REG - UK Oil & Gas Inv PLC - Final Results <Origin Href="QuoteRef">UKOGa.L</Origin> - Part 3
28/02/2017 07:06
- Part 3: For the preceding part double click ID:nRSb9881Xb
that would use the
asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available
to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. From
time to time external valuers are used to assess FVLCD of the Group's non-financial assets. Involvement of external valuers
is decided upon by the valuation committee after discussion with and approval by the Company's Audit Committee. Selection
criteria include market knowledge, reputation, independence and whether professional standards are maintained. Valuers are
normally rotated every three years. The valuation committee decides, after discussions with the Group's external valuers,
which valuation techniques and inputs to use for each case.
Changes in estimates and assumptions about these inputs could affect the reported fair value.
Going Concern
The Directors noted the losses that the Group has made for the Year Ended 30 September 2016. The Directors have prepared
cash flow forecasts for the period ending 28 February 2018 which take account of the current cost and operational structure
of the Group.
The cost structure of the Group comprises a high proportion of discretionary spend and therefore in the event that cash
flows become constrained, costs can be quickly reduced to enable the Group to operate within its available funding.
These forecasts demonstrate that the Group has sufficient cash funds available to allow it to continue in business for a
period of at least twelve months from the date of approval of these financial statements. Accordingly, the financial
statements have been prepared on a going concern basis.
It is the prime responsibility of the Board to ensure the Group remains a going concern. At 30 September 2016 the Company
had cash and cash equivalents of £2,444,000 and borrowings of £nil. The Company has minimal contractual expenditure
commitments and the Board considers the present funds sufficient to maintain the working capital of the Company for a
period of at least 12 months from the date of signing the Annual Report and Financial Statements. For these reasons the
Directors adopt the going concern basis in the preparation of the Financial Statements.
1. Business Combinations
Acquisition of Celtique Energie Weald Limited
On 13 June 2016 through UK Oil and Gas Investments PLC, the Group announced the acquisition of 100 per cent of the entire
issued share capital of Celtique Energie Weald Limited. The company was re-named Kimmeridge Oil & Gas Limited.
The total consideration of £3.5 million comprised £1.25 million in cash and £2.25 million in the form of 142,648,831 UKOG
ordinary shares. The acquisition was completed and shares issued on 5 August 2016.
Through the business combination the Group acquired the following assets:
· Weald Basin licence, PEDL234, a 300 sq km area, more than doubling the Group's net acreage holdings in the prime
Kimmeridge Limestone Oil province.
The assets and liabilities arising on the day of the acquisition are as follows:
Celtique Energie
Weald Limited Fair Value Fair Value Adjustments Total Fair Value
£'000 £'000 £'000
Intangible Assets: Exploration Costs 4,536 - 4,536
Net identifiable assets acquired at fair value 4,536 - 4,536
- - -
Total consideration 3,507 - 3,507
Negative goodwill on purchase 1,029
Total cash outflow on the acquisition is as follows:
Cash paid 1,257
Net cash acquired with the subsidiaries -
Net consolidated cash flow 1,257
Acquisition of Northern Petroleum Companies
On 19 October 2014 through UK Oil and Gas Investments PLC, the Group acquired 100 per cent of the entire issued share
capital of Northern Petroleum (GB) Limited, NP Weald Limited and NP Solent Limited. The companies were re-named UKOG (GB)
Limited, UKOG Weald Limited and UKOG Solent Limited.
Through the business combination the Group acquired the following assets:
· The Horndean (UKOG 10%) and Avington (UKOG 5%) onshore producing oil fields, producing around 17 barrels of oil per
day ("bopd") net to UKOG; both fields are operated by IGas.
· Offshore Isle of Wight exploration licence, P1916 (UKOG 100% and operator), containing the significant, drill-ready
M prospect, with primary targets in the Jurassic Upper Portland Limestone and Triassic Sherwood Sandstone.
· The Baxters Copse (UKOG 50%, IGas operator, PEDL233) and Markwells Wood (UK 100% and operator, PEDL126) onshore oil
discoveries.
The assets and liabilities arising on the day of the acquisition are as follows:
Northern Petroleum NP Weald Limited NP Solent Limited Total
(GB) Limited
Fair Value Fair Value Fair Value Fair Value
£'000 £'000 £'000 £'000
Intangible Assets: Exploration Costs - 264 32 296
Tangible Assets: Oil Properties 1,609 - - 1,609
Cash and cash equivalents 19 - - 19
Trade and other receivables 78 1 14 93
Other current assets 1 - - 1
Trade and Other Payables (101) - (46) (147)
Provisions (282) (77) - (359)
Net identifiable assets/(liabilities) acquired at fair value 1,324 188 - 1,512
Goodwill on purchase - - - -
Total consideration 1,324 188 - 1,512
Total cash outflow on the acquisition is as follows:
Cash paid 1,512
Net cash acquired with the subsidiaries (19)
Net consolidated cash flow 1,493
2. Segment Reporting
All of the Group's assets and operations are located in the United Kingdom. For management purposes, the Group is organised
into business units based on the main types of activities and has three reportable segments, as follows:
· Oil exploration and production segment: includes producing business activities
· Oil exploration and evaluation: includes non-producing activities.
· Head Office, corporate and administrative, including parent company activities.
The Board of Directors monitors the operating results of its business units separately for the purpose of making decisions
about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss
and is measured consistently with operating profit or loss in the consolidated financial statements. However, the Group's
financing (including finance costs and finance income) and income taxes are managed on a Group basis and are not allocated
to operating segments.
The accounting policies used by the Group in reporting segments internally are the same as those used in the financial
statements.
Subject to further acquisitions and/or disposals, the Group expects to further review its segmental information during the
forthcoming financial year, as it begins to see the full impact of its acquisitions and/or disposals.
Group Oil production & exploration Oil exploration & evaluation Corporate & Administrative Consolidated
Year ended 30 September 2016 £'000 £'000 £'000 £'000
Revenue
External Customers 151 - - 151
Total revenue 151 - - 151
Results
Depletion & impairment (78) - - (78)
Share of associates loss - (106) - (106)
(Loss) before& after taxation (35) (106) (1,831) (1,972)
Segment assets 2,162 10,052 6,305 18,519
Segment liabilities (310) (341) (299) (950)
Other disclosures:
Investment in associate - 2,800 - 2,800
Capital expenditure (1) 320 4,940 - 5,260
(1) Capital expenditure consists of capitalised exploration expenditure, development expenditure, additions to oil & gas
properties and to other intangible assets including expenditure on assets from the acquisition of subsidiaries.
Group Oil production & exploration Oil exploration & evaluation Corporate & Administrative Consolidated
Year ended 30 September 2015 £'000 £'000 £'000 £'000
Revenue
External Customers 240 - - 240
Total revenue 240 - - 240
Results
Depletion & impairment (82) - - (82)
Share of associates loss - (69) - (69)
Profit/(loss) before& after taxation 37 (84) (1,648) (1,695)
Segment assets 1,907 4,078 5,596 11,581
Segment liabilities (297) (78) (424) (799)
Other disclosures:
Investment in associate - 352 - 352
Investment in available for sale investments - 580 - 580
Capital expenditure (1) 251 802 - 1,053
(1) Capital expenditure consists of capitalised exploration expenditure, development expenditure, additions to oil & gas
properties and to other intangible assets including expenditure on assets from the acquisition of subsidiaries.
3. Operating Loss
2016 2015
Group £'000 £'000
Operating (loss) is stated after charging:
- Directors remuneration 489 628
- Auditors' remuneration;
Audit-related assurance services 20 25
Other compliance services - -
Tax compliance - -
- Depletion & impairment of oil & gas properties 78 82
4. Directors and Employees
The Company employed the services of 3 Directors (2015: 3).
Remuneration in respect of these executive and non-executive Directors was:
2016 2015
Group £'000 £'000
Employment costs, including Directors, during the year:
Wages and salaries 413 34
Consultancy fees 76 594
Share based payments 577 -
1,066 628
Average number of persons, including executive Directors employed No. No.
Administration 3 3
3 3
Directors' remuneration £'000 £'000
Emoluments 1,066 628
No. No.
Number of Directors in money purchase pension schemes - -
The amounts set out above include remuneration in respect of the directors' are as follows:
2016 2015
£'000 £'000
David Lenigas (resigned 8 July 2015) - 170
Donald Strang (resigned 23 October 2015) 1 245
Jason Berry 366 162
Stephen Sanderson 607 51
Kiran Morzaria (appointed 23 October 2015) 92 -
Total Directors Emoluments 1,066 628
5. Finance costs
2016 2015
Group £'000 £'000
Loan interest - 35
Loan arrangement fee - 46
Total finance costs - 81
6. Income Tax
There is no tax credit on the loss for the current or prior year. The tax assessed for the year differs from the standard
rate of corporation tax in the UK as follows:
2016 2015
Group £'000 £'000
Loss for the year before tax (1972) (1,695)
Tax rate 20% 20/21%
Expected tax credit (394) (348)
Differences between capital allowances and depreciation - -
Expenses not deductible for tax purposes 136 78
Future income tax benefit not brought to account 258 270
Actual tax expense - -
No deferred tax asset has been recognised because there is uncertainty of the timing of suitable future profits against which they can be recovered.
7. Loss per Share
The calculation of the basic loss per share is calculated by dividing the consolidated loss attributable to the equity
holders of the Company by the weighted average number of ordinary shares in issue during the year.
2016 2015
Group £'000 £'000
(Loss) attributable to ordinary shareholders (1,972) (1,695)
Number Number
Weighted average number of ordinary shares for 2,177,913,909 1,770,767,449
calculating basic loss per share
Pence Pence
Basic and diluted loss per share (0.09) (0.10)
As inclusion of the potential ordinary shares would result in a decrease in the earnings per share they are considered to
be anti-dilutive, as such, a diluted earnings per share is not included..
8. Exploration & evaluation assets
Group Company
£'000 £'000
Cost & Net Book Value
As at 1 October 2014 - -
Acquired through Business Combinations 296 -
Additions 1,013 662
As at 30 September 2015 1,309 662
Acquired through Business Combinations 4,420 -
Additions 458 80
As at 30 September 2016 6,187 742
During the year, there has been no impairment charged, or considered there required to be. The Directors have assessed the
fair value of the exploration & evaluation assets as at 30 September 2016, and have concluded at this time there is no
requirement to impair and reduce the carrying value whilst they continue to explore and assess these licence areas, further
to the detail below.
Exploration and evaluation activity involves the search for hydrocarbon resources, the determination of technical
feasibility and the assessment of commercial viability of an identified resource. The additions during the year reflect the
multiple acquisitions and associated exploration and evaluation activities. As this point the Company is still assessing
the potential of these assets, and will continue to develop and evaluate these assets in the coming year. Since the
acquisition date there has been no material changes to the Licence areas. The directors therefore consider that no
impairment is required at 30 September 2016.
9. Oil & gas properties
Oil & gasproperties Property, plant & equipment Total Oil & gasPropertiesTotal
2016 2016 2016 2015
Group £'000 £'000 £'000 £'000
Cost
As at 1 October 1,648 - 1,648 1,608
Acquired through Business Combinations - 116 116 40
Additions 12 254 266 -
As at 30 September 1,660 370 2,030 1,648
Depletion & impairment
As at 1 October (82) - (82) -
Depletion charge (78) - (78) (82)
As at 30 September (160) - (160) (82)
Carrying value
As at 30 September 1,500 370 1,870 1,566
Impairment review
The Directors have carried out an impairment review as at 30 September 2016, and determined that an impairment charge is
not currently required. The Directors based this assessment ongoing production from Hordean and in the case of Avington the
operational optimisation that is ongoing to improve operational efficiencies.
10. Investment in Subsidiaries
Company 2016 2015
£'000 £'000
Cost and net book amount
At 1 October 1,512 -
Additions in the year 3,507 1,512
At 30 September 5,019 1,512
The Company holds more than 50 per cent of the share capital of the following companies as at 30 September 2016:
Company Country of Registration Proportion held Functional Currency Nature of business
UKOG (GB) Limited UK 100% GB£ Oil production
UKOG Solent Limited UK 100% GB£ Oil exploration
UKOG Weald Limited UK 100% GB£ Oil exploration
Kimmeridge Oil & Gas Limited UK 100% GB£ Oil exploration
11. Investment in Associate
Group & Company 2016 2015
£'000 £'000
Carrying Value as at 1 October 2,063 -
Re-classification from available for sale investments - 1,780
Equity additions at cost 2,800 352
Share of associates loss for the year (106) (69)
Carrying Value as at 30 September 4,757 2,063
On 6 March 2015, the Company acquired a further 8% interest in Horse Hill Developments Ltd ("Horse Hill") for a cash
consideration of £580,000, thus increasing the Company's holding to 28%. At this point the interest was deemed to qualify
as that of an associate company and the investment re-classified from this date. A further 2% holding was acquired on 12
March 2015, for £352,000 payable by the issue of 44million Ordinary Shares in UK Oil & Gas Investments PLC, at a price of
0.8p per share. This acquisition took the Company's interest in Horse Hill to a 30% shareholding.
On 15 April 2016, the Company acquired a further 12% interest in Horse Hill for a total consideration of £1,800,000,
payable as £1,000,000 in cash and £800,000 by the issue of 43,886,116 Ordinary Shares in UK Oil & Gas Investments PLC, at a
price of 1.82p per share. A further 6% interest was acquired on 21 July 2016, for total consideration of £1,000,000,
payable as £150,000 in cash and £850,000 by the issue of 50,981,799 Ordinary Shares in UK Oil & Gas Investments PLC at a
price of 1.57p per share. These acquisitions took the Company's interest in Horse Hill to a 48% shareholding at 30
September 2016.
Details of the Group & Company's associate at 30 September 2016 are as follows:
Name Place of Incorporation Proportion held Date associate interest acquired Reporting Date of associate Principal activities
Horse Hill Developments Ltd UK 48.0% 06/03/15 31/12/16 Oil exploration
Summarised financial information for the Group & Company's associate, where made publicly available, as at 30 September 2016 is given below:
For the period ended 30 September 2016 As at 30 September 2016
Revenue£'000 (Loss)£'000 Total other comprehensive income£'000 Assets£'000 Liabilities£'000
Horse Hill Developments Ltd - (340) - 9,668 (6,858)
12. Available for Sale Investments
2016 2015
Group & Company £'000 £'000
Investment in unlisted securities
Valuation at 1 October 368 1,568
Additions at cost - 580
Re-classification of investment to associate - (1,780)
Valuation at 30 September 368 368
On 16 May 2014, the Company completed the acquisition of a strategic 6% shareholding in Angus Energy Plc, a company
incorporated in Scotland and resident in the UK, for a consideration of £368,000, payable by the issue of 46 million shares
in the Company.
Angus Energy Plc completed a listing on the AIM Market on 14 November 2016. The Market value of the Company's shareholding
as at 21 February 2017 was £810,000.
13. Inventory
2016 2015
Group £'000 £'000
Inventories - Crude Oil 3 2
Total 3 2
14. Trade and Other Receivables
Group Company
2016 2015 2016 2015
£'000 £'000 £'000 £'000
Trade debtors 160 26 145 26
Other debtors 594 609 546 609
Loans to related parties (see Note 26) 2,117 901 2,117 901
Loans to subsidiary companies - - 864 452
Prepayments and accrued income 19 147 - 132
Total 2,890 1,683 3,672 2,120
The directors consider that the carrying amount of trade and other receivables approximates to their fair value.
15. Derivative Financial Instrument
Group & Company 2016 2015
Equity Swap Agreement £'000 £'000
Fair value at 1 October - 184
Cost of equity swap arrangement - -
Settled during the year - (201)
Gain/(loss) on settled instalments - 61
Transfer to income statement - (44)
Fair value adjustment at 30 September - -
Fair value carried forward at 30 September - -
The Company agreed to close out the equity swap agreement on 27 October 2014, for a single final payment of £201,250,
resulting in a gain above the benchmark price of £61,250. No further equity swap arrangements were made during the year to
30 September 2016.
16. Cash and Cash Equivalents
Group Company
2016 2015 2016 2015
£'000 £'000 £'000 £'000
Cash at bank and in hand 2,444 4,590 2,371 4,461
Total 2,444 4,590 2,371 4,461
17. Trade and Other Payables
Group Company
2016 2015 2016 2015
Current trade and other payables £'000 £'000 £'000 £'000
Trade creditors 536 117 244 101
Accruals and deferred income 55 212 55 212
Total 591 329 299 313
The directors consider that the carrying amount of trade and other payables approximates to their fair value.
19. Borrowings
Group Company
2016 2015 2016 2015
£'000 £'000 £'000 £'000
YAGM Debt facility - 111 - 111
Total - 111 - 111
The Company entered into an unsecured US$10 million debt facility to be provided by YA Global Master SPV Ltd ("YAGM") on 28
October 2014 to fund further investment in the UK oil and gas sector in accordance with the Company's investing policy (the
"YAGM Facility") The facility is available to the Company for three years from the date of the agreement. Any drawdowns by
the Company under the YAGM Facility were to be repaid in twelve equal monthly amounts ("Monthly Repayment Amount") and
carry an annual interest rate of 10 per cent.
UKOG was entitled to pay the Monthly Repayments Amounts either in cash, or at the Company's sole election, by means of
conversion of the Monthly Repayment Amount into new ordinary shares, to be issued at a conversion price equal to 95% of the
average of the lowest 5 daily volume weighted average prices ("VWAP") during the 15 trading days prior to the scheduled
repayment date. All drawdowns under the YAGM Facility were subject to the prior approval of YAGM.
The Company drew down US$1 million under the YAGM Facility on signing the agreement, which was repayable at the rate of
US$83,333 per month on or before 1 November 2015, together with accrued interest. This drawdown was repaid in full on 2
November 2015, and no further drawdowns were made.
20. Provisions - Decommissioning
2016 2015
Group £'000 £'000
As at 1 October 359 -
Acquired on acquisition of subsidiaries - 359
Additions - -
As at 30 September 359 359
The amount provided at 30 September 2016 represents the Group's share of decommissioning liabilities in respect of the
producing Horndean and Avington fields, and the Markwells Wood and Havant drilling sites.
The Company makes full provision for the future cost of decommissioning oil production facilities and pipelines on a
discounted basis on the installation of those facilities. The decommissioning provision represents the present value of
decommissioning costs relating to oil and gas properties. At this point in time it is uncertain as to when some of these
decommissioning costs will occur given current plans by the Company which may change when operations cease. Therefore the
Directors have taken a conservative approach and not discounted these values. These provisions have been created based on
the Company's internal estimates. Assumptions based on the current economic environment have been made, which management
believes are a reasonable basis upon which to estimate the future liability. These estimates are reviewed regularly to take
into account any material changes to the assumptions. However, actual decommissioning costs will ultimately depend upon
future market prices for the necessary decommissioning works required that will reflect market conditions at the relevant
time. Furthermore, the timing of decommissioning is likely to depend on when the fields cease to produce at economically
viable rates. This, in turn, will depend upon future oil and gas prices, which are inherently uncertain.
21. Share Capital
Ordinary Shares Number of
ordinary shares Nominal Value Total Value
£ £'000
Issued at 30 September 2014 1,423,063,508 0.0001 142
On 15 October 2014, placing for cash at 1.2p per share 166,666,667 0.0001 17
On 28 November 2014, warrants exercised at 0.35p pere share 59,333,334 0.0001 6
On 13 March 2015, issue of shares at 0.8p per share for acquisition 44,000,000 0.0001 4
On 17 April 2015, exercise of warrants and options at 0.4p, & 1.48p per share 70,553,844 0.0001 7
On 10 June 2015, placing for cash at 2.25p per share 266,666,667 0.0001 27
Issued at 30 September 2015 2,030,284,020 0.0001 203
On 01 March 16, warrants exercised at at 2.25p per share 10,666,666 0.0001 1
On 10 March 16, warrants exercised at at 2.25p per share 2,500,000 0.0001 -
On 15 April 16, for non-cash on acquisition at at 1.82p per share 43,886,116 0.0001 5
On 25 May 16, placing for cash at at 1.5p per share 266,666,667 0.0001 27
On 05 August 16, for non-cash on acquisition at at 1.58p per share 142,648,831 0.0001 14
On 11 September 16, for non-cash on acquisition at at 1.67p per share 50,981,799 0.0001 5
On 22 September 16, for options exercised at at 0.4p per share 30,000,000 0.0001 3
Issued at 30 September 2016 2,577,634,099 0.0001 258
Deferred shares
The Company has in existence at 30 September 2015 and at 30 September 2016, 1,158,385,229 deferred shares of 0.001p. These
deferred shares do not carry voting rights.
Total Ordinary and Deferred Shares
The issued share capital as at 30 September 2016 is as follows:
Number of shares Nominal Value£ Total Value£'000
Ordinary shares 2,577,634,099 0.0001 258
Deferred shares 1,158,385,352,229 0.00001 11,584
11,842
Share Options
During the year 65 million options were granted (2015: 100 million).
As at 30 September 2016 the options in issue were:
Exercise price Expiry date Options in issue
30 September 2016
0.4p 31 December 2017 90,000,000
0.4p 28 November 2020 22,500,000
1.15p 22 August 2019 10,000,000
1.82p 28 September 2019 65,000,000
187,500,000
30 million options were exercised and no options were cancelled during the year (2015: 17.5 million exercised).
No options lapsed during the year (2015: nil).
Warrants
As at 30 September 2016, 13,500,001 warrants were in issue, all of these warrants are exercisable up to 10 June 2018, at
2.25p per share. No warrants lapsed during the year (2015: nil). 13,166,666 warrants were exercised during the year (2015:
112,387,178 exercised).
Employee Benefit Trust
The Company established on 29 September 2014 an employee benefit trust called the UK Oil & Gas Employee Benefit Trust
("EBT") to implement the use of the Company's existing share incentive plan over 10% of the Company's issued share capital
from time to time in as efficient a manner as possible for the beneficiaries of that plan. The EBT is a discretionary trust
for the benefit of directors, employees and consultants of the Company.
Accordingly, the trustees of the EBT subscribed for 129,000,000 new ordinary shares of 0.01p each in the Company, at par
value per share at an aggregate cost to the Company of £12,900, such shares representing 9.07% of the existing issued share
capital of the Company (at that date). The shares held in the EBT are intended to be used to satisfy future awards made by
the Company's Remuneration Committee under the share incentive scheme.
No further issue of ordinary shares was made to the EBT during the year ended 30 September 2016.
22. Share-Based Payments
Details of share options and warrants granted during the year to Directors & consultants over the ordinary shares are as
follows:
At Issued during the year Exercised during the year At Exercise price Date from which exercisable Expiry date
1 October 2015 30 September 2016
No. No. No. No. £
Share options millions million millions millions
Donald Strang 10 - - 10 0.0040 28/11/2013 28/11/2020
David Lenigas 10 - - 10 0.0040 28/11/2013 28/11/2020
Jason Berry 10 - - 10 0.0115 22/08/2014 22/08/2019
Jason Berry - 20 - 20 0.0182 28/09/2016 28/09/2019
Stephen Sanderson 25 - - 25 0.0040 21/01/2015 31/12/2017
Stephen Sanderson - 35 - 35 0.0182 28/09/2016 28/09/2019
55 55 - 110
Consultants 22.5 - (20) 2.5 0.0040 28/11/2013 28/11/2020
Consultants 75 - (10) 65 0.0040 21/01/2015 31/12/2017
Consultants - 10 - 10 0.0182 28/09/2016 28/09/2019
152.5 65.0 (30) 187.5
The share price range during the year was £0.0088 to £0.0298 (2015 - £0. 0035 to £0. 0310).
The disclosure of Weighted Average Exercise Prices, and Weighted Average Contractual Life analysis is not viewed as
informative because of the minimal variation of options currently in issue, and therefore has accordingly not been
disclosed.
For those options granted where IFRS 2 "Share-Based Payment" is applicable, the fair values were calculated using the
Black-Scholes model. The inputs into the model were as follows:
Risk free rate Share price volatility Expected life Share price at date of grant
21 January 2015 2.3% 251.4% 2.95 years £0.0039
28 September 2016 2.5% 90.1% 3. years £0.0180
Expected volatility was determined by calculating the historical volatility of the Company's share price for 12 months
prior to the date of grant. The expected life used in the model has been adjusted, based on management's best estimate, for
the effects of non-transferability, exercise restrictions and behavioural considerations.
The Company recognised total expenses of £682,000 (2015: £378,000) relating to equity-settled share-based payment
transactions during the year, and £117,000 (2015: £70,000) was transferred via equity to retained earnings on the
exercising or lapse of options during the year.
23. Financial Instruments and Risk Analysis
Financial Assets by Category
The IAS 39 categories of financial asset included in the balance sheet and the headings in which they are included are as
follows:
Current assets - Group 2016 2015
£'000 £'000
Inventory 3 2
Loans and receivables 2,890 1,683
Cash and cash equivalents 2,444 4,590
5,337 6,275
Financial Liabilities by Category
The IAS 39 categories of financial liability included in the balance sheet and the headings in which they are included are
as follows:
Current liabilities - Group
Financial liabilities measured at amortised cost 591 440
The Group is exposed to market risk through its use of financial instruments and specifically to credit risk, and liquidity
risk which result from both its operating and investing activities. The Group's risk management is coordinated at its head
office, in close co-operation with the board of Directors, and focuses on actively securing the Group's short to medium
term cash flows by minimising the exposure to financial markets. Long term financial investments are managed to generate
lasting returns. The Group does not actively engage in the trading of financial assets for speculative purposes nor does it
write options. The most significant financial risks to which the Group is exposed to are described below.
Interest Rate Sensitivity
The Group is not substantially exposed to interest rate sensitivity, other than in relation to interest bearing bank
accounts.
Credit Risk Analysis
The Group's exposure to credit risk is limited to the carrying amount of trade receivables. The Group continuously monitors
defaults of customers and other counterparties, identified either individually or by Company, and incorporates this
information into its credit risk controls. Where available at reasonable cost, external credit ratings and/or reports on
customers and other counterparties are obtained and used. Group's policy is to deal only with creditworthy counterparties.
Group management considers that trade receivables that are not impaired for each of the reporting dates under review are of
good credit quality, including those that are past due. None of the Group's financial assets are secured by collateral or
other credit enhancements. The credit risk for liquid funds and other short-term financial assets is considered negligible,
since the counterparties are reputable banks with high quality external credit ratings.
Liquidity risk analysis
The Group's continued future operations depend on the ability to raise sufficient working capital through the issue of
equity share capital. The Directors are confident that adequate funding will be forthcoming with which to finance
operations. Controls over expenditure are carefully managed.
Capital Management Policies
The Group's capital management objectives are to:
· Ensure the Group's ability to continue as a going concern; and
· Provide a return to shareholders
The Group monitors capital on the basis of the carrying amount of equity less cash and cash equivalents.
Commodity price risk
The Group is exposed to the risk of fluctuations in prevailing market commodity prices on the mix of oil and gas products
it produces. The Group's policy is to manage these risks through the use of contract-based prices with customers.
Commodity price sensitivity
The table below summarises the impact on profit before tax for changes in commodity prices. The analysis is based on the
assumption that the crude oil price moves 10% resulting in a change of US$4.35/bbl (2015: US$4.50/bbl), with all other
variables held constant. Reasonably possible movements in commodity prices were determined based on a review of the last
two years' historical prices and economic forecasters' expectations.
Increase/decrease in crude oil prices Effect on profit before tax for the year ended 30 September 2016Increase/(Decrease) Effect on profit before tax for the year ended 30 September 2015Increase/(Decrease)
£'000 £'000
Increase US$4.35/bbl (2015: US$4.50/bbl) 16 20
Decrease US$4.35/bbl (2015: US$4.50/bbl) (16) (20)
23. Commitments & Contingent Liabilities
As at 30 September 2016, the Group had the following material commitments;
Ongoing exploration expenditure is required to maintain title to the Group's exploration permits. No provision has been
made in the financial statements for these amounts as the expenditure is expected to be fulfilled in the normal course of
the operations of the Group.
There were no contingent liabilities at 30 September 2016.
24. Events after the Reporting Date
On 21 November 2016, the Company announced the death of Jason Berry, an Executive Director of the Company, following a
short illness.
On 8 December 2016, the Company announced that it had issued 20 million new ordinary shares in the Company, on the
exercising of share options at 0.4p per share for cash consideration of £80,000.
25. Related Party Transactions
The company had the following amounts outstanding from its investee companies at 30 September:
2016 2015
£'000 £'000
Horse Hill Developments Ltd ("Horse Hill") 2,117 901
2,117 901
The above loans outstanding are included within trade and other receivables, Note 15. The loan to Horse Hill has been made
in accordance with the terms of the investment agreement whereby it accrues interest daily at the Bank of England base rate
and is repayable out of future cashflows.
Remuneration of Key Management Personnel
The remuneration of the directors, and other key management personnel of the Company, is set out below in aggregate for each of the categories specified in IAS24 Related party Disclosures
2016 2015
£'000 £'000
Short-term employee benefits 678 728
Share-based payments 682 132
1,360 860
26. Ultimate Controlling Party
In the opinion of the directors there is no
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