Annual Report
for the year ended 31 December 2019
Company Number: 07503957
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Sustaining Growth
in the North Sea
CONTENTS
Overview
2019 Highlights
At a Glance
Chairman’s Statement
Chief Executive Officer’s Report
Strategic Report
Economic & Industry Environment
Strategy
Environmental, Social and
Corporate Governance (ESG)
Business Review and Future
Activities
Financial Review
Risks
Our Governance
Board of Directors
Corporate Governance Report
Directors’ Report
Audit Committee Report
Remuneration Report
Directors’ Responsibilities
Independent Auditors’ Report
Our Financial Statements
Consolidated Statement of
Comprehensive Income
Consolidated Statement of
Financial Position
Consolidated Statement of
Changes in Equity
Consolidated Statement of
Cash Flows
Notes to the Consolidated
Financial Statements
Company Statement of
Financial Position
Company Statement of
Changes in Equity
Company Statement of Cash
Flows
Notes to the Company
Financial Statements
Glossary
01
02
04
06
10
11
12
14
18
20
24
26
30
32
33
38
39
46
47
48
48
49
63
64
64
65
69
Jersey Oil and Gas (“JOG”) is a UK
independent North Sea focused upstream
oil and gas company, driving shareholder
value through creative deal making
and operational success.
Scale
•
142 mmboe of discovered oil net to JOG
• 232 mmboe of exploration potential net to JOG
• Progressing a major new development in the Greater Buchan Area
• Further upside from third party tie-back potential
Location
• Strategic location in a prolific part of the Central North Sea
• Close to multiple export routes
• Regional collaboration studies underway
• Potential for power from shore (low carbon electrification hub)
Value
• Core development assets worth US$1.2bn NPV10 (>US$10/bbl)*
• Project lifetime undiscounted cash flows forecast to be in excess of
US$3bn*
• Significant value potential from modest investments to date
• Strong focus on Maximising Economic Recovery (‘MER’)
Quality
• Scale and breadth – 142 mmboe across five discovered assets
•
Light crude oil (>30°API)
• Data – 36 years of production history in core asset
• High quality and experienced team
The front cover shows an image of Skellig Michael, an island off the south west coast of Ireland
made up of fluvial and aeolian Old Red Sandstone; It is a contemporary geological analogue for
what is now the Buchan oil field reservoir, which was also uplifted and exposed as an island for 30 to
40 million years during the Lower Cretaceous period.
*
See CPR details on p69
View more online at jerseyoilandgas.com
2019 HIGHLIGHTS
1
4
2
5
01
3
6
Figures 1-5 above (described on page 69) are indicative of the Company’s in-depth approach to understanding the geology and reservoir characteristics and properties
of the Buchan Field using outcrop, core and 3D seismic data, together with 36 years of production history, to build up-to-date reservoir models. Figure 6 provides a GBA
perspective on the Buchan Field and neighbouring prospects.
MATERIALITY
CAPABILITY
GAME CHANGING
AWARDS
31 SLR(1)
Pre-application
•
In-depth subsurface and
facilities studies
Discovered resources
• Five oil accumulations in close
proximity
− Buchan
• Created Area Hub plan
− Buchan Andrew
− Collaboration with area
stakeholders
− Investigation into
applicable technologies
− Verbier
− J2
− Glenn
− Ensured alignment with OGA’s
MER strategy
Exploration potential
• Eight prospects and one lead
Award of three licences,
four blocks
Buchan & J2
• P2498 Blocks 20/5a & 21/1a
•
100% working interest and
operatorship
Glenn
• P2499 Block 21/2a
•
100% working interest
and operatorship
Zermatt
• P2497 Block 20/4c
•
100% working interest
and operatorship
− Verbier Deep
− Verbier North
− Wengen
− Cortina
− Capri
− Zermatt
− Chamonix
− Courchevel
− Meribel (lead)
(1)
31 SLR refers to the 31st Supplementary Offshore Licensing Round. Further acronyms can be found on page 69.
Strength of team
•
JOG has assembled a team with
the right skills, experience and track
record to implement its Greater
Buchan Area (“GBA”) development
plan
• Key team members have successfully
developed other major North Sea
projects including Buzzard, Golden
Eagle, Tolmount, Gannett and Goliat
•
JOG is building the in-house
capability to develop and operate
the GBA
• Additional expertise leveraged from
the creation of a Board advisory panel
Annual Report for the year ended 31 December 2019OverviewStrategic ReportOur GovernanceOur Financials 02
AT A GLANCE
Investment proposition
Experienced
management team
Proven ability
to explore
Jersey Oil and Gas is run by a
management team of substance with
over 100 years of combined experience
operating, exploring and acquiring assets
in the UK North Sea.
Read more about Our Team
on pages 24 to 25
In addition to a wealth of UK North
Sea exploration successes with former
companies, Jersey Oil and Gas’s
management team was responsible for
progressing exploration of the P2170
licence and has seen the licence through
initial exploration success with the Verbier
oil discovery. Our recent awards in the
31st Supplementary Offshore Licensing
Round have added valuable exploration
prospects to our existing asset base.
Read more about Performance
on pages 14 to 17
Proven ability to
build a significant
licence portfolio
Jersey Oil and Gas’s team was
responsible for the successful awards
in the 31st Supplementary Offshore
Licensing Round which provided
JOG with a new large-scale Area Hub
development and operatorship. This is a
transformational step for the Company in
its journey to becoming a significant E&P
company.
Read more about Our Assets
on pages 14 to 17
Value creation – Jersey Oil and Gas has entered the phase of maximum value creation
Typical upstream
project phases
Commencement of
engineering and
subsurface work
Construction begins and
production wells are drilled
Production begins
Acquire
seismic,
undertake
studies
License
acreage
One or more
exploration
wells
Appraisal of
discovery
The Greater Buchan
Area development
is entering this phase
l
e
u
a
V
License
Study
Explore
Appraise
Verbier
Greater
Buchan Area
2014
2019
2015/16
2017
2019
Concept
selection
2020
FEED
Develop
Produce
Time
Our Stakeholders – we believe in good corporate citizenship
Employees
Government/
Regulator
Suppliers
• Health and safety
• Training
• Culture
• Ethics & values
• Wellbeing
• Communication
• Collaborate and consult
• Compliance
• Sustainable supply chain
management
• Registered with FPAL supply chain
• Ethical procurement
• Establishing ESG criteria with suppliers
Annual Report for the year ended 31 December 2019
03
Our Assets
Located in the Outer Moray Firth in the
Central North Sea, the Greater Buchan
Area sits in a prolific basin surrounded
by iconic fields such as Forties and
Buzzard as well as established routes
for export of oil and gas.
Read more about Our Assets
on pages 16 to 17
Buchan
& Andrew
85 mmboe
100% W.I
J2
Verbier
Glenn
Exploration
20 mmboe
100% W.I
25 mmboe
88% W.I
14 mmboe
100% W.I
232 mmboe
88–100% W.I
Our Strategy
• License – New Ventures
Identify and license assets with potential
• Acquire – Targeted M&A
Acquisitions to build scale
• Develop – Core Area Focus
Develop GBA assets to deliver material value
Read more about Our Strategy
on page 11
L i cense
D
e
v
e
l
o
p
Acquire
Shareholders
Community
Read more about Our Stakeholders
on page 11
• Communication
• Engagement
• Reporting
• Contribute to economic growth
•
Investment opportunities
• Support and educate
•
Job creation
• ESG
Annual Report for the year ended 31 December 2019OverviewStrategic ReportOur GovernanceOur Financials
04
CHAIRMAN’S STATEMENT
“
This last year has been an exceptional one for Jersey
Oil and Gas. We have increased our resource base
over 30-fold, built an excellent project team and are
progressing towards becoming a significant North Sea
E & P company.”
Marcus Stanton
Non-Executive Chairman
Overview
This past year has been an exceptional
one for Jersey Oil and Gas (‘JOG’). We
started the year with an inventory of less
than 5 million barrels of oil equivalent
(‘mmboe’) discovered recoverable
resources net to our 18% interest in the
Verbier discovery located on Licence
P2170. The year had potential for growth
given we had an appraisal well planned
at Verbier and were participating in
the OGA’s 31st Supplementary Offshore
Licensing Round (‘31 SLR’). We ended
the year with more than 120 mmboe of
discovered recoverable oil equivalent
resources net to JOG. Post year end
we took this figure to over 140 mmboe
with our acquisition of Equinor’s interest
in Licence P2170 (Verbier), representing
a 30-fold increase on our 2019 starting
position, which was a transformational
result for JOG.
For much of 2018 and the first half of
2019, we were working extensively
on our application for further licence
interests under the 31 SLR, a round solely
dedicated to what is known as the
Greater Buchan Area (‘GBA’). I am glad to
report that as a result of the JOG team’s
well thought out strategy, and planning
detail for the development of the GBA,
in July 2019 the Oil and Gas Authority
(“OGA”) announced the award to JOG
of two licences in the GBA surrounding
our Verbier discovery. A further acreage
award was made in August 2019, resulting
in a total of three licence awards and
four blocks, with each licence awarded
on a 100% equity interest basis. Against
this backdrop, the Verbier appraisal well
drilled in 2019, did not encounter the
anticipated Upper Jurassic sands. This
was an unexpected result for us and, as a
result, we lowered our estimate of gross
recoverable resources for the Verbier
discovery down to the lower end of the
initial resource estimate of 25 mmboe (as
estimated by Equinor following the initial
discovery well result in October 2017).
Nonetheless, in our view there remains
significant prospectivity (>160 mmboe
gross) across the P2170 licence area and,
subsequent to the year end, we were
pleased to have acquired an additional
70% interest in this licence, bringing
our total interest in Licence P2170 up to
88% on completion. This is particularly
important to JOG given that Verbier and
any other discoveries in the licence are
within the heart of the GBA and therefore
will be prime candidates for tying back
to the planned Buchan hub, for which
we are currently working on the concept
select phase of this new development
project.
Discovered Resources
142mmboe*
(2018: 4.5 mmboe)
+3,020%
Exploration Prospects
232mmboe*
(2018: 32 mmboe)
+625%
Prolific GBA
5 Discovered Fields
8 Exploration Prospects
4 Operated Licences
* See page 14 for details.
Annual Report for the year ended 31 December 2019 05
Economic Environment
For 2019, Brent Crude Oil started the year
trading at a price of approximately $52
per barrel and ended the year at a price
of $65 per barrel, with a sizeable level of
volatility in the second half of the year.
Since then the spot oil price has fallen
dramatically as a result of falling demand
due to the Covid-19 outbreak and excess
supply notwithstanding cuts from OPEC+.
At the end of April 2020 Brent was trading
at around $23 per barrel.
As regards our own position, we do not
currently have any production, nor do
we have any debt. First oil from the GBA
development project is currently planned
for 2025 and we, along with all the major
market commentators, believe that the
effects of both the Covid-19 outbreak
and the current reduction in demand for
oil will have ended by that time, with the
Brent spot price returning to materially
higher levels. At the end of April 2020, the
January 2025 forward price for Brent was
approximately $48 per barrel with prices
increasing for longer term contracts and
many market commentators looking at
forward prices of $60+.
As a result, we believe the best course
of action is to carry on with the various
workstreams needed to take the GBA
project through, and past, the Concept
Select phase.
Environmental, Social and
Corporate Governance
We continue to embrace the energy
transition and fully support the UK
Government’s commitment to net zero
emissions by 2050, which the OGA are
integrating into their regulatory policies.
Nonetheless, we believe that these
initiatives will take time to implement
and that in the interim oil and gas will
continue to be a vital part of the UK and
broader global energy mix. Our role in
this process is therefore to provide our
energy product in a way that is best in
class for both operational issues, such
as health and safety, environmental
compliance and our workplace needs
and for longer term issues such as
reducing the climate change risks
associated with our business, in addition
to reducing the carbon emissions
from developing the GBA. With a new
greenfield development in the North
Sea, we are well placed to use the latest
engineering and operational techniques
to bring down its carbon emissions, in a
safe and efficient manner.
Our maiden statement on JOG’s
approach to Environmental, Social and
Governance matters appears later in this
Annual Report.
During 2018 we adopted the Quoted
Companies Alliance Corporate
Governance Code, which codifies our
belief that a strong and transparent
governance policy is a key ingredient to
our success. Underlying this approach
is the recognition that good corporate
governance is based on culture rather
than procedure.
A separate report on the principles
that we strive to implement, without
constraining the entrepreneurial spirit
in which the Company was created,
appears later in this report.
The Covid-19 Virus Outbreak
As will be well understood by all,
countries, businesses, organisations,
individuals and families are having to
change the way they operate and
behave following the Covid-19 virus
outbreak. As a company, we continue to
place the highest priority on the safety
and wellbeing of our employees. As a
result, all of our employees now work
from home and will continue to do so
until it is safe for them to return to an
office environment.
This work from home approach is
working well, with all employees
continuing with their respective
workstreams remotely, alongside a
similar approach being adopted by
our contractors. We currently see the
GBA Concept Select key stages largely
proceeding to their original timelines of
summer 2020, although this may change,
depending on how events unfold.
Outlook
JOG ended 2019 in a strong position, with
substantial contingent and prospective
reserves, which were then increased
through the 2020 acquisition of an
additional 70% interest in Licence P2170
(Verbier). The GBA licences, which
can now be regarded as including the
Verbier licence area, should generate
substantial cash flows once we reach
first oil, which we currently estimate to
be in 2025. We are moving ahead, at
speed, through the planning phases of
this development and, at the time of
this statement, we will be approaching
the concluding parts of the Concept
Select phase. Nonetheless, the costs
of developing the GBA area will be
substantial and once we have passed
through the key stages of Concept
Select we will launch a process to
attract industry partners and additional
providers of capital in order to advance
this important project, taking into account
market conditions at that time.
We very much hope that the Covid-19
outbreak will pass, in due course. In the
interim the safety of our employees
remains our highest priority.
We believe that the current historically
low oil price is not sustainable and that
by the time we reach first oil for the
GBA development project, oil prices
will have returned to substantially higher
levels, in part due to underinvestment in
conventional growth projects.
On behalf of the Board, I would like to
thank all of our employees, both old and
new, for the continuing hard work that is
being put into the development of the
GBA, with all of us now working in difficult
circumstances, outside of our normal
office environment.
As always, I would also thank our
Shareholders for their continuing support.
Marcus Stanton
Non-Executive Chairman
6 May 2020
Annual Report for the year ended 31 December 2019OverviewStrategic ReportOur GovernanceOur Financials 06
CHIEF EXECUTIVE OFFICER’S REPORT
“
Our efforts during 2019 resulted in transformational asset
growth for our Company. The GBA Project promises
to be the largest new area hub development in the UK
Central North Sea in recent times.”
Andrew Benitz
Chief Executive Officer
Discovered Resources
30-fold
Uplift
Project Value*
US$1.2bn
NPV(10%)
Project Value*
US$3bn+
Free cash flow
*
See CPR details on page 69.
Dear Shareholders,
Our efforts during 2019 resulted in
transformational asset growth for our
Company. Our winning application in
the 31 SLR has provided our business
with a vastly increased portfolio and the
potential to develop a highly valuable
business for all of our stakeholders. The
GBA Project promises to be the largest
new area hub development by reserves
in the UK Central North Sea in recent
times. JOG is now focused on the timely
delivery of selecting the development
concept for this major new area hub
development that has an estimated
current project value of $1.2 bn. and has
the potential to deliver free cash flow in
excess of $3 bn.
Having grown our discovered oil
resources 30-fold, we are now operating
a project which is estimated to contain
net to JOG approximately 140 million
barrels of discovered and recoverable
oil and over 200 million barrels of
highly prospective exploration upside.
At the core of the GBA is the Buchan
oil field that benefits from 36 years of
production history and once production
resumes on this field we estimate more
than 80 million barrels of oil is yet to
be recovered from this remarkable
field, that was often referred to as the
field that kept on delivering. We are
making excellent progress on defining
not only the core hub volumes that
JOG owns, but also third-party regional
volumes. We have established and are
leading the Greater Buchan Area Joint
Integrated Studies Agreement (‘JISA’).
This agreement, between neighbouring
field operators, will see JOG undertake
and complete technical and commercial
evaluation studies for a collaborative
development of the wider GBA, together
with other regional operators. The wider
area contains discovered oil and gas
resources in excess of 200 million barrels
of oil equivalent.
A key objective of the JISA is to establish
whether a collaborative development
involving regional field operators
would lead to a single new production
hub in the area, potentially reducing
development costs for all of the
operators and delivering on the OGA’s
objective of Maximising Economic
Recovery (‘MER’).
Our industry is at an inflexion point
with respect to energy transition. We
believe that oil and gas will remain an
important part of the UK’s energy mix
for the foreseeable future and projects
such as GBA will be a vital resource for
retaining the UK’s energy security as we
transition to net zero. It is JOG’s vision
to provide cleaner, safer energy in the
most responsible way. JOG is now a
proud signatory of the United Nations
Global Compact, the world’s largest
corporate sustainability initiative. We have
put energy transition at the forefront of
our strategic thinking, seeing this as an
opportunity rather than a challenge, with
the potential to unlock significant value in
the GBA for JOG.
Annual Report for the year ended 31 December 2019
07
Fig 7 – Conceptual bridge-linked platform
Financial Results
JOG continues to benefit from a
straightforward capital structure, with a
strong cash position that more than covers
our current contracted work programme
for the Concept Select phase of the
GBA Project. We have no debt and no
decommissioning liabilities. Our pre-tax
loss for the year amounted to £2.1m as
compared to a £2.0m loss in 2018.
Cash at year end was £12.3m, down from
£19.8m at the end of 2018, largely due
to our share of the costs of drilling the
Verbier appraisal well in 2019.
JOG remains fully funded to deliver the
Concept Select work we are progressing
on our GBA development and we have
implemented cost saving initiatives to cut
our 2020 budget guidance by more than
£3m from £10.6m to £7.5m. The Company
has sufficient working capital through
to at least the end of 2021, prior to any
proceeds from our planned sale of a part
interest in our GBA Project, the process
for which is expected to be launched
later this year. Cost control continues to
be monitored closely by our Board.
People
We continue to build a strong and
focused team in order to progress the
development of the GBA Project through
to first oil or, more accurately, second
oil, given the Buchan field’s production
history. These talented industry
professionals bring many skills to JOG
ranging from extensive North Sea
relevant field development experience
through to expertise in health, safety,
environment and social responsibility
matters. The project team’s experience
has been gained from working on
projects including Buzzard, Golden
Eagle, Tolmount, Gannett and Goliat.
This is further supplemented through
the extensive project development
track record of our recently appointed
Board adviser. We welcome all of
these individuals into the Company.
We have also leased some new office
space in London which enables our
UK-based employees to work from the
same location.
Looking Forward
Notwithstanding the very real challenges
that Covid-19 is providing, JOG remains
committed to building a profitable,
full-cycle upstream oil and gas business.
Fortunately the Government lockdown is
having minimal impact on our activities,
which are continuing apace despite
working remotely.
JOG has delivered the GBA opportunity
with a nimble and creative team, with a
philosophy of a can-do attitude. We are
building out the team capabilities with a
broad range of industry and commercial
skills and we are well placed to move
forward and create further value for our
Shareholders.
We are pleased to be active in an area
where there is a proactive, industry-
facing regulator, the OGA, and we are
fully aligned with the OGA’s objective of
MER, evidenced through our approach to
progressing area collaboration initiatives
across the wider GBA.
JOG has a very low current and historic
carbon footprint. We have an opportunity
to showcase the GBA Project as a low-
carbon, sustainable development and
highlight JOG as a leader in the UKCS
on sustainability. We fully embrace the
UK Government’s initiative to be carbon
net zero by 2050 and are actively
investigating energy transition initiatives
such as platform electrification and see
the potential for GBA Project to not only
be a new production hub, but potentially
also a power hub. We are well placed to
progress our development plans through
Concept Select, before launching a
process later this year to attract industry
partners to join us in unlocking the
significant value that exists within the GBA.
We are making good progress to deliver
on our strategy, while adapting to an
investment environment that is changing
fast. We have an excellent team at JOG
and I would like to thank them all for
their continued dedication and relentless
commitment to advancing our activities
across our asset base.
Andrew Benitz
Chief Executive Officer
6 May 2020
Annual Report for the year ended 31 December 2019OverviewStrategic ReportOur GovernanceOur Financials 08
STRATEGIC
REPORT
fig 8 – Transocean Spitzbergen used to drill the Verbier discovery well
Annual Report for the year ended 31 December 2019 09
Economic & Industry Environment
Strategy
Environmental, Social and
Corporate Governance (ESG)
Business Review and Future
Activities
Financial Review
Risks
10
11
12
14
18
20
Annual Report for the year ended 31 December 2019Our GovernanceOur FinancialsStrategic ReportOverview 10
ECONOMIC & INDUSTRY ENVIRONMENT
Macro Industry Environment
Business Continuity in response
to global pandemic
The world has been implementing
aggressive measures to tackle the
ongoing outbreak of Covid-19. JOG
has rapidly recognised the growing
uncertainty around growth and
underlying business conditions.
JOG remains fully funded to deliver the
Concept Select work we are progressing
on our GBA development and we have
implemented cost saving initiatives to cut
our 2020 budget guidance by more than
£3m from £10.6m to £7.5m. The Company
has sufficient working capital through
to at least the end of 2021, prior to any
proceeds from our planned sale of a part
interest in our GBA Project, the process
for which is expected to be launched
later this year. Cost control continues to
be monitored closely by our Board.
Therefore, while it would be
inappropriate to describe the situation as
‘business as usual’, we continue to work
on the various workstreams required
to achieve our stated goals and create
long-term shareholder value, including
advancing Concept Select for the GBA
development which remains on track for
delivery this summer. Given the nature
of our current workstreams, these can
mostly be completed remotely by our
team and contractors and therefore we
have set up business continuity measures
to enable our team to work from home
to ensure that the safety of those in our
employ remains a top priority.
Oil prices
Oil prices have been increasingly volatile
since the beginning of 2020. Spot pricing
has been making recent headlines with
WTI front month contracts going into
negative pricing territory for the first
time. While this is clearly a concern, it is
important to note the key drivers of this:
• From late 2016 OPEC+ agreed to
reduce output to prevent prices from
falling as US shale oil production grew
to record highs
•
In March 2020 the actions of both
Saudi Arabia and Russia to gain
market share resulted in oil price
falls, as previous production cuts
from the leading OPEC+ producers
were reversed, exacerbating the
oversupply issue
• Oil storage is currently at or
nearing capacity in a number of
global locations because of supply
destruction caused by Covid-19
lockdowns.
Once lockdown restrictions start to be
lifted, demand will begin to pick up. It
is difficult to forecast how the supply/
demand balance will behave as recovery
begins. However, not all oil production
that has, or will be shut in, will recover
immediately. Many companies will
struggle to survive debt burdens taken
on at times of much higher prices and
the investment rate in sustaining existing
production, especially in the US shale
basins, will fall. The results of these, and
many other contributing factors, may
result in a lack of new developments
coming on stream in the next five years.
As oil companies seek to replace their
declining production, they will look for
new development opportunities that
offer material volumes and which can
deliver economic returns in lower oil
price environments. Given the attractive
economics of the GBA development
(expected break-even costs <$32/bbl,
IRR >40% as per the October 2019 CPR),
it has the potential to appeal to a wide
range of buyers, not just existing regional
players in the North Sea, but companies
from much further afield too.
Annual Report for the year ended 31 December 2019 STRATEGY
11
Business Strategy
JOG has a two-pronged approach to its
strategy. The first prong is a Core Area
Strategy, with an intense focus on the
area surrounding its principal asset to
create and increase value in the licence
and surrounding areas. This time last year
our principal asset was Licence P2170
which contains the Verbier discovery.
Our Core Area focus resulted in our
pursuit of proximal acreage to P2170 in
the 31 SLR. This strategy and focus has
delivered a significant increase in scale
and hence value of our core area. Our
primary asset is now the Buchan field
which sits across two blocks in the P2498
licence. This licence, together with the
three surrounding licences which include
P2170 forms our core area. The second
prong is the pursuit and execution of
asset or corporate acquisitions in the UK
North Sea area. Both approaches aim to
deliver strong Shareholder returns.
Greater Buchan Area: The four licences
that make up JOG’s interest in the GBA
include Licence P2498 (the Buchan
Blocks), Licence P2170 (Verbier), Licence
P2497 (Zermatt) and Licence P2499
(Glenn) and represent our very significant
resource base. In October 2019 we
published summary extracts from the
CPR produced by Rockflow Resources
Ltd that highlighted a mid-case
technically recoverable resource volume
of 94.7 MMstb net to JOG’s interest in
Licence P2498 and an associated post-tax
net present value of US$989m (including
our then equity of 18% in Licence P2170).
Acquisition Strategy
Since JOG’s inception, there has
been a clear focus on acquisition
opportunities. JOG has participated
in a large number of processes. The
Company’s analysis begins with a
technical evaluation. Subject to a positive
technical assessment of the merits of
the opportunity, it is then assessed
commercially. The Company’s approach
is to ensure there is a balance in the risk/
reward outlook of an opportunity and, as
such, many of the opportunities assessed
have not passed our combination
of technical and/or commercial
evaluations. For those opportunities
that have progressed, most were
within competitive processes. We have
maintained our discipline relative to our
technical and commercial assessments,
including our in-house views of the
macro environment (commodity prices,
foreign exchange risk and other macro
considerations pertaining to the UK
North Sea). While this prudent approach
resulted in our being outbid on a
number of opportunities, this discipline
has ensured that we have not bought
production at prices subsequently likely
to be proven uncommercial. We intend
to continue this prudent approach.
With the acquisition of the various
GBA licences, our acquisition targets
have become more focused. We are
particularly interested in the acquisition
of production that would assist our future
funding requirements in relation to the
GBA. The current macro environment
may present some interesting acquisition
opportunities that we, as a company
unencumbered by debt or production,
may be able to exploit beneficially.
As before, however, we continue to fully
evaluate potential acquisitions and we
are not prepared to pay prices which we
believe to be unlikely to deliver a good
return to Shareholders.
Annual Report for the year ended 31 December 2019Our GovernanceOur FinancialsStrategic ReportOverview 12
ENVIRONMENTAL, SOCIAL AND
CORPORATE GOVERNANCE (ESG)
The oil and gas industry is uniquely
positioned to develop efficient
products and services, support
innovation and facilitate knowledge
sharing and collaboration as it seeks to
fully support the energy transition. Within
our operations, JOG fully embraces
this energy transition and fully supports
the UK Government’s commitment to
net-zero by 2050, which the OGA are
integrating into their regulatory policies.
To ensure a just transition, we are
embedding sustainability deep into our
corporate strategies and operations.
JOG is now a proud signatory of the
UN Global Compact, the world’s largest
corporate sustainability initiative. By
aligning our business objectives with
the UN’s values, we aim to support the
advancement of their broader Global
Goals. At the operational level, health and
safety, environmental compliance and
workplace wellness are at the core of
this commitment. We have established
a framework which will ensure the long-
term resilience of our business to climate-
related risks, in addition to reducing
carbon emissions directly attributable to
the development of and production from
the GBA.
Of particular note, as regards our
activities in the GBA, we will not be using
the old Buchan wells or facility and, as a
result, this means the GBA will not only
be environmentally safer but can be
classified as a greenfield development,
with no legacy environmental issues.
We are well placed to use the latest
engineering and operational techniques
to bring down the carbon emissions
associated with this development and
oil and gas produced from it, safely and
efficiently.
During 2018 we adopted the Quoted
Companies Alliance Corporate
Governance Code, and it is our belief
that a transparent and robust governance
policy is a key component to our
success. As a business, we recognise that
good corporate governance is based on
culture rather than procedure.
We are working closely with the OGA
and our contractors to introduce
technologies that may enable the GBA
development to be at the forefront of
the energy transition, as well as being a
new area hub with potential for regional
industry collaboration to ensure the
Maximum Economic Recovery (MER) of
resources in the area.
JOG is committed to an open and honest
relationship with all our contractors and
suppliers, delivering a Procurement and
Supply Chain Management system that
is responsible and professional. Our
processes are aligned to the principles
set out in the OGA’s MER UK Supply Chain
Delivery Programme.
As a fundamental deliverable for Concept
Select for the GBA development project,
JOG contracted a leading engineering
consultancy, to evaluate power solutions
for the GBA. The study assessed various
modes of sustainable power generation
for the Buchan hub and the potential
for distribution of electric power to
Annual Report for the year ended 31 December 2019 13
other regional oil installation operators,
existing and planned, from Buchan, as a
regional power hub. Phase 1 of this study
evaluated and confirmed the technical
feasibility of platform electrification.
JOG believes that the energy transition
is about evolving the energy mix to
be as sustainable as possible. JOG is
developing ESG criteria to be applied
corporately and to the Greater Buchan
Area Project. Our governing principles
are outlined below:
• Applying appropriate criteria to all
of our activities to ensure JOG is
environmentally conscientious
• Respectful treatment of all within
JOG’s operating community
• Honest and transparent business
practices
JOG will make ESG part of its regular
reporting to shareholders and will report
on ESG criteria that the Company is
pursuing.
The UN Global Compact is driving
business ambition and innovation to
help ensure meaningful private sector
contributions towards the achievement
of the Sustainable Development Goals
(‘SDG’).
To deliver impact at scale, the UN Global
Compact is working with business to
raise awareness, showcase best practice
and support meaningful target-setting.
For JOG, ESG and SDG means:
• Raising Awareness of ESG and SDG
internally and within our stakeholders
• Continually increasing our ESG and
SDG capabilities and delivery
•
Inspiring ESG and SDG activities
through good business practice
• Engaging in policy dialogue on ESG
and SDG
− Building multi-stakeholder
partnerships with ESG and SDG as
fundamental drivers
− Establishing internal goals and
creating a public ESG and SDG
strategy with objectives and
commitments that are relevant to
our organisation.
We are aligned with the Davos Manifesto
which states: ‘A company is more than an
economic unit generating wealth. It fulfils
human and societal aspirations as part of
the broader social system. Performance
must be measured not only on the
return to shareholders, but also on how
it achieves its environmental, social and
good governance objectives.’
Annual Report for the year ended 31 December 2019Our GovernanceOur FinancialsStrategic ReportOverview 14
BUSINESS REVIEW AND FUTURE ACTIVITIES
The principal activity of the Company is
that of an upstream oil and gas business
in the United Kingdom. The Company is a
public limited company with share capital
incorporated in England and Wales
(company number 07503957) and is
quoted in London on the AIM market of
the London Stock Exchange (“AIM”) under
the designation JOG.
The Company is required by the
Companies Act 2006 to set out in this
report a review of the business of
the Group during the year ended 31
December 2019 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
Report, the Chairman’s Statement and the
Strategic Report.
Highlights of 2019
Secured Company-defining increase in
resource base from 31 SLR awards.
•
120 mmboe of 2C discovered net
recoverable oil equivalent resources
• 91 mmboe of exploration potential
Development ready with exploration upside
100% 82
Net contingent resources
Buchan
Buchan Andrew 100% 3
J2
Glenn
Verbier (Main)
Total (mmboe)
100% 20*
100% 14*
88% 22*
142
Net prospective resources
Verbier (Deep)
Verbier (North)
Cortina/Capri
Meribel
Wengen
Zermatt
Chamonix
Courchevel
Total (mmboe)
88% 27*
88% 6*
88% 66*
88% 9*
88% 53*
100% 30*
100% 34*
100% 8*
232
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e
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C
P2170
P2497
P2498
P2499
JOG
22
–
105
14
142
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149
72
11
–
232
* Management estimates as at January 2020
Fig 9 – JOG Greater Buchan Area discoveries, prospects and leads volumes are reviewed and approved by
Ronald Lansdell, COO of JOG, a qualified Geologist and Fellow of the Geological Society, who has over 40
years’ relevant experience within the sector.
Recruited a highly capable project team
to progress development planning.
• 3 new licences, 4 new blocks
• A multi-disciplinary project team
•
100% equity interests and
Operatorship
The Verbier appraisal well result was an
unexpected result not encountering the
anticipated Upper Jurassic sands. This
meant we lowered our estimate of gross
recoverable resources for Verbier down
to the lower end of the initial resource
estimate of 25 mmboe.
which reports to Ron Lansdell (COO)
and is led by Stephen Kirby, a senior
project manager with experience
from two of the North Sea’s most
successful developments in the last
15 years in Buzzard and Golden Eagle
• The team has a wealth of North Sea
experience gained from Super-
Majors, Majors, Oilfield Service
companies and large independents
Sanctioned key contracts with
subsurface, facilities and engineering
specialists including Rockflow, Petrofac,
RPS and KBR.
Published summary extracts from a new
CPR produced by Rockflow Resources
Ltd that focused on the Buchan, Buchan
Andrew and J2 discoveries and the Capri
prospect providing third party validation
of the resource potential of the Buchan
blocks (Licence P2498), key constituents
of our GBA resource base.
Cash Position: Ended 2019 with £12.3m,
which sees the Company fully funded
for the Concept Select phase of the GBA
Project and until at least the end of 2021,
based on our current contracted work
programme on the GBA Project and
current company G&A levels.
Post Year End Developments
Acquisition of Equinor’s stake in Licence
P2170 containing the Verbier discovery
• An additional 18 mmboe of 2C
discovered net recoverable oil
equivalent resources
• An additional 119 mmboe of
prospective resources
• No upfront cash consideration
• Deferred contingent consideration
of two modest payments on Field
Development Plan (‘FDP’) sanction and
first oil and then a reducing revenue
royalty over the first 35 mmbbls of oil
produced from on-block volumes net
to the acquired interest (see p17 for
more details).
Annual Report for the year ended 31 December 2019
15
Fig 10 – The P2170 discovery and prospects in relation to the Buchan Field
Operations
In January 2019, the OGA launched the
31 SLR. Known as the Greater Buchan
Area (‘GBA’), the blocks offered in the
31 SLR surround our existing Licence
P2170, where the Company made the
Verbier oil discovery in October 2017.
We referred to this in our 2018 annual
accounts and recognised the potential
for a new area hub development to
produce the material discovered oil
volumes that exist within the GBA.
Looking at the GBA in an area-wide
context has been part of JOG’s strategic
thinking for the past two years and it was
this foresight that has helped to transform
the Company to where it is today.
During the first half of 2019, the Verbier
appraisal well was drilled. While not
successful, the data and information
acquired during the drilling of the
appraisal well combined with the
interpretation of the final processed
volume of PGS 3D seismic data
has increased our confidence in
the depositional model and hence
distribution of the Verbier reservoir
sands and enhanced our understanding
of further prospectivity in the P2170
licensed acreage. Although this was a
temporary setback for the Company, we
subsequently acquired a dominant asset
ownership with significant discovered
resources, across the Greater Buchan
Area.
In July 2019 JOG was awarded 100%
working interests and operatorship
of two licences in the OGA’s 31 SLR.
Subsequent to our initial award we were
awarded a further licence containing the
Glenn oil discovery in August 2019. The
acreage awarded in connection with
the 31 SLR includes the Buchan oil field
and the J2 and Glenn oil discoveries,
together with additional high potential
exploration prospects, and is contiguous
with JOG’s existing interest in Licence
P2170, that contains the Verbier discovery.
These awards that have added significant
proven oil accumulations are by far the
most significant event for JOG since its
inception.
Concurrent with the awards we began
assembling a highly experienced
in-house project team with extensive
regional oil and gas project development
experience. This team will provide
operatorship of the project and will
manage the third party contractors.
In October 2019, JOG was pleased to
announce the award of key contracts
to Rockflow Resources Ltd (“Rockflow”)
and Petrofac Facilities Management
Limited (“Petrofac”). Rockflow, working
closely with the JOG team, is providing
subsurface evaluation and Petrofac is
providing facilities and well studies for
the concept selection phase of the
GBA development project. Our current
estimate for the conclusion of the
Concept Select phase is during summer
2020.
In October 2019, JOG published the key
findings of a Competent Person’s Report
containing an independent assessment
of resource and valuation estimates in
relation to certain oil and gas interests
held by the Company in the GBA. This
was completed by Rockflow. These
assets include the significant resources
of the Buchan Devonian oil field, the J2
and Buchan Andrew oil discoveries and
the Capri prospect. The highlights of this
study concluded Technically Recoverable
Oil Resource Volumes of 94.7 MMstb
net to JOG, with a mid case Contingent
Resource valuation (NPV10) of Licence
P2498, together with a valuation of JOG’s
18% share of the Verbier discovery of
£791m (US$989m).
Annual Report for the year ended 31 December 2019Our GovernanceOur FinancialsStrategic ReportOverview 16
BUSINESS REVIEW AND FUTURE ACTIVITIES
The Greater Buchan Area in context
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Source: Wood Mackenzie except for Greater Buchan Area data which are management estimates.
Base case includes Buchan, Buchan (Andrew), J2 and Verbier @ 25 mmboe.
The GBA Assets
The principal asset within the Greater
Buchan Area is the Buchan oil field. It was
discovered in the mid-1970s and was
brought on stream by BP in 1981 with nine
development wells. Initial production
peaked at 54,537 bopd. A cumulative
total of 148 million barrels (“mmbbls”)
of oil were produced under natural
depletion, with aquifer support, until May
2017, when the Buchan Alpha production
facility was no longer compliant with the
required Safety Case. Buchan oil is light
(33.5° API) with a low GOR (285 scf/bbl).
A number of in-depth studies, compiled
since 2014, have demonstrated a strong
case for the economic attractiveness of
the Buchan field and for bringing it back
into production. JOG has worked for over
two years studying the Buchan field and
we, together with our Competent Person
(Rockflow), have estimated, in agreement
with earlier studies, that over 80 million
barrels of oil remain to be produced
from the field. The reservoir is a Devonian
fluvial sandstone, variable in quality with
porosities of up to 28%. Buchan can now
be described as a conventional, fractured
sandstone reservoir. The oil production is
from a dual matrix porosity and fracture
system. Production from 1991 until 2017
was at a relatively constant pressure of
around 2,500 psi. Making use of our new
3D seismic data and the resulting static
and dynamic reservoir models, we will
target our development wells to optimise
production.
The GBA is located in the heart of the
UK Central North Sea (“CNS”). To the
north is the SAGE gas pipeline, to the
south is the Forties oil pipeline and the
area is surrounded by some of the most
iconic fields that have helped establish
the North Sea’s reputation as a major
hydrocarbon province. JOG had the
foresight in 2018 to pre-fund a major 3D
seismic survey covering the Buchan field
and the surrounding 1,000km² of acreage.
The survey overlays all of the discoveries
and prospects in the acreage we applied
for and which we were subsequently
awarded in the 31 SLR. The final, fully
processed data was received by JOG in
July 2019 and we are pleased to observe
a good improvement in the image
quality and enhanced resolution. This
data has been of significant benefit as we
progress our subsurface work across all
our acreage.
Oil was also discovered in the Buchan
discovery well in 1974, in the shallower
Andrew Sandstone reservoir. The trap
consists of a low relief, four way dip
closure. This proven accumulation is
being evaluated for production through
the Buchan hub.
The J2 oil discovery is some 2 km
north of Buchan and was discovered in
2006. The J2 structure and reservoir are
currently being evaluated as a potential
tie-back opportunity to the Buchan hub.
Further evaluation studies and potential
development plans for the J2 Sgiath
Formation oil discovery will be run
concurrently with our plans for Buchan.
The Glenn oil discovery is located some
6 km to the east of Buchan and is another
potential tie-back opportunity to the
Buchan hub. The Glenn oil accumulation
is contained in a faulted horst structure
with oil entrapped within late Jurassic,
shallow marine Sgiath Formation sands.
JOG has estimated that 14 million barrels
of oil could be produced from Glenn.
The licence in respect of Block 21/2a
comprises a two-year Initial Term with
certain firm work obligations, principally
comprising geotechnical studies, with a
drill or drop well obligation at the end of
the term.
In addition to the above discovered oil
volumes, JOG was awarded block 20/4c,
to the west of the Verbier licence area,
where JOG has mapped Upper Jurassic
prospects, Zermatt and Chamonix. These
are stacked prospects with combined
prospective resources estimated to be in
excess of 60 mmbbls, together with the
Courchevel lead, which is a deeper, Sgiath
reservoir target. The licence working
terms include a drill or drop obligation, to
be exercised at the end of the term.
Annual Report for the year ended 31 December 2019
17
Fig 11 – Buchan Field fault model
P2170 – Verbier Licence Area
Acquisition of Equinor UK’s
interest in Licence P2170
Post year end and during January 2020,
JOG announced that it had entered into a
conditional Sale and Purchase Agreement
(“SPA”) to acquire operatorship of, and
an additional 70% working interest in,
Licence P2170 (Blocks 20/5b and 21/1d)
(“Licence P2170”) from Equinor UK Limited
(“Equinor”).
The consideration for the Acquisition
consists of two milestone payments
and a royalty based on potential future
oil volumes produced from the Verbier
Upper Jurassic (J62-J64) reservoir oil
discovery (the “Verbier Field”), as further
detailed below.
Milestone Payments:
• US$3m upon the UK’s OGA
sanctioning an FDP for the Verbier
Field
• US$5m upon first oil from the Verbier
Field
The earliest of the milestone payments in
respect of the Acquisition is not currently
anticipated being payable before the
start of 2022.
Royalty Terms:
A gross revenue royalty on the oil
production generated from the Verbier
Field calculated on a 70% working
interest for on-block volumes at the
following levels:
• 5% for the first 12 million barrels of oil
produced and sold
• 4% for the subsequent 13 million
barrels of oil produced and sold
• 2% for the next 10 million barrels of oil
produced and sold
Acquiring these additional discovered
oil volumes enhances JOG’s project
value considerably and at the same time
strengthens our plan to bring Verbier
into future production through the GBA
hub development. On completion of the
Acquisition, JOG will assume operatorship
and secure a further 70% interest in
Licence P2170 from Equinor, taking its total
working interest in the licence to 88%.
For JOG, the Acquisition will add
an estimated 17.5 million barrels of
discovered oil volumes to its existing
resource base within the GBA. The
Verbier discovery is located 6km to the
North West of Buchan and, following
completion of the Acquisition, JOG will
own and operate all of the three initial
core components of its planned Buchan
hub development, being the Buchan oil
field, together with the J2 and Verbier oil
discoveries.
In the Competent Person’s Report (‘CPR’)
completed by Rockflow Resources
Limited for JOG in October 2019, the
gross post-tax cash flow associated
with a Verbier Field tie-back to Buchan
was assessed to be US$72m. This
Acquisition consequently adds an
estimated US$506m of post-tax cash flow
to JOG and the estimated NPV of the
GBA development project, net to JOG
increases to US$1.2bn, with the estimated
post-tax cash flow increasing to US$3.1bn.
Other Licence Activity
On 28 May 2019 JOG was pleased to
announce that it had agreed terms with
Total E&P UK Limited (‘TEPUK’) in relation
to TEPUK’s termination of its 2013 farm-
in to licence P2032 (Blocks 21/8c, 21/9c,
21/10c, 21/14a and 21/15b). By way of a
full and final settlement, JOG received
£750,000 from TEPUK.
Annual Report for the year ended 31 December 2019Our GovernanceOur FinancialsStrategic ReportOverview 18
FINANCIAL REVIEW
“
Our cash comfortably funds the Company through
its currently contracted work programme of Concept
Select, after which we will launch a sales process to
attract industry partners to join us in unlocking the
significant value of the GBA.”
Vicary Gibbs
Chief Financial Officer
Administrative Expenses
2019 saw increases in the Group’s
cost base as we began to build out
our project team expanding the size
and capabilities of the Company
commensurate with the requirements of
operatorship of the GBA development
project. The Group continues to remain
lean and cost efficient, which leads to us
having annual administrative expenses
of approximately £2.2m. While this is
an increase over the prior year it is a
necessary increase in order to build the
twin foundations of an operatorship
focused project team and a business
management infrastructure capable of
growing to manage the demands of a
much larger company.
During the year we also incurred modest
costs on acquisition processes that were
terminated or which we were not able to
successfully conclude.
Cash
£12.3m
(2018: £19.8m)
Debt
£0.0m
(2018: £0.0m)
Admin Expenses
£2.2m
(2018: £1.4m)
Cash Resources and Short-Term
Investments
JOG’s cash position was £12.3m as of
31 December 2019. Our cash comfortably
funds the Company through its currently
contracted work programme of Concept
Select, after which we will launch a sales
process to sell a proportion of our equity
in the Greater Buchan Area licences.
Based on current estimates our cash
therefore funds us through to at least the
end of 2021. This provides us ample time
for realising significant proceeds from a
sales process to secure funds to progress
the project work through to submission
of a Field Development Plan and to
progress the Project through to first oil
and beyond.
Debt
JOG currently has no debt.
Consolidated Statement of
Comprehensive Income
The Group had no trading revenues
in 2019 but did receive £750,000 of other
income as a result of the settlement
agreement with Total E&P UK Limited in
relation to TEPUK’s termination of its 2013
farm-in to licence P2032. Cost of Sales
includes expenditure on new licensing
round activities and various data and
service costs associated with these
activities.
Annual Report for the year ended 31 December 2019 19
KPIs
The Group’s Key Performance Indicators
(‘KPIs’) 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 operational
activities including HSSE.
Given the nature of our business, it is
critical that we monitor and manage our
cash very carefully and maintain financial
flexibility to recapitalise the balance sheet
as and when required, while 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 be 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.
Annual General Meeting
The Annual General Meeting will be held
on 3 June 2020. In the light of restrictions
in place arising from the Covid-19
outbreak that prevent physical meetings
of more than two people taking place
we, in accordance with current best
practice, will look to hold a shortened
AGM followed by a form of Company
presentation to be posted on our
website. Further details will be provided
in the Notice of Meeting.
Outlook
The Directors consider that the
Group remains appropriately
capitalised for its current asset base. It
is well managed, with an efficient,
effective and scalable cost base, and
remains well placed to pursue our
current stated strategy.
On behalf of the Board
Vicary Gibbs
Chief Financial Officer
6 May 2020
Annual Report for the year ended 31 December 2019Our GovernanceOur FinancialsStrategic ReportOverview 20
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 attractive returns for our Shareholders. The Company has a well-
developed and discussed Risk Register. It is updated on a regular basis and discussed at regular points throughout the year. The
most recent discussion was at a February 2020 Board meeting.
Financial Risks
• Availability of capital
• Volatility in
macroeconomic
conditions
• Cost overruns
and inflation
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 projections and development
scenarios, are prepared and updated regularly, circulated to all Directors and reviewed at
Board meetings.
The Company raised funds towards the end of 2017 and expects to be able to operate within
its existing cash reserves through to the end of 2021, based on current committed spending
on the GBA and current G&A levels.
Close relationships are maintained with banks and the investor community as the Group will
require further capital to progress its development activities.
Given the scale of the Greater Buchan Area development, the Group will likely require
capital from multiple sources. As has been publicly stated, the Company intends to run a
sales process to sell part of its equity interests in the GBA post completion of Concept Select
to bring in funds for its share of development costs. Given the inherent value of the GBA
development it is currently anticipated that this will provide a material component of the
Company’s overall funding needs for development, with further capital being raised post the
introduction of an asset partner.
The Group currently has no income exposure to oil or gas price fluctuations, as there is no
production currently accruing to the Company from its asset portfolio.
As a buyer of products and services, the Company faces both risks and opportunities from
economic volatility.
The Group insures the risks appropriate for the Group’s needs and circumstances. In particular,
events like the drilling of the Verbier appraisal well carry inherent financial and operational risks
and these are insured, where possible, under specific policies with major insurers.
• Adverse taxation and
legislative changes
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.
• Regulatory and
compliance risks
The Group manages its regulatory and compliance risk through the employment of sufficient
competent personnel and through retaining suitably proficient advisers.
Annual Report for the year ended 31 December 2019 21
Financial Risks
• Co-venturer
Close relationships are maintained with key co-venturers and counterparties. An assessment
of financial capability is a major assessment of suitability and will be a key consideration in any
negotiations.
• Adverse foreign
exchange movements
and other counterparty
risk
The Group has had exposure to US Dollar and Norwegian Krone exchange rate risk through
historic service provision costs paid from Sterling denominated cash deposits. 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
• Co-venturer and other
counterparty risk
• Delays to exploration
well programme
execution
• Failure of third-party
services
•
Inherent geological risks
and uncertainties
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. 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. Subsurface risks and uncertainties
are mitigated through the rigour of internal and external peer reviews and documented in a
Competent Persons’ Report.
The Group typically holds shared equity in its assets. The Group is now operator of licences
and is building up its knowledge and experience, including HSE and the necessary
engineering skills for Concept Select and exploration activities, as appropriate for current
and planned activities. 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 the Company’s JV co-venturers. These risks, together
with relationships with government and regulators, are regularly reviewed by the Board.
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
• Movement and
conditions in capital
markets
• Commercial
misalignment with, or
default of co-venturers
• Material oil price
movements
• Material changes in
projected abandonment
costs of oil and gas fields
• Brexit
• Global pandemics
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 Company does not see Brexit having a significant impact on its business. The global oil
market is not forecast to be significantly directly impacted by an exit of the UK from the EU and
there is significant demand for oil domestically. Access to overseas personnel and equipment
may be affected to a greater or lesser extent, depending on the precise Brexit outcome.
There is no absolute assurance that the Group’s ongoing activities will be successful. At the
current time, the Group has several active licence interests, which it considers to have good
reserves potential and prospects. However, exploration, appraisal and development licences
come with some degree of risk and there may be an uncertainty over the future success and
potential commercialisation of these assets. The Group also intends to expand its portfolio
through the acquisition of producing assets in the future to provide asset diversification.
The risks and opportunities set out above and herein 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.
The Company has implemented revised working practices to protect all personnel and
to minimise the impact of Covid-19 on key workstreams. Given workstreams in 2020 are
predominantly desktop based there is minimal impact currently. Potential macro impacts of
Covid-19 in the longer term are likely capital related and are discussed above.
Annual Report for the year ended 31 December 2019Our GovernanceOur FinancialsStrategic ReportOverview 22
OUR
GOVERNANCE
fig 12 – Little Skellig and Skellig Michael
Annual Report for the year ended 31 December 2019 23
Board of Directors
Corporate Governance Report
Directors’ Report
Audit Committee Report
Remuneration Report
Directors’ Responsibilities
Independent Auditors’ Report
24
26
30
32
33
38
39
Annual Report for the year ended 31 December 2019Strategic ReportOur FinancialsOur GovernanceOverview 24
BOARD OF DIRECTORS
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
Andrew Benitz
Chief Executive Officer
Ron Lansdell
Chief Operating Officer
Marcus Stanton has extensive
experience in the oil & gas and banking
industries and has been a Non-
Executive Director of a number of AIM
quoted companies over the past 20
years, including Velosi Group Limited
(international oil and gas services),
Cardinal Resources plc (oil and gas E&P)
and chairman of JOG since 2015. Marcus
qualified as a Chartered Accountant at
Arthur Andersen, where he worked in
the oil and gas division. Previously held
banking roles include Chief Operating
Officer of Global Capital Markets, Robert
Fleming & Co. and Director, Corporate
Finance, at Hill Samuel & Co. Marcus
also provides expert evidence on
banking transactions, both in the UK and
overseas. 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.
Marcus keeps his skill set up to date
through meetings with chairmen
of other AIM listed companies,
membership of the Quoted Companies
Alliance, attendance at North Sea oil and
gas industry events and the continued
professional development requirements
of the Institute of Chartered Accountants
in England and Wales and the Chartered
Institute for Securities and Investment.
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 (Honours).
Andrew keeps his skill set up to
date through regular meetings with
other oil and gas executives, regular
communication with financial advisers
and attendance at North Sea oil and gas
industry events.
Ron Lansdell is Chief Operating Officer
and a founder director of Jersey Oil
and Gas. 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, Faroes and Ireland. He 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.
Ron 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. He is a
member of the IOD, PESGB and a Fellow
of The Geological Society. Through
his Society and Institute memberships,
Ron keeps himself regularly updated on
technical commercial and governance
issues.
Annual Report for the year ended 31 December 2019 25
Vicary Gibbs
Chief Financial Officer
Frank Moxon
Non-Executive Director
Vicary Gibbs is a corporate financier
with over 20 years’ experience advising
oil and gas companies. He began his
career at Robert Fleming & Co. in their
London oil and gas team. During his
career he subsequently worked for a
variety of different Investment Banks’ oil
and gas teams including Deutsche Bank
(London and Houston), Bank of America,
Hawkpoint and BMO Capital Markets.
Vicary’s extensive experience includes
a multitude of sell-side and buy-side
asset and corporate M&A deals, strategic
advisory, restructuring, privatisation and
capital raising transactions. Vicary has a
BA in Business Administration.
Vicary keeps his skill set up to date
through regular meetings with other oil
and gas executives, attendance at North
Sea oil and gas industry events and
through attendance at workshops and
on courses run by leading accountancy
and legal firms.
Frank Moxon has over 30 years’
experience as a corporate financier and
financial adviser to companies, from
start-ups to over £3bn in size, in a wide
range of industry sectors. However, he
has specialised for over 20 years in oil &
gas and mining. He has held a number
of senior management roles within
the financial services industry and, in
addition to being senior independent
director at Cove Energy Plc, has been a
director of various oil & gas and mining
companies listed in London, Australia
and Canada. Frank is currently also a
non-executive director of AIM-quoted
Harvest Minerals Ltd and of East of
England Co-operative Society. He has
a BSc in Economics and is a Chartered
Honorary Fellow of the Chartered
Institute for Securities & Investment, a
Fellow of the Energy Institute and of
the Institute of Materials, Minerals &
Mining and a member of the Petroleum
Exploration Society of Great Britain.
He is chairman of the Jersey Oil and
Gas plc Remuneration and Nomination
Committees and a member of its Audit
Committee.
Frank keeps his skill set up to date
through attendance at North Sea oil and
gas industry and Quoted Companies
Alliance events and satisfaction of the
continuing professional development
requirements of the Energy Institute, the
Institute of Materials, Minerals and Mining
(which has an oil & gas division) and
the Chartered Institute for Securities &
Investment.
Annual Report for the year ended 31 December 2019Strategic ReportOur FinancialsOur GovernanceOverview 26
CORPORATE GOVERNANCE REPORT
Introduction
The Board of Jersey Oil and Gas plc
(‘JOG’, the ‘Company’ or the ‘Group’),
believes that a sound corporate
governance policy, involving a
transparent set of procedures and
practices, is an essential ingredient to the
Company’s success both in the medium
and long term. The application of these
policies enables key decisions to be
made by the Board as a whole, and for
the Company to function in a manner
that takes into account all stakeholders
in the Group, including employees,
shareholders, suppliers, business partners
and regulators.
As a company quoted on AIM, JOG
is also required to comply with a
recognised corporate governance code.
At the current stage of the Company’s
development, the Board believes it
appropriate for the Group to comply
with the QCA Corporate Governance
Code (the ‘QCA Code’), which is a code
designed for growing companies and
provides an effective and proportionate
governance framework that is reflective
of the Group’s culture and values.
The Chairman of the Board has the
responsibility to ensure these policies
and procedures are in place and operate
effectively.
The Board of Directors
The Board is the main decision-making
body of the Group, being responsible for:
a) the overall direction and strategy of
the Group; b) monitoring performance;
c) understanding risk; and d) reviewing
controls. It is collectively responsible for
the success of the Group.
The Board of Directors currently
comprises a Non-Executive Chairman, a
Chief Executive Officer, a Chief Operating
Officer, a Chief Financial Officer and
one other Non-Executive Director. The
respective skills that each brings to the
Board are listed in the following section.
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 primarily effected
through regular Board meetings as well
as contact with other Board members
and interested parties between
Board meetings. The Chairman is also
responsible for the establishment of
sound corporate governance principles
and practices.
The Chief Executive Officer is responsible
for the day-to-day running of the Group’s
operations 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 Directors.
The Chief Operating Officer is
responsible for: a) the licence-
related activities of the Group; b) the
development of our Environmental,
Social and Corporate Governance
policies and activities; c) maintaining
and applying the Group’s Health, Safety,
Security and Environment (HSSE) Policy;
and d) in conjunction with the Chief
Financial Officer, the Group’s policies and
procedures relating to risk management.
The Chief Financial Officer is responsible
for the Company’s finances, in addition to
other aspects of the business, including
risk management, property matters,
insurance and human resources.
All of the Executive Directors are
employed under service contracts and
work full-time on the Company’s affairs.
The Non-Executive Directors work
part-time, for approximately four to six
full days each month, with additional
time commitments depending on new
Company developments as they arise.
The Board considers that both of the
Non-Executive Directors, Marcus Stanton
and Frank Moxon, are independent in
character and judgement. Although
both have shareholdings (acquired
with their own funds) and limited share
options (granted as part of the annual
remuneration process and approved by
the Board), the Board considers that this
does not impair their judgement.
At the end of each month the Chief
Executive briefs the Non-Executive
Directors on current development
activities.
There is a formal schedule of matters
specifically reserved for the Board, in
addition to the formal matters required
to be considered by the Board under
the Companies Act. This list includes
matters relating to: a) strategy and
policy; b) acquisition and divestment
proposals; c) approval of major capital
investments; d) risk management policy;
e) proposals from the Audit Committee,
the Remuneration Committee and the
Nomination Committee; f) significant
financing matters; and g) statutory
reporting to shareholders.
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 QCA Code recommends that
non-executive directors serve up to
a maximum of nine years, in order to
maintain their independence from the
executive members of the Board. In this
connection, Mr Stanton (Non-Executive
Chairman of JOG), was first appointed
a non-executive director of Trap Oil
in 2011 and took on the role of non-
executive Chairman in 2014, following the
departure of the then Chairman, Chief
Executive Officer and Chief Operating
Officer. Mr. Stanton was responsible
for the rationalisation of the Company’s
operations and the subsequent reverse
takeover by JOG in 2015. For corporate
governance purposes the Board of JOG
regards the nine year period relating to
Mr. Stanton as effectively commencing
with the acquisition of JOG and formation
of the enlarged Group on AIM (in
2015), which introduced a new Chief
Executive Officer, a new Chief Operating
Officer and a new set of controlling
Shareholders.
Post period end Dr Chris Haynes was
appointed as a Board adviser. Mr Haynes
is a non-executive director of Woodside
Petroleum Limited and Worley Limited.
Chris has a wealth of experience
gained from a 39-year career with the
Shell Group of Companies and their
affiliates where, in 2008, Chris assumed
responsibility for the delivery of Shell’s
major upstream projects worldwide. The
Board and the Company will benefit from
his oversight and advice.
The Board is assisted by Ian Farrelly, the
Company Secretary, whose services
are retained through a contract with
MSP Services, a company that provides
company secretarial and corporate
support services.
Annual Report for the year ended 31 December 2019 27
Board Effectiveness
The Board, as a whole, seeks to maintain an appropriate mix of experience, skills, personal qualities and capabilities in order to
deliver the strategy of the Company. As a small but growing company this presents its own challenges, with Board members taking
on responsibilities for dealing with corporate developments as and when opportunities, or problems, arise.
The Group currently undertakes an annual remuneration review, for all Directors and staff, in the last quarter of each year. For the
2019 year, a formal Board evaluation process was undertaken that was led by the Chairman, assisted by the Company Secretary.
Individual directors responded to a very detailed questionnaire covering numerous aspects of the effectiveness of the Board’s
performance as a unit, as well as that of its committees and the individual directors. The results of this questionnaire were compiled
into a formal report that was reviewed and discussed by the Board. Whilst the overall results of the report were encouraging in that
the consensus was that the Board, its committees and individual directors were felt to be performing well, a number of improvement
recommendations were made. These recommendations concerned how we measure the performance of the Company in the light
of our newly acquired licence interests, responding to cyber threats and how to improve information flows across the Board. These
improvement recommendations have now been implemented and/or are in the process of being put in place.
Board Committees
The Company operates an Audit Committee, a Remuneration Committee and a Nomination Committee, each comprised of Non-
Executive Directors.
Audit Committee
CHAIR: Marcus Stanton (Non-Executive Chairman) OTHER MEMBER: Frank Moxon (NED)
Both members of the Audit Committee are regarded as having recent and relevant financial expertise.
Under its terms of reference, the Audit Committee is required to meet at least twice a year, at which Executive Directors may
attend by invitation, and its responsibilities include:
• Monitoring the independence and objectivity of the Auditors;
• Reviewing and approving the external Auditors’ terms of engagement, scope of work, fees, the findings arising from the
external audit work and external audit performance;
• Monitoring the integrity of the Group’s published financial information;
• Reviewing the risk identification and risk management processes of the Group; and
• Reviewing the Group’s procedures to prevent bribery and corruption in addition to ensuring that appropriate
whistleblowing arrangements are in place.
Notes: Due to the current size of the business, it is not considered appropriate to have an internal audit function.
Remuneration Committee
CHAIR: Frank Moxon (NED) OTHER MEMBER: Marcus Stanton (Non-Executive Chairman)
Under its terms of reference, it is required to meet at least twice a year and its responsibilities include:
• Determining and agreeing with the Board the broad policy for the remuneration of the Executive Directors;
• Determining the individual remuneration package of each Executive Director;
• Reviewing all share incentive plans; and
• Recommending option grants for the Executive Directors and other employees, as considered appropriate.
No Director is involved in deciding their own remuneration. The Non-Executive Directors’ remuneration is decided by the
Executive Directors.
Nomination Committee
CHAIR: Frank Moxon (NED) OTHER MEMBER: Marcus Stanton (Non-Executive Chairman)
Under its terms of reference, it is required to meet at least twice a year and its responsibilities include:
• Evaluating the balance of skills, experience and diversity on the Board; and
• Approving candidates for Board vacancies, save for the appointment of the Chairman of the Board or the Chief Executive
Officer, which are matters for the whole Board.
Due to the size of the Company, no meetings of the Nomination Committee were held during 2019 as its functions have been
properly carried out as part of the work of the Remuneration Committee and the Board.
Annual Report for the year ended 31 December 2019Strategic ReportOur FinancialsOur GovernanceOverview 28
CORPORATE GOVERNANCE REPORT
Board and Committee Attendance in 2019
Held
Non-Executive Directors
M J Stanton
F H Moxon
Executive Directors
J A Benitz
R J Lansdell
V J Gibbs
7
7
7
7
7
Board
Attended
Audit Committee
Held
Attended
Remuneration Committee
Attended
Held
Nomination Committee
Attended
Held
7
7
7
7
7
2
2
–
–
–
2
2
–
–
–
5
5
–
–
–
5
5
–
–
–
–
–
–
–
–
–
–
–
–
–
Corporate Culture
The Board believes that long-term
success of the Company, based on our
business model, is underpinned by a
corporate culture that is based on ethical
values and behaviours.
We do this using certain rule-based
procedures (such as a formal Code of
Conduct) and, more importantly, by the
behavioural example of individual Board
members, particularly the Chief Executive
Officer, the Chief Operating Officer and
the Chief Financial Officer. These values,
which we seek to instil throughout the
Group, include integrity, respect, honesty
and transparency. As a small company,
these characteristics are far more visible
to staff than might otherwise be the case.
We also hold internal meetings at which
Directors and staff discuss matters, both
formally and informally.
The Company operates a well-defined
organisational structure through which
we seek to determine that these ethical
values and behaviours are recognised
and respected, in addition to which every
employee is aware of our established
whistleblowing procedures.
Internal Control
The Board is responsible for the Group’s
system of internal control and for regular
reviews of its effectiveness.
These internal procedures include:
a. Board approval for all policies,
procedures and significant projects;
b. a budgeting and planning process,
requiring approval by the Board,;
c.
the receipt of regular reports
covering the Company’s financial
affairs;
d. internal controls as articulated in
the Group’s Financial Reporting
Procedures; and
e. a review by the Audit Committee of
the draft annual and interim reports,
and the Company’s annual budget,
before being recommended to the
Board.
This system 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.
Risk Management
As for the previous year, given the current
size of the Company, it was considered
preferable for risk management to be the
responsibility of the Board as a whole,
rather than a sub-committee. As part of
this process, the Company’s Risk Register
is now formally maintained by the Chief
Operating Officer and presented at every
Board meeting.
Environmental, Social and
Governance
This is an area we have focused on, very
intently, during 2019 particularly as we
seek to develop our licence interests in
the Greater Buchan Area. Although this
is formally led by the Chief Operating
Officer, all of the Directors actively
contribute to these three key aspects of
how we run our business activities.
Further details of our activities in this
important part of our business are
included in our maiden Environmental,
Social and Governance report.
Annual Report for the year ended 31 December 2019 29
Ongoing Review of Corporate
Governance
We continue to review our corporate
governance policies and procedures,
particularly in the light of our
development of the Greater Buchan Area
and taking into account the new staff
employed by the Company to achieve
this. These corporate governance
policies and procedures will continue to
be reviewed as our business develops,
and/or in response to further regulatory
and other relevant guidance.
Marcus Stanton
Non-Executive Chairman
6 May 2020
Health & Safety
The Board firmly believes that Health,
Safety, Security and the Environment
(“HSSE”) is of the highest importance
to the Group and expects all Directors,
officers, managers, employees and
contractors to consider HSSE as part of
their normal duties and responsibilities.
The Board’s commitment to high HSSE
standards is set out in its HSSE Policy,
which is:
• Endorsed by the Board for
implementation by management,
staff, contractors, partners and
stakeholders; and
• Reviewed periodically and, where
appropriate, updated and reissued.
In addition, certain operational HSSE
goals were established by our joint
venture operator 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 provide visible
and active leadership within the Group
promoting a positive HSSE culture
and a common understanding of its
expectations.
The HSSE function is managed by the
Chief Operating Officer, who reports on
these matters to the Board regularly.
Relations with Shareholders
The Board considers that good
communication with Shareholders,
based on the mutual understanding of
objectives, is important. In addition to
the information included in the Group’s
Annual and Interim reports, there is
regular dialogue between the Board
(led by the Chief Executive Officer) and
Shareholders, in addition to required
public announcements. The Chief
Executive Officer and Chief Operating
Officer also give regular presentations to
investors, including one-to-one meetings
with major Shareholders during the
year, in addition to specific meetings
with Shareholders relating to major
transactions.
A constant and up-to-date information
flow is also maintained on the Group’s
website which contains all press
announcements and financial reports as
well as extensive operational information
on the Group’s activities.
The Board also encourages Shareholders
to participate in 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 for the Group.
This year, given Covid-19, there are
restrictions in place that prevent physical
attendance. Please see details relating to
this year’s AGM in the Notice of Meeting.
Annual Report for the year ended 31 December 2019Strategic ReportOur FinancialsOur GovernanceOverview 30
DIRECTORS’ REPORT
The Directors present their report together with the audited Group and Company
financial statements for the year ended 31 December 2019.
Results and Dividends
The Group’s loss for the year was £2.1m (2018: loss of £2.0m). The Directors do not
recommend the payment of a dividend (2018: 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 2019 were:
Directors’ interests
Non-Executive Directors
M J Stanton
F Moxon
Executive Directors
J A Benitz
R J Lansdell
S J Richardson Brown
(resigned 14/11/18)
V J Gibbs
(appointed 14/11/18)
As at 31 December 2019
1p Ordinary Shares
Options
Shares
As at 31 December 2018
1p Ordinary Shares
Options
Shares
70,000
84,935
101,570
55,000
39,192
84,935
81,570
40,000
627,142
1,000,000
430,000
430,000
627,142
925,000
360,000
360,000
–
250,000
21,391
250,000
16,500
190,000
4,447
150,000
Directors’ Third Party
Indemnity Provisions
The Company maintained during the
year 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 2019, 21,829,227 (2018:
21,829,227) ordinary shares of 1p each
were issued and fully paid. Each ordinary
share carries one vote.
fig 13 – Skellig Michael
Annual Report for the year ended 31 December 2019 31
Substantial Shareholders
At 31 December 2019, 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:
Hargreaves Lansdown Asset Mgt. 12.22%
Mr Richard Griffiths
Halifax Share Dealing
Interactive Investor
Mr RJ Lansdell
7.79%
6.82%
6.41%
4.58%
Legal & General Investment Mgt. 4.55%
Barclays Wealth
A J Bell Securities
SVM Asset Mgt.
Janus Henderson Investors
Share Centre Investment Mgt.
4.43%
4.16%
3.35%
3.21%
3.12%
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 2019,
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 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.
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. Further
to completion of the detailed studies in
connection with the GBA Concept Select
contracted work programmes, there
are currently no firm work commitments
on any of the Group’s licences, other
than ongoing Operator overheads
and licence fees. Other work that the
Company is undertaking in respect of
the GBA licences and surrounding areas
is modest relative to its current cash
reserves. The Company’s current cash
reserves are therefore expected to more
than exceed its estimated liabilities for
at least 12 months following the date of
issue of the financial statements. Based
on these circumstances, the Directors
have considered it appropriate to adopt
the going concern basis of accounting in
preparing the Company’s consolidated
financial statements.
Board Committees
Information on the Audit Committee,
Remuneration Committee and
Nomination Committee is included in the
Corporate Governance section, the Audit
Committee Report and the Remuneration
Report contained in 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 3 June 2020. Please see specific
details as stated in the Notice of Meeting.
On behalf of the Board
Vicary Gibbs
Chief Financial Officer
6 May 2020
Annual Report for the year ended 31 December 2019Strategic ReportOur FinancialsOur GovernanceOverview 32
AUDIT COMMITTEE REPORT
“
Our key work during 2019 and into the current year
has been to oversee the management of our cash
resources whilst building up a first class team of industry
professionals to develop the Greater Buchan Area.”
Marcus Stanton
Non-Executive Chairman
Introduction
This Audit Committee Report has been
prepared by the Audit Committee and
approved by the Board.
Membership and meetings held
The Audit Committee is chaired by
Marcus Stanton and its other member
is Frank Moxon (both Non-Executive
Directors). The Committee met twice
during 2019, linked to events in the
Company’s financial calendar. In order
to encourage greater understanding
and involvement in the work of the Audit
committee, the Chief Executive Officer,
the Chief Financial Officer and the Chief
Operating Officer attended each of these
meetings. The external audit partner also
attended the meeting held in connection
with the Company’s Report and Accounts
for the year ended 31 December 2018. In
addition, informal meetings of the Audit
Committee were held during the year.
Role of the Audit Committee
The Terms of Reference for the Audit
Committee, which have been prepared
in accordance with the QCA Code,
provide for the Committee’s main
responsibilities to include:
• Monitoring the independence and
objectivity of the Auditors,
• Reviewing and approving the external
auditor’s terms of engagement,
scope of work, fees, the findings
arising from the external audit work
and external audit performance,
• Monitoring the integrity of the
Group’s published financial
information,
• Reviewing the risk identification and
risk management processes of the
Group, and
• Reviewing the Group’s procedures
to prevent bribery and corruption in
addition to ensuring that appropriate
whistleblowing arrangements are in
place.
Internal Audit
Due to the current size of the Company
the audit committee obtain sufficient
oversight over the operations through
engagement with the Company and
attendance of board meetings. it is
therefore not considered appropriate to
have an internal audit function.
Key Areas of Focus
The Committee’s particular areas of focus
during the year were as follows:
• Review of the 2018 Annual Report
and the accounting for our licence
interests,
• Review of the interim results for the
six months ended 30 June 2019,
• Review of the 2020 cash budget and
beyond, including any impact from
Covid-19.
• The appointment of a new audit
partner at PwC, the previous audit
partner having served the maximum
term permitted under auditing
standards regarding independence
and objectivity,
The Committee also considered the
independence and objectivity of the
PwC audit function. No non-audit services
were provided during 2019 and with
Bruce Collins’s first year as Engagement
Leader due to the mandatory partner
rotation requirements the Committee is
of the view that PwC could continue to
be considered independent.
Management of Risk
As in previous years, it was decided to
continue with the Company practice
of the oversight of risk, and risk
management, being the responsibility of
the Board as a whole, rather than a sub-
committee. This is put into effect by the
preparation of a Risk Register, maintained
by the Chief Operating Officer, which is
presented and discussed at every Board
meeting.
Committee Evaluation
The performance and effectiveness of
the Committee has been reviewed as
part of an annual Board performance
evaluation process and the Committee
was considered to be operating
effectively.
Marcus Stanton
Non-Executive Chairman
6 May 2020
Annual Report for the year ended 31 December 2019 REMUNERATION REPORT
33
“
It was a transformational year. JOG is now a larger and
more complicated business than it was at the start of
2019.”
Frank Moxon
Chairman of the Remuneration Committee
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 2019 sets out the details
of the remuneration policy for the
Directors, describes its implementation
and discloses the amounts paid during
the year. The remuneration report has not
been audited.
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 five times
during 2019.
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”).
Performance of the
Company in 2019
During 2019, the Verbier appraisal well
(Licence P2170) did not produce its
anticipated result and JOG therefore
lowered its estimate of gross recoverable
resources for the Verbier discovery to
the lower end of the operator’s initial
2017 resource estimate of 25mmboe.
Nevertheless, it was a transformational
year for JOG as extensive work carried
out for much of 2018 and the first half of
2019 resulted in the award to it of four
licences in the GBA under the 31 SLR.
These awards, which include the Buchan
oil field, the J2 and Glenn discoveries
and several high potential exploration
prospects, all contiguous with Licence
P2170, are by far the most significant
event for JOG since its inception. As a
result, JOG’s discovered net recoverable
resources increased during the year
from circa 5 mmboe to 120 mmboe.
JOG has subsequently been working on
developing its interests in the GBA into
a major new area hub development
with an estimated value of $1.2 billion.
This has required an expansion of JOG’s
technical team and the management of
considerable external technical and other
project development expertise. Although
not yet reflected in its share price, JOG
is now a larger and more complicated
business that it was at the start of 2019.
Annual Report for the year ended 31 December 2019Strategic ReportOur FinancialsOur GovernanceOverview 34
REMUNERATION REPORT
Discretionary bonuses
A cash bonus award for performance
during 2019 was made to Executive
Directors and most staff at the end of
the year.
In the light of the progress the Company
made during the year, including the
successes of the 31st Supplementary
Offshore Licensing Round, the
Remuneration Committee recommended
annual bonuses of £100,000 each be
awarded to JA Benitz and RJ Lansdell,
and £60,000 to VJ Gibbs.
Share Option Plan
Under the terms of the Company’s
2016 Enterprise Management Incentive
and Unapproved Share Option Plan,
Directors and employees are eligible
for awards. EMI options are subject
to an aggregate limit of £3m 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.
Key activities for 2019
• Reviewed remuneration of Executive
Directors including recommending
increases in the salary levels of JA
Benitz, RJ Lansdell and VJ Gibbs
effective November 2019;
• Reviewed 2019 Company
performance and recommended
discretionary bonuses of 40% of
salary to JA Benitz and RJ Lansdell
and of 27% of salary to VJ Gibbs in
December 2019;
• Reviewed long-term incentives and
made recommendations for option
awards in January 2019 across the
Company (including to Executive
Directors);
• Approved the vesting of the third
tranche of share options granted in
April 2017 and the second tranche
of certain share options granted
in January 2018, the relevant
performance condition having been
deemed by the Committee to have
been met; and
• The Committee, advised and assisted
by the Company Secretary, reviewed
the relevant documentation for
the Company’s annual Board and
Committee evaluation process which
was subsequently completed in
January 2020.
Advisers
H2glenfern Limited (“h2glenfern”) were
appointed in 2017 to act as independent
adviser to the Committee. During
2019 h2glenfern carried out a review
of executive remuneration and share
awards, produced a salary benchmarking
report and updated their review towards
year end. 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 provided
no other services to the Company.
Basic salary
The basic salaries of Executive Directors
are normally determined by the
Committee around the end of each
year with any changes usually taking
effect from 1 January of the following
year (although in 2019 this was brought
forward to 1 November reflecting salary
levels historically well below those of
JOG’s peer group and a step change
in the Company’s operations following
its significant success in the 31 SLR).
Salaries are reviewed and adjusted taking
into account individual performance,
market factors and sector conditions.
The 2019 salary changes were effected
in the context of the need to recruit a
number of senior individuals to progress
the GBA project and to maintain an
appropriate differential in the salaries of
the Company’s lead executives.
The salaries of JA Benitz and RJ Lansdell
at 1 January 2019 were both £165,000.
Following the Committee’s review
of H2glenfern’s salary benchmarking
report these were increased by 52% in
November 2019 to £250,000 for both
individuals. The salary of VJ Gibbs at
1 January 2019 was £150,000. This was
increased by 47% in November 2019
to £220,000. The new salaries of JA
Benitz and RJ Lansdell were set within
the lower quartile of the salaries of lead
executives at companies included in the
benchmarking report. The new salary of
VJ Gibbs was set below the median level
for CFO roles
Benefits in kind and cash
equivalents
Benefits provided to Executive Directors
during the year comprised life and
income protection insurance and private
health insurance. JA Benitz, RJ Lansdell
and VJ Gibbs take an 8% cash alternative
to a 10% matching pension contribution
offering.
Annual Report for the year ended 31 December 2019 35
The following awards were made to Directors during 2019.
Director
Position
Date of Grant
Andrew Benitz
Chief Executive Officer
Ronald Lansdell
Chief Operating Officer
Vicary Gibbs
Chief Financial Officer
17/1/2019
17/1/2019
17/1/2019
Marcus Stanton
Non-Executive Chairman
17/1/2019
Frank Moxon
Non-Executive Director
17/1/2019
Number of
New Options
Granted
Exercise Price
Per Share
(pence) Exercise Period
Total Options
Held Following
This Grant
70,000
70,000
40,000
20,000
15,000
175
175
175
175
175
7 Years
7 years
7 years
5 years
5 years
430,000
430,000
190,000
101,570
55,000
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
J A Benitz
11.03.19
R J Lansdell
11.03.19
V J Gibbs
11.03.19
Unexpired term
Rolling contract
Rolling contract
Rolling contract
Notice period
12 months save that, in certain
circumstances (including
material changes to contract
terms or non-consensual
relocation), the Executive may
provide 30 days’ notice.
12 months save that, in certain
circumstances (including
material changes to contract
terms or non-consensual
relocation), the Executive may
provide 30 days’ notice.
12 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. During 2019, the fee for the Chairman was £55,000
and the annual fee for the Non-Executive Director was £35,000. In November 2019 these fees were increased to £65,000 and
£45,000 respectively.
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
F H Moxon
11.03.19
Rolling contract
3 months
Loss of office compensation
No
M J Stanton
11.03.19
Rolling contract
3 months
No
Annual Report for the year ended 31 December 2019Strategic ReportOur FinancialsOur GovernanceOverview 36
REMUNERATION REPORT
Directors’ Emoluments
Presented in £’000
Executive Directors
J A Benitz
R J Lansdell
S J Richardson Brown
(resigned 14.11.18)
V J Gibbs
(appointed 14.11.18)
Non-Executive Directors
M J Stanton
F H Moxon
Total Directors
Year ended 31 December 2019
Year ended 31 December 2018
Salary1
or fees Pension Benefits
Bonus
Total
Salary1
or fees
Pension Benefits
Bonus
Total
194
194
–
175
563
57
36
93
656
–
–
–
–
–
–
1
1
1
2
7
–
4
13
–
–
–
13
100
100
–
60
260
–
–
–
260
296
301
–
239
836
57
37
94
930
158
162
115
22
457
50
30
80
537
8
–
17
–
25
–
–
–
25
1
–
2
–
3
–
–
–
3
10
10
–
–
20
–
–
–
20
177
172
134
22
505
50
30
80
585
1.
Salary includes an 8% cash contribution as an alternative to a matching 10% pension contribution if elected.
Options held by Directors serving at 31 December 2019 are set out below.
At 1 Jan
2018
’000s
Issued
’000s
Exercised
’000s
Lapsed
’000s
At 31 Dec
2018
’000s
Issued
’000s
Exercised
’000s
Lapsed
’000s
At 31 Dec
2019
’000s
Executive Directors
J A Benitz
At 110.0p (note 1)
(exercisable by
29.11.21)
At 200.0p (note 2)
(exercisable by
29.01.25)
At 175.0p (note 6)
(exercisable by
17.01.26)
R J Lansdell
At 110.0p (note 1)
(exercisable by
29.11.21)
At 200.0p (note 2)
(exercisable by
29.01.25)
At 175.0p (note 6)
(exercisable by
17.01.26)
V J Gibbs
(appointed 14.11.18)
At 172.0p (note 4)
(exercisable by
14.11.25)
At 175.0p (note 6)
(exercisable by
17.01.26)
180
–
–
180
180
–
–
180
–
–
–
180
–
180
–
180
–
180
150
–
150
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
180
180
–
360
180
180
–
360
150
–
150
–
–
70
70
–
–
70
70
–
40
40
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
180
180
70
430
180
180
70
430
150
40
190
Annual Report for the year ended 31 December 2019 37
At 1 Jan
2018
’000s
Issued
’000s
Exercised
’000s
Lapsed
’000s
At 31 Dec
2018
’000s
Issued
’000s
Exercised
’000s
Lapsed
’000s
At 31 Dec
2019
’000s
Non-Executive Directors
M J Stanton
At 4,300.0p (note 5)
(exercisable by
12.03.21)
At 110.0p (note 1)
(exercisable by
29.11.21)
At 200.0p (note 3)
(exercisable by
29.01.23)
At 175.0p (note 7)
(exercisable by
17.01.24)
F H Moxon
At 110.0p (note 1)
(exercisable by
29.11.21)
At 200.0p (note 3)
(exercisable by
29.01.23)
At 175.0p (note 7)
(exercisable by
17.01.24)
Total
2
40
–
–
42
20
–
–
–
40
–
40
–
20
–
20
422
–
20
570
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2
40
40
–
82
20
20
–
40
992
–
–
–
20
20
–
–
15
15
215
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2
40
40
20
102
20
20
15
55
1,207
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
on 29 November 2018. 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 29 January 2018 under the Share
Option Plan. Options vest entirely on the third
anniversary of their date of grant subject to
satisfaction of certain performance conditions.
Subject to vesting, the Share Options are
exercisable at any time up to 29 January 2025
and if not exercised by that date will lapse.
5. 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.
6. Granted on 17 January 2019 under the Share
Option Plan. Options vest in three equal
tranches (one, two and three years from the
date of grant) and are subject to the satisfaction
of certain performance conditions to be
determined and interpreted at the discretion of
the Remuneration Committee. Subject to vesting
and such performance conditions being met,
these options are exercisable for up to seven
years from their date of grant and will lapse if not
exercised by such date.
Shareholder feedback
The objective of this report is to
communicate the remuneration 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.
3. Granted on 29 January 2018 under the Share
7. Granted on 17 January 2019 under the Share
Option Plan. Options vest entirely on the third
anniversary of their date of grant and have no
performance conditions. Subject to vesting, the
Share Options are exercisable at any time up to
29 January 2023 and if not exercised by that date
will lapse.
Option Plan. Options vest in three equal tranches
(one, two and three years from the date of
grant) and have no performance conditions.
Subject to vesting, these options are exercisable
for up to five years from their date of grant and
will lapse if not exercised by such date.
Frank Moxon
Chairman of the Remuneration
Committee
6 May 2020
4. Granted on 14 November 2018 under the Share
Option Plan. Options vest entirely on the third
anniversary of their date of grant subject to
satisfaction of certain performance conditions.
Subject to vesting, the Share Options are
exercisable at any time up to 14 November 2025
and if not exercised by that date will lapse.
Annual Report for the year ended 31 December 2019Strategic ReportOur FinancialsOur GovernanceOverview 38
DIRECTORS’ RESPONSIBILITIES
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 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.
The Directors are also 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.
Vicary Gibbs
Chief Financial Officer
6 May 2020
Statement of Directors’
Responsibilities in Respect
of the Financial Statements
The Directors of Jersey Oil and Gas
plc (“Directors”) (the “Company”) 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 for the Company together
with its subsidiaries, (the “Group”). Under
that law, the Directors have prepared
financial statements for the Group
and Company, each 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
and Company financial statements,
subject to any material departures
disclosed and explained in such
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.
Annual Report for the year ended 31 December 2019 INDEPENDENT AUDITORS’ REPORT
to the members of Jersey Oil and Gas Plc
39
Report on the audit of the 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 2019 and of the group’s loss
and the group’s and the company’s cash flows for the year then ended;
• have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the
European Union and, as 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, which comprise: the Consolidated and Company
statements of financial position as at 31 December 2019; the Consolidated statement of comprehensive income, the Consolidated
and Company statements of cash flows, and the Consolidated and 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: £231,000 (2018: £242,000), based on 1% of total assets.
• Overall company materiality: £225,000 (2018: £239,500), based on an allocation of
Materiality
group materiality.
Audit Scope
Key
Audit
Matters
• We have performed a full scope audit of Jersey Petroleum Limited, the component which
holds all licenses held by the group, and the plc entity. Both components were selected due
to their size and risk.
• 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 opinion.
• Going Concern.
•
Impact of COVID-19 on the financial statements.
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.
Annual Report for the year ended 31 December 2019Strategic ReportOur FinancialsOur GovernanceOverview
40
INDEPENDENT AUDITORS’ REPORT
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.
Key audit matter
Going Concern
At 31 December 2019 the group holds £12.3 million of cash
and cash equivalents. Given the group does not generate
any revenue and currently has no financing facilities, there is
a risk that the cash held is not sufficient to meet the group’s
estimated liabilities for a period of at least 12 months after the
date of the financial statements.
Under accounting standards the Directors’ are required to
make an assessment on whether the Company can continue
as a going concern for at least 12 months after the date of the
financial statements. Please refer to note 2 in the consolidated
financial statements for management’s conclusions regarding
going concern.
This key audit matter relates to both the group and the
company financial statements.
Impact of COVID-19 on the Financial Statements
During the course of the audit both management and the
group engagement team have considered the impact that the
ongoing COVID-19 pandemic has had on the groups’ activities,
the financial statements and the oil price environment.
The group’s assessment has concluded that there is minimal
impact to current activities as the group can continue to
work towards concept select remotely. However, due to the
significance of the pandemic the group has concluded it is
appropriate to disclose the impact as a non-adjusting post
balance sheet event in the financial statements.
As a result of the impact of the pandemic on the wider
financial markets and economic environment, we have
determined that the impact of COVID-19 should be a key audit
matter.
This key audit matter relates to both the group and the
company financial statements.
How our audit addressed the key audit matter
We performed the following procedures to address the risk:
• We obtained and challenged management’s future
budgets and cash flows that underpin the going concern
assessment, corroborating committed costs to underlying
support and challenging the reasonableness of baseline
operating costs, including the impact of COVID-19.
• We held discussions with both finance and operational
management regarding the future development plans.
• We challenged management’s downside scenarios
incorporated into their going concern assessment, which
incorporates a plausible but unlikely overspend prior to
additional financing being obtained. We concluded that in
their plausible downside scenario the group will continue
to have sufficient cash reserves for at least 12 months after
the date of approval of the financial statements.
Please refer to the “Conclusions relating to going concern”
paragraph below for our conclusions on this matter.
We performed the following procedures to address the
impact that COVID-19 has on the financial statements:
• We held discussions with senior management about the
impact this has on the Greater Buchan Area development
plan.
• We considered the impact that COVID-19 may have on
the carrying value of assets, concluding that despite
the reduction in oil price post year end, management’s
assessment was conducted in accordance with IAS 36
Impairment of assets and is based on oil price assumptions
as at 31 December 2019.
• We considered the impact COVID-19 has on
management’s going concern assessment. This includes
consideration of the impact of the resulting drop in oil
price. Given the group does not plan to achieve first
oil until 2025, we concur with management’s view that
sensitivities at current oil prices would not be appropriate.
We concluded that management’s assessment on the impact
of COVID-19 on the financial statements is reasonable, and the
disclosure in note 23 of the financial statements as a non-
adjusting post balance sheet event is reasonable.
Annual Report for the year ended 31 December 2019 41
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.
The group financial statements are a consolidation of four components. Additionally there are three dormant subsidiaries which do
not significantly impact the group consolidated position.
In establishing the overall approach for the group audit, we determined the type of work that needed to be performed over the
components. We identified two financially significant components (Jersey Oil & Gas plc and Jersey Petroleum Limited) that, in our
view, required full scope audits due to their relative size in the group. The audit of these full scope components was performed by
the group engagement team.
Together, the full scope components scoped into our audit included 99% of the consolidated total assets of the group.
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:
Overall
materiality
Group financial statements
Company financial statements
£231,000 (2018: £242,000).
£225,000 (2018: £239,500).
How we determined it
1% of total assets.
Allocation of group materiality.
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. This is based on users of the financial
statements focusing on the recoverable
value of assets on the balance sheet and the
cash balance as this is what will fund future
development.
The allocation reflects the Company’s relative
contribution to the Group’s total assets capped
at overall Group materiality.
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 £50,000 and £225,000. 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 £11,550
(Group audit) (2018: £12,100) and £11,550 (Company audit) (2018: £11,975) 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 where:
•
•
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.
Annual Report for the year ended 31 December 2019Strategic ReportOur FinancialsOur GovernanceOverview 42
INDEPENDENT AUDITORS’ REPORT
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 Directors’ Report, 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 Directors’
Report for the year ended 31 December 2019 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 Directors’ Report.
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 in Respect of the Financial Statements, 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 the audit of the financial statements is located on the FRC’s website at: www.frc.org.
uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Annual Report for the year ended 31 December 2019 43
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.
Bruce Collins
(Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Aberdeen
6 May 2020
Annual Report for the year ended 31 December 2019Strategic ReportOur FinancialsOur GovernanceOverview 44
OUR
FINANCIALS
Fig 14 – Little Skellig and Skellig Michael
Annual Report for the year ended 31 December 2019 OUR
FINANCIALS
45
Consolidated Statement of
Comprehensive Income
Consolidated Statement of
Financial Position
Consolidated Statement of
Changes in Equity
Consolidated Statement of
Cash Flows
Notes to the Consolidated
Financial Statements
Company Statement of
Financial Position
Company Statement of
Changes in Equity
Company Statement of Cash
Flows
Notes to the Company
Financial Statements
Glossary
46
47
48
48
49
63
64
64
65
69
Annual Report for the year ended 31 December 2019Strategic ReportOur GovernanceOur FinancialsOverview 46
CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
for the year ended 31 December 2019
Revenue
Cost of sales
Gross loss
Other income
Loss on sale of assets
Administrative expenses
Operating loss
Finance income
Finance expense
Loss before tax
Tax
Loss for the year
Total comprehensive loss for the year
Total comprehensive loss for the year attributable to:
Owners of the parent
Loss per share expressed in pence per share:
Basic
Diluted
The total comprehensive loss for the year was derived wholly from continuing operations.
Note
3
6
7
7
8
9
10
10
2019
£
–
(666,053)
(666,053)
750,000
(17,975)
(2,237,429)
(2,171,457)
106,867
(419)
(2,065,009)
–
(2,065,009)
(2,065,009)
2018
£
–
(609,925)
(609,925)
12,037
–
(1,447,383)
(2,045,271)
48,971
–
(1,996,300)
–
(1,996,300)
(1,996,300)
(2,065,009)
(1,996,300)
(9.46)
(9.46)
(9.15)
(9.15)
Annual Report for the year ended 31 December 2019 CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 December 2019
47
Non-current assets
Intangible assets
Property, plant and equipment
Right-of-use assets
Deposits
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
Non-current liabilities
Lease liabilities
Current liabilities
Trade and other payables
Lease liabilities
Total liabilities
Total equity and liabilities
Note
2019
£
2018
£
11
12
13
14
15
16
20
18
17
13
10,092,564
13,661
164,125
28,420
10,298,770
428,310
12,318,536
12,746,846
23,045,616
4,306,589
30,264
–
–
4,336,853
80,594
19,782,511
19,863,105
24,199,958
2,466,144
93,851,526
1,928,099
(75,727,888)
(382,543)
22,135,338
2,466,144
93,851,526
1,491,019
(73,662,879)
(382,543)
23,763,267
154,208
154,208
742,166
13,904
756,070
910,278
23,045,616
–
–
436,691
–
436,691
436,691
24,199,958
The financial statements on pages 46 to 48 were approved by the Board of Directors and authorised for issue on 6 May 2020.
They were signed on its behalf by Vicary Gibbs – Chief Financial Officer.
Vicary Gibbs
Chief Financial Officer
6 May 2020
Company Registration Number: 07503957
Annual Report for the year ended 31 December 2019Strategic ReportOur GovernanceOur FinancialsOverview 48
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2019
At 1 January 2018
Loss and total comprehensive
loss for the year
Share-based payments
At 31 December 2018 and 1 January 2019
Loss and total comprehensive
loss for the year
Share-based payments
At 31 December 2019
Called
up share
capital
£
2,466,144
Share
premium
account
£
93,851,526
Share
options
reserve
£
1,231,055
Accumulated
losses
£
(71,666,579)
Reorganisation
reserve
£
(382,543)
Total
equity
£
25,499,603
–
–
2,466,144
–
–
93,851,526
(1,996,300)
–
–
259,964
1,491,019 (73,662,879)
–
–
–
–
2,466,144 93,851,526
–
437,080
(2,065,009)
–
1,928,099 (75,727,888)
–
–
(382,543)
–
–
(382,543)
(1,996,300)
259,964
23,763,267
(2,065,009)
437,080
22,135,338
The following describes the nature and purpose of each reserve within owners’ equity:
Reserve
Called up share capital
Share premium account
Share options reserve
Accumulated losses
Reorganisation reserve
Description and purpose
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 accumulated deficit in respect of options exercised
or cancelled/lapsed
Cumulative net gains and losses recognised in the Consolidated Statement of Comprehensive Income
Amounts resulting from the restructuring of the Group at the time of the Initial Public Offering (IPO) in 2011
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December 2019
Cash flows from operating activities
Cash used in operations
Net interest received
Net interest paid
Net cash used in operating activities
Cash flows from investing activities
Proceeds on sale of tangible assets
Purchase of intangible assets
Purchase of tangible assets
Net cash used in investing activities
Net cash generated from financing activities
Decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Note
2019
£
2018
£
22
7
7
11
12
22
22
22
(1,769,004)
106,867
(419)
(1,662,556)
3,603
(5,785,975)
(19,047)
(5,801,419)
–
(7,463,975)
19,782,511
12,318,536
(2,698,361)
48,971
–
(2,649,390)
–
(2,948,630)
(34,879)
(2,983,509)
–
(5,632,899)
25,415,410
19,782,511
Annual Report for the year ended 31 December 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2019
49
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 at least
12 months after the issue of these financial statements. Further to completion of the detailed studies in connection with the GBA
Concept Select contracted work programmes, there are currently no firm work commitments on any of the Group’s licences, other
than ongoing Operator overheads and licence fees. Other work that the Company is undertaking in respect of the GBA licences
and surrounding areas is modest relative to its current cash reserves. The Company’s current cash reserves are therefore expected
to more than exceed its estimated liabilities for at least 12 months following the date of issue of the financial statements. Based on
these circumstances, the Directors have considered it appropriate to adopt the going concern basis of accounting in preparing the
Company’s consolidated financial statements.
Changes in Accounting Policies and Disclosures
(a) New and amended standards adopted by the Company:
At the start of the year the following standards were adopted:
•
IFRS 16, ‘Leases’;
• Prepayment Features with Negative Compensation – Amendments to IFRS 9;
•
Long-term Interests in Associates and Joint Ventures – Amendments to IAS 28;
• Annual Improvements to IFRS Standards 2015–2017 Cycle;
• Plan Amendment, Curtailment or Settlement – Amendments to IAS 19; and
•
Interpretation 23 ‘Uncertainty over Income Tax Treatments’.
The Group had to change its accounting policies as a result of adopting IFRS 16. From 1 January 2019, leases are recognised as a
right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. The Group
adopted the practical expedient available to not apply IFRS 16 to leases less than £5,000 in value or less than 12 month in lease
term. The other amendments listed above did not have any impact on the amounts recognised in prior periods. At 1 January 2019
the Group had no lease arrangements applicable for IFRS 16 so no transition adjustment was recognised.
(b) Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2019
reporting periods and have not been early adopted by the Group. These standards are not expected to have a material impact on
the entity in the current or future reporting periods and on foreseeable future transactions.
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 assessment of the existence of impairment triggers (note 11).
• 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 fair value
less costs of disposal calculations. There were no impairment triggers in 2019 and no impairment charge has been recorded.
Annual Report for the year ended 31 December 2019Strategic ReportOur GovernanceOur FinancialsOverview 50
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2019
2. Significant accounting policies continued
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 £437,080 (2018: £259,964). 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 mid-point between vesting and expiring. The share price volatility used in the calculation is based on the actual
volatility of the Company’s shares, since 1 January 2017. 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.
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% 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 remeasured 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 are 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 remeasured, 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 remeasured 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.
Annual Report for the year ended 31 December 2019 51
2. Significant accounting policies continued
Acquisitions, Asset Purchases and Disposals
Acquisitions of oil and gas properties are accounted for under the purchase method where the acquisitions meet 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. The purchase consideration is allocated to the assets and liabilities
purchased on an appropriate basis. Proceeds on disposal (including farm-ins/farm-outs) 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.
Exploration and Evaluation Costs
The Group accounts for oil and gas 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. The
Group only capitalises costs as intangible assets once the legal right to explore an area has been obtained. The Group assesses the
intangible assets for indicators of impairment at each reporting date.
Potential indicators of impairment include but are not limited to:
a.
the period for which the Group has the right to explore in the specific area has expired during the period or will expire in the
near future, and is not expected to be renewed.
b. substantive expenditure on further exploration for and evaluation of oil and gas reserves in the specific area is neither
budgeted nor planned.
c. exploration for and evaluation of oil and gas reserves in the specific area have not led to the discovery of commercially viable
quantities of oil and gas reserves and the entity has decided to discontinue such activities in the specific area.
d. sufficient data exist to indicate that, although a development in the specific area is likely to proceed, the carrying amount of the
exploration and evaluation asset is unlikely to be recovered in full from successful development or by sale.
In the event an impairment trigger is identified the Group performs a full impairment test for the asset under the requirements of
IAS 36 Impairment of assets. An impairment loss is recognised for the amount by which the exploration and evaluation assets’
carrying amount exceeds their recoverable amount. The recoverable amount is the higher of the exploration and evaluation assets’
fair value less costs to sell and their value in use.
Cost of Sales
Within the statement of comprehensive income, costs directly associated with generating revenue are included in cost of sales.
The Group only capitalises costs as intangible assets once the legal right to explore an area has been obtained, any costs incurred
prior to the date of acquisition are recognised as cost of sales within the Statement of Comprehensive Income.
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
Leases
Until this financial year, leases of property, plant and equipment were classified as either finance leases or operating leases. From
1 January 2019, leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is
available for use by the Group.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value
of the following lease payments:
•
fixed payments (including in-substance fixed payments), less any lease incentives receivable;
• variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the commencement
date;
• amounts expected to be payable by the Group under residual value guarantees;
•
the exercise price of a purchase option if the Group is reasonably certain to exercise that option; and
• payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option.
Annual Report for the year ended 31 December 2019Strategic ReportOur GovernanceOur FinancialsOverview 52
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2019
2. Significant accounting policies continued
Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is
generally the case for leases in the Group, the lessee’s incremental borrowing rate is used, being the rate that the individual lessee
would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic
environment with similar terms, security and conditions.
To determine the incremental borrowing rate, the Group where possible, uses recent third-party financing received by the
individual lessee as a starting point, adjusted to reflect changes in financing conditions since third party financing was received.
Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease
period to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Right-of-use assets are measured at cost comprising the following:
•
the amount of the initial measurement of lease liability;
• any lease payments made at or before the commencement date less any lease incentives received;
• any initial direct costs; and
•
restoration costs.
Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis.
If the Group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset’s
useful life.
Payments associated with short-term leases of equipment and vehicles and all leases of low-value assets are recognised on a
straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value
assets comprise any lease with a value of £5,000 or less.
Joint Ventures
The Group participates in joint venture/operation agreements with strategic partners. 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 any expected credit loss. The Company recognises an allowance for expected credit losses (ECLs) for all debt
instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due
in accordance with the contract and all the cash flows that the Company expects to receive, discounted at an approximation of
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.
Annual Report for the year ended 31 December 2019 53
2. Significant accounting policies continued
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.
Foreign Currencies
The functional currency of the Group is Sterling. 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.
Other Income
Other income relates to proceeds received from settlements and is only recognised in the statement of comprehensive income
when it is virtually certain the economic benefits will flow to the Group.
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.
3. Segmental reporting
Segmental Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the Board of Directors.
The Board considers 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.
The Board is the Group’s chief operating decision maker within the meaning of IFRS 8 “Operating Segments”.
During 2019 and 2018 the Group had no turnover. During the 2019 year the Group did receive £750,000 from TEPUK in relation to
TEPUK’s termination of its 2013 farm-in to licence P2032 (Blocks 21/8c, 21/9c, 21/10c, 21/14a and 21/15b), which has been recognised in
the Income Statement as Other Income. (2018: £12,037) from carried cost reimbursements from co-venturers which is also shown in
Other Income.
Annual Report for the year ended 31 December 2019Strategic ReportOur GovernanceOur FinancialsOverview 54
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2019
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 it 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-venturers 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
creditworthiness of our partners.
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 needs on the basis of suitability of the type of capital available at a given stage to the quantum
required for that stage of its asset base. Earlier stage assets (pre-production) typically require equity rather than debt given the
absence of cash flow to service debt. As the asset mix becomes biased to production then typically more debt is available.
The Group seeks to maintain progress in developing its assets in a timely fashion. Given the Group’s current cash position is
insufficient to progress its assets to first oil it will be seeking to bring an industry partner into its assets in return for a capital (equity)
contribution. This may be in the form of either cash or payment of some or all the Group’s development expenditures. As the
development progresses towards first oil, debt becomes available and will be sought in order to enhance equity returns. JOG’s
debt today is nil.
The Group monitors its capital structure by reference to 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 borrowings less cash and cash equivalents. Total equity comprises all components
of equity.
The ratio of net debt to equity as at 31 December 2019 is Nil (2018: 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
2019
£
439,014
10,704
171,137
620,855
2019
£
718,614
1,274
165,574
885,462
2018
£
80,595
–
–
80,595
2018
£
436,691
–
–
436,691
Annual Report for the year ended 31 December 2019 5. Employees and Directors
Wages and salaries
Social security costs
Share-based payments (note 20)
Other pensions costs
55
2019
£
1,519,588
138,859
437,080
31,462
2,126,989
2018
£
956,915
76,119
259,964
66,984
1,359,982
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 – Finance
Employees – Technical
Directors’ remuneration
Directors’ pension contributions to money purchase schemes
Benefits
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
Share-based payments
Pension contributions
2019
£
5
1
5
11
2019
£
914,933
1,012
13,108
929,053
2019
£
1
2019
£
300,500
40,810
–
341,310
2018
£
5
1
5
11
2018
£
557,341
24,702
2,992
585,035
2018
£
2
2018
£
167,800
54,088
7,500
229,388
The Directors did not exercise any share options during the year.
Key management compensation
Key management includes Directors (Executive and Non-Executive) and the Company Secretary in 2018. In 2019 the Company
secretarial services were outsourced following the retirement of this employee at the end of January 2019. 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
Settlement agreement with Total E&P UK Limited
Carried costs reimbursement
2019
£
917,183
371,449
1,262
1,289,894
2019
£
750,000
–
750,000
2018
£
584,341
118,423
30,702
733,466
2018
£
–
12,037
12,037
Carried costs reimbursement: Reimbursement of well-related costs received as a result of a carried interest arrangement.
Settlement agreement with Total E&P UK Limited: Funds received from TEPUK in relation to TEPUK’s termination of its 2013 farm-in to
Licence P2032 (Blocks 21/8c, 21/9c, 21/10c, 21/14a and 21/15b), received in May 2019.
Annual Report for the year ended 31 December 2019Strategic ReportOur GovernanceOur FinancialsOverview 56
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2019
7. Net Finance Income
Finance income:
Interest received
Finance costs:
Net finance income
8. Loss before tax
The loss before tax is stated after charging/(crediting):
Depreciation tangible assets
Depreciation right-of-use asset
Auditors’ remuneration – audit of parent company and consolidation
Auditors’ remuneration – audit of subsidiaries
Auditors’ remuneration – non-audit work
Foreign exchange (gain)/loss
9. Tax
Reconciliation of tax charge
Loss before tax
Tax at the domestic rate of 19% (2018: 19%)
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
2019
£
106,867
106,867
(419)
106,448
2019
£
14,067
3,568
51,800
18,700
–
(2,722)
2018
£
48,971
48,971
–
48,971
2018
£
4,615
–
35,000
12,500
8,700
9,678
2019
£
(2,065,009)
(392,352)
(1,121,121)
110,834
1,402,639
–
2018
£
(1,996,300)
(379,297)
(589,363)
51,292
917,368
–
No liability to UK corporation tax arose on ordinary activities for the year ended 31 December 2019 or for the year ended 31
December 2018.
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 usable tax losses within the Group were approximately £39m.
10. Loss per share
Basic loss per share is calculated by dividing the losses attributable to ordinary Shareholders by the weighted average number of
ordinary shares outstanding during the year.
Diluted loss per share is calculated using the weighted average number of shares adjusted to assume the conversion of all dilutive
potential ordinary shares.
Year ended 31 December 2019
Basic and Diluted EPS
Basic and Diluted
Year ended 31 December 2018
Basic and Diluted EPS
Basic and Diluted
Loss attributable
to ordinary
shareholders
£
Weighted
average
number of
shares
Per share
amount
(pence)
(2,065,009)
21,829,227
(9.46)
(1,996,300)
21,829,227
(9.15)
Annual Report for the year ended 31 December 2019 11. Intangible assets
Cost
At 1 January 2018
Additions
At 31 December 2018
Additions
At 31 December 2019
Accumulated amortisation
At 1 January 2018
Charge for the year
Amortisation on disposal
At 31 December 2018
At 31 December 2019
Net book value
At 31 December 2019
At 31 December 2018
At 31 December 2017
57
Exploration
costs
£
1,533,200
2,948,630
4,481,830
5,785,975
10,267,805
175,241
–
–
175,241
175,241
10,092,564
4,306,589
1,357,959
During 2019, the Group retained an 18% equity interest in licence P2170 (Verbier) and was awarded three additional licences with
100% working interests in the OGA’s 31 SLR, Licence P2498 (Buchan and J2), Licence P2499 (Glenn) and Licence P2497 (Zermatt).
In line with the requirements of IFRS 6, we have considered whether there are any indicators of impairment on the exploration and
development assets. Based on our assessment, as at 31 December 2019 there are not deemed to be indicators that the licences are
not commercial and the carrying value of £10,092,564 continues to be supported by ongoing exploration work on the licence area
with no further impairments considered necessary.
12. Property, plant and equipment
Cost
At 1 January 2018
Additions
At 31 December 2018
Additions
Disposals
At 31 December 2019
Accumulated Depreciation
At 1 January 2018
Charge for the year
At 31 December 2018
Charge for the year
Disposals
At 31 December 2019
Net book value
At 31 December 2019
At 31 December 2018
At 31 December 2017
Computer
and office
equipment
£
125,786
34,879
160,665
19,047
(36,130)
143,582
125,786
4,615
130,401
14,067
(14,547)
129,921
13,661
30,264
–
Annual Report for the year ended 31 December 2019Strategic ReportOur GovernanceOur FinancialsOverview 58
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2019
13. Leases
Amounts Recognised in the Statement of financial position
Right-of-use assets
Buildings
Equipment
Vehicles
Other
Lease liabilities
Current
Non-current
2019
£
164,125
–
–
–
164,125
13,904
154,208
168,112
2018
£
–
–
–
–
–
–
On adoption of IFRS 16, the Group recognised lease liabilities in relation to leases which had previously been classified as ‘operating
leases’ under the principles of IAS 17, ‘Leases’. These liabilities were measured at the present value of the remaining lease payments,
discounted using the lessee’s incremental borrowing rate as of 1 January 2019. The weighted average lessee’s incremental
borrowing rate applied to the lease liabilities on 1 January 2019 was 3%.
At 1 January 2019 the Group held no leases which required restating.
Amounts Recognised in the Statement of comprehensive income
Depreciation charge of right-of-use asset
Buildings
Equipment
Vehicles
Other
Interest expenses (included in finance cost)
14. Trade and other receivables
Current:
Trade receivables (net)
Other receivables
Value added tax
Prepayments
2019
£
3,568
–
–
–
3,568
(419)
2019
£
–
135,548
171,344
121,418
428,310
2018
£
–
–
–
–
–
–
2018
£
–
67
63,818
16,709
80,594
As at 31 December 2019 there were no trade receivables past due nor impaired. There are no expected credit losses recognised
on these balances.
Annual Report for the year ended 31 December 2019 59
15. Cash and cash equivalents
Unrestricted cash in bank accounts
Cash in 65-day notice bank accounts
The cash balances are placed with a creditworthy financial institution.
16. Called up share capital
Issued and fully paid:
21,829,227 (2018: 21,829,227)
17. Trade and other payables
Current:
Trade payables
Accrued expenses
Other payables
Taxation and Social Security
18. Non-current Liabilities
Non-current:
Lease liabilities
2019
£
4,318,536
8,000,000
12,318,536
2018
£
19,782,511
–
19,782,511
Class
Ordinary
Nominal
value
1p
2019
£
2,466,144
2018
£
2,466,144
2019
£
399,791
131,706
74,298
136,371
742,166
2019
£
154,208
154,208
2018
£
142,565
140,932
130,905
22,289
436,691
2018
£
–
–
19. Contingent liability
In accordance with a 2015 settlement agreement reached with the Athena Consortium, although Jersey Petroleum 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% of net disposal proceeds or net petroleum profits from the Group’s
interest in the P2170 licence which is the only remaining asset still held that was in the Group at the time of the agreement with
the Athena Consortium who hold security over this asset. Any future repayments, capped at 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 Equinor and the subsequent receipt of monies relating to that farm-out.
JOG is currently contesting a fee for an uplift payment of $479,240 with TGS-NOPEC Geophysical Company ASA (TGS). In February
2018 JOG licensed 185 sq km of TGS MF CFI 3D seismic data. In November 2018 the P2170 Licence Group made a mandatory
relinquishment of part of the P2170 acreage including an area that subsequently became block 20/5a.
In July 2019, JOG was awarded in the 31 SLR, as part of Licence P2498, Block 20/5a. TGS consider that as a consequence of that
award an uplift payment is due. JOG disputes the validity of the uplift payment given that the TGS 3D data was obtained for use by
the Verbier owners for the sole purpose of locating the Verbier appraisal well. The data was not used by the Group for the 31 SLR
application and the licence granted under Clause 2 of the Supplemental Agreement does not apply to individual use by JOG. The
Master Licence Agreement (‘MLA’) between TGS and JOG applies to the use of data by a ‘Related Entity’, such as Jersey Petroleum
Ltd, and permits its use. In the MLA the Related Entity becomes bound when it uses the data and by doing so would trigger the uplift
liability. The JOG subsidiary did not use the data and so has not become bound to pay the uplift.
Annual Report for the year ended 31 December 2019Strategic ReportOur GovernanceOur FinancialsOverview
60
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2019
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 and 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 £437,080 (2018:
£259,964) and details of outstanding options are set out in the table below.
Exercise
price
(pence)
100
4,300
4,300
4,300
4,300
4,300
4,300
2,712
2,712
1,500
1,500
110
110
110
310
310
310
200
200
200
200
172
175
175
175
175
175
175
200
Vesting date
Vested
Vested
Mar 2014
Mar 2015
Jul 2011
Jul 2012
Jul 2014
Dec 2012
Dec 2014
May 2014
May 2015
Nov 2016
Nov 2017
Nov 2018
Apr 2017
Apr 2018
Apr 2019
Jan 2021
Jan 2018
Jan 2019
Jan 2020
Nov 2021
Jan 2020
Jan 2021
Jan 2022
Jan 2020
Jan 2021
Jan 2022
Jan 2021
No. of shares
for which
options
outstanding
at 1 Jan 2019
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
420,000
76,666
76,667
76,667
150,000
–
–
–
–
–
–
–
Expiry date
Mar 2021
Mar 2021
Mar 2021
Mar 2021
Jul 2021
Jul 2021
Jul 2021
Dec 2021
Dec 2021
May 2023
May 2023
Nov 2021
Nov 2021
Nov 2021
Apr 2022
Apr 2022
Apr 2022
Jan 2025
Jan 2023
Jan 2023
Jan 2023
Nov 2025
Jan 2026
Jan 2026
Jan 2026
Jan 2024
Jan 2024
Jan 2024
Jan 2025
Date of Grant
Mar 2011
Mar 2011
Mar 2011
Mar 2011
Jul 2011
Jul 2011
Jul 2011
Dec 2011
Dec 2011
May 2013
May 2013
Nov 2016
Nov 2016
Nov 2016
Apr 2017
Apr 2017
Apr 2017
Jan 2018
Jan 2018
Jan 2018
Jan 2018
Nov 2018
Jan 2019
Jan 2019
Jan 2019
Jan 2019
Jan 2019
Jan 2019
Apr 2019
Options
lapsed/non
vesting
during
the year
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
Options
Exercised
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
No. of shares
for which
options
outstanding at
31 Dec 2019
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
420,000
76,666
76,667
76,667
150,000
88,333
88,333
88,333
11,667
11,667
11,667
120,000
2,063,007
Options
issued
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
88,333
88,333
88,333
11,667
11,667
11,667
120,000
The weighted average fair value of options granted during the year was determined using the Black–Scholes valuation. The
significant inputs into the model were the mid-market share price on the day of grant as shown above and an annual risk-free
interest rate of 2%. 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. The weighted
average exercise price for the options granted in 2019 was 182 pence, the weighted average remaining contractural life of the
options was 5 years, the weighted average volatility rates was 62.86% and the dividend yield was nil. For schemes and scheme
rules, please refer to the Remuneration Report.
Annual Report for the year ended 31 December 2019 61
21. Related undertakings and ultimate controlling party
The Group and Company do not have an ultimate controlling party or parent Company.
Subsidiary
Jersey North Sea Holdings Ltd
Jersey Petroleum Ltd
Jersey E & P Ltd
Jersey Oil Ltd
Jersey Exploration Ltd
Jersey Oil & Gas E & P Ltd
% 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
Registered Offices
1.
10 The Triangle, ng2 Business Park, Nottingham, NG2 1AE
2. 6 Rubislaw Terrace, Aberdeen, AB10 1XE
3. First Floor, 17 The Esplanade, St Helier, Jersey JE2 3QA
22. Notes to the consolidated statement of cash flows
Reconciliation of loss before tax to cash used in operations
Loss for the year before tax
Adjusted for:
Amortisation, impairments, depletion and depreciation
Depreciation right-of-use asset
Share-based payments (net)
Loss on disposal of assets
Finance costs
Finance income
(Increase)/Decrease in trade and other receivables
Increase/(Decrease) in trade and other payables
Cash used in operations
2019
£
(2,065,009)
2018
£
(1,996,300)
14,067
3,568
437,080
17,980
419
(106,867)
(1,698,762)
(543,829)
473,587
4,615
–
259,964
–
–
(48,971)
(1,780,692)
275,513
(1,193,182)
(1,769,004)
(2,698,361)
Cash and cash equivalents
The amounts disclosed on the consolidated Statement of Cash Flows in respect of Cash and cash equivalents are in respect of
these statements of financial position amounts:
Year ended 2019
Cash and cash equivalents
Year ended 2018
Cash and cash equivalents
Cash and cash equivalents
Net cash
31 Dec 2019
£
12,318,536
1 Jan 2019
£
19,782,511
31 Dec 2018
£
19,782,511
1 Jan 2018
£
25,415,410
Analysis of net cash
At 1 Jan 2019
£
19,782,511
19,782,511
Cash flow
£
(7,463,975)
(7,463,975)
At 31 Dec
2019
£
12,318,536
12,318,536
Annual Report for the year ended 31 December 2019Strategic ReportOur GovernanceOur FinancialsOverview
62
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2019
23. Post balance sheet events
On 27 January 2020 JOG entered into a conditional Sale and Purchase Agreement (SPA) to acquire operatorship and an additional
70% working interest on Licence P2170 (Blocks 20/5b and 21/1d) from Equinor UK Limited. The consideration for the Acquisition
consists of two milestone payments and a royalty based on potential future oil volumes produced and sold from the Verbier
Upper Jurassic (J62-J64) reservoir oil discovery (the Verbier Field).
Contingent payments of:
• US$3 million upon sanctioning by the UK’s Oil & Gas Authority (“OGA”) of a Field Development Plan (“FDP”) in respect of the
Verbier Field; and US$5 million upon first oil from the Verbier Field
• Certain royalty payments on the first 35 million barrels of oil produced and sold from the Verbier Field calculated on the basis
of a 70% working interest for on-block volumes
In February 2020 a new lease agreement was signed for offices in 10 Arthur Street, London EC4R 9AY, this is a 19 month lease which
expires in September 2021. The total rent for the property is £109,000 per annum.
After the balance sheet date, we have seen macro-economic uncertainty with regards to prices and demand for oil and gas as a
result of the Covid-19 outbreak. Furthermore, recent global developments and uncertainty in oil supply in March and April have
caused further abnormally large volatility in commodity markets. The scale and duration of these developments remain uncertain
but could impact on the progress of our GBA development project.
The Group consider all matters above to be non-adjusting post balance sheet events.
24. Availability of the annual report 2019
A copy of this Annual Report 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.
Annual Report for the year ended 31 December 2019 COMPANY STATEMENT OF FINANCIAL POSITION
as at 31 December 2019
63
Non-Current Assets
Investments in subsidiaries
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Equity
Called up share capital
Share premium account
Share options reserve
Accumulated losses
Total equity
Liabilities
Current liabilities
Trade and other payables
Total liabilities
Total equity and liabilities
Note
4
6
7
8
9
2019
£
–
2018
£
–
10,908,099
12,197,617
23,105,716
23,105,716
4,361,509
19,590,948
23,952,457
23,952,457
2,466,144
93,851,526
1,928,094
(75,670,918)
22,574,846
2,466,144
93,851,526
1,491,014
(74,199,213)
23,609,471
530,870
530,870
23,105,716
342,986
342,986
23,952,457
As permitted by Section 408 of the Companies Act 2006, the Statement of Comprehensive Income of the parent Company is not
presented as part of these financial statements. The parent Company’s loss for the year was £1,471,705 (2018: Loss £1,422,263).
The financial statements on pages 63 and 64 were approved by the Board of Directors and authorised for issue on 6 May 2020.
They were signed on its behalf by Vicary Gibbs – Chief Financial Officer.
Vicary Gibbs
Chief Financial Officer
6 May 2020
Company Registration Number: 07503957
Annual Report for the year ended 31 December 2019Strategic ReportOur GovernanceOur FinancialsOverview 64
COMPANY STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2019
At 1 January 2018
Total comprehensive loss for the year
Transactions with owners (share-based payments)
At 31 December 2018
Total comprehensive loss for the year
Transactions with owners (share-based payments)
At 31 December 2019
Called up
share
capital
2,466,144
–
–
2,466,144
–
–
2,466,144
Share
premium
account
93,851,526
–
–
93,851,526
–
–
93,851,526
Share
options
reserve
1,231,050
–
259,964
1,491,014
–
437,080
1,928,094
Accumulated
losses
(72,776,950)
(1,422,263)
–
(74,199,213)
(1,471,705)
–
(75,670,918)
Total
equity
24,771,770
(1,422,263)
259,964
23,609,471
(1,471,705)
437,080
22,574,846
COMPANY STATEMENT OF CASH FLOWS
for the year ended 31 December 2019
Cash flows from operating activities
Cash used in 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
Loans to subsidiary companies
Net cash used in financing activities
(Decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Note
11
2019
£
2018
£
(256,628)
(256,628)
(392,611)
(392,611)
106,872
106,872
48,970
48,970
(7,243,575)
(7,243,575)
(7,393,331)
19,590,948
12,197,617
(5,332,834)
(5,332,834)
(5,676,475)
25,267,423
19,590,948
11
11
11
Annual Report for the year ended 31 December 2019 NOTES TO THE COMPANY FINANCIAL STATEMENTS
for the year ended 31 December 2019
65
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 strategy for the Company is consistent with that 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. Further to completion of the detailed studies in connection with the GBA
Concept Select contracted work programmes, there are currently no firm work commitments on any of the Group’s licences, other
than ongoing Operator overheads and licence fees. Other work that the Company is undertaking in respect of the GBA licences
and surrounding areas is modest relative to its current cash reserves. The Company’s current cash reserves are therefore expected
to more than exceed its estimated liabilities for at least 12 months following the date of issue of the financial statements. Based on
these circumstances, the Directors have considered it appropriate to adopt the going concern basis of accounting in preparing the
Company’s consolidated financial statements.
2. Employees and directors
Wages and salaries
Social security costs
Share-based payments
Other pensions costs
2019
£
792,422
122,185
437,080
18,295
1,369,982
2018
£
523,862
60,498
259,964
50,769
895,093
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 – Finance
Employees – Technical
Directors’ remuneration
Directors’ pension contributions to money purchase schemes
Benefits
2019
2018
5
1
4
8
2019
£
327,933
1,012
3,650
332,595
5
1
4
8
2018
£
217,741
16,603
1,252
235,596
Two directors of the Company are remunerated by another entity in the Group. The Directors’ have deemed it not possible to
apportion their remuneration to the Company.
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.
2019
1
2018
1
2019
£
238,250
–
238,250
2018
£
117,214
16,603
133,817
Annual Report for the year ended 31 December 2019Strategic ReportOur GovernanceOur FinancialsOverview 66
NOTES TO THE COMPANY FINANCIAL STATEMENTS
for the year ended 31 December 2019
3. Loss of parent company
As permitted by Section 408 of the Companies Act 2006, the Statement of Comprehensive Income of the parent Company is not
presented as part of these financial statements.
The parent Company’s loss for the year was £1,471,705 (2018: Loss £1,422,263).
Auditors’ remuneration is disclosed in note 8 in the consolidated financial statements.
4. Investment in subsidiaries
Company – shares in subsidiary undertakings:
The carrying value of investments in subsidiary entities has been written off in prior periods.
The subsidiary undertakings at 31 December 2019 were as follows:
2019
£
–
2018
£
–
% owned
Jersey Petroleum Ltd*
Subsidiary
Jersey North Sea Holdings Ltd* 100%
100%
100%
100%
100%
100%
Jersey E & P Ltd**
Jersey Oil Ltd**
Jersey Exploration Ltd**
Jersey Oil & Gas E & P Ltd***
*
Registered address: 10 The Triangle, ng2 Business Park, Nottingham, NG2 1AE
** Registered address: 6 Rubislaw Terrace, Aberdeen, AB10 1XE
*** Registered address: First Floor, 17 The Esplanade, St Helier, Jersey, JE2 3QA
5. Property, plant and equipment
Cost
At 1 January 2018
At 31 December 2018
At 31 December 2019
Accumulated depreciation
At 1 January 2018
At 31 December 2018
At 31 December 2019
Net book value
At 31 December 2019
At 31 December 2018
At 31 December 2017
6. Trade and other receivables
Current:
Value Added Tax
Amounts due from Group undertakings
Prepayments
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
Office
equipment
£
94,793
94,793
94,793
94,793
94,793
94,793
–
–
–
2018
£
2019
£
169,857
10,680,745
57,497
10,908,099
39,360
4,306,589
15,560
4,361,509
The balances above were assessed for recoverability under the expected credit loss model. There is no expected credit loss
on these balances. The amounts due from Group undertakings are not interest bearing, and are repayable on demand. In 2018 a
provision of £408,811 was made to amounts due from Group undertakings. The provision is measured using management’s best
estimate of the expected credit loss for the balance after considering the proposed repayment plan.
Annual Report for the year ended 31 December 2019
67
7. Cash and cash equivalents
Cash at bank
8. Called up share capital
Issued and fully paid:
Number:
21,829,227 (2018: 21,829,227)
9. Trade and other payables
Current:
Amounts due to Group undertakings
Trade payables
Other payables
Accrued expenses
2019
£
12,197,617
2018
£
19,590,948
Class
Ordinary
Nominal
value
1p
2019
£
2,466,144
2018
£
2,466,144
2019
£
2018
£
211,678
94,859
121,418
102,915
530,870
211,678
–
2,917
128,391
342,986
Amounts shown as Current: Amounts due to Group undertakings – are repayable on demand.
10. Related party disclosures and ultimate controlling party
The Group and Company do not have an ultimate controlling party or parent Company.
% owned
Jersey Petroleum Ltd
Subsidiary
Jersey North Sea Holdings Ltd 100%
100%
100%
100%
100%
100%
Jersey E & P Ltd
Jersey Oil Ltd
Jersey Exploration Ltd
Jersey Oil & Gas E & P Ltd
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
Amount due (to)/from
subsidiaries
2019
£
(211,676)
10,680,745
–
(1)
(1)
–
2018
£
(211,676)
4,306,589
–
(1)
(1)
–
The Company lends cash to Jersey Oil & Gas E&P Ltd to fund salaries and other administrative costs. The balance outstanding at the
end of the year from Jersey Oil & Gas E&P Ltd £2,371,207 (2018: £1,501,788) has been fully provided for as a doubtful debt given the
nature of the company which does not generate revenue and the balance is not expected to be recovered.
The Company provides funding to Jersey Petroleum Limited to fund commitments due on its operations and licences. Historically
these have been provided for in full as those licences where not deemed commercial. Following the historical drilling on Verbier
the Company believes that the funding provided for this licence to be fully recoverable as the licence is commercially viable. The
total amount of funding provided to Jersey Petroleum Limited amounts to £78,109,749 (2018: £71,735,593) of which £66,371,145 (2018:
£67,429,004) is provided for as a doubtful debt with the remaining balance being the funding provided in respect of the Verbier
licence.
The receivable balance is non-interest bearing and repayable on demand with recovery expected over a number of years.
During the year the Company also charged a management fee to Jersey Petroleum Limited amounting to £1,414,327 (2018: £985,652).
Annual Report for the year ended 31 December 2019Strategic ReportOur GovernanceOur FinancialsOverview
68
NOTES TO THE COMPANY FINANCIAL STATEMENTS
for the year ended 31 December 2019
11. Notes to the Company statement of cash flows
Reconciliation of loss before income tax to cash used in operations
Loss for the year before tax
Adjusted for:
(Reversal of impairment)/impairment of receivables from subsidiaries (note 10)
Provision for write-off of loan interest
Share-based payments (net)
Finance income
(Increase)/decrease in receivables (note 6)
Increase/(decrease) in trade and other payables (note 9)
Cash used in operations
2019
£
2018
£
(602,287)
(1,422,263)
–
211,154
437,080
(318,026)
(272,079)
(172,434)
187,885
(256,628)
1,026,245
130,161
259,964
(179,131)
(185,024)
21,252
(228,839)
(392,611)
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:
Cash and cash equivalents
Cash and cash equivalents
Cash and cash equivalents
Net cash
31 Dec 2019
£
12,197,617
31 Dec 2018
£
19,590,948
1 Jan 2019
£
19,590,948
1 Jan 2018
£
25,267,423
At
1 Jan 2019
£
19,590,948
19,590,948
Cash flow
£
(7,393,331)
(7,393,331)
At
31 Dec 2019
£
12,197,617
12,197,617
Annual Report for the year ended 31 December 2019 69
FIGURE REFERENCES
Fig 1, page 1
Outcrop of faulted Old Red Sandstone.
Fig 7, page 7
Conceptual bridge-linked platform
Fig 2, page 1
Oil-stained core from a Buchan well.
Fig 3, page 1
Photomicrograph of a thin-section from a
Buchan well. Porosity highlighted in blue.
Fig 4, page 1
The Buchan Field reservoir map from the
new 3D seismic showing faulting.
Fig 5, page 1
The Buchan Field. Cut-away showing
seismic and shut-in wells.
Fig 6, page 1
The P2170 discovery and prospects in
relation to the Buchan Field.
Fig 8, page 8/9
Transocean Spitzbergen used to drill the
Verbier appraisal well
Fig 9, page 14
JOG GreaterBuchan Area discoveries,
prospects and leads
Fig 10, page 15
The P2170 discovery and prospects in
relation to the Buchan Field
Fig 11, page 17
Buchan Field fault model
Fig 12, page 22/23
This image, together with the image
on the front cover and images on p30,
p44/45 shows Skellig Michael, an island
off the south west coast of Ireland
made up of fluvial and aeolian Old
Red Sandstone. It is a contemporary
geological analogue for what is now the
Buchan oil field reservoir, which was also
uplifted and exposed as an island for
30 to 40 million years during the Lower
Cretaceous period.
Fig 13, page 30
Skellig Michael – see Fig 12
Fig 14, page 44/45
Skellig Michael – see Fig 12
GLOSSARY
31 SLR 31st Supplementary Offshore
Licensing Round. This refers to the
process by which the OGA offered
licences for award in the GBA
during 2019.
bbl Barrel of oil
CNS Central North Sea
CPR Competent Persons’ Report. The
independent CPR was completed
by Rockflow Resources and JOG
published it in October 2019 – see
www.jerseyoilandgas.com for further
details on volumes and values. The base
case for volumes and values, referred to
within this annual report, are based on
forecast oil prices of $62.5/bbl and are
escalated in line with inflation.
Company Jersey Oil and Gas plc.
ESG Environmental, social and
corporate governance. ESG refers to the
three central factors in measuring the
sustainability and societal impact of an
investment in a company or business.
FDP Field Development Plan.
FPAL Achilles FPAL identifies, evaluates
and provides pre-qualification
information about suppliers on behalf of
major buyers in oil & gas.
GBA Greater Buchan Area. Refers to
the licences including and surrounding
the Buchan field, namely licences P2498,
P2170, P2499.
GOR Gas to Oil ratio
Group Refers to Jersey Oil and Gas plc
and its subsidiaries.
HSSE Health, Safety, Security and
Environment
IRR Internal Rate of Return
JOG Jersey Oil and Gas plc
MER Maximising Economic Recovery.
The strategy at the forefront of the OGA’s
stewardship of the UK North Sea.
MLA Master Licence Agreement
mmbbls Million barrels of oil
mmboe Million barrels of oil equivalent.
MMstb Million stock tank barrels,
Stabilised oil at the surface after
associated gas has escaped.
NPV Net present value
OGA Oil and Gas Authority. The Oil
and Gas Authority’s role is to regulate,
influence and promote the UK oil and
gas industry in order to maximise the
economic recovery of the UK’s oil and
gas resources.
OPEC+ Organisation of Petroleum
Exporting Countries (14 member
countries and a further 10 Non-OPEC
nations, including Russia, form OPEC+)
SCF Standard Cubic Feet (of gas)
SDG Sustainable development goals
Annual Report for the year ended 31 December 2019Strategic ReportOur GovernanceOur FinancialsOverview Jersey Oil and Gas plc
Ground Floor
5 St Andrew’s Place
St Helier, Jersey
Channel Islands
JE2 3RP
+44(0)1534 858 622
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