TIDMIVE
RNS Number : 8535U
Irvine Energy PLC
30 June 2009
Irvine Energy PLC / Index: AIM / Epic: IVE / Sector: Oil & Gas
30 June 2009
Irvine Energy PLC ('Irvine' or the 'Company')
Audited results for the year ended 31 December 2008
Irvine Energy plc, the AIM listed oil and gas exploration and production
company, announces its results for the year ended 31 December 2008.
Chairman's Statement
As our shareholders will already be aware, Irvine Energy PLC ("Irvine" or "the
Company") has had a difficult year in which the problems associated with
disappointing exploration results and operational issues, have been exacerbated
by the deterioration in the Exploration and Production ("E&P") credit and
broader markets. The Board has spent the last months trying to resolve the
issues with its partners and has been focussing on generating some value from
its assets. To this end, the Board is pursuing discussions in an attempt to
either sell some of the acreage or complete the acquisition of additional assets
and raise further finance with the intention of securing the future of the
Company.
Metro and GasRock
Despite some early successes and a strong initial working relationship, in the
second half of the period, relations with Irvine's operators Metro Energy Inc.
("Metro") deteriorated. They claimed approximately US$3.8 million from the
Company's wholly owned subsidiaries, Wattle Energy Corporation ("Wattle") and
Pinon Energy LLC ("Pinon"), in respect of seismic acquisition, joint interest
billings and management fees which the Company disputed and asked Metro to
substantiate. As a result Metro has withheld revenues from Irvine and has now
commenced proceedings against Wattle, Halcyon Nominees (USA) Inc ("Halycyon")
and GasRock Capital LLC ("GasRock") (the provider of Irvine's debt finance) in
which it claims:
(1) US$2,756,570 in respect of expenditure incurred in connection with the
seismic programme undertaken in accordance with the Agreement for Oil and Gas
Lease Development and Exploration Programme Agreement between Metro, Kanco
Energy Inc and Wattle together with interest;
(2) US$180,314 in respect of furnished labour, material, machinery and
supplies in accordance with the Kansas Exploration and Development Agreement
between Metro and Wattle together with interest; and
(3) US$542,448 in respect of material and equipment sold or furnished, work
or labour performed and services rendered together with interest.
.
Each of Halcyon, Wattle and GasRock has filed responses to Metro's claim. There
is a case management conference in respect of the proceedings on 13 July 2009,
although the Board of Irvine is continuing to seek a negotiated solution to the
claims.
As previously reported, the Company's wholly owned subsidiaries, Wattle and
Pinon (together "the Borrowers"), entered into the GasRock credit agreement on
28 May 2008 and Irvine Plc guaranteed those borrowings. In November 2008,
GasRock advised Wattle and Pinon that it would exercise its discretion not to
make any further advances under the credit facility until the dispute with Metro
and various concerns about the exploration programme had been resolved. GasRock
issued a notice of default, dated 27 January 2009, to Wattle and Pinon calling
for repayment of the outstanding balance of the moneys owed to it under the
credit agreement. It also issued a notice to the Company claiming payment of the
same amount in accordance with the terms of the guarantee. As of 31 March 2009,
the outstanding balance of the moneys owed by the Borrowers to GasRock was
US$5.507 million (31 December 2008: US$6.12 million).
Following extensive negotiations by the Board, on 19 March 2009, Irvine and
GasRock entered into a release of guarantee whereby GasRock released Irvine Plc
from its obligations under the guarantee in consideration of Irvine Plc paying
GBP370,000 to GasRock. The consideration has been paid to GasRock and,
accordingly, the Company has been released from the guarantee. In addition, the
Company agreed to grant, and subsequently granted, GasRock an option to
subscribe for 100 million ordinary shares in the Company at 0.1 pence per share.
With a lack of income to generate cash, the Board has evaluated various options
in order to raise funds by divesting non-core and core assets. However, in spite
of this, the environment for the sale of such assets has been and continues to
be poor and, at this stage, it has been unable to conclude such a transaction.
Although the Company continues to pursue this course of action, the directors do
not expect the environment to materially change in the short term.
The outcome of the debt due to GasRock and Metro's claims against the Company's
US subsidiaries, Wattle and Pinon, is uncertain at the date of this Report.
There is a significant risk that the resolution of these claims will result in a
net asset deficiency in the US subsidiaries. At the date of this Report, GasRock
has not taken any further action to enforce its security. GasRock and the
Company have been discussing various proposals involving Chapter 7 and Chapter
11 of United States Bankruptcy Code. Under these proposals, there is a
significant risk that the Company will not retain an interest in any of its US
oil and gas assets. However, the Directors believe, based on professional
advice, that the liabilities of the US subsidiaries are ring-fenced in those
companies and that the Company's loss will be limited to the amount invested.
As previously mentioned, the Company is currently engaged in advanced
discussions with third parties regarding the acquisition of additional assets
and the raising of further finance. However, at this stage, it is premature to
comment further on these discussions and the directors express no opinion on the
likelihood of a successful outcome and caution shareholders against drawing any
premature inferences.
Operations summary
The Company still hold extensive and potentially prospective acreage in both
Oklahoma and Kansas and particularly believes that potential exists under our
acreage in both the Woodford and Caney shales based on other Woodford results in
the area. However, exploration results during the period were disappointing and
whilst hydrocarbons have frequently been encountered, the drilling has generated
results that are below the Directors' expectations. On the positive side, the
Company obtained encouraging results from the Priegel No. 3-10 well where we
believe we have identified an excellent development opportunity in Booch channel
sands. However, operations have effectively ceased pending resolution of the
dispute with Metro and the restructuring of the Company's finances.
On 1 September 2008, Aaron Close resigned as managing director of Irvine to
pursue other opportunities and I have taken control as interim executive
Chairman.
Financials
The loss of the Group after taxation amounted to GBP2.574 million (2007:
GBP0.850 million). The loss for the Company after taxation amounted to GBP16.037
million (2007: GBP0.594 million). The Group's cash position at 31 December 2008
was GBP0.488 million (2007: GBP1.204 million).
Outlook
In the short term, the principal objectives of the directors are to conclude
additional financed acquisitions and to reach a commercial arrangement with
Metro and GasRock. At this stage, it is difficult to forecast whether the
Company will realise these objectives and I reiterate that the directors express
no opinion on the likelihood of a successful outcome and caution shareholders
against drawing any premature inferences. If the Company is able to achieve
either of these objectives then it will resume operations.
On 30 January 2009, the Company requested a suspension of trading of its shares
on AIM, pending clarification of the Company's financial position and
discussions with GasRock. There remains a significant degree of uncertainty over
the financial position of the Company and as such, the shares shall remain
suspended until further notice. Shareholders should be aware that, pursuant to
AIM Rule 41, the London Stock Exchange will cancel the admission of the
Company's shares from the AIM Market once they have been suspended from trading
for six months.
Douglas Manner
Chairman
30 June 2009
OPERATIONS REPORT
Production Summary
For the year ended 31 December 2008, the Group produced an average net rate of
294 mcfe/d (thousand cubic feet per day). There was an average producing well
count of 22 during the year.
Net production declined from 350 mcfe/d in January to 209 mcfe/d by the end of
the year. The primary cause of the production drop was the watering out of the
Patriot No. 1-15 during 2008.
2008 Drilling Results
The drilling results in 2008 were well below expectations.
Five wells targeting conventional sands were drilled in Oklahoma in 2008. Four
of these were drilled for deeper zones, the Cromwell, Jefferson and Gilcrease.
Hydrocarbons were found in all cases, but the completions yielded rates that
were not sufficiently economic to drill and complete the wells. A fifth well,
the Priegel No. 3-10, was drilled for a shallow Booch channel sand and was
completed as a high water-cut oil well. Although the oil rates were low in this
well, the results were nevertheless encouraging due to the fact that this well
was on the thin edge of the channel and seismic data indicated that it thickened
significantly in an offset position. It is believed that an excellent
development opportunity exists for this channel sand.
Two additional wells were drilled in Oklahoma for the Woodford shale. The Farrow
No. 1-24 was a vertical completion in the Woodford and although not producing at
economic rates, the data supported drilling a horizontal well in the shale.
Therefore, the Jones No. 1-5H was drilled horizontally in the Woodford in June.
Only two of the four frac stages were successful and the well performance has
been disappointing. Although Irvine's first attempt in the shale failed to
produce economic results, Irvine remains confident that the potential exists
under our acreage in both the Woodford and Caney shales based on other Woodford
results in the area.
In Kansas, five wells were drilled targeting shallow oil sands on structural
highs identified by the seismic data acquired in 2007. Four wells were drilled
based on the Rock seismic data and one on the Ayers data. Two wells, the Rock
No. 1-29 and 1-30 found no hydrocarbons. The other three wells, the Rock 1-5,
1-32 and the Ayers 1-20 found hydrocarbons, but ultimately produced uneconomic
oil rates with very high water volumes. The Irvine strategy called for a number
of additional wells in this area in order to play out the statistical nature of
the play. However, due to capital constraints, no additional drilling has
occurred.
As announced on 11 November, GasRock exercised its discretion not to make any
further advances under the debt facility. As a result, the drilling activity was
put on hold.
Niobrara Development
The Niobrara field was brought into production in April 2008 after a number of
logistical issues including salt water disposal permitting and equipment delays
had been resolved. After production commenced, it became apparent that the
compressor in the field was improperly sized and had to be replaced and
subsequent to that a significant pipeline leak was discovered close to the sales
metre, thereby placing previous production reports in question.
Initially, 18 wells were brought into production resulting in a total of only 75
to 100 mcfd and large water volumes. Once the infrastructure issues were
addressed, it was anticipated that the water production would begin to drop off
and that gas production would steadily increase over time. However, this did not
occur. At this stage, it appears that during the two years prior to Irvine's
acquisition of the field, the wells sat with the reservoir exposed to completion
fluid, thereby creating permanent reservoir damage in the Niobrara in which the
relative permeability to gas production couldn't be restored. In order to
develop the proved gas reserves in place, the field would have to be re-drilled.
At this stage, capital constraints preclude this course of action.
Seismic Programme
The seismic programme in the Rock, Ayers and Udall areas in Kansas which was
started in 2007 was completed in 2008. The total 3D data base is now up to 55
square miles in Kansas.
The seismic programme has generated large cost overruns, and has been the source
of dispute between Irvine and the operator Metro. The parties are continuing to
discuss these matters with a view to negotiating a solution.
Land Expiries and Impairment
At its peak, Irvine accumulated approximately 112,000 net acres in Oklahoma and
Kansas. A large portion of the acreage was leased in 2006 and early 2007 with
three year terms. Although a small portion includes currently producing wells,
and will, therefore, be held by production, a significant portion of the acreage
has either expired or will be expiring over the next 12 months. In order to
renew the expiring leases, Irvine will need to pay to the relevant lessors
additional lease bonuses for extension rights. It was Irvine's intention to sell
the non-core land to help support the retention of the core properties. Due to
the significant change in oil and gas prices and the downturn in capital
spending in the industry, there is little demand for new leases at this time.
Notwithstanding the lease expiry, production issues and unfavourable market
conditions, no impairment of the Group's oil and gas assets has been recognised
at this time, as the Group is not currently able to market its assets due to the
ongoing dispute, and forced sale is unlikely to realise sufficient funds to
clear the amounts due to GasRock. In light of the inherent uncertainty and the
absence of comparable transactions, the directors are unable to conclude with
sufficient certainty on the value of the Group's oil and gas assets.
Douglas Manner
Chairman
30 June 2009
Directors' Report
The Directors present their report together with the financial statements for
the Group and the Company for the year ended 31 December 2008.
Company Formation
The Company was incorporated on 6 September 2005 as a public limited company
with the registration number 5555175. The Company is domiciled in the United
Kingdom. The Company is the ultimate parent undertaking for the group.
Principal Activities
The principal activities of the Company and its subsidiaries are the evaluation
and development of on-shore oil and gas projects in North America.
Results and Dividends
The loss of the Group after taxation amounted to GBP2.574 million (2007:
GBP0.850 million). The loss for the Company after taxation amounted to GBP16.037
million (2007: GBP0.594 million). The Directors do not propose the payment of a
dividend.
Directors and Directors Interests
The Directors of the Group and the Company during the period were:
+------------------------+---------------------+---------------------+
| | Date of Appointment | Date of Resignation |
+------------------------+---------------------+---------------------+
| Michael Frayne | 7 October 2005 | - |
+------------------------+---------------------+---------------------+
| Anthony Samaha | 16 September 2005 | - |
+------------------------+---------------------+---------------------+
| Ross Warner | 16 September 2005 | - |
+------------------------+---------------------+---------------------+
| Douglas Manner | 1 February 2007 | - |
+------------------------+---------------------+---------------------+
| Aaron Close | 1 February 2007 | 1 September 2008 |
+------------------------+---------------------+---------------------+
The interests of the Directors in the ordinary share capital of the Company
during the period were:
+------------------------+------------+-------------+------------+------------+
| | Number of ordinary | Number of Options |
| | shares | |
+------------------------+--------------------------+-------------------------+
| | 31 Dec. | 31 Dec. | 31 Dec. | 31 Dec. |
| | 2008 | 2007 | 2008 | 2007 |
+------------------------+------------+-------------+------------+------------+
| Michael Frayne1 | 63,345,238 | 59,345,238 | 5,000,000 | 5,000,000 |
+------------------------+------------+-------------+------------+------------+
| Anthony Samaha2 | 7,000,000 | 3,000,000 | 5,000,000 | 5,000,000 |
+------------------------+------------+-------------+------------+------------+
| Ross Warner3 | 5,000,000 | 1,000,000 | 5,000,000 | 5,000,000 |
+------------------------+------------+-------------+------------+------------+
| Douglas Manner | - | - | 10,000,000 | 10,000,000 |
+------------------------+------------+-------------+------------+------------+
| Aaron Close | - | - | 10,000,000 | 10,000,000 |
+------------------------+------------+-------------+------------+------------+
Shares are held by:
1. Adelise Services Ltd. The interest is a beneficial interest.
2. Reabold Ltd. The interest is a non-beneficial interest.
3. Bournemead International Ltd. The interest is a beneficial interest.
Douglas Manner
Chairman
Mr Manner has over 25 years engineering experience in the oil and gas industry,
principally in the North American region as well as extensive corporate
experience serving on the Boards of numerous oil and gas exploration firms. He
was previously Chief Executive Officer ('CEO') of Westside Energy Corporation
('Westside'), an American Stock Exchange listed shale gas energy company with
65,000 acres in the Barnett Shale area in Northern Texas and production of 3
million cubic feet gas per day. Previously, Mr Manner has held senior positions
in oil & gas companies including, COO of Kosmos Energy LLC, a private company
exploring for oil and gas in offshore West Africa, COO of White Stone Energy, a
Houston based oil and gas advisory firm, Chairman and CEO of Mission Resources
and COO of Gulf Canada Resources Ltd responsible for both international and
domestic activities. He spent 16 years with Ryder Scott Petroleum engineers
having started his career at Amoco Production Company.
Michael Frayne
Non-Executive Director
Michael Frayne is a qualified chartered accountant and geologist with over 15
years' experience in the resource sector. Michael has been responsible for
sourcing significant resource and energy projects around the world and
successfully establishing several UK and Australian listed companies with these
projects. Michael was previously the joint managing director of Asia Energy plc.
Ross Warner
Non-Executive Director
Ross Warner holds a Bachelor of Laws degree from the University of Western
Australia and a Master of Laws degree from the University of Melbourne. Ross has
approximately 10 years' experience working in law firms including Mallesons
Stephen Jaques in Australia and Clifford Chance in the UK. His principal area of
practice was advising venture capital funds in relation to management buy-outs
and related transactions. Ross is a non-executive director of AIM listed Uranium
Resources Plc.
Anthony Samaha
Non-Executive Director
Mr Samaha holds Bachelor of Commerce and Bachelor of Economics degrees. He is an
Associate of the Institute of Chartered Accountants of Australia and an
Associate of the Financial Services Institute of Australasia. Mr Samaha has over
18 years experience in providing accounting and corporate advice in a diverse
range of industry sectors, including resource development. He is a director of
AIM quoted resources companies Braemore Resources Plc and Altona Energy Plc.
Business review and future developments
A review of the business and the future development of the Group is presented in
the Chairman's Statement on pages 3 and 4 and in the Operations Report on pages
5 to 6.
Key performance indicators
The Group has three project areas, Kansas, Oklahoma and Niobrara. A key
objective has been to increase the Group's reserves through successful
implementation of drilling programmes and the raising of production across the
portfolio.
The Group was successful in establishing an independent reserve and resources
audit from Netherland, Sewell & Associates, Inc. ("NSAI") with respect to its
Niobrara and Oklahoma Projects, as announced in April 2008. The Group also
successfully identified drilling targets and established an independent
contingent gas resource by NSAI in respect to the Hartshorne coalbed methane
project in Oklahoma. In addition the Group identified a number of oil
development locations to drill out the Booch sandstone channel in Oklahoma.
The Group was unsuccessful in its drilling programmes and programme for
increasing production in its three project areas, as reviewed in the Operations
Report. The financial results for the Group are set out in page 7 of the
Directors' Report and were significantly below management's expectations for the
reporting period. These financial results reflect the unsuccessful drilling
programmes, disappointing production levels, and 3-D seismic cost over-runs,
which contributed to the financial distress of the Group, together with the
significant decline in oil and gas prices and global credit market difficulties.
The Group cash at 31 December 2009 was GBP0.488 million.
Business risks and uncertainties
The Group is subject to the risks arising from specific commercial disputes and
operational matters, which are described more fully in the Chairman's Statement.
Reference is made to the Going Concern note, in particular to the position of
the Group's US subsidiaries.
The Group's business is subject to risks inherent in oil and gas exploration,
development and production operations, as well as reliance on a third party
operator. In addition, there are risks associated with the jurisdictions where
the Group operates. The Company has identified certain risks pertinent to its
business including: volatility of future oil and gas prices, exploration and
reserve risks, drilling and operating risks, costs and availability of materials
and services, loss of or unfavourable changes to production sharing and foreign
currency risk.
Financial instruments
Details of the use of financial instruments by the Company and its subsidiary
undertakings as well as description of risks inherent in the use of these
financial instruments and the ways the Group seeks to mitigate those risks are
provided in Notes 2 and 10 to the Financial Statements.
Substantial shareholdings
On 24 June 2009 the following were registered as being interested in 3% or more
of the Company's ordinary share capital:
+-------------------------------------------------+-------------+-------------+
| | Ordinary | Percentage |
| | shares of | of issued |
| | GBP0.001 | share |
| | each | capital |
+-------------------------------------------------+-------------+-------------+
| Canaccord Nominees Limited | 79,961,904 | 7.71% |
+-------------------------------------------------+-------------+-------------+
| Barclayshare Nominees Ltd | 76,575,854 | 7.38% |
+-------------------------------------------------+-------------+-------------+
| TD Waterhouse Nominees (Europe) Ltd | 64,458,714 | 6.21% |
+-------------------------------------------------+-------------+-------------+
| HSDL Nominees Ltd | 43,274,062 | 4.17% |
+-------------------------------------------------+-------------+-------------+
| L R Nominees Ltd | 38,451,825 | 3.71% |
+-------------------------------------------------+-------------+-------------+
| HSDL Nominees Ltd (2) | 37,710,424 | 3.63% |
+-------------------------------------------------+-------------+-------------+
| Pershing Nominees Limited | 37,472,141 | 3.61% |
+-------------------------------------------------+-------------+-------------+
| Pershing Nominees Limited (2) | 32,800,000 | 3.16% |
+-------------------------------------------------+-------------+-------------+
Share Capital
Information relating to shares issued during the period is given in Note 18 to
the Financial Statements.
Charitable and Political Donations
During the period there were no charitable or political donations.
Payment of Suppliers
The Company's and Group's policy is to settle terms of payment with suppliers
when agreeing terms of business, to ensure that suppliers are aware of the terms
of payment and to abide by them. It is usual for suppliers to be paid within 28
days of receipt of invoice.
Post Balance Sheet Events
At the date these financial statements were approved, being 30 June 2009, the
Directors were not aware of any significant post balance sheet events other than
those set out in Note 23 to the Financial Statements.
Going Concern
The Group financial statements are subject to significant uncertainties as
detailed in the notes to the financial statements. As a result, the Group's US
subsidiaries do not have sufficient liquid resources to meet their current
obligations and may possibly be liquidated. The financial statements do not
include the adjustments required to present the financial statements on a break
up basis, the prevalent uncertainties prohibit a reliable estimation of
recoverable values of the US subsidiaries.
After taking appropriate professional advice, the Directors believe that the
liabilities of the subsidiaries are ring fenced in these entities. In the event
that the Directors' of the Company are not able to successfully conclude a work
out of the debts and liabilities of the US subsidiaries, the Company may become
an investment shell. Negotiations are in progress to acquire further assets and
raise capital.
The Company has sufficient cash to meet it's current obligations as at the year
end and to fund activities at the current "burn rate", but will need to raise
further equity funds within the next 12 months in order to fund any potential
transaction. The Directors are confident about raising sufficient funds for the
Company to be a going concern, and therefore the financial statements of the
Company are prepared on a going concern basis.
Auditors
The auditors, BDO Stoy Hayward LLP, have indicated their willingness to continue
in office and a resolution that they be reappointed will be proposed at the
annual general meeting.
Remuneration
The Company remunerates the Directors at a level commensurate with the size of
the Company and the experience of its Directors. The Remuneration Committee has
reviewed the Directors' remuneration and believes it upholds the objectives of
the Company with regard to this issue.
Details of directors' emoluments and of payments made for professional services
rendered are set out in Note 8 to the Financial Statements.
Corporate Governance
The Directors are committed to maintaining high standards of corporate
governance. The Directors have established procedures, so far as is practicable
given the Company's size, to comply with the Combined Code as modified by the
recommendations of the Quoted Companies Alliance. The Company has adopted and
operates a share dealing code for Directors and senior employees on
substantially the same terms as the Model Code appended to the Listing Rules of
the UKLA.
The financial risk management policies and objectives are set out in detail in
Note 2 which accompanies the audited Financial Statements.
The Board
The Board meets regularly throughout the year. To enable the Board to perform
its duties, each of the Directors has full access to all relevant information
and to the services of the Company Secretary. If necessary the non-executive
Directors may take independent professional advice at the Company's expense. The
Board currently includes three non-executive Directors. The Board has delegated
specific responsibilities to the committees described below.
The Audit Committee
The audit committee comprises Anthony Samaha (Chairman) and Ross Warner, and met
twice during the period ended 31 December 2008. The committee reviews the
Company's annual and interim Financial Statements before submission to the Board
for approval. The committee also reviews regular reports from management and the
external auditors on accounting and internal control matters. When appropriate,
the committee monitors the progress of action taken in relation to such matters.
The committee also recommends the appointment of, and reviews the fees of, the
external auditors.
The Remuneration Committee
The remuneration committee is made up of Anthony Samaha (Chairman) and Michael
Frayne, and met once during the period ended 31 December 2008. It is responsible
for reviewing the performance of the Executive Directors and for setting the
scale and structure of their remuneration, paying due regard to the interests of
shareholders as a whole and the performance of the Company.
Control Procedures
The Board has approved financial budgets and cash forecasts. In addition, it has
implemented procedures to ensure compliance with accounting standards and
effective reporting.
Provision of Information to Auditors
As far as the Directors are aware, there is no relevant audit information of
which the Company's auditors are unaware. Each Director has taken appropriate
steps to ensure that they are aware of such relevant information, and that the
Company's auditors are aware of that information.
Annual General Meeting
This report and Financial Statements will be presented to shareholders for their
approval at the Company's Annual General Meeting ("AGM"). The Notice of the AGM
will be distributed to shareholders together with the Annual Report.
By order of the Board
Anthony Samaha
Director
30 June 2009
Statement of Directors' Responsibilities
Directors' responsibilities
The Directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
company, for safeguarding the assets of the company, for taking reasonable steps
for the prevention and detection of fraud and other irregularities and for the
preparation of a Directors' Report which complies with the requirements of the
Companies Act 1985.
The Directors are responsible for preparing the annual report and the financial
statements in accordance with the Companies Act 1985. The Directors are also
required to prepare financial statements for the group in accordance with
International Financial Reporting Standards as adopted by the European Union
(IFRSs) and the rules of the London Stock Exchange for companies trading
securities on the Alternative Investment Market. The Directors have chosen to
prepare Financial Statements for the Company in accordance with IFRSs
International Accounting Standard 1 requires that Financial Statements present
fairly for each financial year the Company's financial position, financial
performance and cash flows. This requires the faithful representation of the
effects of transactions, other events and conditions in accordance with the
definitions and recognition criteria for assets, liabilities, income and
expenses set out in the International Accounting Standards Board's 'Framework
for the preparation and presentation of financial statements'. In virtually all
circumstances, a fair presentation will be achieved by compliance with all
applicable IFRSs. A fair presentation also requires the Directors to:
* consistently select and apply appropriate accounting policies;
* present information, including accounting policies, in a manner that provides
relevant, reliable, comparable and understandable information; and
* provide additional disclosures when compliance with the specific requirements in
IFRSs is insufficient to enable users to understand the impact of particular
transactions, other events and conditions on the entity's financial position and
financial performance.
Financial Statements are published on the group's website in accordance with
legislation in the United Kingdom governing the preparation and dissemination of
Financial Statements, which may vary from legislation in other jurisdictions.
The maintenance and integrity of the Group's website is the responsibility of
the Directors. The Directors' responsibility also extends to the ongoing
integrity of the Financial Statements contained therein.
Independent Auditors Report to the Shareholders of Irvine Energy plc
We have audited the Consolidated and Company financial statements of Irvine
Energy plc for the period ended 31 December 2008, which comprise the
Consolidated Income Statement, the Consolidated and Company Balance Sheets, the
Consolidated and Company Cash Flow Statements, the Consolidated and Company
Statements of Changes in Equity, and the related notes. These financial
statements have been prepared under the accounting policies set out therein.
Respective Responsibilities of Directors and Auditors
The Directors' responsibilities for preparing the Annual Report, and the
financial statements in accordance with applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European Union are set
out in the Statement of Directors' Responsibilities.
Our responsibility is to audit the financial statements in accordance with
relevant legal and regulatory requirements and International Standards on
Auditing (UK and Ireland).
We report to you our opinion as to whether the financial statements give a true
and fair view and have been properly prepared in accordance with the Companies
Act 1985, and whether the information given in the directors' report is
consistent with those financial statements. We also report to you if, in our
opinion, the company has not kept proper accounting records, if we have not
received all the information and explanations we require for our audit, or if
information specified by law regarding directors' remuneration and other
transactions is not disclosed.
We read the Chairman's Statement, Operations Report, Directors' Report, and
Statement of Directors' Responsibility and consider the implications for our
report if we become aware of any apparent misstatements within it.
Our report has been prepared pursuant to the requirements of the Companies Act
1985 and for no other purpose. No person is entitled to rely on this report
unless such a person is a person entitled to rely upon this report by virtue of
and for the purpose of the Companies Act 1985 or has been expressly authorised
to do so by our prior written consent. Save as above, we do not accept
responsibility for this report to any other person or for any other purpose and
we hereby expressly disclaim any and all such liability.
Basis of Audit Opinion
We conducted our audit in accordance with International Standards on Auditing
(UK and Ireland) 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 Group's and Company's circumstances, consistently applied and adequately
disclosed.
We planned 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.
However, there are multiple material uncertainties affecting the financial
statements, which are discussed below:
Claims made by Metro Energy Inc ("Metro"), the operator of the Group's US
licences
As detailed in note 11 to the financial statements, the Group have received
claims from the operator of its assets amounting to approximately US$3.8m. The
claims, which are disputed by management, relate to seismic acquisition, joint
interest billings, and management fees. Management have requested that Metro
substantiate the claims and provide supporting documentation. Management have
initiated a detailed review of these claims which indicates a significant amount
cannot currently be substantiated. Furthermore, the amounts claimed include
expenditure that had not been appropriately approved by the Board of Irvine
Energy Plc.
The unresolved status of the dispute and the potential impact on intangible
assets and trade payables (the amount has been fully provided) means we are
unable to conclude with sufficient assurance over these balances and on any
potential adjustments required in the financial statements.
Carrying values of intangible and tangible fixed assets
The Directors have acknowledged that there are indicators of impairment at the
balance sheet date, and have considered the carrying value of the assets.
However, in light of the inherent uncertainty regarding the assumptions
supporting both the value in use and market value, the Directors are unable to
conclude with sufficient certainty on the value of the Group's intangible and
tangible assets and therefore have not impaired these assets in the financial
statements. The Group is not currently able to market these assets to third
parties and a forced sale is unlikely to realise sufficient funds to clear the
outstanding amounts due to GasRock Capital LLC ("GasRock", the secured
creditor).
As a result of the material uncertainty surrounding the assumptions used in the
assessment of the carrying value of assets, the evidence available to us was
limited and we were unable to obtain sufficient appropriate evidence to conclude
on the appropriateness of the carrying value of the Group's intangible and
tangible assets, and on any potential adjustments required in the financial
statements.
Going Concern
The Group financial statements are subject to significant uncertainties as
detailed in the notes to the financial statements. As a result, the Group's US
subsidiaries do not have sufficient liquid resources to meet their current
obligations and may possibly be liquidated. The Company and GasRock (the secured
creditor) have been discussing various proposals involving Chapter 7 and Chapter
11 of United States Bankruptcy Code. Under these proposals, there is a
significant risk that the Group will not retain an interest in any of its US oil
and gas assets.
The circumstances discussed above represent a material uncertainty that casts
significant doubt upon the Group's ability to continue as a going concern. The
financial statements do not include the adjustments required to present the
financial statements on a break up basis.
As a result of these multiple uncertainties and the limitation in scope over the
carrying value of intangible and tangible fixed assets, we are unable to form an
opinion on the consolidated financial statements.
In forming our opinion we also evaluate the overall adequacy of the presentation
of information in the financial statements.
Opinion: disclaimer of view given on the consolidated financial statements
Because of the possible effect of the multiple material uncertainties and
limitation in scope referred to above, we are unable to form an opinion as to
whether:
* the financial statements give a true and fair view, in accordance with
International Financial Reporting Standards, of the state of the Group's affairs
as at 31 December 2008 and of its loss for the year then ended; and
* the financial statements have been properly prepared in accordance with the
Companies Act 1985.
In respect solely of the limitation on our work referred to above:
* we have not obtained all the information and explanations that we considered
necessary for the purposes of our audit; and
* we were unable to determine whether proper accounting records have been
maintained.
Notwithstanding our disclaimer of view given on the financial statements, in our
opinion, the information given in the directors' report is consistent with the
financial statements.
`
Opinion on the Company financial statements
In our opinion:
* the parent company financial statements give a true and fair view, in accordance
with IFRSs as adopted by the European Union as applied in accordance with the
provisions of the Companies Act 1985, of the state of the parent company's
affairs as at 31 December 2008;
* the Parent company financial statements have been properly prepared in
accordance with the Companies Act 1985;and
* the information given in the directors' report is consistent with the Parent
company financial statements.
BDO Stoy Hayward LLP
Chartered Accountants and Registered Auditors
55 Baker Street
London
30 June 2009
CONSOLIDATED Income Statement
For the period 1 January 2008 to 31 December 2008
+----------------------------------------------+----------+---------+-----------+
| | | 2008 | 2007 |
+----------------------------------------------+----------+---------+-----------+
| | Notes | GBP'000 | GBP'000 |
+----------------------------------------------+----------+---------+-----------+
| | | | |
+----------------------------------------------+----------+---------+-----------+
| Revenue | | 330 | - |
| | | | |
+----------------------------------------------+----------+---------+-----------+
| Cost of sales | | (1,005) | - |
+----------------------------------------------+----------+---------+-----------+
| | | | |
+----------------------------------------------+----------+---------+-----------+
| Gross Loss | | (675) | - |
+----------------------------------------------+----------+---------+-----------+
| | | | |
+----------------------------------------------+----------+---------+-----------+
| | | | |
+----------------------------------------------+----------+---------+-----------+
| Other administration expenses | | (1,697) | (799) |
+----------------------------------------------+----------+---------+-----------+
| | | | |
+----------------------------------------------+----------+---------+-----------+
| Share based payments expense | 19 | - | (120) |
+----------------------------------------------+----------+---------+-----------+
| | | | |
+----------------------------------------------+----------+---------+-----------+
| | | | |
+----------------------------------------------+----------+---------+-----------+
| Total administrative expenses | 4 | (1,697) | (919) |
+----------------------------------------------+----------+---------+-----------+
| | | | |
+----------------------------------------------+----------+---------+-----------+
| Interest income | 5 | 31 | 69 |
| Other income | 10 | 92 | - |
| Interest expense | | (325) | - |
+----------------------------------------------+----------+---------+-----------+
| | | | |
+----------------------------------------------+----------+---------+-----------+
| Loss before taxation | | (2,574) | (850) |
+----------------------------------------------+----------+---------+-----------+
| | | | |
+----------------------------------------------+----------+---------+-----------+
| Income tax expense | 6 | - | - |
+----------------------------------------------+----------+---------+-----------+
| | | | |
+----------------------------------------------+----------+---------+-----------+
| Loss for the period | | (2,574) | (850) |
+----------------------------------------------+----------+---------+-----------+
| | | | |
+----------------------------------------------+----------+---------+-----------+
| | | | |
+----------------------------------------------+----------+---------+-----------+
| Loss per share expressed in pence per share | | | |
+----------------------------------------------+----------+---------+-----------+
| - Basic and diluted | 9 | (0.34) | (0.20) |
+----------------------------------------------+----------+---------+-----------+
| | | | |
+----------------------------------------------+----------+---------+-----------+
All amounts above relate to continuing operations.
CONSOLIDATED Balance Sheet
As at 31 December 2008
+----------------------------------------------+-----+---------+----------+----------+
| | Notes | 2008 | 2007 |
| | | GBP'000 | GBP'000 |
+----------------------------------------------+---------------+----------+----------+
| | | | |
+----------------------------------------------+---------------+----------+----------+
| Assets | | | |
+----------------------------------------------+---------------+----------+----------+
| Non-current assets | | | |
+----------------------------------------------+---------------+----------+----------+
| Intangible assets | 11 | 19,345 | 9,693 |
+----------------------------------------------+---------------+----------+----------+
| Property, plant & equipment | 14 | 4,260 | 916 |
+----------------------------------------------+---------------+----------+----------+
| Total non-current assets | | 23,605 | 10,609 |
+----------------------------------------------+---------------+----------+----------+
| | | | |
+----------------------------------------------+---------------+----------+----------+
| Current assets | | | |
+----------------------------------------------+---------------+----------+----------+
| Cash and cash equivalents | 10 | 488 | 1,204 |
+----------------------------------------------+---------------+----------+----------+
| Other receivables | 15 | 680 | 2,670 |
+----------------------------------------------+---------------+----------+----------+
| Total current assets | | 1,168 | 3,874 |
+----------------------------------------------+---------------+----------+----------+
| | | | |
+----------------------------------------------+---------------+----------+----------+
| TOTAL ASSETS | | 24,773 | 14,483 |
+----------------------------------------------+---------------+----------+----------+
| | | | |
+----------------------------------------------+---------------+----------+----------+
| Liabilities | | | |
+----------------------------------------------+---------------+----------+----------+
| Current liabilities | | | |
+----------------------------------------------+---------------+----------+----------+
| Trade and other payables | 16 | (2,965) | (536) |
+----------------------------------------------+---------------+----------+----------+
| Financial liabilities | 17 | (4,257) | - |
+----------------------------------------------+---------------+----------+----------+
| Total current liabilities | | (7,222) | (536) |
+----------------------------------------------+---------------+----------+----------+
| | | | |
+----------------------------------------------+---------------+----------+----------+
| TOTAL LIABILITIES | | (7,222) | (536) |
+----------------------------------------------+---------------+----------+----------+
| | | | |
+----------------------------------------------+---------------+----------+----------+
| Net current assets/(liabilities) | | (6,054) | 3,338 |
+----------------------------------------------+---------------+----------+----------+
| | | | |
+----------------------------------------------+---------------+----------+----------+
| NET ASSETS | | 17,551 | 13,947 |
+----------------------------------------------+---------------+----------+----------+
| | | | |
+----------------------------------------------+---------------+----------+----------+
| SHAREHOLDERS EQUITY | | | |
+----------------------------------------------------+---------+----------+----------+
| Share capital | 18 | 1,037 | 704 |
+----------------------------------------------+---------------+----------+----------+
| Share premium | | 14,168 | 12,226 |
+----------------------------------------------+---------------+----------+----------+
| Merger reserve | 25 | 2,120 | 2,120 |
+----------------------------------------------+---------------+----------+----------+
| Share-based payments reserve | 25 | 186 | 186 |
+----------------------------------------------+---------------+----------+----------+
| Foreign exchange reserve | 25 | 3,710 | (193) |
+----------------------------------------------+---------------+----------+----------+
| Retained earnings | 25 | (3,670) | (1,096) |
+----------------------------------------------+---------------+----------+----------+
| Total equity | | 17,551 | 13,947 |
+----------------------------------------------+-----+---------+----------+----------+
COMPANY Balance Sheet
As at 31 December 2008
+-----------------------------------------------+-----+--------+----------+----------+
| | Notes | 2008 | 2007 |
| | | GBP'000 | GBP'000 |
+-----------------------------------------------------+--------+----------+----------+
| | | | |
+-----------------------------------------------------+--------+----------+----------+
| Assets | | | |
+-----------------------------------------------------+--------+----------+----------+
| Non-current assets | | | |
+-----------------------------------------------------+--------+----------+----------+
| Investment in subsidiaries | 12 | - | 2,419 |
+-----------------------------------------------------+--------+----------+----------+
| Loans to subsidiaries | 13 | - | 8,253 |
+-----------------------------------------------------+--------+----------+----------+
| Property, plant & equipment | 14 | 8 | 14 |
+-----------------------------------------------------+--------+----------+----------+
| Total non-current assets | | 8 | 10,686 |
+-----------------------------------------------------+--------+----------+----------+
| | | | |
+-----------------------------------------------------+--------+----------+----------+
| Current assets | | | |
+-----------------------------------------------------+--------+----------+----------+
| Cash and cash equivalents | 10 | 118 | 1,181 |
+-----------------------------------------------------+--------+----------+----------+
| Other receivables | 15 | 601 | 2,649 |
+-----------------------------------------------------+--------+----------+----------+
| Total current assets | | 719 | 3,830 |
+-----------------------------------------------------+--------+----------+----------+
| | | | |
+-----------------------------------------------------+--------+----------+----------+
| TOTAL ASSETS | | 727 | 14,516 |
+-----------------------------------------------------+--------+----------+----------+
| | | | |
+-----------------------------------------------------+--------+----------+----------+
| Liabilities | | | |
+-----------------------------------------------------+--------+----------+----------+
| Current liabilities | | | |
+-----------------------------------------------------+--------+----------+----------+
| Other payables | 16 | (92) | (119) |
+-----------------------------------------------------+--------+----------+----------+
| Total current liabilities | | (92) | (119) |
+-----------------------------------------------------+--------+----------+----------+
| | | | |
+-----------------------------------------------------+--------+----------+----------+
| TOTAL LIABILITIES | | (92) | (119) |
+-----------------------------------------------------+--------+----------+----------+
| | | | |
+-----------------------------------------------------+--------+----------+----------+
| Net current assets | | 627 | 3,711 |
+-----------------------------------------------------+--------+----------+----------+
| | | | |
+-----------------------------------------------------+--------+----------+----------+
| NET ASSETS | | 635 | 14,397 |
+-----------------------------------------------------+--------+----------+----------+
| | | | |
+-----------------------------------------------------+--------+----------+----------+
| SHAREHOLDERS EQUITY | | | |
+-----------------------------------------------+--------------+----------+----------+
| Share capital | 18 | 1,037 | 704 |
+-----------------------------------------------------+--------+----------+----------+
| Share premium | | 14,168 | 12,226 |
+-----------------------------------------------------+--------+----------+----------+
| Merger reserve | 25 | 2,120 | 2,120 |
+-----------------------------------------------------+--------+----------+----------+
| Share-based payments reserves | 25 | 186 | 186 |
+-----------------------------------------------------+--------+----------+----------+
| Retained earnings | 25 | (16,876) | (839) |
+-----------------------------------------------------+--------+----------+----------+
| Total equity | | 635 | 14,397 |
+-----------------------------------------------+-----+--------+----------+----------+
CONSOLIDATED Cash Flow Statement
For the period 1 January to 31 December 2008
+----------------------------------------------+----------+----------+----------+
| | | 2008 | 2007 |
+----------------------------------------------+----------+----------+----------+
| | Notes | GBP'000 | GBP'000 |
+----------------------------------------------+----------+----------+----------+
| | | | |
+----------------------------------------------+----------+----------+----------+
| Cash flows from operating activities | | | |
+----------------------------------------------+----------+----------+----------+
| Loss for the period | | (2,574) | (850) |
| Adjustments for; | | | |
+----------------------------------------------+----------+----------+----------+
| Interest income | | (31) | (69) |
+----------------------------------------------+----------+----------+----------+
| Interest expense | | 325 | - |
+----------------------------------------------+----------+----------+----------+
| Depreciation and amortisation | | 12 | 9 |
+----------------------------------------------+----------+----------+----------+
| Foreign exchange | | (151) | 38 |
+----------------------------------------------+----------+----------+----------+
| Share based payment | 19 | - | 120 |
+----------------------------------------------+----------+----------+----------+
| Cash flow from operating activities before | | (2,419) | (752) |
| changes in working capital | | | |
+----------------------------------------------+----------+----------+----------+
| | | | |
+----------------------------------------------+----------+----------+----------+
| (Increase)/decrease in trade and other | | (62) | 85 |
| receivables | | | |
+----------------------------------------------+----------+----------+----------+
| (Increase)/decrease in other assets | | - | - |
+----------------------------------------------+----------+----------+----------+
| Increase/(decrease) in trade and other | | 2,429 | 72 |
| payables | | | |
+----------------------------------------------+----------+----------+----------+
| Net cash used in operating activities | | (52) | (595) |
+----------------------------------------------+----------+----------+----------+
| | | | |
+----------------------------------------------+----------+----------+----------+
| Cash flows from investing activities | | | |
+----------------------------------------------+----------+----------+----------+
| Interest received | | 31 | 65 |
+----------------------------------------------+----------+----------+----------+
| Interest paid | | (325) | - |
+----------------------------------------------+----------+----------+----------+
| Net cash generated from investing activities | | (294) | 65 |
+----------------------------------------------+----------+----------+----------+
| | | | |
+----------------------------------------------+----------+----------+----------+
| Cash flows from investing activities | | | |
+----------------------------------------------+----------+----------+----------+
| Payments to acquire intangible assets | | (5,999) | (4,303) |
+----------------------------------------------+----------+----------+----------+
| Payments to acquire property, plant and | | (3,011) | (25) |
| equipment | | | |
+----------------------------------------------+----------+----------+----------+
| Net cash used in investing activities | | (9,010) | (4,328) |
+----------------------------------------------+----------+----------+----------+
| | | | |
+----------------------------------------------+----------+----------+----------+
| Cash flows from financing activities | | | |
+----------------------------------------------+----------+----------+----------+
| Issue of ordinary share capital | | 4,442 | 3,403 |
+----------------------------------------------+----------+----------+----------+
| Costs relating to issue of equity | | (115) | (38) |
+----------------------------------------------+----------+----------+----------+
| Proceeds from borrowings | | 4,257 | - |
+----------------------------------------------+----------+----------+----------+
| Net cash generated from financing activities | | 8,584 | 3,365 |
+----------------------------------------------+----------+----------+----------+
| | | | |
+----------------------------------------------+----------+----------+----------+
| Net (decrease)/increase in cash and cash | | (772) | (1,493) |
| equivalents in the period | | | |
+----------------------------------------------+----------+----------+----------+
| Cash and cash equivalents at beginning of | 10 | 1,204 | 2,697 |
| period | | | |
+----------------------------------------------+----------+----------+----------+
| Exchange gains/(losses) on cash and cash | | 56 | - |
| equivalents | | | |
+----------------------------------------------+----------+----------+----------+
| Cash and cash equivalents at end of period | 10 | 488 | 1,204 |
+----------------------------------------------+----------+----------+----------+
COMPANY Cash Flow Statement
For the period 1 January to 31 December 2008
+----------------------------------------------+----------+----------+----------+
| | | 2008 | 2007 |
+----------------------------------------------+----------+----------+----------+
| | Notes | GBP'000 | GBP'000 |
+----------------------------------------------+----------+----------+----------+
| | | | |
+----------------------------------------------+----------+----------+----------+
| Cash flows from operating activities | | | |
+----------------------------------------------+----------+----------+----------+
| Loss for the period | | (16,037) | (594) |
+----------------------------------------------+----------+----------+----------+
| Adjustments for: | | | |
+----------------------------------------------+----------+----------+----------+
| Interest income | | (31) | (69) |
+----------------------------------------------+----------+----------+----------+
| Depreciation | | 6 | 6 |
+----------------------------------------------+----------+----------+----------+
| Provision for impairment of loans to | | 13,093 | - |
| subsidiary companies | | | |
+----------------------------------------------+----------+----------+----------+
| Write-down of investments | | 2,419 | - |
+----------------------------------------------+----------+----------+----------+
| Share based payment | 19 | - | 120 |
+----------------------------------------------+----------+----------+----------+
| Cash flow from operating activities before | | (550) | (537) |
| changes in working capital | | | |
+----------------------------------------------+----------+----------+----------+
| (Increase)/decrease in trade and other | | (4) | 106 |
| receivables | | | |
+----------------------------------------------+----------+----------+----------+
| Increase/(decrease) in trade and other | | (27) | 27 |
| payables | | | |
+----------------------------------------------+----------+----------+----------+
| Net cash used in operating activities | | (581) | (404) |
+----------------------------------------------+----------+----------+----------+
| | | | |
+----------------------------------------------+----------+----------+----------+
| Cash flows from investing activities | | | |
+----------------------------------------------+----------+----------+----------+
| Interest received | | 31 | 65 |
+----------------------------------------------+----------+----------+----------+
| Net cash generated from investing activities | | 31 | 65 |
+----------------------------------------------+----------+----------+----------+
| | | | |
+----------------------------------------------+----------+----------+----------+
| Cash flows from investing activities | | | |
+----------------------------------------------+----------+----------+----------+
| Advances to related parties | | (4,840) | (4,542) |
+----------------------------------------------+----------+----------+----------+
| Net cash used in investing activities | | (4,840) | (4,542) |
+----------------------------------------------+----------+----------+----------+
| | | | |
+----------------------------------------------+----------+----------+----------+
| Cash flows from financing activities | | | |
+----------------------------------------------+----------+----------+----------+
| Issue of ordinary share capital | | 4,442 | 3,403 |
+----------------------------------------------+----------+----------+----------+
| Costs relating to issue of equity | | (115) | (38) |
+----------------------------------------------+----------+----------+----------+
| Net cash generated from financing activities | | 4,327 | 3,365 |
+----------------------------------------------+----------+----------+----------+
| | | | |
+----------------------------------------------+----------+----------+----------+
| Net (decrease)/increase in cash and cash | | (1,063) | (1,516) |
| equivalents in the period | | | |
+----------------------------------------------+----------+----------+----------+
| Cash and cash equivalents at beginning of | 10 | 1,181 | 2,697 |
| period | | | |
+----------------------------------------------+----------+----------+----------+
| Cash and cash equivalents at end of period | 10 | 118 | 1,181 |
+----------------------------------------------+----------+----------+----------+
Consolidated Statement of Changes in Equity
For the period 1 January 2008 to 31 December 2008
+----------------+---------+---------+-------------+---------+---------+----------+---------+
| | | | | | | | |
+----------------+---------+---------+-------------+---------+---------+----------+---------+
| | Share | Share | Foreign | Merger | Share | Retained | Total |
| | capital | premium | currency | Reserve | based | earnings | equity |
| | | reserve | translation | | payment | | |
| | | | reserve | | reserve | | |
+----------------+---------+---------+-------------+---------+---------+----------+---------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+----------------+---------+---------+-------------+---------+---------+----------+---------+
| As at 1 | 704 | 12,226 | (193) | 2,120 | 186 | (1,096) | 13,947 |
| January 2008 | | | | | | | |
+----------------+---------+---------+-------------+---------+---------+----------+---------+
| Exchange | - | - | 3,903 | - | - | - | 3,903 |
| differences on | | | | | | | |
| translation of | | | | | | | |
| foreign | | | | | | | |
| operations and | | | | | | | |
| total net | | | | | | | |
| expenses | | | | | | | |
| recognised | | | | | | | |
| directly in | | | | | | | |
| equity | | | | | | | |
+----------------+---------+---------+-------------+---------+---------+----------+---------+
| Loss for the | | - | - | - | - | (2,574) | (2,574) |
| period | | | | | | | |
| | | | | | | | |
+----------------+---------+---------+-------------+---------+---------+----------+---------+
| Total | - | - | 3,903 | - | - | (2,574) | 1,329 |
| recognised | | | | | | | |
| income and | | | | | | | |
| expense for | | | | | | | |
| the period | | | | | | | |
+----------------+---------+---------+-------------+---------+---------+----------+---------+
| Issue of share | 333 | 2,057 | - | - | - | - | 2,390 |
| capital | | | | | | | |
+----------------+---------+---------+-------------+---------+---------+----------+---------+
| Cost of issue | - | (115) | - | - | - | - | (115) |
| of share | | | | | | | |
| capital | | | | | | | |
+----------------+---------+---------+-------------+---------+---------+----------+---------+
| | 333 | 1,942 | - | - | - | - | 2,275 |
+----------------+---------+---------+-------------+---------+---------+----------+---------+
| As at 31 | 1,037 | 14,168 | 3,710 | 2,120 | 186 | (3,670) | 17,551 |
| December 2008 | | | | | | | |
+----------------+---------+---------+-------------+---------+---------+----------+---------+
Refer to Note 25 for definitions of equity reserves.
Consolidated Statement of Changes in Equity
For the period 1 January to 31 December 2007
+----------------+---------+---------+-------------+---------+---------+----------+---------+
| | Share | Share | Foreign | Merger | Share | Retained | Total |
| | capital | premium | currency | Reserve | based | earnings | equity |
| | | reserve | translation | | payment | | |
| | | | reserve | | reserve | | |
+----------------+---------+---------+-------------+---------+---------+----------+---------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+----------------+---------+---------+-------------+---------+---------+----------+---------+
| As at 1 | 404 | 6,504 | (171) | 2,720 | 66 | (246) | 9,277 |
| January 2007 | | | | | | | |
| Balance as | | | | | | | |
| previously | | | | | | | |
| reported | | | | | | | |
+----------------+---------+---------+-------------+---------+---------+----------+---------+
| Correction of | - | - | - | (600) | - | - | (600) |
| prior period | | | | | | | |
| adjustment | | | | | | | |
| (Note 24) | | | | | | | |
+----------------+---------+---------+-------------+---------+---------+----------+---------+
| Balance as | 404 | 6,504 | (171) | 2,120 | 66 | (246) | 8,677 |
| restated | | | | | | | |
+----------------+---------+---------+-------------+---------+---------+----------+---------+
| Exchange | - | - | (22) | - | - | - | (22) |
| differences on | | | | | | | |
| translation of | | | | | | | |
| foreign | | | | | | | |
| operations and | | | | | | | |
| total net | | | | | | | |
| expenses | | | | | | | |
| recognised | | | | | | | |
| directly in | | | | | | | |
| equity | | | | | | | |
+----------------+---------+---------+-------------+---------+---------+----------+---------+
| Loss for the | - | - | - | - | - | (850) | (850) |
| period | | | | | | | |
| | | | | | | | |
+----------------+---------+---------+-------------+---------+---------+----------+---------+
| Total | - | - | (22) | - | - | (850) | (872) |
| recognised | | | | | | | |
| income and | | | | | | | |
| expense for | | | | | | | |
| the period | | | | | | | |
+----------------+---------+---------+-------------+---------+---------+----------+---------+
| Issue of share | 300 | 5,890 | - | - | - | - | 6,190 |
| capital | | | | | | | |
+----------------+---------+---------+-------------+---------+---------+----------+---------+
| Cost of issue | - | (168) | - | - | - | - | (168) |
| of share | | | | | | | |
| capital | | | | | | | |
+----------------+---------+---------+-------------+---------+---------+----------+---------+
| Recognition of | - | - | - | - | 120 | - | 120 |
| share based | | | | | | | |
| payments | | | | | | | |
+----------------+---------+---------+-------------+---------+---------+----------+---------+
| | 300 | 5,722 | - | - | 120 | - | 6,142 |
+----------------+---------+---------+-------------+---------+---------+----------+---------+
| As at 31 | 704 | 12,226 | (193) | 2,120 | 186 | (1,096) | 13,947 |
| December 2007 | | | | | | | |
+----------------+---------+---------+-------------+---------+---------+----------+---------+
| | | | | | | | |
+----------------+---------+---------+-------------+---------+---------+----------+---------+
| | | | | | | | |
+----------------+---------+---------+-------------+---------+---------+----------+---------+
| | | | | | | | |
+----------------+---------+---------+-------------+---------+---------+----------+---------+
Refer to Note 25 for definitions of equity reserves
CoMPANY Statements of Changes in Equity
+----------------------+---------+---------+---------+---------+----------+----------+
| | Share | Share | | Share | Retained | Total |
| | capital | premium | Merger | based | earnings | equity |
| | | reserve | Reserve | payment | | |
| | | | | reserve | | |
+----------------------+---------+---------+---------+---------+----------+----------+
| | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 |
+----------------------+---------+---------+---------+---------+----------+----------+
| As at 1 January 2008 | 704 | 12,226 | 2,120 | 186 | (839) | 14,397 |
+----------------------+---------+---------+---------+---------+----------+----------+
| | | | | | | |
| Loss for the period | - | - | - | - | (16,037) | (16,037) |
+----------------------+---------+---------+---------+---------+----------+----------+
| Total recognised | - | - | - | - | (16,037) | (16,037) |
| income and expense | | | | | | |
| for the period | | | | | | |
+----------------------+---------+---------+---------+---------+----------+----------+
| | 333 | 2,057 | - | - | - | 2,390 |
| Issue of share | | | | | | |
| capital | | | | | | |
+----------------------+---------+---------+---------+---------+----------+----------+
| | - | (115) | - | - | - | (115) |
| Cost of issue of | | | | | | |
| share capital | | | | | | |
+----------------------+---------+---------+---------+---------+----------+----------+
| | 333 | 1,942 | | | | 2,275 |
+----------------------+---------+---------+---------+---------+----------+----------+
| As at 31 December | 1,037 | 14,168 | 2,120 | 186 | (16,876) | 635 |
| 2008 | | | | | | |
+----------------------+---------+---------+---------+---------+----------+----------+
+----------------+---------+---------+---------+---------+----------+---------+
| | Share | Share | Merger | Share | Retained | Total |
| | capital | premium | Reserve | based | earnings | equity |
| | | reserve | | payment | | |
| | | | | reserve | | |
+----------------+---------+---------+---------+---------+----------+---------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+----------------+---------+---------+---------+---------+----------+---------+
| As at 1 | | | | | | |
| January 2007 | | | | | | |
| | | | | | | |
+----------------+---------+---------+---------+---------+----------+---------+
| Balance as | 404 | 6,504 | 2,720 | 66 | (245) | 9,449 |
| previously | | | | | | |
| reported | | | | | | |
+----------------+---------+---------+---------+---------+----------+---------+
| Correction of | - | - | (600) | - | - | (600) |
| prior period | | | | | | |
| adjustment | | | | | | |
| (Note 24) | | | | | | |
+----------------+---------+---------+---------+---------+----------+---------+
| Balance as | 404 | 6,504 | 2,120 | 66 | (245) | 8,849 |
| restated | | | | | | |
+----------------+---------+---------+---------+---------+----------+---------+
| Loss for the | - | - | - | - | (594) | (594) |
| period | | | | | | |
| | | | | | | |
+----------------+---------+---------+---------+---------+----------+---------+
| Total | - | - | - | - | (594) | (594) |
| recognised | | | | | | |
| income and | | | | | | |
| expense for | | | | | | |
| the period | | | | | | |
+----------------+---------+---------+---------+---------+----------+---------+
| Issue of share | 300 | 5,890 | - | - | - | 6,190 |
| capital | | | | | | |
+----------------+---------+---------+---------+---------+----------+---------+
| Cost of issue | - | (168) | - | - | - | (168) |
| of share | | | | | | |
| capital | | | | | | |
+----------------+---------+---------+---------+---------+----------+---------+
| Recognition of | - | - | - | 120 | - | 120 |
| share | | | | | | |
| based payments | | | | | | |
+----------------+---------+---------+---------+---------+----------+---------+
| | 300 | 5,722 | - | 120 | - | 6,142 |
+----------------+---------+---------+---------+---------+----------+---------+
| As at 31 | 704 | 12,226 | 2,120 | 186 | (839) | 14,397 |
| December 2007 | | | | | | |
+----------------+---------+---------+---------+---------+----------+---------+
Refer to Note 25 for definitions of equity reserves.
NOTES TO THE FINANCIAL STATEMENTS
For the 12 month period to 31 December 2008
1. Accounting Policies
The principal accounting policies are summarised below. They have all been
applied consistently throughout the period.
Basis of preparation
The Consolidated and Company financial statements have been prepared in
accordance with International Financial Reporting Standards and IFRIC
interpretations issued by the International Accounting Standards Board (IASB) as
adopted by the European Union and with those parts of the Companies Act 1985
applicable to companies reporting under IFRS.
The company has taken advantage of the exemption allowed under section 230 of
the Companies Act 1985 and has not presented its own income statement in these
financial statements. The Group loss for the year is GBP2.574m (2007: loss of
GBP0.850m). The loss for the Company for the year is GBP16.037m (2007: loss of
GBP0.594m).
Going Concern
The Group financial statements are subject to significant uncertainties as
detailed in the notes to the financial statements. As a result, the Group's US
subsidiaries do not have sufficient liquid resources to meet their current
obligations and may possibly be liquidated. The financial statements do not
include the adjustments required to present the financial statements on a break
up basis, the prevalent uncertainties prohibit a reliable estimation of
recoverable values of the US subsidiaries.
After taking appropriate professional advice, the Directors believe that the
liabilities of the subsidiaries are ring fenced in these entities. In the event
that the Directors of the Company are not able to successfully conclude a work
out of the debts and liabilities of the US subsidiaries, the Company may become
an investment shell. Negotiations are in progress to acquire further assets and
raise capital.
The Company has sufficient cash to meet it's current obligations as at the year
end and to fund activities at the current "burn rate", but will need to raise
further equity funds within the next 12 months in order to fund any potential
transaction. The Directors are confident about raising sufficient funds for the
Company to be a going concern, and therefore the financial statements of the
Company are prepared on a going concern basis.
Change in Accounting Policy
* New standards, amendments to published standards and interpretations to existing
standards effective on 1 January 2008 adopted by the group.
+-------------------------+------------------------------------+---------------+
| New and revised | Standard | Effective for |
| standards effective for | | annual |
| 31 December 2008 | | periods |
| year-ends | | beginning on |
| | | or after |
+-------------------------+------------------------------------+---------------+
| Interpretations | IFRIC 11 - IFRS 2 Group and | 1 March 2007 |
| | Treasury Share Transactions | 1 January |
| | IFRIC 12 - Service Concession | 2008 |
| | Arrangements | 1 January |
| | IFRIC 14 - IAS 19 The Limit on a | 2008 |
| | Defined Benefit Asset, Minimum | |
| | Funding Requirements and their | |
| | Interaction | |
| | | |
+-------------------------+------------------------------------+---------------+
b. New standards, amendments to published standards and interpretations to
existing standards in issue at 31 December 2008 but not yet effective, that will
be applicable to the group in the future.
+-------------------------+------------------------------------+---------------+
| New and revised | Standard | Effective for |
| standards issued but | | annual |
| not effective for 31 | | periods |
| December 2008 year-ends | | beginning on |
| | | or after |
+-------------------------+------------------------------------+---------------+
| New Standard | IFRS 8 - Operating Segments | 1 January |
| | | 2009 |
+-------------------------+------------------------------------+---------------+
| Amendment | IFRS 3* - Business Combinations | 1 July 2009 |
| | IFRS 2 - Share-based Payment - | 1 January |
| | Vesting Conditions and | 2009 |
| | Cancellations | 1 January |
| | IAS 1 - Presentation of Financial | 2009 |
| | Statements - A revised Approach | 1 January |
| | IAS 23 - Borrowing Costs | 2009 |
| | IAS 27 - Consolidated and Separate | 1 July 2009 |
| | Financial Statements | 1 January |
| | IAS 32 and 1* - Puttable Financial | 2009 |
| | Instruments and Obligations | 1 July 2008 |
| | Arising on Liquidation | 30 June 2009 |
| | IAS 39 and IFRS 7 - | 1 July 2009 |
| | Reclassification of Financial | 1 January |
| | Instruments | 2010 |
| | IFRIC 9 and IAS 39* - Embedded | 1 January |
| | Derivatives | 2010 |
| | IAS 39 Financial Instruments: | |
| | Recognition and Measurement: | |
| | Eligible Hedged Items* | |
| | Improvements to IFRSs* | |
| | IFRS 2 - Group Cash-settled | |
| | Share-based Payment Transactions | |
| | | |
+-------------------------+------------------------------------+---------------+
| Interpretations | IFRIC 13 - Customer Loyalty | 1 July 2008 |
| | Programmes | 1 January |
| | IFRIC 15* - Agreements for the | 2009 |
| | Construction of Real Estate | 1 October |
| | IFRIC 16 - Hedges of a Net | 2008 |
| | Investment in a Foreign Operation | 1 July 2009 |
| | IFRIC 17 - Distributions of | 1 July 2009 |
| | Non-cash Assets to Owners* | |
| | IFRIC 18 - Transfer of Assets from | |
| | Customers* | |
+-------------------------+------------------------------------+---------------+
Items marked * had not yet been endorsed by the European Union at the date that
these financial statements were approved and authorised for issue by the Board.
The standards listed above that are not yet effective are not expected to have a
significant impact on the Group.
Basis of consolidation
The consolidated financial information incorporates the results of the Company
and its subsidiaries ("the Group") as if they formed a single entity. The Group
consists of all 100% owned subsidiaries. Intercompany transactions and balances
between group companies are therefore eliminated in full.
Business Combinations
The consolidated financial statements incorporate the results of the business
combinations using the purchase method. In the consolidated balance sheet, the
acquiree's identifiable assets, liabilities and contingent liabilities are
initially recognised at their fair values at the acquisition date. The results
of acquired operations are included in the consolidated income statement from
the date on which control is obtained.
The merger reserve relates to the utilisation of the provisions in section 131
for merger relief in the Companies Act 1985. This relief arose on the
acquisition of subsidiaries in a share for share exchange in the period ended 31
December 2006.
The Company's Investments in Subsidiaries
In its separate financial statements the Company recognises its investments in
subsidiaries at cost, less any impairment for permanent diminution in value. The
cost of acquisition includes directly attributable professional fees and other
expenses incurred in connection with the acquisition.
Revenue
The Group had turnover of GBP330,000 during the period based on returns provided
by the operator.
Revenue arises from sales of oil and gas to third parties. Revenue is recognised
at the point of delivery to the purchaser, which is normally on delivery into
pipelines.
Interest revenue is accrued on a time basis, by reference to the principal
outstanding and at the effective interest rate applicable, which is the rate
that exactly discounts estimated future cash receipts through the expected life
of the financial asset to that asset's net carrying amount.
Foreign currencies
Transactions entered into by group entities in currency other than the currency
of the primary economic environment in which they operate (the "functional"
currency) are recorded at rates ruling when the transactions occur. Foreign
currency monetary assets and liabilities are translated at the rates ruling at
the balance sheet date.
On consolidation, the results of the overseas operations are translated into
Pounds Sterling at average rates approximating to those ruling when the
transactions took place. All assets and liabilities of overseas operations are
translated at the rate ruling at the balance sheet date. Exchange differences
arising on translating the opening net assets at open rate and the results of
overseas operations at actual rate are recognised directly in equity (the
"foreign currency translation reserve")
Cash and cash equivalents
Cash consists of cash on hand and cash held on current account or on short term
deposits with an original maturity of 3 months or less at variable interest
rates.
For the purposes of the Cash Flow Statement, cash and cash equivalents consist
of cash and cash equivalents as defined above.
There is no significant difference between the carrying value and fair value of
cash and cash equivalents.
Financial assets
The group classifies its financial assets into one of the categories discussed
below, depending on the purpose for which the asset was acquired. The only
financial assets currently held by the group are classified as loans and
receivables.
The group's accounting policy for each category is as follows:
Loans and receivables: These assets are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active market. They are
initially recognised at fair value plus transaction costs that are directly
attributable to their acquisition or issue, and are subsequently carried at
amortised cost using the effective interest rate method, less provision for
impairment.
Impairment provisions are recognised when there is objective evidence (such as
significant financial difficulties on the part of the counterparty or default or
significant delay in payment) that the group will be unable to collect all of
the amounts due under the terms receivable, the amount of such a provision being
the difference between the net carrying amount and the present value of the
future expected cash flows associated with the impaired receivable. For
receivables, which are reported net, such provisions are recorded in a separate
allowance account with the loss being recognised within administrative expenses
in the income statement. On confirmation that the receivable will not be
collectable, the gross carrying value of the asset is written off against the
associated provision.
The Group's loans and receivables comprise trade and other receivables and cash
and cash equivalents in the balance sheet.
There is no significant difference between the carrying value and fair value of
receivables.
Cash and cash equivalents includes cash in hand and other short term highly
liquid investments with a maturity of 3 months or less. Any interest earned is
accrued monthly and classified as interest. Short term deposits comprise
deposits made for varying periods of between one day and three months.
Trade and other receivables are initially measured at fair value and
subsequently at amortised cost (using the effective interest rate) less
allowance for impairment.
Fair value through profit or loss: The group does not have any assets held for
trading nor does it voluntarily classify any financial assets as being at fair
value through profit or loss.
Financial liabilities
The group classifies its financial liabilities into one of two categories,
depending on the purpose for which the liability was assumed. These are either
fair value through profit or loss and other financial liabilities. At present,
the Group does not have any liabilities classified as fair value through profit
or loss.
The group's accounting policy for the other financial liabilities category is as
follows:
Other financial liabilities: Other financial liabilities include the following
items:
Trade payables and other short-term monetary liabilities, which are initially
recognised at fair value and subsequently carried at amortised cost using the
effective interest method. All interest and other borrowing costs incurred in
connection with the above are expensed as incurred and reported as part of
financing costs in the income statement.
Intangible assets - Oil and gas exploration and evaluation assets
The Group applies the full cost method of accounting for Exploration and
Evaluation ("E&E") costs, where costs of exploring for and evaluating oil and
gas properties are accumulated and capitalised by reference to appropriate cost
pools. Such cost pools are based on geographic areas and are not larger than a
segment. The Group currently has two cost pools being the Kansas, USA, region
and the Oklahoma, USA region.
E&E costs are capitalised until the results of the projects are known. The E&E
costs may include costs of licence acquisition, technical services and studies,
seismic acquisition, exploration drilling and testing. E&E costs include an
allocation of salary costs as determined by management on a time apportionment
based on level of effort expended on each cost pool.
Tangible assets acquired for use in E&E activities are classified as property,
plant and equipment.
Intangible E&E assets related to each exploration lease/prospect are not
depreciated and are carried forward until the existence (or otherwise) of
commercial reserves has been determined. The Group's definition of commercial
reserves for such purpose is proven and probable reserves on an entitlement
basis.
If commercial reserves have been discovered, the related E&E assets are assessed
for impairment on a cost pool basis as set out below and any impairment loss is
recognised in the income statement. The carrying value, after any impairment
loss, of the relevant E&E assets is then reclassified as development and
production assets within property, plant and equipment. Such assets are
amortised on a unit of production basis over the life of the commercial reserves
of the pool to which they relate.
Intangible E&E assets that relate to E&E activities that are determined not to
have resulted in the discovery of commercial reserves remain capitalised as
intangible E&E assets at cost, subject to meeting a pool-wide impairment test as
set out below.
E&E assets are assessed for impairment when facts and circumstances suggest that
the carrying amount may exceed its recoverable amount. Such indicators include
the point at which a determination is made as to whether or not commercial
reserves exist. Where the E&E assets concerned fall within the scope of an
established full cost pool, the E&E assets are tested for impairment together
with all development and production assets associated with that cost pool, as a
single cash generating unit. The aggregate carrying value is compared against
the expected recoverable amount of the pool, generally by reference to the
present value of the future net cash flows expected to be derived from
production of commercial reserves. Where the E&E assets to be tested fall
outside the scope of any established cost pool, there will generally be no
commercial reserves and the E&E assets concerned will generally be written off
in full. Any impairment loss is recognised in the income statement as additional
depreciation and separately disclosed.
Further commentary on the consideration of carrying value of E&E assets is
included in Note 11.
Oil and gas assets - Development and production
Development and production assets, representing evaluated leases, are
accumulated on a field-by-field basis and represent the cost of developing the
commercial reserves discovered and bringing them into production, together with
the E&E expenditures incurred in finding commercial reserves transferred from
intangible E&E assets as outlined above.
The net book values of producing assets are depreciated on a field-by-field
basis using the unit of production method by reference to the ratio of
production in the period to the related commercial reserves o the field, taking
into account estimated future development expenditures necessary to bring those
reserves into production.
An impairment test is performed whenever events and circumstances arising during
the development or production phase indicate that the carrying value of a
development or production asset may exceed its recoverable amount. The aggregate
carrying value is compared against the expected recoverable amount of the cash
generating unit, generally by reference to the present value of the future net
cash flows expected to be derived from production of commercial reserves. The
cash generating unit applied for impairment test purposes is generally the
field, except that a number of field interest may be grouped as a single cash
generating unit where the cash flows of each field are interdependent.
Impairment of non-financial assets
Non-financial assets and identifiable intangibles, other than oil and gas
assets, are reviewed for impairment each reporting date and whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable. If the expected discounted future cash flow from the use of the
assets and their eventual disposition is less than the carrying amount of the
assets, an impairment loss is recognised and measured using the higher of the
asset's fair value less costs to sell and the value in use.
In assessing the value in use, the estimated future cash flows are discounted to
their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the rises specific to the asset for
which the estimates of future cash flows have not been adjusted.
Property, Plant and Equipment other than oil and gas assets
Plant and equipment is stated at cost less accumulated depreciation and any
accumulated impairment losses.
Depreciation is provided on all plant and equipment to write off the cost less
estimated residual value of each asset over its expected useful economic life on
a straight-line basis at the following annual rates:
Plant and Equipment - between 25% and 33%
The estimated useful lives, residual values and depreciation methods are
reviewed at each year end, with the effect of any changes in estimate accounted
for on a prospective basis.
Taxation
Deferred tax liabilities are generally recognised for all taxable temporary
differences and deferred tax assets are generally recognised for all deductible
temporary differences to the extent that it is probable that taxable profits
will be available against which those deductible temporary differences can be
utilised except for differences arising on investments in subsidiaries and
jointly controlled entities where the group is able to control the timing of the
reversal of the difference and it is probable that the difference will not
reverse in the foreseeable future.
Recognition of the deferred tax assets is restricted to those instances where it
is probable that the taxable profit will be available against which the
difference can be utilised.
Deferred tax is also based on rates enacted or substantively enacted at the
balance sheet date and expected to apply when the related deferred tax asset is
realised or liability settled.
Share-based payments
The Group issues equity-settled share-based payments to certain employees.
Equity-settled share-based payments are measured at fair value at the date of
grant. The equity-settled share-based payments are expensed over a straight line
basis over the vesting period based on the group's estimate of shares that will
eventually vest. The fair value is determined using a Black-Scholes model.
Where equity instruments are granted to persons other than employees, the income
statement is charged with the fair value of goods and services received, except
where it is in respect to costs associated with the issue of securities, in
which case it is charged to the share premium account.
Decommissioning
A provision for decommissioning is to be recognised if, due to the environmental
impact of the operations of the Group, an obligation arises as a result of a
past event, and it is probable that an outflow of economic benefits will be
required to settle the obligation. If the effect is material, provisions are
determined by discounting the expected future cash-flows at a pre-tax rate that
reflects current market assessments of the time value of money and, where
appropriate, the risks specific to the liability.
The extent to which a decommissioning provision is required in respect of
potential obligations depends, inter alia, on the legal requirements at the time
of decommissioning, the cost and timing of any necessary decommissioning works,
and the discount rate to be applied to such costs.
Other Provisions
A provision is recognised in the balance sheet when the Group has a present
legal or constructive obligation as a result of a past event, and it is probable
that an outflow of economic benefits will be required to settle the obligation.
If the effect is material, provisions are determined by discounting the expected
future cash flows at a pre-tax rate that reflects current market assessments of
the time value of money and, where appropriate, the risks specific to the
liability.
Where there is a substantial modification of the terms of an existing liability
it is accounted for as an extinguishment of the old financial instrument and
recognition of a new financial instrument.
Segment Reporting
A business segment is a distinguishable component of an enterprise that is
engaged in providing an individual product or service or a group of related
products or services and that is subject to risks and returns that are different
from those of other business segments. A geographical segment is a
distinguishable component of an enterprise that is engaged in providing products
or services within a particular economic environment and that is subject to
risks and returns that are different from those of components operating in other
economic environments.
2. Financial Instruments - Risk Management
The financial instruments grouped together by class and category are as follows:
Group:
+-------------------------+-------------------------+-------------------------+
| | Loans and Receivables |
+-------------------------+---------------------------------------------------+
| | 2008 | 2007 |
+-------------------------+-------------------------+-------------------------+
| Current financial | GBP'000 | GBP'000 |
| assets | | |
+-------------------------+-------------------------+-------------------------+
| Trade and other | 638 | 2,630 |
| receivables | | |
+-------------------------+-------------------------+-------------------------+
| Cash and cash | 488 | 1,204 |
| equivalents | | |
+-------------------------+-------------------------+-------------------------+
| Total | 1,126 | 3,834 |
+-------------------------+-------------------------+-------------------------+
+-------------------------+-------------------------+-------------------------+
| | Financial Liabilities Measured at Amortised Cost |
+-------------------------+---------------------------------------------------+
| | 2008 | 2007 |
+-------------------------+-------------------------+-------------------------+
| Current financial | GBP'000 | GBP'000 |
| liabilities | | |
+-------------------------+-------------------------+-------------------------+
| Trade and other | 2,965 | 536 |
| payables | | |
+-------------------------+-------------------------+-------------------------+
| Financial liabilities | 4,257 | - |
+-------------------------+-------------------------+-------------------------+
| Total | 7,222 | 536 |
+-------------------------+-------------------------+-------------------------+
Company
+-------------------------+-------------------------+-------------------------+
| | Loans and Receivables |
+-------------------------+---------------------------------------------------+
| | 2008 | 2007 |
+-------------------------+-------------------------+-------------------------+
| Current financial | GBP'000 | GBP'000 |
| assets | | |
+-------------------------+-------------------------+-------------------------+
| Trade and other | 567 | 2,623 |
| receivables | | |
+-------------------------+-------------------------+-------------------------+
| Cash and cash | 118 | 1,181 |
| equivalents | | |
+-------------------------+-------------------------+-------------------------+
| Total | 685 | 3,804 |
+-------------------------+-------------------------+-------------------------+
+-------------------------+-------------------------+-------------------------+
| | Financial Liabilities Measured at Amortised Cost |
+-------------------------+---------------------------------------------------+
| | 2008 | 2007 |
+-------------------------+-------------------------+-------------------------+
| Current financial | GBP'000 | GBP'000 |
| liabilities | | |
+-------------------------+-------------------------+-------------------------+
| Trade and other | 92 | 119 |
| payables | | |
+-------------------------+-------------------------+-------------------------+
| Financial liabilities | - | - |
+-------------------------+-------------------------+-------------------------+
| Total | 92 | 119 |
+-------------------------+-------------------------+-------------------------+
Carrying value of the financial assets in the balance sheet is equal to the
maximum exposure to credit risk.
The group is exposed through its operations to the following financial risks:
* Foreign exchange risk
* Interest rate risk
* Liquidity risk
* Credit risk
In common with all other businesses, the group is exposed to risks that arise
from its use of financial instruments. This note describes the group's
objectives, policies and processes for managing those risks and the methods used
to measure them. Further quantitative information in respect of these risks is
presented throughout these financial statements. References in this note to the
Group are also applicable to the Company, unless explicit differences arise
between the Group and Company risks, which are therefore stated.
There have been no substantive changes in the group's exposure to financial
instrument risks, its
objectives, policies and processes for managing those risks or the methods used
to measure them from previous periods unless otherwise stated in this note.
Principal financial instruments
The principal financial instruments used by the Group, from which financial
instrument risk arises, are as follows:
- trade receivables
- cash at bank
- trade and other payables
- loans with related parties
General objectives, policies and processes
The Board has overall responsibility for the determination of the group's risk
management objectives and policies. The Board receives monthly reports from the
group Financial Controller through which it reviews the effectiveness of the
processes put in place and the appropriateness of the objectives and policies it
sets.
Management review the Group and Company's exposure to currency risk, interest
rate risk, liquidity risk and credit risk on a regular basis and consider that
through this review they manage the exposure of the Group and Company.
The overall objective of the Board is to set polices that seek to reduce risk as
far as possible without unduly affecting the Group's competitiveness and
flexibility. Further details regarding these policies are set out below.
No formal policies have been put in place in order to hedge the Group and
Company's activities to the exposure to currency risk or interest risk.
Foreign exchange risk
Foreign exchange risk arises because the Group has operations located in the
United States of America whose functional currency is not the same as the
functional currency in which the Head Company operates and raises finance. The
Group's net assets arising from such overseas operations are exposed to currency
risk resulting in gains or losses on retranslation into sterling.
Only in exceptional circumstances will the Group consider hedging its net
investments in overseas operations as generally it does not consider that the
reduction in foreign currency exposure warrants the cash flow risk created from
such hedging techniques.
The Group's policy is, where possible, to allow group entities to settle
liabilities denominated in their functional currency (primarily US dollar or
pound sterling) with the cash generated from their own operations in that
currency. Where Group entities have liabilities denominated in a currency other
than their functional currency (and have insufficient reserves of that currency
to settle them) cash already denominated in that currency will, where possible,
be transferred from elsewhere within the Group.
At the balance sheet date the Group had trade and other payables of GBP2,873,000
(2007: GBP536,000) denominated in US dollars and financial liabilities of
GBP4,257,000 (2007: GBPnil). Refer note 16 in respect of trade and other
payables and note 17 in respect of financial liabilities.
Interest Rate Risk
The Group and Company manage the interest rate risk associated with the Group
cash assets by ensuring that interest rates are as favourable as possible,
whether this is through investment in floating or fixed interest rate deposits,
whilst managing the access the Group requires to the funds for working capital
purposes.
Liquidity risk
Liquidity risk arises from the Group's management of working capital and the
finance charges and principal repayments on its debt instruments. It is the risk
that the group will encounter difficulty in meeting its financial obligations as
they fall due. Short term payables are classified as those payables that are due
within 30 days.
The Board receives cash flow projections as well as information regarding cash
balances.
Capital Disclosures
The Group considers its capital to comprise its ordinary share capital, share
premium and accumulated retained losses as well as the reserves (consisting of
share based payments reserve, foreign currency translation reserve and merger
reserve).
The Group's objectives when maintaining capital is:
- to safeguard the entity's ability to continue as a going concern, so that it
can continue to provide returns for shareholders and benefits for other
stakeholders.
The Company meets its capital needs by equity financing. The Group sets the
amount of capital it requires in proportion to risk. The Group manages its
capital structure and makes adjustments to it in the light of changes in
economic conditions and the risk characteristics of the underlying assets.
Credit Risk
Cash is the only significant concentration of risk. This risk is managed by only
banking with reputable financial institutions.
Critical Accounting Estimates and Judgements
The Company and Group make certain estimates and assumptions regarding the
future. Estimates and judgements are continually evaluated based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances. In the future, actual
experience may differ from these estimates and assumptions. The estimates and
assumptions that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year are
discussed throughout this report in the relevant notes to the financial
statements. The key estimates and judgements relate to:
* Asset carrying values
* Contingent liabilities
* Going concern presentation
3. Revenue and Segment Analysis
The Group had operating revenue during the period of GBP330,000 (2007: nil)
based on returns from operators.
The Group operates in one business segment, the exploration for oil and gas. The
Group has material interests in two geographical segments, the United States of
America and the United Kingdom. The Group assets are substantially attributable
to the exploration for oil and gas activities in the United States of America.
The parent Company operates a head office based in the United Kingdom which
incurs certain administration costs. These two geographic segments are presented
on a consolidated basis in the table below.
+------------------------------------+------------+------------+------------+
| Geographic Segments | United | United | Total |
| | Kingdom | States of | |
| | | America | |
+------------------------------------+------------+------------+------------+
| Year ended 31 December 2008 | GBP'000 | GBP'000 | GBP'000 |
+------------------------------------+------------+------------+------------+
| Profit / (loss) from operations | (526) | (2,079) | (2,605) |
| before tax and finance income | | | |
+------------------------------------+------------+------------+------------+
| Interest income | 31 | - | 31 |
+------------------------------------+------------+------------+------------+
| Profit / (loss) before tax | (495) | (2,079) | (2,574) |
+------------------------------------+------------+------------+------------+
| | | | |
+------------------------------------+------------+------------+------------+
| Other segment information: | | | |
+------------------------------------+------------+------------+------------+
| Segment assets | | | |
+------------------------------------+------------+------------+------------+
| Tangible oil and gas assets | - | 4,221 | 4,221 |
+------------------------------------+------------+------------+------------+
| Intangible oil and gas assets | - | 19,345 | 19,345 |
+------------------------------------+------------+------------+------------+
| Other tangible and non-current | 8 | 31 | 39 |
| assets | | | |
+------------------------------------+------------+------------+------------+
| Current assets | 719 | 449 | 1,168 |
+------------------------------------+------------+------------+------------+
| Total assets | 727 | 24,046 | 24,773 |
+------------------------------------+------------+------------+------------+
| | | | |
+------------------------------------+------------+------------+------------+
| Capital expenditure | | | |
+------------------------------------+------------+------------+------------+
| Oil and gas assets | - | 8,993 | 8,993 |
+------------------------------------+------------+------------+------------+
| Other tangible assets | - | 17 | 17 |
+------------------------------------+------------+------------+------------+
| Total capital expenditure | - | 9,010 | 9,010 |
+------------------------------------+------------+------------+------------+
| | | | |
+------------------------------------+------------+------------+------------+
| Liabilities | | | |
+------------------------------------+------------+------------+------------+
| Liabilities | | | |
+------------------------------------+------------+------------+------------+
| Trade and other payables | (92) | (2,873) | (2,965) |
+------------------------------------+------------+------------+------------+
| Other financial liabilities | | (4,257) | (4,257) |
+------------------------------------+------------+------------+------------+
| Total liabilities | (92) | (7,130) | (7,222) |
+------------------------------------+------------+------------+------------+
+------------------------------------+------------+------------+------------+
| Geographic Segments | United | United | Total |
| | Kingdom | States of | |
| | | America | |
+------------------------------------+------------+------------+------------+
| Year ended 31 December 2007 | GBP'000 | GBP'000 | GBP'000 |
+------------------------------------+------------+------------+------------+
| Profit / (loss) from operations | (663) | (256) | (919) |
| before tax and finance income | | | |
+------------------------------------+------------+------------+------------+
| Interest income | 69 | - | 69 |
+------------------------------------+------------+------------+------------+
| Profit / (loss) before tax | (594) | (256) | (850) |
+------------------------------------+------------+------------+------------+
| | | | |
+------------------------------------+------------+------------+------------+
| Other segment information: | | | |
+------------------------------------+------------+------------+------------+
| Segment assets | | | |
+------------------------------------+------------+------------+------------+
| Tangible oil and gas assets | - | 882 | 882 |
+------------------------------------+------------+------------+------------+
| Intangible oil and gas assets | - | 9,693 | 9,693 |
+------------------------------------+------------+------------+------------+
| Other tangible and non-current | 14 | 20 | 34 |
| assets | | | |
+------------------------------------+------------+------------+------------+
| Current assets | 3,830 | 44 | 3,874 |
+------------------------------------+------------+------------+------------+
| Total assets | 3,844 | 10,639 | 14,483 |
+------------------------------------+------------+------------+------------+
+------------------------------------+------------+------------+------------+
| Geographic Segments | United | United | Total |
| | Kingdom | States of | |
| | | America | |
+------------------------------------+------------+------------+------------+
| Year ended 31 December 2007 | GBP'000 | GBP'000 | GBP'000 |
+------------------------------------+------------+------------+------------+
| Other segment information: | | | |
+------------------------------------+------------+------------+------------+
| | | | |
+------------------------------------+------------+------------+------------+
| Capital expenditure | | | |
+------------------------------------+------------+------------+------------+
| Oil and gas assets | - | 4,610 | 4,610 |
+------------------------------------+------------+------------+------------+
| Other tangible assets | 2 | 23 | 25 |
+------------------------------------+------------+------------+------------+
| Total capital expenditure | 2 | 4,633 | 4,635 |
+------------------------------------+------------+------------+------------+
| | | | |
+------------------------------------+------------+------------+------------+
| Liabilities | | | |
+------------------------------------+------------+------------+------------+
| Liabilities | - | (417) | (417) |
+------------------------------------+------------+------------+------------+
| Head Office | (119) | - | (119) |
+------------------------------------+------------+------------+------------+
| Total liabilities | (119) | (417) | (536) |
+------------------------------------+------------+------------+------------+
The Company does not show its results on a segmented basis as it operates in one
geographic segment and one business segment only.
4. Loss from Operations
This has been arrived at after charging/(crediting):
+------------------------+-------------------------------+-------------------------+-------------------------+
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+--------------------------------------------------------+-------------------------+-------------------------+
| Staff costs (note 7) | | 431 | 182 |
+------------------------+-------------------------------+-------------------------+-------------------------+
| Share based payments | | - | 120 |
| expense | | | |
+------------------------+-------------------------------+-------------------------+-------------------------+
| Auditors' remuneration | - Group audit services - BDO | 25 | 20 |
+------------------------+-------------------------------+-------------------------+-------------------------+
| | - Group audit services - | - | 7 |
| | Chapman Davis | | |
+------------------------+-------------------------------+-------------------------+-------------------------+
| | - Subsidiary audit services - | - | 5 |
| | BDO | | |
+------------------------+-------------------------------+-------------------------+-------------------------+
| Depreciation (note 14) | 12 | 9 |
+--------------------------------------------------------+-------------------------+-------------------------+
| Foreign exchange differences | - | 13 |
+------------------------+-------------------------------+-------------------------+-------------------------+
5. Interest Income
+-------------------------------------------------------+---------+-------------------------+
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+-------------------------------------------------------+---------+-------------------------+
| Bank interest received / receivable | 31 | 69 |
+-------------------------------------------------------+---------+-------------------------+
| Other interest receivable | - | - |
+-------------------------------------------------------+---------+-------------------------+
| Total interest income | 31 | 69 |
+-------------------------------------------------------+---------+-------------------------+
6. Taxation
+-------------------------------------------------------+------------------------------+------------------------------+
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+-------------------------------------------------------+------------------------------+------------------------------+
| Current year taxation | | |
+-------------------------------------------------------+------------------------------+------------------------------+
| UK corporation tax at 28% on results for the current | - | - |
| period | | |
| (30% rate used in comparative period) | | |
+-------------------------------------------------------+------------------------------+------------------------------+
| | | |
+-------------------------------------------------------+------------------------------+------------------------------+
| Factors affecting the tax charge for the period | | |
+-------------------------------------------------------+------------------------------+------------------------------+
| Loss on ordinary activities before tax | (2,574) | (850) |
+-------------------------------------------------------+------------------------------+------------------------------+
| | | |
+-------------------------------------------------------+------------------------------+------------------------------+
| Loss on ordinary activities at the UK standard rate | (734) | (255) |
| of 28.5% (2007:30%) | | |
+-------------------------------------------------------+------------------------------+------------------------------+
| Effects of: | | |
+-------------------------------------------------------+------------------------------+------------------------------+
| Non deductible expenses | 79 | 54 |
+-------------------------------------------------------+------------------------------+------------------------------+
| Future tax benefit not brought to account | 655 | 201 |
+-------------------------------------------------------+------------------------------+------------------------------+
| Total tax charge for period | - | - |
+-------------------------------------------------------+------------------------------+------------------------------+
No deferred tax asset has been recognised because there is insufficient evidence
of the timing of suitable future profits against which the losses can be
recovered and the losses may be restricted to trades that generated the losses.
The value of the deferred tax asset that is unrecognised in the accounts
GBP0.996m (2007: GBP0.236m).
7. Staff Costs (including Directors)
+-------------------------------------------------------+---------+-------------------------+
| Consolidated | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+-------------------------------------------------------+---------+-------------------------+
| Salaries | 627 | 174 |
+-------------------------------------------------------+---------+-------------------------+
| Share based payments | - | 120 |
+-------------------------------------------------------+---------+-------------------------+
| Social security costs | 48 | 8 |
+-------------------------------------------------------+---------+-------------------------+
| Total | 675 | 302 |
+-------------------------------------------------------+---------+-------------------------+
The Consolidated Group had an average monthly number of employees of 7 employees
during the period ended 31 December 2008 (2007: 6 employees). Three employees
are non-executive directors based in the UK and the other employees, including
executives are based in the US, and are engaged in administration and technical
evaluation.
GBP244,000 of Group staff costs have been capitalised as part of exploration
assets.
+-------------------------------------------------------+---------+-------------------------+
| Company | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+-------------------------------------------------------+---------+-------------------------+
| Salaries | 118 | 109 |
+-------------------------------------------------------+---------+-------------------------+
| Share based payments | - | 120 |
+-------------------------------------------------------+---------+-------------------------+
| Social security costs | 8 | 8 |
+-------------------------------------------------------+---------+-------------------------+
| Total | 126 | 237 |
+-------------------------------------------------------+---------+-------------------------+
The Company had 3 employees during the period ended 31 December 2008 (2007: 3
employees). All employees are non-executive directors of the Company.
8. Directors' and Key Management Personnel Emoluments
+---------------------------------------+------------+-------------+-----------+
| | GBP'000 | GBP'000 | GBP'000 |
| | Total | Share-based | |
| | Emoluments | | |
+---------------------------------------+------------+-------------+-----------+
| 2008 | Directors | Payments | Total |
| | Fees | | |
+---------------------------------------+------------+-------------+-----------+
| Non-Executive Directors: | | | |
+---------------------------------------+------------+-------------+-----------+
| Michael Frayne1 | 46 | - | 46 |
+---------------------------------------+------------+-------------+-----------+
| Anthony Samaha | 36 | - | 36 |
+---------------------------------------+------------+-------------+-----------+
| Ross Warner | 36 | - | 36 |
+---------------------------------------+------------+-------------+-----------+
| Executive Directors | | | |
+---------------------------------------+------------+-------------+-----------+
| Aaron Close | 143 | - | 143 |
+---------------------------------------+------------+-------------+-----------+
| Doug Manner | 70 | - | 70 |
+---------------------------------------+------------+-------------+-----------+
| Executive Officers | | | |
+---------------------------------------+------------+-------------+-----------+
| Charles Bingle | 146 | - | 146 |
+---------------------------------------+------------+-------------+-----------+
| Sean Austin | 43 | - | 43 |
+---------------------------------------+------------+-------------+-----------+
| Total | 520 | - | 520 |
+---------------------------------------+------------+-------------+-----------+
+------------------------------------+------------+-------------+----------+
| | GBP'000 | GBP'000 | GBP'000 |
+------------------------------------+------------+-------------+----------+
| 2007 | Total | Share-based | Total |
| | Emoluments | Payments | |
| | Directors | | |
| | Fees | | |
+------------------------------------+------------+-------------+----------+
| Non-Executive Directors: | | | |
+------------------------------------+------------+-------------+----------+
| Michael Frayne2 | 36 | - | 36 |
+------------------------------------+------------+-------------+----------+
| Anthony Samaha | 37 | - | 37 |
+------------------------------------+------------+-------------+----------+
| Ross Warner | 36 | - | 36 |
+------------------------------------+------------+-------------+----------+
| Executive Directors | | | |
+------------------------------------+------------+-------------+----------+
| Aaron Close | 113 | 40 | 153 |
+------------------------------------+------------+-------------+----------+
| Doug Manner | 50 | 40 | 90 |
+------------------------------------+------------+-------------+----------+
| Executive Officer | | | |
+------------------------------------+------------+-------------+----------+
| Charles Bingle | 97 | 40 | 137 |
+------------------------------------+------------+-------------+----------+
| Total | 369 | 120 | 489 |
+------------------------------------+------------+-------------+----------+
1. Services provided by Equatorial Palm Oil Plc and Adelise Services Ltd
2. Services provided by Adelise Services Ltd
No pension benefits are provided for any Director (2007: GBPnil).
No share options were exercised by the Directors in this period or in the
comparative period.
9. Loss Per Share
The basic loss per share is derived by dividing the loss for the period
attributable to ordinary shareholders by the weighted average number of shares
in issue.
As inclusion of the potential ordinary shares would result in a decrease in the
loss per share they are considered to be anti-dilutive, as such the basic and
diluted loss per share are the same.
+-------------------------------------------------+-------------+------------+
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+-------------------------------------------------+-------------+------------+
| Loss for the period | (2,574) | (850) |
+-------------------------------------------------+-------------+------------+
| Weighted average number of Ordinary shares of | 766.94 | 431.44 |
| GBP0.001 in issue | million | million |
+-------------------------------------------------+-------------+------------+
| Loss per share - basic expressed in pence | (0.34)p | (0.20)p |
+-------------------------------------------------+-------------+------------+
Refer to the 110 million contingent share issue disclosed in Note 18 for
potential future share issues that may dilute the loss per share.
10. Financial Instruments
The Group's financial instruments comprise cash and items arising directly from
its operation such as receivables, trade payables, and borrowings. In addition,
the Group has put options for the sale of gas in the US with a value of GBP0.07m
(2007: nil).
The Company's financial instruments comprise the investments in subsidiaries,
other receivables and payables (as disclosed in note 2), and loans to
subsidiaries. Further information on loans to subsidiaries is included in note
13.
The Group seeks to obtain a favourable interest rate on its cash balances
through the use of bank treasury deposits.
At the period end the Group had a cash balance of GBP0.488m (2007: GBP1.2
million), made up as follows:
+-------------------------------------------------------+----------+----------+
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+-------------------------------------------------------+----------+----------+
| British pounds | 118 | 1,181 |
+-------------------------------------------------------+----------+----------+
| US dollars | 370 | 23 |
+-------------------------------------------------------+----------+----------+
| Total | 488 | 1,204 |
+-------------------------------------------------------+----------+----------+
At the period end the Company had a cash balance of GBP0.118m (2007: GBP1.18m),
made up as follows:
+-------------------------------------------------------+----------+----------+
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+-------------------------------------------------------+----------+----------+
| British pounds | 118 | 1,181 |
+-------------------------------------------------------+----------+----------+
| Total | 118 | 1,181 |
+-------------------------------------------------------+----------+----------+
There is no material difference between the book value and fair value of the
Group's or Company's cash.
The Group has four overseas subsidiaries which operate in the United States of
America and whose expenditure is primarily denominated in US dollars. Foreign
exchange risk is inherent in the Group's activities and is accepted as such.
Refer to Note 2 for detailed commentary on the foreign exchange risk of the
Group.
The majority of parent Company expenses are denominated in British pounds.
Finance income and expense
+-------------------------------------------------------+----------+----------+
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+-------------------------------------------------------+----------+----------+
| | | |
+-------------------------------------------------------+----------+----------+
| Interest income on financial assets classified as | 31 | 69 |
| loans and receivables | | |
+-------------------------------------------------------+----------+----------+
| Total finance income | 31 | 69 |
+-------------------------------------------------------+----------+----------+
| | | |
+-------------------------------------------------------+----------+----------+
| Interest expense on financial liabilities measured at | (325) | - |
| amortised cost | | |
+-------------------------------------------------------+----------+----------+
| Net finance income/(expense) | (294) | 69 |
+-------------------------------------------------------+----------+----------+
There has been no impairment of financial assets or liabilities in the current
or comparative periods.
11. Intangible Assets
Oil and gas exploration and evaluation assets
+-------------------------------------------------------+----------+----------+
| | Group | Group |
+-------------------------------------------------------+----------+----------+
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+-------------------------------------------------------+----------+----------+
| Cost | | |
+-------------------------------------------------------+----------+----------+
| Opening Carrying Value | 9,693 | 5,963 |
+-------------------------------------------------------+----------+----------+
| Additions | 5,999 | 4,672 |
+-------------------------------------------------------+----------+----------+
| Currency translation adjustment | 3,653 | (60) |
+-------------------------------------------------------+----------+----------+
| Assets transferred to property, plant & equipment | - | (882) |
+-------------------------------------------------------+----------+----------+
| Carrying Value at 31 December | 19,345 | 9,693 |
+-------------------------------------------------------+----------+----------+
Additions represent GBP2.3m (US$4.6m) of new licences acquired, and
approximately GBP3.7m (US$5.9) of exploration work performed on the Group's oil
and gas leases in the US. Included in exploration additions is GBP2.7m (US$3.8m)
representing amounts invoiced by Metro, in their capacity as operator of the
licences in the US, that are disputed. The Group have asked Metro to
substantiate these cash calls with supporting documentation. Management have
initiated a detailed independent review of these charges which indicates that
significant amounts cannot currently be substantiated. Furthermore, the amounts
claimed includes expenditure that had not been appropriately approved by the
Board of Irvine. This process is ongoing. Metro continues to withhold revenues
payable to the Group pending the resolution of this dispute.
GasRock have a legal charge over these licences. GasRock served notice on the
Group, dated 27 January 2009, that it was in default on the loan facility.
GasRock has not taken further action in relation to enforcing it's security,
however, given current market conditions it is unlikely that any disposal
proceeds would be sufficient to settle the amounts due to GasRock. There is a
risk that the Group will not retain an interest in any of its US oil and gas
assets.
There is no provision for impairment in the financial statements as at 31
December 2008 as the Group is not currently able to market its assets due to the
ongoing dispute and forced sale is unlikely to realise sufficient funds to clear
the amounts due to GasRock. In light of the inherent uncertainty and the absence
of comparable transactions, the directors are unable to conclude with sufficient
certainty on the value of the Group's oil and gas assets.
12. Investments
+-------------------------------------------------------+----------+----------+
| | Company | Company |
+-------------------------------------------------------+----------+----------+
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+-------------------------------------------------------+----------+----------+
| Cost | | |
+-------------------------------------------------------+----------+----------+
| Investment in subsidiaries: | | |
+-------------------------------------------------------+----------+----------+
| Opening Balance | 2,419 | 2,419 |
+-------------------------------------------------------+----------+----------+
| Impairment of subsidiary investments | (2,419) | - |
+-------------------------------------------------------+----------+----------+
| At 31 December | - | 2,419 |
+-------------------------------------------------------+----------+----------+
The directors have impaired the total carrying value of the Company's investment
in its subsidiaries as at 31 December 2008.
Metro, the Operator of the assets owned by Wattle and Pinon, has claimed
approximately US$3.8m from Wattle and Pinon in respect of seismic acquisition,
joint interest billings, and management fees. Wattle and Pinon have asked Metro
to substantiate its claim and this process is ongoing. There is significant
uncertainty regarding the resolution of the claims.
The Group's US subsidiaries do not have sufficient liquid resources to meet
their current obligations. GasRock issued a notice of default under the Credit
Agreement after the year end. The Group and GasRock are in discussions with
third parties regarding the provision of further debt and the raising of further
equity. However, as noted elsewhere in this report, GasRock has not reached a
conclusion as to the course of action it wants to take in relation to enforcing
its security over the oil and assets.
As a result of the above factors, the directors have impaired the total carrying
value of the investments in subsidiaries.
Details of the Company's Subsidiaries at 31 December 2008 are as follows:
+-------------------------------+--------------+-------------+----------------+
| Company | Country | Proportion | Nature of |
| | of | held | business |
| | Registration | | |
+-------------------------------+--------------+-------------+----------------+
| Direct | | | |
+-------------------------------+--------------+-------------+----------------+
| Wattle Energy Inc | USA | 100% | Oil & gas |
| | | | exploration |
+-------------------------------+--------------+-------------+----------------+
| Irvine Energy (USA) Inc | USA | 100% | Oil & gas |
| | | | exploration |
+-------------------------------+--------------+-------------+----------------+
| Halcyon Investment Co Pty Ltd | Australia | 100% | Holding |
| | | | Company |
+-------------------------------+--------------+-------------+----------------+
| Indirect | | | |
+-------------------------------+--------------+-------------+----------------+
| Via Halcyon Investment Co Pty | | | |
| Ltd | | | |
+-------------------------------+--------------+-------------+----------------+
| Halcyon Nominees Pty Ltd | Australia | 100% | Holding |
| | | | Company |
+-------------------------------+--------------+-------------+----------------+
| Halcyon Nominees (USA) Inc | USA | 100% | Oil & gas |
| | | | exploration |
+-------------------------------+--------------+-------------+----------------+
| Via Wattle Energy Corporation | | | |
+-------------------------------+--------------+-------------+----------------+
| Pinon Energy LLC | USA | 100% | Oil & gas |
| | | | exploration |
+-------------------------------+--------------+-------------+----------------+
13. Loans to Subsidiaries - Company
+------------------------------------------------------+----------+----------+
| | Company | Company |
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+------------------------------------------------------+----------+----------+
| Wattle | 6,739 | 3,490 |
+------------------------------------------------------+----------+----------+
| Pinon Energy | 5,176 | 1,639 |
+------------------------------------------------------+----------+----------+
| Irvine Energy USA | 1,177 | 461 |
+------------------------------------------------------+----------+----------+
| Halcyon Group | - | 2,663 |
+------------------------------------------------------+----------+----------+
| Impairment of subsidiary loans | (13,092) | - |
+------------------------------------------------------+----------+----------+
| Total | - | 8,253 |
+------------------------------------------------------+----------+----------+
The loans to subsidiaries are interest free and have no fixed repayment date.
They are denominated in US Dollars and are repayable on demand.
The Group's US subsidiaries do not have sufficient liquid resources to meet
their current obligations. The Group is in discussions with third parties
regarding the provision of further debt and the raising of further equity. The
outcome of these discussions is uncertain. Claims of US$3.8m have been made
against Wattle and Pinon, as disclosed in Note 12.
Therefore, the directors do not consider the loans made to subsidiaries to be
recoverable and, as a result, have impaired the total amount of the Company's
loans to its subsidiaries as at 31 December 2008.
14. Property, Plant and Equipment
+---------------------+-----------+-----------+-----------+-----------+-----------+-----------+
| | Group | Group | Group | Group | Company | Company |
| | Evaluated | Evaluated | Plant & | Plant & | Plant & | Plant & |
| | Leases | Leases | Equipment | Equipment | Equipment | Equipment |
| | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 |
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+---------------------+-----------+-----------+-----------+-----------+-----------+-----------+
| Cost | | | | | | |
+---------------------+-----------+-----------+-----------+-----------+-----------+-----------+
| Cost at 1 January | 338 | - | 589 | 20 | 22 | 20 |
+---------------------+-----------+-----------+-----------+-----------+-----------+-----------+
| Additions | 2,994 | - | 17 | 25 | - | 2 |
+---------------------+-----------+-----------+-----------+-----------+-----------+-----------+
| Currency | 345 | | | | | |
| translation | | | | | | |
| adjustment | | | | | | |
+---------------------+-----------+-----------+-----------+-----------+-----------+-----------+
| Transferred from | - | 338 | - | 544 | - | - |
| intangible assets | | | | | | |
+---------------------+-----------+-----------+-----------+-----------+-----------+-----------+
| At 31 December | 3,677 | 338 | 606 | 589 | 22 | 22 |
+---------------------+-----------+-----------+-----------+-----------+-----------+-----------+
| | | | | | | |
+---------------------+-----------+-----------+-----------+-----------+-----------+-----------+
| Depreciation | | | | | | |
+---------------------+-----------+-----------+-----------+-----------+-----------+-----------+
| Accumulated | - | - | (11) | (2) | (8) | (2) |
| depreciation at 1 | | | | | | |
| January | | | | | | |
+---------------------+-----------+-----------+-----------+-----------+-----------+-----------+
| Charge for the | - | - | (12) | (9) | (6) | (6) |
| period | | | | | | |
+---------------------+-----------+-----------+-----------+-----------+-----------+-----------+
| At 31 December | - | - | (23) | (11) | (14) | (8) |
+---------------------+-----------+-----------+-----------+-----------+-----------+-----------+
| | | | | | | |
+---------------------+-----------+-----------+-----------+-----------+-----------+-----------+
| Carrying Value | | | | | | |
+---------------------+-----------+-----------+-----------+-----------+-----------+-----------+
| At 31 December | 3,677 | 338 | 583 | 578 | 8 | 14 |
+---------------------+-----------+-----------+-----------+-----------+-----------+-----------+
GasRock have a legal charge over these licences. GasRock served notice on the
Group, dated 27 January 2009, that it was in default on the loan facility.
GasRock has not taken further action in relation to enforcing it's security,
however, given current market conditions it is unlikely that any disposal
proceeds would be sufficient to settle the amounts due to GasRock. There is a
risk that the Group will not retain an interest in any of its US oil and gas
assets.
There is no provision for impairment in the financial statements as at 31
December 2008 as the Group is not currently able to market its assets due to the
ongoing dispute and forced sale is unlikely to realise sufficient funds to clear
the amounts due to GasRock. In light of the inherent uncertainty and the absence
of comparable transactions, the directors are unable to conclude with sufficient
certainty on the value of the Group's oil and gas assets.
15. Other Receivables
+------------------------------------+----------+----------+----------+----------+
| | Group | Group | Company | Company |
| | 2008 | 2007 | 2008 | 2007 |
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+------------------------------------+----------+----------+----------+----------+
| Placement cash receivable | 567 | 2,619 | 567 | 2,619 |
+------------------------------------+----------+----------+----------+----------+
| Other receivables | 71 | 11 | - | 4 |
+------------------------------------+----------+----------+----------+----------+
| VAT receivable | 18 | 14 | 18 | 14 |
+------------------------------------+----------+----------+----------+----------+
| Prepayments | 24 | 26 | 16 | 12 |
+------------------------------------+----------+----------+----------+----------+
| | 680 | 2,670 | 601 | 2,649 |
+------------------------------------+----------+----------+----------+----------+
Included within Other Receivables is an amount of GBP567,000 in respect of
amounts due for share capital issued at the year end.
16. Trade and Other Payables
+------------------------------------+----------+----------+----------+----------+
| | Group | Group | Company | Company |
| | 2008 | 2007 | 2008 | 2007 |
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+------------------------------------+----------+----------+----------+----------+
| Trade payables and accruals | 2,927 | 469 | 54 | 71 |
+------------------------------------+----------+----------+----------+----------+
| Non-trade payables | 38 | 67 | 38 | 48 |
+------------------------------------+----------+----------+----------+----------+
| | 2,965 | 536 | 92 | 119 |
+------------------------------------+----------+----------+----------+----------+
Included in trade payables is GBP2.7 million (US$3.8m) representing amounts
invoiced by Metro in their capacity as operator of the licences in the US, that
are disputed. The Group have asked Metro to substantiate these cash calls with
supporting documentation. Management have initiated a detailed independent
review of these charges which indicates that significant amounts cannot
currently be substantiated. Furthermore, the amounts claimed include expenditure
that had not been appropriately approved by the Board of Irvine Plc. This
process is ongoing. Metro continues to withhold revenues payable to Group
pending the resolution of this dispute.
17. Financial liabilities
+------------------------------------+----------+----------+----------+----------+
| | Group | Group | Company | Company |
| | 2008 | 2007 | 2008 | 2007 |
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+------------------------------------+----------+----------+----------+----------+
| GasRock loan note | 4,257 | - | - | - |
+------------------------------------+----------+----------+----------+----------+
| | 4,257 | - | - | - |
+------------------------------------+----------+----------+----------+----------+
On 28 May 2008, the Company's wholly owned subsidiaries Wattle and Pinon entered
into a credit agreement with GasRock. During the period to 31 December 2008,
GBP4,257,000 was drawn under this facility. Subsequent to the year end GasRock
issued a notice of default, dated 27 January 2009, demanding repayment of the
outstanding monies owed. It also issued a notice to the Company claiming payment
of the same amount in accordance with the terms of the guarantee.
Following extensive negotiations by the Board, on 19 March 2009, Irvine Plc and
GasRock entered into a release of guarantee whereby GasRock released Irvine Plc
from its obligations under the guarantee in consideration of Irvine Plc paying
GBP370,000 to GasRock. The consideration has been paid to GasRock and,
accordingly, the Company has been released from the guarantee. In addition, the
Company agreed to grant, and subsequently granted, GasRock an option to
subscribe for 100 million ordinary shares in the Company at 0.1 pence per share.
At the date of this Report, GasRock has not taken any further action to enforce
its security. GasRock and the Company have been discussing various proposals
involving Chapter 7 and Chapter 11 of United States Bankruptcy Code. Under these
proposals, there is a significant risk that the Company will not retain an
interest in any of its US oil and gas assets. However, the Directors believe,
based on professional advice, that the liabilities of the US subsidiaries are
ring fenced in those companies and that the Company's loss will be limited to
the amount invested.
18. Share Capital
+----------------------------------------------+----------+----------+
| | 2008 | 2007 |
+----------------------------------------------+----------+----------+
| Authorised | GBP'000 | GBP'000 |
+----------------------------------------------+----------+----------+
| 2,000,000,000 Ordinary shares of 0.10p each | 2,000 | 1,000 |
+----------------------------------------------+----------+----------+
An Ordinary resolution was passed at the Annual General Meeting, held on 31 July
2008, to increase the authorised share capital of the company from 1,000,000,000
ordinary shares of 0.10p each to 2,000,000,000 ordinary shares of 0.10p each.
+-------------------+---------------------------------+---------------+----------+
| Called up, allotted, issued and fully paid | Number of | Nominal |
| | shares | |
| | | value |
| | | GBP'000 |
+-----------------------------------------------------+---------------+----------+
| As at 1 January | | 704,674,846 | 704 |
| 2008 | | | |
+-------------------+---------------------------------+---------------+----------+
| 22 May 2008 | Placing at a price of 2.00p per | 34,000,000 | 34 |
| | share | | |
+-------------------+---------------------------------+---------------+----------+
| 24 July 2008 | Placing at a price of 2.00p per | 55,000,000 | 55 |
| | share | | |
+-------------------+---------------------------------+---------------+----------+
| 5 December 2008 | Placing at a price of 0.25p per | 244,000,000 | 244 |
| | share | | |
+-------------------+---------------------------------+---------------+----------+
| | | | |
+-------------------+---------------------------------+---------------+----------+
| As at 31 December 2008 | 1,037,674,846 | 1,037 |
+-------------------+---------------------------------+---------------+----------+
Contingent share issues
Pursuant to the terms of the acquisition of Wattle and the Halcyon Group up to
an additional 110 million Irvine ordinary shares are to be issued upon
achievement of two performance milestones. Under the first performance
milestone, an additional 72.5 million Irvine ordinary shares will be issued upon
acquisition of leases covering a total of 100,000 acres within the AMI, and the
weighted average price of Irvine shares over any subsequent consecutive 20
trading days being 6 pence or greater. Under the second performance milestone,
an additional 37.5 million Irvine ordinary shares will be issued upon
acquisition of leases covering a total of 150,000 acres within the AMI, and the
weighted average price of Irvine shares being 8 pence or greater over any 20
consecutive trading days after achievement of the first performance milestone.
The shares issued in the year rank pari passu with the existing share capital.
Share Options
During the period, no options to subscribe for ordinary shares in the Company
were issued. (2007: 27,500,000)
As at 31 December 2008 the options in issue were:
+---------------+----------------------+-------------------+-------------------+
| Exercise | Expiry Date | Options in Issue | Options in Issue |
| Price | | 31 December 2008 | 31 December 2007 |
+---------------+----------------------+-------------------+-------------------+
| 3.0p | 23 December 2010 | 3,000,000 | 3,000,000 |
+---------------+----------------------+-------------------+-------------------+
| 3.5p | 1 November 2011 | 15,000,000 | 15,000,000 |
+---------------+----------------------+-------------------+-------------------+
| 3.5p | 1 February 2012 | 10,000,000 | 10,000,000 |
+---------------+----------------------+-------------------+-------------------+
| 6.0p | 1 February 2012 | 10,000,000 | 10,000,000 |
+---------------+----------------------+-------------------+-------------------+
| 3.5p | 20 April 2012 | 5,000,000 | 5,000,000 |
+---------------+----------------------+-------------------+-------------------+
| 6.0p | 20 April 2012 | 2,500,000 | 2,500,000 |
+---------------+----------------------+-------------------+-------------------+
| | | 45,500,000 | 45,500,000 |
+---------------+----------------------+-------------------+-------------------+
No options lapsed or were cancelled and no options were exercised during the
period.
19. Share Based Payments
Director Options
Under IFRS 2 'Share Based Payments', the Company determines the fair value of
options issued to Directors and Employees as remuneration and recognises the
amount as an expense in the income statement with a corresponding increase in
equity.
+--------------+-----------+------------+----------+----------+----------+----------+
| Name | Date | Number | Exercise | Expiry | Fair | Fair |
| | Granted | | Price | Date | Value | Value |
| | | | | | Grant | Grant |
| | | | | | Date | Date |
| | | | | | per | Total |
| | | | | | Option | GBP'000 |
+--------------+-----------+------------+----------+----------+----------+----------+
| Michael | 1 Nov | 5,000,000 | 3.5p | 1 Nov | 0.3p | 15 |
| Frayne | 2006 | | | 2011 | | |
+--------------+-----------+------------+----------+----------+----------+----------+
| Anthony | 1 Nov | 5,000,000 | 3.5p | 1 Nov | 0.3p | 15 |
| Samaha | 2006 | | | 2011 | | |
+--------------+-----------+------------+----------+----------+----------+----------+
| Ross Warner | 1 Nov | 5,000,000 | 3.5p | 1 Nov | 0.3p | 15 |
| | 2006 | | | 2011 | | |
+--------------+-----------+------------+----------+----------+----------+----------+
| Aaron Close | 1 Feb | 5,000,000 | 3.5p | 1 Feb | 0.5p | 25 |
| | 2007 | | | 2012 | | |
+--------------+-----------+------------+----------+----------+----------+----------+
| Aaron Close | 1 Feb | 5,000,000 | 6.0p | 1 Feb | 0.3p | 15 |
| | 2007 | | | 2012 | | |
+--------------+-----------+------------+----------+----------+----------+----------+
| Douglas | 1 Feb | 5,000,000 | 3.5p | 1 Feb | 0.5p | 25 |
| Manner | 2007 | | | 2012 | | |
+--------------+-----------+------------+----------+----------+----------+----------+
| Douglas | 1 Feb | 5,000,000 | 6.0p | 1 Feb | 0.3p | 15 |
| Manner | 2007 | | | 2012 | | |
+--------------+-----------+------------+----------+----------+----------+----------+
| Total | | 35,000,000 | | | | 125 |
+--------------+-----------+------------+----------+----------+----------+----------+
There were no share options granted during the period. Therefore, the fair value
of the options granted to Directors during the period was nil (2007: GBP80,000).
The assessed fair value at the grant date was determined using the Black-Scholes
Model that takes into account the exercise price, the term of the option, the
share price at grant date, the expected price volatility of the underlying
share, the expected dividend yield and the risk-free interest rate for the term
of the option.
The key inputs applied to the Black-Scholes Model for options granted in 2007
included: the closing share price on 1 February 2007 of 2.5p; risk-free interest
rate of 5.18%; and expected volatility of 0.40. In assessing the fair value of
the options, a discount of 40% has been applied to the theoretical value
calculated by the Black-Scholes Model to take into account the lack of
marketability of the options and the inherent limitations of the Black-Scholes
Model. The term length of the options has been set at 5 years and the dividend
yield has been set at 0 as no dividends are expected until profits are made.
For options granted in 2006, the key inputs applied to the Black-Scholes Model
included: the closing share price on 1 November 2006 of 2.0p; risk-free interest
rate of 4.68%; and expected volatility of 0.40. In assessing the fair value of
the options, a discount of 40% has been applied to the theoretical value
calculated by the Black-Scholes Model to take into account the lack of
marketability of the options and the inherent limitations of the Black-Scholes
Model.
Options to Executive Officers
The Company did not grant any options to Executive Officers during the period
(2007: 5,000,000 options issued at GBP40,000).
+--------------+-----------+-----------+----------+------------+----------+----------+
| Name | Date | Number | Exercise | Expiry | Fair | Fair |
| | Granted | | Price | Date | Value | Value |
| | | | | | Grant | Grant |
| | | | | | Date | Date |
| | | | | | per | Total |
| | | | | | Option | GBP'000 |
+--------------+-----------+-----------+----------+------------+----------+----------+
| Charles | 20 April | 5,000,000 | 3.5p | 20 April | 0.6p | 30 |
| Bingle | 2007 | | | 2012 | | |
+--------------+-----------+-----------+----------+------------+----------+----------+
| Charles | 20 April | 2,500,000 | 6.0p | 20 April | 0.4p | 10 |
| Bingle | 2007 | | | 2012 | | |
+--------------+-----------+-----------+----------+------------+----------+----------+
| Total | | 7,500,000 | | | | 40 |
+--------------+-----------+-----------+----------+------------+----------+----------+
The fair value of the options granted to Executive Officers during the prior
period was GBP40,000. The assessed fair value at the grant date was determined
using the Black-Scholes Model that takes into account the exercise price, the
term of the option, the share price at grant date, the expected price volatility
of the underlying share, the expected dividend yield and the risk-free interest
rate for the term of the option.
The key inputs applied to the Black-Scholes Model included: the closing share
price on 10 April 2007 of 2.9p; risk-free interest rate of 5.22%; and expected
volatility of 0.40. In assessing the fair value of the options, a discount of
40% has been applied to the theoretical value calculated by the Black-Scholes
Model to take into account the lack of marketability of the options and the
inherent limitations of the Black-Scholes Model. The term length of the options
has been set at 5 years and the dividend yield has been set at 0 as no dividends
are expected until profits are made.
20. Capital Commitments
The Company and Group had no capital commitments at 31 December 2008.
21. Disputes and contingent liabilities
Metro, operator of the Group's US assets, has claimed approximately US$3.8m in
respect of seismic acquisition, joint interest billings and management fees.
Metro have been requested to substantiate its claim and this process is ongoing.
The amount claimed includes invoiced or cash called material amounts that did
not currently have sufficient evidential support or approval. The amounts
claimed have been capitalised and included in trade and other payables.
Resolution of the dispute may result in the claim being different to the amounts
recognised in the financial statements.
The outcome of Metro's claims against the Company's US subsidiaries, Wattle and
Pinon, and the course of action to be taken by GasRock in respect of enforcing
its security over the assets is uncertain at the date of this Report. There is a
significant risk that the resolution of these claims will result in a net asset
deficiency in the US subsidiaries. At the date of this Report, GasRock has not
taken any further action to enforce its security. GasRock and the Company have
been discussing various proposals involving Chapter 7 and Chapter 11 of United
States Bankruptcy Code. Under these proposals, there is a significant risk that
the Company will not retain an interest in any of its US oil and gas assets.
However, the Directors believe, based on professional advice, that the
liabilities of the US subsidiaries are ring fenced in those companies and that
the Company's loss will be limited to the amount invested.
22. Related Party Transactions
There were no related party transactions during the period other than those
disclosed in Note 7, Note 8 and those disclosed below.
Irvine Energy Plc makes payments for serviced office facilities and
administrative support to Equatorial Palm Oil plc ("EPO") who shares common
board members with Irvine Energy plc. These payments are all on arms' length
terms and amount to GBP69,359 for the financial period. There were no amounts
outstanding to EPO at the year end in respect of these services.
Michael Frayne provided consulting services to Irvine Energy Plc which was
charged through EPO. These payments were determined on arm's length terms and
came to an amount of GBP35,531 for the financial period. There were no amounts
outstanding to EPO at the year end in respect of these services.
For details of loans to subsidiaries see Note 13.
For details of investments in subsidiaries see Note 12.
23. Post Balance Date Events
On 30 January 2009, the Company announced that GasRock had issued a notice of
default to Irvine in accordance with the credit agreement dated 28 May 2008
requiring Irvine to pay the outstanding balance of the loan which was
approximately US$5.6 million at that date. The Company's shares were suspended
from trading on AIM, and remain so, pending clarification of the Company's
financial position and discussions with GasRock.
On 24 March 2009, the Company entered into an agreement with GasRock which
releases Irvine Plc from its guarantee of the obligations of its wholly owned
subsidiaries, Wattle and Pinon under the credit agreement dated 28 May 2008. The
release has been given in consideration of the Company paying GBP370,000 to
GasRock. In addition, the Company has agreed to grant GasRock an option
('Option') within two months of 24 March 2009 to subscribe for 100 million
ordinary shares in the Company for 0.1 pence per share.
Following the General Meeting on 15 May 2009, the Company was able to issue the
Option to GasRock completing the release of Irvine from the obligations of
Wattle and Pinon.
24. Operating Lease Commitments
The total value of minimum lease payments are due as follows:
+-------------------------------------------------+-------------+------------+
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+-------------------------------------------------+-------------+------------+
| Not later than one year | 43 | 30 |
+-------------------------------------------------+-------------+------------+
| Later than one year and not later than five | 22 | 90 |
| years | | |
+-------------------------------------------------+-------------+------------+
| Later than five years | - | 15 |
+-------------------------------------------------+-------------+------------+
| Total Lease Commitment | 65 | 135 |
+-------------------------------------------------+-------------+------------+
This lease is held by Irvine Energy (USA) Inc for the lease of business premises
in Texas, with no recourse to the Company.
25. Reserves
The following describes the nature and purpose of each reserve within
Shareholders Equity.
+------------------+---------------------------------------------------------+
| Share capital | Amount subscribed for share capital at nominal value. |
+------------------+---------------------------------------------------------+
| Share premium | Amount subscribed for share capital in excess of |
| | nominal value |
+------------------+---------------------------------------------------------+
| Merger reserve | Value of shares issued in exchange for shares in |
| | acquired subsidiary less the nominal value. |
+------------------+---------------------------------------------------------+
| Share based | Value of equity settled share based payments that |
| payment reserve | were allocated to directors and brokers (per IFRS 2) |
+------------------+---------------------------------------------------------+
| Foreign currency | Differences arising on translating the opening net |
| translation | assets at open rate and the results of overseas |
| reserve | operations at actual rate recognised directly in equity |
+------------------+---------------------------------------------------------+
| Retained | Cumulative net gains and losses recognised in the |
| earnings | consolidated income statement. |
+------------------+---------------------------------------------------------+
A full version of the Company's Report and Accounts can be found at
www.irvineenergy.com.
* * ENDS * *
For further information please visit http://www.irvineenergy.com or contact:
+---------+------------+-----------+
| Doug | Irvine | Tel: |
| Manner | Energy | +44 |
| | plc | (0) 20 |
| | | 7766 7500 |
+---------+------------+-----------+
| Tim | Evolution | Tel: |
| Redfern | Securities | +44 |
| | | (0) 20 |
| | | 7071 4300 |
+---------+------------+-----------+
| Adam | Evolution | Tel: |
| James | Securities | +44 |
| | | (0) 20 |
| | | 7071 4300 |
+---------+------------+-----------+
| Hugo | St | Tel: |
| de | Brides | +44 |
| Salis | Media | (0) 20 |
| | & | 7236 1177 |
| | Finance | |
+---------+------------+-----------+
This information is provided by RNS
The company news service from the London Stock Exchange
END
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