REG - Independent Oil &Gas - Audited Results for the Year Ended 31 December 15 <Origin Href="QuoteRef">IOG.L</Origin> - Part 3
27/05/2016 08:08
- Part 3: For the preceding part double click ID:nRSa4722Zb
was £5,667,000 (2014: loss of £13,070,000).
17 Financial instruments
Significant accounting policies
Details of the significant accounting policies in respect of financial
instruments are disclosed in Note 1 of the financial statements.
Financial risk management
The Board seeks to minimise its exposure to financial risk by reviewing and
agreeing policies for managing each financial risk and monitoring them on a
regular basis. At this stage, no formal policies have been put in place in
order to hedge the Group and Company's activities to the exposure to currency
risk or interest risk and no derivatives or hedges were entered into during
the year.
General objectives, policies and processes
The Board has overall responsibility for the determination of the Group and
Company's risk management objectives and policies and, whilst retaining
ultimate 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 reports from the Chief Financial Officer through which it reviews the
effectiveness of the processes put in place and the appropriateness of the
objectives and policies it sets.
The Group is exposed through its operations to the following financial risks:
• Liquidity risk;
• Credit risk;
• Cash flow interest rate risk; and
• Foreign exchange risk
The overall objective of the Board is to set policies that seek to reduce risk
as far as possible without unduly affecting the Group and Company's
competitiveness and flexibility. Further details regarding these policies are
set out below:
Principal financial instruments
The principal financial instruments used by the Group and Company, from which
financial instrument risk may arise are as follows:
• Cash and cash equivalents
• Derivative assets
• Trade and other payables
Liquidity risk
The Group's and Company'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
supplemented by borrowing facilities sufficient to meet expected requirements
for a period of at least twelve months for overheads and as commitments
dictate for capital spend.
Rolling cash forecasts identifying the liquidity requirements of the Group and
Company are produced frequently. These are reviewed regularly by management
and the Board to ensure that sufficient financial resources are made
available. All Group activities are funded through the Company.
Greater than Greater Total
6 months 6 months, less than undiscounted Carrying
or less than 12 months 12 months amount
2015 Group £000 £000 £000 £000 £000
Current financial assets
Cash and cash equivalents 23 - - 23 23
________ _________ ________ _________ ________
23 - - 23 23
________ _________ ________ _________ ________
Current financial liabilities
Loans
Trade and other payables 1,232 1,430 - 2,662 2,662
Non-current financial liabilities
Trade and other payables - - 293 293 293
________ _________ ________ _________ ________
1,232 1,430 293 2,955 2,955
________ _________ ________ _________ ________
2014 Group
Current assets
Derivative instrument - 307 - 307 307
Cash and cash equivalents 398 - - 398 398
________ _________ ________ _________ ________
398 307 - 705 705
________ _________ ________ _________ ________
Current financial liabilities
Loans 461 461 461
Trade and other payables 194 - - 194 194
Non-current financial liabilities
Trade and other payables - - 1,772 1,772 1,772
________ _________ ________ _________ ________
655 - 1,772 2,427 2,247
________ _________ ________ _________ ________
Trade and other payables include projected interest for the remaining term of
loans where relevant.
Greater than Greater Total
6 months 6 months, less than undiscounted Carrying
or less than 12 months 12 months amount
2015 Company £000 £000 £000 £000 £000
Current assets
Cash and cash equivalents 23 - - 23 23
________ _________ ________ _________ ________
23 - - 23 23
________ _________ ________ _________ ________
Current financial liabilities
Trade and other payables 1,086 - - 1,086 1,086
Non-current financial liabilities
Trade and other payables - - 24 24 24
________ _________ ________ _________ ________
1,086 - 24 1,110 1,110
________ _________ ________ _________ ________
2014 Company £000 £000 £000 £000 £000
Current financial assets
Derivative instrument - 307 - 307 307
Cash and cash equivalents 398 - - 398 398
________ _________ ________ _________ ________
398 307 - 705 705
________ _________ ________ _________ ________
Current financial liabilities
Loans 461 - - 461 461
Trade and other payables 178 - - 178 178
Non-current financial liabilities
Trade and other payables - - 24 24 24
________ _________ ________ _________ ________
639 - 24 663 663
________ _________ ________ _________ ________
Trade and other payables include projected interest for the remaining term of
loans where relevant.
Credit risk
The credit risk on liquid funds is limited because the counterparties are
banks with credit ratings assigned by international credit rating agencies.
The Group places funds only with selected organisations with ratings of 'A' or
above as ranked by Standard & Poor's for both long and short term debt. All
funds are currently placed with NatWest bank.
Carrying Maximum
value exposure
Group and Company: £000 £000
Cash and cash equivalents 23 23
_________ _________
Cash and cash equivalents 23 23
________ ________
The Group made investments and advances into subsidiary companies during the
year, recovery of which is dependent on future income generation of those
subsidiaries.
The Group's and Company's external trade and other receivables comprise UK VAT
and have not been impaired and which are non-interest bearing. The Group and
Company do not hold any collateral as security and do not hold any significant
provision in the impairment account for trade and other receivables as they
relate to third parties with no default history
Cash flow interest rate risk
As cash is non-interest bearing, and loans and creditors are subject to only
fixed interest rates, variations in commercial interest rates would have had
have no impact upon the Group's and Company's result for the year ended 31
December 2015.
Foreign exchange risk
All of the Group's and Company's monetary assets and liabilities are
denominated in Pounds Sterling, the functional currency of the Group and each
of its subsidiaries, other than US$2,169,000 (£1,463,000) of non-current
liabilities held by the Group in one of its subsidiaries. These exposures
give rise to the net currency gains and losses recognised in profit or loss.
A 10% fluctuation in the Pound sterling rate compared to the US dollar would
give rise to a £139,000 gain or loss in the statement of comprehensive
income.
The Group carried limited exposure to foreign exchange risk during the period
to 31 December 2015. Its costs are incurred almost entirely in Pounds
Sterling and it has no current revenues. The Group and the Company's cash
balances are maintained in Pounds Sterling which is the functional and
reporting currency of each Group company. Consequently, no formal policies
have been put in place in order to hedge the Group and Company's activities to
the exposure to currency risk. It is the Group's policy to ensure that
individual Group entities enter into transactions in their functional currency
wherever possible. The Group considers this minimises any foreign exchange
exposure.
Management regularly monitor the currency profile and obtain informal advice
to ensure that the cash balances are held in currencies which minimise the
impact on the results and position of the Group and the Company from foreign
exchange movements.
Capital
The objective of the directors is to maximise shareholder returns and minimise
risks by keeping a reasonable balance between debt and equity. To date the
Group has been principally equity financed, reflecting the early stage and
consequent relatively high risk of its activities. During 2015, the Group
raised £345,000 through the issue of ordinary shares at an average £0.116
(2014 - £450,000 at an average £0.11) and issued a further 6,507,399 ordinary
shares in satisfaction of £246,000 of debt owed to Darwin Securities (2014
issued 5,625,000 ordinary shares at £0.25 in return for notes issued by Darwin
Securities).
In managing its capital, comprising equity, as described in the Statement of
Changes in Equity, and loan notes, as disclosed in Note 12, the Group and
Company's primary objective is to ensure its ability to provide a sufficient
return for its equity shareholders, principally though capital growth. In
order to achieve and seek to maximise this return objective the Group and
Company will in the future seek to maintain a gearing ratio that balances
risks and returns at an acceptable level while also maintaining a sufficient
funding base to enable the Group and Company to meet its working capital and
strategic investment needs. In making decisions to adjust its capital
structure to achieve these aims, either through new share issues, increases or
reductions in debt, or altering a dividend or share buyback policies, the
Group considers not only its short term position but also its medium and
longer term operational and strategic objectives.
Borrowing facilities
The Group and Company had no borrowings outstanding at 31 December 2015 (2014
- £461,000). However, it had in place debt facilities for a total £5,550,000
which remained undrawn at that date.
Hedges
The Group did not hold any hedge instruments at the reporting date.
18 Financial commitments and contingent liabilities
The Group has authorised and committed to capital expenditure in the current
period as part of the exploration and development work programme for the
licences in which it participates:
2015 2014
£000 £000
Authorised but not contracted 7,180 7,500
Contracted 734 682
_________ _________
7,914 8,182
_________ _________
All capital commitments derive from the Group's participation in its joint
venture operations and entities.
Following completion of the acquisition of the remaining 50% of licence P1609,
under the terms of the agreement, the Company will pay US$3 million upon
approval of a Skipper field development plan and a further US$15 million
shortly after field production has commenced.
19 Related party transactions
Details of directors' remuneration are provided in note 4.
Acura Oil & Gas Limited, ("Acura") of which Michael Jordan is a director,
acquired no additional shares during the year (2014 - acquired 181,818 shares
for £20,000). Acura held 6,957,560 shares at 31 December 2015 (2014 -
6,957,560) shares being 8.84% of the total issued share capital.
Mark Routh acquired no additional shares during the year (2014 - acquired
181,821 shares for £20,000). He held to 4,303,010 shares at 31 December 2015
(2014 - 4,303,010) shares being 5.47% of the total issued share capital.
Peter Young subscribed for 105,087 shares for £25,000 (2014 - acquired 181,818
for £20,000) bringing his total holding to 13,831,725 (2014 - 13,726,638)
being 17.57% of the total issued share capital.
Marie Louise Clayton acquired no additional shares during the year (2014 -
acquired 181,818 for £20,000). Including shares held directly by her, she
held 2,732,591 shares at 31 December 2015 (2014 - 2,732,591) being 3.47% of
the total issued share capital.
Paul Murray acquired no additional shares during the year (2014 - acquired
181,818 shares for £20,000). He held 951,420 shares at 31 December 2015 (2014
- 951,420 shares) being 1.21% of the total issued share capital.
20. Subsequent events
The key events subsequent to the year are as follows. Details of these events
are provided in the Chief Executive's Report on page 1.
On 28 January 2016, the Company announced that the Skipper Licence P1609 Block
9/21a had been formally extended until 31 December 2016.
On 28 January 2016, the Company also announced that it had issued 444,989
ordinary shares to VSA Capital and an independent third party consultant as
payment for advisory services received at 8.73p and 8.38p per share
respectively being the Volume Weighted Average Price per ordinary share for
the periods over which the services were provided.
On 5 February 2016, the Company announced that it had entered into a
conditional agreement with London Oil and Gas Limited ("LOG") (part of London
Group Limited) for the provision of a secured convertible loan facility for up
to £10 million. The further loan funding was in addition to the existing
£2.75 million and £0.8 million loans from LOG, as announced on 7 December 2015
and 11 December 2015 respectively, both of which remained undrawn as certain
conditions precedent to their drawdown had yet to be satisfied. Details were
as follows:
• loan secured against IOG's assets and fully convertible at LOG's election
into IOG ordinary shares at a conversion price of 8p
• £3 million of the new facility to be used to fund corporate costs and
licence fees up to July 2018
• £7 million of the new facility to be dedicated to fund acquisitions
• coupon of LIBOR + 9%, with accrued interest capitalised monthly and
convertible with the principal loan.
• loan to be drawn in full within three years of completion
• each drawing to be converted into ordinary shares in IOG three years after
drawing
• appointment of Martin Ruscoe as director
• resignation of Marie-Louise Clayton as director.
On 30 March 2016, the Company announced that all conditions in relation to the
loan facilities had been satisfied.
On 5 February 2016, the Company announced that it had issued to AGR Well
Management, to settle invoices relating to the work on the Skipper well
planning, a total of 9,945,953 Ordinary Shares, at a price of 6.45p per
Ordinary Share, being the weighted average share price over the period that
the work was done.
On 7 March 2016, the Company issued a total of 1,042,395 ordinary shares in
the capital of the Company:
• 31,579 ordinary shares were issued to an independent consultant for
services provided to the Company during the month of January 2016. These
shares were issued at 7.60p each being the volume weighted average price per
share for the period over which the services were provided.
• 910,816 ordinary shares were issued to Clayton Consulting Partners Limited
following the submission of notices to exercise all of the 1p options awarded
to CCP, pursuant to two option agreements:
On 19 April 2016, the Company signed an agreement to acquire the other 50% of
the licence covering Blocks 48/22b and 48/23a in the Southern North Sea,
containing the Blythe gas discovery, from Alpha Petroleum Limited for an
initial consideration of £1.5 million payable at completion with deferred
consideration of a further US$5 million to be paid at first gas.
On 19 April 2016, a total of 2,937,192 new options were issued, with an
exercise price of 1p each, to certain Directors, members of IOG's technical
team and contractors in lieu of all or part of their salaries due between 1
September 2015 and 29 February 2016.
This information is provided by RNS
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