notes 2019 2018
GBP'000 GBP'000
Assets
Non current assets
Property plant and equipment
--- oil and gas assets 10 - -
--- others 10 - -
Intangibles 11 5 66
Goodwill 12 - -
5 66
-------------------------------- --------------------------- --------------------------- ----------------------------- --------------------------- -------------------------------
Current assets
Trade and other receivables 14 49 503
Cash and cash equivalents 15 472 1,838
521 2,341
-------------------------------- --------------------------- --------------------------- ----------------------------- --------------------------- -------------------------------
Total assets 526 2,407
-------------------------------- --------------------------- --------------------------- ----------------------------- --------------------------- -------------------------------
Equity and liabilities
Capital and reserves attributable
to owners of the parent
Share capital 17 482 344
Share premium account 18 30,507 30,237
Share option reserve 18 74 74
Foreign exchange translation
reserve 18 1,643 1,712
Retained earnings 18 (32,251) (30,577)
Total equity 455 1,790
-------------------------------- --------------------------- --------------------------- ----------------------------- --------------------------- -------------------------------
Current liabilities
Trade and other payables 16 64 594
Taxes payable 16 7 23
71 617
-------------------------------- --------------------------- --------------------------- ----------------------------- --------------------------- -------------------------------
Total equity and liabilities 526 2,407
-------------------------------- --------------------------- --------------------------- ----------------------------- --------------------------- -------------------------------
COMPANY STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2019
Notes 2019 2018
GBP'000 GBP'000
Assets
Non current
assets
Property plant and
equipment
--- oil and
gas
assets - -
Intangibles 11 5 66
Investments 13 25 25
30 91
--------------- --------------- -------------------------------------------------------- ----------------------------- --------------------------- -------------------------------
Current assets
Trade and
other
receivables 14 46 502
Cash and cash
equivalents 15 336 1,692
382 2,194
--------------- --------------- -------------------------------------------------------- ----------------------------- --------------------------- -------------------------------
Total assets 412 2,285
--------------- --------------- -------------------------------------------------------- ----------------------------- --------------------------- -------------------------------
Equity and
liabilities
Capital and reserves attributable
to owners of the parent
Share capital 17 482 344
Share premium
account 18 30,507 30,237
Share option
reserve 18 74 74
Foreign exchange translation
reserve 18 (163) (163)
Retained
earnings 18 (32,261) (30,510)
Total equity (1,361) (18)
--------------- --------------- -------------------------------------------------------- ----------------------------- --------------------------- -------------------------------
Current
liabilities
Trade and
other
payables 16 1,766 2,295
Taxes payable 16 7 8
1,773 2,303
--------------- --------------- -------------------------------------------------------- ----------------------------- --------------------------- -------------------------------
Total equity
and
liabilities 412 2,285
--------------- --------------- -------------------------------------------------------- ----------------------------- --------------------------- -------------------------------
The financial statements were approved and authorised for
issue by the Board of Directors on 28 April 2020.
CONSOLIDATED AND COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2019
Share Foreign
Share Share Retained option exchange Total
capital premium earnings reserve translation equity
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 1
January 2018 344 30,237 (28,163) 122 1,723 4,263
--------------- -------------------------------------------- --------------------------- ----------------------------- --------------------------- ------------------------------- -------------------------------
Shares issued - - - - - -
--------------- -------------------------------
Transactions
with
owners - - - - - -
--------------- -------------------------------------------- --------------------------- ----------------------------- --------------------------- ------------------------------- -------------------------------
(Loss) for the
year
attributable
to equity
shareholders - - (2,495) - (2,495)
Share based
payments - - - 33 - 33
Release of
option
reserve - - 81 (81) - -
Foreign
exchange
translation
adjustments - - - - (11) (11)
--------------- --------------------------- -------------------------------
Total
comprehensive
income for
the period - - (2,414) (48) (11) (2,473)
--------------- -------------------------------------------- --------------------------- ----------------------------- --------------------------- ------------------------------- -------------------------------
As at 1
January 2019 344 30,237 (30,577) 74 1,712 1,790
--------------- -------------------------------------------- --------------------------- ----------------------------- --------------------------- ------------------------------- -------------------------------
Shares issued 138 270 - - - 408
--------------- -------------------------------
Transactions
with
owners 138 270 - - - 408
--------------- -------------------------------------------- --------------------------- ----------------------------- --------------------------- ------------------------------- -------------------------------
(Loss) for the
year
attributable
to equity
shareholders - - (1,674) - - (1,674)
Foreign
exchange
translation
adjustments - - - - (69) (69)
--------------- --------------------------- -------------------------------
Total
comprehensive
income for
the period - - (1,674) - (69) (1,743)
-------------------------------------------- --------------------------- ----------------------------- --------------------------- ------------------------------- -------------------------------
As at 31
December
2019 482 30,507 (32,251) 74 1,643 455
--------------- -------------------------------------------- --------------------------- ----------------------------- --------------------------- ------------------------------- -------------------------------
CONSOLIDATED AND COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2019
Share Foreign
Share Share Retained option exchange Total
capital premium earnings reserve translation equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Company
As at 1
January
2018 344 30,237 (27,892) 122 (163) 2,648
--------------- -------------------------------------------- --------------------------- ----------------------------- --------------------------- ------------------------------- -------------------------------
Shares issued - - - - - -
---------------
Transactions
with
owners - - - - - -
--------------- -------------------------------------------- --------------------------- ----------------------------- --------------------------- ------------------------------- -------------------------------
(Loss) for the
year - - (2,699) - - (2,699)
Share based
payments - - - 33 - 33
Release of
option
reserve - - 81 (81) - -
---------------------------
Total
comprehensive
income for
the period - - (2,618) (48) - (2,666)
--------------- -------------------------------------------- --------------------------- ----------------------------- --------------------------- ------------------------------- -------------------------------
As at 1
January
2019 344 30,237 (30,510) 74 (163) (18)
--------------- -------------------------------------------- --------------------------- ----------------------------- --------------------------- ------------------------------- -------------------------------
Shares issued 138 270 - - - 408
---------------
Transactions
with
owners 138 270 - - - 408
--------------- -------------------------------------------- --------------------------- ----------------------------- --------------------------- ------------------------------- -------------------------------
(Loss) for the
year - - (1,751) - - (1,751)
Total
comprehensive
income for
the period - - (1,751) - - (1,751)
--------------- -------------------------------------------- --------------------------- ----------------------------- --------------------------- ------------------------------- -------------------------------
As at 31
December
2019 482 30,507 (32,261) 74 (163) (1,361)
--------------- -------------------------------------------- --------------------------- ----------------------------- --------------------------- ------------------------------- -------------------------------
Share capital is the amount subscribed for shares at nominal
value.
Share premium represents the excess of the amount subscribed
for share capital over the nominal value of those shares net
of share issue expenses.
Retained earnings represents the cumulative loss of the group
attributable to equity shareholders.
Foreign exchange translation occurs on consolidation of the
translation of the subsidiaries balance sheets at the closing
rate of exchange and their income statements at the average
rate.
CONSOLIDATED AND COMPANY STATEMENT OF CASH FLOWS FOR THE
YEARED 31 DECEMBER 2019
Group Company Group Company
2019 2019 2018 2018
--------------- ------------------------------------------------------------------------- ----------------------------- --------------------------- ------------------------------- ---------------------------------
GBP'000 GBP'000 GBP'000 GBP'000
Operating
activities (724) (563) (2,104) (1,875)
Investing
activities
Return from investment and
servicing of finance 1 1 6 6
Loan to subsidiary advanced - (155) - (236)
Acquisition of intangible
assets (1,047) (1,047) (66) (66)
(1,046) (1,201) (60) (296)
Financing
activities
Proceeds from issue of share
capital 408 408 - -
Net cash
outflow (1,362) (1,356) (2,164) (2,171)
Cash and cash
equivalents
at the
beginning
of the year 1,709 1,692 3,873 3,863
Cash and cash
equivalents
at the end of
the
year 347 336 1,709 1,692
--------------- ------------------------------------------------------------------------- ----------------------------- --------------------------- ------------------------------- ---------------------------------
Reconciliation to Consolidated
Statement of Financial Position
Cash not
available
for use 125 - 129 -
Cash and cash equivalents
as shown in the Consolidated
Statement of Financial Position 472 336 1,838 1,692
------------------------------------------------------------------------------------------ ----------------------------- --------------------------- ------------------------------- ---------------------------------
CONSOLIDATED AND COMPANY STATEMENT OF CASH FLOWS FOR THE
YEARED 31
DECEMBER 2019
Group Company Group Company
2019 2019 2018 2018
--------------------- ----------------------- -------------------- -------------------- ------------------------------
GBP'000 GBP'000 GBP'000 GBP'000
Operating activities
Loss for the year
attributable to
controlling
interests (1,674) (1,751) (2,495) (2,699)
Depreciation,
amortisation
and impairment
charges 1,047 1,240 1,360 923
Share based payments - - 33 33
Finance income shown
as an
investing activity (1) (1) (6) (6)
Tax benefit - - (785) -
Foreign exchange
translation (4) 23 (73) (122)
Operating cash
outflow before
movements in working
capital (632) (489) (1,966) (1,871)
---------------------- ----------------------- -------------------- -------------------- ------------------------------
Decrease/(increase)
in receivables 454 456 (485) (488)
Tax paid - - (53) -
(Decrease)/increase
in payables (546) (530) 400 484
Net cash outflow from
operating
activities (724) (563) (2,104) (1,875)
---------------------- ----------------------- -------------------- -------------------- ------------------------------
NOTES TO THE FINANCIAL STATEMENTS
General Information
Baron Oil Plc is a company incorporated in England and Wales and
quoted on the AIM market of the London Stock Exchange. The address
of the registered office is disclosed in the financial statements.
The principal activity of the Group is described in the Strategic
Report.
(1) Significant accounting policies
The principal accounting policies applied in the preparation of
these consolidated financial statements are set out below. These
policies have been consistently applied to all the periods
presented, unless otherwise stated.
Going concern basis
The directors have prepared a cash ow forecast covering a period
extending beyond 12 months from the date of these nancial
statements which contains certain assumptions about the development
and strategy of the business. The directors are aware of the risks
and uncertainties facing the business but the assumptions used are
the directors' best estimate of its future development.
After considering the forecasts and the risks, the directors
have a reasonable expectation that the Group has adequate resources
to continue in operational existence for the foreseeable future.
For these reasons, they continue to adopt the going concern basis
of accounting in preparing the annual nancial statements.
The nancial statements do not include any adjustments that would
result if the Group was unable to continue as a going concern.
Basis of preparation
The financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRSs) and IFRIC
interpretations issued by the International Accounting Standards
Board (IASB) as adopted by the European Union and with those parts
of the Companies Act 2006 applicable to companies reporting under
IFRS. The financial statements have been prepared under the
historical cost convention. The principal accounting policies
adopted are set out below.
Changes in accounting policies and disclosures
New and amended standards adopted by the Group
IFRS 16 'Leases' became effective for the Group from 1 January
2019. The core principle of IFRS 16 is to provide a single lessee
accounting model, requiring lessees to recognise a right-of-use
asset and lease liability for all leases unless the term is less
than 12 months, or the underlying asset has a low value.
As a result of applying IFRS 16, the Group is not impacted by
IFRS 16, as no operating leases exists within the Group.
New and amended standards not yet adopted
A number of new and amended accounting standards and
interpretations have been published that are not mandatory for the
Group's accounts ended 31 December 2019, nor have they been early
adopted. These standards and interpretations are not expected to
have a material impact on the Group's consolidated Financial
Statements:
-- Amendments to References to Conceptual Framework in IFRS
Standards (effective from 1 January 2020);
-- Amendments to IFRS 3 'Definition of a Business' (effective
from 1 January 2020);
-- Amendments to IFRS 10 and IAS 28 - Sale or Contribution of
Assets between an Investor and its Associate or Joint Venture
(effective date not yet confirmed); and
-- IFRS 17 'Insurance Contracts' (effective from 1 January
2022).
Basis of consolidation
The consolidated financial statements include the financial
statements of the Company and its subsidiaries and associated
undertakings.
Subsidiaries
Subsidiaries are all entities over which Baron Oil Plc has the
power to govern the financial and operating policies generally
accompanying a shareholding of more than one half of the voting
rights, or where Baron Oil Plc exercises effective operational
control. The existence and effect of potential voting rights that
are currently exercisable or convertible are considered when
assessing whether the Group controls another entity. Subsidiaries
are fully consolidated from the date on which control is
transferred to the Company. They are de-consolidated from the date
that control ceases.
The purchase method of accounting is used to account for the
acquisition of subsidiaries by the Group. The cost of an
acquisition is measured as the fair value of the assets given,
equity instruments issued and liabilities incurred or assumed at
the date of exchange, plus costs directly attributable to the
acquisition. Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination are
measured initially at their fair values at the acquisition date,
irrespective of the extent of any minority interest. The excess of
the cost of acquisition over the fair value of the Group's share of
the identifiable net assets acquired is recorded as goodwill. If
the cost of acquisition is less than the fair value of the net
assets of the subsidiary acquired, the difference is recognised
directly in the income statement.
Inter-company transactions, balances and unrealised gains on
transactions between Group companies are eliminated. Unrealised
losses are also eliminated but considered an impairment indicator
of the asset transferred. Accounting policies of subsidiaries have
been changed where necessary to ensure consistency with the
policies adopted by the Group.
Joint ventures
Where the Group is engaged in oil and gas exploration and
appraisal through unincorporated joint ventures, the Group accounts
for its share of the results and net assets of these joint ventures
as jointly controlled assets. The Group's interests in jointly
controlled entities are accounted for by proportionate
consolidation. The Group combines its share of the joint ventures'
individual income and expenses, assets and liabilities and cash
flows on a line-by-line basis with similar items in the Group's
financial statements. The Group recognises the portion of gains or
losses on the sale of assets by the group to the joint venture that
is attributable to the other venturers. The Group does not
recognise its share of profits or losses from the joint venture
that result from the Group's purchase of assets from the joint
venture until it re-sells the assets to an independent party.
However, a loss on the transaction is recognised immediately if the
loss provides evidence of a reduction in the net realisable value
of current assets, or an impairment loss. In addition, where the
Group acts as operator of the joint venture, the gross liabilities
and receivables (including amounts due to or from non-operating
partners) of the joint venture are included in the Consolidated
Statement of Financial Position.
Goodwill
Goodwill represents the excess of the cost of an acquisition
over the fair value of the Group's share of the net identifiable
assets of the acquired subsidiary or associate at the date of
acquisition. Goodwill on acquisitions of subsidiaries is included
in 'intangible assets'. Separately recognised goodwill is tested
annually for impairment and carried at cost less accumulated
impairment losses. Impairment losses on goodwill are not reversed.
Gains and losses on the disposal of an entity include the carrying
amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose
of impairment testing. The allocation is made to those
cash-generating units or groups of cash-generating units that are
expected to benefit from the business combination in which the
goodwill arose. The Group allocates goodwill to each business
segment in each country in which it operates.
Impairment of non-financial assets
Assets that have an indefinite useful life, for example
goodwill, are not subject to amortisation and are tested annually
for impairment.
At each statement of financial position date, the Group reviews
the carrying amounts of its tangible and intangible assets to
determine whether there is any indication that those assets have
suffered an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated in order to determine
the extent of the impairment loss (if any). Where the asset does
not generate cash flows that are independent from other assets, the
Group estimates the recoverable amount of the cash-generating unit
to which the asset belongs. An intangible asset with an indefinite
useful life is tested for impairment annually and whenever there is
an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset for
which the estimates of future cash flows have not been
adjusted.
If the recoverable amount of an asset (or cash-generating unit)
is estimated to be less than its carrying amount, the carrying
amount of the asset (cash-generating unit) is reduced to its
recoverable amount. An impairment loss is recognised as an expense
immediately, unless the relevant asset is carried at a re-valued
amount, in which case the impairment loss is treated as a
revaluation decrease.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (cash-generating unit) is increased to the
revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised
for the asset (cash-generating unit) in prior periods. A reversal
of an impairment loss is recognised as income immediately, unless
the relevant asset is carried at a revalued amount, in which case
the reversal of the impairment loss is treated as a revaluation
increase.
Intangible Assets
Oil and gas assets: exploration and evaluation
The Group has continued to apply the 'successful efforts' method
of accounting for Exploration and Evaluation ("E&E") costs,
having regard to the requirements of IFRS 6 'Exploration for the
Evaluation of Mineral Resources'.
The successful efforts method means that only the costs which
relate directly to the discovery and development of specific oil
and gas reserves are capitalised. Such costs may include costs of
licence acquisition, technical services and studies, seismic
acquisition; exploration drilling and testing but do not include
costs incurred prior to having obtained the legal rights to explore
the area. Under successful efforts accounting, exploration
expenditure which is general in nature is charged directly to the
income statement and that which relates to unsuccessful drilling
operations, though initially capitalised pending determination, is
subsequently written off. Only costs which relate directly to the
discovery and development of specific commercial oil and gas
reserves will remain capitalised and to be depreciated over the
lives of these reserves. The success or failure of each exploration
effort will be judged on a well-by-well basis as each potentially
hydrocarbon-bearing structure is identified and tested. Exploration
and evaluation costs are capitalised within intangible assets.
Capital expenditure on producing assets is accounted for in
accordance with SORP 'Accounting for Oil and Gas Exploration'.
Costs incurred prior to obtaining legal rights to explore are
expensed immediately to the income statement.
All lease and licence acquisition costs, geological and
geophysical costs and other direct costs of exploration, evaluation
and development are capitalised as intangible or property, plant
and equipment according to their nature. Intangible assets comprise
costs relating to the exploration and evaluation of properties
which the directors consider to be unevaluated until reserves are
appraised as commercial, at which time they are transferred to
tangible assets as 'Developed oil and gas assets' following an
impairment review and depreciated accordingly. Where properties are
appraised to have no commercial value, the associated costs are
treated as an impairment loss in the period in which the
determination is made.
Costs are amortised on a field by field unit of production
method based on commercial proven and probable reserves, or to the
expiry of the licence, whichever is earlier.
The calculation of the 'unit of production' amortisation takes
account of the estimated future development costs and is based on
the current period and un-escalated price levels. Changes in
reserves and cost estimates are recognised prospectively.
E&E costs are not amortised prior to the conclusion of
appraisal activities.
Property, plant and equipment
Oil and gas assets: development and production
Development and production ("D&P") assets are accumulated on
a well by well basis and represent the cost of developing the
commercial reserves discovered and bringing them into production,
together with the E&E expenditures incurred in finding
commercial reserves transferred from intangible E&E assets as
outlined above. The carrying values of producing assets are
depreciated on a well by well basis using the unit of production
method based on entitlement to provide by reference to the ratio of
production in the period to the related commercial reserves of the
well, taking into account any estimated future development
expenditures necessary to bring additional non producing reserves
into production.
An impairment test is performed for D&P assets whenever
events and circumstances arise that indicate that the carrying
value of development or production phase assets may exceed its
recoverable amount. The aggregate carrying value is compared
against the expected recoverable amount of each well, generally by
reference to the present value of the future net cash flows
expected to be derived from production of commercial reserves.
The cost of the workovers and extended production testing is
capitalised within property, plant and equipment as a D&P
asset.
Decommissioning
Site restoration provisions are made in respect of the estimated
future costs of closure and restoration, and for environmental
rehabilitation costs (which include the dismantling and demolition
of infrastructure, removal of residual materials and remediation of
disturbed areas) in the accounting period when the related
environmental disturbance occurs. The provision is discounted where
material and the unwinding of the discount is included in finance
costs. Over time, the discounted provision is increased for the
change in present value based on the discount rates that reflect
current market assessments and the risks specific to the liability.
At the time of establishing the provision, a corresponding asset is
capitalised where it gives rise to a future benefit and depreciated
over future production from the field to which it relates. The
provision is reviewed on an annual basis for changes in cost
estimates, discount rates or life of operations. Any change in
restoration costs or assumptions will be recognised as additions or
charges to the corresponding asset and provision when they occur.
For permanently closed sites, changes to estimated costs are
recognised immediately in the income statement.
Non oil and gas assets
Non oil and gas assets are stated at cost of acquisition less
accumulated depreciation and impairment losses. Depreciation is
provided on a straight-line basis at rates calculated to write off
the cost less the estimated residual value of each asset over its
expected useful economic life. The residual value is the estimated
amount that would currently be obtained from disposal of the asset
if the asset were already of the age and in the condition expected
at the end of its useful life.
Buildings, plant and equipment unrelated to production are
depreciated using the straight-line method based on estimated
useful lives.
The annual rate of depreciation for each class of depreciable
asset is:
Equipment and machinery 4-10 years
The carrying value of tangible fixed assets is assessed annually
and any impairment is charged to the income statement.
Investments
Investments are stated at cost less provision for any impairment
in value.
Trade and other receivables
Trade receivables are recognised initially at fair value and
subsequently measured at amortised cost using the effective
interest method, less provision for impairment. A provision for
impairment is established when there is objective evidence that the
Group will not be able to collect all amounts due according to the
original terms of the receivables. Significant financial
difficulties of the debtor, probability that the debtor will enter
bankruptcy or financial reorganisation, and default or delinquency
in payments are considered indicators that the trade receivable is
impaired.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held on
call with banks, other short-term highly liquid investments with
original maturities of three months or less, and bank overdrafts.
Bank overdrafts are shown within borrowings in current liabilities
on the statement of financial position.
Inventories
Inventories, including materials, equipment and inventories of
gas and oil held for sale in the ordinary course of business, are
stated at weighted average historical cost, less provision for
deterioration and obsolescence or, if lower, net realisable
value.
Revenue
Oil and gas sales revenue is measured at the fair value of the
consideration received or receivable and represents amounts
receivable for the Group's share of oil and gas supplied in the
period. Revenue is shown net of value-added tax, returns, rebates
and discounts and after eliminating sales within the Group. Revenue
is recognised when the oil and gas produced is despatched and
received by the customers.
Taxation
Income tax
Income tax expense represents the sum of the tax currently
payable and deferred tax.
The tax currently payable is based on taxable profit or loss for
the year. Taxable profit or loss differs from profit or loss as
reported in the same income statement because it excludes items of
income or expense that are taxable or deductible in other periods
and it further excludes items that are never taxable or deductible.
The Company's liability for current tax is calculated using tax
rates that have been enacted or substantively enacted by the
statement of financial position date.
Deferred tax
Deferred tax is recognised on differences between the carrying
amounts of assets and liabilities in the financial statements and
the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the statement of financial
position liability method. Deferred tax liabilities are generally
recognised for all taxable temporary differences and deferred tax
assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible
temporary differences can be utilised. Such assets and liabilities
are not recognised if the temporary difference arises from goodwill
or from the initial recognition (other than in a business
combination) of other assets and liabilities in a transaction that
affects neither the taxable profit nor the accounting profit.
The carrying amount of deferred tax is reviewed at each
statement of financial position date and reduced to the extent that
it is no longer probable that sufficient taxable profits will be
available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset
realised. Deferred tax is charged or credited to income statement,
except when it relates to items charged or credited directly to
equity, in which case the deferred tax is also dealt with in
equity.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes levied
by the same taxation authority and the Company intends to settle
its current tax assets and liabilities on a net basis.
Trade and other payables
Trade payables are not interest bearing and are stated at their
nominal value. Trade and other payables are initially recognised at
fair value. They are subsequently measured at amortised cost using
the effective interest method unless the effect of discounting
would be immaterial, in which case they are stated at cost.
Fair values
The carrying amounts of the financial assets and liabilities
such as cash and cash equivalents, receivables and payables of the
Group at the statement of financial position date approximated
their fair values, due to relatively short term nature of these
financial instruments.
Share-based compensation
The fair value of the employee and suppliers services received
in exchange for the grant of the options is recognised as an
expense. The total amount to be expensed over the vesting period is
determined by reference to the fair value of the options granted,
excluding the impact of any non-market vesting conditions (for
example, profitability and sales growth targets). Non-market
vesting conditions are included in assumptions about the number of
options that are expected to vest. At each statement of financial
position date, the entity revises its estimates of the number of
options that are expected to vest. It recognises the impact of the
revision to original estimates, if any, in the income statement,
with a corresponding adjustment to equity.
The proceeds received net of any directly attributable
transaction costs are credited to share capital (nominal value) and
share premium when the options are exercised.
Share based payments (Note 19)
The fair value of share-based payments recognised in the income
statement is measured by use of the Black Scholes model, which
takes into account conditions attached to the vesting and exercise
of the equity instruments. The expected life used in the model is
adjusted based on management's best estimate, for the effects of
non-transferability, exercise restrictions and behavioural
considerations. The share price volatility percentage factor used
in the calculation is based on management's best estimate of future
share price behaviour and is selected based on past experience,
future expectations and benchmarked against peer companies in the
industry.
Equity instruments
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new
shares or options are shown in equity as a deduction, net of tax,
from proceeds.
Financial assets
On initial recognition, financial assets are classified as
either financial assets at fair value through the statement of
profit or loss, held-to-maturity investments, loans and receivables
financial assets, or available-for-sale financial assets, as
appropriate.
Loans and receivables
The Group classifies all its financial assets as trade and other
receivables. The classification depends on the purpose for which
the financial assets were acquired.
Trade receivables and other receivables that have fixed or
determinable payments that are not quoted in an active market are
classified as loans and receivables financial assets. Loans and
receivables financial assets are measured at amortised cost using
the effective interest method, less any impairment loss.
The Group's loans and receivables financial assets comprise
other receivables (excluding prepayments) and cash and cash
equivalents included in the Statement of Financial Position.
Financial liabilities
Financial liabilities are recognised when, and only when, the
Group becomes a party to the contracts which give rise to them and
are classified as financial liabilities at fair value through the
profit and loss or loans and payables as appropriate. The Group's
loans and payable comprise trade and other.
When financial liabilities are recognised initially, they are
measured at fair value plus directly attributable transaction costs
and subsequently measured at amortised cost using the effective
interest method other than those categorised as fair value through
income statement.
Fair value through the income statement category comprises
financial liabilities that are either held for trading or are
designated to eliminate or significantly reduce a measurement or
recognition inconsistency that would otherwise arise. Derivatives
are also classified as held for trading unless they are designated
as hedges. There were no financial liabilities classified under
this category.
The Group determines the classification of its financial
liabilities at initial recognition and re-evaluate the designation
at each financial year end.
A financial liability is derecognised when the obligation under
the liability is discharged, cancelled or expires.
When an existing financial liability is replaced by another from
the same party on substantially different terms, or the terms of an
existing liability are substantially modified, such an exchange or
modification is treated as a de-recognition of the original
liability and the recognition of a new liability, and the
difference in the respective carrying amounts is recognised in the
income statement.
Provisions
Provisions are recognised when the Company has a present
obligation as a result of a past event, and it is probable that the
Company will be required to settle that obligation. Provisions are
measured at the directors' best estimate of the expenditure
required to settle the obligation at the statement of financial
position date, and are discounted to present value where the effect
is material.
Financial instruments
Non-derivative financial instruments comprise investments in
equity and debt securities, trade and other receivables, cash and
cash equivalents, loans and borrowings, and trade and other
payables.
Non-derivative financial instruments are recognised initially at
fair value plus, for instruments not at fair value through profit
or loss, any directly attributable transactions costs, except as
described below. Subsequent to initial recognition non-derivative
financial instruments are measured as described below.
A financial instrument is recognised when the Group becomes a
party to the contractual provisions of the instrument. Financial
assets are derecognised if the Group's contractual rights to the
cash flows from the financial assets expire or if the Group
transfers the financial assets to another party without retaining
control or substantially all risks and rewards of the asset.
Regular purchases and sales of financial assets are accounted for
at trade date, i.e. the date that the Group commits itself to
purchase or sell the asset. Financial liabilities are derecognised
if the Group's obligations specified in the contract expire or are
discharged or cancelled.
Foreign currencies
i) Functional and presentation currency
Items included in the financial statements of the Group are
measured using the currency of the primary economic environment in
which the entity operates (the functional currency), which are
mainly in Pounds Sterling (GBP), US Dollars (USD), and Peruvian
Nuevo Sol (PEN). The financial statements are presented in Pounds
Sterling (GBP), which is the Group's presentation currency.
ii) Transactions and balances
Foreign currency transactions are translated into the
presentational currency using exchange rates prevailing at the
dates of the transactions. Foreign exchange gains and losses
resulting from the settlement of such transactions and from the
translation at period-end exchange rates of monetary assets and
liabilities denominated in foreign currencies are recognised in the
income statement.
iii) Group companies
The results and financial position of all Group entities (none
of which has the currency of a hyper-inflationary economy) that
have a functional currency different from the presentation currency
are translated into the presentation currency as follows:
(a) assets and liabilities for each statement of financial
position presented are translated at the closing rate at the date
of that statement of financial position;
(b) income and expenses for each income statement are translated
at average exchange rates (unless this average is not a reasonable
approximation of the cumulative effect of the rates prevailing on
the transaction dates, in which case income and expenses are
translated at the rate on the dates of the transactions); and
(c) all resulting exchange differences are recognised as a
separate component of equity.
On consolidation, exchange differences arising from the
translation of the net investment in foreign operations, and of
borrowings and other currency instruments designated as hedges of
such investments, are taken to shareholders' equity. When a foreign
operation is partially disposed of or sold, exchange differences
that were recorded in equity are recognised in the income statement
as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition
of a foreign entity are treated as assets and liabilities of the
foreign entity and translated at the closing rate.
Management of capital
The Group's policy is to ensure that it will always have
sufficient cash to allow it to meet its liabilities when they
become due. The principal liabilities of the Group arise in respect
of committed expenditure in respect of its ongoing exploration
work. To achieve this aim, it seeks to raise new equity finance and
debt sufficient to meet the next phase of exploration and where
relevant development expenditure.
The Board receives cash flow projections on a monthly basis as
well as information on cash balances. The Board will not commit to
material expenditure in respect of its ongoing exploration work
prior to being satisfied that sufficient funding is available to
the Group to finance the planned programmes.
Dividends cannot be issued until there are sufficient reserves
available.
Critica l accounting judgments and key sources of estimation
uncertainty
The preparation of the consolidated financial statements
requires management to make estimates and assumptions concerning
the future that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities
at the dates of the financial statements and the reported amounts
of revenues and expenses during the reporting periods. The
resulting accounting estimates will, by definition, differ from the
related actual results.
Carrying value of intangible exploration and evaluation
assets
Valuation of oil and gas properties: judgements regarding timing
of regulatory approval, the general economic environment, and the
ability to finance future activities has an impact on the
impairment analysis of intangible exploration and evaluation
assets. All these factors may impact the viability of future
commercial production from unproved properties, and therefore may
be a need to recognise an impairment. The timing of an impairment
review and the judgement of when there could be a significant
change affecting the carrying value of the intangible exploration
and and evaluation asset is a critical accounting judgement in
itself.
Commercial reserves estimates
Oil and gas reserve estimates: estimation of recoverable
reserves include assumptions regarding commodity prices, exchange
rates, discount rates, production and transportation costs all of
which impact future cashflows. It also requires the interpretation
of complex geological and geophysical models in order to make an
assessment of the size, shape, depth and quality of reservoirs and
their anticipated recoveries. The economic, geological and
technical factors used to estimate reserves may change from period
to period. Changes in estimated reserves can impact developed and
undeveloped property carrying values, asset retirement costs and
the recognition of income tax assets, due to changes in expected
future cash flows. Reserve estimates are also integral to the
amount of depletion and depreciation charged to income.
Decommissioning costs
Asset retirement obligations: the amounts recorded for asset
retirement obligations are based on each field's operator's best
estimate of future costs and the remaining time to abandonment of
oil and gas properties, which may also depend on commodity
prices.
2. Segmental
information
In the opinion of the Directors the Group has one class of business,
being the exploration for, and development and production of,
oil and gas reserves, and other related activities.
The Group's primary reporting format is determined to be the
geographical segment according to the location of the oil and
gas asset. There are currently three geographic reporting segments:
South America, which has been involved in production, development
and exploration activity, South East Asia where production,
development and exploration activity is being assessed, and
the United Kingdom being the head office and where exploration
activity is taking place.
Exploration and production year ended 31 December
2019
United South South East
Kingdom America Asia Total
GBP'000 GBP'000 GBP'000 GBP'000
Revenue - oil - - - -
Cost of sales - - - -
Gross profit - - - -
Exploration and
evaluation
expenditure 15 (133) (42) (160)
Intangible asset
impairment (1,108) 61 - (1,047)
Receivables and
inventory
impairment - 16 - 16
Administration
expenses (442) - - (442)
Loss on exchange (41) - - (41)
Other operating
income - - - -
Operating loss (1,576) (56) (42) (1,674)
Finance costs - (1) - (1)
Finance income 1 - - 1
Loss on ordinary
activities
before taxation (1,575) (57) (42) (1,674)
Income tax
expense - - - -
Loss on ordinary
activities
after taxation (1,575) (57) (42) (1,674)
----------------- --------------------------------- ----------------------------- ----------------------------- ---------------------------------
Assets and
liabilities
Segment assets 46 8 - 54
Cash and cash
equivalents 336 136 - 472
Total assets 382 144 - 526
----------------- --------------------------------- ----------------------------- ----------------------------- ---------------------------------
Segment
liabilities 62 2 - 64
Current tax
liabilities - 7 - 7
Total
liabilities 62 9 - 71
----------------- --------------------------------- ----------------------------- ----------------------------- ---------------------------------
Other segment
items
Capital
expenditure 1,047 - - 1,047
Depreciation,
amortisation
and impairment
charges 1,108 (77) - 1,031
2. Segmental
information
(continued)
Exploration and production year ended 31 December 2018
United South South
East
Kingdom America Asia Total
GBP'000 GBP'000 GBP'000 GBP'000
Revenue - oil - - - -
Cost of sales - - - -
Gross profit - - - -
Exploration and
evaluation
expenditure (1,323) (164) (39) (1,526)
Intangible asset
impairment - (1,360) - (1,360)
Receivables and
inventory
impairment - (54) - (54)
Administration
expenses (534) (15) - (549)
Profit on
exchange 130 - - 130
Other operating
income - 83 - 83
Operating loss (1,727) (1,510) (39) (3,276)
Finance costs - (10) - (10)
Finance income 6 - - 6
Loss on ordinary
activities
before taxation (1,721) (1,520) (39) (3,280)
Income tax
expense - 785 - 785
Loss on ordinary
activities
after taxation (1,721) (735) (39) (2,495)
----------------- ----------------------------- -------------------- ----------------------------- --------------------
Assets and
liabilities
Segment assets 502 67 - 569
Cash and cash
equivalents 1,692 146 - 1,838
Total assets 2,194 213 - 2,407
----------------- ----------------------------- -------------------- ----------------------------- --------------------
Segment
liabilities 591 3 - 594
Current tax
liabilities - 23 - 23
Total
liabilities 591 26 - 617
----------------- ----------------------------- -------------------- ----------------------------- --------------------
Other segment
items
Capital
expenditure 66 - - 66
Depreciation,
amortisation
and impairment
charges - 1,414 - 1,414
3. (Loss) from operations 2019 2018
----------------------------- -------------------------------
GBP'000 GBP'000
The loss on ordinary activities before
taxation is stated after charging:
Auditors' remuneration
Group - audit 21 22
Company - audit 21 22
Group - other non-audit services 5 5
Company - other non-audit services 5 5
Exploration and evaluation expenditure 160 1,526
Impairment of intangible assets 1,047 1,360
Impairment of foreign tax receivables (16) 54
Loss/(gain on exchange 41 (130)
The analysis of development and administrative expenses in
the consolidated income statement by nature of expense is:
2019 2018
---------------------------------------- ----------------------------- -------------------------------
GBP'000 GBP'000
Employee benefit
expense 258 323
Exploration and evaluation expenditure 160 1,526
Depreciation, amortisation and
impairment charges 1,031 1,414
Legal and professional
fees 133 159
Loss/(gain) on exchange 41 (130)
Other expenses 51 67
1,674 3,359
---------------------------------------- ----------------------------- -------------------------------
4. Other operating
income 2019 2018
----------------------------- -------------------------------
GBP'000 GBP'000
Release of historic
liabilities - 83
- 83
---------------------------------------- ----------------------------- -------------------------------
5. Staff numbers
and cost
The average number of persons employed by the Group (including
directors) during the year, analysed by category, were as follows:
2019 2018
----------------------------------------- ----------------------------- -------------------------------
Number Number
Directors 3 3
Technical and production - -
Administration 1 -
Total 4 3
The aggregate payroll costs of these
persons
were as follows: GBP'000 GBP'000
Wages and salaries 43 -
Directors' fees, salaries and
benefits 192 264
Share based payments - 33
Social security
costs 23 27
258 324
----------------------------------------- ----------------------------- -------------------------------
6. Finance income 2019 2018
----------------------------------------- ----------------------------- -------------------------------
GBP'000 GBP'000
Bank and other interest received 1 6
Finance cost (1) (10)
Total - (4)
7. Income tax expense 2019 2018
----------------------------------------- ----------------------------- ---------------------------------
GBP'000 GBP'000
The tax charge on the loss on
ordinary activities was:-
UK Corporation Tax
- current - -
Foreign taxation - (785)
- (785)
----------------------------------------- ----------------------------- ---------------------------------
The total charge for the year can be
reconciled
to the accounting profit as follows:
2019 2018
----------------------------------------- ----------------------------- ---------------------------------
GBP'000 GBP'000
(Loss) before tax
Continuing operations (1,674) (3,280)
Tax at composite group rate of 19% (2018:
19%) (318) (623)
Effects of:
Losses/(profits) not subject to
tax 221 206
Movement on capital allowances (153) 95
Increase in tax
losses 250 322
Foreign taxation - (785)
Tax expense - (785)
-------------------------------------------- ----------------------------- ---------------------------------
At 31 December 2019, the Group has tax losses of GBP28,208,000
(2018 - GBP26,828,000) to carry forward against future profits.
The deferred tax asset on these tax losses at 19% of GBP5,359,000
(2018: at 17%, GBP4,465,000) has not been recognised due to the
uncertainty of the recovery.
8. Loss for the
period
As permitted by section 408 of the Companies Act 2006, the Parent
Company's income statement has not been included in these financial
statements. The loss for the financial year is made up as follows:
2019 2018
----------------------------------------- ----------------------------- ---------------------------------
GBP'000 GBP'000
Parent company's
loss (1,751) (2,699)
9. Earnings per
share
2019 2018
------------------------------------------------- --------------- --------------
Loss per ordinary
share
- Basic (0.099p) (0.181p)
- Diluted (0.099p) (0.181p)
Earnings per ordinary share is based on the Group's loss attributable
to controlling interests for the year of GBP1,674,000 (2018: GBP2,495,000).
The weighted average number of shares used in the calculation
is the weighted average ordinary shares in issue during the year.
2019 2018
--------------- --------------
Number Number
Weighted average ordinary shares in issue
during the year 1,685,313,686 1,376,409,576
Weighted average potentially dilutive options
and warrants issued 82,150,685 46,671,139
Weighted average ordinary shares for diluted
earnings per share 1,767,464,371 1,423,080,715
--------------------------------------------------- --------------- --------------
Due to the Group's results, the diluted earnings per share was
deemed to be the same as the basic earnings per share for that
year.
10. Property,
plant and
equipment
Development Equipment
and and
production machinery
costs Total
GBP'000 GBP'000 GBP'000
Group
Cost
At 1 January 2018 - 32 32
Foreign exchange
translation
adjustment - 2 2
At 1 January 2019 - 34 34
Foreign exchange
translation
adjustment - (4) (4)
At 31 December
2019 - 30 30
------------------ ----------------------------- ----------------------------- ---------------------------------
Depreciation
At 1 January 2018 - 32 32
Foreign exchange
translation
adjustment - 2 2
At 1 January 2019 - 34 34
Foreign exchange
translation
adjustment - (4) (4)
At 31 December
2019 - 30 30
------------------ ----------------------------- ----------------------------- ---------------------------------
Net book value
At 31 December
2019 - - -
At 31 December
2018 - - -
11. Intangible fixed
assets Exploration
and evaluation
Licence costs Total
GBP'000 GBP'000 GBP'000
Group
Cost
At 1 January 2018 - 2,320 2,320
Foreign exchange translation
adjustment - 100 100
Expenditure - 66 66
Disposals - - -
At 1 January 2019 - 2,486 2,486
Foreign exchange translation
adjustment - (61) (61)
Expenditure - 1,047 1,047
Disposals - - -
At 31 December 2019 - 3,472 3,472
-------------------------------- ---------------------------- ------------------ -------------------
Impairment
At 1 January 2018 - 1,060 1,060
Charge for the period - 1,360 1,360
-------------------------------- ---------------------------- ------------------ -------------------
At 1 January 2019 - 2,420 2,420
Charge for the period - 1,047 1,047
At 31 December 2019 - 3,467 3,467
-------------------------------- ---------------------------- ------------------ -------------------
Net book value
At 31 December 2019 - 5 5
At 31 December 2018 - 66 66
11. Intangible fixed
assets (continued) Exploration
and evaluation
Licence costs Total
GBP'000 GBP'000 GBP'000
Company
Cost
At 1 January 2018 - 634 634
Expenditure - 67 67
At 1 January 2019 - 701 701
Expenditure - 1,047 1,047
At 31 December 2019 - 1,748 1,748
------------------------ ---------------------------- --------------------------- -------------------------------
Impairment
At 1 January 2018 - 69 69
Charge for the year - 566 566
At 1 January 2019 - 635 635
Charge for the year - 1,108 1,108
At 31 December 2019 - 1,743 1,743
------------------------ ---------------------------- --------------------------- -------------------------------
Net book value
At 31 December 2019 - 5 1,113
At 31 December 2018 - 66 66
The exploration and evaluation costs above represent the cost
in acquiring, exploring and evaluating the company's and group's
assets.
The impairment of all intangible assets has been reviewed,
giving rise to the following impairment charges, or reduction
in impairment charges.
Block XXI Peru: this licence was fully impaired in 2018.
UK offshore block P2235 ("Wick"): the drilling of an exploration
well commenced on 25 December 2018 and concluded on 16 January
2019 without success. As a result all costs relating to this
activity, included accrued amounts expended in 2019, have been
fully expensed.
UK offshore block P1918 ("Colter"): the drilling of an exploration
well commenced on 6 February 2019 and was completed on 25 February
2019, with a further side-track well being drilled, completing
on 8 March 2019. This licence continued into the Second Term
with effect from 1 February 2020 but the Company has impaired
the asset as it is likely that this licence will be relinquished
within the next 12 months.
Goodwill
12. Goodwill on
Consolidation
of subsidiaries
GBP'000
Group
Cost
At 1 January 2018, 1 January and
31 December 2019 81
------------------------------------------------------------ ---------------------------------
Impairment
At 1 January 2018, 1 January and
31 December 2019 81
------------------------------------------------------------ ---------------------------------
Net book value
At 31 December 2019 -
At 31 December 2018 -
The carrying value of goodwill represents the purchase of
shares in Gold Oil Peru SAC.
13. Investments
Loans to Shares in
group group
undertaking undertaking Total
GBP'000 GBP'000 GBP'000
Company
Cost
At 1 January 2018 2,348 3,672 6,020
Exchange rate adjustment 41 - 41
Additions - 1,947 1,947
Disposals - (150) (150)
Net loan movements (1,834) - (1,834)
----------------------------------------------- ----------------------------- ----------------------------- -----------------------------
At 1 January 2019 555 5,469 6,024
Exchange rate adjustment (23) - (23)
Net loan movements 155 - 155
At 31 December 2019 687 5,469 6,156
----------------------------------------------- ----------------------------- ----------------------------- -----------------------------
Impairment
At 1 January 2018 2,348 3,647 5,995
Charge/(release)
for the year (1,793) 1,947 154
Disposals - (150) (150)
----------------------------------------------- ----------------------------- ----------------------------- -----------------------------
At 1 January 2019 555 5,444 5,999
Charge for the year 132 - 132
At 31 December 2019 687 5,444 6,131
----------------------------------------------- ----------------------------- ----------------------------- -----------------------------
Carrying value
At 31 December 2019 - 25 25
At 31 December 2018 - 25 25
The company has made provision on the the investment in Gold
Oil Peru S.A.C. of GBP6,131,000 (2018: GBP5,999,000). During
2018, the Group capitalised GBP1,949,000 of an intercompany
loan to Gold Oil Peru S.A.C. as equity
In April 2014, the Group disposed of a 50% interest in Inversiones
Petroleras de Colombia SA ("Invepetrol"), incorporated in
Colombia. In previous years, the Company had effective control
of the operations and the results of the Company's operations
were consolidated with the 50% no longer held by the Group
being shown as a non-controlling interest. In March 2017,
the 50% partner, CI International Fuels of Colombia, took
control of the board of Invepetrol and, as a result, the Company
no longer had operational control and the results and financial
position of that company were deconsolidated in 2017. Invepetrol
was put in liquidation in March 2018 and the liquidation was
completed in October 2019. The Company's interest in that
company has been fully written off.
Ayoopco Limited, a UK subsidiary, was dissolved on 21 August
2018.
13. Investments
continued
The Company's subsidiary undertakings at the
year end were as follows:
Proportion Method
Place of Proportion of voting used to
Subsidiary/controlled incorporation of ownership power account Nature of
entity and operation interest held for investment business
% %
--------------------- ----------------------------- ----------------------------- ----------------------------- ----------------
Exploration
equity of oil and
Gold Oil Peru S.A.C Peru 100 100 method gas
Exploration
Gold Oil Caribbean Commonwealth equity of oil and
Limited of Dominica 100 100 method gas
All shareholdings are in ordinary, voting shares.
The results of subsidiaries
are as follows:
2019 2018
GBP'000 GBP'000
------------------------ --------------------- ----------------------------- ----------------------------- ----------------------------- ----------------
Gold Oil Peru S.A.C
Aggregate capital
and reserves 1,947 1,460
Profit/ (Loss) for
the year (65) 194
Gold Oil Caribbean
Limited
Aggregate capital
and reserves 1,421 1,421
Profit for the year - -
------------------------ --------------------- ----------------------------- ----------------------------- ----------------------------- ----------------
14. Trade and other receivables 2019 2018
-------------------- ------------------
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
Other receivables 8 8 111 111
Prepayments and accrued
income 41 38 392 391
49 46 503 502
------------------------------------ --------- --------- -------- --------
15. Cash and cash equivalents 2019 2018
-------------------- ------------------
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
Bank current accounts 335 335 898 898
Bank deposit accounts 137 1 940 794
472 336 1,838 1,692
------------------------------------ --------- --------- -------- --------
Bank deposit accounts comprise cash held by the Group and short-term
bank deposits with an original maturity of three months or
less and earn interest at respective short-term deposit rates.
The carrying amount of these assets approximates to their fair
value.
As at 31 December 2019, bank deposits included GBP125,000 (2018:
GBP129,000) that is being held as a guarantee until the Group
fulfills certain licence commitments in Peru and is not available
for use . This is not considered to be liquid cash and has
therefore been excluded from the cash flow statement.
16. Trade and
other
payables 2019 2018
----------------------------------------------- ---------------------------------------------------
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
Trade payables 32 29 362 358
Amounts owed to
subsidiary
and associate
undertakings - 1,705 - 1,705
Accruals and
deferred
income 32 32 232 232
Taxation 7 7 23 8
71 1,773 617 2,303
----------------- --------------------------- ------------------ --------------------------- ----------------------
17. Share
capital 2019 2018
----------------- --------------------------- ------------------ --------------------------- ----------------------
GBP'000 GBP'000
Allotted, called
up and
fully paid
Equity: 1,926,409,576 (2018: 1,376,409,576)
ordinary shares of GBP0.00025 each 482 344
482 344
----------------- --------------------------- ------------------ --------------------------- ----------------------
During the period, the Company issued 550,000,000 new ordinary
shares of GBP0.00025 each for cash at GBP0.001 per share.
18. Share premium
and reserves Foreign
Share Share exchange Profit
premium Option translation and loss
account reserve reserve account
GBP'000 GBP'000 GBP'000 GBP'000
Group
----------------- --------------------------- ------------------ --------------------------- ----------------------
At beginning of
the year 30,237 74 1,712 (30,577)
Loss for the year
attributable
to controlling
interests - - - (1,674)
Issue of new
shares 303 - - -
Share issue
costs (33) - - -
Foreign exchange
translation
adjustments - - (69) -
30,507 74 1,643 (32,251)
----------------- --------------------------- ------------------ --------------------------- ----------------------
Company
----------------- --------------------------- ------------------ --------------------------- ----------------------
At beginning of
the year 30,237 74 (163) (30,510)
Loss for the year - - - (1,751)
Issue of new
shares 303 - - -
Share issue
costs (33) - - -
30,507 74 (163) (32,261)
----------------- --------------------------- ------------------ --------------------------- ----------------------
Details of options and warrants issued, exercised and lapsed during
the year together with options outstanding at 31 December 2019 are
as follows:
1 January New 31 December
Exercise 2019 Issue Exercised Lapsed 2019
Final
Issue exercise
date date price Number Number Number Number Number
---------- ---------- ------------ --------------------------- --------------------------- ------------------------------- ------------------------- ------------------------------------------------
7 July 7 July
2017 2020 GBP0.00350 41,000,000 - - - 41,000,000
27 27
November November
2018 2021 GBP0.00435 20,000,000 - - - 20,000,000
3 3
December December
2018 2021 GBP0.00440 10,000,000 - - - 10,000,000
6 August 6 August
2019 2020 GBP0.00080 - 27,500,000 - - 27,500,000
71,000,000 27,500,000 - - 98,500,000
---------------------------------- --------------------------- --------------------------- ------------------------------- ------------------------- ------------------------------------------------
Details of options issued, exercised and lapsed during
the year together with options outstanding at 31
December 2018 are as follows:
1 January New 31 December
Exercise 2018 Issue Exercised Lapsed 2018
Final
Issue exercise
date date price Number Number Number Number Number
---------- ---------- ------------ --------------------------- --------------------------- ------------------------------- ------------------------- ------------------------------------------------
23 March 23 March
2015 2018 GBP0.0145 35,172,414 - - 35,172,414 -
7 July 7 July
2017 2020 GBP0.0035 41,000,000 - - - 41,000,000
27 27
November November
2018 2021 GBP0.00435 - 20,000,000 - - 20,000,000
3 3
December December
2018 2021 GBP0.00440 - 10,000,000 - - 10,000,000
76,172,414 30,000,000 - 35,172,414 71,000,000
---------------------------------- --------------------------- --------------------------- ------------------------------- ------------------------- ------------------------------------------------
19. Share based
payments
The fair values of the options and warrants granted have been
calculated using Black--Scholes model assuming the inputs shown
below:
6 August 3 December 27 November 7 July
Grant date 2019 2018 2018 2017
Number of ptions
or warrants
granted 27,500,000 10,000,000 20,000,000 41,000,000
Share price at
grant
date 0.06p 0.44p 0.435p 0.35p
Exercise price at
grant date 0.08p 0.44p 0.435p 0.35p
Option life 3 years 3 years 3 years 3 years
Risk free rate 0.86% 0.85% 0.85% 1.40%
Expected volatility 80% 75% 75% 75%
Expected dividend
yield 0% 0% 0% 0%
Fair value of
option 0.01p 0.11p 0.11p 0.10p
The options and warrants will not normally be exercisable during
a closed period, and furthermore can only be exercisable if
the performance conditions are satisfied. Subsisting warrants
and options will lapse no later than 3 years after the date
of grant. Warrants and options, which have vested immediately
before either the death of a participant or his ceasing to
be an eligible employee by reason of injury, disability, redundancy,
retirement or dismissal (otherwise than for good cause) shall
remain, exercisable (to the extent vested) for 12 months after
such cessation, and all non--vested options shall lapse.
20. Directors'
emoluments
2019 2018
--------------------- ------------- ------------- ----------------------------- -------------------------------
GBP'000 GBP'000
Directors'
remuneration 198 264
Compensation for loss
of office 10 -
Share based payments - 33
208 297
--------------------- ------------- ------------- ----------------------------- -------------------------------
Highest paid director emoluments
and other benefits are as listed
below.
2019 2018
--------------------- ------------- ------------- ----------------------------- -------------------------------
GBP'000 GBP'000
Remuneration 103 150
Share based payments - 11
103 161
--------------------- ------------- ------------- ----------------------------- -------------------------------
21. Financial instruments
The Group's activities expose it to a variety of financial
risks: credit risk, cash flow interest rate risk, foreign currency
risk, liquidity risk, price risk and capital risk. The Group's
activities also expose it to non-financial risks: market risk. The
Group's overall risk management programme focuses on
unpredictability and seeks to minimise the potential adverse
effects on the Group's financial performance. The Board, on a
regular basis, reviews key risks and, where appropriate, actions
are taken to mitigate the key risks identified.
Financial instruments - Risk Management
The Group is exposed through its operations to the following
risks:
Ø Credit risk
Ø Cash flow interest rate risk
Ø Foreign Exchange Risk
Ø Liquidity risk
Ø Price risk
Ø Capital risk
Ø Market risk
In common with all other businesses, the Group is exposed to
risks that arise from its use of financial instruments. This note
describes the Group's objectives, policies and processes for
managing those risks and the methods used to measure them. Further
quantitative information in respect of these risks is presented
throughout these financial statements.
There have been no substantive changes in the Group's exposure
to financial instrument risks, its objectives, policies and
processes for managing those risks or the methods used to measure
them from previous periods unless otherwise stated in this
note.
Principal financial instruments
The principal financial instruments used by the Group, from
which financial instrument risk arises are as follows:
Ø Loans and receivables
Ø Trade and other receivables
Ø Cash and cash equivalents
Ø Short term investments
Ø Trade and other payables
General objectives, policies and processes
The Board has overall responsibility for the determination of
the Group's risk management objectives and policies and, whilst
retaining responsibility for them, it has delegated the authority
for designing and operating processes that ensure the effective
implementation of the objectives and policies to the Group's
finance function. The Board receives regular updates from the
Executive Directors through which it reviews the effectiveness of
the processes put in place and the appropriateness of the
objectives and policies it sets. The overall objective of the Board
is to set policies that seek to reduce as far as possible without
unduly affecting the Group's competitiveness and flexibility.
Further details regarding these policies are set out below:
Credit risk
The Group's principal financial assets are bank balances and
cash, trade and other receivables. The credit risk on liquid funds
is limited because the counterparties are banks with high credit
ratings assigned by international credit-rating agencies. The
Group's credit risk is primarily attributable to its trade. The
amounts presented in the statement of financial position are net of
allowance for doubtful receivables. An allowance for impairment is
made where there is an identified loss event which, based on
previous experiences, is evidence of a reduction in the
recoverability of the cash flows. The Group has no significant
concentration of credit risk, with exposure spread over a number of
counterparties and customers.
As at 31 December 2019 and 2018 there were no trade
receivables.
Cash flow interest rate risk
The Group is exposed to cash flow interest rate risk from its
deposits of cash and cash equivalents with banks. The cash balances
maintained by the Group are proactively managed in order to ensure
that the maximum level of interest is received for the available
funds but without affecting the working capital flexibility the
Group requires.
The Group is not at present exposed to cash flow interest rate
risk on borrowings as it has no significant debt. No subsidiary
company of the Group is permitted to enter into any borrowing
facility or lease agreement without the prior consent of the
Company.
Interest rates on financial assets
The Group's financial assets consist of cash and cash
equivalents, loans, trade and other receivables. The interest rate
profile at period end of these assets was as follows:
31 December 2019 Financial
assets Financial
on which assets on
interest which interest
earned not earned Total
GBP'000 GBP'000 GBP'000
UK sterling - 329 329
US dollar (USD) 125 53 178
Peruvian Nuevo Sol
(PEN) - 14 14
--------------------- ---------- ---------------- --------
125 396 521
-------------------- ---------- ---------------- --------
31 December 2018 Financial
assets Financial
on which assets on
interest which interest
earned not earned Total
GBP'000 GBP'000 GBP'000
UK sterling - 1,213 1,213
US dollar (USD) 923 202 1,125
Peruvian Nuevo Sol
(PEN) - 3 3
--------------------- ---------- ----------------
923 1,418 2,341
-------------------- ---------- ---------------- --------
The Group earned interest on its interest bearing financial
assets at rates between 0.1% and 3% (2018 0.1% and 3%) during the
period.
A change in interest rates on the statement of financial
position date would increase/(decrease) the equity and the
anticipated annual income or loss by the theoretical amounts
presented below. The analysis is made on the assumption that the
rest of the variables remain constant. The analysis with respect to
31 December 2018 was prepared under the same assumptions.
Change of 1.0% in the interest rate
as of
--------------------------------------------------
31 December 2019 31 December 2018
------------------------ ------------------------
Increase Decrease Increase Decrease
of 1.0% of 1.0% of 1.0% of 1.0%
----------- ----------- ----------- -----------
Instruments bearing
variable interest
(GBP'000) 1 (1) 9 (9)
----------- ----------- ----------- -----------
It is considered that there have been no significant changes in
cash flow interest rate risk at the reporting date compared to the
previous period end and that therefore this risk has had no
material impact on earnings or shareholders' equity.
Foreign exchange risk
Foreign exchange risk arises because the Group has operations
located in various parts of the world whose functional currency is
not the same as the functional currency in which other Group
companies are operating. Although its geographical spread reduces
the Group's operation risk, the Group's net assets arising from
such overseas operations are exposed to currency risk resulting in
gains and losses on retranslation into Sterling. Only in
exceptional circumstances will the Group consider hedging its net
investments in overseas operations, as generally it does not
consider that the reduction in foreign currency exposure warrants
the cash flow risk created from such hedging techniques. It is the
Group's policy to ensure that individual Group entities enter into
local transactions in their functional currency wherever possible
and that only surplus funds over and above working capital
requirements should be transferred to the parent company treasury.
The Group considers this policy minimises any unnecessary foreign
exchange exposure.
In order to monitor the continuing effectiveness of this policy
the Board, through its approval of both corporate and capital
expenditure budgets and review of the currency profile of cash
balances and management accounts, considers the effectiveness of
the policy on an ongoing basis.
The following table discloses the major exchange rates of those
currencies utilised by the Group:
USD PEN
Average for year ended 31
December 2019 1.28 4.28
At 31 December 2019 1.32 4.37
Average for year ended 31
December 2018 1.33 4.37
At 31 December 2018 1.27 4.28
Liquidity risk
Liquidity risk arises from the Group's management of working
capital and the finance charges and principal repayments on its
debt instruments. It is the risk that the Group will encounter
difficulty in meeting its financial obligations as they fall
due.
The Group's policy is to ensure that it will always have
sufficient cash to allow it to meet its liabilities when they
become due. To achieve this aim, it seeks to maintain readily
available cash balances (or agreed facilities) to meet expected
requirements for a period of at least 60 days. The Group currently
has no long term borrowings.
Price risk
Oil and gas sales revenue is subject to energy market price
risk.
Given current production levels, it is not considered
appropriate for the Group to enter into any hedging activities or
trade in any financial instruments, such as derivatives. This
strategy will continue to be subject to regular review.
It is considered that price risk of the Group at the reporting
date has not increased compared to the previous period end.
Volatility of crude oil prices
A material part of the Group's revenue will be derived from the
sale of oil that it expects to produce. A substantial or extended
decline in prices for crude oil and refined products could
adversely affect the Group's revenues, cash flows, profitability
and ability to finance its planned capital expenditure. The
movement of crude oil prices is shown below:
31 December Average 31 December
2019 price 2018
2019
Per barrel - US$ 61 56 45
Per barrel - GBP 46 44 36
Oil prices are dependent on a number of factors impacting world
supply and demand. Due to these factors, oil prices may be subject
to significant fluctuations from year to year. The Group's normal
policy is to sell its products under contract at prices determined
by reference to prevailing market prices on international petroleum
exchanges. However, these prices had no effect on on the Group's
results for 2019, since it had no production.
Capital risk
The Group's objectives when managing capital are to safeguard
the ability to continue as a going concern in order to provide
returns for shareholders and benefits to other stakeholders and to
maintain an optimal capital structure to reduce the cost of
capital.
Market risk
The market may not grow as rapidly as anticipated. The Group may
lose customers to its competitors. The Group's major competitors
may have significantly greater financial resources than those
available to the group. There is no certainty that the group will
be able to achieve its projected levels of sales or
profitability.
22. Capital commitments
As of 31 December 2019, there were no capital commitments (2018
GBP703,000).
23. Contingent Liabilities
The Group and the Company have given guarantees of US$160,000
(31 December 2018: - US$160,000) to Perupetro SA to fulfil licence
commitments for Block XXI. The Company considers that there are no
potential decommissioning costs in respect of abandoned fields.
24. Events after the reporting period
On 19 February 2020, the Company issued 735,714,286 new ordinary
shares of 0.025p each, followed by a further issue of 1,764,285,714
new ordinary shares of 0.025p each on 11 March 2020. The two share
issues combined was for new capital of GBP2,500,000 gross,
GBP2,306,000 net of costs. It is intended that the proceeds of the
placing will be largely used to fund the Company's share of the
ongoing TL-SO-19-16 PSC ("Chuditch PSC") work programme in
Timor-Leste, the drilling of the onshore El Barco-3x well in Peru
and provide additional working capital.
A Shareholders' Agreement ("SHA") has been executed with
SundaGas Resources Pte. Ltd ("SundaGas") governing the operation of
SundaGas (Timor-Leste Sahul) Pte.Ltd ("SundaGas TLS"), in which the
Company now has a 33.33% shareholding. The sole asset of SundaGas
TLS is its 100% shareholding in SundaGas Banda Unipessoal Lda.,
Operator of the Chuditch PSC, in which it holds a 75% interest.
Under the terms of the Carry Agreement, executed between
SundaGas and the Company on 27(t) January 2020, and the SHA,
US$521,149 was paid to SundaGas on 21 April 2020 to reimburse the
Company's 33.33% share of costs incurred since the Chuditch PSC was
signed on 8 November 2019. This amount includes the Company's33.33%
share of a $1,000,000 Bank Guarantee and the subscription for 3,333
shares in SundaGas TLS, representing 33.33% of the issued share
capital of that company.
25. Ultimate controlling party
Baron Oil Plc is listed on the AIM market operated by the London
Stock Exchange. At the date of the Annual Report in the directors'
opinion there is no controlling party.
26. Related party transactions
Company
During the year, the Company advanced loans to its subsidiaries.
The details of the transactions and the amount owed by the subsidiaries
at the year end were.
Year ended 31 December Year ended 31 December
2019 2018
----------------------------------------- --------------------------------------
Balance Loan advance/(repayment) Balance Loan advance
GBP'000 GBP'000 GBP'000 GBP'000
Gold Oil Peru S.A.C
* 688 133 555 (1,793)
* The company has provided for an impairment of GBP688,000 (2018:
GBP555,000) on the outstanding loans.
Group and company
The company paid GBPnil (2018: GBP9,000) for services rendered
by Praetorian Advisors 2 Limited, a company controlled by Mr A
Yeo, a director.
The company paid GBP9,915 (2018: GBPnil) for services rendered
by Tedstone Oil and Gas Limited, a company controlled by Mr J
Ford, a director.
The company paid GBP2,250 (2019:GBP9,000) for services rendered
by Langley Associates Limited, a company controlled by Mr G Barnes,
a director.
Glossary of Technical Terms
BCF Billion cubic feet.
Geological chance of success The estimated probability that exploration activities will confirm the existence of a
significant
accumulation of potentially recoverable petroleum.
GIIP Volume of natural gas initially in-place in a reservoir.
Oil equivalent Volume derived by dividing the estimate of the volume of natural gas in billion
cubic feet
by six in order to convert it to an equivalent in million barrels of oil and adding
this to
the estimate of the volume of oil in millions of barrels.
MMBBLS Million barrels of oil.
Prospective Resources Quantities of petroleum that are estimated to exist originally in naturally occurring
reservoirs,
as of a given date. Crude oil in-place, natural gas in-place, and natural bitumen
in-place
are defined in the same manner.
SPE PRMS Prospective Resources The Society of Petroleum Engineers' ("SPE") Petroleum Resources Management System
("PRMS")
is a system developed for consistent and reliable definition, classification, and
estimation
of hydrocarbon resources prepared by the Oil and Gas Reserves Committee of SPE and
approved
by the SPE Board in June 2018 following input from six sponsoring societies: the
World Petroleum
Council, the American Association of Petroleum Geologists, the Society of Petroleum
Evaluation
Engineers, the Society of Exploration Geophysicists, the European Association of
Geoscientists
and Engineers, and the Society of Petrophysicists and Well Log Analysts. Quantities
of petroleum
estimated, as of a given date, to be potentially recoverable from undiscovered
accumulations
by application of future development projects. The total quantity of petroleum that
is estimated
to exist originally in naturally occurring reservoirs, as of a given date. Crude oil
in-place,
natural gas in-place, and natural bitumen in-place are defined in the same manner.
SPE PRMS Unrisked Prospective Denotes the unrisked estimate qualifying as SPE PRMS Prospective Resources.
Resources
1U or P90 Prospective Resources Denotes the low estimate qualifying as Prospective Resources. Reflects a volume
estimate that
there is a 90% probability that the quantities actually recovered will equal or
exceed the
estimate.
2U or P50 Prospective Resources Denotes the median or best case estimate qualifying as Prospective Resources.
Reflects a volume
estimate that there is a 50% probability that the quantities actually recovered
will equal
or exceed the estimate.
3U or P10 Prospective Resources Denotes the high estimate qualifying as Prospective Resources. Reflects a volume
estimate
that there is a 10% probability that the quantities actually recovered will equal
or exceed
the estimate.
Pmean Reflects an unrisked median or best case volume estimate of resource derived using
probabilistic
methodology. This is the mean of the probability distribution for the resource
estimates and
is often not the same as 2U as the distribution can be skewed by high resource
numbers with
relatively low probabilities.
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 SEEFIAESSELL
(END) Dow Jones Newswires
April 29, 2020 02:00 ET (06:00 GMT)
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