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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Europa Oil & Gas (holdings) Plc | LSE:EOG | London | Ordinary Share | GB00B03CJS30 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.95 | 0.90 | 1.00 | 0.95 | 0.925 | 0.95 | 1,836,811 | 15:28:37 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Oil And Gas Field Expl Svcs | 6.65M | -852k | -0.0009 | -10.56 | 9.1M |
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Europa Oil & Gas (Holdings) plc / Index: AIM / Epic: EOG / Sector: Oil & Gas
13 October 2020
Europa Oil & Gas (Holdings) plc ('Europa' or 'the Company')
Final Results for the year to 31 July 2020
Europa Oil & Gas (Holdings) plc, the AIM traded Ireland, Morocco and UK focused
oil and gas exploration, development and production company, announces its
final results for the 12 month period ended 31 July 2020.
The full Annual Report and Accounts will be available shortly on the Company's
website at www.europaoil.com and will be mailed in November 2020 to those
shareholders who have requested a paper copy.
Operational highlights
Onshore UK - production on course to more than double to over 200bopd
* Wressle Development granted planning consent on appeal
* First oil at Wressle set to commence at an estimated gross rate of 500bopd
late 2020
* Estimated break-even oil price (excluding Europa's corporate overheads) of
US$17.6 per barrel for Wressle, well below current oil prices
* 92boepd produced from Europa's three existing UK onshore fields during the
year - matches FY 2019 performance
Offshore Ireland - portfolio refocused on proven gas play in the Slyne Basin
* Acquisition of a 100% interest in Frontier Exploration Licence ('FEL') 3/
19, offshore Ireland, from DNO (pending regulatory approval)
+ Located close to the 1tcf producing Corrib gas field in the Slyne
basin and the 1.5 tcf Inishkea prospect on Europa's 100%-owned FEL 4/19
+ Includes the 1.2 tcf Edge prospect
* Applications submitted for the relinquishment of four licences offshore
Ireland where primary prospectivity is oil - LO16/19, LO16/22, FEL2/13 and
FEL3/13
* Total non-cash write-off of GBP4.0 million
* Forward plan to include FEL 3/19 in a relaunch of the farmout of its
strategic position in the Slyne Basin
Offshore Morocco - awarded 11,228 square km Inezgane licence in the Agadir
Basin
* Area equivalent to about 50 UKCS North Sea blocks
* 14 prospects and 16 leads with the potential to hold in aggregate close to
10 billion barrels of unrisked oil resources mapped in the Lower Cretaceous
fan sand play, a prolific producer in West Africa
* The 14 prospects each have mean resources in excess of 150 mmboe which add
up to total resources in excess of 5 billion barrels of oil equivalent
* The 827 mmboe Falcon and 204 mmboe Turtle prospects have been assigned a
geological chance of success of 20-35% by Europa
* Licence attracting interest from a number of operators looking to farm-in
* Shell, ENI, Repsol, Hunt, Chariot, SDX, Sound, Schlumberger and Genel are
currently active in the area
COVID-19
* At the reporting date of 31 July 2020 there was minimal impact from
Covid-19 on operations
* Operations have continued at the three production sites
* Brent crude price fell dramatically (with Russia and Saudi Arabia
increasing production as the scale of the pandemic became apparent) but
recovered somewhat by period-end
* Directors, London based staff and consultants have been working from home
since March 2020, and agreed a temporary salary/rate cut of 20% since 1
April 2020
* Given the success of home working, the Company has given notice to
terminate the London office lease from December 2020, which will further
cut costs
Financial performance
* Revenue GBP1.2 million (2019: GBP1.7 million)
* Pre-tax loss before exploration write-off / write-back GBP1.2 million (2019:
GBP0.9 million)
* Pre-tax loss of GBP5.4 million including write-offs taken following
relinquishment of Irish licences (see post period reporting events below)
(2019: pre-tax loss GBP0.7 million)
* Net cash used in operating activities GBP0.8 million (2019: GBP0.7 million)
* Cash balance: GBP0.8 million (31 July 2019: GBP2.9 million)
Board
* Hugh Mackay stepped down as CEO, Simon Oddie was appointed as Interim CEO
and Executive Chairman
* Appointment of Stephen Williams as independent Non-Executive director,
replacing Roderick Corrie
Post reporting period events
* Commencement of site works at Wressle Oil Field
* Appointment of Simon Oddie as CEO on a permanent basis
* Senior Independent non-executive Director Mr Brian O'Cathain appointed
non-executive Chairman
* Since 1 August 2020 the Board increased the reduction in their salary and
fees to 50%
Simon Oddie, CEO of Europa, said: "The award of the Inezgane permit offshore
Morocco, the granting of planning consent for the Wressle Oil Field, the
refocus of the Offshore Ireland portfolio onto the proven gas play of the Slyne
Basin following the acquisition of FEL3/19 and the 1.2 tcf Edge prospect - much
progress has been made during the year under review. While the ongoing
pandemic and volatility in oil and gas prices may impact exact timings of
planned activity, we are confident that the momentum behind our various
projects will continue to build in the year ahead.
"In Morocco, work carried out to date has seen our team map up to 30 prospects
and leads which we believe, in aggregate, have the potential to hold close to
10 billion barrels of unrisked oil resources. The size of 50 blocks in the UK
North Sea, our Inezgane licence had already attracted the attention of existing
operators in the area and, while there is more work to be done to de-risk the
prospectivity further, we are growing more and more confident that this
attention is set to increase as we build a prospect inventory ahead of the
launch of a farm-out. Onshore UK, the Wressle Oil Field remains on track to be
brought online at an initial gross rate estimated at 500bopd in late 2020
following the commencement of site works in the summer. At this rate and with
a c.$18 per barrel breakeven oil price, Wressle will more than double Europa's
production to over 200bopd and in the process transform the Company's financial
profile. Offshore Ireland, once the acquisition of FEL 3/19 has been
completed, Europa will own 100% of the most material gas prospects that lie in
the same play as Corrib, Ireland's biggest producing gas field. We will soon
look to launch the farmout of what we view as an unrivalled strategic position
in offshore Ireland's only gas producing basin.
"Our objective is to expose our shareholders to significant value creating
opportunities while minimising risk. Our UK production, which is set to
dramatically increase once Wressle comes online, provides us with a low risk
cash flow generative platform. Our offshore Ireland and offshore Morocco
assets, which hold company-making volumetrics, provide us with multiple
opportunities to generate significant value. We also intend to resume our
efforts to add a third leg to our business by securing a late stage appraisal
project, once market conditions improve. Our confidence in Europa's assets and
team remains as high as ever and with this in mind, I look forward to providing
further updates on our progress in the year ahead."
Chairman's statement
COVID-19, lockdowns, volatile energy markets - the world is a different place
to what it was 12 months ago. Award of the large Inezgane permit offshore
Morocco, the pivot to gas offshore Ireland, the granting of planning permission
for the development of the Wressle oil field in North Lincolnshire - Europa is
a different junior oil and gas company to what it was 12 months ago. Today,
Europa's portfolio of multistage licences is exposed to three jurisdictions:
onshore UK, offshore Ireland, and offshore Morocco. Our strategic position
offshore Ireland is now centred around the proven gas play of the Slyne basin
and includes 100% interests in two prospects with the potential to hold 2.7tcf
of gas, the most material prospects that lie in the same play as the nearby
producing Corrib field.
The above is in line with our objective to expose shareholders to potentially
value creating events while minimising risk. We intend to achieve this by
building a production-based, cash flow generative platform in the UK which
covers both our low cost base as well as exploration activity focused on
de-risking prospects to the point at which partners can be secured to drill
high impact wells. While the ongoing pandemic and measures taken to combat it
may affect timings, work streams in line with our corporate objective are
underway in all three of our licence areas. As a result, I am confident that
in 12 months' time, Europa will once again be a different junior oil and gas
company to the one it is today, one which has a financial profile that has been
transformed by the commencement of production at Wressle and one that has a
prospect inventory comprised of multiple company-making targets located in not
just one but two jurisdictions.
Onshore UK
Europa produces oil from three fields in the East Midlands. Due to the natural
decline of the fields, net production has been on a downward trajectory for a
number of years. Thanks to our active management programme, production during
the 12 months to 31 July 2020 averaged 92boepd, a rate slightly up on the
previous year's. This is a highly creditable outcome and one which is
testament to our excellent operations and technical teams.
Active management of old fields can only go so far. To achieve a step-change
in production, new fields need to be brought online. Following the granting of
planning consent in January 2020, the Wressle Development Project on licences
PEDL180 & 182 in North Lincolnshire, is one such new field which is expected to
lead to a step-change in Europa's net production. Work is currently underway
at the site to bring Wressle into production at an initial gross rate estimated
at 500bopd in late 2020. At this rate, Wressle will more than double Europa's
existing UK onshore production to over 200bopd. Moreover, production at
Wressle is expected to be highly geared to oil price recovery: a stress testing
exercise of the economic model demonstrated that, with an estimated break-even
oil price of US$17.6 per barrel excluding Europa's corporate overheads, the
development plan for the field is economically robust at today's oil prices.
While the focus is very much on bringing Wressle online, there are a number of
low cost/low risk follow-up opportunities on PEDLs 180 & 182. During testing at
Wressle, a total of 710 barrels of oil equivalent per day were recovered from
three separate reservoirs: the Ashover Grit; the Wingfield Flags; and the
Penistone Flags. Producing reserves in the Penistone Flags at Wressle is one
area of development which we, along with our partners, expect to pursue in the
future. PEDL 180 also holds Broughton North, a prospect adjacent to an
historic discovery which was assigned gross mean un-risked prospective
resources of 0.6 million boe and a geological chance of success of 50% in a
CPR. Wressle therefore does not just represent a one-off scaling up of our
production profile, but opens up a series of potential step-ups going forward.
However, in the absence of incremental production from Wressle in 2020,
additional funding for the Company would be required, either via the issuance
of new shares, the addition of a layer of debt funding or the sale of assets.
If additional funding were not able to be secured on satisfactory terms, there
is a risk that commitments could not be fulfilled, or that assets may be
relinquished.
Offshore Ireland
Even before the Irish Government took the decision in September 2019 to phase
out oil but not gas exploration, our flagship project offshore Ireland was the
1.5 tcf Inishkea gas prospect in Frontier Exploration Licence ('FEL') 4/19.
Located in the proven gas play of the Slyne Basin and close to the producing
Corrib field and associated processing facilities, we have long viewed Inishkea
as lower risk infrastructure-led exploration compared to the higher risk
unproven plays being targeted elsewhere in the Irish Atlantic Margin. When
the opportunity arose to effectively double up our position in the Slyne for a
nominal sum by acquiring a 100% interest in FEL 3/19, which holds the 1.2 tcf
Edge prospect, we acted swiftly.
Following the acquisition, which is subject to regulatory sign-off, Europa will
hold 100% interests in the only two tcf+ prospects which lie in the same gas
play that has yielded the Corrib field. Corrib plays an important role in
satisfying Ireland's energy needs, but the field is in decline. This
represents a major opportunity for Europa. With the Corrib gas field already
in decline, nearby existing processing facilities are likely to have spare
capacity in the future, which would potentially have positive implications for
development costs. With gas being viewed by the Irish Government as a key
transition fuel as the economy moves towards net zero emissions, the
acquisition will give Europa an unrivalled strategic position, one which has
the potential to hold gross unrisked prospective resources of 2.7 tcf. With
the above in mind, our intention is to relaunch the farm-out of our revamped
position in the Slyne Basin once the acquisition of FEL 3/19 has received
regulatory sign-off.
The flip side of the rebalance of our Irish portfolio towards gas is the
streamlining of the Company's exposure to oil plays in the Irish Atlantic
Margin. In line with this we have elected to relinquish all exploration
licences offshore Ireland which were targeted on oil rather than gas.
Offshore Morocco
The Inezgane block, which lies offshore Morocco, is at an earlier stage of
development when compared to Europa's UK and Irish positions having only been
awarded the licence in September 2019. This has not however prevented
significant progress being made during the period in terms of building a
prospect inventory. In July 2020, we announced that technical work centred
around reprocessing and interpreting historic 3D seismic data had resulted in
the mapping of 14 prospects and 16 leads in the Lower Cretaceous play, a
prolific producer elsewhere in West Africa. In aggregate these 30 targets have
the potential to hold close to 10 billion barrels of unrisked oil resources.
Two of the targets, the 827 mmboe Falcon and 204 mmboe Turtle prospects, have
been assigned a geological chance of success of 20-35% by Europa.
Work is underway to further de-risk the targets ahead of launching a farm-out
to secure partner(s) to drill wells. Europa continues to maintain dialogue with
potential partners, a number of whom expressed an interest in Inezgane at the
time of the award.
Board Changes
Europa's asset base is not the only area of the business to undergo major
change since last year's Annual Report. The Board too has seen a change in
personnel culminating in my appointment in August 2020 as non-executive
Chairman of the Company, replacing Simon Oddie who took on the role of Chief
Executive Officer on a permanent basis. Simon had temporarily assumed this
role in November 2019 following the departure of long-serving CEO Hugh Mackay.
These were not the only changes to the Board during the year. In March 2020, we
announced that Roderick Corrie had decided to step down from his position as
non-executive Director after 12 years, and in July 2020 Finance Director Phil
Greenhalgh informed the Board of his intention to retire having held this role
since January 2008. Stephen Williams, Co-CEO of Reabold Resources plc (AIM:
RBD), has been appointed to the Board as an independent non-executive Director.
Stephen has also agreed to take on the role of Chairman of the Audit committee,
and Senior Independent Director. Following Phil's departure, the
responsibilities of the Finance Director will for now be divided and assigned
to existing members of the Europa team.
Conclusions
This is my first Chairman's Statement for Europa. Having previously held the
position of senior non-executive Director of the Company, I was of course
already very familiar with Europa: with its focus on exposing shareholders to
value creating events while minimising risk; with its asset base which combines
stable production and high impact exploration; with its team, which has done
much to increase the industry's understanding of Ireland's various basins and
plays.
With Wressle on course to commence production by the end of the year, the
rebalancing of our Irish portfolio to gas, and the excellent results of ongoing
technical work offshore Morocco, I believe I have stepped up to the role of
Chairman at an exciting time in Europa's development, albeit one that is set
against a backdrop dominated by COVID-19, an unprecedented decline in global
demand for oil and gas, and consequently low commodity prices. However, we know
that this business is cyclical, and remain confident that demand and pricing
will recover. The wellbeing of all those involved with Europa is of paramount
importance to the Board and as we advance our various workstreams we will at
all times adhere to the prevailing government advice and guidance.
Finally, on behalf of the Board I would like to thank the management, employees
and consultants for their hard work during what has been and continues to be an
unprecedented period for everyone. I look forward to continuing working with
the team in the year ahead as we look to advance all our assets and at the same
time seek to add a late stage appraisal venture to our portfolio so that Europa
has exposure to all stages of the oil and gas cycle.
Mr Brian O'Cathain (non-executive Chairman)
Operations
Operational review
UK Production - East Midlands
Europa produces oil from three UK onshore fields: West Firsby; Crosby Warren;
Whisby-4. During the financial year ended 31 July 2020, an average of 92boepd
were recovered from the three fields. This is a similar performance to the
previous 12 month period and is testament to the Company's ongoing active
management of the three fields which is focused on maximising production.
A 1% interest in the West Firsby licence was assigned to FourTrees Energy
Limited following the successful workover of the WF6 well.
UK Development - Wressle Oil Field
Planning consent for the development of Wressle in North Lincolnshire, which
lies on licences PEDL180 & 182 ('the Licences'), was granted on 17 January
2020. Under the development plan, Wressle is expected to commence production
at an initial gross rate of 500bopd from the Ashover Grit formation. As well as
more than doubling Europa's existing UK onshore production to over 200bopd, oil
recovered from Wressle is expected to be highly profitable. In March 2020, the
Company announced the results of a stress testing exercise of the economic
model undertaken by the operator Egdon Resources in light of the current low
oil price environment. The results demonstrate that, with an estimated
break-even oil price of US$17.6 per barrel (excluding Europa's corporate
overheads), the development plan for the field is economically robust at
today's oil price levels.
Wressle is expected to be brought online late 2020. Work at the site is
underway in line with the development plan which is comprised of a number of
key stages. These along with work carried out to date are listed below:
* Key planning conditions have been discharged, detailed design tendering is
underway and all HSE documentation and procedures are progressing in line
with expectations
* Four groundwater boreholes have been installed and two rounds of sampling
and analysis undertaken to date
* Reconfiguration of the site - Site works are underway
* Installation and commissioning of surface facilities
* Sub-surface operations
* Commencement of production
The civil works contractor has commenced works to reconfigure the Wressle
production area. Works being undertaken include the installation of a new High
Density Polyethylene impermeable membrane; a French drain system; an approved
surface water interceptor; the construction of a purpose-built bund area for
storage tanks; a tanker loading plinth; and an internal roadway system.
Europa holds a 30% working interest in the Licences alongside Egdon Resources
(operator, 30%), and Union Jack Oil (40%). The Wressle Oil Field was discovered
by the Wressle-1 well in 2014. During testing, a total of 710 barrels of oil
equivalent per day were recovered from three separate reservoirs: the Ashover
Grit; the Wingfield Flags; and the Penistone Flags. In September 2016, a
Competent Person's Report provided independent estimates of reserves and
contingent and prospective oil and gas resources for the Wressle discovery of
2.15 million stock tank barrels classified as discovered (2P+2C). There is
additional development potential on the Licences including Broughton North, a
low risk exploration prospect lying on the footwall side of a fault, adjacent
to the historic Broughton-B1 discovery made by BP in 1984 which the CPR
assigned gross mean un-risked prospective resources of 0.6 million boe and a
geological chance of success of 49% for the Penistone Flags and 40% for the
Ashover Grit. Further development of the Wressle field, including producing
additional reserves existing in the Penistone Flags formation, is expected in
the future.
During the period, GBP403,000 was received from North Lincolnshire Council
('NLC') in settlement of gross costs incurred by the partners in relation to
the appeal process. This followed a favourable ruling by the Planning Inspector
regarding Egdon's application for costs against NLC when planning consent for
Wressle was granted on appeal on 17 January 2020. The gross sum has been
divided between the partners in Wressle proportionate with their interests. As
a result, Europa received GBP120,900.
Exploration: Offshore Ireland
During the period, the Company took the decision to rebalance its portfolio of
offshore Ireland licences in favour of gas, specifically the proven gas play in
the Slyne Basin which is home to the producing Corrib gas field. The Company
regards this as lower risk infrastructure exploration due to the close
proximity of Corrib and associated processing facilities. Furthermore,
Europa's flagship project is the nearby 1.5tcf Inishkea gas prospect.
In line with the above, in June 2020 the Company announced the acquisition of a
100% interest in Frontier Exploration Licence ('FEL') 3/19 from DNO. FEL 3/19,
which holds the 1.2 tcf Edge prospect, lies close to Corrib and Europa's 100%
owned FEL 4/19 which holds the 1.5 tcf Inishkea prospect. The directors believe
the acquisition, which is subject to regulatory sign-off, will provide Europa
with a key strategic position in the proven gas play of the Slyne Basin. FEL3/
19 was formerly the LO16/23 block which DNO acquired following the acquisition
of Faroe Petroleum. In 2016, CNOOC farmed into the block, acquiring an 80%
interest and operatorship. CNOOC has since exited and having assumed CNOOC's
80% interest, DNO is now selling 100% of the licence to Europa for a nominal
upfront fee.
In tandem with the acquisition of FEL 3/19, the Company has elected to reduce
its position in more early stage and prospective areas of the Irish Atlantic
Margin where the primary target is oil. This decision was taken following the
Irish Government's announcement in September 2019 of its intention to phase out
oil but not gas exploration. In line with this and in addition to the
acquisition of FEL 3/19, during the period the Company announced the
relinquishment of four licences in the South Porcupine Basin where the primary
target was oil. FEL 1/17 has not yet been relinquished pending a possible
evaluation of gas potential. Following these changes, Europa's Irish portfolio
consists of three FELs with combined gross prospective resources of 2.7tcf of
gas and gross mean un-risked prospective resources of 3.9 billion barrels oil
equivalent.
Subject to the approval of the acquisition of FEL 3/19 by the Irish
authorities, the forward plan for Ireland is to launch a farm-out process for
both licences which combined have company-making gross unrisked prospective
resources of 2.7 tcf. In tandem with ongoing farm-out discussions, the site
survey process for a drilling location at Inishkea continues to be advanced.
Further to the application to relinquish of licences LO16/19, LO16/22, FEL2/13
and FEL 3/13, and the pending situation on FEL 1/17 the decision has been taken
to write off the value of these intangible assets, resulting in a non-cash
charge to income of GBP4,004,000.
Exploration: Offshore Morocco
In September 2019, Europa was awarded a 75% interest in and operatorship of the
Inezgane Offshore licence with the remaining 25% interest held by the Moroccan
regulator, ONHYM (Office National des Hydrocarbures et des Mines). Covering an
area of 11,228 sq km, Inezgane is the equivalent of approximately 50 UKCS North
Sea blocks, or over half the size of Wales. Europa's focus is on the Lower
Cretaceous fan sand play, which is a prolific play in West Africa but is highly
under-explored offshore Morocco. Out of just 10 wells that have been drilled in
deepwater Morocco to date, only three have penetrated a complete Lower
Cretaceous section. Despite this Europa has identified all the key elements of
source (including the world class Cenomanian-Turonian source rock), reservoir
and seal within the Inezgane licence.
The licence period commenced in November 2019 and since then work has been
focused on reprocessing and interpreting historic seismic data to de-risk large
prospects in the Lower Cretaceous play. Initial results have been highly
encouraging. To date, 14 prospects and 16 leads have been mapped, which the
Company estimates have the potential to hold in aggregate close to 10 billion
barrels of unrisked oil resources. All the identified prospects have mean
resources in excess of 150 mmboe which taken together add up to total resources
in excess of 5 billion barrels of oil equivalent. The prospects have stacked
reservoir potential and include a wide range of structural styles including for
example 4-way dip closure in the case of the 827 mmboe Falcon and 204 mmboe
Turtle prospects. Europa has assigned a geological chance of success to these
prospects of 20-35%. In addition, examples of shallow gas anomalies have been
seen on seismic data which is a positive indication of a working petroleum
system operating in the basin.
Ongoing work is focused on further de-risking these prospects and leads while
the forward plan is to build a robust prospect inventory and, subject to the
results, secure partner(s) to drill wells. A farm-out process will be formally
launched shortly, however the Company has maintained dialogue with three
companies, all of whom have expressed interest in Inezgane.
A number of other oil and gas companies are currently active in this area of
Morocco, notably Shell, ENI, Repsol, Hunt, Chariot, SDX, Sound, Schlumberger
and Genel.
The Inezgane Permit is of 8-years duration comprising three phases of which the
Initial Phase of the licence comprises 2-years. The Initial Phase includes 3D
seismic reprocessing as well as other technical studies. At the end of the
Initial Phase, Europa has the option to commit to drilling an exploration well
in the Second Phase of the licence or to relinquish the licence.
Financials
Revenue was GBP1.2 million (2019: GBP1.7 million). The average oil price achieved
was US$48.0/bbl (2019: US$66.7/bbl) and the average Sterling exchange rate was
US$1.27 (2019: US$1.29). An average of 92 boepd (2019: 91 boepd) was recovered
from our three UK onshore fields. Production was down at West Firsby,
relatively flat at Crosby Warren, but increased at Whisby.
Stringent cost controls continue to be implemented. Cost of sales was GBP
1,438,000 (2019: GBP1,682,000).
Administrative expenses of GBP823,000 (2019: GBP811,000) included GBP81,000 on new
licence evaluations (2019: GBP102,000).
Net cash spent on operating activities was GBP844,000 (2019: cash spent GBP
661,000).
Purchase of intangible fixed assets of GBP1,148,000 (2019: GBP1,973,000) was spent
advancing the portfolio.
The Group's cash balance at 31 July 2020 was GBP0.8 million (31 July 2019: GBP2.9
million), sufficient to fund Europa's share of the Wressle development.
Non-financial Key Performance Indicators ('KPIs')
There were no reportable accidents or incidents in the year (2019: zero).
One new licence, the Morocco Inezgane Offshore exploration permit, was signed
in the year. (2019: zero).
Conclusion and Outlook
Despite the disruption caused by the ongoing pandemic, much has been achieved
across Europa's asset base during the year. As a result, the foundations are
in place for further progress to be made in the year ahead starting with first
production at Wressle. As well as doubling Europa's net production to over
200boepd, bringing the field on stream will open up a number of low risk
opportunities on the licence to build production further. By scaling up
Europa's internally generated revenues and cash flows, Wressle will put the
Company in a strong position to pursue these follow-up opportunities. In the
absence of incremental production from Wressle in 2020 additional funding for
the Company would be required, either via the issuance of new shares, the
addition of a layer of debt funding or the sale of assets. If additional
funding were not able to be secured on satisfactory terms, there is a risk that
commitments could not be fulfilled, or that assets may be relinquished.
Outside the UK, farm-out will be the focus. Offshore Ireland, a farm-out of
Europa's strategic position in the Slyne Basin will be launched once the
acquisition of FEL3/19 has been approved. With combined gross prospective
resources of 2.7 tcf and located close to the producing Corrib gas field, the
Board believes FELs 3/19 and 4/19 represent a compelling investment opportunity
and remains confident that one or more partners will be secured to take these
licences forward. Offshore Morocco, once technical work has been completed to
de-risk what is a sizeable prospect inventory, a farm-out will be launched,
although discussions have been taking place with interested parties on an
informal basis ever since Inezgane was awarded to Europa.
Outside our existing portfolio, the Board remains keen to add a third leg to
the business, specifically a late stage appraisal project to complete Europa's
exposure to the full oil and gas cycle. While COVID-19 has delayed this
process, together with volatile oil and gas markets, it may yet generate
opportunities as assets are divested that may have not warranted Europa's
serious attention prior to the onset of the pandemic. Importantly, once
Wressle is in production, Europa will have a much-improved financial profile
with which to secure a new venture and further build the Company.
Qualified Person Review
This release has been reviewed by Rowland Thomas, geophysical advisor to
Europa, who is a geophysicist with over 39 years' experience in petroleum
exploration and a member of the Society of Exploration Geophysicists, European
Association of Geoscientists and Engineers and the Petroleum Exploration
Society of Great Britain, and has consented to the inclusion of the technical
information in this release in the form and context in which it appears.
Simon Oddie (CEO)
The financial information set out below does not constitute the company's
statutory accounts for 2020 or 2019. The financial information has been
prepared in accordance with International Financial Reporting Standards (IFRS)
as adopted by the European Union on a basis that is consistent with the
accounting policies applied by the group in its audited consolidated financial
statements for the year ended 31 July 2020. Statutory accounts for the years
ended 31 July 2019 and 31 July 2018 have been reported on by the Independent
Auditors.
The Independent Auditors' Report on the Annual Report and Financial Statements
for 2020 and 2019 were unqualified, but included a material uncertainty in
relation to going concern, and did not contain a statement under 498(2) or 498
(3) of the Companies Act 2006.
Statutory accounts for the year ended 31 July 2019 have been filed with the
Registrar of Companies. The statutory accounts for the year ended 31 July 2020
will be delivered to the Registrar in due course.
Consolidated statement of comprehensive income
For the year ended 31 July
2020 2019
Note GBP000 GBP000
Revenue 1,244 1,713
Cost of sales (1,438) (1,682)
Impairment of producing fields 2 (160) -
Total cost of sales (1,598) (1,682)
------ ------
Gross (loss)/profit (354) 31
Exploration (write-off)/ write back 1 (4,004) 270
Administrative expenses (823) (811)
Finance income 7 43
Finance expense (266) (187)
-------- --------
Loss before taxation (5,440) (654)
Taxation charge - -
-------- --------
Loss for the year (5,440) (654)
====== ======
Other comprehensive income
Items which will not be reclassified to profit /(loss)
Loss on investment revaluation (197) (59)
-------- --------
Total other comprehensive loss (197) (59)
====== ======
Total comprehensive loss for the year attributable to (5,637) (713)
the equity shareholders of the parent
====== ======
Earnings per share (EPS) attributable to the equity Pence per Pence per
shareholders of the parent share share
Basic and diluted EPS (1.22)p (0.17)p
Consolidated statement of financial position
As at 31 July
2020 2019
Note GBP000 GBP000
Assets
Non-current assets
Intangible assets 1 4,965 7,818
Property, plant and equipment 2 476 575
------ ------
Total non-current assets 5,441 8,393
------ ------
Current assets
Investments 44 241
Inventories 12 19
Trade and other receivables 234 315
Restricted cash 245 251
Cash and cash equivalents 768 2,905
------ ------
Total current assets 1,303 3,731
------ ------
Total assets 6,744 12,124
====== ======
Liabilities
Current liabilities
Loans (2) -
Trade and other payables (1,013) (1,086)
-------- --------
Total current liabilities (1,015) (1,086)
-------- --------
Non-current liabilities
Loans (48) -
Trade and other payables (31) -
Long-term provisions (3,163) (2,917)
------ ------
Total non-current liabilities (3,242) (2,917)
------ ------
Total liabilities (4,257) (4,003)
------- -------
Net assets 2,487 8,121
====== ======
Capital and reserves attributable to equity holders
of the parent
Share capital 4,447 4,447
Share premium 21,010 21,010
Merger reserve 2,868 2,868
Retained deficit (25,838) (20,204)
------ ------
Total equity 2,487 8,121
====== ======
These financial statements were approved by the Board of Directors and
authorised for issue on 12 October 2020 and signed on its behalf by:
P Greenhalgh (Finance Director)
Company registration number 5217946
Consolidated statement of changes in equity
Attributable to the equity holders of the parent
Share Share Merger Retained Total
capital premium reserve deficit equity
GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 1 August 2018 3,014 18,481 2,868 (19,508) 4,855
Comprehensive loss for the
year
Loss for the year (654) (654)
attributable to the equity - - -
shareholders of the parent
Other comprehensive loss (59) (59)
attributable to the equity - - -
shareholders of the parent
------ ------ -------- ------- ------
Total comprehensive loss
for the year - - - (713) (713)
------ ------ -------- ------- ------
Contributions by and
distributions to owners
Issue of share capital 1,433 2,546 - - 3,979
Issue of share options - (17) - 17 -
(note 22)
Share-based payments (note - - - - -
23)
------ ------ ------ -------- -------
Total contributions by and 1,433 2,529 - 17 3,979
distributions to owners
------ ------ -------- ------- ------
Balance at 31 July 2019 4,447 21,010 2,868 (20,204) 8,121
====== ====== ====== ====== ======
Share Share Merger Retained Total
capital premium reserve deficit equity
GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 1 August 2019 4,447 21,010 2,868 (20,204) 8,121
Comprehensive loss for the
year
Loss for the year - - - (5,440) (5,440)
attributable to the equity
shareholders of the parent
Other comprehensive loss - - - (197) (197)
attributable to the equity
shareholders of the parent
------ ------ -------- ------- ------
Total comprehensive loss - - - (5,637) (5,637)
for the year
------ ------ -------- ------- ------
Contributions by and
distributions to owners
Share-based payments (note - - - 3 3
23)
------ ------ ------ -------- -------
Total contributions by and - - - 3 3
distributions to owners
------ ------ -------- ------- ------
Balance at 31 July 2020 4,447 21,010 2,868 (25,838) 2,487
====== ====== ====== ====== ======
Consolidated statement of cash flows
For the year ended 31 July
2020 2019
Note GBP000 GBP000
Cash flows used in operating activities
Loss after tax from continuing operations (5,440) (654)
Adjustments for:
Share-based payments 3 -
Depreciation 2 186 94
Impairment of producing field 2 160 -
Exploration write off/ (write back) 1 4,004 (270)
Finance income (7) (43)
Finance expense 266 187
Decrease in trade and other receivables 72 7
Decrease in inventories 7 1
(Decrease)/increase in trade and other payables (95) 17
-------- --------
Net cash used in operations (844) (661)
Income taxes paid - -
-------- --------
Net cash used in operating activities (844) (661)
====== ======
Cash flows used in investing activities
Purchase of property, plant and equipment (100) (1)
Purchase of intangible assets (1,148) (1,973)
Cash guarantee re Morocco (1) (251)
Sale of part interest in licence - associated costs (12) (8)
Interest received 7 16
------- -------
Net cash used in investing activities (1,254) (2,217)
====== ======
Cash flows (used in)/ from financing activities
Gross proceeds from issue of share capital - 4,299
Costs incurred on issue of share capital - (320)
Proceeds from borrowings 50 -
Lease liability payments (73) -
Lease liability interest payments (3)
Finance costs (1) (5)
------- -------
Net cash (used in)/from financing activities (27) 3,974
====== ======
Net (decrease)/ increase in cash and cash equivalents (2,125) 1,096
Exchange (loss)/gain on cash and cash equivalents (12) 38
Cash and cash equivalents at beginning of year 2,905 1,771
------- -------
Cash and cash equivalents at end of year 768 2,905
====== ======
Notes to the financial statements
1 Intangible assets
Intangible assets - Group 2020 2019
GBP000 GBP000
At 1 August 7,818 5,959
Additions 1,151 1,869
Disposal - (10)
Exploration write-off (4,004) -
------- -------
At 31 July 4,965 7,818
====== ======
Intangible assets comprise the Group's pre-production expenditure on licence
interests as follows:
2020 2019
GBP000 GBP000
Ireland FEL 2/13 (Doyle A, B, C, Kilroy, Keane & Kiely) - 1,280
Ireland FEL 3/13 (Beckett, Wilde, Shaw) - 1,255
Ireland FEL 1/17 - 636
Ireland LO 16/19 - 89
Ireland FEL 4/19 (Inishkea) 1,482 1,259
Ireland LO 16/22 - 213
UK PEDL180 (Wressle) 2,947 2,867
UK PEDL181 118 101
UK PEDL182 (Broughton North) 29 29
UK PEDL299 (Hardstoft) 12 12
UK PEDL343 (Cloughton) 78 77
Morocco (Inezgane) 299 -
------- -------
Total 4,965 7,818
====== ======
Disposal
UK PEDL143 (Holmwood) - 10
====== ======
Exploration write-off
Ireland FEL 2/13 (Doyle A, B, C, Kilroy, Keane & Kiely) 1,445 -
Ireland FEL 3/13 (Beckett, Wilde, Shaw) 1,343 -
Ireland FEL 1/17 845 -
Ireland LO 16/19 94 -
Ireland LO 16/22 277 -
------- -------
Total 4,004 -
====== =======
Exploration write-back
On 8 May 2019 the Group sold its interest in PEDL143 (Holmwood) to UK Oil & Gas
Plc ('UKOG') for 25,951,557 shares in UKOG at 1.156p per share.
2020 2019
GBP000 GBP000
Consideration for the PEDL143 interest - 300
Disposal costs - (20)
Book value of remaining interest - (10)
------- -------
Exploration write-back - 270
====== ======
If the Group is not able to or elects not to continue in any other licence,
then the impact on the financial statements will be the impairment of some or
all of the intangible assets disclosed above. Further details of commitments
are included in note 25.
Intangible assets - Company
2020 2019
GBP000 GBP000
At 1 August 302 198
Additions 69 106
Transfer to Group companies - (2)
Exploration write-off (371) -
------ ------
At 31 July - 302
====== ======
Intangible assets comprise the Company's pre-production expenditure on licence
interests as follows:
2020 2019
GBP000 GBP000
Ireland LO 16/19 - 89
Ireland LO 16/22 - 213
------ ------
Total - 302
====== ======
Exploration write-off
2020 2019
GBP000 GBP000
Ireland LO 16/19 94 -
Ireland LO 16/22 277 -
------ ------
Total 371 -
====== ======
LO 16/22 and LO 16/19 were relinquished due to a lack of commercial prospects
and the GBP371,000 spent to date was written off.
2 Property, plant & equipment
Property, plant & equipment - Group
Furniture & Producing Right of
computers fields use assets Total
GBP000 GBP000 GBP000 GBP000
Cost
At 1 August 2018 52 10,790 - 10,842
Additions 1 - - 1
------ ------ ------ ------
At 31 July 2019 53 10,790 - 10,843
Additions 3 97 - 100
On transition - - 147 147
Disposals (50) - - (50)
------ ------ ------ ------
At 31 July 2020 6 10,887 147 11,040
====== ====== ====== ======
Depreciation, depletion and
impairment
At 1 August 2018 51 10,123 - 10,174
Charge for year 1 93 - 94
------ ------ ------ ------
At 31 July 2019 52 10,216 - 10,268
Charge for year 1 112 73 186
Disposal (50) - - (50)
Impairment in year - 160 - 160
------ ------ ------ ------
At 31 July 2020 3 10,488 73 10,564
====== ====== ====== ======
Net Book Value
At 31 July 2018 1 667 - 668
====== ====== ====== ======
At 31 July 2019 1 574 - 575
====== ====== ====== ======
At 31 July 2020 3 399 74 476
====== ====== ====== ======
The producing fields referred to in the table above are the production assets
of the Group, namely the oilfields at Crosby Warren and West Firsby, and the
Group's interest in the Whisby W4 well, representing the Group's three cash
generating units.
The carrying value of each producing field was tested for impairment by
comparing the carrying value with the value-in-use. The value-in-use was
calculated using a discounted cash flow model with production decline rates of
5-12%, Brent crude prices rising from US$48 per barrel in 2021 to US$61 per
barrel in 2023 and a pre-tax discount rate of 13.4%. The pre-tax discount rate
is derived from a post-tax rate of 10% and is high because of the applicable
rates of tax in the UK. Cash flows were projected over the expected life of the
fields which is expected to be longer than five years. There was an impairment
of GBP160,000 for the West Firsby oilfield in the year (2019: No impairment).
Sensitivity to key assumption changes
Variations to the key assumptions used in the value-in-use calculation would
cause impairment of the producing fields as follows:
Further impairment
of producing fields
GBP000
Production decline rate (current assumption 5-12%)
12% 55
15% 279
Brent crude price per barrel (current assumption US$42/
bbl in 2021 rising to US$61/bbl in 2023)
$42 flat 531
$50 flat 111
Pre-tax discount rate (current assumption 13.4%)
20% 310
25% 725
Property, plant & equipment - Company
Furniture & Right of use Total
computers assets
GBP000 GBP000 GBP000
Cost
At 1 August 2018 52 - 52
Additions 1 - 1
------ ------ ------
At 31 July 2019 53 - 53
At transition - 117 117
Additions 3 - 3
Disposals (50) - (50)
------ ------ ------
At 31 July 2020 6 117 123
====== ====== ======
Depreciation
At 1 August 2018 51 - 51
Charge for the year 1 - 1
------ ------ ------
At 31 July 2019 52 - 52
Charge for year 1 65 66
Disposals (50) - (50)
------ ------ ------
At 31 July 2020 3 65 68
====== ====== ======
Net Book Value
At 31 July 2018 1 - 1
====== ====== ======
At 31 July 2019 1 - 1
====== ====== ======
At 31 July 2020 3 52 55
====== ====== ======
* *S * *
For further information please visit www.europaoil.com or contact: Simon Oddie Europa +44 (0) 20 7009 2010 Christopher Raggett / Simon finnCap Ltd +44 (0) 20 7220 0500 Hicks / Tim Harper Frank Buhagiar / Megan St Brides Partners Ltd +44 (0) 20 7236 1177 Dennison The information communicated in this announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014. END
(END) Dow Jones Newswires
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