Final Results for the year ended 31 December 2018

RNS Number : 4835Z

Jersey Oil and Gas PLC

20 May 2019

 

20 May 2019

Jersey Oil and Gas plc

("Jersey Oil & Gas", "JOG" or the "Company")

Final Results for the year ended 31 December 2018

Jersey Oil & Gas (AIM: JOG), an independent upstream oil and gas company ‎focused on the UK Continental Shelf ("UKCS") region of the North Sea, is pleased to announce its audited results for the year ended 31 December 2018.

Highlights

·     Post discovery well analysis: 2018 was a year of post well analysis following the Verbier oil discovery made in October 2017.

·    PGS Seismic Survey: JOG participated in pre-funding a 3D seismic survey over the P2170 licence area and certain offset acreage to advance the interpretation of the 2017 Verbier discovery and assessment of other exploration opportunities within the P2170 licence and surrounding area.

·   Preparation for the Verbier Appraisal Well: The West Phoenix semi-submersible rig was contracted for drilling, as part of a larger Equinor operated drilling campaign, leading to cost benefits for JOG with certain costs being shared. Originally scheduled to commence in H2 2018, the well was subsequently rescheduled and drilled in H1 2019. 

·   Board Change: On 14 November 2018, Vicary Gibbs joined the Company and Board, replacing Scott Richardson Brown as Chief Financial Officer.

·    Strong Cash Position: Ended 2018 with £19.8 million of which approximately £4-5 million will be utilised through H1 2019, principally to settle our share of the Verbier appraisal well costs.

Post year end

·     Verbier Appraisal Well Result: The 20/05b-14 appraisal well, which was safely drilled, ahead of schedule and within budget, unfortunately did not encounter Upper Jurassic reservoir sands as anticipated. The appraisal well results will be fully integrated with the final processed data from the 3D seismic survey, acquired in 2018, in order to evaluate the upside potential for further Verbier appraisal activity.

o  Our contingent resource volumetric estimates are likely to be revised towards the lower end of the initial resource estimate of 25 million barrels of oil equivalent ("MMboe") from the 2017 Verbier oil discovery results, a volume which JOG views to be commercially viable.

o  A large part of the mapped area of the Verbier discovery, located to the north west of the 20/05b-14 well location remains untested. Additional resource potential, which was not tested with this well or the discovery well, has also been identified in a deeper horizon beneath the Verbier discovery. These prospects, along with the Cortina prospect, will be re-evaluated with the new seismic data and then considered for future drilling.

 Outlook

·     Delivery of final 3D seismic survey dataset: Final processed dataset from the 3D seismic survey is expected to be delivered around the end of Q2 2019.

·     Technical re-evaluation of P2170 licence area: JOG, together with Equinor and CIECO, will complete the already planned full re-evaluation of the licence area, combining the recent appraisal well results and data collected during operations with the fully processed 3D seismic data in order to better understand the reservoir distribution of the primary target. The evaluation will also include an assessment of additional prospectivity in deeper targets and the other previously identified exploration opportunities, including Cortina, before making decisions on any potential future appraisal/exploration programme.

·      Licensing awards in the 31^st Supplementary Offshore Licensing Round: We look forward to the results of the 31^st Supplementary Offshore Licensing Round which we see as being highly beneficial to the Verbier discovery, with the potential to enhance its commercial viability.

·    M&A: The UKCS continues to benefit from a vibrant M&A market. JOG continues to evaluate all relevant opportunities as it pursues its growth strategy seeking attractive returns.

Andrew Benitz, CEO of Jersey Oil & Gas, commented:

"JOG continues to benefit from our initial Verbier oil discovery announced in 2017, notwithstanding the recent appraisal well results. We look forward to delivery of the new 3D seismic data and working with our co-venturers on assessing potential future appraisal and exploration drilling opportunities on the licence area.  Additionally, we are excited by the potential for a new area hub catalysed by the 31st Supplementary Offshore Licensing Round and the positive impact we believe this will have for Verbier.

"The Company benefits from a strong funding position and we are optimistic that we can create value for shareholders through our core asset base, with multiple catalysts that exist for the Company through the remainder of 2019."

Enquiries:

Jersey Oil and Gas plc	Andrew Benitz, CEO	C/o Camarco: Tel: [phone]
Strand Hanson Limited	James Harris Matthew Chandler James Bellman	Tel: [phone]
Arden Partners plc	Paul Shackleton Benjamin Cryer	Tel: [phone]
BMO Capital Markets Limited	Jeremy Low Tom Rider	Tel: [phone]
Camarco	Billy Clegg James Crothers	Tel: [phone]

Qualified Person's Statement:

The information contained in this announcement has been reviewed and approved by Ronald Lansdell, Chief Operating Officer of Jersey Oil & Gas, a qualified Geologist and Fellow of the Geological Society, who has over 40 years' relevant experience within the sector.

Notes to Editors:

Jersey Oil & Gas is a UK E&P company focused on building an upstream oil and gas business in the North Sea. The Company owns an 18% interest in the P2170 licence, Blocks 20/5b & 21/1d, Outer Moray Firth, in which the operator, Equinor UK Limited, owns a 70% interest and CIECO V&C (UK) Limited owns a 12% interest.

The Company plans to build an upstream E&P portfolio via both organic development and acquisitions coinciding with the cyclical recovery in the oil price and the opportune buying market in the North Sea. The Company is involved in multiple acquisition opportunities and intends to draw on its management team's considerable experience, knowledge and expertise to deliver shareholder value from its stated growth strategy.

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014.

CHAIRMAN'S STATEMENT

Overview

During the year ended 31 December 2018 Jersey Oil and Gas ("JOG" or the "Company" or, together with its subsidiaries, the "Group") sought to consolidate and develop its position following the oil discovery at licence P2170 ("Verbier"). We did this largely through agreeing a work programme with our co-venturers for the drilling of an appraisal well to assess the extent of the Verbier discovery in addition to undertaking seismic and other pre-drilling technical work.

The appraisal well was drilled in the first quarter of 2019 and, to our great disappointment, failed to intersect Upper Jurassic reservoir sands as anticipated.

Whilst this was a setback to our short-term ambitions, we continue to see core value to the Company from the estimated contingent resource volume for the Verbier oil discovery and material additional value potential across the P2170 licence and look forward to the results of further technical work currently being undertaken. We are also confident of our ability to capitalise on a number of further opportunities in the North Sea, the background to which is covered in the Chief Executive's Statement that follows.

Economic and Industry Environment

Brent Crude Oil started trading in 2018 at a price of $65 per barrel, increasing to $85 per barrel and then falling back to $55 per barrel at the year end. At the time of this statement Brent is trading around $70 per barrel, with market commentators anticipating prices of $70 per barrel for the end of 2019. Geopolitical events and macroeconomic influences, of which there are many, continue to play their part in setting the market price of oil. Nonetheless, current and expected price levels continue to bode well for the development of profitable oil and gas opportunities in the North Sea.

Across the whole of the North Sea region, sixty exploration wells are expected to be drilled in 2019, which is a 25% increase versus 2018. As regards the UK sector of the North Sea, the Oil and Gas Authority ("OGA") estimates that 10 to 20 billion barrels of oil remain to be developed, which could sustain production for another 20 years or more. As a result, we continue to be very comfortable operating within this economic and industry environment.

The OGA also continues to place great emphasis on its Maximising Economic Recovery ("MER") programme, and our strategic plans to develop the P2170 licence and surrounding areas, are fully aligned with this strategy.

In addition to our operational activities, we continue to assess multiple M&A growth opportunities, assisted by £30m of tax losses and indicative bank funding support. However, based on our internal pricing analysis and prudent economic evaluation of many oil and gas interests, we have not been prepared to pay prices which we believe to be unlikely to deliver a good return to shareholders.

Financial Results

Our pre-tax loss for the year amounted to £2.0m down from a £0.7m profit in 2017, reflecting the end of the carried interest arrangement with CIECO V&C (UK) Limited in relation to licence P2170.

Cash at year end was £19.8m, which will be reduced further by approximately £4-5m, as our share of the Verbier appraisal well costs falls due during H1 2019.

Corporate Governance

During 2018 we adopted the Quoted Companies Alliance Corporate Governance Code (the "QCA Code") which, in practical terms, meant that we codified many of the governance processes that we already undertook, and implemented a number of new processes in a more formal way, such as board effectiveness reviews. This process of adopting the principles of the QCA Code was completed smoothly and a full corporate governance report follows later in the 2018 Report and Accounts and further details can be found on our website.

People

We continue to add to our team as our requirements grow and, subsequent to the 2018 year-end, leased some office space in London which is modest and cost effective and will act as a focal point for our UK-based personnel.

In the latter part of 2018, Scott Richardson Brown stood down as Chief Financial Officer and a director of the Company, in order to focus on his other directorships and business interests, having served on the Board since June 2013. At the same time, we welcomed Vicary Gibbs as our new Chief Financial Officer. Vicary has extensive experience as a corporate financier advising oil and gas corporates, including JOG, and in addition to his finance responsibilities, we look forward to taking advantage of his deal-based skills, as the Company develops.

Outlook

JOG has a strong team, and on behalf of the Board, I would like to thank all of our employees who have continued to work in support of the Company's activities, both in the front line and in support roles.

We continue to view the P2170 licence area, including Verbier, as a valuable asset with significant prospectivity and will assess the information obtained from the first quarter appraisal well, in addition to the enhanced seismic data due to be delivered around the end of Q2 2019 to determine the potential for further appraisal and exploration wells.

Work also continues on other catalysts for growth, including the OGA's 31st Supplementary Offshore Licensing Round, which includes acreage in the Greater Buchan Area and various potential production asset acquisition opportunities.

The Company remains well-funded to continue its exploration and appraisal activities on its core P2170 licence and we remain fully focused on increasing shareholder value.

Marcus Stanton

Non-Executive Chairman

20 May 2019

CHIEF EXECUTIVE OFFICER'S REPORT

Overview

2018 was a year of post-well analysis following the Verbier oil discovery announced in October 2017 and preparation for the next phase of exploration activity. Early on in the year, the joint venture, operated by Equinor UK Ltd ("Equinor"), approved an appraisal well programme and contracted the West Phoenix semi-submersible rig for drilling. Such drilling had the objective of determining the potential volume range of the Verbier oil discovery, which on discovery was estimated by the operator to be 25-130 million barrels of oil equivalent ("MMboe"), whilst acquiring data important to our further understanding of the depositional model for the Verbier reservoir sands. In addition, we pre-funded the acquisition and processing of a significant 3D seismic survey by Petroleum Geo-Services ASA ("PGS") covering the P2170 licence area and certain offset acreage. The final processed dataset is expected to be delivered around the end of Q2 2019.  

Post year-end, JOG announced the results of the Verbier appraisal well, which unfortunately did not encounter the anticipated Upper Jurassic reservoir sands. As a result, our contingent resource estimate is likely to be revised towards the lower, 25 MMboe end of its initial range. It is important to note that such a revision does not factor in elements of additional resource potential within the P2170 licence area which include the area to the north west of Verbier, a deeper objective beneath the Verbier discovery and the Cortina prospect to the east of Verbier.

In addition to the P2170 prospects, we believe that there is potential for the exploitation and development of existing discovered, but currently undeveloped reserves that would allow for an area development approach around Verbier. Further to this, in January 2019, the OGA launched its 31st Supplementary Offshore Licensing Round, covering what is referred to as the Greater Buchan Area, which will comprise eight blocks that surround the existing P2170 licence. The OGA has estimated that up to 300 MMboe of recoverable oil volumes exist within this area, a material volume that potentially could lead to an area hub development, thereby enhancing the commercial viability of volumes discovered within P2170. During the year and post year-end, JOG committed resources to evaluating the development potential of this wider area. Post completion of the Verbier appraisal well, JOG remains well funded for further potential drilling activity on P2170, should this be agreed by the joint venture parties.

Operations

In January 2018, the P2170 co-venturers confirmed an approved work programme and budget for the appraisal of the Verbier oil discovery. Subsequently, Equinor contracted the West Phoenix, a sixth-generation semi-submersible drilling rig and related well services. This high-specification drilling rig is equipped with a dual derrick drilling system and substantial main deck space that can be pre-loaded, allowing for an optimal drilling performance at an attractive price.

Post the initial 2017 discovery, the co-venturers analysed the discovery well results, re-interpreting the existing seismic data and updating the prospectivity of P2170. JOG was pleased to announce, in April 2018, the pre-funding of a significant new 3D seismic survey over the licence area and certain offset acreage, as part of a wider survey by PGS. The acquisition parameters of this survey were specifically optimised to advance our interpretation of Verbier and the further assessment of other late Jurassic exploration opportunities. The survey was completed at the end of June 2018 and the data is now being processed by PGS. In December 2018, a fast-track processed dataset volume from the PGS survey, that overlays Verbier and Cortina, was delivered. Interpretation of this data has already commenced, and JOG has recruited a senior geoscientist in order to manage our own interpretation in parallel with work underway by Equinor. Early indications are that the data quality is improved compared to previous datasets. The fully processed dataset is on track to be delivered around the end of Q2 2019. The drilling location for the appraisal well was determined utilising a seismic data set, purchased for this purpose from TGS-NOPEC Geophysical Company ASA during 2018.

In November 2018, the co-venturers relinquished certain acreage in order to satisfy the Mandatory Surrender Area required under the terms of the Licence, at the end of the Initial Term. The remaining licensed area retains all identified prospectivity including Verbier, Cortina and Meribel and is illustrated on our company website.

The Verbier appraisal well programme was part of a larger Equinor operated drilling campaign which began in September 2018 and moved into UK waters in January 2019 to commence the drilling of two exploration wells for Equinor prior to Verbier. This had cost benefits for JOG in that certain costs were shared, such as mobilisation and demobilisation, across the whole campaign. Post year-end, the 20/05b-14 Verbier appraisal well commenced drilling on 4 March 2019 and its results were announced by JOG on 3 April 2019. The well was drilled ahead of schedule and under budget. However, the well did not encounter Upper Jurassic reservoir sands as anticipated and as a result, our contingent resource volumetric estimates are likely to be revised towards the lower, 25 MMboe end of the initial resource estimate range[1]. As a reminder, the 20/05b-13Z Verbier discovery well encountered excellent quality oil bearing reservoir sands. A full suite of wireline logs was acquired during the 2019 appraisal well programme and this data, together with all the previous well results will be integrated into the final processed 3D seismic data, of which JOG is expecting delivery from PGS around the end of Q2 2019. The resulting analysis will be used to fully evaluate the upside potential for further Verbier appraisal activity. A large part of the mapped area of the Verbier discovery, located to the north west of the recent 20/05b-14 appraisal well remains untested and further additional resource potential, which was not tested with this appraisal well or the 20/05b-13Z discovery well, has also been identified in a deeper horizon beneath the Verbier discovery. These prospects, along with the Cortina prospect, also within the P2170 licence area, will be re-evaluated with the new seismic data and considered for future drilling. A 2017 Competent Person's Report produced by ERC Equipoise, for JOG, ascribed mean recoverable prospective resources of 124 MMbbls to the Cortina prospect.

Figure 1, illustrated in the following hyperlink, shows JOG's latest prospect inventory map, outlining the aerial extent of the Verbier discovery and the additional prospectivity across the P2170 licence area. Whilst the drilling of this first Verbier appraisal well was disappointing, additional prospectivity remains on the P2170 licence, beyond the Verbier low case and JOG expects to update its on-licence resource estimates, once the new 3D seismic has been fully evaluated.

[1] This on-block resource estimate was assessed by the Operator as the minimum proven volumes as a result of the positive well results of the 20/05b-13Z discovery well, its extent in a southerly direction to the Verbier entry point and to the east where the 20/05a-10Y discovery well tested what is believed to be the eastern extent of Verbier.

Figure 1 - P2170 discovery and prospect inventory map

http://www.rns-pdf.londonstockexchange.com/rns/4835Z_1-2019-5-19.pdf

Other Licence Activity

As reported in prior years, Total E&P UK Limited ("TEPUK") has a conditional agreement to pay the Company £1m in relation to the termination of its 2013 farm-in to licence P2032 (Blocks 21/8c, 21/9c, 21/10c, 21/14a and 21/15b). TEPUK disputes that the conditions giving rise to the obligation to pay the Company have been satisfied, but we continue our efforts in pursuit of this claim.

JOG's Acquisition Strategy

The landscape for potential acquisitions in the North Sea has changed and is increasingly active. The Company bid competitively on the sales of multiple producing assets during the year, but on each occasion, we were outbid. One exception was an acquisition that was agreed but was withdrawn by the vendor at the last minute due to vendor tax considerations. The Board remains committed to growing the business and bringing positive cash flow generation ever closer. Accordingly, we will continue to evaluate opportunities that we consider to be accretive to building shareholder value. We also acknowledge the growth opportunities that exist within the region of the North Sea that we know best, namely the Central Norh Sea, so we see potential growth in shareholder value being achieved both through organic and inorganic means. JOG remains committed to scaling up its business in the UK North Sea and sees this as a good sector in which to build a profitable full cycle upstream oil and gas business. We are pleased to be active in an area where there is a proactive, industry-facing regulator, the Oil and Gas Authority ("OGA"), and we are fully aligned with the OGA's objective of Maximising Economic Recovery.

Financial Review

JOG's 2018 year-end cash position was £19.8 million. As an oil and gas exploration company, JOG produced no production revenue during the year. The final amount payable under our carried interest arrangement with CIECO V&C Limited ("CIECO"), in respect of the P2170 licence, received at the start of 2018, was £12,038 (2017: circa £2.4m). In addition, we received a small amount of interest on our cash deposits.

The loss for the year, before and after tax, was £1,996,300 (2017: Profit £726,692). The change from 2017 reflects the fact that we have fully used the carried interest arrangement with both Equinor and CIECO but also reflects the Company's continued focus on controlling administrative costs within the context of the work undertaken during the year.

We also recognised the benefit of pre-funding the abovementioned PGS multiclient 3D survey with our co-venturers on the P2170 licence, which is an important step in our overall strategic planning as the P2170 licence area retains the potential for further exploration, appraisal and future development phases. Including other appraisal costs, our total spend on licence P2170 for year ended 31 December 2018 was £2.9m.

Further to the P2170 work programme and budget being approved in November 2018, JOG estimated total capex for 2019 to be in the range of £7 million to £10 million. The Verbier appraisal well, which comprised the majority of this estimated capex, was drilled ahead of schedule and under budget and therefore our capex guidance for 2019 has been reduced to a range of £6 million to £7 million. JOG therefore remains in a well-funded position.

Looking Forward

Equinor, as the operator of the P2170 licence, remains committed to the project and has confirmed to the co-venturers that it will complete the already planned full re-evaluation of the licence area, combining the recent appraisal well results and data collected during operations with the fully processed new 3D broadband seismic data, in order to better understand the reservoir distribution of the primary target. The evaluation will also include an assessment of additional prospectivity in the deeper targets and the other previously identified exploration opportunities, including Cortina, before a decision is made by the co-venturers on potential future appraisal and exploration programmes. Additionally, it is anticipated that plans for an area hub development will be catalysed by licence awards in the OGA's 31st Supplementary Licencing Round and that this will enhance the commercial viability of our Verbier oil discovery.

I would like to welcome new members to the JOG team, including our new CFO, Vicary Gibbs and Senior Geoscientist, Dr Nasser Bani Hassan. The Company has leased some new office space in London and invested in the latest industry interpretation software and hardware, which will position us well for the post well analysis and seismic interpretation. I thank our dedicated team of professionals for all their work and effort during the year.

Management remain excited by the Company's investment case and continue to believe that there is significant potential to create value for shareholders during 2019, with key events being the integration of data from the wells drilled to date on Verbier into the new 3D dataset, together with a potential update on resource estimates, the 31st Supplementary Licencing Round and planning for future drilling activity.

Many of our shareholders have supported JOG through the highs and lows, as we have sought to grow this business from the ground floor up. We are committed to the long-term growth of this Company and would like to thank our shareholders for their continued support

Andrew Benitz

Chief Executive Officer

20 May 2019

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

				2018		2017
		Note		£		£
Revenue		3		-		-
Cost of sales				(609,925)		(13,498)
GROSS LOSS				(609,925)		(13,498)
Other income		6		12,037		2,440,248
Administrative expenses				(1,447,383)		(1,705,068)
OPERATING (LOSS)/PROFIT				(2,045,271)		721,682
Finance income		7		48,971		5,010
(LOSS)/PROFIT BEFORE TAX		8		(1,996,300)		726,692
Tax		9		-		-
(LOSS)/PROFIT FOR THE YEAR				(1,996,300)		726,692
TOTAL COMPREHENSIVE (LOSS)/PROFIT FOR THE YEAR				(1,996,300)		726,692
Total comprehensive (loss)/profit for the year attributable to:
Owners of the parent				(1,996,300)		726,692
(Loss)/profit per share expressed in pence per share:
Basic		10		(9.15)		6.49
Diluted		10		(9.15)		6.03

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

				2018		2017
		Note		£		£
NON-CURRENT ASSETS
Intangible assets - Exploration costs		11		4,306,589		1,357,959
Property, plant and equipment		12		30,264		-
				4,336,853		1,357,959
CURRENT ASSETS
Trade and other receivables		13		80,594		356,107
Cash and cash equivalents		14		19,782,511		25,415,410
				19,863,105		25,771,517
TOTAL ASSETS				24,199,958		27,129,476
EQUITY
Called up share capital		15		2,466,144		2,466,144
Share premium account				93,851,526		93,851,526
Share options reserve		19		1,491,019		1,231,055
Accumulated losses				(73,662,879	)	(71,666,579)
Reorganisation reserve				(382,543)		(382,543)
TOTAL EQUITY				23,763,267		25,499,603
LIABILITIES
CURRENT LIABILITIES
Trade and other payables		16		436,691		1,629,873
TOTAL LIABILITIES				436,691		1,629,873
TOTAL EQUITY AND LIABILITIES				24,199,958		27,129,476

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

	Called up		Share		Share
	share		premium		options		Accumulated		Reorganisation			Total
	capital		account		reserve		losses		reserve			equity
	£		£		£		£		£			£
At 1 January 2017	2,347,017		71,170,230		1,495,921		(72,763,959)		(382,543)			1,866,666
Profit and total comprehensive profit for the year	-		-		-		726,692		-			726,692
Issue of share capital	119,127		22,681,296		-		-		-			22,800,423
Share based payments	-		-		105,822		-		-			105,822
Exercised share options		-		-	(370,688)		370,688		-			-
At 31 December 2017 and 1 January 2018	2,466,144		93,851,526		1,231,055		(71,666,579)		(382,543)			25,499,603
Loss and total comprehensive loss for the year	-		-		-		(1,996,300)		-			(1,996,300)
Share based payments	-		-		259,964		-		-			259,964
At 31 December 2018	2,466,144		93,851,526		1,491,019		(73,662,879)		(382,543)			23,763,267

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

Reserve                                                                    Description and purpose

Called up share capital                                          Represents the nominal value of shares issued

Share premium account                                         Amount subscribed for share capital in excess of nominal value

Share options reserve                                            Represents the accumulated balance of share-based payment charges recognised in respect of share options granted by the Company less transfers to accumulated deficit in respect of options exercised or cancelled/lapsed

Accumulated losses                                               Cumulative net gains and losses recognised in the Consolidated Statement of Comprehensive Income

Reorganisation reserve                                         Amounts resulting from the restructuring of the Group at the time of the Initial Public Offering (IPO) in 2011

CONSOLIDATED STATEMENT OF CASH FLOWS

				2018		2017
		Note		£		£
Cash flows from operating activities
Cash (used in)/generated from operations		21		(2,698,361)		2,036,892
Net interest received		7		48,971		5,010
Net cash (used in)/generated from operating activities				(2,649,390)		2,041,902
Cash flows from investing activities
Purchase of intangible assets		11		(2,948,630)		(1,309,225)
Purchase of tangible assets		12		(34,879)		-
Net cash used in investing activities				(2,983,509)		(1,309,225)
Cash flows from financing activities
Net proceeds from share issue				-		22,800,423
Net cash generated from financing activities				-		22,800,423
(Decrease)/Increase in cash and cash equivalents		21		(5,632,899)		23,533,100
Cash and cash equivalents at beginning of year		21		25,415,410		1,882,310
Cash and cash equivalents at end of year		21		19,782,511		25,415,410

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1.          GENERAL INFORMATION

Jersey Oil and Gas plc (the "Company") and its subsidiaries (together, the "Group") are involved in the upstream oil and gas business in the UK.

The Company is a public limited company incorporated and domiciled in the United Kingdom and quoted on AIM, a market operated by London Stock Exchange plc. The address of its registered office is 10 The Triangle, ng2 Business Park, Nottingham, NG2 1AE.

2.          SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

Basis of Accounting

These financial statements have been prepared under the historic cost convention, in accordance with International Financial Reporting Standards and IFRS IC interpretations as adopted by the European Union ("IFRSs") and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

Going Concern

The Company is required to have sufficient resources to cover the expected running costs of the business for a period of at least 12 months after the issue of these financial statements. Further to completion of the Verbier appraisal well programme, there are currently no firm work commitments on the P2170 licence, other than ongoing Operator overheads and licence fees. Other work that the Company is undertaking in respect of the P2170 licence and surrounding areas is modest relative to its current cash reserves. The Company's current cash reserves are therefore expected to more than exceed its estimated liabilities. Based on these circumstances, the Directors have considered it appropriate to adopt the going concern basis of accounting in preparing its consolidated financial statements. 

Changes in Accounting Policies and Disclosures

(a) New and amended standards adopted by the Company:

At the start of the year the following standards were adopted

·   IFRS 9 'Financial 'instruments' is effective for accounting periods beginning on or after 1 January 2018.

·   IFRS 15 'Revenue from Contracts with Customers' is effective for accounting periods beginning on or after 1 January 2018.

Other than changes to the terminology used in accounting policies, these have not had a material impact on the financial statements of the Group.

(b) The following standards have been published and are mandatory for the Group's accounting periods beginning on or after 1 January 2019, but the Group has not adopted them early. The Group does not expect the adoption of these standards to have a material impact on the financial statements.

·   IFRS 16 'Leases' is effective for accounting periods beginning on or after 1 January 2019.

Amendments have also been made to the following standards effective on or after 1 January 2018. The Group does not expect the amendments to have a material impact on the Group's financial statements.

·     IFRS 2 'Share-based Payment'

·     IFRS 9 'Financial Instruments'

·     IAS 28 'Investment in Associates and Joint Ventures'

·     IAS 40 'Investment Property'

All other amendments to accounting standards not yet effective and not included above are not material or applicable to the Group.

Significant Accounting Judgements and Estimates

The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities at the date of the financial statements. If in future such estimates and assumptions, which are based on management's best judgement at the date of the financial statements, deviate from the actual circumstances, the original estimates and assumptions will be modified as appropriate in the period in which the circumstances change. The Group's accounting policies make use of accounting estimates and judgements in the following areas:

·      the assessment of the existence of impairment triggers (note 11).

·      the estimation of share-based payment costs (note 19).

Impairments

The Group tests its capitalised exploration licence costs for impairment when facts and circumstances suggest that the carrying amount exceeds the recoverable amount. The recoverable amounts of Cash Generating Units are determined based on value-in-use calculations. There were no impairment triggers in 2018 and no impairment charge has been recorded.

Share-Based Payments

The Group currently has a number of share schemes that give rise to share-based charges. The charge to operating profit for these schemes amounted to £259,964 (2017: £105,822). For the purposes of calculating the fair value of the share options, a Black-Scholes option pricing model has been used. Based on past experience, it has been assumed that options will be exercised, on average, at the mid-point between vesting and expiring. The share price volatility used in the calculation is based on the actual volatility of the Company's shares, since 1 January 2017. The risk-free rate of return is based on the implied yield available on zero coupon gilts with a term remaining equal to the expected lifetime of the options at the date of grant.

Basis of Consolidation

(a) Subsidiaries

Subsidiaries are all entities over which the Group has the power to govern their financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. The Group also assesses existence of control where it does not have more than 50 per cent. of the voting power but is able to govern the financial and operating policies by virtue of de-facto control. De-facto control may arise in circumstances where the size of the Group's voting rights relative to the size and dispersion of holdings of other shareholders give the Group the power to govern the financial and operating policies.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date the Group ceases to have control.

The Group applies the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair value at the acquisition date. The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest's proportionate share of the recognised amounts of the acquiree's identifiable net assets.

Acquisition related costs are expensed as incurred.

If the business combination is achieved in stages, the acquisition date fair value of the acquirer's previously held equity interest in the acquiree is re-measured to fair value at the acquisition date through profit or loss.

Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not re-measured, and its subsequent settlement is accounted for within equity.

Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss.

Inter-company transactions, balances, income and expenses on transactions between Group companies are eliminated. Profits and losses resulting from inter-company transactions that are recognised in assets are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

(b) Changes in ownership interests in subsidiaries without change of control

Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions - that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

(c) Disposal of subsidiaries

When the Group ceases to have control any retained interest in the entity is re-measured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.

Acquisitions, Asset Purchases and Disposals

Acquisitions of oil and gas properties are accounted for under the purchase method where the business meets the definition of a business combination.

Transactions involving the purchase of an individual field interest, farm-ins, farm-outs, or acquisitions of exploration and evaluation licences for which a development decision has not yet been made that do not qualify as a business combination, are treated as asset purchases. Accordingly, no goodwill or deferred tax arises. Consideration from farm-ins/farm-outs is adequately credited from, or debited to, the asset. The purchase consideration is allocated to the assets and liabilities purchased on an appropriate basis. Proceeds on disposal are applied to the carrying amount of the specific intangible asset or development and production assets disposed of and any surplus is recorded as a gain on disposal in the Consolidated Statement of Comprehensive Income.

Exploration and Evaluation Costs

The Group accounts for oil and gas and exploration and evaluation costs using IFRS 6 "Exploration for and Evaluation of Mineral Resources". Such costs are initially capitalised as Intangible Assets and include payments to acquire the legal right to explore, together with the directly related costs of technical services and studies, seismic acquisition, exploratory drilling and testing.

Exploration costs are not amortised prior to the conclusion of appraisal activities.

Exploration costs included in Intangible Assets relating to exploration licences and prospects are carried forward until the existence (or otherwise) of commercial reserves has been determined subject to certain limitations including review for indications of impairment on an individual license basis. If commercial reserves are discovered, the carrying value, after any impairment loss of the relevant assets, is then reclassified as Property, plant and equipment under Production interests and fields under development. If, however, commercial reserves are not found, the capitalised costs are charged to the Consolidated Statement of Comprehensive Income. If there are indications of impairment prior to the conclusion of exploration activities, an impairment test is carried out.

Property, Plant and Equipment

Property, plant and equipment is stated at historic purchase cost less accumulated depreciation. Asset lives and residual amounts are reassessed each year. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use.

Depreciation on these assets is calculated on a straight-line basis as follows:

Computer & office equipment

-

3 years

Joint Ventures

The Group participates in joint venture agreements with strategic partners. The Group accounts for its share of assets, liabilities, income and expenditure of these joint venture agreements and discloses the details in the appropriate Statement of Financial Position and Statement of Comprehensive Income headings in the proportion that relates to the Group per the joint venture agreement.

Investments

Fixed asset investments in subsidiaries are stated at cost less accumulated impairment in the Company's Statement of Financial Position and reviewed for impairment if there are any indications that the carrying value may not be recoverable.

Financial Instruments

Financial assets and financial liabilities are recognised in the Group's Statement of Financial Position when the Group becomes party to the contractual provisions of the instrument. The Group does not have any derivative financial instruments.

Cash and cash equivalents include cash in hand and deposits held on call with banks with a maturity of three months or less.

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less any expected credit loss. The Company recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Company expects to receive, discounted at an approximation of the original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss will be recognised in the Consolidated Statement of Comprehensive Income within administrative expenses. Subsequent recoveries of amounts previously provided for are credited against administrative expenses in the Consolidated Statement of Comprehensive Income.

Trade payables are stated initially at fair value and subsequently measured at amortised cost.

Exceptional Items

Exceptional items are disclosed separately in the financial statements where it is necessary to do so to provide further understanding of the financial performance of the Group. They are material items of income or expense that have been shown separately due to the significance of their nature or amount.

Deferred Tax

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred taxation liabilities are provided, using the liability method, on all taxable temporary differences at the reporting date. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred income tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. The carrying amount of deferred tax assets is reviewed at each reporting date.

Foreign Currencies

Monetary assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the reporting date. Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the date of the transaction. Gains and losses arising on retranslation are recognised in the Consolidated Statement of Comprehensive Income for the year.

Employee Benefit Costs

Payments to defined contribution retirement benefit schemes are recognised as an expense when employees have rendered service entitling them to contributions.

Share-Based Payments

Equity settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. The total amount to be expensed is determined by reference to the fair value of the options granted:

·        including any market performance conditions (for example, an entity's share price);

·        excluding the impact of any service and non-market performance vesting conditions (for example, profitability, sales growth targets and remaining an employee of the entity over a specified time period); and

·        including the impact of any non-vesting conditions (for example, the requirement for employees to save).

The fair value determined at the grant date of the equity settled share-based payments is expensed on a straight line basis over the vesting period, based on the Group's estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the equity settled employee benefits reserve.

Equity settled share based payment transactions with parties other than employees are measured at the fair value of the goods or services received, except where that fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service.

Exercise proceeds net of directly attributable costs are credited to share capital and share premium.

Share Capital

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, net of tax, from the proceeds.

Where any Group company purchases the Company's equity share capital (treasury shares), the consideration paid, including any directly attributable incremental costs (net of taxes) is deducted from equity attributable to the Company's equity holders until the shares are cancelled or reissued. Where such ordinary shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related tax effects is included in equity attributable to the Company's equity holders.

Segmental Reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the Board of Directors.

3.          SEGMENTAL REPORTING

The Board consider that the Group operates in a single segment, that of oil and gas exploration, appraisal, development and production, in a single geographical location, the North Sea of the United Kingdom and do not consider it appropriate to disaggregate data further from that disclosed.

The Board is the Group's chief operating decision maker within the meaning of IFRS 8 "Operating Segments".

During 2018 and 2017 the Group had no turnover. During the 2018 year the Group did receive £12,037 (2017: £2,417,748) carried cost reimbursements from co-venturers which is shown in Other Income.

4.          FINANCIAL RISK MANAGEMENT

The Group's activities expose it to financial risks and its overall risk management programme focuses on minimising potential adverse effects on the financial performance of the Group. The Company's activities are also exposed to risks through its investments in subsidiaries and is accordingly exposed to similar financial and capital risks as the Group.

Risk management is carried out by the Directors and they identify, evaluate and address financial risks in close co-operation with the Group's management. The Board provides written principles for overall risk management, as well as written policies covering specific areas, such as mitigating foreign exchange risks and investing excess liquidity.

Credit Risk

The Group's credit risk primarily relates to its trade receivables. Responsibility for managing credit risks lies with the Group's management.

A debtor evaluation is typically obtained from an appropriate credit rating agency. Where required, appropriate trade finance instruments such as letters of credit, bonds, guarantees and credit insurance will be used to manage credit risk.

The Group also has a number of joint venture arrangements where co-venturers have made commitments to fund certain expenditure. Management evaluate the credit risk associated with each contract at the time of signing and regularly monitor the credit worthiness of our partners.

Liquidity Risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they become due. The Group manages its liquidity through continuous monitoring of cash flows from operating activities, review of actual capital expenditure programmes, and managing maturity profiles of financial assets and financial liabilities.

Capital Risk Management

The Group seeks to maintain an optimal capital structure. The Group considers its capital to comprise both equity and net debt.

The Group monitors its capital structure on the basis of its net debt to equity ratio. Net debt to equity ratio is calculated as net debt divided by total equity. Net debt is calculated as borrowing less cash and cash equivalents. Total equity comprises all components of equity.

The ratio of net debt to equity as at 31 December 2018 is Nil (2017: Nil).

Maturity analysis of financial assets and liabilities

Financial Assets

	2018		2017
	£		£
Up to 3 months	80,595		356,107
3 to 6 months	-		-
Over 6 months	-		-
	80,595		356,107

Financial Liabilities

	2018		2017
	£		£
Up to 3 months	436,691		1,629,872
3 to 6 months	-		-
Over 6 months	-		-
	436,691		1,629,872

5.	EMPLOYEES AND DIRECTORS
		2018		2017
		£		£
	Wages and salaries	956,915		795,389
	Social security costs	76,119		64,409
	Share based payments (note 19)	259,964		105,822
	Other pensions costs	66,984		42,407
		1,359,982		1,008,027

Other pension costs include employee and Company contributions to money purchase pension schemes.

The average monthly number of employees during the year was as follows:

		2018		2017
	Directors	5		5
	Employees	6		7
		11		12

		2018			2017
		£			£
	Directors' remuneration	557,341			489,000
	Directors' pension contributions to money purchase schemes	24,702			20,000
	Benefits	2,992			5,231
		585,035			514,231
	The average number of Directors to whom retirement benefits were accruing was as follows:
			2018		2017
	Money purchase schemes	2			1

	Information regarding the highest paid Director is as follows:	2018		2017
		£		£
	Aggregate emoluments and benefits	167,800		153,924
	Pension contributions	7,500		-
		175,300		153,924
	The Directors did not exercise any share options during the year.

             Key management compensation

Key management includes Directors (Executive and Non-Executive) and the Company Secretary. The compensation paid or payable to key management for employee services is shown below;

		2018		2017
		£		£
	Wages and short-term employee benefits	584,341		519,544
	Share based payments (note 19)	118,423		52,978
	Pension Contributions	30,702		24,375
		733,466		596,897

6.          OTHER INCOME

	2018		2017
	£		£
Sale of datasets	-		22,500
Carried costs reimbursement	12,037		2,417,748
	12,037		2,440,248

Carried costs reimbursement:                   Reimbursement of well-related costs received as a result of the carried interest arrangement with CIECO V&C (UK) Limited in relation to licence P2170

Sale of datasets                                          Income generated from the sale of data relating to a relinquished licence

7.	NET FINANCE INCOME
		2018		2017
		£		£
	Finance income:
	Joint venture finance charge	-		-
	Interest received	48,971		5,010
		48,971		5,010
	Finance costs:	-		-
	Net finance income	48,971		5,010

.

8.	(LOSS)/PROFIT BEFORE TAX
	The loss before tax is stated after charging/(crediting):
		2018		2017
		£		£
	Depreciation	4,615		372
	Auditors' remuneration - audit of parent company and consolidation	35,000		28,500
	Auditors' remuneration - audit of subsidiaries	12,500		11,500
	Auditors' remuneration - non-audit work	8,700		50,000
	Foreign exchange loss	9,678		4,980
	Directors' remuneration (note 5)	585,035		514,231
	Employee costs (note 5)	514,983		387,974
	Share based payments (notes 5 & 19)	259,964		105,822

9.          TAX

	Reconciliation of tax charge
		2018		2017
		£		£
	(Loss)/Profit before tax	(1,996,300)		726,692
	Tax at the domestic rate of 19% (2017: 19.25%)	(379,297)		139,888
	Capital allowances in excess of depreciation	(589,363)		(276,257)
	Expenses not deductible for tax purposes and non-taxable income	51,292		20,034
	Deferred tax asset not recognised	917,368		116,336
	Total tax expense reported in the Consolidated Statement of Comprehensive Income	-		-

No liability to UK corporation tax arose on ordinary activities for the year ended 31 December 2018 or for the year ended 31 December 2017.

The Group has not recognised a deferred tax asset due to the uncertainty over when the tax losses can be utilised. At the year end the usable tax losses within the Group were approximately £30 million.

10.        (LOSS)/PROFIT PER SHARE

Basic (loss)/profit per share is calculated by dividing the losses attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year.

Diluted (loss)/profit per share is calculated using the weighted average number of shares adjusted to assume the conversion of all dilutive potential ordinary shares. As a profit was recorded for the prior year, the issue of potential ordinary shares would have been anti-dilutive (see note 19 for share options in place at the end of the year).

		Profit/(Loss attributable to ordinary shareholders £		Weighted average number of shares		Per share amount pence
Year ended 31 December 2018
Basic and Diluted EPS
Basic & Diluted		(1,996,300)		21,829,227		(9.15)
Year ended 31 December 2017
Basic and Diluted EPS
Basic		726,692		11,203,777		6.49
Diluted		726,692		12,056,036		6.03

11.        INTANGIBLE ASSETS

						Exploration costs
						£
COST
At 1 January 2017						16,446,425
Additions Disposals						1,309,596 (16,222,821)
At 31 December 2017						1,533,200
Additions						2,948,630
At 31 December 2018						4,481,830
ACCUMULATED AMORTISATION, DEPLETION & DEPRECIATION
At 1 January 2017						16,398,062
Charge for the year						-
Amortisation on disposal						(16,222,821)
At 31 December 2017						175,241
At 31 December 2018						175,241
NET BOOK VALUE
At 31 December 2018						4,306,589
At 31 December 2017						1,357,959
At 31 December 2016						48,363

During 2017, the Group retained an 18% equity interest in licence P2170 (Verbier) and a commercial interest in P1989 (Partridge)

In line with the requirements of IFRS 6, we have considered whether there are any indicators of impairment on the remaining exploration asset (P2170 - Verbier). Based on our assessment, as at 31 December 2018 there are not deemed to be indicators that the licence is not commercial and the carrying value of £4,306,589 continues to be supported by on-going exploration work on the licence area with no further impairments considered necessary.

12.        PROPERTY, PLANT AND EQUIPMENT

						Computer and office equipment
						£
COST
At 1 January 2017						286,022
Disposals						(160,236)
At 31 December 2017						125,786
Additions						34,879
At 31 December 2018						160,665
ACCUMULATED AMORTISATION, DEPLETION & DEPRECIATION
At 1 January 2017						285,650
Charge for the year Disposals						372 (160,236)
At 31 December 2017						125,786
Charge for the year						4,615
At 31 December 2018						130,401
NET BOOK VALUE
At 31 December 2018						30,264
At 31 December 2017						-
At 1 January 2017						372

13.        TRADE AND OTHER RECEIVABLES

		2018		2017
	Current:	£		£
	Trade receivables (net)	-		277,710
	Other receivables	67		67
	Value added tax	63,818		52,085
	Prepayments and accrued revenue	16,709		26,245
		80,594		356,107
	As at 31 December 2018 there were no trade receivables past due nor impaired. There are no credit quality concerns over the trade receivables balance outstanding at the year end.

14.        CASH AND CASH EQUIVALENTS

		2018		2017
		£		£
	Unrestricted cash in bank accounts	19,782,511		25,415,410
	The cash balances are placed with a creditworthy financial institution.

15.        CALLED UP SHARE CAPITAL

Issued and fully paid:

	Number:	Class	Nominal		2018		2017
			value		£		£
	21,829,227 (2017:21,829,227)	Ordinary	1p		2,466,144		2,466,144

16.        TRADE AND OTHER PAYABLES

		2018		2017
	Current:	£		£
	Trade payables	142,565		1,279,870
	Accrued expenses	140,932		219,586
	Other payables	130,905		8,169
	Taxation and Social Security	22,289		122,248
		436,691		1,629,873

 

17.        NON-CANCELLABLE OPERATING LEASE COMMITMENTS

             Total commitments under non-cancellable operating leases were as follows:

		2018		2017
		£		£
	Not longer than one year	5,333		-
	Longer than one year but not longer than five years	-		-
	Longer than five years	-		-
		5,333		-

18.        CONTINGENT LIABILITY

In accordance with a 2015 settlement agreement reached with the Athena Consortium, although Jersey Petroleum Limited remains a Licensee in the joint venture, any past or future liabilities in respect of its interest can only be satisfied from the Group's share of the revenue that the Athena Oil Field generates and up to 60 per cent. of net disposal proceeds or net petroleum profits from the Group's interest in the P2170 licence which is the only remaining asset still held that was in the Group at the time of the agreement with the Athena Consortium who hold security over this asset. Any future repayments, capped at the unpaid liability associated with the Athena Oil Field, cannot be calculated with any certainty, and any remaining liability still in existence once the Athena Oil Field has been decommissioned will be written off. A payment was made in 2016 to the Athena Consortium in line with this agreement following the farm-out of P2170 (Verbier) to Equinor and the subsequent receipt of monies relating to that farm-out.

19.        SHARE BASED PAYMENTS

The Group operates a number of share option schemes. Options are exercisable at the prices set out in the table below. Options are forfeited if the employee leaves the Group through resignation or dismissal before the options vest.

Equity settled share-based payments are measured at fair value at the date of grant and expensed on a straight-line basis over the vesting period, based upon the Group's estimate of shares that will eventually vest.

The Group's share option schemes are for Directors, Officers and employees. The charge for the year was £259,964 (2017: £105,822) and details of outstanding options are set out in the table below.

Date of Grant	Exercise price (pence)	Vesting date	Expiry date	No. of shares for which options outstanding at 1 Jan 2018	Options issued	Options Exercised	Options lapsed/non vesting during the year	No. of shares for which options outstanding at 31 Dec 2018
Mar 2011	100	Vested	Mar 2021	3,164	-	-	-	3,164
Mar 2011	4,300	Vested	Mar 2021	5,809	-	-	-	5,809
Mar 2011	4,300	Mar 2014	Mar 2021	4,355	-	-	-	4,355
Mar 2011	4,300	Mar 2015	Mar 2021	5,809	-	-	-	5,809
Jul 2011	4,300	Jul 2011	Jul 2021	523	-	-	-	523
Jul 2011	4,300	Jul 2012	Jul 2021	523	-	-	-	523
Jul 2011	4,300	Jul 2014	Jul 2021	523	-	-	-	523
Dec 2011	2,712	Dec 2012	Dec 2021	1,650	-	-	-	1,650
Dec 2011	2,712	Dec 2014	Dec 2021	1,650	-	-	-	1,650
Dec 2011	2,712	Dec 2015	Dec 2021	-	-	-	-	-
May 2013	1,500	May 2014	May 2023	9,500	-	-	-	9,500
May 2013	1,500	May 2015	May 2023	9,500	-	-	-	9,500
May 2013	1,500	May 2015	May 2023	-	-	-	-	-
Nov 2016	110	Nov 2016	Nov 2021	246,667	-	-	-	246,667
Nov 2016	110	Nov 2017	Nov 2021	246,667	-	-	-	246,667
Nov 2016	110	Nov 2018	Nov 2021	246,667	-	-	-	246,667
Apr 2017	310	Apr 2017	Apr 2022	20,000	-	-	-	20,000
Apr 2017	310	Apr 2018	Apr 2022	20,000	-	-	-	20,000
Apr 2017	310	Apr 2019	Apr 2022	20,000	-	-	-	20,000
Jan 2018	200	Jan 2021	Jan 2025		420,000	-	-	420,000
Jan 2018	200	Jan 2021	Jan 2025		120,000	-	120,000	-
Jan 2018	200	Jan 2018	Jan 2023		76,666	-	-	76,666
Jan 2018	200	Jan 2019	Jan 2023		76,667	-	-	76,667
Jan 2018	200	Jan 2020	Jan 2023		76,667	-	-	76,667
Jun 2018	207	Jun 2019	Jun 2023		33,333	-	33,333	-
Jun 2018	207	Jun 2020	Jun 2023		33,333	-	33,333	-
Jun 2018	207	Jun 2021	Jun 2023		33,334	-	33,334	-
Nov 2018	172	Nov 2021	Nov 2025		150,000	-	-	150,000
							Total	1,643,007

The weighted average fair value of options granted during the year determined using the Black-Scholes valuation model was 41.7p per option. The significant inputs into the model were the mid-market share price on the day of grant or 1p exercise price as shown above and an annual risk-free interest rate of 2 per cent. The volatility measured at the standard deviation of continuously compounded share returns is based on a statistical analysis of daily share prices from the date of admission to AIM to the date of grant on an annualised basis.

20.        RELATED UNDERTAKINGS AND ULTIMATE CONTROLLING PARTY

The Group and Company do not have an ultimate controlling party or parent Company.

	Subsidiary		% owned	County of Incorporation	Principal Activity		Registered Office
	Jersey North Sea Holdings Ltd		100%	England & Wales	Non-Trading		1
		Jersey Petroleum Ltd	100%	England & Wales	Oil Exploration		1
	Jersey E & P Ltd		100%	Scotland	Non-Trading		2
		Jersey Oil Ltd	100%	Scotland	Non-Trading		2
		Jersey Exploration Ltd	100%	Scotland	Non-Trading		2
	Jersey Oil & Gas E & P Ltd		100%	Jersey	Management services		3

             Registered Offices

                   1     10 The Triangle, ng2 Business Park, Nottingham, NG2 1AE

                   2     6 Rubislaw Terrace, Aberdeen, AB10 1XE

             3     First Floor, 17 The Esplanade, St Helier, Jersey JE2 3QA

21.       NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS

             RECONCILIATION OF LOSS BEFORE TAX TO CASH (USED IN)/GENERATED FROM OPERATIONS

		2018		2017
		£		£
	(Loss)/profit for the year before tax	(1,996,300)		726,692
	Adjusted for:
	Amortisation, impairments, depletion and depreciation	4,615		-
	Share based payments (net)	259,964		105,822
	Gain on disposal of assets	-		-
	Finance costs	-		-
	Finance income	(48,971)		(5,010)
		(1,780,692)		827,504
	(Increase)/Decrease in trade and other receivables	275,513		(233,235)
	Increase/(Decrease) in trade and other payables	(1,193,182)		1,442,623
	Cash Generated from/(used in) operations	(2,698,361)		2,036,892

             CASH AND CASH EQUIVALENTS

The amounts disclosed on the consolidated Statement of Cash Flows in respect of Cash and cash equivalents are in respect of these statements of financial position amounts:

Year ended 2018

		31 Dec 2018		1 Jan 2018
		£		£
	Cash and cash equivalents	19,782,511		25,415,410

Year ended 2017

		31 Dec 2017		1 Jan 2017
		£		£
	Cash and cash equivalents	25,415,410		1,882,310

		Analysis of net cash
		At 1 Jan 2018		Cash flow		At 31 Dec 2018
		£		£		£
Cash and cash equivalents		25,415,410		(5,632,899)		19,782,511
Net cash		25,415,410		(5,632,899)		19,782,511

22.        POST BALANCE SHEET EVENT

Since the balance sheet date, the appraisal well on the Verbier prospect, within the P2170 licence, has been completed. Unfortunately, the well did not encounter Upper Jurassic reservoir sands as anticipated and as a result, our contingent resource volumetric estimates are likely to be revised towards the lower end of the initial resource estimate of 25 MMboe. For further details refer to the Chief Executive Officer's Report.

23       AVAILABILITY OF THE ANNUAL REPORT 2018

A copy of these results will be made available for inspection at the Company's registered office during normal business hours on any weekday. The Company's registered office is at 10 The Triangle, ng2 Business Park, Nottingham NG2 1AE. A copy can also be downloaded from the Company's website at www.jerseyoilandgas.com. Jersey Oil and Gas plc is registered in England and Wales with registration number 7503957.

 

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