Final Results

RNS Number : 0394C

Prospex Oil and Gas PLC

13 June 2019

 

Prospex Oil and Gas Plc / Index: AIM / Epic: PXOG / Sector: Oil and Gas

13 June 2019

Prospex Oil and Gas Plc ('Prospex' or the 'Company')
Final Results

Prospex Oil and Gas Plc, the AIM quoted investment company, is pleased to announce its Final Results for the year ended 31 December 2018. The Company also gives notice that its Annual General Meeting ('AGM') will be held at the offices of Charles Russell Speechlys, 5 Fleet Place, London, EC4M 7RD at 9 a.m. on 4 July 2019.  The Financial Results for the year ended 31 December 2018 ('Accounts') together with the Notice of AGM will be available to download today from the Company's website and will also be posted to shareholders on or around 14 June 2019.

HIGHLIGHTS

·    Significant progress made across portfolio of late stage onshore European projects focused on the European foredeep play

·    EIV-1 Suceava Concession, onshore Romania:

o  Commencement of first gas production at Bainet-1 well within 10 months of drilling - completion of permitting process and installation of connection to existing production facility

o  Anticipated average flow rate of 15,000 m3/day for budgeting purposes based on more than six months of production

o  Post period end enlargement of the concession area includes new high priority Bainet lookalike gas prospect - preparations underway to drill an exploration well in June/July 2019

·    Podere Gallina Exploration Permit, onshore Italy:

o  Commercial gas discovery confirmed following testing of Podere Maiar-1d well - peak flow rates of 148,136 scm/day (5.2mmscf/d) and 129,658 scm/day (4.6 mmscf/d) from two gas-bearing reservoirs achieved

o  Post period end preliminary award of production concession keeps first gas on track to commence at Selva in 2020 

o  Post period end Competent Person's Reports assign 2P reserves / 2C resources / prospective resources of 2.26 bcf / 2.40 bcf / 15.56 bcf respectively net to Prospex's 17% interest

·    Tesorillo Gas Project, onshore Spain:

o  Increase in interest to 15% from 2.5% as part of staged earn-in option to acquire 49.9% interest following 2018 field programme centred on de-risking up to 830 billion cubic feet of gas (Best Estimate) of gross unrisked Prospective Resources

o  Results of ongoing work programmes to determine well location and an updated Competent Person's Report

o  Strong local and regional support garnered through community engagement programmes

FINANCIAL HIGHLIGHTS

·    £779,904 maiden net profit after taxation from continuing operations (2017: loss - £3,161,241)

·    77% increase in the net book value of investments to £4,307,617 (2017: £2,426,789)

·    £1,710,418 unrealised gains on financial assets (2017: loss - £613,723)

·    £1,061,451 administrative expenses, before bad debt provisions, broadly in line with 2017's £1,003,630

·    £1.2 million raised via placing of 200,000,000 new ordinary shares to fund 2018 work programmes

·    £480,000 raised via the issue of loan notes, primarily to fund the Company's share of the budgeted early stage development costs (including environmental monitoring) at the Selva gas discovery

·    Post period end £800,000 raised via placing of 400,000,000 new ordinary shares, primarily to fund the Company's share of costs for the 2019 Suceava work programme, including drilling the Bainet West prospect

Edward Dawson, Managing Director of Prospex, said, "A maiden net profit of £779,000 is testament to the progress made on the ground across our portfolio of late stage European projects during the year under review.  This includes first gas production in Romania, confirmation of a commercial gas discovery in Italy and an increase in our interest in the up to 830bcf Tesorillo gas project in Spain to 15% from 2.5%, following completion of 2018 work programmes.  Our objective remains to expose our shareholders to a continuous stream of high impact activity, and in line with this we are focused on ensuring 2019 builds on the success we have had over the past two years.  2019 is expected to see us participate in the drilling of a second well in Romania targeting a prospect that is a lookalike to the producing Bainet field, and further advance our work programmes in Spain and Italy. I look forward to providing further updates on our progress as we focus on ensuring the underlying value of our assets is more fully reflected in our share price."

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.

* * ENDS * *

For further information visit www.prospexoilandgas.com or contact the following:

Edward Dawson	Prospex Oil and Gas Plc	Tel: [phone]
Rory Murphy Ritchie Balmer Jack Botros	Strand Hanson Limited	Tel: [phone]
Colin Rowbury John Belliss	Novum Securities Limited	Tel: [phone]
Duncan Vasey	Peterhouse Corporate Finance	Tel: [phone]
Frank Buhagiar Priit Piip	St Brides Partners Ltd	Tel: [phone]

CHAIRMAN'S STATEMENT

The discovery of commercial hydrocarbon accumulations, the commencement of production, the generation of first revenues, the acquisition of an interest in a high impact project - all are key objectives for any oil and gas company, let alone a junior investment company such as Prospex Oil & Gas.  It is therefore noteworthy that Prospex's 2018 report card includes all the above: a commercial gas discovery at the Selva field on the Podere Gallina permit, Italy; the commencement of gas production and first revenues at the Bainet field on the Suceava Concession, Romania; and the acquisition of a further 12.5% interest in the large Tesorillo gas project, Spain, on which there is a historic discovery and 830bcf of gross unrisked prospective resources.

Success on the ground has been reflected in the Company's full year financial results which include a maiden net profit after taxation from continuing operations of £779,904, compared to 2017's loss of £3,161,241, and a 77% increase in the net book value of our investments to £4,307,617 as at 31 December 2018 (2017: £2,426,789). Comparing this last figure to the Company's current sub £3million market capitalisation highlights how Prospex is not only a fast-growing junior oil and gas investment company, but also a value play trading at a significant discount to net assets.  Due to the progress made to date in de-risking two of our three projects via the drill bit and the considerable run room they offer, we would argue there is a strong case for our shares to trade at a premium to net book value rather than a discount.

One of these substantially de-risked projects is the Podere Gallina Exploration Permit in Italy.  Here we have reported (post period end) maiden gas 2P reserves of 2.26Bcf net to Prospex's 17% interest, as contingent resources previously assigned to the Selva gas field were reclassified as reserves following the successful testing of the Podere Maiar well ('PM-1') in January 2018.  This represents the first time that reserves have been assigned to one of our projects by an independent third party, in this case via a Competent Person's Report produced by geophysical services consultancy, CGG Services (UK) Limited ('CGG').  Being assigned first reserves is a major milestone.  Not only does it provide Prospex with significant asset backing, particularly when compared to our current market valuation, it also opens up new channels of non-dilutive funding, such as reserves-based lending.  Additionally, production from these reserves will lead to a step up in our internally generated revenues which in turn will provide another source of funding for investment in late stage onshore European opportunities both inside and outside our existing portfolio.

January 2019's preliminary award of a production concession for Podere Gallina keeps first production at Selva on course to commence in 2020 at a gross rate of up to 150,000m3/day.  At this level and at current gas prices, Selva alone promises to generate significant cash flow for reinvestment across our asset base.  This includes Podere Gallina where multiple follow-up targets, many larger than Selva, have already been identified.  The scale of the additional run room at Podere Gallina was quantified by the substantial resource upgrade we reported post period end.  In addition to 13.3Bcf of gross 2P reserves, Selva's two historic gas producing North Flank and South Flank reservoirs are estimated by CGG to have a 60% - 70% chance of holding 14.1Bcf of gross contingent resources ('2C'). At the same time, aggregate gross prospective resources (best estimate) for four large prospects (East Selva, Fondo Perino, Cembalina, and Riccardina) have increased by 74% to 91.5Bcf from 52.7Bcf.  Following the upgrade, our 17% interest in Podere Gallina now translates into net 2P reserves / 2C resources / prospective resources of 2.26Bcf / 2.40Bcf / 15.56Bcf respectively.  The joint venture partners are keen to prove up Podere Gallina's potential and bring Selva online.

This is what we are doing in Romania where our wholly-owned subsidiary PXOG Massey Limited has a 50% non-operated interest in the EIV-1 Suceava Concession, onshore Romania.  A proven hydrocarbon basin, multiple targets, access to existing infrastructure, and a supportive regulatory environment - we recognised from the outset that Suceava has the potential to deliver fast track, low cost exploration and development opportunities.  The successful Bainet-1 well, in which we participated in late 2017, provides proof of concept. In less than 12 months of the discovery being made in November 2017, the field was brought into production in September 2018.  Between discovery and first production, a 2.2km flowline was successfully laid connecting Bainet-1 to the existing Bilca production facility, which in turn indirectly connected the field to Romania's Transgaz-owned national gas grid.  At the same time, the relevant Government approvals required to commence production were sought and subsequently secured.  In all Bainet-1 was drilled and tied into production in line with the original €800,000 gross cost estimate (€400,000 net to Prospex). 

Production at Bainet-1 commenced in September 2018 and averaged 18,000m3/day during the period to the end of the year. Moving forward the Joint Venture is assuming an average production rate of 15,000m3/day for 2019 budgeting purposes.

In terms of production, Bainet-1 is relatively small.  However, when the low costs and short timelines are considered alongside the presence of multiple copycat structures, the potential to rapidly build Suceava into a highly cash flow generative platform becomes clear.  We are looking to do just this, and post period end we announced the enlargement of the Exploration Area of the Concession, which automatically added a new Bainet-1 lookalike gas prospect to our inventory of targets.  The new gas prospect, Bainet-West, is well defined on 2D seismic and has similar seismic attributes to Bainet-1 which was drilled to a total depth of 600m and encountered 9m of reservoir with 8m of net gas pay consisting of a good quality Sarmatian sandstone reservoir also found in producing fields in and around the Concession. Lying at a similar depth to Bainet-1, the new gas prospect, which is similarly positioned in relation to a fault, is a priority target and the operator has commenced work on securing the relevant permits in order to drill an exploration well. Based on our experience with Bainet-1, we are confident that drilling operations will be able to commence later this year.

Drilling is also a priority at the 38,000ha Tesorillo Project in southern Spain.  Tesorillo lies in a proven hydrocarbon region and comprises two petroleum exploration permits, Tesorillo and Ruedalabola. Tesorillo holds the 1956 Almarchal-1 discovery well and has multi-Tcf potential over a thick section of possible gas pay, including zones which flowed gas to surface on testing.  Drill stem tests and log analysis also confirmed 48m of gas play from two Miocene Aljibe Formation sandstone intervals, whilst a further 492m of potential gas play has been interpreted from logs but unconfirmed by testing.  Ruedalabola contains the 1957 Puerto de Ojen-1 well, which is located 15km to the east of Almarchal and has displayed similar gas reservoir zones to Almarchal-1 but could not be tested for mechanical reasons.

As with Podere Gallina and Suceava, Tesorillo has excellent access to infrastructure being located 3.9km from the European landing point of the North African Maghreb gas pipeline, providing access to high priced European gas markets.  Unlike Podere Gallina and Suceava, Prospex is acquiring an up to 49.9% interest in the project via an to earn-in option based on the results of work programmes centred on de-risking targets ahead of drilling to test a historic gas discovery and prove up the potentially significant resources.  A report undertaken by Netherland Sewell and Associates in 2015 estimated that Tesorillo could hold gross unrisked Prospective Resources of 830Bcf of gas (Best Estimate), with upside in excess of 2Tcf.  Following favourable progress on the 2018 work programme, in December 2018 the Company decided to increase its interest in the project from 2.5% to 15% for a net consideration of €153,250.

There were three strands to the 2018 work programme, the first of which was general field studies to populate the Environmental and Social Impact Assessment ('ESIA') report on Tesorillo, which is required for the permitting of two new wells, the first of which is likely to twin the Almarchal-1 discovery.  As at the end of the reporting period, ca.70% of the overall fieldwork required for the ESIA had been completed with the remaining work to be carried out once a well location has been decided.  The second strand was centred on a detailed surface structural geology mapping exercise by a leading expert from Granada University.  The new map and related cross-sections show that the structural subsurface geometry of the exploration target, the Aljibe sandstone in the Lowermost Miocene, is possibly formed by several folds and thrust ramps of 3 to 5km length which are inferred to be potential gas traps.  The third strand involved an Audio Magneto Telluric survey to help evaluate the subsurface geology of the permit area and test for resistivity as a further indication of the presence of hydrocarbons.  This has been completed over key areas of interest and the raw field data acquired is currently being processed.

The results of strands two and three will increase our geological and geophysical understanding of the permit area and will be used to decide the location of the new exploration wells.  The final results will also likely be fed into an updated Competent Person's Report.  A further work stream is underway to reprocess raw 2D seismic data acquired by Repsol in 1991 using modern depth migration techniques.  This data includes a line that intersects the Almarchal-1 well.

Financial Review

For the year ended 31 December 2018, the Company is reporting a net profit after taxation from continuing operations of £779,904 (2017: loss - £3,161,241).  Unrealised gains arising on financial assets at fair value totalled £1,710,418 (2017: loss - £613,723). Administrative expenses of £1,064,151 for the year, before bad debt provisions for continuing operations, remained in line with those incurred during the previous year (2017: £1,003,630). No bad debt provisions were taken against amounts due from subsidiary undertakings during the year (2017: £1,543,888).

During the year, the Company raised £1.2m via an oversubscribed placing of 200,000,000 ordinary shares to fund the Company's share of costs of work programmes across its portfolio. This included the successful flow testing of the Podere Maiar well in Italy in Q1 2018; the tie in at the Bainet-1 gas discovery in Romania in Q2 2018; and work to further delineate the gas discovery at Tesorillo in Spain.

In October the Company raised £480,000 of debt capital through the issue of loan notes. These funds were raised primarily to fund the Company's share of the budgeted early stage development costs (including environmental monitoring) at the Selva gas discovery ('Selva') on the Podere Gallina Permit in Italy ('Podere Gallina'). The loan notes bear interest at 10% per annum, capitalised to 30 June 2019, with the first biannual cash payment on 31 December 2019. Capital repayments start in December 2020 with final repayment on 30 June 2022 (four equal payments).

As at 31 December 2018, the Company held cash and cash equivalents of £233,138 (2017: £850,060).  Subsequent to the reporting period, in March 2019, the Company raised £800,000 gross via an oversubscribed placing of 400,000,000 new ordinary shares primarily to fund the Company's share of costs for the 2019 work programme at Suceava which includes plans to drill the Bainet-West prospect.

Outlook

In little more than 18 months, we have acquired material interests in three European onshore projects, drilled two wells, resulting in two commercial gas discoveries, brought one of these onto production, booked maiden gas reserves for the other, and now we have reported our first net profit.  The rapid progress we have made is testament to the quality of our asset base and the rigorous screening process we apply to all potential new ventures.  Our focus on late stage projects in proven hydrocarbon regions with drill-ready prospects, multiple follow-up targets, access to existing infrastructure and short timelines to activity has served us well.  We intend to build on this success going forward and while there is still much to go for with our existing assets, we continue to evaluate potential new projects to grow our portfolio further.

Key to delivering shareholder value is hitting the milestones we set ourselves. Drilling success, first production and acquisitions do not happen overnight.  An investment of considerable time and resources lie behind all these achievements.  The seeds of the successes disclosed over the course of 2018 were very much planted in prior reporting periods.  With an eye on future value generating activity, the year under review has been no different.  Much work has taken place to ensure that 2018's success is no one-off and that, importantly, our shareholders continue to be exposed to the consistent flow of high impact, activity that we set out to deliver.  Thanks to the work carried out over the course of the year, shareholders can expect more of the same in 2019 and beyond.

Finally, I would like to take this opportunity to thank the Board and the management team for their continued hard work and support over the course of the year.  I look forward to working with them all in the year ahead, as we focus on delivering on our overriding objective which remains to generate value for all our shareholders.

Bill Smith

Non-Executive Chairman

June 2019

Consolidated Statement of Profit or Loss and Other Comprehensive Income

for the year ended 31 December 2018

		Notes		2018		2017
				£		£
CONTINUING OPERATIONS
Revenue		4		-		-
Other operating income		5		60,601		-
Administrative expenses				(1,064,151)		(2,547,518)
OPERATING LOSS				(1,003,550)		(2,547,518)
Gain/(loss) on revaluation of investments				1,710,418		(613,723)
Loss on disposal of investments				(8,407)		-
				698,461		(3,161,241)
Finance costs				(10,840)		-
Finance income		7		92,283		-
PROFIT/(LOSS) BEFORE INCOME TAX		8		779,904		(3,161,241)
Income tax		9		-		-
PROFIT/(LOSS) FOR THE YEAR				779,904		(3,161,241)
Other comprehensive income				-		-
TOTAL COMPREHENSIVE INCOME/(LOSS) FOR THE YEAR				779,904		(3,161,241)
Earnings per share expressed in pence per share:		10
Basic				0.065p		(0.580)p

Consolidated Statement of Financial Position

31 December 2018

		Note		2018		2017
				£		£
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment		11		-		429
Investments		12		4,307,617		2,426,789
Loans and other financial assets		13		1,013,129		1,062,587
Trade and other receivables		14		897,371		-
				6,218,117		3,489,805
CURRENT ASSETS
Trade and other receivables				396,626		149,231
Cash and cash equivalents		16		233,138		850,060
				629,764		999,291
TOTAL ASSETS				6,847,881		4,489,096
EQUITY
SHAREHOLDERS' EQUITY
Called up share capital				6,035,587		5,835,587
Share premium				9,756,759		8,862,779
Merger reserve				2,416,667		2,416,667
Capital redemption reserve				43,333		43,333
Retained earnings				(11,955,212)		(12,735,116)
TOTAL EQUITY				6,297,134		4,423,250
LIABILITIES
NON-CURRENT LIABILITIES
Financial liabilities - borrowings
Interest bearing loans and borrowings				360,000		-
CURRENT LIABILITIES
Trade and other payables		17
Financial liabilities - borrowings		18		70,747		65,846
Interest bearing loans and borrowings				120,000		-
				190,747		65,846
TOTAL LIABILITIES				550,747		65,846
TOTAL EQUITY AND LIABILITIES				6,847,881		4,489,096

 

Consolidated Statement of Changes in Equity

for the Year Ended 31 December 2018

				Share capital		Share premium		Merger reserve		Capital redemption reserve		Retained earnings		Total
				£		£		£		£		£		£
Balance at 1 January 2017				5,107,779		6,740,144		2,416,667		43,333		(9,754,371)		4,553,552
Changes in equity														-
Loss for the year				-		-		-		-		(3,161,241)		(3,161,241)
Issue of shares				727,808		2,372,193		-		-		-		3,100,001
Costs of share issue				-		(239,416)		-		-		-		(239,416)
Equity-settled share-based payments				-		(10,142)		-		-		180,496		170,354
Balance at 31 December 2017				5,835,587		8,862,779		2,416,667		43,333		(12,735,116)		4,423,250
Changes in equity
Profit for the year				-		-		-		-		779,904		779,904
Issue of shares				200,000		1,000,000		-		-		-		1,200,000
Costs of share issue				-		(106,020)		-		-		-		(106,020)
Equity-settled share-based payments				-		-		-		-		-		-
Balance at 31 December 2018				6,035,587		9,756,759		2,416,667		43,333		(11,955,212)		6,297,134

Share capital

Represents the nominal value of the issued share capital.

Share premium account

Represents amounts received in excess of the nominal value on the issue of share capital less any costs associated with the issue of shares.           

Merger reserve

Represents the difference between the nominal value of the share capital issued by the Company and the fair value of the subsidiary at the date of acquisition.

Capital redemption reserve

A reserve into which amounts are transferred following the redemption or purchase of the company's own shares.

Retained earnings

Represents accumulated comprehensive income for the year and prior periods.

         Consolidated Statement of Cash Flows

         for the year ended 31 December 2018

				2018		2017
				£		£
Cash flows from operating activities
Cash generated from operations				(2,062,306)		(972,151)
Net cash used in operating activities				(2,062,306)		(972,151)
Cash flows from investing activities
Purchase of fixed asset investments				(246,040)		(1,504,787)
Sale of fixed asset investments				67,223		-
Interest received				2		-
Dividends received				5,261		-
Net cash used in investing activities				(173,554)		(1,504,787)
Cash flows from financing activities
New loans in year				480,000		-
Loan repayments in year				44,958		-
Share issue				1,200,000		3,100,001
Costs of shares issued				(106,020)		(239,416)
Net cash from financing activities				1,618,938		2,860,585
(Decrease)/increase in cash and cash equivalents				(616,922)		383,647
Cash and cash equivalents at beginning of year				850,060		466,413
Cash and cash equivalents at end of year				233,138		850,060

            Reconciliation of operating loss to cash generated from operating activities

				2018		2017
				£		£
Profit/(loss) before income tax				779,904		(3,161,241)
Depreciation charges				429		420
Loss on disposal of fixed assets				8,407		-
(Gain)/loss on revaluation of fixed assets				(1,797,438)		613,723
Equity-settled share-based payments				-		170,354
Bad debt provision				-		1,543,888
Finance costs				10,840		-
Finance income				(5,263)		-
				(1,003,121)		(832,856)
Increase in trade and other receivables				(1,057,746)		(117,465)
Decrease in trade and other payables				(1,439)		(21,830)
Cash used in operations				(2,062,306)		(972,151)

 

                Notes to the Consolidated Financial Statements

                for the year ended 31 December 2018

1.            STATUTORY INFORMATION

Prospex Oil and Gas Plc is registered in England and Wales and is quoted on the AIM Market of the London Stock Exchange Plc. The Company's registered number and registered office address can be found on the Company Information page.

The presentation currency of the financial statements is the Pound Sterling (£).

2.            ACCOUNTING POLICIES

               Basis of preparation

 The Company financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union, (IFRSs) and International Financial Reporting Interpretations Committee ('IFRIC') interpretations issued by the International Accounting Standards Board (IASB) as adopted by the European Union and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

The Company financial statements have been prepared under the historical cost convention or fair value where appropriate.

               Preparation of consolidated financial statements

Subsidiaries include all entities over which the Company has the power to govern financial and operating policies. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Company controls another entity. Subsidiaries are consolidated from the date on which control commences until the date that control ceases. Intra-group balances and any unrealised gains and losses on income or expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements.

The Company is an investment entity and, as such, does not consolidate the investment entities it controls. The Company's interests in subsidiaries are recognised at fair value through profit and loss.

               Going concern

The current economic environment is challenging, and the Company has reported an operating loss for the year of £1,003,550. These operating losses are expected to continue in the current accounting year to 31 December 2019.

The Company regularly carries out fund-raising exercises in order that it can provide the necessary working capital and investment funds for the Company. As detailed in note 21, since the year end, the Company has raised £800,000 before expenses, through the issue of new ordinary shares. The board expects to continue to raise additional funding as and when required to cover the Group's development, primarily from the issue of further shares.

The Directors have prepared detailed financial forecasts and cash flows looking beyond 12 months from the date of the approval of these financial statements. In developing these forecasts, the Directors have made assumptions based upon their view of the current and future economic conditions that are expected to prevail over the forecast period. The Directors estimate that the cash held by the Company together with known receivables will be sufficient to support the current level of activities into the second quarter of 2020. The Directors are continuing to explore sources of finance available to the Company and based upon initial discussions with a number of existing and potential investors they have a reasonable expectation that they will be able to secure sufficient cash inflows for the Company to continue its activities for not less than 12 months from the date of approval of these financial statements; they have therefore prepared the financial statements on a going concern basis.

               Property, plant and equipment

Depreciation is provided at the following annual rates in order to write off the cost less estimated residual value of each asset over its estimated useful life.

Computer equipment

-

25% per annum on reducing balance

               Financial instruments

Financial assets and financial liabilities are recognised on the balance sheet when the Company becomes a party to the contractual provisions of the instrument.

Loans and receivables

These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.  The principal financial assets of the company are loans and receivables, which arise principally through the provision of goods and services to customers (e.g. trade receivables) but also incorporate other types of contractual monetary asset. They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as non-current assets.

The Company's loans and receivables are recognised and carried at the lower of their original amount less an allowance for any doubtful amounts. An allowance is made when collection of the full amount is no longer considered possible.

The Company's loans and receivables comprise trade and other receivables and cash and cash equivalents in the consolidated statement of financial position.

Financial liabilities and equity

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the entity after deducting all of its financial liabilities.

Where the contractual obligations of financial instruments (including share capital) are equivalent to a similar debt instrument, those financial instruments are classed as financial liabilities. Financial liabilities are presented as such in the balance sheet. Finance costs and gains or losses relating to financial liabilities are included in the profit and loss account. Finance costs are calculated so as to produce a constant rate of return on the outstanding liability.

Where the contractual terms of share capital do not have any terms meeting the definition of a financial liability then this is classed as an equity instrument. Dividends and distributions relating to equity instruments are debited direct to equity.

Equity comprises the following:

- Share capital represents the nominal value of equity shares;

- Share premium represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of the share issue;

- Profit and loss reserve represents retained deficit;

- Other reserve represents the capital redemption reserve arising on redemption of shares in previous years and own share reserve.

               Taxation

Current taxes are based on the results shown in the financial statements and are calculated according to local tax rules, using tax rates enacted or substantially enacted by the statement of financial position date.

Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax is determined using tax rates that have been enacted or substantially enacted at the balance sheet date and are expected to apply when the related deferred income tax asset is realised, or the deferred tax liability is settled. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets are only recognised to the extent that it is probable that future taxable profit will be available against which the asset can be utilised.

               Cash and cash equivalents

Cash and cash equivalents include cash at bank and in hand and short-term deposits with an original maturity of three months or less.

Trade and other payables

Trade and other payables are initially measured at fair value and subsequently measured at amortised cost using the effective interest rate method.           

Hire purchase and leasing commitments

Rentals paid under operating leases are charged to the statement of comprehensive income on a straight-line basis over the period of the lease.

               Employee benefit costs

The company operates a defined contribution pension scheme.  Contributions payable to the company's pension scheme are charged to the income statement in the period to which they relate.

               Equity-settled share-based payment

The Company makes equity-settled share-based payments. The fair value of options granted is recognised as an expense, with a corresponding increase in equity. The fair value is measured at grant date and spread over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. The fair value of the options granted is measured based on the Black-Scholes framework, taking into account the terms and conditions upon which the instruments were granted. At each balance sheet date, the Company revises its estimate of the number of options that are expected to become exercisable. It recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity.

               Accounting standards issued but not yet effective and/or adopted

As at the date of approval of these financial statements, the following standards were in issue but not yet effective. These standards have not been adopted early by the company as they are not expected to have a material impact on the company's financial statements.

Effective date (period beginning on or after)

IFRS 3, IFRS 11 IAS 12, IAS 23

Amendments resulting from Annual Improvements 2015-17 cycle

01/01/2019

IFRS 3

Amendments - Definition of a Business

01/01/2020

IFRS 9

Amendment - Prepayment features with negative compensation

01/01/2019

IFRS 16

Leases - recognition, measurement, presentation and disclosure

01/01/2019

IFRS 17

Insurance contracts

01/01/2021

IAS 1 and IAS 8

Amendments - Definition of Material

01/01/2020

IAS 19

Amendment - Plan Amendment, Curtailment or Settlement

01/01/2019

IAS 28

Amendment - Long term interests in Associates and Joint Ventures

01/01/2019

The International Financial Reporting Interpretations Committee has also issued interpretations which the company does not consider will have a significant impact on the financial statements.

3.            CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

The preparation of the financial information in conformity with IFRS requires the use of certain critical accounting estimates that affect the reported amounts of assets and liabilities at the date of the financial information and the reported amounts of revenue and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amounts, events or actions, actual results ultimately may differ from these estimates. The estimates and underlying assumptions are as follows:

Investment entities

The judgements, assumptions and estimates involved in the Company's accounting policies that are considered by the Board to be the most important to the portrayal of its financial condition are the fair valuation of the investment and the assessment regarding investment entities. The investment portfolio is held at fair value. The Directors review the valuations policies, process and application to individual investments.

Entities that meet the definition of an investment entity within IFRS 10 are required to account for most investments in controlled entities, as well as investments in associates and joint ventures, at fair value through profit and loss. The Board has concluded that the Company continues to meet the definition of an investment entity as its strategic objective of investing in portfolio investments for the purpose of generating returns in the form of investment income and capital appreciation remains unchanged.

Fair value is the underlying principle and is defined as "the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date". Fair value is therefore an estimate and, as such, determining fair value requires the use of judgement. The quoted assets in our portfolio are valued at their closing bid price at the balance sheet date. The largest investment in the portfolio, however, is represented by an unquoted investment.

Impairment of assets

The Company's principal investments are in wholly owned unquoted subsidiaries which each have a minority interest in overseas entities with oil and gas assets.

The Company is required to test, on an annual basis, whether its non-current assets have suffered any impairment. Determining whether these assets are impaired requires an estimation of the value in use of the cash-generating units to which the assets have been allocated. The value in use calculation requires the Directors to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate to calculate the present value. Subsequent changes to the cash generating unit allocation or to the timing of cash flows could impact on the carrying value of the respective assets.

The calculation of value-in-use for oil and gas assets under development or in production is most sensitive to the following assumptions:

- Commercial reserves

- production volumes;

- commodity prices;

- fixed and variable operating costs;

- capital expenditure; and

- discount rates.

A potential change in any of the above assumptions may cause the estimated recoverable value to be lower than the carrying value, resulting in an impairment loss. The assumptions which would have the greatest impact on the recoverable amounts of the fields are production volumes and commodity prices

Recoverability of other financial assets

The majority of the Company's financial assets represent loans provided to its subsidiaries, which are associated with funding of mineral exploration and development projects. The recoverability of such loans is dependent upon the discovery of economically recoverable reserves, the ability of the Company to maintain necessary financing to complete the development of the reserves and future profitable production or proceeds from the disposition thereof.

Share based payments

The estimates of share-based payments requires that management selects an appropriate valuation model and make decisions on various inputs into the model including the volatility of its own share price, the probable life of the options before exercise, and behavioural consideration of employees.

Deferred tax assets

Deferred taxation is provided for using the liability method. Deferred tax assets are recognised in respect of tax losses where the Directors believe that it is probable that future profits will be relieved by the benefit of tax losses brought forward. The Board considers the likely utilisation of such losses by reviewing budgets and medium-term plans for the Company. The Directors have decided that no deferred tax asset should be recognised at 31 December 2018. If the actual profits earned by the Company differs from the budgets and forecasts used then the value of such deferred tax assets may differ from that shown in these financial statements.

4.            REVENUE

Segmental reporting

The Company is an Investing Company. The results for this continuing operation, all of which were carried out in the UK, are disclosed in the Income Statement. The net assets as at 31 December 2018 as shown on the Statement of Financial Position all relate to the Investment activity.

5.            OTHER OPERATING INCOME

				2018		2017
				£		£
Sundry receipts				60,601		-

6.            EMPLOYEES AND DIRECTORS

				2018		2017
				£		£
Wages and salaries				406,603		283,879
Social security costs				42,293		30,088
Other pension costs				20,892		13,500
				469,788		327,467

Under the Pensions Act 2008, every UK employer must put certain staff into a pension scheme and contribute to it. The Company auto-enrolled its eligible employees in a defined contribution scheme. The charge to the Statement of Profit or Loss represents the amounts paid to the scheme. At the year end, the amount due to the pension scheme was £nil (2017: £nil)

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

				2018		2017
Directors				4		4
Staff				3		-
				7		4

				2018		2017
				£		£
Directors' remuneration				183,400		147,133
Directors' pension contributions				13,083		12,350
				196,483		159,483

               Details of Directors' remuneration can be found in note 24.

7.            NET FINANCE INCOME

				2018		2017
				£		£
Finance income:
Dividend received				5,261		-
Interest receivable on group loan				87,020		-
Deposit account interest				2		-
				92,283		-
Finance costs:
Loan interest payable				10,840		-
Net finance income				81,443		-

               8.    PROFIT/(LOSS) BEFORE INCOME TAX

The profit before income tax (2017 - loss before income tax) is stated after charging/(crediting):

				2018		2017
				£		£
Other operating leases				42,841		31,927
Depreciation - owned assets				429		420
Auditors' remuneration				20,000		16,250
Foreign exchange differences				(4,315)		(10,572)
Bad debt provision against amounts due from subsidiaries				-		1,543,888

9.            INCOME TAX                                                                                                                                                                                        

               Analysis of tax expense

No liability to UK corporation tax arose for the year ended 31 December 2018 nor for the year ended 31 December 2017.

               Factors affecting the tax expense

The tax assessed for the year is lower (2017 - higher) than the standard rate of corporation tax in the UK. The difference is explained below:

				2018		2017
				£		£
Profit/(loss) before income tax				779,904		(3,161,241)
Profit/(loss) multiplied by the standard rate of corporation tax in the UK of 19.00% (2017 - 19.25%)				148,182		(608,539)
Effects of:
Non-deductible expenses				2,222		330,280
Depreciation add back				82		81
Losses used for group relief				5,124		-
Tax losses not utilised				168,772		164,720
Unrealised chargeable (gains)/losses				(324,979)		113,458
Loss on sale of investments				1,597		-
Other tax adjustments				(1,000)		-
				-		-

There is no provision for UK Corporation Tax due to adjusted losses for tax purposes, subject to agreement with HM Revenue and Customs. The deferred asset of approximately £0.98m (2017: £0.93m) arising from the accumulated tax losses of approximately £5.7m (2017: £4.8m) carried forward has not been recognised but may become recoverable against future trading profits.

Changes in the applicable tax rates

The main rate of UK corporation tax is 19% effective from 1 April 2017. The main rate will reduce from 19% to 17% from 1 April 2020.

10.         EARNINGS PER SHARE

The loss and number of shares used in the calculation of earnings per ordinary share are set out below:

				2018		2017
				£		£
Basic:
Profit/(loss)for the financial period				779,904		(3,161,241)
Weighted average number of ordinary shares				1,202,086,287		544,580,539

The loss and the weighted average number of shares used for calculating the diluted loss per share are identical to those for the basic profit/loss per share. The outstanding share options and share warrants (note 23) exercise prices are above the average market price of the shares and would therefore not be dilutive under IAS 33 'Earnings per Share'.

11.         PROPERTY, PLANT AND EQUIPMENT

								Computer equipment
								£
COST
At 1 January 2018 and 31 December 2018								1,699
DEPRECIATION
At 1 January 2018								1,270
Charge for year								429
At 31 December 2018								1,699
NET BOOK VALUE
At 31 December 2018								-
At 31 December 2017								429

                                                                                                                                                                                                                Computer

12.         INVESTMENTS

		Shares in group undertakings		Listed investments		Unlisted investments		Total
		£		£		£		£
COST OR VALUATION
At 1 January 2017		2,308,600		131,712		100,000		2,540,312
Additions		500,200		-		-		500,200
Revaluations		(665,553)		51,830		-		(613,723)
At 1 January 2018		2,143,247		183,542		100,000		2,426,789
Additions		246,040		-		-		246,040
Disposals		-		(75,630)		-		(75,630)
Revaluations		1,764,778		(29,360)		(25,000)		1,710,418
At 31 December 2018		4,154,065		78,552		75,000		4,307,617
NET BOOK VALUE
At 31 December 2018		4,154,065		78,552		75,000		4,307,617
At 31 December 2017		2,143,247		183,542		100,000		2,426,789

The company's investments at the Statement of Financial Position date in the share capital of companies include the following:

PXOG County Limited
Registered office: England & Wales
Nature of business: Investment entity
Class of shares:					% holding
Ordinary					100.00
							2018		2017
							£		£
Aggregate capital and reserves							(26)		(13)
Loss for the year							(13)		(3,852,501)
PXOG Massey Limited
Registered office: England & Wales
Nature of business: Investment entity
Class of shares:					% holding
Ordinary					100.00
							2018		2017
							£		£
Aggregate capital and reserves							585,094		(48,323)
Profit/(loss) for the year							633,417		(48,423)
PXOG Marshall Limited
Registered office: England & Wales
Nature of business: Investment entity
Class of shares:					% holding
Ordinary					100.00
							2018		2017
							£		£
Aggregate capital and reserves							3,568,671		2,142,947
Profit for the year							1,179,684		1,642,947
PXOG Muirhill Limited
Registered office: England & Wales
Nature of business: Investment entity
Class of shares:					% holding
Ordinary					100.00
							2018		2017
							£		£
Aggregate capital and reserves							(413)		100
Loss for the year							(513)		-

Investments are recognised and de-recognised on the date when their purchase or sale is subject to a relevant contract and the associated risks and rewards have been transferred. The Company manages its investments with a view to profiting from the receipt of investment income and capital appreciation from changes in the fair value of investments.

All investments are initially recognised at the fair value of the consideration given and are subsequently measured at fair value through profit and loss.

Unquoted investments, including both equity and loans are designated at fair value through profit and loss and are subsequently carried in the statement of financial position at fair value. Fair value is determined in line with the fair value guidelines under IFRS.

In accordance with IFRS 10, the proportion of the investment portfolio held by the Company's unconsolidated subsidiaries is presented as part of the fair value of investment entity subsidiaries, along with the fair value of their other assets and liabilities.

The holding period of the Company's investment portfolio is on average greater than one year. For this reason, the portfolio is classified as non-current. It is not possible to identify with certainty investments that will be sold within one year.

Investments in investment entity subsidiaries are accounted for as financial instruments at fair value through profit and loss and are not consolidated in accordance with IFRS10.

These entities hold the Company's interests in investments in portfolio companies. The fair value can increase or reduce from either cash flows to/from the investment entities or valuation movements in line with the Company's valuation policy. The fair value of these entities is their net asset values.

The Directors determine that in the ordinary course of business, the net asset values of an investment entity subsidiary are considered to be the most appropriate to determine fair value. At each reporting period, they consider whether any additional fair value adjustments need to be made to the net asset values of the investment entity subsidiaries. These adjustments may be required to reflect market participants' considerations about fair value that may include, but are not limited to, liquidity and the portfolio effect of holding multiple investments within the investment entity subsidiary.

	13.	LOANS AND OTHER FINANCIAL ASSETS
										Loans to group undertakings
											£
At 1 January 2018											1,062,587
New in year											(49,458)
At 31 December 2018											1,013,129

14.   TRADE AND OTHER RECEIVABLES

						2018		2017
						£		£
Current:
Amounts owed by group undertakings						338,398		113,364
Other debtors						36,035		-
Rent deposit						10,242		2,026
VAT						9,121		28,408
Prepayments and accrued income						2,830		5,433
						396,626		149,231
Non-current:
Amounts owed by group undertakings						897,373		-
Aggregate amounts						1,293,999		149,231

The loss and the weighted average number of shares used for calculating the diluted loss per share are identical to those for the basic profit/loss per share. The outstanding share options and share warrants (note 23) exercise prices are above the average market price of the shares and would therefore not be dilutive under IAS 33 'Earnings per Share'.

15.         CASH AND CASH EQUIVALENTS

						2018		2017
						£		£
Bank accounts						233,138		850,060

The Directors consider that the carrying amount of cash and cash equivalents approximates to their fair value. All of the Company's cash and cash equivalents are at floating rates of interest.

16.         CALLED UP SHARE CAPITAL

		2018		2017		2018		2017
		Number		Number		£		£
Allotted, issued and fully paid
Ordinary shares of 0.1p each		1,213,593,136		1,013,593,136		1,213,593		1,013,593
Deferred shares of 0.1p each		942,462,000		942,462,000		942,462		942,462
Deferred shares of £24 each		54,477		54,477		1,307,459		1,307,459
Deferred shares of 0.9p each		285,785,836		285,785,836		2,572,073		2,572,073
						6,035,587		5,835,587

On 22 January 2018, the Company raised £1,200,000 gross via a placing of 200,000,000 ordinary shares of £0.001 each at a price of 0.6 pence per ordinary share. The net proceeds of the Placing ensured that the Company was fully funded for its 2018 work programmes across its portfolio of investments in late stage European onshore oil and gas projects.

The deferred shares have no rights to vote, attend or speak at general meetings of the Company or to receive any dividend or other distribution and have limited rights to participate in any return of capital on a winding-up or liquidation of the Company.

17.   TRADE AND OTHER PAYABLES

						2018		2017
						£		£
Current:
Trade creditors						20,513		28,681
Amounts owed to group undertakings						-		3
Social security and other taxes						15,394		11,362
Accruals and deferred income						34,840		25,800
						70,747		65,846

The Directors consider that the carrying amount of trade and other payables approximates to their fair value.

18.	FINANCIAL LIABILITIES - BORROWINGS
							2018		2017
							£		£
	Current:
	Unsecured loan notes						120,000		-
	Non-current:
	Unsecured loan notes						360,000		-

				1 year or less		1-2 years		Totals
				£		£		£
Unsecured loan notes				120,000		360,000		480,000

                        Terms and debt repayment schedule

The Company raised £480,000 via the issue of unsecured Loan Notes ('the Loan Notes') to new and existing investors ('the Subscribers').  In addition, the Subscribers have been issued with 55 warrants ('the Warrants') for each £1 of Loan Note subscribed.  Each Warrant confers to the Subscriber the right to acquire one Ordinary Share at 0.6p (note 23).

The proceeds of the Loan Notes will be used to fund the Company's share of the budgeted early stage development costs (including environmental monitoring) at the Selva gas discovery on the Podere Gallina Permit in Italy in 2019 and cover the Company's general expenditure in 2019. The Company anticipates being able to fund the full development of the gas discovery and further exploration in the proposed production concession from this and further non-equity funding as the project progresses.

The Loan Notes will pay 10% interest per annum, every six months, capitalised to 30 June 2019, with the first cash payment to be made on 31 December 2019. Repayments start in December 2020 with final repayment on 30 June 2022 (four equal payments) and fit conservatively with expected first production at Selva in mid-2020.

19.  FINANCIAL INSTRUMENTS

The principal financial instruments used by the Company, from which financial instrument risk arises are as follows:

- Trade and other receivables

						2018		2017
						£		£
Financial assets
Loans and receivables:
Trade and other receivables						58,225		5,433
Cash and cash equivalents						233,622		850,060
						291,847		855,493
Other assets at amortised costs:
Amounts owed to group undertakings						2,253,420		1,175,951
Financial liabilities
Trade and other payables						70,747		65,846

- Cash and cash equivalents

- Trade and other payables

A summary of the financial instruments held by category is provided below:

Financial assets at fair value through profit or loss

				Fair value measurement
				Level 1		Level 2		Level 3
				£		£		£
At 31 December 2018				78,552		-		4,229,065
At 31 December 2017				183,542		-		2,243,247

The financial assets at fair value through profit and loss are the Company's holdings in subsidiary undertakings, quoted securities and one unquoted security. The quoted security falls within Level 1 of the fair value hierarchy as defined by IFRS 13 whereas the investments in subsidiary undertakings and unquoted security fall within Level 3.

Financial risk management

The Company's activities expose it to a variety of risks including market risk (foreign currency risk and interest rate risk), credit risk and liquidity risk. The Company manages these risks through an effective risk management programme and through this programme, the Board seeks to minimise potential adverse effects on the Company's financial performance.

The Board provides written objectives, policies and procedures with regards to managing currency and interest risk exposures, liquidity and credit risk including guidance on the use of certain derivative and non-derivative financial instruments

Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Company's credit risk is primarily attributable to its receivables and its cash deposits. It is Company policy to assess the credit risk of new customers before entering contracts. The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies.

Liquidity risk and interest rate risk

Liquidity risk arises from the Company's management of working capital.  It is the risk that the Company will encounter difficulty in meeting its financial obligations as they fall due.  The Board regularly receives cash flow projections for a minimum period of 12 months, together with information regarding cash balances monthly.

The Company is principally funded by equity and invests in short-term deposits, having access to these funds at short notice. The Company's policy throughout the period has been to minimise interest rate risk by placing funds in risk free cash deposits but also to maximise the return on funds placed on deposit.

All cash deposits attract a floating rate of interest. The benchmark rate for determining interest receivable and floating rate assets is linked to the UK base rate.

Foreign currency exposure

At 31 December 2018, the Company's monetary assets and liabilities are denominated in GBP Sterling, the functional currency of the Company, other than €76,034 (£68,015) of cash at bank. This exposure gives rise to net currency gains and losses recognised in the Statement of Comprehensive Income. A 10% fluctuation in the GBP sterling rate compared to the Euro would give rise to a £6,802 gain or loss in the Company's Statement of Comprehensive Income.

Although the Company has a Euro bank account it has no formal policies in place to hedge the Company's activities to the exposure to currency risk. It is the Company's policy to ensure that it enters into transactions its functional currency wherever possible.

Management regularly monitor the currency profile and obtain informal advice to ensure that the cash balances are held in currencies which minimise the impact on the results and position of the Company from foreign exchange movements.

20.  RELATED PARTY DISCLOSURES

Included in loans to group undertakings is an amount of £1,543,888 (2017: £1,543,888) due from PXOG County Limited, the company's wholly owned subsidiary. At the year end, a provision of £1,543,888 (2017: £1,543,888) was made against this balance. Included in trade and other receivables is an amount of £14,526 (2017: £13) due from PXOG County Limited.

Included in loans to group undertakings is an amount of £1,013,129 (2017: £1,062,587) due from PXOG Massey Limited, the company's wholly owned subsidiary. Included in trade and other payables is an amount of £4,500 (2017: £nil) due to PXOG Massey Limited.

Included in trade and other receivables - non-current - is an amount of £897,371 (2017: current - £113,350) due from PXOG Marshall Limited, the company's wholly owned subsidiary. Interest receivable of £87,020 (2017: £nil) has been accounted for through the Statement of Profit or Loss.

Included in trade and other receivables is an amount of £ 323,872 (2017: payable - £3) due from PXOG Muirhill Limited, the company's wholly owned subsidiary.

During the year, there were consultancy fees of £15,000 (2017: £12,000) and £7,800 (2017: £16,000) charged by Sallork Limited and Sallork Legal and Commercial Consulting Limited ("Sallork") respectively. Included in trade payables at the year end is £1,500 (2017: £6,674) and £800 (2017: £nil) owing to Sallork Limited and Sallork Legal and Commercial Consulting Limited respectively. Richard Mays is a director and shareholder of of both these companies.

Included in trade and other payables are the following balances due to Directors as at 31 December 2018.

						2018		2017
						£		£
William Smith						7,745		-

The following Directors subscribed to the unsecured loan notes (note 18):

						2018		2017
						£		£
Richard Mays						50,000		-
William Smith						50,000		-
James Smith						25,000		-

21.  EVENTS AFTER THE REPORTING PERIOD

In March 2019, the Company raised £800,000 before expenses by way of a  placing of 400,000,000 new ordinary shares of £0.001 each in the Company at a price of 0.2 pence per share (the "Placing Price") (the "Placing").  The Placing was undertaken with new and existing investors.

The net proceeds of the Placing should ensure Prospex is fully funded for its basic 2019 work programmes across its portfolio of investments in late stage European onshore oil and gas projects.

The Placing was completed by Novum Securities Limited ("Novum"), which was issued with 8,125,000 warrants to subscribe for, in aggregate, 8,125,000 new Ordinary Shares at an exercise price of 0.4 pence per new Ordinary Share for a period of 3 years from Admission.

22.  ULTIMATE CONTROLLING PARTY

In the opinion of the Directors, there is no ultimate controlling party.

23.  SHARE-BASED PAYMENT TRANSACTIONS

Share options

At 31 December 2017 and 31 December 2018 outstanding awards to subscribe for ordinary shares of 1p each in the Company, granted in accordance with the rules of the share option scheme, were as follows:

				Shares under option		Weighted average remaining contractual life (years)		Weighted average exercise price (pence)
31 December 2018
Brought forward				95,653,810		2.80		0.78
Granted				-		-		-
Lapsed				(812,000)				(3.05)
Carried forward				94,841,810		1.76		0.76
				Shares under option		Weighted average remaining contractual life (years)		Weighted average exercise price (pence)
31 December 2017
Brought forward				24,632,061		3.59		2.74
Granted				71,226,149		3.00		0.52
Lapsed				(204,400)
Carried forward				95,653,810		1.76		0.78

All options were exercisable at the year end. No options were exercised during the year.

The following share-based payment arrangements were in existence at the year-end.

Options		Number		Expiry date		Exercise price		Fair value at grant date
1. Granted 30 April 2012		40,000		30/04/2022		125.00p		47.50p
2. Granted 16 April 2015		2,847,116		15/04/2025		3.05p		1.94p
3. Granted 22 September 2016		1,434,209		22/09/2019		1.00p		0.53p
4. Granted 22 September 2016		13,694,336		22/09/2019		1.00p		0.31p
5. Granted 22 September 2016		4,164,000		22/09/2019		1.10p		0.29p
6. Granted 23 December 2016		1,436,000		23/12/2019		1.10p		0.53p
7. Granted 13 November 2017		71,226,149		13/11/2020		0.52p		0.29p

The fair value of remaining share options has been calculated using the Black Scholes model. The assumptions used in the calculation of the fair value of the share options outstanding during the year are as follows:

Options		Grant date share price		Exercise price		Expected volatility		Expected option life		Risk-free interest rate
1. Granted 30 April 2012		175.00p		125.00p		32.00%		3.5 years		0.24% - 0.43%
2. Granted 16 April 2015		4.00p		3.05p		71.50%		3 years		0.71%
3. Granted 22 September 2016		1.70p		1.00p		71.00%		3 years		0.10%
4. Granted 22 September 2016 *		1.70p		1.00p		71.00%		3 years		0.10%
5. Granted 22 September 2016 *		1.70p		1.10p		71.00%		3 years		0.10%
6. Granted 23 December 2016 *		2.50p		1.10p		79.00%		3 years		0.28%
7. Granted 13 November 2017		0.51p		0.52p		96.80%		3 years		0.56%

* These options vest once the share price of the Company has closed at 5p or higher for 5 consecutive trading days.

The fair value has been calculated assuming that there will be no dividend yield.

Volatility was determined by reference to the standard deviation of expected share price returns based on a statistical analysis of daily share prices over a 3 year period to grant date. All of the above options are equity settled and the charge for the year is £nil (2017: £170,354).

Warrants

At 31 December 2018, outstanding warrants to subscribe for ordinary shares of 0.1p each in the Company, granted in accordance with the warrant instruments issued by Prospex, were as follows. There are no comparatives as no warrants were in existence prior to this year. Following the year end, the company which was granted these warrants entered Administration, at which point the warrants lapsed.

				Shares under warrant		Weighted average remaining contractual life (years)		Weighted average exercise price (pence)
31 December 2018
Brought forward				8,500,000		1.14		1.25
Granted				26,400,000		2.00		0.60
Lapsed				-
Carried forward				34,900,000		1.38		0.76
				Shares under warrant		Weighted average remaining contractual life (years)		Weighted average exercise price (pence)
31 December 2017
Brought forward				-
Granted				8,500,000		2.00		1.25
Lapsed				-
Carried forward				8,500,000		1.14		0.78

All warrants were exercisable at the year end.

The following warrants were in existence at the year end.

Warrants		Number		Expiry date		Exercise price		Fair value at grant date
1. Granted 20 February 2017		8,500,000		21/02/2019		1.25p		0.22p
2. Granted 12 October 2018		26,400,000		12/10/2021		0.60p		N/A

The fair value of the remaining warrants has been calculated using the Black-Scholes model. The assumptions used in the calculation of the fair value of the share options outstanding during the year are as follows:

Options		Grant date share price		Exercise price		Expected volatility		Expected option life		Risk-free interest rate
1. Granted 20 February 2017		0.52p		1.25p		98.00%		2 years		0.13%
2. Granted 12 October 2018		0.32p		0.60p		N/A		N/A		N/A

The warrants granted on 12 October 2018 fall outside the scope of IFRS and as such no charge is made.

The fair value has been calculated assuming that there will be no dividend yield.

Volatility was determined by reference to the standard deviation of expected share price returns based on a statistical analysis of daily share prices over a 3-year period to grant date.

All of the warrants are equity settled and the charge for the year is £nil (2017: £10,142). As the warrants relating to the charge for 2017 were all in consideration of shares issued during that year, it was taken directly to equity and charged against the share premium as costs in respect of the issue of shares.

24.         DIRECTORS' EMOLUMENTS

Key management personnel are those persons having authority and responsibility for planning, directing and controlling activities of the Company, including all directors of the Company.

						2018		2017
						£		£
Directors' emoluments						183,400		147,333
Benefit in kind						4,200		4,200
Pension contributions						13,083		12,350
						200,683		163,883

		Salaries and fees		Benefit in kind		Pension contributions		2018		2017
		£		£		£		£		£
Edward Dawson		130,000		4,200		13,083		147,283		127,883
William Smith		18,000		-		-		18,000		12,000
Richard Mays		15,000		-		-		15,000		12,000
James Smith		20,400		-		-		20,400		12,000
		183,400		4,200		13,083		200,683		163,883

The number of directors for whom retirement benefits are accruing under money purchase pension schemes amounted to 1 (2017: 1).

The Directors interests in share options as at 31 December 2018 are as follows:

Director		Options at 31 December 2018		Exercise price		Date of grant		First date of exercise		Final date of exercise
Edward Dawson		680,212		3.05p		14/04/2015		14/04/2015		14/04/2025
Edward Dawson		971,663		1.00p		22/09/2016		22/09/2016		22/09/2019
Edward Dawson *		4,438,000		1.00p		22/09/2016		22/09/2016		22/09/2019
Edward Dawson *		1,292,000		1.10p		22/09/2016		22/09/2016		22/09/2019
Edward Dawson		16,940,273		0.52p		13/11/2017		13/11/2017		13/11/2020
Richard Mays		541,726		3.05p		14/04/2015		14/04/2015		14/04/2025
Richard Mays		20,196		1.00p		22/09/2016		22/09/2016		22/09/2019
Richard Mays *		2,327,418		1.00p		22/09/2016		22/09/2016		22/09/2019
Richard Mays *		1,436,000		1.10p		22/09/2016		22/09/2016		22/09/2019
Richard Mays		10,395,168		0.52p		13/11/2017		13/11/2017		13/11/2020
William Smith		541,726		3.05p		14/04/2015		14/04/2015		14/04/2025
William Smith		20,196		1.00p		22/09/2016		22/09/2016		22/09/2019
William Smith *		2,327,418		1.00p		22/09/2016		22/09/2016		22/09/2019
William Smith *		1,436,000		1.10p		22/09/2016		22/09/2016		22/09/2019
William Smith		10,395,168		0.52p		13/11/2017		13/11/2017		13/11/2020
James Smith *		1,436,000		1.10p		23/12/2016		23/12/2016		23/12/2019
James Smith		10,395,168		0.52p		13/11/2017		13/11/2017		13/11/2020

* These options vest once the share price of the Company has closed at 5p or higher for 5 consecutive trading days.

The options awarded to Richard Mays are held in the name of Sallork Limited, a company he owns and controls.

The Directors interests in share warrants as at 31 December 2018 are as follows:

			Warrants at 31 December 2018		Exercise price		Date of grant		Final date of exercise
Richard Mays			2,750,000		0.60p		22/10/2018		22/10/2020
William Smith			2,750,000		0.60p		03/10/2018		03/10/2020
James Smith			1,375,000		0.60p		12/10/2018		12/10/2020

25.         PUBLICATION OF REPORT AND ACCOUNTS

The report and accounts for the year ended 31 December 2018 will be posted to shareholders shortly and will be available from the Company's website: http://www.prospexoilandgas.com .

 

END

 

 

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