Argos Resources Ltd
Annual Report
Year ended 31 December 2018
Contents
Highlights
Joint Chairman’s statement and
Managing Director’s review
Statutory information
Statement of directors’ responsibilities
Corporate governance
Chairman’s statement
Strategy and business model
Risk management report
The board and committees
Directors
Remuneration report
Group financial statements
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
Parent Company accounts
Statement of financial position
Statement of cash flows
Statement of changes in equity
Notes to the accounts
Investor Information and advisors
Page
2
3
4
8
10
10
10
11
16
19
20
26
27
28
29
30-44
45
46
47
48-54
55
Argos Resources Ltd
Annual report 2018
Page 1
Highlights
Argos Resources Ltd (AIM: ARG.L), the Falkland Islands based exploration company focused on the
North Falkland Basin, announced its financial results for the year ended 31 December 2018 on 18
March 2019.
US$406,000 profit (2017: US$118,000)
US$788,000 cash reserves at 31 December 2018 (2017: US$758,000)
The Working Interest in the Licence was transferred back to Argos in February 2019
The Group will continue to receive quarterly cash payments from Noble and Edison of
£75,000 per quarter, for a period of 450 days after the notice to withdraw, until 27
December 2019
The current Second Phase of the Licence expires in November 2019. Discussions about the
licence term beyond that date are underway with the Falkland Islands Government
Argos Resources Ltd
Annual report 2018
Page 2
Joint Chairman’s statement and Managing Director’s review
In October 2018 Noble Energy Falklands Limited (“Noble”) and Edison International S.p.A (“Edison”)
served notice of their intention to withdraw from Production Licence PL001 (the Licence) in the North
Falkland Basin, in which Argos held a 5% Overriding Royalty Interest under a Participation Agreement.
The Licence covers an area of approximately 1,126 square kilometres in the North Falkland Basin.
On receipt of the notice Argos exercised the option under the Participation Agreement to have the
Licence reassigned to it, which effectively terminated the Participation Agreement. Although the
Participation Agreement has now terminated, under the terms of that agreement the Group will
continue to receive quarterly cash payments from Noble and Edison of £75,000 per quarter, for a
period of 450 days after the notice to withdraw. These payments, together with current cash balances
of $788,000 at year end 2018, leave the Group adequately financed for at least twelve months beyond
sign-off.
The current Second Phase of the Licence expires in November 2019 and discussions about the licence
term beyond that date are underway with the Falkland Islands Government. The Working Interest in
the Licence was transferred back to Argos in February 2019 and the Company will seek to secure other
partners to participate in its development.
Ian Thomson
Chairman
18 March 2019
John Hogan
Managing Director
Argos Resources Ltd
Annual report 2018
Page 3
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 2018.
Principal activity
In October 2018 Noble Energy Falklands Limited (“Noble”) and Edison International S.p.A (“Edison”)
served notice of their intention to withdraw from Production Licence PL001 (the Licence) in the North
Falkland Basin, in which Argos Resources Limited held a 5% Overriding Royalty Interest under a
participation agreement. The Licence covers an area of approximately 1,126 square kilometres in the
North Falkland Basin.
On receipt of the notice the Company exercised the option under the Participation Agreement to have
the Licence reassigned to them which effectively terminated the Participation Agreement and the
Working Interest in the Licence was transferred back to Argos in February 2019.
The current Second Phase of the Licence expires in November 2019. Discussions about the licence
term beyond that date are underway with the Falkland Islands Government.
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 (2017: $nil).
Business review
The Group has returned a profit for the year ended 31 December 2018 of $406,000 (2017: $118,000)
which equates to a profit per share of 0.18 cents (2017: 0.05 cents). The increase in profit is due to the
recognition of the full amount of the income due under the Participation agreement in the current
year, as Argos are contractually entitled to the income under the termination clause of the agreement.
Administration expenses were $334,000 in 2018 compared to $329,000 in 2017.
Shareholders’ equity has increased marginally from $29.46 million to $29.87 million in the year since
31 December 2017, as receipts under the Participation Agreement offset the administration costs
leaving a small surplus. Cash in the year increased from $758,000 to $788,000.
IFRS 9 requires the consideration of the risk attached intercompany loan between the parent and
subsidiary companies. This has resulted in an impairment provision in the accounts of the parent but
it has no impact on the group accounts and does not affect the group’s view of the outcome of the
project.
Outlook for the next financial year
Although the Participation Agreement has now terminated, under the terms of that agreement the
Group will continue to receive quarterly cash payments from Noble and Edison of £75,000 per quarter,
which equates to $96,000 at the year-end exchange rate, for a period of 450 days after the notice to
withdraw.
The Group is therefore fully funded for at least twelve months beyond sign-off.
Key performance indicators
At this stage in its development, the directors do not consider that standard industry key performance
indicators are relevant.
Argos Resources Ltd
Annual report 2018
Page 4
Statutory information (continued)
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 10.
Substantial shareholders
As at 5 March 2019, the Company has been notified of interests in 3% or more of the Company’s voting
rights, based on an issued share capital of 220,713,205, as shown below:
Shareholder/Fund manager
Ian Thomson
Iain Aylwin
Orian Partners LP
Salida Capital International
JP Morgan Asset Management (UK) Ltd
Portogon Investments SA
Robert Smith
Percentage of
voting rights
12.93
9.11
6.29
6.33
4.93
4.53
4.27
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:
Name
I M Thomson
J Hogan
A Irvine
D Carlton
C Fleming
J Ragg
Total
Chairman
Managing Director
Finance Director
Non-executive
Non-executive
Non-executive
At 31 December 2018
Ordinary shares of
2 pence each
28,544,701
3,000,000
2,125,000
3,750,000
2,625,000
200,000
At 31 December 2017
Ordinary shares of
2 pence each
27,844,701
3,000,000
2,125,000
3,750,000
2,625,000
200,000
40,244,701
39,544,701
The directors also hold options in the Company’s shares which are detailed in the directors’ remuneration report
on page 19.
Argos Resources Ltd
Annual report 2018
Page 5
Statutory information (continued)
Directors’ service agreements
The terms of the directors’ service agreements or letters of engagement are summarised as follows.
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 Ian Thomson and 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. Each non-executive
director has been duly re-elected on the expiration of their term in office.
Related party transactions
See note 16.
Events after the reporting date
See note 19.
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 or charitable donations in the year under review (2017: $nil).
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 1 day (2017: 3 days), on the basis of
accounts payable (excluding retention held) as a percentage of purchase ledger turnover which
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 6 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 best practice.
Argos Resources Ltd
Annual report 2018
Page 6
Statutory information (continued)
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.
Argos Resources Ltd
Annual report 2018
Page 7
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
and parent Company financial statements in accordance with International Financial Reporting
Standards as adopted by the European Union (IFRSs).
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:
select suitable accounting policies and then apply them consistently;
make judgements and estimates that are reasonable and prudent;
state whether the Group and parent Company financial statements have been prepared in
accordance with IFRSs as adopted by the European Union, subject to any material departures
disclosed and explained in the financial statements; and
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.
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.
Argos Resources Ltd
Annual report 2018
Page 8
Statement of directors’ responsibilities in respect of the annual report and the
financial statements (continued)
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 reappointment of
BDO LLP as auditor of the Company.
On behalf of the board
Ian Thomson
Chairman
Date: 18 March 2019
Argos Resources Ltd
Annual report 2018
Page 9
Corporate governance
Chairman’s statement on corporate governance
As an AIM company, Argos Resources Ltd is required to adopt a recognised Corporate Governance
Code and the Company has chosen to apply the Quoted Companies Alliance (“QCA”) Corporate
Governance Code. The Company believes that high standards of corporate governance helps effective
and efficient decision-making, reduces risk and adds value, which is important for the long-term
benefit of all stakeholders.
Ultimate responsibility for the quality of, and approach to, corporate governance lies with the chair of
the board.
The board meets 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. Corporate Governance is a standing agenda item for each board meeting where directors
confirm their interests and related parties together with any external interests beyond a given
threshold. There is also an opportunity to raise any concerns in relation to corporate governance more
generally.
The Company has also adopted rules for dealings in the Company’s shares to ensure compliance by
directors. Any proposed share transaction by a director requires approval from the Chairman.
The Company has followed the QCA recommended location for each of the 10 principles in terms of
whether these are published on the Company’s website or in the annual report and accounts. The
annual report and accounts disclosures are detailed below and the website disclosures can be found
at http://www.argosresources.com/docs/arg-corporate-governance.pdf.
The following paragraphs describe how the company implements the key governance principles
contained within the QCA code in relation to the required disclosure in annual accounts.
Strategy and business model
Following the withdrawal of Noble and Edison the Company indicated its intention to take a
reassignment of the Licence and this process was concluded and the Licence re-assigned in February
2019.
Although the Participation Agreement has now terminated the Group will continue to receive quarterly
cash payments of £75,000 per quarter, which equates to $96,000 at the year-end exchange rate, for a
period of 450 days after the notice to withdraw. The Group is therefore fully funded for a period of
more than 12 months beyond sign-off.
The main challenge and focus of the business going forward is to attract well-resourced partners to
meet the drilling commitment under the Licence.
Risk management
The Group’s business, financial condition and results could be materially adversely affected by a
number of factors.
Argos Resources Ltd
Annual report 2018
Page 10
Corporate Governance (continued)
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 Licence
area, no commercial volumes of oil or gas have yet been discovered and there is no certainty that such
discoveries will ever be made.
Mitigation: Although Noble and Edison have served notice to withdraw from the Licence there is no
indication that this was due to a lack of prospectivity and the Company is actively seeking new partners
to continue exploration in the area covered by the Licence.
Licence risk
The licence requires a well to be drilled by 25 November 2019. There is a risk that the licence will
expire and not be extended.
Mitigation: In August 2016 an extension of 3 years was approved by the Executive Council of the
Falkland Islands Government and by the UK Secretary of State for Foreign and Commonwealth Affairs.
This approval extended the current Second Phase of the Licence to November 2019. Discussions about
the licence term beyond that date are underway with the Falkland Islands Government and the
Company is actively seeking new partners to continue exploration in the Licence area.
Commercial risk
Even if quantities of oil or gas are discovered, there is a risk that these will not be developed.
Mitigation: The Company is actively seeking partners with strong financial backgrounds and track
records of expediting the process from commercial discovery to production.
Future funding requirements
There is a risk that funds run out before a partner is found.
Mitigation: The Company has sufficient cash reserves to meet the ongoing overhead for a period of
more than one year beyond sign-off, during which time the Company could seek to raise further finance
if required.
Political risk
The Argentine Government has not relinquished its claims to sovereignty over the Falkland Islands and
the surrounding maritime areas.
Mitigation: In a referendum, conducted in 2013, 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.
The Board
The board members have a collective responsibility and legal obligation to promote the interests of
the company, and are collectively responsible for defining corporate governance arrangements.
The board (and committees) are provided with high quality information in a timely manner to facilitate
proper assessment of the matters requiring a decision or insight.
Argos Resources Ltd
Annual report 2018
Page 11
Corporate Governance (continued)
The board has an appropriate balance between executive and non-executive directors, with three
independent non-executive directors.
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.
The policy for managing financial risks is set by the board following recommendations from the Finance
Director but the Company has no formal policy on the management of other types of risk as the
directors are the only employees and as such decisions on risk are not delegated but assessed by the
board in relation to all key management decisions.
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 and the Board
is satisfied that it has a suitable balance between independence on the one hand, and knowledge of
the Company on the other, to enable it to discharge its duties and responsibilities effectively.
Dennis Carlton is the senior non-executive director. Dennis is considered a valuable member of the
Board and his experience in the oil industry more than outweighs any perceived loss of independence
due to the time he has served as non-executive.
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 chairman 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.
Argos Resources Ltd
Annual report 2018
Page 12
Corporate Governance (continued)
The role and responsibilities of the audit committee have been set out in written terms of reference
which are principally:
risk assessment, particularly, but not exclusively, in respect of financial reporting risks;
assessment of processes relating to the Company’s control environment;
oversight of financial reporting;
evaluation of internal and external audit processes; and
development and implementation of policy on the provision of non-audit services by the
external auditor.
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 one meeting during the year and during that meeting the following items
were considered:
the auditors’ report to members of the audit committee; and,
in relation to the annual report:
changes in accounting policies and practices;
significant adjustments resulting from the audit;
the going concern position of the company for a period of 12 months from the date of
judgement areas and accounting issues which are of a subjective nature;
approval of the accounts;
whether there is any indication of impairment to the carrying value of capitalised
exploration expenditure which was transferred to royalty interests;
compliance with accounting standards;
compliance with the Quoted Companies Alliance (“QCA”) Corporate Governance Code,
AIM Rules and regulatory requirements;
compliance with corporate governance requirements;
narrative elements; and,
the draft RNS and annual report.
Argos Resources Ltd
Annual report 2018
Page 13
Corporate Governance (continued)
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.
During the period since the year end one further meeting has been held.
Remuneration committee
Board performance is subject to regular review, as well as that of its committees and the individual
directors.
The Chairman meets with the non-executive directors annually, without the other executive directors
present, to evaluate executive director performance in terms of contribution and commitment. In
addition the Chairman also considers the non-executive director performance in terms of contribution
and independence.
The Remuneration Committee meets annually to review the terms, conditions and performance of the
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 and succession planning, are carried out by the board as a
whole.
No appointments to the board were made in the year under review.
Argos Resources Ltd
Annual report 2018
Page 14
Corporate Governance (continued)
Internal controls
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.
The Directors are expected to devote sufficient time to carry out their duties. Briefings take place
where directors are unable to attend a meeting to ensure that all contributions are considered.
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
Board
meetings
5
5
5
5
1
3
5
Audit
committee
meetings
-
-
-
Remuneration
committee
meetings
-
-
-
1
1
1
1
1
1
1
1
Argos Resources Ltd
Annual report 2018
Page 15
Corporate Governance (continued)
Directors
The board believes that there is an appropriate balance of sector, financial and public markets skills
and experience, as well as an appropriate balance of personal qualities and capabilities. The Board
supports members in their efforts to keep up to date with changing regulations and practices largely
through Continuing Professional Development (CPD) as required by relevant professional body
memberships. Details of individual board members are listed on the following pages, together with
their qualifications, external appointments and any committee positions that they hold.
Ian Thomson OBE
Executive Chairman (aged 79)
Skills and experience
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.
External appointments
He is a director of a number of Falkland Islands and overseas companies engaged in fishing and other operations.
Committee membership
None
John Hogan
Managing Director (aged 65)
Skills and experience
John joined the board in 2005. John is a qualified geologist who has spent over 40 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.
External appointments
John is a non-executive director of Chrysaor Holdings Ltd.
Committee membership
None
Andrew Irvine FCCA
Finance Director (aged 57)
Skills and experience
Drew 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.
Argos Resources Ltd
Annual report 2018
Page 16
Corporate Governance (continued)
External appointments
He is a director of Argos Group Limited, a Falkland Islands fishing quota holder, a member of the board of the
Falkland Islands Fishing Companies Association and chairman of the Falkland Islands Pensions Scheme.
Committee membership
None
Dennis Carlton
Senior Non-executive Director (aged 68)
Skills and experience
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.
External appointments
He is currently consulting for a number of other private companies operating in the energy and other sectors.
Committee membership
Dennis is a member of the Audit Committee and Chairman of the Remuneration Committee.
Christopher Fleming
Non-executive Director (aged 59)
Skills and experience
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 retired as Head of Global Markets EMEA Sales for Nomura
International PLC in August 2016. In June 2017 Chris returned to Nomura as Vice Chairman of EMEA Wholesale.
External appointments
Christopher is Chairman and co-founder of “mentorxchange", a company set up in 2016.
Committee membership
Christopher is a member of the Audit Committee and a member of Remuneration Committee.
Argos Resources Ltd
Annual report 2018
Page 17
Corporate Governance (continued)
James Ragg LLB, FCA
Non-executive Director (aged 53)
Skills and experience
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 de-merger of his firm from Haines Watts and its renaming as Blue Spire South LLP
where he was a Management Partner until September 2012, and a non-executive partner until September 2013.
External appointments
He is currently heading up the finance and development operations for a group of private companies.
Committee membership
James is Chairman of the Audit Committee and a member of the Remuneration Committee.
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 12 months from that date. The
board has therefore continued to adopt the going concern basis in preparation of the financial
statements. See also Accounting Policy note 1 on page 31.
Capital
Capital is managed to ensure that the Group is able to continue as a going concern. The Group is not
subject to any externally imposed capital requirements.
Argos Resources Ltd
Annual report 2018
Page 18
Corporate Governance (continued)
Remuneration report
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 did not recommend any changes to remuneration for executive members
of the Board.
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
2018
Fees
£’000
-
50
20
10
10
10
100
132
2018
Pension
contributions
£’000
-
-
1
-
-
-
1
2
2018
Total
£’000
-
50
21
10
10
10
101
2017
Fees and
total
£’000
-
50
21
10
10
10
101
134
131
Share options
The share options in place as at 31 December 2018 and held by directors are as follows:
Date of grant
12/11/2009
12/11/2009
12/11/2009
12/11/2009
12/11/2009
Number of
options
brought
forward
4,805,818
-
875,000
-
1,025,000
6,705,818
Exercised
during the
year
Number of
options carried
forward
Exercise
price
(pence)
-
-
-
-
-
-
4,805,818
-
875,000
-
1,025,000
6,705,818
2
2
2
2
2
J Hogan
A Irvine
D Carlton
C Fleming
J Ragg
Total
The share options were exercisable from 30 October 2010 and expire on 11 November 2019.
Argos Resources Ltd
Annual report 2018
Page 19
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ARGOS RESOURCES LIMITED
Opinion
We have audited the financial statements of Argos Resources Ltd (the ‘parent company’) and its
subsidiaries (the ‘Group’) for the year ended 31 December 2018 which comprise the consolidated
statements of comprehensive income, the consolidated and company statements of financial position,
the consolidated and company statements of cash flows, the consolidated and company statements
of changes in equity and notes to the financial statements including a summary of significant
accounting policies. The financial reporting framework that has been applied in their preparation is
applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European
Union and, with regards to the parent company financial statements, as applied in accordance with
the Companies Act 1948 as amended by the Companies (Amendment) Ordinance 2006 as it applies in
the Falkland Islands.
In our opinion:
the financial statements give a true and fair view of the state of the Group’s and of the parent
company’s affairs as at 31 December 2018 and of the Group’s profit for the year then ended;
the Group financial statements have been properly prepared in accordance with IFRSs as adopted
by the European Union;
the parent company’s financial statements have been properly prepared in accordance with IFRSs
as adopted by the European Union as applied in accordance with Companies Act 1948 as amended
by the Companies (Amendment) Ordinance 2006 as it applies in the Falkland Islands and
the financial statements have been prepared in accordance with the requirements of the
Companies Act 1948 as amended by the Companies (Amendment) Ordinance 2006 as it applies in
the Falkland Islands.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and
applicable law. Our responsibilities under those standards are further described in the Auditor’s
responsibilities for the audit of the financial statements section of our report. We are independent of
the Group and the parent company in accordance with the ethical requirements that are relevant to
our audit of the financial statements in the UK, including the FRC’s Ethical Standard and we have
fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Argos Resources Ltd
Annual report 2018
Page 20
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require
us to report to you where:
the Director’s use of the going concern basis of accounting in the preparation of the financial
statements is not appropriate; or
the Director’s have not disclosed in the financial statements any identified material uncertainties
that may cast significant doubt about the Group’s or the parent company’s ability to continue to
adopt the going concern basis of accounting for a period of at least twelve months from the date
when the financial statements are authorised for issue.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial statements of the current period and include the most significant assessed
risks of material misstatement (whether or not due to fraud) that we identified. including those which
had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and
directing the efforts of the engagement team. These matters were addressed in the context of our
audit of the financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
Key Audit Matter
Accounting treatment and carrying value of Intangible Assets
In the prior year the Group’s principal asset was a 5% overriding royalty interest (ORRI)
in Licence PL001. As detailed in notes 1 and 12 to the financial statements, on 3
October 2018 Noble and Edison gave notice of their intention to withdraw from the
Participation Agreement and surrender the Falkland Islands Production Licence PL001
to Argos on 2 January 2019.
The ORRI ceased to exist after the termination of the Participation Agreement and the
Group regained the exploration rights. Upon cessation of the Participation
Agreement, the Group’s accounting policy was to derecognise the intangible ORRI
asset and recognise an intangible exploration asset. This accounting policy is disclosed
in Note 1.
The accounting for the cessation of the Participation Agreement is complex and there
is a risk that the carrying value of the intangible asset is higher than the recoverable
amount. Reviewing indicators of impairment often requires significant estimates and
judgements and therefore we identified this as a key audit matter.
Argos Resources Ltd
Annual report 2018
Page 21
How we addressed
the key audit
matter in the audit
We reviewed the correspondence with Edison and Noble and confirmed the effective
date of the termination agreement is on 3 October 2018.
We have obtained and reviewed the correspondence from the Falkland Islands
Government approving the re-assignment of the PL001 exploration licence to Argos.
We have reviewed the Group’s accounting policy for the de-recognition of the
intangible ORRI asset and the recognition of an Intangible Exploration asset to ensure
this is line with the requirements of IFRS.
We reviewed Management's assessment of whether there were any indicators of
impairment.
The royalty interest is similar in economic terms to holding a direct interest in the
underlying licence as there is only a right to receive benefit from the ORRI on
production and therefore many of the risks faced by the Group are the same as those
faced by the owner of the licence.
We have considered the indicators of impairment applicable to exploration
businesses, including the following indicators identified in IFRS 6 ‘Exploration for and
Evaluation of Mineral Resources’:
•
•
•
•
The period for which the entity has the right to explore in the specific area has
expired during the period or will expire in the near future, and was not
expected to be renewed.
Substantive expenditure on further exploration for and evaluation of mineral
resources in the specific area is neither budgeted nor planned.
Exploration for and evaluation of mineral resources in the specific area have
not led to the discovery of commercially viable quantities of mineral resources
and the entity has decided to discontinue such activities in the specific area.
Sufficient data exists to indicate that, although a development in the specific
area is likely to proceed, the carrying amount of the exploration and
evaluation asset
in full from successful
development or by sale.
is unlikely to be recovered
Discussions about the licence term beyond November 2019 are underway with the
Falkland Islands Government and the Company is actively seeking new partners to
continue exploration in the Licence area.
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the
effect of misstatements. We consider materiality to be the magnitude by which misstatements,
including omissions, could influence the economic decisions of reasonable users that are taken on
the basis of the financial statements. Importantly, misstatements below these levels will not
necessarily be evaluated as immaterial as we also take account of the nature of identified
misstatements, and the particular circumstances of their occurrence, when evaluating their effect on
the financial statements as a whole.
Argos Resources Ltd
Annual report 2018
Page 22
Materiality for the Group financial statements as a whole was set at $500,000 for 2017 and 2018 being
1.5% of total assets which we consider to be the most significant determinant of the group’s financial
performance used by shareholders. Materiality for the Parent company has been set at 1.5% of total
Parent assets at $400,000 for 2017 and 2018. Materiality for the subsidiary, Argos Exploration Limited
has been set at $300,000, which was 1.5% of total assets capped at 80% of Group materiality.
In performing the audit, we apply a lower performance materiality at the individual account or balance
level which is set at an amount to reduce to an appropriately low level the probability that the
aggregate of uncorrected and undetected misstatements exceeds materiality. Performance
materiality was set at 75 per cent of the above materiality levels. This threshold was used as a
reasonable basis, taking into consideration; the expected value of misstatements was likely to be very
low, based on past experience. There are few accounts which are subject to estimation, the
components are all based within one location and there are no brought forward adjustments from the
prior period.
We agreed with the audit committee that we would report to the committee all individual audit
differences identified during the course of our audit in excess of $25,000. We also agreed to report
differences below these thresholds that, in our view warranted reporting on qualitative grounds.
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the Group and its environment,
including the Group’s system of internal control, and assessing the risks of material misstatement in
the financial statements at the Group level.
The Group audit team performed a full scope audit of Argos Resources Limited and Argos Exploration
Limited, being the parent company and wholly owned subsidiary respectively, along with the
consolidation. These were all deemed to be significant components.
Other information
The directors are responsible for the other information. The other information comprises the
information included in the annual report, other than the financial statements and our auditor’s report
thereon. Our opinion on the financial statements does not cover the other information and, except to
the extent otherwise explicitly stated in our report, we do not express any form of assurance
conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with
the financial statements or our knowledge obtained in the audit or otherwise appears to be materially
misstated. If we identify such material inconsistencies or apparent material misstatements, we are
required to determine whether there is a material misstatement in the financial statements or a
material misstatement of the other information. If, based on the work we have performed, we
conclude that there is a material misstatement of this other information, we are required to report
that fact.
We have nothing to report in this regard.
Argos Resources Ltd
Annual report 2018
Page 23
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where Companies Act 1948 as amended
by the Companies (Amendment) Ordinance 2006 as it applies in the Falkland Islands requires us to
report to you if, in our opinion:
•
•
adequate accounting records have not been kept by the parent company, or returns adequate
for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records
and returns; or
•
certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of Directors
As explained more fully in the directors’ responsibilities statement, the directors are responsible for
the preparation of the financial statements and for being satisfied that they give a true and fair view,
and for such internal control as the directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s and the
parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to
going concern and using the going concern basis of accounting unless the directors either intend to
liquidate the Group or the parent company or to cease operations, or have no realistic alternative but
to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report
that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when
it exists. Misstatements can arise from fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the economic decisions of users taken
on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the
Financial Reporting Council’s website at:
https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Argos Resources Ltd
Annual report 2018
Page 24
Use of our report
This report is made solely to the parent company’s members, as a body, in accordance with section
235 of the Companies Act 1948 as amended by the Companies (Amendment) Ordinance 2006 as it
applies in the Falkland Islands. Our audit work has been undertaken so that we might state to the
parent 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 parent company and the parent company’s members as a body, for our audit
work, for this report, or for the opinions we have formed.
BDO LLP
Chartered Accountants
London
Date: 18 March 2019
BDO LLP is a limited liability partnership registered in England and Wales (with registered number
OC305127).
Argos Resources Ltd
Annual report 2018
Page 25
Consolidated statement of comprehensive income
Year ended 31 December 2018
Other income
Administrative expenses
Finance income
Foreign exchange (losses)/gains
Note
4
5
9
Profit for the year attributable to owners of
the parent
Total comprehensive income for the period
attributable to owners of the parent
Basic and diluted earnings per share (cents)
11
The notes on pages 30 to 44 form part of the financial statements.
Year
ended
Year
ended
31 December
31 December
2018
$’000
784
(334)
4
(48)
406
406
0.18
2017
$’000
380
(329)
1
66
118
118
0.05
Argos Resources Ltd
Annual report 2018
Page 26
Consolidated statement of financial position
As at 31 December 2018
Note
2018
$’000
2017
$’000
Assets
Non-current assets
Exploration intangible assets
and royalty interests
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
12
13
14
15
28,749
28,749
392
788
1,180
28,749
28,749
14
758
772
29,929
29,521
61
61
59
59
29,868
29,462
6,696
30,071
(6,899)
6,696
30,071
(7,305)
29,868
29,462
The notes on pages 30 to 44 form part of the financial statements.
These financial statements were approved by the directors and authorised for issue on 18 March 2019
and are signed on their behalf by:
I M Thomson
Chairman
Argos Resources Ltd
Annual report 2018
Page 27
Consolidated statement of cash flows
Year ended 31 December 2018
Cash flows from operating activities
Profit for period before taxation
Adjustments for:
Finance income
Foreign exchange loss/(gain)
Net cash inflow from operating activities
before changes in working capital
Increase in other receivables
Increase/(decrease) in other payables
Net cash inflow/(outflow) from operating activities
Investing activities
Interest received
Net cash received from investment activities
Financing activities
Issue of ordinary shares (share options exercised)
Net cash from financing activities
Net increase/(decrease) in cash and cash
equivalents
Cash and cash equivalents at beginning of period
Exchange (losses)/gains on cash and cash
equivalents
Cash and cash equivalents at end of the year
Note
9
Year
ended
Year
ended
31 December
31 December
2018
$’000
406
(4)
50
452
(378)
2
76
4
4
-
-
80
758
(50)
788
2017
$’000
118
(1)
(67)
50
1
(89)
(38)
1
1
27
27
(10)
701
67
758
The notes on pages 30 to 44 form part of the financial statements.
Argos Resources Ltd
Annual report 2018
Page 28
Consolidated statement of changes in equity
Year ended 31 December 2018
At 1 January 2017
Total comprehensive income for
the year
Shares issued (share options
exercised)
At 31 December 2017
And 1 January 2018
Total comprehensive income for
the year
Share
capital
$’000
6,669
Share
premium
$’000
30,071
Retained
losses
$’000
(7,423)
-
27
-
-
118
-
Total
equity
$’000
29,317
118
27
6,696
30,071
(7,305)
29,462
-
-
406
406
At 31 December 2018
6,696
30,071
(6,899)
29,868
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 and
the share payment reserve.
The notes on pages 30 to 44 form part of the financial statements.
Argos Resources Ltd
Annual report 2018
Page 29
Notes to the consolidated financial statements
Year ended 31 December 2018
1 Accounting policies
The Group and its operations
Argos Resources Ltd is an AIM quoted, limited liability company. The Group comprises 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 address of its registered office is Argos House, H Jones Road, Stanley, Falkland Islands, FIQQ 1ZZ.
Following the withdrawal of Noble and Edison from Licence PL001 the Company exercised the option
under the Participation Agreement to have the Licence reassigned to them, which effectively
terminated the Participation Agreement. The Licence re-assignment process was concluded in
February 2019.
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 18 March 2019
and are subject to adoption at the Annual General Meeting of shareholders which is expected to be
held in Stanley, Falkland Islands, in October 2019.
Basis of preparation
These financial statements have been prepared under the historical cost convention, using the
accounting policies set out below, which have been consistently applied unless stated otherwise. 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
Standards which have been implemented in the year
IFRS 9 ‘Financial Instruments’
The standard replaces all phases of the financial instruments project and IAS 39 'Financial Instruments:
Recognition and Measurement'. The standard is effective from periods beginning on or after January
2018 and introduces:
new requirements for the classification and measurement of financial assets and financial
Liabilities; and,
a new model for recognising provisions based on expected credit Losses.
The impact of IFRS 9 has been assessed at a Group level, and there is no material impact on the
consolidated results of the Group, as all financial instruments have been classified as amortised cost
and the expected credit loss impairment is minimal.
Argos Resources Ltd
Annual report 2018
Page 30
Notes to the consolidated financial statements
Year ended 31 December 2018
Accounting policies (continued)
IFRS 15 ‘Revenue from Contracts with Customers’
IFRS 15 replaced IAS 18 ‘Revenue’ and IAS 11 ‘Construction Contracts’ for accounting periods
commencing on or after 1 January 2018. The core principle of the standard is that an entity will
recognise revenue at an amount that reflects the consideration to which the entity expects to be
entitled in exchange for transferring promised goods or services to a customer. The Group performed
an impact assessment during the prior year regarding the accounting requirements of IFRS 15. As the
Group has not previously had any revenue there has been no impact on adoption of the standard.
Standards which have been issued but are not yet effective
The International Accounting Standards Board (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 2018 and have not been adopted early. The Group is currently assessing the
impact of these standards and based on the Group’s current operations do not expect them to have a
material impact on the financial statements.
New Standards
IFRS 16 Leases
Amendments to Existing Standards
Annual Improvements to IFRSs (2015-2017 Cycle)*
Amendments to References to the Conceptual Framework in IFRS Standards
Definition of Material - Amendments to IAS 1 and IAS 8
Effective date
01-Jan-19
01-Jan-19
01-Jan-20
01-Jan-20
IFRS 16 ‘Leases’
IFRS 16 ‘Leases’ will replace IAS 17 ‘Leases’ for periods commencing on or after 1 January 2019 There
are no leases within the Group and there is no impact expected on the Group accounts.
Going concern
Following the withdrawal of Noble and Edison the Company indicated its intention to take a
reassignment of the Licence and this process was concluded and the Licence re-assigned in February
2019.
Although the Participation Agreement has now terminated the Group will continue to receive quarterly
cash payments of £75,000 per quarter, which equates to $96,000 at the year-end exchange rate, for a
period of 450 days after the notice to withdraw.
The directors consider that the Group’s available financial resources are 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 2018 using the acquisition method of accounting.
Where the acquisition method is used, the results of subsidiary undertakings are included from the
date of acquisition.
Argos Resources Ltd
Annual report 2018
Page 31
Notes to the consolidated financial statements
Year ended 31 December 2018
Accounting policies (continued)
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 and 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.
Intangible assets – capitalised exploration expenditure, impairment and royalty interests
Evaluation and exploration (E&E) expenditure
As part of the 2015 farmout transaction the Group retained an ORRI of 5% of gross revenues from all
hydrocarbon discoveries developed within the Licence area and the accumulated historical E&E cost
was reclassified as “royalty interests”. The Group therefore believes that the most appropriate method
of accounting for the Noble and Edison withdrawal is to reclassify the ORRI to E&E asset accounting
for it using the method, as permitted under IFRS 6 whereby all historic costs associated with oil
exploration are capitalised as intangible assets, pending determination of feasibility of the project.
As an initial fair value could not be reliably determined the E&E asset was measured at cost, which was
the carrying amount of the ORRI, with no gain or loss. The E&E asset is therefore presented as an
intangible asset and carried at cost less accumulated amortisation and any impairment provision.
Costs incurred include appropriate technical and administrative expenses but not general overheads.
If an exploration project is successful, the related expenditures are 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.
Impairment
E&E assets are assessed for impairment when facts and circumstances suggest that the carrying
amount may exceed the recoverable amount.
In accordance with IFRS 6 the Group firstly considers the following facts and circumstances in their
assessment of whether the Group’s exploration and evaluation assets may be impaired:
whether the period for which the Group has the right to explore in a specific area has expired
during the period or will expire in the near future, and is not expected to be renewed;
whether substantive expenditure on further exploration for and evaluation of mineral
resources in a specific area is neither budgeted nor planned;
whether exploration for and evaluation of hydrocarbons in a specific area have not led to the
discovery of commercially viable quantities of hydrocarbons and the Group has decided to
discontinue such activities in the specific area; and,
whether sufficient data exists to indicate that although a development in a specific area is
likely to proceed, the carrying amount of the exploration and evaluation assets is unlikely to
be recovered in full from successful development or by sale.
Argos Resources Ltd
Annual report 2018
Page 32
Notes to the consolidated financial statements
Year ended 31 December 2018
Accounting policies (continued)
If any such facts or circumstances are noted the Group must perform an impairment test in accordance
with the provisions of IAS 36, assessing the recoverable amount of the E&E assets together with all
development and production assets, as a single cash generating unit (CGU). The aggregate carrying
value is compared against the expected recoverable amount of the CGU. The recoverable amount is
the higher of value in use and the fair value less costs to sell.
Any E&E impairment loss would be recognised in the income statement and separately disclosed.
Overriding royalty interest (ORRI)
In October 2018 Noble and Edison served notice of their intention to withdraw from the Licence in
which the Group retained an ORRI entitling them to 5% of all oil and gas produced from all hydrocarbon
discoveries developed within the Licence area. The Participation Agreement was terminated in
October 2018 when Argos exercised the option to have the Licence reassigned to them.
The Group considered that the ORRI was similar in economic terms to holding a direct interest in the
underlying licence as there was only a right to receive benefit from the ORRI on production and many
of the risks faced by the Group were the same as those faced by the owner of the licence. These risks
were seen as:
Existence risk - whether oil is found in commercially extractable quantities;
Production risk – whether the operator is able to get any discovery to commercial production;
Timing risk – commencement and quantity as determined by the operator; and,
Price risk – determined by future commodity supply and demand.
Other income
Income from the Participation Agreement has been recognised each quarter when it is received.
The termination clause of the Participation agreement requires Noble & Edison to continue to pay
Argos the income from the Participation Agreement for a period of 450 days after notice has been
given. The full amount of income remaining under the agreement has been recognised, as Argos
are contractually entitled to the income under the termination clause of the agreement. The
remaining income will be received over quarterly payments until 27 December 2019.
Financial instruments
Financial assets
The Group classifies its financial assets depending on the purpose for which the asset was acquired.
The Group has classified its financial assets as amortised cost.
Financial assets held at amortised cost
These assets are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. These financial assets were referred to as ‘Loans and receivables’ in the
prior period. 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 at variable interest rates that are readily convertible to known amounts of cash and
which are subject to an insignificant risk of changes in value. Any interest earned is accrued and
classified as interest receivable.
Argos Resources Ltd
Annual report 2018
Page 33
Notes to the consolidated financial statements
Year ended 31 December 2018
Accounting policies (continued)
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.
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.
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.
Monetary amounts 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$
2018
1.28
2017
1.35
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 IFRS 2 “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, capitalised over
the expected vesting period of the options and credited to retained losses.
Revenue and income
Income from the Participation Agreement consists of quarterly payments of £75k paid in advance in
accordance with the Participation Agreement.
As a result of the withdrawal from Noble & Edison, the termination clause of the Agreement stipulates
that Noble & Edison are required to continue to make quarterly payments of £75k for 450 days after
notice of withdrawal has been provided. The income expected to be received each quarter for the
remaining period until 27 December 2019 has been recognised as a receivable.
Investment income consists of interest receivable for the period. Interest income is recognised as it
accrues.
Argos Resources Ltd
Annual report 2018
Page 34
Notes to the consolidated financial statements
Year ended 31 December 2018
2
Financial instruments
The Group’s financial assets comprise of cash and cash equivalents and other receivables, which are
categorised as “financial assets held at amortised cost”. These were referred to as ‘loans and
receivables’ in the prior period. Financial liabilities comprise other payables which are categorised as
financial liabilities held at amortised cost and these are all 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. 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 monetary assets and liabilities are in Sterling
there is a risk of loss in relation to the net Sterling financial assets position, should there be a
devaluation of Sterling against US$. The risk of any loss, in terms of meeting future liabilities, is
however eliminated by matching the currencies of cash balances with the currencies of projected
liabilities.
As of 31 December 2018 the Group's financial assets and financial liabilities were denominated in a
mixture of US$ and Sterling which consisted of:
Financial assets
Other receivables
Cash and cash equivalents
Financial Liabilities
Other payables
Add: amounts received in advance
Net financial assets
Financial assets held at amortised cost
Sterling
denominated
$’000
US$
denominated
$’000
382
781
1,163
-
7
7
Total
$’000
382
788
1,170
Financial liabilities held at amortised cost
(61)
-
1,102
-
7
(61)
-
1,109
Argos Resources Ltd
Annual report 2018
Page 35
Notes to the consolidated financial statements
Year ended 31 December 2018
Financial instruments (continued)
At 31 December 2017 the comparative balances were:
Financial assets
Other receivables
Less: prepayments
Cash and cash equivalents
Financial liabilities
Other payables
Add: amounts received in advance
Net financial assets
Sterling
denominated
$’000
US$
denominated
$’000
14
(10)
756
760
(59)
-
701
-
-
2
2
-
2
Total
$’000
14
(10)
758
762
(59)
-
703
If the US$ had strengthened against Sterling by 10%, the profit for the year would decrease and equity
would reduce by $110K (2017: decrease in profit and equity of $70K). Conversely if the US$ weakens
against Sterling by 10% the profit for the year and equity would increase by $110K (2017: increase in
loss and equity of $70K).
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 two high quality
institutions, Lloyds Bank PLC, which is part owned by the British government, and Standard Chartered
Bank. The following was the split of funds between the various institutions at 31 December 2018:
Institution
Lloyds Bank PLC
Standard Chartered Bank
2018
$’000
645
143
788
2017
$’000
665
93
758
Argos Resources Ltd
Annual report 2018
Page 36
Notes to the consolidated financial statements
Year ended 31 December 2018
Financial instruments (continued)
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 6 months.
Credit risk
The Group is not exposed to credit risk as it does not trade, and the cash balances held by the Group
are spread between two 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
When conducting an impairment review of its assets, the Group exercises judgement in making
assumptions about future oil and gas prices, oil and gas reserves/resources and future development
and production costs. By their nature, impairment reviews include significant judgements regarding
future financial resources and commercial and technical feasibility to enable the successful realisation
of the exploration and evaluation expenditure or capitalised value of the royalty interest. Changes in
the judgements used can result in significant charges to the statement of comprehensive income as
any impairment loss arising from the review is charged to the statement of comprehensive income
whenever the carrying amount of the asset exceeds its recoverable amount.
Re-assignment of PL001 licence
On receipt of the notice, from Noble and Edison to withdraw from the Licence, Argos exercised its
option to have the Licence re-assigned to the Company. This process required the approval of the
Falkland Islands Government and was not completed by 31 December 2018. A judgement was
therefore required in terms of completion. At 31 December 2018 there had been no indication from
the Falkland Islands Government that re-assignment of the Licence would be refused.
4 Other income
Income from the Participation Agreement
Total
2018
$’000
784
784
2017
$’000
380
380
The termination clause of the Participation agreement requires Noble & Edison to continue to pay
Argos the income from the Participation Agreement for a period of 450 days after notice has been
given. The full amount of income remaining under the agreement has been recognised, as Argos are
contractually entitled to the income under the termination clause of the agreement. The remaining
income will be received over quarterly payments until 27 December 2019.
Argos Resources Ltd
Annual report 2018
Page 37
Notes to the consolidated financial statements
Year ended 31 December 2018
5 Administrative expenses
Directors’ remuneration (see note 6)
Professional fees
Other expenses
Total
6 Directors’ remuneration
Remuneration and fees
Pensions*
Total
2018
$’000
134
159
41
334
2018
$’000
132
2
134
2017
$’000
131
139
59
329
2017
$’000
129
2
131
*A Irvine is accruing retirement benefits under a defined contribution pension arrangement.
Directors’ remuneration, by director, is disclosed in the directors’ remuneration report on page 19.
The average monthly number of employees, including directors, during this and the preceding year
was 6.
7 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
Fees payable to the Company’s auditor for the
Taxation services for the subsidiary company
2018
$’000
2017
$’000
25
5
-
30
2
1
33
25
5
-
30
4
4
38
Argos Resources Ltd
Annual report 2018
Page 38
Notes to the consolidated financial statements
Year ended 31 December 2018
8
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.
At 1 January 2017
Exercised – 4 September 2017
At 31 December 2017
And 31 December 2018
Average share
price on date
exercised
(pence)
3.125
Exercise price
(pence)
Number
2
2
9,080,818
(1,000,000)
8,080,818
All options outstanding at the end of the year and at the end of the comparative period had vested
and remained exercisable. The weighted average contractual life of the options is 8.87 years.
9
Finance income
Interest on bank deposits
10 Taxation
Total tax:
Corporation tax on losses for the year
Reconciliation of total tax:
Profit before tax
Profit 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
Receipts not taxable
Interest receivable not taxable
Expenses not deductible for tax purposes
Total tax for the year
2018
$’000
4
2018
$’000
-
406
105
94
(204)
-
5
-
2017
$’000
1
2017
$’000
-
118
31
68
(99)
-
-
-
The Group has capital tax losses carried forward of $23m. The resulting deferred tax assets and
liabilities have been offset and the Group and Company intend to manage the assets in the future so
as to utilise all of the carried forward capital and trading losses.
Argos Resources Ltd
Annual report 2018
Page 39
Notes to the consolidated financial statements
Year ended 31 December 2018
Taxation (continued)
The group has the following temporary differences:
Trading Losses Carried forward
Capital losses carried forward
Accelerated tax depreciation
Net Deferred Tax Asset
2018
$’000
7,900
22,900
(28,700)
2,100
2017
$’000
7,900
23,200
(28,900)
2,200
The resulting deferred tax assets and liabilities have been offset and the Group and Company intend
to manage the assets in the future so as to utilise all of the carried forward losses.
In respect of the net deferred tax asset, no deferred tax asset has been recognised due to the uncertain
timing of the utilisation of losses.
Argos Resources Ltd
Annual report 2018
Page 40
Notes to the consolidated financial statements
Year ended 31 December 2018
11 Earnings per share
Shares in issue brought forward (2 pence shares)
Options exercised
Shares in issue carried forward
Weighted average shares in issue
Profit for the year
Weighted average number of ordinary shares
in issue during the year
Basic earnings per ordinary share (cents)
Diluted earnings per share
Shares in issue brought forward (2 pence shares)
Options exercised
Dilutive securities in issue during the period but not
converted
Shares in issue, plus the weighted average number of
dilutive securities in issue but not converted
Weighted average number of shares, plus the weighted
average number of dilutive securities in issue during the
period but not converted
Profit for the year
Weighted average number of shares, plus the weighted
average number of dilutive securities in issue during the
period but not converted
Diluted earnings per ordinary share (cents)
2018
Number
220,713,205
-
2017
Number
219,713,205
1,000,000
220,713,205
220,713,205
220,713,205
220,036,493
2018
$’000
406
2017
$’000
118
220,713,205
220,036,493
0.18
0.05
2018
Number
220,713,205
-
2017
Number
219,713,205
1,000,000
8,080,818
8,080,818
228,794,023
228,794,023
228,794,023
228,794,023
2018
$’000
406
2017
$’000
118
228,794,023
228,794,023
0.18
0.05
Basic earnings per share has been computed by dividing the earnings by the weighted average number
of shares in issue during the period. Diluted earnings per share is calculated by dividing the earnings
by the weighted average number of shares, plus the weighted average number of dilutive securities in
issue during the period but not converted.
Argos Resources Ltd
Annual report 2018
Page 41
Notes to the consolidated financial statements
Year ended 31 December 2018
12 Exploration and
evaluation (E&E)
intangible assets and
royalty interest (ORRI)
At 1 January 2017 and
1 January 2018
Royalty interests
reclassified as E&E assets
At 31 December 2018
Royalty
interests
$’000
Exploration
& evaluation
(E&E) assets
$’000
Total
$’000
28,749
-
28,749
(28,749)
28,749
-
-
28,749
28,749
The Group reclassified “royalty interests” as E&E expenditure on termination of the Participation
Agreement in October 2018. Details of the accounting policies adopted by the Group for these types
of assets and the consideration of impairment is detailed in note 1 on page 33. As at 31 December
2018 the Falkland Islands Government were still in progress of re-assigning the PL001 licence. In
February 2019 the licence was approved and re-assigned back to Argos.
The PL001 licence expires on 29 November 2019 and discussions about the licence term beyond that
date are underway with the Falkland Islands Government and the Company is actively seeking new
partners to continue exploration in the Licence area.
13 Other receivables
Income from the Participation Agreement
Prepayments
Other
14 Trade and other payables
Trade payables
Accruals
2018
$’000
378
10
4
392
2018
$’000
1
60
61
2017
$’000
-
10
4
14
2017
$’000
1
58
59
Argos Resources Ltd
Annual report 2018
Page 42
Notes to the consolidated financial statements
Year ended 31 December 2018
15 Share capital
Authorised:
500,000,000 ordinary shares of 2 pence each
2018
$’000
2017
$’000
14,960
14,960
Allotted, issued and fully paid:
Ordinary shares of 2 pence each
At 1 January 2017
Shares issued (share options exercised) during 2017
Number
219,713,205
1,000,000
$’000
6,669
27
At 31 December 2017
and 31 December 2018
220,713,205
6,696
16 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
2018
$’000
-
5
(5)
-
-
2017
$’000
-
-
-
-
-
* The services and agency agreement between the Company and Argos Georgia Ltd in which Argos Georgia Ltd
provided certain agency, accounting, secretarial and operational services to the Company was terminated with
effect from 31 March 2016. The cost of continued provision of these services, which has not been charged for,
is $15,000. The key management personnel are the directors only.
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 19 and in note 6.
17 Commitments
(a) Capital commitments
The Second Phase of the PL001 licence requires an Oil Well to be drilled.
(b) Operating commitments
There were no ongoing commitments at 31 December 2018 nor for the comparative period.
Argos Resources Ltd
Annual report 2018
Page 43
Notes to the consolidated financial statements
Year ended 31 December 2018
18 Contingent liabilities
The Group has no anticipated material contingent liabilities.
19 Events after the reporting date
Licence PL001 was approved and re-assigned back to Argos in February 2019.
Argos Resources Ltd
Annual report 2018
Page 44
Parent Company financial statements
Statement of financial position
As at 31 December 2018
Assets
Non-current assets
Investments
Current assets
Other receivables
Cash and cash equivalents
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
Note
7
8
9
10
2018
$’000
2,120
2,120
9,795
788
2017
$’000
2,120
2,120
25,752
758
10,583
26,510
12,703
28,630
44
44
41
41
12,659
28,589
6,696
30,071
(24,108)
6,696
30,071
(8,178)
12,659
28,589
The notes on pages 48 to 52 form part of the financial statements.
These financial statements were approved by the directors and authorised for issue on 18 March 2019
and are signed on their behalf by:
Ian Thomson
Chairman
Argos Resources Ltd
Annual report 2018
Page 45
Parent Company financial statements
Statement of cash flows
Year ended 31 December 2018
Cash flows from operating activities
Profit for period before taxation
Adjustments for:
Finance income
Foreign exchange
IFRS 9 provision in current year
Net cash inflow from operating activities
before changes in working capital
(Increase) in other receivables
Increase in other payables
Net cash inflow/(outflow) from operating activities
Investing activities
Interest received
Net cash used in investment activities
Financing activities
Issue of ordinary shares (share options exercised)
Net cash from financing activities
Net increase/(decrease) in
cash and cash equivalents
Cash and cash equivalents at beginning of period
Exchange (losses)/gains on
cash and cash equivalents
Cash and cash equivalents at end of the year
The notes on pages 48 to 52 form part of the financial statements.
Year
ended
31 December
Year
ended
31 December
2018
$’000
2017
$’000
28
(4)
50
2
76
(3)
3
76
4
4
-
-
80
758
(50)
788
118
(1)
(67)
-
50
(91)
3
(38)
1
1
27
27
(10)
701
67
758
Argos Resources Ltd
Annual report 2018
Page 46
Parent Company financial statements
Statement of changes in equity
Year ended 31 December 2018
Share
capital
$’000
Share
premium
$’000
Retained
earnings/
(deficit)
$’000
Total
equity
$’000
At 1 January 2017
6,669
30,071
(8,296)
28,444
Profit for year
Shares issued (share options exercised)
-
27
-
-
118
-
118
27
At 31 December 2017
IFRS 9 adjustment on intercompany
debt
6,696
30,071
(8,178)
28,589
-
-
(15,958)
(15,958)
At 1 January 2018
Profit for year
6,696
30,071
(24,136)
12,631
-
-
28
28
At 31 December 2018
6,696
30,071
(24,108)
12,659
The notes on pages 48 to 52 form part of the financial statements.
Argos Resources Ltd
Annual report 2018
Page 47
Notes to the parent Company financial statements
Year ended 31 December 2018
1 Accounting policies
Basis of preparation
The financial statements have been prepared under the historical cost convention. All accounting
policies are consistent with those adopted in the Group financial statements except as otherwise
noted below.
The amount due from the subsidiary company is repayable on demand.
Investments
Investments are measured at cost at acquisition and are then subsequently measured at cost less
impairment
The Group’s financial assets comprise of cash and cash equivalents and other receivables, which are
categorised as “financial assets held at amortised cost” These financial assets were referred to as
‘loans and receivables’ in the prior period. Financial liabilities comprise other payables which are
categorised as financial liabilities held at amortised cost and these are all current financial liabilities.
Changes in accounting standards
Please refer to Changes in accounting standards, Note 1, in the group financial statements.
There are no Leases and IFRS 16 will not have an impact.
Standards implemented in the year
IFRS 9 ‘Financial Instruments’
Classification and measurement
There was no impact to the Parent resulting from the application of the classification and
measurement requirements of IFRS 9.
Impairment
The adoption of IFRS 9 has impacted the Parent company. This is a result of the existing incurred loss
approach under IAS 39 being replaced by the forward looking expected credit loss model approach of
IFRS 9. The expected credit loss model is required to be applied to the intercompany loan receivable
which is classified as held at amortised cost. Please refer to note 12 for the detail on the impact and
assumptions used in the calculation.
The transition method requires a retrospective application for the first time adoption of IFRS 9,
however the standard has allowed an exemption to not restate the comparative information with
differences being recorded in opening retained earnings, these changes have been processed at the
date of initial application (i.e. 1 January 2018), and presented in the statement of changes in equity as
at 31 December 2018.
IFRS 15 ‘Revenue from contracts with customers’
There is no impact on the parent accounts relating to the implementation of IFRS 15.
Argos Resources Ltd
Annual report 2018
Page 48
Notes to the parent Company financial statements
Year ended 31 December 2018
3 Significant accounting judgements, estimates and assumptions
Application of the expected credit loss model prescribed by IFRS 9
The new IFRS 9 account standard, requires the Parent company to make assumptions when
implementing the forward-looking expected credit loss model. This model is required to be used to
assess the intercompany loan receivable from Argos Exploration Limited for impairment.
Estimations were made regarding the credit risk of the counterparty and the probability of default in
each of the credit loss scenarios. The following was considered; the expected future oil prices, the
value of the reserves reflected in the independent economic assessment of the Licence area; the ability
to sell the project, and the ability to find a new farm-out partner.
Re-assignment of PL001 licence
On receipt of the notice, from Noble and Edison to withdraw from the Licence, Argos exercised its
option to have the Licence re-assigned to the Company. This process required the approval of the
Falkland Islands Government and was not completed by 31 December 2018. A judgement was
therefore required in terms of completion. At 31 December 2018 there had been no indication from
the Falkland Islands Government that re-assignment of the Licence would be refused.
4 Financial instruments
The policy for managing financial risks is set by the board following recommendations from the Finance
Director.
Foreign exchange
As the functional currency is US$ and some of the current monetary assets and liabilities are in Sterling
there is a risk of loss in relation to the net Sterling financial assets position, should there be a
devaluation of Sterling against US$. The risk of any loss, in terms of meeting future liabilities, is
however eliminated by matching the currencies of cash balances with the currencies of projected
liabilities.
As of 31 December 2018 the Company’s financial assets and financial liabilities were denominated in
a mixture of US$ and Sterling which consisted of:
Financial assets
Other receivables
Less: prepayments
Cash and cash equivalents
Financial liabilities
Other payables
Net financial assets
Amortised cost
Sterling
denominated
$’000
14
(10)
781
US$
denominated
$’000
9,781
-
7
Total
$’000
9,795
(10)
788
785
9,788
10,573
Amortised cost
(44)
741
-
9,788
(44)
10,529
Argos Resources Ltd
Annual report 2018
Page 49
Notes to the parent Company financial statements
Year ended 31 December 2018
Financial instruments (continued)
At 31 December 2017 the comparative balances were:
Current assets
Other receivables
Less: prepayments
Cash and cash equivalents
Financial liabilities
Other payables
Net financial assets
Sterling
denominated
$’000
14
(10)
756
US$
denominated
$’000
25,738
-
2
Total
$’000
25,752
(10)
758
760
25,740
26,500
(41)
719
-
(41)
25,740
26,459
If the US$ had strengthened against Sterling by 10%, the profit for the year would decrease and equity
would reduce by $74K (2017: decrease in profit and equity of $72K). Conversely if the US$ weakens
against Sterling the profit for the year and equity would increase by $74K (2017: increase in profit and
equity of $72K).
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 two high quality
institutions, Lloyds Bank PLC, which is part owned by the British government, and Standard Chartered
Bank. The following was the split of funds between the various institutions at 31 December 2018.
Institution
Lloyds Bank PLC
Standard Chartered Bank
2018
$’000
645
143
788
2017
$’000
665
93
758
Interest rates
The Company 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 Company 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 6 months.
Argos Resources Ltd
Annual report 2018
Page 50
Notes to the parent Company financial statements
Year ended 31 December 2018
Financial instruments (continued)
Credit
The Company is not exposed to credit risk, other than amounts due from the subsidiary company, as
it does not trade and the cash balances held by the Company are spread between two reputable
institutions. Please refer to note 12 for the details of the expected credit loss on the intercompany
receivable due from the subsidiary company.
Fair values
The fair values of the Company’s financial assets and liabilities are not materially different from the
carrying values in the statement of financial position and notes to the financial information.
5 Loss attributable to the members of the parent Company
The profit for the year was $28 thousand (2017: $118 thousand). A separate income statement for
the Company has not been presented as permitted by the Companies Act 1948 as amended by the
Companies (Amendment) Ordinance 2006 (Falkland Islands Companies Act) as it applies in the Falkland
Islands.
6 Staff costs
The information given in note 6 of the consolidated financial statements relates wholly to the
Company. There is no difference between the directors’ remuneration of the parent Company and
the Group.
7
Investments
Investment in subsidiary
Cost:
At 1 January and
31 December
2018
$’000
2017
$’000
2,120
2,120
The principal undertaking in which the Company’s interest at the year-end was 20% or more is as
follows:
Investment in subsidiary
Country of
incorporation
Percentage of voting
rights and ordinary
share capital held
Nature of business
Argos Exploration Ltd
Falkland Islands
100
Oil and gas
exploration
Argos Resources Ltd
Annual report 2018
Page 51
Notes to the parent Company financial statements
Year ended 31 December 2018
8 Other receivables
Amounts due from subsidiary company (see below)
Prepayments
Other
Amounts due from subsidiary company
As at 1 January
Opening provision for impairment
Restated through opening retained earnings
Movement in year
Increase in impairment in year
2018
$’000
9,781
10
4
9,795
2018
$’000
25,738
(15,958)
9,780
3
(2)
2017
$’000
25,738
10
4
25,752
2017
$’000
25,646
-
25,646
92
-
As at 31 December
9,781
25,738
Please refer to note 12 for the detail of how the provision for impairment has been calculated.
9 Trade and other payables
Trade payables
Accruals
10 Share capital
2018
$’000
1
43
44
2017
$’000
1
40
41
Share capital movements are set out note 15 on page 43 of the consolidated financial statements.
11 Other statutory disclosures
Audit services
Costs incurred on audit and other services provided by the auditor are provided on a consolidated
basis in note 7 of the consolidated financial statements.
Share based remuneration
The information given in note 8 of the consolidated financial statements relates wholly to the
Company.
Argos Resources Ltd
Annual report 2018
Page 52
Notes to the parent Company financial statements
Year ended 31 December 2018
Other statutory disclosures (continued)
Related party transactions
The information given in note 16 of the consolidated financial statements relates wholly to the
Company.
Commitments
The information given in note 17 of the consolidated financial statements relates wholly to the
Company.
Events after the balance sheet date
There were no reportable events occurring after the balance sheet date.
12 Effects of changes in accounting policies
The Parent adopted IFRS 9 with a transition date of 1 January 2018. The Parent has chosen not to
restate comparatives on adoption of IFRS 9 and, therefore, are not reflected in the restated prior year
financial statements. Rather, these changes have been processed at the date of initial application (i.e.
1 January 2018) and recognised in the opening equity balances.
The increase in loss allowance resulted in a reduction to opening reserves, at 1 January 2018, as
follows:
Accounts affected
Intercompany loan receivable
(opening balance as presented
under IAS39)
Total current assets
Cumulative transition adjustment
Retained earnings
Restated balance (in accordance
with IFRS 9)
$’000
25,741
25,741
15,958
15,958
9,780
The increase in the loss allowance is only as a result of the application of the expected credit loss
model. This is a result of the existing incurred loss approach under IAS 39 being replaced by the forward
looking expected credit loss model approach of IFRS 9. No loss allowance had previously been
recognised, as no loss event had previously occurred.
The impairment assessment of the loan has been performed using a lifetime expected credit loss
model.
The loan to the subsidiary company, Argos Exploration Limited, is classified as repayable on demand.
IFRS 9 requires consideration of the expected credit risk associated with the loan. As the subsidiary
company does not have any liquid assets to sell to repay the loan, should it be recalled, the conclusion
reached was that the loan should be categorised as stage 3.
Argos Resources Ltd
Annual report 2018
Page 53
Notes to the parent Company financial statements
Year ended 31 December 2018
Effects of changes in accounting policies (continued)
As part of the assessment of expected credit losses of the intercompany loan receivable, the Directors
have considered the expected future oil prices; the value of the reserves reflected in the independent
economic assessment of the Licence area; the ability to sell the project, the ability to find a new farm-
out partner and the exploration project risk provided in the Competent Persons Report. The Directors
have also assessed the cash flow scenarios of the above considerations.
The credit risk of the intercompany loan was assessed at the date of initial application of IFRS 9, being
1 January 2018, and again at the current year-end. There had no change in the significant credit risk
at year-end.
Argos Resources Ltd
Annual report 2018
Page 54
Investor Information and 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
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 Bank PLC
3-5 Bridge Street
Newbury
UK, RG14 5HB
Bankers
Standard Chartered Bank
Ross Road
Stanley
Falkland Islands
Website
www.argosresources.com
Argos Resources Ltd
Annual report 2018
Page 55