Europa Oil & Gas (Holdings) plc /
Index: AIM / Epic: EOG / Sector: Oil & Gas
10 October 2019
Europa Oil &
Gas (Holdings) plc (‘Europa’ or ‘the Company’)
Final Results for
the year to 31 July 2019
Europa Oil & Gas (Holdings) plc, the UK and Ireland focussed oil and gas exploration,
development and production company, announces its final results for
the 12 month period ended 31 July
2019.
The full Annual Report and Accounts will be available shortly on
the Company’s website at www.europaoil.com and will be mailed in
November 2019 to those shareholders
who have requested a paper copy.
Operational highlights
Offshore Ireland
- LO 16/20, which holds Inishkea, Europa’s flagship gas prospect,
converted to 15 year exploration licence FEL 4/19
- 1.5 trillion cubic feet (‘tcf’) gross mean un-risked
prospective gas resources and 1 in 3 chance of success assigned to
Inishkea
- Progressing regulatory consent for site surveys over Inishkea,
Kiely East and Edgeworth as part of
drill site preparations
- Continuing farm-out discussions with respect to Frontier
Exploration Licence (“FEL”) 4/19, FEL 1/17 and FEL 3/13. FEL 4/19
now expected to be prioritised
- Secured a 12 month extension to the first phase of FEL 2/13 to
4 July 2020
UK
- Average of 91 barrels of oil equivalent per day (‘boepd’)
(2018: 94 boepd) recovered from three UK onshore fields
- Workover of the West Firsby 6 well utilising a drain hole
jetting technique – the well is currently producing 7 boepd net to
Europa having previously produced nothing
- Wressle planning appeal scheduled for 5
November 2019 – subject to a positive outcome, development
would more than double Europa’s net production to around 240
bopd
- Sold interest in PEDL143 to UK Oil & Gas PLC
Financial
- 6% increase in Group revenue to £1.7m (2018: £1.6m)
- Zero exploration write-off (2018: £1.3m)
- Narrowing of pre-tax loss to £0.7m (2018: loss £2.3m)
- Post-tax loss of £0.7m (2018: loss £2.6m)
- 16% reduction in administrative expenses to £811,000 (2018:
£967,000)
- Cash used in operating activities £0.66m (2018: cash used
£0.48m)
- Net cash balance as at 31 July
2019 £2.9m (31 July 2018:
£1.8m)
Post reporting date events
- Award of Inezgane Offshore licence on Atlantic coast of
Morocco.
- Irish Government announced intent to phase out future licensing
for oil exploration, but not gas exploration; later confirmed that
all existing exploration licences for both oil and gas remain
valid.
Europa’s CEO, Hugh Mackay, said
“Having de-risked multiple hundred million barrel plus prospects
offshore Ireland and embarked on
farm-out discussions with suitable partners, we have been keen to
add a third territory to Europa’s portfolio, specifically one that
complements the team’s technical capabilities. The post
period end award of the Inzeghane Permit offshore Morocco represents the culmination of an
extensive process and considerable work over the course of the
year. Similar to Atlantic Ireland, Europa’s entry into
Morocco is low cost and early
stage. Like Ireland, with 250 million plus barrel prospects
already identified, Inzeghane has the potential to move the needle
in the event of drilling success.
“Inzeghane does not represent the sum of our new venture
activity. Our aim is to build a full cycle oil and gas
company and our priority is to add a late stage
appraisal/development project to our licence base. At the same
time, we are working hard to advance our existing assets,
specifically securing funding to drill wells offshore Ireland and supporting the operator’s efforts
to obtain planning consent for the development of the Wressle oil
field, which promises to more than double our UK onshore production
to around 240bopd. At this rate and based on current oil
prices, Europa’s revenue profile would leap to £3-4million a year,
a figure that represents almost half our current market
capitalisation. Together with a low cost base, Europa would be
transformed into a profitable oil and gas company, at least at the
underlying level, with a prospect inventory that has significant
company-making potential.”
Chairman's statement
New Ventures
Our portfolio currently comprises two main business areas:
- Very high impact exploration offshore Atlantic margin in
Ireland and (as recently
announced) Morocco, and
- Oil development and production onshore UK.
It is a priority for the Board to add a third area in the
appraisal/development part of the business cycle. Following a
strategy review in October 2018 a
dedicated Board Strategy Committee was set up, meeting monthly to
track progress and review new venture opportunities against a
continuously evolving business environment. We are seeking projects
in different stages of the business cycle, in new basins, in
countries with low political and regulatory risk. Our approach is
to review many candidates and progress only those which meet strict
suitability criteria. Our target is to have identified and likely
added this third area within the next period.
Ireland – Inishkea
Inishkea is our flagship prospect in Ireland. This is “infrastructure-led”
exploration next to the ~1tcf Corrib gas field in the Slyne basin
and is unaffected by well results in the South Porcupine basin.
We reported gross unrisked prospective resources of 1.5tcf and
an estimated geological chance of success of 1 in 3. LO 16/20 was
converted to a 15 year Frontier Exploration Licence FEL 4/19
effective 1 August 2019. We have
submitted a site survey application for a drilling location. The
process began on 31 January and we hope to obtain regulatory
approval during Q4 2019. As a consequence of the time taken by the
regulatory authorities, site survey operations will be in 2020
subject to regulatory approval. We believe that there is a
compelling technical and commercial case for gas exploration in the
vicinity of the Corrib gas infrastructure and there are positive
signs for a farmout.
Ireland - Porcupine
Though the Iolar exploration well on the western flank of the
South Porcupine was unsuccessful, we believe that the geological
fundamentals of the undrilled eastern flank are different and
better. New technical work on FEL 1/17 and FEL 3/13 has enhanced
our appreciation and understanding of the Edgeworth, Ervine,
Egerton prospect complex and we will be presenting this to the
industry at the Atlantic Ireland conference in October 2019. We have secured a 12-month
extension for FEL 2/13 and await a similar extension for FEL 3/13.
We have a site survey application in process for a location on the
Edgeworth prospect in FEL 1/17. We hope to obtain regulatory
approval during Q4 2019. As a consequence of the time taken, any
site survey operations will be in 2020 and subject to regulatory
approval.
Ireland – general
Two headwinds have adversely affected the oil and gas industry
in Ireland:
- The Climate Emergency Measures Bill. Though the Bill did not
proceed, it threatened substantial investments in Atlantic Ireland
and was a significant concern.
- The time taken to obtain regulatory approvals for licence
renewals and conversions, and for operational activities such as
site surveys, has been extended substantially.
These factors have slowed the pace of industry activity and the
farmout market and it is against this backdrop that our work
continues with operations and farmouts.
The previously flagged farmout discussions continue, but given
the time elapsed and the changing local market conditions the Board
now considers it more likely that the farmin for the Inishkea
licence FEL 4/19 will be concluded first rather than three licenses
simultaneously as originally envisaged.
Morocco
Post the reporting date, we announced the award of the Inezgane
licence offshore Morocco. This
licence is in an under-explored basin with the key elements of a
working hydrocarbon system in the Lower Cretaceous. Morocco has an active oil and gas industry and
a supportive Government, with a desire to grow the sector.
Offshore, ENI and Genel are exploring just to the south of our
licence. Shell, Repsol, Sound and SDX Energy are amongst the
companies active onshore. Morocco
has good fiscal terms. Entry costs, political, regulatory and
security risks are all low.
During the initial two-year phase of the licence, Europa will
reprocess 1,300 km2 of 3D seismic data. This continues a
workflow process that we thoroughly understand having reprocessed
3,500 km2 in three seismic surveys offshore Ireland with very positive results. The
forward plan is to reprocess, interpret, build a prospect inventory
and farmout to drill.
Our decision to enter Morocco
was predicated on using the skills which our technical team have
developed in working up prospects in areas covered with modern 3D
seismic in a prospective offshore setting and presenting these to
the industry in order to attract capital investment from larger
industry players. We looked for a country where the entry costs
were low, 3D was available at low cost, and the prospectivity, and
consequential industry interest was high. We are delighted to have
secured a large and prospective block, in an area which is of keen
interest to the industry, as the presence of major oil and gas
companies in adjacent acreage demonstrates. Given the sometimes
difficult operating environment in other jurisdictions, it is a
pleasure for us to be operating in an area where the Government and
the regulators are keen to work with industry in making progress
for the country.
UK - Wressle
Our focus is on getting the Wressle oil discovery into
production. The Wressle oil development Planning Inquiry takes
place in November 2019 and the news
that North Lincolnshire Council have withdrawn from the inquiry is
positive. The operator Egdon is working hard to present a strong
case to the planning inspector and we are more hopeful than ever
that we will have the well, which was drilled in 2014, producing
oil in 2020.
Gross oil production on Wressle startup is forecast to be 500
bopd and Europa’s 30% share will more than double our current
production providing an important part of our financial
resilience.
UK - Production
We are trying to maximise our existing production from fields
that we operate. At West Firsby a workover of well WF6 was
successful and achieved oil production from a reservoir interval
which has never previously produced. We gained invaluable insights
into the practicalities of deploying drain-hole jetting technology
and this will enable us to exploit other opportunities in our
portfolio.
Conclusions
This has been a challenging year for the company in Ireland where there have been delays beyond
our control in both farmout and operational activities. On the
positive side our further studies on Inishkea confirm it to be a
potential company maker which fits well with the existing gas
producing infrastructure and importantly with Ireland’s short to
medium term energy and environmental requirements. I am optimistic
that the Wressle development in the UK will finally be completed
and brought on stream within the next period. I am also confident
that adding a new venture in the appraisal/development part of the
business will diversify the asset portfolio and provide greater
protection for the company from extraneous delays and unforeseen
events.
I would like on behalf of the Board to thank the management,
employees and consultants for their work and commitment throughout
the year.
Finally, may I thank our shareholders for their support and
confidence in the company going forward.
Simon Oddie
Chairman
Operations
Offshore Ireland: Exploration
Slyne Basin: FEL 4/19 (Inishkea)
The Inishkea gas prospect in FEL 4/19 has been the focus of
substantial technical, commercial and operations work during the
year and remains the Company’s flagship project. Inishkea is a
large, low risk gas prospect close to gas infrastructure and in a
country with a robust demand for gas.
Ireland has a growing economy
and its demand for energy and electricity is forecast to rise. The
Government has announced its firm commitment to phase out coal from
the Irish generating mix by 2025, and the 915 MW currently
generated by coal at the Moneypoint power station is likely to be
replaced by gas-fired power generation. Gas will be a key part of
the Irish energy transition providing baseload and back up to
renewables. As Minister Bruton said on 25
July 2019 in www.thejournal.ie “There’s no doubt if we had a
gas find beside Corrib and could continue to supply from Corrib
that would be of immense benefit to us in that transition, it would
allow us to have gas as a transition fuel because when the wind
doesn’t blow and the sun doesn’t shine you need a transition
fuel”.
The Irish Government approved the Company’s application to
convert Licensing Option 16/20 in the Slyne basin in Atlantic
Ireland to FEL 4/19. The 100% owned licence has a 15-year term
commencing from 1 August 2019.
During the year, substantial technical work was undertaken to
further de-risk and quantify prospective resources for
Inishkea. This work included Pre-Stack Depth Migration
(‘PSDM’) reprocessing of 770 km2 of 3D seismic data over
Inishkea and the Corrib gas field. The geophysical interpretation
arising from the PSDM data has been benchmarked and calibrated
against newly released Ocean Bottom Cable 3D seismic data over
Corrib. That work assigned the Inishkea prospect an estimated Gross
Mean Un-Risked Prospective Resource (‘GMUPR’) of 1.5 tcf.
Licence |
Prospect |
Play |
Gross
Un-risked Prospective Resources
(billion cubic feet) |
Low |
Best |
High |
Mean |
FEL 4/19 |
Inishkea |
Triassic gas |
244 |
968 |
3,606 |
1,528 |
Inishkea is a large fault bounded Triassic structure that lies
northwest of the Corrib gas field. The reservoir is Triassic age
sandstone sourced from the underlying Carboniferous. The trap is
provided by a combination of Triassic Uilleann Halite top seal and
fault seal. Engineering studies demonstrate strong positive
economics for a range of porosity outcomes, including outcomes
significantly poorer than Corrib. Europa’s view of porosity at
Inishkea is supported by velocity data from the new PSDM data.
Given the Company’s confidence in trap and reservoir quality and
the nearby Corrib gas field, the Company assigned Inishkea a
one-in-three chance of success.
Inishkea is in relatively shallow water in a proven gas play
18km from the Corrib infrastructure connecting it to the 350
million cubic feet of gas per day Bellanaboy gas processing
plant. Corrib field production is in decline. During Q2 2019
average production was 245 mmscf/d and there is growing spare
capacity in the infrastructure that a new discovery could
potentially take advantage of. Inishkea offers a low risk, high
impact exploration prospect that can be potentially fast tracked to
commercialisation.
A drilling location for a first exploration well on Inishkea
(18/20-H) has been identified and the well engineering design is
completed. There is a robust, low risk seismic tie for the Corrib
Sandstone reservoir back to the Corrib gas field. Europa
intended to acquire a site survey in summer 2019 and began the
regulatory consent process in January
2019. We remain hopeful that regulatory consent will be
obtained during Q4 2019. Unfortunately, the delay in granting
permission for this survey means that site survey operations will
likely take place in 2020 and that any drilling will be from 2021
at the earliest.
Elsewhere on FEL 4/19 the Corrib North structure containing the
18/20-7 gas discovery well drilled by Shell in 2010 may be upgraded
to contingent resources pending further engineering evaluation.
Discovered Gas Initially In Place (“GIIP”) is provided in the table
below:
Licence |
Prospect |
Play |
Gross
discovered GIIP
(billion cubic feet) |
Low |
Best |
High |
FEL 4/19 |
Corrib North |
Triassic gas |
5 |
41 |
208 |
South Porcupine Basin: FELs 1/17,
2/13 and 3/13
Europa holds four licences in the South Porcupine Basin.
These include three operated licences, FELs 1/17, 2/13 and 3/13,
which are estimated to hold gross mean un-risked prospective
resources of 4.3 billion barrels of oil equivalent (‘boe’) across
our top nine prospects, including firm drilling targets Edgeworth
in FEL 1/17, Wilde in 3/13 and Kiely
East in 2/13. The volumetrics are based on prospect mapping
utilising the 2017 and 2018 reprocessed PSDM 3D seismic data that
we originally acquired in 2013. This has resulted in a marked
improvement in seismic quality and a substantial de-risking of the
prospect inventory.
The table below summarises the GMUPR across selected prospects
in FELs 1/17, 2/13 and 3/13:
Licence |
Prospect |
Play |
Gross Un-risked Prospective Resources
(mmboe) * |
|
Low |
Best |
High |
Mean |
|
FEL 1/17 |
Ervine |
Pre-rift |
63 |
159 |
363 |
192 |
|
FEL 1/17 |
Edgeworth |
Pre-rift |
49 |
156 |
476 |
225 |
|
FEL 1/17 |
Egerton |
Syn-rift |
59 |
148 |
301 |
167 |
|
|
|
|
|
|
|
|
|
FEL 3/13 |
Beckett |
mid-Cretaceous
Fan |
111 |
758 |
4,229 |
1,719 |
|
FEL 3/13 |
Shaw + |
mid-Cretaceous
Fan |
20 |
196 |
1,726 |
747 |
|
FEL 3/13 |
Wilde |
Early Cretaceous
Fan |
45 |
241 |
1,082 |
462 |
|
|
|
|
|
|
|
|
|
FEL 2/13 |
Kiely East
+ |
Pre-rift |
52 |
187 |
612 |
280 |
|
FEL 2/13 |
Kiely West
+ |
Pre-rift |
23 |
123 |
534 |
225 |
|
FEL 2/13 |
Kilroy
+ |
Cret. Slope Apron |
37 |
177 |
734 |
312 |
|
|
|
|
|
|
|
|
|
Total |
4,329 |
|
*million barrels of oil equivalent. The hydrocarbon system
is considered an oil play and mmboe is used to take account of
associated gas. However, due to the significant uncertainties
in the available geological information, there is a significant
possibility of gas charge. |
|
|
+prospect extends outside licence, volumes are
on-licence |
|
FEL 3/13 and FEL 1/17 are considered our most prospective
licences in the South Porcupine and our top ranked prospects are
the Edgeworth Ervine fault block complex in FEL 1/17. The
application process for a site survey on Edgeworth commenced in
February 2019 and remains
ongoing.
The Government approved the Company’s application for a 12 month
extension to the First Phase of FEL 2/13 to 4 July 2020. The Company’s application for a 12
month extension to the First Phase of FEL 3/13 remains under
Government consideration.
The next steps for FEL 2/13 include integration of recently
purchased CREAN 3D seismic data with particular focus on mapping
the extension of Kiely East into
open acreage to the south of the licence. The application process
for a site survey on Kiely East
commenced in February 2019 and
remains ongoing.
South Porcupine Basin: LO 16/19
Europa holds a 30% interest in the Cairn-operated LO 16/19 on
the west side of the South Porcupine. 3D seismic was acquired in
mid-2017 and a final processed product was delivered in Q4 2018.
Following the farmout in April 2017,
Europa is carried on this work programme by Cairn Energy up to a
cap of US$6 million. Prospect
mapping is in progress and the prospect inventory is expected later
in 2019.
The Iolar well
The South Porcupine basin is a large basin (circa 50,000
km2) with only four exploration wells drilled since
1988. The most recent well is the CNOOC operated Iolar well in FEL
3/18 on the west flank of the basin and drilled during summer 2019.
On 22 August 2019 CNOOC advised that
the well had been plugged and abandoned as a dry hole. The
pre-drill public domain information indicated the well was to be
drilled in 2,162 m water depth, with
a forecast TD of 6,174 mtvdss and with a primary target of Middle
Jurassic sandstones. The well was drilled as a “tight hole” which
means that the partners have not released any detailed information
on its results post drilling. Consequently, there is no information
available as yet regarding actual stratigraphy, formation tops,
source rocks, reservoir and hydrocarbon indications encountered in
the well.
Europa believes that its Middle Jurassic prospects in FEL 3/13
and FEL 1/17 on the undrilled east flank of the South Porcupine are
more prospective, and lower risk than prospects on the west flank
of the basin. Whilst the 417 mmbo Edgeworth Ervine fault block
complex is also targeting marine Middle Jurassic sandstone
reservoirs crucially at this location we expect to encounter top
seal provided by Upper Jurassic mudstones, and the basinward
dipping fault blocks are likely to be in communication with mature,
oil prone Upper Jurassic source rocks.
Farmout
As previously announced, we have negotiated farmout agreements
in respect of FEL 4/19, FEL 1/17 and FEL 3/13 with the NW Europe division of a major oil company (the
‘Major’). Europa is in regular contact with the Major and
continues to await a final investment decision from the Major’s
head office. However, owing to the length of time it
has taken to complete the farmout agreement, we have continued to
market the licences to other potential partners. We are focused on
being in a position to drill Inishkea at the earliest opportunity
and farmout discussions are ongoing with a number of parties,
including the Major. We believe that the ‘Major’ is considering
prioritising conclusion of the FEL 4/19 Inishkea farmout and in
advance of the South Porcupine licences FEL 1/17 and FEL 3/13.
The Future of Exploration in
Ireland
On 23 September 2019 at the UN
Climate Action Summit in New York An Taoiseach Leo Varadkar stated the Irish Government’s
intention to phase out oil exploration licences in the future, but
not gas exploration. The Irish Offshore Operators Association
(IOOA), the representative organisation for the
Irish offshore oil and gas industry, sought clarification from
the Government on behalf of its members. On 24 September the
Government confirmed to IOOA that its proposals 'will relate to
future applications' and that its 'existing licences will remain
valid'.
All of Europa’s existing licences in Atlantic Ireland are
therefore valid, and will continue to be valid, irrespective of
whether exploration is for oil or gas.
IOOA are awaiting a meeting with Government to outline their
proposals on how future licensing rounds will be implemented. We
understand that future applications for gas exploration licences
may be permitted.
Our flagship project in Atlantic Ireland is the 1.5 tcf Inishkea
gas prospect and we note in the letter of 20 September from
Ireland’s Climate Change Advisory Council and tweeted by Minister
Bruton at the UN on 23 September the comment that “Recovery of
newly discovered gas reserves may lead to improved energy security,
lower energy costs, and facilitate reductions in greenhouse gas
emissions during the transition to a low carbon economy”. We
consider this a positive statement for Irish gas exploration.
UK - Onshore Production
Our oil production in onshore UK and the revenue streams that it
generates is an important part of the company’s portfolio. We are
actively maximising production from our existing fields and most
importantly we are finally making positive progress towards
obtaining planning approval for the Wressle oil development.
East Midlands: West Firsby; Crosby
Warren; Whisby-4
During the period, initiatives were undertaken to maximise
production at the West Firsby oil field including a workover of the
WF6 well utilising a drain hole jetting technique for the
first-time onshore UK. The workover involved jetting sixteen
90m length drain holes and setting a
new record for hole angle. Having previously produced zero oil, WF6
is currently producing 7 bopd net to Europa. Whilst a comparatively
small quantum of oil at $60 per
barrel oil price it is an increase of around 8% in our UK
production. Most importantly we have gained unique insights into
utilisation and deployment of the technology and we are seeking
other opportunities where the quantum increase in production will
be more substantial.
An average of 91 boepd (2018: 94 boepd) was recovered from the
three UK onshore fields. Production was down as a result of natural
decline, but partially offset by the contribution from the WF6
well.
East Midlands: PEDL180 (Wressle);
PEDL182 (Broughton North)
Europa has a 30% working interest in licence PEDL 180 in the
East Midlands which holds the Wressle oil discovery, alongside
Egdon (operator, 30%), Union Jack Oil (27.5%), and Humber Oil &
Gas Limited (12.5%).
An inquiry to hear the Company’s appeal against the refusal of
planning consent for the development of the Wressle oil field by
the planning committee of North Lincolnshire Council (‘NLC’) is
scheduled to commence on 5 November
2019. Following a closed meeting held on 17 July 2019, we learnt that NLC will not present
evidence at the inquiry and has withdrawn its case following
agreement of acceptable planning conditions.
We welcome the NLC decision and look forward to continuing to
support the operator Egdon, as it seeks to obtain planning
permission via the appeal and prepares to present the case for the
development of the Wressle oil field to the independent
professional Planning Inspector.
The Wressle oil field was discovered in 2014 by the Wressle-1
well. During testing, a total of 710 boepd were recovered
from three separate reservoirs, the Ashover Grit, the Wingfield
Flags and the Penistone Flags. In September 2016, a Competent Person’s Report
(‘CPR’) provided independent estimates of reserves and contingent
and prospective oil and gas resources for the Wressle discovery of
2.15 million stock tank barrels classified as discovered (2P+2C).
Under the proposed development plan, Wressle is anticipated
to produce at an initial gross rate of 500 bopd. If that were
achieved, Europa would receive a net 150 bopd from Wressle and
Europa’s UK production would increase to around 240 bopd. Most
importantly our revenue from production would more than double and
make an important contribution to the financial stability of the
company.
East Midlands: PEDL181
PEDL181 provides exposure to the hydrocarbon potential of the
Humber basin. The licence has technical synergy with the adjacent
PEDL334 which was awarded to an Egdon Resources-led group in the
14th Round for the purpose of conventional and unconventional
exploration.
East Midlands: PEDL299
(Hardstoft)
PEDL299 contains the Hardstoft oil field which was discovered in
1919 by the UK’s first ever exploration well. Hardstoft
produced 26,000 barrels of oil from Carboniferous limestone
reservoirs in the 1920s. We believe there is more oil to be
recovered from the Hardstoft structure. Gross 2C contingent
resources of 3.1 mmboe and gross 3C contingent resources of 18.5
mmboe were identified in a CPR issued by joint operation partner
Upland Resources. We believe that application of modern production
testing and drilling methodologies could well lead to commercial
oil flowrates being achieved. Europa’s interest in PEDL299, which
is restricted to the conventional prospectivity including
Hardstoft, is 25%, alongside Upland 25% and INEOS, the operator,
50%.
Cleveland Basin: PEDL343 (Cloughton)
PEDL343 contains the Cloughton gas discovery, which was drilled
by Bow Valley in 1986 and flowed gas to surface on production test
from conventional Carboniferous sandstone reservoirs. Europa
regards Cloughton as a gas appraisal opportunity with the critical
challenge being to obtain commercial flowrates from future
production testing operations. Europa holds a 35% interest in
PEDL343 alongside Arenite 15%, Third Energy 20% (operator), Egdon
Resources 17.5% and Petrichor Energy 12.5%.
Weald Basin: PEDL143 (Holmwood)
We completed the sale of our 20% interest in the UK onshore
PEDL143 exploration licence to AIM-traded UK Oil & Gas PLC
(‘UKOG’) for a consideration of £300,000, satisfied through the
issue of 25,951,557 shares (‘Consideration Shares’) in UKOG. The
Consideration Shares are subject to a six-month orderly market
provision.
New Ventures
In Morocco we have signed the
Inezgane Offshore exploration permit with ONHYM (The National
Office of Hydrocarbons and Mines) on 17 September. Inezgane is on
the Atlantic Margin of Morocco and
represents a new high impact exploration component to our portfolio
of licences.
The next step is formal ratification by the Ministry of Energy
and Ministry of Finance. This is expected to be obtained during
November and the eight-year licence will formally be given its
start date. In the interim period work has already started. ONHYM
is already providing Europa with the relevant 3D, 2D, well data and
regional geological information.
The first phase of the licence is for two years during which
time we will reprocess 1,300 km2 3D seismic, build the
prospect inventory, define a drillable prospect and farmout to
drill in Phase 2. The cost of the first phase programme is expected
to be around £500,000.
Inezgane Offshore is located in the Agadir Basin on the Atlantic
Coast of Morocco. Water depths
vary from 600-2,000m and the licence
is very large; 11,288 km2 in area. Morocco’s Atlantic
coastline is ~1,800 km in length, only 10 deep-water wells have
been drilled and only three of them have penetrated the Lower
Cretaceous reservoir interval that we are interested in, none of
them optimally. We consider the Atlantic Coast to be underexplored
and that the potential of the Lower Cretaceous play has been
previously overlooked by the industry. The Atlantic region of
Morocco has already demonstrated
world class source rocks. Good quality lower Cretaceous reservoirs
are exposed on the surface in the nearby Canary Islands and in the
Moroccan onshore. We believe that there is an optimal combination
of thick reservoir, source rock and trap in our licence with
potential to host prospects with resources in excess of 250 mmbo.
Morocco has amongst the best
fiscal terms in the world and whilst deep water the operating
environment is more benign compared to West of Shetland or Atlantic
Ireland.
We have been provided with a large volume of modern 3D seismic
data and we will be reprocessing around 1,300 km2
focused on maturing the Falcon, Sandpiper prospects (amongst
others) to drillable status.
This region of the Atlantic Coast in Morocco is already a focus for industry
interest. To the south of Inezgane Genel has acquired 3,500
km2 of 3D seismic in Sidi Moussa Offshore and ENI have
farmed out a 30% interest to Qatar Petroleum in Tarfaya Offshore.
Immediately to the north of and abutting Inezgane is the Mogador
Offshore licence which is under active negotiation. We await with
interest the announcement of an award of an exploration licence
here. We consider that in Inezgane, we have a very prospective
licence in an area that is re-emerging as an industry exploration
hotspot.
We believe that the main reason that the exploration industry’s
major oil and gas companies have turned their interest to offshore
Morocco again is that it shares
similar geology and prospectivity to other Atlantic margin
countries like Guyana and
Senegal. Like Morocco these countries also had intermittent
exploration drilling since the 1960s and were also “off radar”
until very recent discoveries changed that mindset. In offshore
Guyana in excess of 5 billion
barrels of oil has been discovered and in offshore Senegal/Mauritania in excess of 50TCF and 1 billion
barrels of oil has been discovered in recent years. We are
optimistic that the Moroccan offshore can become a similar
resurgence story.
Our work programme is one that plays to our technical strengths
given our previous experience reprocessing three 3D surveys in
Ireland against a tight timeframe
and with excellent results. In due course we will be seeking to
bring in a farmin partner and even at this early stage there is
significant industry interest in our licence.
Non-financial Key Performance
Indicators (‘KPIs’)
There were no reportable accidents or incidents in the year
(2018: zero).
There were no new licence awards in the year, the Morocco
Inezgane Offshore exploration permit was signed post year end.
(2018: zero).
Financials
Revenue was £1.7 million (2018: £1.6 million). The average oil
price achieved was US$66.7/bbl (2018:
US$64.5/bbl) and the average Sterling
exchange rate was US$1.29 (2018:
US$1.35). An average of 91 boepd
(2018: 94 boepd) was recovered from our three UK onshore fields.
Production was down as a result of natural decline, but partially
offset by a contribution from the West Firsby WF6 well following
the workover.
Stringent cost controls continue to be implemented but
additional one-off cost was incurred during the WF6 workover. Cost
of sales was £1,682,000 (2018: £1,365,000).
Administrative expenses of £811,000 (2018: £967,000) included
£102,000 on new licence evaluations (2018: £230,000).
The placing and open offer announced in November 2018 raised combined £4,299,000 gross
and £3,962,000 after expenses (including £17,000 of non-cash
expenses).
Net cash spent on operating activities was £661,000 (2018: cash
spent £479,000).
Purchase of intangible fixed assets of £1,973,000 (2018:
£1,336,000) was largely spent advancing the Irish portfolio.
The Group’s cash balance at 31 July
2019 was £2.9 million (31 July
2018: £1.8 million).
The Group’s cash flow forecast up to 31
December 2020 considers the continuing and forecast cash
inflow from the Group’s producing assets, the cash held by the
Group at the year end, less administrative expenses and planned
capital expenditure. Based on that forecast, the Directors have
concluded that Group will be able to continue as a going concern
and meet its obligations as and when they fall due. The critical
assumption in reaching that conclusion is that the Wressle planning
appeal scheduled for 5 November 2019
has a positive outcome and production commences at the forecasted
rate in 2020. In the absence of incremental production from Wressle
in 2020 then additional funding by the issuance of shares or sale
of assets would be required. If additional funding was not
available there is a risk that commitments could not be fulfilled,
and assets would be relinquished.
HGD Mackay
Chief Executive Officer
The financial information set out below does not constitute the
company's statutory accounts for 2019 or 2018. The financial
information has been prepared in accordance with International
Financial Reporting Standards (IFRS) as adopted by the European
Union on a basis that is consistent with the accounting policies
applied by the group in its audited consolidated financial
statements for the year ended 31 July
2019. Statutory accounts for the years ended 31 July 2018 and 31 July
2017 have been reported on by the Independent Auditors.
The Independent Auditors' Report on the Annual Report and
Financial Statements for 2019 and 2018 were unqualified, but
included a material uncertainty in relation to going concern, and
did not contain a statement under 498(2) or 498(3) of the Companies
Act 2006.
Statutory accounts for the year ended 31
July 2018 have been filed with the Registrar of Companies.
The statutory accounts for the year ended 31
July 2019 will be delivered to the Registrar in due
course.
Consolidated statement of comprehensive income
For the year ended 31 July |
|
2019 |
2018 |
|
Note |
£000 |
£000 |
|
|
|
|
Revenue |
|
1,713 |
1,634 |
Cost of sales |
|
(1,682) |
(1,365) |
Impairment of producing
fields |
2 |
- |
(142) |
Exploration write-back /
(write-off) |
1 |
270 |
(1,289) |
Total cost of sales |
|
(1,412) |
(2,796) |
|
|
-------- |
-------- |
Gross profit/(loss) |
|
301 |
(1,162) |
|
|
|
|
Administrative expenses |
|
(811) |
(967) |
Finance income |
|
43 |
10 |
Finance expense |
|
(187) |
(171) |
|
|
-------- |
-------- |
Loss before taxation |
|
(654) |
(2,290) |
|
|
|
|
Taxation charge |
|
- |
(341) |
|
|
-------- |
-------- |
Loss for the
year |
|
(654) |
(2,631) |
|
|
=========== |
========= |
Other comprehensive
income |
|
|
|
Items which will not
be reclassified to profit /(loss) |
|
|
|
Loss on investment
revaluation |
|
(59) |
- |
|
|
-------- |
-------- |
Total other
comprehensive loss |
|
(59) |
- |
|
|
=========== |
========= |
Total comprehensive loss for the
year attributable to the equity shareholders of the parent |
|
(713) |
(2,631) |
|
|
=========== |
========= |
|
|
|
|
Consolidated statement of financial position
As at 31 July |
|
2019 |
2018 |
|
Note |
£000 |
£000 |
Assets |
|
|
|
Non-current assets |
|
|
|
Intangible assets |
1 |
7,818 |
5,959 |
Property, plant and equipment |
2 |
575 |
668 |
|
|
-------- |
-------- |
Total non-current
assets |
|
8,393 |
6,627 |
|
|
-------- |
-------- |
Current
assets |
|
|
|
Investments |
|
241 |
- |
Inventories |
|
19 |
20 |
Trade and other receivables |
|
315 |
471 |
Restricted cash |
|
251 |
- |
Cash and cash equivalents |
|
2,905 |
1,771 |
|
|
-------- |
-------- |
|
|
3,731 |
2,262 |
|
|
-------- |
-------- |
Total
assets |
|
12,124 |
8,889 |
|
|
======== |
======== |
Liabilities |
|
|
|
Current liabilities |
|
|
|
Trade and other payables |
|
(1,086) |
(1,299) |
|
|
-------- |
-------- |
Total current
liabilities |
|
(1,086) |
(1,299) |
|
|
-------- |
-------- |
Non-current
liabilities |
|
|
|
Long-term provisions |
|
(2,917) |
(2,735) |
|
|
-------- |
-------- |
Total non-current
liabilities |
|
(2,917) |
(2,735) |
|
|
-------- |
-------- |
Total liabilities |
|
(4,003) |
(4,034) |
|
|
-------- |
-------- |
Net assets |
|
8,121 |
4,855 |
|
|
======== |
======== |
|
|
|
|
Capital
and reserves attributable to equity holders
of the parent |
|
|
|
Share capital |
|
4,447 |
3,014 |
Share premium |
|
21,010 |
18,481 |
Merger reserve |
|
2,868 |
2,868 |
Retained deficit |
|
(20,204) |
(19,508) |
|
|
-------- |
-------- |
Total
equity |
|
8,121 |
4,855 |
|
|
======== |
=========== |
These financial statements were approved by the Board of
Directors and authorised for issue on 9
October 2019 and signed on its behalf by:
P Greenhalgh, Finance Director
Company registration number 5217946
Consolidated statement of changes in equity
Attributable to the equity holders of the parent
|
Share
capital |
Share
premium |
Merger
reserve |
Retained
deficit |
Total
equity |
|
£000 |
£000 |
£000 |
£000 |
£000 |
Balance at 1 August
2017 |
3,014 |
18,481 |
2,868 |
(16,888) |
7,475 |
Comprehensive loss for the year |
|
|
|
|
|
Loss for the year
attributable to the equity shareholders of the parent |
- |
- |
- |
(2,631) |
(2,631) |
|
-------- |
-------- |
-------- |
-------- |
--------- |
Total
comprehensive loss for the year |
- |
- |
- |
(2,631) |
(2,631) |
|
-------- |
-------- |
-------- |
-------- |
--------- |
Contributions by and
distributions to owners |
|
|
|
|
|
Share based payment (note 21) |
- |
- |
- |
11 |
11 |
|
-------- |
-------- |
-------- |
-------- |
-------- |
Total contributions by and
distributions to owners |
- |
- |
- |
11 |
11 |
|
-------- |
-------- |
-------- |
-------- |
--------- |
Balance at 31 July 2018 |
3,014 |
18,481 |
2,868 |
(19,508) |
4,855 |
|
======== |
======== |
======== |
======== |
======== |
|
Share
capital |
Share
premium |
Merger
reserve |
Retained
deficit |
Total
equity |
|
£000 |
£000 |
£000 |
£000 |
£000 |
Balance at 1 August 2018 |
3,014 |
18,481 |
2,868 |
(19,508) |
4,855 |
Comprehensive loss for the
year |
|
|
|
|
|
Loss for the year
attributable to the equity shareholders of the parent |
- |
- |
- |
(654) |
(654) |
Other comprehensive
loss attributable to the equity shareholders of the parent |
- |
- |
- |
(59) |
(59) |
|
-------- |
-------- |
-------- |
-------- |
--------- |
Total comprehensive
loss for the year |
- |
- |
- |
(713) |
(713) |
|
-------- |
-------- |
-------- |
-------- |
--------- |
Contributions by and
distributions to owners |
|
|
|
|
|
Issue of share capital |
1,433 |
2,546 |
- |
- |
3,979 |
Issue of share options(note 21) |
- |
(17) |
- |
17 |
- |
Share based payment (note 21) |
- |
- |
- |
- |
- |
|
-------- |
-------- |
-------- |
-------- |
-------- |
Total contributions by and
distributions to owners |
1,433 |
2,529 |
- |
17 |
3,979 |
|
-------- |
-------- |
-------- |
-------- |
--------- |
Balance at 31 July 2019 |
4,447 |
21,010 |
2,868 |
(20,204) |
8,121 |
|
======== |
======== |
======== |
======== |
======== |
Consolidated statement of cash flows
For the year ended 31 July |
|
2019 |
2018 |
|
Note |
£000 |
£000 |
Cash flows used in operating
activities |
|
|
|
Loss after tax from continuing
operations |
|
(654) |
(2,631) |
Adjustments for: |
|
|
|
Share based payments |
|
- |
11 |
Depreciation |
2 |
94 |
72 |
Impairment of producing field |
2 |
- |
142 |
Exploration (write back)/
write-off |
1 |
(270) |
1,289 |
Finance income |
|
(43) |
(10) |
Finance expense |
|
187 |
171 |
Taxation charge |
|
- |
341 |
Decrease in trade and other
receivables |
|
7 |
69 |
Decrease/(increase) in
inventories |
|
1 |
(6) |
Increase in trade and other
payables |
|
17 |
73 |
|
|
-------- |
-------- |
Net cash used in
operations |
|
(661) |
(479) |
|
|
|
|
Income taxes paid |
|
- |
- |
|
|
-------- |
-------- |
Net cash used in operating
activities |
|
(661) |
(479) |
|
|
=========== |
=========== |
Cash flows used in investing
activities |
|
|
|
Purchase of property, plant and
equipment |
|
(1) |
- |
Purchase of intangible assets |
|
(1,973) |
(1,336) |
Cash guarantee re Morocco |
|
(251) |
- |
Sale of part interest in licence –
associated costs |
|
(8) |
- |
Interest received |
|
16 |
10 |
|
|
-------- |
-------- |
Net cash used in investing
activities |
|
(2,217) |
(1,326) |
|
|
=========== |
=========== |
Cash flows from/(used in) financing
activities |
|
|
|
Gross proceeds from issue of share
capital |
|
4,299 |
- |
Costs incurred on issue of share
capital |
|
(320) |
- |
Decrease in payables relating to
share capital issue costs |
|
- |
(16) |
Finance costs |
|
(5) |
(3) |
|
|
-------- |
-------- |
Net cash from/(used in) financing
activities |
|
3,974 |
(19) |
|
|
=========== |
=========== |
|
|
|
|
Net increase/(decrease) in cash
and cash equivalents |
|
1,096 |
(1,824) |
Exchange gain on cash and cash
equivalents |
|
38 |
4 |
Cash and cash equivalents at
beginning of year |
|
1,771 |
3,591 |
|
|
-------- |
-------- |
Cash and cash equivalents at end
of year |
|
2,905 |
1,771 |
|
|
=========== |
=========== |
Notes to the financial statements
1. Intangible assets
|
2019 |
2018 |
|
£000 |
£000 |
At 1 August |
5,959 |
5,276 |
Additions |
1,869 |
1,972 |
Disposal |
(10) |
- |
Exploration write-off |
- |
(1,289) |
|
-------- |
-------- |
At 31 July |
7,818 |
5,959 |
|
========= |
========= |
Intangible assets comprise the Group’s pre-production
expenditure on licence interests as follows:
|
2019
£000 |
2018
£000 |
Ireland FEL 2/13 (Doyle A, B, C,
Kilroy, Keane & Kiely) |
1,280 |
799 |
Ireland FEL 3/13 (Beckett, Wilde,
Shaw) |
1,255 |
1,093 |
Ireland FEL 1/17 |
636 |
453 |
Ireland LO 16/19 |
89 |
71 |
Ireland FEL 4/19 (Inishkea) |
1,259 |
454 |
Ireland LO 16/22 |
213 |
125 |
UK PEDL143 (Holmwood) |
- |
10 |
UK PEDL180 (Wressle) |
2,867 |
2,745 |
UK PEDL181 |
101 |
95 |
UK PEDL182 (Broughton North) |
29 |
26 |
UK PEDL299 (Hardstoft) |
12 |
12 |
UK PEDL343 (Cloughton) |
77 |
76 |
|
---------- |
---------- |
Total |
7,818 |
5,959 |
|
========= |
========= |
Disposal |
|
|
UK PEDL143 (Holmwood) |
10 |
- |
|
========= |
========= |
Exploration write-off |
|
|
UK PEDL143 (Holmwood) |
- |
1,145 |
Ireland LO 16/21 |
- |
97 |
UK Block 41/24 |
- |
47 |
|
-------- |
-------- |
Total |
- |
1,289 |
|
======== |
========== |
Exploration write-back
On 8 May 2019 the Group sold its
interest in PEDL143 (Holmwood) to UK Oil & Gas Plc (‘UKOG’) for
25,951,557 shares in UKOG at 1.156p per share.
|
2019 |
2018 |
|
£000 |
£000 |
Consideration for the PEDL143
interest |
300 |
- |
Disposal costs |
(20) |
- |
Book value of remaining
interest |
(10) |
- |
|
-------- |
-------- |
Exploration write-back |
270 |
- |
|
========= |
========= |
If the Group is not able to or elects not to continue in any
other licence, then the impact on the financial statements will be
the impairment of some or all of the intangible assets disclosed
above.
2. Property, plant & equipment
|
Furniture &
computers |
Producing
fields |
Total |
|
£000 |
£000 |
£000 |
Cost |
|
|
|
At 1 August 2017 |
52 |
10,790 |
10,842 |
Additions |
- |
- |
- |
|
--------- |
--------- |
--------- |
At 31 July 2018 |
52 |
10,790 |
10,842 |
|
|
|
|
Additions |
1 |
- |
1 |
|
--------- |
--------- |
--------- |
At 31 July 2019 |
53 |
10,790 |
10,843 |
|
======== |
======== |
======== |
Depreciation, depletion and
impairment |
|
|
|
At 1 August 2018 |
49 |
9,911 |
9,960 |
Charge for year |
2 |
70 |
72 |
Impairment in year |
- |
142 |
142 |
|
--------- |
--------- |
--------- |
At 31 July 2018 |
51 |
10,123 |
10,174 |
|
|
|
|
Charge for year |
1 |
93 |
94 |
Impairment in year |
- |
- |
- |
|
--------- |
--------- |
--------- |
At 31 July 2019 |
52 |
10,216 |
10,268 |
|
======== |
======== |
======== |
Net Book Value |
|
|
|
At 31 July 2017 |
3 |
879 |
882 |
|
======== |
======== |
======== |
At 31 July 2018 |
1 |
667 |
668 |
|
======== |
======== |
======== |
At 31 July 2019 |
1 |
574 |
575 |
|
======== |
======== |
======== |
The producing fields referred to in the table above are the
production assets of the Group, namely the oilfields at Crosby
Warren and West Firsby, and the Group’s interest in the Whisby W4
well, representing the Group’s three cash generating units.
The carrying value of each producing field was tested for
impairment by comparing the carrying value with the value-in-use.
The value-in-use was calculated using a discounted cash flow model
with production decline rates of 7-12%, Brent crude prices rising
from US$70 per barrel in 2020 to
US$74 per barrel in 2022 increasing
by inflation from 2022 onwards and a pre-tax discount rate of 20%.
The pre-tax discount rate is derived from a post-tax rate of 10%
and is high because of the applicable rates of tax in the UK. Cash
flows were projected over the expected life of the fields which is
expected to be longer than 5 years. There was no impairment in the
year (2018: £142,000 impairment relating to the West Firsby
site).
Sensitivity to key assumption changes
Variations to the key assumptions used
in the value-in-use calculation would cause impairment of the
producing fields as follows:
|
Further impairment
of producing fields
£000 |
Production decline rate (current
assumption 7-12%) |
|
12% |
312 |
15% |
602 |
Brent crude price per
barrel (current assumption US$70/bbl in 2020 rising to
US$74/bbl in 2022) |
|
$70 flat |
168 |
$65 flat |
392 |
Pre-tax discount
rate (current assumption 20%)
25% |
62 |
30% |
29 |
* * ENDS * *
This announcement
contains inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014.
For further information please visit www.europaoil.com or
contact:
Hugh Mackay |
Europa |
+ 44 (0) 20 7224 3770 |
Phil Greenhalgh |
Europa |
+ 44 (0) 20 7224 3770 |
Matt Goode |
finnCap Ltd |
+ 44 (0) 20 7220 0500 |
Simon Hicks |
finnCap Ltd |
+ 44 (0) 20 7220 0500 |
Camille Gochez |
finnCap Ltd |
+ 44 (0) 20 7220 0500 |
Frank Buhagiar |
St Brides Partners Ltd |
+ 44 (0) 20 7236 1177 |
Susie Geliher |
St Brides Partners Ltd |
+ 44 (0) 20 7236 1177 |