Company Registration No. 03896382 (England and Wales)
PROSPEX OIL & GAS PLC
DIRECTORS' REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
PROSPEX OIL & GAS PLC
COMPANY INFORMATION
Directors
Secretary
Company number
Registered office
Auditors
Bankers
Solicitors
Nominated and Financial Adviser
Joint Broker
Joint Broker
Registrars
(Appointed 23 December 2016)
William Smith
Edward Dawson
Richard Mays
James Smith
Gerry Desler FCA
03896382
Stonebridge House
Chelmsford Road
Hatfield Heath
Essex CM22 7BD
Adler Shine LLP
Chartered Accountants and Statutory Auditor
Aston House
Cornwall Avenue
London N3 1LF
Barclays Bank Plc
One Churchill Place
London E14 5HP
Charles Russell Speechlys LLP
Fleet Place
London EC4M 7RD
Strand Hanson Ltd
26 Mount Row
London W1K 3SQ
Peterhouse Corporate Finance Limited
3rd Floor, New Liverpool House
15 Eldon Street
London EC2M 7LD
Beaufort Securities Limited
63 St Mary Axe
London EC3A 8AA
Neville Registrars Limited
Neville House
18 Laurel Lane
Halesowen B63 3DA
PROSPEX OIL & GAS PLC
CONTENTS
Chairman's statement
Strategic report
Directors' report
Independent auditors' report
Statement of comprehensive income
Statement of financial position
Statement of changes in equity
Statement of cash flows
Page
1 - 2
3 - 4
5 - 7
8 - 9
10
11
12
13
Notes to the financial statements
14 - 32
PROSPEX OIL & GAS PLC
CHAIRMAN'S STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2016
The year under review serves to demonstrate management's ability to deliver the strategy that has been put
in place to transform Prospex into a leading multi-project oil and gas investment company. It was an active
year which started with us securing our first investment, fulfilling our investment policy, and culminated in the
drilling of a low cost well on schedule and on budget. While the end result of the well was not what we had
hoped for, the steps we took and the short period of time during which they were taken provide a template
for how we intend to build this company.
Our strategy is to acquire a portfolio of investments in oil and gas projects that are at various stages of the
development cycle and which represent highly attractive opportunities on a risk / reward basis. At the
beginning of the review period the Company made its first investment under the new strategy: the acquisition
for £32,000 in respect of a 49% interest in Hutton Poland Limited's share capital and £588,000 for a similar
interest in its loan capital, which holds the Kolo licence onshore Poland. By the year end the Company had
invested almost £1.6m. Prior to completion of the acquisition in April 2016, we had set about undertaking a
detailed re-evaluation of the prospectivity on the licence by applying our expertise to re-work existing data.
This work resulted in the identification of a conventional gas prospect, Boleslaw, as well as a deeper oil play.
AGR TRACS ('AGR') were then commissioned as a Competent Person to scrutinise our work and provide an
independent assessment. In their report, AGR described Boleslaw as "a worthwhile and attractive
exploration opportunity". Utilising this assessment, the Company's interest in Hutton Poland was valued at
US$4.8m (£3.9m) in the financial statements as at 31 December 2016 (but see note 20 on Investment
Valuation).
Having established Boleslaw as a drill ready prospect the necessary permits to drill a low cost well were
obtained by Hutton Poland. Drilling operations commenced at the Boleslaw-1 well on time in December
2016. For a discovery to be made a number of factors need to be in place: source rock; reservoir; trap; and
migration. Unfortunately, in the case of Boleslaw not all of these were present. As with all oil and gas
exploration there is only so much that can be done to de-risk a prospect prior to drilling. Only success with
the drillbit proves up prospects. As a result, when risks are assigned to drill-ready prospects these are
typically between 1 in 5 and 1 in 3. Boleslaw was a low cost well and based on our own technical work and
that of our competent person it represented an attractive drilling opportunity on a risk / reward basis.
Prospect's interest in the Kolo licence was not exclusive to the Boleslaw prospect. The Company believes
additional prospectivity exists on the licence, including a deeper oil lead. Importantly the result of the
Boleslaw-1 well has no bearing on this potential oil play. The well has validated elements of the deeper
target's geological model and we are currently evaluating all the well data and updating the geological
interpretation to ascertain the best way forward for the licence.
Hutton Poland is just the first of what we believe will be many investments under our investment strategy.
We have an active pipeline of potential opportunities, which we believe offer near term value uplift in line
with our strategy. With this in mind, we are closely evaluating a number of projects which match our criteria:
located in proven hydrocarbon jurisdictions; scope for multiple value trigger events within a short time frame;
located close to market; and available to be acquired on attractive terms. Furthermore, thanks, in part, to
our team's proven track record of generating value in the oil and gas sector, people are approaching us with
their projects. We find many of these investment opportunities to be technically interesting and we are
confident that new investments will be added to our portfolio in due course.
Once new projects have been secured, we will endeavour to move rapidly through the various development
milestones with the aim of reaching a value trigger event such as drilling at the earliest opportunity, as we
did with Boleslaw. We are able to do this because we have ensured that Prospex has a strong capital base,
that corporate overheads are kept to a reasonable level and that monthly cash burn is low. This allows us to
invest as much of our available funds as possible into our portfolio.
- 1 -
PROSPEX OIL & GAS PLC
CHAIRMAN'S STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2016
As announced on 28 March 2017, the Company wishes to amend its investment policy to remove the
paragraph stating that the Company will undertake an acquisition or acquisitions within the natural resources
and/or energy sector, which would likely constitute a reverse takeover under AIM Rule 14 of the AIM Rules
for Companies, within 12 months of the date of that 11 May 2016 GM. A resolution proposing this
amendment will be put to shareholders at the Company's AGM to be held on 1 June 2017 and is set out in
the AGM Notice. Shareholders should note that the Board is actively evaluating a number of possible
investments, any of which would add to its portfolio.
Outlook
Whether it was successful or not, Boleslaw was always going to be the first of many wells in which the
Company invests. We are working hard to secure additional projects on attractive terms for our
shareholders, where we can apply our technical expertise to generate or review drill-ready prospects and
leads. Boleslaw was a potential company-maker. Our aim is to build a portfolio of high impact prospects
that are based on first class technical work, which have been rigorously scrutinised by respected third
parties, have an attractive risk / reward trade off, and can be inexpensively drilled within short time frames.
With this in mind, we have been closely evaluating a number of exciting opportunities and remain confident
that we will invest in at least one of these in the near term. Our target is to participate in further drilling
activity this year, as we look to deliver on our objective and generate value for all our shareholders.
I look forward to providing further updates on our progress in due course. In the meantime, I would like to
take this opportunity to thank our shareholders for their support of the Company and team.
William Smith
Non-Executive Chairman
2 May 2017
- 2 -
PROSPEX OIL & GAS PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2016
The directors present their strategic report for the year ended 31 December 2016.
Principal activities
The principal activity of the Company is that of an Investment Company.
Strategy
In summary, the Company's Investing Policy is to invest in and/or acquire companies and/or projects within
the natural resources and/or energy sector with potential for growth and/or income. The Company may also
directly apply for new exploration licences or invest in existing licences. It is anticipated that the geographical
focus will primarily be Europe. However, investments may also be considered in other regions should the
directors consider that valuable opportunities exist and returns can be achieved.
Business review
A review of the development and performance of the Company, including important events, progress during
the year and likely future developments, can be found in the Chairman's Statement.
In summary:
- administrative expenses for continuing operations for the year rose to £778,093 (2015: £601,892)
- unrealised gain arising on financial assets at fair value through profit or loss was £2,345,557 (2015: £nil)
- net profit after taxation from continuing operations was £1,567,464 (2015: Loss - £502,434)
- profit for the year from discontinued operations £nil (2015: £571,745)
- as at 31 December 2016, the Company had cash and cash equivalents of £466,413 (2015: £382,216)
Key performance indicators
The business Key Performance Indicators ('KPI') monitored by the Board are focussed on managing the
investing activities of the Company. The financial KPI is to ensure that there is adequate funding in place to
cover the Company's investing activities and holding company costs.
Principal risks and uncertainties
The Board regularly reviews the risks to which the Company is exposed and seeks to minimise the effects of
these risks through careful monitoring of the risks on an ongoing basis.
The principal risks and uncertainties which the Company face include:
Early stage investments in the natural resources sector carry a high level of risk and uncertainty, although
the rewards can be outstanding. At this stage there can be no certainty of outcome and, in addition, there is
often a lack of liquidity in the Company's investments that are either unquoted or quoted on AIM, such that
the Company may have difficulty in realising the full value in a forced sale. Accordingly, a commitment to
invest is only made after thorough research into both the management and the business of the target, both
of which are closely monitored thereafter.
Organisational
The Company is highly dependent on the Directors. Whilst the board will continue to ensure that the
Directors are appropriately incentivised, their services cannot be guaranteed, and the loss of their services
to the Company may have a material adverse effect on the performance of the Company. In addition, the
competition for qualified personnel in the oil and gas industry can be intense and there can be no assurance
that the Company will be able to attract and retain all personnel necessary in the required jurisdictions for
the future development and operation of its business.
Corporate governance
The board is committed to maintaining high standards of corporate governance. While Prospex Oil and Gas
Plc does not formally comply with an official corporate governance code, the board has implemented
appropriate measures including the establishment of Audit and Remuneration Committees (detailed below)
to ensure that the company adheres to a standard which is practicable for a company of its size and stage.
- 3 -
PROSPEX OIL & GAS PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2016
Remuneration committee
The Remuneration Committee consists of William Smith, James Smith and Richard Mays who also chairs
the committee, and is responsible for making recommendations to the Board, within agreed terms of
reference, on the Company’s framework of executive remuneration and its cost. The Committee determines
the contract terms, remuneration and other benefits for any executive directors, including performance
related bonus schemes, pension rights and compensation payments. The Board itself determines the
remuneration of the non-executive directors.
Audit committee
The Audit Committee consists of Richard Mays, James Smith and William Smith, who also chairs the
committee, and provides a forum for reporting by the Company’s external auditors. The Committee is
responsible for reviewing a wide range of matters, including half-year and annual results before their
submission to the Board, and for monitoring the controls that are in force to ensure the integrity of
information reported to shareholders. The Committee advises the Board on the appointment of external
auditors and on their remuneration for both audit and non-audit work, and discusses the nature, scope and
results of the audit with the external auditors. The Committee keeps under review the cost effectiveness and
the independence and objectivity of the external auditors.
Edward Dawson
Chief Executive Officer
2 May 2017
- 4 -
PROSPEX OIL & GAS PLC
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2016
The directors present their report and financial statements for the year ended 31 December 2016.
Results and dividends
The results for the year are set out on page 10.
The directors do not recommend payment of an ordinary dividend.
Financial instruments
The company's financial risk management objectives and policies are set out in note 21 to the financial statements.
Going concern
In common with many investment companies, the Company raises finance for its investments, as and when
required.
The Directors prepare annual budgets and cash flow projections that extend beyond 12 months from the date of
this report.
Directors
The following directors held office during the year:
Edward Dawson
Richard Mays
William Smith
James Smith
Gavin Burnell
(Appointed 23 December 2016)
(Resigned 28 April 2016)
Directors' interests
Share interests
The Directors of the Company held the following beneficial interests in the ordinary shares of the Company:
Edward Dawson
Richard Mays
William Smith
James Smith (appointed 23 December 2016)
Gavin Burnell (resigned 28 April 2016)
31 December 2016
1 January 2016
No. of shares
2,639,344
2,811,474
9,139,344
-
N/A
No. of shares
1,639,344
1,311,474
1,639,344
N/A
721,311
Share options
The Directors of the Company held share options granted under the Company share option scheme, as indicated
below. No share options were exercised during the year. Full details of the share options held are disclosed in
note 16 to the financial statements.
Edward Dawson
Richard Mays
William Smith
James Smith (appointed 23 December 2016)
Gavin Burnell (appointed 14 April 2015, resigned 28 April 2016)
- 5 -
31 December 2016
No. of shares
7,381,875
4,325,340
4,325,340
1,436,000
N/A
1 January 2016
No. of shares
680,212
541,726
541,726
N/A
541,726
17,468,555
2,305,390
PROSPEX OIL & GAS PLC
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2016
Directors' insurance
The Directors and officers of the Company are insured against any claims against them for any wrongful act in
their capacity as a Director, officer or employee of the Company, subject to the terms and conditions of the policy.
Substantial shareholdings
So far as the Directors are aware the parties who are directly or indirectly interested in 3% or more of the nominal
value of the Company's share capital as at 30 March 2017 are as follows:
Beaufort Nominees Limited
Barclayshare Nominees Limited
Hargreaves Lansdown (Nominees) Limited
Simon Chantler
Nomura Nominees Limited
TD Direct Investing Limited
HSDL Nominees Limited
% of issued share
capital
11.38%
10.12%
8.10%
5.05%
4.61%
4.55%
4.32%
The market value of the Company's shares at 31 December 2016 was 2.275p and the high and low share prices
during the period were 3.15p and 0.935p respectively.
Creditor payment policy
The company's current policy concerning the payment of trade creditors is to:
- settle the terms of payment with suppliers when agreeing the terms of each transaction;
- ensure that suppliers are made aware of the terms of payment by inclusion of the relevant terms in contracts; and
- pay in accordance with the company's contractual and other legal obligations.
On average, trade creditors at the year end represented 36 days' purchases.
Auditors
In accordance with section 489 of the Companies Act 2006, a resolution proposing that Adler Shine LLP be
reappointed as auditors of the company will be put to the Annual General Meeting.
Statement of disclosure to auditor
So far as each person serving as a Director of the Company at the date this report is approved is aware:
(a) there is no relevant audit information of which the Company's auditors are unaware, and
(b) each Director hereby confirms that he or she has taken all the steps that he or she ought to have taken as
Director in order to make himself or herself aware of any relevant audit information and to establish that the
Company's auditors are aware of that information.
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, as required by the AIM Rules of the London Stock Exchange, elected to prepare the Company
financial statements in accordance with International Financial Reporting Standards as adopted by the European
Union. Under company law, the Directors must not approve the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that
period.
- 6 -
PROSPEX OIL & GAS PLC
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2016
In preparing these financial statements, the directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgments and accounting estimates that are reasonable and prudent;
• state whether the parent company financial statements have been prepared in accordance with IFRS as adopted
by the European Union;
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the
company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
company’s transactions and disclose with reasonable accuracy at any time the financial position of the company
and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also
responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
Website publication
The Directors are responsible for the maintenance and integrity of the corporate and financial information included
on the company’s website. Legislation in the United Kingdom governing the preparation and dissemination of the
financial statements and other information included in annual reports may differ from legislation in other
jurisdictions.
This report was approved by the board of directors and signed on its behalf by:
Edward Dawson
Director
2 May 2017
- 7 -
PROSPEX OIL & GAS PLC
INDEPENDENT AUDITORS' REPORT
TO THE MEMBERS OF PROSPEX OIL & GAS PLC
We have audited the financial statements (the "financial statements") of Prospex Oil & Gas Plc for the year
ended 31 December 2016 which comprise the Statement of Comprehensive Income, the Statement of
Financial Position, the Cash Flow Statement, the Statement of Changes in Equity and the related notes.
The financial reporting framework that has been applied in the preparation of the financial statements is
applicable law and International Financial Reporting Standards ('IFRSs') as adopted by the European Union.
This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of
the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's
members those matters we are required to state to them in an auditors' report and for no other purpose. To
the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the
Company and the Company's members as a body, for our audit work, for this report, or for the opinions we
have formed.
Respective responsibilities of directors and auditors
As explained more fully in the Directors' Responsibilities Statement set out on pages 6 - 7, the directors are
responsible for the preparation of the financial statements and for being satisfied that they give a true and fair
view. Our responsibility is to audit and express an opinion on the financial statements in accordance with
applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to
comply with the Auditing Practices Board's Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient
to give reasonable assurance that the financial statements are free from material misstatement, whether
caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to
the
the Company's circumstances and have been consistently applied and adequately disclosed;
reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the
financial statements. In addition, we read all the financial and non-financial information in the annual report
and financial statements to identify material inconsistencies with the audited financial statements and to
identify any information that is materially incorrect based on, or materially inconsistent with, the knowledge
acquired by us in the course of performing the audit. If we become aware of any apparent material
misstatements or inconsistencies we consider the implications for our report.
Opinion on financial statements
In our opinion the financial statements:
-
give a true and fair view of the state of the Company's affairs as at 31 December 2016 and of its profit for
the year then ended;
have been properly prepared in accordance with International Financial Reporting Standards as adopted
by the European Union; and
have been prepared in accordance with the requirements of the Companies Act 2006.
-
-
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Strategic Report and the Directors' Report for the financial year for
which the financial statements are prepared is consistent with the financial statements.
- 8 -
PROSPEX OIL & GAS PLC
INDEPENDENT AUDITORS' REPORT (CONTINUED)
TO THE MEMBERS OF PROSPEX OIL & GAS PLC
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to
report to you if, in our opinion:
-
adequate accounting records have not been kept by the Company, or returns adequate for our audit
have not been received from branches not visited by us; or
the Company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
-
-
-
Darsh Shah
(Senior Statutory Auditor)
for and on behalf of Adler Shine LLP
Chartered Accountants
Statutory Auditor
2 May 2017
Aston House
London
N3 1LF
- 9 -
PROSPEX OIL & GAS PLC
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2016
Notes
4
5
9
6
7
Continuing operations
Administrative expenses
Operating loss
Surplus as a result of the CVA
Finance income
Financial assets at fair value through
profit and loss
Profit/(loss) before income taxation
Income tax expense
Profit/(loss) on ordinary activities
after taxation from continuing
operations
Discontinued operations
Profit/(loss) for the year from
discontinued operations
Profit for the year and total
comprehensive income attributable
to owners of the parent
Earnings/(loss) per share - basic and
diluted
From continuing operations
From discontinued operations
2016
£
(778,093)
(778,093)
-
(778,093)
-
2,345,557
1,567,464
-
2015
£
(601,892)
(601,892)
98,885
(503,007)
162
-
(502,845)
411
1,567,464
(502,434)
-
571,745
1,567,464
69,311
0.96p
-
(1.64)p
1.86p
The notes on pages 14 - 31 form an integral part of these financial statements.
- 10 -
PROSPEX OIL & GAS PLC
STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2016
ASSETS
Non current assets
Tangible assets
Investments
Current assets
Trade and other receivables
Cash and cash equivalents
LIABILITIES
Current liabilities
Trade and other payables
Net current assets
Net assets
EQUITY
Share capital
Share premium account
Capital redemption reserve
Merger reserve
Profit and loss account
Total equity
Notes
8
9
10
11
2016
£
849
4,142,200
4,143,049
31,766
466,413
498,179
155,909
382,216
538,125
12
(87,676)
(80,975)
15
410,503
4,553,552
5,107,779
6,740,144
43,333
2,416,667
(9,754,371)
4,553,552
2015
£
1,274
100
1,374
457,150
458,524
2,657,234
6,732,714
43,333
2,416,667
(11,391,424)
458,524
Approved by the Board and authorised for issue on 2 May 2017
Edward Dawson
Director
Richard Mays
Director
Company Registration No. 03896382
The notes on pages 14 - 31 form an integral part of these financial statements.
- 11 -
PROSPEX OIL & GAS PLC
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2016
Balance at 1 January 2015
Changes in equity for 2015
Total comprehensive income for the
year
Issue of shares
Costs in respect of shares issued
On completion of CVA
Equity-settled share-based payments
On disposal of subsidiaries
Share
capital
-
Share
premium
Retained
earnings
Foreign
currency
reserve
Capital
redemption
reserve
Merger
reserve
Non
controlling
interests
Convertible
loan note
Total
£
£
£
£
£
£
£
£
£
2,304,398
6,063,208
(11,531,728)
39,467
43,333
2,416,667
(166,865)
100,216
-
(731,304)
-
352,836
-
-
723,314
(53,808)
-
-
-
-
-
-
69,311
-
-
-
70,993
-
-
-
-
-
-
(39,467)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
166,865
(100,216)
-
-
Balance at 31 December 2015
2,657,234
6,732,714
(11,391,424)
Changes in equity in 2016
Total comprehensive income for the
year
Issue of shares
Costs in respect of shares issued
Equity-settled share-based payments
-
2,450,545
-
-
-
70,455
(63,025)
-
1,567,464
-
-
69,589
15
14
Balance at 31 December 2016
5,107,779
6,740,144
(9,754,371)
-
-
-
-
-
-
43,333
2,416,667
-
-
-
-
-
-
-
-
43,333
2,416,667
-
-
-
-
-
-
-
-
-
-
-
-
69,311
1,076,150
(53,808)
(100,216)
70,993
127,398
458,524
1,567,464
2,521,000
(63,025)
69,589
4,553,552
Merger reserve
The merger reserve has been created as a result of the acquisition of the whole of the issued share capital of Central Asia Resources Limited ('CAR') by the Company in
exchange for shares in the Company and the nominal value. It represents the difference between the fair value of the share capital issued by the Company and the nominal
value.
- 12 -
PROSPEX OIL & GAS PLC
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2016
£
2016
£
£
2015
£
Cash flows from operating activities
Operating loss
Depreciation of property, plant and equipment
Increase in inventories
Increase/(decrease) in trade and other receivables
Increase/(decrease) in trade and other payables
Equity-settled share based payments
Other movement
(778,093)
425
-
124,143
6,701
69,589
-
Net cash used in operating activities - continuing operations
(577,235)
(601,892)
425
-
(130,552)
(96,409)
70,993
33,955
(723,480)
Investing activities
Finance income
Net cash (outflow)/inflow investing
activities
Capital expenditure and financial
investment
Payments to acquire tangible assets
Payments to acquire investments
Net cash (outflow)/inflow for capital
expenditure
Acquisitions and disposals
Cash on disposal of subsidiary
undertaking
Net cash outflow for acquisitions
and disposals
Financing activities
Issue of share capital
Proceeds received from issue of
derivative financial asset
Cost of share issue
Convertible unsecured loan notes
Net cash generated from financing
activities
Net increase in cash and cash
equivalents in year
Cash and cash equivalents at
beginning of the year
Cash and cash equivalents at end of the year
-
162
-
162
-
(1,796,543)
(1,699)
-
(1,796,543)
(1,699)
-
(247)
-
(247)
2,521,000
1,076,150
-
(63,025)
-
12,404
(53,808)
50,000
2,457,975
1,084,746
84,197
382,216
466,413
359,482
22,734
382,216
The notes on pages 14 - 31 form an integral part of these financial statements.
- 13 -
PROSPEX OIL & GAS PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
1
Accounting policies and basis of preparation
1.1 General information
Prospex Oil and Gas Plc is incorporated in England and Wales and is quoted on the AIM Market of the
London Stock Exchange Plc. The address of its registered office is Stonebridge House, Chelmsford Road,
Hatfield Heath, Essex CM22 7BD. The registered number of the company is 03896382.
These financial statements are presented in pounds sterling because that is the currency of the primary
economic environment in which the company operates.
1.2 Going concern
The current economic environment is challenging and the Company has reported an operating loss for the
year. These losses are expected to continue in the current accounting year to 31 December 2017.
The Company regularly carries out fund-raising exercises in order that it can provide the necessary
working capital and investment funds for the Company. As detailed in note 20, since the year end, the
Company has raised £850,000 before expenses, through the issue of new ordinary shares.
The Board expects to continue to raise additional funding as and when required to cover the Company's
investments, primarily from the issue of further shares.
As such, the Directors have a reasonable expectation that the Company has adequate resources to
continue in operational existence for the foreseeable future. For this reason, they continue to adopt the
going concern basis in preparing the financial statements.
1.3 Basis of preparation
The Company financial statements have been prepared in accordance with International Financial
Reporting Standards as adopted by the European Union, (IFRSs) and International Financial Reporting
Interpretations Committee ('IFRIC') interpretations issued by the International Accounting Standards Board
(IASB) as adopted by the European Union and with those parts of the Companies Act 2006 applicable to
companies reporting under IFRS.
The Company financial statements have been prepared under the historical cost convention or fair value
where appropriate.
1.4 Basis of consolidation
Subsidiaries include all entities over which the Company has the power to govern financial and operating
policies. The existence and effect of potential voting rights that are currently exercisable or convertible are
considered when assessing whether the Company controls another entity. Subsidiaries are consolidated
from the date on which control commences until the date that control ceases. Intra-group balances and any
unrealised gains and losses on income or expenses arising from intra-group transactions, are eliminated in
preparing the consolidated financial statements.
The Company is an investment entity and, as such, does not consolidate the investment entities it controls.
The Company's interests in subsidiaries are recognised at fair value through profit and loss.
- 14 -
PROSPEX OIL & GAS PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2016
1
Accounting policies
(continued)
1.5 Property plant and equipment
Property, plant and equipment are stated at cost less depreciation. Depreciation is provided at rates
calculated to write off the cost less estimated residual value of each asset over its expected useful life, as
follows:
Fixtures, fittings & equipment
Motor vehicles
1.6 Impairment of non-financial assets
25% per annum on the reducing balance
Assets that have an indefinite useful life, for example goodwill, are not subject to amortisation and are
tested annually for impairment. Assets that are subject to amortisation are tested for impairment whenever
events or changes in circumstances indicate that the carrying amount may not be recoverable. An
impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are
separately identifiable cash flows (Cash Generating Units). Non-financial assets other than goodwill that
have suffered impairment are reviewed for possible reversal of the impairment at each reporting date.
1.7 Financial instruments
Financial assets and financial liabilities are recognised on the balance sheet when the Company becomes
a party to the contractual provisions of the instrument.
1.8 Loans and receivables
These assets are non-derivative financial assets with fixed or determinable payments that are not quoted
in an active market. The principal financial assets of the company are loans and receivables, which arise
principally through the provision of goods and services to customers (e.g. trade receivables) but also
incorporate other types of contractual monetary asset. They are included in current assets, except for
maturities greater than 12 months after the balance sheet date. These are classified as non-current assets.
The Company's loans and receivables are recognised and carried at the lower of their original amount less
an allowance for any doubtful amounts. An allowance is made when collection of the full amount is no
longer considered possible.
The Company's loans and receivables comprise trade and other receivables and cash and cash
equivalents in the consolidated statement of financial position.
Cash and cash equivalents include cash at bank and in hand and short-term deposits with an original
maturity of three months or less.
1.9 Trade and other payables
Trade and other payables are initially measured at fair value and subsequently measured at amortised cost
using the effective interest rate method.
- 15 -
PROSPEX OIL & GAS PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2016
1
Accounting policies
(continued)
1.10 Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the substance of the contractual
arrangements entered into. An equity instrument is any contract that evidences a residual interest in the
assets of the entity after deducting all of its financial liabilities.
Where the contractual obligations of financial instruments (including share capital) are equivalent to a
similar debt instrument, those financial instruments are classed as financial liabilities. Financial liabilities
are presented as such in the balance sheet. Finance costs and gains or losses relating to financial
liabilities are included in the profit and loss account. Finance costs are calculated so as to produce a
constant rate of return on the outstanding liability.
Where the contractual terms of share capital do not have any terms meeting the definition of a financial
liability then this is classed as an equity instrument. Dividends and distributions relating to equity
instruments are debited direct to equity.
Equity comprises the following:
- Share capital represents the nominal value of equity shares;
- Share premium represents the excess over nominal value of the fair value of consideration received for
equity shares, net of expenses of the share issue;
- Profit and loss reserve represents retained deficit;
- Other reserve represents the capital redemption reserve arising on redemption of shares in previous
years and own share reserve.
1.11 Equity-settled share-based payment
The Company makes equity-settled share-based payments. The fair value of options granted is recognised
as an expense, with a corresponding increase in equity. The fair value is measured at grant date and
spread over the vesting period, which is the period over which all of the specified vesting conditions are to
be satisfied. The fair value of the options granted is measured based on the Black-Scholes framework,
taking into account the terms and conditions upon which the instruments were granted. At each balance
sheet date, the Company revises its estimate of the number of options that are expected to become
exercisable. It recognises the impact of the revision to original estimates, if any, in the income statement,
with a corresponding adjustment to equity.
1.12 Taxation
The income tax expense or taxation recoverable represents the sum of tax currently payable or
recoverable and deferred tax.
The tax currently payable is based on the taxable profit for the period using the tax rates that have been
enacted or substantially enacted by the balance sheet date. Taxable profit differs from the net profit as
reported in the income statement because it excludes items of income or expense that are taxable or
deductible in other years and it further excludes items that are never taxable or deductible.
Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax is
determined using tax rates that have been enacted or substantially enacted at the balance sheet date and
are expected to apply when the related deferred income tax asset is realised or the deferred tax liability is
settled. Deferred tax is charged or credited in the income statement, except when it relates to items
charged or credited to equity, in which case the deferred tax is also dealt with in equity. Deferred tax
assets are only recognised to the extent that it is probable that future taxable profit will be available against
which the asset can be utilised.
- 16 -
PROSPEX OIL & GAS PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2016
1
Accounting policies
1.13 Leasing
(continued)
Rentals payable under operating leases are charged against income on a straight line basis over the lease
term.
1.14 Investments
Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is
classified in this category if acquired principally for the purpose of selling in the short term. Assets in this
category are classified as current assets.
Financial assets carried at fair value through profit or loss are initially recognised at fair value and
transaction costs are expensed in the income statement. Financial assets are derecognised when the
rights to receive cash flows from the investments have expired or have been transferred and the company
has transferred substantially all risks and rewards of ownership. Financial assets at fair value through profit
or loss are subsequently carried at fair value.
Gains or losses arising from changes in the fair value of the financial assets at fair value through profit or
loss are presented in the income statement within 'other gains/(losses) - net' in the period in which they
arise.
1.15 Pensions
The company operates a defined contribution scheme for the benefit of its employees. Contributions
payable are charged to the profit and loss account in the year they are payable.
- 17 -
PROSPEX OIL & GAS PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2016
1
Accounting policies
(continued)
1.16 Accounting Standards issued but not yet effective and/or adopted
As at the date of approval of these financial statements, the following standards were in issue but not yet
effective. These standards have not been adopted early by the company as they are not expected to have
a material impact on the company's financial statements.
IFRS 2
IFRS 4
IFRS 9
IFRS 12
IFRS 15
IFRS 16
IAS 7
IAS 12
IAS 28
IAS 40
Amendments - Classification and measurement of share-based payments
transactions
Amendment - applying IFRS 9 "Financial Instruments" with IFRS 4
"Insurance Contracts"
Financial instruments – incorporating requirements for classification and
measurement, impairment, general hedge accounting and de-recognition
Disclosure of interests in other activities - amendments resulting from
Annual Improvements 2014 - 2016 cycle. (clarifying scope)
Revenue from contracts with customers, and the related clarifications
Leases - recognition, measurement, presentation and disclosure.
Statement of cash flows – Amendments resulting from the disclosure
initiative
Income taxes - Amendments regarding recognition of deferred tax assets
for unrealised losses
Amendment resulting from Annual Imoprovement 2014 - 2016 cycle,
clarifying certain fair value measurements
Amendment - Transfers of investment property
Effective
date (period
beginning on
or after)
01/01/2018
01/01/2018
01/01/2018
01/01/2017
01/01/2018
01/01/2019
01/01/2017
01/01/2017
01/01/2018
01/01/2018
The International Financial Reporting Interpretations Committee has also issued interpretations which the
company does not consider will have a significant impact on the financial statements.
IFRIC 22
Foreign currency translations and advance consideration
01/01/2018
- 18 -
PROSPEX OIL & GAS PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2016
2
Critical accounting estimates and judgements
The preparation of the financial information in conformity with IFRS requires the use of certain critical
accounting estimates that affect the reported amounts of assets and liabilities at the date of the financial
information and the reported amounts of revenue and expenses during the reporting period. Although
these estimates are based on management's best knowledge of the amounts, events or actions, actual
results ultimately may differ from these estimates. The estimates and underlying assumptions are as
follows:
Investment entities
The judgements, assumptions and estimates involved in the Company’s accounting policies that are
considered by the Board to be the most important to the portrayal of its financial condition are the fair
valuation of the investment and the assessment regarding investment entities. The investment portfolio is
held at fair value. The Directors review the valuations policies, process and application to individual
investments.
Entities that meet the definition of an investment entity within IFRS 10 are required to account for most
investments in controlled entities, as well as investments in associates and joint ventures, at fair value
through profit and loss. The Board has concluded that the Company continues to meet the definition of
an investment entity as its strategic objective of investing in portfolio investments for the purpose of
generating returns in the form of investment income and capital appreciation remains unchanged.
Fair value is the underlying principle and is defined as "the price that would be received to sell an asset
in an orderly transaction between market participants at the measurement date". Fair value is therefore
an estimate and, as such, determining fair value requires the use of judgement. The quoted assets in our
portfolio are valued at their closing bid price at the balance sheet date. The largest investment in the
portfolio, however, is represented by an unquoted investment.
Impairment of assets
The Company is required to test, on an annual basis, whether its non-current assets have suffered any
impairment. Determining whether these assets are impaired requires an estimation of the value in use of
the cash-generating units to which the assets have been allocated. The value in use calculation requires
the Directors to estimate the future cash flows expected to arise from the cash-generating unit and a
suitable discount rate in order to calculate the present value. Subsequent changes to the cash
generating unit allocation or to the timing of cash flows could impact on the carrying value of the
respective assets.
Recoverability of other financial assets
The majority of the Company's financial assets represent loans provided to its subsidiary, which are
associated with funding of mineral exploration and development projects. The recoverability of such
loans is dependent upon the discovery of economically recoverable reserves, the ability of the Company
to maintain necessary financing to complete the development of the reserves and future profitable
production or proceeds from the disposition thereof.
Share based payments
The estimates of share based payments requires that management selects an appropriate valuation
model and make decisions on various inputs into the model including the volatility of its own share price,
the probable life of the options before exercise, and behavioural consideration of employees.
Deferred tax assets
Deferred taxation is provided for using the liability method. Deferred tax assets are recognised in respect
of tax losses where the Directors believe that it is probable that future profits will be relieved by the
benefit of tax losses brought forward. The Board considers the likely utilisation of such losses by
reviewing budgets and medium term plans for the Company. The Directors have decided that no deferred
tax asset should be recognised at 31 December 2016. If the actual profits earned by the Company differs
from the budgets and forecasts used then the value of such deferred tax assets may differ from that
shown in these financial statements.
- 19 -
PROSPEX OIL & GAS PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2016
3
Segmental information
The Company is an Investing Company. The results for this continuing operation, all of which were
carried out in the UK, are disclosed in the Income Statement. The net assets as at 31 December 2016 as
shown on the Statement of Financial Position all relate to the Investment activity.
4
Operating loss
Operating loss is stated after charging:
Depreciation of tangible assets
Loss on foreign exchange transactions
Auditors' remuneration
- Fees payable to the company's auditor for
the audit of the company's financial
statements
- Fees payable to the company's auditors for
non-audit services
5
Finance income
Bank interest received
2016
£
425
4,584
2015
£
425
250
16,250
17,545
-
2,000
2016
£
-
2015
£
162
- 20 -
PROSPEX OIL & GAS PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2016
6
Income tax expense
Domestic current year tax
Adjustment for prior years
Total tax expenses
2016
£
-
-
2015
£
(411)
(411)
Factors affecting the tax charge for the year
Profit before income taxation
1,567,464
68,900
Profit on ordinary activities before taxation multiplied by standard rate of
UK corporation tax of 20.00% (2015 - 20.00%)
313,493
13,780
Effects of:
Non deductible expenses
Depreciation add back
Capital allowances
Tax losses not utilised
Unrealised chargeable gains
Prior year
Other tax adjustments
Total tax expense
15,768
85
-
139,765
(469,111)
-
-
20,207
85
(340)
(80,650)
-
(411)
46,918
(313,493)
(14,191)
-
(411)
There is no provision for UK Corporation Tax due to adjusted losses for tax purposes, subject to
agreement with HM Revenue and Customs. The deferred asset of approximately £686,000 (2015:
£578,000) arising from the accumulated tax losses of approximately £4.0m (2015: £3.4m) carried forward
has not been recognised but may become recoverable against future trading profits.
7
Earnings/loss per share
The (loss)/earnings and number of shares used in the calculation of earnings per ordinary share are set
out below:
Basic:
Continuing operations
Discontinued operations
Loss for the financial period
2016
£
2015
£
1,567,464
-
(502,434)
571,745
1,567,464
69,311
Weighted average of ordinary shares
163,085,489
30,677,884
There was no dilutive effect from the options outstanding during the period (note 14).
- 21 -
Plant and
machinery
£
1,699
425
425
850
849
1,274
PROSPEX OIL & GAS PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2016
8
Tangible fixed assets
Cost
At 1 January 2016 & at 31 December 2016
Depreciation
At 1 January 2016
Charge for the year
At 31 December 2016
Net book value
At 31 December 2016
At 31 December 2015
9
Investments
The Company
Cost
At 1 January 2016
Additions
Fair value movement
Investment
at fair value
£
Investment entity
subsidiaries
Shares
£
Loans
£
Total
£
-
194,655
37,057
100
-
2,308,500
-
1,601,888
-
100
1,796,543
2,345,557
At 31 December 2016
231,712
2,308,600
1,601,888
4,142,200
Investments are recognised and de-recognised on the date when their purchase or sale is subject to a relevant
contract and the associated risks and rewards have been transferred. The Company manages its investments with a
view to profiting from the receipt of investment income and capital appreciation from changes in the fair value of
investments.
All investments are initially recognised at the fair value of the consideration given and are subsequently measured at
fair value through profit and loss.
Unquoted investments, including both equity and loans are designated at fair value through profit and loss and are
subsequently carried in the statement of financial position at fair value. Fair value is determined in line with the fair
value guidelines under IFRS.
In accordance with IFRS 10, the proportion of the investment portfolio held by the Company's unconsolidated
subsidiaries is presented as part of the fair value of investment entity subsidiaries, along with the fair value of their
other assets and liabilities.
The holding period of the Company's investment portfolio is on average greater than one year. For this reason the
portfolio is classified as non-current. It is not possible to identify with certainty investments that will be sold within one
year.
- 22 -
PROSPEX OIL & GAS PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2016
9
Investments
(continued)
Investments in investment entity subsidiaries are accounted for as financial instruments at fair value through profit
and loss and are not consolidated in accordance with IFRS10.
These entities hold the Company's interests in investments in portfolio companies. The fair value can increase or
reduce from either cash flows to/from the investment entities or valuation movements in line with the Company's
valuation policy.
The fair value of these entities is their net asset values.
The Directors determine that in the ordinary course of business, the net asset values of an investment entity
subsidiary are considered to be the most appropriate to determine fair value. At each reporting period, they consider
whether any additional fair value adjustments need to be made to the net asset values of the investment entity
subsidiaries. These adjustments may be required to reflect market participants' considerations about fair value that
may include, but are not limited to, liquidity and the portfolio effect of holding multiple investments within the
investment entity subsidiary.
Subsidiary
The Company owns the whole of the issued share capital of PXOG County Limited, a company registerd in England
and Wales. This company owns the Company's principal investment, a 49% shareholding in Hutton Poland Limited.
Full details of this investment is set out in the Chairman's report.
At the balance sheet date PXOG County Limited had net assets of £3,910,488 and had made a profit of £2,308,500
for the period then ended.
10 Trade and other receivables
Other receivables
Prepayments and accrued income
2016
£
21,484
10,282
2015
£
138,779
17,130
31,766
155,909
The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.
11 Cash and cash equivalents
Cash at bank and in hand
2016
£
2015
£
466,413
382,216
The Directors consider that the carrying amount of cash and cash equivalents approximates to their fair value.
All of the Company's cash and cash equivalents are at floating rates of interest.
- 23 -
PROSPEX OIL & GAS PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2016
12 Trade and other payables
Trade payables
Taxes and social security costs
Other payables
Accruals and deferred income
2016
£
53,123
9,138
-
25,415
2015
£
1,349
9,829
26,751
42,946
87,676
80,975
The Directors consider that the carrying amount of trade and other payables approximates to their fair value.
13 Pension and other post-retirement benefit commitments
Defined contribution
Contributions payable by the company for the year
9,000
7,125
2016
£
2015
£
- 24 -
PROSPEX OIL & GAS PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2016
14 Share-based payments
Share options
At 31 December 2015 and 31 December 2016 outstanding awards to subscribe for ordinary shares of 1p each in
the Company, granted in accordance with the rules of the share option scheme, were as follows:
31 December 2015
Brought forward
Granted
Lapsed
Carried forward
31 December 2016
Brought forward
Granted
Lapsed
Carried forward
Shares under
option
268,400
3,659,116
(24,000)
Weighted
average
remaining
contractual
life (years)
6.3
-
-
Weighted
average exercise
price (pence)
143.62
3.05
(2.08)
3,903,516
9.1
11.86
Shares under
option
Weighted
average exercise
price (pence)
Weighted
average
remaining
contractual
life (years)
3,903,516
20,728,545
-
9.1
-
-
11.86
1.03
24,632,061
3.59
2.74p
All options were exercisable at the year end. No options were exercised during the year.
The following share-based payment arrangements were in existence during the current and prior years.
Options
Number
Expiry dateExercise price
Fair value at
grant date
1. Granted 31 July 2007
2. Granted 30 April 2012
3. Granted 16 April 2015
4. Granted 16 April 2015
5. Granted 22 September 2016
6. Granted 22 September 2016 *
7. Granted 22 September 2016 *
8. Granted 23 December 2016 *
36,400
208,000
2,847,116
812,000
1,434,209
13,694,584
4,164,000
1,436,000
31/07/2017
30/04/2022
15/04/2025
15/04/2018
22/09/2019
22/09/2019
22/09/2019
23/12/2019
250.0p
125.0p
3.0p
3.0p
1.0p
1.0p
1.1p
1.1p
82.5p
47.5p
1.94p
1.94p
0.53p
0.31p
0.29p
0.53p
- 25 -
PROSPEX OIL & GAS PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2016
14 Share-based payments
(continued)
The fair value of remaining share options has been calculated using the Black Scholes model. The assumptions
used in the calculation of the fair value of the share options outstanding during the year are as follows:
Options
Grant date share
price
Exercise
price
Expected
volatility
Expected
option life
Risk-free
interest rate
1. Granted 31 July 2007
2. Granted 30 April 2012
3. Granted 16 April 2015
4. Granted 16 April 2015
5. Granted 22 September 2016
6. Granted 22 September 2016 *
7. Granted 22 September 2016 *
8. Granted 23 December 2016 *
212.5p
175.0p
4.0p
4.0p
1.7p
1.7p
1.7p
2.5p
250.0p
125.0p
3.0p
3.0p
1.0p
1.0p
1.1p
1.1p
100%
32%
71.5%
71.5%
71.0%
71.0%
71.0%
79.0%
5 years
3.5 years
3 years
3 years
3 years
3 years
3 years
3 years
4.4%
0.24% - 0.43%
0.71%
0.71%
0.10%
0.10%
0.10%
0.28%
* These options vest once the share price of the Company has closed at 5p or higher for 5 consecutive trading
days.
The fair value has been calculated assuming that there will be no dividend yield.
Volatility was determined by reference to the standard deviation of expected share price returns based on a
statistical analysis of daily share prices over a 3 year period to grant date. All of the above options are equity
settled and the charge for the year is £69,589 (2015: £70,993).
- 26 -
PROSPEX OIL & GAS PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2016
15 Share capital
2016
Number
2015
Number
2016
£
2015
£
Allotted, called up and fully paid
Ordinary shares of 1p each
Deferred shares of 0.1p each
Deferred shares of £24 each
285,785,836
942,462,000
54,477
40,731,291
942,462,000
54,477
2,857,858
942,462
1,307,459
407,313
942,462
1,307,459
5,107,779
2,657,234
In June 2016, the Company raised £1.64m, before expenses, through the issue of 164,600,000 New
Ordinary Shares of 1p each at a price of 1p per share to provide capital for the Company's Investing Policy.
In August 2016, the Company raised £100,000, before expenses, through the issue of 10,000,000 New
Ordinary Shares of 1p each at a price of 1p per share to provide capital for the Company's Investing Policy.
In September 2016, the Company raised £775,000, before expenses, through the issue of 70,454,545 New
Ordinary Shares of 1p each at a price of 1.1p per share to provide capital for the Company's Investing
Policy.
The deferred shares have no rights to vote, attend or speak at general meetings of the Company or to
receive any dividend or other distribution and have limited rights to participate in any return of capital on a
winding-up or liquidation of the Company.
- 27 -
PROSPEX OIL & GAS PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2016
16 Directors' emoluments
Key management personnel are those persons having authority and responsibility for planning, directing and
controlling activities of the Company, including all directors of the Company.
Directors
Emoluments for qualifying services
Benefit in kind
Pension contributions
Directors and key management personnel
Directors' emoluments
Edward Dawson
William Smith
Richard Mays
Gavin Burnell (resigned 28
April 2016)
James Smith (appointed 22
December 2016)
Gerry Desler (resigned 14
April 2015)
Christian
(resigned 14 April 2015)
Garth Earls
April 2015)
Richard Nolan (resigned 14
April 2015)
(resigned 14
Schaffalitzky
Salaries and
fees
£
Benefit in
kind
£
80,750
8,500
8,000
-
415
-
-
-
-
4,200
-
-
-
-
-
-
-
-
Pension
£
9,000
-
-
-
-
-
-
-
-
2016
£
2015
£
97,665
4,200
9,000
126,659
2,975
7,125
110,865
136,759
2016
Total
£
93,950
8,500
8,000
-
415
-
-
-
-
2015
£
82,350
8,500
9,000
8,576
-
10,000
3,333
5,000
10,000
97,665
4,200
9,000
110,865
136,759
The number of directors for whom retirement benefits are accruing under money purchase
pension schemes amounted to 1 (2015 - 1).
- 28 -
PROSPEX OIL & GAS PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2016
16 Directors' emoluments
(continued)
The Directors interests in share options as at 31 December 2016 are as follows:
Director
Edward Dawson
Edward Dawson
Edward Dawson *
Edward Dawson *
Richard Mays
Richard Mays
Richard Mays *
Richard Mays *
William Smith
William Smith
William Smith *
William Smith *
James Smith *
Options at
31
December
2016
680,212
971,663
4,438,000
1,292,000
541,726
20,196
2,327,418
1,436,000
541,726
20,196
2,327,418
1,436,000
1,436,000
Exercise
price
Date of grant First date of
exercise
Final date of
exercise
3.05p
1.0p
1.0p
1.1p
3.05p
1.0p
1.0p
1.1p
3.05p
1.0p
1.0p
1.1p
1.1p
14/04/2015
22/09/2016
22/09/2016
22/09/2016
14/04/2015
22/09/2016
22/09/2016
22/09/2016
14/04/2015
22/09/2016
22/09/2016
22/09/2016
23/12/2016
14/04/2015
22/09/2016
22/09/2016
22/09/2016
14/04/2015
22/09/2016
22/09/2016
22/09/2016
14/04/2015
22/09/2016
22/09/2016
22/09/2016
23/12/2016
14/04/2025
22/09/2019
22/09/2019
22/09/2019
14/04/2025
22/09/2019
22/09/2019
22/09/2019
14/04/2025
22/09/2019
22/09/2019
22/09/2019
23/12/2019
* These options vest once the share price of the Company has closed at 5p or higher for 5 consecutive trading
days.
17 Employees
Number of employees
There were 5 employees during the year including the directors (2015: 5).
Employment costs
Wages and salaries
Social security costs
Other pension costs
Equity settled share-based payments
18 Control
In the opinion of the directors, there is no ultimate controlling party.
2016
£
2015
£
192,665
19,015
9,000
69,589
211,659
20,186
7,125
70,993
290,269
309,963
- 29 -
PROSPEX OIL & GAS PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2016
19 Related party transactions
Included in trade and other receivables is an amount of £1,601,888 (2015: £nil) due from PXOG County
Limited, the company's wholly owned subsidiary.
During the year, there were consultancy fees of £15,200 (2015: £17,200) charged by Sallork Legal and
Commercial Consulting Limited ("Sallork") and included in trade payables at the year end is £nil (2015:
£1,200) owing to Sallork. Richard Mays is a director and shareholder of Sallork.
Included in trade and other payables are the following balances due to Directors as at 31 December 2016.
Edward Dawson
20 Subsequent events
2016
£
2015
£
13,660
3,881
Share reorganisation
On 20 February 2017, the Company held a General Meeting at which shareholders approved a share
capital reorganisation. The reorganisation was effected through the subdivision of each of the Existing
Ordinary Shares of 1p each into one New Ordinary Share of 0.1p each and one New Deferred Share of
0.9p each.
Placing
In February 2017, following shareholder approval of the share reorganisation, the Company completed a
placing to raise approximately £850,000, before expenses, from the issue of 170,000,000 new ordinary
shares of 0.1p each ("New Ordinary Shares") at a price of 0.5p per share (the "Placing"). The funds
raised will be used towards the Company's ongoing evaluation of a number of potential projects, in line
with its strategy to build a portfolio of investments in the European oil and gas sector, and will also be
used for general working capital purposes.
Investment valuation
Drilling operations at the Boleslaw-1 well ('Boleslaw-1' or 'the Well') commenced on 10 December 2016
and continued until 10 January 2017. However no recoverable hydrocarbons were indicated on the mud
logs. As a result, the operator advised the Company that the Well was to be plugged and abandoned.
While the outcome was disappointing, Boleslaw was drilled safely, on schedule, and on budget. The
Directors believe this is testament to the performance of the engineering crew on the ground as well as
the quality of the pre-drill technical work undertaken by the partners. Boleslaw was the first well to be
drilled on the Kolo licence, which covers an area of 1,150 sq. km and which is located in a working
hydrocarbon system. Further technical work will be conducted to generate an updated geological and
hydrocarbon system model, as the partners plan the next steps for the Licence. This work will incorporate
all the data and geological samples recovered from the Well.
In accordance with IAS10 "Events after the reporting period" no adjustment has been made to the
carrying value of the Company's investment in its 'Investment Entity Subsidiary', as the evidence that the
Well was dry was obtained after the balance sheet date.
The result of this first well is likely to have a negative impact on the value of the Company's investment,
which at the balance sheet date was valued at US$4.8m. The valuation was based on a Competent
Person's Report which was completed mid-2016.
- 30 -
PROSPEX OIL & GAS PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2016
21 Financial instruments
The principal financial instruments used by the Company, from which financial instrument risk arises are
as follows
- Trade and other receivables
- Cash and cash equivalents
- Trade and other payables
A summary of the financial instruments held by category is provided below:
Financial assets
Loans and receivables
Trade and other receivables
Cash and cash equivalents
Total financial assets
Financial liabilities
Trade and other payables
2016
£
2015
£
31,766
466,413
155,909
382,216
498,179
538,125
2016
£
2015
£
87,676
80,975
The Directors consider that the carrying amount of trade and other receivables and trade and other
payables approximate their fair value.
Financial risk management
The Company's activities expose it to a variety of risks including market risk (foreign currency risk and
interest rate risk), credit risk and liquidity risk. The Company manages these risks through an effective
risk management programme and through this programme, the Board seeks to minimise potential
adverse effects on the Company's financial performance.
The Board provides written objectives, policies and procedures with regards to managing currency and
interest risk exposures, liquidity and credit risk including guidance on the use of certain derivative and
non derivative financial instruments
Credit risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial
instrument fails to meet its contractual obligations. The Company's credit risk is primarily attributable to
its receivables and its cash deposits. It is Company policy to assess the credit risk of new customers
before entering contracts. The credit risk on liquid funds is limited because the counterparties are banks
with high credit-ratings assigned by international credit-rating agencies.
- 31 -
PROSPEX OIL & GAS PLC
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2016
21 Financial instruments
(continued)
Liquidity risk and interest rate risk
Liquidity risk arises from the Company's management of working capital. It is the risk that the Company
will encounter difficulty in meeting its financial obligations as they fall due. The Board regularly receives
cash flow projections for a minimum period of 12 months, together with information regarding cash
balances monthly.
The Company is principally funded by equity and invests in short-term deposits, having access to these
funds at short notice. The Company's policy throughout the period has been to minimise interest rate risk
by placing funds in risk free cash deposits but also to maximise the return on funds placed on deposit.
All cash deposits attract a floating rate of interest. The benchmark rate for determining interest receivable
and floating rate assets is linked to the UK base rate.
Foreign currency exposure
The Company has no exposure to foreign currency risk.
- 32 -