PROGRESS.
INTO PRODUCTION.
INTO NIGERIA.
INTO NEW ASSETS.
San Leon Energy plc
Annual Report and Accounts 2015
A
TRANSFORMATIONAL
YEAR FOR SAN LEON
PROGRESS COMES
IN MANY FORMS,
IN MANY PLACES.
For San Leon, from deal preparation in 2015 through
to deal execution in 2016 (subject to shareholder approval),
it was a game-changing project in Nigeria. A deal which
would make us grow into a different company, taking us into
production and cash flow. A deal which would let us share
new value with our shareholders, with our partners,
and with the local communities where we operate.
A
TRANSFORMATIONAL
YEAR FOR SAN LEON
PROGRESS COMES
IN MANY FORMS,
IN MANY PLACES.
For San Leon, from deal preparation in 2015 through
to deal execution in 2016 (subject to shareholder approval),
it was a game-changing project in Nigeria. A deal which
would make us grow into a different company, taking us into
production and cash flow. A deal which would let us share
new value with our shareholders, with our partners,
and with the local communities where we operate.
pg 02
NEW
TERRITORIES,
NEW
VENTURES
OUR PROPOSED NEW NIGERIAN
PRODUCTION ASSETS
OPEN UP A NEW WORLD.
THIS IS A NEW SAN LEON.
The Niger Delta is an oil and gas-rich
area the size of Ireland. Here lies OML 18,
a world-class asset larger than the country
of Bahrain, the pivot of San Leon’s 2015-2016
proposed transformation.
pg 04
A
NEW
DEAL –
OML ��
THE PLANNED ENTRY
INTO A WORLD-CLASS
ASSET IN NIGERIA
San Leon’s 2015-16 restructuring (subject to shareholder approval) revolved around OML 18,
a 1,035 km 2 mangrove swamp licence located in the southern Niger Delta near Port Harcourt.
OML 18 (for “Oil Mining Lease 18”) has 9 discovered fields, with 4 currently producing, and
infrastructure including flow stations together with oil and gas pipelines.
Since Eroton, its Operator, purchased 45% in 2015 from Shell, Total and Agip for a total
consideration of approximately $1.1 billion and became the operator of the asset, OML
18 has achieved a substantial increase in production – from approximately 10,000 bopd
(barrels of oil per day) in March 2015 to approximately 50,000 bopd in May 2016 as well
as more than 50 mmscf/d (million standard cubic feet per day) of gas. In the development
plans currently being finalised for OML 18, the intention is to increase production to in excess
of 100,000 bopd.
pg 06
A
NEW
FUTURE
FOR A NEW
SAN LEON
The OML 18 deal, if approved by shareholders, is expected to underpin the
future cash flow of San Leon.
The OML 18 operator is executing a low-risk infrastructure and development
plan, which includes:
– 2016 & 2017: Re-entry and workover program to continue
– mid 2017: Low-risk infill drilling to start
– 2018 & 2019: Non-associated gas wells to be drilled
This plan is expected to enable significant distributions to shareholders, once
share capital / share premium is reduced at Plc level through an application
to the Irish courts.
San Leon expects to receive revenues associated with its right to provide drilling
and workover rig services to Eroton in its capacity as the OML 18 Operator.
pg 08
PROGRESS.
INTO PRODUCTION.
INTO NIGERIA.
INTO NEW ASSETS.
Zuma Rock, near Nigeria’s capital, is twice as high as Australia’s
famous Ayers Rock (Uluru Rock). It is a striking reminder of
Nigeria’s scale and of its geological riches.
San Leon Energy plc
Annual Report and Accounts 2015
HIGHLIGHTS / CONTENTS
pg 10
San Leon is a progressive oil and gas company which develops
conventional and unconventional assets in Africa and Europe,
from exploration to monetisation.
For San Leon, transaction planning in 2015 and execution
(subject to shareholder approval) in 2016 constituted a period
when our company prepared to transform around a major Nigerian
deal which would bring our shareholders a significant change
in size and a move into new territories, production and cashflow.
San Leon Energy plc Annual Report and Accounts 2015 Overview | Strategic Report | Governance | Financial Statements
OVERVIEW
01 A transformational year for San Leon
02 New territories, new ventures
04 A new deal – OML 18
06 A new future for a new San Leon
08 Progress. Into production.
Into Nigeria. Into new assets.
10 Highlights / Contents
STRATEGIC
REPORT
We are committed to securing
cash flow for our shareholders.
In this section we set out our strategy,
the progress we have made and
our current operational focus.
12 OML 18: a world-class asset,
onshore Nigeria
GOVERNANCE
We work to strict standards of
governance and responsibility.
14 Some of our key assets
32 Board of Directors
16 Chairman’s review
34 Directors’ report
30 Progress. We promised it.
39 Statement of Directors’
We are delivering it
responsibilities
pg 11
FINANCIAL
STATEMENTS
Loss for the year was €213.4 million.
Net assets decreased by €173.7 million
as the portfolio was restructured in
line with commodity prices and the
Company’s entry into Nigeria.
40 Independent auditors’ report to the
Members of San Leon Energy plc
42 Consolidated income statement
43 Consolidated statement of other
comprehensive income
44 Consolidated statement of changes
in equity
46 Company statement of changes
in equity
48 Consolidated statement
of financial position
49 Company statement
of financial position
50 Consolidated statement
of cash flows
51 Company statement
of cash flows
52 Notes to financial statements
91 Corporate information
92 Glossary
94 Conversion
OML ��
pg 12
OML ��
A WORLD-CLASS ASSET,
ONSHORE NIGERIA.
OML 18 covers an area of 1,035 km2 of mangrove swamp in the Southern Nigeria delta –
larger than the country of Bahrain. This world-class resource of oil, natural gas and
condensate includes the Alakiri, Awoba (50% interest, field straddles two blocks),
Cawthorne Channel, Krakama, and Buguma Creek fields and related facilities. Crude oil
production is exported through the nearby Shell-operated Bonny Crude Oil Terminal.
Gas production is delivered to the adjacent Notore Petrochemical Plant via the Nigeria Gas
Company’s pipeline. The presence of extensive existing gas infrastructure is important.
Approximately 140 wells have been drilled on OML 18, and four fields are currently in
production. Gross crude oil production from OML 18 increased from around 10,000 bopd
(barrels of oil per day) in March 2015 to approximately 50,000 bopd in May 2016, as well
as more than 50 mmscf/d (million standard cubic feet per day) of gas, as the initial stages
of a comprehensive well reactivation programme were executed. This programme will be
expanded to an extensive workover and infill well drilling programme. In the development
plans currently being finalised for OML 18, the intention is to increase production to in
excess of 100,000 bopd.
San Leon Energy plc Annual Report and Accounts 2015 $��
A significant portion of production
is covered by a hedge at $95 per
barrel until December 2017
���M
OML 18 2P reserves are nearly
600 million barrels of oil and
4 Tscf of gas. 2C contingent
resources are more than
200 billion barrels of oil and
nearly 2 Tcf of gas. Significant
exploration upside also exists
��%
pg 13
San Leon will receive (subject to
equity placing and shareholder
approval) a minimum 65% cash
sweep (versus its 40% equity
interest in BidCo*) of the available
funds distributed to BidCo from
OML 18's production proceeds for
four years, to ensure repayment
of initial investment plus interest
* Midwestern Leon Petroleum Limited, a
Mauritian incorporated special purpose
vehicle, established for the purpose of holding
the combined OML 18 interest of both San Leon
Energy and Midwestern Oil & Gas Limited.
On completion, San Leon will hold 40% and
Midwestern will hold 60% of BidCo, subject to
placing completion and shareholder approvals.
Overview | Strategic Report | Governance | Financial Statements SOME kEY ASSETS
SOME OF OUR
pg 14
KEY ASSETS
From new frontiers to near-term production, from conventional to unconventional,
onshore and offshore, our assets cover the whole value chain and share two
characteristics: scale and early-mover advantage.
OIL
GAS
TIGHT OIL
TIGHT GAS
OIL SHALE
LONG-TERM PROJECTS
APPRAISAL & READY TO DEVELOP
EXPLORATION ASSETS
NEAR-TERM INCOME
San Leon Energy plc Annual Report and Accounts 2015 pg 15
+
NIGERIA
OML ��
Overview | Strategic Report | Governance | Financial Statements CHAIRMAN'S REVIEW
pg 16
“ 2015 was the year to plan to acquire assets, with the whole
energy industry depressed. The Nigerian OML 18 deal
proposed in 2016 certainly was not easy to achieve,
but it was worth it: a new world opens up to San Leon
and its shareholders.”
Oisín Fanning
Executive Chairman
San Leon Energy plc Annual Report and Accounts 2015 PROGRESS IS NOT A WALK IN THE PARK. It is more like an
uphill run on a scree, faster and faster to keep climbing,
each step threatening to drag you back down. It is a race
against the clock, forward and upward always. This is what
2015 felt like for San Leon. A year that positioned San Leon
to be stronger, more valuable and with a bright future.
pg 17
We took advantage of the crisis that brought down the price of oil and gas assets to move aggressively.
We put together a deal with Eroton and Midwestern, two major Nigerian players, to acquire a 9.72% indirect
economic interest in the world-class onshore OML 18 block in Nigeria.
We structured and marketed a proposed equity raise to complete the deal, which will be voted on by
shareholders in the near future.
Last year we promised shareholders that we would focus on appraisal and production assets, and in particular
production. The proposed OML 18 deal is expected to achieve this in a highly material fashion, subject to
shareholder approval. Full details of the announced deal structure will be provided in the AIM re-admission
document, and highlights are given below:
• Expected transformational cash flow impact on the Company will enable 50% of free cash flow to be
returned to shareholders via dividend and/or share buyback
• San Leon’s investment is to be made through a $173 million loan instrument which will be repaid,
with 17% per annum interest, over four years
• Three sources of cash flow to San Leon from the deal:
1. Loan repayments (principal plus interest)
2. Dividends from indirect economic interest in OML 18
3. Right to provide workover and drilling rig services to the operator
• Acquisition to be funded through a minimum $200 million equity placing
• OML 18 is producing ~50,000 bopd, with a low risk development plan to reach 100,000 bopd
• Hedge at $95 per barrel of oil with Shell for around 35% of expected 2P production
until the end of 2017
• Significantly reduced theft or supply disruption through engagement with local community
and indigenous operating partners
• Former Head of Shell Nigeria joining the San Leon Board as Non-Executive Chairman, with
other Board changes appropriate to the post-deal Company.
Overview | Strategic Report | Governance | Financial Statements
San Leon Energy plc Annual Report and Accounts 2015
CHAIRMAN'S REVIEW
pg 18
POLAND
Rawicz, expected to be the largest gas development in Poland for 20 years, continues
to succeed. The second appraisal/development well on the structure was drilled in 2015
and tested in 2016, and first gas from an initial well stock of at least 3 wells is expected
in early 2017.
Other operational activity in Poland has been limited, in response to low commodity prices
and a difficult transaction environment for exploration and appraisal assets. Various
non-core assets, particularly those which were early-stage exploration and which therefore
no longer fit with the Company’s focus on cash flow, have been fully or partly relinquished.
MOROCCO
The Laayoune-4 well on the onshore Tarfaya licence, targeting the conventional Tertiary
sandstone, was drilled in summer 2015 and encountered gas shows. ONHYM and the
Company now intend to apply for a long licence, which may include 3D seismic over the
broader structure (including the existing well), and the well may also be re-entered.
Elsewhere in Morocco activity has been limited to technical analysis. Our interest in the
offshore Sidi Moussa licence is available for farm out, and the operator (Genel Energy)
is focussing its offshore efforts there. Spending on the Tarfaya oil shale licence has been
restricted, pending a recovery in the oil price.
CORPORATE
Once again the Company recorded no Lost Time Incidents (LTIs) for the year, reflecting the priority placed
by all staff and contractors on HSEQ.
pg 19
The major step for your Company comes with the proposed Nigerian deal announced after the reporting period
in January 2016, and the proposed placing at a significant premium to the price at suspension. The expected
fiscal strength of the Company as a result of a completed Nigerian deal has encouraged the Company to put
in place a policy for returning 50% of Nigerian asset free cash flow to investors for the next 5 years.
San Leon raised £29 million via a placing, in the middle of 2015. These funds enabled the drilling of the
Tarfaya conventional well, the retention of the Barryroe NPI, provided working capital, and – as foreseen in the
Placing documentation – positioned the Company for the proposed Nigerian production deal. As part of that
move towards a production focus, and also reflecting the downturn in the industry, the Company announced
various licence exits (particularly on early-stage exploration) to reduce overheads and avoid distraction of
effort, and that portfolio optimisation continues. As a result, €166.9m of assets were impaired during 2015,
resulting in a loss for the year after providing for depreciation and taxation of €213.4m. As at 31 December 2015,
cash and cash equivalents was €0.9m, and the Company has access to several sources of funding which
satisfies the Directors that the Company continues as a going concern.
Other items reflected in the accounts are firstly that short-term financing was required during 2015, as detailed
in finance expenses. Secondly, various Company subsidiaries (the “Subsidiaries”) have been unsuccessful
in their appeal against the findings of the International Court of Arbitration of the International Chamber of
Commerce, in relation to the arbitration between the Subsidiaries and Avobone N.V. and Avobone Poland B.V..
The Subsidiaries appealed the ICC findings to the UK Commercial Court in October 2015. The findings of
the Court, received by the Company on 4 February 2016 but not conclusive until 11 February, were that the
Subsidiaries’ leave to appeal was dismissed. Accordingly, the Company has provided for the award.
For several months around the end of 2015 the Company was in a formal offer period, having received
an approach. That approach was subsequently withdrawn.
The Company’s wholly-owned subsidiary, NovaSeis, signed a Memorandum of Understanding with
Northbridge, an indigenous Nigerian technical company, with the aim of developing a seismic acquisition,
processing and interpretation business in Nigeria. NovaSeis performed a considerable amount
of such European and North African work since 2011 both internally to San Leon and to third parties.
OUTLOOK
In the current industry climate, securing cash flow is key. Subject to shareholder approval, the
Nigeria deal is expected to provide exactly that. The Directors believe your Company will become
one of the largest E&P companies on AIM, and one of very few paying dividends and/or undertaking
share buybacks.
Overview | Strategic Report | Governance | Financial Statements
pg 20
“ Our proposed OML 18 project has all the essential
components of success: a proven ability to increase
production, quality of operatorship, good community
relationships, a supportive and reliable partner and
several material cash flow streams.”
Joel Price
Chief Operating Officer
Overview | Strategic Report | Governance | Financial Statements pg 22
MOROCCO
Oil shale development
The 36 km2 Timahdit oil shale block onshore Morocco is an asset being
kept for the future, when oil prices recover and an update to the existing
pre-feasibility study for developing the asset is warranted.
FRANCE
Shale gas licences
In France, San Leon continues to apply for over 2.4 million acres
(c9,000 km2) of licences – licence applications which have been
made at very low cost.
San Leon Energy plc Annual Report and Accounts 2015 OIL SHALE
COULD SUPPLY
��,���
BARRELS
OF OIL PER DAY
TO SAN LEON FOR
�� YEARS
ONCE DEVELOPED
L
O
N
G
-
T
E
R
M
P
R
O
J
E
C
T
S
Overview | Strategic Report | Governance | Financial Statements
pg 24
ALBANIA
Offshore
The Company is in discussions with the Ministry regarding the next
stages on its offshore Albania Durresi block. A large suite of data,
including modern 3D seismic, defines the large oil and gas target
(near to the A4-1X discovery well) in relatively deep water. San Leon
continues to seek a partner to drill the structure.
MOROCCO
Offshore
The Genel-operated Sidi Moussa block (San Leon net 10.0% interest)
is the subject of farm out activity by the operator, with the prospect
of further well activity.
Onshore (Zag)
Zag is a large licence on which technical works continues to evaluate
its potential.
San Leon Energy plc Annual Report and Accounts 2015 E
X
P
L
O
R
A
T
I
O
N
A
S
S
E
T
S
Overview | Strategic Report | Governance | Financial Statements
POLAND
pg 26
Baltic Basin
2014 saw testing on the Company’s 100%-owned Lewino-1G2 shale gas well,
on the Gdansk W concession, providing the best single frac on a vertical
gas well in Europe. The concession requires a follow-up horizontal well with
multiple fractures (much of the planning for which is complete), and a partner
is being sought to perform that work to enable a proper evaluation of the level
of commerciality of the 220,000 acres.
The Sczcawno concession, further to the south in a region with dry gas, has a
vertical well already drilled into its shale target, and awaits fraccing and testing.
Siekierki, in the Permian Basin, is a tight gas field on which the Company has
an agreement for Palomar Natural Resources (“Palomar”; the operator, with
65% equity) to perform workovers on three existing wells.
IRELAND
Offshore
San Leon’s 4.5% Net Profit Interest (NPI) on the Barryroe oil field provides
access to future revenue streams with no additional capital required. A CPR
was produced by the operator in 2013, and the operator continues efforts
to farm out the asset to enable the next wells to be drilled.
MOROCCO
Onshore
Laayoune-4 was drilled as a commitment well targeting Tertiary channel sands
on the onshore Tarfaya licence. It is in an excellent location for gas marketing,
and believed to be part of a larger structure. The well encountered gas shows
and has been suspended pending possible re-entry. In the meantime the
Company intends to apply in conjunction with ONHYM for a long licence
extension on Tarfaya, which may include a significant 3D seismic programme
over the broader structure, including the Laayoune-4 well.
San Leon Energy plc Annual Report and Accounts 2015 R
E
A
D
Y
T
O
D
E
V
E
L
O
P
I
A
P
P
R
A
S
A
L
A
N
D
THE BEST
SINGLE FRAC
ON A VERTICAL GAS WELL
IN EUROPE
Overview | Strategic Report | Governance | Financial Statements
pg 28
POLAND
Rawicz-15, the second appraisal/development well on the onshore
Poland Rawicz gas field, was drilled during 2015 by the operator,
Palomar. It was subsequently tested in early 2016 and produced
3.6 mmscf/d, confirming the producibility of the reservoir on the
western side of the structure and providing further evidence of volumes.
Palomar is finalising a full development plan to be submitted to the
Polish Government for approval. The operator's development plan
envisages at least three wells available for first production (including
Rawicz-12 and Rawicz-15), now expected in early 2017, which would
bring onstream the largest gas development in Poland for 20 years.
San Leon Energy plc Annual Report and Accounts 2015 Overview | Strategic Report | Governance | Financial Statements
N
E
A
R
-
T
E
R
M
I
N
C
O
M
E
pg 30
PROGRESS.
WE PROMISED IT.
WE ARE
DELIVERING IT.
Subject to shareholder approval, San Leon’s share of future net cash flows
generated from OML 18 is expected to support a dividend policy, which will
be subject to typical distribution conditions, including a court-sanctioned
reduction in share capital/share premium. San Leon will be targeting to return
to shareholders, via either dividends or share buybacks, approximately
50% of available Plc cash flow for a period of five years from receipt of first
cashflow from BidCo.
Board of directors
pg 32
Oisín Fanning
Executive Chairman
Paul Sullivan
Managing Director
Daniel Martin
Non-Executive Director
Piotr Rozwadowski
Non Executive Director
Ray King
Company Secretary
Background and experience
Oisín has almost 30 years’ experience
in structured finance, stockbroking
and corporate finance, with 12 years
specialising in the oil and gas industry.
Formerly CEO of Astley & Pearce Ltd.,
MMI Stockbrokers, and Smart Telecom
Plc, Oisín was closely involved with
the restructuring of Dana Petroleum
Plc in the early 1990s. He was also
a major supporter of Tullow Oil Plc
in its early growth phase.
Paul Sullivan gained substantial
banking experience over 30 years,
before joining San Leon as
Commercial Director. He became
Managing Director in 2010.
Previously, Paul gained extensive
Corporate Treasury and Operations
experience through senior
appointments with leading financial
institutions. These included
Nordbanken NY, Standard Chartered
Bank, Dublin and BNP Paribas in
Dublin.
Daniel is a London-based
commercial lawyer and graduate
of Cambridge University, the
University of South Carolina,
and the American University
Law School in Washington, DC.
He has extensive legal and
corporate finance experience –
this includes having acted as
a legal advisor to Nissan, Chrysler
and Texaco. Daniel is a co-founder
and Director of Green Corporate
Finance and is also a member of
South Carolina Bar.
Piotr is President of the Board and
Ray is a qualified Chartered Secretary,
Managing Director of Belos-PLP SA,
Banker, Compliance Officer and
a leading Polish producer of
has considerable experience in IT
components for overhead power lines
and Finance.
and a subsidiary of NASDAQ-listed
Preformed Line Products Company.
Piotr is also former Vice Minister of
As a Chartered Secretary with
40 years’ experience, much of
State for the Treasury of Poland where
it with a large City bank, he has
he was responsible for the energy and
acted as Company Secretary and
in various senior Executive and
Non-Executive Director roles for
companies which have been brought
to the AIM, Nasdaq and Plus.
telecoms sectors.
He has also worked as a consultant
for AT Kearney and Roland Berger
Strategy Consultants and was
previously on the board of Aurelian Oil
& Gas plc, recently acquired by San
Leon Energy. Piotr graduated with an
MSc in Electrical Engineering from the
Silesian University of Technology in
Poland and also holds an MBA from
the University of Central Lancashire.
Key strengths
Oisín is both visionary and deeply
practical in pursuing business goals
on behalf of stakeholders. He
recognises the importance of finding
and developing talented people
to achieve a clear set of objectives.
Committee memberships
Paul is well qualified to acquire
and integrate San Leon’s corporate
acquisitions, acquire licences
and exploit the potential of both
conventional and shale assets.
Daniel has considerable skills
and expertise in both commercial
law and corporate finance.
Piotr has over 25 years’ experience
Ray is a highly experienced and seasoned
working in the energy sector in Poland
Company Secretary with considerable
and has held senior positions with
experience of listed entities. He is a Fellow
a number of companies in the Polish
of the Institute of Chartered Secretaries
electrical and power sectors.
and Administrators, the Chartered Institute
of Bankers and the Institute of Financial
Accountants. He is also qualified as
a Chartered Information Technology
Professional and has achieved the
Certificate of Regulated Insurance.
Member of Nominations Committee.
Member of Nominations Committee.
Member of Remuneration, Audit
and Risk and Safety Committees.
Member of Risk and Safety
Committees.
Member of Risk and Safety and
Nominations and Audit Committees.
San Leon Energy plc Annual Report and Accounts 2015 Oisín Fanning
Executive Chairman
Background and experience
Oisín has almost 30 years’ experience
Paul Sullivan gained substantial
Daniel is a London-based
in structured finance, stockbroking
banking experience over 30 years,
commercial lawyer and graduate
and corporate finance, with 12 years
before joining San Leon as
specialising in the oil and gas industry.
Commercial Director. He became
Managing Director in 2010.
Formerly CEO of Astley & Pearce Ltd.,
MMI Stockbrokers, and Smart Telecom
Previously, Paul gained extensive
of Cambridge University, the
University of South Carolina,
and the American University
Law School in Washington, DC.
Plc, Oisín was closely involved with
the restructuring of Dana Petroleum
Plc in the early 1990s. He was also
a major supporter of Tullow Oil Plc
in its early growth phase.
Corporate Treasury and Operations
He has extensive legal and
experience through senior
corporate finance experience –
appointments with leading financial
this includes having acted as
institutions. These included
a legal advisor to Nissan, Chrysler
Nordbanken NY, Standard Chartered
and Texaco. Daniel is a co-founder
Bank, Dublin and BNP Paribas in
Dublin.
and Director of Green Corporate
Finance and is also a member of
South Carolina Bar.
Key strengths
Oisín is both visionary and deeply
Paul is well qualified to acquire
Daniel has considerable skills
practical in pursuing business goals
and integrate San Leon’s corporate
and expertise in both commercial
on behalf of stakeholders. He
acquisitions, acquire licences
law and corporate finance.
recognises the importance of finding
and exploit the potential of both
and developing talented people
to achieve a clear set of objectives.
conventional and shale assets.
Paul Sullivan
Managing Director
Daniel Martin
Non-Executive Director
Piotr Rozwadowski
Non Executive Director
Ray King
Company Secretary
pg 33
Piotr is President of the Board and
Managing Director of Belos-PLP SA,
a leading Polish producer of
components for overhead power lines
and a subsidiary of NASDAQ-listed
Preformed Line Products Company.
Piotr is also former Vice Minister of
State for the Treasury of Poland where
he was responsible for the energy and
telecoms sectors.
He has also worked as a consultant
for AT Kearney and Roland Berger
Strategy Consultants and was
previously on the board of Aurelian Oil
& Gas plc, recently acquired by San
Leon Energy. Piotr graduated with an
MSc in Electrical Engineering from the
Silesian University of Technology in
Poland and also holds an MBA from
the University of Central Lancashire.
Piotr has over 25 years’ experience
working in the energy sector in Poland
and has held senior positions with
a number of companies in the Polish
electrical and power sectors.
Ray is a qualified Chartered Secretary,
Banker, Compliance Officer and
has considerable experience in IT
and Finance.
As a Chartered Secretary with
40 years’ experience, much of
it with a large City bank, he has
acted as Company Secretary and
in various senior Executive and
Non-Executive Director roles for
companies which have been brought
to the AIM, Nasdaq and Plus.
Ray is a highly experienced and seasoned
Company Secretary with considerable
experience of listed entities. He is a Fellow
of the Institute of Chartered Secretaries
and Administrators, the Chartered Institute
of Bankers and the Institute of Financial
Accountants. He is also qualified as
a Chartered Information Technology
Professional and has achieved the
Certificate of Regulated Insurance.
Committee memberships
Member of Nominations Committee.
Member of Nominations Committee.
Member of Remuneration, Audit
and Risk and Safety Committees.
Member of Risk and Safety
Committees.
Member of Risk and Safety and
Nominations and Audit Committees.
Overview | Strategic Report | Governance | Financial Statements directors’ report
for the year ended 31 December 2015
The Directors present their annual report together with
the audited financial statements of San Leon Energy Plc
(“the Company”) and its subsidiaries (collectively
“the Group”) for the year ended 31 December 2015.
Principal activity and future developments
The principal activity of the company is the exploration
and production of oil and gas.
pg 34
A detailed review of activities for the year and future
prospects of the Group is contained in the Chairman’s
Statement and Operating Review.
Results and dividends
The Group loss for the year after providing for
depreciation and taxation amounted to €213.4 million
(2014: loss of €38.3 million). Net assets of the Group
at 31 December 2015 amounted to €77.1 million
(2014: €250.8 million). No dividends are proposed
by the Directors.
Principal risks and uncertainties
The Group’s principal areas of oil and gas exploration
activity are in Poland, Morocco and Albania. The Group
has a management structure and system of internal
controls in place designed to identify, evaluate, manage
and mitigate business risk. Details of the principal
financial risks are set out in Note 30. Other risks and
uncertainties are considered to be the following:
Exploration risk
Exploration and development activities may be delayed
or adversely affected by factors outside the Group’s
control, in particular, climatic conditions, performance
of joint venture partners or suppliers, availability of
drilling and other equipment, delays or failures in
installing and commissioning plant and equipment,
unknown geological conditions, remoteness of location,
actions of host governments or other regulatory
authorities (relating to, inter alia, the grant, maintenance
or renewal of any required authorisations, environmental
regulations or changes in law).
Commodity price risk
The demand for, and price of oil and gas is dependent
on global and local supply and demand, actions of
governments or cartels and general global economic
and political developments.
Political risk
As a consequence of activities in different parts of the
world, the Group may be subject to political, economic
and other uncertainties, including but not limited to
terrorism, war or unrest, changes in national laws and
energy policies and exposure to different legal systems.
Environmental risk
Environmental and safety legislation may change
in a manner that may require stricter or additional
standards than those now in effect, which could result
in heightened responsibilities for the Group and
potentially increased operating costs.
Financial risk management
The Group’s multinational operations expose it to
different financial risks that include foreign exchange
risk, credit risk, liquidity risk, interest rate risk, and
equity price risk. The Group has a risk management
programme in place which seeks to limit the impact
of these risks on the performance of the Group and it
is the policy to manage these risks in a non-speculative
manner.
Currency risk
Although the reporting currency is Euro, significant
transactions denominated in other currencies are
entered into by the Group including exploration
expenditure, other costs and equity funding, thus
creating currency exposures for the Group.
Going concern risk
As set out in Note 1 to the financial statements, there
are a number of assumptions underlying the Group’s
cash flow projections which indicate the existence of
a material uncertainty which may cast significant doubt
on the Group and the Company’s ability to continue
as a going concern.
Share price
The share price movement in the year ranged from
a low of Stg£0.2735 to a high of Stg£1.61. The share
price at 31 December 2015 was Stg£0.34.
San Leon Energy plc Annual Report and Accounts 2015 pg 35
Directors
The directors of San Leon Energy Plc, all of whom
served for the full year, except where indicated, are
as follows:
Oisín Fanning, Executive Chairman
Paul Sullivan, Managing Director
Raymond King, Non-Executive Director and
Company Secretary
Daniel Martin, Non-Executive Director
Jeremy Boak, Non-Executive Director
(resigned 22 July 2015)
Piotr Rozwadowski, Non-Executive Director
(resigned 5 May 2016)
In accordance with the Articles of Association, Raymond
King and Paul Sullivan retire from the board by rotation
and being eligible offer themselves for re-election.
Directors and their interests
The Directors and Secretary who held office at
31 December 2015, except where indicated, had no
interests other than those shown below in the Ordinary
Shares of the Company. All interests are beneficially
held by the directors.
Number of Ordinary Shares
Director
Oisín Fanning
Paul Sullivan
Raymond King
Jeremy Boak+
Daniel Martin
Piotr Rozwadowski~
31/12/15
01/01/15
28/06/16
<
<
<
818,926#
818,926
818,926
608,400 608,400 608,400
–
–
11,345
–
–
–
11,345
–
–
–
11,345
–
< Adjusted to reflect the share consolidation in July 2015. Further details
are provided in Note 24.
# Oisín Fanning is also due 1,167,183 ordinary shares in lieu of 80% of his
salary for the year ended 31 December 2015.
Share options
Details of share options granted to the Directors are as follows:
+ Resigned 22 July 2015.
~ Resigned 5 May 2016.
Director
Oisín Fanning
Paul Sullivan
Raymond King
Daniel Martin
Piotr Rozwadowski~
Options at
01/01/15
<
25,000
30,000
50,000^
35,000^
2,500
55,000*
35,000
55,000*
20,000
50,000^
2,500
25,000^
2,500
27,500
40,000*
30,000
40,000*
10,000
10,000
2,500
2,500
15,000
–
–
Granted
in year
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Exercised
in year
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Lapsed
in year
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(10,000)
–
–
–
–
–
–
Options at
31/12/15
25,000
30,000
50,000
35,000
2,500
55,000
35,000
55,000
20,000
50,000
2,500
25,000
2,500
27,500
40,000
30,000
40,000
–
10,000
2,500
2,500
15,000
–
–
Exercise
price
<
£11.00
£11.00
£35.00
£35.00
£25.00
€5.00
£13.00
€5.00
£11.00
£35.00
£25.00
£35.00
£11.00
£11.00
€5.00
£13.00
€5.00
€5.00
£11.00
£25.00
£11.00
£13.00
–
–
Expiry
date
04/02/16
14/11/18
25/07/17
13/02/18
29/12/17
14/11/18
20/03/19
06/07/19
04/02/16
25/07/17
29/12/17
13/02/18
14/11/18
14/11/18
14/11/18
20/03/19
06/07/19
22/09/15
04/02/16
29/12/17
14/11/18
20/03/19
–
–
< Adjusted to reflect the share consolidation in July 2015. Further details are provided in Note 24.
^ The 100,000 (2014: 100,000) options granted at £35.00 in 2010 and the 60,000 (2014: 60,000) options granted at £35.00 in 2011 are only exercisable
on fulfilment of a market condition requiring the Company share price to exceed £100.00 and £120.00 respectively for a period of thirty days.
* Options vest subject to achievement of a production target of over 501 barrels of oil equivalent per day within the life of the option.
~ Resigned 5 May 2016.
All other options vest immediately on grant.
Overview | Strategic Report | Governance | Financial Statements directors’ report continued
for the year ended 31 December 2015
Transactions involving Directors
Contracts and arrangements of significance during the
year in which Directors of the Company were interested
are disclosed in Note 29 to the financial statements.
Significant shareholders
The Company has been informed that, in addition to the
interests of the Directors above, at 31 December 2015
and at 28 June 2016, the following shareholders own
3% or more of the issued share capital of the Company:
pg 36
Toscafund Asset
Management LLP
OWG Plc
The Capital Group
Companies Inc
Quantum Partners LP
Percentage of
issued share capital
28/06/16
31/12/15
41.47%
8.66%
6.48%
3.50%
41.47%
8.66%
6.48%
3.50%
The Directors are not aware of any other holding
of 3% or more of the share capital of the Company.
Group undertakings
Details of the Company’s subsidiaries are set out
in Note 14 to the financial statements.
Political donations
There were no political donations made during the
current or prior year.
Going concern
The Directors have reviewed budgets, projected cash
flows and other relevant information, and on the basis
of this review, are confident that the Company and
the Group will have adequate financial resources to
continue in operational existence for the foreseeable
future which covers a period of at least twelve months
from the date of approval of these financial statements.
Further details on the assumptions in the cash flow
projections are provided in Note 1 to the financial
statements.
The Directors have discussed the assumptions and
basis of preparation of the projections and, having
considered the financial resources available, believe
that it is appropriate to prepare the financial statements
on the going concern basis.
Corporate Governance
The Directors are committed to maintaining high
standards of corporate governance consistent with the
size, nature and stage of development of the Company.
The Board is accountable to Shareholders for good
corporate governance and has adopted the procedures
below in this regard.
The Board
At the date this Annual Report is published, the
Board comprises two executive directors and two
non-executive directors.
In order to ensure that the Directors can properly carry
out their roles, the members of the Board are provided
with comprehensive information and financial details
prior to all Board meetings. The Board meets at least
six times a year to discuss and decide the Company’s
business and strategic decisions. In addition, there is
a high degree of contact between Board meetings
to ensure all Directors are aware of the Company’s
business. If necessary, the non-executive Directors
may take independent advice at the expense of
the Company.
Remuneration Committee
The Remuneration Committee is composed of Daniel
Martin and Raymond King with Daniel Martin appointed
as chairman. The Remuneration Committee monitors
the performance of each of the Company’s executive
Directors and senior executives to ensure they
are rewarded fairly for their contribution. The
recommendations of the Remuneration Committee
are presented to a meeting of the full Board. The
remuneration and terms and conditions of appointment
of the non-executive directors are set by the Board
as a whole.
San Leon Energy plc Annual Report and Accounts 2015
Audit Committee
The Audit Committee consists of Daniel Martin and
Raymond King with Daniel Martin appointed as
chairman. The duties of the Committee include the
review of the accounting principles, policies and
practices adopted in preparing the financial statements,
external compliance matters, internal control principles
and the review of the Group’s financial results. It also
considers how to maintain an appropriate relationship
with the Company’s auditors. The Committee approves
fees in respect of non-audit services provided by
external auditors in order to safeguard the external
auditor’s independence and objectivity. The Audit
Committee meets internally twice per year and meets
the external auditor at those meetings. The Committee
also meets on an ad hoc basis as required.
Nomination Committee
The Nomination Committee consists of Oisín Fanning,
Paul Sullivan and Raymond King with Oisín Fanning
appointed as chairman. The nomination committee
is responsible for reviewing the structure, size and
composition of the Board and making recommendations
to the Board with regard to any changes required. It is
responsible for locating appropriate senior candidates
and conducting initial interviews and submitting
recommendations on any appointment to the Board.
Risk and Safety Committee
The Risk and Safety Committee consists of Daniel
Martin and Raymond King with Raymond King appointed
as chairman. The committee is responsible for
evaluating risks in Group operations including property,
personnel and environmental risks and ensuring that
appropriate procedures are in place for mitigating risk
and ensuring that adequate insurance cover is in place
for identifiable risks.
pg 37
Internal control
The Board acknowledges its overall responsibility
for ensuring that the Company has a system of internal
control in place that is appropriate. However,
shareholders should be mindful that any system can
only provide reasonable, not absolute, assurance
against material misstatement or loss and is designed
to manage but not to eliminate the risk of failure to
achieve business objectives. The key procedures are:
• preparation of annual budgets for all licence areas
for approval by the board;
• ongoing review of expenditure and cash flows versus
approved budget;
• establishment of appropriate cash flow management
and treasury policies for the management of liquidity,
currency and credit risk on financial assets and
liabilities;
• regular management meetings to review operating
and financial activities;
• recruitment of appropriately qualified;
• experienced staff to key financial and management
positions; and
• preparation of financial statements.
The Company has adopted a model code for Directors’
share dealings which is appropriate for an AIM listed
company. The Directors comply with Rule 21 of the
AIM Rules relating to Directors’ dealings and take
all reasonable steps to ensure compliance by the
Company’s applicable employees.
Overview | Strategic Report | Governance | Financial Statements directors’ report continued
for the year ended 31 December 2015
Remuneration Committee Report
The Group’s policy on senior executive remuneration is designed to attract and retain individuals of the highest
calibre who bring relevant experience and independent views to the development of policy, strategic decisions
and governance of the Group.
In determining remuneration levels, the Remuneration Committee takes into consideration the practices of other
companies of similar scope and size. A key philosophy is that staff should be properly rewarded and motivated
to perform in the best interests of the Shareholders.
pg 38
Director emoluments and pension contributions, excluding share based payments, during the year ended
31 December 2015 were as follows:
Oisín Fanning
Paul Sullivan
Raymond King
Jeremy Boak+
Daniel Martin
Piotr Rozwadowski~
Salary
& emoluments
€’000
Pension
€’000
Fees
€’000
Shares
to be issued
€’000
248
572
–
–
–
–
820
–
96
–
–
–
–
96
50
50
30
–
30
35
195
992#
–
–
–
–
–
992
2015
Total
€’000
1,290
718
30
–
30
35
2,103
2014
Total
€’000
1,465
678
30
36
30
35
2,274
+ Resigned 22 July 2015.
# Oisín Fanning is due 1,167,183 ordinary shares in lieu of 80% of his salary for the year ended 31 December 2015.
~ Resigned 5 May 2016.
The Group has a legal services agreement and a consultancy agreement with entities connected with Daniel Martin
and Raymond King, which received €311,414 (2014: €294,888) consultancy fees from the Company during the year.
See Note 29 for further details.
In addition to the emoluments above, in accordance with IFRS 2, share based payments, an additional cost of
€118,740 (2014: €533,282) has been recognised in respect of share options granted to Directors. See Note 26
for further details of share options.
Books and accounting records
The Directors are responsible for ensuring adequate accounting records, as outlined in Section 281 to 285 of
the Companies Act 2014, are kept by the Company. The Directors, through the use of appropriate procedures
and systems and the employment of competent persons, have ensured that measures are in place to secure
compliance with these requirements. The books and accounting records are maintained at 3300 Lake Drive,
Citywest Business Campus, Dublin 24.
Events since the year end
Details of significant events since the year end are included in Note 31.
Auditor
The Auditor, KPMG, Chartered Accountants, have indicated their willingness to continue in office in accordance
with the provisions of Section 383(2) of the Companies Act 2014.
On behalf of the board
Oisín Fanning
Director
Raymond King
Director
San Leon Energy plc Annual Report and Accounts 2015
statement of directors’ responsiBilities in respect
of the annual report and financial statements
The Directors are responsible for the maintenance
and integrity of the corporate and financial information
included on the Company’s website. Legislation in
the Republic of Ireland governing the preparation and
dissemination of financial statements may differ from
legislation in other jurisdictions.
On behalf of the board
Oisín Fanning Raymond King
Director
Director
pg 39
The Directors are responsible for preparing the
Annual Report and the Group and Company financial
statements in accordance with applicable Irish law
and regulations.
Company law requires the directors to prepare Group
and Company financial statements for each financial
year. Under that law and in accordance with AIM/ESM
Rules, the Directors are required to prepare the Group
financial statements in accordance with International
Financial Reporting Standards (IFRS) as adopted by the
EU and applicable law and have elected to prepare the
Company financial statements in accordance with IFRS
as adopted by the EU and as applied in accordance with
the Companies Act 2014.
Under company law the Directors must not approve the
Group and Company financial statements unless they
are satisfied that they give a true and fair view of the
assets, liabilities and financial position of the Group and
Company and of the Group’s profit or loss for that year.
In preparing each of the Group and Company financial
statements, the Directors are required to:
• select suitable accounting policies and apply them
consistently;
• make judgements and estimates that are reasonable
and prudent;
• state whether they have been prepared in
accordance with IFRS as adopted by the EU; and
• prepare the financial statements based 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 which disclose with reasonable
accuracy at any time the assets, liabilities, financial
position and profit or loss of the Company and which
enable them to ensure that the financial statements of
the Group are prepared in accordance with applicable
IFRS, as adopted by the EU and comply with the
provisions of the Companies Act 2014. They have
general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of
the Group and to prevent and detect fraud and other
irregularities. Under applicable law, the directors
are also responsible for preparing a Directors’ Report
that complies with the Companies Act 2014.
Overview | Strategic Report | Governance | Financial Statements
independent auditor’s report
to the Members of San Leon Energy plc
pg 40
We have audited the Group and Company financial
statements (‘’financial statements’’) of San Leon Energy
plc for the year ended 31 December 2015 which
comprise the Consolidated Income Statement, the
Consolidated Statement of Other Comprehensive
Income, the Consolidated and Company Statement
of Changes in Equity, the Consolidated and Company
Statement of Financial Position, the Consolidated and
Company Statement of Cash Flows and the related
notes. The financial reporting framework that has been
applied in their preparation is Irish law and International
Financial Reporting Standards (IFRS) as adopted by the
European Union and as regards the Company financial
statements, as applied in accordance with the
provisions of the Companies Act 2014. Our audit was
conducted in accordance with International Standards
on Auditing (ISAs) (UK & Ireland).
Opinions and conclusions arising from our audit
1. Our opinion on the financial statements is unmodified
In our opinion:
• the Group financial statements give a true and fair
view of the assets, liabilities and financial position
of the Group as at 31 December 2015 and of its loss
for the year then ended;
• the Company Statement of Financial Position gives a
true and fair view of the assets, liabilities and financial
position of the Company as at 31 December 2015;
• the Group financial statements have been properly
prepared in accordance with IFRS as adopted by
the European Union;
• the Company financial statements have been properly
prepared in accordance with IFRS as adopted by
the European Union as applied in accordance with
the provisions of the Companies Act 2014; and
• the Group financial statements and Company financial
statements have been properly prepared in
accordance with the requirements of the Companies
Act 2014.
2. Our opinion on the financial statements is
accompanied by an emphasis of matter – going concern
In forming our opinion on the financial statements, which
is not modified, we have considered the adequacy of
the disclosure made in Note 1 to the financial statements
concerning the Group and Company’s ability to
continue as a going concern. The ability of the Group
and Company to continue as a going concern is
dependent on a number of key assumptions as set out
in Note 1 including the approval by the shareholders
of the Company of a share placing and of the acquisition
by the Company of a 9.72% indirect economic interest in
the OML 18 block, onshore Nigeria, at an Extraordinary
General Meeting in July 2016. These assumptions,
along with the other matters explained in Note 1 to the
financial statements, indicate the existence of material
uncertainties which may cast significant doubt about
the Group and Company’s ability to continue as a going
concern. The financial statements do not include the
adjustments that would result if the Group and Company
were unable to continue as going concerns.
3. Our conclusions on other matters on which we are
required to report by the Companies Act 2014 are set
out below
We have obtained all the information and explanations
which we consider necessary for the purposes of
our audit.
In our opinion the accounting records of the Company
were sufficient to permit the financial statements to
be readily and properly audited and the financial
statements are in agreement with the accounting
records.
In our opinion the information given in the Directors’
Report is consistent with the financial statements.
4. We have nothing to report in respect of matters on
which we are required to report by exception
ISAs (UK & Ireland) require that we report to you if,
based on the knowledge we acquired during our audit,
we have identified information in the annual report that
contains a material inconsistency with either that
knowledge or the financial statements, a material
misstatement of fact, or that is otherwise misleading. In
addition, the Companies Act 2014 requires us to report
to you if, in our opinion, the disclosures of directors’
remuneration and transactions required by sections 305
to 312 of the Act are not made.
San Leon Energy plc Annual Report and Accounts 2015 Our report is made solely to the Company’s members,
as a body, in accordance with section 391 of the
Companies Act 2014. Our audit work has been
undertaken so that we might state to the Company’s
members those matters we are required to state to
them in an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the
Company and the Company’s members as a body,
for our audit work, for this report, or for the opinions
we have formed.
pg 41
Cliona Mullen
for and on behalf of
KPMG
Chartered Accountants, Statutory Audit Firm
1 Stokes Place
St Stephen’s Green
Dublin 2
Ireland
28 June 2016
Basis of our report, responsibilities and restrictions
on use
As explained more fully in the Statement of Directors’
Responsibilities set out on page 39, the directors
are responsible for the preparation of the financial
statements and for being satisfied that they give a true
and fair view and otherwise comply with the Companies
Act 2014. Our responsibility is to audit and express
an opinion on the financial statements in accordance
with Irish law and International Standards on Auditing
(UK and Ireland). Those standards require us to comply
with the Financial Reporting Council’s Ethical Standards
for Auditors.
An audit undertaken in accordance with ISAs (UK &
Ireland) 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 Company’s circumstances and have been
consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates
made by the directors; and the overall presentation
of the financial statements.
In addition, we read all the financial and non-financial
information in the Annual Report to identify material
inconsistencies with the audited financial statements
and to identify any information that is apparently
materially incorrect based on, or materially inconsistent
with, the knowledge acquired by us in the course
of performing the audit. If we become aware of any
apparent material misstatements or inconsistencies
we consider the implications for our report.
Whilst an audit conducted in accordance with ISAs
(UK & Ireland) is designed to provide reasonable
assurance of identifying material misstatements or
omissions it is not guaranteed to do so. Rather the
auditor plans the audit to determine the extent of
testing needed to reduce to an appropriately low level
the probability that the aggregate of uncorrected and
undetected misstatements does not exceed materiality
for the financial statements as a whole. This testing
requires us to conduct significant audit work on a broad
range of assets, liabilities, income and expense as well
as devoting significant time of the most experienced
members of the audit team, in particular the
engagement partner responsible for the audit, to
subjective areas of the accounting and reporting.
Overview | Strategic Report | Governance | Financial Statements consolidated income statement
for the year ended 31 December 2015
pg 42
Continuing operations
Revenue
Cost of sales
Gross profit
Administrative expenses
Impairment of exploration and evaluation assets
Impairment of equity accounted investments
Decommissioning of wells
Arbitration award
Loss on disposal of subsidiaries
Loss from operating activities
Finance expense
Finance income
Share of loss of equity accounted investments
Loss before income tax
Income tax
Loss from continuing operations
Discontinued operations
Profit from discontinued operations (net of income tax)
Loss for the year attributable to equity holders of the Group
Loss per share (cent) – continuing operations
Basic loss per share
Diluted loss per share
Earnings per share (cent) – discontinued operations
Basic earnings per share
Diluted earnings per share
Loss per share (cent) – total
Basic loss per share
Diluted loss per share
< Adjusted to reflect the share consolidation in July 2015. Further details are provided in Note 24.
On behalf of the board
Oisín Fanning
Director
Raymond King
Director
Notes
2
10
11
23
23
3
5
6
11
8
3
9
9
9
9
9
9
2015
€’000
2014
€’000
145
(1)
144
(17,049)
(123,659)
(43,245)
(4,291)
(20,561)
–
(208,661)
(9,379)
4
(18)
(218,054)
3
(1)
2
(16,877)
(9,150)
(3,346)
–
–
(6,429)
(35,800)
(1,797)
231
(54)
(37,420)
4,688
(213,366)
(875)
(38,295)
–
(213,366)
30
(38,265)
(506.40)
(506.40)
<
(151.05)
(151.05)
–
–
0.12
0.12
(506.40)
(506.40)
(150.93)
(150.93)
San Leon Energy plc Annual Report and Accounts 2015
consolidated statement
of other comprehensive income
for the year ended 31 December 2015
Loss for the year
Items that may be reclassified subsequently to the income statement
Foreign currency translation differences – foreign operations
Fair value movements in available-for-sale financial assets
Deferred tax on fair value movements in available-for-sale financial assets
Total comprehensive loss for the year
Notes
15
28
2015
€’000
(213,366)
(3,320)
4,658
(1,615)
(213,643)
2014
€’000
(38,265)
818
5,102
(2,084)
(34,429)
The accompanying notes on pages 52 – 90 form an integral part of these financial statements.
pg 43
On behalf of the board
Oisín Fanning
Director
Raymond King
Director
Overview | Strategic Report | Governance | Financial Statements
consolidated statement
of changes in equity
for the year ended 31 December 2015
pg 44
2014
Balance at 1 January 2014
Total comprehensive income for year
Loss for the year
Other comprehensive income
Foreign currency translation differences – foreign operations
Fair value movements in available-for-sale financial assets
Deferred tax on fair value movements in
available-for-sale financial assets
Total comprehensive income for year
Transactions with owners recognised directly in equity
Contributions by and distributions to owners
Cost of issue of shares for cash in 2013
Share based payment
Effect of share options exercised
Shares issued to Realm Shareholders
on conversion of exchangeable shares
Total transactions with owners
Balance at 31 December 2014
2015
Balance at 1 January 2015
Total comprehensive income for year
Loss for the year
Other comprehensive income
Foreign currency translation differences – foreign operations
Fair value movements in available-for-sale financial assets
Deferred tax on fair value movements in
available-for-sale financial assets
Total comprehensive income for year
Transactions with owners recognised directly in equity
Contributions by and distributions to owners
Issue of shares for cash (Note 24)
Issue of advisor shares (Note 24)
Share based payment
Effect of share options cancelled
Change in ownership interests
Shares issued to Realm Shareholders
on conversion of exchangeable shares
Total transactions with owners
Balance at 31 December 2015
Share
capital
reserve
€’000
Share
premium
reserve
€’000
Currency
translation
reserve
€’000
Share based
payment
reserve
€’000
Attributable to
Fair value
reserve
€’000
Retained
earnings
€’000
equity holders
Non-controlling
in Group
€’000
interest
€’000
Total
€’000
126,561
164,233
(1,389)
10,213
(3,095)
(12,604)
283,919
528
284,447
–
–
–
–
–
–
–
27
–
–
–
–
–
(474)
–
6
191
218
126,779
335
(133)
164,100
–
818
–
–
818
–
–
–
–
–
(571)
–
–
–
–
–
–
1,212
–
–
1,212
11,425
126,779
164,100
(571)
11,425
(77)
(50,869)
250,787
–
–
–
–
–
–
–
–
–
–
–
(3,320)
–
–
(3,320)
–
–
–
–
–
363
2
–
–
40,801
224
–
–
–
–
–
–
–
–
4,542
(3,918)
1
366
127,145
1
41,026
205,126
–
–
(3,891)
–
624
12,049
(77)
(50,869)
250,787
250,789
(38,265)
(38,265)
5,102
(2,084)
3,018
(38,265)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(6,015)
3,918
818
5,102
(2,084)
(34,429)
(474)
1,212
33
526
1,297
(3,320)
4,658
(1,615)
35,149
226
4,542
–
2
(213,366)
(213,366)
4,658
(1,615)
3,043
(213,366)
(213,643)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(2,097)
2,966
(266,332)
39,919
77,063
(526)
(526)
–
–
–
–
–
–
–
–
2
2
–
–
–
–
–
–
–
–
–
(2)
(2)
–
(38,265)
818
5,102
(2,084)
(34,429)
(474)
1,212
33
–
771
250,789
(213,366)
(3,320)
4,658
(1,615)
(213,643)
35,149
226
4,542
–
–
39,917
77,063
The accompanying notes on pages 52 – 90 form an integral part of these financial statements.
On behalf of the board
Oisín Fanning
Director
Raymond King
Director
San Leon Energy plc Annual Report and Accounts 2015
Share
capital
reserve
€’000
Share
premium
reserve
€’000
Currency
Share based
translation
reserve
€’000
payment
reserve
€’000
Fair value
reserve
€’000
Retained
earnings
€’000
Attributable to
equity holders
in Group
€’000
Non-controlling
interest
€’000
Total
€’000
126,561
164,233
(1,389)
10,213
(3,095)
(12,604)
283,919
528
284,447
2014
Balance at 1 January 2014
Total comprehensive income for year
Loss for the year
Other comprehensive income
Foreign currency translation differences – foreign operations
Fair value movements in available-for-sale financial assets
Deferred tax on fair value movements in
available-for-sale financial assets
Total comprehensive income for year
Transactions with owners recognised directly in equity
Contributions by and distributions to owners
Cost of issue of shares for cash in 2013
Share based payment
Effect of share options exercised
Shares issued to Realm Shareholders
on conversion of exchangeable shares
Total transactions with owners
Balance at 31 December 2014
2015
Balance at 1 January 2015
Total comprehensive income for year
Loss for the year
Other comprehensive income
Foreign currency translation differences – foreign operations
Fair value movements in available-for-sale financial assets
Deferred tax on fair value movements in
available-for-sale financial assets
Total comprehensive income for year
Transactions with owners recognised directly in equity
Contributions by and distributions to owners
Issue of shares for cash (Note 24)
Issue of advisor shares (Note 24)
Share based payment
Effect of share options cancelled
Change in ownership interests
Shares issued to Realm Shareholders
on conversion of exchangeable shares
Total transactions with owners
Balance at 31 December 2015
On behalf of the board
Oisín Fanning
Director
Raymond King
Director
–
–
–
–
–
–
–
–
–
–
2
–
–
1
–
–
27
191
218
(474)
335
(133)
126,779
164,100
(571)
1,212
1,212
11,425
–
–
–
–
–
–
6
–
–
–
–
–
–
–
1
818
818
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(3,320)
(3,320)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4,542
(3,918)
–
624
363
40,801
224
The accompanying notes on pages 52 – 90 form an integral part of these financial statements.
366
41,026
127,145
205,126
(3,891)
12,049
–
–
2,966
–
(2,097)
(266,332)
–
(38,265)
(38,265)
–
–
818
5,102
–
(38,265)
(2,084)
(34,429)
–
–
–
(474)
1,212
33
–
–
–
–
–
–
–
–
(38,265)
818
5,102
(2,084)
(34,429)
(474)
1,212
33
pg 45
–
–
(50,869)
526
1,297
250,787
(526)
(526)
2
–
771
250,789
–
5,102
(2,084)
3,018
–
–
–
–
–
(77)
–
4,658
(1,615)
3,043
–
–
–
–
2
–
–
–
–
–
–
–
–
–
(2)
(2)
–
250,789
(213,366)
(3,320)
4,658
(1,615)
(213,643)
35,149
226
4,542
–
–
39,917
77,063
–
–
(3,320)
4,658
–
(213,366)
(1,615)
(213,643)
(6,015)
–
–
3,918
35,149
226
4,542
–
2
39,919
77,063
126,779
164,100
(571)
11,425
(77)
(50,869)
250,787
–
(213,366)
(213,366)
Overview | Strategic Report | Governance | Financial Statements
company statement
of changes in equity
for the year ended 31 December 2015
pg 46
2014
Balance at 1 January 2014
Total comprehensive income
Loss for the year
Fair value movement in available for sale financial asset
Total comprehensive income for the year
Transactions with owners recognised directly in equity
Contributions by and distributions to owners
Cost of issue of shares for cash in 2013
Share based payment
Effect of share options exercised
Shares issued to Realm Shareholders
on conversion of exchangeable shares
Total transactions with owners
Balance at 31 December 2014
2015
Balance at 1 January 2015
Total comprehensive income
Loss for the year
Fair value movements in
available-for-sale financial assets
Total comprehensive income for the year
Transactions with owners recognised directly in equity
Contributions by and distributions to owners
Issue of shares for cash (Note 24)
Issue of advisor shares (Note 24)
Share based payment
Effect of share options cancelled
Shares issued to Realm Shareholders
on conversion of exchangeable shares
Total transactions with owners
Balance at 31 December 2015
Share
capital
€’000
Share
premium
€’000
Shares to be
issued
€’000
Share based
payment
reserve
€’000
Fair
value
reserve
€’000
Retained
earnings
€’000
Total
equity
€’000
126,561
164,233
528
10,213
(981)
(29,652)
270,902
–
–
–
–
–
27
–
–
–
(474)
–
6
–
–
–
–
–
–
191
218
126,779
335
(133)
164,100
(526)
(526)
2
126,779
164,100
–
–
–
363
2
–
–
1
366
127,145
–
–
–
40,801
224
–
–
1
41,026
205,126
2
–
–
–
–
–
–
–
(2)
(2)
–
–
–
–
–
1,212
–
–
1,212
11,425
11,425
–
–
–
–
–
4,542
(3,918)
–
624
12,049
–
63
63
–
–
–
–
–
–
–
–
–
–
–
(42,397)
(42,397)
(42,397)
(42,334)
63
(474)
1,212
33
–
771
(918)
(72,049)
229,339
(918)
(72,049)
229,339
–
(200,269)
(200,269)
7,583
7,583
7,583
(200,269)
(192,686)
(6,015)
3,918
35,149
226
4,542
–
–
6,665
(2,097)
(274,415)
39,917
76,570
–
–
–
–
–
–
–
–
–
–
The accompanying notes on pages 52 – 90 form an integral part of these financial statements.
On behalf of the board
Oisín Fanning
Director
Raymond King
Director
San Leon Energy plc Annual Report and Accounts 2015
Share
capital
€’000
Share
premium
€’000
Shares to be
issued
€’000
Share based
payment
reserve
€’000
Fair
value
reserve
€’000
Retained
earnings
€’000
Total
equity
€’000
126,561
164,233
528
10,213
(981)
(29,652)
270,902
pg 47
–
63
63
–
–
–
(42,397)
–
(42,397)
(42,397)
63
(42,334)
–
–
–
(474)
1,212
33
–
–
(918)
–
–
(72,049)
–
771
229,339
(918)
(72,049)
229,339
–
(200,269)
(200,269)
7,583
7,583
–
(200,269)
7,583
(192,686)
–
–
–
–
(6,015)
–
–
3,918
–
–
6,665
–
(2,097)
(274,415)
35,149
226
4,542
–
–
39,917
76,570
2014
Balance at 1 January 2014
Total comprehensive income
Loss for the year
Fair value movement in available for sale financial asset
Total comprehensive income for the year
Transactions with owners recognised directly in equity
Contributions by and distributions to owners
Cost of issue of shares for cash in 2013
Total comprehensive income for the year
Transactions with owners recognised directly in equity
Contributions by and distributions to owners
Share based payment
Effect of share options exercised
Shares issued to Realm Shareholders
on conversion of exchangeable shares
Total transactions with owners
Balance at 31 December 2014
2015
Balance at 1 January 2015
Total comprehensive income
Loss for the year
Fair value movements in
available-for-sale financial assets
Issue of shares for cash (Note 24)
Issue of advisor shares (Note 24)
Share based payment
Effect of share options cancelled
Shares issued to Realm Shareholders
on conversion of exchangeable shares
Total transactions with owners
Balance at 31 December 2015
On behalf of the board
Oisín Fanning
Director
Raymond King
Director
–
–
–
–
–
27
191
218
–
–
–
2
–
–
1
(474)
335
(133)
–
–
–
–
6
–
–
–
–
–
1
126,779
164,100
126,779
164,100
363
40,801
224
366
127,145
41,026
205,126
(526)
(526)
–
–
–
–
–
–
2
2
–
–
–
–
–
–
–
(2)
(2)
–
1,212
1,212
11,425
11,425
–
–
–
–
–
–
–
–
–
–
–
4,542
(3,918)
–
624
12,049
The accompanying notes on pages 52 – 90 form an integral part of these financial statements.
Overview | Strategic Report | Governance | Financial Statements
consolidated statement
of financial position
as at 31 December 2015
pg 48
Assets
Non-current assets
Intangible assets
Equity accounted investments
Property, plant and equipment
Other non-current assets
Financial assets
Current assets
Inventory
Trade and other receivables
Other financial assets
Cash and cash equivalents
Total assets
Equity and liabilities
Equity
Called up share capital
Share premium account
Share based payments reserve
Currency translation reserve
Fair value reserve
Retained earnings
Attributable to equity holders of the Group
Non-controlling interest
Total equity
Non-current liabilities
Provisions
Derivative
Deferred tax liabilities
Current liabilities
Trade and other payables
Loans and borrowings
Provisions
Total liabilities
Total equity and liabilities
Notes
2015
€’000
2014
€’000
10
11
12
13
15
16
17
18
19
24
24
25 / 26
25
23
21
28
20
22
23
47,532
11,375
10,266
833
52,553
122,559
329
6,546
1,370
913
9,158
131,717
127,145
205,126
12,049
(3,891)
2,966
(266,332)
77,063
–
77,063
24,437
–
9,086
33,523
14,583
4,778
1,770
21,131
54,654
131,717
163,375
44,483
10,832
833
47,895
267,418
321
10,344
1,335
1,809
13,809
281,227
126,779
164,100
11,425
(571)
(77)
(50,869)
250,787
2
250,789
–
4
12,199
12,203
10,964
5,814
1,457
18,235
30,438
281,227
The accompanying notes on pages 52 – 90 form an integral part of these financial statements.
On behalf of the board
Oisín Fanning
Director
Raymond King
Director
San Leon Energy plc Annual Report and Accounts 2015
company statement
of financial position
as at 31 December 2015
Assets
Non-current assets
Property, plant and equipment
Financial assets – investment in subsidiaries
Financial assets
Current assets
Trade and other receivables
Other financial assets
Cash and cash equivalents
Total assets
Equity and liabilities
Equity
Called up share capital
Share premium account
Shares to be issued
Share based payments reserve
Fair value reserve
Retained earnings
Total equity attributable to equity shareholders
Non-current liabilities
Derivative
Current liabilities
Trade and other payables
Loans and borrowings
Total liabilities
Total equity and liabilities
pg 49
Notes
2015
€’000
2014
€’000
12
14
15
17
18
19
9,057
48,122
52,553
109,732
4,108
84
572
4,764
114,496
8,630
146,386
5,772
160,788
106,703
182
1,439
108,324
269,112
24
24
25
25 / 26
21
20
22
127,145
205,126
–
12,049
6,665
(274,415)
76,570
126,779
164,100
2
11,425
(918)
(72,049)
229,339
–
4
33,148
4,778
37,926
37,926
114,496
33,955
5,814
39,769
39,773
269,112
The accompanying notes on pages 52 – 90 form an integral part of these financial statements.
On behalf of the board
Oisín Fanning
Director
Raymond King
Director
Overview | Strategic Report | Governance | Financial Statements
consolidated statement
of cash flows
for the year ended 31st December 2015
pg 50
Cash flows from operating activities
Loss for the year – continuing operations
Profit for the year – discontinued operations
Adjustments for:
Depletion and depreciation
Finance expense
Finance income
Share based payments charge
Foreign exchange
Income tax
Impairment of exploration and evaluation assets – continuing operations
Impairment of equity accounted assets – continuing operations
Arbitration award
Decommissioning of wells
Loss on disposal of subsidiaries
(Increase) in inventory
Decrease in trade and other receivables
Increase in trade and other payables
Movement in non-current assets
Share of loss of equity-accounted investments
Tax paid
Net cash outflow from operating activities
Cash flows from investing activities
Expenditure on exploration and evaluation assets
Joint venture partner share of exploration costs
Purchase of property, plant and equipment
Interest received
Decrease in restricted cash
Advances to equity accounted investments
Proceeds of farm-out arrangement
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from issue of shares
Cost of issue of shares
Proceeds from drawdown of other loans
Repayment of other loans
Movement in director loan
Interest and arrangement fees paid
Net cash inflow from financing activities
Net (decrease) in cash and cash equivalents
Effect of foreign exchange fluctuation on cash and cash equivalents
Cash and cash equivalents at start of year
Cash and cash equivalents at end of year
Notes
2015
€’000
2014
€’000
(213,366)
–
(38,295)
30
1,005
9,379
(4)
4,278
(591)
(4,688)
123,659
43,245
20,561
4,291
–
(8)
3,988
3,490
–
18
(112)
(4,855)
(20,473)
–
(434)
–
99
(2,115)
2,000
(20,923)
41,390
(6,015)
6,106
(7,805)
202
(9,116)
24,762
(1,016)
120
1,809
913
5
6
10
11
23
23
11
19
11
19
19
102
1,797
(231)
249
(1,740)
875
9,150
3,346
–
–
6,429
(90)
2,399
5,483
2,575
54
(21)
(7,888)
(19,909)
363
(1,701)
4
325
(1,055)
14,807
(7,166)
–
(474)
8,415
(3,071)
2,201
(1,641)
5,430
(9,624)
12
11,421
1,809
The accompanying notes on pages 52 – 90 form an integral part of these financial statements.
On behalf of the board
Oisín Fanning
Director
Raymond King
Director
San Leon Energy plc Annual Report and Accounts 2015
company statement
of cash flows
for the year ended 31st December 2015
Cash flows from operating activities
Loss for the year
Adjustments for:
Depletion and depreciation
Non cash dividend on transfer of asset
Finance income
Finance expense
Share based payments charge
Impairment of investment in subsidiaries
and amounts due from group undertakings
Foreign exchange
Income tax
Decrease / (increase) in trade and other receivables
(Decrease) / increase in trade and other payables
Taxation
Net cash outflow from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Interest paid
Advances to subsidiary companies
Decrease / (increase) in restricted cash
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from issue of shares
Cost of issue of shares
Proceeds from drawdown of other loans
Repayment of other loans
Movement in director loan
Net interest and arrangement fees paid
Net cash inflow from financing activities
Net (decrease) in cash and cash equivalents
Effect of foreign exchange fluctuation on cash and cash equivalents
Cash and cash equivalents at start of year
Cash and cash equivalents at end of year
19
19
The accompanying notes on pages 52 – 90 form an integral part of these financial statements.
On behalf of the board
Oisín Fanning
Director
Raymond King
Director
Notes
2015
€’000
2014
€’000
(200,269)
(42,397)
pg 51
87
(27,360)
(187)
9,316
3,286
206,501
488
9
3,837
(1,131)
1
(5,422)
(514)
–
(19,840)
99
(20,255)
41,390
(6,015)
6,106
(7,805)
202
(9,053)
24,825
(852)
(15)
1,439
572
101
–
(710)
155
200
30,983
90
10
(2,368)
4,281
–
(9,655)
(1,807)
(179)
(1,002)
(182)
(3,170)
–
(474)
8,415
(3,071)
1,259
126
6,255
(6,570)
220
7,789
1,439
Overview | Strategic Report | Governance | Financial Statements
notes to the financial statements
for the year ended 31st December 2015
1. Accounting policies
San Leon Energy Plc (“the Company”) is a company
incorporated and domiciled in the Republic of Ireland.
The Group financial statements consolidate those of the
Company and its subsidiaries (together referred to as
the “Group”). The registered office address is 1st Floor,
Wilton Park House, Wilton Place, Dublin 2.
pg 52
The accounting policies set out below have been
applied consistently to all periods presented in these
consolidated financial statements.
The figures in the financial statements are presented
in €’000 for the first time in 2015. The comparatives
have been presented on the same basis and, as
a consequence, rounding differences may arise.
Statement of compliance
As required by AIM and ESM rules and permitted by
Company Law, the Group financial statements have
been prepared in accordance with IFRS as adopted
by the EU. The individual financial statements of the
Company (Company financial statements) have been
prepared in accordance with IFRSs as adopted by the
EU and as applied in accordance with the Companies
Act 2014 which permits a Company, that publishes its
Company and Group financial statements together,
to take advantage of the exemption in Section 304
of the Companies Act 2014, from presenting to its
members its Company income statement and related
notes that form part of the approved Company financial
statements. The IFRS’s adopted by the EU as applied
by the Company and the Group in the preparation of
these financial statements are those that were effective
for accounting periods commencing on or before
1 January 2015 or were early adopted as indicated
below. The accounting policies adopted are consistent
with those of the previous year except for the following
new and amended IFRS and IFAC assumptions
adopted by the Group as of 1 January 2015.
San Leon Energy plc Annual Report and Accounts 2015 1. Accounting policies continued
New standards required by EU companies for the year ended 31 December 2015
The following new standards and amendments were adopted by the Group for the first time in the current financial
reporting period. There was no impact on the results for the year ended 31 December 2015.
Standard
Annual Improvements to IFRSs 2011-2013 Cycle
New standards and interpretations effective that have not been early adopted
Standard
Defined Benefit Plans: Employee Contributions (Amendments to IAS 19)
Annual improvements to IFRSs 2010-2012 Cycle
Amendments to IFRS 11: Accounting for acquisitions of interests in Joint Operations
Amendments to IAS 16 and IAS 38: Clarification of acceptable methods
of depreciation and amortisation
Amendments to IAS 16 Property, Plant and Equipment and IAS 41 Bearer Plants
Amendments to IAS 27 Equity method in Separate Financial Statements
Amendments to IAS 1: Disclosure Initiative
Annual Improvements to IFRSs 2012-2014 Cycle
Amendments to IFRS 10, IFRS 12 and IAS 28: Investment Entities:
Applying the consolidation exception (December 2014)
IFRS 15: Revenue from contracts with customers
IFRS 9 Financial Instruments (2009, and subsequent amendments
in 2010 and 2013)
Amendments to IAS 7: Disclosure Initiative
Amendments to IAS 12: Recognition of deferred tax assets for unrealised losses
IFRS 14: Regulatory Deferral Accounts
IFRS 16: Leases
Amendments to IFRS 10 and IAS 28: Sale or contribution of assets
between an investor and its associate or joint venture (September 2014)
Effective date
1 January 2015
Effective date
1 February 2015
1 February 2015
1 January 2016
1 January 2016
pg 53
1 January 2016
1 January 2016
1 January 2016
1 January 2016
Not endorsed, expected
to be endorsed H2 2016
Not endorsed, expected
to be endorsed H2 2016
Not endorsed, expected
to be endorsed H2 2016
Not endorsed, expected
to be endorsed Q4 2016
Not endorsed, expected
to be endorsed Q4 2016
Not endorsed, no indicative
endorsement date provided
Not endorsed, no indicative
endorsement date provided
Endorsement postponed
Awaiting IASB developments
A number of new standards, amendments to standards and interpretations are effective for annual periods
beginning on or after 1 February 2015, and have not been applied in preparing these financial statements.
The Group does not plan to adopt these standards early; instead it will apply them from their effective dates
as determined by their dates of EU endorsement. The Group is reviewing the upcoming standards to determine
their impact.
Overview | Strategic Report | Governance | Financial Statements
notes to the financial statements continued
for the year ended 31st December 2015
1. Accounting policies continued
Basis of preparation
The Group and Company financial statements are
prepared on the historical cost basis, except for financial
assets (net profit interests and quoted shares), which
are carried at fair value, and equity settled share option
awards and warrants which are measured at grant
date fair value.
pg 54
The Directors have prepared a detailed cash flow
forecast for the Group and Company for the period
from 1 July 2016 to 31 December 2017.
The cash flow forecast reflects the Directors' plans
to raise a minimum of US$200 million (gross) by way
of an Equity Placing, which will be used to acquire
the US$103 million of Loan Notes (and any associated
accrued interest) issued by Midwestern Leon Petroleum
Limited (“MLPL”), the special purpose vehicle set up
by the Company and Midwestern Oil & Gas Company
Limited and provide a further US$70 million in funding
to MLPL, also structured as Loan Notes, for the
purposes of acquiring the interest in the OML 18
Production Arrangement, (“OML 18”), with the remaining
proceeds from the Placing to be used to cover
transaction costs and provide for general working
capital for the Company.
On completion of the above transaction, the Company
will hold US$173 million of Loan Notes, which will be
repayable by MLPL to San Leon and a 40 per cent
shareholding in MLPL, which will give San Leon
an initial 9.72% economic interest in OML 18.
The cash flow forecast reflects the on-going exploration
activity across the Group's exploration asset portfolio
taking account of its licence commitments, technical
team costs, administrative overhead, other financial
commitments and its available financial resources from
existing cash balances and committed facilities. The
strategy of the Directors is to continue to mitigate risk
on its exploration portfolio by monetising certain assets
through outright/partial disposal of interests or securing
farm-in partners on certain projects. The Directors
intend, where appropriate, to continue to seek to
structure such farm-ins to secure cash contributions
for past costs or secure payments for future exploration
activities. The Directors are engaged in on-going
discussions on a number of its assets which they
expect will generate cash resources to assist in
financing the Group's exploration programme in
the foreseeable future.
The principal assumptions underlying the cash flow
forecast and the availability of finance to the Group
are as follows:
• The proposed conditional placing of a minimum of
US$200 million will be approved by the Company’s
Shareholders at an EGM subsequent to the date
of approval of the financial statements for the year
ended 31 December 2015 enabling the Company
to complete the acquisition of the OML 18 Production
Arrangement and related Loan Notes.
• The acquisition of the Group’s initial 9.72% economic
interest in OML 18 will be approved by the Company’s
shareholders at an EGM subsequent to the date of
approval of the financial statements for the year
ended 31 December 2015. As a result, the Group will
receive cash flows from it’s initial 9.72% economic
interest in OML 18 in the form of interest and capital
repayments on the loan notes and dividend income.
The model assumes that sufficient cash flows will be
generated from oil and gas production on the OML 18
field. This assumption is based on a Competent
Person’s Report on OML 18.
• The terms of the OML 18 transaction also allows the
Company the right to provide oilfield services to
the operator of OML 18. The projections assume
that the Company will receive an up-front payment
on completion of the agreement to provide these
services with further income streams arising on the
roll out of these services.
• Any potential cash outflow for the Group to make a
payment under the Avobone Arbitration Award will be
scheduled either through agreement with Avobone
or instructions of the Court in a manner consistent
with available funds.
• Ongoing production revenues and exploration and
administrative expenditure from existing activities are
in line with current expectations and commitments.
• Although there is potential for further cash inflows
from monetising certain assets through outright/
partial disposal of interests or securing farm-in
partners on certain projects, the cash flow projections
do not include these supplemental cash inflows.
• The Group has committed financing facilities in place
which may be required to help fulfill the Group’s
immediate cash flow requirements in the period from
July to December 2016 in advance of the cash inflows
from OML 18 which are forecast to flow to the Group
on a quarterly basis from December 2016 onwards.
The facilities available are as follows:
– A Fixed Schedule Equity Funding Agreement
("FSEFA") between the Company and YA Global
Master SPV Ltd ("YA Global") provides the Group
with a debt facility of Stg£15 million accessible
over a 30 month period from 21 May 2015 ("the
facility"). This Term Sheet modifies the existing
Standby Equity Distribution Agreement with
YA Global, which remains in effect.
San Leon Energy plc Annual Report and Accounts 2015
pg 55
Estimates and underlying assumptions are reviewed on
an on-going basis. Revisions to accounting estimates
are recognised in the period in which the estimate is
revised and in any future periods affected. In particular,
significant areas of estimation uncertainty and critical
judgements used in applying accounting policies that
have the most significant effect on the amounts
recognised in the financial statements include:
• Recoverability of intangible assets (Note 10)
• Recoverability of equity accounted investments
(Note 11)
• Measurement of financial assets (Note 15)
• Measurement of share-based payments (Note 26)
• Recognition of tax losses (Note 28)
• Provision (Avobone) (Note 23)
Basis of consolidation
The financial information incorporates the financial
information of the Company and entities controlled by
the Group (its subsidiaries). Control is defined as when
the Group is to or has the rights to variable returns from
its investment with the entity and has the ability to affect
these returns through its power over the entity. The
financial statements of subsidiaries are included in the
consolidated financial statements from the date control
commences until the date that control ceases. Where
necessary, adjustments are made to the financial
information of subsidiaries to bring their accounting
policies into line with those used by other members
of the Group. Intra-group balances and any unrealised
gains and losses or income or expenses arising from
intragroup transactions are eliminated in preparing the
Group financial statements.
Business combinations and goodwill
Business combinations are accounted for using the
acquisition method as at the acquisition date, which
is the date on which control is transferred to the Group.
Control is defined as when the Group is to or has the
rights to variable returns from its investment with the
entity and has the ability to affect these returns through
its power over the entity. In assessing control, the
Group takes into consideration potential voting rights
that currently are exercisable.
1. Accounting policies continued
– A facility of Stg£15 million from Brandon Hill
Capital available for a six month period in the
event that the planned equity placing does
not complete.
Conditional on the placing and OML 18 transaction
being approved by shareholders at an EGM, the
Directors have a reasonable expectation that the Group
and Company will have adequate resources to continue
in operational existence and to discharge its debts as
they fall due for the foreseeable future and for a period
of at least 12 months from the date of approval of the
financial statements.
Accordingly the Directors continue to adopt the going
concern basis of preparation of the financial statements
for the year ended 31 December 2015.
Based on indicative support from key shareholders,
the Directors expect that the placing will be successfully
completed and shareholder approval will be received
at the EGM to be held subsequent to the date of
approval of these financial statements. However, if the
above assumptions did not materialise, it could indicate
the existence of material uncertainties which may cast
significant doubt about the Group and Company’s ability
to continue as a going concern and to continue realising
their assets and discharging their liabilities in the normal
course of business. The financial statements do not
include the adjustments that would result if the Group
and Company were unable to continue as going
concerns.
Functional and presentation currency
These consolidated financial statements are presented
in Euro (€), which is the Company’s functional currency
and the Group’s presentational currency, rounded to
the nearest thousand.
Use of estimates and judgements
The preparation of financial statements in conformity
with EU IFRS requires management to make
judgements, estimates and assumptions that affect
the application of policies and reported amounts of
assets and liabilities, income and expenses. Actual
results may differ from these estimates. The estimates
and associated assumptions are based on historical
experience and various other factors that are
believed to be reasonable under the circumstances,
the results of which form the basis of making the
judgements about carrying values of assets and
liabilities that are not readily apparent from other sources.
Overview | Strategic Report | Governance | Financial Statements
notes to the financial statements continued
for the year ended 31st December 2015
pg 56
1. Accounting policies continued
Acquisitions
The Group measures goodwill at the acquisition date as:
• the fair value of the consideration transferred; plus
• the recognised amount of any non-controlling
interests in the acquiree; plus if the business
combination is achieved
• in stages, the fair value of the existing equity interest
in the acquiree; less
• the net recognised amount (generally fair value) of the
identifiable assets acquired and liabilities assumed.
When the excess is negative, a bargain purchase gain
is recognised immediately in profit or loss.
Costs related to the acquisition, other than those
associated with the issue of debt or equity securities,
that the Group incurs in connection with a business
combination are expensed as incurred.
Any contingent consideration payable is recognised
at fair value at the acquisition date. If the contingent
consideration is classified as equity, it is not
re-measured and settlement is accounted for within
equity. Otherwise, subsequent changes to the fair
value of the contingent consideration are recognised
in profit or loss.
Intangible assets – exploration and evaluation assets
Expenditure incurred prior to obtaining the legal rights
to explore an area is recognised in profit or loss as
incurred. All expenditure relating to licence acquisition,
exploration, evaluation and appraisal of oil and gas
interests, including an appropriate share of directly
attributable overheads, is capitalised on a licence
by licence basis.
Exploration and evaluation assets are carried at cost
until the exploration phase is complete or commercial
reserves have been discovered. The Group regularly
reviews the carrying amount of exploration and
evaluation assets for indicators of impairment and
capitalised costs are written off where the carrying
amount of assets may not be recoverable. Where
commercial reserves have been established and
development is approved by the Board, the relevant
expenditure is transferred to oil and gas properties
following assessment of impairment.
Royalty
Royalty assets are carried at cost less accumulated
amortisation. Amortisation is charged in proportion to
the current year production based on total estimated
production over the life of the field.
Impairment
The carrying amounts of the Group’s assets are
reviewed at each reporting date and, if there is any
indication that an asset may be impaired, its recoverable
amount is estimated. The recoverable amount is the
higher of its fair value less costs to sell and its value
in use. Estimates on impairment are limited to an
assessment by the Directors of any events or changes
in circumstance that would indicate that the carrying
amount of the asset may not be recoverable. Any
impairment loss arising from the review is recognised
in profit or loss to the extent the carrying amount of the
asset exceeds its recoverable amount. An impairment
loss is reversed only to the extent that the asset’s
carrying amount does not exceed the carrying amount
that would have been determined, net of depreciation
or amortisation, if no impairment loss had been
recognised.
Oil and Gas Properties
Oil and gas properties are stated at cost less
accumulated depreciation and impairment losses.
The initial cost comprises the purchase price or
construction cost including any directly attributable
costs of bringing the asset into operation and any
estimated decommissioning provision.
Oil and gas properties are depleted on a unit of
production basis over the estimated proven and
probable reserves of the field.
Property, plant and equipment
Property, plant and equipment are stated at cost less
accumulated depreciation. Depreciation is provided at
rates calculated to write off the cost less residual value
of each asset over its expected useful life. The residual
value is the estimated amount that would currently be
obtained from disposal of the asset if the asset were
already of the age and in the condition expected at the
end of its useful life. The annual rate of depreciation
for each class of depreciable asset is:
Office equipment
Motor vehicles
Plant and equipment
25% Straight line
20% Reducing balance
20% - 33% Straight line
Jointly controlled operations or assets
The Group has entered into a number of joint
arrangements on production and exploration assets that
result in jointly controlled assets. The Group accounts
for only its share of assets, liabilities, income and
expenditure in relation to these jointly controlled assets.
Inventories
Inventories are valued at the lower of cost and net
realisable value.
San Leon Energy plc Annual Report and Accounts 2015
pg 57
Deferred tax is recognised using the liability method,
providing for temporary differences between the
carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation
purposes. Deferred tax is not recognised for the
following temporary differences: the initial recognition
of goodwill, the initial recognition of assets or liabilities
in a transaction that is not a business combination and
that affects neither accounting nor taxable profit, and
differences relating to investments in subsidiaries to
the extent that they are controlled and probably will
not reverse in the foreseeable future. Deferred tax
is measured at the tax rates that are expected to
be applied to the temporary differences when they
reverse, based on the laws that have been enacted
or substantively enacted by the reporting date.
A deferred tax asset is recognised to the extent that it
is probable that future taxable profits will be available
against which the temporary differences can be utilised.
Deferred tax assets are reviewed at each reporting
date and are reduced to the extent that it is no longer
probable that the related tax benefit will be realised.
Foreign currencies
Transactions in foreign currencies are initially translated
to the respective functional currencies of Group entities
at the exchange rates at the dates of the transactions.
Monetary assets and liabilities denominated in foreign
currencies are retranslated to the functional currency
at the exchange rates ruling at the reporting date
with gains or losses recognised in profit or loss.
Non-monetary items are translated using the exchange
rates ruling as at the date of the initial transaction.
Foreign operations
The assets and liabilities of foreign operations are
translated into Euro at the exchange rate at the
reporting date and the income and expenses of foreign
operations are translated at the actual exchange rates
at the date of the transaction or at average exchange
rates for the year where this approximates to the actual
rate. Exchange differences arising on translation are
recognised in other comprehensive income and
presented in the foreign currency translation reserve
in equity. Details of exchange rates used are set out
in Note 30.
1. Accounting policies continued
Joint arrangements
The Group also has entered into joint venture
arrangements which are operated through jointly
controlled entities. The Group accounts for its interest
in these entities on an equity basis, with Group share
of profit or loss after tax recognised in the Income
Statement and its share of other comprehensive income
of the joint venture recognised in other comprehensive
income.
Financial fixed assets - investment in subsidiaries
Financial fixed assets in the Company Statement of
Financial Position consist of investments in subsidiary
undertakings and are stated at cost less provision for
impairment where applicable.
Financial assets – available for sale
The Group’s financial assets are initially recognised at
fair value plus any directly attributable transaction costs.
Subsequent to initial recognition, they are measured at
fair value and changes therein are recognised in other
comprehensive income. On disposal, the cumulative
gain or loss previously reported in other comprehensive
income is included in the calculation of any gain or loss
arising on disposal and recognised in profit or loss.
Decommissioning provision
A provision is made for decommissioning of oil and
gas wells. The cost of decommissioning is determined
through discounting the amounts expected to be
payable to their present value at the date the provision
is recognised and reassessed at each reporting date.
This amount is regarded as part of the total investment
to gain access to economic benefits and consequently
capitalised as part of the cost of the asset and the
liability is recognised in provisions. Such cost is
depleted over the life of the asset on the basis of
estimated proven and probable reserves and charged
to the Income Statement. The unwinding of the discount
is reflected as a finance cost in the Income Statement
over the life of the field or well.
Taxation
Income tax expense comprises current and deferred
tax. Income tax expense is recognised in the
Consolidated Income Statement except to the extent
that it relates to items recognised directly in other
comprehensive income or equity, in which case it is
recognised in other comprehensive income or equity.
Current tax is the expected tax payable on the taxable
income for the year, using tax rates enacted or
substantively enacted at the reporting date, and any
adjustment to tax payable in respect of previous years.
Overview | Strategic Report | Governance | Financial Statements notes to the financial statements continued
for the year ended 31st December 2015
1. Accounting policies continued
Revenue
Revenue from the sale of gas is recognised when the
significant risks and rewards of ownership have been
transferred, which is when the title passes to the
customer. Revenue is measured at the fair value of
the consideration receivable net of value added tax.
pg 58
Finance income and expenses
Interest income is accrued on a time basis by reference
to the principal on deposit and the effective interest
rate applicable.
Finance expenses comprise interest or finance costs
on borrowings and unwinding of any discount on
provisions using the effective interest rate.
Share capital
Incremental costs directly attributable to the issue
of ordinary shares are recognised as a deduction
from equity.
Share based payments
The Group has applied the requirements of IFRS 2
‘share based payments’. The Group issues share
options as an incentive to certain key management and
staff (including Directors), which are classified as equity
settled share based payment awards. The grant date
fair value of share options granted to Directors and
employees under the Company’s share option scheme
is recognised as an expense over the vesting period
with a corresponding credit to the share based
payments reserve. The fair value is measured at grant
date and spread over the period during which the
awards vest. The fair value of options granted in the
year has been determined by an external valuer using
an appropriate valuation model as detailed in Note 26.
The options issued by the Group are subject to
both market-based and non-market based vesting
conditions. Market conditions are included in the
calculation of fair value at the date of the grant. Non-
market vesting conditions are not taken into account
when estimating the fair value of awards as at grant
date; such conditions are taken into account through
adjusting the number of the equity instruments that are
expected to vest. The proceeds received net of any
directly attributable transaction costs will be credited
to share capital (nominal value) and share premium
when options are converted into ordinary shares.
Any grant date fair value of options granted under the
company’s share option scheme that were recognised
as an expense over the vesting period and are
subsequently cancelled and reversed as an expense
with a corresponding debit to the share based payment
reserve.
Earnings per share
The Group presents basic and diluted earnings per
share (EPS) data for its ordinary shares. Basic EPS is
calculated by dividing the profit or loss attributable to
equity shareholders of the Company by the weighted
average number of ordinary shares outstanding during
the period. Diluted EPS is determined by adjusting the
profit or loss attributable to ordinary shareholders
and the weighted average number of ordinary shares
outstanding for the effects of all dilutive potential
ordinary shares, which comprise convertible notes,
share options granted to employees and warrants.
Segmental reporting
A segment is a distinguishable component of the Group
that is engaged in business activities from which it may
earn revenues and incur expenses which is subject to
risks and rewards that are different from those of other
segments and for which discrete financial information
is available.
All operating segments and results are regularly
reviewed by the Board of Directors to make decisions
about resources to be allocated to each segment
and to assess its performance.
Full details of the Group’s operating segments all
of which are involved in oil and gas exploration are
set out in Note 2 to the financial statements.
Assets and liabilities held for sale
Non-current assets and liabilities that are expected
to be recovered primarily through sale rather than
through continuing use are classified as held for sale.
Immediately before classification as held for sale, the
assets are remeasured in accordance with the Group’s
accounting policies. Thereafter, the assets are
measured at the lower of their carrying amount and
fair value less cost to sell. Impairment losses on initial
classification as held for sale and subsequent gains
or losses on remeasurement are recognised in profit
or loss. Gains are not recognised in excess of any
cumulative impairment loss.
San Leon Energy plc Annual Report and Accounts 2015 pg 59
For further detail on assumptions made in measuring
level 3 fair values see the following notes:
• Note 15 Financial Assets
• Note 21 Derivative.
In accordance with IFRS 13, the group discloses its
assets and liabilities held at fair value after initial
recognition in the following categories: at fair value
through profit or loss and available for sale.
With the exception of shares held in quoted entities,
which are classified as level 1 items under the fair value
hierarchy, all assets and liabilities held at fair value are
measured on the basis of inputs classified as level 3
under the fair value hierarchy on the basis that the
inputs underpinning the valuations are not based
on observable market data as defined in IFRS 13.
Where derivatives are traded either on exchanges or
liquid over-the-counter markets, the Group uses the
closing price at the reporting date. Normally, the
derivatives entered into by the Group are not traded
in active markets. The fair values of these contracts are
estimated using a valuation technique that maximises
the use of observable market inputs, e.g. market
exchange and interest rates. All derivatives entered
into by the Group are included in Level 3 and consist
of share warrants issued.
1. Accounting policies continued
Defined contribution pension scheme
The Group operates a defined contribution scheme.
All contributions made are recognised in the Income
Statement in the period in which they fall due.
Discontinued operations
A discontinued operation is a component of the Group’s
business, the operations and cash flows of which can
be clearly distinguished from the rest of the Group
and which:
• represents a separate major line of business or
geographical area of operations;
• is part of a single co-ordinated plan to dispose of
a separate major line of business or geographical
area of operations; or
• is a subsidiary acquired exclusively with a view
to re-sale.
Classification as a discontinued operation occurs at
the earlier of disposal or when the operation meets
the criteria to be classified as held-for-sale.
When an operation is classified as a discontinued
operation, the comparative statement of profit or loss
and Other Comprehensive Income is represented as
if the operation had been discontinued from the start
of the comparative year.
Fair value movement
The Group has an established a process with respect
to the measurement of fair values. The finance team
regularly reviews significant unobservable inputs and
valuation adjustments. If third party information, such
as broker quotes or pricing services, is used to measure
fair values, then the valuation team assesses the
evidence obtained from the third parties to support the
conclusion that such valuations meet the requirements
of IFRS, including the level in the fair value hierarchy
in which such valuations should be classified.
Significant valuation issues are reported to the board.
Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities. Level 2: inputs other than
quoted prices included in Level 1 that are observable
for the asset or liability, either directly (i.e. as prices)
or indirectly (i.e. derived from prices). Level 3: inputs
for the asset or liability that are not based on observable
market data (unobservable inputs).
Overview | Strategic Report | Governance | Financial Statements
notes to the financial statements continued
for the year ended 31st December 2015
2. Revenue and segmental information
Operating segment information is presented on the basis of the geographical areas as detailed below, which
represent the financial basis by which the Group manages its operations. The Board of Directors, which has
been recognised as the Chief Operating Decision Maker (CODM), regularly review internal management reports
for each of the segments based on the below criteria which management consider to be appropriate in evaluating
segment performance relative to other entities that operate in the industry.
pg 60
Total revenue
Poland
Morocco
Ireland
2015
€’000
145
2014
€’000
–
2015
€’000
–
2014
€’000
–
2015
€’000
–
2014
€’000
–
Romania
Albania
Other areas
Corporate#
2015
€’000
2014
€’000
2015
€’000
–
2014
€’000
–
2015
€’000
2014
€’000
2015
€’000
2014
€’000
Discontinued operations
Revenue
–
Segment (loss) / profit before income tax
(122,830)
Exploration and evaluation assets
12,561
Impairment of exploration and evaluation assets (80,654)
Equity accounted investments
11,375
Impairment of equity accounted investments
(35,220)
Non-current assets
25,089
Capital expenditure^
2,811
Segment liabilities
(1,671)
–
(12,260)
93,002
(6,173)
44,483
(3,346)
139,545
5,913
(3,189)
–
(42,087)
26,859
(41,657)
–
–
35,881
15,699
(6,212)
–
(85)
52,818
–
–
–
61,325
11,887
(1,002)
–
–
–
–
–
–
–
–
–
680
30
–
–
–
–
42,123
–
–
Revenue relates to the provision of seismic acquisition services in Poland in 2015 and it related to residual royalty
income from leasehold interests in the U.S.A in 2014.
^ This is the net expenditure incurred by the Group excluding amounts incurred by partners on shared exploration interests. It includes assets acquired
through business combinations and equity accounted investments.
# Corporate includes head office balances and activities which are not directly attributable to any other segment.
–
–
–
–
–
–
–
–
–
–
–
–
(8,025)
(8,025)
663
(671)
–
(6)
–
–
–
–
(86)
7,123
–
–
–
7,123
693
(14)
–
–
–
–
–
3
–
–
–
–
–
–
–
–
–
9,413
8,112
(1,331)
(3,039)
(43,775)
(21,980)
(218,054)
(1,331)
1,019
(2,977)
(17)
– (123,659)
9,420
395
(98)
8,112
988
(760)
833
312
843
1,852
1,057
52,644
6,030
122,559
(160)
(46,183)
(25,975)
(54,654)
(30,438)
Total
2015
€’000
145
–
47,532
11,375
(43,245)
20,473
Total
2014
€’000
3
680
(37,420)
163,375
(9,150)
44,483
(3,346)
267,418
19,945
–
–
–
–
–
–
San Leon Energy plc Annual Report and Accounts 2015
2. Revenue and segmental information
Operating segment information is presented on the basis of the geographical areas as detailed below, which
represent the financial basis by which the Group manages its operations. The Board of Directors, which has
been recognised as the Chief Operating Decision Maker (CODM), regularly review internal management reports
for each of the segments based on the below criteria which management consider to be appropriate in evaluating
segment performance relative to other entities that operate in the industry.
Total revenue
Discontinued operations
Revenue
Poland
Morocco
Ireland
2014
€’000
2015
€’000
2014
€’000
–
2015
€’000
2015
€’000
145
–
–
–
–
–
–
–
–
(85)
52,818
–
–
–
2014
€’000
–
680
30
–
–
–
–
–
–
42,123
–
–
–
–
–
–
–
–
–
–
Segment (loss) / profit before income tax
(122,830)
(12,260)
(42,087)
Exploration and evaluation assets
12,561
93,002
Impairment of exploration and evaluation assets (80,654)
26,859
(41,657)
Equity accounted investments
Impairment of equity accounted investments
11,375
(35,220)
(6,173)
44,483
(3,346)
Non-current assets
Capital expenditure^
Segment liabilities
25,089
139,545
2,811
(1,671)
5,913
(3,189)
35,881
15,699
(6,212)
61,325
11,887
(1,002)
Revenue relates to the provision of seismic acquisition services in Poland in 2015 and it related to residual royalty
income from leasehold interests in the U.S.A in 2014.
^ This is the net expenditure incurred by the Group excluding amounts incurred by partners on shared exploration interests. It includes assets acquired
through business combinations and equity accounted investments.
# Corporate includes head office balances and activities which are not directly attributable to any other segment.
Romania
Albania
2015
€’000
–
2014
€’000
–
2015
€’000
–
2014
€’000
–
Other areas
2015
€’000
–
2014
€’000
3
Corporate#
2015
€’000
–
2014
€’000
–
Total
2015
€’000
145
Total
2014
€’000
3
pg 61
–
(8,025)
–
–
–
(8,025)
–
663
(671)
–
–
9,413
–
–
–
9,420
395
(98)
–
(6)
8,112
–
–
–
8,112
988
(760)
–
(86)
7,123
–
–
–
7,123
693
(14)
–
(1,331)
–
(1,331)
–
–
833
312
843
–
(3,039)
1,019
(2,977)
–
–
1,852
1,057
(160)
–
(43,775)
–
(17)
–
–
52,644
–
(46,183)
–
–
(21,980)
(218,054)
–
47,532
– (123,659)
–
11,375
–
(43,245)
6,030
122,559
–
20,473
(25,975)
(54,654)
680
(37,420)
163,375
(9,150)
44,483
(3,346)
267,418
19,945
(30,438)
Overview | Strategic Report | Governance | Financial Statements
notes to the financial statements continued
for the year ended 31st December 2015
3. Loss on disposal of subsidiaries
During 2014, the sale to Ardilaun Energy Limited (“Ardilaun”) of Island Oil and Gas Limited completed and the
Group recognised a loss on disposal of €6,429,007. The loss primarily relates to the Group’s contribution to the
decommissioning liability associated with the exploration and evaluation assets.
Results from discontinued operations – Ardilaun
pg 62
Revenue
Cost of sales
Gross profit
Administration expenses
Results from operating activities
Income tax
Results from operating activities after tax
The total profit from discontinued operations is attributable to the owners of the Company.
Cashflows from discontinued operations
Net cash from operating activities
Net cash flows for the year
Earnings per share (cent) from discontinued operations
Basic earnings per share
Diluted earnings per share
< Adjusted to reflect the share consolidation in July 2015. Further details are provided in Note 24.
4. Statutory information
(a) Group
The loss for the financial year is stated after charging / (crediting):
Depreciation of property, plant and equipment
Loss / (gain) on foreign currencies
Operating lease rentals
– Premises
– Motor vehicles
Pre-licence expenditure
Impairment of exploration and evaluation assets
Impairment of equity accounted investments
2015
€’000
–
–
–
–
–
–
–
2014
€’000
680
(659)
21
9
30
–
30
2015
€’000
2014
€’000
–
–
2015
€
–
–
2015
€’000
1,005
280
1,668
49
96
123,659
43,245
285
285
2014
€
<
0.12
0.12
2014
€’000
1,454
(598)
1,542
47
2,609
9,150
3,346
San Leon Energy plc Annual Report and Accounts 2015
4. Statutory information continued
During the year, the Group (including its overseas subsidiaries) obtained the following services from KPMG, the
Group Auditor:
Audit services
Group Auditor – KPMG Ireland
Group Auditor – KPMG Poland
Tax and non-assurance services
Group Auditor – KPMG Ireland
Other network firm – KPMG
Total
Group Auditor – KPMG Ireland
Other network firm – KPMG
pg 63
2015
€’000
2014
€’000
120
–
120
–
15
15
120
15
135
95
–
95
–
5
5
95
5
100
Tax and non-assurance services relates to accounting, administration and tax compliance work in Spain and Poland.
(b) Company
The loss for the financial year is stated after charging:
Depreciation of property, plant and equipment
Loss on foreign currencies
Operating lease rentals – premises
Auditor’s remuneration – audit services
Pre-licence expenditure
2015
€’000
87
152
1,055
25
52
2014
€’000
101
166
955
25
481
As permitted by Section 304 of the Companies Act 2014, the Company Statement of Comprehensive Income has
not been separately disclosed in these financial statements. A loss of €200.3 million (2014: €42.4 million) has been
recorded in the parent company.
5. Finance expenses
On loans and overdraft
Finance arrangement expenses
2015
€’000
8,237
1,142
9,379
2014
€’000
147
1,650
1,797
The finance expenses relate primarily to interest on short term loans arranged by Brandon Hill Capital prior to the
Group’s equity placing in July 2015. The capital and interest payments were financed out of the placing proceeds.
Overview | Strategic Report | Governance | Financial Statements
notes to the financial statements continued
for the year ended 31st December 2015
6. Finance income
Deposit interest received
Interest on other loan
Fair value movement on issue of warrants to non-employee (Note 21)
pg 64
7. Personnel expenses
Number of employees
The average monthly number of employees (including the Directors) during the year was:
Directors
Administration
Technical
Seismic crew
Employment costs (including directors)
Wages and salaries (excluding directors)
Directors’ salaries
Social welfare costs
Directors’ fees
Consultancy services
Share based payments including shares in lieu of salary (including directors)#
Directors’ pension
2015
€’000
–
–
4
4
2014
€’000
3
24
204
231
2015
Number
6
18
21
23
68
2015
€’000
3,448
820
427
195
311
4,278
96
9,575
2014
Number
6
27
25
30
88
2014
€’000
4,680
1,947
567
231
295
1,038
96
8,854
# Oisín Fanning is due 1,167,183 ordinary shares in lieu of 80% of his salary for the year ended 31 December 2015 and €991,800 has been recognised
in share based payments in respect of this.
Details of the Directors’ remuneration is set out in the Directors’ Report.
During the year, €4.3 million (2014: €4.2 million) was capitalised in exploration and evaluation assets in respect
of Group employment costs above. No share based payments were capitalised during the year (2014: €0.9 million).
The Group contributes to a defined contribution pension scheme for certain executives and employees. The
scheme is administered by trustees and is independent of the Group finances. Total contributions by the Group
to the pension scheme, including contributions for Directors amounted to €0.2 million (2014: €0.2 million).
San Leon Energy plc Annual Report and Accounts 2015
8. Income tax expense
Current tax
Current year income tax
Deferred tax
Origination and reversal of temporary differences
Total income tax (credit) / expense
2015
€’000
40
(4,728)
(4,688)
2014
€’000
90
785
875
pg 65
The difference between the total tax shown above and the amount calculated by applying the applicable standard
rate of Irish corporation tax to the loss before tax is as follows:
Loss before income tax
Tax on loss at applicable Irish corporation tax rate of 25% (2014: 25%)
Effects of:
Income not taxable
Expenses not deductible for tax purposes
Losses utilised in the year
Income tax withheld
Origination and reversal of temporary differences
Excess losses carried forward
Tax (credit) / charge for the year
2015
€’000
(218,054)
(54,514)
–
48,219
(13)
3
(4,728)
6,345
(4,688)
2014
€’000
(37,420)
(9,355)
(51)
6,156
(29)
10
785
3,359
875
9. Earnings per share
Basic earnings per share
Basic loss per share is calculated by dividing the loss attributable to equity holders of the Company by the
weighted average number of ordinary shares in issue during the year as follows:
Loss for the year
The weighted average number of shares in issue is calculated as follows:
In issue at start of year
Effect of shares issued related to a prior year business combination
Effect of share options and warrants exercised
Effect of outstanding exchangeable shares
Effect of shares issued in the year
Weighted average number of ordinary shares in issue (basic)
Basic loss per ordinary share (cent)
< Adjusted to reflect the share consolidation in July 2015. Further details are provided in Note 24.
2015
€’000
(213,366)
2014
€’000
(38,265)
Number
of shares
<
25,355,727
–
–
173
16,778,438
42,134,338
(506.40)
Number
of shares
<
25,312,189
28,876
2,455
9,470
–
25,352,990
(150.93)
Overview | Strategic Report | Governance | Financial Statements
notes to the financial statements continued
for the year ended 31st December 2015
9. Earnings per share continued
Diluted earnings per share
Diluted earnings per share is calculated by dividing the loss attributable to equity holders of the Company by
the weighted average number of ordinary shares outstanding after adjustment for effects of all dilutive potential
ordinary shares as follows:
pg 66
Loss for the year (diluted)
The diluted weighted average number of shares in issue is calculated as follows:
Basic weighted average number of shares in issue during the year
Effect of share options and warrants in issue
Diluted earnings per ordinary share (cent)
2015
€’000
(213,366)
2014
€’000
(38,265)
Number
of shares
<
42,134,338
–
42,134,338
(506.40)
Number
of shares
<
25,352,990
–
25,352,990
(150.93)
At 31 December 2015, a total of 10,017,043 (2014: 1,904,739<) options and warrants were excluded from the
weighted average number of ordinary shares calculation for diluted earnings per share as their effect would have
been anti-dilutive.
< Adjusted to reflect the share consolidation in July 2015. Further details are provided in Note 24.
10. Intangible assets
Group
Cost and net book value
At 1 January 2014
Additions
Impairment of exploration assets
Disposals
Proceeds from farm-out arrangement
Transfer to equity accounted investments
Currency translation adjustment
At 31 December 2014
Additions (ii)
Impairment of exploration assets (i)
Proceeds from farm out arrangements
Transfer to equity accounted investments
Currency translation adjustment
At 31 December 2015
An analysis of intangible assets by geographical area is set out in Note 2.
Exploration
and
evaluation
assets
€’000
186,052
19,945
(9,150)
(206)
(10,945)
(23,231)
910
163,375
20,473
(123,659)
(2,000)
(8,025)
(2,632)
47,532
San Leon Energy plc Annual Report and Accounts 2015
10. Intangible assets continued
(i) Following a strategic review the Company has decided to relinquish a number of early stage exploration
licences in Poland, Morocco and Spain. The Company has also taken the decision to exit its interests in Romania.
This has resulted in an impairment charge of €123.7m of historical accumulated exploration costs in the
following areas:
Area
Poland
Morocco
Spain
€’000
80,629
41,657
1,373
123,659
pg 67
(ii) This is the net amount incurred by San Leon Energy and excludes amounts attributable to joint operating
partners of nil (2014: €363,293).
The Directors have considered the carrying value at 31 December 2015 of capitalised costs in respect of its
exploration and evaluation assets. These assets have been assessed for impairment indicators and in particular
with regard to remaining licence terms, likelihood of licence renewal, likelihood of further expenditures and
on-going appraisals for each area, as described in the Operating Review. Based on internal assessments, the
Directors have impaired the exploration and evaluation assets by €123.7 million and are satisfied that there are
no further impairment indicators. The Directors recognise that future realisation of these oil and gas interests
is dependent on future successful exploration and appraisal activities and subsequent production of oil and
gas reserves.
11. Equity accounted investments
Group
Cost and net book value
At 1 January
Transfer from exploration and evaluation assets
Transfer from other assets
Proceeds of farm out arrangement
Impairment of equity accounted investments
Net advances to equity accounted investments
Share of loss of equity accounted investments
Exchange rate adjustment
At 31 December
2015
€’000
2014
€’000
44,483
8,025
–
–
(43,245)
2,115
(18)
15
11,375
23,729
23,231
1,753
(1,922)
(3,346)
1,055
(54)
37
44,483
(i) In June 2012, San Leon purchased a 75% interest in three LLPs, namely Olesnica LLP, Wielun LLP and South
Prabuty LLP, from Hutton Energy Plc. The LLPs are the 100% title holders of the following Polish exploration
concession areas: Wielun (219,430 acres) and Olesnica (286,642 acres) concessions in the Carboniferous Basin,
and the South Prabuty concession (118,611 acres) in the Baltic Basin. The purchase consideration of €11.88 million
(USD15 million) was payable by the issue of new Ordinary shares in San Leon. Hutton Poland Limited own the
remaining 25% of the three LLPs. At 31 December 2015, the Company made a decision to exit the South Prabuty,
Olesnica and Wielun concession. Therefore, the Company’s investments in the South Prabuty, Olesnica and Wielun
joint ventures were fully impaired.
Overview | Strategic Report | Governance | Financial Statements
notes to the financial statements continued
for the year ended 31st December 2015
11. Equity accounted investments continued
(ii) In January 2013, San Leon acquired a 90% interest in Energia Zachod Sp. Z o.o. and a 45% interest in each
of Energia Torzym Sp. Z o.o Spk. and Energia Cybinka Sp. Z o.o. Spk. as part of the Aurelian Oil and Gas PLC
acquisition. Avobone Poland B.V. own the other 10% of Energia Zachod Sp. Z o.o. SNGN Romgaz S.A. own 30% of
both Energia Torzym Sp. Z o.o Spk. and Energia Cybinka Sp. Z o.o. Spk. with Sceptre Oil and Gas Limited owning
the remaining 25% of both entities. At 31 December 2015, the Company decided it was not going to pursue
its interest in the Torzym and Cybinka licences and has thus fully impaired them at year end.
pg 68
(iii) On 1 July 2014 the company announced that it had signed a joint venture agreement with Palomar Natural
Resources (“PNR”) across seven Concessions in Poland’s Permian Basin initially focused on developing the
discovered, unproduced Siekierki and Rawicz gas fields. In return for a 65% working interest in the Southern
Permian Basin and Northern Permian Basin Concessions, PNR paid upfront to San Leon €3,615,068 ($5 million) and
€11,032,657 ($15 million), respectively, in cash and agreed to carry San Leon for a defined initial work programme
aimed at bringing the Rawicz and Siekierki fields into production as soon as possible. PNR became the operator
of all of the Concessions. The PNR transaction was accounted for as a farm-out transaction in 2014.
Prior to the joint venture agreement the company undertook a reorganisation of the assets that formed the deal.
Two new companies were set-up, TSH Energy Joint Venture B.V. (“TSH”) and Poznan Energy B.V. (“Poznan”), and
the assets were transferred to the two new entities as follows:
The Rawicz (39/2009/p), Wschowa (8/2009/p), Gora (30/2008/p) and Nowa Sol (5/2009/p) concessions (“Southern
Permian Basin”) were transferred to TSH; and the Poznan North (26/2008/p), Poznan East (4/2003/p), Poznan East
(5/2003/p) concessions (“Northern Permian Basin”) were transferred to Poznan.
In November 2015 the Gora (30/2008/p) and Nowa Sol (5/2009/p) concessions were transferred back to the
Company from TSH for a nominal fee of €1 each and the carrying value of the Company’s investment in Gora and
Nowa Sol were fully impaired at 31 December 2015.
The carrying value of the Company’s investment in Pozan Energy B.V. at 31 December 2015 relates to Northern
Permian Basin Concessions. The carrying value of the Company’s investment in TSH Energy Joint Venture B.V.
at 31 December 2015 relates to the Rawicz concession in Poland’s Southern Permian Basin.
(iv) During the year the Company divested 50% of its 100% interest in Aurelian Petroleum S.R.L. to TDE Engineering
and Development Limited (“TDE”). As a result of the deal TDE became the operator of the Romanian concessions.
In 2016, in line with the Company’s strategy to focus on cash flow from appraisal and development, the Company
transferred its remaining interest in Aurelian Petroleum S.R.L. to TDE.
The Company’s joint venture entities at 31 December 2015 are as follows:
Name
Olesnica LLP
South Prabuty LLP
Wielun LLP
Energia Torzym Sp. z o.o. Sp. K.
Energia Cybinka Sp. z o.o. Sp. K.
Poznan Energy B.V.
TSH Energy Joint Venture B.V.
Joyce Investments Sp. z o.o.
Maryani Investments Sp. z o.o.
Aurelian Petroleum S.R.L
Registered office
84 Brook Street, London, W1K 5EF, United Kingdom
84 Brook Street, London, W1K 5EF, United Kingdom
84 Brook Street, London, W1K 5EF, United Kingdom
Ul. Moniuszki 1a, 00-014, Warsaw, Poland
Ul. Moniuszki 1a, 00-014, Warsaw, Poland
Mendelssohnlaan 33, 6815 ET, Arnhem, The Netherlands
Mendelssohnlaan 33, 6815 ET, Arnhem, The Netherlands
ul. Swietokrzyska 30 lok. 63, 00-116 Warsaw, Poland
ul. Swietokrzyska 30 lok. 63, 00-116 Warsaw, Poland
6 Maior Ghe, Sontu Street, 3rd Floor, 011448, Bucharest, Romania
San Leon Energy plc Annual Report and Accounts 2015 11. Equity accounted investments continued
2015
A summary of the financial information of the equity investments including an analysis of the impairment charge of
€43.2 million is detailed below.
Olesnica
LLP (i)
South
Prabuty
LLP (i)
Wielun
LLP (i)
Energia
Torzym
Sp. Z o.o.
Spk (ii)
Energia
Cybinka
Sp. Z o.o.
Spk (ii)
Poznan
Energy
B.V. (iii)
TSH
Energy
Joint
Venture
B.V. (iii)
Joyce
Investments
Sp. Z o.o.
Maryani
Investments
Sp. Z o.o.
Aurelian
Petroleum
s.r.l. (iv)
Total
Equity interest
75%
75%
75%
45%
45%
35%
35%
50%
50%
50%
pg 69
€’000
€’000
€’000
€’000
€’000
€’000
€’000
€’000
€’000
€’000
€’000
Total
comprehensive
income
Non-current assets
Current assets
(excluding cash)
Cash
Current liabilities
Net assets /
(liabilities)
Group’s interest
in net assets
of investee at
1 January 2015
Share of loss
Group’s interest
in net assets
of investee
at end of year
Other adjustments
Advances /
(repayments)
Impairment
Transfers from
exploration and
evaluation assets
Transfers from
other assets
Disposals
Foreign exchange
Carrying amount
of interest in
investee at
31 December 2015
(10)
982
34
1
(1,035)
(3)
870
13
1
(893)
(2)
813
(7)
10,592
(7)
3,846
–
17,180
–
77
36
–
(859)
366
7
(11,143)
17
3
(3,959)
603
–
(347)
38,071
–
(1,075)
–
813
36
–
(859)
–
813
36
–
(859)
–
–
(29)
35,986
6
159
(8,962)
39,218
171
(29,991)
(18)
(9)
(10)
(178)
(93)
17,436
37,073
(10)
(10)
(8,797)
45,383
7,082
(8)
2,684
(2)
5,482
(2)
2,112
(3)
1,497
(3)
427
–
25,099
–
7,074
–
2,682
–
5,480
–
2,209
(64)
1,494
(182)
219
(7,293)
125
(2,807)
163
(5,643)
146
(2,291)
290
(1,602)
427
55
893
–
25,099
206
279
(15,584)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,375
10,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
44,483
(18)
44,465
15
–
(8,025)
2,115
(43,245)
8,025
8,025
–
–
–
–
–
–
–
11,375
The above interests are accounted for as equity accounted investments as San Leon does not have control over
the entities, which are governed under Joint Venture Agreements requiring the approval of both parties to the
Joint Venture Agreement in respect of all operating decisions.
The Directors recognise that the future realisation of the equity accounted investments is dependent on future
successful exploration and appraisal activities and subsequent production of oil and gas reserves.
Overview | Strategic Report | Governance | Financial Statements
notes to the financial statements continued
for the year ended 31st December 2015
11. Equity accounted investments continued
2014
A summary of the financial information of the equity investments is detailed below.
Olesnica
LLP
South
Prabuty
LLP
Equity interest
75%
75%
Wielun
LLP
75%
Energia
Torzym
Sp. Z o.o.
Spk
Energia
Cybinka
Sp. Z o.o.
Spk
Poznan
Energy
B.V.
TSH
Energy
Joint
Venture
B.V.
Energia
Zachod
Sp. Z o.o.
Joyce
Investments
Sp. Z o.o.
Maryani
Investments
Sp. Z o.o.
Total
45%
45%
35%
35%
90%
50%
50%
€’000
€’000
€’000
€’000
€’000
€’000
€’000
€’000
€’000
€’000
€’000
pg 70
Total
comprehensive
income
Non-current assets
Current assets
(excluding cash)
Cash
Current liabilities
Net assets /
(liabilities)
Group’s interest
in net assets
of investee at
1 January 2014
Share of loss
Group’s interest
in net assets
of investee
at end of year
Other adjustments
Advances /
(repayments)
Impairments
Transfers from
exploration and
evaluation assets
Transfers from
other assets
Disposals
Foreign exchange
Carrying amount
of interest in
investee at
31 December 2014
(5)
958
9
1
(162)
(2)
844
9
–
(93)
(4)
804
(3)
10,663
(3)
3,720
–
17,180
–
77
13
–
(133)
29
25
(10,892)
16
7
(3,729)
603
–
(347)
38,071
–
(1,075)
806
760
684
(175)
14
17,436
37,073
666
(4)
84
(2)
55
(3)
(13)
(1)
(16)
(2)
662
6,464
82
2,602
52
5,545
(14)
2,043
(18)
1,367
–
–
–
–
(115)
–
183
–
148
–
427
–
–
–
–
–
115
–
(1)
–
–
–
–
–
(41)
(1)
(56)
536
5
8
(940)
(27)
–
(101)
34,782
7
101
(830)
38,762
142
(18,201)
(391)
(722) 55,485
(110)
(27)
(462)
(14)
163
(54)
(42)
1,681
286
–
(137)
3,038
55
(3,007)
(476)
826
109
23,566
–
(339)
1,055
(3,346)
(44)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
23,231
–
1,753
–
–
–
(1,922)
(3)
–
–
–
51
–
–
23,231
–
–
(11)
1,753
(1,922)
37
–
44,483
7,082
2,684
5,482
2,212
1,497
427 25,099
–
The above interests are accounted for as equity accounted investments as San Leon does not have control over
the entities, which are governed under Joint Venture Agreements requiring the approval of both parties to the
Joint Venture Agreement in respect of all operating decisions.
The Directors recognise that the future realisation of the equity accounted investments is dependent on future
successful exploration and appraisal activities and subsequent production of oil and gas reserves.
San Leon Energy plc Annual Report and Accounts 2015
12. Property, plant and equipment
Group
Cost
At 1 January 2014
Additions
Currency translation adjustment
Disposals
At 31 December 2014
Additions
Disposals
Currency translation adjustment
At 31 December 2015
Depreciation
At 1 January 2014
Disposals
Charge for the year
Currency translation adjustment
At 31 December 2014
Disposals
Currency translation adjustment
Charge for the year
At 31 December 2015
Net book values
At 31 December 2015
At 31 December 2014
Company
Cost
At 1 January 2014
Additions
At 31 December 2014
Additions
At 31 December 2015
Depreciation
At 1 January 2014
Charge for the year
At 31 December 2014
Charge for the year
At 31 December 2015
Net book values
At 31 December 2015
At 31 December 2014
Plant &
equipment
€’000
Assets under
construction
€’000
Office
equipment
€’000
Motor
vehicles
€’000
5,570
–
(143)
(87)
5,340
–
–
12
5,352
2,491
(87)
1,098
(57)
3,445
–
8
839
4,292
1,060
1,895
6,699
1,807
–
–
8,506
514
–
–
9,020
–
–
–
–
–
–
–
–
–
9,020
8,506
1,172
211
(13)
(244)
1,126
–
(40)
–
1,086
668
(94)
270
(7)
837
–
–
118
955
131
289
476
2
(11)
–
467
–
(39)
–
428
244
–
86
(5)
325
–
–
48
373
55
142
Assets under
construction
€’000
Office
equipment
€’000
6,703
1,807
8,510
514
9,024
–
–
–
–
–
9,024
8,510
437
–
437
–
437
216
101
317
87
404
33
120
pg 71
Total
€’000
13,917
2,020
(167)
(331)
15,439
514
(79)
12
15,886
3,403
(181)
1,454
(69)
4,607
–
8
1,005
5,620
10,266
10,832
Total
€’000
7,140
1,807
8,947
514
9,461
216
101
317
87
404
9,057
8,630
Assets under construction relate to the Group’s Oil Shale Project in Morocco. The asset is not in use and, therefore,
is not currently being depreciated.
Overview | Strategic Report | Governance | Financial Statements
notes to the financial statements continued
for the year ended 31st December 2015
13. Other non-current assets
Deposits on Spanish oil and gas concession applications (i)
Deposits on Spanish oil and gas concessions (i)
Group
2015
€’000
736
97
833
Group
2014
€’000
736
97
833
Company
2015
€’000
–
–
–
Company
2014
€’000
–
–
–
pg 72
(i) The deposits paid are recoverable on completion of work programmes attached to each of the concessions.
In 2016 €0.6 million was returned to the Company in relation to oil and gas concession applications that were
withdrawn by the Company.
14. Financial assets – Company
Investment in subsidiary undertakings at cost:
Balance at beginning of year
Impairment during the year (i)
Capital contribution in respect of share options
Capital reduction by Canadian subsidiary
Disposal of subsidiary
Balance at end of year
2015
€’000
2014
€’000
146,386
(98,264)
–
–
–
48,122
184,808
(30,982)
1,044
(2,995)
(5,489)
146,386
(i) The impairments to the Company’s investment in subsidiary undertakings recorded in 2015 and 2014 reflect
the write down in the carrying value of the Group’s exploration and evaluation assets in each year.
San Leon Energy plc Annual Report and Accounts 2015
pg 73
14. Financial assets – Company continued
At 31 December 2015, the Company had the following principal subsidiaries, all of which are wholly owned through
holding all of the issued ordinary shares of the entities:
Name
Directly held:
San Leon Energy B.V.
San Leon (USA) Limited
San Leon (Morocco) Limited
San Leon (Netherlands) Limited
San Leon Italy Srl
San Leon Services Limited
Gold Point Energy Corp.
0921642 B.C. Unlimited Liability Company
Aurelian Oil & Gas Limited
Indirectly held:
Baltic Oil and Gas Sp. Z o.o.
Vabush Energy Sp. z o.o.
Braniewo Energy Sp. Z o.o.
Novaseis Sp. z o.o.
Helland Energy Sp. z o.o.
San Leon Services Sp. z o.o.
San Leon Czersk Sp. z o.o.
San Leon Praszka Sp. z o.o.
Aurelian Oil and Gas Poland Sp. z o.o.
Energia Cybinka Sp. z o.o.
Energia Torzym Sp. z o.o.
Energia Kalisz Sp. z o.o.
Energia Karpaty Wschodnie Sp. z o.o.
Energia Karpaty Zachodnie Sp. z o.o.
Energia Karpaty Zachodnie Sp. z o.o. Spk.
Energia Bieszczady Sp. z o.o.
Gora Energy Sp. z o.o.
Liesa Energy Sp. z o.o.
T.K. Exploration Sp. z o.o.
Gdansk Energy Sp. z o.o.
Szczawno Energy Sp. z o.o.
San Leon Durresi B.V.
San Leon Morocco B.V.
San Leon Offshore Morocco B.V.
San Leon Tarfaya Shale B.V.
Seisquest B.V.
San Leon Adriatiku B.V.
Registered office
Kabelweg 37, 1014 BA, Amsterdam, The Netherlands
1st Floor, Wilton House, Wilton Place, Dublin 2
PO Box 146, Trident Chambers, Tortola, BVI
PO Box 146, Trident Chambers, Tortola, BVI
Piazza Vescovio, 700199 Rome, Italy
12 Castle Street, St. Helier, Jersey JE2 3RT
Suite 700, 625 Howe Street, Vancouver, B.C.
V6C 2T6, Canada
Suite 1700, Park Place, 666 Burrard Street,
Vancouver BC V6C 2X8, Canada
84 Brook Street, London, W1K 5EF, United Kingdom
ul. Moniuszki 1A, 00-014 Warsaw, Poland
ul. Moniuszki 1A, 00-014 Warsaw, Poland
ul. Moniuszki 1A, 00-014 Warsaw, Poland
ul. Moniuszki 1A, 00-014 Warsaw, Poland
ul. Moniuszki 1A, 00-014 Warsaw, Poland
ul. Moniuszki 1A, 00-014 Warsaw, Poland
ul. Moniuszki 1A, 00-014 Warsaw, Poland
ul. Moniuszki 1A, 00-014 Warsaw, Poland
ul. Moniuszki 1A, 00-014 Warsaw, Poland
ul. Moniuszki 1A, 00-014 Warsaw, Poland
ul. Moniuszki 1A, 00-014 Warsaw, Poland
ul. Moniuszki 1A, 00-014 Warsaw, Poland
ul. Moniuszki 1A, 00-014 Warsaw, Poland
ul. Moniuszki 1A, 00-014 Warsaw, Poland
ul. Moniuszki 1A, 00-014 Warsaw, Poland
ul. Moniuszki 1A, 00-014 Warsaw, Poland
ul. Moniuszki 1A, 00-014 Warsaw, Poland
ul. Moniuszki 1A, 00-014 Warsaw, Poland
ul. Moniuszki 1A, 00-014 Warsaw, Poland
ul. Moniuszki 1A, 00-014 Warsaw, Poland
ul. Moniuszki 1A, 00-014 Warsaw, Poland
Kabelweg 37, 1014 BA, Amsterdam, The Netherlands
Kabelweg 37, 1014 BA, Amsterdam, The Netherlands
Kabelweg 37, 1014 BA, Amsterdam, The Netherlands
Kabelweg 37, 1014 BA, Amsterdam, The Netherlands
Kabelweg 37, 1014 BA, Amsterdam, The Netherlands
Kabelweg 37, 1014 BA, Amsterdam, The Netherlands
Overview | Strategic Report | Governance | Financial Statements notes to the financial statements continued
for the year ended 31st December 2015
pg 74
14. Financial assets – Company continued
Name
San Leon Canada Limited (formerly Realm Energy
International Corporation)
Realm Energy Operations Corporation
Realm Energy (BVI) Corporation
Realm Energy International Coopteratief U.A.
Realm Energy International Holding B.V.
Realm Energy European Investments B.V.
Frontera Energy Corporation S.L.
San Leon Wielun B.V.
San Leon Olesnica B.V.
San Leon South Prabuty B.V.
San Leon Energy (UK) Limited
AOG Finance Limited
Balkan Explorers (Bulgaria) Limited
Registered office
Suite 1700, Park Place, 666 Burrard Street, Vancouver,
BC V6C 2X8, Canada
Suite 1700, Park Place, 666 Burrard Street, Vancouver
BC V6C 2X8, Canada
Walkers Chambers, 171 Main Street, Road Town,
Tortola, BVI
Kabelweg 37, 1014 BA, Amsterdam, The Netherlands
Kabelweg 37, 1014 BA, Amsterdam, The Netherlands
Kabelweg 37, 1014 BA, Amsterdam, The Netherlands
Paseo Independancia 24-26, 6 2, Zaragoza, Spain
Kabelweg 37, 1014 BA, Amsterdam, The Netherlands
Kabelweg 37, 1014 BA, Amsterdam, The Netherlands
Kabelweg 37, 1014 BA, Amsterdam, The Netherlands
84 Brook Street, London, W1K 5EF, United Kingdom
84 Brook Street, London, W1K 5EF, United Kingdom
84 Brook Street, London, W1K 5EF, United Kingdom
The principal activity of all of the above companies is oil and gas exploration with the exception of San Leon
Services Limited, San Leon Energy (UK) Limited and San Leon Services Sp. z o.o. which provide employment
and administrative services to the Group.
The Company’s joint ventures are listed in Note 11.
15. Financial assets
Group
Cost
At 1 January 2014
Fair value movement
At 31 December 2014
Fair value movement
At 31 December 2015
At 31 December 2015
At 31 December 2014
Barryroe 4.5%
net profit
interest (i)
€’000
Quoted
shares (ii)
€’000
Unquoted
shares (iii)
€’000
37,083
5,040
42,123
4,895
47,018
47,018
42,123
349
63
412
(237)
175
175
412
5,360
–
5,360
–
5,360
5,360
5,360
Total
€’000
42,792
5,103
47,895
4,658
52,553
52,553
47,895
San Leon Energy plc Annual Report and Accounts 2015
15. Financial assets continued
Company
Cost
At 1 January 2014
Fair value movement
At 31 December 2014
Additions (i)
Fair value movement
At 31 December 2015
At 31 December 2015
At 31 December 2014
Barryroe 4.5%
net profit
interest (i)
€’000
Quoted
shares (ii)
€’000
Unquoted
shares (iii)
€’000
–
–
–
39,198
7,820
47,018
47,018
–
349
63
412
–
(237)
175
175
412
5,360
–
5,360
–
–
5,360
5,360
5,360
Total
€’000
5,709
63
5,772
39,198
7,583
52,553
52,553
5,772
pg 75
(i) Barryroe – 4.5% net profit interest
The Directors have estimated the fair value of the NPI by reference to a third party evaluation report of contingent
resources and cash flows prepared Netherland Sewell & Associates Inc. (NSAI) in July 2013 for Providence
Resources Plc (“Providence”).
NSAI reported that the Basal Wealden oil reservoir has an estimated 2C in-place gross on-block volume of 761
MMBO with recoverable resources of 266 MMBO and 187 BCF of associated gas, based on a 35% oil recovery
factor. In July 2013, NSAI also provided an estimate of the cash flows attributable to Providence’s net interest from
the Basal Wealden oil reservoir only. It estimated Providence’s net present value at USD 2.63 billion in the 2C case
(estimated recoverable resources of 266 MMBO and 187 BCF of associated gas) at a 10% discount rate. Further
details are available on the Providence website.
Further information has also been made available regarding the revised development plan or development costs
which are key inputs into the valuation model.
As San Leon is not the operator of this licence, the Group does not have the ability to commission an independent
technical evaluation of the licence area. Therefore, the directors believe that the NSAI report, when coupled with
other information released by Providence and adopted for certain changes in the market, gives the basis for the
best estimate of fair value at year end.
The key information relevant to the fair value of the Barryroe 4.5% net profit interest is as follows:
Valuation technique
Third party evaluation report
prepared by NSAI in July 2013 as
released by Providence Resources
Plc and internal management
assumptions / amendments based
on a net present value of future cash
flows model.
Significant unobservable inputs
• Oil production of 261MM BBL
over the life of the field on
a successful development of the
2C contingent resources case
• Life of field expected to be
24 years
• Oil price over the period is
assumed to be US$40/bbl
• Opex is discounted by 30% relative
to original economic model, and
capex by 40% to reflect market
conditions
• Discount rate 10%
Inter-relationships between the
measurement unobservable inputs
and fair value
The estimated fair value would
increase / (decrease) if:
• The capital expenditure required
to develop the field (decreased) /
increased
• The oil price per barrel increased /
(decreased)
• The resource estimates increased /
(decreased) or the life of the field
increased / (decreased)
• US Dollar exchange rate increased /
(decreased)
Overview | Strategic Report | Governance | Financial Statements
notes to the financial statements continued
for the year ended 31st December 2015
15. Financial assets continued
(ii) Amedeo Resources plc
In 2013 the Company purchased 71,225,000 ordinary shares in Amedeo Resources plc, a company listed on the
AIM Market in London, for a total consideration of €1,329,349. The market value of the shares at 31 December 2015
was €174,678 (2014: €411,494).
pg 76
(iii) Ardilaun Energy Limited
As part of the consideration for the sale of Island Oil and Gas Limited to Ardilaun Energy Limited (“Ardilaun”) in 2014.
Ardilaun agreed to issue shares equivalent to 15% of the issued share capital of Ardilaun. The original fair value of
the 15% interest in Ardilaun was based on a market transaction in Ardilaun shares. The Directors have considered
the carrying value of this interest at 31 December 2015 and are satisfied that the carrying value continues to be
appropriate in the absence of further market data.
16. Inventory
Spare parts and consumables
Group
2015
€’000
329
Group
2014
€’000
321
Company
2015
€’000
–
Company
2014
€’000
–
Spare parts includes drilling equipment and consumables utilised by the Group’s seismic services company and
will be consumed within 12 months.
17. Trade and other receivables
Amounts falling due within one year:
Trade receivables from joint operating partners
Amounts owed by group undertakings*
VAT and other taxes refundable
Other debtors
Prepayments and accrued income
Group
2015
€’000
196
–
927
5,151
272
6,546
Group
2014
€’000
713
–
1,138
7,919
574
10,344
Company
2015
€’000
686
649
51
832
1,890
4,108
Company
2014
€’000
376
99,573
22
4,168
2,564
106,703
* Amounts owed by the Group’s undertakings are interest free and repayable on demand with the exception of any amounts due from the Group’s Polish
subsidiaries which are repayable on demand but subject to a market rate of interest from the date the loan was advanced.
18. Other financial assets
Restricted cash at bank
Group
2015
€’000
1,370
Group
2014
€’000
1,335
Company
2015
€’000
84
Company
2014
€’000
182
Restricted cash at bank at 31 December 2015 includes deposit accounts held in support of bank guarantees
required under the Moroccan exploration licences, Zag and Tarfaya held by the Group.
San Leon Energy plc Annual Report and Accounts 2015
19. Cash and cash equivalents
Cash and cash equivalents
20. Trade and other payables
Current
Trade payables
Amounts owed to group undertakings*
PAYE / PRSI
Other creditors
Accruals
Director’s loan (Note 29)
Group
2015
€’000
913
Group
2014
€’000
1,809
Company
2015
€’000
572
Company
2014
€’000
1,439
Group
2015
€’000
10,618
–
306
1,437
2,020
202
14,583
Group
2014
€’000
9,246
–
519
199
1,000
–
10,964
Company
2015
€’000
Company
2014
€’000
pg 77
4,025
28,178
80
107
556
202
33,148
2,287
28,042
138
119
3,369
–
33,955
* Amounts owed to Group undertakings are interest free and repayable on demand with the exception of any amounts due to the Group’s Polish
subsidiaries which are repayable on demand but subject to a market rate of interest from the date the loan was advanced.
21. Derivative liability
Non-current
Derivative
Group
2015
€’000
–
–
Group
2014
€’000
Company
2015
€’000
Company
2014
€’000
4
4
–
–
4
4
In 2012, the Company issued 110,000< and 111,250< warrants to a non-employee with an exercise price of £11.00 for
periods of 3.9 years and 4.6 years respectively. The warrants replaced instruments previously issued in connection
with a convertible loan note issued to the Company. The fair value of the warrants issued has been calculated
using the Black Scholes Model. The fair value was nil at year end.
< Adjusted to reflect the share consolidation in July 2015. Further details are provided in Note 24.
Valuation technique
Black-Scholes Model
Significant unobservable inputs
• Stock asset price between
£0.60 and £1.18
• Option strike price between
£2.00 and £11.00
• Average maturity of 3 years
• Risk-free interest rate of 1.25%
• Share price volatility of 65%
Inter-relationships between
the measurement unobservable
inputs and fair value
The estimated fair value would
increase / (decrease) if:
• The share price increased /
(decreased)
• Sterling exchange rate increased /
(decreased)
• The risk free interest rate increased /
(decreased)
Overview | Strategic Report | Governance | Financial Statements
notes to the financial statements continued
for the year ended 31st December 2015
22. Loans and borrowings
Current
YA Global Masters SPV Limited (i)
Palomar Holdings Limited (ii)
LPL Finance Limited (iii)
Other
pg 78
Group
2015
€’000
3,318
–
1,022
438
4,778
Group
2014
€’000
3,343
2,471
–
–
5,814
Company
2015
€’000
Company
2014
€’000
3,318
–
1,022
438
4,778
3,343
2,471
–
–
5,814
(i) In 2014, the Company received a loan of US$3,200,000 from YA Global Masters SPV Limited with an
arrangement fee of US$800,000.
(ii) In 2014, the Company received a loan of US$3,000,000 from Palomar Holdings Limited. This loan was repaid
in 2015.
(iii) Oisín Fanning has personally guaranteed the loan from LPL Finance Limited. See Note 29 for further details.
23. Provisions for liabilities
Group
At 1 January 2015
Provision during the year
Exchange rate adjustment
At 31 December 2015
Current
Non-current
Decommissioning
€’000
–
4,291
–
4,291
415
3,876
Arbitration
€’000
–
20,561
–
20,561
–
20,561
Other
€’000
1,457
–
(102)
1,355
1,355
–
Total
€’000
1,457
24,852
(102)
26,207
1,770
24,437
Decommissioning
The provision for decommissioning costs is recorded at the value of the expenditures expected to be required
to settle the Group’s future obligations on the decommissioning of previously drilled wells.
Arbitration
Aurelian Oil & Gas Limited (“Aurelian”) and a number of other subsidiaries (the ‘subsidiaries’) have been
unsuccessful in their appeal against the findings of the International Court of Arbitration of the International
Chamber of Commerce (“ICC”), in relation to an award dated 21 May 2015 in an arbitration between the subsidiaries
and Avobone N.V. and Avobone Poland B.V.
The subsidiaries appealed to the UK Commercial Court in October 2015 to set aside the ICC’s findings and award.
The findings of the Commercial Court, received by the Company on 4 February 2016 but not conclusive until
11 February 2016 were that the subsidiaries’ appeal was dismissed. Accordingly, the award has been provided for
in full.
Other
Certain Realm Energy International Corporation shareholders exercised rights of dissent under Canadian law not
to accept the terms of acquisition in 2011. Under Canadian law, these dissenting shareholders are eligible to receive
a cash payment equal to the fair value of their shareholding at acquisition. The provision represents the Directors’
estimate of the cash consideration to be paid to those shareholders taking account of the market price of the Realm
shares at acquisition.
San Leon Energy plc Annual Report and Accounts 2015
24. Share capital – Group and Company
Authorised equity
At 1 January 2014 and 1 January 2015
Consolidation and subdivision
At 31 December 2015
Issued, called up and fully paid:
Number of New
Ordinary shares
€0.01 each
Number of Deferred
Ordinary shares
€0.0001 each
’m
Number of
Ordinary shares
€0.05 each
Authorised
equity
’000
–
15,500,000,000
15,500,000,000
– 3,100,000,000
1,265,259 (3,100,000,000)
–
1,265,259
155,000
–
155,000
pg 79
At 1 January 2014
Issue of shares to
non-controlling interest
Issue of shares on exercise
of warrants and options
Expenses directly relating
to share placing in 2013
At 31 December 2014
Issue of shares
Consolidation and subdivision
Issue of shares to
non-controlling interest
Issue of shares on placing
Issue of advisor shares on placing
At 31 December 2015
Number of New
Ordinary shares
€0.01 each
–
Number of
Deferred Ordinary
shares
€0.0001 each
’m
–
Number of
Ordinary shares
€0.05 each
2,531,218,948
Share capital
€’000
126,561
Share premium
€’000
164,233
–
–
–
–
3,817,224
536,508
–
–
25,355,899
–
36,250,000
203,153
61,809,052
–
– 2,535,572,680
17,295
–
1,265,259 (2,535,589,975)
–
–
–
1,265,259
–
–
–
–
191
27
–
126,779
1
–
–
363
2
127,145
335
6
(474)
164,100
1
–
–
40,801
224
205,126
On 16 June 2015, the Company issued 17,295 €0.05 Ordinary Shares at £0.1175 in relation to conversion notices
issued by the holders of exchangeable shares issued under the terms of the acquisition of the Realm Energy
International Corporation.
Share capital reorganisation
On 15 July 2015, a share consolidation and subdivision took place whereby 2,535,589,975 existing ordinary shares
of €0.05 each were consolidated on the following basis:
(a) each Existing Ordinary Share in issue was sub-divided into one Intermediate Ordinary Share of EUR0.0001
each and 499 Deferred Shares of EUR0.0001 each;
(b) every one hundred Intermediate Ordinary Shares in issue was consolidated into one New Ordinary Share of
EUR0.01 each;
(c) each authorised but un-issued Existing Ordinary Share was sub-divided into five New Ordinary Shares;
(d) no shareholder may hold a fraction of a share and accordingly fractional entitlements arising out of the
consolidation under sub-paragraph (b) above were aggregated.
An amendment of the Company’s Articles of Association set out the rights and restrictions attaching to the Deferred Shares.
On the same day, the Company issued 36,250,000 €0.01 New Ordinary Shares as a cash equity placing.
There were also 203,153 €0.01 New Ordinary Shares issued to advisors in consideration for their professional fees
in relation to the 36,250,000 €0.01 New Ordinary Shares placing.
Overview | Strategic Report | Governance | Financial Statements
notes to the financial statements continued
for the year ended 31st December 2015
25. Reserves and non-controlling interest
The Statement of Changes in Equity outlines the movement in reserves during the year. Further details of these
reserves are set out below:
Currency translation reserve
The currency translation reserve comprises all foreign currency differences arising from the translation of the
financial statements of foreign operations.
pg 80
Share based payments reserve
The share based payments reserve comprises the fair value of all share options which have been charged over the
vesting period, net of the amount relating to share options which have expired, been cancelled and have vested.
Non-controlling interest
The non-controlling interest related to shares that were issued by San Leon Energy plc to the holders of
exchangeable shares issued as part consideration for the acquisition of Realm Energy International Corporation in
2011. The exchangeable shares do not have any voting or dividend rights and are exchangeable on a one for one
basis into ordinary shares of San Leon Energy plc.
Available for sale fair value reserve
The available for sale fair value reserves comprises fair value adjustments arising on Group’s available for sale
financial assets (Note 15).
26. Share based payments
Prior to 31 December 2012, the Group had one share based payment scheme for executives and senior employees
of the Group. In accordance with the provisions of the plan, as approved by shareholders at a previous general
meeting, executives and senior employees may be granted options to purchase ordinary shares.
Each share option converts into one ordinary share of San Leon Energy Plc on exercise and options do not carry
rights to dividends nor voting rights. Options may be exercised at any time from the date of vesting to the date
of their expiry. The options vest in tranches subject to the achievement of certain service and non-market
performance conditions. Market conditions in relation to the achievement of share price trading levels also apply
in the case of certain options granted to the directors, further details of which are set out in the Directors’ Report.
During the first quarter of 2013, this scheme was replaced by a more formal Share Option Plan, which will govern
all future awards of share options made by San Leon. All employees, and certain directors and consultants, may
from time to time be eligible to receive a discretionary bonus to be awarded in the form of options over San Leon
Ordinary shares. Historic options in respect of San Leon shares will continue to be governed by the terms and
conditions set out in the historic share based payments scheme.
The Group’s equity share options are equity settled share based payments as defined in IFRS 2: Share Based
Payments. The total share based payment charge for the year has been calculated based on grant date fair value
obtained using an option pricing model with a discount for market conditions applied based on a Monte Carlo
simulator analysis where appropriate. The charge for the year is €4,541,565 (2014: €1,211,407) which includes the
charge for the shares to be issued to Oisín Fanning in lieu of salary.
San Leon Energy plc Annual Report and Accounts 2015 26. Share based payments continued
The movement on outstanding share options and warrants during the year was as follows:
Balance at beginning of the financial year
Granted during the year
Expired during the financial year
Effect of modification during the financial year
Exercised during the financial year
Balance at end of the financial year
Exercisable at end of the financial year
2015
2014
Number
of options /
warrants
<
1,904,739
2,500,000
(514,739)
6,127,043
–
10,017,043
9,368,844
Weighted
average
exercise
price
<
£12.70
£0.64
£11.09
£1.75
–
£2.29
£1.72
Number
of options /
warrants
<
1,930,210
5,000
(25,106)
–
(5,365)
1,904,739
1,137,972
Weighted
average
exercise
price
<
£15.30
£6.70
£21.70
–
£4.90
£12.70
£12.40
pg 81
< Adjusted to reflect the share consolidation in July 2015. Further details are provided in Note 24.
The range of exercise prices of outstanding options / warrants at year end is £0.60-£35.00 (2014: £4.00 - £62.00).
The weighted average remaining contractual life for options / warrants outstanding at 31 December 2015 is
4.43 years (2014: 2.96 years).
No options or warrants were exercised in the current or previous year.
The following table lists the fair value of options granted and the inputs to the models used to calculate the grant
date fair values of awards granted in 2015 and 2014:
Weighted average fair value of options granted during year (adjusted)
Weighted average share price of options at date of grant (adjusted)
Dividend yield
Expected volatility
Risk-free interest rate
Expected option life
Expected early exercise %
Model used
2015
£0.34
£0.64
0%
65%
1.1% - 1.7%
7 - 10 years
0%
Black-
Scholes
Model
2014
£0.30
£0.40
0%
65%
1.1% - 1.7%
7 - 10 years
10%
Black-
Scholes
Model
The expected life used in the model is based on the expectation of management including the probability of
meeting market conditions (where applicable) attaching to the option and behavioural considerations and is
not necessarily indicative of exercise patterns that may occur. Expected volatility is based on an analysis of the
historical volatility of San Leon Energy Plc shares and comparable listed entities. The fair value is measured
at the date of grant.
Overview | Strategic Report | Governance | Financial Statements
notes to the financial statements continued
for the year ended 31st December 2015
27. Commitments and contingencies
(a) Operating leases
Commitments under operating leases are as follows:
pg 82
Payable:
Within one year
Between one and five years
Over five years
Property
2015
€’000
Motor vehicles
2015
€’000
1,276
4,540
697
6,513
26
23
–
49
Total
2015
€’000
1,302
4,563
697
6,562
Total
2014
€’000
1,049
3,663
1,315
6,027
(b) Exploration, evaluation and development activities
The Group has commitments of approximately €5.2 million (2014: €11 million) in the year ended 31 December 2016
to contribute to its share of exploration and evaluation expenditure in respect of exploration licences and
concessions held.
(c) Security for loans
Palomar Holdings Limited did have a charge over the assets of the Company’s subsidiary Novaseis Sp.z o.o
as security for the debt outlined in Note 22. This charge has been released on repayment of the loan in 2015.
Oisín Fanning has personally guaranteed the loan from LPL Finance Limited referred to in Note 22.
28. Deferred tax
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Exploration and
evaluation assets
Financial assets –
net profit interest
Tax losses recognised
Unrecognised deferred tax asset
Tax losses
Capitalised expenditure
Assets
2015
€’000
–
–
5,836
5,836
2014
€’000
–
–
10,437
10,437
Liabilities
2015
€’000
2014
€’000
Net
2015
€’000
2014
€’000
–
(9,329)
–
(9,329)
(14,922)
–
(14,922)
(13,307)
–
(22,636)
(14,922)
5,836
(9,086)
(13,307)
10,437
(12,199)
2015
€’000
10,276
27,652
37,928
2014
€’000
7,425
31,008
38,433
Deferred tax assets have not been recognised in respect of the above items because it is not probable that future
taxable profits will be available against which the Group can utilise these losses.
San Leon Energy plc Annual Report and Accounts 2015
29. Related party transactions
Mr. Oisín Fanning
San Leon holds an option to acquire a property at market value from Mr. Fanning. The option has a remaining life
of eleven years and the option fee of £300,000 is refundable when the Company either exercises or terminates
the option. Mr. Fanning was paid £90,000 rent for the use of this property by the company.
The property is available for use by all staff and consultants requiring overnight accommodation while conducting
business on behalf of the company.
A summary of the movement in Mr. Fanning’s loan balance is set out below:
At 1 January 2015
Advances during year
Expenses incurred on behalf of the company not yet reimbursed
Loan to San Leon during the year
Repayments during the year
At 31 December 2015 (Note 20)
pg 83
€’000
–
296
(23)
(153)
(322)
(202)
At 31 December 2015 Mr Fanning was owed €0.2 million by the Company. During the year, the maximum amount
outstanding on the loan was €56,692.
Mr. Fanning had personally guaranteed the loan from Palomar Holdings Limited which was repaid during the year
and referred to in Note 22. He has also personally guaranteed the loan from LPL Finance Limited referred to in
Note 22 which remains outstanding at 31 December 2015.
Green Corporate Finance Limited
San Leon Energy Plc and Green Corporate Finance Limited have a common director, Daniel Martin. San Leon
have a legal services agreement with Green Corporate Finance Limited who were paid €161,438 in 2015
(2014: €150,936).
Surplan Limited
San Leon Energy Plc and Surplan Limited have a common director, Raymond King. San Leon have a consultancy
agreement with Surplan Limited who were paid €149,976 in 2015 (2014: €143,952).
Key management
Key management is deemed to comprise the Board of Directors. The total remuneration paid to key management
was as follows:
Salary and emoluments
Shares to be issued in lieu of salary
Fees
Pension
Share based payment expense
Consultancy services
2015
€’000
820
992
195
96
119
311
2,533
2014
€’000
1,947
–
231
96
533
295
3,102
Overview | Strategic Report | Governance | Financial Statements
notes to the financial statements continued
for the year ended 31st December 2015
29. Related party transactions continued
Company
Transactions with subsidiaries
Transactions between San Leon Energy Plc (“the Company”) and its subsidiaries, which are related parties, have
been eliminated on consolidation. At 31 December 2015, the Company is owed €120.7 million (2014: €99.6 million)
by its subsidiaries in respect of funds advanced to and expenses discharged by the Company on their behalf.
An impairment provision of €120 million against these debts has been provided for in the year (2014: nil.
The Company owes €28 million (2014: €28 million) to subsidiaries in funds received and services provided
by Group companies.
pg 84
30. Financial instruments and financial risk management
The Group and Company’s principal financial instruments comprise trade receivables, available for sale financial
assets, other financial assets, trade payables and cash and cash equivalents.
The main purpose of these financial instruments is to provide finance for the Group and Company’s operations.
The Group and Company’s financial assets and liabilities are classified as:
• Loans and receivables: all trade and other receivables, amounts due to and from subsidiaries and cash
and cash equivalents as disclosed in the statement of financial position
• Available for sale: financial assets – net profit interest and quoted investments as described in Note 15
• Liabilities at amortised cost: all trade and other payables and loans and borrowings as disclosed in the statement
of financial position
The main risks arising from the Group and Company’s financial instruments are foreign currency risk, credit risk,
liquidity risk, interest rate risk and capital management. Management reviews and agrees policies for managing
each of these risks in a non-speculative manner which are summarised below.
(a) Currency risk
The Group is exposed to foreign currency risk on transactions denominated in a currency, other than the relevant
functional currency of the entities of the Group which consist of Euro, Sterling, US Dollars, Polish Zloty, Moroccan
Dirhams and Canadian Dollars. The Euro is the presentation currency for financial reporting and budgeting. The
Group manages its exposure by matching receipts and payments in the same currency and monitoring the residual
net cash position. During the years ended 31 December 2015 and 2014, the Group did not utilise either forward
currency contracts or other derivatives to manage foreign currency risk.
At 31 December 2015, the Group’s principal exposure to foreign currency risk was as follows:
Trade and other receivables (Note 17)
Trade and other payables (Note 20)
Provisions (Note 23)
Loans and borrowings
(payable within one year) (Note 22)
Cash and cash equivalents (Note 19)
Other financial assets (Note 18)
Total 2015
Total 2014
Denominated
in GBP£
€’000
250
(2,262)
–
Denominated
in US$
€’000
2,329
(4,668)
–
Denominated
in PLN
€’000
416
(1,132)
–
Denominated
in CAD
€’000
3
(616)
(1,356)
Denominated
in MAD
€’000
697
(1,287)
–
(1,459)
–
–
(3,471)
(1,225)
(3,318)
5
1,286
(4,366)
(2,541)
–
169
84
(463)
(2,334)
–
7
–
(1,962)
(1,765)
–
557
–
(33)
1,232
San Leon Energy plc Annual Report and Accounts 2015 30. Financial instruments and financial risk management continued
At 31 December 2015, the Company’s principal exposure to foreign currency risk was as follows:
Trade and other receivables (Note 17)
Trade and other payables (Note 20)
Loans and borrowings
(payable within one year) (Note 22)
Cash and cash equivalents (Note 19)
Financial assets
Total 2015
Total 2014
Denominated
in GBP£
€’000
827
(26,833)
Denominated
in US$
€’000
2,301
(365)
Denominated
in PLN
€’000
–
(715)
Denominated
in CAD
€’000
–
(553)
Denominated
in MAD
€’000
–
(5)
(1,459)
45
–
(27,420)
(24,438)
(3,318)
49
–
(1,333)
(8,569)
–
9
84
622
10,091
–
–
–
553
626
–
557
–
552
541
pg 85
The euro exchange rates used in the preparation of the financial statements were as follows:
Sterling
US Dollars
Polish Zloty
Canadian Dollars
Moroccan Dirhams
2015
Average rate
0.7259
1.1095
4.1841
1.4777
10.8597
2015
Closing rate
0.7340
1.0877
4.2639
1.5116
10.7647
2014
Average rate
0.8061
1.3285
4.1843
1.4661
11.0868
2014
Closing rate
0.7789
1.2141
4.2732
1.4063
10.9619
Sensitivity analysis
If the Euro increased by 1% in value against the above currencies, the Group’s loss for the year would increase
and equity at year end would decrease by approximately €0.2 million. A 1% decrease in the Euro value would have
an equal but opposite effect.
If the Euro increased by 1% in value against the above currencies, the Company’s loss for the year would decrease
and equity at year end would increase by approximately €0.3 million. A 1% decrease in the Euro value would have
an equal but opposite effect.
(b) Credit risk
Credit risk refers to the risk that any counter-party will default on its contractual obligations resulting in financial
loss to the Group.
The Group and Company’s financial assets (excluding Financial Assets – Net Profit Interest, see (f) Fair values)
comprise trade and other receivables and cash and cash equivalents. Due to the nature of trade and other
receivables, there is no significant exposure to credit risk on these assets. The credit risk on amounts receivable
from joint operating partners is managed by agreeing budgets in advance with partners and where appropriate
collecting any material share of exploration costs from partners in advance of completing the exploration work
programme.
The credit risk on cash and cash equivalents is considered limited because the counterparties are banks with high
credit-ratings assigned by international credit rating agencies. The Group also holds limited funds for day to day
operational purposes with Irish banking institutions which are subject to guarantee by the Irish government.
The Group and Company’s maximum exposure to credit risk is equal to the carrying amount of cash and cash
equivalents in its consolidated and company statement of financial position. The Group does not expect any
counterparty to fail to meet its obligations.
Overview | Strategic Report | Governance | Financial Statements
notes to the financial statements continued
for the year ended 31st December 2015
30. Financial instruments and financial risk management continued
Details of cash deposits, which are all for terms of one month or less are as follows:
pg 86
Euro
Sterling
US Dollar
Polish Zloty
Canadian Dollar
Moroccan Dirhams
Romanian Lei
Other
2015
€’000
16
–
5
169
7
557
159
–
913
2014
€’000
16
2
888
219
6
548
130
–
1,809
Cash deposits held by the Company total €572,478 at the reporting date (2014: €1,439,121), comprised of €14,838
in Euro, €45 in Sterling, €49 in US Dollars, €557,367 in Moroccan Dirhams and other €178.
(c) Liquidity risk management
Liquidity risk is the risk that the Group will not have sufficient funds to meet liabilities as they fall due. The Group
manages liquidity risk by maintaining adequate cash reserves and by continuously monitoring forecast and actual
cash flows and matching the maturity profiles of financial assets and liabilities. Cash forecasts are produced to
identify the liquidity requirements of the Group. Surplus cash is placed on deposit in accordance with limits and
counterparties agreed by the Board, with the objective to maximise return on funds whilst ensuring that the short
term cash requirements of the Group are maintained.
All cash and cash equivalents are due within three months. All trade and other receivables and trade and other
payables are due within three months.
The Group’s financial liabilities at 31 December 2015 are as follows:
Group
Trade and other payables and derivative
(Note 20 & Note 21)
Loans and borrowings (Note 22)
Provisions (Note 23)
Company
Trade and other payables and derivative
(Note 20 & Note 21)
Loans and borrowings (Note 22)
Provisions (Note 23)
Less than
1 year
€’000
One to
two years
€’000
Two to
five years
€’000
14,583
4,778
1,770
21,131
–
–
–
–
–
–
24,437
24,437
Less than
1 year
€’000
One to
two years
€’000
Two to
Five years
€’000
33,148
4,778
–
37,926
–
–
–
–
–
–
–
263
Total
€’000
14,583
4,778
26,207
45,568
Total
€’000
33,148
4,778
–
37,926
The contractual cashflows are equal to the carrying value of the financial liabilities included in the tables above.
San Leon Energy plc Annual Report and Accounts 2015
30. Financial instruments and financial risk management continued
(d) Interest rate risk
The Group and Company’s exposure to the risk of changes in market interest rates relates primarily to the Group
and Company’s holdings of cash and short term deposits.
It is the Group and Company’s policy to place surplus funds on short term deposit in order to maximise interest
earned whilst maintaining adequate short term liquidity for operational requirements.
(e) Capital risk management
The Group and Company manages its capital to ensure that entities in the Group will be able to continue as a
going concern while maximising the return to shareholders through the optimisation of the debt and equity balance.
The Group and Company manages its capital structure and makes adjustments to it, in light of changes in economic
conditions. To maintain or adjust its capital structure, the Group may adjust or issue new shares or raise debt.
No changes were made in the objectives, policies or processes during the years ended 31 December 2015 and
31 December 2014. The capital structure of the Group consists of equity attributable to equity holders of the parent,
comprising issued capital, reserves and retained losses as disclosed in the consolidated statement of changes in
equity together with long term borrowings.
pg 87
San Leon has entered into a Standby Equity Distribution Agreement (“SEDA”) with YA Global Master SPV Ltd
(“Yorkville”), an investment fund managed by Yorkville Advisors LLC, for a GBP15 million equity line of credit. Under
the terms of the agreement San Leon may draw down funds from time to time, at its sole discretion, in exchange
for the issue of new shares in the capital of the Company. The term of this facility has been extended to
30 November 2017. The shares issued by the company will be priced at a 6% discount to the prevailing market
price at the time of the draw down. The company may also set a minimum price for each draw down to ensure
the company receives an acceptable price. No draw down of funds has occurred to date on this facility.
A facility of Stg15m from Brandon Hill Capital is available for a six month period in the event that the planned equity
placing in 2016 does not complete.
(f) Financial assets and liabilities by category
As set out in the statement of accounting policies, Financial assets and liabilities recognised at fair value are
analysed between those based on quoted prices in the active markets for identical assets or liabilities (Level 1),
those involving inputs other than quoted prices that are observable for the assets or liabilities, either directly or
indirectly (Level 2); and those involving inputs for the assets or liabilities that are not based on observable market
data (Level 3).
The following table sets out the carrying value of all the financial assets and liabilities held at 31 December 2015:
Financial assets
Barryroe NPI (Note 15)
Quoted shares (Note 15)
Unquoted shares (Note 15)
Trade receivables* (Note 17)
Other financial asset* (Note 18)
Cash and cash equivalents* (Note 19)
Other debtors* (Note 17)
Financial liabilities
Trade payables* (Note 20)
Other creditors* (Note 20)
Provisions (Note 23)
At 31 December 2015
Carrying
amount
31 December
2015
€’000
Level 1
31 December
2015
€’000
Level 2
31 December
2015
€’000
Level 3^
31 December
2015
€’000
47,018
175
5,360
196
1,370
913
5,151
(10,618)
(1,437)
(26,207)
21,921
–
175
–
–
–
–
–
–
–
–
175
–
–
5,360
–
–
–
–
–
–
–
5,360
47,018
–
–
–
–
–
–
–
–
–
47,018
Overview | Strategic Report | Governance | Financial Statements San Leon Energy plc Annual Report and Accounts 2015
notes to the financial statements continued
for the year ended 31st December 2015
30. Financial instruments and financial risk management continued
pg 88
Company
Financial assets
Barryroe NPI (Note 15)
Quoted shares (Note 15)
Unquoted shares (Note 15)
Trade receivables* (Note 17)
Other financial asset* (Note 18)
Cash and cash equivalents* (Note 19)
Other debtors* (Note 17)
Financial liabilities
Trade payables* (Note 20)
Other creditors* (Note 20)
Provisions (Note 23)
At 31 December 2015
Carrying
amount
31 December
2015
€’000
Level 1
31 December
2015
€’000
Level 2
31 December
2015
€’000
Level 3^
31 December
2015
€’000
175
5,360
686
84
572
832
(4,025)
(107)
–
3,577
175
–
–
–
–
–
–
–
–
175
–
5,360
–
–
–
–
–
–
–
5,360
47,018
–
–
–
–
–
–
–
–
–
47,018
* The Group has not disclosed the fair value of financial instruments such as short term receivables and payables, as it is considered that their carrying
amounts are a reasonable approximation of their fair values.
^ For detailed disclosures on the valuation techniques of level 3 disclosures see the note referenced above.
During the period ended 31 December 2015, there were no significant changes in the business or economic
circumstances that affect the fair value of financial assets and liabilities, no reclassifications and no transfers
between levels of the fair value hierarchy used in measuring the fair value of the financial instruments.
(g) Hedging
At 31 December 2015 and 31 December 2014, the Group and Company had no outstanding contracts designated
as hedges.
31. Subsequent events
Nigerian Onshore Production Arrangement
On 22 January 2016, San Leon announced that it had reached agreement to participate in a transaction which
would result in the Company securing an initial 9.72% indirect economic interest in OML 18, onshore Nigeria for
a total consideration of US$173 million. The OML 18 Production Arrangement represents an entry by the Company
into the Nigerian onshore oil and gas production market, one of the largest in the world. The OML 18 Production
Arrangement is considered by the Board to be a transformational transaction for the Company and is subject to
shareholders approval at an EGM in July 2016.
San Leon and Midwestern Oil & Gas Company Limited (“Midwestern”) have set up the SPV Midwestern Leon
Petroleum Limited (“MLPL or BidCo”) to complete the OML 18 Production Arrangement. The OML 18 Production
Arrangement is structured in three parts, of which the initial stage was completed on 22 March 2016, with the
finalisation of the Mart Acquisition. The Mart Acquisition comprised the provision of approximately US$73 million of
funding provided by funds managed by Toscafund and structured as secured notes (“Loan Notes”) issued by
BidCo, which together with other transaction costs, enabled the acquisition of Mart Resources indirect shareholding
in OML 18. Midwestern also contributed its indirect shareholding in OML 18 to BidCo. The Loan Notes have a
coupon of 17% per annum and mature on 22 March 2020. Principal and interest repayments will be paid through a
cash sweep of at least 65% of the available funds distributed to BidCo from OML 18.
31. Subsequent events continued
A further US$30 million, structured as Loan Notes, issued on the same terms as the previous Loan Notes (i.e 17%
coupon), has also been provided by funds managed by Toscafund. BidCo has, through a share buyback of its own
shares, completed the second step of the three-step OML 18 Production Arrangement. As a result Midwestern now
holds 70.43% of BidCo and San Leon’s share of BidCo has increased to 29.57%, equal to an economic interest in
OML 18 of 5.75%.
In order to complete the subsequent parts of the OML 18 Production Arrangement (collectively the “Remaining
Transactions”), BidCo will need to raise an additional US$70 million which is also intended to be structured as Loan
Notes. Subject to completion of the OML 18 Production Arrangement and San Leon shareholder and regulatory
approvals, San Leon will hold a 40% interest in BidCo. The Company has concluded that shareholder value would
best be obtained by San Leon becoming the ultimate beneficial owner of the entire US$173 million of Loan Notes
and has therefore agreed to purchase the Loan Notes from the funds managed by Toscafund.
pg 89
Related party transaction
On 22 March 2016, San Leon entered into a conditional agreement to purchase up to all of the Loan Notes issued
to Toscafund, plus accrued interest. The purchase is subject to approvals, consents and permissions including
shareholder and regulatory approvals and is also dependent upon San Leon raising capital through a placing with
institutional investors. In consideration for providing the debt finance to BidCo, San Leon has pledged its shares in
BidCo to Toscafund (the “Share Pledge”) and agreed to issue 10 million warrants in San Leon to Toscafund at a price
of 25 pence per share (the “Warrants”). The Warrants are exercisable for the period of 7 years from the date of issue
and their exercise is subject to shareholder approval and any other applicable regulatory approvals. The Company
has also agreed to pay Toscafund an arrangement fee of US$3 million (“Arrangement Fee”) on completion of the
purchase by the Company of any of the Loan Notes.
Proposed conditional placing
The Company is therefore planning to undertake an equity fundraising of at least US$200 million (the “Placing”).
The net proceeds of the Placing will be used (subject to any necessary shareholder and regulatory approvals) to:
• purchase the Loan Notes from Toscafund;
• subscribe for the additional US$70 million in Loan Notes to complete the OML 18 Production Arrangement;
• fund transaction costs; and
• provide working capital to the Company.
Suspension of Shares
As the OML 18 Production Arrangement represents a reverse takeover under AIM Rules, trading in the Company’s
ordinary shares were suspended and will remain suspended pending the publication of an admission document
by the Company or an announcement that the proposed acquisition is not proceeding.
The OML 18 Production Arrangement and equity placing are subject to shareholder approval at an EGM which
is expected to occur in July 2016.
Arbitration
Aurelian Oil & Gas Limited (“Aurelian”) and a number of other subsidiaries (the ‘subsidiaries’) have been
unsuccessful in their appeal against the findings of the International Court of Arbitration of the International
Chamber of Commerce (“ICC”), in relation to an award dated 1 May 2015 in an arbitration between the subsidiaries
and Avobone N.V. and Avobone Poland B.V.
The subsidiaries appealed to the UK Commercial Court in October 2015 to set aside the ICC’s findings and award.
The findings of the Commercial Court, received by the Company on 4 February 2016 but not conclusive until
11 February 2016 were that the subsidiaries’ appeal was dismissed.
On 19 April 2016, Avobone indicated their intention to pursue the award against Aurelian through the Irish Courts.
See Note 23 for further details.
San Leon Energy plc Annual Report and Accounts 2015
notes to the financial statements continued
for the year ended 31st December 2015
32. Approval of financial statements
The Financial Statements were approved by the Board on 28 June 2016.
pg 90
pg 91
corporate information
Directors
Registered Office
Secretary
Auditor
Oisín Fanning (Chairman)
Paul Sullivan (Managing Director)
Jeremy Boak (Non-Executive Director) – resigned 22 July 2015
Raymond King (Non-Executive Director)
Daniel Martin (Non-Executive Director)
Piotr Rozwadowski (Non-Executive Director) – resigned 5 May 2016
First Floor
Wilton Park House
Wilton Place
Dublin 2
Raymond King FCIS
KPMG
Chartered Accountants
1 Stokes Place
St Stephen’s Green
Dublin 2
Principal Bankers
Allied Irish Bank
40/41 Westmoreland Street
Dublin 2
Solicitors
Whitney Moore
Solicitors
Wilton Park House
Dublin 2
Mc Carthy Denning Limited
Albert Buildings
49 Queen Victoria Street
London EC4N 4SA
Nomad and Joint Broker SP Angel Corporate Finance LLP (replaced Stockdale Securities Limited)
Prince Frederick House, 35-39 Maddox Street
London W1S 2PP
Joint Stockbrokers
Whitman Howard Limited (replaced Macquarie Capital Advisors)
First floor, Connaught House
1-3 Mount Street
London W1K 3NB
Brandon Hill Capital
1 Tudor Street
London EC4Y 0AH
Registrars
Computershare Investor Services (Ireland) Limited
Heron House
Corrig Road
Sandyford Industrial Estate
Dublin 18
Public Relations
Vigo Communications
One Berkeley Street
London W1J 8DJ
Registered Number
237825
San Leon Energy plc Annual Report and Accounts 2015
glossary
2C
AIM
AIM Rules
Aurelian
BCF or bcf
B.V.
BVI
€’000
pg 92
Best estimate of Contingent Resources
The London Stock Exchange’s AIM market
AIM Rules for Companies
Aurelian Oil & Gas Limited (formerly Aurelian Oil & Gas PLC)
Billion cubic feet
Dutch private limited company
British Virgin Islands
Euro, thousands
Gold Point Energy
Gold Point Energy Corp.
Group
San Leon and its subsidiaries
Island Oil & Gas
Island Oil & Gas PLC
km
LLP
Ltd or limited
m
’m
Nomad
NovaSeis
PLC or S.A.
Providence
Kilometres
Limited liability partnership
A private limited company incorporated under the laws of England
and Wales, Scotland, certain Commonwealth countries and Ireland
Metres
Millions
A company that has been approved as a nominated advisor
for AIM by the London Stock Exchange
NovaSeis Sp. z o.o.
A publicly held company
Providence Resources PLC
Realm or Realm Energy
Realm Energy International Corporation
San Leon or the Company
San Leon Energy PLC
SEDA
Sp. z o.o.
Standby Equity Distribution Agreement
Polish limited liability company
Sp. z o.o. sp.k
Polish LLP
SPV
Yorkville
Special purpose vehicle
YA Global Master SPV Ltd
Reserves
Proved
Probable
Possible
Gross
Net
1P
2P
3P
Reserves which have a ‘reasonable certainty’ of being recovered
Probable reserves are volumes that are defined as ‘less likely to be recovered
than proved, but more certain to be recovered than possible reserves’
Possible reserves are reserves which analysis of geological and engineering
data suggests are less likely to be recoverable than probable reserves
Reserves before deduction of royalty
Reserves after royalty plus royalty interest
Proved
Proved plus probable
Proved plus probable plus possible
pg 93
San Leon Energy plc Annual Report and Accounts 2015
conversion
The following table sets forth certain standard conversions from Standard Imperial Units
to the International System of Units (or metric units).
pg 94
To convert from
mcf
Cubic metres
bbls
Cubic metres
Feet
Metres
Miles
Kilometres
Acres
Hectares
To
Cubic metres
Cubic feet
Cubic metres
bbls
Metres
Feet
Kilometres
Miles
Hectares
Acres
Multiply by
28.174
35.494
0.159
6.290
0.305
3.281
1.609
0.621
0.405
2.471
notes
pg 95
notes
pg 96
San Leon Energy plc Annual Report and Accounts 2015 Concept/Design: LAMTAR INTL, Milos Zaric/Philippe Boutié
Photos: 500px, Philippe Boutié, DR, Nick Pearce,
Krzysztof Plebankiewicz, Joel Price
San Leon Energy plc
Head Office
3300 Lake Drive
Citywest Business Campus
Dublin 24
Ireland
Registered address
First Floor
Wilton Park House
Wilton Place
Dublin 2
Ireland