Half Yearly Report

RNS Number : 3851N

Borders & Southern Petroleum plc

28 September 2012

 



28 September 2012

Borders & Southern Petroleum plc

("Borders & Southern" or "the Company")

2012 Interim Financial Results

Borders & Southern (AIM: BOR) is pleased to announce its interim financial results for the six month period ending 30 June 2012.

Highlights

·	Safely executed a two well exploration drilling programme in the Falkland Islands.
·	Made a gas condensate discovery with recoverable liquids in the range 130 to 250 million barrels
·	Identified a significant number of structural and stratigraphic prospects within the now proven Early Cretaceous play fairway
·	Entered negotiations with a seismic contractor to acquire additional 3D seismic
·	Cash balance (including restricted use cash) as of 30 June 2012, was $122m
·	Based on current estimates, the Company will have a cash balance of $50 to $55 million after all 2012 operations expenditures have been accounted for
·	In order to help fund the next phase of drilling operations, the Company will shortly look to farmout some of its 100% interest in its discovery and adjacent exploration areas.

Chairman, Harry Dobson, said, " As the Company approaches the end of its first exploration period and having safely executed its first operated drilling campaign we can take stock of our achievements. We have made a very attractive gas condensate discovery, opened up a new hydrocarbon basin, defined an exciting play fairway in the Early Cretaceous and consolidated a rich prospect inventory. This is a really great start to our activities in the Falkland Islands and provides an excellent foundation for future success."

For further information please visit www.bordersandsouthern.com or contact:

Howard Obee, Chief Executive Borders & Southern Petroleum plc Tel: [phone]

Katherine Roe Panmure Gordon (UK) Limited Tel: [phone]

Simon Hudson / Kelsey Traynor Tavistock Communications Tel: [phone]

Statement

The Company's first drilling programme resulted in one discovery and one well with very strong gas shows, but which failed to evaluate all reservoir targets due to abnormal pressures.

The Darwin gas condensate discovery has a relatively high liquid content. Initial reservoir modelling indicates a range in recoverable resource of 130 to 250 million barrels of 46 to 49 degree API condensate. Log analysis indicates that the reservoir quality is good. The well encountered 67.8m of net pay with average porosity of 22% and average permeability of 337 mD. The well also confirmed that the seismic amplitude anomalies, identified on 3D seismic data prior to drilling, correspond directly to hydrocarbon charged reservoir. This ability to identify good quality reservoir and hydrocarbons on seismic will have significant benefits in high grading future exploration prospects.

In contrast, the Stebbing well encountered a hydrocarbon charged, poorly defined reservoir interval in the Tertiary. It is clear that significant hydrocarbons have charged the structure, but the reservoir was characterised by thinly laminated siltstones and claystones. Good average porosity values of 19% were measured on logs, but due to the thin-bedded nature of the interval it was not possible to gain a clear indication of fluid type, nor hydrocarbon saturation. Again, there was a good correlation between hydrocarbons encountered in the well and seismic amplitude anomalies. Whilst these anomalies can be traced over a large area onto the adjacent FitzRoy structure, the Company's initial assessment is that this target is unlikely to be commercial. For this reason the Company believes that its short-term focus should be on the Early Cretaceous play fairway.

The Company's exploration portfolio contains a number of Early Cretaceous prospects that have been identified on 2D seismic data but are located outside the 3D coverage. In order to mature these prospects and to enhance our understanding of this Early Cretaceous play fairway, the Company initiated a competitive tender for the acquisition of a new 3D seismic survey. We are currently finalising contract discussions with the selected contractor and hope to have a vessel to start acquisition in mid January 2013. The survey area will measure approximately 1100 sq. km. and be located adjacent to the existing 3D area. Key objectives from the survey are to provide greater definition to our Covington, Childs and Bute prospects along with potentially identifying new Early Cretaceous prospects. The Company also intends to reprocess some of its existing 3D data with the aim of providing greater definition to our Chaffers and Burgess prospects.

In the interim period prior to seismic acquisition there are numerous technical studies underway or about to be commissioned including: reservoir engineering, fluid analysis, sedimentology & petrology, biostratigraphy, geochemistry, petrophysics, rock physics, pore pressure analysis and drilling optimisation studies. Additionally, we have commissioned a screening facilities study to assess a range of potential development concepts along with economics in order to understand the commercial thresholds for existing and potential future discoveries.

At the end of October, the first exploration term under our Production Licences comes to an end. Having exceeded our work programme obligations for the first exploration period, we have indicated to the Falkland Islands Government our intent to enter the second five-year exploration term. This will have a one well work programme commitment associated with it. At the same time, we are obliged to relinquish 50% of our current acreage which will reduce our holding to just under 10,000 sq. km. This can be done without impacting the prospectivity, and a proposed relinquishment area has been submitted to the Falkland Islands Government for approval.

The Company is still in the process of closing out drilling operations from earlier in the year. Once the rig and equipment have been demobilised towards the end of the year, we will have an accurate view of costs for the operation. Based on current estimates, the Company will have a cash balance of $50 to $55 million after all 2012 operations expenditures have been accounted for. In order to help fund the next phase of drilling operations, the Company will shortly look to farmout some of its 100% interest in its discovery and adjacent exploration areas.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 June 2012

		6 months ended 30 June 2012 (unaudited)		6 months ended 30 June 2011 (unaudited)		12 months ended 31 December 2011 (audited)
	Notes	$		$		$
Administrative expenses		(1,237,093)		(942,784)		(2,081,967)
loss from operations		(1,237,093)		(942,784)		(2,081,967)
Finance income	3	159,721		1,703,995		360,037
Finance expense		-		-		(13,465)
(LOSS)/ PROFIT BEFORE TAX		(1,077,372)		761,211		(1,735,395)
Tax  expense		-		(320,000)		(5,506)
(LOSS)/PROFIT FOR THE PERIOD AND TOTAL COMPREHENSIVE (LOSS)/INCOME FOR THE PERIOD ATTRIBUTABLE TO EQUITY OWNERS OF THE PARENT		(1,077,372)		441,211		(1,740,901)
(loss)/Earnings per share - basic and diluted	2	(0.2) cents		0.10 cents		(0.4) cents

CONSOLIDATED STATEMENT OF FINANCIAL POSITION 

At 30 June 2012

		At 30 June 2012 (unaudited) $		At 30 June 2011 (unaudited) $		At 31 December 2011 (audited) $
	Notes
ASSETS NON-CURRENT ASSETS
Property, plant and equipment		20,773		10,222		20,629
Intangible assets		230,313,934		39,148,560		64,643,520
Total non-current assets		230,334,707		39,158,782		64,664,149
CURRENT ASSETS
Other receivables		1,755,844		9,638,438		1,544,103
Restricted use cash	4	60,191,585		35,543,923		80,947,886
Cash and cash equivalents		62,461,656		161,772,970		95,776,313
TOTAL CURRENT ASSETS		124,409,085		206,955,331		178,268,302
TOTAL ASSETS		354,743,792		246,114,113		242,932,451
LIABILITIES CURRENT LIABILITIES
Trade and other payables Current tax liability		(42,529,315) -		(2,310,191) (320,000)		(1,330,112) -
TOTAL LIABILITIES		(42,529,315)		(2,630,191)		(1,330,112)
TOTAL NET ASSETS		312,214,477		243,483,922		241,602,339
EQUITY
Share capital		8,530,461		7,675,453		7,675,453
Share premium account Other reserve		308,602,131 1,313,031		238,034,095 746,036		238,034,095 1,046,565
Retained deficit		(6,214,750)		(2,955,266)		(5,137,378)
Foreign currency reserve		(16,396)		(16,396)		(16,396)
TOTAL EQUITY		312,214,477		243,483,922		241,602,339

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2012

	Share capital $	Share premium account $	Other reserve $	Retained Deficit $	Foreign currency reserve $	Total $
Unaudited
Balance at 1 January 2012	7,675,453	238,034,095	1,046,565	(5,137,378)	(16,396)	241,602,339
Total comprehensive loss for the period	-	-	-	(1,077,372)	-	(1,077,372)
Issue of ordinary shares	855,008	70,568,036	-	-	-	71,423,044
Recognition of share based payments	-	-	266,466	-	-	266,466
Balance at 30 June 2012	8,530,461	308,602,131	1,313,031	(6,214,750)	(16,396)	312,214,477

Unaudited
Balance at 1 January 2011	7,675,453	238,034,095	620,662	(3,396,477)	(16,396)	242,917,337
Total comprehensive income for the period	-	-	-	441,211	-	441,211
Recognition of share based payments	-	-	125,374	-	-	125,374
Balance at 30 June 2011	7,675,453	238,034,095	746,036	(2,955,266)	(16,396)	243,483,922

Audited
Balance at 1 January 2011	7,675,453	238,034,095	620,662	(3,396,477)	(16,396)	242,917,337
Total comprehensive loss for the year	-	-	-	(1,740,901)	-	(1,740,901)
Recognition of share based payments	-	-	425,903	-	-	425,903
Balance at 31 December 2011	7,675,453	238,034,095	1,045,565	(5,137,378)	(16,396)	241,602,339

CONSOLIDATED STATEMENT OF CASH FLOWS

For the six months ended 30 June 2012

		6 months ended 30 June 2012 (unaudited)		6 months ended 30 June 2011 (unaudited)		12 months ended 31 December 2011  (audited)
Cash flow from operating activities		$		$		$
(loss)/Profit  before tax Adjustments for:		(1,077,372)		761,211		(1,735,395)
Depreciation		4,000		2,888		13,606
Share-based payment		266,466		125,374		425,903
Finance income		(159,721)		(1,703,995)		(360,037)
Finance expense		-		-		13,465
		(966,627)		(814,522)		(1,642,458)
(Increase)/decrease in trade and other receivables		(211,741)		3,684,305		402,423
Increase in trade and other payables		41,199,203		38,720		1,058,641
Tax paid		-		-		(5,506)
Net cash inflow / (outflow) from operating activities		40,020,835		2,908,503		(186,900)
Cash flows used in investing activities
Interest received		66,214		211,790		360,743
Interest paid		-		-		(254)
Exploration and evaluation expenditure		(165,670,414)		(1,418,395)		(17,545,073)
Purchase of property, plant and equipment		(4,144)		-		(21,125)
Net cash used in investing activities		(165,608,344)		(1,206,605)		(17,205,709)
		(125,587,509)		1,701,898		(17,392,609)
Cash flows from financing activities
Proceeds from issue of shares		71,423,044		-		-
Net (decrease)/increase in cash and cash equivalents		(54,164,465)		1,701,898		(17,392,609)
Cash, cash equivalents and restricted use cash at the beginning of the period		176,724,199		194,130,019		194,130,019
Exchange gains/ (losses)  on cash and cash equivalents		93,507		1,484,976		(13,211)
Cash , cash equivalents and restricted use cash at the end of the period		122,653,241		197,316,893		176,724,199

NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the six months ended 30 June 2012

1.         Basis of preparation

The unaudited condensed consolidated interim financial statements have been prepared using the recognition and measurement principles of International Accounting Standards, International Reporting Standards and Interpretations adopted for use in the European Union (collectively EU IFRSs).  The Group has not elected to comply with IAS 34 "Interim Financial Reporting" as permitted. The principal accounting policies used in preparing the interim financial statements are unchanged from those disclosed in the Group's Annual Report for the year ended 31 December 2011 and are expected to be consistent with those policies that will be in effect at the year end. 

The condensed financial statements for the six months ended 30 June 2012 and 30 June 2011 are unreviewed and unaudited. The comparative financial information does not constitute statutory financial statements as defined by Section 435 of the Companies Act 2006. The comparative financial information for the year ended 31 December 2011 is not the company's full statutory accounts for that period. A copy of those statutory financial statements has been delivered to the Registrar of Companies. The auditors' report on those accounts was unqualified, did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain a statement under section 498(2)-(3) of the Companies Act 2006.

2.                 (loss)/EARNINGS per share

The calculation of the basic earnings per share is based on the (loss)/profit attributable to ordinary shareholders divided by the weighted average number of shares in issue during the period. Diluted earnings per share are not stated as the effect of the loss is considered anti-dilutive.

	(Loss)/profit  after tax for the period $		Weighted average number of shares		(Loss)/ earnings per share cent
basic and diluted
Six months ended 30 June 2012 (unaudited)	(1,077,372)		442,071,503		(0.2)
Six months ended 30 June 2011 (unaudited)	441,211		428,578,404		0.10
Twelve months ended 31 December 2011 (audited)	(1,740,901)		428,578,404		(0.4)

3.             FINANCE INCOME AND EXPENSE

Finance income	Unaudited 6 months ended 30 June 2012 $		Unaudited 6 months ended 30 June 2011 $		Audited 12 months ended 31 December 2011 $
Bank interest receivable	66,214		219,019		360,037
Foreign exchange gain	93,507		1,484,976		-
	159,721		1,703,995		360,037

Finance expense	6 months ended 30 June 2012 $		6 months ended 30 June 2011 $		12 months ended 31 December 2011 $
Exchange loss on cash and other financial assets	-		-		13,211

4.                 RESTRICTED USE CASH

The Company has placed funds with a bank as security for a letter of credit and has funds held in an escrow account in both cases to provide suppliers with security of payment.

-ends-

 

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