Independent Oil and Gas plc
(formerly Silbury 395 Limited)
Report and Audited Financial Statements
Year ended
31 December 2012
Company Number 07434350
Independent Oil and Gas plc
Report and audited financial statements
for the year ended 31 December 2012
Contents
Page:
1
4
6
7
8
9
10
11
12
Report of the Directors
Independent auditor’s report
Consolidated statement of comprehensive income
Consolidated statement of changes in equity
Consolidated statement of financial position
Company statement of financial position
Consolidated cash flow statement
Company cash flow statement
Notes forming part of the financial statements
Country of incorporation of parent company
United Kingdom
Legal form
Public limited company with share capital
Directors
Mehdi Varzi
Marie-Louise Clayton
Peter Young
Mark Routh
Michael Jordan
Secretary and registered office
Ben Harber
One America Square
Crosswall
London
EC3N 2SG
Company number
07434350
Auditors
BDO LLP, 55 Baker Street, London, W1U 7EU
Independent Oil and Gas plc
Report of the directors
for the year ended 31 December 2012
The directors present their report and audited financial statements of Independent Oil and Gas plc (“the
Company”) and its subsidiaries ("the Group") for the year to 31 December 2012. All amounts are shown in
Pounds Sterling, unless otherwise stated.
Review of activities and business review
The Company was incorporated as Silbury 395 Limited on 9 November 2010 and subsequently changed its
name to Independent Oil and Gas Limited on 25 March 2011. On 18 September 2013, the Company re-
registered as a public limited company and changed its name to Independent Oil and Gas plc.
The principal activity of the Group during the year was the acquisition and development of oil and gas production
assets.
Risks and uncertainties
The Group operates in the oil and gas industry, an environment subject to a range of inherent risks and
uncertainties. Being at an early stage the prime risks to which the Group is subject are the access to sufficient
funding to continue its operations, the status and financing of its partners, changes in cost and reserves
estimates for its assets, changes in forward commodity prices and the successful development of its oil and gas
reserves.
Key performance indicators
The Group’s main business is the acquisition and exploitation of oil and gas acreage. Non-financial performance
is tracked through the accumulation of licence interests, and the successful discovery and exploitation of oil and
gas reserves.
Future developments
Once sufficient new finance has been obtained the Group plans to appraise and develop its existing discoveries
in conjunction with its partners, explore its new licence interests and seek new investment opportunities.
Results and dividend
The Group made a loss on ordinary activities of £446,419 for the year (2011: £172,633). The directors do not
recommend the payment of a dividend (2011: £Nil).
Going concern
The Company’s access to further funding over the past year has been complicated by the financial position of
the Company’s operating partner for its oil and gas assets, ATP Oil & Gas (UK) Ltd, whose US parent filed for
protection from its creditors under Chapter 11 of the US Bankruptcy Code on 17 August 2012. Bids have been
requested for ATP’s assets and the directors understand that negotiations with preferred bidders have
commenced with expected completion in the near future.
The directors have been considering a number of options in order to raise additional finance to fund the Group’s
ongoing oil and gas appraisal and development activities. In this context the Company announced on 16
September 2013 its intention to seek admission to the Alternative Investment Market (“AIM”) of the London Stock
exchange with associated new funding.
As a result, the directors consider that the Group has adequate working capital for at least the next twelve
months. Accordingly, the directors continue to adopt the going concern basis in preparing the annual report and
accounts.
1
Independent Oil and Gas plc
Report of the directors
for the year ended 31 December 2012
Directors
The directors who held office during the year were:
Mark Routh
Marie-Louise Clayton
Peter Young
Thomas Hardy (resigned 22 March 2013)
Michael Jordan (appointed 17 August 2012)
Mehdi Varzi (appointed 17 August 2012)
Related Parties
Information on related parties can be found in note 20 to the financial statements.
Subsequent Events
Information on subsequent events can be found in note 21.
Financial Instruments
Information on financial instruments can be found in note 17.
Directors' responsibilities
The directors are responsible for preparing the Report of the Directors and the financial statements in accordance
with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that legislation
the directors have elected to prepare the Group and Company financial statements in accordance with
International Financial Reporting Standards ("IFRSs") as adopted by the European Union. Under company law
the directors must not approve the financial statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and Company and of the profit or loss of the Group and Company for that
period.
In preparing these financial statements, the Directors are required to:
•
select suitable accounting policies and then apply them consistently;
• make judgments and accounting estimates that are reasonable and prudent;
•
•
state whether they have been prepared in accordance with IFRSs as adopted by the European Union,
subject to any material departures disclosed and explained in the financial statements; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the
Company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company
and enable them to ensure that the financial statements comply with the requirements of the Companies Act
2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable
steps for the prevention and detection of fraud and other irregularities.
2
Independent Oil and Gas plc
Report of the directors
for the year ended 31 December 2012 (continued)
Directors' confirmation
Each person who is director at the time when this report is approved has confirmed that:
a. So far as each director is aware, there is no relevant audit information of which the Company's auditors are
unaware; and
b. Each director has taken all the steps that ought to have been taken as a director, including making
appropriate enquiries of fellow directors and the Company's auditors for that purpose, in order to be aware of
any information needed by the Company's auditors in connection with preparing their report and to establish
that the Company's auditors are aware of that information.
Auditors
BDO LLP have expressed their willingness to continue in office and a resolution to re-appoint them will be
proposed at the annual general meeting.
On behalf of the Board
Peter Young
Director
20 September 2013
3
Independent Oil and Gas plc
Independent auditor's report
to the members of Independent Oil and Gas plc
TO THE MEMBERS OF INDEPENDENT OIL AND GAS PLC
We have audited the financial statements of Independent Oil and Gas plc for the year to 31 December 2012
which comprise the Consolidated Statement of Comprehensive Income, Consolidated and Company Statements
of Changes in Equity, Consolidated and Company Statements of Financial Position, Consolidated and Company
Statements of Cash Flows and the related notes. The financial reporting framework that has been applied in their
preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the
European Union and, as regards the Parent Company financial statements, as applied in accordance with the
provisions of the Companies Act 2006.
This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members
those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the
Company's members as a body for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
As explained more fully in the Statement of Directors' Responsibilities, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view. Our
responsibility is to audit and express an opinion on the financial statements in accordance with applicable law
and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the
Auditing Practices Board's 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 Financial Reporting Council'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 December 2012 and of the Group's loss for the year then ended;
the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the
European Union;
the Parent Company financial statements have been properly prepared in accordance with IFRSs as
adopted by the European Union and as applied in accordance with the provisions of the Companies Act
2006; and
the financial statements have been prepared in accordance with the requirements of the Companies Act
2006.
4
Independent Oil and Gas plc
Independent auditor's report
to the members of Independent Oil and Gas plc
Opinion on other matters prescribed by the Companies Act 2006
In our opinion the information given in the directors’ report for the financial year for which the financial statements
are prepared is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report
to you if, in our opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit
have not been received from branches not visited by us; or
•
•
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
[Signature]
Scott Knight (senior statutory auditor)
For and on behalf of BDO LLP, statutory auditor
London
United Kingdom
20 September 2013
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
5
Independent Oil and Gas plc
Consolidated statement of comprehensive income
for the year ended 31 December 2012
Other administrative expenses
Exchange (gain)/loss
Operating loss
Finance expense
Loss before tax
Taxation
Loss from continuing operations
Total comprehensive loss
Note
2012
£
2011
£
3
5
6
391,587
(45,026)
_________
140,029
32,604
_________
346,561
172,633
99,858
_________
-
_________
446,419
172,633
-
_________
-
_________
446,419
_________
172,633
_________
446,419
_________
172,633
_________
All amounts relate to continuing activities.
All recognised gains and losses in the current and prior year are included in the income statement.
The notes on pages 12 to 30 form part of these financial statements.
6
Independent Oil and Gas plc
Consolidated statement of changes in equity
for the year ended 31 December 2012
Group
At 9 November 2010
Share capital issued
Loss for the period
Share
capital
£
premium
Share Convertible
debt option
reserve
£
£
Retained
Profit/(deficit)
£
Total
equity
£
-
471,768
-
_________
-
12,992,373
-
_________
-
-
-
_________
-
-
(172,633)
_________
-
13,464,141
(172,633)
_________
At 31 December 2011
471,768
_________
12,992,373
_________
-
_________
(172,633)
_________
13,291,508
_________
Share capital issued
Issue of convertible loan notes
Loss for the year
1,389
-
-
_________
86,107
-
-
_________
-
122,412
-
_________
-
-
(446,419)
_________
87,496
122,412
(446,419)
_________
At 31 December 2012
473,157
_________
13,078,480
_________
122,412
_________
(619,052)
_________
13,054,997
_________
Company
At 9 November 2010
Share capital issued
Profit for the period
-
471,768
-
_________
-
12,992,373
-
_________
-
-
-
_________
-
-
834
_________
-
13,464,141
834
_________
At 31 December 2011
471,768
_________
12,992,373
_________
-
_________
834
_________
13,464,975
_________
Share capital issued
Issue of convertible loan notes
Profit for the year
1,389
-
-
_________
86,107
-
-
_________
-
122,412
_________
-
-
6,014
_________
87,496
122,412
6,014
_________
At 31 December 2012
473,157
_________
13,078,480
_________
122,412
_________
6,848
_________
13,680,897
_________
Share capital
Amounts subscribed for share capital at nominal value.
Share premium account
Amounts received by the Company on the issue of its shares in excess of the nominal value of the shares.
Convertible debt option reserve
Amount of proceeds on issue of convertible debt relating to the equity component (i.e. option to convert the debt
into share capital).
Retained profit/(deficit)
Cumulative net gains and losses recognised in the Statement of Comprehensive Income net of amounts
recognised directly in equity.
The notes on pages 12 to 30 form part of these financial statements.
7
Independent Oil and Gas plc
Consolidated statement of financial position
at 31 December 2012
Company Number: 07434350
Non-current assets
Oil and gas costs pending determination
Current assets
Other receivables
Cash and cash equivalents
Total assets
Current liabilities
Loan notes
Trade and other payables
Non-current liabilities
Trade and other payables
Total liabilities
Net assets
Capital and reserves
Called up equity share capital
Share premium account
Convertible debt option reserve
Retained deficit
Note
2012
£
2011
£
7
15,171,428
14,556,759
10
15
30,206
22,703
_________
28,115
118,047
_________
11
11
11
12
13
13
11
52,909
_________
146,162
_________
15,224,337
14,702,921
(396,353)
(311,733)
_________
-
(160,559)
_________
(708,086)
(160,559)
(1,461,254)
_________
(1,250,854)
_________
(2,169,340)
_________
(1,411,413)
_________
13,054,997
_________
13,291,508
_________
473,157
13,078,480
122,412
(619,052)
_________
471,768
12,992,373
-
(172,633)
_________
13,054,997
_________
13,291,508
_________
The financial statements were approved and authorised for issue by the Board of Directors on 20 September
2013 and were signed on its behalf by:
Peter Young
Director
The notes on pages 12 to 30 form part of these financial statements.
8
Independent Oil and Gas plc
Company statement of financial position
at 31 December 2012
Company Number: 07434350
Non-current assets
Investments
Current assets
Trade and other receivables
Amounts due from subsidiaries
Cash and cash equivalents
Total assets
Current liabilities
Loan Notes
Trade and other payables
Trade and other payables
Total liabilities
Net assets
Capital and reserves
Called up equity share capital
Share premium account
Convertible debt option reserve
Retained profit
Note
2012
£
2011
£
8
12,591,943
12,591,943
10
8
15
30,206
1,723,761
22,703
_________
28,115
882,807
118,047
_________
11
11
11
12
13
13
11
1,776,670
_________
1,028,969
_________
14,368,613
13,620,912
(396,353)
(267,722)
_________
-
(132,296)
_________
(664,075)
(132,296)
(23,641)
_________
(23,641)
_________
(687,716)
_________
(155,937)
_________
13,680,897
_________
13,464,975
_________
473,157
13,078,480
122,412
6,848
_________
471,768
12,992,373
-
834
_________
13,680,897
_________
13,464,975
_________
The financial statements were approved and authorised for issue by the Board of Directors on 20 September
2013 and were signed on its behalf by:
Peter Young
Director
The notes on pages 12 to 30 form part of these financial statements.
9
Independent Oil and Gas plc
Consolidated cash flow statement
for the year ended 31 December 2012
Cash flows from operating activities
Cash used in operations
Note
2012
2011
14
(198,935)
_________
(147,819)
_________
Net cash used in operating activities
(198,935)
(147,819)
Cash flows from investing activities
Purchase of intangible non-current assets
Net cash received with acquisitions
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of ordinary shares
Proceeds from issue of loan notes
(428,648)
-
_________
(690,849)
315,306
_________
(428,648)
(375,543)
87,496
444,743
_________
641,409
-
_________
Net cash generated from financing activities
532,239
641,409
(Decrease)/increase in cash and cash equivalents in the period
(95,344)
118,047
Cash and cash equivalents at start of period
Cash and cash equivalents at end of period
118,047
_________
-
_________
15
22,703
_________
118,047
_________
The notes on pages 12 to 30 form part of these financial statements.
10
Independent Oil and Gas plc
Company cash flow statement
for the year ended 31 December 2012
Cash flows from operating activities
Cash used in operations
Note
2012
£
2011
£
14
(156,094)
_________
(160,210)
_________
Net cash used in operating activities
(156,094)
(160,210)
Cash flows from investing activities
Amounts invested in subsidiaries
Net cash received with acquisitions
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of ordinary shares
Proceeds from issue of loan notes
Net cash generated from financing activities
(471,489)
-
_________
(678,458)
315,306
_________
(471,489)
(363,152)
87,496
444,743
_________
641,409
-
_________
532,239
641,409
(Decrease)/increase in cash and cash equivalents in the period
(95,344)
118,047
Cash and cash equivalents at start of period
Cash and cash equivalents at end of period
118,047
_________
-
_________
15
22,703
_________
118,047
_________
The notes on pages 12 to 30 form part of these financial statements.
11
Independent Oil and Gas plc
Notes forming part of the financial statements
for the year ended 31 December 2012
1
Accounting policies
Statement of significant accounting policies
IAS 8 requires management to use its judgement in developing and applying accounting policies that result
in information which is relevant to the economic decision-making needs of users; that are reliable, free from
bias, prudent, complete and represent faithfully the financial position, financial performance and cash flows
of the entity.
Basis of preparation
The principal accounting policies adopted in the preparation of the financial statements are set out below.
The policies have been consistently applied to all the years presented, unless otherwise stated.
These financial statements have been prepared on the basis of a going concern and in line with
International Financial Reporting Standards (“IFRSs”) and IFRIC interpretations issued by the International
Accounting Standards Board (“IASB”) adopted by the European Union and in accordance with applicable
United Kingdom Law.
The adoption of all of the new and revised Standards and Interpretations issued by the IASB and the
International Financial Reporting Interpretations Committee (IFRIC) of the IASB that are relevant to the
operations and effective for annual reporting periods beginning on or after 1 January 2010 are reflected in
these financial statements.
The preparation of financial statements in conformity with IFRS requires management to make judgements,
estimates and assumptions that affect the application of policies and reported amounts of assets and
liabilities, income and expenses. The estimates and associated assumptions are based on historical
experience and factors that are believed to be reasonable under the circumstances, the results of which
form the basis of making judgements about carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised if the revision only affects that period
or in the period of revision and future periods if the revision affects both current and future periods.
Adoption of new and revised International Financial Accounting Standards
New and amended standards adopted by the Group:
The accounting policies adopted are consistent with those of the previous financial period, except for the
following new and amended IFRS and IFRIC interpretations applied as of 1 January 2012.
Standard
Amendments to IFRS 7 Disclosures –
Transfer of Financial Assets
Amendments to IAS 12
Deferred tax – recovery of underlying
assets
Effective
date
1 Jul 2011
Impact on initial application
Applies for periods beginning on or after the
effective date. No impact upon the Group or
Company.
1 Jan 2012 Applies for periods beginning on or after 1 Jan
2012. No impact upon the Group or Company.
No other IFRS issued and adopted but not yet effective are expected to have a material impact on the
Group's financial statements.
12
Independent Oil and Gas plc
Notes forming part of the financial statements
for the year ended 31 December 2012 (continued)
1
Accounting policies (continued)
Adoption of new and revised International Financial Accounting Standards (continued)
Standards, amendments and interpretations, which are effective for reporting periods beginning after the
date of these financial statements which have not been adopted early:
Standard
Description
IAS 1
IFRS 9*
IFRS 10
IFRS 11
IFRS 12
IFRS 13
IAS 27
IAS 28
IAS 19
IFRS 7
IAS 32
Financial statements presentation – Other comprehensive income
Financial Instruments
Consolidated Financial Statements
Joint Arrangements
Disclosure of Interests in Other Entities
Fair Value Measurement
Separate Financial Statements
Investments in Associates and Joint Ventures
Employee Benefits
Financial Instrument Disclosures
Financial Instrument Presentation
Effective date
1 July 2012
1 Jan 2015
1 Jan 2014
1 Jan 2014
1 Jan 2014
1 Jan 2013
1 Jan 2014
1 Jan 2014
1 Jan 2013
1 Jan 2013
1 Jan 2014
Items marked * had not yet been endorsed by the European Union at the date these financial statements
were approved and authorised for issued by the Board.
These new and revised standards and interpretations are not expected to materially affect the Group's
reporting or reported numbers.
Going concern
The directors have been considering a number of options in order to raise additional finance to fund the
Group’s ongoing oil and gas appraisal and development activities. In this context the Company announced
on 16 September 2013 its intention to seek admission to the Alternative Investment Market (“AIM”) of the
London Stock exchange with associated new funding.
As a result, the directors consider that the Group has adequate working capital for at least the next twelve
months. Accordingly, the directors continue to adopt the going concern basis in preparing the annual report
and accounts.
13
Independent Oil and Gas plc
Notes forming part of the financial statements
for the year ended 31 December 2012 (continued)
1
Accounting policies (continued)
Basis of consolidation
Where the Company has the power, either directly or indirectly, to govern the financial and operating
policies of another entity or business so as to obtain benefits from its activities, it is classified as a
subsidiary. The consolidated financial statements present the results of the Company and its subsidiaries
as if they formed a single entity. Inter-company transactions and balances between Group companies are
therefore eliminated in full. The financial statements of subsidiaries are included in the Group's financial
statements from the date that control commences until the date that control ceases.
Subsidiaries
A subsidiary is an entity over which the Company is able to exercise control. Control is achieved where the
Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so
as to obtain benefits from its activities. In assessing control, potential voting rights that presently are
exercisable are taken into account.
Jointly controlled assets
Jointly controlled assets are arrangements in which the Group holds an interest on a long term basis which
are jointly controlled by the Group and one or more venturers under a contractual arrangement. The
Group's exploration, development and production activities are generally conducted jointly with other
companies in this way. When these arrangements do not constitute entities in their own right, the
consolidated financial statements reflect the relevant proportion of costs, revenues, assets and liabilities
applicable to the Group's interests in accordance with IAS 31.
Oil and gas exploration assets and development/producing assets
The Group follows a successful efforts based accounting policy for oil and gas assets. Under successful
efforts expenditure incurred on the acquisition of a licence interest is initially capitalised on a licence by
licence basis. Costs are held undepleted within exploration assets until such time as the exploration phase
on the licence area is complete or commercial reserves have been discovered.
Exploration expenditure incurred in the process of determining exploration targets is capitalised initially
within intangible assets and subsequently allocated to drilling activities. Exploration drilling costs are initially
capitalised on a well by well basis until the success or otherwise of the well has been established. The
success or failure of each exploration effort is judged on a well by well basis. Drilling costs are written off on
completion of a well unless the results indicate that hydrocarbon reserves exist and there is a reasonable
prospect that these reserves are commercial.
Costs incurred prior to obtaining the legal rights to explore an area are expensed immediately to the
Statement of Comprehensive Income as exploration costs written off.
All lease and licence acquisition costs, geological and geophysical costs and other direct costs of
exploration, evaluation and development are capitalised as intangible assets or oil and gas development
costs according to their nature. Intangible assets comprise costs relating to the exploration and evaluation
of licences which the Directors consider to be unevaluated until reserves are appraised as commercial, at
which time they are transferred to oil and gas development costs following an impairment review and
depreciated accordingly.
Where results of exploration drilling indicate the presence of hydrocarbons which are ultimately considered
not commercially viable, all related costs are written off to the Statement of Comprehensive Income as
exploration costs written off.
All costs incurred after the technical feasibility and commercial viability of producing hydrocarbons have
been demonstrated are capitalised as oil and gas development costs on a field by field basis. Subsequent
expenditure
the
development/producing asset or replaces part of the existing development/producing asset. Any costs
remaining associated with the replaced asset part are expensed.
the economic benefits of
is capitalised only where
it either enhances
14
Independent Oil and Gas plc
Notes forming part of the financial statements
for the year ended 31 December 2012 (continued)
1
Accounting policies (continued)
Oil and gas exploration assets and development/producing assets (continued)
Net proceeds from any disposal of an exploration asset are initially credited against the previously
capitalised costs. Any surplus proceeds are credited to the Statement of Comprehensive Income. Net
proceeds from any disposal of development/producing assets are credited against the previously capitalised
cost. A gain or loss on disposal of a development/producing asset is recognised in the Statement of
Comprehensive Income to the extent that the net proceeds exceed or are less than the appropriate portion
of the net capitalised costs of the asset.
Depletion and amortisation
The Group depletes separately, where applicable, any identifiable part of development/producing assets,
such as fields, processing facilities and pipelines which is significant in relation to the total cost of a
development/producing asset.
The Group depletes expenditure on oil and gas production and development on a unit of production basis,
based on proved and probable reserves on a field by field basis. In certain circumstances, fields within a
single development area may be combined for depletion purposes.
Impairment
Exploration assets are reviewed regularly for indications of impairment and costs are written off where
circumstances indicate that the carrying value might not be recoverable. In such circumstances the
exploration asset is allocated to development/producing assets within the same geographic segment and
tested for impairment. Any such impairment arising is recognised in the Statement of Comprehensive
Income as exploration costs written off for the period. Where there are no development or producing assets
within a geographic segment, the exploration costs are charged immediately to the Statement of
Comprehensive Income.
Impairment reviews on development/producing oil and gas assets are carried out on each cash generating
unit identified in accordance with IAS 36. The Group’s cash generating units are those assets which
generate largely independent cash flows and are normally, but not always, single development areas.
At each reporting date, where there are indications of impairment, the net book value of the cash generating
unit is compared with the associated expected discounted future cash flows. If the net book value is higher,
then the difference is written off to the Statement of Comprehensive Income as cost of sales.
Where there has been a charge for impairment in an earlier year that charge will be reversed in a later
period where there has been a change in circumstances to the extent that the discounted cash flows are
higher than the net book value at the time. In reversing impairment losses, the carrying amount of the asset
will be increased to the lower of its original carrying value or the carrying value that would have been
determined (net of depletion) had no impairment loss been recognised in prior periods.
Investments and loans
Shares in subsidiary undertakings are shown at cost. Loans to subsidiary undertakings are stated at
amortised cost.
Provisions are made for any impairment in value.
15
Independent Oil and Gas plc
Notes forming part of the financial statements
for the year ended 31 December 2012 (continued)
1
Accounting policies (continued)
Financial instruments
(i) Financial assets
Loans and receivables
The Group's loans and receivables comprise trade receivables, other financial assets, and cash and cash
equivalents.
These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in
an active market. They arise principally through prepayments and recoverable VAT but may also
incorporate other types of contractual monetary asset. Loans and receivables are recognised initially at fair
value and subsequently measured at amortised cost using the effective interest method, less provision for
impairment.
A provision for impairment is established when there is objective evidence that the asset will not be
collectible in full according to the original terms of the instruments. The amount of the provision is the
difference between the asset's carrying amount and the present value of the estimated future cash flows
discounted at the original effective interest rate. The carrying amount of the asset is reduced through the
use of an allowance account, and the amount of the loss is recognised in profit or loss. When loans and
receivables are uncollectible, they are written off against the allowance account for loans and receivables.
Subsequent recoveries of amounts previously written off are credited to profit or loss, subject to a restriction
that the carrying amount of the asset at the date the impairment is reversed does not exceed what the
amortised cost would have been had the impairment not been recognised.
Cash and cash equivalents
Cash includes cash on hand and demand deposits with any bank or other financial institution. Cash
equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash
which are subject to an insignificant risk of changes in value.
(ii) Financial liabilities held at cost
Trade payables and other short-term monetary liabilities are recognised at fair value and in view of the short
payment periods are not amortised.
Equity
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs,
allocated between share capital and share premium.
Share issue expenses and Share premium account
The costs of issuing new share capital are written-off against the Share premium account arising out of the
proceeds of the new issue.
16
Independent Oil and Gas plc
Notes forming part of the financial statements
for the year ended 31 December 2012 (continued)
1
Accounting policies (continued)
Taxation
Tax on the profit or loss for the period comprises current and deferred tax. Tax is recognised in the
Statement of Comprehensive Income except to the extent that it relates to items recognised in other
comprehensive income, in which case it is recognised in other comprehensive income.
Current tax is the expected tax payable on the taxable income for the period, using tax rates enacted or
substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the
statement of financial position differs to its tax base, except for differences arising on the initial recognition of
an asset or liability in a transaction which is not a business combination and at the time of the transaction
affects neither accounting or taxable profit; and investments in subsidiaries and jointly controlled entities
where the Group is able to control the timing of the reversal of the difference and it is probable that the
difference will not reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will
be available against which the difference can be utilised.
The amount of the asset or liability is determined using tax rates that have been enacted or substantively
enacted by the reporting date and are expected to apply when the deferred tax liabilities/(assets) are
settled/(recovered). Deferred tax balances are not discounted.
Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current
tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax
authority on either:
the same taxable Group company; or
-
- different Group entities which intend either to settle current tax assets and liabilities on a net basis, or
-
to realise the assets and settle the liabilities simultaneously, in each future period in which significant
amounts of deferred tax assets or liabilities are expected to be settled or recovered.
Decommissioning
At the end of the producing life of a field, costs are incurred in removing and decommissioning production
facilities. The Group recognises the full discounted cost of decommissioning as an asset and liability when
the obligation to rectify environmental damage arises. Where material, the decommissioning asset is
included within fixed assets with the cost of the related installation. The corresponding liability is included
within provisions. Revisions to the estimated costs of decommissioning which alter the level of the
provisions required are also reflected in adjustments to the decommissioning asset. The amortisation of the
asset, calculated on a unit of production basis based on proved and probable reserves, is shown as the
"decommissioning charge" in the Statement of Comprehensive Income and the unwinding of the discount on
the provision is included within "finance costs".
17
Independent Oil and Gas plc
Notes forming part of the financial statements
for the year ended 31 December 2012 (continued)
1
Accounting policies (continued)
Foreign currencies
The functional and presentation currency of the Group and the Company is Pounds Sterling.
The Group translates foreign currency transactions into the functional currency at the rate of exchange
prevailing at the transaction date. Monetary assets and liabilities denominated in foreign currency are
translated into the functional currency at the rate of exchange prevailing at the reporting date. Exchange
differences arising are taken to the Statement of Comprehensive Income except for those incurred on
borrowings specifically allocable to development projects, which are capitalised as part of the cost of the
asset.
Segmental reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief
operating decision maker. The chief operating decision makers have been identified as the Chief Executive
Officer, Chief Financial Officer and the other executive and non-executive Board members.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting
date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year, are discussed below:
Gas and liquids reserves
The volume of proven and probable gas and liquids reserves is an estimate that affects the unit of
production depreciation of producing gas and oil property, plant and equipment as well as being a significant
estimate affecting decommissioning estimates and impairment calculations.
The impact of a change in estimated proven and probable reserves is dealt with prospectively by
depreciating the remaining book value of producing assets over the expected future production. If proven
and probable reserves estimates are revised downwards, earnings could be affected by higher depreciation
expense or an immediate write-down (impairment) of the asset's book value.
The Group currently holds no proven and probable gas and liquids reserves.
Decommissioning costs
The estimated cost of decommissioning at the end of the producing lives of fields is reviewed periodically
and is based on proven and probable reserves, price levels and technology at the reporting date. Provision
is made for the estimated cost of decommissioning at the reporting date. The payment dates of total
expected future decommissioning costs are uncertain and dependent on the lives of the facilities. The
abandonment of the fields is expected to happen in one to thirty five years. As no field developments have
commenced to-date no provision for decommissioning costs had been made at the balance sheet date.
2
Segmental information
The Group complies with IFRS 8, Operating Segments, which requires operating segments to be identified
on the basis of internal reports about components of the Group that are regularly reviewed by the directors
to allocate resources to the segments and to assess their performance. In the opinion of the directors, the
operations of the Group comprise one class of business, being the exploration and development of oil and
gas opportunities in the North Sea.
18
Independent Oil and Gas plc
Notes forming part of the financial statements
for the year ended 31 December 2012 (continued)
3 Operating loss
The Group operating loss is stated after charging/(crediting) the following:
Fees payable to the Company's auditor for the audit
of the Company's and Group's annual financial statements
Exploration expense
Staff costs
Staff costs capitalised as oil and gas non-current assets
Foreign exchange (gain)/loss
4
Staff costs and directors' remuneration
The Group did not have any employees during this period.
All personnel were engaged under consultancy contracts.
Group
Directors’ costs
Management costs
2012
£
2011
£
24,000
97,300
23,027
(12,432)
(45,026)
_________
35,000
-
123,316
(51,509)
32,604
_________
2012
£
2011
£
20,910
2,117
_________
76,348
46,968
_________
23,027
_________
123,316
_________
During the period, the average number of employees was:
Number
Number
Management/operational
Directors
Company
Directors’ costs
Management costs
2
_________
2
_________
5
_________
5
_________
£
£
20,910
2,117
_________
76,348
46,968
_________
23,027
_________
123,316
_________
19
Independent Oil and Gas plc
Notes forming part of the financial statements
For the year ended 31 December 2012 (continued)
4
Staff costs and directors' remuneration (continued)
During the period, the average number of employees was:
Management/operational
Directors
Number
Number
2
_________
2
_________
5
_________
5
_________
Key management and personnel are considered to be the Executive and Non-executive Directors. Directors
held no options during 2012 (2011: Nil).
The Company paid premiums of £12,282 for Directors and Officers Liability insurance during the year (2011:
£Nil).
5
Finance expense
Loan interest
Other Interest
6
Taxation
a) Current taxation
2012
£
2011
£
74,022
25,836
_________
-
-
_________
99,858
_________
-
_________
There was no tax charge during the year since the Group had no income. Expenditures to date will be
accumulated for offset against future tax charges
20
Independent Oil and Gas plc
Notes forming part of the financial statements
For the year ended 31 December 2012 (continued)
6
Taxation (continued)
The reasons for the difference between the actual tax charge for the year and the standard rate of
corporation tax in the United Kingdom applied to profits for the year are as follows:
Loss for the year
Income tax expense (including income tax on
associate and discontinued operation)
Loss before income taxes
Expected tax credit based on the standard rate of United Kingdom
corporation tax at the domestic rate of 24.5% (2011: 26.5%)
Expenses not deductible for tax purposes
Unrecognised taxable losses carried forward
Total tax expense
2012
£
2011
£
446,419
172,633
-
_________
-
_________
446,419
172,633
109,373
45,748
(32,971)
(76,402)
_________
(54)
(45,694)
_________
-
_________
-
_________
Changes in tax rates and factors affecting the future tax charge
Finance Act 2012 includes provision for the main rate of corporation tax to reduce from 26% to 24% on
1 April 2012, and to 23% on 1 April 2013. It has also been announced that there will be a further 1%
reduction to bring the main rate to 22% from 1 April 2014. This will reduce the Company’s future tax charge
accordingly. The rate of 24% was substantially enacted on the 26 March 2012 and the rate of 23%
substantially enacted on 6 July 2012. Future net production revenues with be subject to ring fence
corporation tax including a supplementary charge. Currently applicable rates total 62% combined.
b) Deferred taxation
Due to the nature of the Group's exploration activities there is a long lead time in either developing or
otherwise realising exploration assets. A deferred tax asset will only be created if there is reasonable
certainty that profits will be earned in the foreseeable future.
21
Independent Oil and Gas plc
Notes forming part of the financial statements
For the year ended 31 December 2012 (continued)
7
Non-current assets
Oil and gas costs pending determination - Group
At cost
At beginning of the year
Acquisitions
Additions
At end of the year
Write-downs at the beginning and end of the year
Net book value
At 31 December
At 1 January
2012
£
2011
£
14,556,759
229,588
385,081
_________
-
13,783,465
773,294
_________
15,171,428
_________
14,556,759
_________
-
_________
-
_________
15,171,428
_________
14,556,759
_________
14,556,759
_________
-
_________
On 27 October 2011 the Group exercised its options to acquire 50% interests in UKCS licences P1736
(Blocks 48/22b and 48/23a) from Ebor Energy UK Limited and P1609 (Block 9/21a) from MOST including
equivalent interests in the Blythe and Skipper fields respectively. Consideration consisted of the issue of
shares in Independent Oil and Gas plc plus the acceptance of creditors and the transfer of cash balances as
set out below.
Shares issued
Creditors assumed
Associated costs
Cash received
Net consideration
Licence P1736
(Blythe)
£
Licence P1609
(Skipper)
£
Total
£
4,109,283
-
60,427
(210,959)
3,958,751
8,654,448
1,218,250
56,363
(104,347)
9,824,714
12,763,731
1,218,250
116,790
(315,306)
13,783,465
On 1 April 2012 long term creditors assumed under the terms of the acquisition increased by £229,588
(US$370,861) in accordance with the relevant agreement as that creditor had not been repaid by 31 March
2012.
In August 2012 ATP Oil & Gas Corporation, the US parent of the Company’s operating partner for its oil &
gas assets, ATP Oil & Gas (UK) Ltd, filed for protection from its creditors under Chapter 11 of the US
Bankruptcy Code. Bids have been requested for ATP’s assets and the directors understand that
negotiations with preferred bidders have commenced with expected completion in the near future. Once a
sale has been completed and a new operator appointed, the management expect the operator to propose
appraisal and development plans for the fields. Pending completion of this process the Blythe and Skipper
licences have been extended to 31 December 2013. Management expects the licences to be further
extended by the Department of Energy and Climate Change once a new operator has been installed.
22
Independent Oil and Gas plc
Notes forming part of the financial statements
for the year ended 31 December 2012 (continued)
8
Investments
Company
At cost
At beginning of period
Additions
Written off
At 31 December 2011
Additions
At 31 December 2012
Shares
in Group
companies
£
Loans
to Group
companies
£
Total
£
-
12,591,943
-
_________
-
882,807
-
_________
-
13,474,750
-
_________
12,591,943
_________
882,807
_________
13,474,750
_________
-
_________
840,954
_________
840,954
_________
12,591,943
_________
1,723,761
_________
14,315,704
_________
The Company's principal subsidiaries are as follows:
Directly held
Country of
incorporation
Area of
operation
IOG Skipper Limited
IOG North Sea Limited (formerly IOG Blythe Limited)
United Kingdom
United Kingdom
United Kingdom
United Kingdom
%
100
100
Both subsidiaries were incorporated in the United Kingdom on 13 May 2011 and are engaged in the
business of oil and gas exploration in the North Sea.
9
Interests in jointly controlled assets
Licence
United Kingdom
Skipper oil field
Blythe gas field
Skipper West exploration licence
10 Other receivables
Group and Company
Value added tax recoverable
Beneficial
interest %
Operator
50.00%
50.00%
100.00%
2012
£
ATP
ATP
IOG
2011
£
30,206
__________
28,115
__________
23
Independent Oil and Gas plc
Notes forming part of the financial statements
for the year ended 31 December 2012 (continued)
11 Current liabilities
Group
Loan notes
Trade payables
Amounts due to joint venture partners
Accruals
Company
Loan notes
Trade payables
Amounts due to joint venture partners
Accruals
2012
£
2011
£
396,353
186,889
22,171
102,673
_________
-
96,050
29,509
35,000
_________
708,086
_________
160,559
_________
396,353
162,876
22,171
82,675
_________
-
96,037
29,509
6,750
_________
664,075
_________
132,296
_________
During 2012 the Company raised additional finance totalling £444,743 through the issue of loan notes.
Interest accrues on the loan notes at a rate of 7.5% per annum and totalled £19,958 at 31 December 2012.
In the event of an AIM admission or Initial Public Offering of the Company, the loan notes plus accrued
interest will convert into ordinary shares of the Company at a price equivalent to 80% of the offering price.
Otherwise the loan notes will be redeemed on 30 September 2013 In view of the right to conversion into
equity of the loan notes, a fair value of £122,412 has been ascribed to the equity component and is reflected
in the convertible debt option reserve within capital and reserves. There has been an additional interest
charge of £54,064 to reflect the effective interest rate of the loan notes.
12 Non-current liabilities
Group
Trade creditors
Company
Trade creditors
2012
£
2011
£
1,461,254
_________
1,250,854
_________
23,641
_________
23,641
_________
These trade creditors were assumed by the Group in conjunction with acquisition of licence interests in
2011. Of the Group total, £1,174,123 is due no later than 31 March 2015 whilst the balance is not due until
after sustained production is achieved from the Skipper field. The Company’s trade creditors are not due
until after sustained production is achieved from the Skipper field.
24
Independent Oil and Gas plc
Notes forming part of the financial statements
for the year ended 31 December 2012 (continued)
13 Equity share capital
Allotted, issued and fully paid
At beginning of period
- Ordinary shares of 1 pence each
Asset acquisitions
Equity issued
At 31 December 2011
- Ordinary shares of 1 pence each
Equity issued
At 31 December 2012
- Ordinary shares of 1 pence each
14 Cash flow statement
2012
(Profit)/loss after tax
Adjustments for:
Capitalisation
Recharges
Interest on loan notes
Interest on long-term payable
Foreign exchange
Decrease in trade and other receivables
Increase in trade and other payables
Cash used in operations
2011
(Profit)/loss after tax
Adjustments for:
Capitalisation
Recharges
Foreign exchange
Increase in trade and other receivables
Increase in trade and other payables
Cash used in operations
Number
Share
capital
£
Share
premium
£
Total
£
-
44,730,089
2,454,616
_________
-
447,223
24,545
_________
-
12,316,508
675,865
_________
-
12,763,731
700,410
_________
47,184,705
_________
471,768
_________
12,992,373
_________
13,464,141
_________
138,712
_________
1,389
_________
86,107
_________
87,496
_________
47,323,417
_________
473,157
_________
13,078,480
_________
13,551,637
_________
Company
£
Group
£
(6,014)
446,419
-
369,466
(74,022)
-
-
2,091
(135,427)
_________
12,432
-
(74,022)
(25,836)
45,024
2,091
(207,173)
_________
156,094
_________
198,935
_________
(834)
172,633
-
176,498
-
28,115
(43,569)
_________
51,509
-
(32,604)
28,115
(71,834)
_________
160,210
_________
147,819
_________
25
Independent Oil and Gas plc
Notes forming part of the financial statements
for the year ended 31 December 2012 (continued)
15 Cash and cash equivalents
Group and Company
Cash at bank
16 Company profit for the year
2012
£
2011
£
22,703
_________
118,047
_________
The Company has taken advantage of the exemption allowed under Section 408 of the Companies Act
2006 and has not presented its own Statement of Comprehensive Income in these financial statements.
The Company profit for the year was £6,014 (2011: £834).
17 Financial instruments
Significant accounting policies
Details of the significant accounting policies in respect of financial instruments are disclosed in Note 1 of the
financial statements.
Financial risk management
The Board seeks to minimise its exposure to financial risk by reviewing and agreeing policies for managing
each financial risk and monitoring them on a regular basis. No formal policies have been put in place in
order to hedge the Group and Company's activities to the exposure to currency risk or interest risk, however
as the Group enters greater commercial production this may be considered. No derivatives or hedges were
entered into during the period.
General objectives, policies and processes
The Board has overall responsibility for the determination of the Group and Company's risk management
objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for
designing and operating processes that ensure the effective implementation of the objectives and policies to
the Group's finance function. The Board receives regular reports from the Finance Director through which it
reviews the effectiveness of the processes put in place and the appropriateness of the objectives and
policies it sets.
The Group is exposed through its operations to the following financial risks:
Liquidity risk;
•
• Credit risk;
• Cash flow interest rate risk; and
• Foreign exchange risk
The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly
affecting the Group and Company's competitiveness and flexibility. Further details regarding these policies
are set out below:
Principal financial instruments
The principal financial instruments used by the Group and Company, from which financial instrument risk
arises are as follows:
• Other receivables
• Cash and cash equivalents
• Trade and other payables
26
Independent Oil and Gas plc
Notes forming part of the financial statements
for the year ended 31 December 2012 (continued)
17 Financial instruments (continued)
Liquidity risk
The Group's and Company's policy is to ensure that it will always have sufficient cash to allow it to meet its
liabilities when they become due. To achieve this aim, it seeks to maintain readily available cash balances
to meet expected requirements for a period of at least 60 days.
Rolling cash forecasts identifying the liquidity requirements of the Group and Company are produced
frequently. These are reviewed regularly by management and the Board to ensure that sufficient financial
resources are made available. All Group activities are funded through the Company.
At 31 December 2012 the Group and Company had loan notes totalling £444,743 plus interest accrued of
£19,958 outstanding (2011: £Nil). Due to the expected conversion, a fair value of £122,412 has been
ascribed to the equity component and is reflected in the convertible debt option reserve within capital and
reserves. There has been an additional interest charge of £54,064 to reflect the effective interest rate of the
loan notes.
2012 Group
Current assets
Trade and other receivables
Cash and cash equivalents
Current financial liabilities
Loan notes
Trade and other payables
Non-current financial liabilities
Trade and other payables
2011 Group
Current assets
Trade and other receivables
Cash and cash equivalents
Contractual
cash flows
£
-
-
_________
6 months
or less
£
30,206
22,703
________
Greater than
6 months, less
than 12 months
£
Greater
than
12 months
£
Total
undiscounted
£
Carrying
amount
£
-
-
_________
-
-
________
30,206
22,703
_________
30,206
22,703
________
-
_________
52,909
________
-
_________
-
________
52,909
_________
52,909
________
-
-
396,353
311,733
-
-
396,353
311,733
396,353
311,733
-
_________
-
________
-
_________
1,461,254
________
1,461,254
_________
1,461,254
________
-
_________
708,086
________
-
_________
1,461,254
________
2,169,340
_________
2,169,340
________
£
£
£
£
£
£
-
-
_________
28,115
118,047
________
-
-
_________
-
-
________
28,115
118,047
_________
28,115
118,047
________
-
________
146,162
________
-
_________
-
________
146,162
_________
146,162
________
Current financial liabilities
Trade and other payables
Non-current financial liabilities
Trade and other payables
-
-
160,559
-
-
-
-
160,559
160,559
1,250,854
1,250,854
1,250,854
_________
________
_________
________
_________
________
-
________
160,559
________
-
_________
1,250,854
________
1,411,413
_________
1,411,413
________
27
Independent Oil and Gas plc
Notes forming part of the financial statements
for the year ended 31 December 2012 (continued)
17 Financial instruments (continued)
Credit risk
The credit risk on liquid funds is limited because the counterparties are banks with credit ratings assigned by
international credit rating agencies. The Group places funds only with selected organisations with ratings of
'A' or above as ranked by Standard & Poor's for both long and short term debt.
The Group made investments and advances into subsidiary companies during the year, recovery of which is
dependent on future income generation of those subsidiaries. The Group and Company's maximum
exposure to credit risk by class of individual financial instrument and the contractual maturities of financial
assets, including estimated interest payments and excluding the impact of netting agreements are shown
below.
None of the Group's external trade and other receivables have been impaired. Group trade and other
receivables are predominantly non-interest bearing. The Group does not hold any collateral as security and
the Group does not hold any significant provision in the impairment account for trade and other receivables
as they mainly relate to third parties with no default history.
Cash and receivables
Cash and cash equivalents
Trade and other receivables
Carrying
value
£
Maximum
exposure
£
22,703
30,206
_________
22,703
30,206
_________
52,909
_________
52,909
_________
Cash flow interest rate risk
The interest rate profile of the financial assets and liabilities as at 31 December is as follows (excluding
short term assets and liabilities):
Group and Company
2012
Cash and cash equivalents
Pound Sterling
US Dollar
Loans and borrowings
Pounds Sterling
2011
Cash and cash equivalents
Pound Sterling
US Dollar
Loans and borrowings
Pounds Sterling
Fixed interest
maturing in
1 year or less
£
-
-
________
-
________
396,353
________
Non-interest
bearing
£
22,703
-
________
22,703
________
-
________
Total
£
22,703
-
________
22,703
________
396,353
________
-
-
_________
108,200
9,847
_________
108,200
9,847
_________
-
_________
118,047
_________
118,047
_________
-
_________
-
_________
-
_________
28
Independent Oil and Gas plc
Notes forming part of the financial statements
for the year ended 31 December 2012 (continued)
17 Financial instruments (continued)
Interest rate sensitivity analysis
As loans and creditors are subject to only fixed interest rates, variations in commercial interest rates would
have had have no impact upon the Group’s and Company’s result for the year ended 31 December 2012.
Foreign exchange risk
The table above shows the extent to which the Group and Company have monetary assets and liabilities in
currencies other than the functional currency of the operating company involved. These exposures give rise
to the net currency gains and losses recognised in profit or loss.
The Group carried limited exposure to foreign exchange risk during the period to 31 December 2012. Its
costs are incurred almost entirely in pounds sterling and it has no current revenues. The Group and the
Company's cash balances are maintained in Pounds sterling which is the functional and reporting currency
of each Group company. Consequently no formal policies have been put in place in order to hedge the
Group and Company's activities to the exposure to currency risk. It is the Group's policy to ensure that
individual Group entities enter into transactions in their functional currency wherever possible. The Group
considers this minimises any foreign exchange exposure.
The management regularly monitor the currency profile and obtain informal advice to ensure that the cash
balances are held in currencies which minimise the impact on the results and position of the Group and the
Company from foreign exchange movements.
Consequently the management do not consider that a Foreign Exchange sensitivity analysis is material to
the results of the Group and the Company.
Capital
The objective of the Directors is to maximise shareholder returns and minimise risks by keeping a
reasonable balance between debt and equity. To date the Group has been principally equity financed,
reflecting the early stage and consequent relatively high risk of its activities. During 2012, the Group issued
£444,743 in interest bearing loan notes pending the raising of further equity and/or public listing of its
shares.
In managing its capital, comprising equity, as described in the Statement of Changes in Equity, and loan
notes, as disclosed in Note 11, the Group and Company's primary objective is to ensure its ability to provide
a sufficient return for its equity shareholders, principally though capital growth. In order to achieve and seek
to maximise this return objective the Group and Company will in the future seek to maintain a gearing ratio
that balances risks and returns at an acceptable level while also maintaining a sufficient funding base to
enable the Group and Company to meet its working capital and strategic investment needs. In making
decisions to adjust its capital structure to achieve these aims, either through new share issues, increases or
reductions in debt, or altering a dividend or share buyback policies, the Group considers not only its short
term position but also its medium and longer term operational and strategic objectives.
Borrowing facilities
During 2012 the Company raised £444,743 through the issue of loan notes. Interest accrues on the loan
notes at a rate of 7.5% per annum and totalled £19,958 at 31 December 2012. In the event of an AIM
admission or Initial Public Offering of the Company, the loan notes plus accrued interest will convert into
ordinary shares of the Company at a price equivalent to 80% of the offering price. Otherwise the loan notes
will be redeemed on 30 September 2013. Due to the expected conversion, a fair value of £122,412 has
been ascribed to the equity component and is reflected in the convertible debt option reserve within capital
and reserves. There has been an additional interest charge of £54,064 to reflect the effective interest rate
of the loan notes.
Hedges
The Group did not hold any hedge instruments at the reporting date.
29
Independent Oil and Gas plc
Notes forming part of the financial statements
for the year ended 31 December 2012 (continued)
19 Financial commitments
The Group has authorised and committed to capital expenditure in the current period as part of the
exploration and development work programme for the licences in which it participates:
Authorised but not contracted
Contracts
2012
£
2011
£
64,000
132,000
_________
9,250,000
461,000
_________
196,000
_________
9,711,000
_________
All capital commitments derive from the Group's participation in its joint venture operations and entities.
Pending resolution of the financial position of the operator of both exploration licences, ATP (UK) Limited,
current commitments are limited to licence fees and general work.
20 Related party transactions
Key management and personnel remuneration for the period was £20,910 (2011: £76,348).
Acura Oil & Gas Limited, of which Michael Jordan is a director, acquired 37,200 shares during the year
(2011 – 8,825,579) for £23,473 bringing its total holding to 8,862,779 shares being 18.8% of the total issued
share capital.
Mark Routh acquired 37,768 shares during the year (2011 – 2,247,748) for £23,818 bringing his total
holding to 2,285,516 shares being 4.8% of the total issued share capital. He also subscribed for £200,000
in loan notes (2011 – £nil) upon which £9,904 of interest was outstanding at 31 December 2012.
Peter Young received £20,910 for consultancy services during the year (2011 - £41,678), of which £4,335
was outstanding at year end (2011 - £nil), and also subscribed for 8,000 shares (2011 – 6,540,281) for
£5,048 bringing his total holding to 6,548,281 being 13.9% of the total issued share capital. In addition his
wife, Fiona Young, held 6,600,436 shares (2011 – 6,600,436) being13.9% of the total issued share capital.
Marie Louise Clayton held 2,419,518 shares (2011 – 2,419,518) directly plus a further 40,655 shares (2011
– nil) acquired for £25,639 during the year through Clayton Consulting Partners, of which she is a director,
being 5.1% and 0.1% of the total issued share capital respectively.
Thomas Hardy acquired 5,020 shares during the year (2011 – 298,767) for £3,166 bringing his total to
303,787 shares being 0.6% of the total issued share capital.
21 Subsequent events
During 2013 to-date the Company has raised additional finance totalling £172,392 through the issue of loan
notes. Interest accrues on the loan notes at a rate of 7.5% per annum. In the event of an admission to AIM
or Initial Public Offering of the Company the loan notes plus accrued interest will convert into ordinary
shares of the Company at a price equivalent to 80% of the offering price. Otherwise the loan notes will be
redeemed on 30 September 2013.
The Company announced on 16 September 2013 its intention to seek admission to the Alternative
Investment Market (“AIM”) of the London Stock Exchange with associated new funding.
30