Interim Results

RNS Number : 4624L

Infrastrata PLC

28 April 2015

 



28 April 2015                                                                         For Immediate Release

InfraStrata plc

("InfraStrata" or the "Company")

Interim results for the six months ended 31 January 2015

InfraStrata plc (AIM:INFA), the independent petroleum exploration and gas storage company is pleased to announce its unaudited interim results for the six months ended 31 January 2015.

Overview and highlights

Operational

·	The Company's near term focus is the drilling of two wells in Northern Ireland at Islandmagee and Woodburn Forest and recent activity has concentrated on achieving these goals.
·	Islandmagee Gas Storage project (County Antrim)
	·	The Company was successful in December 2014 in securing European Commission grant funding for 50% of the cost of a well to obtain salt cores and complete engineering design (€2.5 million; c £1.9 million). The formal grant agreement has been concluded.
	·	The balancing 50% required to complete the work by the end of 2015 was secured in February 2015 with a placing and subscription of InfraStrata shares.
	·	The work programme will enable the project to progress to the extent required for potential developers to reach final investment decision.
	·	All the regulatory approvals have been granted for the Islandmagee-1 well. The most recent approval was a 'Consent to Drill' granted by the Department of Enterprise, Trade and Investment ("DETI") in April 2015.
	·	The wellsite and cellar have been constructed and the well is scheduled to start drilling in May 2015.
	·	InfraStrata holds a 65% interest in the project and the strategic importance of the project and European Commission support through Project of Common Interest designation are key credentials.
·	PL1/10 & P2123 (operator, onshore and offshore County Antrim)
	·	All of the relevant regulatory approvals have now been granted by the various government departments to allow the Company to drill a conventional petroleum exploration well at Woodburn Forest, Carrickfergus. The most recent approval was a 'Consent to Drill' granted by DETI in February 2015.
	·	It was not possible to commence site construction before the bird nesting season commenced at the end of February, so site work for the Woodburn Forest-1 well is now planned after the season closes in September 2015.
	·	The well is targeting 40 million barrels of oil equivalent ("mmboe") in conventional Carboniferous, Permian and Triassic sandstone reservoirs and seeks to de-risk over 500mmboe of further potential upside within the licence areas.
	·	InfraStrata's net interest in PL1/10 and P2123 is expected to be 27.5% once the funding arrangements for the well have been completed.
	·	InfraStrata expects to be fully carried for its interest in the Woodburn Forest-1 well.
	·	The drill-or-drop has been exercised for PL1/10. The initial term of the licence expires in March 2016.
	·	In P2123 the licence group are planning to acquire new 2D seismic data in 2016 and the initial term of the licence expires in December 2017.
·	P1918 (operator, offshore Dorset)
	·	Planning permission granted in 2013 and pre-start conditions discharged during 2014 for the proposed California Quarry-1 exploration well to be drilled from an onshore location and drilled directionally into the offshore licence within the Purbeck Prospect.
	·	The well will target 10 mmboe in conventional Jurassic sandstone and limestone reservoirs.
	·	Following a farm-in by Southwestern Resources Limited ("Southwestern"), InfraStrata's net interest in P1918 is now 68.4%. Southwestern are funding ongoing seismic permitting for a new 2D seismic line over the Purbeck Prospect and 3D seismic reprocessing over the Colter Prospect.
	·	The Colter Prospect has the potential for 50 mmboe in the Triassic Sherwood Sandstone. This will be better defined once the 3D seismic reprocessing has been completed and interpreted in Q3 2015.
	·	Southwestern have been granted options to drill a well on either the Purbeck or Colter Prospects.
	·	Environmental restrictions over the timing of the acquisition of the new 2D seismic data over the Purbeck Prospect (to finalise the well design), uncertainty regarding the timing of the award of a petroleum licence over the onshore area to either InfraStrata or a third party (required to drill from California Quarry) and the planning lead time for drilling a well on the Colter Prospect mean that it is unlikely now that drilling will be possible before the initial term of the licence expires in February 2016. Drilling of a well after February 2016 will require a licence extension to be granted by Department of Energy and Climate Change ("DECC").
·	InfraStrata was successful in being awarded Licence P2222 in the UKCS 28th Seaward Licensing Round. InfraStrata is the operator and holds a 50% interest in the licence.
·	In December 2014 InfraStrata signed a binding Heads of Agreement for an Asset Exchange with Fyrd Energy Limited ("Fyrd"). Under the terms of the Agreement, InfraStrata acquired a 25% interest in Licence P2235, offered to Fyrd in the UKCS 28th Seaward Licensing Round. The assignment will be subject to DECC approval. In return, InfraStrata is assigning its rights and intellectual property in the Portland project (excluding the gas pipeline construction authorisation and associated rights) to a new project company Integrated GeoRenewables (Dorset) Limited ("IGR"), managed by the principals of Fyrd, InfraStrata will hold a 22.5% shareholding in IGR.
·	Through associate company Corfe Energy Limited ("Corfe"), InfraStrata is positioned to benefit from additional onshore UK exploration activities, including exploration activities onshore in Dorset.
Financial
·	Successful placing and subscription completed on 23 February 2015 to raise £2.1 million before costs. Also in February the Company's subsidiary Islandmagee Storage Limited received £400,000 in cash in relation to a data release agreement.
·	The aggregate new funding of £2.4 million in cash provides sufficient resources to meet 50% (£1.9 million) share of the cost of the salt core programme on the Islandmagee gas storage facility.
·	Loss for the six month period ended 31 January 2015, £599,048 (31 January 2014 - loss £705,952). Annualised net administrative costs after recoveries maintained below £1 million following further reductions in staff costs in February 2015.
·	Basic and diluted loss per share - 0.60p (31 January 2014 loss - 0.73p).

Commenting on the results and outlook, Ken Ratcliff, Chairman, said:

"InfraStrata has further progressed the drilling of two wells in Northern Ireland over the past six months against a backdrop of difficult market conditions for oil and gas companies. We seek to secure value for our shareholders by completing this programme during 2015.

Value has been achieved by leveraging value out of our existing assets, demonstrated by the transaction with Fyrd in December 2014 which gave the Company access to a high quality exploration project in the North Sea in exchange for rights to data from the Portland project, and more recently in January 2015 with a data release agreement in respect of proprietary seismic data in Northern Ireland for which its subsidiary Islandmagee Storage Limited received £0.4 million in cash during February 2015. The Company will seek to monetise further value from existing projects during the coming year. Much of this activity will focus on realising value from the Islandmagee gas storage project following the drilling of the well in Q2 2015.

InfraStrata also acknowledges the support of existing shareholders and new investors in securing additional £2.1 million funding for the Company in February 2015 to support the matched funding from the European Commission for the Islandmagee project."

For further information please contact:
InfraStrata plc
Andrew Hindle, Chief Executive Officer	020 8332 1200
Stewart McGarrity, Finance Director
Financial PR - Buchanan
Richard Darby/ Anna Michniewicz	020 7466 5000
Nominated Advisor and Joint Broker - Arden Partners plc
Chris Hardie/ Michael McNeilly	020 7614 5917
Joint Broker - VSA Capital Limited
Andrew Raca/ Richard Buckle	020 3005 5004

Notes to Editors:

Background on InfraStrata plc

InfraStrata is an independent petroleum exploration and gas storage company. The Company is focused on the UK and Ireland.

Further information is available on the Company's website www.infrastrata.co.uk.

In accordance with the AIM Rules - Note for Mining and Oil and Gas Companies, the information contained in this announcement has been reviewed and signed off by the Chief Executive Officer of InfraStrata plc Andrew Hindle BSc, MSc, PhD, a Chartered Geologist with 30 years' experience, a Fellow of the Geological Society of London, and a member of the American Association of Petroleum Geologists and the Petroleum Exploration Society of Great Britain.

CHAIRMAN AND CEO's STATEMENT

InfraStrata's focus during the period has been on its projects in Northern Ireland which are progressing towards the drilling stage on both its gas storage and exploration projects during calendar year 2015.

Elsewhere progress has been made with our other exploration projects and new projects have resulted from a successful award in the UK 28^th Seaward Licensing Round in the East Shetland Basin and also from an asset swap with Fyrd which resulted in an interest in a new exploration project offshore in the Moray Firth. This Fyrd transaction fits well with our strategy of acquiring front-end exploration opportunities. In this case we were able to leverage access to the opportunity by securing value from our Portland project assets.

These new exploration projects have the potential to be high impact for a company of InfraStrata's size and widens our exposure to exploration opportunities in the UK.

Our gas storage project at Islandmagee in County Antrim is progressing towards a planned drilling of a data gathering well in May 2015, 50% financed by the European Union's Connecting Europe Facility. Drilling of the data gathering well will confirm the feasibility of the development of the underground gas storage facility by obtaining salt core samples and related data, which will then be tested and the results used to update the basis of design for the facility and develop accurate construction cost estimates to enable a Final Investment Decision in 2016.

During the period the Company also leveraged value from technical data acquired for the Islandmagee project and strengthened the Company's balance sheet by concluding a data release agreement in January 2015 in respect of proprietary seismic data for which its subsidiary Islandmagee Storage Limited received £0.4 million in cash when the agreement completed in February 2015. InfraStrata will seek further opportunities to monetise data and assets within its portfolio over the coming year.

GAS STORAGE & INFRASTRUCTURE

Islandmagee project - County Antrim

Islandmagee Storage Limited ("IMSL") is an independent Northern Ireland registered company and is a joint venture between a wholly-owned subsidiary of InfraStrata (65% shareholder) and Moyle Energy Investments Limited, part of the Mutual Energy group of companies (35% shareholder).

No other location on the island of Ireland is suitable for the development of salt cavern gas storage; Northern Ireland has a valuable geological asset which when developed for underground salt cavern gas storage will make a significant contribution towards security of gas supplies to the wider region, including the north and south of the island of Ireland and Great Britain.

While overall demand for gas in the UK and Ireland is predicted to decline, the global supply chain for gas is lengthening as the need for more flexible gas is growing. Rapid deliverability of gas supplies will become increasingly important to support the intermittent renewable power generation already deployed and planned across the island of Ireland and Great Britain. The increasing amount of wind generation in the system is putting significant strain on the gas infrastructure in Ireland with periods of peak demand rising year-on-year as gas-fired power stations respond to the great swings in output from the intermittent renewable power sources. The gas storage facility would help alleviate these infrastructure pressures and make a key contribution to policy objectives on renewable power - through its ability to rapidly inject and withdraw gas it can provide the short term flexibility needed to support the intermittent nature of wind generation.

Natural gas will also have a key role to play as a bridge to a zero carbon economy with more reliance being placed on gas to backup wind and other renewable sources as coal generation is closed. Increasingly storage will be required to provide fast delivery of gas to the system.
 

The strategic importance of the Islandmagee gas storage facility and the contribution it could deliver in terms of security of gas supplies and as a key enabler to meet policy objectives on renewable energy and CO₂ reduction is reflected in the project being awarded "Project of Common Interest (PCI)" status by the European Union. PCI status also means that the project is eligible to apply for certain grant funding from the EU and in April 2015 the Company concluded a Grant Agreement with the EU's Connecting Europe Facility for £1.9 million (€2.5 million) to fund 50% of the costs of drilling a data gathering well and subsequent testing and engineering. The project is eligible to apply for further grant funding going forwards.

The next investment step in the project is the drilling of the data gathering well (Islandmagee-1) to approximately 1,670 metres depth to obtain cores of the salt sequence and subsequently undertake further engineering design work at an aggregate cost of approximately £3.8 million. Drilling engineers Acona UK were appointed in May 2014. RPS Consulting Engineers have provided environmental and planning support since 2008. Procurement of the well has been completed and the necessary funding has been secured through the Connecting Europe Facility Grant Agreement and a corporate placing by InfraStrata concluded in February 2015. The Company is finalising a bridging loan facility to manage the grant drawdown and once in place the drilling rig contract will be signed.

Drilling of the data gathering well is planned to commence in May 2015 for a period of six weeks and in advance of going onsite the Islandmagee project has engaged extensively with key stakeholders, including the Community Liaison Group, which the project company established, to keep the local community briefed on the project's plans and how any potential adverse impacts will be minimised. Public information events were held in November 2014. Construction of the wellsite and the cellar were completed during April 2015.

Following the drilling of the data gathering well and further engineering design work all key technical risks will have been addressed and the project will be deemed "construction ready" enabling a Final Investment Decision to be taken after that point. The thickness and depth of the salt and the proximity of key services (electricity supply, water and the gas network) give the project a significant unit capital cost advantage and it is estimated that full project funding of £274 million will be required to construct the facility.

Portland Project - Dorset

In December 2014 InfraStrata signed a binding Heads of Agreement for an Asset Exchange ("Agreement") with Fyrd.

Under the terms of the Agreement, InfraStrata acquired a 25% interest in UK Promote Licence P2235 (see below for more details). In return, InfraStrata is assigning its rights and intellectual property in the Portland project (excluding the gas pipeline construction authorisation and associated rights) to a new project company Integrated GeoRenewables (Dorset) Limited ("IGR"), managed by the principals of Fyrd, Alan Booth (a Non-executive Director of InfraStrata) and Jon Taylor. InfraStrata will hold a 22.5% shareholding in IGR and be carried for the first £200,000 of expenditure by IGR. IGR will also be granted an option to acquire the gas pipeline rights from InfraStrata, in return for the Company being carried for a further £200,000 of expenditure by IGR.

IGR will seek to evaluate the potential to develop an integrated geo-renewable energy project with a hub in the Portland area of Dorset. There are already a number of renewable projects planned for the area (wind and tidal). IGR believes there is the potential to use the unique deep geology of the area to improve the efficiency of renewable generation, using such technologies as geothermal energy or compressed air storage. The existing sub-surface geological and engineering work (including deep drilling and seismic data), surface facilities engineering and environmental work undertaken by InfraStrata for its former planned gas storage project at Portland will have a significant value for IGR.

 

OIL AND GAS EXPLORATION

County Antrim - Onshore PL1/10, Offshore P2123

Petroleum Licence PL1/10 was awarded in March 2011 by the Northern Ireland Department of Enterprise, Trade and Investment ("DETI"). The five year licence covers an area of 663 square kilometres over what the Company believes is a highly prospective largely unexplored sedimentary basin. Subsequently in December 2013 the JV group were awarded adjacent offshore Petroleum Licence P2123 by the DECC for a period of four years, covering an area of 613 square kilometres.

The joint venture group recognisescombined un-risked P50 prospective resources in the Triassic, Permian and Carboniferous sandstone reservoir intervals of over 500 mmboe.

Permission was confirmed under Permitted Development in December 2013 for an exploration well, Woodburn Forest-1, in PL1/10 which will target prospective resources estimated by the joint venture at 40 mmboe within conventional Triassic, Permian and Carboniferous sandstones. The Permitted Development rights provide a window for site construction activities between September and February inclusive.All of the relevant regulatory approvals have now been granted by the various government departments to allow the Company to drill a conventional petroleum exploration well at Woodburn Forest, Carrickfergus.

The most recent approval is a 'Consent to Drill' granted by DETI. DETI's consent follows a separate consent issued by the Northern Ireland Environment Agency (Water Management Unit) under the Water (Northern Ireland) Order 1999, which regulates the well in terms of surface water and groundwater impacts and includes the implementation of a monitoring plan to verify that no adverse impacts arise on the neighbouring waterbodies from the exploration activity.

The well will be drilled to a depth of 2,000 metres. The exploration is conventional and will not now or at any time in the future involve hydraulic fracturing (also known as 'fracking') - InfraStrata has confirmed this in the form of a legal undertaking given to the landowner, NI Water.

In July 2014, InfraStrata, together with joint venture partners Brigantes Energy Limited ("Brigantes") and Terrain Energy Limited ("Terrain"), entered into an option agreement with Larne Oil and Gas Limited ("Larne") with respect to acquiring licence interests in PL1/10 and the adjacent offshore licence P2123. Larne exercised the option in September 2014. The agreement was subsequently modified in November 2014 whereby Larne's prospective interest in the licence was modified to 33.33% from its original 50%. The JV group are seeking to introduce another partner for the balancing 16.67% on the same terms and the funding for the well will only be confirmed when all partners have placed their respective share of the costs into an escrow account in good time for the drilling of the well to commence in late 2015.

Larne is a wholly owned subsidiary of Larne Basin Exploration LLC, a recently formed U.S. based investment company set up for the purpose of investing in oil and gas exploration in the Larne Basin, Northern Ireland. Larne will fund a disproportionate share of the forthcoming Woodburn Forest exploration well to earn its 33.33% interest in the licence. Should the well cost exceed the Authorisation For Expenditure ("AFE"), which includes a contingency of 10%, then all partners would pay their respective percentage share of such excess. However, InfraStrata has pre-existing farmout agreements with partners Brigantes and Terrain with respect to the Woodburn Forest-1 well, which mean that any excess cost accruing to its interest in the well would still be carried assuming the 16.67% interest is farmed out on the same terms as Larne.

Subject to the completion of the funding arrangement as anticipated, InfraStrata does not expect its existing net interest in the licence (27.5%) to be reduced as a result of these transactions. As a result of the terms of the farmout to Larne and agreements with Terrain and Brigantes, InfraStrata is currently over carried in respect of the costs of the well and still anticipates being fully carried through the well.
 

Drilling engineers Acona UK were appointed in May 2014. The well planning and design have been completed. RPS Consulting Engineers in Belfast have undertaken the environmental support work. It was not possible to commence site construction before the bird nesting season commenced at the end of February 2015, so site work for the Woodburn Forest-1 well is now planned after the season closes in September 2015. The final timing of drilling is dependent upon a number of factors including drilling rig availability and completing all the contractual arrangements. However the intention to drill within the initial term of the licence was notified to DETI in February in order to exercise the drill-or-drop by the 4 March 2015 deadline.

InfraStrata is committed to carrying out this conventional exploration in an environmentally-responsible manner and in compliance with all conditions associated with regulatory approvals. Public information events were held in Carrickfergus in November 2014 to explain what will be involved in the exploration work and the Company will continue to liaise directly with residents in the vicinity of Woodburn Forest and other key stakeholders.

The focus during the period has been on the onshore PL1/10 licence, however in P2123 the JV group are planning to acquire new 2D seismic data in 2016 and the initial term of the licence expires in December 2017.

Dorset - Offshore P1918

Petroleum licence P1918 comprises Blocks 97/14, 97/15 and 98/11, covering an area of 584 square kilometres, and was awarded in February 2012 by DECC for a period of four years. The prospective resources on the licence have been estimated by the joint ventures at over 100 mmboe within Block 98/11.

Work has focused during the period on two prospects, the Purbeck and Colter Prospects.

Planning permission was granted in 2013 for an exploration well, California Quarry-1, on the offshore extension of the Purbeck Prospect within Block 98/11. During 2014 the pre-start planning conditions were discharged and a lease over the wellsite entered into with the landowner. The California Quarry-1 well will target prospective resources within the licence estimated by the joint venture at 10 mmboe.

The exploration is conventional and will not now or at any time in the future involve hydraulic fracturing (also known as 'fracking'). InfraStrata has confirmed this in the form of a legal undertaking given to the landowner. A further public information event was held in Swanage in October 2014 to keep the local community and other stakeholders updated on the project.

In October 2014, InfraStrata together with joint venture partners Corfe and Brigantes signed an agreement with Southwestern Resources Limited ("Southwestern") under which Southwestern will acquire a 10% interest in the P1918 licence, subject to DECC approval, in return for funding 100% of the next £500,000 of expenditure on the licence and thereafter funding its own share. In addition, it has been granted an exclusive option to acquire a further interest in the licence in return for funding future drilling activity. Subject to the approval for the licence interest assignments by DECC, InfraStrata will hold a 68.4% net interest in the licence.

Southwestern has been granted an exclusive option until July 2015 to acquire a further 65% interest from InfraStrata and partners on a pro-rated basis by funding 100% of the costs of an offshore exploration well in the P1918 licence. If the option were exercised, InfraStrata's net interest in P1918 would be 19%, with its costs carried through the drilling of the well.

In the event that Southwestern decides not to exercise the option to drill an offshore well for the first well, it has been granted an option, until September 2015, to acquire a further 40% licence interest by funding 100% of the costs to drill the California Quarry-1 well. If this alternative option were exercised, InfraStrata's net interest in P1918 would be 38%, with its costs carried through the drilling of the well. The proposed California Quarry-1 well is an onshore to offshore well. Since it is necessary for the area from which a well is drilled to be held under a petroleum licence, either InfraStrata or a third party will need to be awarded a licence over the area as part of the UK 14th Landward Licensing Round before drilling can commence. This licence round closed in October 2014 but awards remain pending.

The initial funding includes the cost of acquiring a new 2D seismic line over the Purbeck Prospect, in order to complete the well design for the proposed California Quarry-1 well and also undertake Pre-stack Depth Migration re-processing of two offshore 3D seismic surveys in the north of Block 98/11 acquired during 1992 and 1999.

The permitting for the new seismic line is nearing completion, however due to a seasonal restriction it will not be possible to acquire the data until August 2015 at the earliest.

Reprocessing of the offshore data commenced in Houston in February 2015 and is focusing on the undeveloped Colter discovery. The Colter Prospect is located within a fault block immediately to the south of the giant Wytch Farm oilfield. The 98/11-3 well was drilled on the prospect in 1989 by Gas Council (Exploration) Ltd and encountered a 10.5 metres vertical oil column in the Sherwood Sandstone with an oil-water-contact at a depth of 1,739 metres sub-sea. Reservoir quality is very similar to that observed in Wytch Farm.

A well is required to be drilled by February 2016, the end of the first term of the licence, to retain P1918 into its second term. However, InfraStrata will not be able to commit to a drilling rig for California Quarry-1 to test the Purbeck Prospect until the 2D seismic has been acquired, processed and interpreted. The unavoidable delay to the acquisition makes it likely that the well will not be drilled before the February deadline. Also should Southwestern not elect to farmin to drill a well on the Colter Prospect in July 2015 it is unlikely funding could be concluded in time to commence drilling an offshore well within the timeframe. With this in mind, the JV group is investigating the possibility with DECC of a licence extension. A well on either of these two prospects would enable the P1918 licence to be renewed for a further four-year period.

East Shetland Basin - Offshore P2222

InfraStrata announced in November 2014 that, together with joint venture partner Carstone Exploration Limited ("Carstone"), the Company has been offered Block 3/11a by DECC in the UKCS 28th Seaward Licensing Round. InfraStrata will be the Operator with a 50% interest. The partners have accepted the offer for the block under the terms of a promote exploration licence where a drill-or-drop decision is required within the first two years of the licence period.

The block contains the undeveloped Oulton oil discovery (3/11-1 and 1ST) estimated to contain approximately 16 million barrels of recoverable oil. The discovery was made over 40 years ago by Amoco, and flowed in excess of 1000 barrels of 41 degrees API oil per day on test from Jurassic Emerald sandstones. InfraStrata believes that the use of modern offshore technologies combined with access to nearby infrastructure will enable Oulton to be successfully developed in the near future.

The JV group will need to conclude funding for a well prior to December 2016 in order to proceed into the last two years of the initial term of the licence and drill a well prior to December 2018.

Moray Firth - Offshore P2235

Under the terms of the Agreement signed with Fyrd in December (see above for more details), InfraStrata acquired a 25% interest in UK Promote Licence P2235, offered to Fyrd in the UKCS 28^th Seaward Licensing Round.

P2235 comprises Block 11/24b (part) and contains the Wild Boar Prospect, 3 kilometres North East of and structurally updip of the producing Lybster oilfield within the Moray Firth. Fyrd estimates that if successful the Minimum, Most Likely and Maximum Prospective Resources to be 10, 70 and 266 million barrels of oil ("mmbo") respectively (net InfraStrata 2.5, 17.5, 66.5 mmbo respectively). The prospect lies close to the coast and there is the potential to drill an exploration well from onshore to offshore.

The JV group will need to conclude funding for a well prior to December 2016 in order to proceed into the last two years of the initial term of the licence and drill a well prior to December 2018.

Other exploration interests

The Company has additional non-operator exploration interests via its shareholdings in associated companies Corfe and Brigantes as follows:

·	PEDL201 (Leicestershire) - Corfe 12.5% interest (net InfraStrata 5%). The Burton-on-the-Wolds-1 well was drilled in October 2014 and abandoned as a dry hole.  The licence operator, Egdon Resources, is now carrying out a study of the potential of the large area of the Widmerpool Gulf that covers the northern half of PEDL201.  The licence terms allow the JV group to retain at least 50% of the block for a further four-year period from June 2015.
·	PEDL237/PL090 (Dorset) - Corfe 12.5% interest (net InfraStrata 5%). The final processing of the new 3D seismic has been received and preliminary interpretation has been undertaken. Under the terms of an existing farmout agreement the partners in these blocks will carry Corfe for a work programme which includes the 3D acquisition and the drilling of a well, to earn a 12.5% interest in the blocks, leaving Corfe with 12.5%.  However, the partners have the option to decline to carry Corfe any further after the interpretation of the 3D seismic is available, in which case Corfe will revert to a 25% interest. The PEDL237 licence term expires in June 2015 and it is anticipated that the JV group will seek an extension.
·	PEDL 070 (Hampshire) - Corfe and Brigantes combined 10% (net InfraStrata 4%). Avington field currently producing around 65 barrels of oil per day (net InfraStrata production circa 2.6 barrels of oil per day ("bopd").

FINANCIAL RESULTS AND FUNDING

Following the Annual General Meeting on 21 January 2015 the then existing 99,491,599 ordinary shares of 10p each in the Company were subdivided into 99,491,599 ordinary shares of 1p each and 895,424,391 deferred shares of 1p each. Subsequent to the balance sheet date on 23 February 2015, the Company issued 52,500,000 new ordinary shares of 1p each at 4 pence per share to institutional and other shareholders and raised £2.1 million before costs - just under £2 million after costs. Also in February the Company's subsidiary Islandmagee Storage Limited received £400,000 in cash in relation to a data release agreement in respect of proprietary seismic data in Northern Ireland.

The aggregate new funding amounting to £2.4 million in cash provides sufficient resources for the Company to meet its 50% (£1.9 million) share of the cost of the salt core programme on the Islandmagee gas storage facility match funding a 50% grant (up to €2.5 million) from the European Commission's Connecting Europe Facility and to meet management and administration costs until the end of December 2015. 

The Company anticipates that additional funding to meet costs beyond the end of December 2015 can be generated through a combination of further data sales, the realisation or partial realisation of the Group's assets (including a targeted realisation of our interest in the Islandmagee gas storage project in early 2016) or if necessary a further equity fundraising.

InfraStrata has recorded a loss for the six month period ended 31 January 2015 of £599,048 (31 January 2014 - loss £705,952) the principal component of which is administrative expenditure as further analysed in note 2 to the interim results which shows that the cash cost of management and administrative costs in the six months to 31 January 2015 was £537,910 compared to £628,812 in the corresponding period last year.

As further explained in note 4 to the interim results, other comprehensive income in the six months to 31 January 2014 comprised £2,028,275 arising from the re-classification of amounts received from BP Gas Marketing in relation to the Islandmagee gas storage project from Non-controlling interests to Retained earnings.

The Company continues to monitor cash spent on management and administrative expenses and ensure that expenditure levels are kept to a minimum consistent with the requirements of legislative compliance and the efficient management of the Company's assets.
 

In October 2014, our executive management team was greatly strengthened by the appointment of Anita Gardiner as Commercial Development Director. Following a 15% reduction in staff costs in January 2014, a further 15% reduction in staff costs was implemented on 1 February 2015. As a result our annualised management and administration costs remain just over £1 million before recoveries and is well under £1 million taking into account anticipated operator overhead recoveries from licence partners and direct staff costs associated with the Islandmagee salt core well programme.   

InfraStrata operates a funding model for our exploration projects which seeks to manage risk for our shareholders by attracting investment by quality partners and thereby minimising our own commitments to pay the costs of exploration. We anticipate that the two exploration wells anticipated in the next 12 months in Northern Ireland (planned for 2015) and in Dorset (planned for 2016) will be fully funded by existing and future partners and that InfraStrata's share of the drilling costs will be fully carried.  

On our exploration licences, InfraStrata's share of expenditure during the six months to 31 January 2015 was £55,757 (31 January 2014 - £109,846). These costs were mostly related to our share of licence fees and other costs which are not covered by farm-out agreements with partners. On the Islandmagee gas storage project, gross expenditure during the six months to 31 January 2015 was £201,782 (31 January 2014 - £199,498) comprising £101,944 costs associated with the renewal of land options and other general project costs and £99,838 costs directly attributable to the salt core well programme, the latter being 50% funded by the grant from the European Commission's Connecting Europe Facility.   

The Group's associated companies, Corfe and Brigantes, are self-funded and therefore we have no commitments to fund exploration costs on our non-operated exploration interests.

The Group's cash and cash equivalents at 31 January 2015 (prior to securing the new funding of £2.4 million described above) was £624,227 (31 January 2014 - £1,334,748) and net working capital was £154,624 (31 January 2014 - £1,669,032).

OUTLOOK

Management's focus for the remainder of 2015 is on the drilling programme for the two wells in Northern Ireland whilst continuing to keep close control of costs.

Looking further ahead, and following completion of the salt core well programme at Islandmagee, we are targeting a monetisation of our interest in the Islandmagee gas storage project which should provide good value to our shareholders as soon as possible with a target in early 2016. The planning workstreams to deliver this monetisation are already under way.  

Ken Ratcliff - Non-executive Chairman

Andrew Hindle - Chief Executive Officer

28 April 2015

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the six months ended 31 January 2015

	Notes		Six months ended 31 January 2015 Unaudited		Six months ended 31 January 2014 Unaudited		Year ended 31 July 2014 Audited
			£		£		£
Continuing operations
Revenue			5,138		5,652		17,764
Cost of sales			-		-		-
Gross profit			5,138		5,652		17,764
Administrative expenses	2		(582,768)		(806,538)		(1,331,350)
Operating loss			(577,630)		(800,886)		(1,313,586)
Finance income Share of loss of Associates			1,105 (22,523)		3,434 (48,677)		8,921 (82,961)
Loss before taxation			(599,048)		(846,129)		(1,387,626)
Taxation	3		-		140,177		140,925
Loss for the period attributable to equity holders of the parent			(599,048)		(705,952)		(1,246,701)
Other comprehensive income
Reclassification of funds received from BP Gas Marketing Limited	4		-		2,028,275		2,033,450
Total comprehensive (loss)/profit for the period attributable to the equity holders of the parent			(599,048)		1,322,323		786,749
Basic and diluted earnings per share
Continuing operations	5		(0.60)p		(0.73)p		(1.27)p

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

as at 31 January 2015

	Notes		31 January 2015 Unaudited		31 January 2014 Unaudited		31 July 2014 Audited
			£		£		£
Non-current assets
Intangible fixed assets:    Exploration & Evaluation    Gas Storage Development Property, plant and equipment			3,882,823 3,843,219 440,100		3,588,689 3,585,643 440,559		3,827,066 3,641,437 440,100
Investments in associates			2,522,489		2,579,296		2,545,012
Total non-current assets			10,688,631		10,194,187		10,453,615
Current assets
Trade and other receivables			139,047		992,537		144,823
Cash and cash equivalents			624,227		1,334,748		1,648,955
Total current assets			763,274		2,327,285		1,793,778
Current liabilities
Trade and other payables Deferred income tax liabilities	3		(608,650) -		(585,304) (72,949)		(836,287) -
Total current liabilities			(608,650)		(658,253)		(836,287)
Net current assets			154,624		1,669,032		957,491
Non-current liabilities
Deferred income tax liabilities	3		(745,183)		(672,982)		(745,183)
Net assets			10,098,072		11,190,237		10,665,923
Shareholders' funds
Share capital			9,949,160		9,949,160		9,949,160
Share premium			11,920,219		11,920,219		11,920,219
Merger reserve			8,988,112		8,988,112		8,988,112
Share based payment reserve			561,607		519,150		530,410
Retained earnings			(21,321,026)		(20,186,404)		(20,721,978)
Total equity			10,098,072		11,190,237		10,665,923

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the six months ended 31 January 2015

	Share       capital	Share premium	Merger reserve	Share based payment reserve	Retained earnings	Attributable to the owners of the parent	Non-controlling interests	Total equity
	£	£	£	£	£	£	£	£
Balance at 31 July 2013	9,149,160	11,920,219	8,988,112	434,920	(21,508,727)	8,983,684	1,427,277	10,410,961
Loss for the period	-	-	-	-	(705,952)	(705,952)	-	(705,952)
Other comprehensive income	-	-	-	-	2,028,275	2,028,275	-	2,028,275
Total comprehensive profit for the period	-	-	-	-	1,322,323	1,322,323	-	1,322,323
Issue of equity capital	800,000	-	-	-	-	800,000	-	800,000
Share based payments	-	-	-	84,230	-	84,230	-	84,230
Funds received from BPGM	-	-	-	-	-	-	600,998	600,998
Reclassification of funds received from BPGM (Note 4)	-	-	-	-	-	-	(2,028,275)	(2,028,275)
Balance at 31 January 2014	9,949,160	11,920,219	8,988,112	519,150	(20,186,404)	11,190,237	-	11,190,237
Loss for the period	-	-	-	-	(540,749)	(540,749)	-	(540,749)
Other comprehensive income	-	-	-	-	5,175	5,175	-	5,175
Total comprehensive loss for the period	-	-	-	-	(535,574)	(535,574)	-	(535,574)
Share based payments	-	-	-	11,260	-	11,260	-	11,260
Funds received from BPGM	-	-	-	--	-	-	5,175	5,175
Reclassification of funds received from BPGM (Note 4)	-	-	-	-	-	-	(5,175)	(5,175)
Balance at 31 July 2014	9,949,160	11,920,219	8,988,112	530,410	(20,721,978)	10,665,923	-	10,665,923
Loss for the period	-	-	-	-	(599,048)	(599,048)	-	(599,048)
Total comprehensive loss for the period	-	-	-	-	(599,048)	(599,048)	-	(599,048)
Share based payments	-	-	-	31,197	-	31,197	-	31,197
Balance at 31 January 2015	9,949,160	11,920,219	8,988,112	561,607	(21,321,026)	10,098,072	-	10,098,072

 

CONSOLIDATED CASH FLOW STATEMENT

for the six months ended 31 January 2015

	Notes		Six months ended 31 January 2015 Unaudited		Six months ended 31 January 2014 Unaudited		Year ended 31 July 2014 Audited
			£		£		£
Net cash used in operating activities	6		(768,294)		(542,186)		(702,407)
Investing activities
Interest received			1,105		2,358		4,772
Purchase of intangible assets:    Exploration & Evaluation    Gas Storage Development			(55,757) (201,782)		(109,846) (199,498)		(347,211) (255,292)
Proceeds from disposal of exploration intangible assets			-		-		360,000
Portland Gas Limited  preference share receipts			-		367,476		367,474
Net cash (used in)/from investing activities			(256,434)		60,490		129,743
Financing activities
Proceeds on issue of ordinary shares			-		800,000		800,000
Contribution from non-controlling interest			-		200,998		606,173
Cash inflow on reclassification of assets previously held for sale			-		40,701		40,701
Net cash generated from financing activities			-		1,041,699		1,446,874
Net (decrease)/increase in cash and cash equivalents			(1,024,728)		560,003		874,210
Cash and cash equivalents at beginning of period			1,648,955		774,745		774,745
Cash and cash equivalents at end of period			624,227		1,334,748		1,648,955

 

NOTES TO THE INTERIM RESULTS

for the six months ended 31 January 2015

1.     Basis of preparation

    The interim financial information in this report has been prepared using accounting policies consistent with IFRS as adopted by the European Union. IFRS is subject to amendment and interpretation by the International Accounting Standards Board (IASB) and the IFRS Interpretations Committee and there is an ongoing process of review and endorsement by the European Commission. The financial information has been prepared on the basis of IFRS that the Directors expect to be adopted by the European Union and applicable as at 31 July 2015.

          Non-statutory accounts

          Financial information contained in this document does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006. A copy of the statutory accounts of the Company for the year ended 31 July 2014 has been delivered to the Registrar of Companies. The audit report on these accounts is unqualified and did not contain a statement under Sections 498(2) or (3) of the Companies Act 2006.

          In their report, the auditors drew attention by way of emphasis and without qualifying their report to uncertainties associated with each of a) the carrying value of the Group's development costs relating to the Islandmagee gas storage facility and the amounts due to the Company from its subsidiaries if further funding to progress the project was not secured; b) the carrying value of the Group's licence interest in Licence PL1/10 if the Group were unable to providing a commitment to DETI by 4 March 2015 to undertake exploration drilling on the licence before the end of the current licence period in March 2016 and the possible relinquishment of the licence in those circumstances; and c) the adoption of the going concern basis for the preparation of the accounts in the circumstances that there was material uncertainty regarding the Group's ability to secure new funding to meet its obligations for the foreseeable future. The current position regarding these uncertainties are detailed below.

The financial information for the 6 months ended 31 January 2015 and 31 January 2014 is unaudited.

    Accounting policies

The interim financial information has been prepared under the historical cost convention. The same accounting policies, presentation and methods of computation are followed in preparing the interim financial information as were applied in preparation of the Group's financial statements for the year ended 31 July 2014.

    Funding for and carrying value of Islandmagee gas storage project

The next stage of the development of this project (drilling a well to obtain a salt core sample to obtain and subsequent testing and engineering work) was funded after the period end. Once this work is completed, it is the Directors' intention to realise cash for the Group's interest in the project as soon as practicable with a target of early 2016.

Having reviewed the value of the Islandmagee gas storage project using the same methodologies as described in the 2014 financial statements the Directors are of the opinion that the asset is not impaired in value.  

    Carrying value of exploration and evaluation assets

The Group is currently seeking a farm in partner for the PL1/10 license and to ensure that the all necessary funds are available for the proposed Q4 drilling programme. The terms of the PL1/10 license required a commitment by the license partners before 4 March 2015 to the drilling of a well before the end of the licence term on 4 March 2016. In February DETI accepted a notice of the Company's intent to drill a well before the end of the licence term dependent upon a number of factors including rig availability and the completion of all contractual arrangements.    

Under the terms of the Dorset offshore licence P1918, a well is required to be drilled by February 2016. However, seasonal restrictions on the timing of when 2D seismic data can be obtained will delay the finalisation of the design of the first well and the P1918 partners are investigating the possibility with DECC of a licence extension.   

Having reviewed the value of exploration and evaluation assets using the same methodologies as described in the 2014 financial statements the Directors are of the opinion that these assets are not impaired in value.

Going concern

The Company's current exploration activities are carried by partners and the next stage of the Islandmagee gas storage development is funded. Following the February 2015 equity fundraising, the Group has sufficient resources to cover its management and administrative costs to the end of December 2015.

The directors anticipate that additional funding to meet costs beyond the end of December 2015 can be generated through a combination of further data sales, the realisation or partial realisation of the Group's assets or if necessary a further equity fundraising. Consequently the Directors consider it appropriate to prepare the interim financial information on a going concern basis which assumes that the Group will continue in operational existence without significant curtailment of its activities for the foreseeable future.

 

NOTES TO THE INTERIM RESULTS

for the six months ended 31 January 2015 (continued)

2.       Administrative expenditure           

		Six months ended 31 January 2015 Unaudited		Six months ended 31 January 2014 Unaudited		Year ended 31 July 2014 Audited
		£		£		£
Administrative costs which are paid in cash		537,910		628,812		1,126,482
Non-cash items: -     Share options expense		31,197		84,230		95,490
-     Depreciation		-		1,515		1,974
-     Exchange differences		-		49,197		58,903
Pre-licence costs written off Expenses of share issue		13,661 -		- 42,784		5,717 42,784
		582,768		806,538		1,331,350

3.       Taxation

The gross movement on the deferred income tax account is as follows:

		Six months ended 31 January 2015 Unaudited		Six months ended 31 January 2014 Unaudited		Year ended 31 July 2014 Audited
		£		£		£
Balance at the beginning of the period		(745,183)		(886,108)		(886,108)
Reversal of timing differences		-		102,882		96,446
Change of rate of tax		-		37,295		44,479
Credit for the period		-		140,177		140,925
Balance at the end of the period		(745,183)		(745,931)		(745,183)
Classified as current		-		(72,949)		-
Classified as non-current		(745,183)		(672,982)		(745,183)
Balance at the end of the period		(745,183)		(745,931)		(745,183)

 

NOTES TO THE INTERIM RESULTS

for the six months ended 31 January 2015 (continued)

4.	Reclassification of assets previously held for sale To 24 January 2014 BP Gas Marketing Limited (BPGM) had an option to acquire a majority holding in the equity of the Group's subsidiary, Islandmagee Storage Limited (IMSL) and option payments from BPGM were classified as Non-controlling interests as a component of equity in the Group balance sheet. On 24 January 2014 BPGM relinquished its option and the balance of amounts paid and payable by BPGM at that date amounting to £2,033,450 was transferred from Non-controlling interests to Retained earnings.
5.	Earnings per share
		Six months ended 31 January 2015 Unaudited				Six months ended 31 January 2014 Unaudited	Year ended 31 July 2014 Audited
		£				£	£
	Loss The (loss) for purposes of basic and diluted loss per share being the net (loss) attributable to equity shareholders:
	Continuing operations	(599,048)				(705,952)	(1,246,701)
	Number of shares
	Weighted average number of ordinary shares for the purposes of basic earnings per share	99,491,599				97,174,659	98,307,952
	Basic and diluted earnings per share
	Continuing operations	(0.60)p				(0.73)p	(1.27)p

For all periods presented, share options were not dilutive as a loss was incurred.

Note 9 details the post period end issue of shares which will impact on future earnings per share.

 

NOTES TO THE INTERIM RESULTS

for the six months ended 31 January 2015(continued)

6.	Cash (used in) operations		Six months ended 31 January 2015 Unaudited		Six months ended 31 January 2014 Unaudited		Year ended 31 July 2014 Audited
			£		£		£
	Operating loss for the period		(577,630)		(800,886)		(1,313,586)
	Decrease in trade and other receivables		5,776		20,893		103,863
	(Decrease)/Increase in trade and other payables		(227,637)		12,472		263,455
	Share option expense Depreciation Exchange differences on eCORP debtor		31,197 - -		84,230 1,515 49,197		95,490 1,974 56,004
	Net working capital change in Islandmagee Storage Limited prior to reclassification		-		90,393		90,393
	Cash used in operating activities		(768,294)		(542,186)		(702,407)

7.      Fyrd asset exchange

In December 2014 the group agreed to an asset exchange with Fyrd Energy Limited ("Fyrd") ("the Agreement").

Under the terms of the Agreement, InfraStrata will acquire a 25% interest in UK Promote Licence P2235, a 22.5% shareholding in Integrated GeoRenewables (Dorset) Limited ("IGR") and a carry for the first £200,000 of expenditure by IGR. InfraStrata will assign its rights and intellectual property in the Portland project (excluding the gas pipeline construction authorisation and associated rights) to IGR and will grant an option to that company to acquire the gas pipeline rights from InfraStrata in return for the Company being carried for a further £200,000 of expenditure by IGR.

The Portland project was fully impaired in prior years and it is not expected that this transaction will have any impact on the reported results.

8.      Dividend

The Directors do not recommend payment of a dividend.

9.       Post balance sheet events

In February 2015 the Company's subsidiary Islandmagee Storage Limited received £400,000 in cash in relation to a data release agreement in respect of proprietary seismic data in Northern Ireland.

On 23 February 2015 the Company issued 52,500,000 new ordinary shares of 1 pence each at 4 pence per share to institutional and other shareholders and raised £2,100,000 before costs. Following the issue, the Company has 151,991,599 ordinary shares in issue.

9.      Publication of the interim report

This interim report is available on the Company's website www.infrastrata.co.uk.

 

END

 

 

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