JERSEY OIL AND GAS PLC
CONTENTS OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
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
Pages
1
2
3-4
5-6
7-9
10
11-12
13
14-16
17-19
20
21
22
23
Notes to the Consolidated Financial Statements
24-34
Company Financial Statements for Jersey Oil and Gas plc
35-41
JERSEY OIL AND GAS PLC
HIGHLIGHTS AND OUTLOOK
FOR THE YEAR ENDED 31 DECEMBER 2017
Highlights
• Oil Discovery at Verbier sidetrack well 20/05b-13Z, with estimated gross recoverable resources of up to 130 million barrels of
oil equivalent, with a minimum proven volume of 25 million barrels of oil equivalent
•
•
Placing with new and existing institutional investors and open offer completed in November 2017 raising £23.8m (gross) to
significantly strengthen the Company’s balance sheet
The Company benefitted from a double carry on the exploration programme, with Operator Statoil carrying well costs of up to
$25 million on the 20/05b-13 well and JOG receiving a 10% cash carry from its co-venturer CIECO of approximately £2.4m
•
Cash balances at year end of £25.4m and no debt
Post year end
•
•
•
2018 work programme and budget approved for P2170 licence which includes an appraisal well programme for the recent Verbier
oil discovery
Contracts awarded by P2170 Licence Operator, Statoil, for the semi-submersible rig, West Phoenix, to drill an appraisal well, with
the possibility for a sidetrack well, on the Verbier oil discovery in P2170 licence in the summer of 2018
The P2170 licence co-venturers have committed to pre-fund a 3D seismic survey over the P2170 licence area and certain offset
acreage, during Q2 2018 with delivery of final data in Q1 2019
Outlook
•
•
•
•
•
•
Global oil prices appear to be holding steady above the $60/bbl level, providing increased clarity for pursuit of the Group’s
growth strategy
Exciting year ahead with near-term drilling activity on Verbier in the summer of 2018
Additional 3D seismic survey will facilitate the potential future development of the Verbier discovery and enhance our
understanding and evaluation of other drillable prospects in the greater P2170 licence area
Ongoing licence-wide exploration effort looking for other Verbier analogues, including Cortina and Meribel
Contingent plans for site survey and additional exploration well planning
The Company continues to pursue its dual strategy of appraising and exploring P2170, while seeking to acquire oil and gas
production assets in the UK Continental Shelf (“UKCS”) region of the North Sea
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JERSEY OIL AND GAS PLC
CHAIRMAN’S STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2017
Overview
The year ended 31 December 2017 was transformational for Jersey Oil and Gas (“JOG” or the “Company” or, together with its subsidiaries,
the “Group”), led by the Verbier discovery in licence P2170, in which the Company has an 18% working interest.
This discovery was a result of the drilling programme undertaken in 2017, by Statoil as operator of licence P2170, which enabled us to
announce estimated gross recoverable resources of between 25 and 130 mmboe (million barrels of oil equivalent), with a minimum proven
volume of 25 mmboe. Besides being of major significance to JOG, the Verbier discovery was also a positive endorsement of North Sea
exploration activity generally.
The Board believes that the results at Verbier provide encouragement that in addition to the Verbier prospect there could be a material amount
of further resources within the P2170 licence area, and we are approaching this potential prospectivity on a number of fronts. An appraisal
drilling programme for Verbier is scheduled for which a work programme and budget have been agreed by the P2170 co-venturers. In addition,
we have recently announced a major new 3D seismic survey, which will help with early stage development planning, should the Verbier
appraisal programme be successful and also advance our exploration activity across the rest of the P2170 licence, which includes the Cortina
prospect, the Meribel lead and other potential Verbier analogues. This work is being undertaken both by Statoil, on behalf of the joint venture,
and by JOG on its own account, as we look to fully maximise the value of the Verbier discovery.
Whilst further details of the discovery are covered in the Chief Executive’s Officers Report, it is clear that these are exciting times for JOG,
with the potential for generating significant shareholder value, both from the Verbier prospect itself, and in the areas beyond.
Economic Background
The economic background against which this was achieved included Brent Crude Oil opening 2017 at $56 per barrel, falling back to $50 per
barrel at the half way point, and then increasing to $66 per barrel at the year end. The consensus view, at the beginning of 2018, was for a
year-end Brent Crude Oil price of around $60, which at the time of this statement is trading at c.$74 per barrel. In terms of the long-term
outlook, the majority of global projections envisage the level of oil and gas demand in 2035 or 2040 to be in excess of what is it today. In a
UK Continental Shelf (“UKCS”) context, whilst we are past peak production, and a number of companies are seeking to dispose of asset
portfolios, there also continues to be exploration activity, with notable successes, one of which was the 2017 JOG discovery at Verbier.
The development of activity in the UKCS continues to be actively promoted through the Oil and Gas Authority’s Maximising Economic
Recovery programme, which provides strategic influence on the future development of the UKCS (which the Government estimates could
have up to 20billion barrels of recoverable reserves remaining). As part of this Government led incentivisation process, the headline rate of
tax in the UKCS was reduced to 40% in 2016.
Against this backdrop, we have continued to engage with multiple vendors in connection with the acquisition of producing assets. As in
previous years, we continue to apply a rigorous and disciplined approach to asset valuation and will not be swayed in the event of what we
see as uneconomic prices being offered by others, or unrealistic terms being asked by vendors. A number of potential transactions have
reached very advanced stages of negotiation for JOG but have not been completed, for a number of quite different, deal-related reasons.
We believe that the level of divestment activity will most likely increase following proposed tax changes, announced by the Chancellor of the
Exchequer in 2017 which, effective from November 2018, should allow the historical tax profile of an oil and gas field to be transferred to the
purchaser of a licence interest, thereby allowing tax relief for future costs of abandonment expenditure. Although our experience is that a
number of vendors are prepared to retain their abandonment obligations, this change should enable asset purchasers, such as JOG, to take
them on more easily.
Equity Placing
In the third quarter of 2017 we raised approximately £24m through a placing and open offer of new ordinary shares, largely in order to fund
our share of future appraisal and exploration costs relating to the Verbier discovery. We were particularly pleased to welcome new institutional
shareholders via the placing and report a 94% take up of the maximum allocation of £4m, under the subscription offer, to our existing
shareholders.
Financial Results
Our pre-tax profit for the year amounted to £726k, up from a loss of £793k in 2016. The main contributor to this profit was the carry
reimbursement we received in relation to the Verbier drilling programme. Nonetheless, we continue to maintain a tight control over our costs,
both in the year just passed and going forward.
Cash at year end was just over £25m and we are presently budgeting for £9m to £11m of capital expenditure in relation to the 2018 P2170
work programme, including the Verbier appraisal well.
Outlook
The drilling of one or perhaps two appraisal wells on Verbier later this year will clearly be an important milestone for JOG and we will be
working closely with our co-venturers on this major opportunity. We will also continue to assess potential production asset acquisitions, whilst
maintaining our pricing discipline and are cognisant not to overly dilute what may be significant value for shareholders ahead of this summer’s
Verbier appraisal well. Given the operating and economic environment in which JOG operates, I believe that the JOG strategy of appraising
the Verbier discovery and additional exploration activity, together with an active production acquisition programme leaves us in the right place,
at the right time, to develop significant value for shareholders, and we will be working very hard to do so.
On behalf of the Board, I would like to welcome the new shareholders who supported our equity placing in 2017 and to thank those existing
shareholders who have increased their shareholdings. I would also like to thank all of our employees who have continued to work on our
exploration and production ambitions, not forgetting the significant salary cuts that were taken in earlier years.
Marcus Stanton
Non-Executive Chairman
26 April 2018
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JERSEY OIL AND GAS PLC
CHIEF EXECUTIVE OFFICER’S REPORT
FOR THE YEAR ENDED 31 DECEMBER 2017
Overview
When our interim results were published on 28 September 2017, we had just embarked on the drilling of the Verbier sidetrack well, following
a disappointing initial well earlier in the month. Potential for hydrocarbons to exist up dip from the water-bearing sands encountered in the
initial well could not be ruled out, so a decision by the joint venture was made to drill the sidetrack well. We were subsequently delighted to
announce, in early October, the Verbier oil discovery in good quality sands with the results exceeding pre-drill expectations for the sidetrack
well. The operator’s initial estimates of gross recoverable resources associated with the Verbier discovery were between 25 and 130 million
barrels of oil equivalent, with a minimum proven recoverable volume of 25 million barrels of oil equivalent. It is our belief that this discovery
was the largest conventional discovery to be made in UKCS part of the North Sea during 2017 and was a significant milestone for Jersey Oil
and Gas.
Soon after the discovery, JOG completed a successful equity placing that strengthened its balance sheet ahead of an expected work
programme of appraisal and further exploration across the P2170 licence. Post year end, we were pleased to announce that the West Phoenix,
a sixth generation semi-submersible rig, has been contracted for a summer 2018 appraisal programme to determine the potential of our
Verbier discovery. We have also recently announced JOG’s participation in a new 3D seismic survey that will cover licence P2170 and further
offset acreage, optimised to advance the interpretation of Verbier and additional exploration analogues;; a clear demonstration of the licence
co-venturers’ optimism for the acreage.
Operations
A key focus for JOG during 2017 was the build up of operations and drilling on the P2170 licence area with respect to the Verbier exploration
well programme, operated by Statoil. Following our successful farm-out to Statoil during 2016, JOG retained an 18% interest in this licence.
In April 2017, we were pleased to announce the signing, by Statoil, of a contract for use of the Transocean Spitsbergen rig. This set in motion
detailed plans for drilling of the Verbier exploration well, which commenced in August 2017.
Prior to the exploration drilling programme, JOG also furthered its technical understanding of the two drill-ready prospects on the licence,
Verbier and Cortina, and in March 2017 we announced the findings of an independent Competent Person’s Report (“CPR”), conducted by
ERC Equipoise Limited, which ascribed prospective resources and risks for these prospects. We were pleased with the outcome of this
independent study, as it reported an upgrade on our previous management estimates, with mean prospective resources of 162MMbbls
ascribed to Verbier with a chance of success of 29%, and 124MMbbls ascribed to Cortina with a chance of success of 19%.
In August, JOG announced the commencement of the drilling of the Verbier exploration well, 20/05b-13. Unfortunately, although the well was
on time and within budget, after 29 days of drilling, JOG was disappointed to announce that the well had failed to find any commercial
hydrocarbons. The well encountered water-bearing Upper Jurassic sands, deeper than anticipated. This geological result was indeed a
surprise to the P2170 co-venturers. Led by the operator, Statoil, the wireline log data from the well, together with the pressure samples and
seismic data, were subsequently evaluated. It was concluded that potential for hydrocarbons to be present in an accumulation up dip of the
20/05b-13 Verbier exploration well could not be ruled out. Accordingly, JOG was pleased to support the operator’s recommendation to
undertake the drilling of a sidetrack exploration well which commenced in September 2017.
Successful Verbier Sidetrack
In October 2017, JOG was delighted to announce an oil discovery in the Verbier sidetrack well. Preliminary analysis indicated that the well
had proven a hydrocarbon accumulation in good quality sands, up-dip of the water-bearing sands encountered in the initial well. Extensive
evaluation of the sidetrack well results, together with the existing 3D seismic data, has been ongoing since the discovery, with initial Statoil
estimates of gross recoverable resources associated with the discovery of between 25 and 130 million barrels of oil equivalent, with a minimum
proven recoverable volume of 25 million barrels of oil equivalent in the immediate vicinity of the wellbore.
The Company's management has run notional development scenarios, which include a subsea tie-back development scenario to
commercialise the minimum proven volume and a standalone platform development for volumes in excess of the mean recoverable volume
estimate of 69 million barrels. For the Verbier upside case of 130 million barrels, management has estimated that full lifecycle costs (including
capex, opex and abex) have the potential to be under $35/barrel. In the event of a low case of 25 million barrels recoverable, development
scenarios exist which management currently believe could be commercially viable. When aggregating recoverable prospective resource
estimates for the Cortina prospect and Meribel lead, the resource range for P2170 is estimated by management to be 70 MMboe in the low
case to 273 MMboe in the upside case.
In addition to confirming the presence of oil in the Verbier prospect, this discovery provides valuable information to help better understand the
prospectivity of the P2170 licence area, incentivising the joint venture to increase its exploration activities. In parallel with the excellent
technical analysis being conducted by licence operator Statoil, JOG has been conducting its own technical studies post well results, for the
benefit of shareholders, which are fully aligned, and have been presented to the co-venturers.
Other Licence Activity
In early 2016, JOG sold its interest in licence P1989, in which the Partridge prospect was located, to Azinor Catalyst Limited ("Azinor") in
return for a contingent financial interest, subject to a discovery, of up to US$4m. During August 2017, Azinor announced that drilling had
begun on its Partridge prospect. While the well encountered excellent quality reservoir rocks, hydrocarbons were not present and it has now
been plugged and abandoned. Accordingly, no contingent payments will be received by the Company from Azinor.
In 2014 the P1923 licence was relinquished in which JOG has a 30% working interest. During 2017, Centrica, the original operator, identified
an opportunity to recoup some of the costs incurred in the reprocessing of the datasets. The sale of the data resulted in a payment to JOG of
£22,500.
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 P2032, 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.
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JERSEY OIL AND GAS PLC
CHIEF EXECUTIVE OFFICER’S REPORT - continued
FOR THE YEAR ENDED 31 DECEMBER 2017
JOG’s Acquisition Strategy
The Company has continued with its other main focus of seeking to acquire value-enhancing North Sea production focused assets. The
Company now benefits from a stronger balance sheet, which will provide vendors with greater confidence in its ability to execute on potential
acquisitions. The Company will also benefit from having the necessary resources to undertake its own studies in relation to the ongoing
evaluation of numerous North Sea oil and gas production focused prospects. The Company has a strong pipeline of asset opportunities
currently under evaluation. Following the success with Verbier, JOG’s management is mindful of the remaining upside potential that a 2018
appraisal programme has for our shareholders and whilst we are keen to expand our North Sea portfolio, we remain sensitive about equity
dilution and are therefore increasingly disciplined in our approach to acquisitions.
Financial review
Due to the beneficial nature of JOG’s carry arrangements on licence P2170, the Company ended the financial year posting a profit of £0.7m.
Following the successful farm out to Statoil during 2016, JOG and its co-venturer CIECO benefitted from a cost carry of $25m for expenditure
relating to the 20/05b-13 well. This well was drilled within budget and did not exceed this carry value. In addition to the carry from Statoil, JOG
benefitted from a double carry arrangement receiving an additional 10% cash carry reimbursement from CIECO for the exploration
programme, which included expenditure during the drilling of the sidetrack well. Reimbursement cash received by JOG from its co-venturer,
CIECO, in relation to this carry arrangement was approximately £2.4m during 2017. Following the successful exploration programme in 2017,
JOG’s carry arrangements have now ceased and any future expenditure on this licence will be funded by JOG in proportion to its 18% working
interest in the licence.
Our Cost of Sales during the year was limited to ongoing work on our remaining licence interest, P2170, where we have incurred expenditure
which is not recoverable from our co-venturers. This included proprietary technical studies, commissioned by JOG, to further our geological
understanding of the Verbier prospect and an independent competent person’s report by ERC Equipoise Limited, the results of which were
announced in March 2017.
The Company has always been focused on controlling administration costs and tries to keep these to a minimum. To this end we have
continued to maintain a low cost operation, comprising only one very cost-effective office in Jersey. Overall, however, costs have increased
year-on-year as we expanded our cost base slightly following the farm-out of licence P2170 and in the lead up to drilling. We also incurred
increased advisory costs relating to potential asset acquisitions pursued during the period.
Looking Forward
The Company has worked hard over the last few years to deliver value to our shareholders and in 2017 we achieved another significant
value-enhancing event with the Verbier oil discovery, following on from the farm-out to Statoil in 2016. Further to the successful fundraising
in October 2017, the Company is well funded, as we turn our attention to appraising Verbier. We are also continuing our exploration activities
with the recently announced 3D survey, to fully evaluate the prospectivity across the P2170 licence area.
We remain very excited by the opportunities currently available to us in the year ahead. The significant investment being made by our co-
venturers in Verbier and the potential analogous opportunities, in close proximity, provide us with the potential to deliver significant further
upside for our shareholders in the coming years. I would like to take this opportunity to thank our existing and new shareholders for their
support and look forward to providing updates as we progress another exciting drilling programme during this year.
Andrew Benitz
Chief Executive Officer
26 April 2018
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JERSEY OIL AND GAS PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2017
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 on the AIM market of 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 (the Group being Jersey Oil and Gas plc and all of its subsidiaries) during the year ended 31 December 2017 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 this 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 and legislative changes
• Regulatory and compliance risks
• Co-venturer and other party counterparty credit risk
• Adverse foreign exchange movements
Managed:
Close relationships are maintained with financial parties including shareholders, banks and the investor community as the Group may
require capital beyond its existing cash resources, to advance potential development scenarios and further exploration potential for its
principal asset, Licence P2170 and to facilitate potential future acquisitions.
The Group relies on external funding for its own cash reserves, however our cash reserves are depleted by Group overheads and required
capital expenditure on assets. 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. The Company raised significant
funds towards the end of 2017 and expects to be able to operate within its existing cash reserves well into 2019, 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 production accruing to the Company from its asset
portfolio.
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 Board’s ongoing business risk appraisal process.
Operational Risks:
Loss of key employees
•
• Delay and cost overrun on projects, including weather related delays
• HSSE incidents
• Exploration and appraisal well failures
• Delays to exploration well programme execution
• Failure of third-party services
•
Inherent geological risks and 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 industry costs have reduced, due to the low oil price environment, this should
not be expected to continue in the future, particularly with recent oil price recovery. 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 quality staff and contractors, we believe we can
mitigate many of the risks associated with our operations.
The Group typically holds shared equity in its assets. As a result, in its joint venture operations, it relies on the skills, knowledge and
experience of the JV licence operator. The Company is pleased to have secured an operator for the P2170 Licence of the calibre and
reputation of Statoil. Having such an operator helps to mitigate many of the operational risks including Health, Safety, Security and
Environment (“HSSE”), and the management of third-party contractors and service suppliers. Co-venturer 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.
Page 5
JERSEY OIL AND GAS PLC
STRATEGIC REPORT - continued
FOR THE YEAR ENDED 31 DECEMBER 2017
Full operational risk cover and advice is provided through the Group’s insurance brokers. The Group monitors and evaluates all aspects
of HSSE 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, safety and
security of employees, contractors and the public and minimises the impact on the environment.
Strategic and External Risks and Opportunities:
Commercial misalignment with, or default of co-venturers
• Movement and conditions in capital markets,
•
• Material oil price movements
• Material changes in projected abandonment costs of oil and gas fields
The risks and opportunities set out above are not exhaustive and additional risks, uncertainties and opportunities 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 ongoing activities will be successful. At the current time, the Group has one licence
interest, which it considers to have very good reserves potential and prospects, particularly considering the farm-out in 2016 to Statoil and
successful drilling results on Verbier in 2017. However it is an exploration licence which comes with some degree of risk and there may
be an uncertainty over the future success and potential commercialisation of this asset. The Group also intends to expand it portfolio
through the acquisition of producing assets in the future to provide asset diversification and there appears to be strong investor appetite
for the right transactions.
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. 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 funds 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.
The Group’s Key Performance Indicators (“KPI’s”) that the Directors consider most important are split into two groups. Firstly our financial
KPIs, which relate to cash and administration and operating expenditure, and second our non-financial KPIs which relate to HSSE. Given
the nature of our business, it is critical that we monitor and manage very carefully our cash and maintain financial flexibility to recapitalise
the balance sheet as and when required, whilst at all times being able to honour our commitments and progress our business in the
interest of shareholders. On a similar note, our administration and operating expenditure needs to me kept within budget and within a
range that is appropriate to the size and operations of the Group. HSSE is our most important non financial KPI, due to the importance
we place on the protection of the environment and the safety of our employees.
Cash Resources and Short-Term Investments
We ended 2017 in a much stronger position than we entered it, with the fundraising we undertook in the fourth quarter of 2017 raising
£23.8m (gross). We have a hard-working management team closely aligned with shareholder interests. As at 31 December 2017, we had
£25.4m of cash in the bank. The Group remains lean and cost efficient, with annual running costs in 2017 of £1.7m. Budgeted annual
running costs for 2018 are currently estimated at around £2.4m as the Group increases its activity, principally across the P2170 licence.
Consolidated Statement of Comprehensive Income
The Group had no trading revenues in 2017 but received other income from its co-venturer CIECO, in respect of operations conducted
on Licence P2170.
Financing
In late 2017, the Group raised £23.8m (gross), through a share issue in order to provide sufficient working capital for the Company through
into 2019.
Administrative Expenses
2017 saw small increases in the Group’s cost base, as the low level of costs incurred during 2016 which included staff salary reductions,
were not sustainable in the longer term. Nevertheless the Company still remains nimble and the Directors aim to deliver value for
shareholders and maximise the value of every pound spent. During the year we incurred costs on acquisition processes that were
terminated or which we were not able to successfully conclude.
Outlook
The Directors consider that the Group remains appropriately capitalised for its current appraisal well programme. It is well managed, 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 continued near term value creation. Our key remaining asset, the P2170 licence area, which includes the Verbier oil discovery
and associated exploration potential, has manageable expected obligations in respect of its proposed summer 2018 drilling programme.
On behalf of the Board
Scott Richardson Brown
Chief Financial Officer
26 April 2018
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JERSEY OIL AND GAS PLC
CORPORATE GOVERNANCE
FOR THE YEAR ENDED 31 DECEMBER 2017
The Company is quoted on AIM and is not therefore required to comply with the requirements of The UK Corporate Governance Code
published by the Financial Reporting Council in April 2016. However, the Board is committed to high standards of good corporate
governance and, having regard to the current size and structure of the Group, seeks to apply the principles of the Corporate Governance
Code for Small and Mid-Size Quoted Companies 2013 published by the Quoted Companies Alliance (“QCA Code”). It is the intention of
the Board that the Group will be fully compliant with the requirements of the QCA Code by 28th September 2018.
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 Executive Directors are employed under service contracts.
At each Annual General Meeting one third of the Directors are subject to reappointment 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 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
HSSE 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 QCA 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 Non-Executive Directors’ judgement and as such they are considered independent for the purposes of
corporate governance.
Board Committees
The Company operates Audit, Remuneration and Nomination Committees comprised of Non-Executive Directors.
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 report of its proceedings.
Under its terms of reference, it is required to meet at least 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, including those 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 regularly
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 report of
its proceedings.
Under its terms of reference, it is required to meet at least twice a year and is responsible for ensuring that the Executive Directors and
Officers 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 their own remuneration.
Page 7
JERSEY OIL AND GAS PLC
CORPORATE GOVERNANCE - continued
FOR THE YEAR ENDED 31 DECEMBER 2017
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 at least twice a year and is responsible for identifying and nominating candidates to fill
Board vacancies, but it was considered unnecessary to do so during 2017 as its functions were properly carried out as part of the
procedures of the Remuneration Committee and 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 an appropriate stage of its development in accordance with best practice.
Board and Committee Attendance in 2017
Board
Audit Committee
Remuneration
Committee
Nomination
Committee
Held
Attended
Held
Attended
Held
Attended
Held
Attended
Non-Executive Directors
M J Stanton
F H Moxon
Executive Directors
J A Benitz
R J Lansdell
S J Richardson Brown
7
7
7
7
7
7
6
7
7
7
2
2
-
-
-
2
2
-
-
-
2
2
-
-
-
2
2
-
-
-
-
-
-
-
-
-
-
-
-
-
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, Chief Executive Officer 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 and the management meet shareholders on a
regular basis through annual meetings and roadshows.
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 duty to ensure the health, safety, security 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 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
• The security of Company data and information
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, Security and the Environment (“HSSE”) is of the highest importance to the Company and
expects all Directors, Officers, Managers, Employees and contractors to consider Health, Safety and Security as part of their normal duties
and responsibilities. Ron Lansdell, COO, has overall responsibility for implementation and management of the Company’s HSSE policy.
Page 8
JERSEY OIL AND GAS PLC
CORPORATE GOVERNANCE - continued
FOR THE YEAR ENDED 31 DECEMBER 2017
Management commitment to high HSSE standards is set out its HSSE Policy which is:
•
•
Endorsed by the Board for implementation by management, staff, contractors, partners and stakeholders;;
Reviewed periodically and where appropriate updated and re-issued.
Operational HSSE goals are established by our joint venture operators for our joint venture projects. 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 HSSE culture and a common
understanding of the Group’s expectations.
The Group’s management of HSSE includes:
Promotion of the Company’s HSSE Policy and goals;;
•
• Monitoring and tracking HSSE performance at Board and management meetings;;
•
•
Encouraging staff to identify possible hazards, raise HSSE concerns and suggest improvements;;
Regular reviews by management of HSSE performance.
Reporting relationships and responsibilities within the organisation are defined and personnel are briefed on the HSSE risks associated
with their work and of their specific HSSE roles and responsibilities.
John Church FCA
Company Secretary
26 April 2018
Page 9
JERSEY OIL AND GAS PLC
BOARD OF DIRECTORS
FOR THE YEAR ENDED 31 DECEMBER 2017
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 over the past 18 years, 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 reviews banking transactions on behalf of UK and overseas governmental agencies, and provides expert
evidence in Court proceedings. 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 quoted company. He joined Longreach in 2009 as Chief Operating Officer
when it was a small private company and oversaw 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 (Honors).
Ron Lansdell
Chief Operating Officer
Ron Lansdell is Chief Operating Officer and a founder director of Jersey Oil & Gas E & P Ltd. Previously he was VP E&P at Longreach
Oil and Gas responsible for exploration in Morocco. Ron held a number of senior technical and commercial roles during a 13 year career
at Eni. These roles included roles in Nigeria, Kazakhstan and exploration management in the Atlantic Margin UK, Faroe Islands and
Ireland. Ron began his career in 1972 in seismic data acquisition and processing, initially at Digicon and then at CGG in London, before
joining Elf in Norway and then BHP Petroleum as Exploration Coordinator, Western Australia. He spent nine years with Elf (in Norway,
France and Syria) and then joined QP as Chief Geophysicist in Qatar before joining Eni. Ron graduated in geology from the University of
London, is a member of the PESGB, the Institute of Directors and is a Fellow of The Geological Society.
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, Scott 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. Scott is also a Non-Executive Director of Genius Concepts Ltd a smart heating control business.
Frank Moxon
Non-Executive Director
Frank Moxon has over 28 years’ experience as a corporate financier and financial adviser to companies, from start-ups to over £3 billion
in size, in a wide range of industry sectors. However, he has specialised for the last 20 years in mining and oil & gas. He has also been a
director, trustee or governor of various private and quoted companies, a professional body, several charities and a comprehensive school.
He was senior independent director of Cove Energy Plc and is currently a non-executive director of AIM-quoted Harvest Minerals Ltd. He
has a BSc in Economics and is a Chartered Fellow of the Chartered Institute for Securities and Investment and a Fellow of both the Energy
Institute and the Institute of Materials, Minerals and Mining. 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 2017
The Directors present their report together with the audited Group and Company financial statements for the year ended 31 December 2017.
Results and Dividends
The Group’s profit for the year was £0.7m (2016: loss of £0.8m). The Directors do not recommend the payment of a dividend (2016: 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 2017 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 2017
1p Ordinary Shares
Shares
Options
39,192
84,935
627,142
900,000
21,391
41,570
20,000
180,000
180,000
130,000
As at 31 December 2016
1p Ordinary Shares
Shares
24,195
84,935
627,142
884,663
16,391
Options
41,570
20,000
180,000
180,000
130,000
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 2017, 21,829,227 (2016: 9,916,478) ordinary shares of 1p each were issued and fully paid. Each ordinary share carries
one vote.
Substantial Shareholders
At 31 December 2017, 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:
Schroders plc
Hargreaves Lansdown Asset Mgt
Legal & General Investment Mgt
Interactive Investor
SVM Asset Mgt
Mr R Lansdell
Halifax Share Dealing
Barclays Wealth
Jarvis Investment Mgt
City Financial
A J Bell Securities
9.39%
7.50%
6.87%
6.51%
4.12%
4.12%
3.79%
3.64%
3.49%
3.44%
3.09%
Except for Mr Lansdell, none of the directors hold 3% or more of the nominal value of the ordinary share capital of the company. As at 31
December 2017 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.
Up to date details and changes 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 opportunities 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
disclosed in note 4.
Page 11
JERSEY OIL AND GAS PLC
REPORT OF THE DIRECTORS - continued
FOR THE YEAR ENDED 31 DECEMBER 2017
Going Concern
The Company is required to have sufficient resources to cover the expected running costs of the business for a period of at least 12 months
after the issue of these financial statements. Taking into account the P2170 licence 2018 approved work programme and budget, our current
cash reserves are, expected to more than exceed the estimated liability of the Company. 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 this Annual Report.
Disclosure of Information to the Auditors
Each of the Directors 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 they ought to have taken as a Director in order to make themselves 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 24 May 2018 as stated in the Notice of Meeting.
On behalf of the Board
Scott Richardson Brown
Chief Financial Officer
26 April 2018
Page 12
JERSEY OIL AND GAS PLC
DIRECTORS’ RESPONSIBILITIES
FOR THE YEAR ENDED 31 DECEMBER 2017
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 profit 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 profit of the group;; 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
26 April 2018
Page 13
JERSEY OIL AND GAS PLC
REMUNERATION REPORT
FOR THE YEAR ENDED 31 DECEMBER 2017
Introduction
This Remuneration Report has been prepared by the Remuneration Committee and approved by the Board. The Committee is committed to
transparent and quality disclosure. Our report for 2017 sets out the details of the remuneration policy for the Directors, describes its
implementation and discloses the amounts paid during the year.
Membership and meetings held
The Remuneration Committee is chaired by Frank Moxon and its other member is Marcus Stanton (both Non-Executive Directors). The
Committee met twice during 2017.
Performance of the Company in 2017
2017 was a transformational year for the Company following on from the successful drilling campaign in licence P2170 (Verbier), which was
drilled safely, on time and within budget. This was followed by a major capital raising in November 2017 involving both new and existing
shareholders, resulting in year-end cash balances of c.£25 million.
Share price movements during the year
The Company’s share price performance during the year was as follows:
As at 31 December 2016
As at 31 December 2017
2017 low (12 September 2017)
2017 high (9 October 2017)
Key decisions and pay outcomes in 2017
Price per
share
125.5p
191.5p
53.5p
328.0p
Market
capitalisation
(£m)
12.4
41.8
5.3
32.6
•
•
•
Basic salaries for the Executive Directors were frozen during 2017 (no change since 1st January 2016) at rates considerably lower
than those of appropriate, comparable industry participants;;
The outstanding proportion of the up to 50% salary cuts voluntarily taken by directors and employees from February 2016 to October
2016 were paid in full;;
Annual discretionary bonuses of between 40% and 67% were awarded to Executive Directors in recognition of their historically low
salaries and the significant progress made by the Company during 2017 arising from its initial Verbier farm-out success in August
2016 and subsequent technical and other work done prior to and after drilling;;
•
• Options over a total of 60,000 ordinary shares were granted to employees at an exercise price of 310p in April 2017;;
•
The vesting of the second tranche of share options granted in November 2016 was approved, the relevant performance condition
having been deemed by the Committee to have been met;;
In December 2017, a wholesale review of executive and Board remuneration was undertaken in the light of the Company’s significant
development during 2017 with a view to achieving a revised remuneration structure reflecting its size, profile, future objectives and
status as an independent E&P company with a significant proportion of institutional investors. This resulted in salary increases for
Executive Directors (revised salaries: J A Benitz £150,000 pa;; R J Lansdell £150,000 pa;; and S J Richardson Brown £100,000 pa),
effective from 1st January 2018, and adjustments to cash and other incentives and benefits.
Advisers
H2glenfern Limited (“h2glenfern”), appointed in November 2017, acted as independent adviser to the Committee when carrying out its review
of executive and Board remuneration in December 2017. The Committee is of the view that h2glenfern provides independent remuneration
advice to the Committee and does not have any connections with the Group that may impair its independence. H2glenfern reported directly to
the Committee and gave a presentation to the Board but provided no other services to the Company. Its total fee for the provision of remuneration
services in 2017 was £7,500 (excluding VAT) based on time and materials.
Remuneration policy
The Committee aims to ensure that total remuneration is set at an appropriate level for the Group and its operations.
The objectives and core principles of the remuneration policy are to ensure:
•
•
•
•
•
•
remuneration levels support the Group strategy;;
an appropriate link between performance and reward;;
alignment of Directors, senior management and shareholder interests;;
linking of long term incentives to shareholder returns;;
recruitment, retention and motivation of individuals with the skills, capabilities and experience to achieve Group objectives;; and
good teamwork by enabling all employees to share in the success of the business.
There are four possible elements that can make up the remuneration packages for Executive Directors, senior management and employees:
•
•
•
•
basic annual salary or fees;;
benefits in kind;;
discretionary annual bonus;; and
a long term incentive plan, the Jersey Oil and Gas PLC 2016 Enterprise Management Incentive and Unapproved Share Option Plan
(the “Share Option Plan”).
Basic salary
The basic salaries of Executive Directors are usually determined by the Committee around the end of each year with any changes taking effect
from 1 January. These are reviewed and adjusted taking into account individual performance, market factors and sector conditions. Base
salaries for the Executive Directors remained unchanged at their contractual levels during 2017.
Page 14
JERSEY OIL AND GAS PLC
REMUNERATION REPORT
FOR THE YEAR ENDED 31 DECEMBER 2017
Benefits in kind
Benefits provided to Executive Directors during the year comprised life insurance, private health insurance and, for S J Richardson Brown, a 10
per cent. of basic salary matching pension contribution.
Discretionary bonuses
A cash bonus award for performance during 2017 was made to Executive Directors and all staff at the end of the year.
Share Option Plan
In November 2016, the Share Option Plan was approved by the Board and the first grants of share option were made to directors and staff since
the August 2015 formation of the new board and reorganisation of the Company. No new grants were made to any Director during 2017.
Under the terms of the Plan, Directors and employees are eligible for awards. Options may be issued over shares not exceeding 10% of issued
share capital within any period of 10 years. EMI options are subject to an aggregate limit of £3 million and an individual limit of £250,000 by
market value of shares. Performance conditions are not required but options can be granted with performance conditions, vesting schedules or
both. Performance conditions can apply to individual tranches within grants. Performance conditions can be amended provided they are still
deemed a fair measure of performance and not materially more easy or difficult to satisfy as a result. Upon any change of control all options
vest in full and any performance conditions are not applied. All options lapse upon the tenth anniversary of grant.
Executive Directors’ service contracts
The principal termination provisions of the Executive Directors’ service contracts, as amended by any relevant deed of variation, are summarised
below. Executive Directors’ service contracts are available to view at the Company’s registered office.
Effective contract date
Unexpired term
Notice period
J A Benitz
14.08.15
Rolling contract
in
12 months save
the
certain circumstances,
Executive may provide 30
days’ notice.
that,
R J Lansdell
14.08.15
Rolling contract
in
12 months save
the
certain circumstances,
Executive may provide 30
days’ notice.
that,
S J Richardson Brown
03.06.13
Rolling contract
4 months
Non-‐‑executive Directors’ fees
The Non-‐‑executive Directors receive a fee for carrying out their duties and responsibilities. The level of such fees is set and reviewed annually
by the Board, excluding the Non-executive Directors. The Non-‐‑executive Directors do not currently receive additional fees for acting as members
of the Board’s various committees.
Non-‐‑executive Directors’ letters of appointment
The principal termination provisions of the Non-executive Directors’ letters of appointment, as amended by any relevant deed of variation, are
summarised below. Non-executive Directors’ letters of appointment are available to view at the Company’s registered office.
Date of appointment
Unexpired term
Notice period
Loss of office compensation
Directors’ Emoluments
Presented in £’000
Executive Directors
J A Benitz
R J Lansdell
S J Richardson Brown
Non-Executive Directors
M J Stanton
F H Moxon
Total Directors
F H Moxon
30.09.15
Rolling contract
3 months
No
M J Stanton
13.03.11
Rolling contract
3 months
No
Year ended 31 December 2017
Year ended 31 December 2016
Salary
or fees
Pension
Benefits
Bonus
Total
89
100
90
279
53
27
80
359
-
-
20
20
-
-
-
20
1
4
-
5
-
-
-
5
50
50
30
130
-
-
-
130
140
154
140
434
53
27
80
514
Salary
or fees
61
50
45
156
27
13
40
196
Pension
Benefits
Bonus
Total
-
-
11
11
-
-
-
11
2
3
-
5
-
-
-
5
5
5
5
15
-
-
-
15
68
58
61
187
27
13
40
227
The figures shown above for 2016 reflect the Directors’ (and employees’) voluntary agreement to take salary reductions of up to 50% from
February 2016 to October 2016, to provide the Company with sufficient working capital. The figures for 2017 reflect repayment of the outstanding
proportion of these 2016 salary reduction amounts.
Page 15
JERSEY OIL AND GAS PLC
REMUNERATION REPORT
FOR THE YEAR ENDED 31 DECEMBER 2017
Options held by Directors serving at 31 December 2017 are set out below.
At 1
January
2016
‘000s
Issued
‘000s
Exercised
‘000s
Lapsed
‘000s
At 1
January
2017
‘000s
Issued
‘000s
Exercised
‘000s
Lapsed
‘000s
At 31
December
2017
‘000s
Executive Directors
J A Benitz
At 110.0p (note 1)
(exercisable by 29.11.21)
R J Lansdell
At 110.0p (note 1)
(exercisable by 29.11.21)
S J Richardson Brown
At 1,500.0p (note 2)
(exercisable by 31.05.23)
At 110.0p (note 1)
(exercisable by 29.11.21)
Non-executive Directors
M J Stanton
At 4,300.0p (note 3)
(exercisable by 12.03.21)
At 110.0p (note 1)
(exercisable by 29.11.21)
F H Moxon
At 110.0p (note 1)
(exercisable by 29.11.21)
-
-
-
-
10
-
10
2
-
2
-
-
180
180
180
180
-
120
120
-
40
40
20
20
Total
12
540
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
180
180
180
180
10
120
130
2
40
42
20
20
552
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
180
180
180
180
10
120
130
2
40
42
20
20
552
Notes:
1. Granted on 29 November 2016 under the Share Option Plan. Options vest in equal portions over a three-year period from the date of grant.
One third vested immediately, one third vested on 29 November 2017 and the remaining third are due to vest, subject to satisfaction of a
performance condition, on 29 November 2018. Subject to vesting, the Share Options are exercisable at any time up to 29 November 2021
and if not exercised by that date will lapse.
2. Granted on 31 May 2013 under the Trap Oil plc Unapproved Share Option Plan 2011. Options vested in equal portions on 31 May 2014,
31 May 2015 and 31 May 2016 and were not subject to the completion of any performance condition.
3. Granted on 13 March 2011 under an Individual Option Agreement. The options (to the extent that they have not lapsed) may be exercised
at any time after the date of grant.
Shareholder feedback
The objective of this report is to communicate the earnings of the Directors and how this is linked to performance. In this regard the Board is
committed to maintaining an open and transparent dialogue with shareholders and is always interested to hear their views on remuneration
matters.
Frank Moxon
Chairman of the Remuneration Committee
26 April 2018
Page 16
JERSEY OIL AND GAS PLC
INDEPENDENT AUDITORS’ REPORT
YEAR ENDED 31 DECEMBER 2017
Independent auditors’ report to the members of Jersey Oil and Gas Plc
Report on the group financial statements
Opinion
In our opinion, Jersey Oil and Gas Plc’s group financial statements and company financial statements (the “financial statements”):
•
•
•
give a true and fair view of the state of the group’s and of the company’s affairs as at 31 December 2017 and of the group’s profit and
the group’s and the company’s cash flows for the year then ended;;
have been properly prepared in accordance with IFRSs as adopted by the European Union and, as regards the company’s financial
statements, 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.
We have audited the financial statements, included within the Annual Report and Accounts (the “Annual Report”), which comprise: the group
and parent company statement of financial position as at 31 December 2017;; the group statement of comprehensive income, the group and
parent company statements of cash flows, and the group and parent company statements of changes in equity for the year then ended;; and
the notes to the financial statements, which include a description of the significant accounting policies.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities
under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We believe
that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial statements
in the UK, which includes the FRC’s Ethical Standard, as applicable to listed entities, and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
Our audit approach
Overview
• Overall group materiality: £270,575 (2016: £42,280), based on 1% of total assets.
• Overall company materiality: £253,320 (2016: £34,000), based on 1% of total assets.
• We identified 2 components (the Plc parent company and Trap Oil Limited) out of the group's total of 3
non-dormant components which were selected due to their size and risk.
• We conducted full scope audits on both of these components which are UK companies.
•
•
•
No audit work was performed outside of the UK.
No other component auditors or firms were involved in reporting for the purposes of the consolidated
audit opinion
Risk of management override of controls (Group and parent).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In
particular, we looked at where the directors made subjective judgements, for example in respect of significant accounting estimates that
involved making assumptions and considering future events that are inherently uncertain.
As in all of our audits we also addressed the risk of management override of internal controls, including evaluating whether there was evidence
of bias by the directors that represented a risk of material misstatement due to fraud.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud)
identified by the auditors, including those which had the greatest effect on: the overall audit strategy;; the allocation of resources in the audit;;
and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon, were
addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters. This is not a complete list of all risks identified by our audit.
Page 17
JERSEY OIL AND GAS PLC
INDEPENDENT AUDITORS’ REPORT continued
YEAR ENDED 31 DECEMBER 2017
Key audit matter
How our audit addressed the key audit matter
Risk of management override of controls
Group and parent
Our Auditing Standards consider management override of
controls as a significant audit risk, due to the general risk around
management’s unique position to perpetrate or conceal the
effects of fraud. This may take a number of forms such as
falsifying accounting entries which may give a misleading view of
the entity’s financial position or performance. This cannot be
rebutted as this risk is present in all entities.
We have performed the following procedures to address the risk of
management override of controls:
•
•
•
•
Held discussions with management on their assessment and
consideration of fraud risk
Performed journal testing, identifying journal postings meeting
pre-determined risk criteria across the group
Held fraud inquiries with employees both within and outside of
the finance function
Incorporated an element of unpredictability into our audit
procedures such as testing individually immaterial balances and
transactions throughout the year
Overall, we are satisfied that there have been no suspected, alleged or
actual instances of fraud through the application of management override
of controls.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a
whole, taking into account the structure of the group and the company, the accounting processes and controls, and the industry in which they
operate.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together
with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the
individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on
the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group financial statements
Company financial statements
Overall materiality
£270,575 (2016: £42,280).
£253,320 (2016: £34,000).
How we determined it
1% of total assets.
1% of total assets.
Rationale for benchmark
applied
A benchmark of total assets is deemed to be the most
appropriate measure used by shareholders
in
assessing the performance of the group. We note that
in the previous year a measure of loss before tax was
used based on the low value balance sheet at that
period and loss before tax is a generally accepted
auditing benchmark in this scenario. However, given
the success in the year of the drilling of the Verbier well,
which has increased the capitalised asset position,
coupled with a large share issue increasing the group’s
cash position, total assets was determined to be a more
appropriate benchmark
for calculating materiality
based on what is of most interest to the current users
of the financial statements.
A benchmark of total assets is deemed to be the
most appropriate measure used by shareholders in
assessing the performance of the company. We note
that in the previous year a measure of loss before
tax was used based on the low value balance sheet
at that period and loss before tax is a generally
accepted auditing benchmark in this scenario.
However, given the success in the year associated
with the drilling of the Verbier well, a large share
issue has occurred increasing the group’s cash
position and as such total assets was determined to
be a more appropriate benchmark for calculating
materiality based on what is of most interest to the
current users of the financial statements.
For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality. The range of
materiality allocated across components was between £154,290 and £253,320. Certain components were audited to a local statutory audit
materiality that was also less than our overall group materiality.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £18,250 (Group audit)
(2016: £2,100) and £9,500 (Company audit) (2016: £1,700) as well as misstatements below those amounts that, in our view, warranted
reporting for qualitative reasons.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which ISAs (UK) require us to report to you when:
•
•
the directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate;; or
the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt
about the group’s and company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve
months from the date when the financial statements are authorised for issue.
However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the group’s and company’s
ability to continue as a going concern.
Page 18
JERSEY OIL AND GAS PLC
INDEPENDENT AUDITORS’ REPORT - continued
YEAR ENDED 31 DECEMBER 2017
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report thereon.
The directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and,
accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether
the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to
be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to
conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based
on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that
fact. We have nothing to report based on these responsibilities.
With respect to the Strategic Report and Report of the Directors, we also considered whether the disclosures required by the UK Companies
Act 2006 have been included.
Based on the responsibilities described above and our work undertaken in the course of the audit, ISAs (UK) require us also to report certain
opinions and matters as described below.
Strategic Report and Report of the Directors
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and Report of the
Directors for the year ended 31 December 2017 is consistent with the financial statements and has been prepared in accordance with
applicable legal requirements.
In light of the knowledge and understanding of the group and company and their environment obtained in the course of the audit, we did not
identify any material misstatements in the Strategic Report and Report of the Directors.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
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 in accordance with the applicable framework and for being satisfied that they give a true and fair view. The directors
are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the company’s ability to continue as a going
concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either
intend to liquidate the group or the company or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
the audit of the financial statements is
located on
the FRC’s website at:
Use of this report
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.
Other required reporting
Companies Act 2006 exception reporting
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 company, or returns adequate for our audit have not been received from
branches not visited by us;; or
certain disclosures of directors’ remuneration specified by law are not made;; or
the company financial statements are not in agreement with the accounting records and returns.
•
•
We have no exceptions to report arising from this responsibility.
Richard Spilsbury (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Aberdeen
26 April 2018
Page 19
JERSEY OIL AND GAS PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2017
Note
2017
£
2016
£
-
(4,950)
(4,950)
214,110
239,724
(1,244,393)
-
(13,498)
(13,498)
2,440,248
-
(1,705,068)
721,682
(795,509)
-
5,010
-
2,070
726,692
(793,439)
10
-
-
3
6
7
8
8
9
Revenue
Cost of sales
GROSS LOSS
Other income
Gain on disposal of asset
Administrative expenses
OPERATING PROFIT/(LOSS)
Finance costs
Finance income
PROFIT/(LOSS) BEFORE TAX
Tax
PROFIT/(LOSS) FOR THE YEAR
726,692
(793,439)
TOTAL COMPREHENSIVE PROFIT/(LOSS) FOR THE YEAR
726,692
(793,439)
Total comprehensive profit/(loss) for the year attributable to:
Owners of the parent
726,692
(793,439)
Profit/Loss per share expressed in pence per share:
Basic
Diluted
11
11
6.49
6.03
(9.28)
(9.28)
The notes on pages 24 to 34 are an integral part of these financial statements
Page 20
JERSEY OIL AND GAS PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2017
Note
2017
£
NON-CURRENT ASSETS
Intangible assets - Exploration 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
12
13
15
16
17
20
18
2016
£
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)
1,357,959
-
1,357,959
356,107
25,415,410
25,771,517
27,129,476
2,466,144
93,851,526
1,231,055
(71,666,579 )
(382,543)
25,499,603
1,866,666
1,629,873
1,629,873
187,251
187,251
TOTAL EQUITY AND LIABILITIES
27,129,476
2,053,917
The financial statements on pages 20 to 34 were approved by the Board of Directors and authorised for issue on 26 April 2018. They
were signed on its behalf by Scott Richardson Brown – Chief Financial Officer.
Scott Richardson Brown
Chief Financial Officer
26 April 2018
Company Registration Number: 07503957
The notes on pages 24 to 34 are an integral part of these financial statements
Page 21
JERSEY OIL AND GAS PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2017
Called up
share
capital
£
Share
premium
account
£
Share
options
reserve
£
Accumulated Reorganisation
losses
£
reserve
£
Total
equity
£
At 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 and 1 January
2017
2,347,017 71,170,230
1,495,921
(72,763,959)
(382,543)
1,866,666
Profit and total comprehensive Profit for the
year
-
-
Issue of share capital
119,127 22,681,296
-
-
Share based payments
Exercised share options
-
-
-
105,822
-
(370,688)
370,688
726,692
-
726,692
-
-
- 22,800,423
-
-
105,822
-
At 31 December 2017
2,466,144 93,851,526
1,231,055
(71,666,579)
(382,543) 25,499,603
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 Initial Public
Comprehensive Income
Offering (IPO) in 2011
The notes on pages 24 to 34 are an integral part of these financial statements
Page 22
JERSEY OIL AND GAS PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2017
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
Net cash generated from/(used in) investing activities
Cash flows from financing activities
Net proceeds from share issue
Net cash generated from financing activities
Increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Note
22
8
12
7
22
22
22
2017
£
2,036,892
5,010
2,041,902
(1,309,225)
-
(1,309,225)
22,800,423
22,800,423
23,533,100
1,882,310
25,415,410
2016
£
(927,144)
2,070
(925,074)
(85,993)
414,966
328,973
1,615,501
1,615,501
1,019,400
862,910
1,882,310
The notes on pages 24 to 34 are an integral part of these financial statements
Page 23
JERSEY OIL AND GAS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
1.
GENERAL INFORMATION
Jersey Oil and Gas plc (the “Company”) and its subsidiaries (together, the “Group”) are involved in the upstream oil and gas business in
the UK.
The Company is a public limited company incorporated and domiciled in the United Kingdom and quoted on AIM, a market operated by
London Stock Exchange plc. 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 required 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 P2170 licence 2018 approved work programme and budget, our current
cash reserves are, expected to more than exceed the estimated liability of the Company. 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 Policies and Disclosures
(a) New and amended standards adopted by the Company:
There are no new standards that came into effect during 2017.
(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 beginning 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:
•
the estimation of share based payment costs (note 20).
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 Cash Generating Units are determined based on value-in-use calculations.
There were no impairment triggers in 2017 and no impairment charge has been recorded.
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 £105,822 (2016: £114,788). 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 of 40% used in the calculation is based on the actual volatility of the Company’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.
Page 24
JERSEY OIL AND GAS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 DECEMBER 2017
2.
SIGNIFICANT ACCOUNTING POLICIES – continued
Basis of Consolidation
(a) Subsidiaries
Subsidiaries are all entities over which the Group has the power to govern their 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 is 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 the 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 is recognised in the period in which services are provided to such partners by the Group or the date a
trigger event occurs if this is later.
Page 25
JERSEY OIL AND GAS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 DECEMBER 2017
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 has 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’s 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 maturity 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 administrative expenses in the Consolidated Statement of Comprehensive Income.
Trade payables are stated initially at fair value and subsequently measured at amortised cost.
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 26
JERSEY OIL AND GAS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 DECEMBER 2017
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
Payments to defined contribution retirement benefit schemes are recognised as an expense when employees have rendered service
entitling them to contributions.
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 2017 and 2016 the Group had no turnover. During the 2017 year the Group did receive £2,417,748 (2016: £87,528) for carried
cost reimbursements from co-venturers which is shown in Other Income.
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 debtor 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 co-ventureres have made commitments to fund certain expenditure.
Management evaluate the credit risk associated with each contract at the time of signing and regularly monitor the credit worthiness of
our partners.
Page 27
JERSEY OIL AND GAS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 DECEMBER 2017
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 2017 is Nil (2016: 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 20)
Other pensions costs
2017
£
356,107
-
-
2016
£
122,872
-
-
356,107
122,872
2017
£
1,629,872
-
-
1,629,872
2017
£
795,389
64,409
105,822
42,407
2016
£
187,251
-
-
187,251
2016
£
429,553
38,690
114,788
24,367
1,008,027
607,398
Other pension costs include employee and Company contributions to money purchase pension schemes.
The average monthly number of employees during the year was as follows:
Directors
Employees
Directors’ remuneration
Directors’ pension contributions to money purchase schemes
Benefits
2017
2016
5
7
12
2017
£
489,000
20,000
5,231
514,231
5
6
11
2016
£
210,500
11,000
4,665
226,165
Page 28
JERSEY OIL AND GAS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 DECEMBER 2017
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 and benefits
Pension contributions
The Directors did not exercise any share options during the year.
Key management compensation
2017
1
2017
£
153,924
-
153,924
1
2016
2016
£
68,000
-
68,000
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 20)
Pension Contributions
6.
OTHER INCOME
Refund of well insurance
Refund of joint venture well costs
Sale of datasets
Carried costs reimbursement
Carried costs reimbursement:
Refund of well insurance:
Sale of datasets
Refund of joint venture well costs:
7.
GAIN ON DISPOSAL OF ASSET
Proceeds from Statoil
Net book value of asset
Gain on disposal of asset
2017
£
519,544
52,978
24,375
596,897
2017
£
-
-
22,500
2,417,748
2,440,248
2016
£
230,353
82,411
14,375
327,139
2016
£
37,380
89,202
-
87,528
214,110
Reimbursement of well-related costs received as a result of the carried interest arrangement
with CIECO V&C (UK) Limited in relation to licence P2170
A return of prepaid insurance premiums on various policies
Income generate from the sale of data relating to a relinquished licence
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.
2017
£
-
-
-
2016
£
414,966
(175,242)
239,724
During the prior year licence P2170, which contains the Verbier oil discovery and other exploration prospects was farmed out to Statoil.
The Group retains an 18% interest in this licence.
8.
NET FINANCE INCOME
Finance income:
Joint venture finance charge
Interest received
Finance costs:
Unwinding of discount on the decommissioning liability
Joint venture finance charge
Net finance income
.
Page 29
2017
£
2016
£
-
5,010
5,010
-
-
-
26
2,044
2,070
-
-
-
5,010
2,070
JERSEY OIL AND GAS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 DECEMBER 2017
9.
PROFIT/(LOSS) BEFORE TAX
The loss before tax is stated after charging/(crediting):
Depreciation
Impairment of intangible assets (note 12)
Auditors' remuneration – audit of parent company and consolidation
Auditors’ remuneration – audit of subsidiaries
Foreign exchange (gain)/loss
Directors’ remuneration (note 5)
Employee costs (note 5)
Share based payments (notes 5 & 20)
10.
TAX
Reconciliation of tax charge
Profit/Loss before tax
Tax at the domestic rate of 19.25% (2016: 20%)
Capital allowances in excess of depreciation
Expenses not deductible for tax purposes and non-taxable income
Deferred tax asset not recognised
Total tax expense reported in the Consolidated Statement of Comprehensive Income
2017
£
372
-
28,500
11,500
4,980
514,231
387,974
105,822
2017
£
726,692
138,072
(276,257)
20,034
118,151
-
2016
£
4,683
710
28,500
11,500
(33,326)
226,165
266,445
114,788
2016
£
(793,439)
(158,688)
-
1,338
157,350
-
No liability to UK corporation tax arose on ordinary activities for the year ended 31 December 2017 or for the year ended
31 December 2016.
The Group has 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 £25million.
11.
PROFIT/LOSS PER SHARE
Basic profit/(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 profit/(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 prior year, the issue of potential ordinary shares would have been anti dilutive
(see note 20 for share options in place at the end of the year).
Year ended 31 December 2017
Basic and Diluted EPS
Basic
Diluted
Year ended 31 December 2016
Basic and Diluted EPS
Loss attributable to ordinary shareholders
Profit/(Loss)
attributable
to ordinary
shareholders
£
Weighted
average
number
of
shares
Per share
amount
pence
726,692
726,692
11,203,777
12,056,036
6.49
6.03
(793,439)
8,545,612
(9.28)
Page 30
JERSEY OIL AND GAS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 DECEMBER 2017
12.
INTANGIBLE ASSETS
COST
At 1 January 2016
Additions
Disposals
Refund of prior additions
At 31 December 2016
Additions
Disposals
At 31 December 2017
AMORTISATION, DEPLETION & DEPRECIATION
At 1 January 2016
Charge for the year
Impairment charge for the year
Refund on prior year additions (note 6)
At 31 December 2016
Amortisation on disposal
At 31 December 2017
NET BOOK VALUE
At 31 December 2017
At 31 December 2016
At 31 December 2015
Exploration
costs
£
16,629,877
85,992
(175,242)
(94,202)
16,446,425
1,309,596
(16,222,821)
1,533,200
16,491,554
-
710
(94,202)
16,398,062
(16,222,821)
175,241
1,357,959
48,363
138,323
During 2017, the Group retained an 18% equity interest in Licence P2170 (Verbier) and a commercial interest in P1989 (Partridge)
During 2016, the P2170 licence was farmed out to Statoil, under the terms of which we disposed of 42% of our 60% interest (retaining an
18% interest) in the licence. The disposal recorded in the previous year within this note reflects this reduced interest.
At 31 December 2017 the remaining exploration asset (P2170 – Verbier) was reviewed and the then carrying value of £1,357,959 was
considered reasonable based on on-going exploration work on the licence area and as a result no further impairments have been
considered necessary.
Page 31
JERSEY OIL AND GAS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 DECEMBER 2017
13.
PROPERTY, PLANT AND EQUIPMENT
COST
At 1 January 2016
Additions
At 31 December 2016
Disposals
At 31 December 2017
ACCUMULATED AMORTISATION, DEPLETION &
DEPRECIATION
At 1 January 2016
Charge for the year
At 31 December 2016
Charge for the year
Disposals
At 31 December 2017
NET BOOK VALUE
At 31 December 2017
At 31 December 2016
At 1 January 2016
14.
IMPAIRMENTS
Exploration assets
15.
TRADE AND OTHER RECEIVABLES
Current:
Trade receivables (net)
Other receivables
Value added tax
Prepayments and accrued revenue
Computer
and office
equipment
£
286,022
-
286,022
(160,236)
125,786
280,967
4,683
285,650
372
(160,236)
125,7856
-
372
5,055
2016
£
710
710
2016
£
-
67
19,513
103,292
122,872
2017
£
-
-
2017
£
277,710
67
52,085
26,245
356,107
As at 31 December 2017 there were no trade receivables past due nor impaired. There are no credit quality concerns over the trade
receivables balance outstanding at the year end.
16.
CASH AND CASH EQUIVALENTS
Unrestricted cash in bank accounts
The cash balances are placed with a creditworthy financial institution.
2017
£
2016
£
25,415,410
1,882,310
17.
CALLED UP SHARE CAPITAL
Issued and fully paid:
Number:
Class
21,829,227 (2016: 9,916,478) Ordinary
Nominal
value
1p
2017
£
2016
£
2,466,144
2,347,017
During the year the company issued 11,912,749 ordinary shares for which it received c.£24m gross
18.
TRADE AND OTHER PAYABLES
Current:
Trade payables
Accrued expenses
Other payables
Taxation and Social Security
2017
£
1,279,870
219,586
8,169
122,248
1,629,873
2016
£
46,413
98,587
10,391
31,860
187,251
Page 32
JERSEY OIL AND GAS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 DECEMBER 2017
19.
CONTINGENT LIABILITY
In accordance with a 2015 settlement agreement reached with the Athena Consortium, although Trap Oil Limited remains a Licensee in
the joint venture, any past or future liabilities in respect of its interest can only be satisfied from the Group’s share of the revenue that the
Athena Oil Field generates and up to 60 per cent. of net disposal proceeds or net petroleum profits from the Group’s interests in the P2170
and P1989 licences which are the only remaining assets still held that were in the Group at the time of the agreement with the Athena
Consortium 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 P2170 (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, however 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.
20.
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’s share option schemes are for Directors, Officers and employees. The charge for the year was £105,822 (2016: £114,788l)
and details of outstanding options are set out in the table below.
Date Of
Grant
Exercise
price
(pence)
Vesting
date
Expiry date
No. of shares
for which
options
outstanding at
1 Jan 2017
Options
issued
Options
Exercised
Options
lapsed/non
vesting during
the year
No. of shares
for which
options
outstanding at
31 Dec 2017
Mar 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
Apr 2017
Apr 2017
Apr 2017
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
310
310
310
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
Apr 2017
Apr 2018
Apr 2019
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
Apr 2022
Apr 2022
Apr 2022
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
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
20,000
20,000
20,000
20,974
-
-
-
-
-
-
-
-
-
-
-
-
13,333
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
13,333
13,333
-
-
-
Total
3,164
5,809
4,355
5,809
523
523
523
1,650
1,650
-
9,500
9,500
-
246,667
246,667
246,667
20,000
20,000
20,000
843,007
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.
21.
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 33
JERSEY OIL AND GAS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 DECEMBER 2017
22. NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS
RECONCILIATION OF LOSS BEFORE TAX TO CASH USED IN OPERATIONS
Profit/(loss) for the year before tax
Adjusted for:
Amortisation, impairments, depletion and depreciation
Share based payments (net)
Gain on disposal of assets
Finance costs
Finance income
(Increase)/Decrease in trade and other receivables
Increase/(Decrease) in trade and other payables
2017
£
726,692
-
105,822
-
-
(5,010)
827,504
(233,235)
1,442,623
2016
£
(793,439)
5,393
114,788
(239,724)
-
(2,070)
(915,052)
104,846
(116,938)
Cash Generated from/(used in) operations
2,036,892
(927,144)
CASH AND CASH EQUIVALENTS
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 2017
Cash and cash equivalents
Year ended 2016
Cash and cash equivalents
Cash and cash equivalents
Net cash
31 Dec 2017
£
25,415,410
1 Jan 2017
£
1,882,310
31 Dec 2016
£
1,882,310
1 Jan 2016
£
862,910
At 1 Jan 2017
Analysis of net cash
Cash flow
At 31 Dec 2017
£
1,882,310
£
23,533,100
£
25,415,410
1,882,310
23,533,100
25,415,410
23
AVAILABILITY OF THE ANNUAL REPORT 2017
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 34
JERSEY OIL AND GAS PLC
CONTENTS OF THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
Company Statement of Financial Position
Company Statement of Changes in Equity
Company Statement of Cash Flows
Pages
36
37
38
Notes to the Company Financial Statements
39-41
Page 35
JERSEY OIL AND GAS PLC
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2017
Note
2017
£
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
5
6
7
8
2016
£
32,696
1,777,566
1,810,262
1,810,262
2,347,017
71,170,230
1,495,916
(73,552,237)
76,172
25,267,423
25,343,595
25,343,595
2,466,144
93,851,526
1,231,055
(72,776,950)
24,771,770
1,460,926
571,825
571,825
349,336
349,336
TOTAL EQUITY AND LIABILITIES
25,343,595
1,810,262
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 financial statements on pages 36 to 41 were approved by the Board of Directors and authorised for issue on 26 April 2018. They
were signed on its behalf by S J Richardson Brown – Chief Financial Officer.
Scott Richardson Brown
Chief Financial Officer
26 April 2018
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 2017
Called up
share
capital
£
Share
premium
account
£
Share
options
reserve
£
Accumulated
losses
£
Total
equity
£
At 1 January 2016
2,331,767
69,569,979
1,381,128
(72,828,837)
454,037
Total comprehensive loss for the year
-
-
Issue of Share capital
15,250
1,600,251
-
-
Transactions with owners (share based payments)
-
-
114,788
(723,400)
(723,400)
-
-
1,615,501
114,788
At 31 December 2016
2,347,017
71,170,230
1,495,916
(73,552,237)
1,460,926
Total comprehensive profit for the year
-
-
Issue of Share capital
119,127
22,681,296
-
-
404,599
404,599
-
22,800,423
Transactions with owners (share based payments)
Lapsed share options
-
-
-
-
105,822
-
105,822
(370,688)
370,688
-
At 31 December 2017
2,466,144
93,851,526
1,231,055
(72,776,950)
24,771,770
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 2017
Cash flows from operating activities
Cash generated from operations
Net cash used in 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 from/(to) subsidiary companies
Net cash generated from financing activities
Increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Note
10
10
10
10
2017
£
(107,146)
(107,146)
5,010
5,010
22,800,423
791,570
23,591,993
23,489,857
1,777,566
25,267,423
2016
£
(299,706)
(299,706)
2,044
2,044
1,615,501
(283,895)
1,331,606
1,033,944
743,622
1,777,566
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 2017
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, where appropriate, provisions for impairment.
Going Concern
The Company is required to have sufficient resources to cover the expected running costs of the business for a period of at least 12
months after the issue of these financial statements. Taking into account the P2170 licence 2018 approved work programme and budget,
our current cash reserves are, expected to more than exceed the estimated liability of the Company. Based on these circumstances, the
Directors have considered it appropriate to adopt the going concern basis of accounting in preparing its consolidated 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.
PROFIT/(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 profit for the year was £404,599 (2016: Loss £723,400).
Auditors’ remuneration is disclosed in note 10 in the consolidated financial statements.
4.
PROPERTY, PLANT AND EQUIPMENT
COST
At 1 January 2016
At 31 December 2016
Disposals
At 31 December 2017
ACCUMULATED DEPRECIATION
At 1 January 2016
Charge for the year
At 31 December 2016
Eliminated on disposal
At 31 December 2017
NET BOOK VALUE
At 31 December 2017
At 31 December 2016
At 1 January 2016
Page 39
Office
equipment
£
255,029
255,029
(160,236)
94,793
255,029
-
255,029
(160,236)
94,793
-
-
-
JERSEY OIL AND GAS PLC
NOTES TO THE COMPANY FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 DECEMBER 2017
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
21,829,227 (2016: 9,916,478) Ordinary
2017
£
2016
£
49,915
26,257
76,172
15,363
17,333
32,696
2017
£
2016
£
25,267,423
1,777,566
Nominal
Value
1p
2017
£
2016
£
2,466,144
2,347,017
During the year the company issued 11,912,749 ordinary shares for which it received c£24m gross.
8.
TRADE AND OTHER PAYABLES
Current:
Amounts due to Group undertakings
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
2017
£
2016
£
211,678
117,295
89,520
153,332
571,825
211,678
28,209
22,272
87,177
349,336
Amount due to subsidiaries
2016
2017
£
£
211,676
211,676
-
-
-
-
1
1
1
1
-
-
Page 40
JERSEY OIL AND GAS PLC
NOTES TO THE COMPANY FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 DECEMBER 2017
9.
RELATED PARTY DISCLOSURES AND ULTIMATE CONTROLLING PARTY - continued
The balances outstanding at the end of the year from Trap Oil Limited £67,020,193 (2016: £68,255,683) and Jersey Oil & Gas E&P Ltd
£884,356 (2016: £440,433) have been fully provided for as a doubtful debt given the doubt over the ability of the subsidiaries to continue as
going concerns without support from the parent company.
During the year the Company also made sales to Trap Oil Limited amounting to £725,147 (2016: £445,466).
10.
NOTES TO THE COMPANY STATEMENT OF CASH FLOWS
RECONCILIATION OF LOSS BEFORE INCOME TAX TO CASH GENERATED FROM OPERATIONS
Profit /(Loss) for the year before tax
Adjusted for:
(Reversal of impairment)/Impairment of receivables from subsidiaries (note 9)
Provision for write off of loan interest
Share based payments (net)
Finance income
(Increase)/Decrease in receivables (note 5)
Increase in trade and other payables (note 8)
Cash used in operations
CASH AND CASH EQUIVALENTS
2017
£
2016
£
404,599
(723,400)
(791,570)
149,182
105,822
(154,192)
283,895
69,489
114,788
(71,533)
(286,159)
(326,761)
(43,476)
222,489
2,613
24,442
(107,146)
(299,706)
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 2017
Cash and cash equivalents
Year ended 2016
Cash and cash equivalents
Cash and cash equivalents
Net cash
31 Dec 2017
£
25,267,423
31 Dec 2016
£
1,777,566
1 Jan 2017
£
1,777,566
1 Jan 2016
£
743,622
At 1 Jan 2017
£
1,777,566
Analysis of net cash
Cash flow
£
23,489,857
At 31 Dec 2017
£
25,267,423
1,777,566
23,489,857
25,267,423
Page 41