Borders & Southern Petroleum plc Final Results (7118J)

TIDMBOR

RNS Number : 7118J

Borders & Southern Petroleum plc

04 April 2018

4 April 2018

Borders & Southern Petroleum plc

("Borders & Southern" or "the Company")

Audited Results for the 12 month period ended 31 December 2017

Borders & Southern (AIM: BOR), the London based independent oil and gas exploration company with assets offshore the Falkland Islands, announces its audited results for the year ending 31 December 2017. Full copies of the Company's Annual Report and Accounts, including the Company Overview, Chairman's Statement, Remuneration Committee Report, Directors' Report, Auditor's Report and full Financial Statements, will be available on the Company's website later today.

2017 Highlights

-- An independent resource assessment produced an un-risked best estimate for total recoverable liquids (condensate and LPGs) of 462 million barrels with peak liquids production of 91,100 bbl/d.

-- Company estimates new break-even oil price for a Darwin FPSO development of mid-$30s per barrel.

   --      Farm-out process is actively on-going. 
   --      Administrative expenses for 2017: $1.73 million (2016 - $1.74 million). 
   --      Cash balance at 31 December 2017: $8.25 million (2016 - $9.65 million); no debt. 

For further information please visit www.bordersandsouthern.com or contact:

 
 Borders & Southern Petroleum plc 
  Howard Obee, Chief Executive 
  Tel: [phone] 
 Panmure Gordon (UK) Limited 
  Adam James / Atholl Tweedie 
  Tel: [phone] 
 Tavistock 
  Simon Hudson / Barney Hayward 
  Tel: [phone] 
 

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

Notes:

Borders & Southern Petroleum plc is an oil & gas exploration company listed on the London Stock Exchange AIM (BOR). The Company operates and has a 100% interest in three Production Licences in the South Falkland Basin covering an area of nearly 10,000 square kilometres. The Company has acquired 2,517 square kilometres of 3D seismic and drilled two exploration wells, making a significant gas condensate discovery with its first well.

The technical aspects of this announcement have been reviewed, verified and approved by Dr Howard Obee in accordance with the Guidance Note for Mining, Oil and Gas Companies, issued by the London Stock Exchange in respect of AIM companies. Dr Obee is a petroleum geologist with more than 30 year's relevant experience. He is a Fellow of the Geological Society and member of the American Association of Petroleum Geologists and the Petroleum Exploration Society of Great Britain.

Chief Executive's Statement

We entered 2018 with a strong balance sheet and no debt. Our cash balance at the end of 2017 was $8.25 million. The majority of our funds are held in sterling, so we have benefited from the pound's recovery during the year. Capital discipline has been maintained, reflected in a slightly lower administrative expenditure than the previous year, $1.7 million. As the Company is still not generating revenue, the loss after tax on operations for the year was $1.2 million (2016 - $3.6 million loss).

Our prime focus throughout the year has been to secure partners and funding to progress the Darwin project. Achieving this goal continues to be challenging. Despite the progressive increase in oil price from mid-2017, the industry has not returned to significant investment in conventional oil and gas projects. Furthermore, analysts have predicted that global spending on exploration and appraisal will decrease in 2018, as it has done for the last few years. Notwithstanding the challenges posed by the industry's investment climate, we have still been actively talking to companies about our project.

To enhance our efforts, we commissioned an independent evaluation of the Darwin East and West structures. As reported in February 2018, Gaffney, Cline and Associates (GCA) provided an independent resource assessment of the two fault blocks. Their un-risked best estimate for total recoverable liquids (condensate and LPGs) is 462 million barrels, produced into a single FPSO over 25 years. The peak combined liquids production was modelled at 91,100 bbl/day.

The rate of production has a significant impact on the project economics. Our previous economic models have been based on peak condensate production of 56,000 bbl/day. The impact of producing more condensate, along with additional LPG, sooner, is to lower the break-even oil price. Assuming the combined development of Darwin East and West, using six production wells and four gas injection wells, a leased FPSO and capex of $1.8 billion (including 25% contingency), the Company estimates the break-even oil price to be in the mid-30's dollars per barrel. Based on a $65 per barrel oil price, the project pay back would be within two/three years. As mentioned on other occasions, the positive economics are grounded in the attractive fiscal terms offered by the Falkland Islands Government and the high quality reservoir which does not require a large number of development wells.

The commercial attractiveness of the project is compelling, but we still require further drilling to prove up the resource estimates and confirm the deliverability of the reservoir. Our current plan is to drill a well on Darwin West with a possible side-track. This would provide two penetrations of the main reservoir and would test additional reservoir intervals, fluid contacts and investigate the possibility of an oil rim. Darwin West has very similar seismic characteristics and attributes as Darwin East. The independent assessment of the geological chance of success of finding hydrocarbons in Darwin West is 0.81. We consider that a well drilled on Darwin West would be very low risk.

Our outlook for 2018 is optimistic. The independent evaluation has reaffirmed our confidence in the quality of the Darwin discovery. Globally, there have been very few large conventional liquid discoveries made in recent years. We believe that on a commercial basis, Darwin stands out. We will maintain our focus on securing partners and funding for the next phase of operations. If the oil price remains at the current level, then the chance of success will be enhanced. Additionally, we will continue with technical work to increase our understanding of the sub-surface and further improve the attractiveness of the project.

Howard Obee

3 April 2018

Consolidated statement of comprehensive income

for the year ended 31 December 2017

 
                                 2017          2016 
                                 $000          $000 
                              -------      -------- 
Administrative expenses       (1,734)       (1,744) 
                              -------      -------- 
Loss from operations          (1,734)       (1,744) 
Finance income                    542            30 
 Finance expense                    -       (1,890) 
                              -------      -------- 
Loss before tax               (1,192)       (3,604) 
Tax expense                         -             - 
                              -------      -------- 
Loss for the year and total 
 comprehensive loss for 
 the year attributable to 
 owners of the parent         (1,192)       (3,604) 
                              =======      ======== 
 
Basic and diluted loss         (0.25)        (0.74) 
 per share (see note 3)         cents         cents 
                              =======      ======== 
 

Consolidated statement of financial position

as at 31 December 2017

 
                                  2017                    2016 
                      ----------------  -------------  -------  --------- 
                                  $000           $000     $000       $000 
--------------------  ----------------  -------------  -------  --------- 
Assets 
 Non-current assets 
 Property, plant 
 and equipment                                     11                  12 
Intangible assets                             290,826             290,381 
--------------------  ----------------  -------------  -------  --------- 
Total non-current 
 assets                                       290,837             290,393 
--------------------  ----------------  -------------  -------  --------- 
Current assets 
 Other receivables                 440                   1,167 
Cash and cash 
 equivalents                     8,251                   9,645 
--------------------  ----------------  -------------  -------  --------- 
Total current 
 assets                                         8,691              10,812 
--------------------  ----------------  -------------  -------  --------- 
Total assets                                  299,528             301,205 
--------------------  ----------------  -------------  -------  --------- 
Liabilities Current 
 liabilities 
 Trade and other 
 payables                                       (633)             (1,136) 
--------------------  ----------------  -------------  -------  --------- 
Total net assets                              298,895             300,069 
--------------------  ----------------  -------------  -------  --------- 
Equity 
 Share capital                                  8,530               8,530 
Share premium                                 308,602             308,602 
Other reserves                                  1,773               2,418 
Retained deficit                             (19,994)            (19,465) 
Foreign currency 
 reserve                                         (16)                (16) 
--------------------  ----------------  -------------  -------  --------- 
Total equity                                  298,895             300,069 
--------------------  ----------------  -------------  -------  --------- 
 

Consolidated statement of changes in equity

for the year ended 31 December 2017

 
                           Share     Share      Other  Retained    Foreign    Total 
                         capital   Premium   reserves   deficit   currency 
                                                                   reserve 
                            $000      $000       $000      $000       $000     $000 
----------------------  --------  --------  ---------  --------  ---------  ------- 
 
Balance at 1 
 January 2016              8,530   308,602      2,370  (15,861)       (16)  303,625 
Loss and total 
 comprehensive 
 loss for the 
 year                          -         -          -   (3,604)          -  (3,604) 
Recognition of 
 share based payments          -         -         48         -          -       48 
----------------------                                 --------  --------- 
Balance at 
 31 December 2016          8,530   308,602      2,418  (19,465)       (16)  300,069 
Loss and total 
 comprehensive 
 loss for the 
 year                          -         -          -   (1,192)          -  (1,192) 
Expiry of share 
 options                       -         -      (663)       663          -        - 
Recognition of 
 share based payments          -         -         18         -          -       18 
----------------------  --------  --------  ---------  --------  ---------  ------- 
Balance at 31 
 December 2017             8,530   308,602      1,773  (19,994)       (16)  298,895 
======================  ========  ========  =========  ========  =========  ======= 
 

The following describes the nature and purpose of each reserve within owners' equity:

 
Reserve            Description and purpose 
Share capital      This represents the nominal value 
                    of shares issued. 
Share premium      Amount subscribed for share capital 
                    in excess of nominal value. 
Other reserves     Fair value of options issued. 
Retained deficit   Cumulative net gains and losses recognised 
                    in the Consolidated Statement of 
                    Comprehensive Income. 
Foreign currency   Differences arising on change of 
 reserve            presentation and functional currency 
                    to US Dollars. 
 

Consolidated statement of cash flows

for the year ended 31 December 2017

 
 
                                  2017                  2016 
                                ------  ------------  ------  --------- 
                                  $000          $000    $000       $000 
------------------------------  ------  ------------  ------  --------- 
Cash flow from operating 
 activities 
 Loss before tax                             (1,192)            (3,604) 
Adjustments for: 
 Depreciation                                      1                  1 
Share-based payment                               18                 48 
Net finance costs                                  -              1,860 
 Net finance income                            (542)                  - 
Realised foreign exchange 
 gains                                          (17)                 25 
------------------------------  ------  ------------  ------  --------- 
Cash flows from operating 
 activities before changes 
 in working capital                          (1,732)            (1,670) 
Decrease/(increase) 
 in other receivables                            728              (476) 
Decrease/(increase) 
 in trade and other payables                   (503)                 29 
 Tax paid                                          -                  - 
------------------------------  ------  ------------  ------  --------- 
Net cash outflow from 
 operating activities 
 Cash flows used in investing 
 activities 
 Interest received                  11       (1,507)      30    (2,117) 
Purchase of intangible 
 assets                          (445)                 (849) 
Proceed from disposal 
 intangible assets 
 Net cash used in investing 
 activities                          -         (434)     430      (389) 
------------------------------  ------  ------------  ------  --------- 
Cash flows from financing 
 Proceeds from issue                 -                     - 
 of shares                                         -                  - 
 Cash flows from financing 
 activities 
Net decrease in cash 
 and cash equivalents                        (1,941)            (2,506) 
------------------------------  ------  ------------  ------  --------- 
Cash and cash equivalents 
 at the beginning of 
 the year                                      9,645             14,011 
Exchange gain/(loss) 
 on cash and cash equivalents                    547            (1,860) 
------------------------------  ------  ------------  ------  --------- 
Cash and cash equivalents 
 at the end of the year                        8,251              9,645 
------------------------------  ------  ------------  ------  --------- 
 

Notes

   1.     Accounting policies 

Basis of preparation

The financial information for the year ended 31 December 2017 set out in this announcement does not constitute the Company's statutory accounts. These financial statements included in the announcement have been extracted from the Group annual financial statements for the year ended 31 December 2017. The financial statements have been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards adopted for use in the European Union. However, this announcement does not itself contain sufficient information to comply with IFRS.

The auditor has issued its opinion on the Group's financial statements for the year ended 31 December 2017 which is unmodified and is available for inspection at the Company's registered address and will be posted to the Group's website.

   2.     Going concern 

The Directors believe that the Company has sufficient funds, with contingency, to meet its current commitments with excess funds expected to be sufficient to fund ongoing operations for the foreseeable future. Therefore, this financial information has been prepared on a going concern basis.

   3.     Basic and dilutive loss per share 

The calculation of the basic and dilutive loss per share is based on the loss attributable to ordinary shareholders divided by the weighted average number of shares in issue during the year. The loss for the financial year for the group was $1.2 million (2016 - loss $3.6 million) and the weighted average number of shares in issue for the year was 484.1 million (2016 - 484.1 million). During the year the potential ordinary shares are anti-dilutive and therefore diluted loss per share has not been calculated. At the statement of financial position date, there were 7.05 million (2016 - 7.05 million) potentially dilutive ordinary shares being the share options.

   4.     Subsequent Date Events 

There were no subsequent events requiring disclosure

-ends-

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The company news service from the London Stock Exchange

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April 04, 2018 02:00 ET (06:00 GMT)