Final Results - Part 1
LEPCO plc
20 June 2001
PART 1
LEPCO plc
and subsidiary undertakings
Consolidated financial statements 31 December 2000
together with Chairman's statement, directors' report and auditors' report*
Registered number: 1757721
During 2000 the directors continued to pursue a number of opportunities for
the Group to acquire significant producing oil and gas interests to provide
the Group with positive cash flows.
In October 1999 agreement was reached with Total Oil and Gas Nederland B.V.,
the Dutch subsidiary of TotalFina, for LEPCO to acquire a portfolio of
producing gas fields offshore in the Netherlands. This transaction was not
completed due to pre-emption in early 2000 by existing licence partners.
Activity on block 47/9c in the UK Southern Gas Basin, the Company's principal
asset, continued during the year. LEPCO was appointed operator of the block in
November 1999 and over the following months a full evaluation of the licence's
prospectivity was completed. The evaluation involved the acquisition of 3-D
seismic over the acreage and confirmed that the acreage contains a potentially
commercial gas discovery. Following completion of this evaluation ongoing
discussions are being held with industry partners to fund the appraisal and
development of this asset. The Company has also agreed with the Department of
Trade and Industry to pay the necessary licence fees until at least June 2002.
In August 2000 the Company was awarded a 20% interest in PEDL 071, an
exploration licence in the Cleveland basin onshore UK. The Licence is operated
by Egdon Resources Limited and the objective is to undertake an evaluation
into the block's exploration prospectivity before exploration drilling. In the
Netherlands, following a review of the commerciality of the Donkerbroek
licence by the operator NAM, a decision has been made to put the licence on a
'care and maintenance basis' and the carrying value of this asset has
therefore been written down to a nominal value.
Since LEPCO sold its interest in the Forties fields at the end of 1998, the
Group's only income has been from its non-operated North American interests
with revenue for the year of £32,318 (1999 - £37,125). The major expenditure
during 2000 was the evaluation of block 47/9c, together with overhead and
abortive transaction costs. Overhead costs were reduced by the directors
waiving emoluments as set out in note 8 to the accounts. Including the
write-off on the Donkerbroek licence of £147,648 and abortive transaction
costs of £66,906, total losses for the year were £390,846.
*Note: Page numbers in this announcement refer to page numbers of the signed
consolidated financial statements, directors' report and auditors' report and
are not intended to act as a cross-reference within this announcement.
On 26 October 2000 the Company announced that it had entered into an Agreement
of Intent with DNO to acquire assets in the Republic of Yemen from DNO in
return for an issue of shares. The transaction would have resulted in DNO
acquiring a majority shareholding in LEPCO and control of the Board. During
negotiations DNO changed the proposed transaction substantively. Ultimately in
April 2001 DNO withdrew from the deal when it became apparent that LEPCO's
major shareholders would not support the revised transaction.
The Board announced on 30 May 2001 that it had entered into an underwriting
agreement with Park Resources Limited, the general partner of the Company's
largest shareholder, Endeavour Oil and Gas Limited Partnership, for Park
Resources to underwrite an open offer to shareholders to raise £990,200 before
expenses. The open offer is conditional inter alia on a restructuring of the
Company's share capital and following completion of the offer there will be
substantive Board changes. Full details of the proposals are given in the
attached circular of today's date.
If the open offer is successfully completed, the Board will be restructured on
completion of the refinancing, with Professor Audrey Lees, Jimmy West and I
retiring as directors. Peter Wilde will resign as managing director and will
be appointed a non-executive director. Dr Elizabeth Butler will also remain on
the Board as a non-executive director. Conditional on the new shares being
admitted to AIM, Harry Wilson will be appointed executive Chairman and, in
addition, Richard O'Toole and Graeme Thomson will be appointed non-executive
directors.
I wish to thank the outgoing Board for their contribution to the Company and
wish the new Board every success in continuing LEPCO's development as a UK
quoted exploration and production independent.
Peter Bassett
Chairman
20 June 2001
The directors have pleasure in presenting their report on the affairs of LEPCO
plc ('the Company') and subsidiaries ('the Group'), together with the
financial statements and auditors' report for the year ended 31 December 2000.
Principal activity and business review
The principal activity of the Group throughout the year was the exploration
for and production of oil and gas.
The activities of the Group, the significant developments during 2000 and the
future prospects for the Group are reviewed in detail in the Chairman's
statement.
Results and dividends
The Group made a loss after tax of £390,846 during the year (1999 - loss after
tax of £333,709). This loss, together with the accumulated deficit of £
1,406,950 brought forward, leaves an accumulated deficit of £1,797,796 to be
carried forward as a balance on the Group profit and loss account.
The directors do not recommend the payment of a dividend (1999 - £nil).
Directors and their interests
The directors who served during the year, together with their beneficial
interests in the share capital of the Company at the end of the year, were as
follows:
Ordinary Shares of 10p each
15 June 31 December 31 December
2001 2000 1999
P.J. Bassett 1,121,392 1,121,392 1,121,392
Dr. E.J. Butler 88,800 88,800 88,800
Prof. A.M. Lees 354,577 354,577 354,577
J.G. West 105,000 105,000 105,000
P.K. Wilde 329,000 329,000 329,000
Beneficial shareholdings include the shareholdings of a director's spouse.
As at all dates concerned P.J. Bassett also had a non-beneficial interest in
91,000 ordinary shares as an executor and trustee of the estate of the late
J.C. Bassett. Otherwise, at no time did the Directors have any non-beneficial
shareholdings.
The Company operates share option schemes entitling the directors to subscribe
at a given subscription price for ordinary shares in the Company. To date ten
schemes have been introduced annually between 1986 and 1996 and each scheme
expires seven years after it was formally granted and executed. The options
still held by the directors and not exercised under these schemes, the
subscription price for each scheme and their expiry date, were as follows on
31 December 2000:
Scheme 1996 1995 1994 1993
Subscription 60p 50p 25p 20p
price
P.J. Bassett 30,000 30,000 50,000 50,000
Date 9-Sep-04 22-Jun-05 22-Jun-05 22-Jun-05
options
expire
Dr. E.J. 50,000 50,000 50,000 41,000
Butler
Date 2-Feb-05 16-Dec-03 1-Feb-02 1-Sep-01
options
expire
Prof. A.M. 20,000 20,000 20,000 20,000
Lees
Date 11-Mar-05 1-Mar-04 26-Jun-02 26-Jun-02
options
expire
J.G. West 20,000 30,000 - -
Date 11-Sep-04 30-Dec-03
options
expire
P.K. Wilde 50,000 50,000 50,000 50,000
Date 9-Sep-04 18-Dec-03 1-Feb-02 1-Sep-01
options
expire
As part of the proposed refinancing scheme described in the Chairman's
statement, all the above options have been cancelled since 31 December 2000.
In accordance with recommended investment practice, the Company's policy is
that the number of share options outstanding should not exceed 10% of the
issued share capital and the Company is in compliance with this policy.
Service contracts
P.K. Wilde has a service agreement with the Company as Managing Director.
Substantial shareholders
Except for the holdings of ordinary shares listed within 1 month of notice of
AGM below, the directors are not aware of any person holding 3% or more of the
ordinary share capital of the Company at 15 June 2001.
Ordinary shares of 10p each Number %
Endeavour Oil & Gas Limited Partnership 1,801,000 18.19
Aectra Investments Limited 1,579,971 15.95
P.J. Bassett 1,121,392* 11.32
Prof A. M. Lees 354,577 3.58
P.K. Wilde 329,000 3.32
Ashcourt Asset Management 327,500 3.31
* Excluding the non-beneficial shareholdings disclosed on page 3.
Supplier payment policy and practice
The Company's policy is to settle terms of payment with suppliers when
agreeing the terms of each transaction, ensuring that suppliers are made aware
of the terms of payment and abide by the terms of payment. At the year end the
number of supplier days outstanding for the Company was 54 (1999 - 45 days).
Directors' responsibilities
Company law requires the directors to prepare financial statements for each
financial year which give a true and fair view of the state of affairs of the
Company and Group and of the profit or loss of the Group for that year. After
making enquiries, the directors have a reasonable expectation that the Company
and the Group have adequate resources to continue in operational existence for
the foreseeable future. For this reason, they continue to adopt the going
concern basis in preparing the financial statements.
In preparing those financial statements, the directors are required to:
* select suitable accounting policies and then apply them consistently;
* make judgements and estimates that are reasonable and prudent; and
* state whether applicable accounting standards have been followed,
subject to any material departures disclosed and explained in the
financial statements.
The directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
Company and Group and enable them to ensure that the financial statements
comply with the Companies Act 1985. They are also responsible for safeguarding
the assets of the Company and Group and hence for taking reasonable steps for
the prevention and detection of fraud and other irregularities.
Auditors
Arthur Andersen have indicated their willingness to remain in office and in
accordance with the provisions of the Companies Act 1985 the directors will
place a resolution before the Annual General Meeting to reappoint Arthur
Andersen as Auditors for the ensuing year.
By order of the Board,
J.E. Bushell
Secretary
20 June 2001
To the Shareholders of LEPCO plc:
We have audited the financial statements on pages 8 to 27 which have been
prepared under the historical cost convention and the accounting policies set
out on pages 13 to 16.
Respective responsibilities of directors and auditors
As described on page 5, the Company's directors are responsible for the
preparation of the financial statements in accordance with applicable United
Kingdom law and accounting standards. Our responsibilities, as independent
auditors, are established in the United Kingdom by statute, the Auditing
Practices Board and by our profession's ethical guidance.
Basis of opinion
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the financial statements.
It also includes an assessment of the significant estimates and judgements
made by the directors in the preparation of the financial statements and of
whether the accounting policies are appropriate to the circumstances of the
Company and of the Group, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
Going concern
In forming our opinion, we have considered the adequacy of the disclosures
made in note 1b) of the financial statements concerning the uncertainty as to
whether the Group will have sufficient funding to continue in existence beyond
30 June 2002. In view of the significance of this uncertainty we consider that
this should be drawn to your attention but our opinion is not qualified in
respect of this matter.
Opinion
In our opinion the financial statements give a true and fair view of the state
of affairs of the Company and of the Group as at 31 December 2000 and of the
Group's loss and cash flows for the year then ended and have been properly
prepared in accordance with the Companies Act 1985.
Arthur Andersen
Chartered Accountants and Registered Auditors
1 Surrey Street
London
WC2R 2PS
20 June 2001
Notes 2000 1999
£ £
Turnover 1(d)
Continuing 32,318 37,125
__________ __________
Cost of sales
Continuing (9,778) (46,630)
Discontinued - (64,362)
__________ __________
3 (9,778) (110,992)
__________ __________
Gross profit (loss)
Continuing 22,540 (9,505)
Discontinued - (64,362)
__________ __________
22,540 (73,867)
__________ __________
Administrative expenses (continuing)
Amounts written off intangible fixed 12 (147,648) -
assets in the Netherlands
Abortive acquisition/deal costs 12 (66,906) (83,382)
Other (211,423) (212,074)
__________ __________
(425,977) (295,456)
__________ __________
Operating loss
Continuing (403,437) (304,961)
Discontinued - (64,362)
__________ __________
(403,437) (369,323)
__________ __________
Profit on sale of tangible fixed assets - 11,140
(continuing)
Investment income 4 12,591 24,936
Interest payable and similar charges 5 - (462)
__________ __________
Loss on ordinary activities before 6 (390,846) (333,709)
taxation
Taxation 9 - -
__________ __________
Loss for the financial year (390,846) (333,709)
__________ __________
Loss per share (basic and diluted) 11 3.96p 3.39p
__________ __________
The accompanying notes are an integral part of this consolidated profit and
loss account.
2000 1999
£ £
Loss for the financial year (390,846) (333,709)
(Loss) gain on foreign currency translation (374) 526
__________ __________
Total recognised gains and losses relating to the year (391,220) (333,183)
__________ __________
The accompanying notes are an integral part of this consolidated statement of
total recognised gains and losses.
Notes 2000 1999
£ £
Fixed assets
Intangible assets 12 914,998 877,434
Tangible assets 13 11,235 18,532
__________ __________
926,233 895,966
__________ __________
Current assets
Debtors 15 30,474 23,254
Cash at bank and in hand 47,955 436,238
__________ __________
78,429 459,492
Creditors: Amounts falling due within one year 16 (104,796) (74,372)
__________ __________
Net current (liabilities) assets (26,367) 385,120
__________ __________
Total assets less current liabilities, being net 899,866 1,281,086
assets
__________ __________
Capital and reserves
Called-up equity share capital 17 990,273 983,273
Share premium account 18 1,672,145 1,669,145
Other reserves 18 35,244 35,618
Profit and loss account 18 (1,797,796) (1,406,950)
__________ __________
Total equity shareholders' funds 19 899,866 1,281,086
__________ __________
The accompanying notes are an integral part of this consolidated balance
sheet.
Notes 2000 1999
£ £
Fixed assets
Intangible assets 12 912,177 729,510
Tangible assets 13 371 5,090
Investments 14 37,678 37,678
__________ ___________
950,226 772,278
__________ ___________
Current assets
Debtors 15 265,715 253,230
Cash at bank and in hand 25,998 410,434
__________ ___________
291,713 663,664
Creditors: Amounts falling due within one year 16 (97,967) (66,607)
__________ ___________
Net current assets 193,746 597,057
__________ ___________
Total assets less current liabilities, being net 1,143,972 1,369,335
assets
__________ __________
Capital and reserves
Called-up equity share capital 17 990,273 983,273
Share premium account 18 1,672,145 1,669,145
Profit and loss account 18 (1,518,446) (1,283,083)
__________ ___________
Total equity shareholders' funds 1,143,972 1,369,335
__________ __________
Signed on behalf of the Board on 20 June 2001
P.J. Bassett Director
P.K. Wilde Director
The accompanying notes are an integral part of this balance sheet.
2000 1999
£ £
Operating loss (403,437) (369,323)
Depletion and amounts written off tangible fixed assets - 32,777
Depreciation 8,013 8,477
Amounts written off intangible fixed assets 214,554 83,382
Decrease in debtors 13,600 87,225
Increase (decrease) in creditors 22,841 (40,572)
__________ __________
Net cash outflow from operations (144,429) (198,034)
__________ __________
Consolidated cash flow statement
For the year ended 31 December 2000
Notes 2000 1999
£ £
Net cash outflow from operations (144,429) (198,034)
Returns on investments and servicing of finance 21a) 12,591 24,474
Capital expenditure 21a) (256,445) 662,331
__________ __________
(Decrease)/increase in cash 21b) (388,283) 488,771
__________ __________
The accompanying notes are an integral part of this consolidated cash flow
statement.
MORE TO FOLLOW