IN FRASTRATA plc
Annual Report & Financial Statements
2015
TABLE OF CONTENTS
• DIRECTORS, SECRETARY, ADVISORS
• & SHAREHOLDER INFORMATION
• CHAIRMAN’S STATEMENT
• STRATEGIC REPORT
- STRATEGY & BUSINESS MODEL
- KEY PERFORMANCE INDICATORS
- OPERATIONAL REVIEW
- PRINCIPAL RISKS & UNCERTAINTIES
• REPORT OF THE DIRECTORS
- DIRECTORS OF THE COMPANY
- CORPORATE GOVERNANCE
- DIRECTORS’ RESPONSIBILITIES
• INDEPENDENT AUDITOR’S REPORT TO THE
MEMBERS OF INFRASTRATA PLC
• FINANCIAL STATEMENTS
• NOTES TO THE FINANCIAL STATEMENTS
3
4
5-13
5
6
6-12
12-13
14-18
14-15
16-17
18
19-20
21-27
28-56
• LETTER FROM CHAIRMAN WITH NOTICE OF AGM
57-58
• NOTICE OF AGM
• PROXY FORM WITH NOTES
58-60
61-62
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)
Anita Elizabeth Gardiner (Commercial Development Director)
Maurice Edward Hazzard (Non-executive Director)
Company secretary
Walter Rookehurst Roberts
Registered office
Principal office
Auditor
Tax advisors
Registrars
Nominated advisor and joint broker
Joint broker
Solicitors
Bankers
Blackstable House
Longridge
Sheepscombe
Stroud
Gloucestershire, GL6 7QX
80 Hill Rise
Richmond
Surrey, TW10 6UB
Nexia Smith & Williamson
Statutory Auditor
1 Bishops Wharf, Walnut Tree Close
Guildford
Surrey, GU1 4RA
Smith & Williamson LLP
Chartered Accountants
1 Bishops Wharf, Walnut Tree Close
Guildford
Surrey, GU1 4RA
Capita Registrars Limited
The Registry
34 Beckenham Road
Beckenham
Kent, BR3 4TH
Allenby Capital Limited
3 St Helen’s Place
London, EC3A 6AB
VSA Capital Limited
New Liverpool House
15-17 Eldon Street
London, EC2M 7LD
Field Fisher Waterhouse LLP
Riverbank House
2 Swan Lane
London, EC4R 3TT
Bank of Scotland plc
33 Old Broad Street
London, EC2N 1HZ
3
CHAIRMAN’S STATEMENT
The past year has seen great progress towards the monetisation of our 65% interest in the Islandmagee gas storage project but has
also seen continued negative market sentiment towards investment in oil and gas exploration, none more so than for AIM listed
companies, and this is reflected in share prices and the challenges associated with raising new capital to invest in exploration. The
company has responded by embarking on a strategic review resulting in the disposal of the majority of our exploration assets whilst
retaining an interest in future exploration success. As a result, the operations of InfraStrata going forward into 2016 are focused
on the delivery of value to shareholders from our gas storage project at Islandmagee. The feasibility phase of the project has now
addressed all key technical risks enabling us to move forward to seek the investors who will take it through detailed design and on to
full construction.
At Islandmagee we have successfully completed the drilling of the Islandmagee-1 salt core well, subsequent salt testing and design
development; all on time and within budget. The completion of this programme of work is testament to our small management
team’s ability to procure and operate a well successfully and effectively manage the relationships with the permitting and licencing
agencies and the local community. The programme of work at a total cost of £3.8m was 50% funded by the European Union (“EU”)
Connecting Europe Facility with the balance provided by InfraStrata shareholders. Bridging finance for the programme was provided
by our new partner Baron Oil plc who have an option to convert their loan into a 15% interest in the project.
The EU funding was available by virtue of the project’s status as a Project of Common Interest (“PCI”). In November we were
delighted to announce that the project’s PCI status has been renewed for another two years until 2017. This is a major advantage for
the project providing as it does support for permitting and continued access to funding through grants for further studies or financial
contributions to the construction of the project. We will continue to pursue the advantages of the project’s PCI status in a way which
ensures the project remains funded and our shareholders’ investment in it is secured.
The news in August 2015 that Larne Oil and Gas Limited was unable to meet its funding obligations in respect of licences PL1/10
and P2123 placed the Company in unexpected financial difficulties. This, coupled with continuing deterioration in the oil and
gas investment market, culminated in our November announcement that we had entered into agreements with Corallian Energy
Limited (“Corallian”) to dispose of most of our exploration interests for £240,000 in cash plus retained Net Profits Interest (“NPI”)
instruments in each of the assets sold. A further £300,000 will be received if we achieve full funding of the Woodburn Forest-1
well to be drilled on licence PL1/10 in County Antrim in which it is expected InfraStrata will retain a 10% interest fully funded
through the well. The Board believes these transactions provide absolute clarity regarding the Company’s long stated strategy of not
using its own cash resources to fund major exploration expenditure whilst in the process of monetising the gas storage project. No
further investment is expected to be required by InfraStrata in the assets sold, but the Company retains an upside in the event of any
successful exploration through the retained NPI instruments and the retained operated interest in licence PL1/10.
With respect to the Woodburn Forest-1 well our management team’s efforts have resulted in a fully permitted and procured well
which we hope to drill in H1 2016, again demonstrating our excellent working relationship with the relevant agencies in Northern
Ireland. This project provides an excellent near term opportunity targeting significant and economically viable resources even with
currently depressed oil prices.
The cash consideration from the Corallian transactions provides short term capital for our immediate working capital needs.
However uncertainties remain including the timing and extent of the additional £300,000 element of the cash consideration from
Corallian. The Company remains dependent upon direct investment in our projects and, where necessary and appropriate, will seek
additional funds from existing and new shareholders both to meet working capital requirements and to progress the delivery of our
projects. The Board have prepared the financial statements on the basis that such support will continue for the foreseeable future.
I would like to thank again our small management team who continue to show the skill and dedication to take our projects forward
in very difficult market conditions whilst implementing cost reduction which have resulted in our internal project management and
company administration costs reducing to less than £800,000 on an annualised basis, a 35% reduction since October 2014. Your
Board is now firmly focussed on securing best value from the Islandmagee gas storage project in 2016 and, as ever, I offer my thanks
to shareholders for their continuing support in this endeavour.
Ken Ratcliff
Non-executive Chairman
7 December 2015
4
INFRASTRATA plc
STRATEGIC REPORT
STRATEGY AND BUSINESS MODEL
Strategic review
During 2015 InfraStrata, like many small companies with oil and gas exploration activities, has faced a very difficult market in which
to secure new funding for its exploration activities. This has been precipitated by poor market sentiment following the very significant
fall in oil prices since the summer of 2014. For InfraStrata this was exacerbated by confirmation from Larne Oil & Gas Limited in
August 2015 that they were unable to meet their funding obligations on the PL1/10 and P2123 licences in Northern Ireland.
With upcoming expenditure commitments in 2016 across the portfolio of exploration assets, the Board determined that the transfer
of substantially all future commitments associated with the exploration assets in exchange for a cash consideration and a retained
interest in the assets represented the best outcome for shareholders. This strategy means future expenditure on these assets will be
funded by specialist investors and avoids dilution in the Islandmagee project for shareholders through equity fundraising for the
purposes of exploration at a time of depressed share prices. The strategy of divesting the exploration assets in exchange for cash and a
retained interest also enables the Company to focus on the development and monetisation of its gas storage project in 2016.
In February 2015 we raised £2.0 million from a placing which together with £0.4 million from a data licensing agreement
provided us with enough cash to meet our approximately £1.9 million commitment to the capital costs of the Islandmagee salt core
programme and to meet project management and other costs to the end of 2015. The disposal of our exploration assets will provide
short term capital for our immediate working capital needs and allow InfraStrata to sustain and add value to the Islandmagee gas
storage work programme in the near term 2016, as the Company seeks to optimise the timing and nature by which value can be
secured from the project for shareholders.
Divestment of exploration assets
On 16 November 2015, we announced that we had signed Sale & Purchase Agreements (“S&P Agreements”) to sell substantially
all of the Group’s oil and gas exploration interests, including its interest in its two associates, to two newly formed special purpose
vehicles Corallian Energy Limited (“Corallian”) and its subsidiary Osmington Holdings Limited (“Osmington”). The initial disposal,
covering the Group’s UK oil and gas exploration interests and the two associates, Brigantes Energy Limited (“Brigantes”) and Corfe
Energy Limited (“Corfe”) resulted in an immediate cash inflow of £240,000. The Group also retained a Net Profits Interest (“NPI”)
in the licences and the former associates. Following this disposal, the Group now has no exposure to any future exploration costs,
including cost overruns in these assets, but, through the NPIs, will participate in any future profits.
The second disposal is expected to complete in February 2016 and relates to the part disposal of the Group’s Northern Ireland
licences (the “NI Agreement”). This disposal is dependent on the Woodburn Forest-1 well being fully funded (see below). If this
disposal completes, it will generate a cash inflow of £300,000. The Group is expected to retain a 10% interest in the PL1/10 licence
for which it will be fully carried on the Woodburn Forest-1 well.
Further details on these disposals are given in note 32 to the financial statements.
Following satisfactory completion of all the transactions above and in addition to the retained NPI instruments, InfraStrata’s business
will comprise its 65% interest in the Islandmagee gas storage project in Northern Ireland and a 10% interest in onshore licence
PL1/10, fully carried through the Woodburn Forest-1 well. InfraStrata will remain as operator on PL1/10 and will be compensated
accordingly. The cash proceeds from the transactions are being applied to the ongoing work programme on the Islandmagee gas
storage project in preparation for monetisation during 2016, both on external costs and contributing to the Group’s own project
management costs incurred on progressing the Islandmagee work programme.
InfraStrata’s business going forward
The main focus of InfraStrata’s business will now be the Islandmagee Gas Storage Facility (currently 65% owned) where our work
programme during 2015 has been to de-risk the project to the maximum extent possible through the completion of the feasibility
study phase. We are now seeking to secure value for our shareholders through a monetisation of our interest in the project.
Our retained 10% interest in PL1/10 provides us with material upside in the event of a successful Woodburn Forest-1 well and
completing the farmout process followed by efficient and economic drilling of the well in 2016 remains a priority, albeit with the
overriding conditionality that all well costs are borne by partners. InfraStrata’s NPI instruments in licence interests P1918, P2222 and
P2235 together with its NPI interests in Brigantes and Corfe also provide upside in the underlying exploration activities in the event
of successful exploration but without a commitment to pay exploration costs on the assets disposed of.
INFRASTRATA plc
5
STRATEGIC REPORT (CONTINUED)
KEY PERFORMANCE INDICATORS
Key performance indicators (“KPIs”), both financial and non-financial, are used by the Board to monitor progress against
predetermined objectives and our strategy:
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 manage Group
working capital prudently
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
The KPIs are reported at Board meetings. Measurement entails analysing variance between expected and actual progress, financial
position and financial performance. Relevant performance measures since our last annual report include:
•
Strategic re-positioning in light of challenges to funding exploration commitments – delivery of divestment of most of
exploration assets for a cash consideration plus carried interests.
• Conclusion of formal grant agreement with European Commission for 50% of the cost of the Islandmagee salt core programme
with the balancing 50% raised in a placing of InfraStrata shares.
• New partner in the Islandmagee gas storage project in Baron Oil plc who are providing bridge finance for the salt core
programme with an option to convert into equity in the project.
• Procurement and delivery of the £3.8 million Islandmagee salt core well and subsequent testing and engineering on time and on
budget.
• Continued delivery against programme on exploration activities including securing Consent to Drill for the Woodburn Forest-1
•
well. Design and procurement of the well is substantially complete in anticipation of drilling in H1 2016 following completion
of funding arrangements.
Implementation of staff cost reduction in February and October 2015 delivering savings in aggregate annualised staff costs
of 15% and 28% respectively preserving the Group’s cash. Annualised cash costs of project management and company
administration, before taking into account anticipated operator overhead recoveries, is now less than £800,000, a 35% reduction
since October 2014.
OPERATIONAL REVIEW - GAS STORAGE DEVELOPMENT
Islandmagee project – County Antrim
Outline
Islandmagee Storage Limited (“IMSL”) is an independent Northern Ireland registered company and is a joint venture between a
wholly-owned subsidiary of InfraStrata (currently 65% shareholder) and Moyle Energy Investments Limited (“Moyle”), part of the
Mutual Energy group of companies (currently 35% shareholder).
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 1,400 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.
6
INFRASTRATA plc
No other location on the island of Ireland is suitable for the development of salt cavern gas storage; Northern Ireland has a valuable
geological asset which when developed for underground salt cavern gas storage will make a significant contribution towards security
of gas supplies to the wider region, including the north and south of the island of Ireland and mainland Great Britain.
The global supply chain for gas is lengthening as the need for more flexible gas is growing. Rapid deliverability of gas supplies will
become increasingly important to support the intermittent renewable power generation already deployed and planned across the
island of Ireland and Great Britain. The increasing amount of wind generation in the system is putting significant strain on the gas
infrastructure in Ireland with periods of peak demand rising year-on-year as gas-fired power stations respond to the great swings
in output from the intermittent renewable power sources. The gas storage facility would help alleviate these infrastructure pressures
and make a key contribution to policy objectives on renewable power - through its ability to rapidly inject and withdraw gas it can
provide the short term flexibility needed to support the intermittent nature of wind generation.
Natural gas will also have a key role to play as a bridge to a zero carbon economy with more reliance being placed on gas to backup
wind and other renewable sources as coal generation is closed. Increasingly storage will be required to provide fast delivery of gas to
the system.
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. The
estimated timescale for the project is approximately seven years, with the first cavern becoming operational after five years.
The strategic importance of the Islandmagee gas storage facility and the contribution it could deliver in terms of security of gas
supplies and as a key enabler to meet policy objectives on renewable energy and CO2 reduction is reflected in the project being
awarded Project of Common Interest (“PCI”) status by the European Union. PCI status also means that the project benefits from
accelerated permitting procedures and improved regulatory conditions making it more attractive to investors. In addition, a PCI can
apply for significant financial support from the European Union’s Connecting Europe Facility (“CEF”). A budget of €5.35 billion
has been allocated under CEF for 2014-20 for PCI projects. Assistance may be in the form of direct grant or other forms of financial
backing from institutions such as the European Investment Bank.
In November 2015 the status of the project as a PCI was reconfirmed with the adoption of the latest PCI list by the European
Commission. The list of PCIs is reviewed and updated every 2 years and continued inclusion is a significant boost for the project.
Islandmagee is the only gas storage project in NW Europe to be awarded PCI status.
Development progress & Outlook
The development of the project commenced in 2007 with the acquisition of 3D seismic data to image the Permian salt in the
Larne Lough area. During 2012, planning permission was granted for the project and a gas storage licence was issued by the Utility
Regulator. A wellsite was constructed in the summer of 2013. During 2014, a sub-surface agreement for lease was signed with The
Crown Estate and all other land rights required for the project were secured. Also during 2014, the project was granted marine
licences by the Department of Environment for the offshore elements of the project, including a discharge consent.
In May and June 2015 a data gathering well (Islandmagee-1) was successfully drilled to a total depth of 1,753 metres obtaining
wireline data and cores of the 185.8 metre Permian salt sequence encountered. Core samples were sent to Germany to undertake
laboratory analyses and the test results on the salt cores and rock mechanics have now been incorporated into the subsurface and
surface facility preliminary design and cost estimates for the project have been updated.
The overall results from the technical programme of work are positive and the objective to confirm the feasibility of the development
of an underground gas storage facility in salt caverns in this location has been met. The thickness and depth of the Permian Salt were
both within 10% of pre-drill estimates. The Permian Salt average thickness over the area of the proposed caverns is approximately
200 metres at a depth of approximately 1,300 metres sub-sea. The rock mechanical properties of the salt determined from the
core data are in line with data for Permian Salt at other locations across Northern Europe where caverns for gas storage have been
constructed and are in operation.
The five stages of the £3.8million programme of work co-funded by a £1.9m (€2.5 million) grant from the CEF have been
successfully completed, on time and within budget. The project was eligible to receive this grant assistance by virtue of being a PCI
and is eligible for further grant assistance in the future.
INFRASTRATA plc
7
STRATEGIC REPORT (CONTINUED)
OPERATIONAL REVIEW - GAS STORAGE DEVELOPMENT (CONTINUED)
Islandmagee project – County Antrim (continued)
Development progress & Outlook (continued)
In May 2015 the Company concluded a Convertible Loan Facility Agreement with Baron Oil Plc (“Baron”) under which Baron
has provided a loan for €1.8 million (£1.3 million) to InfraStrata which has been be used as working capital to bridge the receipt
of the CEF grant, the outstanding 70% of which (€1.8 million) will be received in the first quarter of 2016 following reporting on
the outcome of the work programme completed in 2015. Baron has an accompanying option to convert the loan balance into an
equity participation of 15% of the share capital of IMSL. Should the option be exercised, the equity would be provided pro-rata by
InfraStrata and Moyle which would give rise to a revised participation in the project of InfraStrata 55.25%, Moyle 29.75% and Baron
15.00%.
The feasibility phase of the project has now addressed all key technical risks enabling us to move forward to seek the investors who
will take it through detailed design and on to full construction. The thickness and depth of the salt and the proximity of key services
(electricity supply, water and the gas network) give the project a significant unit capital cost advantage with an estimated capital
cost of £274 million. We anticipate that the next stage will provide InfraStrata with the opportunity to monetise our interest in the
project.
Portland project - Dorset
The transfer of licence P2235 to Corallian involved an amendment of the Asset Exchange Agreement with Fyrd Energy Limited
(“Fyrd”) announced on 16 December 2014 (the “Fyrd Agreement”) under which InfraStrata was to acquire a 25% interest in licence
P2235 and other assets, in return for a 77.5% interest in the intellectual property in the former Portland project. Under the revised
Fyrd Agreement and subject to government consent, Fyrd will transfer its remaining 75% interest in licence P2235 to InfraStrata,
and in exchange, InfraStrata will transfer its 22.5% retained interest in the rights and intellectual property in its former Portland
project, excluding the gas pipeline rights and associated intellectual property, to Fyrd. The entire P2235 interest is to be transferred
under the S&P Agreements to Corallian as described above. In addition, the Portland gas pipeline rights and associated intellectual
property will be transferred by InfraStrata to Osmington as part of the S&P Agreements.
OPERATIONAL REVIEW - OIL & GAS EXPLORATION
Following the completion of the S&P Agreements as anticipated, InfraStrata’s retained interest in exploration will comprise:
10% interest in onshore PL1/10 in Northern Ireland, fully carried until the end of the Woodburn Forest-1 well.
•
• Net profits interest (“NPI”) instruments in each of P1918, P2222 and P2235 of 0.5%, 0.5% and 1% respectively of the gross,
•
representing 4% of Corallian’s anticipated interest in the licences at the time of drilling the first well on the licences.
4% share of any future profits derived by Osmington from the transferred 40% shareholdings in Brigantes and Corfe, again in
the form of NPI instruments.
The operational review below details the progress made on these exploration activities during the period.
County Antrim – Onshore PL1/10, Offshore P2123
Petroleum Licence PL1/10 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 JV group believes is a highly prospective
largely unexplored sedimentary basin. Subsequently in December 2013 the JV group were awarded adjacent offshore Petroleum
Licence P2123 by the Department of Energy and Climate Change (“DECC”) for a period of four years, covering an area of 613
square kilometres. The joint venture group recognises combined un-risked P50 prospective resources in the Triassic, Permian and
Carboniferous sandstone reservoir intervals of over 500 mmboe.
The well planning and design have been completed for the Woodburn Forest-1 well in PL1/10. Permitted Development rights
provide a window for commencement of site construction activities between September and February inclusive. In February 2015
a ‘Consent to Drill’ was granted by DETI following a separate consent issued by the Northern Ireland Environment Agency
(Water Management Unit) under the Water (Northern Ireland) Order 1999, which regulates the well in terms of surface water
and groundwater impacts. All of the relevant regulatory approvals for the well have now been granted. InfraStrata and its partners
are committed to carrying out this conventional exploration in an environmentally-responsible manner and in compliance with all
conditions associated with regulatory approvals.
8
INFRASTRATA plc
In August 2015 we reported that Larne Oil and Gas Limited had run into funding difficulties and was unable to meet its funding
obligations to earn a 33.33% interest in the licence PL1/10 by funding a disproportionate share of the Woodburn Forest-1 well.
Larne were also to acquire a 33.33% interest in Licence P2123.
Since August 2015 InfraStrata, together with Brigantes, have focused on farming out a combined 60% interest in the PL1/10 licence
in order to complete the 80% outstanding funding for the Woodburn Forest-1 well. In November 2015 we signed an agreement,
together with Brigantes, with Ermine Resources Limited (“Ermine”) whereby Ermine will acquire a 15% interest (paying 20% of the
Woodburn Forest-1 well costs) in the PL1/10 licence, subject to the full well funding being completed. InfraStrata and Brigantes are
in discussions with a number of other parties with regard to completing the farm-out process for the remaining 45% so that the well
can be drilled this coming winter.
Should the well be fully funded as anticipated then the NI Agreement with Corallian will proceed and InfraStrata will retain a
10% interest in PL1/10 fully carried until the end of the Woodburn Forest-1 well. In the event that the funding of the Woodburn
Forest-1 well is not completed then the NI Agreement will not complete. A request has been submitted to DETI to continue the
licence into the second term beyond 4 March 2016 and part surrender 50% of the licence area, as required under the terms of the
licence, to focus on the most prospective acreage. InfraStrata is awaiting a response from DETI.
InfraStrata will remain as Operator on the PL1/10 licence until at least the end of the Woodburn Forest well for which we will be
compensated accordingly. However we will have no commitment to pay drilling costs.
The JV group have a work programme for P2123 for 2016 including the acquisition of new 2D seismic data before the initial term of
the licence expires in December 2017. Should the NI Agreement not complete then InfraStrata will seek to farmout its obligation in
respect of the P2123 work programme costs and any PL1/10 expenditure or otherwise transfer these assets to another party without
commitment of cash to new exploration costs. In November the JV group made a part surrender of 68% of the licence area, again to
focus on the most prospective acreage on the P2123 licence. InfraStrata’s entire interest in P2123 is to be transferred under the NI
Agreement to Corallian.
Dorset – Offshore P1918
Petroleum licence P1918 initially comprised Blocks 97/14, 97/15 and 98/11, covering an area of 584 square kilometres, and was
awarded in February 2012 by the Department of Energy and Climate Change (“DECC”) for a period of four years. In October 2015
blocks 97/14 and 97/15 and part of Block 98/11 were relinquished leaving 105 square kilometres in Block 98/11. At the same time
DECC granted a one year extension to the first term of the licence until 30 January 2017. Work during the period continued to focus
on two prospects, the Purbeck and Colter Prospects.
Planning permission was granted in 2013 for an exploration well, California Quarry-1, on the offshore extension of the Purbeck
Prospect within Block 98/11 targeting prospective resources within the licence estimated by the joint venture at 10 mmbo. Drilling
of the California Quarry-1 well is dependent upon the acquisition and processing of 2D seismic data over the Purbeck Prospect and
this is anticipated to take place this coming winter. Further the proposed California Quarry-1 well is an onshore to offshore well and
since it is necessary for the area from which a well is drilled to be held under a petroleum licence, either InfraStrata or a third party
will need to be awarded a licence over the area as part of the UK 14th Landward Licensing Round before drilling can commence.
The licence awards in this area remain pending.
The current partners in the project are Corallian Energy Limited, Southwestern Resources Limited (“Southwestern”), Ermine, Corfe
and Brigantes. Southwestern have met the costs of 3D seismic reprocessing work on the Colter Prospect and a proportion of the
2D seismic acquisition on the Purbeck Prospect under a farmout agreement which also gives Southwestern the option to fund the
drilling of a well in return for a further interest in the licence. The balance of the 2D seismic costs will be met by Ermine under a
farmout agreement. The Colter Prospect is located within a fault block immediately to the south of the giant Wytch Farm oilfield.
InfraStrata will remain as operator under the licence until the formal assignment of the licence interest to Corallian has been
approved by the Oil and Gas Authority (“OGA”), expected to be in H1 2016. However we will have no commitment under the
S&P Agreements to pay exploration costs and InfraStrata will receive payment for services rendered during the 2D seismic work
programme.
INFRASTRATA plc
9
STRATEGIC REPORT (CONTINUED)
OPERATIONAL REVIEW - OIL & GAS EXPLORATION (CONTINUED)
East Shetland Basin – Offshore P2222
The licence contains the undeveloped Oulton oil discovery (3/11-1 and 1ST) estimated to contain approximately 16 million barrels
of recoverable oil. The discovery was made over 40 years ago by Amoco, and flowed in excess of 1000 barrels of 41 degrees API oil per
day on test from Jurassic Emerald sandstones. The use of modern offshore technologies combined with access to nearby infrastructure
are expected to enable Oulton to be successfully developed in the near future. Funding for a well will need to be concluded prior to
December 2016 in order to proceed into the last two years of the initial term of the licence and drill a well prior to December 2018.
InfraStrata’s entire interest in P2222 is to be transferred under the S&P Agreements to Corallian. InfraStrata will remain as licence
administrator until the formal assignment of the licence interest to Corallian has been approved by OGA.
Moray Firth – Offshore P2235
P2235 comprises Block 11/24b (part) and contains the Wild Boar Prospect, 3 kilometres north east of and structurally updip of
the producing Lybster oilfield within the Moray Firth. Prospective resources have been estimated as 70 mmbo. The prospect lies
close to the coast and there is the potential to drill an exploration well from onshore to offshore. Funding for a well will need to be
concluded prior to December 2016 in order to proceed into the last two years of the initial term of the licence and drill a well prior
to December 2018. InfraStrata’s entire interest in P2235 is to be transferred under the S&P Agreements to Corallian. InfraStrata will
remain as licence administrator until the formal assignment of the licence interest to Corallian has been approved by OGA.
Corfe & Brigantes
Corfe and Brigantes have interests in licence P1918 and Brigantes has interests in PL1/10 and P2123. Corfe and Brigantes are
seeking to farmout their commitments to further exploration costs including drilling on all these licence interests and the interests
are therefore expected to reduce accordingly. Corfe and Brigantes also hold interests in PEDL201 (Leicestershire), PEDL237/
PL090 (Dorset) and PEDL070 (Hampshire). InfraStrata’s shareholdings in both Corfe and Brigantes have been transferred under
the S&P Agreements to Corallian’s subsidiary Osmington.
OPERATIONAL REVIEW - FUNDING
Financing
The success of our projects and therefore the carrying value of the projects on InfraStrata’s statement of financial position are
dependent not only on the underlying economics of the projects but also on our continuing success in attracting investment into the
projects. We do not make financial commitments to significant project development costs in the absence of such investment.
On the Islandmagee gas storage project gross capital expenditure during the year to 31 July 2015 was £3,663,514. Of this total £1.9
million was funded by InfraStrata shareholders through a placing completed in February 2015 with the balance funded by a grant
from the European Union. Our share of expenditure on our oil and gas exploration licences during the year to 31 July 2015 was
£179,732 out of a total gross expenditure of £421,999. These costs were mostly related to the planning, permitting and consultation
processes as well as paying annual licence fees.
The book value of the Group’s intangible Exploration and Evaluation assets immediately before the divestments to Corallian was
£4,006,798 comprising £3,364,909 being the fair value of well and seismic data and a P1918 licence interest recognised in 2012
when the Group acquired 50% of Portland Gas Limited, £361,012 being the consideration for the cancellation of eCORP’s NPI
in P1918 in 2014 and £280,877 being the Group’s share of the historic net cash investment in licence interests after adjusting for
the proceeds of disposals. Impairments of £3,577,659 have been recognised to reflect the net cash sales proceeds from the S&P
Agreements excluding the NI Agreement. Should the NI Agreement complete the Group will realise a profit of approximately
£131,000 on the remaining book value of Exploration and Evaluation assets in future periods.
The book value of the Group’s interest in associated companies Brigantes and Corfe immediately before the divestments to Corallian
was £2,495,726 comprising £2,495,126 fair value adjustments recognised in 2011 net of the Group’s share of subsequent losses of the
associated companies and the Group’s historic net cash investment in the associated companies of £600. Impairments of £2,495,126
have been recognised to reflect the net cash sales proceeds from the S&P Agreements. The impairments had no impact on the
Group’s cash position.
No value has been ascribed to any of the NPI instruments retained in the Group’s financial statements as it is not possible to
determine a fair value for these instruments.
10
INFRASTRATA plc
On 21 January 2015, following approval at the Company’s AGM, each existing ordinary share of 10 pence was subdivided into
1 New Ordinary Share of 1 penny and 9 Deferred Shares of 1 penny. The Deferred Shares do not carry any rights to vote or any
dividend rights and holders will only be entitled to a payment on return of capital or winding up of the Company after each of the
holders of the Ordinary Shares has received a payment of £10,000,000 on each such share.
On 23 February 2015, following approval at a General Meeting of the Company, the Company issued 52,500,000 new Ordinary
Shares of 1 penny each at 4 pence per share to raise £2,100,000, before expenses, to institutional and other shareholders including
members of the Board of Directors. The net proceeds of £1,984,196, taken together with £400,000 received in February by the
Company’s subsidiary Islandmagee Storage Limited in relation to a data release agreement, at that time was forecast to provide the
Group with sufficient cash to meet our approximately £1.9 million share of the costs of the Islandmagee salt core programme (50%
of the total) and to pay InfraStrata management and other costs to the end of 2015. The Islandmagee salt core programme was
delivered on time and within the original budget and our management costs to the end of 2015 are within the estimates we presented
in February.
The balancing 50% (£1.9 million or €2.5 million) of the costs of the Islandmagee salt core programme have been met by the
European Commission under a grant agreement concluded with the EU’s Connecting Europe Facility in April 2015. Under the
terms of the grant agreement 70% of the total grant (€1.8 million) is received on completion of the work programme and application
for the balance. In order to bridge this working capital requirement, on 30 April 2015 the Company signed a Convertible Loan
Facility Agreement (“Agreement”) with Baron Oil Plc (“Baron”) for €1.8 million. The loan is subject to an interest rate of 8% of the
funds drawn down and is repayable by 1 May 2016. Baron has the right to extend the loan period until 31 December 2016 and to
convert it into equity participation of 15% of the share capital in subsidiary Islandmagee Storage Limited. £1 million of this facility
had been drawn down at 31 July 2015 and the remaining £0.3 million was drawn down in August 2015.
The Islandmagee salt core work programme has been completed and the balancing €1.8 million of the grant is expected to be
received before the end of the first quarter of 2016 at which time it will be held in escrow as security to satisfy the repayment of the
Baron loan. However, if Baron excises its option, then the €1.8 million will be available as corporate funding for InfraStrata.
The Group’s cash and cash equivalents at 31 July 2015 were £430,199 (2014 - £1,648,955) and net current assets were £42,122 (2014
- £957,491).
The divestment of exploration assets to Corallian announced on 16 November 2015 has provided the Company with additional
cash resources of £240,000 which will provide short term capital for our immediate needs. The Company will receive an additional
£300,000 should the conditions for the transfer of the Northern Ireland licence interests be met, including full funding of the
Woodburn Forest-1 well. This additional cash would permit the Company to meet all committed expenditure until the end of April
2016 without further fundraising requirements.
In the event that the funding of the Woodburn Forest-1 well is not completed then the disposals of the Northern Ireland licences
will not complete. A request has been submitted to DETI to continue the licence into the second term beyond 4 March 2016 and
part surrender 50% of the licence area. InfraStrata is awaiting a response from DETI.
Forward cash flow forecasts reflect that all significant future exploration costs will now be borne by Corallian in respect of exploration
interests transferred to that company and that any future costs associated with retained licence interests will continue to be funded
by joint venture partners. With respect to the Islandmagee gas storage project, the Group now seeks new equity participation in the
project or otherwise a monetisation of all or part of the Group’s interest in the project. The exact nature of this monetisation is not yet
determined and may involve continued management of the project’s development with the continued support of the EU. There will
be no commitments to significant new expenditure on the project in the absence of funding secured for that purpose.
As explained in note 2 to the financial statements the directors have prepared the accounts on the going concern basis which assumes
that the Group will continue in operational existence without significant curtailment of its activities for the foreseeable future. Project
management and administrative costs of the Group will remain at current levels (see below), consistent with the delivery of the
Group’s strategy and the management of challenges and risks associated with the Group’s development programmes. The forecasts
reflect that the Group requires an additional £600,000 to meet project management and administrative costs and committed project
expenditure on the Islandmagee project until the end of December 2016 increasing to £900,000 should the conditional disposals of
the Northern Ireland licence interests not proceed.
The directors anticipate that additional funding can be generated through an equity fundraising or by disposing of assets or data
licensing; however, the success of such fundraising cannot be guaranteed. After preparing cash flow forecasts, making enquiries and
considering the uncertainties described above, the directors have a reasonable expectation that the Group has adequate resources
to continue in operational existence for the foreseeable future. For these reasons, they continue to adopt the going concern basis of
accounting in preparing the annual financial statements. However, the success of any equity fundraising, asset disposal or data trade
cannot be guaranteed and the directors have concluded that at the date of this report a material uncertainty must therefore exist that
may cast significant doubt upon the Group’s ability to continue as a going concern.
INFRASTRATA plc
11
STRATEGIC REPORT (CONTINUED)
OPERATIONAL REVIEW - FUNDING (CONTINUED)
Project management and company administration costs
The Group’s policy is to resource the delivery of our project management objectives to the maximum extent possible with our own
management team, procuring more expensive external technical expertise only when it is necessary to do so. As such, every member
of the management team has a hands-on project management role and makes an indispensable contribution to delivery of our
strategy and effective management of the risks and uncertainties our business faces. Nevertheless, during 2015 the Company has
continued to reduce management and administrative costs. This has been led by voluntary reductions in salary costs recognising the
need to conserve cash resources as much as possible. In addition members of the Board participated in the February 2015 placing.
The remuneration committee sets salaries and is acutely aware of the need to balance the financial performance of the Company
with the need to maintain incentive and motivation for an executive which has delivered our 2015 work programme with dedication
and a focus on the interests of our shareholders. During 2016 every member of the management team will be required to make
indispensable contributions to effective delivery of our strategy, performance against our key performance indicators and effective
management of the risks and uncertainties our business faces.
Following an overall 15% reduction in staff costs, which was implemented in February 2015, in October 2015 the Company
implemented a Performance Incentive Scheme under which voluntary salary reductions have been taken in return for participation in
the scheme. The salary reductions (including company pension contributions) implemented on 1 October 2015 comprise a reduction
to £100,000 per annum for each of the Executive Directors (an aggregate reduction of 32% including a 41% reduction for the
Chief Executive Officer) and a 25% reduction for the Non-executive directors and the Company Secretary. For further details see
Remuneration Committee on page 17.
Total management and administrative expenditure is further analysed in note 5 to the financial statements showing that the cash cost
of management and administrative costs in the year to 31 July 2015 was £1,065,161 (2014: £1,126,482). Our current annualised cash
cost of management and administration, taking into account the salary reductions above and other significant reductions in general
costs implemented during the year, is now less than £800,000 and this will be further reduced by operator overhead recoveries when
the Woodburn Forest-1 well is drilled and by time related cost recoveries for services rendered to Corallian in relation to the ongoing
management of assets sold to that company.
PRINCIPAL RISKS & UNCERTAINTIES
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.
Financing – the risk of not obtaining sufficient financing
Access to adequate working capital is critical to our ability to pursue our existing and future projects and to continue as a going
concern. We work closely with our advisors and brokers to identify the optimum approach and timing to secure new equity financing
to provide working capital.
The Group manages risk for our shareholders by attracting investment through quality partners thereby minimising our own
commitments to pay project development costs. We do not make financial commitments unless such funding has been secured
through joint venture partners or otherwise new investment in our projects or we have a high degree of confidence that it will be
secured.
Strategic and external risks - failure to manage and grow the business while creating shareholder value
There is no assurance that the Group’s gas storage development or remaining exploration activities will be successful. The directors
have sought to manage and mitigate the exploration risks by divesting of substantially all our exploration assets. We place a premium
on recruitment and retention of suitably skilled personnel, compliance with applicable legislation and careful management of cash
resources and requirements.
12
INFRASTRATA plc
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.
Deterioration of capital markets may reduce our ability to raise new equity funding. Group management works closely with our
advisors and brokers to identify the optimum approach and timing to secure new equity financing to provide working capital and
flexibility in the way we fund our projects.
We place great emphasis on regular communication with shareholders including the release of announcements for the interim and
annual results and after significant developments. We seek to ensure that through such communication our shareholders are aware of
our strategy and operations and that management has their continuing support. The Company’s system of Corporate Governance is
set out in the Report of the Directors on pages 16 to 17.
Operational risks - damage to shareholder value, environment, personnel or communities caused by operational failures
InfraStrata attracts and retains a high quality management team to manage operational risks on our projects and ensure they are
progressed in the shortest possible timescales in a cost effective manner. We have built up our core competencies in oil and gas
exploration and gas storage development and have developed excellent relationships with government and public stakeholders in the
geographical areas in which we operate.
Our management team works alongside strong and experienced joint venture partners in all projects and is supported by a highly
effective network of carefully selected service delivery specialists such as environmental consults and drilling engineering services. In
this way we mitigate the risk that we fail to be seen to be acting in a socially responsible manner and/or failure to maintain good local
community relations.
On behalf of the Board
Andrew Hindle,
Chief Executive Officer
7 December 2015
INFRASTRATA plc
13
REPORT OF THE DIRECTORS
FOR THE YEAR ENDED 31 JULY 2015
The directors have pleasure in presenting their report and audited financial statements for the year ended 31 July 2015.
General
InfraStrata plc is incorporated and domiciled in England and Wales.
Health, safety and environment
There were no reportable health, safety or environmental incidents during the financial year.
Share capital
At the date of this report 151,991,599 ordinary shares are issued and fully paid. Details of movements in share capital during the year
are given in note 24 to the financial statements.
RESULTS AND DIVIDENDS
The Group recognised cash revenue of £414,106 (2014: £17,764) including £400,000 from the licensing of seismic data.
Administrative expenses totalled £1,144,393 (2014: £1,331,350). The Group incurred a loss after tax of £6,106,070 (2014:
£1,246,701) after impairments of Exploration and Evaluation assets and interests in associates of £3,577,659 and £2,495,126
respectively. The loss which added to the losses of £20,721,978 brought forward leaves a retained loss of £26,828,048 to be carried
forward.
The directors do not recommend the payment of a dividend (2014: £nil).
CHARITABLE AND POLITICAL DONATIONS
Portland Gas Trust is a charity which supports initiatives focusing on the environment, geology and education with its activities
centred on Portland, Dorset. In the 2014 year the Group supported the Trust by making a donation of £20,000. No charitable
donations were made in the 2015 year.
No donations were made for political purposes (2014: £nil).
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 23 to the
financial statements. The principal risks and uncertainties relating to the Group’s business and how we mitigate them are detailed in
the Strategic Report on pages 12 to 13.
DIRECTORS
The directors, who served during the year and subsequently, were as follows:
Executive Directors
A D Hindle
S McGarrity
A E Gardiner (appointed 28 October 2014)
Non-executive Directors
K M Ratcliff
M E Hazzard
A Booth (appointed 21 January 2015, resigned 10 November 2015)
W Colvin (resigned 31 January 2015)
W R Roberts (resigned 28 October 2014)
All directors benefit from the provisions of individual directors’ Personal Indemnity insurance policies. Premiums payable to third
parties are as described in note 7 to the financial statements. The Company operates a share option scheme and the particulars of
share options granted to directors at 31 July 2015 are detailed in note 7 to the financial statements.
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, is a Chartered Accountant with extensive finance and business experience. He was formerly the 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.
14
INFRASTRATA plc
Andrew Hindle (Chief Executive Officer)
Andrew Hindle, BSc, MSc, PhD, FGS, CGeol, is a highly experienced geologist with over 30 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 the demerger in 2008. Andrew is also a director of
Geofocus Limited and Toffee Limited.
Stewart McGarrity (Finance Director)
Stewart McGarrity, BCom, CA, has 30 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.
Anita Gardiner (Commercial Development Director)
Anita Gardiner, BA, MA, MCIPS graduated from Queens University, Belfast and started her career at the Prudential plc where she
worked in a number of commercial roles in procurement and supply chain, real estate and operations. She moved to BP in 2005 and
held various project and managerial positions in the UK and India, most recently as Business Development Manager for BP Gas
Marketing where she had responsibility for asset development and origination activities across Europe.
Maurice Hazzard (Non-Executive Director)
Maurice Hazzard, 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.
DIRECTORS’ EMOLUMENTS
The directors’ emoluments are disclosed in note 7 to the Financial Statements.
DIRECTORS AND SUBSTANTIAL SHAREHOLDINGS
The directors of the Company held the following beneficial shareholdings as at 30 November 2015:
Ordinary shares of 1p each
Ken Ratcliff
Andrew Hindle
Stewart McGarrity
Anita Gardiner
Maurice Hazzard
Number
154,000
8,297,625
1,000,000
-
69,326
The Company has also received notification of the following interests in 3% or more of the Company’s issued share capital at 30
November 2015. The percentages presented are at the date of notification.
Ordinary shares of 1p each
Legal & General Investment Management Ltd
Mark Abbott
Eugene Whyms
Alan Booth
Number
15,102,273
5,739,545
5,659,725
5,500,000
INFRASTRATA plc
%
0.10
5.46
0.66
-
0.05
%
9.93
3.78
3.72
3.62
15
REPORT OF THE DIRECTORS
FOR THE YEAR ENDED 31 JULY 2015 (CONTINUED)
CORPORATE GOVERNANCE
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 have regard to the recommendations of the Code in so far as is appropriate for a public company of its size.
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. The directors are of the opinion that the Board has a suitable balance. 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 2015 financial year
12§
3
3
Board
Audit Committee
Renumeration
Committee
No. of meetings
attended
No. of meetings
attended
No. of meetings
attended
Executive Directors
Andrew Hindle
Stewart McGarrity
Anita Gardiner (appointed 28 October 2014)
Non-executive Directors
Ken Ratcliff
Maurice Hazzard
Alan Booth (appointed 21 January 2015, resigned 10 November 2015)
William Colvin (resigned 31 January 2015)
Walter Roberts (resigned 28 October 2014)
12
12
9
10
10
5
3
2
-
-
-
3
2
-
1
-
-
-
-
3
3
-
1
-
§ Of which two were minimally attended as they were to finalise business already approved by all directors.
Audit Committee
The Audit Committee met three times in the year to 31 July 2015. Its members currently are Ken Ratcliff (Chairman) and Maurice
Hazzard. 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.
16
INFRASTRATA plc
Remuneration Committee
The members of the Remuneration Committee are Maurice Hazzard (Chairman) and Ken Ratcliff. The committee met three
times during the year. 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.
The Committee recognises the continuing financial pressures on the Company and is appreciative in particular of the contribution
made by the Executive Directors in further reducing salary costs during the year. On 1 February 2015 an overall 15% reduction in
staff costs was implemented including a reduction of 15% in the aggregate remuneration including pension contributions of the
Chief Executive Officer and the Finance Director.
On 1 October 2015 the Company implemented a Performance Incentive Scheme under which voluntary salary reductions have been
taken to preserve the Group’s cash resources. In return the participants in the scheme have been awarded Performance Units (PU’s)
at the rate of 1 PU for £1 of salary reduction (salary for this purpose including company contributions to pension arrangements). The
PUs will not achieve any value unless certain value creation criteria have been met including the completion of a significant asset or
corporate sale. Once a value creating trigger event has occurred, the amount paid as a £1 bonus for each PU will be calculated with
reference to a sliding scale based on the share price following the trigger event with the number of PU’s being multiplied by zero for
a share price of 4 pence up to x3 for share price of 9 pence or more. The scheme will end and the PUs will expire on 30 September
2016.
Salary reductions (including company pension contributions) implemented on 1 October 2015 comprise a reduction to £100,000
per annum for each of the Executive Directors (an overall reduction of 32% in aggregate including a 41% reduction for the Chief
Executive Officer) and a 25% reduction for the Non-executive directors and the Company Secretary.
The Committee remains acutely aware of the need to balance the financial performance of the Company with the need to maintain
incentive and motivation for an executive which has delivered our 2015 work programme with dedication and a focus on the interests
of our shareholders.
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.
Allenby Capital Limited, the company’s Nominated Advisor and joint broker, actively researches 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.
INFRASTRATA plc
17
REPORT OF THE DIRECTORS
FOR THE YEAR ENDED 31 JULY 2015 (CONTINUED)
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 Strategic Report and the accounting
policies in note 2 to the financial statements.
DIRECTORS’ RESPONSIBILITIES
The directors are responsible for preparing the Strategic Report, 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 or herself aware of any relevant audit 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.
On behalf of the Board
A Hindle
Director
7 December 2015
18
INFRASTRATA plc
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 2015 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 33. 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 18, the directors are responsible for the preparation
of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an
opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland).
Those standards require us to comply with the 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/
auditscopeukprivate.
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 2015
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.
Emphasis of matter – carrying value of the Group’s development costs relating to the Islandmagee gas storage facility and the
amounts due to the Company from its subsidiaries
In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosure made
in note 2 to the financial statements concerning the Group’s development costs relating to the proposed Islandmagee gas storage
facility with a carrying value of £5,704,951 and the balances of £5,085,527 due to the company from its subsidiaries.
As described in note 2, to continue to develop the Group’s Islandmagee gas storage facility and to enable the Company to recover
balances due to it from its subsidiaries, the Group is dependent upon securing further funds or monetisation of all or part of the
Group’s interest in the project. The financial statements do not include the impairment of the Group’s development costs relating the
project that would result if the Group were unable to continue to raise such funds or the impairment of the Company’s balances due
from its subsidiaries if the Group was unsuccessful in the monetisation of all or part of the Group’s interest in the project.
Emphasis of matter – carrying value of the Group’s interest in Licences PL1/10 and P2123
In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosures
made in notes 2 and 32 to the financial statements concerning the Group’s interest in the PL1/10 and P2123 licences, which have a
carrying value of £189,739.
INFRASTRATA plc
19
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF INFRASTRATA PLC (CONTINUED)
Emphasis of matter – carrying value of the Group’s interest in Licences PL1/10 and P2123 (continued)
As described in note 32, if funding is not obtained for the Woodburn Forest-1 well, then the part disposal of the license interests
to Corallian Energy Limited will not complete and, as described in note 2, unless the Northern Ireland Department of Enterprise,
Trade and Investment agrees to allow the license to continue into its second term prior to the well being drilled, the PL1/10 license
will have be to be relinquished. The financial statements do not include the impairments that would result if the funding is not
received and the license is not allowed to continue into its second term.
Emphasis of matter – going concern
In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosure made
in note 2 to the financial statements concerning the Group’s and the Company’s ability to continue as going concerns. Financial
projections prepared by the directors show that future funding is required within the forthcoming year in order for the Group and
the Company to continue as going concerns. The directors anticipate generating additional funding by way of an equity fundraising
or by disposing of assets or data trades. If such funding cannot be generated, the Group and Company would need to seek alternative
sources of funding to enable them to meet their liabilities as they fall due for the foreseeable future.
These conditions indicate the existence of a material uncertainty which may cast significant doubt about the Group and Company’s
abilities to continue as going concerns. The financial statements do not include the adjustments that would result if the Group and /
or Company were unable to continue as going concerns.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Strategic Report and 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.
Guy Swarbreck
Senior Statutory Auditor,
for and on behalf of
Nexia Smith & Williamson
Statutory Auditor
Chartered Accountants
Walnut Tree Close
1 Bishops Wharf
Walnut Tree Close
Guildford
GU1 4RA
7 December 2015
20
INFRASTRATA plc
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 JULY 2015
Notes
2015
£
2014
£
Continuing operations
Revenue
Cost of sales
Gross profit
Management & administrative expenses
Impairment of Exploration & Evaluation assets
Total administrative expenses
Operating loss
Finance income
Share of loss of Associates
Impairment of interest in Associates
Loss before taxation
Taxation
Loss for the year attributable to the equity holders of the parent
Other comprehensive income
Reclassification of funds received from
BP Gas Marketing Limited
4
5
14
10
17
17
11
15
414,106
17,764
-
-
414,106
17,764
(1,144,393)
(1,331,350)
(3,577,659)
-
(4,722,052)
(1,331,350)
(4,307,946)
(1,313,586)
1,105
8,921
(49,286)
(82,961)
(2,495,126)
-
(6,851,253)
(1,387,626)
745,183
140,925
(6,106,070)
(1,246,701)
-
2,033,450
Total comprehensive (loss) / profit for the year attributable to the
equity holders of the parent
(6,106,070)
786,749
Basic and diluted (loss) per share
Continuing operations
12
(5.00)p
(1.27)p
INFRASTRATA plc
21
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 JULY 2015
Notes
2015
£
2014
£
Non-current assets
Intangible fixed assets:
Exploration & Evaluation
Gas Storage Development
Property, plant and equipment
Investments in Associates
Total non-current assets
Current assets
Trade and other receivables
Grant receivable
Cash and cash equivalents
Total current assets
Current liabilities
Trade and other payables
Short-term convertible borrowings
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
Total equity
14
15
16
17
18
19
20
21
19
22
24
25
26
429,139
3,827,066
5,704,951
3,641,437
440,453
440,100
600
2,545,012
6,575,143
10,453,615
300,408
144,823
1,066,306
-
430,199
1,648,955
1,796,913
1,793,778
(754,791)
(836,287)
(1,000,000)
-
(1,754,791)
(836,287)
42,122
957,491
-
(745,183)
6,617,265
10,665,923
10,474,160
9,949,160
13,379,415
11,920,219
8,988,112
8,988,112
603,626
530,410
(26,828,048)
(20,721,978)
6,617,265
10,665,923
Company registration number: 06409712. Approved and authorised for issue by the Board on 7 December 2015
22
A Hindle
Director
S McGarrity
Director
INFRASTRATA plc
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 JULY 2015
Notes
2015
£
2014
£
Non-current assets
Intangible exploration assets
Property, plant and equipment
Investments
Total non-current assets
Current assets
Trade and other receivables
Grant receivable
Cash and cash equivalents
Total current assets
Current liabilities
Trade and other payables
Short-term convertible borrowings
Total current liabilities
Net current assets
Net assets
Shareholders’ funds
Share capital
Share premium
Merger reserve
Share based payment reserve
Retained earnings
Total equity
14
16
17
18
19
20
21
19
24
25
26
280,877
101,145
353
600
-
600
281,830
101,745
5,377,201
4,139,208
1,066,306
-
256,192
938,903
6,699,699
5,078,111
(658,436)
(780,465)
(1,000,000)
-
(1,658,436)
(780,465)
5,041,263
4,297,646
5,323,093
4,399,391
10,474,160
9,949,160
13,379,415
11,920,219
8,466,827
8,466,827
603,626
530,410
(27,600,935)
(26,467,225)
5,323,093
4,399,391
Company registration number: 06409712. Approved and authorised for issue by the Board on 7 December 2015
A Hindle
Director
S McGarrity
Director
INFRASTRATA plc
23
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 JULY 2015
Share
capital
£
Share
premium
£
Merger
reserve
£
Share
based
payment
reserve
£
Attributable
to the
owners of
the parent
£
Retained
earnings
£
Non-
controlling
interest
£
Total
equity
£
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
Loss for the year
Other comprehensive
income
Total comprehensive profit
for the year
-
-
-
Shares issued
800,000
Share based payments
BP Gas Marketing Limited
- Islandmagee Storage
Limited option (note 15)
Reclassification of funds
received from BP Gas
Marketing Limited (note 15)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Loss for the year
Total comprehensive loss
for the year
-
-
-
-
Shares issued
525,000
1,459,196
Share based payments
-
-
-
-
-
-
-
-
-
95,490
-
-
-
-
73,216
-
(1,246,701)
(1,246,701)
-
(1,246,701)
2,033,450
2,033,450
786,749
786,749
800,000
95,490
-
-
-
-
2,033,450
786,749
800,000
95,490
-
-
-
-
-
606,173
606,173
-
(2,033,450)
(2,033,450)
-
(6,106,070)
(6,106,070)
-
(6,106,070)
(6,106,070)
(6,106,070)
-
(6,106,070)
-
-
1,984,196
73,216
-
-
-
1,984,196
73,216
6,617,265
Balance at 31 July 2014
9,949,160
11,920,219
8,988,112
530,410
(20,721,978)
10,665,923
-
10,665,923
Balance at 31 July 2015
10,474,160
13,379,415
8,988,112
603,626
(26,828,048)
6,617,265
24
INFRASTRATA plc
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 JULY 2015
Share
capital
£
Share
premium
£
Merger
reserve
£
Share based
payment
reserve
£
Retained
earnings
£
Total equity
£
Balance at 31 July 2013
9,149,160
11,920,219
8,466,827
434,920
(25,753,870)
4,217,256
Loss for the year
Total comprehensive loss for the year
Shares issued
Share based payments
-
-
800,000
-
-
-
-
-
-
-
-
-
-
-
-
95,490
(713,355)
(713,355)
(713,355)
(713,355)
-
-
800,000
95,490
Balance at 31 July 2013
9,949,160
11,920,219
8,466,827
530,410
(26,467,225)
4,399,391
Loss for the year
Total comprehensive loss for the year
-
-
-
-
Shares issued
525,000
1,459,196
Share based payments
-
-
-
-
-
-
-
-
-
73,216
(1,133,710)
(1,133,710)
(1,133,710)
(1,133,710)
-
-
1,984,196
73,216
Balance at 31 July 2015
10,474,160
13,379,415
8,466,827
603,626
(27,600,935)
5,323,093
INFRASTRATA plc
25
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 JULY 2015
Notes
2015
£
2014
£
Net cash (used in) operating activities
27
(894,081)
(702,407)
Investing activites
Interest received
Purchase of exploration intangible assets
1,105
4,772
(179,732)
(347,211)
Purchase of gas storage intangible assets
(3,663,514)
(255,292)
Grant received
Purchase of equipment
Proceeds from the disposal of exploration intangible assets
PGL preference shares receipts
533,694
(424)
-
-
Net cash (used in)/generated from investing activities
(3,308,871)
-
-
360,000
367,474
129,743
Financing activities
Proceeds on issue of ordinary shares
Drawdown of short-term borrowings
Contribution from non-controlling interest
Cash inflow on reclassification of assets previously held for sale
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:
1,984,196
800,000
1,000,000
-
-
-
606,173
40,701
2,984,196
1,446,874
(1,218,756)
1,648,955
874,210
774,745
430,199
1,648,955
Cash at bank
20
430,199
1,648,955
Significant non-cash transactions
As disclosed in note 19, at 31 July 2015 the Group has accrued £1,066,306 as the portion of the Grant from the European
Commission in respect of the Islandmagee gas storage project attributable to work done at that date. This accrual is a non-cash item,
as are the impairment charges of £6,072,785 (2014 – nil); therefore these items do not appear in the statement of cash flows.
During 2014 the Group acquired the preference shares held by eCORP in subsidiary Portland Gas Limited for a non-cash
consideration of US$600,000 satisfied by the cancellation of a debt of US$600,000 payable by eCORP at that time.
26
INFRASTRATA plc
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 JULY 2015
Net cash (used in) operating activities
27
(4,021,550)
(609,030)
Notes
2015
£
2014
£
Investing activites
Interest received
Purchases of exploration intangible assets
Grant received
Purchases of equipment
Proceeds on the disposal of exploration intangible assets
Net cash generated from investing activities
Financing activities
Proceeds on issue of ordinary shares
Drawdown of short-term borrowings
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:
1,105
4,772
(179,732)
(347,211)
533,694
(424)
-
354,643
-
-
360,000
17,561
1,984,196
800,000
1,000,000
2,984,196
(682,711)
938,903
256,192
-
800,000
208,531
730,372
938,903
Cash at bank
20
256,192
938,903
Significant non-cash transactions
As disclosed in note 19, at 31 July 2015 the Group has accrued £1,066,306 as the portion a Grant from the European Commission
in respect of the Islandmagee gas storage project attributable to work done at that that date. This accrual is a non-cash item and
therefore does not appear in the in the statement of cash flows.
There were no significant non-cash transactions in 2014.
INFRASTRATA plc
27
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 JULY 2015
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.
Basis of preparation
InfraStrata plc adopted International Financial Reporting Standards (IFRS) as adopted by the European Union effective in July
2015, 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
In accordance with market practice for infrastructure development and oil and gas exploration groups, the Group has been
historically funded on a project and milestone basis. As of the date of this report the directors believe the Group has sufficient cash
resources to be able to continue to pay its creditors as they fall due until February 2016. Cash flow forecasts reflect that the Group
requires an additional £600,000 to meet project management and administrative costs, project costs on the Islandmagee project
and other working capital requirements until the end of December 2016 increasing to £900,000 should the conditional disposals to
Corallian Energy Limited in respect of the NI Agreement not complete (see note 32).
The directors anticipate that additional funding can be generated through an equity fundraising or by disposing of assets or data
licensing; however, the success of such fundraising cannot be guaranteed. After preparing cash flow forecasts, which include
fundraising, making enquiries and considering the uncertainties described above, the directors have a reasonable expectation that
the Group has adequate resources to continue in operational existence for the foreseeable future. For these reasons, they continue to
adopt the going concern basis of accounting in preparing the annual financial statements.
However, the directors have concluded that the uncertainty of fundraising indicates that a material uncertainty exists which may cast
significant doubt upon the Group’s ability to continue as a going concern and therefore the Group may be unable to realise its assets
and discharge its liabilities in the normal course of business. Were the Group no longer a going concern, adjustments may be required
to the carrying value of assets, provision would be required for the future liabilities arising as a consequence of the Group ceasing
business and assets and liabilities currently classified as non-current would be reclassified as current.
In the event that the funding of the Woodburn Forest-1 well is not completed then the disposals of the Northern Ireland licences
will not complete. A request has been submitted to DETI to continue the licence into the second term beyond 4 March 2016 and
part surrender 50% of the licence area. InfraStrata is awaiting a response from DETI. In the absence of such an agreement by DETI,
then the licence would need to be relinquished and re-applied for. In any event no significant new expenditure commitments will be
made unless they are fully funded by partners.
The directors remain confident that the Woodburn Forest-1 well will be fully funded to meet the requisite construction and drilling
programme. However, the well funding cannot be guaranteed and the directors have therefore concluded that a material uncertainty
exists with regard to the completion of the sale of the Northern Ireland licence interests and, subsequently, the Group’s ability to
retain the licence.
Forward cash flow forecasts reflect that all significant future exploration costs will now be borne by Corallian in respect of
exploration interests transferred to that company and that any future costs associated with retained licence interests will continue to
be funded by joint venture partners.
With respect to the Islandmagee gas storage project, following the successful completion of the EU co-financed drilling testing and
engineering programme during 2015, the Group now seeks new equity participation in the project or otherwise a monetisation of all
or part of the Group’s interest in the project. The exact nature of this monetisation is not yet determined and may involve continued
management of the project’s development with the continued support of the EU. There will be no commitments to significant new
expenditure on the project in the absence of funding secured for that purpose.
28
INFRASTRATA plc
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2015
Should the Group not be successful in obtaining future funding for its projects or realising value for them in excess of current book
value, the Group’s capitalised project development costs and amounts due to the Company from its subsidiaries amounting to
£5,085,527 may become impaired in value. The directors are confident that such funding will continue to be secured.
Having reviewed the value of gas storage and exploration and evaluation assets in accordance with the principles on page 33, and the
value of balances due to the Company from its subsidiaries, the directors are of the opinion that these assets are not impaired in value.
Adoption of new and revised standards
The following new and revised standards have been adopted in the preparation of the financial statements for the current financial
year:
IFRS 10 Consolidated Financial Statements
IFRS 11 Joint Arrangements
IFRS 12 Disclosure of Interests in Other Entities
IAS 27 Separate Financial Statements (revised 2011)
IAS 28 Investments in Associates and Joint Ventures (revised 2011)
The adoption of these standards had no material impact on the financial statements of the Group.
Other than minor changes to standards arising from annual improvements, there are no EU adopted revised or new standards
which have yet to be adopted. The minor changes to the standards are not expected to have a material impact on the Group financial
statements.
IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers have been issued, but not yet adopted by the
EU. After their adoption by the EU, the Group will be required to adopt them; it is not expected that these will have a material effect
on the Group financial statements.
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 profit or loss 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.
Oil and gas exploration joint operations
The Group is engaged in oil and gas exploration and development which may lead to production through unincorporated joint
operations. The Group accounts for its share at cost of the results and net assets of these joint operations as jointly controlled assets
based on its percentage ownership of these joint operations. In addition, where the Group acts as operator to the jointly controlled
operation, the gross liabilities and receivables (including amounts due to and from non-operating partners) of the jointly controlled
operation are included in the statement of financial position. Details of the Group’s oil & gas exploration jointly controlled
operations accounted for as joint assets are provided in note 31.
Farm-outs in the exploration and evaluation phase
The Group does not record any expenditure made by the farminee on its account. In entering into a farm-out arrangement any
costs previously capitalised in relation to the whole interest are re-designated 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 as a gain on disposal.
INFRASTRATA plc
29
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2015
2. ACCOUNTING POLICIES (CONTINUED)
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.
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 or loss represents the profit or loss attributable to equity holders of the parent attributable to each segment. 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 statement of financial position 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.
30
INFRASTRATA plc
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2015
Oil & gas exploration and evaluation expenditure and assets
The Group accounts for oil & gas expenditure under the full cost accounting method.
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 statement of comprehensive income.
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 statement of comprehensive income 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.
Government grants
Government grants are recognised only when there is reasonable assurance that the Group will comply with the conditions attaching
to the grant and that the grants will be received. Capital grants are recognised to match the related development expenditure and are
deducted in arriving at the carrying value of the related assets.
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 statement of comprehensive income 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 statement of financial position 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 statement of financial position 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 statement of comprehensive income, 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 statement
of financial position date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates
prevailing on the statement of financial position date and gains or losses are taken to operating profit.
INFRASTRATA plc
31
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2015
2. ACCOUNTING POLICIES (CONTINUED)
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.
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 statement of comprehensive income 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 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 statement of comprehensive income 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 statement of financial position.
Financial instruments
Financial assets and financial liabilities are recognised on the statement of financial position 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 statement of comprehensive income. 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 statement of comprehensive income using the effective interest method.
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.
32
INFRASTRATA plc
Data licensing
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2015
Revenue from licensing of data to other parties is recognised in full upon the delivery of the data to the licensee.
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.
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 gas storage and exploration and evaluation 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.
Review of gas storage 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 a 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.
Review of exploration and evaluation asset carrying values
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.
INFRASTRATA plc
33
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2015
2. ACCOUNTING POLICIES (CONTINUED)
Judgements in applying accounting policies and key sources of estimation uncertainty (continued)
Net profit interests
Post year end the Group has obtained net profit interests in certain assets. Judgement is needed to assess if a reliable estimate of value
of the NPIs can be made. Any valuations require estimates of the likely future cash flows arising from those rights.
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.
2015
Southern England
Exploration
Northern Ireland
Gas storage
Exploration
Other and
central income
and management
Total
Continuing activities
Revenue
651
400,000
4,929
8,526
414,106
Management & administrative
expenses
(55,274)
(506,193)
(331,646)
(251,280)
(1,144,393)
Impairment of Exploration &
Evaluation assets
(3,570,362)
Share of loss of associates
(24,532)
Impairment of interest in
associates
Finance income
Taxation
Analysis of:
(1,261,120)
-
745,183
-
-
-
-
-
-
(7,297)
(3,577,659)
(24,754)
(1,234,006)
-
-
(49,286)
(2,495,126)
-
-
1,105
1,105
-
745,183
(4,165,454)
(106,193)
(1,585,477)
(248,946)
(6,106,070)
Assets by segment
247,212
7,491,517
232,180
401,147
8,372,056
Liabilities by segment
(68,540)
(1,081,957)
(464,596)
(139,698)
(1,754,791)
Net assets (liabilities) per
segment
178,672
6,409,560
(232,416)
261,449
6,617,265
Capital expenditure
78,633
91,653
3,663,514
9,870
3,843,670
Depreciation
Impairments
-
4,831,482
-
-
-
71
71
1,234,006
7,297
6,072,785
The Group’s gas storage operations in Southern England are no longer reported as an operating segment as they are immaterial.
34
INFRASTRATA plc
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2015
2014
Southern England
Northern Ireland
Gas storage
Exploration
Gas storage
Exploration
Other and
central income
and management
Total
Continuing activities
Revenue
-
8,534
-
4,956
4,274
17,764
Administrative expenses
(195,559)
-
(206,043)
-
(929,748)
(1,331,350)
Share of loss of associates
-
(46,560)
Finance income
4,149
-
Taxation
107,276
33,649
-
-
-
(36,401)
-
(82,961)
-
-
4,772
8,921
-
140,925
(84,134)
(4,377)
(206,043)
(31,445)
(920,702)
(1,246,701)
Analysis of:
Assets by segment
343,835
5,166,825
4,445,373
1,273,612
1,017,749
12,247,394
Liabilities by segment
(10,350)
(846,138)
(35,564)
(622,380)
(67,039)
(1,581,471)
Net assets per segment
333,485
4,320,687
4,409,809
651,232
950,710
10,665,923
Capital expenditure
Depreciation
4. REVENUE
Revenue comprises:
Licensing of seismic data
Other income
-
-
250,324
255,292
96,887
-
602,503
-
-
-
1,974
1,974
2015
£
400,000
14,106
414,106
2014
£
-
17,764
17,764
INFRASTRATA plc
35
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2015
5. 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
Impairments of Exploration and Evaluation assets
Impairments of associates
Net foreign exchange (gain) loss
Operating lease rentals – land and buildings
Project management & company administrative expenditure
2015
£
20,440
20,300
21,300
3,825
71
3,577,659
2,495,126
(1,476)
30,000
2014
£
19,450
20,300
13,050
6,550
1,974
-
-
58,903
30,000
Management & administrative expenditure which is paid in cash
1,065,161
1,126,482
Non-cash items:
Share options expense
Exchange differences
Depreciation
Pre-licence costs written off
Expenses of share issue
73,216
(1,476)
71
7,421
-
95,490
58,903
1,974
5,717
42,784
1,144,393
1,331,350
36
INFRASTRATA plc
Group and Company
2015
Executive Directors
Andrew Hindle
Stewart McGarrity
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2015
6. EMPLOYEE INFORMATION
Average number of 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
2015
Number
2014
Number
5
£
6
£
614,265
610,328
73,216
47,191
73,126
71,368
61,352
95,490
Staff costs before recoveries and capitalisation
807,798
838,538
7. DIRECTORS’ AND KEY MANAGEMENT EMOLUMENTS AND COMPENSATION
Salary & fees
£
Benefits
£
Pension
£
185,000
142,860
37,590
15,000
7,500
9,500
4,269
3,612
2,893
676
-
-
-
-
-
-
3,000
4,557
1,719
-
-
-
-
Anita Gardiner (appointed 28 October 2014)
101,835
Non-executive Directors
Ken Ratcliff
Maurice Hazzard
Alan Booth (appointed 21 January 2015)
William Colvin (resigned 31 January 2015)
Walter Roberts (resigned 28 October 2014)*
Share based payment
Employers national insurance contributions
503,554
7,181
9,276
520,011
58,120
70,923
649,054
* During 2015 fees for legal services totalling £22,052 were paid to Pinnacle Energy Limited,
a company in which Walter Roberts is both a director and shareholder.
INFRASTRATA plc
37
Total
2015
£
188,612
148,753
107,068
39,309
15,000
7,500
9,500
4,269
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2015
7. DIRECTORS’ AND KEY MANAGEMENT EMOLUMENTS AND COMPENSATION (CONTINUED)
Salary & fees
£
Benefits
£
Pension
£
2014
Executive Directors
Andrew Hindle
200,000
Stewart McGarrity (appointed 25 September 2013)
119,683
Craig Gouws (resigned 25 September 2013)
16,203
Non-executive Directors
Ken Ratcliff
Walter Roberts**
Maurice Hazzard
William Colvin
37,905
46,901
15,000
15,000
2,754
1,343
298
-
3,111
-
-
-
5,000
1,000
1,875
2,500
-
-
Total
2014
£
202,754
126,026
17,501
39,780
52,512
15,000
15,000
Share based payment
Employers national insurance contributions
450,692
7,506
10,375
468,573
75,581
53,698
597,852
**Walter Roberts became a Non-executive Director with effect from 1 January 2014. During 2014 fees for legal services totalling
£15,614 were paid to Pinnacle Energy Limited, a company in which Walter Roberts is both a director and shareholder.
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 held by directors at 31 July 2015 are as follows:
38
INFRASTRATA plc
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2015
Number
Exercise price
£
Exercise from
Exercisable to
Granted 13 October 2014
Anita Gardiner
508,000
0.10
13 October 2015
31 December 2023
Granted 18 September 2014
Andrew Hindle
Stewart McGarrity
Ken Ratcliff
Maurice Hazzard
Granted 22 July 2013
800,000
600,000
150,000
60,000
Stewart McGarrity
518,918
Granted 1 January 2013
Andrew Hindle
Ken Ratcliff
Maurice Hazzard
Granted 25 January 2008
Andrew Hindle
Ken Ratcliff
Maurice Hazzard
956,022
143,403
57,361
43,859
21,929
21,929
0.10
0.10
0.10
0.10
0.10
0.1046
0.1046
0.1046
2.28
2.28
2.28
19 September 2015
31 December 2023
19 September 2015
31 December 2023
19 September 2015
31 December 2023
19 September 2015
31 December 2023
22 July 2014
22 July 2024
31 December 2013
31 December 2021
31 December 2013
31 December 2021
31 December 2013
31 December 2021
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 2015 or 2014.
Key man insurance premiums of £798 (2014: £1,595) were paid for Executive Directors and directors’ indemnity insurance premiums
of £15,370 (2014: £15,370) were paid in respect of all directors. Two Executive and one Non-executive Director participate in the
Group Stakeholder Pension Plan.
INFRASTRATA plc
39
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2015
8. 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 the year.
2015
Number
Outstanding at the beginning of the year
3,637,167
Granted during the year
Forfeited during the year
Outstanding at the end of the year
Exercisable at the end of the year
2,742,000
-
6,379,167
3,637,167
2015
WAEP
£
0.2415
0.1000
-
0.1807
0.2415
2014
Number
2014
WAEP
£
3,637,167
0.2415
-
-
3,637,167
3,637,167
-
-
0.2415
0.2415
The weighted average remaining vesting period for the share options outstanding at 31 July 2015 is 0.06 years (2014: zero 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 2015 is 6 years (2014: 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.
Expected volatility (%)
Risk free interest rate
Weighted average contractual life of option (years)
Expected dividend yield
Exercise price of options (£)
Weighted average share price (£)
35%
0.5%
9
Nil
0.10
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.
9. 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 £47,191 (2014: £61,352) 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 2015, employer and employee contributions of £Nil (2014: £5,624) due in respect of the current
period had not been paid over to the scheme.
10. FINANCE INCOME
Interest on bank deposits
Unwinding of discount on other financial assets
40
INFRASTRATA plc
2015
£
1,105
-
1,105
2014
£
4,772
4,149
8,921
11. INCOME TAX
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2015
The major components of income tax expense for the years ended 31 July 2015
and 2014 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 tax
Deferred tax charge/(credit)
- origination and reversal of timing differences
- change of rate of tax
Total deferred tax
2015
£
2014
£
-
-
-
-
-
-
(745,183)
-
(96,446)
(44,479)
(745,183)
(140,925)
b) A reconciliation between tax expense and the product of accounting loss from
continuing operations for the years ended 31 July 2015 and 2014 is as follows:
Accounting loss before tax from continuing operations
(6,851,253)
(1,387,626)
Loss on continuing activities multiplied by the standard rate of tax
(20.67%; 2014: 22.33%)
(1,416,154)
(309,857)
Expenses not permitted for tax purposes and pre-trading expenditure
Tax losses carried forward
Items not subject to tax
28,911
113,623
528,437
67,773
242,084
(140,925)
Income tax credit reported in the profit or loss relating to continuing operations
(745,183)
(140,925)
c) Factors that may affect the future tax charge
The Group has trading losses of £4,322,290 (2014: £3,939,974) which may reduce future tax charges. Future tax charges may also be
reduced by capital allowances on cumulative capital expenditure.
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.
INFRASTRATA plc
41
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2015
12. LOSS PER SHARE
(Loss)
The (loss) for the purposes of basic and diluted loss per share being the net
loss attributable to equity shareholders
Continuing operations
Number of shares
2015
£
2014
£
(6,106,070)
(1,246,701)
Weighted average number of ordinary shares for the purposes of basic earnings
per share
122,217,627
98,307,952
Basic and diluted loss per share
Continuing operations
(5.00)p
(1.27)p
For 2015 and 2014, 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 £1,133,710 (2014: £713,355). As provided by
s408 of the Companies Act 2006, no statement of comprehensive income is presented in respect of InfraStrata plc.
14. INTANGIBLE ASSETS - EXPLORATION & EVALUATION
Cost
At 1 August 2013
Additions
Acquisition of net profits interest from eCORP (see footnote 2 overleaf)
Group
£
Company
£
3,478,843
347,211
361,012
113,934
347,211
-
Disposal of interest in P1918 to associate (see footnote 3 overleaf)
(360,000)
(360,000)
At 31 July 2014
Additions
Disposals
Impairments (see footnote 1 overleaf)
Net book value
At 31 July 2015
3,827,066
179,732
-
(3,577,659)
101,145
179,732
-
-
429,139
280,877
42
INFRASTRATA plc
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2015
Note 1: As disclosed in note 32, subsequent to the end of the reporting period the Company entered into agreements to dispose of its
interests in exploration licences P1918, P2222 and P2235 for a cash consideration and a retained Net Profits Interest in each licence
interest. The carrying value of the Group’s interest in these licences has been impaired such that it equates to the attributable net sales
proceeds of £239,400. Should the conditions be met for the further disposals of a 10% interest in Northern Ireland licence PL1/10
and the entirety of the Group’s interest in licence P2123 for £300,000, the Company will realise a profit of approximately £131,000
in future periods.
No value has been ascribed to the Net Profits Interests retained on each of the licence interests as it is not possible to determine a
reliable fair value for these instruments.
Note 2: In June 2012 InfraStrata entered into agreements as part of which its licence interest in P1918 became subject to a net profits
interest (“NPI”) equivalent to 3.75% on the whole licence in favour of eCORP Oil & Gas UK Limited (“eCORP”). On 14 March
2014 eCORP’s NPI in P1918 was cancelled (and InfraStrata UK Limited acquired the related preference shares held by eCORP in
our subsidiary Portland Gas Limited) for a consideration of US$600,000 satisfied by the cancellation of the US$600,000 (£361,012)
still payable by eCORP under the terms of the June 2012 agreements.
Note 3: On 17 March 2014, associated company Brigantes agreed to acquire an 18% interest in licence P1918 for a consideration of
US$600,000 (£360,000 received), subject to DECC approval.
15. INTANGIBLE ASSETS - GAS STORAGE DEVELOPMENT
Group
£
Company
£
Cost
Reclassified on 24 January 2014 (see footnote)
Additions subsequent to reclassification
At 31 July 2014
Additions
Grant received (note 19)
Grant accrued at 31 July 2015 (note 19)
Net book value
At 31 July 2015
Capitalised finance costs
3,585,643
55,794
3,641,437
3,663,514
(533,694)
(1,066,306)
5,704,951
-
-
-
-
-
-
-
Additions during the year to 31 July 2015 include capitalised finance costs totalling £14,145 (2014: £nil).
Re-classification of Gas Storage Development assets and liabilities
Until 24 January 2014, the gas storage development costs were classified as held for sale while BP Gas Marketing Limited (BPGM)
had an option to acquire a controlling interest in Islandmagee Storage Limited in return for funding development costs. On 24
January 2014 BPGM relinquished its option and the assets and liabilities were reclassified under the appropriate heading in the
Group’s balance sheet. No element of the amounts paid by BPGM was repayable and the balance of amounts paid and payable by
BPGM at that date amounting to £2,033,450 were transferred from Non-controlling interests to Retained earnings.
Capital and other commitments
In the event that the project does not proceed to development IMSL would have an obligation to reinstate the area of the well-pad
which has already been constructed. This is a contingent liability estimated at £100,000 (2014: £100,000). At 31 July 2015 the Group
had capital commitments of £218,000 (2014: £nil) relating to the project.
INFRASTRATA plc
INFRASTRATA plc
43
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2015
16. PROPERTY, PLANT AND EQUIPMENT
Group
Cost
At 1 August 2013
Additions
Reclassified from held for sale (note 15)
Disposals
At 31 July 2014
Additions
At 31 July 2015
Depreciation
At 1 August 2013
Charge for the year
At 31 July 2014
Charge for the year
At 31 July 2015
Net book value
At 31 July 2015
At 31 July 2014
Freehold property
£
Office equipment
£
Total
£
-
-
440,100
-
440,100
-
440,100
-
-
-
-
-
440,100
440,100
82,894
82,894
-
-
-
82,894
424
83,318
80,920
1,974
82,894
71
82,965
353
-
-
440,100
-
522,994
424
523,418
80,920
1,974
82,894
71
82,965
440,453
440,100
44
INFRASTRATA plc
Company
Cost
At 1 August 2013
Additions
At 31 July 2014
Additions
At 31 July 2015
Depreciation
At 1 August 2013
Charge for the year
At 31 July 2014
Charge for the year
At 31 July 2015
Net book value
At 31 July 2015
At 31 July 2014
17. INVESTMENTS
Group
Investment in associates
At 1 August
Share of losses
Impairments (see note below)
At 31 July
Total investments at the end of the year
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2015
Freehold property
£
Office equipment
£
Total
£
-
-
-
-
-
-
-
-
-
-
-
-
17,748
17,748
-
17,748
424
18,172
-
17,748
424
18,172
17,748
17,748
-
17,748
71
17,819
353
-
2015
£
-
17,748
71
17,819
353
-
2014
£
2,545,012
2,627,973
(49,286)
(82,961)
(2,495,126)
-
600
600
2,545,012
2,545,012
The Group has 40% interests (2014: 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
45
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2015
17. INVESTMENTS (CONTINUED)
Impairments
As disclosed in note 32, subsequent to the end of the reporting period the Company entered into agreements to dispose of its
interests in both Corfe Energy Limited and Brigantes Energy Limited for a cash consideration and a retained Net Profits Interest
in future profits derived from the disposed shareholding in each company. The carrying value of the Company’s interest in these
associates has been impaired such that it equates to the attributable net sales proceeds of £600. No value has been ascribed to the Net
Profits Interests retained on each of the interests in these associates as it is not possible to determine a reliable fair value for these
instruments.
Share of net assets, revenue and net loss
The following table summarises the Group’s share of the assets and liabilities of each of these associates as recorded in each associates’
management accounts made up to 31 July 2015 and after making adjustments to align the accounting policies of the associates with
those of the Group:
Corfe Energy Limited
Long-term assets
Current assets
Current liabilities
Long-term liabilities
2015
£
729,626
37,871
(10,911)
(4,700)
Group’s share of net assets of associates
751,886
2014
£
690,470
95,074
(10,729)
(1,600)
773,215
Brigantes Energy Limited
2015
2014
£
£
753,082
704,676
20,946
(9,281)
(4,700)
91,200
(6,567)
(1,600)
760,047
787,709
The revenue and net loss of each of these associates as recorded in each associates’ audited financial statements made up to 31 July
2015 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
2015
£
45,089
61,332
24,533
Group’s share of other comprehensive income
-
2014
£
72,775
96,378
46,560
-
Brigantes Energy Limited
2015
2014
£
£
45,089
61,882
24,753
-
72,771
66,082
36,401
-
46
INFRASTRATA plc
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2015
Company
Investment in subsidiaries and associates
Cost
2015
£
2014
£
Balance at 1 August 2014 and 31 July 2015
15,247,611
15,247,611
Impairment
Balance at 1 August 2014 and 31 July 2015
(15,247,011)
(15,247,011)
Net book value
Balance at 31 July
Investment in subsidiaries
600
600
The Company’s subsidiary undertakings at 31 July 2015, 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)
Portland Gas Limited
Portland Gas Storage Limited
Portland Gas Transportation Limited
Sub surface gas storage developer
Holding company
Sub surface gas storage developer
Gas storage pipeline developer
Northern Ireland
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 when the construction and operation of the facility is certain or when the
current shareholders’ interests in the project are monetised. Therefore InfraStrata plc includes 100% of the results, assets and liabilities
of Islandmagee Storage Limited in its financial statements.
The Company has impaired its investment in InfraStrata UK Limited investment and loan receivable from InfraStrata UK Limited
as required. The impairments in 2012 followed the impairment of the Portland Gas Limited project.
InfraStrata UK Limited has granted a debenture over its assets which include the Group’s 65% interest in the share capital of
Islandmagee Storage Limited to secure short–term borrowings (see note 19).
Investment in associates
The company owns 40% (2014: 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
INFRASTRATA plc
47
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2015
18. TRADE AND OTHER RECEIVABLES
Amounts due from Group undertakings
Trade receivables
Other receivables
Prepayments
Group
2015
£
-
-
220,043
80,365
300,408
Group
2014
£
Company
2015
£
Company
2014
£
-
5,085,527
3,990,081
14,188
78,467
52,168
-
216,921
74,753
18,619
78,340
52,168
144,823
5,377,201
4,139,208
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. GRANT RECEIVABLE AND SHORT-TERM BORROWINGS
Grant receivable
In April 2015 the Company concluded a Grant Agreement with the European Commission’s Connecting Europe Facility for a
maximum €2.5 million (£1.8 million) up to 50% of the costs of a programme of work to progress the Islandmagee Gas Storage
project. The programme of work comprises the drilling of a data gathering well to obtain salt cores and subsequently undertake
testing and engineering design work at an estimated aggregate cost of approximately £3.8 million. Under the conditions of the Grant
Agreement 30% of the maximum grant amounting to €750,000 (£533,694) was received in May 2015 and the remaining €1.75
million (£1.3 million) will be received once the work programme has been completed in late 2015 and an application for the balance
submitted to the European Commission.
The drilling phase of the work programme was completed satisfactorily in June 2015 and the directors consider there is reasonable
assurance that the Company will comply with the conditions of the Grant Agreement and that the remaining €1.75 million (£1.3
million) will be received. In addition to the £533,694 received in May 2015, a further £1,066,306 of the total grant has been accrued
at the year. The total of the grant accounted for at 31 July 2015 is therefore 90% (£1,600,000) of the total grant representing the
proportion of the total costs of the related work programme which has been incurred at that date. Grant monies received and accrued
have been credited against Intangible assets – Gas Storage Development (note 15).
Short-term convertible borrowings
On 30 April 2015, the Company concluded a €1.8 million Convertible Loan Facility Agreement with Baron Oil Plc (“Baron”) for
the purposes of providing bridge finance until receipt of the €1.75 million balancing grant from the European Commission. The loan
is drawn-down as Sterling fixed at £1.3 million of which £1 million had been drawn-down at 31 July 2015 with the balance drawn-
down in August 2015. The loan accrues interest at a fixed rate of 8% which is payable when the principal on the loan is repaid. The
balance on the loan is repayable on 1 May 2016. Baron has the right to extend the loan period until 31 December 2016.
Baron has an accompanying option to convert the entirety of the balance on the loan at any time during the life of the agreement
into an equity participation of 15% of the share capital of Islandmagee Storage Limited (“IMSL”) to be effected by the issue of new
shares by IMSL. In the event of conversion the accrued interest on the loan would be cancelled.
The borrowings are secured by a debenture over the assets of InfraStrata UK Limited which includes the Group’s 65% interest in the
share capital of IMSL.
48
INFRASTRATA plc
20. CASH AND CASH EQUIVALENTS
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2015
Group
2015
£
Group
2014
£
Company
2015
£
Company
2014
£
Cash at bank
430,199
1,648,955
256,192
938,903
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. TRADE AND OTHER PAYABLES
Group
2015
£
Group
2014
£
Company
2015
£
Company
2014
£
Trade creditors
596,481
695,507
582,075
680,303
Preference shares (note 24)
Other taxation and social security
Accruals
12,500
23,928
121,882
754,791
12,500
14,087
114,193
836,287
12,500
23,928
39,933
12,500
17,895
69,767
658,436
780,465
The directors consider that the carrying amount of trade and other payables approximates to their fair value.
22. DEFERRED TAX
Group
2015
£
Group
2014
£
Deferred income tax liabilities in relation to:
Intangible assets (recovered in more than 12 months)
-
745,183
The gross movement on the deferred tax account is as follows:
At 1 August
Credited to the statement of comprehensive income
Reversal of timing differences
Change of tax rate
At 31 July
Group
2015
£
Group
2014
£
745,183
886,108
(745,183)
-
(96,446)
(44,479)
(745,183)
(140,925)
-
745,183
Deferred tax has been calculated at rates of 20% (2014: 20%) 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.
INFRASTRATA plc
49
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2015
23. FINANCIAL ASSETS AND LIABILITIES
The Group and Company’s financial instruments comprise cash and cash equivalents, short-term borrowings and items such as trade
and other receivables and trade and other payables which arise directly from the Group’s operations. The Group’s operations expose
it to a variety of financial risks including credit risk, interest rate risk, foreign currency exchange risk and liquidity 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. The Group held funds in Bank of Scotland and Investec bank accounts during the last two years; at year end all of the funds
were held in Bank of Scotland. In the directors’ view there is a low risk of the bank holding the Group’s funds at year end failing in
the foreseeable future.
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the
reporting date was:
Group
2015
£
Group
2014
£
Company
2015
£
Company
2014
£
Trade and other receivables
61,075
92,655
60,949
18,619
Due from subsidiary undertakings
-
-
5,085,527
3,990,081
Cash and cash equivalents
430,199
1,648,955
256,192
938,903
The reconciling items between the trade and other receivables presented above and that presented in note 18 are VAT receivable and
prepayments. No receivables are past due but not impaired.
Interest rate risk
The Company and Group are exposed to interest rate risk as a result of positive cash balances, denominated in sterling, which earn
interest at variable rates. Any surplus cash is held on deposit with Bank of Scotland. 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
£4,302 (2014: £16,489).
As disclosed in note 19, the Group and Company’s short-term borrowings bear interest at a fixed rate of 8%.
Foreign currency risk
The Group is exposed to foreign currency rate risk as a result of United States Dollar denominated bank balances and in 2015,
certain trade payables, the grant debtor and the Baron loan. The Group and Company did not enter into any arrangements to hedge
these risks, as the directors consider the exposure to be insignificant.
As disclosed in note 19 Group and Company’s short term borrowings are denominated in Euros with the fully drawn balance on the
facilities (€1.8 million) expected to be repaid from a €1.75 million European Commission grant receipt. The directors do not consider
the exposure to an unhedged liability of €50,000 to be significant.
50
INFRASTRATA plc
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2015
The currency risk disclosures are as follows:
Cash and cash equivalents
Trade and other payables
Grant debtor
Loan and accrued interest
Group
2015
USD
£885
-
Group
2014
USD
£119,304
£118,469
Euros
Euros
£1,066,306
£1,014,145
-
-
The book value of financial assets and liabilities disclosed is considered to be equal to fair value.
Liquidity risk
The total carrying value of Group and Company financial liabilities is disclosed in note 21 (trade and other payables) and in note
19 (short-term borrowings). The Company seeks to issue share capital or dispose of assets when external funds are required. The
reconciling items between the contractual maturities presented below and that presented in notes 21 and 19 are taxes and accruals.
The following table shows the contractual maturities of the Group’s and Company’s financial liabilities, all of which are measured at
amortised cost.
Trade and other payables
Within one month
Group
2015
£
63,344
More than one month less than one year
533,137
Short-term borrowings
Group
2014
£
Company
2015
£
Company
2014
£
69,527
625,980
49,568
533,137
54,323
625,980
More than one month less than one year
1,000,000
-
1,000,000
-
INFRASTRATA plc
51
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2015
24. SHARE CAPITAL AND REDEEMABLE PREFERENCE SHARES
10p Ordinary Shares
Number
£
At 31 July 2013
91,491,599
9,149,160
Issue of £0.10
ordinary shares
8,000,000
800,000
At 31 July 2014
99,491,599
9,949,160
Allotted, called and
fully paid
1p Ordinary Shares
Number
-
-
-
£
-
-
-
1p Deferred Shares
£
Number
Total
£
-
-
-
-
-
-
9,149,160
800,000
9,949,160
Share subdivision
(99,491,599)
(9,949,160)
99,491,599
994,916
895,424,391
8,954,244
-
Issue of £0.01
ordinary shares
At 31 July 2015
-
-
-
-
52,500,000
525,000
-
-
525,000
151,991,599
1,519,916
895,424,391
8,954,244
10,474,160
Redeemable preference shares of £1 each (classified as liabilities)
Allotted, called up and part paid
Number
£
At 31 July 2015, 2014 and 2013
50,000
12,500
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.
On 21 January 2015, following approval at the Company’s AGM, the existing ordinary shares of 10 pence each were subdivided into
1 New Ordinary Share of 1 penny and 9 Deferred Shares of 1 penny each. The Deferred Shares do not carry any rights to vote or any
dividend rights. The Deferred Shares will not be admitted to AIM and holders will only be entitled to a payment on return of capital
or winding up of the Company after each of the holders of the Ordinary Shares has received a payment of £10,000,000 on each such
share.
On 23 February, following approval at a General Meeting of the Company, the Company issued 52,500,000 new Ordinary Shares of
1 penny each at 4 pence per share to raise £2,100,000, before expenses, to institutional and other shareholders. The expenses of the
issue totalled £115,804.
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.
Authorised share capital
The Company’s articles do not specify an authorised share capital.
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.
52
INFRASTRATA plc
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2015
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.
25. 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.
26. 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 £73,216 (2014: £95,490) relates to the share option expense for the year. There were no options forfeited or
exercised during the year (2014: £nil). For further information on the share based payment scheme see note 8.
27. CASH (USED IN) OPERATIONS
Group
2015
£
2014
£
Operating loss for the year
(4,307,946)
(1,313,586)
Impairment of Exploration & Evaluation assets
Depreciation
Decrease in trade and other receivables
(Decrease)/Increase in trade and other payables
Share option expense
Exchange difference on eCORP debtor
Net working capital change in Islandmagee Storage Limited prior to reclassification
3,577,659
71
(155,585)
(81,496)
73,216
-
-
-
1,974
103,863
263,455
95,490
56,004
90,393
Cash (used in) operating activities
(894,081)
(702,407)
INFRASTRATA plc
53
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2015
27. CASH (USED IN) OPERATIONS (CONTINUED)
Company
Operating loss for the year
Impairment of intercompany receivables
Depreciation
2015
£
2014
£
(1,134,815)
(718,127)
523,650
71
-
1,974
(Increase) in trade and other receivables
(3,361,643)
(265,006)
(Decrease)/Increase in trade and other payables
Share option expense
Cash (used in) operating activities
28. OPERATING LEASE COMMITMENTS
(122,029)
73,216
276,639
95,490
(4,021,550)
(609,030)
Future minimum rentals payable under non-cancellable operating leases as at 31 July are as follows:
Amounts due:
Within one year
Land and
buildings
2015
£
Land and
buildings
2014
£
15,000
15,000
Operating lease payments represent rentals payable by the Group for office premises. 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.
29. OTHER COMMITMENTS
Fyrd asset exchange
In December 2014 the group agreed to an asset exchange with Fyrd Energy Limited (“Fyrd”) (“the Agreement”). Under the terms
of the Agreement, InfraStrata was to acquire a 25% interest in UK Promote Licence P2235, a 22.5% shareholding in Integrated
GeoRenewables (Dorset) Limited (“IGR”) and a carry for the first £200,000 of expenditure by IGR. InfraStrata was to assign 77.5%
of its rights and intellectual property in the Portland project (excluding the gas pipeline construction authorisation and associated
rights) to IGR and would grant an option to that company to acquire the gas pipeline rights from InfraStrata in return for the
Company being carried for a further £200,000 of expenditure by IGR.
As disclosed in note 32, InfraStrata has now amended the Agreement such that Fyrd will transfer, subject to OGA approval, its
remaining 75% P2235 licence interest to InfraStrata and in exchange InfraStrata will transfer its remaining 22.5% of the rights and
intellectual property in the Portland project, excluding the gas pipeline rights and intellectual property, to Fyrd.
54
INFRASTRATA plc
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2015
30. RELATED PARTY TRANSACTIONS
Group and Company
InfraStrata plc leases the Group’s head office from Toffee Limited, a company of which Andrew Hindle is a director and shareholder.
The rent and service charges paid during the period were £45,000 (2014: £45,000). The balance outstanding at 31 July 2015 was £nil
(2014: £nil).
The Group has related party relationships with its associates. Amounts owed by associates at 31 July 2015 were £27,793 (2014:
£3,600) and amounts owed to associates at 31 July 2015 were £2,959 (2014: £87,149).
Fyrd (note 29) is a related party as Alan Booth, a director of the Company at the end of the financial year, is also a director and
shareholder of Fyrd.
Company
The Company has related party relationships with its subsidiaries and associates in the course of normal operations.
InfraStrata plc recovered overhead and technical support costs from Islandmagee Storage Limited of £552,744 (2014: £181,264),
InfraStrata UK Limited of £nil (2014: £181,264) and Portland Gas Storage Limited of £nil (2014: £120,000).
Gross balances due to/from subsidiaries were £182,465 (2014: £nil) / £13,683,316 (2014: £11,884,754). The amounts due from
Group undertakings, which are unsecured, are stated net of an impairment provision of £8,418,323 (2014: £7,894,673).
31. JOINTLY CONTROLLED OIL & GAS EXPLORATION ACTIVITIES
At 31 July 2015 the Group and Company held in interests in the following exploration licences:
Country
Northern Ireland
Northern Ireland
England
Scotland
Scotland
Licence
PL1/10
P2123
P1918
P2222
P2235
Field name
Larne-Lough Neagh Basin
Larne-Lough Neagh Basin
English Channel
East Shetland Basin
Moray Firth
Operator
InfraStrata
InfraStrata
InfraStrata
InfraStrata
Fyrd
The Company has entered into agreements with partners whereby the Company’s share of initial exploration costs are wholly or
partly covered by the partners, therefore the company has incurred net expenditure to the extent of £179,732 (2014: £347,211) in
developing its share of the assets. As explained in note 32, after the end of the period the Company has entered into agreements to
dispose of most of its licence interests to Corallian Energy Limited.
Joint Bidding Agreement
The Company has a New Ventures Exploration Joint Bidding Agreement with Carstone Exploration Limited (“Carstone”).
Under the terms of the agreement InfraStrata and Carstone (which expires in March 2016) work together to identify early stage
opportunities where the principals of each company have expertise and experience. Each company bears its own costs in relation to
the agreement and will hold 50% of the available licence interest in each new venture.
INFRASTRATA plc
55
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2015
32. EVENTS AFTER THE REPORTING PERIOD
On 16 November 2015, the Company announced that it had signed Sale & Purchase Agreements (“S&P Agreements”) with
Corallian Energy Limited (“Corallian”) and Osmington Holdings Limited (“Osmington”), a wholly owned subsidiary of Corallian.
Corallian and Osmington are recently incorporated UK companies. Under the S&P Agreements, InfraStrata will transfer its entire
interests in UK offshore licences P1918, P2222 and P2235 to Corallian, and its 40% shareholdings in Brigantes Energy Limited
(“Brigantes”) and Corfe Energy Limited (“Corfe”) (which between them hold interests in UK licences P1918, P2123, PL1/10,
PEDL201, PEDL 237, PL090 and PEDL070) to Osmington. The effective date for these transfers is 1 October 2015.
The transfer of licence P2235 involves an amendment of the Asset Exchange Agreement with Fyrd Energy Limited (“Fyrd”)
announced on 16 December 2014 (the “Fyrd Agreement”) under which InfraStrata acquired a 25% interest in licence P2235.
Under the revised Fyrd Agreement, Fyrd will transfer its remaining 75% interest in licence P2235 to InfraStrata and in exchange,
InfraStrata will transfer its 22.5% retained interest in the rights and intellectual property in its former Portland project (which are
held directly by InfraStrata rather than via a new project company as originally contemplated in the Fyrd Agreement), excluding
the gas pipeline rights and associated intellectual property, to Fyrd. The entire P2235 interest to be held by InfraStrata will then be
transferred under the S&P Agreements to Corallian. In addition, the Portland gas pipeline rights and associated intellectual property
will be transferred by InfraStrata to Osmington as part of the S&P Agreements.
The total consideration payable immediately under the S&P Agreements is £240,000 plus a net profits interest (“NPI”) instrument
in each of P1918, P2222 and P2235 of 4% of Corallian’s anticipated interest in the licence at the time of drilling the first well on
the licences (0.5%, 0.5% and 1% respectively of the gross) plus a 4% share of any future profits derived by Osmington from its
shareholdings in Brigantes and Corfe, again in the form of NPI instruments.
The NPIs will entitle InfraStrata to that share of any future profits from the licences or from Brigantes and Corfe without making
any further investment. The NPI instruments may be traded and sold by InfraStrata.
In addition to the above, Corallian has also agreed to acquire from InfraStrata a fully carried 10% interest in both the PL1/10 licence
and offshore licence P2123 in Northern Ireland, for a cash consideration of £300,000 (the “NI Agreement”). The NI Agreement is
subject to conditions precedent, notably a successful outcome of the ongoing farm-out process, on terms currently being negotiated
with interested parties, for the Woodburn Forest-1 well in Northern Ireland licence PL1/10. InfraStrata and Corallian are looking to
conclude the NI Agreement by February 2016.
Andrew Hindle is a Director of InfraStrata and has made an investment in Corallian, but holds less than 20 percent of its issued
share capital.
33. 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)
Anita Gardiner (Commercial Development Director)
Stewart McGarrity (Finance Director)
Maurice Hazzard (Non-executive Director)
Dear Shareholder,
1. Introduction
Registered Office:
Blackstable House
Longridge
Sheepscombe
Stroud
GL6 7QX
7 December 2015
Notice of the Company’s forthcoming annual general meeting to be held on Tuesday 26 January 2016 (“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
Ordinary Business
Annual Report and Accounts (Resolution 1)
A copy of the annual report and accounts (together with the Directors’ and Auditor’s reports on the annual report and accounts) for
the Company for the financial year ended 31 July 2015 (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 Auditor (Resolution 2)
The Company is required at each general meeting at which accounts are presented to appoint an auditor 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 auditor 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 and 4)
Maurice Hazzard and Stewart McGarrity are the Directors retiring by rotation this year and each of them 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 pages 14 and 15 of the Accounts.
Authority of Directors to Allot Shares (Resolution 5)
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 5, pursuant to paragraph
(A) of the Resolution, the Directors will have authority to allot shares up to a maximum of £506,638.66 (which is approximately one
third of the current issued share capital as at 7 December 2015, being the latest practicable date before the publication of this Letter).
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 5, 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 £506,638.66 (which
is approximately a further third of the current issued share capital as at 7 December 2015, being the latest practicable 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. As a result, if Resolution 5 is passed, the
Directors could allot shares representing up to two-thirds of the current issued share capital pursuant to a rights issue.
To the extent not already expired, the authorities conferred by Resolution 5 will expire immediately following the next Annual General
Meeting or, if earlier, on 31st January 2017.
INFRASTRATA plc
57
LETTER FROM THE CHAIRMAN WITH NOTICE OF ANNUAL GENERAL MEETING
2. Resolutions to be proposed at the AGM (continued)
Ordinary Business (continued)
Disapplication of Pre-emption Rights (Resolution 6)
If the Directors wish to exercise the authority under Resolution 5 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 6 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 £303,983.19 (which represents approximately 20% of current issued share capital as at 7 December
2015, being the latest practicable date before the publication of this Letter). If given, to the extent not already expired, the authorities
conferred by Resolution 6 will expire on the conclusion of the next Annual General Meeting or, if earlier, on 31st January 2017.
For this purpose the ABI recommendation aimed predominantly at premium-listed 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 restrictive. The nature of our business and
the critical phase 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 develop fully 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 9,520,951 Ordinary shares (representing 6.26 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 PXS1, 34 Beckenham Road, Beckenham, Kent BR3 4ZF not less than 48
hours prior to the time appointed for the holding of the AGM on 26 January 2016.
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
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 Allenby
Capital Limited, 3 St Helen’s Place, London EC3A 6AB, United Kingdom on Tuesday 26 January 2016 at 11.30 a.m., for the
purpose of passing the following Resolutions, of which Resolutions 1 to 5 will be proposed as Ordinary Resolutions and Resolution 6
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 2015, together with
the report of the Auditor 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.
58
INFRASTRATA plc
LETTER FROM THE CHAIRMAN WITH NOTICE OF ANNUAL GENERAL MEETING
3. To re-elect Maurice Hazzard as Director who retires pursuant to article 92 of the Company’s articles of association and who,
being eligible, offers himself for re election.
4. To re-elect Stewart McGarrity 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 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)
(B)
up to an aggregate nominal amount of £506,638.66; and
comprising equity securities (within the meaning of section 560 CA 2006) up to a further aggregate nominal
amount of £506,638.66 in connection with an offer by way of a rights issue:
(1)
(2)
to ordinary shareholders in proportion (as nearly as may be practicable) to their existing holdings;
and
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, in so far as they have not previously
expired, expire at the conclusion of the next annual general meeting of the Company after the passing of this Resolution
or 31 January 2017, 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.
Special Resolution:
6. To consider and, if thought fit, to pass the following resolution as a special resolution:
THAT, subject to the passing of Resolution 5 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 5, 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
authorities granted under paragraph (B) of Resolution 5, by way of a rights issue only):
(i)
(ii)
to ordinary shareholders in proportion (as nearly as may be practicable) to their existing holdings;
and
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
INFRASTRATA plc
59
LETTER FROM THE CHAIRMAN WITH NOTICE OF ANNUAL GENERAL MEETING
Special Resolution (continued):
(B)
to the allotment (otherwise than under paragraph (A) of this Resolution 6) of equity securities up to an
aggregate nominal amount of £303,983.19;
and shall, in so far as they have not previously expired, expire at the conclusion of the next annual general meeting of the
Company after the passing of this Resolution or 31 January 2017, 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 7 December 2015
By Order of the Board
Walter Roberts
Secretary
Notes:
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 12 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 PXS1, The
Registry, 34 Beckenham Road, Beckenham, Kent BR3 4ZF, 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
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.
6.
7.
8.
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 PXS1, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4ZF. 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 1800 hours on 22 January 2016 shall be entitled to attend the above Annual General Meeting (or,
in the case of an adjourned meeting, 1800 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 1800 hours on 22 January 2016 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
(Incorporated and registered in England and Wales under the
Companies Act 1985 (as amended) with registered number 6409712)
Proxy Form for use by Shareholders at the Annual General Meeting (“AGM”) of
InfraStrata plc (the “Company”) to be held at the offices of Allenby Capital Limited,
3 St Helen’s Place, London EC3A 6AB, United Kingdom on Tuesday 26 January 2016 at 11.30 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,
being a Shareholder/Shareholders of InfraStrata plc, appoint the Chairman of the AGM or
(in BLOCK CAPITALS please)
(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 2015
2. To re-appoint Nexia Smith &
Williamson Audit Limited as auditor at
a remuneration to be determined by the
Directors
3. To re-elect Maurice Hazzard
4. To re-elect Stewart McGarrity
5. To grant the directors authority to
allot shares on the basis set out in the
Notice of AGM
SPECIAL RESOLUTION
6. 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, PXS1, The Registry, 34 Beckenham Road,
Beckenham, Kent, BR3 4ZF.
INFRASTRATA plc
61
NOTES TO 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 PXS1, The Registry, 34 Beckenham Road, Beckenham, Kent
BR3 4ZF, by no later than 11.30 a.m. on 22 January 2016.
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 12p 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 22 January 2016 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 22 January 2016 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 PXS1, The Registry,
34 Beckenham Road, Beckenham, Kent BR3 4ZF. 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