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IOG PLC

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FY2018 Annual Report · IOG PLC
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■  Registered Address 

 6th Floor 

60 Gracechurch Street 

London EC3V 0HR

■  Office 

 10 Arthur Street 

London EC4R 9AY

■   Contact  

+44 (0)20 3879 0510 

www.independentoilandgas.com

ANNUAL REPORT & ACCOUNTS 2018

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Independent Oil and Gas plc 

Report and Audited Financial Statements 

Year Ended 

31 December 2018 

Company Number 07434350 

ANNUAL REPORT & ACCOUNTS 2018 

Contents 
Chief Executive’s Review ............................................................................................................. 2 
Strategic Report ............................................................................................................................ 4 

Page 

Highlights of 2018 .............................................................................................................. 4 
Post Year End Developments ........................................................................................... 5 
Statement of Reserves & Resources ................................................................................ 9 

Operational Update .......................................................................................................... 11 
Finance Review ................................................................................................................ 20 

Corporate Governance................................................................................................................ 23 
Glossary of Key Terms ............................................................................................................... 35 

Report of the Directors ............................................................................................................... 38 
Statement of Directors’ Responsibilities ................................................................................... 40 
Independent auditor’s report to the members of Independent Oil & Gas Plc ......................... 41 

Consolidated Statement of Comprehensive Income ................................................................ 46 
Consolidated and Company Statements of Changes in Equity ............................................... 47 

Consolidated Statement of Financial Position .......................................................................... 48 
Company Statement of Financial Position ................................................................................ 49 
Consolidated Cash Flow Statement ........................................................................................... 50 

Company Cash Flow Statement ................................................................................................. 51 
Notes Forming Part of the Financial Statements ...................................................................... 52 

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Independent Oil & Gas plc 

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CHIEF EXECUTIVE’S REVIEW FOR THE YEAR ENDED 31 DECEMBER 2018 

I am pleased to be able to report progress on all fronts in 2018 for Independent Oil and Gas plc (the ‘Company’) and 
the Group (‘IOG’) across our UK Southern North Sea (‘SNS’) portfolio.  We continue to move toward our goal of bringing 
indigenous UK gas into the import-dependent UK market safely and at a low unit cost to generate material cash flows 
for the Group and attractive returns for our shareholders. 

During the year we have successfully added to our portfolio at low cost through successful awards made in the UK 30th 
Offshore Licensing Round. On 23 May 2018 IOG was offered three new licences containing the Goddard discovery, 
the south eastern Harvey structure and the Abbeydale discovery.  Our core gas portfolio now comprises 302 BCF of 
Proven and Probable (‘2P’) Reserves at the Blythe Hub (67 BCF)1 and the Vulcan Satellites Hub (235 BCF)1, 108 BCF 
of Contingent 2C resources at Goddard with incremental upside of an additional 73BCF of Best Estimate Prospective 
Resources  at  Goddard  and  a  further  129  BCF  Gross  Best  Estimate  Prospective  Resources  at  Harvey,  our  exciting 
appraisal opportunity.  The combined development of core and incremental upside is very valuable, targeting total daily 
production of approximately 230mmcfd and an NPV10 of £688million as at year end 2018.  

Throughout the year our development team has progressed the necessary engineering studies and benchmarked our 
capital and operating costs versus the market, such that we have been able to quantify the cost base associated with 
developing  our  portfolio  and  then  to  submit  a  revised  Field  Development  Plan  (‘FDP’)  to  the  Oil  and  Gas  Authority 
(‘OGA’) in October 2018. This Field Development Plan envisages a phased approach to our  core portfolio. Phase 1 
comprises the Blythe Hub (the Blythe and Elgood Fields) and the Southwark Field from the Vulcan Satellites Hub. The 
Nailsworth and Elland fields from the Vulcan Satellites form part of Phase 2 of the development.  We plan to develop 
Phase 1 via two simple unmanned wellhead platforms at Blythe and Southwark and a subsea tieback at Elgood, with 
up to five long reach wells to be drilled. Initial analysis of the Goddard discovery acquired in the 30th UKCS Licensing 
Round indicates that the 108 BCF of 2C Contingent Resources recognised within it may be included in the Core Project 
development. Final Investment Decision (‘FID’) is planned within 1H 2019 and First Gas is targeted for the start of 2021, 
from the Southwark field. In early 2018 an offshore survey campaign acquired all necessary environmental and survey 
data for platform locations and connecting pipelines for Phase 1 and 2 core developments, excluding Goddard, and 
external  survey  data  for  the  Thames  Pipeline.  A  second  campaign  in  November  2018  acquired  the  necessary 
geotechnical data for the Phase 1 development and for the Harvey appraisal well. At Harvey, PSDM reprocessing of 
3D seismic data  in the first half of 2018  and subsequent remapping  in  3Q 2018 improved  our understanding of the 
incremental upside and we are seeking to appraise this structure at the earliest opportunity having committed to the 
OGA to drill a well by the end of 2019. In the Harvey appraisal success case we would seek to incorporate this asset 
into Phase 1 of the core development. On 11th February 2019 the Company allowed the Skipper Licence to expire in 
order to focus our portfolio fully in the UK Southern North Sea Gas Basin. 

The key to unlocking the value of our gas assets is the recommissioned Thames Pipeline (‘PL370’).  This 24” gas line 
was decommissioned in 2015 and bringing it back into operation will provide us with a low-cost export route via which 
we can bring our gas to market at Bacton Terminal on the North Norfolk coast.  In April 2018, we completed a Sales 
and  Purchase  Agreement  (‘SPA’)  with  PL370  owners  Perenco  UK  Limited,  Tullow  Oil  SK  Limited  and  Centrica  to 
purchase the  90 km offshore line for a nominal sum and  we  have  worked closely  with the OGA,  the Department of 
Business, Energy & Industrial Strategy (‘BEIS’) and the Health & Safety Executive (‘HSE’) to become pipeline owner 
and operator. As part of our offshore surveys campaign, the exterior of PL370 was surveyed and an extensive pigging 
programme was executed to demonstrate its internal integrity in the first half of 2018. In view of equipment failure on 
the intelligent pig run in May, a further crawler pig run was executed in September, demonstrating the viability of the 
shoreward  end  of  the  line.  A  150  bar  24  hour  hydrotest  in  September  demonstrated  the  capability  of  the  line  to 
accommodate up to 550 mmcfd, providing us with ample capacity for our own portfolio, for any add-on opportunities we 
deliver  and  for  third-party  business  we  may  attract.    Progress  on  the  assessment  and  refurbishment  of  the  Bacton 
facilities, where the Thames Pipeline comes ashore, will commence in 1H 2020. 

In support of our subsurface and engineering efforts the Company has been busy engaging with the supply chain who 
we hope will be highly engaged partners in developing our gas hubs.  To date, Letters of Intent have been signed with 
Maersk (development drilling), Halliburton (well services), Offshore Design Engineering (‘ODE’) (duty holder, operations 
and  maintenance  contractor),  Heerema  Fabrication  Group  (‘Heerema’  -  offshore  platform  fabrication)  and  Allseas 
(subsea and pipeline fabrication and installation contractors). 

We are also pleased that in December 2018 the OGA granted an extension of the Blythe licence for a further year and 
confirmed the waiver of the drill or drop commitment at Elgood allowing the Licence to pass into its second term.  We 
look forward to working ever closer with the OGA as we seek to bring our SNS gas assets into production. 

1 Management Adjustment Estimates based on ERC Equipoise CPR, October 2017 
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Independent Oil & Gas plc 

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STRATEGIC REPORT FOR THE YEAR ENDED 31 DECEMBER 2018 

Highlights of 2018 

Operations 

•  Completion of the transformational acquisition of 100% operated ownership of the Thames Pipeline (‘PL370’) and 
the demonstration of its viability to provide a stable export route for the Company’s 100% owned gas assets straight 
to the UK market and National Transport System (‘NTS’). 

o  Offshore site and route survey along PL370, all proposed platform locations and intra-field connecting pipelines 

completed in May 2018; 

o  Completion of the Intelligent Pigging Programme (‘IPP’) confirmed excellent condition of the PL370 infrastructure; 

and 

o  Completion of tethered pig inspection together with 150-bar pressure hydrotest confirms PL370 economic life good 
for the next two decades and condition ‘as new’ confirmed by analysis undertaken by Oilfield Testing Services. 

•  Significant operational progress towards delivering IOG’s SNS gas hub strategy. 

o  Environmental Impact Assessment (‘EIA’) submitted for the Blythe Hub in January 2018 and the Vulcan Satellites 

Hub in April 2018; 

o  Platform fabrication Front End Engineering and Design (‘FEED’) undertaken by the Heerema Fabrication Group; 

and 

o  FEED completed by Wood for the Subsea, Umbilicals, Risers and Flowlines (‘SURF’) scope of work on the Phase 

1 development 

•  Strengthened portfolio around PL370 with the award of 100% ownership of three new licence areas, during the UKCS 
30th Licensing Round - Goddard, Harvey SE and Abbeydale. Goddard adds 108 BCF of independently assessed 2C 
Contingent Resources of gas and 73 BCF Best Case Prospective Gas Resources at Goddard. 

•  3D seismic reprocessing over the  Harvey  structure completed  and re-interpreted leading to  revised management 

estimate of Best-Case Prospective Resources of 129 BCF. 

o  Harvey appraisal well planned to spud in 2019, with the potential to significantly increase the Company’s resource 

base. 

Board and Management 

•  Refreshed Board and management team to drive future growth. 

o  Andrew  Hockey  succeeds  Mark  Routh  as  Chief  Executive  Officer  and  Mark  Routh  appointed  Non-Executive 

Chairman; 

o  Mark Hughes appointed as Chief Operating Officer; 
o  Fiona MacAulay appointed as independent Non-Executive Director (‘NED’) succeeding Andrew Hay who stepped 

down as independent NED in February 2018; 

o  Rupert Newall appointed as Head of Corporate Finance; and 
o  At 31 December 2018, Fiona MacAulay succeeded Mark Routh as Non-Executive Chair. 

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Independent Oil & Gas plc 

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STRATEGIC REPORT FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

Highlights of 2018 (continued) 

Financial 

•  Additional £10 million convertible loan facility signed with London Oil & Gas Limited (‘LOG’) on 21 February 2018, 
with a further £15 million loan (not convertible) secured from LOG on 13 September 2018. As at 31 December 2018, 
£7.85 million remains undrawn on the £15 million facility. A further £3.925 million was drawn in January 2019 and 
£3.925 million outstanding remains.  

•  Cash balance at period end of £0.70 million. 

•  Post tax loss for the year was £5.64 million. 

•  Continue  to  progress  funding  process  for  Final  Investment  Decision  (‘FID’)  on  Phase  1  of  the  core  development, 
including debt and equity discussions as well as an announced farm-out process to bring in an industrial partner. 

•  FID targeted for 1H 2019, with first gas targeted at the start of Q1 2021. 

Post Year End Developments 

•  Fiona MacAulay was appointed Non-Executive Chair effective 1 January 2019. 

•  Robin Storey was appointed General Counsel and Company Secretary on 9 January 2019. 

•  Esa Ikaheimonen was appointed Non-Executive Director and Chair of the Audit Committee on 14 March 2019. 

•  On 4 January 2019, it was announced that the Financial Conduct Authority (‘FCA’) was  investigating the affairs of 
LCAF.  LCAF  was  subsequently  put  into  administration  during  February  2019.  Furthermore,  LOG  entered 
administration on 19 March 2019. In conclusion, it was envisaged the Company would not be adversely affected by 
the administration of LOG and that the Company would continue to trade normally. 

•  The Company announced on the 25 February 2019 that it had initiated a focused farm-out process with a carefully 

selected shortlist of motivated and well-funded potential farm-in partners. 

•  The Company announced on 5 March 2019 that it had received and promptly rejected an unsolicited pre-conditional 
proposal  from  RockRose  Energy  plc  (‘RockRose’)  in  respect  of  a  possible  cash  offer  for  the  entire  issued  share 
capital of the Company at a price of 20 pence per Company share. Subsequently on 25 March 2019, the Company 
announced that RockRose had approached the joint administrators of LOG to acquire the entire debt and accrued 
interest due to LOG from the Company for the sum of £40 million in cash. The Board concluded to reject the proposal 
unequivocally and continue to state that this subsequent offer is a further transparent attempt by RockRose to deny 
both LOG’s  and LCAF’s creditors, and  by  extension to LCAF’s mini-bond holders, of fundamental value, seeking 
instead to reserve that value for the benefit of RockRose and those directly associated with RockRose. RockRose 
withdrew their proposal on 1 April 2019. 

•  The Company announced on 1 April 2019 that it had conditionally placed 165,795,050 new ordinary shares of £0.01 
each in the capital of the Company by way of a placing at a price of 10 pence per Ordinary Share to raise gross 
proceeds of approximately £16.6 million. In addition, a further proposed issue of 3,250,000 new Ordinary Shares by 
way  of  a  subscription  at  a  price  of  10  pence  per  Ordinary  Share  by  certain  directors  and  key  executives  of  the 
Company. Furthermore, the Company announced  that it  intends to  launch an open offer to shareholders to raise 
approximately £2 million through the issue of approximately 20,000,000 new Ordinary Shares, also at an issue price 
of 10 pence per share. This  Fundraising is conditional, inter alia,  upon the  approval of shareholders at a general 
meeting  of  the  Company  that  will  take  place  on  or  around  23  April  2019  and  the  admission  of  the  relevant  new 
Ordinary Shares to London AIM. 

•  The Company announced on 1 April 2019, that concurrent to the Fundraising announcement above, the Company 
has proposed to restructure its debt with LOG (in administration) by rescheduling by twelve months an amount of 
£7.1 million of debt service due to LOG, the conversion of £1.64 million in interest due from LOG’s existing convertible 
debt  into  new  Ordinary  Shares  and  a  one  year  maturity  extension  to  existing  warrants  being  those  13,277,310 
warrants which were granted by the Company in December 2015. 

•  The Skipper licence, P1609, was formally relinquished on 11 February 2019, as determined by the OGA. 

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Independent Oil & Gas plc 

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STRATEGIC REPORT FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

Health, Safety and Environment (‘HSE’) 
The corporate HSE policies were reviewed, renewed and re-issued in anticipation of further Licence Round applications 
during the year and the progressive selection and procurement of contracted services for the development of the Blythe 
and Vulcan Satellites gas hub developments.  The revised policies provide clear corporate expectation and direction 
for the effective HSE planning and performance of activities. 

The  Company  continued  to  develop  its  HSE  organisation,  arrangements  and  capabilities  during  the  year.    These 
corporate developments formed a significant part of the demonstration of necessary operator competencies that were 
submitted  to  the  OGA  in  support  of  field  licences  for  Blythe,  Elgood,  Nailsworth,  Elland  and  Southwark.    The 
arrangements also support the Group’s applications in the OGA’s 30th Offshore Licensing Round. 

The selection process of suitable contracted services for the engineering, design and operation of the Blythe and Vulcan 
Satellites gas hub development incorporated appropriate HSE criteria and has been followed by the development and 
implementation  of  HSE  bridging  documentation  with  both  partnered  and  contracted  enterprises,  some  of  whom  are 
intended to undertake 'duty holder' responsibilities in the operations and maintenance of the Group’s eventual offshore 
facilities, pipelines and wells. 

Effective briefing and consultation with the regulatory authorities has been an essential activity during the year, in order 
to assure compliance and to secure the necessary permits and consents for the range of project activities.   This has 
involved  close  contact  with  the  OGA,  HSE  Pipelines  Inspectorate  and  the  BEIS  Offshore  Petroleum  Regulator  for 
Environment and Decommissioning (‘OPRED’). 

In preparation of statutory Environmental Impact Assessments (‘EIA’) that are required to support the Blythe and Vulcan 
Satellites gas hub developments, an Early Consultation Document (‘ECD’) was circulated to over 40 identified potential 
stakeholder parties, including oil & gas operators, windfarm operators, regulatory bodies, non-government organisations 
(‘NGO’) and  others with potential  interest in  the  development.  Responses to  the ECD  are being  considered as our 
project develops, and in the preparation of the formal EIAs that follow.  The EIAs will themselves be subject to public 
review and statutory consultation. 

Business Strategy 
The Company’s strategy is to target stranded  gas assets and dormant discoveries, especially those near to existing 
and ideally, owned infrastructure (the ’Hub Strategy’).  These are assets that are no longer targets for the major oil and 
gas  companies  but  are  potentially  profitable  developments  which  can  be  beneficially  developed  by  a  smaller 
independent company, focused on the North Sea.   

Given the steady rise of imported vs domestic gas in the UK over the last fifteen years and the country’s dependency 
on gas for power, industry and heating, the maximising of gas resources in the North Sea makes strategic sense and 
will help deliver energy security in the UK. 

The aim is to build upon our existing gas portfolio in order to achieve a diversified and balanced portfolio of near and 
long-term developments, ideally with appraisal upside that complements our existing operations.  This will include the 
acquisition of producing fields or near-term production if the risk is positively assessed and the acquisition price results 
in value accretion.  The Directors believe that there is a significant opportunity for the Company to exploit this strategy, 
given that there are over 400 undeveloped and underdeveloped assets in the UK Continental Shelf (‘UKCS’). 

The  Hub  Strategy  targets  strategic  control  over  a  number  of  dormant  discoveries  and  appraisal  assets  that  can  be 
developed through common existing infrastructure, thereby generating significant economies of scale.  The Company 
is executing this strategy  in order  to create  UK SNS  gas hubs  with the  acquisition  of the Blythe  licence,  along  with 
operatorship,  in  addition  to  the  acquisition  of  the  Vulcan  Satellites,  the  award  of  Licence  P2342  (Nailsworth  NW 
Extension) in the 2016 29th Offshore Supplementary Licensing Round and the successful award of the Harvey, Harvey 
South East, Goddard and Abbeydale licences in the 2018 30th Offshore Licensing Round. 

The Company seeks to operate all its assets.  Operatorship is strategically important for several reasons: firstly, third 
party consents to tie in additional discoveries are easier to facilitate for operators of owned infrastructure.  Secondly, as 
the major oil and gas companies continue to divest late-life producing assets they often prefer to assign operatorship 
and redeploy their  own resources and so additional opportunities arise.   Finally,  in the UK licensing rounds, certain 
licences will only be made available to pre-qualified operators. 

Overall, the Board is confident that the Company has the management, experience and technical expertise to create 
and seize new opportunities for future growth. 

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STRATEGIC REPORT FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

Licences 
The Company, through its wholly owned subsidiaries IOG North Sea Limited and IOG UK Limited is currently a licensee 
on five Traditional Licences, two Promote Licences and four Innovate Licences all in the UK North Sea;  

Licence 

Blocks 

Subsidiary 

Interest 

Discovery 
Name 

Licence 
Type 

Blythe/Elgood Hub 

P1736 

P2260 

Harvey 

P2085 

P2441 

48/22b ALL and 
48/23a ALL 
48/22c ALL 

48/23c ALL and 
48/24b ALL 
48/24a 

Vulcan Satellites Hub 
P039 
P2342 
P130 
P1915 

49/21a J 
48/25a ALL 
48/25b NW 
49/21c ALL 

IOG North Sea Limited 

100% 

Blythe 

Traditional 

IOG North Sea Limited 

100% 

Elgood 

Promote 

IOG North Sea Limited 

100% 

Harvey 

Promote 

IOG North Sea Limited 

100% 

Harvey SE 

Innovate A/C 

IOG UK Limited 
IOG UK Limited 
IOG UK Limited 
IOG UK Limited 

100% 
100% 
100% 
100% 

Elland [1] 
Nailsworth [2] 
Nailsworth [2] 
Southwark [3] 

Traditional 
Innovate C 
Traditional 
Traditional 

Goddard 
P2438 

Abbeydale 
P2442 

Skipper 
P1609 

48/11c and 48/12b 

IOG North Sea Limited 

100% 

Goddard 

Innovate C 

53/1b 

IOG North Sea Limited 

100% 

Abbeydale 

Innovate A/C 

9/21a ALL 

IOG North Sea Limited 

100% 

Skipper [4] 

Traditional 

[1] Formerly Vulcan East 
[2] Formerly Vulcan North West 
[3] Formerly Vulcan South 
[4] Skipper relinquished 11 February 2019 

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STRATEGIC REPORT FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

Licences (continued) 
On 1 October 2018 Licences P2441 (Harvey SE) and P2442 (Abbeydale) commenced as Innovate A & C Licences and 
Licence P2438 (Goddard) commenced as an Innovate C Licence. The Innovate Licence replaces several earlier types 
of Seaward Production Licence: Traditional, Promote and Frontier. The Innovate Licence offers greater flexibility in the 
durations of the Initial and Second Terms (which was the main difference between the older licence types).  An applicant 
for an Innovate Licence is able to propose the durations of the Initial and Second Terms, and among the permutations 
that may be proposed are those that represent those associated with each of the older licence types. 

The  Initial  Term  can  now  be  subdivided  into  up  to  three  phases,  with  the  Work  Programme  being  correspondingly 
divided: 

•  Phase A is a period for carrying out geotechnical studies and geophysical data reprocessing; 
•  Phase B is a period for undertaking seismic surveys and acquiring other geophysical data; and 
•  Phase C is for drilling. 

Phases A and B are optional and depend on the applicant’s plans.  Every Work Programme must have at least a Phase 
C (just as a drilling commitment was the minimum Work Programme before the Innovate concept). 

It remains the case that a Licence may only continue from the Initial Term into the Second Term if (among other things) 
the Initial Term Work Programme has been completed and surrendered 50% of the initial acreage. Similarly, an Innovate 
Licence may only continue from one Phase into another if that part of the Term Work Programme associated with the 
earlier Phase has been completed and if the Licensee has committed to complete that part associated with the next.  
When continuing into Phase C, the licensee must also demonstrate the technical and financial capacity to carry out the 
Phase C part of the Work Programme. 

In special cases where an applicant does not propose any exploration at all and proposes to develop an existing field 
discovery or redevelop a field, a Licence may be awarded with no Initial Term; this is called a ‘Straight to Second Term’ 
Licence.  Again, this was an option that was available before the Innovate concept. 

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STRATEGIC REPORT FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

Statement of Reserves & Resources 

SNS Hubs Reserves 

SNS Portfolio 

Gas Reserves 

Condensate Reserves 

Field 

Blythe 

Elgood 

Total Blythe Hub 

Nailsworth 

Elland 

Southwark 

(BCF)  

Blythe Hub 

2P 

33.0 

21.7 

54.7 

3P 

44.1 

32.6 

76.7 

Vulcan Satellites Hub 

2P 

99.4 

55.0 

94.2 

3P 

147.2 

72.9 

137.7 

1P 

25.2 

14.7 

39.9 

1P 

60.4 

39.9 

61.2 

Total Vulcan Satellites 
Hub 

161.5 

248.5 

357.8 

Totals SNS Portfolio 

201.4 

303.2 

434.5 

Source: ERC Equipoise Competent Person’s Report 11 October 2017 

Goddard Contingent Resources 

(MMBbls) 

2P 

0.3 

0.2 

0.5 

2P 

1.0 

0.0 

0.1 

1.2 

1.7 

3P 

0.4 

0.3 

0.7 

3P 

1.5 

0.1 

0.1 

1.7 

2.4 

1P 

0.3 

0.1 

0.4 

1P 

0.6 

0.0 

0.0 

0.7 

1.1 

Contingent Gas Resources 

Discovery 

Goddard 

1C 

54.3 

(BCF)  

2C 

107.8 

3C 

202.8 

Source: ERC Equipoise Competent Person’s Report 10 October 2018 

Goddard Prospective Resources 

Prospective Gas Resources 

Prospect 

Pop Up 1 

Pop Up 2 

Low 

27.8 

14.0 

(BCF)  

Best 

48.8 

24.2 

High 

81.5 

39.9 

Mean 

52.3 

25.9 

Source: ERC Equipoise Competent Person’s Report 10 October 2018 

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STRATEGIC REPORT FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

Statement of Reserves & Resources (continued) 

Harvey Prospective Resources 

Prospective Gas Resources 

Discovery 

Harvey 

Low 

85 

(BCF)  

Best 

129 

Source: Management Estimates: September 2018 
Abbeydale Contingent Resources 

Contingent Gas Resources 

Discovery 

Abbeydale 

1C 

5 

(BCF)  

2C 

11 

High 

199 

3C 

24 

Source: Management Estimates: September 2018 

Skipper STOIIP and Resources 

Discovered Oil Initially in Place 

Contingent Resources 

Field 

(MMBbls) 

(MMBbls) 

Skipper [1] 

P90 

P50 

P10 

123.1 

136.5 

150.8 

1C 

17.9 

2C 

26.2 

3C 

34.9 

[1] Relinquished 11 February 2019 

Source:   AGR Tracs CPR - September 2013. 

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STRATEGIC REPORT FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

Operational Update 

Thames Pipeline 

The acquisition of the Thames Pipeline from Perenco UK Limited, Tullow Oil SK Limited and Spirit Energy Resources 
Limited (Sale and Purchase Agreement, SPA1) completed on 16 April 2018. 

On this date, the pre-acquisition costs for the Thames Pipeline and associated onshore Bacton Facility, previously held 
as a prepayment in the books of the parent company, IOG plc, were brought across to IOG Infrastructure Limited. Also, 
on this date, the Initial Thames Pipeline Decommissioning Security Amount of £500k was paid to Perenco UK. IOG 
Infrastructure Limited is the owner, user, holder and operator of the pipeline under the Pipeline Works Authority (‘PWA’). 

The MV Fugro Galaxy mobilised in late January 2018 and as part of its work programme carried out surveys along the 
Thames Pipeline. 

Preparation for the Intelligent Pigging Programme (‘IPP’) commenced on 20 February 2018 with onshore mechanical 
preparation work at the Bacton Terminal. The main IPP work took place in May 2018 and early June 2018. Three 12m 
pipeline sections were cut 60km offshore and retrieved to surface and indicated the pipeline  to be in extremely good 
condition. Two successful pipeline pressure tests confirmed pipeline integrity and initial 60km gauge pigging runs from 
Bacton  to  the  offshore  tie-in  point  were  successfully  executed.  The  initial  IPP  run  gathered  insufficient  data  due  to 
technical malfunction with the pig and an alternative strategy was planned and presented to the HSE. 

In September 2018, a crawler pig run was completed from Bacton to c.1km offshore demonstrating the viability of this 
nearshore element of the line and the viability of the whole line and thus this export route was then confirmed by a 150 
bar  24  hour  hydrotest  completed  on  23  September  2019.    Progress  continued  through  2H  2018  toward  signing  the 
Sales  and  Purchase  Agreement  (SPA2)  for  the  Thames  Reception  Facility  with  owners  Perenco,  Tullow  and  Spirit 
Energy. 

Other capital costs associated with the Thames Pipeline acquisition include potential tie-in studies (offshore → onshore), 
the  Crown  Estate  lease  associated  with  the  12-mile  onshore  boundary  (of  which  the  Thames  Pipeline  lies  in  situ), 
capitalised G&A and other directly attributable expenses. 

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STRATEGIC REPORT FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

Operational Update (continued) 

Blythe 
The Blythe gas discovery in the Rotliegend Leman Formation, straddles Blocks 48/22b and 48/23a in the SNS in licence 
P1736.  IOGNSL has 100% working interest in and is operator. Blythe is planned to be developed with a single well tied 
back to the Thames Pipeline via an unmanned platform (‘NUI’).  

The MV Fugro Galaxy mobilised in late January 2018 and as part of its work programme carried out surveys across the 
Blythe  Hub  (Blythe  and  Elgood  fields)  in  support  of  field  development.  At  Blythe  this  work  included  site  surveys  for 
platform location and pipeline route surveys to the tie-in point at the Thames pipeline, and environmental sampling. The 
Environmental Impact Assessment (‘EIA’) for the Blythe Hub was submitted on 31 January 2018 in line with milestones 
agreed with the UK Oil & Gas Authority (‘OGA’). 

During  development  engineering  studies  in  1H  2018,  it  was  decided  to  split  the  development  into  two  Phases  with 
Phase 1 development comprising Blythe, Elgood and Southwark and Phase 2 to include Nailsworth and Elland.  

The Phase 1 Field Development Plan comprising Blythe, Elgood and Southwark was submitted to the OGA in August 
2018 and following bilateral meetings was resubmitted in late October 2018 taking account of OGA comments. At year 
end, FID and subsequent EIA and FDP approval was expected to occur in late Q1 2019 with first gas from Southwark 
20 months later in Q4 2020 and Blythe first gas in early Q1 2021, subject to project financing.  

In July 2018 Wood carried out FEED studies to assess costs and schedule for the tie-in lines to the Thames Pipeline 
for the Phase 1 development including Blythe. In November 2018, offshore geotechnical surveys for the Blythe Platform 
were completed alongside geotechnical surveys at Southwark and at Harvey, where a geophysical site survey was also 
executed. Heerema also made progress with the FEED studies for the Blythe Platform in 2H 2018.  

In December 2018 the initial Term of Licence P1736 containing Blythe was extended to 31 December 2019 subject to 
the condition that an FDP capable of approval would be received by the OGA by 30 June 2019 and FID would occur by 
30 September 2019. 

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STRATEGIC REPORT FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

Operational Update (continued) 

Elgood 
IOGNSL has 100% working interest in and is operator of Licence P2260 (Block 48/22c), which was awarded in the 28th 
Licensing  Round.    The  licence,  which  lies  immediately  to  the  north-west  of  the  Blythe  licence,  contains  the  Elgood 
discovery in the Rotliegend Leman Sandstone.  

Elgood is planned to be developed with a single well tied back subsea to the Thames Pipeline via a NUI at Blythe. The 
MV Fugro Galaxy mobilised in late January 2018 and as part of its work programme carried out surveys across the 
Blythe Hub (Blythe and Elgood fields) in support of  field development. At Elgood this work included site surveys for 
pipeline route surveys to the tie-in point at Blythe and environmental sampling. The EIA for the Blythe Hub was submitted 
on 31 January 2018 in line with milestones agreed with the OGA. 

The Phase 1 Field Development Plan comprising Blythe, Elgood and Southwark was submitted to the OGA in August 
2018 and following bilateral meetings was resubmitted in late October 2018 taking account of OGA comments. At year 
end, FID and subsequent EIA and FDP approval was expected to occur at end Q1 2019 with first gas at Southwark 20 
months later in Q4 2020 and Elgood first gas in Q2 2021 subject to project financing.  

In July 2018 Wood carried out FEED studies to assess costs and schedule for the tie-in lines to the Thames Pipeline 
for the Phase 1 development including Elgood.  

In January 2019 IOG received notification from the OGA that the drill or drop commitment for the initial Term of Elgood 
Licence P2260 had been waived and the Licence could proceed into the Second Term, subject to the condition that an 
FDP capable of approval would be received by the OGA by 30 June 2019 and FID would occur by 30 September 2019.  

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STRATEGIC REPORT FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

Operational Update (continued) 

Vulcan Satellites – Southwark, Elland and Nailsworth 

The  Vulcan  Satellites  are  planned  to  be  developed  with  NUIs  at  Southwark  (three  wells),  Elland  (two  wells)  and 
Nailsworth  (three  wells)  to  the  Thames  Pipeline.  All  three  satellites  have  their  reservoirs  in  the  Rotliegend  Leman 
Sandstone. 

The MV Fugro Galaxy mobilised in late January 2018 and as part of its work programme carried out surveys across the 
Vulcan Satellites Hub (Southwark, Nailsworth and Elland fields) in support of field development. This work included site 
surveys for platform locations and pipeline route surveys to the tie-in point at the Thames Pipeline and environmental 
sampling. The EIA for the Vulcan Satellites Hub was submitted in April 2018 in line with milestones agreed with the 
OGA. 

During  development  engineering  studies  in  1H  2018  it  was  decided  to  include  Southwark  as  part  of  a  Phase  1 
development comprising Blythe, Elgood and Southwark.  

The Phase 1 Field Development Plan comprising Blythe, Elgood and Southwark was submitted to the OGA in August 
2018 and following bilateral meetings was resubmitted in late October 2018 taking account of OGA comments. At year 
end, FID and subsequent EIA and FDP approval was expected to occur at end Q1 2019 with first gas at Southwark 20 
months later in Q4 2020, subject to project financing.  

In July 2018, Wood carried out FEED studies to assess costs and schedule for the tie-in lines to the Thames Pipeline 
for the Phase 1 development including Southwark. In November 2018, offshore geotechnical surveys for the Southwark 
platform were completed alongside geotechnical surveys at Blythe and at Harvey, where a geophysical site survey was 
also executed. Heerema made progress with the FEED studies for the Southwark platform in 2H 2018 and FEED works 
were also completed by ODE for the refurbishment at the Bacton Terminal.  

Elland and Nailsworth, the other two Vulcan Satellites, will be part of Phase 2 of the development. 

Given the development deferral of both Elland and Nailsworth (Phase 2), most current year 2018 fixed asset additions 
have been attributable to the Southwark development area. 

Further to the Vulcan East suspended well decommissioning paper, prepared by Acona in April 2015, IOGUKL believes 
that the abandonment provision of £3.60 million continues to represent a reasonable cost estimate.  Decommissioning 
of  this  suspended  well  has  been  targeted  as  part  of  the  Vulcan  Satellites  development  program;  however,  as  this 
particular well is not assigned for development, this activity remains uncertain and may be further deferred subject to 
agreement with the OGA. 

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STRATEGIC REPORT FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

Operational Update (continued) 

Harvey 
IOGNSL  has  a  100%  working  interest  in  Licence  P2085  to  the  east  of  Blythe  (Blocks  48/23c  &  48/24b)  which  was 
awarded in the 27th Licensing Round and in Licence P2441 awarded in the 30th Licensing Round. These blocks contain 
100% of the Harvey Structure with the reservoir targeted in the Rotliegend Leman Sandstone Formation. 

In the first half of 2018 work on P2085 and adjacent open areas focused on reprocessing of existing 3D seismic data 
to Pre-Stack Depth Migration level with Schlumberger WesternGeco to support the selection of a well location for the 
firm Harvey well committed on P2085 in late 2017. 

Following  the  completion  of  seismic  reprocessing  in  July  2018,  the  dataset  was  reinterpreted  and  remapped.  This 
remapping  led  to  a  new  volumetric  assessment  of  gross  unrisked  Prospective  Resources  (as  estimated  by 
management)  at  Harvey  of  85-129-199BCF  (Low-Mid-Best  Estimate)  versus  the  2017  CPR  estimate  of  45-114-
286BCF.  Management’s  assessment of Geological Chance  of Success at  Harvey  is 63%. The gross volumes were 
secured by IOG with the award of Licence P2441 (SE Harvey) in the 30th UKCS Offshore Licensing Round, with licence 
commencement  on  1  October  2018.  Under  the  licence  a  firm  commitment  was  made  to  the  Oil  and  Gas  Authority 
(“OGA”) to reprocess 87km2 of 3D seismic to PSDM and drill a well to 2,345m TD or drop the Licence.  

In support of the Licence P2085 firm well commitment a Letter of Intent was signed with Ensco for the Ensco 72 Jack-
Up Drilling Unit for the drilling of a Harvey appraisal well in 2019 to be spud before 20 September 2019. Halliburton are 
under LOI to provide well services and Fraser Well Management were identified as drilling operator. Technical work 
proceeded  to  the  point  where  a  well  location  was  selected  for  the  Harvey  well  in  October  2018  and  permitting  and 
planning to drill the well in 1Q 2019 subject to funding were advanced. 

All costs associated  with developing the Harvey  SE extension  are now  incorporated  within the main Harvey  licence 
P2085, as determined by one single field area. Management will continue to account for any minor licence admin costs 
(licence fee, OGA levy etc.) associated with P2441 separately. 

Resources in the other discoveries and prospects on the Harvey area blocks will be subject to evaluation and appraisal 
following the results of the 3D seismic reprocessing. 

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STRATEGIC REPORT FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

Operational Update (continued) 

Goddard 

On 23 May 2018, IOG was offered Blocks 48/11c & 48/12b in the 30th UKCS Licensing Round and accepted the offer 
as Provisional Licence P2438 which contains Goddard, hitherto known as Glein, a dormant gas discovery. 

Licence P2438 formally commenced on 1 October 2018. Under the licence a firm commitment was made to the Oil and 
Gas Authority (“OGA”) to reprocess 175 km2 of 3D seismic to PSDM and drill an appraisal well on Goddard to 3,140m 
TD within three years. 

In the second half of 2018 work on Goddard focused on securing access to 3D seismic data processed to PSDM level 
across the Goddard licence. This dataset was secured from a previous operator. On licence commencement it was 
decided to submit the work done to date to ERC Equipoise, as the Competent Person, for audit purposes. Based on 
the  30th  Round  Licence  Application  document,  management  estimates  of  Contingent  Resources  were  1C/2C/3C 
45/189/396BCF. ERC Equipoise completed their work and assessed gross unrisked 1C/2C/3C Contingent Resources 
of 54.3/107.8/202.8 BCF and Low/Best/High gross unrisked prospective gas resources are 41.8/73.0/121.4 BCF. The 
CPR assesses the geological chance of success of the prospective gas resources at 48%. The chance of development 
of Goddard is estimated by ERC Equipoise as being 75%. 

In  the  light  of  the  relative  maturity  of  Goddard’s  Contingent  Resources  it  was  decided  in  early  2019  to  commence 
Goddard FDP planning and to include Goddard in Phase 1 Core development planning. 

Abbeydale 

On 23 May 2018, IOG was offered Block 53/1b in the 30th UKCS Licensing Round and accepted the offer as Provisional 
Licence  P2442  which  contains  the  Abbeydale  dormant  gas  discovery,  hitherto  known  as  Aberdonia,  which  was 
discovered  in  1996.   Licence  P2442  formally  commenced  on  1  October  2018.  Under  the  four-year  Licence,  a 
commitment was made to reprocess 150 km2 3D seismic data to PSDM and drill a well to 1,960m TD or drop the licence. 
2H 2018 work focused on securing prices for 3D reprocessing. 

Management  estimates  contingent  resources  on  Abbeydale  are  1C/2C/3C  5/11/24  BCF. The  new  3D  seismic  work 
programme is expected to increase these estimates to more commercial levels with a view to tying into IOG’s Thames 
Pipeline as the export route. 

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STRATEGIC REPORT FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

Operational Update (continued) 

Skipper 
The Skipper licence, P1609, was formally relinquished on 11 February 2019, as determined by the OGA. 

Asset Acquisitions  
The Company continues to assess the potential for the acquisition of a number of assets, particularly those already in 
production, to support the wider development and growth of the business.  

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 followed by the successful discovery and exploitation of oil and 
gas reserves as indicated through prospective, contingent and proved reserves inventories.  Financial performance is 
tracked through the raising of finance to fund proposed programmes and the control of costs against budgets. 

Principal 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  risks  and  associated 
mitigation are set out below. 

Investment  Returns:  Management  seeks  to  raise  funds  and  then  to  generate  shareholder  returns  through 
investment in a portfolio of exploration and development acreage leading to the drilling of wells, the discovery of 
commercial reserves followed by their exploitation.  Delivery of this business model carries several key risks. 

Risk 

Mitigation 

Market support may be eroded obstructing 
fundraising and lowering the share price 

•  Management regularly communicates its strategy to 

shareholders 

General market conditions may fluctuate 
hindering delivery of the Company’s 
business plan 

•  Focus is placed on building an asset portfolio capable of 
delivering regular news flow and offering continuing 
prospectivity 

•  Management aims to retain adequate working capital and 
secure finance facilities sufficient to ride out downturns 
should they arise 

Each asset carries its own risk profile and 
no outcome can be certain 

•  Management aims to avoid over-exposure to individual 
assets and to identify the associated risks objectively 

Company may not be able to raise funds to 
exploit its assets or continue as a going 
concern 

•  Management is pursuing specific and appropriate plans for 

funding the development of its asset portfolio and is 
confident in a successful outcome  

Company has given security over its assets 
to its lender, LOG 

•  Progress is ongoing with these potential funding routes and 
on 1 April 2019 the Company announced a fund raise of 
£16.6m (gross) as well as a concurrent amendment to the 
term of £7.1m of LOG loan notes. As set out in Note 1 the 
Group will require additional funding within the next twelve 
months in order to meet its working capital needs, 
development plans and loan repayment schedule. 

•  Management is in discussion with the Administrators of LOG 
who have acknowledged the importance of developing the 
Company’s assets in order to return value to LCAF bond 
holders. The LOG shareholders have made public 
announcements of their intention to continue to support the 
Group and that the Group’s ongoing operations are not 
adversely affected by the LOG Administration.  

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STRATEGIC REPORT FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

Principal Risks and Uncertainties (continued) 

Operations: Operations may not go to plan, leading to damage, pollution, cost overruns and poor outcomes 

Risk 

Mitigation 

Individual wells may not deliver recoverable 
oil and gas reserves 

• 

Thorough pre-drill evaluations are conducted to identify the 
risk/reward balance 

Operations may take far longer or cost more 
than expected 

Resource estimates may be misleading 
curtailing actual reserves recovered 

•  Exposure selectively mitigated through farm-out 
•  Management applies rigorous budget control 
•  Adequate working capital is retained to cover reasonable 

eventualities 
• 
The Group deploys qualified personnel 
•  Regular third-party reports are commissioned 
•  A prudent range of possible outcomes are considered within the 

planning process 

Licensing & Regulation: The Group may be unable to meet its licence and regulatory obligations 

Risk 

Mitigation 

UKCS Licences may be revoked 

•  Continue thorough communications with the OGA to determine 

licence status and meet requirements 

Personnel: The Company relies upon a pool of experienced and motivated personnel to identify and execute 
successful investment strategies 

Risks 

Mitigation 

Key personnel may be lost to other 
companies 

Difficulty in attracting the necessary talent as 
the Group moves into development of its 
projects 

• 

• 

The Remuneration Committee regularly evaluates 
incentivisation schemes to ensure they remain competitive 

The Group continues to review and adopt attractive packages 
for both staff and contractors 

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STRATEGIC REPORT FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

Principal Risks and Uncertainties (continued) 

Commercial environment: World and regional markets continue to be volatile with fluctuations and infrastructure 
access issues that might hinder the Company’s business success 

Risk 

Mitigation 

Volatile commodity prices mean that the 
Company cannot be certain of the future sales 
value of its products 

Brexit 

The Group may not be able to get access, at 
reasonable cost, to infrastructure and product 
markets when required 

•  Price mitigation strategies may be employed at the point of 

major capital commitment 

•  Gas may be sold under long-term contracts reducing exposure 

to short term fluctuations 

•  Oil and gas price hedging contracts may be utilised where 

viable 

•  Budget planning considers a range of commodity pricing 
• 

The Group does not see Brexit having a significant impact on 
its business model – the Company’s production will be 
indigenous, and the UK gas market is not forecast to be 
significantly directly impacted by an exit from the EU, being a 
substantial core element of UK primary energy demand. 
However, access to overseas personnel and equipment may be 
affected to a greater or lesser extent, depending on the precise 
Brexit outcome 

•  A range of different off-take options are pursued wherever 

possible  

Credit to support field development 
programmes may not be available at 
reasonable cost 

• 

The Company seeks to build and maintain strong banking 
relationships and initiates funding discussions at as early a 
stage a practicable 

Corporate Hedging Strategy and Implementation 
The  primary  objective  of  the  Company’s  hedging  policy  is  to  protect  projected  future  cash  flows,  generated  from 
operations, against unforeseen changes in short and medium-term market conditions. 

No  hedging  instruments  were  utilised  during  2018  in  view  of  the  limited  exposures  carried  during  the  year.    As  the 
Company’s capital investment programmes increase, hedging will be carried out in a simple and cost-effective manner, 
retaining  exposure  to  upside  but  avoiding  any  speculative  exposure  to  commodity  prices  or  exchange  rates.    The 
application of the policy is within a range to require exercise of management judgement in the light of market conditions 
and business variables. 

Details  of  the  risks  arising  from  the  Group’s  use  of  financial  instruments  can  be  found  in  Note  20  to  the  financial 
statements. 

Insurance 
The Group insures the risks it considers appropriate for the Group’s needs and circumstances.  However, the  Group 
may elect not to have insurance for certain risks, due to the high premium costs associated with insuring those risks or 
for various other reasons, including an assessment that the risks are remote. 

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STRATEGIC REPORT FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

Finance Review 

Income Statement 
The Group made a loss for the year of £5.64 million (2017 – £2.75 million). 

Further post 2016 well drilling expenses on the Skipper asset, resulted in an impairment charge to the Income Statement 
of £184k (refer Note 8).  There was no other impairment made against oil and gas properties during the year.  This 
compares  with  the  £119k  impairment  charged  in  2017  which  included  £85k  for  Skipper  post  well  drilling  expenses 
together with £34k on the relinquishment of Licence P2122. 

A  charge  of  £922k  (2017:  £430k)  to  the  Income  Statement  reflects  the  expenses  incurred  for  pre-licence  activity, 
business development (‘BD’) and other corporate project activity and expenses. 

Administration  expenses  of  £974k  (2017  –  £700k)  for  the  year  comprise  gross  general  and  administration  (‘G&A’) 
expenses of £3.19 million (2017 - £2.12 million) including non-cash share-based payment expense of £378k (2017 - 
£298k), net of both the allocation of £702k (2017 - £666k) attributable to pre-licence activity, BD and other corporate 
projects,  as  included  in  the  £922k  above,  and  the  allocation  of  £1.52  million  (2017  -  £757k)  capitalised  to  assets 
throughout  the  Group.    The  increase  in  gross  G&A  expenses  highlights  the  further  significant  increase  in  resource 
required to support the Group’s accelerating SNS capital projects and other capital activities during the year. 

The net loss on settlement of liabilities of £106k (2017: £1k) reflects both realised and unrealised movements on the 
settlement of liabilities via the issue of shares. 

The foreign exchange loss of £334k (2017: gain £333k) reflects foreign exchange movements on non-GBP denominated 
loans, provisions and trade creditors.  

Finance expense of £3.12 million (2017 – £1.83 million) includes accrued interest payable on loans (net of capitalised 
interest £752k (2017 - £22k)), discount accretion and both current and amortised finance expenses.  These expenses 
relate to fees and interest incurred on both loan finance facilities and those trade creditors subject to deferred payment 
and equity conversion terms. 

Balance Sheet 
PPE oil and gas assets have increased to £41.53 million (2017: £21.32 million) during the year, which represents capital 
expenditure on Front End Engineering Design (‘FEED’), the Thames Pipeline acquisition and other pre-development 
activities  with respect to Blythe, Elgood and the Vulcan Satellites. The £20.21 million increase includes  the Thames 
Pipeline acquisition, pigging operations and other associated onshore and offshore pipeline engineering studies. The 
Group also completed several subsea activities including surveys on all pre-development pipeline routes together with 
subsurface  geotechnical surveys for both Blythe and Southwark. Other  capital  cost drivers included further platform 
studies and miscellaneous pre-FID work programmes associated with the dual hub development strategy.  

The  Harvey,  Goddard  and  Abbeydale  exploration  and  evaluation  (‘E&E’)  assets  represent  the  E&E  portfolio  at  31 
December 2018, with a net book value of £2.35 million (2017: £185k) to the Group at 31 December 2018. This increase 
essentially consists of capital costs associated with the aforementioned Harvey appraisal well, including  geophysical, 
geotechnical and well site surveys and pre-drill engineering and planning. 

Current assets have increased to £1.37 million (2017: £1.11 million) mainly resulting from an increase in cash resources 
of £557k to £702k and recognition of prepaid financing costs of 291k. This prepayment includes miscellaneous direct 
financing fees incurred with regard to the Company’s debt and equity funding efforts.  

Total liabilities have increased to £51.07 million (2017: £27.40 million) mainly resulting from further drawings on the 
loans provided by London Oil & Gas Limited (‘LOG’) (see table below).  Total liabilities comprise LOG Loan facilities of 
£34.03 million (2017: £13.00 million) offset by £4.21 million (2017: £0.61 million) loan finance costs, Skipper deferred 
trade creditors of £2.22 million (2017: £4.46 million), SNS Project creditors £3.41 million (2017: £0.18 million), other 
creditors £0.32 million (2017: £0.19 million), deferred consideration in relation to acquisitions of £6.19 million (2017: 
£6.01  million),  the  Vulcan  East  suspended  well  abandonment  provision  of  £3.60  million  (2017:  £3.60  million),  the 
Thames Pipeline decommissioning provision of £2.04 million (2017: £nil) and accruals of £3.47 million (2017:  £0.57 
million). 

Cash Flow 
Net  cash  outflows  of  £3.04  million  (2017:  £1.05  million)  from  operations,  £14.82  million  (2017:  £3.40  million)  from 
investing activities and £0.43 million (2017: £2.03 million) from loan repayments and financing activities were funded 
via loan drawings and the issue of equity instruments in the Company totalling £18.85 million (2017: £6.38 million). 

The Directors will not be recommending payment of a dividend. 

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STRATEGIC REPORT FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

Finance Review (continued) 

London Oil and Gas Limited and GE Oil and Gas UK Limited Loans 

•  4 December 2015 - the Company secured agreement for a loan of £2.75 million from LOG in parallel with a 

£2.00 million loan from GE Oil & Gas UK Limited (‘GE’); 

•  11 December 2015 - a further loan of £0.80 million was provided by LOG; 
•  5 February 2016, a further £10.00 million loan was provided by LOG, convertible at 8p; 
•  21 February 2018, a further £10.00 million loan was provided by LOG, convertible at 19p; and finally 
•  13 September 2018, a further £15.00 million loan was provided by LOG. 

On 21 December 2017, both the outstanding GE loan and GE Skipper creditor (provision of wellhead equipment and 
services)  were  renegotiated  under  the  terms  of  a  Conversion  Deed  (‘CD’)  and  a  Deferred  Payment  Deed  (‘DPD’) 
allowing circa 50% of the total outstanding liability to be converted to equity, with the remaining liability to be settled in 
cash. Similar CD and/or DPD arrangements were negotiated for all other remaining Skipper creditors which resulted in 
a total of £1.98 million being subject to conversion with a further £2.44 million and USD 2.75 million to be settled in 
cash, with an original settlement date of 31 August 2018. 

The  LOG  loans  are  secured  over  the  Group’s  assets  and  are  due  to  be  redeemed  thirty-six  months  following  each 
individual drawdown.  All outstanding LOG debt is redeemable after 31 December 2018.  Interest of LIBOR + 9% per 
annum accrues on a cumulative monthly basis on each drawdown, other than the £15.00 million loan which accrues 
interest at the higher rate of LIBOR + 11% from 1 December 2018. 

LOG 

LOG 

LOG 

LOG 

LOG 

Facility Amount 
(£ million) 
2.75 

0.80 

10.00 

10.00 

15.00 

£38.55 

Table 1: Summary Loans with LOG 

Available until 

Interest rate 

Warrants / Convertible details 

Repayment by 

31 Dec-19 

LIBOR + 9%. 

5,777,310 warrants @ 11.9p 

36 months from drawing 

31 Dec-19 

LIBOR + 9%. 

7,500,000 warrants @ 8p 

36 months from drawing 

31 Dec-19 

LIBOR + 9%. 

8p conversion price 

36 months from drawing 

21 Feb-22 

LIBOR + 9% 

19p conversion price 

36 months from drawing 

13 Mar-19 

LIBOR + 9% / 
11% wef 1 Dec-
18 

20,000,000 warrants @ 32.18p 

36 months from drawing 

All Conditions Precedent to the LOG loans have been met and have been drawn with agreement from LOG. 

The  aim  of  the  £10.00  million  LOG  loan  from  February  2016  was  to  support  G&A  expenditures,  together  with 
acquisitions in the endemic oil and gas E&P sector low-price environment, but also organic growth.  During 2016, the 
additional 50% acquisition of the Blythe licence was funded from this facility, together with the acquisition  of Oyster 
Petroleum Limited (renamed IOG UK Limited), incorporating the Vulcan Satellite assets.  The loan, including accrued 
interest, may be converted into new ordinary Company shares at a price  of 8p  per share  at LOG’s election prior to 
repayment.  This loan has a coupon of LIBOR + 9%, which is deferred until maturity. 

The main purpose of the £10.00 million loan from February 2018 was to support G&A expenditures, repay outstanding 
Skipper creditors and to fund the Group through to Final Investment Decision (‘FID’) on its SNS development projects. 
The loan, including accrued interest, may be converted into new ordinary Company shares at a price of 19p per share 
at LOG’s election prior to repayment. This loan has a coupon of LIBOR + 9%, which is deferred until maturity. 

The main purpose of the £15.00 million loan from September 2018 was to fund the drilling of the Harvey appraisal well, 
repay  outstanding  Skipper  creditors  which  had  been  further  deferred,  and  cover  ongoing  overheads.  The  loan  was 
issued together with 20,000,000 warrants which may be converted into new ordinary Company shares at LOG’s election 
at a warrant subscription price of 32.18p, prior to the maturity date of 13 September 2023. 

The Group had £34.03 million borrowings outstanding on its LOG facilities at 31 December 2018 (2017 - £13.00 million) 
including accrued interest.  It had in place further undrawn debt from the LOG facilities of a total £7.85 million, excluding 
accrued  interest,  at  that  date.  A  further  £3.925  million  was  drawn  in  January  2019  and  £3.925  million  outstanding 
remains. The Company notes that at time of writing London Oil and Gas Ltd has been placed into administration as has 
London Capital and Finance, from whom LOG secured loan finance to provided IOG’s funding above. The Company 
has engaged with LOG and LCAF administrators who have stated publicly that they will support IOG and the LOG/LCAF 
administration process will have no impact on the Company’s business. 

The Company has recently announced the rescheduling by 12 months, initially to January 2020, of £7.1 million of debt 
service  due  to  LOG  over  the  course  of  2019,  the  conversion  of  £1.64  million  of  interest  due  from  LOG’s  existing 
convertible debt into new Ordinary Shares and a 12-month maturity extension pursuant to those 13,277,310 warrants 
that were issued to LOG by the Company in December 2015. 

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CORPORATE GOVERNANCE 

Board of Directors 

The  Company  is  led  by  a  strong,  disciplined  Board  with  extensive  experience  in  all  aspects  of  the  Company’s  business 
supported by a capable and experienced management team.  Their experience covers both ends of the investment spectrum 
from private equity backed start-up companies to FTSE-100 listed companies.   The Board is supported by a capable  and 
experienced management team. 

Fiona MacAulay – Non-Executive Chair (appointed 10 July 2018) 
A Chartered Geologist with over 30 years’ experience in the Upstream oil and gas sector including key roles in a number of 
leading  oil  and  gas  firms  across  the  large,  mid  and  small  cap  space  including  Mobil,  British  Gas,  Amerada  Hess  and 
Rockhopper.  Non-Executive  Director  at  Coro  Energy  plc.  Currently  serving  as  the  European  President  of  the  American 
Association of Petroleum Geologists. 

Andrew Hockey – Chief Executive Officer (appointed 20 March 2017) 
Having worked in the industry for 36 years, Andrew Hockey has significant sector experience.  He has a technical background 
with a degree in geology from Oxford University, and a master’s degree in petroleum geology from Imperial College London.  
Until the end of 2015 Andrew was General Manager of Business Development at UKCS oil and gas exploration and production 
company Fairfield Energy Limited which he helped to found in 2005.  Andrew led the team to acquire Clipper South as an 
undeveloped discovery from Shell and Esso and then subsequently managed its development  via farm down and funding 
through to first gas in 2012.  Andrew is now a non-executive director of Fairfield Energy and a founder of its parent company, 
Decom Energy Limited.  Andrew has also served on the board of AIM-listed Sound Energy plc, an upstream company with 
onshore interests in Italy and Morocco, where he was a Non-Executive Director from 2011-2015 and Chairman from 2012-
2014. 

Martin Ruscoe – Non-Executive Director (appointed 9 February 2016) 
Martin has over 40 years' experience in the Financial Services Industry.  Martin initially worked for a top 20 life assurance 
company for 25 years, the last 9 years as Chief Investment Officer being involved in all forms of investment, taxation and new 
product  development  within  the  company.    Following  a  takeover,  he  left  to  move  to  the  broking  side  of  the  investment 
community working for Swiss Bank, Citicorp and Smith New Court.  Martin then spent 12 years with Charterhouse Securities 
who were voted number one in the small cap market and then spent 6 years with Seymour Pierce, at the time, the largest AIM 
Broker in London.  He has vast experience and has overseen more than 200 institutional fund raisings including new listings, 
placings and rights issues.  His current Non-Executive Director positions include: LOG, London Power Corporation plc and 
the Company.  Following the investments by LOG into the Group, Martin is an appointed LOG Board representative pursuant 
to the execution of the LOG loan agreements. 

The Rt. Hon. Charles Hendry – Non-Executive Director (appointed 20 March 2017) 
Charles Hendry was Minister of State for Energy from May 2010 until September 2012.  Since leaving ministerial office he 
has undertaken a wide range of roles, including as President of the British Institute of Energy Economics, chair of the Forewind 
Consortium from 2013-2015, and in 2016 he was appointed by the UK Government to lead a review into the strategic case 
for tidal lagoons and their role in the UK energy  mix.   His current Non-Executive Director positions include: LOG, London 
Power Corporation plc and the Company.  Following the investments by LOG into the Group, Charles Hendry is an appointed 
LOG Board representative pursuant to the execution of the LOG loan agreements. 

Mark Hughes – Chief Operating Officer (appointed 18 April 2018) 
Mark started his career at Shell  International Exploration and Production in a number of roles including Head of Topsides 
Design for the Sole Pit Compression Project.  Mark was  Group Development Engineering Manager for Lasmo  UK plc and 
Group E&P Exploration and Operations Manager for Gaz de France, Paris. He was also Managing Director of GDF Britain 
and GDF Country Manager. He was founder and CEO of Hibernia Energy, an independent Southern North Sea focussed gas 
developer. Mark was made Head of Development for RWE Dea UK where he was responsible for the RWE operated North 
Sea Breagh and Clipper South Developments from inception to first gas, representing some £880 million gross investment. 
Upon the sale of RWE Dea UK to INEOS, Mark was made Commercial Director UK at INEOS Breagh. Mark is a Chartered 
Member of the Institute of Mechanical Engineers and has a technical background with a first-class Honours degree in Civil 
Engineering from the University of Southampton.  

Esa Ikaheimonen - Non-Executive Director (appointed 14 March 2019) 
Esa has over 25 years of oil and gas industry experience and strong board level expertise. He is currently the CFO of London 
listed E&P company Genel Energy plc and a Non-Executive Chairman of Lamor Corporation, a leading environmental service 
company.  Esa’s  previous  non-executive  experience  includes  roles  at  Ahlstrom  Corporation,  global  supplier  of  fibre-based 
products,  and  at  Vantage  Drilling  International,  a  major  offshore  drilling  contractor.  Previously,  in  addition  to  these  non-
executive roles, Esa was Executive Vice President and CFO of Transocean, the world’s largest offshore drilling company. 
Prior to Transocean, Esa enjoyed a 20-year career at Royal Dutch Shell, culminating in the role of Vice President Finance for 
Shell Africa E&P. He holds a master’s degree in Law from the University of Turku, specialising in tax law and tax planning. As 
Senior Independent Non-Executive Director, Esa will chair the Company’s Audit Committee and serve on the Remuneration 
and Nominations committee. 

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CORPORATE GOVERNANCE (CONT’D) 

Remuneration Policy 
Remuneration comprises a mix of salary payments and equity incentives.  During the initial investment phase, the mix 
is weighted towards incentives rather than cash payments. 

Options and Long-Term Incentive Plan Policy 
The Board believes that it is important that employees of the Group (including executive directors) are appropriately 
and properly motivated and rewarded, with the success of the Group dependent to a significant degree on the future 
performance of the executive management team.  Accordingly, the Board has adopted the Long-Term Incentive Plan 
(‘LTIP’)  allowing  the  Company  to  grant  to  directors  and  employees  options  over  ordinary  shares.    The  LTIP  is 
administered by the Remuneration Committee and the maximum aggregate awards under the LTIP, together with any 
other employee share schemes, cannot exceed ten per cent of the issued share capital of the Company at the time of 
grant. 

Salary Sacrifice Arrangements 
The Directors may establish further share incentive arrangements for the benefit of the Group’s employees in the future.  
Any options to be granted under any such share incentive arrangements will be at the discretion of the Remuneration 
Committee.  Options may also be granted to both non-executive directors and consultants. 

During the year, resulting from cash constraints on the Company and a desire to ensure that these limited resources 
were focussed on operations, the service agreements of personnel were varied such that cash payments were reduced, 
and the difference settled by options granted with a strike price of 1p.  The number of options granted is determined by 
the Company’s volume weighted average share price for each six-month period of salary or fee sacrifice.  Further details 
can be found in Notes 4 and 16 to the financial statements. 

Corporate Governance Statement 
The  Directors  recognise  the  importance  of  sound  corporate  governance.  The  Company  has  adopted  the  Quoted 
Companies Alliance Corporate Governance Code (“Code”) to the extent considered appropriate for a company of its 
size.  

The ten ‘Principles of the Code’ are set out below with details as to how the Company complies with each principle and 
explanations of why if it does not. 

DELIVER GROWTH 

1.  Establish a strategy and business model which promote long-term value for shareholders 

The Company’s strategy is to target stranded assets and dormant discoveries, especially those near to existing and 
ideally,  owned  infrastructure  (the  ‘Hub  Strategy’).    These  are  assets  that  are  no  longer  targets  for  the  major  oil 
companies but are potentially profitable developments which can be beneficially developed by a smaller independent 
company, focused on the North Sea. 

Given the steady rise of imported vs domestic gas in the UK over the last decade and the country’s dependency on gas 
for power, industry and heating, the maximising of gas resources in the North Sea makes strategic sense and will help 
deliver energy security in the UK. 

The aim is to build upon the existing development gas assets in order to achieve a diversified and balanced portfolio of 
near  and  long-term  developments,  ideally  with  appraisal  upside  that  complement  the  existing  operations.    This  will 
include the acquisition of producing fields or near-term production if the risk is positively assessed and the acquisition 
price results in value accretion.  The Directors believe that there is a significant opportunity for the Company to exploit 
this  strategy,  given  that  there  are  over  400  undeveloped  and  underdeveloped  assets  in  the  UK  Continental  Shelf 
(‘UKCS’). 

The  Hub  Strategy  targets  strategic  control  over  a  number  of  dormant  discoveries  and  appraisal  assets  that  can  be 
developed through common existing infrastructure, thereby generating significant economies of scale.  The Company 
also acquires low cost development ready assets through the Licensing Round system and has been active in all UKCS 
Licensing Rounds since the Company was formed. 

The Company seeks to operate all its assets.  Operatorship is strategically important for several reasons: firstly, third 
party consents to tie in additional discoveries are easier to facilitate for operators of owned infrastructure.  Secondly, as 
the  major  oil  companies  continue  to  divest  late-life  producing  assets  they  often  prefer  to  assign  operatorship  and 
redeploy their own resources and so additional opportunities arise.  Finally, in the UK licensing rounds, certain licences 
will only be made available to pre-qualified operators. 

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CORPORATE GOVERNANCE (CONT’D) 

Corporate Governance Statement (continued) 
Overall, the Board is confident that the Company has the management, experience and technical expertise to create 
and seize new opportunities for future growth. 

This Business Strategy is communicated and updated annually in the Annual Report and Accounts. 

2.  Seek to understand and meet shareholder needs and expectations 

The  Company  remains  committed  to  listening  and  to  communicating  openly  with  its  shareholders  to  ensure  that  its 
strategy, business model and performance are clearly understood.  Understanding what analysts and investors think 
about the Company and in turn, helping these audiences understand our business, is a key part of driving our business 
forward and we actively seek dialogue with the market.  

We do so via investor roadshows, attending investor conferences, hosting capital markets days, our website and our 
regular reporting. 

Private shareholders 

The AGM is the main forum for dialogue with shareholders and the Board.  The Notice of Meeting is sent to shareholders 
at least 21 days before the meeting.  The Directors routinely attend the AGM and are available to answer questions 
raised by shareholders.  For each vote, the number of proxy votes received for, against and withheld is announced at 
the  meeting.    The  outcome  of  the  resolutions  proposed  at  the  AGM  are  subsequently  published  on  the  Company’s 
corporate website.   

To contact the Company, please email:  info@independentoilandgas.com 

Institutional shareholders 

The Directors actively seek to build a relationship with institutional shareholders.  Shareholder relations are managed 
primarily by the Chief Financial Officer, supported by the Chief Executive Officer, as appropriate.  The Chief Executive 
Officer and Chief Financial Officer make presentations to analysts throughout each year and immediately following the 
release of the full-year and half-year results. 

The Board is kept informed of the views and concerns of major shareholders by briefings from the Executive Team.  
Any significant investment reports from analysts are also circulated to the Board.  The Non-Executive Chair and Senior 
Independent Director are available to meet with major shareholders if required to discuss issues of importance to them. 

A form to contact the Company is available on the Company website.  To request any information or meetings please 
contact: info@independentoilandgas.com 

General Market Updates 

The Company makes regular updates to the market on its commercial progress at all stages of executing on its strategy. 

3.  Consider wider stakeholder and social responsibilities and their implications for long- term success. 

Engaging with our stakeholders strengthens our relationships and helps us make better business decisions to deliver 
on our commitments.  The Board is regularly updated on wider stakeholder engagement feedback to stay abreast of 
stakeholder insights into the issues that matter most to them and our business and to enable the Board to understand 
and consider these issues in decision-making. 

Employees 

 We have: - 

Introduced a Maternity Policy 

Our maternity pay  policy  is for an employee taking maternity  leave to receive six weeks at 100% pay  and  a further 
seven weeks at 50% pay followed by 26 weeks during which they will receive Statutory Maternity Pay.  A further 13 
weeks unpaid leave may be taken.  

Developed a Staff Handbook  

Following a significant increase in staff numbers over the past year, we have written a staff handbook to improve the 
communication of the Company’s principles and policies with our staff and contractors.  It encapsulates the Company’s 
Code of Conduct by which all staff and contractors are expected to comply. 

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CORPORATE GOVERNANCE (CONT’D) 

Corporate Governance Statement (continued) 

Suppliers 

Over the past year we have: - 

Developed a Supply Chain Action Plan as required by the OGA. 

As part of the process to submit Field Development Plans to the Oil & Gas Authority, the Company has developed a 
Supply Chain Action Plan.  

Health, Safety and Environment (‘HSE’) 

Over the past year, the corporate HSE policies were reviewed, renewed and re-issued.  These policies support further 
Licence Round applications during the period and the progressive selection and procurement of contracted services for 
the  development  of  the  Blythe  and  Vulcan  Satellites  gas  hub  developments.    The  revised  policies  provide  clear 
corporate expectation and direction for the effective HSE planning and performance of activities. 

The Health and Safety Policy and the Environmental Management Policy are published on the Company Website and 
both are displayed in the Company’s offices. 

The  Company  has  continued  to  develop  its  HSE  organisation,  arrangements  and  capabilities.    These  corporate 
developments formed a significant part of the demonstration of necessary operator competencies that were submitted 
to the OGA in support of our field licences.  The arrangements also support applications in the OGA Licensing Rounds. 

Selection of suitable contracted services for the engineering design and operation of the Blythe and Vulcan Satellites 
gas hub development incorporated suitable HSE criteria and has been followed by the development and implementation 
of HSE bridging documentation with our partnered and contracted enterprises, some of whom are intended to undertake 
'duty holder' responsibilities in the operations and maintenance of our eventual offshore facilities, pipelines and wells. 

Effective briefing and consultation with the regulatory authorities has been an essential activity during the period, in 
order to assure compliance and secure necessary permits and consents for the range of project activities.  This has 
involved  close  contact  with  the  OGA,  HSE  Pipelines  Inspectorate  and  the  BEIS  Offshore  Petroleum  Regulator  for 
Environment and Decommissioning (‘OPRED’). 

To aid preparation of the statutory Environmental Impact Assessments (‘EIA’) that are required to support our Blythe 
and  Vulcan  Satellites  gas  hub  developments,  an  Early  Consultation  Document  (‘ECD’)  was  circulated  to  over  40 
identified  potential  stakeholder  parties,  including  oil  &  gas  operators,  windfarm  operators,  regulatory  bodies,  non-
government organisations (‘NGO’) and others with potential interest in the development.  Responses to the ECD are 
being considered as our project develops and in the preparation of the formal EIAs that follow.  The EIAs will themselves 
be subject to public review and statutory consultation. 

MAINTAIN A DYNAMIC MANAGEMENT FRAMEWORK 

4.  Embed  effective  risk  management,  considering  both  opportunities  and  threats,  throughout  the 

organisation 

Audit, risk and internal control 

The Board of Directors are aware of their responsibility for establishing and communicating a system to manage risk 
and implement internal controls. 

Operational  risks  are  identified  and  assessed  by  management  and  any  significant  risks  are  reported  to  the  Board.  
Financial and commercial risks are reviewed by the Board. 

The  Company’s  internal  control  systems  are  designed  to  provide  the  directors  with  reasonable  assurance  that  any 
problems are identified on a timely basis and dealt with appropriately.  The Board considers the internal controls to be 
effective, but no system of internal control can provide absolute assurance against material misstatement or loss. 

The Company will effectively review the risks faced by the business, considering both opportunities and threats and 
identify these in its annual report. 

Further disclosures on risk and internal controls are set out below. 

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CORPORATE GOVERNANCE (CONT’D) 

Corporate Governance Statement (continued) 

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 followed by the successful discovery and exploitation of oil and 
gas reserves as indicated through prospective and contingent resources and proved reserves inventories.  Financial 
performance is tracked through the raising of finance to fund proposed programmes and the control of costs against 
budgets. 

Principal 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 and resources estimates for its assets, 
changes in forward commodity prices and the successful development of its oil and gas reserves. 

Key risks and associated mitigation 

Investment Returns 

Management  seeks  to  raise  funds  and  then  to  generate  shareholder  returns  though  investment  in  a  portfolio  of 
exploration and development acreage leading to the drilling of wells and the discovery of commercial reserves, followed 
by their exploitation.  Delivery of this business model carries several key risks. 

Risk 

Mitigation 

Market support may be eroded obstructing 
fundraising and lowering the share price 

regularly  communicates 

•  Management 
shareholders 
Focus  is  placed  on  building  an  asset  portfolio  capable  of 
delivering  regular  news 
flow  and  offering  continuing 
prospectivity 

its  strategy 

to 

• 

General  market  conditions  may  fluctuate 
hindering  delivery  of 
the  Company’s 
business plan 

•  Management  aims  to  retain  adequate  working  capital  and 
secure  finance  facilities  sufficient  to  ride  out  downturns 
should they arise 

Each  asset  carries  its  own  risk  profile  and 
no outcome can be certain 

•  Management  aims  to  avoid  over-exposure  to  individual 
assets and to identify the associated risks objectively 

Company may not be able to raise funds to 
exploit  its  assets  or  continue  as  a  going 
concern 

Company has given security over its assets 
to its lender, LOG 

•  Management  maintains  regular  dialogue  with  a  variety  of 

potential funding partners. 

•  Management is in discussion with the Administrators of LOG 
who have acknowledged the importance of developing the 
Company’s  assets  in  order  to  return  value  to  LCAF  bond 
holders.  The  LOG  shareholders  have  made  public 
announcements of their intention to continue to support the 
Group  and  that  the  Group’s  ongoing  operations  are  not 
adversely affected by the LOG Administration.  

Operations 

Operations may not go to plan, leading to damage, pollution, cost overruns and poor outcomes. 

Risk 

Mitigation 

Individual wells may not deliver recoverable 
oil and gas reserves 

• 

Operations may take far longer or cost more 
than expected 

Resource  estimates  may  be  misleading 
curtailing actual reserves recovered 

Thorough pre-drill evaluations are conducted to identify the 
risk/reward balance 
Exposure selectively mitigated through farm-out 

• 
•  Management applies rigorous budget control 
• 

Adequate  working  capital  is  retained  to  cover  reasonable 
eventualities 
• 
The Group deploys qualified personnel 
•  Regular third-party reports are commissioned 
• 

A prudent range of possible outcomes are considered within 
the planning process 

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CORPORATE GOVERNANCE (CONT’D) 

Corporate Governance Statement (continued) 

Licensing & Regulation 

The Group may be unable to meet its licence and regulatory obligations. 

Risk 

Mitigation 

UKCS Licences may be revoked 

•  Continue  thorough  communications  with  the  OGA  to 
determine licence status and meet requirements 

Personnel 

The Company relies upon a pool of experienced and motivated personnel to identify and execute successful investment 
strategies 

Risks 

Mitigation 

Key  personnel  may  be  lost  to  other 
companies 

Difficulty  in  attracting  the  necessary 
into 
talent  as 
development of its projects. 

the  Group  moves 

Commercial Environment 

•  The  Remuneration  Committee  regularly  evaluates 
they  remain 

to  ensure 

incentivisation  schemes 
competitive 

•  The  Group  continues  to  review  and  adopt  attractive 

packages for both staff and contractors 

World and regional markets continue to be volatile with fluctuations and infrastructure access issues that might hinder 
the Company’s business success 

Risk 

Mitigation 

Volatile  commodity  prices  mean  that  the 
Company  cannot  be  certain  of  the  future 
sales value of its products 

• 

Price mitigation strategies may be employed at the point of 
major capital commitment 

•  Gas  may  be  sold  under  long-term  contracts  reducing 

exposure to short term fluctuations 

•  Oil and gas price hedging contracts may be utilised where 

Brexit 

The Group may not be able to get access, at 
reasonable  cost, 
infrastructure  and 
to 
product markets when required 

to  support 

field  development 
Credit 
programmes  may  not  be  available  at 
reasonable cost 

• 
• 

• 

• 

viable. 
Budget planning considers a range of commodity pricing 
The Group does not see Brexit having any significant impact 
on  its  business  model.  The  Company’s  production  will  be 
indigenous,  and  the  UK  gas  market  is  not  forecast  to  be 
significantly directly impacted by an exit from the EU, being 
a substantial core element of UK primary energy demand. 
However,  access  to  overseas  personnel  and  equipment 
may be affected to a greater or lesser extent, depending on 
the precise Brexit outcome 
A range of different off-take options are pursued wherever 
possible  

The Company seeks to build and maintain strong banking 
relationships and initiates funding discussions at as early a 
stage a practicable 

Corporate Hedging Strategy and Implementation 

The  primary  objective  of  the  Company’s  hedging  policy  is  to  protect  projected  future  cash  flows,  generated  from 
operations, against unforeseen changes in short and medium-term market conditions. 

No hedging instruments were utilised to date in view of the limited exposures carried out so far.  As the Company’s 
capital investment programmes increase, hedging will be carried out in a simple and cost-effective manner, retaining 
exposure to upside but avoiding any speculative exposure to commodity prices or exchange rates.  The application of 
the policy is within a range to require exercise of management judgement in the light of market conditions and business 
variables. 

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CORPORATE GOVERNANCE (CONT’D) 

Corporate Governance Statement (continued) 

Insurance 

The Group insures the risks it considers appropriate for the Group’s needs and circumstances.  However, the Group 
may elect not to have insurance for certain risks, due to the high premium costs associated with insuring those risks or 
for various other reasons, including an assessment that the risks are remote. 

Financial Controls 

The  Company  has  an  established  framework  of  internal  financial  controls,  the  effectiveness  of  which  is  regularly 
reviewed  by  the  Executive  Management,  the  Audit  Committee  and  the  Board  in  light  of  an  ongoing  assessment  of 
significant risks facing the Company. 

In 2018, the Board approved and adopted an updated Financial Operating Policy for the Group.  

– 
–  The  Financial  Operating  Policy  is  the  framework  to  regulate  the  financial  processes  of  the  Group;  from  the 
concept of Group strategy through to the payment of invoices.  The key objectives of the Financial Operating 
Policy are to: - 
- provide a clear framework for internal financial control; 

- define the levels of financial authority for Staff, Contractors, Directors and the Board;  

and 

- set out the processes for budgeting and financial reporting. 

–  The Board is responsible for reviewing and approving overall Company strategy, approving revenue and capital 
budgets and plans, and for determining the financial structure of the Company including treasury and tax. 
–  The Audit Committee assists the Board in discharging its duties regarding the financial statements, accounting 
policies and the maintenance of proper internal business and operational and financial controls, including the 
review of results of work performed by the Group controls function. 

–  There are comprehensive procedures for budgeting and planning, for monitoring and reporting to the Board 
business  performance  against  those  budgets  and  plans  and  for  forecasting  expected  performance  over  the 
remainder of the financial period.  These cover profits, cash flows, capital expenditure and balance sheets. 
–  The  Company  has  a  consistent  system  of  prior  appraisal  for  investments,  overseen  by  the  Chief  Financial 
Officer and Chief Executive Officer, with defined financial controls and procedures with which each business 
area is required to comply in order to be granted investment funds for development. 

Non-financial Controls 

The Board recognises that maintaining sound controls and discipline is critical to managing the downside risks to our 
plan. 

The  Board  has  ultimate  responsibility  for  the  Group’s  system  of  internal  control  and  for  reviewing  its  effectiveness.  
However, any such system of internal control can provide only reasonable, but not absolute, assurance against material 
misstatement or loss.  The Board considers that the internal controls in place are appropriate for the size, complexity 
and risk profile of the Group.  The principal elements of the Group’s internal control system include: 

–  Close management of the day-to-day activities of the Group by the Executive Directors. 
–  An  organisational  structure  with  defined  levels  of  responsibility,  which  promotes  entrepreneurial  decision-

making and rapid implementation while minimising risks. 

–  A comprehensive annual budgeting process. 
–  Detailed monthly reporting of performance against budget. 
–  Central control over key areas such as capital expenditure authorisation and banking facilities. 

The Group continues to review its system of internal control to ensure compliance with best practice, while also having 
regard to its size and the resources available.  As part of the Group’s review a number of non-financial controls covering 
areas such as regulatory compliance, business integrity, health and safety, risk management, business continuity and 
corporate social responsibility have been assessed.  The key elements of those non-financial controls are set out below. 

Standards and Policies 

The Board is committed to maintaining appropriate standards for all the Company’s business activities and ensuring 
that these standards are set out in written policies and kept under review. 

Approval Process 

All material contracts are required to be reviewed and signed by a senior Director of the Company. Major contracts 
require the signature of 2 directors.  

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CORPORATE GOVERNANCE (CONT’D) 

Corporate Governance Statement (continued) 

Re-assessment 

The Company has a Business Risk Register with business continuity plans to address key risks that have an immediate 
impact.  Risks facing the business are re-assessed and potential mitigating actions are considered and implemented to 
help protect against those risks.  

5.  Maintaining the Board as a well-functioning, balanced team led by the Chair 

The  Board  comprises  the  Non-Executive  Chair,  two  Executive  Directors  and  three  Non-Executive  Directors.    On  1 
January 2019 Fiona MacAulay became Chair succeeding Mark Routh, who stepped down on this date. On 1 March 
2018,  Andrew  Hockey  was  appointed  CEO.  In  April  2018  Mark  Hughes,  COO  was  appointed  as  a  director  of  the 
Company and its three subsidiaries.   

On 9 January 2019 Fiona MacAulay became interim Chair of the Audit Committee, succeeding Martin Ruscoe, who 
had  held the role since February  2018.  She continues as the  Chair of the HSE  and Technical subcommittee of the 
Board. 

The Board considers, after careful review, that its previous Non-Executive Directors brought an independent judgement 
to bear.  Fiona MacAulay had previously been appointed as the Company’s Senior Non-executive director on 10 July 
2018 and qualifies as independent. The Company is currently recruiting one further Independent Directors. Both Charles 
Hendry  and  Martin  Ruscoe  are  considered  non-independent  since  they  are  appointees  from  the  Company’s  major 
investor London Oil and Gas Limited.  

On 9 January 2019, Robin Storey was appointed as General Counsel and Company Secretary.  

Non-executive directors are expected to devote such time as necessary for proper performance of their duties.  This 
includes regular attendance at Board, AGM, shareholder and committee meetings. 

The Board is satisfied that it has a suitable balance between independence on the one hand and knowledge of the 
Company on the other, to enable it to discharge its duties and responsibilities effectively. 

All  Directors  are  encouraged  to  use  their  independent  judgement  and  to  challenge  all  matters,  whether  strategic  or 
operational.  During the year at least six scheduled Board meetings take place and a number of additional meetings as 
may be required.  These are held at IOG’s head office in London. 

Key Board activities include: 

–  Considering our financial and non-financial policies. 
–  Discussing strategic priorities. 
–  Discussing the Group’s capital structure and financial strategy, including capital investments and shareholder 

returns. 

–  Discussing internal governance processes. 

Directors’ Conflict of Interest 

The Company has effective procedures in place to monitor and deal with conflicts of interest.  The Board is aware of 
the other commitments and interests of its Directors and changes to these commitments and interests are reported to 
and, where appropriate, agreed with the rest of the Board. 

Directors’ Attendance: 

Director 

Andrew Hay 

Andrew Hockey 

Charles Hendry 

Fiona MacAulay 

Mark Hughes 

Mark Routh 

Martin Ruscoe 

Audit Committee 

Remuneration and 
Nominations Committee 

Board 

2 (of 2) 

17 

17 

9 (of 9) 

11 (of 11) 

17 Chair 

n/a 

n/a 

6 (of 6) 

2 (of 2) 

n/a 

n/a 

17 

6 (of 6) Acting Chair 

n/a 

n/a 

1 (of 1) 

1 (of 1) 

n/a 

1 (of 1) Chair 

1 (of 1) 

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CORPORATE GOVERNANCE (CONT’D) 

Corporate Governance Statement (continued) 

6.  Ensure  that  between  them  the  Directors  have  the  necessary  up-to-date  experience,  skills  and 

capabilities 

The Board is satisfied that, between the Directors, it has an effective and appropriate balance of skills and experience, 
including in the areas of technical Oil and Gas subsurface, project management, drilling and facilities experience and 
in  the  areas  of  banking,  financial  and  commercial  skills  and  experience.    All  Directors  receive  regular  and  timely 
information on the Group’s operational and financial performance.  Relevant information is circulated to the Directors 
by the Company Secretary in advance of meetings.  The business reports monthly on its headline performance against 
its agreed budget and the Board reviews the monthly update on performance and any significant variances are reviewed 
at each meeting. 

All Directors retire by rotation at regular intervals in accordance with the Company’s Articles of Association. 

Appointment, removal and re-election of Directors 

The Board makes decisions regarding the appointment and removal of Directors and there is a formal, rigorous and 
transparent procedure for appointments.  The Company’s Articles of Association require that one-third of the Directors 
must stand for re-election by shareholders annually in rotation; that all Directors must stand for re-election at least once 
every three years; and that any new Directors appointed during the year must stand for election at the AGM immediately 
following their appointment. 

The  Board  of  directors  has  a  mix  of  experience,  skills  and  personal  qualities  that  help  deliver  the  strategy  of  the 
Company.  The Company will ensure that between them the directors have the necessary up-to-date experience, skills 
and capabilities to deliver the Company strategy and targets.  Each director is listed on the website and in the annual 
report along with a clear description of their role and experience.  

The Board also evaluates the balance of skills, knowledge and experience on the Board and considers all new Board 
appointments and re-appointments against this evaluation. 

Independent Advice 

All Directors are able to  take independent professional advice in the furtherance of their duties, if necessary, at  the 
Company’s expense.  In addition, the Directors have direct access to the advice and services of the General Counsel 
and Company Secretary, the Chief Executive Officer and the Chief Financial Officer. 

Experience, Skills and Capabilities 

Biographical details of the directors and their relevant experience can be found on the Company website at the following 
link https://www.independentoilandgas.com/board.html. 

7.  Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement. 

The Chair will continue to informally assess the individual contributions of each of the members of the team to ensure 
that Company strategy is effectively implemented, and that: - 

- 

- 

- 

Their contribution is relevant and effective. 

That they are committed. 

Where relevant, they have maintained their independence. 

Over the next 12 months we intend to more formally review the performance of what is a new board team as a unit, 
using  external  consultants  where  appropriate,  to  ensure  that  the  members  of  the  Board  collectively  function  in  an 
efficient and productive manner. 

8.  Promote a culture that is based on ethical values and behaviours 

The Board aims to lead by example and do what is in the best interests of the Company. 

The Company operates a corporate culture that is based on ethical values and behaviours.  It maintains policies and 
processes that are appropriate to do this for a Company of its size. The Executive Directors communicate regularly with 
staff through meetings and messages. 

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CORPORATE GOVERNANCE (CONT’D) 

Corporate Governance Statement (continued) 

The  Board  has  implemented  a  robust  governance  framework  including  a  Code  of  Conduct,  which  includes  the 
Company’s Compliance with Anti-bribery and Corruption Policy that is incorporated into our Staff Hand Book and is 
communicated  to  all  employees.    The  Code  provides  clear  guidance  on  how  the  members  of  staff  are  expected  to 
behave  towards  other  colleagues,  suppliers,  customers,  shareholders  and  on  our  wider  responsibility  to  the 
communities within which we operate.  All employees are expected to comply with the Code and any violations of it 
may be reported to local management or the Group HR. 

Anti-bribery and Corruption Policy  

Company policy is to conduct all its business in an honest and ethical manner.  The Company and Group apply a zero-
tolerance approach to bribery and corruption and is committed to acting professionally, fairly and with integrity in all its 
business dealings and relationships wherever it operates by implementing and enforcing effective systems to counter 
bribery. 

9.  Maintain  governance  structures  and  processes  that  are  fit  for  purpose  and  support  good  decision-

making by the Board 

Board programme 

The Board meets at least six times each year in accordance with its scheduled meeting calendar. 

The Board sets direction for the Company through a formal schedule of matters reserved for its decision.  Prior to the 
start of each financial year, a schedule of dates for that year’s Board meetings is compiled to align as far as reasonably 
practicable with the Company’s financial calendar while also ensuring an appropriate spread of meetings across the 
financial year.  This may be supplemented by additional meetings as and when required. 

During 2018, the Board met for its  twelve scheduled meetings and five further ad-hoc meetings.  The Board and its 
subcommittees receive appropriate and timely information prior to each meeting; a formal agenda is produced for each 
meeting and Board and Committee papers are distributed several days before meetings take place.  Any Director may 
challenge Company proposals and decisions are taken democratically after discussion.  Any Director who feels that 
any concern remains unresolved after discussion may ask for that concern to be noted in the minutes of the meeting, 
which are then circulated to all Directors by the Chairman.  Any specific actions arising from such meetings are agreed 
by the Board or relevant Committee and then followed up by the Company’s executive management. 

Roles of the Board, Chair and Chief Executive Officer. 

The Board is responsible for the long-term success of the Company.  There is a formal schedule of matters reserved to 
the  Board.    It  is  responsible  for  overall  Group  strategy;  approval  of  major  investments  (whether  Capex  or  Opex); 
approval  of  the  annual  and  interim  results;  annual  budgets  and  Board  structure.    It  monitors  the  exposure  to  key 
business risks and reviews the strategic direction of all trading subsidiaries, their annual budgets and their performance 
in  relation  to  those  budgets.    There  is  a  clear  division  of  responsibility  at  the  head  of  the  Company.    The  Chair  is 
responsible for running the business of the Board and for ensuring appropriate strategic focus and direction.  The Chief 
Executive  Officer  is  responsible  for  proposing  the  strategic  focus  to  the  Board,  implementing  it  once  it  has  been 
approved and overseeing the management of the Company through the Executive Team. 

All Directors receive regular and timely information on the Group’s operational and financial performance.  Relevant 
information  is  circulated  to  the  Directors  in  advance  of  meetings.    The  business  reports  monthly  on  its  headline 
performance against its agreed budget and the Board reviews the monthly update on performance and any significant 
variances are reviewed at each meeting.  Senior executives below Board level attend Board meetings where appropriate 
to present business updates.  Board meetings throughout the year are held at the Company’s head office. 

Executive Team 

The Executive Team comprises Andrew Hockey the Chief Executive Officer, James Chance the Chief Financial Officer, 
Mark  Hughes  the  Chief  Operating  Officer,  Rupert  Newall,  Head  of  Corporate  Finance  and  Robin  Storey,  General 
Counsel and Company Secretary. They are responsible for formulation of the proposed strategic focus for submission 
to the Board, the day-to-day management of the Group’s businesses and its overall trading, operational and financial 
performance  in  fulfilment  of  that  strategy,  as  well  as  plans  and  budgets  approved  by  the  Board  of  Directors.    The 
Executive  Team  also  manages  and  oversees  key  risks,  management  development  and  corporate  responsibility 
programmes.    The  Chief  Executive  Officer  reports  to  the  plc  Board  on  issues,  progress  and  recommendations  for 
change.  The controls applied by the Executive Team to financial and non-financial matters are set out earlier in this 
document and the effectiveness of these controls is regularly reported to the Audit Committee and the Board. 

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CORPORATE GOVERNANCE (CONT’D) 

Corporate Governance Statement (continued) 

Board Committees 

The Board is supported by the Audit Committee, Remuneration and Nomination Committee and the HSE and Technical 
Committee.  Each subcommittee has access to such resources, information and advice as it deems necessary, at the 
cost of the Company, to enable the committee to discharge its duties.  The terms of reference of each committee are 
as follows: - 

Audit Committee 

The Audit Committee comprises Esa Ikaheimonen (Chair), Fiona MacAulay, Martin Ruscoe and Charles Hendry.  The 
Audit Committee has primary responsibility for monitoring the quality of internal controls and ensuring that the financial 
performance of the Group is properly measured and reported on.  In addition, it receives, and reviews reports from the 
Company’s management and auditors.  The Audit Committee meets at least twice a year and has unrestricted access 
to the Company’s auditors. 

Remuneration & Nominations Committee 

The  Remuneration  Committee  comprises  Fiona  MacAulay  (Chair),  Martin  Ruscoe  and  Charles  Hendry.    The 
Remuneration Committee determines the remuneration of the executive directors and grants share options and any 
other equity incentives pursuant to any share option scheme or LTIP in operation from time to time.  The Remuneration 
Committee meets at least twice a year. 

The Nomination Committee comprises Fiona MacAulay (Chair), Martin Ruscoe and Charles Hendry.  The Committee 
is chaired by the Chair unless the matter under discussion is their own succession.  Other Directors are invited to attend 
as appropriate and only if they do not have a conflict of interest.  The Committee is also assisted by executive search 
consultants  as  and  when  required.    The  Committee’s  principal  responsibility  is  to  lead  the  process  for  Board 
appointments and to make recommendations for maintaining an appropriate balance of skills on the Board.   

HSE and Technical Committee 

The HSE and Technical Committee comprises Fiona MacAulay (Chair), Andrew Hockey and Mark Hughes.  The HSE 
and  Technical  Committee  determines  the  Company’s  Environmental  Management  Policy,  its  Health  and  Safety 
Management  Policy  and  directs  the  overall  governance  of  the  Company’s  Subsurface  and  Technical  Management 
policies. 

BUILD TRUST 

10.  Communicate  how  the  Company  is  governed  and  is  performing  by  maintaining  a  dialogue  with 

shareholders and other relevant stakeholders 

The Company communicates with shareholders through the Annual Report and Accounts, full-year and half-year interim 
announcements, the Annual General Meeting (‘AGM’), General Meetings (‘GMs’) and one-to-one meetings with large 
existing or potential new shareholders.  Investor Relations are managed by the Executive Team and email queries from 
private individual shareholders are handled with responses limited to clarifying information that is already in the public 
domain. 

In regard to a general meeting of the Company, once the meeting has concluded the results of the meeting are released 
through a regulatory news service and a copy of the announcement is posted on the Company’s website.  If it became 
relevant an explanation of actions where a significant proportion of votes (e.g. 20% of votes received) is cast against a 
resolution would be provided. 

A range of corporate information (including all Company announcements, third party reports, summaries of key assets 
and presentations)  is also  available to shareholders,  investors and the public on the Company’s corporate  website, 
https://www.independentoilandgas.com. 

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GLOSSARY of KEY TERMS 

“1C” 
“2C” 
“3C” 
‘‘3D-seismic’’ 

“1P” 
“2P” 
“3P” 
‘‘API’’ 

‘‘appraisal well’’ 

‘‘barrels’’ or ‘‘bbls’’ or “Bbls” 

‘‘BCF’’ or “BCF” or “Bscf” 

‘‘Best Estimate’’ 

‘‘block’’ 

‘‘Boe’’ or “BOE” 

‘‘Brent Crude’’ 

“Carboniferous” 

‘‘Contingent Resources’’ 

‘‘Cretaceous’’ 

‘‘discovery’’ 

‘‘farm-in’’ 

‘‘farm-out’’ 
‘‘FDP’’ 
‘‘field’’ 

‘‘formation’’ 
‘‘ft’’ 
“G&A” 
“GIIP” 
‘‘gross resources’’ 

the minimum estimate of Contingent Resources; 
the Best Estimate of Contingent Resources; 
the maximum estimate of Contingent Resources; 
geophysical  data  that  depicts  the  subsurface  strata  in  three  dimensions.    3D-
seismic  typically  provides  a  more  detailed  and  accurate  interpretation  of  the 
subsurface strata than 2D seismic; 
the Proved Reserves; 
the sum of Proved Reserves + Probable Reserves; 
the sum of Proved Reserves + Probable plus Possible Reserves; 
a  standard  measure  of  oil  density,  as  defined  by  the  American  Petroleum 
Institute; 
a well drilled as part of an appraisal drilling programme which is carried out to 
determine the physical extent, reserves and likely production rate of a field; 
a unit of volume measurement used for petroleum and its products (for a typical 
crude oil 7.3 barrels ≈ 1 tonne: 6.29 barrels ≈ 1 cubic metre); 
billion (109) standard cubic feet; 1 BCF is approximately equal to 172,414 Boe 
or 23,618 tonnes of oil equivalent, using a factor of 5.8 BCF per MMBbls; 
the  middle  value  in  a  range  of  estimates  considered  to  be  the  most  likely.    If 
based on a statistical distribution, can be the mean, median or mode depending 
on usage; 
an  area  subdivision  of  the  UKCS  of  10  minutes  of  latitude  by  12  minutes  of 
longitude  measuring  approximately  10  by  20  kilometres,  forming  part  of  a 
quadrant.  Each quadrant is divided into a grid, five blocks wide and six blocks 
deep, and numbered 1 to 30 from NW to SE e.g. Block 14/13 is the 13th block 
in Quadrant 14; 
barrels of oil equivalent.  One barrel of oil is approximately the energy equivalent 
of 5,800 cubic feet of natural gas; 
an  international benchmark comprising  a mix of crude oil from 15  different oil 
fields in the North Sea; 
a  geological  period  and  system  that  extends  from  the  end  of  the  Devonian 
Period,  about  359  million  years  ago,  to  the  beginning  of  the  Permian  Period, 
about 299 million years ago; 
those  quantities  of  petroleum  estimated,  as  of  a  given  date,  to  be  potentially 
recoverable from known accumulations by application of development projects, 
but  which are not currently considered to be commercially recoverable due to 
one or more contingencies; 
geological strata formed during the period 140 million to 65 million years before 
the present;  
an exploration well which has encountered hydrocarbons for the first time in a 
structure; 
when a company acquires an interest in a block, by taking over all, or part of, the 
financial commitment for drilling an exploration well; 
to assign an interest in a licence to another party; 
field development plan; 
an area consisting of either a single reservoir or multiple reservoirs, all grouped 
on  or  related  to  the  same  individual  geological  structural  feature  and/or 
stratigraphic condition; 
a layer or unit of rock.  A productive formation in the context of reservoir rock; 
foot/feet; 
general and administrative; 
gas initially in place; 
the  total  estimated  petroleum  that  is  potentially  recoverable  from  a  field  or 
prospect; 

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GLOSSARY of KEY TERMS (CONT’D) 

‘‘hydrocarbon’’ 

‘‘km’’ 
‘‘km2’’ or “sq. km” 
‘‘licence’’ 

‘‘Mcf’’ or “mcf” 
“Mcfd” or “mcfd” 
“MMbbl” or “MMBbls” 
“MMBO” 
“MMBOE” 
“MMcf” 
“MMcfd” 
“MMscf” 
“MMscfd” 
“NUI” 
‘‘oil’’ 
‘‘oil equivalent’’ 
‘‘operator’’ 

“P90” 

“P50” 

“P10” 

‘‘petroleum’’ 

‘‘probable reserves’’ 

‘‘Promote Licence’’ 

‘‘prospect’’ 

‘‘prospective resources’’ 

a compound containing only the elements hydrogen and carbon.  May exist as 
a solid, a liquid or a gas.  The term is mainly used in a catch-all sense for oil, gas 
and condensate; 
kilometre; 
square kilometres; 
an exclusive right to search for or to develop and produce hydrocarbons within 
a specific area.  Usually granted by the State authorities and may be time limited; 
thousand standard cubic feet; 
thousand cubic feet per day; 
millions (106) of barrels of oil; 
million (106) barrels of oil; 
million (106) barrels of oil equivalent; 
million (106) cubic feet; 
million (106) cubic feet per day; 
million (106) standard cubic feet; 
million (106) standard cubic feet per day; 
Normally Unmanned Installation; 
mixture of liquid hydrocarbons of different molecular weights; 
international standard for comparing the thermal energy of different fuels; 
the company that has legal authority to drill wells and undertake production of 
hydrocarbons  found.    The  operator  is  often  part  of  a  consortium  and  acts  on 
behalf of such consortium; 
in the  probabilistic estimation of hydrocarbon reserves, a term referring to the 
quantity  of  recoverable  hydrocarbons  from  a  reservoir  having  a  90  per  cent. 
probability of being produced.  Often also referred to as Proved or 1P; 
in the  probabilistic estimation of hydrocarbon reserves, a term referring to the 
quantity  of  recoverable  hydrocarbons  from  a  reservoir  having  a  50  per  cent. 
probability of being produced.  Often also referred to as “Proved + Probable” or 
2P; 
in the  probabilistic estimation of hydrocarbon reserves, a term referring to the 
quantity  of  recoverable  hydrocarbons  from  a  reservoir  having  a  10  per  cent. 
probability of being produced.  Often also referred to as “Proved + Probable + 
Possible” or 3P; 
a generic name for hydrocarbons, including crude oil, natural gas liquids, natural 
gas and their products; 
those  unproved  reserves  which  analysis  of  geological  and  engineering  data 
suggests  are  more  likely  than  not  to  be  recoverable.    In  this  context,  when 
probabilistic methods are used, there should be at least a 50% probability that 
the  quantities  actually  recovered  will  equal  or  exceed  the  sum  of  estimated 
Proved + Probable reserves; 
a specific type of licence awarded by DECC whereby licence holders are given 
two years after an award, with low rental payments and obligations, in order to 
attract the technical, environmental and financial capacity to complete an agreed 
work programme.  The licence will expire after two years if the licensee has not 
made a firm commitment to DECC to complete the work programme; 
a  project  associated  with  a  potential  accumulation  of oil  or  natural  gas  that  is 
sufficiently well defined to represent a viable drilling target; 
those  quantities  of  petroleum  estimated,  as  of  a  given  date,  to  be  potentially 
recoverable 
future 
development projects; 

from  undiscovered  accumulations  by  application  of 

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GLOSSARY of KEY TERMS (CONT’D) 

‘‘proven reserves’’ 

‘‘quadrant’’ 

‘‘recovery factor’’ 
‘‘reserves’’ 

‘‘reservoir’’ 

‘‘resources’’ 

“Rotliegendes” or 
“Rotliegend” 

“STOOIP” or “STOIIP” 
‘‘scf’’ 
‘‘seismic survey’’ 

“TCF” or “tcf” 

“UKCS” 

those quantities of petroleum which, by analysis of geological and engineering 
data,  can  be  estimated  with  reasonable  certainty  to  be  commercially 
recoverable, from a given date forward, from known reservoirs and under current 
economic conditions, operating methods and government regulations.  Proved 
reserves  can  be  categorised  as  developed  or  undeveloped.    If  deterministic 
methods are used, the term reasonable certainty is intended to express a high 
degree  of  confidence  that  the  quantities  will  be  recovered.    If  probabilistic 
methods are used, there should be at least a 90% probability that the quantities 
actually recovered will equal or exceed the estimate; 
an area subdivision of the UKCS of 1 degree of longitude by 1 degree of latitude 
- typically around 6,600km2.  On the UKCS each quadrant is further subdivided 
into 30 blocks; 
the percentage of the hydrocarbon in place that can be produced; 
those  quantities  of  petroleum  anticipated  to  be  commercially  recoverable  by 
application of development projects to known accumulations from a given date 
forward  under  defined  conditions.    Reserves  must  further  satisfy  four  criteria: 
they  must  be  discovered,  recoverable,  commercial  and  remaining  (as  of  the 
evaluation date) based on the development project(s) being applied; 
a  subsurface  body  of  rock having  sufficient  porosity  and  permeability  to  store 
and transmit fluids.  A reservoir is a critical component of a complete petroleum 
system; 
deposits of naturally occurring hydrocarbons which, if recoverable, include those 
volumes  of  hydrocarbons  either  yet  to  be  found  (prospective)  or  if  found  the 
development of which depends upon a number of factors (technical, legal and/or 
commercial) being resolved (contingent); 
a lithostratigraphic geological unit of early Permian age (beneath the Zechstein 
and above the Carboniferous) that is found in the subsurface of large areas in 
western and central Europe; 
stock tank oil originally in place or stock tank oil initially in place; 
standard cubic feet; 
a method by which an image of the earth’s subsurface is created through the 
generation of shockwaves and analysis of their reflection from rock strata.  Such 
surveys can be done in two or three-dimensional form; 
trillion (1012) standard cubic feet; 1 tcf is approximately equal to 172.4 MMBoe 
or 23.6 million tonnes of oil equivalent, using a factor of 5.8 BCF per MMBbls; 
United Kingdom Continental Shelf. 

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REPORT OF THE DIRECTORS FOR THE YEAR ENDED 31 DECEMBER 2018 

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 ended 31 December 2018.  All amounts are shown in Pounds Sterling, unless 
otherwise stated. 

The Company has its headquarters in London and its oil and gas interests are in the UK sector of the North Sea. 

Information about the principal activities of the business, statement of reserves and resources, operational and financial 
updates, the principal risks and uncertainties faced by the business, the Group’s KPIs and the Directors’ going concern 
assessment can be found in the Strategic Report / Finance Review. 

Dividend 
The Directors do not recommend the payment of a dividend (2017: £nil). 

Political contributions 
No payments to political parties have been made during the year (2017: nil). 

Future Developments 
Following the arrangement of debt funding in late 2015 and early 2016 and further debt funding in both February and 
September 2018, the Group plans to appraise and develop its existing discoveries,  explore its new licence interests 
and seek new investment opportunities.  Full details are included in the Strategic Report. 

Directors and their Interests 
The directors who held office during the year, and at the date of this report, were: - 

Mark Routh (resigned 31 December 2018) 
Martin Ruscoe 
Andrew Hay (resigned 13 February 2018) 
Andrew Hockey 
Rt. Hon. Charles Hendry 
Mark Hughes (appointed 18 April 2018) 
Fiona MacAulay (appointed 10 July 2018, appointed Chair on 1 January 2019) 
Esa Ikaheimonen (appointed 14 March 2019) 

Directors’ biographies and committee memberships are set out in the Corporate Governance section from pages 23 to 
34. 

The Group has provided the directors with third party  indemnity insurance of £25 million for 2018/19 (2017/18 - £25 
million) 

Directors who held office at the end of the financial year had the following interests in shares of the Company: 

Ordinary shares of 1p each  At 31 December 2018 
178,000 
Mark Hughes 
144,813 
Martin Ruscoe 

At 31 December 2017 
0 
144,813 

Details of directors’ emoluments and share options are set out in Note 4 to the financial statements. 

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REPORT OF THE DIRECTORS FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

Substantial Shareholdings 
Except for the holdings of ordinary shares listed below, the Company has not been notified by or become aware of any 
persons holding 3% or more of the 126,868,156 issued ordinary shares of 1p each of the Company at 4 April 2019. 

Shareholder 

Hargreaves Lansdown (Nominees) 
Limited  

Interactive Investor Services Nominees 
Limited 

Aurora Nominees Limited 

Hargreaves Lansdown (Nominees) 
Limited <15942> 

Hargreaves Lansdown (Nominees) 
Limited  

Barclays Direct Investing Nominees 
Limited 

Remainder 

TOTAL 

Number 

16,075,605 

13,118,996 

9,593,417 

9,260,506 

7,658,266 

5,431,092 

66,343,130 

127,481,012 

% 

12.61 

10.29 

7.53 

7.26 

6.01 

4.26 

52.04 

100% 

Risk Management 
Information on the financial and operational risks faced by the Group and the risk management objectives and policies 
is included in the Strategic Report, 

Financial Instruments 
Information on financial instruments can be found in Note 20 to the financial statements. 

Related Parties 
Information on related party transactions can be found in Note 22 to the financial statements. 

Subsequent Events 
Information on subsequent events can be found in Note 24 to the financial statements. 

Shareholder Communications 
The Company has a website, www.independentoilandgas.com, to provide information to shareholders. 

____________________________________________________________________________________________________________________ 

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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF INDEPENDENT OIL AND GAS PLC 

Independent auditor’s report to the members of Independent Oil & Gas Plc 

Opinion 
We have audited the financial statements of Independent Oil and Gas Plc (the ‘Parent Company’) and its subsidiaries 
(the  ‘Group’)  for  the  year  ended  31  December  2018  which  comprise  the  consolidated  statement  of  comprehensive 
income,  the  consolidated  and  company  statements  of  changes  in  equity,  the  consolidated  statement  of  financial 
position, the company statement of financial position, the consolidated cash flow statement, the company cash flow 
statement and notes to the financial statements, including a summary of significant accounting policies and notes to the 
financial statements, including a summary of significant accounting policies.  

The financial reporting framework that has been applied in the preparation of the financial statements 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. 

In our opinion: 

•

•

•

•

the financial statements give a true and fair view of the state of the Group and of the Parent Company’s affairs as
at 31 December 2018 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 IFRS 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.

Basis for opinion 
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. 
Our  responsibilities  under  those  standards  are  further  described  in  the  Auditor’s  responsibilities  for  the  audit  of  the 
financial statements section of our report.  We are independent of the Group and the Parent Company in accordance 
with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s 
Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with 
these requirements.  We believe that the audit evidence we have obtained is sufficient and appropriate to provide a 
basis for our opinion. 

Material uncertainty related to going concern 
We  draw  attention  to  Note  1  of  the  financial  statements  concerning  the  Group  and  the  Parent  Company’s  ability  to 
continue as a going concern. The matters explained in Note 1 relating to the uncertainty around the Group and Parent 
Company’s ability to fund its working capital needs, development plans and loan repayments indicate the existence of 
a material uncertainty which may cast significant doubt over the Group and Parent Company’s ability to continue as a 
going concern. Our opinion is not modified in respect of this matter. 

We have highlighted going concern as a key audit matter based on our assessment of the significance of the risk and 
the effect on our audit strategy. 

Our audit procedures in response to this key audit matter included: 

•

•

•

Analysing Management’s and the Directors’ cashflow forecast which forms the basis of their assessment that
the  going  concern  basis  of  preparation  remains  appropriate  for  the  preparation  of  the  Group  and  Company
financial statements for a period of at least twelve months from the date of approval of these financial statements
Assessing and sensitising key costs included within the cashflow forecast and where available agreeing these
costs to other evidence obtained during the course of our audit work
Testing the mathematical integrity of the cashflow model in order to ensure the basis of preparation of the model
is in line with our expectations

• Obtaining  and  reviewing  documents  which  support  the  funding  streams  included  by  Management  and  the
Directors in the Group cashflow forecast and confirming the documents to third party documents and public
available information

• Obtaining and reviewing correspondence in respect of the terms of the Group’s and Company’s debt facilities

and making an assessment of the ongoing availability of such funding

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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF INDEPENDENT OIL AND GAS PLC (CONT’D) 

• Discussing with Management and the Board the Group’s strategy to continue to ensure funds are available to
the  Group  to  fund  its  operations  and  development  plans.  Confirming  statements  made  to  publicly  available
information and third-party documentation where available

• Reviewing  and  considering  the  adequacy  of  the  disclosure  within  the  financial  statements  relating  to  the

Directors’ assessment of the going concern basis of preparation.

Key audit matters 
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the 
financial  statements  of  the  current  period  and  include  the  most  significant  assessed  risks  of  material  misstatement 
(whether or not due to fraud) we identified, including those which had the greatest effect on the overall audit strategy, 
the allocation of resources in the audit and directing the efforts of the engagement team. These matters were addressed 
in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not 
provide a separate opinion on these matters. 

Carrying value of non-current assets 

The  Group’s  non-current  assets  represent  its  most  significant  assets  on  the  consolidated  statement  of  financial 
position  as  at  31  December  2018,  comprising  of  capitalised  evaluation  &  exploration  (E&E)  and  development  & 
production (D&P) expenditure on its Southern North Sea Projects. Please refer to notes 8 and 9.  

For both the E&E and D&P assets at each year end Management and the Board are required to assess whether 
there are any potential impairment triggers which would indicate that the carrying value of a cash generating unit 
(CGU)  may  not  be  recoverable.  Given  the  materiality  of  the  assets  in  the  context  of  the  Group’s  consolidated 
statement of financial position and the judgement involved in making this assessment we consider this to be a key 
audit matter.  

Management and the Board concluded that there were no impairment triggers present for any of the CGUs. 

How we addressed the key audit matter in our audit 

Our specific audit testing in this regard included: 

• Holding meetings with operational management in order to be able to assess the operating activity

and development of the assets undertaken in the year

• Undertaking a review assessment against the accounting standard requirements of Management’s

and the Board’s conclusion around the number of CGUs identified

• Undertaking a review of licence concession agreements and supporting documentation in order to

assess compliance with key terms

• Reviewing Management’s impairment indicators assessment for each CGU against the criteria in
the accounting standards in order to determine whether their assessment was complete and in
accordance with the requirements of the accounting standard
Performing an independent assessment of financial and non-financial data for potential
impairment indicators, and

•

• Reviewing the competent persons reports, as applicable and field development plans, where

available for CGUs. In addition, we reviewed key model inputs to data obtained elsewhere during
the course of the audit, third party public available information and benchmark data in order to
assess whether there are any assumptions in the model which would suggest a potential
impairment indicator. Our work was undertaken in order to assess whether there were any
potential impairment triggers highlighted in the model which had not previously been identified.

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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF INDEPENDENT OIL AND GAS PLC (CONT’D) 

Our application of materiality 

Group materiality FY 2018 

Group materiality FY 2017 

Basis for materiality 

£550,000 

£330,000 

1.4% of total assets  
(2017: 1.5% of total assets) 

Total  Assets  was  determined  as  an  appropriate  basis  as  the  principal  focus  of  the  Group  remains  fundamentally 
focussed on the development of its oil and gas assets.  

Materiality for the Parent Company was set at £410,000 (2017: £247,500) and was restricted to 75% of Group materiality 
(2017: 75% of Group materiality).  

We  apply  the  concept  of  materiality  both  in  planning  and  performing  our  audit  and  in  evaluating  the  effect  of 
misstatements.  We  consider  materiality  to  be  the  magnitude  by  which  misstatements,  including  omissions,  could 
influence  the  economic  decisions  of  reasonable  users  that  are  taken  on  the  basis  of  the  financial  statements. 
Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also take account 
of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their 
effect on the financial statements as a whole. 

Performance materiality is the application of materiality at the individual account or balance level set at an amount to 
reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements 
exceeds materiality for the financial statements as a whole. Performance materiality was set at 75% (2017: 75%) of the 
above materiality levels for both Group and Company.  

We agreed with the Audit Committee that we would report to the Committee all individual audit differences identified 
during the course of our audit in excess of £10,000.  

Whilst materiality for the financial statements as a whole was £550,000 each significant component of the Group was 
audited to a lower level of materiality ranging from £113,000 to £410,000 which was used to determine the financial 
statement areas that  were  included  within the scope  of the Component audits and the extent  of sample sizes used 
during the audit. 

An overview of the scope of our audit 

Our Group audit scope focused on the Group’s principal activities and the reporting entities in which these operations 
were held. As a result, we determined that there were three significant components, and all of these were subject to a 
full scope audit. Together with the parent company and its Group consolidation, which were both also subject to a full 
scope audit, these represent the significant components of the Group.  

The  remaining  components  of  the  Group  were  considered  non-significant  and  these  components  were  principally 
subject to analytical review procedures, together with additional substantive testing over the risk areas detailed above 
where applicable to that component. 

The audits of each of the components were performed in the UK.  All of the audits were conducted by BDO LLP. 

Other information 

The Directors are responsible for the other information. The other information comprises the information included in the 
annual  report  other  than  the  financial  statements  and  our  auditor’s  report  thereon.  Our  opinion  on  the  financial 
statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we 
do not express any form of assurance conclusion thereon. 

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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF INDEPENDENT OIL AND GAS PLC (CONT’D) 

Other information (continued) 

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing 
so,  consider  whether  the  other  information  is  materially  inconsistent  with  the  financial  statements  or  our  knowledge 
obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or 
apparent material misstatements, we are required to determine whether there is a material misstatement in the financial 
statements or a material misstatement of the other information. If, based on the work we have performed, we conclude 
that there is a material misstatement of this other information, we are required to report that fact. We have nothing to 
report in this regard. 

Opinions on other matters prescribed by the Companies Act 2006 

In our opinion, based on the work undertaken in the course of the audit: 

•

•

the information given in the Strategic Report and the Directors’ report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
the  Strategic  Report  and  the  Directors’  report  have  been  prepared  in  accordance  with  applicable  legal
requirements.

Matters on which we are required to report by exception 

In the light of the knowledge and understanding of the Group and the Parent Company and its environment obtained in 
the course of the audit, we have not identified material misstatements in the strategic report or the Directors’ report. 

We have nothing to report in respect of the following matters in relation to which 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.

Responsibilities of Directors 

As explained more fully in the Directors’ responsibilities statement the Directors are responsible for the preparation of 
the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the 
Directors  determine  is  necessary  to  enable  the  preparation  of  financial  statements  that  are  free  from  material 
misstatement, whether due to fraud or error. 

In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Parent Company’s 
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going 
concern basis of accounting unless the Directors either intend to liquidate the Group or the Parent Company or to cease 
operations, or have no realistic alternative but to do so. 

Auditor’s responsibilities for the audit of the financial statements 

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from 
material  misstatement,  whether  due  to  fraud  or  error,  and  to  issue  an  auditor’s  report  that  includes  our  opinion. 
Reasonable assurance is a high level of assurance; however, is not a guarantee that an audit conducted in accordance 
with ISAs (UK) will always detect a material misstatement when it exists. 

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could 
reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. 

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting 
Council’s website: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. 

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INDEPENDENT AUDITOR'S  REPORT  TO  THE  MEMBERS  OF INDEPENDENT  OIL AND GAS  PLC

Use of our report

This report is made  solely  to the Parent  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 Parent Company's
members those matters we are required  to state  to them in an auditor's report  and for no other  purpose.  To the fullest
extent permitted by law,  we do not  accept  or assume  responsibility  to anyone  other  than  the Parent  Company  and  the
Parent  Company's members  as a body,  for our audit work,  for this report,  or for the  opinions  we have formed.

8oo I,t€

Anne Sayerc (Senior Statutory  Auditor)

For and on behalf  of BDO LLP,  Statutory  Auditor
London

4 April 2019

BDO LLP is a limited liability  partnership  registered  in England  and Wales (with registered  number  OC3O512Z).

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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2018 

Consolidated Statement of Comprehensive Income 

Notes 

Administration expenses 
Impairment of oil and gas properties 
Project, pre-licence and exploration expenses 
Net loss on settlement of liabilities 
Foreign exchange (loss)/gain 

Operating loss 

Finance expense 

Loss for the year before taxation 

Taxation  

Loss and total comprehensive loss for the year attributable to 
equity holders of the parent 

Loss for the year per ordinary share – basic 
Loss for the year per ordinary share – diluted 

The loss for the year arose from continuing operations. 

The Notes on pages 52 to 89 form part of these financial statements. 

8 

3 

3 

5 

6 

7 

7 
7 

2018 
£000 

(974) 
(184) 
(922) 
(106) 
(334) 

2017 
£000 

(700) 
(119) 
(430) 
(1) 
333 

_________ 

_________ 

(2,520) 

(917) 

(3,124) 
_________ 

(1,834) 
_________ 

(5,644) 

(2,751) 

- 
_________ 

- 
_________ 

(5,644) 

(2,751) 

_________ 

_________ 

4.6p 
4.6p 

2.5p 
2.5p 

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CONSOLIDATED AND COMPANY STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2018 

Consolidated and Company Statements of Changes in Equity 

Group: 

At 1 January 2017 
Loss for the year 

Total comprehensive loss attributable to owners 
of the parent 
Settle creditors via issue of shares 
Lapse of warrants 
Issue of share options 
Exercise of share options 

At 31 December 2017 

Loss for the year 

Total comprehensive loss attributable to owners 
of the parent 
Issue of warrants 
Issue of share options 
Exercise of share options 

At 31 December 2018 

Company: 
At 1 January 2017 
Profit for the year 

Total  comprehensive  income  attributable  to 
owners of the parent 
Settle creditors via issue of shares 
Lapse of warrants 
Issue of share options 
Exercise of share options 

At 31 December 2017 

Loss for the year 

Share 
capital 

Share 
premium 

£000 

£000 

1,093 
- 

20,460 
- 
_____  ________ 

- 
105 
- 
- 
5 

- 
1,877 
- 
- 
- 
_____  ________ 
22,337 
1,203 

Share-based 
payment 
reserve 
£000 

Accumulated 
losses 

Total equity 

£000 

£000 

2,885 
- 
________ 

- 
- 
(10) 
298 
(74) 
________ 
3,099 

(28,738) 
(2,751) 
________ 

(2,751) 
- 
10 
- 
74 
________ 
(31,405) 

(4,300) 
(2,751) 
_______ 

(2,751) 
1,982 
- 
298 
5 
_______ 
(4,766) 

- 

- 
_____  ________ 

- 
________ 

(5,644) 
________ 

(5,644) 
_______ 

- 
- 
- 
- 
- 
- 
- 
66 
______ 
_____ 
1,269 
22,337 
_____  ________ 

1,093 
- 

20,460 
- 
_____  ________ 

- 
105 
- 
- 
5 

- 
1,877 
- 
- 
- 
_____  ________ 
22,337 
1,203 

- 
4,190 
378 
(1,359) 
________ 
6,308 
_______ 

2,885 
- 
________ 

- 
- 
(10) 
298 
(74) 
________ 
3,099 

(5,644) 
- 
- 
1,359 
________ 
(35,690) 
________ 

(5,172) 
1,176 
________ 

1,176 
- 
10 
- 
74 
________ 
(3,912) 

(5,644) 
4,190 
378 
66 
_______ 
(5,776) 
_______ 

19,266 
1,176 
_______ 

1,176 
1,982 
- 
298 
5 
_______ 
22,727 

- 

- 
_____  ________ 

- 
________ 

(2,604) 
________ 

(2,604) 
_______ 

Total comprehensive loss attributable to owners 
of the parent 
Issue of warrants 
Issue of share options 
Exercise of share options 

At 31 December 2018 

- 
- 
- 
66 

- 
- 
- 
- 
_____  ________ 
22,337 
1,269 
______  ________ 

- 
4,190 
378 
(1,359) 
_______ 
6,308 
_______ 

(2,604) 
- 
- 
1,359 
_______ 
(5,157) 
________ 

(2,604) 
4,190 
378 
66 
_______ 
24,757 
_______ 

Share capital - Amounts subscribed for share capital at nominal value. 
Share premium - Amounts received on the issue of shares, in excess of the nominal value of the shares. 
Share-based payment reserve - Amounts reflecting fair value of options and warrants issued. 
Accumulated losses - Cumulative net losses recognised in the Statement of Comprehensive Income net of amounts recognised directly in equity. 

The Notes on pages 52 to 89 form part of these financial statements. 

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CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2018 

Consolidated Cash Flow Statement 

Loss for the year 

Depreciation, depletion and amortisation 
Exploration asset write off 
Loss on settlement of liabilities 
Share based payments 
Movement in trade and other receivables 
Movement in trade and other payables 
Interest received 
Finance fees 
Foreign exchange differences 

Notes 

2018 
£000 

2017 
£000 

7 

8 
3 

(5,644) 

(2,751) 

9 
184 
106 
187 
(812) 
(415) 
(2) 
3,206 
142 
_________ 

3 
119 
1 
174 
(278) 
178 
- 
1,834 
(333) 
_________ 

Net cash used in operating activities 

(3,039) 

(1,053) 

Investing activities 
Purchase of intangible and tangible assets 
Interest received 
Acquisitions 
Initial Thames Pipeline decommissioning security 

Net cash used in investing activities 

Financing activities 
Proceeds from issue of equity instruments of the Group  
Cash received from loans 
Amounts repaid on loans 
Finance fees paid 

Net cash generated from financing activities 

Net increase / (decrease) in cash and cash equivalents 

Cash and cash equivalents at the beginning of the year 

10 

23 
23 

(14,327) 
2 
- 
(500) 
_________ 

(2,648) 
- 
(750) 
- 
_________ 

(14,825) 

(3,398) 

67 
18,787 
- 
(433) 
_________ 

8 
6,372 
(2,019) 
(12) 
_________ 

18,421 

557 

4,349 

(102) 

145 
_________ 

247 
_________ 

Cash and cash equivalents at end of year 

17 

702 
_________ 

145 
_________ 

The Notes on pages 52 to 89 form part of these financial statements. 

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COMPANY CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2018 

Company Cash Flow Statement 

(Loss)/profit for the year 

Depreciation charges 
Investment write back 
Loss on settlement of liabilities 
Share based payments 
Movement in trade and other receivables 
Movement in trade and other payables 
Inter-company service charge uplift 
Interest received 
Finance fees 
Foreign exchange differences 

Net cash used in operating activities 

Investing activities 
Purchase of intangible and tangible assets 
Loans to subsidiary undertakings 
Interest received 
Investments in subsidiary undertakings 

Net cash used in investing activities 

Financing activities 
Proceeds from issue of equity instruments of the Company  
Cash received from loans 
Amounts repaid on loans 
Finance fees paid 

Net cash generated from financing activities 

Net (decrease) / increase in cash and cash equivalents 

Cash and cash equivalents at the beginning of the year 

Notes 

2018 
£000 

2017 
£000 

18 

11 
3 

10 

23 
23 

(2,604) 

1,176 

8 
- 
106 
138 
(312) 
(415) 
(206) 
(2) 
1,322 
142 
_________ 

3 
(1,870) 
1 
96 
(284) 
214 
(105) 
- 
166 
(200) 
_________ 

(1,823) 

(803) 

(573) 
(15,470) 
2 
- 
_________ 

(371) 
(2,539) 
- 
(750) 
_________ 

(16,041) 

(3,660) 

67 
18,787 
- 
(433) 
_________ 

8 
6,372 
(2,019) 
- 
_________ 

18,421 

557 

4,361 

(102) 

145 
_________ 

247 
_________ 

Cash and cash equivalents at end of year 

17 

702 
_________ 

145 
_________ 

The Notes on pages 52 to 89 form part of these financial statements. 

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NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 

1  Accounting policies 

General information 

Independent  Oil  and  Gas  plc  is  a  public  limited  company  incorporated  and  domiciled  in  England  and  Wales.    The 
Group’s and Company’s financial statements for the year ended 31 December 2018 were authorised for issue by the 
Board of Directors on 28 March 2019 and the balance sheets were signed on the Board’s behalf by the CEO, Andrew 
Hockey. 

Basis of preparation and accounting 

The principal accounting policies adopted in the preparation of the financial statements are set out below.  The policies 
have been consistently applied to all years presented, unless otherwise stated.  The consolidated financial statements 
are presented in GBP Sterling, which is also the functional currency of the Company and its subsidiaries.  Amounts are 
rounded to the nearest thousand, unless otherwise stated. 

These  financial  statements  have  been  prepared  in  accordance  with  International  Financial  Reporting  Standards 
adopted by the European Union, International Accounting Standards and Interpretations (collectively ‘IFRSs’) and with 
those parts of Companies Act 2006 applicable to companies preparing their accounts under IFRS.  

The preparation of financial statements in compliance with adopted IFRSs requires the use of certain critical accounting 
estimates.  It also requires Group management to exercise judgment in applying the Group's accounting policies.  The 
areas where significant judgments and estimates have been made in preparing the financial statements and their effect 
are disclosed within this Note 1 on pages 62 and 63. 

The consolidated financial statements have been prepared on a historical cost basis. 

Going concern 

The Board has reviewed the Group’s cash flow forecasts up until September 2020 having regard to its current financial 
position and operational objectives. On 1 April 2019 the Group announced it had raised £16.6m (gross) of equity via 
the placing of 165,795,050 shares for 10p per ordinary share and had simultaneously renegotiated the term of £7.1m 
of LOG debt whereby repayments previously scheduled for 2019, which are now rescheduled to 1 January 2020 at the 
earliest. The Group have continued to draw down against the LOG £15m facility having taken a further drawdown of 
£3.925 million in January 2019. The Group have received confirmation from the LOG Administrators that the remaining 
£3.925 million available to the Group under the £15m LOG facility will remain available to the Group under the original 
terms of the facility, and as  publicly  noted by the LOG Administrators, they  will continue to support the Group in its 
endeavours to develop its dual Hub Strategy in order to generate shareholder return.  

Notwithstanding  this  announcement  the  Group’s  cashflow  forecast  to  September  2020  indicates  that  the  Group  will 
need additional funding to enable it to progress with its planned development activities and to meet its liabilities (working 
capital and LOG scheduled debt repayments) as they fall due in the period from 1 January 2020. The Board; however, 
is satisfied that the Group and Company will have sufficient financial resources available to meet its commitments based 
on the likelihood of the Group being able to secure additional funding from existing stakeholders, the farmout of existing 
assets  and/or  funding  from  new  investors.  The  Consolidated  Statement  of  Financial  Position  at  31  December  2018 
details a net liability position of the Group of £5.8 million; however, the funding and LOG restructuring, pursuant to the 
announcement  on  1  April  2019,  will  both  provide  increased  equity  and  the  reduction  of  debt  on  the  balance  sheet, 
Management  identify  this  trend  as  an  important  steer  to  deliver  its  dual  Hub  Strategy  and  the  development  of  its 
associated  oil  and  gas  asset  portfolio.  Accordingly,  the  Board  continue  to  adopt  the  going  concern  basis  for  the 
preparation of these financial statements. 

However, at the date of approval of these financial statements there are no legally binding agreements in place relating 
to future fundraising. Therefore, there can be no certainty that additional funds will be forthcoming which indicates the 
existence of a material uncertainty which may cast significant doubt about the Group and Company’s ability to continue 
as a going concern and therefore it may be unable to realise its assets and discharge its liabilities in the normal course 
of business.  The financial statements do not include the adjustments that would result if the Group and Company was 
unable to continue as a going concern. 

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NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

1  Accounting policies (continued) 

New and revised accounting standards 

(i) New and amended standards adopted by the Group: 

The accounting policies adopted are consistent with those of the previous financial year.   New or amended financial 
standards or interpretations adopted during the year and that have a significant impact upon the financial statements 
are detailed below. 

(ii) The following standards, amendments and interpretations, which are effective for reporting periods beginning after 
the date of these financial statements, have not been adopted early: - 

Standard 
IFRS 16 
IFRIC 23 

IFRS 9 

IAS 28 

IFRS 3, IFRS 11, IAS 12, IAS 23 

IAS 19 

IFRS 3 

IAS1, IAS8 

n/a 

IFRS 17 

Description 
Leases 
Uncertainty over Income Tax Treatments 
Prepayment Features with Negative 
Compensation (Amendments) 
Long-term Interest in Associates and Joint 
Ventures (Amendments) 
Annual Improvements to IFRS Standards 2015-
2017 Cycle 
Plan Amendment, Curtailment or Settlement 
(Amendments) 
Definition of a Business (Amendments to IFRS 3) 
Definition of Material (amendments to IAS1 and 
IAS 8) 
Amendments to References to the Conceptual 
Framework in IFRS Standards 
Insurance Contracts 

Effective date 
1 January 2019 
1 January 2019 

1 January 2019 

1 January 2019 

1 January 2019 

1 January 2019 

1 January 2020 

1 January 2020 

1 January 2020 

1 January 2021 

IFRS 16 “Leases” - the Board assesses that the net impact to the Income Statement in 2019 and future years will be 
dependent on those prevailing lease contracts and other such similar oil and gas development contractual agreements 
which  may  have  been  executed  prior  to  31  December  2019.  The  Board  is  uncertain  as  to  the  length  of  time  such 
contracts  may  cover;  however,  if  such  contracts  cover  any  continuous  period  of  greater  than  one  year,  then  such 
contracts  will  be subject to IFRS16.  Such contracts  will result in  both assets and liabilities on the Balance  Sheet to 
increase by corresponding amounts, which, as at 31 December 2018 would have been immaterial. At 31 December 
2018 the Group was not subject to any long-term lease contracts, other than for the rental of its office premises at 10 
Arthur Street, London EC4R 9AY and the Crown Estate lease where the Thames Pipeline crosses the foreshore at 
Bacton. The Company has not adopted this standard early and has not made any IFRS16 provision, for its office lease 
or Crown Estate agreements, or otherwise, in the financial statements for the year ending 31 December 2018. 

The application of the other standards above in future financial statements is not expected to have a material impact 
on those financial statements. 

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NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

1  Accounting policies (continued) 

New significant standards and amendments effective 1 January 2018 

IFRS 9 Financial Instruments 

IFRS  9,  Financial  Instruments  introduced  new  requirements  for  the  recognition,  classification  and  measurement  of 
financial  assets  and  liabilities,  derecognition  of  financial  instruments,  impairment  of  financial  assets  and  hedge 
accounting.  IFRS 9 replaced the multiple classification  and measurement models for financial  assets  and financial 
liabilities that existed under IAS 39 Financial Instruments, and the basis on which financial assets are measured will 
determine their classification as either, at amortised cost, fair value through profit and loss, or fair value through other 
comprehensive income.  The Group’s principal financial assets comprise cash and other receivables. All these financial 
assets continue to be classified and measured at amortised cost. The Group’s principal financial liabilities comprise 
trade and other payables and loans.  All these financial liabilities continue to be classified and measured at amortised 
cost. 

The adoption of IFRS 9 has changed the Group’s accounting for impairment losses for financial assets  by replacing 
IAS 39’s incurred loss approach with a forward-looking expected credit loss approach. IFRS 9 requires the Group to 
measure and recognise expected credit losses on all applicable financial assets. 

The Company did not choose to adopt IFRS 9 early and have chosen not to apply the standard retrospectively on the 
basis  of  the  impact  not  being  significant  in  terms  of  impairment  and  or  additional  expected  credit  losses  (‘ECL’s) 
recognised with regard to intercompany balances. The Company has assessed the resulting impact on the financial 
statements and there was no material quantitative impact on the financial statements. There are a number of additional 
disclosures that have been added to the financial statements.   

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NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

1  Accounting policies (continued) 

Basis of consolidation 

Where the Company has control over an investee, it is classified as a subsidiary.  The Company controls an investee if 
all three of the following elements are present: power over the investee, exposure to variable returns from the investee, 
and the ability of the investor to use its power to affect those variable returns.  Control is reassessed whenever facts 
and circumstances indicate that there may be a change in any of these elements of control.   

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.   

Asset Acquisition 

In the event of an asset acquisition, the cost of the acquisition is assigned to the individual assets and liabilities based 
on their relative fair values.  All directly attributable costs are capitalised.  Contingent consideration is accrued for when 
these amounts are considered probable and are discounted to present value based on the expected timing of payment.  

Oil and gas exploration, development and producing assets 

The  Group  adopts  the  following  accounting  policies  for  oil  and  gas  asset  expenditure,  based  on  the  stage  of 
development of the assets: 

1)  Pre-Licence 

Expenditure  incurred  prior  to  the  acquisition  and/or  award  of  a  licence  interest  is  expensed  to  the  Statement  of 
Comprehensive Income as ‘Exploration Expenses’. 

2)  Exploration and evaluation (‘E&E’) 

Capitalisation 

Costs incurred after rights  to explore have been  obtained, such as  geological and geophysical surveys, drilling and 
commercial appraisal costs, and other directly attributable costs of exploration and appraisal including technical and 
administrative overheads, are capitalised as intangible exploration and evaluation (‘E&E’) assets.  The assessment of 
what constitutes an individual E&E asset is based on technical criteria but essentially either a single licence area or 
contiguous licence areas with consistent geological features are designated as individual E&E assets.  Costs relating 
to  the  exploration  and  evaluation  of  oil  and  gas  interests  are  carried  forward  until  the  existence,  or  otherwise,  of 
commercial reserves have been determined. 

E&E costs are not amortised prior to the conclusion of appraisal activities.  Once active exploration is completed the 
asset is assessed for impairment.  If commercial reserves are discovered then the carrying value of the E&E asset is 
reclassified  as  a  development  and  production  (‘D&P’)  asset,  within  property,  plant  and  equipment  (‘PPE’),  following 
development sanction by the Board, but only after the carrying value is assessed for impairment at point of transfer and, 
where appropriate, its carrying value adjusted.  Following development sanction by the Board, a Field Development 
Plan (‘FDP’) may be submitted.  If it is subsequently assessed that commercial reserves have not been discovered, the 
E&E asset is written off to the Statement of Comprehensive Income.  The Group’s definition of commercial reserves for 
such purpose is proven and probable (‘2P’) reserves on an entitlement basis. 

Intangible  E&E  assets  that  relate  to  E&E  activities  that  are  not  yet  determined  to  have  resulted  in  the  discovery  of 
commercial reserves remain capitalised as intangible E&E assets at cost, subject to impairment assessments as set 
out below. 

Impairment 

The Group’s oil and gas assets are analysed into cash generating units (‘CGU’) for impairment reporting purposes, with 
E&E asset impairment testing being performed at an individual asset level.  E&E assets are reviewed for impairment 
when circumstances arise which indicate that the carrying value of an E&E  asset exceeds the recoverable  amount.  
Such indicators would include but not limited to: 

(i)  adequate and sufficient data exists that render the resource uneconomic and unlikely to be developed; 
(ii)  title to the asset is compromised; 
(iii)  budgeted or planned expenditure is not expected in the foreseeable future; and 
(iv)  insufficient discovery of commercially viable resources leading to the discontinuation of activities. 

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NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

1  Accounting policies (continued) 

Oil and gas exploration, development and producing assets (continued) 

The recoverable amount of the individual asset is determined as the higher of its fair value less costs to sell and value 
in  use.    Impairment  losses  resulting  from  an  impairment  review  are  separately  recognised  and  written  off  to  the 
Statement of Comprehensive Income. 

Impaired  assets  are  reviewed  annually  to  determine  whether  any  substantial  change  to  their  fair  value  amounts 
previously impaired would require reversal. 

A previously recognised impairment loss is reversed if the recoverable amount increases because of a change in the 
estimates used to determine the recoverable amount, but not to an amount higher than the carrying amount that would 
have  been  determined  (net  of  depletion  or  amortisation)  had  no  impairment  loss  been  recognised  in  prior  periods.  
Reversal of impairments and impairment charges are credited/(charged) to a separate line item within the Statement of 
Comprehensive Income. 

3)  Development and production (‘D&P’) 

Capitalisation 

Costs of bringing a field into production, including the cost of facilities, wells and sub-sea equipment together with E&E 
assets reclassified in accordance  with the above policy,  are capitalised  as a D&P asset  within  PPE. Normally  each 
individual field development will form an individual D&P asset but there may be cases, such as phased developments, 
or multiple fields around a single production facility when fields are grouped together to form a single D&P asset.  The 
cost of development and production assets also include the cost of acquisitions and purchases of such assets, directly 
attributable  overheads,  applicable  borrowing  costs  and  the  cost  of  recognising  provisions  for  future  consideration 
payments - see Note 9 and Note 10. The discounted cost for future decommissioning is also added to the D&P asset. 

Depreciation and depletion 

All  costs  relating  to  a  development  are  accumulated  and  not  depreciated/depleted  until  the  commencement  of 
production.  Depletion is calculated on a UOP basis based on the 2P reserves of the asset.  Any re-assessment of 
reserves  affects  the  depletion  rate  prospectively.    Significant  items  of  plant  and  equipment  will  normally  be  fully 
depreciated over the life of the field; however, these items are assessed to consider if their useful lives differ from the 
expected life of the D&P asset and should this occur a different depreciation rate may be charged.  The key areas of 
estimation regarding depletion and the associated unit of production calculation for oil and gas assets are recoverable 
reserves and future capital expenditures. 

Impairment 

A review is carried out for any indication that the carrying value of the Group’s D&P assets may be impaired.  If any 
indicators are identified, a review of D&P assets is carried out on an asset by asset basis and involves comparing the 
carrying value with the recoverable value of an asset.  The recoverable amount of an asset is determined as the higher 
of its fair value less costs to sell and value in use.  The value in use is determined from estimated future net cash flows, 
being  the  present  value  of  the  future  cash  flows  expected  to  be  derived  from  production  of  commercial  reserves.  
Impairment  resulting  from  the  impairment  testing  is  charged  to  a  separate  line  item  within  the  Statement  of 
Comprehensive Income. 

The pre-tax future cash flows are adjusted for risks specific to the CGU and are discounted using a pre-tax discount 
rate.  The discount rate is derived from the Group’s post-tax weighted average cost of capital and is adjusted where 
applicable to consider any specific risks relating to the country where the CGU is located, although other rates may be 
used  if  appropriate  to  the  specific  circumstances.    The  discount  rates  applied  in  assessments  of  impairment  are 
reassessed each year.  The Company uses a risk adjusted discount rate of 10%, unless otherwise stated. 

The CGU basis is generally the field, however, oil and gas assets, including infrastructure assets may be accounted for 
on an aggregated basis where such assets are economically inter-dependent.  

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NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

1  Accounting policies (continued) 

Oil and gas exploration, development and producing assets (continued) 

4)  Offshore Pipelines 

Capitalisation 

Costs of commissioning an offshore pipeline to transport hydrocarbons, including the cost of related onshore facilities 
and subsea equipment are capitalised as a tangible asset within PPE. Each contiguous pipeline will form an exclusive 
individual asset but there may be cases, such as phased developments, when pipelines are grouped together to form 
a single tangible pipeline asset. The cost of offshore pipeline assets also includes the cost of acquisitions and 
purchases of such assets, directly attributable overheads, applicable borrowing costs and the discounted cost of 
future decommissioning. 

Depreciation 

All  costs  relating  to  pipeline  commissioning  are  not  depreciated  until  the  commencement  of  transportation  of 
hydrocarbons.  Depreciation is calculated on a straight-line basis over the period in which transportation is likely to take 
place.  Any re-assessment of this timeline will impact on the depreciation rate prospectively. The key areas of estimation 
regarding depreciation are future capital expenditures and recoverable reserves for those fields where such pipelines 
are utilised for the transportation of oil and gas production. 

Impairment 

A review is carried out for any indication that the carrying value of the pipeline asset may be impaired.  If any indicators 
are identified, such as the pipeline’s inability to continue to operate safely and effectively in its current environment, a 
review of the pipeline asset is carried out. Impairment resulting from the impairment review is charged to a separate 
line item within the Statement of Comprehensive Income. 

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NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

1  Accounting policies (continued) 

Assets other than oil and gas interests 

Assets  other  than  oil  and  gas  interests  are  stated  at  cost,  less  accumulated  depreciation  and  any  provision  for 
impairment.  Depreciation is provided at rates estimated to write off the cost, less estimated residual value, of each 
asset over its expected useful life as follows: - 

•  Computer and office equipment: 33% straight line, with one full year’s depreciation in year of acquisition; and 
•  Tenants improvements: 20% straight line, with one full year’s depreciation in year of acquisition. 

Provisions 

Provisions are recognised when: 

•  the Group has a present legal or constructive obligation resulting from past events; 
•  it is more likely than not that an outflow of resources will be required to settle the obligation; and 
•  the amount can be reliably estimated. 

Decommissioning 

Provisions for decommissioning costs are recognised in accordance with IAS 37 Provisions, Contingent Liabilities and 
Contingent Assets.  Provisions are recorded at the present value of the expenditures expected to be required to settle 
the Group’s future obligations. 

Provisions are reviewed at each reporting date to reflect the current best estimate of the cost at present value.  Any 
change in the date on  which provisions fall due  will change the present value of the provision.  These changes are 
treated as an administration expense.  The unwinding of the discount is reflected as a finance expense. 

In the case of a D&P and/or pipeline asset, since the future cost of decommissioning is regarded as part of the total 
investment to gain access to future economic benefits, this is included as part of the cost of the relevant D&P and/or 
pipeline asset. 

Disposals 

Net proceeds from any disposal of an E&E, D&P or pipeline asset are initially credited against the previously capitalised 
costs of that asset and any surplus proceeds are credited to the Statement of Comprehensive Income.   

Foreign currencies 

The  Group’s  presentational  currency  is  GBP  Sterling  and  has  been  selected  based  on  the  currency  of  the  primary 
economic environment in which the Group operates.  The Group’s primary product is generally traded by reference to 
its pricing in GBP Sterling.  The functional currency of all companies in the Group is also considered to be GBP Sterling.  
Transactions  in  currencies  other  than  the  functional  currency  of  a  company  are  recorded  at  a  rate  of  exchange 
approximating  to  that  prevailing  at  the  date  of  the  transaction.    At  each  balance  sheet  date,  monetary  assets  and 
liabilities that are denominated in currencies other than the functional currency are translated at the amounts prevailing 
at  the  balance  sheet  date  and  any  gains  or  losses  arising  are  recognised  in  the  Consolidated  Statement  of 
Comprehensive Income. 

Taxation 

Current Tax 

Tax is payable based upon taxable profit for the year.  Taxable profit differs from net profit as reported in the Statement 
of Comprehensive Income because it excludes items of income or expense that are taxable or deductible on other years 
and it further excludes items that are never taxable or deductible.  Any Group liability for current tax is calculated using 
tax rates that have been enacted or substantively enacted by the reporting date. 

Deferred Tax 

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.  
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. 

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NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

1  Accounting policies (continued) 

Taxation (continued) 

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except 
where the Group can control the reversal of the temporary differences 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 reporting 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 is realised.  Deferred tax is charged or credited in 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 tax assets and liabilities on a net basis. 

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. 

Investments & Loans (Company) 

Non-current  investments in subsidiary  undertakings  are shown in the Company’s Statement of Financial  Position at 
cost less any provision for permanent diminution of value. 

Loans to subsidiary undertakings are stated at amortised cost and recognised in accordance with IFRS9. The loans 
have no maturity date and are not repayable until the respective subsidiary entity has sufficient cash to repay the loan 
and thus are expected to continue indefinitely. 

Operating Leases 

Rentals under operating leases are charged on a straight-line basis over the lease term. 

Financial instruments 
Financial instruments are recognised when the Group becomes a party to the contractual provisions of the instrument 
and are subsequently measured at amortised cost. 

Classification and measurement of financial assets 
The initial classification of a financial asset depends upon the Group’s business model for managing its financial assets 
and the contractual terms of the cash flows. The Group’s financial assets are measured at amortised costs and are held 
within a business model whose objective is to hold assets to collect contractual cash flows and its contractual terms 
give rise on specified dates to cash flows that represent solely payments of principal and interest. 

The Group’s cash and cash equivalents and other receivables are measured at amortised cost. Other receivables are 
initially measured at fair value. The Group holds other receivables with the objective to collect the contractual cash flows 
and therefore measures them subsequently at amortised cost. 

The Group has no financial assets measured at FVOCI (Fair Value Through Other Comprehensive Income) or FVTPL 
(Fair Value Through the Statement of Profit or Loss) 

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. 

Impairment of financial assets 
The Group recognises loss allowances for expected credit losses (‘ECL’s) on its financial assets measured at amortised 
cost. Due to the nature of its financial assets, the Group measures loss allowances at an amount equal to the lifetime 
ECLs. Lifetime ECLs are the anticipated ECLs that result from all possible default events over the expected life of a 
financial asset. ECLs are a probability-weighted estimate of credit losses. 

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NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

1  Accounting policies (continued) 

Financial instruments (continued) 

Classification and measurement of financial liabilities 
A  financial  liability  is  initially  classified  as  measured  at  amortised  cost  or  FVTPL.  A  financial  liability  is  classified  as 
measured at FVTPL if it is held-for-trading, a derivative or designated as FVTPL on initial recognition. 

The Group’s accounts payable, accrued liabilities and long-term debt are measured at amortised cost. 

Accounts payable and accrued liabilities are initially measured at fair value and subsequently measured at amortised 
cost. Accounts payable and accrued liabilities are presented as current liabilities unless payment is not  due within 12 
months after the reporting period. 

Long-term debt is initially measured at fair value, net of transaction costs incurred. The contractual cash flows of the 
long-term  debt  are  made  up  of  solely  principal  and  interest,  therefore  long-term  debt  is  subsequently  measured  at 
amortised cost. Long-term debt is classified as current when payment is due within 12 months after the reporting period. 

Where warrants are issued in lieu of arrangement fees on debt facilities, the fair value of the warrants are measured at 
the date of grant as determined through the use of the Black-Scholes technique. The fair value determined at the grant 
date of the warrants is recognised in the Group’s warrant reserve and is amortised as a finance cost over the life of the 
facility. 

The Group has no financial liabilities measured at FVTPL. 

The LOG loans are securitised by guarantees  over the assets of IOG North Sea Limited, IOG UK Limited and IOG 
Infrastructure Limited. These guarantees are considered to be insurance contracts and accounted for in accordance 
with the provisions of IFRS 4.  

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NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

1  Accounting policies (continued) 

Convertible loan notes 

Upon issue, convertible notes are separated into the equity and liability components at the date of issue.  The liability 
component is recognised initially at its fair value.  Subsequent to initial recognition, it is carried at amortised carrying 
value using the effective interest method until the liability is extinguished on conversion or redemption of the notes.  The 
equity component is the residual amount of the convertible note after deducting the fair value of the liability component.  
This is recognised and included in equity and is not subsequently re-measured. 

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. 

Share-based payments 

The  Company  and  Group  have  applied  the  requirements  of  IFRS  2  Share-based  payments.    The  Company  issues 
equity share options, to certain employees and contractors, as direct compensation for both salary and fees sacrificed 
in lieu of such share options.  Other Long-Term Incentive Plan (‘LTIP’) share options may be awarded to incentivise 
and reward successful corporate and individual performance.  The fair value of these awards has been determined at 
the date of the grant of the award allowing for the effect of any market-based performance conditions. 

The fair value of share options awarded, in lieu of salary sacrifice, is expensed on the effective date of grant, with no 
vesting conditions applied.  The fair value is deemed to be the actual salary sacrificed. 

For LTIP share option awards, based upon incentive and performance, the fair value, adjusted by the estimate of the 
number of awards that will eventually vest because of non-market conditions, is expensed uniformly over the vesting 
period and is charged to the Statement of Comprehensive Income, together with an increase in equity reserves, over a 
similar period.  The fair values are calculated using an option pricing model with suitable modifications to allow for early 
exercise.  The  inputs  to  the  model  include:  the  share  price  at  the  date  of  grant;  exercise  price;  expected  volatility; 
expected dividends; risk-free rate of interest; and patterns of exercise of the plan participants.  Where the terms and 
conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately 
before and after the modification, is also charged to the Statement of Comprehensive Income over the remaining vesting 
period.  No expense is recognised for options that do not ultimately vest except where vesting is only conditional upon 
a market condition. 

Where the Group renegotiates the terms of its debt, with the result that the liability is extinguished by the issuing of its 
own equity instruments to the creditor (referred to as a ‘debt for equity swap’), the equity instruments issued to settle a 
liability  represent  ‘consideration  paid’.    In  accordance  with  IFRIC  19  ‘Extinguishing  Financial  Liabilities  with  Equity 
Instruments’ the Group therefore recognises a gain or loss in profit or loss when a liability is settled through the issuance 
of the Group’s own equity instruments.  The amount of the gain or loss recognised in profit or loss is determined as the 
difference between the carrying value of the financial liability and the fair value of the equity instruments issued.  The 
fair value of the equity instruments issued is used to measure the gain or loss on the settlement of the existing financial 
liability. 

The  fair  value  of  warrants  issued  to  third  parties  is  calculated  by  reference  to  the  service  provided,  or  if  this  is  not 
considered possible, calculated in the same way as for LTIP share options as detailed above.  Typically, these amounts 
have related to debt issues and are included in the effective interest rate calculation of borrowings.  

Loss/earnings per share 

Loss/earnings per share is calculated as loss/profit attributable to shareholders divided by the weighted average number 
of ordinary shares in issue for the relevant period.  Diluted earnings per share is calculated using the weighted average 
number of ordinary shares in issue plus the weighted average number of ordinary shares that would be in issue on the 
conversion  of  all  relevant  potentially  dilutive  shares  to  ordinary  shares  adjusted  for  any  proceeds  obtained  on  the 
exercise of any options and warrants.  Where the impact of converted shares would be anti-dilutive they are excluded 
from the calculation. 

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NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

1  Accounting policies (continued) 

Critical accounting judgements and key sources of estimation uncertainty 

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 clear from other sources.  Actual results may differ from these estimates. 

The following are the critical judgements that management has made in the process of applying the entity’s accounting 
policies and that have the most significant effect on the amounts recognised in financial statements. 

Impairment of assets 

Management is required to assess oil and gas assets for indicators of impairment and has considered the economic 
value of individual E&E and D&P assets.  The carrying value of oil and gas assets is disclosed in Notes 8 and 9.  The 
carrying value of related investments in the Company Statement of Financial Position is disclosed in  Note 11.  E&E 
assets are subject to a separate review for indicators of impairment, by reference to the impairment indicators set out 
in IFRS 6, which is inherently judgmental. 

Key estimates used in the value-in-use calculations 

The  calculation  of  value-in-use  for  oil  and  gas  assets  under  development  or  in  production  is  most  sensitive  to  the 
following assumptions: 

•  Commercial reserves 
•  production volumes; 
• 
commodity prices; 
• 
fixed and variable operating costs; 
• 
capital expenditure; and 
•  discount rates. 

Commercial Reserves 

Commercial reserves are proven and probable (‘2P’) oil and gas reserves, calculated on an entitlement basis.  Estimates 
of commercial reserves underpin the calculation of depletion and amortisation on a UOP basis.  Estimates of commercial 
reserves include estimates of the amount of oil and gas in place, assumptions about reservoir performance over the life 
of the field and assumptions about commercial factors which, in turn, will be affected by the future oil and gas price. 

Production volumes/recoverable reserves 

Annual estimates of oil and gas reserves are generated internally by the Group with external input from operator profiles 
and/or a Competent Person.  These are reported annually by the Board.  The self-certified estimated future production 
profiles are used in the life of the fields which in turn are used as a basis in the value-in-use calculation. 

Commodity prices 

An average of published forward prices and the long-term assumption for natural UKNBP gas and Brent oil are used 
for future cash flows in accordance with the Group’s corporate assumptions.  Field specific discounts and prices are 
used where applicable. 

Fixed and variable operating costs 

Typical  examples  of  variable  operating  costs  are  pipeline  tariffs,  treatment  charges  and  freight  costs.    Commercial 
agreements are in place for most of these costs and the assumptions used in the value-in-use calculation are sourced 
from  these  where  available.    Examples  of  fixed  operating  costs  are  platform  costs  and  operator  overheads.    Fixed 
operating costs are based on operator and/or third-party duty holder budgets. 

Capital expenditure 

Field development is capital intensive and future capital expenditure has a significant bearing on the value of an oil and 
gas development asset.  In addition, capital expenditure may be required for producing fields to increase production 
and/or extend the life of the field.  Cost assumptions are based on operator and/or service contractor cost estimates or 
specific contracts where available. 

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NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

1  Accounting policies (continued) 

Critical accounting judgements and key sources of estimation uncertainty (continued) 

Discount rates 

Discount rates reflect the current market assessment of the risks specific to the oil and gas sector and are based on 
the weighted average cost of capital for the Group.  Where appropriate, the rates are adjusted to reflect the market 
assessment of any risk specific to the field for which future estimated cash flows have not been adjusted.  The Group 
has applied a risk adjusted discount rate of 10% for the current year (2018: 10%). 

Sensitivity to changes in assumptions 

A potential change in any of the above assumptions may cause the estimated recoverable value to be lower than the 
carrying  value,  resulting  in  an  impairment  loss.    The  assumptions  which  would  have  the  greatest  impact  on  the 
recoverable amounts of the fields are production volumes (linked to recoverable reserves) and commodity prices. 

Investments (Company) 

If  circumstances  indicate  that  impairment  may  exist,  investments  in  subsidiary  undertakings  of  the  Company  are 
evaluated using market values, where available, or the discounted expected future cash flows of the investment.   If 
these cash flows are lower than the Company’s carrying value of the investment, an impairment charge is recorded in 
the Company.  Evaluation of impairments on such investments involves significant management judgement and may 
differ from actual results - see above. 

Decommissioning 

At  31  December  2018,  the  Group  has  obligations  in  respect  of  decommissioning  a  suspended  well  on  the  Vulcan 
Satellites D&P asset, together with the acquired offshore Thames Pipeline. 

The  extent  to  which  a  provision  is  recognised  depends  on  the  legal  requirements  at  the  date  of  decommissioning, 
regulatory activity required to ensure such infrastructure meets safety and environmental requirements, the estimated 
costs and timing of the work and the discount rate applied.  

A full decommissioning estimate for the Vulcan Satellites asset remains uncertain until all development infrastructure 
has been installed and production volumes and time to abandonment has been considered.  Prior to full development 
infrastructure and commissioning, the Group will utilise technical reports, and advice from the UK Oil & Gas Authority, 
to estimate costs of abandonment. 

On acquisition of the Thames Pipeline, the Group assumed the decommissioning liability for the pipeline, which is based 
upon  a  regulatory  framework  determined  by  the  OGA.  A  discounted  cost  estimate  provision  has  been  made  in  the 
financial statements as at 31 December 2018 and this provision will continue to be reviewed on an annual basis, given 
the regulatory framework is subject to constant change and is inherently uncertain over future years.   

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. 

Fair value of share options and warrants 

The fair value of options and warrants is calculated using appropriate estimates of expected volatility, risk free rates of 
return, expected life of the options/warrants, the dividend growth rate, the number of options expected to vest and the 
impact of any attached conditions of exercise.  See above for further details of these assumptions. 

2  Segmental information 

The Group complies with IFRS 8, Operating Segments, which requires operating segments to be identified based upon 
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 UK North Sea. 

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NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

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 financial statements 

- 

Depreciation, depletion and amortisation 
Project, pre-licence and exploration expenses 
Impairment of oil and gas properties 
Personnel costs – direct expenses 
Personnel costs - share-based payments 

Net loss on settlement of liabilities 
Foreign exchange loss/(gain) 

2018 
£000 

2017 
£000 

58 

21 
922 
184 
2,115 
378 

106 
334 

50 

8 
430 
119 
1,306 
298 

1 
(333) 

Of those charges above for both depreciation and personnel costs, respective sums of £12k (2017: £5k) and £1,268k 
(2017: £869k) were reallocated and capitalised to oil and gas / pipeline properties. 

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NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

4  Personnel costs and directors' remuneration 

During the year, the average number of personnel, including contract personnel, for both the Company and Group was: 

Management / technical / operations   

of which: Directors 

2018 

Number 
18 

5 

2017 

Number 

17 

5 

Personnel costs Group and Company 

£000 

£000 

Wages, salaries, fees and other direct costs 
Social security costs 
Pension costs 
Share-based payments 

1,882 
232 
1 
378 
________ 

2,493 
________ 

1,229 
77 
- 
298 
________ 

1,604 

________ 

Note that project contract personnel, capitalised directly to project cost centres, are excluded from the above figures. 

Key management personnel are deemed to be directors, the Chief Financial Officer and Head of Corporate Finance. 

Directors’ remuneration 

Salary 

Share-based 
payment 

£000 

£000 

2018 
Total 

£000 

Salary  Share-based 

payment 

£000 

£000 

2017 
Total 

£000 

Mark Routh1 
Fiona MacAulay2 
Mark Hughes3 
David Peattie4 
Martin Ruscoe 
Andrew Hay5 
Peter Young6 
Hywel John7 
Andrew Hockey 
Charles Hendry 

Other key management 
personnel 

Total key management 
personnel 

141 
17 
90 
- 
15 
11 
- 
- 
179 
15 
_______ 
468 
_______ 

143 

611 

52 
- 
52 
- 
15 
8 
- 
- 
118 
15 
________ 
260 
________ 

193 
17 
142 
- 
30 
19 
- 
- 
297 
30 
________ 
728 
________ 

149 
- 
- 
- 
15 
18 
38 
69 
101 
12 
_______ 
402 
_______ 

79 
- 
- 
35 
20 
23 
- 
13 
19 
7 
________ 
196 
________ 

228 
- 
- 
35 
35 
41 
38 
82 
120 
19 
________ 
598 
________ 

79 

222 

97 

30 

127 

339 

950 

499 

226 

725 

1 Mark Routh resigned on 31 December 2018; 
2 Fiona MacAulay was appointed on 10 July 2018; 
3 Mark Hughes was appointed on 18 April 2018; 
4 David Peattie resigned on 21 March 2017; 
5 Andrew Hay resigned on 13 February 2018; 
6 Peter Young resigned on 21 March 2017; 
7 Hywel John was appointed on 21 March 2017, resigned on 13 September 2017 

The salary amounts are those cash amounts paid to directors and key management personnel during the year. The share-based 
payment amounts represent the fair value of options issued and/or expensed in the year, for both LTIPs and those in lieu of cash 
salary and/or director fees paid. 

In addition to the above, an amount of £470 was paid in employer pension contributions for Mark Hughes. 

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NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

4  Personnel costs and directors' remuneration (continued) 

Social security costs for the year for key management personnel were £134k (2017 - £53k). 

For  the  current  directors  at  31  December  2018,  the  service  agreements  for  Mark  Hughes,  Andrew  Hockey,  Martin 
Ruscoe and Charles Hendry provide that only a proportion of the full contractual amount will be paid in cash with the 
balance to be settled in share options granted. 

The proportions paid in 2018 for all directors were 100% for Fiona MacAulay, 75% for each of Mark Routh, Andrew 
Hockey, Mark Hughes and other key management personnel and 50% for Martin Ruscoe, Andrew Hay and Charles 
Hendry.  For each six-month interval, ending on 28 (or 29) February and 31 August respectively, the Company settles 
the difference between the reduced rate and the full rate through the granting of options over ordinary shares of the 
Company at the volume-weighted average share price over the period to which they relate.  Amounts of salary and/or 
fees  outstanding  at  31  December  2018  to  which  these  terms  relate  totalled  £76k  (31  December  2017  –  £60k)  for 
directors and key management personnel and £11k (2017 - £9k) for other personnel. These were subsequently settled 
in share options, issued on 1 March 2019. 

Directors’ interests in options on 1p ordinary shares of the Company at 31 December 2018 were as follows: 

Granted 

 Total  
31 Dec 2017 

Awarded / 
(Exercised) in 
2018 

Total  
31 Dec 
2018 

Exercise 
price 

Expiry date 

Andrew Hockey 

Mark Hughes 

Martin Ruscoe1 

Charles Hendry 

1 Sep 2017 
1 Mar 2018 
1 Mar 2018 
1 Sep 2018 

27 Jul 2018 
1 Sep 2018 

1 Sep 2017 
1 Mar 2018 
1 Sep 2018 

1 Sep 2017 
1 Mar 2018 
1 Sep 2018 

110,800 
- 
- 
- 

- 
102,537 
1,600,000 
128,700 

110,800 
102,537 
1,600,000 
128,700 

- 
- 

1,000,000 
62,417 

1,000,000 
62,417 

44,699 
- 
- 

39,745 
- 
- 

- 
34,179 
30,888 

- 
34,179 
30,888 

44,699 
34,179 
30,888 

39,745 
34,179 
30,888 

1p 
1p 
20p 
1p 

35p 
1p 

1p 
1p 
1p 

1p 
1p 
1p 

31 Aug 2022 
28 Feb 2023 
28 Feb 2028 
31 Aug 2023 

27 July 2028 
31 Aug 2023 

31 Aug 2022 
28 Feb 2023 
31 Aug 2023 

31 Aug 2022 
28 Feb 2023 
31 Aug 2023 

1 Options granted to South Riding Consultancy Limited, a company in which Martin Ruscoe is a majority shareholder and a director. 

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NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

5  Finance expense 

Interest on loans 
Interest on deferred payment creditors 
Amortisation of loan finance charges 
Current year loan finance charges 
Current year finance charges on deferred payment creditors 
Unwinding of deferred consideration provisions 

2018 
£000 

1,493 
373 
617 
49 
- 
592 

2017 
£000 

1,092 
12 
411 
44 
122 
153 

________ 

________ 

3,124 

1,834 

________ 

_________ 

6  Taxation 

a) Current taxation 

There  was  no  tax  charge  during  the  year  as  the  Group  loss  was  not  chargeable  to  corporation  tax.    Applicable 
expenditures to-date will be accumulated for offset against future tax charges. 

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   

Loss before income taxes 

Expected tax credit based on the standard rate of United Kingdom 
corporation tax at the domestic rate of 40% (2017: 40%) 

Difference in tax rates 
Expenses / (income) not deductible for tax purposes 
Income not taxable/allowable 
Unrecognised taxable losses carried forward 

Total tax expense 

b) Deferred taxation 

2018 
£000 

2017 
£000 

(5,644) 
- 
_________ 
(5,644) 

(2,751) 
- 
_________ 
(2,751) 

(2,258) 

(1,100) 

826 
137 
(2,617) 
3,912 
_________ 
- 
_________ 

(244) 
(220) 
(3,107) 
4,671 
_________ 
- 
_________ 

Due to the nature of the Group's E&P activities there is a long lead time in either developing or otherwise realising E&P 
assets. The amount of deductible temporary differences, unused tax losses and unused tax credits for which no deferred 
tax asset is recognised in the statement of financial position is £80.72 million (2017: £57.72 million). Included within this 
figure are accelerated capital allowances of £32.6 million (2017: £18.1 million). 

The Group has not recognised a deferred tax asset at 31 December 2018 on the basis that the Group would expect the 
point of recognition to be when the Group has some level of production history showing that the Group is making profits 
in line with the underlying economic model which would support the recognition. 

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NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

7  Loss per share 

Loss for the year attributable to shareholders 

2018 

£000 

2017 

£000 

(5,644) 

(2,751) 
___________  ___________ 

Weighted average number of ordinary shares – basic and diluted 

123,581,926 

109,538,499 

___________  ___________ 

Loss per share in pence – basic and diluted 

4.6p 

2.5p 

Diluted loss per share is calculated based upon the weighted average number of ordinary shares plus the  weighted 
average  number  of  ordinary  shares  that  would  be  issued  upon  conversion  of  potentially  dilutive  share  options  and 
warrants into ordinary shares.  As the result for 2018 was a loss, the options and warrants outstanding would be anti-
dilutive.  Therefore, the dilutive loss per share is considered as the same as the basic loss per share. 

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NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

8 

Intangible assets 

Group 

At cost 
At beginning of the year 

Additions 

Disposals 
Reclassified as Development & 
Production assets 

At end of the year 

Impairments and write-downs 
At beginning of the year 

DD&A 

Net Impairment 

Disposals 

At end of the year 

Net book value 
At 31 December 2018 

A t 1 January 2018 

At 1 January 2017 

Exploration 
& 
evaluation 
assets 

Company 
& IT 
software 
assets 

Total  Exploration 
& 
evaluation 
assets 

Company 
& IT 
software 
assets 

Total 

2018 

£000 

22,402 

2,351 

(34) 

- 

2018 

£000 

2018 

£000 

2017 

£000 

2017 

£000 

2017 

£000 

3 

4 

- 

- 

22,405 

2,355 

(34) 

27,923 

1,484 

- 

- 

(7,005) 

3 

- 

- 

- 

27,926 

1,484 

- 

(7,005) 

_________  _________  ________ 

________  ________  ________ 

24,719 

24,726 
_________  _________  ________ 

7 

22,402 

22,405 
________  ________  ________ 

3 

(22,217) 

- 

(184) 

34 

(2) 

(2) 

- 

- 

(22,219) 

(22,098) 

(2) 

(184) 

34 

- 

(119) 

- 

(1) 

(1) 

- 

- 

(22,099) 

(1) 

(119) 

- 

_________  _________  ________ 

________  ________  ________ 

(22,367) 

(22,371) 
_________  _________  ________ 

(4) 

(22,217) 

(22,219) 
________  ________  ________ 

(2) 

2,352 
185 

5,825 

3 
1 

2 

2,355 
186 

5,827 

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NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

8 

Intangible assets (continued) 

E&E assets at 31 December 2018 comprise the Group’s interest in the Harvey and Abbeydale appraisal prospects and 
the Goddard pre-development prospect. 

An impairment charge of £184k was recognised during the year reflecting those post 2016 drilling expenses and licence 
administration costs incurred on the previously impaired Skipper asset, Licence P1609. Licence P2122 which had been 
relinquished in 2017, was formally released from the balance sheet in 2018. 

9  Property, plant and equipment 

Group 

D&P 
assets 

Pipeline 
assets 

Company & 
admin 
assets 

Total 

D&P assets 

Company & 
admin assets 

Total 

At cost 
At beginning of the year 

Additions 
Reclassified from current 
assets 
Initial Thames Pipeline 
decommissioning security 
Reclassified from E&E 
assets (see Note 8) 
Blythe asset acquisition 
(Note 10)  
Vulcan Satellites asset 
acquisition (Note 10) 

At end of the year 

Accumulated 
depreciation 
At beginning of the year 

DD&A 

At end of the year 

Net book value 
At 31 December 2018 

At   1 January 2018 

At 1 January 2017 

2018 

£000 

2018 

£000 

2018 

£000 

2018 

£000 

21,316 

- 

9,676 

10,447 

34 

40 

21,350 

20,163 

- 

500 

- 

- 

- 

- 

- 

- 

- 

- 

200 

500 

- 

(392) 

(220) 

200 

- 

- 

(392) 

(220) 
  ________ 
30,580 
  ________ 

2017 

£000 

7,506 

825 

- 

- 

7,005 

3,078 

2,902 

2017 

£000 

2017 

£000 

30 

4 

7,536 

829 

- 

- 

- 

- 

- 

- 

- 

7,005 

3,078 

2,902 

______  _________ 

______ 

_________  _________ 

______ 

10,947 

74 

41,601 

21,316 

34 

21,350 

______  _________ 

______ 

_________  _________ 

______ 

- 

- 
  ________ 
- 
  ________ 

- 

- 

(14) 

(19) 

(14) 

(19) 

- 

- 

(6) 

(8) 

(6) 

(8) 

______  _________ 

______ 

_________  _________ 

______ 

- 

(33) 

(33) 

- 

(14) 

(14) 

______  _________ 

______ 

_________  _________ 

______ 

30,580 
21,316 
7,506 

10,947 
- 

- 

41 
20 
24 

41,568 
21,336 
7,530 

All development and production assets are awaiting approval from the OGA expected 31 March 2019. 

Amounts paid as decommission security guarantees in respect of both the Elland P039 Licence suspended well, £200k 
(paid on acquisition to the prior owners of the Vulcan Satellites in October 2016 and previously held as a current asset) 
and  the  Initial  Thames  Pipeline  Decommissioning  Security,  £500k  (paid  on  completion  of  the  Thames  Pipeline 
acquisition in April 2018) have been classified as fixed assets at 31 December 2018. 

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NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

10  Asset Acquisitions 

Vulcan Satellites 

On 28 October  2016,  the  Company announced the completion of the acquisition of Oyster  Petroleum Limited, from 
Verus  Petroleum,  comprising  the  Vulcan  Satellites.    This  has  been  accounted  for  as  an  asset  acquisition  given  the 
status of the projects held by Oyster Petroleum on the acquisition date.  Under the terms of the agreement the Company 
paid £1 million, plus interim cash adjustments payable at completion.  In accordance with the Vulcan Satellites purchase 
agreement a further £0.75 million was payable nine months after completion and was subsequently paid on 1 August 
2017.  Further payments of £3.25 million are payable upon achievement of certain further milestones which are; 

•  £1.75 million on FDP approval and  
•  £1.50 million on first gas production. 

After further work on the project during 2017 and 2018, the achievement of future milestones, which are now considered 
more certain than not and as the transaction was considered an asset acquisition, these future payments have therefore 
been recognised in the financial statements and recorded within the cost base of the Vulcan Satellites asset.  See Note 
15 for further details. 

At 1 January 
Milestone payments recognised within D&P assets  
Discount adjustment on future milestone payments 
At 31 December 

Blythe 

2018 
£000 

2,902 
- 

  (220) (Note 9) 
2,682 

2017 
£000 

- 

2,902 (Note 9) 
         - 
 2,902 

On 21 June 2016, the Company announced the completion of the additional 50% operated stake in the Blythe field, 
thereby increasing its interest to 100%.  The consideration comprised an upfront payment of £1.50 million, plus interim 
cash adjustments payable at completion with deferred consideration of a further USD 5.00 million to be paid at first gas 
production. 

Given the USD 5.00 million is dependent on achievement of a future milestone event, which is now considered more 
certain  than  not,  and  the  transaction  is  considered  an  asset  acquisition,  this  amount  of  £3,078k  has  now  been 
recognised in the financial statements and recorded within the cost base of the Blythe asset.  See Note 15 for further 
details. 

At 1 January 
Milestone payments recognised within D&P assets 
Discount adjustment on future milestone payments 
At 31 December 

2018 
£000 

3,078 
- 

2017 
£000 

- 

3,078 (Note 9) 

  (392) (Note 9) 
2,686 

          - 
  3,078 

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NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

11  Investments 

Company 

At cost 
At 1 January 2017 
Additions 

At 31 December 2017 
Additions 

At 31 December 2018 

Impairment 
At 1 January 2017 
Impairment reversal 

At 31 December 2017 
Impairment 

At 31 December 2018 

Net book value 
At 31 December 2018 

At 1 January 2018 

At 1 January 2017 

Shares 
in Group 
companies 

Loans 
to Group 
companies 

£000 

£000 

14,514 
2,902 
_________ 
17,416 
(219) 
_________ 
17,197 

- 
- 
_________ 
- 
- 
_________ 
- 

11,995 
285 
_________ 
12,280 
17,246 
_________ 
29,526 

(1,870) 
1,870 
_________ 
- 
- 
_________ 
- 

Total 

£000 

26,509 
3,187 
_________ 
29,696 

_________ 

(1,870) 
1,870 
_________ 
- 
- 
_________ 
- 

17,197 

17,416 

29,526 

12,280 

46,723 

29,696 

14,514  

10,125  

24,639 

The  Company  has  undertaken  not  to  seek  repayment  of  loans  from  other  Group  subsidiary  companies  until  each 
subsidiary has sufficient funds to make such payments however they are technically due on demand.  These loans are 
non-interest bearing. 

The impairment of £1.87 million taken on loans to Group companies in prior years was reversed in 2017. 

The Company's subsidiaries, all registered at 60 Gracechurch Street, London EC3V 0HR, are as follows: 

Directly held 
IOG Infrastructure Limited 
IOG North Sea Limited 
IOG UK Limited 
Avalonia Energy Limited (dormant) 
Avalonia Goddard Limited (dormant) 
Avalonia Abbeydale Limited (dormant) 

Country of 
incorporation 
United Kingdom 
United Kingdom 
United Kingdom 
United Kingdom 
United Kingdom 
United Kingdom 

Area of 
operation 
United Kingdom 
United Kingdom 
United Kingdom 
United Kingdom 
United Kingdom 
United Kingdom 

% 
100 
100 
100 
100 
100 
100 

IOG Infrastructure Limited completed the Thames Pipeline acquisition on 16 April 2018 and became an active subsidiary 
at that time.  All three active subsidiaries are now engaged in the business of oil and gas appraisal, development and/or 
operations in the UK North Sea. 

The three dormant companies were incorporated in 2H18 and have been made available to support any potential Group 
restructure following refinancing of the Group. 

The financial reporting periods for each subsidiary entity are consistent with the Company and end on 31 December. 

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NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

12  Interests in production licences 

All ten Group UK Offshore Production Licences, held at 31 December 2018, are owned 100% by either IOG North Sea 
Limited or IOG UK Limited. The Thames Pipeline P370 asset is owned 100% by IOG Infrastructure Limited. 

13  Other receivables and prepayments 

Group 
VAT recoverable 
Prepayments 
Debtors 
Decommissioning guarantees (Note 9) 

Company 
VAT recoverable 
Prepayments 
Debtors 

2018 
£000 

2017 
£000 

311 
361 
- 
- 
_________ 
672 
_________ 

311 
361 
- 
_________ 
672 
_________ 

285 
465 
18 
200 
_________ 
968 
_________ 

285 
465 
17 
_________ 
767 
_________ 

Included in 2018 Prepayments (both Group and Company) are financing costs of £291k (2017: £nil) incurred, cumulative 
at 31 December 2018, on progressing further refinancing for the Company and Group. These will be either transferred 
to equity (share capital issue costs), set off against debt,  or expensed to the Statement of Comprehensive Income, 
dependent upon the outcome of such refinancing. Included in 2017 Prepayments (both Group and Company) is capital 
of  £408k  representing  expenditure  incurred,  cumulative  to  date  at  31  December  2017,  on  progressing  the  Thames 
Pipeline deal acquisition and completion. This was transferred to PPE within the Group on acquisition completion of the 
Thames Pipeline facility in April 2018. 

14  Current liabilities 

Group 
Loans 
Trade payables 
Accruals 
Contingent consideration payable (see Note 15) 

Company 
Trade payables 
Accruals 
Contingent consideration payable (see Note 15) 

2018 
£000 

2017 
£000 

6,934 
5,961 
3,467 
1,709 
_________ 
18,071 
_________ 

5,961 
401 
1,709 
_________ 
8,071 
_________ 

- 
4,827 
569 
1,642 
_________ 
7,038 
_________ 

4,827 
174 
1,642 
_________ 
6,643 
_________ 

Accruals for the Group have increased significantly in the period, due to the value of SNS Project work undertaken for 
the year to 31 December 2018, which remains unbilled by vendors and suppliers as at 31 December 2018. 

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NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

14  Current liabilities (continued) 

Of the Group’s current liabilities at 31 December 2018: 

•  £6.93 million (2017: £nil) was owing to LOG consisting £5.54 million principal and £1.39 million interest. 

These loans accrue interest at LIBOR+9%. See also below Note 15; 

•  Trade payables consist Skipper deferred creditors £2.22 million (2017: £4.46 million), SNS Project creditors 

£3.42 million (2017: £0.18 million) and other creditors £0.32 million (2017: £0.19 million); 

•  Accrued expenditures consist SNS Projects £3.07 million (2017: £0.42 million) and other accruals £0.40 

million (2017: £0.15 million); and 

•  Verus Petroleum deferred consideration payable £1.71 million (2017: £1.64 million). 

15  Non-current liabilities 

Group 
Long-term loans 
Contingent consideration payable 
Decommissioning provision 

Company 
Long-term loans 
Contingent consideration payable 

2018 
£000 

22,884 
4,478 
5,640 

_________ 
33,002 
_________ 

14,054 
1,259 
_________ 
15,313 
_________ 

Long-term loans: 

The amounts drawn on LOG loans at 31 December 2018 were as follows: 

Loan Facility 
£2.75 million facility1 
£0.80 million facility1 
£10.00 million facility2 
£10.00 million facility2 
£15.00 million facility1 

Entity 

Effective Date 

Principal 

IOG North Sea Limited 

7 December 2015 

£2.75 million 

IOG North Sea Limited 

11 December 2015 

£0.80 million 

IOG North Sea Limited 

5 February 2016 

£10.00 million 

IOG plc 

IOG plc 

21 February 2018 

£10.00 million 

13 September 2018 

£7.15 million 

2017 
£000 

12,394 
4,371 
3,598 

_________ 
20,363 
_________ 

- 
1,259 
_________ 
1,259 
_________ 

Interest 

£0.66 million 

£0.19 million 

£1.67 million 

£0.67 million 

£0.14 million 

1 Warrants were issued to LOG in respect of these facilities. The valuation of these warrants is detailed in Note 16 and 
is amortised over the life of the facilities. 

2 Both these 2016 and 2018 £10.00 million loans are convertible into ordinary shares of 1p in the Company at 8p and 
19p respectively. 

The balance on the Group’s long-term loans at 31 December 2018 is represented by drawings of £30.70 million (2017: 
£11.91  million)  plus  accrued  interest  of  £3.33  million  (2017:  £1.09  million)  on  these  LOG  facilities,  less  the  non-
amortised value £4.21 million (2017: £0.61 million) of loan finance (which includes both the non-amortised amount of 
warrants as detailed above and prepaid financing costs), less the £6.93 million included in current liabilities (2017: £nil). 
Interest accrued during the year was £2.24 million (2017: £0.88 million) of which £0.75 million (2017: £0.02 million) has 
been capitalised to SNS Projects 

The interest rate on all LOG loans is LIBOR+9% for the duration of the term other than the September 2018 £15.00 
million facility where the rate increases to LIBOR+11% from 1 December 2018.  These interest rates are determined as 
market debt rates and hence no equity element has been recognised for either of the £10.00 million convertible loans. 

The LOG loans are securitised by guarantees  over the assets of  IOG North Sea Limited, IOG UK Limited and IOG 
Infrastructure Limited. These guarantees are considered to be insurance contracts and accounted for in accordance 
with the provisions of IFRS 4.  

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NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

15  Non-current liabilities (continued) 

Contingent consideration payable: 

As indicated in Note 10, the Group is required under the terms of the 2016 acquisition of the additional 50% of Blythe 
and the 2016 acquisition of Vulcan Satellites, to make further amounts payable on both the FDP approval (Vulcans), 
being a current liability expected 31 March 2019, and first gas (Blythe and Vulcans) being non-current liabilities, see 
below. 

As disclosed in the 2017 financial statements, these milestone events triggering deferred consideration payments are 
now considered to be more certain than not and a non-current amount of £4.37 million was recognised. These amounts 
have been provided for and the payments discounted to the point where the Board expect the milestones to be achieved 
based on the current development programme.  Timings for these non-current payments, pursuant to first gas, are now 
anticipated to be 31 October 2020 (Vulcans) and 31 January 2021 (Blythe). 

The movements in the year are as follows: 

at 1 January 

Additional Blythe consideration 

Additional Vulcans consideration 

Prospective adjustment for change in payment dates 
(Note 10) 

Foreign exchange 

Unwinding of discount 

at 31 December 

2018 

£000 

6,013 

- 

- 

(612) 

194 

   592 

6,187 

2017 

£000 

- 

3,078 

2,901 

- 

(118) 

   152 

6,013 

Given the timing of the expected payments, the total balance is split between current and non-current as below: 

Current contingent consideration payable (FDP 
approval) 

Non-Current contingent consideration payable (first gas) 

2018 

£000 

1,709 

4,478 

6,187 

2017 

£000 

1,642 

4,371 

6,013 

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NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

15  Non-current liabilities (continued) 

Decommissioning provision: 

at 1 January 

additions: Thames Pipeline 

At 31 December 

2018 

£000 

3,598 

2,042 

5,640 

2017 

£000 

3,598 

        - 

3,598 

The  Group  has  regulatory  and  financial  obligations  in  respect  of  decommissioning  a  suspended  well  on  the  Elland 
Licence P039 - £3.60 million (2017: £3.60 million)  and decommissioning the Thames Pipeline - £2.04 million (2017: 
£nil). 

A  full  decommissioning  estimate  for  the  Elland  suspended  well  remains  uncertain  until  an  appropriate  drilling 
programme has been reviewed and considered for the Elland development, which may include the abandonment of 
that particular well. The timing and thus payment of this decommissioning program remains inherently uncertain. As per 
Note 1, the current estimate of £3.60 million is based upon a recent technical valuation.  

The £2.04 million provision for the Thames Pipeline decommissioning obligation has been calculated on a discounted 
cash  flow  basis,  whereby  the  present  value  of  the  regulatory  marine  surveys  has  been  inflated  at  2%  and  then 
discounted at the risk-free discount rate of 1.8%. It has been estimated that the Thames Pipeline has a useful life over 
the  next  25  years;  however,  the  judgements  made  on  this  and  other  variables,  currently  provided  by  the  OGA,  are 
inherently uncertain.  

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NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

16  Equity share capital 

Authorised, allotted, issued and fully 
paid 

At 1 January 2017 
- Ordinary shares of 1p each 
Equity issued 
Creditor settlement via issue of shares 

At 31 December 2017 
- Ordinary shares of 1p each 

Equity issued 

At 31 December 2018 
- Ordinary shares of 1p each 

Number 

Share 
capital 
£000 

Share 
premium 
£000 

Total 
£000 

109,268,163 
462,206 
10,479,260 
_________ 

1,093 
5 
105 
_________ 

20,460 
- 
1,877 
_________ 

21,553 
5 
1,982 
_________ 

120,209,629 

1,203 

22,337 

23,540 

6,658,527 
_________ 

66 
_________ 

- 
_________ 

66 
_________ 

126,868,156 
_________ 

1,269 
_________ 

22,337 
_________ 

23,606 
_________ 

2017: 

During  2017,  the  Company  issued  462,206  ordinary  shares  at  a  subscription  price  of  1p  from  the  exercise  of 
management and other personnel share options. 

On 29  December 2018, the Company issued 10,479,260 ordinary shares in lieu of Skipper creditor  settlement cash 
payments to both GE Oil & Gas UK Limited and AGR Well Management Limited. 

2018: 

During  2018,  the  Company  issued  6,658,527  ordinary  shares  at  a  subscription  price  of  1p  from  the  exercise  of 
management and other personnel share options.

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NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

16  Equity share capital (continued) 

Share options and warrants 

During the current and prior year, the Company granted share options under its share option plans as follows:  

1 January 2017 

Salary/fee sacrifice options 
Salary/fee sacrifice options 
Salary/fee sacrifice options 
Options exercised 

31 December 2017 

Salary/fee sacrifice options 
LTIP options 
LTIP options 
Salary/fee sacrifice options 
Options exercised 

Number 

Price  Date of Grant 

Expiry 

11,029,143 

905,099 
5,718 
845,912 
(462,206) 

12,323,666 

483,166 
2,600,000 
1,000,000 
534,420 
(6,658,527) 

1p 

1p 
1p 
1p 

1p 

1p 
20p 
35p 
1p 

1 Mar 2018 
28 Jun 2017 
1 Sep 2017 

28 Feb 2023 
28 Jun 2022 
31 Aug 2022 

1 Mar 2018 
1 Mar 2018 
27 Jul 2018 
1 Sep 2018 

28 Feb 2023 
28 Feb 2028 
26 Jul 2028 
31 Aug 2023 

31 December 2018 

10,282,725 

9.11p 

Of the remaining personnel options, 11,029,143 outstanding at 1 January 2017, 308,860 were exercised during 2017.  
Of  those  personnel  options  granted  during  2017,  153,346  were  exercised  during  2017.  Total  personnel  options 
exercised in 2017 is thus 462,206. 

Of the remaining staff options, 12,323,66, outstanding at 31 December 2017, 6,652,717 were exercised during 2018.  
Of those staff options granted during 2018, 5,810 were exercised during 2018. Total personnel options exercised in 
2018 is thus 6,658,527. 

The  fair  value  of  these  options  exercised  was  transferred  from  the  Share-based  Payment  Reserve  to  Accumulated 
Loss. 

All salary/fee sacrifice options outstanding at 31 December 2018 were issued at an exercise price of 1p per share and 
carry no additional performance conditions. All LTIP options outstanding at 31 December 2018 were issued to option 
holders with, other than the target price, several performance criteria including the delivery, measurement, control and 
management of an appropriate HSE statement and policy together with a Group-wide HSE focussed culture.  

The remaining average contractual life of the 10,282,725 options outstanding at 31 December 2018 (2017 – 12,323,666) 
was 4.91 years at that date (2017 – 2.14 years) of which 6,682,725 were exercisable at 31 December 2018 (2017 – all 
12,323,666 options were exercisable at 31 December 2017). 

The weighted average exercise price of the options remaining was 9.11p at 31 December 2018 (2017 – 1p). 

A  further  612,856  options  were  exercised  during  March  2019;  however,  no  further  share  options  have  been  issued 
during 2019 as at the date of this report.  

The Company calculates the value of personnel salary/fee sacrificed share-based compensation as the actual value of 
the sacrificed amount.  This is deemed to be the fair value of such awards.  The fair value of sacrificed salary/fee share 
options  granted  in  2018  is  calculated  as  £236k  (2017  -  £298k)  and  this  has  been  charged  to  the  Statement  of 
Comprehensive Income.  The exercise price of such awards was determined as 1p (2017 – 1p). 

The Company calculates the fair value of LTIP share-based compensation using a Black-Scholes options pricing model. 
The fair value of LTIP options granted in 2018 is calculated as  £633k (2017 - £nil), of which £141k (2017 - £nil) has 
been  charged  to  the  Statement  of  Comprehensive  Income,  being  the  amortised  amount  over  the  vesting  period 
attributable to the current year. The exercise price of these options has been determined as 20p for those issued on 1 
March 2018 and 35p for those issued on 27 July 2018. 

Further details for directors are provided in Note 4. 

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NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

16  Equity share capital (continued) 

The Company has granted warrants in the current year as follows (2017: lapsed warrants): 

Number 

Price  Date of Grant 

Expiry 

1 January 2017 

14,103,397 

10.48p 

Lapsed – Darwin Strategic 

(326,087) 

31 December 2017 

13,777,310 

9.64p 

London Oil & Gas Ltd 

20,000,000 

32.18p 

13 Sep 2018 

12 Sep 2023 

31 December 2018 

33,777,310 

22.98p 

326,087 warrants awarded to Darwin Strategic in June 2014 expired and lapsed on 4 September 2017. Accordingly, 
the fair value of these awards was transferred from the Share-based Payment Reserve to Accumulated Loss. 

The  Company  calculates  the  value  of  share-based  compensation  using  the  Black-Scholes  option  pricing  model  to 
estimate the fair value of warrants at the date of grant. 

The fair value of 20,000,000 warrants granted to London Oil & Gas Limited on 13 September 2018 was calculated as 
£4.19 million, all of which was recognised as an issue cost of the £15 million LOG loan facility, held at amortised cost 
using the effective interest method. The exercise price of these warrants was determined as 32.18p. 

The following assumptions were applied in the LOG warrant award calculation: 

Risk free interest rate 
Dividend yield 
Weighted average life expectancy 
Volatility factor 

1.50% 
nil 
4 years 
96.45% 

A volatility of 96.45% has been applied based upon the Company’s share price over the period from the Company’s 
listing on AIM on 30 September 2013 until 13 September 2018. 

The  remaining  average  contractual  life  of  the  33,777,310  warrants  outstanding  at  31  December  2018  (2017  – 
13,777,310) was 3.18 years at that date (2017 – 1.97 years).  All such warrants were exercisable at 31 December 2018. 

The weighted average exercise price of the warrants remaining was 22.98p at 31 December 2018 (2017 – 9.64p).  No 
further warrants have been issued or exercised as at 28 March 2019. 

17  Cash and cash equivalents 

Group and Company 

Cash at bank 

2018 
£000 

2017 
£000 

702 
_________ 

145 
_________ 

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NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

18  Company loss for the year 

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 loss for the year was £2,604k (2017: profit £1,176k). 

19  Operating Leases 

Minimum lease payments under operating leases recognised 
as a gross expense in the year 

Group 

2018 
£000 

73 

2017 
£000 

64 

Minimum lease payments under operating leases recognised 
as capital expenditure in the year 

87 

- 

Company 
2018 
£000 

73 

- 

2017 
£000 

64 

- 

At 31 December 2018, outstanding commitments for operating lease payments fall due as follows: 

Within one year 
In the second to fifth year inclusive 

Group 

2018 
£000 

187 
454 

2017 
£000 

73 
200 

Company 
2018 
£000 

2017 
£000 

73 
126 

73 
200 

Operating lease payments represent the Group and Company’s share of office lease rental payments at 10 Arthur 
Street, London EC4R 9AY, together with the Crown Estate lease for the rights for the Thames Pipeline to cross the 
foreshore at Bacton. 

____________________________________________________________________________________________________________________ 

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NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

20  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.  At this stage, no formal policies have been put in place to hedge 
the Group and Company's activities to the exposure to currency risk or interest risk and no derivatives or hedges were 
entered during the year. 

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  its  objectives  and  policies  to  the  Group's  finance 
function.  The Board receives regular reports from the Chief Financial Officer 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 may arise are 
as follows: 

•  Cash and cash equivalents 
•  Loans 
•  Trade and other payables 

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NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

20  Financial instruments (continued) 

Liquidity risk 

The Group 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 supplemented by 
borrowing  facilities  sufficient  to  meet  expected  requirements  for  a  period  of  at  least  twelve  →  eighteen  months  for 
personnel costs, overheads, working capital and as commitments dictate for capital spend. 

Rolling cash forecasts, which are essentially the current budgeting and reforecasting process, identifying the liquidity 
requirements of the Group and Company, are produced frequently.  These are reviewed  and approved regularly by 
management and the Board to ensure that sufficient financial resources are made available. The Group’s oil and gas 
exploration and development activities are currently funded through the Company. The Board has identified that further 
funds will be required within the next twelve months and are implementing various courses of action as detailed in the 
Finance Review to ensure that adequate funding is available. 

2018 Group 

Current financial assets 
Cash and cash equivalents 

Current financial liabilities 
Trade and other payables 
Deferred consideration 
Accruals 
Loans 

Non-current financial liabilities 
Deferred Consideration 
Loans 
Decommissioning Provisions 

2017 Group 

Current financial assets 
Cash and cash equivalents 

Current financial liabilities 
Trade and other payables 

Non-current financial liabilities 
Provisions 
Loans 

6 months 
or less 
£000 

702 
________ 

702 
________ 

6,017 
1,750 
3,467 
3,138 

- 
- 
- 
________ 

14,372 
________ 

145 
________ 

145 
________ 

Greater than 
6 months, less 
than 12 months 
£000 

Greater 
than 
12 months 
£000 

Total 
undiscounted 

£000 

Carrying 
amount 
£000 

- 
_________ 

- 
________ 

702 
_________ 

702 
________ 

- 
_________ 

- 
________ 

702 
_________ 

702 
________ 

- 
- 
- 
4,213 

- 
- 
- 
- 

6,017 
1,750 
3,467 
7,351 

5,961 
1,709 
3,467 
6,934 

- 
- 
- 
_________ 

5,426 
34,118 
6,291 
________ 

5,426 
34,118 
6,291 
_________ 

4,478 
22,884 
4,331 
________ 

4,213 
_________ 

45,835 
________ 

64,420 
_________ 

49,764 
________ 

- 
_________ 

- 
________ 

145 
_________ 

145 
________ 

- 
_________ 

- 
________ 

145 
_________ 

145 
________ 

1,225 

5,979 

208 

7,412 

7,038 

- 
- 
________ 

1,225 
________ 

- 
- 

5,206 
15,705 
________ 

_________ 

5,206 
15,705 
_________ 

4,371 
13,000 
________ 

5,979 
_________ 

21,119 
________ 

28,323 
_________ 

24,409 
________ 

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NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

20  Financial instruments (continued) 

2018 Company 

Current financial assets 
Cash and cash equivalents 
Loans to Group companies 

Current financial liabilities 
Trade and other payables 
Deferred Consideration 
Accruals 

Non-current financial liabilities 
Deferred Consideration 
Loans 

2017 Company 

Current financial assets 
Cash and cash equivalents 
Loans to Group companies 

Current financial liabilities 
Trade and other payables 

Non-current financial liabilities 
Deferred Consideration 

6 months 
or less 
£000 

702 
- 
________ 

702 
________ 

6,017 
1,750 
402 

- 
- 
________ 

8,169 
________ 

145 
- 
________ 

145 
________ 

Greater than 
6 months, less 
than 12 months 
£000 

Greater 
than 
12 months 
£000 

Total 
undiscounted 

£000 

Carrying 
amount 
£000 

- 
- 
_________ 

- 
29,526 
________ 

702 
29,526 
_________ 

702 
29,526 
________ 

- 
_________ 

29,526 
________ 

30,228 
_________ 

30,228 
________ 

- 
- 
- 

- 
- 
- 

6,017 
1,750 
402 

5,961 
1,709 
402 

- 
- 
_________ 

1,500 
23,543 
________ 

1,500 
23,543 
_________ 

1,259 
14,054 
________ 

- 
_________ 

25,043 
________ 

33,212 
_________ 

23,385 
________ 

- 
- 
_________ 

- 
12,280 
________ 

145 
12,280 
_________ 

145 
12,280 
________ 

- 
_________ 

12,280 
________ 

12,425 
_________ 

12,425 
________ 

1,038 

5,979 

- 

7,017 

6,643 

- 
________ 

1,038 
________ 

- 
_________ 

1,500 
________ 

1,500 
_________ 

1,259 
________ 

5,979 
_________ 

1,500 
________ 

8,517 
_________ 

7,902 
________ 

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NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

20  Financial instruments (continued) 

Credit risk 

Credit risk arises principally from the Group’s and Company’s other receivables, cash and cash equivalents, and loans 
to subsidiaries (Company). It is the risk that the counterparty fails to discharge its obligation in respect of the instrument. 
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.  All  funds  are  currently  placed  with  the  National 
Westminster  Bank  plc.  IFRS  9  provides  an  updated  framework  for  the  accounting  recognition  and  treatment  of  the 
Group’s  and  Company’s  other  receivables  held.  The  Group  and  Company  adopted  IFRS  9  in  this  financial  year. 
Management have chosen not to apply the standard retrospectively on the basis of the impact not being material, both 
in terms of impairment or additional Expected Credit Losses (‘ECLs’) recognised. The Company has assessed that the 
resulting impact on the financial statements is not material.   

The Group made investments and advances into subsidiary undertakings during the year and these mostly relate to the 
funding of the SNS Hub Development Projects, and the Company expects to recover these loans when these Projects 
start to generate positive cash flows. Loans to subsidiary undertakings are recognised at amortised cost in accordance 
with IFRS 9. The loans have no maturity date and are not repayable until the respective subsidiary entity has sufficient 
cash to repay the loan. The Board has accordingly assessed the expected repayment dates based on the strategic 
forecasts approved by the Board.  

As at the Balance Sheet date, the Group and Company do not have any other external receivables (2017: £17k).  

IFRS 9 introduces a new impairment model that requires the recognition of ECLs on financial assets at amortised cost. 
The ECL computation must also consider forward looking information to recognise impairment allowances earlier. IFRS 
9 consequently is likely to increase the volatility of impairment allowances as the economic outlook changes although 
cash flows and cash losses are expected to remain unchanged. Intercompany exposures, where appropriate, are also 
in scope under IFRS 9. The Company has assessed the loans made to subsidiary undertakings on the basis of the 
relevant subsidiaries’ long-term strategic forecasts and alongside the Board’s commercial rationale for providing the 
specific  loan.  The  loans  are  not  repayable  on  demand  and  are  expected  to  be  repaid  once  the  underlying  assets 
progress  into  the  production  phase  when  cash  inflows  are  generated.  Based  on  the  methodology  set  out  by  the 
standard, the Board has for each intercompany loan, assessed the probability of the default, the loss given default and 
the  expected  exposure  to  compute  the  ECLs.  The  Board  has  incorporated  relevant  medium  and  long-term 
macroeconomic forecasts in their  assessment which is included as  a principle consideration  in the entity’s  strategic 
forecasts. Such factors include oil price sensitivities, funding requirements, reserve and resource estimates. The Board 
has concluded that any ECLs to be recognised are not material to these financial statements and that there has been 
no significant increase in credit risk that would warrant the recognition of a material provision. Accordingly, the Company 
has  not  recognised  any  expected  credit  loss  for  the  balances  owed  by  subsidiary  undertakings  recognised  on  the 
Balance  Sheet  at  amortised  cost.  The  Group  and  Company  do  not  hold  any  collateral  as  security  for  any  external 
financial instruments, or otherwise. 

The maximum exposure to credit risk is the same as the carrying value of these items in the financial statements as 
shown below. 

Other receivables 

Loans to subsidiaries 

Cash and cash equivalents 

Group 

Company 

  2018 
  £000 

2017 
£000 

2018 
£000 

2017 
£000 

- 

- 

  702 

17 

- 

145 

- 

17 

29,526 

12,280 

702 

145 

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NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

20  Financial instruments (continued) 

Cash flow interest rate risk 

Cash is essentially non-interest bearing. Loans and trade creditors are subject only to fixed interest rates (albeit with 
low  volatility  LIBOR+  variation);  accordingly,  commercial  interest  rates  would  have  no  significant  impact  upon  the 
Group’s and Company’s result for the year ended 31 December 2018 (nor 31 December 2017). 

Foreign exchange risk 

At 31 December 2018, the Group’s and Company’s monetary assets and liabilities are denominated in GBP Sterling, 
the functional currency of the Group and each of its subsidiaries, other than USD 1,848k (£1,451k), EURO 717k (£644k) 
and NOK 891k (£81k) of current liabilities held by the Group and Company and USD 4,100k (£3,219k) of long-term 
liabilities held by the Group. This exposure gives rise to net currency gains and losses recognised in the Statement of 
Comprehensive Income. 

A 10% fluctuation in the GBP sterling rate compared to USD would give rise to a £425k gain or £519k loss in the Group’s 
Statement of Comprehensive Income and a £132k gain or £161k loss in the Company’s Statement of Comprehensive 
Income. 

A 10% fluctuation in the GBP sterling rate compared to EURO would give rise to a £58k gain or £72k loss in the Group 
and Company’s Statement of Comprehensive Income. 

A 10% fluctuation in the GBP sterling rate compared to NOK would give rise to a £8k gain or £9k loss in the Group and 
Company’s Statement of Comprehensive Income. 

The Group has no current revenues. The Group and the Company's cash balances are maintained in GBP Sterling 
which is the functional and reporting currency of each Group company.  Consequently, no formal policies have been 
put in place 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  transactions  in  their  functional  currency  wherever  possible.    The  Group 
considers this minimises any foreign exchange exposure. 

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. 

Capital management 

The  primary  objective  of  the  Group’s  capital  management  is  to  maintain  appropriate  levels  of  funding  to  meet  the 
commitments of its forward programme of appraisal and development expenditure, and to safeguard the entity’s ability 
to  continue  as  a  going  concern  and  create  shareholder  value.    The  Director’s  consider  capital  to  include  equity  as 
described in the Statement of Changes in Equity, and loan notes, as disclosed in Notes 14 and 15.  Prior to 1 January 
2016, the Group has been principally equity financed, reflecting the early stage and consequent relatively high risk of 
its activities.  During 2016, 2017 and 2018 the Group made drawings of £30.70 million against its London Oil & Gas 
Limited loan facilities. 

Borrowing facilities 

The Group had £34.03 million of borrowings outstanding at 31 December 2018 (2017 - £13.00 million) including accrued 
interest.  It had in place further undrawn debt on the London Oil & Gas Limited facilities of a total £7.85 million excluding 
accrued  interest,  at  that  date.  A  further  £3.925  million  was  drawn  in  January  2019  and  £3.925  million  outstanding 
remains.  

Hedges 

The Group did not hold any hedge instruments at the reporting date. 

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NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

21  Financial commitments and contingent liabilities 

The  Group  has  contracted  capital  expenditure  in  the  current  period  as  part  of  the  appraisal  and  development  work 
programmes for the licences in which it participates: 

Authorised but not contracted 
Contracted 

2018 
£000 

2017 
£000 

- 
1,287 
_________ 

7,560 
1,358 
_________ 

1,287 
_________ 

8,918 
_________ 

All 2018 contracted amounts relate to contracted UKCS Licence Fee and associated OGA Levy payments (estimate) 
together with contracted service awards to suppliers procured for the development of the Group’s SNS assets (Harvey 
well  long  lead  items,  project  personnel  and  offshore  engineering  duty  holder  commitments).  There  are  no  further 
authorised amounts, at 31 December 2018, as the Group awaits the outcome of discussions and negotiations on Group 
fund raising and refinancing.  

All 2017 capital commitments, in addition to contracted UKCS Licence Fee and associated OGA Levy payments, were 
owing to 2018 activities committed at 31 December 2017 in conjunction with the Group's participation in its UK North 
Sea operations. 

Skipper: 

As detailed in Note 24, Subsequent Events, the Skipper licence P1609 was relinquished in February 2019, discharging 
all contingent liabilities at that date. 

Thames Pipeline: 

Security in the sum of £0.50 million, the Initial Thames Decommissioning Pipeline Security Amount,  was provided on 
completion of the Thames Pipeline SPA in April 2018. 

Further security in the sum of £2.50 million, the Thames Decommissioning Pipeline Security Amount, is to be provided 
on the earlier of: 

•  one month after the variation issued by the OGA to the Pipeline Works Authorisation to allow for the tie-in of 

one or more of the Group’s fields; or 

•  at the date of sale or alternative use of the Thames Pipeline 

Cross-Guarantees: 

The  Company  acts  as  guarantor  to  its  subsidiary  IOG  North  Sea  Limited  and  its  facilities  with  LOG.  These  cross 
guarantees are considered insurance contracts in accordance with IFRS4. 

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NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

22  Related party transactions 

Details of directors’ and key management personnel remuneration are provided in Note 4. 

Mark Hughes, COO, acquired 178,000 ordinary shares of 1p each in the capital of  the Company and is the current 
holder of these shares at 31 December 2018. Mark is also the current holder of 1,062,417 share options at 31 December 
2018; these were also acquired during the year. 

South Riding Consultancy Limited (‘SRCL’) of which Martin Ruscoe is a director acquired a further 65,067 share options 
(2017: 113,254) and exercised nil share options (2017: 148,113) during the year. SRCL is the current holder of 148,113 
shares and 109,766 share options as at 31 December 2018. 

Details of loans and interest charged by LOG are detailed in Notes 14 and 15.  The relevant loans were issued to both 
IOG North Sea Limited and the Company. 

23  Notes supporting statements of cash flows 

Details of significant non-cash transactions 

Equity consideration for settlement of liabilities 

Group – Loans and borrowings 

At 1 January 2017 

Drawdowns (Repayments) 

Effects of foreign exchange 

Debt converted into equity 

Debt converted into current liability 

Amortisation of finance fees 

Interest accruing in period 

At 31 December 2017 

2018 
£000 
- 

2017 
£000 
1,982 

Current 
 loans and 
borrowings 
£000 

Non-current  
loans and 
borrowings 
£000 

Total 
 loans and 
borrowings 
£000 

4,076 

(2,019) 

(15) 

(1,750) 

(527) 

- 

235 

- 

4,733 

6,372 

- 

- 

- 

411 

878 

8,809 

4,353 

(15) 

(1,750) 

(527) 

411 

1,113 

12,394 

12,394 

Of  the  interest  accruing  in  the  period,  £22k  was  capitalised  to  D&P  assets,  leaving  £1.09  million  expensed  to  the 
Statement of Comprehensive Income (Note 5). 

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NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

23  Notes supporting statements of cash flows (continued) 

Group – Loans and borrowings 

At 1 January 2018 

Drawdowns (Repayments) 

Debt converted into current liability 

Issue of warrants and finance fees 

Amortisation of finance fees 

Interest accruing in period 

Current 
 loans and 
borrowings 
£000 

Non-current  
loans and 
borrowings 
£000 

Total 
 loans and 
borrowings 
£000 

- 

- 

6,934 

- 

- 

- 

12,394 

18,787 

(6,934) 

(4,225) 

617 

2,245 

12,394 

18,787 

- 

(4,225) 

617 

2,245 

29,818 

At 31 December 2018 

6,934 

22,884 

Of the interest accruing in the period, £752k was capitalised to D&P and Pipeline assets, leaving £1.49 million expensed 
to the Statement of Comprehensive Income (Note 5). 

Company – Loans and borrowings 

At 1 January 2018 

Drawdowns (Repayments) 

Issue of warrants and finance fees 

Amortisation of finance fees 

Interest accruing in period 

At 31 December 2018 

Current 
 loans and 
borrowings 
£000 

Non-current  
loans and 
borrowings 
£000 

Total 
 loans and 
borrowings 
£000 

- 

- 

- 

- 

- 

- 

- 

17,150 

(4,224) 

314 

814 

- 

17,150 

(4,224) 

314 

814 

14,054 

14,054 

The Company was not subject to loans and borrowings in 2017. 

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NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 (CONT’D) 

24  Subsequent events 

The key events after 31 December 2018 are as follows: 

Fiona MacAulay was appointed non-executive Chair effective 1 January 2019. 

Robin Storey was appointed General Counsel and Company Secretary on 9 January 2019. 

Esa Ikaheimonen was appointed Non-Executive Director and Chair of the Audit Committee on 14 March 2019. 

On 4 January 2019, it was announced that the Financial Conduct Authority (‘FCA’) was investigating the affairs of LCAF. 
LCAF was subsequently put into administration during February 2019. Furthermore, LOG entered administration on 19 
March 2019. The Company has engaged with LOG and LCAF administrators who have agreed to restructure the LOG 
loans and have stated publicly that they will support IOG and the LOG/LCAF administration process will have no impact 
on the Company’s business. 

The Skipper licence, P1609, was formally relinquished on 11 February 2019, as determined by the OGA. 

The Company announced on 25 February 2019 that it had initiated a focused farm-out process with a carefully selected 
shortlist of motivated and well-funded potential farm-in partners. 

The Company announced on 5 March 2019 that it had received and promptly rejected an unsolicited pre-conditional 
proposal from RockRose Energy plc (‘RockRose’) in respect of a possible cash offer for the entire issued share capital 
of the Company at a price of 20 pence per Company share. Subsequently on 25 March 2019, the Company announced 
that RockRose had approached the joint administrators of LOG to acquire the entire debt and accrued interest due to 
LOG from the Company for the sum of £40 million in cash. The Board concluded to reject the proposal unequivocally 
and continue to state that this subsequent offer is a further transparent attempt by RockRose to deny both LOG’s and 
LCAF’s creditors, and by extension to LCAF’s mini-bond holders, of fundamental value, seeking instead to reserve that 
value for the benefit of RockRose and those directly associated with RockRose. RockRose withdrew their proposal on 
1 April 2019. 

The Company announced on 1 April 2019 that it had conditionally placed 165,795,050 new ordinary shares of £0.01 
each in the capital of the Company by way of a placing at a price of 10 pence per Ordinary Share to raise gross proceeds 
of approximately £16.6 million. In addition, a further proposed issue of  3,250,000 new Ordinary Shares by way of a 
subscription  at  a  price  of  10  pence  per  Ordinary  Share  by  certain  directors  and  key  executives  of  the  Company. 
Furthermore, the Company announced that it intends to launch an open offer to shareholders to raise approximately £2 
million through the issue  of approximately  20,128,580 new Ordinary Shares, also at an issue price of 10 pence per 
share. This Fundraising is conditional, inter alia, upon the approval of shareholders at a general meeting of the Company 
that will take place on or around 23 April 2019 and the admission of the relevant new Ordinary Shares to London AIM. 

The Company announced on 1 April 2019, that concurrent to the Fundraising announcement above, the Company has 
restructured its debt with LOG (in administration) by rescheduling by twelve months, initially to January 2020, an amount 
of £7.1 million of debt service due to LOG, the conversion of £1.64 million in interest due from LOG’s existing convertible 
debt  into  20,497,204  new  Ordinary  Shares  and  a  one  year  maturity  extension  to  existing  warrants  being  those 
13,277,310 warrants which were granted by the Company in December 2015. 

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INFORMATION & ADVISERS 

INFORMATION AND ADVISERS 

Country of incorporation of parent company 

United Kingdom 

Legal form 

Public limited company with share capital 

Directors 

Fiona MacAulay 
Andrew Hockey 
Mark Hughes 
Rt. Hon. Charles Hendry 
Martin Ruscoe 
Esa Ikaheimonen  

General Counsel and Company Secretary  

Robin Storey 

Registered office 

60 Gracechurch Street 
London EC3V 0HR 

Company registered number 

07434350 

Auditors 

BDO LLP  
55 Baker Street, 
London W1U 7EU 

Legal advisers 

Fieldfisher LLP 
Riverbank House 
2 Swan Lane 
London EC4R 3TT 

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■  Registered Address 

 6th Floor 
60 Gracechurch Street 
London EC3V 0HR

■  Office 

 10 Arthur Street 
London EC4R 9AY

■   Contact  

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ANNUAL REPORT & ACCOUNTS 2018

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Job Name: 96798z 2018 Annual Report