ANNUAL REPORT AND ACCOUNTS 2015
Contents
1 Highlights
2 Company information
3 Chairman’s Report
4 Chief Executive Officer’s Report
5
Strategic Report
6 Directors’ Report
9 Corporate Governance Report
10 Board of Directors
11 Independent Auditors’ Report
13 Consolidated Income Statement
14 Consolidated Statement of Comprehensive Income
15 Consolidated Statement of Changes in Equity
16 Company Statement of Changes in Equity
17 Consolidated Statement of Financial Position
18 Company Statement of Financial Position
19 Consolidated Statement of Cash Flows
20 Note to the Consolidated Statement of Cash Flows
21 Company Statement of Cash Flows
22 Note to the Company Statement of Cash Flows
23 Notes to the Financial Statements
48 Notes
www.ntog.co.uk
1
Highlights
• Revenue for the period of £594,000
• Acquired a 25% interest in the East
(2014: £1,267,000)
• Gross profit for the period of £385,000
before depletion, depreciation and
amortisation (2014: £997,000)
• 81% increase in net production to
Ghazalat concession in Egypt operated
by North Petroleum International
Company (NPIC)
• Approval of Exploration Unit for Paw
Paw prospect
64,063 BOE (29,678 US, 34,385 Egypt)
compared to 2014: 35,380, primarily due
to expansion into Egypt
• Obtained a three year extension of
the $25 million lending facility until
31 January 2019
• Ewen Ainsworth joined the board as
Chairman
• Farm-in to Paw Paw prospect with Koch
Exploration where NTOG will operate
2,440 net acres in Wyoming
Post Balance Sheet Highlights
• Joint venture between Nostra Terra
(NTOG) and Independent Resources
(IRG) announced a breach in the joint
venture agreement by North Petroleum
International Company (NPIC)
• Raised £350,000 via a placing of new
shares
• Proposal to acquire 60% interest in
producing assets in the Permian basin in
New Mexico
• Reorganisation of its share capital
• Cost cutting initiative complete achieving
a 40% reduction in overheads
• Sale of Chisholm Trail prospect for
$2.1 million
Nostra Terra Oil and Gas Company plc Annual Report and Accounts 2015 2
Company Information
Directors
Ewen Ainsworth (Non-Executive Chairman)
Matt Lofgran (Chief Executive Officer)
Stephen Oakes (Non-Executive Director)
Secretary
International Registrars Limited
Registered office
Finsgate
5-7 Cranwood Street
London EC1V 9EE
Registered number
05338258 (England and Wales)
Auditor
Jeffreys Henry LLP
Finsgate
5-7 Cranwood Street
London EC1V 9EE
Nominated adviser and broker
Strand Hanson Limited
26 Mount Row
London W1K 3SQ
Broker
Cornhill Capital Limited
4th Floor, 18 St. Swithin’s Lane
London EC1V 9EE
Solicitors
Ronaldsons LLP
55 Gower Street
London WC1E 6HQ
Bankers
National Westminster Bank plc
PO Box 712
94 Moorgate
London EC2M 6XT
Registrars
Share Registrars Ltd
The Courtyard
17 West Street
Farnham
Surrey GU9 7DR
Website
www.ntog.co.uk
Nostra Terra Oil and Gas Company plc Annual Report and Accounts 2015 3
Chairman’s Report
The oil industry continues to wrestle
with the persistently lower oil
price environment. The bear market
has hurt the entire sector and led to
a re-evaluation of strategy by many
companies. At Nostra Terra we have
taken steps to act early in response to
such challenging conditions, seeking to
restructure and reposition the business.
This has involved making some difficult
decisions and we would like to thank
our shareholders for their continued
support, in particular for voting in
favour of the consolidation and
capital reorganisation at the recent
Extraordinary General Meeting. This
was not a proposal we made lightly,
but we remain convinced it will be
in the long term best interests of the
Company.
Our strategic goals have been twofold
in repositioning Nostra Terra. First we
had to ensure the Company survives
this extremely difficult period and
second our key aim is to deliver
significant value to shareholders
over the medium term. We remain
confident the Company’s renewed
strategic focus on the acquisition of
distressed assets will yield substantial
results.
The success of the previous business
model was reliant on modern
exploration technology such as
hydraulic fracturing and much
higher oil prices, which allowed the
Company to recover investment
capital and generate a return. High
initial production rates were also an
important factor. However, such initial
high levels of production declined
significantly within a relatively short
period, a feature of using hydraulic
fracturing in the reservoirs targeted by
the Company, which, combined with
a rapid decline in the oil price, had
an adverse effect on the Company’s
revenue stream. The declining oil price
also made it uneconomic to drill new
wells to offset diminishing production.
Our new strategy at Nostra Terra is
predicated upon the macro-adjustment
within the entire industry, caused by
the decline in the price of oil. Our focus
is to build a business which at $30/bbl
is cash neutral and reliant on more
conventional oil with lower decline
rates in production. At oil prices above
$30/bbl Nostra Terra will then have the
internally generated funds to invest
in either organic growth within its
producing oil field(s) or pursue new
investment opportunities.
In order to identify suitable
opportunities for Nostra Terra we have
extended our geographical focus, with
the aim of having up to two focus
areas outside of the USA.
Following a prolonged period of low
prices, we have noted a sizeable recent
increase in the quantity and caliber
of oil & gas assets available for sale
at distressed prices. This presents a
rare opportunity for Nostra Terra to
take advantage of. Now that we have
repositioned the business we feel the
Company is well placed to deliver its
refocussed growth strategy over the
coming years.
The foundation of our new growth
strategy is based on the recently
announced cost cutting initiative,
which we completed. During mid-
2015 Nostra Terra started to cut back
spending in anticipation of further
pressure on the oil price during the
course of 2016. So far this decision
has been vindicated and the Company
now benefits from an overall reduction
of 40% in overheads at a time when
the industry remains subdued. A
core component of the cost-cutting
initiative has been for the Board to
take a voluntary 25% pay cut. In light
of ongoing weakness in the oil & gas
market, which has caused significant
declines in share prices across the
sector, the Board strongly felt that this
was an appropriate step to take.
With Nostra Terra now better
positioned to withstand current
market conditions, albeit with a lot
of work still to be done, the Board
remains fully committed to securing
new projects for the Company, and
to create shareholder value over the
medium term. As Nostra Terra delivers
its new growth strategy the Company
plans to bolster its team with the
addition of suitably experienced and
astute technical personnel. This will
only become necessary as we introduce
additional producing assets to the
business.
I would like to thank the Company’s
shareholders for their continued
support and the next time I write
to you I hope to report meaningful
progress on the Company’s strategy
and on the appointment of new
non-executive and/or executive
management personnel.
Ewen Ainsworth
Chairman
29 June 2016
Nostra Terra Oil and Gas Company plc Annual Report and Accounts 2015 4
Chief Executive Officer’s Report
As Ewen has stated in his Chairman’s
Report, we are experiencing the
worst market in our sector for at least
thirty years. Over the last 12 months
our share price has suffered as Brent
declined from $56.81 at the start of
the year, dropping to $27 and closed
at $37.50 by the end of the year. In
the face of extreme adverse conditions
we have worked tirelessly on behalf
of Nostra, making a number of tough
choices for the long-term good of the
company. This has not been easy, but I
am pleased to report we are starting to
reap the benefits.
Overall this has been an extremely
busy year for Nostra. As it became
clear the industry would have to
adapt to a significantly lower oil
price environment, we recognized
how vital it was to reposition the
business. We initiated a cost cutting
initiative in mid-2015, achieving an
overall reduction of 40% in overheads,
as recently announced. We also
sought to restructure our board and
management team to reflect Nostra’s
needs going forward.
On a personal note, I’m very happy
to have welcomed Ewen as our
new Chairman to the team. Since
his appointment, Ewen’s input into
reformulating Nostra’s strategy has
been crucial and I am certain he will
play an extremely important role in the
Company in the years to come.
Rather than simply attempt to
weather the storm, we decided to take
advantage of a new oil price cycle.
This involved adopting a new strategic
focus, seeking to acquire producing
or lower risk assets at distressed
prices, which Nostra could take full
operational control of. We expanded
our global view, looking to enter
into new geographical areas outside
of the United States, and sought
opportunities that presented large
upside potential for relatively small
initial consideration.
We started our new strategy through
identifying an opportunity in Southern
Texas with intriguing potential. We
acquired a minor interest in two
different prospects for a minimal
amount of consideration. These had
large acreage positions with scope to
increase our working interest should
results prove up. Ultimately we decided
not to proceed with the prospect, but
this marked the beginning of Nostra’s
new approach.
Having acquired the White Buffalo
prospect in the Big Horn Basin of
Wyoming in late 2014, in 2015 we
signed an agreement with Koch
Exploration, a subsidiary of Koch
Industries, to operate the Paw Paw
prospect located in the same basin. The
structure of the agreement allowed
Nostra Terra the ability to control a
prospect with a large potential reserve.
While no consideration was paid for
this we have worked to create an
Exploration Unit over the prospective
leases along with permitting for the
initial well. We were able to extend the
agreements into 2016 where Nostra
Terra will seek partners to participate
in the prospect.
During the second half of 2015 we
expanded into Egypt by acquiring
a 25% interest in the East Ghazalat
concession in the Western Desert of
Egypt. The seller agreed to finance
a large portion of the acquisition
leaving Nostra with a $500,000 equity
investment to close the acquisition of
this producing asset. Nostra and its
other minority partner are currently in
dispute with the operator over costs
but are working with the operator
to reduce operating costs in order to
improve the economics on existing
wells. There’s scope for further upside
in development and exploration wells
including the discoveries in the North
Dabaa.
On the financial side of the business
conditions have been tough. We
doubled production into the turn of
2015 and increased it by 81% by the
end of the year. Revenue decreased
to £594,000 primarily due to the drop
of oil prices and natural production
declines in wells, achieving a gross
profit for the period before depletion,
depreciation and amortization costs of
£385,000. Our expectation had been
this would put the company on a much
firmer financial footing, but the sharp
decline in the price of oil undid much
of the good work we had completed
previously. Despite this, at the end
of 2015 Nostra was granted a 3-year
extension to its $25 million Credit
Facility with Texas Capital Bank with
drawdown subject to production. This
was particularly encouraging, given the
number of companies whose business
models failed over the period through
being unable to secure refinancing
terms on lending facilities.
Moving into 2016 we continue to
generate revenue from our existing
assets, in particular Chisholm Trail,
Bale Creek, and Verde. Multiple wells
exist on each prospect thus creating
a portfolio where the Company isn’t
risked on a single well or operator. As
some of these fields develop further
we will look to reinvest capital in fields
at an earlier stage in the cycle where
further upside exists.
As announced on 29 June 2016, Nostra
decided to sell an interest in a Chisholm
Trail prospect for $2.1 million providing
the opportunity to redeploy funds to
assets where we have a larger interest
and more control over the pace of
growth.
I would like to finish by offering
a personal message of thanks to
our shareholders. This has been an
extremely difficult period for the
company. As the largest private holder
of shares in Nostra I’ve suffered the
effects of the falling share price
alongside shareholders. However, we
do live to fight another day. My fellow
directors and I have made a number
of extremely difficult decisions for
the long term good of the company
and I am confident we will turn the
business around as conditions improve
in the market. Our new strategy is
both ambitious and built on a solid
foundation and I look forward to
providing more positive updates as we
deliver on our objectives.
Matt Lofgran
Chief Operating Officer
29 June 2016
Nostra Terra Oil and Gas Company plc Annual Report and Accounts 2015 5
and well completion technologies,
there are environmental and economic
risks, as there are in any hydrocarbon
region. Further information relating to
risk can be found at note 20 to these
accounts.
On behalf of the board:
M B Lofgran
Director
29 June 2016
Strategic Report
The directors now present their
Strategic Report with the financial
statements of Nostra Terra Oil and Gas
Company plc (“the company”) and its
subsidiaries (collectively “the group”)
for the year ended 31 December 2015.
Principal activity
The group’s principal activity is the
exploitation of hydrocarbon resources
focusing at present in the US mid-
continent and Egypt.
Review of business, future
developments, trading outlook
and future strategy
The results for the year and financial
position of the company and the group
are shown in the financial statements
on pages 13 to 22, and are noted in
the Chairman’s Report on page 3 and
the Chief Executive Officer’s Review on
page 4.
Key performance indicators
At this stage in the company’s
development, the directors regularly
monitor key performance indicators
associated with managing liquid
resources, namely: cash flows and
bank balances; general administrative
expenses, which are tightly controlled;
and the level of production. The
directors also monitor the increase in
net production which in 2015 rose to
64,063 BOE (29,678 US, 34,385 Egypt)
compared to 2014: 35,380 as noted on
page 4.
Key risks and uncertainties
The key risk in exploration and
production is the technical risk of
not finding hydrocarbons when an
exploration well is drilled. While the US
mid-continent is a proven hydrocarbon
region and is seeing resurgence
through the application of new drilling
Nostra Terra Oil and Gas Company plc Annual Report and Accounts 2015 6
Directors’ Report
The directors present their report with the financial statements of Nostra Terra Oil and Gas Company plc (“the company”)
and its subsidiaries (collectively “the group”) for the year ended 31 December 2015.
Directors
The following directors have held office since 1 January 2015:
M B Lofgran, S V Oakes , A M Blennerhassett (resigned June 2015)
The following directors have held office since 24 June 2015:
K E Ainsworth
Kristian Ewen Ainsworth will retire at the company’s forthcoming Annual General Meeting under the company’s Articles of
Association and, being eligible, offers himself for re-election.
The directors’ remuneration for the year is summarised as follows:
K E Ainsworth
A M Blennerhassett
M B Lofgran
S V Oakes
A B McCall
Salaries
£
–
–
127,608
–
98,160
225,768
Fees
£
8,333
–
–
24,000
–
32,333
Share-based
compensation
£
3,887
–
7,033
1,758
7,033
19,711
The directors’ remuneration for the year ended 31 December 2014 is summarised as follows:
A M Blennerhassett
M B Lofgran
S V Oakes
A B McCall
Salaries
£
–
118,404
–
109,296
227,700
Fees
£
–
–
24,000
–
24,000
Share-based
compensation
£
–
8,035
2,009
8,035
18,079
Total
£
12,220
–
134,641
25,758
105,193
277,812
Total
£
–
126,439
26,009
117,331
269,779
There were no benefit-in-kind payments during the year.
More detail on the Share options issued to Directors’ during the year are disclosed within the share based payment note
together with the outstanding options and warrants at the year end, please refer to note 22.
At 31 December 2015, the directors’ beneficial interests in the company’s issued share capital were as follows:
K E Ainsworth
M B Lofgran
S V Oakes
No of ordinary
shares of
0.1p each
180,000
4,375,976
283,333
31.12.15
31.12.14
Percentage of
issued share
capital
0.22
5.32
0.34
No of ordinary
shares of
0.1p each
–
4,375,976
283,333
Percentage of
issued share
capital
–
7.88
0.51
Nostra Terra Oil and Gas Company plc Annual Report and Accounts 2015
7
Remuneration Committee and policy
The Remuneration Committee takes into account both group and individual performance, market value and sector conditions
in determining directors’ remuneration. The group’s policy is to pay only minimum salaries compared with peer companies
in the oil and gas sector, until the group has established a good position with acreage, assets, income and cash at hand. All
current salaries are without pension benefits.
Substantial shareholders
As reported in note 25, on 31 May 2016 the company effected a capital reorganisation. Shareholdings held by directors at the
year end, quoted above, shown as at the dates as noted have been adjusted to reflect this reorganisation. The holdings below
are quoted post reorganisation and reflect the effect of the resulting share reorganisation.
As at 16 June 2016, the company was aware of the following interests in its issued share capital:
JIM Nominees Limited
TD Direct Investing Nominees (Europe) Limited
Barclayshare Nominees Limited
HSDL Nominees Limited
Kayne Anderson Energy Fund
M B Lofgran
HSBC Client Holdings Nominee (UK) Limited
Investor Nominees Limited
Hargreaves Lansdown (Nominees) Limited
No of ordinary
shares of
0.1p each
9,429,885
8,511,276
8,371,768
7,669,346
5,642,867
4,375.976
3,746,541
3,338,511
2,524,713
Percentage of
issued share
capital
11.47
10.35
10.18
9.33
6.86
5.32
4.56
4.06
3.07
Results and dividends
The loss for the year was £1,842,000, which has been
allocated against reserves. No dividends will be distributed
for the year ended 31 December 2015.
Political and charitable contributions
The group made no political or charitable contributions
during the year.
Events after the reporting period
Refer to note 26 for details.
Publication of accounts on company website
The company publishes financial statements on its website.
The directors are responsible for the website’s maintenance
and integrity, and their responsibility also extends to the
financial statements contained therein.
Indemnity of officers
The group may purchase and maintain, for any director or
officer, insurance against any liability. The group maintains
appropriate insurance cover against legal action bought
against its directors and officers.
Financial instruments
The group does not have formal policies on interest rate
risk or foreign currency risk. The group is exposed to foreign
currency risk on sales and purchases that are denominated
in a currency other than pounds sterling (£). The group
maintains a natural hedge that minimises its foreign
exchange exposure by matching foreign currency income
with foreign currency costs. For the time being, the group
does not consider it necessary to enter into foreign exchange
contracts to manage its foreign currency risk, given the
nature of its business.
Listing
The company’s ordinary shares have traded on London’s
Alternative Investment Market since 20 July 2007. Northland
Capital Partners Limited was the company’s nominated
advisor and Hume Capital Securities plc was the company’s
sole broker until 31 March 2016. On 31 March 2015, the
company announced the appointment of Sanlam Securities
UK Limited as nominated advisor and broker. On 4 March
2016, the company announced the appointment of Cornhill
Capital Limited as broker. On 15 March 2016, the company
announced the appointment of Strand Hanson Limited as
nominated advisor and broker.
The closing mid-market price at 31 December 2015, adjusted
for the capital reorganisation, was 4.24p (2014: 11.68p).
Going concern
The Directors believe that based on the forecasts and
projections they have prepared, the resources available will
be sufficient for the Company and its subsidiaries to continue
as a going concern for the foreseeable future when taking
into account proceeds generated from production, potential
asset sale(s), farm-out(s) of its oil interests and/or equity
placing and/or financing facility as described more fully in
note1 of the accounts.
The Directors have concluded that this combination of
circumstances should they not materialise represents
uncertainty upon the Company’s ability to continue as a
going concern. Nevertheless after making enquiries, and
considering the uncertainties described above, the Directors
have a reasonable expectation that the Group will have
adequate resources to continue in operational existence
for the foreseeable future. For these reasons, they continue
to adopt the going concern basis in preparing the annual
report and accounts.
Nostra Terra Oil and Gas Company plc Annual Report and Accounts 2015
8
Directors’ Report continued
Statement of directors’ responsibilities in respect
of the Strategic Report, the Directors’ Report and
the Financial Statements
The directors are responsible for preparing 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, the
directors have elected to prepare the financial statements
in accordance with International Financial Reporting
Standards (IFRSs) as adopted for use in the European Union.
The financial statements are required by law to give a true
and fair view of the state of affairs of the company and the
group and of the profit or loss of the group for that year.
In preparing these financial statements, the directors are
required to:
• select suitable accounting policies and then apply them
consistently;
• make judgments and estimates that are reasonable and
prudent;
• prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
company will continue in business; and
• follow IFRS as adopted by the European Union.
The directors are responsible for keeping proper accounting
records which disclose with reasonable accuracy at any time
the financial position of the company and the group and to
enable them to ensure that the financial statements comply
with the Companies Act 2006. They are also responsible for
safeguarding the assets of the company and the group and
hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
Statement as to disclosure of information to
auditors
So far as the directors are aware, there is no relevant audit
information (as defined by Section 418 of the Companies Act
2006) of which the group’s auditors are unaware, and each
director has taken all the steps that he ought to have taken
as a director in order to make himself aware of any relevant
audit information and to establish that the group’s auditors
are aware of that information.
Auditors
In accordance with Section 485 of the Companies Act 2006, a
resolution that Jeffreys Henry LLP be reappointed as auditors
of the company will be put to the Annual General Meeting.
On behalf of the board:
M B Lofgran
Director
29 June 2016
Nostra Terra Oil and Gas Company plc Annual Report and Accounts 2015 9
Corporate Governance Report
The board has sought to comply with a number of the
provisions of the Code in so far as it considers them to be
appropriate for a company of their size and nature. They
make no statement of compliance with the Code overall and
do not ‘explain’ in detail any aspect of the Code with which
they do not comply.’
The directors recognise the importance of sound corporate
governance, commensurate with the group’s size and
shareholders’ interests. As the group grows, policies and
procedures that reflect the FRC’s UK Corporate Governance
Code will be developed. So far as is practicable and
appropriate, the directors will take steps to comply with the
UK Corporate Governance Code.
The Board of Directors
The board comprises two executive directors and two non-
executive directors. It meets at least four times a year, as
issues arise which require board attention. The board has
a formal schedule of matters specially referred to it for
decision. The directors are responsible for:
• management structure and appointments;
• consideration of strategy and policy;
• approval of major capital investments and transactions;
and
• significant financing matters.
The board has Audit, Remuneration and Nomination
Committees, the roles and responsibilities of which are
discussed below.
Audit Committee
The Audit Committee comprises Ewen Ainsworth as
Chairman, and S V Oakes. Both have considerable and
relevant financial experience.
The Audit Committee has terms of reference agreed by
the board and meets at least twice a year. The committee
provides an opportunity for reporting by the company’s
auditors, and is responsible for:
• monitoring, in discussion with the auditors, the integrity
of the financial statements and announcements of the
company;
• reviewing the company’s internal financial controls and
risk management systems; and
• reviewing and monitoring the external auditor’s
independence, and the objectivity and effectiveness of the
audit process, taking into consideration relevant UK and
other professional and regulatory requirements.
The Audit Committee is also responsible for making
recommendations to the board to be put to shareholders
for their approval in general meeting in relation to the
appointment, reappointment and removal of the external
auditors and to approve the external auditors’ remuneration
and terms of engagement. Other responsibilities include
considering annually whether there is a need for an internal
audit function and making a recommendation to the board,
and reviewing arrangements by which the group’s staff will
be able to raise concerns about possible improprieties in
matters of financial reporting or other matters related to the
group.
Remuneration and Nomination Committees
The Remuneration and Nomination Committees, which meet
at least twice a year, consist of Ewen Ainsworth as Chairman
and S V Oakes. Based on the terms of reference approved by
the board, the Remuneration Committee is responsible for:
• determining and agreeing with the board the framework
or broad policy for the remuneration of the Chief
Executive Officer, the Chairman and other members it is
designated to consider;
• setting the remuneration for all executive directors, the
Chairman and the Company Secretary;
• recommending and monitoring the level and structure of
remuneration for senior management;
• determining targets for any performance-related pay
schemes operated by the group;
• determining the policy and scope of pension arrangements
for each executive director; and
• ensuring that contractual terms on termination and any
payments made are fair to the individual and the company.
The Remuneration Committee determines the terms and
conditions of service of executive directors. This includes
agreeing the policy for authorising claims for expenses from
the Chief Executive Officer and the Chairman and, within
the terms of the agreed policy, recommending the total
individual remuneration package of each executive director
including, where appropriate, bonuses, incentive payments
and share options.
The Nomination Committee is responsible for ensuring all
director appointments are considered by the Committee
before their formal recommendation to the board for
approval.
Relations with shareholders
Communications with shareholders are very important and
are given a priority. The company maintains a website,
www.ntog.co.uk, to inter alia improve information flow to
shareholders and potential investors. It contains inter alia
information about the company’s activities, and annual
and interim reports. Shareholders are welcome to make
enquiries on any matters relating to the business and to
their shareholdings. The company encourages shareholders
to attend the Annual Meeting, at which they will be given
the opportunity to put questions to the chairman and other
members of the board.
Internal financial control
The board is responsible for establishing and maintaining
the company’s system of internal controls and for reviewing
their effectiveness. They are designed to safeguard the
company’s assets and to ensure the reliability of the financial
information for both internal use and external publication.
The controls that include inter alia financial, operational and
compliance matters and management are reviewed on an
ongoing basis.
A system of internal control can provide only reasonable, and
not absolute, assurance that material financial irregularities
will be detected or that risk of failure to achieve business
objectives is eliminated. The board has considered the need for
an internal audit function but because of the size and nature
of its operations does not consider it necessary at this time.
Nostra Terra Oil and Gas Company plc Annual Report and Accounts 2015
10
Board of Directors
EWEN AINSWORTH
Non-Executive Chairman
MATT LOFGRAN
Chief Executive Officer
STEPHEN VAUGHAN OAKES
Non-Executive Director
Stephen Oakes (60) has over 35 years’
experience in financial markets and
is a Fellow of the Securities Institute.
He is a former Chief Executive Officer,
HSBC Investment Management. Since
2003, he has worked with a number of
smaller AIM and Plus Markets-quoted
companies.
Ewen Ainsworth (54) is a chartered
management accountant and a fellow
of the Institute of Petroleum who
brings wide industry experience to
his new role. He has worked in the
industry for 27 years at various stages
of the oil and gas life cycle from
exploration to appraisal/development,
production and de-commissioning.
Starting his career in the late 1980’s
at Conoco, Mr Ainsworth’s career
has included Financial Controller,
Financial Director and CFO roles across
various public and private companies,
including six years as Financial Director
of Gulf Keystone Petroleum Limited
until 2014. He is currently CFO of CAP
Energy Plc. In his career he has been
involved in companies with assets and
operations across the UK, Europe,
Russia, Azerbaijan, Iraq and North and
West Africa.
Matt Lofgran (40) has wide experience
of business development in the energy,
real estate and communications sectors.
Prior to becoming CEO of Nostra Terra
in July 2009, he was with Robson
Energy, LLC, latterly as Vice President
of International Business Development.
In this capacity, he launched the oil and
gas, field services and coal divisions,
and was responsible for extending
Robson Energy’s activities into Mexico.
Mr Lofgran holds a Bachelor of
Business Management degree from
the University of Phoenix and a Global
MBA from Thunderbird School of
Global Management. Mr Lofgran is also
a Director of Elephant Oil Limited and
Atlas Oil & Gas Limited.
Nostra Terra Oil and Gas Company plc Annual Report and Accounts 2015 11
Independent Auditors’ Report
The shareholders
Nostra Terra Oil and Gas Company plc
We have audited the group and parent company financial
statements of Nostra Terra Oil and Gas Company plc
for the year ended 31 December 2015, which comprise
the consolidated income statement, the consolidated
statement of comprehensive income, the consolidated
and parent company statements of financial position, the
consolidated and parent company statements of cash flow,
consolidated and company statements of changes in equity
and related notes. The financial reporting framework that
has been applied in their preparation is applicable law
and International Financial Reporting Standards (IFRSs) as
adopted by the European Union and as regards the parent
company financial statements, as applied in accordance with
the provisions of the Companies Act 2006.
This report is made solely to the company’s members, as
a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken
so that we might state to the company’s members those
matters we are required to state to them in an auditors’
report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility
to anyone other than the company and the company’s
members as a body, for our audit work, for this report, or for
the opinions we have formed.
Respective responsibilities of directors and auditors
As explained more fully in the statement of directors’
responsibilities, the directors are responsible for the
preparation of the financial statements and for being
satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on the
financial statements in accordance with applicable law and
International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices
Board’s Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts
and disclosures in the financial statements sufficient to
give reasonable assurance that the financial statements
are free from material misstatement, whether caused by
fraud or error. This includes an assessment of: whether the
accounting policies are appropriate to the group’s and the
parent company’s circumstances and have been consistently
applied and adequately disclosed; the reasonableness of
significant accounting estimates made by the directors;
and the overall presentation of the financial statements. In
addition we read all financial and non-financial information
in the Chairman’s statement, Chief Executive’s review,
Strategic report, Directors’ report and Corporate Governance
report to identify material inconsistencies with the audited
financial statements, and to identify any information that
is apparently materially incorrect based on, or materially
inconsistent with, the knowledge acquired by us in the
course of performing the audit. If we become aware of
any apparent material misstatements or inconsistencies we
consider the implications for our report.
Basis for qualified opinion on financial statements
The scope of our work was limited as a result of the
following matter. As disclosed in Notes 13 and 26 a dispute
has arisen in relation to the operation of the joint venture
arrangements relating to the group’s 50 per cent working
interest in the East Ghazalat production licence, held
through Independent Resources (Egypt) Limited, and in
which the group holds a 50 per cent interest (the ‘Joint
Venture’). After the reporting period the Joint Venture
was served with notice of default in relation to cash calls
raised by North Petroleum International S.A. (“North
Petroleum”) the operator of East Ghazalat. The Joint
Venture has rebutted the claims from North Petroleum but
the current breakdown in relations has meant that operator
North Petroleum has been unwilling to furnish financial
information to allow a proper determination of licence
costs and an audit of licence revenues to be completed.
In addition, the quantum of a vendor loan note of $2.5
million issued by the Joint Venture as partial consideration
for the transaction remains subject to final determination
in accordance with the sale and purchase agreement. As
a consequence of the lack of access to primary accounting
records we have been unable to obtain sufficient
appropriate audit evidence in relation to the group and
company financial statements concerning:
• the carrying value of £189,619 of the group’s investments
in equity-accounted joint ventures as at 31 December 2015;
• the initial cost of £346,604 of the company’s investments in
equity accounted joint ventures as at 31 December 2015;
• the quantum of the loan note principal of $2.5 million
and interest accrued theron by the Joint Venture at 31
December 2015; and
• the group’s share of any profit or loss attributable to the
group’s underlying interests in the East Ghazalat licence
for the period from 1 July 2015 to 31 December 2015.
Qualified opinion on financial statements
In our opinion, except for the effects of the matter described
in the Basis for Qualified Opinion paragraph, the financial
statements:
• the financial statements give a true and fair view, of the
state of the group’s and parent company’s affairs as at
31 December 2015 and of the group’s loss for the year
then ended;
• the group financial statements have been properly
prepared in accordance with International Financial
Reporting Standards as adopted by the European Union;
• the parent company financial statements have been
properly prepared in accordance with IFRS’s as adopted by
the European Union and as applied in accordance with the
provisions of the Companies Act 2006; and
• the financial statements have been properly prepared in
accordance with the Companies Act 2006.
Opinion on other matter prescribed by the
Companies Act 2006
In our opinion the information given in the Directors’ report
for the financial year for which the financial statements are
prepared is consistent with the financial statements.
Nostra Terra Oil and Gas Company plc Annual Report and Accounts 2015 12
Independent Auditors’ Report continued
Matters on which we are required to report by
exception
We have nothing to report in respect of the following
matters where the Companies Act 2006 requires us to report
to you if, in our opinion:
• adequate accounting records have not been kept by the
Parent company, or returns adequate for audit have not
been received from branches not visited by us; or
• the parent company financial statements are not in
agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by
law are not made; or
• we have not received all the information and explanations
we require for our audit.
David Warren BA FCA
SENIOR STATUTORY AUDITOR
For and on behalf of Jeffreys Henry LLP, Statutory Auditor
Finsgate
5-7 Cranwood Street
London
EC1V 9EE
United Kingdom
29 June 2016
Nostra Terra Oil and Gas Company plc Annual Report and Accounts 2015
Consolidated Income Statement
for the year ended 31 December 2015
Revenue
Cost of sales
Production costs
Exploration and appraisal
Depletion, depreciation, amortisation
Total cost of sales
GROSS PROFIT/(LOSS)
Share based payment
Administrative expenses
Share of results of joint venture
OPERATING LOSS
Finance expense
LOSS BEFORE TAX
Tax (expense) recovery
LOSS FOR THE YEAR
Attributable to:
Owners of the company
Earnings per share expressed
in pence per share:
Continued operations
Basic and diluted (pence)
13
2014
£000
1,267
(268)
(2)
(1,396)
(1,666)
(399)
(19)
(318)
–
(736)
(107)
2015
£000
594
(209)
–
(1,700)
(1,909)
(1,315)
(27)
(689)
(157)
(2,188)
(122)
(2,310)
(843)
–
–
(2,310)
(843)
(2,310)
(843)
Notes
13
5
4
6
8
(0.069)
(0.029)
Nostra Terra Oil and Gas Company plc Annual Report and Accounts 2015
14
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2015
Loss for the year
Other comprehensive income:
Currency translation differences
2015
£000
(2,310)
111
2014
£000
(843)
(249)
Total comprehensive income for the year
(2,199)
(1,092)
Total comprehensive income attributable to:
Owners of the company
(2,199)
(1,092)
Nostra Terra Oil and Gas Company plc Annual Report and Accounts 2015
15
Consolidated Statement of Changes in Equity
for the year ended 31 December 2015
Share
capital
£000
Share
premium
£000
Share
options
reserve
£000
Translation
reserves
Retained
losses
Total
£000
£000
£000
As at 1 January 2014
2,776
9,991
119
74
(9,299)
3,661
Shares issued
Share issue costs
Foreign exchange translation
Loss after tax for the year
Share based payments
584
–
–
–
–
1,166
(97)
–
–
–
–
–
–
–
19
–
–
(249)
–
–
–
–
–
(843)
–
1,750
(97)
(249)
(843)
19
As at 31 December 2014
3,360
11,060
138
(175)
(10,142)
4,241
Shares issued
Share issue costs
Foreign exchange translation
Loss after tax for the year
Share based payments
–
–
–
–
–
–
–
–
–
–
–
–
–
–
27
–
–
111
–
–
–
–
–
(2,310)
–
–
–
111
(2,310)
27
As at 31 December 2015
3,360
11,060
165
(64)
(12,452)
2,069
Share capital is the amount subscribed for shares at nominal value.
Retained loss represents the cumulative losses of the group attributable to owners of the company.
Share premium represents the excess of the amount subscribed for share capital over the nominal value of those shares net
of share issue expenses. Share issue expenses in the year comprise costs incurred in respect of the issue of new shares on the
London Stock Exchange’s AIM market.
Translation reserves arise on consolidation of the translation of the subsidiary’s balance sheet at the closing rate of exchange
and its income statement at the average rate.
Nostra Terra Oil and Gas Company plc Annual Report and Accounts 2015
16
Company Statement of Changes in Equity
for the year ended 31 December 2015
Share
capital
£000
Share
premium
£000
Share
options
reserve
£000
Retained
losses
Total
£000
£000
As at 1 January 2014
2,776
9,991
119
(8,870)
4,016
Shares issued
Share issue costs
Loss after tax for the year
Share based payments
584
–
–
–
1,166
(97)
–
–
–
–
–
19
–
–
(1,058)
–
1,750
(97)
(1,058)
19
As at 31 December 2014
3,360
11,060
138
(9,928)
4,630
Shares issued
Share issue costs
Loss after tax for the year
Share based payments
–
–
–
–
–
–
–
–
–
–
–
27
–
–
(1,650)
–
–
–
(1,650)
27
As at 31 December 2015
3,360
11,060
165
(11,578)
3,007
Share capital is the amount subscribed for shares at nominal value.
Retained loss represents the cumulative losses of the company attributable to owners of the company.
Share premium represents the excess of the amount subscribed for share capital over the nominal value of those shares net of
share issue expenses. Share issue expenses in the year comprise costs incurred in respect of the issue of new shares.
Nostra Terra Oil and Gas Company plc Annual Report and Accounts 2015
Consolidated Statement of Financial Position
31 December 2015
ASSETS
NON-CURRENT ASSETS
Goodwill
Other intangibles
Property, plant and equipment
– oil and gas assets
Investment in joint venture
CURRENT ASSETS
Trade and other receivables
Other debtors
Cash and cash equivalents
LIABILITIES
CURRENT LIABILITIES
Trade and other payables
Borrowings
NET CURRENT ASSETS
NON-CURRENT LIABILITIES
Borrowings
NET ASSETS
EQUITY AND RESERVES
Called up share capital
Share premium
Translation reserves
Share option reserve
Retained losses
Notes
9
10
11
13
14
15
16
17
17
18
19
19
23
19
17
2014
£000
–
4,283
521
–
4,804
491
–
861
1,352
293
1,010
1,303
49
612
4,241
2015
£000
–
3,127
464
190
3,781
171
5
144
320
373
1,308
1,681
(1,361)
351
2,069
3,360
11,060
(64)
165
(12,452)
2,069
3,360
11,060
(175)
138
(10,142)
4,241
The financial statements were approved and authorised for issue by the Board of Directors on 29 June 2016 and were signed
on its behalf by:
M B Lofgran
Director
Company registered number: 05338258
Nostra Terra Oil and Gas Company plc Annual Report and Accounts 2015
18
Company Statement of Financial Position
31 December 2015
ASSETS
NON-CURRENT ASSETS
Fixed asset investments
Investment in joint venture
CURRENT ASSETS
Trade and other receivables
Cash and cash equivalents
LIABILITIES
CURRENT LIABILITIES
Trade and other payables
NET CURRENT ASSETS
NET ASSETS
EQUITY AND RESERVES
Called up share capital
Share premium
Share option reserve
Retained losses
Notes
12
14
15
16
18
19
23
19
2015
£000
2,836
190
3,026
14
69
83
102
102
(24)
3,007
3,360
11,060
165
(11,578)
3,007
2014
£000
4,124
–
4,124
19
552
571
65
65
506
4,630
3,360
11,060
138
(9,928)
4,630
The financial statements were approved and authorised for issue by the Board of Directors on 29 June 2016 and were signed
on its behalf by:
M B Lofgran
Director
Company registered number: 05338258
Nostra Terra Oil and Gas Company plc Annual Report and Accounts 2015
Consolidated Statement of Cash Flows
for the year ended 31 December 2015
Notes
1
Cash flows from operating activities
Cash generated/(consumed) by operations
Interest paid
Cash generated/(consumed) by operations
Cash flows from investing activities
Purchase of intangibles – new oil properties
Sale/(purchases) of plant and equipment
Proceeds from sale of assets
Purchase of equity in joint venture investment
Net cash from investing activities
Cash flows from financing activities
Proceeds on issue of shares
New borrowing
Repayment of borrowings
Net cash from financing activities
Effect of exchange rate changes on cash and cash equivalents
Increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
14
Cash and cash equivalents at the end of the year
2015
£000
57
(115)
(58)
(276)
(25)
–
(347)
(648)
–
1,156
(1,162)
(6)
(5)
(717)
861
144
Represented by:
Cash at bank
14
144
19
2014
£000
222
(163)
59
(2,527)
(245)
295
–
(2,477)
1,653
2,221
(966)
2,908
–
490
371
861
861
Nostra Terra Oil and Gas Company plc Annual Report and Accounts 2015
20
Note to the Consolidated Statement of Cash Flows
for the year ended 31 December 2015
1. RECONCILIATION OF OPERATING LOSS TO NET CASH GENERATED FROM OPERATIONS
Loss for the year
Adjustments for:
Depreciation of property, plant, and equipment
Amortisation of intangibles
Well impairment
Share of results of joint venture
Loss on disposal of assets
Share based payment
Foreign exchange loss/(gains) non-cash items
Operating cash flows before movements in working capital
(Decrease)/increase in finance charge provision
(Increase)/decrease in receivables
(Decrease)/increase in payables
(Increase)/decrease in deposits and prepayments
Cash generated/(consumed) by operations
2015
£000
(2,188)
103
1,026
571
157
–
27
–
(304)
(15)
310
34
32
57
2014
£000
(736)
127
577
–
–
691
19
(521)
57
56
52
(43)
–
222
Nostra Terra Oil and Gas Company plc Annual Report and Accounts 2015
Company Statement of Cash Flows
for the year ended 31 December 2015
Cash generated/(consumed) by operations
Net cash from operating activities
Cash flows from investing activities
Interest received
Net cash from investing activities
Cash flows from financing activities
Inter group loan (advances)
Issue of new shares
Net cash from financing activities
Increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Represented by:
Cash at bank
Notes
1
14
14
2015
£000
(161)
(161)
–
–
(322)
–
(322)
(483)
552
69
69
21
2014
£000
733
733
–
–
(1,864)
1,653
(211)
522
30
552
552
Nostra Terra Oil and Gas Company plc Annual Report and Accounts 2015
22
Note to the Company Statement of Cash Flows
for the year ended 31 December 2015
1. RECONCILIATION OF OPERATING LOSS TO NET CASH GENERATED FROM OPERATIONS
Loss for the year
Adjustments for:
Impairment of cost of investments
Share of results of joint venture
Share based payment
Foreign exchange loss/(gain) non-cash items
Operating cash flows before movements in working capital
(Increase)/decrease in receivables
(Decrease)/increase in payables
Cash generated (consumed) by operations
Notes
2015
£000
(1,650)
1,277
(157)
27
300
(203)
5
37
(161)
2014
£000
(1,058)
1,289
–
478
19
728
(13)
18
733
Nostra Terra Oil and Gas Company plc Annual Report and Accounts 2015
23
Notes to the Financial Statements
for the year ended 31 December 2015
GENERAL INFORMATION
Nostra Terra Oil and Gas Company plc (Nostra Terra) is a company incorporated in England and Wales and quoted on the AIM
market of the London Stock Exchange. The address of the registered office is disclosed on the company information page of
this annual report. The principal activity of the group is described in the directors’ report.
1. ACCOUNTING POLICIES
Going concern
The financial statements have been prepared on the assumption that the group is a going concern. When assessing the
foreseeable future, the directors have looked at a period of 12 months from the date of approval of this report.
The group’s business activities, together with the factors likely to affect its future development, performance and position are
set out in the Chief Executive Officer’s report and Directors report. In addition, note 19 to the financial statements includes
the group’s objectives, policies and processes for managing its capital; its financial risk management objectives; and its
exposures to credit risk and liquidity risk.
The group’s forecasts and projections, taking account of reasonable possible changes in trading performance, show that
the group should be able to operate within the level of its current cash resources. In addition, the group has entered into a
US$25 million credit facility (current borrowing base US$1.1 million and anticipated to increase) in 2015, a £5 million financing
agreement (expandable to £10 million), and a US$1 million promissory note (expandable to US$3 million) with Yorkville
Advisors.
After making enquiries, the directors have a reasonable expectation that the company and group have adequate resources to
continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in
preparing the annual report and financial statements.
Basis of preparation
These financial statements have been prepared in accordance with International Financial Reporting Standards and IFRIC
interpretations issued by the International Accounting Standards Board (IASB) as adopted by the European Union and with
those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The financial statements have been
prepared under the historical cost convention.
New and amended standards adopted by the company
There are no IFRS or IFRIC interpretations that are effective for the first time in this financial period that would be expected to
have a material impact on the group.
Standards, interpretations and amendments to published standards that are not yet effective
The following new and amended IFRSs have been adopted during the year.
• Annual Improvements to IFRS 2011-2013 Cycle
• IFRIC interpretation 21 Levies
There were no material changes in the financial statements as a result of adopting new or revised accounting standards
during the year.
Nostra Terra Oil and Gas Company plc Annual Report and Accounts 2015 24
Notes to the Financial Statements
for the year ended 31 December 2015
1. ACCOUNTING POLICIES continued
The following new and amended IFRSs have been adopted during the year.
• Annual Improvements to IFRS 2011-2013 Cycle
• IFRIC interpretation 21 Levies
There were no material changes in the financial statements as a result of adopting new or revised accounting standards
during the year.
The Group has not yet adopted certain new standards, amendments and interpretations to existing standards, which have
been published but are not yet effective. The new pronouncements are listed below:
• IFRS 9 Financial Instruments (IASB effective 1 January 2018; not yet adopted by EU)
• IFRS 14 Regulatory Deferral Accounts (IASB effective 1 January 2016; not yet adopted by EU)
• IFRS 15 Revenue from Contracts with Customers including amendments and clarifications (IASB effective 1 January 2018; not
yet adopted by EU)
• IFRS 16 Leases (IASB effective 1 January 2019; not yet adopted by EU)
• Amendments to IFRS 10, IFRS 12 and IAS 28: Investment Entities: Applying the Consolidation Exception (IASB effective date 1
January 2016; not yet adopted by EU)
• Amendments to IFRS 10 and 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (IASB
effective 1 January 2016; not yet adopted by EU)
• Amendments to IAS 12 Recognition of Deferred Tax Assets for Unrealised Losses (IASB effective 1 January 2017; not yet
adopted by EU)
• Amendments to IAS 7 Disclosure Initiative (IASB effective 1 January 2017; not yet adopted by EU).
• Amendments to IAS 27: Equity Method in Separate Financial Statements (effective 1 January 2016)
• Amendments to IAS 1 Disclosure Initiative (effective 1 January 2016)
• Annual Improvements to IFRS’s: 2012 - 2014 Cycle (effective 1 January 2016)
• Amendments to IAS 16 and IAS 38: Clarification of Acceptable Methods of Depreciation and Amortisation (effective 1
January 2016)
• Amendments to IFRS 11: Accounting for Acquisitions of Interests in Joint Operations (effective 1 January 2016)
• Amendments to IAS 16 and 41: Bearer Plants (effective 1 January 2016)
• Amendments to IAS 19: Defined Benefit Plans: Employee Contributions (effective 1 February 2015)
• Annual Improvements to IFRS’s: 2010 - 2012 Cycle (effective 1 February 2015)
The directors anticipate that the adoption of these standards and interpretations in future periods will have no material effect
on the financial statements of the group.
Basis of consolidation
Where the company has the power, either directly or indirectly, to govern the financial and operating policies of another
entity or business so as to obtain benefits from its activities, it is classified as a subsidiary. The consolidated financial
statements present the results of the company and its subsidiaries (“the group”) as if they formed a single entity.
Intercompany transactions and balances between group companies are therefore eliminated in full.
The consolidated financial statements incorporate the results of business combinations using the purchase method. In the
statement of financial position, the acquiree’s identifiable assets, liabilities and contingent liabilities are initially recognised
at their fair values at the acquisition date. The results of acquired operations are included in the consolidated statement of
comprehensive income from the date on which control is obtained. They are deconsolidated from the date control ceases.
Subsidiaries
The purchase method of accounting is used to account for the acquisition of subsidiaries by the group. The cost of an
acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed
at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date,
irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the group’s share
of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net
assets of the subsidiary acquired, the difference is recognised directly in the income statement.
Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated.
Unrealised losses are also eliminated but considered an impairment indicator of the asset transferred. Accounting policies of
subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group.
Nostra Terra Oil and Gas Company plc Annual Report and Accounts 2015 25
Associates
An associate undertaking (“associate”) is an enterprise over whose financial and operating policies the group has the power
to exercise significant influence and which is neither a subsidiary nor a joint venture of the group. The equity method of
accounting for associates is adopted in the group financial statements, such that they include the group’s share of operating
profit or loss, exceptional items, interest, taxation and net assets of associates (“the equity method”).
In applying the equity method, account is taken of the group’s share of accumulated retained earnings and movements in
reserves from the effective date on which an enterprise becomes an associate and up to the effective date of disposal. The
share of associated retained earnings and reserves is generally determined from the associate’s latest interim or final financial
statements. Where the group’s share of losses of an associate exceeds the carrying amount of the associate, the associate is
carried at nil. Additional losses are only recognised to the extent that the group has incurred obligations or made payments
outside the course of ordinary business on behalf of the associate.
Joint Venture
Investment in entities which constitute a joint venture in accordance with the definition in International Accounting Standard
no. 28 Investments in Associates are accounted for using the equity method, with the group’s share of profits or losses being
adjusted against the original cost of the investment on an annual basis.
Intangible assets
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the group’s share of the net identifiable
assets of the acquired subsidiary or associate at the date of acquisition. Goodwill on acquisitions of subsidiaries is included
in ‘intangible assets’. Separately recognised goodwill is tested annually for impairment and carried at cost less accumulated
impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the
carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-
generating units or groups of cash-generating units that are expected to benefit from the business combination in which the
goodwill arose. The group allocates goodwill to each business segment in each country in which it operates.
Impairment of non-financial assets
Assets that have an indefinite useful life, for example goodwill, are not subject to amortisation and are tested annually for
impairment. 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 fair 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 (cash-generating units). Non-financial assets other than goodwill that suffered impairment
are reviewed for possible reversal of the impairment at each reporting date.
Property, plant and equipment
Tangible non-current assets are stated at historical cost less depreciation. Historical cost includes expenditure that is directly
attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when
it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be
measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged
to the income statement during the financial year in which they are incurred. Depreciation is provided at the following
annual rates in order to write off each asset over its estimated useful life:
Plant and machinery – over 7 years
The assets’ residual values and useful economic lives are reviewed, and adjusted if appropriate, at each balance sheet date. An
asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than
its estimated recoverable value.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within
other (losses) or gains in the income statement. When revalued assets are sold, the amounts included in other reserves are
transferred to retained earnings.
Nostra Terra Oil and Gas Company plc Annual Report and Accounts 2015
26
Notes to the Financial Statements
for the year ended 31 December 2015
1. ACCOUNTING POLICIES continued
Investments
Investments are stated at cost less provision for any impairment value.
Revenue recognition
Revenue comprises the fair value of the consideration received or receivable for the sale of hydrocarbons and services in the
ordinary course of the group’s activities. Revenue is shown net of value-added tax, returns, rebates and discounts and after
eliminating sales within the group. Revenue is recognised when the oil and gas produced is despatched and received by the
customers.
Functional currency translation
(i) Functional and presentation currency
Items included in the financial statements of the group are measured using the currency of the primary economic
environment in which the entity operates (the functional currency), which is mainly United States Dollars (US$). The
financial statements are presented in Pounds Sterling (£), which is the group’s presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the presentational currency using exchange rates prevailing at the dates
of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the
translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised
in the income statement.
(iii) Group companies
The results and financial position of all group entities (none of which has the currency of a hyper-inflationary economy)
that have a functional currency different from the presentation currency are translated into the presentation currency as
follows:
(a) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance
sheet;
(b) income and expenses for each income statement are translated at average exchange rates (unless this average is not
a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case
(c)
income and expenses are translated at the rate on the dates of the transactions); and
(d) all resulting exchange differences are recognised as a separate component of equity.
On consolidation, exchange differences arising from the translation of the net investment in foreign operations, and of
borrowings and other currency instruments designated as hedges of such investments, are taken to shareholders’ equity.
When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity are recognised in
the income statement as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the
foreign entity and translated at the closing rate.
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on the
taxable profit for the year. Taxable profit differed from net profit as reported in the income statement because it excludes
items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable
or deductible. The entity’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted
by the balance sheet date.
Deferred tax
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts in the financial statements. However, the deferred income tax is not
accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that
at the time of the transaction affects neither accounting nor taxable profit nor loss. Deferred income tax is determined using
tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply
when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against
which the temporary differences can be utilised.
Operating leases
Rental leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as
operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the
income statement.
Nostra Terra Oil and Gas Company plc Annual Report and Accounts 2015 27
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held on call with banks, other short-term highly liquid investments
with original maturities of three months or less, and bank overdrafts.
Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective
interest method, less provision for impairment. A provision for impairment is established when there is objective evidence
that the group will not be able to collect all amounts due according to the original terms of the receivables. Significant
financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default
or delinquency in payments are considered indicators that the trade receivable is impaired.
Trade payables
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest
method.
Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at
amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the
income statement over the year of the borrowings using the effective interest method.
Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability
for at least 12 months after the balance sheet date.
Financial instruments
Non-derivative financial instruments comprise investments in equity and debt securities, trade and other receivables, cash and
cash equivalents, loans and borrowings, and trade and other payables.
Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through
profit or loss, any directly attributable transactions costs, except as described below. Subsequent to initial recognition, non-
derivative financial instruments are measured as described below.
A financial instrument is recognised when the group becomes a party to the contractual provisions of the instrument.
Financial assets are derecognised if the group’s contractual rights to the cash flows from the financial assets expire or if the
group transfers the financial assets to another party without retaining control or substantially all risks and rewards of the
asset. Regular way purchases and sales of financial assets are accounted for at trade date, i.e. the date that the group commits
itself to purchase or sell the asset. Financial liabilities are derecognised if the group’s obligations specified in the contract
expire or are discharged or cancelled.
Fair values
The carrying amounts of the financial assets and liabilities such as cash and cash equivalents, receivables and payables of the
group at the balance sheet date approximated their fair values, due to the relatively short-term nature of these financial
instruments.
The company provides financial guarantees to licensed banks for credit facilities extended to a subsidiary company. The fair
value of such financial guarantees is not expected to be significantly different as the probability of the subsidiary company
defaulting on the credit lines is remote.
Nostra Terra Oil and Gas Company plc Annual Report and Accounts 2015 28
Notes to the Financial Statements
for the year ended 31 December 2015
1. ACCOUNTING POLICIES continued
Share-based compensation
The fair value of the employee and suppliers services received in exchange for the grant of the options is recognised as an
expense. The total amount to be expensed over the vesting year is determined by reference to the fair value of the options
granted, excluding the impact of any non-market vesting conditions (for example, profitability and sales growth targets).
Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. At each
balance sheet date, the entity revises its estimates of the number of options that are expected to vest. It recognises the impact
of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity.
The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share
premium when the options are exercised.
The fair value of share-based payments recognised in the statement of comprehensive income is measured by use of the
Black Scholes model, which takes into account conditions attached to the vesting and exercise of the equity instruments.
The expected life used in the model is adjusted; based on management’s best estimate, for the effects of non-transferability,
exercise restrictions and behavioural considerations. The share price volatility percentage factor used in the calculation is
based on management’s best estimate of future share price behaviour and is selected based on past experience, future
expectations and benchmarks against peer companies in the industry.
Share capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax,
from the proceeds.
Oil and gas assets
The group applies the successful efforts method of accounting for oil and gas assets and has adopted IFRS 6 Exploration for
and evaluation of mineral resources.
Exploration and evaluation (“E&E”) assets
Under the successful efforts method of accounting, all licence acquisition, exploration and appraisal costs are initially
capitalised in well, field or specific exploration cost centres as appropriate, pending determination. Expenditure incurred
during the various exploration and appraisal phases is then written off unless commercial reserves have been established or
the determination process has not been completed.
Pre-licence costs
Costs incurred prior to having obtained the legal rights to explore an area are expensed directly to the income statement as
they are incurred.
Exploration and evaluation (“E&E”) costs
Costs of E&E are initially capitalised as E&E assets. Payments to acquire the legal right to explore, together with the directly
related costs of technical services and studies, seismic acquisition, exploratory drilling and testing are capitalised as intangible
E&E assets.
Tangible assets used in E&E activities (such as the group’s drilling rigs, seismic equipment and other property, plant and
equipment used by the company’s exploration function) are classified as property, plant and equipment. However, to the
extent that such a tangible asset is consumed in developing an intangible E&E asset, the amount reflecting that consumption
is recorded as part of the cost of the intangible asset. Such intangible costs include directly attributable overheads, including
the depreciation of property, plant and equipment utilised in E&E activities, together with the cost of other materials
consumed during the exploration and evaluation phases.
E&E costs are not amortised prior to the conclusion of appraisal activities.
Nostra Terra Oil and Gas Company plc Annual Report and Accounts 2015 29
Treatment of E&E assets at conclusion of appraisal activities
Intangible E&E assets relating to each exploration licence/prospect are carried forward until the existence (or otherwise) of
commercial reserves has been determined, subject to certain limitations including review for indications of impairment. If
commercial reserves are discovered the carrying value, after any impairment loss of the relevant E&E assets, is then reclassified
as development and production assets. If, however, commercial reserves are not found, the capitalised costs are charged to
expense after conclusion of appraisal activities.
Development and production assets
Development and production assets are accumulated generally on a field-by-field basis and represent the cost of developing
the commercial reserves discovered and bringing them into production, together with the E&E expenditures incurred in
finding commercial reserves transferred from intangible E&E assets as outlined above.
The cost of development and production assets also includes the cost of acquisitions and purchases of such assets, directly
attributable overheads and the cost of recognising provisions for future restoration and decommissioning.
Depletion, amortisation and impairment of oil and gas assets
All expenditure carried within each field is amortised from the commencement of production on a unit of production basis,
which is the ratio of oil and gas production in the period to the estimated quantities of commercial reserves at the end of the
period plus the production in the period, on a field-by-field basis. Costs used in the unit of production calculation comprise
the net book value of capitalised costs plus the estimated future field development costs to access the related commercial
reserves. Changes in the estimates of commercial reserves or future field development costs are dealt with prospectively.
Where there has been a change in economic conditions that indicates a possible impairment in an oil and gas asset, the
recoverability of the net book value relating to that field is assessed by comparison with the estimated discounted future cash
flows based on management’s expectations of future oil and gas prices and future costs. Any impairment identified is charged
to the income statement as additional depletion and amortisation. Where conditions giving rise to impairment subsequently
reverse, the effect of the impairment charge is also reversed as a credit to the income statement, net of any depreciation that
would have been charged since the impairment.
Commercial reserves
Commercial reserves are proven and probable oil and gas reserves, which are defined as the estimated quantities of crude oil,
natural gas and natural gas liquids which geological, geophysical and engineering data demonstrate with a specified degree
of certainty to be recoverable in future years from known reservoirs and which are considered commercially producible.
Critical accounting estimates and judgments
The preparation of consolidated financial statements requires the group to make estimates and assumptions that affect
the application of policies and reported amounts. Estimates and judgments are continually evaluated and are based on
historical experience and other factors including expectations of future events that are believed to be reasonable under the
circumstances. Actual results may differ from these estimates. The estimates and assumptions which have a significant risk of
causing a material adjustment to the carrying amount of assets and liabilities are discussed below:
a)
Impairment of investments
Costs of investments are reviewed for impairment if events or changes in circumstances indicate that the carrying amount
may not be recoverable. When a review for impairment is conducted, the recoverable amount is determined based on
value in use calculations prepared on the basis of management’s assumptions and estimates for each cash generating
unit.
Impairment of property, plant and equipment
Property, plant and equipment are reviewed for impairment if events or changes in circumstances indicate that the
carrying amount may not be recoverable. When a review for impairment is conducted, the recoverable amount is
determined based on value in use calculations prepared on the basis of management’s assumptions and estimates.
b)
c) Recoverability of exploration and evaluation costs
E&E assets are assessed for impairment when circumstances suggest that the carrying amount may exceed its
recoverable value. This assessment involves judgment as to (i) the likely future commerciality of the asset and when
such commerciality should be determined, and (ii) future revenues and costs pertaining to the asset in question, and the
discount rate to be applied to such revenues and costs for the purpose of deriving a recoverable value.
d) Share-based payments
Note 1 sets out the group’s accounting policy on share-based payments, specifically in relation to the share options and
warrants that the company has granted. The key assumptions underlying the fair value of such share-based payments are
discussed in note 22. The fair value amounts used by the group have been derived by external consultants using standard
recognised valuation techniques.
Nostra Terra Oil and Gas Company plc Annual Report and Accounts 2015 30
Notes to the Financial Statements
for the year ended 31 December 2015
2. SEGMENTAL ANALYSIS
In the opinion of the directors, the group has one class of business, being the exploitation of hydrocarbon resources.
The group’s primary reporting format is determined by geographical segment according to the location of the hydrocarbon
assets. The group’s reportable segments under IFRS 8 in the year are as follows:
United Kingdom being the head office.
US Mid-Continent properties at year end included the following:
(i) Texas: 1% working interest in the Vintage Hills Prospect Unit located within the Giddings Field; 3% working interest
in the Nesbitt Prospect Unit located within the Woodlawn Field;
(ii) Colorado: 16.25% working interest in the Verde Prospect Unit;
(iii) Oklahoma: 30% working interest in the Bale Creek Prospect Unit;
(iv) Oklahoma: 20% interest (varied working interest) in the Chisholm Trail Project.
(v) Wyoming: 100% working interest in the White Buffalo Prospect
Egypt properties at year end included the following:
(i) Egypt: 25% interest in the East Ghazalat concession
The chief operating decision maker’s internal report is based on the location of the oil properties as disclosed below.
Segment results – 2015
Revenue
Operating loss before depreciation, amortisation
share-based payment charges and restructuring costs:
Depreciation of tangibles
Amortisation of intangibles
Well impairment
Share of results of joint venture
Share based payment
Operating loss
Realised exchange (loss)/gain
Tax
Gain (loss) before taxation
Segment assets
Property, plant and equipment
Intangible assets
Cash and cash equivalents
Other assets
US mid-
continent
2015
£000
594
(181)
(103)
(1,026)
(571)
–
–
(1,881)
–
(122)
(2,003)
464
3,127
75
352
4,018
Head
office
2015
£000
–
(123)
–
–
–
(157)
(27)
(307)
–
–
(307)
–
–
69
14
83
Total
2015
£000
594
(304)
(103)
(1,026)
(571)
(157)
(27)
(2,188)
–
(122)
(2,310)
464
3,127
144
523
4,101
Nostra Terra Oil and Gas Company plc Annual Report and Accounts 2015
3. EMPLOYEES AND DIRECTORS
Directors’ fees
Directors’ remuneration
Social security costs
2015
£000
32
226
13
271
The average monthly number of employees (including directors) during the year was as follows:
Directors
2015
Number
4
4
31
2014
£000
24
228
15
267
2014
Number
4
4
Directors’ remuneration
Other than the directors, the group had no other employees. Total remuneration paid to directors during the year was as
listed above.
The highest paid director’s emoluments and other benefits for the years ended 31 December 2015 is as listed below:
M B Lofgran
4. FINANCE INCOME/EXPENSE
For the years ended 31 December:
On bank balance
On other receivables
Finance Expense
2015
£000
129
2015
£000
–
–
(122)
(122)
2014
£000
126
2014
£000
–
–
(107)
(107)
Nostra Terra Oil and Gas Company plc Annual Report and Accounts 2015
32
Notes to the Financial Statements
for the year ended 31 December 2015
5. OPERATING LOSS FOR THE YEAR
The operating loss for the years ended 31 December is stated after charging/(crediting):
Auditors’ remuneration (company £21,000 – 2014: £21,000)
Depreciation of property, plant and equipment
Amortisation of intangibles
Foreign exchange differences
Loss on the disposal of exploration and evaluation and oil and gas assets
2015
£000
21
103
1,026
–
–
The analysis of administrative expenses in the consolidated income statement by nature of expense:
Directors’ remuneration
Social security costs
Directors’ fees
Travelling and entertaining
Accountancy fees
Legal and professional fees
Auditors’ remuneration
Foreign exchange differences
Other expenses
2015
£000
226
13
32
55
55
214
21
(6)
78
689
2014
£000
21
127
577
480
691
2014
£000
228
15
24
74
149
180
21
(480)
107
318
Nostra Terra Oil and Gas Company plc Annual Report and Accounts 2015
INCOME TAX EXPENSE
6.
The tax charge on the loss for the year was as follows:
Current tax:
Corporation tax
Overseas corporation tax/(recovery)
Total
Loss before tax
33
2014
£000
–
–
–
2014
£000
(843)
2015
£000
–
–
–
2015
£000
(2,310)
Loss on ordinary activities before taxation multiplied by standard rate
of UK corporation tax of 20% (2014: 20%)
Effects of:
Non-deductible expenses
Other tax adjustments
Foreign tax
Current tax charge
(462)
(167)
–
462
–
462
–
–
167
–
167
–
At 31 December 2015 the group had excess management expenses to carry forward of £1,308,750 (2014: £1,108,870) and
trading losses of £2,158,000 (2014: £2,158,000). The deferred tax asset at 20% (2014: 20%) on these tax losses of £693,000
(2014: £653,000) has not been recognised due to the uncertainty of recovery.
7. LOSS OF PARENT COMPANY
As permitted by Section 408 of the Companies Act 2006, the income statement of the parent company is not presented as part
of these financial statements. The parent company’s loss for the financial year was £1,654,865 (2014: £1,058,124).
Nostra Terra Oil and Gas Company plc Annual Report and Accounts 2015
34
Notes to the Financial Statements
for the year ended 31 December 2015
8. EARNINGS PER SHARE
The calculation of earnings per ordinary share is based on earnings after tax and the weighted average number of ordinary
shares in issue during the year. 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 had two classes of dilutive potential
ordinary shares, being those share options granted to employees and suppliers where the exercise price is less than the
average market price of the group’s ordinary shares during the year, and warrants granted to directors and one former
adviser.
Details of the adjusted earnings per share are set out below:
EPS – loss
Loss attributable to ordinary shareholders (£000)
Weighted average number of shares
Continued operations:
Basic and diluted EPS – loss (pence)
2015
2014
(2,310)
3,359,587,276
(843)
2,922,053,277
(0.069)
(0.029)
The diluted loss per share is the same as the basic loss per share as the loss for the year has an antidilutive effect.
Gross profit before depreciation, depletion and amortisation
EPS on gross profit before depletion, depreciation and amortisation (pence)
Reconciliation from gross loss to gross profit before depletion,
depreciation and amortisation
Gross (loss)/profit
Add back:
Depletion, depreciation and amortisation
Gross profit before depreciation, depletion and amortisation
2015
£000
385
0.011
2015
£000
(1,315)
1,700
385
2014
£000
997
0.034
2014
£000
(399)
1,396
997
Nostra Terra Oil and Gas Company plc Annual Report and Accounts 2015
9. GOODWILL
Group
COST
At 1 January 2014
Additions
At 31 December 2014
Additions
At 31 December 2015
PROVISION
At 1 January 2014
Charge for the year
At 31 December 2014
Charge for the year
At 31 December 2015
CARRYING VALUE
At 31 December 2015
At 31 December 2014
Goodwill arose on the acquisition of Nostra Terra (Overseas) Limited in 2007 and was fully impaired in 2009.
35
£000
4,211
–
4,211
–
4,211
4,211
–
4,211
–
4,211
–
–
Nostra Terra Oil and Gas Company plc Annual Report and Accounts 2015
36
Notes to the Financial Statements
for the year ended 31 December 2015
10. OTHER INTANGIBLES
Group
Licence
£000
Exploration
and evaluation
assets
£000
Development
and production
assets
£000
COST
At 1 January 2014
Additions
Disposals
Transfer to development and production assets
Currency
At 31 December 2014
Additions
Disposals
Transfer to property, plant and equipment
Currency
At 31 December 2015
PROVISION
At 1 January 2014
Transfer to development and production assets
Charge for the year
Impairment
Currency
At 31 December 2014
Charge for the year
Impairment
Disposals
Currency
At 31 December 2015
302
12
–
–
20
334
3
–
–
17
354
–
–
–
–
–
–
–
–
–
–
–
498
947
(68)
(209)
73
1,241
188
–
–
61
1,490
–
–
–
–
–
–
–
–
–
–
–
CARRYING VALUE
At 31 December 2015
At 31 December 2014
354
334
1,490
1,241
3,028
1,568
(918)
209
251
4,138
80
–
–
197
4,415
890
577
–
(118)
81
1,430
1,026
571
–
105
3,132
1,283
2,708
Total
£000
3,828
2,527
(986)
–
344
5,713
271
–
–
275
6,259
890
577
–
(118)
81
1,430
1,026
571
–
105
3,132
3,127
4,283
The group assesses at each reporting date whether there is an indication that the intangible assets may be impaired, by
considering the net present value of discounted cash flows forecasts. If an indication exists an impairment review is carried
out by reference to available engineering information. At the year end, the directors are of the opinion that an impairment
of £571,000 (2014: £nil) should be provided.
Amortisation, impairment charges and any profit or loss on disposal of the capitalised intangible costs is included within cost
of sales in the consolidated income statement.
Nostra Terra Oil and Gas Company plc Annual Report and Accounts 2015
37
Plant & equipment
– oil and gas assets
£000
670
245
(247)
44
712
25
–
33
770
(181)
(127)
129
(12)
(191)
(103)
–
(12)
(306)
464
521
11. PROPERTY, PLANT AND EQUIPMENT
Group
COST
At 1 January 2014
Additions
Dispositions
Currency
At 31 December 2014
Additions
Dispositions
Currency
At 31 December 2015
PROVISION
At 1 January 2014
Charge for the year
Disposals
Currency
At 31 December 2014
Charge for the year
Disposals
Currency
At 31 December 2015
CARRYING VALUE
At 31 December 2015
At 31 December 2014
Depreciation charges are included within cost of sales in the Consolidated Income Statement.
Nostra Terra Oil and Gas Company plc Annual Report and Accounts 2015
38
Notes to the Financial Statements
for the year ended 31 December 2015
12. FIXED ASSET INVESTMENTS
Company
Investment
in subsidiary
Loan to
subsidiaries
COST
At 1 January 2014
Additions
At 31 December 2014
Additions
Reduction
At 31 December 2015
PROVISION
At 1 January 2014
Charge for the year
At 31 December 2014
Charge for the year
At 31 December 2015
CARRYING VALUE
At 31 December 2015
At 31 December 2014
£000
4,409
–
4,409
–
–
4,409
(4,409)
–
(4,409)
–
(4,409)
–
–
£000
6,361
1,386
7,747
–
(16)
7,731
(2,334)
(1,289)
(3,623)
(1,277)
(4,900)
2,831
4,124
Loans to
participating
interests
£000
–
–
–
5
–
5
–
–
–
–
–
5
–
Total
£000
10,770
1,386
12,156
5
(16)
12,145
(6,743)
(1,289)
(7,032)
(1,277)
(9,309)
2,836
4,124
In the opinion of the directors, the aggregate value of the company’s investment in subsidiary undertakings is not less than
the amount included in the balance sheet. See note 9 for details on impairment.
The details of the subsidiaries are as set out below:
Shareholding Country of
Nature of Business
Nostra Terra (Overseas) Limited (“NTOL”) 100%
100%
New Horizon Energy 1 LLC (“NHE”)
100%
Goldhawk Oil & Gas, LLC (“Goldhawk”)
100%
Churchill Operating, LLC (“Churchill”)
Incorporation
Cyprus
USA
USA
USA
Oil and gas exploration in Ukraine (Dormant)
Oil and gas exploration in USA
Oil and gas exploration in USA
Oil and gas exploration in USA
Nostra Terra Oil and Gas Company plc Annual Report and Accounts 2015
13. INVESTMENT IN JOINT VENTURE
COST
At 1 January 2015
Additions in year
Impairment
At 31 December 2015
Share of post-tax losses of equity accounted joint ventures
CARRYING VALUE
At 31 December 2015
39
£000
–
347
–
347
(157)
190
The group has a 50 per cent interest in Independent Resources (Egypt) Limited a company incorporated in England & Wales,
whose purpose is to invest in the oil and gas exploration and production activities in the Arab Republic of Egypt. The other
shareholder in Independent Resources (Egypt) Limited (the “Joint Venture”) is Independent Resources Group plc (“IRG”) a UK
resident company whose shares are traded on the AIM market of the London Stock Exchange.
In October 2015 the Joint Venture acquired a 50 per cent. working interest in the East Ghazalat production licence located in
the Western Desert, Egypt from TransGlobe Energy Corporation through the acquisition of the entire share capital of Trans
Globe (GOS) Inc. a wholly-owned subsidiary of TransGlobe Energy Corporation (“TransGlobe). In December 2015, the name of
the acquired company was changed to Sahara Resources (GOS) Inc.
The total consideration for the transaction was $3.5 million of which $2.5 million has been deferred as a vendor loan
repayable by the Joint Venture on 30 September 2017. The loan note accrues interest at 10 per cent annum payable semi-
annually. Nostra Terra and Independent Resources plc are joint and severally liable for the repayment of the loan note.
The final loan note principal and semi-annual interest payable to Trans Globe thereon remain subject to final determination
in accordance with completion working capital adjustment provisions in the sale and purchase agreement.
At 31 December 2015 the loan note principal has been recorded based on Trans Globe’s initial assessment of working capital
at completion and interest on this estimated loan note principal has been accrued up to 31 December 2015.
The US dollar denominated loan liability all to TransGlobe has been retranslated at prevailing year-end exchange rates.
As a non-monetary long-term asset, the consideration for acquiring the share capital of Trans Globe GOS Inc. has been
recorded at the prevailing exchange rate at the time of completion of the acquisition but has not been retranslated at the
prevailing year-end exchange rate.
In January 2016 the Joint Venture was served with notice of default in relation to cash calls raised by North Petroleum
International S.A. (“North Petroleum”) the operator of East Ghazalat.
The Joint Venture has rebutted the claims from North Petroleum but the current breakdown in relations has meant that
operator North Petroleum has been unwilling to furnish financial information to allow a proper determination of licence costs
and an audit of licence revenues to be completed.
In light of this lack of access to primary accounting records the results of the Joint Venture for the year ended 31 December
2015 reflect the investment in Sahara Resources GOS Inc. at historical cost and the loan note consideration payable to Trans
Globe and the accrued costs of completing the related acquisition but do not consolidate any share of profits or losses
attributable to Sahara Resources GOS Inc. underlying interests in the East Ghazalat licence for the period since 1 July 2015, the
effective date of the transaction.
The current liabilities of the Joint Venture at 31 December 2015 primarily reflects amounts due to Independent Resources plc in
respect of costs incurred by it to third parties in relation to the acquisition by the Joint Venture of Sahara Resources GOS Inc.
Nostra Terra Oil and Gas Company plc Annual Report and Accounts 2015
40
Notes to the Financial Statements
for the year ended 31 December 2015
13. INVESTMENT IN JOINT VENTURE continued
Summarised financial information in relation to the joint venture is presented below:
As at 31 December
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Included in the above amounts are:
Cash and cash equivalents
Current financial liabilities (excluding trade payables)
Non-current financial liabilities (excluding trade payables)
Net assets (100%)
Group share of net assets (50%)
Year ended 31 December
Revenues
Total comprehensive loss (100%)
Group share of total comprehensive loss (50%)
Included in the above amounts are:
Depreciation and amortisation
Interest income
Interest expense
Income tax expense
14. TRADE AND OTHER RECEIVABLES
Current:
Prepayments and other receivables
Other taxes and receivables
31 December 2015
£
31 December 2014
£
1
2,303,201
(266,124)
(2,286,990)
–
(266,124)
(2,286,990)
(249,912)
(124,956)
–
(313,969)
(156,985)
–
–
36,277
–
1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2015
£000
157
14
171
Group
Company
2014
£000
472
19
491
2015
£000
–
14
14
2014
£000
–
19
19
The directors consider that the carrying amount of other receivables approximates their fair value.
Nostra Terra Oil and Gas Company plc Annual Report and Accounts 2015
15. CASH AND CASH EQUIVALENTS
Bank current accounts
16. TRADE AND OTHER PAYABLES
Current:
Trade payables
Accruals and deferred income
Decommissioning liability
Other taxes payables
2015
£000
144
2015
£000
230
105
29
9
373
Group
Company
2014
£000
861
2015
£000
69
Group
Company
2014
£000
185
74
24
10
293
2015
£000
–
102
–
–
102
41
2014
£000
552
2014
£000
–
65
–
–
65
Trade payables and accruals principally comprise amounts outstanding for trade purchases and on-going expenses. The
directors consider that the carrying amount of trade and other payables approximates their fair value.
17. FINANCIAL LIABILITIES – BORROWINGS
Maturity of the borrowings is as follows:
Current:
Repayable within one year:
Loan notes
Repayable after one year:
Loan notes
2015
£000
1,308
351
1,659
Group
2014
£000
1,010
612
1,622
Company
2015
£000
2014
£000
–
–
–
–
–
–
The group has entered into a US$25 million credit facility (current borrowing base US$1.2 million) with Texas Capital Bank, a
£5 million financing agreement (expandable to £10 million), and a US$1 million promissory note (expandable to US$3 million)
with Yorkville Advisors.
18. CALLED UP SHARE CAPITAL
Authorised:
Number:
Class:
3,360 million (2014 – 3,360 million)
Ordinary
Allotted, called up and fully paid:
Number:
3,359,578,276 / 3,359,578,276
Class:
Ordinary
Nominal
value:
0.1p
Nominal
value:
0.1p
2015
£000
3,360
2015
£000
3,360
2014
£000
3,360
2014
£000
3,360
Nostra Terra Oil and Gas Company plc Annual Report and Accounts 2015
42
Notes to the Financial Statements
for the year ended 31 December 2015
19. RESERVES
Group
At 1 January 2014
Shares issued in the year
Share issue cost
Loss for the year
Foreign exchange translation
At 31 December 2014
Shares issued in the year
Share issue cost
Loss for the year
Foreign exchange translation
At 31 December 2015
Company
At 1 January 2014
Shares issued in the year
Share issue cost
Loss for the year
At 31 December 2014
Shares issued in the year
Share issue cost
Loss for the year
At 31 December 2015
Translation
reserve
£000
74
–
–
–
(249)
(175)
–
–
–
111
(64)
Retained
losses
£000
(9,299)
–
–
(843)
–
(10,142)
–
–
(2,310)
–
(12,452)
Retained
losses
£000
(8,870)
–
–
(1,058)
(9,928)
–
–
(1,650)
(11,578)
Share
premium
£000
9,991
1,166
(97)
–
–
11,060
–
–
–
–
11,060
Share
premium
£000
9,991
1,166
(97)
–
11,060
–
–
–
11,060
Total
£000
766
1,166
(97)
(843)
(249)
743
–
–
(2,310)
111
(1,456)
Total
£000
1,121
1,166
(97)
(1,058)
1,132
–
–
(1,650)
(518)
Nostra Terra Oil and Gas Company plc Annual Report and Accounts 2015
43
20. RISK AND SENSITIVITY ANALYSIS
The group’s activities expose it to a variety of financial risks: interest rate risk, liquidity risk, foreign currency risk, capital risk
and credit risk. The group’s activities also expose it to non-financial risks: market, legal and environment risk. The group’s
overall risk management programme focuses on unpredictability and seeks to minimise the potential adverse effects on the
group’s financial performance. The board, on a regular basis, reviews key risks and, where appropriate, actions are taken to
mitigate the key risks identified.
Capital risk
The group’s objectives when managing capital are to safeguard the ability to continue as a going concern in order to provide
returns for shareholders and benefits to other stakeholders and to maintain an optimal capital structure to reduce the cost of
capital.
Market risk
The group also faces risks in conducting operations in US mid-continent, which include but are not limited to:
• Fluctuations in the global economy could disrupt the group’s ability to operate its business in the US Mid-Continent and
could discourage foreign and local investment and spending, which could adversely affect its production.
Environmental risks
The group faces environmental risks in conducting operations in the US Mid-Continent which include but are not limited to:
• If the group is found not to be in compliance with applicable laws or regulations, it could be exposed to additional costs,
which might hinder the group’s ability to operate its business.
Credit risk
The group’s principal financial assets are bank balances and cash, trade and other receivables. The group’s credit risk is
primarily attributable to its trade receivables. The amounts presented in the balance sheet are net of allowances for doubtful
receivables. An allowance for impairment is made where there is an identified loss which, based on previous experience, is
evidence of a reduction in the recoverability of the cash flows.
Foreign currency risk
The group does not have formal policies on interest rate risk or foreign currency risk.
The group reports its results in Pounds Sterling. A significant share of the exploration and development costs and the local
operating costs are in United States Dollars. Any change in the relative exchange rates between Pounds Sterling and United
States Dollars could positively or negatively affect the group’s results.
The group is exposed to foreign currency risk on sales, purchases and borrowings that are denominated in a currency other
than Pounds Sterling. The group maintains a natural hedge that minimises the foreign exchange exposure by matching
foreign currency income with foreign currency costs.
The group does not consider it necessary to enter into foreign exchange contracts in managing its foreign exchange risk
resulting from cash flows from transactions denominated in foreign currency, given the nature of the business for the time
being.
The foreign exchange rate affecting the group is as follows:
Group
Income statement
Balance sheet
United States Dollars (US$)
2015
£
0.6544
2014
£
0.6072
2015
£
0.6741
2014
£
0.6437
Nostra Terra Oil and Gas Company plc Annual Report and Accounts 2015
44
Notes to the Financial Statements
for the year ended 31 December 2015
20. RISK AND SENSITIVITY ANALYSIS continued
Volatility of crude oil prices
A material part of the group’s revenue will be derived from the sale of oil that it expects to produce. A substantial or
extended decline in prices for crude oil and refined products could adversely affect the group’s revenues, cash flows,
profitability and ability to finance its planned capital expenditure. The movement of crude oil prices is shown below:
Per barrel – US$
Per barrel – £
2015
37.19
25.07
2014
59.29
38.16
Liquidity risk
The group expects to fund its exploration and development programme, as well as its administrative and operating expenses
throughout 2015, principally using existing working capital and expected proceeds from the sale of future crude oil
production. The group had a bank balance of approximately £232,000 at 31 December 2015.
21. FINANCIAL COMMITMENTS
Operating lease commitments
There are no significant operating lease obligations at the year end.
Capital commitments
The group had no material capital commitments at the year end.
22. RELATED PARTY TRANSACTIONS
Group
No related party transactions.
Company
During the year, the company advanced loans to its subsidiaries. The details of the transactions and the amount owed by the
subsidiaries at the year-end were:
New Horizon Energy 1 LLC
Goldhawk Oil & Gas, LLC
Churchill Operating, LLC
Nostra Terra (Overseas) Limited
Independent Resources (Egypt) Ltd
Totals
Balance
2015
£000
7,413
860
–
7
5
8,285
Loan
advance/
repayment
£000
538
–
–
–
5
543
Balance
2014
£000
6,880
860
–
7
–
7,747
Loan
advance/
repayment
£000
1,341
45
–
–
–
1,386
The intercompany loans are unsecured and interest-free.
During the year fees amounting to £16,667 were paid to Discovery Energy Limited (a company controlled by Kristian Ewen
Ainsworth) for the services of Kristian Ewen Ainsworth.
Nostra Terra Oil and Gas Company plc Annual Report and Accounts 2015
45
23. SHARE-BASED PAYMENTS
The group has a share-ownership compensation scheme for senior executives of the group whereby senior executives may
be granted options to purchase ordinary shares in company. The group has previously issued warrants to senior executives as
a welcome incentive and additionally during the year issued warrants as detailed below to third parties as consideration for
their services. A share based payment charge of £nil (2014: £19,097) was expensed during the year.
The details of options and warrants are as follows:
Date of Grant
At
31.12.14
Granted
Exercised
Forfeits
At
31.12.15
Exercise Exercise/vesting date
To
From
price
Warrants
22/06/2010
28/07/2014
24/06/2015
Options
25/01/2012
19/07/2012
29/10/2014
10,000,000
10,000,000
–
–
– 50,000,000
38,000,000
120,000,000
–
–
– 90,000,000
–
–
–
–
–
–
(10,000,000)
–
–
–
10,000,000
50,000,000
–
(100,000,000)
–
38,000,000
20,000,000
90,000,000
0.52
0.29
0.18
0.41
0.47
0.40
22/06/2010
28/07/2014
24/06/2015
21/06/2015
28/09/2019
24/06/2020
25/01/2012
19/07/2012
29/10/2014
25/01/2017
19/07/2017
28/10/2024
The total options and warrants outstanding at 31 December 2015 and 31 December 2014 are as follows:
Total at 31.12.15 208,000,000
Total at 31.12.14 168,000,000
The numbers of options outstanding to the directors at the year end were as follows:
Director
M B Lofgran
S V Oakes
Totals
Other – third party
Warrants
Options
Total
2015
–
–
–
–
2014
–
–
10,000,000
10,000,000
2015
–
–
–
–
2014
–
–
2015
54,000,000
16,000,000
2014
54,000,000
16,000,000
– 148,000,000 158,000,000
–
–
10,000,000
Options and warrants issued during the year:
On 28 July 2014, 10,000,000 warrants were issued to a supplier for services provided, exercisable at 0.29p per share on or
before 27 July 2019. The warrants will vest once the services have been provided.
On 29 October 2014, 90,000,000 options were issued to the group’s directors, exercisable at 0.4p per share on or before
28/10/2014. 33,750,000 of the options vested on the date of grant, 22,500,00 of the options vest on the later of the 12 month
anniversary of the date hereof and the date the first well is spudded on the White Buffalo Project and the final 33,750,000
options vest on the later of the 12 month anniversary of the date hereof and the date that the mid-market price per share as
listed on AIM closes above 1 pence for 10 consecutive trading days.
On 23 June 2015 a total of 50,000,000 warrants were issued to Kristian Ewen Ainsworth (16,666,666 options issued) and to
Discovery Energy Limited, a company controlled by Kristian Ewen Ainsworth (33,333,334 options issued) exercisable at 0.1754p
on or before 23 June 2020. Half of all warrants issued in this round vest 12 months from the issue date, with the remaining
half vesting 24 months from the issue date.
Nostra Terra Oil and Gas Company plc Annual Report and Accounts 2015
46
Notes to the Financial Statements
for the year ended 31 December 2015
23. SHARE-BASED PAYMENTS continued
The estimated fair value of the warrants issued during the year was calculated by applying the Black-Scholes option pricing
model. Expected volatility was originally stated at 30%. This has been revised to 50% because the volatility over the past
year has been used rather than the past 5 years. The directors consider this is more appropriate due to a significant share
price drop in 2008 which is attributable to a one-off event where work stopped during the opening of a well in Ukraine. The
assumptions used in the calculation were as follows:
Share price at grant date
Exercise price
Option life in years
Risk free rate
Expected volatility
Expected dividend yield
Fair value of option/warrant
23 June
2015
0.16p
0.18p
5 years
1%
50%
0%
0.07p
28 October
2014
0.265p
0.40p
3.5 years
1.5%
50%
0%
0.045p
28 July
2014
0.31p
0.29p
3.5 years
1.5%
50%
0%
0.024p
22 June
2010
0.47p
0.52p
5 years
3.5%
10%
0%
0p
24. CONTINGENT LIABILITIES AND GUARANTEES
The group has no contingent liabilities in respect of legal claims arising from the ordinary course of business and it is not
anticipated that any material liabilities will arise from contingent liabilities other than those provided for.
25. ULTIMATE CONTROLLING PARTY
The company is quoted on the AIM market of the London Stock Exchange. At the date of the annual report there was no one
controlling party.
Nostra Terra Oil and Gas Company plc Annual Report and Accounts 2015
47
26. EVENTS AFTER THE REPORTING PERIOD
On 25 January 2016, Nostra Terra and Independent Resources plc (IRG), together joint venture (JV), announced that North
Petroleum International Company (NPIC) was in substantial breach of the joint operating agreement between JV and NPIC
which governs the East Ghazalat Concession in Egypt. The JV has prepared and served a full and detailed Dispute Notice as
required by the joint operating agreement. The agreement provides for arbitration in London under UK Law if the dispute
cannot be resolved.
On 4 March 2016, Nostra Terra issued 350,000,000 new ordinary shares at 0.10 pence per share. The issuance raised gross
proceeds of £350,000 and Nostra Terra intends to use the net proceeds to strengthen its balance sheet, while seeking
additional acquisitions.
On 31 May 2016 in General Meeting the company passed resolutions to effect a capital reorganization. The Capital
Reorganisation comprises a sub-division of shares that created two classes of shares: subdivided shares with a nominal value
of 0.002p (“Subdivided Shares”) and deferred shares with a nominal value of 0.098p (“Deferred Shares”) (the “Subdivision”)
followed by a consolidation of every 50 Subdivided Shares into one new ordinary share of 0.1 pence (“Consolidated Share”)
(the “Consolidation”). Subject to the provisions of the Companies Act 2006, the Deferred Shares may then be cancelled by the
Company; or may be bought back by the Company for £1 and then cancelled as permitted under the amended articles.
The Deferred Shares are not be quoted and are required to be issued in order for the aggregate par value of the shares, once
sub-divided and consolidated, to remain at 0.1p.
At the same time an additional 9 shares were issued so that the total number of shares in issue were 4,110,347,700 at the time
of the Subdivision and Consolidation ensuring the number of shares in issue was exactly divisible by 50.
On 29 June 2016 the Company announced the acceptance of an offer for its 20 per cent interest in the prospect operated by
Ward Petroleum Corporation in the Chisholm Trail, Oklahoma, for approximately US$ 2.1 million net. The sale is anticipated
to close no later than 17 August 2016.
Nostra Terra Oil and Gas Company plc Annual Report and Accounts 2015 48
Notes
Nostra Terra Oil and Gas Company plc Annual Report and Accounts 2015 Nostra Terra Oil and Gas Company plc
Finsgate 5-7 Cranwood Street London EC1V 9EE
www.ntog.co.uk