Company Number 05385506
PANTHEON RESOURCES PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2018
PANTHEON RESOURCES PLC
CONTENTS
Directors, secretary and advisers
Chairman’s statement
Chief Executive Officer’s statement and operational review
Finance Director’s report
Strategic report
Directors' report
Directors’ biographies
Independent auditors’ report
Consolidated Statement of Comprehensive Income
Consolidated and Company Statements of Changes in Equity
Consolidated Statement of Financial Position
Company Statement of Financial Position
Consolidated Statement of Cash Flows
Company Statement of Cash Flows
Notes to the financial statements
Glossary
Page
3
4
5
7
10
12
17
18
24
25
28
29
30
31
32
50
2
PANTHEON RESOURCES PLC
DIRECTORS, SECRETARY AND ADVISERS
Directors
John Walmsley (Non-Executive Chairman)
John (“Jay”) Cheatham (Chief Executive Officer)
Justin Hondris (Executive Director, Finance and Corporate Development)
Phillip Gobe (Non-Executive Director)
Company Secretary
Ben Harber
Registered Office
Shakespeare Martineau
6th Floor
60 Gracechurch Street
London EC3V 0HR
Company Number
05385506
Auditors
Solicitors
Registrars
Principal Bankers
Nominated Adviser
& Broker
Communications
& Public Relations
UHY Hacker Young
Quadrant House
4 Thomas More Square
London E1W 1YW
Bryan Cave Leighton Paisner LLP
Adelaide House
London Bridge
London EC4R 9HA
Computershare Investor Services plc
PO Box 82
The Pavilions
Bridgwater Road
Bristol BS99 7NH
Barclays Bank plc
Level 27, 1 Churchill Place
London E14 5HP
Arden Partners PLC
125 Old Broad Street
London EC2N 1AR
FTI Consulting
200 Aldersgate
Aldersgate Street
London EC1A 4HD
3
PANTHEON RESOURCES PLC
CHAIRMAN’S STATEMENT
FOR THE YEAR ENDED 30 JUNE 2018
The year under review has been a mixed one for your company, but one we believe is ending on a higher note.
This week’s announcement that the company had reached non-binding heads of terms for the acquisition of 2/3rds
of the Vision group, leading to both strategic control and operatorship, was very significant.
We started 2018 with anticipation of good results from our drilling programme which we believed was tapping a
substantial subsurface resource. Our operational programme turned out to be disappointing due to a series of
operational issues.
Our attempts to remedy the position were severely hampered by the passing of Mr Bobby Gray, the Chief
Executive and principal of the operating company, Vision in June of this year. Unsurprisingly, his death created
great uncertainty over our project and over our Company.
In July 2018, Pantheon announced its intention to acquire the interests of Vision to move to 100% working
interest in the project for non-cash consideration (comprising equity in Pantheon and a success-based royalty). A
successful completion of this acquisition will benefit Pantheon shareholders as the deal is in terms of adding
attributable resource. Importantly, the transaction directly aligns the Vision estates’ interest with that of Pantheon.
Despite the operational issues experienced, we have not lost faith in the underlying geological potential of our
acreage, which remains undiminished. We have significantly strengthened our technical team, including the
appointments of Dr. Eric van Oort, a world-class expert in drilling and production on a consultancy basis, and
Sierra Hamilton, one the world’s largest, most experienced technical consulting companies.
We completed gas processing and distribution arrangements in Polk County during the year, and in Tyler County
since year end, allowing for production and revenues in both counties. Importantly successful future wells can be
brought onstream quickly. We began production of the VOS#1 well in Tyler after a prolonged shut in period. The
well was brought onstream carefully and slowly to enhance our understanding of the subsurface issues. We are
now pleased to announce that well is now producing much needed cash flow and benefiting from the current
strong prices for natural gas. We plan to drill a further well, the sidetrack of the VOBM#1 discovery well in Polk
County, as soon as is practical, which we believe could be funded by a farm out if required, or another form of
funding as required. The VOBM#1 sidetrack well is considered to have a high chance of success given the
performance of the original VOBM#1 well which tested at exceptional rates before being seriously compromised
by collapsed casing believed to have occurred during the 2 year period it was shut in. A successful sidetrack well
could deliver very significant revenues.
A technical review of the 2017/2018 drilling and operational experiences suggested that the problems
encountered were not due to a lack of prospective resource, but rather in the well completions; a problem which
the new team is addressing. We believe the original resource potential of the acreage remains in place and
accordingly, we look forward to a successful New Year in 2019, which will place a great focus on improving
execution of all operational activities.
As this is my last report as your Chairman, I know I am handing the helm over to a very capable person in Phillip
Gobe. I know your company is in good hands.
John Walmsley
Chairman
20 December 2018
4
PANTHEON RESOURCES PLC
CHIEF EXECUTIVE OFFICER’S STATEMENT AND OPERATIONAL REVIEW
FOR THE YEAR ENDED 30 JUNE 2018
The sudden and untimely death of Bobby Gray, founder and principal of Vision Resources, our working interest
partner and operator for our East Texas project, in June 2018, changed the dynamic of our venture and cast a
cloud of uncertainty over our Company, the operatorship of our assets, the timing of future operations, funding,
and the future structure of the project. I am pleased to report that we have now made great progress towards
removing these uncertainties. This week we announced that we had reached non-binding agreement with Kaiser
Francis for a non-cash acquisition of their 2/3rds interest in Vision in exchange for Pantheon shares. This
transaction is strategically very important, positioning us for both control and operatorship of the Vision group.
Pantheon is already in discussions to next acquire the remainder of the working interests in the project from
Vision and other minority partners, also on a non cash basis, bringing Pantheon’s working interest in the projects
to between 95% - 100%. Whilst increasing the working interest in the project brings the obvious benefits of
control, operatorship and increased resource base, it also carries the obligation of greater proportionate funding
which would require financing through either farmouts (easier to achieve when controlling the project) or
fundraising through other sources such as debt or the equity market. The complexity of the organisational
structure of Vision made this a complicated and protracted process, but one that was logical, especially given
Pantheon and Vision had in fact been in merger discussions prior to Bobby’s death. Since this time Pantheon has
retained all key staff and has assumed all overhead and capital costs of the Polk and Tyler County projects,
ensuring continuity of operations.
Operational Update
2018 was exceptionally challenging operationally. The year has ended better than it began with the successful
signing of the Gas Processing, Gas Gathering and Interconnect Agreements and completion of the VOS#1 well
connection to the Enterprise pipeline and processing system in Tyler County. The well commenced production
on 1 November on a 2/64ths choke and was steadily increased to a 10/64ths choke before reducing to a very
narrow current choke size of 7/64ths and it is currently producing at a rate of c1425 mcfpd. This pipeline was a
difficult construction project due to the heavy rains in East Texas and localized flooding which was highly
disruptive, slowing progress and requiring removal of our crews and equipment over a number of days.
2018 began with the discovery of the casing collapse at our first drilled well VOBM#1 in Polk County. This was
the well that had tested over several days at over 1500 boepd and had looked so promising. At those tested rates
and at pricing of $55 oil and $4/mcf gas this well is modelled to produce c.$1m free cashflow per month on a
100% basis. We diagnosed the collapsed casing when we performed several diagnostic operations and ultimately
attempted to drill out the apparent obstruction only to completely destroy the bit while making zero progress.
That and the deteriorating flow rates and pressures led to the conclusion that the casing had collapsed at the top of
the perforated interval. This is a mechanical issue which has compromised the well and not one that is believed to
be representative of the geological potential, which we firmly believe is outstanding. Our forward programme is
to side track this well to further test the reservoir geology in our West Double A area with the aim to generate
significant production revenues which could be hooked up to production almost immediately if successful.
The drilling of the VOBM#4 well in Tyler was another challenge. This well flowed significant hydrocarbons
from the Wilcox formation starting at 11,700’ all the way to 14,500’ where drilling was aborted prior to reaching
the objective of the Eagle Ford sand at 15,500’. A misplaced liner set by a third-party contractor caused us to lose
this as a productive well bore due to massive amounts of cement required to squeeze the liner top. Our attempt to
side track this well to test the Wilcox was not successful. In the original wellbore the logs looked extremely
promising and the well flowed substantial hydrocarbons during drilling operations, however the test results in the
Wilcox sidetrack were poor. More work on this zone is warranted and full potential remains in the Eagle Ford
sandstone as well as the Navarro formation which produced potentially significant hydrocarbons during drilling.
The Wilcox has been a prolific producer regionally and we believe significant potential remains for this formation
when drilled horizontally.
The VOBM#5 well in Polk County was positioned west of the VOBM#1 well and was drilled on time and on
budget. Logs were run and a decision was made by the operator to frack the well before testing. The logs were
excellent and compared favourably to some of the better wells in the Double A wells field. The intention of the
frack was simply to penetrate any skin damage akin to that seen in the VOBM#1 well and to extend the areal
reach of the well bore. Test results were disappointing with high water production believed to be as a result of the
5
PANTHEON RESOURCES PLC
CHIEF EXECUTIVE OFFICER’S STATEMENT AND OPERATIONAL REVIEW
FOR THE YEAR ENDED 30 JUNE 2018
frack communicating with a deeper water horizon not seen on well logs. The expert technical consultancy (Sierra
Hamilton) was contracted to undertake a comprehensive log analysis of our Polk County wells. The study
confirmed that: (1) Vision’s initial evaluation of all wells was consistent with that of the consultants; (2) all the
wells were perforated appropriately; (3) The VOBM#1, 2 & 5 wells should have all performed at commercial
rates based on the analysis and logs; (4) Water production in the VOBM#5 well was most likely not from the
perforated intervals. The conclusions from the study were that the VOBM#1 well should be side-tracked to target
the upper Eagle Ford only, and the VOBM#2 well should be side-tracked to penetrate the Eagle Ford objective
vertically, and the VOBM#5 should be cement squeezed and re-perforated in the upper Eagle Ford sand.
Forward Programme
The first order of business is to complete the acquisition of Vision’s working interests to deliver Pantheon
between 95% -100% working interest in the projects, and both management and operational control. Our
intention is to complete these acquisitions on a non-cash basis, comprising shares and a royalty stream which
would align the interests with those of Pantheon shareholders. Completion of these transactions will position
Pantheon far better for potential farmout deals on its projects.
Subsequent to year end the Company also announced that certain acreage positions were not renewed. The
Company also holds an exclusive option over certain leases in East Texas which may or may not be exercised,
depending upon our funding position. In view of the Company’s stated intention of acquiring the Vision group
assets and moving to a 100% working interest position the company will carefully manage its leasing programme
to its capital budgets and to continue to “high grade” our portfolio.
The completion of the contracts with Enterprise in Tyler County to purchase, transport and treat the VOS#1 gas
production was a major step, avoiding expensive treating equipment at the well head. Construction of the 2 ½
mile tie in was difficult given the rain and localised flooding but was completed within a week of budget. Now
complete, the production will provide much needed cash flow to the Company.
I believe the production from VOS#1, despite the well publicised interventions in that well and despite having
been shut-in for over 2 years, demonstrates that with proper completion techniques the Eagle Ford sandstone in
both Polk and Tyler Counties should produce wells with the economics initially promised.
As I have repeatedly stated, our confidence on the geological potential of our project is undiminished. Our
problems have been operational in nature, mainly with respect to completions. Going forward, as operator, we
intend to improve upon the operational and completion performance of the past and will use expert third party
consultants wherever necessary to ensure optimum performance. I have always stated our belief in the potential of
our acreage to host one or more Double A Wells field lookalike fields, and my belief in this concept is
unwavered. Finally, the company intends to ‘high grade’ its acreage position going forward. Moving to a 100%
working interest from as little as 50% is a large and accretive step for Pantheon and affords the Company greater
opportunity to high grade its acreage or to introduce possible farm in partners.
On a final note I’m very pleased that Phillip Gobe has agreed to become Chairman of Pantheon. Phillip’s counsel
has always been appreciated and well reasoned. I want to thank John Walmsley for guiding the Company for
years and I am glad that his counsel will not be lost in moving to a non-executive Director position.
Jay Cheatham
Chief Executive Officer
20 December 2018
6
PANTHEON RESOURCES PLC
FINANCE DIRECTOR’S REPORT
FOR THE YEAR ENDED 30 JUNE 2018
Financial Review
The Group made a total loss from operations for the financial year ended 30 June 2018 of $8,753,604 (2017:
$1,740,192). The increase over the prior year was primarily due to an impairment of exploration and evaluation
assets of $6,805,537, relating to non-core acreage not renewed, and the cost of the sidetrack of the VOBM#4
well.
Production
The Group’s net total sales production for the financial year ended 30 June 2018 amounted to 203,565 (2017: Nil)
mcf of natural gas and 7,326 (2017: Nil) bbl of oil. Average realisations for the year for natural gas and oil were
US$2.40 (2017: Nil) per mcf and US$61.11 (2017: Nil) per barrel respectively.
Revenue
Revenues for the year ended 30 June 2018 were $1,009,570 (2017: Nil).
Cost of Sales
“Cost of sales” for the year ended 30 June 2018 was $562,986 (2017: $Nil). “Production royalties” for the year
ended 30 June 2018 was $244,783 (2017: $Nil). “Depletion of developed oil & gas assets” for the year ended 30
June 2018 was $88,293 (2017: $Nil).
Impairments
In accordance with IFRS 6 ‘Exploration for and Evaluation of Mineral Resources’ (IFRS 6), exploration and
evaluation assets are reviewed for indicators of impairment. Should indicators of impairment be identified an
impairment test is performed.
The Group has reviewed these assets for indications of impairment. Where impairment indications have been
found we have performed impairment tests. Impairments losses have been measured, presented and disclosed in
Accordance with IAS 36.
An impairment charge has been determined for the year of $6.8m (2017: $nil). This comprised $1.8m for the
VOBM#4 sidetrack (initially disclosed in the interim accounts) and $4.98m for capitalised leases on non-renewed
acreage deemed non-core.
Accounting policies
There have been no major changes to accounting policies during the year.
Capital structure
The Company issued 22,379,097 new fully paid ordinary shares at an issue price £0.43 per share in August 2017,
raising cash proceeds of c.$12.7m before expenses. As at 30 June 2018 there were 237,336,555 shares in issue
(2017: 214,957,458). The Company has 10,000,000 options outstanding to acquire ordinary shares (2017:
10,000,000) at an exercise price of £0.30 per share. As at 30 June 2018 all share options were fully vested.
Going concern
The Directors have reviewed the Group’s overall position and outlook and are of the opinion that the Group is able
to operate as a going concern for at least the next twelve months from the date of approval of these financial
statements.
7
PANTHEON RESOURCES PLC
FINANCE DIRECTOR’S REPORT
FOR THE YEAR ENDED 30 JUNE 2018
Post year end, on 1 November 2018, the VOS#1 well (Tyler County) was connected to the Enterprise pipeline
system and commenced production sales. As at 17 December 2018, VOS#1 was producing at a rate of 1,425 mcfpd
through a 7/64th choke, equating to circa $5,700 per day gross revenues at gas prices current at the time of writing.
The Group has no current drilling commitments and anticipates the net revenue generated from VOS#1 would cover
the current levels of general and administrative expenses. However, future events such as production volumes,
revenues, commodity prices along with other matters inherent in exploration, cannot be estimated with certainty.
Further, once the Group has achieved its stated ambition of acquiring the remainder of the working interests in the
projects from Vision, additional funding will be required to meet the expanded cost base.
Pantheon’s leasehold position includes certain leases in Tyler and Polk Counties which are currently held for
renewal under exclusive option and which may be renewed for a 3-year term for a payment of c.$4.3m if the
Group elects to renew all of these leases. The Group is under no obligation to renew all leases and can renew a
smaller portion at its election. Should the Group decide not re-new some or all of these leases, the directors
remain satisfied that the modelled NPV of the Group’s exploration and evaluation on its existing leases exceeds
their current carrying values and would not require further impairment, however it would result in a reduction in
the resource potential of the project to the extent that the acreage would be reduced.
The Directors believe that a farm out of the VOBM#1 sidetrack well is achievable and that it would have the ability
to raise additional funds through either equity, debt, or farm-out one or more of the Group’s future wells if required.
The Board has therefore concluded that they have a reasonable expectation that the Group can continue in
operational existence for the next 12 months and has prepared the financial statements on a Going Concern basis.
Taxation
The Group incurred a loss for the year and has not incurred a tax charge. The Directors have not considered it
appropriate to recognise a deferred tax asset to reflect the potential benefit arising from these timing differences.
Risk assessment
The Group’s oil and gas activities are subject to a variety of risks, both financial and operational, including but
not limited to those outlined below. These and other risks have the potential to materially affect the financial
performance of the Group.
Liquidity and Interest Rate Risk
Liquidity risk remains elevated for many companies in the natural resources sector for a number of reasons
including but not limited to global macro-economic conditions, the volatility in commodity prices, recent political
and other influences, which have impacted energy prices and created economic uncertainty.
Oil & Gas Price Risk
Future oil and gas sales revenues are subject to the volatility of the underlying commodity prices throughout the
year. Over the past year the energy sector has been impacted by volatility in commodity prices, which may
continue to impact the Group going forward. The Group did not engage in any commodity price hedging activity
during the year.
8
PANTHEON RESOURCES PLC
FINANCE DIRECTOR’S REPORT
FOR THE YEAR ENDED 30 JUNE 2018
Currency Risk
Almost all capital expenditure and operational revenues for the year were denominated in US dollars. The Group
keeps the majority of its cash resources denominated in US dollars to minimise volatility and foreign currency
risk. The Group did not engage in any foreign currency hedging activity during the year.
Financial Instruments
As this stage of the Group’s activities it has not been considered appropriate or necessary to enter into any
derivatives strategies or hedging. Once the Group’s production revenues increase substantially, such strategies
will be reviewed on a more regular basis.
Justin Hondris
Director
20 December 2018
9
PANTHEON RESOURCES PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2018
Principal activity
The Company is registered in England and Wales, having been incorporated under the Companies Act with
registered number 05385506 as a public company limited by shares.
The principal activity of the Group is the investment in oil and gas exploration and development. The Group
operates in the U.K. through its parent undertaking and in the U.S.A. through subsidiary companies, details of
which are set out in the Note 8 to these accounts.
Review of the Business and Key Performance Indicators
2017 KPI
Exploration and appraisal
Measurement
Delivery of the exploration &
appraisal program
Commission of the Polk County gas plant Commission of the Polk County
2017/2018 Performance
Appraisal of Polk County well
VOBM#5. Appraisal of Tyler
County Well VOBM#4
Commissioned November 2017
Production and development
gas plant
Establishment of facilities for the
processing and distribution of
Natural Gas.
Commencement of production in
Tyler & Polk Counties
Investigating opportunities for potential
farm outs and other opportunities
Seek potential farm out and other
monetisation opportunities
Ensuring continued high-quality technical
consultant relationships
Establish and maintain
relationships with industry experts,
and review performance
Kinder Morgan gas processing
facility commissioned and first
production in Polk County in
November 2017.
Connection to Enterprise gathering
system & first production in Tyler
County in November 2018
The company continues to develop
these options which should be
simpler to achieve should the
proposed acquisition of Vision’s
interests be achieved.
Sierra Hamilton relationship
leveraged to deliver valuable high
quality technical advice.
Engagement of Prof Van Oort.
Financial Position and Future Prospects
Please refer to the Chief Executive Officer’s statement and operation review on page 6 for an overview of the
Company position and prospects.
Key operational risks and uncertainties
The Group is in the business of exploration and production of oil and gas. Accordingly, the principal operational
risks and uncertainties affecting the Group include, but are not limited to, the time and monetary costs associated
with the unsuccessful drilling of prospects; the potential for incorrect geological interpretation or evaluation;
mechanical, operational or other technical problems encountered during the drilling of prospects; lease issues;
lease costs; environmental or permitting issues; costs and contractual obligations relating to gas processing and
distribution; mechanical or other technical problems which may from time to time affect existing production; the
potential for increased costs for drilling or operating in a tight rig market; the uncertainty surrounding potential
recoverability of reserves; deterioration in commodity prices or unfavourable exchange rate movements, political
risk or economic conditions; and the potential for unexpected deterioration or abandonment of existing
10
PANTHEON RESOURCES PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2018
production. Pursuant to the terms of the respective operational agreements, and typical for the industry, the Group
is also potentially exposed to the timing, financial and operational position of counterparties, in particular with
respect to the timing, and therefore payment for the proposed drilling of wells.
By order of the board.
Justin Hondris
Director
20 December 2018
11
PANTHEON RESOURCES PLC
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2018
The Directors present their report together with the audited accounts of Pantheon Resources plc (“Pantheon” or
“the Company”) and its subsidiary undertakings (together “the Group”) for the year ended 30 June 2018.
Results and dividends
The Group results for the period are set out on page 24. The Directors do not propose to recommend any
distribution by way of a dividend for the year ended 30 June 2018.
Information to shareholders – website
The Group maintains its own website (www.pantheonresources.com) to facilitate provision of information to
external stakeholders and potential investors and to comply with Rule 26 of the AIM Rules for Companies.
Group structure and changes in share capital
Details of the Group structure and the Company’s share capital during the period are set out in Notes 8 and 15 to
these accounts.
Directors
The following Directors held office during the year:
John Walmsley (Non-Executive Chairman)
John Cheatham (Chief Executive Officer)
Justin Hondris (Director, Finance & Corporate Development)
Phillip Gobe (Non-Executive Director)
Directors’ interests
The beneficial and non-beneficial interests in the Company’s shares of the Directors and their families were as
follows:
Name
J Cheatham
J Hondris*
J Walmsley*
P Gobe
30 June 2018
Number of
Ordinary shares of £0.01
1,983,404
1,181,511
1,859,938
75,000
*Some of these ordinary shares are beneficially owned by the respective spouses of Messrs J Walmsley and J
Hondris.
Share options
Share options for Ordinary shares of £0.01, held by Directors on 30 June 2018 were as follows:
Exercise price
J Walmsley
J Cheatham
J Hondris
Total
Number of options
£0.30
1,000,000
4,385,000
3,865,000
9,250,000
These are 100% vested as at 30 June 2018.
12
PANTHEON RESOURCES PLC
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2018
Report on Directors’ remuneration and service contracts
The service contracts of all the Directors are subject to a six-month termination period.
Pensions
Following implementation of the mandatory work place pension scheme the company is now fully compliant.
Directors’ remuneration
Fees/basic Share-based
Pension
payments Contributions
$
-
17,898
-
-
17,898
$
-
-
-
-
-
Health
Insurance
$
-
4,021
-
-
4,021
2018
Total
$
496,540
361,983
111,399
52,460
1,022,382
2017
Total
$
398,270
350,542
92,350
30,192
871,354
J Cheatham
J Hondris
J Walmsley
P Gobe
salary
$
496,540
340,064
111,399
52,460
1,000,463
Director incentive scheme
In 2012 the Company implemented a short-term executive director incentive scheme (“the scheme”) developed in
conjunction with executive remuneration specialists at Deloitte LLP. Any incentive bonus resulting from the
scheme will be shared by executive Directors and will be calculated as 2.25% of the value of “net-booked reserves”
for a period (deducting any net-booked reserves recognised in earlier periods for this purpose). For the purposes of
the scheme, net-booked reserves will include 100% of proved reserves and 25% of probable reserves booked to the
Group, as determined by an independent third party, where relevant, in accordance with the classification
definitions as mandated by the Society of Petroleum Engineers.
The remuneration committee will determine the extent to which any annual bonus resulting from the scheme will
be settled in cash or share options with a discounted exercise price. The cash component will be at least one third
of the total and there is no obligation to pay any of the annual bonus by way of share options. In the event of a sale
of the Company or other change of control, the calculation will be undertaken by reference to the equity value of
the Company (less the value of net booked reserves recognised in earlier periods). The remuneration committee
believes that the scheme, together with the granting of share options provides an appropriate and reasonable
structure to reward and motivate the executive Directors for performance that is aligned to the interests of
shareholders and provides a balance of long term and short-term performance measurement. Any potential benefit
from the scheme is linked to the booking of net-booked reserves which is considered to be a key milestone
reflecting potential “value add” for the benefit of shareholders. The value of share options is directly linked to the
longer-term share price performance and is therefore also considered to be a suitable metric as a basis for executive
remuneration.
No benefit has been paid from the scheme since inception.
Subsequent events
Details of subsequent events can be found at Note 24.
13
PANTHEON RESOURCES PLC
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2018
Substantial shareholders
The Company has been notified, in accordance with Chapter 5 of the FCA Disclosure and Transparency Rules, of
the under noted interests in its ordinary shares as at 13 December 2018:
Number of Ordinary Shares
% of Share Capital
Jim Nominees Limited
Interactive Investor Services Nominees Limited
Rock (Nominees) Limited
Vidacos Nominees Limited
Barclays Direct Investing Nominees Limited
HSDL Nominees Limited
Hargreaves Lansdown (Nominees) Limited
Political and charitable contributions
32,133,297
13,803,467
13,724,700
11,046,779
10,227,214
8,388,622
7,160,515
13.53
5.81
5.78
4.65
4.31
3.53
3.02
There were no political or charitable contributions made by the Company during the year ended 30 June 2018
(2017: £Nil).
Remuneration and Nomination Committee
The Board of Directors has established the Remuneration and Nomination Committee of the Board. Phillip Gobe
is the chairman of the committee and John Walmsley and Justin Hondris are the other members. Other Directors
may attend meetings by invitation.
The Remuneration and Nomination Committee meets as required but aims to meet at least annually. Its role is to
determine the remuneration arrangements and contracts of executive Directors and senior employees, and the
appointment or re-appointment of Directors. It also has the responsibility for reviewing the performance of the
executive Directors and for overseeing administration of the Company's share option schemes. No Director is
however involved in deciding his own remuneration.
Audit Committee
An Audit Committee of the Board has been established. During the year, the Audit Committee consisted of John
Walmsley as chairman, Jay Cheatham and Phillip Gobe. This Committee provides a forum through which the
Group's finance functions and auditors report to the non-executive Directors. Meetings may be attended, by
invitation, by the Company Secretary, other Directors and the Company’s auditors.
The Audit Committee meets at least twice a year. Its terms of reference include review of the Annual and Interim
Accounts, consideration of the Company and Group’s accounting policies, the review of internal control, risk
management and compliance procedures, and consideration of all issues surrounding the annual audit. The Audit
Committee will also meet with the auditors and review their reports relating to accounts and internal control
systems.
To follow best practice the external auditors have held discussions with the Audit Committee on the subject of
auditor independence and have confirmed their independence in writing.
14
PANTHEON RESOURCES PLC
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2018
Conflicts Committee
A Conflicts Committee of the Board has been established. This Committee consists of John Walmsley as
chairman, Justin Hondris, Jay Cheatham and Phillip Gobe.
The role of the Conflicts Committee is to assist the Board in monitoring actual and potential conflicts of interest
under the definitions of the Companies Act 2006. Under the Companies Act 2006 Directors are responsible for
their individual disclosures of actual or potential conflict. To follow best practice, the Conflicts Committee holds
discussions with the Company’s UK lawyers.
Anti-Corruption & Bribery Committee
An Anti Corruption & Bribery Committee has been established. This committee consists of Justin Hondris (as
Chairman), Jay Cheatham and Phillip Gobe.
The purpose of the Anti-Corruption & Bribery Committee is to ensure the Company’s compliance with the
Bribery Act 2010.
Corporate Governance
The Company adopted the Quoted Companies Alliance Corporate Governance Code 2018 (the “QCA Code”) on
28 September 2018. The Board takes account of the requirements of the QCA Corporate Governance Code.
Corporate Governance adherence will be the responsibility of the Chairman and will take steps to ensure
compliance by the Board and applicable employees with the terms of the code. The Company has adopted a share
dealing code for the Board and employees of the Company. More information can be found on our website
http://www.pantheonresources.com/investors/governance.
EU Market Abuse Regulations
The EU Market Abuse Regulation came into effect in the UK on 3 July 2016 and the company has implemented
relevant policies and procedures to ensure compliance with the requirements of the regime.
Statement of Directors’ responsibilities
The Directors are responsible for preparing the financial statements in accordance with applicable laws and
International Financial Reporting Standards (“IFRS”) as adopted by the European Union. Company Law requires
the Directors to prepare financial statements for each financial period which give a true and fair view of the state
of affairs of the Group and of the Company and of the profit or loss of the Group for that period. In preparing
those financial statements, the Directors are required to:
select suitable accounting policies and then apply them consistently;
a)
b) make judgements and estimates that are reasonable and prudent;
c)
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the
Group will continue in business; and
state whether applicable accounting standards have been followed, subject to any material departures
disclosed and explained in the financial statements.
d)
The Directors confirm that the financial statements comply with the above requirements.
The Directors are responsible for keeping adequate accounting records which disclose with reasonable accuracy
at any time the financial position of the Group and Company and to enable them to ensure that the financial
15
PANTHEON RESOURCES PLC
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2018
statements comply with the Companies Act 2006. The Directors are also responsible for safeguarding the assets
of the Group and hence for taking steps for the prevention and detection of fraud and other irregularities. The
Directors are responsible for the maintenance and integrity of the corporate and financial information included on
the Company’s website.
Statement of disclosure to the auditors
So far as the Directors are aware:
a)
b)
there is no relevant audit information of which the Company’s auditors are unaware; and
all the Directors have taken all the steps that they ought to have taken to make themselves aware of any
relevant audit information and to establish that the auditors are aware of that information.
Auditors
In accordance with Section 489 of the Companies Act 2006, a resolution proposing that UHY Hacker Young be
reappointed as auditors of the Company and that the Directors be authorised to determine their remuneration will
be put to the next Annual General Meeting.
By order of the board
Justin Hondris
Director
20 December 2018
16
PANTHEON RESOURCES PLC
DIRECTORS’ BIOGRAPHIES
FOR THE YEAR ENDED 30 JUNE 2018
John Walmsley, Non Executive Chairman
John Walmsley has over 30 years’ experience in the energy sector as either adviser or principal. This includes
periods as Chief Executive of Hardy Oil & Gas (1994 – 1998) and Managing Director, Finance and Business
Development, of Enterprise Oil plc (1984 – 1993). He is currently Executive Chairman of Consilience Energy
Advisory Group Ltd (CEAG) and non-executive Chairman of TSX and AIM listed Orosur Mining Inc. He has
international business and financial experience in Europe, Asia-Pacific and North America at the corporate,
institutional and senior government level. He is a fellow of the Institute of Chartered Accountants in England and
Wales and was a Tax Partner at Arthur Andersen prior to joining Enterprise Oil. He acts as Chairman of
Pantheon’s Audit and Conflicts Committees.
Jay Cheatham, Chief Executive Officer
Jay Cheatham has more than 40 years' experience in all aspects of the petroleum business. He has extensive
international experience in both oil and natural gas, primarily for ARCO. At ARCO, Jay held a series of senior
appointments. These include Senior Vice President and District Manager (ARCO eastern District) with direct
responsibility for Gulf Coast US operations and exploration and President of ARCO International where he had
responsibility for all exploration and production outside the U.S. Jay's most recent appointment was as President
and CEO of Rolls-Royce Power Ventures, where he had the key responsibility for restructuring the Company.
Jay also has considerable financial skills in addition to his corporate and operational expertise. He has acted as
Chief Financial Officer for ARCO's US oil and natural gas company (ARCO Oil & Gas). Moreover he has
understanding of the capital markets through his past position as CEO to the Petrogen Fund, a private equity fund.
Justin Hondris, Director, Finance and Corporate Development
Justin Hondris has over 11 years experience in public company management in the upstream oil and gas sector
and has wide ranging experience in corporate finance, private equity and capital markets in the UK and abroad.
Prior to Pantheon, Justin was involved in the private equity sector where he gained valuable experience in both
investment and exit strategies for growth companies.
He is responsible for the financial, legal, administrative and corporate development functions of the company.
Phillip Gobe, Non-Executive Director
Phillip Gobe has over 40 years’ experience in the oil and gas business both in the U.S.A. and internationally.
Phillip has held senior positions in Energy Partners Ltd (President & COO), Nuevo Energy Co. (COO), Vastar
Resources (COO) and several senior positions with Atlantic Richfield Company, including a role as Operations
Manager of Prudhoe Bay in Alaska, the largest oilfield in the USA. Throughout his career Phillip has
successfully overseen several corporate exits at substantial premiums to pre-deal valuations. Phillip also has a
background in drilling, human resources and health & safety. He is currently a non-executive director of the S&P
500 company, Pioneer Natural Resources and Scientific Drilling International Inc, the fifth largest provider of
directional drilling and measurement equipment and operational services. Phillip acts as Chairman of Pantheon’s
Remuneration and Nominations Committee.
17
PANTHEON RESOURCES PLC
INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF PANTHEON RESOURCES PLC
FOR THE YEAR ENDED 30 JUNE 2018
Opinion
We have audited the financial statements of Pantheon Resources Plc for the year ended 30 June 2018 which
comprise the Consolidated Statement of Comprehensive Income, the Consolidated and Parent Company
Statements of Changes in Equity, the Consolidated and Parent Company Statement of Financial Position, the
Consolidated and Parent Company Statements of Cash Flows and the related notes, including a summary of
significant accounting policies. 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.
In our opinion, the financial statements:
•
•
•
give a true and fair view of the state of the Group and Parent Company’s affairs as at 30 June 2018 and of
the Group’s loss for the year then ended;
have been properly prepared in accordance with IFRSs as adopted by the European Union; and
have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable
law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit
of the financial statements section of our report. We are independent of the Company in accordance with the
ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s
Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance
with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Emphasis of matter – going concern
We have considered the adequacy of the going concern disclosures made in note 1.4 of the accounting policies to
the financial statements concerning the Group’s and Company’s ability to continue as a going concern. The
Group incurred a loss for the year ended 30 June 2018 of $8,753,604, which included an impairment of intangible
assets of $6,805,537.
Whilst the Group is currently generating production revenues, future production revenues cannot be estimated
with certainty and in the absence of a capital raising and/or a farm out of the Groups prospects, the Group would
be unable to drill future wells, renew significant leases, or potentially meet their liabilities as they fall due over
the next 12 months. These conditions, along with other matters discussed in note 1.4 of the accounting policies
indicate the existence of an inherent material uncertainty which may cast significant doubt about the Group’s and
company’s ability to continue as a going concern. The financial statements do not include the adjustments (such
as impairment of assets) that would result if the Group and Company were unable to continue as a going concern.
18
PANTHEON RESOURCES PLC
INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF PANTHEON RESOURCES PLC (continued)
FOR THE YEAR ENDED 30 JUNE 2018
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of
the financial statements of the current period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the
overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters.
Our assessment of risks of material misstatements
We identified the following risks of material misstatement that we believe had the greatest impact on our overall
audit strategy and scope, the allocation of resources in the audit; and directing the efforts of the engagement team.
This is not a complete list of all risks identified by our audit.
Key audit matter
How our audit addressed the key audit matter
Impairment exploration and evaluation assets
The Group has capitalised significant costs in
respect of the Tyler and Polk county projects in
International Financial
accordance with
Reporting Standard 6 ‘Exploration for and
Evaluation of Mineral Resources’ (IFRS 6),
therefore there is a risk of impairment.
There are a significant number of leases
covering the areas over which the Exploration
and Evaluation (“E&E”) assets are located,
therefore the renewal and good standing of the
leases is vital in order to ensure no impairment
of the exploration assets is required.
Impairment of developed oil & gas properties
If production has not met initial estimates this
may indicate that the developed oil and gas
properties are impaired. In addition if any of
the key licenses/leases were to expire or were
not renewed this would lead to impairment of
these assets.
Reviews should be undertaken by the directors
to confirm that there are no indications, or
requirement for, impairments of their carrying
values.
The results of these reviews by the directors
should be documented
the
company’s board minutes.
formally
in
We tested a sample of additions to E&E assets to confirm
they meet the criteria for capitalisation in accordance with
International Financial Reporting Standards.
We reviewed and challenged management’s impairment
assessment which was carried out in accordance with IFRS
6 in order to determine whether there were any indicators
of impairment.
We confirmed there is an ongoing plan to develop each
prospect.
We obtained evidence that a sample of key leases remain
valid and are in good standing or are in the process of
renewal.
We assessed the developed oil and gas properties for
impairment and considered whether the prospect/lease
line with
areas were correctly pooled
International Accounting Standard 36 (“IAS 36”) and
confirmed the wells were located in proximity to each other
and can be reasonably considered to be the same prospect
or cash generating unit (“CGU”).
together
in
A discounted cash flow calculation was reviewed and
sensitised to support the carrying value of the developed oil
and gas properties.
We also reviewed a sample of the key leases to ensure that
they are in good standing, have been renewed, or are in the
process of renewal.
This is the first year that E&E costs have been
transferred to developed oil & gas properties.
There is a risk that assets have been reclassified
incorrectly.
We assessed the reasonableness of transferred development
costs and reviewed the appropriateness of the accounting
policy relating to capitalisation and depreciation of these
assets.
19
PANTHEON RESOURCES PLC
INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF PANTHEON RESOURCES PLC (continued)
FOR THE YEAR ENDED 30 JUNE 2018
Key audit matter
How our audit addressed the key audit matter
Impairment of loans due from subsidiary
companies
The Company has a significant loan balance
due from its subsidiary Pantheon Oil and Gas
LP
Revenue recognition
During
the year, Pantheon commenced
production in Polk County within the West AA
propsect. This is the first year of production
therefore there is a risk that revenue may be
incorrectly recognised.
Going concern
to
the production phase. If
The group intends to supplement working
capital by successfully taking the Polk County
project
the
production revenues are delayed or the drilling
of other wells are unsuccessful or requires
significantly higher levels of funding than
budgeted the working capital position would be
put under significant pressure.
We assessed the recoverability of the loans due from
subsidiary companies in conjunction with our review of the
Group’s exploration assets for
the
discounted cash flow model prepared to support the
carrying value of the developed oil and gas properties.
impairment and
No indications of impairment were identified.
We reviewed revenue on a sample basis agreeing income to
customer statements to confirm its completeness and that it
had been recorded in the correct period in the nominal
ledger.
Our audit procedures did not identify any material errors in
respect of completeness or cut-off.
We have assessed the group’s cashflow forecasts for the
period to 31 December 2019 along with the current
financial position. Whilst
is generating
production revenues it is likely to require further funding in
order to renew key leases and meet their liabilities as they
fall due over the next 12 months.
the Group
An emphasis of matter has therefore been included above
in respect of going concern.
Our application of materiality
The scope and focus of our audit was influenced by our assessment and application of materiality. We apply the
concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements on
our audit and on the financial statements.
We define financial statement materiality as the magnitude by which misstatements, including omissions, could
reasonably be expected to influence the economic decisions taken on the basis of the financial statements by
reasonable users.
We also determine a level of performance materiality which we use to determine the extent of testing needed to
reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected
misstatements exceeds materiality for the financial statements as a whole.
Overall materiality
We determined materiality for the financial statements as a whole to be
$612,628.
How we determine it
Based on the main key indicator, being 1% of net assets of the Group.
Rationale for benchmarks applied We believe net asset values is the most appropriate benchmark due to the
size and stage of development of the Company and Group.
20
PANTHEON RESOURCES PLC
INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF PANTHEON RESOURCES PLC (continued)
FOR THE YEAR ENDED 30 JUNE 2018
Our application of materiality (continued)
Performance materiality
On the basis of our risk assessment, together with our assessment of the
Company’s control environment, our judgement is that performance
materiality for the financial statements should be 75% of materiality, and
this was rounded to $459,471.
We agreed with the Audit Committee that we would report to them all misstatements over $25,000 identified
during the audit, as well as differences below that threshold that, in our view, warrant reporting on qualitative
grounds. We also report to the Audit Committee on disclosure matters that we identified when assessing the
overall presentation of the financial statements.
An overview of the scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the
financial statements. In particular, we looked at where the directors made subjective judgements, for example in
respect of significant accounting estimates that involved making assumptions and considering future events that
are inherently uncertain.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the
financial statements as a whole, taking into account an understanding of the structure of the Company and the
Group, their activities, the accounting processes and controls, and the industry in which they operate. Our planned
audit testing was directed accordingly and was focused on areas where we assessed there to be the highest risk of
material misstatement.
Our Group audit scope includes all of the group companies. At the parent company level, we also tested the
consolidation procedures. The audit team met and communicated regularly throughout the audit with the Finance
Director in order to ensure we had a good knowledge of the business of the Group. During the audit we
reassessed and re-evaluated audit risks and tailored our approach accordingly.
The audit testing included substantive testing on significant transactions, balances and disclosures, the extent of
which was based on various factors such as our overall assessment of the control environment, the effectiveness
of controls and the management of specific risk.
We communicate with those charged with governance regarding, among other matters, the planned scope and
timing of the audit and significant findings, including any significant deficiencies in internal control that we
identify during the audit.
21
PANTHEON RESOURCES PLC
INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF PANTHEON RESOURCES PLC (continued)
FOR THE YEAR ENDED 30 JUNE 2018
Other information
The directors are responsible for the other information. The other information comprises the information included
in the annual report, other than the financial statements and our auditors’ report thereon. Our opinion on the
financial statements does not cover the other information and, except to the extent otherwise explicitly stated in
our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the financial statements or our
knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to determine whether there is a material
misstatement in the financial statements or a material misstatement of the other information.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the strategic report and the directors’ report for the financial year for which
the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors’ report have been prepared in accordance with applicable legal
requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Company and its environment obtained in the course of the
audit, we have not identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006
requires us to report to you if, in our opinion:
•
•
•
adequate accounting records have not been kept by the Company, or returns adequate for our audit
have not been received from branches not visited by us; or
the 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.
22
PANTHEON RESOURCES PLC
INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF PANTHEON RESOURCES PLC (continued)
FOR THE YEAR ENDED 30 JUNE 2018
Responsibilities of directors
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, and for such
internal control as the directors determine is necessary to enable the preparation of financial statements that are
free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the company’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the Company or to cease operations, or have no
realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial
Reporting Council’s website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our
auditor’s report.
Use of our report
This report is made solely to the Company’s members, as a body, in accordance with part 3 of Chapter 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members
those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than the Company and the
Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Daniel Hutson (Senior Statutory Auditor)
For and on behalf of
UHY Hacker Young
Chartered Accountants
Statutory Auditor
Quadrant House
4 Thomas More Square
London E1W 1YW
20 December 2018
23
PANTHEON RESOURCES PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2018
Continuing operations
Revenue
Production royalties
Depletion of developed oil & gas assets
Cost of sales
Gross profit
Administration expenses
Impairment of intangible assets
Depreciation of production & pipe line facilities
Operating loss
Interest receivable
Loss before taxation
Taxation
Loss for the year
Notes
2018
$
2017
$
3
12
4
6
7
1,009,570
(244,783)
(88,293)
(562,986)
113,508
-
-
-
-
-
(1,922,917)
(6,805,537)
(145,516)
(8,760,462)
(1,754,259)
-
-
(1,754,259)
6,858
14,067
(8,753,604)
(1,740,192)
-
-
(8,753,604)
(1,740,192)
Other comprehensive income / (loss) for the year
Exchange differences from translating foreign
operations
277,183
(239,528)
Total comprehensive loss for the year
(8,476,421)
(1,979,720)
Loss per share
Loss per ordinary share – basic and diluted from
continuing operations
2
(3.72)c
(0.81) c
The loss for the current and prior year and the total comprehensive loss for the current and prior year are wholly
attributable to the equity holders of the parent company, Pantheon Resources Plc.
24
PANTHEON RESOURCES PLC
CONSOLIDATED AND COMPANY STATEMENTS OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2018
Group
At 1 July 2017
Net loss for the year
Other comprehensive
income: Foreign
currency translation
Total comprehensive
income for the year
Capital Raising
Issue of shares
Issue of shares in lieu of
fees
Issue costs
Balance at 30 June
2018
-
-
-
-
-
277,183
(8,476,421)
12,596,484
92,421
(629,779)
Share
capital
$
Share
premium
$
Retained
losses
$
Currency
reserve
$
Share
reserve
$
Total
Equity
$
3,557,582
94,914,770
(39,383,794)
(318,737)
902,854
59,672,675
(8,753,604)
-
-
(8,753,604)
-
-
-
-
-
-
-
277,183
(8,753,604)
277,183
292,941
12,303,543
2,150
-
90,271
(629,779)
-
-
-
-
3,852,673
106,678,805
(48,137,398)
(41,554)
902,854
63,255,380
25
PANTHEON RESOURCES PLC
CONSOLIDATED AND COMPANY STATEMENTS OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2018
-
-
-
1,124,989
(12,306)
12,596,484
92,421
(629,779)
Share
capital
$
Share
premium
$
Retained
losses
$
Currency
reserve
$
Equity
reserve
$
Total
Equity
$
3,557,582
94,914,770
(18,700,160)
(14,366,568)
902,854 66,308,478
(1,137,295)
-
-
(1,137,295)
-
-
-
-
-
-
-
1,124,989
(1,137,295)
1,124,989
Company
At 1 July 2017
Net loss for the year
Other comprehensive
income: Foreign currency
translation
Total comprehensive loss for
the year
Capital Raising
Issue of shares
Issue of shares in lieu of fees
Issue costs
292,941
2,150
-
12,303,543
90,271
(629,779)
-
-
Balance at 30 June 2018
3,852,673
106,678,805
(19,837,455)
(13,241,579) 902,854
78,355,298
26
PANTHEON RESOURCES PLC
CONSOLIDATED AND COMPANY STATEMENTS OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2018
Group
At 1 July 2016
Share
capital
$
Share
premium
$
Retained
losses
$
Currency
reserve
$
Equity
reserve
$
Total
Equity
$
3,557,582
94,914,770
(37,643,602)
(79,209)
902,854
61,652,395
Net loss for the year
Other comprehensive
income: Foreign currency
translation
Total comprehensive income
for the year
-
-
-
-
(1,740,192)
-
-
(1,740,192)
-
-
-
(239,528)
(1,740,192)
(239,528)
-
-
(239,528)
(1,979,720)
Balance at 30 June 2017
3,557,582
94,914,770
(39,383,794)
(318,737)
902,854
59,672,675
Company
At 1 July 2016
Share
capital
$
Share
premium
$
Retained
losses
$
Currency
reserve
$
Equity
reserve
$
Total
Equity
$
3,557,582
94,914,770
(17,592,913)
(13,003,202)
902,854
68,779,091
Net loss for the year
Other comprehensive
income: Foreign currency
translation
Total comprehensive income
for the year
-
-
-
-
-
-
(1,107,247)
-
-
(1,107,247)
-
(1,363,366)
(1,107,247)
(1,363,366)
-
-
(1,363,366)
(2,470,613)
Balance at 30 June 2017
3,557,582
94,914,770
(18,700,160)
(14,366,568)
902,854
66,308,478
27
PANTHEON RESOURCES PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2018
Notes
2018
$
ASSETS
Non-current assets
Exploration and evaluation assets
Developed oil & gas assets
Property, plant and equipment
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Total liabilities
Net assets
EQUITY
Capital and reserves
Share capital
Share premium
Retained losses
Currency reserve
Equity reserve
Shareholders’ equity
13
14
14
9
10
11
15
15
21
2017
$
55,545,596
-
1,166
55,546,762
328,319
4,382,206
4,710,525
43,498,422
13,736,007
2,237,698
59,472,127
700,939
3,399,290
4,100,229
63,572,356
60,257,287
316,976
316,976
584,612
584,612
63,255,380
59,672,675
3,852,673
106,678,805
(48,137,398)
(41,554)
902,854
63,255,380
3,557,582
94,914,770
(39,383,794)
(318,737)
902,854
59,672,675
The financial statements were approved by the Board of Directors and authorised for issue on 20 December 2018
and signed on its behalf by:
Justin Hondris
Director
Company Number 05385506
28
PANTHEON RESOURCES PLC
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2018
ASSETS
Property, plant and machinery
Loans to subsidiaries
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Total liabilities
Net assets
EQUITY
Capital and reserves
Share capital
Share premium
Retained losses
Currency reserve
Equity reserve
Shareholders’ equity
Notes
2018
$
2017
$
14
9
9
10
11
15
15
21
1,099
77,770,641
77,771,740
1,166
64,069,579
64,070,745
100,110
687,768
787,878
123,075
2,260,055
2,383,130
78,559,618
66,453,875
204,320
204,320
145,397
145,397
78,355,298
66,308,478
3,852,673
106,678,805
(19,837,455)
(13,241,579)
902,854
3,557,582
94,914,770
(18,700,160)
(14,366,568)
902,854
78,355,298
66,308,478
In accordance with the provisions of Section 408 of the Companies Act 2006, the Company has not presented an
income statement. A loss for the year ended 30 June 2018 of $1,137,295 (2017: loss of $1,107,247) has been
included in the consolidated income statement.
The financial statements were approved by the Board of Directors and authorised for issue on 20 December 2018
and signed on its behalf by:
Justin Hondris
Director
Company Number 05385506
29
PANTHEON RESOURCES PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2018
Notes
2018
$
2017
$
Net outflow from operating activities
16
(2,082,803)
(1,598,530)
Cash flows from investing activities
Interest received
Funds used for drilling, exploration and leases
Developed oil & gas assets
Property, plant & equipment
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from share issues
Issue costs paid in cash
Net cash inflow from financing activities
6,858
(10,679,594)
(495,183)
208,682
(10,959,237)
14,067
(17,760,518)
-
-
(17,746,451)
15
12,596,484
(537,360)
12,059,124
-
-
-
Net decrease in cash & cash equivalents
(982,916)
(19,344,981)
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
10
4,382,206
3,399,290
23,727,187
4,382,206
30
PANTHEON RESOURCES PLC
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2018
Notes
2018
$
2017
$
Net cash inflow (outflow) from operating activities
16
65,107
(2,415,692)
Cash flows from investing activities
Purchase of plant and equipment
Interest received
Loans to subsidiary companies
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from share issues
Issue costs paid in cash
Net cash inflow from financing activities
(1,318)
5,861
(13,701,062)
(13,696,519)
-
10,468
(1,376,565)
(1,366,097)
15
12,596,484
(537,359)
12,059,125
-
-
-
Decrease in cash and cash equivalents
(1,572,287)
(3,781,789)
Cash and cash equivalents at the beginning of the year
2,260,055
6,041,844
Cash and cash equivalents at the end of the year
10
687,768
2,260,055
31
PANTHEON RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
1. Accounting policies
A summary of the principal accounting policies, all of which have been applied consistently throughout the year, is
set out below.
1.1. Basis of preparation
The financial statements have been prepared on a going concern basis using the historical cost convention and in
accordance with the International Financial Reporting Standards (“IFRSs”), including IFRS 6, ‘Exploration for and
Evaluation of Mineral Resources’, as adopted by the European Union (“EU”) and in accordance with the provisions
of the Companies Act 2006.
The Group’s financial statements for the year ended 30 June 2018 were authorised for issue by the board of
Directors on 20 December 2018 and were signed on the Board’s behalf by Mr J Hondris.
The Group and Company financial statements are presented in US dollars.
1.2. Basis of consolidation
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-
consolidated from the date that control ceases. 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. Goodwill arising on acquisitions is capitalised and subject to impairment
review, both annually and when there are indications that the carrying value may not be recoverable.
Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated.
All the companies over which the Company has control apply, where appropriate, the same accounting policies as
the Company.
1.3. Interests in joint arrangements
IFRS defines a joint arrangement as an arrangement over which two or more parties have joint control. Joint control
is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant
activities (being those that significantly affect the returns of the arrangement) require unanimous consent of the
parties sharing control.
Joint operations
A joint operation is a type of joint arrangement whereby the parties that have joint control of the arrangement have
rights to the assets and obligations for the liabilities, relating to the arrangement. In relation to its interests in joint
operations, the Group recognises its:
-
-
-
-
-
Assets, including its share of any assets held jointly
Liabilities, including its share of any liabilities incurred jointly
Revenue from the sale of its share of the output arising from the joint operation
Share of the revenue from the sale of the output by the joint operation
Expenses, including its share of any expenses incurred jointly
32
PANTHEON RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
1.4. Going concern
The Directors have reviewed the Group’s overall position and outlook and are of the opinion that the Group is able
to operate as a going concern for at least the next twelve months from the date of approval of these financial
statements.
Post year end, on 1 November 2018, the VOS#1 well (Tyler County) was connected to the Enterprise pipeline
system and commenced production sales. As at 17 December 2018, VOS#1 was producing at a rate of 1,425 mcfpd
through a 7/64th choke, equating to circa $5,700 per day gross revenues at gas prices current at the time of writing.
The Group has no current drilling commitments and anticipates the net revenue generated from VOS#1 would cover
the current levels of general and administrative expenses. However, future events such as production volumes,
revenues, commodity prices along with other matters inherent in exploration, cannot be estimated with certainty.
Further, once the Group has achieved its stated ambition of acquiring the remainder of the working interests in the
projects from Vision, additional funding will be required to meet the expanded cost base.
Pantheon’s leasehold position includes certain leases in Tyler and Polk Counties which are currently held for
renewal under exclusive option and which may be renewed for a 3-year term for a payment of c.$4.3m if the
Group elects to renew all of these leases. The Group is under no obligation to renew all leases and can renew a
smaller portion at its election. Should the Group decide not re-new some or all of these leases, the directors
remain satisfied that the modelled NPV of the Group’s exploration and evaluation on its existing leases exceeds
their current carrying values and would not require further impairment, however it would result in a reduction in
the resource potential of the project to the extent that the acreage would be reduced.
The Directors believe that a farm out of the VOBM#1 sidetrack well is achievable and that it would have the ability
to raise additional funds through either equity, debt, or farm-out one or more of the Group’s future wells if required.
The Board has therefore concluded that they have a reasonable expectation that the Group can continue in
operational existence for the next 12 months and has prepared the financial statements on a Going Concern basis.
1.5.
Revenue
Revenue, excluding production tax and similar taxes, represents net amounts invoiced for the Group’s share of oil
and gas revenues in the year.
Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial
assets.
1.6. Foreign currency translation
(i) Functional and presentational currency
The financial statements are presented in US Dollars (“$”), which is the functional currency of the Company and
is the Group’s presentation currency.
(ii) Transactions and balances
Transactions in foreign currencies are translated into US dollars at the average exchange rate for the year. Monetary
assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the balance
sheet date. The resulting exchange gain or loss is dealt with in the income statement.
The assets, liabilities and the results of the foreign subsidiary undertakings are translated into US dollars at the rates
of exchange ruling at the year end. Exchange differences resulting from the retranslation of net investments in
subsidiary undertakings are treated as movements on reserves.
33
PANTHEON RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
1.7. Cash and cash equivalents
The Company considers all highly liquid investments, with a maturity of 90 days or less to be cash equivalents,
carried at the lower of cost or market value.
1.8. Deferred taxation
Deferred 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. Deferred tax is determined using tax
rates (and laws) that have been enacted or substantially enacted by the balance sheet date and expected to apply
when the related deferred tax is realised or the deferred liability is settled.
Deferred tax assets are recognised to the extent that it is probable that the future taxable profit will be available
against which the temporary differences can be utilized.
1.9. Exploration and evaluation costs and developed oil and gas properties
The Group follows the ‘successful efforts’ method of accounting for exploration and evaluation costs. All costs
associated with oil, gas and mineral exploration and investments are classified into and capitalised on a ‘cash
generating unit’ (“CGU”) basis, in accordance with IAS 36. Costs incurred include appropriate technical and
administrative expenses but not general corporate overheads. If an exploration project is successful, the related
expenditures will be transferred to Developed Oil and Gas Properties and amortised over the estimated life of the
commercial reserves on a ‘unit of production’ basis.
The recoverability of all exploration and evaluation costs is dependent upon the discovery of economically
recoverable reserves, the ability of the Group to obtain necessary financing to complete the development of the
reserves and future profitable production or proceeds from the disposition thereof. The prospect acreage has been
classified into discrete “prospects” or CGU’s. When production commences the accumulated costs for the specific
CGU is transferred from intangible fixed assets to tangible fixed assets i.e. ‘Developed Oil & Gas Properties’ or
‘Production Facilities and Equipment’, as appropriate. Amounts recorded for these assets represent historical costs
and are not intended to reflect present or future values.
1.10 Impairment of exploration costs and developed oil and gas properties, and depreciation of assets
In accordance with IFRS 6 ‘Exploration for and Evaluation of Mineral Resources’ (IFRS 6), exploration and
evaluation assets are reviewed for indicators of impairment. Should indicators of impairment be identified an
impairment test is performed.
In accordance with IAS 36, the Company is required to perform an “impairment test” on assets when an
assessment of specific facts and circumstances indicate there may be an indication of impairment, specifically to
ensure that the assets are carried at no more than their recoverable amount. Where an impairment test is required,
any impairment loss is measured, presented and disclosed in accordance with IAS 36
In accordance with IAS 36 the Company has determined an accounting policy for allocating exploration and
evaluation assets to specific ‘cash-generating units’ (“CGU”).
Exploration and evaluation costs
In relation to the Tyler and Polk County projects, the carrying value as at 30 June 2018 represents back costs and
direct costs paid in relation to the project, seismic, land and drilling costs relating to the prospects as well as prepaid
costs towards future drilling.
34
PANTHEON RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
Developed Oil and Gas Properties
Developed Oil and Gas Properties represent three wells (VOBM#1, VOBM#2H, VOBM#3) located in Polk County.
These costs were transferred from “Exploration and Evaluation costs” to “Developed Oil & Gas properties” when
the wells were commissioned. The wells are depleted over the estimated life of the commercial reserves based on
the “Unit of production basis” based upon a typeset P50 well estimated at 1.4Mmboe P50 prospective resource
(recoverable).
Other property, plant and equipment
Other property, plant and equipment are stated at historical cost less depreciation. Depreciation is provided at rates
calculated to write off the costs less estimated residual value of each asset over its estimated useful life as follows:
-
-
Production facilities and equipment are depreciated by equal instalments over their expected useful lives,
ranging from 3 to 30 years.
Office equipment is depreciated by equal annual instalments over their expected useful lives, being three
years.
1.11. Financial instruments
IFRS 7 requires information to be disclosed about the impact of financial instruments on the Group's risk profile,
how the risks arising from financial instruments might affect the entity's performance, and how these risks are being
managed.
The Group's policies include that no trading in derivative financial instruments shall be undertaken. These
disclosures have been made in Note 20 to the accounts.
1.12. Critical accounting estimates and judgements
The preparation of financial statements in conformity with International Financial Reporting Standards requires the
use of accounting estimates and assumptions that affect the reported amounts of assets and liabilities at the date of
the financial statements and the reported amounts of income and expenses during the reporting period. Although
these estimates are based on management’s best knowledge of current events and actions, actual results ultimately
may differ from those estimates. IFRSs also require management to exercise its judgement in the process of
applying the Group’s accounting policies.
The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are
significant to the financial statements are as follows:
Impairment of tangible and intangible assets
Assessing whether there is an indication of possible impairment of an asset requires an estimation of whether there
are any indications that its carrying value is not greater than its recoverable amount (i.e. the higher of fair value less
costs of disposal and value in use)
35
PANTHEON RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
At each reporting date, the Company reviews the carrying value of its tangible and intangible assets to determine
whether there is any indication that those assets require impairment. If such an indication exists, the recoverable
amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the
asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the
income statement.
Developed Oil & Gas Properties
Developed Oil & Gas Properties are amortised over the life of the area according to the unit of production method.
If the amount of economically recoverable reserves varies, this will impact on the amount of the asset which should
be carried on the balance sheet. The group categorises its leases (intangible assets) and its Developed Oil and Gas
Properties (tangible assets) into a number of discreet geological prospects (“cash generating units” or “CGU’s”).
Share-based payments
The Group records charges for share-based payments.
For option based share-based payments, to determine the value of the options management estimate certain factors
used in the option pricing model, including volatility, vesting date, exercise date of options and the number of
options likely to vest. At each reporting date during the vesting period management estimate the number of shares
that will vest after considering the vesting criteria. If these estimates vary from actual occurrence, this will impact
on the value of the equity carried in the reserves.
1.13. New standards and interpretations not applied
As of the date of these financial statements the IASB and IFRIC have issued a number of new standards,
amendments and interpretations. These new Standards, Amendments and Interpretations are effective for
accounting periods beginning on or after the dates shown below. Of these, only the following are expected to be
relevant to the Group:
Standard
IFRS 9*
IFRS 15
IFRS 16
Impact on initial application
Financial Instruments
Revenue from Contracts with Customers
Leases
Effective date
1 January 2018
1 January 2018
1 January 2019
* Amendments
The Group does not anticipate that the adoption of these standards will have a material effect on its financial
statements in the period of initial adoption.
1.14 Share based payments
On occasion, the Company has made share-based payments to certain Directors and advisers by way of issue of
share options. The fair value of these payments is calculated by the Company using the Black-Scholes option pricing
model. The expense is recognised on a straight-line basis over the period from the date of award to the date of
vesting, based on the Company’s best estimate of the number of shares that will eventually vest.
During the year, no share-based payments were made.
36
PANTHEON RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
2.
Loss per share
The total loss per share for the group of 3.72 US cents (2017: 0.81 US cents) is calculated by dividing the loss for
the year from continuing operations by the weighted average number of ordinary shares in issue of 235,471,630
(2017: 214,957,458).
The diluted loss per share has been kept the same as the basic loss per share as the conversion of share options
decreases the basic loss per share, thus being anti-dilutive. The diluted weighted average number of shares in
issue is 235,471,630 (2017: 224,957,458). The 10,000,000 options in issue have not been included in the
weighted average number of shares number as they were out of the money at 30 June 2018.
3.
Segmental information
The Group’s activities involve production of and exploration for oil and gas. There are two reportable operating
segments: USA and Head Office. Non-current assets, income and operating liabilities are attributable to the USA,
whilst most of the corporate administration is conducted through Head Office.
Each reportable segment adopts the same accounting policies.
In compliance with IFRS 8 ‘Operating Segments’, the following tables reconcile the operational loss and the
assets and liabilities of each reportable segment with the consolidated figures presented in these Financial
Statements, together with comparative figures for the year ended 30 June 2018.
Oil and Gas production commenced from 3 wells during the year; VOBM#1 & VOBM#3 in November 2017 and
VOBM#2H in early 2018.
The Group’s net total sales production for the financial year ended 30 June 2018 amounted to 203,565 (2017: Nil)
mcf of natural gas and 7,326 (2017: Nil) bbl of oil. Average realisations for the year for natural gas and oil were
US$2.40 (2017: Nil) per mcf and US$61.11 (2017: Nil) per barrel of oil respectively.
Revenues for the year ended 30 June 2018 were $1,009,570 (2017: Nil).
37
PANTHEON RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
Year ended 30 June 2018
Geographical segment (Group)
Revenue
Production royalties
Depletion of developed oil & gas assets
Cost of sales
Administration expenses
Impairment of intangible assets
Depreciation of production & pipeline facilities
Interest receivable
Head Office
$
-
-
-
-
(1,143,157)
-
-
5,862
USA
$
1,009,570
(244,783)
(88,293)
(562,986)
(779,760)
(6,805,537)
(145,516)
996
Consolidated
$
1,009,570
(244,783)
(88,293)
(562,986)
(1,922,917)
(6,805,537)
(145,516)
6,858
Loss by reportable segment
(1,137,295)
(7,616,309)
(8,753,604)
Exploration & evaluation assets
Developed oil & gas assets
Property, plant & equipment
Trade and other receivables
Cash and cash equivalents
Intercompany balances
-
-
1,099
100,110
687,768
77,770,641
43,498,422
13,736,007
2,236,599
600,829
2,711,522
(77,770,641)
43,498,422
13,736,007
2,237,698
700,939
3,399,290
-
Total assets by reportable segment
78,559,618
(14,987,262)
63,572,356
Total liabilities by reportable segment
(204,320)
(112,656)
(316,976)
Net assets by reportable segment
78,355,298
(15,099,918)
63,255,380
38
PANTHEON RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
3.
Segmental information (continued)
Year ended 30 June 2017
Geographical segment (Group)
Administrative expenses
Interest receivable
Head Office
$
(1,117,716)
10,467
USA
$
(636,543)
3,600
Consolidated
$
(1,754,259)
14,067
Loss by reportable segment
(1,107,249)
(632,943)
(1,740,192)
Exploration & evaluation assets
Property, plant & equipment
Trade and other receivables
Cash and cash equivalents
Intercompany balances
-
1,166
123,075
2,260,055
64,069,579
55,545,596
-
205,244
2,122,151
(64,069,579)
55,545,596
1,166
328,319
4,382,206
-
Total assets by reportable segment
66,453,875
(6,196,588)
60,257,287
Total liabilities by reportable segment
(145,397)
(439,215)
(584,612)
Net assets by reportable segment
66,308,478
(6,635,803)
59,672,675
4. Operating loss
Operating loss is stated after charging:
Depreciation – production facilities & equipment
Depreciation – office equipment
Auditor’s remuneration
- group and parent company audit services
Auditor’s remuneration for non-audit services
- taxation services and compliance services
5.
Employment costs
2018
$
145,516
1,436
23,250
11,725
The employee costs of the Group, including Directors’ remuneration, are as follows:
Wages and salaries
Social security costs
Statutory pension costs
2018
$
1,071,015
89,606
21,611
2017
$
-
1,714
23,565
14,329
2017
$
941,952
85,820
23,015
The summary of the directors’ remuneration is shown in the directors’ report.
39
1,182,232
1,050,787
PANTHEON RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
Number of employees (including Executive Directors) at the end of
the year
2018
2017
number
number
Management and administration
5
5
6.
Interest receivable
Bank interest received
7. Taxation
Current tax
UK corporation tax
2018
$
2017
$
6,858
14,067
2018
$
-
2017
$
-
Factors affecting the tax charge for the period
Loss on ordinary activities before taxation
Loss on ordinary activities before taxation
multiplied by the standard rate of UK corporation
tax of 19% (2017: 20.5%)
Effects of:
Non deductible expenses
Capital allowances
Tax losses carried forward not recognised as deferred tax asset
Total tax charge
(8,756,152)
(1,740,192)
(1,663,669)
(343,688)
1,293,052
-
370,617
958
162
342,568
-
-
Factors that may affect future tax charges
The Finance Bill (2016) has reduced the rate of corporation tax to 17% from 1 April 2020. As a result, this
reduction in the rate would be reflected in these financial statements had the company’s deferred tax assets and
liabilities been provided for.
The Group’s deferred tax assets and liabilities as at 30 June 2018 have been measured at 17%, although no
deferred tax has been recognised as such in these accounts.
At the year end date, the Group has unused losses carried forward of $34.5M (2017: $32.6M) available for
offset against suitable future profits. Of these losses approximately $25M (2017: $24.0M) were sustained in the
USA. Unused US tax losses expire in general within 20 years of the year in which they are sustained.
The directors do not consider it appropriate to recognise a deferred tax asset in respect of such losses, due to the
uncertain nature of future revenue streams. The contingent deferred tax asset is estimated to be $5.8M (2017:
$6.5M).
40
PANTHEON RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
8.
Subsidiary entities
The Company currently has the following wholly owned subsidiaries all of which were incorporated on 3
February 2006:
Name
Hadrian Oil & Gas LLC
Agrippa LLC
Pantheon Oil & Gas LP
Country of
Incorporation
United States
United States
United States
Percentage
Activity
ownership
Holding Company
100%
100%
Holding Company
100% Oil & gas exploration
Pantheon Oil & Gas LP is 99% owned by Agrippa LLC as its limited partner and 1% by Hadrian Oil & Gas LLC
as its general partner.
9.
Trade and other receivables
Amounts falling due within one year:
Group
2018
$
Group
2017
$
Company
2018
$
Company
2017
$
Prepayment & accrued income
Other receivables
672,468
28,471
145,781
182,538
74,301
25,809
94,997
28,078
700,939
328,319
100,110
123,075
Group
2018
$
Group
2017
$
Company
2018
$
Company
2017
$
-
-
77,770,641
64,069,579
Amounts falling due after one year:
Amount due from
Subsidiary undertaking
An annual impairment review of the amount due from subsidiary undertakings (loans to subsidiaries) is
performed by comparing the expected recoverable amount of the subsidiary’s underlying tangible and intangible
assets to the carrying value of the loan in the Company’s statement of financial position. See note 14 for further
detail.
41
PANTHEON RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
10. Cash and cash equivalents
Cash at bank and in hand
3,399,290
4,382,206
687,768
2,260,055
Group
2018
$
Group Company
2018
$
2017
$
Company
2017
$
11. Trade and other payables
Trade creditors
Accruals
Group
2018
$
106,619
210,357
Group Company
2018
$
2017
$
Company
2017
$
473,102
111,510
106,619
97,701
82,246
63,151
316,976
584,612
204,320
145,397
12.
Impairment of Intangible Assets
Impairment loss – cost of well side track VOBM#4
Impairment loss on Prospect E leased acreage not
renewed – deemed non core
Impairment loss on previously leased West West AA
leased acreage not renewed
2018
$
2017
$
1,825,051
1,798,993
3,181,493
6,805,537
-
-
-
-
The Group has reviewed these assets for indications of impairment. Where impairment indications have been
found we have performed impairment tests. Impairments losses have been measured, presented and disclosed in
accordance with IAS 36.
An impairment charge has been determined for the year; $6.8m (2017: $nil). This was comprised of $1.83m of
costs associated with the sidetrack component of the VOBM#4 well (initially impaired in the interim accounts for
the 6 months ended 31 December 2017) and c.$5m representing capitalised lease costs on non-renewed acreage.
42
PANTHEON RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
13.
Exploration and evaluation assets
Group
Cost
At 1 July
Additions
Transfer to developed oil & gas assets
Transfer to production facilities & equipment
At 30 June
Impairment
As at 1 July
Impairment
At 30 June
Net book value
At 30 June
2018
$
55,545,596
10,679,595
(13,329,117)
(2,592,115)
50,303,959
-
6,805,537
6,805,537
2017
$
37,785,078
17,760,518
-
-
55,545,596
-
-
-
43,498,422
55,545,596
The Group additions for the year comprise the direct costs associated with the preparation and drilling of oil and
gas wells, together with costs associated with leases and seismic acquisition and processing.
Pantheon’s leasehold position includes certain leases in Tyler and Polk Counties which are currently held under
exclusive option. These leases may be renewed for a 3-year term for a payment of c.$4.2m on a 100% basis at the
Company’s election. Should the Company decide to not re-new any of these leases, the directors are still satisfied
that the NPV of the Group’s remaining exploration and evaluation exceeds their current carrying values.
Details of the impairments for the year are disclosed in note 12.
The Directors are satisfied that the NPV of the Group’s exploration and evaluation assets exceeds the carrying
values and believe that no additional impairment of these is required at 30 June 2018.
43
PANTHEON RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
14.
Property, plant and equipment
Group & Company
Cost
At 1 July 2016
Exchange difference
At 30 June 2017
Additions
Transfer from exploration & evaluation assets
At 30 June 2018
Depreciation
At 1 July 2016
Depreciation for the year
Exchange difference
At 30 June 2017
Depreciation for the year
Exchange difference
At 30 June 2018
Developed
Oil & Gas
Properties
$
Production
Facilities
&
Equipment
$
Office
Equipment
$
-
-
-
495,183
13,329,117
-
-
-
(210,000)
2,592,115
13,824,300
2,382,115
15,073
(293)
14,780
1,319
-
16,099
12,102
1,714
(202)
13,614
1,436
(50)
-
-
-
-
145,516
-
-
-
-
-
-
-
-
145,516
15,000
Depletion
At 01 July 2016 and at 30 June 2017
Depletion for the year
At 30 June 2018
-
88,293
88,293
-
-
-
-
-
-
Total
$
15,073
(293)
14,780
286,502
15,921,232
16,222,514
12,102
1,714
(202)
13,614
146,952
(50)
160,516
-
88,293
88,293
Net book value
As at 30 June 2018
As at 30 June 2017
13,736,007
2,236,599
-
-
1,099
1,166
15,973,706
1,166
In accordance with IAS 36 ‘Impairment of Assets’ (IAS 36), the prospect acreage has been classified into discrete
“prospects” or cash generating units (“CGU’s”).
The “Developed oil & gas properties” category above represents 3 Polk County wells, within the West AA
prospect, namely VOBM#1, VOBM#2H and VOBM#3. The Polk County gas processing plant in the “Production
facilities and equipment” category is also located with the West AA prospect. Hence, the 3 wells and gas
processing plant are all part of the same individual CGU.
44
PANTHEON RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
The recoverable amount of the developed oil and gas properties and loan to subsidiary is based upon value in use
calculations. The use of this method requires the estimation of future cash flows from the underlying assets,
discounted using a suitable pre tax discount rate. For the purposes of these calculations the Company’s Tyler &
Polk County Eagle Ford sandstone project currently under lease was modelled on a P50 basis using a discount
rate of 10%. The key assumptions upon which the cash flow projections were based include recoverable resource,
number of wells drilled, leasehold position, cost of drilling and the future prices of both oil and natural gas.
Management also recognised that material value is believed to exist in the separate and independent Austin Chalk
prospect. For the purpose of the calculations the following assumptions were used:
Average reserves per well
Oil price ($/bbl)
Natural gas price ($/mcf)
Cost of drilling modelled vertical well
1.4Mmboe
$50
$3.50
$4.50m
These key assumptions have been determined by reference to a number of sources including information provided
by the operator of the project, external market information, published futures pricing for oil and natural gas and
management’s expectations of future events that are believed to be reasonable under the circumstances. Actual
results may differ from these estimates.
Management has performed sensitivity analysis on each of the key assumptions including increasing the drilling
costs, reducing commodity prices and reducing average reserves per well by a number of scenarios. None of these
factors lead to an indication of impairment; hence the Company concluded that no impairment was required as of
30 June 2018.
The Group has performed value in use calculations of its developed oil and gas properties. These involved NPV
calculations with a variety of sensitivity assumptions for both commodity prices and well recoverabilities using
the geological estimates provided by an independent geological consultant. The Directors are satisfied that the
NPV of the Group’s developed oil and gas properties exceeds the carrying values and believe no impairment of
these is required at 30 June 2018.
15.
Share Capital
Allotted, issued and fully paid:
237,336,555 ordinary shares of £0.01 each
(2017: 214,957,458)
Issued share capital:
As at 30 June 2018
2018
$
2017
$
3,852,673
3,557,582
Issued and
fully paid
capital
Number
237,336,555
3,852,673
In August 2017 the Company completed a placing of 22,379,097 new fully paid ordinary shares with a nominal
value of £0.01, raising gross proceeds of c.$12.7m before expenses of the share issue .The ordinary shares rank
pari passu in all respects including the right to receive dividends and other distributions declared, made or paid.
The value of the yearly movement in ordinary shares $295,091 is calculated as; the number of new fully paid
ordinary shares issued 22,379,097 multiplied by £0.01 nominal value converted at the USD / GBP exchange rate
1.3186 at the time of the completed placing.
45
PANTHEON RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
16.
Net cash outflow from operating activities
Loss for the year
Net interest received
Unrealised gains on assets held for sale
Impairment of intangible assets
Depreciation of office equipment
Depletion of developed oil & gas assets
Depreciation of production & pipeline facilities
(Increase)/decrease in trade and other receivables
(Decrease)/increase in trade and other payables
Effect of translation differences (Fixed Assets)
Effect of translation differences
Net cash outflow from operating activities
Loss for the year
Net interest received
Depreciation
Decrease in trade and other receivables
Increase in trade and other payables
Effect of translation differences (Fixed Assets)
Effect of translation differences
Net cash inflow (outflow) from operating activities
17. Control
No one party controls the Company.
18. Decommissioning expenditure
Group
2018
$
(8,753,604)
(6,858)
-
6,805,537
1,436
88,293
145,516
(372,620)
(267,636)
(50)
277,183
(2,082,803)
Company
2018
$
(1,137,295)
(5,862)
1,436
22,965
58,923
(50)
1,124,990
65,107
Group
2017
$
(1,740,192)
(14,067)
(14,590)
-
1,714
-
-
35,823
372,216
93
(239,527)
(1,598,530)
Company
2017
$
(1,107,249)
(10,467)
1,714
2,795
60,786
93
(1,363,364)
(2,415,692)
The Directors have considered the environmental issues and the need for any necessary provision for the cost of
rectifying any environmental damage, as might be required under local legislation. The Company believes that
the value of reusable pipe that can be retrieved from each of its wells is of greater value than the future cost of
any plug and abandonment expenses related to those wells. Therefore, no provision has been made for any future
costs of decommissioning or any environmental damage.
19. Exploration and evaluation commitments
The Group has no obligation to drill any further wells beyond the current drilling programme, or make any further
payments in respect of any new wells in any of its operations. Should the Group elect to not participate in any
wells beyond the first well in Polk and Tyler County then it would forfeit an area of acreage surrounding the
particular well that the Group had elected not to participate in.
46
PANTHEON RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
As at 30 June 2018, the Group has no fixed financial commitments in respect of any other programmes other than
maintaining its interest in its existing operations. Before any new wells are commenced in relation to these
operations, the Group must first elect to participate in any proposed well thereby allowing the Group to decline
participation if it deems appropriate.
20. Financial instruments
The Group’s principal financial instruments comprise cash and cash equivalents, trade and other receivables and
trade and other payables. Financial assets and liabilities are initially measured at fair value plus transaction costs.
The main purpose of cash and cash equivalents financial instruments is to finance the Group’s operations. The
Group’s other financial assets and liabilities such as receivables and trade payables, arise directly from its
operations. It is, and has been throughout the entire period, the Group’s policy that no trading in financial
instruments shall be undertaken.
The main risk arising from the Group’s financial instruments is market risk. Other minor risks are summarised
below. The Board reviews and agrees policies for managing each of these risks.
Market risk
Market risk is the risk that changes in market prices, and market factors such as foreign exchange rates and
interest rates will affect the entity’s income or the value of its holdings of financial instruments.
The objective of market risk management is to manage and control market risk exposures within acceptable
parameters while optimising the return.
The Company does not use derivative products to hedge foreign exchange risk and has exposure to foreign
exchange rates prevailing at the dates when funds are transferred into different currencies.
Cash flow interest rate risk
The Group’s exposure to the risks of changes in market interest rates relates primarily to the Group’s cash and
cash equivalents with a floating interest rate. These financial assets with variable rates expose the Group to cash
flow interest rate risk. All other financial assets and liabilities in the form of receivables and payables are non-
interest bearing. The Group does not engage in any hedging or derivative transactions to manage interest rate
risk.
In regard to its interest rate risk, the Group continuously analyses its exposure. Within this analysis consideration
is given to potential renewals of existing positions, alternative investments and the mix of fixed and variable
interest rates. The Group has no policy as to maximum or minimum level of fixed or floating instruments.
Interest rate risk is measured as the value of assets and liabilities at fixed rate compared to those at variable rate.
Financial assets:
Cash on deposit
Trade and other receivables
Weighted average
interest rate
2018
%
0.05
-
Fixed
interest rate
2018
$
3,399,290
-
Non – interest
bearing
2018
$
-
700,939
Net fair value
The net fair value of financial assets and financial liabilities approximates to their carrying amount as disclosed in
the statement of financial position and in the related notes.
47
PANTHEON RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
Currency risk
The functional currency for the Group’s operating activities and exploration activities is the US dollar. The
Group has not hedged against currency depreciation but continues to keep the matter under review.
Financial risk management
The Directors recognise that this is an area in which they may need to develop specific policies should the Group
become exposed to wider financial risks as the business develops.
Liquidity risk
Liquidity risk is the risk that the entity will not be able to meet its financial obligations as they fall due.
The objective of managing liquidity risk is to ensure as far as possible, that it will always have sufficient liquidity
to meet its liabilities when they fall due, under both normal and stressed conditions.
The entity has established a number of policies and processes for managing liquidity risk. These include:
-
Continuously monitoring actual and budgeted cash flows and longer term forecasting cash flows;
-
Monitoring the maturity profiles of financial assets and liabilities in order to match inflows and outflows;
and
Monitoring liquidity ratios (working capital).
-
Given the modest cash balance and the relatively illiquid nature of the Group’s non-current assets there is currently
an increased liquidity risk. This is partially mitigated by a number of factors including: (1) That the Group does not
have any current mandatory drilling commitments, and, (2) that the VOS#1 discovery well has recently commenced
production and is currently producing a rate of 1,425 mcfpd, equating to circa $5,700 of gross revenues per day.
Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial
loss to the Group. The Group’s main counterparties are the operators of the respective projects. Funds are
normally only remitted on a prepayment basis a short period before the expected commencement of drilling. The
Group has adopted a policy of only dealing with what it believes to be creditworthy counterparties and would
consider obtaining sufficient collateral where appropriate, as a means of mitigating the risk of financial loss from
defaults. The Group’s exposure and the credit ratings of its counterparties are continuously monitored, and the
aggregate value of transactions concluded is spread amongst approved counterparties. Ongoing credit evaluation
is performed on the financial condition of accounts receivable.
Capital management
The Group’s objective when managing capital is to ensure that adequate funding and resources are obtained to
enable it to develop its projects, while in the meantime safeguarding the Group’s ability to continue as a going
concern. This is aimed at enabling it, once the projects come to fruition, to provide appropriate returns for
shareholders and benefits for other stakeholders. Capital will continue to be sourced from equity and from
borrowings where appropriate.
48
PANTHEON RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
21. Share-based payments
Movements in share options in issue
Exercise price
Number of
options issued
as of 30 June 2017
Issued during
year
Expired during year
Number of
options issued
as of 30 June 2018
£0.30
Total
10,000,000
10,000,000
-
-
-
-
10,000,000
10,000,000
The Group has previously issued share options to directors and employees. These are equity settled share-based
payments as defined in IFRS 2 Share-based payments. A recognised valuation methodology (using the Black &
Scholes valuation model) was employed to determine the fair value of options granted as set out in the standard.
The charge incurred relating to these options was recognised within operating costs. All share options have been
fully expensed as at 30 June 2018. The weighted average exercise price of share options outstanding and
exercisable at the end of the period was £0.30 (2017: £0.30).
No share options were issued in the year, (2017: $Nil).
The Equity reserve account represents expired share options that were originally expensed through the profit and
loss account.
22. Related party transactions
There were no related party transactions during the year other than the payment of remuneration to Directors.
23.
Contingent liability
In September 2017, the lease dispute with certain third parties, as disclosed in Pantheon’s announcement of 27
July 2017, was settled. Pantheon’s working interest in the units associated with the VOBM#1 and VOBM#2H
wells has been reduced from 58% to 55.1% after well payout. No cash or additional consideration was paid in
relation to this settlement.
Additionally, subsequent to the year end the Group settled its long running dispute with the independent third
party geological consultant who was seeking from Pantheon a payment of $25,000 per successfully completed
well together with a 1% overriding royalty interest on future revenues. The dispute has now been settled with
both parties agreeing to cease proceedings and to not pursue the other party for any claims.
24.
Subsequent events
VOS#1 Well and pipeline – Tyler County
The 2½ mile gathering pipeline in East Texas (Tyler County) was completed at the end of October 2018. The
pipeline connected the VOS #1 well to the Enterprise gas gathering and processing system and was hooked up
and producing in November 2018. The well was brought onstream in a conservative manner given that the well
had been shut in for over 2.5 years and had experienced a number of remediation processes historically. As at the
28th of November 2018, the wells were producing at a rate of 1,425 mcfpd natural gas.
49
PANTHEON RESOURCES PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
Directorate change
John Walmsley has decided to retire from his role as Chairman of the Company at the Company’s forthcoming
Annual General Meeting. Mr Walmsley has served on the Board of Pantheon for 11 years and has agreed to
continue with the Company in the role of Non-Executive Director. Phillip Gobe, currently Non-Executive
Director, has accepted the role of Chairman. Mr Gobe’s appointment as Chairman reflects the Board’s
determination to commercialise the geological potential of the East Texas assets.
Acquisition on Vision’s Working Interest in jointly leased Tyler and Polk County acreage
Pantheon announced its intention to purchase the working interest positions held by the Vision group in the
jointly leased Tyler and Polk County project (the “Project”), increasing Pantheon’s working interests to 100% and
assuming operatorship and control of the Project.
On the 17th of December the Group announced that it had agreed non-binding terms with Kaiser Francis and
associated limited partners (“KF”) to acquire KF’s 66.6% ownership of Vision Gas Limited and Vision Resources
LLC (“Vision”) including its working interest in the VOS#1 well and associated Tyler County acreage. As
consideration, Pantheon expects to issue to KF 3.5 million new fully paid ordinary shares in Pantheon in full and
final settlement. Should this transaction complete successfully then it is the Group’s intention to acquire the
remainder of Vision for non-cash consideration of shares and a success based royalty which would bring
Pantheon’s working interest position to 100% in its prospects.
Reduction in Acreage
In July 2018 the Company announced a reduction in its acreage position to 17,145 net mineral acres, which
compared to 20,576 net mineral acres as at October 2014, to which the project’s Prospective P50 Resource
estimate of 301mmboe related. The Group’s current acreage position currently under lease and under exclusive
option amounts to 16,251 acres. To the extent that the leased position remains below 20,576 net mineral acres, the
Prospective P50 Resource estimate of 301mmboe has reduced and requires revision. To the extent that Pantheon
may increase its working interest in the project through the acquisition of Vision’s working interests, then a
proportionate increase in P50 Prospective Resource attributable to Pantheon shareholders will result. Pantheon
will continue to manage and high grade its acreage portfolio in line with its capital budgets.
GLOSSARY
bbl
bopd
boepd
mcf
barrel of oil
barrels of oil per day
barrels of oil equivalent per day
thousand cubic feet
mcfd
Mmboe
NPV
$
thousand cubic feet per day
million barrels of oil equivalent
net present value
United States dollar
50