TIDMUOG
RNS Number : 2943O
United Oil & Gas PLC
29 May 2020
29 May 2020
United Oil & Gas PLC ("United" or the "Company")
Final audited results for the year ended 31 December 2019,
Shareholder call and Notice of AGM
United Oil & Gas Plc, the AIM-listed oil and gas
exploration, development and production company, is pleased to
announce its audited results for the year ended 31 December
2019.
2019 highlights :
-- Successful acquisition of Rockhopper Egypt and its 22%
interest in the Abu Sennan concession onshore Egypt
-- Continued progress in securing the environmental and legal
permitting for the Selva gas development project in Italy with the
objective of first gas in early 2021
-- Significant profit realised from the divestment of the Crown
discovery, following value enhancing input from the United
technical team
-- Award of licences in highly prospective area in North Sea in UK 31(st) Licencing Round
-- Significant strengthening of the United Executive team and
Board with the appointment of David Quirke as Chief Financial
Officer
Post Year-end:
-- Acquisition of Rockhopper Egypt finalised in February 2020
-- Since the completion of the acquisition, the Abu Sennan asset has performed strongly
o The ASH-2 well has continued to outperform expectations, with
current gross production from the well remaining above 3,000 bopd.
Plans are now in place for further development of the gas at the
ASH field, with this project due for completion before the end of
2020
o Gas from Al Jahraa was brought onstream in March, adding an
average 650 boepd gross, and reducing flaring on the asset
o Results from the ES-5 development well, which spudded in
February, are expected to be announced shortly
-- All Egyptian production, including new gas supply, has
positive operational cashflow even at current low market prices
o Low operating costs at Abu Sennan of around $6.5/bbl provide
solid operating margins even at low price levels
o The Company's pre-payment facility with BP provides downside
price protection by effectively hedging 6,600 bbls of oil per month
at $60/bbl until September 2022
o c.20% of United's net production is gas which is sold under
fixed contract that is relatively insensitive to oil-price
changes
-- Discussions are being initiated with Jamaican Government to
agree a path forward for the transformative Walton Morant
licence
-- In line with the completion of the Rockhopper acquisition,
United has recently completed a strategic review of its licences to
ensure optimal use of resources. Accordingly, the Company will seek
to divest non-core assets and maintain a focus on Mediterranean
(Italy, Egypt), Jamaican and North Sea assets
-- In response to Covid-19, the Company has proactively moved to
defer non-committed capital expenditure and dramatically reduce
corporate budgets with savings of $500,000 delivered across the
business. In addition, three of the four wells planned for 2020 in
Egypt have now been deferred until market conditions improve,
providing further net Capex savings of over $2m to United
CEO, Brian Larkin, reported:
"I am pleased with the significant progress that the Company has
made throughout 2019. At the beginning of the year we outlined our
intention to complete a transformative acquisition and to build a
full cycle oil and gas company. We have achieved both goals with
the Rockhopper acquisition, which has already exceeded
expectations. In addition to the continued drilling success on the
licence, which has seen production grow rapidly and contribute
positive cashflow despite the current pricing environment, we are
glad to have built new partnerships with BP and Rockhopper.
Beyond the Rockhopper deal we have made excellent progress
across our portfolio. We have delivered shareholder value through
operations, geological assessment and through acquisition and
divestment.
Covid-19 has caused unprecedented disruption to our world and to
our industry. United's management has acted quickly to protect our
business and to ensure that our strategy is appropriate to these
circumstances. While we are currently adopting a prudent approach,
this is with the objective of ensuring that we maintain a pipeline
of opportunities for future development and emerge from this
challenging time in a position to take advantage of opportunities
which may arise. "
Annual General Meeting
In light of the Coronavirus (COVID-19) pandemic and the UK
Government's measures to restrict travel and public gatherings of
more than two people who do not live together, it will not be
possible to hold the AGM in its usual format. The meeting will be
held at 9 Upper Pembroke Street, Dublin 02 KR83, Ireland at 11:00
a.m. on 29 June 2020. This year's AGM will be organised as a closed
meeting. Shareholders must not attend the AGM in person and anyone
seeking to attend in person will be refused entry. The Company will
make arrangements for a quorum to be present to transact the formal
business of the meeting as set out in the notice of the AGM.
Extracts from the Annual Report are set out below. The financial
information set out below does not constitute the Company's
statutory accounts for the periods ended 31 December 2019 or 31
December 2018 but it is derived from those accounts. Statutory
accounts for 31 December 2018 have been delivered to the Registrar
of Companies and those for 31 December 2019 will be delivered
following the Company's Annual General Meeting. The auditors have
reported on those accounts, their reports were unqualified and did
not contain statements under section 498(2) or (3) of the Companies
Act 2006.
The Company encourages shareholders to vote on the resolutions
or to appoint the Chairman of the AGM as a proxy to vote on their
behalf. Shareholders can vote on the resolutions using an online
portal, following the procedure below.
-- Visiting www.shareregistrars.uk.com and following the online
instructions. Through the website shareholders will be able to
access the Registrars' Portal, on which they will be able to
register to be able to vote. For security reasons, registration is
a two-stage authentication process. Once registered, shareholders
will be able to vote online via the platform.
-- Shareholders can submit their completed Form of Proxy electronically by emailing the same to voting@shareregistrars.uk.com
-- Completing and returning the Form of Proxy to the Company's
Registrars, Share Registrars Limited, The Courtyard, 17 West
Street, Farnham, Surrey GU9 7DR no later than 48 hours before the
Annual General Meeting
In the event that further disruption to the AGM becomes
unavoidable or there are any changes to the current AGM
arrangements, the Company will announce any changes to the meeting
(such as timing or venue) as soon as reasonably practicably through
a Regulatory Information Service and the Company's website.
Pursuant to Rule 20 of the AIM Rules for Companies, copies of
both the Annual Report and the Notice will shortly be available for
inspection at www.uogplc.com .
Shareholder call
In order to allow shareholders the opportunity to engage with
the Company, United will be holding a shareholder call ahead of the
AGM. This call will take place on 25 June 2020 at 11.00 a.m.
Shareholders are invited to submit questions in advance to
investor.relations@uogplc.com . The leadership team will give an
update on the Company and run through a corporate presentation as
well as answering shareholder questions. Dial in details for the
call will be posted on the Company's website and via a Regulatory
Information Service.
This announcement contains inside information for the purposes
of Article 7 of EU Regulation 596/2014.
For more information please visit the Company's website at
www.uogplc.com or contact:
United Oil & Gas Plc (Company)
Brian Larkin, CEO brian.larkin@uogplc.com
Beaumont Cornish Limited (Nominated
Adviser)
Roland Cornish and Felicity Geidt +44 (0) 20 7628 3396
Optiva Securities Limited (Joint
Broker)
Christian Dennis +44 (0) 20 3137 1902
Cenkos Securities Plc (Joint
Broker)
Joe Nally (Corporate Broking) +44 (0) 20 7397 8900
Derrick Lee and Pete Lynch +44 (0) 131 220 6939
Murray (PR Advisor) +353 (0) 87 6909735
Joe Heron jheron@murrayconsultants.ie
St Brides Partners (Financial
PR/IR)
Frank Buhagiar +44 (0) 207 236 1177
Notes to Editors
United Oil & Gas plc (UOG) is an AIM-traded company. United
is a rapidly-growing full-cycle oil and gas company with focus on
low-risk production and development projects in Egypt, Italy, and
the UK, and high-impact exploration in Jamaica.
CHAIRMAN'S STATEMENT
FORE THE YEARED 31 DECEMBER 2019
Dear shareholders,
Introduction
Building on the momentum of 2018, I am pleased to report that in
2019 and early 2020 we have made great strides towards our aim of
becoming a full cycle oil and gas company with a strong and
diversified portfolio of exploration, development and production
assets. This was achieved in the course of another very active
period for our small but highly skilled and experienced executive
management team and staff.
Strengthening of Executive Team
We were delighted to welcome David Quirke to the executive team
as CFO and to the Board in early 2019. His arrival has enhanced
what was an already highly advanced 'deal-making' expertise within
the business. David made an immediate impact and played a key role
in the acquisition and financing of the Rockhopper Egypt assets
discussed below. I am now very pleased that our executive team have
the fully complementary skills and experience to allow us to
deliver on our strategy and growth potential.
Strategy
Our strategy remains clear: it is focussed on building a full
cycle portfolio of low risk production, development and exploration
assets (as we now have in Egypt, Italy and the UK) complemented by
a few higher risk but high impact exploration opportunities (as we
have in Jamaica and are in discussions regarding elsewhere). We are
committed to a dynamic approach to portfolio management and see
opportunity to deliver value to shareholders through our technical
expertise as well as through drilling operations. In pursuit of
this strategy we continue to seek opportunities when appropriate,
and to sell or withdraw from less fitting or promising assets, or
when we can realise an immediate gain. 2019 was a very active year
in the pursuit of that strategy as outlined below.
Key activities in 2019
2019 was dominated by the acquisition of Rockhopper Egypt and
its 22% interest in the Abu Sennan concession onshore Egypt. Such
acquisitions are complicated and involve many hurdles which must be
overcome, each with the potential to end the deal. Our management
team built and carefully managed relationships with the vendor,
licence partners, financing partner, new and existing shareholders
and with the Government and regulatory authorities in Egypt. Each
of these stakeholders played a role in the process and it was only
through the tireless work and considerable skill of our Executive
team that this deal was delivered. I am particularly proud that
United Oil & Gas Plc ("United" or "Company") secured this asset
in the face of competition from larger and longer established
bidders.
The merit of targeting this asset has been conclusively proven
since the deal was announced, with a series of positive
announcements, significantly enhancing the value of our new asset.
Production at the licence has greatly exceeded expectations and
will provide an important revenue source for the future development
of our company.
In Italy, throughout 2019 we continued to pursue the various
permissions required for our Selva gas development project with the
objective of first gas in late 2020, leading to a further
significant revenue stream for the company. The approval process
was on track during 2019 and into H1 2020 but with the COVID-19
crisis affecting Italy, more seriously than most countries,
progress has now inevitably slowed. While disappointing, the delay
and associated cost deferral will help sustain our cash reserves in
the current low-price environment.
In the UK, we divested our Crown discovery, successfully
monetising that asset and delivering early value to shareholders.
We were also awarded further interesting blocks in the 31(st)
licensing round which we are continuing to review.
The Colter well was drilled in the early part of last year.
While the well made a new discovery at Colter South, the originally
targeted structure did not meet our expectations. Little work was
done in the year on our Wessex Basin portfolio, and with our focus
now on the Egypt assets and more prospective opportunities
elsewhere, we have taken the decision to begin the process to
divest those assets.
Elsewhere, we remain committed to progressing our Jamaica asset
and while the operator has now taken the decision to withdraw from
the licence, we are optimistic about its potential and are in
discussions with the Government to agree a path forward.
There was limited activity in the year on our interest in Benin
and since the year end, as part of our portfolio rationalisation,
we have taken the decision not to progress our option there.
Business development opportunities across the full cycle
continued to be offered to and assessed by the team in the course
of 2019. These were put through a rigorous review process and only
the most attractive ones consistent with our strategy were taken
forward. However, while there were a number of such opportunities
still in our pipeline as we entered 2020, these will only be
pursued as and when the current industry challenges are
overcome.
AIM Listing and capital raising
In March 2019 the company's shares were admitted to trading on
the AIM market of the London Stock Exchange. While this was an
onerous exercise in terms of both costs and management time, we
believe that the move will prove to have been in the best interests
of the company. It will lead to lower costs going forward and will
assist us in undertaking with speed the type of value-adding
transactions we look for to significantly grow our business.
In February 2020, as part of the financing for the Rockhopper
Egypt assets, we raised GBP4.8 million at 3p with certain existing
and new investors. We are very grateful for the support shown to
the company by our existing shareholders in approving that
fundraising, and of course by our new shareholders who we welcome
to the company and I hope to meet in due course.
Financial Results for 2019
As expected at this stage in the company's history with no cash
flow from operations during 2019, the company made a loss for the
year. This loss of $2,139,075 comprises administrative expenditure
in support of the company's activities, exploration costs written
off (principally the Colter well), and costs associated with new
ventures and evaluating acquisition opportunities. The costs of our
AIM listing, the Egypt acquisition including a Reverse Takeover
process as well as the corporate expenses associated with being a
listed company, were also included.
Key events since year end
At the end of February 2020, we completed the acquisition of the
Rockhopper Egypt assets. Since the effective date of the
acquisition the performance of these assets has been stellar, and
they are providing positive operational cash flow even at current
low prices.
Impact to the Company of COVID-19 and Oil Price uncertainty
The human and economic impact of the COVID-19 pandemic has been
very significant. The priority of the Company remains the health
and wellbeing of our employees and wider stakeholders. At this
point in time, we are glad to report that all of our employees are
safe and well and continuing to work from home.
Proactive measures taken by United and its partners to reduce
near-term Capex commitments during current oil-price uncertainty
and the impact of Covid-19
-- Deferral of Italian Capex improves cash flow and moves expected first gas slightly to H1 2021
-- Deferral of Egyptian Capex reduces 2020 infill campaign from
4 wells to 1 well, significantly reducing gross 2020 Capex
estimates. Further optimisation of the Capex and Opex budgets is
being considered.
-- Completion of post-Egyptian-acquisition licence review sees
divestment plans for selected non-core assets in the Wessex Basin
and a decision not to exercise the farm-in option in Benin
-- Substantial cut in administrative expenditure resulting in further cost savings
There has been no impact on our operations in Egypt and the
production and transport of oil and gas has continued
uninterrupted. In Italy we expect the impact of COVID-19 to cause a
slight delay in approvals for the Selva gas development project and
now expect to deliver first gas in H1 2021.
In addition to this the Company's pre-payment facility with BP
provides downside price protection by effectively hedging 6,600
bbls per month of production at $60/bbl. Coupled with this, c. 20%
of United's net production is gas which is sold under a fixed
contract that is relatively insensitive to oil-price changes. The
low operating costs of Abu Sennan of $6.50/bbl provide solid
operating margins even at current oil price levels.
Conclusion
2019 was another very successful year for the company in the
development and pursuit of our strategy and I would like to record
my thanks to our executives and staff for their continued
commitment and energy throughout the year.
Despite the challenges now facing our industry in 2020 with the
rapid and unexpected oil price decline, and now the effects of
COVID-19, I believe we are well placed to weather the storm and
emerge from these crises with a balanced full cycle portfolio, the
cash flow to fund our business and some exciting new opportunities
under review.
Graham Martin
Chairman
CONSOLIDATED INCOME STATEMENT
FOR THE YEARED 31 DECEMBER 2019
Notes Year to 31 December 2019 Year to 31 December 2018
$ $
Revenue - -
Cost of sales - -
Gross profit / (loss) - -
Administrative expenses:
------------------------------------------------------ ------ ------------------------- -------------------------
Other administrative expenses (1,516,035) (1,080,272)
Impairment of intangible assets (2,111,319) -
Gain on disposal of intangible assets 3 2,881,976 -
Acquisition and AIM expenses (1,202,586) -
------------------------------------------------------ ------ ------------------------- -------------------------
Total administrative expenses (1,947,964) (1,080,272)
Operating loss 2 (1,947,964) (1,080,272)
Interest expense (4,841) -
Loss before taxation 2 (1,952,805) (1,080,272)
Taxation 5 (186,270) -
Loss for the financial year attributable to the
Company's equity shareholders (2,139,075) (1,080,272)
Loss per share from continuing operations
expressed in pence per share:
Basic and diluted 6 (0.62) (0.38)
========================= =========================
Consolidated Statement of Comprehensive Income
2019 2018
$ $
Loss for the financial year (2,139,075) (1,080,272)
Foreign exchange gains/(losses) 405,954 (496,793)
Total comprehensive loss for the financial
year attributable to the Company's equity
shareholders (1,733,121) (1,577,065)
Consolidated Balance Sheet as at 31 December 2019
Notes 2019 2018
Assets $ $
Non-current assets
Intangible assets 8 5,580,864 5,226,219
Property, plant and equipment 9 26,722 4,717
5,607,586 5,230,936
Current assets
Trade and other receivables 10 3,524,655 739,119
Cash and cash equivalents 11 1,275,537 5,149,907
4,800,192 5,889,026
Total Assets 10,407,778 11,119,962
============ ============
Equity and liabilities
Capital and reserves
Share capital 12 4,564,787 4,564,787
Share premium 12 9,912,988 9,912,988
Share-based payment reserve 13 1,591,808 1,465,036
Merger reserve (2,697,357) (2,697,357)
Translation reserve (11,227) (417,181)
Retained earnings (4,255,398) (2,116,323)
Shareholders' funds 9,105,601 10,711,950
Current liabilities:
Trade and other payables 14 1,085,701 408,012
Current tax payable 190,446 -
Lease liabilities 26,030 -
------------ ------------
1,302,177 408,012
Total equity and liabilities 10,407,778 11,119,962
============ ============
The financial statements were approved by the Board of Directors
and authorised for their issue on 28 May 2020 and were signed on
its behalf by:
Brian Larkin
Chief Executive Officer
Registered number: 09624969
Consolidated Statement of Changes in Equity
Share-based
Share Share payments Retained Translation Merger
capital premium reserve earnings reserve reserve Total
$ $ $ $ $ $ $
For the year
ended 31
December 2019
Balance at 1
January 2019 4,564,787 9,912,988 1,465,036 (2,116,323) (417,181) (2,697,357) 10,711,950
Loss for the
year - - - (2,139,075) - - (2,139,075)
Foreign
exchange
difference - - - - 405,954 - 405,954
Total
comprehensive
income - - - (2,139,075) 405,954 - (1,733,121)
Share based
payments - - 126,772 - - - 126,772
Balance at 31
December 2019 4,564,787 9,912,988 1,591,808 (4,255,398) (11,227) (2,697,357) 9,105,601
---------- ------------- ------------- ------------ ------------- ------------- ------------
For the year
ended 31
December 2018
Balance at 1
January 2018 3,054,383 5,562,026 600,145 (1,036,051) 79,612 (2,697,357) 5,562,758
Loss for the
year - - - (1,080,272) - - (1,080,272)
Foreign
exchange
difference - - - - (496,793) - (496,793)
Total
comprehensive
income - - - (1,080,272) (496,793) - (1,577,065)
Exercise of
share warrants 827 3,309 - - - - 4,136
Issue of share
capital 1,509,577 5,796,341 - - - - 7,305,918
Share issue
expenses - (1,448,688) 799,829 - - - (648,859)
Issue of share
options - - 65,062 - - - 65,062
Balance at 31
December 2018 4,564,787 9,912,988 1,465,036 (2,116,323) (417,181) (2,697,357) 10,711,950
---------- ------------- ------------- ------------ ------------- ------------- ------------
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER
2019 2018
$ $
Cash flow from operating activities
Loss for the financial year before tax (1,952,805) (1,080,272)
Share-based payments 126,772 65,062
Depreciation 94,026 1,732
Impairment of intangible assets 2,111,319 -
Gain on disposal of intangible assets (2,881,976) -
Interest expense 4,841 -
Foreign exchange movements 268,159 (137,119)
------------ ------------
(2,229,664) (1,150,597)
Changes in working capital
Increase in trade and other receivables (61,527) (570,512)
Increase in trade and other payables 677,689 126,387
------------ ------------
Cash outflow from operating activities (1,613,502) (1,594,722)
Cash outflow from investing activities
Disposal of intangible assets 950,000 -
Purchase of property, plant & equipment (1,637) (3,535)
Spend on exploration activities (3,097,401) (3,651,592)
Net cash (used in) investing activities (2,149,038) (3,655,127)
Cash flow from financing activities
Issue of ordinary shares net of expenses - 6,661,195
Capital payments on lease (88,387) -
Interest paid on lease (4,841) -
Net cash (used in) / generated from financing activities (93,228) 6,661,195
Net (decrease) / increase in cash and cash equivalents (3,855,768) 1,411,346
Cash and cash equivalents at beginning of financial year 5,149,907 4,097,985
Effects of exchange rate changes (18,602) (359,424)
Cash and cash equivalents at end of financial year 1,275,537 5,149,907
Notes to the consolidated financial statements
Principal Accounting Policies
Company information
United Oil & Gas plc is a public limited company
incorporated and domiciled in the United Kingdom.
Basis of preparation
The consolidated financial statements of United Oil & Gas
plc and its subsidiaries (together "the Group" or "United Oil &
Gas") have been prepared in accordance with International Financial
Reporting Standards ("IFRS"), as adopted by the European Union,
IFRIC interpretations, and with those parts of the Companies Act
2006 applicable to companies reporting under IFRS.
IFRS is subject to amendment and interpretation by the IASB and
the IFRS Interpretations Committee, and there is an on-going
process of review and endorsement by the European Commission. These
accounting policies comply with each IFRS that is mandatory for
accounting periods ending on 31 December 2019.
The principal accounting policies set out below have been
consistently applied to all periods presented.
Basis of consolidation
The financial statements for the year ended 31 December 2019
incorporate the results of United Oil & Gas plc ("the Company")
and entities controlled by the Company (its subsidiaries). Control
is achieved where the Company has the power to govern the financial
and operating policies of an investee entity so as to obtain
benefits from its activities.
All intra-Group transactions, balances, income and expenses are
eliminated in full on consolidation. Accounting policies of
subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the Group.
Going Concern
The Group's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the Chairman's Statement and the Strategic
Report.
The Directors' recent forecasts demonstrate that the Group will
meet its day-to-day working capital and financial commitments over
the forecast period (being at least 12 months from the date the
financial statements were approved) from the cash held on deposit
and planned oil and gas revenue from Abu Sennan in 2020, as further
opportunities arise and the portfolio continues to grow in line
with group strategy. This base case forecast is inclusive of the
lower oil prices that are forecast well into 2021, primarily as a
result of the global oil supply and demand dynamics and the
COVID-19 pandemic. The Group has been able to defer a significant
portion of the budgeted capital expenditure programme for 2020 and
taken other measures to reduce the running costs of the business,
which combined will protect the Group cashflows. Management have
also considered some additional downside scenarios including a case
where a significant contingent consideration receipt relating to
the Crown disposal due in late 2020 is not received within the
forecast period, and if realised would place doubt on the ability
to fund the business for 12 months from the current cash reserves
and projected oil and gas revenues from Egypt. Some mitigating
actions have been considered in the event that the downside
scenario was realised and include further divestment of the
portfolio, potential restructuring of debt arrangements and a
further equity raise.
The Group has sufficient funding to meet planned financial
commitments in relation to operational activities and a level of
contingency, and as a result the directors continue to adopt the
going concern basis of accounting in preparing the financial
statements. However, in the downside scenario discussed, and
without the successful implementation of mitigating actions, a
material uncertainty does exist that may affect the ability of the
company to continue as a going concern. The consolidated financial
statements have not been adjusted for the scenario where the Group
is not a going concern.
Foreign currency
Transactions in foreign currencies are recorded at the rate
ruling at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies are translated at the
rate of exchange ruling at the year-end date. All differences are
taken to the Income Statement.
Assets and liabilities of subsidiaries that have a functional
currency different from the presentation currency (US dollar), if
any, are translated at the closing rate at the date of each balance
sheet presented. Income and expenses are translated at average
exchange rates. All resulting exchange differences are recognised
in other comprehensive income (loss), if any.
The Group has taken the decision to change its presentation
currency to USD. This has been accounted for retrospectively as a
change in accounting policy. In making this change in presentation
currency, the Company followed the requirements set out in IAS 21,
The Effects of Change in Foreign Exchange Rates. In accordance with
IAS 21, the change in presentational currency is applied
retrospectively and financial statements for the previous financial
periods have therefore been translated into the new presentation
currency.
Finance income and costs
Interest is recognised using the effective interest method which
calculates the amortised cost of a financial asset or liability and
allocates the interest income or expense over the relevant period.
The effective interest rate is the rate that exactly discounts
estimated future cash receipts or payments through the expected
life of the financial asset or liability to the net carrying amount
of the financial asset or liability.
Exploration and evaluation assets
The group accounts for oil and gas expenditure under the full
cost method of accounting.
Costs (other than payments to acquire the legal right to
explore) incurred prior to acquiring the rights to explore are
charged directly to the profit and loss account. All costs incurred
after the rights to explore an area have been obtained, such as
geological, geophysical, data costs and other direct costs of
exploration and appraisal are accumulated and capitalised as
intangible exploration and evaluation ("E&E") assets.
E&E costs are not amortised prior to the conclusion of
appraisal activities. At the completion of appraisal activities if
technical feasibility is demonstrated and commercial reserves are
discovered, then following development sanction, the carrying value
of the relevant E&E asset will be reclassified as a development
and production asset within tangible fixed assets.
If after completion of appraisal activities in an area, it is
not possible to determine technical feasibility or commercial
viability, then the costs of such unsuccessful exploration and
evaluation are written off to the profit and loss account. The
costs associated with any wells which are abandoned are fully
amortised when the abandonment decision is taken.
Development and production assets, are accumulated generally on
a field by-field basis and represent the costs of developing the
commercial reserves discovered and bringing them into production,
together with the E&E expenditures incurred in finding
commercial reserves which have been transferred from intangible
E&E assets.
The net book values of development and production assets are
depreciated generally on a field-by-field basis using the unit of
production method based on the commercial proven and probable
reserves. Assets are not depreciated until production
commences.
Other intangible assets
Other intangible assets acquired separately from a business
combination are capitalised at cost.
Intangible assets are amortised on a straight-line basis over
their useful lives as follows:
Computer software 33%
The carrying value of intangible assets is assessed annually and
any impairment is charged to the income statement.
Property, plant and equipment
Property, plant and equipment are stated at cost less
depreciation. Depreciation is provided on a straight-line basis at
rates calculated to write off the cost less the estimated residual
value of each asset over its expected useful economic life. The
residual value is the estimated amount that would currently be
obtained from disposal of the asset if the asset were already of
the age and in the condition expected at the end of its useful
life.
The annual rate of depreciation for each class of depreciable
asset is:
Computer equipment 33%
The carrying value of property plant and equipment is assessed
annually and any impairment is charged to the income statement.
Impairment of non-financial assets
At each balance sheet date, the Directors review the carrying
amounts of the Group's tangible and intangible assets, other than
goodwill, to determine whether there is any indication that those
assets have suffered an impairment loss. If any such indication
exists, the recoverable amount of the asset is estimated in order
to determine the extent of the impairment loss, if any. Where the
asset does not generate cash flows that are independent from other
assets, the Group estimates the recoverable amount of the
cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset for
which the estimates of future cash flows have not been
adjusted.
If the recoverable amount of an asset or cash-generating unit is
estimated to be less than its carrying amount, the carrying amount
of the asset or cash-generating unit is reduced to its recoverable
amount. If the recoverable amount of a cash-generating unit is less
than its carrying amount, the impairment loss is allocated first to
reduce the carrying amount of any goodwill allocated to the unit
and then to the other assets of the unit pro rata based on the
carrying amount of each asset in the unit.
An impairment loss is recognised as an expense immediately.
An impairment loss recognised for goodwill is not reversed in
subsequent periods.
Where an impairment loss subsequently reverses, the carrying
amount of the asset or cash-generating unit is increased to the
revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised
for the asset or cash-generating unit in prior periods. A reversal
of an impairment loss is recognised in the Income Statement
immediately.
Financial instruments
Recognition and derecognition
Financial assets and financial liabilities are recognised when
the Group becomes a party to the contractual provisions of the
financial instrument.
Financial assets are derecognised when the contractual rights to
the cash flows from the financial asset expire, or when the
financial asset and substantially all the risks and rewards are
transferred.
A financial liability is derecognised when it is extinguished,
discharged, cancelled or expires.
Classification and initial measurement of financial assets
Except for those trade receivables that do not contain a
significant financing component and are measured at the transaction
price in accordance with IFRS 15, all financial assets are
initially measured at fair value adjusted for transaction costs
(where applicable).
Financial assets are classified into the following
categories:
-- amortised cost
-- fair value through profit or loss (FVTPL)
-- fair value through other comprehensive income (FVOCI).
In the periods presented the Group does not have any financial
assets categorised as FVOCI or FVTPL.
The classification is determined by both:
-- the entity's business model for managing the financial asset
-- the contractual cash flow characteristics of the financial asset.
Subsequent measurement of financial assets
Financial assets at amortised cost
Financial assets are measured at amortised cost if the assets
meet the following conditions:
-- they are held within a business model whose objective is to
hold the financial assets and collect its contractual cash
flows
-- the contractual terms of the financial assets give rise to
cash flows that are solely payments of principal and interest on
the principal amount outstanding
After initial recognition, these are measured at amortised cost
using the effective interest method. Discounting is omitted where
the effect of discounting is immaterial. The Group's cash and cash
equivalents, trade and other receivables fall into this category of
financial instruments.
Impairment of Financial Assets
In relation to the impairment of financial assets, IFRS 9
requires an expected credit loss model to be applied. The expected
credit loss model requires the Group to account for expected credit
losses and changes in those expected credit losses at each
reporting date to reflect changes in credit risk since initial
recognition of the financial assets.
IFRS 9 requires the Group to recognise a loss allowance for
expected credit losses on trade receivables.
In particular, IFRS 9 requires the Group to measure the loss
allowance for a financial instrument at an amount equal to the
lifetime expected credit losses (ECL) if the credit risk on that
financial instrument has increased significantly since initial
recognition, or if the financial instrument is a purchased or
originated credit -- impaired financial asset. However, if the
credit risk on a financial instrument has not increased
significantly since initial recognition, the Group is required to
measure the loss allowance for that financial instrument at an
amount equal to 12 months ECL.
Classification and measurement of financial liabilities
The Group's financial liabilities include trade and other
payables.
Financial liabilities are initially measured at fair value, and,
where applicable, adjusted for transaction costs unless the Group
designated a financial liability at fair value through profit or
loss.
Subsequently, financial liabilities are measured at amortised
cost using the effective interest method except for contingent
consideration designated at FVTPL, which is carried subsequently at
fair value with gains or losses recognised in profit or loss.
All interest-related charges and, if applicable, changes in an
instrument's fair value that are reported in profit or loss are
included within finance costs or finance income.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, deposits held
at call with banks and other short-term highly liquid investments
with original maturities of three months or less.
Leases
The Group has applied IFRS 16 using the modified retrospective
approach and therefore comparative information has not been
restated and is presented under IAS 17. The details of accounting
policies under both IAS 17 and IFRS 16 are presented separately
below.
Policy applicable from 1 January 2019
The Group assesses whether a contract is or contains a lease, at
inception of the contract. The Group recognises a right-of-use
asset and a corresponding lease liability with respect to all lease
arrangements in which it is the lessee.
The lease liability is initially measured at the present value
of the lease payments that are not paid at the commencement date,
discounted by using the rate implicit in the lease. If this rate
cannot be readily determined, the lessee uses its incremental
borrowing rate.
The lease liability is presented as a separate line in the
balance sheet.
The lease liability is subsequently measured by increasing the
carrying amount to reflect interest on the lease liability (using
the effective interest method) and by reducing the carrying amount
to reflect the lease payments made.
The Group remeasures the lease liability (and makes a
corresponding adjustment to the related right-of-use asset)
whenever:
-- The lease term has changed in which case the lease liability
is remeasured by discounting the revised lease payments using a
revised discount rate.
-- The lease payments change due to changes in an index or rate
or a change in expected payment under a guaranteed residual value,
in which cases the lease liability is remeasured by discounting the
revised lease payments using an unchanged discount rate (unless the
lease payments change is due to a change in a floating interest
rate, in which case a revised discount rate is used).
-- A lease contract is modified and the lease modification is
not accounted for as a separate lease, in which case the lease
liability is remeasured based on the lease term of the modified
lease by discounting the revised lease payments using a revised
discount rate at the effective date of the modification.
The right-of-use assets comprise the initial measurement of the
corresponding lease liability, prepayments made on the lease at or
before the commencement day, less any lease incentives received and
any initial direct costs. They are subsequently measured at cost
less accumulated depreciation and impairment losses.
Right-of-use assets are depreciated over the shorter period of
lease term and useful life of the underlying asset.
The depreciation starts at the commencement date of the
lease.
Policy applicable prior to 1 January 2019
Operating leases
Where substantially all of the risks and rewards incidental to
ownership are not transferred to the Group (an "operating lease")
amounts payable under the lease are charged to the income statement
on a straight-line basis over the lease term.
Taxation
Current taxation for each taxable entity in the Group is based
on the local taxable income at the local statutory tax rate enacted
or substantively enacted at the balance sheet date and includes
adjustments to tax payable or recoverable in respect of previous
periods.
Deferred taxation
Deferred taxation is calculated using the liability method, on
temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the financial statements.
However, if the deferred tax arises from the initial recognition of
an asset or liability in a transaction other than a business
combination that at the time of the transaction affects neither
accounting nor taxable profit or loss, it is not accounted for.
Deferred tax is determined using tax rates and laws that have been
enacted or substantively enacted by the balance sheet date and are
expected to apply when the related deferred tax asset is realised,
or the deferred tax liability is settled.
Deferred tax liabilities are provided in full.
Deferred tax assets are recognised to the extent that it is
probable that future taxable profits will be available against
which the temporary differences can be utilised.
Changes in deferred tax assets or liabilities are recognised as
a component of tax expense in the Income Statement, except where
they relate to items that are charged or credited directly to
equity in which case the related deferred tax is also charged or
credited directly to equity.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred tax assets and
liabilities relate to taxes levied by the same taxation authority
on either the same taxable entity or different taxable entities
where there is an intention to settle the balances on a net
basis.
Share-based payments
Where share-based payments (warrants and options) have been
granted, IFRS 2 has been applied whereby the fair value of the
share-based payments is measured at the grant date and spread over
the period during which they vest. A valuation model is used to
assess the fair value, taking into account the terms and conditions
attached to the share-based payments. The fair value at grant date
is determined including the effect of market-based vesting
conditions, to the extent such vesting conditions have a material
impact.
The cost of equity-settled transactions is recognised, together
with a corresponding increase in equity, over the period in which
the performance and/or service conditions are fulfilled, ending on
the date on which the holders become fully entitled to the award
("the vesting date").
The cumulative expense recognised for equity-settled
transactions at each reporting date until the vesting date reflects
the extent to which the vesting period has expired and the Group's
best estimate of the number of equity instruments that will
ultimately vest.
Where the terms of an equity-settled award are modified, the
minimum expense recognised is the expense as if the terms had not
been modified. An additional expense is recognised for any
modification, which increases the total fair value of the
share-based payment arrangement or is otherwise beneficial to the
employee, as measured at the date of modification.
Where an equity-settled award (share options) is cancelled, it
is treated as if it had vested on the date of cancellation if it
had not yet fully vested, and any expense not yet recognised for
the award is recognised immediately. However, if a new award is
substituted for the cancelled award and designated as a replacement
award on the date that it is granted, the cancelled and new awards
are treated as if they were a modification of the original award,
as described in the previous paragraph.
Where an equity-settled award is forfeited, the cumulative
charge expensed up to the date of forfeiture is credited to the
Income Statement. Upon expiry of an equity-settled award, the
cumulative charge expensed is transferred from the Share-based
payment reserve to retained earnings.
Equity
Equity comprises the following:
-- "Share capital" represents amounts subscribed for shares at nominal value.
-- "Share premium" represents amounts subscribed for share
capital, net of issue costs, in excess of nominal value.
-- "Share-based payment reserve" represents the accumulated value of share-based payments.
-- "Retained earnings" represents the accumulated profits and
losses attributable to equity shareholders.
-- "Translation reserve" represents the exchange differences
arising from the translation of the financial statements of
subsidiaries into the Group's presentational currency.
-- "Merger reserve" represents amounts arising from statutory
merger relief arising on business combinations.
New and amended International Financial Reporting Standards
adopted by the Group
The Group has adopted the following standards, amendments to
standards and interpretations which are effective for the first
time this year. The impact is shown below:
New/Revised International Financial Reporting Effective Date: Annual periods beginning EU Impact on
Standards on or after: adopted the Group
IFRS 16 Leases 1 January 2019 Yes See below
----------------------------------------- ------------------------------------------ -------- -----------
Annual Improvements to IFRS Standards 1 January 2019 Yes Immaterial
2015-2017 Cycle
----------------------------------------- ------------------------------------------ -------- -----------
IFRS 16 introduces new or amended requirements with respect to
lease accounting. It introduces significant changes to lessee
accounting by removing the distinction between operating and
finance leases and requiring all leases (subject to exemptions) to
be recognised giving a right of use asset and lease liability in
the balance sheet, with the statement of comprehensive income
reflecting depreciation of the right of use asset and the interest
charge on the lease liability.
The adoption of this new Standard has resulted in the Group
recognising a right-of-use asset and related lease liability in
connection with the former operating lease.
The new Standard has been applied using the modified
retrospective approach, with right of use asset and corresponding
liability recognised as an adjustment in the current period. At
this date, the Group has also elected to measure the right-of-use
assets at an amount equal to the lease liability adjusted for any
prepaid or accrued lease payments that existed at the date of
transition. Prior periods have not been restated.
The Group has elected not to include initial direct costs in the
measurement of the right-of-use asset for operating leases in
existence at the date of initial application of IFRS 16, being 1
January 2019.
Instead of performing an impairment review on the right-of-use
assets at the date of initial application, the Group has relied on
its historic assessment as to whether leases were onerous
immediately before the date of initial application of IFRS 16.
The impact of the implementation of this standard is set out
below:
-- Recognition of lease liabilities and right of use assets, the
initial impact of which is an increase in property, plant and
equipment and in total liabilities.
-- A new finance expense due to the lease finance charge
-- Increased annual depreciation of property, plant and equipment for the duration of the leases
-- Elimination of the former operating lease rental expense
International Financial Reporting Standards in issue but not yet
effective
At the date of authorisation of the consolidated financial
statements, the IASB and IFRS Interpretations Committee have issued
standards, interpretations and amendments which are applicable to
the Group.
Whilst these standards and interpretations are not effective
for, and have not been applied in the preparation of these
consolidated financial statements, the following could have a
material impact on the Group's financial statements going
forward:
New/Revised International Financial Reporting Standards Effective Date: Annual periods beginning on or EU
after: adopted
IAS 1 Amendments to IAS 1 and IAS 8: 1 January 2020 Yes
Definition of Material
----------------------------------------------- ------------------------------------------------ ----------
IAS 1 Amendments to IAS 1: Classification of 1 January 2022 No
Liabilities as Current or Non-current
----------------------------------------------- ------------------------------------------------ ----------
IFRS 3 Amendment to IFRS 3 Business Combinations 1 January 2020 Yes
----------------------------------------------- ------------------------------------------------ ----------
IFRS 3 Amendment to IFRS 3 Business Combinations 1 January 2022 No
----------------------------------------------- ------------------------------------------------ ----------
IAS 16 Amendments to IAS 16 Property, Plant and 1 January 2022 No
Equipment
----------------------------------------------- ------------------------------------------------ ----------
IAS 37 Amendments to IAS 37 Provisions, Contingent 1 January 2022 No
Liabilities and Contingent Assets
----------------------------------------------- ------------------------------------------------ ----------
Annual Improvements: minor amendments to IFRS 1 1 January 2022 No
First-time Adoption of International Financial
Reporting Standards, IFRS 9 Financial
Instruments, and the Illustrative Examples
accompanying
IFRS 16 Leases
----------------------------------------------- ------------------------------------------------ ----------
New / revised International Financial Reporting Standards which
are not considered to potentially have a material impact on the
Group's financial statements going forwards have been excluded from
the above.
Management anticipates that all relevant pronouncements will be
adopted in the Group's accounting policies for the first period
beginning after the effective date of the pronouncement. New
standards, interpretations and amendments not listed above are not
expected to have a material impact on the Group's financial
statements.
Critical accounting judgements and key sources of estimation
uncertainty
The preparation of financial statements in conformity with
generally accepted accounting practice requires management to make
estimates and judgements that affect the reported amounts of assets
and liabilities as well as the disclosure of contingent assets and
liabilities at the balance sheet date and the reported amounts of
revenues and expenses during the reporting period.
Estimates and judgements are continually evaluated and are based
on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances.
The following are the significant judgements used in applying
the accounting policies of the Group that have the most significant
effect on the financial statements:
Impairment of exploration licenses
Management reviews intangible exploration assets for indicators
of impairment under IFRS 6 - Exploration for and Evaluation of
Mineral Resources at the end of each reporting period. This review
of assets for potential indicators of impairment requires judgement
including whether renewal of licences is planned, interpretation of
the results of exploration activity and the extent to which the
Group plans to continue substantive expenditure on the assets. In
determining whether substantive expenditure remains in the Group's
plan, management considers factors including future oil prices,
plans to develop or renew licences and future exploration plans. If
impairment indicators exist the assets are tested for impairment
and carried at the lower of the estimated recoverable amount and
net book value.
During the year, a decision was taken to impair the Colter
intangible exploration asset. Management did not consider there to
be any indicators of impairment in the remaining intangible
exploration assets at any reporting date presented.
Fair value of consideration in relation to Crown Disposal
Management have applied judgement in determining the
consideration recognised for the Crown disposal in accordance with
IFRS 5, including a receivable for contingent consideration of
$2.85m. In the event of non-payment of the contingent consideration
the Group would retain the asset which has been attributed a fair
value of $3.8m as a result of the disposal deal.
Notes to the Consolidated Financial Statements
1. Segmental reporting
Operating segments
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision maker.
The chief operating decision maker, who is responsible for
allocating resources, assessing the performance of the operating
segment and making strategic decision, has been identified as the
Board of Directors. The Board of Directors consider that the Group
has only one operating segment at corporate level, being the
exploration and evaluation of oil and gas prospects, therefore no
additional segmental information is presented.
The Group operates in three geographic areas - the UK, Europe
and greater Mediterranean and Latin America. The Group's revenue
from external customers and information about its non-current
assets (other than financial instruments, investments accounted for
using the equity method, deferred tax assets and post-employment
benefit assets) by geographical location are detailed below.
2019
Latin
$ UK Other EU America Total
Revenue - - - -
-------- ---------- ---------- ----------
Non-current assets 511,009 2,336,837 2,759,740 5,607,586
-------- ---------- ---------- ----------
2018
Latin
$ UK Other EU America Total
Revenue - - - -
-------- ---------- ---------- ----------
Non-current assets 872,229 2,185,608 2,173,099 5,230,936
-------- ---------- ---------- ----------
2. Operating loss
2019 2018
$ $
Operating loss is stated after charging/(crediting):
Fees payable to the Company's auditors for the audit of the annual financial statements 40,000 40,000
Fees payable to the Company's auditors and its associates for other services to the Group:
* Tax compliance services 10,000 8,000
* Reporting accountant services 90,000 13,000
3. Disposal of Crown asset
On 12 December 2019, United announced the completion of the sale
of its 95% share in the North Sea Blocks 12/18d and 15/19b (licence
P2366) to Anasuria Hibiscus UK limited. The disposal was of the
aforementioned licence only, and the UOG Crown Limited subsidiary
company is retained in the group.
Under the deal for this disposal of the Crown licence
(intangible asset disposal - see note 8), United received $950,000
in 2019 on completion, with a further receivable of $2,850,000 due
in 2020 which is contingent upon approval of an FDP, the latter
amount being reflected in current receivables in the balance sheet.
In the event of non-payment of the latter amount, ownership of the
licence asset would return to the Group .
Having acquired the licence in 2018 and incurred costs of
$918,024 in the interim period on a work programme, some in-house
technical work, and the costs of disposal the Group is reporting a
profit on disposal before tax in its 2019 Income Statement of
$2,881,976.
4. Directors and employees
The aggregate payroll costs of the employees, including both
management and Executive Directors, were as follows:
2019 2018
$ $
Staff costs
Wages and salaries 675,928 514,480
Share-based payments 126,772 65,064
Social security 31,958 19,717
======== ========
834,658 599,261
======== ========
Average monthly number of persons employed by the Group during
the year was as follows:
2019 2018
Number Number
By activity:
Administrative 3 3
Directors 5 4
======= =======
8 7
======= =======
2019 2018
$ $
Remuneration of Directors
Emoluments and fees for qualifying services 450,450 389,538
Share-based payments 112,015 57,490
Social security 13,881 4,966
-------- --------
576,346 451,994
======== ========
Key management personnel are identified as the Executive
Directors.
No share warrants have been exercised by any of the directors,
nor have any payments of pensions contributions been made on behalf
of directors in any of the periods presented.
5. Taxation
2019 2018
$ $
Loss before tax (1,952,805) (1,080,272)
----------- -----------
Loss on ordinary activities multiplied by standard
rate of corporation tax in the UK of 19% (2018:
19%) (371,033) (216,054)
Tax effects of:
Unrelieved tax losses carried forward 557,303 216,054
-----------
Corporation tax charge 186,270 -
=========== ===========
The Group has accumulated tax losses of approximately $4m (2018:
$2m). No deferred tax asset was recognised in respect of these
accumulated tax losses as there is insufficient evidence that the
amount will be recovered in future years.
6. Loss per share
The Group has issued share warrants and options over Ordinary
shares which could potentially dilute basic earnings per share in
the future. Further details are given in note 13.
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 93,329,853 (2018: 93,329,853)
share warrants and options outstanding at the end of the year that
could potentially dilute basic earnings per share in the
future.
Basic and diluted loss per share
2019 2018
Cents Cents
Loss per share from continuing operations (0.62) (0.38)
------ ------
The loss and weighted average number of ordinary shares used in
the calculation of basic loss per share are as follows:
2019 2018
$ $
Loss used in the calculation of total basic and
diluted loss per share (2,139,075) (1,080,272)
----------- -----------
Number of shares 2019 2018
Number Number
Weighted average number of ordinary shares for the
purposes of basic and diluted loss per share 345,613,985 282,810,516
----------- -----------
7. Subsidiaries
Details of the Group's subsidiaries in 2019 are as follows:
Name & address of subsidiary Principal activity Class Place of % ownership
of shares incorporation held by the
and operation Group
2019 2018
------------------------- ------------ ---------------- ------- ------
UOG Holdings plc
200 Strand, London, WC2R Intermediate holding England and
1DJ company Ordinary Wales 100 100
------------------------- ------------ ---------------- ------- ------
UOG Ireland Limited*
9 Upper Pembroke Street, Intermediate holding
Dublin 2, Ireland company Ordinary Ireland 100 100
------------------------- ------------ ---------------- ------- ------
UOG PL090 Ltd*
200 Strand, London, WC2R England and
1DJ Oil and gas exploration Ordinary Wales 100 100
------------------------- ------------ ---------------- ------- ------
UOG Italia Srl*
Viale Gioacchino Rossini
9, 00198, Rome, Italy Oil and gas exploration Ordinary Italy 100 100
------------------------- ------------ ---------------- ------- ------
UOG Jamaica Ltd*
200 Strand, London, WC2R England and
1DJ Oil and gas exploration Ordinary Wales 100 100
------------------------- ------------ ---------------- ------- ------
UOG Crown Ltd*
200 Strand, London, WC2R England and
1DJ Oil and gas exploration Ordinary Wales 100 100
------------------------- ------------ ---------------- ------- ------
UOG Colter Ltd*
200 Strand, London, WC2R England and
1DJ Oil and gas exploration Ordinary Wales 100 100
------------------------- ------------ ---------------- ------- ------
*held indirectly by United Oil & Gas
8. Intangible assets
Exploration and Evaluation assets Computer software
$ $ Total
$
Cost
At 1 January 2018 1,574,627 - 1,574,627
Additions 3,902,289 - 3,902,289
Foreign exchange differences (250,697) - (250,697)
------------------ ----------
At 31 December 2018 5,226,219 - 5,226,219
Additions 3,086,027 11,374 3,097,401
Disposals (792,033) - (792,033)
Foreign exchange differences 207,925 - 207,925
------------------ ----------
At 31 December 2019 7,728,138 11,374 7,739,512
------------------ ----------
Amortisation and impairment
At 1 January 2018 - - -
Charge for the year - - -
At 31 December 2018 - - -
Charge for the year - - -
Impairment 2,111,319 - 2,111,319
Foreign exchange differences 47,329 - 47,329
------------------ ----------
At 31 December 2019 2,158,648 - 2,158,648
------------------ ----------
Net book value
At 31 December 2019 5,569,490 11,374 5,580,864
================================== ================== ==========
At 31 December 2018 5,226,219 - 5,226,219
================================== ================== ==========
At 31 December 2019 the group's E&E carrying values of $5.6m
related to our development Selva asset in Italy, our high impact
exploration activity in Jamaica, and the UK North Sea and Wessex
basin exploration/development work programmes. During the year we
divested the Crown Discovery in the North Sea, and after evaluating
a number of commercialization options, have made the decision to
write off the expenditure on the Colter wells.
Our Italian development at the Selva field continued to make
progress in 2019. Factoring in the impact of Covid-19, we are now
targeting first production in early 2021. Formal technical
environmental approval from the Italian Environmental Ministry was
granted in January 2020 and preliminary work has commenced on the
development programme preparing for first gas. Testing has
previously indicated rates of 150,000scm/day with UOG's economic
interest being 20%. At the Balance Sheet date $2,335,135 had been
capitalised for our Italian asset.
In Jamaica work continued in 2019 on the processing of 3D
seismic data acquired during the previous year, adding further
prospectivity to the numerous structures already identified in the
licence. Further resources and funds were also spent during 2019 on
a joint-venture farm out process, led by the operator to seek
partners to participate in drilling an exploration well. This
generated significant interest, but the current market conditions
have proven a challenging environment in which to complete a
farm-down of such a frontier wildcat opportunity. A 6-month
extension to the initial Exploration Period was granted in January
2020, giving the Joint Venture until the 31(st) July before a
drill-or-drop decision is required. United has indicated to the
Jamaican authorities that it wishes to explore options for
continuing to progress what United believe to be a transformative
licence beyond the 31 July deadline, and discussions to this end
have been initiated positively with the Government . As at 31
December UOG are carrying $2,764,170 for Jamaica in its Intangibles
number.
In the UK, United has had an interesting year. In the North Sea,
Licence P2480, containing four blocks, was acquired in the OGA's
31(st) licensing round, whilst the divestment of Licence P2366,
containing the Crown discovery was completed for a significant
profit. In the Wessex Basin, the Colter well (98/11a-6) and its
sidetrack have been fully impaired, whilst the work programme
continues on the Waddock Cross development.
A key achievement of the year was the divestment of the Crown
licence to Anasuria Hibiscus UK Limited for an initial $4m of which
United have a 95% share. This sale required the net off of costs
incurred from the work programme and some disposal costs, amounting
to $792,033 in total. With the addition of the 31(st) round
licences in Q3 of 2019 the company is carrying a small value of
$33,884 on its North Sea assets, with a work programme to ramp up
in 2020/2021 on the P2480 licence, which includes the Zeta
prospect.
In the PL090 licence, work continues with some independent
reservoir modelling after the seismic completion in 2018 and at the
Balance Sheet date the company is carrying $481,336 in capitalised
costs in this licence.
In licence P1918 the Colter Well and side-track were drilled in
Q1 of 2019. Despite some encouraging signs and positive CPR
indicators of a structure that could hold up to 24 MMstb in an
upside case, the company has decided to impair its costs in full,
amounting to $2,158,649. This decision was made as after evaluating
numerous scenarios, it was determined that to make further progress
towards development, further investment in 3D seismic acquisition
and an appraisal well would be required. The company's view is that
such investment would be more profitably deployed elsewhere.
Management review the intangible exploration assets for
indications of impairment at each balance sheet date based on IFRS
6 criteria. Commercial reserves have not yet been established and
the evaluation and exploration work is ongoing. The Directors
believe the only impairment indicators relate to Colter (as
described above) and have impaired all associated costs to date
accordingly, with all remaining assets described continuing to be
carried at cost.
9. Property, plant and equipment
Computer equipment Right of use asset
$ $ Total
$
Cost
At 1 January 2018 3,773 - 3,773
Additions 3,535 - 3,535
Foreign exchange differences (356) - (356)
At 31 December 2018 6,952 - 6,952
Transition to IFRS 16 - 72,453 72,453
Additions 1,637 41,860 43,497
Foreign exchange differences - 462 462
At 31 December 2019 8,589 114,775 123,364
Depreciation
At 1 January 2018 609 - 609
Charge for the year 1,732 - 1,732
Foreign exchange differences (106) - (106)
At 31 December 2018 2,235 - 2,235
Charge for the year 3,562 90,464 94,026
Foreign exchange differences 15 366 381
At 31 December 2019 5,812 90,830 96,642
Net book value
At 31 December 2019 2,777 23,945 26,722
=================== =================== ========
At 31 December 2018 4,717 - 4,717
=================== =================== ========
Depreciation is recognised within administrative expenses.
10. Trade and other receivables
2019 2018
$ $
Prepayments and deposit 340,019 68,636
Other tax receivables 334,636 670,483
Crown disposal proceeds due 2,850,000 -
3,524,655 739,119
========== ========
The Directors consider that the carrying values of trade and
other receivables are approximate to their fair values.
No expected credit losses exist in relation to the Group's
receivables as at 31 December 2019 (2018: GBPnil).
Prepayments and deposits relate to monies paid in advance in
relation to the Rockhopper acquisition completed after the balance
sheet date, and 2 months advance rent on the office.
Crown disposal proceeds due are being carried at the full value
of the ascertainable contingent consideration expected to be
received (see note 3).
11. Cash and cash equivalents
2019 2018
$ $
Cash at bank (GBP) 263,536 4,975,449
Cash at bank (EUR) 21,465 74,891
Cash at bank (USD) 990,536 99,567
1,275,537 5,149,907
========== ==========
At 31 December 2019 and 2018 all significant cash and cash
equivalents were deposited in the UK and Ireland with large
international banks.
12. Share capital, share premium and merger reserve
Allotted, issued, and fully paid:
2019
Share capital Share premium
No $ $
Ordinary shares of $0.01 each
At 1 January and 31 December 2019 345,613,985 4,564,787 9,912,988
2018
Share capital Share premium
No $ $
Ordinary shares of $0.01 each
At 1 January 2018 232,185,001 3,054,383 5,562,026
Allotments:
28 February 2018 60,000 827 3,309
11 May 2018 58,823,530 797,404 2,591,561
08 October 2018 54,545,454 712,173 3,204,780
Share issue costs - - (1,448,688)
At 31 December 2018 345,613,985 4,564,787 9,912,988
As regards income and capital distributions, all categories of
shares rank pari passu as if the same constituted one class of
share.
13. Share-based payments
Options
Details of the number of share options and the weighted average
exercise price (WAEP) outstanding during the year are as
follows:
2019
Number of WAEP
Options GBP
Outstanding at the beginning of the year 11,117,647 0.05
Issued - -
Outstanding at the year end 11,117,647 0.05
Number vested and exercisable at 31 December 2019 - -
2018
Number of WAEP
Options GBP
Outstanding at the beginning of the year - -
Issued 11,117,647 0.05
Outstanding at the year end 11,117,647 0.05
Number vested and exercisable at 31 December 2018 - -
The fair values of share options issued in the current financial
year were calculated using the Black Scholes model as follows:
Share options
Date of grant 25 June 2018
Number granted 11,117,647
Share price at date of grant GBP0.05
Exercise price GBP0.04
Expected volatility 58%
Expected life from date of grant (years) 6.5
Risk free rate 0.9876%
Expected dividend yield 0%
Fair value at date of grant GBP293,069
Earliest vesting date 25 June 2021
Expiry date 25 June 2028
Expected volatility was determined based on the historic
volatility of the Company's shares for a period averaging 1 year.
The expected life used in the model has been adjusted, based on
management's best estimate, for the effects of non-transferability,
exercise restrictions and behavioural considerations.
The Group recognised total expenses of $126,772 in the income
statement in relation to share options accounted for as
equity-settled share-based payment transactions during the year in
relation (2018: $65,062).
Warrants
Details of the number of share warrants and the weighted average
exercise price (WAEP) outstanding during the year are as
follows:
2019
Number of WAEP
Warrants GBP
Outstanding at the beginning of the year 82,212,206 0.04
Outstanding at the year end 82,212,206 0.04
Number vested and exercisable at 31 December 2019 82,212,206 0.04
2018
Number of WAEP
Warrants GBP
Outstanding at the beginning of the year 37,260,000 0.02
Exercised (60,000) (0.05)
Issued 45,012,206 0.05
Outstanding at the year end 82,212,206 0.04
Number vested and exercisable at 31 December 2018 41,303,126 0.02
The fair values of share warrants issued or extended in the
current financial year were calculated using the
Black Scholes model as follows:
Share warrants Share warrants Share warrants
Share warrants Share warrants
Date of grant 31 July 2017 31 July 2017 27 December 2017 11 May 2018 18 September 2018
--------------- --------------- ----------------- --------------- ------------------
Number granted 28,000,000 9,200,000 1,375,000 2,728,126 40,909,080
--------------- --------------- ----------------- --------------- ------------------
Share price at date of GBP0.03 GBP0.03 GBP0.04 GBP0.04 GBP0.06
grant
--------------- --------------- ----------------- --------------- ------------------
Exercise price GBP0.01 GBP0.03 GBP0.04 GBP0.04 GBP0.08
--------------- --------------- ----------------- --------------- ------------------
Expected volatility 59% 59% 55% 56% 58%
--------------- --------------- ----------------- --------------- ------------------
Expected life from date of
grant (years) 2.5 2.5 2.5 2.5 2.5
--------------- --------------- ----------------- --------------- ------------------
Risk free rate 0.5555% 0.5555% 0.7280% 1.0783% 1.1283%
--------------- --------------- ----------------- --------------- ------------------
Expected dividend yield 0% 0% 0% 0% 0%
--------------- --------------- ----------------- --------------- ------------------
Fair value / incremental GBP382,533 GBP72,959 GBP18,952 GBP40,957 GBP550,390
fair value at date of
grant
--------------- --------------- ----------------- --------------- ------------------
Earliest vesting date 31 July 2017 31 July 2017 27 December 2017 11 May 2018 18 September 2019
--------------- --------------- ----------------- --------------- ------------------
Expiry date 31 July 2022 31 July 2022 27 December 2022 11 May 2023 18 September 2022
--------------- --------------- ----------------- --------------- ------------------
Expected volatility was determined based on the historic
volatility of a comparable company's shares for a period averaging
1 year. The expected life used in the model has been adjusted,
based on management's best estimate, for the effects of
non-transferability, exercise restrictions and behavioural
considerations.
The Group recognised total expenses of $nil in relation to share
warrants accounted for as equity-settled share-based payment
transactions during the year in relation (2018: $799,829). These
were recognised as follows:
$nil (2018: $799,829) as a deduction from share premium related
to share warrants accounted for as equity-settled share-based
payment transactions during the year.
14. Trade and other payables
2019 2018
$ $
Trade payables 403,816 10,403
Tax and social security 26,151 20,571
Other payables 200,074 1,610
Deferred shares (note 15) 39,804 38,281
Accruals 415,856 337,147
1,085,701 408,012
========== ========
15. Deferred shares
On 12 October 2015, the Company issued 30,000 Deferred Shares of
GBP1 for GBP30,000 to the Founder, which have an entitlement to a
non-cumulative annual dividend at a fixed rate of 0.1 per cent of
their nominal value. The Deferred Shares have no voting rights
attached to them, and may be redeemed in their entirety by the
Company for an aggregate redemption payment of GBP1.
16. Leases
Disclosure required by IFRS 16
Right of use assets
The Group used leasing arrangements relating to property, plant
and equipment. As the Group has the right of use of the asset for
the duration of the lease arrangement, a "right of use" asset is
recognised within property, plant and equipment.
When a lease begins, a liability and right of use asset are
recognised based on the present value of future lease payments.
2019
$
Interest expense on lease liabilities 4,841
Total cash outflow for leases (93,228)
Additions to right-of-use assets 114,313
Depreciation charge - right of use assets (90,464)
Foreign exchange movement on right of use assets 96
--------------
Carrying amount at the end of the year:
Right of use assets 23,945
==============
Lease liabilities
2019
$
Current 26,030
Non-current -
------------
26,030
------------
Disclosure required by IAS 17
Operating leases
Minimum lease payments under non-cancellable operating leases
fall due as follows:
2018
Land and buildings: $
Less than one year 75,668
Between one and five years -
During 2018, $nil was recognised as an expense in the income
statement in relation to operating leases.
17. Financial instruments
Categories of financial instruments
The tables below set out the Group's accounting classification
of each class of its financial assets and liabilities.
Financial assets 2019 2018
$ $
Crown disposal proceeds due (note 10) 2,850,000 -
Cash and cash equivalents (note 11) 1,275,537 5,149,907
---------- ----------
4,125,537 5,149,907
========== ==========
All of the above financial assets' carrying values are
approximate to their fair values, as at 31 December 2019 and
2018.
Financial liabilities Measured at amortised cost
2019 2018
$ $
Trade payables (note 14) 403,816 10,403
Other payables (note 14) 200,074 1,610
Lease liabilities (note 16) 26,030 -
Accruals (note 14) 415,856 337,147
1,045,776 349,160
In the view of management, all of the above financial
liabilities' carrying values approximate to their fair values as at
31 December 2019 and 2018.
Fair value measurements
This note provides information about how the Group determines
fair values of various financial assets and financial
liabilities.
Fair value of financial assets and financial liabilities that
are not measured at fair value on a recurring basis
The directors consider that the carrying amounts of financial
assets and financial liabilities recognised in the consolidated
financial statements approximate their fair values (due to their
nature and short times to maturity).
18. Financial instrument risk exposure and management
The Group's operations expose it to degrees of financial risk
that include liquidity risk, credit risk, interest rate risk.
This note describes the Group's objectives, policies and process
for managing those risks and the methods used to measure them.
Further quantitative information in respect of these risks is
presented in notes 10, 11, 14, 15, 16, 17 and 19.
Liquidity risk
Liquidity risk is dealt with in note 19 of these financial
statements.
Credit risk
The Group's credit risk is primarily attributable to its cash
balances.
The credit risk on liquid funds is limited because the third
parties are large international banks with a minimum investment
grade credit rating.
The Group's total credit risk amounts to the total of other
receivables and cash and cash equivalents. Credit assessments are
routinely reviewed on all of the Group's joint venture partners and
other counterparties.
Interest rate risk
The Group's only exposure to interest rate risk is the interest
received on the cash held on deposit, which is immaterial. The
Group does not have any borrowings as at 31 December 2019.
Foreign exchange risk
The Group is exposed to foreign exchange movements on monetary
assets and liabilities denominated in currencies other than USD.
The Group's transactions are carried out in GBP, EUR and USD.
Equity funding transactions are carried out in GBP. Operational
transactions are carried out predominantly in USD but also in GBP
and EUR.
The monetary assets and liabilities denominated in currencies
other than USD are e relatively immaterial (see notes 10 and 11)
and transactional risk is considered manageable.
The Group does not hold material non-domestic balances and
currently does not consider it necessary to take any action to
mitigate foreign exchange risk due to the immateriality of that
risk.
19. Liquidity risk
Prudent liquidity risk management includes maintaining
sufficient cash balances to ensure the Group can meet liabilities
as they fall due.
In managing liquidity risk, the main objective of the Group is
therefore to ensure that it has the ability to pay all of its
liabilities as they fall due. The Group monitors its levels of
working capital to ensure that it can meet its debt repayments as
they fall due. The table below shows the undiscounted cash flows on
the Company's / Group's financial liabilities as at 31 December
2019 and 2018, on the basis of their earliest possible contractual
maturity.
Within Within Within
Within 2 2 -6 6 - 12 1-2
Total Payable on demand months months months years
$ $ $ $ $ $
At 31 December 2019
Trade payables 403,816 - 403,816 - - -
Other payables 200,074 200,074 - - - -
Lease liabilities 26,446 - 17,631 8,815 - -
Accruals 415,856 - - 415,856 - -
1,046,192 200,074 421,447 424,671 - -
At 31 December 2018
Trade payables 10,403 - 10,403 - - -
Other payables 1,610 1,610 - - - -
Accruals 337,147 - - 337,147 - -
349,160 1,610 10,403 337,147 - -
Other payables comprise loans from directors which are repayable
on demand.
20. Capital management
The Group's capital management objectives are:
-- To provide long-term returns to shareholders
-- To ensure the Group's ability to continue as a going concern; and
The Group defines and monitors capital on the basis of the
carrying amount of equity less cash and cash equivalents as
presented on the face of the balance sheet and as follows:
2019 2018
$ $
Equity 9,105,601 10,711,950
Cash and cash equivalents (1,275,537) (5,149,907)
------------ ------------
7,830,064 5,562,043
============ ============
The Board of Directors monitors the level of capital as compared
to the Group's commitments and adjusts the level of capital as is
determined to be necessary by issuing new shares. The Group is not
subject to any externally imposed capital requirements.
These policies have not changed in the year. The Directors
believe that they have been able to meet their objectives in
managing the capital of the Group.
21. Related party transactions
Key management personnel are identified as the Executive
Directors, and their remuneration is disclosed in note 3.
Loan from director
Brian Larkin
$
Principal
At 31 December 2017 11,558
Loans repaid (11,402)
Foreign exchange differences (156)
-------------
At 31 December 2018 -
Loans repaid -
-------------
At 31 December 2019 -
The loan balance was repayable on demand with no formal
terms.
22. Financial commitments
As at 31 December 2019, the Group's commitments comprise their
exploration expenditure interests in Waddock Cross, Crown, Colter,
Po Valley and the Walton-Morant licence. These commitments have
been summarised below:
Exploration licence Year Year
ending 31 ending 31
December December
2019 2020
$ $
Crown 107,045 9,952
Colter 1,067,590 6,774
Walton-Morant licence 751,676 103,407
Po Valley 75,377 177,883
Waddock Cross 47,039 47,314
2,048,727 345,330
----------------- -----------------
23. Ultimate controlling party
The directors do not consider there to be an ultimate
controlling party.
24. Events after the balance sheet date
1. On 28 February 2020 the company announced that it has
completed the acquisition of Rockhopper Egypt Pty Ltd. from
Rockhopper Exploration plc. The Acquisition, which has an effective
date of 1st January 2019, includes a 22% non-operating interest in
the producing Abu Sennan concession, onshore Egypt.
The consideration for the Acquisition was US$16 million
(approximately GBP13 million) which was being funded by:
-- the issue to Rockhopper PLC of 114,503,817 Consideration
Shares at 3 pence per Ordinary Share representing 18.5% of the
Company's Enlarged Ordinary Share Capital,
-- a pre-payment financing structure of US$8 million provided by BP ('the BP Facility') and
-- the issue of 150,616,669 Placing Shares at 3 pence per share
with certain existing and new investors and 8,419,498 Subscription
Shares also at 3 pence per share.
Consideration Shares held by Rockhopper in United are subject to
certain lock-up and orderly market disposal provisions for a period
of up to 12 months from completion.
This deal and its financial impacts are transformational for the
company. At 31 December 2019 the acquired company had net assets of
$15.9m and generated profits of $2.4m in 2019.
$'000
------------
Intangible exploration and evaluation
assets 3,012
Property, plant and equipment 11,764
Inventories 67
Other receivables 3,082
Other payments -2,000
------------
15,925
------------
$'000
------------
Revenue's 7,637
Cost of sales 4,629
Administration & other costs 635
------------
Profits 2,373
------------
Post year-end, gross production has continued to increase
upwards from early 2019 levels of 5,000 boepd to over 8,500 boepd
in May 2020 (1,870 boepd to United's working Interest), with the
ASH-2 well coming on stream in Q1.
Even at the current levels of lower commodity prices, the Abu
Sennan assets remain on track to add significant revenue, profits
and cashflow to United in 2020. Proactive measures have been taken
by the joint venture partners including the deferral of three of
the four wells in the 2020 campaign and further optimization of the
Capital and Operating expenditure budgets is being considered.
2. On the 12 March 2020 UOG announced that further to the
Rockhopper acquisition and readmission of shares announcement of 28
February 2020, the Company has appointed Mr. Stewart MacDonald as
Non-Executive Director of the Company.
3. Impact of COVID-19
Directors have considered the impact of the COVID-19 pandemic
and measures were taken in response to the situation and oil-price
volatility.
The Company is going forward with an awareness that, due to the
COVID-19, the low oil price and decline in oil and gas demand may
sustain. Both human and economic impact has been very significant
so far and at this point the long-term effect is uncertain. United
has published a statement regarding the fall of Brent oil price in
March and April, underlining the facts and efforts that management
and staff are making to maintain the company's operations.
Proactive measures taken by United and its partners to reduce
near-term Capex commitments during current oil-price uncertainty
and the impact of Covid-19
-- Deferral of Italian Capex improves cash flow and moves expected first gas slightly to H1 2021
-- Deferral of Egyptian Capex reduces 2020 infill campaign from
4 to 1 well, significantly reducing gross 2020 Capex estimates.
Further optimisation of the Capex and Opex budgets is being
considered.
-- Completion of post-Egyptian-acquisition licence review sees
divestment plans for selected non-core assets in the Wessex Basin
and a decision not to exercise the farm-in option in Benin
-- Substantial cut in administrative expenditure resulting in further cost savings
Measures taken to minimise the impact of oil-price uncertainty
and Covid-19 will help safeguard the company during the current
industry challenges, with the aim of putting it in a position to
take advantage of future opportunities
The Company's pre-payment facility with BP is based on a floor
price of $60/bbl for c.6,600 bbls of crude oil production per month
for the next thirty months . This provides downside price
protection by effectively hedging this portion of production.
Coupled with this, c. 20% of United's net production is gas which
is sold under a fixed contract that is relatively insensitive to
oil-price changes.
INDEPENT AUDITORS' REPORT
TO THE MEMBERS OF UNITED OIL & GAS PLC
FOR THE YEARED 31 DECEMBER 2019
Opinion
We have audited the financial statements of United Oil & Gas
Plc (the "Parent Company") and its subsidiaries (the "Group") for
the year ended 31 December 2019, which comprise the Consolidated
Income Statement, the Consolidated Statement of Comprehensive
Income, the Consolidated Balance sheet, the Consolidated Statement
of Changes in Equity, the Consolidated Statement of Cash Flow and
related notes to the consolidated financial statements, the Parent
Company Balance sheet, the Parent Company Statement of Changes In
Equity and the related notes to the parent company financial
statements. The financial reporting framework that has been applied
in the preparation of the consolidated financial statements is
applicable law and International Financial Reporting Standards as
adopted by the European Union (IFRSs). The financial reporting
framework that has been applied in the preparation of the Parent
Company financial statements is applicable law and United Kingdom
Accounting Standards, including Financial Reporting Standard 101
'Reduced Disclosure Framework' (United Kingdom Generally Accepted
Accounting Practice).
In our opinion:
-- the financial statements give a true and fair view of the
state of the Group's and of the Parent Company's affairs as at 31
December 2019 and of the Group's loss for the year then ended;
-- the Group financial statements have been properly prepared in
accordance with IFRSs, as adopted by the European Union;
-- the Parent Company financial statements have been properly
prepared in accordance with United Kingdom Generally Accepted
Accounting Practice; and
-- the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor's responsibilities for the audit of the financial
statements section of our report. We are independent of the Company
in accordance with the ethical requirements that are relevant to
our audit of the financial statements in the UK, including the
FRC's Ethical Standard as applied to listed entities, and we have
fulfilled our other ethical responsibilities in accordance with
these requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our
opinion.
Material uncertainty related to going concern
We draw attention to the Going Concern section of the Principal
Accounting Policies of the Group financial statements concerning
the Group's and Company's ability to continue as a going concern.
The Group incurred an operating loss of $2.1m during the year ended
31 December 2019 (2018: $1.1m). The Group is faced with a lower oil
price environment along with the Covid-19 pandemic. Management have
considered a number of scenarios including a downside case where
further receipts from the Crown disposal are not received within
the forecast period, and in the absence of potential mitigating
actions, if realised would place doubt on the ability to fund the
business for 12 months from the current cash reserves and projected
oil and gas revenues following the acquisition of Rockhopper Egypt
Pty Limited ('Rockhopper Egypt'). Some mitigating actions have been
considered and include further divestment of the portfolio,
restructuring of debt arrangements and further equity raises. These
conditions, along with other matters discussed in the Principal
Accounting Policies indicate the existence of a material
uncertainty which may cast significant doubt about the Group's and
Company's ability to continue as a going concern. The financial
statements do not include the adjustments (such as impairment of
assets) that would result if the Group and Company were unable to
continue as a going concern.
Our opinion is not modified in respect of this matter.
The risk
Due to the nature of the industry and the significant amount of
capital needed in order to fund cash calls and operating costs,
there are risks surrounding the going concern assumption. Whilst
post year end, the Group began to generate revenues following the
acquisition of Rockhopper Egypt, the current low oil price impacts
cash flow at least in the short term. Following the acquisition the
Group also has significant monthly commitments in respect of the
repayment of the BP Oil International Limited loan facility. This
facility is underpinned by a hedging instrument which reduces the
monthly settlements when the Brent oil price falls. Furthermore,
the current market conditions, including the global Covid-19
pandemic and suppressed oil price will have a direct impact on the
Group's ability to generate profits. Whilst a further instalment of
$2.85m is expected in relation to the Crown disposal later this
year it remains contingent on the submission and approval of
Hibiscus's field development plan.
Given the above factors, we consider going concern to be a
significant audit risk area.
The directors' conclusion of the risks and circumstances
described in the Going Concern section of the Principal Accounting
Policies of the Group financial statements represent a material
uncertainty over the ability of the Group and Company to continue
as a going concern for a period of at least a year from the date of
approval of the financial statements. However, clear and full
disclosure of the facts and the directors' rationale for the use of
the going concern basis of preparation, including that there is a
related material uncertainty, is a key financial statement
disclosure and so was the focus of our audit in this area. Auditing
standards require that to be reported as a key audit matter.
How our audit addressed the key audit matter
Our audit procedures included:
-- Assessing the transparency and the completeness and accuracy
of the matters covered in the going concern disclosure by
evaluating management's cash flow projections for the next 12
months and the underlying assumptions.
-- We obtained budgets and cash flow forecasts, reviewed the
methodology behind these, ensured arithmetically correct and
challenged the assumptions.
-- We obtained post year end results and compared these to
budget to ensure budgeting is reasonable and results are in line
with expectations.
-- We completed sensitivity analysis on the budgets provided to
assess the change in revenue or costs that would need to occur to
push the Group into a cash negative position.
-- We discussed plans for the Group going forward with
management, ensuring these had been incorporated into the budgeting
and would not have an impact on the going concern status of the
Group.
Emphasis of matter - Valuation of the Walton Morant license in
Jamaica
We draw attention to principal accounting policies in the
financial statements which describes management's review and the
key assumptions used in the assessment of impairment of the Group's
exploration assets. In respect of the Walton Morant license in
Jamaica in which the Group have a 20% interest and have capitalised
$2,764,170. Tullow Jamaica Limited have made the decision to
relinquish the licence and withdraw as operator by 31 July 2020.
Although the licence ends in 2024, a 'drill or drop decision'
currently needs to be made by 31 July 2020. UOG Jamaica Limited
have written to the Jamaican authorities expressing their interest
in continuing the current phase of exploration beyond this period
and the Board are confident that this will be approved. However,
due to the uncertainty in respect of the current exploration phase
there is an indication of possible future impairment should the
extension of the exploration period not be granted. The financial
statements do not include the asset impairment adjustments that
would result if the Group does not obtain the required approvals to
continue with the license and to extend the current exploration
phase.
Our opinion is not modified in respect of this matter.
Emphasis of matter - Consideration relating to the Crown
disposal
We draw attention to note 3 of the financial statements which
describes management's review and the key assumptions used when
assessing the appropriate value of the consideration to be received
in respect of the Crown disposal. The next instalment of $3m is
dependent on field development plan approval by the Oil & Gas
Authority in the UK. We understand that Anasuria Hibiscus UK
Limited (Hibiscus) is still progressing with both the Sunflower and
Marigold oil fields in the UK of which the Crown discovery is a key
part. The Board remain confident that Hibiscus are still pressing
ahead with the field development plan and are therefore expecting
to receive the second instalment of $2.85m by the 31 December 2020.
As at the year-end receipt of these funds is therefore considered
probable, therefore we are satisfied that this has been
appropriately recognised in these financial statements. However
there is an inherent uncertainty due to the fact that the receipt
is reliant on Hibiscus submitting the field development plan and
obtaining approval. The financial statements do not include the
receivable impairment adjustment that would result if the required
approvals are not obtained.
Our opinion is not modified in respect of this matter.
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) we identified, including those which had the greatest effect
on: the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
Key audit matter How the matter was addressed during the
audit
Impairment of exploration Our audit work included, but was not restricted
and evaluation assets in to:
the Group
* Obtaining and discussing each of the licences with
The Group has capitalised the directors and evaluating their assessment in
costs in respect of the Group's conjunction with the Competent Person's Reports
licence interests in accordance available for each exploration project and reviewed
with IFRS 6 'Exploration available information to assess whether the licenses
for and Evaluation of Mineral remain in good standing.
Resources' (IFRS 6). The
Directors need to assess
the exploration assets for * We discussed each of the licences with the directors
indicators of impairment and challenged their assessment in conjunction with
and where they exist to undertake the Competent Person's Reports available for each
a full review to assess the exploration project and reviewed available
need for impairment charge. information to assess whether the licenses remain in
This involves significant good standing.
judgements and assumptions
such as the timing and extent
and probability of future * We reviewed the future plans of the projects in
cash flow. respect of funding, viability and development to
assess whether there were any indicators of
impairment.
We therefore identified the
impairment of exploration
and evaluation assets as * Assessing the future plans of the projects in respect
a key audit matter, which of funding, viability and development to assess
was one of the most significant whether there were any indicators of impairment.
assessed risks of material
misstatement.
Key observations
An emphasis of matter has been included
above in respect of the Group's Walton Morant
license in Jamaica due to the uncertainty
in respect of the extension of the current
exploration phase which ends on 31 July
2020.
We obtained evidence that all the licenses
remain valid and are in good standing. No
other indicators of impairment were identified
in respect of the carrying values of exploration
and evaluation assets at the year end.
------------------------------------------------------------------------
Impairment of investments Our audit work included, but was not restricted
and loans due from subsidiary to:
companies in the Parent Company
* Reviewing the investments balances for indicators of
Under International Accounting impairment in accordance with IAS 36;
Standard 36 'Impairment of
Assets', companies are required
to assess whether there is * Assessing the appropriateness of the methodology
any indication that an asset applied by management in their assessment of the
may be impaired at each reporting recoverable amount of intragroup loans by comparing
date. it to the Group's accounting policy and IAS 36;
Management assessment involves
significant judgements and * Assessing management's evaluation of the recoverable
assumptions such as the timing amounts of intragroup loans including review the
and extent and probability impairment provisions and net asset values of
of future cash flow. components that have intercompany debt;
The Parent Company has loans
due from subsidiary companies * Checking that intragroup loans have been reconciled
of $6.5m (2018: $11.3m). and confirming that there are no material
The investments represent differences.
the primary balance on the
Company balance sheet and
there is a risk it could
be impaired and that intragroup
loans may not be recoverable
as a result of the subsidiary Key observations
companies incurring losses. The majority of the investment balances
correlate with the exploration assets held
We therefore identified the by that subsidiary and our impairment review
impairment of loans due from was therefore linked to our assessment of
subsidiary companies as a indicators of impairment on the corresponding
key audit matter in the Parent exploration licences.
Company financial statements,
which was one of the most An impairment provision of $1.65m was recognised
significant assessed risks in the parent company following the impairment
of material misstatement. of the Colter licence at the year end. No
further indications of impairment were identified.
------------------------------------------------------------------------
Accounting and valuation Our audit work included, but was not restricted
of consideration relating to:
to the Crown disposal in
the Group * Obtaining and reviewing the sale purchase agreement
with Hibiscus along with the terms and conditions
During the current year the therein.
Group disposed of its interest
in the Crown discovery for
total consideration of up * In respect of the contingent consideration, we have
to $5m to Hibiscus. A further considered management's assessment of the probability
instalment of $2.85m is expected of receipt and the key assumptions.
to be received by 31 December
2020. The receipt is reliant
on Hibiscus submitting the * We have considered the announcements made by Anasuria
field development plan and Hibiscus UK Limited to ensure consistency with
obtaining approval. Therefore management's assessment.
key judgements are required
in order to conclude as to
the appropriate value to
recognise in the financial Key observations
statements. As at the year-end the receipt of these
funds is considered probable, however, an
emphasis of matter has been discussed above
in which we have included further observations
due to the fact that there is inherent uncertainty
due to the fact that the receipt is reliant
on Hibiscus submitting the field development
plan and obtaining approval.
------------------------------------------------------------------------
Our application of materiality
The scope and focus of our audit was influenced by our
assessment and application of materiality. We apply the concept of
materiality both in planning and performing our audit, and in
evaluating the effect of misstatements on our audit and on the
financial statements.
We define financial statement materiality as the magnitude by
which misstatements, including omissions, could reasonably be
expected to influence the economic decisions taken on the basis of
the financial statements by reasonably knowledgeable users.
We also determine a level of performance materiality which we
use to determine the extent of testing needed to reduce to an
appropriately low level the probability that the aggregate of
uncorrected and undetected misstatements exceeds materiality for
the financial statements as a whole.
Materiality Measure Group Parent
Overall materiality We determined materiality for the financial statements
to be:
------------------------------------------------------------------
$182,000 (2018: $214,000). $146,000 (2018: $171,000).
--------------------------------- -------------------------------
How we determine Based on the main key indicator, 2% of net assets of the Parent
it being 2% of net assets Company exceeded the Group
of the Group. materiality amount therefore
this was capped at 80% of
Group materiality.
--------------------------------- -------------------------------
Rationale for benchmarks We believe the net assets are the most appropriate
applied benchmark due to the size and stage of development
of the Company and Group and due to the Group not yet
generating any revenue.
------------------------------------------------------------------
Performance materiality On the basis of our risk assessment, together with
our assessment of the Group and Company's control environment,
our judgement is that performance materiality for the
financial statements should be 75% of materiality being:
------------------------------------------------------------------
$136,500 (2018: $160,500) $109,500 (2018: $129,000)
--------------------------------- -------------------------------
Reporting threshold We agreed with the Audit Committee that we would report
to them all misstatements over 5% of Group and company
materiality identified during the audit as set out
below, as well as differences below that threshold
that, in our view, warrant reporting on qualitative
grounds. We also report to the Audit Committee on disclosure
matters that we identified when assessing the overall
presentation of the financial statements.
------------------------------------------------------------------
$9,000 (2018: $11,000) $7,500 (2018: $8,500)
--------------------------------- -------------------------------
An overview of the scope of our audit
As part of designing our audit, we determined materiality and
assessed the risks of material misstatement in the financial
statements. In particular, we looked at where the directors made
subjective judgements and assumptions in respect of the
capitalisation or impairment of the costs attributable to the
Group's exploration assets, such as allocations of time writing
costs and where there were future events that are inherently
uncertain.
We tailored the scope of our audit to ensure that we performed
enough work to be able to give an opinion on the financial
statements as a whole, taking into account an understanding of the
structure of the Company and the Group, their activities, the
accounting processes and controls, and the industry in which they
operate. Our planned audit testing was directed accordingly and was
focused on areas where we assessed there to be the highest risk of
material misstatement.
Our Group audit scope includes all of the group companies. At
the parent company level, we also tested the consolidation
procedures. The audit team met and communicated regularly
throughout the audit with the Finance Director in order to ensure
we had a good knowledge of the business of the Group. During the
audit we reassessed and re-evaluated audit risks and tailored our
approach accordingly.
The audit testing included substantive testing on significant
transactions, balances and disclosures, the extent of which was
based on various factors such as our overall assessment of the
control environment, the effectiveness of controls and the
management of specific risk.
We communicate with those charged with governance regarding,
among other matters, the planned scope and timing of the audit and
significant findings, including any significant deficiencies in
internal control that we identify during the audit.
Other information
The directors are responsible for the other information. The
other information comprises the information included in the annual
report, other than the financial statements and our auditors'
report thereon. Our opinion on the financial statements does not
cover the other information and, except to the extent otherwise
explicitly stated in our report, we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
audit or otherwise appears to be materially misstated. If we
identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a
material misstatement in the financial statements or a material
misstatement of the other information.
If, based on the work we have performed, we conclude that there
is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this
regard.
Opinions on other matters prescribed by the Companies Act
2006
In our opinion, based on the work undertaken in the course of
the audit:
-- the information given in the strategic report and the
directors' report for the financial year for which the financial
statements are prepared is consistent with the financial
statements; and
-- the strategic report and the directors' report have been
prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Company
and its environment obtained in the course of the audit, we have
not identified material misstatements in the strategic report or
the directors' report.
We have nothing to report in respect of the following matters in
relation to which the Companies Act 2006 requires us to report to
you if, in our opinion:
-- adequate accounting records have not been kept by the
Company, or returns adequate for our audit have not been received
from branches not visited by us; or
-- the financial statements are not in agreement with the accounting records and returns; or
-- certain disclosures of directors' remuneration specified by law are not made; or
-- we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the statement of directors'
responsibilities, the directors are responsible for the preparation
of the financial statements and for being satisfied that they give
a true and fair view, and for such internal control as the
directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the Company or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs (UK) will
always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of
these financial statements.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial Reporting
Council's website at www.frc.org.uk/auditorsresponsibilities .This
description forms part of our auditor's report.
Use of our report
This report is made solely to the Company's members, as a body,
in accordance with part 3 of Chapter 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
Company's members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the Company and the Company's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
Daniel Hutson (Senior Statutory Auditor)
For and on behalf of
UHY Hacker Young
Chartered Accountants
Statutory Auditor
Quadrant House
4 Thomas More Square
London E1W 1YW
28 May 2020
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 EAFSPADPEEAA
(END) Dow Jones Newswires
May 29, 2020 02:00 ET (06:00 GMT)
United Oil & Gas (LSE:UOG)
Historical Stock Chart
From May 2024 to Jun 2024
United Oil & Gas (LSE:UOG)
Historical Stock Chart
From Jun 2023 to Jun 2024
