REGISTERED NUMBER: 03896382 (England and Wales)
Strategic Report, Report of the Directors and
Financial Statements for the Year Ended 31 December 2017
for
Prospex Oil And Gas Plc
Prospex Oil And Gas Plc
Contents of the Financial Statements
for the year ended 31 December 2017
Company Information
Chairman's Report
Strategic Report
Report of the Directors
Report of the Independent Auditors
Statement of Profit or Loss and Other
Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Statement of Cash Flows
Notes to the Financial Statements
Page
1
2
4
6
9
13
14
15
16
17
18
Prospex Oil And Gas Plc
Company Information
for the year ended 31 December 2017
DIRECTORS:
E R Dawson
Dr. R P Mays
W H Smith
J N Smith
SECRETARY:
G Desler
REGISTERED OFFICE:
Stonebridge House
Chelmsford Road
Hatfield Heath
Essex
CM22 7BD
REGISTERED NUMBER:
03896382 (England and Wales)
AUDITORS:
Adler Shine LLP
Chartered Accountants & Statutory Auditor
Aston House
Cornwall Avenue
London
N3 1LF
Page 1
Prospex Oil And Gas Plc
Chairman's Report
for the year ended 31 December 2017
2017 may well have been just the second full year the current management team has been in place at
Prospex but that has not prevented considerable progress being made during the year towards delivering
on our corporate objective: to build an oil and gas investment company with a growing portfolio of late
stage European projects with short timelines to value trigger events, such as drilling. Over the course of
the year, Prospex acquired material interests in three core projects, Suceava in Romania, Podere Gallina
in Italy and Tesorillo in Spain. We have also participated in the drilling of three new wells, two of which
resulted in gas discoveries in Italy and Romania; and, towards the end of the period, we embarked on a
programme to de-risk up to 2TCF of gas resources at the Tesorillo Project in Spain.
We have been able to achieve so much in such a short period thanks to our focus on acquiring interests
in late stage projects where considerable resources have already been invested. This not only saves the
Company significant expense, it also enables us to apply, at low cost, new techniques and technologies to
legacy data, thereby accelerating the process of de-risking existing targets or identifying new plays.
Depending on the results, high impact drilling activity can then be fast tracked. Our two-out-of-three
success rate with the drilling shows that we are able to achieve this without compromising the quality of
the technical work undertaken. Furthermore, a successful well does not begin and end with drilling. Flow
testing, reserves estimates, additional drilling and first production are among major milestones that
typically need to be met before the value of an oil and gas project can be fully realised. A positive well
result therefore can lead to a pipeline of near term value trigger events that our shareholders can look
forward to.
This is precisely where we are at with our projects in Italy and Romania. Thanks to the success we
enjoyed in the second half of 2017 the year ahead will not be short of high impact activity. In 2018 we
have already has seen confirmation that the Podere Maiar-1d appraisal/redevelopment well on the Podere
Gallina Exploration Permit ('Podere Gallina') in the Po Valley region of Italy is a commercial gas discovery
after the testing of two gas bearing reservoirs exceeded expectations. Flow rates were well in excess of
the pre-test target of 100,000 scm/day, while methane gas content of 99.1% was recorded at both
levels. The permitting process is now underway to bring Podere Maiar-1d into production, and in tandem
with this, work is ongoing to generate revised contingent resource and reserve estimates based on
analysis of the log and well test results. This includes reservoir engineering to optimise production from
the two gas levels over the field life.
Podere Maiar-1d successfully tested the shut-in Selva gas-field, which was previously operated by ENI
and historically produced 80+ Bcf of gas between 1960 and 1984. Prior to drilling, the well was
targeting contingent resources (2C) of 17 Bcf. In addition to Selva, other targets have been identified
on the licence, offering considerable upside of up to 40.6 BCFG of prospective resources as detailed in an
historic Competent Person's Report ('CPR'). Contingent resource and reserve estimates, first production
and potential follow-up drilling all represent additional value drivers that our shareholders can look
forward to at Podere Gallina.
It is a similar story at the Exploration Area of the EIV-1 Suceava Concession in onshore Romania. Here
first production from the Bainet gas discovery, which was successfully drilled in Q4 2017 by the Bainet-1
well, is set to commence in Q2 2018. Bainet-1, which was drilled to a total depth of 600m, encountered
9m of reservoir with 8m of net gas pay consisting of a good quality Sarmatian sandstone reservoir,
similar to that found in fields producing elsewhere in the concession. During testing, natural gas
containing over 99% methane flowed at a rate of approximately 33,000 cubic metres/day through an
8mm choke. Production from Bainet-1, which was completed as a producer and lies close to an existing
gas processing plant and associated infrastructure, will represent Prospex's first internally generated
revenues. It will also provide the Company with a platform with which to target additional prospects and
leads on the concession area.
Our third core project, Tesorillo in Spain, may be less advanced in terms of monetisation, but as with our
projects in Italy and Romania, it holds a gas discovery which a CPR has assigned gross unrisked
Prospective Resources of 830 billion cubic feet of gas (Best Estimate), with upside in excess of 2 TCF.
Clearly these are huge numbers. We are very keen to commence the de-risking process and a fully
funded work programme at the 38,000ha project is underway to test known gas bearing sandstone
sequences. An Audio Magnetotellurics ('AMT') survey is due to commence in the near term to evaluate
the subsurface geology of the licence area and test for resistivity, as a further indicator of the presence of
hydrocarbons. As well as holding a historic gas discovery, Tesorillo benefits from being located in a
proven hydrocarbon region and has excellent access to nearby infrastructure, offering a fast track route
to monetisation.
Page 2
Prospex Oil And Gas Plc
Chairman's Report
for the year ended 31 December 2017
Financial Review
At the time of our 2016 final results we assigned a carrying value of £3,910,388 to the Company's
investment in the Kolo licence in Poland. Following the result of the Boleslaw-1 well in January 2017,
the Company took the decision to write down the carrying value of its Investment in Hutton Poland to
£1,442,011, resulting in an exploration write-off during the six months to 30 June 2017 of £2,308,500.
In April 2018, the Company, together with its joint venture partners, decided not to extend the Kolo
Licence into its second 2 year term, as a result the Directors have written down the remaining value
investment to zero at the 2017 year end. This has led to a further loss of £1,543,888 in the 6 month
period to the end of 2017 bringing the total write down for the Polish investment in the year to
£3,852,388.
In August the Company announced its entry into Romania with an investment in the Exploration Area of
the EIV-1 Suceava Concession. Notwithstanding the positive well result obtained, and the near-term
prospect of revenues, the Board have decided to keep the carrying value of this asset at its cost of
£1,062,687 at the year end conservatively awaiting for production to start.
The entry into the Po Valley has got off to a flying start. Based on the drilling results of the Podere Maiar
well and the better than expected flow results in January, the Board have revalued the Italian
investment, which cost £500,000 upward by £1,642,947. This represents a conservative allocation of the
expected value that the Board expects to ultimately realise.
The Company's Spanish investment - The Schuepbach Energy Espania S.r.l share acquisition announced
in late December - was completed in January 2018. As a result, no value has been attributed in the 2017
accounts. With the positive reinvigoration of the project the directors expect a significant uplift in
valuation over future periods as the project progresses.
In January 2018, the Company raised £1.2million via an oversubscribed placing of 200,000,000 ordinary
shares at a price of 0.6 pence per New Ordinary Share to fully fund the Company's 2018 basic work
programmes across its portfolio. This includes the successful flow testing of the Podere Maiar well in
Italy in Q1 2018; the planned commencement of production at the Bainet gas discovery in Romania in Q2
2018; and work to further delineate the gas discovery at Tesorillo in Spain, including the upcoming AMT
Survey.
Outlook
Few junior oil and gas companies can lay to claim to having drilled three new wells in three different
jurisdictions over a 12 month period, two of which resulted in commercial gas discoveries. Thanks to
the efforts of the executive team, who came on board with the intention of applying their proven
expertise and experience within the sector to build a leading oil and gas investment company, Prospex
can. Furthermore, following the progress made during the year under review, Prospex has an excellent
platform in place with which to expose shareholders to multiple value trigger events in the year ahead,
including the commencement of the Company's first internally generated cash flows once the Bainet gas
discovery comes on line in Q2 2018.
With over 2TCF of gas resources our existing portfolio of investments already has significant
company-making potential. However, we continue to evaluate additional assets that match our
investment criteria: low cost, undervalued, late stage projects located in proven European hydrocarbon
jurisdictions where considerable legacy data is accessible and importantly where short timelines to
production have been defined. I look forward to providing further updates on our progress during what
promises to be an exciting period for Prospex and our shareholders, one in which we are confident that
the disconnect that has opened up between our market valuation and the underlying value of our
portfolio will begin to close.
Finally, I would like to take this opportunity to thank the management team, our advisers and of course
our shareholders for their support of the Company during the period.
Bill Smith
Non-Executive Chairman
7 June 2018
Page 3
Prospex Oil And Gas Plc
Strategic Report
for the year ended 31 December 2017
The directors present their strategic report for the year ended 31 December 2017.
PRINCIPAL ACTIVITY
The principal activity of the Company is that of an Investment Company.
STRATEGY
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, before bad debt provision for continuing operations for the year rose to
£1,003,630 (2016: gain - £778,093)
- bad debt provision against amount due from subsidiary undertaking - £1,543,888 (2016 - £nil)
- unrealised loss arising on financial assets at fair value through profit or loss was £613,723 (2016:
£2,345.557)
- net loss after taxation from continuing operations was £3,161,241 (2016: Profit - £1,567,464)
- as at 31 December 2017, the Company had cash and cash equivalents of £850,060 (2016: £466,413)
KEY PERFORMANCE INDICATORS
The business Key Performance Indicator ('KPI') monitored by the Board is 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.
Page 4
Prospex Oil And Gas Plc
Strategic Report
for the year ended 31 December 2017
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 of development.
As a result of recent changes to the AIM Rules for Companies, the Board is currently reviewing which
corporate governance code to apply to the Company on a comply or explain basis as required by 28
September 2018.
The Board is committed to creating value for shareholders; determining strategy, investment and
acquisition policy; approving significant items of expenditure; and considering significant financing and
legal matters.
The Board has referred certain responsibilities to the Board Committees, which operate within defined
terms. The current composition and responsibility of Board Committees is as follows:
Remuneration committee
The Remuneration Committee consists of William 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 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
ON BEHALF OF THE BOARD:
E R Dawson - Director
Date: 7 June 2018
Page 5
Prospex Oil And Gas Plc
Report of the Directors
for the year ended 31 December 2017
The directors present their report and financial statements for the year ended 31 December 2017.
DIVIDENDS
No dividends will be distributed for the year ended 31 December 2017.
The results for the year are set out on page 13.
EVENTS SINCE THE END OF THE YEAR
Information relating to events since the end of the year is given in the notes to the financial statements.
DIRECTORS
The directors shown below have held office during the whole of the period from 1 January 2017 to the
date of this report.
E R Dawson
Dr. R P Mays
W H Smith
J N Smith
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
2017
No. of shares
2,639,344
2,811,474
9,139,344
4,000,000
2016
No. of shares
2,639,344
2,811,474
9,139,344
-
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 22 to the financial statements.
Edward Dawson
Richard Mays
William Smith
James Smith (appointed 23 December 2016)
2017
No. of shares
24,322,148
14,720,508
14,720,508
11,831,168
2016
No. of shares
7,381,875
4,325,340
4,325,340
1,436,000
65,594,332
17,468,555
FINANCIAL INSTRUMENTS
The company's financial risk management objectives and policies are set out in note 17 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' 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
Page 6
Prospex Oil And Gas Plc
Report of the Directors
for the year ended 31 December 2017
SUBSTANTIAL SHAREHOLDINGS
The Company has been notified of the following voting rights as a shareholder of the company as at 29
May 2018:
ordinary shares
No. of
% of issued
share capital
B Hale
38,720,900
3.20%
The market value of the Company's shares at 31 December 2017 was 0.56p and the high and low share
prices during the period were 2.65p and 0.30p 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 20 days' purchases.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report and 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. The Directors are also required to prepare financial statements in accordance
with the rules of the London Stock Exchange for companies trading securities on the Alternative
Investment Market. In preparing each of the Company financial statements the Directors are required to:
- select suitable accounting policies and then apply them consistently;
- make judgements and estimates that are reasonable and prudent;
- state whether they have been prepared in accordance with IFRSs as adopted by the European Union,
subject to any material departures disclosed and explained in the financial statements; and
- 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 enable them to ensure that the financial statements comply with the
requirements of 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.
Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report,
Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that complies
with that law and those regulations.
Page 8
Prospex Oil And Gas Plc
Report of the Directors
for the year ended 31 December 2017
The Directors are responsible for ensuring the annual report and the financial statements are made
available on a website. Financial statements are published on the Company's website in accordance with
legislation in the United Kingdom governing the preparation and dissemination of financial statements,
which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company's
website is the responsibility of the Directors. The Directors' responsibility also extends to the ongoing
integrity of the financial statements contained therein.
STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS
So far as the directors are aware, there is no relevant audit information (as defined by Section 418 of the
Companies Act 2006) of which the company's auditors are unaware, and each director has taken all the
steps that he or she ought to have taken as a 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.
AUDITORS
The auditors, Adler Shine LLP, will be proposed for re-appointment at the forthcoming Annual General
Meeting.
ON BEHALF OF THE BOARD:
E R Dawson - Director
Date: 7 June 2018
Page 8
Report of the Independent Auditors to the Members of
Prospex Oil And Gas Plc
Opinion
We have audited the financial statements of Prospex Oil And Gas Plc (the 'company') for the year ended
31 December 2017 which comprise the Statement of Comprehensive Income, the Statement of Financial
Position, the Statement of Changes in Equity, the Statement of Cash Flow and Notes to the Statement of
Cash Flows and the related notes, including a summary of significant accounting policies. The financial
reporting framework that has been applied in their preparation is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European Union.
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 a Report of the Auditors 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.
In our opinion the financial statements:
- give a true and fair view of the state of the company's affairs as at 31 December 2017 and of its loss
for the year then ended;
- have been properly prepared in accordance with IFRSs as adopted by the European Union; and
- have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and
applicable law. Our responsibilities under those standards are further described in the Auditors'
responsibilities for the audit of the financial statements section of our report. We are independent of the
company in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, including the FRC's Ethical Standard, 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.
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 where:
- 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 company'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.
Page 9
Report of the Independent Auditors to the Members of
Prospex Oil And Gas Plc
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the financial statements of the current period and include the most significant assessed risks of
material misstatement (whether or not due to fraud) we identified, including those which had the
greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the
efforts of the engagement team. These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters.
The key audit matters identified were:
Going concern
Area of focus
Refer to Note 2 to the financial statements for the directors' disclosures of related accounting policies,
judgements and estimates. The Directors have concluded that the Company has sufficient cash resources
and cash inflows to continue its activities for not less than twelve months from the date of approval of
these financial statements and have therefore prepared these financial statements on a going concern
basis.
Management produces a cash flow forecast based on the board plans.
The key judgment within the cash flow forecast that we particularly focused on are:
o The continued availability of funding.
o Cash outflows expected from investing activities
o Flexibility of the investment programme
How our audit addressed the area of focus
We assessed the reasonableness and support for the judgments underpinning management's forecast.
We considered the reasonableness of the assumptions within management's proposed cost reduction
actions.
Our conclusion on management's use of the going concern basis of accounting is included in the going
concern section of the report.
Valuation of Investments
Area of focus - Fair Value of PXOG Marshall Limited
The fair value of the investments that are not traded on the active market is determined using the
valuation techniques such as NPV analysis. During the year Prospex Oil and Gas acquired 17% working
interest in the Podere Gallina Exploration Permit in the Po Valley region of Italy, a proven play in a prolific
hydrocarbon region - up to 40.6 BCFG of prospective resources. A total gain of £1,642,947 was
recognised on this investment for the year ended 31.12.2017.
Management utilised an NPV model to calculate the increase in value of this investment as of the year
ended 31.12.2017.
How our audit addressed the area of focus
We obtained a copy of the NPV model used and a copy of CPR report provided by CGG to calculate the
increase in valuation of investment.
We reviewed the documentation in respect of the investment made. We gained an understanding of the
key assumptions and judgements underlying the model. We reviewed 2 different NPV calculations made
as the Well can be drilled via 3 different ways which would then have 3 different outputs. We assessed
the appropriateness of the methodology applied and tested the mathematical accuracy of the models.
We considered the increase in the valuation of investment in the financial statements of the company to
be reasonable.
Page 10
Report of the Independent Auditors to the Members of
Prospex Oil And Gas Plc
Area of focus - Fair Value of PXOG County Limited - Hutton Poland Investment
The company's investment in Kolo Licence in Poland was written off completely as of the year ended
31.12.2017.
How our audit addressed the area of focus
This is in line with the Board Of Directors' valuation report provided to us and the fact that no oil was
found.
Area of focus - Fair Value of PXOG Massey Limited
In August 2017, a 50% working interest was acquired in the exploration area of the Suceava license from
Raffles Energy, who are the block operator. We agreed and concluded that this investment should be
recognised at cost due to the fact that the operator is relatively opaque at this point regarding potential
production volumes.
How our audit addressed the area of focus
We reviewed announcements made to AIM and agreed payments made to Raffles Ltd for the 50%
interest in Suceava Concession.
Valuation of warrants and share options
Area of focus
The company granted warrants and share options during the year to advisers and shareholders on a
placing of ordinary shares and for services provided resulting in a charge of £170,354 and £10,142,
against the Statement of Profit or Loss and share premium respectively.
Management utilised a Black Scholes option pricing model to calculate the charge which required the use
of assumptions and judgements.
How our audit addressed the area of focus.
We obtained a copy of the model used to calculate the share-based payments charge.
We reviewed the documentation in respect of the warrants and the share options. We gained an
understanding of the key assumptions and judgements underlying the model. We assessed the
appropriateness of the methodology applied and tested the mathematical accuracy of the models.
We considered the charge provided in the financial statements of the group and company to be
reasonable.
Our application of materiality
Materiality for the Company was £72,000 (2016: £62,000) based on an average of 5% of adjusted loss
before tax and 2% of net assets (2016: based on 5% of adjusted loss before tax and 2% on net assets).
Loss before tax is the key metric, we believe, as it is most commonly used by the shareholders as a body
in assessing the Company's performance. In the case of Prospex, the value of its investments and assets
are also key as the Company is still in the development stage. We therefore considered that materiality
weighted on the loss for the year but which also considered the net assets of the Company to be
reasonable.
Other information
The directors are responsible for the other information. The other information comprises the information
in the Annual Report, but does not include the financial statements and our Report of the Auditors
thereon.
Our opinion on the financial statements does not cover the other information and 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, 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.
Page 11
Report of the Independent Auditors to the Members of
Prospex Oil And Gas Plc
Opinion on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
- the information given in the Strategic Report and the Report of the Directors for the financial year for
which the financial statements are prepared is consistent with the financial statements; and
- the Strategic Report and the Report of the Directors have been prepared in accordance with applicable
legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the company and its environment obtained in the
course of the audit, we have not identified material misstatements in the Strategic Report or the Report
of the Directors.
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, or returns adequate for our audit have not been
received from branches not visited by us; or
- the financial statements are not in agreement with the accounting records and returns; or
- certain disclosures of directors' remuneration specified by law are not made; or
- we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the statement of directors' responsibilities, the Directors are responsible for
the preparation of the financial statements and for being satisfied that they give a true and fair view, and
for such internal control as the directors determine is necessary to enable the preparation of the financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the company's ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are
free from material misstatement, whether due to fraud or error, and to issue a Report of the Auditors
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 Report of the Auditors.
Darsh Shah (Senior Statutory Auditor)
for and on behalf of Adler Shine LLP
Chartered Accountants & Statutory Auditor
Aston House
Cornwall Avenue
London
N3 1LF
Date: 7 June 2018
Page 12
Prospex Oil And Gas Plc
Statement of Profit or Loss and Other Comprehensive Income
for the year ended 31 December 2017
Notes
CONTINUING OPERATIONS
Revenue
Administrative expenses
OPERATING LOSS
Finance costs
Finance income
(LOSS)/PROFIT BEFORE INCOME
TAX
Income tax
(LOSS)/PROFIT FOR THE YEAR
OTHER COMPREHENSIVE INCOME
TOTAL COMPREHENSIVE
(LOSS)/INCOME FOR THE YEAR
Earnings per share expressed
in pence per share:
Basic
4
6
6
7
8
9
2017
£
-
(2,547,518)
(2,547,518)
(613,723)
2016
£
-
(778,093)
(778,093)
-
-
2,345,557
(3,161,241)
1,567,464
-
(3,161,241)
-
-
1,567,464
-
(3,161,241)
1,567,464
(0.58)p
0.96p
The notes form part of these financial statements
Page 13
Prospex Oil And Gas Plc (Registered number: 03896382)
Statement of Financial Position
31 December 2017
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment
Investments
Loans and other financial assets
CURRENT ASSETS
Trade and other receivables
Cash and cash equivalents
TOTAL ASSETS
EQUITY
SHAREHOLDERS' EQUITY
Called up share capital
Share premium
Merger reserve
Capital redemption reserve
Retained earnings
TOTAL EQUITY
LIABILITIES
CURRENT LIABILITIES
Trade and other payables
TOTAL LIABILITIES
Notes
10
11
12
13
14
15
16
2017
£
429
2,426,789
1,062,587
3,489,805
149,231
850,060
999,291
2016
£
849
2,540,312
1,601,888
4,143,049
31,766
466,413
498,179
4,489,096
4,641,228
5,835,587
8,862,779
2,416,667
43,333
(12,735,116)
5,107,779
6,740,144
2,416,667
43,333
(9,754,371)
4,423,250
4,553,552
65,846
65,846
87,676
87,676
TOTAL EQUITY AND LIABILITIES
4,489,096
4,641,228
The financial statements were approved by the Board of Directors on 7 June 2018 and were signed on its
behalf by:
E R Dawson - Director
The notes form part of these financial statements
Page 14
Prospex Oil And Gas Plc
Statement of Changes in Equity
for the year ended 31 December 2017
Note
Share capital
£
Share
premium
£
Merger
reserve
£
Capital
redemption
reserve
£
Retained
earnings
£
Total
£
Balance at 1 January 2016
Changes in equity
Loss for the year
Issue of shares
Costs of shares issued
Equity-settled share-based payments
2,657,234
6,732,714
2,416,667
43,333
(11,391,424)
458,524
-
2,450,545
-
-
70,455
(63,025)
-
- -
-
-
- -
- - -
1,567,464
-
-
69,589
1,567,464
2,521,000
(63,025)
69,589
Balance at 31 December 2016
5,107,779
6,740,144
2,416,667
43,333
(9,754,371)
4,553,552
Changes in equity
Loss for the year
Issue of shares
Costs of shares issued
Equity-settled share-based payments
15
-
727,808
-
-
-
2,372,193
(239,416)
(10,142)
-
-
-
-
- (3,161,241)
-
-
-
(3,161,241)
- 3,100,001
(239,416)
-
170,354
180,496
Balance at 31 December 2017
5,835,587
8,862,779
2,416,667
43,333 (12,735,116)
4,423,250
Share capital
Represents the nominal value of the issued share capital.
Share premium account
Represents amounts received in excess of the nominal value on the issue of share capital less any costs associated with the issue of shares.
Merger reserve
Represents the difference between the nominal value of the share capital issued by the Company and the fair value of the subsidiary at the date of acquisition.
Capital redemption reserve
A reserve into which amounts are transferred following the redemption or purchase of the company’s own shares.
Retained earnings
Represents accumulated comprehensive income for the year and prior periods.
The notes form part of these financial statements
Page 15
Prospex Oil And Gas Plc
Statement of Cash Flows
for the year ended 31 December 2017
Cash flows from operating activities
Cash generated from operations
1
Net cash from operating activities
2017
£
(972,151)
(972,151)
2016
£
(577,235)
(577,235)
Cash flows from investing activities
Purchase of fixed asset investments
(1,504,787)
(1,796,543)
Net cash from investing activities
(1,504,787)
(1,796,543)
Cash flows from financing activities
Share issue
Costs of shares issued
3,100,001
(239,416)
2,521,000
(63,025)
Net cash from financing activities
2,860,585
2,457,975
Increase in cash and cash equivalents
Cash and cash equivalents at
beginning of year
2
383,647
466,413
84,197
382,216
Cash and cash equivalents at end
of year
2
850,060
466,413
The notes form part of these financial statements
Page 16
Prospex Oil And Gas Plc
Notes to the Statement of Cash Flows
for the year ended 31 December 2017
1.
RECONCILIATION OF (LOSS)/PROFIT BEFORE INCOME TAX TO CASH GENERATED FROM
OPERATIONS
(Loss)/profit before income tax
Depreciation charges
Loss/(gain) on revaluation of investment
Equity-settled share based payments
Bad debt provision
(Increase)/decrease in trade and other receivables
(Decrease)/increase in trade and other payables
2017
£
(3,161,241)
420
613,723
170,354
1,543,888
2016
£
1,567,464
425
(2,345,557)
69,589
-
(832,856)
(117,465)
(21,830)
(708,079)
124,143
6,701
Cash generated from operations
(972,151)
(577,235)
2.
CASH AND CASH EQUIVALENTS
The amounts disclosed on the Statement of Cash Flows in respect of cash and cash equivalents are
in respect of these Statement of Financial Position amounts:
Year ended 31 December 2017
Cash and cash equivalents
Year ended 31 December 2016
Cash and cash equivalents
31.12.17
£
850,060
1.1.17
£
466,413
31.12.16
£
466,413
1.1.16
£
382,216
The notes form part of these financial statements
Page 17
Prospex Oil And Gas Plc
Notes to the Financial Statements
for the year ended 31 December 2017
1.
STATUTORY INFORMATION
Prospex Oil And Gas Plc is a private company, registered in England and Wales. The company's
registered number and registered office address can be found on the Company Information page.
The presentation currency of the financial statements is the Pound Sterling (£).
Prospex Oil and Gas Plc is registered in England and Wales and is quoted on the AIM Market of the
London Stock Exchange Plc. The Company's registered number and registered office address can
be found on the Company Information page.
2.
ACCOUNTING POLICIES
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.
Preparation of consolidated financial statements
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.
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
2018.
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 19, since the year end,
the Company has raised £1.2m 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.
Property, plant and equipment
Depreciation is provided at the following annual rates in order to write off the cost less estimated
residual value of each asset over its estimated useful life.
Computer equipment
- 25% per annum on reducing balance
Page 18
continued...
Prospex Oil And Gas Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2017
2.
ACCOUNTING POLICIES - continued
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.
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.
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.
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.
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.
Page 19
continued...
Prospex Oil And Gas Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2017
2.
ACCOUNTING POLICIES - continued
Taxation
Current taxes are based on the results shown in the financial statements and are calculated
according to local tax rules, using tax rates enacted or substantially enacted by the statement of
financial position date.
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.
Cash and cash equivalents
Cash and cash equivalents include cash at bank and in hand and short-term deposits with an
original maturity of three months or less.
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.
Hire purchase and leasing commitments
Rentals paid under operating leases are charged to the statement of comprehensive income on a
straight-line basis over the period of the lease.
Employee benefit costs
The company operates a defined contribution pension scheme. Contributions payable to the
company's pension scheme are charged to the income statement in the period to which they
relate.
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.
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.
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.
Page 20
continued...
Prospex Oil And Gas Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2017
2.
ACCOUNTING POLICIES - continued
IFRS 1
IFRS 2
Amendments resulting from Annual Improvements 2014-2016 cycle
(removing short-term exemptions)
Amendments - Classification and measurement of share-based
payments transactions
01/01/2018
01/01/2018
Effective date
(period
beginning on or
after)
IFRS 3, IFRS Amendments resulting from Annual Improvements 2015-2017 cycle
11, IAS 12,
IAS 23
IFRS 4
IFRS 9
IFRS 9
IFRS 10/
IAS 28
IFRS 15
IFRS 16
IFRS 17
IAS 19
IAS 28
IAS 28
IAS 40
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
Amendment - Prepayment features with negative compensation
Amendments - Sale or contribution of assets between an investor
and its associate or joint venture
Revenue from contracts with customers, and the related
clarifications
Leases - recognition, measurement, presentation and disclosure
Insurance contracts
Amendment - Plan Amendment, Curtailment or Settlement
Amendments resulting from Annual Improvements 2014-2016 cycle
(clarifying certain fair value measurements
Amendment - Long term interests in Associates and Joint Ventures
Transfers of investment property - Amendment
01/01/2019
01/01/2018
01/01/2018
01/01/2019
01/01/2018
01/01/2018
01/01/2019
01/01/2019
01/01/2019
01/01/2018
01/01/2019
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.
Page 22
continued...
Prospex Oil And Gas Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2017
3.
CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
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 2017. 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.
Page 22
continued...
Prospex Oil And Gas Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2017
4.
SEGMENTAL REPORTING
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
2017 as shown on the Statement of Financial Position all relate to the Investment activity.
5.
EMPLOYEES AND DIRECTORS
Wages and salaries
Social security costs
Other pension costs
The average number of employees during the year was as follows:
Directors
6.
NET FINANCE COSTS
Finance income:
(Loss)/gain on revaluation of investments
7.
(LOSS)/PROFIT BEFORE INCOME TAX
2017
£
283,879
30,088
13,500
2016
£
192,665
19,015
9,000
327,467
220,680
2017
2016
4
5
2017
£
2016
£
(613,723)
2,345,557
The loss before income tax (2016 - profit before income tax) is stated after charging/(crediting):
Other operating leases
Depreciation - owned assets
Auditors' remuneration
Foreign exchange differences
Bad debt provision against amounts due from subsidiaries
2017
£
31,927
420
16,250
(10,752)
1,543,888
2016
£
16,815
425
16,250
4,584
-
8.
INCOME TAX
Analysis of tax expense
No liability to UK corporation tax arose for the year ended 31 December 2017 nor for the year
ended 31 December 2016.
Page 23
continued...
Prospex Oil And Gas Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2017
8.
INCOME TAX - continued
Factors affecting the tax expense
The tax assessed for the year is higher (2016 - lower) than the standard rate of corporation tax in
the UK. The difference is explained below:
(Loss)/profit before income tax
2017
£
(3,161,241)
2016
£
1,567,464
(Loss)/profit multiplied by the standard rate of corporation tax in
the UK of 19.250% (2016 - 20%)
(608,539)
313,493
Effects of:
Non-deductible expenses
Depreciation add back
Tax losses not utilised
Unrealised chargeable gains
330,280
81
15,768
85
164,720
113,458
139,765
(469,111)
Tax expense
-
-
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 (2016:
£578,000) arising from the accumulated tax losses of approximately £4.0m (2016: £3.4m) carried
forward has not been recognised but may become recoverable against future trading profits.
9.
EARNINGS PER SHARE
The (loss)/earnings and number of shares used in the calculation of earnings per ordinary share
are set out below:
Basic
(Loss)/profit for the financial period
2017
£
2016
£
(3,161,241)
1,567,464
Weighted average of ordinary shares
44,580,539 163,085,489
There was no dilutive effect from the options and warrants outstanding during the period (note
22).
Page 24
continued...
Prospex Oil And Gas Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2017
10. PROPERTY, PLANT AND EQUIPMENT
COST
At 1 January 2017
and 31 December 2017
DEPRECIATION
At 1 January 2017
Charge for year
At 31 December 2017
NET BOOK VALUE
At 31 December 2017
At 31 December 2016
Compute
equipme
£
1,699
850
420
1,270
429
849
11.
INVESTMENTS
Shares in Investments
COST OR VALUATION
At 1 January 2017
Additions
Revaluations
group
undertakings
Listed Unlisted
£
£
£
Totals
£
2,308,600
500,200
(665,553)
131,712
-
51,830
100,000 2,540,312
500,200
(613,723)
-
-
At 31 December 2017
2,143,247
183,542
100,000 2,426,789
NET BOOK VALUE
At 31 December 2017
2,143,247
183,542
100,000 2,426,789
At 31 December 2016
2,308,600
131,712
100,000
2,540,312
The company's investments at the Statement of Financial Position date in the share capital of
companies include the following:
PXOG County Limited
Registered office: England & Wales
Nature of business: Investment entity
Class of shares:
Ordinary
Aggregate capital and reserves
(Loss)/profit for the year
%
holding
100.00
2017
£
(13)
(3,852,501)
2016
£
3,910,475
2,308,500
Page 25
continued...
Prospex Oil And Gas Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2017
11.
INVESTMENTS - continued
PXOG Massey Limited
Registered office: England & Wales
Nature of business: Investment entity
Class of shares:
Ordinary
Aggregate capital and reserves
Loss for the year
PXOG Marshall Limited
Registered office: England & Wales
Nature of business: Investment entity
Class of shares:
Ordinary
Aggregate capital and reserves
Profit for the year
PXOG Muirhill Limited
Registered office: England & Wales
Nature of business: Investment company
Class of shares:
Ordinary
Aggregate capital and reserves
Profit for the year
%
holding
100.00
%
holding
100.00
%
holding
100.00
2017
£
(48,323)
(48,423)
2017
£
2,142,947
1,642,947
2017
£
100
Nil
Page 26
continued...
Prospex Oil And Gas Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2017
11.
INVESTMENTS - continued
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.
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.
12.
LOANS AND OTHER FINANCIAL ASSETS
At 1 January 2017
New in year
Repayment in year
Other movement
At 31 December 2017
Loans to
group
undertakings
£
1,601,888
1,062,587
(58,000)
(1,543,888)
1,062,587
Page 27
continued...
Prospex Oil And Gas Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2017
13. TRADE AND OTHER RECEIVABLES
Current:
Amounts owed by group undertakings
Rent deposit
VAT
Prepayments and accrued income
2017
£
113,364
2,026
28,408
5,433
2016
£
-
2,026
19,458
10,282
149,231
31,766
The Directors consider that the carrying amount of trade and other receivables approximates to
their fair value.
14. CASH AND CASH EQUIVALENTS
Bank accounts
2017
£
850,060
2016
£
466,413
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.
Page 28
continued...
Prospex Oil And Gas Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2017
15. CALLED UP SHARE CAPITAL
Allotted, issued and fully paid
Ordinary shares of 0.1p each
Ordinary shares of 1p each
Deferred shares of 0.1p each
Deferred shares of £24 each
Deferred shares of 0.9p each
2017
Number
2016
Number
2017
£
1,013,593,136
- 1,013,593
- 285,785,836
942,462,000 942,462,000
54,477
285,785,836
-
942,462
54,477 1,307,459
- 2,572,073
2016
£
-
2,857,858
942,462
1,307,459
-
5,835,587
5,107,779
In February 2017, the Company undertook a Share Capital Reorganisation whereby each Existing
Ordinary Share of £0.01 was subdivided into one New Ordinary Share of £0.001 and one New
Deferred Share of £0.009.
In February 2017, the Company raised £850,000, before expenses, via a placing of 170 million
new ordinary shares of £0.001 each (as reorganised by the share capital reorganisation) ("New
Ordinary Shares") at a price of 0.5 pence per New Ordinary Share. The net proceeds of the Placing
went 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 be used for
general working capital purposes.
In September 2017, the Company raised £650,000, before expenses, via a placing of 185,714,300
ordinary shares of £0.001 each at a price of 0.35 pence per New Ordinary Share. The net proceeds
of the Placing would help fund the Company's share of the 2017 work programme at the Suceava
Concession ('Suceava') in North East Romania. In addition, the funds would go towards the
ongoing evaluation of a number of potential projects, in line with the Company's strategy to build a
portfolio of investments in the European oil and gas sector, as well as for general working capital
purposes.
In November 2017, the Company raised £1.6million, before expenses, via a placing of
372,093,000 ordinary shares of £0.001 each at a price of 0.43 pence per New Ordinary Share).
The net proceeds of the Placing were to be used to satisfy the Consideration to acquire a 17%
working interest in the Podere Gallina Exploration Permit in the Po Valley region of Italy for a total
consideration payable of approximately EUR1.15 million and for general working capital purposes.
Page 29
continued...
Prospex Oil And Gas Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2017
16. TRADE AND OTHER PAYABLES
Current:
Trade creditors
Social security and other taxes
Accruals and deferred income
2017
£
28,681
11,362
25,803
2016
£
53,123
9,138
25,415
65,846
87,676
The Directors consider that the carrying amount of trade and other payables approximates to their
fair value.
Page 30
continued...
Prospex Oil And Gas Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2017
17.
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
Financial liabilities
Trade and other payables
2017
£
2016
£
5,433
850,060
31,766
466,413
855,493
498,179
90,178
87,676
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.
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.
Page 31
continued...
Prospex Oil And Gas Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2017
18. RELATED PARTY DISCLOSURES
Included in loans to group undertakings is an amount of £1,543,888 (2016: £1,601,888) due from
PXOG County Limited, the company's wholly owned subsidiary. At the year end, a provision of
£1,543,888 (2016: £nil) was made against this balance.
Included in loans to group undertakings is an amount of £1,062,587 (2016: £nil) due from PXOG
Massey Limited, the company's wholly owned subsidiary.
Included in trade and other receivables is an amount of £113,350 (2016: £nil) due from PXOG
Marshall Limited, the company's wholly owned subsidiary.
During the year, there were consultancy fees of £18,000 (2016: £15,200) charged by Sallork Legal
and Commercial Consulting Limited ("Sallork") and included in trade payables at the year-end is
£6,674 (2016: £nil) 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 2017.
Edward Dawson
19. EVENTS AFTER THE REPORTING PERIOD
2017
£
2016
£
-
13,660
Placing
In January 2018, the Company, raised £1,200,000, before expenses, via a placing of 200,000,000
ordinary shares of £0.001 each (the "New Ordinary Shares") at a price of 0.6 pence per New
Ordinary Share.
The net proceeds of the Placing should ensure Prospex is fully funded for its basic 2018 work
programmes across its portfolio of investments in late stage European onshore oil and gas
projects.
20. ULTIMATE CONTROLLING PARTY
In the opinion of the Directors, there is no ultimate controlling party.
21. SHARE-BASED PAYMENT TRANSACTIONS
Share options
At 31 December 2016 and 31 December 2017 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 2016
Brought forward
Granted
Lapsed
Carried forward
Weighted
average
remaining
contractual
life (years)
9.10
Weighted
average
exercise price
(pence)
11.86
1.03
Shares under
options
3,903,516
20,728,545
-
24,632,061
3.59
2.74
Page 32
continued...
Prospex Oil And Gas Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2017
21. SHARE-BASED PAYMENT TRANSACTIONS (continued)
31 December 2017
Brought forward
Granted
Lapsed
Carried forward
Weighted
average
remaining
contractual
life (years)
3.59
3.00
Weighted
average
exercise price
(pence)
2.74
0.52
Shares under
options
24,632,061
71,226,149
(204,400)
95,653,810
2.80
0.78
All options were exercisable at the year end. No options were exercised during the year.
The following share-based payment arrangements were in existence at the year-end.
Options
1. Granted 30 April 2012
2. Granted 16 April 2015
3. Granted 16 April 2015
4. Granted 22 September 2016
5. Granted 22 September 2016
6. Granted 22 September 2016
7. Granted 23 December 2016
8. Granted 13 November 2017
Number
Expiry date
40,000 30/04/2022
2,847,116 15/04/2025
812,000 15/04/2018
1,434,209 22/09/2019
13,694,336 22/09/2019
4,164,000 22/09/2019
1,436,000 23/12/2019
13/11/2020
71,226,149
Exercise
price
125.0p
3.05p
3.05p
1.00p
1.00p
1.10p
1.10p
0.52p
Fair value at
grant date
47.5p
1.94p
1.94p
0.53p
0.31p
0.29p
0.53p
0.29p
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
1. Granted 30 April 2012
2. Granted 16 April 2015
3. Granted 16 April 2015
4. Granted 22 September
2016
5. Granted 22 September
2016 *
6. Granted 22 September
2016 *
7. Granted 23 December
2016 *
8. Granted 13 November
2017
Grant date
share price
Exercise
price
Expected
volatility
Expected
option life
Risk-free
interest rate
175.0p
4.0p
4.0p
125.0p
3.05p
3.05p
32.0%
71.5%
71.5%
3.5 years
3 years
3 years
0.24%
- 0.43%
0.71%
0.71%
1.7p
1.00p
71.0%
3 years
0.10%
1.7p
1.00p
71.0%
3 years
0.10%
1.7p
1.10p
71.0%
3 years
0.10%
2.5p
1.10p
79.0%
3 years
0.28%
0.51p
0.52p
96.8%
3 years
0.56%
Page 33
continued...
Prospex Oil And Gas Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2017
* 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 £170,354 (2016: £69,589).
Warrants
At 31 December 2017, outstanding warrants to subscribe for ordinary shares of 0.1p each in the
Company, granted in accordance with the warrant instruments issued by Prospex, were as follows.
There are no comparatives as no warrants were in existence prior to this year. Following the year
end, the company which was granted these warrants entered Administration, at which point the
warrants lapsed.
Brought forward
Granted
Lapsed
Carried forward
Weighted
average
remaining
contractual
life (years)
Weighted
average
exercise price
(pence)
2.00
1.25
-
8,500,000
-
8,500,000
1.14
1.25
All warrants were exercisable at the year end.
The following warrants were in existence at the year end.
Warrants
1. Granted 20 February 2017
Number
Expiry date
8,500,000 21/02/2019
Exercise
price
1.25p
Fair value at
grant date
0.22p
The fair value of the remaining warrants 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
1. Granted 20 February 2017
0.52p
Grant date
share price
Exercise
price
1.25p
Expected
volatility
98.0%
Risk-free
interest rate
Expected
option life
2 years
0.13%
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 warrants are equity settled and the charge for the year is £10,142 (2016: £nil). As the
warrants relating to the charge were all in consideration of shares issued during the year, it has
been taken directly to equity and charged against the share premium as costs in respect of the
issue of shares.
Page 34
continued...
Prospex Oil And Gas Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2017
22. 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
Benefit in kind
Pension contributions
2017
£
147,333
4,200
12,350
2016
£
97,665
4,200
9,000
163,883
136,759
Edward Dawson
William Smith
Richard Mays
James Smith
(appointed 22
December 2016)
Salaries and
fees
Benefit in kind
Pension
contributions
£
111,333
12,000
12,000
£
4,200
-
-
£
12,350
-
-
2017
£
127,883
12,000
12,000
2016
£
93,950
8,500
8,000
12,000
-
-
12,000
415
147,333
4,200
12,350
163,883
110,865
The number of directors for whom retirement benefits are accruing under money purchase pension
schemes amounted to 1 (2016: 1).
The Directors interests in share options as at 31 December 2017 are as follows:
Director
Edward Dawson
Edward Dawson
Edward Dawson *
Edward Dawson *
Edward Dawson
Richard Mays
Richard Mays
Richard Mays *
Richard Mays *
Richard Mays
William Smith
William Smith
William Smith *
William Smith *
William Smith
James Smith *
James Smith
Options at
31
December
2017
680,212
971,663
4,438,000
1,292,000
16,940,273
541,726
20,196
2,327,418
1,436,000
10,395,168
541,726
20,196
2,327,418
1,436,000
10,395,168
1,436,000
10,395,168
Exercise
price
3.05p
1.00p
1.00p
1.10p
0.52p
3.05p
1.00p
1.00p
1.10p
0.52p
3.05p
1.00p
1.00p
1.10p
0.52p
1.10p
0.52p
Date of
grant
Final date of
exercise
First date of
exercise
14/04/2015 14/04/2015 14/04/2025
22/09/2016 22/09/2016 22/09/2019
22/09/2016 22/09/2016 22/09/2019
22/09/2016 22/09/2016 22/09/2019
13/11/2017 13/11/2017 13/11/2020
14/04/2015 14/04/2015 14/04/2025
22/09/2016 22/09/2016 22/09/2019
22/09/2016 22/09/2016 22/09/2019
22/09/2016 22/09/2016 22/09/2019
13/11/2017 13/11/2017 13/11/2020
14/04/2015 14/04/2015 14/04/2025
22/09/2016 22/09/2016 22/09/2019
22/09/2016 22/09/2016 22/09/2019
22/09/2016 22/09/2016 22/09/2019
13/11/2017 13/11/2017 13/11/2020
23/12/2106 23/12/2106 23/12/2019
13/11/2017 13/11/2017 13/11/2020
* These options vest once the share price of the Company has closed at 5p or higher for 5
consecutive trading days.
The options awarded to Richard Mays are held in the name of Sallork Limited, a company he owns
and controls.
This page does not form part of the statutory financial statements
Page 36