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.

 


This information is provided by RNS
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