UNION JACK OIL plc
Annual Report and
Financial Statements
2019
PRODUCTION, DRILLING, DEVELOPMENT
AND INVESTMENT IN THE UNITED KINGDOM
ONSHORE HYDROCARBON SECTOR
UNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
www.unionjackoil.com
Directors, Officers and Advisers
DIRECTORS
David Bramhill
Executive Chairman
Joseph O’Farrell
Executive
Graham Bull
Non-Executive
Raymond Godson
Non-Executive
COMPANY OFFICE
6 Charlotte Street,
Bath BA1 2NE,
England
Telephone: +44 (0) 1225 428139
+44 (0) 1225 428140
Fax:
Email: info@unionjackoil.com
Web: www.unionjackoil.com
REGISTERED NUMBER
07497220
SECRETARY AND
REGISTERED OFFICE
Matthew Small
6 Charlotte Street,
Bath BA1 2NE,
England
BANKERS
Royal Bank of Scotland plc
8-9 Quiet Street,
Bath BA1 2JN,
England
REGISTRARS
NOMINATED ADVISER
AND BROKER
Computershare Investor Services PLC
The Pavilions,
Bridgwater Road,
Bristol BS13 8AE,
England
SP Angel Corporate Finance LLP
Prince Frederick House,
35-39 Maddox Street,
London W1S 2PP,
England
PUBLIC RELATIONS
CONSULTANTS
Cassiopeia Services Ltd
Second Floor,
4-5 Gough Square,
London EC4A 3DE,
England
AUDITOR
BDO LLP
55 Baker Street,
London W1U 7EU,
England
SOLICITORS
Osborne Clarke
2 Temple Back East,
Temple Quay,
Bristol BS1 6EG,
England
Union Jack Oil plc is an onshore oil and gas
company with a focus on production, drilling,
development and investment in the United
Kingdom hydrocarbon sector. The issued share
capital is traded on the AIM Market of the
London Stock Exchange (Ticker: UJO).
Our strategy is the appraisal and exploitation of
the assets currently owned. Simultaneous with this
process, the Company’s management expects to
continue to use its expertise to acquire further
licence interests over areas where there is a short
lead time between the acquisition of the interest
and either exploration drilling or initial production
from any oil or gas fields that may be discovered.
“Fully funded for the
2020 West Newton
appraisal and testing
programme”
READ MORE ON PAGE 3
Contents
BUSINESS AND STRATEGY
Chairman’s Statement
Strategic Report
Licence Interests
GOVERNANCE
Directors’ Report
Corporate Governance Report
Independent Auditor’s Report
on the Financial Statements
FINANCIAL STATEMENTS
Income Statement
Statement of
Comprehensive Income
Balance Sheet
Statement of Changes in Equity
Statement of Cash Flows
Principal Accounting Policies
2
10
16
18
21
34
39
40
41
42
43
44
Notes to the Financial Statements
50
ANNUAL GENERAL MEETING
Notice of Annual General Meeting 67
1
Chairman’s Statement
I am pleased to present to the shareholders
of Union Jack Oil plc (“Union Jack” or
the “Company”), the Annual Report and
Financial Statements for the year ended
31 December 2019.
Union Jack’s strategy remains consistent with the objective
of the Board to build a successful and sustainable,
UK-focused, onshore hydrocarbon production and
development business. In this respect, we have delivered
demonstrable growth in asset value and 2019 has seen
the expansion of our portfolio with what we consider
to be high quality, asset value accretive project interests
with substantial upside potential in our focus areas of
the East Midlands, Humber Basin and East Yorkshire.
In addition, success in any one of our key assets is expected
to result in a significant increase in the market valuation
of the Company.
The unexpected arrival of the COVID-19 pandemic has
meant very few, if any, companies and individuals have not
felt the unwelcome consequences that have resulted from
this unprecedented event.
We continue to remain vigilant in the way we operate both
technically and financially and are doing our best to keep
shareholders and our Joint Operating Agreement (“JOA”)
partners informed of any changes being implemented to
our operations in respect of the effects of COVID-19.
Currently, it is business as usual, however, I would like
to add that any forward-looking statements made within
this report are made with good intent, as the effects of
this virus are not fully known and will remain so for the
foreseeable future. Thus, the potential for any changes
in working and planning in respect of our project interests
remain possible and we will continue to be guided by the
regulatory bodies and our Operators.
I would urge shareholders to read the Notice of Annual
General Meeting and the subsequent notes within this
report, where COVID-19 arrangements have been
highlighted.
Marked progress was made in the year under review and
in the post balance sheet events period up to the signing
of these financial statements, with the highlights being:
• Successful drilling of the West Newton A-2
conventional appraisal well where initial petrophysical
evaluation has identified a gross oil column of
45 metres underlying a gross gas column of
20 metres within the Kirkham Abbey formation
• Permission granted by the Planning Inspectorate
for the development of the Wressle hydrocarbon
discovery where first oil is anticipated during H2 2020
• Economic modelling at Biscathorpe indicates a financially
robust project in the current oil price environment
• Environment Agency approval received for the
recommencement of well testing at West Newton A-2
• Fully funded for all current drilling and testing
commitments
• Cash balance in excess of £5.5 million as at 1 May 2020
• Company remains debt free
“Permission granted by the
Planning Inspectorate for the
development of the Wressle
hydrocarbon discovery where
first oil is anticipated during
H2 2020”
2
www.unionjackoil.comUNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
OPERATIONAL HIGHLIGHTS
• Successful drilling of the West Newton A-2 conventional
appraisal well where initial petrophysical evaluation has
identified a gross oil column of 45 metres underlying a
gross gas column of 20 metres within the Kirkham Abbey
formation
• Permission granted by the Planning Inspectorate for the
development of the Wressle hydrocarbon discovery where
first oil is anticipated during H2 2020
• Economic modelling at Biscathorpe indicates a financially
robust project in the current oil price environment
• Environment Agency approval received for the
recommencement of well testing at West Newton A-2
FINANCIAL HIGHLIGHTS
• Fully funded for all current drilling
and well testing commitments
• Cash balance in excess of
£5.5 million as at 1 May 2020
• Company remains debt free
PEDL183 WEST NEWTON (16.665%)
Union Jack completed a farm-in in late 2018 on licence
PEDL183, covering 176,000 acres and containing the
West Newton A-1 discovery, with Rathlin Energy (UK)
Limited (“Rathlin”).
PEDL183 is located onshore UK, north of the river
Humber, also encompassing the town of Beverley,
East Yorkshire. The licence area is within the western
sector of the Southern Zechstein Basin. The West
Newton A-1 and subsequent A-2 discoveries are on-
trend with the prolific offshore Hewett gas complex.
In the UK, the carbonates of the Permian Basin have
been targeted and produced offshore and onshore in
the Southern North Sea Gas Basin. These carbonates
have been extensively explored and produced onshore
in the Netherlands, Germany and Poland, which
provide several direct analogues for West Newton
and the overall licence area.
The A-2 well was drilled as an appraisal of the A-1
discovery and reached a total depth of 2,061 metres.
A full suite of logs was run and 28 metres of core
were successfully cut.
Evaluation of the West Newton A-2 open hole data
has identified an estimated gross hydrocarbon column
of approximately 65 metres in the Kirkham Abbey
formation. Based on the previously described data in
conjunction with cuttings analysis and mudlogging data,
a cased hole pulsed-neutron tool was run across the
Kirkham Abbey zone as a means to differentiate and
confirm fluid saturations.
Initial petrophysical evaluation identifies a gross oil column
of approximately 45 metres, underlying a gross gas column
of approximately 20 metres within the Kirkham Abbey
interval. The West Newton A-2 well exhibits encouraging
porosities on logs and in core, particularly in the identified
oil zone. The core also exhibits natural fracturing which is
confirmed by an imaging log run across the entire Kirkham
Abbey interval.
The cased hole logging and completion programmes
were initiated during August 2019, followed by well test
operations. Completion and testing efforts were focused
on the newly identified oil column. With the indication
of this potentially significant result, the Extended Well
Test (“EWT”) was paused in order to review and revise
the well test design and to deliver the necessary test
information to validate this significant onshore resource.
Rathlin has now redesigned the EWT and all the
necessary equipment has been identified. Approval for
the variation to the permit to recommence well testing
at West Newton A-2 has been received from the
Environment Agency.
Additionally, the West Newton A-2 well data provides a
good tie to the high quality three component 3D seismic
volume that covers the entire West Newton project. The
new data allow for a revised interpretation of the seismic
volume incorporating the newly identified gas over oil
hydrocarbon column.
Following the integration and evaluation of the core,
petrophysical, seismic and test data, the Operator and
partners intend to commission a revised Competent
Person’s Report (“CPR”) to re-assess volumetric estimates
and provide a revised Net Present Value based on the
information acquired from the West Newton A-2 well.
3
BUSINESS AND STRATEGY Chairman’s Statement
Subsequent to the drilling of the A-2 well, the Operator
undertook a number of core, geochemical and other
technical studies and re-evaluated the volumetrics of
the West Newton Kirkham Abbey reservoir, utilising
data obtained from both the A-1 discovery and A-2
appraisal wells.
The result of the volumetric exercise indicated a material
upgrade in the liquid hydrocarbons believed present. The
in-place volume estimates were generated for a Base Case
and Upside Case by the Operator.
Base Case and Upside Case Volumes in Place
CASE
Base Case
Upside Case
LIQUIDS
(MMBBL)
146.4
283.0
GAS
(BCF)
211.5
265.9
The basis used for the re-evaluation of the Kirkham Abbey
reservoir was as follows:
• Differing rock volumes, porosities and saturations, based
on direct measurement and analogue data, have been
used in arriving at the in-place hydrocarbon estimates
• Evaluation of drilling results from the West Newton
A-2 well, particularly the revised petrophysical, fluid
saturation, sedimentological and diagenetic analyses
•
Identification of the oil leg in the Kirkham Abbey
reservoir in the West Newton A-2 well, based on:
– geochemical analysis of the gas and fluid samples
– core fluorescence and surface samples, including
– results obtained from the Pulsed Neutron Raptor tool
• 28 metre core sample over the Kirkham Abbey
interval, which yielded important sedimentological
and depositional data and core analysis.
4
The process for commencement of appraisal drilling
operations is now underway for the conventional West
Newton B-1 appraisal well. This well will further appraise
the Kirkham Abbey formation and test the deeper Cadeby
formation at its optimum location.
All the results to date continue to support our belief that
West Newton is a large scale, conventional onshore oil
and gas development asset with potential offshore sized
resources in place.
“Evaluation of the West
Newton A-2 open hole data
has identified an estimated
gross hydrocarbon column of
approximately 65 metres in the
Kirkham Abbey formation”
www.unionjackoil.comUNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2019 Chairman’s Statement
PEDL180/PEDL182 WRESSLE DISCOVERY (27.5%)
Located in Lincolnshire on the Western margin of the Humber Basin, PEDL180 and PEDL182 contain the substantial
Wressle oil discovery, with proven reserves and significant upside, from which first commercial oil is anticipated during
H2 2020, where it is expected to flow at a constrained rate of 500 barrels a day gross.
During January 2020, the JOA partners received the welcome news that, after several years of planning setbacks in respect
of the development of the Wressle discovery, the Planning Inspectorate had upheld the appeal and granted planning
consent for the development of this company changing project. The Inspector also allowed the application for an award
of costs against the North Lincolnshire Council (“NLC”). Subsequently, the NLC has paid costs of £403,000. Union Jack
will receive its proportion of this payment once the sum to be paid is agreed with the Operator.
Translated into 2P and 2C reserves and resources, using figures quoted from the Competent Person’s report compiled
by ERC Equipoise Limited, the net volumes attributable to Union Jack are as shown below.
Gross and Net Volumes of Wressle Hydrocarbons Attributable to Union Jack
Gross Volumes
Net Volumes attributable to Union Jack
OIL MMSTB
GAS BCF
OIL EQUIV
MMBOE
OIL MMSTB
GAS BCF
OIL EQUIV
MMBOE
2P Ashover Grit and
Wingfield Flags
2C Penistone Flags
Broughton North Mean
Unrisked Prospective
Resources
0.62
1.53
0.51
0.20
2.00
0.51
0.65
1.86
0.60
0.17
0.42
0.14
0.05
0.55
0.14
0.18
0.51
0.16
The forward plan for the Wressle oilfield development
comprises the following key stages:
• Discharging the planning conditions, finalising
detailed designs, tendering and procurement of
materials, equipment and services and finalising
all HSE documentation and procedures
•
Installation of the ground water monitoring
boreholes and establishment of baseline
conditions through monitoring
• Reconfiguration of the site
•
Installation and commissioning of surface facilities
• Sub-surface operations
• Commencement of production
Progress to date has concentrated on the enabling works
highlighted in the first bullet point above. The initial
work on site will be the installation of the groundwater
monitoring boreholes with the main site operations
occurring in the last months of the work stream. On
current plans, first oil is anticipated during H2 2020.
The Economic Growth Plan for North Lincolnshire
champions the growth of, and diversification of, the
Humber chemical and energy cluster, currently contributing
some £6 billion to the economy. Industries include
petrochemicals, commodity and speciality chemicals,
composite materials, pigments and paints, wind turbines
and pharmaceuticals, and a raft of other associated
industries employing circa 15,000 people in at least
120 companies. Petroleum remains fundamental to these
locally important industries, including in the manufacture
of items such as wind turbines for the renewable energy
sector which rely upon composite materials involving
petroleum products, as do many industrial applications.
The oil that Wressle will produce will contribute to
these industries and benefit the region as a whole and
further afield in the UK. The oil produced at Wressle
would also help offset international oil imports typically
shipped over long distances, as the oil produced
would be refined nearby in Immingham, keeping
trucking and transportation to a minimum, reducing
the carbon footprint and greenhouse gas emissions.
With first oil at Wressle anticipated during H2 2020,
we believe this will have a positive economic impact
on Union Jack and the revenues will significantly
improve the Company’s cash generating capability.
5
BUSINESS AND STRATEGY Chairman’s Statement
PEDL253 BISCATHORPE (27.5%)
PEDL253 is situated within the proven hydrocarbon
fairway of the South Humber Basin and is on-trend with
the Keddington oilfield, Saltfleetby gasfield and the Louth
and North Somercotes Prospects.
In February 2019, the Biscathorpe-2 well was drilled and
logging operations were conducted. Preliminary analysis
indicated that, unexpectedly, the primary objective, the
Basal Westphalian Sandstone, was not encountered.
However, this result has subsequently turned full circle
and the determination of the respective technical teams
and their research has demonstrated that PEDL253 can be
considered a viable hydrocarbon play and that Biscathorpe
remains one of the largest untested onshore prospects
within the UK.
The JOA partnership has completed extensive and detailed
studies of the Biscathorpe Prospect, including the re-
processing and re-mapping of 264 square kilometres of
3-D seismic. This exercise has significantly enhanced the
understanding of the prospectivity over the licence area.
Accessible targets have been identified where evidence
for a thickened Westphalian sandstone reservoir exists.
These targets can be drilled using a side-track from the
existing Biscathorpe-2 well which was suspended once
site operations were concluded in 2019. Any proposed
side-track will also target the oil column logged in the
underlying Dinantian Carbonate as described later within
this commentary.
The Mean Prospective Resources associated within the
Westphalian target area are estimated by the Operator, in
accordance with 2018 PRMS Standard, to be 3.95 mmbbls
of oil, with an upside case of 6.69 mmbbls. Preliminary
economic modelling demonstrates that the Westphalian
target is economically robust in the current oil price
environment with a full cycle economic valuation of
£55.6 million gross (NPV10%) and a US$18.07 per bbl
breakeven oil price.
6
While drilling the B-2 well, there were hydrocarbon shows
indicated in background gas measurements and sample
fluorescence, observed over the entire interval from the
top of the Dinantian to the Total Depth (“TD”) of the well
(an interval of over 157 metres), with a total of 57 metres
interpreted as being oil bearing in the petrophysical analysis.
A geochemical analysis of the gas data and hydrocarbons
extracted from drill cuttings was originally commissioned
by Union Jack and carried out by Applied Petroleum
Technology (UK) Limited (“APT”).
The results of this analysis show a hydrocarbon column
of 33º-34º API gravity oil in the Dinantian Carbonate,
comparable with that produced at the nearby
Keddington oilfield.
An assessment of the Dinantian oil volumes has also been
modelled with volumetric assumptions as being filled to spill
and a proven likely live oil column following the results of
the APT exercise.
Mean Stock Tank Oil Initially in Place (“STOIIP”) within
the Dinantian has been calculated to be 24.3 mmbbls
with an upside case of 36 mmbbls.
Although the Dinantian is not considered to be the
primary target, should there be effective permeability,
or the presence of fractures within this section, there is
the possibility of a further commercially viable play being
present within the Biscathorpe licence area that would add
considerable resource upside over and above the principal
Westphalian target.
During the year, one of the JOA partners, Humber Oil
and Gas Limited (“Humber”), defaulted on a balance due
to the Operator.
The Operator, on behalf of the remaining JOA partners,
has enforced the rights under the JOA default provisions
and commenced proceedings to recover the sum owed.
Under the terms of the JOA, the defaulting party can be
removed from the licence and that party’s share of the
asset redistributed amongst the remaining JOA partners.
Humber remains liable for the outstanding debt, however,
in the meantime the remaining JOA partners have assumed
responsibility for the pro-rata payment of invoices.
The payment default under the JOA by Humber has
resulted in Union Jack increasing its holding from 22%
to 27.5% in PEDL253.
www.unionjackoil.comUNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2019 Chairman’s Statement
DISPOSAL OF INTEREST IN PEDL143 WEALD
BASIN (FORMERLY HOLMWOOD)
In April 2019, Union Jack reached agreement with the
Operator, UK Oil & Gas PLC (“UKOG”), to sell its 7.5%
interest in PEDL143 for a consideration of £112,500
payable in ordinary shares of UKOG.
This disposal allows Union Jack to concentrate on its
focus areas of the East Midlands, Humber Basin and East
Yorkshire, where we believe all our interests are material
and potentially company-changing core assets, namely,
West Newton, Wressle, Biscathorpe and Keddington.
PRODUCTION ASSETS
Union Jack’s portfolio includes licence interests in two
production assets, PEDL005(R) (55%) and EXL294 (20%)
containing the Keddington and Fiskerton Airfield oilfields
respectively.
Combined production of high-quality oil from these two
assets is averaging 50 barrels of oil per day gross from
Carboniferous age sandstone reservoirs.
Keddington is located along the very prospective East
Barkwith Ridge, an east-west structural high on the
southern margin of the Humber Basin.
A detailed, subsurface review of the Keddington field and
the surrounding licence area was conducted by Egdon
and Union Jack during 2019, resulting in a fully audited
and consistent data set that supports updated resource
estimates generated by the Operator.
These geological and geophysical studies indicate that
potentially significant resources remain unswept at
Keddington, highlighting an excellent opportunity to increase
production volumes multifold by the drilling of a relatively
inexpensive development well from the existing production
site. The gross remaining Mean Contingent Resource at
Keddington is 567,000 bbls of oil (311,000 bbls net to
Union Jack).
The Operator is finalising the assessment of potential in-fill
drilling locations at Keddington with a view to targeting a
side-track drilling location.
The Keddington site lease has been extended until 2029,
and planning consent expires in 2058, with approval in place
for the drilling of a further two wells.
In addition to the unswept resources at Keddington, a near-
field exploration opportunity exists at Keddington South,
which has a gross Mean Prospective Resource Volume of
635,000 bbls of oil (349,250 bbls net to Union Jack).
During March 2020, Union Jack acquired a further 35%
economic interest in PEDL005(R) from Terrain Energy
Limited, increasing its holding to 55%. The consideration
in respect of the acquisition was £200,000, financed
from existing cash resources. This transaction provides
an immediate uplift in oil production which will have a
beneficial effect when consolidated into the production
revenues generation from Fiskerton Airfield and the
anticipated “first oil” from the Wressle development
later in the year.
Production at Fiskerton Airfield remains steady and focus
will continue to be the maximising of oil output from the
existing wells.
“These geological and
geophysical studies indicate
that potentially significant
resources remain unswept
at Keddington”
7
BUSINESS AND STRATEGY Chairman’s Statement
OTHER PORTFOLIO INTERESTS
COVID-19 STATEMENT
Union Jack holds interests in a number of other non-core
projects.
PEDL241 North Kelsey (20%) located within the proven
Humberside platform contains the drill-ready North Kelsey
Prospect. Subject to a successful future farm out process,
this prospect is expected to be drilled during 2021.
An interest is also held in PEDL118 Dukes Wood (16.67%)
and PEDL203 Kirklington (16.67%) discoveries.
PEDL201 Widmerpool Gulf (26.25%), formerly known as
Burton-on the-Wolds, contains significant non-conventional
Bowland Hodder shale potential. During November 2019,
the Government introduced a moratorium on non-
conventional operations, therefore the Board has decided
to fully impair this asset.
PEDL181 Humber Basin (12.5%) is located within the
Humber Basin and holds non-conventional upside. As in the
case of PEDL201, the Board has decided not to continue
with this licence interest and we intend to withdraw during
2020. This licence has been fully impaired.
PEDL 209 Laughton (10%) has no activity planned for the
foreseeable future and it is the intention of the Company
to withdraw from this interest during 2020.
The relinquishments planned will have a modest cost saving
element to our operations going forward and will enable
additional focus on our core assets.
A detailed map of Union Jack’s licence interests can be
viewed on pages 16 and 17.
Following the outbreak of Coronavirus (COVID-19), the
priority of the Company has been on the health and safety
of its employees and technical staff. Like many organisations,
plans have been implemented and active measures have
been taken to mitigate risk, such as no one-to-one contact
and numerous telephone meetings. The Board is also in
frequent contact with the Company’s JOA partners and
our external technical team to assess any potential impact
on the assets in which the Company has invested.
We continue to follow the most up-to-date Government
advice and engage with the regulatory bodies and
stakeholders.
To date, the exploration, development and production
activities of the Company’s assets have continued in line
with plans and with minimal impact from COVID-19.
However, the Company recognises COVID-19 and
associated geo-political factors have created uncertainty
around the price and demand for oil.
The Company’s financial health remains strong, with a
robust balance sheet, cash reserves to fund its operations
through to April 2021 and we remain debt free.
Accordingly, the Board does not currently plan to make
changes going forward. However, the Board continues to
monitor the situation closely and will, with its JOA partners,
make adjustments if appropriate.
I would like to bring to the attention of shareholders the
Notice of Annual General Meeting (“AGM”) on page 67
of this Annual Report and associated notes. We have no
statutory requirement to delay the publishing or production
of the Company’s accounts and financial statements
for the year ended 31 December 2019, and COVID-19
arrangements have been implemented to allow the AGM
to take place as planned within the guidelines and advice
of our legal team.
8
www.unionjackoil.comUNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2019 Chairman’s Statement
CORPORATE AND FINANCIAL
SUMMARY
A successful placing of £5 million before expenses in
November 2019 has ensured the financial well-being
of the Company going forward. The costs of the EWT
at West Newton A-2 have already been paid and no
further cash calls are expected for this process. We
also have sufficient monies in place to fund our share
of planned drilling and testing at the West Newton B-1
well and the development of the Wressle discovery
where first oil is anticipated during H2 2020.
Union Jack remains debt free and the cash balance
as at 1 May 2020 is in excess of £5.5 million.
We continue to identify and add value-accretive asset
interests to our portfolio and execute a very strict technical
and financial regime, thus protecting the Company and
its shareholders.
I would like to thank our shareholders for their continued
support, as well as my colleagues and co-directors, who
provide invaluable advice and continue to champion the
development of the UK onshore hydrocarbon industry
for the benefit of both Union Jack and the wider economy.
I would also like to thank our wider suite of professional
advisers, who have contributed to the efficient running of
Union Jack, and have enabled us to engage with investors
to source essential funding which enables our core projects
to move forward.
My confidence in respect of Union Jack’s future remains
highly positive.
The Company, during 2019 and to date, has advanced
its key projects, and seen drilling and appraisal activity,
supported by technical research input from our very
competent technical team, resulting in accretion in asset
value and providing clarity on the next steps towards
commerciality.
I have no doubt that, even in these difficult times, given our
attractive projects, we will achieve our goal of increasing
production materially and becoming a significant mid-
tier UK onshore producer in the medium term. In the
meantime, I am certain that the news stream arising from
the ongoing progress of our endeavours will vindicate our
optimism in respect of our licence interests.
Union Jack’s wider asset portfolio is well balanced with the
relevant components of production, development, appraisal
and discovery and we are fully funded for all our planned
commitments going forward.
The future of Union Jack remains bright.
David Bramhill
Executive Chairman
7 May 2020
9
BUSINESS AND STRATEGY Strategic Report
FOR THE YEAR ENDED 31 DECEMBER 2019
STRATEGY
Our strategy is the appraisal and exploitation of the assets
currently owned. Simultaneous with this process, the
Company’s management expects to continue to use its
expertise and cash resources to acquire further licence
interests in the UK over areas where there is a short lead
time between the acquisition of the interest and either
exploration drilling or initial production from any oil or
gas fields that may be discovered.
BUSINESS REVIEW
Union Jack Oil plc is a UK registered company, focused
on the exploration for, and future development of,
hydrocarbon projects.
A review of the Company’s operations during the year
ended 31 December 2019 and subsequently to the date
of this report is contained in the Chairman’s Statement
and this Strategic Report.
The loss for the year amounted to £1,692,383
(2018: £1,098,708).
The loss for the year includes impairments of which total
costs are £393,697 (2018: £205,308). These impairments
are in relation to PEDL201, £375,892 (2018: £nil), PEDL181,
£15,042 (2018: £nil) and PEDL209, £2,763 (2018: £nil).
Administrative expenses amounted to £1,343,362 (2018:
£871,489). The increase in this cost was due to additional
technical work in respect of West Newton, Wressle,
Biscathorpe, and Keddington, undertaken by the Company’s
external consultants.
Cash and cash equivalents at year end amounted to
£6,626,322 (2018: £3,123,287).
Total assets at year end amounted to £14,234,850 (2018:
£7,458,441).
Non-current assets at year end amounted to £7,428,331
(2018: £4,137,100).
The directors do not recommend the payment of a dividend
(2018: £nil).
In April 2019, 2,333,333,334 new ordinary shares were
issued for cash at a price of 0.075 pence per share, raising
£1,750,000 before expenses of £153,213 by way of a
placing and subscription.
In July 2019, 1,323,529,411 new ordinary shares were issued
at a price of 0.17 pence per share, raising £2,250,000 before
expenses of £140,888, by way of a placing and subscription.
In November 2019, 3,333,333,326 new ordinary shares
were issued at a price of 0.15 pence per share raising
£5,000,000 before expenses of £346,495 by way of a
placing and subscription.
The enlarged issued share capital following the issue of
the new shares described above is 15,440,906,325 ordinary
shares of 0.025 pence each and 831,680,400 deferred
shares of 0.225 pence each.
FUTURE DEVELOPMENTS
The directors intend to continue with the Company’s
stated strategy, reviewing the licence interests held in
respect of future viability, any potential impairment triggers
that may arise during the year and adjusting immediately
to any changes that may be required in the operation of
the licence interests held.
The Company holds a number of key quality project
interests, namely, Wressle, West Newton and Biscathorpe,
where development and appraisal plans are in place for the
future benefit of stakeholders and the Company.
The directors will continue to investigate further acquisition
opportunities as and when they arise.
KEY PERFORMANCE INDICATORS
The Company has made good progress during the year
ended 31 December 2019. Traditional KPIs are not
appropriate to the Company. Performance is measured by
monitoring exploration costs and ensuring sufficient funds
are available to meet exploration commitments.
The directors were successful in raising funds to ensure
the Company is adequately funded to meet all of its current
commitments.
During February 2019, the Biscathorpe-2 appraisal well
reached target depth. The Basal Westphalian Sandstone was
not present, however, elevated gas readings and oil shows
were calculated in the Dinantian Carbonate. The open-hole
section was sealed and the well suspended to allow for a
possible side-track operation once the well data have been
integrated into a new subsurface model.
In April 2019, the Company agreed to sell its 7.5% interest
in PEDL143, containing the Holmwood Prospect to UK
Oil & Gas PLC ("UKOG"). The consideration for this
transaction was £112,500 payable in ordinary shares of
UKOG. The transaction was completed in June 2019.
In June 2019, the Company announced positive preliminary
results from the West Newton A-2 appraisal well drilled
on PEDL183. A gross 45 metre liquids column, overlain by
a gross 20 metre gas column, was identified from core and
logging data. An EWT followed and was paused due to a
new test configuration and equipment being required due
to the liquid content present.
In July 2019, a positive update was published in respect of
the Biscathorpe-2 well. An analysis of drill cutting samples
taken from 20 intervals provided geo-chemical evidence of
the presence of live hydrocarbons. A report compiled by
APT, an independent laboratory, confirmed the presence
of hydrocarbons from both the Westphalian and Dinantian
cutting samples. The APT report also confirmed the data
support the existence of a significant oil column of good
quality oil (high API gravity) within the Dinantian, validated
by the presence of a full suite of gases, ranging from
methane to pentane.
10
www.unionjackoil.comUNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2019 Strategic Report
FOR THE YEAR ENDED 31 DECEMBER 2019
During November 2019, the Operator of PEDL183, Rathlin
Energy (UK) Limited, released a positive update in respect
of hydrocarbon volumetrics at the West Newton A-2 well.
Further events which took place after the Balance Sheet
date are described in the Directors’ Report and note 23.
Intangible Assets totalled £6,726,743 (2018: £3,485,961).
Tangible assets totalled £581,300 (2018: £611,139).
The Company’s Income Statement reports revenues of
£136,959 (2018: £165,270) in respect of production
income from the Keddington oilfield and the Fiskerton
Airfield oilfield.
SECTION 172 STATEMENT
For periods beginning on or after 1 January 2019, all large
companies must include a separate statement within their
strategic report that explains how the directors have had
regard to broader stakeholder interests when performing
their duty under section 172 of the Companies Act 2006 to
promote the success of the company for the benefit of its
members as a whole.
The past few years have seen intense focus and debate
on UK corporate governance. A decline in public trust in
business has been caused in part by high-profile business
failures, accusations of excessive executive pay, unethical
tax avoidance by multinational businesses and deteriorating
relationships with employees over pay and contractual
terms. These factors have led to Prime Ministerial
statements, select committee inquiries, public consultations,
a government green paper and, ultimately, to changes in
legislation, stock exchange rules and governance codes.
Many of the matters noted above have resulted from
decisions made in the board room and their effects have
been felt by the employees, pension scheme members,
customers, suppliers and other stakeholders, as well as
shareholders, the interests of all of whom the directors
have a statutory duty to consider when making a decision.
It is in this context that the widest-ranging of the new
reporting requirements has been introduced for large
companies: The Section 172 Statement, which must be
included in the Annual Report of all large companies (as
defined in the Companies Act 2006).
Under section 172, directors have a duty to promote the
success of the company for the benefit of the members as a
whole and, in doing so, they should have regard to (amongst
other matters) six specified areas that relate, by-and-large,
to wider stakeholder interests:
Likely consequence
of any decision in
the long term
Act fairly as
between members
of the company
Interests of
employees
Duty to promote the
success of the company
for the benefit of its
members as a whole,
having regard to:
Maintain a
reputation for
high standards of
business conduct
Foster business
relationships with
suppliers, customers
and others
Impact of
operations on
the community
and the
environment
11
BUSINESS AND STRATEGY Strategic Report
FOR THE YEAR ENDED 31 DECEMBER 2019
Likely consequences of any decision in the
long term
The Company’s activities of investment in licences
for blocks to explore and/or produce oil and/or
gas are in general focused on the longer term. This
is particularly the case given that the Company itself
is not an operator of any of the oil or gas fields in
which it has an interest, which means that the Board
is able to focus on longer term strategic decisions
rather than day to day operating decisions.
Through its financing activities, the Board has ensured
that the Company is well capitalised and has cash
resources for all of its current and anticipated
capital requirements, to ensure that the Company
has a viable operating plan for the long term.
Interests of Company’s employees
Given the nature of the Company’s business, it has
very few employees and the majority are themselves
directors. The Board recognises that the Company’s
employees are, nevertheless, critical to the success
of the Company and takes steps to ensure that
the interests of employees are protected.
Need to foster the Company’s business
relationships with suppliers, customers and others
The Company recognises the importance of fostering
strong relationships with its stakeholders in order to create
sustainable long-term value, and the Board encourages active
dialogue and transparency with all its stakeholder groups.
The Company does not deal directly with customers or
suppliers in relation to the oil and gas fields, save for its
relationship with its JOA partners who operate the relevant
fields, Egdon Resources U.K. Limited, Rathlin Energy (UK)
Limited and Europa Oil & Gas Limited. The Company seeks
a sustainable relationship with its JOA Operators and there
is a direct relationship at Board level with the Company’s
partners. The Board is careful to choose JOA and other
partners with experience, resources and similar values to
the Company. The Company only invests in interests in
licences where it has a degree of influence over the manner
in which the operations of that block are operated.
In addition, the Board is mindful in its decisions of the
indirect impact that the Company’s decisions may have
through the activities of its operators and other partners
on suppliers, customers and others.
The Company acknowledges the importance of maintaining
good relations with its suppliers and creditors and it adheres
to a strict policy of settling all invoices in a timely manner.
12
www.unionjackoil.comUNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2019 Strategic Report
FOR THE YEAR ENDED 31 DECEMBER 2019
Impact on the environment and the community
The Company is committed to the highest standards
of health, safety and environmental protection. These
aspects command equal prominence with other
business considerations.
The onshore oil and gas industry has an excellent
record in relation to health, safety and the protection
of the environment.
The industry is regulated by a number of statutory
bodies including the Environment Agency in England
and is recognised as being robust. By producing oil and
gas here in the UK, instead of importing from overseas,
jobs, a stream of tax revenues and direct investment
into our communities are achieved.
The desirability of the Company maintaining a
reputation for high standards of business conduct
The Board believes that its reputation will follow from
ensuring that appropriate governance structures are in place
and from taking the right decisions, as noted in the factors
above, and as set out further on pages 21 to 33 of this
Annual Report.
The need to act fairly as between members
of the Company
As an AIM quoted Company, the Company is subject to
governance requirements and rules (including the AIM
Rules for Companies and the Market Abuse Regulation)
which are intended to ensure that shareholders are treated
fairly. The Board takes its obligations to comply with these
requirements seriously and has regular contact with its
experienced professional advisers to ensure that these
requirements are satisfied.
The directors of the Company all hold shares in the
Company and their interests are therefore aligned to
those of the other shareholders.
PRINCIPAL RISKS AND UNCERTAINTIES
As with the majority of companies within the energy sector
the business of oil and gas exploration and development
includes varying degrees of risk. These risks broadly include
operating reliance on third parties, the ability to monetise
discoveries and the risk of cost overruns. There are also
specific political, regulatory and licensing risks attached
to various projects as well as issues of commerciality,
environmental, economic, competition, reliance on key
personnel, contractor and judicial factors.
Commodity prices will have an impact on potential
revenues and forward investment decisions by the
Operator on the projects invested in, as the economics
may be adversely affected. However, onshore development
costs are lower than for offshore developments. The
Company does not use hedging facilities. The Company
holds adequate Directors’ Insurance cover and the
Company is covered by the Operator’s insurance during
drilling and other operational situations. The Board, in its
opinion, has mitigated risks as far as reasonably practicable.
The principal risks to the Company as well as the mitigation
actions are set out below:
Strategic: A weak or poorly executed development
process fails to create shareholder value
This risk is mitigated through performing a detailed technical
review, both internally by management and externally by
advisers before an investment decision is taken, for each
investment which includes a valuation exercise on the
potential return on monies spent. The amount of interest
acquired in each project is dependent upon the Company’s
financial capability to fulfil its obligation. The Company’s
technical management team is highly skilled with many
years’ industry experience.
13
BUSINESS AND STRATEGY Strategic Report
FOR THE YEAR ENDED 31 DECEMBER 2019
Operational: Operational events can have
an adverse effect
The main risk is the potential failure to obtain planning
permission in respect of the Company’s licence interests.
This risk is mitigated by the appointment of specialist
professional entities who work together to compile planning
applications designed to achieve a positive result.
A further potential risk is the reliance upon the Operators,
Egdon Resources plc, Rathlin Energy (UK) Limited and
Europa Oil & Gas Limited and their ability to determine
timetables and priorities which are beyond the control
of the Company.
External Risk: Lack of growth caused by political,
industry or market factors
The Company operates exclusively within the United
Kingdom (“UK”) and the Board considers that the
UK onshore hydrocarbon arena offers excellent value
under a regime with a very clearly spelt out protocol
giving the opportunity to develop assets unhindered.
As mentioned in this review, oil and gas price volatility
can cause concern. However, onshore developments can
continue as planned in most cases as development costs
are lower than for offshore.
The oil price environment is always being monitored,
however, the Company’s key assets are cashflow positive
at a breakeven oil price of approximately US$18. Lack
of control over key assets is mitigated by the fact that
our Operators of choice, Egdon Resources plc, Europa
Oil & Gas Limited and Rathlin Energy (UK) Limited have
a very transparent operating protocol and all partners
are involved, both formally and informally, with offering
input to the ongoing development of the projects in
which they are involved. The Company’s in-house
technical team capabilities are further supported by
external consultants involved at all times and whom
together participate in regular technical meetings.
The outbreak of COVID-19 in early 2020 presents
a possible risk for delay in implementing drilling and
development. To date, the Company’s projects have not
been subjected to material delays. The Company continues
to follow the most up-to-date government advice.
In respect of ongoing Brexit discussions and the potential
effect on the Company going forward, it is impossible to
predict the effects of Brexit at this moment in time.
Financial Risk: The lack of ability to meet financial
obligations
The main risk is the lack of funds being available to pay
for our future drilling commitments.
All drilling expenditure associated with exploration assets
is forecast and budgeted at least 12 months in advance.
The Company raises its funds through the financial
market by share issues and does not become involved in
derivatives and borrowing to fund its financial obligations.
Further comment in respect of Financial Risk Management
Objectives and Policies, Cash Flow Risk, Credit Risk, and
Liquidity Risk are also covered within this Strategic Report.
FINANCIAL RISK MANAGEMENT OBJECTIVES
AND POLICIES
The Company’s activities expose it to a number of financial
risks including liquidity risk, oil price risk, credit risk, and
cash flow risk.
The use of financial derivatives is governed by the
Company’s policies approved by the Board of Directors,
which provide written principles on the use of financial
derivatives to manage these risks. The Company does not
use derivative financial instruments for speculative purposes.
LIQUIDITY RISK
In order to maintain liquidity to ensure that sufficient
funds are available for ongoing operations and future
developments, the Company uses its existing cash funds.
OIL PRICE RISK
The Company is exposed to oil price risk associated
with sales of oil from production. The Company does
not currently consider it necessary to use hedging
instruments to manage its exposure to this risk.
CREDIT RISK
The Company’s principal financial assets are its cash
balances. The credit risk on liquid funds is limited because
the counterparty is a bank with high credit-rating.
CASH FLOW RISK
During the year, the Company’s activities did not
expose it to financial risks of changes in foreign currency
exchange rates.
14
www.unionjackoil.comUNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2019 Strategic Report
FOR THE YEAR ENDED 31 DECEMBER 2019
GOING CONCERN
The Company’s business activities, together with the factors
likely to affect its future development, performance and
position are set out in the Chairman’s Statement and this
Strategic Report. The directors’ forecasts demonstrate
that the Company will meet its day-to-day working capital
and share of estimated drilling costs over the forecast
period (being at least 12 months from the date the
financial statements were approved) from the cash held
on deposit on 31 December 2019. The principal risk to
the Company’s working capital position is drilling cost
overruns. The Company has sufficient funding to meet
planned drilling expenditures and a level of contingency.
Taking account of these risks, sensitised forecasts show
that the Company is able to operate within the level of
funds currently held at the date of approval of these
financial statements. The directors have a reasonable
expectation that the Company has adequate resources
to continue in operational existence for the foreseeable
future. Thus they continue to adopt the going concern
basis of accounting in preparing the financial statements.
The effect of COVID-19 is actively being assessed by
management. The future impact remains unknown. The
management is of the opinion that there is no reason to
believe there will be any effect in respect of the Company’s
going concern status for the foreseeable future.
APPROVAL OF THE BOARD
This Strategic Report contains certain forward-looking
statements that are subject to the usual risk factors and
uncertainties associated with the oil and gas exploration
and production business. While the directors believe the
expectation reflected within the Annual Report to be
reasonable in light of the information available up to the
time of their approval of this report, the actual outcome
may be materially different owing to factors either beyond
the Company’s control or otherwise within the Company’s
control, for example owing to a change of plan or strategy.
Accordingly, no reliance may be placed on the forward-
looking statements.
On behalf of the Board
David Bramhill
Executive Chairman
7 May 2020
15
BUSINESS AND STRATEGY UNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
Union Jack’s
Licence Interests
1 PEDL183 West Newton
16.665%
2
PEDL180
PEDL182
Wressle Discovery
Broughton North
27.5%
3 PEDL253
Biscathorpe
27.5%
PEDL005(R) Keddington Oilfield
4
Louth
North Somercotes
PEDL339
Louth Extension
5 EXL294
Fiskerton Airfield
Oilfield
6 PEDL241 North Kelsey
7
PEDL118 Dukes Wood
PEDL203
Kirklington
55%
35%
20%
20%
16.67%
8 PEDL201 Widmerpool Gulf
26.25%
9 PEDL181 Humber Basin
12.5%
10 PEDL209
Laughton
10%
16
PEDL146
PEDL183
WEST NEWTON A-1
NORTH SEA
EXL288
1
6
1
L
D
E
P
8
8
2
L
X
E
TRUMFLEET
PL161
HATFIELD
9
6
1
L
D
E
P
PL162
PEDL182
PEDL173
PEDL180
PEDL043
PEDL043
PEDL209
PEDL140
ML004
ML004
BECKINGHAM
CORRINGHAM
ML004
HATFIELD
PL162
PEDL181
PEDL241
PEDL012
PEDL200
PEDL
210
PEDL006
PEDL
210
WEST FIRSBY
PEDL006
COLD HANWORTH
SOUTH LEVERTON
ML007
SCAMPTON NORTH
SCAMPTON
PEDL007
EAST
GLENTWORTH
PEDL253
BOTHAMSALL
NEWTON-ON-TRENT
NETTLEHAM
PEDL210
PL179
FARLEYS WOOD
ML003
PEDL130
PEDL090
EGMANTON
WHISBY
BECKERING
STAINTON
WELTON
EXL294
PEDL005
PEDL005
PEDL005
SALTFLEETBY
EAKRING
KIRKLINGTON
PEDL
118
PEDL
203
PEDL202
PEDL255
PEDL208
PEDL254
PEDL204
PL220
PEDL201
REMPSTONE
PL220
PEDL021
GOODWORTH
PL116
HUMBLY GROVE
PL233
PL249
STOCKBRIDGE
PEDL070
AVINGTON
DL004
ALBURY
BROCKHAM
PL235
PALMERS WOOD
ML021
PEDL246
BLETCHINGLEY
ML018
PL182
EXL189
EXL189
PEDL137
PEDL143
PEDL246
PEDL235
PEDL243
PEDL231
PEDL234
PEDL244
PL240
HORNDEAN
PL211
PEDL126
PEDL233
SINGLETON
PL205
STORRINGTON
PL241
LIDSEY
PEDL146
PEDL183
West Newton
PEDL183
WEST NEWTON A-1
NORTH SEA
BUSINESS AND STRATEGY
PEDL180
PEDL182
Wressle
Discovery
PL162
PEDL182
Broughton
North
PEDL182
PEDL173
PEDL180
EXL288
1
6
1
L
D
E
P
8
8
2
L
X
E
TRUMFLEET
PL161
HATFIELD
PEDL209
Laughton
9
6
1
L
D
E
P
PEDL043
PEDL043
PEDL209
PEDL140
ML004
ML004
BECKINGHAM
CORRINGHAM
ML004
HATFIELD
PL162
PEDL181
PEDL241
PEDL241
North Kelsey
PEDL181
Humber Basin
PEDL012
PEDL200
PEDL
210
PEDL006
PEDL
210
WEST FIRSBY
PEDL006
COLD HANWORTH
EAST
GLENTWORTH
PEDL253
PEDL005
SALTFLEETBY
BECKERING
STAINTON
WELTON
EXL294
PEDL253
Biscathorpe
EXL294
Fiskerton Airfield
Oilfield
SOUTH LEVERTON
ML007
SCAMPTON NORTH
SCAMPTON
PEDL007
BOTHAMSALL
NEWTON-ON-TRENT
NETTLEHAM
PEDL210
PL179
FARLEYS WOOD
ML003
PEDL130
PEDL090
EGMANTON
WHISBY
EAKRING
KIRKLINGTON
PEDL
118
PEDL
203
PEDL202
PEDL118
Dukes Wood
PEDL203
Kirklington
PEDL255
PEDL208
PEDL254
PEDL204
PL220
PEDL201
REMPSTONE
PL220
PEDL201
Widmerpool
Gulf
10km
Gas Field
Oil Field/Discovery
Prospect
PEDL005(R)
North
Somercotes
Prospect
PEDL005
PEDL005
PEDL005(R)
Louth
Prospect
PEDL005(R)
Keddington
Oilfield
17
PEDL021
GOODWORTH
PL116
HUMBLY GROVE
PL233
PL249
STOCKBRIDGE
PEDL070
AVINGTON
DL004
ALBURY
BROCKHAM
PL235
PALMERS WOOD
ML021
PEDL246
BLETCHINGLEY
ML018
PL182
EXL189
EXL189
PEDL137
PEDL143
PEDL246
PEDL235
PEDL243
PEDL231
PEDL234
PEDL244
PL240
HORNDEAN
PL211
PEDL126
PEDL233
SINGLETON
PL205
STORRINGTON
PL241
LIDSEY
Directors’ Report
FOR THE YEAR ENDED 31 DECEMBER 2019
The directors present their report together with the
financial statements for the year ended 31 December 2019.
The directors have chosen, in accordance with section
414C(11) of the Companies Act 2006, to set out in the
Company’s Strategic Report information required by
Schedule 7 to the Accounting Regulations to be contained
in the Directors’ Report. This information includes future
developments of the Company and the risks associated
with the use of financial instruments.
DIRECTORS
The directors in office at the end of the year, and their
interests in the shares of the Company as at 1 January 2019
and 31 December 2019, were as shown in the table below.
ORDINARY SHARES
31 December
2019
1 January
2019
63,929,285
63,929,285
275,732,806
212,987,709
48,411,764
42,529,411
4,000,000
4,000,000
D Bramhill
J O’Farrell
R Godson
G Bull
In July 2019, Joseph O’Farrell purchased 29,411,764 new
ordinary shares. In December 2019, Joseph O’Farrell
purchased a further 33,333,333 new ordinary shares
following which he now holds a beneficial interest in
275,732,806 ordinary shares representing approximately
1.79% of the share capital of the Company.
In July 2019, Raymond Godson purchased 5,882,353
ordinary shares following which he now holds a beneficial
interest in 48,411,764 ordinary shares representing
approximately 0.31% in the share capital of the Company.
Directors who served during the year are as follows:
David Bramhill (Executive Director);
Joseph O’Farrell (Executive Director);
Raymond Godson (Non-executive Director);
Graham Bull (Non-executive Director);
Frazer Lang (Non-executive Director)*
* Frazer Lang resigned on 10 June 2019.
(Details of Frazer Lang’s remuneration are disclosed
in note 3).
DIRECTORS’ REMUNERATION
The remuneration of the directors in office at the year end
31 December 2019 was as follows:
SALARIES AND FEES
2018
£
2019
£
160,000
70,000
30,000
30,000
110,000
55,833
25,000
25,000
OPTIONS
2019
240,000,000
140,000,000
60,000,000
110,000,000
2018
120,000,000
60,000,000
30,000,000
30,000,000
D Bramhill
J O’Farrell
R Godson
G Bull
D Bramhill
J O’Farrell
R Godson
G Bull
Directors’ remuneration is disclosed in note 3 of these
financial statements.
Copies of the Service Agreements in respect of D Bramhill
and J O’Farrell are available for inspection at the Company’s
Registered Office. Copies of the Letters of Appointment in
respect of G Bull and R Godson are available for inspection
at the Company’s Registered Office.
In July 2019, David Bramhill was granted 120,000,000
options.
In July 2019, Graham Bull was granted 80,000,000 options.
In July 2019, Raymond Godson was granted 30,000,000
options.
In July 2019, Matthew Small (Company Secretary) was
granted 30,000,000 options.
The options are exercisable at 0.265 pence per share and
the earliest vesting date is 19.07.22.
In August 2019, Joseph O’Farrell was granted 80,000,000
options. The options are exercisable at 0.265 pence per
share and the earliest vesting date is 06.08.22.
Further information in respect of these options can be
found in note 13(c) within the Notes to the Financial
Statements section.
18
www.unionjackoil.comUNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
Directors’ Report
FOR THE YEAR ENDED 31 DECEMBER 2019
DIRECTORS’ RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2019
The directors are responsible for preparing the Annual
Report and the financial statements in accordance with
applicable law and regulations.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the
directors have elected to prepare the Company financial
statements in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European
Union. Under company law the directors must not approve
the financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the
Company and of the profit or loss of the Company
for that period. The directors are also required to prepare
financial statements in accordance with the rules of the
London Stock Exchange for companies trading securities
on the Alternative Investment Market. In preparing these
financial statements the directors are required to:
•
select suitable accounting policies and then apply them
consistently;
• make judgements and accounting estimates that are
reasonable and prudent;
•
state whether they have been prepared in accordance
with IFRSs as adopted by the European Union, subject
to any material departures disclosed and explained in
the financial statements;
• prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
Company will continue in business.
The directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the Company’s transactions and disclose with
reasonable accuracy at any time the financial position of
the Company and enable them to ensure that the financial
statements comply with the Companies Act 2006. They
are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The directors are responsible for ensuring the Annual
Report and Financial Statements is made available on
a website. Financial statements are published on the
Company’s website in accordance with legislation in
the United Kingdom governing the preparation and
dissemination of financial statements, which may vary
from legislation in other jurisdictions. The maintenance
and integrity of the Company’s website is the responsibility
of the directors. The directors’ responsibility also extends
to the ongoing integrity of the financial statements
contained therein.
ANNUAL GENERAL MEETING
The Annual General Meeting of the Company will be held
on 18 June 2020, in accordance with the Notice of Annual
General Meeting on page 67. Details of the resolutions to
be passed are included in this notice.
19
GOVERNANCE Directors’ Report
FOR THE YEAR ENDED 31 DECEMBER 2019
EVENTS AFTER THE BALANCE SHEET DATE
The following events have taken place after the year end:
During January 2020, the Planning Inspectorate informed
the Operator that the appeal in respect of obtaining
planning consent for the development of the Wressle
oilfield, situated on licences PEDL180 and PEDL182 located
in North Lincolnshire, was successful. The Inspector also
allowed the application for an award of costs against the
North Lincolnshire Council (“NLC”). Subsequently, the
NLC has paid costs of £403,000. Union Jack will receive
its proportion of this payment once the sum to be paid is
agreed with the Operator.
During March 2020, the Company acquired a 35% interest
in PEDL005(R) containing the producing Keddington oilfield
and a 15% interest in PEDL339 containing a portion of
the Louth Prospect, from Terrain Energy Limited for a
consideration of £200,000.
In April 2020, the Company purchased 5,000,000 new
ordinary shares in Egdon Resources plc via means of a
subscription at a price of 2 pence per Subscription Share
for a total subscription amount of £100,000.
In April 2020, approval for the variation to the permit
to recommence well testing at West Newton A-2 was
received from the Environment Agency.
Since the outbreak of Coronavirus (COVID-19) in early
2020, the priority of the Company has been on the health
and safety of its employees and technical staff. Like many
organisations, plans have been implemented and active
measures have been taken to mitigate risk, such as no
one-to-one contact and numerous telephone meetings.
The Board is also in frequent contact with the Company’s
JOA partners and our external technical team to assess
any potential impact on the assets in which the Company
has invested. We continue to follow the most up-to-date
Government advice and engage with the regulatory bodies
and stakeholders.
To date, the exploration, development and production
activities of the Company’s assets have continued in line
with plans and with minimal impact from COVID-19.
However, the Company recognises COVID-19 and
associated geo-political factors have created uncertainty
around the price and demand for oil.
The Company’s financial health remains strong, with a
robust balance sheet, cash reserves to fund its operations
through to April 2021 and remains debt free. Accordingly,
the Board does not currently plan to make changes going
forward. However, the Board continues to monitor the
situation closely and will, with its JOA partners, make
adjustments if appropriate.
CAPITAL STRUCTURE
Details of the issued share capital, together with details
of the movements in the Company’s issued share capital
during the year, are shown in note 13(a).
DISCLOSURE OF INFORMATION TO THE
AUDITOR
The directors at the date of the approval of this Annual
Report confirm that:
•
•
so far as the directors are aware, there is no relevant
audit information of which the Company’s auditor
is unaware; and
the directors have taken all the steps that they ought
to have taken as directors in order to make themselves
aware of any relevant audit information and to establish
that the Company’s auditor is aware of that information.
This confirmation is given and should be interpreted
in accordance with the provisions of Section 418 of
the Companies Act 2006.
AUDITOR
A resolution to reappoint BDO LLP will be proposed
at the forthcoming Annual General Meeting.
COMPANY NAME AND REGISTERED NUMBER
The registered number of Union Jack Oil plc is 07497220.
On behalf of the Board
David Bramhill
Executive Chairman
7 May 2020
20
www.unionjackoil.comUNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2019 Corporate Governance Report
FOR THE YEAR ENDED 31 DECEMBER 2019
CORPORATE GOVERNANCE REPORT
The Company’s securities are traded on the Alternative
Investment Market (“AIM”) of the London Stock Exchange.
Board of directors (the "Board") in accordance with the
recommendations of the QCA Corporate Governance
Code 2018 (the "Code"), which the Company has adopted
as its code of governance.
The London Stock Exchange has recently introduced
changes to the AIM rules requiring all AIM listed companies
to adopt and comply with a recognised corporate
governance code.
The Corporate Governance Report has been prepared
by David Bramhill, the Executive Chairman of the
Company, and has been approved by the Company’s
This statement explains how the 10 principles of the Code
are applied by the Company, and where the Company
departs from the Code, an explanation of the reasons
for doing so is provided.
QCA Code Recommendation
Application by the Company
1.
Principle 1
Establish a strategy and
business model which
promotes long-term value
for shareholders.
The Board must be able to express
a shared view of the Company’s
purpose, business model and
strategy.
It should go beyond the simple
description of products and
corporate structures and set out
how the Company intends to deliver
shareholder value in the medium to
long-term.
It should demonstrate that the
delivery of long-term growth is
underpinned by a clear set of values
aimed at protecting the Company
from unnecessary risk and securing
its long-term future.
The primary objective of the Company is to build a safe, sustainable
and successful conventional onshore hydrocarbon exploration,
development and production business, which the Board seeks to
deliver through the acquisition of, and subsequent investment in,
carefully selected licence interests. The Company undertakes this in
conjunction with three JOA partners, Egdon Resources plc, Rathlin
Energy (UK) Limited and Europa Oil & Gas Limited.
The Company’s strategy is the appraisal and exploitation of the assets
currently owned. Simultaneous with this process, the Board expects
to continue to use its expertise and cash resources to acquire further
licence interests and production in the UK.
The Board is optimistic about the prospect of delivering shareholder
value in the medium to long term via the acquisition and increased
interest in various high impact licence areas with proven reserves,
contingent resources and drill-ready prospects.
The Board is acutely aware of the risks associated with hydrocarbon
exploration, development and production and seeks to mitigate the
risk of exploration by having interests in a portfolio of petroleum
licences thereby not being overly exposed to any single asset.
The Company’s strategy is underpinned by a well-balanced and
diverse onshore UK asset portfolio, ensuring the relevant components
of production, development, appraisal and discovery are all in place,
as is adequate and prudently sourced funding for the Company’s
commitments going forward.
21
GOVERNANCE Corporate Governance Report
FOR THE YEAR ENDED 31 DECEMBER 2019
QCA Code Recommendation
Application by the Company
2.
Principle 2
Seek to understand and meet
shareholders’ needs and
expectations.
Directors must develop a good
understanding of the needs and
expectations of all elements of the
Company’s shareholder base.
Since the Company’s incorporation in January 2011, members of
the Board have been very active in encouraging and participating in
direct dialogue with shareholders in order to ensure the Company’s
shareholders are kept regularly updated and are able to discuss
strategy and performance directly with the Board (subject always
to compliance with legal and regulatory requirements, including the
Market Abuse Regulations ("MAR")). This also allows the Board
to obtain a clear understanding of shareholders’ motivations and
concerns.
The Board must manage
shareholders’ expectations and
should seek to understand the
motivations behind shareholder
voting decisions.
Direct communication with shareholders is achieved primarily through
the timely release of regulatory news, via a regulatory information
service, which can be accessed through various channels, including the
London Stock Exchange website (https://www.londonstockexchange.
com/) and the Company’s website (http://unionjackoil.com/).
In addition to the dissemination of regulatory news, the Company
also seeks to keep its shareholders informed of current developments
and performance via interviews and speaking events at various
conferences.
All shareholders are encouraged to attend the Company’s Annual
General Meeting, where the directors are available to answer
questions. Investors also have access to current information on the
Company through its website and via genuine enquiries sent to:
info@unionjackoil.com.
Investor communications are managed by the Executive Chairman,
in conjunction with the Company’s Nominated Adviser and public
relations consultants.
Due to investor speculation around junior hydrocarbon companies,
the Board recognises the particular importance of regular, clear and
timely communications with shareholders, to ensure that they are
kept abreast of major developments and potential risks in respect
of the Company and the Industry without delay.
Management believes that shareholders are seeking a return on
their investment primarily through capital appreciation as a result of
exploration and appraisal success. Management prudently manages
the Company to ensure that work programmes are fully funded and
uses the Board’s technical expertise to reduce or mitigate the risk of
exploration.
22
www.unionjackoil.comUNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2019 Corporate Governance Report
FOR THE YEAR ENDED 31 DECEMBER 2019
QCA Code Recommendation
Application by the Company
3.
Principle 3
Take into account wider
stakeholder and social
responsibilities and their
implications for long-term
success.
Long-term success relies upon good
relations with a range of different
stakeholder groups both internal
(workforce) and external (suppliers,
customers, regulators and others).
The Board needs to identify the
Company’s stakeholders and
understand their needs, interests
and expectations.
Feedback is an essential part of all
control mechanisms. Systems need
to be in place to solicit, consider and
act on feedback from all stakeholder
groups.
The Board is keenly aware of the local environment and the
inhabitants in which the Company’s licence interests are situated.
While the Company does not manage these relationships directly on
a day to day basis, the Board works with the Company’s JOA partners
to ensure that any queries or concerns any community members
may have are swiftly addressed and, at the same time, all community
members are treated with the respect and attention they deserve.
The JOA partnerships act, via the Operators, to the highest standards
and operate in a safe and conscientious manner in respect of site
safety and environmental policies. Site operations are subject to
scrutiny by the Oil & Gas Authority, Environment Agency and the
Health and Safety Executive before commencement. The Operator
adheres diligently to all requirements for a safe working environment.
All site personnel are subject to all Health and Safety measures which
include induction courses before admission to site and the mandatory
wearing of safety equipment in order to ensure the wellbeing of site
staff and visitors.
As set out above, due to the specific nature of the Company’s
business, the Company currently relies on three key JOA partners,
Egdon Resources U.K. Limited, Rathlin Energy (UK) Limited and
Europa Oil & Gas Limited, who manage and operate the Company’s
licence interests on its behalf.
The Company takes its relationship with its JOA partners and its
third party professional advisers (both of whom it sees as its key
stakeholders) very seriously and the Board continues to discuss any
issues and queries the Company’s JOA partners may have in an open,
direct and constructive manner.
The Company also acknowledges the importance of maintaining good
relations with its suppliers and creditors and it adheres to a strict
policy of settling all invoices in a timely manner.
23
GOVERNANCE Corporate Governance Report
FOR THE YEAR ENDED 31 DECEMBER 2019
QCA Code Recommendation
Application by the Company
4.
Principle 4
Embed effective risk
management, considering both
opportunities and threats,
throughout the organisation.
The Board needs to ensure that
the Company’s risk management
framework identifies and addresses
all relevant risks in order to execute
and deliver strategy.
Setting strategy includes determining
the extent of exposure to the
identified risks that the Company is
able to bear and willing to take (risk
tolerance and risk appetite).
The management of the business and the execution of the Company’s
strategy are subject to a number of risks. The Board ensures risks are
mitigated as far as reasonably practicable by performing a detailed
review of the issues pertaining to each significant decision. Significant
decisions are reviewed by the Board having consulted the Company’s
professional third party advisers (be they legal, financial or technical).
The Board convenes on a regular basis, either by telephone or in person
on a formal basis to discuss risk management as explained in Principle 5.
As with the majority of companies within the energy sector, the
business of oil and gas exploration and development includes varying
degrees of risk. These risks include operating reliance on third parties,
the ability to monetise discoveries, the price of products and the costs
of exploration and/or production.
The principal risks to the Company as well as the mitigation actions by
the Board are set out below:
Strategic risk: a weak or poorly executed acquisition and
development process fails to create shareholder value. This risk is
mitigated through performing a detailed technical review, both internally
by management and externally by advisers, for each investment which
includes valuation exercises on the potential return on capital invested.
Operational risk: operational events can have an adverse effect.
The main risk is the potential failure to obtain planning permission in
respect of the Company’s licence interests. This risk is mitigated by
the appointment of specialist professional entities who work together
to compile planning applications designed to achieve a positive result.
On-site operational risks are managed by the site Operators, Egdon
Resources U.K. Limited, Rathlin Energy (UK) Limited and Europa Oil &
Gas Limited, who have, to date, safety records of the highest standard.
External Risk: Lack of growth caused by political, industry or market
factors. The Company operates exclusively within the UK and the
Board considers that the UK onshore hydrocarbon arena offers political
security and excellent value under a regime with a very clearly spelt
out protocol giving the opportunity to develop assets unhindered. In
respect of the ongoing Brexit discussions and the potential effect on the
Company going forward, it is impossible to predict the effects of Brexit,
at this moment in time.
Financial Risk: the lack of ability to meet financial obligations. The
Company has historically raised its funds through equity capital markets
by share issues and has not been involved in derivative instruments and
debt financing to meet its financial obligations.
Product Price Risk: due to the nature of the periodic fluctuation of
oil prices, any such adverse fluctuation could potentially have an impact
on the Company’s resulting return to its shareholders.
The Company also holds Directors’ and Officers’ Liability Insurance
cover and the Company is covered by the Operators’ insurance policies
during drilling and other operational situations for specific projects.
24
www.unionjackoil.comUNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2019 Corporate Governance Report
FOR THE YEAR ENDED 31 DECEMBER 2019
QCA Code Recommendation
Application by the Company
5.
Principle 5
Maintain the Board as a well-
functioning, balanced team led
by the Chairman.
The Board members have a
collective responsibility and legal
obligation to promote the interests
of the Company, and are collectively
responsible for defining corporate
governance arrangements. Ultimate
responsibility for the quality of, and
approach to, corporate governance
lies with the chair of the Board.
The Board (and any committees)
should be provided with high quality
information in a timely manner
to facilitate proper assessment
of the matters requiring a decision
or insight.
The Board should have an
appropriate balance between
executive and non-executive
directors and should have at least
two independent non-executive
directors. Independence is a Board
judgement.
The Board should be supported
by committees (e.g. audit,
remuneration, nomination) that have
the necessary skills and knowledge
to discharge their duties and
responsibilities effectively.
Directors must commit the time
necessary to fulfil their roles.
The Board consists of two executive directors, David Bramhill and
Joseph O’Farrell, and two non-executive directors, Graham Bull and
Raymond Godson, who are responsible for the management of the
Company.
Raymond Godson is classified as an independent director. Although
Mr Godson holds shares and options in the Company, these are
considered to be de minimis and are not deemed to affect his
independent thought and judgement.
No members of the Board have other commitments that would
prevent them from spending as much time as required to ensure the
aims and best interests of the Company are met. Any changes to
directors’ commitments and interests will be reported to and, where
appropriate, agreed with the rest of the Board.
The Board meets formally in person and by telephone multiple times
throughout the year, attendance of which has always been 100% since
the Company’s incorporation. The Board also holds regular informal
project appraisal and strategy discussions, and meets every quarter,
on a formal basis, to review trading performance, budgets, ensure
adequate funding, set and monitor strategy, examine acquisition
opportunities and assess risks on an ongoing basis in respect of
operational projects.
The directors encourage a collaborative Board culture to ensure
that each decision reached is always in the Company’s and its
shareholders’ best interests and that any one individual opinion never
dominates the decision making process. The Board seeks, so far
as possible, to achieve decisions by consensus and all directors are
encouraged to use their independent judgement and to challenge all
matters whether strategic or operational. To date all decisions have
been unanimous.
The Company’s two non-executive directors hold shares and options
in the Company. The Board is satisfied that these shareholdings and
options are not "significant". Therefore, such shareholdings do not
contravene the provisions of the Code.
During 2019, the Board held eight meetings, either by telephone
or in person.
There are no mandatory hours for directors to be available for
Company business. The executive directors and non-executive
directors are available for any Company business when it may arise.
The Board delegates certain decisions to an Audit Committee
and a Remuneration Committee. The Audit Committee has joint
responsibility for reviewing the year end accounts with the Auditor.
The Remuneration Committee reviews the remuneration of
the executive directors on an annual basis. Both committees are
dedicated to establish and maintain robust internal financial control
systems for the Company.
25
GOVERNANCE Corporate Governance Report
FOR THE YEAR ENDED 31 DECEMBER 2019
QCA Code Recommendation
Application by the Company
6.
Principle 6
Ensure that between them the
directors have the necessary
up-to-date experience, skills
and capabilities.
The Board must have an appropriate
balance of sector, financial and public
markets skills and experience, as
well as an appropriate balance of
personal qualities and capabilities.
The Board should understand and
challenge its own diversity, including
gender balance, as part of its
composition.
The Board should not be dominated
by one person or a group of
people. Strong personal bonds can
be important but can also divide a
board.
As companies evolve, the mix of
skills and experience required on
the Board will change, and Board
composition will need to evolve to
reflect this change.
The current Board composition of the Company and each director’s
experience is set out in this report. The Board’s view is that the
directors have a variety of complementary experiences and skillsets,
including experience of industry-specific technical, financial and public
capital markets sectors. An overview of the directors are as follows:
David Bramhill, Executive Chairman, 69
Mr Bramhill has over 40 years’ experience in the natural resources
industry. Mr Bramhill has directed and managed several energy
companies and was the former managing director of OilQuest
Resources plc, subsequently acquired by EnCore Oil plc. Mr Bramhill
was an executive director at the time of Nighthawk Energy plc’s AIM
flotation in March 2007 and a non-executive chairman of Wessex
Exploration plc when that company floated on AIM in March 2011.
He resigned from these companies in 2010 and 2012 respectively.
Mr Bramhill had previously consulted in an engineering capacity for
over 20 years on projects for Shell, ExxonMobil, Petrofina, BP and
numerous other international energy companies.
Joseph O’Farrell, Executive Director, 68
Mr O’Farrell has over 30 years’ corporate experience in the
hydrocarbon and mining industry. He has managed several energy
companies and is a former director of OilQuest Resources plc and
Nighthawk Energy plc, having been a director of these two companies
at the time of their respective flotations on AIM. He has assisted a
number of companies working in conjunction with corporate advisers
in pre-IPO fundraising and project acquisition.
Graham Bull, Non-Executive Director, 74
Mr Bull is a geologist with 51 years of international oil and gas industry
exploration experience. Following graduation from the University
of Leicester in 1968 with a BSc Hons Geology he worked in Canada
and held positions with Chevron, Dome Petroleum, Siebens Oil and
Gas and Poco Petroleum and also provided exploration expertise to
a Canadian drilling fund. He returned to the UK in 1982 taking the
position as Chief Geologist to Sovereign Oil and Gas plc. In addition,
Mr Bull has operated as a geological adviser for EnCore Oil plc
(formerly OilQuest Resources plc), Premier Oil plc, Cirque Energy
and DSM Energy. He is currently an exploration geological consultant
working on Northwest Europe offshore and onshore United Kingdom
and other international areas. Mr Bull is a member of the Petroleum
Exploration Society of Great Britain, the American Association of
Petroleum Geologists and a Fellow of the Geological Society of
London.
Mr Bull is the Chairman of the Remuneration Committee and a
member of the Audit Committee.
26
www.unionjackoil.comUNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2019 Corporate Governance Report
FOR THE YEAR ENDED 31 DECEMBER 2019
QCA Code Recommendation
Application by the Company
6.
Principle 6 (continued)
Raymond Godson, Non-Executive Director, 76
Mr Godson is a chartered accountant with 43 years’ experience in
the provision of oil and gas related services to energy companies.
Mr Godson joined the Rio Tinto group in 1973 where he spent 16
years rising to become the financial and commercial director of the oil
and gas subsidiary RTZ Oil & Gas Limited. In 1988 he joined Teredo
Petroleum PLC (“Teredo”) where he became the managing director in
1992. Following the takeover of Teredo in 1993, he became a full time
accountant in general practice, where the majority of his business has
been oil and gas related. Mr Godson acted as Company Secretary for
Fusion Oil & Gas plc from IPO to its takeover by Sterling Energy Plc.
He was subsequently company secretary for both Ophir Energy Plc
and Aurelian Oil & Gas Plc. He is currently an executive director of
Montrose Industries Limited.
Mr Godson is the Chairman of the Audit Committee and a member
of the Remuneration Committee.
The directors are mindful of the need to ensure the Company has
in place a diverse Board that encompasses the right skills required
to ensure the Company’s continued success, including creating an
atmosphere of constructive challenge and consensus for any decision
reached. As such, and given the current size of the Company, the
Board is of the opinion its composition and skillset is sufficient
to maintain and drive the long term success for the Company’s
shareholders.
Each director takes his continued professional and technical
development seriously, so in order to ensure the Board keeps abreast
of the current challenges faced by the industry the Company operates
in, the directors attend both trade shows and technical sessions during
the course of any given year.
The Board ensures it is well advised and supported by utilising a range
of external experts in various fields, and employs accountants, legal
counsel, a Company Secretary and a Nominated Adviser, in accordance
with the AIM rules. On the industry specific front, it also employs three
technical consultancies: Sotwell Exploration Ltd, Calderdale Geoscience
Limited and Oil & Gas Advisers Limited.
Sotwell Exploration Ltd and Calderdale Geoscience Limited are
responsible for supplying technical advice on specific projects. Both
companies work closely with non-executive director, Graham Bull
and are responsible, on a permanent basis, for updating and reviewing
independently all technical information provided to the Company on its
key projects.
Oil & Gas Advisers Limited provides a financial overview in respect of
due diligence on potential project acquisitions and ongoing economics
of our key projects.
Matthew Small is Company Secretary and, via an established accounting
entity, Berkeley Hall Marshall Limited, represents the Company as de
facto financial controller, working closely with the Executive Chairman
and the Audit and Remuneration Committees.
27
GOVERNANCE Corporate Governance Report
FOR THE YEAR ENDED 31 DECEMBER 2019
QCA Code Recommendation
Application by the Company
While the Board is very much aware of the needs of the Company
in ensuring effectiveness of Board performance and the periodic
refreshment of the composition of the Board, the Board believes that
due to the Company’s current size and its current corporate culture
of constructive challenge and consensus on each decision reached,
the procedures already in place are sufficient for monitoring Board
performance and no external performance reviews are required at
this time. This will be kept under review.
The Board is also of the opinion that the Company has appropriate
measures in place to ensure any refreshment of the Board occurs in a
timely manner, and always with the best interests of the shareholders
in mind.
7.
Principle 7
Evaluate Board performance
based on clear and relevant
objectives, seeking continuous
improvement.
The Board should regularly review the
effectiveness of its performance as a
unit, as well as that of its committees
and the individual directors.
The Board performance review may
be carried out internally or, ideally,
externally facilitated from time to
time. The review should identify
development or mentoring needs
of individual directors or the wider
senior management team.
It is healthy for membership of the
Board to be periodically refreshed.
Succession planning is a vital task for
the board. No member of the Board
should become indispensable.
28
www.unionjackoil.comUNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2019 Corporate Governance Report
FOR THE YEAR ENDED 31 DECEMBER 2019
QCA Code Recommendation
Application by the Company
8.
Principle 8
Promote a corporate culture
that is based on ethical values
and behaviours.
The Board should embody and
promote a corporate culture that is
based on sound ethical values and
behaviours and use it as an asset and
a source of competitive advantage.
The policy set by the Board should
be visible in the actions and decisions
of the chief executive and the rest of
the management team. Corporate
values should guide the objectives
and strategy of the Company.
The culture should be visible in every
aspect of the business, including
recruitment, nominations, training
and engagement. The performance
and reward system should endorse
the desired ethical behaviours across
all levels of the Company.
The corporate culture should
be recognisable throughout the
disclosures in the Annual Report,
website and any other statements
issued by the Company.
The directors recognise that their decisions regarding strategy and risk
will impact the corporate culture of the Company as a whole and that
this will impact the performance of the Company. The Board seeks
to embody and promote a corporate culture that is based on sound
ethical values as it believes the tone and culture set by the Board
impacts all aspects of the Company, including the way that employees
and other stakeholders behave.
The Company has adopted a share dealing code which is appropriate
for a company whose securities are traded on AIM and is in
accordance with the requirements of MAR.
The Board believes that, as evidenced through the disclosures made
throughout this statement, its corporate governance regime and
culture are at the core of its operations and are appropriate given the
current size of the Company.
Furthermore, through its interaction with its stakeholders and in the
communities in which it operates (described above), it maintains a
collaborative and constructive dialogue that embodies a dynamic,
accessible, open door and vibrant corporate culture.
The Company’s corporate culture is monitored/assessed regularly,
taking on board immediately any changes made by AIM Rule 26 and
where advisers may advise. All financial transactions are reviewed
independently by Berkeley Hall Marshall Limited. An anti-bribery
policy is in place.
As such, and taking into account the Board interaction with each of
its professional advisers described above, the Board is satisfied that
its governance regime is more than adequate given the size of the
Company, its shareholder base and business pipeline.
29
GOVERNANCE Corporate Governance Report
FOR THE YEAR ENDED 31 DECEMBER 2019
QCA Code Recommendation
Application by the Company
9.
Principle 9
Maintain governance structures
and processes that are fit for
purpose and support good
decision-making by the Board.
The Company should maintain
governance structures and processes
in line with its corporate culture and
appropriate to its:
•
size and complexity; and
• capacity, appetite and tolerance
for risk.
The governance structures should
evolve over time in parallel with its
objectives, strategy and business
model to reflect the development
of the Company.
As disclosed throughout this statement, the Company maintains and
employs robust corporate governance practices to support an effective
and collaborative Board, always working in the best interests of its
shareholders.
The roles of the individual Board members are as follows:
• The Executive Chairman, David Bramhill, is responsible for
running the business of the Board, ensuring strategic focus and
direction and for managing investor communications.
• The Executive Director, Joseph O’Farrell, is responsible for
assisting the Executive Chairman to execute the Board’s strategy and
coordinating corporate finance activities.
• The Non-Executive Director, Graham Bull, is a petroleum
geologist and is responsible for identifying and evaluating potential
projects and to provide technical oversight of the Company’s existing
projects.
• The Non-Executive Director, Raymond Godson, is a Chartered
Accountant who has abundant experience in the oil & gas industry.
Mr Godson chairs the Audit Committee.
Two Board committees are in place to ensure control over the
Company’s financial reporting processes and directors’ remuneration.
Details of the two Board committees are as follows:
The Audit Committee
The Audit Committee comprises Raymond Godson, who acts as its
Chairman, and Graham Bull. The Audit Committee is responsible
for considering a wide range of financial matters which include the
reviewing of Half Yearly and Annual Reports, discussions with the
Auditor, share placing agreements and the oversight of internal controls
and new accounting standards relevant to the Company.
This Committee also provides a forum for reporting by the Company’s
auditor. The executive directors may attend meetings by invitation.
30
www.unionjackoil.comUNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2019 Corporate Governance Report
FOR THE YEAR ENDED 31 DECEMBER 2019
QCA Code Recommendation
Application by the Company
9.
Principle 9 (continued)
The Remuneration Committee
The Remuneration Committee comprises Graham Bull, who acts as
its Chairman, and Raymond Godson.
The current executive director remuneration package comprises basic
salary and share options. Directors’ remuneration for the year
is noted in the Directors’ Report in the Company’s annual report.
The remuneration of non-executive directors is determined by the
Board.
Due to the size of the Company, it is not considered necessary to
have a separate Nominations Committee at this time. Instead this role
is fulfilled by the Board as a whole. The Board also reserves to itself
the process by which a new director is appointed.
Each committee has access to such resources, information and advice
as it deems necessary, at the cost of the Company, to enable the
committee to discharge its duties.
The Board intends that the Company’s governance structures will
evolve over time in parallel with its objectives, strategy and business
model to reflect the development of the Company.
31
GOVERNANCE Corporate Governance Report
FOR THE YEAR ENDED 31 DECEMBER 2019
QCA Code Recommendation
Application by the Company
10.
Principle 10
As set out above, the Company ensures:
Communicate how the
Company is governed and is
performing by maintaining a
dialogue with shareholders and
other relevant stakeholders.
A healthy dialogue should exist
between the Board and all of its
stakeholders, including shareholders,
to enable all interested parties to
come to informed decisions about
the Company.
In particular, appropriate
communication and reporting
structures should exist between the
Board and all constituent parts of its
shareholder base.
This will assist:
•
•
the communication of
shareholders’ views to the Board;
and
the shareholders’ understanding
of the unique circumstances
and constraints faced by the
Company.
It should be clear where these
communication practices are
described (Annual Report or
website).
• a printed Annual and Half Year Report is delivered to each
shareholder, and also made available on the Company’s website.
• all RNS announcements are released in a timely manner, while
also ensuring all announcements are drafted in a clear and concise
fashion.
In addition, all shareholders are encouraged to attend the Company’s
Annual General Meeting. The outcome of all shareholder votes are
disclosed in a clear and transparent manner via a RNS.
The Company includes historical Annual Reports, Notices of General
Meetings and RNS announcements over the last five years on its
website. The Company also lists contact details on its website, should
shareholders wish to communicate with the Board.
The Company intends to include, where relevant, in its Annual
Report, any matters of note arising from the Audit or Remuneration
Committees. A Remuneration or Audit Committee report is not
included separately within these financial statements. All relevant
information has been included where required.
Shareholders are actively encouraged to both attend the Company’s
Annual General Meeting and throughout the year to contact the
Chairman to discuss any queries or concerns they may have.
Given the size of the Company, the Board is of the opinion that no
formal communication structures are required at this time.
The Company does however:
• ensure continued disclosure of all items in conjunction with AIM
Rule 26 on its website;
• disclose the results of all shareholder votes once held, in
conjunction with the Company’s Annual General Meeting; and
• keep in constant communication and dialogue with its key
stakeholders and JOA partners through an accessible and open-
door policy, with the Executive Chairman acting as the key
conduit. For avoidance of doubt, it is important to note that any
conversations shareholders and the Executive Chairman may have
are always conducted in accordance of what is permissible under
MAR.
The Company’s communication practices are set out on its website
at: http://unionjackoil.com/company-information/aim-rule-26/
32
www.unionjackoil.comUNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2019 Corporate Governance Report
FOR THE YEAR ENDED 31 DECEMBER 2019
THE BOARD
AUDIT COMMITTEE
During the year the Board of Directors of Union Jack Oil
plc consisted mainly of two executive directors and two
non-executive directors as disclosed within the Directors,
Officers and Advisers section of this report, who were
responsible for the proper management of the Company.
The Board met in person or by telephone, as permitted by
the current Articles of Association, eight times during the
year. In addition, the Board held numerous project appraisal
and strategy discussions during the year.
The Board will meet at least four times in the coming
year to review trading performance and budgets, ensure
adequate funding, set and monitor strategy, examine
acquisition opportunities and report to shareholders.
The Board has a formal schedule of matters specifically
reserved to it for decisions.
REMUNERATION COMMITTEE
The Remuneration Committee comprises Graham Bull,
who acts as its Chairman, and Raymond Godson.
The current executive director remuneration package
comprises basic salary and share options. Directors’
remuneration for the year is noted in the Directors’ Report
and shown in note 3 on page 52.
Those disclosures form part of this report and are disclosed
within the Directors’ Report, and note 3 within the Notes
to the Financial Statements section of this Annual Report.
The remuneration of non-executive directors is determined
by the Board.
The Audit Committee comprises Raymond Godson,
who acts as its Chairman, and Graham Bull. The Audit
Committee is responsible for considering a wide range of
financial matters, which include the reviewing of Half Yearly
and Annual Reports, discussions with the Auditor, share
placing agreements and the oversight of internal controls
and new accounting standards relevant to the Company.
This Committee also provides a forum for reporting by the
Company’s auditor. The executive directors may attend
meetings by invitation.
INTERNAL FINANCIAL CONTROL
The directors are responsible for establishing and
maintaining the Company’s internal financial control
systems. These are designed to meet the particular needs
of the Company and the risks to which it is exposed, and
by their nature can provide reasonable but not absolute
assurance against material misstatement or loss.
The key procedures that the directors have established to
provide effective internal financial controls are:
•
Identification of Business Risks
The Board is responsible for identifying the major
business risks faced by the Company and for
determining the appropriate course of action
to manage these risks.
•
Investment Appraisal
Capital expenditure is regulated by authorisation limits.
For expenditure beyond the specified limits including
investments in exploration projects, detailed proposals
are submitted to the Board for review and sign-off.
• Financial Reporting
The Company has a comprehensive system for
reporting financial results to the Board.
• Audit Committee
The Audit Committee considers and determines
relevant action in respect of any control issues raised
by the external auditor.
33
GOVERNANCE
Independent Auditor’s Report
on the Financial Statements
TO THE MEMBERS OF UNION JACK OIL PLC
CONCLUSIONS RELATING TO GOING CONCERN
We have nothing to report in respect of the following
matters in relation to which the ISAs (UK) require us to
report to you where:
•
•
the directors’ use of the going concern basis of
accounting in the preparation of the financial statements
is not appropriate; or
the directors have not disclosed in the financial
statements any identified material uncertainties that may
cast significant doubt about the Company’s ability to
continue to adopt the going concern basis of accounting
for a period of at least twelve months from the date
when the financial statements are authorised for issue.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the
financial statements of the current period and include the
most significant assessed risks of material misstatement
(whether or not due to fraud) we identified, including those
which had the greatest effect on the overall audit strategy,
the allocation of resources in the audit and directing the
efforts of the engagement team. These matters were
addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
OPINION
We have audited the financial statements of Union
Jack Oil plc (the ‘Company’) for the year ended
31 December 2019, which comprise the Income
Statement, the Statement of Comprehensive Income,
the Balance Sheet, the Statement of Changes in Equity,
the Statement of Cash Flows, the Principal Accounting
Policies and the Notes to the financial statements,
including a summary of significant accounting policies.
The financial reporting framework that has been applied
in the preparation of the financial statements is applicable
law and International Financial Reporting Standards (IFRSs)
as adopted by the European Union.
In our opinion the financial statements:
• give a true and fair view of the state of the Company’s
affairs as at 31 December 2019 and of its loss for the
year then ended;
• have been properly prepared in accordance with IFRSs
as adopted by the European Union;
• have been prepared in accordance with the
requirements of the Companies Act 2006.
BASIS FOR OPINION
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable
law. Our responsibilities under those standards are further
described in the Auditor’s responsibilities for the audit
of the financial statements section of our report. We
are independent of the Company in accordance with the
ethical requirements that are relevant to our audit of the
financial statements in the UK, including the FRC’s Ethical
Standard as applied to listed entities, and we have fulfilled
our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for
our opinion.
34
www.unionjackoil.comUNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2019 Independent Auditor’s Report
on the Financial Statements
TO THE MEMBERS OF UNION JACK OIL PLC
CARRYING VALUE OF THE OIL AND GAS ASSETS
Matter identified
How we addressed the matter
The Company’s oil and gas assets are classified
as intangible assets where the Company has
exploration and evaluation interests (‘E&E’)
and as property, plant and equipment where
the Company has development and producing
interests (‘D&P’). See notes 1, 7 and 8.
In respect of both the Company’s E&E
assets and D&P assets, management and the
directors are required to assess annually for
any indicators of impairment of the assets.
If an indicator of impairment is identified
management are required to perform an
assessment of the carrying value of the assets.
In respect of both the E&E assets and the D&P assets we evaluated
management’s and the Board’s impairment review for each of the
assets held. We critically challenged the considerations made of
whether or not there were any indicators of impairment identified in
accordance with the requirements of the relevant accounting standards.
Our specific audit testing for the E&E Assets included:
•
reviewing the impairment assessment performed by management
and independently assessing whether there were any further
triggers for impairment not identified by management
• checking the proposed impairment write off against the underlying
nominal ledger transactions to ensure the correct impairment
provision was made
Management identified that the Widmerpool
Gulf, Laughton and Humber Basin E&E assets
were considered to be impaired in the year
due to the government moratorium on
development of non-conventional assets.
• confirming the disclosure of the impairment in the period was
presented in the financial statements in accordance with the
requirements of the accounting standard
• verification of licence status in order to confirm legal title and
validity of each of the licences
Given the significance of the assets on the
Company’s Balance Sheet and the significant
management judgement involved in the
assessment of the carrying values of the
assets there is an increased risk of material
misstatement and we therefore consider this
to be a key audit matter.
•
•
•
reviewing activity to assess whether there was evidence from
technical work undertaken to date by management and third parties
which may indicate a potential impairment trigger
reviewing approved budget forecasts and minutes of management
and Board meetings to confirm the Company’s intention to
continue exploration work on the licences, and
in order to obtain and understanding of management’s
expectation of commercial viability, we reviewed available
technical documentation and discussed results and operations
with management
Our specific audit testing for the D&P assets included:
•
the verification of licence status in order to confirm legal title
and validity of each of the licences;
• assessing available market data on oil prices and the impact on the
Company’s assets
• assessing the external and internal sources of information, such
as third party reports and reports provided by operators in order
to assess whether any impairment triggers were identified
• evaluating third party reports and management estimates relating
to the assessment of the potential recoverable value of the assets
• considering the classification of assets and disclosures in the
financial statements
Key Observations: Other than the impairment of the exploration and evaluation assets identified by management,
based on our work we found no evidence that the carrying value of the Company’s Oil and Gas assets were impaired.
35
GOVERNANCE Independent Auditor’s Report
on the Financial Statements
TO THE MEMBERS OF UNION JACK OIL PLC
OUR APPLICATION OF MATERIALITY
Company materiality as at 31 December 2019
Basis for materiality
£100,000 (2018: £74,000)
0.7% of total assets (2018: 1% of total assets)
We apply the concept of materiality both in planning
and performing our audit and in evaluating the effect
of misstatements. We consider materiality to be the
magnitude by which misstatements, including omissions,
could influence the economic decisions of reasonable
users that are taken on the basis of the financial statements.
Importantly, misstatements below these levels will not
necessarily be evaluated as immaterial as we also take
account of the nature of identified misstatements, and
the particular circumstances of their occurrence, when
evaluating their effect on the financial statements as a
whole. The materiality for the company was set after
taking into account the high level of cash held by the
company along with the impairment indicators anticipated
relating to the exploration and evaluation assets. We
consider total assets of the Company to be the relevant
benchmark for materiality as the total assets are likely to be
the primary focus of the users of the financial statements.
In performing the audit we applied a lower level of
performance materiality in order to reduce to an
appropriately low level the probability that the aggregate
of uncorrected and undetected misstatements exceeds
financial statement materiality. Performance materiality for
the financial statements was set at £75,000 (2018: £55,500),
being 75% of financial statement materiality.
We agreed with the Audit Committee that we would
report to them all individual audit differences identified
during the course of our audit in excess of £2,000
(2018: £1,500). We also agreed to report differences
below these thresholds that, in our view, warranted
reporting on qualitative grounds.
OVERVIEW OF THE SCOPE OF OUR AUDIT
We performed a full scope audit on the financial
statements of the Company. All audit work was
undertaken by BDO LLP.
OTHER INFORMATION
The directors are responsible for the other information.
The other information comprises the information included
in the Annual Report and Financial Statements, other than
the financial statements and our Auditor’s Report thereon.
Our opinion on the financial statements does not cover
the other information and, except to the extent otherwise
explicitly stated in our report, we do not express any form
of assurance conclusion thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing
so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge
obtained in the audit or otherwise appears to be materially
misstated. If we identify such material inconsistencies
or apparent material misstatements, we are required to
determine whether there is a material misstatement in the
financial statements or a material misstatement of the other
information. If, based on the work we have performed, we
conclude that there is a material misstatement of this other
information, we are required to report that fact. We have
nothing to report in this regard.
36
www.unionjackoil.comUNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2019 RESPONSIBILITIES OF DIRECTORS
As explained more fully in the directors’ responsibilities
statement for the year ended 31 December 2019, the
directors are responsible for the preparation of the
financial statements and for being satisfied that they give
a true and fair view, and for such internal control as the
directors determine is necessary to enable the preparation
of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the Company’s ability to continue
as a going concern, disclosing, as applicable, matters related
to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate
the Company or to cease operations, or have no realistic
alternative but to do so.
Independent Auditor’s Report
on the Financial Statements
TO THE MEMBERS OF UNION JACK OIL PLC
OPINIONS ON OTHER MATTERS PRESCRIBED BY
THE COMPANIES ACT 2006
In our opinion, based on the work undertaken in the course
of the audit:
•
•
the information given in the Strategic Report and
the Directors’ Report for the financial year for which
the financial statements are prepared is consistent with
the financial statements; and
the Strategic Report and the Directors’ Report have
been prepared in accordance with applicable legal
requirements.
MATTERS ON WHICH WE ARE REQUIRED TO
REPORT BY EXCEPTION
In the light of the knowledge and understanding of the
Company and its environment obtained in the course
of the audit, we have not identified material misstatements
in the Strategic Report or the Directors’ Report.
We have nothing to report in respect of the following
matters in relation to which the Companies Act 2006
requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by the
Company, or returns adequate for our audit have not
been received from branches not visited by us; or
•
the Company financial statements are not in agreement
with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified
by law are not made; or
• we have not received all the information and
explanations we require for our audit.
37
GOVERNANCE Independent Auditor’s Report
on the Financial Statements
TO THE MEMBERS OF UNION JACK OIL PLC
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT
OF THE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and
to issue an Auditor’s Report that includes our opinion.
Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when
it exists.
Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial
statements.
A further description of our responsibilities for the audit
of the financial statements is located on the Financial
Reporting Council’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part
of our Auditor’s Report.
USE OF OUR REPORT
This report is made solely to the Company’s members,
as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken
so that we might state to the Company’s members those
matters we are required to state to them in an 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.
Anne Sayers, Senior Statutory Auditor
For and on behalf of BDO LLP, Statutory Auditor
London, United Kingdom
7 May 2020
BDO LLP is a limited liability partnership registered in
England and Wales (with registered number OC305127).
38
www.unionjackoil.comUNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2019 Income Statement
FOR THE YEAR ENDED 31 DECEMBER 2019
Revenue
Cost of sales - operating costs
Cost of sales - depreciation
Gross loss
Administrative expenses (excluding impairment charge)
Impairment
Exploration write-back
Total administrative expenses
Operating loss
Finance income
Loss before taxation
Taxation
Loss for the financial year
Attributable to:
Equity shareholders of the Company
Loss per share
Basic and diluted loss per share (pence)
Notes
31.12.19
£
31.12.18
£
136,959
(185,169)
(32,429)
165,270
(159,046)
(32,186)
(80,639)
(25,962)
(1,343,362)
(393,697)
112,500
(871,489)
(205,308)
–
(1,624,559)
(1,076,797)
(1,705,198)
(1,102,759)
12,815
4,051
(1,692,383)
(1,098,708)
–
–
(1,692,383)
(1,098,708)
(1,692,383)
(1,098,708)
(0.02)
(0.01)
2
2
2
4
5
6
The accompanying accounting policies and notes form an integral part of these financial statements.
39
FINANCIAL STATEMENTS
Statement of Comprehensive Income
FOR THE YEAR ENDED 31 DECEMBER 2019
Notes
31.12.19
£
31.12.18
£
Loss for the financial year
(1,692,383)
(1,098,708)
Items which will not be reclassified
subsequently to profit or loss account
Other comprehensive loss
10
(32,212)
–
Total comprehensive loss for the financial year
(1,724,595)
(1,098,708)
The accompanying accounting policies and notes form an integral part of these financial statements.
40
www.unionjackoil.comUNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
Balance Sheet
AS AT 31 DECEMBER 2019
Assets
Non-current assets
Exploration and evaluation assets
Property, plant and equipment
Investments
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Liabilities
Current liabilities
Trade and other payables
Non-current liabilities
Provisions
Total liabilities
Net assets
Notes
31.12.19
£
31.12.18
£
7
8
10
11
12
19
20
6,726,743
581,300
120,288
3,485,961
611,139
40,000
7,428,331
4,137,100
180,197
6,626,322
198,054
3,123,287
6,806,519
3,321,341
14,234,850
7,458,441
231,284
396,688
620,686
453,165
851,970
849,853
13,382,880
6,608,588
5,731,508
14,205,000
167,466
(6,721,094)
3,983,958
7,593,146
78,319
(5,046,835)
13,382,880
6,608,588
Capital and reserves attributable to the
Company’s equity shareholders
Share capital
Share premium
Share-based payments reserve
Accumulated deficit
13(a)
14
14
14
Total equity
The financial statements of Union Jack Oil plc, registered number 07497220, were approved and authorised for issue
by the Board of Directors on 7 May 2020 and were signed on its behalf by:
David Bramhill
Director
The accompanying accounting policies and notes form an integral part of these financial statements.
41
FINANCIAL STATEMENTS
Statement of Changes in Equity
FOR THE YEAR ENDED 31 DECEMBER 2019
Share Accumulated
deficit
capital
£
£
Share
premium
£
Share-based
payment
reserve
£
Total
£
Balance at 1 January 2019
3,983,958
(5,046,835)
7,593,146
78,319
6,608,588
Loss for the financial year
Other comprehensive loss
Total comprehensive loss
Contributions by and
distributions to owners
Issue of share capital
Share issue costs
Share-based payments
Expired warrants
Total contributions by and
distributions to owners
–
–
–
(1,692,383)
(32,212)
(1,724,595)
–
–
–
–
–
(1,692,383)
(32,212)
–
(1,724,595)
1,747,550
–
–
–
–
–
–
50,336
7,252,450
(640,596)
–
–
–
–
139,483
(50,336)
9,000,000
(640,596)
139,483
–
1,747,550
(1,674,259)
6,611,854
89,147
6,774,292
Balance at 31 December 2019
5,731,508
(6,721,094) 14,205,000
167,466 13,382,880
Balance at 1 January 2018
2,954,547
(3,948,129)
5,379,670
61,438
4,447,526
Loss for the financial year
Total comprehensive loss
Contributions by and
distributions to owners
Issue of share capital
Share issue costs
Share-based payments
Total contributions by and
distributions to owners
–
–
(1,098,708)
(1,098,708)
–
–
–
(1,098,708)
–
(1,098,708)
1,029,411
–
–
–
–
–
2,470,589
(257,113)
–
–
–
16,881
3,500,000
(257,113)
16,881
1,029,411
(1,098,708)
2,213,476
16,881
2,161,162
Balance at 31 December 2018
3,983,958
(5,046,835)
7,593,146
78,319
6,608,588
The accompanying accounting policies and notes form an integral part of these financial statements.
42
www.unionjackoil.comUNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
Statement of Cash Flows
FOR THE YEAR ENDED 31 DECEMBER 2019
Cash flow from operating activities
Cash flow from investing activities
Purchase of intangible assets
Purchase of property, plant and equipment
Sale of licence interest
Investments
Interest received
Notes
31.12.19
£
31.12.18
£
15
7
8
2
10
4
(1,473,164)
(893,956)
(3,319,108)
(5,947)
112,500
(112,500)
6,850
(755,919)
(52,291)
–
–
4,051
Net cash used in investing activities
(3,318,205)
(804,159)
Cash flow from financing activities
Proceeds on issue of new shares
Cost of issuing new shares
13(a)
13(a)
8,935,000
(640,596)
3,500,000
(257,113)
Net cash generated from financing activities
8,294,404
3,242,887
Net increase in cash and cash equivalents
3,503,035
1,544,773
Cash and cash equivalents at beginning of financial year
3,123,287
1,578,514
Cash and cash equivalents at end of financial year
12
6,626,322
3,123,287
The accompanying accounting policies and notes form an integral part of these financial statements.
43
FINANCIAL STATEMENTS
Principal Accounting Policies
Union Jack Oil plc is a company incorporated in the United
Kingdom under the Companies Act 2006. The address
of the registered office is 6 Charlotte Street, Bath BA1 2NE,
England. The nature of the Company’s operations and its
principal activities are set out in the Chairman’s Statement,
Strategic Report and the Directors’ Report. These financial
statements are presented in pounds sterling because that is
the currency of the primary economic environment in which
the Company operates.
BASIS OF PREPARATION
The annual financial statements of Union Jack Oil plc
(“the Company”) have been prepared in accordance
with International Financial Reporting Standards (“IFRS”)
as adopted by the European Union (“EU”) applied in
accordance with the provisions of the Companies Act 2006.
IFRS is subject to amendment and interpretation by the
International Accounting Standards Board (“IASB”) and
the IFRS Interpretations Committee, and there is an ongoing
process of review and endorsement by the European
Commission. These accounting policies comply with each
IFRS that is mandatory for accounting periods ending on
31 December 2019.
The financial statements have been prepared under the
historical cost convention except for the valuation of
investments that have been measured at fair value through
other comprehensive income. The principal accounting
policies set out below have been consistently applied to
all periods presented.
GOING CONCERN
The Company’s business activities, together with the factors
likely to affect its future development, performance and
position are set out in the Chairman’s Statement and the
Strategic Report. The directors’ forecasts demonstrate that the
Company will meet its day-to-day working capital and share
of estimated drilling costs over the forecast period (being at
least 12 months from the date the financial statements were
approved) from the cash held on deposit on 31 December
2019. The principal risk to the Company’s working capital
position is drilling cost overruns. The Company has sufficient
funding to meet planned drilling expenditures and a level of
contingency. Taking account of these risks, sensitised forecasts
show that the Company should be able to operate within the
level of funds currently held. The directors have a reasonable
expectation that the Company has adequate resources
to continue in operational existence for the foreseeable
future. Thus they continue to adopt the going concern
basis of accounting in preparing the financial statements.
The effect of COVID-19 is actively being assessed by
management. The future impact remains unknown. The
management is of the opinion that there is no reason to
believe there will be any effect in respect of the Company’s
going concern status for the foreseeable future.
REVENUES
Revenues represent amounts receivable for the sale of crude
oil, net of taxes, and are recognised when control of the
product passes to the customer. This is on delivery to a
third party storage facility on behalf of a customer.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash on hand and deposits
held at call with banks.
FINANCIAL INSTRUMENTS
Recognition and Derecognition
Financial assets and financial liabilities are recognised when
the Company becomes a party to the contractual provisions
of the financial instrument.
Financial assets are derecognised when the contractual rights
to the cash flows from the financial asset expire, or when
the financial asset and substantially all the risks and rewards
are transferred.
A financial liability is derecognised when it is extinguished,
discharged, cancelled or expires.
Classification and Initial Measurement of Financial
Assets
Except for those trade receivables that do not contain a
significant financing component and are measured at the
transaction price in accordance with IFRS 9, all financial assets
are initially measured at fair value adjusted for transaction
costs (where applicable).
Financial assets are classified into the following categories:
• amortised cost
•
•
fair value through profit or loss (“FVTPL”)
fair value through other comprehensive income
(“FVOCI”).
In the periods presented the Company does not have any
financial assets categorised as FVTPL.
The classification is determined by both:
•
•
the entity’s business model for managing the financial asset
the contractual cash flow characteristics of the financial
asset.
Subsequent Measurement of Financial Assets
Financial assets at amortised cost
Financial assets are measured at amortised cost if the assets
meet the following conditions:
•
•
they are held within a business model whose objective
is to hold the financial assets and collect its contractual
cash flows
the contractual terms of the financial assets give rise
to cash flows that are solely payments of principal
and interest on the principal amount outstanding
44
www.unionjackoil.comUNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2019 Principal Accounting Policies
After initial recognition, these are measured at amortised cost
using the effective interest method. Discounting is omitted
where the effect of discounting is immaterial. The Company’s
cash and cash equivalents, trade and most other receivables
fall into this category of financial instruments.
Financial assets at Fair Value through Other Comprehensive
Income (“FVOCI”)
The Company accounts for financial assets at FVOCI if the
assets meet the following conditions:
•
they are held under a business model whose objective it is
“hold to collect” the associated cash flows and sell; and
•
the contractual terms of the financial assets give rise
to cash flows that are solely payments of principal and
interest on the principal amount outstanding.
The Company’s investments in unlisted shares are classified
as financial assets at FVOCI.
Classification and Measurement of Financial
Liabilities
The Company’s financial liabilities include trade and
other payables.
Financial liabilities are initially measured at fair value, and,
where applicable, adjusted for transaction costs.
Subsequently, financial liabilities are measured at amortised
cost using the effective interest method.
All interest-related charges are included within finance costs
or finance income.
Impairment of Financial Assets
In relation to the impairment of financial assets, IFRS 9
requires an expected credit loss model to be applied. The
expected credit loss model requires the Company to account
for expected credit losses and changes in those expected
credit losses at each reporting date to reflect changes in
credit risk since initial recognition of the financial assets.
IFRS 9 requires the Company to recognise a loss allowance
for expected credit losses on trade receivables.
In particular, IFRS 9 requires the Company to measure the
loss allowance for a financial instrument at an amount equal
to the lifetime expected credit losses (“ECL”) if the credit risk
on that financial instrument has increased significantly since
initial recognition, or if the financial instrument is a purchased
or originated credit-impaired financial asset. However, if
the credit risk on a financial instrument has not increased
significantly since initial recognition, the Company is required
to measure the loss allowance for that financial instrument
at an amount equal to 12 months ECL.
INTANGIBLE ASSETS – EXPLORATION AND
EVALUATION ASSETS
Costs (including research costs) incurred prior to obtaining
the legal rights to explore an area will be expensed
immediately to the Income Statement, as these are classified
as pre-licence costs.
Expenditure incurred on the acquisition of a licence interest
will initially be capitalised on a licence-by-licence basis.
Costs will be held within exploration and evaluation costs
until such a time as the exploration phase on the licence area
is complete or commercial reserves have been discovered.
Exploration expenditure incurred in the process of
determining exploration targets will be capitalised initially
within intangible assets as exploration and evaluation costs.
Exploration costs will initially be capitalised whilst exploration
and evaluation activities are continuing, and until the success
or otherwise has been established. The success or failure of
each exploration/evaluation effort will be judged generally on
a licence-by-licence basis. Capitalised costs will be written off
on completion of exploration and evaluation activities unless
the results indicate that hydrocarbon reserves exist and that
these reserves are commercially viable.
All such costs will be subject to regular technical, commercial
and management review for indicators of impairment
which includes confirming the continued intent to develop
or otherwise extract value from the licence, prospect or
discovery. Where this is no longer the case, the costs will
be immediately expensed.
Following evaluation of successful exploration wells, if
commercial reserves are established and the technical
feasibility of extraction is demonstrated, and once a project
is sanctioned for commercial development, then the related
capitalised exploration/evaluation costs will be transferred
into a single field cash generating unit within development/
producing assets after testing for impairment, within Property,
Plant and Equipment. Where results of exploration drilling
indicate the presence of hydrocarbons which are ultimately
not considered commercially viable, all related costs will be
written off to the Income Statement.
PROPERTY, PLANT AND EQUIPMENT –
DEVELOPMENT AND PRODUCTION ASSETS
Development and Production (“D&P”) assets are
accumulated into cash generating units ("CGU") and represent
the cost of developing the commercial reserves and bringing
them into production together with the Exploration and
Evaluation (“E&E”) expenditures previously transferred from
E&E assets as outlined in the policy above.
All costs incurred after the technical feasibility and commercial
viability of producing hydrocarbons have been demonstrated
will be capitalised within development/producing assets on a
field-by-field basis. Subsequent expenditure will be capitalised
only where it either enhances the economic benefits of the
development/producing asset or replaces part of the existing
development/producing asset.
On acquisition of a D&P asset from a third party, the asset
will be recognised in the financial statements on signature
of the sale and purchase agreement, subject to satisfaction
of any substantive conditions within the agreement.
Costs relating to each CGU are depleted on a unit of
production method based on the commercial Proven and
Probable Reserves for that CGU. Development assets are not
depreciated until production commences. The depreciation
calculation takes account of the residual value of site
equipment and the estimated future costs of development of
recognised Proven and Probable Reserves, based on current
price levels. Changes in reserve quantities and cost estimates
are recognised prospectively.
45
FINANCIAL STATEMENTS Principal Accounting Policies
DECOMMISSIONING AND SITE RESTORATION
PROVISIONS
Licensees have an obligation to restore fields to a condition
acceptable to the relevant authorities at the end of their
commercial lives.
Provision for decommissioning and reinstatement is recognised
in full as a liability and an asset when the obligation arises.
The asset is included within exploration and evaluation
assets or property, plant and equipment as is appropriate.
The liability is included within provisions.
The amount recognised is the estimated cost of
decommissioning and reinstatement, discounted where
appropriate to its net present value, and is reassessed each
year in accordance with local conditions and requirements.
Revisions to the estimated costs of decommissioning and
reinstatement which alter the level of the provisions required
are also reflected in adjustments to the decommissioning
and reinstatement asset.
CONTINGENT LIABILITIES
Contingent consideration payable in respect of the Company’s
interest in certain licences is considered to be a contingent
liability, which is not recognised due to the lack of estimation
certainty of both the timing and amount payable. These will
be recognised as a provision when it is possible to accurately
estimate costs and the timing is known.
IMPAIRMENT
The carrying amounts of non-current assets are reviewed for
impairment, under IAS 36 for Production and Development
assets and IFRS 6 for Exploration and Evaluation assets, if events
or changes in circumstances indicate the carrying value may not
be recoverable. If there are indicators of impairment, such as
a well not encountering commercial quantities of oil or a site
being shut-in, an exercise is undertaken to determine whether
the carrying values are in excess of their recoverable amount.
Such review is undertaken on an asset by asset basis, except
where such assets do not generate cash flows independent
of other assets, in which case the review is undertaken at the
cash generating unit level on a field-by-field basis. For intangible
exploration and evaluation assets potential impairment triggers
may include the short term expiry of a licence, lack of budgeted
spend, or the lack of potential for commercial development
of the asset. The potential recoverable value of such assets
is assessed by the directors based on their knowledge of
the assets and available information. The Company’s cash-
generating units are the smallest identifiable groups of assets
that generate cash inflows that are largely independent of the
cash inflows from other assets or groups of assets.
A previously recognised impairment loss is reversed if the
recoverable amount increases as a result of a reversal of
the conditions that originally resulted in the impairment.
This reversal is recognised in the Income Statement and
is limited to the carrying amount that would have been
determined, net of depreciation, had no impairment loss
been recognised in the prior years.
The recoverable amount of assets is the higher of their value
in use and fair value less costs to sell. In assessing value in use,
the estimated future cash flows are discounted to their present
value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific
to the asset. For an asset that does not generate cash inflows
largely independent of those from other assets, the recoverable
amount is determined for the cash-generating unit to which the
asset belongs.
Impairments are recognised in the Income Statement to the
extent that the carrying amount exceeds the assets’ recoverable
amount. The revised recoverable amounts are amortised in line
with the Company’s accounting policies.
JOINT ARRANGEMENTS, FARM-IN AND PROFIT
SHARING AGREEMENTS
The Company is party to a joint arrangement when there
is a contractual agreement that sets out the terms of the
relationship over the relevant activities of the Company
and at least one other party.
The management has a legal degree of control over these joint
operating arrangements through Joint Operating Agreements.
The Company classifies its interests in joint arrangements as
joint operations: where the Company has both the rights to
assets and obligations for the liabilities of the joint arrangement.
The Company accounts for its interests in joint operations
by recognising its share of assets, liabilities, revenues and
expenses in accordance with its contractually conferred
rights and obligations.
The Company accounts for its own assets, liabilities and cash
flows measured in accordance with the terms of the production
sharing agreement and the accounting treatment reflects the
agreement’s commercial effect. The Company’s revenue and
cost of sales include revenues and operating costs associated
with the Company’s interest.
CURRENT TAX
Current tax is based on taxable profit for the year. Taxable
profit differs from net profit as reported in the Income
Statement because it excludes items of income or expense
that are taxable or deductible in other years and it further
excludes items that are never taxable or deductible. The
Company’s liability for current tax is calculated using tax
rates that have been enacted or substantively enacted by
the Balance Sheet date.
46
www.unionjackoil.comUNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2019 Principal Accounting Policies
DEFERRED TAX
Deferred tax is the tax expected to be payable or recoverable
on differences between the carrying amounts of assets and
liabilities in the financial statements and the corresponding
tax bases used in the computation of taxable profit, and
is accounted for using the Balance Sheet liability method.
Deferred tax liabilities are generally recognised for all taxable
temporary differences and deferred tax assets are recognised
to the extent that it is probable that taxable profits will be
available against which deductible temporary differences can
be utilised. Such assets and liabilities are not recognised if
the temporary difference arises from the initial recognition
of goodwill or from the initial recognition (other than in
a business combination) of other assets and liabilities in a
transaction that affects neither the taxable profit nor the
accounting profit.
The carrying amount of deferred tax assets is reviewed at
each Balance Sheet date and reduced to the extent that it is no
longer probable that sufficient taxable profits will be available
to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset is
realised based on tax laws and rates that have been enacted or
substantively enacted at the Balance Sheet date. Deferred tax
is charged or credited in the Income Statement, except when
it relates to items charged or credited in other comprehensive
income, in which case the deferred tax is also dealt with in
other comprehensive income.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes
levied by the same taxation authority and the Company
intends to settle its current tax assets and liabilities on a
net basis.
EQUITY INSTRUMENTS
An equity instrument is any contract that evidences a residual
interest in the assets of an entity after deducting all of its
liabilities. Equity instruments issued by the Company are
recognised at the proceeds received, net of direct issue costs.
The equity instrument in respect of the Company is in relation
to the issue of ordinary shares.
SHARE-BASED PAYMENTS AND WARRANTS
Equity-settled share-based payments in respect of warrants
and options issued by the Company are measured at the fair
value of the equity instruments at the grant date, on the basis
that this is immaterially different from the fair value of the
services provided.
Details regarding the determination of the fair value of
equity-settled share-based transactions are set out in note
13(b) and 13(c). The fair value determined at the grant date
of the equity-settled share-based payments is expensed over
the vesting period, based on the Company’s estimate of the
number of equity instruments that will eventually vest.
At each Balance Sheet date, the Company revises its estimate
of the number of equity instruments expected to vest as a
result of the effect of non-market-based vesting conditions.
The impact of the revision of the original estimates, if any, is
recognised in the Income Statement such that the cumulative
expense reflects the revised estimate, with a corresponding
adjustment to equity reserves.
When a share-based payment or warrant expires, the
cumulative expense recognised in the share based payment
reserve is reclassified to the relevant component of equity
in line with the original recognition of the expense.
ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS
The Company has adopted the following standards, amendments to standards and interpretations which are effective for the first
time this year. The impact is shown below:
New and revised International Financial Reporting
Standards
Effective Date: Annual periods
beginning on or after:
EU adopted
IFRS 16
Leases
1 January 2019
Yes
IFRS 16 ‘Leases’ provides a new model for lessee accounting in which all leases, other than short-term and small-ticket-item
leases, will be accounted for by the recognition on the Balance Sheet of a right-to-use asset and a lease liability, and the
subsequent amortisation of the right-to-use asset over the lease term.
The Company adopted IFRS 16 on 1 January 2019. The adoption of the standard has no impact on the Company’s financial
statements as the Company does not hold any leases either at the date of sign off of these financial statements or during any
of the periods presented.
At the date of authorisation of the consolidated financial statements, the IASB and IFRS Interpretations Committee have issued
standards, interpretations and amendments which are applicable to the Company.
47
FINANCIAL STATEMENTS
Principal Accounting Policies
ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS
(CONTINUED)
Whilst these standards and interpretations are not effective for, and have not been applied in the preparation of, these
consolidated financial statements, the following could potentially have a material impact on the Company’s financial statements
going forward:
New and revised International Financial Reporting Standards
Effective Date: Annual
periods beginning on
or after:
EU
adopted
IAS 1
Amendments to IAS 1 and IAS 8: Definition of Material
1 January 2020
IAS 1
Amendments to IAS 1: Classification of Liabilities as Current or
Non-current
1 January 2021
IFRS 3
Amendment to IFRS 3 Business Combinations
IFRS 9
Amendments to IFRS 9, IAS 39 and IFRS 7: Interest Rate Benchmark
Reform
1 January 2020
1 January 2020
Yes
No
No
Yes
New and revised International Financial Reporting Standards which are not considered to potentially have a material impact on
the Company’s financial statements going forwards have been excluded from the above.
Management anticipates that all relevant pronouncements will be adopted in the Company’s accounting policies for the first
period beginning after the effective date of the pronouncement.
There are no other standards and interpretations in issue but not yet adopted that the directors anticipate will have a material
effect on the reported income or net assets of the Company.
CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
In the application of the Company’s accounting policies, which are described in this note, the directors are required to make
judgements regarding the choice and application of accounting policies, as well as estimates and assumptions about the carrying
amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions
are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these
estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised
in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future
periods if the revision affects both current and future periods.
The following are the critical judgements and estimates that the directors have made in the process of applying the Company’s
accounting policies and that have the most significant effect on the amounts recognised in the financial statements:
48
www.unionjackoil.comUNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2019 Judgements in Applying Accounting Policies and Key
Sources of Estimation Uncertainty – Impairment
Management is required to assess the Exploration and
Evaluation assets and the Development and Production
assets for indicators of impairment. Note 7 discloses the
carrying value of the Exploration and Evaluation assets.
Note 8 discloses the carrying value of the Development
and Production assets.
Impairment is considered on a licence-by-licence basis.
In assessing the need to impair Exploration and Evaluation
assets and Development and Production assets the Board
makes assumptions about the future progress and likely
successful outcome of exploration and drilling activities. Due
diligence is performed at the outset of the investment before
an investment is made. At an early stage of exploration of
each investment the need for impairment is determined
through monitoring market and industry conditions,
competent person reports on each prospect and any available
information from each licence’s main Operator.
In the case of those licences where drilling has commenced
and management is committed to further exploration
and evaluation with sufficient financial resources available
to do so, impairment is not recognised unless technical
analysis confirms that commercially viable hydrocarbons
are insufficient to recover costs incurred.
Judgements in Applying Accounting Policies and Key
Sources of Estimation Uncertainty – Investments
The Company’s investments in equity instruments are not
held for trading. Instead they are for medium to long-term
strategic purposes and as such these investments are held
at Fair Value Through Other Comprehensive Income
(“FVTOCI”). Management assesses these assets for any
indication of change in their fair value by reviewing the market
value of the relevant companies and therefore the value of
the underlying asset.
Principal Accounting Policies
CRITICAL ESTIMATES
Share-based Payments and Warrants
In determining the fair value of warrants and options and
the related charges to the Income Statement, the Company
makes assumptions about future events and market
conditions.
The fair value is determined using a valuation model which
is dependent on estimates, including the future volatility
of the Company’s share price and the expected life of the
share-based payments. This is determined by using historic
data from similar companies and historic trends on exercising
share-based payments by holders. See note 13(b) and 13(c).
Exploration and Evaluation Costs
The Company’s accounting policy leads to the development
of tangible and intangible fixed assets, where it is considered
likely that the amount will be recoverable by future
exploitation or sale, or alternatively where the activities
have not reached a stage which permits a reasonable
assessment of the existence of reserves.
This requires management to make assumptions as to the
future events and circumstances, especially in relation to
whether an economically viable extraction operation can
be established. Such estimates are subject to change and
following initial capitalisation, should it become apparent that
recovery of the expenditure is unlikely, the relevant capitalised
amount will be written off to the Income Statement.
Decommissioning and Reinstatement Provisions
Management uses estimates for future decommissioning
expenditure, discount rates (1.63%) and inflation rates
(1%) provided by the Operator to determine appropriate
decommissioning provisions. These may change as a result
of revisions to the estimated timing and future cost of
decommissioning.
Carrying Value of Property, Plant and Equipment
The Company assesses at each reporting period whether
there is any indication that these assets may be impaired
as indicated in note 8.
If such indication exists, the Company estimates the
recoverable amount of the asset. The recoverable amount
is assessed by reference to the higher of ‘value in use’ (being
the net present value of expected future cash flows of the
relevant cash generating unit) and ‘fair value less cost to sell’.
The Company considers the quantities of the Proven and
Probable Reserves, future production levels and future oil
prices as well as other IAS 36 criteria in their assessment of
indicators of impairment. The directors do not believe there
are any indicators of impairment in respect of the assets.
49
FINANCIAL STATEMENTS Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2019
1
BUSINESS AND OPERATING SEGMENTS
The Company is considered to have two operating segments, being the exploration and evaluation of, and the development
and production of hydrocarbon discoveries onshore United Kingdom.
For the year ending 31 December 2019
Exploration Development
and Evaluation and Production
Corporate
Total
Revenue
Operating expenses
Depreciation
Impairment
Other administrative expenses
Exploration write-back
Loss from continuing operations before tax
Finance income
Loss for the year
For the year ending 31 December 2018
Revenue
Operating expenses
Depreciation
Impairment
Other administrative expenses
Loss from continuing operations before tax
Finance income
Loss for the year
For the year ending 31 December 2019
–
–
–
(393,697)
–
112,500
(281,197)
–
(281,197)
–
–
–
(205,308)
–
(205,308)
–
(205,308)
136,959
(185,169)
(32,429)
–
–
–
(80,639)
–
(80,639)
165,270
(159,046)
(32,186)
–
–
(25,962)
–
(25,962)
–
–
–
–
(1,343,362)
–
(1,343,362)
12,815
(1,330,547)
–
–
–
–
(871,489)
(871,489)
4,051
(867,438)
136,959
(185,169)
(32,429)
(393,697)
(1,343,362)
112,500
(1,705,198)
12,815
(1,692,383)
165,270
(159,046)
(32,186)
(205,308)
(871,489)
(1,102,759)
4,051
(1,098,708)
Exploration Development
and Evaluation and Production
Corporate
Total
Non-current assets
Current assets
Non-current liabilities
Current liabilities
6,726,743
–
(457,815)
(144,493)
581,300
84,716
(162,871)
(28,216)
120,288
6,721,803
–
(58,575)
7,428,331
6,806,519
(620,686)
(231,284)
Net assets
6,124,435
474,929
6,783,516
13,382,880
For the year ending 31 December 2018
Non-current assets
Current assets
Non-current liabilities
Current liabilities
3,485,961
–
(286,937)
(275,179)
611,139
173,906
(166,228)
(50,497)
40,000
3,147,435
–
(71,012)
4,137,100
3,321,341
(453,165)
(396,688)
Net assets
2,923,845
568,320
3,116,423
6,608,588
50
www.unionjackoil.comUNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2019
2
OPERATING LOSS
Operating loss is stated after charging:
Impairment charge on intangible assets
Exploration write-back
Depletion of producing assets
Staff costs (see note 3)
Fees payable to the Company’s auditor for:
– The audit of these financial statements
– Tax compliance services
31.12.19
£
31.12.18
£
393,697
(112,500)
32,429
456,482
29,600
6,600
205,308
–
32,186
255,856
28,000
6,500
The impairment charges of £393,697 (2018: £205,308) are in respect of Intangible Assets, PEDL201, PEDL181 and
PEDL209.
The impairment shown for 2018 in last year’s Annual Report and Financial Statements was in respect of PEDL143 Weald
Basin.
During May 2019 the Company sold its interest in PEDL143 Weald Basin to UK Oil & Gas Plc ("UKOG") for 9,731,834
shares in UKOG at an agreed price of 1.156p per share. This transaction is for accounting purposes considered to be an
exploration write-back.
3
EMPLOYEE INFORMATION AND REMUNERATION OF DIRECTORS
The aggregate payroll cost in the year of the employees, all of whom are directors, was as follows:
Salaries
Share-based payment expense
Social security costs
31.12.19
£
31.12.18
£
302,500
121,727
32,255
217,916
15,805
22,135
456,482
255,856
The number of persons employed by the Company was 5 (2018: 5).
Details of each director’s emoluments are included in the Director’s Report and within this note.
The salaries and fees of individual directors were as follows:
D Bramhill
J O’Farrell
R Godson
G Bull
F Lang
2019
£
160,000
70,000
30,000
30,000
12,500
2018
£
110,000
55,833
25,000
25,000
2,083
302,500
217,916
51
FINANCIAL STATEMENTS
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2019
3
EMPLOYEE INFORMATION AND REMUNERATION OF DIRECTORS (CONTINUED)
The emoluments of the highest paid director were £160,000 (2018: £110,000).
Directors’ share-based payments
D Bramhill
J O’Farrell
R Godson
G Bull
F Lang
2019
2018
49,750
28,077
14,125
26,909
2,866
8,741
4,371
1,076
1,076
541
121,727
15,805
The above represents the accounting charge in respect of share options. F Lang resigned as director on 10 June 2019.
Directors’ share options outstanding as at 31 December 2019 and at 31 December 2018:
D Bramhill
J O’Farrell
R Godson
G Bull
Directors’ share options granted 2019:
D Bramhill
J O’Farrell
R Godson
G Bull
Directors’ share options granted 2018:
D Bramhill
J O’Farrell
R Godson
G Bull
2019
2018
240,000,000
140,000,000
60,000,000
110,000,000
120,000,000
60,000,000
30,000,000
30,000,000
Number
Grant date
Exercise price
Vesting date
120,000,000
80,000,000
30,000,000
80,000,000
19.07.19
06.08.19
19.07.19
19.07.19
0.265p
0.265p
0.265p
0.265p
19.07.22
06.08.22
19.07.22
19.07.22
Number
Grant date
Exercise price
Vesting date
120,000,000
60,000,000
30,000,000
30,000,000
18.07.18
18.07.18
07.11.18
07.11.18
0.09p
0.09p
0.11p
0.11p
18.07.21
18.07.21
07.11.21
07.11.21
F Lang resigned as a non-executive director, on 10 June 2019. During 2018, F Lang was awarded 30,000,000 options at
an exercise price of 0.11 pence, with a vesting date of 04.12.21. F Lang has been allowed to retain his options which are
exercisable under the same terms as outlined in the option agreement and as disclosed within note 13(c).
52
www.unionjackoil.comUNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2019
4
FINANCE INCOME
HMRC interest
Bank interest
5
TAXATION
31.12.19
£
31.12.18
£
5,965
6,850
12,815
4,051
4,051
31.12.19
£
31.12.18
£
Current tax
UK Corporation Tax
Adjustment in respect of prior periods
Total UK Corporation Tax charge
–
–
–
The differences between the current tax shown above and the amount calculated by applying the standard rate of UK
Corporation Tax for oil and gas companies of 40% (2018: 40%) to the loss before tax is as follows:
£
–
–
–
£
Loss on ordinary activities before tax
Tax on Company loss on ordinary activities at standard UK corporation tax
rate of 40% (2018: 40%)
Effects of:
Expenses not deductible for tax purposes
Impairment of intangible assets not deductible for tax purposes
Losses carried forward
Current tax charge for year
(1,692,383)
(1,098,708)
(676,953)
(439,483)
3,663
157,479
(515,811)
–
82,123
(357,360)
–
–
A deferred tax asset of £2,684,837 (2018: £2,169,026) relating to the carry forward of losses from trading and pre-
trading expenditure has not been recognised in the year as at present it is not envisaged that any tax will become payable
in the foreseeable future against which those losses could be utilised as deductions.
The Company has total carried forward losses of £6,721,094 (2018: £5,046,835).
53
FINANCIAL STATEMENTS
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2019
6
LOSS PER SHARE
The Company has issued warrants and options over ordinary shares which could potentially dilute the basic loss per share
in the future. Further details are given in note 13(b) and 13(c).
Basic loss per share is calculated by dividing the loss attributable to ordinary shareholders by the weighted average number
of ordinary shares outstanding during the year.
During the current and prior year, the Company had warrants and options in issue as detailed in note 13(b) and 13(c).
At 31 December 2019 the Company had 6,074,510 (2018: 51,407,842) warrants in issue and 640,000,000 (2018:
300,000,000) options in issue.
These warrants and options have not been taken into account when calculating the diluted loss per share as their impact
was anti-dilutive. Therefore, the basic and diluted loss per share are the same.
Loss per share
2019
Pence
2018
Pence
Loss per share from continuing operations
(0.02)
(0.01)
The loss and weighted average number of ordinary shares used in the calculation of loss per share are as follows:
2019
£
2018
£
Loss used in the calculation of total basic and diluted loss per share
(1,692,383)
(1,098,708)
Number of shares
2019
2018
Weighted average number of ordinary shares for the purposes of basic
and diluted loss per share
11,118,881,083
7,532,096,235
As detailed in note 13, the Company has 831,680,400 (2018: 831,680,400) deferred shares. These have not been included
within the calculations of basic shares above on the basis that IAS 33 defines an ordinary share as an equity instrument
that is subordinate to all other classes of equity instruments. Any residual interest in the assets of the Company would
not currently, on liquidation, go to the deferred shareholders, hence they are not currently considered subordinate.
These deferred shares have not been taken into account when calculating the diluted loss per share as their impact
was anti-dilutive.
The Company issued 6,990,196,071 new ordinary shares during the year (2018: 4,117,647,049).
54
www.unionjackoil.comUNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2019
7
INTANGIBLE ASSETS
At 1 January
Costs incurred during the year
Transfer to development and production assets
Costs impaired
At 31 December
31.12.19
£
31.12.18
£
3,485,961
3,634,479
–
(393,697)
2,806,278
991,172
(106,181)
(205,308)
6,726,743
3,485,961
Additions to exploration and evaluation costs represent exploration and appraisal costs incurred in the year in respect of
unproven properties and provisions recognised for decommissioning and restoration liabilities.
Total costs of £393,697 (2018: £205,308) have been impaired with regard to PEDL201, £375,892 (2018: £nil), PEDL181,
£15,042 (2018: £nil) and PEDL209, £2,763 (2018: £nil). These impairment costs are disclosed within the Strategic Report on
page 10.
The total impairment charge for 2018 was in respect of PEDL143 (Weald Basin). This licence interest was sold during 2019
and is described elsewhere in this Annual Report.
The directors have reviewed whether there were any potential triggers for impairment evidence for each of the assets.
If a trigger was identified the directors considered the potential value of the projects and licences. The directors have
also considered the likely opportunities for realising the value of licences and have concluded that the likely value of each
exploration area is individually in excess of its carrying amount with the exception of those noted above.
Included in the above intangible asset additions during the year are amounts arising in relation to changes in decommissioning
and restoration provisions (note 20).
Intangible assets (less any impairment) comprise amounts capitalised as follows:
Wressle
Widmerpool Gulf
West Newton
Biscathorpe
North Kelsey
Louth Extension
Broughton North
Humber Basin
Laughton
PEDL180
PEDL201
PEDL183
PEDL253
PEDL241
PEDL339
PEDL182
PEDL181
PEDL209
31.12.19
£
31.12.18
£
2,429,830
–
2,346,915
1,821,371
104,168
16,426
8,033
–
–
2,280,866
367,730
329,784
387,137
83,851
16,003
6,236
12,881
1,473
55
FINANCIAL STATEMENTS
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2019
8
PROPERTY, PLANT AND EQUIPMENT
Cost
At 1 January
Transfer from exploration and evaluation assets
Additions
At 31 December
Depreciation
At 1 January
Charge for the year
At 31 December
Net book value
At 31 December
At 1 January
Development and Production assets comprise amounts capitalised as follows:
Fiskerton Airfield
Keddington
Dukes Wood
Kirklington
EXL294
PEDL005(R)
PEDL118
PEDL203
31.12.19
£
31.12.18
£
660,647
–
2,587
663,234
49,508
32,426
81,934
514,181
106,181
40,285
660,647
17,322
32,186
49,508
581,300
611,139
611,139
496,859
31.12.19
£
208,742
266,418
59,542
46,598
31.12.18
£
222,048
282,910
59,566
46,615
581,300
611,139
The Board has assessed the development and production assets as at 31 December 2019 and has not identified any
indicators of impairment as set out in IAS36 Impairment of assets.
56
www.unionjackoil.comUNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2019
JOINT OPERATIONS
9
The Company is party to ten joint arrangements which carry out exploration and development of hydrocarbons
in the United Kingdom. The joint operations in which the Company held an interest as at 31 December 2019 are as below:
Licence
Name
Proportion of
ownership interest
Principal place
of business
PEDL180
PEDL183
PEDL201
PEDL005(R)
PEDL253
PEDL241
PEDL339
PEDL182
PEDL118
PEDL203
EXL294
PEDL181
PEDL209
Wressle
West Newton
Widmerpool Gulf
Keddington
Biscathorpe
North Kelsey
Louth Extension
Broughton North
Dukes Wood
Kirklington
Fiskerton Airfield
Humber Basin
Laughton
27.5%
16.665%
26.25%
20%
27.5%
20%
20%
27.5%
16.67%
16.67%
20%
12.5%
10%
England
England
England
England
England
England
England
England
England
England
England
England
England
57
FINANCIAL STATEMENTS
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2019
10
INVESTMENTS
Investments in equity instruments designated as at FVTOCI
Shares
2019
£
2018
£
120,288
40,000
These investments in equity instruments are not held for trading. Instead, they are held for medium to long-term strategic
purposes. Accordingly, the directors of the Company have elected to designate these investments in equity instruments as
at FVTOCI as they believe that recognising short-term fluctuations in these investments’ fair value in profit or loss would
not be consistent with the Company’s strategy of holding these investments for long-term purposes and realising their
performance potential in the future. Measurement criteria for investments are given in note 16.
At 1 January
Additions
Changes in fair value of investments
At 31 December
31 December
2019
£
31 December
2018
£
40,000
112,500
(32,212)
120,288
40,000
–
–
40,000
The Company is the beneficial owner of 169,959 (2018: 169,959) ordinary shares in Elephant Oil Limited, a company
registered in England and Wales, which represents a 0.73% (2018: 0.73%) interest in that company. The principal activity
of Elephant Oil Limited is the exploration and evaluation of hydrocarbon assets.
The Company is the beneficial owner of 9,731,834 (2018: nil) ordinary shares in UK Oil & Gas plc (“UKOG”), a company
registered in England and Wales, which represents a 0.133% (2018: nil) interest in that company at year end. The principal
activity of UKOG is the exploration and evaluation of hydrocarbon assets. The shares in UKOG were received as
consideration from the sale of the Company’s 7.5% interest in PEDL143 Weald Basin to the value of £112,500. At the
time of the sale the UKOG shares were valued at 1.156p each.
The investment in UKOG was revalued at the year end to the value of £80,288 (0.825p per share) with the loss being
recorded in the Statement of Comprehensive Income on page 40.
11
TRADE AND OTHER RECEIVABLES
The average credit period on sales of goods is 30 days. No interest is charged on outstanding trade receivables. The
Company measures the loss allowance for trade receivables at an amount equal to 12 months ECL. The expected credit
losses on trade receivables are estimated using a provision matrix by reference to past default experience of the debtor and
an analysis of the debtor current financial position, adjusted for factors that are specific to the debtors, general economic
conditions of the industry in which the debtors operate and an assessment of both the current as well as the forecast
direction of conditions at the reporting date.
The Company has recognised no loss allowance as the receivables are not past due nor has there been historical experience
to indicate that these receivables are generally not recoverable.
There has been no change in the estimation techniques or significant assumptions made during the current reporting period.
Trade receivables
Other debtors
VAT
Prepayments
58
31.12.19
£
31.12.18
£
6,408
65,000
78,308
30,481
77,678
–
75,538
44,838
180,197
198,054
www.unionjackoil.comUNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2019
12
CASH AND CASH EQUIVALENTS
Cash at bank
31.12.19
£
31.12.18
£
6,626,322
3,123,287
Cash and cash equivalents comprise cash and short-term bank deposits with an original maturity of three months or less.
The carrying amount of these assets is equal to their fair value.
13(a)
SHARE CAPITAL
Allotted and issued:
Number
Class
Nominal
value
31.12.19
£
31.12.18
£
15,440,906,325
(31 December 2018: 8,450,710,254)
831,680,400
(31 December 2018: 831,680,400)
Total
Ordinary
0.025p
3,860,227
2,112,677
Deferred
0.225p
1,871,281
1,871,281
5,731,508
3,983,958
Ordinary shares hold voting rights and are entitled to any distributions made on winding up. Deferred shares do not hold
voting rights and are not entitled to distributions made on winding up.
Allotments during the year
In April 2019, 2,333,333,334 new ordinary shares were issued for cash at 0.075 pence per share, raising approximately
£1,750,000 before expenses of £153,213 by way of a placing and subscription.
In July 2019, 1,323,529,411 new ordinary shares were issued for cash at 0.17 pence per share, raising approximately
£2.25 million before expenses of £140,888 by way of a placing and subscription.
In November 2019, 3,333,333,326 new ordinary shares were issued for cash at 0.15 pence per share, raising approximately
£5 million before expenses of £346,495 by way of a placing and subscription.
59
FINANCIAL STATEMENTS
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2019
13(b) SHARE-BASED PAYMENTS – WARRANTS
Details of the number of warrants and the weighted average exercise price (WAEP) outstanding during the year
are as follows:
Year ended December 2019
Number of warrants
Outstanding and exercisable at the beginning of the year
Outstanding and exercisable at the end of the year
51,407,842
6,074,510
Year ended December 2018
Number of warrants
Outstanding and exercisable at the beginning of the year
Outstanding and exercisable at the end of the year
51,407,842
51,407,842
WAEP
£
0.003
0.003
WAEP
£
0.003
0.003
The fair values of warrants in issue are calculated using the Black-Scholes model. The inputs into the model are as follows:
Date of grant
Number in issue at 31 December 2019
Share price at date of grant
Exercise price
Expected volatility
Expected life (years)
Risk-free rate
Expected dividend yield
Fair value at date of grant
Earliest vesting date
Expiry date
During the year 45,333,332 warrants, with a fair value of £50,336, expired (2018: nil).
04.12.12
6,074,510
0.3p
0.25p
69%
5.0
0.8464%
0%
£11,099
20.12.12
20.12.22
60
www.unionjackoil.comUNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2019
13(c) SHARE-BASED PAYMENTS – OPTIONS
During the year, options were granted to directors of the Company. Options are Issued with an exercise price
equating to the mid-market closing price on the date of Issue.
Options have a vesting period of 3 years and are subject to a further condition that the options can only be exercised
if the share price is at a 30% premium to the exercise price.
Details of the number of options and the weighted average exercise price (WAEP) outstanding during the year are
as follows:
Year ended December 2019
Number of options
Outstanding at the beginning of the year
Granted during 2019
Outstanding at the end of the year
Exercisable at the end of the year
300,000,000
340,000,000
640,000,000
–
Year ended December 2018
Number of options
Outstanding at the beginning of the year
Granted during 2018
Outstanding at the end of the year
Exercisable at the end of the year
–
300,000,000
300,000,000
–
WAEP
£
0.00098
0.00265
0.00187
–
WAEP
£
–
0.00098
0.00098
–
The fair values of options in issue are calculated using the Black-Scholes model. The inputs into the model are as follows:
Date of grant
06.08.19
19.07.19
04.12.18
07.11.18
18.07.18
Number in issue at 31 December 2019
Share price at date of grant
Exercise price
Expected volatility
Expected life (years)
Risk-free rate
Expected dividend yield
Fair value at date of grant
Earliest vesting date
Expiry date
80,000,000 260,000,000
0.265p
0.265p
70%
6.5
0.5187%
0%
£435,086
19.07.22
19.07.29
0.265p
0.265p
70%
6.5
0.3161%
0%
£133,497
06.08.22
06.08.29
30,000,000
0.11p
0.11p
63%
6.5
0.8840%
0%
£19,491
04.12.21
04.12.28
90,000,000 180,000,000
0.09p
0.09p
55%
6.5
0.9427%
0%
£85,822
18.07.21
18.07.28
0.11p
0.11p
62%
6.5
1.1035%
0%
£58,106
07.11.21
07.11.28
The Company recognised total expenses in the Income Statement of £139,483 in relation to share options accounted
for as equity-settled share-based payment transactions during the year (2018: £16,881).
Expected volatility was determined based on a historic 5-year volatility of the Company.
61
FINANCIAL STATEMENTS
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2019
14
RESERVES
The nature and purpose of each reserve within equity is as follows:
Share capital – represents the nominal value of shares issued.
Share premium – represents the amount subscribed for share capital in excess of nominal value, less related
share issue costs.
Share-based payment reserve – represents the cumulative cost of warrants and options issued in return for
professional services.
Accumulated deficit – represents cumulative profits or losses, and all other net gains and losses and transactions
with owners not recognised elsewhere.
15
RECONCILIATION OF LOSS TO CASH GENERATED FROM OPERATIONS
Loss before taxation
Depletion of producing assets
Impairment of intangibles
Exploration write-back
Share-based payments
Finance income
Decrease / (increase) in trade and other receivables
(Decrease) / increase in trade and other payables
31.12.19
£
31.12.18
£
(1,692,383)
32,429
393,697
(112,500)
139,483
(6,850)
(1,098,708)
32,186
205,308
–
16,881
(4,051)
(1,246,124)
(848,384)
82,857
(309,897)
(132,182)
86,609
Cash used in operations
(1,473,164)
(893,956)
16
FINANCIAL INSTRUMENTS
Classification of measurement of financial instruments
The fair value hierarchy groups financial assets and liabilities into three levels based on the significance of inputs used
in measuring the fair value of the financial assets and liabilities.
The fair value hierarchy has the following levels:
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices); and
• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The level within which the financial asset or liability is classified is determined based on the lowest level of significant input
to the fair value measurement.
The Company holds investments at fair value through other comprehensive income. Investments in unlisted shares are
a level 3 valuation as the quoted price is not available.
62
www.unionjackoil.comUNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2019
16
FINANCIAL INSTRUMENTS (CONTINUED)
The tables below set out the Company’s accounting classification of each class of its financial assets and liabilities.
Financial assets measured at fair value
At 31 December 2019
Investments: FVOCI
At 31 December 2018
Investments: FVOCI
Financial assets measured at amortised cost
At 31 December 2019
Trade receivables
Cash and cash equivalents
Total carrying value
At 31 December 2018
Trade receivables
Cash and cash equivalents
Total carrying value
All of the above financial assets’ carrying values approximate to their fair values at 31 December 2019 and
31 December 2018 given their nature and short times to maturity.
Financial liabilities measured at amortised cost
At 31 December 2019
Trade payables
Accruals
Total carrying value
At 31 December 2018
Trade payables
Accruals
Total carrying value
All of the above financial liabilities’ carrying values approximate to their fair values at 31 December 2019 and
31 December 2018 given their nature and short times to maturity.
£
120,288
40,000
£
6,408
6,626,322
6,632,730
77,678
3,123,287
3,200,965
£
144,394
86,890
231,284
351,454
45,234
396,688
63
FINANCIAL STATEMENTS
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2019
17
FINANCIAL INSTRUMENT RISK EXPOSURE AND MANAGEMENT
The principal financial risks to which the Company is exposed are: liquidity risk, oil price risk and credit risk. This note
describes the Company’s objectives, policies and processes for managing those risks and the methods used to measure
them.
Credit risk
The Company’s credit risk is primarily attributable to its cash balances and such risk is limited because the third party
is an international bank of which the latest Standard & Poors rating is BBB.
The Company’s total credit risk amounts to the total of the sum of the receivables, cash and cash equivalents. At the year
end this amounted to £6,632,730 (2018: £3,200,965).
Liquidity risk
In managing liquidity risk, the main objective of the Company is to ensure that it has the ability to pay all of its liabilities as they
fall due. The Company monitors its levels of working capital to ensure that it can meet its debt repayments as they fall due.
The table below shows the undiscounted cash flows on the Company’s financial liabilities as at 31 December 2019 and
31 December 2018 on the basis of their earliest possible contractual maturity.
At 31 December 2019
Trade payables
Accruals
At 31 December 2018
Trade payables
Accruals
Oil price risk
Total
£
Within
2 months
£
Within Greater than
6 months
£
2-6 months
£
144,394
86,890
144,394
50,690
–
36,200
231,284
195,084
36,200
351,454
45,234
351,454
10,734
–
34,500
396,688
362,188
34,500
–
–
–
–
–
–
The Company is exposed to oil price risk associated with sales of oil from production. The Company does not currently
consider it necessary to use hedging instruments to manage its exposure to this risk.
Capital management
The Company’s objectives when managing capital are to safeguard its ability to continue as a going concern, add shareholder
value and to maintain an optimal capital structure to reduce the cost of capital. The Company defines capital as being share
capital plus reserves as disclosed in the Balance Sheet.
The Board of Directors monitors the level of capital as compared to the Company’s commitments, and adjusts the level
of capital as is determined to be necessary, by issuing shares.
The Company is not subject to any externally imposed capital requirements.
64
www.unionjackoil.comUNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2019
18
FINANCIAL COMMITMENTS
The Company had no financial commitments as at 31 December 2019 or 31 December 2018, other than those recognised
in the Balance Sheet and where Authority for Expenditure has been agreed with the Operator.
19
TRADE AND OTHER PAYABLES
Trade payables
Accruals
20
PROVISIONS
As at 1 January 2018
Adjustment to provision estimates
New provisions arising on licences
Accretion of provision
At 31 December 2018
Adjustment to provision estimates
Accretion of provision
At 31 December 2019
31.12.19
£
31.12.18
£
144,394
86,890
351,454
45,234
231,284
396,688
Decommissioning
and reinstatement
provision
£
229,918
6,604
213,071
3,571
453,165
160,134
7,387
620,686
Provision has been made for decommissioning costs on productive fields. Provision has also been made for reinstatement
costs relating to exploration and evaluation assets where work performed to date gives rise to an obligation, principally for
site restoration. Assumptions, based on the current economic environment, have been made which the directors believe
are a reasonable basis upon which to estimate the future liability. This estimate will be reviewed regularly to take into
account any material changes to assumptions. Actual costs will depend on a number of factors, including future market
prices and any variation in the extent of decommissioning and reinstatement to be performed.
Decommissioning and reinstatement costs are currently expected to be utilised between 2020 and 2040.
Provisions created during the year, based on information provided by the Operators, relate to obligations in respect of
Keddington, Fiskerton Airfield oilfield, Dukes Wood, Kirklington, Wressle and West Newton assets. No provisions have
been utilised during the year.
65
FINANCIAL STATEMENTS
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2019
21
RELATED PARTY TRANSACTIONS
Details of key management personnel remuneration are disclosed in note 3. Key management comprises only the directors.
Charnia Resources (UK), an entity owned by Graham Bull, non-executive director, was paid £92,800 (2018: £55,200)
in respect of consulting fees. No amounts were outstanding at the year end (2018:nil).
Jayne Bramhill, spouse of David Bramhill, received the sum of £9,000 (2018: £6,000) from the Company in respect
of IT maintenance and administration costs. No amounts were outstanding at the year end. (2018:nil).
22
CONTINGENT LIABILITIES
In respect of PEDL180 and PEDL182 a sum of £1,040,000 is to be paid to the entity Calmar LP on first oil production
from the Wressle discovery.
23
EVENTS AFTER THE BALANCE SHEET DATE
The following events have taken place after the year end:
During January 2020, the Planning Inspectorate informed the Operator that the appeal in respect of obtaining planning
consent for the development of the Wressle oilfield, situated on licences PEDL180 and PEDL182 located in North
Lincolnshire, was successful. The Inspector also allowed the application for an award of costs against the North Lincolnshire
Council (“NLC”). Subsequently, the NLC has paid costs of £403,000. Union Jack will receive its proportion of this payment
once the sum to be paid is agreed with the Operator.
During March 2020, the Company acquired a 35% interest in PEDL005(R) containing the producing Keddington oilfield and
a 15% interest in PEDL339 containing a portion of the Louth Prospect, from Terrain Energy Limited for a consideration of
£200,000.
In April 2020, the Company purchased 5,000,000 new ordinary shares in Egdon Resources plc via means of a subscription
at a price of 2 pence per Subscription Share for a total subscription amount of £100,000.
In April 2020, approval for the variation to the permit to recommence well testing at West Newton A-2 was received from
the Environment Agency.
Since the outbreak of Coronavirus (COVID-19) in early 2020, the priority of the Company has been on the health and
safety of its employees and technical staff. Like many organisations, plans have been implemented and active measures have
been taken to mitigate risk, such as no one-to-one contact and numerous telephone meetings. The Board is also in frequent
contact with the Company’s JOA partners and our external technical team to assess any potential impact on the assets in
which the Company has invested. We continue to follow the most up-to-date Government advice and engage with the
regulatory bodies and stakeholders.
To date, the exploration, development and production activities of the Company's assets have continued in line with plans
and with minimal impact from COVID-19. However, the Company recognises COVID-19 and associated geo-political
factors have created uncertainty around the price and demand for oil.
The Company's financial health remains strong, with a robust balance sheet, cash reserves to fund its operations through to
April 2021 and remains debt free. Accordingly, the Board does not currently plan to make changes going forward. However,
the Board continues to monitor the situation closely and will, with its JOA partners, make adjustments if appropriate.
66
www.unionjackoil.comUNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2019 Notice of Annual General Meeting
COVID-19 AGM ARRANGEMENTS
1 The Company’s AGM is currently scheduled to be held
on Thursday 18 June 2020 at the Company’s registered office
6 Charlotte Street, Bath, BA1 2NE at 11.00am.
2 The Company is closely monitoring the COVID-19 situation,
including UK Government guidance and will continue to do so in the
lead up to the AGM. The health of our shareholders, employees and
stakeholders remains extremely important to us and accordingly, the
Board has taken into consideration the compulsory ‘Stay at Home’
measures that have been published by the UK Government.
3 These measures provide that public gatherings of more than two
people are currently not permitted. Should these directives from the
government remain in place up to and in the build up to the AGM,
shareholders will not be allowed to attend the Company’s AGM in
person and anyone seeking to attend the meeting will be refused
entry. As such, shareholders should note they are not entitled to
attend the Company’s AGM in person unless notified otherwise via
the Company’s website www.unionjackoil.com
4 Shareholders are requested to therefore submit their votes, in
respect of the business to be discussed, via proxy (electronically
or by post in advance, as set out in this Notice of Annual General
Meeting) as early as possible. Shareholders should appoint the Chair
of the meeting as their proxy. If a shareholder appoints someone else
as their proxy, that proxy will not be able to attend the meeting in
person or cast the shareholder’s vote.
5 The business at the Company’s AGM will be curtailed to the formal
business section only, with no wider presentations on business
performance or Q and A. No advisers or other guests will be
permitted to attend. If any shareholder has a question they would
like to pose to the Board, this should be submitted to the Chairman
via info@unionjackoil.com
6 In the event that further disruption to the AGM becomes
unavoidable, we will announce any changes to the meeting (such
as timing or venue) as soon as practicably possible through the
Company’s website.
Notice is hereby given that the Annual General Meeting (the
“AGM”) of Union Jack Oil plc (the “Company”) will be held at
the offices of Berkeley Hall Marshall Limited, 6 Charlotte Street,
Bath BA1 2NE on 18 June 2020 at 11.00 a.m. to consider and, if
thought fit, pass the following resolutions, of which resolutions
numbered 1 to 5 will be proposed as ordinary resolutions and
resolution number 6 will be proposed as a special resolution:
authority shall expire on the conclusion of the next AGM
of the Company, except that the Company may at any
time before such expiry make an offer or agreement
which would or might require Relevant Securities to
be allotted after such expiry and the directors may
allot Relevant Securities in pursuance of such an offer
or agreement as if this authority had not expired.
ORDINARY RESOLUTIONS
1 Report and accounts
To receive the audited annual accounts of the Company
for the year ended 31 December 2019, together with the
Directors’ Report and the Auditor’s Report on those annual
accounts.
2 Re-election of director retiring by rotation
To re-elect Raymond Godson as a director, who retires
by rotation in accordance with the Company’s Articles of
Association.
3 Re-appointment of auditor
To re-appoint BDO LLP as auditor of the Company to hold
office from the conclusion of this AGM until the conclusion
of the next general meeting at which accounts are laid
before the Company.
4 Auditor’s remuneration
To authorise the directors to determine the remuneration
of the auditor.
5 Directors’ authority to allot shares
That, in substitution for any equivalent authorities and
powers granted to the directors prior to the passing of
this resolution, the directors be and they are generally and
unconditionally authorised pursuant to Section 551 of the
Companies Act 2006 (the “Act”) to exercise all powers
of the Company to allot shares in the Company, and to
grant rights to subscribe for or to convert any security
into shares in the Company (“Relevant Securities”)
up to an aggregate nominal amount of £2,865,753.50
(representing approximately 50% of the issued share
capital of the Company at the date of this notice) provided
that, unless previously revoked, varied or extended, this
SPECIAL RESOLUTION
6 Directors’ power to issue shares for cash
That, conditional upon the passing of resolution number
5, the directors be and they are empowered pursuant
to Section 570(1) of the Act to allot equity securities
(as defined in Section 560(1) of the Act) of the Company
wholly for cash pursuant to the authority of the directors
under Section 551 of the Act conferred by resolution
5 above as if Section 561(1) of the Act did not apply
to such allotment provided that the power conferred
by this resolution shall be limited to the allotment of
equity securities up to an aggregate nominal value equal
to £2,865,753.50 (representing approximately 50% of
the issued share capital of the Company at the date
of this notice) and, unless previously revoked, varied
or extended, this power shall expire on the conclusion
of the next AGM of the Company, except that the
Company may before the expiry of this power make
an offer or agreement which would or might require
equity securities to be allotted after such expiry and the
directors may allot equity securities in pursuance of such
an offer or agreement as if this power had not expired.
By order of the Board
Matthew Small
Company Secretary
Dated: 7 May 2020
Registered Office:
6 Charlotte Street,
Bath BA1 2NE
67
ANNUAL GENERAL MEETING
Notice of Annual General Meeting
COVID-19 AGM ARRANGEMENTS
1 The Company’s AGM is currently scheduled to be held
4 Shareholders are requested to therefore submit their votes, in
on Thursday 18 June 2020 at the Company’s registered office
6 Charlotte Street, Bath, BA1 2NE at 11.00am.
2 The Company is closely monitoring the COVID-19 situation,
including UK Government guidance and will continue to do so in the
lead up to the AGM. The health of our shareholders, employees and
stakeholders remains extremely important to us and accordingly, the
Board has taken into consideration the compulsory ‘Stay at Home’
measures that have been published by the UK Government.
3 These measures provide that public gatherings of more than two
people are currently not permitted. Should these directives from the
government remain in place up to and in the build up to the AGM,
shareholders will not be allowed to attend the Company’s AGM in
person and anyone seeking to attend the meeting will be refused
entry. As such, shareholders should note they are not entitled to
attend the Company’s AGM in person unless notified otherwise via
the Company’s website www.unionjackoil.com
respect of the business to be discussed, via proxy (electronically
or by post in advance, as set out in this Notice of Annual General
Meeting) as early as possible. Shareholders should appoint the Chair
of the meeting as their proxy. If a shareholder appoints someone
else as their proxy, that proxy will not be able to attend the meeting
in person or cast the shareholder’s vote.
5 The business at the Company’s AGM will be curtailed to the formal
business section only, with no wider presentations on business
performance or Q and A. No advisers or other guests will be
permitted to attend. If any shareholder has a question they would
like to pose to the Board, this should be submitted to the Chairman
via info@unionjackoil.com
6 In the event that further disruption to the AGM becomes
unavoidable, we will announce any changes to the meeting (such
as timing or venue) as soon as practicably possible through the
Company’s website.
Notes:
1 Pursuant to Regulation 41 of the Uncertificated Securities Regulations
2001 (as amended), only those members registered in the register
of members of the Company at 6.00 p.m. on 16 June 2020 (or if the
AGM is adjourned, 48 hours before the time fixed for the adjourned
AGM) shall be entitled to attend and vote at the AGM in respect of the
number of shares registered in their name at that time. In each case,
changes to the register of members after such time shall be disregarded
in determining the rights of any person to attend or vote at the AGM.
2 If you wish to attend the AGM in person, you should arrive at the offices
of Berkeley Hall Marshall, 6 Charlotte Street, Bath BA1 2NE at 11.00am.
In order to gain admittance to the AGM, members may be required to
prove their identity, however the Company would like to draw attention
to the COVID-19 AGM arrangements shown above and on page 67.
3 A member who is entitled to attend, speak and vote at the AGM may
appoint a proxy to attend, speak and vote instead of him.
A member may appoint more than one proxy provided each proxy is
appointed to exercise rights attached to different shares (so a member
must have more than one share to be able to appoint more than one
proxy). A proxy need not be a member of the Company but must attend
the AGM in order to represent you. A proxy must vote in accordance
with any instructions given by the member by whom the proxy is
appointed. Appointing a proxy will not prevent a member from attending
in person and voting at the AGM (although voting in person at the
AGM will terminate the proxy appointment). A proxy form is enclosed.
The notes to the proxy form include instructions on how to appoint
the Chairman of the AGM or another person as a proxy. You can only
appoint a proxy using the procedures set out in these notes and in the
notes to the proxy form.
4 To be valid, a Proxy Form, and the original or duly certified
copy of the power of attorney or other authority (if any) under which
it is signed or authenticated, should reach the Company’s registrar,
Computershare Investor Services PLC of The Pavilions, Bridgwater Road,
Bristol BS99 6ZY, by no later than 11.00 a.m. on 16 June 2020.
5 CREST members who wish to appoint a proxy or proxies through the
CREST electronic proxy appointment service may do so for the AGM
and any adjournment by using the procedures described in the CREST
manual (euroclear.com/crest). CREST personal members or other
CREST-sponsored members and those CREST members who have
appointed a voting service provider should refer to their CREST sponsor
or voting service provider, who will be able to take the appropriate action
on their behalf. In order for a proxy appointment or instruction made
using the CREST service to be valid, the appropriate CREST message
(a CREST proxy instruction) must be properly authenticated in
accordance with Euroclear’s specifications and must contain the
information required for such instructions, as described in the CREST
manual. All messages relating to the appointment of a proxy or an
instruction to a previously appointed proxy must be transmitted so as to
be received by Computershare (ID: 3RA50) by 11.00 a.m. on Tuesday
16 June 2020. It is the responsibility of the CREST member concerned
to take such action as shall be necessary to ensure that a message is
transmitted by means of the CREST system by any particular time. In
this connection, CREST members and, where applicable, their CREST
sponsors or voting service providers, are referred, in particular, to those
sections of the CREST manual concerning practical limitations of the
CREST system and timings. The Company may treat a CREST proxy
instruction as invalid in the circumstances set out in Regulation 35(5)(a)
of the Uncertificated Securities Regulations 2001.
6 In the case of joint holders of shares, the vote of the first named in the
register of members who tenders a vote, whether in person or by proxy,
shall be accepted to the exclusion of the votes of other joint holders.
7 A member that is a company or other organisation not having a physical
presence cannot attend in person but can appoint someone to represent
it. This can be done in one of two ways: either by the appointment of a
proxy (described in notes 3 to 5 above) or of a corporate representative.
Members considering the appointment of a corporate representative
should check their own legal position, the Company’s Articles of
Association and the relevant provision of the Companies Act 2006.
8 Copies of the executive directors’ service contracts with the Company
and letters of appointment of the non-executive directors are available
for inspection at the registered office of the Company during the usual
business hours on any weekday (Saturday, Sunday or public holidays
excluded) from the date of this notice until the conclusion of the AGM.
68
www.unionjackoil.comUNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
Union Jack Oil plc
6 Charlotte Street,
Bath BA1 2NE,
England
Telephone: +44 (0) 1225 428139
Fax:
+44 (0) 1225 428140
Email: info@unionjackoil.com
Web: www.unionjackoil.com