INFRASTRATA plc
Annual Report &
Financial Statements
2013
TABLE OF CONTENTS
CHAIRMAN’S STATEMENT
CHIEF EXECUTIVE’S OPERATING REVIEW
CORPORATE AND SOCIAL RESPONSIBILITY
OPERATIONS OVERVIEW
DIRECTORS, SECRETARY, ADVISORS AND SHAREHOLDER
INFORMATION
REPORT OF THE DIRECTORS
- DIRECTORS OF THE COMPANY
- CORPORATE GOVERNANCE
- DIRECTORS RESPONSIBILITIES
INDEPENDENT AUDITOR’S REPORT
FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
LETTER FROM CHAIRMAN WITH NOTICE OF AGM
NOTICE OF ANNUAL GENERAL MEETING
PROXY FORM WITH NOTES
3
4-8
8
9-12
13
14-21
16-18
18-20
21
22
23-28
29-56
57-58
59-60
61-62
2
INFRASTRATA plc
CHAIRMAN’S STATEMENT
Last year I reported on your Company’s successful transition from a single project gas storage development business to one with
an increasing focus on oil and gas exploration. In 2013 our small and dedicated management team has made considerable progress
further mitigating delivery risk associated with each of our three major projects - the exploration licences located in Country
Antrim, Northern Ireland (PL1/10) and Dorset (P1918) plus the Islandmagee natural gas storage project in Northern Ireland. This
has been achieved against a background of increasing public scrutiny and legislative regulation on-shore in the UK, which has had
the inevitable consequence of creating some delay in bringing projects to maturity. Although the availability of new funding for oil
and gas exploration on this scale has also been disappointing across the entire sector during this period I am pleased to report that
continued shareholder support has enabled the company to weather the delays and remain well placed to face the coming year.
In Northern Ireland on licence PL1/10 we are at an advanced stage of securing the necessary consents and approvals to drill having
earlier identified a suitable site for a first exploration well and engaged with the landowners. The prospectivity of this licence is very
exciting indeed, offering the potential for very significant upside in shareholder value. We have made tremendous progress on the
offshore Dorset licence P1918 where Dorset County Council resolved to grant planning permission for a first exploration well after
year end. We plan to drill from an on-shore location at California Quarry to the offshore Purbeck Prospect. The licence is in an area
where successful exploration has been carried out in the past and there is a proven petroleum source.
On both our exploration projects we have now reached a stage where we can be confident that subject to successful completion of
funding arrangements we can look forward to drilling the wells during 2014. This may be later than we had originally anticipated but
the opportunity to unlock significant shareholder value on each remains undiluted.
We have also progressed the Islandmagee natural gas storage project in Northern Ireland, funded by BP Gas Marketing since early
2012, with the intention of disposing of an interest in the project when a new developer to complete the construction has been
identified. An issue that continues to hinder progress on this project is lack of confirmation of the cross-border regulatory regime
within which the facility will operate. Once received this will trigger drilling of the first well and that in turn will move us towards
the intended disposal of an interest in the project. In this context it was, however, extremely encouraging to see the project identified
as being of significance in the broader European context when it was listed as a Project of Common Interest by the European
Commission and was then prequalified for potential debt guarantee support under HM Treasury’s UK Guarantee Scheme. These are
both very significant elements in enhancing the attractiveness of the project to potential investors.
Your Company’s priorities remain focussed upon the delivery of value to shareholders on each of our three main projects in the
short-term. Strategically, we are also turning our minds to the future and the longevity of our business. The abilities and experience
of our management team are unique and we believe they offer a real advantage through the selection and assessment of exploration
opportunities and the hands-on management of the pre-drilling project programme to bring a project to maturity far quicker than
would otherwise be the case. New business would ultimately require a reinforced management team and reliable source of funding
to pursue new opportunities. We will keep shareholders informed as our thoughts develop on this subject and in the meantime the
Board is grateful for their forbearance and continued support.
I would like to conclude by offering my thanks to Andrew Hindle and the rest of the executive team for their tremendous effort and
achievements during the year. I would also like to record my thanks to Craig Gouws who was CFO of the Company from inception
in 2007 until his departure in September 2013 to live overseas. Stewart McGarrity was appointed Finance Director in September
2013 and has been very quick to engage with Andrew Hindle and the team in driving our programme of work forward.
Ken Ratcliff,
Non-executive Chairman
2 December 2013
INFRASTRATA plc
3
CHIEF EXECUTIVE’S OPERATING REVIEW
InfraStrata has continued to refocus its activities on oil and gas exploration in its two operated licences within the United Kingdom,
County Antrim in Northern Ireland and Dorset in Southern England. The Group also has non-operated interests in exploration
licenses in Hampshire, Dorset and East Midlands through associated companies Corfe Energy Limited (“Corfe”) and Brigantes
Energy Limited (“Brigantes”).
The Company has also been engaged in the development of a gas storage project in County Antrim in Northern Ireland with a view
to realising fair value for our interest in the project as soon as practicable.
InfraStrata works alongside strong and experienced partners in all projects and the Company’s small management team is supported
by a highly effective network of service delivery specialists.
During the past year significant progress has been made on all our projects and, having effectively managed a number of challenges to
the programme on each of them, we now look forward to a busy 2014 during which we expect to see the drilling of two exploration
wells and one gas storage well. A detailed review of the Group’s business is provided below.
OIL AND GAS EXPLORATION
County Antrim - PL1/10
Petroleum Licence PL1/10 (Central Larne - Lough Neagh Basin) was awarded in March 2011 by the Northern Ireland Department
of Enterprise, Trade and Investment (“DETI”). The five year licence covers an area of 663 square kilometres over what the Company
believes is a very prospective largely unexplored sedimentary basin.
Following the sale of a further 5% interest in the licence to our associated company Brigantes (40% owned by InfraStrata) announced
in March 2013, InfraStrata has a direct operated interest of 25% and is now carried in respect of all but 10% of the costs to drill the
first exploration well and is seeking a further farmout to complete the funding of the well costs. Brigantes now holds a 45% interest
in the license – resulting in an overall net licence interest for InfraStrata of 43%. The other partners in the licence are Cairn Energy
(20%) and Terrain Energy (10%).
The Larne-Lough Neagh Basin is a SW-NE trending Permo-Triassic Basin, overlying an older Carboniferous sequence. The basin
has historically received little attention from explorers, primarily due to the thick development of Palaeocene Antrim Flood Basalts
overlying the target horizons. This has been a barrier to effective seismic imaging but with the recent technological advances in data
processing, exploration in the basin is now entering an exciting phase.
Only one exploration well has historically been drilled in the centre of the basin covered by the PL1/10 licence, back in 1971, before
any seismic data had been acquired. Drilling in the area over the past 40 years has largely been for coal exploration and geothermal
feasibility. However this has confirmed the development of good sandstone reservoirs and seals within the thick Permo-Triassic
sedimentary section. Oil-prone source rocks have been identified on the margins of the Basin within the Carboniferous section, and
gas-prone coals have also been mined to the west in the Coalisland area, and along the North Antrim coast. The basin is also along
trend from the Midland Valley of Scotland where oil and gas prone rocks of Carboniferous age are well known. It is anticipated that
in the more deeply buried areas of the Larne-Lough Neagh Basin the Carboniferous will have been buried sufficiently to generate oil
and possibly also gas.
Substantial progress has been made in the de-risking of the Larne-Lough Neagh Basin play following two seismic surveys
undertaken by InfraStrata in 2011 and 2012 acquiring over 400km of new 2D seismic data which revealed a basin very similar
in structural style to the prolific East Irish Sea Basin with a large number of undrilled structures. In March 2013, the Company
published a prospectivity review of the PL1/10 license prepared by project geoscience Merlin Energy Resources Limited (“Merlin”).
Merlin has identified combined un-risked P50 prospective resources on the PL1/10 licence in the Triassic and Permian sandstone
reservoir intervals of over 450 million barrels of oil (“mmbo”) (net InfraStrata over 194 mmbo at 43%).
During the year a suitable site from which to drill the well was selected and substantial and satisfactory progress made in both
negotiations with the landowner and the progression of the necessary consents. The un-risked P50 prospective resources targeted by
the first exploration well have been estimated by the joint venture at 40 mmbo (net InfraStrata 17 mmbo at 43%), an increase on the
previous estimate of 25 mmbo following further detailed mapping of the seismic data. Preparation for procurement of the drilling
activities is progressing with the final programme dependant on completion of consents and farmout activities.
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INFRASTRATA plc
CHIEF EXECUTIVE’S OPERATING REVIEW
The PL1/10 partners submitted an application for an adjacent prospective area in the 27th UK Offshore Round in 2012 and the
licence was offered by the UK Department of Energy and Climate Change (“DECC”) on 29 November 2013. Un-risked P50
prospective resources of 150 mmbo have been identified within the application area.
Dorset - P1918
Petroleum licence P1918 comprises Blocks 97/14, 97/15 and 98/11 and was awarded in February 2012 by the DECC. Following
the farmout of a further 8% interest in the licence to our associated company Corfe (40% owned by InfraStrata) in August 2012,
InfraStrata now has a direct operated 70% interest and Corfe holds a 20% interest in the licence – resulting in an overall net licence
interest for InfraStrata of 78%. This is subject to a net profits interest equivalent to 3.75% on the whole licence in favour of eCORP
Oil & Gas UK Limited (“eCORP”). The other partner in the licence is Cairn Energy with a 10% interest. The Company is seeking a
further farmout to complete the funding of the costs of the first exploration well.
Within and immediately adjacent to the licence area there are a number of active oil and gas seeps. A total of seven wells have
previously been drilled within the licence area, including the first UK offshore well in 1963 on Lulworth Banks in Block 97/14. Six
of these wells encountered oil or gas shows and three flowed oil or gas on test. The advances in technology and higher petroleum
prices mean that we are hopeful of being able to develop one or more of the existing discoveries profitably as a base from which to
appraise the full potential of the area. The prospective resources on the license have been estimated by the joint venture at 93 mmbo
(net InfraStrata 73 mmbo at 78%).
The focus for a first exploration well is the offshore extension of the Purbeck Prospect, an anticline in the east of the licence, up dip of
the onshore well Southard Quarry-1, which encountered oil and gas shows within Jurassic and Triassic intervals. Only the Sherwood
was tested but failed to flow. The Purbeck Prospect immediately overlies the kitchen area for the giant Wytch Farm oilfield. This large
structure lies largely within Licence P1918. During the year we reprocessed 156km of onshore and offshore 2D data to further define
the sub-surface target location. In June 2013, ocean divers collected gas samples from an active gas seep above the Purbeck Prospect.
Isotopic analysis of the gas indicates that the gas was generated at the base of the oil window as expected.
Following two public information events held in June 2013, a planning application for drilling and testing of the California Quarry-1
well was submitted to Dorset County Council (“DCC”) in July 2013 and DCC resolved to grant planning permission for the well on
29 November 2013, subject to conditions in the normal course of business.
The well, to be drilled from onshore to offshore within licence P1918 will target prospective resources, within licence, estimated by
the joint venture at 10 million barrels of oil equivalent “mmboe” (net InfraStrata 8 mmboe at 78%). The planning conditions preclude
construction or drilling activities between March and September and consequently we currently anticipate the well will be drilled in
late 2014.
The P1918 partners submitted an application for adjacent prospective areas in the 27th UK Offshore Round in 2012 and the licence
was offered by DECC on 29 November 2013.
Non-operated exploration interests
The Company has non-operator exploration interests via its shareholdings
in associated companies Corfe and Brigantes as follows:
• PEDL201 (Leicestershire) - Corfe 12.5% interest (net InfraStrata
5%) with planning permission for a first well (Burton on the Wolds-1)
expected to be drilled during 2014 and targeting prospective resources
estimated by the joint venture of 4 mmbo (net InfraStrata 0.2 mmbo)
• PEDL237/PL090 (Dorset) – Corfe 12.5% interest (net InfraStrata 5%)
expecting to complete interpretation of seismic surveys in 2014
• PEDL 070 (Hampshire) – Corfe and Brigantes combined 10% (net
InfraStrata 4%). Avington field currently producing around 70 barrels
of oil per day.
INFRASTRATA plc
5
CHIEF EXECUTIVE’S OPERATING REVIEW
GAS STORAGE
Islandmagee project – County Antrim
Islandmagee Storage Limited (“IMSL”) is an independent Northern Ireland registered company and is a joint venture between a
wholly-owned subsidiary of InfraStrata plc (65% shareholder) and Moyle Energy Investments Limited, part of the Mutual Energy
group of companies (35% shareholder). During 2012, IMSL was granted planning permission for a natural gas storage facility at
Islandmagee, County Antrim and a Gas Storage Licence from the Utility Regulator.
IMSL plans to create seven caverns, capable of storing up to a total of 500 million cubic metres of gas in Permian salt beds
approximately 1,500 metres beneath Larne Lough. The project has unique advantages including being immediately adjacent to gas
and electrical infrastructure, the salt being at an optimum depth for gas storage and close to a water source for solution mining of the
salt to create the caverns. The project is also designed to access the extrinsic value of the gas storage market in the UK and Ireland by
being able to respond to short-term volatility.
The proposed gas storage facility will make a significant contribution to the security of gas supplies for the whole island of Ireland.
Ireland is dependent on gas for around 65% of its electricity generation with 90% of the island’s gas imported via a single pipeline
from Scotland. The facility, when complete, will store enough gas to satisfy Northern Ireland’s demand for around 60 days. Northern
Ireland has a target to generate 40% of electricity from renewables by 2020 – this will primarily be achieved through wind-powered
generation. A shift to renewable energy sources is likely to result in an increasing reliance on gas-fired power stations to support
the inherently intermittent supply from wind. Rapid cycle gas storage facilities, such as this planned project, will be important to
respond to the increasingly fluctuating demands for gas to fuel this electricity generation requirement.
The estimated timescale for the project is approximately seven years, with the first cavern becoming operational after five years. The
drilling of a well is planned, subject to confirmation on the regulatory framework for the project, to collect samples of the Permian
salt to provide the final design parameters for the caverns.
In January 2012 IMSL entered into agreements with BP Gas Marketing Limited (“BPGM”) for the appraisal of the project and
the option for BPGM to acquire a 50.495% equity interest in IMSL. Under the terms of a Joint Appraisal Agreement, BPGM is
funding the activities necessary to develop the project up to the point where a decision can be made on whether to proceed with its
detailed engineering design.
During 2013, work was substantially completed on securing the land rights necessary for the construction and operation of the
facility and applications were submitted for the necessary marine and associated environmental licences to the Department of
Environment and Northern Ireland Environment Agency. The well site construction for the Islandmagee-1 gas storage well
commenced in May 2013 and was completed shortly after the financial year end. IMSL had received £1,427,277 from BPGM at 31
July 2013 under the Joint Appraisal Agreement.
The next step is to drill the well, which will be fully funded by BPGM and will provide the core samples of Permian salt to confirm
the depth, thickness, rock mechanical properties and composition of the salt to finalise the design of the caverns and will complete
the projects credentials and facilitate the realisation of InfraStrata’s interest in IMSL. Procurement of the well will commence once
the delayed regulatory framework for the project has been confirmed. We now expect the well to be drilled in mid-2014.
On 16 October 2013, we were delighted to announce that the importance of the project had been acknowledged by the European
Commission which had given it Project of Common Interest (“PCI”) status requiring Member States to give priority and quick
passage in the permitting process and cooperation in its development. It also means the project is eligible to apply for significant
financial support from the European Union in the form of direct grant or other forms of financial backing from institutions such
as the European Investment Bank. The project has also been ‘pre-qualified’ (deemed eligible for support) under the Treasury’s ‘UK
Guarantee Scheme’ which is making cover of up to £40 billion available to ensure that key infrastructural projects across all sectors
in the UK, those that really ought to go ahead, are not held back due to any difficulty in obtaining finance. Under the scheme the
Government will guarantee a certain proportion of the capital required to fund projects, so that banks can lend more freely in today’s
risk-averse lending environment. Both of these developments give us further confidence that the full development of the project can
commence within reasonably short timescales.
The assets and liabilities of IMSL have been classified as held for sale in the Group’s balance sheet since inception of the Joint
Appraisal Agreement in January 2012, in firm expectation that BPGM will exercise the option to acquire a controlling interest
in IMSL and at that point InfraStrata will seek the disposal of an interest in the project to a new partner who will take the full
development of the project forward.
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INFRASTRATA plc
CHIEF EXECUTIVE’S OPERATING REVIEW
Portland project - Dorset
Last year we reported that the poor seasonal gas storage market, a different market to that being targeted by the Islandmagee project,
meant that it is unlikely that the Portland gas storage project will be realised in the near term and we fully impaired our historical
investment in the project, with the exception of data obtained from seismic surveys and drilling, which are key for the development
of the petroleum exploration play.
With the decision not to pursue the gas storage project, the Portland site leases were terminated at their break date on 1 June 2013.
The Company, through its subsidiary, Portland Gas Transportation Limited, will continue to renew the gas pipeline construction
authorisation with DECC as a potential means of exporting future gas production under the P1918 licence. The Company will
continue to examine this and other opportunities which may arise to realise some value from our historic investment in the project.
In June 2012 we restructured the funding obligations of eCORP, formerly joint venture partners in the Portland project, into an
obligation to provide a further US$2.88 through monthly subscriptions of US$120,000 for preference shares in our subsidiary
Portland Gas Limited. In return eCORP will earn a 7.5% share of the future profits from the Portland project. Amounts received
from eCORP during the financial year totalled US$1,440,000 and the balance due of US$1,200,000 is included on the Group
balance sheet at 31 July 2013.
FUNDING
InfraStrata continues to have no debt and to operate a funding model for our projects which manages risk for our shareholders by
attracting investment by quality partners and thereby minimising our own commitments to pay the costs of exploration and other
project development costs.
The sale of a 5% interest in licence PL1/10 to Brigantes (40% owned by InfraStrata) announced in March 2013 raised £150,000,
together with a commitment by Brigantes to carry 5% of InfraStrata’s share of the first exploration well. Gross aggregate expenditure
during the year on the PL1/10 and P1918 licences was £392,195 of which InfraStrata’s share was £146,128. We are currently in the
process of seeking further partners to fund the balance of InfraStrata’s share of the costs of drilling the first exploration well on each
of these licences.
The Group’s associated companies, Corfe and Brigantes are self-funded and therefore we have no commitments to fund exploration
costs on our non-operated exploration interests. InfraStrata director William Colvin represents the Company’s interests on the Board
of each of these associated companies.
BPGM fully funded the expenditure on the Islandmagee gas storage project amounting to £951,588 during the financial year under
the terms of the Joint Appraisal Agreement and are expected to continue funding the development of the project through the drilling
of the well.
The process of securing new partners for the Islandmagee gas storage project, including a lead developer for the main construction
of the project, has been initiated with expressions of interest received from a number of potential investors. The next focused
approach to potential new partners will be following the drilling of the first well in 2014. Securing a new partner should present the
opportunity to realise cash for all or part of InfraStrata’s 65% shareholding in IMSL. Securing a new partner and commencement of
construction would also trigger the payment to InfraStrata of approximately £1.3m in settlement of partner Mutual Energy’s share of
the shareholder’s loan account to IMSL.
As explained above, eCORP continues to subscribe for preference shares in our subsidiary Portland Gas Limited. Aggregate receipts
during the financial year were £899,608 (US$1,440,000). This has offset the payments made in respect of the Portland site leases
totalling £750,000 during the financial year. These leases were terminated at their break date on 1 June 2013.
Post year end, on 23 September 2013, the Company completed the placing of 8,000,000 new ordinary shares at 10p per share and
raised £800,000 before expenses. The proceeds of the Placing have improved the Company’s balance sheet and enable the Company
to be flexible about the funding of exploration costs in advance of the completion of the farmout of exploration well costs. Any
balance of the Placing proceeds will be used for contingency and general working capital purposes.
INFRASTRATA plc
7
CHIEF EXECUTIVE’S OPERATING REVIEW
OUTLOOK
The Group’s activities during the year ended 31 July 2013 and since the year end have been focused on the activities which de-risk
our three main projects including the delivery of the various agreements with third parties, obtaining consents and approvals and the
continuing assessment and refinement of the prospectivity within our exploration licence areas.
Management’s focus going into 2014 now switches to the completion of the farmout process on PL1/10 and P1918 and the
procurement and drilling of exploration wells on each these two exploration licences as well as the well at the Islandmagee gas
storage project. Each of our main projects has the potential to lead to a steep change in valuation and future opportunities.
Andrew Hindle,
Chief Executive Officer
2 December 2013
CORPORATE AND SOCIAL RESPONSIBILITY
Through the work of the Portland Gas Trust, InfraStrata continues to support local communities in its area of operation. The Trust
is a registered charity that supports initiatives around education, geology and the environment. Throughout the year the Trust has
continued to support local projects both financially, and in kind, through Rachel Barton, Manager of the Trust.
Subject to obtaining full project funding, Islandmagee Storage Limited intends to set up a Trust with objectives around education,
geology and the environment. An initial investment of £1 million over three years, with a further £50,000 per annum for a minimum
of six years thereafter is planned. The company is continuing discussions with local residents and community groups in the Larne
Lough area with regard to ideas and initiatives which could be funded through the proposed Trust. Local businesswoman, Judith
Tweed, is the company Community Liaison Consultant; Judith is collating a wide range of ideas for potential funding.
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INFRASTRATA plc
PL 1/10
InfraStrata (Operator) - 43%*, Brigantes Energy Limited - 45%, Cairn Energy - 20%, Terrain Energy Limited - 10%
* InfraStrata holding comprises 25% direct interest together with an additional net 18% interest via shareholding in Brigantes Energy Limited
The licence covers 663 km2 in the Larne-
Lough Neagh Basin which has been
largely overlooked by the oil and gas
industry, primarily due to the presence of
extensive surface flood basalts at or near
the surface.
By applying newer techniques in seismic
processing, InfraStrata has been able
to image below the basalts and this has
revealed a basin with a large number of
prospective undrilled structures.
Key Features
• Over 20 high-grade prospects have
been identified within the licence and
27th Round Application area with
combined prospective resources over
600 mmbo
• Primary targets are the Triassic
Sherwood Sandstone and the
Permian Collyhurst Sandstone, with
potential deeper reservoir targets in
the Carboniferous sandstones
First prospect to drill has estimated
P50 prospective resources of 40
mmbo
Site identified for first exploration
well
•
•
Forward Plan
• Drilling of first exploration well
Project Overview
During 2011 and 2012, InfraStrata acquired over 400km of new 2D seismic data which
revealed a basin very similar in structural style to the prolific East Irish Sea Basin.
Existing geothermal wells have confirmed the development of good sandstone
reservoirs and seals within the thick Permo-Triassic sedimentary section. Oil-prone
source rocks have been identified on the margins of the basin within the Carboniferous
section, and gas-prone coals have also been mined to the west.
As with any new exploration province anywhere, the presence of a working petroleum
basin remains the highest risk of the play and can only be resolved by drilling. Success
with the first well would open up a new play fairway within the licence with multiple
reservoir targets in multiple prospects.
INFRASTRATA plc
9
P1918
InfraStrata (Operator) - 78%*, Corfe Energy Limited - 20%, Cairn Energy - 10%
* InfraStrata holding comprises 70% direct interest together with an additional net 8% interest via shareholding in Corfe Energy Limited
The licence comprises three offshore
Blocks 97/14, 97/15 and 98/11, covering
an area of 584 km2 in the Wessex Basin
adjacent to the giant Wytch Farm oilfield.
There are existing undeveloped oil and gas
discoveries and active oil and gas seeps
within P1918 licence.
Prospects have been identified with
combined prospective resources over 90
mmboe.
Key Features
•
Initial focus on the offshore extension
of the Purbeck Anticline
Project Overview
A total of seven wells have previously been drilled within the licence area, six of these
wells encountered oil or gas shows and three flowed oil or gas on test.
The InfraStrata led joint venture purchased approximately 3,500 kilometres of existing
2D seismic data, and three existing 3D surveys, within or adjacent to the licence. A
total of 156 km 2D seismic and 33.5 km2 3D seismic has been reprocessed and the
interpretation of the data will be completed in 2014.
The drilling of the exploration well in 2014 will target a prospect with gross 10 mmboe
within the P1918 licence.
Additional prospects with combined prospective resources over 70 mmboe will be
further evaluated in 2014.
• Planning permission approved in
November 2013 for a wellsite to drill
the Purbeck Prospect onshore to
offshore
InfraStrata owns rights to construct
a gas pipeline connection from
Portland to NTS
•
Forward Plan
•
Interpretation of reprocessed seismic
data to further define the sub-surface
target location
• Drilling of the California Quarry-1
exploration well
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INFRASTRATA plc
NON-OPERATOR LICENCES
InfraStrata interest via 40% shareholding in Corfe Energy Limited and Brigantes Energy Limited
InfraStrata presently has an interest in
three onshore licences covering a total of
513 km2:
• PEDL 201 (Corfe Energy Limited
-12.5%) located in the East Midlands
Petroleum Province
• PEDL 237/ PL090 (Corfe Energy
Limited -12.5%) located in the
Wessex Basin
• PEDL 070 (Corfe Energy Limited -
5%, Brigantes Energy Limited – 5%)
located in the Weald Basin
Key Features
• Planning permission granted in
•
July 2013 for drilling Burton on the
Wolds well in PEDL 201
Successful acquisition of a 3D
seismic survey covering an area
of approximately 68.5 km2 in
PEDL237/PL090
Forward Plan
• Drilling of the Burton on the Wolds
•
exploration well in 2014
Interpretation of acquired 3D seismic
data in PEDL237/PL090
Project Overview
The Burton on the Wolds prospect has been mapped using both newly acquired and
vintage 2D seismic data. The prospect covers an area of approximately 1.3 km2 with
target prospective resources of 4 mmbo.
A number of structural prospects and leads have been mapped using existing vintage
2D seismic data within PEDL237/PL090. Interpretation of the acquired 3D seismic
survey will further define these prospects and identify locations for future exploration
drilling.
PEDL070 contains the Avington Field which currently produces c. 70 bopd (no
decline).
SOURCE: Egdon Resources plc
INFRASTRATA plc
11
ISLANDMAGEE PROJECT
InfraStrata - 65%, Moyle Energy Investments Limited - 35%
The Islandmagee gas storage project has a
number of advantages which enhance its
commercial case, including:
•
•
•
being immediately adjacent to gas
and electrical infrastructure,
the salt being at an optimum depth
for gas storage
being close to a water source for
solution mining of the salt to create
the caverns
The project is designed to access the
extrinsic value of the gas storage market
in the UK and Ireland by being able to
respond to short-term volatility.
Key Features
• A 500mcm (18 bcf ) fast-acting salt
gas storage facility
• Project is strategically important for
island of Ireland & GB
• Granted Project of Common Interest
status by EU in October 2013
• BP Gas Marketing have an option
to acquire 50.495% following
completion of an agreed work
programme which includes the
drilling of a well
• Planning permission and a gas
storage licence granted in October
2012
• HM Treasury stated in October 2013
that the project is eligible for the
£40bn UK Guarantee Scheme
Forward Plan
• Clarification on the regulatory
framework for the project
• Drilling of the Islandmagee-1
appraisal well
Project Overview
The project plans to create seven caverns within a layer of Permian salt greater than
200 metres thick which is located approximately 1,500 metres beneath Larne Lough.
Samples of the salt will be obtained from the drilling of the appraisal well which will
provide final design parameters for the caverns.
The estimated timescale for the project is approximately seven years, with the first
cavern becoming operational after five years.
The facility will make a significant contribution to the security of energy supplies as
well as helping to meet the greater short-term demands placed on the gas network to
support increased intermittent renewable generation.
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INFRASTRATA plc
DIRECTORS, SECRETARY, ADVISORS
AND SHAREHOLDER INFORMATION
Directors
Kenneth Maurice Ratcliff (Non-executive Chairman)
Andrew David Hindle (Chief Executive Officer)
Stewart McGarrity (Finance Director) - Appointed 25 September 2013
Craig Gouws (Chief Financial Officer) - Resigned 25 September 2013)
Walter Rookehurst Roberts (Legal and Commercial Director)
Maurice Edward Hazzard (Non-executive Director)
William Colvin (Non-executive Director)
Company secretary
Walter Rookehurst Roberts
Registered Office
Principal office
Auditor
Tax advisors
Registrars
Nominated advisor and broker
Solicitors
Bankers
Investor and public relations
Blackstable House
Longridge
Sheepscombe
Stroud
Gloucestershire, GL6 7QX
80 Hill Rise
Richmond
Surrey, TW10 6UB
Nexia Smith & Williamson
1 Bishops Wharf, Walnut Tree Close
Guildford
Surrey, GU1 4RA
Smith & Williamson LLP
1 Bishops Wharf, Walnut Tree Close
Guildford
Surrey, GU1 4RA
Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent, BR3 4TH
Arden Partners plc
125 Old Broad Street
London, EC2N 1AR
Field Fisher Waterhouse LLP
35 Vine Street
London, EC3N 2AA
Bank of Scotland plc
33 Old Broad Street
London, EC2N 1HZ
Buchanan Communications Limited
107 Cheapside
London, EC2V 6DN
INFRASTRATA plc
13
REPORT OF THE DIRECTORS
FOR THE YEAR ENDED 31 JULY 2013
The directors have pleasure in presenting their report and audited financial statements for the year ended 31 July 2013.
PRINCIPAL ACTIVITY AND REVIEW OF BUSINESS
The principal activities of the Group throughout the year were petroleum exploration and the development of a sub-surface gas
storage facility.
General
InfraStrata plc is incorporated and domiciled in England and Wales.
Business review
During the year the Group continued to develop its petroleum exploration and gas storage business.
A review of the Group’s business and funding arrangements during the financial period and its outlook for the future is given in the
Chairman’s statement and the Chief Executive’s operating review on pages 3 to 8.
Health, safety and environment
There were no reportable health, safety or environmental incidents during the financial year.
Key performance indicators
Key performance indicators, both financial and non-financial, are used by the Board to monitor progress against predetermined
objectives:
Objective
Definition
Strategy
We endeavour to develop projects in
accordance with project schedules
Predetermined and agreed project
development schedules adhered to
including submission of planning
applications
Delivery of projects to sensible time
schedules. Submit and achieve planning
permission approvals in a cost effective
and timely manner
We seek to identify new project
opportunities
Identify new project opportunities which
are expected to increase shareholder value
once development commences
Develop a balanced portfolio of projects
We aim to control general and
administrative costs keeping costs as low
as possible
Management and control of group general
and administrative costs
Maintain low cost of Group general and
administration expenditure and conserve
cash to the extent possible
We aim to prudently manage Group
working capital
Management and control of working
capital ensuring liquidity as is necessary
Management of working capital to ensure
liquidity to develop projects as planned in
development schedules
Our Group KPIs provide a measure of our progress and performance against our strategy. Key performance indicators include
identification of new economic project opportunities, submission of project planning applications in accordance with project
scheduling, project development in accordance with project development programme, management of general and administrative
costs and Group working capital management.
The KPIs are reported at Board meetings. Measurement entails analysing variance between expected and actual progress, financial
position and financial performance. Relevant performance measures for 2013 include:
• The prudent application of available cash resources. The cash balance at the financial year end was £774,745 (£948,037 including
cash resources classified as held for sale).
14
INFRASTRATA plc
REPORT OF THE DIRECTORS FOR THE YEAR ENDED 31 JULY 2013
• Net corporate and administration expenditure was once again very well controlled during the financial year - excluding gas
storage lease costs and transaction legal fees these were £1,054,008 (2012: £1,068,547).
• No new ordinary shares were issued for cash during the financial year. The proceeds of the Placing in September 2013 have
improved the Company’s balance sheet and enable the Company to be flexible about the funding of exploration costs in advance
of the completion of the farm-out of exploration well costs
eCORP continued to subscribe for the agreed $2,880,000 preference shares in Portland Gas Limited during the year.
•
• The Islandmagee Storage Limited funding transaction with BPGM progressing.
• PL1/10 well site negotiations progressed to expectation.
• P1918 well site lease secured and planning application submitted since the year end.
Principal risk factors
The directors are responsible for the effectiveness of the Group’s risk management activities and internal control processes. As a
participant in the gas storage development and upstream oil & gas industries, the Group is exposed to a wide range of business
risks in the conduct of its operations. The Group is exposed to financial, operational, strategic and external risks which are further
described below. These risks are not exhaustive and additional risks or uncertainties may arise or become material in the future. Any
of these risks, as well as other risks and uncertainties in this document, could have a material effect on the Group’s business.
Financial risks - failure to meet financial obligations
• Cost inflation and over runs
• Access to working capital
Operational risks - damage to shareholder value, environment, personnel or communities caused by operational failures
• Loss of key employees
• Delays in planning application awards
•
•
• Once hydrocarbon production projects become operational there will be an increased environmental risk (for example
Sustained exploration failures
Failure of third party services
hydrocarbon spillage)
Failure to be seen to be acting in a socially responsible manner and/or failure to maintain good local community relations.
•
Future deterioration of capital markets, reducing ability to raise new equity funding
Strategic and external risks - failure to manage and grow the business while creating shareholder value
•
• Misalignment with partners
•
Shareholder sentiment
• Mix of storage and upstream interests
• Corporate governance failings
There is no assurance that the Group’s exploration and development activities will be successful. The directors seek to manage and
mitigate these risks by developing a balanced portfolio of projects, recruitment and retention of suitably skilled personnel, through
compliance with applicable legislation and careful management of cash resources and requirements.
The successful progression of the Group’s activities depends not only on technical success, but also on the ability of the Group to
obtain appropriate financing through equity financing, farm downs, disposing of interest in projects or other means. If the Group is
unable to obtain additional financing needed to fulfil its planned work programmes some interests may be relinquished and/or the
scope of operations reduced.
Share capital
On 14 June 2013 the Company issued 500,000 new ordinary shares of 10 pence each at 10 pence per share to Andrew Hindle under
a salary sacrifice agreement which conserved £50,000 of the Company’s cash resources.
Following the financial year end on 23 September 2013 the Company issued 8,000,000 new ordinary shares of 10 pence each at 10
pence per share to raise £800,000, before expenses, to institutional and other shareholders. Following the Placing, the Company has
99,491,599 ordinary shares in issue.
Outlook
An outlook for the Group’s business and funding arrangements is given in the Chairman’s statement and the Chief Executive’s
operating review on pages 3 to 8.
INFRASTRATA plc
15
REPORT OF THE DIRECTORS FOR THE YEAR ENDED 31 JULY 2013
RESULTS AND DIVIDENDS
The 2013 financial year was an active period for the Group during which cash investment in projects was largely funded by partners.
BPGM funded Islandmagee Storage Limited to the extent of £951,588 during the financial year bringing their total investment to
£1,427,277.
The Group recognised cash revenue of £62,428 (2012: £253,932) which arose from activities including operatorship income,
consulting and technical services. Revenues in 2012 included £150,000 received for services to a former joint venture which is now
a subsidiary. These revenues offset corporate and administrative expenditure. Corporate and administrative expenditure, before gas
storage lease costs and transaction legal fees of £750,774 (2012: £190,659), was £1,054,008 (2012: £1,068,547).
The Group incurred a loss after tax of £1,642,760 (2012: £19,727,362). The loss in 2012 included net losses of £18,420,125 relating
to the impairment and restructure of the Portland gas storage project as detailed in note 16 to the financial statements. The loss for
the year, together with the balance of £19,865,967 loss brought forward leaves a retained loss of £21,508,727 to be carried forward.
The directors do not recommend the payment of a dividend (2012: £nil).
In accordance with international financial reporting standards, the Islandmagee Storage project assets and liabilities continue to be
classified as a disposal group and they are shown as held for sale and in the consolidated statement of financial position - note 21.
As a corollary, the net loss attributable to this project company, representing costs that could not be capitalized, has been classified as
arising from discontinued operations in the statement of comprehensive income.
CHARITABLE AND POLITICAL DONATIONS
Portland Gas Trust is a charity which supports initiatives focusing on the environment, geology and education with its activities
centered on Portland, Dorset. In prior years, the Group supported the Trust by incurring and paying costs on its behalf. In 2013, the
Group waived the resultant loans to the Trust which amounted to £125,708. As these loans had previously been impaired, no expense
was recognised in the year in respect of them.
During 2012 charitable donations were £250.
No donations were made for political purposes (2012: £nil).
PAYMENT OF CREDITORS
The Group’s policy for all suppliers is to fix terms of payment when entering into a business transaction, ensure that the supplier is
aware of those terms and to abide by the agreed terms of payment. The number of days’ trade creditors was 13 (2012: 26) for the
Group.
RISK MANAGEMENT
The financial risk management objectives and policies of the Company in relation to the use of financial instruments, and the
exposure of the Company and its subsidiary undertakings to its main risks, credit risk and liquidity risk, are set out in note 24 to the
financial statements.
DIRECTORS
The directors, who served during the year and subsequently, were as follows:
Executive Directors
A D Hindle
C S Gouws (resigned 25 September 2013)
S McGarrity (appointed 25 September 2013)
W R Roberts
Non-executive Directors
K M Ratcliff
M E Hazzard
W Colvin
All directors benefit from the provisions of individual directors’ Personal Indemnity insurance policies. Premiums payable to third
parties are as described in note 6.
The Company operates a share option scheme and the particulars of share options granted to directors are detailed in note 6 to the
financial statements.
16
INFRASTRATA plc
REPORT OF THE DIRECTORS FOR THE YEAR ENDED 31 JULY 2013
DIRECTORS OF THE COMPANY
Directors of the Company at the date of this Annual Report and their abridged CVs are as follows:
Ken Ratcliff (Non-Executive Chairman)
Ken Ratcliff, JP, BSc., FCA, (63) is a Chartered Accountant with extensive finance and business experience. He is currently College
Accountant at Epsom College and co-founder of Geokinetics Processing UK Limited, an oil and gas industry seismic contractor.
He was an audit manager with Touche Ross & Co in London before moving into accountancy and finance positions within the oil
and gas industry in 1978. Ken has previously held senior management positions with Ensign Geophysics Limited, Seismic Geocode
Limited, Tenneco Corporation and Merlin Geophysical Limited. He joined the Board in 2007 and became Chairman in October
2007. Ken has been a non-executive director of Egdon Resources plc since 2001.
Andrew Hindle (Chief Executive Officer)
Andrew Hindle, BSc., MSc., PhD, FGS, CGeol, (51) is a highly experienced geologist with over 25 years worldwide experience. He
holds a degree in Geological Sciences gained in 1983 from Leeds University and, following a year with BP, gained a MSc. degree in
Petroleum Geology in 1985 from Aberdeen University. In 1998 he completed a PhD (part-time) through the Open University. He
received the J. C. “Cam” Sproule Memorial Award from the American Association of Petroleum Geologists in 1999. He worked for
Texaco from 1985 until 1996 on UK and international petroleum exploration and development projects, working overseas from 1990
to 1994. Subsequently, he worked for Anadarko Algeria Corporation from 1996 to 1997. In 1997 he became a founding director
of Egdon Resources plc and, following the demerger of Egdon and InfraStrata, remained a non-executive director of Egdon until
February 2011. Andrew has been the Chief Executive of the Group since 2005. Andrew is also a director of Geofocus Limited and
Toffee Limited.
Stewart McGarrity (Finance Director)
Stewart McGarrity, BCom. CA, (52) has 27 years of UK and international experience in both senior finance and commercial roles.
Following qualification as a Chartered Accountant, Stewart spent a number of years with Deloitte in Zimbabwe and Hong Kong
in senior audit and technical roles. Stewart then held a senior financial position with the Airport Authority in Hong Kong during
the construction and commercial development of Hong Kong International Airport. Since returning to the UK he has worked with
property investor and developer MEPC plc, based in London as Group Financial Controller and with tie Limited, in Edinburgh,
developing and maintaining the business case for Edinburgh Trams and other transport projects. Stewart joined InfraStrata in July
2013 as Financial Controller.
Walter Roberts (Legal Director and Company Secretary)
Walter Roberts, MA (Cantab.), (62) is an oil and gas lawyer with a strong record in commercial and legal management. Walter
qualified as a solicitor with Simmons & Simmons before joining Phillips Petroleum in 1980. He then worked for Lasmo in both
the UK and in Australia where he set up its legal department. Walter was the principal negotiator for UK joint venture commercial
negotiations and gas sales for Talisman Energy (UK) Limited (previously Bow Valley Petroleum (U.K.) Limited) until 1995. More
recently he was the London partner of Cummings & Co. and he is currently an executive director of Pinnacle Energy Limited and a
non-executive director of Egdon Resources plc. Walter joined the Board of Egdon Resources plc in 2001 as a non-executive director.
He joined the Group in an executive role in 2007.
Maurice Hazzard (Non-Executive Director)
Maurice Hazzard, (75) has extensive business experience in the oil and gas industry, particularly in large offshore projects. He has
held senior positions with Phillips Petroleum, Hamilton Bros. Oil & Gas Limited and Halyard Offshore Limited. Between 1979
and 1989 Maurice was responsible for development of the Energy Division of the Tung Group of companies, based in Hong Kong,
and during this period was Executive Chairman of Houlder Marine Drilling Limited. From 1989 to 1996 he was a consultant with
Maritime Audit & Technical Services Limited, consulting to the international offshore oil and marine services industry. From 1996
to 1999 he was Chairman and CEO of PD Systems International Limited, a UK electronics manufacturer. He is also non-executive
Chairman of Orbitron Technologies Limited, a software company.
William Colvin (Non-Executive Director)
William Colvin, BCom. CA, (55) is a Chartered Accountant and has wide experience in the oil and gas, and healthcare sectors in
senior management and board positions of large corporations. He was Finance Director of British-Borneo Oil & Gas Plc from
1992 to 1999. From 1990 to 1992, William was Finance Manager/Director at Oryx UK Energy. From 1984 to 1989, he worked in
a variety of financial roles for Atlantic Richfield (ARCO) Inc. He qualified as a Scottish Chartered Accountant in 1982 and holds a
Bachelor of Commerce degree from the University of Edinburgh. William is currently a non-executive director of Energy XXI, the
independent oil & natural gas exploration and production company.
DIRECTORS EMOLUMENTS
The directors’ emoluments are disclosed in note 6 to the Financial Statements.
INFRASTRATA plc
17
Non-executive Directors
K M Ratcliff
M E Hazzard
W Colvin
DIRECTORS AND SUBSTANTIAL SHAREHOLDINGS
The directors of the Company held the following beneficial shareholdings as at 30 November 2013.
Ordinary shares of 10p each
Ken Ratcliff
Andrew Hindle
Stewart McGarrity (appointed 25 September 2013)
Craig Gouws (resigned 25 September 2013)
Walter Roberts
Maurice Hazzard
William Colvin
Number
104,000
7,422,625
-
277,226
1,132,378
19,326
272,727
%
0.10
7.46
-
0.28
1.14
0.02
0.27
The Company has received notification of the following interests in 3% or more of the Company’s issued share capital at 30
November 2013. The percentages presented are at the date of notification.
Ordinary shares of 10p each
JP Morgan Asset Management Holdings Inc.
Mark Abbott
Maven Income and Growth VCT 5 PLC
Calculus Nominees Limited
CORPORATE GOVERNANCE
Number
15,516,600
6,294,806
2,974,013
1,858,950
%
18.26
6.92
3.80
3.60
The UK Corporate Governance Code
The directors recognise the value of the UK Corporate Governance Code (“the Code”) and whilst under the AIM rules compliance is
not required the directors believe that the Company applies the recommendations in so far as is appropriate for a public company of
its size. The Company therefore does not fully comply with the Code.
The Board
At the financial year end the Board was comprised of three Executive Directors and three Non-executive directors whose
background and experience are relevant to the Company’s activities. As such, the directors are of the opinion that the Board has a
suitable balance and that the recommendations of the Code have been implemented to an appropriate level. The Board, through
the directors, maintain regular contact with its advisors and public relations consultants in order to ensure that the Board develops
an understanding of the views of major shareholders about the Company. All directors have access to the advice and services of the
company secretary who is responsible to the Board for ensuring that the Board procedures are followed and that the applicable rules
and regulations are complied with. In addition, the company secretary will ensure that the directors receive appropriate training as
necessary. The appointment and removal of the company secretary is a matter for the Board as a whole.
The table below contains details on the number of meetings held during the period and individual director attendance.
Number of meetings held
during the 2013 financial
year
Executive Directors
Andrew Hindle
Craig Gouws
Walter Roberts
Non-executive Directors
Ken Ratcliff
Maurice Hazzard
William Colvin
Board
9§
Audit Committee
Renumeration Committee
4
2
Number of meetings
attended
Number of meetings
attended
Number of meetings
attended
9
8
9
7
7
7
-
-
-
4
-
4
-
-
-
2
2
2
§ Of which 2 were minimally attended as they were to finalise business already approved by all directors
18
INFRASTRATA plc
REPORT OF THE DIRECTORS FOR THE YEAR ENDED 31 JULY 2013
CORPORATE GOVERNANCE
Audit Committee
The Audit Committee met four times in the year to 31 July 2013. Its members are William Colvin (Chairman) and Ken Ratcliff.
Members of the committee attended all meetings either in person or by telephone. Senior representatives of the external auditors
attend these meetings if considered appropriate. The external auditor has unrestricted access to the Chairman of the committee.
The role of the Audit Committee includes:
• Consideration of the appointment of the external auditor and the audit fee.
• Reviewing the nature, scope and results of the external audit.
• Monitoring the integrity of the financial statements and interim report.
• Discussing with the Group’s auditors problems and reservations arising from the interim and final results.
• Reviewing the external auditor’s management letter and management’s response.
• Reviewing on behalf of the Board the Group’s system of internal control and making recommendations to the Board.
The committee also keeps under review the necessity for establishing an internal audit function but considers that, given the size of
the Group and the close involvement of senior management in day-to-day operations, there is currently no requirement for such
a function. Notwithstanding the absence of an internal audit function, the committee keeps under review the effectiveness of the
Group’s internal controls and risk management systems.
Renumeration Committee
The members of the Remuneration Committee are Maurice Hazzard (Chairman), Ken Ratcliff and William Colvin. The committee
met twice during the year and the meeting was attended by all current members. The Group’s policy is to remunerate senior
executives fairly in such a manner as to facilitate the recruitment, retention and motivation of staff. The Remuneration Committee
recommends to the Board a framework for the remuneration of the Chairman, the Executive Directors and the senior management
of the Group.
The principal objectives of the Committee include:
• Determining and recommending to the Board the remuneration policy for the Chief Executive and Executive Directors;
• Reviewing the design of share incentive plans for approval by the Board and determining the annual award policy to Executive
Directors under existing plans; and
During the year and the prior year, the Remuneration Committee discussed the continuing need to maintain motivation of the
Executive during a period of intense activity and changing focus. Salaries for Executive Directors have not been increased and there
have been no bonus payments for the past two years reflecting a commitment by the Executive Directors to continuing control
over the Group’s administrative expenses and alignment of their remuneration and other incentives to the delivery of value to
shareholders.
The view of the committee is that the salaries remain competitive, but are not over generous, and therefore did not recommend an
adjustment during the current financial year. Non-executive fees are considered and agreed by the Board as a whole and there has
been no specific review in this regard during the period. The committee remains mindful of the continuing responsibility and reliance
placed upon all of the Company’s employees and will endeavour to ensure that this is reflected in appropriate remuneration packages.
Nomination Committee
The Company has not established a Nomination Committee as the directors are of the opinion that such a committee is
inappropriate given the current size of the Company.
INFRASTRATA plc
19
REPORT OF THE DIRECTORS FOR THE YEAR ENDED 31 JULY 2013
CORPORATE GOVERNANCE
Relations with Shareholders
Communication with shareholders is given high priority and the Company therefore communicates regularly with shareholders
including the release of announcements for the interim and annual results and after significant developments. The Annual General
Meeting is normally attended by all directors. Shareholders, including private investors, are invited to ask questions on matters
including the Group’s operations and performance and to meet with the directors after the formal proceedings have ended.
Representatives of the Board, at least twice per year, together with the Company brokers go on road shows during which existing
and new investors are updated on Company affairs. The Company maintains a website (www.infrastrata.co.uk) for the purpose of
improving information flow to shareholders as well as potential investors. The website contains all press announcements and financial
reports as well as extensive operational information about the Group’s activities and enquiries from individual shareholders on
matters relating to their shareholdings and the business of the Group are welcomed. The Board encourages shareholders to attend the
Annual General Meeting, at which members of the Board are available to answer questions.
Arden Partners plc who were appointed as Nominated Advisor and broker to the Company during the prior financial year has
actively been researching the Company and its business followed by research notes being issued.
Internal controls
The directors are responsible for the Group’s system of internal controls, the setting of appropriate policies on those controls, and
regular assurance that the system is functioning effectively and that it is effective in managing business risk. Internal control systems
are designed to meet the particular needs of the Group and to manage rather than eliminate the risk of failure to meet business
objectives. The internal controls cover financial, operational and compliance matters and are reviewed on an on-going basis.
The directors consider that the frequency of Board meetings and the information provided to the Board in relation to Group
operations assists the identification, evaluation and management of significant risks relevant to its operations on a continuous basis.
The Group’s internal controls can only provide reasonable and not absolute assurance against material misstatement or loss or the
risk of failure to meet business objectives. Having thus monitored risk management and internal control processes in place, the Board
considers that the Company’s internal control systems operated appropriately during the year and up to the date of signing of the
Annual Report and Financial Statements.
GOING CONCERN
The directors have prepared the financial statements on the going concern basis which assumes that the Group will continue in
operational existence for the foreseeable future. The basis of this assumption is detailed in the accounting policies in note 2 to the
financial statements.
After making inquiries and considering all the relevant factors in relation to the Group, the directors have a reasonable expectation
that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue
to adopt the going concern basis of accounting in preparing the annual financial statements.
20
INFRASTRATA plc
DIRECTORS’ RESPONSIBILITIES
The directors are responsible for preparing the Report of the Directors and the financial statements in accordance with applicable law
and regulations.
UK Company law requires the directors to prepare Group and Company financial statements for each financial year. Under that law
the directors have elected (as required by the rules of the AIM market of the London Stock Exchange) to prepare Group financial
statements in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union (“EU”)
and have elected to prepare the Company financial statements in accordance with IFRS as adopted by the EU and as applied in
accordance with the provisions of the Companies Act 2006.
The Group financial statements are required by law and IFRS adopted by the EU to present fairly the financial position and
performance of the Group; the Companies Act 2006 provides in relation to such financial statements that references in the relevant
part of that Act to financial statements giving a true and fair view are references to their achieving a fair presentation.
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 Company and of the Group and of the profit or loss of the group for that period.
In preparing each of the Group and Company financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
•
• make judgements and estimates that are reasonable and prudent;
•
•
state whether they have been prepared in accordance with IFRSs as adopted by the EU;
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and 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 to enable them to ensure
that the financial statements comply with 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.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the InfraStrata
plc website.
Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation
in other jurisdictions.
DISCLOSURE OF INFORMATION TO THE AUDITOR
In the case of each person who was a director at the time this report was approved: - so far as the director was aware there was no
relevant audit information of which the Company’s auditor was unaware; and the director had taken all steps that the director ought
to have taken as a director to make himself aware of any relevant information and to establish that the Company’s auditor was aware
of that information.
This information is given and should be interpreted in accordance with the provisions of s418 of the Companies Act 2006.
AUDITOR
A resolution to re-appoint the auditor, Nexia Smith & Williamson, will be proposed at the forthcoming Annual General Meeting.
By order of the Board
A Hindle
Director
2 December 2013
INFRASTRATA plc
21
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
INFRASTRATA PLC
We have audited the financial statements of InfraStrata plc for the year ended 31 July 2013 which comprise the Consolidated
Statement of Comprehensive Income, the Consolidated and Parent Company Statements of Financial Position, the Consolidated
and Parent Company Statements of Cash Flow, the Consolidated and Parent Company Statements of Changes in Equity, and the
related notes 1 to 37. 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 auditor
As explained more fully in the Directors’ Responsibilities Statement on page 21, 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 the financial
statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us
to comply with the Financial Reporting Council’s (FRC’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 FRC’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 2013
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; and
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.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Report of the directors’ 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.
Andrew Bond
Senior Statutory Auditor,
for and on behalf of
Nexia Smith & Williamson
Statutory Auditor, Chartered Accountants, 1 Bishops Wharf, Walnut Tree Close, Guildford, GU1 4RA
2 December 2013
22
INFRASTRATA plc
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 JULY 2013
Continuing operations
Revenue
Cost of sales
Gross profit
Administrative expenses
Operating loss
Finance income
Share of loss of Joint Venture
Impairment of interest in Joint Venture
Gain arising on assuming control of the former Joint Venture
Share of loss of Associates
Loss before taxation
Taxation
Loss for the year from continuing operations
Loss for the year from discontinued operations
Loss for the year attributable to the equity holders of the parent
Other comprehensive income
Total comprehensive loss for the year attributable to the equity holders of the parent
Basic and diluted earnings per share
Continuing operations
Discontinued operations
Continuing and discontinued operations
Notes
4
9
16
16
16
16
10
11
12
2013
£
62,428
-
62,428
2012
£
253,932
-
253,932
(1,804,782)
(1,259,206)
(1,742,354)
(1,005,274)
25,566
2,596
-
-
-
(43,862)
(10,306,395)
(10,626,210)
2,512,480
(174,869)
(1,760,650)
(19,597,672)
315,188
-
(1,445,462)
(19,597,672)
(197,298)
(129,690)
(1,642,760)
(19,727,362)
-
-
(1,642,760)
(19,727,362)
(1.59)p
(0.22)p
(1.81)p
(23.30)p
(0.15)p
(23.45)p
INFRASTRATA plc
23
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 JULY 2013
Notes
2013
£
2012
£
Non-current assets
Intangible fixed assets
Property, plant and equipment
Investments in associates
Other receivables
Total non-current assets
Current assets
Trade and other receivables
Available for sale financial assets
Cash and cash equivalents
Assets classified as held for sale
Total current assets
Current liabilities
Trade and other payables
Deferred income tax liabilities
Liabilities directly associated with assets classified as held for sale
Total current liabilities
Net current assets
Non-current liabilities
Deferred income tax liabilities
Net assets
Shareholders’ funds
Share capital
Share premium
Merger reserve
Share based payment reserve
Retained earnings
Attributable to owners of the parent
Non-controlling interests
Total equity
Company registration number: 06409712
Approved and authorised for issue by the Board on 2 December 2013
A Hindle
Director
24
S McGarrity
Director
INFRASTRATA plc
14
15
16
17
18
19
20
21
22
23
21
23
25
26
27
28
3,478,843
3,399,473
1,974
2,627,973
-
6,108,790
893,563
12,500
774,745
1,680,808
4,190,267
5,871,075
(533,236)
(179,478)
(149,560)
(862,274)
5,008,801
7,471
2,705,131
768,102
6,880,177
1,114,145
12,500
1,918,201
3,044,846
3,206,003
6,250,849
(905,750)
-
(73,032)
(978,782)
5,272,067
(706,630)
(1,201,296)
10,410,961
10,950,948
9,149,160
9,099,160
11,920,219
11,920,219
8,988,112
434,920
8,988,112
333,735
(21,508,727)
(19,865,967)
8,983,684
1,427,277
10,475,259
475,689
10,410,961
10,950,948
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 JULY 2013
Non-current assets
Intangible exploration assets
Property, plant and equipment
Investments
Total non-current assets
Current assets
Trade and other receivables
Available for sale assets
Cash and cash equivalents
Total current assets
Current liabilities
Trade and other payables
Net current assets
Net assets
Shareholders’ funds
Share capital
Share premium
Merger reserve
Share based payment reserve
Retained earnings
Total equity
Company registration number: 06409712
Approved and authorised for issue by the Board on 2 December 2013
A Hindle
Director
S McGarrity
Director
Notes
14
15
16
18
19
20
22
25
26
27
2013
£
113,934
1,974
600
116,508
3,861,702
12,500
730,372
4,604,574
(503,826)
4,100,748
4,217,256
2012
£
34,564
7,153
600
42,317
3,623,518
12,500
1,814,603
5,450,621
(858,636)
4,591,985
4,634,302
9,149,160
9,099,160
11,920,219
11,920,219
8,466,827
434,920
8,466,827
333,735
(25,753,870)
(25,185,639)
4,217,256
4,634,302
INFRASTRATA plc
25
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 JULY 2013
Share
capital
£
Share
premium
£
Share based
payment
reserve
£
Merger
reserve
£
Attributable
to the
owners of
the parent
£
Retained
earnings
£
Non-
controlling
interest
£
Total equity
£
Balance at 31 July 2011
7,826,433
11,848,946
8,988,112
322,431
(138,605)
28,847,317
-
28,847,317
Loss for the year
Total comprehensive loss for the year
-
-
-
-
Shares issued
1,272,727
71,273
Share based payments
BP Gas Marketing Limited - Islandmagee
Storage Limited option (note 28)
-
-
-
-
-
-
-
-
-
-
(19,727,362)
(19,727,362)
-
(19,727,362)
-
(19,727,362)
(19,727,362)
-
(19,727,362)
-
11,304
-
-
-
-
1,344,000
11,304
-
-
1,344,000
11,304
-
475,689
475,689
Balance at 31 July 2012
9,099,160
11,920,219
8,988,112
333,735
(19,865,967)
10,475,259
475,689
10,950,948
Loss for the year
Total comprehensive loss for the year
Shares issued
Share based payments
BP Gas Marketing Limited - Islandmagee
Storage Limited option (note 28)
-
-
50,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
101,185
-
(1,642,760)
(1,642,760)
(1,642,760)
(1,642,760)
50,000
101,185
-
-
-
-
-
-
-
(1,642,760)
(1,642,760)
50,000
101,185
-
951,588
951,588
Balance at 31 July 2013
9,149,160
11,920,219
8,988,112
434,920
(21,508,727)
8,983,684
1,427,277
10,410,961
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 JULY 2013
Balance at 31 July 2011
Loss for the year
Total comprehensive loss for the year
Shares issued
Share based payments
Balance at 31 July 2012
Loss for the year
Total comprehensive loss for the year
Shares issued
Share based payments
Balance at 31 July 2013
Share
capital
£
Share
premium
£
Share based
payment
reserve
£
Merger
reserve
£
Retained
earnings
£
Total equity
£
7,826,433
11,848,946
8,466,827
322,431
(1,390,342)
27,074,295
-
-
-
-
1,272,727
71,273
-
-
-
-
-
-
-
(23,795,297)
(23,795,297)
-
(23,795,297)
(23,795,297)
-
11,304
-
-
1,344,000
11,304
9,099,160
11,920,219
8,466,827
333,735
(25,185,639)
4,634,302
-
-
50,000
-
-
-
-
-
-
-
-
-
-
-
-
101,185
(568,231)
(568,231)
(568,231)
(568,231)
-
-
50,000
101,185
9,149,160
11,920,219
8,466,827
434,920
(25,753,870)
4,217,256
26
INFRASTRATA plc
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 JULY 2013
Net cash (used in) operating activities
Investing activities
Interest received
Purchase of exploration intangible assets
Purchase of gas storage intangible assets
Purchase of equipment
Proceeds from the disposal of exploration intangible assets
PGL preference shares receipts
Cash inflow on acquisition of subsidiary
Notes
29
2013
£
2012
£
(2,249,084)
(423,415)
5,318
(146,128)
(754,390)
(368)
150,000
899,608
-
2,596
(34,564)
(371,510)
-
-
156,862
53,574
Net cash generated from/(used in) investing activities
154,040
(193,042)
Financing activities
Proceeds on issue of ordinary shares
Contribution from non-controlling interest
Net cash generated from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Cash and cash equivalents consist of:
-
951,588
951,588
(1,143,456)
1,918,201
774,745
1,344,000
475,689
1,819,689
1,203,232
714,969
1,918,201
Cash at bank
20
£774,745
£1,918,201
Significant non-cash transactions
There were no significant non-cash transactions in the year. The significant non-cash transaction for the year ended 31 July 2012 was
the assumption of control over the previous joint venture.
Cash flows arising from discontinued activities
Cash flows arising from discontinued operations are analysed in note 29.
INFRASTRATA plc
27
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 JULY 2013
Net cash (used in)/generated from operating activities
Investing activities
Interest received
Purchases of exploration intangible assets
Purchases of equipment
Proceeds on the disposal of exploration intangible assets
Net cash generated from/(used in) investing activities
Financing activities
Proceeds on issue of ordinary shares
Net cash generated from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Cash and cash equivalents consist of:
Notes
29
2013
£
(1,092,979)
5,245
(146,129)
(368)
150,000
8,748
-
-
(1,084,231)
1,814,603
730,372
2012
£
385,086
1,633
(34,564)
-
-
(32,931)
1,344,000
1,344,000
1,696,155
118,448
1,814,603
Cash at bank
20
£730,372
£1,814,603
Significant non-cash transactions
There were no significant non-cash transactions in the year. The significant non-cash transaction for the year ended 31 July 2012 was
the recognition of impairment losses in respect of the company’s investments in and balances with its subsidiaries.
28
INFRASTRATA plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 JULY 2013
1. GENERAL INFORMATION
InfraStrata plc is a company incorporated in England & Wales under the Companies Acts 2006 and is domiciled in the United
Kingdom and is listed on the AIM market of the London Stock Exchange.
2. ACCOUNTING POLICIES
The financial statements are based on the accounting policies set out below which have been consistently applied. The estimates and
judgements used in applying these accounting policies are summarised in note 33.
Basis of preparation
InfraStrata plc adopted International Financial Reporting Standards (IFRS) as adopted by the European Union effective in July
2013, as the basis for preparation of its financial statements. The financial information has been prepared under the historical cost
convention as modified by the revaluation of certain financial assets.
Going concern
The directors have prepared the financial statements on the going concern basis which assumes that the Group will continue in
operational existence for the foreseeable future.
The Islandmagee gas storage project, in which InfraStrata plc currently holds a 65% interest, is funded by BPGM. Under the terms
of a Joint Appraisal Agreement, BPGM agreed to fund the activities necessary to develop the project, including the drilling of the
first well, up to the point where a decision can be made on whether to proceed with its detailed engineering design. Subsequent
to this decision, it is expected that BPGM will exercise its option to acquire 50.495% of Islandmagee Storage Limited, leaving
InfraStrata with a 32.18% holding. The directors believe that a further disposal of an interest in Islandmagee Storage Limited is the
best way of maximising shareholder value by allowing an entity other than InfraStrata plc to develop this project. It is expected that
such a disposal will provide working capital for the Group and will transfer responsibility for funding future development of the
Islandmagee gas storage project to the new shareholder.
The Group generally seeks to farmout the costs of exploration on its directly operated licences to manage risk and minimise cash
requirements. The Group is currently seeking to farmout its current paying interests on exploration licences PL1/10 and P1918 prior
to commitment to drilling exploration wells.
On 1 June 2012, eCORP agreed to subscribe for US$2.88 million of Portland Gas Limited preference shares over the following two
years. The funds received to date have enabled the Company to settle existing commitments including lease payments in respect of
land at Portland.
On 23 September 2013 the Company issued 8,000,000 new ordinary shares of 10 pence each at 10 pence per share to institutional
and other shareholders and raised £800,000 before costs. The proceeds of the Placing have improved the Company’s balance sheet
and enable the Company to be flexible about the funding of exploration costs in advance of the completion of the farmout of
exploration well costs.
After making inquiries and considering all the relevant factors in relation to the Group, the directors have a reasonable expectation
that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue
to adopt the going concern basis of accounting in preparing the annual financial statements.
Adoption of new and revised standards
At the date of approval of these financial statements, the following Standards and Interpretations which have not yet been applied in
these financial statements were in issue but not yet effective (and in some cases, had not yet been adopted by the EU) and that may
have an impact going forward:
IFRS 9 Financial Instruments: Recognition and measurement
INFRASTRATA plc
29
NOTES TO THE FINANCIAL STATEMENTS
IFRS 10 Consolidated Financial Statements
IFRS 11 Joint Arrangements
IFRS 12 Disclosure of Interests in Other Entities
IFRS 13 Fair Value Measurement
IAS 19 Employee benefits
IAS 27 Separate Financial Statements
IAS 28 Investments in Associates and Joint Ventures
The directors anticipate that all of the above standards and interpretations will be adopted in the Group’s financial statements in
future periods. Adoption of these standards is not expected to have a material impact on the Group.
Basis of consolidation
The financial information incorporates the financial information of the Company and entities controlled by the Company. Control
is achieved where the Company has power to govern the financial and operating policies of an investee entity so as to obtain benefits
from its activities.
Business combinations and goodwill
On acquisition, the assets and liabilities and contingent liabilities of subsidiaries are measured at their fair values at the date of
acquisition. Any excess of cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill.
Any deficiency of the cost of acquisition below the fair values of the identifiable net assets acquired (i.e. discount on acquisition)
is credited to the income statement in the period of acquisition. Goodwill arising on consolidation is recognised as an asset
and reviewed for impairment at least annually. Any impairment is recognised immediately in the income statement and is not
subsequently reversed.
When a business combination is achieved in stages, the Group’s previously held equity interest in the acquiree is re-measured to fair
value at the acquisition date and the resulting gain or loss, if any, is recognised in profit or loss in the statement of comprehensive
income.
Non-controlling interests that are present ownership interests are recognised at the non-controlling interests’ proportionate share of
the recognised net assets, except that negative non-controlling interests are not recognised where the Group is obliged to bear the
non-controlling interest’s share of any net liabilities.
Oil and gas exploration joint ventures
The Group is engaged in oil and gas exploration and development which may lead to production through unincorporated joint
ventures. The Group accounts for its share at cost of the results and net assets of these joint ventures as jointly controlled assets
based on its percentage ownership of these joint ventures. In addition, where the Group acts as operator to the joint venture, the
gross liabilities and receivables (including amounts due to and from non-operating partners) of the joint venture are included in the
statement of financial position. Details of the Group’s oil & gas exploration joint ventures accounted for as jointly controlled assets
are provided in note 35.
Farmouts in the exploration and evaluation phase
The Group does not record any expenditure made by the farminee on its account. It also does not recognise any gain or loss on its
exploration and evaluation farmout arrangements but redesignates any costs previously capitalised in relation to the whole interest as
relating to the partial interest retained. Any cash consideration received directly from the farminee is credited against costs previously
capitalised in relation to the whole interest with any excess accounted for by the farminor as a gain on disposal.
Interests in associates
The Group has interests in associates, which are entities over which the Group has significant influence but not control and which
are not joint ventures. The Group recognises its interest in associates using equity accounting. The financial statements of the
associates are prepared for the same reporting year as the parent company, using consistent accounting policies.
Disposal groups held-for-sale
Disposal groups are classified as assets held for sale when their carrying amount is to be recovered principally through a sale
transaction and a sale is considered highly probable. They are stated at the lower of carrying amount and fair value less costs to sell if
30
INFRASTRATA plc
NOTES TO THE FINANCIAL STATEMENTS
their carrying amount is to be recovered principally through a sale transaction rather than through continuing use.
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker
as required by IFRS 8 “Operating Segments”. The chief operating decision-maker, who is responsible for allocating resources and
assessing performance of the operating segments, has been identified as the Board of directors.
The accounting policies of the reportable segments are consistent with the accounting policies of the Group as a whole. Segment
profit represents the profit earned by each segment without allocation of gains or losses on the disposal of available-for-sale
investments, investment income, interest payable and tax. This is the measure of profit that is reported to the Board of directors for
the purpose of resource allocation and the assessment of segment performance.
When assessing segment performance and considering the allocation of resources, the Board of directors review information about
segment assets and liabilities.
Property plant and equipment
Property plant and equipment is stated at cost less accumulated depreciation and any recognised impairment loss. The initial cost of
an asset comprises its purchase price or construction cost and any costs directly attributable to bringing the asset into operation.
Depreciation is charged so as to write off the cost of assets, over their estimated useful lives, using the straight-line method, once the
asset has been brought into use, on the following basis:
Office equipment
Freehold land
20-33%
0%
There is no depreciation to charge in respect of capitalised tangible gas storage inclusive of related and pipeline costs as the assets are
fully impaired.
The carrying values of property plant and equipment are reviewed for impairment when events or changes in circumstances indicate
that the carrying value may not be recoverable.
Gas storage research and development costs
Research expenditure, incurred when undertaking exploration activities for gas storage opportunities, is written off in the year in
which it is incurred.
Capitalisation and impairment of intangible gas storage assets
Costs of development of gas storage facilities are capitalised as intangible assets once it is probable that future economic benefits that
are attributable to the assets will flow to the Group and until consent to construct has been awarded, at which time the capitalised
costs are transferred to plant and equipment provided there being reasonable certainty of construction proceeding. The nature of
these costs includes all direct costs incurred in project development. No amortisation or depreciation is provided until the storage
facility is brought into commercial use.
An impairment test is performed annually and whenever events or circumstances arising during the development phase indicate
that the carrying value of a development asset may exceed its recoverable amount. The aggregate carrying value is compared against
the expected recoverable amount of the cash generating unit, generally by reference to the present value of the future net cash flows
expected to be derived from storage revenue. The present value of future cash flows is calculated on the basis of future storage prices
and cost levels as forecast at the balance sheet date. Capitalisation of project rental costs are reviewed on a regular basis and expensed
when the physical progress on the project is in the directors opinion, significantly less than expected.
The cash generating unit applied for impairment test purposes is generally an individual gas storage facility. Where the carrying
value of the facility is greater than the present value of its future cash flows a provision is made. Any such provisions are charged to
cost of sales.
Oil & gas exploration and evaluation expenditure and assets
The Group accounts for oil & gas expenditure under the full cost accounting method.
INFRASTRATA plc
31
NOTES TO THE FINANCIAL STATEMENTS
Pre-licence costs (other than payments to acquire rights to explore) are those costs incurred prior to acquiring the rights to explore
and are charged directly to the income statement.
All costs incurred after the rights to explore an area have been obtained, such as geological, geophysical, data costs and other direct
costs of exploration and appraisal are accumulated and capitalised as exploration and evaluation assets (“E&E”).
E&E costs are not amortised prior to the conclusion of appraisal activities. If technical feasibility is demonstrated and commercial
reserves are discovered, then following development sanction, the carrying value of the relevant E&E asset will be reclassified as a
development and production asset, but only after the carrying value of the E&E asset has been assessed for impairment, and where
appropriate, its carrying value adjusted. Development assets will be depreciated on the unit production method.
If after completion of appraisal activities in an area, it is not possible to determine technical feasibility or commercial viability,
then the costs of such unsuccessful exploration and evaluation are written off to the income statement as a component of costs of
sales in the period the relevant events occur. The costs associated with any wells which are abandoned are fully amortised when the
abandonment decision is taken.
When oil or gas is sold from E&E assets, the carrying value of the E&E asset is reduced by the gross profit generated from the sale.
Investments
Investments in subsidiaries are stated at cost less provision for impairments.
Taxation
Tax expense represents the sum of the tax currently payable and any deferred tax. The taxable result differs from the net result as
reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and
it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that
have been enacted or substantially enacted by the balance sheet date. Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in
the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally
recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable
profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised
if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets
and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred tax liabilities are recognised
for taxable temporary differences arising on investments in subsidiaries, except where the Group is able to control the reversal of the
temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at
the tax rates that are expected to apply in the period when the liability is settled or the asset realised.
Deferred tax is charged or credited to the income statement, except when it relates to items charged or credited directly to equity, in
which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax
liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current assets
and liabilities on a net basis.
Foreign currency
Transactions in foreign currency are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance
sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the
balance sheet date and gains or losses are taken to operating profit.
Leases
Leases are classified as finance leases or hire purchase lease contracts whenever the terms of the lease transfer substantially all the
risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
32
INFRASTRATA plc
NOTES TO THE FINANCIAL STATEMENTS
Rental costs under operating leases are charged on a straight-line basis over the lease term.
Share based payment transactions
Employees (including senior executives) of the Group receive part of their remuneration in the form of share based payment
transactions, whereby employees render services as consideration for equity instruments (equity settled transactions).
The cost of equity settled transactions is recognised, together with a corresponding increase in equity, over the period in which the
performance and or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the
award (the vesting date). The cumulative expense recognised for equity settled transactions at each reporting date until the vesting
date reflects the extent to which the vesting period has expired and the Group’s best estimate of the number of equity instruments
that will ultimately vest. The income statement charge or credit for a period represents the movement in cumulative expense
recognised as at the beginning and end of that period. No expense is recognised for awards that do not ultimately vest, except for
awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether or not the market
condition is satisfied, provided that all other performance conditions are satisfied.
Where the terms of an equity settled award are modified, as a minimum an expense is recognised as if the terms had not been
modified. In addition, an expense is recognised for any modification which increases the total fair value of the share based payment
arrangement, or is otherwise beneficial to the employee as measured at the date of modification.
Where an equity settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet
recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated
as a replacement award on the date that is granted, the cancelled and new awards are treated as if they were a modification of the
original award, as described in the previous paragraph.
Retirement benefit costs
The Company has a defined contribution plan which requires contributions to be made into an independently administered fund.
The amount charged to the income statement in respect of pension costs reflects the contributions payable in the year. Differences
between contributions payable during the year and contributions actually paid are shown as either accrued liabilities or prepaid assets
in the balance sheet.
Financial instruments
Financial assets and financial liabilities are recognised on the balance sheet when the Group becomes a party to the contractual
provisions of the instrument.
Trade and other receivables are measured at initial recognition at fair value and are subsequently measured at amortised cost using
the effective interest method. 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 income statement. Cash and cash equivalents comprise cash held by
the Group and short-term bank deposits with an original maturity of three months or less.
Trade and other payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective
interest rate 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. Equity instruments issued by the
Company are recorded at the proceeds received, net of direct issue costs.
Interest bearing bank loans, overdrafts and other loans are recorded at the proceeds received, net of direct issue costs. Finance costs
are accounted for on an accruals basis in the income statement using the effective interest method.
Available for sale financial assets are those non-derivative financial assets that are designated as available for sale or are not classified
as financial assets at fair value through profit and loss, held to maturity investments or loans and receivables. After initial recognition
available for sale financial assets are measured at fair value with gains or losses being recognised as a separate component of equity
until the investment is derecognised or until the investment is determined to be impaired at which time the cumulative gain or loss
previously reported in equity is included in the income statement. The fair value of investments that are actively traded in organised
financial markets is determined by reference to quoted market bid prices at the close of business on the balance sheet date. For
investments where there is no active market, fair value is determined using appropriate valuation techniques.
INFRASTRATA plc
33
NOTES TO THE FINANCIAL STATEMENTS
Revenue
Revenue is recognised as the fair value of the consideration received or receivable and represents the amounts receivable for services
delivered during the normal course of business. Revenue is recognised as the services are delivered.
Operating activities
The activities of investments controlled by InfraStrata plc are treated as operating activities in the Group financial statements.
Finance income
Finance income is recognised when it is probable that the economic benefits will flow to the group and the amount of income can
be measured reliably. Income is accrued on a time basis, by reference to the principal outstanding and the effective interest rate
applicable.
3. SEGMENT INFORMATION
The directors have determined the Group’s operating segments by reference to the risk profile of the Group’s activities, which are
affected predominately by location of the Group’s assets. The Group’s head office is located in the United Kingdom with operations
located in Dorset and Northern Ireland. The segmental businesses activities are the development and construction of gas storage and
associated facilities, and petroleum exploration.
Dorset
Northern Ireland
Gas Storage
Exploration
Gas Storage
Exploration
Central income
and overheads
Total
2013
Continuing activities
Revenue
49,311
Administrative expenses
(868,440)
3,421
-
Share of loss of associates
-
(24,134)
Finance income
Taxation
Discontinued activities
20,248
247,890
(550,991)
-
67,298
46,585
-
-
-
-
-
-
4,327
-
(19,728)
-
-
5,369
62,428
(936,342)
(1,804,782)
-
5,318
-
(43,862)
25,566
315,188
(15,401)
(925,655)
(1,445,462)
Administrative expenses
-
-
*(197,298)
-
-
(197,298)
(550,991)
46,585
*(197,298)
(15,401)
(925,655)
(1,642,760)
Analysis of:
Assets by segment
882,522
4,811,862
*4,190,267
1,301,803
Liabilities by segment
(189,829)
(715,212)
*(149,560)
(383,980)
Net assets per segment
692,693
4,096,650
*4,040,707
917,823
Capital expenditure
Depreciation
-
-
33,394
*724,373
112,735
-
-
-
793,412
(130,324)
663,088
368
5,865
11,979,866
(1,568,905)
10,410,961
870,870
5,865
* discontinued activities comprise the results, assets and liabilities of Islandmagee Storage Limited which is classified as held for sale
as explained in note 21.
34
INFRASTRATA plc
Dorset
Northern Ireland
Gas Storage
Exploration
Gas Storage
Exploration
Unallocated
Total
NOTES TO THE FINANCIAL STATEMENTS
2012
Continuing activities
Revenue from services
provided to joint venture
and associates
150,000
Administrative expenses
(183,559)
Share of loss of joint
venture
(10,306,395)
-
-
-
Share of loss of
associates
Impairment of interest in
joint venture
Gain arising on assuming
control of the former
joint venture
-
(83,354)
(10,626,210)
-
1,218,334
1,294,146
Finance income
-
-
(19,747,830)
1,210,792
Discontinued activities
-
-
-
-
-
-
-
-
97,142
6,790
253,932
-
-
(91,515)
-
-
-
(1,075,647)
(1,259,206)
-
-
-
-
2,596
(10,306,395)
(174,869)
(10,626,210)
2,512,480
2,596
5,627
(1,066,261)
(19,597,672)
Administrative expenses
-
-
*(129,690)
(19,747,830)
1,210,792
*(129,690)
-
5,627
-
(129,690)
(1,066,261)
(19,727,362)
Analysis of:
Assets of segment
1,846,155
4,721,556
*3,206,003
1,383,048
Liabilities by segment
(567,201)
(773,930)
*(73,032)
-
Net assets per segment
1,278,954
3,947,626
*3,132,971
1,383,048
Capital expenditure
Depreciation
-
-
-
-
*371,510
34,564
-
-
1,974,265
(765,916)
1,208,349
-
7,690
13,131,027
(2,180,079)
10,950,948
406,074
7,690
* discontinued activities comprise the results, assets and liabilities of Islandmagee Storage Limited which is classified as held for sale
as explained in note 21.
INFRASTRATA plc
35
NOTES TO THE FINANCIAL STATEMENTS
4. PROFIT OR LOSS BEFORE TAXATION
Fees payable to the Group’s auditor and its associates:
- for the audit of the Company’s annual financial statements
- for the audit of the Company’s subsidiaries
- other services relating to taxation
- all other services
Depreciation
Profit on the disposal of intangible assets
Net foreign exchange loss/(gain)
Operating lease rentals - land and buildings
Research costs
2013
£
18,400
20,300
23,000
3,750
5,865
(49,945)
46,373
780,000
10,376
2012
£
16,000
21,650
9,150
6,550
7,690
-
(961)
180,000
55,791
During the year the company sold a 5% interest in PL1/10 to Brigantes Energy Limited for cash consideration of £150,000 and a
carry of 5% of the costs of the initial well. The transaction gave rise to a profit on disposal of £49,945 (Company: £83,242).
5. EMPLOYEE INFORMATION
Executive Directors and staff
Staff costs for the above persons and Non-executive Directors were:
Wages and salaries
Social security costs
Defined contribution pension plan expenditure
Share based payments
2013
Number
2012
Number
6
£
651,065
75,178
35,753
101,185
863,181
5
£
698,670
82,416
17,925
11,304
810,315
36
INFRASTRATA plc
NOTES TO THE FINANCIAL STATEMENTS
6. DIRECTORS’ AND KEY MANAGEMENT EMOLUMENTS AND COMPENSATION
Group and Company
2013
Salary & fees
£
Bonus
£
Benefits
£
Pension
£
Executive Directors
Andrew Hindle
Craig Gouws
Walter Roberts
Non-executive Directors
Ken Ratcliff
Maurice Hazzard
William Colvin
250,000*
121,800
79,160
35,250
15,000
15,000
516,210
Share based payment attributable to directors
Employers national insurance contributions
-
-
-
-
-
-
-
2,610
1,815
4,110
-
-
-
8,535
-
11,280
11,280
4,395
125
-
27,080
Group and Company
2012
Salary & fees
£
Bonus
£
Benefits
£
Pension
£
Executive Directors
Andrew Hindle
Craig Gouws
Walter Roberts
Non-executive Directors
Ken Ratcliff
Maurice Hazzard
William Colvin
279,167*
120,000
123,960
37,500
15,000
15,000
590,627
Share based payment attributable to directors
Employers national insurance contributions
-
-
-
-
-
-
-
2,358
1,674
3,363
-
-
-
7,395
-
6,000
6,000
1,875
750
-
14,625
Total
2013
£
252,610
134,895
94,550
39,645
15,125
15,000
551,825
79,033
61,863
692,721
Total
2012
£
281,525
127,674
133,323
39,375
15,750
15,000
612,647
-
72,000
684,647
*Andrew Hindle agreed during the financial year to reduce his cash remuneration for 12 months by the sum of £50,000 (2012:
£50,000) and in return he was issued 500,000 (2012: 454,545) ordinary shares.
The Company moved the company pension plan from Bank of Scotland/Halifax to Scottish Widows during the financial year and in
so doing gave pension plan members an opportunity to enter into salary sacrifice in favour of pension contribution agreements.
The total of short-term employee benefits for directors was £665,641 (2012: £670,022).
The directors are considered to be the Group’s key management.
INFRASTRATA plc
37
NOTES TO THE FINANCIAL STATEMENTS
6. DIRECTORS’ AND KEY MANAGEMENT EMOLUMENTS AND COMPENSATION (CONTINUED)
Aggregate emoluments above include amounts for the value of options to acquire ordinary shares in the Company granted or held
by directors. Details of Enterprise Management Incentive and other options granted on 1 January 2013 and 25 January 2008 are as
follows:
1 January 2013
Executive Directors
Andrew Hindle
Craig Gouws
Walter Roberts
Non-executive Directors
Ken Ratcliff
William Colvin
Maurice Hazzard
25 January 2008
Executive Directors
Andrew Hindle
Craig Gouws
Walter Roberts
Non-executive Directors
Ken Ratcliff
Maurice Hazzard
Number
Exercise price
£
Exercise from
Exercisable to
956,022
458,891
458,891
143,403
57,361
57,361
43,859
43,859
43,859
21,929
21,929
0.1046
31 December 2013
31 December 2021
0.1046
31 December 2013
31 December 2021
0.1046
31 December 2013
31 December 2021
0.1046
31 December 2013
31 December 2021
0.1046
31 December 2013
31 December 2021
0.1046
31 December 2013
31 December 2021
2.28
2.28
2.28
2.28
2.28
1 January 2011
31 December 2017
1 January 2011
31 December 2017
1 January 2011
31 December 2017
1 January 2011
31 December 2017
1 January 2011
31 December 2017
No options were exercised by directors in 2013 or 2012.
Key man insurance premiums of £1,940 (2012: £1,927) were paid for Executive Directors and directors’ indemnity insurance
premiums of £19,425 (2012: £23,479) were paid in respect of all directors. Two Executive and one Non-executive Directors
participate in the Group Stakeholder Pension Plan under which Group Life Cover is offered.
7. SHARE BASED PAYMENT PLANS
A share based payment plan was created in the year ended 31 July 2008. All directors and employees are entitled to a grant of options
subject to the Board of directors’ approval. The options do not have a cash settlement alternative. The options granted are Enterprise
Management Incentive share options for qualifying employees.
The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options during
year.
38
INFRASTRATA plc
NOTES TO THE FINANCIAL STATEMENTS
2013
WAEP
£
1.50
0.1046
-
0.2415
1.50
2012
Number
352,407
-
-
352,407
352,407
2012
WAEP
£
1.50
-
-
1.50
1.50
2013
Number
352,407
3,284,760
-
3,637,167
352,407
Outstanding at the beginning of the year
Granted during the year
Forfeited during the year
Outstanding at the end of the year
Exercisable at the end of the year
The weighted average remaining vesting period for the share options outstanding at 31 July 2013 is 0.47 years (2012: 0.06 years). The
range of exercise prices for options outstanding at the end of the year was £0.10 - £2.28. The weighted average remaining option life
for the share options outstanding at 31 July 2013 is 8 years (2012: 7 years).
The fair value of equity settled options granted is estimated as at the date of the grant using a Black-Scholes model, taking into
account the terms and conditions upon which the options were granted. The following table lists the inputs to the model used to
value the options issued in 2013.
Expected volatility (%)
Risk free interest rate
Weighted average contractual life of option (years)
Expected dividend yield
Exercise price of options (£)
Weighted average share price (£)
2013
35%
0.5%
10
Nil
0.10 - 0.14
0.1061
The expected volatility reflects the assumption that the historical volatility of a sample of oil and gas companies is indicative of future
trends for InfraStrata plc, which may not necessarily be the actual outcome. The expected life of the options is based on directors’ best
estimate and may not necessarily be indicative of the patterns that may occur.
8. RETIREMENT BENEFITS
The Group operates a defined contribution retirement plan for all qualifying employees who wish to participate. The assets of the
scheme are held separately from those of the Group in funds under the control of independent trustees.
The total cost charged to expenses of £35,753 (2012: £17,925) represents contributions payable to the scheme by the Group at rates
specified in the rules of the scheme for the year. As at 31 July 2013, employer and employee contributions of £5,758 (2012: £3,295)
due in respect of the current period had not been paid over to the scheme, the payment was made on the 30 August 2013 (2012: 10
August 2012).
9. FINANCE INCOME
Interest on bank deposits
Unwinding of discount on other financials assets
2013
£
5,318
20,248
25,566
2012
£
2,596
-
2,596
39
INFRASTRATA plc
NOTES TO THE FINANCIAL STATEMENTS
10. INCOME TAX
The major components of income tax expense for the years ended 31 July 2013 and 2012 are:
a) Income tax recognised in profit or loss
Current income tax charge / (credit)
Adjustments in respect of current income tax of previous years
Total current corporation tax
Deferred tax charge / (credit)
- origination and reversal of timing differences
- change of rate of tax
Total current deferred tax
2013
£
2012
£
-
-
-
(247,888)
(67,300)
(315,188)
-
-
-
-
-
-
b) A reconciliation between tax expense and the product of accounting loss from continuing
operations for the years ended 31 July 2013 and 2012 is as follows:
Accounting loss before tax from continuing operations
(1,760,650)
(19,597,672)
Loss on continuing activities multiplied by the standard rate of tax (23.67%; 2012: 25.33%)
(416,687)
(4,996,941)
Expenses not permitted for tax purposes and pre-trading expenditure
Other timing differences
Tax losses carried forward
Income tax expense reported in the profit or loss relating to continuing operations
A reconciliation between tax expense and the product of accounting profit / (loss) for discontinued
operations for the years ended 31 July 2013 and 2012 is as follows:
25,335
-
391,352
-
4,500,328
-
496,613
-
Accounting (loss) / profit before tax from discontinued operations
(197,298)
(129,690)
(Loss) / profit on discontinued activities multiplied by the standard rate of tax 23.67% (2012: 25.33%)
Expenses not permitted for tax purposes and pre-trading expenditure
Non-taxable income
Income tax expense reported in the profit or loss relating to discontinued operations
(46,694)
46,694
-
-
(32,850)
32,850
-
-
c) Factors that may affect the future tax charge
The Group has trading losses of £4,003,757 (2012: £1,573,810) which may reduce future tax charges. Future tax charges may also be
reduced by capital allowances on cumulative capital expenditure.
The Government has announced a reduction in the corporation rate to 21% to be in force for 2013/14 which has been substantively
enacted.
The Group’s potential charge to tax arising from its investments in the associates is dependent on the source of future inflows to the
Group. Inflows arising from the partial or complete disposal by way of sale are not expected to be subject to tax. The Group has no
current expectation of receiving distributions of profits from these investments in the foreseeable future and therefore no deferred tax
liability arises.
40
INFRASTRATA plc
11. DISCONTINUED OPERATIONS
Revenue
Net operating costs
(Loss) before tax
Tax charge (note 10)
(Loss) after tax
Details of the discontinued operations are given in note 21.
12. EARNINGS PER SHARE
(Loss)/profit
The (loss) for the purposes of basic and diluted loss per share being the net loss attributable to
equity shareholders:
Continuing operations
Discontinued operations
Continuing and discontinued operations
Number of shares
NOTES TO THE FINANCIAL STATEMENTS
2013
£
-
(197,298)
(197,298)
-
2012
£
-
(129,690)
(129,690)
-
(197,298)
(129,690)
2013
£
2012
£
(1,445,462)
(19,597,672)
(197,298)
(129,690)
(1,642,760)
(19,727,362)
Weighted average number of ordinary shares for the purposes of basic earnings per share
91,055,983
84,122,359
Basic and diluted earnings per share
Continuing operations
Discontinued operations
Continuing and discontinued operations
(1.59)p
(0.22)p
(1.81)p
(23.30)p
(0.15)p
(23.45)p
For 2013 and 2012, the share options were not dilutive as a loss was incurred.
13. LOSSES ATTRIBUTABLE TO INFRASTRATA PLC
The loss for the period dealt with in the financial statements of InfraStrata plc was £568,231 (2012: £23,795,297).
As provided by s408 of the Companies Act 2006, no income statement is presented in respect of InfraStrata plc.
INFRASTRATA plc
41
NOTES TO THE FINANCIAL STATEMENTS
14. INTANGIBLE ASSETS - EXPLORATION & EVALUATION
Group
£
Company
£
Cost
At 1 August 2011
Additions
Arising on acquisition
At 1 August 2012
Additions
Disposals
At 31 July 2013
Net book value
At 31 July 2013
15. PLANT AND EQUIPMENT - GROUP
Office equipment
Cost
At 1 August
Additions
Disposals
At 31 July
Depreciation
At 1 August
Charge for the year
Disposals
At 31 July
Net book value
At 31 July
-
34,564
3,364,909
3,399,473
146,128
(66,758)
3,478,843
-
34,564
-
34,564
146,128
(66,758)
113,934
3,478,843
113,934
2013
£
87,028
368
(4,502)
82,894
79,557
5,865
(4,502)
80,920
2012
£
87,028
-
-
87,028
71,867
7,690
-
79,557
1,974
7,471
42
INFRASTRATA plc
15. PLANT AND EQUIPMENT - COMPANY
Office equipment
Cost
At 1 August
Additions
At 31 July
Depreciation
At 1 August
Charge for the year
At 31 July
Net book value
At 31 July
16. INVESTMENTS
Group
Investment in associates
At 1 August
Elimination of inter-company profit
Share of losses
At 31 July
Total investments at the end of the year
NOTES TO THE FINANCIAL STATEMENTS
2013
£
17,380
368
17,748
10,227
5,547
15,774
2012
£
17,380
-
17,380
3,358
6,869
10,227
1,974
7,153
2013
£
2012
£
2,705,131
2,880,000
(33,296)
(43,862)
2,627,973
2,627,973
-
(174,869)
2,705,131
2,705,131
The Group has 40% interests (2012: 40%) in both of Corfe Energy Limited and Brigantes Energy Limited which are involved in
hydrocarbon exploration. The associates are private companies, incorporated in England and Wales and are not listed on any public
exchanges.
INFRASTRATA plc
43
NOTES TO THE FINANCIAL STATEMENTS
16. INVESTMENTS (CONTINUED)
The following table summarises the Group’s share of the assets and liabilities of each of these associates as recorded in each associates’
audited financial statements made up to 31 July 2013 and after making adjustments to align the accounting policies of the associates
with those of the Group:
Corfe Energy Limited
Long-term asset
Current assets
Current liability
Long-term liability
Group’s share of net assets of associates
Brigantes Energy Limited
Long-term asset
Current assets
Current liability
Long-term liability
Group’s share of net assets of associates
2013
£
613,276
215,101
(10,392)
(1,210)
816,775
2013
£
510,813
319,835
(7,411)
(1,210)
822,027
2012
£
32,320
781,356
(10,012)
(1,210)
802,454
2012
£
376,234
428,412
(7,335)
(1,210)
796,101
The revenue and net loss of each of these associates as recorded in each associates’ audited financial statements made up to 31 July
2013 and after making adjustments to align the accounting policies of the associates with those of the Group:
Corfe Energy Limited
Revenue
Total loss for the year
Group’s share of losses
Group’s share of other comprehensive income
Brigantes Energy Limited
Revenue
Total loss for the year
Group’s share of losses
Group’s share of other comprehensive income
44
INFRASTRATA plc
2013
£
96,052
70,073
24,134
-
2013
£
96,296
55,006
19,728
-
2012
£
69,491
63,864
83,354
-
2012
£
69,491
60,653
91,515
-
NOTES TO THE FINANCIAL STATEMENTS
16. INVESTMENTS (CONTINUED)
Joint Venture - Portland Gas Limited
In June 2012 the Group restructured its ownership of Portland Gas Limited by acquiring the 50% interest in Portland Gas
Limited which had been held by eCORP. Portland Gas Limited fully impaired its investment in the Portland project prior to the
restructuring and the Group’s share of the impairment charge and other losses was £10,306,395. The Group’s investment in the
joint venture was then subject to an impairment review and as a result an impairment loss of £10,626,210 was recognised. A gain of
£2,512,480 arose on assuming control of the former Joint Venture due to the net assets acquired having a higher fair value than the
fair value of the Group’s 50% interest in the ordinary share capital of Portland Gas Limited immediately prior to the restructuring.
Company
Cost
Balance at 1 August
Additions
Disposals
Balance at 31 July
Impairment
Balance at 1 August
Charge for the year
Balance at 31 July
Net book value
Balance at 31 July
2013
£
2012
£
15,247,611
15,249,611
-
-
-
(2,000)
15,247,611
15,247,611
(15,247,011)
-
-
(15,247,011)
(15,247,011)
(15,247,011)
600
600
Subsidiaries
The Company’s subsidiary undertakings at 31 July 2013, all of which are wholly owned unless indicated otherwise, are as follows:
Principal undertaking
Country of incorporation
InfraStrata UK Limited
Holding and corporate
England
InfraStrata UK Limited owns the following subsidiary
undertakings:
Islandmagee Storage Limited (65% owned)
Sub surface gas storage developer
Northern Ireland
Portland Gas Limited
Holding company
Portland Gas Storage Limited
Sub surface gas storage developer
Portland Gas Transportation Limited
Gas storage pipeline developer
England
England
England
Under the terms of a preliminary shareholder agreement entered into by InfraStrata UK Limited and Moyle in January 2010, Moyle
acquired a 35% interest in Islandmagee Storage Limited but InfraStrata UK Limited continues to assume one hundred percent of
the risks and rewards of ownership of Islandmagee Storage Limited (including voting rights) until such time as Moyle settles its
share of the intercompany loan to Islandmagee Storage Limited. Therefore InfraStrata plc includes 100% of the results, assets and
liabilities of Islandmagee Storage Limited in its financial statements and these are classified as held for sale as detailed in note 21.
The Company impaired its investment in InfraStrata UK Limited investment and loan receivable from InfraStrata UK Limited by
£nil (2012: £15,247,011) and £nil (2012: £7,894,673) respectively during the year. The impairments in 2012 followed the impairment
of the Portland Gas Limited project .
INFRASTRATA plc
45
NOTES TO THE FINANCIAL STATEMENTS
16. INVESTMENTS (CONTINUED)
Investment in associates - Company
Balance at beginning and end of the year
2013
£
600
2012
£
600
The company owns 40% (2012: 40%) of the issued share capital of the following companies, both of which are incorporated in
England and are involved in oil and gas exploration:
Corfe Energy Limited
Brigantes Energy Limited
17. NON-CURRENT RECEIVABLES
Other receivables
Group
2013
£
-
-
Group
2012
£
768,102
768,102
The non-current receivables were amounts due from eCORP. The receivable is denominated in United States dollars and is now
entirely categorised as a current receivable. The fair value of the non-current receivable is £nil (2012: £768,102).
18. TRADE AND OTHER RECEIVABLES
Amounts due from Group undertakings
Trade receivables
Other receivables
Prepayments
Group
2013
£
-
20,149
841,561
31,853
893,563
Group
2012
£
Company
2013
£
Company
2012
£
-
3,791,796
3,478,924
107,829
970,449
35,867
38,159
-
31,747
107,629
1,205
35,760
1,114,145
3,861,702
3,623,518
An element of the Company and Group’s credit risk is attributable to its trade and other receivables. Based on prior experience
and an assessment of the current economic environment, the directors did not consider any provision for irrecoverable amounts was
required and consider that the carrying amounts of these assets approximates to their fair value.
19. AVAILABLE FOR SALE FINANCIAL ASSETS
At 1 August
At 31 July
Group
2013
£
12,500
12,500
Group
2012
£
12,500
12,500
Company
2013
£
12,500
12,500
Company
2012
£
12,500
12,500
The investment in securities above represents an investment in Egdon Resources plc redeemable preference shares. The assets are held
at cost as an approximation of fair value. These are the only financial assets which the Group and Company are required to carry at
fair value.
46
INFRASTRATA plc
NOTES TO THE FINANCIAL STATEMENTS
20. CASH AND CASH EQUIVALENTS
Group
2013
£
Group
2012
£
Company
2013
£
Company
2012
£
Cash at bank
774,745
1,918,201
730,372
1,814,603
The directors consider that the carrying amount of these assets approximates their fair value. The credit risk on liquid funds is limited
because the counter-parties are banks with high credit ratings.
21. ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS (DISPOSAL GROUP)
In January 2012 the Company together with Moyle entered into an agreement with BPGM regarding the acquisition of an equity
interest in Islandmagee Storage Limited owned by InfraStrata plc (65%) and Moyle (35%). Under the agreements, the equity interest
will arise through the issue of shares by Islandmagee Storage Limited rather than the sale of equity by the Group and the majority of
the proceeds from the issue of equity will be retained in Islandmagee Storage Limited to fund project development.
Islandmagee Storage Limited continues to be classified as held for sale as, in the opinion of the directors, it is highly probable that
BPGM will exercise its option and the delay in the disposal is due to events outside the control of the Company. BPGM’s option
will be triggered following the drilling of a well which is to be funded by BPGM under a Joint Appraisal Agreement. The drilling
of the well is subject to certain conditions precedent including confirmation of the gas infrastructure tariffing regime under which
the project will operate. This confirmation is an inter-jurisdictional regulatory decision which has been delayed and is out with the
Company’s control. Whilst there can be no guarantee that there will be no further delays, the directors currently expect that the well
will be drilled in 2014, thereby triggering the vesting of the option and thereby leading to Islandmagee Storage Limited ceasing to be
a subsidiary.
Whilst the assets held for sale are classified as current assets, due to the nature of the arrangements described above, the Group does
not expect to receive cash inflows equivalent to, or in excess of, the book value of the assets so classified. The measurement basis is the
carrying amount.
Assets classified as held for sale
Freehold land
Intangible assets - gas storage development costs
Trade and other receivables
Cash and cash equivalents
Liabilities classified as held for sale
Current liabilities
Trade creditors
Accruals
2013
£
2012
£
440,100
3,386,145
190,730
173,292
440,100
2,631,755
64,772
69,376
4,190,267
3,206,003
2013
£
102,741
46,819
149,560
2012
£
69,518
3,514
73,032
At 31 July 2013 BPGM has paid an amount of £1,427,277 to Islandmagee Storage Limited in relation to their option to acquire an
interest in that Company and this amount is classified as a non-controlling interest in the Group’s balance sheet.
INFRASTRATA plc
47
NOTES TO THE FINANCIAL STATEMENTS
22. TRADE AND OTHER PAYABLES
Trade creditors
Preference shares (note 25)
Other taxation and social security
Accruals
Group
2013
£
424,669
12,500
28,231
67,836
533,236
Group
2012
£
818,782
12,500
18,137
56,331
905,750
Company
2013
£
408,963
12,500
28,231
54,132
503,826
The directors consider that the carrying amount of trade and other payables approximates to their fair value.
23. DEFERRED TAX
Deferred income tax liabilities in relation to:
Intangible assets (recovered in more than 12 months)
Financial assets (recovered within 12 months)
The gross movement on the deferred tax account is as follows:
At 1 August
Acquisition of subsidiary (note 16)
Credited to the statement of comprehensive income
At 31 July
Current element
Non-current element
Company
2012
£
794,267
12,500
17,126
34,743
858,636
Group
2012
£
773,929
427,367
1,201,296
Group
2012
£
Group
2013
£
706,630
179,478
886,108
Group
2013
£
1,201,296
-
-
1,201,296
(315,188)
886,108
179,478
706,630
886,108
-
1,201,296
-
1,201,296
1,201,296
Deferred tax has been calculated at rates of 21% - 23%, which are the rates which have been substantively enacted and which are
expected to be applicable when the underlying assets are forecast to be recovered.
The Government has announced that the UK Corporate tax rates will be reduced to 20%, but this has yet to be enacted; had this rate
been enacted then the liability would have been £852,460.
48
INFRASTRATA plc
NOTES TO THE FINANCIAL STATEMENTS
24. FINANCIAL ASSETS AND LIABILITIES
The Group and Company’s financial instruments comprise financial assets, cash and cash equivalents and items such as trade
payables and other receivables which arise directly from the Group’s operations. The Group’s operations expose it to a variety of
financial risks including credit risk, liquidity risk, interest rate risk and foreign currency exchange risk. Given the size of the Group,
the directors have not delegated the responsibility of monitoring financial risk management to a subcommittee of the board. The
objectives of the financial instrument policies are to reduce the Group and Company’s exposure to financial risk. The policies set by
the board of directors are implemented by the Company’s finance department. The Group is also indirectly exposed to risks arising
from its interests in its associates. The Group is not required to give detailed information relating to these risks.
Credit risk
The credit risk on liquid funds is limited because the Group and Company policy is to only deal with counter parties with high credit
ratings and more than one institution is utilised to deposit cash holdings. The Group held funds in the Bank of Scotland, Investec,
Northern Rock and Lloyds TSB bank accounts during the last two years; at year end all of the funds were held in Bank of Scotland
and Investec accounts. In the directors’ view there is a low risk of one of the banks holding the Groups funds at year end failing in the
foreseeable future. As at 31 July 2013, the Group is also exposed to the credit risk in relation to the eCORP receivable of £780,341
(2012: £1,706,592), which is payable over 10 months.
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the
reporting date was:
Non-current receivables
Trade and other receivables
Cash and cash equivalents
Group
2013
£
-
800,490
774,745
Group
2012
£
784,314
1,101,820
1,918,201
Company
2013
£
-
38,159
730,372
Company
2012
£
-
107,629
1,814,603
The reconciling item between non-current receivables as shown above and as presented in note 17 is the discount to fair value. The
reconciling items between the trade and other receivables presented above and that presented in note 18 and 21 are VAT receivable,
prepayments and the discount to fair value. No receivables are past due but not impaired.
Interest rate risk
The Company and Group is exposed to interest rate risk as a result of positive cash balances, denominated in sterling, which earn
interest at a variable rate. These attract interest at rates that vary with bank interest rates. Cash at bank at floating rates consisted of
money market deposits which earn interest at rates set in advance from periods of 1-3 months by reference to Sterling LIBOR. An
effective interest rate increase or decrease by 1% on the cash and cash equivalents balance at year end would result in a before tax
financial effect of an increase or decrease of £7,303 (2012: £18,146).
Foreign currency risk
The Group is exposed to foreign currency rate risk as a result of the eCORP receivable, which is denominated in United States
dollars and, for 2012, certain trade payables, which are settled in Euros. During the year the Group and Company did not enter into
any arrangements to hedge these risks, as the directors did not consider the exposure to be significant given the short term nature of
the balances. The Group and Company will review this policy as appropriate in the future. As at 31 July 2013, if the United States
dollar had weakened or strengthened 10% against sterling with all other variables held constant, the Group’s net loss and equity
would have decreased or increased by £71,038 (2012: £267,593).
The currency risk disclosures at 31 July 2013 are as follows:
Current accounts receivable
USD
£780,341
Euro
-
INFRASTRATA plc
49
NOTES TO THE FINANCIAL STATEMENTS
24. FINANCIAL ASSETS AND LIABILITIES (CONTINUED)
The currency risk disclosures at 31 July 2012 are as follows:
Accounts payable
Non-current accounts receivable
Current accounts receivable
USD
-
£768,102
£938,491
Euro
£6,145
-
-
The book value of financial assets and liabilities disclosed is considered to be equal to fair value.
Liquidity risk
The Group and Company policy is to actively maintain a mixture of long-term and short-term deposits that are designed to ensure
it has sufficient available funds for operations. The total carrying value of Group and Company financial liabilities is disclosed in
notes 21 (assets held for sale and discontinued operations) and 22 (trade and other payables). The Company issues share capital when
external funds are required. The reconciling items between the contractual maturities presented below and that presented in notes 21
and 22 are taxes. The following table shows the contractual maturities of the Group’s and Company’s financial liabilities, all of which
are measured at amortised cost.
Within one month
More than one month less than one year
Group
2013
£
275,309
366,755
Group
2012
£
951,439
-
25. SHARE CAPITAL AND REDEEMABLE PREFERENCE SHARES
Ordinary share capital
At 31 July 2011
- Ordinary shares of 10 pence each
Issue 10 pence ordinary shares
At 31 July 2012
- Ordinary shares of 10 pence each
Issue 10 pence ordinary shares
At 31 July 2013
- Ordinary shares of 10 pence each
Redeemable preference shares of £1 each (classified as liabilities)
At 31 July 2013, 2012 and 2011
Company
2013
£
96,341
366,755
Company
2012
£
826,953
-
Allotted, called up, and fully paid
Number
£
78,264,326
12,727,273
90,991,599
500,000
7,826,433
1,272,727
9,099,160
50,000
91,491,599
9,149,160
Allotted and part called
50,000
12,500
On 14 June 2013 the Company issued 500,000 new ordinary shares of 10 pence each at 10 pence per share to Andrew Hindle in
terms of a salary sacrifice agreement to conserve £50,000 of the Company cash resources. Following the Placing, the Company has
91,491,599 ordinary shares in issue.
50
INFRASTRATA plc
NOTES TO THE FINANCIAL STATEMENTS
Preference shares
The preference shares carry the right to an annual dividend out of distributable profits of 0.00001% per annum on the amount for the
time being paid up on each such share and do not carry any voting rights. The Company may redeem the shares at any time by giving
preference shareholders one week’s notice. Preference shareholders may require the Company to redeem their shares at any time by
giving six months’ notice. In each case, any redemption is at par and is subject to the provisions of the Companies Act. The preference
shares are treated as short-term liabilities and included within trade payables.
Objectives, policies and processes for managing capital
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to achieve
its operational objectives.
The Group defines capital as being share capital plus reserves. The Board of directors monitors the level of capital as compared to the
Group’s forecast cash flows and long term commitments and when necessary issues new shares. Dilution of existing shareholder value
is considered during all processes which may result in an alteration of share capital in issue.
Ordinary share capital in issue is managed as capital and the redeemable preference shares in issue are managed as current liabilities.
The Group is not subject to any externally imposed capital requirements.
26. MERGER RESERVE
Company
The merger reserve arose on the demerger of the Portland Gas Group of companies from Egdon Resources Plc when the Company
issued shares at a premium to their nominal value on acquisition of InfraStrata UK Limited. The reserve is not distributable.
Group
The merger reserve represents the difference between the nominal value of the shares issued on the demerger and the combined share
capital and share premium of InfraStrata UK Limited at the date of the demerger.
27. SHARE BASED PAYMENT RESERVE
The reserve for share based payments is used to record the value of equity settled share based payments awarded to employees and
transfers out of this reserve are made upon the exercise or expiration of the share awards.
The transfer in of £101,185 (2012: £11,304) relates to the share option expense for the year. There were no options forfeited or
exercised during the year (2012: £nil). For further information on the share based payment scheme see note 7.
28. NON-CONTROLLING INTEREST
BPGM has paid an amount of £1,427,277 to Islandmagee Storage Limited in relation to their option to acquire an interest in that
company. Should BPGM exercise its option, this amount will form part of the consideration for the equity issued to BPGM.
INFRASTRATA plc
51
NOTES TO THE FINANCIAL STATEMENTS
29. CASH (USED IN) OPERATIONS
Group
2013
£
2012
£
Operating loss for the year from continuing operations
(1,742,354)
(1,005,274)
Depreciation
Exchange differences on eCORP debtor
Decrease/(increase) in trade and other receivables
(Decrease)/increase in trade and other payables
Share option expense
Shares issued in lieu of salary or bonus
Profit on sale of assets
Cash (used in) discontinued operations
Cash (used in) continuing and discontinued operations
Cash flows arising from discontinued activities
Group
Cash (used in) discontinued operations
Investing activities
Financing activities
Cash (used in)/from operations
Company
Operating loss for the year
Depreciation
(Increase)/decrease in trade and other receivables
(Decrease)/increase in trade and other payables
Share option expense
Shares issued in lieu of salary or bonus
Profit on sale of assets
Impairment of investment in subsidiaries
Cash (used in)/generated from operations
52
INFRASTRATA plc
5,865
46,890
62,432
(372,514)
101,185
50,000
(49,945)
(350,643)
(2,249,084)
2013
£
(350,643)
(754,390)
951,588
7,690
-
(191,990)
801,592
11,304
50,000
-
(96,737)
(423,415)
2012
£
(96,737)
(371,510)
475,689
2013
£
2012
£
(573,476)
(23,793,664)
5,547
(238,183)
(354,810)
101,185
50,000
(83,242)
6,869
8,142,456
721,110
11,304
50,000
-
-
15,247,011
(1,092,979)
385,086
30. OPERATING LEASE COMMITMENTS
Future minimum rentals payable under non-cancellable operating leases as at 31 July are as follows:
NOTES TO THE FINANCIAL STATEMENTS
Amounts due:
Within one year
Land and buildings
2013
£
Land and buildings
2012
£
15,000
765,000
Operating lease payments represent rentals payable by the Group for office premises and land which is for the purposes of gas storage
facility development.
The office premises lease rentals are fixed for 5 years and the escalation clause is linked to market rates agreed between the landlord
and tenant. The lease provides for a break clause at the fifth anniversary of the lease which was on 30 October 2012, exercisable at
the Company’s option. The landlord and the Company agreed on 16 May 2012 that there will be no rent review and that either party
may terminate the lease at any time on or after 30 October 2012 by serving six months written notice.
During the year, the Portland Gas Storage leases were terminated.
31. OTHER COMMITMENTS
Portland Gas Storage Limited entered into a Section 106 deed of agreement relating to the development of the gas storage facility
on the Isle of Portland on 13 June 2012 which supersedes the original deed of agreement dated 17 June 2008.
On first material operation of the development of the gas storage facility gas pipeline block value at Osmington, Dorset, Portland
Gas Storage Limited covenants:
• To work with the Portland Gas Trust to complete the Engine Shed refurbishment at a cost of approximately £2,000,000.
• On completion of the Engine Shed to pay to the Portland Gas Trust a sum of £100,000 per annum for a period of not less than
twenty years.
• To pay to the Portland Gas Trust a sum of not less than £350,000 to fund projects on the gas storage pipeline route and
Portland.
32. RELATED PARTY TRANSACTIONS
InfraStrata plc leases the Group’s head office from Toffee Limited, a company of which Andrew Hindle is a director and shareholder.
A fair market rent paid during the period was £45,000 (2012: £45,000). The balance outstanding at 31 July 2013 was £nil (2012:
£nil).
The Group has related party relationships with its associates and joint ventures in the course of normal operations. The Group
recovered overhead and technical support costs from its joint venture of £nil (2012: £161,856). Amounts owed by associates at 31
July 2013 were £nil (2012: £nil) and amounts owed to associates at 31 July 2013 were £600 (2012: £600).
Company
The Company has related party relationships with its subsidiaries, associates and joint ventures in the course of normal operations.
InfraStrata plc recovered overhead and technical support costs from InfraStrata UK Limited of £184,560 (2012: £177,242), Portland
Gas Storage Limited of £180,000 (2012: £35,746) and Islandmagee Storage Limited of £184,465 (2012: £123,282).
The balances outstanding at 31 July 2013, which are not secured, are provided in the following table.
INFRASTRATA plc
53
NOTES TO THE FINANCIAL STATEMENTS
32. RELATED PARTY TRANSACTIONS (CONTINUED)
Related party
Subsidiary
InfraStrata UK Limited
Portland Gas Storage Limited
Islandmagee Storage Limited
Associates
Corfe Energy Limited
Brigantes Energy Limited
Amounts owed by
related parties
£
Amounts owed to
related parties
£
10,878,289
72,289
735,901
-
3,122
-
-
-
300
300
The balances outstanding at 31 July 2012, which are not secured, are provided in the following table.
Related party
Subsidiary
InfraStrata UK Limited
Portland Gas Storage Limited
Islandmagee Storage Limited
Associates
Corfe Energy Limited
Brigantes Energy Limited
Amounts owed by
related parties
£
Amounts owed to
related parties
£
10,687,534
102,247
583,818
-
-
-
-
300
300
The amounts due from Group undertakings in note 18 are stated net of an impairment provision of £8,248,775 (2012: £8,248,775)
relating to Infrastrata UK Limited.
33. JUDGEMENTS IN APPLYING ACCOUNTING POLICIES AND KEY SOURCES OF ESTIMATION UNCERTAINTY
Amounts included in the financial statements involve the use of judgement and/or estimation. These estimates and judgements are
based on management’s best knowledge of the relevant facts and circumstances, having regard to previous experience, but actual
results may differ from the amounts included in the financial statements. Information about such judgements and estimation is
contained in the accounting policies and/or the notes to the financial statements, and the key areas are summarised below.
Capitalisation of project costs
The assessment of whether costs incurred on project exploration and evaluation should be capitalised or expensed involves judgement.
Any expenditure which is considered to relate to gas storage exploration research activities or where it is not probable that future
economic benefits will flow to the Group are expensed. Management considers the nature of the costs incurred and the stage of
project development and concludes whether it is appropriate to capitalise the costs. The key assumptions depend on whether rights to
explore an area have been obtained, the rock mechanical properties of the halite, the availability of a suitable site for construction of
the required facilities and the likelihood of gaining the relevant permissions.
54
INFRASTRATA plc
NOTES TO THE FINANCIAL STATEMENTS
Review of project asset carrying values
The assessment of capitalised project costs for any indications of impairment involves judgement. When facts or circumstances
suggest that impairment exists, a formal estimate of recoverable amount is performed and an impairment loss recognised to the
extent that the carrying amount exceeds recoverable amount. Recoverable amount is determined to be the higher of fair value
less costs to sell and value in use. The key assumptions are the net income expected to be generated from the facilities, the cost of
construction and the date from which the facilities become operational. Management assigns values and dates to these inputs after
taking into account market information, engineering design costing and the project programme. A discount rate of 8% is applied
in determining gas storage project net present values. Salt cavern gas storage projects are long term investments and cash flows are
therefore projected over periods greater than 5 years. Engineering design provides for Project life of 40 years. It is assumed that
100% of a project’s capacity will be sold from the date that the capacity becomes operational, therefore no cash flow growth is used
when performing cash flow projections.
Impairments of exploration and evaluation assets
IFRS 6 requires that exploration and evaluation assets be assessed for impairment when facts and circumstances suggest that the
carrying amount of an exploration and evaluation asset may exceed its recoverable amount. Management therefore consider annually
whether there are any such facts and circumstances and, if so, undertake an impairment review. In making the initial judgements,
management consider the outcome of exploration and evaluation activities to date and, in particular, data from any seismic surveys
and drilling activities. Management also consider the continuity of the license interests and market data, including oil and gas prices.
Where an impairment test is required, a comparison is made between the carrying value of the assets at the reporting date with the
expected discounted cash flow from the Group’s license interest. For the discounted cash flows to be calculated, management use
production profiles based on its best estimate of reserves and a range of assumptions, including oil/gas prices and discount rates.
Share based payments
The estimation of share based payment costs requires the selection of an appropriate valuation model and consideration as to the
inputs necessary for the valuation model chosen. The Group has made estimates as to the volatility of its own shares, the probable
life of options granted, and the time of exercise of those options. The model used by the Group is the Black-Scholes model. The key
assumptions are detailed in note 7.
Investments in associates
In order to establish whether an entity is a consolidated subsidiary, a joint venture or an associate, key areas of judgment include:
• Quantitative analysis of an entity including review of, amongst other factors, its capital structure, contractual terms, which
interests create or absorb variability, related party relationships and design of the entity.
• Rights of partners reflecting significant business decisions, including dispositions and acquisitions of assets.
• Board and management representation.
• Ability to make financing decisions.
• Operating and capital budget approvals and contractual rights of other parties.
Identification of assets and liabilities arising on a business combination
Management are required to identify the assets and liabilities arising on a business combination, having regard to contractual rights
and obligations and whether cash flows are expected to arise from such rights and obligations.
Fair values
Management are required to assess the fair value of assets and liabilities acquired on business combinations. As part of this
assessment management considers:
-
-
-
Third party disposals or acquisitions of the asset or liability (or part thereof )
In respect of assets, any costs avoided as a result of owning the asset
Expected future discounted cash flows
INFRASTRATA plc
55
NOTES TO THE FINANCIAL STATEMENTS
34. GUARANTEE
The Company previously guaranteed the lease payments to be made by Portland Gas Storage Limited to Portland Port Limited. The
leases were terminated during the year. The financial commitment under this guarantee at 31 July 2013 is £nil (2012: £750,000).
35. JOINTLY CONTROLLED OIL & GAS EXPLORATION ACTIVITIES
Group and Company
Country
Licence
Field name
Operator
Net interest
Northern Ireland
England
PL1/10
P1918
Larne-Lough Neagh Basin
InfraStrata
English Channel
InfraStrata
43%
78%
The Company has entered into agreements with partners whereby the Company’s share of initial exploration costs on PL1/10 are
largely covered by the partners, therefore the company has incurred net expenditure to the extent of £146,128 (2012: £34,564) in
developing its share of the assets.
36. EVENTS AFTER THE REPORTING PERIOD
On the 23 September 2013 the Company issued 8,000,000 new ordinary shares of 10 pence each at 10 pence per share to
institutional and other shareholders and raised £800,000 before costs. Following the Placing, the Company has 99,491,599 ordinary
shares in issue.
37. CONTROL OF THE GROUP
There is no ultimate controlling party of InfraStrata plc.
56
INFRASTRATA plc
LETTER FROM THE CHAIRMAN WITH
NOTICE OF ANNUAL GENERAL MEETING
Directors:
Kenneth Ratcliff (Non-executive Chairman)
Andrew Hindle (Chief Executive Officer)
Stewart McGarrity (Finance Director)
Walter Roberts (Legal and Commercial Director)
William Colvin (Non-executive Director)
Maurice Hazzard (Non-executive Director)
Dear Shareholder,
1. Introduction
Registered Office:
Blackstable House
Longridge
Sheepscombe
Stroud
GL6 7QX
2 December 2013
Notice of the Company’s forthcoming annual general meeting to be held on Tuesday 21 January 2014 (“AGM” or “Annual General
Meeting”) appears on the following pages.
As in previous years your Board is not recommending the payment of a dividend.
2. Resolutions to be proposed at the AGM
Annual Report and Accounts (Resolution 1)
A copy of the annual report and accounts (together with the Directors’ and Auditors’ reports on the annual report and accounts) for
the Company for the financial year ended 31 July 2013 (the “Accounts”) has been sent to you with this document. Shareholders will
be asked to receive the Accounts at the Annual General Meeting.
Re-appointment of Auditors (Resolution 2)
The Company is required at each general meeting at which accounts are presented to appoint auditors to hold office until the
next such meeting. Nexia Smith & Williamson Audit Limited have indicated their willingness to continue in office. Accordingly,
Resolution 2 proposes their re-appointment as auditors of the Company to hold office from the conclusion of the Annual General
Meeting until the conclusion of the next annual general meeting of the Company at which Accounts are laid, and authorises the
Directors to determine their remuneration.
Retirement by Directors (Resolutions 3 to 5)
Stewart McGarrity who was appointed as Finance Director on 25 September 2013, retires as required and offers himself for re-
election. Andrew Hindle and William Colvin are the Directors retiring by rotation this year and each offers himself for re-election.
All members of the Board are required to submit themselves for re-election at least once every three years. Brief biographical details
of each of the Directors appear on page 17 of the Accounts.
Authority of Directors to Allot Shares (Resolution 6)
The authority given to the Directors to allot further shares in the capital of the Company requires the prior authorisation of the
shareholders in general meeting under section 551 Companies Act 2006. Upon the passing of Resolution 6, pursuant to paragraph
(A) of the Resolution, the Directors will have authority to allot shares up to a maximum of £3,316,386 which is approximately one
third of the current issued share capital as at 2 December 2013, being the latest practicable date before the publication of this Letter.
This authority will expire immediately following the next annual general meeting or, if earlier, six months following the date to which
the Company’s next annual report and accounts are made up.
In addition, in accordance with the guidance from the Association of British Insurers (“ABI”) on the expectations of institutional
investors in relation to the authority of directors to allot shares, upon the passing of Resolution 6, the Directors will have authority
(pursuant to paragraph (B) of the Resolution) to allot an additional number of ordinary shares up to a maximum of £3,316,386,
which is approximately a further third of the current issued ordinary share capital as at 2 December 2013, being the latest practical
date before the publication of this Letter. However, the Directors will only be able to allot those shares for the purposes of a rights
issue in which the new shares are offered to existing shareholders in proportion to their existing shareholdings. This authority
will also expire immediately following the next annual general meeting or, if earlier, six months following the date to which the
Company’s next annual report and accounts are made up to.
INFRASTRATA plc
57
LETTER FROM THE CHAIRMAN WITH NOTICE OF ANNUAL GENERAL MEETING
As a result, if Resolution 6 is passed, the Directors could allot shares representing up to two-thirds of the current issued share capital
pursuant to a rights issue.
Disapplication of Pre-emption Rights (Resolution 7)
If the Directors wish to exercise the authority under Resolution 6 and offer unissued shares (or sell any shares which the Company
may purchase and elect to hold as treasury shares) for cash, the Companies Act 2006 requires that unless shareholders have given
specific authority for the waiver of the statutory pre-emption rights, the new shares be offered first to existing shareholders in
proportion to their existing shareholdings. In certain circumstances, it may be in the best interests of the Company to allot new
shares (or to grant rights over shares) for cash without first offering them to existing shareholders in proportions to their holdings.
Resolution 7 would authorise the Directors to do this by allowing the Directors to allot shares for cash (i) by way of a rights issue
(subject to certain exclusions), (ii) by way of an open offer or other offer of securities (not being a rights issue) in favour of existing
shareholders in proportions to their shareholdings (subject to certain exclusions) and (iii) to persons other than existing shareholders
up to an aggregate nominal value of £1,989,832 which is equivalent to 20 per cent of the issued share capital of the Company on
2 December 2013, being the latest practicable date prior to the publication of this Letter. If given, the authority will expire on the
conclusion of the next annual general meeting or, if earlier, six months following the date to which the Company’s next annual
reports and accounts are made up.
For this purpose the ABI recommendation for companies on the LSE main list is 5% although it is generally recognised that for
smaller companies and those on AIM this may be too constrictive. The nature of our business and the critical phase of so many of
the projects in which we are involved, which can both be expected to require up-front investment and can take a long time to fully
develop means that your Board considers 5% to be insufficient. Consequently I would ask that you approve a 20% disapplication of
pre-emption rights to provide your Board with the flexibility to pursue such opportunities without incurring the costs of a rights
issue or the need to market part of the investment opportunity to third parties.
3. Recommendation
Your Directors consider the Resolutions to be proposed at the AGM to be in the best interests of the Company and its shareholders
as a whole. Consequently, the Directors recommend shareholders to vote in favour of the Resolutions as they intend to do in respect
of their own beneficial holdings totalling 8,951,055 ordinary shares (representing 8.99 per cent. of the Company’s issued share capital
as at the date of this Letter).
A form of proxy is included for use at the AGM. Forms of proxy should be completed, signed and returned as soon as possible and
in any event so as to be received by Capita Asset Services at The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU not less
than 48 hours prior to the time appointed for the holding of the AGM on 21 January 2014.
Completion of a proxy form will not prevent you from attending the AGM in person if you so wish.
Yours sincerely,
Ken Ratcliff
Non-executive Chairman
58
INFRASTRATA plc
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the Annual General Meeting of InfraStrata plc (the “Company”) will be held at the offices of Buchanan
Communications Limited, 107 Cheapside, London, EC2V 6DN, United Kingdom on Tuesday 21 January 2014 at 1100 hours,
for the purpose of passing the following Resolutions, of which Resolutions 1 to 6 will be proposed as Ordinary Resolutions and
Resolution 7 will be proposed as a Special Resolution:
Ordinary Resolutions:
1. To receive the report of the Directors and the audited accounts of the Company for the year ended 31 July 2013, together with
the report of the Auditors on those audited accounts.
2. That Nexia Smith & Williamson Audit Limited be and are hereby reappointed as auditor of the Company to hold office from
the conclusion of this meeting until the conclusion of the next meeting at which accounts are laid before the meeting, at a
remuneration to be determined by the Directors.
3. To re-elect Stewart McGarrity as Director who retires pursuant to article 87 of the Company’s articles of association and who,
being eligible, offers himself for re election.
4. To re-elect Andrew Hindle as Director who retires pursuant to article 92 of the Company’s articles of association and who,
being eligible, offers himself for re election.
5. To re-elect William Colvin as Director who retires pursuant to article 92 of the Company’s articles of association and who, being
eligible, offers himself for re election.
6. To consider and, if thought fit, to pass the following Resolution as an ordinary resolution:
THAT the Directors be and they are hereby generally and unconditionally authorised in accordance with section 551
Companies Act 2006 (CA 2006) to exercise all the powers of the Company to allot shares in the Company and to grant rights to
subscribe for, or to convert any security into, shares in the Company:
(A) up to an aggregate nominal amount of £3,316,386; and
(B) comprising equity securities (within the meaning of section 560 CA 2006) up to a further aggregate nominal amount of
£3,316,386 in connection with an offer by way of a rights issue:
(i) to ordinary shareholders in proportion (as nearly as may be practicable) to their existing holdings; and
(ii) to holders of other equity securities as required by the rights of those securities or as the Directors otherwise
consider necessary,
and so that that Directors may impose any limits or restrictions and make any arrangements which they consider necessary or
appropriate to deal with treasury shares, fractional entitlements, record dates, legal, regulatory or practical problems in, or under
the laws of, any territory or the requirements of any regulatory body or stock exchange or any other matter (including any such
problems arising by virtue of equity securities being represented by depositary receipts).
The authorities conferred on the Directors under paragraphs (A) and (B) above shall expire at the conclusion of the next annual
general meeting of the Company after the passing of this Resolution or 31 January 2015, whichever is the earlier save that the
Company may before such expiry make an offer or agreement which would or might require shares to be allotted or rights to
subscribe for, or to convert any security into, shares to be granted after such expiry and the Directors may allot shares or grant
rights to subscribe for, or to convert any security into, shares (as the case may be) in pursuance of such an offer or agreement as if
the authority conferred hereby had not expired.
INFRASTRATA plc
59
NOTICE OF ANNUAL GENERAL MEETING
Special Resolution:
7. To consider and, if thought fit, to pass the following Resolution as a special resolution:
THAT, subject to the passing of Resolution 6 above the Directors be and they are hereby empowered pursuant to section 570
CA 2006 to allot equity securities (within the meaning of section 560 CA 2006) for cash pursuant to the authority conferred by
Resolution 6, as if section 561 CA 2006 did not apply to any such allotment, provided that this power shall be limited:
(A) to the allotment of equity securities in connection with an offer of equity securities (but in the case of the authority
granted under paragraph (B) of Resolution 6, by way of a rights issue only):
(i) to ordinary shareholders in proportion (as nearly as may be practicable) to their existing holdings; and
(ii) to holders of other equity securities as required by the rights of those securities or as the Directors otherwise
consider necessary,
and so that the Directors may impose any limits or restrictions and make any arrangements which they consider necessary
or appropriate to deal with any treasury shares, fractional entitlements, record dates, legal, regulatory or practical problems
in, or under the laws of, any territory or the requirements of any regulatory body or stock exchange or any other matter
(including any such problems arising by virtue of equity securities being represented by depositary receipts); and
(B)
nominal amount of £1,989,831;
to the allotment (otherwise than under paragraph (A) of this Resolution 7) of equity securities up to an aggregate
and shall expire at the conclusion of the next annual general meeting of the Company after the passing of this Resolution or
31 January 2015, whichever is the earlier, except that the Company may before such expiry make an offer or agreement which
would or might require equity securities to be allotted after such expiry and the Directors may allot equity securities in pursuance
of such offer or agreement as if the power conferred hereby had not expired.
Dated 2 December 2013
By Order of the Board
Walter Roberts
Secretary
Registered Office:
Blackstable House, Longridge, Sheepscombe, Stroud
GL6 7QX
1. A member is entitled to appoint one or more proxies to exercise all or any of the member’s rights to attend, speak and vote on his/her behalf at the meeting. A
proxy need not be a member of the Company. If a member appoints more than one proxy to attend the meeting, each proxy must be appointed to exercise the
rights attached to a different share or shares held by the member. If a member wishes to appoint more than one proxy and so requires additional proxy forms, the
member should contact Capita Asset Services on 0871 664 0300 if calling within the United Kingdom or +44 20 8639 3399 if calling from outside the United
Kingdom. Lines are open 8:30am – 5:30pm Mon–Fri. Calls to the helpline from within the United Kingdom cost 10 pence per minute (including VAT) from
a BT landline. Other service providers’ costs may vary. Call to the helpline from outside the United Kingdom will be charged at applicable international rates.
Calls may be recorded and monitored for security and training purposes. A form of proxy for use by members at the Annual General Meeting accompanies this
notice.
2. To be effective, the form of proxy and the power of attorney or other authority (if any) under which it is signed, or a notarially certified copy of such authority,
must be received by post or (during normal business hours only) by hand at the office of the Company’s Registrars, being Capita Asset Services at The Registry,
34 Beckenham Road, Beckenham, Kent BR3 4TU, not less than 48 hours, excluding non-business days, before the time of the holding of the meeting or any
adjournment thereof.
3. Completion and return of the proxy form does not preclude a member from attending and voting at the meeting in person.
4.
In the case of joint shareholders, where more than one of the joint holders purports to appoint a proxy, only the appointment submitted by the most senior
holder will be accepted. Seniority is determined by the order in which the names of the joint shareholders appear in the Company’s register of members in
respect of the joint holding (the first-named being the most senior).
5. To change your proxy instructions simply submit a new proxy appointment using the methods set out above. Note that the cut-off time for receipt of proxy
6.
7.
8.
appointments (see above) also apply in relation to amended instructions; any amended proxy appointment received after the relevant cut-off time will be
disregarded. 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.
In order to revoke a proxy instruction you will need to inform the Company by sending notice in writing clearly stating your intention to revoke your proxy
appointment to the Company’s Registrars, being Capita Asset Services at The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU. In the case of a
member which is a company, the revocation notice must be executed under its common seal or signed on its behalf by an officer of the company or an attorney
for the company. Any power of attorney or any other authority under which the revocation notice is signed (or a duly certified copy of such power or authority)
must be included with the revocation notice. The revocation notice must be received by the Company no later than 48 hours, excluding non-business days,
before the time of the holding of the meeting or any adjournment thereof. If you attempt to revoke your proxy appointment but the revocation is received after
the time specified then your proxy appointment will remain valid. If you have appointed a proxy and attend the meeting in person, your proxy appointment will
automatically be terminated.
In accordance with the permission in Regulation 41(1) of The Uncertificated Securities Regulations 2001 (SI 2001 No. 3755), only those holders of ordinary
shares who are registered on the Company’s share register at 18.00 hours on 17 January 2014 shall be entitled to attend the above Annual General Meeting (or,
in the case of an adjourned meeting, 18.00 hours on the day which is two days before the adjourned meeting) and to vote in respect of the number of shares
registered in their names at that time. Changes to entries on the share register after 18.00 hours on 17 January 2014 shall be disregarded in determining the
rights of any person to attend and/or vote at the Annual General Meeting.
If the Chairman, as a result of any proxy appointments, is given discretion as to how the votes the subject of those proxies are to be cast and the voting rights
in respect of those discretionary proxies, when added to the interests in the Company’s securities already held by the Chairman, result in the Chairman
holding such number of voting rights that he has a notifiable obligation under the Disclosure and Transparency Rules, the Chairman will make the necessary
notifications to the Company and the Financial Services Authority. As a result, any member holding 3% or more of the voting rights in the Company who
grants the Chairman a discretionary proxy in respect of some or all of those voting rights and so would otherwise have a notification obligation under the
Disclosure and Transparency Rules, need not make a separate notification to the Company and the Financial Services Authority.
9. Copies of the service agreements and letters of appointment between the Company and its Directors will be available for inspection at the registered office of the
Company during usual business hours on any weekday (Saturdays, Sundays and Bank Holidays excluded) until the date of the meeting and also on the date and
at the place of the meeting from half an hour before the meeting until the conclusion of the meeting.
60
INFRASTRATA plc
PROXY FORM
INFRASTRATA PLC
Proxy Form for use by Shareholders at the Annual General Meeting (“AGM”) of InfraStrata plc (the “Company”) to
be held at the offices of Buchanan Communications Limited, 107 Cheapside, London, EC2V 6DN, United Kingdom
on Tuesday 21 January 2014 at 11.00 a.m.
Please read the Notice of the AGM and the accompanying notes carefully before completing this Proxy Form.
As a Shareholder of the Company you have the right to attend, speak at and vote at the AGM. If you cannot, or do not
want to attend the AGM, but still want to vote, you can appoint someone to attend the AGM and vote on your behalf.
That person is known as a “proxy”. You can use this Proxy Form to appoint the Chairman of the AGM, or someone else,
as your proxy. Your proxy does not need to be a Shareholder of the Company
I/We,
(in BLOCK CAPITALS please)
being a Shareholder/Shareholders of InfraStrata plc, appoint the Chairman of the AGM or
(see note 1) as my/our proxy to attend and, on a poll, to vote for me/us and on my/our behalf as indicated below at the
AGM and at any adjournment thereof (see notes below).
Please clearly mark the boxes below to instruct your proxy how to vote.
ORDINARY RESOLUTIONS
For
Against
Vote witheld
Discretionary
1. To receive the Report and Accounts
for the year ended 31 July 2013
2. To re-appoint Nexia Smith &
Williamson Audit Limited as auditors
at a remuneration to be determined by
the Directors
3. To re-elect Stewart McGarrity
4. To re-elect Andrew Hindle
5. To re-elect William Colvin
6. To grant the directors authority to
allot shares on the basis set out in the
Notice of AGM
SPECIAL RESOLUTIONS
7. To disapply pre-emption rights on
the basis set out in the Notice of AGM
Signature(s) ........................................................................................... (see note 8) Date ........................................ 20.........
Please complete and send this proxy form to Capita Asset Services, PXS, The Registry, 34 Beckenham Road, Beckenham,
Kent, BR3 4TU.
INFRASTRATA plc
61
Notes to the Proxy Form
1. A proxy need not be a member of the Company but must attend the meeting to represent you. If you wish to appoint as a proxy
a person other than the Chairman of the AGM, please delete the words “the Chairman of the AGM” and insert the name of the
other person. All alterations made to this Proxy Form must be initialled by the signatory. If you sign and return this Proxy Form
with no name inserted in the box, the Chairman of the AGM will be deemed to be your proxy. If the proxy is being appointed
in relation to less than your full voting entitlement, please enter the number of shares in relation to which they are authorised
to act as your proxy. If left blank your proxy will be deemed to be authorised in respect of your full voting entitlement (or if this
Proxy Form has been issued in respect of a designated account for a shareholder, the full voting entitlement for that designated
account).
2. To be effective, this Proxy Form (together with any power of attorney or other authority (if any) under which it is signed, or a
notarially certified copy of such authority) must be received by post or (during normal business hours only) by hand at the office
of the Company’s Registrars, being Capita Asset Services at The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU, by
no later than 11.00 a.m. on 17 January 2014.
3. You are entitled to appoint more than one proxy provided that each proxy is appointed to exercise rights attached to a different
share or shares held by you. You may not appoint more than one proxy to exercise rights attached to any one share. To appoint
more than one proxy, (an) additional Proxy Form(s) may be obtained by contacting the Registrars helpline on +44 (0)871 664
0300 (calls cost 10 p per minute plus network extras) or you may photocopy this form. Please indicate next to the proxy holder’s
name the number of shares in relation to which they are authorised to act as your proxy. Please also indicate by ticking the box
provided if the proxy instruction is one of multiple instructions being given. All forms must be signed and should be returned
together in the same envelope.
4. Completion and return of this Proxy Form will not prevent you from attending in person and voting at the AGM should you
5.
subsequently decide to do so.
If you wish your proxy to cast all of your votes “For” or “Against” a resolution you should insert an “X” in the appropriate box.
If you wish your proxy to cast only certain votes “For” and certain votes “Against”, insert the relevant number of shares in
the appropriate box. In the absence of instructions, your proxy may vote or abstain from voting as he or she thinks fit on the
specified resolution and, unless instructed otherwise, may also vote or abstain from voting as he or she things fit on any other
business (including on a motion to amend a resolution to propose a new resolution or to adjourn the AGM) which may properly
come before the AGM.
7.
6. The “Vote Withheld” option is provided to enable you to instruct your proxy to abstain from voting on a particular resolution. A
“Vote Withheld” is not a vote in law and will not be counted in the calculation of the proportion of the votes “For” or “Against” a
resolution. The “Discretionary” option is provided to enable you to give discretion to your proxy to vote or abstain from voting on
a particular resolution as he or she thinks fit.
In accordance with the permission in Regulation 41 of the Uncertificated Securities Regulations 1001 (SI 2001 No. 3755), only
those holders of ordinary shares who are registered on the Company’s share register at 1800 hours on 17 January 2014 shall be
entitled to attend the above AGM (or 1800 hours on the day which is two days before the day of any adjourned meeting) and to
vote in respect of the number of shares registered in their names at that time. Changes to entries on the share register after 1800
hours on 17 January 2014 shall be disregarded in determining the rights of any person to attend and/or vote at the AGM.
8. This Proxy Form must be signed by the shareholder or his/her attorney. Where the shareholder is a corporation, the signature
must be under seal or signed by a duly authorised representative stating their capacity (e.g. Director, secretary). In the case of
joint shareholders, any one shareholder may sign this Proxy Form or may vote in person at the Meeting. If more than one joint
shareholder is present at the AGM either in person or by proxy, that one of them whose name stands first in the register of
members in respect of the share shall alone be entitled to vote (whether in person or by proxy) in respect of it.
9. To change your proxy instructions simply submit a new proxy appointment using the methods set out above. Note that the
cut-off time for receipt of proxy appointments (see above) also apply in relation to amended instructions; any amended proxy
appointment received after the relevant cut-off time will be disregarded.
10. In order to revoke a proxy instruction you will need to inform the Company by sending notice in writing clearly stating
your intention to revoke your proxy appointment to Company’s Registrars, being Capita Asset Services at The Registry, 34
Beckenham Road, Beckenham, Kent BR3 4TU. In the case of a member which is a company, the revocation notice must be
executed under its common seal or signed on its behalf by an officer of the company or an attorney for the company. Any
power of attorney or any other authority under which the revocation notice is signed (or a duly certified copy of such power
or authority) must be included with the revocation notice. The revocation notice must be received by the Company no later
than 48 hours before the time of the holding of the meeting or any adjournment thereof. If you attempt to revoke your proxy
appointment but the revocation is received after the time specified then your proxy appointment will remain valid. If you have
appointed a proxy and attend the meeting in person, your proxy appointment will automatically be terminated.
11. If you submit more than one valid proxy appointment in respect of the same share or shares, the appointment received last
before the latest time for the receipt of proxies will take precedence. If the Company is unable to determine which was received
last, none of the proxy appointments in respect of that share or shares shall be valid.
62
INFRASTRATA plc
InfraStrata plc
80 Hill Rise
Richmond
Surrey
TW10 6UB
www.infrastrata.co.uk