Lansdowne Oil & Gas plc Final Results (6340J)

TIDMLOGP

RNS Number : 6340J

Lansdowne Oil & Gas plc

30 June 2017

Final Results for the year ended 31 December 2016

30(th) June 2017

Lansdowne Oil & Gas ("Lansdowne" or "the Company") is pleased to announce its audited results, for the year ended 31 December 2016. Lansdowne is an upstream oil and gas company, focused on exploration and appraisal activities in the North Celtic Sea Basin, off the south coast of Ireland. The Company has targeted the Irish offshore shelf areas close to existing operating infrastructure for exploration, as these provide shallow water (generally less than 100 metres), and relatively low drilling costs and the Directors believe that these factors, combined with favourable fiscal terms, have the potential to deliver high value reserves.

Lord Torrington, Chairman commented:

"The long running litigation with Transocean, with the requirement to make substantial payments, dominated events in 2016. However, the Company was successful in its re-financing and all issues relating to the litigation have concluded.

The focus now is to create value from our 20% interest in the Barryroe oilfield, which is by any standards a significant resource, with attractive costs of development and production, against a background of greatly reduced drilling and operating costs. With the recovery of the oil price, activity within the industry has started to recover and the Barryroe Farm-Out process is continuing with discussions ongoing with a number of parties."

Operational highlights

   --     Barryroe Oil Field 

o In April 2016, a judgement was handed down by the Court of Appeal overturning an earlier ruling against Transocean, in a dispute relating to the use of semi-submersible drilling unit, the Arctic III, on the Barryroe oilfield in 2011/2012.

o In line with its 20 per cent working interest in the field, Lansdowne was liable for c US $1.4 million

o In order to satisfy these obligations and to meet its working capital requirements, in June 2016 the Company issued 210 million shares at 1p each to raise GBP2.1 million before expenses.

o Coincident with the placing a portion (GBP930,000) of the LC Master Fund loan was converted into equity at a placing price of 1p per share, the remaining loan was extended to the end of June 2017 and the interest rate was reduced from 10% per annum to 5% per annum

o In October 2016 the issue of costs in the dispute with Transocean was addressed in the Commercial Court in London. Transocean were awarded a portion, c. 40% of the costs they were claiming.

o In December 2016, the Company triggered its option agreement with Brandon Hill Capital and placed 30,000,000 new ordinary shares ("Additional Placing Shares") at a Placing Price of 1p per share to raise GBP300,000 before costs to settle its share of the Transocean costs award and to provide general working capital

o All litigation issues with Transocean have now concluded

o Providence Resources continued its farm-out efforts on behalf of the partners in the Barryroe oil field (Lansdowne 20%) and discussions are continuing with a number of parties.

   --     Standard Exploration Licence 4/07 

o Post well studies confirmed the Midleton gas discovery was considered too small to be commercial

o Following a comprehensive review, it was concluded that none of the other prospective structures on the acreage were attractive enough to offer drillable targets and the Licence was relinquished with effect from 31 December 2016.

Board Changes

-- In addition to portfolio rationalisation, the Company took other actions to further reduce running costs, with Richard Slape, Commercial Director, leaving after the successful completion of the refinancing and Johnny Greenall, Chairman, retiring at the AGM on 20 July 2016.

Financial

   --     Cash balances at 31 December 2016 of GBP0.17 million (2015: GBP0.32 million). 
   --     Operating expenses for the year were GBP0.7 million (2015: GBP1.05 million). 
   --     Loss for the year after tax of GBP1.2 million (2015: loss GBP15.1 million). 
   --     Loss per share of 0.4 pence (2015: loss 10.2 pence). 
   --     Current cash burn of circa GBP30,000 per month 
 
 Post-balance sheet events 
   *    The LC Master Fund Loan has been further extended to 
        1 July 2018 
 
 
   *    The Company entered into a Loan Facility with its 
        major shareholder Brandon Hill Capital Ltd for a 
        total of up to GBP350,000 as announced on 29 July 
        2017 
 
 
  For further information please contact: 
--------------------------------------------------------------- 
 Lansdowne Oil & Gas plc 
  Steve Boldy                        [phone] 
----------------------------------  --------------------------- 
 Cantor Fitzgerald Europe 
  Nominated Advisor and 
  Joint Broker 
  Sarah Wharry                       [phone] 
  David Porter 
 
  Beaufort Securities 
  Joint Broker 
  Jon Belliss                         [phone] 
----------------------------------  --------------------------- 
 

Chairman's Statement

Introduction

This year proved to be very challenging for the Company. Oil prices continued to decline, reaching a low-point below $30/bbl in the first quarter. Furthermore, on 13 April 2016, a judgement was handed down by the Court of Appeal overturning an earlier ruling against Transocean in a dispute with Providence Resources ("Providence") about certain spread costs.

The case related to amounts claimed by Transocean against Providence regarding the use of the semi-submersible drilling unit, the Arctic III, in 2011/12 on the Barryroe oilfield, offshore Ireland. The total claim, which was made by Transocean in 2012, amounted to approximately US$19 million. Providence, in defence of its position, counterclaimed against Transocean. The Hon. Mr Justice Popplewell, in his judgement of 19 December 2014 in the Commercial Court in London, found that Transocean was in breach of contract for failing to maintain various parts of its sub-sea equipment and that Transocean was not, therefore, entitled to the full amount claimed. The ruling also supported Providence's position that Providence was entitled to set off certain spread costs against Transocean's claim.

Transocean sought and was granted the right to appeal one aspect of Mr Justice Popplewell's judgement. This specifically related to Providence's right of set off and the appeal turned on the Court's interpretation of the wording of the consequential loss clause in the rig contract. The appeal was heard in March 2016.

The financial implications of the Court of Appeal's judgement resulted in the payment of approximately US$7 million (excluding interest and costs) to Transocean by the Barryroe partners. In line with its working interest in the field, Lansdowne was liable for 20% of this amount (c. US $1.4 million) and any amounts to be paid in the future.

Given the financial implications of this, Lansdowne shares were suspended pending clarification of the Company's financial position. The Company moved to address the situation and a General Meeting held on 9 June 2016 gave shareholder approval to allot new shares and for a necessary share capital re-organisation. A placing was then completed to raise GBP2.1 million to settle the outstanding amounts due and to provide working capital and Lansdowne's shares returned to trading on 22 June 2016.

Coincident with the placing, a portion (GBP930,000) of the LC Capital Master Fund loan was converted into equity at a placing price of 1p pershare, the remaining loan was extended to the end of June 2017 and the interest rate was reduced from 10% per annum to 5% per annum.

In addition, the Company entered into an option, exercisable on one or more occasions at any time for 12 months from June 2016, to require Brandon Hill Capital to use its reasonable endeavours to procure subscribers for new ordinary shares in the capital of the Company to raise up to an aggregate additional GBP500,000 (the "Additional Placing"). Exercise of the option was conditional, inter alia, upon the Company being required to reimburse Providence Resources in respect of further costs and/or awards associated with the Transocean dispute.

A hearing of Transocean's application in respect of Part 36 of the English Civil Procedure Rules was heard by Mr Justice Popplewell in the Commercial Court in London on 14 October 2016 and Judgement was handed down on 20 October 2016.

The Judgement stated that, as a result of the decision of the Court of Appeal in April 2016, Transocean was entitled to its costs of the first instance proceedings from 30 August 2014 on the Standard Basis (i.e. approximately 70%) but that the other Part 36 cost consequences in relation to obtaining costs on the indemnity basis, interest on costs and the principal sum and the surcharge of GBP75,000 did not apply. Based on the Judgement, Providence paid Transocean a sum amounting to some 40% of Transocean's claim for costs. Under the Joint Operating Agreement, Lansdowne reimbursed Providence for its 20% share of these costs.

On 9 November 2016, the Company announced that the Supreme Court ordered that permission to appeal be refused as the appeal does not raise a point of law of general public importance.

This dispute arose as a result of the failure of equipment on the rig whilst drilling the Barryroe appraisal well, leading to extensive delay and cost over-run. The long-running litigation has been a painful and distracting experience for the Company and it is a great relief to finally put this behind us.

In December 2016, the Company triggered its outstanding option agreement with Brandon Hill Capital and placed 30,000,000 new ordinary shares ("Additional Placing Shares") at a Placing Price of 1p per share to raise GBP300,000 before costs to settle its share of costs and to provide general working capital.

Standard Exploration Licence 4/07 was relinquished with effect from 31 December 2016.

Lansdowne retained a 20% interest in the licence after farming out to PSE Kinsale Energy Limited ("Kinsale Energy"), who acquired an 80% interest and operatorship and who drilled the 49/11-3 well on the Midleton Prospect in 2015. The well found gas in the Greensand, the main reservoir target, but the volume was considered too small to be commercial.

Kinsale Energy conducted a comprehensive post-well evaluation of the other prospective structures on the acreage, but concluded that, based on the current data available, none of these were attractive enough in terms of risk and reward to offer drillable targets.

Midleton was considered the prime prospect on SEL 4/07 and, following the disappointing results of the 49/11-3 well, it made sense to relinquish the acreage. This further portfolio rationalisation reduced Lansdowne's running costs and allowed the Company to focus all its resources upon the Barryroe Field where substantial 2C resources have been established.

In addition to portfolio rationalisation, the Company has taken other actions to further reduce running costs, with Richard Slape, Commercial Director, leaving after the successful completion of the re-financing and Johnny Greenall, Chairman, retiring at the AGM on 20 July 2016.

I would like to thank both of them for all their efforts and wish them the very best for the future.

Financial Results

The Group recorded an after tax loss of GBP1.2 million for the year ended 31 December 2016 compared to a loss of GBP15.1 million for the year ended 31 December 2015.

Group operating expenses for the year were GBP0.7 million, compared to GBP1.0 million in 2015.

Net finance expense for the year was GBP571,000 (2015: GBP129,000).

Cash balances of GBP0.17 million (2015: GBP0.32 million) were held at the end of the financial year.

Total equity attributable to the ordinary shareholders of the Group has increased to GBP12.5 million as at 31 December 2016 from GBP10.4 million as at 31 December 2015.

Outlook

The Court of Appeal ruling posed a real problem at what was already a difficult time for your Company. However, the Company was successful in its re-financing efforts and I would like to thank all that took part, but in particular the support of Brandon Hill Capital, Beaufort Securities and LC Capital, was essential to providing a successful outcome. I would also like to thank LC Capital for further extending the LC Capital Master Fund Load to 1 July 2018.

Now that the immediate problems associated with the litigation payment have been resolved, it is time to look forward to creating value from our 20% interest in Barryroe. This is by any standards a significant resource with attractive costs of development and production and our entire focus is to move this project forward against a background of greatly reduced drilling and operating costs and a stabilising oil price environment.

With the recovery of the oil price, farm-in activity within the industry has started to recover and the Barryroe Farm Out process is continuing.

Having recently secured a facility of up to GBP350,000 with major shareholder Brandon Hill Capital, as announced on 29 June 2017, the Company now has sufficient access to funding into 2018.

Again, I would like to thank all our shareholders for your continued support.

Tim Torrington

Chairman

Lansdowne Oil & Gas plc

Consolidated Statement of Financial Position

As at 31 December 2016

 
 
                                            2016       2015 
                                 Note    GBP'000    GBP'000 
 Assets 
 Non- current assets 
 Intangible assets                4       14,399     14,335 
 
 
 Current Assets 
 Trade and other receivables                  38         92 
 Cash at bank and on hand                    165        320 
                                             203        412 
 
   Total Assets                           14,602     14,747 
 
   Equity and Liabilities 
 Shareholders' Equity 
 Share capital                    5       11,571      8,087 
 Share premium                            25,126     25,247 
 Currency translation reserve                 59         59 
 Share-based payment reserve                 923        923 
 Accumulated deficit                    (25,186)   (23,950) 
 
   Total Equity                         12,493           10,366 
 Non-Current Liabilities 
 Provisions for liabilities                  261        240 
 
 
  Current Liabilities                                 1.968 
  Shareholder loan                          1587      2,173 
  Trade and other payables                   261 
 Total Liabilities                         2,109      4,381 
 
 
 Total Equity and Liabilities             14,602     14,747 
 
 
 

Consolidated Income Statement

For the year ended 31 December 2016

 
                                              2016        2015 
                                    Note   GBP'000     GBP'000 
 
   Administrative expenses                   (665)     (1,048) 
 Impairment of intangible assets                 -    (14,949) 
 
 Operating loss                              (665)    (15,997) 
 
 Finance costs                               (571)       (129) 
 
 Loss for the year before tax              (1,236)    (16,126) 
 
 Income tax credit                               -       1,052 
                                          --------  ---------- 
 Loss for the year                         (1.236)    (15,074) 
                                          --------  ---------- 
 
 Loss per share (pence): 
 Basic loss per ordinary share       3      (0.4p)     (10.2p) 
                                          --------  ---------- 
 Diluted loss per ordinary share     3      (0.4p)     (10.2p) 
                                          --------  ---------- 
 
 

The results for the period all arise on continuing operations. The group has no other comprehensive income or expense in the current or prior year.

Consolidated Statement of Changes in Equity

For the year ended 31 December 2016

 
                                          Share       Currency 
                              Share       based    translation     Accumulated       Total 
                             premium    payment       reserves         deficit      equity 
                             GBP'000    Reserve        GBP'000         GBP'000     GBP'000 
                                        GBP'000 
 
 
 At 1 January 2015          25,273          894             59         (8,876)      24,337 
 
 Loss for the financial 
  year                         -              -              -        (15,074)    (15,074) 
 
 Total comprehensive 
  loss for the year            -              -              -        (15,074)    (15,074) 
 
 Share based payments 
  charge                       -             29              -               -          29 
 Issue of new shares           -              -              -               -       1,060 
 Cost of share issues        (26)             -              -               -        (26) 
 At 31 December 2015        25,247          923             59        (23,950)      10,366 
 
 
 At 1 January 2016          25,247          923             59        (23,950)      10,366 
 
 Loss for the financial 
  year                         -              -              -         (1,236)     (1,236) 
 Total comprehensive 
  loss for the year            -              -              -         (1,236)     (1,236) 
 
 Issue of new shares           -              -              -               -       3,484 
 Cost of share issues        (121)            -              -               -       (121) 
 At 31 December 2016        25,126          923             59        (25,186)      12,493 
 

Consolidated Statement of Cash Flows

For the year ended 31 December 2016

 
                                                2016       2015 
                                             GBP'000    GBP'000 
 
 Cash flows from operating activities 
 Loss for the year                           (1,236)   (15,074) 
 
 Adjustment for: 
 Impairment of assets                              -     14,949 
 Interest payable and similar charges            571        127 
 Equity settled share-based payment 
  expenses                                         -         29 
 Tax credit                                        -    (1,052) 
 Decrease in trade and other receivables          54        105 
 (Decrease)/increase in trade and 
  other payables                             (1,913)        196 
 
 Net cash used in operating activities       (2,524)      (720) 
                                            --------  --------- 
 
   Cash flows from investing activities 
 Acquisition of intangible exploration 
  assets                                        (64)    (2,133) 
 Net cash from investing activities             (64)    (2,133) 
                                            --------  --------- 
 
 Cash flows from financing activities 
 Proceeds from issue of shares                 3,363      1,034 
 Proceeds from borrowing                           -      1,863 
 Repayment of loan                             (930)          - 
                                            --------  --------- 
 Net cash from financing activities            2,433      2,897 
                                            --------  --------- 
 
 Net (decrease)/increase in cash 
  and cash equivalents                         (155)         44 
 Cash and cash equivalents at 1 January          320        276 
 Cash and cash equivalents at 31 
  December                                       165        320 
                                            --------  --------- 
 

Notes to the Financial Information

For the year ended 31 December 2016

   1.        Basis of presentation 

The consolidated financial statements are presented in Sterling, the Group's functional currency, and all values are rounded to the nearest thousand (GBP000) except where otherwise indicated.

The Directors have prepared the financial statements on the going concern basis which assumes that the Group will continue in operational existence for at least twelve months from the date of the approval of these financial statements as described below.

The Directors have carried out a detailed assessment of the Group's current and prospective exploration activity, its relationship with the holder of its loan note, and the cash flow projections for the period to 30 June 2018. The following represent the key assumptions underpinning the cash flow projections:

Barryroe farm out

Discussions are continuing with a view to concluding a farm-out deal(s) on attractive commercial terms.

Other options

Should a farm out deal not be concluded in relation to Barryroe, the Directors believe that the Group has a number of available funding options; while the Group's primary aim is to conclude the ongoing farm out campaign with a view to attracting industry partners to drill wells, the Company also has the option of issuing new equity.

The Directors have considered the various matters set out above and have concluded that these assumptions are affected by material uncertainties that may cast significant doubt on the ability of the Group and Company to continue as going concerns and that they may therefore be unable to realise assets and discharge liabilities in the normal course of business. Nevertheless, the Directors are of the view that the Group and Company will have sufficient cash resources available to meet their liabilities for at least 12 months from the date of approval of these financial statements.

It is on this basis that the directors consider it appropriate to prepare the financial statements on a going concern basis. These financial statements do not include any adjustment that would result from the going concern basis of preparation being inappropriate.

   2.        Segmental reporting 

The Group has one reportable operating and geographic segment, which is the exploration for oil and gas reserves in Ireland. All operations are classified as continuing and currently no revenue is generated from the operating segment.

   3.        Loss per ordinary share 

The loss for the year was wholly from continuing operations.

 
 
                                  (pence per share) 
                                    2016       2015 
 Loss per share arising 
  from continuing operations 
  attributable to the equity 
  holders of the Group 
 - basic and diluted               (0.4)     (10.2) 
 
 

The calculations were based on the following information.

 
                                       GBP'000       GBP'000 
 Loss for the year attributable 
  to equity holders                    (1,236)      (15,074) 
 
 Weighted average number 
  of ordinary shares in 
  issue 
 - basic and diluted               334,116,800   157,698,252 
 

For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. The Group has one class of potential ordinary shares being share options. As a loss was recorded for both 2016 and 2015, potentially issuable shares would have been antidilutive. The number of potentially issuable shares at 31 December 2016 is 513,704,394 (2015: 165,007,665).

   4.            Intangible assets 
 
                         Exploration 
                         / appraisal 
 Group                        assets 
 Cost                        GBP'000 
 At 1 January 2015            27,151 
 Additions                     2,133 
 Impairment                 (14,949) 
                       ------------- 
 At 31 December 2015          14,335 
                       ------------- 
 
 Cost 
 At 1 January 2016            14,335 
 Additions                        64 
 Impairment                        - 
                       ------------- 
 At 31 December 2016          14,399 
                       ------------- 
 

Oil and gas project expenditures, all of which relate to Ireland, including geological, geophysical and seismic costs, are accumulated as intangible fixed assets prior to the determination of commercial reserves.

   5.        Share capital and premium- Group and Company 
 
                              Number 
                                  of   Ordinary      Share 
                              shares     shares    premium       Total 
                         (thousands)    GBP'000    GBP'000     GBP'000 
                       -------------  ---------  ---------  ---------- 
 At 1 January 2016           161,742      8,087     25,247      33,334 
 Issued in year              348,422      3,484          -       3,484 
 Share issue costs                 -          -      (121)       (121) 
                       -------------  ---------  ---------  ---------- 
 At 31 December 2016         510,164     11,571     25,126      36,697 
 
 
   6.            Accounts 

Copies of the annual accounts for the year ended 31 December 2016 will be sent to shareholders shortly and will be available from the Group's office at 6 Northbrook Road, Ranelagh, Dublin 6, Ireland and the Group's website www.lansdowneoilandgas.com.

Notes to Editors

About Lansdowne

Lansdowne Oil & Gas (LOGP.LN) is a North Celtic Sea focussed, oil and gas exploration company quoted on the AIM market and headquartered in Dublin. Lansdowne's acreage holdings include a 20% stake in SEL 1/11, which contains the Barryroe oil field.

For more information on Lansdowne, please refer to www.lansdowneoilandgas.com

This information is provided by RNS

The company news service from the London Stock Exchange

END

FR OKCDQQBKDPAB

(END) Dow Jones Newswires

June 30, 2017 02:00 ET (06:00 GMT)