(cid:1)(cid:152)(cid:152)(cid:213)(cid:62)(cid:143)(cid:202)(cid:44)(cid:105)(cid:171)(cid:156)(cid:192)(cid:204)(cid:202)(cid:69)
(cid:19)(cid:136)(cid:152)(cid:62)(cid:152)(cid:86)(cid:136)(cid:62)(cid:143)(cid:202)(cid:45)(cid:204)(cid:62)(cid:204)(cid:105)(cid:147)(cid:105)(cid:152)(cid:204)(cid:195)(cid:202)(cid:211)(cid:228)(cid:163)(cid:211)
Lansdowne Oil & Gas plc is an independent oil and gas exploration company
listed on the AIM market of the London Stock Exchange since 21 April 2006.
The Company has its operating headquarters based in Dublin, Ireland with
its registered office in London, England.
www.lansdowneoilandgas.com
Contents
2 Chairman’s Statement
4 Operations Review
8 Oil and Gas Interests
9 Finance Review
11 Directors’ Report
15 Corporate Governance
18 Remuneration Report
21
Independent Auditors’ Report to the Shareholders
of Lansdowne Oil & Gas plc
23 Consolidated Income Statement
23 Consolidated Statement of Comprehensive Income
24 Consolidated Statement of Financial Position
25 Company Statement of Financial Position
26 Consolidated Statement of Cash Flows
27 Company Statement of Cash Flows
28 Consolidated Statement of Changes in Equity
29 Company Statement of Changes in Equity
30 Statement of Accounting Policies
36 Notes to the Financial Statements
46 Notice of Annual General Meeting
48 Advisers
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Chairman’s Statement
I am pleased to say that 2012 was a year of major progress for Lansdowne Oil & Gas plc (”Lansdowne”).
Your Company’s business was considerably enhanced by the success of the Barryroe appraisal well in the North Celtic
Sea and its subsequent technical and commercial analysis; by the award and addition of the Barryroe North licensing
option area; by the completion of 3D seismic inversion work on our other licences leading to further de-risking of key
exploration prospects ahead of farmout and drilling in 2014; and by the strengthening of the balance sheet through a
£10 million fundraising (before expenses) in August 2012.
Lansdowne now has a material balanced portfolio of acreage under licence in the relatively underexplored North Celtic
Sea basin. This portfolio of oil and gas prospects affords Lansdowne a competitive strategic position in an area currently
being positively reassessed by the industry in the light of the Barryroe success. I fully expect Lansdowne to exploit this
advantage in the near future.
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Lansdowne now has
a material balanced
portfolio of acreage
under licence in the
relatively underexplored
North Celtic Sea basin
Financial results
The Group recorded a loss after tax of £1.1 million for the year ended 31 December 2012 compared to a loss after tax
of £0.8 million for the year ended 31 December 2011.
Group operating expenses for the year were £1.0 million, compared to £1.0 million in 2011.
Net finance expense for the year was £127,000 (2011 income: £122,000). Interest expense on loans from shareholders
amounted to £7,000 (2011: £29,000).
Total equity attributable to the shareholders of the Group has increased to £26.3 million as at 31 December 2012 from
£17.8 million as at 31 December 2011.
Cash balances of £5.5 million (2011: £3.2 million) were held at the end of the financial year.
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Outlook
Lansdowne’s platform for growth is solidly based on a continued focus on exploration and appraisal drilling in the North
Celtic Sea. Through the use of modern 3D seismic inversion technology in 2012, Lansdowne’s oil and gas prospects have
been further de-risked and the Company is confident of forming joint-ventures through farmout with industry partners
ahead of an exciting high-impact drilling programme in 2014.
Again, I would like to thank all our shareholders for their continued support.
John Greenall
Chairman
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Operations Review
Lansdowne holds rights, through its wholly owned subsidiaries, to five Standard Exploration Licences and one Licensing Option in
the Irish offshore.
Lansdowne continued its technically focused approach to exploit its extensive licensed areas in the North Celtic Sea Basin (“NCSB”),
off the south coast of Ireland.
Lansdowne, through the success of the 48/24-10z “Barryroe” oilfield appraisal well completed in March 2012 and the application
of seismic inversion technology over its 3D seismic data base on its prospects in other licences during the course of the report
period, is now positioned to explore for additional commercial oil and gas fields in its licensed areas.
In addition to the “Barryroe” oilfield farmout process that is being led by the operator Providence Resources, Lansdowne is actively
engaged with potential farm-in joint-venture partners to drill on its “Amergin”, “Midleton” and “Rosscarbery” licences in 2014.
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Licence
Helvick
Midleton / East Kinsale
Rosscarbery
Amergin
Barryroe
North Barryroe
2/07
4/07
5/07
5/08
1/11
12/4
Equity
10%
100%
99%
100%
20%
20%
Total
Sq Km
12
542
366
449
316
521
Acres
2,964
133,874
90,402
110,903
78,052
128,774
2,206
544,969
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(cid:110)(cid:168)(cid:228)(cid:228)(cid:189)(cid:55)
Lansdowne Licences
Lansdowne Licensing Option
Other Companies
Producing Gas Field
(cid:120)(cid:163)(cid:168)(cid:228)(cid:228)(cid:189)(cid:32)
Gas Discovery
Oil Discovery
Prospect
(cid:199)(cid:168)(cid:228)(cid:228)(cid:189)(cid:55)
Operational highlights
• “Barryroe” appraisal well 48/24-10z successfully tested at a stabilised rate of 3,514 BOPD and 2.93 MMSCFD.
• “Barryroe” updated operator estimate of P50 oil in place estimates currently total 1,043 MMBO for the Middle & Basal Wealden
reservoirs.
• “Barryroe” additional potential identified in Lower Wealden and Purbeckian reservoir intervals with operator estimate of P50 oil
in place estimate of 778 MMBO.
• “Barryroe”technical reservoir resource audit by Netherland Sewell & Associates Inc. of the Basal Wealden Sand.
• Total gross audited on-block 2C recoverable resources of 346 MMBOE, (69 MMBOE net to Lansdowne).
• “Barryroe North” Licensing Option secured over 521 sq kms.
• “Amergin”, “Midleton” & “Rosscarbery” prospects de-risked substantially by 3D seismic mapping and subsequent inversion.
Industry farmout discussions on-going with Macquarie Capital as advisor to the company.
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Standard exploration licence 1/11 (“Barryroe”) – Lansdowne 20%
Licence 1/11 (“Barryroe”) incorporates part blocks 48/22, 48/23, 48/24, 48/27, 48/28, 48/29, 48/30 covering an area of 316.36 sq
km along the axis of the North Celtic Sea Basin.
The Barryroe Licence is held by Lansdowne (20 per cent) with Providence Resources as operator. Part of the Barryroe acreage lies
beneath the Seven Heads Gas Field, with the horizontal boundary between the two concessions lying at 4,000 ft (approximately
1,250 m) sub-sea.
On 15 March 2012, Providence Resources plc (“Providence”) as operator of the Barryroe 48/24-10z appraisal well, in which your
company has a 20% interest, confirmed that the well had successfully flow tested at a stabilised rate of 3,514 BOPD and 2.93
MMSCFD. The stabilized flow rates were achieved without the use of artificial lift and subsequent laboratory reservoir fluid analysis
confirmed that the oil is light with a gravity of 43 degree API and a wax content of 17%. The oil is highly mobile with an in-situ
reservoir viscosity of 0.68 centipoises and a gas-oil ratio of c. 800 SCF/STB.
On 23 March 2012, following the successful testing of the lower basal 24’ net oil bearing interval, an additional 17’ thick net gas
bearing section was perforated to test the potential of the upper part of the basal Wealden sandstone section. The surface test
spread equipment was optimized for the lower oil zone test and was therefore equipment constrained on this gas zone test, which
achieved highly productive flow rates of c. 7 MMSCFD & 1,350 BOPD (c. 2,516 BOEPD) through a restricted 36/64” choke, with
a flowing well head pressure of c. 1,700 PSIG. The productivity of the gas bearing interval far exceeded expectations and thereby
constrained the ability to fully open the well up to its maximum potential. Preliminary modelling of the pressure data indicates
that a co-mingled flow rate of c. 17 MMSCFD and 3,350 BOPD (c. 6,183 BOEPD) at a flowing well head pressure of c. 500 PSIG
is achievable.
On 24 May 2012, the results of further analysis of the 48/24-10z well test data which were acquired by Schlumberger during well
testing operations were announced. The data was analyzed using a leading wellbore modelling software system to determine the
potential Initial Production (IP) rates achievable from a single horizontal development well. The analysis forecasts that a 1,000’
horizontal well could deliver an IP of c. 12,500 BOPD and c. 11 MMSCFD (c. 14,300 BOEPD) through a standard 4.5” outer diameter
(OD) production tubing under natural lift. Further well deliverability analysis and optimization studies are on-going to incorporate
artificial lift which is expected to form part of the field development plan.
On 25 July 2012, Providence Resources announced the completion of a series of comprehensive post-well studies in order to
update the in-place volumetric resource estimate for the Barryroe discovery contained within Standard Exploration Licence (SEL)
1/11. This assessment has incorporated the data from all 6 wells drilled on Barryroe, together with the recently acquired/processed
3D seismic data, existing 2D seismic data, as well as utilizing other regional data. This analysis demonstrates that the Barryroe trap
at Base Wealden level is situated in the hanging wall side of an inverted major intra-basinal growth-fault system and covers an area
of several hundred square kilometres. The crest of the structure is located at c. 6,400 ft TVDSS with deepest logged hydrocarbons
at c. 7,300 ft TVDSS with no evidence of an oil-water contact. Reservoir fluid data from the recent 48/24-10z well indicate that
there is unlikely to be any primary gas cap present at the crest of the structure in the Basal Wealden sands.
The updated P50 oil in place estimates currently total 1,043 MMBO for the Middle & Lower Wealden reservoirs. On September
5th, the oil in place volume estimates for the additional Lower Wealden and Purbeckian reservoir intervals were announced, with
a further P50 potential of 778 MMBO being identified.
Lansdowne’s share of 2C recoverable resources
in Barryroe is 69 MMBOE
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Operations Review
Continued
Licensing option 12/4 (“Barryroe North”) – Lansdowne 20%
On 9 August 2012, the Barryroe consortium announced that it had secured a new Licensing Option 12/4 (“Barryroe North”) over
an area of 521 sq kms contiguous to the north of Barryroe where seismic mapping suggests that parts of the Barryroe Oilfield may
extend. The area is contiguous with Lansdowne’s Amergin (SEL 5/08) and Rosscarbery (SEL 5/07) licences and further consolidates
the Company’s position in the emerging Basal Wealden play fairway.
Standard exploration licence 5/08 (“Amergin”) – Lansdowne 100%
Licence 5/08 incorporates part-blocks 47/25, 48/21 and 48/22 on the north-western flank of the North Celtic Sea Basin. Situated
in water depths of c. 100 metres, the blocks cover an area of 449 sq kms and are approximately 30km from the south coast of
Ireland.
The 3D seismic data has resulted in much better imaging of the “Amergin” structure and has confirmed the prospect as a robust
structural closure ready for drilling. Seismic inversion results indicate that the Lower and Basal Wealden sandstone reservoirs that
are productive in the adjoining “Barryroe” licence and also found in the 48/22-1A well appear to be present on the up thrown
“Amergin” prospect.
The findings were most encouraging with the “Amergin” Prospect interpreted as having pre-drill probabilistic STOIIP (Stock Tank
Oil Initially in Place) for the primary targets (Basal Wealden and Upper Jurassic) P50 un-risked case calculated as 472 MMBO, with
potential ultimate recoverable resources estimated internally as 151 MMBO.
These figures compare to 212 MMBO and 62 MMBO respectively derived from the older 2D seismic and published in the RPS
Competent Person’s Report (“CPR”) in February 2011. In addition the two secondary targets in the Cretaceous Wealden have been
estimated to contain P50 un-risked STOIIP of 267 MMBO with potential ultimate recoverable resources of 80 MMBO. No volumes
were calculated for these additional Wealden sands in the Competent Person’s Report published in February 2011. Additional
follow-on structures have been identified in the licensed area which could be pursued in the event of a successful test of the
“Amergin” structure in 2014.
Amergin prospect substantially
de-risked by Barryroe success
Standard exploration licence 4/07 (“Midleton”) – Lansdowne 100%
Licence 4/07 incorporates part-blocks 49/11, 49/12, 49/17 and 49/18 immediately south-east of the Kinsale Head Gas field along
the axis of the North Celtic Sea Basin. The licence encompasses an area of 542 sq kms and is currently held 100% by Lansdowne.
This licence contains the “Midleton” and the ”East Kinsale” gas prospects.
The “Midleton” Prospect lies approximately 20 km northeast of the Kinsale Head gas field (c. 1.7 TCF reserves) and also 20 km to
the east of the Ballycotton gas field (c. 60 BCF reserves).
The producing reservoir in the Ballycotton and Kinsale Head gas fields is the Lower Cretaceous Greensand / ‘A’ Sand. The Greensand
/’A’ Sand also forms the reservoir target in the Midleton Prospect and has been established to be present with good reservoir quality
in the nearby 49/11-1 and 49/11-2 wells, which were drilled off structure.
• The Midleton Prospect is identified as a four-way dip closed faulted anticline at the primary Lower Cretaceous “A” Greensand
level – the main reservoir in the nearby Kinsale Head Gas field and the sole producing reservoir in the nearby Ballycotton Gas field.
• Amplitude brightening at Greensand ‘A’ Sand level is seen on seismic lines across the Midleton Prospect, similar to that seen on
lines across the Ballycotton Field.
• Midleton has been assessed as having potential for 330 BCF GIIP / 268 BCF recoverable.
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Following the 3D seismic, internal pre-drill probabilistic GIIP of the Midleton prospect for the Lower Cretaceous “A” Greensand P50
un-risked gas case is calculated as 204 BCF, with potential ultimate recoverable gas resources estimated internally as 174 BCF. These
figures compare to 75 BCF and 56 BCF respectively derived from the older 2D seismic and published in the Competent Person’s
Report in February 2011. An amplitude anomaly, which Lansdowne considers may be an indicator of gas, has been identified on the
3D seismic at “A” Greensand level and may reduce perceived risk on this prospect ahead of drilling. A further amplitude anomaly
has been identified in the Upper Wealden and this forms a new, secondary target in the prospect. Following the interpretation of
the 3D seismic internal pre-drill probabilistic GIIP of the Midleton prospect for the Lower Cretaceous Upper Wealden P50 un-risked
gas case is calculated as 126 BCF, with potential ultimate recoverable gas resources estimated internally as 94 BCF. Volumes were
not calculated for the Upper Wealden in the Competent Person’s Report published in February 2011. Additional follow-on features
have been identified for future drilling in the licensed area in the event of a successful test on Midleton in 2014.
Conceptual Development studies have also been carried out by Asset Development and Improvement Limited (ADIL) a third party
specialist oil and gas engineering consultancy. The study concluded that, if drilling proved successful, Midleton is economically
viable as a stand-alone development project or a tie-back to existing infrastructure in the area.
Midleton is considered a low risk,
substantial gas prospect, with early
development potential
Standard exploration licence 5/07 (“Rosscarbery”) – Lansdowne 99%
Licence 5/07 incorporates part-blocks 48/17, 48/18, 48/19, 48/22 and 48/24 adjacent to and immediately north-west of the Kinsale
Head Gas field. The licence encompasses an area of 366 sq. kms, lies in water depth of circa 100 metres, and is currently held 99%
by Lansdowne as operator.
On 12 April 2012, Lansdowne announced the results of the 3D seismic survey that covered the Galley Head gas discovery and other
prospects in the Rosscarbery licence area. As a result the Galley Head gas discovery is now interpreted by Lansdowne as having
gross P50 in place volume of 30 BSCF GIIP with 25 BSCF potentially technically recoverable. This compares favourably with the
historic “CPR”, February 2011 that calculated gross P50 in place volume of 7.1 BCF GIIP with some 5.3 BSCF considered technically
recoverable. The Carrigaline gas discovery, lies outside the area covered by the 2011 3D seismic survey and remains unchanged
from the February 2011 CPR which calculated gross P50 in place volume of 81.8 BSCF with P50 technically recoverable gas of
60.8 BSCF. Internal pre-drill P50 un-risked probabilistic estimates of the GIIP for the shallow Lower Cretaceous “A” Greensand and
Upper/Middle Wealden gas prospects, covered by the 2011 3D seismic is calculated as 254 BSCF, with potential ultimate recoverable
gas resources estimated internally as 199 BSCF. These figures compare to 324 BSCF and 239 BSCF respectively derived from the
older 2D seismic and published in the CPR. Amplitude anomalies, which Lansdowne considers may be an indicator of gas, have
been identified on the 3D seismic at “A” Greensand and Wealden horizons on some prospects and may reduce the perceived risk
ahead of any drilling. In summary, the Rosscarbery licence contains the Galley Head gas discovery that now looks more promising
than previously thought, along with a number of other identified gas prospects as interpreted by 3D seismic. Should drilling prove
successful there would appear to be scope for a cluster development of these prospects in due course.
Licence 2/07 – 49/9P – Helvick oilfield – Lansdowne 10%
The undeveloped Helvick field, with Providence Resources as operator, is situated some 40 km offshore Ireland in c. 80m (265 ft)
water depth. The field was discovered in 1983 by Gulf Oil with the drilling of the 49/9-2 discovery well. This well was tested and
flowed at a cumulative rate of c. 10,000 BOPD from four zones.
The Helvick oil is a light (44° API) and non-waxy crude oil, contained in high permeability Upper Jurassic sands. The field has been
appraised by the 49/9-3 and 49/9-6, 6Z wells.
This small oil accumulation is constantly being reviewed for innovative development possibilities.
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Oil and Gas Interests
The Group has interests in the following Licence and Licensing Options all of which are in Irish waters:
Licence
4/07 Midleton Exploration Licence
5/07 Rosscarbery Exploration Licence
5/08 Amergin Exploration Licence
01/11 Barryroe Exploration Licence
12/4 Barryroe North Licensing Option
2/07 Helvick Exploration Licence
Notes
Irish licensing regime
Interest
100 per cent
99 per cent
100 per cent
20 per cent
20 per cent
10 per cent
Operator
Lansdowne
Lansdowne
Milesian
Providence Resources Plc
Providence Resources Plc
Providence Resources Plc
Licensing option
Gives the holder an exclusive right to apply for an Exploration Licence
a. for a defined period
b. in return for undertaking an agreed work programme.
Exploration Licence
A “Standard” licence covers an agreed work programme in water less than 200 metres deep. The work programme
usually includes an exploration well. The licence period is six years.
A “Frontier” licence covers an agreed work programme in areas where the Minister has declared the area to be a
“Frontier” area. The work programme usually includes an exploration well, but the licence period is generally longer
than other licences (minimum 15 years).
Lease undertaking
Gives the holder an exclusive right to apply for a Petroleum Lease
a. for a defined period
b. in return for undertaking an agreed work programme.
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Finance Review
For the year ended 31 December 2012
Description of business
Lansdowne Oil & Gas plc, an English public limited company, and its subsidiaries form an energy group focused on exploration
activities. The Group is actively exploring for, and appraising, oil and gas reserves offshore Ireland. The Company’s shares, since 21
April 2006, have been quoted on the AIM Market of the London Stock Exchange. This financial review is intended to assist in the
understanding of the Group’s results of operations for the year ended 31 December 2012 and of its financial position at that date.
The consolidated financial statements and notes included elsewhere contain additional information and should be referred to in
conjunction with this review. They have been prepared in accordance with International Financial Reporting Standards (“IFRS”).
Administrative expenses
The Group has two full-time paid Executive Directors. During the year, administration and technical support was provided by
SeaEnergy PLC (a major shareholder through its subsidiary Ramco Hibernia Ltd) and LHM Casey McGrath under a service agreement.
These costs and the professional fees associated with the Company’s listed status account for the administrative expenses of £1.0
million (2011: £1.0 million).
Operating loss
The Group recorded a loss before interest and taxation of £1.0 million in the year (2011: £1.0 million).
Finance income and costs
Bank interest receivable was £13,000 (2011: £19,000). Interest payable on loans from shareholders amounted to £7,000 (2011:
£29,000). Foreign exchange differences on cash balances amounted to a loss of £26,000 (2011: gain of £133,000).
Income tax expense
The current tax credit for the year is £53,000 (2011: £105,000) and the unprovided deferred tax asset on unrelieved losses was
£1.2 million (2011: £1.0 million).
Loss for the financial year
A loss of £1.1 million was recorded in the year (2011: £800,000).
Loss per share
Basic and diluted loss per share for the year was 0.9p (2011: 0.8p).
Balance sheet
The Group and Company Statements of Financial Position as at 31 December 2012 and 31 December 2011 are shown on pages
24 and 25. Group net assets were £26.3 million at 31 December 2012 (2011: £17.8 million). At 31 December 2012, the Group
held £5.5 million (2011: £3.2 million) as cash or short-term deposits. The Group had goodwill and other intangible assets totalling
£25.8 million at the balance sheet date (2011: £17.8 million). Included in this category is goodwill of £1.4 million (2011: £1.4
million) arising on the acquisition of Milesian Oil & Gas Limited in 2007 and costs of £24.4 million (2011: £16.4 million) incurred
in connection with the Group’s exploration licences in the Celtic Sea and the associated work programmes. Of the £24.4 million,
£5.4 million relates to the acquisition of Milesian Oil & Gas Limited during 2007.
Cash flow from operations
As indicated by the consolidated statement of cash flows on page 26, the Group’s net cash generated by operating activities was
£1.2 million for the year ended 31 December 2012 (2011: £70,000).
Cash flows related to investing activities
In the period ended 31 December 2012 the Group invested approximately £8.0 million (2011:£7.6 million) in connection with its
oil and gas interests.
Cash flows related to financing activities
The Group raised £9.4 million, net of costs, of cash from the issue of new share capital during the year (2011:£10.6 million).
Future capital requirements
The Group’s prospects are all in the exploration or appraisal stages and do not contain any proven reserves.
A number of companies have expressed an interest in farming into one or more of the Group’s licences.
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Finance Review
Continued
The Group aims to finance the work programme obligations related to the licences which it holds by either reducing its equity
interest through new participants farming in, by the issue of new share capital, or by a combination of both.
Market risks
The Group is exposed to a variety of risks, including the effects of changes in interest rates and foreign currency exchange
rates. These are discussed in note 11. In the normal course of business the Group also faces certain other non-financial or non-
quantifiable risks. To the extent that the Group’s oil and gas assets can be successfully developed, the Group’s assets, revenues and
cash flows may become dominated by Dollar or Euro-based oil and gas operations. Accordingly, the Sterling/Dollar and Sterling/
Euro exchange rates are important to the Sterling prices of the Shares traded on the AIM.
The tables below set forth, for the periods and dates indicated, the exchange rate for the Dollar against Sterling and for the Euro
against Sterling.
Dollar/Sterling exchange rates (Dollar per Pound Sterling)
2007
2008
2009
2010
2011
2012
At end
of year
1.99
1.45
1.62
1.56
1.55
1.61
Average
rate*
2.01
1.88
1.58
1.55
1.61
1.59
Euro/Sterling exchange rates (Euro per Pound Sterling)
2007
2008
2009
2010
2011
2012
At end
of year
1.36
1.04
1.15
1.19
1.20
1.23
Average
rate*
1.47
1.27
1.12
1.16
1.15
1.23
High
2.08
1.99
1.67
1.62
1.67
1.62
High
1.51
1.36
1.19
1.22
1.20
1.28
Low
1.96
1.45
1.43
1.47
1.55
1.52
Low
1.36
1.04
1.01
1.11
1.10
1.18
* The average rates on the last business day of each full month during the relevant year.
Details of how the Group manages interest rate and foreign currency exchange risks are included in note 11.
Stephen Boldy
Chief Executive Officer
8 May 2013
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Directors’ Report
For the year ended 31 December 2012
Company Number: 05662495
The Directors submit their report and audited Group financial statements for the year ended 31 December 2012.
Principal activities and review of business
The principal activities of the Group are the exploration and appraisal of hydrocarbons. The activities of the subsidiaries are detailed
in note 5 to the financial statements. The Group consolidated income statement set out on page 23 shows a loss on ordinary
activities before tax of £1.1 million (2011: £0.9 million). After tax the Group loss for the year was £1.1 million (2011: £0.8 million).
The Directors do not recommend the payment of a dividend and £1.1 million (2011: £0.8 million) will be deducted from the
Group’s reserves. Further details of the Group’s activities during the year and its position at the end of the year are given in the
Chairman’s Statement and in the Financial Review.
Strategy
Lansdowne Oil & Gas plc (“Lansdowne”) is an upstream oil and gas company, focused on exploration and appraisal opportunities
offshore Ireland. The Group has targeted the Irish offshore shelf areas for exploration, as these provide shallow water (generally
less than 100 metres), and relatively low drilling costs and these factors, combined with favourable fiscal terms, have the potential
to deliver high value oil and gas reserves.
Principal risks and uncertainties
The Directors are responsible for the effectiveness of the Group’s risk management activities and internal control processes. As
a participant in the upstream oil & gas industry, Lansdowne is exposed to a wide range of risks in the conduct of its operations.
These risks include:
Financial risks:
• Cost inflation
• Oil and gas price movements
• Adverse taxation legislative changes
• Co-venturer and third party counterparty credit risk
• Adverse foreign exchange movements
• Ability to raise finance to maintain licence participation
Operational risks:
• Loss of key employees
• Delay and cost overrun on projects, including weather related delay
• HSE incidents
• Poor reservoir performance
• Exploration and appraisal well failures
• Failure of third party services
Strategic and external risks:
• Future deterioration of capital markets, inhibiting efficient equity and/or debt raising for developments
• Commercial misalignment with co-venturers
• Material fall in oil or gas prices
The risks set out are not exhaustive and additional risks and uncertainties may arise or become material in the future. Any of the
risks, as well as other risks and uncertainties discussed in this document, could have a material adverse effect on our business.
There is no absolute assurance that the Group’s exploration and development activities will be successful. The Group’s activities
may also be curtailed, delayed or cancelled not only as a result of adverse weather conditions but also as a result of shortage or
delays in the delivery of drilling rigs and other equipment which, at times, are in short supply. The Group seeks to manage these
risks through portfolio management, balancing risk across a range of prospects and leads, which carry varying technical and
commercial risks, and carefully managing the financial exposure to each asset in the portfolio through the arrangements set out
with joint venture partners.
The Group competes with other E&P companies, some of whom have much greater financial resources than the Group, for
the identification and acquisition of oil and gas licences and properties and also for the recruitment and retention of skilled
personnel.
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Directors’ Report
Continued
The market price of hydrocarbon products is volatile and is not within the control of the Group. If significant declines occur in the
price of oil or gas, or detrimental changes occur to the Irish fiscal regime, the economic commerciality of the Groups projects can
be significantly reduced or rendered uneconomic. The successful progression of the Group’s oil and gas assets depends not only
on technical success, but also on the ability of the Group to obtain appropriate financing through equity financing, debt financing,
farm downs or other means. The availability of such funding will continue to be influenced by macro-economic events, including
oil and gas price fluctuations and 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 required financing going forward. If the Group is unable to obtain
additional financing needed to fulfil its planned work programmes some interests may be relinquished and/or the scope of the
operations reduced.
Future outlook
The Group’s future outlook is described in the Chairman’s Statement on pages 2 and 3.
Employees
The Group has two full-time employees, both of whom are Executive Directors of the Company. Employees are encouraged directly
to participate in the business through a share option scheme. Although much of the Group’s work is unsuitable for disabled
persons, positive efforts are made to recruit and train disabled persons for suitable work.
Directors
In accordance with the Company’s Articles of Association, Directors retire and, being eligible, offer themselves for re-election.
Stephen Boldy and Emmet Brown have service contracts with an unexpired notice period of one year. Details of the remuneration
of the Directors and the interests of the Directors in the share capital and share options of the Company are disclosed in the
Remuneration Report included on pages 18 to 20.
Details of executive directors
Dr Stephen Boldy (Chief Executive Officer), aged 57, joined Ramco Energy plc in March 2003, becoming CEO of Lansdowne in
April 2006. From 1980 to 1984 Dr Boldy worked as a petroleum geologist for the Petroleum Affairs Division of the Department of
Energy in Dublin and then spent almost 19 years with Amerada Hess Corporation, where his appointments included UK Exploration
Manager and International Exploration Manager. Dr Boldy has extensive experience of working Irish offshore basins and the basins
west of Britain and earned his PhD in geology from Trinity College Dublin.
Emmet Brown (Director of Business Development), aged 63, was managing director and founder of Milesian, acquired by
Lansdowne in December 2007. Mr Brown is a petroleum geologist with 40 years experience, having worked in many facets of
exploration and production worldwide. He began his career with US-based Marathon Oil in Ireland. Mr Brown was employed
initially by multinational companies in positions of increasing responsibility and later as CEO and Managing Director of two junior
quoted E & P oil and gas companies. Mr Brown re-established Milesian in 2003 to explore the Irish offshore. Experienced in
technical and commercial due diligence evaluations, throughout his career he has advised banks, investment houses, private clients
and oil and gas companies on matters of corporate and business development, asset management, mergers, acquisitions and
divestments, and oil and gas joint ventures.
Details of non-executive directors
John Greenall (Non-Executive Chairman)*†, aged 74, joined RC Greig & Co in Glasgow in 1960 becoming a partner in 1965. He
assisted in the formation and subsequent fund raising of London and Scottish Marine Oil (“LASMO”) and Clyde Petroleum. Mr
Greenall was instrumental in creating Greig Middleton through the merger of RC Greig and WN Middleton in 1983. He joined The
Stock Exchange Council in 1985 and served on the Board of its Successor – The Securities Association. In 1994 he joined HCIB (a
subsidiary of Guinness Mahon (“GM”) as Director of Corporate Broking. When GM was taken over by Investec in 1998 he headed
up the corporate broking team at that bank. One of HCIB’s specialist research areas was the Exploration & Production sector and he
oversaw a number of flotations in the sector – the most recent being Venture Production before he retired in 2002. He is a former
Non-Executive Director of RP&C International Limited, a niche investment bank based in London.
Steven Lampe (Non-Executive Director)†, aged 54, an investment manager based in New York, USA, is managing member of
Lampe, Conway & Co LLC, a limited liability company organised in the state of Delaware.
Christopher Moar (Non-Executive Director), aged 50, joined SeaEnergy in 1993. Mr. Moar was Company Secretary from December
1996 to January 2013, and became Finance Director of SeaEnergy in 2006. Prior to this he was a planning and financial accountant
for Baker Oil Tools (United Kingdom) Limited. Mr Moar has an MA degree in Accountancy from Aberdeen University and qualified
as a Chartered Accountant with Arthur Young in 1987.
* A member of the Audit Committee † A member of the Remuneration Committee
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Viscount Torrington (Non-Executive Director)†*, aged 69, graduated from Oxford University as a geologist in 1964. He served in
technical and managerial roles with Anglo American plc and Lonrho plc. In 1975 he became Managing Director of the Attock Oil
Company, later Anvil Petroleum plc. The latter was merged with Berkeley Exploration in 1986, and acquired by Ranger Oil the same
year. In 1987, he became a Director of Flextech plc and chief executive of Exploration & Production Services (Holdings) Limited,
better known as Expro, a major UK oilfield services contractor. From 1995 to 2000, he served as Managing Director of Heritage
Oil & Gas Limited, later listed in Toronto as Heritage Oil Corporation. He has also served as a non-executive Director of other listed
companies.
John H Aldersey-Williams (Non-Executive Director)*, aged 50, is Chief Executive of SeaEnergy plc and has worked in the energy
business for 25 years. In 2001, he founded Redfield Consulting Limited, a consultancy offering commercial, strategic and economic
advice to companies across the zero-carbon energy space. Redfield advised public and private sector clients in wind and marine
energy, as well as in carbon capture and storage and policy areas. He was also a director of the European Marine Energy Centre
from 2005-2009. He was appointed as a Non-Executive Director of Lansdowne Oil & Gas plc on 11 September 2012.
Substantial shareholders
The Directors have been notified of the following interests in 3 per cent or more of the Company’s issued share capital at 8 May
2013.
(cid:32)(cid:156)(cid:176)(cid:202)(cid:156)(cid:118)(cid:202)(cid:195)(cid:133)(cid:62)(cid:192)(cid:105)(cid:195)(cid:202)
(cid:29)(cid:62)(cid:147)(cid:171)(cid:105)(cid:202)(cid:10)(cid:156)(cid:152)(cid:220)(cid:62)(cid:222)(cid:202)(cid:69)(cid:202)(cid:10)(cid:156)(cid:202)(cid:29)(cid:29)(cid:10)(cid:202)(cid:201)(cid:202)(cid:29)(cid:10)(cid:202)
(cid:10)(cid:62)(cid:171)(cid:136)(cid:204)(cid:62)(cid:143)(cid:202)(cid:31)(cid:62)(cid:195)(cid:204)(cid:105)(cid:192)(cid:202)(cid:19)(cid:213)(cid:152)(cid:96)(cid:202)(cid:29)(cid:136)(cid:147)(cid:136)(cid:204)(cid:105)(cid:96)
(cid:206)(cid:200)(cid:93)(cid:123)(cid:228)(cid:163)(cid:93)(cid:120)(cid:120)(cid:211)
(cid:44)(cid:62)(cid:147)(cid:86)(cid:156)(cid:202)(cid:21)(cid:136)(cid:76)(cid:105)(cid:192)(cid:152)(cid:136)(cid:62)(cid:202)(cid:29)(cid:136)(cid:147)(cid:136)(cid:204)(cid:105)(cid:96)(cid:202)
(cid:173)(cid:62)(cid:202)(cid:195)(cid:213)(cid:76)(cid:195)(cid:136)(cid:96)(cid:136)(cid:62)(cid:192)(cid:222)(cid:202)(cid:156)(cid:118)(cid:202)(cid:45)(cid:105)(cid:62)(cid:13)(cid:152)(cid:105)(cid:192)(cid:125)(cid:222)(cid:202)(cid:171)(cid:143)(cid:86)(cid:174)
(cid:206)(cid:228)(cid:93)(cid:163)(cid:153)(cid:123)(cid:93)(cid:163)(cid:153)(cid:206)
(cid:47)(cid:133)(cid:156)(cid:147)(cid:62)(cid:195)(cid:202)(cid:1)(cid:152)(cid:96)(cid:105)(cid:192)(cid:195)(cid:156)(cid:152)
(cid:153)(cid:93)(cid:200)(cid:110)(cid:110)(cid:93)(cid:200)(cid:153)(cid:206)
(cid:1)(cid:219)(cid:136)(cid:219)(cid:62)(cid:202)(cid:42)(cid:143)(cid:86)(cid:202)(cid:69)(cid:202)(cid:195)(cid:213)(cid:76)(cid:195)(cid:136)(cid:96)(cid:136)(cid:62)(cid:192)(cid:136)(cid:105)(cid:195)
(cid:163)(cid:206)(cid:93)(cid:211)(cid:123)(cid:211)(cid:93)(cid:123)(cid:163)(cid:228)
(cid:200)(cid:176)(cid:110)(cid:153)(cid:175)
(cid:153)(cid:176)(cid:123)(cid:211)(cid:175)
(cid:1)(cid:192)(cid:204)(cid:105)(cid:147)(cid:136)(cid:195)(cid:202)(cid:22)(cid:152)(cid:219)(cid:105)(cid:195)(cid:204)(cid:147)(cid:105)(cid:152)(cid:204)(cid:202)
(cid:31)(cid:62)(cid:152)(cid:62)(cid:125)(cid:105)(cid:147)(cid:105)(cid:152)(cid:204)
(cid:200)(cid:93)(cid:120)(cid:228)(cid:228)(cid:93)(cid:228)(cid:228)(cid:228)
(cid:123)(cid:176)(cid:200)(cid:206)(cid:175)
(cid:12)(cid:136)(cid:192)(cid:105)(cid:86)(cid:204)(cid:156)(cid:192)(cid:195)(cid:202)(cid:173)(cid:171)(cid:62)(cid:125)(cid:105)(cid:202)(cid:211)(cid:228)(cid:174)(cid:202)
(cid:206)(cid:93)(cid:153)(cid:110)(cid:199)(cid:93)(cid:200)(cid:110)(cid:110)
(cid:211)(cid:176)(cid:110)(cid:123)(cid:175)
(cid:42)(cid:105)(cid:192)(cid:202)(cid:86)(cid:105)(cid:152)(cid:204)(cid:202)(cid:156)(cid:118)(cid:202)(cid:86)(cid:62)(cid:171)(cid:136)(cid:204)(cid:62)(cid:143)
(cid:211)(cid:120)(cid:176)(cid:153)(cid:228)(cid:175)
(cid:211)(cid:163)(cid:176)(cid:123)(cid:110)(cid:175)
Share capital
Details of allotments made during the year are given in note 12 to the financial statements.
Creditor payment policy
The Group’s current policy concerning the payment of its trade creditors is to:
a settle the terms of payment with those suppliers when agreeing the terms of each transaction;
b ensure that those suppliers are made aware of the terms of payment by inclusion of the relevant terms in contracts; and
c pay in accordance with its contractual and other legal obligations.
The payment policy applies to all payments to creditors for revenue and capital supplies of goods and services without exception.
UK subsidiaries follow the same policy. The Group’s average creditor payment period at 31 December 2012 was 60 days (2011:
66 days).
Auditors
A resolution to reappoint Ernst & Young LLP as auditors will be put to the members at the Annual General Meeting.
* A member of the Audit Committee † A member of the Remuneration Committee
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Directors’ Report
Continued
Directors’ statement as to disclosure of information to auditors
The directors who were members of the board at the time of approving the directors’ report are listed on pages 12 and 13. Having
made enquiries of fellow directors and of the Group’s auditors, each of these directors confirms that:
• to the best of each Director’s knowledge and belief, there is no information (that is, information needed by the Group’s
auditors in connection with preparing their report) of which the Group’s auditors are unaware; and
• each Director has taken all the steps a Director might reasonably be expected to have taken to be aware of relevant audit
information and to establish that the Group’s auditors are aware of that information.
Post Balance Sheet Events
Since the end of the financial year, the Directors are not aware of any other event or circumstance which has not being dealt
with in this report which may have a significant impact on the operations of the Consolidated Entity.
Financial Instruments
Risk exposures and financial risk management policies and objectives are discussed in note 11 to the financial statements.
By order of the Board
Con Casey FCCA
Company Secretary
8 May 2013
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Corporate Governance
For the year ended 31 December 2012
Lansdowne, as an AIM-listed company, is not required to comply with the UK Corporate Governance Code (“the Code”) published
by the Financial Reporting Council in June 2010. However, the Board recognises the importance of sound corporate governance
and has ensured that, following Admission, the Group adopted policies and procedures which reflect such of the Principles of
Good Governance and the Code of Best Practice as are appropriate to the Group’s size. The main departure from the Code arises
because the Non-Executive Directors are all shareholders of the Company and therefore cannot be considered independent in
terms of the Code.
Directors
The Board comprises a Non-Executive Chairman, three Executive Directors and three further Non-Executive Directors. Biographies of
the Directors are presented on pages 12 and 13. John Greenall is the senior independent Non-Executive Director and Chairman.
Board Meeting attendance record
2012
Eligible
2012
Attended
2011
Eligible
2011
Attended
S A R Boldy
C G Moar
J Greenall
T Torrington
S R Bertram (resigned 11 September 2012)
S G Lampe
E Brown
J Aldersey-Williams (appointed 11 September 2012)
10
10
10
10
8
10
10
2
10
6
7
7
4
7
9
1
7
7
7
7
7
7
7
–
7
6
6
6
7
7
7
–
Relationship with former parent company
Three of the Directors of the Company, C G Moar, S G Lampe and J H Aldersey-Williams are also Directors of the Company’s
former parent Company, SeaEnergy PLC. SeaEnergy PLC remains a major shareholder. Under a Relationship Agreement dated April
2006, SeaEnergy PLC has undertaken that the relevant members of the SeaEnergy Group will exercise their voting rights so as
to ensure (so far as they are able by the exercise of such rights) the continued independence from SeaEnergy PLC of the majority
of the Board, that any transactions between persons or companies controlled by SeaEnergy PLC (to the extent that there are any
such transactions in the future) will be at arms’ length, and that they will not vote (as shareholder or Director) in relation to any
such transaction. SeaEnergy PLC has also undertaken that neither it nor any member of the SeaEnergy Group shall, for so long as
SeaEnergy PLC has a significant interest in the Company, compete with the Group in the sector and geographic area in which the
Group operates.
The Board is responsible for setting overall Group strategy, policy, monitoring Group performance and authorising significant
transactions.
The Board meets not less than four times a year and has adopted a schedule of matters reserved for its decision. All Directors have
full and timely access to information and may take independent professional advice at the Group’s expense.
The Board has two standing committees with terms of reference as follows:
Audit and Remuneration Committees
These committees comprise solely of Non-Executive Directors who take no part in the discussion of their own remuneration.
Audit Committee
The Audit Committee comprises John H Aldersey-Williams (Chairman), John Greenall and Viscount Torrington. It determines
the terms of engagement of the Group’s Auditors and in consultation with the Auditors, the scope of the audit. The Audit
Committee receives and reviews reports from management and the Group’s Auditors relating to the interim and annual accounts
and the accounting and internal control systems in the Group. The Audit Committee has unrestricted access to, and oversees, the
relationship with the Group’s Auditors. The Audit Committee meets at least twice a year and meets with the Group’s Auditors at
least once a year. Other Directors may attend by invitation.
The External Auditors are engaged to express an opinion on the financial statements. They review and test the systems of internal
financial control and data contained in the financial statements to the extent necessary to express their audit opinion. They discuss
with management the reporting of operational results and the financial position of the Group and present their findings to the
Audit Committee.
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Corporate Governance
Continued
The Audit Committee reviews the independence and objectivity of the External Auditors. The Committee reviews the nature
and amount of non-audit work undertaken by Ernst & Young LLP each year to satisfy itself that there is no effect on their
independence. Details of this year’s fees are given in note 15 to the accounts. The Committee is satisfied that Ernst & Young LLP
are independent.
The Group does not have an internal audit function but the need for such a function is reviewed at least annually. It is the current
view of the Board that an internal audit function is not considered appropriate given the size and nature of the operations and
the Group.
Remuneration Committee
The Remuneration Committee comprises John Greenall, Steven Lampe and Viscount Torrington (Chairman). It reviews the scale
and structure of the Executive Directors’ remuneration and the terms of their service or employment contracts, including share
option schemes and other bonus arrangements. The remuneration and terms and conditions of the Non-Executive Directors are set
by the entire Board. No Director or manager of the Company may participate in any meeting at which discussion or any decision
regarding his own remuneration takes place. The Remuneration Committee also administers any share option schemes or other
employee incentive schemes adopted by the Company from time to time. The Remuneration Report is presented on pages 18 to
20 and contains a statement of remuneration policy and details of the remuneration of each Director.
Risk management and internal control
The Board has established an ongoing process for identifying, evaluating and managing the significant risks faced by the Group.
Management from each business area and major project identify their risks, the likelihood of those risks occurring, the impact if
they do occur and the actions being taken to manage and mitigate those risks to an acceptable level. This process is reviewed by
the Board annually and accords with the Turnbull guidance on internal control. It has been in place throughout the year under
review and up to the date of this report.
The Board of Directors has overall responsibility for maintaining a sound system of internal financial control to safeguard
shareholders’ investment and the Group’s assets. Such a system can provide reasonable but not absolute assurance that assets are
safeguarded, transactions are authorised and correctly recorded, and that material errors and irregularities are either prevented
or would be detected within a timely period. The system, which has been in place throughout the year and up to the date of this
report, comprises the following main elements, all of which are reviewed by the Board:
• An organisation structure with clearly defined lines of responsibility and delegation of authority.
• Appointment of employees of the necessary calibre to fulfil their allotted responsibilities.
• Established procedures for budgeting and capital expenditure.
• Monthly reporting of actual performance compared to budget, reviewed by the Board quarterly.
• Rolling monthly forecasts for the financial year.
• The Group reports to shareholders on a half-yearly basis to ensure timely reporting of financial results.
Investor relations
Communications with investors are given high priority. The Group keeps its institutional shareholders up to date with its business
and objectives, and obtains their views on the Group, by means of periodic presentations. Additionally the Group is ready to
respond appropriately to particular issues or questions that may be raised by investors. All shareholders are sent the Annual
Report and financial statements, the Interim Report and can also elect to receive all press releases, many choosing to receive this
information by e-mail.
The Group has a website, www.lansdowneoilandgas.com, which is regularly updated and contains a wide range of information
about the Group including the AIM admission document and press releases. The Board views the AGM as an opportunity to
communicate with private investors and encourages them to attend. The Board aims to ensure that the Chairmen of the Audit
and Remuneration Committees are available to answer questions. Shareholders are invited to ask questions and are given the
opportunity to meet the Directors informally following the meeting. The Company endeavours to comply with best practice in
ensuring that the Notice of the AGM is dispatched to shareholders at least 20 working days ahead of the meeting.
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Directors’ responsibilities
The Directors are responsible for preparing the Annual Report and the Group and Company financial statements in accordance
with applicable United Kingdom law and those International Financial Reporting Standards as adopted by the European Union.
Under Company Law the directors must not approve the Group and Company financial statements unless they are satisfied that
they present fairly the financial position, financial performance and cash flows of the Group and Company for that period. In
preparing the Group and Company financial statements the directors are required to:
• select suitable accounting policies in accordance with IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors
and then apply them consistently;
• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and
understandable information;
• provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to
understand the impact of particular transactions, other events and conditions on the Group and Company’s financial position
and financial performance;
• monthly reporting of actual performance compared to budget, reviewed by the Board quarterly.
• state that the Group and Company has complied with IFRSs, subject to any material departures disclosed and explained in the
financial statements; and
• make judgements and estimates that are reasonable and prudent.
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 Group and Company financial statements comply with the Companies Act 2006 and Article 4
of the IAS Regulation. They 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 maintenance and integrity of the Lansdowne Oil & Gas plc website is the responsibility of the Directors. The work carried out by
the Auditors does not involve consideration of these matters and, accordingly, the Auditors accept no responsibility for any changes
that may have occurred to the financial statements since they were initially presented on the website.
Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation
in other jurisdictions.
Going concern
The financial statements have been prepared on the going concern basis which assumes that the Company and its subsidiaries will
continue in operational existence for the foreseeable future.
The Directors consider that it is appropriate to adopt a going concern assumption in preparing these financial statements for the
reasons outlined in note 1 to the financial statements.
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Remuneration Report
For the year ended 31 December 2012
Introduction
This report has been prepared in accordance with the provisions of Schedule 8 to the Large and Medium Sized Companies and
Group (Accounts and Reports) Regulations 2008, except for the non-inclusion of a performance graph and provision of details
of how remuneration packages have been benchmarked. Lansdowne, as an AIM-listed Company, is not required to comply with
these requirements but it is committed to the highest standards of Corporate Governance. This report also meets the relevant
requirements of the Listing Rules of the Financial Services Authority and describes how the Board has applied the Principles of Good
Governance relating to Directors’ remuneration.
Remuneration Committee
The members of the Remuneration Committee (The Committee) are John Greenall, Steven Lampe and Viscount Torrington
(Chairman), all of whom are Non-Executive Directors of the Company. The Committee has followed the provisions set out in
Schedules A and B of The Code in preparing this report. The Committee believes that Lansdowne’s reward structure is in accordance
with those recommendations.
The Committee, which meets at least twice each year, is responsible to the Board for determining the terms and conditions
of employment of the Executive Directors and their remuneration packages (including pension rights and any compensation
payments) and oversees the operation of the Company’s Employee Share Option Scheme.
The Committee has access to external independent professional advice, at the Company’s expense, as the Committee sees fit.
None of the Committee members has any personal financial interest in the matters to be decided by the Committee or any conflicts
arising from cross- directorships or day-to-day involvement in the running of Lansdowne.
Remuneration policy
Lansdowne operates in the international oil and gas industry and aims to attract, reward, motivate and retain top executives in a
manner appropriate to that industry and with the objective of long term accumulation of value for shareholders. The remuneration
packages currently being offered are intended to be competitive and comprise a mix of performance related and non-performance
related remuneration designed to incentivise Directors, but not to detract from the goals of Corporate Governance. The packages
are in line with industry norms.
Directors’ service contracts
S A R Boldy and E Brown have service contracts with the Company with a rolling notice period of one year. The other Directors do
not have service contracts with the Company.
The remuneration of Non-Executive Directors is determined by the Board after consideration of appropriate external comparisons
and the responsibilities and time involvement of individual Directors. No Director is involved in deciding his own remuneration.
Remuneration package
Directors’ remuneration packages, which are reviewed annually, consist of annual salary, performance related bonuses, health and
other benefits, pension contributions and share options.
S A R Boldy and E Brown are each entitled to annual bonuses equal to 2 per cent of the consolidated audited after tax profits of the
Company and its subsidiaries subject to a cap equal to their annual salaries during the relevant financial year. They are also entitled
to bonus payments on the entering into of binding agreements with third parties in respect of any farmout arrangements relating
to the Group’s assets, with a requirement to utilise any such bonus payments to subscribe for Ordinary Shares of the Company.
C G Moar receives no salary in relation to his appointment. He remains an employee of SeaEnergy PLC, a major shareholder. The
costs of his services were included in the monthly management charge paid to SeaEnergy PLC (note 24) until that agreement ended
in September 2012. In the opinion of the Directors it is not possible to apportion an element of the monthly management charge
to directors’ services and accordingly no allocation has been made.
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Directors’ detailed emoluments
Salary
Performance
and fees Related Bonus
£’000
£’000
Executive Directors
S A R Boldy
E Brown
Non-Executive Directors
J Greenall
T Torrington
S R Bertram (1)
S G Lampe (2)
J H Aldersey-Williams (3)
C G Moar
2012
2011
179
179
15
15
–
15
–
–
403
415
–
–
–
–
–
–
–
–
–
–
Aggregate
Benefits Emoluments
£’000
£’000
3
3
–
–
–
–
–
–
6
6
182
182
15
15
–
15
–
–
409
421
2012
Pension
2011
Pension
Contributions Contributions
£’000
£’000
2012 2011
Total Total
£’000 £’000
27
27
–
–
–
–
–
–
28
29
209 224
209 224
–
–
–
–
–
–
15
15
–
15
–
–
15
15
–
–
–
–
54
463
57
478
(1) Waived fees from 1 January 2009 onwards.
(2) All fees are paid to Lampe Conway & Co LLC. S Lampe is Managing member of Lampe Conway & Co LLC.
(3) Waived fees from 11 September 2012.
In addition to the above cash based emoluments, the expense/(credit) in the year for share options awarded to S A R Boldy was
£52,000 (2011: £35,000), E Brown £21,000 (2011: £22,000), C G Moar £9,000 (2011: £9,000), J Greenall £5,000 (2011: £2,000),
T Torrington £5,000 (2011: £2,000) and S R Bertram £5,000 (2011: £2,000).
Interests in share options
Exercise
Price
At
31 Dec
2011
2012
Lapsed
2012
Granted
At
31 Dec
2012
Normal
Exercise
Dates
S A R Boldy
36.5p
–
S A R Boldy
25p
1,000,000
E Brown
E Brown
36.5p
–
25p
400,000
C G Moar
36.5p
–
C G Moar
25p
250,000
J Greenall
36.5p
–
J Greenall
25p
100,000
–
–
–
–
–
–
–
–
600,000
600,000
–
1,000,000
240,000
240,000
–
400,000
50,000
50,000
–
250,000
50,000
50,000
–
100,000
1 June 2015
to 31 May 2022
20 May 2014
to 19 May 2021
1 June 2015
to 31 May 2022
20 May 2014
to 19 May 2021
1 June 2015
to 31 May 2022
20 May 2014
to 19 May 2021
1 June 2015
to 31 May 2022
20 May 2014
to 19 May 2021
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Remuneration Report
Continued
Interests in Share Options continued
T Torrington
Exercise
Price
36.5p
At
31 Dec
2011
–
T Torrington
25p
100,000
S R Bertram
36.5p
–
S R Bertram
25p
100,000
S G Lampe
36.5p
–
2012
Lapsed
2012
Granted
At
31 Dec
2012
–
–
–
–
–
50,000
50,000
–
100,000
50,000
50,000
–
100,000
50,000
50,000
–
1,950,000
–
1,090,000
3,040,000
Normal
Exercise
Dates
1 June 2015
to 31 May 2022
20 May 2014
to 19 May 2021
1 June 2015
to 31 May 2022
20 May 2014
to 19 May 2021
1 June 2015
to 31 May 2022
Details of the performance criterion, conditional upon which the options are exercisable, is set out in note 17 to the accounts.
During 2012, the share price ranged between a high of 65.12p and a low of 29.88p. The quarterly highest and lowest closing
share prices are detailed in note 12.
Interests in shares
The beneficial interests of the Directors who served during the year in the ordinary shares of 5p of the Company are as follows:
S A R Boldy
S R Bertram
C G Moar
J Greenall
T Torrington
S G Lampe
E Brown
J H Aldersey-Williams
At
31 Dec
2011
At
31 Dec
2012
At
8 May
2013
52,660
52,660
52,660
141,314
–
–
– –
–
85,380
85,380
85,380
105,880
105,880
105,880
–
–
–
3,743,768
3,743,768
3,743,768
–
– –
4,129,002
3,987,688
3,987,688
S G Lampe has a non-beneficial interest in 36,401,552 shares in Lansdowne held by LC Capital Master Fund Limited (36,205,474
shares) and Lampe Conway and Co. LLC (196,078 shares). S Lampe is managing member of Lampe Conway & Co. LLC, the
investment manager of LC Capital Master Fund Limited.
Pensions
Directors’ pensions are based on salary only, with bonuses and other discretionary benefits excluded.
Retirement benefits were accruing to two Executive Directors under the Group’s defined contribution scheme where the Company
contributes at a rate of 15 per cent of salary.
On behalf of the Board
T Torrington
Chairman, Remuneration Committee
8 May 2013
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Independent Auditors’ Report to the Shareholders of Lansdowne Oil & Gas plc
We have audited the financial statements of Lansdowne Oil & Gas plc for the year ended 31 December 2012 which comprise the
Consolidated Income Statement, the Consolidated Statement of Financial Position, the Company Statement of Financial Position,
the Consolidated Statement of Cash Flows, the Company Statement of Cash Flows, the Consolidated Statement of Changes in
Equity, the Company Statement of Changes in Equity, Statement of Accounting Policies and the related notes 1 to 25. The financial
reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards
(“IFRSs”) as adopted by the European Union, and as regards the parent company financial statements, as applied in accordance
with the provisions of the Companies Act 2006.
This report is made solely to the company’s members, as a body, in accordance with chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to
state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for
the opinions we have formed.
Respective responsibilities of directors and auditors
As explained more fully in the Directors’ Responsibilities Statement set out on page 17, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and
express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and
Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable
assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the Group’s and the parent Company’s circumstances and have
been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors;
and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in
the Annual Report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent
material misstatements or inconsistencies we consider the implications for our report.
Opinion on financial statements
In our opinion:
• the financial statements give a true and fair view of the state of the Group’s and the Company’s affairs as at 31 December
2012 and of the Group’s loss for the year then ended;
• the consolidated financial statements have been properly prepared in accordance with International Financial Reporting
Standards (“IFRSs”) as adopted by the European Union;
• the company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union
and as applied in accordance with the provisions of the Companies Act 2006; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Emphasis of matter – going concern
In forming our opinion on the financial statements, which is not qualified, we have considered the adequacy of the disclosure made
in note 1 to the financial statements concerning the Company’s ability to continue as a going concern. The conditions referred to
in note 1 to the financial statements; indicate the existence of a material uncertainty, which may cast significant doubt about the
Company’s ability to continue as a going concern. The financial statements do not include the adjustments that would result if the
Company was unable to continue as a going concern.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Directors’ Report for the financial year for which the financial statements are prepared
is consistent with the financial statements.
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Independent Auditors’ Report to the Shareholders of Lansdowne Oil & Gas plc
Continued
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in
our opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been
received from branches not visited by us; or
• the company financial statements are not in agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Kevin Weston
Senior statutory auditor
for and on behalf of Ernst & Young LLP, Statutory Auditor
Aberdeen
10 May 2013
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2012
£’000
(991 )
(29 )
(1,020 )
(140 )
13
(1,147 )
53
(1,094 )
(0.9p )
(0.9p )
2012
£’000
(1,094 )
53
(1,041 )
Consolidated Income Statement
For the year ended 31 December 2012
Administrative expenses
Disposal of intangible assets
Operating loss
Finance costs
Finance income
Loss for the year before tax
Income tax credit
Loss for the year
Loss per share (pence):
Basic loss per ordinary share
Diluted loss per ordinary share
Notes
15
18
18
19
2
2
The results for the period all arise on continuing operations.
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2012
Loss for the year
Currency translation differences
Total comprehensive loss for the year
The accompanying notes on pages 36-45 form an integral part of these financial statements.
These financial statements were approved by the Board of Directors on 8 May 2013.
Emmet Brown
Director
Stephen Boldy
Director
2011
£’000
(1,007 )
–
(1,007 )
(30 )
152
(885 )
105
(780 )
(0.8p )
(0.8p )
2011
£’000
(780 )
(5 )
(785 )
2
1
0
2
S
T
N
E
M
E
T
A
T
S
L
A
I
C
N
A
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I
F
&
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O
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A
U
N
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A
23
C
L
P
S
A
G
&
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I
O
E
N
W
O
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A
L
Consolidated Statement of Financial Position
As at 31 December 2012
Assets
Notes
Non-Current Assets
Intangible assets
Property, plant and equipment
Goodwill
Current Assets
Trade and other receivables
Cash and cash equivalents
Total Assets
Equity and Liabilities
Shareholders’ Equity
Share capital
Share premium
Other reserves
Accumulated deficit
Total Equity
Non-Current Liabilities
Deferred income tax liabilities
Current Liabilities
Trade and other payables
Borrowings
Total Liabilities
Total Equity and Liabilities
3
4
3
6
7
12
12
13
14
10
8
9
The accompanying notes on pages 36-45 form an integral part of these financial statements.
These financial statements were approved by the Board of Directors on 8 May 2013.
Emmet Brown
Director
Stephen Boldy
Director
2012
£’000
24,399
1
1,421
25,821
101
5,549
5,650
31,471
7,027
25,273
118
(6,070 )
26,348
1,263
1,263
3,860
–
3,860
5,123
31,471
2011
£’000
16,365
1
1,421
17,787
36
3,228
3,264
21,051
6,118
16,736
65
(5,076 )
17,843
1,316
1,316
1,719
173
1,892
3,208
21,051
2
1
0
2
S
T
N
E
M
E
T
A
T
S
L
A
I
C
N
A
N
I
F
&
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A
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A
24
C
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P
S
A
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&
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I
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N
W
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L
Company Statement of Financial Position
As at 31 December 2012
Assets
Notes
Non-Current Assets
Property, plant and equipment
Investment in subsidiaries
Current Assets
Trade and other receivables
Cash and cash equivalents
Total Assets
Equity and Liabilities
Shareholders’ Equity
Share capital
Share premium
Accumulated deficit
Total Equity
Current Liabilities
Trade and other payables
Borrowings
Total Liabilities
Total Equity and Liabilities
4
5
6
7
12
12
14
8
9
2012
£’000
1
5,432
5,433
97
5,548
5,645
11,078
7,027
25,273
(25,060 )
7,240
3,838
–
3,838
11,078
2011
£’000
1
5,432
5,433
36
3,228
3,264
8,697
6,118
16,736
(15,888 )
6,966
1,558
173
1,731
8,697
The accompanying notes on pages 36-45 form an integral part of these financial statements.
These financial statements were approved by the Board of Directors on 8 May 2013.
Emmet Brown
Director
Stephen Boldy
Director
2
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2
S
T
N
E
M
E
T
A
T
S
L
A
I
C
N
A
N
I
F
&
T
R
O
P
E
R
L
A
U
N
N
A
25
C
L
P
S
A
G
&
L
I
O
E
N
W
O
D
S
N
A
L
Consolidated Statement of Cash Flows
for the year ended 31 December 2012
Cash flows from operating activities
Cash generated by operations
Net finance expense/ (income)
Net cash generated by operating activities
Cash flows from investing activities
Acquisition of intangible exploration assets
Acquisition of property, plant and equipment
Interest received
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issuance of ordinary shares
Proceeds from borrowings
Repayment of borrowings
Interest paid
Net cash generated from financing activities
Notes
20
3
18
12
9
2012
£’000
1,111
127
1,238
(8,063 )
–
13
(8,050 )
9,446
–
(173 )
(114 )
9,159
2011
£’000
192
(122 )
70
(7,632 )
(1 )
19
(7,614 )
10,550
65
–
(2 )
10,613
Effect of exchange rate fluctuations on cash held
(26 )
133
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
7
7
2,321
3,228
5,549
3,202
26
3,228
The accompanying notes on pages 36-45 form an integral part of these financial statements.
2
1
0
2
S
T
N
E
M
E
T
A
T
S
L
A
I
C
N
A
N
I
F
&
T
R
O
P
E
R
L
A
U
N
N
A
26
C
L
P
S
A
G
&
L
I
O
E
N
W
O
D
S
N
A
L
Company Statement of Cash Flows
for the year ended 31 December 2012
Cash flows from operating activities
Cash used in operations
Net finance expense /(income)
Net cash used in operating activities
Cash flows from investing activities
Acquisition of property, plant and equipment
Interest received
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issuance of ordinary shares
Proceeds from borrowings
Repayment of borrowings
Interest paid
Net cash generated from financing activities
Notes
20
18
12
9
2012
£’000
(6,953 )
20
(6,933 )
–
13
13
9,446
–
(173 )
(7 )
9,266
2011
£’000
(7,440 )
(122 )
(7,562 )
(1 )
19
18
10,550
65
–
(2 )
10,613
Effect of exchange rate fluctuations on cash held
(26 )
133
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
7
7
2,320
3,228
5,548
3,202
26
3,228
The accompanying notes on pages 36-45 form an integral part of these financial statements.
2
1
0
2
S
T
N
E
M
E
T
A
T
S
L
A
I
C
N
A
N
I
F
&
T
R
O
P
E
R
L
A
U
N
N
A
27
C
L
P
S
A
G
&
L
I
O
E
N
W
O
D
S
N
A
L
Consolidated Statement of Changes in Equity
For the year ended 31 December 2012
Share
Capital
£’000
Share
Premium
£’000
Other Accumulated
Deficit
£’000
Reserve
£’000
Total
Equity
£’000
Balance at 1 January 2011
Loss for the financial year
Currency translation difference (note 13)
2,685
7,672
–
–
–
–
Total comprehensive income for the year
2,685
7,672
Share based payments charge (note 17)
Issue of new shares – gross consideration (note 12)
Issue of new shares – debt conversion (note 12)
Cost of share issues
–
3,043
390
–
–
8,087
1,558
(581 )
70
–
(5 )
65
–
–
–
–
(4,362 )
6,065
(780 )
–
(780 )
(5 )
(5,142 )
5,280
66
–
–
–
66
11,130
1,948
(581 )
Balance at 31 December 2011
6,118
16,736
65
(5,076 )
17,843
Balance at 1 January 2012
Loss for the financial year
Currency translation difference (note 13)
6,118
16,736
–
–
–
–
65
-
53
(5,076 )
(1,094 )
–
17,843
(1,094 )
53
Total comprehensive income for the year
6,118
16,736
118
(6,170 )
16,802
Share based payments charge (note 17)
Issue of new shares – gross consideration (note 12)
Cost of share issues
–
909
–
9,091
(554 )
–
–
–
100
–
–
100
10,000
(554 )
Balance at 31 December 2012
7,027
25,273
118
(6,070 )
26,348
The accompanying notes on pages 36-45 form an integral part of these financial statements.
2
1
0
2
S
T
N
E
M
E
T
A
T
S
L
A
I
C
N
A
N
I
F
&
T
R
O
P
E
R
L
A
U
N
N
A
28
C
L
P
S
A
G
&
L
I
O
E
N
W
O
D
S
N
A
L
Company Statement of Changes in Equity
For the year ended 31 December 2012
Balance at 1 January 2011
Loss for the financial year
Share based payments charge (note 17)
Issue of new shares – gross consideration (note 12)
Issue of new shares – debt conversion (note 12)
Cost of share issues
Share
Capital
£’000
Share Accumulated
Deficit
£’000
Premium
£’000
2,685
7,672
–
–
3,043
390
–
–
–
8,087
1,558
(581 )
(7,281 )
(8,673 )
66
–
–
–
Total
Equity
£’000
3,076
(8,673 )
66
11,130
1,948
(581 )
Balance at 31 December 2011
6,118
16,736
(15,888 )
6,966
Balance at 1 January 2012
Loss for the financial year
Share based payments charge (note 17)
Issue of new shares – gross consideration (note 12)
Cost of share issues
6,118
16,736
(15,888 )
–
–
909
–
–
–
9,091
(554 )
(9,272 )
100
–
–
Balance at 31 December 2012
7,027
25,273
(25,060 )
6,966
(9,272 )
100
10,000
(554 )
7,240
The accompanying notes on pages 36-45 form an integral part of these financial statements.
2
1
0
2
S
T
N
E
M
E
T
A
T
S
L
A
I
C
N
A
N
I
F
&
T
R
O
P
E
R
L
A
U
N
N
A
29
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A
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I
O
E
N
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O
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A
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Statement of Accounting Policies
For the year ended 31 December 2012
1. Presentation of accounts and accounting policies
General information
Lansdowne Oil & Gas plc (the “Company”) and its subsidiaries (together, the “Group”) explore for and develop oil and gas reserves
in the Irish Celtic Sea.
The Company is a public limited company, incorporated and domiciled in the UK. The address of its registered office is McGrigors
LLP 5 Old Bailey, London EC4M 7BA.
The Company’s shares are quoted on the AIM Market of the London Stock Exchange.
Basis of preparation
The consolidated financial statements are presented in Sterling and all values are rounded to the nearest thousand (£’000) except
where otherwise indicated.
The Directors have prepared the accounts on the going concern basis which assumes that the Group and Company and its
subsidiaries will continue in operational existence for at least twelve months from the date of these accounts as described below.
During the year the Group and Company successfully raised funds of £9.4 million (net) through placing of new ordinary shares
to enable the company to fund their share of costs in relation to the continued evaluation of the licences held, and meet the
company’s working capital requirements.
In relation to Barryroe, the Directors are confident that with the successful well test, Providence, as operator, will be able to
conclude a farm out deal. The Company is participating in this process with Providence and the Directors believe this will provide
sufficient resources for the Company to continue with the appraisal of this licence.
Macquarie Capital have commenced a farm out process across the Company’s other licences, in order to find a partner(s) to
participate in the next stage drilling. A data room is operational with a number of interested parties currently reviewing the
information contained therein. The Directors are confident that with the positive results from the seismic surveys they will be able
to conclude a farm out deal(s) which will provide sufficient resources for the Company to continue with the appraisal of these
licences held.
The Directors believe that the Company has a number of available funding options; the Company’s primary aim is to conclude
the ongoing farm out campaign with a view to attracting industry partners to drill wells, plus the Company also has the option of
issuing new equity that would provide the company with sufficient resources to progress the licences in the near term.
The Directors believe that at the date of these financial statements there exists a material uncertainty regarding whether or not the
Company will be successful in raising the required future funding to progress the appraisal of the licences held, which may cast
significant doubt upon the ability of the Company to continue as a going concern and therefore to realise its assets and discharge
its liabilities in the normal course of business. Nevertheless, after making enquiries and considering all the relevant factors, the
Directors are of the opinion that with the current level of interest in the farm out process and the option of issuing new equity, the
Company will be able to source the necessary funds.
Although this material uncertainty exists, the Directors have a reasonable expectation that the Group and Company will have
adequate resources to continue in operational existence for the foreseeable future and have therefore concluded that it is
appropriate to adopt the going concern basis in preparing these financial statements.
If for any reason the uncertainty described above cannot be successfully resolved, the going concern basis may no longer be
appropriate. The financial statements do not include any adjustments that would result if the Group and Company was unable to
continue as a going concern.
Accounting policies
The financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) and
International Financial Reporting Interpretations Committee (“IFRIC”) interpretations endorsed by the European Union (“EU”) as
applied in accordance with the provisions of the Companies Act 2006 applicable to companies reporting under IFRS. A summary
of the more important accounting policies, which have been applied consistently, is set out below.
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A
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A
30
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&
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I
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E
N
W
O
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S
N
A
L
Change in accounting policies
New and amended standards and interpretations
The accounting policies adopted are consistent with those of the previous financial year, except for the following new and amended
IFRS effective as of 1 January 2012:
• IAS 12 Income Taxes (Amendment) – Deferred Taxes: Recovery of Underlying Assets
• IFRS 7 Financial Instruments: Disclosures – Enhances Derecognition Disclosure Requirements
The adoption of the standards or interpretations is described below:
Standards, amendments and interpretation effective in 2012 but not relevant
• IFRS 1 First-Time Adoption of International Financial Reporting Standards
(Amendments) – Serve Hyperinflation and Removal of Fixed Dates for First-Time Adopters IFRS 7 Financial Instruments: Disclosures-
(Amendments)
Standards, amendments and interpretations issued but not yet effective
At the date the financial statements were authorised for issue, the following standards, interpretation and amendments, which are
not expected to impact the Group’s financial position or performance, were in issue but not yet effective:
Standard
IAS 1
IFRS 9
IFRS 10
IFRS 11
IFRS 12
IFRS 13
IAS 27
IAS 28
IFRS 7
IAS 32
‘Presentation of items of Other Comprehensive Income’
‘Financial Instruments’
‘Consolidated Financial Statements’
‘Joint Arrangements’
‘Disclosure of Interests in Other Entities’
‘Fair Value Measurement’
‘Separate Financial Statements’
‘Investments in Associates and Joint Ventures’
‘Disclosures- Offsetting Financial Assets and Financial Liabilities-Amendments to IFRS 7’
‘Offsetting Financial Assets and Financial Liabilities-Amendments to IAS 32’
Effective Date
1 July 2012
1 January 2015
1 January 2014
1 January 2014
1 January 2014
1 January 2013
1 January 2014
1 January 2014
1 January 2013
1 January 2014
Basis of accounting
The Group prepares its accounts on the historical cost basis. Where the carrying value of assets and liabilities are calculated on a
different basis, this is disclosed in the relevant accounting policy.
Basis of consolidation
The consolidated accounts include the results of Lansdowne Oil & Gas plc and its subsidiary undertakings, made up to 31 December
each year. No separate income statement is presented for the parent company, as permitted by Section 408 of the Companies Act
2006.
The subsidiaries are those companies controlled, directly or indirectly, by Lansdowne Oil & Gas plc, where control is defined as
the power to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. This control is
normally evidenced when Lansdowne Oil & Gas plc owns, either directly or indirectly, more than 50 per cent. of the voting rights or
potential voting rights of a company’s share capital. Companies acquired during the year are consolidated from the date on which
control is transferred to the Group, and subsidiaries to be divested are included up to the date on which control passes from the
Group. Inter-company balances, transactions and resulting unrealised income are eliminated in full.
Joint ventures
The Group participates in several unincorporated Joint Ventures which involve the joint control of assets used in the Group’s oil
and gas exploration activities. The Group accounts for its proportionate share of assets, liabilities, income and expenditure of Joint
Ventures in which the Group holds an interest, classified in the appropriate balance sheet and income statement headings.
2
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2
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A
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S
L
A
I
C
N
A
N
I
F
&
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R
O
P
E
R
L
A
U
N
N
A
31
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N
W
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N
A
L
Statement of Accounting Policies
Continued
Oil and gas intangible exploration/appraisal assets and property, plant & equipment –
development/producing assets
All expenditure relating to oil and gas activities is capitalised in accordance with the “successful efforts” method of accounting,
as described in the Oil and Gas SORP. The Group’s policy for oil and gas assets is also compliant with IFRS 6 “Exploration for and
Evaluation of Mineral Resources”. Under this standard the Group’s exploration and appraisal activities are capitalised as intangible
assets and its development and production activities are capitalised as part of the “Property, plant and equipment” asset category.
All costs incurred prior to the acquisition of licences are expensed immediately to the income statement.
Licence acquisition costs, geological and geophysical costs and the direct costs of exploration and appraisal are initially capitalised
as intangible assets, pending determination of the existence of commercial reserves in the licence area. Such costs are classified
as intangible assets based on the nature of the underlying asset, which does not yet have any proven physical substance.
Exploration and appraisal costs are held, un-depleted, until such a time as the exploration phase on the licence area is complete or
commercial reserves have been discovered. If commercial reserves are determined to exist and the technical feasibility of extraction
demonstrated, then the related capitalised exploration/appraisal costs are first subjected to an impairment test (see below) and the
resulting carrying value is transferred to the development and producing assets category within property, plant and equipment. If
no commercial reserves exist then that particular exploration/appraisal effort was “unsuccessful” and the costs are written off to
the income statement in the period in which the evaluation is made. The success or failure of each exploration/appraisal effort is
judged on a well by well basis.
All costs incurred after the technical feasibility and commercial viability of producing hydrocarbons has been demonstrated are
capitalised within development/producing assets on a field by field basis. Development expenditure comprises all costs incurred
in bringing a field to commercial production, including financing costs. Subsequent expenditure is capitalised only where it either
enhances the economic benefits of the development/producing asset or replaces part of the existing development/producing asset.
Any costs remaining associated with the part replaced are expensed.
Net proceeds from any disposal of an exploration asset are initially credited against the previously capitalised costs. Any surplus
proceeds are credited to the income statement. Net proceeds from any disposal of development/ producing assets are credited against
the previously capitalised cost. A gain or loss on disposal of a development/producing asset is recognised in the income statement to
the extent that the net proceeds exceed or are less than the appropriate portion of the net capitalised costs of the asset.
Upon commencement of production, capitalised costs are amortised on a unit of production basis that is calculated to write off the
expected cost of each asset over its life in line with the depletion of proved and probable reserves.
Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount
exceeds its recoverable amount. The recoverable amount is the higher of an asset’s net realisable value less costs to sell and value
in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable
cash flows. These cash-generating units (“CGUs”) are aligned to the business unit and sub-business unit structure the Group uses
to manage its business. Cash flows are discounted in determining the value in use.
Where there has been a charge for impairment in an earlier period that charge will be reversed in a later period where there has
been a change in circumstances to the extent that the discounted future net cash flows are higher than the net book value at the
time. In reversing impairment losses, the carrying amount of the asset will be increased to the lower of its original carrying value or
the carrying value that would have been determined (net of depletion) had no impairment loss been recognised in prior periods.
Goodwill
Goodwill represents the excess of the fair value of the consolidation over the fair value of the Group’s share of the net identifiable
assets of the acquired subsidiary at the date of acquisition. Goodwill on acquisition of subsidiaries is included in “intangible assets”.
Separately recognised goodwill is assessed upon acquisition, and annually for impairment and carried at cost less accumulated
impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the
carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-
generating units that are expected to benefit from the business combination in which the goodwill arose.
Goodwill is not subject to amortisation but is tested for impairment annually or whenever there is an indication that the asset may
be impaired.
2
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A
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A
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A
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For the purpose of impairment testing, assets are grouped at the lowest levels for which there are separately identifiable cash flows,
known as cash-generating units. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit,
the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other
assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. Impairment losses recognised for goodwill
are not reversed in a subsequent period.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value
of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
Property, plant and equipment
Property, plant and equipment is stated at historical cost or deemed cost less accumulated depreciation and any impairment in
value. Depreciation is charged to the income statement on a straight line basis over the estimated useful lives of the items of
property, plant and equipment. The depreciable amount is the cost less residual value based on prices prevailing at the balance
sheet date. The depreciation charge is spread equally over the expected useful economic lives of the assets as follows:
• Furniture, fittings and equipment 4-5 years
Expected useful lives and residual values are reviewed each year and adjusted if appropriate.
Profits and losses on disposal of property, plant and equipment are calculated as the difference between the net sales proceeds and
the carrying amount of the asset at the date of disposal.
Investments
Shares in Group undertakings are held at cost less impairment provisions. Impairments occur where the recoverable value of the
investment is less than its carrying value. The recoverable value of the investment is the higher of its fair value less costs to sell and
value in use. Value in use is based on the discounted future net cash flows of the investee.
Leases as lessee
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership
to the lessee. All other leases are classified as operating leases and are charged to the income statement on a straight-line basis
over the term of the lease.
Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with banks and other short term highly liquid investments
with original maturities of three months or less.
Equity
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs, allocated between share
capital and share premium.
Taxation
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities,
based on tax rates and laws that are enacted or substantively enacted by the balance sheet date.
Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and their
carrying amounts in the financial statements, with the following exceptions:
• Where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is
not a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss;
•
In respect of taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, where the
timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not
reverse in the foreseeable future; and
• Deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available against
which the deductible temporary differences, carried forward tax credits or tax losses can be utilised.
Deferred income tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected to apply when the
related asset is realised or liability is settled, based on tax rates or laws enacted or substantively enacted at the balance sheet date.
2
1
0
2
S
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N
E
M
E
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A
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S
L
A
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A
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A
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A
33
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Statement of Accounting Policies
Continued
The carrying amount of deferred income tax assets is reviewed at each balance sheet date. Deferred income tax assets and liabilities
are offset, only if a legal enforcement right exists to set off current tax assets against current tax liabilities, the deferred income tax
relates to the same taxation authority and that authority permits the group to make a single net payment.
Income tax is charged or credited to other comprehensive income if it relates to items that are charged or credited to other
comprehensive income. Similarly income tax is charged or credited directly to equity if it relates to items that are credited or
charged directly to equity. Otherwise income tax is recognised in the income statement.
Defined contribution pension schemes
The Group contributes to a defined contribution pension scheme. The pension cost represents contributions payable by the Group
to the scheme.
Share based payments
The Group incentivises its employees and Directors with access to equity-settled share option schemes, details of which are given
in the Directors’ Remuneration Report and note 17 of these financial statements.
The cost of awards to employees and Directors under the share option scheme is recognised over the three or five year period to
which the performance criteria relate. The amount recognised is based on the fair value of the share options, as measured at the
date of the award. The corresponding credit is taken to a share based payments reserve, which is included within retained earnings.
The proceeds on exercise of share options are credited to share capital and share premium.
The share options are valued using a Total Shareholder Return (“TSR”) simulation model, which adjusts the fair value for the market-
based performance criteria in the schemes. The TSR simulation model is based on the Monte Carlo model and is tailored to meet
the requirements of the scheme’s performance criteria. The inputs to the model include the share price at date of grant, exercise
price, expected volatility, expected dividends, risk free rate of interest and patterns of early exercise of the plan participants.
Share based payments made to parties other than employees are valued at the fair value of the services received, where this can be
reliably measured, and at the fair value of the instrument used otherwise. The cost is recognised over the period that the service is
received with the corresponding credit taken to the share based payments reserve.
No expense is recognised for awards that do not ultimately vest, except for equity settled transactions where vesting is conditional
upon a market or non-vesting condition, which are treated as vesting irrespective of whether or not the market or non-vesting
condition is satisfied, provided that all other performance and/or service conditions are satisfied.
Where the terms of an equity settled transaction award are modified, the minimum expense recognised is the expense as if the
terms had not been modified, if the original terms of the award are met. An additional expense is recognised for any modification
that increases the total fair value of the share based payment transaction, or is otherwise beneficial to the employee as measured
at the date of the modification.
Where an equity settled award is cancelled, it is treated as if it vested on the date of cancellation, and any expense not yet
recognised for the award is recognised immediately. This includes any award where non-vesting conditions within the control of
either the entity or the employee are not met. However, if a new award is substituted for the cancelled award, and designated as
a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the
original award, as described in the previous paragraph. All cancellations of equity settled transactions are treated equally.
Revenue and other income
Interest income is recognised on an accruals basis and is presented within “Finance income” in the income statement.
Foreign currency
The Group’s consolidated financial statements are presented in Sterling, which is also the parent company’s functional currency.
The assessment of functional currency has been based on the currency of the economic environment in which the Group operates
and in which its revenue and costs arise. These accounts have been presented in Sterling, which is the functional currency of most
companies within the Group. The financial statements of overseas subsidiaries and associated undertakings are maintained in
their functional currency. Where the functional currency differs from the Group’s presentational currency, they are translated into
Sterling at the rate of exchange ruling at the balance sheet date. The exchange difference arising on the retranslation of opening
net assets is taken directly to a cumulative translational reserve.
Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the rate of exchange
ruling at the balance sheet date. Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. All
exchange gains and losses are taken to the income statement. Gains and losses on trading assets and liabilities are presented within
2
1
0
2
S
T
N
E
M
E
T
A
T
S
L
A
I
C
N
A
N
I
F
&
T
R
O
P
E
R
L
A
U
N
N
A
34
C
L
P
S
A
G
&
L
I
O
E
N
W
O
D
S
N
A
L
“Operating expenses”, and gain and losses on cash and cash equivalents are presented within “Finance income” or “Finance
expense”.
Financial instruments and risk management
The Group’s current and anticipated operations expose it to a variety of financial risks that include the effects of changes in foreign
currency exchange rates, interest rates and commodity prices. The Board approves the use of financial products to manage the
Group’s exposure to fluctuations in foreign currency exchange rates, interest rates and commodity prices. Further details of the
Group’s accounting policy for financial instruments and risk management are given in note 11.
Judgements and key sources of estimation uncertainty
The Group has used judgements, estimates and assumptions in arriving at certain figures in the preparation of its financial
statements. The resulting accounting estimates may not equate with the actual results which will only be known in time.
Those areas believed to be key areas of estimation are;
– Impairment testing (note 1)
– Share based payments (note 17)
– Deferred tax (note 10)
Those areas believed to be key areas of judgements are;
– Going concern (note 1)
– Oil and Gas Intangible exploration/ appraisal assets (note 1)
Further details of the assumptions used can be found in this note and in the notes to these financial statements.
Interest-bearing loans and borrowings
All loans and borrowings are initially recognised at fair value less directly attributable transaction costs. After initial recognition,
interest- bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Gains and
losses arising on the repurchase, settlement or otherwise cancellation of liabilities are recognised respectively in interest income and
interest expense.
2
1
0
2
S
T
N
E
M
E
T
A
T
S
L
A
I
C
N
A
N
I
F
&
T
R
O
P
E
R
L
A
U
N
N
A
35
C
L
P
S
A
G
&
L
I
O
E
N
W
O
D
S
N
A
L
Notes to the Financial Statements
For the year ended 31 December 2012
1. Segmental Reporting
The directors believe that the Group has only one reportable operating and geographic segment, which is the exploration for oil
and gas reserves in Ireland. All operations are classified as continuing and currently no revenue is generated from the operating
segment.
The Chief Executive monitors the operating results of its operating segment for the purposes of making decisions and performance
assessment. Segment performance is evaluated based on operating profit or loss and is reviewed consistently with operating profit
or loss in the consolidated financial statements.
2. Loss per ordinary share
The loss for the year was wholly from continuing operations.
Loss for the year attributable to equity holders
2012
£’000
(1,094 )
2011
£’000
(780 )
Weighted average number of ordinary shares in issue – basic and diluted
128,535,058
93,929,858
Loss per share arising from continuing operations attributable
to the equity holders of the Company – basic and diluted (in pence)
(0.9 )
(0.8 )
For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all
dilutive potential ordinary shares. The Group has two classes of potential ordinary shares; share options and share warrants. As a
loss was recorded for both 2012 and 2011 the issue of new shares would have been antidilutive.
3. Goodwill and other intangible assets
Group
Cost
At 1 January 2012
Additions
Disposals
At 31 December 2012
Net book values
At 31 December 2012
At 31 December 2011
Exploration /
appraisal assets
£’000
Goodwill
£’000
Total
£’000
16,365
8,063
(29 )
24,399
1,421
–
–
17,786
8,063
(29 )
1,421
25,820
24,399
16,365
1,421
1,421
25,820
17,786
Oil and gas project expenditures, including geological, geophysical and seismic costs, are accumulated as intangible fixed assets
prior to the determination of commercial reserves. At 31 December 2012, intangible fixed assets totalled £24.4 million (2011:
£16.4 million), all of which relate to Ireland.
An annual impairment review is carried out in respect of goodwill as outlined in the operational highlights on page 4, the directors
are satisfied that no impairment adjustment is required.
The disposal of £29,375 relates to the write off of expenditure on the Lee licence area as the directors have decided not to renew
this licence because it not considered a viable project.
2
1
0
2
S
T
N
E
M
E
T
A
T
S
L
A
I
C
N
A
N
I
F
&
T
R
O
P
E
R
L
A
U
N
N
A
36
C
L
P
S
A
G
&
L
I
O
E
N
W
O
D
S
N
A
L
4. Property, plant and equipment
Furniture, fittings & equipment
Cost
At 1 January 2012
Additions
Disposals
At 31 December 2012
Accumulated depreciation
At 1 January 2012
Charge for the year
At 31 December 2012
Net book amount
At 31 December 2012
At 31 December 2011
5. Investments in subsidiaries
Cost
At 1 January 2011, 31 December 2011 and 31 December 2012
The interests in Group undertakings of the Company are listed below:
Group
£’000
Company
£’000
4
–
–
4
3
–
3
1
1
2
–
–
2
1
–
1
1
1
Company
£’000
5,432
Name of undertaking
Country of registration
Class of share
Proportion held
Nature of business
Lansdowne Celtic Sea Limited
England
Milesian Oil & Gas Limited
Ireland
Ordinary
Ordinary
100 per cent
Oil and gas exploration
100 per cent
Oil and gas exploration
6. Trade and other receivables
Amounts falling due within one year:
Value added tax and other taxes
Bank interest receivable
Other debtors
Prepayments
7. Cash and cash equivalents
Cash at bank and on hand
Group
2012
£’000
60
–
6
35
101
Group
2012
£’000
5,549
5,549
Group
2011
£’000
Company
2012
£’000
Company
2011
£’000
24
3
–
9
36
56
–
6
35
97
24
3
–
9
36
Group
2011
£’000
3,228
3,228
Company
2012
£’000
5,548
5,548
Company
2011
£’000
3,228
3,228
2
1
0
2
S
T
N
E
M
E
T
A
T
S
L
A
I
C
N
A
N
I
F
&
T
R
O
P
E
R
L
A
U
N
N
A
37
C
L
P
S
A
G
&
L
I
O
E
N
W
O
D
S
N
A
L
Notes to the Financial Statements
Continued
8. Trade and other payables
Amounts falling due within one year:
Trade payables
Other taxes and social security
Amount due to shareholder (note 24)
Accruals
9. Borrowings
Loans from shareholders
Group
2012
£’000
3,701
69
–
90
3,860
Group
2012
£’000
–
Group
2011
£’000
1,419
28
2
270
1,719
Company
2012
£’000
Company
2011
£’000
3,681
1,386
69
–
88
28
2
142
3,838
1,558
Group
2011
£’000
173
Company
2012
£’000
Company
2011
£’000
–
173
2009 Loan facilities
In February 2009, the Company entered into a loan agreement with one of its principal shareholders, LC Capital MasterFund Ltd
(“LC”), pursuant to which LC agreed to provide Lansdowne with an initial loan facility of up to £500,000. The amount of the facility
was subsequently extended, ultimately to a total of £1.6 million, in December 2010.
Interest initially accrued at the rate of LIBOR plus 2 per cent per annum. Interest on amounts drawn under the facility after 13
October 2010 accrued at the rate of LIBOR plus 4 per cent per annum.
Repayment of the facilities was initially due on 12 March 2010 but had subsequently been extended until 31 December 2011. The
facility, including all accrued interest was fully discharged in the year ended 31 December 2012.
10. Deferred income tax liabilities
As at 1 January
Movement for the year
As at 31 December
Group
2012
£’000
1,316
(53 )
1,263
Group
2011
£’000
1,421
(105 )
1,316
Company
2012
£’000
Company
2011
£’000
–
–
–
–
–
–
Deferred tax movement relates to a rate adjustment. Deferred tax is calculated using the UK tax rate of 23% (2011: 25%). This
is the rate which was in force at the balance sheet date. On 26 March 2012 the main rate was reduced to 24% effective from 1
April 2012 (see note 19 – income tax).
2
1
0
2
S
T
N
E
M
E
T
A
T
S
L
A
I
C
N
A
N
I
F
&
T
R
O
P
E
R
L
A
U
N
N
A
38
C
L
P
S
A
G
&
L
I
O
E
N
W
O
D
S
N
A
L
11. Financial risk management
The Group’s current and anticipated operations expose it to a variety of financial risks: market risk (including the effects of changes
in foreign currency exchange rates, interest rates and commodity prices), credit risk and liquidity risk. The Board approves the
use of financial products to manage the Group’s exposure to fluctuations in foreign currency exchange rates, interest rates and
commodity prices.
(a) Market risk
Foreign exchange risk
Although the Group reports in Sterling, elements of its business are conducted in Euros. Given the low level of business conducted
in Euros during the year foreign exchange rate fluctuations would have an immaterial effect on post tax losses.
Given the low values of expenses transacted in Euros by the Group during the year a 10 per cent increase or decrease in average
exchange rates would have had an immaterial effect on post tax losses.
Interest rate risk
The Group’s interest rate risk arises from short term borrowings and cash deposits. Short term borrowings are fixed rate in nature.
The Board does not consider the use of hedging instruments to be necessary given the relatively small amounts borrowed and the
short term of the loans concerned.
Given the low level of average cash balances held by the Group during the year a 10 per cent increase or decrease in average
interest rates would have had an immaterial effect on post tax losses.
Price risk
The Group is not currently exposed to commodity price risk, as the Group currently does not enjoy an income stream.
(b) Credit risk
Credit risk arises from cash and cash equivalents and deposits with banks. The Group’s policy is to deposit cash with banks with an
‘A’ rating or better where possible. 100 per cent of cash held on deposit at 31 December 2012 was held with such banks.
There is no credit risk associated with other debtors and prepayments.
There are no financial assets which are past due but not impaired at the end of the reporting period.
The maximum credit risk exposure relating to financial assets is represented by carrying values as at the balance sheet date.
(c) Liquidity risk
The Board regularly reviews rolling cash flow forecasts for the Group.
Work programme obligations related to the Group’s licences will be financed by either reducing its equity interest through new
participants farming in, by the issue of new capital, or by a combination of both.
Based on current forecasts the Group has sufficient funding in place to meet its future obligations. This is reliant upon the
assumptions discussed in the basis of presentation note 1.
There is no difference between the carrying value and the contractually undiscounted cash flows for financial liabilities. At 31
December 2012, and 31 December 2011, all trade and other payables were due within one year.
There are no derivative financial instruments held by the Group.
2
1
0
2
S
T
N
E
M
E
T
A
T
S
L
A
I
C
N
A
N
I
F
&
T
R
O
P
E
R
L
A
U
N
N
A
39
C
L
P
S
A
G
&
L
I
O
E
N
W
O
D
S
N
A
L
Notes to the Financial Statements
Continued
11. Financial risk management continued
Fair value of non-derivative financial assets and financial liabilities
The Group’s financial instruments comprise cash, debtors and creditors due within one year and therefore management believes
that the carrying values of those financial instruments approximate a fair value.
Capital management
The Group defines capital as the total equity of the Group.
The Group’s objective when managing capital is to safeguard its ability to continue as a going concern in order to provide returns
for the shareholders and to maintain an optimal capital structure to reduce the cost of capital.
The Group regularly reviews its capital structure on the basis of its expected capital requirements in order to achieve the defined
strategic objectives and manages its capital accordingly.
12. Share capital and premium – Group and Company
Issued, called up and fully paid:
As at 1 January
Issued in year
Share issue costs
At 31 December 2012
Number of
shares
(thousands )
122,358
18,182
–
Share
Capital
£’000
Share
Premium
£’000
6,118
16,736
909
–
9,091
(554 )
Total
£’000
22,854
10,000
(554 )
140,540
7,027
25,273
32,300
On 28 August 2012, the Company raised £10 million before expenses, by the placing for cash of 18,182,000 new ordinary shares
of £0.05 each at 55 pence per share.
The principal trading market for the shares in the UK is the London Stock Exchange’s AIM Market on which the shares have been
traded since 21 April 2006. The following table sets forth, for the calendar quarters indicated, the reported highest and lowest
price for the shares on AIM, as reported by the London Stock Exchange
First quarter
Second quarter
Third quarter
Fourth quarter
13. Other reserves
Currency transition reserve
Balance at beginning of year
Currency translation differences
Balance at end of year
2
1
0
2
S
T
N
E
M
E
T
A
T
S
L
A
I
C
N
A
N
I
F
&
T
R
O
P
E
R
L
A
U
N
N
A
40
C
L
P
S
A
G
&
L
I
O
E
N
W
O
D
S
N
A
L
2012
Pence per share
High
55.75
45.62
65.12
63.50
Low
29.88
31.00
36.75
50.00
2011
Pence per share
High
Low
40.00
13.75
23.75
15.25
29.16
15.25
39.25
23.15
Group
2012
£’000
65
53
118
Group
2011
£’000
70
(5 )
65
14. Accumulated deficit
Year ended 31 December 2011
At 1 January 2011
Loss for the financial year
Share based payments charge (Note 17)
At 31 December 2011
Year ended 31 December 2012
At 1 January 2012
Loss for the financial year
Share based payments charge (Note 17)
At 31 December 2012
15. Group operating loss
This is stated after charging
Loss on exchange
Operating lease rentals – land and buildings
Audit Services:
Fees payable to Group’s auditor for the audit of parent Company
and consolidated accounts.
Fees payable to the Group’s auditor for the audit of Company’s
subsidiaries pursuant to legislation.
16. Employees and Directors costs
Number of employees
The average monthly number of employees
(including the Executive Directors) during the year was:
Oil and gas exploration
Staff costs during the year amounted to:
Wages and salaries
Social security costs
Pension costs (note 21)
Share based payment
The two full time Executive Directors are the key management personnel.
Remuneration of the Directors is discussed within the Remuneration Report on pages 18 to 20.
Group Company
£’000
£’000
(4,362 )
(780 )
66
(7,281 )
(8,673 )
66
(5,076 )
(15,888 )
(5,076 )
(1,094 )
100
(6,070 )
(15,888 )
(9,272 )
100
(25,060 )
2012
£’000
2011
£’000
69
23
26
6
3
23
26
6
2012
Number
2011
Number
2
2
2012
£’000
403
91
54
100
648
2011
£’000
414
54
57
66
591
2
1
0
2
S
T
N
E
M
E
T
A
T
S
L
A
I
C
N
A
N
I
F
&
T
R
O
P
E
R
L
A
U
N
N
A
41
C
L
P
S
A
G
&
L
I
O
E
N
W
O
D
S
N
A
L
Notes to the Financial Statements
Continued
17. Share-based payments
Share options
The Company has granted options to Directors under an Employee Share Option Scheme. Details of the grants are shown in the
Remuneration Report on pages 18 to 20. As at 31 December 2012, the following options were outstanding:
Number
2012
Number
2011
Exercisable at
31 Dec ‘12
Exercisable at
31 Dec ‘11
Remaining
contractual
life
Normal
exercise
dates
Target
variable
Option price
25p
–
1,950,000
36.5p
1,090,000
–
–
–
–
–
– 19/05/2014 to
Share
18/05/2021
price
– 01/06/2015 to
Share
31/05/2022
price
Target
(1 )
(2 )
(1)
(2)
The Average share price must reach or exceed a share price which is 30 per cent greater than the exercise price.
The target share price is therefore 32.5 pence per share.
The Average share price must reach or exceed a share price which is 30 per cent greater than the exercise price.
The target share price is therefore 47.5 pence per share.
The number of further options available for grant under the scheme rules is 11,014,016.
The fair value of services received in return for share options is based on the fair value of the share options granted,
measured using a TSR simulation model, with the following inputs:
Fair value of share options and assumptions
Grant date
Fair value at grant date
Share price at grant date
Exercise price
Expected volatility
Expected option life
Risk-free interest rate (based on government bonds)
Expected Dividend yield
31/05/12
18/05/11
19.0p
9.0p
36.4p
36.5p
80.8%
19.5p
25.0p
75.9%
3.0 years
3.0 years
0.73%
0%
2.37%
0%
The cost of awards to Directors under the share option scheme is recognised over the vesting period of the awards which is three years.
Expense for share options granted in 2012
Expense for share options granted in 2011
Expense for share options granted in 2008
Total expense as employee costs in the year
2012
£’000
41
59
–
100
2011
£’000
–
36
30
66
2
1
0
2
S
T
N
E
M
E
T
A
T
S
L
A
I
C
N
A
N
I
F
&
T
R
O
P
E
R
L
A
U
N
N
A
42
C
L
P
S
A
G
&
L
I
O
E
N
W
O
D
S
N
A
L
18. Finance income and costs
Finance income
Bank interest
Retranslation of foreign cash balances
Finance costs
Loan interest
Other interest
Retranslation of foreign cash balances
19. Income Tax
The total tax credit for the year is £53,000 (31 December 2011: £105,000).
The tax assessed for the year is higher than the standard rate of corporation tax in the UK (24.50%)
(31 December 2011: 26.49%)
The differences are explained below:
Loss before income tax
Loss before income tax multiplied by standard rate of tax 24.50% (2011:26.49%)
Effects of:
Expenses not deductible for tax purposes
Other short term timing differences
Rate adjustment for deferral tax
Total current tax charge
2012
£’000
13
–
13
2012
£’000
7
107
26
140
2011
£’000
19
133
152
2011
£’000
29
1
–
30
2012
£’000
2011
£’000
(1,147 )
(885 )
(281 )
(234 )
281
–
(53 )
(53 )
67
158
(96 )
(105 )
In addition to the changes in rates of corporation tax disclosed, a number of further changes to the UK corporate tax system were
announced in the March 2012 UK Budget statement. A resolution passed by Parliament on 26 March 2012 has reduced the main
rate of corporation tax to 24% from 1 April 2012. Legislation to reduce the main rate of corporation tax from 24% to 23% from
1 April 2012 was included in the Finance Bill 2012. Further reductions to the main rate are proposed to reduce the rate by 1% to
22% from 1 April 2014. None of these expected rate reductions had been substantively enacted at the balance sheet date and,
therefore, are not included in these financial statements.
2
1
0
2
S
T
N
E
M
E
T
A
T
S
L
A
I
C
N
A
N
I
F
&
T
R
O
P
E
R
L
A
U
N
N
A
43
C
L
P
S
A
G
&
L
I
O
E
N
W
O
D
S
N
A
L
Notes to the Financial Statements
Continued
20. Reconciliation of loss before income tax to cash used in operations
Loss before income tax
Adjustment for:
Disposal of intangible
Equity settled share-based payment transactions
Unrealised foreign exchange gains
Operating cash flows before movements
in working capital
Change in trade and other receivables
Change in trade and other payables
Cash generated by operations
21. Pension commitments
Group
2012
£’000
2011
£’000
Company
2012
£’000
2011
£’000
(1,147 )
(885 )
(9,272 )
(8,673 )
29
100
53
–
66
35
–
100
–
–
66
–
(965 )
(784 )
(9,172 )
(8,607 )
(65 )
2,141
1,111
(14 )
990
192
(61 )
(14 )
2,280
1,181
(6,953 )
(7,440 )
The Group contributes to a defined contribution pension scheme. The assets of this scheme are held separately from those of the
Group in independently administered funds. The pension cost charge represents contributions payable by the Group to the funds
and amounted to £54,000 (2011: £57,000). There were no contributions payable to the funds at the year end.
Staff are eligible to join the Group’s defined contribution scheme after three months’ service with the Group. The Group contributes
15 per cent of each participating employee’s salary to the scheme. The employees may also contribute to the scheme.
Details of the Directors’ pension contributions are given in the Remuneration Report on pages 18 to 20.
22. Capital commitments and contingencies
At the 31 December 2012, Providence Resources plc on behalf of the Barryroe consortium is in legal dispute with two of its
contractors in relation to the provision of services during the Barryroe drilling campaign. The company is not in a position to give
the details and values surrounding the legal disputes with the two contractors due to the commercial sensitivity and nature of
the claim. Therefore, the information usually required by IAS 37 Provisions, Contingent Liabilities and Contingent Assets is not
disclosed on the grounds that it can be expected to prejudice seriously the outcome of the legal dispute. The directors are of the
opinion that the claim against the two contractors will be successful.
The legal dispute against both contractors is expected to last up to 2 years.
The Group has no unprovided contractual commitments for capital expenditure.
23. Operating lease commitments – minimum lease payments
At 31 December 2012 there were no operating lease commitments.
Group and company
Future minimum lease payments due
No later than 1 year
Land and buildings
2012
£’000
2011
£’000
–
6
2
1
0
2
S
T
N
E
M
E
T
A
T
S
L
A
I
C
N
A
N
I
F
&
T
R
O
P
E
R
L
A
U
N
N
A
44
C
L
P
S
A
G
&
L
I
O
E
N
W
O
D
S
N
A
L
24. Related party transactions
(a) Transactions with SeaEnergy PLC (formerly Ramco Energy plc)
Until December 2007, the ultimate controlling party of the Group was SeaEnergy PLC (“SeaEnergy”). Following the issue of new
shares to the shareholders of Milesian Oil & Gas Limited in December 2007 SeaEnergy’s holding was reduced to 42.6 per cent. and
subsequently to 21.48 per cent. It is no longer the controlling party, but retains significant influence. The Company entered into
a services agreement with SeaEnergy on 10 April 2006, pursuant to which SeaEnergy undertook to provide the Group with (a)
certain management, accounting, IT support, insurance and administrative services required by the Group in connection with its
business in consideration of a fee of £10,500 per month and (b) certain commercial and technical services as the Group may require
from time to time, such services being charged at an hourly rate of £100 per hour. The Directors consider the service agreement
to be based at fair value on an arm’s length basis. The company terminated this agreement effective 30 September 2012. As at 31
December 2012 the Group owed SeaEnergy £nil (2011: £nil) under the agreement.
There has been no turnover during the period between the Lansdowne and SeaEnergy Groups. As at 31 December 2012 the Group
had no other outstanding amounts owed to SeaEnergy PLC. (2011: £2,000). Amounts due to SeaEnergy are unsecured. Interest is
payable at 4 per cent. plus LIBOR.
(b) Loans from directors
In February 2009 the Company entered into a new loan agreement with LC Capital Master Fund Limited. S Lampe is a managing
member of LC Capital Advisors LLC, the general partner of LC. Details are given in note 9.
(c) Amounts due by subsidiaries
At 31 December 2012 amounts owed to Lansdowne Oil & Gas plc by its subsidiaries totalled £19.5 million (2011: £11.1 million).
These amounts have been provided in full in the parent Company’s accounts as there is no immediate prospect of repayment.
Amounts due to the parent are unsecured, non-interest bearing and have no fixed repayment terms.
(d) Compensation of key management personnel
Short-term employee benefits
Post employment benefits
Share-based payment
25. Post Balance Sheet events
2012
£’000
358
54
99
2011
£’000
390
57
66
511
513
Since the end of the financial year, the Directors are not aware of any other event or circumstance which has not being dealt with
in this report which may have a significant impact on the operations of the Consolidated Entity.
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Notice of Annual General Meeting
Notice is hereby given that the 7th Annual General Meeting of the members of Lansdowne Oil & Gas plc (“the Company”) will be
held at the offices of Cenkos Securities, 6.7 & 8 Tokenhouse Yard, London EC2R 7AS, on 13 June 2013 at 12 noon to conduct the
following business:
1
To receive the Report of the Directors, the Financial Statements for the period ended 31 December 2012 and the Auditors’ Report
thereon.
2
To consider the re-election of Emmet Brown who retires by rotation and being eligible offers himself for re-election as a Director.
3
To consider the re-election of Stephen Boldy who retires by rotation and being eligible offers himself for re-election as a Director.
4
To consider the re-election of J Aldersey-Williams who has been appointed to the board since the last Annual General Meeting and
being eligible offers himself for re-election as a Director.
5
That Ernst & Young LLP be appointed Auditors of the Company, to hold office until the conclusion of the next Annual General
Meeting at which accounts are laid before the Company and that their remuneration be fixed by the Directors.
6
To consider the following Resolution as an Ordinary Resolution:
THAT in accordance with Article 2.9 of the Company’s current articles of association (“the Current Articles”), the Directors be and
they are hereby generally and unconditionally authorised pursuant to and in accordance with section 551 of the Companies Act
2006 (“the Act”) to allot relevant securities (as defined in section 560 of the Act), in addition to any existing authorities, up to an
aggregate nominal amount equal to £2,342,500 such authority to expire at the conclusion of the next Annual General Meeting of
the Company (save that the Company may, before such expiry, make any offer or agreement which would or might require relevant
securities to be allotted after such expiry and the Directors shall be entitled to allot relevant securities pursuant to any such offer or
agreement as if this authority had not expired).
7
To consider the following Resolution as a Special Resolution:
THAT, subject to and conditional upon the passing of Resolution 6 above, in accordance with Article 2.10 of the Current Articles,
the Directors be and they are hereby empowered pursuant to and in accordance with section 570 of the Act, in additional to any
existing authorities, to allot equity securities (as defined in section 560 of the Act) for cash as if sub-section 561(1) of the Act did
not apply to the allotment of such equity securities pursuant to the provision of that Article, provided that this power shall be
limited to:
7.1 the allotment of equity securities in connection with a rights issue, open offer or other offer of securities in favour of the holders
of ordinary shares on the register of members at such record date as the Directors may determine where the equity securities
respectively attributable to the interests of the ordinary shareholders are proportionate (as nearly as may be) to the respective
numbers of ordinary shares held by them on any such record date, subject to such exclusions or other arrangements as the Directors
may deem necessary or expedient to deal with factional entitlements or legal or practical problems arising under the laws of
any overseas territory or the requirements of any regulatory body or stock exchange or by virtue of shares being represented by
depositary receipts or any other matter whatever; and
7.2 the allotment (otherwise than pursuant to paragraph 7.1 above) to any person or persons of equity securities up to an aggregate
nominal amount of £1,405,400;
and this power shall expire on the conclusion of the next Annual General Meeting of the Company (save that the Company may,
before such expiry, make any offer or agreement which would or might require relevant securities to be allotted after such expiry
and the Directors shall be entitled to allot relevant securities pursuant to any such offer or agreement as if this authority had not
expired).
8
To consider the following Resolution as a Special Resolution:
THAT, in accordance with section 701 of the Act, the Company be and is hereby generally and unconditionally authorised to
purchase for cancellation its own ordinary shares by way of market purchase (within the meaning of sub-section 693(4) of the Act),
provided that:
8.1 the maximum number of ordinary shares hereby authorised to be acquired is 14,054,000 ordinary shares of 5 pence each, being
approximately 10 per cent. of the Company’s existing issued share capital;
8.2 the maximum price which may be paid for such shares is an amount equal to 105 per cent. of the average of the middle market
quotations for an ordinary share in the Company derived form the Daily Official List of The London Stock Exchange for the five
dealing days immediately preceding the date of purchase, and the minimum price is 5 pence per share being the nominal value
thereof, in both cases exclusive of expenses;
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8.3 the authority hereby conferred shall expire at the conclusion of the next Annual General Meeting of the Company; and
8.4 the Company may before the expiry of the authority hereby conferred make a contract to purchase its ordinary shares under such
authority, which contract will or may be executed wholly or partly after the expiry of such authority, and may purchase its ordinary
shares in pursuance of any such contract.
By order of the Board
Con Casey
Company Secretary
Notes
Every member entitled to attend and vote at the above Annual General Meeting is entitled to appoint a proxy or proxies, who need not be a member of the
Company, to attend, speak and on a show of hands, or on a poll, vote instead of him or her. A member may appoint more than one proxy in relation to the
Annual General Meeting, provided that each proxy is appointed to exercise the rights attached to a different share of shares held by that member. Return of the
form of proxy will not prevent a member from attending and voting in person. To be effective, forms of proxy must be received by the Company’s registrars,
Capita Registrars, PXS, 34 Beckenham Road, Beckenham BR3 4TU at least (i) 48 hours before the time appointed for the holding of the Annual General Meeting
or the adjourned meeting and (ii) in the case of a poll taken more than 48 hours after it was demanded, 24 hours before the time appointed for the taking of the
poll. In calculating these periods, no account shall be taken of any part of a day that is not a working day.
Only persons entered on the registrar of members of the Company at 6.00pm on 11 June 2013 shall be entitled to attend and vote at the Annual General
Meeting or adjourned meeting in respect of the number of shares registered in their name at that time. Changes to entries on the relevant register of members
after that time will be disregarded in determining the rights of any person to attend or vote (and the number of votes they may cast) at the Annual General
Meeting or adjourned meeting.
A statement of all transactions of each Director and his family interest in the shares of the Company and copies of all service contracts of the Directors with the
Company or any of its subsidiaries are available for inspection at the registered office of the Company on any weekday from the date of this notice until the date
of the Annual General Meeting and will be available for inspection at the place of the Annual General Meeting for a period of fifteen minutes prior to the meeting
until its conclusion.
In order for a proxy appointment made by means of CREST to be valid, the appropriate CREST message (a CREST Proxy Instruction) must be properly authenticated
in accordance with Euroclear UK & Ireland Limited’s specifications and must contain the information required for such instructions, as described in the CREST
Manual. The message must be transmitted so as to be received by the Company’s registrars, Capita Registrars (CREST participant ID: RA10), not later than 48
hours before the time fixed for the Annual General Meeting. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp
applied to the message by the CREST Applications Host) from which Capita is able to retrieve the message by enquiry to CREST. After this time any change of
instructions to proxies appointed through CREST should be communicated to the appointee through other means. Euroclear UK & Ireland Limited does not make
available special procedures in CREST for any particular messages and normal system timings and limitations will apply in relation to the input of a CREST Proxy
Instruction. It is the responsibility of the Crest member concerned to take such action as shall be necessary to ensure that a message is transmitted by means of
the CREST system by any particular time. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the
Uncertified Securities Regulations 2001.
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Auditors
Ernst & Young LLP
Blenheim House
Fountainhall Road
Aberdeen AB15 4DT
Registrars
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Bankers
Bank of Scotland
39 Albyn Place
Aberdeen
AB10 1YN
Bank of Ireland
175 Rathmines Road Lower
Dublin 6
Website
www.lansdowneoilandgas.com
Advisers
Secretary
Con Casey FCCA
Registered Office
Pinsent Masons
5 Old Bailey
London EC4M 7BA
Registered in England and Wales
Number 05662495
Nominated Adviser and Broker
Cenkos Securities
6.7 & 8 Tokenhouse Yard
London EC2R 7AS
Solicitors
Burness Paull & Williamsons
50 Lothian Road
Festival Square
Edinburgh EH3 9WJ
Pinsent Masons
5 Old Bailey
London EC4M 7BA
Reddy Charlton McKnight
12 Fitzwilliam Place
Dublin 2
Ireland
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Lansdowne Oil & Gas plc is an independent oil and gas exploration company
listed on the AIM market of the London Stock Exchange since 21 April 2006.
The Company has its operating headquarters based in Dublin, Ireland with
its registered office in London, England.
www.lansdowneoilandgas.com
www.lansdowneoilandgas.com
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