Argos resources Ltd Annual Report & Accounts 2012 growing ProsPect inventory Peregrine Falcon The peregrine falcon, Falco peregrinus, ranges across the Falkland Islands. It is one of the world’s fastest animals reaching speeds in excess of 100km per hour whilst diving to hunt. growing ProsPect inventory 1 Argos Resources is an oil and gas exploration company listed on AIM and based in the Falkland Islands. The Company’s principal asset is a 100% interest in production licence PL001 covering an area of approximately 1,126 sq kms in the North Falkland Basin. A 3D seismic survey was acquired in early 2011 covering the entire licence area. The quality of the seismic data acquired is excellent and clearly demonstrates a material increase in the prospectivity of the licence over that which could be identified from the older 2D seismic data. A Competent Person’s Report issued in October 2011 described 28 prospects based on mapping of an early fast‑track processed version of the 3D seismic data. These prospects have a total unrisked potential of 2.107 billion barrels of prospective recoverable resource in the most likely case and up to 7.301 billion barrels in the upside case. Mapping of the final processed seismic data has identified more than 30 new prospects and leads not included in the earlier Competent Person’s Report. The prospective resource potential in the licence area is expected to increase significantly as a consequence of this, and a new Competent Person’s Report has been commissioned to determine this change. The licence area adjoins licences PL032 and PL004b. The Sea Lion oil discovery was made in licence PL032 in 2010 and a total of nine wells have now been drilled to complete the appraisal of this large discovery. An extension of the Sea Lion field into licence PL004b was proven by drilling in late 2011 and additional shallower stacked oil and gas accumulations above the Sea Lion field have also been proven in the Casper, Casper South and Beverley discoveries. Highlights ZZ Final processed 3D seismic data was received in January 2012 and proved to be of exceptionally good quality, helping to de‑risk the numerous stratigraphic prospects in the licence ZZ Many of the stratigraphic prospects described in the October 2011 Competent Person’s Report (CPR) are larger than originally described ZZ Over 30 new prospects and leads, not reported in the CPR, have been identified ZZ Estimated prospective recoverable resource figures are expected to increase substantially from those reported in the 2011 CPR ZZ New CPR commissioned to independently document the full potential of the licence as now identified. Publication expected in 2Q 2013 ZZ Both Premier Oil and Noble Energy, two substantial independent oil companies, have committed to the Falkland Islands through farm‑ins ZZ The Falkland Islands Government is investing in new infrastructure projects and updating its legislation and approval procedures in readiness for field development and production Contents Business review 01 Highlights 02 At a Glance 04 3D Seismic Survey 06 Current Prospects 08 New Prospects for 2013 Environmental Impact 10 12 Chairman’s Statement 14 Managing Director’s Review Corporate governance 16 Board of Directors 17 19 21 Risk management report Statutory information Corporate governance statement Group financial statements 22 23 Independent auditor’s report Consolidated statement of comprehensive income Consolidated statement of financial position Consolidated statement of cash flows Consolidated statement of changes in equity Notes to the consolidated financial statements 24 25 26 27 Parent Company accounts 36 37 Parent Company balance sheet Notes to the parent Company financial statements 40 Advisors Argos resources LtdAnnual Report & Accounts 2012 2 At a Glance An emerging oil and gas province Falkland Islands Situated approximately 480km to the east of South America in the South Atlantic Ocean. Cover approximately 12,000 sq kms of land and include the two main islands of East and west Falkland and about 200 small islands. Own legislation relating to oil and gas, which is administered by the Director of Mineral Resources, an official of the Falkland Islands Government based in Stanley. water depth in the North Falkland Basin is between 140 metres and 500 metres and the operating environment is similar to that of the uK Central North Sea with the potential for year‑round drilling. OuR PRINCIPAL ASSET IS 100% OwNERSHIP OF LICENCE PL001 Some of our Prospects 01 Rhea The Rhea prospect is a lacustrine sandstone with a pronounced fan morphology encased in organic‑rich mudstones which provide both source and seal. 02 Kratos Like Rhea, the Kratos prospect is a lacustrine sandstone with a pronounced fan morphology encased in organic‑rich mudstones which provide both source and seal. 03 Helios The largest prospect identified in the basin to date, Helios is a sequence of thick stacked fan sandstones which have scoured into the underlying organic‑rich mudstones. 04 Zeus The Zeus prospect is a robust structural closure on a culmination of the Central Ridge with multiple reservoir objectives. Argos resources LtdAnnual Report & Accounts 2012 3 PL033 WELLS Oil discover y Oil and gas discover y P&A, oil shows m 0 0 5 P&A, dr y well 500m 02 04 01 PL032 JOHNSON A rgos Resources ARGOS PROSPECTS SEA LION OIL DISCOV E RIES CASPER CASPER SOUTH BEVERLEY PL003 (1) PL004b PL004c LIZ GAS DISCOV ERIES PL001 ARGOS 03 200m PL003 PL003 (1) PL004a PL004a 0 10 20 Kilometres 2 0 0 m Argos resources LtdAnnual Report & Accounts 2012 4 3D Seismic Survey Innovations in exploration Stacked targets The 3D seismic allows numerous sandstones to be mapped within the licence area which form discrete prospects encased within thick organic‑rich mudstones. In several areas these prospects are vertically stacked, just as in the Sea Lion, Casper, Casper South and Beverley stacked discoveries. This allows several prospects to be tested within a single exploration well. Examples of the Rhea, Kratos and Helios stacked targets are presented in this report. Early Cretaceous Basin Architecture The diagram opposite is a projection of the basin floor architecture in Licence PL001 at the time of deposition of the sandstones that form the reservoir in the Sea Lion field and which are the target reservoirs for the majority of the prospects in the Company’s licence area. The diagram is based upon an extract from the 3D seismic data cube. The Sea Lion field and a selection of the Company’s prospects are projected onto the diagram to demonstrate the relative lateral and vertical positions of the prospects in relation to Sea Lion. The principal reservoir objectives are turbidite sandstones of Lower Cretaceous age. These sandstones are derived from a major delta system which originated to the north of Licence PL001 and migrated southwards along the axis of the basin during the Lower Cretaceous, depositing turbidite sandstones onto the basin floor in front of the delta. These sandstones were deposited within thick organic‑rich mudstones which provide both source and seal to the prospects. 28 CONFIRMED PROSPECTS 30+ NEw PROSPECTS AND LEADS Argos resources LtdAnnual Report & Accounts 2012 5 Helios Stack Zeus Kratos Stack rhea Stack 3D Projection The Early Cretaceous basin architecture in PL001 at the beginning of post‑rift sedimentation Sea Lion Stack Argos resources LtdAnnual Report & Accounts 2012 Helios Prospect ZZ The largest prospect identified anywhere in the North Falkland Basin to date, Helios is a very large lacustrine fan and composite channel sand sequence of Aptian age. ZZ Sandstones have prograded northwards in large stacked foresets from a delta system in the south, creating a combination structural/stratigraphic trap which exhibits a pronounced and visibly striking fan morphology at 1800m subsea. ZZ The sands have scoured into the underlying highly organic rich lacustrine mudstones resulting in direct contact with the primary source rock. ZZ Additional source rock potential exists in deeper pre‑rift organic shales via faulting. Mudstones provide excellent topseal and sideseal. PL001 6 Current Prospects PL001 Prospect Helios Stack P90 61 P50 790 P10 2,990 Rhea Prospect ZZ Rhea is a lacustrine fan and composite channel sand sequence in a combination structural/ stratigraphic trap at 2500m subsea. ZZ The objective is Early Cretaceous sandstones derived from a major delta system to the north. Seal and source are provided by highly organic rich lacustrine mudstones which encase the sands. ZZ The prospect exhibits a pronounced fan morphology highlighted by an amplitude anomaly with coincident isopach thickening. ZZ Additional prospects in the western Graben to the west of Rhea can also be seen on this map and are the subject of ongoing work. Prospect Rhea Stack P90 66 P50 346 P10 1,193 Argos resources LtdAnnual Report & Accounts 2012Helios Prospect 32 1613 P90 HeliosTriton Prospect6587755 P50 2,590251149 P10 61Helios Stack7902,990SW• Helios is a very large lacustrine fan and composite channel sand sequence of Aptian age. • Sandstones have prograded northwards in large stacked foresets from a delta system in the south, creating a combination structural/stratigraphic trap which exhibits a pronounced and visibly striking fan morphology at 1800m subsea. • The sands have scoured into the underlying highly organic rich lacustrine mudstones resulting in direct contact with the primary source rock. • Additional source rock potential exists in deeper pre-rift organic shales via faulting. Mudstones provide excellent topseal and sideseal.SELENEPOSEIDON ERHEAPOSEIDON DPOSEIDON CPOSEIDON BKRATOS EKRATOS DRhea Prospect 2014994631 P90 Rhea (A&B)SelenePoseidon BPoseidon CPoseidon DPoseidon EKratos DKratos E Prospect1038131323629268 P50 4262828185120828928 P10 66Rhea Stack3461,193• Rhea is a lacustrine fan and composite channel sand sequence in a combination structural/stratigraphic trap at 2500m subsea.• The objective is Early Cretaceous sandstones derived from a major delta system to the north. Seal and source are provided by highly organic rich lacustrine mudstones which encase the sands.• The prospect exhibits a pronounced fan morphology highlighted by an amplitude anomaly with coincident isopach thickening.METISTRITONHELIOSOCEANISIRISELPHISKRATOS (A,B,C)POSEIDON AKratos Prospect 31 4 4 5 7 P90 Kratos (A,B,C)Poseidon AIrisOceanisElphis Prospect125 14 28 20 27 P50 360 38 90 56 81 P10 51Kratos Stack214625• Similar to Rhea, but slightly younger, Kratos is a lacustrine fan and composite channel sand sequence in a combination structural/stratigraphic trap at 2200m subsea. • The objective is Early Cretaceous sandstones derived from a major delta system to the north. Seal and source are provided by highly organic rich lacustrine mudstones which encase the sands. • The prospect exhibits a pronounced fan morphology highlighted by an amplitude anomaly with coincident isopach thickening.ZEUSDEMETERZeus Structure 3412248512 P90 ZeusDemeterApolloGlaucosIstrosHermes Structure19447216355354P50 642140765102202157 P10 95Total Structural5992,008• Zeus is a prominent fault bounded structural culmination on the Central Ridge, and is one of a number of robust structural closures within the licence. • Closure is mapped at most horizons from the early syn-rift (Jurassic) to the post-rift (Upper Cretaceous) with at least three principal reservoir objectives in the Jurassic, Lower Cretaceous (Aptian) and Upper Cretaceous (Campanian), offering potential for stacked accumulations. • Source is either from adjacent highly organic rich lacustrine mudstones of Early Cretaceous age onlapping the flanks of the structure or deeper pre-rift organic shales via faulting.PL001PL001PL001PL001Helios Prospect 32 1613 P90 HeliosTriton Prospect6587755 P50 2,590251149 P10 61Helios Stack7902,990SW• Helios is a very large lacustrine fan and composite channel sand sequence of Aptian age. • Sandstones have prograded northwards in large stacked foresets from a delta system in the south, creating a combination structural/stratigraphic trap which exhibits a pronounced and visibly striking fan morphology at 1800m subsea. • The sands have scoured into the underlying highly organic rich lacustrine mudstones resulting in direct contact with the primary source rock. • Additional source rock potential exists in deeper pre-rift organic shales via faulting. Mudstones provide excellent topseal and sideseal.SELENEPOSEIDON ERHEAPOSEIDON DPOSEIDON CPOSEIDON BKRATOS EKRATOS DRhea Prospect 2014994631 P90 Rhea (A&B)SelenePoseidon BPoseidon CPoseidon DPoseidon EKratos DKratos E Prospect1038131323629268 P50 4262828185120828928 P10 66Rhea Stack3461,193• Rhea is a lacustrine fan and composite channel sand sequence in a combination structural/stratigraphic trap at 2500m subsea.• The objective is Early Cretaceous sandstones derived from a major delta system to the north. Seal and source are provided by highly organic rich lacustrine mudstones which encase the sands.• The prospect exhibits a pronounced fan morphology highlighted by an amplitude anomaly with coincident isopach thickening.METISTRITONHELIOSOCEANISIRISELPHISKRATOS (A,B,C)POSEIDON AKratos Prospect 31 4 4 5 7 P90 Kratos (A,B,C)Poseidon AIrisOceanisElphis Prospect125 14 28 20 27 P50 360 38 90 56 81 P10 51Kratos Stack214625• Similar to Rhea, but slightly younger, Kratos is a lacustrine fan and composite channel sand sequence in a combination structural/stratigraphic trap at 2200m subsea. • The objective is Early Cretaceous sandstones derived from a major delta system to the north. Seal and source are provided by highly organic rich lacustrine mudstones which encase the sands. • The prospect exhibits a pronounced fan morphology highlighted by an amplitude anomaly with coincident isopach thickening.ZEUSDEMETERZeus Structure 3412248512 P90 ZeusDemeterApolloGlaucosIstrosHermes Structure19447216355354P50 642140765102202157 P10 95Total Structural5992,008• Zeus is a prominent fault bounded structural culmination on the Central Ridge, and is one of a number of robust structural closures within the licence. • Closure is mapped at most horizons from the early syn-rift (Jurassic) to the post-rift (Upper Cretaceous) with at least three principal reservoir objectives in the Jurassic, Lower Cretaceous (Aptian) and Upper Cretaceous (Campanian), offering potential for stacked accumulations. • Source is either from adjacent highly organic rich lacustrine mudstones of Early Cretaceous age onlapping the flanks of the structure or deeper pre-rift organic shales via faulting.PL001PL001PL001PL001Helios Prospect 32 1613 P90 HeliosTriton Prospect6587755 P50 2,590251149 P10 61Helios Stack7902,990SW• Helios is a very large lacustrine fan and composite channel sand sequence of Aptian age. • Sandstones have prograded northwards in large stacked foresets from a delta system in the south, creating a combination structural/stratigraphic trap which exhibits a pronounced and visibly striking fan morphology at 1800m subsea. • The sands have scoured into the underlying highly organic rich lacustrine mudstones resulting in direct contact with the primary source rock. • Additional source rock potential exists in deeper pre-rift organic shales via faulting. Mudstones provide excellent topseal and sideseal.SELENEPOSEIDON ERHEAPOSEIDON DPOSEIDON CPOSEIDON BKRATOS EKRATOS DRhea Prospect 2014994631 P90 Rhea (A&B)SelenePoseidon BPoseidon CPoseidon DPoseidon EKratos DKratos E Prospect1038131323629268 P50 4262828185120828928 P10 66Rhea Stack3461,193• Rhea is a lacustrine fan and composite channel sand sequence in a combination structural/stratigraphic trap at 2500m subsea.• The objective is Early Cretaceous sandstones derived from a major delta system to the north. Seal and source are provided by highly organic rich lacustrine mudstones which encase the sands.• The prospect exhibits a pronounced fan morphology highlighted by an amplitude anomaly with coincident isopach thickening.METISTRITONHELIOSOCEANISIRISELPHISKRATOS (A,B,C)POSEIDON AKratos Prospect 31 4 4 5 7 P90 Kratos (A,B,C)Poseidon AIrisOceanisElphis Prospect125 14 28 20 27 P50 360 38 90 56 81 P10 51Kratos Stack214625• Similar to Rhea, but slightly younger, Kratos is a lacustrine fan and composite channel sand sequence in a combination structural/stratigraphic trap at 2200m subsea. • The objective is Early Cretaceous sandstones derived from a major delta system to the north. Seal and source are provided by highly organic rich lacustrine mudstones which encase the sands. • The prospect exhibits a pronounced fan morphology highlighted by an amplitude anomaly with coincident isopach thickening.ZEUSDEMETERZeus Structure 3412248512 P90 ZeusDemeterApolloGlaucosIstrosHermes Structure19447216355354P50 642140765102202157 P10 95Total Structural5992,008• Zeus is a prominent fault bounded structural culmination on the Central Ridge, and is one of a number of robust structural closures within the licence. • Closure is mapped at most horizons from the early syn-rift (Jurassic) to the post-rift (Upper Cretaceous) with at least three principal reservoir objectives in the Jurassic, Lower Cretaceous (Aptian) and Upper Cretaceous (Campanian), offering potential for stacked accumulations. • Source is either from adjacent highly organic rich lacustrine mudstones of Early Cretaceous age onlapping the flanks of the structure or deeper pre-rift organic shales via faulting.PL001PL001PL001PL001Helios Prospect 32 1613 P90 HeliosTriton Prospect6587755 P50 2,590251149 P10 61Helios Stack7902,990SW• Helios is a very large lacustrine fan and composite channel sand sequence of Aptian age. • Sandstones have prograded northwards in large stacked foresets from a delta system in the south, creating a combination structural/stratigraphic trap which exhibits a pronounced and visibly striking fan morphology at 1800m subsea. • The sands have scoured into the underlying highly organic rich lacustrine mudstones resulting in direct contact with the primary source rock. • Additional source rock potential exists in deeper pre-rift organic shales via faulting. Mudstones provide excellent topseal and sideseal.SELENEPOSEIDON ERHEAPOSEIDON DPOSEIDON CPOSEIDON BKRATOS EKRATOS DRhea Prospect 2014994631 P90 Rhea (A&B)SelenePoseidon BPoseidon CPoseidon DPoseidon EKratos DKratos E Prospect1038131323629268 P50 4262828185120828928 P10 66Rhea Stack3461,193• Rhea is a lacustrine fan and composite channel sand sequence in a combination structural/stratigraphic trap at 2500m subsea.• The objective is Early Cretaceous sandstones derived from a major delta system to the north. Seal and source are provided by highly organic rich lacustrine mudstones which encase the sands.• The prospect exhibits a pronounced fan morphology highlighted by an amplitude anomaly with coincident isopach thickening.METISTRITONHELIOSOCEANISIRISELPHISKRATOS (A,B,C)POSEIDON AKratos Prospect 31 4 4 5 7 P90 Kratos (A,B,C)Poseidon AIrisOceanisElphis Prospect125 14 28 20 27 P50 360 38 90 56 81 P10 51Kratos Stack214625• Similar to Rhea, but slightly younger, Kratos is a lacustrine fan and composite channel sand sequence in a combination structural/stratigraphic trap at 2200m subsea. • The objective is Early Cretaceous sandstones derived from a major delta system to the north. Seal and source are provided by highly organic rich lacustrine mudstones which encase the sands. • The prospect exhibits a pronounced fan morphology highlighted by an amplitude anomaly with coincident isopach thickening.ZEUSDEMETERZeus Structure 3412248512 P90 ZeusDemeterApolloGlaucosIstrosHermes Structure19447216355354P50 642140765102202157 P10 95Total Structural5992,008• Zeus is a prominent fault bounded structural culmination on the Central Ridge, and is one of a number of robust structural closures within the licence. • Closure is mapped at most horizons from the early syn-rift (Jurassic) to the post-rift (Upper Cretaceous) with at least three principal reservoir objectives in the Jurassic, Lower Cretaceous (Aptian) and Upper Cretaceous (Campanian), offering potential for stacked accumulations. • Source is either from adjacent highly organic rich lacustrine mudstones of Early Cretaceous age onlapping the flanks of the structure or deeper pre-rift organic shales via faulting.PL001PL001PL001PL00114/10-214/10-314/10-414/10-514/10-614/10-714/10-814/10-914/13-114/15-114/15-214/15-314/15-414/19-10300060009000Scale = 1:250000516000526000536000546000556000566000576000586000Seismic Micro-Technology, Inc.Project: North FalklandsProject Location: Scale = 1:25000051600052600053600054600055600056600057600058600014/10-114/10-214/10-314/10-414/10-514/10-614/10-714/10-814/10-914/13-114/15-114/15-214/15-314/15-414/19-114/5-114/9-114/9-203000516000526000536000546000556000566000576000Seismic Micro-Technology, Inc.Project: North FalklandsProject Location: 7 PL001 Kratos Prospect ZZ Similar to Rhea, but slightly younger, Kratos is a lacustrine fan and composite channel sand sequence in a combination structural/stratigraphic trap at 2200m subsea. ZZ The objective is Early Cretaceous sandstones derived from a major delta system to the north. Seal and source are provided by highly organic rich lacustrine mudstones which encase the sands. ZZ The prospect exhibits a pronounced fan morphology highlighted by an amplitude anomaly with coincident isopach thickening. Prospect Kratos Stack P90 51 P50 214 P10 625 PL001 Zeus Prospect ZZ Zeus is a prominent fault bounded structural culmination on the Orca Ridge, and is one of a number of robust structural closures within the licence. ZZ Closure is mapped at most horizons from the early syn‑rift (Jurassic) to the post‑rift (upper Cretaceous) with at least three principal reservoir objectives in the Jurassic, Lower Cretaceous (Aptian) and upper Cretaceous (Campanian), offering potential for stacked accumulations. ZZ Source is either from adjacent highly organic rich lacustrine mudstones of Early Cretaceous age onlapping the flanks of the structure or deeper pre‑rift organic shales via faulting. Prospect Zeus P90 34 P50 194 P10 642 Argos resources LtdAnnual Report & Accounts 2012Helios Prospect 32 1613 P90 HeliosTriton Prospect6587755 P50 2,590251149 P10 61Helios Stack7902,990SW• Helios is a very large lacustrine fan and composite channel sand sequence of Aptian age. • Sandstones have prograded northwards in large stacked foresets from a delta system in the south, creating a combination structural/stratigraphic trap which exhibits a pronounced and visibly striking fan morphology at 1800m subsea. • The sands have scoured into the underlying highly organic rich lacustrine mudstones resulting in direct contact with the primary source rock. • Additional source rock potential exists in deeper pre-rift organic shales via faulting. Mudstones provide excellent topseal and sideseal.SELENEPOSEIDON ERHEAPOSEIDON DPOSEIDON CPOSEIDON BKRATOS EKRATOS DRhea Prospect 2014994631 P90 Rhea (A&B)SelenePoseidon BPoseidon CPoseidon DPoseidon EKratos DKratos E Prospect1038131323629268 P50 4262828185120828928 P10 66Rhea Stack3461,193• Rhea is a lacustrine fan and composite channel sand sequence in a combination structural/stratigraphic trap at 2500m subsea.• The objective is Early Cretaceous sandstones derived from a major delta system to the north. Seal and source are provided by highly organic rich lacustrine mudstones which encase the sands.• The prospect exhibits a pronounced fan morphology highlighted by an amplitude anomaly with coincident isopach thickening.METISTRITONHELIOSOCEANISIRISELPHISKRATOS (A,B,C)POSEIDON AKratos Prospect 31 4 4 5 7 P90 Kratos (A,B,C)Poseidon AIrisOceanisElphis Prospect125 14 28 20 27 P50 360 38 90 56 81 P10 51Kratos Stack214625• Similar to Rhea, but slightly younger, Kratos is a lacustrine fan and composite channel sand sequence in a combination structural/stratigraphic trap at 2200m subsea. • The objective is Early Cretaceous sandstones derived from a major delta system to the north. Seal and source are provided by highly organic rich lacustrine mudstones which encase the sands. • The prospect exhibits a pronounced fan morphology highlighted by an amplitude anomaly with coincident isopach thickening.ZEUSDEMETERZeus Structure 3412248512 P90 ZeusDemeterApolloGlaucosIstrosHermes Structure19447216355354P50 642140765102202157 P10 95Total Structural5992,008• Zeus is a prominent fault bounded structural culmination on the Central Ridge, and is one of a number of robust structural closures within the licence. • Closure is mapped at most horizons from the early syn-rift (Jurassic) to the post-rift (Upper Cretaceous) with at least three principal reservoir objectives in the Jurassic, Lower Cretaceous (Aptian) and Upper Cretaceous (Campanian), offering potential for stacked accumulations. • Source is either from adjacent highly organic rich lacustrine mudstones of Early Cretaceous age onlapping the flanks of the structure or deeper pre-rift organic shales via faulting.PL001PL001PL001PL001Helios Prospect 32 1613 P90 HeliosTriton Prospect6587755 P50 2,590251149 P10 61Helios Stack7902,990SW• Helios is a very large lacustrine fan and composite channel sand sequence of Aptian age. • Sandstones have prograded northwards in large stacked foresets from a delta system in the south, creating a combination structural/stratigraphic trap which exhibits a pronounced and visibly striking fan morphology at 1800m subsea. • The sands have scoured into the underlying highly organic rich lacustrine mudstones resulting in direct contact with the primary source rock. • Additional source rock potential exists in deeper pre-rift organic shales via faulting. Mudstones provide excellent topseal and sideseal.SELENEPOSEIDON ERHEAPOSEIDON DPOSEIDON CPOSEIDON BKRATOS EKRATOS DRhea Prospect 2014994631 P90 Rhea (A&B)SelenePoseidon BPoseidon CPoseidon DPoseidon EKratos DKratos E Prospect1038131323629268 P50 4262828185120828928 P10 66Rhea Stack3461,193• Rhea is a lacustrine fan and composite channel sand sequence in a combination structural/stratigraphic trap at 2500m subsea.• The objective is Early Cretaceous sandstones derived from a major delta system to the north. Seal and source are provided by highly organic rich lacustrine mudstones which encase the sands.• The prospect exhibits a pronounced fan morphology highlighted by an amplitude anomaly with coincident isopach thickening.METISTRITONHELIOSOCEANISIRISELPHISKRATOS (A,B,C)POSEIDON AKratos Prospect 31 4 4 5 7 P90 Kratos (A,B,C)Poseidon AIrisOceanisElphis Prospect125 14 28 20 27 P50 360 38 90 56 81 P10 51Kratos Stack214625• Similar to Rhea, but slightly younger, Kratos is a lacustrine fan and composite channel sand sequence in a combination structural/stratigraphic trap at 2200m subsea. • The objective is Early Cretaceous sandstones derived from a major delta system to the north. Seal and source are provided by highly organic rich lacustrine mudstones which encase the sands. • The prospect exhibits a pronounced fan morphology highlighted by an amplitude anomaly with coincident isopach thickening.ZEUSDEMETERZeus Structure 3412248512 P90 ZeusDemeterApolloGlaucosIstrosHermes Structure19447216355354P50 642140765102202157 P10 95Total Structural5992,008• Zeus is a prominent fault bounded structural culmination on the Central Ridge, and is one of a number of robust structural closures within the licence. • Closure is mapped at most horizons from the early syn-rift (Jurassic) to the post-rift (Upper Cretaceous) with at least three principal reservoir objectives in the Jurassic, Lower Cretaceous (Aptian) and Upper Cretaceous (Campanian), offering potential for stacked accumulations. • Source is either from adjacent highly organic rich lacustrine mudstones of Early Cretaceous age onlapping the flanks of the structure or deeper pre-rift organic shales via faulting.PL001PL001PL001PL00114/10-214/10-314/10-414/10-514/10-614/10-714/10-814/10-914/13-114/15-114/15-214/15-314/15-414/19-114/5-10300060009000Scale = 1:250000516000526000536000546000556000566000576000586000Seismic Micro-Technology, Inc.Project: North FalklandsProject Location: Scale = 1:250000Helios Prospect 32 1613 P90 HeliosTriton Prospect6587755 P50 2,590251149 P10 61Helios Stack7902,990SW• Helios is a very large lacustrine fan and composite channel sand sequence of Aptian age. • Sandstones have prograded northwards in large stacked foresets from a delta system in the south, creating a combination structural/stratigraphic trap which exhibits a pronounced and visibly striking fan morphology at 1800m subsea. • The sands have scoured into the underlying highly organic rich lacustrine mudstones resulting in direct contact with the primary source rock. • Additional source rock potential exists in deeper pre-rift organic shales via faulting. Mudstones provide excellent topseal and sideseal.SELENEPOSEIDON ERHEAPOSEIDON DPOSEIDON CPOSEIDON BKRATOS EKRATOS DRhea Prospect 2014994631 P90 Rhea (A&B)SelenePoseidon BPoseidon CPoseidon DPoseidon EKratos DKratos E Prospect1038131323629268 P50 4262828185120828928 P10 66Rhea Stack3461,193• Rhea is a lacustrine fan and composite channel sand sequence in a combination structural/stratigraphic trap at 2500m subsea.• The objective is Early Cretaceous sandstones derived from a major delta system to the north. Seal and source are provided by highly organic rich lacustrine mudstones which encase the sands.• The prospect exhibits a pronounced fan morphology highlighted by an amplitude anomaly with coincident isopach thickening.METISTRITONHELIOSOCEANISIRISELPHISKRATOS (A,B,C)POSEIDON AKratos Prospect 31 4 4 5 7 P90 Kratos (A,B,C)Poseidon AIrisOceanisElphis Prospect125 14 28 20 27 P50 360 38 90 56 81 P10 51Kratos Stack214625• Similar to Rhea, but slightly younger, Kratos is a lacustrine fan and composite channel sand sequence in a combination structural/stratigraphic trap at 2200m subsea. • The objective is Early Cretaceous sandstones derived from a major delta system to the north. Seal and source are provided by highly organic rich lacustrine mudstones which encase the sands. • The prospect exhibits a pronounced fan morphology highlighted by an amplitude anomaly with coincident isopach thickening.ZEUSDEMETERZeus Structure 3412248512 P90 ZeusDemeterApolloGlaucosIstrosHermes Structure19447216355354P50 642140765102202157 P10 95Total Structural5992,008• Zeus is a prominent fault bounded structural culmination on the Central Ridge, and is one of a number of robust structural closures within the licence. • Closure is mapped at most horizons from the early syn-rift (Jurassic) to the post-rift (Upper Cretaceous) with at least three principal reservoir objectives in the Jurassic, Lower Cretaceous (Aptian) and Upper Cretaceous (Campanian), offering potential for stacked accumulations. • Source is either from adjacent highly organic rich lacustrine mudstones of Early Cretaceous age onlapping the flanks of the structure or deeper pre-rift organic shales via faulting.PL001PL001PL001PL001 8 New Prospects for 2013 The final processed 3D seismic data is of exceptional quality, leading to significant additional prospectivity being identified, including shared prospects with Premier. A new CPR is underway to verify and upgrade the full resource potential of the licence. A small selection of the new prospects is presented on these pages. PL001 14/5-1 14/10-3 14/10-7 14/10-414/10-5 14/10-2 14/10-6 14/10-1 14/10- 14/10-9 14/9-2 14/9-1 0 10 14/15-4 KM 14/13-1 14/15-2 14/15-1 Big Metis ZZ A very large lacustrine basin floor fan in the western Graben in which sands have ponded against the Orca Ridge. ZZ underlies Helios and is encased in high quality, mature Lower Cretaceous source rocks, providing both source and seal. ZZ Deeper source rocks in the upper synrift section in fault communication provide additional source potential. Poseidon ZZ A northerly sourced “string of pearls” of confined to semi‑confined stacked basin floor fans and channels showing differential compaction and drape. ZZ Encased in high quality, mature Lower Cretaceous source rocks, providing both source and seal. Argos resources LtdAnnual Report & Accounts 2012 9 Key strengths ZZ Proven working petroleum system ZZ Adjacent to the large Sea Lion oil discovery ZZ Potentially large Johnson gas discovery appears to extend onto the licence ZZ 28 prospects confirmed from excellent quality 3D seismic data ZZ Over 30 additional prospects and leads under evaluation ZZ Several prospects analogous to Sea Lion PL001 Tyche ZZ A very large lacustrine system of turbidite sands derived from a major delta to the north. ZZ updip and connected to the Chatham channel prospect (PL032). ZZ Encased in high quality, mature Lower Cretaceous source rocks, providing both source and seal. 14/5-1 14/10-3 14/10-7 14/10-414/10-5 14/10-2 14/10-6 14/10-1 14/10-8 14/10-9 14/9-2 14/9-1 0 10 14/15-4 KM 14/13-1 14/15-2 14/15-1 PL001 14/9-2 14/9-1 0 KM 14/13-1 14/5-1 14/10-3 14/10-7 14/10-414/10-5 14/10-2 14/10-6 14/10-1 14/10-8 14/10-9 10 14/15-4 14/15-2 14/15-1 Big Selene ZZ A very large lacustrine system of turbidite sands derived from a major delta to the north. ZZ Encased in high quality, mature Lower Cretaceous source rocks, providing both source and seal. ZZ A combination structural/stratigraphic trap with overlying highstand shales providing top seal. Argos resources LtdAnnual Report & Accounts 2012 10 Environmental Impact working to minimise the impact of operations on the environment The Company continues to work with the community and the government of the Falkland Islands to minimise any impact on the unique environment of the Falkland Islands. we are committed to implementing and maintaining the highest standards of environmental management in all aspects of our operations. Argos resources LtdAnnual Report & Accounts 2012 11 23 SPECIES OF MARINE MAMMALS RECORDED IN FALKLAND wATERS 80 SPECIES OF FISH RECORDED IN FALKLAND wATERS 218 SPECIES OF SEABIRDS RECORDED IN FALKLAND wATERS ZZ maintaining a spirit of openness and ongoing consultation with the Falkland Islands Government, the public and key stakeholders; ZZ applying established uK standards to operations, particularly in offshore chemical use and emissions reporting; ZZ using water‑based drilling muds and low toxicity chemicals approved under the uK Offshore Chemical Notification Scheme; ZZ implementing a high level of offshore environmental management and applying environmental procedures for potentially impacting operations (chemical storage, bunkering, waste handling, maintenance programmes, benthic surveys etc.); ZZ implementing a waste Management Plan to minimise the quantity of waste going to landfill, prevent unsuitable disposal of waste and maximise the re‑use of materials; and ZZ establishing and implementing a project‑specific OSCP and conducting training of key personnel in oil spill response. Both the EIS and the OSCP will require an addendum and further government approval once drilling locations and the selection of a suitable rig are finalised. The Company is committed to ensuring that all operational risks are controlled using safe drilling practices and effective planning. Our Environmental Impact Statement (EIS), approved by the Falkland Islands Government on 29 September 2011, gathered and documented data on year round environmental sensitivities and identified the potential hazards arising from an exploration drilling programme. The identification and possible effects on these environmental sensitivities have been quantified wherever possible. New high‑quality 3D seismic data was acquired over the entire licence area in 2011 and finalised in 2012. This data has not only increased our understanding of the basin but also provides detailed data to assist in designing and engineering our wells. This means we can efficiently plan safe drilling practices to ensure minimum impact to the environment. Additional important steps to become drill ready included the publication of the Company’s Oil Spill Contingency Plan (OSCP) which was approved by the Falkland Islands Government on 14 December 2011. The OSCP, prepared in conjunction with RPS Energy, provides guidance on the actions and reporting requirements in the event of an oil spill originating from drilling activity within the North Falkland Basin. The plan has been created to guide onshore and offshore personnel through the various actions and decisions which will be required in the unlikely event of an oil spill. The Company is committed to ensuring that all operational risks are controlled using safe drilling practices and effective planning. The potential impact of the proposed drilling activity will be mitigated in a number of ways, including: Argos resources LtdAnnual Report & Accounts 2012 12 Chairman’s Statement Ian Thomson OBE The outlook for sustained oil industry activity and investment in the Falklands was reinforced in 2012 by the commitment of two substantial independent oil companies to the offshore areas. Company history 1995 Incorporated for the purpose of participating in a consortium, led by Amerada Hess, to apply for a petroleum production licence in the first licensing round by the Falkland Islands Government. 1996 The consortium was awarded production licence PL001, effective October 1996, and immediately acquired a new 2D seismic survey. The consortium drilled two wells on the licence. Amerada Hess and the other group members, except Argos, subsequently withdrew from the licence leaving Argos with 100% equity. 2008 Argos entered the second phase of its exploration licence. This second of three exploration phases continues to November 2015. Upon entering the second phase of the licence the Company was required to relinquish 30% of the original licence area. The retained licence area in PL001 covers around 1,126 sq kms, equivalent to approximately four North Sea blocks. 2010 The Company listed on AIM, raising £22 million before expenses. 2011 Acquired 1,579 sq kms of 3D seismic from which 28 prospects were identified in the licence area, based on the interpretation of preliminary processed seismic data. A Competent Persons Report describing these prospects was published in October 2011. 2012 In excess of 30 additional prospects and leads were identified from mapping of the final processed data. A new Competent Person’s Report was commissioned early in 2013. Argos resources LtdAnnual Report & Accounts 2012 13 Key strengths ZZ Attractive and stable fiscal terms (9% Royalty & 26% CT); top quartile ZZ British Overseas Territory with legislative framework similar to uK ZZ Straightforward operating conditions, <500m water depth, <3000m TD; weather better than North Sea ZZ $30 million average well cost over 15 well campaigns in 2010/2011 ZZ Good harbour and air facilities in place with further infrastructure planned work undertaken during the year has also confirmed the presence of two mature source rocks across the licence area, thereby enhancing the probability of prospects in our licence being charged with commercial volumes of hydrocarbons. we have commenced the search for an industry partner. Several potential counterparties with both the technical and financial capacity to develop and bring into production any commercial discoveries made have expressed an interest. we will continue the farmout process until a suitable transaction can be agreed that reflects the board’s view of the value of our acreage. This process is time consuming with many companies requiring an extended period of review where a commitment to a new country is involved. with this in mind, we are being prudent in assuming that exploration drilling on our licence is now more likely to be in 2014. we will pursue an earlier drilling opportunity if one arises but not at the expense of a sub‑optimal transaction. In July 2012, Premier Oil announced that it had acquired from Rockhopper Exploration a 60 percent interest in, and operatorship of, the Sea Lion oil field in the North Falkland Basin, as well as a 60 percent interest in all of Rockhopper’s remaining licence interests in the Basin. Premier is now proceeding with the initial stages of the development of Sea Lion and envisages project sanction in mid 2014 and first oil in 2017. Premier has also committed to undertake additional exploration drilling in the licences acquired. In August 2012, it was announced that Noble Energy had farmed in to substantially all of the Falkland Oil and Gas Limited licences in the area to the south and east of the Falkland Islands. Noble acquired a 35 percent interest in the licences and will become the operator. The farm in deal envisages extensive new 3D seismic acquisition and multiple exploration wells involving an initial investment by Noble of up to $230 million. Both of these transactions, and the substantial capital commitments involved, are testament to the emerging awareness of the prospectivity around the Falkland Islands. we would now expect others in the industry to focus more on what has attracted these large independents to the area and for industry interest to increase as a consequence. An obvious benefit for Argos Resources is that the commitment to further exploration drilling will ensure future rig availability in the area, which the company will seek the opportunity to use to progress our own drilling plans. In parallel with this increased corporate activity, the Falkland Islands Government is progressing investment in new infrastructure projects to ensure that land based services and facilities will be available to fully support oilfield production operations. The Government is also comprehensively reviewing and updating its legislation and approval procedures to ensure that all of the administrative processes required to support field development and production are in place. Argos Resources will benefit from the product of these activities and we actively participate in the consultation processes whenever Government consults with the industry on its requirements and plans. In my Statement in the 2011 Report and Accounts I referred to our Competent Person’s Report which was published in October 2011 and which was based upon the results of early processing of 3D seismic data acquired at the beginning of 2011 across the entire licence area. That report described 28 prospects with a Best Estimate of unrisked prospective recoverable resource of 2.1 billion barrels of oil. I said that additional prospects were likely to be identified as further detailed mapping progressed. This has indeed proven to be the case. Final processing of the 3D seismic data was completed in early 2012 and the final data is of exceptionally good quality. Interpretation of this data has led to the identification of a significant number of additional prospects. Some of these new prospects are in the same stratigraphic interval as the Sea Lion oil discovery and some are in the deeper, syn‑rift section. It was previously not possible to map the syn‑rift interval with confidence, so again the value of the new 3D seismic data is being clearly demonstrated. ZZ TO DATE: 2.1 7.3 BILLION BARRELS OF MOST LIKELy uNRISKED RECOvERABLE RESOuRCE BILLION BARRELS OF uNRISKED RECOvERABLE RESOuRCE IN uPSIDE CASE ZZ PROSPECTIvE RESOuRCE NuMBERS EXPECTED TO INCREASE Argos resources LtdAnnual Report & Accounts 2012 14 Managing Director’s Review John Hogan we have been busy throughout 2012 undertaking extensive mapping of our proprietary and traded 3D seismic data with the aim of understanding fully the hydrocarbon potential of the North Falkland Basin within the vicinity of our licence. Resource upgrade Interpretation of the final processed 3D seismic data has demonstrated that licence PL001 is rich in sandstones and rich in prospects. An early priority is to publish a new Competent Person’s Report to independently determine the full resource potential of the licence. We believe this will assist in our efforts to raise sufficient funds for exploration drilling. Argos resources LtdAnnual Report & Accounts 2012 15 Operational highlights ZZ 1,579 sq kms of 3D data acquired, including data over open acreage ZZ Better than expected results both in terms of data quality and the amount of prospectivity identified ZZ New Competent Person’s Report commissioned ZZ Efforts to raise funding for a multi‑well drilling campaign are ongoing This work has included detailed mapping of the extensive prospect inventory within Licence PL001, mapping of the Sea Lion oil field and mapping of the several features drilled by others in 2010 and 2011 which proved unsuccessful. we believe that understanding why some prospects were successful and why others failed will help in ranking our own prospect inventory and thereby increase the chances of success once exploration drilling commences on our licence. 1,579 sq kms of proprietary 3D seismic data was acquired by the Company between January and May 2011 which included coverage of the entire licence area and certain areas within the adjacent open acreage. In October 2011 we issued a Competent Person’s Report which documented 28 prospects with a Best Estimate of unrisked prospective recoverable resource of 2.1 billion barrels of oil and an upside of 7.3 billion barrels. 22 of those prospects are stratigraphic traps with several being similar in appearance to Sea Lion. The remaining 6 prospects are structural traps within robust closures confirmed by the 3D data. This report was based on the preliminary results of processing of the 3D seismic data, described as fast‑track processing. Given the preliminary nature of the work, a set of conservative assumptions were adopted in determining the dimensions of the prospects identified from that data. It was expected at that time that additional prospects might be identified once the final processed data was received and as further detailed mapping continued. The final processed versions of the 3D data were received in January 2012. The quality of the final processed data is exceptionally good and this is helping us to resolve the detail of the numerous stratigraphic prospects in the licence. with the benefit of this final data it is clear that many of the stratigraphic prospects described in the October 2011 Competent Person’s Report are larger than originally described and these have now all been remapped in detail. In addition, over 30 new prospects and leads, which were not reported in the earlier Competent Person’s Report, have also been mapped since January 2012. There are considerably more new prospects than were expected and, as a consequence, the work required to map these in detail extended well into the second half of the year. we now benefit from a licence which we believe from the 3D seismic data is sand‑rich at the same stratigraphic levels as the Sea Lion oil field and which is also rich in prospects defined by excellent 3D seismic data. we expect the estimated prospective recoverable resource figures to increase substantially from the numbers reported above as a consequence both of the increase in size of many of the previously reported prospects and of the numerous new prospects and leads now identified. Consequently, in February 2013, the Company commissioned Senergy to prepare a new Competent Person’s Report to independently document the full potential of the licence as now identified. This new report is expected to be published in the second quarter of 2013. work on basin modelling studies using the final processed 3D seismic data was ongoing throughout 2012 and is continuing into 2013. This work is important in understanding the distribution, burial history and levels of maturity of oil and gas source rocks within the basin. The work completed to date indicates that there are two mature source rocks generating hydrocarbons in the North Falkland Basin. The shallower is the thick Barremian source rock which is oil‑prone and which has charged the oil in the Sea Lion field. This is a world class source rock, rich in terrestrial organic material and is present extensively across the northern part of the North Falkland Basin including in both the eastern and western grabens in our licence. This source rock has been described in publications by Shell as the second richest source rock known in the world. The second, deeper source rock in the North Falkland Basin is in the Early Cretaceous syn‑rift stratigraphic interval. In the deepest parts of the basin this source rock is gas condensate prone and is believed to have charged the gas and liquids in the Liz discovery to the south of our licence and contributed, at least in part, to the gas and condensate in the Beverley and Casper South discoveries. Gas was also encountered in the Johnson discovery which may extend into our licence. No attempts were made to recover fluid samples from the Johnson discovery so the presence of any associated liquids is unknown. where buried less deeply, it is thought that this second source rock might be light oil‑prone. The presence of both source rocks within our licence has been confirmed from mapping and both intervals are believed to be mature for hydrocarbon generation within the licence area. By the end of 2012 we had largely completed our basin evaluation work and detailed prospect mapping, including the mapping of the enlarged prospect inventory described above. Our major expenditures other than the capital required for drilling have therefore been incurred and our remaining cash position at year‑end 2012 of $5.7 million is deemed sufficient to meet the Company’s ongoing needs and overheads. Argos resources LtdAnnual Report & Accounts 2012 16 Board of Directors 1 2 3 4 5 6 5. CHRISTOPHER FLEMING Non‑executive Director (aged 53) Christopher joined the board in 2008. Christopher graduated from Aberdeen university with an M.A. in Economics and Law and joined Morgan Grenfell in 1985. Between 1987 and 2005 he was involved in the development of the Gilt Sales operations of Bankers Trust, Deutsche Bank and SBC warburg as Head of Government Bond Sales of each of the banks. From 2005 to 2009 he was Head of EMEA Flow Rates, Credit and Currency Sales for RBS Global Markets and is currently Global Head of Macro Sales for Nomura International PLC. 6. JAMES RAGG LLB, FCA Non‑executive Director (aged 47) James joined the board in 2008. James qualified as a Chartered Accountant in 1995 and, after eight years with Saffery Champness, joined a Haines watts accountancy practice as an audit and assurance partner in 2004. He subsequently managed the independence of his firm from Haines watts and its renaming as Blue Spire South LLP where he was a Management Partner until September 2012. Now a non‑executive partner in that firm, he is currently heading up the finance and development operations for a group of private companies. 1. IAN THOMSON OBE Executive Chairman (aged 73) Ian, a Chartered Engineer, founded Argos in 1995. After an early career in the mining and energy equipment industry he became the Managing Director of Evergreen Resources Inc.’s exploration and production interests in the uK and Europe. He is director of a number of Falkland Islands and overseas companies engaged in fishing and other operations. 2. JOHN HOGAN Managing Director (aged 59) John joined the board in 2005. John is a qualified geologist who has spent over 35 years in the oil industry. He was Chief Operating Officer of LASMO PLC and Managing Director of LASMO North Sea between 1989 and 2000. Since 2000, he has been active at board level in a number of privately held and quoted energy businesses internationally. 3. ANDREw IRvINE FCCA Finance Director (aged 51) Andrew joined the board in 2005. After qualifying as a Chartered Certified Accountant in Scotland, Drew managed the Pannell Kerr Foster related accounting practice in the Falkland Islands. Drew is now a Falkland Islands resident and is a director of a number of Falkland Island Companies. He is Chairman of the Falkland Islands Pensions Scheme, a member of the board of the Falkland Islands Fishing Companies Association and a director of the Falkland Islands Chamber of Commerce. 4. DENNIS CARLTON Senior Non‑executive Director (aged 62) Dennis joined the board in 2005 having served on the board of Argos Exploration since 1995. Dennis is a qualified petroleum geologist and has been involved with the North Falkland Basin since 1995. He was Chief Operating Officer of Evergreen Resources Inc. between 1981 and 2004 and, following its merger, vice President of Exploration, western division for Pioneer Natural Resources uSA Inc until 2008. He is currently a director of a number of other private companies operating in the energy and other sectors. Argos resources LtdAnnual Report & Accounts 2012 17 Statutory information The directors submit their report and the consolidated financial statements of Argos Resources Ltd and its subsidiary (the “Group”), for the year ended 31 December 2012. Argos Georgia Ltd held 17,278,850 ordinary shares of 2 pence each at 31 December 2012 (2011: 26,078,850 ordinary shares of 2 pence each). Principal activity The principal activity of the Group is exploration for oil and gas in the area licensed to it in the North Falkland Basin. The directors have no plans to change this in the foreseeable future. Directors and their interests The interests of the directors and their immediate families and of persons connected with the directors, within the meaning of the Acts, in the share capital of the Company are as follows: Results and dividend The results for the year and the Group’s financial position as at the year end are shown in the attached financial statements. The directors have not recommended a dividend for the year (2011: $nil). Business review The Group has incurred a loss for the year ended 31 December 2012 of $1.58 million (2011: $1.14 million) which equates to a loss per share of 0.73 cents (2011: 0.53 cents). The loss has increased over that incurred in the comparative period due to an increase in administration expenses. Administration expenses were $1.75 million as compared to $1.45 million for the comparative period mostly due to increased travel and exhibition attendance costs. Shareholders’ equity has decreased from $35.1 million to $33.6 million in the year since 31 December 2011, representing the administration expenses, interest receivable and foreign exchange differences. Cash in the year reduced from $8.2 million to $5.7 million which reflects the overhead spend and the company’s continued investment in 3D seismic processing and interpretation. Outlook for the next financial year The Group’s administrative expenditure is fully funded for the foreseeable future, but further fund raising will be required before the Group can embark upon a drilling programme. Key performance indicators At this stage in its development, the directors do not consider that standard industry key performance indicators are relevant. Principal risks and uncertainties Risks in relation to financial instruments are explained within note 2 to the Group financial statements. A discussion of other potential risks can be found in the risk management report on page 21. Substantial shareholders As at 5 March 2013, the Company has been notified of interests in 3% or more of the Company’s voting rights, based on an issued share capital of 217,363,205, as shown below: Shareholder/Fund manager Ian Thomson* JP Morgan Asset Management (UK) Ltd Argos Georgia Ltd Orian Partners LP Iain Aylwin** Portogon Investments SA Robert Smith Salida Capital International Percentage of voting rights 10.22 9.90 7.95 6.90 6.19 4.60 4.34 3.31 * ** Ian Thomson also has a 46.46 per cent interest in the issued share capital of Argos Georgia Ltd. Iain Aylwin also has a 23.23 per cent interest in the issued share capital of Argos Georgia Ltd. Name I M Thomson* J Hogan A Irvine D Carlton C Fleming J Ragg Total At 31 December 2012 Ordinary shares of 2 pence each At 31 December 2011 Ordinary shares of 2 pence each Chairman Managing director Finance director Non executive Non executive Non executive 22,211,613 2,000,000 1,250,000 3,250,000 1,850,000 150,000 22,211,613 2,000,000 750,000 3,250,000 1,250,000 – 30,711,613 29,461,613 * See preceding note on substantial shareholders for information on shares held by Ian Thomson in Argos Georgia Ltd, which itself is a substantial shareholder of Argos Resources Ltd shares. The number of shares held by Ian Thomson in the table above does not include those held by virtue of his position as a shareholder in Argos Georgia Ltd. The directors also hold options in the Company’s shares which are detailed in the directors’ remuneration report on page 20. Directors’ service contracts The terms of the directors’ service agreements or letters of engagement are summarised below. The Company entered into a service agreement with the executive directors Ian Thomson, John Hogan and Andrew Irvine on 8 July 2010 setting out the terms of their employment following the Admission to AIM, which took place on 29 July 2010. The terms of the service contracts permit termination by either party giving notice to the other of not less than 12 months in the case of John Hogan and 6 months for Andrew Irvine. There are no specific entitlements on termination of any of the employments concerned. Dennis Carlton, Christopher Fleming and James Ragg are engaged as non‑executive directors upon the terms of various letters of appointment, the principal terms of which are that each of them is appointed for an initial term of up to three years commencing at the time of Admission, subject to early termination rights of not less than three months’ notice by either party. Related party transactions See note 17. Events after the reporting date See note 20. Financial instruments For the year under review the Group held no financial instruments outside of cash and receivables. The policies for financial risk management are disclosed in note 2. Political and charitable contributions The Group made no political donations in the year under review (2011: $Nil). The Group made charitable donations during 2012 totalling $8K (2011: $10K). Argos resources LtdAnnual Report & Accounts 2012 18 Statutory information continued Creditor payment policy It is the Group’s policy to ensure that all of its suppliers are paid promptly and in accordance with contractual obligations. Average creditor days for the year were 10 days (2011: 10 days), on the basis of accounts payable (excluding retention held) as a percentage of purchase ledger turnover and includes amounts capitalised. Directors’ and officers’ insurance The Group purchased directors’ and officers’ liability insurance. The directors may also, in their capacity as directors, obtain independent legal advice at the Group’s expense if they consider it necessary to do so. Employees The Group employees consisted of three executive and three non‑executive directors during the course of the year who are included in the total staff numbers shown in note 5 to these accounts. Health, safety and the environment It is the Company’s objective to maintain the highest standards for health and safety and the protection of the environment which adhere to all applicable laws and represent industry best practice at all onshore and offshore sites with which it is involved. Social and community The Falkland Islands is a small community and the Company is conscious that the impact of its activities on the country could be significant. The Company believes that working closely with the Falkland Islands Government and seeking views through consultation with stakeholder groups should help to ensure a positive impact from its operations on the Falkland Islands and its population. Statement of directors’ responsibilities in respect of the annual report and the financial statements The directors are responsible for preparing the annual report and the Group and parent Company financial statements in accordance with applicable law and regulations. Company law, the Companies Act 1948 as amended by the Companies (Amendment) Ordinance 2006 (Falkland Islands Companies Act) requires the directors to prepare Group and parent Company financial statements for each financial year. Under that law the directors have elected to prepare the Group financial statements in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs). The Group have elected to prepare the parent Company financial statements in accordance with UK Accounting Standards and applicable law. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and parent Company and of the Group’s profit or loss for that period. The directors are also required to prepare financial statements in accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market. In preparing each of the Group and parent Company financial statements, the directors are required to: ZZ Select suitable accounting policies and then apply them consistently; ZZ Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and parent Company will continue in business. The directors are responsible for keeping proper accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 1948 as amended by the Companies (Amendment) Ordinance 2006 (Falkland Islands Companies Act) as it applies in the Falkland Islands. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The directors are responsible for ensuring the annual report and the financial statements are made available on a website. Financial statements are published on the Company’s website in accordance with legislation in the Falkland Islands governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company’s website is the responsibility of the directors. The directors’ responsibility also extends to the ongoing integrity of the financial statements contained therein. The directors confirm to the best of their knowledge: ZZ the Group financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the European Union, and the parent Company financial statements, prepared in accordance with United Kingdom Accounting Standards, give a true and fair view of the financial position of the Group and Company and loss of the Group; and the undertakings included in the consolidation taken as a whole; and ZZ the management report, which is incorporated into the directors’ report, includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face. Statement as to disclosure of information to the auditor Each director in office at the date of this report has confirmed, as far as he is aware, that there is no relevant information of which the auditor is unaware. Each such director has confirmed that he has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant audit information and to establish that the auditor is aware of that information. Auditor In accordance with the provisions of the Companies Act 1948 as amended by the Companies (Amendment) Ordinance 2006 (Falkland Islands Companies Act) as it applies in the Falkland Islands, a resolution is to be proposed at the Annual General Meeting of the Company for the re‑appointment of BDO LLP as auditor of the Company. On behalf of the board ZZ Make judgements and estimates that are reasonable and prudent; ZZ State whether the financial statements have been prepared in accordance with IFRSs; and Ian Thomson Chairman Date: 22 March 2013 Argos resources LtdAnnual Report & Accounts 2012 19 Corporate governance statement As an AIM company, Argos Resources Ltd is not required to comply with the UK Corporate Governance Code. The board does, however, seek to comply with the Code where it is practical to do so. ZZ evaluation of internal and external audit processes; and ZZ development and implementation of policy on the provision of non‑audit services by the external auditor. An outline of how it does this is as follows: The board The Argos Resources Ltd board is currently comprised of three executive and three non‑executive directors. It is therefore compliant with the Code’s recommendation for smaller companies that at least two of the board members are independent non‑executive directors. Whilst the non‑executive directors are shareholders in the Company and hold options to acquire shares in the Company, this is not considered a significant threat to their independence. One of the non‑executive directors, James Ragg, became a senior employee of Argos Georgia Limited, a substantial shareholder in the Company, with effect from 1 January 2013. The board has considered, in conjunction with its advisers, whether this has any impact on Mr Ragg’s independence and has concluded that it does not. Apart from these matters and their directors’ fees the non‑executive directors have no other financial interests in the Company or business relationships that would interfere with their independent judgement. Dennis Carlton is the senior non‑executive director. Should shareholders have concerns which have not been adequately addressed by the chairman or managing director, he can be contacted by sending an email to info@argosresources.com. The same address can also be used to contact James Ragg, chairman of the audit committee. The board has agreed to meet four times per year or more frequently if it needs to do so. There is a schedule of matters reserved for board approval and this ensures that the board exercises control over all key areas. The board’s executive chairman, Ian Thomson, is not considered independent as he holds a substantial number of the Company’s shares and he has been on the board for more than 10 years. The Company considers, however, that the benefit of his experience and long involvement with business in the Falkland Islands more than outweighs the benefits of an independent chairman. He meets with the non‑executive directors, without the other executive directors present, at least once per year. The Company complies with Rule 21 of the AIM Rules for Companies regarding dealings in the Company’s shares and has adopted a code on dealing in securities to ensure compliance by directors. Audit committee The audit committee comprises James Ragg (committee chairman), Dennis Carlton and Chris Fleming. The board considers all three members of the committee to be independent and is satisfied that at least one, James Ragg, has recent and relevant financial experience. The committee invites the remainder of the board and the external auditor to attend its meetings as observers. It meets the external auditor, in the absence of the remainder of the board, at least once per year. The role and responsibilities of the audit committee have been set out in written terms of reference which include: ZZ risk assessment, particularly, but not exclusively, in respect of financial reporting risks; ZZ assessment of processes relating to the Company’s control environment; ZZ oversight of financial reporting; The full terms of reference for the audit committee are available on the Company’s website. The audit committee has established procedures by which concerns regarding accounting or audit matters may be brought to the committee chairman’s attention and the chairman can be contacted by sending an email to info@argosresources.com. The audit committee has considered the need for an internal audit function and regards this as unnecessary given the Company’s current size and lack of complexity. The audit committee makes recommendations to the board regarding the appointment, reappointment and removal of external auditors. At the Annual General Meeting the shareholders are requested to authorise the audit committee to fix the remuneration of the external auditors. The audit committee recognises that, for smaller companies, it is cost‑effective to procure certain non‑audit services from the external auditor but there is a need to ensure that provision of such services does not impair, or appear to impair, the auditor’s independence or objectivity. The committee has therefore put in place a written policy on the use of external auditors which includes clear limits on the level of non‑audit work beyond which the chairman of the audit committee must be consulted before the assignment can be awarded to the external auditor. The audit committee was satisfied throughout the year that the external auditor’s objectivity and independence were in no way impaired by the nature of the non‑audit work undertaken or any other factors including the level of non‑audit fees charged. The audit committee held three meetings during the year. During the period since the year end two further meetings have been held. The chairman of the audit committee reports to the board on the committee’s discussions and minutes of the committee’s meetings are circulated to all directors. Nominations committee The board considers that, at its current stage of development, the Company does not require a separate nominations committee. The functions of that committee, namely consideration of any new appointments of directors to the board, are therefore carried out by the board as a whole. No appointments to the board were made in the year under review. Remuneration committee The remuneration committee comprises Dennis Carlton (committee chairman), Chris Fleming and James Ragg. The board considers that all members of the remuneration committee are independent. The committee’s role is to establish the Company’s policy for the remuneration of the executive directors in order to ensure that all members of the executive management of the Company are provided with appropriate incentives to encourage enhanced performance. The committee met formally once during the year under review and held a number of informal discussions. The committee considered the salaries paid to executives and recommended that increases, taking into account the effect of inflation, should be implemented with effect from 1 August 2012. Argos resources LtdAnnual Report & Accounts 2012 20 Corporate governance statement continued Directors’ remuneration for the year is as set out below: I M Thomson J Hogan A Irvine D Carlton C Fleming J Ragg Total directors’ remuneration Remuneration above Converted to $’000 2012 Fees £’000 – 198 38 20 20 20 296 472 2012 Pension Contributions £’000 – *(10) 2 – – – (8) (14) 2012 Total £’000 – 188 40 20 20 20 288 458 2011 Fees and total £’000 – 174 35 20 20 20 269 434 * In 2012 J Hogan relinquished the right to any future pension entitlement, which was accruing at a rate of 5% of salary. The total amount of $32K, which had accrued, was transferred to a newly set up scholarship fund and amounts will continue to accrue to the scholarship fund at the same rate. Internal controls and risk management The board of directors is responsible for implementing and reviewing the effectiveness of the Group’s system of internal control. The system of internal control is designed to mitigate rather than eliminate risk and therefore provides reasonable rather than total assurance against material misstatement or loss. As noted above, the board does not consider it necessary, at the Company’s current stage of development, to implement an internal audit capability. Shareholder relationships During the year the executive directors held a number of meetings with shareholders and potential shareholders. These meetings included formal road shows and presentations, analyst briefings and media interviews. All directors are kept informed regarding these meetings. Going concern As at the date of approval of the financial statements the board is of the opinion that the Group and Company have adequate resources to continue in existence for at least twelve months from that date. The board has therefore continued to adopt the going concern basis in preparation of the financial statements. Capital Capital is managed to ensure that the group is able to continue as a going concern and consists of cash and equity. The group is not subject to any externally imposed capital requirements. Directors’ attendance Directors’ attendance at board and committee meetings for the year is as set out below: I M Thomson (Chairman) J Hogan A Irvine D Carlton (chairman, remuneration committee) C Fleming J Ragg (chairman, audit committee) Total meetings during the year Share options The share options in place as at 31 December 2012 and held by directors are as follows: board Meetings Audit Committee Meetings Remuneration Committee Meetings 6 6 6 6 2 5 6 – – – 3 2 3 3 – – – 1 1 1 1 J Hogan A Irvine D Carlton C Fleming J Ragg Total Date of grant 12/11/2009 12/11/2009 12/11/2009 12/11/2009 12/11/2009 Number of options brought forward Exercised during the year Number of options carried forward Exercise price (pence) 5,805,818 1,375,000 1,375,000 1,375,000 1,375,000 – 500,000 – 600,000 150,000 5,805,818 875,000 1,375,000 775,000 1,225,000 11,305,818 1,250,000 10,055,818 2 2 2 2 2 The share options were exercisable from 30 October 2010 and expire on 11 November 2019. Options exercised in 2012 resulted in 1,250,000 shares (2011: Nil shares) being issued. The related average share price at the time of exercise was 16.9 pence per share. The directors believe that performance related pay is an important element in retaining key staff and other personnel and also benefits the shareholders by linking reward to performance. Argos resources LtdAnnual Report & Accounts 2012 21 Political risk The Argentine Government has not relinquished its claims to sovereignty over the Falkland Islands and the surrounding maritime areas. Mitigation: In a recent referendum the Falkland Islanders voted unequivocally to remain as a British Overseas Territory and the UK Government has stated that it has no doubt about its sovereignty and remains fully committed to the offshore prospecting policy pursued by the Falkland Islands Government. Retention of business relationships It is likely that the Group will rely significantly on strategic relationships with other entities in the oil and gas industry such as service providers. The loss of these services could have an adverse effect on the business, financial position and results of operations of the Group. Mitigation: The Group establishes good working relationships and oversight arrangements with its operating partners. Risk management report The Group’s business, financial condition, results and future operations could be materially adversely affected by a number of factors. General exploration risk Whilst results in the surrounding area are encouraging with respect to the oil and gas potential of the area and interpretation of the seismic data has indicated extensive prospectivity within the Group’s licence area, no commercial volumes of oil or gas have yet been discovered in the licence area and there is no certainty that such discoveries will ever be made. Mitigation: Senergy was commissioned following the year end to prepare a new Competent Person’s Report which is expected to be available in the second quarter of 2013. This report will risk the prospects using industry standard methods. Commercial risk Even if the Group recovers quantities of oil or gas, there is a risk the Group will not achieve a commercial return. Historically, oil prices have fluctuated significantly and are affected by numerous factors over which the Group has no control. Mitigation: As production is a number of years away current price volatility is not expected to have a significant impact on the eventual outcome. Future funding requirements The Group will need to raise additional funding to undertake drilling and there is no certainty that this will be possible. Mitigation: Regular discussions are held with current and prospective investors. Environmental factors and insurance risk Although the Group intends to be in compliance with all applicable environmental laws and regulations, and to insure its operations in accordance with industry practice, there are certain risks inherent to its activities that could subject the Group to extensive liability. Insurance cover will not be available for every risk faced by the Group. Mitigation: The Group applies industry best practice standards. Argos resources LtdAnnual Report & Accounts 2012 22 Independent auditor’s report to the members of Argos Resources Ltd We have audited the financial statements of Argos Resources Ltd for the year ended 31 December 2012 which comprise the consolidated statement of comprehensive income, the consolidated statement of financial position, the consolidated statement of cash flows, the consolidated statement of changes in equity, the Company balance sheet and the related notes. The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. The financial reporting framework that has been applied in the preparation of the parent Company financial statements is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). This report is made solely to the Company’s members, as a body, in accordance with applicable Law. Our audit work has been undertaken so that we might state to the Company’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 Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors As explained more fully in the statement of directors’ responsibilities, the directors are responsible for the preparation of the 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 financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors. Scope of the audit of the financial statements A description of the scope of an audit of financial statements is provided on the APB’s website at www.frc.org.uk/apb/scope/ private.cfm. Opinion on financial statements In our opinion: ZZ the financial statements give a true and fair view of the state of the Group’s and the parent Company’s affairs as at 31 December 2012 and of the Group’s loss for the year then ended; ZZ the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; ZZ the parent Company’s financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and ZZ the financial statements have been prepared in accordance with the requirements of the Companies Act 1948 as amended by the Companies (Amendment) Ordinance 2006 (Falkland Islands Companies Act) as it applies in the Falkland Islands. Opinion on other matters In our opinion the information given in the directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements. BDO LLP Chartered Accountants London United Kingdom Date: 22 March 2013 BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127) Argos resources LtdAnnual Report & Accounts 2012 Consolidated statement of comprehensive income Year ended 31 December 2012 23 Administrative expenses Finance income Foreign exchange gains Loss before tax Taxation credit Loss for the year attributable to owners of the parent Total comprehensive income for the period attributable to owners of the parent Basic and diluted loss per share (cents) The notes on pages 27 to 35 form part of the financial statements. Year ended 31 December 2012 $’000 Year ended 31 December 2011 $’000 (1,749) 37 130 (1,582) – (1,582) (1,582) (0.73) (1,449) 40 123 (1,286) 146 (1,140) (1,140) (0.53) Note 4 8 9 16 10 Argos resources LtdAnnual Report & Accounts 2012 24 Consolidated statement of financial position As at 31 December 2012 Assets Non‑current assets Capitalised exploration expenditure Plant and equipment Current assets Other receivables Cash and cash equivalents Total current assets Total assets Liabilities Current liabilities Trade and other payables Total liabilities Total net assets Capital and reserves attributable to equity holders of the Company Share capital Share premium Retained losses Total shareholders’ equity The notes on pages 27 to 35 form part of the financial statements. Note 2012 $’000 2011 $’000 11 12 13 14 15 16 16 28,280 54 28,334 169 5,688 5,857 34,191 27,390 59 27,449 204 8,175 8,379 35,828 637 637 731 731 33,554 35,097 6,595 30,071 (3,112) 33,554 6,556 30,071 (1,530) 35,097 These financial statements were approved by the directors and authorised for issue on 22 March 2013 and are signed on their behalf by: I M Thomson Chairman Argos resources LtdAnnual Report & Accounts 2012 Consolidated statement of cash flows Year ended 31 December 2012 Cash flows from operating activities Loss for period before taxation Adjustments for: Finance income Depreciation Net cash outflow from operating activities before changes in working capital Decrease in other receivables Decrease in other payables Net cash outflow from operating activities Investing activities Interest received Exploration and development expenditure Purchase of plant and equipment Net cash used in investment activities Financing activities Issue of ordinary shares (share options exercised) Net cash from financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of period Exchange gains on cash and cash equivalents Cash and cash equivalents at end of the year The notes on pages 27 to 35 form part of the financial statements. 25 Note 8 Year ended 31 December 2012 $’000 Year ended 31 December 2011 $’000 (1,582) (1,286) (37) 18 (1,601) 30 (154) (1,725) 42 (966) (13) (937) 39 39 (2,623) 8,175 136 5,688 (40) 7 (1,319) 6 (90) (1,403) 43 (22,671) (66) (22,694) – – (24,097) 32,151 121 8,175 Argos resources LtdAnnual Report & Accounts 2012 26 Consolidated statement of changes in equity Year ended 31 December 2012 At 1 January 2011 Total comprehensive income for the year Share based payment expense At 31 December 2011 At 1 January 2012 Total comprehensive income for the year Shares issued (share options exercised) At 31 December 2012 The notes on pages 27 to 35 form part of the financial statements. Share capital $’000 6,556 – – 6,556 6,556 – 39 Share premium $’000 30,071 – – 30,071 30,071 – – 6,595 30,071 Retained losses $’000 (394) (1,140) 4 (1,530) (1,530) (1,582) – (3,112) Total equity $’000 36,233 (1,140) 4 35,097 35,097 (1,582) 39 33,554 Argos resources LtdAnnual Report & Accounts 2012 27 Notes to the consolidated financial statements Year ended 31 December 2012 1 Accounting Policies The Group and its operations Argos Resources Ltd is an AIM quoted, limited liability company. The Group comprises of the ultimate parent Company, Argos Resources Ltd, and its wholly owned subsidiary Argos Exploration Ltd. Argos Resources Ltd is incorporated and domiciled in the Falkland Islands under registration number 10605. The Group holds exploration licence PL001 for the exploration and exploitation of oil and gas in the North Falkland Basin. The address of its registered office is Argos House, H Jones Road, Stanley, Falkland Islands, FIQQ 1ZZ. Statement of compliance The consolidated financial statements are prepared in compliance with International Financial Reporting Standards as adopted by the European Union (IFRSs) and interpretations of those standards as issued by the International Accounting Standards Board, and applicable legislation. The consolidated financial statements were approved for issue by the board of directors on 22 March 2013 and are subject to adoption at the Annual General Meeting of shareholders which is expected to be held in Stanley, Falkland Islands, in October 2013. Basis of preparation These financial statements have been prepared using the accounting policies set out below which have been consistently applied unless stated otherwise. The financial statements have been prepared under the historical cost convention. The functional and presentational currency of the parent and subsidiary companies is considered to be US dollars (US$). All values are rounded to the nearest thousand dollars ($’000) except where otherwise indicated. Changes in accounting standards The IASB has issued the following new and revised standards, amendments and interpretations to existing standards that are not effective for the financial year ending 31 December 2012 and have not been adopted early. The directors do not expect these standards and interpretations to have material impact on the financial statements except for the requirement of additional disclosures. Standard/interpretation IAS 12, ‘Income taxes’ Deferred tax and the recovery of underlying assets IAS 1, ‘Presentation of financial statements’ Amendment IFRS 10, ‘Consolidated Financial Statements’ Presentation and preparation of consolidated financial statements IFRS 11, ‘Joint arrangements’ Recognition of rights and obligations – substance over form IFRS 12, ‘Disclosure of interests in other entities’ Assists users to assess nature and financial effects of the reporting entity’s relationship with other entities IFRS 13, ‘Fair value measurement’ Sets out in a single IFRS a framework for measuring fair value IAS 27, ‘Separate financial statements’ Accounting and disclosure requirements for investments in subsidiaries, joint ventures and associates when an entity prepares separate financial statement IAS 28, ‘Investments in associates and joint ventures’ Accounting requirements for joint ventures and associates IAS 19, ‘Employee benefits’ Main changes relate to accounting for defined benefit pension schemes IFRIC 20, ‘Stripping costs in the production phase of a surface mine’ Treatment of waste removal costs IFRS 7, ‘Financial instruments: Disclosures’ Offsetting financial assets and financial liabilities IFRS 1, ‘First‑time adoption of International Financial Reporting Standards’ Treatment of government loans Annual improvements to IFRSs – (2009 – 2011 Cycle) Clarification and elimination of inconsistencies IFRS 10, ‘Consolidated Financial Statements’ IFRS 11, ‘Joint Arrangements’ IFRS 12, ‘Disclosure of Interests in Other Entities’ Transition relief and guidance IAS 32, ‘Financial instruments: Presentation’ Clarification on offsetting financial assets and financial liabilities IFRS 10, ‘Consolidated Financial Statements’ Effective date 1 Jan 2012 1 Jul 2012 1 Jan 2014 1 Jan 2014 1 Jan 2014 1 Jan 2013 1 Jan 2014 1 Jan 2014 1 Jan 2013 1 Jan 2013 1 Jan 2013 1 Jan 2013 1 Jan 2013 1 Jan 2013 1 Jan 2014 Argos resources LtdAnnual Report & Accounts 2012 28 Notes to the consolidated financial statements continued Year ended 31 December 2012 1 Accounting Policies continued Standard/interpretation IFRS 12, ‘Disclosure of Interests in Other Entities’ IAS 27, ‘Consolidated and separate financial statements’ Exception from the requirements to consolidate controlled investees IFRS 9, ‘Financial instruments’ Phased replacement of IAS 39 Effective date 1 Jan 2014 1 Jan 2015 Going concern The directors consider that the Group’s available financial resources are more than adequate to provide working capital for the foreseeable future, being at least 12 months from the date on which the financial statements were signed. The financial statements have therefore been prepared on a going concern basis. Basis of consolidation The consolidated financial statements incorporate the results of Argos Resources Ltd and its wholly‑owned subsidiary undertaking as at 31 December 2012 using the acquisition method of accounting. Where the acquisition method is used, the results of subsidiary undertakings are included from the date of acquisition. All inter‑company accounts and transactions have been eliminated on consolidation. Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision‑maker. The chief operating decision maker has been identified as the board of directors. The Group’s operations consist entirely of oil and gas exploration around the Falkland Islands. In the opinion of the directors there is only one business segment and the information contained in the financial statements reflects the operations within that segment. No further information is therefore deemed necessary. Intangible assets – Capitalised exploration expenditure and impairment As permitted under IFRS 6, the Group has accounted for evaluation and exploration expenditure using the “full cost” method, whereby all costs associated with oil exploration are capitalised as intangible assets, pending determination of feasibility of the project. Costs incurred include appropriate technical and administrative expenses but not general overheads. If an exploration project is successful, the related expenditures will be transferred to tangible assets and amortised over the estimated life of the commercial reserves. Where a licence is relinquished, a project is abandoned, or is considered to be of no further value to the Group the related costs are written off. All capitalised costs are reviewed annually against the underlying value of oil and gas reserves, unless the expenditure relates to an area where it is too early to make a decision about the value of the assets. Impairment Exploration and evaluation assets are assessed for impairment when facts and circumstances suggest that the carrying amount may exceed its recoverable amount. Such indicators include the point at which a determination is made as to whether or not commercial reserves exist. Where the exploration and evaluation (“E&E”) assets concerned fall within the scope of an established full cost pool, the E&E assets are tested for impairment together with all development and production assets associated with that cost pool, as a single cash generating unit. The aggregate carrying value is compared against the expected recoverable amount of the pool, generally by reference to the present value of future net cash flows expected to be derived from production of commercial reserves. Where the E&E assets to be tested fall outside the scope of any established cost pool, there will generally be no commercial reserves and the E&E assets concerned will generally be written off in full. Any impairment loss would be recognised in the income statement and separately disclosed. Plant and equipment Plant and equipment consist mainly of computer equipment and software. Plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. Argos resources LtdAnnual Report & Accounts 2012 29 1 Accounting Policies continued Depreciation on other assets is calculated using the straight‑line method to allocate their cost or re‑valued amounts less their residual values over their estimated useful lives, as follows: ZZ Plant and equipment – 4 years The assets residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in the income statement. Capital commitments Capital commitments include expenditure in relation to all projects which have received specific board approval up to the reporting date. Projects without approval at the reporting date are excluded. Financial instruments Financial assets The Group classifies its financial assets depending on the purpose for which the asset was acquired. The Group has not classified any of its financial assets as held to maturity, available for sale or fair value through profit and loss. Loans and receivables These assets are non‑derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are initially recognised at fair value plus costs that are directly attributable to the acquisition or issue and subsequently carried at amortised cost less any provision for impairment. The Group’s loans and receivables comprise cash and cash equivalents and other receivables in the statement of financial position. Cash and cash equivalents comprise current account balances or short term deposits, maturing within three months, at variable interest rates. Any interest earned is accrued and classified as interest receivable. The effect of discounting on these financial instruments is not considered to be material. Financial liabilities The Group classifies its financial liabilities depending on the purpose for which the liability was incurred. All are non‑derivative liabilities and are measured at amortised cost. There are no financial liabilities which are measured at fair value through profit and loss. Financial liabilities held at amortised cost are initially recognised at fair value and subsequently at amortised cost. The effect of discounting on these financial instruments is not considered to be material. Cash and cash equivalents This includes cash in hand and deposits held with banks. Deposits range from instant access to fixed term deposits. No fixed term deposit exceeds 3 months. Foreign currencies The functional and presentational currency is US dollars (US$). Transactions denominated in currencies other than US$ are translated at the rate of exchange ruling at the date of the transaction. Balances held in currencies other than US$ are converted at the rate ruling at the year end. Any translation differences are dealt with in the consolidated statement of comprehensive income. The year end rates of exchanges used were: £:US$ 2012 1.63 2011 1.55 Income taxes and deferred taxation Deferred tax assets and liabilities are not discounted and shall be measured using the liability method at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the reporting date. Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Share based remuneration The Company has issued share options to directors and key personnel. The Group accounts for the costs of the issue of these options in line with IFRS2 “Share based payments”. Under this standard, the cost of providing for such options is based on the fair value of the options at the date of grant and is charged to the consolidated statement of comprehensive income or, if appropriate, the fixed asset class is debited with the fair value of goods and services received, over the expected vesting period of the options and credited to retained losses. Argos resources LtdAnnual Report & Accounts 2012 30 Notes to the consolidated financial statements continued Year ended 31 December 2012 2 Financial instruments The Group’s financial assets comprise of cash and cash equivalents and other receivables, which are categorised as “Loans and other receivables”. Financial liabilities comprise other payables which are categorised as financial liabilities held at amortised cost and these are all deemed to be current financial liabilities. It is, and has been throughout the period of the financial statements, the Group’s policy that no trading in financial instruments shall be undertaken. The policy for managing financial risks is set by the board following recommendations from the Finance Director. Certain risks are managed centrally, while others are managed locally following guidelines communicated from the centre. The policy for each of the above risks is described in more detail below. Foreign exchange As the functional currency is US$ and some of the current assets and liabilities are in Sterling there is a risk of loss in relation to the net financial assets position, should there be a devaluation of Sterling against US$. As of 31 December 2012 the Group’s financial assets and financial liabilities were denominated in a mixture of US$ and Sterling which consisted of: Current assets Other receivables Less: prepayments Cash and cash equivalents Liabilities Other payables Net financial assets At 31 December 2011 the comparative balances were: Current assets Other receivables Less: prepayments Cash and cash equivalents Liabilities Other payables Net financial assets Sterling denominated $’000 US$ denominated $’000 90 (83) 2,739 2,746 (239) 2,507 79 (79) 2,949 2,949 (398) 2,551 Sterling denominated $’000 US$ denominated $’000 141 (106) 1,906 1,941 (242) 1,699 63 (61) 6,269 6,271 (489) 5,782 Total $’000 169 (162) 5,688 5,695 (637) 5,058 Total $’000 204 (167) 8,175 8,212 (731) 7,481 If the US$ had strengthened against Sterling by 10% equity would reduce by $251K (2011: $170K). Conversely if the US$ weakens against Sterling the equity would increase by $251K (2011: $170K). Counter‑parties This is the risk that a third party failure results in loss to the Group such as a bank collapse resulting in the loss of deposits. To mitigate against this risk cash deposits are spread between three high quality institutions, Lloyds TSB, Standard Chartered Bank and HSBC. The following was the split of funds between the various institutions at 31 December 2012: Institution Lloyds TSB Standard Chartered Bank HSBC 2012 $’000 1,482 2,240 1,966 5,688 2011 $’000 3,491 2,564 2,120 8,175 Argos resources LtdAnnual Report & Accounts 2012 31 2 Financial instruments continued Interest rates The Group is not exposed to interest rate risk as there are no interest bearing loans or balances outstanding to providers of finance. Liquidity This is the risk that the Group cannot meet its liabilities as these fall due. As the timing of significant payments carries a degree of uncertainty cash balances are being kept in interest bearing term deposits with periods of no longer than 3 months. Credit The Group is not exposed to credit risk as it does not trade, and the cash balances held by the Group are spread between three reputable institutions. The comments made above in relation to counter‑party risk are relevant. Fair values The fair values of the Group’s financial assets and liabilities are not materially different from the carrying values in the consolidated statement of financial position and notes to the financial information. 3 Significant accounting judgements, estimates and assumptions Impairment of Intangible assets The Group makes certain estimates and assumptions regarding the future in relation to intangible assets and impairment of these assets. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The valuation of intangible assets requires judgements to be made in respect of discount rates, growth rates and future cash flows and the cost of capital. Actual outcomes may vary. 4 Administrative expenses Directors’ remuneration (see note 5) Professional fees Depreciation Other expenses Total 5 Directors’ remuneration Remuneration and fees Pensions* Total 2012 $’000 458 284 18 989 1,749 2012 $’000 472 (14) 458 2011 $’000 434 314 7 694 1,449 2011 $’000 417 17 434 * A Irvine is accruing retirement benefits under a defined contribution pension arrangement. During 2012 J Hogan relinquished his entitlement to enter into a defined contribution arrangement in favour of the setting up of an educational scholarship fund, which will be used to make awards in fields of study related to the business of the company. Amounts accrued since 1 August 2010, totalling $32K, have been transferred to this fund. Directors’ remuneration, by director, is disclosed in the directors’ remuneration report on page 20. The average monthly number of employees, including directors, during this and the preceding year was 6. 6 Auditor’s remuneration Fees payable to the Company’s auditor for the audit of the Company’s annual financial statements Fees payable to the Company’s auditor for the audit of the subsidiary’s annual financial statements Review of interim accounts Total payable for audit related services Fees payable to the Company’s auditor for other services: Taxation 2012 $’000 2011 $’000 30 5 11 46 13 59 30 5 11 46 15 61 Argos resources LtdAnnual Report & Accounts 2012 32 Notes to the consolidated financial statements continued Year ended 31 December 2012 7 Share based remuneration In 2009 Argos Resources Ltd introduced an equity‑settled share based remuneration scheme for employees and key personnel, the only vesting condition being that the individual remains a director or employee of the Group or, where not an employee, serves out the full contract term over the vesting period. Brought forward at 1 January 2011 and 1 January 2012 Exercised – 7 June 2012 Outstanding at 31 December 2012 Exercise price (pence) 2 2 2 Number 12,680,818 (1,250,000) 11,430,818 All options outstanding at the end of the year and at the end of the comparative period had vested and remained exercisable. The average share price on the date that the options were exercised was 16.9 pence per share. The weighted average contractual life of the options is 8.87 years. Charge for share based payment Capitalised as part of exploration expenditure Equity‑settled 8 Finance income Interest on bank deposits 9 Taxation credit Total tax: Corporation tax on losses for the year Adjustment in respect of prior year Total corporation tax on losses for the year Reconciliation of total tax credit: Loss before tax Loss on ordinary activities multiplied by the standard rate of corporation tax of 26% Effects of: Unrelieved tax losses and other deductions arising in the period Interest receivable not taxable Expenses not deductible for tax purposes Reversal of 2010 tax over provision Total tax credit for the year 2012 $’000 – – 2012 $’000 37 2012 $’000 – – – 1,582 (411) 408 (6) 9 – – 2012 $’000 2011 $’000 4 4 2011 $’000 40 2011 $’000 – (146) (146) 1,286 (334) 334 (5) 5 (146) (146) 2011 $’000 Unrelieved tax losses, on which no deferred tax asset has been recognised, which are available for offset against future profits 4,096 2,564 Argos resources LtdAnnual Report & Accounts 2012 10 Loss per share Shares in issue brought forward (2 pence shares) Options exercised Shares in issue carried forward Weighted average shares in issue Loss for the year Weighted average number of ordinary shares in issue during the year Basic and diluted loss per ordinary share (cents) 33 2012 Number 2011 Number 216,113,205 1,250,000 216,113,205 – 217,363,205 216,113,205 216,822,109 216,113,205 2012 $’000 2011 $’000 (1,582) 216,822,109 (1,140) 216,113,205 (0.73) (0.53) In accordance with IAS 33 as the Group is reporting a loss for both this and the preceding year the share options are not considered dilutive because the exercise of share options would have the effect of reducing the loss per share. 11 Capitalised exploration expenditure Cost and net book value: At 1 January Additions At 31 December 12 Plant and equipment Cost: At 1 January Additions At 31 December Depreciation: At 1 January Charge for year At 31 December Net book value: At 31 December 13 Other receivables Prepayments Accrued interest Other 2012 $’000 2011 $’000 27,390 890 28,280 4,238 23,152 27,390 2012 $’000 2011 $’000 66 13 79 7 18 25 54 2012 $’000 162 2 5 169 – 66 66 – 7 7 59 2011 $’000 167 3 34 204 Argos resources LtdAnnual Report & Accounts 2012 34 Notes to the consolidated financial statements continued Year ended 31 December 2012 14 Trade and other payables Trade payables Accruals 15 Share capital Authorised: 250,000,000 ordinary shares of 2 pence each Allotted, issued and fully paid: Ordinary shares of 2 pence each At 1 January 2011 and 1 January 2012 Shares issued (share options exercised) Ordinary shares of 2 pence each At 31 December 2012 2012 $’000 434 203 637 2011 $’000 603 128 731 2012 $’000 2011 $’000 7,480 7,480 Number $’000 216,113,205 1,250,000 6,556 39 217,363,205 6,595 16 Reserves Movements on the various reserves are detailed in the consolidated statement of changes in equity on page 26. The nature and purpose of each is set out below. The share premium reserve comprises the amount subscribed for share capital in excess of its nominal value. Retained losses represent the accumulated gains and losses recognised in the financial statements. 17 Related party transactions Argos Georgia Ltd is a related party of the Group due to one of the Group’s directors, Ian Thomson, having a significant shareholding in Argos Georgia Ltd. Transactions with Argos Georgia Ltd during the year are as follows: Due to Argos Georgia Ltd at 1 January Expenses paid on behalf of the Group Loans repaid/creditor balances paid Office running costs* Due to Argos Georgia Ltd at 31 December 2012 $’000 (7) (42) 370 (324) (3) 2011 $’000 (1) (55) 365 (316) (7) * There is a services and agency agreement between the Company and Argos Georgia Ltd in which Argos Georgia Ltd provides certain agency, accounting, secretarial and operational services to the Company for an annual basic fee of $358K. This agreement is terminable on six months notice. Key management personnel are the directors only. In 2012 J Hogan relinquished the right to any future pension entitlement, which was accruing at a rate of 5% of salary. The total amount which had accrued was transferred to a newly set up scholarship fund and amounts will continue to accrue to the scholarship fund at the same rate. The first payment from the fund was awarded during 2012 and a payment of $18,000 was made to J Hogan’s son who is studying towards a Master of Science degree in petroleum geology. The directors are considered to be the key management of the Group. There have been no transactions with directors during the year other than remuneration paid to each director which is disclosed in the directors’ remuneration report on page 20 and in note 5. Argos resources LtdAnnual Report & Accounts 2012 35 18 Commitments (a) Capital commitments There were no capital commitments at 31 December 2012 nor for the comparative period. (b) Operating commitments There is a services and agency agreement dated 26 July 2010 between the Company and Argos Georgia Ltd in which Argos Georgia Ltd provides certain agency, accounting, secretarial and operational services to the Company for an annual basic fee of $358K. This agreement is terminable on six months notice. The ongoing commitment at 31 December 2012 was as follows: Total committed within 1 year 19 Contingent liabilities The Group has no anticipated material contingent liabilities. 20 Events after the reporting date There were no reportable events occurring after the balance sheet date. 2012 $’000 179 2011 $’000 155 Argos resources LtdAnnual Report & Accounts 2012 36 Parent Company balance sheet As at 31 December 2012 Fixed assets Plant and equipment Investments Current assets Debtors Cash at bank Creditors: amounts falling due within one year Net current assets Total assets less current liabilities Capital and reserves Called up share capital Share premium Profit and loss account Shareholders’ funds Note 2 3 4 5 6 7 7 7 2012 $’000 27 2,120 2,147 25,059 5,688 30,747 548 30,199 32,346 6,595 30,071 (4,320) 32,346 2011 $’000 21 2,120 2,141 24,236 8,175 32,411 687 31,724 33,865 6,556 30,071 (2,762) 33,865 The notes on pages 37 to 39 form part of the financial statements. These financial statements were approved by the directors and authorised for issue on 22 March 2013 and are signed on their behalf by: Ian Thomson Chairman Argos resources LtdAnnual Report & Accounts 2012 37 Notes to the parent Company financial statements Year ended 31 December 2012 1 Accounting policies Basis of preparation The financial statements have been prepared under the historical cost convention and are in accordance with United Kingdom accounting standards. Going concern The directors consider that the Group’s available financial resources are more than adequate to allow completion of the work programme and provide working capital for the foreseeable future. The financial statements have therefore been prepared on a going concern basis. Profit and loss account As a Group income statement has been published as part of the financial statements, a separate profit and loss account for the Company has not been presented as permitted by section 230 of the United Kingdom Companies Act 1985, as it applies in the Falkland Islands, by virtue of section 2(1)(c) of the Companies (Amendment) Ordinance 2006. The loss for the year was $1.56 million (2011: loss of $1.12 million). Cash flow statement The Company has not presented a cash flow statement as part of the financial statements as the Company is part of a Group which prepares consolidated financial information, including a Group cash flow statement. This is an exemption which is permitted under FRS1. Investments Investments held as fixed assets are stated at cost less provision for any impairment. Plant and equipment Plant and equipment consist mainly of computer equipment and software. Plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. Depreciation on other assets is calculated using the straight‑line method to allocate their cost or re‑valued amounts to their residual values over their estimated useful lives, as follows: ZZ Plant and equipment – 4 years Financial instruments The Company has taken advantage of FRS13 which permits non‑presentation of Company only information where the disclosures provided in the Group accounts comply with the requirements. Deferred taxation Deferred tax balances are recognised in respect of all timing differences that have originated but not reversed by the balance sheet date except that the recognition of deferred tax assets is limited to the extent that the Company anticipates making sufficient taxable profits in the future to absorb the reversal of the underlying timing differences. Deferred tax balances are not discounted. Foreign currencies The functional and presentational currency is US$. Transactions denominated in currencies other than US$ are translated at the rate of exchange ruling at the date of the transaction. Balances held in currencies other than US$ are converted at the rate ruling at the year end. Any translation differences are dealt with in the profit and loss account. The year end rates of exchanges used were: £:US$ 2012 1.63 2011 1.55 Share‑based payments The Company has issued share options to directors and key personnel and accounts for the costs of the issue of these options in line with FRS20 “Share based payments”. Under this standard, the cost of providing for such options is based on the fair value of the options at the date of grant and is charged to the profit and loss account or, if appropriate, the fixed asset class is debited with the fair value of goods and services received, over the expected vesting period of the options and credited to retained losses. Argos resources LtdAnnual Report & Accounts 2012 38 Notes to the parent Company financial statements continued Year ended 31 December 2012 2 Plant and equipment Cost: At 1 January Additions At 31 December Depreciation: At 1 January Charge for year At 31 December Net book value: At 31 December 3 Investments Investment in subsidiary Cost at 1 January and 31 December 2012 The principal undertaking in which the Company’s interest at the year end was 20% or more is as follows: 2012 $’000 2011 $’000 24 13 37 3 7 10 27 – 24 24 – 3 3 21 2012 $’000 2011 $’000 2,120 2,120 Investment in subsidiary Argos Exploration Ltd 4 Debtors Amounts due from subsidiary Accrued interest Prepayments Other All amounts fall due for payment in one year. 5 Creditors: – amounts falling due within 1 year Trade creditors Accruals and deferred income Country of incorporation Falkland Islands Percentage of voting rights and ordinary share capital held Nature of business 100 Oil and gas exploration 2012 $’000 24,955 2 97 5 25,059 2011 $’000 24,097 3 102 34 24,236 2012 $’000 434 114 548 2011 $’000 602 85 687 6 Share capital The information on share capital is given in note 15 on page 34 of the Group financial statements. Argos resources LtdAnnual Report & Accounts 2012 39 7 Reconciliation of movements in shareholders’ funds At 1 January 2012 Loss for year Shares issued (share options exercised) At 31 December 2012 Share capital $’000 6,556 – 39 Share premium $’000 30,071 – – 6,595 30,071 Retained earnings/ (deficit) $’000 (2,762) (1,558) – (4,320) Total equity $’000 33,865 (1,558) 39 32,346 8 Other statutory disclosures Directors’ remuneration This information given in note 5 of the Group financial statements relates wholly to the Company. There is no difference between the directors’ remuneration of the parent and the Group. Audit services Costs incurred on audit and other services provided by the auditor are provided on a consolidated basis in note 6 of the Group financial statements. Share based remuneration In 2009 Argos Resources Ltd introduced an equity‑settled share based remuneration scheme for employees and key personnel, the only vesting condition being that the individual remains a director or employee of the Group or, where not an employee, serves out the full contract term over the vesting period. Brought forward at 1 January 2011 and 1 January 2012 Exercised during the year Outstanding at 31 December 2012 Exercise price (pence) 2 2 2 Number 12,680,818 (1,250,000) 11,430,818 All options outstanding at the end of the year and at the end of the comparative period had vested and remained exercisable. The average share price on the date that the options were exercised was 16.9 pence per share. The weighted average contractual life of the options is 8.87 years. Related party transactions The information given in note 17 of the consolidated financial statements relates wholly to the Company. Commitments The information given in note 18 of the consolidated financial statements relates wholly to the Company. Events after the balance sheet date The information given in note 20 of the consolidated financial statements relates wholly to the Company. Argos resources LtdAnnual Report & Accounts 2012 40 Advisors Registered Office Argos House H Jones Road Stanley Falkland Islands Business address Argos House H Jones Road Stanley Falkland Islands Company Secretary Kevin Kilmartin Argos House H Jones Road Stanley Falkland Islands Nominated advisor and broker Cenkos Securities PLC 6,7,8 Tokenhouse Yard London, EC2R 7AS Solicitors (Falkland Islands law) Kevin Kilmartin Argos House H Jones Road Stanley Falkland Islands Solicitors (English law) Peachey & Co LLP 95 Aldwych London, WC2B 4JF Auditors BDO LLP 55 Baker Street London, W1U 7EU Registrars Computershare Investor Services (Jersey) Ltd Queensway House Hilgrove Street St Helier Jersey, JE1 1ES Bankers Lloyds TSB 3–5 Bridge Street Newbury, RG14 5HB Bankers Lloyds TSB Offshore Ltd Corporate Banking 9 Broad Street St Helier Jersey, JE4 8RS Bankers Standard Chartered Bank Ross Road Stanley Falkland Islands Bankers HSBC Bank Bermuda Ltd Harbourview Centre 87 Front Street Hamilton, HM 11 Bermuda Public relations Citigate Dewe Rogerson 3 London Wall Buildings London, EC2M 5SY Web site www.argosresources.com Argos resources LtdAnnual Report & Accounts 2012 www.argosresources.com Argos resources Argos House H Jones Road Stanley Falkland Islands FIQQ 1ZZ Tel: +500 22685 Fax: +500 22687 info@argosresources.com A r g o s r e s o u r c e s L t d A n n u a l R e p o r t & A c c o u n t s 2 0 1 2