Lansdowne Oil & Gas plc Annual Results and Notice of AGM (6050E)

TIDMLOGP

RNS Number : 6050E

Lansdowne Oil & Gas plc

30 June 2023

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the retained EU law version of the Market Abuse Regulations (EU) No. 596/2014 ("MAR"). Upon the publication of this announcement via Regulatory Information Service ("RIS"), this inside information is now considered to be in the public domain. If you have any queries on this, then please contact Steve Boldy, the Chief Executive Officer of the Company (responsible for arranging release of this announcement).

30 June 2023

Lansdowne Oil & Gas plc

("Lansdowne" or the "Company")

Audited Results for the year ended 31 December 2022

2022 Annual Report & Accounts and Notice of Annual General Meeting

Lansdowne Oil & Gas ("Lansdowne" or "the Company") is pleased to announce its audited results, for the year ended 31 December 2022. Lansdowne is an upstream oil and gas company, focused on exploration and appraisal activities in the North Celtic Sea Basin, off the south coast of Ireland.

Lansdowne is also pleased to announce that the Company's 2022 Annual Report & Accounts have been posted to shareholders along with the notice of the Annual General Meeting ("AGM") to be held at 12.00 noon on 9 August 2023 at the offices of Pinsent Masons LLP, 30 Crown Place, Earl Street, London EC2A 4ES.

Copies of the 2022 Annual Report & Accounts and Notice of AGM will shortly be available to download from the Company's website, www.lansdowneoilandgas.com

Jeffrey Auld, Non-Executive Chairman of Lansdowne, commented:

Lansdowne exited 2022 having spent the year pursuing the award of a Lease Undertaking for the Barryroe oil and gas field.

Having discovered hydrocarbons on the Barryroe Licence in 2012 the Company has continued to move towards development of the discovery. The Company and its partner duly submitted an application for a Lease Undertaking in April 2021.

In 2019, eight years since Lansdowne acquired the Standard Exploration Licence 1/11 (the licence upon which the Barryroe field was discovered), the Department of the Environment, Climate and Communications ("DECC") introduced new Financial Capability Guidelines. These Financial Capabilities Guidelines are much more onerous than those in place when Lansdowne acquired the licence and discovered the Barryroe field and are considerably different from those in extractive industries elsewhere.

Without evidence that Lansdowne and its joint-venture partner has approval to proceed with the drilling of an appraisal well on Barryroe, in the form of the Lease Undertaking, it is extremely difficult to raise the full capital required to drill the well. The Barryroe joint venture partners have repeatedly attempted to correspond with DECC since the submission of the Lease Undertaking Application in April 2021. Responses from DECC have taken many months and repeated requests for meetings have been denied.

In October 2022 DECC provided a report of financial capability to the Barryroe joint-venture partners indicating that the arrangements put forward did not meet the financial capability requirements and providing an opportunity for the Barryroe partners to provide additional information. Both partners sought to respond to the concerns outlined under the new and revised financial capability guidelines in November 2022.

At year end 2022 this application continued to remain under consideration by DECC.

Barryroe Offshore, as operator of the Joint Venture commenced planning for drilling in 2024, in the expectation that a Lease Undertaking would be granted and went out to the market enquiring about rig availability in early May 2023.

However, on 19 May 2023, Barryroe Offshore Energy received a letter from the Irish DECC advising that Eamon Ryan, Minister for the DECC (the "Minister") was unwilling to grant the Lease Undertaking, as sought, on grounds of financial capability. DECC also confirmed in the letter that the application was satisfactory from a technical perspective.

Outlook

As reported by the Sustainable Energy Authority of Ireland, in 2022:

"Oil (48.2%) and Gas (31.1%) remain the largest sources of Ireland's energy, together accounting for just under four-fifths of our national energy requirement. In 2022, 86.4% of Ireland's energy was derived from fossil fuels, almost unchanged from their 2021 energy share of 86.1%.

Ireland's dependence on energy imports continued to increase in 2022. We imported 83.4% of our energy requirement, up from 80.5% in 2021, and 69.0% in 2018. Ireland's import dependency is relatively high (the EU average was 57.5% in 2020), because we import all our oil and coal products, and an increasing proportion of our gas, as production from the Corrib gas-field declines. In 2022, 73.9% of Ireland's gas was imported, up from 71.3% in 2021, and 38.6% in 2018."

Ireland will continue to require oil and gas in its energy mix for decades to come.

It has been commented on many times that indigenous production of oil and gas delivers greatly lower carbon emissions than imported hydrocarbons.

As has been demonstrated on many occasions, Barryroe contains significant quantities of oil and gas with the potential to deliver much needed energy security for Ireland, lower carbon emissions compared to imports and great value for all stakeholders.

Lansdowne has invested c. $20 million in the Barryroe project to date and the results of the Competent Person Report carried out by RPS ("RPS CPR") announced in February 2022, addressing simply the first phase of a Barryroe development and solely the Basal Wealden Oil reservoir, concluded that the P50 volumes were estimated at 81.2 million barrels of oil recoverable gross (16.24 million barrels net to Lansdowne) from a Best Estimate of 278 million barrels of oil in place (STOIIP).

An economic evaluation, documented in the RPS CPR, covering the Phase 1 development and in the 2C oil resources case, delivers an NPV10% for Lansdowne's 20% share of $104 million under a Brent Oil Price assumption of US$68 per barrel in 2027, rising to $70/barrel (bbl) in 2028 and 2029 and inflated at 2% per annum thereafter. As stated before, the RPS CPR has only addressed the oil in the Basal Wealden A Sand, which allows it to be correlated to the earlier work carried out by Netherland Sewell and Associates Inc. ("NSAI").

Gas was proven in the Basal Wealden C Sand reservoir in the 48/24-10z well that overlays the oil reservoir and this has previously been estimated to hold a potential gas resource of c 400 billion cubic feet (BCF) Gas Initially in Place (GIIP). Lansdowne believes this significant gas resource could make a vitally important contribution to Ireland's energy mix as it transitions to a zero net carbon economy and it is anticipated that any future phased development programme will include consideration of this important gas resource.

The decision by the Minister not to grant the Lease Undertaking is disappointing not only for the Company, but also other stakeholders, including Ireland, which continues to import significant amounts of oil & gas, something the development of Barryroe could help to address.

Given the lack of progress on the Lease Undertaking, Lansdowne had already commenced discussions with external legal advisors on the potential to pursue legal proceedings to protect its investment in Barryroe, prior to receipt of the letter from DECC.

The Company has now advanced the engagement with external legal counsel and has continued to pursue the steps required to move towards arbitration to protect its investment in the Barryroe Project. The Company believes there is clear evidence of the DECC and the Minister failing to act in a fair and equitable manner with the Barryroe Partners consistent with its obligations under Irish law and also international law. Given Lansdowne is a UK domiciled Company it will be pursuing its claim in international arbitration pursuant to the investment protection regime established under the Energy Charter Treaty to which both Ireland and the United Kingdom are signatories.

Lansdowne's legal advisors, Ashurst LLP, have initiated arbitration proceedings under the Energy Charter Treaty by submitting a letter giving notice pursuant to Article 26 (2) (c) of the ECT requiring Ireland to participate in discussions with a view to settling the dispute.

Funding for this legal action is expected to be provided by litigation funders, with no additional financial requirement from the Company. The Company has been approached by litigation funding firms and initial discussions are already underway, with positive feedback thus far. The Company intends to wait to see the Irish Government's response within the statutory 3-month timeframe, which is already underway, before subsequently looking to formalise litigation funding.

Further updates will be made with respect to the funding and legal process as appropriate, along with more information on the claims sought by Lansdowne in this matter.

In parallel the Company is also undertaking further cost-cutting measures at the plc level given the status of the Barryroe licence. The Company believes these initiatives will reduce its annual costs consistent with the activity levels required to pursue the ECT arbitration. As at 30 June 2023 the Company had cash of GBP15,000, however based on conversations with its existing shareholders, the Company believes it will be able to secure further equity funding as required. However, there is no guarantee that the Company will be able to secure such funding.

Our partner, and Operator of the Barryroe Joint Venture, Barryroe Offshore Energy plc. ("BEY"), announced on 19 June 2023 that its shares would be suspended from trading and that it would arrange an Extraordinary General Meeting in July 2023 to seek shareholder approval to appoint a Liquidator to the Company through a Creditors Voluntary Liquidation. In the meantime, discussions will continue with BEY's major shareholders to secure renewed funding.

Unlike Lansdowne, BEY being an Irish company, does not have investor protection under the Energy Charter Treaty ("ECT") and so would only have recourse to compensation through the Irish Courts, rather than through the International Arbitration open to Lansdowne.

Your company continues to seek to create value for shareholders, whilst facing a number of headwinds. We had hoped to achieve this through the appraisal and development of the Barryroe oil and gas field to the benefit of all stakeholders, but now must turn to the litigation pathway to seek compensation.

Operational highlights

   --    Barryroe Oil Field (SEL 1/11) 

o New reservoir and development studies to assess potential of first Phase development of Barryroe, centred around the 48/24-10z area were completed

o New CPR completed by RPS over Phase 1 development area estimated 2C Resources of 81.2 million barrels recoverable, 16.4 million barrels net to Lansdowne

o In October 2022 correspondence was received from the Department of the Environment, Climate and Communications ("DECC") that an independent report had concluded that on the basis of financial information provided to date, the parties to the Barryroe Joint Venture Partnership had not yet demonstrated compliance with the Financial Capability Assessment for Offshore Oil & Gas Exploration and Appraisal Application Guidance (the "Financial Capability Assessment").

o In November 2022, Lansdowne and it partner, Barryroe Offshore Energy, submitted additional materials to DECC confirming financial capability to deliver the work programme

o On 19 May 2023 a letter was received from DECC advising that Eamon Ryan, the Minister for DECCwould not grant a Lease Undertaking for Barryroe, on grounds of financial capability.

o Lansdowne has commenced arbitration proceedings as allowed for under the Energy Charter Treaty.

Financial highlights

   --    Cash balances at 31 December 2022 of GBP0.01 million (2021: GBP0.20 million). 
   --    Operating expenses for the year were GBP0.2 million (2021: GBP0.1 million). 
   --    Loss for the year after tax of GBP0.4 million (2021: loss GBP0.1 million). 
   --    Diluted loss per share of 0.04 pence (2020: loss 0.02 pence). 

-- The LC Capital Master Fund loan, due for repayment on 31 December 2022, was extended to 31 December 2023.

-- In March 2022, the Company placed 60,000,000 new ordinary shares with new and existing investors at a placing price of 0.5 pence per share, raising GBP300,000 before costs.

-- Associated with the fund raise, 1,821,826 warrants were granted to LC Capital Targeted Opportunities Fund, LP in accordance with the provisions of LCCTOC's warrant instrument.

-- LC now holds 27,821,826 warrants over ordinary shares and the strike price for these warrants has been amended to 0.5 pence per share from 0.525 pence per share pursuant to the LC warrant instrument.

For further information please contact:

 
 Lansdowne Oil & Gas plc                [phone] 
 Steve Boldy 
 
 SP Angel Corporate Finance LLP    [phone] 
 Nominated Adviser and Joint 
  Broker 
 Stuart Gledhill 
 Richard Hail 
 
 
 Tavira Financial Limited          [phone] 
 Joint Broker 
 Oliver Stansfield 
 

Notes to editors:

About Lansdowne

Lansdowne Oil & Gas (LOGP.LN) is a North Celtic Sea focused, oil and gas exploration and appraisal company quoted on the AIM market and head quartered in Dublin.

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

Results for the year ended 31 December 2022

Chairman's Statement

Introduction

Lansdowne exited 2022 having spent the year pursuing the award of a Lease Undertaking for the Barryroe oil and gas field.

Having discovered hydrocarbons on the Barryroe Licence in 2012 the Company has continued to move towards development of the discovery. The Company and its partner duly submitted an application for a Lease Undertaking in April 2021.

In 2019, eight years since Lansdowne acquired the Standard Exploration Licence 1/11 (the licence upon which the Barryroe field was discovered), the Department of the Environment, Climate and Communications ("DECC") introduced new Financial Capability Guidelines. These Financial Capabilities Guidelines are much more onerous than those in place when Lansdowne acquired the licence and discovered the Barryroe field and are considerably different from those in extractive industries elsewhere.

Without evidence that Lansdowne and its joint-venture partner has approval to proceed with the drilling of an appraisal well on Barryroe, in the form of the Lease Undertaking, it is extremely difficult to raise the full capital required to drill the well. The Barryroe joint venture partners have repeatedly attempted to correspond with DECC since the submission of the Lease Undertaking Application in April 2021. Responses from DECC have taken many months and repeated requests for meetings have been denied.

In October 2022 DECC provided a report of financial capability to the Barryroe joint-venture partners indicating that the arrangements put forward did not meet the financial capability requirements and providing an opportunity for the Barryroe partners to provide additional information. Both partners sought to respond to the concerns outlined under the new and revised financial capability guidelines in November 2022.

At year end 2022 this application continued to remain under consideration by DECC.

Barryroe Offshore, as operator of the Joint Venture commenced planning for drilling in 2024, in the expectation that a Lease Undertaking would be granted and went out to the market enquiring about rig availability in early May 2023.

However, on 19 May 2023, Barryroe Offshore Energy received a letter from the Irish DECC advising that Eamon Ryan, Minister for the DECC (the "Minister") was unwilling to grant the Lease Undertaking, as sought, on grounds of financial capability. DECC also confirmed in the letter that the application was satisfactory from a technical perspective.

Financial Results

The Group recorded an after tax loss of GBP0.4 million for the year ended 31 December 2022 compared to a loss of GBP0.1 million for the year ended 31 December 2021.

Group operating expenses for the year were GBP0.2 million, compared to GBP0.1 million in 2021. Net finance expense for the year was GBP146,000 (2021: GBP49,000). Cash balances of GBP0.01 million (2021: GBP0.2 million) were held at the end of the financial year.

The spend incurred on the Barryroe Licence area for the year totalled GBP211,000 (2021: GBP435,000). Total equity attributable to the ordinary shareholders of the Group was GBP14.8 million as at 31 December 2022 (GBP14.7 million as at 31 December 2021).

In March 2022, the Company placed 60,000,000 new ordinary shares with new and existing investors at a placing price of 0.5 pence per share, raising GBP300,000 before costs.

Associated with the fund raise, 1,821,826 warrants were granted to LC Capital Targeted Opportunities Fund, LP in accordance with the provisions of LCCTOC's warrant instrument, the terms of which were announced previously on 31 December 2021. LC now holds 27,821,826 warrants over ordinary shares and the strike price for these warrants has been amended to 0.5 pence per share from 0.525 pence per share pursuant to the LC warrant instrument.

The Company on 30 December 2022 announced that it had entered into an agreement with LC Capital Master Fund ("LCCMF") to extend the payment date of its outstanding loan of GBP1.08 million (the "Loan") which was due for repayment on 31 December 2022. The repayment date on the loan has been extended to 31 December 2023.

Post year end, in January 2023, the Company placed 60,000,000 new ordinary shares of 0.1 pence each in the Company ("ordinary shares") with new and existing investors at a placing price of 0.5 pence per share, raising GBP300,000 before costs.

In association with the Placing, 3,000,000 Broker Warrants were granted to the broker Tavira Financial Limited, with an exercise price of 0.5p per ordinary share. The Broker Warrants are exercisable up until the third anniversary of Admission.

In connection with the Placing, the Company also granted a total of 60,000,000 warrants ("Investor Warrants") to placees participating in the Placing, on a one Investor Warrant per new ordinary share basis, to subscribe for new ordinary shares in the Company at a price of 1.0 pence per share. The Investor Warrants will be exercisable until the second anniversary of Admission. In the event all of the Investor Warrants are exercised before their expiry, the Company would receive a further GBP0.60 million in cash.

Separately, 1,788,000 warrants have been granted to LC Capital Targeted Opportunities Fund, LP ("LC") in accordance with the provisions of LC's warrant instrument, the terms of which have been previously announced on 31 December 2021. LC now holds 29,609,826 warrants over ordinary shares at a strike price of 0.5 pence per share. In addition, in the event that the Investor Warrants and Broker Warrants are exercised in full prior to the maturity date of the LC warrants, LC will be granted up to an additional 1,877,400 warrants over ordinary shares in accordance with the provisions of LC's warrant instrument.

Outlook

As reported by the Sustainable Energy Authority of Ireland, in 2022:

"Oil (48.2%) and Gas (31.1%) remain the largest sources of Ireland's energy, together accounting for just under four-fifths of our national energy requirement. In 2022, 86.4% of Ireland's energy was derived from fossil fuels, almost unchanged from their 2021 energy share of 86.1%.

Ireland's dependence on energy imports continued to increase in 2022. We imported 83.4% of our energy requirement, up from 80.5% in 2021, and 69.0% in 2018. Ireland's import dependency is relatively high (the EU average was 57.5% in 2020), because we import all our oil and coal products, and an increasing proportion of our gas, as production from the Corrib gas-field declines. In 2022, 73.9% of Ireland's gas was imported, up from 71.3% in 2021, and 38.6% in 2018.

Ireland will continue to require oil and gas in its energy mix for decades to come.

It has been commented on many times that indigenous production of oil and gas delivers greatly lower carbon emissions than imported hydrocarbons.

As has been demonstrated on many occasions, Barryroe contains significant quantities of oil and gas with the potential to deliver much needed energy security for Ireland, lower carbon emissions compared to imports and great value for all stakeholders.

Lansdowne has invested c. $20 million in the Barryroe project to date and the results of the Competent Person Report carried out by RPS ("RPS CPR") announced in February 2022, addressing simply the first phase of a Barryroe development and solely the Basal Wealden Oil reservoir, concluded that the P50 volumes were estimated at 81.2 million barrels of oil recoverable gross (16.24 million barrels net to Lansdowne) from a Best Estimate of 278 million barrels of oil in place (STOIIP).

An economic evaluation, documented in the RPS CPR, covering the Phase 1 development and in the 2C oil resources case, delivers an NPV10% for Lansdowne's 20% share of $104 million under a Brent Oil Price assumption of US$68 per barrel in 2027, rising to $70/barrel (bbl) in 2028 and 2029 and inflated at 2% per annum thereafter. As stated before, the RPS CPR has only addressed the oil in the Basal Wealden A Sand, which allows it to be correlated to the earlier work carried out by Netherland Sewell and Associates Inc. ("NSAI").

Gas was proven in the Basal Wealden C Sand reservoir in the 48/24-10z well that overlays the oil reservoir and this has previously been estimated to hold a potential gas resource of c 400 billion cubic feet (BCF) Gas Initially in Place (GIIP). Lansdowne believes this significant gas resource could make a vitally important contribution to Ireland's energy mix as it transitions to a zero net carbon economy and it is anticipated that any future phased development programme will include consideration of this important gas resource.

The decision by the Minister not to grant the Lease Undertaking is disappointing not only for the Company, but also other stakeholders, including Ireland, which continues to import significant amounts of oil & gas, something the development of Barryroe could help to address.

Given the lack of progress on the Lease Undertaking, Lansdowne had already commenced discussions with external legal advisors on the potential to pursue legal proceedings to protect its investment in Barryroe, prior to receipt of the letter from DECC.

The Company has now advanced the engagement with external legal counsel and has continued to pursue the steps required to move towards arbitration to protect its investment in the Barryroe Project. The Company believes there is clear evidence of the DECC and the Minister failing to act in a fair and equitable manner with the Barryroe Partners consistent with its obligations under Irish law and also international law. Given Lansdowne is a UK domiciled Company it will be pursuing its claim in international arbitration pursuant to the investment protection regime established under the Energy Charter Treaty to which both Ireland and the United Kingdom are signatories.

Lansdowne's legal advisors, Ashurst LLP, have initiated arbitration proceedings under the Energy Charter Treaty by submitting a letter giving notice pursuant to Article 26 (2) (c) of the ECT requiring Ireland to participate in discussions with a view to settling the dispute.

Further updates will be made with respect to the legal process as appropriate, along with more information on the claims sought by Lansdowne in this matter.

Our partner, and Operator of the Barryroe Joint Venture, Barryroe Offshore Energy plc. ("BEY"), announced on 19 June 2023 that its shares would be suspended from trading and that it would arrange an Extraordinary General Meeting in July 2023 to seek shareholder approval to appoint a Liquidator to the Company through a Creditors Voluntary Liquidation. In the meantime, discussions will continue with BEY's major shareholders to secure renewed funding.

Unlike Lansdowne, BEY being an Irish company, does not have investor protection under the Energy Charter Treaty ("ECT") and so would only have recourse to compensation through the Irish Courts, rather than through the International Arbitration open to Lansdowne.

Your company continues to seek to create value for shareholders, whilst facing a number of headwinds. We had hoped to achieve this through the appraisal and development of the Barryroe oil and gas field to the benefit of all stakeholders, but now must turn to the litigation pathway to seek compensation.

Jeffrey Auld

Chairman

30 June 2023

Lansdowne Oil & Gas plc

Consolidated Income Statement

For the year ended 31 December 2022

 
                                                          2022       2021 
                                           Notes       GBP'000    GBP'000 
Administrative expenses                                  (218)       (82) 
                                                  ------------  --------- 
Operating loss                                           (218)       (82) 
Finance costs                              16            (146)       (49) 
                                                  ------------  --------- 
Loss for the year before 
 tax                                                     (364)      (131) 
Income tax                                 17                -          - 
                                                  ------------  --------- 
Loss for the year                                        (364)      (131) 
                                                  ============  ========= 
 
 
  Loss per share (pence): 
  Basic loss per ordinary share          3             (0.04p)    (0.02p) 
 
Diluted loss per ordinary 
 share                                  3              (0.04p)    (0.02p) 
                                                  ============  ========= 
 
 

The results for the year all arise on continuing operations.

Lansdowne Oil & Gas plc

Consolidated Statement of Financial Position

As at 31 December 2022

 
 Assets                                         Notes         2022      2021 
  Non-Current Assets                                       GBP'000   GBP'000 
Intangible assets                           4               16,336    16,125 
                                                          --------  -------- 
 
  Current Assets 
  Trade and other receivables                6                  19        21 
Cash and cash equivalents                                       15       199 
                                                          --------  -------- 
                                                                34       220 
                                                          --------  -------- 
Total Assets                                                16,370    16,345 
                                                          ========  ======== 
 
Equity and Liabilities 
Shareholders' Equity 
 Share capital                                    12        11,990    11,930 
Share premium                                    12         28,475    28,284 
Currency translation reserve                                    59        59 
Share-based payment reserve                      15              -       316 
Warrants reserve                                       9       115         - 
Accumulated deficit                                       (25,889)  (25,936) 
                                                          --------  -------- 
Total Equity                                                14,750    14,653 
                                                          --------  -------- 
Non-Current Liabilities 
Provisions                                       10            512       388 
                                                          --------  -------- 
                                                               512       388 
                                                          --------  -------- 
 
  Current Liabilities 
  Shareholder loan                           8                 979     1,027 
Trade and other payables                    7                  129       277 
                                                          --------  -------- 
Total Liabilities                                            1,620     1,692 
                                                          --------  -------- 
 
  Total Equity and Liabilities                              16,370    16,345 
                                                          ========  ======== 
 
 

Lansdowne Oil & Gas plc

Consolidated Statement of Cash Flows

For the year ended 31 December 2022

                                                                                                                                                 2022                                 2021 
 
                                                       Notes             GBP'000  GBP'000 
  Cash flows from operating activities 
Loss for the year                                                          (364)    (131) 
 Adjustments for: 
 Interest payable and similar charges                                       146        48 
Decrease/(increase) in trade and other 
 receivables                                                                   2      (4) 
(Decrease)/increase in trade and other 
 payables                                                                   (23)       86 
                                                              ------------------  ------- 
Net cash used in operating activities                                      (239)      (1) 
                                                              ------------------  ------- 
 
  Cash flows from investing activities 
  Acquisition of intangible exploration 
  assets                                               4                   (211)    (435) 
                                                              ------------------  ------- 
Net cash used in investing activities                                      (211)    (435) 
                                                              ------------------  ------- 
Cash flows from financing activities 
 Proceeds from the issue of share capital                                    300        - 
Cost of raising shares                                                      (34)        - 
                                                              ------------------  ------- 
Net cash from financing activities                                           266        - 
                                                              ------------------  ------- 
Net (decrease) in cash and cash equivalents                                (184)    (436) 
Cash and cash equivalents at 1 January                                       199      635 
                                                              ------------------  ------- 
Cash and cash equivalents at 31 December                                      15      199 
                                                              ==================  ======= 
 
 

Lansdowne Oil & Gas plc

Consolidated Statement of Changes in Equity

For the year ended 31 December 2022

 
                                                         Share       Currency 
                            Share       Share    Based Payment    Translation     Warrants     Accumulated       Total 
                          Capital     Premium          Reserve        Reserve      Reserve         Deficit      Equity 
                          GBP'000     GBP'000          GBP'000        GBP'000      GBP'000         GBP'000     GBP'000 
 Balance at 1 January 
  2021                     11,930      28,284              923             59            -        (26,412)      14,784 
 Loss for the 
  financial 
  year                          -           -                -              -            -           (131)       (131) 
                       ----------  ----------  ---------------  -------------  -----------  --------------  ---------- 
 
   Total 
   comprehensive 
   loss for the year            -           -                -              -            -           (131)       (131) 
 Lapse of share 
  options                       -           -            (607)              -            -             607           - 
                       ----------  ----------  ---------------  -------------  -----------  --------------  ---------- 
 
   Balance at 31 
   December 
   2021                    11,930      28,284              316             59            -        (25,936)      14,653 
                       ----------  ----------  ---------------  -------------  -----------  --------------  ---------- 
 
   Balance at 1 
   January 
   2022                    11,930      28,284              316             59            -        (25,936)      14,653 
 Loss for the 
  financial 
  year                          -           -                -              -            -           (364)       (364) 
                       ----------  ----------  ---------------  -------------  -----------  --------------  ---------- 
 
   Comprehensive loss 
   for the year                 -           -                -              -            -           (364)       (364) 
 Issue of new shares 
  - gross 
  consideration 
  (note 12)                    60         240                -              -            -               -         300 
 Issue of shares - 
  warrants (Note 9)             -        (15)                -              -           15               -           - 
 Issue of warrants 
  to holder of loan 
  notes (Note 9)                -           -                -              -          100              95         195 
 Cost of share issues           -        (34)                -              -            -               -        (34) 
 Lapse of share 
  options                       -           -            (316)              -            -             316           - 
 
   Balance at 31 
   December 
   2022                    11,990      28,475                -             59          115        (25,889)      14,750 
                       ==========  ==========  ===============  =============  ===========  ==============  ========== 
 

Lansdowne Oil & Gas plc

Notes to the Financial Information

For the year ended 31 December 2022

1. Basis of presentation

The consolidated financial statements are presented in Sterling, the Company's functional currency, and all values are rounded to the nearest thousand (GBP'000) except where otherwise indicated.

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

The Directors have carried out a detailed assessment of the Group's current and prospective activity, its relationship with the holder of its loan note, and have prepared cash flow projections for the period to 30 June 2024. The following represent the key assumptions underpinning the cash flow projections:

Regulatory considerations

Lansdowne exited 2022 having spent the year pursuing the award of a Lease Undertaking for the Barryroe oil and gas field.

In October 2022, DECC provided a report of financial capability to the Barryroe joint-venture partners. Both partners sought to respond to the concerns outlined under the new and revised financial capability guidelines in November 2022.

On 19 May 2023, Barryroe Offshore Energy received a letter from the Irish Department of the Environment, Climate and Communications ("DECC") advising that Eamon Ryan, Minister for the Environment, Climate and Communications (the "Minister") was unwilling to grant the Lease Undertaking, as sought, on grounds of financial capability. DECC also confirmed in the letter that the application was satisfactory from a technical perspective.

Funding options

In February 2021 the Irish Minister at the Department of the Environment, Climate and Communications, Eamonn Ryan announced that the Government would introduce legislation to end the award of any new licences for both oil and gas exploration. This has since been passed into law.

It was again confirmed that the legislation will not affect existing authorisations (such as SEL1/11 - Barryroe), whereby existing licences can progress to production.

Should this change, the Company stated previously that it would pursue strenuously claims for compensation.

Now that the Minister has refused to award a Lease Undertaking for Barryroe, pursuing compensation through legal proceedings is that path that is being followed.

It is anticipated that the Company's loan note holder will extend the maturity of its loan notes which currently mature on 31 December 2023 should this be requested in line with previous experience. In addition, the Company will seek new funds to pursue legal proceedings for compensation for Barryroe, either from a further equity placing, via shareholder loans, or accessing other potential forms of less dilutive funding available to the Company that includes, but is not limited to, combinations of the following:

   (i)       a convertible instrument or 
   (ii)      external litigation funders or 
   (iii)     financial support from either a strategic partner or 
   (iv)     debt funding 

This legal action will only be pursued on the condition that sufficient additional funds are raised to finance this undertaking.

Based on the cash flow projections prepared by the Directors, planned future fund-raisings will be adequate to ensure that the Group and Company will be able to discharge all liabilities as they fall due.

The Directors believe that the Company will be able to secure further debt or equity funding as may be required. However, there is no guarantee that the Company will be able to secure such funding.

The Directors have considered the various matters set out above and have concluded that a material uncertainty exists that may cast significant doubt on the ability of the Group and Company to continue as going concern and that the Group and Company may therefore be unable to realise their assets and discharge their liabilities in the normal course of business. Nevertheless, after making enquiries and considering the uncertainties described above, the Directors are of the view that the Group and Company will have sufficient cash resources available to meet their liabilities and continue in operational existence for at least 12 months from the date of approval of these financial statements.

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

2. Segmental Reporting

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

3. Loss per ordinary share

 
                                                                  2022             2021 
                                                               GBP'000          GBP'000 
   The loss for the year was wholly from continuing 
    operations 
 
 
 
    Loss for the year attributable to equity 
     holders                                                     (364)            (131) 
                                                      ----------------  --------------- 
 
     Weighted average number of ordinary shares 
     in issue - basic and diluted                          919,974,501      873,618,337 
                                                      ----------------  --------------- 
   Loss per share arising from continuing 
    operations attributable to the equity holders 
    of the Company - basic and diluted (in 
    pence)                                                        0.04             0.02 
                                                      ================  =============== 
 

For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. The Group has one class of potential ordinary shares being share options. As a loss was recorded for both 2022 and 2021, potentially issuable shares would have been anti-dilutive. The number of potentially issuable shares at 31 December 2022 is 30,821,826 (2021: 27,445,970).

4. Intangible assets

 
   Group                    Exploration/ 
                               Appraisal 
                                  assets 
                                 GBP'000 
   Cost 
   At 1 January 2021              15,690 
   Additions                         435 
                         --------------- 
   At 31 December 2021            16,125 
                         --------------- 
 
   At 1 January 2022              16,125 
   Additions                         211 
                         --------------- 
   At 31 December 2022            16,336 
                         --------------- 
 

Oil and gas project expenditures, all of which relate to Barryroe, including geological, geophysical and seismic costs, are accumulated as intangible assets prior to the determination of commercial reserves. The directors have assessed the current ongoing activities and future planned activities and are satisfied that the carrying value is appropriate.

Under IFRS 6 the following considerations have been reviewed

1) Whether the period for exploration has expired or is near expiry and is not expected to be renewed: Licence SEL 1/11 expired in July 2021 and, as allowed for under the terms of the Licence, an application for a follow on authorization, a Lease Undertaking, was submitted in April 2021 and was expected to be awarded.

2) Whether significant expenditures on further E&E activities are not budgeted or planned: The work program submitted with the application consisted of an appraisal well with an expected costs of $40 million gross $8 million net to Lansdowne.

3) Whether the entity has decided to discontinue E&E activities due to lack of exploration success: Barryroe is an oil and gas discovery and the entity planned to continue activities, with the expectation that development of the field would follow on from a successful appraisal well.

4) Whether the entity has sufficient data indicating that the book cost is unlikely to be recovered from a successful development or from a sale: The most recent independent CPR completed in 2022 indicated a value of $104 million for a Phase 1 development of the Barryroe Field for Lansdowne's 20% share, greatly in excess of the current book value of c. $20 million.

Following the drilling of the 48/24-10z well a Competent Persons Report (CPR) was produced by Netherland Sewell and Associates Inc (NSAI). This concluded that the Basal Wealden oil bearing A Sand had 2C resources of 266 million barrels of oil and 187 billion cubic feet of associated gas.

A CPR carried out previously by RPS on the Middle Wealden oil bearing sands concluded that these contained 2C resources of 45 million barrels and 21 billion cubic feet of gas.

The total combined audited gross on block 2C recoverable resources at Barryroe therefore amount to 346 million barrels of oil equivalent, comprising 311 million barrels of oil and 207 billion cubic feet of gas.

A further CPR was carried out by RPS to assess the potential oil recoverable from a first phase of development of the central area of Barryroe. This work concluded in February 2022. The total estimated 2C resources for a Phase 1 development of the Basal Wealden oil bearing A Sand, amounted to 81.2 million barrels of oil recoverable gross (16.24 million barrels net to Lansdowne) from a Best Estimate of 278 million barrels of oil in place (STOIIP).

An economic evaluation, documented in the RPS CPR, covering the Phase 1 development in the 2C oil resources case, delivers an NPV10% for Lansdowne's 20% share of $104 million (GBP82.5 million at GBP1 = $1.26) under a Brent Oil Price assumption of US$68 per barrel in 2027, rising to $70/bbl in 2028 and 2029 and inflated at 2% per annum thereafter.

The Brent Oil Price is currently $75/bbl and the forward curve remains above $62/bbl through to the end of 2030.

Importantly, no CPR has assessed the volumes and value of the gas contained in the Basal Wealden C Sand that was tested with strong flow rates in the 48/24-10z well. Previous work by Providence indicated this reservoir could contain c. 400 billion cubic feet of gas.

As at the period end the Board considers that no impairment of the assets is required for a variety of reasons explored below. Subsequent to the period end the Board believed that the Lease Undertaking would be provided. The Board went as far as committing expense to the provision of a capital guarantee that was designed to meet the financial capabilities test. The Board also considered that given the extremely high energy prices of late 2022, the continuing war in Ukraine impacting oil and gas supplies to Europe and the greatly increased focus on energy security, that the lease undertaking would be granted. Well into the second quarter of 2023 the Board felt this expectation to be reasonable.

In October 2022 DECC provided a report of financial capability to the Barryroe joint-venture partners indicating that the arrangements put forward did not meet the financial capability requirements and providing an opportunity for the Barryroe partners to provide additional information. Both partners sought to respond to the concerns outlined under the new and revised financial capability guidelines in November 2022.

Barryroe Offshore Energy (previously Providence Resources) put forward a EUR40 million convertible loan from its largest shareholder, Vevan. This amount was sufficient to cover the entire costs of the minimum work programme commitment put forward in the Barryroe Lease Undertaking Application.

Lansdowne put in place a letter of support to provide a loan of more than enough to cover its share of the work programme (estimated at $8 million).

In dialogue with DECC it was also established that EUR1.25 million had already been expended by the Barryroe partners on various items included in the work programme for preparatory works prior to drilling.

At year end, this application continued to remain under consideration by the DECC but a decision was finally made as detailed in the Post Balance Sheet event in Note 6.

Also, as outlined in the Post Balance Sheet event in Note 6, the Intangible asset of GBP16.3 million and related decommissioning provision were written off post year end in May 2023.

5. Share capital

 
                                                    2022          2021 
 Authorised 
 933,618,337 ordinary shares at 0.1 pence 
  each                                       933,618,337   873,618,337 
                                            ============  ============ 
 
 
 
 Issued, called up and        Number of      Share   Share Premium 
  fully paid:                  Ordinary    Capital         GBP'000       Total 
                                 Shares    GBP'000                     GBP'000 
 At 1 January 2021          873,618,337     11,930          28,284      40,214 
                         --------------  ---------  --------------  ---------- 
 At 31 December 2021        873,618,337     11,930          28,284      40,214 
                         --------------  ---------  --------------  ---------- 
 
 At 1(st) January 2022      873,618,337     11,930          28,284      40,214 
 Issued in year              60,000,000         60             240         300 
 Share issue costs                    -          -            (34)        (34) 
 Share warrant issue 
  costs                               -          -            (15)        (15) 
                         --------------  ---------  --------------  ---------- 
 
   At 31 December 2022      933,618,337     11,990          28,475      40,465 
                         ==============  =========  ==============  ========== 
 

In March 2022, the Company placed 60,000,000 new ordinary shares with new and existing investors at a placing price of 0.5 pence per placing share, raising GBP300,000 before costs. Warrants were also awarded as part of this placing and details of these are outlined in note 9.

6. Post Balance Sheet events

Share Placing:

In January 2023, the Company placed 60,000,000 new ordinary shares with new and existing investors at a placing price of 0.5 pence per placing share, raising GBP300,000 before costs.

In association with the Placing, 3,000,000 warrants (Broker Warrants) have been granted to Tavira Financial Limited, with an exercise price of GBP0.5p per ordinary share. The Broker Warrants are exercisable up until the third anniversary of Admission 1 February 2026.

In connection with the Placing, the Company will also grant a total of 60,000,000 warrants (Investor Warrants) to places participating in the Placing, on a one Investor Warrant per Placing Share basis, to subscribe for new ordinary shares in the Company at a price of GBP1.0 pence per share. The Investor Warrants will be exercisable until the second anniversary of Admission 1 February 2025. In the event all of the Investor Warrants are exercisable before their expiry, the Company would receive a further GBP0.6 million in cash.

Separately, 1,788,000 warrants have been granted to LC Capital Targeted Opportunities Fund, LP(LC) in accordance with the provisions of LC's warrant instrument, the terms of which have been previously announced on 31 December 2021. LC holds 29,609,826 warrants over ordinary shares at a strike price of 0.5 pence per share. In addition, in the event that the Investor Warrants and Broker Warrants are exercised in full prior to the maturity date of the LC warrants, LC will be granted up to an additional 1,877,400 warrants over ordinary shares in accordance with the provisions of LC's warrant instrument.

Lease Undertaking:

On 19 May 2023, Barryroe Offshore Energy received a letter from the Irish Department of the Environment, Climate and Communications ("DECC") advising that Eamon Ryan, Minister for the Environment, Climate and Communications (the "Minister") was unwilling to grant the Lease Undertaking, as sought, on grounds of financial capability. DECC also confirmed in the letter that the application was satisfactory from a technical perspective.

The decision by the Minister not to grant the Lease Undertaking is disappointing not only for the Company, but also other stakeholders, including Ireland, which continues to import significant amounts of oil & gas, something the development of Barryroe could help to address.

Given the lack of progress on the Lease Undertaking, Lansdowne had already commenced discussions with external legal advisors on the potential to pursue legal proceedings to protect its investment in Barryroe, prior to receipt of the letter from DECC.

The Company has now advanced the engagement with external legal counsel and has continued to pursue the steps required to move towards arbitration to protect its investment in the Barryroe Project. These discussions are already well advanced, and the Company believes there is clear evidence of the DECC and the Minister failing to act in a fair and equitable manner with the Barryroe Partners consistent with its obligations under Irish law and also international law. Given Lansdowne is a UK domiciled Company it expects to pursue its claim in international arbitration pursuant to the investment protection regime established under the Energy Charter Treaty to which both the Ireland and the United Kingdom are signatories.

Lansdowne's legal advisors, Ashurst LLP, have initiated arbitration proceedings under the Energy Charter Treaty by submitting a letter giving notice pursuant to Article 26 (2) (c) of the ECT requiring Ireland to participate in discussions with a view to settling the dispute.

Further updates will be made with respect to the legal process as appropriate, along with more information on the claims sought by Lansdowne in this matter.

In light of the above, the Directors have determined that this is a non adjusting event as at 31 December 2022 under the provisions of IAS 10 Event After the Reporting Period. However, the Intangible asset of GBP16.3 million and related decommissioning provision were written off post year end in May 2023.

7. Accounts

Copies of the annual accounts for the year ended 31 December 2022 will be sent to shareholder shortly and will be available from the Group's office at Paramount Court, Corrig Road, Sandyford Business Park, Dublin 18 Ireland and the Group's website www.lansdowneoilandgas.com.

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END

FR UROORONUNOAR

(END) Dow Jones Newswires

June 30, 2023 09:47 ET (13:47 GMT)