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Predator Oil & Gas Holdings Plc
Annual Report for the year ended 31 December 2019
SEQUESTRATING
ANTHROPOGENIC CO2
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Contents
Business Review
1 Chairman’s statement
3 Strategy
4 Group strategic report
Our Governance
18 Report of the directors
21 Board of directors
22 Corporate governance report
26 Directors’ remuneration report
Investor Information
51 Corporate information
Financial Statements
30 Independent auditors’ report
32 Consolidated statement of
comprehensive income
33 Consolidated statement of
financial position
34 Consolidated statement of
changes in equity
35 Consolidated statement of
cash flows
36 Statement of accounting
policies
41 Notes to the financial
statements
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BUSINESS
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STATEMENTS
INVESTOR
INFORMATION
Chairman’s statement
Dear Shareholder,
On behalf of the Board of Directors, I hereby present the consolidated
financial statements of Predator Oil & Gas Holdings Plc (the “Group”,
“Predator” or the “Company”) for the year ended 31 December 2019.
During July 2019, our chairman, Sarah Cope, stepped down in order
to focus on other commitments to be replaced by Carl Kindinger as
interim chairman.
On the 19 March 2019, we announced the signing of the Guercif
Petroleum Agreement (the “Guercif PA”) and Association Contract
with the Office National des Hydrocarbures et des Mines (“ONHYM”)
acting on behalf of the State. Award of the Guercif PA was
subsequently ratified by a Joint Ministerial Order on 4 July 2019. As
is required under the terms of the Guercif PA, a US$1.5 million bank
guarantee was put in place in favour of ONHYM. We have identified
during the year several attractive undrilled gas targets, one of which
is the Moulouya Prospect, with an estimated 320 BCF net
recoverable resources.
An Environmental Impact Assessment (“EIA”) was progressed during
the year for the area of the Moulouya Prospect.
On 9 December 2019, we announced entering into a rig option
agreement with Canadian drilling contractor Star Valley Drilling Ltd.,
who were undertaking an extensive drilling programme for SDX Energy
Plc in the Rharb Basin west of the Guercif using its Rig No. 101.
We have continued to spend judiciously on our core asset to further
develop the Enhanced Oil Recovery pilot project using injected carbon
dioxide (“CO2 EOR”) in the InnissTrinity field, onshore Trinidad.
Through these activities, and workover of the wells selected for CO2
injection, we have ensured that we are “operationallyready” to
commence CO2 injection at any time.
During the year we have made a significant contribution to providing
the technical and environmental data required for processing of
approvals sought by the operator of the InnissTrinity Incremental
Production Services Contract (“IPSC”), FRAM Exploration Trinidad Ltd.
(“FRAM”), from Trinidad’s Environmental Management Authority,
Heritage Petroleum Trinidad Ltd. (“Heritage” and formerly Petrotrin,
the State oil company) and the Ministry of Energy and Energy
Industries (“MEEI”) for the implementation of CO2 injection by
28 January 2020 in the AT4 Block within the InnissTrinity field. During
this period progress in the granting of approvals was challenging as
Petrotrin underwent three different episodes of corporate
restructuring to create the new Stateowned entity Heritage. I am
pleased to report that we successfully overcame this substantial
hurdle which resulted the InnissTrinity IPSC being extended by
two years, initially to 31 December 2021, a condition required by the
Company to ensure that CO2 EOR results could be sufficiently
evaluated before considering expansion of CO2 EOR activities.
During the year we have also continued to maintain exclusivity over
Trinidad’s supply of surplus liquid CO2. Upon the commencement of
CO2 injection, the Company will be in a position to start to
demonstrate a practical commitment to helping to reduce
anthropogenic carbon emissions
line with
Environmental, Social and Governance (“ESG”) goals and growing
climate concern awareness.
in Trinidad
in
We have established ourselves, by deploying only capital raised at the
time of our IPO, in a nicheposition in Trinidad as a fully integrated
CO2 EOR services provider. We are on course to start generating
revenues in the coming months; to expand our CO2 EOR production
capabilities; and to further research the potential CO2 sequestration
“green dividend” based on the substantive practical expertise we
have accumulated during this year.
We continue to maintain a business dialogue offshore Ireland with
the government and regulators in the context of a change of our
business strategy that is dictated by Ireland moving inexorably
towards lower CO2 emissions and a greener energy future. We are
progressing discussions with LNG suppliers regarding the potential
for offshore regasification and the development of gas storage
facilities using existing infrastructure offshore Ireland. The change in
business strategy is consistent with the European Commission
sustainable energy security package announced on 16 February 2016,
which included a nonlegislative EU strategy for LNG and gas storage.
In order to fund the Guercif PA bank guarantee, the Company
announced on 15 February 2019 that it had raised £1.5 million by the
issue of a convertible loan note (“Loan Notes”) to Arato Global
Opportunities LLC (“Arato”). The pros and cons of the decision to issue
the Loan Notes were rigorously evaluated by the Board, but taking
into account market conditions and the market capitalisation of the
Company at the time, it was determined that the compelling and
sustainable investment case represented by the signing of the Guercif
PA, in particular the potential gas marketing opportunity represented
by the gasstranded Casablanca industrial sites, was best advanced
through the issue of the Convertible Loan Note.
Arato was issued with warrants to subscribe for 2,083,333 Ordinary
Shares in the Company at an exercise price of 12p per share for a
period of 2 years, and Novum Securities, the Company’s broker who
arranged the Loan Notes, was also issued with warrants to subscribe
for 2,000,000 Ordinary Shares in the Company also at an exercise
price of 12p per share.
During the year the principal outstanding on the Loan Notes was
reduced by £485,000 through the issue to Arato of 8,035,019 ordinary
shares, representing an average price of £0.0735 per share.
We have continued to place reducing CO2 emissions at the forefront
of our business development strategy and in 2020 we can look
forward to becoming a sequestrator of CO2 in Trinidad and a potential
contributor eventually to reducing CO2 emissions in Morocco, by
replacing imported fuel oil with gas.
Post balance sheet events include:
Ratification of the EIA for Moulouya drilling by the Ministry of Energy
and Mines and Environment, valid for 5 years from the effective date
of issue of 29 January 2020.
On the 19 February 2020 we announced that the exercise of our rig
option with Star Valley Drilling Ltd. (“Star”) without entering into any
financial liabilities.
On the 27 January 2020 we announced that the first injection of CO2
into the InnissTrinity field had been successfully achieved.
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The longerterm outcome to Brexit in 2020 may still pose new
challenges in terms of creating continuing instability in the financial
markets and currency exchange rate fluctuations, reducing access to
UKbased oil field services, and in creating conditions liable to weaken
investor sentiment and decisionmaking processes. The Company has
some protection in that it does not operate in the United Kingdom
and is intending to generate revenues in United States dollars from
production in Trinidad.
On a positive note we look forward to being a small cap leader in the
postcoronavirus equity market recovery, based on being well
capitalised; focussed on generating improved cash flow; adding CO2
EOR production opportunities capitalising on distressed producing
assets; and having a drillready asset fitforpurpose to attract peer
company partners requiring the ability to raise fresh capital in the
immediate, potentially highly competitive, postcoronavirus equity
market where increasingly stronger “green dividend” investor and
public opinion sentiments will prevail.
Carl Kindinger
Interim Chairman
1 May 2020
Chairman’s statement (continued)
On 14 February 2020 we conditionally placed 89,000,000 new
ordinary shares of no par value in the Company (the “Placing Shares”)
at a placing price of 4 pence each (the “Placing Price”) to raise
£3.56 million (before expenses) (the “Placing”). Optiva Securities
Limited was appointed by the Company as a joint broker with Novum
Securities Limited.
On the 28 February 2020 we announced that the Placing was
completed on Admission of all the Placing Shares to listing on the UK
Listing Authority’s Official List (standard listing segment) and to
trading on the London Stock Exchange’s main market for listed
securities. Following Admission, the total number of voting rights in
the Company was 197,172,169.
On the 5 March 2020, we gave notice of a General Meeting of the
Company to be held on 25 March 2020. A resolution seeking
Shareholder approval for the issue of sufficient ordinary shares to
cover the Arato Loan Note conversion in full during the term of the
Arato Convertible Loan Note; the exercise of the Warrants granted at
IPO and on entering into the Convertible Loan Note with Arato; the
exercise of options granted to Directors at the time of the Company’s
IPO in May 2018; issuing 4,875,000 new ordinary shares in settlement
of fees together with warrants over 4,450,000 new ordinary shares
at 4p per share expiring on 28 February 2023.
On the 25 March 2020, we announced that at the GM held that day,
that the resolution was duly passed.
On the 31 March 2020 we announced that we had injected more CO2
into AT5X as part of initiating Phase 2 of the CO2 EOR pilot project
and had observed encouraging downhole pressure buildup.
On the 7 April 2020, the admission of 4,875,000 new ordinary shares
to listing on the UK Listing Authority’s Official List (standard listing
segment) and to trading on the London Stock Exchange’s main market
for listed securities became effective. Following admission, the total
number of voting rights in the Company was 202,047,169.
In accordance with the terms of the Arato Global Opportunities
Limited for the conversion of Convertible Loan Note issued on
15 February 2019, on the 9 April 2020, the admission of 5,267,118
new ordinary shares to listing on the UK Listing Authority’s Official
List (standard listing segment) and to trading on the London Stock
Exchange’s main market for listed securities became effective.
Following admission, the total number of voting rights in the
Company was 207,314,287.
Post balance sheet events are however dominated by the global
public health emergency caused by the spread of the coronavirus.
This has produced the most challenging times anyone of our
generation has lived through. It has pervasively impacted negatively
global economies, financial and equity markets, and oil and gas
commodity prices. We have moved swiftly to put in place a
comprehensive set of actions to deal with the impact of coronavirus
on our business operations and investment strategy. Shareholders
can be reassured that our excellent and experienced management
team are therefore well prepared to enact our strategy to weather a
sustained period of market volatility without any significant impact
on our mediumterm value creation goals.
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Strategy
The Company’s core strategy is to build a carbon neutral business
focussed on assembling material equity positions in a portfolio of
assets combining existing gas discoveries and new gas prospects with
production opportunities where enhanced oil production can be
achieved by sequestrating significant quantities of pollutant C02.
The Company seeks to develop and provide sources of energy that
contribute to reducing C02 emissions.
The Board believes that the Company’s mediumterm future relies on
focussing on gas as being the flexible energy source to replace coal
and oil as a fuel for power generation, thereby reducing C02
emissions as gas by comparison is less CO2 pollutant.
The Company’s business plan is being executed to minimise where
possible capital expenditures through:
–
–
prudent lowcost investment in existing mature oil fields for C02
EOR production revenues; and
by leveraging our management’s gas experience, industry
relationships and
licence positions around gasgathering
infrastructure with third parties to validate our commercial
understanding of the gas marketing potential and the potential
of our exploration and appraisal assets in order to provide the
framework for gasfocussed M & A transactions and farmouts to
defray CAPEX for subsequent drilling/development.
Geological risk mitigation has been enacted through screening
suitable projects for the Company’s portfolio using management’s
extensive and relevant industry experience. Farmout transaction risk
is being addressed by improving development economics and
lowering commercial risk by assembling projects close to
infrastructure and in areas where there is a high demand for
indigenous gas to improve security of energy supply and reduce CO2
emissions from more carbonintensive energy sources.
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Group strategic report
for the year ended 31 December 2019
The directors present their strategic report for the year ended
31 December 2019.
PRINCIPAL ACTIVITY
The Group was formed for the purpose of acquiring assets,
businesses, material equity positions in oil and gas licences, or target
companies that have operations in the oil and gas exploration and
production sector that it will then look to develop and expand. The
Group seeks to develop and provide sources of fossil fuelderived
energy that contribute to reducing C02 emissions.
FAIR REVIEW OF THE BUSINESS
The Guercif PA is the first onshore licence where a Predator entity will
be an approved operator.
The Guercif PA includes an existing 1972 well for which a previous
operator reinterpreted the old wireline
logs using modern
techniques to identify a potential untested gasbearing interval. This
was subsequently never tested as the operator got into financial
difficulties at that time. In addition to this encouraging historical
interpretation for the potential presence of gas in GRF1, we have also
during the year carried out technical studies to upgrade several
attractive undrilled gas targets to “drillready” status, falling within
an area very close to GRF1 defined as the “Moulouya Prospect”.
The results of an independent competent person’s report (“CPR”) for
the Guercif Permit were announced on 25 April 2019. This CPR
estimates that the primary target area of the Moulouya Prospect
holds 320 BCF of net recoverable prospective gas resources.
Additional gas prospectivity at the Moulouya target levels is
referenced by the CPR, including an updip appraisal of GRF1, with
postulated gross gas resources of 10 to 200 BCF. The CPR estimates
that a separate Triassic prospect contains 155 BCF of net recoverable
prospective gas resources. The CPR also references 9 prospective
Triassic and Jurassic leads previously identified by ONHYM, with mid
case recoverable volumes reported by ONHYM to range from 18 to
366 million BOE.
An Environmental Impact Assessment was progressed during the year
for the area of the Moulouya Prospect.
The ability to test larger gas targets than those present in the gas
producing, geologically analogous, Rharb Basin; the proximity to road,
rail and gas pipeline infrastructure linking the potential gas targets to
the lucrative industrial markets of Casablanca and Tangiers; the
competitive advantage of domestic gas compared to imported fuels
currently supplying these industrial markets, which supports far
higher incountry gas prices compared to European gas prices; and
the benign government fiscal terms and low capital commitments
together create a sustainable investment case that is largely
independent of global market conditions. The ability to capture this
lucrative, gasstranded market and to be able to dictate gaspricing
terms is a key driver for fasttracking drilling and considering a
simplified initial development concept that is not capital intensive.
Entering into a rig option agreement with Canadian drilling contractor
Star Valley Drilling Ltd., Involved no financial commitments However,
when the rig option is exercised it facilitates the release of the Bank
Guarantee in favour of ONHYM in two stages – US$1 million on
fulfilment of the drilling work commitment and US$0.5 million on
fulfilment of desktop studies committed to in the Initial Exploration
Period of 30 months duration commencing 19 March 2019.
In the InnissTrinity field in Trinidad we have refined desktop
engineering and environmental studies and imported additional
specialised equipment and spares from the United States necessary
for the completion of CO2 injection and oil production wells and the
commissioning of the CO2 injection facilities. Through these activities,
and workover of the wells selected for CO2 injection, we have
ensured that we are “operationallyready” to commence CO2
injection at any time.
The results of an independent competent person’s report (“CPR”) for
the CO2 EOR potential of the InnissTrinity field were announced on
4 July 2019. This CPR estimates that CO2 EOR contingent, pending
development, gross oil resources for the field are 6.8 million barrels.
The Company retains an exclusive option to acquire Fram Exploration
Trinidad Ltd. (“FRAM”) and to further develop the potential CO2 EOR
contingent resources.
During the year our desktop work has provided the basis for the
processing of approvals sought by the operator of the InnissTrinity
Incremental Production Services Contract (“IPSC”), FRAM, from
Trinidad’s Environmental Management Authority, Heritage Petroleum
Trinidad Ltd. (“Heritage” and formerly Petrotrin, the State oil
company) and the Ministry of Energy and Energy Industries (“MEEI”)
for the implementation of CO2 injection by 28 January 2020 in the
AT4 Block within the InnissTrinity field. During this period, Petrotrin
underwent three different episodes of corporate restructuring to
create the new Stateowned entity Heritage. The processing of the
approval by Petrotrin and its successor Heritage, owner of the Inniss
Trinity production licence, was delayed as a consequence. Whilst we
remained operationallyready, execution of our CO2 EOR pilot project
was unavoidably delayed by an unforeseen circumstance beyond our
control, however the InnissTrinity IPSC was extended by two years,
initially to 31 December 2021, a condition required by the Company
to ensure that CO2 EOR results could be sufficiently evaluated before
considering expansion of CO2 EOR activities. The Company’s Well
Participation Agreement (“WPA”) with FRAM was amended to extend
the period to acquire FRAM under the terms of the WPA to
30 September 2020, or 30 June 2020 should CO2 injection in
accordance with Phase 2 of the work programme for the extension
to the IPSC not occur.
During the year the Company has progressed discussions with LNG
suppliers regarding the potential for offshore regasification and the
development of gas storage facilities using existing infrastructure
offshore Ireland. The change in business strategy is consistent with
the European Commission sustainable energy security package
announced on 16 February 2016, which included a nonlegislative EU
strategy for LNG and gas storage.
The Company is not intending to create financial liabilities and capital
requirements by progressing such discussions and potential
negotiations, but rather to use its management’s long experience
offshore Ireland, which includes gas sales, constructing bids for
acquiring infrastructure assets, and designing a gas storage facility
concept for the Celtic Sea, to allow Predator Oil and Gas Ventures
Ltd., an operator offshore Ireland, to leverage its position to become
the entity through which the LNG supplier participates in the offshore
regasification proposal initiated by the Company.
The Company is not expecting any practical nearterm benefits
regarding the execution of this change of business strategy for Ireland.
The strategy for Morocco is to be “drillready” at minimal cost whilst
maintaining our current equity exposure (75% Predator and 25%
ONHYM) in the Guercif PA to give maximum flexibility for a farmout
if required at a later date.
KEY PERFORMANCE INDICATORS
At this stage in the Group’s development, the Directors do not
consider that standard industry key performance indicators are
relevant. The Group currently has no oil and gas production and
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therefore has no income. The Group is not expected to report profits
until it develops its exploration and development projects. The main
KPI is therefore considered to be the conservation of cash whilst they
continue to obtain the appropriate licenses and to undertake
appropriate exploration activity as described as follows:
l
Expanding total prospective, probable and proven resources
and reserves.
These measure our ability to discover resources and develop
reserves, including through the acquisition of new licences, as
demonstrated by our signing of the Guercif Petroleum
Agreement.
l
Develop oil and gas projects which will result in positive cash flow
within a short time horizon.
This measures our ability to assist the internal funding of projects
with medium term time horizons, as demonstrated by our
continued funding of the development of a CO2 EOR project
in Trinidad.
l
Enter into value adding joint venture and farmout transactions.
l
l
This measures our ability to mitigate risk, share capital
expenditure with partners and assist in meeting licence
commitments. This objective is as yet unfulfilled but remains a
nearterm priority for the Group.
Secure funding that minimises shareholder dilution, cognisant
of a judicious level of debt funding. This measures our ability to
enhance shareholder value whilst securing the means to grow
the business without unduly increasing risk. Debt has been
reduced whilst the priority of the Group remains focussed on
securing an adequate quantum of equity funding to maintain
sufficient working capital as we transition to a revenue
generating Group through a potential period of low commodity
prices. Shareholders’ interests are bestprotected by establishing
sufficient liquidity to support going concern criteria during
periods of adverse global market conditions.
The rate of utilisation of the Group’s cash resources. This
measures our ability to plan expenditure and conserve cash to
ensure a going concern and is addressed by reducing corporate
costs and operating costs whenever and wherever prudent to do
so and by not entering into any discretionary new commitments
and liabilities.
GROUP STRUCTURE AND LIST OF ASSETS
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Group strategic report
for the year ended 31 December 2019 (continued)
TRINIDAD NEAR TERM REVENUES FROM PRODUCTION
TRINIDAD
South America
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CO2 being hookedup for injection
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Well Participation Agreement – Pilot CO2 Enhanced Oil Recovery
Project InnissTrinity Field
The producing InnissTrinity oil field is located onshore Trinidad in the
Southern Basin approximately 10 km southeast of the Barrackpore
Penal oil field and approximately 75 km south of the capital Port of
Spain. The InnissTrinity Licence covers an area of 23.35 km² and
currently contains 86 producing wells that are available for the
application of enhanced oil recovery techniques.
During 2018 the WPA with FRAM was amended to refocus on
Enhanced Oil Recovery operations using locally sourced carbon
dioxide for injection (“CO2 EOR”). This technique is widely used in oil
fields in the United States, where an affordable source of C02 is
available. The option to acquire FRAM has been extended to
30 September 2020. An option to acquire Cory Moruga Holdings Ltd.,
another wholly owned subsidiary of Steeldrum, was dropped in order
to focus resources on the InnissTrinity asset.
Through its whollyowned subsidiary, POGT, the Company currently
holds an interest in a WPA signed with FRAM, a whollyowned
subsidiary of Steeldrum, on 17 November 2017 and relating to the
Company’s entitlement to profits derived from its investment in the
producing InnissTrinity oil field (“InnissTrinity”).
InnissTrinity is licenced to Petrotrin, the State Oil Company. Following
the closure of Petrotrin’s oil refinery in Trinidad, Petrotrin was
restructured during the end of 2018 to create the new State Oil
Company Heritage Petroleum Company Ltd. (“Heritage”).
FRAM is operator of the InnissTrinity field under the terms of an
Incremental Production Services Contract with Heritage (“IPSC”). The
IPSC allows for FRAM to invest in InnissTrinity by satisfying certain
annual infill drilling commitments during the life of the IPSC. In return,
FRAM receives 100% of the benefits of all incremental production
achieved through the investment relative to the base line production
established for the field prior to the investment being made. FRAM’s
net incremental production revenues are after deduction of
operating costs and certain royalties and taxes. Historical tax losses
accumulated within FRAM are available for offset against Petroleum
Profits Tax on operating profits. CO2 EOR Project Costs can also be
offset against 18% Supplemental Petroleum Tax where applied when
the price of West Texas crude is between US$50.01/brl and
US$90.00/brl.
The term of the IPSC has been extended until 31 December 2021,
conditional upon CO2 injection commencing on or before 28 January
2020. The outstanding FRAM drilling commitment of 7 wells has been
replaced by the CO2 EOR Pilot Project.
FRAM currently produces between 120 and 150 bopd from the field,
which is sold directly to the stateowned oil company Heritage. FRAM
is engaged in operating and drilling infill development/production
wells in the field and carrying out workovers for selected wells based
on up to 86 wells that have been assigned by Heritage to FRAM under
the IPSC.
Under the WPA, POGTL is entitled to a profit split from all profits
generated from incremental production attributable to enhanced oil
production from the CO2 EOR Pilot Project under the same terms of
the IPSC through the Company’s investment in InnissTrinity. However,
in the specific case of the WPA, POGT has capped the operating costs
at US$10/bbl. and will also benefit from utilising FRAM’s historical tax
losses. POGT is not a partner in the IPSC and therefore has no
exposure to any of the FRAM commitments relating to the IPSC. POGT
will receive 100% of all operating profits until payback of its
investment and thereafter operating profits will be split 50:50
between POGT and FRAM. Under the WPA, POGT also has an option
up to 30 September 2020 to acquire certain assets of Steeldrum,
including FRAM for an agreed sum of US$4.2 million.
The completion of the sale of Steeldrum, owners of FRAM, to
Columbus was announced on 8 October 2018. The WPA remains in
full force and effect following the sale of FRAM. FRAM is now therefore
a wholly owned subsidiary of Columbus and retains its 100% of the
rights of the IPSC for Heritage’s InnissTrinity licence onshore Trinidad.
CO2 supply
To further the initiation of a CO2 EOR Pilot Project in InnissTrinity, a
Heads of Agreement for C02 Gas Sales (“CO2 HOA”) was entered into
with the only incountry C02 supplier, Massy Gas Products Trinidad
Ltd. (“Massy”), based on a minimum scoping daily delivery of 60 Mt
C02. An exclusivity period to negotiate the C02 Gas Sales Agreement,
initially to 31 August 2018, was extended to 30 November 2018 and
has been subsequently extended further to 30 September 2020.
CO2 EOR planning and operations
During the year, an independent CO2 EOR reservoir engineering study
was completed for the AT4 Block within the InnissTrinity Field. Based
on this, pilot C02 injection volumes have been modelled and
incorporated in the CO2 Gas Sales Agreement discussions with Massy.
Oil production forecasts derived from the above study have been
modelled and input into the design criteria for the CO2 EORdedicated
surface production facilities. Pilot C02 EOR is forecast from desk top
studies to increase production compared to the current production from
the existing wells in the AT4 Block chosen for the CO2 EOR Pilot Project
by lowering oil viscosity and increasing current reservoir pressures.
CO2 delivery system at InnissTrinity
Site meeting CO2 EOR team, InnissTrinity field
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Group strategic report
for the year ended 31 December 2019 (continued)
A competent person’s report by SLR Consulting commissioned by the
Company in 2019 had indicated Gross Contingent Recoverable Oil
Resources pending development for a fullfield CO2 EOR development
of the InnissTrinity field of: 5.3 million barrels (Low Estimate);
6.8 million barrels (Best Estimate) and 8.9 million barrels (High
Estimate). These resources estimates are attributable to FRAM’s
interest in the IPSC. Exercising the Company’s option to acquire
FRAM, as FRAM is the party at present to the IPSC and not the
Company, and following all regulatory consents and approvals for the
change of control of FRAM after an acquisition, would allow the
aforementioned resources to be included by the Company in its list
of assets. For the avoidance of doubt, currently the Company only
receives a split of net operating profits only under the terms of the
WPA from any potential production from the CO2 EOR Pilot Project
in the AT4 Block within the InnissTrinity field, which is the only part
of the InnissTrinity field to which the WPA currently applies.
A threewell workover programme for AT4, AT5X and AT13 has been
executed to survey the wells for suitability and integrity for CO2 EOR
operations based on the Company’s CO2 EOR design specifications.
Following the results of the well workover survey, the Herrera #2 Sand
will be isolated in the wellbore in AT5X for initial CO2 injection
followed by oil production whilst simultaneously injecting CO2
continuously into AT13. Currently producing wells AT6, AT12 and
IN6 in the AT4 block may also potentially exhibit enhanced oil
production if the pilot CO2 injection is completely successful.
HSE
An environmental monitoring programme has been established with
the Environmental Monitoring Authority (“EMA”) and collection of
“base line” samples has begun.
The Health and Safety Plan for CO2 EOR operations has been drafted
and will be updated after further consultations with the EMA and Massy.
A Certificate of Environmental Clearance has been issued by the EMA
for CO2 EOR operations in InnissTrinity.
The Company is dependent on FRAM and Heritage receiving regulatory
approval from the Ministry of Energy and Energy Industries (“MEEI”) for
the CO2 EOR Pilot Project to be implemented in InnissTrinity. Heritage
approval for the pilot CO2 EOR injection was given in 2019 subject to final
approval by the MEEI, which was received by FRAM on 3 January 2020.
Forward work programme
The CO2 EOR Pilot Project startup to “first oil” includes: third party
HSE monitoring; management of CO2 injection volumes and pressures;
ongoing civil works and road maintenance for CO2 truck deliveries and
to expand the permanent location for CO2 EOR storage and injection
equipment; additional well workovers and well completions to
potentially expand the CO2 EOR project should pilot CO2 EOR results
be encouraging; upgrading CO2 site security; installing generator for
reliable power supply; adding VSAT telecommunications; contingency
to increase CO2 supply; provision of standby CO2 supply; realtime
reservoir engineering monitoring; and providing safety equipment.
Injection of CO2 over a period of up to 60 days, as forecast by
preinjection reservoir engineering studies, is a requirement to
repressurise the Herrera #2 Sand reservoir. Early analysis of initial
CO2 injectivity results may result in the CO2 injection volumes and
pressures being modified and aligned with the CO2 supply deliveries
and CO2 storage capacity on site. This will be followed by continuous
injection of CO2 into the Herrera #2 Sand in the AT13 well and
monitoring of oil production from the AT5X well, and potentially IN6,
AT6 and AT12 too. Realtime pressure data will be continuously
collected to assess and adjust if necessary the CO2 injection pressures
and volumes s continuous injection progresses.
The gross budget for the work programme for the next 12 months is
estimated to be £318,665, inclusive of a contingency.
Morocco near term exploration and appraisal
Downhole plug used to isolate the
reservoir zone for CO2 injection
Europe
Morocco
Mediterranean
Sea
Middle
East
Africa
Part of CO2 delivery system constructed at InnissTrinity
The layout of the injection and production wells and the operational
plan for CO2 EOR injection and oil production has been finalised.
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In the Initial Period the work programme comprises 250 kilometres
of 2D seismic reprocessing and AVO analysis and the drilling of one
well to a minimum depth of 2,000 metres. Desktop geological and
gas marketing studies will also be carried out. The Minimum
Exploration Commitment is US$3,458,000.
The fiscal terms in Morocco are restricted to a 5% State royalty for
gas, applicable after the first 10.6 BCF of net production to the
operator, and corporation tax charged at 31%. However, there is a
10year “holiday” before corporation tax will be charged and any
unused tax losses can be offset against the tax due. There are no
signature bonuses but production bonuses in the form of cash
payments exist with a maximum oneoff payment of US$5,000,000
on production greater than 30,000 BOE/day. A discovery bonus of
US$1,000,000 is also payable.
Gas prices for producers in Morocco are currently higher than UK
National Balancing Point (“NPB”) prices for domestic delivery.
History
Guercif has been very lightly explored with only 4 deep exploration
wells drilled by Elf in 1972 (GRF1), Phillips in 1979 (TAF1X), ONAREP
(the forerunner of ONHYM) in 1985 and 1986 (MSD1 and KDH1) and
2 shallow stratigraphic wells drilled by BRPM for coal exploration in
the 1950s.
TransAtlantic reentered, logged and tested the MSD1 well, originally
drilled in 1985, in 2008 but the logging and testing failed to establish
the presence of hydrocarbons in the Jurassic.
The seismic inventory includes 3,291 kilometres of 2D seismic data
acquired between 1968 and 2003, including a new 300kilometre
ONAREP 2D seismic survey acquired in 2003, which were reprocessed
in 2006 by TransAtlantic when PreStack Time Migration was applied
for the first time to the seismic inventory. TransAtlantic also acquired
an aero magnetic and aero gravity survey in 2006, comprising 10,000
line kilometres.
Historical exploration focus was entirely on the Jurassic and was
completed before the shift in focus took place that resulted in shallow
(Tertiary) gas production in the Rharb Basin and successful deep
(Triassic) gas appraisal drilling at Tendrara.
In this context therefore Guercif has never been the focus of
exploration for the more recent Tertiary targets encountered in the
gas producing Rharb Basin and this is the new focus for PGV.
Current Prospectivity
The Company has reevaluated the existing reprocessed 2D seismic
database and well data and has identified the Moulouya_1 Prospect
as being drillready. The core prospective area of the Moulouya_1
Prospect covers up to 34 sq. km. and is supported by multiple seismic
amplitude anomalies. The current drilling programme will test several
stacked seismic amplitude anomalies to evaluate their potential to
reflect the presence of reservoirs and the potential for gas generation
and migration.
Star Valley rig option for Guercif
Guercif Petroleum Agreement – Moulouya Prospect
Through its wholly owned subsidiary PGV, the Company holds a 75%
working interest in and is the operator of the Guercif Petroleum
Agreement. ONHYM, the State oil company, holds 25% and is carried
through exploration, but funds its prorata share of all costs upon a
Declaration of Commerciality. ONHYM is owned by the Moroccan
government and is involved in oil exploration, appraisal, and
development within Morocco. In addition to mining activities, ONHYM
is the regulatory authority for all oil and gas licences in Morocco.
The Guercif Petroleum Agreement, comprising the Guercif Permits I,
II, III and IV, is located in the Guercif Basin and covers 7,269 km²,
c. 250 km due east of and on trend with the Rharb Basin, where
shallow commercial gas production has been established by SDX
Energy Plc for several years. Guercif also lies approximately 180 km
due northwest of Tendrara, where deep discovered gas is currently
being appraised and potentially developed by Sound Energy Plc.
The Licence is for 8 years and is split into an Initial Period of
30 months, commencing on 19th March 2019; a First Extension Period
of 36 months duration; and a Second Extension Period also of
30 months. After each Licence Period there is an opportunity to
withdraw from the Licence, without entering the next Licence Period.
Signing of Guercif Petroleum Agreement at ONHYM offices Rabat
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Group strategic report
for the year ended 31 December 2019 (continued)
Moulouya_1 location – multiple targets including TGB2 Sand (yellow) and GRF1 interval interpreted as gas (red)
An offset well, GRF1 drilled in 1972 before the acquisition of the
2003 ONAREP seismic, less than 1.5 kilometres to the southeast of
the edge of the seismic amplitude anomaly, had minor dry gas shows
in the Tertiary. The previous operator, TransAtlantic Petroleum,
reevaluated in 2006 the wire line logs from GRF1 and interpreted
gas pays between 1,860 and 1,960 meters below ground level in the
basal Tertiary section. No corresponding gas shows were seen on mud
logs when the well was originally drilled and the well has never been
tested to determine whether this interval is indeed gasbearing.
High quality Tertiary sandstone reservoir –
one of the gas targets at Guercif
Two microseepage surveys carried out for TransAtlantic by
GeoMicrobial Technologies in 2006 and 2007 also identified dry gas
around the GRF1 well in soil samples.
Small volumes of gas could potentially be utilised for the domestic
gas market if additional transport infrastructure were added, but
larger volumes require gastopower and export options.
A competent person’s report by SLR Consulting commissioned by the
Company in 2019 has indicated Net Prospective recoverable Gas
Resources in the Tertiary (Moulouya_1 Prospect primary objectives)
in the range of 320 to 659 BCF with a 34% geological chance of
success. For the avoidance of doubt this is not an economic chance
of success.
Forward Work Programme
The Company believes that the Moulouya_1 Prospect warrants a fast
tracked approach to drilling in order to capitalise upon its attractive
valuation metrics and the ability to accelerate a gas development in
the case of a gas discovery to exploit the current demand for gas in
Morocco.
The Company intends to continue with well planning, well design, and
HSE implementation; to engage with contractors for drill site
preparation and civil works and the preparation of a base camp; to
start the process of procurement of well casing, mud and wireline
logging services; to exercise an option for the use of an incountry rig
to be mobilised to drill the Moulouya_1 Prospect; and, subject to all
necessary regulatory approvals, drill one exploration well to
2,000 metres to test the potential for gas in several potential
reservoirs within the Tertiary. The well is currently forecast to take
20 days to drill to 2,000 metres.
The gross budget estimate for drilling is estimated to be £2,022,102.
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Ireland medium term appraisal and exploration
Appraisal: North Celtic Sea Offshore Ireland
NORTHERN
IRELAND
REPUBLIC OF
IRELAND
Predator Licensing
Option 16/30
Kinsale Gas Field
Petronas
LO 16/30 – Ram Head Gas Project
Through its whollyowned subsidiary POGV, the Company currently
holds a 50% working interest in and is operator of L0 16/30, which
contains the 49/191 and Ardmore 49/141 gas discoveries made by
Marathon Oil Ireland Ltd in 1984 and 1975 but never subsequently
appraised.
History
In the past, under the operatorship of Marathon, three wells were
drilled within the Licensing Option area. Of these 2 wells successfully
logged hydrocarbonbearing reservoirs and one of which, 49/141,
was tested for gas and flowed 8 mm cfgpd from several different
horizons in the Lower Cretaceous.
LO 16/30 is located in the North Celtic Sea Basin and covers 799 km²,
c. 75 km offshore from the current landfall of gas from the Kinsale
field at Inch, County Cork. It is situated in approximately 100 m of
water depth. The Licensing Option is located approximately 40 km
east of the Petronasoperated Kinsale Head Gas Field, for which an
application to decommission has been submitted to the regulatory
authorities for approval.
The Company’s joint venture partner is Theseus Limited (“Theseus”),
which is a private company holding 50% of Licensing Options 16/26
and 16/30 offshore Ireland. It has no other licence interests or
business activities. It is a party to the Joint Operating Agreements for
Licensing Options 16/26 and 16/30 operated by POGV.
During 2018, following the award of a twoyear Licensing Option to
the Company and its partner Theseus, the Company carried out a
number of studies to redetermine the quality of the gas reservoirs
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Group strategic report
for the year ended 31 December 2019 (continued)
in the original discovery well 49/191; to complete an initial reservoir
engineering study and scoping development plan; and to assess the
technical feasibility of reentering the 49/191 well to test the
previously
logged gasbearing Jurassic reservoirs to validate
production forecasts determined from the desk top studies.
A competent person’s report by SLR Consulting, commissioned by the
Company in 2019 has indicated net prospective recoverable gas
resources in the Jurassic in the range of 118 to 1,370 BCF with a 12%
chance of success. The Company’s Conceptual Development Plan
below is addressed in the Competent Person’s Report by SLR
Consulting.
The programme of 2018/9 studies was designed to assess reservoir
risk in terms of gas deliverability and also to determine a cost
effective way to flowtest the discovered gas, without drilling an
expensive appraisal well.
Reservoir studies based on new NuTech log analysis technology have
identified 64 feet of previously unrecognised good quality gas pay in
49/191. A reservoir engineering study and Conceptual Development
Plan was commissioned by the Company through a third party
consultant Dr. John Tingas. This has indicated a potential field
development profile of 400 mm cfgpd from a minimum of 10 vertical
wells. An ultimate gas recovery of 96% over 59.3 years was estimated,
with no economic cutoffs applied. The scoping development concept
requires gas to be landed at the existing Inch brown field site and
therefore the Company has made a submission to the regulatory
authorities during 2018 stressing the importance of the continuance
of the Inch site, after decommissioning of the Kinsale Gas Field
facilities, for future potential gas developments.
Forward Programme
An application for a successor authorisation to Licensing Option 16/30
was submitted on 31 October 2019, following a successful application
for a 12month extension to its initial term to 30 November 2019
made on 18 October 2018, to convert it to a SEL upon expiry of
Licensing Option 16/30 on 30 November 2019.
licence successor
For the award of a standard exploration
authorisation a substantial work programme commitment is required,
which is likely to include 3D seismic acquisition and drilling. At this
early stage in the application process for a successor authorisation
no negotiations have been entered into with the regulatory
authorities regarding a specific work programme.
No work programme has been committed to for the next 12 months,
nor beyond this period, and therefore the award of any successor
authorisation will be dependent primarily on attracting a farmin
partner to address the financial and technical operating capability
and to finalise a work programme with the regulatory authorities
which is capable of being financed. In the event this does not occur
in a timely manner then the Company may lose its rights to progress
to a successor authorisation.
Exploration: Atlantic Margin Offshore Ireland
Licensing Option 16/26 – Corrib South Gas Exploration
Through its whollyowned subsidiary POGV, the Company currently
holds a 50% working interest in and is operator of Licensing Option
16/26, which contains the 18/252 well drilled by Enterprise Oil in 1999.
Licensing Option 16/26 is located in the Slyne Basin and covers
302 km², c. 70 km offshore from the current landfall of gas from the
Corrib field in County Mayo. It is situated in approximately 335 m of
water depth. The Licensing Option is adjoining and to the south of
the Vermillionoperated Corrib Gas Field, which is currently Ireland’s
largest producing gas field.
History
In the past, under the operatorship of Enterprise Oil, 640 km² of
3D seismic were acquired in 1997 which resulted in the identification
of the Corrib Gas Field structure and two structures to the south
within the Licensing Option area. One well, 18/252, was drilled in
1999 within the Licensing Option area on the structure closest to the
Corrib Gas Field, after the first Corrib discovery well was drilled. No
logged hydrocarbonbearing reservoirs were penetrated but the
Corrib Field gas reservoir was proven to be present in the well. The
second structure, the “Deel Prospect” and renamed “Corrib South”
by the Company, was never drilled, and was eventually relinquished
by Enterprise’s successor, Shell, prior to the approval of the Corrib
Gas Field Plan of Development by the regulatory authorities.
During 2017 and 2018, following the award of a twoyear Licensing
Option to the Company and its partner Theseus Ltd. in the 2015
Atlantic Margin Licensing Round, the Company carried out a
reassessment of the Corrib South Prospect based on integrating
regional geological and geophysical data and new information from
the producing Corrib gas field. The Company concluded that the
Corrib South Prospect was potentially larger than previously
considered and extended beyond the limit of the current 1997
3D seismic coverage.
Based on this reinterpretation of the Corrib South Prospect, SLR
Consulting were commissioned by the Company in 2018 to produce
a Competent Person’s Report. This indicated net prospective
recoverable gas resources in the Triassic reservoir (the Corrib Gas
Field reservoir) to be in the range of 92.3 to 452.4 BCF with a 30%
chance of success.
Forward Programme
An application to convert Licensing Option 16/26 into a FEL was made
on 25 May 2018 before the expiry of the Licensing Option on 30 June
2018 and is still actively under consideration by the regulatory
authorities.
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The work programme for a successor authorisation, a FEL, initially
proposed by the Company in consultation with the regulatory
authorities in Ireland was for 200km² of 3D seismic acquisition and
processing in the first 3year phase of the FEL, with an option to drop
the Licence after 3 years unless committing to an exploration well in
the next succeeding 3year phase of the Licence. Gross (100%) costs
of this work programme were estimated to be Euros 3,204,773 in the
event a successor authorisation was awarded to and, at its sole
discretion, accepted by the Company.
For the avoidance of doubt, no work programme has been committed
to for the next 12 months, nor beyond this period, and therefore the
award of any successor authorisation will be dependent primarily on
attracting a farmin partner to address the financial and technical
operating capability and to finalise a work programme with the
regulatory authorities which is capable of being financed. In the event
this does not occur in a timely manner then the Company may lose
its rights to progress to a successor authorisation if it cannot commit
to a future work programme.
Regulatory Environment
Ireland remains an extremely challenging regulatory environment and
concerns over Brexit remain.
The Company therefore maintains a flexible strategy towards its
assets offshore Ireland in the context of minimising financial exposure
through seeking farmin partners and attempting to generate M&A
activity through synergies created by the consolidation of different
assets.
The Company has produced an indicative strategic gas development
proposal. It highlights the potential synergies of its assets in terms of
consolidation with existing infrastructure for the purposes of
developing the potential for offshore regasification of LNG and gas
storage, in line with European Union strategy and adopted policy for
liquefied natural gas and gas storage. The strategic gas development
proposal is being included as part of a farmout process to potentially
attract LNG suppliers and other industry parties to take an equity
interest directly in the project. Other parties specialising in gas and
LNG in the oil and gas sector are required by the Company in order
to access the considerable financial resources necessary to progress
the applications for successor authorisations for Licensing Options
16/26 and 16/30 and to further develop the Company’s indicative
strategic gas proposal. Further discussions are anticipated to take
place during 2020, however a successful outcome to any such
discussions should not be relied upon given the early stage of
development of the business concept and the challenging regulatory
and investment environment currently prevailing offshore Ireland in
relation to the fossil fuel industry in general.
fossil
towards
Whilst maintaining the ability to progress to a successor
authorisation, subject to proving financial and technical capability,
the Company retains some shortterm leverage in farmout and M&A
discussions with interested parties. Ireland’s recently stated political
fuel exploration, appraisal and
positioning
development, reflecting climate change concerns, lays emphasis on
promoting gas exploration and development as a transition fuel to a
greener energy mix; respects the continuance of existing licences and
their potential successor authorisations; but makes it more difficult
for new licences to be awarded under the proposed new regulatory
framework. Potential farminees interested in the exploration and
development of gas in Ireland may be attracted to existing licences
rather than get involved in an extended regulatory process to acquire
new licences in any future licensing round yet to be announced. Given
the changing government policy towards fossil fuel exploration,
investment decisions may be deferred and the ability to finance the
further development of the Company’s Irish assets within a
reasonable time framework acceptable to the regulatory authorities
may prove impossible.
PRINCIPAL RISKS AND UNCERTAINTIES
Exploration industry risks
Oil and gas drilling is a speculative activity and involves numerous
risks and substantial and uncertain costs that could adversely affect
the Group.
Mitigation: Where possible the Board aims to build a diversified
portfolio of assets so that an adverse outcome is mitigated by the
prospects of favourable outcomes
Oil and gas exploration and development activities are dependent on
the availability of skilled personnel, drilling and related equipment in
the particular areas where such activities will be conducted. Demand
for such personnel or equipment, or access restrictions may affect
the availability to the Group.
Mitigation: Management through many years of experience has a
network of independent contractors with skilled personnel and
equipment which it can access
Oil and gas prices are highly volatile, and lower oil and gas prices will
negatively affect the Group’s financial position, capital expenditures
and results of operations.
Mitigation: By balancing projects with near cash inflow prospects
with projects that require long term funding the risk is mitigated.
Planning includes simulation of downside risk scenarios.
Reserve and resource data and estimated discounted future net cash
flows are estimates based on assumptions that may be inaccurate
and are based on existing economic and operating conditions that
may change in the future.
Mitigation: The Group has considerable experience in project
evaluation. It may resort from time to time to independent expert
consultants to verify assumptions
The Group is dependent on the successful development of its oil and
gas assets.
Mitigation: The Group has diversified its profile away from regular oil
and gas exploration by undertaking a CO2 EOR project.
The principal subsurface geological risks that have been identified
specific to the Group’s portfolio are as follows:
Risk 1: In the immediate area of focus for drilling, which is the
Moulouya Prospect in Morocco, the 2D seismic database is sparse
and the quality and completeness of the well logs in old offset wells
pertinent to understanding the geology of the GRF1 and MSD1 wells
is poor.
Risk 2: GRF1 provides evidence of overpressuring of some potential
reservoirs which will have to be taken into consideration for the
purposes of safe well planning.
Risk 3: The existing sparse 2D seismic data demonstrate the presence
of seismic amplitude anomalies. There is a risk that these may not be
related to the presence of gas reservoirs or the presence of gas in
commercial quantities.
Mitigation: Extensive use of offset well data for the geologically
analogous, gasproducing Rharb Basin and information from the
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Group strategic report
for the year ended 31 December 2019 (continued)
Anchois1 Tertiary gas discovery in the offshore is used to improve
the overall knowledge base.
Independent consultants are used to help validate geological and
seismic interpretations.
Risk 4: Forecast production rates for CO2 EOR rely on desktop
calculations and have not been tested yet by actual CO2 EOR
operations. There are no offset production wells producing from CO2
injection to calibrate the desktop models that have been calculated
using theoretical material balance reservoir engineering equations.
The success of the CO2 EOR project is dependent therefore on a
comparison of the actual operational results versus the preinjection
desktop forecasts.
Risk 5: The volumes of CO2 required to be injected to increase
reservoir pressure from its currently low level in order to enhance oil
production have been estimated using desktop models. These models
assume limited vertical and lateral communication of the five Herrera
reservoir sand intervals controlled by faulting and intervening vertical
seals. If this is not the case then significantly more CO2 will be
required to increase reservoir pressure and potentially enhance oil
production should CO2 escape into other geological formations or
adjacent fault compartments.
Risk 6: The volume of CO2 to be injected has also been estimated on
the basis of the remaining volume of oil in place in the reservoirs
based upon historical estimates made by other operators. If this
volume has been underestimated, then the volume of CO2 required
for injection will be larger.
Risk 7: In the event additional volumes of CO2 are required then the
time to restore pressure in the reservoirs to facilitate natural flow will
be longer than currently calculated using reservoir engineering
desktop calculations and as a consequence the date of first enhanced
oil production could be significantly delayed.
Mitigation: All desktop analytical data are reviewed and evaluated by
the relevant technical teams in Heritage and the MEEI as part of the
regulatory approval process. Satellite communications and data
logging were installed at the InnissTrinity CO2 EOR site to allow the
Group’s management realtime remotecontrol monitoring of
operational procedures to intervene if required to vary the volume
of CO2 being injected and the injection pressure.
Political risks
All of the Group’s operations are located in a foreign jurisdiction. As
a result, the Group is subject to political, economic and other
uncertainties, including but not limited to, changes in policies or the
personnel administering
terrorism, nationalisation,
them,
appropriation of property without fair compensation, cancellation or
modification of contract rights, foreign exchange restrictions,
currency fluctuations, export quotas, royalty and tax increases and
other risks arising out of foreign governmental sovereignty over the
areas in which these operations are conducted, as well as risks of loss
due to civil strife, acts of war, guerrilla activities and insurrection.
Mitigation: The Group only conducts operations in those countries
with a stable political environment and which have established
acceptable oil and gas codes. The Company adheres to all local laws
and pays heed to local customs.
Corporate risk
Risk: The Group’s success depends upon skilled management as well
as technical and administrative backup. The loss of service of critical
members of the Group’s team could have an adverse effect on
the business.
The Group is dependent on the executive Directors to identify
potential business and acquisition opportunities in Trinidad, Morocco
and Ireland and to oversee and execute its oil and gas operations. The
loss of services of the executive Directors could materially adversely
affect it.
Mitigation: The Group periodically reviews the compensation and
contract terms of its consultants and service providers to ensure that
they are competitive subject to the working capital available to the
Group from time to time.
The executive Directors are material shareholders in the Group and
committed to developing shareholder value.
Financial and liquidity risks
The Group’s business involves significant capital expenditure and
given the current liquidity position of the Group as at the date of this
report the Group will require additional funding to meet its planned
work programme. There is no guarantee that such additional funding
will be available on acceptable terms at the relevant time.
Mitigation: Management has demonstrated and continues to
demonstrate an ability to raise funds. Through timely and regular cash
flow projections proactive action is capable of being taken to pre
empt cash deficits. Such actions may include farmouts and loan and
equity fund raises
Instability in the global financial system may have impacts on the
Group’s liquidity and financial condition that currently cannot be
predicted.
Mitigation: Judicious assumption of new licence commitments;
careful financial planning, currency hedging and economic evaluation
of opportunities with simulation of risks mitigate against these risks.
The Directors also maintain tight budgetry and financial controls to
ensure cash is spent is spent in the most efficient manner.
Foreign exchange risks
The Group operates internationally and is exposed to foreign
exchange risk arising from various currency exposures, primarily with
respect to the Moroccan Dirham, Euro and US Dollar.
Risks to exchange movements are mitigated by minimising the
amount of funds held overseas. All treasury matters are handled
centrally in Jersey. All requests for funds from overseas operations
are reviewed and authorised by Board members. The Group
endeavours to reduce its exposure to foreign currencies by holding
cash balances in the currency of intended expenditure and recognises
the profits and losses resulting from currency fluctuations as and
when they arise.
As the Group may undertake some exploration activity offshore
Ireland under the terms of agreements with the Irish regulatory
authorities, the Directors currently anticipate that the impact on the
business of the UK’s exit from the European Union will be limited to
the effects of potential increased foreign exchange fluctuations. As a
result of these fluctuations, it is expected that the reported results of
the Group may decline in the short to mediumterm. However, the
Directors do not expect there to be any significant lasting impact.
Liquidity risks
The Group’s liquidity risk is considered to be insignificant.
The Group does not enter into binding commitments for exploration
expenditure. Cash forecasts are updated continuously. The financial
exposure of the Group will reduce as it is the intention of the directors
to partner with third parties in exploration joint ventures.
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Environmental risks
The Group is subject to various environmental risks and governmental
regulations and future regulations will become more stringent.
Mitigation: The Group is aware of these risks before it undertakes
licence commitments and periodically reevaluates these risks
Climate change and climate change legislation and regulatory
initiatives could result in increased operating costs and decreased
demand for oil.
Mitigation: The Group’s strategy is to diversify into greener types of
energy. The current profile of the Group is weighted towards gas
exploration, a more climate friendly energy source
Insurance risks
Oil and gas operations are subject to various operating and other
casualty risks that could result in liability exposure.
Mitigation: The Group comprehensively surveys its exposure to these
kinds of risks and considers taking either an appropriate level of
insurance cover or selfinsuring where judicious
The Group may not have enough insurance to cover all of its risks.
Mitigation: A judicious quantum of selfinsurance may need to be
resorted to in these circumstances
Coronavirus Risk
A significant event since the balance sheet date is the global public
health emergency caused by the spread of the coronavirus. This has
pervasively impacted negatively global economies; financial and
equity markets, including pension funds; forex exchange rates; oil and
gas commodity prices, caused by collapsing demand, particularly from
the aviation industry, and storage capacity being oversaturated; and
general investor and debtfinancing sentiment.
The principal risks identified are:
Risk 1: Suspension of international travel between many different
jurisdictions which impact the Group’s field operations insofar as
specialised drilling engineers and technicians are unable to be
despatched from overseas to operate, install or repair key pieces of
equipment necessary, in particular, for the conduct of safe drilling
operations.
A further consequence is the inability to mobilise drilling services and
equipment from overseas that may not be available in the country of
the Group’s operations.
Mitigation: The Star Valley drilling rig is currently stacked securely in
Morocco west of Guercif at no cost to the Group. No commitments
to rig mobilisation and an enactment of a drilling contract will be
made until public health and travel restrictions are relaxed and
market conditions improve. The Group maintains a close dialogue
with drilling services providers to determine which services remain
incountry, and also the rig contractor to ensure the Group is
“drillready” as soon as the coronavirus emergency passes.
Risk 2: Restricted ability to operate incountry activities such as
drilling and site construction due to local restrictions on travel and
enforceable social distancing measures.
Mitigation: Trained incountry personnel are moving into place to
ensure continuity of CO2 EOR operations within the framework of
HSE public health restrictions enabled by the Trinidadian government
from time to time. CO2 EOR is seen as an essential industry. Secure
satellite communications linked to a datalogger were installed at the
InnissTrinity CO2 EOR site immediately prior to the coronavirus
emergency to allow the Group’s management realtime remote
control monitoring of operational CO2
and procedures.
injection parameters
Risk 3: Supply chain issues caused by equipment not being available
for purchase or delayed by customs if imported from overseas.
Mitigation: CO2 EOR spares and equipment are in a secure
warehouse and yard in Trinidad to cover immediate requirements
during the coronavirus emergency. Drilling inventory for Guercif also
remains accessible for purchase by the Company, at the appropriate
time, from a secure warehouse and yard in Morocco by the Group at
the right time
Risk 4: Collapsing oil and gas commodity prices caused by global
economic slowdown, oversupply, falling demand and storage filled
to capacity.
Mitigation: Project economics for CO2 EOR operations in Trinidad
have been rerun at WTI US$20/barrel and are robust and
commercially viable based on Trinidad’s requirement for domestic oil
production to replace imports. Robust and commercially viable
project economics for Guercif have also been rerun at much lower
gas prices, but still at a premium to imported fuel prices, with a
development scenario that fasttracks an initial development of a gas
discovery to the captive Casablanca industrial market that currently
relies on less efficient fuel oil imports.
Our business development strategy has also been based upon
focussing on niche local energy markets where pricing of and demand
for oil and gas is not as severely impacted by the global supply and
demand dynamics.
Risk 5: Insufficient liquidity and working capital, undercapitalisation,
lack of revenue, contractual
liabilities and unfulfilled work
commitment obligations.
Mitigation: On the 14 February 2020, immediately prior to the full
impact of the coronavirus pandemic being felt, the Group announced
a successful oversubscribed placing of 89 million shares at £0.04 per
share to raise £3.56 million net of expenses. The Group has sufficient
liquidity and working capital over the next 12 months to weather the
coronavirus storm and volatility in the financial, equity and
commodity markets. The Group is in the shortterm making corporate
overhead reductions to ensure working capital is focussed on
prioritising existing CO2 EOR cashgenerating potential in Trinidad.
A contingency to shut down noncommercial CO2 EOR wells would
be maintained to avoid any lossmaking business activities.
No new financial commitments or work programme liabilities are
being entered into. The existing drilling commitment for the Guercif
PA is being delayed until such time as cash flow from Trinidad provides
a safety net of 12 months working capital required to maintain the
Group as a Going Concern, whilst ringfencing the working capital
required to drill the Moulouya Prospect in Morocco and release
US$ 1 million of the Guercif PA bank guarantee in favour of ONHYM.
Under the Guercif PA the Group has until the 18 September 2021 to
complete the drilling commitment. The Group will in any event seek
from ONHYM a one year extension of the Initial Exploration Period of
the Guercif PA on the basis that the coronavirus emergency is a Force
Majeure event. The Group will use in the short term any delay in
implementing the drilling programme to seek drilling partners as an
additional safety net option to reduce its net share of drilling costs.
The Group will maintain a “drillready” status in Morocco, without
entering into any financial liabilities. The Group will use its discretion
to choose when to enact the Guercif drilling programme in the
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Group strategic report
for the year ended 31 December 2019 (continued)
context of an improvement in market sentiment and prudent
management of available discretionary working capital.
The outstanding principal amount of the Convertible Loan Notes has,
with the agreement of Arato, been secured on the release of
US$ 1 million of the Guercif PA bank guarantee in favour of ONHYM
following the completion of the Moulouya well. The Group anticipates
that, before the Loan Repayment Date of 14 February 2021, increased
cash flow from CO2 EOR operations in Trinidad and an improvement
in market sentiment will enable conversion of some, if not all, of the
outstanding principal amount to shares. Any outstanding amount on
the Repayment Date remains secured on the above terms and an
extension of the Repayment Date to allow for any delay in drilling the
Moulouya well would be sought from Arato one month prior to the
expiry of the current Repayment Date should this prove necessary.
Risk 6: Inability to access the capital markets for equity finance or the
lending market for debt finance.
Mitigation: All required desktop planning for the Group’s CO2 EOR
operations to continue during the coronavirus emergency has been
completed and desktop well planning will be completed over the
next month to ensure that the Group continues to be drillready in
Morocco. The Group is wellcapitalised and is positioned for near
term cash flow from operations. The Group has no requirement to
access the capital or lending markets over the next 12 months.
Guercif remains an integral part of the Company’s business
development strategy and the value proposition, given the size of the
targets versus the Group’s current market capitalisation and the
ability to monetise versus by exploiting Moroccan industry’s heavy
reliance on imported fuel, remains an important and sustainable
driver for share price performance after the coronavirus emergency
subsides. Coronavirus has no lasting impact on the fundamentals of
the value proposition that Guercif and the Moulouya Prospect
presents
The Boards’ view is that the global economy will rebound, and
commodity prices will improve once the commodity oversupply is
exhausted as the coronavirus emergency passes. Shutin production
will take longer to be reestablished in this transition period. The
equity markets will recover, and the pace of the recovery will
accelerate as investor sentiment returns. There will be a strong
appetite for cashgenerating companies who have weathered the
coronavirus storm and with potential for immediate growth to
support appreciation in share price. Many peer companies will be
seeking to recapitalise quickly as the equity markets improve but will
not have projects as sufficiently advanced as Guercif or as
commercially attractive in the nearterm to promote to attract new
investors. The Company has started the process of identifying
potential candidates to join us in the Guercif drilling programme and
a potential ensuing initial development programme. There are several
possible entities who working in unison may see Guercif as an
attractive gas marketing opportunity and commercial proposition.
Risk 7: Curtailment of expansion of business development activities
necessary to support value creation and shareholder equity values,
and reduction in the potential to generate future revenues from such
activities.
Mitigation: The Group’s business development strategy continues to
be focussed on niche local energy markets where pricing of and
demand for oil and gas is not severely impacted by the global supply
and demand dynamics.
Upscaling CO2 EOR operations in Trinidad, now that the CO2 delivery
system has been constructed and commissioned, can be implemented
for very small amounts of capital deployment in additional well
workovers for CO2 EOR production that can be recovered within a few
months from incremental production revenues.
The Group has also started the process of identifying suitable
producing assets in Trinidad with attractive synergies for applying our
existing InnissTrinity CO2 EOR expertise. The Group has opened a
dialogue with several operators with a view to supplying our CO2 EOR
services. Commercial terms that the Group can potentially negotiate
will be driven by the fact that the Group is wellcapitalised; has
exclusivity over CO2 supply; and most importantly has developed the
template for a viable CO2 EOR project that meets all regulatory and
environmental conditions required for approvals to be granted to
execute field operations.
This prudent and low cost expansion of the Group’s business
development activities focussed on derisked CO2 EOR operating
success, can potentially support value creation and shareholder
equity values, and any perceived reduction in the potential to
generate future revenues from such activities as a result of the
coronavirus emergency.
FUTURE DEVELOPMENTS
The Group’s near term priority is to focus on developing cash flow
from its pilot CO2 EOR project in the InnissTrinity field onshore
Trinidad. The CO2 delivery and injection system is operational, and
the supply of CO2 has been secured. Reservoir repressurisation can
now be measured in realtime through a remote secure internet site.
Consequently, operations can continue, operating costs are
minimised and the capital investment required for the CO2 EOR
project has already been made. Next step is to determine the
optimum level of reservoir repressurisation required to be attained
before considering an oil rate flow test, considering commercial
factors such as the prevailing oil price and oil rate required to
generate positive cash flow.
The derisking of the design, engineering and construction of the CO2
delivery and injection system and the recognition of the Group’s
developing expertise in the CO2 EOR niche an its potential
contribution to Sustainability through CO2 sequestration, has created
an environment for the Group to expand its business development
growth onshore Trinidad by leveraging this expertise.
The Group’s medium term priority is to execute the Guercif drilling
programme in Morocco. The Group remains “drillready” with an
incountry rig available to it under a rig option agreement with Star
Valley and an approved Environmental Impact Assessment. It is
anticipated at present that drilling operations can commence
3 months from the lifting of some coronavirus restrictions on travel.
The Group is developing an economic model for a nearer term gas
monetisation strategy for Guercif that involves Compressed Natural
Gas rail shipments to the industrial centre of Casablanca. The size of
the gas market will be assessed, and capital and operating costs will
be estimated. The Group’s experience and expertise with engineering,
costing and developing the CO2 EOR project in Trinidad will be applied
to the CNG project in Morocco. The “drillready” status and ability to
monetise gas for relatively low amounts of capital investment and
low operating costs will be the Group’s marketing tools to attract joint
venture partners to help fasttrack the financing, execution and
development of the project.
The Group’s immediate priority is to consolidate repositioning of its
business strategy for Ireland to focus on offshore regasification of LNG
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and gas storage in accordance with EU guidelines for member States.
It is anticipated that confidentiality agreements will be signed with
the Group’s preferred LNG supplier and owner of regasification
vessels based on the project design and economic model generated
by the Group and its initial approaches to the relevant stakeholders
in Ireland. The Group continues to develop the commercial structure
whereby shareholders potentially profit from this change of business
strategy. The Irish regulatory hurdles remain very high and
challenging, but the Group sees this as a narrow window of
opportunity to try to exploit based on leveraging its management
relevant experience and expertise.
Liquidity remains a fundamental priority for the Group and the
potential to leverage the Company’s assets, growing operational
expertise, and specific incountry business and regulatory network to
joint venture with partners to reduce business development costs is
a clear future strategic objective for the Group.
SUSTAINABILITY REPORT
The Group is committed to sustainable development of its oil and gas
operations.
To sustain our business, we must meet the expectations of our
stakeholders and focus on mitigating climate change, advancing the
circular economy so that nothing goes to waste and implementing
responsible business practices.
Our longterm ambition is to be a carbon neutral producer of oil and gas
and to expand our responsible business practices to benefit our people,
partners and the communities that are affected by our supply chain.
At the corporate level our management operate our business from
homebased locations, thereby reducing the high level of energy
consumed by a fixed office location and eliminating the CO2
emissions footprint left by commuting to work by many forms of
transport that emit pollutant CO2.
A post balance sheet event saw the installation of satellite
communications facilities linked to a datalogger at the InnissTrinity
CO2 EOR site to allow the Group’s management realtime remote
control monitoring of operational CO2 injection parameters and
procedures. During 2020 this will significantly reduce the requirement
for physical site visits by the overseas management team thereby
reducing our CO2 emissions footprint related to aviation travel, which
globally in 2019 accounted for approximately 12% of refined
oil demand.
For a single round trip for two members of the management team
using a Boeing 747400 or equivalent (used for long distance
international flights) the calculated CO2 emissions are as follows:
Distance: 7061 km
Fuel used: 75.7 tonnes
Seats: 416
Seat occupancy: 80%
Average number of passengers: 333
Fuel use per passenger km: 75.7 tonnes / (7061km x 333) =
32.2 g per passenger km
CO2 emissions: 101 g per passenger km
(multiplying by 3.15 g CO2 per g
fuel)
Cruising speed: 910 km per hour
CO2 emissions: 92 kg CO2 per hour
These CO2 emissions are generally into the high atmosphere, and this
is thought to have a greater greenhouse effect than CO2 released at
sea level. The emissions are therefore adjusted by multiplication by
a factor of 2.00 (‘Radiative forcing’) to give 180 kg CO2 equivalent
per hour.
Further allowance is needed for fossil fuel energy used in:
l
l
l
l
extraction and transport of crude oil
inefficiencies in refineries (around 7%)
aircraft manufacture and maintenance, and staff training
airport construction, maintenance, heating, lighting etc.
The CO2 emissions are therefore rounded up and the Carbon
Independent calculator takes a value of 250 kg i.e. 1/4 tonne CO2
equivalent per hour flying.
Based on just one less site visit by two members of the management
team this is equivalent to a reduction in the Company’s carbon
footprint of 9 metric tonnes of CO2.
A post balance sheet event announced on the 31 March 2020, noted
that the Group had begun initiating Phase 2 of the CO2 EOR pilot
project in Trinidad and had observed encouraging downhole pressure
buildup, indicating that CO2 was being sequestrated within the
injected reservoir interval. During 2020 the Group is intending to
reach an initial continuous CO2 injection rate of 13 metric tonnes per
day for the first phase of the CO2 EOR pilot project. In a full year of
operations, the total volume of CO2 injected is forecast to be
4,745 metric tonnes of which 75% (3,559 metric tonnes) are
estimated to be efficiently sequestrated with the remainder available
for recycling once recycling facilities are developed at the Inniss
Trinity field. This is anthropogenic CO2 that would otherwise be
vented into the atmosphere. Current forecasts for a full year of CO2
injection estimate 556 kg of CO2 will be injected for one barrel of oil
produced. One barrel of oil produces 400 kg of CO2 on combustion.
It is estimated that one barrel of oil produces 100 kg of CO2 on
production and export for processing, transport and distribution
(lower in the case of an incountry solution to processing and
marketing). As the CO2 EOR pilot project gathers empirical data
during 2020, it will be possible to better quantify the sustainability
objectives of the Group. However, the Group is currently on track in
the medium term to being carbon neutral or even carbon negative in
relation to its CO2 EOR operations in Trinidad, well ahead of the
timescale set by many of its peer companies.
Maintaining Trinidad’s oil producing capability, but within a carbon
neutral framework being exclusively piloted by the Group through its
InnissTrinity CO2 EOR project, is strategically important to the
Trinidad, which relies on the oil and gas sector to generate jobs,
underpin the economy, and through the taxes and royalties collected
give support to local communities and community initiatives that
would otherwise not be possible without such a source of funding.
Revenues from the Group’s business activities in Trinidad also attract
an unemployment levy and a green levy used by the government to
support the jobless and the environment, respectively.
Paul Griffiths
Chief Executive Officer
1 May 2020
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Report of the directors
for the year ended 31 December 2019
The Directors present their report together with the audited financial statements for the year ended 31 December 2019.
The Company’s Ordinary Shares were admitted on 24 May 2018 to a listing on the London Stock Exchange on the Official List pursuant to
Chapters 14 of the Listing Rules, which sets out the requirements for Standard Listings.
RESULTS AND DIVIDENDS
The Directors do not recommend the payment of a dividend (2018: nil).
DIRECTORS
The Directors who served during the year and up to the date hereof were as follows:
Paul Griffiths
Ron Pilbeam
Sarah Cope
Steve Staley
Carl Kindinger
Date of Appointment
31 December 2017
31 December 2017
24 May 2018
(resigned 19 July 2019)
24 May 2018
19 July 2019
DIRECTORS THIRD PARTY INDEMNITY PROVISIONS
The Group maintained during the period and to the date of approval of the financial statements, indemnity insurance for its Directors and
Officers against liability in respect of proceedings brought by third parties.
GOING CONCERN
Notwithstanding the loss incurred during the year under review and following a successful placing to raise £3.56 million gross (£3.26 million
net) the Directors have a reasonable expectation that the Group will not need to raise funds to continue operations for the foreseeable future.
The Directors do not believe that either Covid19 or Brexit will adversely influence the Group.
In the case of Covid19 the potential impact and mitigation thereof is discussed in detail in the Strategic Report. The two planned major
initiatives for 2020 are drilling in Morocco and commencement of oil production in Trinidad. If these activities are to be delayed for more than
nine months there will be adverse consequences for working resources. In the event that the Group will require funds to be raised in the
foreseeable future and if directors’ endeavours to raise fresh funds fail, they will institute a programme of cuts to directors’ and consultant’s
remuneration. The directors having made due and careful enquiry, are of the opinion that the Group has adequate working capital to execute
its operations over the next 12 months given that current spending commitments will prevail. The Group will therefore continue to adopt the
going concern basis in preparing the Annual Report and Financial Statements. Further details on their assumptions and their conclusion
thereon are included in the statement on going concern included in page 37 under accounting policies.
SUBSTANTIAL SHAREHOLDERS
As at 31 December 2019, the total number of issued ordinary shares with voting rights in the Company was 108,172,169. Pursuant to a placing
of 89,000,000 ordinary shares on 28 February 2020 the total number of issued ordinary shares was 197,172,169. The Company has been
notified of the following interests of 3 per cent or more in its issued share capital as at 30 April 2020.
Mr Paul Griffiths
Jim Nominees Limited
The Bank of New York (Nominees) Limited (672938)
Hargreaves Lansdown (Nominees) Limited (15942)
Pershing Nominees Limited
Mr Ronald Pilbeam
Hargreaves Lansdown (Nominees) Limited (HLNOM)
Vidacos Nominees Limited (IGUKCLT)
Hargreaves Lansdown (Nominees) Limited (VRA)
Spreadex Limited
Total
% Holding
Ordinary shares held of the Company
45,085,794
28,162,327
12,481,150
10,518,198
7,736,915
7,585,794
7,253,730
6,993,832
6,683,544
6,377,000
138,878,284
21.75%
13.58%
6.02%
5.07%
3.73%
3.66%
3.50%
3.37%
3.22%
3.08%
66.99%
FINANCIAL INSTRUMENTS
Details of the use of financial instruments by the Group are contained in note 13 of the financial statements.
GREENHOUSE GAS EMISSIONS
The Group does not have responsibility to disclose any other emission producing sources under the Companies Act 2006 (Strategic Report
and Directors’ Report) Regulations 2014. However, Management is committed to reducing its greenhouse gas emissions. As disclosed above,
the recent installation of satellite communications facilities will ensure a more flexible working environment and will reduce the amount of
travel required by management as part of their duties in overseeing the Group’s projects.
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STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The Directors are responsible for preparing the Strategic Report, the Directors’ Report and the financial statements in accordance with
applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare
the financial statements in accordance with International Financial Reporting Standards (IFRSs’) as adopted by the EU and applicable law.
Under Company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of
the state of affairs of the Group and the Company and of the profit or loss of the Group for that period. In preparing these financial statements,
the Directors are required to:
l
select suitable accounting policies and then apply them consistently;
l make judgements and accounting estimates that are reasonable and prudent;
l
state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the
financial statements;
l
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.
In accordance with Article 103 of Companies (Jersey) Law 1991, the Directors are responsible for keeping adequate accounting records that
are sufficient to show and explain the Group’s transactions and disclose with reasonable accuracy at any time the financial position of the
Group and enable them to ensure that the financial statements comply with the requirements of Companies (Jersey) Law 1991 as a whole.
They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
They are further responsible for ensuring that the Strategic Report and the Report of the Directors and other information included in the
Annual Report and Financial Statements is prepared in accordance with applicable law in the United Kingdom.
The maintenance and integrity of the Group’s website is the responsibility of the Directors; the work carried out by the auditors does not
involve the consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred in
the accounts since they were initially presented on the website.
Legislation in Jersey governing the preparation and dissemination of the accounts and the other information included in annual reports may
differ from legislation in other jurisdictions.
DIRECTORS’ RESPONSIBILITIES PURSUANT TO DTR4 (DISCLOSURE AND TRANSPARENCY RULES)
The directors confirm to the best of their knowledge:
l
l
The group and company financial statements have been prepared in accordance with IFRSs as adopted by the European Union and Article 4
of the IAS Regulation and give a true and fair view of the assets, liabilities, financial position and profit and loss of the Group and Company;
and
The annual report includes a fair review of the development and performance of the business and financial position of the group and
company together with a description of the principal risks and uncertainties.
FUTURE DEVELOPMENTS
The Group’s plans for future developments are more fully set down in the Strategic Report, on pages 4 to 17.
STATEMENT AS TO DISCLOSURE OF INFORMATION TO THE AUDITOR
So far as the Directors are aware, there is no relevant audit information of which the Company’s auditor are unaware, and each Director has
taken all the steps that he ought to have taken as a Director in order to make himself aware of any relevant audit information and to establish
that the Company’s auditor is aware of that information.
We confirm to the best of our knowledge:
l
l
l
The financial statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as whole;
The strategic report includes a fair review of the development and performance of the business and the position of the Company and the
undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they
face; and
The annual report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary
for shareholders to assess the Company’s position and performance, business model and strategy.
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Report of the directors
for the year ended 31 December 2019 (continued)
AUDITORS
The Company’s auditor, PKF Littlejohn LLP, was initially appointed on 4 December 2017 and it is proposed by the Board that they be reappointed
as auditors at the forthcoming AGM. The auditors have expressed their willingness to continue in office.
EVENTS AFTER THE REPORTING DATE
These are more fully disclosed in Note 21.
By order of the Board
Paul Griffiths
Chief Executive Officer
1 May 2020
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Board of directors
for the year ended 31 December 2019
Paul Griffiths, Chief Executive Officer (age 65)
Mr. Griffiths has 40 years’ oil and gas industry experience, including with the Libyan National Oil Corporation and
Gulf Oil, and as CEO of both Island Oil & Gas plc and Fastnet Oil and Gas plc. During this time Mr. Griffiths has
managed 2D and 3D seismic data acquisition and processing projects onshore and offshore; drilling and testing
programmes, both onshore and offshore; and geological and reservoir simulation desk top studies. Mr. Griffiths
is also experienced in business development in respect of licence acquisitions, farmins, farm outs, gas marketing
and gas sales contracts and negotiations with government agencies. In 2006, Mr. Griffiths put together and led
the team that drilled the first successful exploration well in offshore southeast Ireland in 16 years. In 2008 he
put together and led the team that generated and submitted the plan of development for the Amstel Field in
the Netherlands and in 2014 he put together and led the team that carried out the Tendrara gas field
reevaluation prior to a successful appraisal drilling programme by Sound Energy. He is a geology graduate of
the Royal School of Mines (London) and an Associate of the Royal School of Mines.
Ronald Pilbeam, Project Development Director (age 73)
Mr. Pilbeam has over 40 years’ technical and commercial experience in energyrelated E&P activities. During this
time Mr. Pilbeam has worked with Parsons Brinckerhoff in the United States, the Caribbean and Brazil, then with
United Technologies in Brazil, before becoming associated with Unigas International both in Brazil and South
Africa. Mr. Pilbeam has undertaken the management of a number of projects in oil & gas shipping, gastoliquids,
offshore LNG, onshore petrochemical plant, gas storage, and gas handling, pipelines, and terminals. In so doing,
Mr. Pilbeam has also amassed considerable international experience in working with government, industry, and
commerce, to achieve often challenging objectives. A British national, Mr. Pilbeam is an engineering graduate of
King’s College (London), a licensed Professional Engineer (Canada) and an Associate Member of the Institution
of Civil Engineers (UK).
Dr Stephen Staley, NonExecutive Director (age 59)
Dr Staley has over 35 years wideranging management, technical and commercial experience in the international
oil, gas and power sectors. He was until October 2019 the CEO and a director of Upland Resources Limited,
a Londonlisted (Standard Listing) oil & gas company which he cofounded, currently with assets in Tunisia and
onshore and offshore UK. He is a nonexecutive director of 88 Energy Limited, an Australian oil & gas company
with assets onshore Alaska. 88 Energy has a dual listing on the ASX and AIM. He is also a nonexecutive director
of Nostra Terra Oil & Gas PLC, and AIMlisted oil & gas company with producing assets in Texas. Dr Staley
cofounded and brought to the AIM market both Fastnet Oil & Gas plc (where he was the founding CEO) and
Independent Resources plc (where he was the founding managing director). He was also both a technical
consultant to, and nonexecutive director of, Cove Energy plc – the highly successful East Africa focused explorer
that went from having a market capitalisation of £2 million in mid2009 to being sold to PTTP for £1.2 billion in
less than three years. Dr Staley is owner and founder of Derwent Resources Limited, an upstream consultancy
advising on oil and gas opportunities. Prior to this he has worked for Cinergy Corp., Conoco and BP.
He holds a BSc (Hons.) in geophysics from Edinburgh University, a PhD in petroleum geology from Sheffield
University and an MBA from Warwick University. He is a fellow of the Geological Society and a member of the
European Association of Geoscientists & Engineers, the Petroleum Exploration Society of Great Britain and
The Arctic Club.
Carl Kindinger, NonExecutive Interim Chairman (age 68)
Mr. Kindinger has held senior corporate finance roles for 30 years, including board level appointments, in a
multitude of industries in several countries, including for much of the past fifteen years in oil and gas exploration.
He joined the Board of Island Oil & Gas in 2006 and was a founder member of Pathfinder Hydrocarbon Ventures,
later profitably onsold to Fastnet Oil and Gas Ltd, a UKbased oil and gas explorer.
He is an associate member of the Institute of Chartered Management Accountants and also holds a degree in
economics and an MBA.
His experience has been gained in small and medium sized companies in Africa, the Middle East, Ireland and
Romania. He has participated both at executive committee and board level in strategic decision making. His major
achievements include identifying, evaluating and promoting major investment projects, raising finance in difficult
circumstances, a tax savingled equity and debt restructuring, and mergers and acquisitions. He is seasoned at
high level negotiations with JV partners, suppliers and principals. He has considerable experience in
Stock Exchange and IFRS reporting, IPO requirements, business plans and performance evaluation.
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Corporate Governance Report
The Chairman of the Board of Directors of Predator Resources PLC (‘Predator’ or ‘the Company’ or’ the Group’ or ‘we/our’) has a responsibility
to ensure that Predator has a sound corporate governance policy and an effective Board.
The Board has not adopted, but voluntarily follows the Quoted Companies Alliance (QCA) Corporate Governance Code. The QCA code identifies
ten principles to be followed in order for companies to deliver growth in longterm shareholder value, encompassing effective management
with regular and timely communication to shareholders. This report follows the structure of those principles and explains how we have applied
the guidance as well as disclosing any areas of noncompliance.
We will provide annual updates on our compliance with the code. The Board considers that the Group complies with the QCA code so far as
is practicable having regard to the size, nature and current stage of development of the Company.
The sections below set out how the Group applies the ten principles of the QCA code and sets out areas of noncompliance.
Key governance changes during the year include the adherence to the QCA code.
PRINCIPLE 1: ESTABLISH A STRATEGY AND BUSINESS MODEL WHICH PROMOTES LONGTERM VALUE FOR SHAREHOLDERS
The Company is a oil and gas exploration specialist, with operations in Morocco, Trinidad and Ireland. Our goal is to deliver long term value
for our shareholders. We aim to do this by identifying prospective and earlystage exploration projects. Consequently we:
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use our expertise to identify areas with economically feasible resources,
assess the business environment of the target country and its attractiveness for prospecting and eventual development and production,
understand existing interests in a licence area in order to ensure we can earnin to existing interests on terms favourable to our
shareholders.
Oil and gas exploration is by its nature speculative and we aim to reduce the risks inherent in the industry by careful application of funds
throughout individual projects. We do that by:
l Reviewing existing exploration data;
l
Establishing close incountry partnerships for our projects;
l Applying the most appropriate costeffective exploration techniques in order to determine whether further work, using increasingly
expensive exploration techniques, is justified; and
l Appreciating the likely realisation routes that will be available to us as the project moves towards development.
PRINCIPLE 2: SEEK TO UNDERSTAND AND MEET SHAREHOLDER NEEDS AND EXPECTATIONS
The Company is committed to engaging with its shareholders to ensure that its strategy, operational results and financial performance are
clearly understood. We engage with our shareholders via roadshows, attending investor conferences and through our regular reporting on
the London Stock Exchange. Roadshows are typically timed to follow the release of interim and final results. The Company regularly takes part
in investor conferences, both in the UK and internationally. LSE announcements include details of the website, and include phone numbers to
contact the Company and its professional advisors.
Private shareholders
The AGM is the main forum for dialogue with retail shareholders and the Board. The Notice of Meeting is sent to shareholders at least 21 days
before the meeting. All Directors attend the AGM and are available to answer questions raised by shareholders. For each vote, the number of
proxy votes received for, against and withheld is announced at the meeting. The results of the AGM are announced via the London Stock
Exchange. In addition, the Executive Directors regularly attend investor forums specific to the mining industry and engage with shareholders
at those events. Investors can contact us via our website or by email.
Retail shareholders also regularly attend investor evenings held by our brokers or other industry bodies and we publicise our attendance via
LSE announcements. In addition, our up to date Corporate presentation is made available on our website.
Institutional shareholders
The Directors actively seek to build a relationship with institutional shareholders. Shareholder relations are managed primarily by the Chief
Executive Officer. The Chief Executive Officer makes presentations to institutional shareholders and analysts throughout the year, mainly in
London. We also have adhoc meetings with our shareholders via conference call and email. The Board as a whole is kept informed of the
views and concerns of major shareholders by the Chief Executive Officer. Any significant investment reports from analysts are also circulated
to the Board. The NonExecutive Chairman and NonExecutive Director are available to meet with major shareholders if required to discuss
issues of importance to them and are considered to be Independent from the executive management of the Company.
PRINCIPLE 3: TAKE INTO ACCOUNT WIDER STAKEHOLDER AND SOCIAL RESPONSIBILITIES AND THEIR IMPLICATIONS FOR LONG TERM
SUCCESS.
Aside from our shareholders, our most important stakeholder groups are local partners and those local communities that may be impacted
by our exploration activities. The Board is regularly updated on stakeholder issues and their potential impact on our business to enable the
Board to understand and consider these issues in decisionmaking. The Board understands that maintaining the support of all its stakeholders
is paramount for the longterm success of the Company.
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Personnel
The Group does not have permanent staff in Jersey, Channel Islands. All staff are recruited under consultancy agreements as service providers.
We aim to provide an environment which will attract, retain and motivate our team and monitor the effectiveness by regular oneonone
discussion. Our key value is to treat all staff fairly and equally and to promote ethical behaviour, diversity and nondiscrimination.
Local partners and communities
Our operations provide employment in remote areas of developing countries. Essential to our success is the establishment of close working
relationships with local partners. We seek local partners who have a good understanding of the local exploration and oil and gas exploration
industry and regulations within their country, and with the capacity and capability to assist with the management and maintenance of the
project.
We are mindful of our obligations to the local environment and operate to high levels of health and safety in respect of both our local workers
and the local community. Staff training focuses on operating safety. Engagement with local communities is dependent on jurisdiction and the
stage of exploration but is typically by public forum or with local or regional leaders, including site visits and workshops. Social projects in the
local communities are dependent on local need and also the stage of exploration/level of project investment.
As projects move forward, towards potential production activities, we seek to bring in partners who can credibly make the investments to
move towards development and production. In doing so we have regard for their ability and desire to move projects forward, their industry
reputation and their commitment to treating the local communities fairly and protecting the environment. We enter agreements that allow
us to monitor their activities and have monthly updates on project progress.
PRINCIPLE 4: EMBED EFFECTIVE RISK MANAGEMENT, CONSIDERING BOTH OPPORTUNITIES AND THREATS, THROUGHOUT THE
ORGANISATION
Audit, risk and internal control
Financial controls
The Company has an established framework of internal financial controls, the effectiveness of which is regularly reviewed by the Executive
Management, the Audit Committee and the Board. The key financial controls are:
l
l
The Board is responsible for reviewing and approving overall company strategy, approving new exploration projects and budgets, and for
determining the financial structure of the Company including treasury, tax and dividend policy. Monthly results and variances from plans
and forecasts are reported to the Board;
The Audit Committee, comprising the two Nonexecutive Directors, assists the Board in discharging its duties regarding the financial
statements, accounting policies and the maintenance of proper internal business, and operational and financial controls;
l Regular budgeting and forecasting is performed to monitor the Company’s ongoing cash requirements and cash flow forecasts are
circulated to the Board on a monthly basis;
l Actual results are reported against budget and prior year and are circulated to the Board;
l
The Company has an investment appraisal system that considers expected costs against a range of potential outcomes arising from the
exploration opportunities that we are invited to participate in;
l Regular reviews of exploration results are performed as the basis for decisions regarding future expenditure commitment;
l Due to the international nature of the business there are, at times, significant foreign exchange rate movement exposures. Cash flow
forecasting is done at the ‘required currency’ level and foreign currency balances are maintained to meet expected requirements; and
l
For exploration projects, we manage the risk of failure to find economic deposits by low cost early stage exploration techniques, with
detailed analysis of results. Moving projects to more expensive exploration techniques requires a rigorous review of results data prior to
deciding whether to proceed with further work.
Nonfinancial controls
The Board has ultimate responsibility for the Group’s system of internal control and for reviewing its effectiveness. However, any such system
of internal control can provide only reasonable, but not absolute, assurance against material misstatement or loss. The Board considers that
the internal controls in place are appropriate for the size, complexity and risk profile of the Group. The principal elements of the Group’s
internal control system include:
l Close management of the daytoday activities of the Group by the Executive Directors;
l An organisational structure with defined levels of responsibility, which promotes entrepreneurial decisionmaking and rapid
implementation while minimising risks; and
l Central control over key areas such as capital expenditure authorisation and banking facilities.
The Group reviews at least annually the effectiveness of its system of internal control, whilst also having regard to its size and the resources
available. As part of the Group’s plans we continue to review a number of nonfinancial controls covering areas such as regulatory compliance,
business integrity, health and safety, and corporate social responsibility. All personnel are aware of their obligations under antibribery and
corruption legislation.
Predator Oil & Gas Holdings plc Annual Report and Financial Statements 2019 ❘ 23
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Corporate Governance Report (continued)
PRINCIPLE 5: MAINTAINING THE BOARD AS A WELLFUNCTIONING, BALANCED TEAM LED BY THE CHAIR
The Board comprises the NonExecutive Chairman, two Executive Directors and one NonExecutive Director. One nonexecutive Director has
extensive experience in the oil and gas industry, is a qualified geologist and has considerable experience of serving on the Board of public
companies.
The Board is satisfied that it has a suitable balance between independence on the one hand, and knowledge of the Company and industry on
the other, to enable it to discharge its duties and responsibilities effectively. All Directors are encouraged to use their independent judgement
and to challenge all matters, whether strategic or operational.
The Board aim to meet at least monthly. The agenda is set by the Company Secretary in consultation with the Chairman and CEO. The standard
agenda points include:
l Review of previous meeting minutes and actions arising there from;
l A report by the CEO covering all operational matters;
l A report from the Financial consultant covering all financial matters;
l Any other business including update of Register of Conflicts.
Directors’ conflict of interest
The Company has effective procedures in place to monitor and deal with conflicts of interest. The Board is aware of the other commitments
and interests of its Directors, and changes to these commitments and interests are reported to and, where appropriate, agreed with the rest
of the Board. A Register of Conflicts is maintained and is a standard agenda item at each Board Meeting. The Board has access to the Company’s
nominated adviser, its brokers and its lawyers. The advisers do not typically provide materials for Board meetings except if requested to do so
for the purposes of discussing upcoming regulations and other issues.
Board meetings are deemed quorate if two Board members are present and providing 7 days’ notice of such meeting has been given and
waived by the nonattending Directors.
Directors and Officers Liability insurance is maintained for all Directors and key staff members.
PRINCIPLE 6: ENSURE THAT BETWEEN THEM THE DIRECTORS HAVE THE NECESSARY UPTODATE EXPERIENCE, SKILLS AND CAPABILITIES
The Board is satisfied that, between the Directors, it has an effective and appropriate balance of skills and experience, particularly so in the
area of oil and gas exploration and evaluation. All Directors receive regular and timely information on the Group’s operational and financial
performance. Relevant information is circulated to the Directors in advance of meetings by the Company Secretary. Contracts are available
for inspection at the Company’s registered office and at the Annual General Meeting (“AGM”).
Directors are selected having regards to the Company’s needs for a balance of operational, industry, legal and financial skills. Experience of
the Oil and Gas exploration industry is important but not critical, as is experience of running a public company.
All Directors retire by rotation at regular intervals in accordance with the Company’s Articles of Association.
Appointment, removal and reelection of Directors The Board makes decisions regarding the appointment and removal of Directors, and there
is a formal, rigorous and transparent procedure for appointments. The Company’s Articles of Association require that at every AGM any director
(i) who has been appointed by the board since the last AGM or (ii) who held office since the first of the three previous AGMs and who did not
retire at either of them or (iii) who has been selected by the board for reelection shall retire from office and may offer himself for
reappointment by the members.
Independent advice
All Directors are able to take independent professional advice in the furtherance of their duties, if necessary, at the Company’s expense from
lawyers, the nominated adviser, brokers and other professional advisors that they deem relevant. In addition, the Directors have direct access
to the advice and services of the Company Secretary.
PRINCIPLE 7: EVALUATE BOARD PERFORMANCE BASED ON CLEAR AND RELEVANT OBJECTIVES, SEEKING CONTINUOUS IMPROVEMENT
Over the next 12 months we intend to review the performance of the team as a unit to ensure that the members of the Board collectively
function in an efficient and productive manner. Over the same period the NonExecutive Directors will be seeking to set clear and relevant
objectives for the Executive Directors, and for the Board as a whole.
PRINCIPLE 8: PROMOTE A CULTURE THAT IS BASED ON ETHICAL VALUES AND BEHAVIOURS
The Board aims to lead by example and do what is in the best interests of the Company. We operate in remote and underdeveloped areas
and ensure our staffs understand their obligations towards the environment and in respect of antibribery and corruption.
24 ❘ Predator Oil & Gas Holdings plc Annual Report and Financial Statements 2019
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INVESTOR
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PRINCIPLE 9: MAINTAIN GOVERNANCE STRUCTURES AND PROCESSES THAT ARE FIT FOR PURPOSE AND SUPPORT GOOD
DECISIONMAKING BY THE BOARD
Board programme
The Board aims to meet monthly and as and when required. The Board sets direction for the Company through a formal schedule of matters
reserved for its decision. During the year to December 2018 the Board met for fourteen scheduled meetings. The Board and its Committees
receive appropriate and timely information prior to each meeting; a formal agenda is produced for each meeting and Board and Committee
papers are distributed by the Company Secretary several days before meetings take place. Any Director may challenge Company proposals
and decisions are taken democratically after discussion. Any Director who feels that any concern remains unresolved after discussion may ask
for that concern to be noted in the minutes of the meeting, which are then circulated to all Directors. Any specific actions arising from such
meetings are agreed by the Board or relevant Committee and are then followed up by the Company’s management.
Roles of the Board, Chairman and Chief Executive Officer.
The Board is responsible for the longterm success of the Company. There is a formal schedule of matters reserved to the Board. It is responsible
for overall Group strategy; approval of exploration projects; approval of the annual and interim results; annual budgets; dividend policy; and
Board structure. It monitors the exposure to key business risks. There is a clear division of responsibility at the head of the Company. The
Chairman is responsible for running the business of the Board and for ensuring appropriate strategic focus and direction.
The Chief Executive Officer (‘CEO’) is responsible for proposing the strategic focus to the Board, implementing it once it has been approved
and overseeing the management of the Company. The CEO, together with the Financial consultant, is responsible for establishing and enforcing
systems and controls, and liaison with external advisors. The CEO has responsibility for communicating with shareholders.
All Directors receive regular and timely information on the Group’s operational and financial performance. Relevant information is circulated
to the Directors in advance of meetings. The business reports monthly on its headline performance against its agreed budget, and the Board
reviews the monthly update on performance and any significant variances are reviewed at each meeting. A senior executive, the Financial
consultant, attends Board meetings when deemed appropriate by the CEO or Chairman, to present business updates.
Board committees
The Board is supported by the Audit and Remuneration committees. Each committee has access to such resources, information and advice as
it deems necessary, at the cost of the Company, to enable the committee to discharge its duties. The two committees comprise both of the
NonExecutive Directors.
The Audit Committee provides a formal review of the effectiveness of the internal control systems, the Group’s financial reports and results
announcements and the external audit process. The Committee meets twice per year to review the published financial information and to
meet with the Auditors.
The Remuneration Committee provides a formal and transparent review of the remuneration of the Executive Directors and senior personnel
and makes recommendations to the Board on individual remuneration packages. The Committee did not meet during the year.
The Audit committee has not provided a separate report for the current financial period, but intends to do so for next years report.
PRINCIPLE 10: COMMUNICATE HOW THE COMPANY IS GOVERNED AND IS PERFORMING BY MAINTAINING A DIALOGUE WITH
SHAREHOLDERS AND OTHER RELEVANT STAKEHOLDERS
The Company communicates with shareholders through the Annual Report and Accounts, fullyear and halfyear results announcements, the
Annual General Meeting (AGM) and onetoone meetings with large existing or potential new shareholders. The Company regularly posts
LSE announcements covering operational and corporate matters, such as drilling results and significant changes in ownership positions across
historic projects in which it still retains an investment. A range of corporate information (including all Company announcements and a corporate
presentation) is also available to shareholders, investors and the public on the Company’s corporate website.
The Board receives regular updates on the views of shareholders through briefings and reports from Investor Relations, the CEO,and the
Company’s brokers. The Company communicates with institutional investors frequently through briefings with management. In addition,
analysts’ notes and brokers’ briefings are reviewed to achieve a wide understanding of investors’ views.
By order of the Board
Carl Kindinger
Interim Chairman
1 May 2020
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Directors’ Remuneration Report
The Company’s Remuneration Committee comprises two NonExecutive Directors: Carl Kindinger and Stephen Staley.
The Company’s Remuneration Committee operates within the terms of reference approved by the Board.
In the year to 31 December 2019 the two members of the Remuneration Committee have not met.
The items included in this report are unaudited unless otherwise stated.
COMMITTEE’S MAIN RESPONSIBILITIES
l
The Remuneration Committee considers the remuneration policy, personnel engagement terms and remuneration of the Executive
Directors and senior management;
l
l
l
l
The Remuneration Committee’s role is advisory in nature and it makes recommendations to the Board on the overall remuneration
packages for Executive Directors and senior management in order to attract, retain and motivate high quality executives capable of
achieving the Company’s objectives;
The Remuneration Committee also reviews proposals for any share option plans and other incentive plans, makes recommendations for
the grant of awards under such plans as well as approving the terms of any performancerelated pay schemes;
The Board’s policy is to remunerate the Company’s executives fairly and in such a manner as to facilitate the recruitment, retention and
motivation of suitably qualified personnel as service providers; and
The Remuneration Committee, when considering the remuneration packages of the Company’s executives, will review the policies of
comparable companies in the industry.
CONSIDERATION OF SHAREHOLDER VIEWS
The Remuneration Committee considers shareholder feedback received and guidance from shareholder bodies. This feedback, plus any
additional feedback received from time to time, is considered as part of the Company’s periodic reviews of its policy on remuneration.
STATEMENT OF POLICY ON DIRECTORS’ REMUNERATION
The Company’s policy is to maintain levels of remuneration so as to attract, motivate, and retain Directors and Senior Executives of the highest
calibre who can contribute their experience to deliver industry leading performance with the Company’s operations. Currently Director’s
remuneration is not subject to specific performance targets.
In future periods the Company intends to implement a remuneration policy so that a meaningful proportion of Executive and Senior
Management’s remuneration is structured so as to link rewards to corporate and individual performance, align their interests with those of
shareholders and to incentivise them to perform at the highest levels. The Remuneration Committee considers remuneration policy and the
employment terms and remuneration of the Executive Directors and makes recommendations to the Board of Directors on the overall
remuneration packages for the Executive Directors. No Director takes part in any decision directly affecting their own remuneration.
There was no vote taken during the last general meeting with regard to the Director’s remuneration policy. This is considered reasonable given
the current size and stage of development of the Company and the fact that remuneration is not currently linked to performance. This will be
revisited in future periods once a meaningful remuneration policy has been implemented as noted above.
DIRECTORS’ REMUNERATION
The Directors who held office at 31 December 2019 and who had beneficial interests in the ordinary shares of the Company are summarised
as follows:
Name of Director Position
Carl Kindinger Interim Chairman, NonExecutive Director
Dr Stephen Staley NonExecutive Director
Paul Griffiths Chief Executive Officer
Ron Pilbeam Executive Officer
The interests in the shares of the Company of the Directors who served during the year were as follows:
31 December 2019 At the date of this report
Paul Griffiths*1
Ron Pilbeam
Carl Kindinger
Sarah Cope*2
Steve Staley
Total
*1 Paul Griffiths is the Group’s controlling shareholder
*2 Sarah Cope resigned 19 July 2019
26 ❘ Predator Oil & Gas Holdings plc Annual Report and Financial Statements 2019
Ordinary Shares
Share Options Ordinary Shares
Share Options
46,871,508
7,549,794
1,661,962
–
669,600
4,005,486 46,871,508
7,549,794
4,005,486
1,661,962
–
–
1,001,370
669,600
1,001,370
4,005,486
4,005,486
–
1.001,370
1,001,370
56,752,864
10,013,712
56,752,864
10,013,712
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Share Option Scheme
The following Directors have been granted rights under the Group’s Share Option Scheme:
Vesting period
In issue at 2019 Exercised/ In issue at
31 December Grant Options lapsed 31 December
2018 date Awarded during year 2019 Start
Various
Paul Griffiths 4,005,486 24 May 2018 – – 4,005,486 24 May 2018
Ron Pilbeam 4,005,486 24 May 2018 – – 4,005,486 24 May 2018
Sarah Cope 1,001,370 24 May 2018 – – 1,001,370 24 May 2018
Steve Staley 1,001,370 24 May 2018 – – 1,001,370 24 May 2018
See note14
Each of the directors entered into service agreements at the time of the Company’s admission to the market in May 2018. Details of those
service agreements are set out below. There were no other major remuneration decisions in the period.
DIRECTORS’ SERVICE CONTRACTS
Dr Stephen Staley was appointed as a NonExecutive Director of the Company on 18 May 2018 when he entered into a letter of appointment
with the Company. Pursuant to his letter of appointment Dr Staley is entitled to an annual fee of £30,000 which includes consideration for
being a member the Remuneration Committee and for being a member of the Audit Committee. Dr Staley is not entitled to receive any
compensation on termination of his appointment (other than payment in respect of a notice period where notice is served) and is entitled to
be reimbursed all reasonable outofpocket expenses incurred in the proper performance of his duties. Dr Staley’s appointment may be
terminated by either party giving to the other three month’s prior written notice. The services of Dr Staley are provided on a consultancy
basis. The Company established a share option scheme that became effective on 24 May 2018 for a longterm incentive plan for the award of
share options subject to performance conditions. The share option scheme includes Dr Staley as a beneficiary.
Paul Griffiths provides his services as Chief Executive Officer under a consultancy agreement with the Company. The Company entered into a
consultancy agreement dated 18 May 2018 with PetroCeltex Consultancy Limited (“PetroCeltex”) under which PetroCeltex is to provide the
services of Paul Griffiths as Chief Executive of the Company, on a parttime basis (120 hours in each calendar month). Under the consultancy
agreement, PetroCeltex is entitled to a fee of £80,000 per annum (plus VAT, if applicable) for the basic 120 hours per calendar month,
£1,200 per 8 hour day (plus VAT, if applicable) for each additional day or part day in excess of the first 120 hours in any calendar month, up to
an annual cumulative cap of 320 hours in a calendar year, and reimbursement of all reasonable expenses. The consultancy agreement may be
terminated at any time by 3 months’ prior written notice served by either party. Paul Griffiths entered into a side letter dated 18 May 2018
with the Company confirming that the terms of this consultancy agreement will be binding on him as an individual. Paul Griffiths also entered
into a letter of appointment dated 21 December 2017 with the Company in respect of his continued appointment as a director of the Company
with effect from 24 May 2018, but with no additional fee payable to him over and above the fee referred to in the consultancy agreement
above. The continued appointment of Paul Griffiths as a director of the Company on the terms of such appointment letter is (subject to limited
exceptions) for an initial period of 12 months with effect from 24 May 2018 and thereafter subject to termination by either party on three
months’ written notice. In addition the Company may forthwith terminate Paul Griffiths’s appointment as a director of the Company for,
inter alia, a material breach by PetroCeltex of its obligations under the consultancy agreement referred to above and Paul Griffiths may
terminate such appointment for a material breach by the Company of its obligations under the consultancy agreement referred to above.
The Company established a share option scheme that became effective on 24 May 2018 for a longterm incentive plan for the award of share
options subject to performance conditions. The share option scheme includes Paul Griffiths as a beneficiary.
Ronald Pilbeam provides his services as an Executive Director under a consultancy agreement with the Company. The Company entered into
a consultancy agreement dated 18 May 2018 with Ronald Pilbeam to provide the services of Ronald Pilbeam as project development director
of the Company, on a parttime basis (75 hours in each calendar month). Under the consultancy agreement, Ronald Pilbeam is entitled to a
fee of £50,000 per annum (plus VAT, if applicable) for the basic 75 hours per calendar month, £1,000 per 8 hour day (plus VAT, if applicable)
for each additional day or part day in excess of the first 75 hours in any calendar month, up to an annual cumulative cap of 400 hours in a
calendar year, and reimbursement of all reasonable expenses. The consultancy agreement may be terminated at any time by 3 months’ prior
written notice served by either party.
Ronald Pilbeam also entered into a letter of appointment dated 19 March 2018 with the Company in respect of his continued appointment as
a director of the Company with effect from 24 May 2018, but with no additional fee payable to him over and above the fee referred to in the
consultancy agreement above. The continued appointment of Ronald Pilbeam as a director of the Company on the terms of such appointment
letter is (subject to limited exceptions) for an initial period of 12 months following Admission and thereafter subject to termination by either
party on three months’ written notice. In addition the Company may forthwith terminate Ronald Pilbeam’s appointment as a director of the
Company for, inter alia, a material breach by Ronald Pilbeam of his obligations under the consultancy agreement referred to above, and Ronald
Pilbeam may terminate such appointment for a material breach by the Company of its obligations under the consultancy agreement referred
to above.
The Company established a share option scheme that became effective on 24 May 2018 for a longterm incentive plan for the award of share
options subject to performance conditions. The share option scheme includes Ronald Pilbeam as a beneficiary.
Carl Kindinger provides his services as an Executive Director under a consultancy agreement with the Company The Company entered into a
consultancy agreement dated 21 September 2018, and revised on 1 September 2019 with Carl Kindinger to provide financial consultancy
Predator Oil & Gas Holdings plc Annual Report and Financial Statements 2019 ❘ 27
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Directors’ Remuneration Report (continued)
advice and services in relation to the Company’s exploration for and exploitation of oil and gas resources, on a part timebasis (100 hours in
each calendar month). Under the consultancy agreement, Carl Kindinger is entitled to a fee of £70,000 per annum (plus VAT, if applicable).
The consultancy agreement may be terminated at any time by 30 days’ prior written notice served by either party. Carl Kindinger has also
entered into a letter of appointment dated 19 July 2019 with the Company in respect of his continued appointment as a director of the
Company with effect from Admission, with an additional fee of £25,000 per annum payable to him under this letter of appointment. The
continued appointment of Carl Kindinger as a director of the Company on the terms of such appointment letter is (subject to limited exceptions)
for 3 years from the day of appointment and subject to termination by either party on thirty Days’ written notice. In addition the Company
may forthwith terminate Carl Kindinger’s appointment as a director of the Company for, amongst other things, a material breach by Carl
Kindinger of his obligations under the consultancy agreement referred to above, and Carl Kindinger may terminate such appointment for a
material breach by the Company of its obligations under the consultancy agreement referred to above. Under the letter of appointment,
Carl Kindinger shall be entitled to participate in the Company’s option scheme.
REMUNERATION COMPONENTS
For the year ended 31 December 2019 consultancy fees and a share incentive scheme were the only two components of remuneration. The
Company established a share option scheme that became effective on 24 May 2018 for a long term incentive plan for the award of share
options subject to certain oil production targets being reached and sustained by the Company for a period of not less than thirty calendar
days. The Board is not planning to consider any other components of director remuneration during the year.
DIRECTORS’ EMOLUMENTS AND COMPENSATION
Short Term Employment benefits
Director
Carl Kindinger
Sarah Cope
Stephen Staley
NonExecutive total
Paul Griffiths
Ronald Pilbeam
Executive total
Total
2019
£
27,277*
32,083
30,000
89,360
150,380
128,125
278,505
367,865
2018
£
–
20,900
18,100
39,000
98,200
83,100
181,300
220,300
*includes £16,047 for services as a financial consultant
There were no awards of annual bonuses or incentive arrangements other than share options granted in the period. Remuneration was
therefore fixed in nature and no illustrative table of the application of remuneration policy has been included in this report.
Pension entitlements
The Company does currently not have any pension plans for any of the directors and does not pay pension amounts in relation to their
remuneration.
Directors’ interests in share warrants
Directors do not hold any share warrants over ordinary shares.
Consideration of employment conditions elsewhere in the Group
The Committee has not consulted with the other personnel in the Group about executive pay but considers that the current remuneration of
Executive Directors to be consistent with pay and employment benefits across the Group.
UK 10year performance graph
The directors have considered the requirement for a UK 10year performance graph comparing the Group’s Total Shareholder Return with
that of a comparable indicator. The directors do not currently consider that including the graph will be meaningful because the Company has
only been listed since May 2018, is not paying dividends and is currently incurring losses as it gains scale. The directors therefore do not
consider the inclusion of this graph to be useful to shareholders at the current time. The directors will review the inclusion of this table for
future reports.
UK 10year CEO table and UK percentage change table
The directors have considered the requirement for a UK 10year CEO table and UK percentage change table. The directors do not currently
consider that including these tables would be meaningful because, as described under the Directors’ Service Contracts section above directors
have been engaged in the Company only since May 2018. The directors will review the inclusion of this table for future reports.
Relative importance of spend on pay
The Directors have considered the requirement to present information on the relative importance of spend on pay compared to shareholder
dividends paid. Given that the Company does not currently pay dividends the directors have not considered it necessary to include such
information.
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Policy for new appointments
Base salary levels will take into account market data for the relevant role, internal relativities, the individual’s experience and their current
base salary. Where an individual is recruited at below market norms, they may be realigned over time (e.g. two to three years), subject to
performance in the role. Benefits will generally be in accordance with the approved policy.
For external and internal appointments, the Committee may agree that the Company will meet certain relocation and/or incidental expenses
as appropriate.
Policy on payment for loss of office
Payment for loss of office would be determined by the Remuneration Committee, taking into account contractual obligations.
Approved by the Board on 1 May 2020.
Dr Stephen Staley
Chairman of the Remuneration Committee
Predator Oil & Gas Holdings plc Annual Report and Financial Statements 2019 ❘ 29
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Independent Auditor’s Report To The Members Of Predator Oil & Gas Holdings Plc
OPINION
We have audited the financial statements of Predator Oil & Gas Holdings Plc and its subsidiaries (the ‘group’) for the period ended 31 December
2019 which comprise of the Consolidated Statement of Comprehensive Income, Consolidated Statement of Financial Position, Consolidated
Statement of Changes in Equity, Consolidated Statement of Cash Flows and notes to the financial statements, 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:
l
l
l
give a true and fair view of the state of the group’s affairs as at 31 December 2019 and of the group’s loss for the period then ended;
are in accordance with IFRSs as adopted by the European Union; and
have been prepared in accordance with the requirements the Companies (Jersey) Law 1991.
BASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are
independent of the group in accordance with 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
We draw attention to Note 1 of the financial statements, which describes the group assessment of the COVID19 impact on its ability to
continue as a going concern. The Group has explained that the events arising from COVID19 outbreak do not impact its use of the going
concern basis of preparation nor do they cast significant doubt about the group ability to continue as a going concern for a period of at least
twelve months from the date when the financial statements are authorised for issue.
Our opinion is not modified in this respect.
CONCLUSIONS RELATING TO GOING CONCERN
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you were:
l
l
the directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about
the group’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when
the financial statements are authorised for issue.
OUR APPLICATION OF MATERIALITY
The scope of our audit was influenced by our application of materiality. The quantitative and qualitative thresholds for materiality determine
the scope of our audit and the nature, timing and extent of our audit procedures. The materiality applied to the group financial statements
was set at £24,500. Performance materiality was set at £19,600, being 80% of materiality for the financial statements as a whole.
Materiality has been calculated as 2% of the benchmark of expenses, which we have determined, in our professional judgement, to be the
principal benchmark relevant to members of the group in assessing financial performance. As the group has yet to begin trading, the key focus
of the group is to restrict expenditure in order to use the resources to carry out a future acquisition.
We agreed that we would report to the directors’ all misstatements we identified through our audit with a value in excess of £1,225, in addition
to other audit misstatements below that threshold that we believe warrant reporting on qualitative grounds.
AN OVERVIEW OF THE SCOPE OF OUR AUDIT
In designing our audit, we determined materiality and assessed the risk of material misstatement in the group financial statements. In particular,
we looked at areas involving significant accounting estimates and judgement by the directors and considered future events that are inherently
uncertain. We also addressed the risk of management override of internal controls, including among other matters consideration of whether
there was evidence of bias that represented a risk of material misstatement due to fraud. The audit was scoped to support our audit opinion on
the group financial statements of Predator Oil & Gas Holdings Plc and was based on group materiality and an assessment of risk at group level.
KEY AUDIT MATTERS
We have determined that there are no key matters to communicate in our report.
OTHER INFORMATION
The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report
thereon. The directors are responsible for the other information. Our opinion on the group 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.
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BUSINESS
REVIEW
OUR
GOVERNANCE
FINANCIAL
STATEMENTS
INVESTOR
INFORMATION
MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION
We have nothing to report in respect of the following matters where The Companies (Jersey) Law 1991 requires us to report to you if, in our
opinion:
l
adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by
us; or
l
the financial statements are not in agreement with the accounting records and returns; or
l we have not received all the information and explanations we require for our audit.
RESPONSIBILITIES OF DIRECTORS
As explained more fully in the statement of directors’ responsibilities, the directors are responsible for the preparation of the group 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 group financial statements, the directors are responsible for assessing the group’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend
to liquidate the group or 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 Article 113A of The Companies (Jersey) Law 1991 and our
engagement letter date 5 March 2020. 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.
Zahir Khaki (Engagement Partner)
For and on behalf of PKF Littlejohn LLP
Statutory Auditor
1 May 2020
15 Westferry Circus
Canary Wharf
London E14 4HD
Predator Oil & Gas Holdings plc Annual Report and Financial Statements 2019 ❘ 31
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Consolidated statement of comprehensive income
for the year ended 31 December 2019
Administrative expenses
Loan impairment/write off
Operating loss
Finance income
Finance expense
Loss for the year before taxation
Taxation
Loss for the year after taxation
Comprehensive income
Total comprehensive loss for the year attributable to the owner of the parent
Notes
4
15
01.01.2019 to
31.12.2019
£
01.01.2018 to
31.12.2018
£
(1,204,464)
–
(1,204,464)
12
(74,791)
(1,279,243)
–
(761,302)
(32,171)
(793,473)
1,012
–
(792,461)
–
(1,279,243)
(792,461)
–
–
(1,279,243)
(792,461)
Earnings per share basic and diluted (pence)
7
(1.2)
(1.0)
The accompanying accounting policies and notes on pages 36 to 50 form an integral part of these financial statements.
All items in the above statement derive from continuing operations.
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BUSINESS
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OUR
GOVERNANCE
FINANCIAL
STATEMENTS
INVESTOR
INFORMATION
Consolidated statement of financial position
as at 31 December 2019
Noncurrent assets
Tangible fixed assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Equity attributable to the owner of the parent
Share capital
Reconstruction reserve
Other reserves
Retained deficit
Total equity
Noncurrent liabilities
Trade and other payables
Current liabilities
Trade and other payables
Total liabilities
Total liabilities and equity
Notes
31.12.2019
£
31.12.2018
(Restated)
£
9
11
14
7,158
7,158
3,622
3,622
1,381,175
109,716
1,490,891
1,498,049
12,250
973,600
985,850
989,472
2,346,336
3,270,648
250,964
(5,568,143)
1,837,086
3,294,898
81,570
(4,294,352)
299,805
919,202
15
918,406
–
12
279,838
1,198,244
70,270
70,270
1,498,049
989,472
The accompanying accounting policies and notes on pages 36 to 50 form an integral part of these financial statements.
The Company has adopted the exemption under Companies (Jersey) Law 1991 Article 105 (11) not to prepare separate accounts. The Group
reported a loss after taxation for the year of £1.2 million (2018: £0.8 million loss). The financial statements on pages 32 to 50 were approved
and authorised for issue by the Board of Directors on 1 May 2020 and were signed on its behalf by:
Paul Griffiths
Director
1 May 2020
Company Registered number: 125419
Predator Oil & Gas Holdings plc Annual Report and Financial Statements 2019 ❘ 33
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Condensed consolidated statement of changes in equity
For the year ended 31 December 2019
Attributable to owner of the parent
Share based
payments
Share
premium
Share Capital
Balance at 31 December 2017
Issue of ordinary share capital
Issue of warrants
Fair value movement of share options
Listing costs capitalised
Total contributions by and distributions to owners of the parent
recognised directly in equity
Loss for the period
Other comprehensive income
Total comprehensive income for the period
Balance at 31 December 2018
Issue of ordinary share capital
Issue of warrants
Fair value movement of share options
Loan note conversion premium
Total contributions by and distributions to owners of the parent
recognised directly in equity
Loss for the year
Other comprehensive income
Total comprehensive income for the year
Balance at 31 December 2019
£
£
537,085 3,547,190
–
–
–
(252,292)
1,300,001
–
–
–
£
–
–
27,051
54,519
–
Retained
deficit
£
Total
£
(3,501,891)
–
–
–
–
582,384
1,300,001
27,051
54,519
(252,292)
1,837,086 3,294,898
81,570
(3,501,891)
1,711,663
–
–
–
–
–
–
–
–
–
(792,461)
–
(792,461)
–
(792,461)
(792,461)
1,837,086 3,294,898
81,570
(4,294,352)
919,202
509,250
–
–
–
–
–
–
(24,250)
–
81,385
93,461
–
–
–
–
–
509,250
81,385
93,461
(24,250)
2,346,336 3,270,648
256,416
(4,294,352)
1,579,048
–
–
–
–
–
–
–
–
–
(1,279,243)
–
(1,279,243)
–
(1,279,243)
(1,279,243)
2,346,336 3,270,648
256,416
(5,573,595)
299,805
The accompanying accounting policies and notes on pages 36 to 50 form an integral part of these financial statements.
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BUSINESS
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GOVERNANCE
FINANCIAL
STATEMENTS
INVESTOR
INFORMATION
Condensed consolidated statement of cash flows
for the year ended 31 December 2019
Cash flows from operating activities
Loss for the period before taxation
Adjustments for:
Loans waived
Issue of share options
Finance income
Amortisation of transaction costs
Depreciation
(Increase)/decrease in trade and other receivables
Increase in trade and other payables
Net cash used in operating activities
Cash flow from investing activities
Loan advances
Purchase of computer equipment
Net cash generated from investing activities
Cash flows from financing activities
Proceeds from issuance of shares, net of issue costs
Proceeds from issue of convertible loan notes, net of issue costs
Finance income received
Net cash generated from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Noncash transactions
01.01.2019
to
31.12.2019
£
01.01.2018
to
31.12.2018
£
(1,279,243)
(792,461)
–
93,461
(12)
74,791
1,158
(1,167,848)
209,568
32,171
54,519
(1,012)
–
392
24,383
62,911
(2,068,125)
(619,097)
(201,077)
(4,694)
(205,771)
–
(4,014)
(4,014)
–
1,410,000
12
1,074,760
–
1,012
1,410,012
1,075,772
(863,884)
973,600
109,716
452,661
520,939
973,600
During the year 8,035,019 ordinary shares with a nominal value of £509,250 were issued as part of the loan note conversion Further details
are disclosed in Note 15.
The accompanying accounting policies and notes on pages 36 to 50 form an integral part of these financial statements.
Predator Oil & Gas Holdings plc Annual Report and Financial Statements 2019 ❘ 35
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Statement of accounting policies
for the year ended 31 December 2019
GENERAL INFORMATION
Predator Oil & Gas Holdings Plc (“the Company”) and its subsidiaries (together “the Group”) are engaged principally in the operation of an oil
and gas development business in the Republic of Trinidad and Tobago and an exploration and appraisal portfolio in Ireland and Morocco. The
Company’s ordinary shares are on the Official List of the UK Listing Authority in the standard listing section of the London Stock Exchange.
Predator Oil & Gas Holdings plc was incorporated in 2017 as a public limited company under Companies (Jersey) Law 1991 with registered
number 125419. It is domiciled and registered at 3rd Floor, Standard Bank House, 47–49 La Motte Street, Jersey, JE2 4SZ, Channel Islands.
BASIS OF PREPARATION AND GOING CONCERN ASSESSMENT
The principal accounting policies adopted in the preparation of the financial information are set out below. The policies have been consistently
applied throughout the current year and prior year, unless otherwise stated. These financial statements have been prepared in accordance
with International Financial Reporting Standards (IFRSs and IFRIC interpretations) issued by the International Accounting Standards Board
(IASB) as adopted by the European Union and with those parts of the Companies (Jersey) Law, 1991 applicable to companies preparing their
accounts under IFRS. The Company has adopted the exemption under Companies (Jersey) Law 1991 Article 105 (11) not to prepare separate
accounts.
The consolidated financial statements incorporate the results of Predator Oil & Gas Holdings Plc and its subsidiary undertakings as at
31 December 2019.
The financial statements are prepared under the historical cost convention on a going concern basis. The financial statements of the subsidiaries
are prepared for the same reporting period as the parent company, using consistent accounting policies. All intragroup balances, transactions,
income and expenses and profits and losses resulting from intragroup transactions that are recognised in assets, are eliminated in full.
Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be
consolidated until the date that such control ceases.
The preparation of financial statements requires an assessment on the validity of the going concern assumption. At the date of these financial
statements the Directors expect that the Group will not require further funding in 2020 for the Group’s corporate overheads; Irish licence
interests, Moroccan licence and for the development of a CO2 EOR pilot project. Post the year end the Group placed 89 million new ordinary
shares of nopar value each in the Company at a placing price of 4 pence each to raise £ 3,560,000 (before expenses). Directors are confident
that the Group will be able to raise further funds as it considers appropriate to meet requirements for the period beyond 2020 in cash, as
debt finance, joint venture or farminee partner equity, share issues or otherwise. Failing the success of these fundraising activities the Directors
will be prepared to accept appropriate reductions in their remuneration to conserve cash resources.
In the case of Covid19 the potential impact and mitigation thereof is discussed in detail in the Strategic Report. The two planned major
initiatives for 2020 are drilling in Morocco and commencement of oil production in Trinidad. If these activities are to be delayed for more than
nine months there will be adverse consequences for working resources. In the event that the Group will require funds to be raised in the
foreseeable future and if directors’ endeavours to raise fresh funds fail, they will institute a programme of cuts to directors’ and consultant’s
remuneration. The directors having made due and careful enquiry, are of the opinion that the Group has adequate working capital to execute
its operations over the next 12 months given that current spending commitments will prevail. The Group will therefore continue to adopt the
going concern basis in preparing the Annual Report and Financial Statements.
CHANGES IN ACCOUNTING POLICIES
At the date of approval of these financial statements, certain new standards, amendments and interpretations have been published by the
International Accounting Standards Board but are not as yet effective and have not been adopted early by the Group. All relevant standards,
amendments and interpretations will be adopted in the Group’s accounting policies in the first period beginning on or after the effective date
of the relevant pronouncement.
At the date of authorisation of these financial statements, a number of Standards and Interpretations were in issue but were not yet effective.
The Directors do not anticipate that the adoption of these standards and interpretations, or any of the amendments made to existing standards
as a result of the annual improvements cycle, will have a material effect on the financial statements in the year of initial application.
New Accounting Standards and Interpretations issued and applied in the Financial Statements
IFRS 16, LEASES
IFRS 16 replaces the current guidance in IAS 17 – ‘Leases’. Under IAS 17, lessees were required to make a distinction between a finance lease
(on balance sheet) and an operating lease (off balance sheet). IFRS 16 requires lessees to recognise a lease liability reflecting future lease
payments and a ‘rightofuse asset’ for virtually all lease contracts.
IFRS 16 includes an optional exemption for certain shortterm leases and leases of lowvalue assets; however, this exemption can only be
applied by lessees. For lessors, the accounting remains substantially unchanged. IFRS 16 provides updated guidance on the definition of a
lease (as well as the guidance on the combination and separation of contracts); under IFRS 16, a contract is, or contains, a lease if the contract
conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The standard is effective for periods commencing on or after 1 January 2019 and has been endorsed by the EU. Under the provisions of the
standard most leases including the majority of those previously classified as operating leases, will be brought onto the statement of financial
position, as both a rightofuse asset and a largely offsetting lease liability. The rightofuse asset and lease liability are both based on the
present value of lease payments due over the term of the lease, with the asset being depreciated in accordance with IAS 16 ‘Property, Plant
and Equipment’ and the liability increased for the accretion of interest and reduced by lease payments.
The Group does not have leases hence there is no material impact on the financial statements.
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BUSINESS
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OUR
GOVERNANCE
FINANCIAL
STATEMENTS
INVESTOR
INFORMATION
New Accounting Standards and Interpretations in issue but not applied in the Financial Statements
New standards, amendments and Interpretations in issue but not yet effective or not (and in some cases have not yet been adopted by the
EU):
The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the financial statements are listed below.
The Company intend to adopt these standards, if applicable, when they become effective. These are summarised below:
Amendments to References to the Conceptual Framework in IFRS Standards: Included are revised definitions of an asset and a liability as well
as new guidance on measurement and derecognition, presentation and disclosure. (Issued 29 March 2018, applies to accounting periods
beginning on or after 1 January 2020, subject to EU endorsement).
Amendment to IFRS 3: Business Combinations: The amendments clarify that to be considered a business, an acquired set of activities and
assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs.
The definition removes the reference to an ability to reduce costs, and the assessment of whether market participants are capable of replacing
any missing inputs or processes and continuing to produce outputs. An optional concentration test that permits a simplified assessment of
whether an acquired set of activities and assets is not a business has been included as part of the amendments. (Issued 22 October 2018,
applies to accounting periods beginning on or after 1 January 2020, subject to EU endorsement).
Amendments to IAS 1 and IAS 8: Definition of Material: The amendments clarify the definition of material and how it should be applied. The
amendments ensure that the definition of material is consistent across all IFRS Standards. (Issued 31 October 2018, applies to accounting
periods beginning on or after 1 January 2020, subject to EU endorsement).
The Group has not early adopted any of the above standards and the directors are assessing the impact on future financial statements.
There are no other IFRS or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group.
AREAS OF ESTIMATES AND JUDGEMENT
The preparation of the group financial statements in conformity with generally accepted accounting principles requires the use of estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based
on management’s best knowledge of current events and actions, actual results may ultimately differ from those estimates. The Group
commenced operations in 2018 and did not enter into material operational transactions requiring significant estimates and assumptions to
be effected in preparation of financial statements for the reporting period. The critical accounting estimates and judgements made are in line
with those made in the audited financial statements for the year ended 31 December 2018. The estimates and assumptions that have a
significant risk of causing a material adjustment to the carrying amounts of assets and liabilities in the next financial year are discussed below:
a) Going concern and Intercompany loan recoverability.
The Group’s cash flow projections indicate that the Group should have sufficient resources to continue as a going concern. Further details are
disclosed in the management’s assessment of going concern
The recoverability of intercompany loans advanced by the Company to subsidiaries depends also on the subsidiaries realising their cash flow
projections. This is the case for Predator Oil & Gas Trinidad Ltd. where production revenues are forecast from the nearterm from pilot CO2
EOR operations where project economics have been stresstested at lower oil prices. In the event of sustained lower oil prices positive cash
flow will be less and the time taken to recover intercompany loans longer.
In the case of Predator Gas Ventures Ltd., recovery of intercompany loans is dependent upon the Guercif drilling programme successfully
recovering commercial quantities of gas that can be developed and brought to market. The Moroccan gas market is commercially attractive
and even relatively low volumes of discovered gas are likely to be economic. A partial sale of equity in a future potential gas discovery is the
preferred strategy for recovery of intercompany loans rather than a longer term dependency on a gas development.
In the case of Predator Oil and Gas Ventures Ltd., the quantum of intercompany loan is relatively small and no substantive expenditures are
anticipated going forward. The change in business strategy to a focus on LNG and gas storage offshore Ireland, creates a marketing opportunity
for the Group’s relevant experience and expertise within this sector of the industry. It creates the potential as promoters of the project to
receive introduction and service providers’ fees and a free minority equity position in a joint venture vehicle to move to the project development
stage. Under these circumstances the intercompany loan would constitute past costs contributing to the level of free equity. Recovery of the
relatively modest intercompany loan therefore has a variety of ways of being repaid.
Management have also assessed that the carrying value and recoverability of the investment, including intercompany receivables is ultimately
dependent on the value of the underlying assets of the Group. Further evidence of its realisable value can also be noted by reference the
market capitalisation of the Group on the London Stock exchange at the date of this report which can be used as a guide and to provide further
assurance of its carrying value subsequent to the year end.
Predator Oil & Gas Holdings plc Annual Report and Financial Statements 2019 ❘ 37
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Statement of accounting policies
for the year ended 31 December 2019 (continued)
b) Recoverability of loan
The Group entered into an agreement FRAM Exploration Trinidad Limited (“FRAM”), a wholly owned subsidiary of Columbus Energy Resources
PLC, who are listed on AIM.
The FRAM Loan is recovered based on the production profile of a minimum of 54,631 barrels of oil produced in the first four months of
production from the Pilot CO2 EOR project, assuming an average WTI Spot price of US$20/barrel. Lower oil price and/or extended time to
recover that volume of oil would delay the recovery of the FRAM Loan. Under the legally binding WPA, revenues from any such production
are 100% to the account of Predator until cost recovery of all Predator’s costs, inclusive of the FRAM Loan, expended on the Project.
Management have concluded that there is no impairment required at the reporting date as the project is still in the early stages and it is too
early to conclude whether or not it will lead to the commercial success or otherwise of the Pilot CO2 EOR Project as field operations are still
in the CO2 injection phase and not yet moving to the production phase. Whilst Management have concluded that the loan remains recoverable
at the reporting date, they note, that, In the event there is insufficient oil production to reach 54,631 barrel and/or no profits from CO2 EOR
sales revenues due to sustained low oil prices, then management consider the FRAM Loan cannot be recovered and an impairment of £201,077
would be required.
c) Useful lives of property, plant & equipment
Property, plant and equipment are depreciated over their useful economic lives. Useful economic lives are based on management’s estimates
of the period that the assets will be in operational use, which are periodically reviewed for continued appropriateness. More details, including
carrying values, are included in note 8 to the financial statements.
Share based payments
d)
The Group has applied the requirements of IFRS 2 Sharebased Payment for all grants of equity instruments.
The Group operates an equity settled share option scheme for directors. The increase in equity is measured by reference to the fair value of
equity instruments at the date of grant. The liabilities assumed under these arrangements into shares in the parent company, under an option
arrangement. The fair value of the service received in exchange for the grant of options and warrants is recognised as an expense. Equity
settled sharebased payments are measured at fair value (excluding the effect of nonmarket based vesting conditions) at the date of grant.
The fair value determined at the grant date of equitysettled sharebased payment is expensed on a graded vesting basis over the vesting
period, based on the Group’s estimate of shares that will eventually vest and adjusted for the effect of nonmarket based vesting conditions.
During the year the Company issued warrants in lieu of fees to stockbrokers. The warrant agreements do not contain vesting conditions and
therefore the full sharebased payment charge, being the fair value of the warrants using the BlackScholes model, has been recorded
immediately. A charge was recorded against share premium as a transaction cost. The valuation of these warrants involves making a number
of estimates relating to price volatility, future dividend yields and continuous growth rates (see Note 16).
The fair value of these share options is estimated by using the Black Scholes model on the date of grant based on certain assumptions. Those
assumptions are described in note 16 and include, among others, the expected volatility and expected life of the options. The expected life
used in the model has been adjusted, based on management’s best estimate, for the effects of nontransferability exercise restrictions and
behavioural considerations. The market price used in the model is the issue price of the Company’s shares at the last placement of shares
immediately preceding the calculation date. Where the terms and conditions of options are modified before they vest, the increase in the fair
value of the options, measured immediately before and after the modification, is also charged to profit or loss over the remaining vesting
period.
Where equity instruments are granted to persons or entities other than staff, the fair value of goods and services received is charged to profit
or loss, except where it is in respect to costs associated with the issue of shares, in which case, it is charged to the share premium account.
The fair values calculated are inherently subjective and uncertain due to the assumptions made and the limitation of the calculations used.
Further details of the specific amounts concerned are given in note 16.
BASIS OF CONSOLIDATION
Where the Group has control over an investee, it is classified as a subsidiary. The Group controls an investee if all three of the following
elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power
to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these
elements of control.
The consolidated financial statements present the results of the Company and its subsidiaries (“the Group”) as if they formed a single entity.
Intercompany transactions and balances between Group companies are therefore eliminated in full. Uniform accounting policies are applied
across the Group
The consolidated financial statements incorporate the results of business combinations using the acquisition method. In the statement of
financial position, the acquirer’s identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the
acquisition date. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on
which control is obtained. They are deconsolidated from the date on which control ceases.
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FINANCIAL
STATEMENTS
INVESTOR
INFORMATION
FINANCIAL ASSETS
The Financial assets currently held by the Group are classified as loans and receivables and cash and cash equivalents. These assets are
nonderivative financial assets with fixed or determinable payments that are not quoted in an active market. They are initially recognised at
fair value plus transaction costs that are directly attributable to their acquisition or issue and are subsequently carried at amortised cost using
the effective interest rate method less provision for impairment.
Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the counterparty
or default or significant delay in payment) that the Group will be unable to collect all of the amounts due under the terms receivable, the
amount of such a provision being the difference between the net carrying amount and the present value of the future expected cash flows
associated with the impaired receivable. For receivables, which are reported net, such provisions are recorded in a separate allowance account
with the loss being recognised within administrative expenses in the statement of comprehensive income. On confirmation that the receivable
will not be collectable, the gross carrying value of the asset is written off against the associated provision.
Cash and cash equivalents
These amounts comprise cash on hand and balances with banks. Cash equivalents are short term, highly liquid accounts that are readily
converted to known amounts of cash. They include shortterm bank deposits and shortterm investments.
Any cash or bank balances that are subject to any restrictive conditions, such as cash held in escrow pending the conclusion of conditions
precedent to completion of a contract, are disclosed separately as “Restricted cash”.The security deposit is shown within debtors in note 11.
There is no significant difference between the carrying value and fair value of receivables.
Derecognition:
The Group derecognises a financial asset when the contractual rights to the cash flow from the asset expire, or it transfers the asset and
substantially all the risk and rewards of ownership of the asset to another entity.
FINANCIAL LIABILITIES
The Group’s financial liabilities consist of trade and other payables (including short terms loans). These are initially recognised at fair value
and subsequently carried at amortised cost, using the effective interest method. All interest and other borrowing costs incurred in connection
with the above are expensed as incurred and reported as part of financing costs in profit or loss. Where any liability carries a right to
convertibility into shares in the Group, the fair value of the equity and liability portions of the liability is determined at the date that the
convertible instrument is issued, by use of appropriate discount factors.
Derecognition:
The Group derecognises a financial liability when the obligations are discharged, cancelled or they expire.
FOREIGN CURRENCY
The functional currency of the Group and all of its subsidiaries is the British Pound Sterling.
Transactions entered into by the Group entities in a currency other than the currency of the primary economic environment in which it operates
(the “functional currency”) are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are
translated at the rates ruling at the date of the statement of financial position. Exchange differences arising on the retranslation of unsettled
monetary assets and liabilities are similarly recognised immediately in profit or loss, except for foreign currency borrowings qualifying as a
hedge of a net investment in a foreign operation.
The exchange rates applied at each reporting date were as follows:
31 December 2018
£1: USUS$1.274 and £1: Euro1.14
31 December 2019
£1: USUS$1.311 and £1: Euro 1.17
INVESTMENT IN SUBSIDIARIES
The Group’s investment in its subsidiaries is recorded at cost.
PENSION COSTS
Contributions to defined contribution pension schemes are charged to profit or loss in the year to which they relate. The Group currently does
not have a pension scheme.
PRODUCTION EXPENSES
Production expenses include all direct costs of production, including depreciation of property plant and equipment involved in the oil & gas
production, but excluding corporate overhead. The Group currently does not produce any oil and gas.
Plant and equipment
The only assets the Group currently has are personal computers.
Depreciation is provided on equipment so as to write off the carrying value of items over their expected useful economic lives. It is applied at
the following rates:
Computer assets – 20% per annum, straight line
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Statement of accounting policies
for the year ended 31 December 2019 (continued)
Share Options and Equity Instruments
Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately
before and after the modification, is also charged to profit or loss over the remaining vesting period.
Where equity instruments are granted to persons other than consultants, the fair value of goods and services received is charged to profit or
loss, except where it is in respect to costs associated with the issue of shares, in which case, it is charged to the share premium account.
TAXATION
The Company and all subsidiaries (‘the Group’) are registered in Jersey, Channel Islands and are taxed at the Jersey company standard rate of
0%. However, the Group’s projects are situated in jurisdictions where taxation may become applicable to local operations.
The major components of income tax on the profit or loss include current and deferred tax.
Current tax
Current tax is based on the profit or loss adjusted for items that are nonassessable or disallowed and is calculated using tax rates that have
been enacted or substantively enacted by the reporting date.
Tax is charged or credited to the statement of comprehensive income, except when the tax relates to items credited or charged directly to
equity, in which case the tax is also dealt with in equity.
Deferred tax
Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the statement of financial position differs
to its tax base, except for differences arising on:
l
l
The initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects
neither accounting or taxable profit; and
Investments in subsidiaries and jointly controlled entities where the Group is able to control the timing of the reversal of the difference
and it is probable that the differences will not reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the
difference can be utilised.
The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the reporting date and
are expected to apply when deferred tax liabilities/ (assets) are settled/ (recovered). Deferred tax balances are not discounted.
The Group currently does not hold any deferred tax asset or liability.
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INVESTOR
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Notes to the financial statements
for the year ended 31 December 2019
Segmental analysis
1.
The Group operates in one business segment, the exploration, appraisal and development of oil and gas assets. The Group has interests in
three geographical segments being Africa (Morocco), Europe (Ireland) and the Caribbean (Trinidad and Tobago)
The Group’s operations are reviewed by the Board (which is considered to be the Chief Operating Decision Maker (‘CODM’)) and split between
oil and gas exploration and development and administration and corporate costs.
Exploration and development is reported to the CODM only on the basis of those costs incurred directly on projects.
Administration and corporate costs are further reviewed on the basis of spend across the Group.
Decisions are made about where to allocate cash resources based on the status of each project and according to the Group’s strategy to
develop the projects. Each project, if taken into commercial development, has the potential to be a separate operating segment. Operating
segments are disclosed below on the basis of the split between exploration and development and administration and corporate.
Year to 31 December 2019
Gross loss
Depreciation
Other administrative and overhead expenses
Share option and warrant expense
Finance income
Finance expense
Taxation (charge)
Loss for the year from continuing operations
Total assets
Total noncurrent assets
Additions to noncurrent assets
in Total current assets
Total liabilities
Europe
£’000
Caribbean
£’000
Africa
£’000
Corporate
£’000
(46)
–
(159)
–
(163)
–
–
–
(46)
33
–
–
33
(1)
–
–
(159)
239
–
–
239
(4)
–
–
(163)
1150
–
–
1150
(7)
(742)
–
(93)
–
(75)
–
(911)
76
7
–
76
(1,187)
There are no noncurrent assets held in the Group’s country of domicile, being the Jersey Isles (2018: £nil).
2. Group loss from operations
Operating loss is stated after charging/(crediting):
Auditors’ remuneration (note 3)
Depreciation
Share option expense
Foreign exchange (gain)
3. Auditor’s remuneration
Fees payable to the Group’s auditor for other services:
– Audit of the accounts of the Group
– Other services
2019
Group
£’000
2018
Group
£’000
68
53
–
1
93
54
27 (18)
2019
Group
£’000
23
30
53
2018
Group
£’000
20
48
68
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Notes to the financial statements
for the year ended 31 December 2019 (continued)
4. Administration expenses
Administration fees
Design, publishing, presentation and printing fees
Audit fee
Annual return fee
Nonexecutive director fees
Fair value adjustment share options
Insurance
Legal and professional fees
Listing costs
Website costs
Licencing options
Directors fees
Technical Consultancy fees
Travel expenses
Computer/system costs/IT support
Conferences and exhibitions
Bank charges
Depreciation
ISE fee
Sundry expenses
Foreign exchange
Formation costs
Accountancy fees
5.
Taxation
Factors affecting the tax charge for the year
Loss on ordinary activities before tax:
Loss on ordinary activities at Jersey standard 0% tax (2017: 0%)
Tax charge (credit) for the year:
No deferred tax asset or liability has been recognised as the Standard Jersey corporate tax rate is 0%.
6.
Personnel
Personnel costs (including directors) consist of:
Consultancy fees
Share based payments
The average number of personnel (including directors) during the year was as follows:
Management
2019
Group
£’000
2018
Group
£’000
84
10
24
1
70
93
8
81
251
13
8
144
262
94
3
2
26
1
1
1
27
–
–
1,204
2019
Group
£’000
(1,279)
–
64
–
20
1
39
55
6
26
180
–
89
40
162
77
6
4
1
–
1
1
(18)
2
5
761
2018
Group
£’000
(792)
–
–
–
2019
Group
£’000
477
93
570
5
5
2018
Group
£’000
242
55
297
5
5
Three Directors at the end of the period have share options receivable under long term incentive schemes. The highest paid Director received
an amount of £150,310 (2018: £98,200). The Group does not have employees. All personnel are engaged as service providers.
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INVESTOR
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7.
Earnings per share
Loss per ordinary share has been calculated using the weighted
average number of ordinary shares in issue during the relevant
financial year.
The weighted average number of ordinary shares in issue for the period is:
Losses for the period: (£’000)
Earnings per share basic and diluted (pence)
31 Dec
2019
Group
£’000
31 Dec
2018
Group
£’000
104,261,956 82,201,718
(£1,279)
(1.2p)
(£792)
(1.0p)
Dilutive loss per Ordinary Share equals basic loss per Ordinary Share as, due to the losses incurred in 2019 and 2018, there is no dilutive effect
from the subsisting share options.
Loss for the financial year
8.
The Group has adopted the exemption in terms of Companies (Jersey) Law 1991 and has not presented its own income statement in these
financial statements.
Property, plant and equipment
9.
Fixed Assets
Cost
At 31 December 2018
Additions
At 31 December 2019
Amortisation
At 31 December 2018
Charge for the year
At 31 December 2019
Carrying amount
At 31 December 2018
At 31 December 2019
10.
Investments in subsidiaries
Cost at the beginning of the year
Additions during the year
Cost at the end of the year
£
4,014
4,694
8,708
392
1,158
1,550
3,622
7,158
2018
Group
£’000
–
537
537
2019
Group
£’000
537
–
537
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Notes to the financial statements
for the year ended 31 December 2019 (continued)
The principal subsidiaries of Predator Oil and Gas Holdings Plc, all of which are included in these consolidated Annual Financial Statements,
are as follows:
Group
Predator Oil and Gas Ventures Limited
Proportion
held by
Country of Group
registration Class 2019 2018
Jersey, Ordinary 100% 100%
Channel Islands
Predator Gas Ventures Limited
Jersey, Ordinary 100% 100%
Channel Islands
Predator Oil and Gas Trinidad Limited
Jersey, Ordinary 100% 100%
Channel Islands
Nature
of business
Licence
options
offshore
Ireland
Exploitation
licence
onshore
Morocco
Drilling rights
for a CO2
pilot oil
recovery project
The registered address of all of the Group’s companies is at 3rd Floor, Standard Bank House, 47–49 La Motte Street, Jersey, JE2 4SZ,
Channel Islands.
11. Trade and other receivables
Loan receivable
Provision for impairment
Security deposit (US$1,500,000)
Prepayments
Dec 2019
Group
£’000
201
–
1,144
36
1,381
Dec 2018
Group
£’000
32
(32)
–
12
12
Loan receivable includes a loan of £201,077 effected to FRAM Exploration Trinidad Limited (‘FRAM’) in respect of the CO2 EOR project
comprising USUS$ 167,089 advanced as cash and USUS$ 96,540 advanced as equipment. The loan is denominated in US Dollars, unsecured,
interest free and repayable at the discretion of Predator Oil & Gas Trinidad Limited provided not less than one week’s notice is given. The CO2
EOR project is expected to progress to the next stage of development in 2020 and ultimately to full production status at which time the
aforesaid loan is likely to be recovered in terms of a Well Participation Agreement with FRAM dated 17 November 2017.
Other receivables comprise a security deposit of $1,500,000 held by Barclays Bank in respect of a guarantee provided to Office National des
Hydrocarbures et des Mines (ONHYM) as a condition of being granted the Guercif exploration licence. These funds are refundable on the
completion of the Minimum Work Programme set out in the terms of the Guercif Petroleum Agreement and Association Contract.
Prepayments in are in respect of amounts paid in advance to the Financial Conduct Authority , media service providers and an insurance
premium. These amounts are expensed between 60 and 120 days and are denominated in Pound Sterling
There are no material differences between the fair value of trade and other receivables and their carrying value at the year end.
12. Trade and other payables
Loans payable within one year
Trade payables
Accrued expenses
Dec 2019
Group
£’000
Dec 2018
Group
£’000
37
54
188
279
–
3
67
70
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INVESTOR
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Loans payable comprise £25,000 and £12,500 advanced by Ron Pilbeam and Paul Griffiths (the Lenders) respectively. The Company required
supplementary funds to further a program of injecting CO2 into specified wells to recover oil in Trinidad. The loans are unsecured and bear
interest at a rate of 12.5% (twelve and a half per cent) accruing interest on a daily basis until repayment in full to the Lenders by the Company
on 20th January 2020.
Accrued expenses include:
1.
£154,000 due to service providers in respect of preparation and submission of a Prospectus.
2.
£59,976 due to directors for outstanding consultancy and directors’ fees.
These amounts were scheduled to be settled after receipt of placing funds on 28 February 2020.
Trade payables are required to be settled within 30 days.
13. Financial instruments – risk management
SIGNIFICANT ACCOUNTING POLICIES
Details of the significant accounting policies in respect of financial instruments are disclosed on page 39. The Group’s financial instruments
comprise cash and items arising directly from its operations such as other receivables, trade payables and loans.
FINANCIAL RISK MANAGEMENT
The Board seeks to minimise its exposure to financial risk by reviewing and agreeing policies for managing each financial risk and monitoring
them on a regular basis. No formal policies have been put in place in order to hedge the Group’s activities to the exposure to currency risk or
interest risk; however, the Board will consider this periodically. A foreign exchange hedge was entered into during the year whereby Sterling
£ was converted to United States US$.
The Group is exposed through its operations to the following financial risks:
l
Credit risk
l Market risk (includes cash flow interest rate risk and foreign currency risk)
l
Liquidity risk
The policy for each of the above risks is described in more detail below.
The principal financial instruments used by the Group, from which financial instruments risk arises are as follow:
l
l
l
l
Receivables
Cash and cash equivalents
Trade and other payables (excluding other taxes and social security) and
Loans: payable within one year and payable in more than one year
The table below sets out the carrying value of all financial instruments by category and where applicable shows the valuation level used to
determine the fair value at each reporting date. The fair value of all financial assets and financial liabilities is not materially different to the
book value.
Loans and receivables
Cash and cash equivalents
Receivables
Other liabilities
Trade and other payables (excl short term loans)
Loans payable within one year
Loans payable after one year
2019
Group
£’000
110
1,381
266
38
918
2018
Group
£’000
974
12
70
–
–
CREDIT RISK
Financial assets, which potentially subject the Group to concentrations of credit risk, consist principally of cash, shortterm deposits and other
receivables. Cash balances are all held at recognised financial institutions. Other receivables are presented net of allowances for doubtful
receivables. Other receivables currently form an insignificant part of the Group’s business and therefore the credit risks associated with them
are also insignificant to the Group as a whole.
The Group has a credit risk in respect of intercompany loans to subsidiaries. The Company is owed £1,957,978 by its subsidiaries. The
recoverability of these balances is dependent on the commercial viability of the exploration activities undertaken by the respective subsidiary
companies. The credit risk of these loans is managed as the directors constantly monitor and assess the viability and quality of the respective
subsidiary’s investments in intangible oil & gas assets.
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Notes to the financial statements
for the year ended 31 December 2019 (continued)
Maximum exposure to credit risk
The Group’s maximum exposure to credit risk by category of financial instrument is shown in the table below:
Cash and cash equivalents
Receivables
Loans and borrowings
2019
Carrying
value
£’000
110
1,381
956
2019
Maximum
exposure
£’000
1,160
1,381
956
2018
Carrying
value
£’000
973
12
–
The holding company’s maximum exposure to credit risk by class of financial instrument is shown in the table below:
Cash and cash equivalents
Receivables
Loans to Group Companies
2019
Carrying
value
£’000
110
1,381
1,958
2019
Maximum
exposure
£’000
1,160
1,381
1,958
2018
Carrying
value
£’000
973
12
197
2018
Maximum
exposure
£’000
1034
12
–
2018
Maximum
exposure
£’000
1,034
12
197
MARKET RISK
Cash flow interest rate risk
The Group has adopted a nonspeculative policy on managing interest rate risk. Only approved financial institutions with sound capital bases
are used to borrow funds and for the investments of surplus funds.
The Group seeks to obtain a favourable interest rate on its cash balances through the use of bank deposits. The Group’s bank ceased paying
interest on cash balances during the year, therefore the Group is not currently affected by interest rate changes. At 31 December, 2019, the
Group had a cash balance of £0.110 million (2018: £0.973 million) which was made up as follows:
Sterling
United States Dollar
2019
Group
£’000
85
25
110
2018
Group
£’000
455
518
973
At the reporting date, the Group had a cash balance of £0.110 million.
At the current year end the Group’s interestbearing debt comprised £37,500. The balance outstanding on a Convertible Loan Note entered
into on 15 February was £1,015,000 including a transaction cost of £96,594 (net of £918,406).
Foreign currency risk
Foreign exchange risk is inherent in the Group’s activities and is accepted as such. The majority of the Group’s expenses are denominated in
Sterling and therefore foreign currency exchange risk arises where any balance is held, or costs incurred, in currencies other than Sterling. At
31 December 2019 and 31 December 2018, the currency exposure of the Group was as follows:
At 31 December 2019
Cash and cash equivalents
Trade and other receivables
Trade and other payables
Loans repayable after one year
At 31 December 2018
Cash and cash equivalents
Trade and other receivables
Trade and other payables
Sterling
£’000
US Dollar
£’000
Euro
£’000
Other
£’000
Total
£’000
85
36
304
918
455
12
70
25
1,345
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
110
1,381
304
918
455
12
70
The effect of a 10% strengthening of Sterling against the US dollar at the reporting date, all other variables held constant, would have resulted
in increasing post tax losses by £102,677 (2018: £51,800 ). Conversely the effect of a 10% weakening of Sterling against the US dollar at the
reporting date, all other variables held constant, would have resulted in decreasing post tax losses by £102,677 (2018: £51,800).
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INVESTOR
INFORMATION
LIQUIDITY RISK
Any borrowing facilities are negotiated with approved financial institutions at acceptable interest rates. All assets and liabilities are at fixed
and floating interest rate. The Group seeks to manage its financial risk to ensure that sufficient liquidity is available to meet the foreseeable
needs both in the short and long term. See also references to Going Concern disclosures in the Strategic Report.
CAPITAL
The objective of the directors is to maximise shareholder returns and minimise risks by keeping a reasonable balance between debt and equity.
At 31 December 2019 the Group’s interest and noninterestbearing debt amounted to £955,906.
14. Share Capital
Issued and fully paid
Opening Balance
11 May 2019
Loan note conversion
13 May 2019
Loan note conversion
28 May 2019
Loan note conversion
4 September 2019
Loan note conversion
23 October 2019
Loan note conversion
15. NonCurrent liability
Convertible loan notes
Less redemptions
Less transaction costs
Number of shares Nominal value
100,137,150
1,837,086
1,966,888
157,500
1,441,664
105,000
1,702,251
105,000
1,482,356
89,250
1,441,860
52,500
108,172,169
2,346,336
2019
Group
£’000
1,500
(485)
(97)
918
2018
Group
£’000
–
–
–
–
To progress, inter alia, the development of the Guercif licence the Company entered into a Convertible Loan Note Instrument with Arato Global
Opportunities LLC on 15 February 2019 for £1,500,000, the nominal amount of each note was £1.00 and can be increased to £1,750,000. The
notes are converted at 105% in multiples of £50,000 as a conversion price per ordinary share being 90% of the VWAP for the 2 trading days
preceding the conversion, and to the extent not already redeemed or converted shall be redeemed in full the earlier of 15 February 2021 or
in the event of default. The loan notes carry no coupon, are repayable at a premium of 5%. A fee of 10% of the principal amount applies if the
loan notes are not converted into equity prior to 15 February 2021. The lender was issued with 2,083,333 warrants at an exercise price of 12p
with a vesting period of two years. Novum Securities Limited, the arranger of the convertible loan notes, was issued with 2,000,000 in warrants
on the same terms.
The Directors have assessed the accounting treatment for the instrument under the requirements of IAS 32 and have concluded that it should
be treated as a liability.
The fair value of the 4,083,333 warrants was determined at £81,385 See note 16.
Novum Securities Limited was paid a £90,000 placement fee in for the Convertible Loan Note Instrument. The total transaction cost of £171,384,
accounted for in terms of IFRS 9, was offset against the carrying value of the Convertible Loan Note and amortised according to the effective
interest rate method giving rise to a £74,790 charge to the income statement during the Period.
At the date of these financial statements £485,000 of the loan notes had been redeemed. The gross amount outstanding at year end before
deduction of the £74,791 transaction cost is £1,015,000.
Predator Oil & Gas Holdings plc Annual Report and Financial Statements 2019 ❘ 47
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Notes to the financial statements
for the year ended 31 December 2019 (continued)
16. Share based payments
Equity – settled sharebased payments
Warrant and Share option expense
Warrant and share option expense:
– In respect of remuneration contracts
– In respect of financing arrangements
Total expense
Share Options
2019
Group
£’000
2018
Group
£’000
93
55
81 27
175
82
The Group operates a share option plan for directors. Details of share options granted in the year to 31 December 2018 are noted below.
On 24 May 2018 both Paul Griffiths and Ron Pilbeam were granted share options each of 4,005,486 exercisable at £0.028 each and Steve
Staley and Sarah Cope were granted share options each of 1,001,370 exercisable at £0.028 each
The options are subject to the following vesting conditions:
1/3 of the option shares 3,337,904 on gross production from the wells drilled under the Well Participation Agreement Predator Oil and Gas
Ventures Limited and FRAM Exploration Trinidad Limited of 50 BOPD (measured over a consecutive 30 day period)
1/3 of the option shares 3,337,904 on incremental gross production from a Pilot C02 test of 300 BOPD (measured over a consecutive 30 day
period)
1/3 of the option shares 3,337,904 on incremental total gross production from wells for which the Company receives revenues of 1,000 BOPD
(measured over a consecutive 30day period)
Each option shall lapse 5 years after the date on which it vests, assuming it is not exercised before then and no event occurs to cause it to
lapse early.
Each option shall lapse 5 years after the date on which it vests, assuming it is not exercised before then and no event occurs to cause it to
lapse early. The Black Scholes model has been used to fair value the options, the inputs into the model were as follows
Grant date
Share price
Exercise price
Term
Expected volatility
Expected dividend yield
Risk free rate
Fair value per option
The total fair value of the options:
24 May, 2018
£0.028
£0.028
5 years
400%
0%
0.80%
£0.0197
£280,382
The total share option reserve in respect of 2019 is £93,461 (2018: £54,519).
Warrants
On 24 May 2018 the Company’s granted 2,231,248 warrants to Novum Securities Limited and 160,714 warrants to Optiva Securities Limited
in consideration of services provided to the Company pursuant to the terms of the Placing Agreement and conditional upon admission
becoming effective. The warrants may be exercised at £0.028 each in whole or in part at any time and from time to time from the date of their
grant until the third anniversary of admission. The total fair value of these warrants was determined as £0.0113 per warrant and a £27,051
reserve was created for the year ended 31 December 2018.
On 15 February 2019 the Company granted 2,083,333 and 2,000,000 warrants respectively to Arato Global Opportunities LLC and Novum
Securities Limited pursuant to the Convertible Loan Note (‘CLN’) agreement. The warrants are exercisable at any time between the date of
issue and 15 February 2021 at a subscription price of 12p per share. Expected volatility was determined by reference to the Company’s share
price since admission to the Standard List of the London Stock Exchange and the year end. The riskfree rate is based on the UK threeyear
bond yield. The warrant agreements for the aforesaid 4,083,333 do not contain vesting conditions and therefore the full sharebased payment
charge, being the fair value of the warrants using the BlackScholes model, has been recorded immediately. A fair value of £81,384 was deemed
as a transaction cost in terms of IFRS9 and was offset against the Convertible Loan Note Principal of £1,500,000. As at 31 December 2019
£485,000 in loan notes were redeemed during the period. In addition, Novum Securities Limited was paid a £90,000 placement fee for the
Convertible loan note instrument taking the total CLN transaction cost to £171,384. Accordingly, a £74,790 charge was taken to the income
statement during the period in respect of the aforesaid loan notes as a funding cost applying the effective interest method.
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BUSINESS
REVIEW
OUR
GOVERNANCE
FINANCIAL
STATEMENTS
INVESTOR
INFORMATION
The valuation of these warrants involves making a number of estimates relating to price volatility, future dividend yields and continuous growth
rates.
The Black Scholes model has been used to fair value the warrants, the inputs into the model were as follows
Grant date
Share price
Exercise price
Term
Expected volatility
Expected dividend yield
Risk free rate
Fair value per warrant
Total fair value of warrants
15 February 2019
£0.07
£0.12
3 years
80%
0%
0.73%
£0.0199
£81,385
17. Reserves
Details of the nature and purpose of each reserve within owners’ equity are provided below:
l
l
l
l
Share capital represents the nominal value each of the shares in issue.
The Other Reserves are included in the Consolidated Statement of Changes in Equity and in the Consolidated Statement of Financial
Position and represent the accumulated balance of share benefit charges recognised in respect of share options and warrants granted by
the Company, less transfers to retained losses in respect of options exercised or lapsed.
The Retained Deficit Reserve represents the cumulative net gains and losses recognised in the Group’s statement of comprehensive
income.
The Reconstruction Reserve arose through the acquisition of Predator Oil & Gas Ventures Limited. This entity was under common control
and therefore merger accounting was adopted.
18. Related party transactions
Directors and key management emoluments are disclosed note 9 and in the Remuneration report.
Paul Griffiths holds 45,085,794 ordinary shares, 22.87% (44,773,294 ordinary shares, 41.29% as at the reporting date) of the issued share
capital in the Company and is the Group’s controlling shareholder.
19. Contingent liabilities and capital commitments
The Group had at the reporting date no capital commitments or contingent liabilities.
20. Litigation
The Group is not involved in any litigation.
21 Events after the reporting date
1. On 27 January 2020 announced the first tranche of CO2 had been injected into well AT5X in the InnissTrinity field and will over time
contribute to the determination of any impact on enhancement of production in offset wells to AT5X. Predator and Columbus, its joint
venture partner, will inject further tranches of CO2 as is required to fully evaluate the potential of CO2 injection to increase oil production
from the offsetting wells in the AT4 Block, which is the site of the initial Pilot CO2 EOR.
2.
In terms of the Convertible Loan Note (‘CLN’) , Arato Global Opportunities LLC (“Arato”), providers of the CLN, have the right to have 20%
of all funds raised by the Group applied to the redemption of the CLN. On 12 February 2020 Arato agreed with the Company to waive
their aforesaid right to 20% of funds raised to allow the Company not to repay any of the Convertible Loan Note from the Placing Proceeds
and also agreed to an Orderly Market Agreement. In terms of this agreement Arato was to be given security over the US$ 1 million cash
in the form of the returnable Bank Guarantee from ONHYM following completion of the Moulouya well, such security to protect against
an inability to convert into POGH Plc shares in the event of insufficient headroom shares. The security will be reduced from time to time
as and when the amount of the outstanding loan and fees is less than US$ 1 million based on the US$:£ exchange rate on the date of
conversion. In return for this substantive concession, Arato will receive a fee equivalent to £100,000 in shares at the Placing Price of
4 pence, representing 2,500,000 Ordinary shares of no par value.
3. On 19 February 2020 Predator Gas Ventures Ltd. announced it had exercised its previously announced Rig Option with Star Valley Drilling
Ltd., a Canadian drilling company currently undertaking an extensive drilling programme for SDX Energy Plc in the Rharb Basin west of
the Guercif using its Rig No. 101. Rig mobilisation can occur within a window commencing 15 March 2020 and ending 30 April 2020.
4. On 25 February 2020 Predator Gas Ventures Ltd announced it had appointed, Moyra Scott as consultant Project Drilling Manager, to
execute its Guercif drilling operations. Ms. Scott has relevant and practical experience, through SDX Energy’s 2014 drilling programme in
the Rharb Basin, of the drilling conditions likely to be encountered in the geologically analogous, much larger gas targets, which are the
subject of the Company’s Guercif drilling programme.
5. On 28 February 2020 the Company announced that it had placed 89 million new ordinary shares of no par value each in the Company at
a Placing Price of 4 pence each to raise £3.56 million (before expenses).The Placing was oversubscribed. These funds, when combined
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Notes to the financial statements
for the year ended 31 December 2019 (continued)
with the Company’s existing cash reserves, will be used to fund the Moulouya well onshore Morocco (which is due to spud in the second
quarter of this year), on upscaling during the second quarter of this year the potential for profits from Enhanced Oil Recovery by using
and sequestrating injected CO2 onshore Trinidad (“CO2 EOR”) and on the ongoing costs of running the business. This additional
capitalisation of the Company creates the ability to secure an incountry rig to drill the Moulouya well, resulting in a significant saving in
rig mobilisation costs if a rig had to be contracted from overseas. It also facilitates the earlier return of US$ 1 million of the US$ 1.5 million
Bank Guarantee in place with ONHYM after the completion and reporting of drilling operations. The additional funds give the Company
greater opportunity to move more rapidly to potentially upscale profits from CO2 EOR operations in Trinidad following on from successful
CO2 injection announced previously.
6. On 4 March 2020 the approval by the Moroccan National Committee of Environment for the Environmental Impact Assessment Study
covering the drilling of three wells for petroleum exploration in the Onshore Guercif permits located in Guercif province, as presented by
Predator Gas Ventures Ltd., was been ratified by the Ministry of Energy and Mines and Environment. The EIA approval is valid for 5 years
from the effective date of issue of 29 January 2020.
7. On 7 April 2020 the Company announced that pursuant to its announcement on 14 February 2020 of the placing of 89,000,000 new
shares of no par value in the Company at 4p per share to raise £3.56 million (before expenses) that fees agreed at the time of the said
placing to maximise cash resources of the Company, were settled by the allotment and issuance of 4,875,000 new ordinary shares.
Accordingly, the Company’s issued share capital was increased to 202,047,169 shares of nopar value, each with one vote per share.
8. On 8 April 2020 following the receipt of notice from Arato Global Opportunities Limited for the conversion of £70,000 of the Loan Note,
issued on 15 February 2019, 1,702,251 new ordinary shares were allotted and issued. Following the issue of such 1,702,251 new ordinary
shares, the Company’s issued share capital was 203,749,420 shares of no par value, each with one vote per share.
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BUSINESS
REVIEW
OUR
GOVERNANCE
FINANCIAL
STATEMENTS
INVESTOR
INFORMATION
Corporate Information
Directors
Company Secretary
Registered Office
Joint Broker and Placing Agent
Joint Broker and Placing Agent
Auditors
Paul Stanard Griffiths (Executive Director – CEO)
Ronald Pilbeam (Executive Director)
Carl Kindinger (NonExecutive Chairman) (appointed 19 July 2019)
Sarah Cope (resigned 19 july 2019)
Dr Stephen Staley (NonExecutive Director)
Oak Secretaries (Jersey) Limited
3rd Floor, Standard Bank House
47 – 49 La Motte Street
Jersey JE2 4SZ
3rd Floor, Standard Bank House
47 – 49 La Motte Street
Jersey JE2 4SZ
Telephone +44 (0) 1534 834 600
Novum Securities Limited
810 Grosvenor Gardens
London SW1W 0DH
Optiva Securities Limited
49 Berkeley Square
London W1J 5AZ
PKF Littlejohn LLP
15 Westferry Circus
Canary Wharf
London E14 4HD
Legal advisers to the Group as to
English law
Charles Russell Speechlys LLP
5 Fleet Place
London EC4M 7RD
Legal advisers to the Group as to
Jersey law
Pinel Advocates
7 Castle Street
St Helier
Jersey JE2 3B
Predator Oil & Gas Holdings plc Annual Report and Financial Statements 2019 ❘ 51
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Corporate Information (continued)
Competent Person
Registrar
Financial PR
Principal Bankers
SLR Consulting (Ireland) Ltd
7 Dundrum Business Park
Windy Arbour
Dublin 14, D14 N2Y7
Republic of Ireland
Computershare Investor Services (Jersey) Limited
Queensway House
Hilgrove Street
St Helier,
Jersey JE11ES
IFC Advisory Limited
15 Bishopsgate London EC2N 3AR
The Royal Bank of Scotland International Limited
P.O. Box 64
Royal Bank House
71 Bath Street
St Helier
Jersey JE4 8PJ
Barclays Bank Plc
13 Library Place
St Helier
Jersey JE4 8NE
52 ❘ Predator Oil & Gas Holdings plc Annual Report and Financial Statements 2019
Perivan 258867
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Contents
Business Review
1 Chairman’s statement
3 Strategy
4 Group strategic report
Our Governance
18 Report of the directors
21 Board of directors
22 Corporate governance report
26 Directors’ remuneration report
Investor Information
51 Corporate information
Financial Statements
30 Independent auditors’ report
32 Consolidated statement of
comprehensive income
33 Consolidated statement of
financial position
34 Consolidated statement of
changes in equity
35 Consolidated statement of
cash flows
36 Statement of accounting
policies
41 Notes to the financial
statements
258867 00 Predator Cover Spread 3mm spine.qxp 26/05/2020 19:21 Page 1
Predator Oil & Gas Holdings Plc
Annual Report for the year ended 31 December 2019
SEQUESTRATING
ANTHROPOGENIC CO2