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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Bahamas Petroleum Company Plc | LSE:BPC | London | Ordinary Share | IM00B3NTV894 | ORD 0.002P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.325 | 0.32 | 0.34 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMBPC
RNS Number : 1914R
Bahamas Petroleum Company PLC
13 June 2018
13 June 2018
Bahamas Petroleum Company plc
("BPC" or the "Company")
Final Results for the year ended 31 December 2017
Bahamas Petroleum Company plc, the oil and gas exploration company with significant prospective resources in licences in The Commonwealth of The Bahamas is pleased to announce its final results for the year ended 31 December 2017.
2017 Highlights:
-- Significantly improved oil price has created a more buoyant commercial environment for exploration, increasing investor confidence in the sector
-- After discussion with the Government of the Bahamas, the Company was granted a licence extension in March 2017, extending the term of the Company's licences, and the time in which to perform the obligations and requirements thereof, for a further 12 months through to June 2019
-- New Government elected in The Bahamas in May 2017 with a clear mandate to address the fiscal deficit in the country. The Government has shown continued support for the development of an oil and gas industry in The Bahamas, including the approval in February 2018 of a new $5.5 billion oil and gas refinery on the island of Grand Bahamas
-- Successfully raised GBP2.8 million before expenses in June and July 2017, through the placement of 280 million new shares, bolstering the Company's negotiating position in farm-out discussions
Hot Features
Premium
-- External technical audit completed in December 2017 by Moyes & Co, indicated aggregate mean volumetrics of 8.3 billion barrels of oil, with a further upside of up to 28 billion barrels STOIIP and a probability of success ("PoS") in the 25-35% range
-- Operating loss decreased 16% to $3.25 million (vs $3.88 million in 2016), with the entire Board now deferring 90% of their remuneration to be repaid only in the event of a successful farm-out or well-financing being completed
Post Year End Highlights:
-- Lodged an application for Environmental Authorisation with the Government of The Bahamas, an important milestone for the Company and representing the first step in commencing offshore field activity
-- Signed a Confidentiality and Exclusivity Agreement with a major international oil company in May 2018, for an initial period of three months, and extendable by the counterparty for a maximum of a further three months. During the term of the Agreement, BPC and the major international oil company will work together exclusively to conclude a detailed technical evaluation and at the same time seek to develop a commercial framework for a potential transaction. BPC will receive a non-refundable cash payment of US$250,000 per month for the initial three-month period of exclusivity, with a further US$250,000 per month for each additional month of exclusivity thereafter
-- Appointed Macquarie Capital Markets Canada Ltd as an advisor to assist the Company with various corporate initiatives, providing a full suite of global corporate solutions with a leading presence in the international energy sector
-- Raised GBP1.1 million before expenses by way of a subscription at a price of 2.5p per Subscription Share, representing a 250% increase on the price achieved in the raising a year earlier, allowing the Company to further bolster its cash position whilst minimising dilution
Simon Potter, Chief Executive Officer of Bahamas Petroleum Company, said:
"The higher oil price environment, the sheer scale of our prospectivity and the need for large oil companies to replace reserves after five years of under investment in this area has resulted in a marked upturn in the exploration sector, and added energy and urgency to our farm-out process, which has gained considerable momentum over the year. As previously advised, we are currently in an exclusivity period with a major international oil company and I am happy to report that discussions are progressing constructively."
The Annual Report and Financial Statements for the Year Ended 31 December 2016 are now available on the Company's website www.bpcplc.com and will be posted to shareholders shortly.
The information communicated in this announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014.
Ends
For further information, please contact:
Bahamas Petroleum Company plc Tel: +44 (0) 1624 Simon Potter, Chief Executive Officer 647 883 Strand Hanson Limited - Nomad Tel: +44 (0) 20 Rory Murphy / James Spinney 7409 3494 Shore Capital Stockbrokers Limited Tel: +44 (0) 207 Jerry Keen / Toby Gibbs / James Thomas 408 4090 CAMARCO Tel: +44 (0) 20 Billy Clegg / Gordon Poole / James Crothers 3757 4983
Notes to editors:
Bahamas Petroleum Company is an oil and gas exploration company with 100% owned offshore licences exclusively focused on The Commonwealth of The Bahamas. The Company has significant prospective resources, which have been de-risked through both extensive 2D and 3D seismic. The Company is intent on delivering safe and environmentally responsible exploration.
www.bpcplc.com
Chairman's Report
Dear Shareholder,
The last year saw a gradual recovery and stabilisation of the global oil price which has enabled a level of optimism to return to the exploration sector. This trend has continued into 2018 with the price of oil having recently breached $80 per barrel for the first time in over 3 years. Macro-economic developments and global political uncertainty continue to support this trend, giving industry participants increasing levels of confidence to assess investment opportunities such as ours.
Efforts to secure an industry partner continued during 2017 and, whilst we would have liked to have concluded a partnership transaction during this period, our announcement on 3 May 2018 that we have entered into a period of exclusivity with a major international oil company represents a significant step forward in this process. Furthermore, the recently announced appointment of Macquarie Bank to assist with various corporate initiatives that the Company has available to it demonstrates a level of confidence in the Company's prospects by a globally renowned investment bank. This in turn supports our own confidence in being able to conclude a farm-out or similar partner transaction in 2018 which will enable our Company to move into the next phase.
As regards the 2017 period, there are three specific developments on which I would like to comment.
As noted, the overall industry landscape continued to improve through 2017 and into 2018. Oil prices rose steadily, from around $50 - $55 per barrel at the time of my last report to circa $80 per barrel at the time of writing. As a result of this recovery, both investment capital and the enthusiasm of industry majors have begun to return to the exploration sector. Through this period we have seen a marked increase in exploration deal-flow and fundraisings, and we are optimistic that this improved investment sentiment will support the Company's ongoing efforts towards securing a funding arrangement.
In May 2017, a general election in The Bahamas saw a change of Government. The new Government has made the development of a robust and successful local oil and gas industry a key plank of its vision and strategy for The Bahamas. This has included, for example, the new Government indicating its support for a $5.5 billion oil and gas refinery development on Grand Bahama, in February 2018. Over the past six months Company management has engaged proactively and productively with the new Government, and we look forward to working collaboratively as we continue to progress our project.
Finally, in 2017 we raised GBP2.8 million before expenses through the issue of 280 million new shares, or approximately 15% of the post-raising fully diluted share capital. The level of support we received from these investors, both existing and new shareholders, was very encouraging and has been further demonstrated by our more recent placing in May 2018 of GBP1.1 million through the issue of 44 million new shares, notably at a price two and a half times greater than that achieved in 2017, and therefore substantially less dilutive to the existing shareholders. These raisings have acted to strengthen the Company's funding position whilst we seek to conclude partner discussions and secure a funding arrangement. Your Board, and certain of the Company's management, staff and consultants took part in the 2017 raising by subscribing for 20 million of the new shares, and the board and executive continue to defer the vast majority of their fees and salary pending a successful farm-in or funding arrangement. I believe that by "putting our money where our mouth is" we are clearly demonstrating the confidence we all have in our project, and our ability to eventually succeed in securing a project partner.
On behalf of the entire team at the Company I would like to thank our fellow shareholders for their continued support and patience. I look forward to reporting on the next stage of progress in the near future.
Yours sincerely,
Bill Schrader
Chairman
12 June 2018
Chief Executive Officer's Report
Dear Shareholder,
Over the last 12 months the key focus of the Company has been on securing the investment needed to take its project in The Bahamas forward into the next stage, which would be the drilling of an initial exploration well.
The Company's primary strategy in this regard has been to pursue an industry partnership, or 'farm-out', which would see a partner (typically a major international oil company) take an agreed percentage interest in the licences, which are currently 100% owned by the Company, in return for paying all or a substantial part of the costs of an agreed drilling program (but at a minimum sufficient to see the first exploration well completed), and making a cash contribution towards the costs historically incurred by the Company.
As shareholders are well aware, progress in this regard over the last few years has been disappointing, despite our best efforts. Initiatives over this period were impeded by a variety of "above ground" issues, in particular, the compound effect of two factors: (i) the extensive length of time taken for licence renewal and the implementation of updated petroleum regulations in The Bahamas - in aggregate, over 5 years, and (ii) the oil price collapse in the period 2015 - 2017, and the subsequent impact this had on industry participants globally, most notably massive reductions in exploration budgets and risk appetite.
More recently, however, these "above ground" issues have begun to abate. At a macro-level, the oil price rose and stabilised during 2017, as a result of which we are seeing a notable return of risk appetite globally to the industry, including to "frontier exploration" plays like that which the Company is pursuing. More specific to the Company, an updated suite of petroleum laws and regulations in The Bahamas is now fully in force, and the new Government elected in The Bahamas in May 2017 has made a clear commitment to the development of local industry involving oil and gas, most notably with the sanctioning of a large new refinery project on the island of Grand Bahama, and a new Liquified Natural Gas facility on New Providence.
The Company's Licences were renewed into a 2(nd) 3 year exploration period in 2015 and in March 2017 this period was extended by the Government for a further 12 months through to June 2019. The Company is presently in ongoing discussions with the Government in relation to the extent to which a further extension is warranted as a result of other events outside of the Company's control since 2015. In compliance with requirements introduced under the newly implemented environmental protection regulations, the Company filed an application for Environmental Authorisation in April 2018 representing the mandated first step under the regulations to commencing offshore field activity.
The Company announced on 3 May 2018 that it has entered into an exclusivity agreement with a potential industry partner for a period of 3 months (and extendable for up to a further 3 months at the counterparty's option), during which the potential partner will conclude a detailed technical evaluation of the Company's project and, in parallel, seek to develop a commercial framework with the Company for a potential transaction. The counterparty, whose identity remains subject to the confidentiality arrangements in place between both parties, is a major international oil company and therefore represents a suitable candidate for partnership should these discussions result in an agreement. The potential party has agreed to pay the Company for this period of exclusivity, at a rate of $250,000 per month, demonstrating that the investment opportunity is being taken seriously. Due to the exclusive nature of this arrangement, all discussions with other potential partners have been suspended while the exclusivity agreement remains active.
Subsequently, on 22 May 2018 the Company announced the appointment of Macquarie Capital as advisor, to assist the Company with various corporate initiatives. This appointment bolsters the Company's positioning, and affords access to the reach and expertise of a globally renowned organisation with deep sector expertise in oil and gas, and acts as further endorsement of the potential that the Company's project represents.
It is against this backdrop of improved operating conditions, globally and in-country, and the recent progress made in the Company's efforts to secure a partner and thereafter move forward to field operations, that the last year has been one of considerable activity for the Company.
Technical Operations
The Company has sought to do everything possible to drive the progress of partnership discussions throughout the last year. This has included continually seeking ways to further reduce the technical risk associated with the project, through targeted pieces of technical work.
For this reason, in mid-2017 the Company commissioned Moyes & Co ("Moyes"), a leading international petroleum industry consultancy, to undertake an independent evaluation of the project prospects and their expected volumes. This involved Moyes conducting an independent audit of the Company's own assessment of the total petroleum system and drill prospects within its four southern licences, utilising the full range of the Company's exhaustive database, including the interpreted 2D and 3D seismic data.
The results of this work validated the Company's own in-house assessment of the prospect volumes, with Moyes reporting an aggregate mean STOIIP (Stock Tank Oil Initially In Place) of 8.3 billion barrels and upside of 28 billion barrels. Additionally, the Company's assessment of the geological probability of success ("PoS") of these structures was also validated, with a reported range of 25% - 35% for the majority of reservoirs. Application of a recovery factor in the range of 20% - 40% to these volumetrics would result in an unrisked EUR (Estimated Ultimately Recoverable) in the range of 1.6 billion to 3.3 billion barrels (mean), and up to 11 billion barrels (upside). These figures are less than the Company's own internal resource estimates but are larger than those determined by Ryder Scott in 2011 for the same structures (as per the previously disclosed Ryder Scott Competent Person's Report which is available via the Company website) - the Ryder Scott CPR was completed without the benefit of the modern 3D seismic acquired and interpreted by the Company in 2011/2012.
Moyes also identified a number of strong amplitude conformances to structure and interval velocity reductions with dip closure on both the B and C fold structures. These geophysical effects are strongly suggestive of enhanced fracture porosity, a necessity for permeability and hence the ability to optimally produce any hydrocarbons in place. Further interpretation of these effects could also imply the presence of hydrocarbons in the fracture pore spaces. Geophysical characteristics of this type are a key technical indicator generally used by the oil and gas industry to assess a prospect's exploration potential but are typically more difficult to image in carbonates. Thus, the ability of the Company to offer this interpretation to a potential farm-out partner, independently supported by Moyes, represents a further significant reduction in the perceived risk of the project.
Licences & Government Relations
As previously noted, the Company's Licences were renewed into a 2(nd) 3 year exploration period in 2015, and as reported to you in March 2017 the Government of The Bahamas provided a 12 month extension to our licence term and well commencement deadline, in recognition of the delays imposed on the project by the time taken to implement the updated environmental regulations in country. We are presently in ongoing discussions with the Government in relation to the extent to which a further extension is warranted as a result of other events outside of the Company's control since 2015.
More recently, the Company filed its application for Environmental Authorisation in April 2018 as required by the Petroleum (Offshore Environmental Protection and Pollution Control) Regulations 2016 ("the Regulations"). Under these newly implemented regulations, an application for Environmental Authorisation represents the first step in commencing field activities and therefore the submission of the application by the Company represents an important milestone in the project and its development, with the next key milestone being the execution of an exploration well before the end of the current licence term. The Company is presently in ongoing discussion with the Government in relation to the process by which the application will be progressed in a timely manner.
Capital Raising
In June and July of 2017, the Company raised GBP2.8 million before expenses of additional working capital through the placement of 280 million new shares. The commitment of new and existing institutional shareholders to this raising was encouraging, as was the participation of the Board, management, staff and consultants, which together subscribed for 20 million of the new shares issued, demonstrating our collective confidence in the project. More recently in May 2018 the Company raised a further GBP1.1 million through the placement of 44 million new shares at a price of 2.5 pence. This represents a 250% increase on the price achieved in the raising a year earlier, and has allowed the Company to further bolster its cash position whilst minimising the dilutive effect of this raising on the existing shareholders. These fundraisings taken together have acted to secure the financial footing of the Company as we seek to progress discussions and ultimately secure a farm-out or other funding arrangement to finance the Company's first exploration well.
Cash Management & Operating Results
The total operating loss for the year was $3.25 million. This represents a further 16% decrease in losses on the prior year, driven by the continuation of various cost cutting and cash management initiatives.
A large part of this reduction comes from the 10% decrease in Employee Benefit expenses. This reduction does not however reflect the fact that key management and employees (myself included) having agreed to defer approximately 90% of their total remuneration, to be repaid (in cash and/or shares) only in the event of a successful farm-out being completed. Under IFRS 2, these amounts must still be recognised in the Group loss for the year as "share based payments". The total reported Employee Benefit cost of $1.99 million thus includes approximately $1.10 million of non-cash items relating to these salary and fee deferrals. Effective 1 January 2018, the rest of the Board has also elected to increase its fee deferral level to 90%, commensurate with my own salary deferral.
Through 2017 we also continued to maintain a strict focus on non-staff based costs, and have reduced the total Other Expenses in the year by 24% against 2016 levels. These savings were predominantly made up of a 32% reduction in travel and accommodation costs, and a 35% reduction in legal and professional fees through a rationalisation of the use of any advisors, other than technical, external to the organisation whilst also seeing a meaningful reduction in their levels of remuneration.
As we work toward concluding a farm-out or similar funding arrangement, strict financial management and preservation of cash remains a top priority for the Company. With the recent strengthening of our finances provided by the raisings in 2017 and 2018, and the receipt of $250,000 per month in consideration for entering a period of exclusivity as described above, the Board is satisfied that the Company has sufficient financial resources to complete its current farm-out or financing negotiations. A successful farm-out or funding agreement would in turn see the exploration programme funded (at least through to the first well) and potentially the addition of further cash resources through the recovery of proportionate back costs.
Outlook
The outlook for the oil and gas industry in 2018 is more positive than it has been in any of the past five years, given the sustained recovery in the oil price and the pick-up in global exploration activity. The strong fundamentals of our project remain unchanged - we have a world-class asset, with multi-billion barrel potential. It is thus incumbent on us at the Company to use the current window of opportunity, and during 2018, move forward to finalising an agreement sufficient to enable the commencement of the first exploration well on our licences.
I look forward to reporting back to you our positive progress against this objective.
Yours sincerely,
Simon Potter
Chief Executive Officer
Consolidated statement of comprehensive income for the year ended 31 December 2017
Note
2017 2016
Group Group
$ $
Continuing operations
Employee benefit expense 7 (1,993,171) (2,214,490)
Depreciation expense 12 (21,508) (31,722)
Other expenses 8 (1,238,397) (1,632,405)
Operating loss (3,253,076) (3,878,617)
Other income 36,253 48,122
Finance income 6 3,507 3,835
Loss before tax (3,213,316) (3,826,660)
Taxation 9 - -
Loss for the year (3,213,316) (3,826,660)
Total comprehensive loss
for
the year (3,213,316) (3,826,660)
Loss per share for loss
attributable
to owners of the
Company:
Basic and diluted loss
per
share (expressed in
cents
per share) 10 (0.24) (0.31)
Consolidated balance sheet as at 31 December 2017
Note 2017 2016
Group Group
$ $
ASSETS
Non-current assets
Intangible exploration and
evaluation assets 13 48,318,079 48,052,657
Property, plant and equipment 12 41,278 44,545
Restricted cash 11 - 36,972
Total non-current assets 48,359,357 48,134,174
Current assets
Restricted cash 11 527,063 500,000
Other receivables 15 729,292 675,624
Cash and cash equivalents 14 1,838,527 970,021
Total current assets 3,094,882 2,145,645
Total assets 51,454,239 50,279,819
LIABILITIES
Current liabilities
Trade and other payables 16 1,098,512 618,460
Total liabilities 1,098,512 618,460
EQUITY
Share capital 17 44,481 37,253
Share premium reserve 17 81,398,084 78,185,102
Merger reserve 17 77,130,684 77,130,684
Reverse acquisition reserve 17 (53,846,526) (53,846,526)
Share based payment reserve 18 3,381,645 2,694,171
Retained earnings / (deficit) (57,752,641) (54,539,325)
Total equity 50,355,727 49,661,359
Total equity and liabilities 51,454,239 50,279,819
Edward Shallcross Simon Potter
Director Director
Consolidated statement of changes in equity for the year ended 31 December 2017
Share
Share Reverse based
Share premium Merger acquisition payment Retained Total
capital reserve reserve reserve reserve earnings equity
Note $ $ $ $ $ $ $
Balance
at 1 January
2016 37,253 78,185,102 77,130,684 (53,846,526) 2,123,760 (50,712,665) 52,917,608
Comprehensive
income
Total
comprehensive
loss for
the year - - - - - (3,826,660) (3,826,660)
Total
Comprehensive
expense - - - - - (3,826,660) (3,826,660)
Transactions
with owners
Share options
- value
of services 18 - - - - 570,411 - 570,411
Total
transactions
with owners - - - - 570,411 - 570,411
--------- ------------- ------------- --------------- ------------ --------------- --------------
Balance
at 31 December
2016 37,253 78,185,102 77,130,684 (53,846,526) 2,694,171 (54,539,325) 49,661,359
--------- ------------- ------------- --------------- ------------ --------------- --------------
Balance
at 1 January
2017 37,253 78,185,102 77,130,684 (53,846,526) 2,694,171 (54,539,325) 49,661,359
Comprehensive
income
Total
comprehensive
loss for
the year - - - - - (3,213,316) (3,213,316)
--------- ------------- ------------- --------------- ------------ --------------- --------------
Total
Comprehensive
expense - - - - - (3,213,316) (3,213,316)
Transactions
with owners
Issue of
ordinary
shares 7,228 3,212,982 - - - - 3,220,210
Share options
- value
of services 18 - - 687,474 - 687,474
Total
transactions
with owners 7,228 3,212,982 - - 687,474 3,907,684
--------- ------------- ------------- --------------- ------------ --------------- --------------
Balance
at 31 December
2017 44,481 81,398,084 77,130,684 (53,846,526) 3,381,645 (57,752,641) 50,355,727
--------- ------------- ------------- --------------- ------------ --------------- --------------
Consolidated statement of cash flows for the year ended 31 December 2017
Note
2017 2016
Group Group
$ $
Cash flows from operating
activities
Cash used in operations 19 (2,173,444) (3,100,458)
Net cash used in operating
activities (2,173,444) (3,100,458)
Cash flows from investing
activities
Purchase of property, plant and
equipment 12 (18,241) (12,535)
Payments for exploration and
evaluation
assets 13 (241,197) (963,401)
Decrease/(increase) in restricted
cash 11 13,455 (16)
Other income received 36,253 48,122
Interest received 6 3,507 3,835
Net cash used in investing
activities (206,223) (923,995)
Cash flows from financing
activities
Proceeds from issuance of ordinary
shares 17 3,220,210 -
Net cash flows from financing 3,220,210 -
activities
Net increase/(decrease) in cash
and cash equivalents 840,543 (4,024,453)
Cash and cash equivalents at the
beginning of the year 14 970,021 5,048,800
Effects of exchange rate changes
on cash and cash equivalents 27,963 (54,326)
Cash and cash equivalents at the
end of the year 14 1,838,527 970,021
1 General information
Bahamas Petroleum Company plc ("the Company") and its subsidiaries (together "the Group") is the holder of several oil & gas exploration licences issued by the Government of the Commonwealth of The Bahamas ("the Government").
The Company is a limited liability company incorporated in the Isle of Man. The address of its registered office is IOMA House, Hope Street, Douglas, Isle of Man. The Company's review of operations is set out in the Directors' Report. The principal activity of the Group and the Company consists of oil & gas exploration in The Commonwealth of The Bahamas.
The Company has four directly and eleven indirectly 100% owned subsidiaries as follows:
Name Country of Incorporation Holding BPC (A) Limited Isle of Man 100% Direct BPC (B) Limited Isle of Man 100% Direct BPC (C) Limited Isle of Man 100% Direct BPC (D) Limited Isle of Man 100% Direct BPC Limited Bahamas 100% Indirect BPC (A) Limited Bahamas 100% Indirect BPC (B) Limited Bahamas 100% Indirect BPC (C) Limited Bahamas 100% Indirect BPC (D) Limited Bahamas 100% Indirect Bahamas Offshore Petroleum Ltd Bahamas 100% Indirect Island Offshore Petroleum Ltd Bahamas 100% Indirect Sargasso Petroleum Ltd Bahamas 100% Indirect Privateer Petroleum Ltd Bahamas 100% Indirect Columbus Oil & Gas Limited Bahamas 100% Indirect 2 Summary of significant accounting policies
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.
2.1 Basis of preparation
The consolidated financial statements of Bahamas Petroleum Company plc (the "Financial Statements") reflect the results and financial position of the Group for the year ended 31 December 2017, have been prepared in accordance with International Financial Reporting Standards ("IFRS") and IFRIC (International Financial Reporting Interpretations Committee) interpretations as adopted by the European Union ("EU"). These financial statements have been prepared under the historical cost convention and the requirements of the Isle of Man Companies Acts 1931 to 2004.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 4.
Going concern
The Directors have, at the time of approving these financial statements, determined that the Group has adequate financial resources and therefore these financial statements have been prepared on a going concern basis, which assumes that the Group will be able to meet its liabilities as and when they fall due. See note 4 for further information.
Adoption of new and revised Standards
a) New standards, amendments and interpretations adopted
No new standards, amendments or interpretations, effective for the first time for the financial year beginning on or after 1 January 2017 have had a material impact on the Group or the Company.
b) New standards, amendments and interpretations not yet adopted
A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 January 2017 and have not been applied in preparing these financial statements. None of these are expected to have a significant effect on the financial statements of the Group or the Company, except the following, set out below:
IFRS 9, 'Financial instruments', addresses the classification, measurement and recognition of financial assets and financial liabilities. It replaces the guidance in IAS 39 that relates to the classification and measurement of financial instruments. IFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for financial assets: amortised cost, fair value through other comprehensive income and fair value through profit or loss. The basis of classification depends on the entity's business model and the contractual cash flow characteristics of the financial asset. There is now a new expected credit losses model that replaces the incurred loss impairment model used in IAS 39. For financial liabilities, there were no changes to classification and measurement, except for the recognition of changes in own credit risk in other comprehensive income, for liabilities designated at fair value through profit or loss. The standard is effective for accounting periods beginning on or after 1 January 2018. Early adoption is permitted. The Group has determined that the classification and measurement basis for its financial assets and liabilities will be largely unchanged by the adoption of IFRS 9. No material impact on profit for future periods is expected.
IFRS 16, 'Leases' addresses the definition of a lease, recognition and measurement of leases and establishes principles for reporting useful information to users of financial statements about the leasing activities of both lessees and lessors. A key change arising from IFRS 16 is that most operating leases will be accounted for on balance sheet for lessees. The standard replaces IAS 17 'Leases', and related interpretations. The standard is effective for annual periods beginning on or after 1 January 2019 and earlier application is permitted, subject to the entity adopting IFRS 15 'Revenue from contracts with customers' at the same time. Based on existing operating leases under IAS 17, the directors estimate that, if IFRS 16 were implemented on 1 January 2018, additional land and buildings of $246,474 would be recognised, together with an additional lease liability of $246,474. In future periods, the operating lease charge would be replaced by a depreciation charge that is not expected to be materially different. The Directors are in the process of reviewing contracts to identify any additional lease arrangements that would need to be recognised under IFRS 16.
2.2 Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 December each year. Control is achieved where the Company is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition or up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used in line with those used by the Group.
All intra-group transactions, balances, income and expenses (including unrealised gains and losses on transactions between group companies) are eliminated on consolidation.
Changes in the Group's interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions - that is, as transactions with owners in their capacity as owners. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to the Group.
The financial statements consolidate the results, cash flows and assets and liabilities of the Company and its wholly owned subsidiary undertakings.
2.3 Operating segments
All of the Group's business activities relate to oil & gas exploration activities in the Commonwealth of The Bahamas. The business is managed as one business segment by the chief operating decision maker ("the CODM"), who has been identified as the Chief Executive Officer ("the CEO"). The CODM receives reports at a consolidated level and uses those reports to assess business performance. It is not possible to assess performance properly using the financial information collected at the subsidiary level.
2.4 Foreign currency translation (i) Functional and presentation currency
Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ("the functional currency"). The consolidated financial statements and company financial statements are presented in United States Dollars, which is the functional currency of the Company and all of the Group's entities, and the Group's and Company's presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denoted in foreign currency are translated into the functional currency at exchange rates ruling at the year end. Foreign exchange gains and losses resulting from the settlement of transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income.
2.5 Property, plant and equipment
Property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the statement of comprehensive income during the reporting period in which they are incurred.
Depreciation on assets is calculated using the straight--line method to allocate their cost, net of their residual values, over their estimated useful economic lives, as follows:
3 - 4 years
* Furniture, fittings and equipment
5 years
* Motor vehicles
Over the life of the lease
* Leasehold improvements
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount with any impairment charge being taken to the statement of comprehensive income.
Gains and losses on disposals are determined by comparing proceeds with carrying amount and are recognised in the statement of comprehensive income.
2.6 Intangible assets - exploration and evaluation assets
Exploration and evaluation expenditure incurred which relates to more than one area of interest is allocated across the various areas of interest to which it relates on a proportionate basis. Exploration and evaluation expenditure incurred by or on behalf of the Group is accumulated separately for each area of interest. The area of interest adopted by the Group is defined as a petroleum title.
Expenditure in the area of interest comprises direct costs and an appropriate portion of related overhead expenditure but does not include general overheads or administrative expenditure not linked to a particular area of interest.
As permitted under IFRS 6, exploration and evaluation expenditure for each area of interest, other than that acquired from the purchase of another entity, is carried forward as an asset at cost provided that one of the following conditions is met:
-- the costs are expected to be recouped through successful development and exploitation of the area of interest, or alternatively by its sale; or
-- exploration and/or evaluation activities in the area of interest have not, at the reporting date, reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in, or in relation to, the area of interest are continuing.
Exploration and evaluation expenditure which fails to meet at least one of the conditions outlined above is taken to the statement of comprehensive income.
Expenditure is not capitalised in respect of any area of interest unless the Group's right of tenure to that area of interest is current.
Intangible exploration and evaluation assets in relation to each area of interest are not amortised until the existence (or otherwise) of commercial reserves in the area of interest has been determined.
2.7 Impairment
Exploration and evaluation assets are assessed for impairment when facts and circumstances suggest that the carrying amount may exceed its recoverable amount. In accordance with IFRS 6, the Group reviews and tests for impairment on an ongoing basis and specifically if the following occurs:
a) the period for which the Group has a right to explore in the specific area has expired during the period or will expire in the near future, and is not expected to be renewed;
b) substantive expenditure on further exploration for and evaluation of mineral resources in the specific area is neither budgeted nor planned;
c) exploration for and evaluation of mineral resources in the specific area have not led to the discovery of commercially viable quantities of mineral resources and the Group has decided to discontinue such activities in the specific area; and
d) sufficient data exists to indicate that although a development in the specific area is likely to proceed the carrying amount of the exploration and evaluation asset is unlikely to be recovered in full from successful development or by sale.
An impairment loss is recognised for the amount by which the asset's carrying value exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units).
2.8 Financial instruments
The Group classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivables and available for sale. The classification depends on the purpose for which the financial assets were
acquired. The classification of financial assets is determined at initial recognition.
At 31 December 2017 and 2016 the Group did not have any financial assets held at fair value through profit or loss or classified as available for sale. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in any active market. They are included in current assets, except for those with maturities greater than 12 months after the balance sheet date which are classified as non--current assets. Loans and receivables are stated initially at their fair value and subsequently at amortised cost using the effective interest rate method. The Group's loans and receivables consist of 'cash and cash equivalents' at variable interest rates, 'restricted cash' and 'other receivables' excluding 'prepayments'.
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a 'loss event') and that loss event or events has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.
The Group classifies its financial liabilities in the following categories: at fair value through profit or loss and other liabilities. As at 31 December 2017 and 2016, the Group did not have any financial liabilities at fair value through profit or loss. Other liabilities are recognised initially at fair value and are subsequently measured at amortised cost using the effective interest method. Other liabilities consist of 'trade and other payables'. These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial period which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.
2.9 Cash and cash equivalents
Cash and cash equivalents includes cash on hand and deposits held at call with financial institutions with original maturities of three months or less. For the purposes of the cash flow statement, restricted cash is not included within cash and cash equivalents.
2.10 Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are deducted, net of tax, from the proceeds. Net proceeds are disclosed in the statement of changes in equity.
2.11 Employee benefits (i) Wages and salaries, annual leave and sick leave
Liabilities for wages and salaries, including non--monetary benefits, expected to be settled within 12 months of the reporting date are recognised in other payables in respect of employees' services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled.
(ii) Share based payments
Where equity settled share based instruments are awarded to employees or Directors, the fair value of the instruments at the date of grant is charged to the statement of comprehensive income over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each balance sheet date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of instruments that eventually vest. Market vesting conditions are factored into the fair value of the instruments granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition.
Where equity instruments are granted to persons other than employees or Directors, the statement of comprehensive income is charged with the fair value of goods and services received.
(iii) Bonuses
The Group recognises a liability and an expense for bonuses. Bonuses are approved by the Board and a number of factors are taken into consideration when determining the amount of any bonus payable, including the recipient's existing salary, length of service and merit. The Group recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation.
(iv) Pension obligations
For defined contribution plans, the Group pays contributions to privately administered pension plans. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as an employee benefit expense when they are due.
(v) Termination benefits
Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it is demonstrably committed to a termination and when the entity has a detailed formal plan to terminate the employment of current employees without the possibility of withdrawal. Benefits falling due more than 12 months after the end of the reporting period are discounted to their present value.
2.12 Interest Income
Interest income is recognised on a time proportion basis using the effective interest method.
2.13 Leases
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the statement of comprehensive income on a straight--line basis over the period of the lease.
3 Financial risk management in respect of financial instruments 3.1 Financial risk factors
The Group's activities expose it to a variety of financial risks: liquidity, market and credit risk. The Group's overall risk management programme focuses on minimising potential adverse effects on the financial performance of the Group.
Risk management is carried out by the CEO under policies approved by the Board of Directors. The CEO identifies, evaluates and addresses financial risks in close cooperation with the Group's management. The Board provides written principles for overall risk management, as well as written policies covering specific areas, such as mitigating foreign exchange risk, interest rate risk, credit risk and investing excess liquidity.
(i) Liquidity risk
The Group monitors its rolling cash flow forecasts and liquidity requirements to ensure it has sufficient cash to meet its operational needs. Surplus cash is invested in interest bearing current accounts and money market deposits.
No profit to date
The Group has incurred losses since its inception and it is therefore not possible to evaluate its prospects based on past performance. Since the Group intends to continue investing in the exploration licences it currently holds an interest in, the Directors anticipate making further losses. There can be no certainty that the Group will achieve or sustain profitability or achieve or sustain positive cash flows from its activities.
Future funding requirements
The Group raises funding through the placing of ordinary shares and farm-outs of its licences. There is no certainty that the Company will be able to raise funding on the equity markets or that the raising of sufficient funds through future farm-outs will be possible at all or achievable on acceptable terms. This could substantially dilute the Group's interest in the licences, however, given the size of the Group's existing holding it would be expected, although there is no guarantee, that the Group will retain a significant equity interest in the licences.
Financial liabilities
The Group's financial liabilities comprise entirely its trade and other payables which all fall due within 1 year. The Group's payment policy is to settle amounts in accordance with agreed terms which is typically 30 days.
(ii) Market risk
Foreign exchange risk
The Group operates internationally and therefore is exposed to foreign exchange risk arising from currency exposures, primarily with regard to UK Sterling. The exposure to foreign exchange risk is managed by ensuring that the majority of the Group's assets, liabilities and expenditures are held or incurred in US Dollars, the functional currency of all entities in the Group. At 31 December 2017, the Group held $785,907 of cash in UK Sterling (31 December 2016: $195,404) and had an insignificant amount of trade and other payables denominated in UK Sterling.
At 31 December 2017, if the US Dollar currency had weakened/strengthened by 10% against UK Sterling with all other variables held constant, post-tax losses for the year and total equity would have been reduced/increased by approximately $79,000 (31 December 2016: reduced/increased by $20,000), mainly as a result of foreign exchange gains/losses on translation of UK Sterling denominated bank balances.
The Group also has operations denominated in the Bahamian Dollar. As the Bahamian Dollar is pegged to the US Dollar on a one for one basis these operations do not give rise to any currency exchange exposures.
Interest rate risk
The Group's exposure to interest rate risk relates to the Group's cash deposits which are linked to short term deposit rates and therefore affected by changes in bank base rates. At 31 December 2017 and 2016 short term deposit rates were in the range of 0% to 1% and therefore the interest rate risk is not considered significant to the Group. An increase in interest rate of 0.25% in the year would have had an insignificant effect of the Group's loss for the year.
(iii) Credit risk
Credit risk is managed on a Group basis. Credit risk arises from cash and cash equivalents and restricted cash. For banks and financial institutions, only independently rated parties with a minimum rating of 'A' are accepted. In order to mitigate credit risk arising from cash balances the Group holds cash reserves with more than one counterparty.
3.2 Capital risk management
Capital is defined by the Group as all equity reserves, including share capital and share premium. The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to support the Group's business operations and maximise shareholder value. The Group is not subject to any externally imposed capital requirements.
4 Critical accounting estimates and assumptions
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
(a) Going concern
These financial statements have been prepared on a going concern basis, which assumes that the Group will continue in operation for the foreseeable future.
The Directors are of the opinion that the Group has adequate financial resources to meet its working capital needs for at least the next 12 months based on cash flow forecasts and management's ability to effect further cost reductions in the event that such action is deemed necessary.
The Group's ability to meet its obligations beyond the next 12 months is dependent on the level of exploration and appraisal activities undertaken. The next step in the Group's asset development programme requires the drilling of an exploration well on its prospects. The ability of the Group to discharge this obligation is contingent on the successful completion of a farm-out arrangement or equity raise to finance this activity.
(b) Carrying value of exploration expenditure
Expenditure of $48,318,079 relating to the cost of exploration licences, geological and geophysical consultancy and seismic data acquisition and interpretation has been capitalised as at 31 December 2017 (2016: $48,052,657).
The Group's exploration activities are subject to a number of significant and potential risks including:
-- licence obligations; -- requirement for further funding; -- geological and development risks; and -- political risk.
The recoverability of these intangible assets is dependent on the discovery and successful development of economic reserves, including the ability to raise finance to develop future projects or alternatively, sale of the respective licence areas. The carrying value of the Group's exploration and evaluation expenditure is reviewed at each balance sheet date and, if there is any indication that it is impaired, its recoverable amount is estimated. Estimates of impairment are limited to an assessment by the Directors of any events or changes in circumstances that would indicate that the carrying value of the asset may not be fully recoverable. Any impairment loss arising is charged to the statement of comprehensive income.
On 26 April 2018 the Company filed its application for Environmental Authorisation ("EA") as required by the Petroleum (Offshore Environmental Protection and Pollution Control) Regulations 2016 (the "Regulations"). Under these newly implemented regulations, an application for Environmental Authorisation represents the first step in commencing field activities and therefore the submission of the application by BPC represents an important milestone in the project and its development, with the next key milestone being the execution of an exploration well before the end of the current licence term. The Company is presently in ongoing discussion with the Government in relation to the process by which the application will be progressed in a timely manner.
In performing an assessment of the carrying value of the exploration and evaluation assets at the reporting date, the Directors concluded that it was not appropriate to book an impairment given the remaining term of the licences, geological probability of success of the structures and the continued plans to explore and develop the block.
Renewal of the Miami licence remains under review as at the balance sheet date.
5 Segment information
The Company is incorporated in the Isle of Man. The total of non-current assets other than financial instruments located in the Isle of Man as at 31 December 2017 is $7,884 (31 December 2016: $7,110), and the total of such non-current assets located in The Bahamas is $48,351,474 (31 December 2016: $48,090,092).
6 Finance income
2017 2016
Group Group
$ $
Finance income - interest income on
short-term bank deposits 3,507 3,835
7 Employee benefit expense
2017 2016
Group Group
$ $
Directors and employees salaries and
fees 1,087,548 1,226,012
Social security costs 51,364 59,319
Pension costs - defined contribution 124,621 140,573
Share based payments (see note 18) 652,168 570,411
Other staff costs 77,470 218,175
1,993,171 2,214,490
Effective 1 October 2014, the Directors agreed to forgo 20% of their remuneration which becomes repayable in shares only once the Company's farm-out transaction or other arrangement for the financing of the first exploration well has been successfully completed.
Effective 1 April 2016, the Directors agreed to increase the above fee deferral to 50% of their remuneration which becomes repayable in shares only once the Company's farm-out transaction or other arrangement for the financing of the first exploration well has been successfully completed. In the case of Mr Potter, CEO, this deferral is 90% of salary and is to be repaid in equal proportions of shares and cash on the conclusion of a farm-out transaction or other arrangement for the financing of the first exploration well.
Effective 1 January 2018, the Directors agreed to increase the above fee deferral to 90% of their remuneration which becomes repayable only once the Company's farm-out transaction or other arrangement for the financing of the first exploration well has been successfully completed and is to be repaid in equal proportions of shares and cash.
See note 18 for further details.
8 Other expenses
2017 2016
Group Group
$ $
Travel and accommodation 131,436 193,053
Operating lease payments 259,480 250,084
Legal and professional 549,446 844,094
Net foreign exchange
(gain)/loss (24,039) 39,046
Other 259,522 250,139
Fees payable to the
Company's auditor for
the audit of the company
and consolidated financial
statements 60,273 45,582
Fees payable to the
Company's auditor for
other services:
* Tax advisory services 2,279 10,407
Total auditor remuneration 62,552 55,989
Total other expenses 1,238,397 1,632,405
9 Taxation
The Company is incorporated and resident in the Isle of Man and subject to Isle of Man income tax at a rate of zero per cent (2016: zero per cent).
All other group companies are within the tax free jurisdiction of the Commonwealth of The Bahamas. Under current Bahamian law, the Bahamian group companies are not required to pay taxes in The Bahamas on income or capital gains.
10 Basic and diluted loss per share
(a) Basic
Basic loss per share is calculated by dividing the loss attributable to the equity holders of the Company by the weighted average number of ordinary shares in issue during the year.
2017 2016
Group Group
Loss attributable to equity
holders of the Company (US$) (3,213,316) (3,826,660)
Weighted average number of ordinary
shares in issue (number) 1,365,492,795 1,230,479,096
Basic loss per share (US Cents
per share) (0.24) (0.31)
(b) Diluted
Diluted loss per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Company had one category of dilutive potential ordinary shares: share options. For these share options, a calculation is performed to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company's shares) based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options. Share options outstanding at the reporting date were as follows:
1
2017 2016
Group Group
Total share options and warrants in
issue (number) (see note 18) 84,450,000 68,850,000
The effect of the above share options at 31 December 2017 and 2016 is anti-dilutive; as a result they have been omitted from the calculation of diluted loss per share.
11 Restricted cash
2017 2016
Group Group
$ $
Non-current assets
Bank deposits - 36,972
Total non-current restricted cash - 36,972
Current assets
Bank performance bond 500,000 500,000
Bank deposits 27,063 -
Total current restricted cash 527,063 500,000
The Bank performance bond emplaced during 2015 is in favour of the Government. The bond formed a condition of the 2015 licence renewal and will be released in 2018 given the Company has now satisfied the licence condition to undertake $750,000 of qualifying expenditure during the licence period.
Bank deposits consist of funds held as security for Company credit card facilities. Amounts held at the year end have been classified as current as they may be recovered at any point following cancellation of the corporate credit card facilities.
12 Property, plant & equipment
Group
Leasehold Furniture,
Improvements fittings and Motor Vehicles
equipment Total
$ $ $ $
At 1 January
2016
Cost 56,417 243,506 97,689 397,612
Accumulated
depreciation (51,681) (231,171) (51,028) (333,880)
Net book amount 4,736 12,335 46,661 63,732
Year ended 31
December 2016
Opening net
book amount 4,736 12,335 46,661 63,732
Additions - 12,535 - 12,535
Depreciation
charge (4,058) (12,424) (15,240) (31,722)
Closing net
book amount 678 12,446 31,421 44,545
At 31 December
2016
Cost 56,417 256,041 97,689 410,147
Accumulated
depreciation (55,739) (243,595) (66,268) (365,602)
Net book amount 678 12,446 31,421 44,545
Year ended 31
December 2017
Opening net
book amount 678 12,446 31,421 44,545
Additions - 18,241 - 18,241
Depreciation
charge (678) (6,981) (13,849) (21,508)
Closing net
book amount - 23,706 17,572 41,278
At 31 December
2017
Cost 56,417 274,282 97,689 428,388
Accumulated
depreciation (56,417) (250,576) (80,117) (387,110)
- 23,706 17,572 41,278
Net book amount
13 Intangible exploration and evaluation assets
Group Geological,
Geophysical
and Technical
Licence costs Analysis Total
$ $ $
Year ended 31 December
2016
Opening cost / net
book amount 2,851,250 45,008,006 47,859,256
Additions (note 20(iii)) - 193,401 193,401
Closing cost / net
book amount 2,851,250 45,201,407 48,052,657
Year ended 31 December
2017
Opening cost / net
book amount 2,851,250 45,201,407 48,052,657
Additions (note 20(iii)) - 265,422 265,422
Closing cost / net
book amount 2,851,250 45,466,829 48,318,079
Ultimate recoupment of intangible exploration and evaluation assets capitalised is dependent on successful development and commercial exploitation, or alternatively, sale of the respective licence areas (note 4(b)).
These assets are reviewed for impairment annually or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. At present, the Directors do not believe any such impairment indicators are present (note 4(b)).
14 Cash and cash equivalents
2017 2016
Group Group
$ $
Cash at bank 1,838,527 970,021
The 2017 balance includes interest bearing accounts at rates between 0% and 1% (2016: 0% to 1%).
Reconciliation of total cash balances 2017 2016
Group Group
$ $
Cash at bank 1,838,527 970,021
Restricted cash (see note 11) 527,063 536,972
Total cash 2,365,590 1,506,993
15 Other receivables
2017 2016
Group Group
$ $
Other receivables (note (a)) 115,954 51,043
Prepayments (note (b)) 613,338 624,581
729,292 675,624
(a) Other receivables
As at 31 December 2017 and 2016, these amounts predominantly consist of VAT recoverable.
(b) Prepayments
As at 31 December 2017, prepayments include $500,000 (2016: $500,000) in application fees paid to The Government for five additional exploration licences. During 2015, two of these licence applications were withdrawn, consequently receipt of $200,000 against these applications is expected to be credited against future licence rental payments (see note 20(iii)). The three retained applications remain pending award, in the event that the Group's applications are unsuccessful, 50% of the remaining $300,000 in application fees is refundable to the Group. No provision has been made in the consolidated financial statements to write down the carrying value of these prepayments.
16 Trade and other payables
2017 2016 2014
Group Group Group
$ $ $
Accruals 1,053,922 579,239 210,265
Trade payables 40,496 35,849 208,979
Other payables 4,094 3,372 12,000
1,098,512 618,460 431,244
The fair value of trade and other payables approximates to their carrying value as at 31 December 2017 and 2016.
17 Share capital, share premium reserve, merger reserve and reverse acquisition reserve
Share Reverse
Number Issue Ordinary premium Merger acquisition
of shares price shares reserve reserve reserve
Group issued $ $ $ $ $
At 1
January
2016 1,230,479,096 - 37,253 78,185,102 77,130,684 (53,846,526)
At 31
December
2016 1,230,479,096 - 37,253 78,185,102 77,130,684 (53,846,526)
Shares
issued 280,000,000 0.013 7,228 3,212,982 - -
------------------- ---------- ------------- ---------------- ---------------- ------------------
As at 31
December
2017 1,510,479,096 44,481 81,398,084 77,130,684 (53,846,526)
------------------- ---------- ------------- ---------------- ---------------- ------------------
During the year the Company issued 110,000,000 new ordinary shares on 21 June 2017 for 1 pence each and 170,000,000 new ordinary shares on 19 July 2017 for 1 pence each, raising gross proceeds of $1,395,383 and $2,218,806 respectively. The costs associated with the issuances in the year of $196,393 and $197,586 respectively have been deducted from the Share Premium account.
In 2008, BPC Jersey Limited acquired Falkland Gold and Minerals Limited ('FGML') via a reverse acquisition, giving rise to the reverse acquisition reserve. BPC Jersey Limited was the acquirer of FGML although FGML became the legal parent of the Group on the acquisition date. FGML subsequently changed its name to BPC Limited.
The merger reserve arose in 2010 as a result of the Group undergoing a Scheme of Arrangement which saw the shares in the then parent company BPC Limited replaced with shares in Bahamas Petroleum Company plc.
The total authorised number of ordinary shares at 31 December 2017 and 2016 was 5,000,000,000 shares with a par value of 0.002 pence per share. All issued shares of 0.002 pence are fully paid.
18 Share based payments
A) Options and warrants
Share options have been granted to Directors, selected employees and consultants to the Company.
The Group had no legal or constructive obligation to repurchase or settle any options in cash. Movements in the number of share options and warrants outstanding during the year are as follows:
2017 2016
Group Group
Average exercise No. Options Average No. Options
price per & Warrants exercise & Warrants
share price per
share
At beginning of year 2.22p 68,850,000 17.39p 58,500,000
Relinquished - - 16.23p (45,000,000)
Expired - - 21.25p (13,500,000)
Granted 1.00p 15,600,000 2.22p 68,850,000
At end of year 1.99p 84,450,000 2.22p 68,850,000
Exercisable at end of year 1.00p 15,600,000 - -
The weighted average remaining contractual life of the options and warrants in issue at 31 December 2017 is 2.93 years (31 December 2016: 4.25 years) and the weighted average exercise price of these instruments is 1.99 pence per share (31 December 2016: 2.22 pence).
On 12 April 2016, all options previously granted on 12 April 2011 expired. On 4 April 2016, all other options previously granted over Company shares were cancelled by mutual election.
No adjustment was made to the share based payments reserve or charge for the year following the above forfeitures.
On 4 April 2016, 68,850,000 options were granted all of which carried the following terms:
-- The options have an exercise price of 2.22 pence.
-- Half of the options become exercisable only once the Company secures a partnership or other arrangement sufficient to finance the Company's first exploration well (Tranche 1).
-- Half of the options become exercisable only once the Company's first exploration well is commenced (Tranche 2).
-- The options expire after 5 years.
-- The options require the option holder to remain in office, with the provision of this service requirement to be waived at the discretion of the Company.
The fair value of the options granted in 2016 was estimated using the Black Scholes model. The inputs and assumptions used in calculating the fair value of options granted in the year were as follows:
Options Granted on 4 April 2016
----------------
Tranche 1 Tranche 2
------------------ -----------------
Number of
options
granted 34,425,000 34,425,000
------------------ -----------------
Share price
at date
of grant 2.02p 2.02p
------------------ -----------------
Exercise
price 2.22p 2.22p
------------------ -----------------
Expected
volatility 20% 18%
------------------ -----------------
Expected 0.75 years 1.08 years
life
------------------ -----------------
Risk free
return 0.13% 0.13%
------------------ -----------------
Dividend Nil Nil
yield
------------------ -----------------
Fair value 0.10 cents 0.11 cents
per option
------------------ -----------------
On 27 July 2017, the Company issued 15,600,000 warrants to Shore Capital Stockbrokers in consideration of services rendered during the fund raise in June 2017. The terms of the warrants granted are as follows:
-- The warrants are exercisable from the date of grant. -- The warrants expire on 14 July 2019. -- The warrants have an exercise price of 1 pence per share.
All warrants granted to Shore Capital Stockbrokers during the year were exercised on 29 May 2018.
The fair value of the warrants granted in the year was estimated using the Black Scholes model. The inputs and assumptions used in calculating the fair value of options granted in the year were as follows:
Warrants Granted on 27
July 2017
-----------------------
Number of warrants
granted 15,600,000
-----------------------
Share price at date
of grant 1.10p
-----------------------
Exercise price 1.0p
-----------------------
Expected volatility 22%
-----------------------
Expected life 2.0 years
-----------------------
Risk free return 0.31%
-----------------------
Dividend yield Nil
-----------------------
Fair value per option 0.27 cents
-----------------------
B) Salary deferrals
On 17 December 2014, the Directors entered into an agreement for the deferral of 20% of their salary and fees on the following terms:
-- 20% of all directors' fees and the CEO's salary were forgone until a farm-out or other arrangement sufficient to finance the first exploration well is completed.
-- The value of fees/salary forgone accrued at the end of each month as an entitlement to ordinary shares in the Company.
-- The number of ordinary shares accrued was calculated as the value of fees/salary forgone divided by the volume weighted average closing price of the Company shares over each month.
-- The "accrued shares" shall only be issued to the directors on completion of a farm-out or other arrangement sufficient to finance the first exploration well.
-- The agreement is effective for all parties from 1 October 2014.
On 1 April 2016, the Directors entered into a further agreement for the deferral of 50% of their fees and Mr Potter entered into an agreement for the deferral of 90% of his salary on the following terms:
-- 50% of all directors' fees and 90% of the CEO's salary are to be forgone until a farm-out or other arrangement sufficient to finance the first exploration well is completed.
-- The value of Directors fees forgone shall accrue at the end of each month as an entitlement to ordinary shares in the Company.
-- 50% of the value of the CEO's salary forgone shall accrue at the end of each month as an entitlement to ordinary shares in the Company.
-- 50% of the value of the CEO's salary forgone shall be repayable in cash on settlement of the well financing criteria.
-- Receipt of the CEO's forgone salary is conditional on his continued employment by the Group up to the completion of a farm-out or other financing arrangement.
-- All of the CEO share entitlements accrued under the agreement entered into on 1 October 2014 were forgone.
-- The number of ordinary shares accruing shall be calculated as the value of fees/salary forgone divided by the volume weighted average closing price of the Company shares over each month.
-- The "accrued shares" shall only be issued to the directors on completion of a farm-out or other arrangement sufficient to finance the first exploration well.
-- The agreement is effective for all parties from 1 April 2016 and, in the case of Simon Potter, supersedes the agreement entered into on 17 December 2014.
Under IFRS 2, the above agreement (excluding the CEO's cash entitlement from 1 April 2016) constitutes the issuance of equity settled share based payment instruments with the following terms:
-- Each month of deferred fee entitlements is treated as a separate grant of options with the date of grant being the first day of the month.
-- The Fair value of the options at grant is estimated as the share price on the date of grant.
-- Options awarded each month vest at the end of that month.
The value of the instruments has been estimated and is being charged to the Statement of Total Comprehensive Income in monthly tranches as each month's award of options vest.
From 1 January 2018, the Directors agreed to increase their fee deferral, see note 21 for further details.
C) Expense arising from share-based payment transactions
Total expense arising from equity-settled share based payment transactions:
2017 2016
Group Group
$ $
Options and warrants 24,509 67,931
Salary deferrals 638,740 502,480
Expense in relation to share based
payment transactions 663,249 570,411
The above charges in relation to share based payments include $647,516 relating to Directors (2016: $546,879), $4,652 related to staff and consultants (2016: $23,532) and $11,081 relating to warrants granted to the Company's brokers (2016: $nil). In addition to the above total charge to profits, $24,225 (2016: $nil) in share based payments charges have been capitalised into intangibles during the year.
19 Cash used in operations
2017 2016
Group Group
$ $
Loss after income tax (3,213,316) (3,826,660)
Adjustments for:
- Depreciation (note 12) 21,508 31,722
- Share based payment (note 18) 663,249 570,411
- Finance income (note 6) (3,507) (3,835)
- Other income received (36,253) (48,122)
- Foreign exchange (gain)/loss on operating
activities (note 8) (24,039) 39,046
Changes in working capital:
- Other receivables (26,384) 85,945
- Trade and other payables 445,298 51,035
Cash used in operations (2,173,444) (3,100,458)
20 Contingencies and commitments
(i) Contingencies
As at 31 December 2017 and 2016, the Group had no contingent liabilities that require disclosure in these financial statements.
(ii) Expenditure commitments
In order for the Group to ensure successful renewal of its licences when they expire on 8 June 2019 there is an expectation for the Group to have executed an exploration well in the licenced area by this date. Management is presently in ongoing discussions with the Government in relation to the extent to which a further extension of the licence term is warranted as a result of events outside of BPC's control since 2015.
As the Group does not have sufficient cash resources to discharge this commitment, an industry partnership or other financing arrangement will be required in order to meet this licence obligation.
(iii) Annual rental commitments
The Group is required under the exploration licences to remit annual rentals in advance to the Government in respect of the licenced areas.
The Group has made numerous payments of licence rentals since the expiry of the first licence period in April 2012. During the period from this expiry to July 2016 the Group has been unable to undertake exploration activity over its renewed licences due to factors outside of its control. As a consequence, the Group believes that all licence rental payments made to date are sufficient to meet these obligations through to the end of the current licence term. Management is presently in ongoing discussions with the Government regarding reaching agreement on this matter.
Renewal of the Group's Miami licence remains under review pending negotiations with the Government regarding the terms of renewal.
The Group leases various premises under non-cancellable operating lease agreements. The leases have varying terms and renewal rights.
The future aggregate minimum lease payments under non-cancellable operating leases are as follows:
2017 2016
Group Group
$ $
No later than 1 year 151,257 61,950
151,257 61,950
21 Related party transactions
Key Management Personnel
Details of key management personnel during the current and prior year are as follows:
William Schrader Non-Executive Chairman
James Smith Non-Executive Deputy Chairman
Simon Potter Director and Chief Executive Officer
Adrian Collins Non-Executive Director
Ross McDonald Non-Executive Director
Edward Shallcross Non-Executive Director
Key Management Compensation
2017 2016
Group Group
$ $
Short term employee benefits - paid 362,093 711,312
Short term employee benefits - accrued
and contingent* 450,000 337,500
Share based payments (see note 18) 647,516 546,879
1,459,609 1,595,691
*Short term employee benefits - accrued and contingent consist of the 50% of Mr Potter's deferred fees which are repayable in cash, rather than shares, contingent on the successful completion of a farm-out transaction or other arrangement sufficient to finance the project's first exploration well.
Simon Potter's key remunerative terms as Chief Executive Officer of the Company are as follows:
-- Annual salary of $1,000,000 with minimum CPI indexation.
-- Entitlement to receive pension contributions from the Company equal to 10% of his contracted annual salary.
-- The term of the contract expired on 31 March 2018 and was renewed following the balance sheet date for a further 12 months on substantially the same terms. Benefits arising from termination during the term range from nil to payment of salary over the full term, depending on the circumstances surrounding termination.
-- Effective 1 October 2014, Mr Potter agreed to defer 20% of his salary, equating to $200,000 annually, to be received in Company shares contingent on the successful conclusion of a farm-out or other arrangement sufficient to finance the Company's first exploration well. All amounts accruing to Mr Potter under this arrangement from 1 October 2014 to 31 March 2016 were forgone during 2016 as part of the agreement entered into effective 1 April 2016, see below.
-- Effective 1 April 2016, Mr Potter agreed to defer 90% of his salary, equating to $900,000 annually, to be received 50% in Company shares and 50% in cash contingent on the successful conclusion of a farm-out or other arrangement sufficient to finance the Company's first exploration well.
Directors' remuneration
2017 2016
Group Group
$ $
Simon Potter
Cash remuneration
- Salary (80% of contractual
entitlement to 31 March 2016) - 200,000
- Salary (10% of contractual
entitlement 1 April 2016 to
31 December 2016) - 75,000
- Salary (10% of contractual 100,000 -
entitlement from 1 January 2017)
- Contractual Entitlements - 141,667
Total cash remuneration 100,000 416,667
Non-cash remuneration
- Salary (45% deferred and
contingent) 450,000 337,500
- Share based payments 457,606 425,979
- Accrued Pension liability 100,000 100,000
1,007,606
Total non-cash remuneration 1,107,606 863,479
Total 1,280,146
William Schrader
- Cash remuneration 41,989 50,877
- Share based payments 49,462 31,868
- Total Remuneration 91,451 82,745
James Smith
- Cash remuneration 27,460 33,271
- Share based payments 32,281 20,533
- Total Remuneration 59,741 53,804
Adrian Collins
- Cash remuneration 32,836 37,761
- Share based payments 37,943 23,983
- Total Remuneration 70,779 61,744
Ross McDonald
- Cash remuneration 27,460 33,271
- Share based payments 32,281 20,533
- Total Remuneration 59,741 53,804
Edward Shallcross
- Cash remuneration 32,348 39,465
- Share based payments 37,943 23,983
- Total Remuneration 70,291 63,448
Total 1,459,609 1,595,691
Effective 1 October 2014, the Directors agreed to forgo 20% of their remuneration which becomes repayable in shares only once the Company's first exploration well has been successfully financed. Effective 1 April 2016 the Directors agreed to increase this fee deferral to 50% for Board members and 90% for the CEO. See note 18 for further details. From 1 January 2018, the Directors agreed to increase their fee deferral terms to match those of the
CEO, being a 90% deferral with 50% of deferred fees recoverable in cash and 50% in shares, following the conclusion of a successful farm-out or other suitable financing arrangement.
Accumulated unpaid Contractual Entitlements totalling $141,667 relating to prior years were paid to Simon Potter in the prior year. Simon Potter is not entitled to any further contractual benefits until a farm-out or other arrangement sufficient to finance the first exploration well is completed.
Cash payments totalling $158,333 were made in the prior year related to Simon Potter's pension benefits entitlement which had accrued in prior years. The remaining entitled amounts of $175,000 (2016: $75,000) have accrued in the year and are included in accruals on the balance sheet as at 31 December 2017.
There were no share options granted to key management personnel in the current year. Share options granted during the prior year were as follows:
Number of options Exercise price
granted per Ordinary Date of Grant
Share
William Schrader 2,000,000 2.22p 4 April 2016
Simon Potter 39,000,000 2.22p 4 April 2016
James Smith 1,000,000 2.22p 4 April 2016
Adrian Collins 1,000,000 2.22p 4 April 2016
Edward Shallcross 1,000,000 2.22p 4 April 2016
Ross McDonald 1,000,000 2.22p 4 April 2016
Details of share options granted are disclosed in note 18 to these financial statements.
Other related party transactions
During the year the Company operated banking facilities with RBC Royal Bank (Bahamas) Limited in Nassau, The Bahamas. Ross McDonald, a director of the Company, is also a director of RBC Royal Bank (Bahamas) Limited. As at 31 December 2017, $62,706 was held on deposit with RBC Royal Bank (Bahamas) Limited (31 December 2016: $78,184).
22 Events After the Balance Sheet Date
On 26 April 2018, the Company filed its application for an Environmental Authorisation certificate ("EA") as required by the Petroleum (Offshore Environmental Protection and Pollution Control) Regulations 2016 (the "Regulations"). Under these newly implemented regulations, an application for Environmental Authorisation represents the first step in commencing field activities and therefore the submission of the application by BPC represents an important milestone in the project and its development, with the next key milestone being the execution of an exploration well. The Company is presently in ongoing discussions with the Government in relation to the process by which the application will be progressed in a timely manner.
On 2 May 2018, the Company executed a Confidentiality and Exclusivity Agreement with a major international oil company to conclude a detailed technical evaluation of the Company's licences in The Bahamas, and at the same time seek to develop a commercial framework for a potential transaction. Under the terms of the Agreement, the Company shall receive non-refundable consideration of $250,000 per month ($750,000 in aggregate) for an initial three month period of exclusivity, with an additional $250,000 per month receivable for any extended period of exclusivity, such extension being at the option of the counterparty, up to a maximum of a further three months.
On 22 May 2018, the Company appointed the Advisory and Capital Markets Division of Macquarie Capital Markets Canada Ltd. ("Macquarie Capital") as its advisor. Macquarie Capital will be assisting the Company with its various corporate initiatives. Macquarie Capital, a wholly-owned subsidiary of Macquarie Group Limited, provides a full suite of global corporate solutions with a leading presence in the international energy sector.
On 22 May 2018, the Company raised an additional GBP1.1 million of cash reserves before expenses through the placing of 44 million new shares for GBP0.025 per share.
Company balance sheet as at 31 December 2017
2017 2016
Company Company
Note $ $
ASSETS
Non-current assets
Investment in subsidiaries 7 29,560,465 29,560,465
Other receivables 8 62,345,811 60,397,394
Property, plant and equipment 6 7,884 7,110
Restricted cash 5 - 36,972
Total non-current assets 91,914,160 90,001,941
Current assets
Restricted cash 5 527,063 500,000
Other receivables 8 165,406 119,599
Cash and cash equivalents 9 1,775,822 891,207
Total current assets 2,468,291 1,510,806
Total assets 94,382,451 91,512,747
LIABILITIES
Current liabilities
Trade and other payables 10 1,093,385 542,709
Total liabilities 1,093,385 542,709
EQUITY
Share capital 11 44,481 37,253
Share premium reserve 11 81,398,084 78,185,102
Other reserve 11 29,535,159 29,535,159
Share based payments reserve 12 3,011,601 2,324,127
Retained earnings (20,700,259) (19,111,603)
Total equity 93,289,066 90,970,038
Total equity and liabilities 94,382,451 91,512,747
The Company financial statements on pages 42 to 49 were approved and authorised for issue by the Board of Directors on 12 June 2018 and signed on its behalf by:
______________ ______________
Edward Shallcross Simon Potter
Director Director
Company statement of changes in equity for the year ended 31 December 2017
Share
based
Share Share Other payment Retained Total equity
capital premium Reserve reserve earnings
Note $ $ $ $ $ $
Balance
at 1 January
2016 37,253 78,185,102 29,535,159 1,753,716 (17,291,675) 92,219,555
Comprehensive
income:
Total
comprehensive
loss for
the year 4 - - - - (1,819,928) (1,819,928)
------------ ---------------- ---------------- --------------- ------------------ -----------------
Total
Comprehensive
Income - - - - (1,819,928) (1,819,928)
Transactions
with owners
Share options
- value
of service 12 - - - 570,411 - 570,411
------------ ---------------- ---------------- --------------- ------------------ -----------------
Total
transactions
with owners - - - 570,411 - 570,411
------------ ---------------- ---------------- --------------- ------------------ -----------------
Balance
at 31
December
2016 37,253 78,185,102 29,535,159 2,324,127 (19,111,603) 90,970,038
------------ ---------------- ---------------- --------------- ------------------ -----------------
Balance
at 1 January
2017 37,253 78,185,102 29,535,159 2,324,127 (19,111,603) 90,970,038
Comprehensive
income:
Total
comprehensive
loss for
the year 4 - - - - (1,588,656) (1,588,656)
Total
Comprehensive
Income - - - - (1,588,656) (1,588,656)
Transactions
with owners
Issue of
Ordinary
Shares 7,228 3,212,982 - - - 3,220,210
Share options
- value
of service 12 - - - 687,474 - 687,474
------------ ---------------- ---------------- --------------- ------------------ -----------------
Total
transactions
with owners 7,228 3,212,982 - 687,474 - 3,907,684
------------ ---------------- ---------------- --------------- ------------------ -----------------
Balance
at 31
December
2017 44,481 81,398,084 29,535,159 3,011,601 (20,700,259) 93,289,066
------------ ---------------- ---------------- --------------- ------------------ -----------------
Company statement of cash flows for the year ended 31 December 2017
2017 Company 2016
Note $ Company
$
Cash flows from operating activities
Cash used in operations 13 (452,395) (1,037,668)
Net cash used in operating activities (452,395) (1,037,668)
Cash flows from investing activities
Purchase of property, plant and equipment (3,933) (8,140)
Interest received 3,507 3,835
Decrease/(increase) in restricted cash 13,455 (16)
Advances to and payments on behalf
of group companies (1,924,192) (2,455,443)
Net cash used in investing activities (1,911,163) (2,459,764)
Cash flows from financing activities
Proceeds from issuance of ordinary 3,220,210 -
shares
Net cash flows from financing activities 3,220,210 -
Net increase/(decrease) in cash and
cash equivalents 856,652 (3,497,432)
Cash and cash equivalents at the beginning
of the year 891,207 4,442,965
Effects of exchange rate changes on
cash and cash equivalents 27,963 (54,326)
Cash and cash equivalents at the end
of the year 1,775,822 891,207
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 EAFKAFSEPEAF
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June 13, 2018 02:00 ET (06:00 GMT)
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