EUROPA
Oil & Gas
EUROPA OIL & GAS (HOLDINGS) PLC
Annual Report and Accounts for the year ended 31 July 2012
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Exploration Discovery Production
Europa Oil & Gas (Holdings) plc
Annual Report and Accounts for the year ended 31 July 2012
Europa Oil & Gas (Holdings) plc is an AIM listed
exploration and production company focused
on Europe. It offers an attractive mix of highly
prospective exploration assets, including the
Berenx gas appraisal project onshore France,
two substantial prospects in the Irish Atlantic
Margin as well as interests in three producing
assets onshore UK.
Highlights
Where we operate
New prospects in the Irish Atlantic Margin
Chairman’s statement
Interview with CEO Hugh Mackay on the CPR
Operational review
Financial review
Board of Directors
Directors’ report
Statement of Directors’ responsibilities
Corporate governance statement
Report of the independent auditors
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Company statement of financial position
Company statement of changes in equity
Consolidated statement of cash flows
Company statement of cash flows
Notes to the financial statements
Notice of AGM
Resolutions to be put to the AGM
Form of proxy for the Europa Oil & Gas (Holdings) plc AGM
Directors and Advisers
Glossary
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08
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31
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51
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1
Please visit our website for more
information. www.europaoil.com
Operational highlights
• Average daily UK production up 18% to 200 boepd (2011: 169 boepd)
• CPR confirms 48.2 mmboe net mean unrisked resource for UK (excluding Holmwood)
and Berenx Deep in onshore France
• Identified exciting shallow gas play in Béarn des Gaves permit, France
Financial performance
• Revenue up 34% to £5.1m (2011: £3.8m)
• Pre-tax profit before impairment and exploration write-down £1.2m (2011: £0.7m)
• Net loss £11.3m (2011: £0.2m) after exploration write-down of £12.5m in respect of
Romania and PEDL150
• Cash generated from continuing operations £2.1m (2011: £0.7m)
• Net cash £0.2m (2011: £1.9m)
• Repaid £1m term loan
Post reporting date events
• Two large prospects identified in South Porcupine Basin, offshore Ireland
• Holmwood planning appeal in Surrey dismissed, next steps being considered
Revenue (£’m)
Adjusted pretax
profit (£’m)1
2.9
3.1
3.8
5.1
0.7 0.3 0.7 1.2
09
10
11
12
09
10
11
12
1 Pretax profit for continuing operations,
excluding exploration write-off and impairment
www.europaoil.comOUR BUSINESSGOVERNANCEFINANCIAL STATEMENTSADVISERS 2
Where we operate
EXPLORATION AND PRODUCTION
COMPANY FOCUSED ON EUROPE,
MEDITERRANEAN AND ATLANTIC MARGIN
Ireland
UK
France
Romania
SADR
Europa Oil & Gas (Holdings) plc Annual Report and Accounts for the year ended 31 July 2012 3
Europa holds a varied asset portfolio across
four EU jurisdictions and in the Sahrawi Arab
Democratic Republic (SADR). These range
from oil producing assets, through exciting
discoveries at the appraisal stage, to exploration
projects in both new and established oil and
gas plays.
Area
Licence
Operator
Equity
Country
UK
Ireland
France
East Midlands
Weald
North Sea
Porcupine
Aquitaine
DL003
DL001
PL199/215
PEDL150
PEDL180
PEDL181
PEDL182
PEDL143
Holderness
Humber South
LO 11/7
LO 11/8
100%
100%
65%
75%
33%
50%
33%
40%
90%
90%
100%
100%
Status
Production
Production
Production
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Field/
Prospect
West Firsby
Crosby Warren
Whisby-4
Hykeham
Wressle
Caister/shale
Broughton
Holmwood
Offshore UCG
Offshore UCG
Mullen
Kiernan
Europa
Europa
BPEL
Europa
Egdon
Europa
Egdon
Europa
Europa
Europa
Europa
Europa
Europa
Europa
Raffles
Europa
Europa
Europa
Béarn des Gaves Berenx (deep and shallow)
Osmets/Jacque
Tarbes val d’Adour
Romania
Carpathians
SADR
Tindouf
Aaiun
EIII-4 Bacau
EPI-3 Brates
Bir Lehlou
Hagounia
Barchiz
100% Exploration/Appraisal
100% Exploration/Appraisal
19%
100%
100%
100%
Exploration
Exploration
Exploration
Exploration
www.europaoil.comOUR BUSINESSGOVERNANCEFINANCIAL STATEMENTSADVISERS
4
NEW PROSPECTS IN
THE IRISH ATLANTIC MARGIN
Europa Oil & Gas (Holdings) plc Annual Report and Accounts for the year ended 31 July 2012 5
NEW PROSPECTS IN
Two sizeable prospects, Mullen and Kiernan
THE IRISH ATLANTIC MARGIN
were identified in the lower Cretaceous Clastic
play in the Irish Atlantic Margin in September
Two sizeable prospects, Mullen and Kiernan,
2012. Europa owns a 100% equity interest in
were identified in the Lower Cretaceous
Licensing Options 11/07 and 11/08 which
clastic play in the Irish Atlantic Margin in
cover these two discoveries.
September 2012. Europa owns a 100% equity
interest in Licensing Options 11/07 and 11/08
which cover these prospects.
Overview
The two Licensing Options cover two four-block parcels in Quads
Our initial technical work and prospect mapping
43 and 54 situated off the west coast of Ireland in the South
exercise exceeded our expectations. Mullen
Porcupine Basin. The licences cover a total area of approximately
in LO 11/07 and Kiernan in LO 11/08 are both
2,000 km2 in water depths of between 700 metres and 2,000
located close to the Burren oil discovery and
metres.
the ExxonMobil-operated Dunquin prospect
The initial technical work and prospect mapping exercise
which indicates the presence of a functioning
has exceeded our expectations. Two prospects have been
hydrocarbon system. In addition, seismic mapping
indentified: Mullen in LO 11/7 and Kiernan in LO 11/8. Seismic
shows potential for large stratigraphic closures of
mapping shows potential for large stratigraphic closures of up to
up to 120sq km in size in the case of Mullen and
120 km2 in size in the case of Mullen and 244 km2 in the case of
244sq km in the case of Kiernan.
Kiernan. Both prospects are part of the Lower Cretaceous clastic
play; a hydrocarbon play proven by the Burren oil discovery in
the North Porcupine Basin.
The size of these prospects warrants further
priority investigation. A work programme has
The size of these prospects warrants further priority
been embarked upon which we hope will provide
investigation. A work programme has been embarked upon
Vestibulum ante ipsum primis
volumetric estimates in due course and eventually
that will provide volumetric estimates in due course. Additional
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seismic data will be required to further de-risk the prospects and
see Mullen and Kiernan upgraded to drillable
ullamcorper consequat. Nulla sit amet gravida odio. Nunc eget
upgrade Mullen and Kiernan to drillable status.
mauris at lacus ultricies dignissim.
status.
Donec at accumsan sapien. Praesent tempus pharetra ultrices.
Europa is seeking a joint venture partner for both
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licenses and a data room at its London offices has
Vestibulum condimentum, purus vitae suscipit vestibulum, est
been opened. The two license options cover two
augue auctor enim, nec mollis neque nibh vel ipsum. In sapien urna,
imperdiet sed ultricies nec, luctus ut nulla. In eget rhoncus turpis.
block…..
Vestibulum accumsan rutrum posuere.
The Mullen prospect lies in approximately 1,000 metres water
depth with the Lower Cretaceous reservoir targets lying
3,850 metres below the mud line (bml). Mullen is located
200 km offshore from SW Ireland, 140 km SSW from the Lower
Cretaceous Burren oil discovery, 35/8-1 and 50 km NW from the
ExxonMobil operated Dunquin exploration well which is due
to be drilled in Q1 2013 to evaluate a Middle Cretaceous
carbonate play.
The Kiernan prospect lies in 1,780 metres water depth with
the Lower Cretaceous reservoir targets at a depth of 4,220
metres bml. Kiernan is located 145 km offshore from SW Ireland,
200 km SSE from the Burren oil discovery and 65 km SE from
Dunquin.
The Company’s current focus is to mature the large Lower
Cretaceous stratigraphic prospects at the Mullen and Kiernan
Vestibulum ante ipsum primis
locations and to identify other submarine fan systems similar
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to those that have been proved to be successful elsewhere
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along the Atlantic Margins. A joint venture partner is being
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sought for both licences.
sapien. Praesent tempus pharetra ultrices. Maecenas dignissim
aliquam augue, et dictum nunc egestas nec. Vestibulum
condimentum, purus vitae suscipit vestibulum, est augue auctor
enim, nec mollis neque nibh vel ipsum.
In sapien urna, imperdiet sed ultricies nec, luctus ut nulla. In eget
rhoncus turpis. Vestibulum accumsan rutrum posuere.
www.europaoil.comOUR BUSINESSGOVERNANCEFINANCIAL STATEMENTSADVISERS 6
Chairman’s statement
We are now well
placed to progress our
assets further along the
development curve.
Key highlights
• Production & revenue growth
• Wressle has potential to transform Europa
• Progress on French permits
• Completed and published CPR
• Strengthened technical team
Dear shareholders,
The year under review has served to highlight the significant benefits
of being an oil and gas company focused on Europe with a multistage
portfolio of licences, including both production in the UK as well as highly
prospective exploration in France and the Irish Atlantic Margin. While
adverse macroeconomic conditions have prevailed for much of the last
twelve months impacting business activity across a wide range of sectors,
Europa’s UK producing assets have had an excellent year, averaging 200
boepd, an 18% increase on last year’s 169 boepd. Together with a 10.5%
increase in the average oil price achieved over the course of the year, our
full year revenues show a 34% increase to £5.1million.
The wider financial conditions notwithstanding, the £5.1million in
revenues has allowed us to progress what we hope will become our
future producing assets further along the development curve. In the UK,
we funded our share of costs for acquisition and processing of 49km2 of
3D seismic survey over our 33% owned PEDL180 and PEDL182 licences.
We rate the Wressle and Broughton prospects on the licences as both
having a one in three chance of making a commercial discovery which
would lead to a material increase in our production. The licences are
operated by Egdon Resources and a well is expected to be drilled on one
of the two prospects in the first quarter of 2013. Thanks to the strong
performance of our UK production, Europa is fully funded to cover its
share of drilling costs.
Progress has also been made on our French permits. Earlier in the year,
re-evaluation of existing seismic and well data resulted in our in-house
technical team identifying a previously unrecognised shallow gas play
on the already highly prospective Béarn des Gaves permit in South West
France that lies adjacent to the giant gas fields of Lacq and Meillon. This is
a significant development for the Company with positive implications for
the on-going farm-out process for this 100% owned permit.
The prospectivity of the deep gas play in the Béarn des Gaves permit
(Berenx Deep) has been known for decades following the drilling of wells
in the 1960s and 1970s combined with the existence of historic seismic
data. However, at 5,500 metres below the surface, the cost of one well is
estimated at €40-50million which has effectively limited the number of
potential partners, an issue exacerbated by the challenging economic
climate. By contrast, the cost of drilling the newly identified shallow
prospect is considerably lower at €4-5 million and therefore affordable
to a much larger pool of oil and gas companies. As a result, our strategy
regarding Berenx has changed so that we are now looking to drill and
prove up the shallow prospect first, which we estimate holds up to 59
bcf of gas, before addressing the deeper prospectivity. With this strategy
in mind, we are in active discussions with regards to farming out Berenx,
both shallow and deep.
In October 2011, Europa was awarded two exploration Licensing Options
in the Irish Atlantic Margin. The waters around Ireland have been
generating much excitement recently following drilling success in the
Celtic Sea and upcoming wells offshore West of Ireland. Since acquiring
the acreage, our technical team has been busy mapping the two
four-block parcels located in the South Porcupine Basin which cover an
area totalling 2,000 km2. This work has resulted in the identification of
two potentially large prospects in the Lower Cretaceous clastic play.
Europa Oil & Gas (Holdings) plc Annual Report and Accounts for the year ended 31 July 2012 7
Further work is required to mature these prospects to drillable status,
however, we are very encouraged by our findings to date. As with our
French permits, we are actively seeking to secure a farm-in partner.
Our strategy
During the year, we published the findings of a Competent Person’s
Report (‘CPR’) drafted by ERC Equipoise Limited (‘ERC’), which provides an
independent assessment of Europa’s UK and French assets. This was the
first time a third party has reviewed the exploration assets and the results
are highly encouraging. ERC estimated our core recoverable reserves and
potential resources at 48.2 mmboe. While we believe this figure to be on
the conservative side, we are happy to accept this as a solid base from
which we are confident we can build on as we progress our UK, French
and Irish prospects along the development curve.
During the period, Hugh Mackay took over as Chief Executive Officer.
Hugh is a geologist by profession with over 30 years’ experience having
held senior posts at BP, Enterprise Oil, The Peak Group, AGR Petroleum
and Avannaa Resources. Hugh is responsible for putting together the
technical team on whose excellent work I have already commented.
In addition to our exploration licences, the team has been working hard
on our UK producing assets with the remit to increase production and
where possible extend the life of the fields by implementing a series of
initiatives aimed at improving operational efficiency and recovery rates.
While it is too early to gauge the long term effects, the results of the
work by our operational team on the ground can nevertheless be seen
in the 19% increase in year on year oil volumes. We are pleased to have
delivered on our forecast production for the year of 200 boepd.
Hugh has also spearheaded an in depth review of our entire asset base, a
process that culminated in the commissioning of the CPR. Thanks to the
review and CPR, our understanding of the potential of our licences
and, by definition, the Company as a whole, has increased considerably.
At the very least, the CPR serves as a benchmark in our on-going
discussions with potential partners, particularly with regards to Berenx.
Outlook
Having an asset base at various stages of development is highly beneficial
to the Company. As a result of our existing production, our exploration
activity in the next twelve months is not wholly dependent on our
securing a farm-out deal. As mentioned earlier, we are fully funded to drill
a well on PEDL180 or PEDL182 in the UK. In addition, our three producing
fields in the East Midlands have been assigned mean recoverable reserves
of 0.65 mmbo by ERC. We believe there is scope to build on this but
as it stands this third party estimate is nevertheless a valuable asset.
Meanwhile, ERC have estimated Berenx Deep has a net mean contingent
resource of 277 bcf. Combined, our UK and French assets provide
tremendous asset backing to a Company of our size, which underpins our
valuation.
The actions taken over the course of the year under review have
strengthened my own and the Board’s belief in the potential of Europa’s
asset base and our ability to create substantial value for all shareholders.
We recognise it is our task to realise this potential.
Europa’s objective is to become listed in the top quartile on
AIM within 5 years. The threshold for this quartile is a market
capitalisation greater than £100 million.
To achieve this objective Europa will drill up its existing exploration
and appraisal portfolio in the UK, France and Ireland. Some of
these activities will be funded from cashflow; others by farm-out.
New ventures will be added to the portfolio. This will be a
combination of ground floor licence application and, where
appropriate, by farm-in. Strategic partnerships will be considered
as a means of accelerating portfolio growth, drill up activity and
achieving the objective.
Europa’s areas of interest are Europe, the Mediterranean, and
the Atlantic margin. Access to good prospectivity, preferably on
ground floor terms, is key and opportunities outside the AOI will
be considered.
Drilling is key to the long term development of all oil and gas companies
no matter what size they are and, with this in mind, the prospect of
commencing drilling in the East Midlands in early 2013 is very much
welcome. Subject to the results of this well, we, along with our partners,
will consider drilling a follow up. In the meantime, we continue to work
hard to move all our licences forward and remain on the look out to add
additional projects to our portfolio that meet our investment criteria.
Updates on our progress will be provided as and when it is appropriate
to do so.
Finally, I would like to thank the management team, directors and advisers
for their hard work during the year and also to our shareholders for their
support over the last twelve months.
WH Adamson
Chairman
www.europaoil.comOUR BUSINESSGOVERNANCEFINANCIAL STATEMENTSADVISERS 8
INTERVIEW WITH CEO
HUGH MACKAY ON THE CPR
On 1st June 2012, Europa published a
Competent Person’s Report (CPR) undertaken
by ERC Equipoise. CEO Hugh Mackay discusses
the findings of the CPR.
Europa Oil & Gas (Holdings) plc Annual Report and Accounts for the year ended 31 July 2012 9
Q: You commissioned a Competent Person’s Report (CPR)
this year – what was the rationale for that?
A: It’s natural that management believes in the Company’s assets –
but it’s prudent to get a 3rd party to review them and give their
independent assessment of risk and reward. It is also our intent to
provide the market with complete clarity on our asset base so we
have made the entire CPR publicly available on our website.
Q: Why were ERC Equipoise chosen to undertake the CPR?
A: ERC Equipoise is a well established provider of independent reserves
and resources reports with a strong reputation in the upstream
oil industry.
Q: And what did the CPR say?
A: At 48.2 mmboe the CPR’s estimate of our core recoverable reserves
and potential resources provides a solid asset backing to our
current market valuation and will also play a key role in our ongoing
negotiations with potential partners, specifically regarding our
French permits.
Q: Were there any areas of disagreement with ERC Equipoise?
A: The only significant difference in interpretation concerned resources
for the Berenx Deep structure. This was largely due to challenges
mapping in a thrust belt using various vintages of seismic data.
Europa had more confidence mapping in this complex terrain
resulting in larger structural closures and consequently resources.
The CPR estimates Berenx Deep holds a net mean contingent
resource of 277 bcf whereas we believe the figure to be 524 bcf.
In the interests of consistency we have nonetheless elected to
proceed with ERC’s more conservative reserves figures for Berenx
in our public documents and in our subsequent net asset value
calculations.
Q: The CPR covered the UK and French assets but why did the
CPR not include volumetrics for Berenx shallow or prospects
on the Tarbes permit?
A: Additional data would be required before these assets could be
included in the CPR. ERC did suggest that the Berenx shallow
structure is a lead with gas initially in place of 75 bcf. Europa
considers this a prospect with gross mean unrisked resources of
59 bcf.
Q: ERC classified Berenx Deep as having 277 bcf of contingent
resources, can you explain the significance of the term
‘contingent resources’?
A: The SPE-PRMS Guidelines define contingent resources as “those
quantities of petroleum estimated, as of a given date, to be
potentially recoverable from known accumulations by application
of development projects, but which are not considered currently
recoverable due to one or more contingences.”
Berenx Deep is a known accumulation that has flowed gas to surface.
The definition of contingent resources is significant for Berenx since
it acknowledges that geological risk has been eliminated, it is an
appraisal project. Commercial recovery is contingent on the ability
to predict and access natural fracture systems capable of delivering
commercial rates of production.
Q: Did the CPR’s volumetrics for PEDL180/182 take account of the
3D seismic acquired earlier in the year?
A: No they did not. The processed 3D seismic did not become
available until May and was too late to include in the report, indeed
interpretation of the dataset is ongoing. We anticipate confirming
new resources based on the new 3D dataset later in 2012.
Q: The CPR estimate for remaining reserves at the three UK
producing fields at 0.65 mmbo. Is there scope to increase this?
A: Yes there is. The CPR indicates 3P reserves of 1 million barrels; most
of the additional 350,000 barrels in the “possible” category is located
in the West Firsby field. We are actively evaluating ways of accessing
this upside.
Q: What next?
A:
I am delighted to have received this independent assessment of
Europa’s UK and French licences which supports our view that our UK
exploration assets at Wressle and Broughton each have the potential
to create significant value for shareholders, while Berenx in France
could be the company maker we believe it is. Since completing the
CPR two new prospects, Mullen and Kiernan, have been identified
offshore Ireland. Technical work to de-risk the prospects is ongoing
and additional seismic acquisition will be required to mature these
prospects to drillable status. Mullen and Kiernan can be included in a
future CPR either as individual projects or as part of a company-wide
review.
Please visit http://www.europaoil.com/news.aspx to read the full CPR.
www.europaoil.comOUR BUSINESSGOVERNANCEFINANCIAL STATEMENTSADVISERS
1010
A STRONG ASSET
INVENTORY READY
TO BE UNLOCKED
Europa’s business comprises three core strands:
production, appraisal and exploration and these
activities take place in four European jurisdictions:
UK, France, Ireland and Romania and in the
Sahrawi Arab Democratic Republic.
The Company continues to evaluate new venture
opportunities in Europe, Mediterranean and
Atlantic Margins to strengthen its asset base.
The current licence portfolio is summarised in
the table on page 3.
Europa Oil & Gas (Holdings) plc Annual Report and Accounts for the year ended 31 July 2012 Operational review
Operations and development
United Kingdom
Highlights
• Achieved production target of 200 boepd.
• Wressle or Broughton well expected early 2013.
11
Dorking area
UK - Weald
M25
Guildford
Dorking
Brockham
Holmwood-1
(Proposed)
United Kingdom - Exploration
NE Lincolnshire
Albury
Easington
Gas Terminal
PEDL143 (40%)
Stallinborough
Immingham
Oil Refinery
Grimsby
0
km
10
Crawley
M23
Crosby Warren
(100%)
PEDL182 (33%)
Winterton
Ulceby
Grange
Broughton
Scunthorpe
Wressle
PEDL180 (33%)
PEDL181
PEDL181 (50%)
Caister
Ridge
Gainsborough-
Beckingham
West Firsby
(100%)
Welton
Lincoln
Mablethorpe
Gas Terminal
Saltfleetby
Keddington
0
km
10
PEDL150 (75%)
Whisby-4
(65%)
UK - East Midlands
PEDL180 33.3% (Wressle)
PEDL180 covers an area of 100 km2 in the East Midlands Petroleum
Province south of the Crosby Warren field. Europa has an equal working
interest share in the block with its partners Egdon Resources and Celtique
Energie. The Wressle prospect has estimated mean gross unrisked
recoverable resources of 2.41 mmbo. 49 km2 of 3D seismic acquisition
covering PEDL180 and PEDL182 has been processed. Drilling at either
Wressle or Broughton is targeted for early 2013.
PEDL182 33.3% (Broughton)
To the north, PEDL182 is an area of 40 km2 with the same equity structure
as that of PEDL180. The Broughton prospect was previously drilled
by BP and flowed oil. Broughton has estimated mean gross unrisked
recoverable resources of 1.85mmbo.
PEDL150 75% (Hykeham)
To the south west of Lincoln, PEDL150 covers 110 km2. Europa has a 75%
interest, the balance being held by Valhalla. The Hykeham well was drilled
in 2010. Despite encountering potential oil pay, the well failed to flow
oil on test. The well results have been comprehensively reviewed and it
is clear that failure to flow is due to extremely poor reservoir quality and
the well will be plugged and abandoned. The Board has further decided
to write-down the carrying value of the PEDL150 block, resulting in an
Income statement charge of £2.1 million.
PEDL143 40% (Holmwood)
The PEDL143 licence covers an area of 92 km2 of the Weald Basin, Surrey.
Europa has a 40% working interest in the licence with partners Egdon
Resources 38.4%, Altwood Petroleum 1.6%, and Warwick Energy 20%.
The Holmwood prospect is a Jurassic sandstone project with a relatively
low geological risk profile. It has mean gross recoverable resources of
5.64 mmbo. Europa considers Holmwood to be one of the best undrilled
exploration prospects onshore UK.
The prospect lies south of Dorking within the Surrey Hills AONB and an
unsuccessful application to construct a temporary exploration well on the
site was made in 2011. An appeal to overturn the decision was heard at
a public inquiry in July 2012. The appeal was dismissed on 26 September
2012. The partnership is considering future steps with the licence.
United Kingdom - Production
• West Firsby (WF) 100%
• Crosby Warren (CW) 100%
• Whisby W-4 well 65%
The three UK fields produced an average of 200 boepd in the period.
The 19% increase in full year oil volumes to 72,360 barrels compared
to the previous year is partly a result of the WF-9 well at West Firsby
coming on stream. In addition, our operations team has implemented a
series of initiatives aimed at improving operational efficiency that have
contributed to a reduction in downtime and in turn, a significant increase
in the number of barrels recovered during the year.
This strong performance was achieved despite unscheduled downtime
in December 2011 caused by a hole in a section of the WF-7 tubing.
The workover programme was completed on schedule, keeping the
effect of the shut-in on overall production to a minimum.
www.europaoil.comOUR BUSINESSGOVERNANCEFINANCIAL STATEMENTSADVISERS 12
Operational review
Operations and development
In connection with our review of assets, the Company considered the
potential value in fracking the CW-1 well. A technical review of pressure
data recovered from the well in early 2012 indicated that the risks clearly
outweighed possible increases in production and it was therefore
decided not to frack the well. The Board further decided to record a
£785,000 impairment charge against the Crosby Warren assets.
France
Highlights
Current 2P producing reserves are estimated at 0.65mmbo.
United Kingdom – Unconventional resources
• CPR assesses Berenx deep prospect at 277 bcf mean
contingent resource
• Berenx shallow gas prospect identified with 75 bcf gas in place
UK - Shale & Underground
Coal Gasification (UCG)
Dax
Aldbrough
Gas Storage
Hull
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(
9
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)
Easington
Gas Terminal
Shale gas potential
Grimsby
PEDL181 (50%)
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o
f
f
s
h
o
r
e
0
10
km
Theddlethorpe
Gas Terminal
U
C
G
(
9
0
%
)
Underground Coal Gasification (UCG) 90%
In August 2010, Europa was awarded two licences by the UK Coal
Authority to investigate the potential for underground coal gasification
(‘UCG’) of virgin coals located near offshore, along the eastern coast of
England. Europa has a 90% interest in the licence with Oxford Energy
Consulting Limited holding the remaining 10%.
PEDL181 50% NE Lincolnshire
Europa holds licences covering an area of over 600 km2 in the Humber
Basin that have the potential for both conventional oil and gas resources
at Caister and possibly also for shale gas resources held in Carboniferous
basinal black marine shales known to be 120m thick in the region.
Berenx
Béarn des
Gaves (100%)
Lacq
0
km
10
France - Aquitaine
Percorade
Vic Bilh
Pau
Meillon
Tarbes val
d’Adour
(100%)
Castera
Lou
Lagrave
Cassourat
Ger
Tarbes
Jacque
& Osmets
Europa holds 100% interests in two permits with both appraisal and
exploration potential in the Aquitaine Basin, adjacent to the producing
Lacq-Meillon gas fields. The permit renewal process started during the
financial year and the Company is actively engaged with the relevant
French authorities. We did not fully meet our expenditure commitments
in the first phase of either permit, and as a result there is a risk that they
will not be renewed. But, based on correspondence received to date from
the authorities, we have a reasonable expectation that both permits will
be renewed.
Béarn des Gaves 100%
The Berenx appraisal project, located in the heartland of the French
oil industry in the Aquitaine basin, has previously been explored and
drilled by EssoRep. Two wells, Berenx-1 (1969) and Berenx-2 (1972), both
encountered strong gas shows over a 500m thick gas bearing zone.
In 1975 Berenx-2 was re-entered, drill stem tested and flowed gas to
surface. The carbonate reservoir is similar to the nearby 9 tcf Lacq Field
and 2 tcf Meillon Field.
Europa possesses all available data for both wells. Good quality 2D
seismic exists for the licence as well as a reprocessed 3D seismic dataset
covering the area between Berenx and Lacq. Europa’s technical work
indicates that the original Berenx wells were drilled on the western
edge of a sizeable structure which could hold in excess of 500 bcf of
recoverable gas resources. In the recent Competent Person’s Report,
ERC Equipoise estimated gross mean unrisked resources of 277 bcf for
the deep Berenx gas play. The difference between Europa’s and ERC’s
assessment of resources reflects the confidence of each party in mapping
in a geologically complex terrain, Europa was able to map a larger area of
closure and as a consequence larger resources.
Europa Oil & Gas (Holdings) plc Annual Report and Accounts for the year ended 31 July 2012
13
The project also benefits from being located only 20 km from the Lacq
Field, which potentially provides a straightforward export route, allowing
gas to be processed in an existing facility with spare capacity.
Ireland
Re-evaluation and interpretation of existing seismic and well data on the
permit has resulted in the identification of a previously unknown shallow
gas play. Previous exploration on the concession had focused only on
deep lying gas prospects.
In the CPR, ERC Equipoise suggested gas in place at Berenx shallow of
75 bcf. Europa estimates gross mean unrisked gas resources of 59 bcf.
We have identified new shallow prospectivity in the permit area and
information about these additional prospects will be released in due
course.
Current activity on the licence is focused on undertaking a detailed
structural analysis and geological modelling which will provide a
predictive model for the orientation and density of fracture systems in
the carbonate reservoirs.
Our strategy for the Béarn des Gaves permit is to target the shallow gas
play and drill a well to deliver a commercial flowrate and on the back of
success to further explore the shallow prospectivity and undertake work
to de-risk the Berenx deep gas appraisal project.
Tarbes Val d’Adour 100%
The Tarbes Val d’Adour permit contains several oil accumulations that
were previously produced by Elf but were abandoned in 1985 due to
low oil prices. Two fields, Jacque and Osmets, were drilled using vertical
wells which generated modest production. At its peak in 1982, Osmets
produced up to 50 bopd while peak production at Jacque reached
almost 30 bopd in 1981. Europa commissioned the French Geological
Survey to map the potential re-development area of the Osmets and
Jacque fields from a reprocessed 2D data set. This work is now complete.
Europa intends to farm-out this permit and, with a partner, drill a
re-development well on one of these fields.
Exploration
Porcupine Basin LO 11/7 and LO 11/8 (Mullen and Kiernan) 100%
Ireland - Porcupine
Corrib
Connemara
Spanish Point
Burren
Mullen
LO 11/7 100%
Dunquin
Galway
Cork
Kiernan
LO 11/8 100%
0
50
km
In October 2011, Europa was awarded two exploration Licensing Options
11/7 and 11/8 in the Irish Atlantic Margin licensing round. These cover
two four-block parcels in the South Porcupine Basin situated off the west
coast of Ireland with a total area of approximately 2,000 km2. Previous
drilling in the North Porcupine Basin led to the discovery of Connemara,
Spanish Point and Burren, providing evidence for the existence of a
viable petroleum system. Burren in particular flowed ~700 bopd from
a Lower Cretaceous sandstone reservoir. We have identified two large
stratigraphic traps at prospects Mullen and Kiernan in Lower Cretaceous
submarine fan systems similar to those that have been proved to be
successful elsewhere along the Atlantic Margins.
The areas are situated on the flanks of the South Porcupine Basin in water
depths of between 700 metres and 2,000 metres. There are modest work
programmes attached to the licences over a two year period requiring
reprocessing and interpretation of seismic data, and, subject to approval
of the Irish Government, an option to convert into a 15 year Frontier
Exploration Licence with associated obligations to undertake seismic and
drilling operations.
Since acquiring the licences, the Company’s in house technical team has
been working to map the prospectivity of the Licensing Options with a
view to securing a farm-out.
www.europaoil.comOUR BUSINESSGOVERNANCEFINANCIAL STATEMENTSADVISERS 14
Operational review
Operations and development
Romania
Highlights
• Exited Brodina and Cuejdiu concessions
• Elected to write-down investment in Bacau and Brates
Ukraine
Lopushna
Todiresti
Frasin
M
o
l
d
o
v
a
Romania
EPI-3
Brates
Barchiz-1
Roman
Gasfield
EIII-4
Bacau
North
Europa has interests in two further concessions in Romania, Brates (100%)
and Bacau (19%). The Bacau licence is operated by Raffles Energy and a
review of existing data is currently underway. The Company is looking to
farm-out its 100% interest in the Brates licence. The Company has elected
to write-off £5.1 million previously incurred drilling and other exploration
expenses in the Brates and Bacau licences, making a total Romanian
write-off of £10.4 million.
In September 2011, the Company was notified by the Romanian tax
authorities that the sum of £0.6 million (including penalties) was payable
in settlement of a VAT liability triggered by the sale of the Company’s Bilca
Gas field in 2007. Europa vigorously disputes the legal basis for the VAT
liability. In July 2012 the Romanian authorities reduced the liability to
£0.4 million. Europa will continue to appeal the decision with the
objective of having the VAT liability reduced to zero and Europa’s VAT
claim of £0.2 million repaid by the Romanian authorities.
Sahrawi Arab Democratic Republic
Exploration
Bir Lehlou and Hagounia 100%
Cap Juby
Atlantic
Ocean
Morocco
Daora
Farsia
At the beginning of the year, the Company held interests in four
exploration licences in Romania.
Bojador
Bir Lehlou (100%)
Hagounia (100%)
In January 2012, Europa announced its decision to withdraw from one of
these, the Brodina licence (Europa 28.75%) in northern Romania, following
the unsuccessful Horodnic-1 appraisal well which failed to indicate the
presence of potentially hydrocarbon bearing intervals. The withdrawal
from the concession resulted in a write-off of previously incurred drilling
and other exploration expenses of £4 million.
In March 2012 Europa, with its partners Aurelian and Romgaz, announced
the withdrawal of its involvement from the Cuejdiu licence (Europa’s
interest having been 17.5%). As with all its licences, an extensive review
of the Cuejdiu concession both in isolation and within the context of the
Company’s portfolio as a whole had been undertaken. This involved a
detailed technical and commercial evaluation of all aspects of the licence
including the prospectivity of the project, anticipated costs attributable to
Europa’s continued participation, associated commitments, timetable and
geologic risk. The result of this analysis led to the Company’s decision to
withdraw resulting in a write-off of previously incurred drilling and other
exploration expenses of £1.3 million.
Mauritania
Sahrawi Arab
Democratic Republic
0
km
200
Europa holds interests in the Bir Lehlou and Hagounia blocks of the
Sahrawi Arab Democratic Republic. The 100% interest in the licences
covers almost 80,000 km2 of exploration acreage and crosses the Tindouf
and Aaiun basins. The concession has significant potential for both
conventional and unconventional gas resources, specifically shale gas.
The Tindouf Basin is geologically similar to the prolific Algerian Palaeozoic
basins. Meanwhile, the Aaiun Basin is an Atlantic margin basin similar to
those developed elsewhere along the African margin.
Europa Oil & Gas (Holdings) plc Annual Report and Accounts for the year ended 31 July 2012 15
Conclusion
In the last twelve months Europa has conducted a detailed technical
review of its entire exploration, appraisal and production portfolio.
As a consequence of this work we have identified an exciting new
shallow gas play in our Béarn des Gaves permit in France and confirmed
Berenx Deep as a gas appraisal project with mean gross contingent
resources of at least 277 bcf. In May we delivered a CPR to the market
providing clarity on the risk and value in our UK and French assets.
We have identified two new and potentially very large prospects in
the South Porcupine Basin offshore Ireland. Whilst at the high risk and
high reward end of the exploration spectrum they are part of the Lower
Cretaceous clastic play that has proved very successful elsewhere
in the Atlantic Margin and further work will be undertaken to de-risk
the prospects.
We chose to exit the Brodina and Cuejdiu licences in Romania and will
continue to rationalise our portfolio on the basis of the technical and
commercial case. In July we mounted a very strong planning appeal for
the Holmwood exploration well, a prospect that we regard as the best
undrilled exploration prospect in onshore UK. Though the appeal was
dismissed by the planning inspector, we continue to believe our case
is strong and we are considering our options to contest the decision.
Our UK production had an excellent year generating £2.1 million cash
to the Company and I am delighted to report that we delivered on our
production promise of 200 boepd.
The next twelve months will see at least one exploration well drilled
in PEDL180 or PEDL182 in the UK with the possibility of a follow up
exploration well contingent on success. We are seeking to joint venture
our Irish and French assets. In particular we wish to test the shallow gas
play in the Béarn des Gaves permit as a matter of priority since we believe
the Aquitaine basin has the potential to provide rapid commercialisation
of any gas discovery. Offshore Ireland is beginning to receive renewed
interest from the upstream oil industry, we have prime acreage in an
exciting play and we wish to accelerate the process of de-risking our
prospects and taking them to drillable status. It is also our intent to
add new opportunities to our portfolio. Europa is in the deal flow and
additional projects will be added in due course. We will work our UK
producing assets hard and continue with initiatives to reduce opex,
augment production and hit our production targets.
Hugh Mackay
CEO
www.europaoil.comOUR BUSINESSGOVERNANCEFINANCIAL STATEMENTSADVISERS 16
Financial review
Group revenue for
the year increased
34% to £5.1 million.
Results for the year
Group revenue for the year to 31 July 2012 was £5,080,000
(2011: £3,766,000).
Oil produced and sold during the year amounted to 72,360 barrels or
198 bopd (2011: 60,956 barrels or 167 bopd). The 19% increase in
production volumes arose at West Fisby where reduced downtime and
a full year contribution from the WF-9 well were positive factors.
In addition, higher crude oil prices helped increase revenue. The average
price per barrel achieved in the year was $110.03 (2011: $99.43).
A stronger US Dollar in the year to 31 July 2012 also meant that sales
were translated to Sterling at an average rate of $1.5845 (2011: $1.6106).
The Crosby Warren field sells a small quantity of gas 3 boepd
(2011: 3 boepd) to the nearby Tata steelworks.
Other cost of sales were higher in line with the increased volume.
Following the CPR assessment of UK reserves, the book value of the
producing assets were written down by £785,000 (2011: £425,000).
An exploration write-off of £12,451,000 represented previously incurred
expenditure in Romania and UK PEDL150.
Pre tax loss from continuing operations for the year was £12,055,000
(2011: profit £291,000).
Taxation
The total tax credit (current and deferred) for the year was £739,000
(2011: a charge of £523,000). The write-down of producing assets and the
intangible assets in PEDL150 allowed a previously recognised deferred tax
liability to be released.
Loss after tax
The results for 2012 show a loss from continuing operations after taxation
of £11,316,000 (2011: loss £232,000).
Discontinued operations
In September 2011, the Company received notification from the
Romanian tax authorities that VAT had been assessed on a sale of a
business in 2007. An accrual of £616,000 was recorded in 2011.
Europa continues to contest the VAT assessment, and in June 2012
received confirmation that one element of the tax authorities claim had
been rejected, thereby reducing the total liability to £420,000.
Cash
Net cash generated from operating activities was £2,059,000
(2011: £985,000). Net cash used in investing activities was £3,033,000
(2011: £5,021,000) and included the Horodnic-1 well (2011: Barchiz-1
and WF-9 wells). Net cash from financing activities was an outflow of
£764,000 (2011: an inflow of £6,408,000) and included one share placing
which raised a total of £665,000 of cash net of broker commission and the
repayment of the Yorkville loan. The net cash balance at the end of the
year was £230,000 (2011: £1,876,000).
Europa Oil & Gas (Holdings) plc Annual Report and Accounts for the year ended 31 July 2012 17
Primary risks and uncertainties
Europa’s activities are subject to a range of financial risks including
commodity prices, liquidity within the business and of counterparties,
exchange rates and loss of operational equipment or wells. These risks are
managed through ongoing review taking into account the operational,
business and economic circumstances at that time.
Commodity price, credit and currency
The Board has considered the use of financial instruments to hedge oil
price and US Dollar exchange rate movements. To date, the Board has
not hedged against price or exchange rate movements, but intends to
regularly review this policy.
Sales revenue is generated primarily in US Dollars and these funds are
matched where possible against expenditures within the business.
However, most capital and operating expenditures are Euro and Sterling
denominated which results in a currency exposure. US Dollar receipts
have been sold to purchase Euros and Sterling.
Crude oil is sold to one multinational oil company. Credit risk is considered
to be minimal.
Liquidity
Detailed cash forecasts are prepared frequently and reviewed by
management and the Board.
The Group’s production provides a monthly inflow of cash and is the main
source of working capital and project finance. Additional cash is available
through a £700,000 overdraft facility and the placing of Europa shares in
the market.
Overdraft Facility
The Royal Bank of Scotland (RBS) multi-currency facility signed on
5 March 2012 provides an overdraft of up to £700,000 (2011: £700,000).
Interest is charged at 3% over base rate (2011: 3% over base rate).
The facility is due to be renewed 31 January 2013. The principal interest
rate risk for the Group is the interest charge arising from utilisation of the
multi-currency facility.
Exploration, drilling and operational risk
The business of exploration and production of oil and gas involves a high
degree of risk. Few prospects that are explored are ultimately developed
into producing oil and gas fields.
Significant expenditure is required to establish the extent of oil and
gas reserves through seismic surveys and drilling and there can be no
certainty that oil and gas reserves will be found. The exploration and
development of oil and gas assets may be curtailed, delayed or cancelled
by unusual or unexpected geological formation pressures, hazardous
weather conditions or other factors.
There are numerous risks inherent in drilling and operating wells, many
of which are beyond the Company’s control. The Group’s operations may
be curtailed, delayed or cancelled as a result of environmental hazards,
industrial accidents, occupational and health hazards, technical failures,
shortage or delays in the delivery of rigs and/or other equipment, labour
disputes and compliance with governmental requirements.
Drilling may involve unprofitable efforts, not only with respect to dry
wells, but also to wells which, though yielding some oil or gas, are not
sufficiently productive to justify commercial development. Completion
of a well does not assure a profit on the investment or recovery of drilling,
completion and operating costs.
Appropriate insurance cover is obtained annually for all of Europa’s
exploration, development and production activities.
Accounting policies
The Group has not made any material changes to its accounting policies
in the year to 31 July 2012.
Placing of Shares
During the year, Europa issued 7,777,776 shares at 9p raising £665,000 net
of broker commission (2011: a total of 47,871,141 shares at an average
13.3p raising £5,920,000 net of broker commission).
Phil Greenhalgh
Finance Director
The SEDA facility
On 15 July 2011 Europa entered into an agreement with YA Global Master
SPV (Yorkville) under which Yorkville provided a £5 million Standby Equity
Distribution Agreement (SEDA). Yorkville is an investment fund managed
by Yorkville Advisors UK LLP. To date there have been no draw downs
against the SEDA. Because of uncertainty over future use of the facility,
Europa elected to write-off the SEDA arrangement fee in the year.
Loan note
Also on 15 July 2011 Europa agreed a $1.6 million (approx £1 million) loan
note with Yorkville. The loan was repayable in tranches over 12 months
and attracted interest at a rate of 8% per annum. The loan note was fully
repaid during the year in accordance with the agreed terms.
www.europaoil.comOUR BUSINESSGOVERNANCEFINANCIAL STATEMENTSADVISERS
18
Board of Directors
Europa Oil & Gas (Holdings) plc Annual Report and Accounts for the year ended 31 July 2012 19
CW Ahlefeldt-Laurvig
Non-Executive Director
William received an MSc in civil engineering from the Danish Technical
University in 1981. Following national service, he worked for Maersk
as a petroleum engineer followed, in 1987, by IPEC, a London based
consultancy company, where he was responsible for field reserves
estimations. In 1990, he became an independent consultant, undertaking
field and portfolio evaluations for acquisitions and field development
work on a range of projects in the North Sea, former Soviet Union and
Middle East. In 2001 he became the major investor in Europa at the time
earning 60% of the Company shares through capital investment. He has
been a non executive director of the Company since its float in 2004.
William has continued to be active in petroleum engineering consulting
doing portfolio evaluations and project management in the Middle East.
RJHM Corrie
Non-Executive Director
Roderick is a graduate of Cambridge University, an Associate of the
Chartered Institute of Banking and a Member of the Securities Institute.
He is a strategic adviser and financier with a variety of companies.
He holds or has held executive or non-executive roles in corporate
finance, strategic advice, financial services, health, property, mineral
exploration, investment and manufacturing companies, and previously
held senior positions in the banking industry. He is Chief Financial Officer
of the Toronto listed gold exploration and development company Lydian
International Ltd.
HGD Mackay
Chief Executive Officer
Hugh was most recently founding Chairman of Avannaa Resources,
a mineral exploration company focused on grass roots exploration in
Greenland. He has a wealth of experience in the oil and gas sector,
including eight years at BP in a variety of roles in the UK, Oman and Egypt,
then 10 years at Enterprise Oil in leadership roles, culminating as head of
the SE Asia division. He played a pivotal role in the development of the
Peak Group and its eventual sale to AGR Petroleum Services where he was
Group Business Development Director. He has a BSc in Geology from the
University of Edinburgh and a Sloan MSc in Management from London
Business School.
P Greenhalgh
Finance Director
Phil graduated from Imperial College with a BEng in chemical
engineering and subsequently became a member of the Chartered
Institute of Management Accountants. He began his financial career as
Financial Controller with Kelco International, a subsidiary of Merck & Co.
He moved to Monsanto plc where he was UK Finance Director before
becoming Finance Director with Pharmacia Ltd. He moved to Whatman
plc, a FTSE 250 company, where he had extensive dealings with the City of
London, lead the financing of a €50m company acquisition and oversaw
a substantial share price recovery.
WH Adamson OBE
Non-Executive Chairman
Bill has had a longstanding career in the energy industry with BG Group
plc managing all aspects of large gas businesses including CNG, power
generation, joint venture management, corporate governance and risk
and safety management. He was the Chairman and CEO of MetroGas
S.A., Argentina’s post-privatisation leading gas utility, Vice President and
General Manager of BG Group’s UK downstream business and most
recently Managing Director BG India where he managed a portfolio of
upstream and downstream businesses. Bill is a Chartered Engineer and
holds an honours degree in gas engineering from the University
of Salford.
www.europaoil.comOUR BUSINESSGOVERNANCEFINANCIAL STATEMENTSADVISERS 20
Directors’ report
The directors present their report and the audited financial statements for the year ended 31 July 2012.
Principal activities
The principal activity of the Group is investment in oil and gas exploration, development and production. The Group’s assets and activities are located
in the United Kingdom, Ireland, France, Romania and the Sahrawi Arab Democratic Republic. The Board has considered and will continue to consider
investments in Europe, Mediterranean and Atlantic Margin.
Business review
A detailed review of the Group’s business and prospects is set out in the Chairman’s statement (page 6) and Operational review (page 11). The Financial
review (page 16) and Corporate governance statement (page 23) detail the risks to which the Group is exposed and how these risks are managed with
the oversight of the Board and the Audit Committee. The directors consider that the combination of production and exploration activities is a key
strength of the Group. All activities are closely managed from the head office.
Results for the year and dividends
The Group loss for the year after taxation was £11,316,000 (2011 loss: £1,020,000). The directors do not recommend the payment of a dividend
(2011: £nil).
Policy and practice on payment of suppliers
The Group’s policy on payment of suppliers is to settle amounts due on a timely basis taking into account the credit period given. At 31 July 2012, the
Group had 47 days of purchases outstanding (2011: 41 days) and the Company had 25 days of purchases outstanding (2011: 32 days).
Directors and their interests
Directors holding office through the year were as follows:
WH Adamson
CW Ahlefeldt-Laurvig
PA Barrett (resigned 21 October 2011)
RJHM Corrie
P Greenhalgh
HGD Mackay (appointed 6 September 2011)
The directors’ interests in the share capital of the Company at 31 July were:
WH Adamson
CW Ahlefeldt-Laurvig1
RJHM Corrie2
P Greenhalgh
HGD Mackay
Number of
ordinary shares
Number of ordinary
share options
2012
2011
2012
2011
475,000
25,502,442
87,500
250,000
786,863
175,000
25,502,442
87,500
250,000
455,615
500,000
—
500,000
1,875,000
5,000,000
250,000
—
500,000
1,875,000
—
1. CW Ahlefeldt-Laurvig holds shares through HSBC Global Custody Nominee (UK) Limited.
2. RJHM Corrie has a 50% interest in RT Property Investments Limited which holds 50,000 shares. Corrie Limited, of which Mr Corrie is a director, holds 62,500 shares
Details of the vesting conditions of the directors’ stock options are included in Note 22.
Director’s interests in transactions
No director had, during the year or at the end of the year, other than disclosed below, a material interest in any contract in relation to the Group’s
activities except in respect of service agreements.
Subject to the conditions set out in the Companies Act 2006, the Company has arranged appropriate Directors’ and Officers’ insurance to indemnify the
directors against liability in respect of proceedings brought by third parties. Such provisions remain in force at the date of this report.
Post reporting date events
Details of post reporting date events are included in Note 27 to the financial statements.
Europa Oil & Gas (Holdings) plc Annual Report and Accounts for the year ended 31 July 2012
21
Capital structure and going concern
The directors took the opportunity to raise £665,000 of new equity financing in October 2011, net of broker commission.
After making enquiries, the directors have formed a judgement at the time of approving the financial statements that there is a reasonable
expectation that the Group can continue in operational existence for the foreseeable future. This judgement is based
on the performance of its existing oil production and correspondence with its bankers.
Further details on the Group’s capital structure are included in Note 21.
Accounting policies
A full list of accounting policies is set out in Note 1 to the financial statements.
Disclosure of information to the auditors
In the case of each person who was a director at the time this report was approved:
• So far as that director was aware there was no relevant available information of which the Company’s auditors were unaware.
• That director had taken all necessary steps to make themselves aware of any relevant audit information, and to establish that the Company’s auditors
were aware of that information.
Auditors
A resolution to re-appoint the auditors, BDO LLP will be proposed at the next Annual General Meeting.
On behalf of the Board 15 October 2012.
P Greenhalgh
Finance Director
OUR BUSINESSGOVERNANCEFINANCIAL STATEMENTSADVISERSwww.europaoil.com
22
Statement of directors’ responsibilities
Directors’ responsibilities
The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared the Group and
have elected to prepare the Company financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the
European Union. 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 Company and of the profit or loss of the Group for that year. 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 these financial statements, the directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• state whether they 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;
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
The directors are responsible for keeping adequate 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
requirements of the Companies Act 2006. 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.
Website publication
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 United Kingdom 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.
Europa Oil & Gas (Holdings) plc Annual Report and Accounts for the year ended 31 July 2012 Corporate governance statement
23
The UK corporate governance code is not mandatory for companies on AIM; however, the directors support the principles and are applying the
requirements where they are considered appropriate to the size and nature of the Group. Where practice differs from the code, the Board will explain
to shareholders why it considers it is in the Group’s best interest not to have applied the code. The Board will consider on a regular basis changes to
those areas in which there is not full compliance.
The Board
At 31 July 2012, the Board consisted of three non-executive and two executive directors.
The role of Chairman is held by a non-executive and the role of CEO is held by an executive director. This creates a clear distinction and division of
responsibilities at the head of the Group.
The Board is responsible to the shareholders of the Company for all significant financial and operational issues which include strategy, reviewing and
approving budgets, ensuring adequate cash resources, approval of capital expenditure and acquisition and divestment opportunities. Matters for
consideration at formal meetings are clearly laid out. A record is kept of proceedings and any decisions taken.
Each director retires and stands for re-election by shareholders at least once every three years. All directors are subject to election by shareholders at
the first opportunity following their appointment.
All directors have full access to management and employees, the Company Secretary and independent professional advice in order to execute their duties.
During the year, the Board held eleven meetings (2011: eleven). RJHM Corrie was unable to attend one meeting.
The Board has considered the independence of CW Ahlefeldt-Laurvig given his 18.5% shareholding and length of tenure as a director of the Company.
The Board considers that he is independent in character and judgment as he has other significant commercial and professional commitments and brings
his own level of senior experience gained as a petroleum engineer. When arriving at this decision, the Board has taken into account the comments
made by the Financial Reporting Council in their 2009 report on the impact and effectiveness of the Combined Code, in particular their comment that
independence is not the primary consideration when assessing the composition of the Board, and that the over-riding consideration should be that the
Board is fit for purpose.
In addition to their interest in the ordinary shares of the Company, WH Adamson and RJHM Corrie hold stock options. These options were awarded
in connection with their appointment to the Board and full details of the options are included in Note 22. The Board has listened to comments raised
by certain investors and discussed the subject with advisers. Whilst recognising that the granting of options to non-executive directors is contrary to
UK corporate governance code the Board considers that the quantum of options granted is not so significant as to raise any issue concerning their
independence. In addition, the Board wishes to retain the ability to grant stock options to non-executive directors in future.
Remuneration Committee
The Remuneration Committee consists of the three non-executive directors and is chaired by CW Ahlefeldt-Laurvig. It is responsible for establishing
and developing the Group’s policy on director and senior management remuneration and contracts.
The Board as a whole decides on the remuneration and contracts of the non-executive directors.
No director is involved in deciding their own remuneration.
Audit Committee
The Audit Committee consists of the three non-executive directors and is chaired by RJHM Corrie. The Group’s auditors and executive directors attend
meetings by invitation. For at least one meeting, or part thereof, the committee meets the auditors without executive Board members present.
The Audit Committee is responsible for reviewing the annual and interim accounts, annual audit, accounting policies, internal control and compliance
procedures, and decision making processes, particularly with regard to the management of risk.
During the year the committee considered the need for an internal audit function. Given the nature and current size of the Group, it is not considered
appropriate to have a dedicated internal audit function.
Internal control
The directors are responsible for the process and system of internal controls and reviewing their effectiveness. The process and system of internal
controls is designed to manage, rather than eliminate, the risk of failure to achieve business objectives and can only provide reasonable and not
absolute assurance against material misstatement or loss.
Internal controls along with business risks were monitored during the course of the year.
Communication with shareholders
The Company provides information to shareholders about the Group’s activities in the annual report and accounts and the interim report. This is
complemented with information available through regulatory announcements of the London Stock Exchange and the Company’s website at
www.europaoil.com. Shareholders may register on the website to receive news releases issued by the Group directly to their email. Shareholders
are encouraged to attend the Annual General Meeting at which directors are introduced and available for questions.
OUR BUSINESSGOVERNANCEFINANCIAL STATEMENTSADVISERSwww.europaoil.com 24
Report of the independent auditors
Independent auditor’s report to the members of Europa Oil & Gas (Holdings) plc
We have audited the financial statements of Europa Oil and Gas (Holdings) plc for the year ended 31 July 2012 which comprise the consolidated
statement of comprehensive income, the consolidated and Company statement of financial position, the consolidated and Company statement of
changes in equity, the consolidated and Company statement of cashflows and the related Notes. 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, as regards
the parent Company financial statements, as applied in accordance with the provisions of the Companies Act 2006.
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work
has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and
for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the
Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
As explained more fully in the statement of directors’ responsibilities, the directors are responsible for the preparation of the financial statements and
for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance
with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s
(APB’s) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the APB’s website at www.frc.org.uk/apb/scope/private.cfm.
Opinion on financial statements
In our opinion:
• the financial statements give a true and fair view of the state of the Group’s and the parent Company’s affairs as at 31 July 2012 and of the Group’s
loss 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 financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied
in accordance with the provisions of the Companies Act 2006; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Emphasis of matter – renewal of French permits
In forming our opinion on the financial statements which is not modified we draw your attention to the disclosures made in Note 11 of the financial
statements concerning the renewal of the French exploration permits.
As disclosed in Note 11, the Group’s French exploration permits are currently in the renewal phase with the French authorities. The Group did not
meet its expenditure commitments on those permits and therefore there is a risk that the permits will not be renewed by the French authorities.
Although the directors are confident that the permits will be renewed, there can be no guarantee. Should the permits not be renewed, the impact
on the financial statements will be the impairment of the French intangible assets disclosed in Note 11. These financial statements do not include the
adjustments that would result if the permits are not renewed.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion the information given in the directors’ report for the financial year for which the financial statements are prepared is consistent with the
financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 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.
Anne Sayers (senior statutory auditor)
For and on behalf of BDO LLP, statutory auditor
London, United Kingdom
15 October 2012
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
Europa Oil & Gas (Holdings) plc Annual Report and Accounts for the year ended 31 July 2012
Consolidated statement of comprehensive income
for the year ended 31 July 2012
Revenue
Other cost of sales
Exploration write-off
Impairment of producing fields
Total cost of sales
Gross (loss)/profit
Administrative expenses
Finance income
Finance expense
(Loss)/profit before taxation
Taxation credit/(charge)
Loss for the year from continuing operations
Discontinued operations
Loss for the year from discontinued operations
Loss for the year attributable to the equity shareholders of the parent
Other comprehensive (loss)/income
Exchange (loss)/gain arising on translation of foreign operations
Total comprehensive loss for the year attributable to the equity
shareholders of the parent
Loss per share (LPS) attributable to the equity shareholders of the parent
Basic and diluted LPS from continuing operations
Basic and diluted LPS from discontinued operations
Basic and diluted LPS from continuing and discontinued operations
The accompanying Notes form part of these financial statements.
25
Note
2
2
11
12
7
8
3
9
6
10
Note
10
10
10
2012
£000
5,080
(2,692)
(12,451)
(785)
(15,928)
(10,848)
(755)
—
(452)
(12,055)
739
(11,316)
—
(11,316)
2011
£000
3,766
(2,216)
—
(425)
(2,641)
1,125
(646)
1
(189)
291
(523)
(232)
(788)
(1,020)
(36)
8
(11,352)
(1,012)
Pence
per share
Pence
per share
(8.33)p
—
(8.33)p
(0.22)p
(0.74)p
(0.96)p
OUR BUSINESSGOVERNANCEFINANCIAL STATEMENTSADVISERSwww.europaoil.com
26
Consolidated statement of financial position
as at 31 July 2012
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Deferred tax asset
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Other current assets
Assets classified as held for sale
Total assets
Liabilities
Current liabilities
Trade and other payables
Current tax liabilities
Derivative
Short-term borrowings
Total current liabilities
Non-current liabilities
Long-term borrowings
Deferred tax liabilities
Long-term provisions
Total non-current liabilities
Total liabilities
Net assets
Capital and reserves attributable to equity holders of the parent
Share capital
Share premium
Merger reserve
Foreign exchange reserve
Retained deficit
Total equity
Note
2012
£000
2011
£000
11
12
19
14
15
16
17
17
18
18
19
20
21
21
21
21
21
2,127
4,959
14
7,100
56
1,250
230
1,536
338
8,974
(1,880)
(87)
(64)
(230)
(2,261)
—
(2,948)
(1,950)
(4,898)
(7,159)
1,815
1,379
13,160
2,868
380
(15,972)
1,815
11,348
6,742
930
19,020
43
795
1,876
2,714
—
21,734
(1,757)
—
(56)
(996)
(2,809)
(230)
(4,686)
(1,570)
(6,486)
(9,295)
12,439
1,301
12,573
2,868
416
(4,719)
12,439
These financial statements were approved by the Board of directors and authorised for issue on 15 October 2012 and signed on its behalf by:
P Greenhalgh
Finance Director
Company registration number 5217946
The accompanying Notes form part of these financial statements.
Europa Oil & Gas (Holdings) plc Annual Report and Accounts for the year ended 31 July 2012
Consolidated statement of changes in equity
for the year ended 31 July 2012
27
Balance at 1 August 2010
Total comprehensive income/(loss) for the year
Share based payment
Issue of share capital (net of issue costs)
Share
capital
£000
822
—
—
479
Share
premium
£000
7,132
—
—
5,441
Balance at 31 July 2011
1,301
12,573
Balance at 1 August 2011
Total comprehensive loss for the year
Share based payment
Issue of share capital (net of issue costs)
Balance at 31 July 2012
1,301
—
—
78
1,379
12,573
—
—
587
13,160
The accompanying Notes form part of these financial statements.
Merger
reserve
£000
2,868
—
—
—
2,868
2,868
—
—
—
2,868
Attributable to the equity holders of the parent
Foreign
exchange
reserve
£000
408
8
—
—
416
416
(36)
—
—
380
Retained
deficit
£000
(3,752)
(1,020)
53
—
(4,719)
(4,719)
(11,316)
63
—
(15,972)
Total
equity
£000
7,478
(1,012)
53
5,920
12,439
12,439
(11,352)
63
665
1,815
OUR BUSINESSGOVERNANCEFINANCIAL STATEMENTSADVISERSwww.europaoil.com
28
Company statement of financial position
as at 31 July 2012
Assets
Non-current assets
Property, plant and equipment
Investments
Loans to Group companies
Total non-current assets
Current assets
Other receivables
Cash and cash equivalents
Total current assets
Other current assets
Assets classified as held for sale
Total assets
Liabilities
Current liabilities
Trade and other payables
Current tax liabilities
Derivative
Short-term borrowing
Total current liabilities
Non-current liabilities
Long-term borrowings
Total non-current liabilities
Total liabilities
Net assets
Capital and reserves attributable to equity holders of the parent
Share capital
Share premium
Merger reserve
Retained deficit
Total equity
Note
2012
£000
2011
£000
12
13
15
15
16
17
17
18
18
21
21
21
21
22
3,316
—
3,338
61
27
88
338
3,764
(162)
—
(64)
(230)
(456)
—
—
(456)
3,308
1,379
13,160
2,868
(14,099)
3,308
369
3,315
12,472
16,156
246
1,578
1,824
—
17,980
(262)
—
(56)
(996)
(1,314)
(230)
(230)
(1,544)
16,436
1,301
12,573
2,868
(306)
16,436
These financial statements were approved by the Board of directors and authorised for issue on 15 October 2012 and signed on their behalf by:
P Greenhalgh
Finance Director
Company registration number 5217946
The accompanying Notes form part of these financial statements.
Europa Oil & Gas (Holdings) plc Annual Report and Accounts for the year ended 31 July 2012
Company statement of changes in equity
for the year ended 31 July 2012
29
Balance at 1 August 2010
Total comprehensive income for the year
Share based payment
Issue of share capital (net of issue costs)
Balance at 31 July 2011
Balance at 1 August 2011
Total comprehensive loss for the year
Share based payment
Issue of share capital (net of issue costs)
Balance at 31 July 2012
The accompanying Notes form part of these financial statements.
Share
capital
£000
822
—
—
479
Share
premium
£000
7,132
—
—
5,441
1,301
12,573
1,301
—
—
78
1,379
12,573
—
—
587
13,160
Merger
reserve
£000
2,868
—
—
—
2,868
2,868
—
—
—
2,868
Retained
deficit
£000
(630)
271
53
—
(306)
(306)
(13,856)
63
—
(14,099)
Total
equity
£000
10,192
271
53
5,920
16,436
16,436
(13,856)
63
665
3,308
OUR BUSINESSGOVERNANCEFINANCIAL STATEMENTSADVISERSwww.europaoil.com
30
Consolidated statement of cash flows
for the year ended 31 July 2012
Cash flows from operating activities
Loss after tax
Adjustments for:
Share based payments
Depreciation
Exploration write-off
Impairment of property, plant & equipment
Finance income
Finance expense
Taxation (credit)/expense
Increase in trade and other receivables
Increase in inventories
Increase/(decrease) in trade and other payables
Cash generated from continuing operations
Loss after taxation from discontinued operations
Adjustments for:
Decrease in trade and other receivables
Increase in trade payables
Non cash increase in intangible assets
Cash used in discontinued operations
Income taxes repayment received
Net cash from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Purchase of intangible assets
Interest received
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of share capital (net of issue costs)
Increase/(decrease) in payables related to the issue of share capital
Proceeds from short-term borrowings
Repayment of borrowings
Finance costs
Net cash from financing activities
Net (decrease)/increase in cash and cash equivalents
Exchange gain/(loss) on cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
The accompanying Notes form part of these financial statements.
Note
2012
£000
22
12
11
12
7
8
9
(11,316)
63
673
12,451
785
—
452
(739)
(647)
(13)
350
2,059
—
—
—
—
—
—
2,059
(78)
(2,955)
—
(3,033)
665
(115)
—
(1,025)
(289)
(764)
(1,738)
92
1,876
230
2011
£000
(232)
53
354
—
425
(1)
189
523
(412)
(5)
(239)
655
(788)
193
617
(22)
—
330
985
(3,213)
(1,809)
1
(5,021)
5,920
115
1,065
(612)
(80)
6,408
2,372
(21)
(475)
1,876
Europa Oil & Gas (Holdings) plc Annual Report and Accounts for the year ended 31 July 2012
Company statement of cash flows
for the year ended 31 July 2012
Cash flows from operating activities
(Loss)/profit after tax
Adjustments for:
Share based payments
Depreciation
Write-off of intercompany loan
Finance income
Finance expense
Decrease/(increase) in trade and other receivables
Increase/(decrease) in trade and other payables
Net cash from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Movement on loan to Group companies
Interest received
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of share capital (net of issue costs)
(Decrease)/increase in payables related to the issue of share capital
Proceeds from short term borrowings
Repayment of borrowings
Finance costs
Net cash from financing activities
Net (decrease)/increase in cash and cash equivalents
Exchange gain/(loss) on cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
The accompanying Notes form part of these financial statements.
31
Note
2012
£000
3
(13,856)
12
63
22
13,096
(377)
844
185
36
13
(16)
(834)
—
(850)
665
(115)
—
(1,025)
(275)
(750)
(1,587)
36
1,578
27
2011
£000
271
53
24
—
(476)
49
(197)
(336)
(612)
(11)
(4,745)
1
(4,755)
5,920
115
1,065
(112)
(48)
6,940
1,573
(16)
21
1,578
OUR BUSINESSGOVERNANCEFINANCIAL STATEMENTSADVISERSwww.europaoil.com
32
Notes to the financial statements
1 Accounting Policies
General information
Europa Oil & Gas (Holdings) plc is a Company incorporated and domiciled in England and Wales with registered number 5217946. The address of the
registered office is 6 Porter Street, London, W1U 6DD. The Company’s administrative office is at the same address.
The functional and presentational currency of the Company is Sterling (UK£).
Basis of accounting
The consolidated financial statements have been prepared in accordance with applicable International Financial Reporting Standards (IFRS) as adopted
by the EU. The policies have not changed from the previous year.
The accounting policies that have been applied in the opening statement of financial position have also been applied throughout all periods presented
in these financial statements. These accounting policies comply with each IFRS that is mandatory for accounting periods ending on 31 July 2012.
Going concern
After making enquiries, the directors have formed a judgement at the time of approving the financial statements that there is a reasonable expectation,
based on the Group’s cash flow forecasts that the Group can continue in operational existence for the foreseeable future, which is deemed to be
at least 12 months from the date of signing these financial statements. This judgement is based on the performance of existing oil production and
correspondence with our bankers.
Future changes in accounting standards
The IFRS financial information has been drawn up on the basis of accounting standards, interpretations and amendments effective at the beginning of
the accounting period. The IASB and IFRIC have issued the following standards and interpretations:
There were no amendments to published standards and interpretations to existing standards effective in the year adopted by the Group.
Various amendments to published standards and interpretations to existing standards were made effective in the year. None of these were relevant to
the Group.
The following are amendments to existing standards and new standards which may apply to the Group in future accounting periods.
IAS 12*
IFRS 9*
Deferred Tax: Recovery of Underlying Assets
Financial instruments
Effective date
(periods beginning on or after)
1 Jan 2012
1 Jan 2013
Items marked * had not yet been endorsed by the European Union at the date that these financial statements were approved and authorised for issue
by the Board.
Basis of consolidation
The Group financial statements consolidate those of the Company and all of its material subsidiary undertakings drawn up to 31 July 2012. Subsidiaries
are entities over which the Group has the power to control the financial and operating policies so as to obtain benefits from its activities. The Group
obtains and exercises control through voting rights.
Intra Group balances are eliminated on consolidation. Unrealised gains on transactions between the Group and its subsidiaries are eliminated.
Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Amounts reported in the
financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.
The Group is engaged in oil and gas exploration, development and production through unincorporated joint ventures. The accounting for the Group’s
share of the results and net assets of these joint arrangements is described below.
Europa Oil & Gas (Holdings) plc Annual Report and Accounts for the year ended 31 July 2012
33
1 Accounting Policies (continued)
Revenue Recognition
Revenue, excluding value added tax and similar taxes, represents net invoiced sales of the Group’s share of oil and gas revenues in the year. Revenue is
recognised at the end of each month based upon the quantity and price of oil and gas delivered to the customer.
Non-current assets
Oil and gas interests
The financial statements with regard to oil and gas exploration and appraisal expenditure have been prepared under the full cost basis. This accords
with IFRS 6 which permits the continued application of a previously adopted accounting policy.
Pre-production assets
Pre-production assets are categorized as intangible assets on the statement of financial position. Pre-licence expenditure is expensed as directed
by IFRS 6. Expenditure on licence acquisition costs, geological and geophysical costs, costs of drilling exploration, appraisal and development wells,
and an appropriate share of overheads (including directors’ costs) are capitalised and accumulated in cost pools on a geographical basis. These
costs which relate to the exploration, appraisal and development of oil and gas interests are initially held as intangible non-current assets pending
determination of commercial viability. On commencement of production these costs are transferred to Production assets.
Production assets
Production assets are categorized within property, plant and equipment on the statement of financial position. With the determination of commercial
viability and approval of an oil and gas project the related pre-production assets are transferred from intangible non-current assets to tangible non-
current assets and depreciated upon commencement of production within the appropriate cash generating unit.
Impairment tests
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash
generating units) as disclosed in Notes 11 and 12. As a result, some assets are tested individually for impairment and some are tested at cash
generating unit level.
An impairment loss is recognised for the amount by which the asset’s or cash generating unit’s carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use based on an internal discounted
cash flow evaluation. Impairment losses recognised for cash-generating units, to which goodwill has been allocated, are credited initially to the
carrying amount of goodwill. Any remaining impairment loss is charged pro rata to the other assets in the cash generating unit. With the exception
of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist.
Property, plant and equipment
Items of property, plant and equipment are initially recognised at cost. As well as the purchase price, cost includes directly attributable costs and
the estimated present value of any future unavoidable costs of dismantling and removing items. The corresponding liability is recognised within
provisions.
Depreciation – production assets
All expenditure within each cost pool is depreciated from the commencement of production, on a unit of production basis, which is the ratio of
oil and gas production in the period to the estimated quantities of proven plus probable commercial reserves at the end of the period, plus the
production in the period. Costs used in the unit of production calculation comprise the net book value of capitalised costs plus the estimated future
field development costs within each cost pool. Changes in the estimates of commercial reserves or future field development costs are dealt with
prospectively.
Furniture and computers are depreciated on a 25% per annum straight line basis.
Leasehold buildings are depreciated on a 2% per annum straight line basis.
Reserves
Proven and probable oil and gas reserves are estimated quantities of commercially producible hydrocarbons which the existing geological,
geophysical and engineering data shows to be recoverable in future years. The proven reserves included herein conform to the definition approved
by the Society of Petroleum Engineers (SPE) and the World Petroleum Congress (WPC). The probable and possible reserves conform to definitions of
probable and possible approved by the SPE/WPC using the deterministic methodology. Reserves used in accounting estimates for depreciation are
updated periodically to reflect management’s view of reserves in conjunction with third party formal reports. Reserves are reviewed at the time of
formal updates or as a consequence of operational performance, plans and the business environment at that time.
Reserves are adjusted, in the year that formal updates are undertaken or as a consequence of operational performance and plans, and the business
environment at that time, with any resulting changes not applied retrospectively.
OUR BUSINESSGOVERNANCEFINANCIAL STATEMENTSADVISERSwww.europaoil.com 34
Notes to the financial statements
1 Accounting Policies (continued)
Non-current assets (continued)
Future decommissioning costs
A provision for decommissioning is recognised in full at the point that the Group has an obligation to decommission an appraisal, development
or producing well. A corresponding non-current asset (included within producing fields in Note 12) of an amount equivalent to the provision is
also created. The amount recognised is the estimated cost of decommissioning, discounted to its net present value and is reassessed each year
in accordance with local conditions and requirements. For producing wells, the asset is subsequently depreciated as part of the capital costs of
production facilities within tangible non current assets, on a unit of production basis. Any decommissioning obligation in respect of a pre-production
asset is carried forward as part of its cost and tested annually for impairment in accordance with the above policy.
Changes in the estimates of commercial reserves or decommissioning cost estimates are dealt with prospectively by recording an adjustment to
the provision, and a corresponding adjustment to the decommissioning asset. The unwinding of the discount on the decommissioning provision is
included within finance expense.
Taxation
Current tax is the tax payable based on taxable profit for the year.
Deferred income taxes are calculated using the balance sheet liability method on temporary differences. Deferred tax is generally provided on the
difference between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition
of goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting
profit. Deferred tax on temporary differences associated with shares in subsidiaries and joint ventures is not provided if reversal of these temporary
differences can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future. Tax losses available to be carried
forward as well as other income tax credits to the Group are assessed for recognition as deferred tax assets.
Deferred tax liabilities are provided in full, with no discounting. Deferred tax assets are recognised to the extent that it is probable that the underlying
deductible temporary difference will be able to be offset against future taxable income. Current and deferred tax assets and liabilities are calculated at
tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the reporting date.
Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the statement of comprehensive income, except where
they relate to items that are charged or credited directly to equity in which case the related deferred tax is also charged or credited directly to equity.
Foreign currency
The Group and Company prepare their financial statements in Sterling.
Transactions denominated in foreign currencies are translated at the rates of exchange ruling at the date of the transaction. Monetary assets and
liabilities in foreign currencies are translated at the rates of exchange ruling at the reporting date. Non-monetary items that are measured at historical
cost in a foreign currency are translated at the exchange rate at the date of transaction. Non-monetary items that are measured at fair value in a
foreign currency are translated using the exchange rates at the date the fair value was determined.
Any exchange differences arising on the settlement of items or on translating items at rates different from those at which they were initially
recorded are recognised in the Statement of comprehensive income in the period in which they arise. Exchange differences on non-monetary
items are recognised in the Statement of Changes in Equity to the extent that they relate to a gain or loss on that non-monetary item taken to the
Statement of Changes in Equity, otherwise such gains and losses are recognised in the Statement of comprehensive income.
The monetary assets and liabilities in the financial statements of foreign subsidiaries are translated at the rate of exchange ruling at the reporting
date. Income and expenses are translated at monthly average rates providing there is no significant change in the month. The exchange differences
arising from the retranslation of the opening net investment in subsidiaries are taken directly to the foreign exchange reserve in equity. On disposal
of a foreign operation the cumulative translation differences are transferred to the statement of comprehensive income as part of the gain or loss on
disposal.
Europa Oil and Gas (Holdings) plc is domiciled in the UK, which is its primary economic environment and the Company’s functional currency is
Sterling. The Group’s current operations are based in the UK, Romania, France and Sahrawi Arab Democratic Republic, and the functional currencies
of the Group’s entities are the prevailing local currencies in each jurisdiction. Given that the functional currency of the Company is Sterling,
management has elected to continue to present the consolidated financial statements of the Group and Company in Sterling.
Investments
Investments, which are only investments in subsidiaries, are carried at cost less any impairment.
Europa Oil & Gas (Holdings) plc Annual Report and Accounts for the year ended 31 July 2012 35
1 Accounting Policies (continued)
Financial instruments
Financial assets and liabilities are recognised on the statement of financial position when the Group becomes a party to the contractual provisions of
the instrument. The Group and Company classifies its financial assets into loans and receivables, which comprise trade and other receivables and cash
and cash equivalents. The Group has not classified any of its financial assets as held to maturity or available for sale or fair value through profit or loss.
Trade and other receivables are measured initially at fair value plus directly attributable transaction costs, and subsequently at amortised cost using
the effective interest rate method, less provision for impairment. A provision is established when there is objective evidence that the Group will not
be able to collect all amounts due. The amount of any provision is recognised in the Statement of comprehensive income.
Cash and cash equivalents comprise cash held by the Group, short-term bank deposits with an original maturity of three months or less and bank
overdrafts. Within the consolidated statement of cash flows, cash and cash equivalents includes the overdraft drawn against the multi-currency
facility described in Note 18.
The Group and Company classify financial liabilities into one of two categories, depending on the purpose for which the asset was acquired.
The accounting policy for each category is as follows:
Fair value through profit or loss
This category comprises only out-of-the-money derivatives. They are carried in the statement of financial position at fair value with changes in fair
value recognised in the consolidated Statement of comprehensive income. Other than these derivative financial instruments, the Group does not
have any liabilities held for trading nor has it designated any financial liabilities as being at fair value through profit or loss.
Other financial liabilities
Include the following items:
Bank and other borrowings are initially recognised at fair value net of any transaction costs directly attributable to the issue of the instrument.
Such interest bearing liabilities are subsequently measured at amortised cost using the effective interest rate method, which ensures that any
interest expense over the period to repayment is at a constant rate on the balance of the liability carried in the statement of financial position.
Interest expense in this context includes initial transaction costs and any interest or coupon payable while the liability is outstanding.
Trade payables and other short-term monetary liabilities, which are initially recognised at fair value and subsequently carried at amortised cost using
the effective interest method.
Financial liabilities and equity instruments issued by the Group are classified in accordance with the substance of the contractual arrangements
entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest
in the assets of the Group after deducting all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds received, net of
direct issue costs.
Leased assets
In accordance with IAS 17, the economic ownership of a leased asset is transferred to the lessee if the lessee bears substantially all the risks and
rewards related to the ownership of the leased asset. The related asset is recognised at the time of inception of the lease at the fair value of the leased
asset or, if lower, the present value of the minimum lease payments plus incidental payments, if any, to be borne by the lessee. A corresponding
amount is recognised as a finance leasing liability.
The interest element of leasing payments represents a constant proportion of the capital balance outstanding and is charged to the statement
of comprehensive income over the period of the lease. All other leases are regarded as operating leases and the payments made under them are
charged to the statement of comprehensive income on a straight line basis over the lease term. Lease incentives are spread over the term of the
lease.
During the current and prior year the Group and Company did not have any finance leases.
Defined contribution pension schemes
The pension costs charged against profits are the contributions payable to the scheme in respect of the accounting period.
Inventories
Inventories comprise oil in tanks stated at the lower of cost and net realisable value.
Joint ventures
Joint ventures are those ventures in which the Group holds an interest on a long term basis which are jointly controlled by the Group and one or
more venturers under a contractual arrangement. When these arrangements do not constitute entities in their own right, the consolidated financial
statements reflect the relevant proportion of costs, revenues, assets and liabilities applicable to the Group’s interests in accordance with IAS 31.
The Group’s exploration, development and production activities are generally conducted jointly with other companies in this way.
OUR BUSINESSGOVERNANCEFINANCIAL STATEMENTSADVISERSwww.europaoil.com 36
Notes to the financial statements
1 Accounting Policies (continued)
Share-based payments
All goods and services received in exchange for the grant of any share-based payment are measured at their fair values. Where employees are rewarded
using share-based payments, the fair values of employees’ services are determined indirectly by reference to the fair value of the instrument granted
to the employee. This fair value is appraised at the grant date and excludes the impact of non-market vesting conditions (for example, profitability and
sales growth targets).
All equity-settled share-based payments are ultimately recognised as an expense in the statement of comprehensive income with a corresponding
credit to reserves. Where options over the parent Company’s shares are granted to employees of subsidiaries of the parent, the charge is recognised
in the statement of comprehensive income of the subsidiary. In the parent Company accounts there is an increase in the cost of the investment in the
subsidiary receiving the benefit.
If vesting periods or other non-market vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of
the number of share options expected to vest. Estimates are subsequently revised if there is any indication that the number of share options expected
to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognised in the current period. No adjustment is made to any
expense recognised in prior periods if the number of share options ultimately exercised is different to that initially estimated.
Upon exercise of share options the proceeds received, net of attributable transaction costs, are credited to share capital, and where appropriate share
premium.
Critical accounting judgements and key sources of estimation uncertainty
Details of the Group’s significant accounting judgements and critical accounting estimates are set out in these financial statements and include:
Accounting judgements and estimates:
• Carrying value of intangible assets (Note 11) – carrying values are justified by reference to future estimates of cash flows
• Carrying value of property, plant and equipment (Note 12) – carrying values are justified by reference to future estimates of cash flows
• Decommissioning provision (Note 20) – inflation and discount rate estimates are used in calculating the provision
• Share-based payments (Note 22) – various estimates are used in determining the fair value of options
2 Business segment analysis
In the opinion of the directors the Group has five reportable segments as reported to the chief operating decision maker, being the UK, Ireland,
Romania, France and North Africa.
The reporting on these segments to management focuses on revenue, operating costs and capital expenditure. The impact of such criteria is discussed
further in the Chairman’s Statement, Operational Review and Financial Review of this annual report.
Income statement for the year ended 31 July 2012
Continuing operations
Revenue
Other cost of sales
Exploration write-off
Impairment of producing fields
Cost of sales
Gross loss
Administrative expenses
Finance costs
Loss before tax
Taxation
Loss for the year from continuing operations
Discontinued operations
Loss for the year from discontinued operation
Loss for the year
UK
£000
Ireland
£000
Romania
£000
France
£000
North Africa
£000
Total
£000
5,080
(2,692)
(2,056)
(785)
(5,533)
(453)
(675)
(358)
(1,486)
739
(747)
—
(747)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(10,395)
—
(10,395)
(10,395)
(39)
(94)
(10,528)
—
(10,528)
—
(10,528)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(41)
—
(41)
—
(41)
—
(41)
5,080
(2,692)
(12,451)
(785)
(15,928)
(10,848)
(755)
(452)
(12,055)
739
(11,316)
—
(11,316)
Europa Oil & Gas (Holdings) plc Annual Report and Accounts for the year ended 31 July 2012
37
Ireland
£000
Romania
£000
66
—
66
—
—
—
66
—
—
—
6
6
(250)
(688)
(938)
1,863
—
—
France
£000
1,039
—
1,039
—
—
—
521
—
—
North Africa
£000
—
—
—
—
—
—
—
—
—
Ireland
£000
Romania
£000
France
£000
North Africa
£000
—
—
—
—
—
—
—
—
—
—
—
—
Ireland
£000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(53)
—
(2)
(55)
—
(55)
(788)
(843)
Romania
£000
8,412
15
8,427
—
(714)
(714)
1,608
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
France
£000
526
—
526
—
—
—
171
—
—
—
—
—
—
—
—
(37)
—
—
(37)
—
(37)
—
(37)
North Africa
£000
—
—
—
—
—
—
—
—
—
Total
£000
7,100
1,874
8,974
(4,898)
(2,261)
(7,159)
3,033
674
63
Total
£000
3,766
(2,216)
—
(425)
(2,641)
1,125
(646)
1
(189)
291
(523)
(232)
(788)
(1,020)
Total
£000
19,020
2,714
21,734
(6,486)
(2,809)
(9,295)
5,022
354
53
2 Business segment analysis (continued)
Segmental assets and liabilities as at 31 July 2012
Total non-current assets
Total current assets
Total assets
Total non-current liabilities
Total current liabilities
Total liabilities
Other segment items
Capital expenditure
Depreciation
Share based payments
Income statement for the year ended 31 July 2011
Continuing operations
Revenue
Other cost of sales
Exploration write-off
Impairment of producing fields
Cost of sales
Gross profit/(loss)
Administrative expenses
Finance income
Finance costs
(Profit)/loss before tax
Taxation
Loss for the year
Discontinued operations
Loss for the year from discontinued operation
Loss for the year
Segmental assets and liabilities as at 31 July 2011
UK
£000
5,995
1,868
7,863
(4,648)
(1,573)
(6,221)
583
674
63
UK
£000
3,766
(2,216)
—
(425)
(2,641)
1,125
(556)
1
(187)
383
(523)
(140)
—
(140)
Total non-current assets
Total current assets
Total assets
Total non-current liabilities
Total current liabilities
Total liabilities
Other segment items
Capital expenditure
Depreciation
Share based payments
UK
£000
10,082
2,699
12,781
(6,486)
(2,095)
(8,581)
3,243
354
53
100% of the total revenue (2011: 100%) relates to UK based customers. Of this figure, one single customer (2011: one) commands more than 99%
of the total.
OUR BUSINESSGOVERNANCEFINANCIAL STATEMENTSADVISERSwww.europaoil.com
38
Notes to the financial statements
3 Profit/(loss) before taxation
(Loss)/profit from continuing operations is stated after charging:
Depreciation
Staff costs including directors
Exploration write-off
Impairment of property, plant and equipment
Fees payable to the auditor for the Company audit
Fees payable to the auditor for the audit of subsidiaries
Fees payable to the auditor in respect of corporate finance services
Operating leases – land and buildings
Note
12
5
11
12
2012
£000
673
1,022
12,451
785
13
29
—
37
2011
£000
354
744
—
425
15
29
34
35
The Company has taken advantage of the exemption provided under Section 408 of the Companies Act 2006 not to publish its individual statement of
comprehensive income and related notes. The loss dealt with in the financial statements of the parent Company is £13,856,000 (2011: profit £271,000).
4 Directors’ emoluments
Directors’ salaries and fees
WH Adamson
CW Ahlefeldt-Laurvig
PA Barrett (to 22 April 2012)
RJHM Corrie
P Greenhalgh
HGD Mackay (from 10 October 2011)
ES Syba (to 31 August 2010)
Directors’ pensions
PA Barrett
P Greenhalgh
ES Syba
2012
£000
40
21
96
21
129
149
—
456
2012
£000
16
17
6
39
2011
£000
40
18
127
18
129
—
6
338
2011
£000
19
16
11
46
The above charge represents premiums paid to money purchase pension plans during the year. Under the terms of a compromise agreement dated
12 August 2010, the Company continued to pay pension contributions in respect of ES Syba until February 2012. PA Barrett resigned as a director on
21 October 2011 and remained an employee until 22 April 2012.
Social security costs in relation to directors’ remuneration were £57,000 (£2011: £41,000).
Directors’ share based payments
WH Adamson
RJHM Corrie
P Greenhalgh
HGD Mackay
2012
£000
11
1
11
39
62
2011
£000
9
7
33
—
49
The above represents the accounting charge in respect of stock options with vesting periods during the year. No share options were exercised during
the period (2011: none).
Europa Oil & Gas (Holdings) plc Annual Report and Accounts for the year ended 31 July 2012
4 Directors’ emoluments continued
Directors’ total emoluments continued
Salaries and fees
Pensions
Share based payments
5 Employee information
Average monthly number of employees including directors
Management and technical
Field exploration and production
Staff costs
Wages and salaries
Social security
Pensions
Share based payment (Note 22)
Total staff costs for the Company were £793,000 (2011: £517,000).
6 Loss from discontinued operations
VAT on Valenii de Munte exploration costs
VAT assessed on the sale of the Bilca gas business
Penalties for late payment of VAT
Loss for the year from discontinued operations
39
2012
£000
456
39
62
557
2011
£000
338
46
49
433
2012
Number
2011
Number
8
4
12
2012
£000
785
100
74
63
1,022
2012
£000
—
—
—
—
6
4
10
2011
£000
550
68
73
53
744
2011
£000
62
357
369
788
The loss for discontinued operations arises from the September 2011 notification from the Romanian tax authorities that VAT had been assessed on the
transfer of two businesses in 2007.
7 Finance income
Interest receivable
8 Finance expense
Bank interest payable
Loan interest payable
Interest on tax payment
Unwinding of discount on decommissioning provision (Note 20)
Exchange rate losses
Bank charges
Loan arrangement fee
Interest rate swap fair value charge (Note 23)
2012
£000
—
—
2012
£000
28
32
1
130
24
10
219
8
452
2011
£000
1
1
2011
£000
44
10
—
92
14
18
10
1
189
OUR BUSINESSGOVERNANCEFINANCIAL STATEMENTSADVISERSwww.europaoil.com
40
Notes to the financial statements
9 Taxation
Current tax liability
Deferred tax asset (Note 19)
Release deferred tax liability (Note 19)
Tax (credit)/charge
2012
£000
83
916
(1,738)
(739)
2011
£000
—
(923)
1,446
523
UK corporation tax is calculated at 30% (2011: 30%) of the estimated assessable profit for the year. Taxation in other jurisdictions is calculated at the
rates prevailing in the respective jurisdictions.
(Loss)/profit on ordinary activities per the accounts
Tax reconciliation
(Loss)/profit on ordinary activities multiplied by the standard rate of corporation tax in the UK of 30% (2010: 30%)
Expenses not deductible for tax purposes
Other reconciling items includung tax payable at a higher rate in the UK
Total tax charge
2012
£000
(12,114)
(3,634)
3,990
(1,095)
(739)
2011
£000
291
87
28
408
523
10 Loss per share
Basic loss per share (LPS) has been calculated on the loss or profit after taxation divided by the weighted average number of shares in issue during the
period. Diluted LPS uses an average number of shares adjusted to allow for the issue of shares, on the assumed conversion of all in-the-money options.
The Company’s average share price for the year to 31 July 2012 was 8.97p (2011: 20.29p), which was below the exercise price of all of the 8,275,000
outstanding share options. As a there was a loss in the period for both years the options are not considered dilutive.
The calculation of the basic and diluted (loss) per share is based on the following:
Losses
Loss after tax from continuing activities
Loss for the year from discontinued operations
Loss for the year from continuing and discontinued operations
Weighted average number of shares
for the purposes of basic eps
for the purposes of diluted eps
11 Intangible assets
At 1 August
Additions
Exploration write-off
At 31 July
Intangible assets comprise the Group’s pre-production expenditure on licence interests as follows:
Romania
France
Ireland
UK PEDL143 (Holmwood)
UK PEDL150 (Hykeham)
UK PEDL180 (Wressle)
UK PEDL181 (Caister)
UK PEDL182 (Broughton)
Total
2012
£000
(11,316)
—
(11,316)
2011
£000
(232)
(788)
(1,020)
135,921,685
135,921,685
105,418,814
105,929,247
2012
£000
11,348
3,230
(12,451)
2,127
2012
£000
—
1,039
66
437
—
279
113
193
2,127
2011
£000
9,751
1,597
—
11,348
2011
£000
8,433
523
—
199
2,020
68
105
—
11,348
Europa Oil & Gas (Holdings) plc Annual Report and Accounts for the year ended 31 July 2012
11 Intangible assets (continued)
Exploration write-off
UK PEDL150 (Hykeham)
Romania
Total
41
2012
£000
2,057
10,394
12,451
2011
£000
—
—
—
As highlighted in the Operational review, the renewal process for the Béarn des Gaves and Tarbes permits is underway. The Group did not meet its
expenditure commitments in the first phase of the permits and as a result there is a risk that the permits will not be renewed by the French authorities.
Based on correspondence received to date from the authorities, the directors have a reasonable expectation that the permits will be renewed. Should
the permits not be renewed, then there would be an impairment of the French intangible assets.
12 Property, plant and equipment
Property, plant & equipment – Group
Cost
At 1 August 2010
Additions
At 31 July 2011
Additions
Transfer to assets for sale
Disposals
At 31 July 2012
Depreciation, depletion and impairment
At 1 August 2010
Charge for year
Impairment
At 31 July 2011
Charge for year
Transfer to assets for sale
Disposal
Impairment
At 31 July 2012
Net Book Value
At 31 July 2010
At 31 July 2011
At 31 July 2012
Furniture &
computers
£000
Leasehold
building
£000
55
11
66
16
—
(39)
43
25
17
—
42
14
—
(35)
—
21
30
24
22
437
—
437
—
(437)
—
—
85
7
—
92
8
(100)
—
—
—
352
345
—
Producing
fields
£000
7,779
3,006
10,785
—
—
—
Total
£000
8,271
3,017
11,288
16
(437)
(39)
10,785
10,828
3,657
330
425
4,412
651
—
—
785
3,767
354
425
4,546
673
(100)
(35)
785
5,848
5,869
4,122
6,373
4,937
4,504
6,742
4,959
OUR BUSINESSGOVERNANCEFINANCIAL STATEMENTSADVISERSwww.europaoil.com
42
Notes to the financial statements
12 Property, plant and equipment (continued)
The producing fields referred to in the table above are the production assets of the Group, namely the oilfields at Crosby Warren and West Firsby,
and the Group’s interest in the Whisby W-4 well, representing three of the Group’s cash generating units.
The carrying value of each producing field was tested for impairment by comparing the carrying value with the value in use. The value in use was
calculated using a discount rate of 10%. In 2012, as a result of the reduction in reserves following the CPR, there was an impairment at Crosby Warren of
£785,000 (2011: £257,000). There was no impairment at West Firsby (2011: £168,000) or Whisby W-4 well.
Property, plant and equipment – Company
Cost
At 1 August 2010
Additions
At 31 July 2011
Additions
Transfer to assets held for sale
Disposals
At 31 July 2012
Depreciation
At 1 August 2010
Charge for the year
At 31 July 2011
Charge for year
Transfer to assets held for sale
On disposals
At 31 July 2012
Net Book Value
At 31 July 2010
At 31 July 2011
At 31 July 2012
Furniture &
computers
£000
Leasehold
building
£000
55
11
66
16
—
(39)
43
25
17
42
14
-
(35)
21
30
24
22
437
—
437
—
(437)
—
—
85
7
92
8
(100)
—
—
352
345
—
Total
£000
492
11
503
16
(437)
(39)
43
110
24
134
22
(100)
(35)
21
382
369
22
The Abingdon property has been vacated and has been put up for sale. The net book value has been transferred to current assets (see Note 16).
The property loan of £230,000 (2011: £251,000) described in Note 18 is secured against this building.
Europa Oil & Gas (Holdings) plc Annual Report and Accounts for the year ended 31 July 2012
13 Investments – Company
Investment in subsidiaries
At 1 August
Current year additions
31 July
43
2012
£000
3,315
1
3,316
2011
£000
3,312
3
3,315
The Company’s investments at the reporting date in the share capital of unlisted companies include 100% of Europa Oil & Gas Limited (this company
undertakes oil and gas exploration, development and production) and 100% of Europa Oil & Gas (West Firsby) Limited (this company is non-trading).
These two companies are registered in England and Wales.
The results of the two companies have been included in the consolidated accounts. Europa Oil & Gas Limited owns 100% of the ordinary share capital
of each of: Europa Oil & Gas Resources Limited (this UK company undertakes exploration in the area of underground coal gasification); Europa Oil
& Gas SRL registered in Romania and Malopolska Oil & Gas Company Sp.z.o.o., registered in Poland. The result of the Polish company has not been
consolidated on the grounds that it is not material to the Group.
Additions to the cost of investments represents the net value of options over the shares of the Company issued to employees of subsidiary companies
less any lapsed, unvested options.
14 Inventories – Group
Oil in tanks
15 Trade and other receivables
Current trade and other receivables
Trade receivables
Other receivables
Prepayments
Non current other receivables
Owed by Group undertakings (Note 26)
2012
£000
56
2012
£000
—
17
44
61
—
2011
£000
43
Company
2011
£000
—
38
208
246
12,472
2012
£000
1,057
109
84
1,250
—
Group
2011
£000
438
128
229
795
—
Loans to subsidiaries have been fully written down in the Company accounts.
16 Assets classified as held for sale
In January 2012 the Group relocated its head office from Abingdon to London. The vacated leasehold property in Abingdon has been classified as an
asset held for sale. The property loan of £230,000 (2011: £251,000) described in Note 18 is secured against this building and will be repaid out of the sale
proceeds.
Property, plant & equipment
Total net assets
17 Trade and other payables
Trade payables
Other payables
Accruals
Derivative liability
Interest rate swap
2012
£000
338
338
2012
£000
1,032
14
834
1,880
Group
2011
£000
—
—
Group
2011
£000
967
50
740
1,757
64
56
2012
£000
338
338
2012
£000
105
—
57
162
64
Company
2011
£000
—
—
Company
2011
£000
226
—
36
262
56
Group other payables includes advances received from partners on projects in UK. More information on the interest rate swap is included in Note 23.
OUR BUSINESSGOVERNANCEFINANCIAL STATEMENTSADVISERSwww.europaoil.com
44
Notes to the financial statements
18 Borrowings
The Royal Bank of Scotland (RBS) multi-currency facility signed on 5 March 2012 provides an overdraft of up to £700,000. At 31 July 2012 and at 31 July
2011 the facility was not used. The facility is due to be renewed 31 January 2013.
A term loan also provided by RBS was fully repaid on 31 January 2011.
The £975,000 ($1,600,000) Yorkville loan note was issued on 15 July 2011 and was repayable in tranches over 12 months. As at 31 July 2012 the loan was
fully repaid (July 2011 balance: £975,000). A loan of £230,000 (2011: £251,000) secured against the Abingdon property is repayable over 11 years but will
be fully repaid with proceeds from the sale of the property which is in current assets for sale (see Note 16). As the Group anticipates the property selling
within a year the property loan has all been shown in short term borrowings.
Loans repayable in less than 1 year
Multi-currency facility
Term loan
Property loan
Loan note (Yorkville)
Total short term borrowing
Loans repayable in 1 to 2 years
Term loan
Property loan
Total loans repayable in 1 to 2 years
Loans repayable in 2 to 5 years
Term loan
Property loan
Total loans repayable in 2 to 5 years
Loans repayable after 5 years
Property loan
Total loans repayable after 5 years
Total long term borrowing
2012
£000
—
—
230
—
230
—
—
—
—
—
—
—
—
—
Group
2011
£000
—
—
21
975
996
—
22
22
—
68
68
140
140
230
2012
£000
—
—
230
—
230
—
—
—
—
—
—
—
—
—
Company
2011
£000
—
—
21
975
996
—
22
22
—
68
68
140
140
230
19 Deferred Tax – Group
The Group recognised a non-current deferred tax asset of £14,000 (2011: £930,000) in respect of losses arising in the year, within the UK ring fence. It is
expected that these losses will be utilised against profits arising in the 2013 financial year.
Recognised deferred tax liability:
As at 1 August
(Credited)/charged to statement of comprehensive income
At 31 July
The Group has a net deferred tax liability of £2,948,000 (2011: £4,686,000) arising from accelerated capital allowances.
Unrecognised deferred tax asset:
Accelerated capital allowances
Trading losses
Net deferred tax asset
2012
£000
4,686
(1,738)
2,948
2012
£000
(335)
1,279
944
2011
£000
3,240
1,446
4,686
2011
£000
(158)
1,181
1,023
The Group has a net deferred tax asset of £944,000 (2011: £1,023,000), which arises mainly in relation to overseas trading losses of £3.7 million and
Holding Company losses of £0.6 million, that have not been recognised in the accounts as the timing of the utilisation of the losses is considered
uncertain.
Europa Oil & Gas (Holdings) plc Annual Report and Accounts for the year ended 31 July 2012
20 Long term provision – Group
As at 1 August
Charged to statement of comprehensive income
Added to exploration write-off
Added to property, plant & equipment non current assets
At 31 July
45
2012
£000
1,570
130
250
—
1,950
2011
£000
1,395
92
—
83
1,570
Decommissioning provisions are based on third party estimates of work which will be required and the judgement of directors. By its nature, the
detailed scope of work required and timing is uncertain. Hykeham and Barchiz are the only wells where decommissioning is anticipated
before 2020.
21 Called up share capital
Allotted, called up and fully paid
137,855,504 ordinary shares of 1p each (2011: 130,077,728)
All the allotted shares are of the same class and rank pari passu.
2012
£000
2011
£000
1,379
1,301
On 31 October 2011 the Company issued 7,777,776 shares at 9p, raising £665,000 net of broker commission (2011: a total of 47,871,141 shares at an
average 13.3p raising £5,920,000 net of broker commission).
In 2005, the Company issued 39,999,998 ordinary shares of 1p at a nil premium in exchange for the entire shareholding of Europa Oil & Gas Limited.
This gave rise to the merger reserve at 31 July 2012 of £2,868,000 (2011: £2,868,000).
The following describes the purpose of each reserve within owners’ equity:
Reserve
Share premium
Merger reserve
Foreign exchange reserve
Retained deficit
Description and purpose
Amount subscribed for share capital in excess of nominal value
Reserve created on issue of shares on acquisition of subsidiaries in prior years
Reserve arising on translation of foreign subsidiaries
Cumulative net gains and losses recognised in the consolidated statement of comprehensive income.
22 Share based payments
There are 8,275,000 ordinary 1p share options outstanding (2011: 3,382,142). These are held by certain members of the Board: WH Adamson 500,000;
RJHM Corrie 500,000; P Greenhalgh 1,875,000; HGD Mackay 5,000,000, and employees of the Group 400,000.
Of the outstanding options, 3,275,000 are exercisable: one third 18 months after grant; a further third 30 months after grant and the balance 42 months
after grant, with no further vesting conditions.
The remaining 5,000,000 options held by HGD Mackay are exercisable after 24 months, subject to the Company’s share price trading above a target
level for at least 30 consecutive business days. The options are exercisable as follows:
Number of options
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
The latest date at which all options can be exercised is the 10th anniversary from the grant date.
Target price
25p
35p
45p
50p
60p
OUR BUSINESSGOVERNANCEFINANCIAL STATEMENTSADVISERSwww.europaoil.com
46
Notes to the financial statements
22 Share based payments (continued)
The fair values of all options were determined using a Black Scholes Merton model. The inputs used to determine the values of the 3,275,000 options
are detailed in the table below:
Grant date
Number of options
Share price at grant
Exercise price
Volatility
Dividend yield
Risk free investment rate
Option life (years)
Fair value per share
11 Nov
2004
160,000
32.5p
25p
40%
nil
4.80%
6.25
16.76p
1 Dec
2006
80,000
21.5p
25p
50%
nil
4.90%
6.25
10.16p
8 May
2008
1,750,000
21.5p
20p
50%
nil
4.42%
6
10.96p
The inputs used to determine the values of the 5,000,000 options are detailed in the table below:
Grant date
Number of options
Share price at grant
Exercise price
Target price
Volatility
Dividend yield
Risk free investment rate
Option life (years)
Fair value per share
10 Oct
2011
1,000,000
10.25p
13p
25p
90%
nil
1.73%
5
3.18p
10 Oct
2011
1,000,000
10.25p
13p
35p
90%
nil
1.73%
6
2.74p
23 Oct
2009
785,000
13.3p
16p
60%
nil
2.74%
6
6.58p
10 Oct
2011
1,000,000
10.25p
13p
45p
90%
nil
1.73%
7
2.18p
17 Apr
2010
250,000
14p
14p
70%
nil
2.82%
5
7.79p
10 Oct
2011
1,000,000
10.25p
13p
50p
90%
nil
1.73%
8
1.52p
24 Oct
2011
250,000
9.5p
10p
90%
nil
1.58%
5
6.15p
10 Oct
2011
1,000,000
10.25p
13p
60p
90%
nil
1.73%
9
0.79p
Volatility is based on the Company’s share price volatility since flotation.
Based on the above fair values the charge arising from employee share options was £63,000 (2011: £53,000).
In the year 5,250,000 options were granted, 357,142 expired, and none were forfeited or exercised (2011: all nil).
Outstanding at the
start of the year
Granted
Forfeited
Expired
Outstanding at the end of the year
Exercisable at the end of the year
2012
Number
of options
2012
Average
exercise price
2011
Number
of options
2011
Average
exercise price
3,382,142
5,250,000
—
(357,142)
8,525,000
2,953,805
18.35p
12.86p
—
14p
15.05p
18.80p
3,382,142
—
—
—
3,382,142
2,025,473
18.35p
—
—
—
18.35p
19.02p
Europa Oil & Gas (Holdings) plc Annual Report and Accounts for the year ended 31 July 2012
47
23 Financial instruments
The Group’s and Company’s financial instruments comprise cash and cash equivalents, bank borrowings, loans, interest rate derivatives, and items
such as trade and other receivables and trade and other payables which arise directly from its operations. Europa’s activities are subject to a range of
financial risks the main ones being, liquidity, interest rates, commodity prices, foreign exchange and capital. These risks are managed through ongoing
review taking into account the operational, business and economic circumstances at that time.
Credit risk
The Group is exposed to credit risk as all crude oil production is sold to one multinational oil company. The customer is invoiced monthly for the oil
delivered to the refinery in the previous month and invoices are settled in full on the 15th of the following month. At 31 July 2012 trade receivables
were £1,057,000 (2011: £438,000) representing one month of oil revenue £417,000 and other recievables in respect of oil deliveries made on behalf of
other parties and joint venture partners £640,000 (2011: one month of oil revenue). The fair value of trade receivables and payables approximates to their
carrying value because of their short maturity. Any surplus cash is held on short term deposit with Royal Bank of Scotland. The maximum credit exposure
in the year was £513,000 (2011: £479,000).
The Company exposure to credit risk is negligible.
Liquidity risk
Though the Group has the benefit of a regular revenue stream, there is still a need for bank financing. The Company has in place a £0.7million flexible
multi-currency facility with its bankers which can be utilised in either Sterling or foreign currency via an overdraft. At the year end there was no
overdraft (2011: no overdraft). At July 2012 the Yorkville SEDA backed loan had been fully repaid (2011: £975,000 payable).
The Group and Company monitor their levels of working capital to ensure they can meet liabilities as they fall due. The following table shows the
contractual maturities of the Group’s financial assets and liabilities.
At 31 July 2012
6 months or less
6-12 months
1-2 years
2-5 years
Over 5 years
Total
At 31 July 2011
6 months or less
6-12 months
1-2 years
2-5 years
Over 5 years
Total
Trade
and other
receivables
£000
Trade
and other
payables
£000
Derivative
£000
Short-term
borrowings
£000
Long-term
borrowings
£000
1,213
8
—
29
—
1,250
682
113
—
—
—
795
(1,763)
(117)
—
—
—
(1,880)
(1,684)
(73)
—
—
—
(1,757)
(6)
(6)
(11)
(25)
(16)
(64)
(6)
(6)
(10)
(20)
(14)
(56)
—
(230)
—
—
—
(230)
(925)
(71)
—
—
—
(996)
—
—
—
—
—
—
—
—
(22)
(67)
(141)
(230)
OUR BUSINESSGOVERNANCEFINANCIAL STATEMENTSADVISERSwww.europaoil.com
48
Notes to the financial statements
23 Financial instruments (continued)
The following table shows the contractual maturities of the Company’s financial assets and liabilities, all of which are measured at amortised cost.
At 31 July 2012
6 months or less
6-12 months
1-2 years
2-5 years
Over 5 years
Total
At 31 July 2011
6 months or less
6-12 months
1-2 years
2-5 years
Over 5 years
Total
Other
receivables
£000
Trade
and other
payables
£000
Derivative
£000
Short-term
borrowings
£000
Long-term
borrowings
£000
40
2
—
—
19
61
154
92
—
—
—
246
(162)
—
—
—
—
(162)
(262)
—
—
—
—
(262)
(6)
(6)
(11)
(25)
(16)
(64)
(6)
(6)
(10)
(20)
(14)
(56)
—
(230)
—
—
—
(230)
(925)
(71)
—
—
—
(996)
—
—
—
—
—
—
—
—
(22)
(67)
(141)
(230)
Cash and cash equivalents in both Group and Company are all available at short notice.
Trade and other payables do not normally incur interest charges. There is no difference between the fair value of the trade and other payables and their
carrying amounts. Borrowings bear interest at variable rates, except for the property loan of £230,000 (2011: £251,000) which was swapped for a fixed
rate of interest.
Interest rate risk
The Group has interest bearing liabilities as described in Note 18. The £700,000 multi-currency facility is secured over the assets of Europa Oil & Gas
(Holdings) plc and Europa Oil & Gas Limited. Interest is charged on the multi-currency facility at base rate plus 3%.
A loan of £230,000 (2011: £251,000) is secured over a long lease property and is repayable over 11 years, although it will be fully repaid on sale of the
property. At the time of the purchase of the property in 2007, the Company considered it prudent to enter into an interest rate swap which fixed
the interest rate for the life of the loan (until May 2022) at 5.52%. The fair value of the swap at 31 July 2012 was £64,000 (2011: £56,000) and this has
been recorded as a current liability of the Company. The table below shows the sensitivity of the swap to changes in interest rates. There would be a
corresponding charge or credit to the statement of comprehensive income.
Fair value of swap
Long term forward Sterling base rate
1%
3%
5%
2012
£000
62
36
10
2011
£000
56
33
10
The fair value of the interest rate swap has been based on an estimate provided by the Company’s bankers which meets the definition of tier 2
disclosures under the provisions of International Financial Reporting Standard 7 “Financial Instruments: Disclosures”.
Europa Oil & Gas (Holdings) plc Annual Report and Accounts for the year ended 31 July 2012
49
23 Financial instruments (continued)
Commodity price risk
The selling price of the Group’s production of crude oil is set at a small discount to Brent prices. The table below shows the range of prices achieved in
the year and the sensitivity of the Group’s Profit/(Loss) Before Taxation (PBT) to such movements in oil price. There would be a corresponding increase
or decrease to net assets. There is no commodity price risk in the Company.
Oil price
Highest
Average
Lowest
Month
Mar 2012
June 2012
Price
2012
$/bbl
123.80
110.03
93.30
PBT
2012
£000
(11,442)
(12,055)
(12,833)
Price
2011
$/bbl
121.70
99.43
75.60
PBT
2011
£000
1,131
291
(614)
Foreign exchange risk
The Group’s production of crude oil is invoiced in US Dollars. Revenue is translated into Sterling using a monthly exchange rate set by reference to the
market rate. The table below shows the range of average monthly US Dollar exchange rates used in the year and the sensitivity of the Group’s PBT to
similar movements in US Dollar exchange. There would be a corresponding increase or decrease to net assets.
US Dollar
Highest
Average
Lowest
Month
Aug 2011
May 2012
2012
Rate
$/£
1.628
1.585
1.528
2012
PBT
£000
(12,190)
(12,055)
(11,870)
2011
Rate
$/£
1.665
1.611
1.557
2011
PBT
£000
166
291
418
The table below shows the Group’s currency exposures. Exposures comprise the net financial assets and liabilities of the Group that are not
denominated in the functional currency.
Currency
Euro
US Dollar
Total
Item
Cash and cash equivalents
Trade and other receivables
Trade and other payables
Cash and cash equivalents
Trade and other receivables
Trade and other payables
Yorkville loan note
Group
Company
2012
£000
(1)
—
(15)
159
879
(562)
—
460
2011
£000
9
7
(182)
486
611
(63)
(975)
(107)
2012
£000
(1)
—
(8)
(4)
—
—
—
(13)
2011
£000
9
7
(7)
—
—
—
(975)
(966)
Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for
shareholders and maintain an optimal capital structure to reduce the cost of capital. The Group defines capital as being the consolidated shareholder
equity and bank borrowings. The Board monitors the level of capital as compared to the Group’s long term debt commitments and adjusts the ratio
of debt to capital as is determined to be necessary, by issuing new shares, reducing or increasing debt, paying dividends and returning capital to
shareholders. The Group is not subject to any externally imposed capital requirements.
24 Capital commitments and guarantees
As at 31 July 2012 the Group had contractual commitments to drill 2 wells and acquire seismic in the UK.
Europa’s share of costs for these wells and other exploration activities over the next year is approximately £1.7million. This commitment is expected to
be met from cash generated from production and borrowings referred to in Note 18.
An appraisal/production well at Osmets (Tarbes Val d’Adour, France) would be drilled in 2013 subject to reaching agreement with a partner. In the
Sahrawi Arab Democratic Republic a further £3 million is committed pending a resolution of the political situation in the country.
OUR BUSINESSGOVERNANCEFINANCIAL STATEMENTSADVISERSwww.europaoil.com
50
Notes to the financial statements
25 Operating lease commitments
Europa Oil & Gas Limited pays an annual site rental for the land upon which the West Firsby and Crosby Warren oil field facilities are located. The West
Firsby lease runs until September 2022 and can be determined upon giving 2 months notice. The annual cost is currently £18,000 and increases
annually in line with the retail price index. The Crosby Warren lease runs until December 2022 and can be determined on 3 months notice. The annual
cost is currently £20,000.
26 Related party transactions
Key management are those persons having authority and responsibility for planning, controlling and directing the activities of the Group. In the
opinion of the Board, the Group’s and the Company’s key management are the directors of Europa Oil & Gas (Holdings) plc. Information regarding their
compensation is given in Note 4.
At the year end the balances owed by subsidiary companies to the Company amounting to £8,520,000 were written off to Income statement. Those
balances are included in the services figure below.
During the year, the Company provided services to subsidiary companies as follows:
Europa Oil & Gas Limited
Europa Oil & Gas SRL
Europa Oil & Gas Resources Limited
Total
At the end of the year the Company was owed the following amounts by subsidiaries:
Europa Oil & Gas Limited
Europa Oil & Gas SRL
Europa Oil & Gas Resources Limited
Total
2012
£000
9,576
4,613
46
14,235
2012
£000
—
—
—
2011
£000
881
40
3
924
2011
£000
9,240
3,203
29
12,472
27 Post reporting date events
On 19 September, Europa announced it had identified two large prospects in the Irish South Porcupine Basin.
On 27 September it was announced that the Holmwood planning appeal had been dismissed. The Company is considering future steps with
the licence.
Europa Oil & Gas (Holdings) plc Annual Report and Accounts for the year ended 31 July 2012
Notice of annual general meeting
51
Notice is hereby given that the 2012 Annual General Meeting (AGM) of Europa Oil & Gas (Holdings) plc (the “Company”) will be held at the offices
of BDO LLP, 55 Baker Street, London, W1U 7EU at 11.00am on Tuesday 11 December 2012.
Entitlement to attend and vote
Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001, the Company specifies that only those members registered on the
Company’s register of members at 10.30am on 10 December 2012 shall be entitled to attend and vote at the Meeting.
Appointment of proxies
If you are a member of the Company at the time set out in note 1 above, you are entitled to appoint a proxy to exercise all or any of your rights to
attend, speak and vote at the Meeting and you have received a proxy form with this Notice of Meeting. You can only appoint a proxy using the
procedures set out in these notes and the notes to the proxy form.
A member of the Company entitled to attend and vote at the meeting may appoint one or more proxies to attend, speak and vote on a poll or a
show of hands on his/her behalf, provided that each proxy is appointed to exercise the rights attached to a different share or shares held. A proxy
need not be a member of the Company. To be valid any form of proxy must be returned to the registered office of the Company being 6 Porter Street,
London, W1U 6DD, in hard copy form by post or courier or by hand. In each case, the proxy appointment must be received not later than 10.30am
on Sunday 9 December 2012 or otherwise no later than 48 hours before any adjourned meeting together with any authority (or a notarially certified
copy of such authority) under which it is signed.
Completion of a Form of Proxy will not preclude a member from attending and voting in person at the meeting should he/she so wish.
In order to facilitate voting by corporate representatives at the meeting, arrangements will be put in place at the meeting so that (i) if a corporate
shareholder has appointed the chairman of the meeting as its corporate representative with instructions to vote on a poll in accordance with the
directors of all of the other corporate representatives for the shareholder at the meeting, then on a poll those corporate representatives will give voting
directions to the chairman and the chairman will vote (or withhold a vote) as corporate representative in accordance with those directions; and (ii) if
more than one corporate representative for the same corporate shareholder attends the meeting but the corporate shareholder has not appointed the
chairman of the meeting as its corporate representative, a designated corporate representative will be nominated, from those corporate representatives
who attend, who will vote on a poll and the other corporate representatives will give voting directions to that designated corporate representative.
Corporate shareholders are referred to the guidance issued by the Institute of Chartered Secretaries and Administrators on proxies and corporate
representatives (www.icsa.org.uk) for further details of this procedure. The guidance includes a sample form of representation letter if the chairman is
being appointed as described in (i) above.
Inspection of documents
The following will be available for inspection at the registered office of the Company during usual business hours on any weekday (public holidays
excepted) from the date of this Notice until the date of the Meeting, and at the place of the Meeting prior to and during the Meeting.
• The register of the interests of each director and his family in the share capital of the Company
• Copies of service contracts and letters of appointment in respect of each director of the Company
OUR BUSINESSGOVERNANCEFINANCIAL STATEMENTSADVISERSwww.europaoil.com 52
Resolutions to be put to the annual general meeting
As ordinary business:
1. THAT the Annual Report and Accounts for the year ended 31 July 2012 be received and adopted.
2. THAT the auditors of the Company BDO LLP be re-appointed to hold office until the conclusion of the next AGM at which the accounts are laid
before the Company and that the directors be authorised to fix their remuneration.
3. THAT Mr WH Adamson, who retires in accordance with the Articles of Association be re-elected as a director of the Company.
4. THAT Mr RJHM Corrie who retires in accordance with the Articles of Association be re-elected as a director of the Company.
5. THAT in accordance with section 551 of the Companies Act 2006 (the “Act”) the directors be and are hereby generally and unconditionally
authorised to exercise all powers of the Company to allot shares and to grant such subscription and conversion rights as are contemplated by
sections 551(1)(a) and (b) of the Act respectively up to a maximum aggregate nominal amount of £695,000 to such persons and at such times and
on such terms as they think fit provided that this authority shall:
5.1. operate in substitution for and to the exclusion of any previous authority given to the directors pursuant to section 551 of the Act to the extent
unused; and
5.2. expire on whichever is earlier of the conclusion of the Company’s next AGM following the passing of this Resolution and the date which is
15 months from the date of the passing of this Resolution unless such authority is renewed, varied or revoked by the Company in general
meeting, save that the Company may prior to such expiry make any offer or agreement which would or might require such shares or rights
to be allotted or granted after the expiry of the said period and the directors may allot such shares or grant such rights in pursuance of any
such offer or agreement as if the authority hereby conferred had not expired.
As special business:
6. THAT, subject to the passing of Resolution 5, the directors be and are hereby generally and unconditionally empowered in accordance with
sections 570 and 573 of the Act to allot equity securities (as defined in section 560 of the Act) for cash, pursuant to the authority conferred on
them by Resolution 5 or by way of the sale of treasury shares, as if section 561 of the Act did not apply to any such allotment provided that this
power shall operate in substitution for and to the exclusion of any previous authority given to the directors pursuant to sections 570 or 573 of the
Act to the extent unused and be limited to:
6.1. the allotment of equity securities in connection with an issue in favour of holders of ordinary shares in the capital of the Company in
proportion (as nearly as maybe) to their existing holdings of ordinary shares as at the record date of such allotment but subject only to such
exclusions or other arrangements as the directors deem necessary or expedient in relation to fractional entitlements or any legal or practical
problems under the laws of, or the requirements of any recognised regulatory body or stock exchange in, any territory; and
6.2. the allotment (otherwise than pursuant to paragraphs 6.1) of equity securities for cash up to an aggregate nominal amount of £200,000.
The authority granted by this Resolution 6 shall expire on whichever is earlier of the conclusion of the Company’s next AGM following the passing of
this Resolution and the date which is 15 months from the date of the passing of this Resolution unless such authority is renewed, varied or revoked by
the Company in general meeting, save that the Company may prior to such expiry make any offer or agreement which would or might require equity
securities to be allotted or granted after the expiry of the said period and the directors may allot such equity securities in pursuance of any such offer
or agreement as if the authority hereby conferred had not expired.
By order of the Board
P Greenhalgh
Company Secretary
15 October 2012
Europa Oil & Gas (Holdings) plc Annual Report and Accounts for the year ended 31 July 2012
Form of proxy for the Europa Oil & Gas (Holdings) plc AGM
Please print in BLOCK CAPITALS
I/we, the undersigned
of
Being a holder of Ordinary Shares of 1p each of Europa Oil & Gas (Holdings) plc hereby appoint the Chairman of the Meeting, or (note 2)
as my/our proxy to attend, speak and vote for me/us and on my/our behalf at the AGM of Europa Oil & Gas (Holdings) plc to be held at the offices of
BDO LLP, 55 Baker Street, London, W1U 7EU at 11.00am on Tuesday 11 December 2012 and at any adjournment thereof.
I/we direct my/our proxy to vote on the following Resolutions as I/we have indicated by marking the appropriate box with an ‘X’. If no indication is
given, my/our proxy will vote or abstain from voting at his or her discretion and I/we authorise my/our proxy to vote (or abstain from voting) as
he/she thinks fit in relation to any other matter which is put before the Meeting.
Ordinary Business
For
Against
1. Adoption of the Annual Report and Accounts for the year ended 31 July 2012
2. Appointment and remuneration of the Auditors
3. Re-election of Mr WH Adamson
4. Re-election of Mr RJHM Corrie
5. Authority to allot Ordinary Shares
Special Business
6. Disapplication of pre-emption rights
Date
Signature(s)
For
Against
This form of proxy may be returned in hard copy form by post, courier or by hand to the Company’s registered office being 6 Porter Street, London,
W1U 6DD.
In each case the proxy appointment must be received not less than 48 hours before the time for the holding of the meeting or adjourned meeting
together (except in the case of appointments made electronically) with any authority (or a notarially certified copy of such authority) under which
it is signed.
Notes re the form of proxy
1. Please indicate how you wish your votes to be cast in respect of the Resolutions to be proposed at the said meeting. If you do not indicate how you
wish your proxy to use your votes, the proxy will exercise discretion both as to how he/she votes and as to whether or not he/she abstains from
voting. Your proxy will have the authority to vote at his/her discretion on any amendment or other motion proposed at the meeting, including any
motion to adjourn the meeting.
2. If you prefer to appoint some other person or persons as your proxy, strike out the words “the Chairman of the Meeting” and insert in the blank
space the name or names preferred and initial the alteration. A proxy need not be a member of the Company. Completion of a form of proxy will not
preclude a member from attending and voting in person. Where you appoint as your proxy someone other than the Chairman, you are responsible
for ensuring that they attend the meeting and are aware of your voting instructions. If you wish your proxy to make any comments on your behalf,
you will need to appoint someone other than the Chairman and provide them the relevant instructions directly.
3. In the case of joint holders, the signature of the holder whose name stands first in the relevant register of members will suffice as the vote of such
holder and shall be accepted to the exclusion of the votes of the other joint holders. The names of all joint holders should, however, be shown.
4. If a member is a corporation, this form must be executed either under its common seal or under the hand of an officer or agent duly authorised in
writing. In the case of an individual the proxy must be signed by the appointor or his agent, duly authorised in writing.
5. If you submit more than one valid proxy appointment, the appointment received last before the latest time for the receipt of proxies will take
precedence.
✂
55
Directors and advisers
Company registration number 5217946
Registered office
6 Porter Street
London
W1U 6DD
Directors
WH Adamson – Non Executive Chairman
CW Ahlefeldt-Laurvig – Non Executive
RJHM Corrie – Non Executive
P Greenhalgh – Finance Director
HGD Mackay – Chief Executive Officer
Secretary
P Greenhalgh
Banker
Royal Bank of Scotland plc
1 Albyn Place
Aberdeen
AB10 1BR
Solicitor
Charles Russell LLP
5 Fleet Place
London
EC4M 7RD
Auditor
BDO LLP
55 Baker Street
London
W1U 7EU
Nominated advisor and broker
finnCap Limited
60 New Broad Street
London
EC2M 1JJ
Registrar
Computershare Investor Services plc
PO Box 82
The Pavilions
Bridgwater Road
Bristol
BS99 7NH
OUR BUSINESSGOVERNANCEFINANCIAL STATEMENTSADVISERSwww.europaoil.com
56
Glossary
AOI
Area of interest
AONB
Area of Outstanding Natural Beauty
APB
Auditing practices board
bbl
A US barrel (equivalent to 159 litres)
bcf
Billion cubic feet
bml
Below mud line (depth below sea bed)
bopd
Barrels of oil per day
BPEL
Blackland Park Exploration Limited
CEO
Chief Executive Officer
CGU
Cash generating unit
CNG
Compressed natural gas
CPR
Competent person’s report
Company
Europa Oil & Gas (Holdings) plc
CW
Crosby Warren wellsite
mmboe
Million barrels of oil equivalent
mmscfpd
Million standard cubic feet per day
PEDL
Petroleum Exploration and Development Licence
RBS
Royal Bank of Scotland
Ring Fence
The area of the UK and UK Continental Shelf within which profits from
oil extraction activities are subject to additional tax charges
SADR
Sahrawi Arab Democratic Republic
SEDA
Standby Equity Distribution Agreement
SIPP
Self invested pension plan
SPE-PRMS
Society of Petroleum Engineers - Petroleum Resources
Management System
Spud
To commence drilling a well
tcf
Trillion cubic feet
UCG
Underground Coal Gasification
WF
West Firsby Wellsite
Frack
Hydraulic fracturing – a method to increase oil extraction rates
Yorkville
An investment fund managed by Yorkville Advisors UK LLP
Group
Company and its subsidiaries
HPHT
High pressure, high temperature
IAS
International Accounting Standard
IFRS
International Financial Reporting Standard
LPS
Loss per share
mmbo
Million barrels of oil
Europa Oil & Gas (Holdings) plc Annual Report and Accounts for the year ended 31 July 2012 Designed and produced by www.carrkamasa.co.uk
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EUROPA OIL & GAS (HOLDINGS) PLC
6 Porter Street
London, W1U 6DD
Tel: +44 (0)20 7224 3770
www.europaoil.com