United Oil & Gas plc
Registered number: 09624969
UNITED OIL & GAS PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
1
United Oil & Gas plc
CONTENTS
Chairman’s statement
Group strategic report
Group operations review
Directors' report
Board of Director’s
Directors' remuneration report
Independent auditor’s report
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Company balance sheet
Company statement of changes in equity
Notes to the Parent Company financial statements
Company information
Page
3
6
11
15
19
21
23
31
31
32
33
34
35
62
63
64
71
2
CHAIRMAN’S STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2019
United Oil & Gas plc
Dear shareholders,
Introduction
Building on the momentum of 2018, I am pleased to report that in 2019 and early 2020 we have made great strides
towards our aim of becoming a full cycle oil and gas company with a strong and diversified portfolio of exploration,
development and production assets. This was achieved in the course of another very active period for our small but
highly skilled and experienced executive management team and staff.
Strengthening of Executive Team
We were delighted to welcome David Quirke to the executive team as CFO and to the Board in early 2019. His arrival
has enhanced what was an already highly advanced ‘deal-making’ expertise within the business. David made an
immediate impact and played a key role in the acquisition and financing of the Rockhopper Egypt assets discussed
below. I am now very pleased that our executive team have the fully complementary skills and experience to allow us
to deliver on our strategy and growth potential.
Strategy
Our strategy remains clear: it is focussed on building a full cycle portfolio of low risk production, development and
exploration assets (as we now have in Egypt, Italy and the UK) complemented by a few higher risk but high impact
exploration opportunities (as we have in Jamaica and are in discussions regarding elsewhere). We are committed to a
dynamic approach to portfolio management and see opportunity to deliver value to shareholders through our
technical expertise as well as through drilling operations. In pursuit of this strategy we continue to seek opportunities
when appropriate, and to sell or withdraw from less fitting or promising assets, or when we can realise an immediate
gain. 2019 was a very active year in the pursuit of that strategy as outlined below.
Key activities in 2019
2019 was dominated by the acquisition of Rockhopper Egypt and its 22% interest in the Abu Sennan concession
onshore Egypt. Such acquisitions are complicated and involve many hurdles which must be overcome, each with the
potential to end the deal. Our management team built and carefully managed relationships with the vendor, licence
partners, financing partner, new and existing shareholders and with the Government and regulatory authorities in
Egypt. Each of these stakeholders played a role in the process and it was only through the tireless work and
considerable skill of our Executive team that this deal was delivered. I am particularly proud that United Oil & Gas Plc
(“United” or “Company”) secured this asset in the face of competition from larger and longer established bidders.
The merit of targeting this asset has been conclusively proven since the deal was announced, with a series of positive
announcements, significantly enhancing the value of our new asset. Production at the licence has greatly exceeded
expectations and will provide an important revenue source for the future development of our company.
In Italy, throughout 2019 we continued to pursue the various permissions required for our Selva gas development
project with the objective of first gas in late 2020, leading to a further significant revenue stream for the company.
The approval process was on track during 2019 and into H1 2020 but with the COVID-19 crisis affecting Italy, more
seriously than most countries, progress has now inevitably slowed. While disappointing, the delay and associated cost
deferral will help sustain our cash reserves in the current low-price environment.
3
United Oil & Gas plc
In the UK, we divested our Crown discovery, successfully monetising that asset and delivering early value to
shareholders. We were also awarded further interesting blocks in the 31st licensing round which we are continuing to
review.
The Colter well was drilled in the early part of last year. While the well made a new discovery at Colter South, the
originally targeted structure did not meet our expectations. Little work was done in the year on our Wessex Basin
portfolio, and with our focus now on the Egypt assets and more prospective opportunities elsewhere, we have taken
the decision to begin the process to divest those assets.
Elsewhere, we remain committed to progressing our Jamaica asset and while the operator has now taken the decision
to withdraw from the licence, we are optimistic about its potential and are in discussions with the Government to
agree a path forward.
There was limited activity in the year on our interest in Benin and since the year end, as part of our portfolio
rationalisation, we have taken the decision not to progress our option there.
Business development opportunities across the full cycle continued to be offered to and assessed by the team in the
course of 2019. These were put through a rigorous review process and only the most attractive ones consistent with
our strategy were taken forward. However, while there were a number of such opportunities still in our pipeline as we
entered 2020, these will only be pursued as and when the current industry challenges are overcome.
AIM Listing and capital raising
In March 2019 the company’s shares were admitted to trading on the AIM market of the London Stock Exchange.
While this was an onerous exercise in terms of both costs and management time, we believe that the move will prove
to have been in the best interests of the company. It will lead to lower costs going forward and will assist us in
undertaking with speed the type of value-adding transactions we look for to significantly grow our business.
In February 2020, as part of the financing for the Rockhopper Egypt assets, we raised £4.8 million at 3p with certain
existing and new investors. We are very grateful for the support shown to the company by our existing shareholders
in approving that fundraising, and of course by our new shareholders who we welcome to the company and I hope to
meet in due course.
Financial Results for 2019
As expected at this stage in the company’s history with no cash flow from operations during 2019, the company made
a loss for the year. This loss of $2,139,075 comprises administrative expenditure in support of the company’s activities,
exploration costs written off (principally the Colter well), and costs associated with new ventures and evaluating
acquisition opportunities. The costs of our AIM listing, the Egypt acquisition including a Reverse Takeover process as
well as the corporate expenses associated with being a listed company, were also included.
Key events since year end
At the end of February 2020, we completed the acquisition of the Rockhopper Egypt assets. Since the effective date
of the acquisition the performance of these assets has been stellar, and they are providing positive operational cash
flow even at current low prices.
Impact to the Company of COVID-19 and Oil Price uncertainty
The human and economic impact of the COVID-19 pandemic has been very significant. The priority of the Company
remains the health and wellbeing of our employees and wider stakeholders. At this point in time, we are glad to report
that all of our employees are safe and well and continuing to work from home.
4
United Oil & Gas plc
Proactive measures taken by United and its partners to reduce near-term Capex commitments during current oil-price
uncertainty and the impact of Covid-19
• Deferral of Italian Capex improves cash flow and moves expected first gas slightly to H1 2021
• Deferral of Egyptian Capex reduces 2020 infill campaign from 4 wells to 1 well, significantly reducing gross
2020 Capex estimates. Further optimisation of the Capex and Opex budgets is being considered.
• Completion of post-Egyptian-acquisition licence review sees divestment plans for selected non-core assets in
the Wessex Basin and a decision not to exercise the farm-in option in Benin
• Substantial cut in administrative expenditure resulting in further cost savings
There has been no impact on our operations in Egypt and the production and transport of oil and gas has continued
uninterrupted. In Italy we expect the impact of COVID-19 to cause a slight delay in approvals for the Selva gas
development project and now expect to deliver first gas in H1 2021.
In addition to this the Company's pre-payment facility with BP provides downside price protection by effectively
hedging 6,600 bbls per month of production at $60/bbl. Coupled with this, c. 20% of United's net production is gas
which is sold under a fixed contract that is relatively insensitive to oil-price changes. The low operating costs of Abu
Sennan of ~ $6.50/bbl provide solid operating margins even at current oil price levels.
Conclusion
2019 was another very successful year for the company in the development and pursuit of our strategy and I would
like to record my thanks to our executives and staff for their continued commitment and energy throughout the year.
Despite the challenges now facing our industry in 2020 with the rapid and unexpected oil price decline, and now the
effects of COVID-19, I believe we are well placed to weather the storm and emerge from these crises with a balanced
full cycle portfolio, the cash flow to fund our business and some exciting new opportunities under review.
Graham Martin
Chairman
5
GROUP STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2019
United Oil & Gas plc
The directors are pleased to present their Strategic Report for the year ended 31 December 2019.
Our strategy is defined, regularly reviewed and all significant decisions are measured against the strategy and the
attainment of our strategic objectives.
In late 2019, the Board and Management took time to review the business strategy and to plan the next phase of our
development as a Company, to ensure that our strategy remains fit for purpose.
Strategy, objectives and business model
Our objective as a business is to maximise shareholder value. Our strategy to meet our objectives, is to create and
extract maximum value from our low risk, cash generative business in Europe and the Greater Mediterranean area
whilst also looking for low cost, high reward explorations opportunities outside of Europe.
We focus on areas and regions that we have experience in, including Europe and the Greater Mediterranean, South
America, the Caribbean and Africa.
United Oil & Gas plc:
• has a multi-stage portfolio of low risk European and Greater Mediterranean production, development and
appraisal assets in Europe and high-impact exploration in Jamaica;
•
is managed by a proven and ambitious management team with strong technical discipline and established
links to the oil and gas industry;
• has an active growth strategy focused on creating maximum value from our existing asset base and
monetisation of non-core assets;
• has a proven acquisition strategy which is built on strong technical experience, deal making expertise and solid
judgement which balances prudence with opportunism.
Business review
I am pleased with the significant progress that the company made throughout 2019. The focus for the year was on
growing portfolio value and I am pleased that we made significant headway across our asset base.
The highlights include advancing our Selva discovery in Italy closer to production, divesting our Crown asset, the award
of four more blocks in the UK 31st licensing round and the acquisition of Rockhopper Egypt.
Throughout late 2018 and 2019, we spent considerable time evaluating a large number of potentially game-changing
acquisitions. We remained patient and focused on short-listing assets that we believed would be truly transformational
for our business. We had strict investment criteria which, although sometimes limiting, ensured that we shortlisted
only the most value accretive transactions which culminated in the acquisition of Rockhopper Egypt for $16million.
United has built a reputation in a short period as a company that other oil companies want to work with. This has seen
us build partnerships with established industry players such as British Petroleum plc (“BP”), Tullow Oil plc, Kuwait
Energy, Hibiscus Petroleum and Rockhopper Exploration plc. It has also seen a continuous flow of opportunities into
the business from prospective partners. While we are currently adopting a cautious approach, we are keen to maintain
a pipeline of opportunities for future development.
6
United Oil & Gas plc
Despite the excellent progress in 2019, the COVID-19 pandemic and oil price uncertainty will no doubt have an impact
upon our business. As a Board, we have taken proactive measures to re-position our company to survive a longer
period of low commodity prices. These measures include $500k of corporate savings across the business and deferral
of non-committed capital expenditure into 2021.
Licence Acquisitions and Divestments
Our focus has always been on value creation, so we were very pleased to announce the divestment of our Crown asset
last July. The work by our technical team in attaining and developing this licence delivered an excellent outcome for
our shareholders in a very short period of time.
At the beginning of 2019, we stated our ambition to deliver a transformational acquisition and I am very pleased that
we announced the acquisition of Rockhopper Egypt in July for $16million and completed the deal in February 2020.
This acquisition has completely transformed our company into an oil and gas production business that generates
significant operational cash flows. In addition, we believe that there is significant unrealised upside within the Egyptian
portfolio and we have seen some of that upside already captured with the completion of the Ash2 well earlier in 2020.
This transaction was partly funded by a prepayment financing structure of $8million provided by BP with the remaining
consideration funded by equity of $3.5million and the issuance of $4.5million of consideration shares to Rockhopper
Exploration Plc. To finance a transaction of this size for a company of our market capitalisation was a remarkable
achievement, particularly in very challenging funding markets.
Corporate
In January 2019, we announced our decision to move the company to the AIM market of the London Stock Exchange.
As a Board, we firmly believe that the AIM market is a more appropriate listing for a company of our current size and
with our future growth plans. This move has positioned the company for the next steps in our development.
In July, we expanded our executive team with the appointment of David Quirke as Chief Financial Officer. David brings
a wealth of experience to our team and has contributed greatly to the success that the company achieved in 2019.
Presentation currency
The Group has decided to change its presentation currency from UK Sterling (GBP) to United States dollars (US$) to
better reflect the Group's expanding and international business activities and to improve investor’s ability to compare
the Group's financial results with other publicly traded businesses in the international oil and gas industry.
Principal risks and uncertainties
The Directors have identified the following as key risks of the Group, setting out their impact and the controls that are
in place:
The Oil and Gas sector – exploration, development and production
The estimating of reserves and resources is a subjective process and there is significant uncertainty in any reserve or
resource estimate. In addition, the exploration for and production of oil and other natural resources is speculative and
involves a high degree of risk, in particular a company’s operations may be disrupted by a variety of challenges which
are beyond its control such as environmental regulation, governmental regulations or delays, increase in costs and the
availability of equipment or services and the volatility of oil and gas prices. United’s portfolio strategy mitigates
exposure to a single asset whilst the company maintains strong relationships with a variety of existing and potentially
new partners in the industry. Strong relations are established with the authorities in all countries, and professional
advisers are also appointed in the countries in which we operate.
7
United Oil & Gas plc
Sustained low oil price & COVID-19
A sustained lower oil price environment may result in a reduction of future revenues, margins, cashflows and returns
and may also impact future debt capacity. The Group builds contingency planning into downside movements in
commodity prices and the Group has an active hedging programme providing downside risk management. Sustained
lower oil prices generally lead to a reduction in activity levels and a resultant reduction in industry development and
exploration costs. Deferral of capital expenditure has been seen across the industry in 2020 and also across the Group’s
portfolio of assets.
Liquidity risk
Prudent liquidity risk management includes maintaining sufficient cash balances to ensure the Group can meet
liabilities as they fall due. In managing liquidity risk, the main objective of the Group is therefore to ensure that it has
the ability to pay all of its liabilities as they fall due. The Group monitors its levels of working capital to ensure that it
can meet its liabilities as they fall due. New debt arrangements are in place meaning the company has a balanced
mixture of equity and debt funding, whilst revenue from producing assets in Egypt will help build cash reserves going
forward from 2020 onwards.
8
SECTION 172 STATEMENT
United Oil & Gas plc
Section 172 of the Companies Act 2006 requires Directors to take into consideration the interests of stakeholders and
other matters in their decision making. The Directors continue to have regard to the interests of the Company’s
employees and other stakeholders, the impact of its activities on the community, the environment and the Company’s
reputation for good business conduct, when making decisions. In this context, acting in good faith and fairly, the
Directors consider what is most likely to promote the success of the Company for its members in the long term. We
explain in this annual report how the Board engages with stakeholders.
• The Directors are fully aware of their responsibilities to promote the success of the Company in accordance with
section 172 of the Companies Act 2006. To ensure the Company was operating in line with good corporate
practice, all Directors received refresher training on the scope and application of section 172 in writing. This
encouraged the Board to reflect on how the Company engages with its stakeholders and opportunities for
enhancement in the future and was considered at the Company’s board meetings. As required, the Company’s
external lawyers and the Company Secretary will provide support to the Board to help ensure that sufficient
consideration is given to issues relating to the matters set out in s172(1)(a)-(f).
• The Board regularly reviews the Company’s principal stakeholders and how it engages with them. This is achieved
through information provided by management via Regulatory News Service announcements, Corporate
Presentations, and Shareholder Meetings and teleconferences and also by direct engagement with stakeholders
themselves.
• We aim to work responsibly with our stakeholders, including suppliers. The Board has recently reviewed its anti-
corruption and anti-bribery, equal opportunities and whistleblowing policies.
The key Board decisions made in the year are set out below:
Significant events/decisions
Approval of the 2019 Business
Plan and Budget
s172 matter(s)
Key
affected
Shareholders,
Employees and Business
Relationships
Acquisition of Rockhopper Egypt
Limited
Shareholders,
Employees
Restructuring post year end
Business Relationships,
Employees and
Shareholders
9
Actions and Consequences
• The Board approved the Business Plan and
Operating budget for the year in early
2019.
• The consequences of this decision were to
allocate capital to investments that have
the potential
substantial
shareholder value and safeguard the
assets of the Company
to deliver
• Acquisition was approved by shareholders
at a general meeting on 23 December
2019.
• The consequences of this decision was to
deliver a production,
revenue and
cashflow stream to the Group in pursuit of
its strategy to become a fully cycle oil and
gas company.
• Decisions were made by the executive
team in consultation with the Board after
carefully considering employee impact.
• $500k of corporate savings across the
business
United Oil & Gas plc
• Deferral
of
non-committed
capital
expenditure into 2021. The consequences
of these decisions were to mitigate the
impact on the company of this uncertainty
the business
on
environment generally
the oil price and
Listing the company on the AIM
market of the London Stock
Exchange
Shareholders, Business
Relationships
• AIM market is a more appropriate listing
for a company of our current size and with
our future growth plans
Divestment of Crown Licence
Shareholders, Business
Relationships
for
lead
• The consequence of this decision results in
the Company being listed on a more
fast growing
suitable Exchange
companies of United's size and is expected
to
and
administrative savings for the Company.
• Divestment was a board decision. The
proceeds from this divestment where used
to part fund the acquisition of Rockhopper
Egypt
significant
cost
to
• The consequence of this decision was to
deliver value for our shareholders and to
reinvest the proceeds in the business
Finally, to you, our shareholders, thank you for your trust, support and advice. Your continued support is appreciated
by your board, our wider internal team and our external advisory group.
I hope you stay safe and well and I look forward to meeting you face to face at a Company event when our world
returns to what will be a ‘new normal’.
This report was approved by the board on 28 May 2020 and signed on its behalf.
Brian Larkin
Chief Executive Officer
10
United Oil & Gas plc
GROUP OPERATIONS REVIEW
Introduction
2019 has been another active year for United operationally. Highlights have included progress towards first gas in Italy,
the divestment of the UK Crown licence, the award of UK Licence P2480, and the work that was completed in 2019 on
the Egyptian Abu Sennan transaction, which completed in early 2020.
The health, safety and well-being of our employees and host communities is always our first priority, and it is very
pleasing to note that throughout our operations in 2019 there were no incidents to report.
Europe
Podere Gallina Licence, Onshore Italy
Progress has continued to be made towards bringing the successful Podere Maiar-1 well, which tested at rates of
150,000scm/day (c. 875boepd) in 2018, into production.
Development plans received a positive technical opinion from the Italian Hydrocarbon Committee (CIRM) at the end
of 2018. An Environmental Impact Study for the proposed Selva Malvezzi Exploitation Concession was submitted to
the relevant authorities on the 23 April 2019, and formal technical environmental approval for the project from the
Italian Environmental Ministry was granted at the beginning of January 2020. This represents another important
milestone on the road to achieving first gas from the field. Final EIA decree is expected in the coming months, and
preliminary work has now commenced to prepare the field for gas production.
It is worth noting that United are expecting the planned development timeline to slow during 2020 with the Italian
Government’s critical focus on fighting the COVID-19 epidemic, and the target for first gas from the field is now H1
2021.
During 2019, a number of CPR reports were completed on the licence by the independent consultants, CGG, indicating
2P Reserves of 13.3Bcf (2.7 Bcf net to United); 2C Resources of 14.1 Bcf (2.8 Bcf net to United); and best-case unrisked
prospective resources of 91.5 Bcf (18.3 Bcf net to United). There is clearly significant potential remaining on the licence
in addition to that proved up by the Podere Maiar well, and plans for 3D seismic acquisition to further pursue this
potential are well-advanced and ready to be implemented, pending first gas. With a significant cash flow to be
delivered from Podere Maiar from 2021 onward, in addition to the relationships and experienced developed within
the Italian market, we are very excited about our position in Italy.
Central North Sea, UK
After the completion of the committed work programme on the Crown Discovery, Licence P2366, the sale of this asset
to Anasuria Hibiscus UK Ltd (Hibiscus) was completed in December 2019. The transaction involved an initial payment
of $1m ($0.95m net to United), with further payments expected, including $3m ($2.85m net to United) due in 2020
upon approval of a Field Development Plan (“FDP”).
The completion of this divestment provided a clear demonstration of United's ability to manage our portfolio in a way
which delivers tangible returns for shareholders. It is also testament to the value that our technical team can add in
the work that they do. In a period of just over 12 months, United were awarded Licence P2366 as part of the UK’s 30th
Licensing Round, adding significant value through completion of the committed work programme, and realised this
value by completing a sales process with Hibiscus.
11
United Oil & Gas plc
In July 2019, United were awarded Licence P2480 in the UK 31st Licensing Round on a 100% basis. This was our second
time applying in the UK Licencing Round system and our second success. The licence covers four highly prospective
blocks in the Central North Sea with a combined area of c. 500 sq. km. It includes the Zeta prospect, which United
estimates could contain over 90 million barrels of in-place oil. The Licence, which lies 10km from United's recently
divested Crown Discovery, is close to the Marigold and Yeoman discoveries, and the substantial Piper, MacCulloch and
Claymore oil fields. A low-cost work programme involving the purchase of seismic data and detailed geological and
geophysical analysis is underway, and at an appropriate time, United will be looking to bring in additional partners.
Wessex Basin, UK
The completion of the Egyptian acquisition earlier in 2020 has led to a change in strategic focus for the company, and
although the Wessex Basin licences remain attractive assets, they are now candidates for divestment, and discussions
are currently underway with a number of potentially interested parties.
In the PL090 licence, seismic reprocessing over the Waddock Cross Field was completed in September 2018. This
reprocessing had a positive impact, with an updated competent person’s report increasing the gross 2C Contingent
Resources for the field to 1.55 MMstb. Independent reservoir modelling work based on this new data was kicked off
in 2019, and suggested that a new horizontal well on the field could yield commercial oil volumes flowing at rates in
excess of 800bopd, albeit at high water cut. Further work is ongoing to finalise a forward plan for the field.
In Licence P1918, the Colter well (98/11a-6) spudded on 6 February 2019. The initial borehole did not intersect the
targeted structure, but made an unexpected new discovery at Colter South. The well was then side-tracked, but the
targeted Sherwood Sandstone reservoir section came in below the oil-water contact of the 98/11-3 discovery well,
suggesting the originally targeted Colter structure is smaller than pre-drill estimates. However, the side-track found
strong shows in the shallower Jurassic section, with encouraging implications for prospectivity along strike, which adds
to the strength of our portfolio in the Wessex Basin.
Work was completed throughout 2019 to update the post-well volumetrics, with an independent CPR report indicating
gross un-risked mean prospective volumes associated with Colter South of 12.6 MMstb (1.26 MMstb net). Although
the structure could hold up to 24 MMstb in an upside case, further 3D seismic acquisition and an appraisal well would
be required to reduce the uncertainty ahead of a development decision. Given the costs and timelines, and United’s
focus on Egypt we have chosen to adopt a prudent position and write-off the costs incurred on the P1918 licence, in
advance of a divestment process.
On the two onshore PEDL licences (330 and 345), further petrophysical and fracture studies were conducted on the
Purbeck Anticline prospect. This resulted in an updated operator estimate of the gross mean prospective resources
associated with the structure of 6.9mmboe (0.69mboe net). In an onshore setting, these volumes would clearly be
expected to be commercial, and alongside the drill-ready Waddock Cross field, should generate greater interest in the
portfolio of Wessex Basin assets that we are now looking to divest.
12
United Oil & Gas plc
Latin America, the Caribbean, and Africa
Walton-Morant Licence, offshore Jamaica
Final processing of the 2,250km2 3D seismic data that was acquired in 2018 was completed in 2019. A CPR completed
on this new data increased the gross unrisked mean-case recoverable Prospective Resources to 229 MMstb, and
improved the chance of success to 20%. Further prospectivity was identified on the new 3D data, adding to the
numerous structures already identified on the larger 2D surveys, and this was used to launch a joint-venture farm-
down process with the operating partners, Tullow Oil plc. This generated significant interest, but the current market
conditions have proven a challenging environment in which to complete a farm-down of such a frontier wildcat
opportunity, despite the lowered risk profile. With time and the support of the Jamaican authorities, we believe the
strength of this licence will attract partners to participate in the drilling of an exploration well.
A 6-month extension to the initial Exploration Period was granted in January 2020, giving the Joint Venture until the
31 July before a drill-or-drop decision is required. United has indicated to the Jamaican authorities that it wishes to
explore options for continuing to progress what United believe to be a transformative licence beyond the 31 July
deadline, and discussions to this end have been initiated with the Government.
Block B, onshore Benin
In March 2019, United agreed a farm-in option with Elephant Oil Ltd on their 4,590km2 Block B licence, onshore Benin.
Passive seismic acquisition, fieldwork, and detailed evaluation of the prospectivity was completed, and although
United were encouraged by the results, our strategic focus shifted during 2019, and a decision was made not to
exercise the option on the licence.
Abu Sennan Licence, onshore Egypt
Although the transaction to acquire a 22% non-operated position in the producing Abu Sennan licence did not
complete until February 2020, the effective date of this transformative deal was 1st January 2019, meaning all revenue
and costs from the effective date accrued to the company. Large part of last year was spent evaluating the opportunity,
and working towards the completion.
We had been looking for a transformational acquisition for some time, and it became apparent to us that Abu Sennan
provided that opportunity. When the acquisition was first announced in July 2019, production levels were at c.
5,000boepd (1,100 boepd net working interest). This production was split across 7 development concessions and 17
producing wells - all contained within the very sizable Abu Sennan licence area. When it is considered that each well
typically has multiple pay zones, it is clear that the asset has a particularly robust production base.
The low operating and drilling costs (c. $6.5/boe and c. $3-4m/well respectively) were another factor that attracted
United to this opportunity. Perhaps most importantly, however, United’s technical team saw significant remaining
infill and exploration upside within Abu Sennan, and was keen to participate in the ongoing drilling campaign that had
been underway since mid-2018. The merit of this has already been realised.
This drilling campaign had success throughout 2019, firstly with infill wells on the Al Jahraa Field, and then with the
ASH-2 appraisal well. The ASH-2 well targeted a fault-block adjacent to the known accumulation at the ASH Field. After
encountering 49.5m of net pay, the well was tested at 7,027 bopd in December, and was brought onstream a few days
later at c. 3,000bopd. It has maintained consistent production since then – significantly outperforming pre-drill
expectations, and demonstrating the presence of a sizeable accumulation.
The successful drilling in 2019, combined with bringing gas from the Al Jahraa Field onstream in March 2020, has led
to production levels of well over 8,000 boepd (1,760 boepd net to United). When it is considered that production was
at less than half these levels when United first started evaluating the asset, it is encouraging to now see the realization
of the potential value that the Company identified.
13
United Oil & Gas plc
Although the asset is outperforming expectations operationally, the current low oil prices have had a significant impact
on the plans for 2020. With its low operating costs, the assets are reasonably robust at low oil prices. However, much
of the planned capital expenditure programme for 2020 on the assets has been deferred, with three of the planned
infill wells pushed back until commodity prices improve. This has removed. c. $10m ($2.2m net) out of the 2020 capital
expenditure budget, and will help to ensure that Abu Sennan remains cash-flow positive at oil prices below $20/bbl.
United believe there is significant potential remaining across the Abu Sennan concession. With results from the El
Salmiya-5 well due shortly, and with the project to bring the gas at the ASH Field onstream continuing, we look forward
to further news flow from the asset, and to resuming the deferred drilling campaign once market conditions improve.
14
DIRECTORS’ REPORT
FOR THE YEAR ENDED 31 DECEMBER 2019
United Oil & Gas plc
The directors present their report and the financial statements for the year ended 31 December 2019.
Results and dividends
The loss for the year, after taxation, amounted to $2,139,075 (2018: loss of $1,080,272). The directors do not
recommend payment of a dividend (2018: $Nil).
Directors
The directors who served during the year were:
Brian Larkin
Jonathan Leather
Graham Martin
Alberto Cattaruzza
David Quirke (appointed 24 June 2019)
Principal activities
The principal activity of the company is to create and extract maximum value from our low risk, cash generative
business in Europe and the Greater Mediterranean area whilst also looking for low cost, high reward explorations
opportunities outside of Europe.
Business review and future developments
The business review and future developments are disclosed in the strategic report on page 6.
Financial instruments and risk management
An explanation of the Group’s financial risk management objectives, policies and strategies and information about the
use of financial instruments by the Group is given in note 17 to the financial statements.
Share capital
The company has one class of ordinary shares in issue. Details of the shares in issue are set out in note 12 to the
financial statements.
Subsequent events
The events since the balance sheet date are disclosed in note 24.
Directors' interests
As at 31 December 2019, the beneficial interests of the Directors and their connected persons in the ordinary share
capital of the Company were as follows:
Director
Brian Larkin
Jonathan Leather
Graham Martin
Number of Ordinary Shares
9,755,690
4,877,810
1,411,764
% of Ordinary Share Capital
2.8%
1.4%
0.4%
15
As at 31 December 2019, the beneficial interests of the Directors and their connected persons in share options and
warrants for ordinary share capital of the Company were as follows:
United Oil & Gas plc
Director
Brian Larkin
Jonathan Leather
David Quirke
Graham Martin
Alberto Cattaruzza
Number of Options
4,235,294
4,058,823
-
1,176,471
352,941
Number of Warrants
9,755,690
4,877,810
-
-
-
Substantial shareholdings
The following had interests of 3 per cent or more in the Company’s issued share capital as at 31 March 2020:
Party name
Rockhopper Exploration plc
Jarvis Securities
Hargreaves Landsdown PLC
Interactive Investor Trading
Lloyds Banking Group
Number of Ordinary Shares
114,503,817
112,910,648
68,289,496
30,702,562
19,613,524
% of Share Capital and Voting Rights
18.52%
18.27%
11.05%
4.97%
3.17%
Capital and returns management
The Company expects that any returns for Shareholders would derive primarily from capital appreciation of the
Ordinary Shares and any dividends paid pursuant to the Company's dividend policy.
The Directors believe that further equity capital raisings may be required by the Company as it continues to pursue its
objectives. The amount of any such additional equity to be raised will depend on the nature of the acquisition
opportunities which arise and the form of consideration the Company uses to make the acquisition and therefore
cannot be determined at this time.
Dividend policy
The Company's current intention is to retain any earnings for use in its business operations, and the Company does
not anticipate declaring any dividends in the foreseeable future. The Company will only pay dividends to the extent
that to do so is in accordance with all applicable laws.
Corporate governance
From Admission to AIM, the company is required under the AIM rules to comply with a recognised corporate
governance code to be chosen by the Board. The Board recognises the importance of sound corporate governance
and, to the extent able, intends that the company will comply with the provisions of the Quoted Companies Alliance
Corporate Governance Code (the “QCA Code”).
The company discloses in full on its website at https://www.uogplc.com/corporate-governance-code/ how it complies
with the QCA Code and its ten principles and, where it departs from the QCA Code, explains the reasons for doing so
and any steps taken or intended to move towards full compliance.
The Board held 6 scheduled meetings during 2019. Meeting dates and attendance are set out in the table below. In
2020 the board have committed to meet on a more frequent monthly basis, as a result of the additional operational
activities in Egypt, to monitor the impact of the oil price and COVID-19 uncertainties and as the company continues to
grow.
16
Table with dates and attendance of directors:
Director
Board meeting
Brian Larkin
Jonathan Leather
David Quirke
(appointment date
24 June 2019)
Graham Martin
Alberto Cattaruzza
6/6
6/6
4/6
6/6
6/6
United Oil & Gas plc
Audit Committee
meeting
Remuneration
Committee
meeting
AIM Compliance
Committee meeting
1/1
1/1
3/3
3/3
3/3
3/3
The Board is responsible for the management of the business of the Group, setting the strategic direction of the Group
and establishing the policies of the Group. It is the Board’s responsibility to oversee the financial position of the Group
and monitor the business and affairs of the Group, on behalf of the shareholders to whom they are accountable. The
primary duty of the Board is to act in the best interests of the Company at all times. The Board will also address issues
relating to internal control and the Group’s approach to risk management and has formally adopted an anti-corruption
and bribery policy.
Alberto Cattaruzza and Graham Martin are considered by the Board to be independent Non-Executive Directors.
The Board has established an audit committee, a remuneration committee and an AIM rules compliance committee
with formally delegated duties and responsibilities, details of these committees are included below.
Audit committee
The audit committee, which comprises Alberto Cattaruzza and Graham Martin, has the primary responsibility for
monitoring the quality of internal control and ensuring that the financial performance of the Group is properly
measured and reported on, for reviewing reports from the Company’s auditors relating to the Group’s accounting and
internal controls, and for overseeing the adequacy and effectiveness of risk management systems. The committee is
also responsible for making recommendations to the Board on the appointment of auditors and the audit fee and for
ensuring that the financial performance of the Group is properly monitored and reported. The audit committee will
meet not less than three times per year.
Remuneration committee
The remuneration committee, which comprises Alberto Cattaruzza and Graham Martin, is responsible for the review
and recommendation of the scale and structure of remuneration for senior management, including any bonus
arrangements or the award of share options with due regards to the interests of the Shareholders and the performance
of the Group.
AIM rules compliance committee
Since admission to AIM, an AIM rules compliance committee comprising Brian Larkin and Graham Martin has been
established. The prime responsibility of this committee is to ensure the company has sufficient procedures in place to
ensure ongoing compliance with the AIM rules. There have been no compliance issues during 2019.
17
United Oil & Gas plc
Auditors
A resolution proposing UHY Hacker Young be reappointed as auditors of the Company will be put to the next Annual
General Meeting in accordance with section 489 of the Companies Act 2006.
Disclosure of information to auditors
Each of the persons who are directors at the time when this directors' report is approved has confirmed that:
•
•
so far as that director is aware, there is no relevant audit information of which the company and the group's
auditors are unaware, and
that director has taken all the steps that ought to have been taken as a director in order to be aware of any
relevant audit information and to establish that the company and the group's auditors are aware of that
information.
Directors' responsibilities statement
The directors are responsible for preparing the strategic report, the directors’ report and the financial statements in
accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the
directors have elected to prepare the group financial statements in accordance with International Financial Reporting
Standards as adopted by the EU and applicable law and the company financial statements in accordance with United
Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under
company law the directors must not approve the financial statements unless they are satisfied that they give a true
and fair view of the state of affairs of the company and the group and of the profit or loss of the group for that period
and otherwise comply with the Companies Act 2006. In preparing these financial statements, the directors are
required to:
select suitable accounting policies and then apply them consistently;
•
• make judgments and accounting estimates that are reasonable and prudent;
•
state whether applicable International Financial Reporting Standards as adopted by the EU have been followed
for the group financial statements and FRS101 for the company financial statements, 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
group 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
the group 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 the group and hence for taking reasonable steps for
the prevention and detection of fraud and other irregularities.
This report was approved by the board on 28 May 2020 and signed on its behalf.
Brian Larkin, Chief Executive Officer
18
United Oil & Gas plc
BOARD OF DIRECTORS
Brian Larkin – Chief Executive Officer
Brian is the founding director of United Oil and Gas Limited.
He is a Qualified Accountant and has an MBA from Dublin City University. He has extensive oil and gas industry
experience having worked for both Tullow Oil Plc (“Tullow Oil”) and Providence Resources Plc (“Providence”).
At Tullow Oil, Brian held positions in both finance and commercial, and worked on a variety of production,
development and exploration projects in South America and Asia and carried out numerous investment case
recommendations.
At Providence, he worked in senior finance and commercial positions. During his time with Providence, Brian worked
on a wide portfolio of assets in regions including the Gulf of Mexico, offshore Ireland, onshore United Kingdom, and
offshore Nigeria.
Jonathan Leather – Chief Operating Officer
Jonathan has 20 years’ experience in the oil industry and holds a Geology degree from Oxford University, a PhD in
Sedimentology from Trinity College, Dublin, and an MBA from Warwick University.
He worked for Tullow Oil from 2007 to 2015, where he held a number of senior positions, including membership of
the Global Exploration Leadership Team. He also managed Tullow’s Subsurface Technology Group – a team he
established and built up to provide specialist technical input across the company in both exploration and development.
As part of this, he worked on global assets and opportunities ranging from onshore producing fields to deep-water
frontier exploration.
Prior to Tullow Oil, Jonathan worked for Shell UK Ltd. During his time there he was involved in a number of exploration
and development projects, and worked on North Sea, European, Middle Eastern and Malaysian assets.
David Quirke – Chief Financial Officer
David has 17 years of treasury and corporate finance experience in the upstream oil and gas sector and is a qualified
chartered management accountant. He holds a BA in law and Accounting from the University of Limerick.
He established and led the Tullow Oil Group Treasury function for a fifteen-year period from 2003 to 2017, supporting
a period of transformational growth. He has extensive experience of the key exploration and production (‘E&P’) debt
and equity instruments such as Reserves Based Lending Facilities, Acquisition Facilities, Corporate Bonds, Trade
Finance Facilities and Equity Transactions. More recently, David acted as a Treasury and Financial Consultant advising
Assala Energy on their corporate finance and treasury following the acquisition of Shell’s onshore assets in Gabon. He
has also supported a number of small E&P companies in managing their capital structure and developing financial
strategies.
Graham Martin – Non-Executive Chairman
Graham is an experienced natural resources executive. He brings a wealth of international expertise having served in
various roles at Tullow Oil plc from 1997 to 2016, including Executive Director and General Counsel. He is currently a
non-executive director, and chairman of the remuneration committee, at Kenmare Resources plc, one of the leading
global producers of titanium minerals and zircon listed in London and Dublin. Prior to Tullow, Graham was a partner
at the US international energy law firm Vinson & Elkins LLP, and at the UK corporate law firm Dickson Minto WS. He
holds a degree in Law and Economics from the University of Edinburgh.
19
Alberto Cattaruzza – Non-Executive Director
United Oil & Gas plc
Alberto graduated as a Chemical Engineer from the University of Padua, and having worked in Germany for LURGI, he
returned to Italy in 1966 and joined Chevron Oil Italiana as Planning Analyst, moving then to Assistant Manager
Planning, Supply & Refining Manager, Marketing Operations Manager and Commercial Sales Manager. During this
period, he was appointed Board Member of the two Italian refining companies of which Chevron was shareholder.
When Chevron left Europe in the 1980’s, Alberto became General Manager of an Italian private refining and marketing
company, and was appointed Board Member of a number of companies belonging to the same Group, including the
ISAB refinery in Sicily where the majority partners where ENI and ERG.
In 1995, Alberto joined the Oilinvest Group, operating in Europe under the brand name Tamoil, as Managing Director
of their German affiliate with HQ in Hamburg. He was later appointed Oilinvest Refining & Marketing Officer and Board
Member of several other Group companies, in Hungary, in the Czech Republic and in Italy.
In 2001, Alberto started an independent entity providing technical and business consultancy services in the oil sector.
His clients include a large number of oil companies in Europe and the Middle East, as well as international consulting
companies such as Accenture and The Boston Consulting Group.
Stewart MacDonald – Non-Executive Director (Appointed 12th March 2020)
Stewart has 17 years of energy and corporate finance experience. He has been the CFO of Rockhopper Exploration Plc
since 2014 and has played a significant role in the execution of many of Rockhopper’s growth initiatives. Prior to joining
Rockhopper, Stewart was a Director of Rothschild’s global oil and gas group and spent 12 years advising clients in the
sector on a range of M&A transactions as well as debt and equity financings.
20
DIRECTORS’ REMUNERATION REPORT
United Oil & Gas plc
The Directors' Remuneration Report, which comprises Alberto Cattaruzza and Graham Martin, sets out the Company's
policy on the remuneration of Directors together with details of Directors' remuneration packages and service
contracts for the period from 1 January 2019 to 31 December 2019.
The items included in this report are unaudited unless otherwise stated.
The Company maintains contact with its shareholders about remuneration in the same way as other matters and, as
required by Section 439 of the Companies Act 2006, this remuneration report will be put to an advisory vote of the
Company's shareholders at the forthcoming Annual General Meeting.
Statement of United Oil & Gas plc’s policy on Director’s remuneration
Each Director shall be reimbursed for all reasonable expenses wholly, properly and necessarily incurred by the Director
in the course of his employment or in performing the duties of his office.
The only change to the Directors' remuneration since the publication of the Company's Prospectus dated 25 July 2017
was for the appointment of David Quirke as CFO on 24 June 2019, and David’s emoluments are disclosed below.
Policy for new appointments
Base salary levels will take into account market data for the relevant role, internal relativities, their individual's
experience and their current base salary. Where an individual is recruited at below market norms, they may be
realigned over time (e.g. two to three years), subject to performance in the role. Benefits will generally be in
accordance with the approved policy.
For external and internal appointments, the Board may agree that the company will meet certain relocation and/or
incidental expenses as appropriate.
Directors' emoluments and compensation (audited)
Set out below are the emoluments of the Directors for the year ended 31 December 2019:
Total
paid
VAT)
fees
(exc
Salary
(incl.
social security
costs)
Pension
Total
$
-
-
-
-
19,465
$
155,724
149,235
51,908
74,118
-
$
-
-
-
-
-
$
155,724
149,235
51,908
74,118
19,465
Brian Larkin
Jonathan Leather
Graham Martin
David Quirke*
Alberto Cattaruzza
*Appointed 24 June 2019
21
Set out below are the emoluments of the Directors for the year ended 31 December 2018:
United Oil & Gas plc
Total
paid
VAT)
fees
(exc
Salary
(incl.
social security
costs)
Pension
Total
$
-
-
-
-
$
162,756
155,975
50,827
19,980
Brian Larkin
Jonathan Leather
Graham Martin
Alberto Cattaruzza
Share-based payments:
Brian Larkin
Jonathan Leather
Graham Martin
David Quirke*
Alberto Cattaruzza
*Appointed 24 June 2019
$
-
-
-
19,980
2019
$
48,294
46,281
13,415
-
4,025
$
162,756
155,975
50,827
-
2018
$
24,786
23,753
6,885
-
2,066
Statement of Directors’ shareholding and share interest
The Directors who served during the year ended to 31 December 2019, and their interests at that date, are disclosed
on page 15.
None of the Directors has any potential conflicts of interest between their duties to the Company and their private
interests or other duties they may also have.
Other matters
The Company does not currently have any annual or long-term incentive schemes in place for any of the Directors and
as such there are no disclosures in this respect.
The Company does not have any pension plans for any of the Directors and does not pay pension amounts in relation
to their remuneration.
The Company has not paid out any excess retirement benefits to any Directors or past Directors. The Company has not
paid any compensation to past Directors.
This report was approved by the board on 28 May 2020 and signed on its behalf.
Brian Larkin
Chief Executive Officer
22
United Oil & Gas plc
INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF UNITED OIL & GAS PLC
FOR THE YEAR ENDED 31 DECEMBER 2019
Opinion
We have audited the financial statements of United Oil & Gas Plc (the “Parent Company”) and its subsidiaries (the
“Group”) for the year ended 31 December 2019, which comprise the Consolidated Income Statement, the
Consolidated Statement of Comprehensive Income, the Consolidated Balance sheet, the Consolidated Statement of
Changes in Equity, the Consolidated Statement of Cash Flow and related notes to the consolidated financial
statements, the Parent Company Balance sheet, the Parent Company Statement of Changes In Equity and the related
notes to the parent company financial statements. The financial reporting framework that has been applied in the
preparation of the consolidated financial statements is applicable law and International Financial Reporting Standards
as adopted by the European Union (IFRSs). The financial reporting framework that has been applied in the preparation
of the Parent Company financial statements is applicable law and United Kingdom Accounting Standards, including
Financial Reporting Standard 101 ‘Reduced Disclosure Framework’ (United Kingdom Generally Accepted Accounting
Practice).
In our opinion:
•
•
•
•
the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s
affairs as at 31 December 2019 and of the Group’s loss for the year then ended;
the Group financial statements have been properly prepared in accordance with IFRSs, as adopted by the
European Union;
the Parent Company financial statements have been properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice; and
the financial statements 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.
Material uncertainty related to going concern
We draw attention to the Going Concern section of the Principal Accounting Policies of the Group financial statements
concerning the Group’s and Company’s ability to continue as a going concern. The Group incurred an operating loss
of $2.1m during the year ended 31 December 2019 (2018: $1.1m). The Group is faced with a lower oil price
environment along with the Covid-19 pandemic. Management have considered a number of scenarios including a
downside case where further receipts from the Crown disposal are not received within the forecast period, and in the
absence of potential mitigating actions, if realised would place doubt on the ability to fund the business for 12 months
from the current cash reserves and projected oil and gas revenues following the acquisition of Rockhopper Egypt Pty
Limited (‘Rockhopper Egypt’). Some mitigating actions have been considered and include further divestment of the
portfolio, restructuring of debt arrangements and further equity raises. These conditions, along with other matters
discussed in the Principal Accounting Policies indicate the existence of a material uncertainty which may cast significant
doubt about the Group’s and Company’s ability to continue as a going concern. The financial statements do not include
the adjustments (such as impairment of assets) that would result if the Group and Company were unable to continue
as a going concern.
Our opinion is not modified in respect of this matter.
23
United Oil & Gas plc
The risk
Due to the nature of the industry and the significant amount of capital needed in order to fund cash calls and operating
costs, there are risks surrounding the going concern assumption. Whilst post year end, the Group began to generate
revenues following the acquisition of Rockhopper Egypt, the current low oil price impacts cash flow at least in the
short term. Following the acquisition the Group also has significant monthly commitments in respect of the repayment
of the BP Oil International Limited loan facility. This facility is underpinned by a hedging instrument which reduces the
monthly settlements when the Brent oil price falls. Furthermore, the current market conditions, including the global
Covid-19 pandemic and suppressed oil price will have a direct impact on the Group’s ability to generate profits. Whilst
a further instalment of $2.85m is expected in relation to the Crown disposal later this year it remains contingent on
the submission and approval of Hibiscus’s field development plan.
Given the above factors, we consider going concern to be a significant audit risk area.
The directors' conclusion of the risks and circumstances described in the Going Concern section of the Principal
Accounting Policies of the Group financial statements represent a material uncertainty over the ability of the Group
and Company to continue as a going concern for a period of at least a year from the date of approval of the financial
statements. However, clear and full disclosure of the facts and the directors' rationale for the use of the going concern
basis of preparation, including that there is a related material uncertainty, is a key financial statement disclosure and
so was the focus of our audit in this area. Auditing standards require that to be reported as a key audit matter.
How our audit addressed the key audit matter
Our audit procedures included:
• Assessing the transparency and the completeness and accuracy of the matters covered in the going concern
disclosure by evaluating management's cash flow projections for the next 12 months and the underlying
assumptions.
• We obtained budgets and cash flow forecasts, reviewed the methodology behind these, ensured arithmetically
correct and challenged the assumptions.
• We obtained post year end results and compared these to budget to ensure budgeting is reasonable and results
are in line with expectations.
• We completed sensitivity analysis on the budgets provided to assess the change in revenue or costs that would
need to occur to push the Group into a cash negative position.
• We discussed plans for the Group going forward with management, ensuring these had been incorporated into
the budgeting and would not have an impact on the going concern status of the Group.
24
Emphasis of matter – Valuation of the Walton Morant license in Jamaica
United Oil & Gas plc
We draw attention to principal accounting policies in the financial statements which describes management’s review
and the key assumptions used in the assessment of impairment of the Group’s exploration assets. In respect of the
Walton Morant license in Jamaica in which the Group have a 20% interest and have capitalised $2,764,170. Tullow
Jamaica Limited have made the decision to relinquish the licence and withdraw as operator by 31 July 2020. Although
the licence ends in 2024, a ‘drill or drop decision’ currently needs to be made by 31 July 2020. UOG Jamaica Limited
have written to the Jamaican authorities expressing their interest in continuing the current phase of exploration
beyond this period and the Board are confident that this will be approved. However, due to the uncertainty in respect
of the current exploration phase there is an indication of possible future impairment should the extension of the
exploration period not be granted. The financial statements do not include the asset impairment adjustments that
would result if the Group does not obtain the required approvals to continue with the license and to extend the current
exploration phase.
Our opinion is not modified in respect of this matter.
Emphasis of matter – Consideration relating to the Crown disposal
We draw attention to note 3 of the financial statements which describes management’s review and the key
assumptions used when assessing the appropriate value of the consideration to be received in respect of the Crown
disposal. The next instalment of $3m is dependent on field development plan approval by the Oil & Gas Authority in
the UK. We understand that Anasuria Hibiscus UK Limited (Hibiscus) is still progressing with both the Sunflower and
Marigold oil fields in the UK of which the Crown discovery is a key part. The Board remain confident that Hibiscus are
still pressing ahead with the field development plan and are therefore expecting to receive the second instalment of
$2.85m by the 31 December 2020. As at the year-end receipt of these funds is therefore considered probable,
therefore we are satisfied that this has been appropriately recognised in these financial statements. However there is
an inherent uncertainty due to the fact that the receipt is reliant on Hibiscus submitting the field development plan
and obtaining approval. The financial statements do not include the receivable impairment adjustment that would
result if the required approvals are not obtained.
Our opinion is not modified in respect of this matter.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy,
the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were
addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and
we do not provide a separate opinion on these matters.
Key audit matter
How the matter was addressed during the audit
Impairment of exploration and evaluation
assets in the Group
Our audit work included, but was not restricted to:
The Group has capitalised costs in respect of
the Group’s licence interests in accordance
with IFRS 6 ‘Exploration for and Evaluation
(IFRS 6). The
of Mineral Resources’
• Obtaining and discussing each of the licences with the
directors and evaluating their assessment in conjunction
with the Competent Person’s Reports available for each
exploration project and reviewed available information to
assess whether the licenses remain in good standing.
25
Key audit matter
How the matter was addressed during the audit
United Oil & Gas plc
Directors need to assess the exploration
assets for indicators of impairment and
where they exist to undertake a full review
to assess the need for impairment charge.
This involves significant judgements and
assumptions such as the timing and extent
and probability of future cash flow.
We therefore identified the impairment of
exploration and evaluation assets as a key
audit matter, which was one of the most
significant assessed
risks of material
misstatement.
Impairment of investments and loans due
from subsidiary companies in the Parent
Company
Under International Accounting Standard
36 ‘Impairment of Assets’, companies are
required to assess whether there is any
indication that an asset may be impaired at
each reporting date.
assessment
Management
involves
significant judgements and assumptions
such as the timing and extent and
probability of future cash flow.
The Parent Company has loans due from
subsidiary companies of $6.5m (2018:
$11.3m). The investments represent the
primary balance on the Company balance
sheet and there is a risk it could be impaired
and that intragroup loans may not be
26
• We discussed each of the licences with the directors and
challenged their assessment
in conjunction with the
Competent Person’s Reports available for each exploration
project and reviewed available information to assess
whether the licenses remain in good standing.
• We reviewed the future plans of the projects in respect of
funding, viability and development to assess whether there
were any indicators of impairment.
• Assessing the future plans of the projects in respect of
funding, viability and development to assess whether there
were any indicators of impairment.
Key observations
An emphasis of matter has been included above in respect of the
Group’s Walton Morant license in Jamaica due to the uncertainty in
respect of the extension of the current exploration phase which
ends on 31 July 2020.
We obtained evidence that all the licenses remain valid and are in
good standing. No other indicators of impairment were identified in
respect of the carrying values of exploration and evaluation assets
at the year end.
Our audit work included, but was not restricted to:
• Reviewing the investments balances for indicators of
impairment in accordance with IAS 36;
• Assessing the appropriateness of the methodology applied
by management in their assessment of the recoverable
amount of intragroup loans by comparing it to the Group’s
accounting policy and IAS 36;
• Assessing management‘s evaluation of the recoverable
amounts of
the
loans
impairment provisions and net asset values of components
that have intercompany debt;
including review
intragroup
• Checking that intragroup loans have been reconciled and
confirming that there are no material differences.
Key observations
The majority of the investment balances correlate with the
exploration assets held by that subsidiary and our impairment
Key audit matter
How the matter was addressed during the audit
United Oil & Gas plc
recoverable as a result of the subsidiary
companies incurring losses.
review was therefore linked to our assessment of indicators of
impairment on the corresponding exploration licences.
We therefore identified the impairment of
loans due from subsidiary companies as a
key audit matter in the Parent Company
financial statements, which was one of the
most significant assessed risks of material
misstatement.
Accounting and valuation of consideration
relating to the Crown disposal in the Group
During the current year the Group disposed
of its interest in the Crown discovery for
total consideration of up to $5m to Hibiscus.
A further instalment of $2.85m is expected
to be received by 31 December 2020. The
receipt is reliant on Hibiscus submitting the
field development plan and obtaining
approval. Therefore key judgements are
required in order to conclude as to the
appropriate value to recognise
in the
financial statements.
An impairment provision of $1.65m was recognised in the parent
company following the impairment of the Colter licence at the year
end. No further indications of impairment were identified.
Our audit work included, but was not restricted to:
• Obtaining and reviewing the sale purchase agreement with
Hibiscus along with the terms and conditions therein.
In respect of the contingent consideration, we have
considered management’s assessment of the probability of
receipt and the key assumptions.
•
• We have considered the announcements made by Anasuria
to ensure consistency with
Hibiscus UK Limited
management’s assessment.
Key observations
As at the year-end the receipt of these funds is considered probable,
however, an emphasis of matter has been discussed above in which
we have included further observations due to the fact that there is
inherent uncertainty due to the fact that the receipt is reliant on
Hibiscus submitting the field development plan and obtaining
approval.
27
Our application of materiality
United Oil & Gas plc
The scope and focus of our audit was influenced by our assessment and application of materiality. We apply the
concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements on our
audit and on the financial statements.
We define financial statement materiality as the magnitude by which misstatements, including omissions, could
reasonably be expected to influence the economic decisions taken on the basis of the financial statements by
reasonably knowledgeable users.
We also determine a level of performance materiality which we use to determine the extent of testing needed to
reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements
exceeds materiality for the financial statements as a whole.
Materiality Measure
Overall materiality
Group
We determined materiality for the financial statements to be:
Parent
How we determine it
$182,000 (2018: $214,000).
Based on the main key indicator, being
2% of net assets of the Group.
$146,000 (2018: $171,000).
2% of net assets of the Parent Company
exceeded the Group materiality amount
therefore this was capped at 80% of Group
materiality.
Rationale for benchmarks
applied
We believe the net assets are the most appropriate benchmark due to the size and stage
of development of the Company and Group and due to the Group not yet generating
any revenue.
Performance materiality On the basis of our risk assessment, together with our assessment of the Group and
Company’s control environment, our judgement is that performance materiality for the
financial statements should be 75% of materiality being:
Reporting threshold
$136,500 (2018: $160,500)
$109,500 (2018: $129,000)
We agreed with the Audit Committee that we would report to them all misstatements
over 5% of Group and company materiality identified during the audit as set out below,
as well as differences below that threshold that, in our view, warrant reporting on
qualitative grounds. We also report to the Audit Committee on disclosure matters that
we identified when assessing the overall presentation of the financial statements.
$9,000 (2018: $11,000)
$7,500 (2018: $8,500)
An overview of the scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the
financial statements. In particular, we looked at where the directors made subjective judgements and assumptions in
respect of the capitalisation or impairment of the costs attributable to the Group’s exploration assets, such as
allocations of time writing costs and where there were future events that are inherently uncertain.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the
financial statements as a whole, taking into account an understanding of the structure of the Company and the Group,
their activities, the accounting processes and controls, and the industry in which they operate. Our planned audit
testing was directed accordingly and was focused on areas where we assessed there to be the highest risk of material
misstatement.
28
United Oil & Gas plc
Our Group audit scope includes all of the group companies. At the parent company level, we also tested the
consolidation procedures. The audit team met and communicated regularly throughout the audit with the Finance
Director in order to ensure we had a good knowledge of the business of the Group. During the audit we reassessed
and re-evaluated audit risks and tailored our approach accordingly.
The audit testing included substantive testing on significant transactions, balances and disclosures, the extent of which
was based on various factors such as our overall assessment of the control environment, the effectiveness of controls
and the management of specific risk.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing
of the audit and significant findings, including any significant deficiencies in internal control that we identify during the
audit.
Other information
The directors are responsible for the other information. The other information comprises the information included in
the annual report, other than the financial statements and our auditors’ 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.
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 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.
29
United Oil & Gas plc
Responsibilities of directors
As explained more fully in the statement of directors’ responsibilities, the directors are responsible for the preparation
of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as
the directors determine is necessary to enable the preparation of 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.
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 part 3 of Chapter 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.
Daniel Hutson (Senior Statutory Auditor)
For and on behalf of
UHY Hacker Young
Chartered Accountants
Statutory Auditor
Quadrant House
4 Thomas More Square
London E1W 1YW
28 May 2020
30
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2019
United Oil & Gas plc
Revenue
Cost of sales
Gross profit / (loss)
Administrative expenses:
Other administrative expenses
Impairment of intangible assets
Gain on disposal of intangible assets
Acquisition and AIM expenses
Total administrative expenses
Operating loss
Interest expense
Loss before taxation
Taxation
Notes
Year to 31
December
2019
$
Year to 31
December
2018
$
-
-
-
-
-
-
3
(1,516,035)
(2,111,319)
2,881,976
(1,202,586)
(1,947,964)
(1,080,272)
-
-
-
(1,080,272)
2
(1,947,964)
(1,080,272)
(4,841)
-
2
5
(1,952,805)
(1,080,272)
(186,270)
-
Loss for the financial year attributable to the Company’s equity
shareholders
(2,139,075)
(1,080,272)
Loss per share from continuing operations
expressed in pence per share:
Basic and diluted
6
(0.62)
(0.38)
Consolidated Statement of Comprehensive Income
Loss for the financial year
Foreign exchange gains/(losses)
Total comprehensive loss for the financial year attributable to the
Company’s equity shareholders
2019
$
2018
$
(2,139,075)
405,954
(1,080,272)
(496,793)
(1,733,121)
(1,577,065)
31
Consolidated Balance Sheet as at 31 December 2019
United Oil & Gas plc
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Current assets
Trade and other receivables
Cash and cash equivalents
Total Assets
Equity and liabilities
Capital and reserves
Share capital
Share premium
Share-based payment reserve
Merger reserve
Translation reserve
Retained earnings
Shareholders’ funds
Current liabilities:
Trade and other payables
Current tax payable
Lease liabilities
Notes
2019
$
2018
$
8
9
10
11
12
12
13
14
5,580,864
26,722
5,607,586
5,226,219
4,717
5,230,936
3,524,655
1,275,537
4,800,192
739,119
5,149,907
5,889,026
10,407,778
11,119,962
4,564,787
9,912,988
1,591,808
(2,697,357)
(11,227)
(4,255,398)
4,564,787
9,912,988
1,465,036
(2,697,357)
(417,181)
(2,116,323)
9,105,601
10,711,950
1,085,701
190,446
26,030
1,302,177
408,012
-
-
408,012
Total equity and liabilities
10,407,778
11,119,962
The financial statements were approved by the Board of Directors and authorised for their issue on 28 May 2020 and
were signed on its behalf by:
Brian Larkin
Chief Executive Officer
Registered number: 09624969
32
Consolidated Statement of Changes in Equity
United Oil & Gas plc
Share
capital
$
Share
premium
$
Share-
based
payments
reserve
$
Retained
earnings
$
Translation
reserve
$
Merger
reserve
$
Total
$
4,564,787
-
-
-
-
4,564,787
9,912,988
-
-
-
-
9,912,988
1,465,036
-
-
-
126,772
1,591,808
(2,116,323)
(2,139,075)
-
(2,139,075)
-
(4,255,398)
(417,181)
-
405,954
405,954
-
(11,227)
(2,697,357)
-
-
-
-
(2,697,357)
10,711,950
(2,139,075)
405,954
(1,733,121)
126,772
9,105,601
3,054,383
-
-
-
827
1,509,577
-
-
4,564,787
5,562,026
-
-
-
3,309
5,796,341
(1,448,688)
-
9,912,988
600,145
-
-
-
-
-
799,829
65,062
1,465,036
(1,036,051)
(1,080,272)
-
(1,080,272)
-
-
-
-
(2,116,323)
79,612
-
(496,793)
(496,793)
-
-
-
-
(417,181)
(2,697,357)
-
-
-
-
-
-
-
(2,697,357)
5,562,758
(1,080,272)
(496,793)
(1,577,065)
4,136
7,305,918
(648,859)
65,062
10,711,950
For the year ended 31 December
2019
Balance at 1 January 2019
Loss for the year
Foreign exchange difference
Total comprehensive income
Share based payments
Balance at 31 December 2019
For the year ended 31 December
2018
Balance at 1 January 2018
Loss for the year
Foreign exchange difference
Total comprehensive income
Exercise of share warrants
Issue of share capital
Share issue expenses
Issue of share options
Balance at 31 December 2018
33
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER
United Oil & Gas plc
Cash flow from operating activities
Loss for the financial year before tax
Share-based payments
Depreciation
Impairment of intangible assets
Gain on disposal of intangible assets
Interest expense
Foreign exchange movements
Changes in working capital
Increase in trade and other receivables
Increase in trade and other payables
2019
$
2018
$
(1,952,805)
126,772
94,026
2,111,319
(2,881,976)
4,841
268,159
(1,080,272)
65,062
1,732
-
-
-
(137,119)
(2,229,664)
(1,150,597)
(61,527)
677,689
(570,512)
126,387
Cash outflow from operating activities
(1,613,502)
(1,594,722)
Cash outflow from investing activities
Disposal of intangible assets
Purchase of property, plant & equipment
Spend on exploration activities
950,000
(1,637)
(3,097,401)
-
(3,535)
(3,651,592)
Net cash (used in) investing activities
(2,149,038)
(3,655,127)
Cash flow from financing activities
Issue of ordinary shares net of expenses
Capital payments on lease
Interest paid on lease
-
(88,387)
(4,841)
6,661,195
-
-
Net cash (used in) / generated from financing activities
(93,228)
6,661,195
Net (decrease) / increase in cash and cash equivalents
(3,855,768)
1,411,346
Cash and cash equivalents at beginning of financial year
Effects of exchange rate changes
5,149,907
(18,602)
4,097,985
(359,424)
Cash and cash equivalents at end of financial year
1,275,537
5,149,907
34
United Oil & Gas plc
Notes to the consolidated financial statements
Principal Accounting Policies
Company information
United Oil & Gas plc is a public limited company incorporated and domiciled in the United Kingdom.
Basis of preparation
The consolidated financial statements of United Oil & Gas plc and its subsidiaries (together “the Group” or “United Oil
& Gas”) have been prepared in accordance with International Financial Reporting Standards ("IFRS"), as adopted by
the European Union, IFRIC interpretations, and with those parts of the Companies Act 2006 applicable to companies
reporting under IFRS.
IFRS is subject to amendment and interpretation by the IASB and the IFRS Interpretations Committee, and there is an
on-going 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 principal accounting policies set out below have been consistently applied to all periods presented.
Basis of consolidation
The financial statements for the year ended 31 December 2019 incorporate the results of United Oil & Gas plc (“the
Company”) and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the
power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.
All intra-Group transactions, balances, income and expenses are eliminated in full on consolidation. Accounting
policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the
Group.
Going Concern
The Group’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’ recent forecasts demonstrate that the Group will meet its day-to-day working capital and financial
commitments over the forecast period (being at least 12 months from the date the financial statements were
approved) from the cash held on deposit and planned oil and gas revenue from Abu Sennan in 2020, as further
opportunities arise and the portfolio continues to grow in line with group strategy. This base case forecast is inclusive
of the lower oil prices that are forecast well into 2021, primarily as a result of the global oil supply and demand
dynamics and the COVID-19 pandemic. The Group has been able to defer a significant portion of the budgeted capital
expenditure programme for 2020 and taken other measures to reduce the running costs of the business, which
combined will protect the Group cashflows. Management have also considered some additional downside scenarios
including a case where a significant contingent consideration receipt relating to the Crown disposal due in late 2020
is not received within the forecast period, and if realised would place doubt on the ability to fund the business for 12
months from the current cash reserves and projected oil and gas revenues from Egypt. Some mitigating actions have
been considered in the event that the downside scenario was realised and include further divestment of the portfolio,
potential restructuring of debt arrangements and a further equity raise.
The Group has sufficient funding to meet planned financial commitments in relation to operational activities and a
level of contingency, and as a result the directors continue to adopt the going concern basis of accounting in preparing
the financial statements. However, in the downside scenario discussed, and without the successful implementation of
mitigating actions, a material uncertainty does exist that may affect the ability of the company to continue as a going
concern. The consolidated financial statements have not been adjusted for the scenario where the Group is not a going
concern.
35
Foreign currency
United Oil & Gas plc
Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the year-end date. All
differences are taken to the Income Statement.
Assets and liabilities of subsidiaries that have a functional currency different from the presentation currency (US
dollar), if any, are translated at the closing rate at the date of each balance sheet presented. Income and expenses are
translated at average exchange rates. All resulting exchange differences are recognised in other comprehensive
income (loss), if any.
The Group has taken the decision to change its presentation currency to USD. This has been accounted for
retrospectively as a change in accounting policy. In making this change in presentation currency, the Company
followed the requirements set out in IAS 21, The Effects of Change in Foreign Exchange Rates. In accordance with IAS
21, the change in presentational currency is applied retrospectively and financial statements for the previous financial
periods have therefore been translated into the new presentation currency.
Finance income and costs
Interest is recognised using the effective interest method which calculates the amortised cost of a financial asset or
liability and allocates the interest income or expense over the relevant period. The effective interest rate is the rate
that exactly discounts estimated future cash receipts or payments through the expected life of the financial asset or
liability to the net carrying amount of the financial asset or liability.
Exploration and evaluation assets
The group accounts for oil and gas expenditure under the full cost method of accounting.
Costs (other than payments to acquire the legal right to explore) incurred prior to acquiring the rights to explore are
charged directly to the profit and loss account. All costs incurred after the rights to explore an area have been obtained,
such as geological, geophysical, data costs and other direct costs of exploration and appraisal are accumulated and
capitalised as intangible exploration and evaluation ("E&E") assets.
E&E costs are not amortised prior to the conclusion of appraisal activities. At the completion of appraisal activities if
technical feasibility is demonstrated and commercial reserves are discovered, then following development sanction,
the carrying value of the relevant E&E asset will be reclassified as a development and production asset within tangible
fixed assets.
If after completion of appraisal activities in an area, it is not possible to determine technical feasibility or commercial
viability, then the costs of such unsuccessful exploration and evaluation are written off to the profit and loss account.
The costs associated with any wells which are abandoned are fully amortised when the abandonment decision is taken.
Development and production assets, are accumulated generally on a field by-field basis and represent the costs of
developing the commercial reserves discovered and bringing them into production, together with the E&E
expenditures incurred in finding commercial reserves which have been transferred from intangible E&E assets.
The net book values of development and production assets are depreciated generally on a field-by field basis using
the unit of production method based on the commercial proven and probable reserves. Assets are not depreciated
until production commences.
Other intangible assets
Other intangible assets acquired separately from a business combination are capitalised at cost.
Intangible assets are amortised on a straight-line basis over their useful lives as follows:
Computer software
33%
36
United Oil & Gas plc
The carrying value of intangible assets is assessed annually and any impairment is charged to the income statement.
Property, plant and equipment
Property, plant and equipment are stated at cost less depreciation. Depreciation is provided on a straight-line basis at
rates calculated to write off the cost less the estimated residual value of each asset over its expected useful economic
life. The residual value is the estimated amount that would currently be obtained from disposal of the asset if the asset
were already of the age and in the condition expected at the end of its useful life.
The annual rate of depreciation for each class of depreciable asset is:
Computer equipment 33%
The carrying value of property plant and equipment is assessed annually and any impairment is charged to the income
statement.
Impairment of non-financial assets
At each balance sheet date, the Directors review the carrying amounts of the Group’s tangible and intangible assets,
other than goodwill, to determine whether there is any indication that those assets have suffered an impairment loss.
If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the
impairment loss, if any. Where the asset does not generate cash flows that are independent from other assets, the
Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. 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 which the estimates of future cash flows
have not been adjusted.
If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the
carrying amount of the asset or cash-generating unit is reduced to its recoverable amount. If the recoverable amount
of a cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying
amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying
amount of each asset in the unit.
An impairment loss is recognised as an expense immediately.
An impairment loss recognised for goodwill is not reversed in subsequent periods.
Where an impairment loss subsequently reverses, the carrying amount of the asset or cash-generating unit is increased
to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the
carrying amount that would have been determined had no impairment loss been recognised for the asset or cash-
generating unit in prior periods. A reversal of an impairment loss is recognised in the Income Statement immediately.
Financial instruments
Recognition and derecognition
Financial assets and financial liabilities are recognised when the Group 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.
37
Classification and initial measurement of financial assets
United Oil & Gas plc
Except for those trade receivables that do not contain a significant financing component and are measured at the
transaction price in accordance with IFRS 15, 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 Group does not have any financial assets categorised as FVOCI or 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
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 Group’s cash and cash equivalents, trade and other
receivables fall into this category of financial instruments.
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 Group 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 Group to recognise a loss allowance for expected credit losses on trade receivables.
In particular, IFRS 9 requires the Group 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 Group
is required to measure the loss allowance for that financial instrument at an amount equal to 12 months ECL.
Classification and measurement of financial liabilities
The Group’s financial liabilities include trade and other payables.
Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs unless the
Group designated a financial liability at fair value through profit or loss.
Subsequently, financial liabilities are measured at amortised cost using the effective interest method except for
contingent consideration designated at FVTPL, which is carried subsequently at fair value with gains or losses
recognised in profit or loss.
38
United Oil & Gas plc
All interest-related charges and, if applicable, changes in an instrument’s fair value that are reported in profit or loss
are included within finance costs or finance income.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, deposits held at call with banks and other short-term highly liquid
investments with original maturities of three months or less.
Leases
The Group has applied IFRS 16 using the modified retrospective approach and therefore comparative information has
not been restated and is presented under IAS 17. The details of accounting policies under both IAS 17 and IFRS 16 are
presented separately below.
Policy applicable from 1 January 2019
The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a
right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee.
The lease liability is initially measured at the present value of the lease payments that are not paid at the
commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the
lessee uses its incremental borrowing rate.
The lease liability is presented as a separate line in the balance sheet.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability
(using the effective interest method) and by reducing the carrying amount to reflect the lease payments made.
The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset)
whenever:
• The lease term has changed in which case the lease liability is remeasured by discounting the revised lease
payments using a revised discount rate.
• The lease payments change due to changes in an index or rate or a change in expected payment under a
guaranteed residual value, in which cases the lease liability is remeasured by discounting the revised lease
payments using an unchanged discount rate (unless the lease payments change is due to a change in a floating
interest rate, in which case a revised discount rate is used).
• A lease contract is modified and the lease modification is not accounted for as a separate lease, in which case
the lease liability is remeasured based on the lease term of the modified lease by discounting the revised lease
payments using a revised discount rate at the effective date of the modification.
The right-of-use assets comprise the initial measurement of the corresponding lease liability, prepayments made on
the lease at or before the commencement day, less any lease incentives received and any initial direct costs. They are
subsequently measured at cost less accumulated depreciation and impairment losses.
Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset.
The depreciation starts at the commencement date of the lease.
Policy applicable prior to 1 January 2019
Operating leases
Where substantially all of the risks and rewards incidental to ownership are not transferred to the Group (an
“operating lease”) amounts payable under the lease are charged to the income statement on a straight-line basis over
the lease term.
39
United Oil & Gas plc
Taxation
Current taxation for each taxable entity in the Group is based on the local taxable income at the local statutory tax
rate enacted or substantively enacted at the balance sheet date and includes adjustments to tax payable or
recoverable in respect of previous periods.
Deferred taxation
Deferred taxation is calculated using the liability method, on temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the financial statements. However, if the deferred tax arises from
the initial recognition of an asset or liability in a transaction other than a business combination that at the time of the
transaction affects neither accounting nor taxable profit or loss, it is not accounted for. Deferred tax is determined
using tax rates and laws that have been enacted or substantively enacted by the balance sheet date and are expected
to apply when the related deferred tax asset is realised, or the deferred tax liability is settled.
Deferred tax liabilities are provided in full.
Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against
which the temporary differences can be utilised.
Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the Income Statement,
except where they relate to items that are charged or credited directly to equity in which case the related deferred
tax is also charged or credited directly to equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred tax assets and liabilities relate to taxes levied by the same taxation
authority on either the same taxable entity or different taxable entities where there is an intention to settle the
balances on a net basis.
Share-based payments
Where share-based payments (warrants and options) have been granted, IFRS 2 has been applied whereby the fair
value of the share-based payments is measured at the grant date and spread over the period during which they vest.
A valuation model is used to assess the fair value, taking into account the terms and conditions attached to the share-
based payments. The fair value at grant date is determined including the effect of market-based vesting conditions, to
the extent such vesting conditions have a material impact.
The cost of equity settled transactions is recognised, together with a corresponding increase in equity, over the period
in which the performance and/or service conditions are fulfilled, ending on the date on which the holders become
fully entitled to the award (“the vesting date”).
The cumulative expense recognised for equity settled transactions at each reporting date until the vesting date reflects
the extent to which the vesting period has expired and the Group’s best estimate of the number of equity instruments
that will ultimately vest.
Where the terms of an equity-settled award are modified, the minimum expense recognised is the expense as if the
terms had not been modified. An additional expense is recognised for any modification, which increases the total fair
value of the share-based payment arrangement or is otherwise beneficial to the employee, as measured at the date
of modification.
Where an equity-settled award (share options) is cancelled, it is treated as if it had vested on the date of cancellation
if it had not yet fully vested, and any expense not yet recognised for the award is recognised immediately. However,
if a new award is substituted for the cancelled award and designated as a replacement award on the date that it is
granted, the cancelled and new awards are treated as if they were a modification of the original award, as described
in the previous paragraph.
40
United Oil & Gas plc
Where an equity-settled award is forfeited, the cumulative charge expensed up to the date of forfeiture is credited to
the Income Statement. Upon expiry of an equity-settled award, the cumulative charge expensed is transferred from
the Share-based payment reserve to retained earnings.
Equity
Equity comprises the following:
•
•
•
•
•
•
“Share capital” represents amounts subscribed for shares at nominal value.
“Share premium” represents amounts subscribed for share capital, net of issue costs, in excess of nominal
value.
“Share-based payment reserve” represents the accumulated value of share-based payments.
“Retained earnings” represents the accumulated profits and losses attributable to equity shareholders.
“Translation reserve” represents the exchange differences arising from the translation of the financial
statements of subsidiaries into the Group’s presentational currency.
“Merger reserve” represents amounts arising from statutory merger relief arising on business combinations.
New and amended International Financial Reporting Standards adopted by the Group
The Group 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/Revised International Financial Reporting
Standards
Effective Date:
Annual periods
beginning on or
after:
EU
adopted
Impact on
the Group
IFRS 16
Leases
Annual
Standards 2015-2017 Cycle
Improvements
to
IFRS
1 January 2019
1 January 2019
Yes
Yes
See below
Immaterial
IFRS 16 introduces new or amended requirements with respect to lease accounting. It introduces significant changes
to lessee accounting by removing the distinction between operating and finance leases and requiring all leases (subject
to exemptions) to be recognised giving a right of use asset and lease liability in the balance sheet, with the statement
of comprehensive income reflecting depreciation of the right of use asset and the interest charge on the lease liability.
The adoption of this new Standard has resulted in the Group recognising a right-of-use asset and related lease liability
in connection with the former operating lease.
The new Standard has been applied using the modified retrospective approach, with right of use asset and
corresponding liability recognised as an adjustment in the current period. At this date, the Group has also elected to
measure the right-of-use assets at an amount equal to the lease liability adjusted for any prepaid or accrued lease
payments that existed at the date of transition. Prior periods have not been restated.
The Group has elected not to include initial direct costs in the measurement of the right-of-use asset for operating
leases in existence at the date of initial application of IFRS 16, being 1 January 2019.
Instead of performing an impairment review on the right-of-use assets at the date of initial application, the Group has
relied on its historic assessment as to whether leases were onerous immediately before the date of initial application
of IFRS 16.
The impact of the implementation of this standard is set out below:
41
United Oil & Gas plc
• Recognition of lease liabilities and right of use assets, the initial impact of which is an increase in property,
plant and equipment and in total liabilities.
• A new finance expense due to the lease finance charge
•
• Elimination of the former operating lease rental expense
Increased annual depreciation of property, plant and equipment for the duration of the leases
International Financial Reporting Standards in issue but not yet effective
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 Group.
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 have a material impact on the Group’s financial statements
going forward:
New/Revised International Financial Reporting Standards
IAS 1
IAS 1
IFRS 3
IFRS 3
IAS 16
IAS 37
Amendments to IAS 1 and IAS 8: Definition of Material
Amendments to IAS 1: Classification of
Liabilities as Current or Non-current
Amendment to IFRS 3 Business Combinations
Amendment to IFRS 3 Business Combinations
Amendments to IAS 16 Property, Plant and Equipment
Amendments
IAS 37 Provisions, Contingent
to
Liabilities and Contingent Assets
Annual Improvements: minor amendments to IFRS 1
First-time Adoption of
Financial
Reporting Standards, IFRS 9 Financial Instruments, and
the Illustrative Examples accompanying IFRS 16 Leases
International
Effective Date: Annual
periods beginning on or
after:
1 January 2020
1 January 2022
1 January 2020
1 January 2022
1 January 2022
1 January 2022
1 January 2022
EU
adopted
Yes
No
Yes
No
No
No
No
New / revised International Financial Reporting Standards which are not considered to potentially have a material
impact on the Group’s financial statements going forwards have been excluded from the above.
Management anticipates that all relevant pronouncements will be adopted in the Group's accounting policies for the
first period beginning after the effective date of the pronouncement. New standards, interpretations and amendments
not listed above are not expected to have a material impact on the Group's financial statements.
Critical accounting judgements and key sources of estimation uncertainty
The preparation of financial statements in conformity with generally accepted accounting practice requires
management to make estimates and judgements that affect the reported amounts of assets and liabilities as well as
the disclosure of contingent assets and liabilities at the balance sheet date and the reported amounts of revenues and
expenses during the reporting period.
Estimates and judgements are continually evaluated and are based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under the circumstances.
The following are the significant judgements used in applying the accounting policies of the Group that have the most
significant effect on the financial statements:
42
United Oil & Gas plc
Impairment of exploration licenses
Management reviews intangible exploration assets for indicators of impairment under IFRS 6 – Exploration for and
Evaluation of Mineral Resources at the end of each reporting period. This review of assets for potential indicators of
impairment requires judgement including whether renewal of licences is planned, interpretation of the results of
exploration activity and the extent to which the Group plans to continue substantive expenditure on the assets. In
determining whether substantive expenditure remains in the Group’s plan, management considers factors including
future oil prices, plans to develop or renew licences and future exploration plans. If impairment indicators exist the
assets are tested for impairment and carried at the lower of the estimated recoverable amount and net book value.
During the year, a decision was taken to impair the Colter intangible exploration asset. Management did not consider
there to be any indicators of impairment in the remaining intangible exploration assets at any reporting date
presented.
Fair value of consideration in relation to Crown Disposal
Management have applied judgement in determining the consideration recognised for the Crown disposal in
accordance with IFRS 5, including a receivable for contingent consideration of $2.85m. In the event of non-payment
of the contingent consideration the Group would retain the asset which has been attributed a fair value of $3.8m as a
result of the disposal deal.
43
United Oil & Gas plc
Notes to the Consolidated Financial Statements
1. Segmental reporting
Operating segments
Operating segments are reported in a manner consistent with the internal reporting provided to the chief
operating decision maker. The chief operating decision maker, who is responsible for allocating resources,
assessing the performance of the operating segment and making strategic decision, has been identified as the
Board of Directors. The Board of Directors consider that the Group has only one operating segment at corporate
level, being the exploration and evaluation of oil and gas prospects, therefore no additional segmental
information is presented.
The Group operates in three geographic areas – the UK, Europe and greater Mediterranean and Latin America.
The Group’s revenue from external customers and information about its non-current assets (other than financial
instruments, investments accounted for using the equity method, deferred tax assets and post-employment
benefit assets) by geographical location are detailed below.
2019
$
Revenue
Non-current assets
2018
$
Revenue
Non-current assets
2. Operating loss
UK
Other EU
Latin
America
Total
-
511,009
-
2,336,837
-
-
2,759,740 5,607,586
UK
Other EU
Latin
America
Total
-
872,229
-
2,185,608
-
-
2,173,099 5,230,936
Operating loss is stated after charging/(crediting):
Fees payable to the Company’s auditors for the audit of the annual financial
statements
Fees payable to the Company’s auditors and its associates for other services
to the Group:
- Tax compliance services
- Reporting accountant services
2019
$
2018
$
40,000
40,000
10,000
90,000
8,000
13,000
3. Disposal of Crown asset
On 12 December 2019, United announced the completion of the sale of its 95% share in the North Sea Blocks
12/18d and 15/19b (licence P2366) to Anasuria Hibiscus UK limited. The disposal was of the aforementioned
licence only, and the UOG Crown Limited subsidiary company is retained in the group.
44
United Oil & Gas plc
Under the deal for this disposal of the Crown licence (intangible asset disposal – see note 8), United received
$950,000 in 2019 on completion, with a further receivable of $2,850,000 due in 2020 which is contingent upon
approval of an FDP, the latter amount being reflected in current receivables in the balance sheet. In the event of
non-payment of the latter amount, ownership of the licence asset would return to the Group.
Having acquired the licence in 2018 and incurred costs of $918,024 in the interim period on a work programme,
some in-house technical work, and the costs of disposal the Group is reporting a profit on disposal before tax in
its 2019 Income Statement of $2,881,976.
4. Directors and employees
The aggregate payroll costs of the employees, including both management and Executive Directors, were as
follows:
Staff costs
Wages and salaries
Share-based payments
Social security
2019
$
675,928
126,772
31,958
2018
$
514,480
65,064
19,717
834,658
599,261
Average monthly number of persons employed by the Group during the year was as follows:
By activity:
Administrative
Directors
Remuneration of Directors
Emoluments and fees for qualifying services
Share-based payments
Social security
2019
Number
2018
Number
3
5
8
3
4
7
2019
$
450,450
112,015
13,881
2018
$
389,538
57,490
4,966
576,346
451,994
Key management personnel are identified as the Executive Directors.
No share warrants have been exercised by any of the directors, nor have any payments of pensions contributions
been made on behalf of directors in any of the periods presented.
45
5. Taxation
United Oil & Gas plc
Loss before tax
Loss on ordinary activities multiplied by standard rate of corporation tax in
the UK of 19% (2018: 19%)
Tax effects of:
Unrelieved tax losses carried forward
Corporation tax charge
2019
$
2018
$
(1,952,805)
(1,080,272)
(371,033)
(216,054)
557,303
216,054
186,270
-
The Group has accumulated tax losses of approximately $4m (2018: $2m). No deferred tax asset was recognised
in respect of these accumulated tax losses as there is insufficient evidence that the amount will be recovered in
future years.
6.
Loss per share
The Group has issued share warrants and options over Ordinary shares which could potentially dilute basic
earnings per share in the future. Further details are given in note 13.
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.
Due to the losses incurred during the year, a diluted loss per share has not been calculated as this would serve to
reduce the basic loss per share. There were 93,329,853 (2018: 93,329,853) share warrants and options
outstanding at the end of the year that could potentially dilute basic earnings per share in the future.
Basic and diluted loss per share
Loss per share from continuing operations
2019
Cents
(0.62)
2018
Cents
(0.38)
The loss and weighted average number of ordinary shares used in the calculation of basic loss per share are as
follows:
Loss used in the calculation of total basic and diluted loss per share
Number of shares
Weighted average number of ordinary shares for the purposes of basic and
diluted loss per share
2019
$
(2,139,075)
2018
$
(1,080,272)
2019
Number
2018
Number
345,613,985
282,810,516
46
United Oil & Gas plc
7. Subsidiaries
Details of the Group’s subsidiaries in 2019 are as follows:
Name & address of subsidiary
Principal activity
Class of
shares
Place of
incorporation
and operation
UOG Holdings plc
200 Strand, London, WC2R 1DJ
Intermediate holding
company
Ordinary
England and
Wales
% ownership
held by the
Group
2019
2018
100
100
UOG Ireland Limited*
9 Upper Pembroke Street,
Dublin 2, Ireland
Intermediate holding
company
Ordinary
Ireland
100
100
UOG PL090 Ltd*
200 Strand, London, WC2R 1DJ
Oil and gas exploration
Ordinary
England and
Wales
100
100
UOG Italia Srl*
Viale Gioacchino Rossini 9,
00198, Rome, Italy
UOG Jamaica Ltd*
200 Strand, London, WC2R 1DJ
UOG Crown Ltd*
200 Strand, London, WC2R 1DJ
UOG Colter Ltd*
200 Strand, London, WC2R 1DJ
Oil and gas exploration
Ordinary
Italy
100
100
Oil and gas exploration
Ordinary
Oil and gas exploration
Ordinary
Oil and gas exploration
Ordinary
England and
Wales
England and
Wales
England and
Wales
100
100
100
100
100
100
*held indirectly by United Oil & Gas
47
8.
Intangible assets
United Oil & Gas plc
Cost
At 1 January 2018
Additions
Foreign exchange differences
At 31 December 2018
Additions
Disposals
Foreign exchange differences
Exploration and
Evaluation assets
$
Computer
software
$
1,574,627
3,902,289
(250,697)
5,226,219
3,086,027
(792,033)
207,925
-
-
-
-
11,374
-
-
Total
$
1,574,627
3,902,289
(250,697)
5,226,219
3,097,401
(792,033)
207,925
At 31 December 2019
7,728,138
11,374
7,739,512
Amortisation and impairment
At 1 January 2018
Charge for the year
At 31 December 2018
Charge for the year
Impairment
Foreign exchange differences
At 31 December 2019
Net book value
At 31 December 2019
At 31 December 2018
-
-
-
-
2,111,319
47,329
2,158,648
-
-
-
-
-
-
-
-
-
-
-
2,111,319
47,329
2,158,648
5,569,490
11,374
5,580,864
5,226,219
-
5,226,219
At 31 December 2019 the group’s E&E carrying values of $5.6m related to our development Selva asset in Italy,
our high impact exploration activity in Jamaica, and the UK North Sea and Wessex basin exploration/development
work programmes. During the year we divested the Crown Discovery in the North Sea, and after evaluating a
number of commercialization options, have made the decision to write off the expenditure on the Colter wells.
Our Italian development at the Selva field continued to make progress in 2019. Factoring in the impact of Covid-
19, we are now targeting first production in early 2021. Formal technical environmental approval from the Italian
Environmental Ministry was granted in January 2020 and preliminary work has commenced on the development
programme preparing for first gas. Testing has previously indicated rates of 150,000scm/day with UOG’s economic
interest being 20%. At the Balance Sheet date $2,335,135 had been capitalised for our Italian asset.
In Jamaica work continued in 2019 on the processing of 3D seismic data acquired during the previous year, adding
further prospectivity to the numerous structures already identified in the licence. Further resources and funds
were also spent during 2019 on a joint-venture farm out process, led by the operator to seek partners to
participate in drilling an exploration well. This generated significant interest, but the current market conditions
have proven a challenging environment in which to complete a farm-down of such a frontier wildcat opportunity.
A 6-month extension to the initial Exploration Period was granted in January 2020, giving the Joint Venture until
the 31st July before a drill-or-drop decision is required. United has indicated to the Jamaican authorities that it
wishes to explore options for continuing to progress what United believe to be a transformative licence beyond
48
United Oil & Gas plc
the 31 July deadline, and discussions to this end have been initiated positively with the Government. As at 31
December UOG are carrying $2,764,170 for Jamaica in its Intangibles number.
In the UK, United has had an interesting year. In the North Sea, Licence P2480, containing four blocks, was
acquired in the OGA’s 31st licensing round, whilst the divestment of Licence P2366, containing the Crown discovery
was completed for a significant profit. In the Wessex Basin, the Colter well (98/11a-6) and its sidetrack have been
fully impaired, whilst the work programme continues on the Waddock Cross development.
A key achievement of the year was the divestment of the Crown licence to Anasuria Hibiscus UK Limited for an
initial $4m of which United have a 95% share. This sale required the net off of costs incurred from the work
programme and some disposal costs, amounting to $792,033 in total. With the addition of the 31st round licences
in Q3 of 2019 the company is carrying a small value of $33,884 on its North Sea assets, with a work programme
to ramp up in 2020/2021 on the P2480 licence, which includes the Zeta prospect.
In the PL090 licence, work continues with some independent reservoir modelling after the seismic completion in
2018 and at the Balance Sheet date the company is carrying $481,336 in capitalised costs in this licence.
In licence P1918 the Colter Well and side-track were drilled in Q1 of 2019. Despite some encouraging signs and
positive CPR indicators of a structure that could hold up to 24 MMstb in an upside case, the company has decided
to impair its costs in full, amounting to $2,158,649. This decision was made as after evaluating numerous
scenarios, it was determined that to make further progress towards development, further investment in 3D
seismic acquisition and an appraisal well would be required. The company’s view is that such investment would
be more profitably deployed elsewhere.
Management review the intangible exploration assets for indications of impairment at each balance sheet date
based on IFRS 6 criteria. Commercial reserves have not yet been established and the evaluation and exploration
work is ongoing. The Directors believe the only impairment indicators relate to Colter (as described above) and
have impaired all associated costs to date accordingly, with all remaining assets described continuing to be carried
at cost.
49
9. Property, plant and equipment
United Oil & Gas plc
Cost
At 1 January 2018
Additions
Foreign exchange differences
At 31 December 2018
Transition to IFRS 16
Additions
Foreign exchange differences
Computer
equipment
$
Right of use
asset
$
3,773
3,535
(356)
6,952
-
1,637
-
-
-
-
-
72,453
41,860
462
Total
$
3,773
3,535
(356)
6,952
72,453
43,497
462
At 31 December 2019
8,589
114,775
123,364
Depreciation
At 1 January 2018
Charge for the year
Foreign exchange differences
At 31 December 2018
Charge for the year
Foreign exchange differences
At 31 December 2019
Net book value
At 31 December 2019
At 31 December 2018
Depreciation is recognised within administrative expenses.
10. Trade and other receivables
Prepayments and deposit
Other tax receivables
Crown disposal proceeds due
609
1,732
(106)
2,235
3,562
15
5,812
2,777
4,717
-
-
-
-
90,464
366
609
1,732
(106)
2,235
94,026
381
90,830
96,642
23,945
26,722
-
4,717
2019
$
340,019
334,636
2,850,000
2018
$
68,636
670,483
-
3,524,655
739,119
The Directors consider that the carrying values of trade and other receivables are approximate to their fair values.
No expected credit losses exist in relation to the Group’s receivables as at 31 December 2019 (2018: £nil).
50
United Oil & Gas plc
Prepayments and deposits relate to monies paid in advance in relation to the Rockhopper acquisition completed
after the balance sheet date, and 2 months advance rent on the office.
Crown disposal proceeds due are being carried at the full value of the ascertainable contingent consideration
expected to be received (see note 3).
11. Cash and cash equivalents
Cash at bank (GBP)
Cash at bank (EUR)
Cash at bank (USD)
2019
$
263,536
21,465
990,536
2018
$
4,975,449
74,891
99,567
1,275,537
5,149,907
At 31 December 2019 and 2018 all significant cash and cash equivalents were deposited in the UK and Ireland
with large international banks.
12. Share capital, share premium and merger reserve
Allotted, issued, and fully paid:
Ordinary shares of $0.01 each
At 1 January and 31 December 2019
345,613,985
4,564,787
9,912,988
Share
capital
$
2019
Share
premium
$
No
Ordinary shares of $0.01 each
At 1 January 2018
Allotments:
28 February 2018
11 May 2018
08 October 2018
Share issue costs
Share
capital
$
2018
Share
premium
$
No
232,185,001
3,054,383
5,562,026
60,000
58,823,530
54,545,454
-
827
797,404
712,173
-
3,309
2,591,561
3,204,780
(1,448,688)
At 31 December 2018
345,613,985
4,564,787
9,912,988
51
United Oil & Gas plc
As regards income and capital distributions, all categories of shares rank pari passu as if the same constituted one
class of share.
13. Share-based payments
Options
Details of the number of share options and the weighted average exercise price (WAEP) outstanding during the
year are as follows:
2019
Outstanding at the beginning of the year
Issued
Outstanding at the year end
Number of
Options
11,117,647
-
11,117,647
WAEP
£
0.05
-
0.05
Number vested and exercisable at 31 December 2019
-
-
2018
Outstanding at the beginning of the year
Issued
Outstanding at the year end
Number of
Options
-
11,117,647
11,117,647
WAEP
£
-
0.05
0.05
Number vested and exercisable at 31 December 2018
-
-
The fair values of share options issued in the current financial year were calculated using the Black Scholes model
as follows:
Date of grant
Number granted
Share price at date of grant
Exercise price
Expected volatility
Expected life from date of grant (years)
Risk free rate
Expected dividend yield
Fair value at date of grant
Earliest vesting date
Expiry date
52
Share options
25 June 2018
11,117,647
£0.05
£0.04
58%
6.5
0.9876%
0%
£293,069
25 June 2021
25 June 2028
United Oil & Gas plc
Expected volatility was determined based on the historic volatility of the Company’s shares for a period averaging
1 year. The expected life used in the model has been adjusted, based on management’s best estimate, for the
effects of non-transferability, exercise restrictions and behavioural considerations.
The Group recognised total expenses of $126,772 in the income statement in relation to share options accounted
for as equity-settled share-based payment transactions during the year in relation (2018: $65,062).
Warrants
Details of the number of share warrants and the weighted average exercise price (WAEP) outstanding during the
year are as follows:
2019
Number of
Warrants
WAEP
£
Outstanding at the beginning of the year
82,212,206
0.04
Outstanding at the year end
82,212,206
0.04
Number vested and exercisable at 31 December 2019
82,212,206
0.04
2018
Outstanding at the beginning of the year
Exercised
Issued
Number of
Warrants
37,260,000
(60,000)
45,012,206
WAEP
£
0.02
(0.05)
0.05
Outstanding at the year end
82,212,206
0.04
Number vested and exercisable at 31 December 2018
41,303,126
0.02
53
United Oil & Gas plc
The fair values of share warrants issued or extended in the current financial year were calculated using the Black
Scholes model as follows:
Share
warrants
Share
warrants
Share warrants
Share
warrants
Share warrants
Date of grant
31 July 2017
31 July 2017
27 December 2017
11 May 2018
18 September 2018
Number granted
Share price at date
of grant
Exercise price
Expected volatility
Expected life from
date of grant (years)
Risk free rate
Expected dividend
yield
Fair value /
incremental fair
value at date of
grant
28,000,000
9,200,000
1,375,000
2,728,126
40,909,080
£0.03
£0.03
£0.04
£0.04
£0.01
£0.03
£0.04
£0.04
59%
59%
55%
56%
2.5
2.5
2.5
2.5
£0.06
£0.08
58%
2.5
0.5555%
0.5555%
0.7280%
1.0783%
1.1283%
0%
0%
0%
0%
0%
£382,533
£72,959
£18,952
£40,957
£550,390
Earliest vesting date
31 July 2017
31 July 2017
27 December 2017
11 May 2018
18 September 2019
Expiry date
31 July 2022
31 July 2022
27 December 2022
11 May 2023
18 September 2022
Expected volatility was determined based on the historic volatility of a comparable company’s shares for a period
averaging 1 year. The expected life used in the model has been adjusted, based on management’s best estimate,
for the effects of non-transferability, exercise restrictions and behavioural considerations.
The Group recognised total expenses of $nil in relation to share warrants accounted for as equity-settled share-
based payment transactions during the year in relation (2018: $799,829). These were recognised as follows:
$nil (2018: $799,829) as a deduction from share premium related to share warrants accounted for as equity-
settled share-based payment transactions during the year.
54
14. Trade and other payables
Trade payables
Tax and social security
Other payables
Deferred shares (note 15)
Accruals
15. Deferred shares
United Oil & Gas plc
2019
$
403,816
26,151
200,074
39,804
415,856
2018
$
10,403
20,571
1,610
38,281
337,147
1,085,701
408,012
On 12 October 2015, the Company issued 30,000 Deferred Shares of £1 for £30,000 to the Founder, which have
an entitlement to a non-cumulative annual dividend at a fixed rate of 0.1 per cent of their nominal value. The
Deferred Shares have no voting rights attached to them, and may be redeemed in their entirety by the Company
for an aggregate redemption payment of £1.
16. Leases
Disclosure required by IFRS 16
Right of use assets
The Group used leasing arrangements relating to property, plant and equipment. As the Group has the right of use
of the asset for the duration of the lease arrangement, a “right of use” asset is recognised within property, plant
and equipment.
When a lease begins, a liability and right of use asset are recognised based on the present value of future lease
payments.
2019
$
4,841
(93,228)
114,313
(90,464)
96
23,945
Interest expense on lease liabilities
Total cash outflow for leases
Additions to right-of-use assets
Depreciation charge – right of use assets
Foreign exchange movement on right of use assets
Carrying amount at the end of the year:
Right of use assets
55
United Oil & Gas plc
Lease liabilities
Current
Non-current
Disclosure required by IAS 17
Operating leases
Minimum lease payments under non-cancellable operating leases fall due as follows:
Land and buildings:
Less than one year
Between one and five years
2019
$
26,030
-
26,030
2018
$
75,668
-
During 2018, $nil was recognised as an expense in the income statement in relation to operating leases.
17. Financial instruments
Categories of financial instruments
The tables below set out the Group’s accounting classification of each class of its financial assets and liabilities.
Financial assets
Crown disposal proceeds due (note 10)
Cash and cash equivalents (note 11)
2019
$
2018
$
2,850,000
1,275,537
-
5,149,907
4,125,537
5,149,907
All of the above financial assets’ carrying values are approximate to their fair values, as at 31 December 2019 and
2018.
Financial liabilities
Trade payables (note 14)
Other payables (note 14)
Lease liabilities (note 16)
Accruals (note 14)
56
Measured at amortised cost
2018
$
2019
$
403,816
200,074
26,030
415,856
10,403
1,610
-
337,147
1,045,776
349,160
United Oil & Gas plc
In the view of management, all of the above financial liabilities’ carrying values approximate to their fair values
as at 31 December 2019 and 2018.
Fair value measurements
This note provides information about how the Group determines fair values of various financial assets and
financial liabilities.
Fair value of financial assets and financial liabilities that are not measured at fair value on a recurring basis
The directors consider that the carrying amounts of financial assets and financial liabilities recognised in the
consolidated financial statements approximate their fair values (due to their nature and short times to maturity).
18. Financial instrument risk exposure and management
The Group’s operations expose it to degrees of financial risk that include liquidity risk, credit risk, interest rate
risk.
This note describes the Group’s objectives, policies and process for managing those risks and the methods used
to measure them. Further quantitative information in respect of these risks is presented in notes 10, 11, 14, 15,
16, 17 and 19.
Liquidity risk
Liquidity risk is dealt with in note 19 of these financial statements.
Credit risk
The Group’s credit risk is primarily attributable to its cash balances.
The credit risk on liquid funds is limited because the third parties are large international banks with a minimum
investment grade credit rating.
The Group’s total credit risk amounts to the total of other receivables and cash and cash equivalents. Credit
assessments are routinely reviewed on all of the Group’s joint venture partners and other counterparties.
Interest rate risk
The Group’s only exposure to interest rate risk is the interest received on the cash held on deposit, which is
immaterial. The Group does not have any borrowings as at 31 December 2019.
Foreign exchange risk
The Group is exposed to foreign exchange movements on monetary assets and liabilities denominated in
currencies other than USD. The Group's transactions are carried out in GBP, EUR and USD. Equity funding
transactions are carried out in GBP. Operational transactions are carried out predominantly in USD but also in
GBP and EUR.
The monetary assets and liabilities denominated in currencies other than USD are e relatively immaterial (see
notes 10 and 11) and transactional risk is considered manageable.
57
United Oil & Gas plc
The Group does not hold material non-domestic balances and currently does not consider it necessary to take
any action to mitigate foreign exchange risk due to the immateriality of that risk.
19. Liquidity risk
Prudent liquidity risk management includes maintaining sufficient cash balances to ensure the Group can meet
liabilities as they fall due.
In managing liquidity risk, the main objective of the Group is therefore to ensure that it has the ability to pay all
of its liabilities as they fall due. The Group 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 / Group’s
financial liabilities as at 31 December 2019 and 2018, on the basis of their earliest possible contractual maturity.
Payable
on
demand
$
Total
$
Within
2
months
$
Within
2 -6
months
$
Within
6 – 12
months
$
Within
1-2
years
$
At 31 December
2019
Trade payables
Other payables
Lease liabilities
Accruals
At 31 December
2018
Trade payables
Other payables
Accruals
403,816
200,074
26,446
415,856
-
200,074
-
-
403,816
-
17,631
-
-
-
8,815
415,856
1,046,192
200,074
421,447
424,671
10,403
1,610
337,147
-
1,610
-
10,403
-
-
-
-
337,147
349,160
1,610
10,403
337,147
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Other payables comprise loans from directors which are repayable on demand.
20. Capital management
The Group’s capital management objectives are:
• To provide long-term returns to shareholders
• To ensure the Group’s ability to continue as a going concern; and
The Group defines and monitors capital on the basis of the carrying amount of equity less cash and cash
equivalents as presented on the face of the balance sheet and as follows:
2019
$
2018
$
58
United Oil & Gas plc
Equity
Cash and cash equivalents
9,105,601
(1,275,537)
10,711,950
(5,149,907)
7,830,064
5,562,043
The Board of Directors monitors the level of capital as compared to the Group’s commitments and adjusts the
level of capital as is determined to be necessary by issuing new shares. The Group is not subject to any externally
imposed capital requirements.
These policies have not changed in the year. The Directors believe that they have been able to meet their
objectives in managing the capital of the Group.
21. Related party transactions
Key management personnel are identified as the Executive Directors, and their remuneration is disclosed in note
3.
Loan from director
Principal
At 31 December 2017
Loans repaid
Foreign exchange differences
At 31 December 2018
Loans repaid
At 31 December 2019
Brian Larkin
$
11,558
(11,402)
(156)
-
-
-
The loan balance was repayable on demand with no formal terms.
22. Financial commitments
As at 31 December 2019, the Group’s commitments comprise their exploration expenditure interests in Waddock
Cross, Crown, Colter, Po Valley and the Walton-Morant licence. These commitments have been summarised
below:
Exploration licence
Crown
Colter
Walton-Morant licence
Po Valley
Waddock Cross
59
Year
ending 31
December
2019
$
107,045
1,067,590
751,676
75,377
47,039
2,048,727
Year
ending 31
December
2020
$
9,952
6,774
103,407
177,883
47,314
345,330
United Oil & Gas plc
23. Ultimate controlling party
The directors do not consider there to be an ultimate controlling party.
24. Events after the balance sheet date
1. On 28 February 2020 the company announced that it has completed the acquisition of Rockhopper Egypt Pty
Ltd. from Rockhopper Exploration plc. The Acquisition, which has an effective date of 1st January 2019,
includes a 22% non-operating interest in the producing Abu Sennan concession, onshore Egypt.
The consideration for the Acquisition was US$16 million (approximately £13 million) which was being funded
by:
•
the issue to Rockhopper PLC of 114,503,817 Consideration Shares at 3 pence per Ordinary Share
representing 18.5% of the Company's Enlarged Ordinary Share Capital,
• a pre-payment financing structure of US$8 million provided by BP ('the BP Facility') and
•
the issue of 150,616,669 Placing Shares at 3 pence per share with certain existing and new investors
and 8,419,498 Subscription Shares also at 3 pence per share.
Consideration Shares held by Rockhopper in United are subject to certain lock-up and orderly market disposal
provisions for a period of up to 12 months from completion.
This deal and its financial impacts are transformational for the company. At 31 December 2019 the acquired
company had net assets of $15.9m and generated profits of $2.4m in 2019.
Intangible exploration and evaluation assets
Property, plant and equipment
Inventories
Other receivables
Other payments
Revenue’s
Cost of sales
Administration & other costs
Profits
$’000
3,012
11,764
67
3,082
-2,000
15,925
$’000
7,637
4,629
635
2,373
Post year-end, gross production has continued to increase upwards from early 2019 levels of 5,000 boepd to
over 8,500 boepd in May 2020 (1,870 boepd to United’s working Interest), with the ASH-2 well coming on
stream in Q1.
Even at the current levels of lower commodity prices, the Abu Sennan assets remain on track to add significant
revenue, profits and cashflow to United in 2020. Proactive measures have been taken by the joint venture
partners including the deferral of three of the four wells in the 2020 campaign and further optimization of the
Capital and Operating expenditure budgets is being considered.
60
United Oil & Gas plc
2. On the 12 March 2020 UOG announced that further to the Rockhopper acquisition and readmission of shares
announcement of 28 February 2020, the Company has appointed Mr. Stewart MacDonald as Non-Executive
Director of the Company.
3.
Impact of COVID-19
Directors have considered the impact of the COVID-19 pandemic and measures were taken in response to the
situation and oil-price volatility.
The Company is going forward with an awareness that, due to the COVID-19, the low oil price and decline in
oil and gas demand may sustain. Both human and economic impact has been very significant so far and at this
point the long-term effect is uncertain. United has published a statement regarding the fall of Brent oil price
in March and April, underlining the facts and efforts that management and staff are making to maintain the
company’s operations.
Proactive measures taken by United and its partners to reduce near-term Capex commitments during current
oil-price uncertainty and the impact of Covid-19
• Deferral of Italian Capex improves cash flow and moves expected first gas slightly to H1 2021
• Deferral of Egyptian Capex reduces 2020 infill campaign from 4 to 1 well, significantly reducing gross 2020
Capex estimates. Further optimisation of the Capex and Opex budgets is being considered.
• Completion of post-Egyptian-acquisition licence review sees divestment plans for selected non-core assets in
the Wessex Basin and a decision not to exercise the farm-in option in Benin
• Substantial cut in administrative expenditure resulting in further cost savings
Measures taken to minimise the impact of oil-price uncertainty and Covid-19 will help safeguard the company
during the current industry challenges, with the aim of putting it in a position to take advantage of future
opportunities
The Company's pre-payment facility with BP is based on a floor price of $60/bbl for c.6,600 bbls of crude oil
production per month for the next thirty months. This provides downside price protection by effectively
hedging this portion of production. Coupled with this, c. 20% of United's net production is gas which is sold
under a fixed contract that is relatively insensitive to oil-price changes.
61
Company Balance Sheet as at 31 December
United Oil & Gas plc
Assets
Non-current assets
Investments
Current assets
Trade and other receivables
Cash and cash equivalents
Total Assets
Equity and liabilities
Capital and reserves
Share capital
Share premium
Share-based payment reserve
Retained earnings:
Opening retained earnings
Loss for the year
Total retained earnings
Shareholders’ funds
Current liabilities
Trade and other payables
Current tax payable
Deferred shares
Total liabilities
Total equity and liabilities
Notes
2019
£
2018
£
2
3
4
7
5
1,554,810
1,554,810
7,353,155
854,670
8,976,635
-
8,207,825
8,976,635
9,762,635
10,531,445
3,456,140
7,486,946
1,212,326
(1,664,378)
(1,911,754)
(3,576,132)
3,456,140
7,486,946
1,114,636
(1,142,052)
(522,326)
(1,664,378)
8,579,280
10,393,344
1,009,816
143,539
30,000
108,101
-
30,000
1,183,355
138,101
9,762,635
10,531,445
The notes to these financial statements form an integral part of these financial statements.
The financial statements were approved by the Board of Directors and authorised for their issue on 28 May 2020 and
were signed on its behalf by:
Brian Larkin
Chief Executive Officer
Registered number: 09624969
62
Company Statement of Changes in Equity
United Oil & Gas plc
31
year
ended
the
For
December 2019
Balance at 1 January 2019
Profit for the financial year
Total comprehensive income
Transactions with owners:
Share based payments
Share
capital
£
Share
premium
£
Share-based
payment reserve
Retained
earnings
£
Total
£
3,456,140
-
-
7,486,946
-
-
1,114,636
-
-
(1,664,378) 10,393,344
(1,911,754)
(1,911,754)
(1,911,754)
(1,911,754)
-
-
97,690
-
97,690
Balance at 31 December 2019
3,456,140
7,486,946
1,212,326
(3,576,132)
8,579,280
31
year
ended
For
the
December 2018
Balance at 1 January 2018
Loss for the financial year
Total comprehensive income
Transactions with owners:
Exercise of share warrants
Share issue
share issue expenses
Issue of share options
Total transactions with owners
Balance at 31 December 2018
2,321,850
-
-
600
1,133,690
-
-
1,134,290
3,456,140
4,213,944
-
-
2,400
4,366,310
(1,095,708)
-
3,273,002
7,486,946
455,493
-
-
(1,142,052)
(522,326)
(522,326)
5,849,235
(522,326)
(522,326)
-
-
610,299
48,844
659,143
1,114,636
3,000
5,500,000
(485,409)
48,844
5,066,435
(1,664,378) 10,393,344
-
-
-
-
-
The notes to these financial statements form an integral part of these financial statements.
63
United Oil & Gas plc
Notes to the Parent Company Financial Statements
for the year ended 31 December 2019
1. Accounting Policies
Basis of Preparation
The annual financial statements of United Oil & Gas (the Parent Company financial statements) have been
prepared in accordance with Financial Reporting Standard 100 Application of Financial Reporting Requirements
("FRS 100") and Financial Reporting Standard 101 Reduced Disclosure Framework ("FRS 101").
Disclosure exemptions adopted
In preparing these financial statements the Company has taken advantage of all disclosure exemptions conferred
by FRS 101. Therefore, these financial statements do not include:
certain disclosures regarding the company's capital;
•
• a statement of cash flows;
•
•
• disclosure of related party transactions with the Company’s wholly owned subsidiaries.
the effect of future accounting standards not yet adopted;
the disclosure of the remuneration of key management personnel; and
In addition, and in accordance with FRS 101 further disclosure exemptions have been adopted because equivalent
disclosures are included in the Company’s Consolidated Financial Statements. These financial statements do not
include certain disclosures in respect of:
• Financial instruments (other than certain disclosures required as a result of recording financial
instruments at fair value)
• Fair value measurement (other than certain disclosures required as a result of recording financial
instruments at fair value)
• Related party transactions
• Share-based payments
As permitted by section 408 of Companies Act 2006, a separate Income Statement for the Company has not been
included in these financial statements. The Company’s loss for the year ended 31 December 2019 was £1,911,754
(2018: £522,326).
Going Concern
The Group’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’ recent forecasts demonstrate that the Group will meet its day-to-day working capital and financial
commitments over the forecast period (being at least 12 months from the date the financial statements were
approved) from the cash held on deposit and planned oil and gas revenue from Abu Sennan in 2020, as further
opportunities arise and the portfolio continues to grow in line with group strategy. This base case forecast is
inclusive of the lower oil prices that are forecast well into 2021, primarily as a result of the global oil supply and
demand dynamics and the COVID-19 pandemic. The Group has been able to defer a significant portion of the
budgeted capital expenditure programme for 2020 and taken other measures to reduce the running costs of the
business, which combined will protect the Group cashflows. Management have also considered some additional
downside scenarios including a case where a significant contingent consideration receipt relating to the Crown
disposal due in late 2020 is not received within the forecast period, and if realised would place doubt on the ability
to fund the business for 12 months from the current cash reserves and projected oil and gas revenues from Egypt.
64
United Oil & Gas plc
Some mitigating actions have been considered in the event that the downside scenario was realised and include
further divestment of the portfolio, potential restructuring of debt arrangements and a further equity raise.
The Group has sufficient funding to meet planned financial commitments in relation to operational activities and
a level of contingency, and as a result the directors continue to adopt the going concern basis of accounting in
preparing the financial statements. However, in the downside scenario discussed, and without the successful
implementation of mitigating actions, a material uncertainty does exist that may affect the ability of the company
to continue as a going concern. The consolidated financial statements have not been adjusted for the scenario
where the Group is not a going concern.
Investments
Fixed asset investments are stated at cost. Investments are tested for impairment when circumstances indicate
that the carrying value may be impaired.
Impairment of non-financial assets
At each balance sheet date, the Directors review the carrying amounts of the Company’s tangible and intangible
assets, other than goodwill, to determine whether there is any indication that those assets have suffered an
impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to
determine the extent of the impairment loss, if any. Where the asset does not generate cash flows that are
independent from other assets, the Company estimates the recoverable amount of the cash-generating unit to
which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. 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 which the estimates
of future cash flows have not been adjusted.
If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the
carrying amount of the asset or cash-generating unit is reduced to its recoverable amount. If the recoverable
amount of a cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce
the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based
on the carrying amount of each asset in the unit.
An impairment loss is recognised as an expense immediately.
An impairment loss recognised for goodwill is not reversed in subsequent periods.
Where an impairment loss subsequently reverses, the carrying amount of the asset or cash-generating unit is
increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not
exceed the carrying amount that would have been determined had no impairment loss been recognised for the
asset or cash-generating unit in prior periods. A reversal of an impairment loss is recognised in the Income
Statement immediately.
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.
65
United Oil & Gas plc
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 15, 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 FVOCI or 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
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 other
receivables fall into this category of financial instruments.
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.
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 unless
the Company designated a financial liability at fair value through profit or loss.
66
United Oil & Gas plc
Subsequently, financial liabilities are measured at amortised cost using the effective interest method except for
contingent consideration designated at FVTPL, which is carried subsequently at fair value with gains or losses
recognised in profit or loss.
All interest-related charges and, if applicable, changes in an instrument’s fair value that are reported in profit or
loss are included within finance costs or finance income.
Current taxation
Current taxation is based on the local taxable income at the local statutory tax rate enacted or substantively
enacted at the balance sheet date and includes adjustments to tax payable or recoverable in respect of previous
periods.
Deferred taxation
Deferred taxation is calculated using the liability method, on temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts in the financial statements. However, if the deferred tax arises
from the initial recognition of an asset or liability in a transaction other than a business combination that at the
time of the transaction affects neither accounting nor taxable profit or loss, it is not accounted for. Deferred tax
is determined using tax rates and laws that have been enacted or substantively enacted by the balance sheet date
and are expected to apply when the related deferred tax asset is realised, or the deferred tax liability is settled.
Deferred tax liabilities are provided in full.
Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available
against which the temporary differences can be utilised.
Changes in deferred tax assets or liabilities are recognised as a component of tax expense in profit or loss, except
where they relate to items that are charged or credited directly to equity in which case the related deferred tax
is also charged or credited directly to equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets
against current tax liabilities and when the deferred tax assets and liabilities relate to taxes levied by the same
taxation authority on either the same taxable entity or different taxable entities where there is an intention to
settle the balances on a net basis.
Foreign currency
Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Monetary assets
and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the year-end
date. All differences are taken to the Income Statement.
Share-based payments
Where share-based payments (warrants and options) have been issued, IFRS 2 has been applied whereby the fair
value of the share-based payment is measured at the grant date and spread over the vesting period. A valuation
model is used to assess the fair value, taking into account the terms and conditions attached to the share-based
payments. The fair value at grant date is determined including the effect of market based vesting conditions, to
the extent such vesting conditions have a material impact.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the
period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant
employees become fully entitled to the award (“the vesting date”).
The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date
reflects the extent to which the vesting period has expired and the Company’s best estimate of the number of
equity instruments that will ultimately vest.
67
United Oil & Gas plc
The charge or credit for a period to the income statement represents the movement in cumulative expense
recognised as at the beginning and end of that period.
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional
upon a market condition, which are treated as vesting irrespective of whether or not the market condition is
satisfied, provided that all other performance and/or service conditions are satisfied. Where the terms of an
equity-settled award are modified, the minimum expense recognised is the expense as if the terms had not been
modified. An additional expense is recognised for any modification, which increases the total fair value of the
share-based payment arrangement or is otherwise beneficial to the recipient as measured at the date of
modification.
Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any
expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for
the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and
new awards are treated as if they were a modification of the original award, as described in the previous
paragraph.
Where an equity-settled award is forfeited, the cumulative charge expensed up to the date of forfeiture is
credited to the income statement.
Equity
Equity comprises the following:
•
•
•
•
“Share capital” represents amounts subscribed for shares at nominal value.
“Share premium” represents amounts subscribed for share capital, net of issue costs, in excess of
nominal value.
“Share-based payment reserve” represents amounts credited to equity as part of the accounting for
share-based payments.
“Retained earnings” represents the accumulated profits and
shareholders.
losses attributable to equity
68
2.
Investments
United Oil & Gas plc
Cost
As at 1 January 2018
Transfer of investment to subsidiary
As at 31 December 2018
Additions
As at 31 December 2019
Investments in
Subsidiaries
£
1,554,910
(100)
1,554,810
-
1,554,810
The Company’s subsidiaries are detailed in note 6 to the consolidated financial statements.
3. Trade and other receivables
Amounts due from group undertakings
Crown disposal proceeds due
Other tax receivables
Prepayments
2019
£
2018
£
4,912,536
2,148,045
46,983
245,591
7,353,155
8,886,506
-
-
90,129
8,976,635
Amounts due from group undertakings represent all intercompany receivables after the deduction of impairment
provisions of £1,645,436 from UOG Colter Limited in relation to the Colter well costs, and £719,370 from UOG
Ireland Limited.
4. Cash and cash equivalents
Cash at bank
5. Trade and other payables
Trade payables
Amounts due to group undertakings
Other payables
Accruals
69
2019
£
854,670
2018
£
-
2019
£
165,527
453,501
142,315
248,473
1,009,816
2018
£
-
-
-
108,101
108,101
6. Deferred shares
United Oil & Gas plc
On 12 October 2015, the Company issued 30,000 Deferred Shares of £1 for £30,000 to the Founder, which have
an entitlement to a non-cumulative annual dividend at a fixed rate of 0.1 per cent of their nominal value. The
Deferred Shares have no voting rights attached to them and may be redeemed in their entirety by the Company
for an aggregate redemption payment of £1.
7. Share Capital
Allotted, issued, and fully paid:
Ordinary shares of £0.01 each
Share
capital
£
2019
Share
premium
£
No
At 1 January and 31 December 2019
345,613,985
3,456,140
7,486,946
Ordinary shares of £0.01 each
At 1 January 2018
Allotments:
28 February 2018
11 May 2018
08 October 2018
Share issue costs
Share
capital
£
2018
Share
premium
£
No
232,185,001
2,321,850
4,213,944
60,000
58,823,530
54,545,454
-
600
588,235
545,455
-
2,400
1,911,765
2,454,545
(1,095,708)
At 31 December 2018
345,613,985
3,456,140
7,486,946
The Company has one class of ordinary shares which carry no fixed right to income.
8. Events After the Balance Sheet Date
See note 24 of the Notes to the Consolidated Financial Statements.
70
COMPANY INFORMATION
Directors
United Oil & Gas plc
Graham Martin (Chairman)
Brian Larkin
David Quirke
Jonathan Leather
Alberto Cattaruzza
Stewart Macdonald
Company secretary
David Quirke
Registered number
09624969
Registered office
200 Strand, London, WC2R 1DJ
Nominated Advisor
Joint Brokers
Beaumont Cornish
10th Floor, 30 Crown Place
London, EC2A 4EB
Optiva Securities
2 Mill Street
London, W1S 2AT
Cenkos Securities plc
6-8 Tokenhouse Yard
London, EC2R 7AS
Independent auditors
UHY Hacker Young
Chartered Accountants & Registered Auditors
Quadrant House
4 Thomas More Square
London, E1W 1YW
Legal advisers
Principal bankers
Registrars
Kerman & Co LLP
200 Strand
London, WC2R 1DJ
Bank of Ireland
Raheny
Dublin 5
Barclays Bank plc
1 Churchill Place
London, E14 5HP
Share Registrars Limited
The Courtyard
17 West Street
Farnham, GU9 7DR
71