Final Results

RNS Number : 1592R

Independent Resources PLC

25 June 2015

 

Independent Resources plc
("Independent Resources" or the "Company" or the "Group)
Audited results for the year ended 31 December 2014
Highlights
• Formalisation of appointment as operator of Ksar Hadada licence
• Ksar Hadada farm-out process commenced
• Rationalisation of Italian portfolio and cost base
• Positive Italian legislative developments ahead of Rivara court processes
• Equity fundraising of £1.75 million of new capital during the year with further capital of £0.80 million raised since year end
• Progress continuing on portfolio of potential investments in producing assets
Key financials
• Operating loss on continuing activities of £1.57 million (2013: £3.04 million)
• Loss from discontinued Ribolla coal bed methane operations of £4.91 million (2013: £ Nil)
• Loss for the year of £6.48 million (2013: £3.34 million)
• Cash at year end of £0.42 million (2013: £0.66 million)
• Cash at 24 June 2015 of £0.46 million
Chairman's statement
Introduction
The year ended 31 December 2014 saw Independent Resources continue to progress its operational and
geographical transformation into a mainstream E&P company focused on North Africa.
Formal approval of Independent Resources' appointment as operator of the Ksar Hadada licence was eventually
obtained in August 2014 and since then we have conducted an extensive technical review of the licence
prospectivity in preparation for the farm-out process which began in the fourth quarter.
We have continued to rationalise our Italian operations. Our conscious decision not to pursue coal bed methane
opportunities in Tuscany led to an impairment charge in relation to our historical investment.  Since the year end,
arrangements have been completed for the closure of the Group's technical office in Rome and the termination of all
Italian contracts of employment.
During 2014, our objective of acquiring an interest in a producing asset in North Africa on reasonable terms was
frustrated, not least by the volatility of underlying oil prices since the Autumn of 2014 which increased the potential
risk of entering into a transaction which may not have been in the best long-term interests of shareholders.
We believe that following the fall in oil prices, the environment is now more attractive for IRG as a potential acquirer
and we continue to examine a number of opportunities and to progress discussions with potential financial partners.
Ksar Hadada
In August 2014, we received formal confirmation from the Consultative Committee on Hydrocarbons ("CCH") in
Tunisia that our application for an extension to the Ksar Hadada permit ("KH") and to become the operator had
been approved.
Our increased operating interest of 86.345 per cent. has provided the potential to attract an investment partner to
fund the work programme and still allow IRG to retain a meaningful future working interest in the permit.
During 2014, we commissioned a revised competent person report on the licence from Blackwatch Petroleum
Services which estimated prospective resources of 108 million BOE at Ksar Hadada.
The Tunisian approvals process was unfortunately very slow during 2014 and no CCH meetings were held from late
2013 until August 2014 causing major delays with many oil and gas projects in Tunisia. In recognition of the
original delay in approval in 2014, the licence period for Ksar Hadada was extended by the CCH from 16 April 2016
to 7 August 2016.  The extension period represents the second renewal of the licence and therefore Independent
Resources (Ksar Hadada) Limited may still, if necessary, seek an additional one-year extension of the licence until
7 August 2017.
Since CCH approval was granted, IRG has agreed and executed a new joint operating agreement with its partners;
agreed a work plan and budget to fulfil the minimum work programme obligations with ETAP and completed
preparation for the 3D seismic survey.
In the last quarter of 2014 we entered into a process to farm out part of our stake in Ksar Hadada to a third party
and that process is still ongoing.  While the speed of this process has understandably been influenced by the
volatility of oil prices and the changing political and security situation in Tunisia and across North Africa, the
licence remains economically viable at prices substantially below today's prices and we remain in discussions with
a number of parties regarding investment.
Rivara
We continue to await the commencement of Administrative court proceedings in relation to Rivara as we contest
the positions taken in 2012 by the Emilia-Romagna region and the Ministry of Economic Development.
If the future court process can be navigated successfully, despite its protracted nature, the general environment in
Italy now appears to be becoming more positive for a project of this kind.  Legislative change proposed by the
Renzi administration as part of its 'Unlock Italy' agenda specifically identifies new gas storage capacity as
strategically important and also seeks to amend the permit approval process to lessen the involvement of regional
governments.
Fiume Bruna and Casoni (Ribolla Basin CBM assets)
In light of significant uncertainty over the potential to develop the Ribolla basin coal bed methane opportunities and
the availability of capital to do so we took the decision at the time of preparation of the interim accounts to impair
the value of the historical investment in Fiume Bruna and Casoni and the goodwill associated with the historical
acquisition of Independent Energy Solutions srl.
All attempts to farm-out these assets have ultimately not been successful and therefore as licence commitments
could not be met, the licences were not renewed and have now been formally relinquished.
The combined impairment events resulted in a charge to the statement of comprehensive income in this financial
year of £4.55m.
Board changes
Since the publication of our last accounts, our commercial director Owain Franks has joined the board as an
executive director.  In January 2015 we welcomed Martin Miller to the board as a non-executive director. Martin
brings with him a wealth of technical expertise and we will value his input tremendously.
I would like to take this opportunity to thank Roberto Bencini, who resigned as a director in January 2015, for his
considerable efforts on the Company's behalf and wish him well for the future.
Having served on the board as a non-executive director since the admission of the Company to AIM in 2005, Alan
Thomas our non-executive director has indicated a desire to step down from the board following the forthcoming
Annual General Meeting and we expect to announce his replacement imminently.  On behalf of my fellow directors,
I would like to thank Alan for his invaluable contribution over the last ten years.
Financial review
The Group made a loss of £6.48 million during 2014 (2013: £3.34 million).
After excluding the impairment charge in respect of Ribolla of £4.55 million, the residual loss was comprised of
£1.74 million in operational and administrative costs, including discontinued operations, (2013: £1.34 million) and
£0.23 million in professional fees and diligence costs related to potential acquisitions (2013: £0.27 million).  The
increased administrative costs this year reflect the effect of a full year's UK head office costs and increased costs
arising from operatorship of the Ksar Hadada licence. Following the reduction in scale of the group's administrative
presence in Italy, the charge for the group for 2015 is expected to be significantly lower.
The results for 2013 also included a £1.51 million charge related to the restructuring of the Group's interest in
Rivara Gas Storage.
Consolidated net assets at 31 December 2014 were £5.41 million (2013: £10.92 million).   The book value of past
investment in relation to Fiume Bruna and Casoni of approximately £4.10 million was impaired in full during 2014.
At 31 December 2014, the consolidated balance sheet included approximately £5.24 million of past investment
in relation to group's Italian gas storage project at Rivara.  Pending resolution of the legal proceedings the carrying
value of Rivara has not been impaired.
Cash used in continuing operations totalled £1.63 million (2013: £0.37 million generated) after adjustments for non-cash
items with capital expenditures incurred during the year limited to £0.22 million (2013: £0.22 million).
There was £0.42 million of available cash at 31 December 2014 (2013: £0.66 million).  Gross equity capital of £0.8m was raised
since year end through a placing of ordinary shares.   Group cash balances at 24 June 2015 were £0.46 million.
Going concern
The financial information for the year to 31 December 2014 has been prepared assuming the group will continue as a going
concern.  Under the going concern assumption, an entity is ordinarily viewed as continuing in business for the foreseeable
future with neither the intention nor the necessity of liquidation, ceasing trading or seeking protection from creditors pursuant to
laws or regulations.
The assessment has been made based on the group's anticipated activities which have been included in the financial forecast
for the years 2015 and 2016. Included in these forecasts is the result of the recent placing which provided approximately £800,000
before expenses. As a result of this additional fund raising the group can continue with its proposed activities.
Whilst the directors remain acutely cost conscious and value focused the group will still need to attract additional funding in forthcoming
months to continue in operation and to cover its share of work programme costs in relation to Ksar Hadada.  Accordingly, the directors
continue to explore all forms of potential fundraising at both a corporate and asset level.  We continue to keep operating costs
to a minimum and to use in-house resource and expertise to assess new opportunities and minimise professional
fees payable to third parties.
Cash is tightly managed and the closure of the Italian office will result in a significant reduction in the Group's overheads
to a currently anticipated level of approximately £1.30 million per annum.  In addition, in recent months the board
as a demonstration of commitment to the future success of the Company have foregone receipt of salaries and fees
in cash in favour of share based remuneration. In relation to Ksar Hadada, management's intention remains to secure a
farm-in or investment partner to cover programme costs.
Based on the above, the directors have formed a judgment that the going concern basis should be adopted in preparing the
financial statements.
Should the group be unable to continue trading, adjustments would have to be made to reduce the value of the assets
to their recoverable amounts, to provide for further liabilities which might arise and to classify fixed assets as current.
Business development
A number of possible transactions are actively being pursued and we expect to report further in due course.  We
have submitted formal offers on two opportunities and await developments.
The investment environment in our industry has been altered by the drop in oil prices over the last nine months.
This decline has ultimately led to a decrease in the costs of services and asset values and heightened the need for
companies to prioritise the use of capital.  Many projects will by necessity become non-core for the current owners
and will be made available for sale.   IRG continues to see this as an attractive time to acquire and exploit
development and appraisal assets.
Egypt remains our primary country of focus.  It represents an established oil province with good commercial terms
and our management team has significant in country operational experience. We believe that the application of a
western approach to production management and proper technical and commercial analysis can make a real
difference to asset performance.
We thank shareholders for their patience and hope to make further announcements about Ksar Hadada and our
investment pipeline in due course.
Grayson Nash
Non-executive Chairman
For more information, please visit www.ir-plc.com or contact:
Greg Coleman	Independent Resources plc	020 3367 1134
Phil Davies	Charles Stanley Securities	020 7149 6942
	(Nominated Adviser & Joint Broker)
Oliver Stansfield	Brandon Hill Capital	020 3463 5000
Alex Walker	(Joint Broker)
Jonathan Evans
Simon Hudson	Tavistock Communications	020 7920 3150

Independent Resources plc
Consolidated statement of comprehensive income
Year ended 31 December 2014
		Notes		Year to 31 December 2014		Period to 31 December 2013
Continuing operations				£		£
Revenue				-		-
Cost of sales				-		-
Gross profit				-		-
Administrative expenses				(1,613,026)		(1,531,735)
Other operating income				42,509		-
Reorganisation of Rivara Gas Storage srl		3		-		(1,511,722)
Operating loss				(1,570,517)		(3,043,457)
Financial income				2,183		2,455
Financial expense				(4,394)		(2,998)
Loss before tax from continuing operations				(1,572,728)		(3,044,000)
Taxation		5		-		-
Loss for the year from continuing operations				(1,572,728)		(3,044,000)
Discontinued operations
Loss after taxation for the year from
discontinued operations		4		(4,907,737)		(297,338)
Loss for the year				(6,480,465)		(3,341,338)
Other comprehensive income:
Items that will or may be reclassified to profit
or loss in subsequent periods (net of tax)
Exchange difference on translating foreign operations				(650,799)		704,123
Total comprehensive loss for the year				(7,131,264)		(2,637,215)
Loss attributable to:
Owners of the parent				(6,480,465)		(3,350,702)
Non-controlling interests				-		9,364
				(6,480,465)		(3,341,338)
Total comprehensive loss attributable to:
Owners of the parent				(7,131,264)		(2,664,623)
Non-controlling interests				-		27,408
				(7,131,264)		(2,637,215)
Loss per share (pence)		6
Basic				(8.3)		(7.3)
Diluted				(8.3)		(7.3)
Loss per share (pence) for continuing operations
Basic				(2.0)		(6.6)
Diluted				(2.0)		(6.6)

Independent Resources plc
Consolidated statement of financial position
As at 31 December 2014
			Notes		31 December 2014		31 December 2013
					£		£
Non-current assets
Property, plant and equipment					13,016		19,883
Goodwill			7		-		450,766
Other intangible assets			8		5,603,152		10,128,364
					5,616,168		10,599,013
Current assets
Other receivables				206,027		464,850
Cash and cash equivalents				425,909		663,117
				631,936		1,127,967
Assets held for distribution			4	47,683		-
				679,619		1,127,967
Current liabilities
Trade and other payables				(609,010)		(807,505)
Liabilities directly associated with the
assets held for distribution			4	(279,989)		-
				(888,999)		(807,505)
Net current assets					(209,380)		320,462
Net assets					5,406,788		10,919,475
Equity attributable to equity holders of the parent
Share capital			9		1,051,434		458,369
Share premium			10		16,302,050		15,287,351
Share option reserve					25,776		418,919
Foreign currency translation reserve					(39,564)		611,235
Retained earnings					(11,932,908)		(5,856,399)
Total equity					5,406,788		10,919,475

Independent Resources plc
Statement of changes in equity
Year ended 31 December 2014
	Retained	Share	Share	Share	Foreign	Total	Non-	Total
	earnings	capital	premium	option	currency		controlling	equity
				reserve	translation		interests
					reserve
	£	£	£	£	£	£	£	£
Consolidated
1 October 2012	(3,766,319)	458,369	15,287,351	264,717	(74,844)	12,169,274	1,172,302	13,341,576
Loss for the period	(3,350,702)	-	-	-	-	(3,350,702)	9,364	(3,341,338)
Exchange differences	-	-	-	-	686,079	686,079	18,044	704,123
Total comprehensive loss for the period	(3,350,702)	-	-	-	686,079	(2,664,623)	27,408	(2,637,215)
Share options lapsed	60,912	-	-	(60,912)	-	-	-	-
Share-based payments	-	-	-	215,114	-	215,114	-	215,114
Non-controlling interest acquired by group	1,199,710	-	-	-	-	1,199,710	(1,199,710)	-
31 December 2013	(5,856,399)	458,369	15,287,351	418,919	611,235	10,919,475	-	10,919,475
1 January 2014	(5,856,399)	458,369	15,287,351	418,919	611,235	10,919,475	-	10,919,475
Loss for the year	(6,480,465)	-	-	-	-	(6,480,465)	-	(6,480,465)
Exchange differences	-	-	-	-	(650,799)	(650,799)	-	(650,799)
Total comprehensive loss for the year	(6,480,465)	-	-	-	(650,799)	(7,131,264)	-	(7,131,264)
New shares issued	-	593,065	1,186,129	-	-	1,779,194	-	1,779,194
Share issue costs	-	-	(171,430)	-	-	(171,430)	-	(171,430)
Share options lapsed	403,956	-	-	(403,956)	-	-	-	-
Share-based payments	-	-	-	10,813	-	10,813	-	10,813
Non-controlling interest acquired by group	-	-	-	-	-	-	-	-
31 December 2014	(11,932,908)	1,051,434	16,302,050	25,776	(39,564)	5,406,788	-	5,406,788

Independent Resources plc
Consolidated statement of cash flows
Year ended 31 December 2014
										Year to 31 December 2014				Period to 31 December 2013
										£				£
Cash flows from operating activities
Loss before taxation from continuing operations										(1,572,728)				(3,044,000)
Loss before taxation from discontinued operations										(4,907,737)				(297,338)
										(6,480,465)				(3,341,338)
Adjustments for:
	Depreciation of property, plant and equipment									10,724				10,818
	Impairment of intangible assets and goodwill									4,547,705				-
	Share-based payments									10,813				215,114
	Financial income									(2,183)				(2,455)
	Financial expense									4,394				2,998
										(1,909,012)				(3,114,863)
Decrease in other receivables										218,331				3,433,381
Increase/(decrease) in trade and other payables										81,494				(153,166)
Cash (used in)/from operations										(1,609,187)				165,352
Income taxes received										-				-
Net cash (used in)/from operating activities										(1,609,187)				165,352
Cash flows from investing activities
Interest received										2,183				2,455
Interest paid										(4,394)				(2,998)
Proceeds on disposal of property, plant and equipment										-				1,495
Purchase of intangible assets										(219,512)				(222,913)
Purchases of property, plant and equipment										(14,062)				(10,060)
Net cash used in investing activities										(235,785)				(232,021)
Cash flows from financing activities
Issue of share capital										1,779,194				-
Share issue costs										(171,430)				-
Net cash from financing activities										1,607,764				-
Net decrease in cash and cash equivalents										(237,208)				(66,669)
Cash and cash equivalents at 1 January 2014										663,117				729,786
Cash and cash equivalents at 31 December 2014										425,909				663,117
1			Basis of preparation
			The company's functional currency is the Euro, and presentational currency is Great British Pounds Sterling.
			The financial information has been prepared in accordance with International Financial Reporting Standards
			("IFRS"), IFRIC interpretations and with those parts of the Companies Act 2006 applicable to companies preparing
			their accounts under IFRS, as adopted by the European Union, and the Companies Act 2006. The financial
			information has been prepared under the historical cost convention, as modified by revaluations of financial assets
			and financial liabilities at fair value through the statement of comprehensive income. Details of the accounting
			policies applied are set out in the financial statements for the period ended 31 December 2013 and have not
			changed for the year ended 31 December 2014.
			The financial information set out in this announcement does not constitute audited financial statements for the year
			ended 31 December 2014. The financial information for the period ended 31 December 2013 is derived from the
			statutory accounts for that period which have been delivered to the Registrar of Companies. The auditors reported on
			those accounts: their report was unqualified but did include an emphasis of matter regarding the ongoing status of
			the Rivara project.
			The financial information for the year ended 31 December 2014 is derived from the financial statements, but does not
			constitute the group's financial statements. The company's auditors have reported on the statutory financial
			statements for the year ended 31 December 2014 and their report is unqualified, but, with the following emphases of
			matter:
		Development and exploration intangible asset In forming our opinion on the financial statements, which is not qualified, we have considered the adequacy of the disclosures made in the financial statements concerning the process of the appeal before the Emilia Romagna Administrative Court in respect of the approval of the development of the Rivara project. In the event that the group is not successful in its appeal, the expenditure capitalised in respect of this project will be subject to impairment testing. No adjustment has been made in relation to the carrying value of this capitalised expenditure in the financial statements of the group or the carrying value of the company's investment in and amounts recoverable from subsidiary undertakings.
		Emphasis of matter - going concern In forming our opinion on the financial statements, which is not qualified, we have considered the adequacy of the disclosure made in the financial statements concerning the company's ability to continue as a going concern. The financial statements have been prepared on the going concern basis, which depends on the ability of the company to raise funds. These conditions, along with the other matters explained in the financial statements, indicate the existence of a material uncertainty which may cast significant doubt about the company's ability to continue as a going concern. The financial statements do not include the adjustments that would result if the company was unable to continue as a going concern. The financial information set out in this announcement was approved by the board on 24 June 2015. The directors do not recommend the payment of a final dividend (2013: £Nil).
2.			Business segments
			The group has adopted IFRS 8 Operating segments. Per IFRS 8, operating segments are based on internal reports
			about components of the group, which are regularly reviewed and used by the Board of Directors being the Chief
			Operating Decision Maker ("CODM") for strategic decision making and resource allocation, in order to allocate
			resources to the segment and to assess its performance. The group's reportable operating segments are as follows:
			a.		Parent company
			b.		Rivara
			c.		Ksar Hadada
			The previously reported segment of Ribolla Basin CBM assets has been classified as a discontinued operation and has been
			excluded from the analysis below.
			The CODM monitors the operating results of each segment for the purpose of performance assessments and
			making decisions on resource allocation. Performance is based on assessing progress made on projects and
			the management of resources used. Segment assets and liabilities are presented inclusive of inter-segment
			balances.
			The group did not generate any revenue during the year to 31 December 2014 nor in the period to 31 December 2013.
			Information regarding each of the operations of each reportable segment within continuing operations is included in
			the following table.
							Parent	Rivara		Ksar Hadada		Consolidation			Total
							company
							£	£		£		£			£
			Year to 31 December 2014
			Interest revenue				139,184	12,633		-		(149,634)			2,183
			Interest expense				-	(68,168)		-		63,774			(4,394)
			Depreciation				2,816	40		-		-			2,856
			Impairment of
			intangible assets				-	-		-		-			-
			Income tax				-	-		-		-			-
			Loss for the year
			before taxation				(9,398,072)	(198,236)		(129,676)		8,153,256			(1,572,728)
			Assets				4,378,459	6,955,152		374,451		(5,459,958)			6,248,104
			Liabilities				(544,028)	(3,003,712)		(890,749)		3,829,479			(609,010)
			Period to 31 December 2013
			Interest revenue				155,807	40,133		-		(193,485)			2,455
			Interest expense				(121)	(111,370)		-		108,493			(2,998)
			Depreciation				-	1,241		-		-			1,241
			Impairment of
			intangible assets				-	-		-		-			-
			Income tax				-	-		-		-			-
			Loss for the
			period before taxation				(789,605)	(1,744,075)		(61,511)		(448,809)			(3,044,000)
			Assets				12,128,214	8,242,367		235,604		(8,879,205)			11,726,980
			Liabilities				(514,288)	(3,810,637)		(622,226)		4,139,646			(807,505)
			The geographical split of non-current assets arises as follows:
									United			Overseas			Total
									Kingdom
									£			£			£
			31 December 2014
			Intangible assets						-			5,603,152			5,603,152
			Goodwill						-			-			-
			Property, plant and equipment						12,968			48			13,016
			31 December 2013
			Intangible assets						-			10,128,364			10,128,364
			Goodwill						-			450,766			450,766
			Property, plant and equipment						1,852			18,031			19,883
3.			Exceptional items
			Reorganisation of Rivara Gas Storage srl (previously named ERG Rivara Storage srl)
			On 22 November 2012 the company completed negotiations with the third party which held a non-controlling interest in
			ERG Rivara Storage srl in order to bring back into full control of the group the valuable Rivara gas storage project. The
			following reorganisation took place:
			•	The non-controlling interest paid €1,400,000 (£1,182,432) for part settlement of the amount it owed in respect of share capital issued by ERG Rivara Storage srl;
			•	The non-controlling interest waived amounts owed by ERG Rivara Storage srl totalling €357,027 (£301,543);
			•	ERG Rivara Storage srl cancelled the remaining amount due to it by the non-controlling interest of €3,531,001 (£2,982,265) in relation to unpaid share capital and cancelled shares to this value. This amount had previously been discounted by £1,169,000.
			•	The non-controlling interest transferred its entire shareholding in ERG Rivara Storage srl to Independent Gas Management srl for €1 (£1); and
			•	ERG Rivara Storage srl changed its name to Rivara Gas Storage srl.
			The amount recognised in the consolidated statement of comprehensive income for the year is calculated as follows:
											Year to 31 December 2014		Period to 31 December 2013
											£		£
			Cancellation of amount due from non-controlling interest
			(pre discounting adjustment)								-		2,982,265
			Discounting adjustment reversed								-		(1,169,000)
			Amount due to non-controlling interest waived								-		(301,543)
			Loss on reorganisation								-		1,511,722

4.	Discontinued operations
	The group was unable to find an investment partner for the coal bed methane opportunities at Fiume Bruna and Casoni,
	in Italy, therefore, these opportunities will no longer be pursued. As a result the directors decided, prior to the year end, to
	significantly reduce its activities in Italy and to discontinue the activities within Independent Energy Solutions srl which
	dealt solely with these opportunities. With Independent Energy Solutions srl classified as discontinued operations, the
	Ribolla Basin CBM assets segment is no longer presented in the segment note. The results of Independent Energy
	Solutions srl, incorporating consolidation adjustments, are presented below:
		Year to 31 December 2014		Period to 31 December 2013
		£		£
	Revenue	-		-
	Administrative expenses	(360,916)		(300,214)
	Operating loss before impairment	(360,916)		(300,214)
	Impairment of the historic cost and carrying value of intangible
	assets	(4,096,939)		-
	Impairment of goodwill arising on acquisition of Independent Energy
	Solutions srl - consolidation adjustment	(450,766)		-
	Operating loss after impairment	(4,908,621)		(300,214)
	Financial income	884		2,876
	Financial expense	-		-
	Loss on ordinary activities before taxation	(4,907,737)		(297,338)
	Taxation	-		-
	Loss for the year from discontinued operations	(4,907,737)		(297,338)
	The major classes of assets and liabilities of  Independent Energy Solutions srl classified as held for distribution to equity
	holders of the parent as at 31 December 2014 are as follows:
		31 December 2014		31 December 2013
		£		£
	Assets
	Intangible assets - fully impaired	-		-
	Property, plant and equipment	9,026		-
	Other receivables	22,008		-
	Cash and cash equivalents	16,649		-
	Assets held for distribution	47,683		-
	Liabilities
	Trade and other payables	(279,989)		-
	Liabilities directly associated with the  assets held for distribution	(279,989)		-
	Net assets directly associated with disposal group	(232,306)		-
	The net cash flows incurred by Independent Energy Solutions srl are as follows:
		Year to 31 December 2014		Period to 31 December 2013
		£		£
	Operating	25,297		128,568
	Investing	(61,737)		(118,329)
	Financing	-		-
	Net cash (outflow)/inflow	(36,440)		10,239

	Loss per share (pence)
		Year to 31 December 2014		Period to 31 December 2013
	Basic, loss for the year from discontinued operations	(6.3)		(0.7)
	Diluted, loss for the year from discontinued operations	(6.3)		(0.7)
	Immediately before the classification of Independent Energy Solutions srl as discontinued operations, the recoverable
	amount was estimated for certain items of property, plant and equipment and no impairment was identified. No adjustment
	has been made to reduce the carrying amount of the assets in the disposal group to their fair value less costs to distribute.
	Immediately before the classification of Independent Energy Solutions srl as discontinued operations, the recoverable
	amount was estimated for the company's intangible assets and these were impaired in full.

5.	Taxation
		Year to 31 December 2014		Period to 31 December 2013
		£		£
	Tax on profit on ordinary activities
	Taxation charged based on profits for the period
	UK corporation tax based on the results for the period	-		-
	Total tax expense in income statement	-		-
	Reconciliation of the tax expense
	The tax assessed for the year is different from the standard rate of corporation tax in the UK (21.5%).  The
	differences are explained below:
		Year to 31 December 2014		Period to 31 December 2013
		£		£
	Loss on ordinary activities before taxation	(1,572,728)		(3,044,000)
	Loss on ordinary activities multiplied by standard rate
	of corporation tax in the UK of 21.5% (2013: 23.4%)	(338,136)		(712,296)
	Effects of:
	Expenses disallowed for tax purposes	2,540		50,337
	Deferred tax not provided - tax losses carried forward	335,596		661,959
	Total current tax	-		-
	The group has tax losses available to be carried forward in certain subsidiaries and the parent. With anticipated
	substantial lead times for the group's projects, and the possibility that these may therefore expire before their use, it is
	not considered appropriate to anticipate an asset value for them.

6.	Loss per share
	The calculation of basic and diluted loss per share at 31 December 2014 was based on the loss attributable
	to ordinary shareholders of £6,480,465. The weighted average number of ordinary shares outstanding during
	the year ending 31 December 2014 and the effect of the potentially dilutive ordinary shares to be issued are
	shown below.
		Year to 31 December 2014		Period to 31 December 2013
		£		£
	Net loss for the year	(6,480,465)		(3,350,702)
	Basic weighted average ordinary shares
	in issue during the year	77,683,625		45,836,867
	Diluted weighted average ordinary shares
	in issue during the year	77,683,625		45,836,867
	Loss per share (pence)
	Basic	(8.3)		(7.3)
	Diluted	(8.3)		(7.3)
	In accordance with IAS 33 and as the average share price in the year is lower than the exercise price, the share options
	do not have a dilutive impact on earnings per share for the year ending 31 December 2014.

7.	Goodwill (group)
						Goodwill
						£
	31 December 2014
	Cost
	1 January 2014 and 31 December 2014					450,766
	Impairment
	1 January 2014					-
	Impairment charge for the year					450,766
	31 December 2014					450,766
	Carrying amount
	31 December 2014					-
	31 December 2013					450,766
	31 December 2013
	Cost
	1 October 2012 and 31 December 2013					450,766
	Carrying amount
	31 December 2013					450,766
	30 September 2012					450,766
	The goodwill arises as a result of the acquisition of Independent Energy Solutions srl which contains the Ribolla project.
	The group was unable to find an investment partner for the coal bed methane opportunities at Fiume Bruna and Casoni,
	in Italy, therefore, these opportunities will no longer be pursued. As a result the directors have decided that the carrying
	value of the goodwill is not recoverable and have fully provided against this in the current year.
8.	Other intangible assets (group)
	Development and exploration
			Rivara gas	Ribolla Basin	Ksar Hadada	Total
			storage	CBM assets	exploration
			facility		acreage
			£	£	£	£
	31 December 2014
	Cost
	1 January 2014		5,584,997	4,316,859	1,307,337	11,209,193
	Exchange differences		(365,374)	(282,411)	-	(647,785)
	Additions		19,730	62,491	137,291	219,512
	31 December 2014		5,239,353	4,096,939	1,444,628	10,780,920
	Impairment
	1 January 2014		-	-	1,080,829	1,080,829
	Impairment charge for the year		-	4,096,939	-	4,096,939
	31 December 2014		-	4,096,939	1,080,829	5,177,768
	Carrying amount
	31 December 2014		5,239,353	-	363,799	5,603,152
	31 December 2013		5,584,997	4,316,859	226,508	10,128,364
	31 December 2013
	Cost
	1 October 2012		5,236,000	4,013,233	1,297,709	10,546,942
	Exchange differences		248,709	190,629	-	439,338
	Additions		100,288	112,997	9,628	222,913
	31 December 2013		5,584,997	4,316,859	1,307,337	11,209,193
	Impairment
	1 October 2012		-	-	1,080,829	1,080,829
	Impairment charge for the period		-	-	-	-
	31 December 2013		-	-	1,080,829	1,080,829
	Carrying amount
	31 December 2013		5,584,997	4,316,859	226,508	10,128,364
	30 September 2012		5,236,000	4,013,233	216,880	9,466,113
	The primary intangible assets are all internally generated.
	For the purpose of impairment testing of intangible assets, recoverable amounts have been determined based
	upon the value in use of the group's three projects.
	Ribolla Basin CBM assets
	The group was unable to find an investment partner for the coal bed methane opportunities at Fiume Bruna and Casoni,
	in Italy, therefore, these opportunities will no longer be pursued. As a result the directors have decided that the carrying
	value of the intangible asset is not recoverable and have fully provided against this in the current year.
	Ksar Hadada exploration permit
	Through a wholly owned subsidiary, the Group owns a 86.345% working interest in the Ksar Hadada exploration
	permit onshore Tunisia. The Group and its partners in the licence expect drilling activity in the licence to commence in 2016.
	The Group is actively searching for a farm-in partner to fund seismic appraisal and drilling.  If a commercial discovery is made
	through drilling then a production licence with a 30 year duration can be obtained. Management's evaluation of the commercial
	terms of the related production sharing contract confirm that the project remains economic at current oil prices and at a substantial
	discount thereto and indicate a net present value significantly in excess of the value of the related intangible assets.
	Rivara gas storage facility
	Despite the expected delay, a review of the latest management information and projections shows a net present value
	significantly in excess of assets and liabilities relating to the project. The main assumptions indicate that no significant
	change has arisen on these calculations which would materially impact on the group.
	The continuing analysis and testing of technical data continues to indicate that the project is feasible.
	The group continues to work towards, and is confident of, obtaining all the necessary approvals from regulatory
	authorities. The group anticipates being able to raise the necessary finance to continue to develop the projects.
	Value in use
	Value in use has been calculated separately for the group's Rivara gas storage facility. Cash flows are projected for
	the periods up to the date that the project is expected to become commercially operational and from then until
	operations are expected to cease, based upon management's expectations. These dates depend on a number of variables,
	including the project's technical feasibility, regulatory approval, forecast revenue prices and the associated development
	and operational costs.
	The project is expected to generate revenue after five to nine years and to continue doing so for a further 35
	years. The directors consider that projections calculated for a period greater than five years are justified as the
	project is still in a development stage.
	Key assumptions used in value in use calculations
	The key assumptions used in the value in use calculations for the intangible assets are the expected storage and
	useable capacity of the Rivara project, costs of plant and infrastructure, expected revenue prices (specifically gas
	prices), expected operational costs, appropriate discount rates and foreign exchange rates.
	Management's assessment of the technical and commercial viability of the project is supported by the evaluation work
	undertaken by appropriately qualified persons.
	Management has assessed the project's individual net present values and thereby impairment on a variety of
	bases and assumptions using, where appropriate, a number of discount rates.  The impairment tests are
	particularly sensitive to changes in the key assumptions, and changes to these assumptions could result in
	impairment; however, all of the varying bases indicate a net present value significantly in excess of the value of
	the intangible assets.
	Foreign exchange rates have been based on external market forecasts, after considering long-term market
	expectations and the countries in which the group operates.
	The key assumptions used in the value in use calculations are as follows:
				Assumption		Sensitivity
						factor *
	Rivara gas storage facility:
		Growth rate		2.0%		+568.29%
		Discount rate		8.0%		+78.23%
		Capital expenditure		-		185.89%
	The growth rates are considered to cover increases resulting from inflation and regulatory changes.
	* The sensitivity factor is the percentage change in each specific assumption which would, on its own, result in the net present
	value equal to the carrying value of the intangible asset in the accounts.
	The discount rates used vary depending on the nature of the projects and the anticipated stability and longevity of expected
	cash flows.
	Potential impairment of the Rivara project
	The Group holds a 100% interest in Rivara Gas Storage srl. Intangible assets include an amount of £5,239,000 with
	respect to project expenditure. The regional council, Regione Emilia Romagna, where the project is located is currently
	denying authorisation for project development. However authorisation has been granted by the national government. As a
	result Rivara Gas Storage srl has appealed against this decision to the Emilia Romagna Administrative Court
	and this appeal is due to be heard in the second half of 2015.
	In the event that Rivara Gas Storage srl's appeal was to be unsuccessful, there may be an indication of impairment of the
	capitalised expenditure which could significantly reduce the carrying value of this asset.

9.	Share capital
			31 December 2014		31 December 2013
			Group	Company		Group	Company
			£	£		£	£
	Issued, called up and fully paid
	105,143,330 (2013: 45,836,867)
	ordinary shares of 1p
	1 January 2014	458,369		458,369		458,369	458,369
	Equity shares issued	593,065		593,065		-	-
	31 December 2014	1,051,434		1,051,434		458,369	458,369
	Since the enactment of the Companies Act 2006 and the resulting changes to the articles of association of the company, the
	company is no longer required to maintain an authorised share capital.
	The holders of ordinary shares are entitled to receive dividends from time to time and are entitled to one vote per
	share at meetings of the company.
	On 19 June 2014, a further 59,306,463 ordinary shares of 1p were issued at a placing price of 3p each giving rise to a
	share premium of £1,186,129.

10.	Share premium account
		31 December 2014		31 December 2013
		Group	Company	Group	Company
		£	£	£	£
	1 January 2014	15,287,351	15,287,351	15,287,351	15,287,351
	Premium arising on issue of equity shares	1,186,129	1,186,129	-	-
	Transaction costs	(171,430)	(171,430)	-	-
	31 December 2014	16,302,050	16,302,050	15,287,351	15,287,351

11.	Share-based payments
	The share option scheme, which was adopted by the company on 25 November 2005, was established to reward and
	incentivise the executive management team for delivering share price growth. The share option scheme is administered
	by the Remuneration Committee.
	One-off options of 16,667 granted to A R H Thomas in recognition of his contribution at the time of the company's AIM
	admission remained exercisable at the year end.
	On 4 March 2013 the company issued 200,000 share options to W G Coleman upon his appointment to the board as
	chief executive officer.
	On 10 October 2014 the company issued 4,205,734 share options in total to the directors, key management personnel and
	their service companies as follows:
	Individual			Number of options granted
	W G Coleman (director)			2,628,583
	O P T Franks (director)			525,717
	F P McCole (key management personnel)			525,717
	Rocky Mountain Limited (company controlled			525,717
	by B Hepp, key management personnel)
				4,205,734
	Details of the tranches of share options outstanding at the year end are as follows:
	Date of grant	01/01/2014 Number of options	Issued/ lapsed in the period	31/12/2014 Number of options	Date from which options may be first exercised	Lapse date	Exercise Price per option
	4/03/2013	200,000	-	200,000	4/03/2013	3/03/2023	1p
	10/10/2014	-	4,205,734	4,205,734	10/10/2015	10/10/2024	3p
	The options outstanding at the end of the year have a weighted average remaining contractual life of 1 year for the options
	issued on 4 March 2013 and 2.75 years for the options issued on 10 October 2014.
	The fair values of the options granted on 4 March 2013 were calculated using the Black-Scholes option pricing model. The
	inputs into the model were as follows:
	Weighted average share price				10.62p
	Weighted average exercise price				1p
	Expected volatility				92.00%
	Expected life				10 years
	Risk free rate				2.10%
	Expected dividend yield				Nil
	The fair values of the options granted on 10 October 2014 were calculated using the Black-Scholes option pricing model. The
	inputs into the model were as follows:
	Weighted average share price				2.12p
	Weighted average exercise price				3p
	Expected volatility				85.00%
	Expected life				10 years
	Risk free rate				2.22%
	Expected dividend yield				Nil
	The average fair value of share options granted in the year was 1.716p each.
	The outstanding share options are not subject to any share-performance related vesting conditions but vesting is conditional
	upon continuity of service.
	The expected volatility was determined with reference to the company's share price since it was admitted for trading
	on AIM in December 2005. The expected life used in the model has been adjusted, based on management's best
	estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.
	The group recognised total expenses of £10,813 (2013: £215,114) related to equity-settled, share-based payment
	transactions during the year.  Of the amount recognised in the current year £Nil (2013: £20,573) related to the options issued to
	W G Coleman, as detailed above, the value of which has been recognised in full as they could be exercised immediately.
	A deferred taxation asset has not been recognised in relation to the charge for share-based payments due to the availability
	of tax losses available to be carried forward.

 

END

 

 

FR SESESLFISEEM