Final Results

RNS Number : 9125S

Borders & Southern Petroleum plc

28 May 2009

 



Borders & Southern Petroleum plc

Preliminary Results for the 12 months ended

31 December 2008

Borders & Southern Petroleum plc (or 'the Company') (AIM: BOR) is pleased to announce its preliminary results for the 12 months to 31 December 2008.

Highlights

• Completed 3D seismic acquisition and processing

• Completed the interpretation of the fast track and fully processed data

• Integrated 3D interpretation into regional evaluation

• Compiled ranked prospect inventory

• In a position to define drilling locations

• Concluded benthic sampling programme 

• Progressing Environmental Impact Assessment

• Cash balance as at 31 December 2008 was US$19.5 million

Harry Dobson, Chairman of Borders & Southern, commented 'We believe that our extensive technical programme has allowed us to define a robust, high value prospect inventory. We now intend to seek partners for our South Falkland Basin licenses and we are optimistic that other companies will share our positive views on the high prospectivity'

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

Howard Obee	Simon Hudson
Borders & Southern Petroleum plc	Tavistock Communications
Tel: [phone]	Tel: [phone]
Katherine Roe	Guy Wilkes
Panmure Gordon (UK) Limited	Ocean Equities
Tel: [phone]	Tel: [phone]

Chairman's Statement

Activity in 2008 has seen the Company focus on its technical objectives. During this period we have completed the acquisition and processing of a large 3D survey and finalised its interpretation. The results of this work have yielded what we believe to be a very attractive and exciting prospect inventory.

Against a challenging economic background, the Company, whilst experiencing a decrease in value along with market trends, has performed well relative to its peer group of AIM listed Exploration & Production Companies. We also have a strong cash balance. 

During the period we have witnessed the oil price decline from $147 per barrel down to around $35 per barrel. Recently the oil price has showed signs of recovery with prices approaching $60 per barrel again. However, it should be noted that our projects in the Falkland Islands are likely to be commercial at the $35 level.

Whilst we cannot impact the external environment, we can influence the technical evaluation by the correct choice of data acquisition and the areas we select in which to collect the data. In this regard, the Board of Directors considers that it has been very successful. Multiple, high quality, large volume prospects have been defined, many of which are supported by geophysical attributes of the type we had hoped for at the onset of the exploration programme.

With the completion of the main phase of 3D seismic interpretation there will be no further requirement for additional data acquisition prior to drilling a well. We are now in a position to define drilling locations on our prioritised prospects. As we have previously reported, the first two high-graded prospects are Darwin and Stebbing.

As we look forward, technical work will continue but our energy will be placed into bringing a partner into the licences to help fund the wells. Given the scale and quality of the prospect inventory we are optimistic that we can attract a credible partner. 

Chief Executive's Review

The technical programme undertaken in 2008 involved the acquisition, processing and interpretation of 1,492 sq km of 3D seismic data. The 3D data has been fully integrated into our regional evaluation so that we now have a comprehensive understanding of the South Falkland Basin. As a result, not only have we been able to define a high quality multi-billion barrel (recoverable) prospect inventory, but also identify those play types within the basin that we think are most likely to deliver success.

As previously reported, the step change in understanding from 2D to 3D seismic data has been dramatic and justifies the size and expenditure of the 3D survey. Prospect sizes are large (up to 150 sq km of mapped structural closure) and display important geophysical attributes that help reduce the risk. These include seismic amplitude conformance to structure, flat spot and AVO anomalies, along with gas hydrates located above prospects. We interpret these seismic attributes to indicate that the structures have received a hydrocarbon charge.

Individual prospect volumes in some cases exceed 1 billion barrels of recoverable oil. The previously reported Darwin and Stebbing prospects have P50 recoverable oil volumes of 300 million and 710 million barrels respectively. Additional stacked reservoirs on the same structures could increase these numbers. These prospects represent different play types and have been prioritised due to the chance of success rather than size. 

Whilst the exploration drilling programme will target high-graded oil prospects, each prospect has also been considered as a gas case. If gas was the only outcome, and we consider it unlikely, then the prospect gas volumes would be sufficient to justify an LNG development. Individual prospect volumes can exceed (P50) 5 trillion cubic feet of recoverable gas.

Aside from producing a ranked prospect Inventory we have conducted a benthic sampling programme, one of the key requirements for the Environmental Impact Assessment (EIA). The operations were completed efficiently and the analysis is currently underway. Once the EIA has been submitted and approved we will be ready to drill and should the opportunity arise will be able to share in a combined drilling operation with other operators in the area.

Whilst the Company has a strong cash balance it does not have sufficient funds to execute a two well programme. Given the economic climate the Board has decided the best way to finance our wells is to seek a partner. Within the coming months we will further discussions with third parties and will report later in the year. Given the strength of the prospect inventory, scale of opportunity and the quality of the geophysical attributes, the Board is confident of securing a competent partner.

Borders & Southern Petroleum Plc

Consolidated Income Statement for the Year Ended 31 December 2008

Continuing operations		2008 $			2007 $
Administrative expenses			(1,287,544)				(1,715,392)
Loss from operations			(1,287,544)				(1,715,392)
Finance income Finance expense - foreign exchange losses			986,177 (4,426,533)				1,379,691 -
Loss before tax			(4,727,900)				(335,701)
Income tax expense			-				-
Loss for the year			(4,727,900)				(335,701)
Loss per share - basic and diluted (see note 2)			(2.43) cents				(0.23) cents

Borders & Southern Petroleum Plc

Consolidated Balance Sheet for the Year Ended 31 December 2008

		2008						2007
		$			$			$			$
Assets Non-current assets
Property, plant and equipment						14,929						7,749
Intangible assets						36,040,860						23,155,802
Total non-current assets						36,055,789						23,163,551
Current assets
Trade and other receivables			251,788						313,400
Other financial assets			9,950,668						-
Cash and cash equivalents			9,522,035						39,064,938
Total current assets						19,724,491						39,378,338
Total assets						55,780,280						62,541,889
Liabilities Current liabilities Trade and other payables						(194,770)						(2,309,741)
Total net assets						55,585,510						60,232,148
Capital and reserves
Share capital						3,867,741						3,867,741
Share premium reserve						57,906,686						57,906,686
Other reserves						209,409						108,032
Retained earnings						(6,381,930)						(1,654,030)
Foreign currency reserve						(16,396)						3,719
Total equity						55,585,510						60,232,148

Borders & Southern Petroleum Plc

Consolidated Statement of Changes in Equity for the Year Ended 31 December 2008

	Share capital $	Share premium reserve $			Other reserves   $			Foreign currency  reserve $		Retained earnings $			Total $
Balance at 1 January 2007 brought forward	2,541,173		21,018,756			30,209			-			(1,318,330)	22,271,808
Loss for the year and total recognised income and expense for the year	-		-			-			-			(335,700)	(335,700)
Issue of share capital	1,326,568		36,887,930			-			-			-	38,214,498
Recognition of share based payments	-		-			77,823			-			-	77,823
Foreign exchange on change in presentation currency	-		-			-			3,719			-	3,719
Balance at 31 December 2007	3,867,741		57,906,686			108,032			3,719			(1,654,030)	60,232,148
Loss for the year and total recognised income and expense for the year	-		-			-			-			(4,727,900)	(4,727,900)
Recognition of share based payments	-		-			101,377			-			-	101,377
Foreign exchange on change in functional currency	-		-			-			(20,115)			-	(20,115)
Balance at 31 December 2008	3,867,741		57,906,686			209,409			(16,396)			(6,381,930)	55,585,510

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

Reserve	Description and purpose
Share capital	This represents the nominal value of shares issued.
Share premium reserve	Amount subscribed for share capital in excess of nominal value.
Other reserves	Fair value of options issued.
Presentation currency reserve	Differences arising on change of presentation and functional currency to $.
Retained earnings	Cumulative net gains and losses recognised in the consolidated income statement.

Borders & Southern Petroleum Plc

Consolidated Cash Flow Statement for the Year Ended 31 December 2008

			2008						2007
			$			$			$		$
Cash flow from operating activities
Loss before tax							(4,727,901)						(335,700)
Adjustments for:
Depreciation							9,850						16,074
Exploration and evaluation expenditure transferred to income statement							-						5,054
Share-based payment							101,377						77,823
Finance income							(986,177)						(1,379,691)
Finance expense							4,426,533						-
Foreign exchange differences							(20,116)						-
Cash flows from operating activities before changes in working capital							(1,196,434)						(1,616,440)
Decrease/(increase) in trade and other receivables							65,881						(7,576)
(Decrease)/increase in trade and other payables							(2,114,973)						2,178,754
Net cash (outflow)/inflow from operating activities							(3,245,526)						554,738
Cash flows used in investing activities
Interest received				981,913						1,343,856
Purchase of other financial assets				(9,950,668)						-
Purchase of intangible assets				(12,885,059)						(19,902,084)
Purchase of property, plant and equipment				(17,030)						(3,543)
Net cash used in investing activities							(21,870,844)						(18,561,771)
Cash flows from financing activities
Proceeds from issue of shares and share options (net of issue costs)				-						38,214,498
Net cash from financing activities							-						38,214,498
Net (decrease)/ increase in cash and cash equivalents							(25,116,370)						20,207,463
Cash and cash equivalents at the beginning of the year Exchange (loss)/gain on cash and cash equivalents							39,064,938 (4,426,533)						18,847,347 10,128 -
Cash and cash equivalents at the end of the year							9,522,035						39,064,938

Group and company	2008 $		2007 $
Cash available on demand	584,285		741,614
Cash on deposit	8,937,750		38,323,324
Total	9,522,035		39,064,938

Cash and cash equivalents consist of cash at bank on demand and balances on deposit with an original maturity of three months or less.

Notes

1    Basis of preparation

The Group financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards (IFRS's and IFRIC Interpretations) issued by the International Accounting Standards Board (IASB) as endorsed for use in the EU and those parts of the Companies Act 1985 and 2006 that are applicable to companies that prepare their financial statements under IFRS. 

The financial information for the years ended 31 December 2008 and 31 December 2007 does not constitute the company's statutory financial statements but is extracted from the audited accounts for those years. The 31 December 2007 accounts have been delivered to the Registrar of Companies. The 31 December 2008 accounts will be delivered to Companies House within the statutory filing deadline. The auditors have reported on those accounts; their reports were unqualified and did not contain statements under Section 498 (2) or (3) of the Companies Act 2006.

Effective 1 July 2008, the Company’s functional currency changed from Pounds sterling ('£') to the US dollar (‘$’). This change was made as, due to significant transactions and balances being denominated in $, the directors considered the $ to most faithfully represent the economic effects of the underlying transactions, events and conditions in the Company. Concurrent with this change in functional currency, the Group adopted the $ as its presentation currency and consequently the financial information for the year ended 31 December 2007 has been re-presented in $.

 

In accordance with International Accounting Standards, this change in functional currency has been accounted for prospectively by translating all items using the $:£ exchange spot rate on that date, being $1.9902:£1. In the parent company accounts the resulting translated amounts for non monetary items at this date have been treated as their historic cost.

 

For the purposes of changing the Group’s presentation currency, the comparatives for the year ended 31 December 2007 were translated for the balance sheet using $:£ exchange spot rate on that date, being $1.9906:£1, for the income statement using the average $:£ exchange rate during the year being $2.0015:£1, and for the opening the balances as at 1 January 2007 using the $:£ spot rate on that date being $1.9728:£1. Resulting exchange differences have been taken to the Foreign currency reserve.

2    Loss per share

The calculation of the basic loss per share is based on the loss attributable to ordinary shareholders divided by the weighted average number of shares in issue during the year. The loss for the financial year for the group was $4,727,900 (2007 - $335,701) and the weighted average number of shares in issue for the year was 194,344,170 (2007 - 144,351,668).  

3    Potentially dilutive share options

At 31 December 2008 there were options over 1,000,000 shares outstanding which are potentially dilutive (2007 - 700,000).  For the majority of the options their exercise price is greater than the weighted average share price during the year and it would not be advantageous of the holders to exercise these, therefore these options have been excluded from the calculation of diluted EPS. As a result the diluted earnings per share is not materially different to the basic earnings per share.

 

END

 

 

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