Final Results for the Year Ended 31 December 2020

RNS Number : 9588Z

Baron Oil PLC

27 May 2021

 

Market Abuse Regulation (MAR) Disclosure

Certain information contained in this announcement would have been deemed inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 (which forms part of domestic UK law pursuant to the European Union (withdrawal) act 2018) until the release of this announcement.

27 May 2021

Baron Oil Plc

("Baron" or "the Company")

Final Results for the Year Ended 31 December 2020

Baron Oil Plc (AIM:BOIL), the AIM-quoted oil and gas exploration company with projects in SE Asia, Latin America and the UK, is pleased to announce its audited financial results for the year ended 31 December 2020.

Highlights

· Material milestone in March 2020 with the funding of the initial 25% effective interest in the TL-SO-19-16 production sharing contract, offshore Timor-Leste ("Chuditch"); subsequently increased to 63.75%.

· Strategic intent to acquire significant working interests in potentially large oil & gas prospects signalled following board changes in October.

· During first half 2021, considerable progress made on Chuditch:

o One year extension to Contract Year 1 of the production sharing contract granted;

o Significant upgrade in non-SPE PRMS compliant volumes;

o Successful raise of £3m (gross) via a placing and subscription to support funding an Earn In agreement which increased effective interest in the PSC to 63.75%;

o Baron's net share of estimated Mean prospective resources increased to 2,248 BCF (375 MMBOE);

o Execution of a 3D seismic licensing and reprocessing contract.

· UK offshore licence P2478 (15% interest)

o Technical studies, delivered in early 2021, confirmed Dunrobin prospect as a potentially attractive and substantial opportunity;

o Activity set to increase once technical studies results incorporated

· Relinquishment of all other interests in United Kingdom licences.

· Peru onshore Block XXI (100% interest)

o Ongoing COVID-19 restrictions throughout Peru prevented tangible progress;

o Decision on drilling the El Barco-3X well expected during the second half of 2021

Financials

· Net result for the year was a loss before taxation of £920,000 (2019: loss of £1,674,000)

· Loss after taxation attributable to shareholders was £920,000 (2019: loss of £1,674,000)

· Exploration and evaluation expenditure of £145,000 (2019: £1,207,000)

· IFRS6 intangible asset impairment charge of £nil (2019: £1,108,000)

· Administration expenditure for the year was £710,000 (2019: £442,000), largely reflecting share-based charges and the temporary reduction in directors' contracted salaries in 2019 

· The end of year free cash balance was £1,190,000 (2019: £347,000)

The Company will hold its Annual General Meeting on 23 June 2021 and the Notice of Annual General Meeting to that effect will be sent to Shareholders shortly.

Qualified Person's Statement

Pursuant to the requirements of the AIM Rules - Note for Mining and Oil and Gas Companies, the technical information and resource reporting contained in this announcement has been reviewed by Jon Ford BSc, Fellow of the Geological Society, Technical Director of the Company. Mr Ford has more than 39 years' experience as a petroleum geoscientist. He has compiled, read and approved the technical disclosure in this regulatory announcement and indicated where it does not comply with the Society of Petroleum Engineers' standard.

Commenting on the results, John Wakefield, Non-executive Chairman, said:

"Over the next 12 months our focus will be on driving the Chuditch PSC forward. Through the operator SundaGas Banda we have already engaged TGS and will be working with them to undertake the critical 3D seismic reprocessing project. The acceleration in Timor-Leste's oil & gas activity is expected to continue and the Chuditch PSC, with its potential Mean gross prospective resources of 3,527 BCF (580 MMBOE) is sufficiently large to attract interest from the major regional gas players and other potential partners.

"In the UK, we anticipate renewed activity on the Dunrobin prospect P2478 later in the year once the results of the regional technical work have been incorporated; Peru is likely to remain subdued. Elsewhere, the Company continues to screen new opportunities which are consistent with its new asset strategy."

"On a personal note, I would like to thank my colleagues and partners for their warm welcome and hard work in ensuring that Baron is well-placed to evaluate the potential of its Chuditch asset during the current year as well as consider opportunities for our other and future assets in due course."

"As for the next twelve months, our current commitments are funded and we look forward to executing on our ambitious plans." 

The Company's Annual Report and Financial Statements for the year ended 31 December 2020 will shortly be available for download from the Company's website ( https://www.baronoilplc.com/ ) and will be despatched by post shortly to those shareholders that have requested a hard copy.

For further information, please contact:

Baron Oil Plc	[phone]
Andy Yeo, Chief Executive
Jon Ford, Technical Director
Allenby Capital Limited	[phone]
Nominated Adviser and Joint Broker
Alex Brearley, Nick Harriss, Nick Athanas (Corporate Finance) Kelly Gardiner (Sales and Corporate Broking)
Turner Pope Investments (TPI) Limited	[phone]
Joint Broker
Andy Thacker

CHAIRMAN'S STATEMENT & OPERATIONS REPORT

Financial and Financial Results

The net result for the year was a loss before taxation of £920,000, which compares to a loss of £1,674,000 for the preceding financial year; the loss after taxation attributable to Baron Oil shareholders was £920,000, compared to a loss of £1,674,000 in the preceding year.

Turnover for the year was £nil (2019: £nil), there being no sales activity during the period.

Exploration and evaluation expenditure written off included in the Income Statement amounts to £145,000. This arises from expenditure of £114,000 in Peru on Block XXI, £29,000 in technical consultancy costs and £2,000 relating to the relinquished P2470 licence.

Shortly after the period end on 31 January 2021, licence P1918 (Colter) and the nearby onshore licences PEDL330 and PEDL345 were relinquished. All expenditure on these licences was written off in the year, however as these prospects had already been fully impaired in 2019, there was no impact on the Income Statement. Impairment provisions in respect of Peru Block XXI were reduced by £133,000, this being attributable to exchange rate fluctuations on the translation of US Dollar based Peruvian assets. The directors judged that no other exploration assets required impairment.

Administration expenditure for the year was £710,000, compared to £442,000 in the preceding year, excluding the effects of exchange rate movements. Directors and employee costs (less £81,000 of share based charges) amounted to £374,000; listing, compliance and other professional fees were £198,000; and other overheads £55,000. The increase in Directors and employee cash costs are largely due to a temporary reduction in directors' contracted salaries in 2019.

During 2020, the Pound Sterling/US Dollar exchange rate was highly volatile, but a strengthening of the Pound towards the end of the year gave rise to an overall exchange gain of £157,000 (loss of £41,000 in 2019) on the Group's holding of US Dollar assets.

At the end of the financial year, free cash reserves of the Group had increased to £1,190,000 from a level at the preceding year end of £347,000. The proceeds of new share issues in the year amounting to £2,500,000 gross (£2,295,000 net of costs) bolstered the Company's cash reserves; excluding this, the overall cash outflow amounted to £1,452,000, consisting of £518,000 of investment in SundaGas (Timor-Leste Sahul) Pte.Ltd, exploration and evaluation activity of £145,000, and £789,000 of operating cash outflow. During March and April 2021, the Company undertook a further capital raise with a new ordinary share Placing and Subscription of £3,000,000 gross (£2,768,000 net).

The Group continues to take a conservative view of its asset impairment policy, giving it a Statement of Financial Position that consists largely of net current assets and what the Board considers to be a realistic value for its exploration assets. Given limited cash resources, the Board will take a prudent approach in entering into new capital expenditures beyond those expected to be committed to existing ventures.

Report On Operations

Introduction

It is hard to believe that we have now lived with the consequences of the COVID-19 pandemic for more than 18 months. We were fortunate enough to enter 2020 without any immediate drilling commitments and instead were able to focus on desktop studies to advance our projects whilst maintaining control over costs.

The funding of the Chuditch Carry Agreement was a key milestone in March 2020 as it not only secured a substantial asset but was achieved in the early stages of the pandemic.

A number of board changes were announced in October 2020, triggered by the retirement of Executive Chairman, Dr Malcolm Butler. John Wakefield was appointed as Independent Non-executive Chairman, Jon Ford changed his role to Technical Director, and Andrew Yeo became Chief Executive of the Company.

Southeast Asia: Timor-Leste Tl-S0-19-16 PSC ("Chuditch PSC" or "PSC")

(Baron 25% effective interest, rising to 63.75% post-reporting period)

During 2020 Baron acquired a 33.33% interest in the shares of SundaGas Timor-Leste (Sahul) Pte. Ltd. ("TLS"), the parent company of the Timor-Leste subsidiary, SundaGas Banda Unipessoal Lda. ("Banda"), which is the Operator of and 75% interest holder in the offshore Timor-Leste TL-SO-19-16 PSC. Banda had put in place the required US$1 million Bank Guarantee (Baron assuming its share of US$0.333 million) against the initial work commitment, which included the reprocessing of legacy seismic data for the first two years of the Initial Term of the PSC. Subject to satisfactory results from the reprocessing and other technical work, the subsequent commitment is for a well to be drilled in the third year of the Initial Term.

The Chuditch PSC is located approximately 185 kilometres south of Timor-Leste, 100 kilometres east of the producing Bayu-Undan field, 50 kilometres south of the Greater Sunrise potential development, and covers approximately 3,571km² in water depths of 50-100 metres. The Shell operated Chuditch-1 discovery in 1998, which was drilled in 64 metres water depth in a total of 25 days for around US$8 million, encountered a 25 metre gas column in Jurassic Plover Formation reservoir sandstones on the flank of what is interpreted to be a large faulted structure. The Chuditch area was largely covered by part of a regional 3D survey which was acquired by a previous operator in 2012.

The initial work programme is designed to extract the maximum information from existing seismic data, utilising the technical expertise of the TLS team and incorporating a training programme for Timor-Leste nationals. There are issues with sea-bed topography and shallow geological features that impact the existing seismic image at the reservoir level local to the Chuditch area and a pre-stack depth migration ("PSDM") processing routine, tailored to resolve these issues, is necessary.  Although the work carried out previously by Shell determined that there were low reservoir, seal and hydrocarbon charge risks, such modern processing is necessary to define the size and shape of the accumulation, which impacts the gas volumes in place and the location of potential future wells. In particular, new advances in seismic processing technology enable a considerably enhanced subsurface image to be achieved in areas with complex seabeds and shallow geology. Accessing the original raw acquisition data for the existing seismic volumes was therefore critical for this programme. A combination of COVID-19 lockdowns and data access issues meant that at the 2020 year end TLS had yet to receive these key data for either 3D or 2D seismic. Despite this, the TLS team was able to perform baseline geological and geophysical studies and establish an initial presence in Dili, the capital of Timor-Leste.

Since the beginning of 2021 we are pleased to report that considerable progress has been made on the Chuditch PSC project, building on the background work carried out during 2020:

· in January 2021, we announced a significant upgrade in TLS's non-SPE PRMS compliant gross volumes, based on the interpretation of legacy 2D (unreprocessed) seismic, well and regional data:

o  Mean gas initially in place volumes to 4,703 BCF (from 2,320 BCF)

o  Mean prospective resources to 3,527 BCF (from 1,508 BCF)

o  Inclusion of a significant new lead within the licence area, Chuditch North East;

· in February 2021, Autoridade Nacional do Petróleo e Minerais ("ANPM", the Timor-Leste state oil and gas regulatory authority) granted a year's extension to Contract Year 1 of the PSC to enable the timely completion of the committed work programme, in particular the seismic reprocessing project;

· in April 2021, we announced the completion of an earn in and executed a seismic licensing and reprocessing contract:

o  increasing our interest in TLS from 33.33% to 85%, thereby increasing Baron's effective interest in the Chuditch PSC from 25% to 63.75%;

o  net share of non-SPE PRMS compliant mean prospective resources increased from 882 BCF to 2,248 BCF (375 MMBOE);

o  Baron agreed to fund the remainder of the Chuditch PSC work programme to November 2022, estimated to be US$3.5 million. we successfully raised gross proceeds of £3 million by the issue of new shares to enable us to commit to this programme;

o  Spectrum Geo Australia Pty Ltd., a wholly owned subsidiary of TGS-NOPEC Geophysical Company ASA ("TGS"), was engaged for the licensing and reprocessing of 1,270km² of 3D seismic data covering the Chuditch-1 discovery and adjacent prospects.

Obtaining a material interest in a very large potential asset and getting the seismic reprocessing back on track is judicious as we are seeing a convergence of events which together have the potential to make the Chuditch PSC an outstanding asset for the Company:

· an acceleration in Timor-Leste regional hydrocarbon exploitation, including drilling activity and planned extensions of existing infrastructure;

· exposure to the SE Asia liquid natural gas ("LNG") market, where future demand is forecast to exceed supply;

· a sufficient level of prospective resources to attract the interest of major regional gas players and other potential funding partners.

The seismic reprocessing results are likely to be delivered across the period from 4^th quarter 2021 to 2^nd quarter 2022. Seismic data interpretation, geological and other studies will occur in parallel ahead of a decision by Q4 2022 on whether to enter the drilling phase, with the potential for a high impact drilling programme in 2023.

The recent uptick in oil & gas activity in Timor-Leste follows the Santos US$1.25 billion acquisition of ConocoPhillips' northern Australia and Timor-Leste assets, completed in May 2020. This package delivered Santos operatorship of a portfolio of natural gas assets (Bayu-Undan and Barossa), partnerships with some of SE Asia's largest LNG players, power generators and utility companies, and a strategic holding in LNG infrastructure of pipelines and the Darwin LNG plant located at Wickham Point, Northern Territories, Australia. This interconnected system, centred on Bayu-Undan (the only producing field currently in Timor-Leste), is key to the evacuation and monetisation of gas from the Timor Sea area. The Chuditch PSC lies only 100 kilometres east of these facilities.

Santos and its partners have so far committed to expenditure of more than US$4.5 billion to extend the life of existing fields and pipelines, bring new fields onstream, and increase capacity at the Darwin LNG plant from around 4 million tonnes per annum (mtpa) to 10mtpa. There are also moves being made by ENI (operator of the Evans Shoal and Blackwood gas fields) and Santos to cooperate in offshore developments in northern Australia and Timor-Leste, the sharing of infrastructure, and CO₂ capture and storage with a Joint Memorandum of Understanding being announced in May 2021.

In the context of these ongoing activities, the Chuditch PSC is well placed to benefit from these activities, in terms of future operational synergies and commercial development of gas in the event of drilling success at Chuditch.

Peru: Block XXI, Onshore Licence (Baron 100%)

Baron has a 100% operated interest in onshore Block XXI, in the Sechura Desert of northern Peru. As indicated in March 2021, the Company intends to make a decision on the drilling of the El Barco-3X project during the second half of 2021. We maintain a preference for bringing in a drilling partner with operator capabilities as we believe this represents the best way to develop and monetise any discovery. However, strict COVID restrictions remain in place throughout Peru, which prevents any progress in relation to the drilling project, and it is unclear when and how quickly oil and gas exploration activity will be allowed to recommence. Currently the licence remains in Force Majeure.   

Our application for a three year extension option to the licence, a prerequisite for attracting a drilling partner, given that we currently have only six months to drill and evaluate well results once Force Majeure is lifted, is currently being assessed by Perupetro, the Peru state regulatory authority. Once approved, this will trigger a prescribed Government process which, if successful, should allow a way forward for the project. In the Piura area where the proposed well is situated, we are required to undertake workshops with the local communities of Belisario and El Barco ahead of any drilling authorisation.

United Kingdom Offshore Licence P2478 (Baron 15%)

Innovate Licence P2478, awarded in September 2019, is held by Corallian Energy Limited (Operator, 45%), Upland Resources (UK Onshore) Limited (40%) and Baron (15%). The licence's current modest work commitment is to undertake reprocessing of legacy 2D and 3D seismic data and perform other studies in order to reduce risk and refine volumetric estimates ahead of making a "drill or drop" decision before the end of Phase A of the licence period in July 2023.

Covering blocks 12/27c, 17/5, 18/1 and 18/2 in the Inner Moray Firth area of the North Sea, the licence contains the Dunrobin prospect which consists of large shallow rotated fault blocks which are mapped mostly on 3D seismic data including Direct Hydrocarbon Indicators. The prospect is understood to be one of the few remaining targets with Pmean prospective resources of the order of 100 MMBOE yet to be drilled in the North Sea.

In April 2020, the joint venture partners signed a Work Sharing and Confidentiality Agreement with a large European E&P Company ("Interested Party") for licence P2478. Under the terms of the agreement the Interested Party completed its own regional technical work and shared its data and interpretations over the area with Corallian and its partners in February 2021. The technical studies delivered by the Interested Party confirmed and enhanced our geological understanding and corroborated our view of Dunrobin as a potentially attractive and substantial target. The results are being incorporated into the ongoing work programme which includes preparations for the seismic reprocessing in order to reduce further the pre-drill risk on the prospect.

Other United Kingdom Licences

In keeping with its revised strategy to focus on high potential impact projects, and by way of the normal course of portfolio management, Baron has relinquished its interests in all other United Kingdom Licences.

Conclusions

Over the next 12 months our focus - both operational and financial - will be on driving the Chuditch PSC forward. Through the operator SundaGas Banda we have already engaged TGS, and will be working with them to undertake the critical 3D seismic reprocessing which will provide an up-to-date assessment of the true potential of the Chuditch discovery and offset prospects. 

Notwithstanding the expected benefits of global economic recovery as normality gradually returns, SE Asia gas prices are already ahead of pre-COVID levels. An acceleration in Timor-Leste's oil & gas activity is expected and the Chuditch PSC with its potential Mean gross prospective resources of 3,527 BCF of gas is sufficient to get noticed. The Earn In increased Baron's net share of estimated non-SPE PRMS compliant Mean gas prospective resources to 2,248BCF (equivalent to 375MMBOE).

Activity in Peru is likely to remain subdued in the short term. 

In the UK, we expect to see activity on P2478 once the results of the regional technical work have been incorporated into the ongoing work programme. Whilst we only have a modest 15% interest, it remains a significant opportunity.

The Company continues to screen opportunities for acquiring significant equity interests in high potential impact exploration and appraisal activity at low entry costs.

As for the next twelve months, our current commitments are fully funded and we look forward to executing on our ambitious plans. 

I would like to thank my colleagues and partners for their warm welcome and hard work in ensuring that Baron is well-placed to evaluate the potential of its Chuditch asset during the current year as well as consider opportunities for our other and future assets in due course.

John Wakefield

Non-executive Chairman

26 May 2021

CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2020
			Notes	2020	2019
				£'000	£'000
Revenue				-	-
Cost of sales				-	-
Gross profit				-	-
Exploration and evaluation expenditure				(145)	(160)
Intangible asset impairment			10	59	(1,047)
Property, plant and equipment impairment and depreciation			9	(2)	-
Receivables and inventory impairment			3	74	16
Administration expenses				(710)	(442)
Loss on exchange			3	(157)	(41)
Operating loss			3	(881)	(1,674)
Loss from associated undertaking			12	(44)	-
Loss before interest and taxation				(925)	(1,674)
Finance cost			5	-	(1)
Finance income			5	5	1
Loss on ordinary activities
before taxation				(920)	(1,674)
Income tax expense			6	-	-
Loss on ordinary activities
after taxation				(920)	(1,674)
Dividends				-	-
Loss for the year				(920)	(1,674)
Loss on ordinary activities
after taxation is attributable to:
Equity shareholders				(920)	(1,674)
Non-controlling interests				-	-
				(920)	(1,674)
Earnings per ordinary share - continuing			8
Basic				(0.023p)	(0.099p)
Diluted				(0.023p)	(0.099p)

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE
YEAR ENDED 31 DECEMBER 2020
			Notes	2020	2019
				£'000	£'000
Loss on ordinary activities after taxation attributable to the parent				(920)	(1,674)
Other comprehensive income:
Release of option reserve				41	-
Exchange difference on translating foreign operations				(115)	(69)
Total comprehensive loss for the year				(994)	(1,743)
Total comprehensive loss attributable to
owners of the parent				(994)	(1,743)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2020
			Notes	2020	2019
				£'000	£'000
Assets
Non current assets
Property plant and equipment
--- oil and gas assets			9	-	-
--- others			9	43	-
Intangibles			10	18	5
Goodwill				-	-
Associated undertaking			12	151	-
				212	5
Current assets
Trade and other receivables				376	49
Cash and cash equivalents				1,311	472
				1,687	521
Total assets				1,899	526
Equity and liabilities
Capital and reserves attributable to owners of the parent
Share capital				1,107	482
Share premium account				32,156	30,507
Share option reserve				135	74
Foreign exchange translation reserve				1,528	1,643
Retained earnings				(33,130)	(32,251)
Total equity				1,796	455
Current liabilities
Trade and other payables				58	64
Taxes payable				16	7
				74	71
Non-current liabilities
Lease finance				29	-
Total equity and liabilities				1,899	526
The financial statements were approved and authorised for issue by the Board of Directors on 26 May 2021 and were signed on its behalf by:
John Wakefield			Andrew Yeo
Director			Director
Company number: 05098776

COMPANY STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2020
			Notes	2020	2019
				£'000	£'000
Assets
Non current assets
Property plant and equipment
--- oil and gas assets				-	-
--- others			9	43	-
Intangibles			10	18	5
Investments				195	25
				256	30
Current assets
Trade and other receivables				375	46
Cash and cash equivalents				1,183	336
				1,558	382
Total assets				1,814	412
Equity and liabilities
Capital and reserves attributable to owners of the parent
Share capital				1,107	482
Share premium account				32,156	30,507
Share option reserve				135	74
Foreign exchange translation reserve				(163)	(163)
Retained earnings				(31,523)	(32,261)
Total equity				1,712	(1,361)
Current liabilities
Trade and other payables				58	1,766
Taxes payable				15	7
				73	1,773
Non-current liabilities
Lease finance				29	-
Total equity and liabilities				1,814	412
The financial statements were approved and authorised for issue by the Board of Directors on 26 May 2021 and were signed on its behalf by:

John Wakefield			Andrew Yeo
Director			Director
Company number: 05098776

CONSOLIDATED AND COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2020
					Foreign
	Share	Share	Retained	Share option	exchange	Total
	capital	premium	earnings	reserve	translation	equity
Group	£'000	£'000	£'000	£'000	£'000	£'000
As at 1 January 2019	344	30,237	(30,577)	74	1,712	1,790
Shares issued	138	270	-	-	-	408
Transactions with owners	138	270	-	-	-	408
Loss for the year attributable to equity shareholders	-	-	(1,674)		-	(1,674)
Foreign exchange translation adjustments	-	-	-	-	(69)	(69)
Total comprehensive income  for the period	-	-	(1,674)	-	(69)	(1,743)
As at 1 January 2020	482	30,507	(32,251)	74	1,643	455
Shares issued	625	1,670	-	-	-	2,295
Transactions with owners	625	1,670	-	-	-	2,295
Loss for the year attributable to equity shareholders	-	-	(920)		-	(920)
Share based payments	-	(21)	-	102	-	81
Share option reserve released	-	-	41	(41)	-	-
Foreign exchange translation adjustments	-	-	-	-	(115)	(115)
Total comprehensive income  for the period	-	(21)	(879)	61	(115)	(954)
As at 31 December 2020	1,107	32,156	(33,130)	135	1,528	1,796

CONSOLIDATED AND COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2020 - continued
					Foreign
	Share	Share	Retained	Share option	exchange	Total
	capital	premium	earnings	reserve	translation	equity
	£'000	£'000	£'000	£'000	£'000	£'000
Company
As at 1 January 2019	344	30,237	(30,510)	74	(163)	(18)
Shares issued	138	270	-	-	-	408
Transactions with owners	138	270	-	-	-	408
Loss for the year	-	-	(1,751)	-	-	(1,751)
Total comprehensive income  for the period	-	-	(1,751)	-	-	(1,751)
As at 1 January 2020	482	30,507	(32,261)	74	(163)	(1,361)
Shares issued	625	1,670	-	-	-	2,295
Transactions with owners	625	1,670	-	-	-	2,295
Profit for the year	-	-	697	-	-	697
Share based payments	-	(21)	-	102	-	81
Share option reserve released	-	-	41	(41)	-	-
Total comprehensive income  for the period	-	(21)	738	61	-	778
As at 31 December 2020	1,107	32,156	(31,523)	135	(163)	1,712
Share capital is the amount subscribed for shares at nominal value.
Share premium represents the excess of the amount subscribed for share capital over the nominal value of those shares net of share issue expenses.
Retained earnings represents the cumulative loss of the group attributable to equity shareholders.
Foreign exchange translation occurs on consolidation of the translation of the subsidiaries balance sheets at the closing rate of exchange and their income statements at the average rate.

CONSOLIDATED AND COMPANY STATEMENT OF CASH FLOWS FOR THE
YEAR ENDED 31 DECEMBER 2020
		Group	Company	Group	Company
		2020	2020	2019	2,019
		£'000	£'000	£'000	£'000
Operating activities		(919)	(797)	(724)	(563)
Investing activities
Return from investment and servicing of finance		5	5	1	1
Advances to subsidiary and associated undertakings		(323)	(441)	-	(155)
Acquisition of intangible assets		(14)	(14)	(1,047)	(1,047)
Investment in associated undertaking		(195)	(195)	-	-
		(527)	(645)	(1,046)	(1,201)
Financing activities
Proceeds from issue of share capital		2,295	2,295	408	408
Lease financing		(6)	(6)	-	-
Net cash inflow		843	847	(1,362)	(1,356)
Cash and cash equivalents at the beginning of the year		347	336	1,709	1,692
Cash and cash equivalents at the end of the year		1,190	1,183	347	336
Reconciliation to Consolidated Statement of Financial Position
Cash not available for use		121	-	125	-
Cash and cash equivalents as shown in the Consolidated Statement of Financial Position		1,311	1,183	472	336

CONSOLIDATED AND COMPANY STATEMENT OF CASH FLOWS FOR THE
YEAR ENDED 31 DECEMBER 2020 - continued
		Group	Company	Group	Company
		2020	2020	2019	2019
		£'000	£'000	£'000	£'000
Operating activities
Loss for the year attributable to controlling interests		(920)	697	(1,674)	(1,751)
Depreciation, amortisation and impairment charges		(57)	90	1,047	1,240
Share based payments		81	81	-	-
Finance income shown as an investing activity		(5)	(5)	(1)	(1)
Profit on disposal of subsidiary undertaking		-	(1,679)	-	-
Income from associated undertaking		44	-	-	-
Foreign exchange translation		(52)	30	(4)	23
Operating cash outflows before movements in working capital		(909)	(786)	(632)	(489)
(Increase)/decrease in receivables		(4)	(5)	454	456
Tax paid		-	-	-	-
Decrease in payables		(6)	(6)	(546)	(530)
Net cash outflows from operating activities		(919)	(797)	(724)	(563)

NOTES TO THE FINANCIAL STATEMENTS

3. Operating Loss				2020	2019
				£'000	£'000
The loss on ordinary activities before taxation is stated after charging:
Auditors' remuneration
Group - audit				32	26
Company - audit				32	21
Group - other non-audit services				2	5
Company - other non-audit services				2	5
Exploration and evaluation expenditure				145	160
Impairment of intangible assets				(59)	1,047
Depreciation of property, plant and equipment				2	-
Impairment of foreign tax receivables				(74)	(16)
(Gain)/loss on exchange				157	41
The analysis of development and administrative expenses in the consolidated income statement by nature of expense is:
				2020	2019
				£'000	£'000
Employee benefit expense				374	258
Share based payments				81	-
Exploration and evaluation expenditure				145	160
Depreciation, amortisation and impairment charges				(131)	1,031
Legal and professional fees				198	133
Loss on exchange				157	41
Other expenses				57	51
				881	1,674

5. Finance income				2020	2019
				£'000	£'000
Bank and other interest received				5	1
Finance cost				-	(1)
Total				5	-
6. Income tax expense				2020	2019
				£'000	£'000
The tax charge on the loss on ordinary activities was:-
UK Corporation Tax - current				-	-
Foreign taxation				-	-
				-	-
The total charge for the year can be reconciled to the accounting profit as follows:
				2020	2019
				£'000	£'000
Loss before tax
Continuing operations				(920)	1,674
Tax at composite group rate of 19% (2019: 19%)				(174)	(318)
Effects of:
Losses not subject to tax				340	221
Movement on capital allowances				(126)	(153)
Increase in tax losses				(40)	250
Foreign taxation				-	-
Tax expense				-	-
At 31 December 2020, the Group has tax losses of £28,990,000 (2019 - £28,208,000) to carry forward against future profits. The deferred tax asset on these tax losses at 19% of £5,508,000 (2019: at 19%, £5,359,000) has not been recognised due to the uncertainty of the recovery.

8. Earnings per share
				2020	2019
Loss per ordinary share
- Basic				(0.023p)	(0.099p)
- Diluted				(0.023p)	(0.099p)
Earnings per ordinary share is based on the Group's loss attributable to controlling interests for the year of £920,000 (2019: £1,674,000).
The weighted average number of shares used in the calculation is the weighted average ordinary shares in issue during the year.
				2020	2019
				Number	Number
Weighted average ordinary shares in issue during the year				3,988,470,466	1,685,313,686
Weighted average potentially dilutive options and warrants issued				373,396,517	82,150,685
Weighted average ordinary shares for diluted earnings per share				4,361,866,983	1,767,464,371
Due to the Group's results, the diluted earnings per share was deemed to be the same as the basic earnings per share for that year.

9. Property, plant and equipment
		Development and	Equipment and	Right for use
		production costs	machinery	asset	Total
		£'000	£'000	£'000	£'000
Group
Cost
At 1 January 2019		-	34	-	34
Foreign exchange translation adjustment		-	(4)	-	(4)
At 1 January 2020		-	30	-	30
Foreign exchange translation adjustment		-	(1)	-	(1)
Expenditure		-	-	45	45
At 31 December 2020		-	29	45	74
Depreciation
At 1 January 2019		-	34	-	34
Foreign exchange translation adjustment		-	(4)	-	(4)
At 1 January 2020		-	30	-	30
Foreign exchange translation adjustment		-	(1)	-	(1)
Charge for the period		-	-	2	2
At 31 December 2020		-	29	2	31
Net book value
At 31 December 2020		-	-	43	43
At 31 December 2019		-	-	-	-
Company
Cost
At 1 January 2019 and 2020		-	-	-	-
Expenditure		-	-	45	45
At 31 December 2020		-	-	45	45
Depreciation
At 1 January 2019 and 2020		-	-	-	-
Charge for the period		-	-	2	2
At 31 December 2020		-	-	2	2
Net book value
At 31 December 2020		-	-	43	43
At 31 December 2019		-	-	-	-

9. Property, plant and equipment (continued)

Included in the above line items is a right-of-use asset of £43,000 (2019: nil) in respect of a motor vehicle. 

At lease commencement date, the Group recognises a right-of-use asset and a lease liability on the balance sheet. The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the Group, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in advance of the lease commencement date.

The Group depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The Group also assesses the right-of-use asset for impairment when such indicators exist.

On the statement of financial position, right-of-use assets have been included in property, plant and equipment.

10. Intangible fixed assets			Exploration
			and evaluation
		Licence	costs	Total
		£'000	£'000	£'000
Group
Cost
At 1 January 2019		-	2,486	2,486
Foreign exchange translation adjustment		-	(61)	(61)
Expenditure		-	1,047	1,047
At 1 January 2020		-	3,472	3,472
Foreign exchange translation adjustment		-	(59)	(59)
Expenditure		-	14	14
Disposals		-	(1,108)	(1,108)
At 31 December 2020		-	2,319	2,319
Impairment
At 1 January 2019		-	2,420	2,420
Charge for the period		-	1,047	1,047
At 1 January 2020		-	3,467	3,467
Charge for the period		-	(59)	(59)
Disposals		-	(1,107)	(1,107)
At 31 December 2020		-	2,301	2,301
Net book value
At 31 December 2020		-	18	18
At 31 December 2019		-	5	5

10. Intangible fixed assets (continued)				Exploration
				and evaluation
			Licence	costs	Total
			£'000	£'000	£'000
Company
Cost
At 1 January 2019			-	701	701
Expenditure			-	1,047	1,047
At 1 January 2020			-	1,748	1,748
Expenditure			-	14	14
Disposals			-	(1,109)	(1,109)
At 31 December 2020			-	653	653
Impairment
At 1 January 2019			-	635	635
Charge for the year			-	1,108	1,108
At 1 January 2020			-	1,743	1,743
Charge for the year			-	-	-
Disposals				(1,108)	(1,108)
At 31 December 2020			-	635	635
Net book value
At 31 December 2020			-	18	18
At 31 December 2019			-	5	5
The exploration and evaluation costs above represent the cost in acquiring, exploring and evaluating the company's and group's assets.
The impairment of all intangible assets has been reviewed, giving rise to the following impairment charges, or reduction in impairment charges.
Block XXI Peru: this licence was fully impaired in 2018.
UK offshore block P1918 ("Colter"): the drilling of an exploration well commenced on 6 February 2019 and was completed on 25 February 2019, with a further side-track well being drilled, completing on 8 March 2019. This licence continued into the second term with effect from 1 February 2020 but the Company has now written off this asset against the impairment provision, as the licence, along with related licences PEDL330 and PEDL 345, were relinquished on 31 January 2021.

12. Associated undertaking
			Shares in
			associated
			undertaking	Total
			£'000	£'000
Group
Gross investment value
At 1 January 2019 and 2020			-	-
Additions			195	195
Share of post acquisition net result			(44)	(44)
At 31 December 2020			151	151
Impairment
At 1 January 2019 and 2020, and 31 December 2020			-	-
Carrying value
At 31 December 2020			151	151
At 31 December 2019			-	-

On 27 April 2020, the Group acquired a 33.33% interest in SundaGas (Timor-Leste Sahul) Pte. Ltd, incorporated in Singapore at a gross cost of £195,000. In accordance with IAS28, the Group accounts for its investment in this company using the equity method.

Glossary
BCF	Billion cubic feet.
Mean	Reflects a mid-case volume estimate of resource derived using probabilistic methodology. This is the mean of the probability distribution for the resource estimates and may be skewed by high resource numbers with relatively low probabilities.
MMBOE	Million barrels of oil equivalent.  Volume derived by dividing the estimate of the volume of natural gas in billion cubic feet by six in order to convert it to an equivalent in million barrels of oil and, where relevant, adding this to an estimate of the volume of oil in millions of barrels.
Prospective Resources	Quantities of petroleum that are estimated to exist originally in naturally occurring reservoirs, as of a given date.  Crude oil in-place, natural gas in-place, and natural bitumen in-place are defined in the same manner.
SPE PRMS	The Society of Petroleum Engineers' ("SPE") Petroleum Resources Management System ("PRMS"): a system developed for consistent and reliable definition, classification, and estimation of hydrocarbon resources prepared by the Oil and Gas Reserves Committee of SPE and approved by the SPE Board in June 2018 following input from six sponsoring societies: the World Petroleum Council, the American Association of Petroleum Geologists, the Society of Petroleum Evaluation Engineers, the Society of Exploration Geophysicists, the European Association of Geoscientists and Engineers, and the Society of Petrophysicists and Well Log Analysts.

 

END

 

 

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