Final Results

RNS Number : 6146T

Borders & Southern Petroleum plc

31 March 2016

 

31 March 2016

Borders & Southern Petroleum plc

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

Unaudited Results for the 12 month period ended 31 December 2015

Borders & Southern (AIM: BOR), the London based independent oil and gas exploration company with assets offshore the Falkland Islands, announces preliminary unaudited results for the year ending 31 December 2015.

2015 Highlights

·    Darwin recoverable resource upgrade: 360 million barrels of condensate (best estimate P50 un-risked)

·    Farm-out process is active, but continues to be impacted by the low oil-price environment

·    Reduced administrative expenses - 2015: $1.97 million (2014: $3.0 million)

·    Cash balance at 31 December 2015: $14.0 million (2014: $16.1 million)

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

Borders & Southern Petroleum plc Howard Obee, Chief Executive Tel: [phone]

Panmure Gordon (UK) Limited Adam James / Atholl Tweedie Tel: [phone]

Tavistock Simon Hudson Tel: [phone]

Notes:

Borders & Southern Petroleum plc is an oil & gas exploration company listed on the London Stock Exchange AIM (BOR). The Company operates and has a 100% interest in three Production Licences in the South Falkland Basin covering an area of nearly 10,000 square kilometres. The Company has acquired 2,862 km of 2D seismic, 2,517 square kilometres of 3D seismic and drilled two exploration wells, making a gas condensate discovery with its first well.

Chairman's Statement

Industry Setting

The industry downturn, triggered by the decline in the oil price, has had a significant impact on the Company's fortunes. Brent has fallen from around $110 per barrel in mid 2014, to around $35 per barrel at the end of 2015. This sustained low oil price has caused companies to make dramatic reductions in their expenditure, delay major capital projects and reduce or stop taking on new opportunities. This has made it a particularly challenging environment for us in which to conduct a farm-out. There are as many views on future oil price trends as there are analysts and commentators, with little consensus at the moment. Most believe a recovery will occur, but to what level and exactly when, there is no agreement. Consequently, companies are trying to re-base their operations to weather a low cost, low oil price world.

Financial Position

Borders & Southern's financial status is relatively robust in the current environment, with a strong balance sheet and no debt. We ended the year with a cash balance of $14.0 million, compared to $16.1 million at the end of 2014. Like most companies in our sector, we have reduced our expenditure. The 2015 administrative expense was $1.97 million compared to $3.04 million in the previous year. This reduced expenditure has not impacted our ability to progress technical work and advance our understanding of our assets. We intend to maintain this capital discipline throughout 2016 and beyond.

Project Status

The industry recession has delayed the timing of the next operations phase on our Production Licences. We had hoped to have secured partners and funding for a new exploration and appraisal drilling programme by now, but have had to reset our expectations. So whilst the current Production Licence period extends through to the end of October 2017, we have applied to the Falkland Islands Government for an extension.

From a sub-surface point of view we have continued to make good progress. Earlier in 2015, we announced an upgrade in the combined Darwin East and West recoverable resource estimate (Best estimate P50: 360 million barrels of condensate) and described some of the surrounding prospects in more detail. We continue to work the Early Cretaceous shallow marine sandstone play fairway in detail, re-mapping the discovery and analysing the seismic response on near-field prospects with the aim of developing reliable predictive models for hydrocarbon presence and phase.

Additionally, we have spent time re-assessing our basin models, incorporating the results from recent drilling activity by other operators. The Humpback well was located over 250 km northeast of Darwin and its findings have no impact on the prospectivity of our Licences. In fact, our recent regional basin analysis has re-enforced our belief that our Licences are optimally located in the South Falkland Basin. 

Current technical work is aimed at re-assessing how a Darwin development would fit into a low oil price world. We know that the combination of competitive fiscal terms in the Falkland Islands and excellent reservoir characteristics of the Early Cretaceous shallow marine sandstone makes a development competitive on the cost curve against other deep water developments. However, we need to assess just how commercial a project would be in a period of sustained low oil prices. Previously we had considered 2 to 3 appraisal wells and 10 development wells (6 producers, 4 gas re-injectors) with sub-sea tie back to an FPSO. New reservoir engineering studies are looking at reduced well count models. Outputs from this work will feed into a fresh look at facilities engineering concepts and costs and, in turn, a new economic evaluation. If we can clearly demonstrate the commercial viability of a development in a low oil price environment, it should assist the farm-out process.

Outlook

All our technical and commercial work to date suggests that Darwin is a robust project, even in a low oil price environment. The principal risk for the Company over the next 12 months is that a sustained low oil price will cause further delay to our farm-out and hence funding for the next phase of operations. We have positioned the Company so that our strong balance sheet will allow us to withstand an extended period of reduced industry activity. As we move forward, we will continue to control costs, undertake good science and maintain our resolve to monetise the Darwin discovery.

Finally, Stephen Posford, 69, one of the Company's founders and a member of the Board since the Company's inception, has announced that he intends to retire from business activities and will step down from the Board prior to the AGM. Stephen has played an influential role in the development of the Company, which included the significant gas condensate discovery in 2012. On behalf of all the Directors I would like to thank Stephen for his contribution and wish him a healthy, happy and long retirement. 

Harry Dobson

30 March 2016

Unaudited consolidated statement of comprehensive income

for the year ended 31 December 2015

		2015 $000		2014 $000
Administrative expenses		(1,968)		(3,037)
Loss from operations		(1,968)		(3,037)
Finance income Finance expense		47 (679)		59 (910)
Loss  before tax		(2,600)		(3,888)
Tax expense		-		-
Loss for the year and total comprehensive loss for the year attributable to owners of the parent		(2,600)		(3,888)
Basic and diluted loss  per share  (see note 3)		(0.54) cents		(0.8) cents

Unaudited consolidated statement of financial position

as at 31 December 2015

	2015		2014
	$000	$000	$000	$000
Assets Non-current assets
Property, plant and equipment		10		11
Intangible assets		289,590		286,966
Total non-current assets		289,600		289,977
Current assets
Other receivables	297		329
Cash and cash equivalents	14,011		16,079
Total current assets		14,308		16,408
Total assets		303,908		306,385
Liabilities Current liabilities
Trade and other payables		(283)		(250)
Total net assets		303,625		306,135
Equity
Share capital		8,530		8,530
Share premium		308,602		308,602
Other reserves		2,370		2,280
Retained deficit		(15,861)		(13,261)
Foreign currency reserve		(16)		(16)
Total equity		303,625		306,135

Unaudited consolidated statement of changes in equity

for the year ended 31 December 2015

	Share capital $000	Share Premium $000	Other reserves $000	Retained deficit $000	Foreign currency reserve $000	Total $000
Balance at 1 January 2014	8,530	308,602	2,035	(9,373)	(16)	309,778
Loss and total comprehensive loss  for the year	-	-	-	(3,888)	-	(3,888)
Recognition of share based payments	-	-	245	-	-	245
Balance at 31 December 2014	8,530	308,602	2,280	(13,261)	(16)	306,135
Loss and total comprehensive loss for the year	-	-	-	(2,600)	-	(2,600)
Recognition of share based payments	-	-	90	-	-	90
Balance at 31 December 2015	8,530	308,602	2,370	(15,861)	(16)	303,625

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

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

Unaudited consolidated statement of cash flows

for the year ended 31 December 2015

	2015		2014
	$000	$000	$000	$000
Cash flow from operating activities
Loss before tax		(2,600)		(3,888)
Adjustments for:
Depreciation		1		2
Share-based payment		90		245
Net finance costs		632		851
Realised foreign exchange gains		(8)		5
Cash flows from operating activities before changes in working capital		(1,885)		(2,785)
Decrease in other receivables		32		689
Increase/(decrease) in trade and other payables		33		(518)
Tax paid		-		(185)
Net cash outflows from operating activities		(1,820)		(2,799)
Cash flows used in investing activities
Interest received	47		59
Purchase of intangible assets	(773)		(3,555)
Proceeds from disposal of intangible assets	1,149		-
Net cash from/(used) in investing activities		423		(3,496)
Cash flows from financing
Net decrease in cash and cash equivalents		(1,397)		(6,295)
Cash and cash equivalents at the beginning of the year		16,079		23,290
Exchange loss on cash and cash equivalents		(671)		(916)
Cash and cash equivalents at the end of the year		14,011		16,079

Accounting policies

1.   Basis of preparation

The financial information set out above does not constitute the company's statutory accounts for 2014 or 2015. Statutory accounts for the year 31 December 2014 have been reported on by the Independent Auditors.  The Independent Auditors' Report on the Annual Report and Financial Statements for 2014 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

The results for 2015 are unaudited. Statutory accounts for the year ended 31 December 2015 will be finalised based on the information presented in this announcement.  The independent Auditors' Report will be based on those statutory accounts once they are complete.

Statutory accounts for the year ended 31 December 2014 have been filed with the Registrar of Companies. The statutory accounts for the year ended 31 December 2015, prepared under IFRS, will be delivered to the Registrar in due course.

2.   Going concern

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

3.   Basic and dilutive loss per share

The calculation of the basic and dilutive loss per share is based on the loss attributable to ordinary shareholders divided by the weighted average number of shares in issue during the year. The loss for the financial year for the group was $2.6 million (2014 - loss $3.888 million) and the weighted average number of shares in issue for the year was 484.1 million (2014 - 484.1 million).    During the year the potential ordinary shares are anti-dilutive and therefore diluted loss per share has not been calculated. At the statement of financial position date, there were 6.15 million (2014 - 6.15 million) potentially dilutive ordinary shares being the share options.

4.   Post Reporting Date Events

There were no post reporting date events.

-ends-

 

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