Lansdowne Oil and Gas Plc
Annual Report 2020

Plain-text annual report

w w w. l a n s d o w n e o i l a n d g a s . c o m 2020 A N N U A L R E P O R T A N D F I N A N C I A L S TAT E M E N T S Contents 2 Chairman’s Statement 4 Oil and Gas Interests 5 Strategic Report 7 Directors’ Report 9 Corporate Governance Statement 12 Remuneration Report 14 Independent Auditor’s Report 18 Consolidated Income Statement 19 Consolidated Statement of Financial Position 20 Company Statement of Financial Position 21 Consolidated Statement of Cash Flows 22 Company Statement of Cash Flows 23 Consolidated Statement of Changes in Equity 24 Company Statement of Changes in Equity 25 Notes to the Financial Statements 38 Advisers 0 2 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 C L P S A G & L I O E N W O D S N A L 1 LANSDOWNE OIL & GAS PLC ANNUAL REPORT & FINANCIAL STATEMENTS 2020 Chairman’s Statement Introduction I am pleased to report that, with the oil price having returned to pre-pandemic levels of c. $70/bbl, the Barryroe Partners (Lansdowne 20% and Exola/Providence 80%) have retaken control of the project and will now be masters of our destiny. Lansdowne retains 69MM boe net 2C resources and we look forward to returning to operations and moving to development. The year 2020 started with a renewed Farm-Out campaign for the Barryroe Field and initial progress was quite promising, with several parties reviewing the asset. The onset of the global Covid-19 Pandemic, however, led quickly to a down-turn in all economic activity and oil and gas prices declined dramatically, with the Brent Oil price sliding below $30/bbl. Nevertheless, work continued on Barryroe and in April it was announced that a non-binding term sheet had been signed with SpotOn Energy Limited (“SpotOn”), a Norwegian company working with a consortium of world leading service providers to deliver cost effective offshore oil and gas developments. A period of exclusivity was granted to SpotOn, to agree an appraisal work programme and commercial terms and conclude a binding farm-out agreement. This led to the Barryroe Partners (Lansdowne 20% and Exola/ Providence 80%) signing a Farm-Out Agreement (“FOA”) with SpotOn at the end of November. Under the Agreement, SpotOn was to fund 100% of an Early Development Scheme (EDS) focused on the eastern part of Barryroe and the subsequent full field development, to earn a 50% interest in the Licence. SpotOn was to fund the Barryroe Partners retained 50% interest (Lansdowne 10%, Exola/ Providence 40%) by a non-recourse loan. The rationale for locating the EDS in the eastern part of Barryroe is that the 48/24-10z well was drilled in this area and established good flow rates from the Basal Wealden A Sand (3,504 bopd) as well as strong gas flow rates from the overlying Basal Wealden C Sand. Furthermore, the 3D seismic quality is optimal in this area and the structural configuration shows low dips and little faulting. The concept of a phased development of Barryroe, commencing in the eastern part of the field, has long been advocated and a first well location was identified by the Barryroe Partners in 2017 – labelled the K Location. A site survey application was lodged for this area in 2020. 2 After the year end, work continued, on the technical and funding aspects of the Barryroe EDS, but problems arose with certain aspects of SpotOn’s planned financing model and they were granted additional time, to the end of April 2021, to find a solution. Unfortunately, it became apparent that despite being granted this additional time, SpotOn would not be able to deliver the funding as required under the FOA and during April the Barryroe Partners terminated the FOA, as allowed under its terms. The Barryroe Partners have now retaken control of the project and Lansdowne will as a result retain its 20% original equity in the project, maintaining 69MM Boe net 2C resources. In April 2021, a revised Lease Undertaking work programme was submitted to the Department of the Environment, Climate and Communications, designed to move Barryroe to a declaration of commerciality, turning 2C resources into 2P reserves and subsequently seeking the award of a Petroleum Lease, prior to the commencement of production via the EDS Approval to proceed with a site survey over the K Location was granted in February 2021 and operations are expected to take place later this year, with the drilling of the K well expected in the second half of 2022 Financial Results In February 2020, the Company placed 83,333,333 new ordinary shares of 0.1 pence each (“Ordinary Shares”) at a placing price of 0.6 pence a share to raise £500,000 before costs (the “Placing”). At the same time, the Shareholder Loans entered into with Brandon Hill Capital Ltd and LC Capital in June 2019, were converted into new Ordinary Shares at the placing price. In connection with the Placing and the conversion of the Shareholder Loans, the Company also granted a total of 139,368,491 warrants, on a one warrant per Placing or Loan Share basis, to subscribe for new Ordinary shares in the Company at a price of 1.2 pence per share, with an expiry date of 31 December 2020. LANSDOWNE OIL & GAS PLC ANNUAL REPORT & FINANCIAL STATEMENTS 2020Barryroe contains significant volumes of both oil and gas and can play a vital role in delivering secure indigenous supplies during the transition to a low carbon future. There is also potential for Carbon Capture and Storage to be developed in conjunction with Barryroe, with CO2 being stored in the nearby depleted fields. The quest to move forward the development of Barryroe’s oil and gas resources has been a long and sometimes frustrating journey and I would like to thank all our shareholders for their continued support through this difficult time. We look forward to the resumption of operations and moving the Barryroe project to development. Lord Torrington Chairman 25 June 2021 During the fourth quarter some 73,066,666 of the warrants were exercised, raising an additional £876,800 for the Company. The remainder of the Warrants lapsed on expiry at 31 December 2020. In December £175,000 of the LC Capital Loan (“the Loan”) was repaid, leaving c. £980,000 outstanding. The term of the Loan was extended to 31 December 2021 and in conjunction with the Loan extension, 26 million Warrants were issued to LC Capital at an exercise price of 1.2p and an expiry date of 31 December 2021. The Group recorded an after tax loss of £0.4 million for the year ended 31 December 2020 compared to a loss of £0.2 million for the year ended 31 December 2019. Group operating expenses for the year were £0.3 million, compared to £0.1 million in 2019. Net finance expense for the year was £59,000 (2019: £57,000). Cash balances of £0.64 million (2019: £0.02 million) were held at the end of the financial year Total equity attributable to the ordinary shareholders of the Group was £14.8 million as at 31 December 2020 (£13.6 million as at 31 December 2019). Outlook It has been another difficult year, but the world is cautiously moving forward and emerging from the effects of the Covid-19 Pandemic. The oil price has returned to pre-Pandemic levels and currently sits at near $70/bbl. Studies have long shown that Barryroe is a viable project above c. $25/bbl and will deliver strong returns at current oil and gas prices. The issue of climate change and the need to control emissions of greenhouse gases grows ever more prominent. There is no question but that the transition is underway to deliver low carbon/carbon neutral energy supplies. There is also no doubt however, that this transition will take time. In 2020 gas provided 51% of Ireland’s electricity generation and 64% of this gas was imported from Britain via interconnectors. Oil continues to be the dominant energy source in Ireland, with consumption of around 140,000bpd and 100% of this is imported. 0 2 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 C L P S A G & L I O E N W O D S N A L 3 Oil and Gas Interests The Group has interests in the following Licences, both of which are in Irish waters: Licence 01/11 Barryroe Exploration Licence* 2/07 Helvick Exploration Licence * An application has been submitted for a Lease Undertaking Interest 20 per cent 9 per cent Operator Exola Providence Resources Plc Notes Irish licensing regime Licensing option Exploration Licence Lease Undertaking 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 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.. 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. 4 LANSDOWNE OIL & GAS PLC ANNUAL REPORT & FINANCIAL STATEMENTS 2020Strategic Report For the year ended 31 December 2020 This Strategic Report has been prepared to inform shareholders and help them to assess how the Directors have performed their duty to promote the success of Lansdowne Oil & Gas plc (“the Company”) and its subsidiaries (together “the Group”). Principal activities The Group is an upstream oil and gas group, focused on exploration and appraisal opportunities for oil and gas reserves offshore Ireland. The Group has targeted the Irish offshore shelf areas for exploration, as these provide shallow water prospects (generally less than 100 metres), and relatively low drilling costs. These factors, combined with favourable fiscal terms, have the potential to deliver high value oil and gas reserves. Review of business 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. The Group and Company Statements of Financial Position as at 31 December 2020 and 31 December 2019 are shown on pages 19 and 20, respectively. Group net assets at 31 December 2020 were £14.8 million (2019: £13.6 million). At 31 December 2020, the Group held £0.64 million (2019: £0.02 million) as cash or short-term deposits. The Group had intangible assets totalling £15.7 million (2019: £15.5 million) at the reporting date. These assets relate to the Group’s exploration licences in the Celtic Sea and their associated work programmes. During the year, the Group had one full-time Executive Director, with administration and technical support provided by Smith & Williamson under a service agreement. These administration and technical support costs, together with the costs associated with the Company’s listed status and general overheads, account for the administrative expenses of £0.35 million (2019: £0.12 million). A loss after tax of £0.4 million (2019: £0.2 million) was recorded in the year and the basic and diluted loss per share for the year was 0.05p (2019: 0.03p). Key performance indicators The Group is not yet producing oil and gas and therefore has no income. Consequently, the Group is not expected to report profits until it disposes of or is able to profitably develop or otherwise turn to account its exploration projects. The Board monitors the activities and performance of the Group on a regular basis and uses both financial and non-financial indicators to assess the Group’s performance. Principal risks and uncertainties The Directors are responsible for the effectiveness of the Group’s risk management activities and internal control processes. The Covid-19 outbreak is an unprecedented global event whose impacts and duration are not yet fully known. While the Group now more clearly understands the impacts of the pandemic, we expect Covid-19 to continue to affect our operations and performance, and to result in further uncertainty for the Group and the wider global economy. Our Group business continuity plans have provided an additional layer of mitigation through the Covid-19 crisis. Additionally, the Group continues to monitor and assess the potential and realised impacts of Covid-19. The risks associated with Brexit remain due to there being no clarity on the long-term trading relationship with the EU. Our Group has amended our Brexit risk description accordingly and continue to monitor this risk. As a participant in the upstream oil & gas industry, the Group is exposed to a wide range of risks in the conduct of its operations. These risks include: Financial risks Operational risks Strategic and external risks • Ability to raise finance to maintain • Loss of key employees licence participation • Cost inflation • Delay and cost overrun on projects, including weather related delay • Oil and gas price movements • HSE incidents • Adverse taxation legislative changes • Poor reservoir performance • Third party counterparty credit risk • Exploration and appraisal well failures • Adverse foreign exchange movements • Failure of third party services • Changes in government policy • 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 5 LANSDOWNE OIL & GAS PLC ANNUAL REPORT & FINANCIAL STATEMENTS 2020Strategic Report Continued 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 10. 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 market of the London Stock Exchange. The tables below sets 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 Euro/Sterling Exchange Rates At end of year Average rate* 1.32 1.36 1.28 1.28 High 1.34 1.36 Low 1.20 1.16 2019 2020 At end of year Average rate* 1.18 1.11 1.14 1.12 High 1.20 1.21 Low 1.08 1.08 2019 2020 *The average rates are calculated based 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 set out in Note 10. There is no 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 the two current discoveries, 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 counterparties. The Group competes with other Exploration & Petroleum 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. 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 Group’s 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. 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. Stephen Boldy Chief Executive Officer 25 June 2021 6 LANSDOWNE OIL & GAS PLC ANNUAL REPORT & FINANCIAL STATEMENTS 2020 Directors’ Report For the year ended 31 December 2020 The Directors present their directors’ report and audited financial statements for the year ended 31 December 2020. Directors In accordance with the Company’s Articles of Association, Directors retire and, being eligible, offer themselves for re-election. Stephen Boldy has a service contract 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 12 to 13. Details of executive director and company secretary Dr Stephen Boldy (Chief Executive Officer), aged 65, 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. Con Casey, aged 60, was appointed Company Secretary in January 2013. Mr. Casey has an honours degree in Business Management from Trinity College and is a Fellow of the Association of Chartered Certified Accountants. He has over 31 years’ experience in advising companies in the natural resources sector as well as acting as adviser to a number of publicly quoted companies and semi-state organisations. He specialises in the area of corporate finance and is a corporate finance director in Smith & Williamson. Details of non executive directors Lord Torrington (Non-Executive Chairman)†*, aged 77, 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. Tim was appointed Chairman effective in July 2016. Jeffrey Auld†* (Non-Executive Director), aged 54, has more than 26 years of financial and commercial experience in upstream oil and gas development and production. He is currently the President and CEO of Serinus Energy plc, an AIM listed oil and gas company. His career has involved periods working for exploration and production companies – Premier Oil, PetroKazakhstan and Equator Exploration; as well as periods spent in financial institutions – Goldman Sachs, Canaccord Adams and Macquarie. He was appointed as a Non-Executive Director of Lansdowne Oil & Gas plc in September 2013. John Aldersey-Williams (Non-Executive Director)†*, aged 58, has worked in the energy sector since 1984. He started his career as an oil company geologist before completing an MBA. He then spent some years in investment banking, with an energy focus, before returning to the oil industry in financial and commercial roles. From 1999 to 2001, he served as finance director to Texaco’s North Sea Upstream Business Unit. From 2001 until 2008, he was a consultant active across the energy sector, before being appointed a Director and subsequently CEO of SeaEnergy PLC in 2012. He has been a director of Lansdowne Oil & Gas plc since 2012 and resigned in August 2020. * A member of the Audit Committee † A member of the Remuneration Committee 7 LANSDOWNE OIL & GAS PLC ANNUAL REPORT & FINANCIAL STATEMENTS 2020Directors’ Report Continued 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 31 December 2020 and 31 March 2021: 31 December 2020 31 March 2021 No. of shares % of Capital No. of shares % of Capital Lampe Conway & Co LLC/LC Capital Master Fund Limited 216,402,606 24.77% 171,241,938 Brandon Hill Capital Hargreaves Stockbrokers Spreadex Interactive Investor (EO) Barclays Capital collateral account Cantor Fitzgerald Europe 100,671,158 11.52% 100,671,158 67,821,447 63,654,279 32,192,453 26,666,667 7.76% 7.29% 3.68% 3.05% 67,221,802 63,654,279 38,093,230 34,678,992 - - 33,487,978 Individuals 32,028,106 3.09% 25,819,106 The Directors are not aware of any other holding of 3% or more of the share capital of the Company. 19.60% 11.52% 7.69% 7.29% 4.36% 3.97% 3.83% 2.96% Dividends The directors do not recommend the payment of a dividend (2019: £Nil). 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 page 7. 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 and future developments The Directors are not aware of any event or circumstance which has not been dealt with in note 19 to the financial statements. Future developments The Group’s future outlook is described in the Chairman’s Statement on pages 2 and 3. The Group’s main prospect is in the exploration and appraisal stage and does not contain any proven reserves. A number of companies have expressed an interest in farming into the Group’s licences. 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. Going concern The Directors have prepared the financial statements on the going concern basis which assumes that the Group and Company will continue in operational existence for at least twelve months from the date of the approval of these financial statements as discussed further in the Statement of Accounting Policies section (d) on page 25. Financial instruments Risk exposures and financial risk management policies and objectives are discussed in Note 10 to the financial statements. Auditor In accordance with Section 489 of the Companies Act 2006, a resolution for the re-appointment of KPMG as auditor of the Group is to be proposed at the forthcoming Annual General Meeting. By order of the Board Stephen Boldy Chief Executive Officer 25 June 2021 8 LANSDOWNE OIL & GAS PLC ANNUAL REPORT & FINANCIAL STATEMENTS 2020 Corporate Governance Statement For the year ended 31 December 2020 The directors recognise the importance of sound corporate governance. The Company has adopted the QCA Code, which the directors consider appropriate for a company of its size and nature. The QCA takes key elements of good governance and allows companies to apply them in a manner which is appropriate for the differing needs of small companies. The “Comply or Explain” maxim allows companies to inform shareholders where policies differ from the norm and why. The details of the Company’s policies in this respect are set out in its AIM Notice 50 Statement, which can be downloaded from the Company’s website at www.lansdowneoilandgas.com/company/corporate-governance/. Directors At 31 December 2020, the Board comprised of a Non-Executive Chairman, one Executive Director and one Non-Executive Director. Biographies of the Directors are presented on page 7. Lord Torrington is the senior Non-Executive Director and Chairman. Board Meeting attendance record S A R Boldy T Torrington J Auld J Aldersey-Williams (Resigned on 26/08/2020) 2020 Eligible 13 13 13 5 2020 Attended 13 13 13 5 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 Committee The Audit Committee comprises Lord Torrington and Jeffrey Auld (Chairman). 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 financial statements 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, KPMG. 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 independent 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. The Audit Committee reviews the independence and objectivity of the independent auditors. The Committee reviews the nature and amount of non-audit work undertaken by KPMG each year to satisfy itself that there is no effect on their independence. Details of this year’s fees are given in note 12 to the accounts. The Committee is satisfied that KPMG is 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 required given the size and nature of the operations of the Group. Remuneration Committee The Remuneration Committee comprises of Jeffrey Auld and Lord 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 Group 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 12 to 13 and contains a statement of remuneration policy and details of the remuneration of each Director. 9 LANSDOWNE OIL & GAS PLC ANNUAL REPORT & FINANCIAL STATEMENTS 2020 Corporate Governance Statement Continued 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 identify 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 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 previous Annual Reports 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 complies with best practice in ensuring that the Notice of the AGM is dispatched to shareholders at least 21 days ahead of the meeting. Directors’ responsibilities The directors are responsible for preparing the directors’ report and the financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare financial statements for each financial year. Under that law, they have elected to prepare the financial statements in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU) and applicable law. Under company law, the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of its profit or loss for that period. In preparing the financial statements, the directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable and prudent; • state whether they have been prepared in accordance with IFRSs as adopted by the EU; • assess the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and • use the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations or have no realistic alternative but to do so. The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or 10 LANSDOWNE OIL & GAS PLC ANNUAL REPORT & FINANCIAL STATEMENTS 2020error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities. Under applicable law and regulations, the directors are also responsible for preparing a strategic report and a directors’ report that complies with that law and those regulations. The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company’s website. Legislation in the UK 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 (d) to the financial statements. By order of the Board Stephen Boldy Director 25 June 2021 0 2 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 C L P S A G & L I O E N W O D S N A L 11 Remuneration Report For the year ended 31 December 2020 Introduction The following report details how the Company’s remuneration committee determines Directors’ remuneration packages through the application of the Company’s remuneration policy. Remuneration Committee The members of the Remuneration Committee (the Committee) are Lord Torrington (Chairman) and Jeffrey Auld, both of whom are Non-Executive Directors of the Company. 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 the Group. Remuneration Policy The Group 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. The packages are in line with industry norms. Directors’ Service Contracts Stephen A R Boldy has a service contract with the Company with a rolling notice period of one year. 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. Directors’ Remuneration Package The executive Directors’ remuneration package, which is reviewed annually, consist of annual salary, performance related bonuses, health and other benefits, pension contributions and share options. Stephen A R Boldy is entitled to an annual bonus equal to 2 per cent of the audited consolidated after tax profits of the Company and its subsidiaries subject to a cap equal to his annual salary during the relevant financial year. He is also entitled to bonus payments on the entering into of binding agreements with third parties in respect of any farm-out arrangements relating to the Group’s assets, with a requirement to utilise any such bonus payments to subscribe for Ordinary Shares of the Company. 0 2 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 C L P S A G & L I O E N W O D S N A L 12 Directors’ detailed emoluments Salary and fees £’000 Performance related bonus £’000 Benefits £’000 Pension Contributions £’000 Executive Directors SAR Boldy Non-Executive Directors T Torrington JD Auld J Aldersey-Williams 2020 2019 Interests In Shares 60 20 15 10 105 110 – – – – – – – – – – – – – – – – – – 2020 Total £’000 60 20 15 10 105 – 2019 Total £’000 60 20 15 15 – 110 The beneficial interests of the Directors who held office at 31 December 2020 in the ordinary shares of the Company are as follows: SAR Boldy T Torrington J D Auld J H Aldersey-Williams Interests in share options At 31 Dec 2019 6,400,660 4,916,500 2,828,619 240,000 At 31 Dec 2020 6,400,660 6,916,500 2,828,619 N/A At 31 March 2021 6,400,660 6,916,500 2,828,619 N/A 14,385,779 16,145,779 16,145,779 Exercise Price At 31 Dec 2019 2020 Granted 2020 Lapsed At 31 Dec 2020 Normal Exercise Dates SAR Boldy SAR Boldy 36.5p 600,000 25p 1,000,000 T Torrington 36.5p 50,000 T Torrington 25p 100,000 - - - - - - - - 600,000 1st June 2015 to 31 May 2022 1,000,000 20 May 2014 to 19 May 2021 50,000 1st June 2015 to 31 May 2022 100,000 20 May 2014 to 19 May 2021 Details of the performance criteria, conditional upon which the options are exercisable, are set out in note 14 to the financial statements. During 2020, the share price ranged between a high of 2.55p and a low of 0.25p. On behalf of the Board Lord Torrington Chairman, Remuneration Committee 25 June 2021 13 LANSDOWNE OIL & GAS PLC ANNUAL REPORT & FINANCIAL STATEMENTS 2020 Independent Auditor’s Report to the Members of Lansdowne Oil & Gas Plc Report on the audit of the financial statements Opinion We have audited the financial statements of Lansdowne Oil & Gas Plc (“the Company”) and its consolidated undertakings (“the Group”) for the year ended 31 December 2020 which comprise the consolidated income statement, the consolidated statement of financial position, the consolidated statement of changes in equity, the consolidated statement of cash flows, the company statement of financial position, the company statement of changes in equity, the company statement of cash flows and the related notes, including the summary of significant accounting policies set out in note 1. The financial reporting framework that has been applied in their preparation is UK Law and international accounting standards in conformity with the requirements of the Companies Act 2006. In our opinion: • the financial statements give a true and fair view of the Group’s and of the Company’s affairs as at 31 December 2020 and of the Group’s loss for the year then ended; • the Group financial statements have been properly prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006; • the Company financial statements have been properly prepared in accordance with international accounting standards in conformity with the requirements of, and as applied in accordance with the provisions of, the Companies Act 2006; • the Group financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the Group in accordance with ethical requirements that are relevant to our audit of financial statements in the UK, including the Financial Reporting Council (FRC)’s Ethical Standard as applied to a listed entity and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion. events or conditions, along with the other matters explained in note 1, indicate that a material uncertainty exists that may cast significant doubt on the Group’s and the Company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter. The directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Group or the Company or to cease their operations, and as they have concluded that, subject to the material uncertainty, the Group and the Company’s financial position means that this is realistic. As set out in note 1 in the financial statements, they have also concluded that there is a material uncertainty that could cast significant doubt over their ability to continue as a going concern for at least a year from the date of approval of the financial statements (“the going concern period”). The risk There is little judgement involved in the directors’ conclusion that risks and circumstances described in note 1 to the financial statements represent a material uncertainty over the ability of the Group and Company to continue as a going concern for a period of at least a year from the date of approval of the financial statements. However, clear and full disclosure of the facts and the directors’ rationale for the use of the going concern basis of preparation, including that there is a related material uncertainty, is a key financial statement disclosure and so was the focus of our audit in this area. Auditing standards require that to be reported as a key audit matter. How the matter was addressed in our audit In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements with the disclosure of a material uncertainty to be appropriate. We evaluated the directors’ assessment of the entity’s ability to continue to adopt the going concern basis of accounting. In our evaluation of the Directors’ conclusions, we considered the inherent risks to the Group’s and Company’s business model and analysed how those risks might affect the Group’s and Company’s financial resources or ability to continue operations over the going concern period. The risk that we considered most likely to adversely affect the Group’s and Company’s available financial resources over this period was the impact of a failure to raise additional funds. As this was a risk that could potentially cast significant doubt on the Group’s and the Company’s ability to continue as a going concern, our audit procedures included: Material uncertainty related to going concern We draw attention to note 1 to the financial statements, which indicates that the Group’s and Company’s ability to continue as • considering sensitivities over the level of available financial resources indicated by the Group’s financial forecasts taking account of reasonably possible (but not unrealistic) adverse effects that could arise from this risk. a going concern is dependent on securing additional debt or equity funding. There is no guarantee that the Company will be in a position to secure such funding. As stated in note 1, these • inspecting the Directors’ Going Concern Memorandum which includes cash flow projections to 30 June 2022 and concludes that there is a “material uncertainty” relating 0 2 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 C L P S A G & L I O E N W O D S N A L 14 to the ability of the Group and Company to continue as a Going Concern; • inspecting management’s cash flow projections and key underlying assumptions prepared by Group management for the period up to 30 June 2022; • critically assessing assumptions in base case scenarios relevant to liquidity, in particular assessing the funds required to discharge the Company’s share of costs on the Barryroe licence together with ongoing working capital requirements and other assumptions inherent in the forecasts; • corroborating the funding requirement to other available information; • inspecting management’s analysis of the alternative funding options available to the Group; and • considering the adequacy of the Group’s disclosures within the basis of preparation note on page 25 in respect of going concern, and whether the disclosures properly reflected the risks that the Group faces in respect of its ability to continue as a going concern. Arising from our procedures, we noted that: • assumptions used by management regarding the funding required were within a reasonable range; and • planned fundraising, either from a further equity placing or via shareholders loans, in late 2021 upon award of a lease undertaking for Barryroe are consistent with the Group’s funding requirements. Based on the work we have performed; we have concluded that the director’s use of the going concern basis of accounting in the preparation of the financial statements with the disclosure of a material uncertainty to be appropriate. We found the disclosure of the material uncertainty to be acceptable. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. Detecting irregularities including fraud We identified the areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements and risks of material misstatement due to fraud, using our understanding of the entity’s industry, regulatory environment and other external factors and inquiry with the directors. In addition, our risk assessment procedures included: • Inquiring with the directors and other management as to the Group’s policies and procedures regarding compliance with laws and regulations, identifying, evaluating and accounting for litigation and claims, as well as whether they have knowledge of non-compliance or instances of litigation or claims. • Inquiring of directors and the audit committee as to the Group’s policies and procedures to prevent and detect fraud, as well as whether they have knowledge of any actual, suspected or alleged fraud. • Inquiring of directors and the audit committee regarding their assessment of the risk that the financial statements may be materially misstated due to irregularities, including fraud. • Inspecting the Group’s regulatory and legal correspondence. • Reading Board minutes. • Performing planning analytical procedures to identify any usual or unexpected relationships. We discussed identified laws and regulations, fraud risk factors and the need to remain alert among the audit team. Firstly, the Group is subject to laws and regulations that directly affect the financial statements including companies, financial reporting, taxation and environmental legislation. We assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items, including assessing the financial statement disclosures and agreeing them to supporting documentation when necessary. Secondly, the Group is subject to many other laws and regulations where the consequences of non-compliance could have a material effect on amounts or disclosures in the financial statements, for instance through the imposition of fines or litigation. We identified the following areas as those most likely to have such an effect: health and safety, anti-bribery, employment law, regulatory capital and liquidity and certain aspects of company legislation recognising the financial and regulated nature of the Group’s activities and its legal form. Auditing standards limit the required audit procedures to identify non-compliance with these non-direct laws and regulations to inquiry of the directors and other management and inspection of regulatory and legal correspondence, if any. These limited procedures did not identify actual or suspected non-compliance. We assessed events or conditions that could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud. As required by auditing standards, we performed procedures to address the risk of management override of controls. On this audit we do not believe there is a fraud risk related to revenue recognition. We did not identify any additional fraud risks. In response to the fraud risks, we also performed procedures including: • Evaluating the business purpose of significant unusual transactions; and • Assessing significant accounting estimates for bias. Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non-compliance with laws and regulations (irregularities) is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it. 15 LANSDOWNE OIL & GAS PLC ANNUAL REPORT & FINANCIAL STATEMENTS 2020Independent Auditor’s Report to the Members of Lansdowne Oil & Gas Plc Continued In addition, as with any audit, there remains a higher risk of non-detection of irregularities, as these may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. We are not responsible for preventing non-compliance and cannot be expected to detect non-compliance with all laws and regulations. Key audit matters: our assessment of risks of material misstatement Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the finan- cial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the ‘Material uncertainty related to going concern section’ above, we identified one further Group key audit matters as follows (unchanged from 2019). Carrying value of intangible exploration/appraisal assets (£15.7 million (2019: £15.5 million)) Refer to accounting policies (d) and (i), Note 4 The key audit matter The Group has a 20% interest in a consortium which holds the rights to develop the Barryroe prospect, offshore Ireland. To date, the Group has incurred expenditure of £15.7 million (2019: £15.5 million) in relation to this prospect, all of which has been capitalised as intangible assets – exploration/appraisal assets. The assessment of the carrying value of the intangible asset capitalised to date requires management to exercise judgement and this judgement requires consideration of a number of factors, including but not limited to, an interpretation and assessment of the results of drilling and other appraisal activities to date, the Group’s intention and ability to proceed with a future work programme for a prospect or licence, and an assessment of the likely economic opportunity. How the matter was addressed in our audit In responding to this key audit matter, among others, we: • evaluated management’s assessment of intangible assets with reference to the criteria of IFRS 6 Exploration for and Evaluation of Mineral Resources and the Group’s accounting policy; • performed inquires with management regarding the Group’s intention to carry out exploration and evaluation activity on the Barryroe prospect and corroborated these inquires by inspecting management’s cash-flow forecast to verify that it includes further spend on the prospect. We also corroborated our inquires with management with the directors to confirm our understanding of the intentions and strategy of the Group; • reviewed the lease undertaking work programme submitted to the department of the Environment, Climate and Communications; • obtained an understanding of the Group’s ongoing and planned exploration and appraisal activity by interviewing executive and finance staff in relation to all key licences; • obtained and documented the process for recording transactions relating to exploration/appraisal assets and assessed the design and implementation of key controls which management performs in relation thereto; • considered the appropriateness of the criteria for the capitalisation of exploration and appraisal expenditure in accordance with relevant accounting standards and whether there was any inappropriate capitalisation of costs; • challenged the directors regarding their conclusion that there were no indicators of potential impairment; • considered the adequacy of the related disclosures in the financial statements. Based on the evidence obtained, we found that the carrying value of the intangible exploration/appraisal assets recognised in the financial statements to be reasonable. We have determined that there are no key audit matters to communicate in our report in relation to the Company. Our application of materiality and an overview of the scope of our audit We define materiality as the magnitude of misstatement that makes it probable that the economic decisions of a reasonably knowledgeable person, relying on the financial statements, would be changed or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our work. We determined Group materiality in current year to be £163,000 (2019: £200,000). This has been calculated using a benchmark of Group total assets (of which it represents 1% (2019: 1.3%). We considered total assets to be the appropriate benchmark for determining materiality due to the relative stability of this measure in recent years. We considered quantitative and qualitative factors such as understanding the entity and its environment, history of misstatements, complexity of the Group and reliability of the control environment. Materiality for the Company financial statements as a whole was set at £6,511 (2019: £373), determined with reference to a benchmark of the Company’s total assets (of which it represents 1% (2019: 1%)). We agreed with the Audit Committee that we would report to them all corrected and uncorrected audit misstatements in excess of £8,150 (2019: £10,000), in addition to other audit misstatements below that threshold that in addition to other audit misstatements below that threshold that we believe warranted reporting on qualitative grounds. Our audit scope included a full audit of all components, accounting for 100 per cent of the Group’s total loss before tax and net assets. 0 2 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 C L P S A G & L I O E N W O D S N A L 16 Other information The directors are responsible for the other information presented in the annual report together with the financial statements. The other information comprises the information included in the strategic and directors’ report and Chairman’s Statement, Oil and Gas Interests, Corporate Governance Statement and Remuneration Report. The financial statements and our auditor’s report thereon do not comprise part of the other information. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except as explicitly stated below, any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work, the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on that work we have not identified material misstatements in the other information. Opinions on other matters prescribed by the Companies Act 2006 Based solely on our work on the other information: • we have not identified material misstatements in the strategic report or the directors’ report; • in our opinion, the information given in the strategic report and the directors’ report is consistent with the financial statements; and • in our opinion, the strategic report and the directors’ report have been prepared in accordance with the Companies Act 2006. Matters on which we are required to report by exception Under the Companies Act 2006, we are required to report to you if, in our opinion: • adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received from branches not visited by us; or • 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 misstatement, whether due to fraud or error; assessing the Group and Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the Group and Company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities. The purpose of our audit work and to whom we owe our responsibilities Our 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. Colm O’Sé, Senior Statutory Auditor for and on behalf of KPMG, Chartered Accountants, Statutory Auditor 1 Stokes Place St. Stephen’s Green, Dublin 2 • we have not received all the information and explanations 25 June 2021 we require for our audit. We have nothing to report on these matters. Respective responsibilities and restrictions on use Responsibilities of directors for the financial statements As explained more fully in the directors’ responsibilities statement set out on page 10, the directors are responsible for: the preparation of the financial statements including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of financial statements that are free from material 0 2 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 C L P S A G & L I O E N W O D S N A L 17 Consolidated Income Statement For the year ended 31 December 2020 Administrative expenses Operating loss Finance costs Loss for the year before tax Income tax Loss for the year Loss per share (pence): Basic loss per ordinary share Diluted loss per ordinary share Notes 15 16 3 3 The results for the year all arise on continuing operations. The accompanying notes on pages 25–37 form an integral part of these financial statements. 2020 £’000 (348 ) (348 ) (59 ) (407 ) – (407 ) 2019 £’000 (122 ) (122 ) (57 ) (179 ) – (179 ) (0.05p ) (0.05p ) (0.03p ) (0.03p ) 0 2 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 C L P S A G & L I O E N W O D S N A L 18 These financial statements were approved by the Board of Directors on 25 June 2021. Jeffrey Auld Director Stephen Boldy Director Consolidated Statement of Financial Position As at 31 December 2020 Assets Notes Non-Current Assets Intangible assets Current Assets Trade and other receivables Cash and cash equivalents Total Assets Equity and Liabilities Shareholders’ Equity Share capital Share premium Currency translation reserve Share-based payment reserve Accumulated deficit Total Equity Non-Current Liabilities Provisions Current Liabilities Shareholder loan Trade and other payables Total Liabilities Total Equity and Liabilities 4 6 11 11 14 9 8 7 2020 £’000 2019 £’000 15,690 15,543 17 635 652 20 16 36 16,342 15,579 11,930 28,284 59 923 (26,412 ) 14,784 316 979 263 1,558 16,342 11,722 26,864 59 923 (26,005 ) 13,563 316 1,305 395 2,016 15,579 The accompanying notes on pages 25–37 form an integral part of these financial statements. These financial statements were approved by the Board of Directors on 25 June 2021. Jeffrey Auld Director Stephen Boldy Director 0 2 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 C L P S A G & L I O E N W O D S N A L 19 Company Statement of Financial Position As at 31 December 2020 Assets Current Assets Trade and other receivables Cash and cash equivalents Total Assets Equity and Liabilities Shareholders’ Equity Share capital Share premium Share-based payment reserve Accumulated deficit Total Equity Current Liabilities Shareholder loan Trade and other payables Total Liabilities Total Equity and Liabilities Notes 6 11 11 14 8 7 2020 £’000 2019 £’000 17 634 651 11,930 28,284 923 (41,727 ) (590 ) 979 262 1,241 651 19 16 35 11,722 26,864 923 (41,171 ) (1,662 ) 1,305 392 1,697 35 The accompanying notes on pages 25–37 form an integral part of these financial statements. These financial statements were approved by the Board of Directors on 25 June 2021. Jeffrey Auld Director Stephen Boldy Director 20 LANSDOWNE OIL & GAS PLC ANNUAL REPORT & FINANCIAL STATEMENTS 2020 Consolidated Statement of Cash Flows For the year ended 31 December 2020 Notes 2020 £’000 2019 £’000 Cash flows from operating activities Loss for the year Adjustments for: Interest payable and similar charges Decrease in trade and other receivables (Decrease) in trade and other payables Net cash used in operating activities Cash flows from investing activities Acquisition of intangible exploration assets 4 Net cash used in investing activities Cash flows from financing activities Proceeds from the issue of share capital Cost of raising shares Proceeds from new loan Repayment of loan Net cash from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at 1 January Cash and cash equivalents at 31 December (407 ) 60 3 (132 ) (476 ) (147 ) (147 ) 1,688 (60 ) – (386 ) 1,242 619 16 635 (179 ) 58 28 (53 ) (146 ) (232 ) (232 ) 35 - 200 – 235 (143 ) 159 16 The accompanying notes on pages 25–37 form an integral part of these financial statements. 0 2 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 C L P S A G & L I O E N W O D S N A L 21 Company Statement of Cash Flows For the year ended 31 December 2020 Notes 2020 £’000 2019 £’000 Cash flows from operating activities Loss for the year Adjustments for: Interest payable and similar charges Decrease in trade and other receivables (Decrease) in trade and other payables Net cash used in operating activities Cash flows from financing activities Proceeds from the issue of share capital Cost of raising shares Proceeds from new loan Repayment of loan Net cash from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at 1 January Cash and cash equivalents at 31 December (556 ) 60 3 (131 ) (624 ) 1,688 (60 ) – (386 ) 1,242 618 16 634 (410 ) 58 28 (54 ) (378 ) 35 – 200 – 235 (143 ) 159 16 The accompanying notes on pages 25–37 form an integral part of these financial statements. 0 2 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 C L P S A G & L I O E N W O D S N A L 22 Consolidated Statement of Changes in Equity For the year ended 31 December 2020 Share Capital £’000 Share Premium £’000 Share Based Payment Reserve £’000 Currency Translation Accumulated Deficit Reserve £’000 £’000 Total Equity £’000 Balance at 1 January 2019 11,718 26,833 923 59 (25,826 ) 13,707 Loss for the financial year Total comprehensive loss for the year Issue of new shares – gross consideration (note 11) – – 4 – – 31 Balance at 31 December 2019 11,722 26,864 Balance at 1 January 2020 11,722 26,864 Loss for the financial year Total comprehensive loss for the year – – – – Issue of new shares - gross consideration (note 11) 208 1,480 Cost of share issues – (60 ) – – – 923 923 – – – – – – – 59 59 – – – – (179 ) (179 ) (179 ) (179 ) – 35 (26,005 ) 13,563 (26,005 ) 13,563 (407 ) (407 ) (407 ) (407 ) – – 1,688 (60 ) Balance at 31 December 2020 11,930 28,284 923 59 (26,412 ) 14,784 The accompanying notes on pages 25–37 form an integral part of these financial statements. 0 2 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 C L P S A G & L I O E N W O D S N A L 23 Company Statement of Changes in Equity For the year ended 31 December 2020 Share Capital £’000 Share Premium £’000 Share Based Payment Reserve £’000 Accumulated Deficit £’000 Total Equity £’000 Balance at 1 January 2019 11,718 26,833 923 (40,761 ) (1,287 ) Loss for the financial year Issue of new shares – gross consideration (note 11) – 4 – 31 Balance at 31 December 2019 11,722 26,864 Balance at 1 January 2020 11,722 26,864 Loss for the financial year Issue of new shares – gross consideration (note 11) Cost of share issues – 208 – – 1,480 (60 ) – – 923 923 – – – (410 ) (410 ) – 35 (41,171 ) (1,662 ) (41,171 ) (1,662 ) (556 ) (556 ) – – 1,688 (60 ) Balance at 31 December 2020 11,930 28,284 923 (41,727 ) (590 ) The accompanying notes on pages 25–37 form an integral part of these financial statements. 0 2 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 C L P S A G & L I O E N W O D S N A L 24 Notes to the Financial Statements For the year ended 31 December 2020 1. Presentation of accounts and accounting policies (a) Reporting Entity 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, domiciled and registered in the UK. The registered number is 05662495. The address of its registered office is c/o Pinsent Masons LLP, 30 Crown Place, London EC2A 4ES. The Company’s shares are quoted on the AIM Market of the London Stock Exchange. (b) Basis of accounting 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”), and effective for the current reporting year and, in the case of the Company, 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, are set out below. (c) Functional and presentation currency The consolidated financial statements are presented in Sterling, the Company’s functional currency, and all values are rounded to the nearest thousand (£’000) except where otherwise indicated. (d) Going concern – basis of accounting The Directors have prepared the financial statements on the going concern basis which assumes that Group and Company will continue in operational existence for at least twelve months from the date of the approval of these financial statements. The Directors have carried out a detailed assessment of the Group’s and Company’s ability to continue as a going concern including assessing its current and prospective exploration activity, its relationship with the holder of its loan note and preparing cash flow projections for the period to 30 June 2022. The cash flow projections indicate that the Group’s and Company’s ability to continue as a going concern is dependent on securing additional debt or equity funding. The Directors anticipate that the Company will raise new funds, either from a further equity placing or via shareholder loans, upon award of a Lease Undertaking for Barryroe sufficient to fund the Company’s share of costs on the Barryroe Licence together with on-going working capital requirements. In addition, the Directors expect that the maturity date of shareholder loans which are due for repayment in December 2021 may be extended should this be requested by the Company. The Directors have considered the various matters set out above and determined that these events and conditions constitute a material uncertainty that may cast significant doubt on the Group’s and Company’s ability to continue as a going concern and that they may therefore be unable to realise assets and discharge liabilities in the normal course of business. The Directors remain confident that the Group and Company will be in a position to secure such funding as may be required and will have sufficient cash resources available to meet their liabilities for at least 12 months from the date of approval of these financial statements. On that basis, the directors consider it appropriate to prepare the financial statements on a going concern basis. These financial statements do not include any adjustment that would result from the going concern basis of preparation being inappropriate. (e) Basis of measurement The Group prepares its financial statements 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. 0 2 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 C L P S A G & L I O E N W O D S N A L 25 Notes to the Financial Statements Continued (f) 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 (policies ( i ) and ( j ) below) • Recognising deferred tax assets (Note 16) • Future decommissioning costs Those areas believed to be key areas of judgements are; • Going concern (policy (d) above) • Oil and Gas Intangible exploration/ appraisal assets (policy (i) below) Further details of the assumptions used can be found in this statement of accounting policies and in the notes to these financial statements. (g) Basis of consolidation The consolidated financial statements 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. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. 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 (h) Joint arrangements The Group participates in a number of joint arrangements where control of the arrangement is shared with one or more other parties. A joint arrangement is classified as a joint operation or as a joint venture, depending on the rights and obligations of the parties to the arrangement. The classification can have a material impact on the consolidated financial statements. The Group’s share of assets, liabilities, revenue, expenses and cash flows of joint operations are included in the consolidated financial statements on a line-by-line basis, whereas the Group’s investment and share of results of joint ventures are shown within single line items in the consolidated statement of financial position and consolidated income statement respectively. (i) 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 IFRS 6. 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 within “Property, plant and equipment”. 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 26 LANSDOWNE OIL & GAS PLC ANNUAL REPORT & FINANCIAL STATEMENTS 2020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 field by field 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. 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 exploration assets are credited against the previously capitalised cost. A gain or loss on disposal of an exploration 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 will be amortised on a unit of production basis which 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. (j) 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. (k) Cash and cash equivalents Cash and cash equivalents include cash in hand, deposits held at call with banks and other short term highly liquid investments with original maturities of three months or less. (l) Decommissioning costs and provisions Provision is made for the cost of decommissioning oil and gas wells and other oilfield facilities. The cost of decommissioning is determined through discounting the amounts expected to be payable to their present value at the date the provision is recorded and this calculation is re-assessed at each reporting date. This amount is included within development and production assets by licence area and the liability is included in provisions. The cost will be depleted over the life of the licence area on a unit of production basis and charged to the Income Statement. The unwinding of the discount is reflected as a finance cost in the income statement over the expected remaining life of the well. (m) 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. (n) 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 reporting date. Deferred 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: • In respect of taxable temporary differences associated with investments in subsidiaries, 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 0 2 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 C L P S A G & L I O E N W O D S N A L 27 Notes to the Financial Statements Continued • Deferred 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 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 reporting date. The carrying amount of deferred tax assets is reviewed at each reporting date. Deferred tax assets and liabilities are offset only if certain criteria are met. 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. (o) Defined contribution pension schemes From time to time, the Group contributes to a defined contribution pension scheme on behalf of certain employees. The pension cost represents contributions payable by the Group to the scheme. (p) Share based payments The Group has in place an equity-settled share option scheme, details of which are given in the Directors’ Remuneration Report and Note 14 of these financial statements. The cost of awards 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. 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. 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 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. All cancellations of equity settled transactions are treated equally. (q) Finance income and expenses Interest income and interest payable is recognised in the income statement as it accrues, using the effective interest method. (r) Foreign currency The Group’s consolidated financial statements are presented in Sterling, which is also the 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 costs arise. These financial statements have been presented in Sterling. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the rate of exchange ruling at the reporting 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. (s) Financial instruments Non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables. Interest- bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost using the effective interest method. 0 2 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 C L P S A G & L I O E N W O D S N A L 28 (t) Operating segments 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. Because the Group does not engage yet in business activities from which it may earn revenue, and as all its developmental activities are currently located in one geographical area, no reportable segment has been identified nor disclosed in these financial statements. (u) Changes in accounting policies New and amended standards and interpretations The following new standards and amendments were adopted by the Group for the first time in the current financial reporting period with no resulting impact to the consolidated financial statements: • Amendment to references to Conceptual Framework in IFRS Standards. Effective 1 January 2020. • Amendment to IFRS 3 – Definition of a Business. Effective 1 January 2020. • Amendments to IAS 1 and IAS 8 – Definition of Material. Effective 1 January 2020. Forthcoming requirements A number of new standards, amendments to standards and interpretations issued are not yet effective and have not been applied in preparing these financial statements. These new standards, amendments to standards and interpretations are not expected to have a material impact on the Group’s financial statements as the Group has no transactions that would be affected by these new standards and amendments. The principal new standards, amendments to standards and interpretations are as follows: • IFRS 17: Insurance Contracts. Deferred until 1 January 2023. • Amendments to IFRS 10 and IAS 28: Sale or contribution of assets between an investor and its associate or joint venture. Endorsement postponed. 0 2 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 C L P S A G & L I O E N W O D S N A L 29 Notes to the Financial Statements Continued 2. Segmental Reporting The Group has 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. 3. Loss per ordinary share The loss for the year was wholly from continuing operations. Loss for the year attributable to equity holders 2020 £’000 (407 ) 2019 £’000 (179 ) Weighted average number of ordinary shares in issue - basic and diluted 789,385,913 665,071,764 Loss per share arising from continuing operations attributable to the equity holders of the Company – basic and diluted (in pence) (0.05 ) (0.03) 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 one class of potential ordinary shares being share options. As a loss was recorded for both 2020 and 2019, potentially issuable shares would have been anti-dilutive. The number of potentially issuable shares at 31 December 2020 is 34,258,887 (2019: 146,685,452). 4. Intangible assets Group Cost At 1 January 2019 Additions At 31 December 2019 At 1 January 2020 Additions At 31 December 2020 Exploration / appraisal assets £’000 15,311 232 15,543 15,543 147 15,690 Oil and gas project expenditures, all of which relate to Barryroe, including geological, geophysical and seismic costs, are accumulated as intangible assets prior to the determination of commercial reserves. The directors have assessed the current ongoing activities and future planned activities and are satisfied that the carrying value is appropriate. The directors recognise that the future realisation of the Group’s appraisal assets are dependent on moving these forward to development and production. Following the termination of the SpotOn FOA, the Barryroe Partners have retaken control of the project and Lansdowne will as a result retain its 20% original equity in the project, maintaining 69MM Boe net 2C resources. At the time of initiating discussions with SpotOn the oil price had fallen to below $30/bbl as a result of the impact of Covid-19. The oil price has recovered sharply since the autumn of 2020 and now stands at c.$70/bbl. In April 2021, a revised Lease Undertaking work programme was submitted to the Department of the Environment, Climate and Communications, designed to move Barryroe to a declaration of commerciality, turning 2C resources into 2P reserves and subsequently seeking the award of a Petroleum Lease, prior to the commencement of production via the EDS. Approval to proceed with a site survey over the K Location was granted in February 2021 and operations are expected to take place later this year, with the drilling of the K well expected in the second half of 2022. 0 2 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 C L P S A G & L I O E N W O D S N A L 30 5. Investments in subsidiaries Cost At 1 January 2019 and 1 January 2020 Impairment At 31 December 2019 and 31 December 2020 Company £’000 – – – The interests in Group undertakings of the Company are listed below: Name of undertaking Lansdowne Celtic Sea Limited Country of registration Class of share England Ordinary Proportion held 100 per cent Milesian Oil & Gas Limited Lansdowne Munster Limited Ireland Ireland Ordinary Ordinary 100 per cent 100 per cent Nature of business Oil and gas exploration Oil and gas exploration Oil and gas exploration Significant joint operation Principal activity Effective Interest Barryroe Exploration Licence Hydrocarbon exploration Helvick Lease Undertaking Hydrocarbon exploration 6. Trade and other receivables Amounts falling due within one year: Value added tax and other taxes Prepayments 7. Trade and other payables Amounts falling due within one year: Trade payables Taxes and social security Accruals 2020 % 20 9 2019 % 20 9 Group 2020 £’000 Group 2019 £’000 Company 2020 £’000 Company 2019 £’000 4 13 17 3 17 20 4 13 17 2 17 19 Group 2020 £’000 Group 2019 £’000 Company 2020 £’000 Company 2019 £’000 73 119 71 263 191 117 87 395 72 119 71 262 188 117 87 392 0 2 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 C L P S A G & L I O E N W O D S N A L 31 Notes to the Financial Statements Continued 8. Shareholder loan – Group and Company This note provides information about the contractual terms of the Group’s interest bearing loans and borrowings, which are mea- sured at amortised cost Amounts falling due within one year: Senior secured loan notes - Issued in 2015 (i) Junior secured loan notes - Issued in 2019 (ii) 2020 £’000 979 – 979 2019 £’000 1,099 206 1,305 (i) A senior secured loan note was issued in 2015 to LC Capital Master Fund Ltd, a related party as outlined in note 18. Currently, the coupon rate is 5% per annum. In December 2020, LC Capital Master Fund Ltd agreed to extend the term of the loan to 31 December 2021. (ii) In June 2019, the Company entered into loan agreements with two of its shareholders, Brandon Hill Capital Ltd and LC Capital, pursuant to which both shareholders agreed to provide a loan of £150,000, repayable one year after drawdown. The loan agreements carry a coupon of 12% per annum simple interest on the drawn parts of the principal. The principal and interest is repayable in cash at the end of the term. In February 2020, both shareholders agreed to convert the outstanding amount of the loan into new ordinary shares at a price of 0.6p per share.. 9. Provisions Beginning of year Unwinding of discount As at 31 December Asset Asset retirement retirement obligation obligation 2020 £’000 316 – 316 2019 £’000 316 – 316 This provision relates to the cost of abandonment of the Barryroe well, discounted to present value. As the discount was fully unwound at the end of 2018, there is no charge for the current year. 32 LANSDOWNE OIL & GAS PLC ANNUAL REPORT & FINANCIAL STATEMENTS 2020 10. Financial risk management The Group’s 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 and interest rates. (a) Market risk Foreign exchange risk Although the Group reports in Sterling, certain transactions are conducted in Euro. Given the low level of business conducted in Euro during the year, foreign exchange rate fluctuations had an immaterial effect on the result for the year. Interest rate risk The Group’s interest rate risk arises from cash deposits and interest bearing liabilities. 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 the loss for the year. (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 2020 was held with such banks. Other than the allowance for impairment of £146,738 (2019: £232,597) recognised in respect of receivables from its subsidiaries, the Company has no credit risk associated with its other receivables. See note 18 (b). 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 reporting 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 raising of new capital, through shareholder loans, or a combination of all three. Based on current forecasts, the Group will need to raise further capital to meet its future obligations. This is reliant upon the assumptions outlined in the Statement of Accounting Policies. There is no difference between the carrying value and the contractually undiscounted cash flows for financial liabilities. At 31 December 2020, all trade and other payables and shareholder loans were due within one year. Fair value of non-derivative financial assets and financial liabilities The Group’s financial instruments comprise cash, other receivables and trade payables and shareholder loans due within one year and therefore, management believes that the carrying values of those financial instruments approximate fair value. Capital management The Group defines capital as equity plus shareholder loans. 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. 0 2 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 C L P S A G & L I O E N W O D S N A L 33 Notes to the Financial Statements Continued 11. Share capital – Group and Company Authorised 873,618,337 ordinary shares at £0.01 pence each 873,618,337 665,349,846 2020 2019 Issued, called up and fully paid: At 1 January 2019 Issued in year At 31 December 2019 Issued in year Share issue costs Number of Ordinary shares 661,849,846 3,500,000 665,349,846 208,268,491 - Share Capital £’000 11,718 4 11,722 208 - Share Premium £’000 26,833 31 26,864 1,480 (60 ) Total £000 38,551 35 38,586 1,688 (60 ) At 31 December 2020 873,618,337 11,930 28,284 40,214 On 17 February 2020, the Company placed 81,333,333 new ordinary shares with new and existing investors at a placing price of 0.6 pence per placing share, raising £500,000 before costs. Also on 17 February 2020, Brandon Hill Capital and LC Capital agreed to convert the outstanding amount of their 2019 loans to the Company, amounting to £311,210 into new ordinary shares at a placing price of 0.6 pence. Details of Warrants Exercised Date 22/10/2020 12/11/2020 18/11/2020 25/11/2020 30/11/2020 07/12/2020 17/12/2020 No of Warrants Exercised 4,166,167 1,750,000 1,600,000 3,833,333 55,883,333 2,500,000 3,333,333 12. Statutory information Exercise Price 1.2 pence 1.2 pence 1.2 pence 1.2 pence 1.2 pence 1.2 pence 1.2 pence Funds Raised £’000 50 21 19.2 46 670.6 30 40 The loss for the year stated after (crediting)/charging: Foreign exchange losses/(gains) Audit Services: Fees payable to Group’s auditor for the audit of the Company and consolidated financial statements Fees payable to the Group’s auditor for the audit of Company’s subsidiaries pursuant to legislation. 2020 £’000 2019 £’000 (1) 25 6 (1) 23 6 34 LANSDOWNE OIL & GAS PLC ANNUAL REPORT & FINANCIAL STATEMENTS 2020 13. Employee costs Number of employees The average monthly number of employees (including executive directors) during the year was: Oil and gas exploration Staff costs during the year amounted to: Wages and salaries Social security costs 2020 Number 1 2020 £’000 60 9 69 2019 Number 1 2019 £’000 60 6 66 Remuneration of the Directors is disclosed in note 18 and within the Remuneration Report on page 13. 14. Share-based payments Share options The Company has granted options to current and former Directors under an Employee Share Option Scheme. Details of the grants are shown in the Remuneration Report on page 13. As at 31 December 2020, the following options were outstanding: Option exercise price Exercisable at 31 Dec ‘20 Number Exercisable at 31 Dec ‘19 Normal exercise dates Target variable Target 25p 36.5p 15p 1,950,000 1,950,000 1,950,000 19/05/2014 to 18/05/2021 1,090,000 1,090,000 1,090,000 01/06/2015 to 31/05/2022 500,000 500,000 500,000 01/04/2017 to 24/06/2025 Share price Share price Share price (1) (2) (3) (1) 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. (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 47.5 pence per share. (3) 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 22.5 pence per share. The share options may only be exercised within the normal exercise dates as shown above. The number of further options available for grant under the scheme rules is 11,014,016. The cost of awards under the share option scheme was recognised over the vesting period of the awards, three years 15. Finance costs Loan interest Retranslation of foreign currency cash balances Total expense 2020 £’000 2019 £’000 60 (1 ) 59 58 (1 ) 57 0 2 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 C L P S A G & L I O E N W O D S N A L 35 Notes to the Financial Statements Continued 16. Income Tax Current tax charge Total income tax credit The tax assessed for the year is different from the standard rate of corporation tax in the UK as follows; Loss before income tax Loss before income tax multiplied by standard rate of tax 19% (2019:19%) Effects of: Expenses not deductible for tax purposes Losses carried forward Total tax credit 2020 £’000 – – 2020 £’000 (407 ) (77 ) 25 52 – 2019 £’000 – – 2019 £’000 (179 ) (34 ) 16 18 – Unrecognised deferred tax assets, in respect of unused losses, amounts to £1.8 million (2019: £1.6 million). Deferred tax assets have not been recognised because it is not sufficiently probable that future taxable profits will be available against which the Group can use the benefits therefrom. 17. Capital commitments The Group has no unprovided contractual commitments for capital expenditure (2019: Nil). 36 LANSDOWNE OIL & GAS PLC ANNUAL REPORT & FINANCIAL STATEMENTS 2020 18. Related party transactions (a) Transactions with Smith & Williamson Con Casey is a director of Smith & Williamson, and he is the company secretary of the Company. The Company has entered into a services agreement with Smith & Williamson pursuant to which Smith & Williamson provides the Group with certain management, accounting, and administrative services required by the Group in connection with its business in consideration of an annual fee totalling £56,000 (2019: £56,000). This agreement can be terminated by Smith & Williamson or by the Company on giving 90 days’ notice. The Directors consider the service agreement to be at fair value on an arm’s length basis. As at 31 December 2020, the Group owed Smith & Williamson £13,014 (2019: £26,788) under the agreement. (b) Amounts due by subsidiaries At 31 December 2020, amounts owed to the Company by its subsidiaries totalled £24.5 million (2019: £24.4 million). These amounts have been provided in full in the Company’s financial statements as there is no immediate prospect of repayment. Amounts due to the Company are unsecured, non-interest bearing and have no fixed repayment terms. (c) Compensation of key management personnel The Board has determined that the Board of Directors comprise the Group’s key management personnel. Their compensation was as follows: Short-term benefits 2020 £’000 105 2019 £’000 110 (d) Transactions with LC Capital Master Fund Ltd The Company has a loan agreement with LC Capital Master Fund Limited, a major shareholder. Details of the loan agreement are given in note 8. (e) Transactions with Brandon Hill Capital Ltd The Company had a loan agreement with Brandon Hill Capital Limited, a major shareholder. Details of the loan agreement are given in note 8. (f) Directors’ shareholdings Details of directors’ shareholdings are given on page 13. 19. Post Balance Sheet events After the year end, work continued, on the technical and funding aspects of the Barryroe EDS, but problems arose with certain aspects of SpotOn’s planned financing model and they were granted additional time, to the end of April 2021, to find a solution. Unfortunately, it became apparent that despite being granted this additional time, SpotOn would not be able to deliver the funding as required under the FOA and during April the Barryroe Partners terminated the agreement, as allowed under its terms. The Barryroe Partners have now retaken control of the project and Lansdowne will as a result retain its 20% original equity in the project, maintaining 69MM Boe net 2C resources. In April 2021, a revised Lease Undertaking work programme was submitted to the Department of the Environment, Climate and Communications, designed to move Barryroe to a declaration of commerciality, turning 2C resources into 2P reserves and subsequently seeking the award of a Petroleum Lease, prior to the commencement of production via the EDS. Approval to proceed with a site survey over the K Location was granted in February 2021 and operations are expected to take place later this year, with the drilling of the K well expected in the second half of 2022. 0 2 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 C L P S A G & L I O E N W O D S N A L 37 Auditors KPMG 1 Stokes Place St. Stephen’s Green Dublin 2 Registrars Computershare Investor Services (Ireland) Ltd. 3100 Lake Drive Citywest Business Campus Dublin 24 D24 AK82 Bankers Bank of Ireland 175 Rathmines Road Lower Dublin 6 Bank of Ireland Global Markets Colville House Talbot Street Dublin 1 Website www.lansdowneoilandgas.com Advisers Secretary Con Casey FCCA Registered Office c/o Pinsent Masons LLP 30 Crown Place London EC2A 4ES Registered in England and Wales Number 05662495 Nominated Adviser and Broker SP Angel Corporate Finance LLP Prince Frederick House 35-39 Maddox Street London W1S 2PP Joint Broker Brandon Hill Capital Limited Kemp House 152-160 City Road London EC1V 2NX Solicitors Burness Paull LLP 50 Lothian Road Festival Square Edinburgh EH3 9WJ Pinsent Masons LLP 30 Crown Place London EC2A 4ES Mason Hayes Curran South Bank House Barrow Street Dublin 4 0 2 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 C L P S A G & L I O E N W O D S N A L 38 w w w. l a n s d o w n e o i l a n d g a s . c o m 2020 A N N U A L R E P O R T A N D F I N A N C I A L S TAT E M E N T S 

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