ANNUAL REPORT AND ACCOUNTS 2016
A Transformational Year
JERSEY OIL AND GAS PLC
CONTENTS OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
Highlights and Outlook
Chairman’s Statement
Chief Executive Officer’s Report
Strategic Report
Corporate Governance
Board of Directors
Report of the Directors
Directors’ Responsibilities
Remuneration Report
Independent Auditors’ Report
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Page
1
2
3-4
5-6
7-9
10
11-12
13
14-15
16-17
18
19
20
21
Notes to the Consolidated Financial Statements
22-32
Company Financial statements for Jersey Oil and Gas plc
33-41
JERSEY OIL AND GAS PLC
HIGHLIGHTS AND OUTLOOK
FOR THE YEAR ENDED 31 DECEMBER 2016
Highlights
• Successful, high impact, promoted farm-out of interest in Licence P.2170, Blocks 20/5b & 21/1d (“Licence P.2170) to Statoil (U.K.)
Limited (“Statoil”), which contains the material Verbier prospect
o
Jersey Oil & Gas (“JOG”) retained an 18% equity interest with Statoil to fund all costs up to US$25 million in respect of the
first exploration well
o US$540,000 received by JOG after payment made to the Athena Consortium Partners
o
o
o
JOG benefits from an additional 10% carry from co-venturer CIECO Exploration and Production (UK) Limited ("CIECO")
Site survey completed on Verbier prospect
Firm well commitment made to the Oil & Gas Authority
• Successful farm-out of JOG’s 50% interest in Licence P.1989, Blocks 14/11, 12 & 16, to Azinor Catalyst Limited (“Azinor”) in return for
contingent payments of up to US$4 million
•
Interests in Licence P.1610, Block 13/23a ("Liberator"), Licence P.1666, Block 30/11c ("Romeo") and Licence P.1889, Blocks 12/26b
& 27 ("Niobe") relinquished, with Niobe relinquishment effective 31st December 2015
• A very active year for JOG engaged in pursuing multiple asset acquisition opportunities
• Oversubscribed equity placing of £1.6m (gross) in November 2016 to new and existing shareholders
• Cash at 31 December 2016 of £1.9m
• Arden Partners plc appointed as Broker
Post period end
• The Company has conducted further technical studies to improve and update it’s understanding of the Verbier prospect
•
Independent assessment of resource estimates in relation to Licence P.2170 and its associated prospects (Verbier and Cortina), has
been completed by ERC Equipoise Ltd ("ERCE")
o Mean Prospective Resources attributed to Licence P.2170 for Verbier increased to 162 Million barrels of oil equivalent
("MMboe") from 118 MMboe and the chance of success increased to 29% from 26%
o Contingent Resources attributed to Verbier for discovery well 20/5a-10Y
o Mean Prospective Resources attributed to Licence P.2170 for the Cortina prospect increased to 124 MMboe from 91
MMboe with a chance of success of 19%
• Statoil has awarded a contract to Transocean Drilling UK Limited for the semisubmersible rig, Transocean Spitsbergen
• Azinor has stated its intention to drill an exploration well to test the Partridge prospect (previously named Homer) on Licence P.1989,
Blocks 14/11, 12 &16 later this year
• BMO Capital Markets appointed as Joint Broker
Outlook
• Exploration well to be drilled on Verbier prospect in Summer 2017
• Discussions continue with a major bank and other funding partners, who remain keen to support JOG as possible providers of capital
for acquired production assets
• The Group continues to work actively on several acquisition opportunities, with the aim of securing UK producing oil and gas assets
Page 1
JERSEY OIL AND GAS PLC
CHAIRMAN’S STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2016
Corporate Activities
The year ended 31 December 2016 saw Brent Crude oil trading at the upper end of a US$30 to US$55 per barrel price range, with
companies continuing to adjust to a new pricing environment. In the UK Continental Shelf (UKCS”) region of the North Sea we are seeing
some companies seeking to rationalise their portfolios. During the year, Jersey Oil and Gas Plc (“JOG” or the “Company”) has been in
many data rooms and evaluated in excess of 40 field interests, with a view to acquiring production assets. In so doing, we continue to
apply a disciplined approach to any offers we make and seek a pragmatic treatment of field abandonment liabilities. We continue to
receive strong shareholder interest and support for our production asset acquisition strategy and have indicative bank funding support.
The other part of our strategy is to rationalise and, if possible, add value to our legacy asset portfolio. In October 2016, we completed a
farm-out of part of our interest in Licence P.2170 Blocks 20/5b & 21/1d (“Verbier”) to Statoil. The Company retains an 18 per cent.
interest in this licence area and benefits from a 10 per cent. carry funded by its co-venturer CIECO. A Competent Person's Report was
completed in March 2017, which indicated a significant uplift in Mean Prospective Resources for Verbier, compared to the previously
announced unaudited management estimates, together with a modest increase in the chance of success for this prospect, which was
most encouraging.
We also successfully farmed out JOG’s 50 per cent. interest in Licence P.1989, Blocks 14/11, 12 & 16 to Azinor in return for contingent
payments of up to US$4 million. Azinor has recently announced the completion of a site survey for a prospect on this licence area in
preparation for a well, intended to be drilled later in 2017. Further details of both the Statoil and Azinor farm-outs are set out in the Chief
Executive Officer’s Report.
Financial Results
Our pre-tax loss for the year amounted to £793,439, down from £1.4 million in 2015. This reflects our continuing tight control of costs, part
of which involved the Directors and staff agreeing to salary cuts of up to 50% for nine months of the year. Salary levels have since been
restored, although they remain low by industry norms.
We continue to operate from our offices in Jersey and plan to re-open a London office when circumstances allow.
Equity Placing
In November 2016, the Company raised £1.6 million (before expenses) by way of a placing with new and existing shareholders at a
placing price of 110 pence per share. The placing was well received by investors and was oversubscribed. As part of this placing, the
directors and certain members of senior management subscribed for 120,454 shares at the placing price, raising £0.13 million (before
expenses). The net proceeds are being utilised to fund technical studies and evaluation work to improve the Company’s understanding of
the Verbier prospect and provide additional working capital.
As at 31 December 2016, available cash amounted to approximately £1.9m.
Following completion of the placing, Arden Partners plc were appointed as broker to the Company. Subsequently, in March 2017, BMO
Capital Markets were appointed as joint brokers.
Outlook
We look forward to the drilling of the Verbier prospect exploration well later this year. Although we believe the prize for success may be
significant, as is the case with exploration wells of this nature, success is not assured. We also have a contingent interest in the outcome
of a well that Azinor has stated it plans to drill later this year. Alongside this, we will continue to pursue our production asset acquisition
strategy. We have observed in the market some notable large scale asset acquisition transactions and are confident that this can be
replicated by the Company at prices which yield a good return for shareholders.
On behalf of the Board, I would like to welcome the new shareholders who supported our equity placing in 2016 and to thank all of our
employees who have continued to work on our exploration and production plans, which I am confident have the potential to provide
long-term shareholder value.
Marcus Stanton
Non-Executive Chairman
20 April 2017
Page 2
JERSEY OIL AND GAS PLC
CHIEF EXECUTIVE OFFICER’S REPORT
FOR THE YEAR ENDED 31 DECEMBER 2016
Transformational Year
2016 proved to be another transformational year for JOG, during which we successfully achieved what we believe to be the first promoted
farm-out of an exploration licence in the UK North Sea in over two years. Statoil is now established as operator of Licence P.2170 and we
eagerly await the drilling of Verbier, a material and moderately risked prospect. With a rig contract announced post period end, Verbier is
now expected to be drilled during summer 2017. We continue to be involved in multiple sales processes and are confident that we are
well placed to deliver further shareholder value through our production asset acquisition strategy.
Successful High Impact Farm-Out to Statoil and confirmation of the drilling of the Verbier prospect
Together with CIECO, we successfully farmed-out a 70% interest in Licence P.2170, Blocks 20/5b and 21/1d to Statoil and retain an 18
per cent. interest in this licence area. Against the backdrop of low oil prices and a dearth of deal flow at that time, this was a significant
achievement for the Company and, we believe, demonstrates the value potential that the Verbier prospect holds for the Company.
Statoil, as the Licence’s operator, has acquired the necessary site survey and has recently contracted the Transocean Spitsbergen for
the drilling, this summer, of an exploration well on the Verbier prospect. JOG has conducted further technical studies to improve and
update it’s understanding of this prospect. Subsequently, we contracted ERCE, to review its latest geological, geophysical and
petrophysical interpretations and produce a Competent Person’s Report on the P.2170 licence area and its Verbier and Cortina
prospects. We were pleased to report an increase in the Mean Prospective Resources attributed to Licence P.2170 for the Verbier
prospect to 162 MMboe from 118 MMboe and in the chance of success from 26% from 29%. In addition, Contingent Resources relating
to the historic third party discovery well 20/5a-10Y were identified. With respect to Cortina, the Mean Prospective Resources were
increased to 124 MMboe from 91 MMboe with a chance of success of 19%.
Pursuant to the terms of the farm-out, Statoil is funding all costs up to US$25 million in respect of the drilling of the Verbier exploration
well and following commencement of the work programme for this well, the Company is also benefiting from a 10 per cent. carry funded
by CIECO in relation to the well programme’s costs.
Production Focused Acquisition Strategy
Over the past 18 months, JOG has significantly increased its corporate intelligence with respect to its objective of establishing a
well-balanced portfolio of production assets. This knowledge base gives us a competitive strength with respect to the identification,
evaluation and negotiation of potential asset acquisitions. We have also built strong relationships with potential financial partners, who
have been and continue to be actively involved with JOG in multiple sales processes.
The UK government’s recent initiative to set up a panel of industry experts to recommend a possible way forward regarding the transfer of
tax history from vendor to purchaser, if implemented, will be of significant benefit to stimulating activity, leading to a level playing field for
the application of decommissioning tax relief. We would welcome this action from the government, which we believe would greatly help
the Oil & Gas Authority’s committed strategy to MER (Maximise Economic Recovery) within the UK North Sea.
We have observed an acceleration of deal-flow in the last few months within the North Sea which is encouraging. Our investment criteria
remains disciplined both technically and commercially. I am optimistic that we will succeed in securing acquisitions that will provide
shareholders with the prospect of significant long term value creation.
Other Licence Activities
Early in the first half of the year, we were pleased to announce the farm-out of our 50 per cent. interest in Licence P.1989, Blocks 14/11,
12 & 16 to Azinor which also acquired the remaining 50 per cent. Interest from Norwegian Energy Company UK Limited ("Noreco") and
was subsequently appointed as operator.
By way of consideration, Azinor will undertake certain firm work commitments, including a drill-or-drop obligation in respect of an
exploration well, and make conditional payments of up to US$4m. Post period end, Azinor has stated its intention to drill an exploration
well on the licence’s Partridge prospect (previously named Homer).
We relinquished our interests in a number of licences, comprising Licence P.1610, Block 13/23a (Liberator), Licence P.1666, Block
30/11c (Romeo) and Licence P.1889 (Niobe) – Niobe relinquished effective 31st December 2015 as they were considered to be
non-prospective and the associated licence fees were onerous.
As reported in previous years, Total E&P UK Limited (“TEPUK”) has a conditional agreement to pay the Company £1m in relation to the
termination of its 2013 farm-in to Licence P.2032, Blocks 21/8c, 21/9c, 21/10c, 21/14a and 21/15b. TEPUK disputes that the conditions
giving rise to the obligation to pay the Company have been satisfied. We continue efforts in pursuit of our claim.
Financial review
During the year, the Company’s revenue-stream ceased. Previously, this was largely associated with our interest in the Athena Oil Field.
As announced in July 2015, we ring-fenced our liabilities to the Athena Consortium with respect to the Athena Oil Field. The result of this
was that we subsequently no longer had any real economic exposure to the field and, as a consequence, the Group no longer accounts
for the income and expenses of the Athena Oil Field in its results.
Our cost of sales largely relate to ongoing work on our remaining licence interest P.2170 and our active pursuit of several production
asset acquisition targets.
We were also in receipt of a small refund of just under £90,000 from our insurers in the period, as a result of a return of premiums on
various policies and, in addition, the Group received a refund of prepaid well costs from the operator on the Niobe exploration well, due to
the actual costs of the well having been less than had been billed. These items are shown as other income in the accounts.
The Company has taken a sharp focus on administration costs over the last couple of years and these costs were lowered further in
January 2016, as is reflected in the reduction of such costs compared to the Group’s 2015 results for the comparable period. There are
also no exceptional items in the current year (2015 £3.3m).
Page 3
JERSEY OIL AND GAS PLC
CHIEF EXECUTIVE OFFICER’S REPORT - continued
FOR THE YEAR ENDED 31 DECEMBER 2016
In November 2016, we successfully closed a significantly oversubscribed equity placing of £1.6m (before expenses), which ensures that
we have sufficient working capital through into 2018. Part of the net proceeds have been used for technical studies conducted by the
Company on the Verbier prospect as we continue to enhance our knowledge of this prospect ahead of the drilling campaign. This work
has provided us with a better understanding of the Verbier prospect and has led to the recent upgrade in prospective resources attributed
to both Verbier and Cortina.
Overall, there was a loss of £793,439 (2015: £1,430,078) in the year and cash balances stood at £1,882,310 (2015: £862,910) at the end
of December 2016.
Looking Forward
We look forward to the drilling of the Verbier prospect set to commence this summer. Together with the nearby Cortina prospect, this
holds significant potential for the Company. We continue to manage our existing cash resources prudently and in addition to the Statoil
carry we are also benefiting from the CIECO carried interest with respect to the drilling of the Verbier prospect.
The market is now firmly open for M&A activity within the North Sea sector and we look forward to executing on the production side of our
strategy, although it should be noted that we will continue to focus on doing the right deal for shareholders rather than executing a deal
just simply to acquire production.
I am particularly grateful to JOG’s management team and employees who have adeptly demonstrated that good people can lead to great
achievements. We have only recently started on JOG’s journey and I believe that our team is capable of developing the Company much
further from where we are today.
I was very pleased with the interest we generated from our placing in November and I welcome the new shareholders to our register. We
remain tightly held, with just under 10 million shares in issue. Management retains a significant shareholding and as such is closely
aligned with the interests of shareholders.
Andrew Benitz
Chief Executive Officer
20 April 2017
Page 4
JERSEY OIL AND GAS PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2016
Business Review and Future Activities
The principal activity of the Company is upstream oil and gas business in the United Kingdom. The Company is a public limited company
incorporated in England and Wales (company number 07503957) and is quoted in London on the AIM market of the London Stock
Exchange plc (“AIM”) under the designation JOG. The Company is required by the Companies Act 2006 to set out in this report a review
of the business of the Group during the year ended 31 December 2016 and the position of the Group at the end of the year as well as the
principal risks and uncertainties facing the Group. The information that fulfils these requirements, including discussion of the business
and future developments, is set out in the Chief Executive Officer’s Statement, the Chairman’s Statement and the Strategic Report.
Risks
The Group operates in an environment that has substantial risks, albeit ones that it aims to mitigate and manage. These risks have to be
carefully balanced to maximise the chances of providing good returns for our shareholders.
Financial Risks:
The key financial risks relate to:
• Availability of funding and access to capital and debt markets
• Cost inflation
• Oil and gas price movements
• Adverse taxation legislative changes
• Co-venturer and third-party counterparty credit risk
• Adverse foreign exchange movements
Managed:
Close relationships are maintained with banks and the investor community as the Group will require capital to facilitate the acquisition of
producing assets. The Group is in ongoing discussions with various financial partners with a view to supporting the Group in the future
once producing assets are acquired. We are also regularly in talks with various third parties and shareholders regarding the provision of
capital to execute with any planned acquisitions.
The Group relies on funding for its own cash reserves, however our cash reserves are depleted by Group overheads. Budgets and cash
flow projections, taking into account a range of cost inflation and joint venture investment scenarios, are prepared and updated regularly,
circulated to all Directors and reviewed at Board meetings. Early in 2016, salary cuts were taken by management and employees of the
Company. Following the subsequent capital raising in the fourth quarter of 2016 salaries have been restored and with the new funds, the
Company expects to be able to operate within its existing cash reserves into 2018 subject to there not being any unforeseen overruns or
other expenses.
The Group currently has no income exposure to oil price fluctuations since there is no longer any production accruing to the Company
from our remaining asset portfolio.
The Group also continuously reviews its portfolio of assets and considers the farming-out and potential sale of assets as part of its
financial planning process. During 2016, the Group farmed out part of its interest in the P.2170 licence with co-venturerer CIECO to
Statoil. The Group is exposed to changes in the UK tax regime and supports the work of industry bodies in influencing government policy
to encourage investment in oil exploration and production, in addition to the management of tax planning and compliance. The Group has
had exposure to US Dollar exchange rate risk through cash deposits as well as both oil and oil services often being sold in US Dollars or
linked to the US Dollar. At present the Group holds almost all its available cash resources in Sterling although we have kept a close eye
on modelling and matching our potential future exposure to our liabilities as part of the ongoing business risk appraisal process by the
Board.
Operational Risks:
Loss of key employees
• HSE incidents
•
• Delay and cost overrun on projects, including weather related delays
• Exploration and appraisal well failures
• Delays to exploration well programme execution
• Failure of third-party services
•
Inherent subsurface uncertainties
Managed:
The Group recognises that to achieve its long-term strategy it will need to continue to take an active approach to identify, attract and
retain the skills and expertise needed and to incentivise employees appropriately. The oil and gas sector is a particularly expensive
sector in which to operate from a personnel perspective although costs have been reducing over the last couple of years due to the low
oil price environment. The Group tries to ensure that we are leanly but appropriately staffed with a focus on technical capability and that
employees are working under contracts that provide the Group with a degree of protection should people leave our employ. Through the
employment of high qualify staff and contractors we believe we can mitigate many of the risks associated with our operations.
Page 5
JERSEY OIL AND GAS PLC
STRATEGIC REPORT - continued
FOR THE YEAR ENDED 31 DECEMBER 2016
The Group typically holds shared equity and carried interests in its assets. As a result, in its joint venture operations, it will have to rely on
the skills, knowledge and experience of its JV licence operator. The Company is pleased to have secured an operator for the P.2170
Licence of the calibre and reputation of Statoil. Having such an operator helps to mitigate many of the operational risks including HSE,
and the management of third-party contractors and service suppliers. Joint venture partner risks relating to their ability to fund their own
share of developments and manage projects to effectively cover other operational risks is also mitigated by the scale and reputation of
company’s JV co-venturers. These foregoing risks together with relationships with government and regulators are part of an on-going
Board review process.
Full operational risk cover and advice is provided through the Group’s insurance brokers. The Group monitors and evaluates all aspects
of Health and Safety Executive (“HSE”) performance and has adopted continuous improvement business practices and processes,
monitored and evaluated at every level of the organisation. The Group will continue to conduct its operations in a responsible manner that
protects the health and safety of employees, contractors and the public and minimises the impact on the environment.
Strategic and External Risks and Opportunities:
Deterioration/Improvement of capital markets, inhibiting efficient equity and/or debt raising for projects
Commercial misalignment with, or default of co-venturers
•
•
• Material oil price movements
• Material changes in projected abandonment costs of oil and gas fields
The risks set out above are not exhaustive and additional risks and uncertainties may arise or become material in the future. Any of these
risks, as well as other risks and uncertainties discussed in this report, could have a material adverse effect on the business.
There is no absolute assurance that the Group’s acquisition or divestiture activities will be successful. The Group seeks to manage these
risks through portfolio management, balancing them across a range of field interests, which carry varying technical and commercial risks,
and carefully managing the financial exposure to each licence in the portfolio through arrangements agreed with joint venture partners.
At the current time, however, the Group has only one licence interest, which it considers has very good prospects particularly considering
the farm-out in 2016 to Statoil, however it is an exploration prospect which comes with a higher level of risk. The Group also intends to
acquire producing assets in the future to provide asset diversification and where there remains strong investor appetite for the right
transaction.
The Group competes with other exploration and production companies, some of whom have much greater financial resources, for the
identification and acquisition of oil and gas licences and properties and also for the recruitment and retention of skilled personnel. The
market price of hydrocarbon products can be volatile and is not within the control of the Group.
The successful progression of the Group’s oil and gas assets depends not only on technical success, but also on the ability of the Group
to obtain appropriate financing through equity financing, debt financing, farm-outs and other means. The availability of funding may
continue to be influenced by macroeconomic events, such as oil price fluctuations or the overall state of the economy, both of which
remain outside the control of the Group. There is no assurance that the Group will be successful in obtaining the required financing going
forward. The Group’s financial risk management policies are set out in note 4.
Cash Resources and Short-Term Investments
We ended 2016 in a much stronger position than we entered it, particularly given the fundraising we undertook in the fourth quarter of
2016. We have a hard-working management team closely aligned with shareholder interests. As at 31 December 2016, we had
approximately £1.9m of cash in the bank. The Group continues to remain lean and cost efficient, which leads to us having annual running
costs of approximately £1.5m.
Consolidated Statement of Comprehensive Income
2016 saw a significant reduction in our revenues to £nil from £4.1m in 2015. Our revenue was historically largely derived via production
from the Athena oil field (Licence P.1293, Block 14/18b) for which the Group had exposure in the first half of 2015 until we agreed a deal
with the Athena Consortium to ring-fence this liability. In 2016 this revenue no longer existed. The Group had other income and gains
relating our Joint Venture Partner CIECO on Licence P.2170 and the farm in receivable from Statoil.
Financing
In late 2016, the Group raised approximately £1.6m before expenses through a share issue in order to provide sufficient working capital
for the Company through into 2018.
Administrative Expenses
2016 saw further reductions achieved in the Group’s cost base as it was recognised early in the year that we needed to cut the cost base
to provide us with enough runway to work on the proposed strategy. For the majority of the year we reduced “G&A” to around £0.9m per
annum reflecting the significant sacrifices all employees and Directors have made in their determination to provide the Company with
every opportunity to succeed.
Exceptional Items
Unlike in previous years there were no significant Exceptional items in 2016 (2015: £3,257,725)
Outlook
The Directors consider that the Group remains lightly capitalised, but is well managed and has a scaled cost base which is efficient and
effective to pursue our current stated strategy and there is strong belief that there is a good likelihood of near term value creation. Our
key remaining asset Verbier, has manageable expected obligations given the carries from Statoil and CIECO and we are excited about
the well being drilled which is planned for the summer of 2017.
On behalf of the board
Scott Richardson Brown
20 April 2017
Page 6
JERSEY OIL AND GAS PLC
CORPORATE GOVERNANCE
FOR THE YEAR ENDED 31 DECEMBER 2016
The Company is quoted on AIM and is not required to comply with the requirements of The UK Corporate Governance Code (“the
Code”). However, the Board is committed to the high standards of good corporate governance prescribed in the Code and seeks to apply
its principles having regard to the current size and structure of the Group.
Board of Directors
The Board is responsible for guidance and direction, playing its role in reviewing strategy, monitoring performance, understanding risk
and reviewing controls. It is collectively responsible for the success of the Group.
The Board is made up of three Executive and two Non-Executive Directors and is deemed to have the appropriate balance of skills,
experience independence and knowledge of the Company to enable them to discharge their respective duties effectively. The Board is of
sufficient size so that the requirements of the business can be met and that changes to its composition and that of its Committees can be
managed without undue disruption. It includes an appropriate combination of Executive and Non-Executive Directors and in particular,
independent Non-Executive Directors.
The Company considers that it is important that where possible its Non-Executive Directors maintain a strong element of independence.
The Executive Directors are employed under contracts for service.
At each Annual General Meeting one third of the Directors are subject to retirement by rotation as are Directors who have been appointed
during the year.
The Board has a formal schedule of matters specifically referred to it for decision making. In addition to these formal matters required by
the Companies Act to be set before the Board of Directors, the Board also considers strategy and policy, acquisition and divestment
proposals, approval of major capital investments, risk management policy, significant financing matters and statutory shareholder
reporting. During the year, all Board meetings were convened with a formal agenda, relevant documentation and documented minutes
and were attended by Board members in office at the time of the Board meetings. To enable the Board to discharge its duties, all
Directors receive appropriate and timely information and the Chairman ensures that all Directors, including the Non-Executive Directors,
may take independent professional advice at the Group’s expense, if required.
Chairman and Chief Executive Officer
There is a clear division of responsibilities between the roles of the Chairman and Chief Executive Officer.
The Chairman’s role is part-time and he is a Non-Executive Director. His key responsibility is the leadership of the Board and this is
effected through regular Board meetings, as well as contact with other Board members and interested parties in-between Board
meetings.
The Chief Executive Officer is responsible for the day-to-day running of the group’s operations, for applying group policies including HSE
and for implementing the strategy agreed by the Board. He plays a pivotal role in developing and reviewing the strategy in consultation
with the Board and in executing it with the support of the other Executive Directors.
Independent Directors
In compliance with the Code the Board considers the Non-Executive Directors, Marcus Stanton and Frank Moxon, to be independent in
character and judgement although they do have shareholdings and share options. The Board considers that these circumstances do not
affect, or appear to affect, the Directors’ judgement and as such they are considered independent for the purposes of corporate
governance.
Audit Committee
The Audit Committee is chaired by Marcus Stanton and its other member is Frank Moxon (both Non-Executive Directors) who are
deemed to have recent and relevant financial expertise. The meeting minutes are circulated to the Board at the next available Board
Meeting, at which the Committee’s chairman provides a verbal report of its proceedings.
Under its terms of reference it is required to meet twice a year, at which Executive Directors may attend by invitation, and is responsible
for keeping under review the scope and results of the audit, its cost effectiveness and the independence and objectivity of the Auditors. It
also has responsibility for public reporting and internal controls and arrangements whereby employees may raise matters of concern in
confidence.
The Group has no internal audit function. Due to the current size of the business it is not considered necessary at this time.
The Group’s Auditors may provide additional professional services and in line with its terms of reference, the Audit Committee continually
assesses their objectivity and independence. The Auditors were initially appointed to report on the financial statements for 2011 and no
tender or re-appointment process has since been carried out.
Remuneration Committee
The Remuneration Committee is chaired by Frank Moxon and its other member is Marcus Stanton (both Non-Executive Directors). The
meeting minutes are circulated to the Board at the next available Board Meeting, at which the Committee’s chairman provides a verbal
report of its proceedings.
Under its terms of reference it is required to meet twice a year and is responsible for ensuring that the Executive Directors, Officers and
other key employees are fairly rewarded (which extends to all aspects of remuneration) for their individual contribution to the overall
performance of the Group.
No Director is involved in deciding his, her or their own remuneration.
Page 7
JERSEY OIL AND GAS PLC
CORPORATE GOVERNANCE - continued
FOR THE YEAR ENDED 31 DECEMBER 2016
Nomination Committee
The Nomination Committee is chaired by Frank Moxon and its other member is Marcus Stanton (both Non-Executive Directors).
Under its terms of reference it is required to meet twice a year and is responsible for identifying and nominating candidates to fill Board
vacancies, but it was considered unnecessary to do so during 2016 as its functions were properly carried out as part of the procedures of
the Board.
Board Effectiveness
The Group does not currently undertake a formal annual evaluation of the performance of the Board, the Committees and individual
Directors, but will consider doing so at the appropriate stage of its development in accordance with The Code.
Board and Committee Attendance in 2016
Board
Audit Committee
Remuneration
Committee
Nomination
Committee
Required
Attended
Required
Attended
Required
Attended
Required
Attended
Non-Executive Directors
M J Stanton
F H Moxon
Executive Directors
J A Benitz
R J Lansdell
S J Richardson Brown
8
8
8
8
8
8
8
8
8
7
2
2
-
-
-
2
2
-
-
-
5
5
-
-
-
5
5
-
-
-
-
-
-
-
-
-
-
-
-
-
Internal Control
The Board is responsible for the Group's system of internal control (in accordance with Financial Reporting Council guidance) and for
regular reviews of its effectiveness. It is designed to manage rather than eliminate the risk of failure to achieve business objectives and
can only provide reasonable, not absolute, assurance against material misstatement or loss. It is summarised and incorporated into the
Group’s Financial Reporting Procedures.
The Board adopts an on-going active process for identifying, evaluating and managing the significant risks faced by the Group, which
was in place for the year under review and up to the date of approval of this report.
Relations with Shareholders
The Board considers that good communication, based on the mutual understanding of objectives with shareholders, is important and
achieves this through its Annual Report, Interim Report and comprehensive website (www.jerseyoilandgas.com). There has also been a
regular dialogue between the Chairman, CEO and investors and other financial institutions in addition to the required public
announcements. A constant and up to date information flow is maintained on the website which contains all press announcements and
financial reports as well as extensive operational information on the Group’s activities.
The Board encourages shareholders to attend the Annual General Meeting, at which members of the Board are available to answer
questions and present a summary of the year’s activity and the corporate outlook.
General
The Group recognises and accepts its duties to ensure the health, safety and welfare at work of all its employees and ensures that every
effort is made to safeguard its visitors, contractors, customers and members of the public, who may be affected by its activities.
The Group observes all relevant statutes, regulations and codes of practice and takes appropriate action for:
• The provision and maintenance of plant and equipment such that it is safe and without risk to health
• Arrangements to ensure the safety and absence of risks to health in relation to the use, handling, storage and transportation of
articles and substances
• The provision of sufficient information, instruction, training and supervision, to ensure the health and safety of its employees at
work
• The maintenance of a safe place of work and provision and maintenance of a safe means of access to it and egress from it
• Provision and maintenance of adequate welfare facilities
The Group makes available adequate resources to promote and maintain best practice in Health and Safety Management and
endeavours to prevent any incident that may result in injury, ill health or damage to property.
Health & Safety
Management firmly believes that Health, Safety and the Environment (“HSE”) is of the highest importance to the Company and expects
all Directors, Officers, Managers, Employees and contractors to consider Health and Safety as part of their normal duties and
responsibilities.
Page 8
JERSEY OIL AND GAS PLC
CORPORATE GOVERNANCE - continued
FOR THE YEAR ENDED 31 DECEMBER 2016
Management commitment to high HSE standards is set out in the HSE Policy. The Policy is:
•
•
Endorsed by the Board for implementation by management, staff, contractors, partners and stakeholders;
Is reviewed periodically and where appropriate updated and re-issued.
Operational HSE goals are established by our JV Operator for our Joint Venture project. These goals are set in the context of compliance
with existing legislation and industry best practice.
Management at all levels provides visible and active leadership within the organisation promoting a positive HSE culture and a common
understanding of JOG’s expectations.
Company’s management of HSE includes:
Promotion of the Company’s HSE Policy and goals;
•
• Monitoring and tracking HSE performance at Board and management meetings;
•
•
Encouraging staff to identify possible hazards, raise HSE concerns and suggest improvements;
Regular reviews by management of HSE performance.
Reporting relationships and responsibilities within the organisation are defined. Personnel are briefed on the HSE risks associated with
their work and of their specific HSE roles and responsibilities.
John Church FCA
Company Secretary
20 April 2017
Page 9
JERSEY OIL AND GAS PLC
BOARD OF DIRECTORS
FOR THE YEAR ENDED 31 DECEMBER 2016
The directors of the company who were in office during the year and up to the date of signing the financial statements were…
Marcus Stanton
Non-Executive Chairman
Marcus Stanton has previously held executive banking roles as Chief Operating Officer of Global Capital Markets at Robert Fleming &
Co. and as a Director of Hill Samuel & Co, Corporate Finance. He has also been a Non-Executive Director of a number of AIM quoted
companies including Velosi Group Limited (international oil and gas services) and Cardinal Resources plc (oil and gas E&P). He qualified
as a Chartered Accountant at Arthur Andersen, where he worked in the oil and gas division. Marcus also runs a consultancy practice
which investigates banking transactions on behalf of UK and overseas governmental agencies. He is a Fellow of the Institute of
Chartered Accountants in England and Wales and a Chartered Fellow of the Chartered Institute for Securities and Investment. He is
Chairman of the Jersey Oil and Gas plc Audit Committee and a member of its Remuneration and Nomination Committees. Marcus
graduated from Oriel College, Oxford.
Andrew Benitz
Chief Executive Officer
Andrew Benitz was a Founding Director of Jersey Oil and Gas E&P Ltd (now a subsidiary of Jersey Oil and Gas plc) and has over 17
years’ experience in financial markets and company management. Prior to co-founding Jersey Oil and Gas, Andrew was Chief Executive
Officer and Director at Longreach Oil and Gas Ltd, a TSX-V listed company. He joined Longreach in 2009 as Chief Operating Officer
when it was a small private company and helped oversee the company’s growth, building a significant portfolio of oil and gas assets in
Morocco. Prior to his move into industry, Andrew worked at Deutsche Bank AG as an Analyst within the Oil and Gas Investment
Banking Group as well as within the Equity Capital Markets team, where he worked on a broad range of oil and gas M&A transactions,
together with equity and equity related financings. Andrew is also founder and Director of Titan Properties SL, a real estate business in
Spain. He completed his undergraduate studies at Edinburgh University graduating with a Bachelor of Commerce (Honours).
Ron Lansdell
Chief Operating Officer
Ron Lansdell was a Founding Director of Jersey Oil and Gas E&P Ltd (now a subsidiary of Jersey Oil and Gas plc) and was formerly Vice
President of Exploration and a Director at Longreach Oil and Gas Ltd. Mr Lansdell has held a number of senior technical and commercial
roles during a 15-year career at ENI S.p.a./Agip (“ENI/Agip”). These roles included being posted to Nigeria, Kazakhstan and the United
Kingdom. Mr Lansdell began his career in 1972 in seismic data acquisition and processing, initially at Digicon Inc. and then CGG
Services (UK) Limited in London, before joining Elf in Norway and then BHP Petroleum as Exploration Coordinator Western Australia. He
spent nine years with Elf Aquitaine S.A. (in Norway, France and Syria) and then joined Qatar General Petroleum Corporation as Chief
Geophysicist in Qatar before joining Eni/Agip. Mr Lansdell graduated in geology from the University of London, is a Fellow of the
Geological Society and a member of the Petroleum Exploration Society of Great Britain.
Scott Richardson Brown
Chief Financial Officer
Scott Richardson Brown is a Fellow of the Institute of Chartered Accountants in England & Wales with wide experience working with AIM,
FTSE 250 and FTSE 100 companies. Beginning his career at Coopers & Lybrand (later PricewaterhouseCoopers) in the Banking and
Capital Markets division, he later became a Partner in the Corporate Broking/Finance division of Oriel Securities Limited covering a range
of sectors including oil and gas. He left Oriel to become Corporate Finance and Investor Relations Director for CSR plc, a FTSE 250
semiconductor company, where, in addition to the day-to-day capital and corporate finance activities, he managed a number of significant
corporate transactions. Immediately prior to joining Jersey Oil and Gas, Mr Richardson Brown was Executive Finance Director of Ascent
Resources plc an AIM-quoted European oil and gas group where he led a number of fund raisings and transactions as he helped the
attempt to turn the company around.
Frank Moxon
Non-Executive Director
Frank Moxon is Managing Director of Hoyt Moxon Ltd, a corporate finance consultancy. He has over 27 years’ experience as a corporate
financier to developing and growth companies in a wide range of industrial sectors, but has specialised for some 19 years in natural
resources, and is or has been a director of a number of mining and oil & gas companies quoted in London, Australia and Canada.
Amongst other things he is a former head of corporate finance at Williams de Broë Plc and, until its August 2012 sale to PTT for £1.2
billion, was senior independent non-executive Director at Cove Energy Plc. He has a BSc in Economics and is a Chartered Fellow of the
Chartered Institute for Securities and Investment, a Fellow of the Energy Institute and a member of the Petroleum Exploration Society of
Great Britain. He is chairman of the Jersey Oil and Gas plc Remuneration and Nomination Committees and a member of its Audit
Committee.
Page 10
JERSEY OIL AND GAS PLC
REPORT OF THE DIRECTORS
FOR THE YEAR ENDED 31 DECEMBER 2016
The Directors present their report together with the audited Group and Company financial statements for the year ended 31 December
2016.
Results and Dividends
The Group’s loss for the year was £0.8m (2015: loss of £1.4m). The Directors do not recommend the payment of a dividend (2015: Nil).
Directors’ interests
The beneficial and other interests of the Directors holding office during the year and their families in the shares of the Company at 31
December 2016 were:
Directors’ interests
Non-Executive Directors
M J Stanton
F Moxon
Executive Directors
J A Benitz
R J Lansdell
S J Richardson Brown
As at 31 December 2016
1p Ordinary Shares
Shares
Options
24,195
84,935
627,142
884,663
16,391
41,570
20,000
180,000
180,000
130,000
As at 31 December 2015
1p Ordinary Shares
Shares
1,465
80,930
604,415
786,108
7,300
Options
1,570
-
-
-
10,000
Directors’ Third Party Indemnity Provisions
The Company maintained during the period and to the date of approval of the financial statements indemnity insurance for its Directors and
Officers against liability in respect of proceedings brought by third parties, subject to the terms and conditions of the Companies Act 2006.
Share Capital
At 31 December 2016, 9,916,478 (2015: 8,391,477) ordinary shares of 1p each were issued and fully paid. Each ordinary share carries one
vote.
Substantial Shareholders
At 31 December 2016, notification had been received by the Company of the following who had a disclosable interest in 3% or more of the
nominal value of the ordinary share capital of the Company:
Union Discount Company of London*
Mr R Lansdell
Newlands Capital
Mr J A Benitz
Hargreaves Lansdown Asset Mgt
A J Bell Securities
The Gascoigne Trust
Jarvis Investment Mgt
9.28%
8.92%
7.15%
6.32%
4.36%
4.29%
3.93%
3.44%
Save for Messrs Lansdell and Benitz, this does not include the shareholdings of the Directors which are disclosed separately. As at 31
December 2016 the Company had not been notified of any other person who had an interest in 3% or more of the nominal value of the
ordinary share capital of the Company.
*Subsequent to the year end the Union Discount Company of London announced that its shareholding had fallen below the 3% reporting
threshold. Up to date details of substantial shareholders are contained on the Company’s website (www.jerseyoilandgas.com).
Employees
The business depends upon maintaining a highly qualified and well-motivated workforce and every effort is made to achieve a common
awareness of the financial and economic factors affecting performance. The Group is committed to being an equal opportunity employer
and engages employees with a broad range of skills and backgrounds.
Nominated Adviser and Stockbrokers
The Company’s Nominated Adviser is Strand Hanson Limited and its Joint Brokers are Arden Partners plc and, since March 2017, BMO
Capital Markets.
Financial Instruments
The Group’s principal financial instruments comprise cash balances, short-term deposits and receivables or payables that arise through the
normal course of business. The Group does not have any derivative financial instruments. The financial risk management of the Group is
discussed in note 4.
Page 11
JERSEY OIL AND GAS PLC
REPORT OF THE DIRECTORS - continued
FOR THE YEAR ENDED 31 DECEMBER 2016
Going Concern
The Company is expected to have sufficient resources to cover the expected running costs of the business for a period of 12 months after
the issue of these financial statements. Taking into account the carry from Statoil and the anticipated cash receivable from CIECO in
relation to our carry from them on the P.2170 (Verbier) well drilling and given the current anticipated well costs, the Statoil carry and
proceeds receivable from CIECO, as well as our current cash reserves, are, in a dry hole case, expected to more than exceed the
estimated liability of the Company. Should the well be successful as we hope, further testing and well activity will be required and the
Company will seek to approve budgets with our partners and raise additional finance in order to cover this eventuality and its share of the
expected additional costs. Whilst there can be no certainty of the success of any fund raising, the Directors believe the successful well
result in this scenario would position the Company favourably in order to source additional capital. Based on these circumstances, the
directors have considered it appropriate to adopt the going concern basis of accounting in preparing its consolidated financial statements.
Board Committees
Information on the Audit Committee, Remuneration Committee and Nomination Committee is included in the Corporate Governance
section of the Annual Report.
Disclosure of Information to the Auditors
Each of the persons who is a Director at the date of approval of this report confirms that:
(1) so far as the Director is aware, there is no relevant audit information of which the Company’s auditors are unaware; and
(2) each Director has taken all the steps that he/she ought to have taken as a Director in order to make himself/herself aware of
any relevant audit information and to establish that the Company’s auditors are aware of that information.
This confirmation is given and should be interpreted in accordance with the provisions of s418 of the Companies Act 2006.
Independent Auditors
A resolution to reappoint PricewaterhouseCoopers LLP as Auditors will be proposed at the forthcoming Annual General Meeting at a fee to
be agreed in due course by the Audit Committee and the Directors.
Annual General Meeting
The Annual General Meeting will be held on 25 May 2017 as stated in the Notice of Meeting.
On behalf of the Board
Scott Richardson Brown
Chief Financial Officer
20 April 2017
Page 12
JERSEY OIL AND GAS PLC
DIRECTORS’ RESPONSIBILITIES
FOR THE YEAR ENDED 31 DECEMBER 2016
Statement of directors’ responsibilities in respect of the financial statements
The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and
regulation.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared
the group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European
Union and company financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the
European Union. Under company law the directors must not approve the financial statements unless they are satisfied that they give a
true and fair view of the state of affairs of the group and company and of the profit or loss of the group and company for that period. In
preparing the financial statements, the directors are required to:
•
•
select suitable accounting policies and then apply them consistently;
state whether applicable IFRSs as adopted by the European Union have been followed for the group financial statements and
IFRSs as adopted by the European Union have been followed for the company financial statements, subject to any material
departures disclosed and explained in the financial statements;
• make judgements and accounting estimates that are reasonable and prudent; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and company will
continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the group and company's
transactions and disclose with reasonable accuracy at any time the financial position of the group and company and enable them to
ensure that the financial statements comply with the Companies Act 2006 and, as regards the group financial statements, Article 4 of the
IAS Regulation.
The directors are also responsible for safeguarding the assets of the group and company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the company’s website. Legislation in the United Kingdom governing
the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
The directors consider that the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the group and company’s performance, business model and strategy.
Each of the directors, whose names and functions are listed in the Report of the Directors confirm that, to the best of their knowledge:
•
•
•
the company financial statements, which have been prepared in accordance with IFRSs as adopted by the European Union, give
a true and fair view of the assets, liabilities, financial position and loss of the company;
the group financial statements, which have been prepared in accordance with IFRSs as adopted by the European Union, give a
true and fair view of the assets, liabilities, financial position and loss of the group; and
the Report of the Directors and the Strategic Report includes a fair review of the development and performance of the business
and the position of the group and company, together with a description of the principal risks and uncertainties that it faces.
In the case of each director in office at the date the Directors’ Report is approved:
•
•
so far as the director is aware, there is no relevant audit information of which the group and company’s auditors are unaware; and
they have taken all the steps that they ought to have taken as a director in order to make themselves aware of any relevant audit
information and to establish that the group and company’s auditors are aware of that information.
Scott Richardson Brown
Chief Financial Officer
20 April 2017
Page 13
JERSEY OIL AND GAS PLC
REMUNERATION REPORT
FOR THE YEAR ENDED 31 DECEMBER 2016
Directors’ Emoluments
The purpose of the Remuneration Committee of the Board of Directors is to ensure that the Executive Directors, Officers and employees
are fairly rewarded for their individual contribution to the overall performance of the Group and to demonstrate to shareholders that the
remuneration of the Executive Directors is set by a committee of the Board whose members have no personal interest in the outcome of
those decisions and who will have due regard to the interests of shareholders of the Company.
To achieve these objectives, the Remuneration Committee links the nature and amount of Executive Directors’ emoluments to the Group’s
financial and operational performance having regard to:
Providing appropriate incentives to encourage enhanced performance
Providing remuneration packages needed to attract, retain and motivate Executive Directors of the quality required
Determining targets for performance-related pay and whether Executive Directors should be eligible for annual bonuses
Considering the Group’s relative position for remuneration in relation to other companies
Aligning Executive Directors’ interests with those of shareholders
•
•
•
•
•
• Maintaining relevance of the remuneration policy taking into account share incentive plans, performance targets and long term
incentive schemes
The terms of their respective employment contracts
•
Executive Directors’ remuneration is dependent upon the annual performance of both the Group and individuals themselves, and each is
measured against agreed objectives.
Executive Directors’ emoluments consist of salary, bonus, pension and discretionary share options whilst Non-Executive Directors
emoluments consist of salary and discretionary share options the details of which, for the year to 31 December 2016, are set out below:
Name
Non-Executive Directors
M J Stanton
F Moxon
T E Jones
Resigned 1 October 2015)
Executive Directors
J A Benitz
R Lansdell
S J Richardson Brown
(Chief Financial Officer)
Salary/Fees
Pension
Benefits
Bonus
Total 2016
Total 2015
£
£
£
£
£
£
26,667
13,333
-
61,000
50,000
-
-
-
-
-
44,500
11,000
195,500
11,000
-
-
-
-
-
-
-
-
-
-
26,667
13,333
46,667
5,000
-
27,810
5,000
66,000
28,125
5,000
55,000
28,125
5,000
60,500
156,933
15,000
221,500
292,660
In February 2016, it was agreed with Directors and other employees that they would take salary reductions of up to 50%, to provide the
Company with as much working capital as possible. These reductions were in effect from the beginning of February 2016 to the end of
October 2016.
In October 2016, a cash bonus of £5,000 was awarded to each Executive Director in recognition of the fact that the Company had achieved
the successful farm-out to Statoil of 70 per cent. of Licence P.2170 under which it received net cash of over US$500,000 and an additional
free carry of up to US$25 million in respect of the cost of first exploration well to be drilled. This award also recognised that the Executive
Directors’ salary levels are low by industry standards.
In November 2016, a new share option scheme, the Enterprise Management Incentive and Unapproved Share Option Plan 2016, was
approved by the Board in order to put in place appropriate share incentives for the Directors and senior management of the Company.
On 29 November 2016, options over a total of 551,570 Ordinary shares were granted to the Directors at an exercise price of 110p per
share. These were the first grants of option by the Company since its August 2015 acquisition of Jersey Oil and Gas Limited with the
injection of a new senior management team and change of strategy. A close period had existed for most of the time up until the option grant
and this was therefore the first practical opportunity for it to be implemented.
Options granted to Andrew Benitz, Ron Lansdell and Scott Richardson Brown, all Executive Directors, were granted under the Enterprise
Management Incentive Plan. Options granted to Marcus Stanton and Frank Moxon, both Non-Executive Directors, were granted under the
Unapproved Share Option Plan. The total number of Options granted to each of Marcus Stanton and Frank Moxon, are subject to an overall
cap at all times, of approximately one year's salary.
Further details of the options held by Directors are set out below.
Page 14
JERSEY OIL AND GAS PLC
REMUNERATION REPORT - continued
FOR THE YEAR ENDED 31 DECEMBER 2016
Share Options Incentivisation
Held At 1
Jan 2016
Granted in
year
Lapsed/
Non
vesting
Held At
31 Dec
2016
Exercise
Price
p
Issue
Date
Expiry
Date
Type
Non-Executive Directors
M J Stanton
F Moxon
Executive Directors
J A Benitz
R Lansdell
S J Richardson
Brown
Total
1,570
-
1,570
-
-
-
10,000
-
10,000
11,570
-
40,000
40,000
20,000
180,000
180,000
-
120,000
120,000
540,000
4,300
110
13/03/11
29/11/16
12/03/21
29/11/21
110
29/11/16
29/11/21
110
110
1,500
110
29/11/16
29/11/21
29/11/16
29/11/21
31/05/13
29/11/16
31/05/23
29/11/21
1
3
3
3
3
2
3
-
-
-
-
-
-
-
-
-
-
1,570
40,000
41,570
20,000
180,000
180,000
10,000
120,000
130,000
551,570
1 Individual Option Agreements
Subject to the Model Code for Securities Transactions by Directors of Listed Companies, the AIM Rules or the Criminal Justice Act 1993,
the options (to the extent that they have not lapsed) may be exercised at any time after the date of grant.
2 Unapproved Share Option Plan 2011
Vest in equal portions over a three-year period from the date of grant and are not subject to the completion of performance condition.
3 Enterprise Management Incentive and Unapproved Share Option Plan 2016
Options vest in equal portions over a three-year period from the date of grant with one third vesting immediately, one third on the first
anniversary of issue and the remaining third on the second anniversary of issue. The last two vesting allocations are subject to a
performance condition. Subject to vesting and the performance condition being met, the Share Options are exercisable at any time up to
the fifth anniversary of the date of grant and if not exercised by that date will lapse.
Frank Moxon
Chairman of the Remuneration Committee
20 April 2017
Page 15
JERSEY OIL AND GAS PLC
INDEPENDENT AUDITORS’ REPORT
YEAR ENDED 31 DECEMBER 2016
Independent auditors’ report to the members of Jersey Oil and Gas Plc
Report on the group financial statements
Our opinion
In our opinion, Jersey Oil and Gas Plc’s group financial statements (the “financial statements”):
• give a true and fair view of the state of the group’s affairs as at 31 December 2016 and of its loss and cash flows for the year then
ended;
• have been properly prepared in accordance with International Financial Reporting Standards (“IFRSs”) as adopted by the
European Union; and
• have been prepared in accordance with the requirements of the Companies Act 2006
What we have audited
The financial statements, included within the Annual Report and Accounts (the “Annual Report”), comprise:
•
•
•
•
•
the consolidated statement of financial position as at 31 December 2016;
the consolidated statement of comprehensive income for the year then ended;
the consolidated statement of changes in equity for the year then ended;
the consolidated statement of cash flows for the year then ended; and
the notes to the financial statements, which include a summary of significant accounting policies and other explanatory
information.
The financial reporting framework that has been applied in the preparation of the financial statements is IFRSs as adopted by the
European Union, and applicable law.
In applying the financial reporting framework, the directors have made a number of subjective judgements, for example in respect of
significant accounting estimates. In making such estimates, they have made assumptions and considered future events.
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 Report of the Directors for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
the Strategic Report and the Report of the Directors have been prepared in accordance with applicable legal requirements.
In addition, in light of the knowledge and understanding of the group and its environment obtained in the course of the audit, we are
required to report if we have identified any material misstatements in the Strategic Report and the Report of the Directors. We have
nothing to report in this respect.
Other matters on which we are required to report by exception
Adequacy of information and explanations received
Under the Companies Act 2006 we are required to report to you if, in our opinion, we have not received all the information and
explanations we require for our audit. We have no exceptions to report arising from this responsibility
Directors’ remuneration
Under the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of directors’ remuneration specified
by law are not made. We have no exceptions to report arising from this responsibility.
Responsibilities for the financial statements and the audit
Our responsibilities and those of the directors
As explained more fully in the Statement of Directors’ Responsibilities set out on page 13, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International
Standards on Auditing (UK and Ireland) (“ISAs (UK & Ireland)”). Those standards require us to comply with the Auditing Practices Board’s
Ethical Standards for Auditors.
This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with Chapter 3
of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for
any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by
our prior consent in writing.
What an audit of financial statements involves
We conducted our audit in accordance with ISAs (UK & Ireland). An audit involves obtaining evidence about the amounts and disclosures
in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement,
whether caused by fraud or error. This includes an assessment of:
• whether the accounting policies are appropriate to the group’s circumstances and have been consistently applied and
adequately disclosed;
the reasonableness of significant accounting estimates made by the directors; and
the overall presentation of the financial statements.
•
•
Page 16
JERSEY OIL AND GAS PLC
INDEPENDENT AUDITORS’ REPORT - continued
YEAR ENDED 31 DECEMBER 2016
We primarily focus our work in these areas by assessing the directors’ judgements against available evidence, forming our own
judgements, and evaluating the disclosures in the financial statements.
We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to provide a
reasonable basis for us to draw conclusions. We obtain audit evidence through testing the effectiveness of controls, substantive
procedures or a combination of both.
In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the
audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent
with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or
inconsistencies we consider the implications for our report. With respect to the Strategic Report and Report of the Directors, we consider
whether those reports include the disclosures required by applicable legal requirements.
Other matter
We have reported separately on the company financial statements of Jersey Oil and Gas Plc for the year ended 31 December 2016.
Richard Spilsbury (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Aberdeen
20 April 2017
Page 17
JERSEY OIL AND GAS PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2016
Note
2016
£
Revenue
Cost of sales
GROSS LOSS
Other operating income
Gain on disposal of asset
Exceptional items
Administrative expenses
OPERATING LOSS
Finance costs
Finance income
LOSS BEFORE TAX
Tax
LOSS FOR THE YEAR
3
6
7
8
9
9
10
11
2015
£
4,065,794
(7,006,952)
(2,941,158)
-
-
3,257,725
(1,595,283)
-
(4,950)
(4,950)
214,110
239,724
-
(1,244,393)
(795,509)
(1,278,716)
-
2,070
(164,399)
13,037
(793,439)
(1,430,078)
-
-
(793,439)
(1,430,078)
TOTAL COMPREHENSIVE LOSS FOR THE YEAR
(793,439)
(1,430,078)
Total comprehensive loss for the year attributable to:
Owners of the parent
(793,439)
(1,430,078)
Loss per share expressed in pence per share:
Basic and diluted
12
(9.28)
(29.21)
The notes on pages 22 to 32 are an integral part of these financial statements
Page 18
JERSEY OIL AND GAS PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2016
Note
2016
£
NON-CURRENT ASSETS
Intangible assets - Exploration costs
Intangible assets - Data licence costs
Property, plant and equipment
CURRENT ASSETS
Trade and other receivables
Cash and cash equivalents
TOTAL ASSETS
EQUITY
Called up share capital
Share premium account
Share options reserve
Accumulated losses
Reorganisation reserve
TOTAL EQUITY
LIABILITIES
CURRENT LIABILITIES
Trade and other payables
TOTAL LIABILITIES
13
13
14
16
17
18
21
19
2015
£
138,323
-
5,055
143,378
227,718
862,910
1,090,628
1,234,006
48,363
-
372
48,735
122,872
1,882,310
2,005,182
2,053,917
2,347,017
71,170,230
1,495,921
(72,763,959)
(382,543)
2,331,767
69,569,978
1,381,133
(71,970,520)
(382,543)
1,866,666
929,815
187,251
187,251
304,191
304,191
TOTAL EQUITY AND LIABILITIES
2,053,917
1,234,006
The financial statements on pages 18 to 32 were approved by the Board of Directors and authorised for issue on 20 April 2017. They
were signed on its behalf by Scott Richardson Brown – Chief Financial Officer.
Company Registration Number: 07503957
The notes on pages 22 to 32 are an integral part of these financial statements
Page 19
JERSEY OIL AND GAS PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2016
Called up
share
capital
£
Share
premium
account
£
Share
options
reserve
£
Accumulated Reorganisation
losses
£
reserve
£
Total
equity
£
At 1 January 2015
2,271,693 68,321,083
1,786,425
(70,945,734)
(382,543)
1,050,924
Loss and total comprehensive loss for the
year
-
-
Issue of share capital
60,074
1,248,895
-
-
(1,430,078)
-
(1,430,078)
-
-
1,308,969
Lapsed share options
-
-
(405,292)
405,292
-
-
At 31 December 2015 and 1 January
2016
2,331,767 69,569,978
1,381,133
(71,970,520)
(382,543)
929,815
Loss and total comprehensive loss for the
year
-
-
Issue of share capital
15,250
1,600,252
-
-
Share based payments
-
-
114,788
(793,439)
-
(793,439)
-
-
-
1,615,502
-
114,788
At 31 December 2016
2,347,017 71,170,230
1,495,921
(72,763,959)
(382,543)
1,866,666
The following describes the nature and purpose of each reserve within owners’ equity:
Reserve
Description and purpose
Called up share capital
Share premium account
Share options reserve
Represents the nominal value of shares issued
Amount subscribed for share capital in excess of nominal value
Represents the accumulated balance of share based payment charges recognised
in respect of share options granted by the Company less transfers to retained deficit
in respect of options exercised or cancelled/lapsed
Accumulated losses
Cumulative net gains and losses recognised in the Consolidated Statement of
Reorganisation reserve
Amounts resulting from the restructuring of the Group at the time of the IPO in 2011
Comprehensive Income
The notes on pages 22 to 32 are an integral part of these financial statements
Page 20
JERSEY OIL AND GAS PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2016
Cash flows from operating activities
Cash used in operations
Net interest received
Net cash used in operating activities
Cash flows from investing activities
Purchase of intangible assets
Proceeds on sale of intangible fixed assets
Purchase of property, plant and equipment
Net cash generated from/(used in) investing activities
Cash flows from financing activities
Proceeds from share issue
Net cash generated from financing activities
Increase/(Decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Note
23
13
7
14
18
23
23
23
2016
£
(927,144)
2,070
(925,074)
(85,993)
414,966
-
328,973
1,615,501
1,615,501
2015
£
(4,163,979)
9,358
(4,154,621)
(2,722,853)
-
(147,868)
(2,870,721)
813,970
813,970
1,019,400
(6,211,372)
862,910
1,882,310
7,074,282
862,910
The notes on pages 22 to 32 are an integral part of these financial statements
Page 21
JERSEY OIL AND GAS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
1.
GENERAL INFORMATION
Jersey Oil and Gas plc (“the Company”) and its subsidiaries (together, “the Group”) are involved in upstream oil and gas business in the
UK.
The Company is a public limited company, which is quoted on AIM, a market operated by the London Stock Exchange plc and
incorporated and domiciled in the United Kingdom. The address of its registered office is 10 The Triangle, ng2 Business Park,
Nottingham, NG2 1AE.
2.
SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies
have been consistently applied to all the periods presented, unless otherwise stated.
Basis of Accounting
These financial statements have been prepared under the historic cost convention, in accordance with International Financial Reporting
Standards and IFRS IC interpretations as adopted by the European Union (“IFRSs”) and with those parts of the Companies Act 2006
applicable to companies reporting under IFRS.
Going Concern
The Company is expected to have sufficient resources to cover the expected running costs of the business for a period of 12 months
after the issue of these financial statements. Taking into account the carry from Statoil and the anticipated cash receivable from CIECO in
relation to our carry from them on the P.2170 (Verbier) well drilling and given the current anticipated well costs, the Statoil carry and
proceeds receivable from CIECO, as well as our current cash reserves, are in a dry hole case expected to more than exceed the
estimated liability of the Company. Should the well be successful as we hope, further testing and well activity will be required and the
Company will seek to approve budgets with our partners and raise additional finance in order to cover this eventuality and its share of the
expected additional costs. Whilst there can be no certainty of the success of any fund raising, the Directors believe the successful well
result in this scenario would position the Company favourably in order to source additional capital. Based on these circumstances, the
directors have considered it appropriate to adopt the going concern basis of accounting in preparing its consolidated financial statements.
Changes in Accounting Policy and Disclosures
(a) New and amended standards adopted by the Company
There are no new standards that came into effect during 2016.
(b) The following standards have been published and are mandatory for the Group’s accounting periods beginning on or after 1 January
2018, but the Group has not adopted them early. The Group does not expect the adoption of these standards to have a material impact
on the financial statements.
• IFRS 15 ‘Revenue from contracts with customers’ is effective for accounting periods beginning on or after 1 January 2018.
• IFRS 9 ‘Financial ‘instruments’ is effective for accounting periods on or after 1 January 2018.
• IFRS 16 ‘Leases’ is effective for accounting periods beginning on or after 1 January 2019.
Amendments have also been made to the following standards effective on or after 1 January 2017. The Group does not expect the
amendments to have a material impact on the Group’s financial statements.
•
•
•
•
•
•
•
IFRS 2 ‘Share-based Payment’
IFRS 4 ‘Insurance Contracts’
IFRS 12 ‘Disclosure of Interests in Other Entities’
IAS 7 ‘Statement of Cash Flows’
IAS 12 ‘Income Tax’
IAS 28 ‘Investment in Associates and Joint Ventures’
IAS 40 ‘Investment Property’
All other amendments to accounting standards not yet effective and not included above are not material or applicable to the Group.
Significant Accounting Judgements and Estimates
The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts
of revenues, expenses, assets and liabilities at the date of the financial statements. If in future such estimates and assumptions, which
are based on management's best judgement at the date of the financial statements, deviate from the actual circumstances, the original
estimates and assumptions will be modified as appropriate in the period in which the circumstances change. The Group's accounting
policies make use of accounting estimates and judgements in the following areas:
•
•
impairment (note 13),
the estimation of share based payment costs (note 21).
Impairments
The group tests its capitalised exploration licence costs for impairment when facts and circumstances suggest that the carrying amount
exceeds the recoverable amount. The recoverable amounts of CGUs are determined based on value-in-use calculations. These
calculations require the use of estimates. An impairment charge of £710 arose relating to licence P1989 during the course of the 2016
year, resulting in the carrying amount of the licence being written down to its recoverable amount of £nil.
Share Based Payments
The Group currently has a number of share schemes that give rise to share based charges. The charge to operating profit for these
schemes amounted to £114,788 (2015: £nil). For the purposes of calculating the fair value of the share options, a Black-Scholes option
pricing model has been used. Based on past experience, it has been assumed that options will be exercised, on average, at the earliest
exercise date. The share price volatility used in the calculation of 40% is based on the actual volatility of the Group’s shares as well as
that of comparable companies. The risk free rate of return is based on the implied yield available on zero coupon gilts with a term
remaining equal to the expected lifetime of the options at the date of grant.
These are described in more detail in the relevant accounting policies within note 2.
Page 22
JERSEY OIL AND GAS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 DECEMBER 2016
2.
SIGNIFICANT ACCOUNTING POLICIES – continued
Basis of Consolidation
(a) Subsidiaries
Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies generally accompanying a
shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or
convertible are considered when assessing whether the Group controls another entity. The Group also assesses existence of control
where it does not have more than 50 per cent. of the voting power but is able to govern the financial and operating policies by virtue of
de-facto control. De-facto control may arise in circumstances where the size of the Group's voting rights relative to the size and
dispersion of holdings of other shareholders give the Group the power to govern the financial and operating policies.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date the
Group ceases to have control.
The Group applies the acquisition method of accounting to account for business combinations. The consideration transferred for the
acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group.
The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair
value at the acquisition date. The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis,
either at fair value or at the non-controlling interest’s proportionate share of the recognised amounts of the acquiree’s identifiable net
assets.
Acquisition related costs are expensed as incurred.
If the business combination is achieved in stages, the acquisition date fair value of the acquirer's previously held equity interest in the
acquiree is re-measured to fair value at the acquisition date through profit or loss.
Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to
the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 either in
profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not re-measured, and
its subsequent settlement is accounted for within equity.
Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non-controlling interest
over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the
subsidiary acquired, the difference is recognised in profit or loss.
Inter-company transactions, balances, income and expenses on transactions between Group companies are eliminated. Profits and
losses resulting from inter-company transactions that are recognised in assets are also eliminated. Accounting policies of subsidiaries
have been changed where necessary to ensure consistency with the policies adopted by the Group.
(b) Changes in ownership interests in subsidiaries without change of control
Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions - that is, as
transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant
share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling
interests are also recorded in equity.
(c) Disposal of subsidiaries
When the Group ceases to have control any retained interest in the entity is re-measured to its fair value at the date when control is lost,
with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of
subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously
recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related
assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.
Acquisitions, Asset Purchases and Disposals
Acquisitions of oil and gas properties are accounted for under the purchase method where the business meets the definition of a
business combination.
Transactions involving the purchase of an individual field interest, farm-ins, farm-outs, or acquisitions of exploration and evaluation
licences for which a development decision has not yet been made that do not qualify as a business combination, are treated as asset
purchases. Accordingly, no goodwill or deferred tax arises. Consideration from farm-ins/farm-outs are adequately credited from, or
debited to, the asset. The purchase consideration is allocated to the assets and liabilities purchased on an appropriate basis. Proceeds
on disposal are applied to the carrying amount of the specific intangible asset or development and production assets disposed of and any
surplus is recorded as a gain on disposal in the Consolidated Statement of Comprehensive Income.
Revenue Recognition
Revenue is recognised to the extent that it is probable that economic benefits will flow to the Group and the revenue can be reliably
measured. It is measured at the fair value of consideration received or receivable for sale of goods.
Revenue derived from the production of hydrocarbons in which the Group has an interest with joint venture partners is recognised on the
basis of the Group’s working interest in those properties. It is recognised when the significant risks and rewards of ownership have been
passed to the buyer.
Revenue from strategic partners on the identification of opportunities for application for a licence to explore further and is recognised in
the period in which the services are provided or the date a trigger event occurs if this is later.
Page 23
JERSEY OIL AND GAS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 DECEMBER 2016
2.
SIGNIFICANT ACCOUNTING POLICIES – continued
Exploration and Evaluation Costs
The Group accounts for oil and gas and exploration and evaluation costs using IFRS 6 “Exploration for and Evaluation of Mineral
Resources”. Such costs are initially capitalised as Intangible Assets and include payments to acquire the legal right to explore, together
with the directly related costs of technical services and studies, seismic acquisition, exploratory drilling and testing.
Exploration costs are not amortised prior to the conclusion of appraisal activities.
Exploration costs included in Intangible Assets relating to exploration licences and prospects are carried forward until the existence (or
otherwise) of commercial reserves have been determined subject to certain limitations including review for indications of impairment on
an individual license basis. If commercial reserves are discovered, the carrying value, after any impairment loss of the relevant assets, is
then reclassified as Property, plant and equipment under Production interests and fields under development. If, however, commercial
reserves are not found, the capitalised costs are charged to the Consolidated Statement of Comprehensive Income. If there are
indications of impairment prior to the conclusion of exploration activities, an impairment test is carried out.
Property, Plant and Equipment
Property, plant and equipment is stated at historic purchase cost less accumulated depreciation. Asset lives and residual amounts are
reassessed each year. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working
condition for its intended use.
Depreciation on these assets is calculated on a straight line basis as follows:
Computer & office equipment
-
3 years
Joint Ventures
The Group participates in joint venture agreements with strategic partners, where revenue is derived from annual retainers and success
fees in a combination of cash and carried interests. The Group accounts for its share of assets, liabilities, income and expenditure of
these joint venture agreements and discloses the details in the appropriate Statement of Financial Position and Statement of
Comprehensive Income headings in the proportion that relates to the Group per the joint venture agreement.
Investments
Fixed asset investments in subsidiaries are stated at cost less accumulated impairment in the Company only Statement of Financial
Position and reviewed for impairment if there are any indications that the carrying value may not be recoverable.
Financial Instruments
Financial assets and financial liabilities are recognised in the Group’s Statement of Financial Position when the Group becomes party to
the contractual provisions of the instrument. The Group does not have any derivative financial instruments.
Cash and cash equivalents include cash in hand and deposits held on call with banks with a maturing of three months or less.
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method,
less provision for doubtful debts. A provision for doubtful debts is established when there is objective evidence that the Group will not be
able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability
that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are
considered indicators that the recoverability of the trade receivable is doubtful. The amount of the provision is the difference between the
asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The
carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss will be recognised in the
Consolidated Statement of Comprehensive Income within administrative expenses. Subsequent recoveries of amounts previously
provided for are credited against admin expenses in the Consolidated Statement of Comprehensive Income.
Trade payables are stated initially at fair value and subsequently measured at amortised cost.
Loan notes are stated initially at fair value and subsequently measured at amortised cost of the investment as agreed in the loan
instrument.
Exceptional Items
Exceptional items are disclosed separately in the financial statements where it is necessary to do so to provide further understanding of
the financial performance of the group. They are material items of income or expense that have been shown separately due to the
significance of their nature or amount.
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 taxation liabilities are provided,
using the liability method, on all taxable temporary differences at the reporting date. Such assets and liabilities are not recognised if the
temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and
liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred income tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the
temporary differences can be utilised. The carrying amount of deferred tax assets is reviewed at each reporting date.
Page 24
JERSEY OIL AND GAS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 DECEMBER 2016
2.
SIGNIFICANT ACCOUNTING POLICIES – continued
Foreign Currencies
Monetary assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the reporting date.
Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the date of the transaction. Gains and
losses arising on retranslation are recognised in the Consolidated Statement of Comprehensive Income for the year.
Employee Benefit Costs
The Group operates a defined contribution pension scheme. Matching contributions are made by the employer and employees up to 10%
of salary each via a salary sacrifice scheme. Contributions payable are charged to the Statement of Comprehensive Income in the period
to which they relate. No further obligations remain once contributions have been paid.
Share Based Payments
Equity settled share based payments to employees and others providing similar services are measured at the fair value of the equity
instruments at the grant date. The total amount to be expensed is determined by reference to the fair value of the options granted:
•
•
•
including any market performance conditions (for example, an entity’s share price);
excluding the impact of any service and non-market performance vesting conditions (for example, profitability, sales growth
targets and remaining an employee of the entity over a specified time period); and
including the impact of any non-vesting conditions (for example, the requirement for employees to save).
The fair value determined at the grant date of the equity settled share based payments is expensed on a straight line basis over the
vesting period, based on the Group's estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At
the end of each reporting period, the Group revises its estimate of the number of equity instruments expected to vest. The impact of the
revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with
a corresponding adjustment to the equity settled employee benefits reserve.
Equity settled share based payment transactions with parties other than employees are measured at the fair value of the goods or
services received, except where that fair value cannot be estimated reliably, in which case they are measured at the fair value of the
equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service.
Exercise proceeds net of directly attributable costs are credited to share capital and share premium.
Share Capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, net of tax, from
the proceeds.
Where any Group company purchases the Company's equity share capital (treasury shares), the consideration paid, including any
directly attributable incremental costs (net of taxes) is deducted from equity attributable to the Company's equity holders until the shares
are cancelled or reissued. Where such ordinary shares are subsequently reissued, any consideration received, net of any directly
attributable incremental transaction costs and the related tax effects is included in equity attributable to the Company's equity holders.
Segmental Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the Board of Directors.
3.
SEGMENTAL REPORTING
The Directors consider that the Group operates in a single segment, that of oil and gas exploration, appraisal, development and
production, in a single geographical location, the North Sea of the United Kingdom and do not consider it appropriate to disaggregate
data further from that disclosed.
During 2016 the group had no turnover. In 2015 revenue from one major customer exceeded 10%, and amounted to £4.1m.
4.
FINANCIAL RISK MANAGEMENT
The Group’s activities expose it to financial risks and its overall risk management programme focuses on minimising potential adverse
effects on the financial performance of the Group. The Company’s activities are also exposed to risks through its investments in
subsidiaries and is accordingly exposed to similar financial and capital risks as the Group.
Risk management is carried out by the Directors and they identify, evaluate and address financial risks in close co-operation with the
Group’s management. The Board provides written principles for overall risk management, as well as written policies covering specific
areas, such as mitigating foreign exchange risks and investing excess liquidity.
Credit Risk
The Group’s credit risk primarily relates to its trade receivables. Responsibility for managing credit risks lies with the Group’s
management.
A customer evaluation is typically obtained from an appropriate credit rating agency. Where required, appropriate trade finance
instruments such as letters of credit, bonds, guarantees and credit insurance will be used to manage credit risk.
The Group also has a number of joint venture arrangements where partners have made commitments to fund certain expenditure.
Management evaluate the credit risk associated with each contract at the time of signing and continually monitor the credit worthiness of
our partners.
Page 25
JERSEY OIL AND GAS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 DECEMBER 2016
4.
FINANCIAL RISK MANAGEMENT - continued
Liquidity Risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they become due. The Group manages its
liquidity through continuous monitoring of cash flows from operating activities, review of actual capital expenditure programmes, and
managing maturity profiles of financial assets and financial liabilities.
Capital Risk Management
The Group seeks to maintain an optimal capital structure. The Group considers its capital to comprise both equity and net debt.
The Group monitors its capital structure on the basis of its net debt to equity ratio. Net debt to equity ratio is calculated as net debt divided
by total equity. Net debt is calculated as borrowing less cash and cash equivalents. Total equity comprises all components of equity.
The ratio of net debt to equity as at 31 December 2016 is Nil (2015: Nil).
Maturity analysis of financial assets and liabilities
Financial Assets
Up to 3 months
3 to 6 months
Over 6 months
Financial Liabilities
Up to 3 months
3 to 6 months
Over 6 months
5.
EMPLOYEES AND DIRECTORS
Wages and salaries
Social security costs
Share based payments (note 21)
Other pensions costs
2016
£
122,872
-
-
2015
£
227,718
-
-
122,872
227,718
2016
£
187,251
-
-
2015
£
304,191
-
-
187,251
304,191
2016
£
429,553
38,690
114,788
24,367
2015
£
555,682
71,954
-
46,950
607,398
674,586
Post-employment benefits include employee and Company contributions to money purchase pension schemes.
The average monthly number of employees during the year was as follows:
2016
2015
Directors
Employees
Directors’ remuneration
Compensation for loss of office/ variation in contract
Directors’ pension contributions to money purchase schemes
5
6
11
2016
£
210,500
-
11,000
221,500
3
4
7
2015
£
144,744
73,333
18,333
236,410
Page 26
JERSEY OIL AND GAS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 DECEMBER 2016
5.
EMPLOYEES AND DIRECTORS – continued
The average number of Directors to whom retirement benefits were accruing was as follows:
Money purchase schemes
Information regarding the highest paid Director is as follows:
Aggregate emoluments
Compensation for loss of office/ variation in contract
Pension contributions
The Directors did not exercise any share options during the year.
Key management compensation
1
2016
2016
£
66,000
-
66,000
-
1
2015
2015
£
65,267
73,333
138,600
18,333
Key management includes Directors (Executive and Non-Executive) and the Company Secretary. The compensation paid or payable to
key management for employee services is shown below;
Wages and short-term employee benefits
Share based payments (note 21)
Pension Contributions
6.
OTHER INCOME
Refund of well insurance
Refund of JV well costs
Carried costs reimbursement
2016
£
225,688
82,411
14,375
322,474
2016
£
37,380
89,202
87,528
214,110
2015
£
475,946
-
54,658
530,604
2015
£
-
-
-
-
Income from JV partners: Reimbursement of well-related costs received as a result of the carried interest arrangement with CIECO
Exploration in relation to P2170
Refund of well insurance: A return of prepaid insurance premiums on various policies
Refund of JV well costs:
Refund of prepaid well costs from the operator on the Niobe exploration well due to the actual costs of the
well having been less than had been billed. These costs were initially capitalised as intangible assets under
IFRS 6 and subsequently impaired in 2015. This has been reflected in the intangible assets note 12.
7.
GAIN ON DISPOSAL OF ASSET
Proceeds from Statoil
Net book value of asset
Gain on disposal of asset
2016
£
414,966
(175,242)
239,724
2015
£
-
-
-
During the year licence P.2170, which contains the Verbier prospected was farmed out to Statoil. The group still retain an 18% carried
interest in this licence.
8.
EXCEPTIONAL ITEMS
Impairment of Goodwill on Business Acquisition
Release from contractual agreements with Creditors
2016
£
-
-
-
2015
£
(569,884)
3,827,609
3,257,725
The impairment of goodwill relates to the acquisition of Jersey Oil E&P Ltd during 2015 and the £3.8m relates to the settlement
agreement reached with the Athena Consortium and CGG.
Page 27
JERSEY OIL AND GAS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 DECEMBER 2016
9.
NET FINANCE INCOME
Finance income:
Joint venture finance charge
Interest received
Finance costs:
CGG Services (UK) Limited interest
Unwinding of discount on the decommissioning liability
Joint venture finance charge
2016
£
2015
£
26
2,044
2,070
-
-
-
-
9,238
3,799
13,037
2,776
160,720
903
164,399
Net finance income/(costs)
2,070
(151,362)
10.
LOSS BEFORE TAX
The loss before tax is stated after charging/(crediting):
Depreciation
Impairment of oil assets
Intangible asset amortisation
Impairment of intangible assets (note 13)
Onerous contract provision
Auditors' remuneration – audit of parent company and consolidation
Auditors’ remuneration – audit of subsidiaries
Foreign exchange gain
Directors’ remuneration (note 5)
Employee costs (note 5)
Share based payments (notes 5 & 21)
11.
TAX
Reconciliation of tax charge
Loss before tax
Tax at the domestic rate of 20% (2015: 20%)
Expenses not deductible for tax purposes and non-taxable income
Deferred tax asset not recognised
Utilisation of prior year trading losses
Total tax expense reported in the Consolidated Statement of Comprehensive Income
2016
£
4,683
-
-
710
-
28,500
11,500
(33,326)
220,500
272,110
114,788
2016
£
(793,439)
(158,688)
1,338
157,350
-
-
2015
£
120,168
147,868
833,332
3,955,329
(4,177,609)
27,500
11,500
(86,813)
236,410
438,106
-
2015
£
(1,430,078)
(286,016)
2,010
284,006
-
-
No liability to UK corporation tax arose on ordinary activities for the year ended 31 December 2016 or for the year ended
31 December 2015.
The Group have not recognised a deferred tax asset due to the uncertainty over when the tax losses can be utilised. At the year end the
tax losses within the Group were approximately £25m.
12.
LOSS PER SHARE
Basic loss per share is calculated by dividing the losses attributable to ordinary shareholders by the weighted average number of ordinary
shares outstanding during the year.
Diluted loss per share is calculated using the weighted average number of shares adjusted to assume the conversion of all dilutive
potential ordinary shares. As a loss was recorded for the current and prior year, the issue of potential ordinary shares would have been
anti dilutive (see note 21 for share options in place at the end of the year).
Loss
attributable
to ordinary
shareholders
£
Weighted
average
number
of
shares
Per share
amount
pence
(793,439)
8,545,612
(9.28)
(1,430,078)
4,895,881
(29.21)
Year ended 31 December 2016
Basic and Diluted EPS
Loss attributable to ordinary shareholders
Year ended 31 December 2015
Basic and Diluted EPS
Loss attributable to ordinary shareholders
Page 28
JERSEY OIL AND GAS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 DECEMBER 2016
13.
INTANGIBLE ASSETS
COST
At 1 January 2015
Additions
At 31 December 2015
Additions
Disposals
Refund of Prior additions (note 6)
At 31 December 2016
AMORTISATION, DEPLETION & DEPRECIATION
At 1 January 2015
Charge for the year
Impairment charge for the year
At 31 December 2015
Impairment charge for the year
Refund on prior year additions (note 6)
At 31 December 2016
NET BOOK VALUE
At 31 December 2016
At 31 December 2015
At 31 December 2014
Exploration
costs
£
13,907,024
2,722,853
16,629,877
85,993
(175,242)
(94,202)
16,446,426
12,536,225
-
3,955,329
16,491,554
710
(94,202)
16,398,062
48,363
138,323
1,370,799
* Impairments relate to the following licences included in Cost of sales in the Consolidated Statement of Comprehensive Income:
Licence P.1989 - Homer
£
710
Following completion of geoscience evaluation activities in 2015, four North Sea licences (P1556 29/1c (Orchid), P1889 12/26b & 27
(Niobe), P1768 14/14b, 18c & 19c (Bordeaux, Brule) and P1666 30/11c (Romeo)) were relinquished as they were considered to be
non-prospective and the associated licence fees were onerous.
Following these relinquishments the Group retained two licences: Licence P.2170 (Verbier) and P.1989 (Homer).
The P.2170 licence was farmed out to Statoil, under which we disposed of 42% of our 60% interest (retaining an 18% interest) in the
licence. The disposal recorded within the note reflects this reduced interest.
At 31 December 2016 the remaining exploration asset (P.2170 – Verbier) was reviewed and the then carrying value of £48,363 was
considered reasonable based on ongoing exploration work in the licence block and as a result no further impairments have been
considered necessary.
Page 29
JERSEY OIL AND GAS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 DECEMBER 2016
14.
PROPERTY, PLANT AND EQUIPMENT
COST
At 1 January 2015
Additions
At 31 December 2015
Additions
At 31 December 2016
ACCUMULATED AMORTISATION, DEPLETION &
DEPRECIATION
At 1 January 2015
Charge for the year
Impairment charge for the year
At 31 December 2015
Charge for the year
At 31 December 2016
NET BOOK VALUE
At 31 December 2016
At 31 December 2015
At 1 January 2015
Production
interests and
fields under
development
£
29,305,027
147,868
29,452,895
-
Computer
and office
equipment
£
286,022
-
286,022
-
Total
£
29,591,049
147,868
29,738,917
-
29,452,895
286,022
29,738,917
29,305,027
-
147,868
29,452,895
-
29,452,895
-
-
-
160,799
120,168
-
280,967
4,683
285,650
372
5,055
29,465,826
120,168
147,868
29,733,862
4,683
29,738,545
372
5,055
125,223
125,223
Following the contract negotiations on the Athena production field the costs incurred on the licence have been impaired as the asset does
not have a value to the Group.
15.
IMPAIRMENTS
Production asset
Exploration assets
16.
TRADE AND OTHER RECEIVABLES
Current:
Trade receivables (net)
Other receivables
Deposits
Value added tax
Prepayments and accrued revenue
17.
CASH AND CASH EQUIVALENTS
Unrestricted cash in bank accounts
18.
CALLED UP SHARE CAPITAL
Issued and fully paid:
Number:
Class
9,916,478 (2015: 8,391,477) Ordinary
19.
TRADE AND OTHER PAYABLES
Current:
Trade payables
Accrued expenses
Other payables
Taxation and Social Security
2016
£
-
710
710
2016
£
-
67
-
19,513
103,292
122,872
2016
£
1,882,310
2015
£
147,868
3,955,329
4,103,197
2015
£
124,526
68
15,000
26,253
61,871
227,718
2015
£
862,910
Nominal
value
1p
2016
£
2015
£
2,347,017
2,331,767
2016
£
46,413
98,587
10,391
31,860
187,251
2015
£
29,202
150,560
101,390
23,039
304,191
Page 30
JERSEY OIL AND GAS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 DECEMBER 2016
20.
CONTINGENT LIABILITY
In 2015 the settlement agreement reached with our partners in the Athena Consortium means that, although Trap Oil Limited remains a
Licensee in the joint venture, any past or future liabilities in respect of its interest can only be paid from the revenue that the Athena Oil
Field generates and 60 per cent. of net disposal proceeds or net profits from the P.2170 and P.1989 licences which are the only
remaining assets still held that were in the Group at the time of the agreement with the consortium partners who hold security over these
assets. Any future repayments, capped at 125% of the unpaid liability associated with the Athena Oil Field, cannot be calculated with any
certainty, and any remaining liability still in existence once the Athena Oil Field has been decommissioned will be written off. A payment
was made in 2016 to the Athena Consortium in line with this agreement following the farm-out of P.2170 (Verbier) to Statoil and the
subsequent receipt of monies relating to that farm-out.
In 2014 the Group assigned its lease of 35 King Street to a third party, although the Group is still acting as Authorised Guarantor for all
liabilities of the assignee in relation to the lease agreement, which terminates on 30 October 2018.
21.
SHARE BASED PAYMENTS
The Group operates a number of share option schemes. Options are exercisable at the prices set out in the table below. Options are
forfeited if the employee leaves the Group through resignation or dismissal before the options vest.
Equity settled share based payments are measured at fair value at the date of grant. The fair value determined at the date of grant of
equity settled share based payments is expensed on a straight line basis over the vesting period, based upon the Group’s estimate of
shares that will eventually vest.
The Group share option schemes are for Directors, Officers and employees. The charge for the year was £114,788 (2015 nil) and details
of outstanding options are set out in the table below.
Date Of Grant
Exercise price
pence
Vesting date
Expiry date
March 2011
Mar 2011
Mar 2011
Mar 2011
Jul 2011
Jul 2011
Jul 2011
Dec 2011
Dec 2011
Dec 2011
May 2013
May 2013
May 2013
Nov 2016
Nov 2016
Nov 2016
100
4,300
4,300
4,300
4,300
4,300
4,300
2,712
2,712
2,712
1,500
1,500
1,500
110
110
110
Vested
Vested
Mar 2014
Mar 2015
Jul 2011
Jul 2012
Jul 2014
Dec 2012
Dec 2014
Dec 2015
May 2014
May 2015
May 2015
Nov 2016
Nov 2017
Nov 2018
Mar 2021
Mar 2021
Mar 2021
Mar 2021
Jul 2021
Jul 2021
Jul 2021
Dec 2021
Dec 2021
Dec 2021
May 2023
May 2023
May 2023
Nov 2021
Nov 2021
Nov 2021
No. of shares
for which
options
outstanding at
1 Jan 2016
Options
lapsed/non
vesting during
the year
No. of shares
for which
options
outstanding at
31 Dec 2016
Options
issued
24,138
5,809
4,355
5,809
523
523
523
1,650
1,650
-
9,500
9,500
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
260,000
260,000
260,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
24,138
5,809
4,355
5,809
523
523
523
1,650
1,650
-
9,500
9,500
-
260,000
260,000
260,000
843,980
The weighted average fair value of options granted during the year determined using the Black-Scholes valuation model was 41.55p per
option. The significant inputs into the model were the mid-market share price on the day of grant or 1p exercise price as shown above
and an annual risk-free interest rate of 2 per cent. The volatility measured at the standard deviation of continuously compounded share
returns is based on a statistical analysis of daily share prices from the date of admission to AIM to the date of grant on an annualised
basis.
22.
RELATED UNDERTAKINGS AND ULTIMATE CONTROLLING PARTY
The Group and Company do not have an ultimate controlling party, or parent Company.
Subsidiary
Predator Oil Ltd
Trap Oil Ltd
Trap Oil & Gas Ltd
Trap Petroleum Ltd
Trap Exploration (UK) Ltd
Jersey Oil & Gas E & P Ltd
Registered Offices
% owned
100%
100%
100%
100%
100%
100%
County of Incorporation
England & Wales
England & Wales
Scotland
Scotland
Scotland
Jersey
Principal Activity
Non Trading
Oil Exploration
Non Trading
Non Trading
Non Trading
Management services
Registered Office
1
1
2
2
2
3
1 10 The Triangle, NG2 Business Park, Nottingham, NG2 1AE
2 6 Rubislaw Terrace, Aberdeen, AB10 1XE
3 Howard House, 9 The Esplanade St Helier, Jersey, Channel Islands, JE2 3QA
Page 31
JERSEY OIL AND GAS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 DECEMBER 2016
23. NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS
RECONCILIATION OF LOSS BEFORE TAX TO CASH USED IN OPERATIONS
Loss for the year before tax
Adjusted for:
Amortisation, impairments, depletion and depreciation
Share based payments (net)
Gain on disposal assets
Finance costs
Finance income
Decrease in inventories
Decrease in trade and other receivables
Decrease in trade and other payables
Cash used in operations
CASH AND CASH EQUIVALENTS
2016
£
2015
£
(793,439)
(1,430,078)
5,393
114,788
(239,724)
-
(2,070)
(915,052)
-
104,846
(116,938)
5,901,697
-
-
164,399
(13,037)
4,622,981
858,060
9,798,988
(19,444,008)
(927,144)
(4,163,979)
The amounts disclosed on the Statement of Cash Flows in respect of Cash and cash equivalents are in respect of these statements of
financial position amounts:
Year ended 2016
Cash and cash equivalents
Year ended 2015
Cash and cash equivalents
Cash and cash equivalents
Net cash
24
CONTINGENT ASSET
31 Dec 2016
£
1,882,310
1 Jan 2016
£
862,910
31 Dec 2015
£
862,910
1 Jan 2015
£
7,074,282
At 1 Jan 2016
Analysis of net cash
cash flow
At 31 Dec 2016
£
£
862,910 1,019,400
£
1,882,310
862,910 1,019,400
1,882,310
The P.1989 licence was farmed out in 2016 to Azinor Catalyst and as such has no value in use at the year end. By way of consideration,
Azinor undertook to:
•
carry out certain firm work commitments (the "Firm Commitments Work Programme"), as set out in the terms of the Licence,
including the drill-or-drop obligation in respect of an exploration well; and
• make certain payments to each of Noreco and JOGl and has contingent on the occurrence of certain future events, namely:
o US$2m within 90 days of the date when an exploration well, drilled within the Licence area, exceeds a threshold of
net-pay with a vertical extent of no less than twenty metres of sands with a hydrocarbon saturation above sixty per
cent. and a permeability cut-off of 1mD; and
o a further US$2m within 90 days of the date when a Field Development Plan in respect of the aforementioned
exploration well is approved by the Secretary of State for Energy and Climate Change.
25 AVAILABILITY OF THE ANNUAL REPORT 2016
A copy of these results will be made available for inspection at the Company’s registered office during normal business hours on any
weekday. The Company’s registered office is at 10 The Triangle, ng2 Business Park, Nottingham NG2 1AE. A copy can also be
downloaded from the Company’s website at www.jerseyoilandgas.com. Jersey Oil and Gas plc is registered in England and Wales with
registration number 7503957.
Page 32
JERSEY OIL AND GAS PLC
CONTENTS OF THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
Independent Auditors’ Report
Company Statement of Financial Position
Company Statement of Changes in Equity
Company Statement of Cash Flows
Page
34-35
36
37
38
Notes to the Company Financial Statements
39-41
Page 33
JERSEY OIL AND GAS PLC
INDEPENDENT AUDITORS’ REPORT
YEAR ENDED 31 DECEMBER 2016
Independent auditors’ report to the members of Jersey Oil and Gas Plc
Report on the parent company financial statements
Our opinion
In our opinion, Jersey Oil and Gas Plc’s parent company financial statements (the “financial statements”):
• give a true and fair view of the state of the parent company’s affairs as at 31 December 2016 and of its cash flows for the year
then ended;
• have been properly prepared in accordance with International Financial Reporting Standards (“IFRSs”) as adopted by the
European Union and as applied in accordance with the provisions of the Companies Act 2006; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
What we have audited
The financial statements, included within the Annual Report and Accounts (the “Annual Report”), comprise:
•
•
•
•
the company statement of financial position as at 31 December 2016;
the company statement of changes in equity for the year then ended; and
the company statement of cash flows for the year then ended;
the notes to the financial statements, which include a summary of significant accounting policies and other explanatory
information.
The financial reporting framework that has been applied in the preparation of the financial statements is IFRSs as adopted by the
European Union, and applicable law, and as applied in accordance with the provisions of the Companies Act 2006.
In applying the financial reporting framework, the directors have made a number of subjective judgements, for example in respect of
significant accounting estimates. In making such estimates, they have made assumptions and considered future events.
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 Report of the directors for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
the Strategic Report and the Report of the directors have been prepared in accordance with applicable legal requirements.
In addition, in light of the knowledge and understanding of the parent company and its environment obtained in the course of the audit, we
are required to report if we have identified any material misstatements in the Strategic Report and the Report of the directors. We have
nothing to report in this respect.
Other matters on which we are required to report by exception
Adequacy of accounting records and information and explanations received
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• 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 financial statements are not in agreement with the accounting records and returns.
•
We have no exceptions to report arising from this responsibility.
Directors’ remuneration
Under the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of directors’ remuneration specified
by law are not made. We have no exceptions to report arising from this responsibility.
Responsibilities for the financial statements and the audit
Our responsibilities and those of the directors
As explained more fully in the Statement of Directors’ Responsibilities set out on page 13, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International
Standards on Auditing (UK and Ireland) (“ISAs (UK & Ireland)”). Those standards require us to comply with the Auditing Practices Board’s
Ethical Standards for Auditors.
This report, including the opinions, has been prepared for and only for the parent company’s members as a body in accordance with
Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume
responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
Page 34
JERSEY OIL AND GAS PLC
INDEPENDENT AUDITORS’ REPORT - continued
YEAR ENDED 31 DECEMBER 2016
What an audit of financial statements involves
We conducted our audit in accordance with ISAs (UK & Ireland). An audit involves obtaining evidence about the amounts and disclosures
in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement,
whether caused by fraud or error. This includes an assessment of:
• whether the accounting policies are appropriate to the parent company’s circumstances and have been consistently applied
and adequately disclosed;
the reasonableness of significant accounting estimates made by the directors; and
the overall presentation of the financial statements.
•
•
We primarily focus our work in these areas by assessing the directors’ judgements against available evidence, forming our own
judgements, and evaluating the disclosures in the financial statements.
We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to provide a
reasonable basis for us to draw conclusions. We obtain audit evidence through testing the effectiveness of controls, substantive
procedures or a combination of both.
In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the
audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent
with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or
inconsistencies we consider the implications for our report. With respect to the Strategic Report and Report of the directors, we consider
whether those reports include the disclosures required by applicable legal requirements.
Other matter
We have reported separately on the group financial statements of Jersey Oil and Gas Plc for the year ended 31 December 2016.
Richard Spilsbury (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Aberdeen
20 April 2017
Page 35
JERSEY OIL AND GAS PLC
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2016
CURRENT ASSETS
Trade and other receivables
Cash and cash equivalents
TOTAL ASSETS
EQUITY
Called up share capital
Share premium account
Share options reserve
Accumulated losses
TOTAL EQUITY
LIABILITIES
CURRENT LIABILITIES
Trade and other payables
TOTAL LIABILITIES
TOTAL EQUITY AND LIABILITIES
Note
2016
£
2015
£
5
6
7
8
32,696
1,777,566
1,810,262
1,810,262
35,309
743,622
778,931
778,931
2,347,017
71,170,230
1,495,916
(73,552,237)
2,331,767
69,569,979
1,381,128
(72,828,837)
1,460,926
454,037
349,336
349,336
1,810,262
324,894
324,894
778,931
The financial statements on pages 36 to 41 were approved by the Board of Directors and authorised for issue on 20 April 2017. They
were signed on its behalf by S J Richardson Brown – Chief Financial Officer.
Company Registration Number: 07503957
The notes on pages 39 to 41 are an integral part of these financial statements
Page 36
JERSEY OIL AND GAS PLC
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2016
Called up
share
capital
£
Share
premium
account
£
Share
options
reserve
£
Accumulated
losses
£
Total
equity
£
At 1 January 2015
2,271,693 68,321,083
1,786,420
(70,718,116)
1,661,080
Total comprehensive loss and loss for the year
Lapsed options
Issue of Share capital
At 31 December 2015
-
-
-
-
(2,516,013)
(2,516,013)
-
(405,292)
405,292
-
60,074
1,248,896
-
-
1,308,970
2,331,767 69,569,979
1,381,128
(72,828,837)
454,037
Total comprehensive loss and loss for the year
-
-
Issue of Share capital
15,250
1,600,251
-
-
(723,400)
(723,400)
-
1,615,501
Transactions with owners (share based payments)
-
-
114,788
-
114,788
At 31 December 2016
2,347,017 71,170,230
1,495,916
(73,552,237)
1,460,926
The notes on pages 39 to 41 are an integral part of these financial statements
Page 37
JERSEY OIL AND GAS PLC
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2016
Cash flows from operating activities
Cash generated from operations
Net cash used in from operating activities
Cash flows from investing activities
Interest received
Net cash generated from investing activities
Cash flows from financing activities
Proceeds from share issue
Loans to subsidiary companies
Net cash generated from/(used) in financing activities
Note
10
2016
£
(299,706)
(299,706)
2,044
2,044
1,615,501
(283,895)
1,331,606
2015
£
(687,917)
(687,917)
3,253
3,253
813,970
(1,192,580)
(378,610)
Increase/(Decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
10
10
10
1,033,944
(1,063,274)
743,622
1,777,566
1,806,896
743,622
The notes on pages 39 to 41 are an integral part of these financial statements
Page 38
JERSEY OIL AND GAS PLC
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
1.
SIGNIFICANT ACCOUNTING POLICIES
The separate financial statements of the Company are presented as required by the Companies Act 2006. As permitted by that Act, the
separate financial statements have been prepared in accordance with International Financial Reporting Standards.
These financial statements have been prepared under the historic cost convention, in accordance with International Financial Reporting
Standards and IFRS IC interpretations as adopted by the European Union (“IFRSs”) and with those parts of the Companies Act 2006
applicable to companies reporting under IFRS. The financial statements have been prepared on a going concern basis. The significant
accounting judgements and estimates are consistent with those set out in note 2 to the consolidated financial statements. The principal
accounting policies adopted are consistent with those set out in note 2 to the consolidated financial statements. The financial risk
management for the Company is consistent with those set out in note 4 to the consolidated financial statements. These policies have
been consistently applied to all the periods presented, unless otherwise stated.
Investments in subsidiaries are stated at cost less, and where appropriate, provisions for impairment.
Going Concern
The Company is expected to have sufficient resources to cover the expected running costs of the business for a period of 12 months
after the issue of these financial statements. Taking into account the carry from Statoil and the anticipated cash receivable from CIECO in
relation to our carry from them on the P.2170 (Verbier) well drilling and given the current anticipated well costs, the Statoil carry and
proceeds receivable from CIECO, as well as our current cash reserves, are in a dry hole case expected to more than exceed the
estimated liability of the Company. Should the well be successful as we hope, further testing and well activity will be required and the
Company will seek to approve budgets with our partners and raise additional finance in order to cover this eventuality and its share of the
expected additional costs. Whilst there can be no certainty of the success of any fund raising, the Directors believe the successful well
result in this scenario would position the Company favourably in order to source additional capital. Based on these circumstances, the
directors have considered it appropriate to adopt the going concern basis of accounting in preparing its company financial statements.
2.
EMPLOYEES AND DIRECTORS
The Directors’ total emoluments, are included in the aggregate of directors' emoluments disclosed in the consolidated financial
statements of the ultimate parent company (note 5).
3.
LOSS OF PARENT COMPANY
As permitted by Section 408 of the Companies Act 2006, the Statement of Comprehensive Income of the parent Company is not
presented as part of these financial statements.
The parent Company's loss for the year was £723,400 (2015: £2,516,013).
Auditors’ remuneration is disclosed in note 10 in the consolidated financial statements.
4.
PROPERTY, PLANT AND EQUIPMENT
COST
At 1 January 2015
At 31 December 2015
Additions
At 31 December 2016
ACCUMULATED DEPRECIATION
At 1 January 2015
Charge for the year
At 31 December 2015
Charge for the year
At 31 December 2016
NET BOOK VALUE
At 31 December 2016
At 31 December 2015
At 1 January 2015
Page 39
Office
equipment
£
255,029
255,029
-
255,029
142,294
112,735
255,029
-
255,029
-
-
112,735
JERSEY OIL AND GAS PLC
NOTES TO THE COMPANY FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 DECEMBER 2016
2016
£
2015
£
15,363
17,333
32,696
24,083
11,226
35,309
2016
£
1,777,566
2015
£
743,622
Nominal
Value
1p
2016
£
2015
£
2,347,017
2,331,767
2016
£
2015
£
211,678
28,209
22,272
87,177
349,336
211,678
4,584
19,393
89,239
324,894
Amount due to subsidiaries
2015
2016
£
£
211,676
211,676
-
-
-
-
1
1
1
1
-
-
5.
TRADE AND OTHER RECEIVABLES
Current:
Value Added Tax
Prepayments
6.
CASH AND CASH EQUIVALENTS
Cash at bank
7.
CALLED UP SHARE CAPITAL
Issued and fully paid:
Number:
Class
9,916,478 (2015: 8,391,477) Ordinary
8.
TRADE AND OTHER PAYABLES
Current:
Amounts due to group undertaking
Trade payables
Other payables
Accrued expenses
Amounts shown as Current: Amounts owed to Group undertakings - are repayable on demand.
9.
RELATED PARTY DISCLOSURES AND ULTIMATE CONTROLLING PARTY
The Group and Company do not have an ultimate controlling party, or parent Company.
Subsidiary
Predator Oil Ltd
Trap Oil Ltd
Trap Oil & Gas Ltd
Trap Petroleum Ltd
Trap Exploration (UK) Ltd
% owned
County of
Incorporation
100% England & Wales
100% England & Wales Oil Exploration
100%
100%
100%
Scotland
Scotland
Scotland
Principal
Activity
Non Trading
Non Trading
Non Trading
Non Trading
Management
services
Jersey Oil & Gas E & P Ltd
100%
Jersey
Page 40
JERSEY OIL AND GAS PLC
NOTES TO THE COMPANY FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 DECEMBER 2016
9.
RELATED PARTY DISCLOSURES AND ULTIMATE CONTROLLING PARTY - continued
The balances outstanding at the end of the year from Trap Oil Limited £68,255,683 (2015: £68,251,398) and Jersey Oil & Gas E&P Ltd
£440,433 (2015: £160,882) have been, given the doubt over the ability of the subsidiaries to continue as going concerns, provided for as a
doubtful debt.
During the year the Company also made sales to Trap Oil Limited amounting to £445,466 (2015: £1,040,704)
10.
NOTES TO THE COMPANY STATEMENT OF CASH FLOWS
RECONCILIATION OF LOSS BEFORE INCOME TAX TO CASH GENERATED FROM OPERATIONS
Loss for the year before tax
Adjusted for:
Depreciation charge (note 4)
Impairment of investment in subsidiaries
Impairment of receivables from subsidiaries (note 9)
Provision for write off of loan interest
Share based payments (net)
Finance income
Decrease in receivables (note 5)
Increase/(Decrease) in trade and other payables (note 8)
Cash used in operations
CASH AND CASH EQUIVALENTS
2016
£
2015
£
(723,400)
(2,516,013)
-
-
283,895
69,489
114,788
(71,533)
112,735
495,000
1,404,258
334,118
-
(3,253)
(326,761)
(173,155)
2,613
24,442
184,864
(699,626)
(299,706)
(687,917)
The amounts disclosed on the Statement of Cash Flows in respect of Cash and cash equivalents are in respect of these statements of
financial position amounts:
Year ended 2016
Cash and cash equivalents
Year ended 2015
Cash and cash equivalents
Cash and cash equivalents
Net cash
31 Dec 2016
£
1,777,566
31 Dec 2015
£
743,622
1 Jan 2016
£
743,622
1 Jan 2015
£
1,806,896
At 1 Jan 2016
£
743,622
Analysis of net cash
Cash flow
£
1,033,944
At 31 Dec 2016
£
1,777,566
743,622 1,033,944
1,777,566
Page 41