REG - Independent Oil &Gas - Final Results for the Year Ended 31 December 2016 <Origin Href="QuoteRef">IOG.L</Origin> - Part 4
26/05/2017 07:06
- Part 4: For the preceding part double click ID:nRSZ2982Gc
Company's activities to the exposure to currency risk or interest risk and no derivatives or hedges were entered 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 its 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 financial instruments
• 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. The Board have identified that further funds will be required within the next
12 months and are implementing various courses of action as detailed in the Finance Review to ensure that adequate funding
is available.
Greater than Greater Total
6 months 6 months, less than undiscounted Carrying
or less than 12 months 12 months amount
2016 Group £000 £000 £000 £000 £000
Current financial assets
Cash and cash equivalents 247 - - 247 247
________ _________ ________ _________ ________
247 - - 247 247
________ _________ ________ _________ ________
Current financial liabilities
Loans 2,086 2,282 - 4,368 4,076
Trade and other payables 696 5,086 - 5,782 5,782
Non-current financial liabilities
Loans - - 5,749 5,749 5,749
________ _________ ________ _________ ________
2,782 7,368 5,749 15,899 15,607
________ _________ ________ _________ ________
2015 Group
Current financial assets
Cash and cash equivalents 23 - - 23 23
________ _________ ________ _________ ________
23 - - 23 23
________ _________ ________ _________ ________
Current financial liabilities
Loans - 1,430 - 1,430 1,430
Trade and other payables 1,232 - - 1,232 1,232
Non-current financial liabilities
Trade and other payables - - 293 293 293
________ _________ ________ _________ ________
1,232 1,430 293 2,955 2,955
________ _________ ________ _________ ________
Greater than Greater Total
6 months 6 months, less than undiscounted Carrying
or less than 12 months 12 months amount
2016 Company £000 £000 £000 £000 £000
Current financial assets
Cash and cash equivalents 247 - - 247 247
________ _________ ________ _________ ________
247 - - 247 247
________ _________ ________ _________ ________
Current financial liabilities
Trade and other payables 639 5,087 - 5,726 5,726
Non-current financial liabilities
Trade and other payables - - - - -
________ _________ ________ _________ ________
639 5,087 - 5,726 5,726
________ _________ ________ _________ ________
2015 Company
Current financial 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
________ _________ ________ _________ ________
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 the National
Westminster Bank plc.
Carrying Maximum
value exposure
Group and Company: £000 £000
Cash and cash equivalents 247 247
________ ________
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 HMRC VAT and Atlantic Petroleum UK Limited 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 no impact upon the Group's and Company's result for the year ended 31 December 2016.
Foreign exchange risk
At 31 December 2016, the Group's and Company's monetary assets and liabilities are denominated in GBP Sterling, the
functional currency of the Group and each of its subsidiaries, other than USD 2,951,000 (£2,392,000) of current liabilities
held by the Company and USD 2,457,000 (£1,992,000) of current liabilities held by the Group in one of its subsidiaries.
This exposure gives rise to net currency gains and losses recognised in the Statement of Comprehensive Income. A 10%
fluctuation in the GBP sterling rate compared to the US dollar would give rise to a £399,000 gain or loss in the Group's
Statement of Comprehensive Income and a £217,000 gain or loss in the Company's Statement of Comprehensive Income.
The Group has no current revenues. The Group and the Company's cash balances are maintained in GBP Sterling which is the
functional and reporting currency of each Group company. Consequently, no formal policies have been put in place 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 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 management
The primary objective of the Group's capital management is to maintain appropriate levels of funding to meet the
commitments of its forward programme of exploration and development expenditure, and to safeguard the entity's ability to
continue as a going concern and create shareholder value. The Director's consider capital to include equity as described
in the Statement of Changes in Equity, and loan notes, as disclosed in Notes 14 and 15. Prior to 1 January 2016, the Group
has been principally equity financed, reflecting the early stage and consequent relatively high risk of its activities.
During 2016, the Group made drawings of £7,542,000 against its London Oil & Gas Limited and GE Oil & Gas UK Limited loan
facilities.
Borrowing facilities
The Group and Company had £9,825,000 borrowings outstanding at 31 December 2016 (2015 - £1,460,000) including accrued
interest. It had in place further undrawn debt on the London Oil & Gas Limited facilities of a total £8,009,000, excluding
accrued interest, at that date.
Hedges
The Group did not hold any hedge instruments at the reporting date.
20 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:
2016 2015
£000 £000
Authorised but not contracted - 7,180
Contracted 408 734
_________ _________
408 7,914
_________ _________
All 2016 capital commitments relate to UKCS Licence and associated fees derived from the Group's participation in its UK
North Sea operations.
Blythe Asset Acquisition
As announced on 19 April 2016 and subsequent deal completion on 21 June 2016, further to the initial £1.5 million
consideration payable at completion, together with interim period adjustments, a further consideration payment of USD 5.0
million is to be paid contingent on first gas.
Vulcan Satellites Acquisition
As announced on 13 June 2016 and subsequent deal completion on 28 October 2016, further to the initial £1.0 million
consideration payable at completion, together with interim period adjustments, and the initial deferred consideration of
£0.75 million payable on 28 July 2017, further consideration payments of £1.75 million and £1.5 million are to be paid
contingent on the approval of a Field Development Plan and on production of first gas respectively.
21 Related party transactions
Details of directors' remuneration are provided in Note 4.
Mark Routh acquired no additional shares during the year (2015 - nil). He held 4,303,010 shares at 31 December 2016 (2015
- 4,303,010) shares being 3.94% of the total issued share capital.
Peter Young subscribed for no additional shares during the year (2015 - acquired 105,087 for £25,000) bringing his total
holding to 13,831,725 (2015 - 13,831,725) being 12.66% of the total issued share capital.
22 Subsequent events
The key events after 31 December 2016 are as follows:
Weatherford Technical Services Limited
On 8 March 2017, the Company, on behalf of its Group subsidiary, IOG North Sea Limited, signed a further amendment to alter
the schedule and loan repayment amounts through to final redemption of the outstanding loan.
The terms of the amendment allowed for the Company to make monthly periodic payments through to 24 May 2017, at which time
the loan has now been fully discharged.
This information is provided by RNS
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