TIDMBOIL
RNS Number : 2101P
Baron Oil PLC
24 May 2018
Market Abuse Regulation (MAR) Disclosure
Certain information contained in this announcement would have
been deemed inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014 until the release of this
announcement.
24 May 2018
Baron Oil Plc
("Baron Oil" or "the Company")
Final Results for the Year Ended 31 December 2017
Baron Oil (AIM: BOIL), the oil and gas company with a strategy
of exploring near-term drilling opportunities in established
producing areas, is pleased to announce its audited financial
results for the year ended 31 December 2017.
Key Points:
-- Net loss before taxation of GBP2,058,000 (2016: loss of
GBP175,000) with an attributable after-tax loss to equity
shareholders of GBP1,539,000 (2016: loss of GBP32,000)
-- End of year free cash balance of GBP3,873,000 (US$5,225,000);
(2016: GBP2,158,000 (US$2,662,000))
-- Increase in cash reserves arises from release of guarantee in
Peru of GBP2,674,000 offset by an operational cash outflow of
GBP959,000
-- Administration costs reduced 27% to GBP510,000 (2016:
GBP700,000) excluding exchange rate movement which gave rise to an
exchange loss of GBP508,000 (2016: gain of GBP1,131,000)
-- Relinquishment of Peru block Z-34 and recovery of the US$3.6
million guarantee during the year enabled the Company to execute a
change in strategic direction
-- Post year-end farmin to Colter and Wick prospects in UK
Offshore will see a well drilled on each in 2018
-- Farmout efforts continue for the El Barco prospect in Peru block XXI
-- Host Government delays continue to hamper progress on the SE Asia initiative
-- Bill Colvin resigned as Chairman in February 2018 and Andy
Yeo was appointed as a non-executive director in May 2018.
Commenting on the results, Malcolm Butler, Chairman & CEO,
said:
"During 2017 we were finally able to extract the Company from
the problems created by our partnership with Union Oil & Gas
Group in Peru. The fact that we were able to relinquish block Z-34
and reclaim the entire amount of the US$3.6 million guarantee bond
made for a very satisfactory end to the year. That put us in a
position to execute a change in direction of the Company and take
interests in the Colter and Wick prospects in the UK Offshore, both
close to existing oilfields and capable of rapid development if
successful. A well is planned on each of these prospects in 2018
and success on either would provide shareholders with a meaningful
uplift in the asset value of the Company. In the meantime, we
continue to seek a partner for Peru block XXI and hope we will be
able to drill the El Barco prospect in due course.
"The composition of the board changed after yearend. We were
very sorry to accept the resignation of Bill Colvin as Chairman but
pleased that Andy Yeo has now joined as an independent
non-executive director.
"The Company remains fully funded for its current planned
activities in 2018 and we look forward to the commencement of an
exciting drilling programme in the UK later in the year."
For further information, please contact:
+44 (0)1892
Baron Oil Plc 838 948
Malcolm Butler, Chairman & Chief Executive
Officer
+44 (0)20 3470
SP Angel Corporate Finance LLP 0470
Nominated Adviser and Broker
Lindsay Mair, Richard Hail, Richard
Redmayne
CHAIRMAN'S STATEMENT & OPERATIONS REPORT
FINANCE AND FINANCIAL RESULTS
The net result for the year was a loss before taxation of
GBP2,058,000, which compares to a loss of GBP175,000 for the
preceding financial year, and the loss after taxation attributable
to Baron Oil shareholders was GBP1,539,000, compared to a loss of
GBP32,000 in the preceding year.
Turnover for the year was GBPnil (2016: GBPnil), there being no
sales activity since the cessation of production in July 2015 from
the Nancy-Burdine-Maxine fields ("NBM") in Colombia and the expiry
of the licence in October 2015.
During 2017, the local staff of Inversiones Petroleras de
Colombia SAS ("Invepetrol") finalised all the steps necessary to
administer the relinquishment of the licence, the clearance of
equipment from the well site and to obtain all necessary
environmental approvals. The remaining staff left the company
before the end of the year. The Group has held a 50% interest in
Invepetrol since 2014 but consolidated the results as it held
effective management control. However, during 2017 our 50% partner,
CI International Fuels, took control of the Board and, as a result,
Invepetrol has been deconsolidated. Furthermore, steps have been
taken to place Invepetrol into liquidation. The effect of
deconsolidation is to release net liabilities previously included
in the Statement of Financial Position and to give rise to a credit
to the Income Statement of GBP831,000. While the directors believe
that the Company will not have any further liabilities from
Colombia, we retain sufficient provision in the Statement of
Financial Position against any unforeseen eventualities.
Exploration and evaluation expenditure written off included in
the Income Statement amounts to GBP109,000. This arises from
GBP90,000 in costs regarding the South East Asia Joint Study
Agreement with SundaGas, mainly relating to the period up to 31
March 2017, and residual costs of GBP19,000 on block Z-34 in Peru
(see below).
In Peru, the decision to relinquish block Z34 leads to a write
off in the Income Statement of GBP1,837,000. This reflects
primarily the write off of the US$2 million receivable from Union
Oil & Gas Group following their failure to meet their
obligation under the farm-out agreement, plus some additional
expenditure incurred locally in Peru. This should be considered in
the context of US$3.6 million being released from cash cover to
support the Z-34 guarantee to Perupetro, this amount being added to
the free cash resources of the Group as shown in the cash flow
statement.
A further effect of the write off of the Union Oil and Gas Group
receivable is a write back of the related provision for Peruvian
tax amounting to GBP519,000, this amount being credited to the
Income Statement.
Also in Peru, the Group incurred expenditure totaling GBP84,000
on our 100%-owned onshore block XXI, arising from both direct costs
and local staff and support costs. In accordance with our
accounting policy, the Group has been charging unsuccessful
exploration costs direct to the Income Statement; however, the
results of the 2015/16 2D seismic on block XXI were encouraging and
may lead to the drilling of an exploration well during 2018.
Accordingly, the Board are of the view that this phase of
exploration is ongoing and that the expenditure should remain on
the Balance Sheet as capitalised exploration and evaluation
expenditure until the results of any such well are known, the
carrying amount being GBP1,260,000.
Administration expenditure for the year was GBP510,000, down
from GBP700,000 in the preceding year, excluding the effects of
exchange rate movements. This cost saving arises from the cessation
in activities in Colombia at GBP122,000, reduced cost in Peru of
GBP49,000, with the remainder due to cost reductions in the UK.
During the year, we saw a relative weakening in the US Dollar
and, with the majority of the group's assets being denominated in
that currency, this has given rise to a loss of GBP508,000. This
compares with a gain of GBP1,131,000 in the preceding year, when
there was a major impact on the Pound Sterling following the Brexit
referendum result.
At the end of the financial year, free cash reserves of the
Group had increased to GBP3,873,000 from a level at the preceding
year end of GBP2,158,000. This increase in cash reserves arises
from the release of cash cover funds held against the guarantee in
respect of Peru block Z-34 at GBP2,674,000 (US$3,600,000), offset
by an operational cash outflow of GBP959,000.
The Group continues to pursue a conservative view of its asset
impairment policy, giving it a Balance Sheet that consists largely
of net current assets and a realistic value for its remaining
exploration assets. Given the limited cash resources, the Board
will take a prudent approach in entering into new capital
expenditures beyond those already committed to existing
ventures.
NEW EXPLORATION ACTIVITY
Following the recovery of $3.6 million from the relinquishment
of Peru block Z-34, of which details are given below, Baron has
followed a new strategy concentrating on near-term drilling
opportunities in the United Kingdom, as follows:
UNITED KINGDOM OFFSHORE LICENCE P2235 ("WICK" PROSPECT) (BARON
15%)
Baron announced on 19 February 2018 that it had signed an option
to farm in to UK Offshore Licence P2235 (Block 11/24b) containing
the Wick Prospect. This option was exercised on 13 March 2018, when
Baron signed a definitive Farmout Agreement with Corallian Energy
Limited, ("Corallian") under which the Company will pay 20% of the
costs of the Wick well, up to a maximum gross cost of GBP4.2
million, and 15% of other costs on the licence to earn a 15%
working interest in P2235. The Wick Prospect lies close to the
shore of NE Scotland, 5 kilometres north and updip from the Lybster
Field, which has been developed from onshore facilities. The
prospect has been defined by 3D seismic mapping by Baron and others
and a recent announcement by Upland Resources Limited stated it has
estimated in-place P50 Prospective Resources of around 250 million
barrels of oil (unrisked) in sands of Jurassic and Triassic age in
the licence area, a large part of which will be tested by the Wick
well. The Wick well will be drilled to a total depth of 1,250
metres subsea in a water depth of 38 metres. Baron announced on 15
May 2018 that Corallian had entered into a letter of intent with
Ensco UK Limited to provide a jack-up drilling rig to drill this
prospect in the third or fourth quarter of 2018, subject to
necessary
approvals and consents. The total well cost has increased, due
largely to more rigorous site survey requirements and substantially
higher fuel costs, and is currently estimated at GBP5.2 million.
Including a 15% share of back costs unrelated to the well, the
total payable by the Company is currently estimated at some
GBP1,020,000 to earn a 15% interest in the licence(1) .
UNITED KINGDOM OFFSHORE LICENCE P1918 ("COLTER" PROSPECT) AND
ONSHORE PEDLs 330 & 345 (BARON 5%)
Baron entered into a Farmout Agreement with Corallian on 5 March
2018 under which it will earn a 5% working interest in UK Offshore
Licence P1918, which contains the Colter Prospect, on which a well
is planned to be drilled this year. By participating in this well,
Baron will also earn a 5% interest in nearby onshore licences PEDL
330 and PEDL 345.
The Colter Prospect lies in Poole Bay, immediately southeast of
the Wytch Farm oilfield which has been developed from onshore
facilities. Recent re-mapping of pre-stack depth migrated 3D
seismic data by Corallian indicates that the 98/11-3 well, which
encountered oil in the Triassic Sherwood sandstone reservoir, lies
on the flank of a structure that has the potential to hold unrisked
Mean Prospective Resources of 23 million barrels of recoverable oil
equivalent. The Colter Prospect will be appraised by a well drilled
to a total depth of 1,850 metres subsea in a water depth of 16
metres. Baron announced on 15 May 2018 that Corallian had entered
into a letter of intent with Ensco UK Limited to provide a jack-up
drilling rig to drill this prospect in the third or fourth quarter
of 2018, subject to necessary approvals and consents. The total
well cost has increased, due largely to more rigorous site survey
requirements and substantially higher fuel costs, and is currently
estimated at GBP7.2 million. Under the terms of the agreement with
Corallian, subject to governmental consents, the Company would pay
6.67% of the costs related to this well, capped at a gross cost of
GBP8.0 million: costs above this cap would be funded at 5%.
Including a 5% share of back costs unrelated to the well, the total
payable by the Company is currently estimated at some GBP490,000 to
earn a 5% interest in the licence(1) .
legacy Exploration activity
PERU OFFSHORE Block Z-34 (Baron Oil 50% interest RELINQUISHED IN
DECEMBER 2017)
In November 2017, the Company elected to relinquish the contract
for block Z-34, in which it held a 50% interest through its
Peruvian subsidiary, Gold Oil Peru SAC ("GOP"). Earlier in the
year, Union Oil & Gas Group (UOGG) defaulted on its obligation
to pay GOP US$2 million when a 30% interest in Z-34 was formally
assigned to it by the Peruvian Government under a Public Deed.
Following protracted discussions, it was agreed to terminate and
unwind the 2013 Farmout Agreement with UOGG and the 30% interest
under the Joint Operating Agreement ("JOA") was returned to GOP on
10 September 2017. UOGG retained ownership of Plectrum Petroleum
Limited, which continued to hold a 50% interest in Z-34. However,
neither UOGG nor Plectrum paid cash calls due to GOP as operator
under the terms of the JOA. On 1 September 2017 both UOGG and
Plectrum were formally placed into default for non-payment of the
August cash call and, following termination of the Farmout
Agreement, Plectrum compounded its default position by not paying
cash calls for September and November.
Taking into account the partner default, the failure of an
extended effort by UOGG to farm out its interests in Z-34 and the
fact that the contract had been in Force Majeure since 2014 because
of the lack of legislation and regulations necessary to allow
drilling operations in this deep-water environment, GOP proposed
that the block be relinquished. An Operating Committee Meeting was
held in accordance with the JOA at the beginning of November 2017,
at which Plectrum could not exercise its vote because of its
default, and the unanimous decision was made to relinquish block
Z-34.
Notice of relinquishment was given to Perupetro on 9 November
2017 and the relinquishment became effective on 9 December. At this
point, GOP notified Perupetro that the terms of the Z-34 contract
allowed it to claim the release of the $3.6 million bond held as
guarantee for the work programme if the contract had been in Force
Majeure for a period exceeding one year. This was accepted by
Perupetro on 14 December 2017 and the funds were released on 19
December. Following delays over the Christmas period, the funds
were finally cleared in the Company's UK bank account on 5 January
2018.
PERU ONSHORE Block XXI (Baron Oil 100%)
The Company owns a 100% interest in the contract for block XXI
through GOP. The block lies onshore in the Sechura Desert, close to
the town of Piura, and covers a current area of 2,425 square
kilometres.
The El Barco prospect has been identified in the area to the
northeast of the 1954 Minchales-1X well and a drilling prognosis
has been prepared for a well to 1,850 metres. Mapping of the El
Barco prospect by GOP indicates that unrisked Prospective Resources
are in the range of 6.4 billion cubic feet of recoverable gas in a
low-risk shallow sand and 7.1 million barrels of recoverable oil in
a much higher risk fractured basement play. Initial estimates are
that the actual drilling of this well will cost some US$1.4 million
but additional costs of some US$500,000 are expected to be incurred
for the necessary civil engineering and environmental work involved
in building a suitable track from the Pan-American Highway across
the desert and scrub to the proposed wellsite, a distance of some
15 kms.
Farmout negotiations with interested parties continue since, as
previously stated, the directors wish to find a partner to pay at
least 50% of the costs of the El Barco well. Discussions are also
underway with qualified drilling contractors. The block XXI
contract is currently in Force Majeure, because of local opposition
to the drilling at El Barco, which adds a further potential expense
to the drilling operation. If the well is not drilled within 6
months of expiry of the current Force Majeure situation, the
contract will terminate and the Company will forfeit its guarantee
bond of US$160,000.
NORTHERN IRELAND ONSHORE LICENCE PL 1/10 licence (Baron Oil
12.5%)
No significant activity took place on this licence in 2017 and
in February 2018 Baron gave notice that it would withdraw from the
licence. This became effective in April 2018 and the Company has no
further obligations.
OPERATIONS IN COLOMBIA
During the year, the remaining staff in Colombia completed the
administration of the cessation of the NBM licence, which took
effect in October 2015. By the end of the year, all staff had left
the local operation. NBM was operated by Invepetrol in which we are
50% shareholders and in which control effectively passed to our
partner, CI International Fuels, in 2017. Proceedings to liquidate
this company are expected to commence shortly.
SE ASIA STUDY GROUP
Baron entered into a joint study agreement in September 2016
with SundaGas Pte Ltd, based in Singapore. The purpose was to give
the Company accelerated access to a range of exploration and
production activities in prospective areas of South East Asia
without the need to increase its own staff and overhead. The
agreement ran for a six-month period to 31 March 2017, during which
time the group considered a broad range of possibilities and
entered into preliminary negotiations on several potential
projects, one of which is still active. The directors had hoped
that this project would come to fruition during 2017 but a decision
by the host government continues to be delayed and it seems
unlikely that an award, if any, will be made before the fourth
quarter of 2018.
Conclusions
Although the directors were forced to spend a great deal of time
during the year in difficult negotiations with our recalcitrant
partners in Peru block Z-34, the final outcome at year-end was a
satisfactory one. It had become clear that it would be impossible
to drill the block in the timeframe of the contract for
administrative, technical and financial reasons and the block was
relinquished in a way that enabled the Company to recover the
entire guarantee bond. The additional US$3.6 million of free cash
has enabled the Company to be re-positioned and, after due
consideration, the board has decided that near-term drilling
activities in areas where discoveries can easily and profitably be
developed represent the best way forward. Each of the Wick and
Colter prospects offers an excellent opportunity to drill a
relatively low-risk well this year with significant potential and
provides the possibility of early, low cost development. Success in
either of these wells would provide shareholders with a meaningful
uplift in the asset value of the Company.
The Company remains debt-free and is fully funded for its
currently planned activities in 2018.
I would like to pay a personal tribute to Bill Colvin, who
resigned as Chairman in February 2018. Bill took over the reins
under very difficult circumstances in January 2015 and guided the
Company through the difficult period when our partners in block
Z-34 prevented us from moving forward with activities on the block,
refused to honour their obligations under the Farmout Agreement and
defaulted on their payment obligations under the JOA. It was good
that he was able to savour the success of regaining the guarantee
bond and participate in the re-positioning of the Company. We wish
him every success in his other ventures.
I would also like to welcome Andrew Yeo as an independent
non-executive director. His experience in the City and in the oil
industry will be of great value to the board and he has been
appointed to chair the audit and remuneration committees.
Malcolm Butler
Chairman and Chief Executive
23 May 2018
_________________________________
(1) Under pre-existing agreements between Corallian and
InfraStrata plc, Baron is obligated to pay to InfraStrata plc on a
monthly basis an
amount equivalent to 1% of the pre-tax net profits generated to
Baron from the sales of oil and gas from licences P1918 and P2235,
taking into account, in each case, cumulative costs and expenses of
exploration, appraisal, development and production.
CONSOLIDATED INCOME STATEMENT FOR THE YEARED
31 DECEMBER 2017
Notes 2017 2016
GBP'000 GBP'000
Revenue - -
Cost of sales - -
Gross profit - -
Exploration and evaluation
expenditure (109) (739)
Intangible assets
written off (1,837) -
Intangible asset
impairment 11 - (370)
Property, plant and equipment
impairment and depreciation 10 - 95
Goodwill impairment 12 - (81)
Receivables and inventory
impairment 3 43 73
Disposal of Colombian
subsidiary 831 -
Disposal of Colombia branch
operations - 31
Administration expenses (510) (700)
(Loss)/profit on
exchange (508) 1,131
Other operating
Income 4 21 319
Operating loss 3 (2,069) (241)
Finance cost 6 (8) (35)
Finance income 6 19 101
Loss on ordinary
activities
before taxation (2,058) (175)
Income tax credit/(expense) 7 519 (113)
Loss on ordinary
activities
after taxation (1,539) (288)
Dividends - -
Loss for the year (1,539) (288)
------------------------------------ ------ ----------------------------- ------------------------------------
Loss on ordinary
activities
after taxation is attributable
to:
Equity shareholders (1,539) (32)
Non-controlling
interests 0 (256)
(1,539) (288)
---------------------------------- ------ ----------------------------- ------------------------------------
Earnings per ordinary
share - continuing 9
Basic (0.112p) (0.002p)
Diluted (0.112p) (0.002p)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AT 31 DECEMBER 2017
Notes 2017 2016
GBP'000 GBP'000
Assets
Non current assets
Property plant and equipment
--- oil and gas
assets 10 - 3
--- others 10 - -
Intangibles 11 1,260 1,325
Goodwill 12 - -
1,260 1,328
----------------------------------- --------- --------------------------- -----------------------------
Current assets
Trade and other
receivables 14 18 2,070
Cash and cash equivalents 15 3,992 5,231
4,010 7,301
----------------------------------- --------- --------------------------- -----------------------------
Total assets 5,270 8,629
------------------------------------- --------- --------------------------- -----------------------------
Equity and liabilities
Capital and reserves attributable
to owners of the parent
Share capital 17 344 344
Share premium account 18 30,237 30,237
Share option reserve 18 122 81
Foreign exchange
translation reserve 18 1,723 1,688
Retained earnings 18 (28,163) (26,624)
Capital and reserves attributable
to non-controlling interests 19 - 347
Total equity 4,263 6,073
------------------------------------- --------- --------------------------- -----------------------------
Current liabilities
Trade and other
payables 16 195 1,054
Taxes payable 16 812 1,502
1,007 2,556
----------------------------------- --------- --------------------------- -----------------------------
Total equity and
liabilities 5,270 8,629
------------------------------------- --------- --------------------------- -----------------------------
The financial statements were approved and authorised
for issue by the Board of Directors on 23 May
2018 and were signed on its behalf by:
Geoffrey
Malcolm Butler Barnes
Director Director
Company number:
5098776
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE
YEARED 31 DECEMBER 2017
Group Company Group Company
2017 2017 2016 2016
------------------- ----------------------------- ----------------------------- --------------------------- ------------------------------------
GBP'000 GBP'000 GBP'000 GBP'000
Operating
activities (680) (508) (2,326) 284
Investing
activities
Return from
investment
and servicing of
finance 19 19 101 90
Sale of Intangible
assets - - 1,784 -
Cash previously not
available
now released 2,674 2,674
Disposal of
tangible assets 82 82
Loan to subsidiary
(advanced)/repaid - (283) - (246)
Acquisition of
intangible
assets (298) (119) (492) (74)
Acquisition of
tangible
fixed assets - - (1) -
2,395 2,291 1,474 (148)
Financing
activities
Proceeds from issue
of
share capital - - - -
Net cash inflow 1,715 1,783 (852) 136
Cash and cash
equivalents
at the beginning
of the year 2,158 2,080 3,010 1,944
Cash and cash
equivalents
at the end
of the year 3,873 3,863 2,158 2,080
-------------------- ----------------------------- ----------------------------- --------------------------- ------------------------------------
Reconciliation to
Consolidated
Statement of
Financial
Position
Cash not available
for use 119 - 3,073 2,943
Cash and cash
equivalents
as shown in the
Consolidated
Statement of
Financial
Position 3,992 3,863 5,231 5,023
-------------------- ----------------------------- ----------------------------- --------------------------- ------------------------------------
CONSOLIDATED AND COMPANY STATEMENT
OF CASH FLOWS FOR THE
YEAR ENDED 31
DECEMBER
2017
Group Company Group Company
2017 2017 2016 2016
--------------------- --------------------------- ----------------------------- ----------------------------- ------------------------------------
GBP'000 GBP'000 GBP'000 GBP'000
Operating activities
Loss for the
year attributable
to controlling
interests (1,539) (1,342) (32) 47
Depreciation,
amortisation
and impairment
charges 2 - 331 61
Loss on disposal of
assets - 120 - -
Share based payments 41 41 - -
Non-cash movement
arising
on consolidation of
non-controlling
interests (347) - (257) -
Impairment of
investment - 74 - 246
Finance income
shown as an
investing
activity (19) (19) (101) (90)
Tax (benefit)/expense (519) - 113 -
Foreign exchange
translation 512 478 (1,319) (430)
Operating cash
outflows before
movements in
working capital (1,869) (648) (1,265) (166)
---------------------- --------------------------- ----------------------------- ----------------------------- ------------------------------------
(Increase)/decrease
in
receivables 2,052 148 (440) 1,178
Tax paid (4) (4) 71 (2)
Increase/(Decrease)
in
payables (859) (4) (692) (726)
Net cash (outflows)/
inflows from
operating
activities (680) (508) (2,326) 284
---------------------- --------------------------- ----------------------------- ----------------------------- ------------------------------------
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR FKQDDDBKDKPB
(END) Dow Jones Newswires
May 24, 2018 07:13 ET (11:13 GMT)
Baron Oil (AQSE:BOIL.GB)
Historical Stock Chart
From Jun 2024 to Jul 2024
Baron Oil (AQSE:BOIL.GB)
Historical Stock Chart
From Jul 2023 to Jul 2024
