TIDMCLNR
RNS Number : 0189X
Cluff Natural Resources plc
25 April 2019
Cluff Natural Resources Plc / Index: AIM / Epic: CLNR / Sector:
Natural Resources
25 April 2019
Cluff Natural Resources Plc ('CLNR' or 'the Company')
Preliminary Results
Cluff Natural Resources Plc, the AIM-quoted natural resources
investing company with a high impact exploration and appraisal
portfolio focused on the Southern and Central North Sea, is pleased
to announce its audited preliminary results for the year ended 31
December 2018 ('FY 2018').
Highlights
-- Farm-out of Licence P2252 (which contains the Pensacola
Prospect) to Shell UK. Farm-out agreed in February 2019, which
includes shooting of new seismic and a contingent well
commitment
-- Option granted to Shell UK to farm into Licence P2437 (which
contains the Selene Prospect), agreed in February 2019. Cash
consideration is US$600,000 which includes an initial payment
already received, and a balance on completion
-- Awarded six additional licences by the UK Oil and Gas
Authority with effect from October 2018 covering 10 full and part
blocks in the Central and Southern North Sea, in the UK's 30th
Offshore Licencing Round
-- Company now has diverse portfolio of seven licences which
includes oil as well as gas prospects
-- Estimated resource on Dewar oil prospect on Licence P2352
significantly enhanced - now estimated by the Company to contain up
to 270 million barrels of oil in place with P50 Prospective
Resources of 39.5 million barrels. Farm-out process planned to
commence towards end of H1 2019
-- GBP2.75 million (gross) raised by way of equity in 2018
-- Cash position of GBP1.43 million as at 31 December 2018 (2017: GBP1.02 million)
-- Loss for the year GBP1.66 million (2017: GBP1.59 million)
-- Cash used in operations for the year GBP1.52 million (2017: GBP1.43 million)
Chairman's Statement
In my last Chairman's statement, I made some commitments and
predictions. These included the Company obtaining a significant
number of additional licences in the 30th Round of North Sea awards
and securing a farm-out of our 28th Round licences. As we reflect
on 2018, not only were we awarded six additional licences in the
30th Round, but on one of them (P2437) we have already signed an
option agreement with Shell which provides for them to acquire a
50% interest in the licence and to pay up to 75% of the costs of an
exploration well on the Selene prospect. Shell has until 30 April
2019 to exercise this option.
Shell has also farmed into our 28th Round licence (P2252) which
contains the Pensacola Prospect, and have committed to conduct a
comprehensive seismic acquisition programme at their cost. The
commitment also includes a contingent well. It is gratifying to
have received the endorsement from Shell of our technical
interpretation of both these licences.
On Licence P2248, although we were unable to achieve a further
extension, it is our intention to reapply for the licence in the
UK's 32nd Licensing Round, which is expected to commence in
mid-2019.
In summary, we have therefore substantially fulfilled the
commitments which I made last year, which is testament to the
diligence of our executive team in negotiating the two agreements
with Shell, together with the expertise of our technical staff in
identifying and communicating the merits of the licences. I would
also like to note how stimulating and rewarding the whole process
of negotiation with Shell proved to be.
There is no question that the North Sea is experiencing a
revival of fortune, especially in the context of natural gas. There
is the market, an infrastructure and a need which will conspire to
keep the North Sea up the agenda of the UK oil & gas industry
for another generation.
Earlier this month, I announced my intention to retire following
this year's AGM and that Mark Lappin, who has been a Director of
the Company since 2016, will succeed me as Chairman.
Since stepping down as CEO last year, the Company's executive
management team, with significant input from Mark, has produced a
tremendous platform for the next stage of activity and growth via
the successful award of six additional licences in the UK's 30th
Licensing Round and delivering a transformational farm-out with
Shell on one, and possibly two of the Company's licences. As a
result of the farm-out with Shell, there is now a clear transition
into a period of intensive oil and gas operations which will see,
inter alia, the acquisition of 3D seismic in the summer of this
year to support an investment decision for the drilling of at least
one and potentially two wells. This is therefore the ideal time to
pass the Chair to Mark whose wealth of operational experience,
particularly in the North Sea, is perfectly suited to guide the
business through this next exciting phase of its development.
I look forward to seeing our company continue to grow and
prosper through this next stage of development.
J G Cluff
Chairman
24 April 2019
Chief Executive's Statement
The last year has undoubtedly been transformational for our
company. This time last year, the Company's portfolio was limited
to two licences and the Company did not yet have any partners. The
Company now has a significantly enhanced and diversified portfolio
of investment assets totalling seven licences, and is partnered
with one of the world's largest oil and gas companies as a result
of securing a farm-out over one and possibly two of its
licences.
The Company has also strengthened its balance sheet in the
course of the year, ending the year in a stronger financial
position, while continuing to drive forward investment in our
portfolio.
From an operational perspective, throughout the year our
technical team continued to carry out extensive technical work on
our existing and new licences. This work further enhanced our
understanding of the various prospects on our portfolio of licences
and has ultimately led to the farm-out success recently
achieved.
In May 2018, we announced that the Company had been
provisionally awarded licences covering 10 full and part blocks, by
the UK Oil and Gas Authority (OGA). The formal award of these
licences was announced in August 2018 and the licences took effect
from 1 October 2018. These blocks are viewed by the Board as being
highly prospective with many containing undeveloped discoveries and
exploration upside which significantly enhances both the pipeline
of potential drilling opportunities and the overall prospective
resources associated with the Company's investment portfolio. This
has been demonstrated by the fact that despite only holding these
licences for a matter of months, the terms of a farm-out of one of
these licences (P2437) has already been agreed, subject to the
exercise of an option by 30 April 2019.
We were delighted to have been awarded these additional licences
which represented a substantial award over multiple blocks which
builds on the Company's core competencies focussed primarily on the
Southern North Sea. While the Company's primary focus remains on
Southern North Sea gas, two of the six licences awarded were made
over blocks in the Central North Sea, which meant that oil
prospectivity was added to the portfolio for the first time. The
new licences contain a number of drilled discoveries, undrilled
prospects and leads and create the potential to build scale,
further diversifying the investment portfolio which we anticipate
will lead to a significant pipeline of future drilling
opportunities.
The Company now has an estimated P50 prospective resource in
excess of 2.4 TCF of gas, equivalent to c.400 million barrels of
oil. With the exception of one licence in which we are partnering
with The Parkmead Group and the licences on which we are
co-venturing with Shell, all our licences are held 100%, which
provides maximum flexibility from which to farm down. The licences
also contain multiple prospects and are located close to existing
infrastructure in a proven gas basin which has enjoyed significant
exploration success in recent years.
We look forward to further expanding our portfolio of licences
when we apply for additional blocks in the UK's next licensing
round which the Oil & Gas Authority has indicated will open in
mid-2019.
Throughout 2018, exploration budgets amongst major operators
remained limited as they continued to focus investment on
maintaining existing production after a prolonged period of
depressed oil and gas prices. However, as majors and other
operators finally started to turn their attention to reserves
replacement and ultimately exploration, we experienced a marked
increase in the level of interest in our assets, ultimately
resulting in the announcement of our agreements with Shell.
In February 2019, we were delighted to announce the farm-out of
Licence P2252 (which contains the Pensacola Prospect) and the terms
of an option to farm out Licence P2437 (which contains the Selene
Prospect) with Shell UK. This partnership is a clear endorsement of
the quality of the licences in our portfolio and demonstrates the
Cluff technical team's ability to identify and transform overlooked
or less understood opportunities. We are particularly excited at
the prospect of embarking on our partnership with Shell with both
parties sharing a commitment to further development in the Southern
North Sea. Most importantly, we now have direct visibility over the
route to future drilling activity, and the potential to create
further significant value for shareholders. We look forward to
building our partnership with Shell and successfully developing
these prospects.
I am also very happy to report that the Company has ended the
year in a stronger financial position. The Company was able to
raise funds by way of equity twice during 2018, raising a total of
GBP2.75 million, before expenses. This allowed the Company to
continue the farm-out process while, at the same time, commencing
the technical and commercial evaluation of the additional Central
and Southern North Sea oil and gas licences awarded in the 30th
Offshore Licensing Round.
While continuing to invest in the expansion and development of
our licences, we have maintained a disciplined approach to costs
and ended the year with just over GBP1.41 million of cash. The
Company remains agile, continues to have no debt or any major
financial commitments and keeps its overheads low. Our working
capital position has improved from that which was previously
guided, and the Company is now funded to the start of Q4 2019.
The outlook for exploration and the North Sea now appears to be
improving significantly, underpinned by relatively stable commodity
prices and significantly reduced costs. In 2018, only eight
exploration wells were completed, however the UK sector expects to
see up to 15 exploration wells drilled this year. This points to
renewed confidence and crucially the budget now appears to be being
made available for exploration. Of particular relevance and
interest to us is that a number of these planned wells are in close
proximity to the Company's existing licences. Spirit Energy are
expected to drill the Andromeda and Aurora Prospects and
Oranje-Nassau Energie are also expected to drill the Ossian-Darach
prospect this year. Each of these three wells are in our core area
of the Southern North Sea where we have our gas licences.
Accordingly, any exploration success will further enhance the
likelihood of success on our prospects.
The North Sea as a whole is becoming an increasingly attractive
place to invest, and this has been evidenced by the increased level
of M&A activity and the involvement of private equity backed
businesses. The UK's regulatory and fiscal regime is now extremely
favourable and with significantly reduced costs and more stable
commodity prices, we believe this is an ideal time to be seeking to
drill in the North Sea.
On behalf of the Board, I would like to thank our shareholders
and other stakeholders for their continued commitment and support.
We believe we are building a sustainable business with a strong and
diversified portfolio of highly prospective oil and gas assets,
with a world class partner on potentially two of the Company's
licences. As such, we anticipate exciting times ahead as we enter
the next stage of the Company's development and continue to strive
to create significant value for our shareholders.
Graham Swindells
Chief Executive Officer
24 April 2019
Operational Review
Shell Farm-out Success
Following a period of exclusivity, the Company was delighted to
announce that it had signed a binding farm-out agreement in
relation to Licence P2252 with Shell U.K. on 8 February 2019.
In return for a 70% working interest and operatorship of Licence
P2252, Shell U.K. Ltd will pay 100% of the costs of the agreed work
programme from the completion date until the earlier of 31 December
2020 or the date on which a well investment decision is made. The
agreed work programme comprises the acquisition of not less than
400km(2) new 3D seismic across the Pensacola Prospect in the summer
of 2019 and associated processing and petro-technical studies
required to support a well investment decision.
In addition to the farm-out on P2252, the Company also granted
Shell a three-month exclusive option which runs until 30 April
2019, over a 50% working interest in Licence P2437 which was
formally awarded to the Company in October 2018 and contains the
Selene prospect. In the event that the option is exercised, binding
terms have been agreed such that the Company will receive the
outstanding balance of the total cash consideration of US$600,000
receivable from Shell. In addition, Shell would also pay 75% of the
costs of the first well to be drilled on the licence up to a gross
cost of US$25 million with any spend in excess of US$25 million to
be shared in proportion to the working interest positions. Until a
well investment decision has been finalised, the Company will
retain operatorship of the licence and any expenditure incurred
prior to a well investment decision will be shared with Shell in
proportion to the working interest positions.
Licence Awards - 30th Licensing Round
As previously indicated, the UK Oil and Gas Authority announced
the provisional award of licences in the 30th Offshore Licensing
Round on 23 May 2018. These awards were formalised on 30 August
2019 and licences issued with an effective date of 1 October 2018.
The Company was awarded 10 blocks, including part blocks, covering
1,376km(2) (gross) which were consolidated into six new licences.
The firm work programme associated with Phase A of the initial term
of the licences is restricted to data acquisition, seismic
reprocessing and sub-surface studies, and is focused on providing
greater clarity around prospect volumetrics and risk.
Licence P2252 - Southern North Sea
Activity during the period was almost exclusively focused on the
farm-out efforts which ultimately resulted in the farm-out with
Shell. We expect that 3D seismic acquisition will commence during
the summer of 2019 with field operations expected to last
approximately one month followed by a period of processing and
re-interpretation prior to a well investment decision being
finalised before the end of 2020.
The exploration well on P2252 is classed as 'contingent' by the
OGA with the contingencies being restricted to demonstration of
structural closure and presence of reservoir facies within closure.
Given that the legacy data available over the Pensacola prospect
demonstrates both structural closure and presence of reservoir
facies, it is the Company's view that the acquisition of the new 3D
seismic by Shell should be primarily centred around the appropriate
placement and design of the exploration well on Pensacola.
Licence P2437 - Southern North Sea
Since the formal award of Licence P2437 on 1 October 2018, the
Company has acquired the available legacy 3D data across the entire
licence and surrounding areas. The Selene structure was identified
by previous operators although issues with velocity modelling and
depth conversion had historically led to significant uncertainty
around the potential volumes of gas associated with the
prospect.
This high-quality 3D data has allowed a re-interpretation of the
Selene structure and allowed the Company, in partnership with a
technology driven seismic specialist, to derive a velocity model
and depth conversion which removes the volumetric uncertainty which
was historically perceived to be the key risk associated with this
prospect.
The Selene prospect is located approximately 20km away from
Shell's existing infrastructure at Barque, which ultimately feeds
Shell's Bacton processing facility near Great Yarmouth, both of
which have the capacity to handle significantly higher volumes of
gas than current throughput due to declining production of the
older fields and significant upgrades to the Clipper South hub and
Bacton processing plant.
The Company continues to work closely with Shell during the
option period to ensure the option can be exercised before 30 April
2019 and to allow a well investment decision to be made at the
earliest practicable date.
Licences P2428 and P2424 - Southern North Sea
During the period since the award of these licences, the focus
has been on identifying and acquiring all the relevant subsurface
data available for the licences and surrounding areas. The Phase A
work programme on both blocks requires the reprocessing of a
limited amount of legacy 2D seismic data and proposals have been
sought for the work programme on both licence areas. It is
anticipated that reprocessing contracts will be awarded during Q2
of 2019 with results expected within five to six months of starting
the reprocessing workflows.
Both blocks contain large scale opportunities in the early
Carboniferous and should exploration activity on adjacent blocks,
including planned drilling on the Andromeda, Darach and Aurora
prospects, prove commercial volumes of gas in the early
Carboniferous, then the Company anticipates that there will be
considerable interest in these licences from the industry.
Licences P2352 & P2384 - Central North Sea
These Central North Sea blocks are located in a relatively under
explored area of the Central North Sea, adjacent to the large
Marnock-Skua field, part of the Eastern Trough Area Project (ETAP)
infrastructure which is operated by BP. These blocks contain
multi-level oil prospectivity in the proven Forties, Pentland and
Skagerrak formations and significantly diversify the portfolio.
Since award, technical work has focused primarily on the Dewar
prospect which is centrally located on Licence P2352. The
availability of newly reprocessed 3D Pre-Stack Depth Migration
(PSDM) seismic data, obtained by the Company since the award of the
licence in October 2018, has allowed a major geological
re-evaluation of the Dewar prospect. New mapping indicates that the
Dewar prospect is a Forties Sandstone Channel which the Company
estimates to contain STOIIP of up to 270 million barrels of light
oil in a high-quality sandstone reservoir with P50 prospective
resources of 39.5 million barrels. The prospect is supported by a
clear Amplitude Versus Offset (AVO) anomaly and is located less
than 10km from the Marnock field infrastructure. Further work to be
completed during 2019 includes a rock physics study and review of
commercial development options both of which are underway and will
be used to support farm-out activities which are expected to
commence towards the end of H1 2019.
Regionally there is significant ongoing development activity
including the development of the Culzean HPHT gas field, which is
expected to produce first gas during 2019, and the Seagull
discovery, which was recently acquired by Neptune with first
production expected in 2022.
Portfolio Management
Following the failure of our preferred bidder on Licence P2248
to demonstrate the necessary financial capacity to fund the forward
work programme within a timeframe that was acceptable to the OGA,
the Company relinquished the licence with effect from 29 March
2019.
We still believe that the block, and in particular the Cadence
prospect, is of significant strategic value and are anticipating
re-applying for the acreage in the 32nd Licensing Round under the
OGA's new, more favourable Innovate licence terms, which would
involve reduced licence rentals, technical work programmes and
administration costs.
In the interim period, the Company will carefully monitor the
planned exploration drilling of analogous structures on adjacent
blocks for the next 18 months, the results of which will
significantly enhance the understanding of the early Carboniferous
Fell Sandstone play.
Portfolio and Resource Summary - March 2019
The Company's current licence portfolio and prospect inventory,
as of the end of March 2019, is summarised below:
Licence Block CLNR Project ID Discovery Net Prospective GCoS%
Ref: ID Equity (D) Resource
Prospect (BCF)
(P)
Lead (L)
---------------------
P90 P50 P10
Low Best High
----- ------ ------
41/5a,
41/10a Pensacola - Zechstein
P2252 & 42/1a 30% Reef P 35 93 170 20
--------- ---------- -------- ------------------------ ---------- ----- ------ ------ ------
Lytham - Permian P 16 37 73 49
--------- ---------- -------- ------------------------ ---------- ----- ------ ------ ------
Lytham - Carboniferous P 4 13 45 30
------------------------ ---------- ----- ------ ------ ------
Fairhaven - Zechstein P 5 14 29 43
--------- ---------- -------- ------------------------ ---------- ----- ------ ------ ------
P2437 48/8b 100% Sloop - Leman D 7 18 38 100
--------- ---------- -------- ------------------------ ---------- ----- ------ ------ ------
Selene - Leman P 105 291 688 39
--------- ---------- -------- ------------------------ ---------- ----- ------ ------ ------
Endymion - Leman L 36 48 62 27
------------------------ ---------- ----- ------ ------ ------
Rig & Jib - Leman L 11 29 58 35
--------- ---------- -------- ------------------------ ---------- ----- ------ ------ ------
42/14
P2424 & 42/15b 100% Furasta - Bunter D 7 18 30 100
--------- ---------- -------- ------------------------ ---------- ----- ------ ------ ------
Burbank - Bunter P 70 200 567 32
--------- ---------- -------- ------------------------ ---------- ----- ------ ------ ------
Cortez - Carboniferous L 24 107 433 29
------------------------ ---------- ----- ------ ------ ------
Cortez South -
Carboniferous L 129 331 732 28
--------- ---------- -------- ------------------------ ---------- ----- ------ ------ ------
43/7
&
P2428 43/8 100% Cupertino - Scremerston L 69 262 914 21
--------- ---------- -------- ------------------------ ---------- ----- ------ ------ ------
Cupertino - Fell
Sandstone L 147 558 2089 30
--------- ---------- -------- ------------------------ ---------- ----- ------ ------ ------
47/10d Bob (Teviot) -
P2435 & 48/6c 25% Leman D 2.8 5.5 10.3 100
--------- ---------- -------- ------------------------ ---------- ----- ------ ------ ------
Blackadder - Leman P 17.8 28.3 42.5 45
--------- ---------- -------- ------------------------ ---------- ----- ------ ------ ------
Licence Block CLNR Project ID Discovery Net Prospective GCoS%
Ref: ID Equity (D) Resource
Prospect (MMBOE)
(P)
Lead (L)
----------------------
P90 P50 P10
Low Best High
------ ------ ------
22/24f
P2352 & 22/25g 100% Dewar - Forties P 10.5 39.5 80.5 40
---------- -------- ------------------ ---------- ------ ------ ------ ------
Tesla - Pentland D To be determined - mean
STOIIP estimated @ 24
mmboe
---------- -------- ------------------ ---------- ------------------------------
P2384 22/19f 100% Manhattan Complex L To be determined
---------- -------- ------------------ ---------- ------------------------------
Future developments
The year ahead will be another busy year for the Company as it
continues to progress its core exploration focused strategy and
plans on making a number of applications in the 32nd UKCS Offshore
Licensing Round, which is currently expected to commence during the
summer of 2019, with awards expected sometime during the first half
of 2020.
The Company is looking forward to its first field operations
during the summer of 2019 with the acquisition of new 3D seismic
data across the Pensacola prospect by Shell.
During the second half of 2019, we will begin the farm-out
process on a number of the licences awarded in the 30th Licence
Round which, if successful, will support potential future drilling
and seismic acquisition activities.
While maintaining focus on our core strategy, the Company
continues to review other potential opportunities within the UK
North Sea and adjacent basins which have the potential to create
value for our shareholders in the short to medium term through near
term exploration activity or potential cash flow generation.
A J Nunn
Chief Operating Officer
24 April 2019
Financial Review
All major expenditure in the last three years has been focused
on the development of the Company's portfolio of conventional North
Sea assets in accordance with the Company's investment strategy, in
addition to on-going administrative expenditure.
Loss for the year
The Company incurred a loss for the year to 31 December 2018 of
GBP1,660,153 (2017: GBP1,590,203) which related primarily to
technical and administrative expenditure. The loss for 2018 was
slightly higher than the previous year as a result of higher
technical and administrative expenses, in conjunction with the
expansion of the investment portfolio.
Financial position
The Company's cash position was GBP1,425,986 at 31 December 2018
(2017: GBP1,016,667) with the year-on-year increase in cash being
explained below. The increase in intangible assets to GBP1,617,087
(2017: GBP775,351) is mainly due to further direct investment in
the North Sea licences of GBP825,391. Total liabilities include
short-term creditors and accruals, which increased to GBP395,580
(2017: GBP212,539). The increase in total equity of GBP1,068,119 is
due to the subscription of new ordinary shares, offset by the loss
for the year, and other movements set out in the Statement of
Changes in Equity.
Cash flow
In the year to 31 December 2018, net cash used in operating
activities was GBP1,522,575 (2017: GBP1,428,306) and GBP674,729 was
used in investing activities (2017: GBP224,729) of which GBP666,565
(2017: GBP223,508) related to expenditure on exploration assets.
This was partially offset by total cash received (net of expenses)
of GBP2,606,623 from the subscription of new ordinary shares in
April 2018 and July 2018.
Consequently, in the year to 31 December 2018, the Company
experienced a net cash inflow of GBP409,319 (2017: GBP691,243
outflow).
Equity fundraising
On 20 April 2018, the Company announced that it had raised
GBP750,000, before expenses, through the subscription of 46,875,000
new ordinary shares of 0.5p each at 1.6 pence per share. The
purpose of this subscription was to fund the evaluation of any
licences awarded in the UK's 30th Offshore Licensing Round,
continue the process to secure a farm-out of the Company's existing
licences in the Southern North Sea, complete ongoing geological and
technical work, and to continue to develop well designs and
planning for a prospective multi-well drilling programme on key
explorations targets on its existing licences. The Company has
since been awarded six new gas and oil licences in the 30th
Offshore Licensing Round and has secured a farm-out over one of its
existing licences. The shares were allotted and admitted to trading
on AIM on 26 April 2018.
On 27 June 2018, following the award of the additional six
licences in the 30th Licensing Round, the Company announced that it
had raised GBP2 million, before expenses, through the placing and
subscription of 95,238,090 new ordinary shares of 0.5p each at 2.1
pence per share with new and existing institutional and private
investors. The purpose of this placing and subscription was to fund
the acceleration of the technical and commercial evaluation of the
additional Central and North Sea licences awarded in the UK's 30th
Offshore Licensing Round, continue the process to secure a farm-out
of the Company's two existing gas licences in the Southern North
Sea, and to continue to develop well designs and planning for a
prospective multi-well drilling programme on key explorations
targets on its existing licences. The shares were allotted and
admitted to trading on AIM on 4 July 2018. Following the allotment
there were 538,173,289 ordinary shares in issue. The Company is
funded until the beginning of Q4 2019.
Closing cash
As at 31 December 2018, the Company held cash balances of
GBP1.43 million (2017: GBP1.02 million).
Shareholders' equity
As at 31 December 2018 there were 538,173,289 (2017:
396,060,199) ordinary shares in issue. Following the exercise of
share options in February 2019, the number of ordinary shares in
issue increased to 548,821,998. Additionally, a total of up to
48,308,192 (2017: 40,756,901) new ordinary shares may be issued
pursuant to the exercise of share options.
Going concern
The inherent nature of the Company means it is dependent on its
existing cash resources and its ability to raise additional funding
in order to progress its exploration programme on an ongoing basis.
Based on the cash balance at year end and the Company's commitments
and, following the subsequent receipt of funds from Shell in
respect of the grant of the option over Licence P2437, and proceeds
of GBP141,095 from the exercise of share options, the Company has
adequate financial resources to cover its budgeted exploration and
development programme until the beginning of the fourth quarter of
2019. Further funding will be required to allow the Company to
fully implement its strategy beyond this period and it therefore
anticipates that further funds will be raised, most likely by way
of equity, as it has successfully done in the past.
Key performance indicators
At this stage in its development, the Company is focusing on the
development of its North Sea gas and oil assets, applying for
additional licences, maintaining and extending existing licences,
as well as the evaluation of various oil and gas opportunities. The
Directors closely monitor the levels of overheads and other
administrative expenditure, exploration expenditure and cash
balances, as set out above. As and when the Company's investments
move into production, other KPIs will become relevant and will be
measured and reported as appropriate.
Graham Swindells
Chief Executive Officer
24 April 2019
Investing policy
In addition to the development of the North Sea gas licences the
Company has acquired to date, the Company proposes to continue to
evaluate other potential oil and gas projects in line with its
investing policy, as it aims to build a portfolio of resource
assets and create value for shareholders. As disclosed in the
Company's AIM Admission Document in May 2012, the Company's
substantially implemented Investment Policy is as follows:
The proposed investments to be made by the Company may be either
quoted or unquoted; made by direct acquisition or through farm-ins;
either in companies, partnerships or joint ventures; or direct
interests in oil & gas and mining projects. It is not intended
to invest or trade in physical commodities except where such
physical commodities form part of a producing asset. The Company's
equity interest in a proposed investment may range from a minority
position to 100% ownership.
The Board initially intends to focus on pursuing projects in the
oil & gas and mining sectors, where the Directors believe that
a number of opportunities exist to acquire interests in attractive
projects. Particular consideration will be given to identifying
investments which are, in the opinion of the Directors,
underperforming, undeveloped and/or undervalued, and where the
Directors believe that their expertise and experience can be
deployed to facilitate growth and unlock inherent value.
The Company will conduct initial due diligence appraisals of
potential projects and, where it is believed further investigation
is warranted, will appoint appropriately qualified persons to
assist with this process. The Directors are currently assessing
various opportunities which may prove suitable although, at this
stage, only preliminary due diligence has been undertaken.
It is likely that the Company's financial resources will be
invested in either a small number of projects or one large
investment which may be deemed to be a reverse takeover under the
AIM Rules. In every case, the Directors intend to mitigate risk by
undertaking the appropriate due diligence and transaction analysis.
Any transaction constituting a reverse takeover under the AIM Rules
will also require Shareholder approval.
Investments in early stage and exploration assets are expected
to be mainly in the form of equity, with debt being raised later to
fund the development of such assets. Investments in later stage
projects are more likely to include an element of debt to equity
gearing. Where the Company builds a portfolio of related assets, it
is possible that there may be cross holdings between such
assets.
The Company intends to be an involved and active investor.
Accordingly, where necessary, the Company may seek participation in
the management or representation on the Board of an entity in which
the Company invests with a view to improving the performance and
use of its assets in such ways as should result in an upward
re-rating of the value of those assets.
Given the timeframe the Directors believe is required to fully
maximise the value of an exploration project or early stage
development asset, it is expected that the investment will be held
for the medium to long term, although disposal of assets in the
short term cannot be ruled out in exceptional circumstances.
The Company intends to deliver Shareholder returns principally
through capital growth rather than capital distribution via
dividends, although it may become appropriate to distribute funds
to Shareholders once the investment portfolio matures and
production revenues are established.
Given the nature of the Investing Policy, the Company does not
intend to make regular periodic disclosures or calculations of its
net asset value.
The Directors consider that as investments are made, and new
investment opportunities arise, further funding of the Company will
be required.
This strategic report contains certain forward-looking
statements that are subject to the usual risk factors and
uncertainties associated with the oil and gas exploration and
production business. Whilst the Directors believe the expectation
reflected herein to be reasonable in light of the information
available up to the time of their approval of this report, the
actual outcome may be materially different owing to factors either
beyond the Company's control or otherwise within the Company's
control but, for example, owing to a change of plan or strategy.
Accordingly, no reliance may be placed on the forward-looking
statements.
J G Cluff Graham Swindells
Chairman Chief Executive Officer
24 April 2019 24 April 2019
Qualified Person
Andrew Nunn, a Chartered Geologist and COO of CLNR, is a
"Qualified Person" in accordance with the Guidance Note for Mining,
Oil and Gas Companies, March 2006, of the London Stock Exchange.
Andrew has reviewed and approved the information contained within
this announcement.
Glossary of Technical Terms
PRMS: Petroleum Resources Management System (2007)
BCF: Billion Cubic Feet
GIIP: Gas Initially In Place
SCF: Standard Cubic Feet
Prospective Resources: Are estimated volumes associated with
undiscovered accumulations. These represent quantities of petroleum
which are estimated, as of a given date, to be potentially
recoverable from oil and gas deposits identified on the basis of
indirect evidence but which have not yet been drilled.
Chance of Success (GCoS): for prospective resources, means the
chance or probability of discovering hydrocarbons in sufficient
quantity for them to be tested to the surface. This, then, is the
chance or probability of the prospective resource maturing into a
contingent resource. Prospective resources have both an associated
chance of discovery (geological chance of success) and a chance of
development (economic, regulatory, market and facility, corporate
commitment and political risks). The chance of commerciality is the
product of these two risk components. These estimates have been
risked for chance of discovery but not for chance of
development.
EMV: Expected Monetary Value, being the value for a set of
possible scenarios based on the average risked value of that set of
scenarios and which is calculated by multiplying the value of each
possible scenario with the chance of that scenario being
realised
TCF: Trillion Cubic Feet
P90 resource: reflects a volume estimate that, assuming the
accumulation is developed, there is a 90% probability that the
quantities actually recovered will equal or exceed the estimate.
This is therefore a low estimate of resource.
P50 resource: reflects a volume estimate that, assuming the
accumulation is developed, there is a 50% probability that the
quantities actually recovered will equal or exceed the estimate.
This is therefore a median or best case estimate of resource.
P10 resource: reflects a volume estimate that, assuming the
accumulation is developed, there is a 10% probability that the
quantities actually recovered will equal or exceed the estimate.
This is therefore a high estimate of resource.
Pmean: is the mean of the probability distribution for the
resource estimates. This is often not the same as P50 as the
distribution can be skewed by high resource numbers with relatively
low probabilities.
The GIIP volumes and Prospective Resources have been presented
in accordance with the 2007 Petroleum Resources Management System
(PRMS) prepared by the Oil and Gas Reserves Committee of the
Society of Petroleum Engineers (SPE), reviewed, and jointly
sponsored by the World Petroleum Council (WPC), the American
Association of Petroleum Geologists (AAPG) and the Society of
Petroleum Evaluation Engineers (SPEE).
Income Statement
for the year ended 31 December 2018
Notes 2018 2017
Continuing operations GBP GBP
Administrative expenses (1,661,121) (1,591,701)
----------- -----------
Operating loss (1,661,121) (1,591,701)
Finance income 968 1,498
------------------------------------------- ----- ----------- -----------
Loss before tax (1,660,153) (1,590,203)
Income tax expense - -
------------------------------------------- ----- ----------- -----------
Loss for the year (1,660,153) (1,590,203)
------------------------------------------- ----- -----------
Loss per share from continuing operations
expressed in pence per share:
Basic and diluted 2 (0.35)p (0.46)p
------------------------------------------- ----- ----------- -----------
Statement of Comprehensive Income
for the year ended 31 December 2018
2018 2017
GBP GBP
Loss for the year (1,660,153) (1,590,203)
Other comprehensive income - -
-------------------------------------------- ----------- -----------
Total comprehensive expense for the year
attributable to the equity holders of the
Company (1,660,153) (1,590,203)
--------------------------------------------- ----------- -----------
Balance Sheet
as at 31 December 2018
Notes 2018 2017
GBP GBP
Assets
Non-current assets
Intangible assets 3 1,617,087 775,351
Property, plant and equipment 11,788 4,350
Other receivables 53,688 53,688
---------------------------------------------------- ----- ------------ -----------
1,682,563 833,389
Current assets
Other receivables 82,265 89,198
Cash and cash equivalents 1,425,986 1,016,667
---------------------------------------------------- ----- ------------ -----------
1,508,251 1,105,865
Total assets 3,190,814 1,939,254
---------------------------------------------------- ----- -----------
Capital and reserves attributable to the equity
holders of the Company
Shareholders' equity
Share capital 2,690,866 1,980,300
Share premium 10,286,493 8,390,436
Share-based payment reserve 749,487 627,838
Accumulated retained deficit (10,932,012) (9,271,859)
---------------------------------------------------- ----- ------------ -----------
Total equity 2,794,834 1,726,715
---------------------------------------------------- ----- ------------ -----------
Liabilities
Current liabilities
Trade and other payables 395,980 212,539
---------------------------------------------------- ----- ------------ -----------
Total liabilities 395,980 212,539
---------------------------------------------------- ----- ------------ -----------
Total equity and liabilities 3,190,814 1,939,254
---------------------------------------------------- ----- ------------ -----------
Statement of Changes in Equity
for the year ended 31 December 2018
Share Share Share-based Accumulated Total
capital premium payment retained equity
reserve deficit
GBP
GBP GBP GBP GBP
Balance at 1 January 2018 1,980,300 8,390,436 627,838 (9,271,859) 1,726,715
Comprehensive income for the year
Loss for the year - - - (1,660,153) (1,660,153)
-------------------------------------------- --------- ---------- ----------- ------------ -----------
Total comprehensive loss for the year - - - (1,660,153) (1,660,153)
Contributions by and distributions to
owners
Issue of share capital 710,566 2,039,434 - - 2,750,000
Expenses of issue - (143,377) - - (143,377)
Share-based payment - - 121,649 - 121,649
--------------------------------------------
Total contributions by and distributions
to owners 710,566 1,896,058 121,649 - 2,728,272
Balance at 31 December 2018 2,690,866 10,286,493 749,487 (10,932,012) 2,794,834
-------------------------------------------- --------- ---------- ----------- ------------ -----------
Balance at 1 January 2017 1,646,967 7,761,977 582,193 (7,749,896) 2,241,241
Comprehensive income for the year
Loss for the year - - - (1,590,203) (1,590,203)
-------------------------------------------- --------- ---------- ----------- ------------ -----------
Total comprehensive loss for the year - - - (1,590,203) (1,590,203)
Contributions by and distributions to
owners
Issue of share capital 333,333 666,667 - - 1,000,000
Expenses of issue - (38,208) - - (38,208)
Share-based payment - - 113,885 - 113,885
Lapsed warrants - - (68,240) 68,240 -
-------------------------------------------- --------- ---------- ----------- ------------ -----------
Total contributions by and distributions
to owners 333,333 628,459 45,645 68,240 1,075,677
Balance at 31 December 2017 1,980,300 8,390,436 627,838 (9,271,859) 1,726,715
-------------------------------------------- --------- ---------- ----------- ------------ -----------
Statement of Cash Flows
for the year ended 31 December 2018
2018 2017
GBP GBP
Cash flows used in operating activities
Loss before tax (1,660,153) (1,590,203)
Investment income (968) (1,498)
Share-based payment 121,649 113,885
Depreciation 2,893 1,864
Amortisation 4,943 2,655
Impairment of investment in subsidiary - 1,491
------------------------------------------------------- ----------- -----------
(1,531,636) (1,471,806)
Decrease in other receivables 6,933 53,838
Increase/(decrease) in trade and other payables 2,128 (10,338)
------------------------------------------------------- ----------- -----------
Net cash used in operating activities (1,522,575) (1,428,306)
------------------------------------------------------- ----------- -----------
Cash flows used in investing activities
Purchase of intangible assets (665,565) (223,508)
Purchase of property, plant and equipment (10,132) (2,329)
Interest received 968 1,498
Investment in subsidiary - (390)
------------------------------------------------------- ----------- -----------
Net cash used in investing activities (674,729) (224,729)
------------------------------------------------------- ----------- -----------
Cash flows from financing activities
Proceeds of share issue 2,750,000 1,000,000
Expenses of share issue (143,377) (38,208)
------------------------------------------------------- ----------- -----------
Net cash from financing activities 2,606,623 961,792
------------------------------------------------------- ----------- -----------
Increase / (decrease) in cash and cash equivalents 409,319 (691,243)
Cash and cash equivalents at beginning of
year 1,016,667 1,707,910
------------------------------------------------------- ----------- -----------
Cash and cash equivalents at end of year 1,425,986 1,016,667
------------------------------------------------------- ----------- -----------
Notes to the Financial Information
for the year ended 31 December 2018
1. Basis of preparation
The financial statements have been prepared in accordance with
International Financial Reporting Standards ('IFRS'), as adopted by
the EU and with those parts of the Companies Act 2006 applicable to
companies reporting under IFRS.
The financial information for the year ended 31 December 2018
and 31 December 2017 set out in this announcement does not
constitute the Company's statutory financial statements for the
year ended 31 December 2018 but is extracted from the audited
financial statements for those years. The 31 December 2017 accounts
have been delivered to the Registrar of Companies. The statutory
financial statements for 2018 will be delivered to the Registrar of
Companies in due course.
The auditors have reported on the financial statements for the
year ended 31 December 2018; their report contained a paragraph
drawing attention to disclosures in the financial statements
regarding the existence of a material uncertainty related to the
ability of the Company to continue as a going concern. Their
opinion on the financial statements was not modified in respect of
this matter. The report did not contain statements under section
498 (2) or (3) of the Companies Act 2006.
While the financial information included in this preliminary
announcement has been prepared in accordance with the recognition
and measurement criteria of International Financial Reporting
Standards (IFRSs and IFRIC interpretations) issued by the
International Accounting Standards Board and as endorsed for use in
the European Union, and with those parts of the Companies Act 2006
applicable to companies preparing their accounting under IFRS, this
announcement does not itself contain sufficient information to
comply with IFRSs.
The principal accounting policies adopted in the preparation of
the financial information in this announcement are set out in the
Company's full financial statements for the year ended 31 December
2018.
Going concern
The Company is dependent on its existing cash resources and its
ability to raise additional funding in order to develop its assets.
Based on the cash balance at year end and the Company's
commitments, the Directors are of the opinion that the Company has
sufficient funds to cover its budgeted exploration and development
programme and to meet its other operational obligations as they
fall due until the beginning of the fourth quarter of 2019. The
Directors acknowledge that additional funds will be required to be
raised to finance the Company's budgeted exploration and
development programme and to meet its other operational obligations
as they fall due beyond the beginning of the fourth quarter of
2019. These funds will need to be raised through partnership
arrangements, capital raisings or other financing packages. At
present there are no such arrangements in place and whilst the
Directors remain confident of being able to successfully raise the
required financing, most likely by way of equity as has been
achieved in the past, there can be no guarantee that this will
occur. These circumstances indicate the existence of a material
uncertainty which may cast doubt on the Company's ability to
continue as a going concern. The financial statements do not
include any adjustments that would result if the Company was unable
to continue as a going concern which would principally relate to
impairment of the Company's non-current assets.
Copies of the Company's audited statutory accounts for the year
ended 31 December 2018 will be available at the Company's website
at www.cluffnaturalresources.com, promptly after the release of
this preliminary announcement and a printed version will be
dispatched to shareholders shortly.
The Board approved this announcement on 24 April 2019.
2. Loss per Share
The Company has issued share options and warrants over ordinary
shares both of which could potentially dilute basic earnings per
share in the future.
Basic loss per share is calculated by dividing the loss
attributable to ordinary shareholders by the weighted average
number of ordinary shares outstanding during the year.
Due to the losses incurred during the year, a diluted loss per
share has not been calculated as this would serve to reduce the
basic loss per share. There were 58,956,901 (2017: 40,756,901)
share incentives outstanding at the end of the year that could
potentially dilute basic earnings per share in the future.
Basic and diluted loss per share
2018 2017
Loss per share from continuing operations (0.35)p (0.46)p
------------------------------------------- -------- --------
The loss and weighted average number of ordinary shares used in
the calculation of basic loss per share are as follows:
2018 2017
GBP GBP
Loss used in the calculation of total basic
and diluted loss per share (1,660,153) (1,590,203)
--------------------------------------------- ------------ ------------
Number of shares 2018 2017
Number Number
Weighted average number of ordinary shares
for the purposes of basic and diluted loss
per share 475,394,019 343,914,080
--------------------------------------------- ------------ ------------
3. Intangible Assets
Exploration Software
& Evaluation licences Total
Assets GBP GBP
GBP
Cost
At 1 January 2017 1,201,313 17,969 1,219,282
Additions 223,508 - 223,508
------------------------- ------------- --------- ---------
At 31 December 2017 1,424,821 17,969 1,442,790
Additions 825,391 21,288 846,679
------------------------- ------------- --------- ---------
At 31 December 2018 2,250,212 39,257 2,289,469
------------------------- ------------- --------- ---------
Amortisation
At 1 January 2017 655,197 9,587 664,784
Charge for year - 2,655 2,655
------------------------- -------------
At 31 December 2017 655,197 12,242 667,439
------------------------- ------------- --------- ---------
Charge for year - 4,943 4,943
------------------------- -------------
At 31 December 2018 655,197 17,185 672,382
------------------------- ------------- --------- ---------
Net Book Value
At 31 December 2018 1,595,015 22,072 1,617,087
------------------------- ------------- --------- ---------
At 31 December 2017 769,624 5,727 775,351
------------------------- ------------- --------- ---------
At 1 January 2017 546,116 8,382 554,498
------------------------- ------------- --------- ---------
The net book value of exploration and evaluation assets at 31
December 2018 and 2017 relates solely to the Company's North Sea
Licences.
Additions of GBP846,679 (2017: GBP223,508) differ to the cash
flows in the Statement of Cash Flows owing to increases in trade
and other payables of GBP181,114 (2017: GBPnil) relating to
intangible assets.
Refer to note 4 for details of a subsequent event impairment
arising in respect of exploration and evaluation assets.
4. Subsequent Events
On 8 February 2019, the Company announced agreements with Shell
U.K. Limited ("Shell") in respect of its Southern North Sea
licences P2252 and P2437. The Company has entered a binding,
conditional farm-out agreement in relation to Licence P2252 and has
granted Shell a three-month exclusive option to acquire a 50%
working interest in Licence P2437. The Company has received payment
from Shell in respect of the grant of the option over Licence
P2437, which will be recognised as a gain in the Income Statement.
The Company will receive a further payment upon completion of this
transaction. If the option is exercised, the total payment
(including that already received) will be US$600,000.
On 15 February 2019, the Company issued 10,648,709 shares at a
price of 1.325p per share, following the exercise of share options
by J G Cluff, generating proceeds of GBP141,095.
Following the failure of our preferred bidder on Licence P2248
to demonstrate the necessary financial capacity to fund the forward
work programme within a timeframe that was acceptable to the OGA,
the Company relinquished the licence with effect from 29 March
2019. As a consequence, in the subsequent period, the Company has
recognised an impairment of the exploration asset relating to
Licence P2248 and has recorded an impairment charge of
approximately GBP805,000. As the decision to relinquish the licence
was made in 2019, this is considered a 'non-adjusting' event and so
the impairment charge will be reflected in the Income Statement in
the 2019 financial report.
There were no other significant events subsequent to 31 December
2018.
**ENDS**
For further information please visit
www.cluffnaturalresources.com or contact the following:
Cluff Natural Resources Plc Tel: +44 (0) 20 7887 2630
Algy Cluff / Graham Swindells /
Andrew Nunn
Allenby Capital Limited (Nominated Tel: +44 (0) 20 3328 5656
Adviser & Broker)
David Hart / Alex Brearley / Asha
Chotai (Corporate Finance)
Camarco Tel: +44 (0) 20 3757 4983
Billy Clegg / James Crothers / Owen
Roberts (Financial PR)
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 DBGDSCGDBGCS
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