REG - Jersey Oil & Gas PLC - Final Results for the Year Ended 31 December 2022
24/05/2023 07:00
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RNS Number : 4263A Jersey Oil and Gas PLC 24 May 2023
24 May 2023
Jersey Oil and Gas plc
("Jersey Oil & Gas", "JOG" or the "Company")
Final Results for the Year Ended 31 December 2022
& Annual General Meeting Notice
Jersey Oil & Gas (AIM: JOG), an independent upstream oil and gas company
focused on the UK Continental Shelf ("UKCS") region of the North Sea, is
pleased to announce its audited financial results for the year ended 31
December 2022 and the date of the forthcoming Annual General Meeting ("AGM").
Highlights
§ In April 2023 JOG executed agreements to farm-out a 50% working interest in
the GBA licences to NEO Energy ("NEO") in exchange for various cash payments
and the carry of a proportion of the Company's future development expenditure
§ The Company has secured a technically and financially strong partner to
move the GBA development forwards into production, with NEO set to become
operator of the GBA licences following completion of the transaction
§ In addition to milestone related cash payments associated with the Buchan
field development totalling approximately $24 million, the transaction results
in the Company being fully carried for its $12.5 million share of costs up to
Field Development Plan ("FDP") approval
§ Following FDP approval, JOG will be carried for 12.5% of its 50% share of
the Buchan field development costs by NEO (equivalent to a 1.25 carry ratio)
§ With the route to monetisation of the GBA resources established, the
Company has the opportunity to deliver long term shareholder value through
unlocking the multiple value catalysts that stem from execution of the GBA
development programme
§ It is anticipated that the farm-out will be completed around the end of the
second quarter of 2023
GBA Development
§ During 2022 the Company was actively engaged with multiple counterparties
regarding the planned divestment of an interest in the GBA licences
§ Technical and commercial diligence has been completed on the range of
different development options that could be used for future production from
the GBA
§ With the introduction of NEO to the GBA, the partnership will work together
to finalise selection of the preferred development solution from a short list
of attractive options, with first production targeted for 2026
§ Upon selection of the preferred development solution, the project will move
into "Front End Engineering & Design" activities along with preparation of
the required FDP that is planned for submission to the North Sea Transition
Authority ("NSTA") for approval in the first half of 2024
Attractive Outlook
§ The NEO farm-out delivers significant value to the Company, not least by
securing a fully funded position through to FDP submission, and additionally
unlocks the route to monetisation of the GBA resources
§ JOG will retain a 50% working interest in the GBA following completion of
the farm-out (with 12.5% of development costs carried by NEO) and to catalyse
further shareholder value, the Company intends to farm-out additional GBA
equity such that it ultimately retains a 20-25% fully carried interest in the
development
§ Pursuit of the Company's corporate growth strategy, through the execution
of accretive acquisitions, remains an important objective
§ The Company is well positioned with a cash balance at the end of 2022 of
approximately £6.6 million, which is set to be enhanced by the various
milestone payments incorporated into the farm-out transaction terms agreed
with NEO
Andrew Benitz, Chief Executive Officer, commented:
"2022 was an instrumental year in securing the future success of the
Company. The GBA farm-out process involved extensive interactions with
multiple counterparties during the year, culminating in the transaction that
was announced in April of this year with NEO Energy. The GBA is a
high-quality re-development, which is on track to generate significant value
for the Company and its shareholders. With the route for execution of the
development programme now firmly established, the Company looks forward to
unlocking the many value catalysts that mark the run up to approval of the
project and beyond."
Annual General Meeting
The Company also announces that its 2022 Annual Report and Financial
Statements together with the AGM Notice and associated Form of Proxy are now
available on the Company's website (www.jerseyoilandgas.com) and will be
posted today to those shareholders who have elected to receive hardcopy
shareholder communications from the Company.
The Company will hold its AGM in respect of its financial year ended 31
December 2022 on 20 June 2023 at 13.00 at the offices of Pinsent Masons LLP,
30 Crown Place, Earl Street, London EC2A 4ES.
Corporate Presentation
An updated corporate presentation has been placed on the Company's website.
Enquiries
Jersey Oil and Gas plc Andrew Benitz C/O Camarco: 020 3757 4980
Strand Hanson Limited James Harris Tel: 020 7409 3494
Matthew Chandler
James Bellman
Zeus Capital Limited Simon Johnson Tel: 020 3829 5000
finnCap Ltd Christopher Raggett Tel: 020 7220 0500
Tim Redfern
Camarco Billy Clegg Tel: 020 3757 4980
Rebecca Waterworth
Notes to Editors:
Jersey Oil & Gas is a UK E&P company focused on building an upstream
oil and gas business in the North Sea. The Company holds a significant acreage
position within the Central North Sea referred to as the Greater Buchan Area
("GBA"), which includes operatorship and prior to completion of the announced
farm-out to NEO Energy, 100% working interest in Licence P2498 (Blocks 20/5a,
20/5e and 21/1a) that contains the Buchan oil field and J2 oil discovery and
an 100% working interest in Licence P2170 (Blocks 20/5b & 21/1d) that
contains the Verbier oil discovery and other exploration prospects.
JOG is focused on delivering shareholder value and growth through creative
deal-making, operational success and licensing rounds. Its management is
convinced that opportunity exists within the UK North Sea to deliver on this
strategy and the Company has a solid track-record of tangible success.
Forward-Looking Statements
This announcement may contain certain forward-looking statements that are
subject to the usual risk factors and uncertainties associated with an oil and
gas business. Whilst the Company believes the expectations reflected herein
to be reasonable in light of the information available to it at this time, the
actual outcome may be materially different owing to factors beyond the
Company's control or otherwise within the Company's control but where, for
example, the Company decides on a change of plan or strategy.
All figures quoted in this announcement are in US dollars, unless stated
otherwise.
The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulation
(EU) No. 596/2014 as it forms part of United Kingdom domestic law by virtue of
the European Union (Withdrawal) Act 2018, as amended by virtue of the Market
Abuse (Amendment) (EU Exit) Regulations 2019.
CHAIRMAN & CHIEF EXECUTIVE OFFICER'S REPORT
GBA Farm-out
In April 2023 we were delighted to announce the farm-out of an interest in our
GBA development to NEO Energy ("NEO"). We have agreed terms for NEO to
acquire a 50% working interest and operatorship in both licences that cover
the GBA, including the Buchan oil field, the Verbier and J2 oil discoveries
and various exploration prospects. This transaction unlocks the route to
finalising the GBA development solution and monetisation of resources in
excess of 100 million barrels of oil equivalent in total. The transaction
delivers material value to JOG, including cash milestone payments, funding
through to Field Development Plan ("FDP") approval and a minimum 12.5%
development expenditure carry to first oil for the 50% interest retained by
the Company (a 1.25 carry ratio). NEO is a major UK North Sea operator
producing approximately 90,000 barrels of oil equivalent per day and is owned
by HitecVision AS, a leading private equity investor focused on Europe's
offshore energy industry with approximately $8 billion of assets under
management.
Operational Update
Our operational focus during 2022 has been on advancing technical studies on
various development solutions in collaboration with infrastructure owners.
This included studies such as flow assurance work for assessing tie back
options to regional platform infrastructure, the topside modification
requirements for the potential receiving infrastructure, and for potential
FPSO options. With this work now completed, the Company will be working in
partnership with NEO to select the preferred development solution, having
already confirmed a short list of attractive options. We also continue to
proactively collaborate on potential joint development opportunities with
other industry parties who own regional assets that could be tied back to a
GBA development.
Low Carbon Development
The GBA development has the exciting potential to be one of the lowest
full-cycle carbon development projects in the UK North Sea through the use of
existing infrastructure and potential low carbon electrification options. In
late 2022, we were pleased to provide letters of support as a potential power
user to the offshore wind developers applying for leases in the vicinity of
the GBA in the Innovation and Targeted Oil & Gas ("INTOG") offshore wind
licence round. Awards were announced in March 2023, with licences granted by
Crown Estate Scotland in close proximity to the GBA. Powering the GBA from
low carbon wind power can reduce our carbon emissions to less than 2kg of
CO2/bbl versus the average in the UK North Sea of 22kg. We will be
evaluating the potential to make the GBA development solution that is
ultimately selected "electrification ready", so that it can be powered with
green energy upon completion of a proximal wind farm.
Licensing Activity
JOG continues to work closely and constructively with the North Sea Transition
Authority ("NSTA") on our licence commitments. In keeping with the Company's
stated strategy of developing the GBA as an area-wide development plan, we
were pleased to receive a licence extension to the Second Term of our P2170
"Verbier" licence, such that it is now aligned with the P2498 "Buchan"
licence, with the current term being until the end of August 2023. Following
the farm-out to NEO, we are in close consultation with the North Sea
Transition Authority to seek an extension on both licences to allow delivery
of a Field Development Plan ("FDP").
JOG's Business Development Strategy
At the forefront of our business development plans is to farm-out additional
GBA equity such that the Company ultimately retains a 20-25% carried interest
in the development. Building a full cycle upstream business focused on the
UKCS remains the ultimate goal for JOG and having now announced a farm-out in
respect of the GBA development, we will also be seeking to advance our
acquisition strategy. We believe the North Sea can be the crucible for the
energy transition and that oil and gas companies can lead investment into new
energies. We see JOG as being no different to our larger peers such that in
addition to upstream asset and corporate opportunities, we are also actively
looking at new energy investment opportunities.
Financial Review
The Company's cash position was approximately £6.6 million as of 31 December
2022, well within our forecast. As an oil and gas exploration and development
company, JOG had no production revenue during the year and received only a
modest amount of interest on its cash deposits.
The loss for the period, before and after tax, was approximately £3.1 million
(2021: £4.2 million). Our main expenditure during 2022 related to technical
studies on parallel development options for the GBA Development project.
Having successfully negotiated the farm-out to NEO, the Company remains
appropriately funded as we move forwards towards approval of the Buchan Field
Development Plan.
Tax
The Energy Profits Levy (EPL) that was introduced by the UK Government in May
2022 caught the industry off guard, particularly those that have invested and
built production portfolios in the UKCS over the past few years. A second
change in September 2022 increased the tax rate further to 75% through to
March 2028. With no price floor on when this windfall tax would fall away, the
industry has no option other than to plan as if it is a permanent tax and
consequently this has significantly harmed the industry's borrowing capacity.
We believe it is sensible for the Government to provide some guidance on a
price floor to facilitate the continuation of vital domestic energy
supplies. The silver lining of these changes, however, was the introduction
of an investment allowance that is specifically ring fenced to attract capital
spend into new investments. A full taxpayer in the North Sea has the ability
to secure substantial tax relief through investing into new projects such as
the GBA Development.
Macro Backdrop
A significantly improved macro-economic outlook for the oil and gas sector
compared to 2021 ushered in significant profits for the oil majors. The
pandemic and the war in Ukraine have masked the underlying issue that is
challenging the upstream sector - a looming supply crunch. Our industry has
been starved of capital since 2015 and this has led to chronic under
investment. The energy transition is underway, and our industry is at the
forefront of the challenges that this evolution brings. The approach must be
managed appropriately as hydrocarbons currently continue to provide the world
with approximately 80% of our daily energy supply. Unfortunately, we are
already seeing the inflationary pressures that result from a restricted energy
supply and an even more concerning prospect of energy poverty. We need
urgent and responsible investment in the upstream sector in order to address
the supply shortfall against a backdrop of significantly increasing global
demand for energy. It will take time for supply to catch up and strong
commodity prices are expected.
Summary and outlook
We are excited to be starting our journey with NEO, who, in partnership with
JOG, will be working to close out the selection of the preferred GBA
development solution and take the project through the Front End Engineering
and Design ("FEED") phase of activities and on to project sanction, which is
targeted for next year. The Company intends to farm-out additional equity in
the GBA licences in order to ultimately retain a 20-25% carried interest in
the development. Discussions with companies potentially interested in
non-operated stakes have been underway as part of the farm-out process and
these remain ongoing.
Finally, we would like to extend our gratitude to the JOG team, who have
delivered a transformational farm-out for the Company. We are a small team
of dedicated professionals and we will use this excellent result as a
springboard to grow the long-term value of the business. We also thank our
shareholders for the ongoing support they have shown as we have advanced the
GBA farm-out process. We were delighted to announce the transaction with NEO
and look forward to building upon this success.
Les Thomas,
Non-Executive
Chairman
Andrew Benitz,
Chief Executive Officer
23 May 2023
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2022
Note 2022 2021
£ £
Cost of sales - (101,079)
Gross loss - (101,079)
Exploration write-off/licence relinquishment 10 - (447,812)
Administrative expenses (3,185,103) (3,672,135)
Operating loss (3,185,103) (4,221,026)
7
Finance income 6 82,842 1,807
Finance expense 6 (4,730) (6,098)
Loss before tax 7 (3,106,991) (4,225,317)
Tax 8 - -
Loss for the year (3,106,991) (4,225,317)
Total comprehensive loss for the year (net of tax) (3,106,991) (4,225,317)
Total comprehensive loss for the year attributable to:
Owners of the parent (3,106,991) (4,225,317)
Loss per share expressed in pence per share:
Basic 9 (9.54) (14.48)
Diluted 9 (9.54) (14.48)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2022
Note 2022 2021
£ £
Non-current assets
Intangible assets - exploration & development costs 10 24,372,882 21,514,153
Property, plant and equipment 11 10,203 40,077
Right-of-use assets 12 81,328 185,008
Deposits 31,112 31,112
24,495,525 21,770,350
Current assets
Trade and other receivables 13 167,060 353,114
Cash and cash equivalents 14 6,579,349 13,038,388
6,746,409 13,391,502
Total assets 31,241,934 35,161,852
Equity
Called up share capital 15 2,573,395 2,573,395
Share premium account 110,309,524 110,309,524
Share options reserve 19 2,566,343 1,397,287
Accumulated losses (84,600,273) (81,551,730)
Reorganisation reserve (382,543) (382,543)
Total equity 30,466,446 32,345,933
Liabilities
- 83,012
Non-current liabilities
Lease liabilities 17
- 83,012
Current liabilities
Trade and other payables 16 688,796 2,603,707
Lease liabilities 12 86,692 129,200
775,488 2,732,907
Total liabilities 775,488 2,815,919
Total equity and liabilities 31,241,934 35,161,852
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2022
Called up Share premium account Share options reserve Accumulated Reorganisation
share capital £ £ losses reserve Total equity
£ £ £ £
At 1 January 2021 Note 2,466,144 93,851,526 2,109,969 (78,509,819) (382,543) 19,535,277
Loss and total comprehensive loss for the year
- - - (4,225,317) - (4,225,317)
Issue of share capital 107,251 16,457,997 - - - 16,565,248
Transactions with owners in their capacity as owners
Expired share options 19 - - (909,176) 909,176 - -
Exercised share options - - (274,230) 274,230 - -
Share based payments 19 - - 470,725 - - 470,725
At 31 December 2021 and
1 January 2022 2,573,395 110,309,524 1,397,287 (81,551,730) (382,543) 32,345,933
Loss and total comprehensive loss for the year
- - - (3,106,991) - (3,106,991)
Transactions with owners in their capacity as owners
Expired share options 19 - - (58,448) 58,448 - -
Share based payments 19 - - 1,227,504 - - 1,227,504
At 31 December 2022 2,573,395 110,309,524 2,566,343 (84,600,273) (382,543) 30,466,446
The following describes the nature and purpose of each reserve within owners'
equity:
Reserve Description and purpose
Called up share capital Represents the nominal value of shares issued
Share premium account Amount subscribed for share capital in excess of nominal value
Share options reserve Represents the accumulated balance of share-based payment charges recognised
in respect of share options granted by the Company less transfers to
accumulated deficit in respect of options exercised or cancelled/lapsed
Accumulated losses Cumulative net gains and losses recognised in the Consolidated Statement of
Comprehensive Income
Reorganisation reserve Amounts resulting from the restructuring of the Group at the time of the
Initial Public Offering (IPO) in 2011
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2022 2021
Note £ £
Cash flows from operating activities
Cash used in operations 21 (3,319,445) (1,495,899)
Interest received 6 82,842 1,807
Interest paid 6 (4,730) (6,098)
Net cash used in operating activities (3,241,333) (1,500,190)
Cash flows from investing activities
Purchase of intangible assets 10 (3,092,186) (6,970,670)
Net cash used in investing activities (3,092,186) (6,970,670)
Cash flows from financing activities
Principal elements of lease payments (125,520) (137,516)
Proceeds from issue of shares - 16,565,248
Net cash (used in)/generated from financing activities (125,520) 16,427,732
(Decrease)/increase in cash and cash equivalents 21 (6,459,039) 7,956,873
Cash and cash equivalents at beginning of year 14 13,038,388 5,081,515
Cash and cash equivalents at end of year 14 6,579,349 13,038,388
Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
1. General information
Jersey Oil and Gas plc (the "Company") and its subsidiaries (together, the
"Group") are involved in the upstream oil and gas business in the UK.
The Company is a public limited company incorporated and domiciled in England
& Wales and quoted on AIM, a market operated by London Stock Exchange plc.
The address of its registered office is 10 The Triangle, ng2 Business Park,
Nottingham, NG2 1AE.
2. 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.
Basis of Accounting
The consolidated financial statements of Jersey Oil and Gas Plc as of 31
December 2022 and for the year then ended (the "consolidated financial
statements") were prepared in accordance with UK-adopted International
Accounting Standards in conformity with the requirements of the Companies Act
2006 (the "Companies Act").
The financial statements have been prepared under the historic cost
convention, except as disclosed in the accounting policies below. All amounts
disclosed in the financial statements and notes have been rounded off to the
nearest one thousand pounds unless otherwise stated.
Going Concern
The Group has sufficient resources to meet its liabilities as they fall due
for a period of at least 12 months after the date of issue of these financial
statements. The Group's main cost commitment; a 50% equity share of Front End
Engineering and Design ("FEED") work for the GBA ahead of project sanction
will be paid for from 1 April 2023 by the $12.5m Pre sanction farm-in carry
agreed with NEO in April 2023. This is forecast to adequately cover the field
development sanction work to be carried out over the next 12 months. In
addition, any FEED spend above $12.5m and post sanction development costs of
the GBA through to first oil are carried at an equity level of 12.5%.
Other work that the Group is undertaking in respect of the GBA licenses and
surrounding areas is modest relative to its current cash reserves. The
Company's current cash reserves are therefore expected to more than exceed its
estimated cash outflows in all reasonable scenarios for at least 12 months
following the date of issue of these financial statements. Even in an extreme
scenario where the Buchan development did not progress for any unforeseen
reason and the future instalment payments were not realised the Group has the
flexibility within its cost structure to amend its expenditure profile and
continue in business beyond the next 12 months solely from utilisation of
its existing cash resources. The directors have also considered the risk
associated with contractual arrangements associated with the farm-out and are
satisfied that the group is not exposed to any contractual commitments which
could impact on the Group's going concern status over the next 12 months.
Based on these circumstances, the directors have considered it appropriate to
adopt the going concern basis of accounting in preparing the consolidated
financial statements.
New and amended standards adopted by the Group. The Group has applied the
following amendments for the first time for the annual reporting period
commencing 1 January 2022:
· Property, Plant and Equipment: Proceeds before Intended Use -
Amendments to IAS 16;
· Annual Improvements to IFRS Standards 2018-2020; and
· Reference to the Conceptual Framework - Amendments to IFRS 3.
The amendments listed above did not have any impact on the amounts recognised
in prior periods and are not expected to significantly affect the current or
future periods.
New standards and interpretations not yet adopted
Certain new accounting standards, amendments to accounting standards and
interpretations have been published that are not mandatory for 31 December
2022 reporting periods and have not been early adopted by the Group. These
standards, amendments or interpretations are not expected to have a material
impact on the entity in the current or future reporting periods or on
foreseeable future transactions.
· Deferred Tax related to Assets and Liabilities arising from a
Single Transaction - amendments to IAS 12; and
· Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS
Practice Statement 2.
Significant Accounting Judgements and Estimates
The preparation of the financial statements requires management to make
estimates and assumptions that affect the reported amounts of expenses, assets
and liabilities at the date of the financial statements. If in future such
estimates and assumptions, which are based on management's best judgement at
the date of the financial statements, deviate from the actual circumstances,
the original estimates and assumptions will be modified as appropriate in the
period in which the circumstances change. The Group's accounting policies make
use of accounting estimates and judgements in the following areas:
• The assessment of the existence of impairment triggers
(note 10).
• The estimation of share-based payment costs (note 19).
Impairments
The Group tests its capitalised exploration licence costs for impairment when
indicators, further detailed below under 'Exploration and Evaluation Costs' as
set out in IFRS 6, suggest that the carrying amount exceeds the recoverable
amount which is inherently judgmental. An impairment loss is recognised for
the amount by which the asset's carrying amount exceeds its recoverable
amount. The recoverable amount of the Cash Generating Unit is the higher of an
asset's fair value less costs of disposal and value in use. The Group assessed
that there were no impairment triggers during the year - this included the
judgement that there was no trigger arising from future licence expiry as the
Group expects its licences concerned to be renewed.
Share-Based Payments
The Group currently has a number of share schemes that give rise to
share-based payment charges. The charge to operating profit for these schemes
amounted to £1,227,504 (2021: £470,725). Estimates and judgements for
determining the fair value of the share options are required. For the purposes
of the calculation, a Black- Scholes option pricing model has been used. Based
on past experience, it has been assumed that options will be exercised, on
average, at the mid-point between vesting and expiring. The share price
volatility used in the calculation is based on the actual volatility of the
Group's shares since 1 January 2017. The risk-free rate of return is based on
the implied yield available on zero coupon gilts with a term remaining equal
to the expected lifetime of the options at the date of grant. Estimates are
also used when calculating the likelihood of share options vesting given the
vesting conditions of time and performance on the options granted.
Basis of Consolidation
(a) Subsidiaries
Subsidiaries are all entities over which the Group has the power to govern
their financial and operating policies generally accompanying a shareholding
of more than one half of the voting rights. The existence and effect of
potential voting rights that are currently exercisable or convertible are
considered when assessing whether the Group controls another entity. The Group
also assesses the existence of control where it does not have more than 50% of
the voting power but is able to govern the financial and operating policies by
virtue of de facto control. De facto control may arise in circumstances where
the size of the Group's voting rights relative to the size and dispersion of
holdings of other Shareholders give the Group the power to govern the
financial and operating policies.
Subsidiaries are fully consolidated from the date on which control is
transferred to the Group. They are de-consolidated from the date the Group
ceases to have control.
(b) Changes in ownership interests in subsidiaries without change of control
Transactions with non-controlling interests that do not result in loss of
control are accounted for as equity transactions - that is, as transactions
with the owners in their capacity as owners. The difference between fair value
of any consideration paid and the relevant share acquired of the carrying
value of net assets of the subsidiary is recorded in equity. Gains or losses
on disposals to non-controlling interests are also recorded in equity.
(c) Disposal of subsidiaries
When the Group ceases to have control any retained interest in the entity is
remeasured to its fair value at the date when control is lost, with the change
in carrying amount recognised in profit or loss. The fair value is the initial
carrying amount for the purposes of subsequently accounting for the retained
interest as an associate, joint venture or financial asset. In addition, any
amounts previously recognised in other comprehensive income in respect of that
entity are accounted for as if the Group had directly disposed of the related
assets or liabilities. This may mean that amounts previously recognised in
other comprehensive income are reclassified to profit or loss.
Inter-company transactions, balances, income and expenses on transactions
between Group companies are eliminated on consolidation. Profits and losses
resulting from inter-company transactions that are recognised in assets are
also eliminated on consolidation. Accounting policies of subsidiaries have
been changed where necessary to ensure consistency with the policies adopted
by the Group.
Acquisitions, Asset Purchases and Disposals
Transactions involving the purchase of an individual field interest, farm-ins,
farm-outs, or acquisitions of exploration and evaluation licences for which a
development decision has not yet been made that do not qualify as a business
combination, are treated as asset purchases. Accordingly, no goodwill or
deferred tax arises. The purchase consideration is allocated to the assets and
liabilities purchased on an appropriate basis. Proceeds on disposal (including
farm-ins/farm-outs) are applied to the carrying amount of the specific
intangible asset or development and production assets disposed of and any
surplus is recorded as a gain on disposal in the Consolidated Statement of
Comprehensive Income.
Acquisitions of oil and gas properties are accounted for under the purchase
method where the acquisitions meet the definition of a business combination.
The Group applies the acquisition method of accounting to account for business
combinations. The consideration transferred for the acquisition of a
subsidiary is the fair value of the assets transferred, the liabilities
incurred, and the equity interests issued by the Group. The consideration
transferred includes the fair value of any asset or liability resulting from a
contingent consideration arrangement. Identifiable assets acquired and
liabilities and contingent liabilities assumed in a business combination are
measured initially at their fair value at the acquisition date. The Group
recognises any non-controlling interest in the acquiree on an
acquisition-by-acquisition basis, either at fair value or at the
non-controlling interest's proportionate share of the recognised amounts of
the acquiree's identifiable net assets.
Acquisition related costs are expensed as incurred.
If the business combination is achieved in stages, the acquisition date fair
value of the acquirer's previously held equity interest in the acquiree is
remeasured to fair value at the acquisition date through profit or loss.
Any contingent consideration to be transferred on business combination by the
Group is recognised at fair value at the acquisition date. Subsequent changes
to the fair value of the contingent consideration that is deemed to be an
asset or liability are recognised in accordance with IFRS 9 either in profit
or loss or as a change to other comprehensive income. Contingent consideration
that is classified as equity is not remeasured, and its subsequent settlement
is accounted for within equity.
Goodwill is initially measured as the excess of the aggregate of the
consideration transferred and the fair value of non-controlling interest over
the net identifiable assets acquired and liabilities assumed. If this
consideration is lower than the fair value of the net assets of the subsidiary
acquired, the difference is recognised in profit or loss.
Exploration and Evaluation Costs
The Group accounts for oil and gas exploration and evaluation costs using IFRS
6 "Exploration for and Evaluation of Mineral Resources". Such costs are
initially capitalised as Intangible Assets and include payments to acquire the
legal right to explore, together with the directly related costs of technical
services and studies, seismic acquisition, exploratory drilling, and testing.
The Group only capitalises costs as intangible assets once the legal right to
explore an area has been obtained. The Group assesses the intangible assets
for indicators of impairment at each reporting date.
Potential indicators of impairment include but are not limited to:
a) the period for which the Group has the right to explore in the specific
area has expired during the period or will expire in the near future and is
not expected to be renewed.
b) substantive expenditure on further exploration for and evaluation of
oil and gas reserves in the specific area is neither budgeted nor planned.
c) exploration for and evaluation of oil and gas reserves in the specific
area have not led to the discovery of commercially viable quantities of oil
and gas reserves and the entity has decided to discontinue such activities in
the specific area.
d) sufficient data exist to indicate that, although a development in the
specific area is likely to proceed, the carrying amount of the exploration and
evaluation asset is unlikely to be recovered in full from successful
development or by sale.
The Group analyses the oil and gas assets into cash generating units (CGUs)
for impairment and reporting purposes. In the event an impairment trigger is
identified the Group performs a full impairment test for the CGU under the
requirements of IAS 36 Impairment of assets. An impairment loss is recognised
for the amount by which the exploration and evaluation assets' carrying amount
exceeds their recoverable amount. The recoverable amount is the higher of the
exploration and evaluation assets' fair value less costs of disposal and value
in use.
As at 31 December 2022, the carrying value of intangible assets was £24.4m,
as per Note 10 'Intangible Assets'. The Group considered other factors which
could give rise to an impairment trigger such as commodity prices, licence
expiration dates, budgeted spend and movements in estimated recoverable
reserves. The Group exercised judgement in determining that the licence
agreements will likely be extended by the NSTA. Based on this assessment, no
impairment triggers existed in relation to exploration assets as of 31
December 2022.
Cost of Sales
Within the statement of comprehensive income, costs directly associated with
generating future revenue are included in cost of sales such as software
licences that were used across the asset base. The Group only capitalises
costs as intangible assets once the legal right to explore an area has been
obtained, any costs incurred prior to the date of acquisition are recognised
as cost of sales within the Statement of Comprehensive Income.
Property, Plant and Equipment
Property, plant and equipment is stated at historic purchase cost less
accumulated depreciation. Asset lives and residual amounts are reassessed each
year. Cost includes the original purchase price of the asset and the costs
attributable to bringing the asset to its working condition for its intended
use.
Depreciation on these assets is calculated on a straight-line basis as
follows:
Computer & office equipment 3 years
Leases
Assets and liabilities arising from a lease are initially measured on a
present value basis. Lease liabilities include the net present value of the
following lease payments:
• fixed payments (including in-substance fixed
payments), less any lease incentives receivable;
• variable lease payment that are based on an index or a
rate, initially measured using the index or rate as at the commencement date;
• amounts expected to be payable by the Group under
residual value guarantees;
• the exercise price of a purchase option if the Group
is reasonably certain to exercise that option; and
• payments of penalties for terminating the lease, if
the lease term reflects the Group exercising that option.
Lease payments to be made under reasonably certain extension options are also
included in the measurement of the liability.
The lease payments are discounted using the interest rate implicit in the
lease. If that rate cannot be readily determined, which is generally the case
for leases in the Group, the lessee's incremental borrowing rate is used,
being the rate that the individual lessee would have to pay to borrow the
funds necessary to obtain an asset of similar value to the right-of-use asset
in a similar economic environment with similar terms, security and conditions.
To determine the incremental borrowing rate, the Group where possible, uses
recent third-party rates provided by banks or financial institutions as a
starting point, adjusted to reflect changes in financing conditions since
third party financing was received.
Lease payments are allocated between principal and finance cost. The finance
cost is charged to profit or loss over the lease period to produce a constant
periodic rate of interest on the remaining balance of the liability for each
period.
Right-of-use assets are measured at cost comprising the following:
• the amount of the initial measurement of lease
liability;
• any lease payments made at or before the commencement
date less any lease incentives received;
• any initial direct costs; and
• restoration costs.
Right-of-use assets are generally depreciated over the shorter of the asset's
useful life and the lease term on a straight-line basis. If the Group is
reasonably certain to exercise a purchase option, the right-of-use asset is
depreciated over the underlying asset's useful life.
Payments associated with short-term leases of equipment and vehicles and all
leases of low-value assets are recognised on a straight-line basis as an
expense in profit or loss. Short-term leases are leases with a lease term of
12 months or less. Low-value assets comprise any lease with a value of £5,000
or less.
Joint Ventures
The Group participates in joint venture/co-operation agreements with strategic
partners, these are classified as joint operations. The Group accounts for its
share of assets, liabilities, income and expenditure of these joint venture
agreements and discloses the details in the appropriate Statement of Financial
Position and Statement of Comprehensive Income headings in the proportion that
relates to the Group per the joint venture agreement.
Investments
Fixed asset investments in subsidiaries are stated at cost less accumulated
impairment in the Company's Statement of Financial Position and reviewed for
impairment if there are any indications that the carrying value may not be
recoverable.
Financial Instruments
Financial assets and financial liabilities are recognised in the Group and
Company's Statement of Financial Position when the Group becomes party to the
contractual provisions of the instrument. The Group does not have any
derivative financial instruments.
Cash and cash equivalents include cash in hand and deposits held on call with
banks with a maturity of three months or less.
Trade receivables are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method, less any
expected credit loss. The Group recognises an allowance for expected credit
losses (ECLs) for all debt instruments not held at fair value through profit
or loss. ECLs are based on the difference between the contractual cash flows
due in accordance with the contract and all the cash flows that the Group
expects to receive, discounted at an approximation of the original effective
interest rate. The carrying amount of the asset is reduced through the use of
an allowance account, and the amount of the loss will be recognised in the
Consolidated Statement of Comprehensive Income within administrative expenses.
Subsequent recoveries of amounts previously provided for are credited against
administrative expenses in the Consolidated Statement of Comprehensive Income.
Trade payables are stated initially at fair value and subsequently measured at
amortised cost.
Offsetting of Financial Instruments
Financial assets and financial liabilities are offset, and the net amount is
reported in the Consolidated Statement of financial position if there is a
currently enforceable legal right to offset the recognised amounts and there
is an intention to settle on a net basis, or to realise the assets and settle
the liabilities simultaneously.
Deferred Tax
Deferred tax is the tax expected to be payable or recoverable 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. Deferred taxation liabilities are provided, using the liability
method, on all taxable temporary differences at the reporting date. 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.
Deferred income tax assets are recognised to the extent that it is probable
that future taxable profits will be available against which the temporary
differences can be utilised. The carrying amount of deferred tax assets is
reviewed at each reporting date.
Current Tax
The current income tax charge is calculated on the basis of the tax laws
enacted or substantively enacted at the end of the reporting period in the
countries where Jersey Oil and Gas Plc and its subsidiaries operate and
generate taxable income. We periodically evaluate positions taken in tax
returns with respect to situations in which applicable tax regulation is
subject to interpretation. Provisions are established where appropriate on the
basis of amounts expected to be paid to the tax authorities.
Current tax is payable based upon taxable profit for the year. Taxable profit
differs from net profit as reported in the Statement of Comprehensive Income
because it excludes items of income or expense that are taxable or deductible
in other years and it further excludes items that are never taxable or
deductible. Any Group liability for current tax is calculated using tax rates
that have been enacted or substantively enacted by the reporting date.
Foreign Currencies
The functional currency of the Company and its subsidiaries is Sterling.
Monetary assets and liabilities in foreign currencies are translated into
Sterling at the rates of exchange ruling at the reporting date. Transactions
in foreign currencies are translated into Sterling at the rate of exchange
ruling at the date of the transaction. Gains and losses arising on
retranslation are recognised in the Consolidated Statement of Comprehensive
Income for the year.
Employee Benefit Costs
Payments to defined contribution retirement benefit schemes are recognised as
an expense when employees have rendered service entitling them to
contributions.
Share-Based Payments
Equity settled share-based payments to employees and others providing similar
services are measured at the fair value of the equity instruments at the grant
date. The total amount to be expensed is determined by reference to the fair
value of the options granted using the Black-Scholes Model:
• including any market performance conditions (for
example, an entity's share price);
• excluding the impact of any service and non-market
performance vesting conditions (for example, profitability, sales growth
targets and remaining an employee of the entity over a specified time-period);
and
• including the impact of any non-vesting conditions
(for example, the requirement for employees to save).
The fair value determined at the grant date of the equity settled share-based
payments is expensed on a straight-line basis over the vesting period, based
on the Group's estimate of equity instruments that will eventually vest, with
a corresponding increase in equity. At the end of each reporting period, the
Group revises its estimate of the number of equity instruments expected to
vest. The impact of the revision of the original estimates, if any, is
recognised in profit or loss such that the cumulative expense reflects the
revised estimate, with a corresponding adjustment to the equity settled
employee benefits reserve.
Equity settled share-based payment transactions with parties other than
employees are measured at the fair value of the goods or services received,
except where that fair value cannot be estimated reliably, in which case they
are measured at the fair value of the equity instruments granted, measured at
the date the entity obtains the goods or the counterparty renders the service.
Exercise proceeds net of directly attributable costs are credited to share
capital and share premium.
Contingent Liabilities & Provisions
In accordance with IAS 37, provisions are recognised where a present
obligation exists to third parties as a result of a past event, where a future
outflow of resources with economic benefits is probable and where a reliable
estimate of that outflow can be made. If the criteria for recognising a
provision are not met, but the outflow of resources is not remote, such
obligations are disclosed in the notes to the consolidated financial
statements (see note 18). Contingent liabilities are only recognised if the
obligations are more certain, i.e. the outflow of resources with economic
benefits has become probable and their amount can be reliably estimated.
Share Capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new ordinary shares or
options are shown in equity as a deduction, net of tax, from the proceeds.
3. Segmental reporting
Operating segments are reported in a manner consistent with the internal
reporting provided to the Board of Directors.
The Board considers that the Group operates in a single segment, that of oil
and gas exploration, appraisal, development and production, in a single
geographical location, the North Sea of the United Kingdom.
The Board is the Group's chief operating decision maker within the meaning of
IFRS 8 "Operating Segments".
During 2022 and 2021 the Group had no revenue.
4. Financial risk management
The Group's activities expose it to financial risks and its overall risk
management programme focuses on minimising potential adverse effects on the
financial performance of the Group. The Company's activities are also exposed
to risks through its investments in subsidiaries and it is accordingly exposed
to similar financial and capital risks as the Group.
Risk management is carried out by the Directors and they identify, evaluate,
and address financial risks in close co-operation with the Group's management.
The Board provides written principles for overall risk management, as well as
written policies covering specific areas, such as mitigating foreign exchange
risks and investing excess liquidity.
Credit Risk
The Group's credit risk primarily relates to its trade receivables.
Responsibility for managing credit risks lies with the Group's management.
A debtor evaluation is typically obtained from an appropriate credit rating
agency. Where required, appropriate trade finance instruments such as letters
of credit, bonds, guarantees and credit insurance will be used to manage
credit risk.
Liquidity Risk
Liquidity risk is the risk that the Group will not be able to meet its
financial obligations as they become due. The Group manages its liquidity
through continuous monitoring of cash flows from operating activities, review
of actual capital expenditure programmes, and managing maturity profiles of
financial assets and financial liabilities.
Capital Risk Management
The Group seeks to maintain an optimal capital structure. The Group considers
its capital to comprise both equity and net debt.
The Group monitors its capital mix needs and suitability dependent upon the
development stage of its asset base. Earlier stage assets (pre-production)
typically require equity rather than debt given the absence of cash flow to
service debt. As the asset mix becomes biased towards production then
typically more debt is available. The Group seeks to maintain progress in
developing its assets in a timely fashion. Given the Group's current cash
position is insufficient to progress its assets to first oil it will be
seeking to bring an industry partner into its assets in return for a capital
(equity) contribution. This may be in the form of either cash or payment of
some or all the Group's development expenditures. Please refer to Note 22,
Post Balance Sheet Events, regarding the farm-out agreement with NEO. As the
development progresses towards first oil, debt becomes available and will be
sought in order to enhance equity returns. As at 31 December 2022 there are no
borrowings within the Group (2021: Nil).
The Group monitors its capital structure by reference to its net debt to
equity ratio. Net debt to equity ratio is calculated as net debt divided by
total equity. Net debt is calculated as borrowings less cash and cash
equivalents. Total equity comprises all components of equity.
Maturity analysis of financial assets and liabilities
Financial assets
2022 2021
£ £
Up to 3 months 69,735 233,864
3 to 6 months - -
Over 6 months 31,112 31,112
100,847 264,976
Financial liabilities
2022 2021
£ £
Up to 3 months 620,713 2,232,325
3 to 6 months - -
Over 6 months - -
620,713 2,232,325
Lease liabilities
2022 2021
£ £
Up to 3 months 31,971 31,028
3 to 6 months 32,212 31,261
Over 6 months 22,509 149,923
86,692 212,212
5. Employees and Directors
2022 2021
£ £
Wages and salaries* 2,312,653 2,207,384
Social security costs** 194,332 215,267
Share-based payments (note 19) 1,227,504 470,724
Other pension costs 209,394 218,253
3,943,883 3,111,628
*In addition, there were payments in lieu of notice and loss of office fees of
£733,725 in 2021.
** In addition, there were social security costs associated with the payments
in lieu of notice and loss
of office of £49,985 in 2021.
Other pension costs include employee and Group contributions to money purchase
pension schemes.
The average monthly number of employees during the year was as follows:
2022 2021
No. No.
Directors 5 6
Employees - Finance 1 1
Employees - Technical 9 10
15 17
Directors Remuneration: 2022 2021
£ £
Directors' remuneration* 664,200 938,465
Directors' pension contributions to money purchase schemes 26,500 26,450
Share-based payments (note 19) 618,914 207,534
Benefits** 12,645 17,074
1,322,259 1,189,523
The Director's remuneration is shown net of share-based payments.
*In addition, there were payments in lieu of notice and loss of office fees of
£733,725 in 2021.
** In addition, there were benefit costs associated with the payments in lieu
of notice and loss of office
of £13,197 in 2021.
The average number of Directors to whom retirement benefits were accruing was
as follows:
2022 2021
No. No.
Money purchase schemes 2
2
Information regarding the highest paid Director is as follows:
2022 2021
£ £
Aggregate emoluments and benefits 255,699 256,036
Share-based payments 228,648 74,707
Pension contributions 25,000 25,000
509,347 355,743
Key management compensation
Key management includes Directors (Executive and Non-Executive) and an adviser
to the Board.
The compensation paid or payable to key management for employee services
is shown below:
2022 2021
£ £
Wages and short-term employee benefits* 698,513 992,204
Share-based payments (note 19) 618,914 207,534
Pension Contributions 26,500 26,450
1,343,927 1,226,188
*In addition, there were payments in lieu of notice and loss of office fees of
£733,725 and associated
benefit costs of £13,197 in 2021.
6. Net Finance Income
2022 2021
£ £
Finance income:
Interest received 82,842 1,807
82,842 1,807
Finance costs:
Interest paid (7) (278)
Interest on lease liability (4,723) (5,820)
(4,730) (6,098)
Net finance income/(expense) 78,112 (4,290)
7. Loss Before Tax
The loss before tax is stated after charging/(crediting):
2022 2021
£ £
Depreciation - tangible assets 29,873 34,472
Depreciation - right-of-use asset 103,680 138,176
Auditors' remuneration - audit of parent company and consolidation 105,000 80,000
Auditors' remuneration - audit of subsidiaries 25,000 27,000
Auditors' remuneration - non-audit work (taxation advice) - 3,150
Foreign exchange gain (6,735) (6,027)
8. Tax
Reconciliation of tax charge
2022 2021
£ £
Loss before tax (3,106,991) (4,225,317)
Tax at the standard rate of 19% (2021: 19%) (590,328) (802,810)
Capital allowances in excess of depreciation (90,204) (1,330,468)
Expenses not deductible for tax purposes and non-taxable income 234,654 91,330
Deferred tax asset not recognised 445,878 2,041,949
Total tax expense reported in the Consolidated Statement of Comprehensive - -
Income
No liability to UK corporation tax arose on ordinary activities for the year
ended 31 December 2022, or for the year ended 31 December 2021.
In April 2023, the rate of corporation tax will increase to 25% for profits
over £250,000.
The Group has not recognised a deferred tax asset due to the uncertainty over
when the tax losses can be utilised. At the year end, the usable tax losses
within the Group were approximately £62 million (2021: £57 million).
9. Loss Per Share
Basic loss per share is calculated by dividing the losses attributable to
ordinary shareholders by the weighted average number of ordinary shares
outstanding during the year.
Diluted loss per share is calculated using the weighted average number of
shares adjusted to assume the conversion of all dilutive potential ordinary
shares.
There is no difference between dilutive and ordinary earnings per share due to
there being a loss recorded in the year.
Loss attributable Weighted
to ordinary shareholders average number Per share amount pence
£ of shares
Year ended 31 December 2022
Basic and Diluted EPS
Basic & Diluted (3,106,991) 32,554,293 (9.54)
Year ended 31 December 2021
Basic and Diluted EPS
Basic & Diluted (4,225,317) 29,171,548 (14.48)
10. Intangible assets
Exploration
costs
£
Cost
At 1 January 2021 15,166,536
Additions
6,970,670
Exploration write-off/relinquishment (447,812)
At 31 December 2021 21,689,394
Additions 2,858,729
At 31 December 2022 24,548,122
Accumulated Amortisation
At 1 January 2021 175,241
Charge for the year -
At 31 December 2021 175,241
At 31 December 2022 175,241
Net Book Value
At 31 December 2022 24,372,882
At 31 December 2021 21,514,153
In 2020, the Group acquired an additional 70% working interest in licence
P2170 (Verbier) in addition to the existing 18% equity interest and retained
100% working interests in the licences awarded pursuant to the NSTA's 31st SLR
(2019), Licence P2498 (Buchan and J2), Licence P2499 (Glenn) and Licence P2497
(Zermatt). The Group was also awarded a 100% working interest in, and
operatorship of, part-block 20/5e in the NSTA's 32 Offshore Licensing Round in
2020. Part-block 20/5e is incorporated within Licence P2498 (Buchan &
J2) and is located within the Group's existing Greater Buchan Area.
In April 2021, the Group acquired an additional 12% working interest in P2170
following the acquisition of Cieco V&C (UK) Limited (now Jersey V&C
Ltd), thereby resulting in the Group owning 100% of this licence which
includes the Verbier oil discovery, some 6km from the Buchan oil field. The
consideration for the acquisition included a completion payment of £150k and
two future milestone payments, details of which can be found in note 18.
Later in 2021, the Group relinquished licences P2497 Block 20/4c (Zermatt) and
P2499 Block 21/2a (Glenn). Following undertaking a comprehensive technical
and economic evaluation of licences P2497 and P2499 and meetings held with
the North Sea Transition Authority ("NSTA"), the NSTA confirmed that it was
satisfied that the Phase A Firm Commitments for both licences had been
fulfilled. JOG decided not to progress to the next licence phase, which would
have required committing to a firm well in each of these two licence areas.
Accordingly, the licences automatically ceased and determined at the end of
Phase A of their Initial Term on 29 August 2021.
In line with the requirements of IFRS 6, we have considered whether there are
any indicators of impairment on the exploration and development assets. Based
on our assessment, as at 31 December 2022 there are not deemed to be
indicators that the licences are not commercial and the carrying value of
£24,372,882 continues to be supported by ongoing exploration and development
work on the licence area with no impairments considered necessary. Under
IFRS 6, this required a significant judgement to be made confirming that
we expect the NSTA to extend our license interests in P2498 and P2170.
11. Property, Plant and Equipment
Computer and office equipment
£
Cost
At 1 January 2021 228,447
Additions -
At 31 December 2021 228,447
Additions -
At 31 December 2022 228,447
Accumulated Depreciation
At 1 January 2021 153,898
Charge for the year 34,472
At 31 December 2021 188,370
Charge for the year 29,873
At 31 December 2022 218,244
Net Book Value
At 31 December 2022 10,203
At 31 December 2021 40,077
12. Leases
Amounts Recognised in the Statement of financial position
2022 2021
£ £
Right-of-use Assets
Buildings 81,328 185,008
81,328 185,008
Lease liabilities
Current 86,692 129,200
Non-Current - 83,012
86,692 212,212
The liabilities were measured at the present value of the remaining lease
payments, discounted using the lessee's incremental borrowing rate as of 1
January 2019. The weighted average lessee's incremental borrowing rate applied
to the lease liabilities on 1 January 2019 was 3%. The borrowing rate applied
for 2022 remained at 3% and the leases relate to office space.
A new lease agreement was entered into in September 2021 with a lease end date
of September 2023, this was in relation to the London office.
Amounts Recognised in the Statement of comprehensive income
2022 2021
£ £
Depreciation charge of right-of-use asset
Buildings 103,680 138,176
103,680 138,176
Interest expenses (included in finance cost) (4,723) (5,820)
13. Trade and other receivables
2022 2021
£ £
Current:
Other receivables 30 30
Value added tax 69,702 233,835
Prepayments 97,328 119,249
167,060 353,114
14. Cash and cash equivalents
2022 2021
£ £
Cash in bank accounts 6,579,349 13,038,388
The cash balances are placed with creditworthy financial institutions with a
minimum rating of 'A'.
15. Called up share capital
Issued and fully paid: Number: Nominal 2022 2021
Class value £ £
32,554,293 (2021: 32,554,293) Ordinary 1p 2,573,395 2,573,395
Ordinary shares have a par value of 1p. They entitle the holder to participate
in dividends, distributions or other participation in the profits of the
Company in proportion to the number of and amounts paid on the shares held.
On a show of hands every holder of ordinary shares present at a meeting, in
person or by proxy, is entitled to one vote, and on a poll each share is
entitled to one vote.
In 2021, 660,000 ordinary shares were issued to satisfy the exercise of share
options which raised £778,357 (gross).
An oversubscribed placing and subscription of shares raised a further £16.61m
(gross) with a total of 10,065,066 ordinary shares issued.
16. Trade and other payables
2022 2021
£ £
Current:
Trade payables 459,461 1,211,220
Accrued expenses 161,253 1,021,105
Taxation and Social Security 68,082 371,381
688,796 2,603,706
17. Lease liabilities
2022 2021
£ £
Non-Current:
- 83,012
Lease liabilities
- 83,012
18. Contingent Liabilities
(i) 2015 settlement agreement with Athena Consortium: In accordance with a
2015 settlement agreement reached with the Athena Consortium, although Jersey
Petroleum Ltd remains a Licensee in the joint venture, any past or future
liabilities in respect of its interest can only be satisfied from the Group's
share of the revenue that the Athena Oil Field generates and up to 60 per
cent. of net disposal proceeds or net petroleum profits from the Group's
interest in the P2170 licence which is the only remaining asset still held
that was in the Group at the time of the agreement with the Athena Consortium
who hold security over this asset. Any future repayments, capped at the
unpaid liability associated with the Athena Oil Field, cannot be calculated
with any certainty, and any remaining liability still in existence once the
Athena Oil Field has been decommissioned will be written off. A payment was
made in 2016 to the Athena Consortium in line with this agreement following
the farm-out of P2170 (Verbier) to Equinor and the subsequent receipt of
monies relating to that farm-out.
(ii) Equinor UK Limited: During 2020, JOG announced that it had entered into
a conditional Sale and Purchase Agreement ("SPA") to acquire operatorship
of, and an additional 70% working interest in Licence P2170 (Blocks 20/5b and
21/1d) from Equinor UK Limited ("Equinor"), this transaction completed in May
2020. The consideration for the acquisition consists of two milestone
payments, which will be accounted for in line with the cost accumulation
model, as opposed to contingent liabilities:
• US$3 million upon sanctioning by the UK's North Sea
Transition Authority ("NSTA") of a Field Development Plan ("FDP") in respect
of the Verbier Field; and
• US$5 million upon first oil from the Verbier Field.
• The earliest of the milestone payments in respect of
the acquisition is not currently anticipated being payable before the start of
2025.
(iii) ITOCHU Corporation and Japan Oil, Gas and Metals National Corporation:
During 2020, JOG announced that it had entered into a conditional Sale and
Purchase Agreement ("SPA") to acquire the entire issued share capital of CIECO
V&C (UK) Limited, which was owned by ITOCHU Corporation and Japan Oil, Gas
and Metals National Corporation, this transaction completed in April 2021. The
acquisition was treated as an asset acquisition rather than a business
combination due to the nature of the asset acquired. There were no assets or
liabilities acquired other than the 12% interest in licence P2170 (Verbier).
The consideration for the acquisition includes a completion payment of £150k
and two future milestone payments, which are considered contingent
liabilities:
• £1.5 million in cash upon consent from the UK's North Sea
Transition Authority ("NSTA") for a Field Development Plan ("FDP") in respect
of the Verbier discovery in the Upper Jurassic (J62-J64) Burns Sandstone
reservoir located on Licence P2170; and
• £1 million in cash payable not later than one year after first oil
from all or any part of the area which is the subject of the Field Development
Plan.
The earliest of the milestone payments in respect of the acquisition is not
currently anticipated being payable before the start of 2025.
19. Share based payments
The Group operates several share options schemes. Options are exercisable at
the prices set out in the table below.
Options are forfeited if the employee leaves the Group through resignation or
dismissal before the options vest.
Equity settled share-based payments are measured at fair value at the date of
grant and expensed on a straight-line basis over the vesting period, based
upon the Group's estimate of shares that will eventually vest.
The Group's share option schemes are for Directors, Officers and employees.
The charge for the year was £1,227,504 (2021: £470,725) and details of
outstanding options are set out in the table below.
Date of Grant Exercise price (pence) Vesting date Expiry date No. of shares for which options outstanding at 1 Jan 2022 Options issued Options Exercised Options lapsed/non vesting during the year No. of shares for which options outstanding at 31 Dec 2022
May 2013 1,500 May 2014 May 2023 9,500 - - - 9,500
May 2013 1,500 May 2015 May 2023 9,500 - - - 9,500
Apr 2017 310 Apr 2017 Apr 2022 20,000 - - (20,000) -
Apr 2017 310 Apr 2018 Apr 2022 20,000 - - (20,000) -
Apr 2017 310 Apr 2019 Apr 2022 20,000 - - (20,000) -
Jan 2018 200 Jan 2021 Jan 2025 420,000 - - - 420,000
Jan 2018 200 Jan 2018 Jan 2023 76,666 - - - 76,666
Jan 2018 200 Jan 2019 Jan 2023 76,667 - - - 76,667
Jan 2018 200 Jan 2020 Jan 2023 70,000 - - - 70,000
Nov 2018 172 Nov 2021 Nov 2025 150,000 - - - 150,000
Jan 2019 175 Jan 2020 Jan 2026 88,333 - - - 88,333
Jan 2019 175 Jan 2021 Jan 2026 88,333 - - - 88,333
Jan 2019 175 Jan 2022 Jan 2026 68,333 - - - 68,333
Jan 2019 175 Jan 2020 Jan 2024 11,667 - - - 11,667
Jan 2019 175 Jan 2021 Jan 2024 11,667 - - - 11,667
Jan 2019 175 Jan 2022 Jan 2024 11,667 - - - 11,667
Jun 2019 200 Jan 2021 Jun 2029 120,000 - - - 120,000
Jun 2019 110 Jun 2019 Jun 2029 40,000 - - - 40,000
Jan 2021 155 Jan 2022 Jan 2028 83,333 - - - 83,333
Jan 2021 155 Jan 2023 Jan 2028 83,333 - - (8,333) 75,000
Jan 2021 155 Jan 2024 Jan 2028 83,334 - - (8,334) 75,000
Mar 2021 210 Mar 2022 Mar 2026 11,666 - - - 11,666
Mar 2021 210 Mar 2023 Mar 2026 11,667 - - - 11,667
Mar 2021 210 Mar 2024 Mar 2026 11,667 - - - 11,667
Mar 2021 210 Mar 2022 Mar 2028 137,334 - - (666) 136,668
Mar 2021 210 Mar 2023 Mar 2028 137,333 - - (44,000) 93,333
Mar 2021 210 Mar 2024 Mar 2028 137,333 - - (44,000) 93,333
Nov 2021 147 Nov 2022 Nov 2028 233,334 - - - 233,334
Nov 2021 147 Nov 2023 Nov 2028 233,333 - - - 233,333
Nov 2021 147 Nov 2024 Nov 2028 233,333 - - - 233,333
Apr 2022 230 Apr 2023 Apr 2029 - 285,000 - - 285,000
Apr 2022 230 Apr 2024 Apr 2029 - 285,000 - - 285,000
Apr 2022 230 Apr 2025 Apr 2029 - 285,000 - - 285,000
Apr 2022 230 Apr 2023 Apr 2027 - 45,000 - - 45,000
Apr 2022 230 Apr 2024 Apr 2027 - 45,000 - - 45,000
Apr 2022 230 Apr 2025 Apr 2027 - 45,000 - - 45,000
Total 3,534,000
The weighted average of the options granted during the year was determined
using a Black-Scholes valuation. The significant inputs into the model were
the mid-market share price on the day of grant as shown above and an annual
risk-free interest rate ranging between 1.10% and 1.30%. The volatility
measured at the standard deviation of continuously compounded share returns is
based on a statistical analysis of daily share prices from the date of
admission to AIM to the date of grant on an annualised basis. The weighted
average exercise price for the options granted in 2022 was 230 pence, the
weighted average remaining contractual life of the options was 6 years (for
all schemes 4 years), the weighted average volatility rates was 114% and
the dividend yield was nil. During the year 60,000 share options from the
April 2018 issuance expired, these had an exercise price of 310 pence, a
further 105,333 share options were forfeited due to the departure of
employees, these had a weighted exercise price of 201 pence. There were no
share options exercised in the year. The weighted average exercise price for
all outstanding options at 31 December 2022 was 199 pence. For details of
the schemes and scheme rules, please refer to the Remuneration Report.
20. Related undertakings and ultimate controlling party
The Group and Company do not have an ultimate controlling party or parent
Company.
County of Incorporation
Subsidiary % owned Principal Activity Registered Office
Jersey North Sea Holdings Ltd 100% England & Wales Non-Trading 1
Jersey Petroleum Ltd 100% England & Wales Oil Exploration 1
Jersey V&C Ltd 100% England & Wales Oil Exploration 1
Jersey E & P Ltd 100% Scotland Non-Trading 2
Jersey Oil Ltd 100% Scotland Non-Trading 2
Jersey Exploration Ltd 100% Scotland Non-Trading 2
Jersey Oil & Gas E & P Ltd 100% Jersey Management services 3
Registered Offices
1. 10 The Triangle, ng2 Business Park, Nottingham, NG2 1AE
2. 6 Rubislaw Terrace, Aberdeen, AB10 1XE
3. First Floor, Tower House, La Route es Nouaux, St Helier, Jersey JE2 4ZJ
21. Notes to the consolidated statement of cash flows
Reconciliation of Loss Before Tax to Cash Used in Operations
2022 2021
£ £
Loss for the year before tax (3,106,991) (4,225,317)
Adjusted for:
Depreciation 29,873 34,472
Impairments - 447,812
Depreciation right-of-use asset 103,680 138,176
Share-based payments (net) 1,227,504 470,724
Finance costs 4,730 6,098
Finance income (82,842) (1,807)
(1,824,046) (3,129,842)
Decrease in trade and other receivables 186,054 99,856
(Decrease)/increase in trade and other payables (1,681,452) 1,534,087
Cash used in operations (3,319,445) (1,495,899)
Cash and cash equivalents
The amounts disclosed on the consolidated Statement of Cash Flows in respect
of Cash and cash equivalents are in respect of these statements of financial
position amounts:
Year ended 2022
31 Dec 2022 01 Jan 2022
£ £
Cash and cash equivalents 13,038,388
6,579,349
Year ended 2021
31 Dec 2021 1 Jan 2021
£ £
Cash and cash equivalents 13,038,388 5,081,515
Analysis of net cash
At 1 Jan 2022 Cash outflow At 31 Dec 2022
£ £ £
Cash and cash equivalents 13,038,388 6,459,039 6,579,349
Net cash 13,038,388 6,459,039 6,579,349
22. Post balance sheet events
On 6 April 2023, Jersey Oil and Gas Plc announced that it has agreed to
farm-out a 50% interest in the Greater Buchan Area licences to NEO Energy
("NEO").
In exchange for entering into definitive agreements to divest a 50% working
interest and operatorship in the GBA licences to NEO, the Company will
receive:
· 12.5% carry of the Buchan field development costs included in the FDP
approved by the North Sea Transition Authority ("NSTA"); equivalent to a
1.25 carry ratio
· Carry for JOG's 50% share of the estimated $25 million cost to
take the Buchan field through to FDP approval
· $2 million cash payment on completion of the transaction
· $9.4 million cash payment upon finalisation of the GBA
development solution
· $12.5 million cash payment on approval of the Buchan FDP by the
NSTA
· $5 million cash payment on each FDP approval by the NSTA in respect
of the J2 and Verbier oil discoveries
The primary conditions precedent to completing the transaction are receipt of
the approvals from the NSTA for the transaction and the associated extension
of the Company's two GBA licences. Following completion of the transaction,
operatorship of the licences will transfer to NEO.
23. Availability of the annual report 2022
A copy of this report will be made available for inspection at the Company's
registered office during normal business hours on any weekday. The Company's
registered office is at 10 The Triangle, ng2 Business Park, Nottingham NG2
1AE. A copy can also be downloaded from the Company's website at
www.jerseyoilandgas.com. (http://www.jerseyoilandgas.com/) Jersey Oil and Gas
Plc is registered in England and Wales, with registration number 7503957.
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