Europa Oil & Gas (Holdings) plc /
Index: AIM / Epic: EOG / Sector: Oil & Gas
30 October 2017
Europa Oil &
Gas (Holdings) plc (‘Europa’ or ‘the Company’)
Final Results for
the year to 31 July 2017
Europa Oil & Gas (Holdings) plc, the AIM listed oil and gas
exploration, development and production company focused on
Europe, announces its final
results for the 12 month period ended 31
July 2017.
The full Annual Report and Accounts will be available shortly on
the Company’s website at www.europaoil.com and will be mailed to
those shareholders who have requested a paper copy in November.
Financial highlights
-
Group revenue of £1.6m (2016: £1.3m)
-
Pre-tax loss of £0.7m (2016: loss £1.9m after £1.2m exploration
write-off in Béarn des Gaves)
-
Post-tax loss for the year £0.5m (2016: loss £1.6m)
-
Cash used in operating activities £0.26m (2016: cash used
£0.32m)
-
Net cash balance as at 31 July
2017 £3.6m (31 July 2016:
£1.7m)
Operational highlights
Offshore Ireland
-
Farm-out of 70% interest in Licensing Option (“LO”) LO16/19 in
the South Porcupine Basin to a
subsidiary of Cairn Energy plc which will fully fund a US$6 million work programme including the
acquisition of 3D seismic over the licence which started in
July 2017.
-
Discussions ongoing with a number of large operators with
regards to farming-out Europa’s leading offshore Ireland licence position, which includes seven
licences exposed to six different play types in three basins.
-
Extension of phase 1 of Irish South Porcupine Basin Frontier
Exploration Licence (“FEL”) FEL 2/13 and FEL 3/13 to July 2019 to enable completion of 3D seismic
reprocessing and subsequent detailed mapping and maturation of
prospects to drillable status.
-
Issued the results of an independent Competent Person’s Report
(‘CPR’) prepared by ERC Equipoise Ltd (‘ERCE’), estimating gross
mean un-risked Prospective Resources of 553 mmboe across two new
pre-rift prospects, Ervine and Edgeworth, in LO 16/2.
-
Issued updated prospect inventory for FEL 2/13 based on in-house
work identifying 9 oil prospects with 1.1 billion boe including 3
new prospects Kiely, Keane and Kilroy.
-
Converted LO 16/2 into a 15 year Frontier Exploration Licence
FEL 1/17 effective from 1 July
2017
-
Commenced Pre-Stack Depth Migration (“PSDM”) reprocessing
project over FEL 2/13 and FEL 1/17 with intent of improving mapping
and interpretation of pre-rift prospects.
Onshore UK
-
Sale of 3.34% interest in PEDL180 & 182 (which includes the
Wressle discovery) to Union Jack Oil plc (‘Union Jack’) for £0.6
million in cash
-
Agreed sale, conditional on planning approval, of 10% interest
in PEDL180 & 182 to Upland Resources (UK Onshore) Limited
(‘Upland’) for up to £1.85 million: £1.3 million in cash, £0.3
million in Upland shares and a contingent consideration of £0.25
million in Upland shares
-
Commencement of production at Wressle delayed pending appeal of
planning decision – Planning Inspectorate appeal due in
November 2017
-
Increase in Europa’s interest in PEDL299 (Hardstoft oil field)
and PEDL343 (Cloughton gas discovery) to 25% and 35% respectively
following acquisition of Shale Petroleum (UK) Limited (‘Shale
Petroleum’)
-
Farm-out of 12.5% interest in PEDL143 (‘Holmwood’) to Angus
Energy – Europa retains 20% interest and is carried on upcoming
well costs up to a cap of £3.2 million
Post reporting date events
-
In September 2017 we announced an
extension to the date by which the conditions of the Upland agreed
sale of 10% interest in Wressle are to be satisfied to 28 February 2018.
-
In October 2017 Surrey County
Council approved a security fence at the Holmwood site but deferred
a decision on traffic conditions.
Europa’s CEO, Hugh Mackay said,
“2016/17 was a record year for Europa in terms of the level of
corporate activity seen across our licence base: the successful
farm-out to Cairn of a 70% interest in one our South Porcupine licences; two separate sales
of our interest in the Wressle oil field in the East Midlands; the
acquisition of Shale Petroleum, which increased our equity in the
Hardstoft oil field and Cloughton gas discovery in the UK; and the
farm-out of a 12.5% stake in the upcoming Holmwood well in the
Weald basin. In our view, this activity is testament to the
quality of the technical work we have carried out on our licences,
the excellent location of our assets both offshore Ireland and onshore UK, and the major uptick
in industry interest and activity in new plays across our areas of
focus.
“The year ahead should see more of the same. We remain
focused on securing farm-outs for the remainder of our Irish
licences with partners with whom we can advance our assets towards
drilling. At the same time, we are looking forward to
commencing drilling activity at the conventional Holmwood prospect
in the Weald, an area that is generating considerable excitement
following the opening up of the Kimmeridge limestone play. In
addition, we remain confident that the green light will finally be
given to bring the Wressle discovery on line. By adding
around 100bopd to our exisitng production, Wressle promises to
bring our operational breakeven down to US$35 a barrel, a major milestone for the
Company. With so much activity on so many fronts in the
months ahead, I look forward to providing further updates, as we
continue with our strategy to monetise our asset base and generate
value for our shareholders.”
**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 |
Frank Buhagiar |
St Brides Partners Ltd |
+ 44 (0) 20 7236 1177 |
Susie Geliher |
St Brides Partners Ltd |
+ 44 (0) 20 7236 1177 |
Chairman's statement
Offshore Ireland
The arrival of blue chip operators of the calibre of Statoil,
ExxonMobil, Total, Nexen and Woodside in recent years has led to
the major uptick in exploration activity that we expected.
Initially this centred on the acquisition of 3D seismic over
awarded acreage but has since moved on to drilling activity.
The diversity of play types in the region has acted as a draw for
the majors. The prolific Cretaceous Fan play as seen offshore
West Africa, the Cretaceous shelf
discoveries similar to those offshore Senegal and the Syn-rift play as seen offshore
Newfoundland are analogues for
three of six plays being pursued in Ireland.
Having gained a presence in Atlantic Ireland in 2011, Europa has
been able to capitalise on its first mover advantage to build and
advance a leading portfolio of seven licences exposed to all six
plays currently being targeted. To date, we have identified
more than four billion barrels of oil equivalent and 1.5 tcf gas of
gross mean un-risked prospective and indicative resources across
our licences, half of which have been audited by a Competent
Person. As a result, we have been actively involved in the
spate of deals that have taken place across the region during the
year, starting in March 2017 with our
own farm-out of a 70% interest in LO 16/19 to Cairn Energy in
return for a carry on a US$6 million
work programme. This included the shooting of 3D seismic
during summer 2017 and we look forward to receiving the processed
data in summer 2018 and delivering a prospect inventory by next
calendar year end.
At the same time, Cairn farmed into the recently drilled
Providence Resources well, which was targeting the Paleocene and
Cretaceous Fan prospects. They were subsequently joined by
Total. Deals were also struck in the Greater Corrib area with the
acquisition by a Canadian pension fund of an interest in the
producing Corrib gas field, as well as Nexen farming into Faroe
Petroleum’s neighbouring licence.
History shows that new plays are rarely opened up by the first
well drilled, and, following the result of the Providence
Druid/Drombeg well, that is the case with the Cretaceous Fan and
Paleocene plays in the South
Porcupine Basin. As far as Europa’s portfolio is concerned,
the result is only relevant to two of the six plays we are exposed
to, but even here the Druid/Drombeg well offers encouragement by
proving the presence of sandstone reservoir in the Drombeg
Cretaceous fan. In our opinion, this has the potential to
de-risk the reservoir presence component of other mid-Cretaceous
aged fans in the South Porcupine
including our three mid-Cretaceous aged fans: Wilde; Beckett and
Shaw, in FEL 3/13. In addition, the presence of bitumen could
also imply the presence of source rock. We expect to learn
more about what the well encountered as and when news is released
to the market.
Europa is not sitting idly waiting on the results of other
operators’ activity. Work continues to be carried out across
all seven of our licences, as we focus on delivering on our target
to deliver six drill ready prospects by the end of 2018, each of
which will have the potential to be a company-maker. We
currently have two prospects at drill ready status.
Shareholders can therefore expect more news flow as we home in on
our target in the months ahead.
Onshore UK
As with offshore Ireland,
onshore UK Europa has a diversified portfolio of licences including
production, development and appraisal projects in the East Midlands
and high impact exploration in the Weald Basin. We were expecting
to see net production double to over 200bopd during the year as the
Wressle discovery was brought on stream. However, two
applications for planning consent were refused by North
Lincolnshire County Council during the year, despite being
recommended by its own planning officers. The case for
Wressle is strong and we look forward to the forthcoming appeal
with the Planning Inspectorate in November
2017. Subject to a successful outcome, Wressle could be
producing 500 bopd gross in 2018.
While a near-doubling in our production to over 200 bopd will be
a milestone event for Europa onshore UK, it could be overshadowed
by developments in the Weald Basin. With planning permission in
place, we are moving forward to drill a well to test the 5.6
million barrel Holmwood prospect. Thanks to the deals we
struck during the last 18 months, our share of the well costs is
carried up to a cap of £3.2 million. In addition to the
proven producing Portland
sandstone reservoir, Holmwood is expected to encounter the
Kimmeridge limestone, which has been the cause of much excitement
at the nearby Horse Hill discovery. Having produced at Horse Hill,
albeit for a limited period, at over 1,300 bopd, the Kimmeridge
represents a new play in the basin which is now due to be tested at
Horse Hill and the nearby Brockham field shortly. Together
with the drilling of Holmwood, the months ahead promise to be an
exciting period for UK onshore exploration, and once again Europa
will be at the heart of it.
At the reporting date, we have £3.6 million cash and subject to
a successful appeal at Wressle we will receive a further £1.1
million cash and £0.3 million in paper with completion of the
Upland transaction that will see our interest in Wressle move to
20%. Thanks to the deals we have secured during the year and
the support we have received from shareholders, the various work
streams that are underway across our asset base are fully
funded. Rather than piggy-backing on the success of other
operators in two hydrocarbon hotspots where we have a strong
presence, Europa is well placed to generate value for shareholders
from its own high impact activity across its own licences in the
year ahead and we look forward to providing updates on progress
made.
Financial performance
We have seen a reduction in administrative expenses from
non-recurring 2016 items and other savings, which has reduced our
pre-tax loss to £675,000 (2016: loss £1,904,000 after £1,162,000
exploration write-off in Béarn des Gaves). The post-tax loss for
the year also fell to £491,000 (2016: loss £1,638,000).
All of this has been against a backdrop of modest growth in oil
prices which has seen the price achieved for sales during the 12
months to end July 2017 average
US$48.9 per barrel (2016:
US$41.5).
The slight rise in sterling equivalent oil price achieved has
helped to increase our revenues and the average of 113 boepd
recovered from our UK onshore fields generated £1.6 million in
revenues (2016: 123 boepd and £1.3 million). Net cash spent on
operations was £0.25 million (2016: cash spent £0.32 million). Our
cash balance at the end of July 2017
was £3.6 million (31 July 2016: £1.7
million).
Europa’s board continues its policy of seeking to maximise
efficiencies and manage our cost and asset base to ensure we remain
fully funded for future operations. We avoid incurring debt for our
activities, preferring instead to farmout exploration obligations
and/or monetise assets wherever possible and, although the market
for farmouts is challenging, we believe we have an excellent
portfolio of assets and that we will continue to be successful in
this strategy during 2017/18.
In June we raised £3.4 million (£3.1 million after expenses) by
a placing of shares to new and existing shareholders and an open
offer to existing shareholders. I would like to thank shareholders
for their support in this equity offering.
The specific geological work on our Irish acreage that is
expected to be funded is as follows:
-
PSDM processing of 3D seismic over FEL 3/13 and FEL 1/17 with
interpretation work to take the identified prospects to drillable
status.
-
PSDM processing of 3D seismic over FEL 2/13 with interpretation
work to take the identified prospects to drillable status and
complete a CPR.
-
Acquiring existing 3D seismic volumes and well data for LO 16/20
and LO 16/21, reprocess and remap leading to completion of a
CPR.
-
Reprocessing existing 2D seismic for LO 16/22 with
interpretation work to mature identified prospects to drillable
status.
The Directors believe this near-term work programme will aid
Europa in its aim of attracting farm-in partners.
In the UK, proceeds will be used as follows:
-
Funding equity share of a 3D seismic survey over the Cloughton
gas discovery in PEDL343 in order to optimise drilling
location.
-
Funding equity share of a 2D seismic survey over the Hardstoft
oil field in PEDL299 so as to detail the structure and locate a
well.
I would like to thank the management, operational teams, my
fellow Board members and our advisers for their hard work over the
year.
Finally I would like to reiterate my thanks to our shareholders
for their continued support during what has been another
challenging year for the oil and gas sector as a whole, but
particularly for small exploration and production companies.
Colin Bousfield,
Non executive Chairman
Operations review
Exploration
Europa is a leading operator in offshore Ireland exploration. The Company holds
seven licences covering 5,818 sq km, six play types, three basins,
and over 30 prospects and leads which potentially hold gross mean
un-risked prospective resources (‘GMUPR’) of more than four billion
barrels of oil equivalent and 1.5 TCF of gas (Europa
estimates).
The diversity of play types as well as the potential volumes of
hydrocarbons being targeted has attracted majors such as
ExxonMobil, Statoil, ENI, BP, Nexen, and Woodside to the basin,
initially via the Atlantic Ireland Licensing round but lately via
farm-ins including Europa’s own LO 16/19 where the Company has
partnered with Cairn Energy. As the number and quality of
companies operating in the region has increased, so too has the
number of work programmes that are underway, predominantly
involving the acquisition and processing of 3D seismic.
Europa expects this activity will lead to up to a dozen wells
being drilled across the region over the next five or six
years. Already, the first of these, the 53/6-A exploration
well on the western side of the South
Porcupine Basin in FEL 2/14, was drilled post period end
between July and September by Providence Resources in partnership
with Cairn Energy, Sosina and Total S.A. This exploration
well was the first to evaluate both the Paleocene and the
Cretaceous fan plays in the South
Porcupine basin, and targeted two prospects: the Paleocene
prospect “Druid” and the Cretaceous fan prospect
“Drombeg”.
While live hydrocarbons were not encountered by the well at
either of the two prospects, the presence of sandstone reservoir at
Drombeg, together with the possible presence of bitumen in drill
cuttings may provide some encouragement for the reservoir and
source elements of the Cretaceous Fan hydrocarbon play (see
Providence’s announcement on 11 September
2017). The Cretaceous Fan play comprises Early Cretaceous
turbidite sandstone reservoirs charged by mature Late Jurassic and
possibly Early Cretaceous source rocks and contained in
stratigraphic traps with elements of structural closure.
Europa has mapped a number of Cretaceous fan prospects on 3D
seismic in FEL 3/13 and LO 16/19 and the Board will be considering
the implications of the Drombeg result on Europa’s
prospectivity. Europa has no licence interest in FEL 2/14 and
any thoughts Europa form will be based on public domain information
about Drombeg, together with the Company’s in-house knowledge of
the South Porcupine basin and
hydrocarbon plays.
Out of the seven licences Europa holds offshore Ireland, four are located in the South Porcupine basin targeting prospectivity
on multiple levels. As well as the Cretaceous Fan play,
Europa is targeting the Cretaceous Shelf, pre-rift and syn-rift
plays in the east on FEL 3/13 and FEL 1/17 (both 100% held) and in
the west on FEL 2/13 (100%) and LO 16/19 (30% following the Cairn
farm-in).
In addition, LO 16/20 and LO 16/21 are located in the Greater
Corrib area of the Slyne basin in the vicinity of the producing
Corrib gas field and are targeting the Triassic gas play. Europa’s
seventh licence lies in the Padraig basin, a remnant Jurassic basin
on the eastern margin of the Rockall Trough, which provides the
Company with exposure to the conjugate margin syn-rift and pre-rift
plays analogous to the Flemish Pass play offshore
Newfoundland.
Work programmes are underway across all of Europa’s offshore
Ireland licences to increase the
number of drill ready prospects within the Company’s portfolio to
six from the current two (Wilde and Beckett in FEL 3/13) by the end
of 2018. In parallel with this work, Europa continues to
interact with prospective partners with whom it can progress its
licences, particularly those in the South Porcupine
Basin.
South Porcupine Basin: FEL 3/13
(Wilde, Beckett & Shaw)
A Competent Persons Report (‘CPR’) by ERC Equipoise confirmed
gross mean un-risked prospective resources of 1,492 million boe and
un-risked NPV10 of US$7 billion
across three Cretaceous fan prospects on FEL 3/13: prospects Wilde
(gross mean un-risked prospective resources 428 million boe),
Beckett (749 million boe) and Shaw (315 million boe). Prospect
Wilde is considered drill ready with a geological chance of success
of 1 in 5. Drill costs are estimated to be US$37 million excluding mobilisation and
demobilisation.
During the period, the Irish Government granted its consent for
the extension of Phase 1 of Frontier Exploration Licence 3/13 by
two years to 4 July 2019 to carry out
further technical work on the licence to mature existing prospects
and leads, particularly in the pre-rift and syn-rift plays, to
drill ready status. The work, which includes PSDM of 3D seismic
data previously acquired in 2013, may also de-risk existing
drill-ready prospects in the Cretaceous fan play.
South Porcupine Basin: FEL 1/17
(Ervine, Edgeworth, PR3)
In June 2017, the Irish Government
approved an application to convert LO 16/2 to FEL 1/17. FEL
1/17 covers approximately 522 sq km of ground and adjoins the
eastern boundary of FEL 3/13. Europa has identified three new
pre-rift prospects in the licence with combined 898 million boe
based on its proprietary 3D seismic which covers both FEL 1/13 and
FEL 3/13. The pre-rift play comprises Jurassic reservoirs in tilted
fault block structures, the analogue is the Brent Province in the
North Sea. Europa is conducting a 3D reprocessing project on
its propriety data over both FEL 3/13 and FEL 1/17 to de-risk the
pre-rift prospects in both licences. This was completed during Q4
2017.
South Porcupine Basin: FEL 2/13
(Doyle A,B,C Kilroy, Keane & Kiely)
To date, nine prospects in the pre-rift, syn-rift Cretaceous
apron and Cretaceous slope plays have been identified on Europa’s
100% owned FEL 2/13. Combined gross mean un-risked
prospective resources are 1.1 billion boe. Europa is conducting a
3D reprocessing project over FEL 2/13 with the intent of improving
prospect definition and maturing prospects to drill ready status.
This work is expected to be completed during H1 2018 and will lead
to a revised prospect inventory with emphasis on the pre-rift,
syn-rift and Cretaceous shelf prospects. Europa has
identified a number of Cretaceous submarine channels on FEL 2/13,
which cross the licence from west to east on its proprietary 948 sq
km 3D seismic survey.
During the period, the Irish Government granted its consent for
the extension of Phase 1 of Frontier Exploration Licence 2/13 by
two years to 4 July 2019 to enable
the Company to complete the above work programme.
South Porcupine Basin: LO
16/19
The channels identified in FEL 2/13 feed submarine fans
developed in LO 16/19. The seismic architecture of the channels in
FEL 2/13 contain features consistent with sandstone deposition and
Europa believes that these sandstones are also deposited in the
fans identified on LO 16/19. There is potential for several
Cretaceous submarine fans with gross mean un-risked prospective
resources of 700 million boe. In addition, evidence of gas
escape features on seismic and sea bed pock marks suggest the
presence of an active source rock. Well 43/13-1, which was
drilled by BP in 1998 approximately 20km from LO 16/19, saw oil
shows and encountered source rocks.
On 8 March 2017, Europa announced
the farm-out of a 70% interest in LO 16/19 to leading independent
Cairn Energy plc. Under the terms of the farm-out, Cairn agreed to
fully fund a US$6 million work
programme including a 3D seismic survey over LO 16/19 to further
mature the prospect inventory towards drillable status. The
TGS Crean multi-client 3D survey is currently being acquired and is
on course to be completed in the near term. Delivery of the
processed dataset is expected in summer 2018 after which geological
and geophysical interpretation is expected to lead to a detailed
prospect inventory over LO 16/19 towards the end of 2018.
Below is a table summarising the GMUPR in million boe across
Europa’s four licences in the South
Porcupine Basin:
Licence
GMUPR
Source
FEL 3/13
1,492
ERCE CPR
FEL 1/17
898
ERCE CPR and Europa in-house
FEL 2/13
1,124
Europa in-house
LO 16/19
700
Europa in-house
Total
4,214
Slyne Basin: LO 16/20 and LO 16/21
LO 16/20 and 16/21 are located in the Greater Corrib area of the
Slyne basin adjacent to the producing Corrib gas field where
substantial gas infrastructure is already in place. The field has a
gross plant capacity of approximately 350 million cubic feet of
natural gas per day, provides approximately 60% of Ireland's natural gas consumption and
constitutes approximately 95% of Ireland's gas production. As a result, unlike
licences in the Porcupine Basin, LO 16/20 and 16/21 are targeting a
low risk infrastructure led play in the Greater Corrib area and
represent exploration in a proven basin comprised of Triassic
sandstone reservoirs in tilted fault block structures with gas
generated from Carboniferous source rocks.
The licences are partially covered by 3D seismic and extensively
covered by historic 2D seismic. Based on the data, Europa has
identified a number of prospects and leads on both licences with
estimated gross mean un-risked prospective and indicative resources
of 1.0 tcf gas on LO 16/20 and 0.5 tcf gas on LO 16/21.
Historic 3D seismic over the licences has been obtained and work
has commenced with the intent of maturing these leads to drillable
prospect status. A farm-in partner will be sought for both
licences to drill a low-risk exploration well. Water depths
range from 300 to 2,000 metres. The Corrib area has
been the subject of considerable corporate activity during the
period: Nexen farmed into an 80% interest in Faroe Petroleum’s LO
16/23; while Vermilion and the Canada Pension Plan Investment
Board, the investment arm of Canada Pension Plan, acquired a 45%
interest in the Corrib gas field for US$1.23
billion.
Padraig Basin: LO 16/22
The Padraig Basin is a remnant Jurassic basin on the eastern
margin of the Rockall Trough. The most relevant analogue for the
Padraig is the conjugate margin play offshore Newfoundland in the Flemish Pass basin, which
was opened up by Statoil’s Bay du Nord oil discovery. Most industry
efforts are concentrated on exploring for this play in the
South Porcupine basin, but
Europa’s restoration of the conjugate margin prior to Atlantic
seafloor spreading suggests the possibility that the Padraig could
be a better fit with the Flemish Pass basin.
Structures of significant size have been identified on 2D
seismic acquired in 1998. In addition, multiple leads in both
pre-rift and syn-rift hydrocarbon plays have been mapped in water
depths ranging from 800 to 2,000 metres. Gross mean un-risked
indicative resources are estimated to be in the range of 300 to 600
million boe. Work is underway to mature the leads to
drillable prospect status using historic data including 2D seismic
and high quality technical work previously conducted by major oil
companies.
UK - Onshore Production
East Midlands: West Firsby; Crosby Warren; Whisby-4
The Company produces from three oilfields in the East Midlands:
a 100% working interest in both the West Firsby and Crosby Warren
fields and a 65% non-operated interest in the Whisby-4 well. As
these are mature oil fields, total production declined in line with
expectations. During the year to 31 July
2017, 113 boepd were recovered (2016: 123 boepd). All
the oil is transported by road to the Immingham refinery.
UK - Development
East Midlands: PEDL180 (Wressle); PEDL182 (Broughton North)
PEDL180 holds the Wressle oil discovery which lies 5km southeast
of, and along the same structural trend as, Europa’s producing
Crosby Warren field. Wressle was discovered by the Wressle-1
conventional exploration in August
2014. Production testing during 2015 delivered a combined
flowrate over 700 boepd from three reservoir intervals: Ashover
Grit; Wingfield Flags; and Penistone Flags. Reservoir engineering
analyses indicate an initial production flow rate of 500 bopd gross
from the Ashover Grit interval at Wressle.
A CPR issued on 26 September 2016
identified gross 2P reserves on the structure of 0.65 million boe
in the Ashover and Wingfield Flags and gross 2C contingent
resources of 1.86 million boe in the Penistone Flags. The CPR
was undertaken by ERCE Equipoise, which at the same time assigned
gross mean un-risked prospective resources of 0.6 million boe and a
geological chance of success of 50% to the Broughton North
exploration prospect on PEDL182 which lies adjacent and north of
PEDL180. In 1984, a well was drilled by BP and discovered oil
at Broughton.
During the period, Europa sold a 3.34% working interest in
PEDLs180 & 182 to Union Jack Oil & Gas (‘UJO’) for a cash
consideration of £600,000. On 24
November 2016, Europa agreed the sale of a further 10%
interest in the two licences to Upland for a total consideration of
up to £1.85 million. The transaction implies a value of up to £3.7
million for Europa’s remaining 20% interest in the licences.
Completion of the sale to Upland is subject to planning, and Field
Development Plan (‘FDP’) approvals. The FDP was submitted to the
OGA on 8 September 2016. In
January 2017, Lincolnshire County
Council refused to grant planning consent. The partners
announced their intention to appeal and at the same time file a new
application which included more detailed information to address the
specific concerns outlined by the Council. In July 2017, this second application was refused by
the County Council’s Planning Committee. As with the first refusal,
the decision of the Committee went against the positive
recommendation of the County Council’s Planning Officer, which was
determined after an extensive and thorough review of an augmented
planning application.
The partners are moving forward with the appeal against the
January and July 2017 determinations,
which is due to be heard by the Planning Inspectorate in November
2017. The partners remain confident that planning consent
will be granted and that Wressle will be brought into
production.
UK – Exploration
Weald Basin: PEDL143 (Holmwood)
PEDL143 is located in the Weald Basin, Surrey and contains the Holmwood conventional
oil prospect, which is predicted to have the same conventional
Jurassic sandstone and limestone reservoirs that have been proven
to be productive at the nearby Brockham oil field and at the Horse
Hill oil discovery. In a CPR dated June
2012, ERCE Equipoise assigned Holmwood gross mean
prospective resources of 5.6 million boe with a range of 1 to 11
million boe. At 5.6 million boe, Holmwood would become the fifth
largest onshore oil field in the UK. Planning permission has been
granted to drill a temporary exploratory borehole to a depth of
1,400 metres. Europa is working to discharge the remaining
conditions before commencing drilling operations at Holmwood in the
first half of 2018. Following the exploration success at Horse Hill
8km to the East, Europa rates the geological chance of success at
Holmwood as 1 in 2.
During the period, Europa agreed to farm-out a 12.5% interest in
PEDL143 to Angus Energy. Thanks to earlier farm out activity,
Europa’s remaining 20% share of the exploration well costs at
Holmwood will be fully carried up to a cap of £3.2 million.
Europa is partnered in the licence with UK Oil & Gas
Investments plc 30%, Egdon Resources 18.4%, Angus Energy 12.5%,
Warwick Energy 10%, UJO 7.5% and Altwood Petroleum 1.6%.
Aside from Holmwood, there is ongoing exploration and
development activity in the Weald Basin, the results of which will
be relevant to Holmwood. The Horse Hill discovery in PEDL137
lies 8km to the east of and along-strike in a very similar
geological structure to Holmwood. Correlation of seismic data
indicates that the Holmwood well will penetrate a similar
stratigraphic section to Horse Hill which produced at a rate of 323
bopd over an 8.5-hour period from Portland sandstone reservoirs, a well-known
producing reservoir in the Weald basin. In addition to the
Portland, Horse Hill produced a
combined 1,365 bopd from two micritic limestone formations in the
Kimmeridge section over a period of up to 7.5 hours. As well
as increasing the geological chance of success on the Portland sandstone reservoir at Holmwood,
Horse Hill has opened up the Kimmeridge limestone as an exciting
new play in the Weald Basin, one which we believe is also present
at Holmwood.
The Kimmeridge has also been identified in the Brockham field,
which lies 5km to the north of Holmwood. Following OGA
consent of the Field Development Plan, the operator, Angus Energy,
intends to bring the Kimmeridge limestone reservoir into production
from the Brockham-X4Z well. In addition, the Kimmeridge is
due to be tested at the Broadford Bridge well in PEDL 234, which
encountered a thick sequence of Kimmeridge with five limestone
intervals. The limestones were cored and found to have live
light oil seeping at surface. The operator, UKOG, intends to
conduct an extended well test (‘EWT’) of Kimmeridge limestone,
which will go some way to determining the amount of connected
volume of the Kimmeridge that can be accessed by a well, and,
importantly, if this is sufficient to enable commercial
production.
East Midlands: PEDL299 (Hardstoft)
The Hardstoft oil field was discovered in 1919 by the UK’s first
ever exploration well and produced 26,000 barrels of oil from
Carboniferous limestone reservoirs. A CPR issued by joint venture
partner Upland, identified gross 2C contingent resources of 3.1
million boe and gross 3C contingent resources of 18.5 million boe
at Hardstoft. Production testing methodologies for carbonate
reservoirs have evolved since 1919, which it is hoped will lead to
commercial oil flowrates being achieved.
During the period, Europa acquired Shale Petroleum, which
resulted in the Company’s interest in the licence increasing from
16.66% to 33.33%. This has subsequently been reduced following the
reassignment of an 8.33% interest in the licence to existing
partner Upland. As a result, Europa’s interest in PEDL299, which is
restricted to the conventional prospectivity, now stands at 25%,
alongside Upland 25% and INEOS, the operator, 50%.
Cleveland Basin: PEDL343
(Cloughton)
PEDL343 is operated by Third Energy and contains the Cloughton
gas discovery made by Bow Valley. An exploration well was drilled
in 1986 and flowed a small amount of gas to surface on production
test from 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.
The acquisition of Shale Petroleum increased the Company’s
equity in PEDL343 to 45% from 22.5%. This has subsequently been
reduced to 35% following the assignment of a 10% interest to
existing partner Arenite Petroleum Limited (‘Arenite’).
Europa holds a 35% interest in PEDL343 alongside Arenite 15%, Third
Energy 20%, Egdon Resources 17.5% and Petrichor Energy 12.5%.
Southern North Sea: Block 41/24
This is a promote licence over Block 41/24 in the Southern North
Sea to a joint venture comprising Europa and Arenite. The licence
was awarded as part of the 28th Seaward Licensing Round. Block
41/24 adjoins the Yorkshire coast
and contains the Maxwell gas field which was discovered in Permian
Zechstein carbonates by Total with the drilling of offshore well
41/24a-1 in 1969. Two follow-up appraisal wells: 41/24a-2 drilled
by Total (1981) and 41/24-3 by Conoco (1992) targeted this
fractured Zechstein carbonate reservoir and flowed gas and
condensate. The exploration emphasis of the licence is to address
the Carboniferous prospectivity in the Namurian and Dinantian
sequences. The adjoining onshore extension of the Cleveland basin contains a number of gas
fields and discoveries including Kirby Misperton, Ebberstone Moor
and Cloughton.
The licence expires in December
2017 and requires financial, technical and environmental
capacity to be in place and a firm drilling (or agreed equivalent
substantive activities) commitment to have been made by the end of
the year.
East Midlands: PEDL181
The licence provides exposure to the hydrocarbon potential of
the Humber basin. It 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.
New Ventures
We are actively evaluating high impact new venture opportunities
outside of our core areas in Ireland and the UK.
Non-financial KPI’s
There were no reportable accidents or incidents in the year
(2016: zero). The Environment Agency has undertaken an exercise of
repermitting all onshore production sites and we have completed
re-applications for activities at both Crosby Warren and West
Firsby in the year.
There were no new licence awards in the year (2016: five
licences in Ireland and three in
UK).
Financials
An average of 113 boepd were recovered from the Company’s three
UK onshore fields in the period, which generated £1.6 million in
revenue (2016: 123 boepd and £1.3 million).
An improving oil price, together with favourable exchange rates,
offset the natural decline in our production in the period. The
average oil price achieved was US$48.9/bbl (2016: US$41.5/bbl) and the average Sterling exchange
rate was $1.27 (2016: $1.45).
Stringent cost controls continue to be implemented. Cost of
sales were £1,459,000 (2016: £1,282,000) despite spending £62,000
on renewal of EA permits for the operated production sites and 2016
benefitting from £106,000 of rates refunds.
Administrative expenses of £553,000 (2016: £593,000) as a result
of the full year effect of the continuing temporary salary
reduction agreed with head office staff £70,000 and non-recurrence
of expenditure on Irish licence applications £80,000.
Administrative expenses also include £98,000 of non-cash cost
associated with the granting of stock options in the period.
Net cash spent on operating activities was £255,000 (2016: cash
spent £322,000).
Purchase of intangible fixed assets of £1.4 million (2016: £0.8
million) was largely spent advancing the Irish portfolio and on
Holmwood. As a result of the delay in receipt of planning consent
for the Wressle development, £1.14 million cash is still expected
to be received from Upland.
The Company’s cash balance at 31 July
2017 was £3.6 million (31 July
2016: £1.7 million).
Hugh Mackay
Chief Executive Officer
The financial information set out below does not constitute the
company's statutory accounts for 2017 or 2016. 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
2017. Statutory accounts for the years ended 31 July 2017 and 31 July
2016 have been reported on by the Independent Auditors.
The Independent Auditors' Report on the Annual Report and
Financial Statements for 2017 and 2016 were unqualified, did not
draw attention to any matters by way of emphasis, 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 2016 have been filed with the Registrar of Companies.
The statutory accounts for the year ended 31
July 2017 will be delivered to the Registrar in due
course.
Consolidated statement of
comprehensive income
For the year ended 31 July |
|
2017 |
2016 |
|
Note |
£000 |
£000 |
|
|
|
|
Revenue |
|
1,569 |
1,269 |
Cost of sales |
|
(1,459) |
(1,282) |
Exploration write-off |
1 |
- |
(1,162) |
Total cost of sales |
|
(1,459) |
(2,444) |
|
|
---------------------------------- |
---------------------------------- |
Gross profit/(loss) |
|
110 |
(1,175) |
|
|
|
|
Administrative expenses |
|
(553) |
(593) |
Profit on fixed asset disposal |
|
- |
28 |
Finance income |
|
2 |
64 |
Finance expense |
|
(234) |
(228) |
|
|
------------------------------------ |
------------------------------------ |
Loss before taxation |
|
(675) |
(1,904) |
|
|
|
|
Taxation credit |
|
184 |
266 |
|
|
------------------------------------ |
------------------------------------ |
Total comprehensive loss for the
year attributable to the equity shareholders of the parent |
|
(491) |
(1,638) |
|
|
===================================== |
=================================== |
|
|
|
|
Earnings
per share (EPS) attributable to the equity shareholders of the
parent |
Note |
Pence per
share |
Pence per share |
Basic and diluted EPS |
|
(0.19)p |
(0.67)p |
Consolidated statement of financial
position
As at 31 July |
|
2017 |
2016 |
|
Note |
£000 |
£000 |
Assets |
|
|
|
Non-current assets |
|
|
|
Intangible assets |
1 |
5,276 |
4,453 |
Property, plant and equipment |
2 |
882 |
1,060 |
Deferred tax asset |
|
341 |
157 |
|
|
---------------------------------- |
---------------------------------- |
Total non-current assets |
|
6,499 |
5,670 |
|
|
---------------------------------- |
---------------------------------- |
Current assets |
|
|
|
Inventories |
|
14 |
23 |
Trade and other receivables |
|
886 |
210 |
Cash and cash equivalents |
|
3,591 |
1,718 |
|
|
---------------------------------- |
---------------------------------- |
|
|
4,491 |
1,951 |
|
|
---------------------------------- |
---------------------------------- |
Total
assets |
|
10,990 |
7,621 |
|
|
================================== |
================================== |
Liabilities |
|
|
|
Current liabilities |
|
|
|
Trade and other payables |
|
(945) |
(444) |
Current tax liabilities |
|
- |
(148) |
|
|
------------------------------------ |
------------------------------------ |
Total current
liabilities |
|
(945) |
(592) |
|
|
------------------------------------ |
------------------------------------ |
Non-current liabilities |
|
|
|
Long-term provisions |
|
(2,570) |
(2,347) |
|
|
---------------------------------- |
---------------------------------- |
Total non-current
liabilities |
|
(2,570) |
(2,347) |
|
|
---------------------------------- |
---------------------------------- |
Total liabilities |
|
(3,515) |
(2,939) |
|
|
----------------------------------- |
----------------------------------- |
Net assets |
|
7,475 |
4,682 |
|
|
================================== |
================================== |
|
|
|
|
Capital and reserves
attributable to equity holders
of the parent |
|
|
|
Share capital |
|
3,014 |
2,449 |
Share premium |
|
18,481 |
15,901 |
Merger reserve |
|
2,868 |
2,868 |
Retained deficit |
|
(16,888) |
(16,536) |
|
|
---------------------------------- |
---------------------------------- |
Total equity |
|
7,475 |
4,682 |
|
|
================================== |
===================================== |
|
|
|
|
These financial statements were approved by the Board of
Directors and authorised for issue on 27
October 2017 and signed on its behalf by:
Phil 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 2015 |
2,449 |
15,901 |
2,868 |
(14,911) |
6,307 |
Comprehensive loss for the
year |
|
|
|
|
|
Loss for the year
attributable to the equity shareholders of the parent |
- |
- |
- |
(1,638) |
(1,638) |
|
---------------------------------- |
---------------------------------- |
--------------------------------- |
------------------------------ |
------------------------------- |
Total comprehensive
loss for the year |
- |
- |
- |
(1,638) |
(1,638) |
|
|
|
|
|
|
Contributions by and
distributions to owners |
|
|
|
|
|
Share based payment |
- |
- |
- |
13 |
13 |
|
---------------------------------- |
---------------------------------- |
---------------------------------- |
--------------------------------- |
------------------------------ |
Total contributions by and
distributions to owners |
- |
- |
- |
13 |
13 |
|
|
|
|
|
|
|
---------------------------------- |
---------------------------------- |
--------------------------------- |
------------------------------ |
------------------------------- |
Balance at 31 July 2016 |
2,449 |
15,901 |
2,868 |
(16,536) |
4,682 |
|
================================== |
================================== |
================================== |
=============================== |
============================== |
|
£000 |
£000 |
£000 |
£000 |
£000 |
Balance at 1 August 2016 |
2,449 |
15,901 |
2,868 |
(16,536) |
4,682 |
Comprehensive loss for the
year |
|
|
|
|
|
Total comprehensive
loss for the year |
- |
- |
- |
(491) |
(491) |
|
---------------------------------- |
---------------------------------- |
---------------------------------- |
--------------------------------- |
------------------------------ |
Total comprehensive
loss for the year |
- |
- |
- |
(491) |
(491) |
|
---------------------------------- |
---------------------------------- |
---------------------------------- |
--------------------------------- |
------------------------------ |
Contributions by and
distributions to owners |
|
|
|
|
|
Issue of share
capital |
565 |
2,603 |
- |
- |
3,168 |
Issue of share
options |
- |
(23) |
- |
23 |
- |
Share based payment |
- |
- |
- |
116 |
116 |
|
---------------------------------- |
---------------------------------- |
---------------------------------- |
--------------------------------- |
------------------------------ |
Total contributions by and
distributions to owners |
565 |
2,580 |
- |
139 |
3,284 |
|
|
|
|
|
|
|
---------------------------------- |
---------------------------------- |
--------------------------------- |
------------------------------ |
------------------------------- |
Balance at 31 July 2017 |
3,014 |
18,481 |
2,868 |
(16,888) |
7,475 |
|
================================== |
================================== |
================================== |
=============================== |
============================== |
Consolidated statement of cash
flows
For the year ended 31 July |
|
2017 |
2016 |
|
|
£000 |
£000 |
Cash flows used in operating
activities |
|
|
|
Loss after tax from continuing
operations |
|
(491) |
(1,638) |
Adjustments for: |
|
|
|
Share based payments |
|
116 |
13 |
Depreciation |
|
184 |
195 |
Exploration write-off |
|
- |
1,162 |
Disposal of fixed asset |
|
- |
(28) |
Finance income |
|
(2) |
(64) |
Finance expense |
|
234 |
228 |
Taxation credit |
|
(184) |
(266) |
(Increase)/decrease in trade and
other receivables |
|
(108) |
170 |
Decrease/(increase) in
inventories |
|
9 |
(10) |
Decrease in trade and other
payables |
|
(13) |
(84) |
|
|
------------------------------------ |
------------------------------------ |
Net cash used in
operations |
|
(255) |
(322) |
|
|
|
|
Income taxes paid |
|
(144) |
- |
|
|
------------------------------------ |
------------------------------------ |
Net cash used in operating
activities |
|
(399) |
(322) |
|
|
===================================== |
===================================== |
Cash flows used in investing
activities |
|
|
|
Purchase of property, plant and
equipment |
|
(6) |
(1) |
Sale of property |
|
- |
338 |
Purchase of intangible assets |
|
(1,491) |
(1,224) |
Sale of part interest in
licence |
|
600 |
- |
Repayment of derivative |
|
- |
(30) |
Interest received |
|
2 |
4 |
|
|
----------------------------------- |
----------------------------------- |
Net cash used in investing
activities |
|
(895) |
(913) |
|
|
===================================== |
===================================== |
Cash flows from/(used in) financing
activities |
|
|
|
Proceeds from issue of share capital
(net of issue costs) |
|
3,145 |
- |
Increase/(decrease) in payables
relating to share capital issue costs |
|
16 |
(71) |
Option based equity movement on
share issue |
|
23 |
- |
Repayment of borrowings |
|
- |
(164) |
Finance costs |
|
(3) |
(17) |
|
|
----------------------------------- |
----------------------------------- |
Net cash from/(used in) financing
activities |
|
3,181 |
(252) |
|
|
===================================== |
===================================== |
|
|
|
|
Net increase/(decrease) in cash
and cash equivalents |
|
1,887 |
(1,487) |
Exchange (loss)/gain on cash and
cash equivalents |
|
(14) |
54 |
Cash and cash equivalents at
beginning of year |
|
1,718 |
3,151 |
|
|
----------------------------------- |
----------------------------------- |
Cash and cash equivalents at end
of year |
|
3,591 |
1,718 |
|
|
===================================== |
===================================== |
Notes to the financial statements
1
Intangible assets
Intangible assets -
Group |
2017 |
2016 |
|
£000 |
£000 |
At 1 August |
4,453 |
4,839 |
Additions |
1,423 |
776 |
Sale of 3.34% interest in PEDL180
and PEDL182 |
(600) |
- |
Exploration write-off |
- |
(1,162) |
|
----------------------------------- |
----------------------------------- |
At 31 July |
5,276 |
4,453 |
|
=================================== |
=================================== |
During the year the Group sold 3.34% of its interest in both
PEDL180 and PEDL182 to Union Jack Oil for £600k. The sale of a
further 10% interest in PEDL180 and PEDL182 to Upland was not
completed in the period and as the £160,000 received is potentially
repayable, it is reported in “Other Payables”. Intangible assets
comprise the Group’s pre-production expenditure on licence
interests as follows:
|
2017
£000 |
2016
£000 |
Ireland FEL 2/13 (Doyle A, B, C,
Kilroy, Keane & Kiely |
340 |
224 |
Ireland FEL 3/13 (Beckett, Wilde,
Shaw) |
725 |
487 |
Ireland FEL 1/17 (LO 16/2) |
224 |
35 |
Ireland LO 16/19 |
61 |
8 |
Ireland LO 16/20 |
206 |
- |
Ireland LO 16/21 |
38 |
- |
Ireland LO 16/22 |
48 |
- |
UK PEDL143 (Holmwood) |
901 |
721 |
UK PEDL180 (Wressle) |
2,527 |
2,672 |
UK PEDL181 |
60 |
47 |
UK PEDL182 (Broughton North) |
24 |
223 |
UK PEDL299 (Hardstoft) |
12 |
5 |
UK PEDL343 (Cloughton) |
69 |
- |
UK Block 41/24 (Maxwell) |
41 |
31 |
|
|
|
|
-------------------------------- |
-------------------------------- |
Total |
5,276 |
4,453 |
|
================================ |
================================ |
Exploration write-off |
|
|
France (Béarn des Gaves) |
- |
1,162 |
|
----------------------------------- |
----------------------------------- |
Total |
- |
1,162 |
|
================================== |
================================= |
The drilling of an exploration well at Holmwood and developing
the discovery at Wressle are subject to the securing of certain
planning permissions. If these are not secured then the PEDL143 and
PEDL180 intangible assets disclosed above will be impaired. 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
Property, plant & equipment -
Group
|
Furniture & computers |
Leasehold
building |
Producing
fields |
Total |
|
£000 |
£000 |
£000 |
£000 |
Cost |
|
|
|
|
At 1 August 2015 |
50 |
437 |
10,785 |
11,272 |
Additions |
1 |
- |
- |
1 |
Disposal |
- |
(437) |
- |
(437) |
|
------------------------------- |
------------------------------- |
------------------------------- |
------------------------------- |
At 31 July 2016 |
51 |
- |
10,785 |
10,836 |
|
|
|
|
|
Additions |
1 |
- |
5 |
6 |
|
------------------------------- |
------------------------------- |
------------------------------- |
------------------------------- |
At 31 July 2017 |
52 |
- |
10,790 |
10,842 |
|
=============================== |
=============================== |
=============================== |
=============================== |
Depreciation, depletion and
impairment |
|
|
|
|
At 1 August 2015 |
44 |
122 |
9,544 |
9,710 |
Charge for year |
3 |
7 |
185 |
195 |
Disposal |
- |
(129) |
- |
(129) |
|
------------------------------- |
------------------------------- |
------------------------------- |
------------------------------- |
At 31 July 2016 |
47 |
- |
9,729 |
9,776 |
|
|
|
|
|
Charge for year |
2 |
- |
182 |
184 |
|
------------------------------- |
------------------------------- |
------------------------------- |
------------------------------- |
At 31 July 2017 |
49 |
- |
9,911 |
9,960 |
|
=============================== |
=============================== |
=============================== |
=============================== |
Net Book Value |
|
|
|
|
At 31 July 2015 |
6 |
315 |
1,241 |
1,562 |
|
=============================== |
=============================== |
=============================== |
=============================== |
At 31 July 2016 |
4 |
- |
1,056 |
1,060 |
|
=============================== |
=============================== |
=============================== |
=============================== |
At 31 July 2017 |
3 |
- |
879 |
882 |
|
=============================== |
=============================== |
=============================== |
=============================== |
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 three of the Group’s 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 7-8%, Brent crude prices rising
from US$56 per barrel in 2018 to
US$71 in 2021 and a pre-tax discount
rate of 21%. The pre-tax discount rate is derived from a post-tax
rate of 10%, and is high because of the applicable rate 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 (2016: no impairment).