TIDMSER
RNS Number : 5866R
Sefton Resources Inc
30 June 2015
30 June 2015
Sefton Resources, Inc.
("Sefton" or the "Company")
Final Results for the 13 Months to 31 January 2015
The board of directors of Sefton (the "Board") is pleased to
announce the Company's financial results for the thirteen-month
period ended 31 January 2015.
Period & Post-Period Highlights:
-- Successful Sale of TEG USA to Hawker Energy LLC
-- Successful release from $4m contingent liability to Bank of the West
-- Major corporate restructuring and significant reduction of Company overheads
-- Relocation of the administrative office to the UK
-- A recent successful equity placing raising GBP799,500 in June 2015
-- Provisional sale of Sefton's Kansas assets for US$400,000 agreed
-- Development agreement signed with UTAS Petroleum
-- Experienced CEO identified pursuant to finalisation of identified acquisition
Reflecting on the progress to date, Raylene Whitford, CFO of
Sefton, commented:
"The prior year brought a significant change for the Company,
not least through the sale of the Company's largest asset to Hawker
Energy LLC, the lifting of the Company's co-borrower status on the
outstanding loan with the Bank of the West and the closure of its
administrative office in Denver and relocation to the UK. A key
element of Company's sustainability was a major internal
restructuring to reduce overheads to a minimum to ensure cost
effective operations.
Cash conservation continues to be of high importance for the
Company and its shareholders, as is the identification of
opportunities to acquire a robust asset portfolio outside of the
US. The Board has made significant progress in this regard and has
identified producing assets in Indonesia, which we believe we are
well placed to investigate further through the establishment of a
Development Agreement with UTAS Petroleum.
Whilst we acknowledge that near-term challenges remain on the
forefront as we seek to stabilise and refocus the Company, the
Board has made clear progress in the last few months and we have a
distinct strategy to grow the Company in order to generate long
term value for our shareholders."
The Company's annual report and audited accounts for the 13
months ending 31 January 2015 have been published on the Company's
website, www.seftonresources.com, in accordance with the Company's
articles of association and AIM Rule 20, and are available to
shareholders.
Visit www.seftonresources.com or contact:
Raylene Whitford, Chief Financial Tel: 0207 872
Officer 5570
------------------------------------ --------------
Nick Harriss, Nick Athanas, Allenby Tel: 0203 328
Capital Limited (Nomad) 5656
------------------------------------ --------------
Nick Bealer, Cornhill Capital Tel: 020 7710
Limited (Broker) 9612
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Ben Romney, Buchanan (PR) Tel: 020 7466
5132
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STRATEGIC REPORT
Directors' Statement for Sefton Resources, Inc ('The Company')
and its subsidiaries ('the Group')
The prior year brought a significant amount of the change for
the Company, not least through sale of the Company's largest asset
to Hawker Energy LLC, the lifting of the Company's status as a
co-borrower on a loan with the Bank of the West, the closure of its
US office in Denver and relocation to the UK, and a major internal
restructuring to reduce overheads to a minimum. Cash conservation
continues to be of high importance for the group, as is the
identification of opportunities to acquire assets outside of the
US.
Sale of TEG USA, TEG MidContinent and TEG Transmission
Following a considerable period of discussion and negotiations,
the sale of the Company's largest asset, TEG USA, signalled the
beginning of the Company's execution of its strategy to divest from
the US.
The consideration for the transaction consisted of 3,000,000
common shares of Hawker (current mid price $0.0625, giving a value
of $187,500), subject to a six month lock in from date of issue and
5,000,000 share purchase warrants to acquire common shares of
Hawker at a strike price of $0.25 per share for 5 years. As part of
the sale, the pension liabilities and Asset Retirement Obligation
costs for the subsidiary were also transferred to the seller.
On 20 March 2015, the Company announced it had successfully
negotiated the release of its status as a co-borrower on the $4
million outstanding loan with the Bank of the West. The loan was
secured against the assets of TEG MidContinent as well as Sefton,
and as part of the release, 1,500,000 shares were returned to
Hawker and the 5,000,000 share purchase warrants were cancelled. As
such, this amount was written down as part of the sale
consideration for TEG USA.
On 31 January 2015, the Company received a Letter of Intent from
a Canadian operator to purchase Sefton's TEG MidContinent and TEG
Transmission companies for $400,000 cash, however the operator
could not raise the funds to proceed with the transaction. In May
2015, the Company received a notification of interest from another
unrelated third party to do the transaction on the same terms and
therefore engaged the Directors in negotiations regarding the
potential sale of these assets.
On 29 June 2015, the Company signed a Sale and Purchase
Agreement for the assets and liabilities of TEG MidContinent and
TEG Transmission on 29 June 2015. The book value of the relevant
assets have been written down to reflect this amount.
Potential Litigation
On 14 May 2015, a claim was filed in the district court of
Denver by the former Chairman, James Ellerton against Sefton, two
of its directors, and a former director which outlined unspecified
damages in connection with his resignation from the board and the
termination of the consulting contract with C&J Resources,
Inc.
This matter remains unsettled as at the date of the release of
these accounts, however the Board has received a firm US legal
opinion that Mr Ellerton's claims are without merit. Furthermore,
the Company has a suite of counterclaims which it is prepared to
file against Mr Ellerton and C&J Resources in relation to the
activities he performed whilst a Director. Some of these claims
were filed when the Company and Mr Ellerton were in arbitration in
2014. The arbitration was subsequently dropped by Mr Ellerton in
late 2014.
On 11 June 2015 the matter was removed from the district courts
of Denver to the federal court of Colorado. The preliminary hearing
date for the case was set for 31 August 2015 as of the date of the
publishing of these accounts.
Change of Accounting Reference Date
The Director's approved a change of the accounting reference
date to 31 January 2015 to take into account the sale of the
Company's largest subsidiary, TEG USA, as well as Letters of Intent
received to purchase subsidiaries TEG MidContinent and TEG
Transmission. Per the Company's strategy update released via RNS on
the 2(nd) and 24(th) of February, the Company's new strategy was to
exit the US, therefore it was deemed appropriate and prudent to
recognise the remaining assets as held for sale as at the balance
sheet date.
Future Strategy and Next Steps
The Directors of Sefton are focused on identifying new
acquisition targets and have identified South East Asia as an area
with potential value. Opportunities to acquire existing producing
assets, exploration and development opportunities are currently
being assessed.
Thorough due diligence is being undertaken on a number of
opportunities in the region and the Company has identified a
balanced portfolio of onshore exploration, development and
producing assets in Indonesia. These assets are currently producing
c.250 boepd, and the Board believes that they have the potential to
produce up to 1,000 boepd within 12 months if developed
appropriately. In order to pursue this opportunity further, the
Company entered into an unincorporated joint venture with UTAS
Petroleum on 25 June 2015.
Management
The Board currently consists of one UK, one Canadian and one
Indonesian Non-Executive Director, each of whom are highly involved
in the day-to-day operations of the Company. The Board also
currently has one Executive Director who is also the Company
Secretary.
Directors' terms expire at the Annual General Meeting of
Shareholders ("AGM"), such that Tom Milne will leave the board in
2015. Keith Morris is due to step down from the Board in 2016.
The Company has identified a suitable CEO candidate with
considerable small cap oil and gas experience who is expected to
join the Board should the Company finalise an acquisition in the
near future.
Going Concern
Management have adopted the going concern basis in preparing the
financial statements of the Group for the 13 month period ended 31
January 2015. In assessing whether the going concern basis is
appropriate, Management have considered all relevant available
information concerning the future of the Group.
In carrying out their review and assessment, Management have
prepared budgets and forecasts for the period to 1 July 2016 which
the Board has reviewed in detail and approved.
The assumptions used in preparing the budgets and forecasts
include:
-- The sale of TEG MidContinent, Inc. and TEG Transmission, Co., LLC is completed
-- The Company's operating and overhead costs will continue to remain low
-- The outstanding litigation does not end adversely or require material settlement
-- The Company is able to secure new capital to close a potential transaction
There are uncertainties in the assumptions which could be
material - the most significant being the release from the
litigation and securing financing to close a new acquisition.
Material uncertainties for the next 12 months include:
-- Commodity price fluctuations: further instability in the oil
price may affect the Company's access to funding, thereby limiting
it's ability to do business in the sector
-- Liquidity: the Company's financial resources are limited,
therefore a lack of access to sufficient capital could result in
the delay or curtailment of operations
Financial Review
During the period, TEG USA produced a total of 28,898 barrels of
oil, generating revenues of circa $2.4m. The Company's secondary
activity was the operation of TEG MidContinent which produced 2,350
barrels of oil during the same period, generating revenues of circa
$0.1m. TEG MidContinent ceased production in November 2014.
TEG Transmission stayed dormant during the year due to lack of
capital to connect the pipeline to any production facilities.
The realised oil prices averaged $88 a barrel in California
during the period, which was a slight reduction on the $99 a barrel
realised in 2013 - however, the Group still benefits from a
favourable premium paid for heavy oil in California. Realised oil
prices in Kansas averaged $65 a barrel during the period compared
to $85 a barrel in 2013, while operating costs were unchanged.
Loss for the period
Cost of sales (lease operating expenses and royalties) was $2.0
million compared to $1.9 million in 2013. The increase in costs is
due to fixed costs not decreasing, higher repairs and maintenance
expenses.
After deducting the cost of sales from revenue, the gross profit
from oil sales during the period was $0.3 million (2013: $2.8
million) - these amounts have been included in discontinued
operations.
General and administrative expenses recognised during the period
remained high largely due to significant legal expenses incurred
during the period, as well as high levels of corporate
overheads.
The most significant impact on the loss for the financial
period, however, is in relation to the two impairments recognised,
as disclosed in notes 10 and 11 to the financial statements. This
resulted from the sale of TEG USA and the Letters of Intent
received for the purchase of TEG MidContinent and TEG Transmission.
An impairment of $3.4m was recognised for the potential sale of
these assets.
As a result of the transaction with Hawker Energy LLC, a loss of
$1.4m was recognised given the agreed consideration for the
purchase of the assets as well as costs to release the Company's
status as a co-borrower on the outstanding loan with the Bank of
the West.
Functional currency
The financial statements have been presented in United States
Dollars ('USD') which is the Company's functional currency. All
foreign currency transactions are converted to USD at the exchange
rate on the date of the transaction. The GBP to USD foreign
exchange rate on 31 January 2015 was 1.50.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report
and Accounts in accordance with applicable law and regulations. The
Directors have elected to prepare the financial statements for the
Group in accordance with International Financial Reporting
Standards (IFRS) as adopted by the European Union.
International Accounting Standard 1 requires that financial
statements present fairly for each financial year the Group'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 Preparation and Presentation of
Financial Statements". In virtually all circumstances, a fair
presentation will be achieved by compliance with all IFRS. The
Directors are also required to:
-- Select suitable accounting policies and then apply them consistently;
-- Make judgements and accounting estimates that are reasonable and prudent;
-- Provide additional disclosures when compliance with the
specific requirements in IFRS is insufficient to enable users to
understand the impact of particular transactions, other events and
conditions on the Group's financial position and financial
performance.
-- Prepare the financial statements on a going concern basis
unless it is inappropriate to presume that the Group will continue
in business
The Directors are responsible for keeping proper accounting
records that are sufficient to show an explain the Group's
transactions, with reasonable accuracy at any time, the financial
position of the Group, for safeguarding the assets and for taking
responsible steps for the prevention and detection of fraud and
other irregularities.
Statement of Disclosure to Auditors
So far as the Directors are aware, there is no relevant audit
information of which the Group's auditors are unaware.
Additionally, the Directors have taken all necessary steps that
they ought to have taken as Directors in order to make themselves
aware of all relevant audit information and to establish that the
Group's auditors are aware of that information.
Raylene Whitford
Chief Financial Officer
29 June 2015
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF SEFTON RESOURCES,
INC.
For the 13 month period ended 31 January 2015
Report of the Independent Auditor on the Financial
Statements
We have audited the accompanying financial statements of Sefton
Resources Inc., which comprise the consolidated statement of
financial position, consolidated statement of comprehensive income,
consolidated statement of changes in equity, consolidated statement
of cash flows, and notes, for the period ended 31 January 2015. The
financial reporting framework that has been applied in their
preparation is International Financial Reporting Standards (IFRS)
as adopted by the European Union.
This report is made solely to the Group's members, as a body, in
accordance with the terms of our engagement letter. Our audit work
has been undertaken so that we might state to the Group's members
those matters we are required to state to them in an Auditor's
report and for no other purpose. To the fullest extent permitted by
law, we do not accept or assume responsibility to anyone other than
the Group and the Group's members as a body, for our audit work,
for this report, or for the opinions we have formed.
Respective Responsibilities of Directors and Auditor
As described in the statement of Directors' responsibilities set
out on page 6, the Directors are responsible for the preparation of
the consolidated financial statements and for being satisfied that
they give a true and fair view. Our responsibility is to audit and
express an opinion on the consolidated financial statements in
accordance with applicable law and International Standards on
Auditing (UK and Ireland). These standards require us to comply
with the Auditing Practices Board's Ethical Standards for
Auditors.
Scope of the Audit of the Financial Statements
An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give
reasonable assurance that the financial statements are free from
material misstatements, whether caused by fraud or error. This
includes an assessment of whether the accounting policies are
appropriate to the Group's circumstances and have been consistently
applied and adequately disclosed; the reasonableness of significant
accounting estimates made by the Directors, and the overall
presentation of the financial statements.
In addition, we read all the financial and non-financial
information in the Annual Report to identify material
inconsistencies with the audited financial statements and to
identify any information that is apparently materially incorrect
based on, or materially inconsistent with, the knowledge acquired
by us in the course of performing the audit. If we become aware of
any apparent material misstatements or inconsistencies we consider
the implications for our report.
Opinion on Consolidated Financial Statements
In our opinion:
-- The consolidated financial statements give a true and fair
view of the state of the Group's affairs as at 31 January 2015 and
of the results of the Group for the period then ended;
-- The consolidated financial statements have been properly
prepared in accordance with IFRS as adopted by the European
Union.
Sanjay Parmar,
Chartered Accountant
(Auditor in charge)
Consolidated Statement of Comprehensive Income
For the 13 month period ended 31(st) January 2015
Notes
Period Year
ended ended
31 January 31 December
2015 2013
$000 $000
Continuing operations
Revenue -
Cost of sales - -
------------- --------------
Gross profit - -
General and administrative
expense (160) (2,167)
Retirement obligation
expense (28) 104
Loss before non-cash charges,
interest and taxes (188) (2,063)
Depletion, depreciation
and amortisation (54) (64)
Share-based payments (176) (234)
Operating loss (418) (2,389)
Finance costs 2 (82) (28)
Loss for the period from
continuing operations (500) (2,389)
------------- --------------
Discontinued operations
Loss for the period from
discontinued operations (7,535) (11,380)
------------- --------------
Loss for the period attributable
to shareholders of the
Company (8,035) (13,769)
------------- --------------
Loss per share 18 Per share Per
share
$ $
From continuing and discontinued
operations
Basic and diluted (0.00989) (0.02047)
From continuing operations
Basic and diluted (0.00062) (0.00360)
Consolidated Balance Sheet
As at 31 January 2015
Notes As at As at
31 January 31 December
2015 2013
$000 $000
Non-current assets
Investments 7 180 -
Intangible assets 8 - 3,671
Property, plant and equipment 9 - 11,511
------------ -------------
180 15,182
Current assets
Non-current assets held
for sale - disposal groups 11 632 -
Cash and cash equivalents 27 250
Trade and other receivables 12 124 690
------------ -------------
783 940
Total assets 963 16,122
Non-current liabilities
Retirement obligation 6 - 292
Asset retirement obligation 16 - 1,939
- 2,231
Current liabilities
Liabilities associated
with non-current assets
held for sale - disposal
groups 11 232 -
Trade and other payables 13 651 1,745
Current portion of borrowings 14 129 4,955
------------ -------------
1,012 6,700
Total liabilities 1,012 8,931
Net (liabilities) / assets (49) 7,191
Shareholders' equity
Share capital 17 25,311 24,692
Retained deficit (25,360) (17,501)
Total equity attributable
to equity holders of the
parent (49) 7,191
The annual financial statements set out on pages 8 to 12 were
approved and authorised for issue by the Board of Directors and
signed on its behalf on 29 June 2015 by:
Raylene Whitford,
Chief Financial Officer
The accompanying notes form part of these consolidated financial
statements.
Consolidated Statement of Changes in Equity
For the 13 month period ended 31 January 2015
Common shares,
no par value
Retained
Shares Amount deficit Total
$000 $000 $000
At 1 January 2013 577,581,720 23,750 (3,981) 19,769
Shares issued for
cash 124,333,333 1,082 - 1,082
Share issuance costs - (150) - (150)
Shares issued on conversion
of loan notes 2,174,688 10 - 10
Compensation expense
related to share options - - 234 234
Compensation expense
related to share warrants - - 15 15
Total comprehensive
income - - (13,769) (13,769)
-------------- ------- --------- ---------
At 31 December 2013 704,089,741 24,692 (17,501) 7,191
At 1 January 2014
Shares issued in lieu
of payments 128,988,778 355 - 355
Shares issued on conversion
of loan notes 76,565,976 150 - 150
Shares issued in placing 160,000,000 120 - 120
Share issuance costs - (6) - (6)
Compensation expense
related to share options - - 176 176
Total comprehensive
expense - - (8,035) (8,035)
-------------- ------- --------- ---------
At 31 January 2015 1,069,644,495 25,311 (25,360) (49)
Consolidated Statement of Cash Flows
For the 13 month period ended 31 January 2015
Period Year
ended ended
31 January 31 December
2015 2013
$000 $000
Cash flows from operating
activities
Total comprehensive expense (8,035) (13,769)
Finance costs 679 246
Share based payments 176 234
Retirement benefit expense 706 72
Depreciation 390 570
Impairments 3,401 12,886
Loss on disposal of subsidiary 1,430 -
Loss on disposal of equipment 3 -
(1,250) 239
Changes in operating assets
and liabilities:
Changes in trade and other
receivables 613 168
Changes in trade and other
payables 225 1,102
Net cash absorbed by operating
activities (412) 1,509
Cash flows from investing
activities
Purchase of intangible
assets (1) (1,071)
Purchase of property, plant
and equipment (122) (1,275)
Net cash outflow on disposal (8) -
of subsidiary
Net cash used in investing
activities (131) (2,346)
Cash flows from financing
activities
Proceeds of issue of new
shares - 1,082
Expenses of new share issue - (150)
Proceeds from notes payable 329 193
Payments on notes payable - (796)
Interest paid (13) (189)
Net cash provided by financing
activities 316 140
Net decrease in cash and
cash equivalents (227) (697)
Cash and cash equivalents
at beginning of period 250 947
Cash and cash equivalents
at end of period 23 250
Consolidated Statement of Cash Flows (continued)
for the 13 month period ended 31 January 2015
Note to the consolidated statement of cash flows:
For the purposes of the consolidated statement of cash flows,
cash and cash equivalents include held in banks. Cash and cash
equivalents at the end of the reporting period as shown in the
consolidated statement of cash flows can be reconciled to the
related items in the consolidated balance sheet as follows:
Period Year
ended ended
31 January 31 December
2015 2013
$000 $000
Cash and bank balances 27 250
Cash and bank balances (4) -
included in disposal groups
held for sale
23 250
Notes to the Consolidated Financial Statements
For the 13 month period ended 31 January 2015
1. Accounting Policies
General information
Sefton Resources, Inc. (the "Company" and together with its
subsidiaries, the "Group") was incorporated on January 17, 1995, as
a British Virgin Islands corporation and has been primarily engaged
in the exploration, development, and production of oil and natural
gas, as well as the gathering and transporting natural gas in the
Continental United States. The Group's properties are located in
California and Kansas, USA.
The Group's consolidated financial statements are presented in
US Dollars, which is the Group's functional and presentation
currency.
Basis of preparation
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRS)
as adopted by the EU. All accounting standards and interpretations
issued by the International Accounting Standards Board and the IFRS
Interpretations Committee effective for the periods covered by
these financial statements have been consistently applied to all
periods presented, unless otherwise stated. The consolidated
financial statements have been prepared under the historical cost
convention.
Basis of consolidation
The consolidated financial statements incorporate the results of
the Company and its subsidiaries as at 31 January 2015.
Consolidation of a subsidiary begins when the Company obtains
control over the subsidiary and ceases when the Company loses
control of the subsidiary. Specifically, income and expenses of a
subsidiary acquired or disposed of during the reporting period are
included in the consolidated statement of comprehensive income from
the date the Company gains control until the date when the Company
ceases to control the subsidiary.
Intercompany transactions, balances and unrealised gains on
transactions between Group entities (the Company and its
subsidiaries) are eliminated on consolidation.
At 31 January 2015, the Group's subsidiaries, all of which are
registered and incorporated in the United States, and included in
the consolidated Group financial statements, were:
TEG MidContinent, Inc. 100%
TEG Transmission, Co., LLC 100%
As Management were committed to a plan to sell the assets in the
subsidiaries and a Letter of Intent was received from two
independent potential buyers, they were classified as Non-current
Assets Held for Sale in the financial statements, as per IFRS
5.
The Company signed a binding Purchase and Sale agreement for TEG
USA, Inc. on 30 January 2015, the date which Management have
determined that the Company gave up control of this subsidiary.
Therefore, in line with IFRS 5, this subsidiary was classified as a
discontinued operation as at the fiscal year end.
Notes to the Consolidated Financial Statements
For the 13 month period ended 31 January 2015
New accounting standards and interpretations
The Group has reviewed new and amended standards and
interpretations currently in issue but not effective as of 31
January 2015 and determined none of the new standards and
interpretations will have significant impact on the Company's
reported results.
Amendments to existing standards and new standards which may
apply to the Group in future accounting periods are:
Standard Title Effective EU Impact on
date (periods adopted Sefton Resources,
beginning Inc.
on or after)
--------- ------------------------- --------------- --------- --------------------
IAS Disclosure Initiative 1 January No Disclosures
1 - Amendments 2016
--------- ------------------------- --------------- --------- --------------------
IAS Clarification 1 January No Review depreciation
16 of Acceptable 2016 methods to
and methods of depreciation ensure in
IAS and amortisation line with
38 - Amendments Standards
--------- ------------------------- --------------- --------- --------------------
IFRS Financial Instruments: 1 January No Classification
9 Classification 2018 and measurement
and Measurement of financial
instruments
--------- ------------------------- --------------- --------- --------------------
IFRS Revenue from Contracts 1 January No Accounting
15 with Customers 2017 for revenue
--------- ------------------------- --------------- --------- --------------------
- Annual Improvements 1 January Yes These Amendments
to IFRSs (2010-2012 2015 clarify the
Cycle) & Annual requirements
Improvements to of IFRS and
IFRSs (2011-2013 eliminate
Cycle) inconsistencies
within and
between Standards
--------- ------------------------- --------------- --------- --------------------
- Annual Improvements 1 January No Disclosures
to IFRSs 2012 2016
- 2014 Cycle
--------- ------------------------- --------------- --------- --------------------
Financial instruments
Financial instruments are recognised when the Group becomes a
party to contractual provisions of the instrument.
Financial assets are derecognised when the contractual rights to
the cash flows from the financial asset expire, or when the
financial asset and all substantial risks and rewards are
transferred. A financial liability is derecognised when it is
extinguished, discharged, cancelled or expires.
Notes to the Consolidated Financial Statements
For the 13 month period ended 31 January 2015
Financial assets
The Group's financial assets are all classified as loans and
receivables. The Group's loans and receivables comprise trade and
other receivables, as well as cash and cash equivalents.
Cash and cash equivalents
Cash and cash equivalents include deposits held at call with
banks and other short-term highly liquid investments which are
subject to insignificant risk of changes in value. Bank overdrafts
are shown within loans and borrowings in current liabilities on the
consolidated balance sheet.
Trade and other receivables
These arise principally through the provision of supplies of oil
and gas (e.g. trade receivables), but also incorporate other types
of contractual monetary assets.
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. A provision
for impairment of trade receivables is established when there is
objective evidence that the Group will not be able to collect all
amounts due according to the original terms of the receivables and
is recognised in the statement of comprehensive income.
Financial liabilities
Trade payables and other short-term monetary liabilities are
classified as financial liabilities and are initially recognised at
fair value and subsequently carried at amortised cost using the
effective interest method.
Bank borrowings and loan notes, including convertible loan notes
which do not qualify as compound financial instruments, are
initially recognised at fair value net of any transaction costs
directly attributable to the issue of the instrument. Such interest
bearing liabilities are subsequently measured at amortised cost
using the effective interest rate method, which ensures that any
interest expense over the period to repayment is at a constant rate
on the balance of the liability carried in the statement of
financial position. Interest expense in this context includes
initial transaction costs and premium payable on redemption, as
well as any interest or coupon payable while the liability is
outstanding.
There is no material difference between the book value and fair
value of financial instruments.
Equity instruments
An equity instrument is any contract that evidences a residual
interest in the assets of the Group after deducting all of its
liabilities. Equity instruments issued by the Group are recorded at
the proceeds received, net of direct issue costs.
Notes to the Consolidated Financial Statements
For the 13 month period ended 31 January 2015
Non-current assets held for sale
Non-current assets and disposal groups are classified as held
for sale if their carrying amount will be recovered principally
through a sale transaction rather than through continuing use. This
condition is met only when the asset (or disposal group) is
available for immediate sale in its present condition subject only
to terms that are usual and customary for sales of such asset (or
disposal group) and its sale is highly probable. Management must be
committed to the sale, which should be expected to qualify for
recognition as a completed sale within one year from the date of
classification.
When the Group is committed to a sale plan involving the loss of
control of a subsidiary, all of the assets and liabilities of that
subsidiary are classified as held for sale when the criteria
described above are met, regardless of whether the Group will
retain a non-controlling interest in its former subsidiary after
the sale.
Non-current assets (and disposal groups) classified as held for
sale are measured at the lower of their previous carrying amount
and fair value less costs to sell.
Exploration and evaluation costs
Exploration and evaluation expenditure, in respect of each area
of interest, is accounted for under the successful efforts
method.
Costs incurred prior to obtaining the legal rights to explore an
area are expensed immediately to the statement of comprehensive
income.
Exploration acquisition costs relating to established oil and
gas exploration areas are capitalised as exploration and evaluation
assets within intangible assets.
The costs of drilling exploration wells are initially
capitalised within exploration and evaluation assets pending the
results of the well. Costs are expensed where the well does not
result in the successful discovery of potentially economically
recoverable reserves.
All other exploration and evaluation expenditure, including
general administration costs, geological and geophysical costs, and
new venture expenditure is expensed as incurred, except where the
expenditure relates to an exploration discovery for which, at
balance sheet date, an assessment of the existence or otherwise of
economically recoverable reserves is not yet complete; or the
expenditure relates to an area of interest under which it is
expected that the expenditure will be recouped through successful
development and exploitation or by sale.
When an oil or gas field has been approved for commercial
development, the accumulated exploration and evaluation costs are
transferred to production assets within property, plant and
equipment.
Net proceeds from any disposal of an exploration asset are
initially credited against the previously capitalised costs. Any
surplus proceeds are credited to the statement of comprehensive
income.
Notes to the Consolidated Financial Statements
For the 13 month period ended 31 January 2015
Development expenditure includes past exploration and evaluation
costs, pre-production development costs, development drilling,
development studies and other subsurface expenditure pertaining to
that area of interest.
The definition of an area of interest for development
expenditure is narrowed from the exploration permit for exploration
and evaluation expenditure to the individual geological area where
the presence of an oil or natural gas field exists, and in most
cases will comprise an individual oil or gas field. Development
expenditure is reviewed for impairment at each reporting date where
there is an indication that the individual geological area may be
impaired.
Amortisation is not charged on costs carried forward in respect
of areas of interest in the development phase until production
commences. When production commences, carried forward development
costs are transferred into production assets within property, plant
and equipment, and depreciated on the units of production basis
over the life of economically recoverable reserves.
Other intangible assets
Other intangible assets include expenditure relating to the
development of gas gathering and
transportation assets.
Amortisation is not charged on costs carried forward in respect
of gas gathering and transportation development assets. When such
assets are certified as ready for use, carried forward development
costs are transferred into gas transportation assets within
property, plant and equipment and depreciated.
Property, plant and equipment
Costs related to surface plant and equipment and any associated
land and buildings are accounted for as property, plant and
equipment.
Property, plant and equipment are stated at historical cost less
depreciation and any impairment losses. Cost includes expenditure
that is directly attributable to the acquisition or construction of
these items. Subsequent costs are included in the asset's carrying
amount only when it is probable that future economic benefits
associated with the item will flow to the Group and the costs can
be measured reliably.
All other costs, including repairs and maintenance costs, are
charged to the statement of comprehensive income in the period in
which they are incurred.
Depreciation is provided on all property, plant and equipment
and is calculated as follows:
Equipment and vehicle costs 2 - 3 years, straight-line
---------------------------- ----------------------------------------------
Production assets % of estimated reserves (units of production)
---------------------------- ----------------------------------------------
Depreciation is provided on cost less residual value. The
residual value, depreciation methods and useful lives are annually
reassessed.
Notes to the Consolidated Financial Statements
For the 13 month period ended 31 January 2015
Impairment of assets
At each balance sheet date Management reviews the carrying
amounts of the Group's tangible and intangible assets, to determine
whether there is any indication that those assets have suffered an
impairment loss.
If any such indication exists, the recoverable amount of the
asset is estimated in order to determine the extent of the
impairment loss, if any. Where the asset does not generate cash
flows that are independent from other assets, the Group estimates
the recoverable amount of the cash-generating unit to which the
asset belongs.
Recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing 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 risks specific to the asset for
which the estimates of future cash flows have not been
adjusted.
If the recoverable amount of an asset (or cash-generating unit)
is estimated to be less than its carrying amount, the carrying
amount of the asset (cash-generating unit) is reduced to its
recoverable amount. An impairment loss is recognised as an expense
immediately.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (cash-generating unit) is increased to the
revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised
for the asset (cash-generating unit) in prior periods. A reversal
of an impairment loss is recognised in the statement of
comprehensive income immediately.
Provisions
A provision is recognised on 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.
Provisions are measured at the present value of management's
best estimate of expenditure required to settle the present
obligation at the balance sheet date. The discount rate used to
determine the present value reflects current market assessments of
the time value of money and the risks specific to the
liability.
Asset retirement obligation
The Group recognises the present value of the future estimated
costs of plugging oil and gas wells and removing surface facilities
associated with those oil and gas wells in the financial statements
in the period in which the obligation arises.
Upon initial recognition of the liability, an asset retirement
cost is capitalised by increasing the carrying amount, included in
oil and gas properties, by the same amount as the liability. In
periods subsequent to initial measurement, the capitalised asset
retirement cost is allocated to depreciation and amortisation
expense at the unit of production rate associated with the
corresponding asset.
Notes to the Consolidated Financial Statements
For the 13 month period ended 31 January 2015
The unwinding of the discount is recognised as an accretion
expense in the statement of comprehensive income.
Revenue recognition
Revenue from the sale of oil and gas is recognised when
significant risks and rewards of ownership are transferred to the
buyer.
The Group follows the gross method of accounting for royalties
where the royalty owners' share of sales is accounted for as an
operating expense of the Group, and calculated as a percentage of
revenue.
Income taxes
Current income tax is based on taxable profit for the year.
The Group's current tax assets and liabilities are calculated
using tax rates that have been enacted or substantively enacted by
the balance sheet date. The Group's ultimate parent is incorporated
in the British Virgin Islands and is not subject to US income tax;
however, the parent's subsidiaries are incorporated and operate in
the US and are subject to US income taxes.
Deferred income tax is provided in full, using the balance sheet
method, on temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the
consolidated financial statements. Deferred income tax is
determined using tax rates and laws that are expected to apply when
the related deferred income tax asset is realised or the deferred
income tax liability is settled.
Deferred tax assets are recognised for deductible temporary
differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those temporary
differences and losses.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to offset current tax assets and
liabilities and when the deferred tax balances relate to the same
taxation authority on either the same taxable entity or different
taxable entities which intend to settle or realise the amounts
simultaneously.
Foreign currency
The presentational currency for the Group's consolidated
financial statements is US dollars and it is this currency in which
the Group reports.
The Group's assets at this time are all in the United States and
the majority of transactions are made in US dollars.
Foreign currency transactions by Group companies are recorded in
their functional currency (being US dollars) at the exchange rate
at the date of the transaction. Monetary assets and liabilities
have been translated at rates in effect at the balance sheet date,
with any exchange adjustments being charged or credited in the
statement of comprehensive income.
Notes to the Consolidated Financial Statements
For the 13 month period ended 31 January 2015
Employment benefits
Provision is made in the financial statements for all employee
benefits.
The Group's contributions to defined contribution pension plans
are charged to profit or loss in the period to which the
contributions relate.
The Group provides for long-term retirement obligations for
certain employees. These provisions are measured at the present
value of management's best estimate of expenditure required to
settle the present obligation at the balance sheet date. The
discount rate used to determine the present value reflects current
market assessments of the time value of money and the risks
specific to the liability.
Share-based payments
Where share options and warrants have been granted to employees,
consultants, Directors and suppliers, IFRS 2 has been applied
whereby the fair value of the options is measured at the grant date
and spread over the period during which the counterparties become
entitled to the options. A Black Scholes options valuation model is
used to assess the fair value, taking into account the terms and
conditions attached to the options. The fair value of goods and
services received are measured by reference to the fair value of
options.
The cost of equity-settled transactions is recognised, together
with a corresponding increase in the retained earnings reserve,
over the period in which the performance and/or service conditions
are fulfilled, ending on the date on which the relevant recipients
become fully entitled to the award ("the vesting date").
The cumulative expense recognised for equity-settled
transactions at each reporting date until the vesting date reflects
the extent to which the vesting period has expired and the Group's
best estimate of the number of equity instruments that will
ultimately vest.
At the end of each period, the Group revises its estimates of
the number of options that are expected to vest based on the
non-market vesting conditions. It recognises the impact of the
revision to original estimates, if any, in the statement of
comprehensive income, with a corresponding adjustment to
equity.
The charge or credit to the statement of comprehensive income
for a period represents the movement in cumulative expense
recognised as at the beginning and end of that period.
No expense is recognised for awards that do not ultimately vest,
except for awards where vesting is conditional upon a market
condition, which are treated as vesting irrespective of whether or
not the market condition is satisfied, provided that all other
performance and/or service conditions are satisfied.
For additional detail regarding share-based compensation see
note 17.
Risk management objectives and policies
The overall objective of the Board is to set policies that seek
to reduce risk as far as possible without unduly affecting the
Group's competitiveness and flexibility.
Notes to the Consolidated Financial Statements
For the 13 month period ended 31 January 2015
The Group uses various financial instruments including cash,
loans, and items such as debtors and creditors that arise directly
from its operations. The existence of these financial instruments
exposes the Group to a number of financial risks, which are
described in note 15 of these financial statements.
Critical accounting estimates and judgements
In the process of applying the Group's accounting policies,
Management makes estimates and assumptions concerning the future.
The resulting accounting estimates will, by definition, seldom
equal the related actual results. 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 below.
Exploration and evaluation costs
The Group's accounting policy leads to the capitalisation of
intangible exploration and evaluation assets, where it is
considered likely that the amount will be recoverable by future
exploitation or sale or alternatively where the activities have not
reached a stage which permits a reasonable assessment of the
existence of reserves. This requires management to make estimates
and assumptions as to the future events and circumstances,
especially in relation to whether an economically viable extraction
operation can be established. Such estimates are subject to change
and following initial capitalisation, should it become apparent
that recovery of the expenditure is unlikely, the relevant
capitalised amount will be written off to the statement of
comprehensive income.
Estimation of oil and gas reserves
Proved oil and gas reserves are the estimated quantities of oil
and gas which geological and
engineering data demonstrate with reasonable certainty to be
recoverable in future years from known reservoirs under existing
economic and operating conditions.
Estimates of oil and gas reserves are inherently imprecise,
require the application of judgement and are subject to future
revision. Accordingly, financial and accounting measures (such as
the standardised measure of discounted cash flows, depreciation,
depletion and amortisation charges, and decommissioning provisions)
that are based on proved reserves are also subject to change.
Impairment of non-financial assets
Management review all non-financial assets at each balance sheet
date to determine whether there are any indications of impairment.
If any such indication exists, an estimate of the recoverable
amount is performed, and an impairment loss is recognised to the
extent that carrying amount exceeds recoverable amount.
Share-based payments
In determining the fair value of equity-settled share-based
payments and the related charge to the statement of comprehensive
income, the Group makes assumptions about future events and market
conditions; in particular, judgement must be made as to the likely
number of shares that will vest, and the fair value of each award
granted. The fair value is determined using a valuation model which
is dependent on further estimates, including the Company's future
dividend policy, the timing with which options will be exercised
and the future volatility in the price of the Company's shares.
Notes to the Consolidated Financial Statements
For the 13 month period ended 31 January 2015
Such assumptions are based on publicly available information.
Different assumptions about these factors to those made by the
Company could materially affect the reported value of share-based
payments.
Asset retirement obligation (provision for abandonment)
Estimates of the amounts of provision for abandonment recognised
are based on current legal and constructive requirements,
technology and price levels. As actual outflows may be different
from estimates due to changes in laws, regulations, technology,
prices and conditions, and can take place in the future, the
carrying amounts of provisions are regularly reviewed and adjusted
to take account of such changes. For additional detail regarding
provision for abandonment see note 13.
Segmental reporting
The Directors have determined that the Group has two principal
business activities - oil and gas exploration and production, and
natural gas gathering and transportation - both of which are
conducted solely within the United States at this time.
For the 13 month period ended 31 January 2015, the Group's
revenues derived solely from the
production and sale of oil.
Subsequent to a decision to dispose of TEG Transmission being
made prior to the reporting date, assets relating to natural gas
gathering and transportation at 31 January 2015 are included within
non-current assets held for sale (at 31 December 2013 these were
recognised within intangible assets and disclosed within note
8).
Subsequent to the disposal of the Group's interests in TEG USA
and a decision to dispose of TEG
MidContinent being made prior to the reporting date, assets
relating to oil and gas exploration and production are included are
included within non-current assets held for sale (at 31 December
2013 these were recognised within both intangible assets and
property, plant and equipment, and are disclosed accordingly in
notes 8 and 9).
All costs associated with natural gas gathering and
transportation were capitalised within intangible assets (note 8)
prior to reclassification to non-current assets held for sale, as
commercial activity has not yet commenced in this segment.
2. Finance Costs
The Group's finance costs during the 13 month period ended 31
January 2015 and the year ended 31 December 2013 were as
follows:
Period Year
ended ended
31 January 31 December
2015 2013
$000 $000
Interest on notes payable 51 15
Share warrant expense recognised
as a finance charge (note
17) 23 10
Other interest charges 7 3
Bank Interest 1 -
82 28
3. Income Tax Expense
Sefton Resources, Inc., the parent company, is a British Virgin
Islands company and is not subject to taxes based on its
jurisdiction. The operating subsidiaries, TEG MidContinent and TEG
Transmission are taxed as US entities.
United States Tax Provision
A reconciliation of the provision for income taxes computed at
the United States statutory rate to the provision for income taxes
as shown in the financial statements of operations for the 13 month
period ended 31 January 2015 and the year ended 31 December 2013 is
summarised below:
Period Year
ended ended
31 January 31 December
2015 2013
% %
Tax provision (benefit)
at federal statutory rate (34.00)% (34.00)%
State taxes, net of federal
tax effects (3.30)% (5.39)%
Other adjustments 0.84% (0.39)%
Valuation allowance 36.46% 39.78%
------------ -------------
Net income tax provision -% -%
The components of the US deferred tax assets and liabilities as
at 31 January 2015 and 31 December 2013 are as follows:
31 31 December
January 2013
2015
$000 $000
Deferred tax assets:
Federal and state net operating
loss and depletion carry forwards 1,916 7,561
Accrued retirement obligation - 766
Deferred tax liabilities:
Oil and gas properties (384) (3,770)
--------- ------------
1,532 4,557
Less: valuation allowance (1,532) (4,557)
--------- ------------
Net deferred tax asset - -
The Group has a $5,135,718 operating loss carryover (31 December
2013: $16,650,344) and $0 percentage depletion carry forward for US
federal income tax purposes as of 31 January 2015 (31 December
2013: $2,593,302). The net operating losses may offset taxable
income through the year ending 31 December 2034 and begin expiring
in the year ending 31 December 2024.
The Group provided a valuation allowance against its deferred
tax assets as at 31 January 2015 and 31 December 2013 since it is
uncertain whether net deferred tax assets will be fully utilised on
future income tax returns.
4. Staff Costs
The average number of Employees, Directors and Consultants
employed or contracted by the Group during the 13 month period
ended 31 January 2015 and the year ended 31 December 2013, by
category was:
Period Year
ended ended
31 January 31 December
2015 2013
Non-Executive Directors 3 3
Management 3 2
Exploration and production 6 7
Administration 2 3
------------ -------------
Total 14 15
The aggregate compensation expense incurred by the Group for
these Employees, Directors and Consultants during the 13 month
period ended 31 January 2015 and the year ended 31 December 2013,
by category was as follows:
Period Year
ended ended
31 January 31 December
2015 2013
$000 $000
Salaries and fees 1,161 1,828
Social security and other
taxes 77 79
Pension costs 27 27
Retirement obligation 706 72
Share-based compensation 176 234
------------ -------------
Total compensation expense 2,147 2,240
A portion of the compensation expense of the Employees,
Directors and Consultants included in the table above was
capitalised into the cost of oil and gas properties where those
costs are directly attributable costs associated with these
assets.
5. Directors' Remuneration
Total remuneration comprises emoluments, which include salaries
or fees accrued, bonuses accrued and health and life insurance
benefits received.
Total remuneration also includes pension and retirement benefits
accrued, and share-based awards. Ad hoc bonuses may be paid to
reward exceptional performance. Such bonuses are decided by the
Board on the recommendation of the compensation committee. Share
options are also awarded to Directors, employees and consultants
from time to time.
The granting of share options to individuals is determined
taking into account seniority, commitment to the business and
recent performance. Such share option awards are also decided by
the Board on the recommendation of the compensation committee. For
additional information on share awards and share-based compensation
see note 17.
The key management of the Group consists of the Board of
Directors. The total remuneration for each Director for the 13
month period ended 31 January 2015 and the year ended 31 December
2013 is shown below.
For the 13 month period ended 31 January
2015 Year
Pension ended
2015 contributions 2015 31 December
Emoluments & retirement Share-based 2015 2013
& compensation benefits compensation Total Total
$000 $000 $000 $000 $000
M Smith
* 43 - 12 55 57
T Milne
* 43 - 5 48 25
K Morris
* 43 - 5 48 25
J Ellerton
** - - - - 375
K Arleth
*** - - - - 34
Total 129 - 22 151 516
**Non-Executive Director during the period ended 31 January
2015
** Includes fees paid under a consultancy agreement with C &
J Resources Inc., which was owned by Mr Ellerton and his wife. Mr
Ellerton resigned as a Director 29 August 2013. The fees shown
represent compensation whilst in office as a Director
*** Resigned 19 June 2013. Fees shown represent compensation
whilst in office as a director
6. Retirement Obligation
The Group provides a retirement benefit to certain employees
with employment or service contracts as described below.
The following outlines the Group's retirement obligations to its
employees:
31 January 31 December
2015 2013
$000 $000
Balance at 1 January 2014 292 220
----------- ------------
Retirement obligation expense 850 72
Disposal of subsidiary (998) -
(note 20)
Restructuring settlement (144) -
Balance at 31 January 2015 - 292
The retirement obligation is based on the individual's ending
monthly salary or fee arrangement at the date of retirement times a
certain multiple for the total number of years in service. This
multiple ranges from one month of base salary or fee for two years
of service or less, to two and a half times monthly salary or fee
for ten or more years of service.
As part of the restructuring in 2015, the retirement obligations
and severance payments to employees were agreed post-year end.
7. Investments
Investments represent shares and share warrants in Hawker Energy
LLC received in consideration for the disposal of TEG USA (note
20):
31 January 31 December
2015 2013
$000 $000
3,000,000 shares of Hawker 180 -
common stock -
5,000,000 warrants for
Hawker stock, exercise
price of $0.25
As part of the settlement with the Bank of The West for lifting
the Company's status as co-borrower on the outstanding loan
facility, 1.5 million shares of Hawker common stock and 5 million
warrants were cancelled and returned to Hawker, and as such, the
value of these investments were written down in the accounts as at
31 January 2015. Refer to note 22 for further details on the post
balance sheet date events.
8. Intangible Assets
Intangible exploration assets for all years presented consist of
the Group's investment in oil and gas properties and pipeline
interests in Kansas.
Exploration Gas gathering
& evaluation & transportation
Total assets assets
31 31 31 31 31 31
Jan Dec Jan Dec Jan Dec
2015 2013 2015 2013 2015 2013
$000 $000 $000 $000 $000 $000
Balance at
1 January 3,671 4,928 787 3,453 2,884 1,475
Additions (34) 1,071 (35) 982 1 89
Transfers
to production
assets - (294) - (294) - -
Transfers
to plant
& equipment - (111) - (111) - -
Reclass of
assets - - - (1,320) - 1,320
Impairment (2,983) (1,923) (298) (1,923) (2,685) -
Reclassified
to disposal
group held
for sale
(note 11) (654) - (454) - (200) -
Closing balance - 3,671 - 787 - 2,884
-------- -------- ------- -------- ----------- -------
At 31 January 2015, all intangible assets were held within
disposal groups held for sale as a result of decisions taken prior
to the reporting date to dispose of the remaining operating
subsidiaries held by the Group.
As a result, impairments have been recognised to reduce the
assets according to the net realisable value of the disposal
groups, which are reclassified to non-current assets held for sale
(note 11).
9. Property, Plant and Equipment
Production assets consist of the Group's investment in producing
oil properties in California and Kansas.
Production Other Total
assets plant
& equipment
$000 $000 $000
Cost
At 31 December
2012 24,251 215 24,466
Transfers from
exploration &
evaluation assets 294 111 405
Additions 1,331 168 1,499
-------------
At 31 December
2013 25,876 494 26,370
Additions 300 - 300
Disposal of assets - (111) (111)
Disposal of subsidiary
(Note 20) (25,772) (179) (25,951)
Reclassified to
disposal group
held for sale
(Note 11) (404) - (404)
----------- -------------
At 31 January
2015 - 204 204
Accumulated depreciation
At 1 January 2013 3,132 194 3,326
Charge 492 78 570
Impairment 10,963 - 10,963
----------- -------------
At 31 December
2013 14,587 272 14,859
Charge 327 136 463
Impairment 386 - 386
Disposal of assets - (73) (73)
Disposal of subsidiary
(Note 20) (14,896) (131) (15,027)
Reclassified to
disposal group
held for sale
(Note 11) (404) - (404)
----------- -------------
At 31 January
2015 - 204 204
Net book value
At 31 January - - -
2015
At 31 December
2013 11,289 222 11,511
----------- ------------- ---------
Other plant and equipment assets include office and computer
equipment and vehicles.
At 31 January 2015, all remaining production assets were held
within disposal groups held for sale as a result of decisions taken
prior to the reporting date to dispose of the remaining operating
subsidiaries held by the Group.
As a result, impairments have been recognised to reduce the
assets according to the net realisable value of the disposal
groups, which are reclassified to non-current assets held for sale
(Note 11).
10. Discontinued Operations
At 31 January 2015, all of the Group's operating activities were
reclassified as discontinued as a result of the sale of TEG USA
(note 20), and the decisions made prior to the reporting date to
dispose of TEG MidContinent and TEG Transmission companies
resulting in these companies being classified as held for sale
(note 11).
Loss for the period from discontinued operations
Period Year ended
ended 31 December
31 January 2014
2015
$000 $000
Revenue 2,381 4,727
Cost of sales (2,031) (1,894)
------------ -------------
Gross profit 350 2,833
General and administrative
expenses (1,226) (427)
Retirement obligation expense (822) (176)
Depletion, depreciation
and amortisation (409) (506)
------------ -------------
Profit/(loss) before interest
and taxes (2,107) 1,724
Finance costs (597) (218)
------------ -------------
Net loss before exceptional
items (2,704) 1,506
Loss on re-measurement (3,401) -
to fair value less costs
to sell
Loss on disposal of operation (1,430) -
Exceptional expense - impairment
(California) - (10,963)
Exceptional expense - impairment
(Kansas) - (1,923)
------------ -------------
Loss from discontinued
operations (7,535) (11,380)
11. Non-Current Assets Held for Sale
Decisions were made prior to 31 January 2015 to dispose of the
Group's remaining operational subsidiaries, TEG MidContinent and
TEG Transmission. Letters of Intent regarding the sale of these
subsidiaries were received from to different third parties during
January 2015 and May 2015.
As a result of these decisions, the assets and liabilities of
these two subsidiaries are determined to be a disposal group held
for sale, and the assets and liabilities have been reclassified on
the Group balance sheet accordingly.
As at
31 January
2015
$000
Disposal group held for sale 632
Liabilities associated with
disposal groups held for sale (232)
Net assets held for sale 400
The major classes of assets and liabilities of the disposal
group at the end of the reporting period are as follows:
31 January
2015
$000
Non-current assets
Intangible assets 620
Current assets
Cash and cash equivalents (3)
Trade and other receivables 15
Total assets 632
Non-current liabilities
Asset retirement obligation (203)
Current liabilities
Trade and other payables (29)
-----------
Total liabilities (232)
Net assets 400
12. Trade and Other Receivables
31 January 31 December
2015 2013
$000 $000
Other receivables - unpaid 120 -
shares
Prepayments 4 83
Trade receivables - 324
Related party receivables - 283
----------- ------------
124 690
Trade receivables represent accruals of the prior month's unpaid
revenues from the sale of product, which are received one month in
arrears. There were no trade receivables as at 31 January 2015 for
TEG MidContinent as the asset stopped producing in November
2014.
Included in other receivables are amounts receivable for share
capital issued on 30 January 2015 of $120,000 for which full
payment was received after the balance sheet date.
There were no related party receivables during the period. Prior
year receivables consisted of amounts owed to the Company by Mr
Ellerton which, in the current year, were netted off against the
gross payable due to him and C&J Resources.
13. Trade and Other Payables
31 January 31 December
2015 2013
$000 $000
Trade payables 502 832
Accruals 70 413
Related party payables 79 500
----------- ------------
651 1,745
Related party payables at 31 January 2015 and 31 December 2013
consist of:
Related party 31 January 31 December
2015 2013
$000 $000
T Milne 32 28
K Morris 24 24
M Smith 23 25
C & J Resources Inc. - 262
C & J Resources Inc. Pension
Plan - 157
Summit Energy - 4
Total 79 500
Amounts due to related parties as at 31 January 2015 consist of
outstanding Director fees and expenses.
Historical amounts due to C&J Resources, Inc. as at 31
December 2013 represent accrued bonus and fees. C&J Resources
Inc. was owned by Mr. Ellerton and his wife and provided his
services under a consultancy agreement. The obligation to the
C&J Resources, Inc. Pension Plan at 31 December 2013
represented the full outstanding retirement obligation due for Mr.
Ellerton's services at that date.
Mr Ellerton was not a related party during the reporting period
and as such balances with Mr Ellerton and organisations under his
control were reclassified to trade payables.
The carrying amounts of trade and other payables approximate
their fair value.
14. Borrowings
2015 2015 2013 2013
Within After Within After
one one one one
year year year year
$000 $000 $000 $000
Notes payable 129 - 129 -
Bank loan - - 4,654 -
Convertible loan - - 172 -
note
Total 129 - 4,955 -
Notes payable
A total of $129,000 of notes payable with a coupon of 10% was
originally issued on 1 April 2012 and the due date extended to 31
March 2015. The notes and outstanding interest were repaid in full
on 31 March 2015 (note 22).
Bank loan
On 14 August 2007, the Group entered into a Credit Agreement
with its primary bank lender for a credit facility with a maximum
commitment amount of $10 million.
The Credit Agreement was amended and restated on several
occasions. The most recent amendment to the agreement was made on
10 May 2013 when a further extension to January 2014 was agreed,
with a number of smaller principal payments being made each month
from July 2013. The interest rate under the Credit Agreement is the
prime rate plus 0.5% or a LIBOR based rate, at the Group's
election.
The Credit Agreement contained various covenants that include
restrictions on additional debt, sale of collateralised assets, as
the Notes were secured by a mortgage on the Group's oil and gas
properties (notes 8 and 9), and maintenance of minimum working
capital and debt service ratios.
Following the sale of TEG USA, advances under the agreement
recognised in the Group balance sheet totalled $nil and $4.65
million at 31 January 2015 and 31 December 2013, respectively. This
loan was derecognised on the disposal of TEG USA (note 20), however
a guarantee from Sefton and further guarantees from TEG
MidContinent and TEG Transmission remained in place at 31 January
2015 and represent a contingent liability for the Group (note
21).
The Company was subsequently released as co-borrowers on the
loan on 20 March 2015 (note 22).
Convertible loan notes
On 17 December 2013, the Group issued $220,000 of convertible
loan notes with a one year term, at a 10% original issue discount.
Conversion of the loan notes was at the holder's option; the
conversion price being 85% of the lowest variable weighted average
trading price for the five trading days prior to conversion
date.
Interest accrued on the aggregate unconverted and outstanding
principal on a monthly basis at 4% p.a. until either payment or
conversion of the loan notes. The principal plus accrued interest
on unconverted notes was due to be repaid on or before 17 December
2014.
Furthermore, 5,141,779 share warrants with a life of three years
were issued alongside the loan notes, which were valued in
accordance with IFRS 2 (as disclosed in note 17) and treated as a
transaction cost of the loan notes. During the period ended 31
January 2015, the full value of this loan was converted into
shares.
15. Financial Instruments, Risk Exposure and Management
The principal financial instruments used by the Group, including
financial instruments included within disposal groups classified as
non-current assets held for sale, from which the financial risk
arises are as follows:
31 January 31 December
2015 2013
$000 $000
Financial assets
Other receivables 134 -
Cash and cash equivalents 27 250
Trade receivables - 324
Related party receivables - 283
----------- ------------
161 857
31 January 31 December
2015 2013
$000 $000
Financial liabilities
Trade payables 531 832
Notes payable 129 4,955
Related party payables 79 500
Accruals 70 413
809 6,700
The Group's activities expose it to a variety of financial risks
that arise as a result of its exploration, development, production
and financing activities. The Group's overall risk management
programme focuses on the unpredictability of financial markets and
seeks to minimise potential adverse effects on the Group's
financial performance.
The Group's objectives, policies and process for managing risks
and the methods used to measure them are as follows.
Commodity price risk
The Group is exposed to commodity price risk as it sells its oil
and gas production on a floating price basis, and may consider
partially mitigating this risk in the future through hedging
instruments.
Interest rate risk
Following the disposal of TEG USA (note 20), the Group has a
$nil credit facility (2013: $10 million) with a $nil million
borrowing base (2013: $4.65 million) with its primary bank lender
at a variable interest rate. The Group does not currently hedge its
interest rate exposure and consequently, its net income or loss is
directly affected by changes in interest rates.
The Group's bank deposits bear interest at nominal rates, and
changes in these rates do not have any significant impact on its
financial results.
The Group additionally issued $220,000 of convertible loan notes
in December 2013. Interest accrues on the aggregate unconverted and
outstanding principal on a monthly basis at a fixed rate 4% p.a.
until either payment or conversion of the loan note. These loan
notes were converted in full by the holder during the reporting
period. Conversion of these loan notes is detailed in the share
issue table in note 17.
Credit risk
Although the Group markets its crude oil to two counterparties,
the Group has not historically experienced any bad debts or delays
in payment with respect to its trade receivables.
Market risk
Due to the nature of the Group's operations during the period
ended 31 January 2015 and the year ended 31 December 2013, it is
mainly exposed to risk arising from fluctuations in the price of
oil. The Group does not currently use hedging instruments to
mitigate this risk.
Liquidity risk
Liquidity risk is the risk that the Group will not have
sufficient funds to meet liabilities. The Group manages its
liquidity needs through forecasts which are reviewed regularly by
the Board to ensure sufficient funds exist to finance the Group's
current operational and investment cash flow requirements.
As at 31 January 2015 the Group held approximately $27,000 in
cash (31 December 2013: $250,000).
There have been no substantive changes in the Group's exposure
to financial instrument risks, as objectives, policies and
processes for managing those risks or the methods used to measure
them from previous periods have not changed.
In managing liquidity risk, the main objective of the Group is
to ensure that it has the ability to pay all of its liabilities as
they fall due. The Group monitors its levels of working capital to
ensure that it can meet its liabilities as they fall due.
The table below shows the undiscounted cash flows on the Group's
financial liabilities as at 31 January 2015 and 31 December 2013 on
the basis of their earliest possible contractual maturity.
Within 2 Within 2 -6 6 - 12
Total months months months Greater than 12 months
$000 $000 $000 $000 $000
At 31 January 2015
Trade payables 581 581 - - -
Other loan notes 129 - 129 - -
Accruals 70 70 - - -
780 651 129 - -
At 31 December 2013
Bank loan 4,654 4,654 - - -
Trade payables 832 832 - - -
Accruals 413 - 413 - -
Other loan notes 301 - - 301 -
6,200 5,486 413 301 -
16. Asset Retirement Obligation
The undiscounted liability for asset retirement obligations as
of 31 January 2015 was estimated at $378,000 (31 December 2013:
$3,278,000), which is expected to be incurred in the period between
2016 and 2036, and does not include any potential salvage values.
The present value of the obligation is estimated using a discount
rate of 3.5%.
The obligation will be released on disposal of the
subsidiaries.
A reconciliation of the asset retirement obligation is as
follows:
31 January 31 December
2015 2013
$000 $000
Liabilities, beginning
of year 1,939 1,678
Accretion expense 43 37
Reduction in provision (139) -
estimate
Revision to estimate - 224
Disposal of subsidiary (1,640) -
Reclassified to disposal (203) -
groups held for sale (Note
11)
Liabilities, end of year - 1,939
17. Share Capital, Share Options and Share-Based Payments
The Group's share capital for the 13 month period ended 31
January 2015 and the year ended 31 December 2013 is as follows:
31 January 31 December
2015 2013
Authorised
Unlimited number of common - -
shares at nil par value
Number of common shares
in issue 1,069,644,495 704,089,741
$000 $000
Issued and fully paid
Share capital 25,311 24,692
Allotments during the period ended 31 January 2015
Total consideration
Price per share Number of shares received $000
Date Description ($) issued
Shares issued in lieu of
17 January 2014 payments 0.0046 7,154,724 33
21 January 2014 Conversion of loan notes 0.0032 3,128,206 10
31 January 2014 Conversion of loan notes 0.0032 3,128,206 10
10 Feb 2014 Conversion of loan notes 0.0032 7,820,513 25
17 April 2014 Conversion of loan notes 0.0025 3,986,929 10
06 May 2014 Conversion of loan notes 0.0024 8,446,671 20
09 June 2014 Conversion of loan notes 0.0017 9,045,226 15
18 June 2014 Conversion of loan notes 0.0015 10,259,917 15
26 June 2014 Conversion of loan notes 0.0016 30,750,308 50
Shares issued in lieu of
18 July 2014 payments 0.0027 32,168,554 88
Shares issued in lieu of
23 July 2014 payments 0.0021 9,487,667 20
Shares issued in lieu of
30 July 2014 payments 0.0024 8,067,940 19
Shares issued in lieu of
15 August 2014 payments 0.0018 8,858,490 16
Shares issued in lieu of
12 Sept 2014 payments 0.0028 30,599,883 84
Shares issued in lieu of
12 Sept 2014 payments 0.0028 32,651,520 90
30 January 2015 Placing of shares 0.0008 160,000,000 120
------------------- ---------------------------
365,554,754 625
During the period ended 31 January 2015 the Group issued
365,554,754 common shares (2013: 126,508,021 shares) and received
proceeds of $625,517 (2013: $1,091,557) before expenses of $6,000
(2013: $150,000).
Equity financing facility
During 2012, the Group entered into an equity financing facility
with Darwin Strategic Ltd.
The facility allowed drawdowns of up to GBP15m in total over the
course of 3 years. Drawdowns, which are at the G roup's discretion,
comprise the issue of common shares in Sefton Resources Inc to
Darwin for cash, with the issue price being based on recent trading
prices, less a 5% discount. The common shares issued under these
drawdowns are equity instruments.
As part of the arrangement, Darwin also has the right to
subscribe for up to 10% of any placings of common shares by the
Company. Darwin also received warrants over 3,500,000 of the
Company's common shares: these warrants had a fair value at issue
date of $40,048.
The Group has received GBPnil during the year (year ended 31
December 2013: GBP70,500) as part of this arrangement, in exchange
for nil common shares (year ended 31 December 2013: 16,000,000).
The financing facility was terminated by the Group in June
2015.
Share options and share-based payments
The Group maintains an incentive share option plan whereby from
time to time at the discretion of the Board, options to purchase
common shares may be granted to the Directors, Consultants and
Employees of the Group.
The plan specifies that the subscription exercise price of such
options shall not be less than the applicable market price of the
common shares at the date of grant of the relevant option. The
number of common shares for which options may be granted is limited
so that at any time the total number of common shares subject to
option under the plan will not exceed 10% of the total number of
common shares issued and outstanding.
The options vest over a three year period and have a ten year
life. The Group records a share-based payment expense based on an
estimate of the fair value of the option awarded. The fair value is
estimated using a Black-Scholes option pricing model.
The fair value of the various options is determined using a
Black-Scholes option pricing model and based on the inputs
below.
Grant date 18-Mar-08 25-Jun-08 1-Jan-11
---------------------- ---------- ----------
Number of options 3,850,000 2,750,000 13,000,000
---------------------- ---------- ----------
Share price at
grant - pounds 0.0578 0.0675 0.0150
---------------------- ---------- ----------
Exercise price
- pounds 0.0600 0.0650 0.0175
---------------------- ---------- ----------
Volatility 62.78% 67.17% 161.51%
---------------------- ---------- ----------
Dividend yield nil nil nil
---------------------- ---------- ----------
Risk free investment
rate 0.014 0.0248 0.0325
---------------------- ---------- ----------
Option life - years 6.5 6.5 10.0
---------------------- ---------- ----------
Fair value per
share option -
pounds 0.034 0.044 0.0149
---------------------- ---------- ----------
Grant date 7-Feb-11 24-Jul-11 27-Sep-11
---------------------- ---------- ----------
Number of options 1,000,000 3,500,000 5,500,000
---------------------- ---------- ----------
Share price at grant
- pounds 0.0180 0.0305 0.0224
---------------------- ---------- ----------
Exercise price -
pounds 0.0200 0.0350 0.0350
---------------------- ---------- ----------
Volatility 122.40% 163.06% 69.01%
---------------------- ---------- ----------
Dividend yield nil nil nil
---------------------- ---------- ----------
Risk free investment
rate 0.0325 0.0325 0.0325
---------------------- ---------- ----------
Option life - years 10.0 10.0 10.0
---------------------- ---------- ----------
Fair value per share
option - pounds 0.0171 0.302 0.0158
---------------------- ---------- ----------
Grant date 05-Jul-13
---------------------- -----------
Number of options 27,000,000
---------------------- -----------
Share price at
grant - pounds 0.0047
---------------------- -----------
Exercise price
- pounds 0.0063
---------------------- -----------
Volatility 70.43%
---------------------- -----------
Dividend yield nil
---------------------- -----------
Risk free investment
rate 0.014
---------------------- -----------
Option life - years 5
---------------------- -----------
Fair value per
share option -
pounds 0.0018
---------------------- -----------
Warrants
Warrants issued in December 2013 alongside convertible loan
notes were fair valued using a Black-Scholes option pricing
model.
Warrants issued in June 2012 as part of the arrangement of the
equity financing facility were also fair valued using a
Black-Scholes option pricing model.
Inputs to the Black-Scholes pricing model for all warrants
issued are detailed below:
Grant date Jun-12 Dec-13
---------------------- ----------
Number of warrants 3,500,000 5,141,779
---------------------- ----------
Share price at
grant - pounds 0.0163 0.0036
---------------------- ----------
Exercise price
- pounds 0.0325 0.0036
---------------------- ----------
Volatility 95.50% 73.09%
---------------------- ----------
Dividend yield nil nil
---------------------- ----------
Risk free investment
rate 0.0079 0.0175
---------------------- ----------
Warrant life -
years 3 3
---------------------- ----------
Fair value per
warrant - pounds 0.0074 0.00175
---------------------- ----------
The fair value of share warrants has been recognised in the
retained earnings reserve.
The expense for warrants issued alongside convertible loan notes
was treated as a transaction cost and deducted from the loan
liability accordingly (see note 14).
The expense recognised in finance costs for the period in
relation to the share warrants issued in previous reporting years
is $23,361 (2013: $10,012).
The following is a summary of share options and warrants for the
reporting periods ended 31 January 2015 and 31 December 2013,
share-based payment expense for the reporting periods ended 31
January 2015 and 31 December 2013, and employees, consultants and
Director option holdings as of 31 January 2015.
Awards, expirations and relinquishments
Number Exercise Number Exercise
of options price of warrants price
Outstanding at
31 December 2012 30,916,666 $0.0217-$0.1164 3,500,000 $0.0506
Granted 27,000,000 $0.0093 5,141,779 $0.0059
Outstanding at
31 December 2013 57,916,666 $0.0093-$0.1164 8,641,779 $0.0059-$0.0506
Cancelled / lapsed (17,999,999) $0.0093 - -
- $0.0542
Outstanding at
31 January 2015 39,916,667 $0.0093-$0.1164 8,641,779 $0.0059-$0.0506
------------- ---------------- ------------- ----------------
Weighted average
exercise price $0.02801 $0.05055
Options / warrants
vested and exercisable
at 31 January
2015 31,916,668 3,500,000
Share-based payment expense
The following outlines share-based payment expense in relation
to share options for the 13 month period ended 31 January 2015 and
the year ended 31 December 2013:
31 January 31 December
2015 2013
$000 $000
Share-based payment expense 176 234
Share option exercise prices are set in sterling and have been
converted to US dollars at the respective year-end exchange
rates.
At 31 January 2015, the Group's Officers and Directors held the
following options:
Officer Number Average
or Director of options Expiration Exercise exercise
held dates prices price
GBP GBP
K Morris 4,000,000 7/5/18 0.00625 0.00625
T Milne 4,000,000 7/5/18 0.00625 0.00625
9/26/2021- 0.00625
M Smith 8,000,000 11/11/2021 - 0.035 0.01406
------------
Total 16,000,000
At 31 December 2013 the Group's Officers and Directors held the
following options:
Officer Number Average
or Director of options Expiration Exercise exercise
held dates prices price
GBP GBP
K Morris 4,000,000 7/5/18 0.00625 0.00625
T Milne 4,000,000 7/5/18 0.00625 0.00625
9/26/2021- 0.00625
M Smith 8,000,000 11/11/2021 - 0.035 0.01406
------------
Total 16,000,000
Shares reserved for employee benefit pool
During 2005, the Board approved the establishment of an employee
benefit and incentive plan. This plan may include cash, a net
profits interest from production, stock and other items which the
Board may elect to contribute. Distributions to employees will be
accumulated and issued at the sole discretion of the Board of
Directors of the Group.
18. Loss Per Share
Basic loss per share is calculated by dividing the loss
attributable to common shareholders by the weighted average number
of common shares outstanding during the reporting period.
Given the Group's reported loss for the reporting periods
presented, share options and warrants are not taken into account
when determining the weighted average number of Ordinary Shares in
issue during the reporting periods and therefore the basic and
diluted earnings per share are the same.
Basic loss per share
31 January 2015 31 December 2013
$'s $'s
Loss per share from continuing and discontinued operations (0.00989) (0.02047)
Loss per share from continuing operations (0.00062) (0.00360)
The loss and weighted average number of common shares used in
the calculation of basic loss per share are as follows:
31 January 2015 31 December 2013
$000 $000
Loss used in the calculation of total basic and diluted loss per share (8,035) (13,769)
---------------- -----------------
Loss used in the calculation of basic and diluted loss per share from
continuing operations (500) (2,389)
---------------- -----------------
As at 31 January 2015 As at 31 December 2013
Number of common shares
Weighted average number of common shares for the purposes of basic
loss per share 812,741,519 672,715,707
If the Company's share options and warrants were taken into
consideration in respect of the Company's weighted average number
of common shares for the purposes of diluted earnings per share, it
would be as follows:
Number of common shares
Dilutive effect of share options and warrants 4,950,433 47,795,096
Weighted average number of common shares for the purposes of diluted loss per share 817,691,952 720,510,803
19. Leases
The Group has the following minimum future payments on
non-cancellable operating leases:
31 January 31
2015 December
2013
$000 $000
Buildings
Expiring within one year 4 10
Equipment
Expiring within one year 4 2
----------- ----------
20. Disposal of Subsidiary
At 31 January 2015, the assets and liabilities of TEG USA were
classified as a disposal due to the fact that the Purchase and Sale
Agreement for the transaction was signed on 16 January 2015 and
shareholder approval was received for the transaction on 30 January
2015.
Hawker Energy LLC advanced a total of $1,850,000 to Sefton for
the TEG USA asset in the months previous which was key to the
Company's ability to continue to operate the asset. Without the
advancement of these funds, the Company would have defaulted on the
loan agreement.
Given the fact that the consideration transferred for the sale
on 1 February 2015 were solely equity instruments and the
transaction was approved by shareholders before the fiscal year
end, it was determined that these events triggered the transfer of
control to Hawker Energy, therefore Management determined it was
prudent classify the subsidiary as a loss on disposal as at 31
January 2015.
Consideration received:
31 January
2015
$000
3,000,000 shares of Hawker
common stock 180
5,000,000 share purchase -
warrants with an exercise
price of $0.25, valid for
five years from date of
issue
180
Analysis of assets and liabilities of subsidiary (TEG USA):
31 January
2015
$000
Non-current assets
Property, plant and
equipment 10,746
Current assets
Cash and cash equivalents 8
Trade and other receivables 23
Total assets 10,777
Non-current liabilities
Retirement obligation (998)
Asset retirement obligation (1,638)
Current liabilities
Trade and other payables (856)
Borrowings (5,675)
-----------
Total liabilities (9,167)
Net assets 1,610
Loss on disposal of subsidiary (TEG USA):
31 January
2015
$000
Consideration received 180
Net assets disposed of (1,610)
Loss on disposal (1,430)
The loss on disposal is included in the loss for the year from
discontinued operations (note 10).
Net cash outflow on disposal of a subsidiary:
31 January
2015
$000
Less: Cash and cash equivalent
balances disposed of (8)
21. Contingent Liabilities
On 18 March 2015, Sefton and TEG MidContinent's status as
co-borrowers with Hawker Energy LLC on TEG USA's outstanding loan
with the Bank of the West was lifted (note 22). As such, no
recognition of a provision for the potential liability was made in
the accounts for this amount.
On 14 May 2015 a claim was filed in the district court of Denver
by the former Chairman, James Ellerton against Sefton, two of its
directors, and a former director which outlined unspecified damages
in connection with his resignation from the board and the
termination of the consulting contract with C&J Resources, Inc.
("C&J"). This matter remains unsettled as at the date of the
release of these accounts, however the Board has received a firm US
legal opinion that Mr Ellerton's claims are without merit.
Furthermore, the Company has a suite of counterclaims which it is
prepared to file against Mr Ellerton and C&J Resources in
relation to the activities he performed whilst a Director. Some of
these claims were filed when the Company was in arbitration with Mr
Ellerton in 2014.
The Company had not other contingent liabilities as at the
balance sheet date.
22. Post Balance Sheet Date Events
On 2 February 2015, Mr Daniel Levi was appointed as the
Company's interim Executive Chairman.
On 24 February 2015 the Company raised gross funds of GBP900,000
through a placing for new common shares of no par value in the
capital of the Company. The new Shares were subscribed for by
private clients of Cornhill Capital Limited at a price of 0.055
pence per share, resulting in a total of 1,636,363,636 new shares
being issued. As part of the placing, the Company issued Cornhill
with 81,818,182 warrants to subscribe for Shares at a price of 0.1
pence per share, exercisable for a period of three years. The
warrants were exercised in full by the 29(th) of May 2015.
The Company also issued 4,918,857 Shares in satisfaction of a
contracted remuneration payment of $9,972 due to an employee of TEG
USA for the prior year.
On the same date, Mr. Clem Chambers was appointed as a
Non-Executive Director and Mr. Daniel Levi was granted 65 million
options at a price of 0.05 pence. These options were fully
exercised by Mr Levi on the 28(th) of April 2015.
On March 18, 2015, a Sixth Amendment to the Forbearance
Agreement ("Sixth Amendment") was entered into amongst Sefton, TEG
USA, TEG MidContinent, Hawker Energy LLC and the Bank of the West
('BOTW'). Under the Sixth Amendment, the BOTW released Sefton and
TEG MidContinent from all respective obligations under the Credit
Agreement (other than the surviving obligations in respect of
indemnification) and removed Sefton and TEG MidContinent as
Borrowers under the Credit Agreement.
As and in consideration of that release, the BOTW was (i) paid
$400,000 by Sefton, which was applied against the amount
outstanding under the Loan as well as an additional $15,000 paid by
Sefton to cover the BOTW's lawyers fees, (ii) delivered a
Collateral Assignment of Note, executed by Sefton in favour of BOTW
and acknowledged and agreed to by Hawker ("Collateral Assignment"),
collaterally assigning to BOTW, to secure all obligations of
Borrowers under the Credit Agreement, a Promissory Note, dated
March 18, 2015 in the principal amount of $400,000, issued by
Hawker in favour of Sefton (the "Hawker Note"), and (iii) delivered
the original Hawker Note. In addition, under the terms of the Sixth
Amendment, Sefton agreed to return to Hawker for cancellation (a)
its Warrant to purchase up to an additional 5,000,000 shares of
Hawker common stock for $0.25 per share (which was issued as part
of Hawker's acquisition of TEG USA), and (b) 1,500,000 shares of
Hawker common stock. All funds were transferred and the transaction
was settled by the 20(th) of March 2015.
On 19 March the Company changed brokers from Dowgate Capital
Limited to Cornhill Capital Limited ('Cornhill').
On 23 April 2015, Mr Levi resigned as interim Executive Chairman
and Ms. Raylene Whitford was appointed as the Company's Executive
Chief Financial Officer and Company Secretary.
On 28 April 2015, Mr Levi exercised all of his options and 65
million shares were issued at a price of 0.05 pence. Furthermore,
Cornhill exercised 57,409,091 of their outstanding warrants at a
price of 0.1 pence.
Post Balance Sheet Date Events (cont.)
On 8 May 2015 Mr Clem Chambers resigned as a Non-Executive
Director and Mr Jossy Rachmantio was appointed as a Non-Executive
in his place. The Board approved the issuance of 13,636,364 shares
to Mr.Clem Chambers at a price of 0.055 pence in line with his
Non-Executive Director
The Company learned a complaint was lodged on 14 May 2015 by Mr
James Ellerton on behalf of himself and his former service company,
C&J Resources, in the District Court of Denver, Colorado
against the Company, two of its directors and a former director
claiming unspecified damages in connection with his resignation
from the board, the termination of the consulting contract pursuant
to which he was providing services and the completion of the
transaction with Hawker Energy. The Board has received a firm US
legal opinion that Mr Ellerton's claims are without merit and the
Company has a suite of counterclaims which it is prepared to file
against Mr Ellerton and C&J Resources in relation to the
activities he performed whilst a Director. Some of these claims
were filed when the Company and Mr Ellerton were in arbitration in
2014.
On 11 June 2015 the Company filed to have the matter removed
from the district courts of Denver to the federal court of
Colorado. The application was accepted and a preliminary hearing
date for the case has been set for 31 August 2015.
On 29 May 2015 the remaining balance of Cornhill's outstanding
warrants originally issued on the 24 February 2015 were exercised
(24,409,091) at the price of 0.1 pence.
On 16 June 2015 the Company raised gross funds of GBP799,500
through a placing for new common shares of no par value in the
capital of the Company. The new Shares were subscribed for by
private clients of Novum Capital Limited at a price of 0.065 pence
per share, resulting in a total of 1,230,000,000 new shares being
issued. As part of the placing, the Company issued Novum Capital
with 615,000,000 warrants to subscribe for Shares at a price of
0.065 pence per share, exercisable until the earlier of new
financing raised or 31 August 2015.
On 22 June 2015 the Company has issued 16,600,499 new common
shares of no par value to Magna Group, LLC at a price of 0.065
pence per Share. The shares were issued in accordance with the
terms of the financing announced on 8 January 2014, as a
substitution of the 5,141,779 warrants to subscribe for Shares at
the lower of 0.36 pence per Share or the current volume weighted
average price, as announced at that time, and calculated in
accordance with a formula incorporated into the financing
agreement.
On 25 June 2015, the Company entered into a Development
Agreement with UTAS Petroleum - a consultancy company owned by Rob
Shepherd. Under the terms of the Development Agreement, the Company
made an advanced payment under commercial terms of GBP500,000 to
UTAS to allow the JV to progress the due diligence and possible
funding arrangements for certain oil and gas properties in
Indonesia which have been identified as potential target
assets.
All activities undertaken and expenditure made by UTAS in
relation to the Potential Transaction require pre-approval by the
Company. Furthermore, a JV committee has been formed on which
Directors of the Company will form a majority of the
representatives and which will be responsible for the decisions
made at all levels of the JV. The Board will receive updates on the
progress of the work performed on a regular basis.
On 30 June 2015 the Company entered into a provisional purchase
and sale agreement with a third party to acquire all the assets and
liabilities of Sefton's two wholly owned subsidiaries: TEG
MidContinent Inc. and TEG Transmission LLC in Kansas. The purchase
price for the transaction is $400,000 and transfers the
responsibility for all plugging liabilities for all the wellbores
included on the leases.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR EAAKNASESEAF
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