Zephyr Energy Plc

Rose
Petroleum plc

Rose Petroleum plc
Annual Report and Financial Statements
For the year ended 31 December 2018

Contents

Directors, Advisers and Officers

Chairman’s Statement

Strategic Report

Directors’ Report

Corporate Governance Statement

Statement of Directors' Responsibili5es

Independent Auditor’s Report

Consolidated Income Statement

Consolidated Statement of Comprehensive Income

Consolidated Balance Sheet

Consolidated Statement of Changes in Equity

Consolidated Cash Flow Statement

Company Balance Sheet

Company Statement of Changes in Equity

Company Cash Flow Statement

Notes to the Financial Statements

No5ce of Annual General Mee5ng

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68

Annual Report and Accounts for the year ended 31 December 2018

01

Rose
Petroleum plc

Directors, Advisers and Officers

Execu&ve Chairman
Non-Execu&ve Director
Non-Execu&ve Director
Chief Execu&ve Officer
Chief Financial Officer

Directors
JC Harrington
TH Reynolds
RL Grant
MC Idiens
CJ Eadie

Secretary
IH McNeill

Registered Office
20-22 Wenlock Road
London
N1 7GU

Auditor
RSM UK Audit LLP
Central Square, 5th Floor
29 Wellington Street
Leeds
LS1 4DL

Registrars
Link Asset Services
34 Beckenham Road
Beckenham
Kent
BR3 4TU

Bankers
Barclays Bank Plc
Level 27
1 Churchill Place
London
E14 5HP

Joint Broker
Novum Securi5es
18 Grosvenor Gardens
London
SW1W 0DH

Solicitors
Memery Crystal LLP
165 Fleet Street
London
EC4A 2DY

Nominated Adviser
Allenby Capital Limited
5 St Helen’s Place
London
EC3A 6AB

Joint Broker
Turner Pope Investments Ltd
Becket House
36 Old Jewry
London
EC2R 8DD

Joint Broker
Cantor Fitzgerald Europe
1 Churchill Place
London
E14 5EF

02

Annual Report and Financial Statements for the year ended 31 December 2018

Chairman’s Statement

Introduc0on

This is my first Chairman’s statement since being appointed as Execu5ve Chairman in May 2019.

While this Annual Report technically covers the twelve months to 31 December 2018, there have been important
developments in the period since. As such, I would like to take this opportunity to detail management and Board
changes, as well as set out the restructured Board’s vision for the future of the Group. I will also outline my opinion
of how the Group is currently posi5oned, as I believe Rose has strong prospects for growth, both from its exis5ng
por4olio and from the poten5al of carefully targeted acquisi5ons.

Board and Management Changes

It is my key ini5al challenge to put together a team best posi5oned to deliver long awaited value to our pa5ent
Shareholders. As part of this effort, I am delighted to announce the appointment of Rick Grant as a non-execu5ve
Board member. In addi5on to being a co-founder of Origin Creek Energy (“OCE”), Rick has a 40-year track record
of success in the oil and gas industry. Prior to OCE, Rick was CEO of Suez North America LNG and then served as
CEO of Suez Global LNG (“Suez LNG”). During his tenure, Suez LNG grew from an ini5al US$680 million acquisi5on
of Cabot LNG (where Rick previously served as President), into the world’s third largest liquefied natural gas
(“LNG”) business, one ac5ve across the en5re global natural gas chain from upstream produc5on through to
distribu5on to end-users. Before his 5me at Cabot, Rick was President of Mountaineer Gas, the largest natural gas
distribu5on company in West Virginia (which also held a sizable upstream por4olio). During his career, Rick has
had significant success managing mul5-billion dollar organisa5ons and developments, and has been involved in
a number of highly profitable corporate exits. I know he will bring a wealth of sector experience, knowledge and
rela5onships to the Rose Board.

The Board con5nues to evaluate roles and needs at the execu5ve and Board levels. Related to this effort, Ma6hew
Idiens has informed the Company of his inten5on to step down as a Board member and CEO a%er assis5ng through
a transi5on period to an updated management team. We expect to make addi5onal announcements about
changes to the execu5ve team during the next quarter.

Exis0ng Opera0ons

The headway achieved by the Group during 2018 was made against the backdrop of challenging market condi5ons
that saw vola5lity in oil prices, par5cularly towards the end of the year. In spite of this, Rose made progress with
con5nued prepara5ons for the start of drilling at its primary asset in the Paradox Basin, Utah, U.S.A. (“Paradox
acreage” or “Paradox”). The Group is earning into a 75% working interest in approximately 80,000 acres in the
Paradox acreage through its joint venture partnership with Rockies Standard Oil Company (“RSOC”).

U5lising the results of the 3D seismic shoot completed in 2017, a Competent Person’s Report (“CPR”) completed
in June 2018 by Gaffney Cline & Associates (“GCA”) confirmed the scale and prospec5vity of the Paradox project.
The Group is now opera5onally in a posi5on to deliver value with the successful drilling of an ini5al well, and such
drilling would complete the earn-in obliga5on at the Paradox.

Discussions with poten5al farm-in, financial and strategic partners in regard to funding drilling of the first Paradox
well con5nue, and based on the scale and prospec5vity of the Paradox asset, I am hopeful that this key funding
objec5ve can be met prior to the end of this calendar year.

Annual Report and Financial Statements for the year ended 31 December 2018

03

Rose
Petroleum plc

Chairman’s Statement
continued

Future Opera0ons

By way of background, it may be helpful to remind readers that I also serve as Chief Execu5ve of OCE, an
investment firm focused on upstream oil and gas opportuni5es in the U.S.A. OCE subscribed US$ 0.4 million
(£0.3 million) in the Company’s shares in May 2019 and has a 14.84% shareholding in the Company. Our newest
Board member, Rick Grant, also serves as Chairman of OCE.

OCE’s principals have significant experience genera5ng value from the highly fragmented small-cap end of the
U.S.A. explora5on and produc5on sector, and we believe it is a segment of the market where outsize investment
returns can be achieved. To access these returns, however, we believe it is cri5cal to align with strong opera5onal
management teams – groups with a high degree of focus and experience within specific geographic basins.

We also believe in the value of construc5ng a balanced por4olio, one with a mix of:

•

•

•

Current produc5on acquired at compelling valua5ons;

Access to near-term, lower risk, yet highly economic development opportuni5es located in core acreage
posi5ons in established basins. We par5cularly like infill, horizontal development drilling opportuni5es in
basins long established through ver5cal produc5on; and

Longer term high upside explora5on projects designed to add significant scale, such as the current
opportunity in the Paradox.

The Group has already laid a strong founda5on for developing scale from the Paradox. Apart from our plans to
develop that asset, we expect to see the Group focus on near-term opportuni5es to acquire accre5ve produc5on
and development projects, par5cularly in established basins nearby. Longer term, we will seek to execute
transac5ons and developments that build a balanced por4olio of produc5on, development and explora5on,
focused solely on basins where our growing opera5ons team has the deepest experience, with a par5cular
emphasis on the Rocky Mountains region.

Vision and Alignment

The decision to invest in Rose was made a%er significant evalua5on. OCE takes a long-term view on its investments
and has had success with its por4olio to date. Aligning OCE with an AIM quoted partner such as Rose was a logical
step for the business. OCE and our opera5ng partners have considerable experience with upstream opera5ons,
explora5on, drilling, produc5on and corporate turnarounds. We have longstanding rela5onships with a large network
of industry partners and investors in the U.S.A. explora5on and produc5on sector, rela5onships which we will u5lise
for the benefit of all Shareholders. A point worth reinforcing is that as a 14.8% Shareholder, OCE is highly aligned with
the Group’s other Shareholders as we seek to build value from our collec5ve investments in Rose.

As I men5oned earlier, a key part of my role is to con5nue to review the resourcing of the Group to ensure we
have the right blend of team to help deliver the strategy outlined above. Cash conserva5on will remain a priority.

Conclusion

In conclusion, I am excited to have joined the Group at this pivotal stage in its development and look forward to
providing further updates as we deliver on key milestones in the transforma5on of the Group. Most importantly,
I want to thank our Shareholders, employees and advisers for their con5nued support – we welcome and take
seriously the opportunity to grow the value of your investment alongside ours.

JC Harrington
27 June 2019

04

Annual Report and Financial Statements for the year ended 31 December 2018

Strategic Report

The Directors present their strategic report on the Group for the year ended 31 December 2018.

Principal Objec0ves And Strategies

Rose Petroleum plc is an Oil & Gas (“O&G”) explora5on company with some residual mining assets. The key
strategic objec5ve is to deliver Shareholder returns through the enhancement of these assets.

This key objec5ve will be achieved by various strategies:

•

•

•

•

•

Con5nuing development of a Board consis5ng of highly experienced professionals covering O&G, mineral
explora5on, financing and financial control of public companies;

Employing strong and experienced management teams to maximise returns from the Group’s underlying
assets;

The poten5al addi5on of further interests through acquisi5on, farm-in agreements or joint arrangements to
deliver near-term value to stakeholders;

Considera5on of the capital and financing required to achieve the Group’s objec5ves and market percep5on;
and

Tight financial control and cash conserva5on.

Review Of Opera0ons

Oil & Gas Division
The period under review was one of sustained ac5vity as the Group worked towards delivering on its key strategic
objec5ve of spudding its first well on its Paradox acreage.

Following on from the successful 3D seismic acquisi5on in late 2017, the key opera5onal milestones achieved
during the period, and since, have been:

•

•

•

•

•

•

•

•

the assembling of a high quality opera5ons team with extensive Paradox Basin experience to deliver the
Paradox project;

the comple5on of the interpreta5on of the 3D data;

comple5on of an updated CPR on the resources within Clas5c 21 in the area covered by the 3D acquisi5on;

U.S. Bureau of Land Management (“BLM”) approval of Applica5on for Permit to Drill (“APD”) for the GV22-1
which will be the Group’s first Paradox well;

well design engineering and detailed cos5ngs of GV22-1 completed;

the acquisi5on of further highly prospec5ve new acreage that falls within the 3D shoot area;

the engagement with financial and industry partners with a view to obtaining funding for the drilling of the
first Paradox well and overall development of the project; and

Schlumberger were engaged to provide a third party verifica5on on the fracture characterisa5on on the
Paradox acreage.

The work carried out during the period and since, and par5cularly the interpreta5on and resource update work,
has con5nued to highlight the substan5al scale, value and geological poten5al of the Paradox project.

Annual Report and Financial Statements for the year ended 31 December 2018

05

Rose
Petroleum plc

Strategic Report
continued

Following the comple5on of the 3D seismic acquisi5on and interpreta5on, and to quan5fy and highlight the
poten5al of the Paradox, GCA were engaged to prepare a CPR on the acreage of the 3D seismic acquisi5on held
by the Group (the “3D area”), being approximately 17,250 acres of the total acreage held by the Group in Utah.
This CPR focused solely on a single reservoir, the Cane Creek reservoir (the “CCR” or “Clas5c 21”), of the mul5ple
prospec5ve reservoirs within the Paradox Forma5on. The CPR upgraded the resource classifica5on from
Prospec5ve Resources to Con5ngent Resources within the 3D seismic acquisi5on area, and reported, net to the
Group, a 2C Con5ngent Resource of 9.25 million barrels of oil (“MBO”) and 18.50 billion standard cubic feet
(“Bscf”) of gas and an unrisked pre-tax NPV10 of US$122 million. For a full summary of the CPR, please refer to
the Group’s announcement on 22 June 2018.

The CPR clearly demonstrates the significant poten5al upside of the Paradox acreage. The Paradox forma5on is
made up of approximately 24 clas5c zones, of which the Cane Creek Cycle (Clas5c 21) is the primary producing
zone of the basin to date. Up to five addi5onal clas5cs, above the Cane Creek Cycle, are also thought to be
prospec5ve. The CPR covered only a por5on of the Group’s total acreage posi5on which is covered by the 3D
acquisi5on, providing the opportunity to significantly increase resource numbers on the Paradox project in the
future, with addi5onal acquisi5on of further seismic coverage.

The Board believes that the CPR ra5fies the proposed appraisal plans for the Paradox acreage, which will be the
first combina5on of horizontal drilling steered by high quality 3D seismic data in the Paradox acreage. A similar
approach has proved very successful in the development of the Cane Creek Field analogue directly south of the
Group’s acreage. Further, we con5nue to evaluate the remaining Clas5c 21 poten5al outside the 3D area and
shallower prospec5ve zones both within the 3D area and outside it, which represent further upside opportuni5es
within the Group’s acreage footprint.

In a further show of its confidence in the Paradox, the Group announced in April 2018 that it had increased its land
posi5on in the Paradox Basin with the acquisi5on of some highly prospec5ve new acreage. The Joint Venture
acquired an addi5onal 3,320 gross acres (2,490 net acres) (the “New Acreage”) for US$36 per gross acre, resul5ng
in a total considera5on of approximately US$120,000.

The acquisi5on of the New Acreage, which is con5nuous with the joint venture’s exis5ng acreage and is in close
proximity to the producing 28-11 well, was achieved following detailed technical analysis of its geological poten5al.
The New Acreage is covered by the Group’s 3D seismic survey, which was acquired in late 2017, which shows
mul5ple highly a6rac5ve geological structures and poten5al well site loca5ons.

In addi5on to the 28-11 well, three other ver5cal wells have been drilled within the 3D seismic areal extent and
all show the presence of moveable oil within the reservoir matrix. These factors give the Board a high degree of
confidence in respect to the Group’s acreage and, as a result, it was decided to proceed to apply for an APD permit
for an addi5onal well loca5on in the New Acreage, the GV22-1 well. The APD for the GV22-1 was approved by the
BLM in the fourth quarter of 2018 and was announced on 1 November 2018.

The GV22-1 will be a horizontal well which the Group’s management consider has a poten5al Es5mated Ul5mate
Recovery (“EUR”) of 894,000 barrels of oil equivalent (“BOE”), consistent with the GCA’s CPR. As already
men5oned, the poten5al of the GV22-1 well is supported by its close analogy to highly produc5ve structures
(>1mmboe EUR) within the nearby Cane Creek Field (12 miles south) and locally by its close proximity to the
producing 28-11. This well produces from the porous and permeable fracture network within Clas5c 21 and can
be 5ed to the GV22-1 loca5on within the 3D seismic data set. The 28-11 is a ver5cal well that was drilled by Delta
Petroleum in 2006 without the benefit of 3D seismic. It has produced 141,000 BOE, and represents a key piece of

06

Annual Report and Financial Statements for the year ended 31 December 2018

Strategic Report
continued

evidence for the presence of hydrocarbons and of a greater fracture network across the area covered by the 3D
seismic. These factors give the Board a high degree of confidence in the poten5al of the GV22-1 well, and it was
for these reasons that the Group decided to priori5se the GV22-1 loca5on as its first well.

The selec5on of the GV22-1 well as the first well was also validated by the fracture characterisa5on study undertaken
by Schlumberger on behalf of the Group, the results of which were announced in January 2019. In Schlumberger’s
detailed analysis of the GV22-1, the models of the combined fracture sets developed in the study show that the well
is situated op5mally to capture the fold and fault related fractures. The study also states that it is expected that both
fault and fold related fracture sets are viable from the geomechanical modeling. Targe5ng both fracture sets
maximises poten5al produc5vity from a successful well.

The Group is now working with the BLM to include the New Acreage, and therefore the GV22-1 proposed well site,
within the Gunnison Valley Unit (“GVU”), where the Group’s opera5onal ac5vity has been focused. The addi5on
of the New Acreage within the GVU will give the Group more op5ons in terms of the future drilling programme.
These discussions with the BLM are being carried out in tandem with ongoing work to manage the exis5ng acreage
posi5on and the GVU itself which requires careful oversight, par5cularly when taking into account the more
proac5ve approach of the BLM towards land usage under the new poli5cal administra5on.

If the BLM approves the proposed plan to include the New Acreage within the GVU, then the Group will be able
to propose the GV22-1 as the next obliga5on well. The GVU, which covers approximately 60,000 acres, presently
requires four obliga5on wells; the first obliga5on well has already been completed (GVU22-9) by Anadarko.

The ongoing discussions with the BLM in respect of the GVU reshape are expected to coincide with the Group’s
5meline to spud the GV22-1 well before the end of the year. The next obliga5on well for the GVU is required to
be drilled within six months of comple5on of opera5ons at GV22-1.

To support the proposed drilling ac5vi5es, the Group has assembled a highly experienced subsurface and surface
opera5onal team with extensive experience and a successful track record in the Paradox Basin. The team designed,
managed and implemented a nine-well drilling programme in the Paradox Basin for Fidelity Explora5on and
Produc5on Inc., directly to the south of the Group’s acreage. Eight of these wells were commercial and produc5on
grew from circa 100 barrels of oil per day (“BOPD”) to over 3,500 BOPD from 2012 to 2014. As the Group
progressed through the well selec5on and permi7ng processes for the first Paradox well, the Group is already
realising the benefits of having such a first class team.

In conclusion, the technical work required ahead of the spudding the GV22-1 has all now been completed, the well
has been permi6ed and the final step in the process is securing the financing to complete the well. Discussions
with industry partners con5nue albeit that the recent oil price vola5lity and investors focus on the established oil
producing basins in the U.S.A, has meant that these discussions, and the subsequent nego5a5ons, have taken
longer than might have otherwise been hoped. The Board remains confident that it will be in a posi5on to spud
the GV22-1 before the end of this calendar year. Poten5al farm-in partners who have reviewed the data related
to the projects have consistently commented on the high quality of the technical assessment of the project.

As the Group’s ac5vity in the Paradox basin has intensified, it has been approached by a number of third par5es
about poten5al partnering and investment opportuni5es in the region. While the Group remains wholly focused
on the Paradox, the Directors believe that they should appraise any addi5onal opportuni5es further, par5cularly
those comprising producing or near-term producing assets, to see if there may be commercial synergies with the
exis5ng Paradox opera5ons and whether they might add value to the Group’s por4olio. The Paradox ac5vity will
remain the absolute priority, and there are no guarantees that any opportuni5es reviewed will develop further.

Annual Report and Financial Statements for the year ended 31 December 2018

07

Rose
Petroleum plc

Strategic Report
continued

Mining Division

Copper explora0on, southwest U.S.A.
In April 2016, the Group announced that it had entered into an agreement with privately owned Burde6 Gold LLC
(“Burde6”), to conduct explora5on drilling on the Ardmore copper project which consists of 18 unpatented mining
claims located north of Tucson, Arizona. Burde6 assumed control of the claims and is the operator of the project
and has commenced explora5on work. Burde6 is currently undertaking a drill programme on the project and the
Group is awai5ng the assay results.

Uranium explora0on, U.S.A.
The majority of the Group’s uranium assets were held in a joint venture with Anfield Resources Inc. (TSXV: ARY)
covering property holdings in the breccia pipe district of northern Arizona. The joint venture has now expired and
the proper5es held have now reverted to their original owners. A number of the proper5es fall within the area
covered by the U.S.A. Government moratorium on uranium explora5on. There is specula5on that the moratorium
may soon be li%ed meaning that the licence areas may be reinstated. This may result in the Group being able to
derive value from these licences whether through disposal or poten5ally through compensa5on claims.

In November 2018, the Group announced that it had entered into an agreement with enCore Energy Corpora5on
(“ENCORE”) (TSX.V:EU) with respect to the Group’s uranium explora5on project database (the “Agreement”). The
database is comprised of geological, geophysical, aerial photography, drilling, and evalua5on data on the uranium
breccia pipe district of northern Arizona, specifically the region south of the Colorado River where a number of
discoveries have been made. In return for the Group providing exclusive access to its uranium project database,
ENCORE issued the Group 3,000,000 ordinary shares in ENCORE. The ini5al term of the agreement is five-years,
and ENCORE will seek, at its own cost, to use the database to generate explora5on prospects and to subsequently
develop these prospects into commercial opera5ons.

If any of the prospects reach the development stage, the Group will have a one-off opportunity to par5cipate in
these projects. The Group will be able to par5cipate up to a maximum 25% interest in any developed projects, at
its sole discre5on. The purchase price for the Group’s interest, at the development stage, will be 250% of the pro-
rata explora5on costs incurred on the project to advance it to the development stage. From the point at which
the Group acquires an equity interest in any project it will be responsible for the development expenditure for its
specific por5on of its interest. If the Group does not elect to par5cipate in the projects in accordance with the
Agreement it will have no further rights in respect of that par5cular project.

Should the Group seek to develop any of its eight exis5ng breccia pipe uranium projects on which it currently
controls the mineral rights, which are currently held on care and maintenance, ENCORE will have the opportunity
to par5cipate in these projects on the same terms that the Group can par5cipate in the ENCORE projects. Under
the terms of the Agreement, ENCORE will have a first right of refusal to acquire any mineral rights on these eight
projects that the Group chooses to dispose of during the term of the Agreement.

As part of the Agreement with ENCORE, the Group excluded its 100% owned North Wash stratabound
vanadium/uranium project in Garfield County, Utah from the transac5on.

With respect to the North Wash project, as previously announced the Group contracted an independent mining
pre-scoping study in May 2012, upon the Group’s comple5on of a two-year drilling programme. This study was
prepared to determine the mining method and development costs in an effort to assess the general feasibility of
the project. Due to the recent strength of the present vanadium market, interest in the North Wash project
significantly improved. The report covered preliminary design engineering sufficient to gain an indica5ve es5mate
of capital and opera5ng costs, manpower requirements and a preliminary development and produc5on schedule,
and highlights that it has the poten5al to be developed into a commercial project. The Group will con5nue to
review all of its op5ons in respect of the project and will keep Shareholders updated on any progress.

08

Annual Report and Financial Statements for the year ended 31 December 2018

Strategic Report
continued

Financial Review

Income Statement
The Group reports a net loss a%er tax from con5nuing opera5ons of US$0.8 million or a loss 0.58 cents per share
for the year ended 31 December 2018 (2017: net loss a%er tax from con5nuing opera5ons of US$3.5 million or
6.22 cents per share). Due to the ongoing cash conserva5on programme, administra5ve costs for the year of
US$1.6 million were materially lower than those in the prior year (2017: US$2.1 million).

Foreign exchange gains on the restatement of the Company’s loans to its subsidiaries were US$1.1 million (2017:
losses of US$1.4 million).

Balance Sheet
Total investment in the Group’s intangible explora5on and evalua5on assets at 31 December 2018 was
US$13.1 million (2017: US$12.1 million) reflec5ng con5nuing investment in the Utah O&G assets.

Cash and cash equivalents at 31 December 2018 were US$0.6 million (2017: US$2.2 million). During the period,
the Company raised gross proceeds of US$1.3 million (2017: US$4.0 million) through the placing of the Company’s
Ordinary Shares.

Going Concern
The Directors have set out in note 3 to the financial statements their considera5on of the future financing
requirements of the Group. The Directors con5nue to adopt the going concern basis in preparing the consolidated
financial statements.

This assessment has been carried out in the light of the guidance issued to the Directors by the Financial Repor5ng
Council.

Key Performance Indicators

The Board monitors the performance of the Group in delivering its key corporate and opera5onal milestones for
a given period. In par5cular, the Board monitors the comple5on of milestones against allocated 5me, resources
and budget in respect of its O&G development ac5vi5es.

Risks and Uncertain0es and Risk Management

There are a number of poten5al risks and uncertain5es which could have a material impact on the Group’s long
term performance and could cause actual results to differ from expected and historical results. The principal risks
and uncertain5es that we face are:

Non-Financial Risks
•

Changes in government law or policies could materially affect the rights and 5tle to the interests held by the
Group, and the opera5ons and financial condi5on of the Group could be adversely affected.

•

•

The geographic loca5ons of the Group’s opera5ons can present environmental and logis5cal difficul5es to
the ac5vi5es of the business.

The Group is dependent on the con5nued services and performances of its core management team and the
Remunera5on Commi6ee reviews the employment terms for execu5ves and key opera5onal management
with the aim of a6rac5ng, mo5va5ng and retaining key personnel for the Group.

Annual Report and Financial Statements for the year ended 31 December 2018

09

Rose
Petroleum plc

Strategic Report
continued

•

•

The Group’s opera5ons are such that minor and major injuries as well as fatali5es could occur which could
result in the temporary closure of the Group’s opera5ons.

The farm-in agreement into the Paradox acreage includes both a financial carry obliga5on of US$5.5 million
and also, the drilling of the second GVU obliga5on well. The well is required to retain the GVU in good
standing and should the well not be drilled and the GVU expires, then the farm-in could terminate.

Financial Risks
•

There is a risk that the carrying value of the Group’s assets will not be recovered through future revenues,
leading to significant impairment losses. The Group manages the recoverability of its assets and assesses the
economic viability throughout the explora5on, development and produc5on phases.

•

•

•

•

The ac5vi5es of the Group are subject to fluctua5ons in prices and demand for commodi5es, which are
vola5le and cannot be controlled.

Funds are maintained by the Group in GBP, and US$. There is a risk that purchasing power in the U.S.A. is lost
through foreign exchange transla5on. The Group considers its foreign exchange risk to be a normal and
acceptable business exposure and does not hedge against the risk.

There is a risk that there will be insufficient funds to meet all corporate, development and produc5on
obliga5ons and ac5vi5es and con5nue as a going concern into the foreseeable future. The Group manages
liquidity risk by maintaining adequate cash reserves and monitoring forecast and actual cash flows.
Management regularly reviews the Group’s cash flow projec5ons and forecasts.

The Group has financial and opera5onal obliga5ons in order to keep licences, leases and permits related to
its projects in good standing. If the Group does not have sufficient funds to develop its por4olio of projects
and to keep the projects in good standing there is a risk that underlying leases, licences and permits may
expire poten5ally leading to a loss of the underlying assets and a subsequent impairment of the assets in the
Group’s financial statements.

On 23 June 2016, the UK electorate voted to discon5nue its membership of the EU. Un5l further details are known
regarding the terms on which the UK will exit, the Directors are not able to assess the impact on the Company and
the Group, or what impact the wider regulatory and legal consequences of the UK leaving the EU would be on the
Company and the Group. The Board has concerns that discon5nued membership of the EU could result in a
deprecia5on in the value of sterling, which could impact the Group’s global purchasing power.

Corporate Social Responsibility

Health and Safety
It is the objec5ve of the Group to ensure the health and safety of its employees and of any other persons who
could be affected by its opera5ons. It is the Group’s policy to provide working environments which are safe and
without risk to health and provide informa5on, instruc5on, training and supervision to ensure the health and
safety of its employees.

Significant Rela0onships
The Group enjoys good rela5onships with all of its suppliers, professional advisers and opera5onal partners.

10

Annual Report and Financial Statements for the year ended 31 December 2018

Strategic Report
continued

Future Developments

Your Board, management and dedicated teams con5nue to operate the Group’s exis5ng O&G assets and will
con5nue to look to enhance the value from these, par5cularly through the drilling of the first Paradox wells. In
addi5on, the Group con5nues to inves5gate and evaluate new opportuni5es to increase Shareholder value.

We would like to thank all Shareholders for their con5nued support.

On behalf of the Board

MC Idiens
Chief Execu&ve Officer

27 June 2019

Annual Report and Financial Statements for the year ended 31 December 2018

11

Rose
Petroleum plc

Directors’ Report

The Directors present the Annual Report and financial statements of the Group for the year ended 31 December
2018.

Review of the Business

A review of the business, future developments and the principal risks and uncertain5es facing the Group is given
in the Strategic Report. The key performance indicators, which the Directors consider to be effec5ve in managing
the business, are included in the Strategic Report.

Dividends

The Directors do not recommend the payment of a dividend for the year ended 31 December 2018 (2017: US$ nil).

Directors

The Directors who held office during the year, and since the year end are as follows:

MC Idiens
PE Jeffcock (resigned 11 April 2019)
KB Sco6 (resigned 23 April 2019)
CJ Eadie
TH Reynolds (appointed 23 April 2019)
JC Harrington (appointed 24 May 2019)
RJ Bensh (appointed 11 April 2019. resigned 20 May 2019)
RL Grant (appointed 27 June 2019)

Directors’ interests in shares and share op0ons

The Directors who held office at 31 December 2018 had the following interests, including family interests, in the
Ordinary Shares of the Company as follows:

MC Idiens
PE Jeffcock
KB Sco6
CJ Eadie

Number of Ordinary Shares

31 December 2018

1 January 2018

1,620,257

208,333(1)

–
771,904

820,257
208,333(1)

–
347,189

(1) Beneficial interest held through the Glenville Discre5onary Trust.

Since 31 December 2018, MC Idiens and CJ Eadie have increased their shareholdings, and at the date of signing
of these financial statements their shareholdings were as follow:

MC Idiens
CJ Eadie

3,620,257
1,717,504

12

Annual Report and Financial Statements for the year ended 31 December 2018

Directors’ Report
continued

Directors’ interests in share op5ons of the Company, including family interests, as at 31 December 2018 were as
follows:

MC Idiens
MC Idiens
MC Idiens
KB Sco6
MC Idiens
CJ Eadie
MC Idiens
CJ Eadie
KB Sco6
MC Idiens
CJ Eadie
PE Jeffcock
KB Sco6

Date of grant/
replacement

28 Sep 2011
30 Sep 2011
3 Sep 2013
3 Sep 2013
10 Oct 2014
13 Feb 2015
24 Mar 2017
24 Mar 2017
24 Mar 2017
6 April 2018
6 April 2018
6 April 2018
6 April 2018

No. of
shares

52,000
8,000
158,000
109,333
200,000
100,000
700,000
500,000
150,000
2,000,000
1,300,000
500,000
500,000

Exercise
price

112.5p
112.5p
112.5p
47.5p
342.5p
182.5p
14.0p
14.0p
14.0p
3.5p
3.5p
3.5p
3.5p

Op0on exercise period

28/09/11 to 30/09/21
01/09/12 to 29/09/21
03/09/14 to 01/09/23
03/09/14 to 01/09/23
10/10/15 to 09/10/24
13/03/16 to 12/03/25
24/04/17 to 23/04/27
24/04/17 to 23/04/27
24/04/17 to 23/04/27
06/04/19 to 05/04/28
06/04/19 to 05/04/28
06/04/19 to 05/04/28
06/04/19 to 05/04/28

Share op5ons held by K Sco6 remain in place subsequent to his resigna5on. Share op5ons held by P Jeffcock,
which had vested at the date of his resigna5on, can be exercised for a period of 2 years from the date of his
resigna5on.

Third party indemnity provision for Directors

The Company currently has in place, and had for the year ended 31 December 2018, Directors and officers liability
insurance for the benefit of all Directors of the Company.

Corporate Governance

Corporate governance ma6ers are set out on page 15.

Substan0al shareholdings

Other than the Directors’ interests shown above, the Company has been no5fied of the following substan5al
interests as at 27 June 2019:

Origin Creek Energy LLC
Flute Investments

Post balance sheet events

Number of shares

Percentage of
issued share capital

25,000,000
5,942,419

14.84%
3.5%

Events a%er the balance sheet date have been disclosed in note 33 to the financial statements.

Financial instruments

During the year the Company and its subsidiary undertakings applied financial risk management policies as
disclosed in note 31 to the financial statements.

Annual Report and Financial Statements for the year ended 31 December 2018

13

Rose
Petroleum plc

Directors’ Report
continued

Disclosure of informa0on to the auditor

The Directors who held office at the date of approval of this Directors’ report confirm that, so far as they are each
aware, there is no relevant audit informa5on of which the Company’s auditor is unaware; and each Director has
taken all the steps that he ought to have taken as a Director in order to make himself aware of any relevant audit
informa5on and to establish that the Company’s auditor is aware of that informa5on.

Auditor

The Directors resolved that RSM UK Audit LLP be re-appointed as auditor. RSM UK Audit LLP has indicated its
willingness to con5nue in office.

The Strategic Report, Corporate Governance Statement and the Directors’ Report were approved by the Board
on 27 June 2019.

On behalf of the Board

CJ Eadie
Chief Financial Officer

27 June 2019

14

Annual Report and Financial Statements for the year ended 31 December 2018

Corporate Governance Statement

All members of the Board believe strongly in the value and importance of good corporate governance and in our
accountability to all of Rose Petroleum plc stakeholders, including Shareholders, staff, clients and suppliers.

Changes to AIM rules on 30 March 2018 required AIM companies to disclose details of the recognised corporate
governance code the Company has decided to apply by 28 September 2018.

The corporate governance framework which the Company operates, including Board leadership and effec5veness,
Board remunera5on, and internal control is based upon prac5ces which the Board believes are propor5onal to
the size, risks, complexity and opera5ons of the business and is reflec5ve of the Company’s values. Of the two
widely recognised formal codes, we have therefore decided to adhere to The QCA Corporate Governance Code
as published by the Quoted Companies Alliance (“The QCA Code”).

The QCA Code is constructed around ten broad principles and a set of disclosures. The QCA Code states what it
considers to be appropriate arrangements for growing companies and asks companies to provide an explana5on
about how they are mee5ng the principles through the prescribed disclosures. We have considered how we apply
each principle to the extent that the Board judges these to be appropriate in the circumstances, and we provide
an explana5on of the approach taken in rela5on to each principle on our website.

Full details of our corporate governance approach and how we comply with The QCA Code can be found on our
website www.rosepetroleum.com in the investors area.

Going Concern

The Directors have prepared cash flow forecasts for the Group for the period to June 2020 based on their
assessment of both the discre5onary and the non-discre5onary cash requirements of the Group during this period.
These cash flow forecasts include its normal opera5ng costs for opera5ons together with all commi6ed
development expenditure.

The Board have been working to secure the financing for the spudding of the first well in the Paradox Basin
throughout the year and since the year end. Discussions with industry partners con5nue albeit that the recent oil
price vola5lity and investors focus on the established oil producing basins in the U.S.A. has meant that these
discussions, and the subsequent nego5a5ons, have taken longer than might otherwise have been hoped. Whilst
the Board remains confident that the Group will be able to secure the required funding through equity issue,
farm in arrangements or other mechanisms, the 5ming and availability of funding sources is outside of the control
of the Board. There can also be no certainty over the 5ming and extent of cash flows arising from the Group’s
explora5on ac5vi5es and hence any forecasts prepared by the Board will have inherent uncertain5es.

Based on these forecasts, the current cash posi5on and from their ongoing discussions with its major Shareholders
and brokers, the Directors are confident that the Group has, or has access to, sufficient resources to con5nue in
opera5on for at least the next twelve months.

The Directors con5nue to adopt the going concern basis in preparing the consolidated financial statements. The
financial statements do not include any adjustment that would result from the basis of prepara5on being
inappropriate.

JC Harrington
Chairman

27 June 2019

Annual Report and Financial Statements for the year ended 31 December 2018

15

Rose
Petroleum plc

Statement of Directors’ Responsibili5es
in respect of the Strategic Report, the Directors’ Report and the Financial Statements

The Directors are responsible for preparing the Strategic Report and the Directors’ Report and the financial
statements in accordance with applicable law and regula5ons.

Company law requires the Directors to prepare group and company financial statements for each financial year.
The Directors are required by the AIM Rules of the London Stock Exchange to prepare group financial statements
in accordance with Interna5onal Financial Repor5ng Standards (“IFRS”) as adopted by the European Union (“EU”)
and have elected under company law to prepare the Company financial statements in accordance with IFRS as
adopted by the EU.

The financial statements are required by law and IFRS adopted by the EU to present fairly the financial posi5on
of the Group and the Company and the financial performance of the Group. The Companies Act 2006 provides in
rela5on to such financial statements that references in the relevant part of that Act to financial statements giving
a true and fair view are references to their achieving a fair presenta5on.

Under company law the Directors must not approve the financial statements unless they are sa5sfied that they
give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group
for that period.

In preparing each of the Group and Company financial statements, the Directors are required to:

a.

select suitable accoun5ng policies and then apply them consistently;

b. make judgements and accoun5ng es5mates that are reasonable and prudent;

c.

d.

state whether they have been prepared in accordance with IFRSs adopted by the EU; and

prepare the financial statements on the going concern basis unless it is inappropriate to presume that the
Group and the Company will con5nue in business.

The Directors are responsible for keeping adequate accoun5ng records that are sufficient to show and explain the
Group’s and the Company’s transac5ons and disclose with reasonable accuracy at any 5me the financial posi5on
of the Group and the Company and enable them to ensure that the financial statements comply with the
Companies Act 2006. They are also responsible for safeguarding the assets of the Group and the Company and
hence for taking reasonable steps for the preven5on and detec5on of fraud and other irregulari5es.

The Directors are responsible for the maintenance and integrity of the corporate and financial informa5on
included on the Rose Petroleum plc website. Legisla5on in the United Kingdom governing the prepara5on and
dissemina5on of financial statements may differ from legisla5on in other jurisdic5ons.

16

Annual Report and Financial Statements for the year ended 31 December 2018

Independent Auditor’s Report to the members of Rose Petroleum plc

Opinion

We have audited the financial statements of Rose Petroleum Plc (the “parent company”) and its subsidiaries (the
“Group”) for the year ended 31 December 2018 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 Cash Flow Statement, the Company Balance Sheet, the Company Statement
of Changes in Equity, the Company Cash Flow Statement and notes to the financial statements, including a
summary of significant accoun5ng policies. The financial repor5ng framework that has been applied in their
prepara5on is applicable law and Interna5onal Financial Repor5ng Standards (IFRSs) as adopted by the European
Union and, as regards the Parent company financial statements, as applied in accordance with the provisions of
the Companies Act 2006.

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 2018 and of the Group’s profit 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 IFRSs as adopted
by the European Union and as applied in accordance with the Companies Act 2006; 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 Interna5onal Standards on Audi5ng (UK) (ISAs (UK)) and applicable
law. Our responsibili5es under those standards are further described in the Auditor’s responsibili5es for the audit
of the financial statements sec5on of our report. We are independent of the Group and parent 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 SME listed en55es and we have fulfilled our other ethical
responsibili5es 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 a6en5on to Note 3 in the financial statements, which indicates that the Group is dependent on raising
further funding in the short term to allow it to meet its opera5onal overheads as they fall due. As stated in Note
3, these events or condi5ons, along with the other ma6ers as set forth in Note 3, indicate that a material
uncertainty exists that may cast significant doubt on the Group’s ability to con5nue as a going concern. Our
opinion is not modified in respect of this ma6er.

Annual Report and Financial Statements for the year ended 31 December 2018

17

Rose
Petroleum plc

Independent Auditor’s Report to the members of Rose Petroleum plc
con5nued

Key Audit Ma1ers

Key audit ma6ers are those ma6ers that, in our professional judgment, were of most significance in our audit of
the Group and parent company financial statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to fraud) we iden5fied, including those which had
the greatest effect on the overall audit strategy, the alloca5on of resources in the audit and direc5ng the efforts
of the engagement team. These ma6ers were addressed in the context of our audit of the Group and parent
company financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these ma6ers. In addi5on to the ma6er described in the Material uncertainty related to going concern
sec5on we have determined the ma6ers described below to be the key audit ma6ers to be communicated in our
report.

Group key audit ma1ers
•

Intangible explora(cid:31)on and evalua(cid:31)on assets (Note 17)
The Group has significant explora5on and evalua5on ac5vi5es in a number of geographical loca5ons. The
performance of these ac5vi5es is dependent on the grant (and ongoing maintenance) of appropriate licences
and permits which may be subject to limita5ons and restric5ons. The Group applies IFRS6 “Explora5on for
and evalua5on of mineral resources” and has determined policies for capitalisa5on of relevant costs and
subsequent monitoring for impairment.

Management provided us with an analysis of the explora5on and evalua5on assets held by the Group by
pool of asset (being the smallest subset of asset held) together with their considera5ons as to the impairment
of these assets. We performed audit work for each pool of asset as follows:

•

Agreed that licences and/or other similar agreements such as the Rockies Standard Earn-In Agreement
were held by the Group during the financial year and at the year end and whether the nature of the
agreements in place were such that there were specific ongoing requirements of the Group as licence
holder to be complied with;

• With regard to the addi5onal acreage acquired during the period we have reviewed the acquisi5on
documents and acquired licences to assess the rights and obliga5ons under these and the ongoing
requirements of Rose/the Licence Holder;

•

Reviewed the considera5on made by management and discussed with them their assessment of
whether there were any indicators of impairment of the licence areas arising under IFRS6 and whether
facts and circumstances were such that a formal impairment assessment was required under the
requirements of this standard. Our work included, but was not restricted to, reviewing the licence
agreements to assess the remaining period of opera5on, reviewing the third party commissioned reports
and challenging management’s assessment of the results, and reviewing management’s forecasts, plans
and external communica5ons as to whether these provided an indicator of impairment; and

•

Considered management’s ongoing assessment of the Group’s ability to meet the licence requirements
and reviewed the cash flow forecasts prepared by management to support their ability to do this.

Parent company key audit ma1ers
•

Carrying value of investments (Note 19)
Included in the Parent Company Balance Sheet set out on page 27 of these financial statements are
investments in subsidiary undertakings which are included at an impaired amor5sed cost of US$13.4 million.
The investments in subsidiary undertakings comprise both investments in the equity and long-term loan
funding advanced to the subsidiaries to fund their respec5ve Explora5on & Evalua5on ac5vi5es and represent
significantly all of the net assets included in the Parent Company Balance Sheet.

18

Annual Report and Financial Statements for the year ended 31 December 2018

Independent Auditor’s Report to the members of Rose Petroleum plc
con5nued

Substan5ally all of the impaired amor5sed cost of US$13.4 million is represented by loans advanced by the
Parent to fund the underlying investment in Explora5on & Evalua5on Assets held by the subsidiary
undertakings. In assessing whether the exis5ng level of impairment provision (which had been calculated by
reference to the underlying net asset value of the capitalised Explora5on & Evalua5on Assets) remains
appropriate, management have considered the poten5al future cashflows arising from these underlying
assets. These poten5al future cash flows have been calculated by reference to the data provided by the
Competent Person’s Report (“CPR”) on the underlying assets and the expected credit loss model in assessing
whether any change in the level of impairment provision was required. We challenged management on the
assump5ons underlying their model and reviewed the documents suppor5ng the calcula5ons.

Our Applica0on of Materiality

When establishing our overall audit strategy, we set certain thresholds which help us to determine the nature,
5ming and extent of our audit procedures. When evalua5ng whether the effects of misstatements, both
individually and on the financial statements as a whole, could reasonably influence the economic decisions of the
users we take into account the qualita5ve nature and the size of the misstatements. During planning materiality
for the Group financial statements as a whole was calculated as US$148,000, which was not significantly changed
during the course of our audit. Materiality for the Parent company financial statements as a whole was calculated
as US$75,000 which was not significantly changed during the course of our audit. We agreed with the Audit
Commi6ee that we would report to them all unadjusted differences in excess of US$5,000, as well as differences
below those thresholds that, in our view, warranted repor5ng on qualita5ve grounds.

An Overview of the Scope of Our Audit

Our audit was a risk-based approach founded on a thorough understanding of the Group’s business, its’
environment and risk profile and in par5cular included:

•

•

•

•

Documen5ng the processes and controls covering all of the Key Audit Ma6ers;

The Group has components across North America, Central America and Europe. We have assessed the risk
of material misstatement for each of these components to conclude which are in scope for full scope audit
procedures using component materiality (including local statutory audit requirements) and which will be
subject to reduced scope review procedures;

Our full scope audit procedures covered 100% of group revenues, 99% of group loss before tax and 91% of
group gross assets; and

Our reduced scope review procedures included analy5cal review procedures and targeted substan5ve
tes5ng.

The audit was scoped to support our audit opinion on the company and group financial statements of Rose
Petroleum plc and was based on group materiality and an assessment of risk at group level.

Other Informa0on

The Directors are responsible for the other informa5on. The other informa5on comprises the informa5on included
in the annual report, other than the financial statements and our auditor’s report thereon. Our opinion on the
financial statements does not cover the other informa5on and, except to the extent otherwise explicitly stated
in our report, we do not express any form of assurance conclusion thereon.

Annual Report and Financial Statements for the year ended 31 December 2018

19

Rose
Petroleum plc

Independent Auditor’s Report to the members of Rose Petroleum plc
con5nued

In connec5on with our audit of the financial statements, our responsibility is to read the other informa5on and,
in doing so, consider whether the other informa5on is materially inconsistent with the financial statements or our
knowledge obtained in the audit or otherwise appears to be materially misstated. If we iden5fy 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 informa5on. If, based on the
work we have performed, we conclude that there is a material misstatement of this other informa5on, we are
required to report that fact. We have nothing to report in this regard.

Opinions on other ma1ers prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:

•

•

the informa5on 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.

Ma1ers on which we are required to report by excep0on

In the light of the knowledge and understanding of the Group and the Parent company and their environment
obtained in the course of the audit, we have not iden5fied material misstatements in the Strategic Report or the
Directors’ Report.

We have nothing to report in respect of the following ma6ers in rela5on to which the Companies Act 2006 requires
us to report to you if, in our opinion:

•

•

•

•

adequate accoun5ng records have not been kept by the Parent company, or returns adequate for our audit
have not been received from branches not visited by us; or

the Parent company financial statements are not in agreement with the accoun5ng records and returns; or

certain disclosures of Directors’ remunera5on specified by law are not made; or

we have not received all the informa5on and explana5ons we require for our audit.

Responsibili0es of Directors

As explained more fully in the Directors’ responsibili5es statement set out on page 16, the Directors are
responsible for the prepara5on of the financial statements and for being sa5sfied that they give a true and fair
view, and for such internal control as the Directors determine is necessary to enable the prepara5on 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 Group’s and the Parent
company’s ability to con5nue as a going concern, disclosing, as applicable, ma6ers related to going concern and
using the going concern basis of accoun5ng unless the Directors either intend to liquidate the Group or the Parent
company or to cease opera5ons, or have no realis5c alterna5ve but to do so.

20

Annual Report and Financial Statements for the year ended 31 December 2018

Independent Auditor’s Report to the members of Rose Petroleum plc
con5nued

Auditor’s responsibili0es for the audit of the financial statements

Our objec5ves 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 descrip5on of our responsibili5es for the audit of the financial statements is located on the Financial
Repor5ng Council’s website at: h6p://www.frc.org.uk/auditorsresponsibili5es. This descrip5on forms part of our
auditor’s report.

Use of our Report

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members
those ma6ers we are required to state to them in an auditor’s report and for no other purpose. To the fullest
extent permi6ed 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.

Andrew Allchin (Senior Statutory Auditor)
For and on behalf of RSM UK Audit LLP, Statutory Auditor
Chartered Accountants
Central Square, 5th Floor
29 Wellington Street
Leeds
LS1 4DL

27 June 2019

Annual Report and Financial Statements for the year ended 31 December 2018

21

Rose
Petroleum plc

Consolidated Income Statement
For the year ended 31 December 2018

Con0nuing opera0ons
Administra5ve expenses
Development expenses
Impairment of intangible explora5on and evalua5on assets
Foreign exchange gains/(losses)

Opera0ng loss

Fair value loss on investments
Other income
Finance income

Loss on ordinary ac0vi0es before taxa0on

Taxa5on charge

Loss for the year from con0nuing opera0ons

Discon0nued opera0ons
Profit from discon5nued opera5ons, net of tax

Profit/(loss) for the year a1ributable to owners of the parent company

Profit/(loss) per Ordinary Share
From con5nuing opera5ons
Basic and diluted, cents per share

From con5nuing and discon5nued opera5ons
Basic and diluted, cents per share

Notes

6
7

8
9
10

11

14

15

16

16

2018
US$’000

(1,646)
(178)
(4)
1,084

(744)

(284)
264
3

(761)

–

(761)

860

99

Restated
2017
US$’000

(2,063)
(154)
82
(1,378)

(3,513)

–
–
1

(3,512)

(1)

(3,513)

382

(3,131)

(0.58)

(6.22)

0.08

(5.54)

The notes on pages 30 to 67 form part of the financial statements.

22

Annual Report and Financial Statements for the year ended 31 December 2018

Consolidated Statement of Comprehensive Income
For the year ended 31 December 2018

Profit/(loss) for the year a1ributable to owners of the parent company

Other comprehensive income
Items that may be subsequently reclassified to profit or loss, net of tax
Foreign currency transla5on differences on foreign opera5ons

Total comprehensive income for the year a1ributable
to owners of the parent company

2018
US$’000

99

Restated
2017
US$’000

(3,131)

2,394

(3,671)

2,493

(6,802)

The notes on pages 30 to 67 form part of the financial statements.

Annual Report and Financial Statements for the year ended 31 December 2018

23

Rose
Petroleum plc

Consolidated Balance Sheet
As at 31 December 2018

Non-current assets
Investments
Intangible assets
Property, plant and equipment

Current assets
Investments
Trade and other receivables
Cash and cash equivalents

Total assets

Current liabili0es
Trade and other payables

Total liabili0es

Net assets

Equity
Share capital
Share premium account
Warrant reserve
Share-based payment reserve
Cumula5ve transla5on reserve
Retained deficit

Equity a1ributable to owners of the parent company

Notes

19
17
18

19
21
22

23

26
28
27
28
28
28

Company No 04573663

2018
US$’000

–
13,148
22

13,170

464
426
616

1,506

14,676

2017
US$’000

500
12,098
27

12,625

–
583
2,185

2,768

15,393

(387)

(387)

(584)

(584)

14,289

14,809

40,504
36,472
341
3,645
(8,909)
(57,764)

14,289

40,463
35,657
–
3,687
(6,864)
(58,134)

14,809

The financial statements on pages 22 to 67 were approved by the Directors and authorised for issue on 27 June
2019 and are signed on its behalf by:

CJ Eadie
Chief Financial Officer

The notes on pages 30 to 67 form part of the financial statements.

24

Annual Report and Financial Statements for the year ended 31 December 2018

Consolidated Statement of Changes in Equity
For the year ended 31 December 2018

As at 1 January 2017
Transac&ons with owners in
their capacity as owners:
Issue of equity shares
Expenses of issue of equity shares
Share-based payments
Transfer to retained deficit in
respect of forfeited op5ons
Effect of foreign exchange rates
Total transac0ons with owners
in their capacity as owner

Loss for the year
Other comprehensive income:
Currency transla5on differences

Total other comprehensive
income for the year
Total comprehensive income
for the year

Currency transla5on differences
on equity at historical rates
As at 31 December 2017
Transac&ons with owners in
their capacity as owners:
Issue of equity shares
Expenses of issue of equity shares
Transfer to warrant reserve
Share-based payments
Transfer to retained deficit in
respect of forfeited op5ons
Effect of foreign exchange rates
Total transac0ons with owners
in their capacity as owner

Profit for the year
Other comprehensive income:
Currency transla5on differences

Total other comprehensive income
for the year
Total comprehensive income
for the year

Currency transla5on differences
on equity at historical rates
Recycled foreign currency
transla5on differences on
discon5nued opera5ons
As at 31 December 2018

Share
capital
US$’000

Share
premium
account
US$’000

40,362

32,183

101
–
–

–
–

3,918
(250)
(194)

–
–

101

3,474

–

–

–

–

–

–

–

–

–

–

40,463

35,657

Warrant
reserve
US$’000

Share-based Cumula0ve
transla0on
reserve
US$’000

payment
reserve
US$’000

Retained
deficit
US$’000

Total
US$’000

–

–
–
–

–
–

–

–

–

–

–

–

–

3,028

(8,376)

(54,869)

12,328

–
–
508

134
17

659

–

–

–

–

–

–
–
–

–
–

–

–

–
–
–

(134)
–

4,019
(250)
314

–
17

(134)

4,100

(3,131)

(3,131)

(3,671)

(3,671)

–

–

(3,671)

(3,671)

(3,671)

(3,131)

(6,802)

5,183

–

5,183

3,687

(6,864)

(58,134)

14,809

41
–
–
–

–
–

41

–

–

–

–

–

1,304
(148)
(341)
–

–
–

–
–
341
–

–
–

–
67
–
172

(271)
(10)

815

341

(42)

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–
–
–
–

–
–

–

–

2,394

2,394

–
–
–
–

271
–

271

99

–

–

1,345
(81)
–
172

–
(10)

1,426

99

2,394

2,394

2,394

99

2,493

(3,614)

–

(3,614)

–
40,504

–
36,472

–
341

–
3,645

(825)
(8,909)

–
(57,764)

(825)
14,289

The notes on pages 30 to 67 form part of the financial statements.

Annual Report and Financial Statements for the year ended 31 December 2018

25

Rose
Petroleum plc

Consolidated Cash Flow Statement
For the year ended 31 December 2018

Opera0ng ac0vi0es
Loss before taxa5on from con5nuing opera5ons
Profit before taxa5on from discon5nued opera5ons

Fair value loss on investments
Other income
Finance income
Adjustments for:
Deprecia5on of property, plant and equipment
Profit on disposal of property, plant and equipment
Gain on disposal of discon5nued opera5ons
Impairment of Intangible explora5on and evalua5on assets
Provision for non-recoverable taxes
Share-based payments
Unrealised foreign exchange (gain)/loss

Opera5ng ou4low before movements in working capital
Decrease in trade and other receivables
(Decrease)/Increase in trade and other payables

Cash used in opera5ons
Income tax recovered

Net cash used in opera0ng ac0vi0es

Inves0ng ac0vi0es
Interest received
Purchase of intangible explora5on and evalua5on assets
Proceeds on disposal of property, plant and equipment
Net cash inflow on disposal of discon5nued opera5ons
Loans advanced

Net cash used in inves0ng ac0vi0es

Financing ac0vi0es
Proceeds from issue of shares
Expenses of issue of shares

Net cash from financing ac0vi0es

Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effect of foreign exchange rate changes

Cash and cash equivalents at end of year

Notes

15

2018
US$’000

Restated
2017
US$’000

(761)
860

99
284
(264)
(3)

5
(6)
–
4
–
172
(2,023)

(1,732)
260
(204)

(1,676)
–

(1,676)

3
(1,002)
6
53
(195)

(1,135)

1,345
(81)

1,264

(1,547)
2,185
(22)

616

(3,512)
402

(3,110)
–
–
(42)

54
–
(1,339)
(82)
197
314
1,388

(2,620)
419
93

(2,108)
143

(1,965)

42
(1,990)
–
950
–

(998)

4,019
(250)

3,769

806
1,273
106

2,185

The notes on pages 30 to 67 form part of the financial statements.

26

Annual Report and Financial Statements for the year ended 31 December 2018

Company Balance Sheet
As at 31 December 2018

Company No 04573663

Non-current assets
Investments
Property, plant and equipment

Current assets
Investments
Trade and other receivables
Cash and cash equivalents

Total assets

Current liabili0es
Trade and other payables

Total liabili0es

Net assets

Equity
Share capital
Share premium account
Warrant reserve
Share-based payment reserve
Cumula5ve transla5on reserve
Retained deficit

Total equity

Notes

19
18

19
21
22

23

26
28
27
28
28
28

2018
US$’000

13,394
22

13,416

200
264
598

1,062

14,478

2017
US$’000

13,552
–

13,552

–
81
2,156

2,237

15,789

(148)

(148)

(175)

(175)

14,330

15,614

40,504
36,472
341
3,645
(8,957)
(57,675)

14,330

40,463
35,657
–
3,687
(8,093)
(56,100)

15,614

As permi6ed by sec5on 408 of the Companies Act 2006, the Parent Company’s Income Statement and Statement
of Other Comprehensive Income have not been included in these financial statements.

The loss for the Company for the year ended 31 December 2018 is US$1.6 million (2017: US$6.0 million).

The financial statements on pages 22 to 67 were approved by the Directors and authorised for issue on 27 June
2019 and are signed on its behalf by:

CJ Eadie
Chief Financial Officer

The notes on pages 30 to 67 form part of the financial statements.

Annual Report and Financial Statements for the year ended 31 December 2018

27

Rose
Petroleum plc

Company Statement of Changes in Equity
For the year ended 31 December 2018

As at 1 January 2017
Transac&ons with owners in
their capacity as owners:
Issue of equity shares
Expenses of issue of equity shares
Share-based payments
Transfer to capital contribu5on
in respect of forfeited op5ons
Effect of foreign exchange rates
Total transac0ons with owners
in their capacity as owner

Loss for the year
Other comprehensive income:
Currency transla5on differences

Total other comprehensive
income for the year
Total comprehensive income
for the year

Currency transla5on differences
on equity at historical rates
As at 31 December 2017

Transac&ons with owners in
their capacity as owners:
Issue of equity shares
Expenses of issue of equity shares
Transfer to warrant reserve
Share-based payments
Transfer to retained deficit in
respect of forfeited op5ons
Transfer to capital contribu5on
in respect of forfeited op5ons
Effect of foreign exchange rates
Total transac0ons with owners
in their capacity as owner

Loss for the year
Other comprehensive income:
Currency transla5on differences

Total other comprehensive
income for the year
Total comprehensive income
for the year

Currency transla5on differences
on equity at historical rates
As at 31 December 2018

Share
capital
US$’000

Share
premium
account
US$’000

40,362

32,183

101
–
–

–
–

3,918
(250)
(194)

–
–

101

3,474

–

–

–

–

–

–

–

–

–

–

40,463

35,657

Warrant
reserve
US$’000

Share-based Cumula0ve
transla0on
reserve
US$’000

payment
reserve
US$’000

Retained
deficit
US$’000

Total
US$’000

–

–
–
–

–
–

–

–

–

–

–

–

–

3,028

(9,368)

(50,052)

16,153

–
–
508

134
17

659

–

–

–

–

–

–
–
–

–
–

–

–

–
–
–

–
–

–

4,019
(250)
314

134
17

4,234

(6,048)

(6,048)

(3,908)

(3,908)

–

–

(3,908)

(3,908)

(3,908)

(6,048)

(9,956)

5,183

–

5,183

3,687

(8,093)

(56,100)

15,614

41
–
–
–

–

–
–

1,304
(148)
(341)
–

–

–
–

–
–
341
–

–

–
–

–
67
–
172

(41)

(230)
(10)

41

815

341

(42)

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–
–
–
–

–

–
–

–

–

–
–
–
–

41

–
–

1,345
(81)
–
172

–

(230)
(10)

41

1,196

(1,616)

(1,616)

2,750

2,750

–

–

2,750

2,750

2,750

(1,616)

1,134

(3,614)

–

(3,614)

40,504

36,472

341

3,645

(8,957)

(57,675)

14,330

The notes on pages 30 to 67 form part of the financial statements.

28

Annual Report and Financial Statements for the year ended 31 December 2018

Company Cash Flow Statement
For the year ended 31 December 2018

Opera0ng ac0vi0es
Loss before taxa5on

Fair value loss on investments
Finance income

Adjustments for:
Impairment of investments in subsidiary undertakings
Share-based payments
Unrealised foreign exchange

Opera5ng cash ou4low before movements in working capital

Decrease/(increase) in trade and other receivables
(Decrease)/increase in trade and other payables

Net cash used in opera0ng ac0vi0es

Inves0ng ac0vi0es
Interest received
Loans to subsidiary undertakings
Loans advanced

Net cash used in inves0ng ac0vi0es

Financing ac0vi0es
Proceeds from the issue of shares
Expenses of issue of shares

Net cash from financing ac0vi0es

Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effect of foreign exchange rate changes

Cash and cash equivalents at end of year

2018
US$’000

2017
US$’000

(1,616)

(6,048)

284
(688)

1,323
138
(132)

(691)

12
(26)

(705)

3
(1,901)
(195)

(2,093)

1,345
(81)

1,264

(1,534)
2,156
(24)

598

–
(502)

5,753
200
1

(596)

(12)
10

(598)

1
(2,308)
–

(2,307)

4,019
(250)

3,769

864
1,185
107

2,156

The notes on pages 30 to 67 form part of the financial statements.

Annual Report and Financial Statements for the year ended 31 December 2018

29

Rose
Petroleum plc

Notes to the Financial Statements
For the year ended 31 December 2018

1.

Corporate Informa0on

Rose Petroleum plc (the “Company” and, together with its subsidiaries, the “Group”) is domiciled and incorporated
in the United Kingdom under the Companies Act 2006 and is limited by shares. The address of the registered
office is 20-22 Wenlock Road, London, N1 7GU.

The nature of the Group’s opera5ons and its principal ac5vity is the explora5on and development of
O&G resources.

2. Adop0on of New and Revised Standards

Standards affec0ng presenta0on and disclosure
The Group has adopted all of the new or amended Accoun5ng Standards and interpreta5ons issued by the
Interna5onal Accoun5ng Standards Board (“IASB”) that are mandatory and relevant to the Group’s ac5vi5es for
the current repor5ng period. The Group has applied IFRS 9 Financial instruments from 1 January 2018. A number
of other new standards are also effec5ve from 1 January 2018, including IFRS 15 Revenue from contracts with
customers, but they do not have a material effect on the Group’s financial statements.

IFRS 9 Financial instruments
IFRS 9 introduced new classifica5on and measurement models for financial assets, financial liabili5es and some
contracts to buy or sell non-financial items. As a result of the adop5on of IFRS 9 the Group has adopted
consequen5al amendments to IAS 1 Presenta&on of financial statements, which requires impairment of financial
assets to be presented in a separate line item in the statement of profit or loss and other comprehensive income.
Previously the Group’s approach was to include the impairment of trade receivables in other expenses.
Addi5onally, the Group has adopted consequen5al amendments to IFRS 7 Financial instruments: disclosures that
are applied to disclosures about 2018 but have not been generally applied to compara5ve informa5on.

There has been no impact of transi5on to IFRS 9 on the opening balance of reserves and retained earnings at
1 January 2018.

Under IFRS 9, financial assets shall be measured at amor5sed cost if it is held within a business model whose
objec5ve is to hold assets in order to collect contractual cash flows which arise on specified dates and that are
solely principal and interest. A debt investment shall be measured at fair value through other comprehensive
income if it is held within a business model whose objec5ve is to both hold assets in order to collect contractual
cash flows which arise on specified dates that are solely principal and interest as well as selling the asset on the
basis of its fair value. All other financial assets are classified and measured at fair value through profit or loss
unless the Group makes an irrevocable elec5on on ini5al recogni5on to present gains and losses on equity
instruments (that are not held-for-trading or con5ngent considera5on recognised in a business combina5on) in
other comprehensive income. Despite these requirements, a financial asset may be irrevocably designated as
measured at fair value through profit or loss to reduce the effect of, or eliminate, an accoun5ng mismatch. For
financial liabili5es designated at fair value through profit or loss, the standard requires the por5on of the change
in fair value that relates to the Group’s own credit risk to be presented in other comprehensive income (unless it
would create an accoun5ng mismatch). New simpler hedge accoun5ng requirements are intended to more closely
align the accoun5ng treatment with the risk management ac5vi5es of the Group. New impairment requirements
use an ‘expected credit loss’ (“ECL”) model to recognise an allowance. Impairment is measured using a 12-month
ECL method unless the credit risk on a financial instrument has increased significantly since ini5al recogni5on, in
which case, the life5me ECL method is adopted. For receivables, a simplified approach to measuring expected
credit losses using a life5me expected loss allowance is available.

There has been no impact of transi5on to IFRS 9 on the Group’s classifica5on and measurement of financial assets
and financial liabili5es, nor its accoun5ng policies related to financial liabili5es at 1 January 2018.

30

Annual Report and Financial Statements for the year ended 31 December 2018

Notes to the Financial Statements
con5nued

2. Adop0on of New and Revised Standards con5nued

The Group has determined that transi5on to IFRS 9 did not result in an addi5onal provision for impairment and
there was no impact on the opening balance of reserves or retained earnings at 1 January 2018, in respect of
either the Group or the Company.

Standards issued but not yet effec0ve
Any new or amended Accoun5ng Standards or interpreta5ons that are not yet mandatory have not been early
adopted by the Group for the year ended 31 December 2018. The assessment of the impact of these new or
amended Accoun5ng Standards and interpreta5ons, most relevant to the Group are set out below.

IFRS 16 – Leases

•
The Group is required to adopt IFRS 16 Leases from 1 January 2019. The Group has assessed the es5mated impact
that ini5al applica5on of IFRS 16 will have on its consolidated financial statements, as described below. The actual
impact of adop5ng the standard on 1 January 2019 may change because the new accoun5ng policies are subject
to change un5l the Group presents its first financial statements that include the date of ini5al applica5on.

IFRS 16 introduces a single, on-balance sheet lease accoun5ng model for lessees. A lessee recognises a right-of-
use asset represen5ng its right to use the underlying asset and a lease liability represen5ng its obliga5on to make
lease payments. There are recogni5on exemp5ons for short-term leases and leases of low-value items. Lessor
accoun5ng remains similar to the current standard and the Group does not undertake any transac5ons as a lessor.

Leases in which the Group is a lessee
The Group will recognise new assets and liabili5es for its opera5ng leases of office facili5es. The nature of the
expense related to those leases will now change because the Group will recognise a deprecia5on charge for right-
of-use assets and interest expense on lease liabili5es.

Previously, the Group recognised opera5ng lease expense on a straight-line basis over the term of the lease, and
recognised assets and liabili5es only to the extent that there was 5ming difference between actual lease payments
and the expense recognised.

The Group plans to apply IFRS 16 ini5ally on 1 January 2019, using the modified retrospec5ve approach. Therefore,
the cumula5ve effect of adop5ng IFRS 16 will be recognised as an adjustment to the opening balance of retained
earnings at 1 January 2019, with no restatement of compara5ve informa5on. The Group do not an5cipate that
there will be a material impact on adop5on of IFRS 16.

The Group plans to apply the prac5cal expedient to grandfather the defini5on of a lease on transi5on. This means
that it will apply IFRS 16 to all contracts entered into before 1 January 2019 and iden5fied as leases in accordance
with IAS 17 and IFRIC 4.

•

•

•

•

•

IAS 19 – Employee benefits

IFRIC 23 – Uncertainty over income tax treatments

Amendments to IAS 28 – Long-term interests in associates and joint ventures

Amendments resul5ng from annual improvements to IFRS Standards 2015-2017

Amendments to references to conceptual framework in IFRS Standards

The Directors do not expect that the adop5on of these Standards or Interpreta5ons in future periods will have a
material impact on the financial statements of the Company or the Group.

Annual Report and Financial Statements for the year ended 31 December 2018

31

Rose
Petroleum plc

Notes to the Financial Statements
con5nued

3.

Significant Accoun0ng Policies

Basis of Prepara0on
The financial statements have been prepared and approved by the Directors in accordance with Interna5onal
Financial Repor5ng Standards as adopted by the EU (“Adopted IFRSs”).

The financial statements have been prepared on the historical cost basis, other than certain financial assets and
liabili5es which are stated at their fair value. Historical cost is generally based on the fair value of the considera5on
given in exchange for assets.

The financial statements are presented in United States dollars (“US$”) as the Group’s business is influenced by
pricing in interna5onal commodity markets which are primarily US$ based. All amounts have been rounded to the
nearest thousand, unless otherwise indicated.

The Directors con5nue to adopt the going concern basis in preparing the consolidated financial statements. The
financial statements do not include any adjustment that would result from the basis of prepara5on being
inappropriate.

The accoun5ng policies set out below have, unless otherwise stated, been applied consistently to all periods
presented in these financial statements. In accordance with IFRS 5 Non-current Assets Held for Sale and Discon&nued
Opera&ons, the compara5ve income statement has been re-presented so that the disclosures in rela5on to
discon5nued opera5ons relate to all opera5ons that have been discon5nued by the balance sheet date.

Judgements made by the Directors in the applica5on of these accoun5ng policies that have significant impact on
the financial statements and es5mates with a significant risk of material adjustment in the next year, are discussed
in note 4.

Going Concern
As an explora5on group, the Directors are mindful that there is an ongoing need to monitor overheads and costs
associated with delivering the explora5on programme and raise addi5onal working capital on an ad hoc basis to
support the Group’s ac5vi5es. The Group has no bank facili5es and has been mee5ng its working capital
requirements from cash resources. At the year end, the Group had cash and cash equivalents amoun5ng to US$0.6
million (2017: US$2.2 million).

The Directors have prepared cash flow forecasts for the Group for the period to June 2020 based on their
assessment of both the discre5onary and the non-discre5onary cash requirements of the Group during this period.
These cash flow forecasts include its normal opera5ng costs for opera5ons together with all commi6ed
development expenditure.

The Board have been working to secure the financing for the spudding of the first well in the Paradox Basin
throughout the year and since the year end. Discussions with industry partners con5nue albeit that the recent oil
price vola5lity and investors focus on the established oil producing basins in the U.S.A. has meant that these
discussions, and the subsequent nego5a5ons, have taken longer than might otherwise have been hoped. Whilst
the Board remains confident that the Group will be able to secure the required funding through equity issue,
farm in arrangements or other mechanisms, the 5ming and availability of funding sources is outside of the control
of the Board. There can also be no certainty over the 5ming and extent of cash flows arising from the Group’s
explora5on ac5vi5es and hence any forecasts prepared by the Board will have inherent uncertain5es.

Based on these forecasts, the current cash posi5on and from their ongoing discussions with its major Shareholders
and brokers, the Directors are confident that the Group has, or has access to, sufficient resources to con5nue in
opera5on for at least the next twelve months.

32

Annual Report and Financial Statements for the year ended 31 December 2018

Notes to the Financial Statements
con5nued

3.

Significant Accoun0ng Policies con5nued

The Directors con5nue to adopt the going concern basis in preparing the consolidated financial statements. The
financial statements do not include any adjustment that would result from the basis of prepara5on being
inappropriate.

Basis of Consolida0on
The consolidated financial statements incorporate the financial statements of the Company and its subsidiary
undertakings (together, ‘the Group’) made up to 31 December each year.

Subsidiary undertakings are those en55es controlled directly or indirectly by the Company. Control is achieved
when the Company is exposed to, or has rights to, variable returns from its involvement with the en5ty and has
the ability to affect those returns through its power over the en5ty.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income
statement from the date on which control is transferred to the Group or, up to the date that control ceases, as
appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring
accoun5ng policies used into line with those used by the Group.

The Group applies the acquisi5on method to account for business combina5ons. The considera5on for each
acquisi5on is measured at the aggregate of the fair values (at the date of exchange) of assets given, liabili5es
incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquire.

All intra-group transac5ons, balances, income and expenses are eliminated on consolida5on.

Investments in Subsidiary Undertakings
Long term investments represen5ng interests in subsidiary undertakings are stated at cost less any provision for
impairment in the value of the non-current investment.

Intangible Explora0on and Evalua0on Assets
The Group applies the full cost method of accoun5ng for Explora5on and Evalua5on (“E&E”) costs, having regard to
the requirements of IFRS 6 Explora&on for and Evalua&on of Mineral Resources. Under the full cost method of
accoun5ng, costs of exploring for and evalua5ng mineral resources are accumulated by reference to appropriate cost
centres being the appropriate licence area but are tested for impairment on a cost pool basis as described below.

E&E assets comprise costs of (i) E&E ac5vi5es that are on-going at the balance sheet date, pending determina5on
of whether or not commercial reserves exist and (ii) costs of E&E that, whilst represen5ng part of the E&E ac5vi5es
associated with adding to the commercial reserves of an established cost pool, did not result in the discovery of
commercial reserves.

Costs incurred prior to having obtained the legal rights to explore an area are expensed directly to the income
statement as they are incurred.

Explora0on and evalua0on costs
All costs of E&E are ini5ally capitalised as E&E assets. Payments to acquire the legal right to explore, costs of
technical services and studies, seismic acquisi5on, exploratory drilling and tes5ng are capitalised as intangible
E&E assets.

Intangible costs include directly a6ributable overheads together with the cost of other materials consumed during
the explora5on and evalua5on phases.

Annual Report and Financial Statements for the year ended 31 December 2018

33

Rose
Petroleum plc

Notes to the Financial Statements
con5nued

3.

Significant Accoun0ng Policies con5nued

Treatment of E&E assets at conclusion of appraisal ac0vi0es
Intangible E&E assets related to each explora5on licence/project are carried forward un5l the existence (or
otherwise) of commercial reserves has been determined. If commercial reserves have been discovered, the related
E&E asset are assessed for impairment on a cost pool basis as set out below and any impairment is recognised in
the income statement. The carrying value, a%er any impairment loss, of the relevant E&E assets is then reclassified
as development and produc5on assets.

Intangible E&E assets that related to E&E ac5vi5es that are determined not to have resulted in the discovery of
commercial reserves remain capitalised as intangible E&E assets at cost less accumulated amor5sa5on, subject
to mee5ng a pool-wide impairment test in accordance with the accoun5ng policy for impairment of E&E assets
set out below. Such E&E assets are amor5sed on a unit-of-produc5on basis over the life of the commercial reserves
of the pool to which they relate.

Impairment of Intangible Explora0on and Evalua0on Assets
E&E assets are assessed for impairment when facts and circumstances suggest that the carrying amount may
exceed its recoverable amount. Such indicators include, but are not limited to, those situa5ons outlined in
paragraph 20 of IFRS 6 Explora&on for and Evalua&on of Mineral Resources and include the point at which a
determina5on is made as to whether or not commercial reserves exist.

Where there are indica5ons of impairment, the E&E assets concerned are tested for impairment. Where the E&E
assets concerned fall within the scope of an established full cost pool, the E&E assets are tested for impairment
together with all development and produc5on assets associated with that cost pool, as a single cash
genera5ng unit.

The aggregate carrying value is compared against the expected recoverable amount of the pool, generally by
reference to the present value of the future net cash flow expected to be derived from produc5on of commercial
reserves. Where the E&E assets to be tested fall outside the scope of any established cost pool, there will generally
be no commercial reserves and the E&E assets concerned will generally be wri6en off in full.

If the recoverable amount of a cash-genera5ng unit is es5mated to be less than its carrying amount, the carrying
amount of the cash-genera5ng unit is reduced to its recoverable amount. An impairment loss is recognised
immediately in profit or loss.

When an impairment loss subsequently reverses, the carrying amount of the cash-genera5ng unit is increased to
the revised es5mate 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 cash-
genera5ng unit in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.

The Group considers each area of explora5on, uranium, copper and oil & gas on a geographical basis to be a
separate cost pool and therefore aggregates all specific assets for the purposes of determining whether
impairment of E&E assets has occurred.

Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated deprecia5on and accumulated impairment
losses. The cost of an item of property, plant and equipment comprises its purchase price and any costs directly
a6ributable to bringing the asset into use.

34

Annual Report and Financial Statements for the year ended 31 December 2018

Notes to the Financial Statements
con5nued

3.

Significant Accoun0ng Policies con5nued

Deprecia5on is recognised so as to write off the cost of assets less their residual values over their useful lives at
the following rates:

Plant and machinery

over 5 years

Office equipment

over 5 years

The es5mated useful lives, residual value and deprecia5on method are reviewed at the end of each repor5ng
period, with the effect of any changes in es5mate accounted for on a prospec5ve basis.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are
expected to arise from the con5nued use of the asset. Any gain or loss arising on the disposal or re5rement of an
item of property, plant and equipment is determined as the difference between the sales proceeds and the
carrying amount of the asset and is recognised in profit or loss.

Leasing
Rentals payable under opera5ng leases are charged to income on a straight-line basis over the term of the relevant
lease. Lease incen5ves received are recognised in the income statement as an integral part of the total lease
expense.

Foreign Currencies
For the purpose of the consolidated financial statements, the results and financial posi5on are expressed in United
States dollar, which is the presenta5on currency for both company and consolidated financial statements.

In preparing the financial statements of the individual companies, transac5ons in currencies other than the
func5onal currency of each group company (“foreign currencies”) are translated into the func5onal currency at
the rates of exchange prevailing on the dates of the transac5ons. At each repor5ng date, monetary assets and
liabili5es that are denominated in foreign currencies are retranslated into the func5onal currency at the rates
prevailing on the repor5ng date. Non-monetary assets and liabili5es carried at fair value that are denominated
in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-
monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Foreign exchange differences are recognised in the profit or loss in the period in which they arise, except for
foreign exchange differences on monetary items receivable from or payable to a foreign opera5on for which
se6lement is neither planned nor likely to occur and which, therefore, form part of the net investment in the
foreign opera5on. Foreign exchange differences arising on the transla5on of the Group’s net investment in foreign
opera5ons are recognised as a separate component of Shareholders’ equity via the statement of other
comprehensive income. On disposal of foreign opera5ons and foreign en55es, the cumula5ve transla5on
differences are recognised in the income statement as part of the gain or loss on disposal.

For the purpose of presen5ng company and consolidated financial statements, the assets and liabili5es of the
Company, and the Group’s opera5ons which have a func5onal currency other than United States dollar, are
translated using exchange rates prevailing at the end of each repor5ng period. Income and expense items are
translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that
period, in which case the exchange rates at the date of transac5ons are used. Foreign exchange differences arising,
if any, are recognised in other comprehensive income and accumulated in equity. Equity items are translated at
the exchange rates at the date of transac5ons and foreign exchange differences arising, if any, are accumulated
directly in equity.

Annual Report and Financial Statements for the year ended 31 December 2018

35

Rose
Petroleum plc

Notes to the Financial Statements
con5nued

3.

Significant Accoun0ng Policies con5nued

On the disposal of a foreign opera5on (i.e. a disposal of the Group’s en5re interest in a foreign opera5on, a
disposal involving loss of control over a subsidiary that includes a foreign opera5on or loss of joint control over a
jointly controlled en5ty that includes a foreign opera5on), all of the accumulated exchange differences in respect
of that opera5on a6ributable to the Group are reclassified to profit or loss. Where there is no change in the
propor5onate percentage interest in an en5ty then there has been no disposal or par5al disposal and accumulated
exchange differences a6ributable to the Group are not reclassified to profit or loss.

Fair value adjustments arising on the acquisi5on of a foreign opera5on are treated as assets and liabili5es of the
foreign opera5on and translated at the rate of exchange prevailing at the end of each repor5ng period. Exchange
differences arising are recognised in equity.

Re0rement Benefits
The Group makes contribu5ons to the personal pension schemes for some of its employees and Directors.
Payments to these schemes are charged as an expense in the income statement in respect of pension costs
payable in the year.

Taxa0on
The tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in
the consolidated income statement because it excludes items of income or expense that are taxable or deduc5ble
in other years and items that are never taxable or deduc5ble. The Group’s liability for current tax is calculated using
tax rates that have been enacted or substan5vely enacted by the repor5ng date.

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabili5es in the
consolidated financial statements and the corresponding tax bases used in the computa5on of taxable profit.
Deferred tax liabili5es are generally recognised for all taxable temporary differences and deferred tax assets are
generally recognised for all deduc5ble temporary differences to the extent that it is probable that taxable profits
will be available against which those deduc5ble temporary differences can be u5lised. Such deferred tax assets
and liabili5es are not recognised if the temporary difference arises from goodwill or from the ini5al recogni5on
(other than in a business combina5on) of other assets and liabili5es in a transac5on which affects neither the
taxable profit nor the accoun5ng profit.

Deferred tax liabili5es are recognised for taxable temporary differences associated with investments in subsidiaries
and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference
and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets
arising from deduc5ble temporary differences associated with such investments and interest are only recognised
to the extent that it is probable that there will be sufficient taxable profits against which to u5lise the benefits of
the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each repor5ng date and reduced to the extent that it
is no longer probable that sufficient taxable profits will be available to allow all or part of the assets to be
recovered.

Deferred tax liabili5es and assets are measured at the tax rates that are expected to apply in the period in which
the liability is se6led or the asset realised, based on tax rates that have been enacted or substan5vely enacted at
the repor5ng date.

36

Annual Report and Financial Statements for the year ended 31 December 2018

Notes to the Financial Statements
con5nued

3.

Significant Accoun0ng Policies con5nued

Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other
comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other
comprehensive income or directly in equity respec5vely. Where current tax or deferred tax arises from the ini5al
accoun5ng for a business combina5on, the tax effect is included in the accoun5ng for the business combina5on.

Deferred tax assets and liabili5es are offset when there is a legally enforceable right to set off current tax assets
against current tax liabili5es and when they relate to income taxes levied by the same taxa5on authority and the
Group intends to se6le its current tax assets and liabili5es on a net basis.

Discon0nued Opera0ons
A discon5nued opera5on is a component of the Group that has been disposed of or is classified as held for sale
and that represents a separate major line of business or geographical area of opera5ons, is part of a single co-
ordinated plan to dispose of such a line of business area or opera5on, or is a subsidiary acquired exclusively with
a view to resale.

Classifica5on of a discon5nued opera5on occurs at the earlier of disposal or when the opera5on meets the criteria
to be classified as held for sale.

The results of discon5nued opera5ons are presented separately on the face of the income statement and other
comprehensive income. The compara5ve statement of profit or loss and other comprehensive income Is re-
presented as if the opera5ons had been discon5nued from the start of the compara5ve year.

Investments And Other Financial Instruments
Recogni(cid:31)on of financial assets and financial liabili(cid:31)es
Financial assets and financial liabili5es are recognised on the Group’s Balance Sheet when the Group becomes a
party to the contractual provisions of the instrument, and are ini5ally measured at fair value. Transac5on costs
are included as part of the ini5al measurement, except for financial assets at fair value through profit or loss.

Investments and other financial assets are subsequently measured at either amor5sed cost or fair value depending
on their classifica5on. Classifica5on is determined based on both the business model within which such assets are held
and the contractual cash flow characteris5cs of the financial asset unless an accoun5ng mismatch is being avoided.

Financial liabili5es are subsequently measured at either amor5sed cost or fair value.

Derecogni(cid:31)on of financial assets and financial liabili(cid:31)es
The Group derecognises a financial asset only when the contractual rights to cash flows from the asset expire, or
it transfers the financial asset and substan5ally all the risks and rewards of ownership of the asset to another
en5ty. If the Group neither transfers nor retains substan5ally all the risks and rewards of ownership and con5nues
to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability
for the amount it may have to pay. If the Group retains substan5ally all the risks and rewards of ownership of a
transferred financial asset, the Group con5nues to recognise the financial asset and also recognises a collateralised
borrowing for the proceeds received.

On derecogni5on of a financial asset and financial liability a gain or loss is recognised in profit or loss.

Annual Report and Financial Statements for the year ended 31 December 2018

37

Rose
Petroleum plc

Notes to the Financial Statements
con5nued

3.

Significant Accoun0ng Policies con5nued

Financial assets at fair value through profit or loss
Financial assets not measured at amor5sed cost or at fair value through other comprehensive income are classified
as financial assets at fair value through profit or loss. Typically, such financial assets will be held for trading, where
they are acquired for the purpose of selling in the short term with an inten5on of making a profit. Gains and losses
arising from changes in fair value are recognised directly in profit or loss.

Impairment of financial assets
The Group recognises a loss allowance for expected credit losses on financial assets which are measured at amor5sed
cost. The measurement of the loss allowance depends upon the Group’s assessment at the end of each repor5ng
period as to whether the financial instrument’s credit risk has increased significantly since ini5al recogni5on, based
on reasonable and supportable informa5on that is available without undue cost or effort to obtain.

Where there has not been a significant increase in exposure to credit risk since ini5al recogni5on, a 12-month
expected credit loss allowance is es5mated. This represents a por5on of the asset’s life5me expected credit losses
that is a6ributable to a default event that is possible within the next 12 months. Where a financial asset has
become credit impaired or where it is determined that credit risk has increased significantly, the loss allowance
is based on the asset’s life5me expected credit losses. The amount of expected credit loss recognised is measured
on the basis of the probability weighted present value of an5cipated cash shor4alls over the life of the instrument
discounted at the original effec5ve interest rate.

For financial assets measured at fair value through other comprehensive income, the loss allowance is recognised
within other comprehensive income. In all other cases, the loss allowance is recognised in profit or loss.

Trade and other receivables
Trade and other receivables are measured at ini5al recogni5on at fair value, and are subsequently measured at
amor5sed cost using the effec5ve interest method, less any allowance for expected credit losses.

The Group has applied the simplified approach to measuring expected credit losses which uses a life5me expected
loss allowance. To measure the expected credit losses, trade receivables are grouped on the basis of days overdue.

Cash and cash equivalents
Cash and cash equivalents comprise cash-in-hand and on-demand deposits.

Trade and other payables
Trade and other payables are ini5ally measured at their fair value, and are subsequently measured at amor5sed
cost using the effec5ve interest rate method.

Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Group a%er deduc5ng
all of its liabili5es. Equity instruments issued by the Group are recognised at the proceeds received, net of direct
issue costs.

The costs of an equity transac5on are accounted for as a deduc5on from equity to the extent they are incremental
costs directly a6ributable to the equity transac5on that would otherwise have been avoided.

Provisions
Provisions are recognised when the Group has a legal or construc5ve obliga5on, as a result of past events, for
which it is probable that an ou4low of economic resources will result and that ou4low can be reliably measured.

38

Annual Report and Financial Statements for the year ended 31 December 2018

Notes to the Financial Statements
con5nued

3.

Significant Accoun0ng Policies con5nued

The amount recognised as a provision is the best es5mate of the considera5on required to se6le the present
obliga5on at the end of the repor5ng period, considering the risks and uncertain5es surrounding the obliga5on.
When a provision is measured using the cash flow es5mated to se6le the present obliga5on, its carrying amount
is the present value of those cash flows.

Decommissioning
Provision for decommissioning is recognised in full when the related facili5es are installed. The decommissioning
provision is calculated as the net present value of the Group’s share of the expenditure expected to be incurred
at the end of the producing life of the facility in the removal and decommissioning of the produc5on, storage and
transporta5on facili5es currently in place. The cost of recognising the decommissioning provision is included as
part of the cost of the relevant asset and is thus charged to the income statement in accordance with the Group’s
policy for deprecia5on of property, plant and equipment. Periodic charges for changes in the net present value
of the decommissioning provision arising from discoun5ng are included in finance costs.

Fair Value Measurement
Measurement of fair value is based on the price that would be received to sell an asset, or paid to transfer a
liability in an orderly transac5on between market par5cipants at the measurement date, and assumes that the
transac5ons will take place either, in the principal market, or in the absence of a principal market, in the most
advantageous market.

Fair value is measure using the assump5ons that market par5cipants would use when pricing the asset or liability,
assuming they act in their economic best interests. For non-financial assets, the fair value measurement is based
on its highest and best use. Valua5on techniques that are appropriate in the circumstances and for which sufficient
data are available to measure fair value, are used, maximising the use of relevant observable inputs and minimising
the use of unobservable inputs.

Assets and liabili5es measure at fair value are classified into three levels, using a fair value hierarchy that reflects
the significance of the inputs used in making the measurements. Classifica5ons are measured at each repor5ng
date and transfers between levels are determined based on a reassessment of the lowest level of input that is
significant to the fair value measurement.

Share-Based Payments
The Group has applied the requirements of IFRS 2 Share-based Payment for all grants of equity instruments.

The Group operates an equity-se6led share op5on plan and a share-based compensa5on plan in respect of certain
Directors, employees and consultants. Equity-se6led share-based payments are measured at fair value (excluding
the effect of non-market based ves5ng condi5ons) at the date of grant. The fair value of the service received in
exchange for the grant of op5ons and equity is recognised as an expense. The fair value determined at the grant
date of equity-se6led share-based payment is expensed on a straight-line basis over the ves5ng period, based on
the Group’s es5mate of shares that will eventually vest and adjusted for the effect of non-market based ves5ng
condi5ons.

Fair value of op5on grants is measured by use of the Black Scholes model for non-performance-based op5ons. The
expected life used in the model has been adjusted, based on management’s best es5mate, for the effect of non-
transferability, exercise restric5ons and behavioural considera5ons.

Annual Report and Financial Statements for the year ended 31 December 2018

39

Rose
Petroleum plc

Notes to the Financial Statements
con5nued

3.

Significant Accoun0ng Policies con5nued

The grant by the Company of op5ons and share-based compensa5on plans over its equity instruments to the
employees of subsidiary undertakings in the Group is treated as a capital contribu5on. The fair value of employee
services received, measured by reference to the grant date fair value, is recognised over the ves5ng period as an
increase to investment in subsidiary undertakings, with a corresponding credit to equity in the parent en5ty accounts.

Opera0ng Expenses
Costs incurred prior to obtaining the legal rights to explore an area together with any costs which cannot be allocated
to a specific explora5on project are expensed directly to the income statement and included as opera5ng expenses.

Development Expenses
Costs incurred by the Group in respect of the assessment and pursuit of poten5al new projects are expensed
directly to the income statement and included as development expenses. Material expenses rela5ng to a specific
project are disclosed on a separate line in the income statement.

Segmental Repor0ng
Opera5ng segments are reported in a manner consistent with the internal repor5ng provided to the chief
opera5ng decision maker. The chief opera5ng decision maker, who is responsible for alloca5ng resources and
assessing performance of the opera5ng segments and making strategic decisions, has been iden5fied as the Board
of Directors.

4.

Cri0cal Accoun0ng Judgements and Key Sources of Es0ma0on Uncertainty

In the applica5on of the Group’s accoun5ng policies, which are described in note 3, the Directors are required to
make judgements, es5mates and assump5ons about the carrying amounts of the assets and liabili5es that are not
readily apparent from other sources. The es5mates and associated assump5ons are based on historical experience
and other factors that are considered to be relevant. Actual results may differ from these es5mates.

The es5mates and underlying assump5ons are reviewed on an on-going basis. Revisions to accoun5ng es5mates
are recognised in the period in which the es5mate is revised if the revision affects only that period or in the period
of the revision and future periods if the revision affects both the current and future periods.

The following are the cri5cal judgements and es5ma5ons that the Directors have made in the process of applying
the Group’s accoun5ng policies and that have the most significant effect on the amounts recognised in the
financial statements:

Recoverability of Loans to Subsidiary Undertakings
The Company has outstanding loans from its directly held subsidiaries which have then made a number of loans
to indirectly held subsidiaries as the primary method of financing the ac5vity of those subsidiaries. The principal
loans are shown in the Company balance sheet on the basis that the loans incur interest at a commercial rate
according to the Group’s inter-company loan policy, which is being rolled up un5l such 5me as the subsidiaries
are in a posi5on to se6le. However, there is a risk that the indirectly held subsidiaries will not commence revenue-
genera5ng ac5vi5es and that the carrying amount of the Company’s investment will, therefore, exceed the
recoverable amount.

40

Annual Report and Financial Statements for the year ended 31 December 2018

Notes to the Financial Statements
con5nued

4.

Cri0cal Accoun0ng Judgements and Key Sources of Es0ma0on Uncertainty con5nued

At 31 December 2018, the Company has total investments and loans in its directly held subsidiaries of US$48.2
million and the Board has assessed the recoverability of these based on the expected future cash flows arising to
the Company from its subsidiary en55es. Based on this assessment the Directors consider that, in considera5on
of the losses currently being generated and the impairment of the Group’s intangible explora5on and evalua5on
assets a provision of US$1.3 million (2017: US$5.8 million) should be recognised by the Company in the year to
31 December 2018. At 31 December 2018, there is a total impairment provision in respect of the investments and
loans to subsidiaries of US$34.8 million. See note 19.

Further sensi5vity analysis prepared by management on the recoverability of the Company’s investments and
loans is based on the performance of the underlying opera5ons. Any downside in these es5mates would result
in an addi5onal impairment of the underlying investments.

5.

Segmental Informa0on

Prior to the sale of the Group’s milling assets (“discon5nued opera5ons”) in the year ended 31 December 2017,
for management purposes the Group was organised into three opera5ng divisions based on its principal ac5vi5es
of gold and silver mining, research and evalua5on of poten5al uranium and copper proper5es and the explora5on
and development of O&G resources. Subsequent to the discon5nuance of opera5ons in Mexico the Group has two
main opera5ng segments, research and evalua5on of poten5al uranium and copper proper5es and the explora5on
and development of O&G resources, which are primarily based in U.S.A. These divisions are the basis on which
the Group reports its segmental informa5on.

Segmental informa5on about these divisions is presented below.

Income statement
Revenue

Discon5nued opera5ons

Segmental results

Uranium and copper
O&G

Total segmental results
Unallocated results
Current and deferred tax

Loss a%er taxa5on from con5nuing opera5ons
Discon5nued opera5ons, net of tax

Profit/(loss) a%er taxa5on

2018
US$’000

–

222
682

904
(1,665)
–

(761)
860

99

Restated
2017
US$’000

304

(137)
(1,677)

(1,814)
(1,698)
(1)

(3,513)
382

(3,131)

The unallocated results of US$1.7 million (2017: US$1.7 million) include costs associated with the development
of new projects (refer to note 6), Directors remunera5on and other general and administra5ve costs incurred by
the Company only.

Annual Report and Financial Statements for the year ended 31 December 2018

41

Rose
Petroleum plc

Notes to the Financial Statements
con5nued

5.

Segmental Informa0on con5nued

Deprecia0on
O&G
Discon5nued opera5ons

Impairment

Uranium and copper
O&G

Net foreign exchange (gains)/losses

O&G
Unallocated
Discon5nued opera5ons

2018
US$’000

2017
US$’000

5
–

5

27
27

54

2018
US$’000

2017
US$’000

4
–

4

43
(125)

(82)

2018
US$’000

2017
US$’000

(1,067)
(17)
892

(192)

1,333
45
–

1,378

Employees
The average numbers of employees for the year for each of the Group’s principal divisions were as follows:

Uranium and copper
O&G
Discon5nued opera5ons

Total segmental employees
Unallocated employees

Total employees

2018
Number

2017
Number

1
1
–

2
2

4

1
1
27

29
3

32

42

Annual Report and Financial Statements for the year ended 31 December 2018

Notes to the Financial Statements
con5nued

5.

Segmental Informa0on con5nued

Balance Sheet
Segment assets

Uranium and copper
O&G

Total segmental assets
Unallocated assets including cash and cash equivalents

Con5nuing opera5ons
Discon5nued opera5ons

Total assets

Segmental liabili0es

Uranium and copper
O&G

Total segmental liabili5es
Unallocated liabili5es

Con5nuing opera5ons
Discon5nued opera5ons

Total liabili5es

Segmental net assets

Uranium and copper
O&G

Total segmental net assets
Unallocated net assets including cash and cash equivalents
Discon5nued opera5ons

Total net assets

Addi0ons to investments

Unallocated
O&G

Addi0ons to intangible assets

Uranium and copper
O&G

2018
US$’000

2017
US$’000

275
13,244

13,519
1,089

14,608
68

14,676

1
219

220
154

374
13

387

274
13,025

13,299
935
55

14,289

2018
US$’000

–
264

264

23
12,205

12,228
2,738

14,966
427

15,393

50
85

135
297

432
152

584

(27)
12,120

12,093
2,441
275

14,809

2017
US$’000

500
–

500

2018
US$’000

2017
US$’000

4
1,050

1,054

43
1,980

2,023

Annual Report and Financial Statements for the year ended 31 December 2018

43

Rose
Petroleum plc

Notes to the Financial Statements
con5nued

6. Development Expenses

Cuba
U.S.A.

Con0nuing
2018
US$’000

Con0nuing
2017
US$’000

–
178

178

154
–

154

Development expenses represent material expenditure incurred by the Group in respect of the assessment and
pursuit of specific projects.

7.

Impairment of Intangible Expora0on and Evalua0on Assets

Uranium and copper assets
O&G assets

Con0nuing
2018
US$’000

Con0nuing
2017
US$’000

4
–

4

43
(125)

(82)

At 31 December 2018, there were indicators of impairment of both the Group’s intangible uranium assets held
in the U.S.A. and its intangible copper assets held in Mexico. The Directors consider that there is reasonable
uncertainty that the Group will recover the carrying value of these assets and accordingly the intangible copper
assets held in Mexico remain fully impaired. An impairment charge of US$4,292 (2017: US$42,896) has been
recognised in the year in respect of the Group’s intangible uranium assets, with the result that these assets have
been impaired in full at 31 December 2018.

At 31 December 2015, the Group had relinquished, and ceased to recognise its interest in two hydrocarbon
licences in south-western Germany. The original recogni5on of these assets included an accrual for outstanding
licence du5es due to the German licencing authori5es. During the year ended 31 December 2017, a reduc5on in
the poten5al liability was agreed with the authori5es and as a result, the previous impairment rela5ng to the
relinquished assets in respect of this cost was reversed and resulted in a credit in impairment of US$0.1 million.
The Group has con5nued to recognise the remaining poten5al liability although it con5nues to nego5ate further
reduc5ons with the German licencing authori5es. See note 23.

The remaining intangible explora5on and evalua5on assets have not reached a stage which permits a reasonable
assessment of the existence or otherwise of economically recoverable reserves. These assets are not amor5sed
un5l technical feasibility and commercial viability is established.

8.

Fair Value Loss on Investments

Change in fair value of investments

Con0nuing
2018
US$’000

284

Con0nuing
2017
US$’000

–

44

Annual Report and Financial Statements for the year ended 31 December 2018

Notes to the Financial Statements
con5nued

8.

Fair Value Loss on Investments con5nued

On 9 September 2017, the Group entered into a Stock Purchase Agreement with Magellan Gold Corpora5on
(‘Magellan”), which resulted in the disposal of the majority of the Group’s ore processing mill in Mexico, together
with its associated assets, licences and agreements. See note 15. The considera5on for the transac5on, which
completed on 1 December 2017, included US$0.5 million in restricted common stock in Magellan. By reference
to the quoted price of Magellan stock, the Directors consider that the fair value of the stock at 31 December 2018
was US$0.2 million, which approximates to its market value at that date of US$0.31 million. This has resulted in
a charge of US$0.3 million in respect of the change in fair value during the year ended 31 December 2018.

9. Other Income

enCore Energy Corpora5on

Con0nuing
2018
US$’000

264

Con0nuing
2017
US$’000

–

On 27 November 2018, the Group announced that it had entered into an agreement with enCore Energy
Corpora5on (‘ENCORE’) in respect of its U.S.A. uranium explora5on project database. The agreement gave ENCORE
exclusive access to the Group’s database for an ini5al term of five years to enable them to iden5fy explora5on
projects which could be developed into commercial opera5ons. Under the terms of the agreement ENCORE issued
3 million Ordinary Shares to the Group’s wholly owned subsidiary, VANE Minerals (US) LLC, which represented
approximately 2.1% of the exis5ng share capital of ENCORE. See note 19.

The Group has recognised the ENCORE shares as investments at fair value through the profit or loss, with a
corresponding credit to other income during the year ended 31 December 2018.

10. Finance Income

Interest on bank deposits

11. Loss before Taxa0on

The loss before taxa5on for the year has been arrived at a%er charging/(credi5ng):

Other income
Deprecia5on of property, plant and equipment
Staff costs excluding share-based payments
Share-based payments
Opera5ng leases – land and buildings
Net foreign exchange (gains)/losses

Con0nuing
2018
US$’000

3

Con0nuing
2017
US$’000

1

Con0nuing
2018
US$’000

Con0nuing
2017
US$’000

(264)
5
553
172
24
(1,084)

–
27
792
314
90
1,378

Annual Report and Financial Statements for the year ended 31 December 2018

45

Rose
Petroleum plc

Notes to the Financial Statements
con5nued

12. Auditor’s Remunera0on

Amounts payable to the external auditors and their associates in respect of both audit and non-audit services:

Audit of these financial statements

Amounts receivable by the Company’s auditor and its associates in respect of:
Audit of financial statements of subsidiaries of the Company
Taxa5on services – compliance

13. Staff Costs

The average monthly number of employees (including Execu5ve Directors) was:

Office and management
Opera5ons

Their aggregate remunera5on comprised:

Wages and salaries
Social security costs
Other pension costs
Share-based payments

Con0nuing
2018
US$’000

Con0nuing
2017
US$’000

54

10
6

70

45

10
11

66

Group

Con0nuing
2018
Number

Con0nuing
2017
Number

2
2

4

3
2

5

Group

Con0nuing
2018
US$’000

Con0nuing
2017
US$’000

536
63
36
118

753

658
61
75
265

1,059

Included within wages and salaries is US$0.08 million (2017: nil) capitalised to intangible explora5on and
evalua5on assets.

Office and management
Opera5ons

Company

Con0nuing
2018
Number

Con0nuing
2017
Number

2
1

3

3
–

3

46

Annual Report and Financial Statements for the year ended 31 December 2018

Notes to the Financial Statements
con5nued

13. Staff Costs con5nued

Their aggregate remunera5on comprised:

Wages and salaries
Social security costs
Other pension costs
Share-based payments

Company

Con0nuing
2018
US$’000

Con0nuing
2017
US$’000

483
58
36
83

660

379
44
60
164

647

Included within wages and salaries is US$0.1 million (2017: nil) which was recharged to other Group en55es during
the year ended 31 December 2018.

Refer to note 32 for details regarding the remunera5on of the highest paid Director.

14. Taxa0on

Current tax:

Current year

Deferred tax:

Origina5on and reversal of temporary differences

Tax charge on loss for the year

Con0nuing
2018
US$’000

Con0nuing
2017
US$’000

–

–

–

–

–

1

1

–

–

1

The charge for the year can be reconciled to the loss per the income statement as follows:

Loss before tax

Loss mul5plied by the rate of corpora5on tax for UK companies of 19%
(2017: 19.25%)

Effects of:
Expenses/income not deduc5ble/chargeable for tax purposes
Share-based payments
Unrelieved tax losses carried forward

Tax charge on loss for the year

Con0nuing
2018
US$’000

Restated
Con0nuing
2017
US$’000

(761)

(3,512)

(145)

(676)

(68)
33
180

–

(236)
60
853

1

There has been no impact due to changes in UK taxa5on rates during the years reported.

Unrelieved tax losses carried forward, as detailed in note 24, have not been recognised as a deferred tax asset,
as there is currently insufficient evidence that the asset will be recoverable in the foreseeable future. The losses
must be u5lised in rela5on to the same opera5ons.

Annual Report and Financial Statements for the year ended 31 December 2018

47

Rose
Petroleum plc

Notes to the Financial Statements
con5nued

15. Discon0nued Opera0ons

Mexico Mining Opera0ons
On 3 March 2017, the Group entered into a Memorandum of Understanding (“MOU”) with Magellan Gold
Corpora5on (“Magellan”) for the poten5al disposal of the Group’s ore processing mill in Mexico, together with
its associated assets, licences and agreements. Under the terms of the agreement Magellan was granted a 90-day
op5on period, for a non-refundable deposit of US$50,000 which was presented as other income, within
discon5nued opera5ons.

On 9 September 2017, the Group signed a Stock Purchase Agreement (“SPA”) with Magellan and the transac5on
completed on 1 December 2017. The considera5on for the transac5on was US$1.5 million, US$1.0 million in cash
and US$0.5 million in restricted common stock in Magellan. See note 19.

The cash considera5on was subject to the reten5on of US$50,000 by Magellan, which fell due for payment by
10 March 2018 and which was actually se6led on 13 April 2018.

Although the SPA referred to the sale of stock, the substance of the transac5on was the disposal of property,
plant and equipment in Minerales VANE S.A. de C.V. and as a result the transac5on was accounted for as a disposal
of property, plant and equipment. At the same 5me, the Group also agreed the sale of its wholly-owned subsidiary,
Minerales VANE Operaciones S.A de C.V. (“MVO”) for US$2,500, which was paid on 13 April 2018.

The Mexico opera5ons were treated as discon5nued opera5ons in the year ended 31 December 2017, and
together with addi5onal costs incurred during the year ended 31 December 2018, have been shown within a
single amount on the face of the consolidated income statement.

U.S.A. Copper Explora0on
Whilst all remaining licences rela5ng to the Group’s U.S.A. copper projects had previously been relinquished,
AVEN Associates LLC, the Group’s U.S.A. copper explora5on company finally ceased all ac5vity and was closed
during the year ended 31 December 2018. In accordance with IAS 21, all cumula5ve transla5on reserves rela5ng
to the en5ty have been recycled to the profit or loss and has been shown within a single amount on the face of
the consolidated income statement for the year ended 31 December 2018. The income statement for the prior
period has been restated to conform to this presenta5on.

48

Annual Report and Financial Statements for the year ended 31 December 2018

Notes to the Financial Statements
con5nued

15. Discon0nued Opera0ons con5nued

Loss from discon0nued opera0ons, net of tax
The results of the discon5nued opera5ons, which have been included in the consolidated income statement were
as follows:

2018
US$’000

2017
US$’000

Mexico Mining Opera0ons
Revenue
Cost of sales

Margin
Other income
Opera5ng and development costs
Expenses
Recycled currency transla5on differences, net of tax

Gain on disposal of property, plant and equipment
Finance income

Loss before taxa5on
Taxa5on charge

Loss a6ributable to discon5nued opera5ons
Gain on disposal of discon5nued opera5ons

(Loss)/profit from discon5nued opera5ons, net of tax

Gain on disposal of discon0nued opera0ons

Property, plant and equipment
Decommissioning provision

Considera5on on disposal of discon5nued opera5ons

Gain on disposal of discon5nued opera5ons

Considera0on on disposal of discon0nued opera0ons
Considera5on on disposal of property, plant and equipment
Considera5on on disposal of MVO

Total considera5on on disposal of discon5nued opera5ons
Considera5on se6led in restricted common stock
Deferred considera5on

Net cash inflow

–
–

–
–
–
(36)
11

(25)
6
–

(19)
–

(19)
–

(19)

2018
US$’000

–
–

–
–

–

304
(259)

45
50
(373)
(698)
–

(976)
–
41

(935)
(20)

(955)
1,339

384

2017
US$’000

(283)
120

(163)
1,502

1,339

1,500
2

1,502
(500)
(52)

950

Annual Report and Financial Statements for the year ended 31 December 2018

49

Rose
Petroleum plc

Notes to the Financial Statements
con5nued

15. Discon0nued Opera0ons con5nued

U.S.A. Copper Explora0on
Expenses

Loss a6ributable to discon5nued opera5ons
Foreign currency exchange
Recycled currency transla5on differences, net of tax

Gain/(loss) from discon5nued opera5ons, net of tax

Total discon0nued opera0ons
(Loss)/profit before taxa5on: Mexico mining opera5ons
Profit/(loss) before taxa5on: U.S.A. copper explora5on

Profit before taxa5on from discon5nued opera5ons
Taxa5on charge: Mexico mining opera5ons

Profit from discon5nued opera5ons, net of tax

Profit per Ordinary Share
Basic and diluted, cents per share

16. Profit/(Loss) Per Ordinary Share

2018
US$’000

Restated
2017
US$’000

(2)

(2)
67
814

879

(19)
879

860
–

860

(2)

(2)
–
–

(2)

404
(2)

402
(20)

382

0.66

0.68

Basic profit/(loss) per Ordinary Share is calculated by dividing the net profit/(loss) for the year a6ributable to
owners of the parent company by the weighted average number of Ordinary Shares in issue during the year. The
calcula5on of the basic and diluted profit/(loss) per Ordinary Share is based on the following data:

Con0nuing
opera0ons
2018
US$’000

Con0nuing and
discon0nued
opera0ons
2018
US$’000

Restated
Con0nuing
opera0ons
2017
US$’000

Con0nuing and
discon0nued
opera0ons
2017
US$’000

Profits/(losses)

Profits/(losses) for the purpose of basic
profit/(loss) per Ordinary Share being
net profit/(loss) a6ributable to owners
of the parent company

Number of shares

Weighted average number of shares for
the purpose of basic profit/(loss) per
Ordinary Share

Profit/(loss) per Ordinary Share

(761)

99

(3,513)

(3,131)

Number
’000

Number
’000

Number
’000

Number
’000

131,814

131,814

56,467

56,467

Basic and diluted, cents per share

(0.58)

0.08

(6.22)

(5.54)

Due to the losses incurred from con5nuing opera5ons in the years reported, there is no dilu5ve effect from the
exis5ng share op5ons, share based compensa5on plan or warrants.

50

Annual Report and Financial Statements for the year ended 31 December 2018

Notes to the Financial Statements
con5nued

17.

Intangible Assets

Cost

At 1 January 2017
Addi5ons
Exchange differences

At 1 January 2018
Addi5ons
Exchange differences

At 31 December 2018

Impairment

At 1 January 2017
Impairment charge
Exchange differences

At 1 January 2018
Impairment charge
Exchange differences

At 31 December 2018

Carrying amount

At 31 December 2018

At 31 December 2017

At 1 January 2017

Explora0on and
evalua0on
assets
US$’000

15,823
2,023
17

17,863
1,054
1

18,918

5,706
43
16

5,765
4
1

5,770

13,148

12,098

10,117

Rockies Standard Earn-in Agreement
In March 2014, the Group signed an agreement under which its subsidiary, Rose Petroleum (Utah) LLC (“Rose
Utah”), acquired the right to commence earning into a 75 per cent working interest of certain oil, gas and
hydrocarbon leases in Grand and Emery Coun5es, Utah, from Rockies Standard Oil Company LLC (“RSOC”), which
retains the remaining 25 per cent working interest.

Farm-in costs incurred by the Group are accounted for as required by the relevant accoun5ng standards including
the capitalisa5on of intangible explora5on and evalua5on assets in accordance with IFRS 6.

In April 2016, RSOC agreed to reduce the Group’s carry obliga5on to earn the 75 per cent working interest in the
Paradox acreage by US$2.0 million to US$5.5 million. Under the terms of the agreement, the obliga5on is not
contractually commi6ed and therefore no liability or con5ngent liability has been recognised in these financial
statements.

The Group’s total expenditure in respect of its U.S.A. O&G assets, included within intangible explora5on and
evalua5on assets, as at 31 December 2018 is US$13.1 million (2017: US$12.1 million).

Annual Report and Financial Statements for the year ended 31 December 2018

51

Rose
Petroleum plc

Notes to the Financial Statements
con5nued

17.

Intangible Assets con5nued

Tango Project
On 25 August 2014, Minerales VANE S.A. de C.V., a wholly owned subsidiary of the Group, entered into an
agreement with Minera Camargo S.A de C.V. (“Camargo”), in respect of both gold and silver and base metal
explora5on. Under the terms of the agreement MV has the right to operate gold and silver mining ac5vi5es at
concessions owned by Camargo with gross margin earned to be allocated on the basis of 50 per cent to MV and
50 per cent to Camargo. In addi5on, MV has the op5on to earn a 75 per cent ownership of the base metals
(porphyries) by inves5ng US$5.0 million in work expenditures over a period of 5 years. Under the terms of the
agreement, the op5on to earn-in is not contractually commi6ed and therefore no liability or con5ngent liability
has been recognised in these financial statements. No expenditure has been incurred in either of the years
presented.

The Directors consider that there is reasonable uncertainty that the Group will recover the carrying value of these
assets and as a result they were impaired in full at 31 December 2018.

U.S.A. Copper Projects
On 2 March 2016, the Group entered into an agreement with Burde6 Gold LLC (“Burde6”) to conduct explora5on
drilling on the Ardmore copper project. The terms included a cash payment of US$5,350 and the Group retained
a 15 per cent net profit interest in the Ardmore project and any other claims that Burde6 might acquire within a
three-mile area. No payments have been received in respect of the project in either of the years presented.

52

Annual Report and Financial Statements for the year ended 31 December 2018

Notes to the Financial Statements
con5nued

18. Property, Plant And Equipment

Ore processing
mill
US$’000

Group

Plant and
machinery
US$’000

Cost

At 1 January 2017
Discon5nued opera5ons
Exchange differences

At 1 January 2018
Group transfer
Discon5nued opera5ons
Derecogni5on

At 31 December 2018

Accumulated deprecia0on
At 1 January 2017
Charge for the year
Discon5nued opera5ons
Exchange differences

At 1 January 2018
Charge for the year
Discon5nued opera5ons
Derecogni5on

At 31 December 2018

Carrying amount

At 31 December 2018

At 31 December 2017

At 1 January 2017

624
(684)
60

–
–
–
–

–

531
17
(599)
51

–
–
–
–

–

–

–

93

705
(573)
51

183
–
(21)
(3)

159

461
37
(375)
33

156
5
(21)
(3)

137

22

27

244

Total
US$’000

1,329
(1,257)
111

183
–
(21)
(3)

159

992
54
(974)
84

156
5
(21)
(3)

137

22

27

337

Company
Office
Equipment
US$’000

–
–
–

–
22
–
–

22

–
–
–
–

–
–
–
–

–

22

–

–

The Group deprecia5on charge has been allocated to the income statement as follows:

Administra5ve expenses

Con0nuing
2018
US$’000

5

Con0nuing
2017
US$’000

27

Annual Report and Financial Statements for the year ended 31 December 2018

53

Rose
Petroleum plc

Notes to the Financial Statements
con5nued

19.

Investments

Cost

At 1 January 2017
Addi5ons
Capital contribu5on
Exchange differences

At 1 January 2018
Addi5ons
Change in fair value
Capital contribu5on
Exchange differences

At 31 December 2018

Impairment

At 1 January 2017
Impairment charge
Exchange differences

At 1 January 2018
Impairment charge
Exchange differences

At 31 December 2018

Carrying amount

Non-current assets
Current assets

At 31 December 2018

Carrying amount

Non-current assets
Current assets

At 31 December 2017

Group
Investment
carried at fair
value
US$’000

Company

Investment
carried at fair
value
US$’000

Shares in
subsidiary
undertakings
US$’000

Loans to
subsidiary
undertakings
US$’000

–
500
–
–

500
264
(284)
–
(16)

464

–
–
–

–
–
–

–

–
464

464

500
–

500

–
500
–
–

500
–
(284)
–
(16)

200

–
–
–

–
–
–

–

–
200

200

500
–

500

4,799
–
–
457

5,256
–
–
–
(294)

4,962

3,252
1,373
377

5,002
(136)
(274)

4,592

370
–

370

254
–

254

37,166
2,308
254
3,568

43,296
2,565
–
(197)
(2,453)

43,211

23,650
4,380
2,468

30,498
1,459
(1,770)

30,187

13,024
–

13,024

12,798
–

12,798

Total
US$’000

41,965
2,808
254
4,025

49,052
2,565
(284)
(197)
(2,763)

48,373

26,902
5,753
2,845

35,500
1,323
(2,044)

34,779

13,394
200

13,594

13,552
–

13,552

On 9 September 2017, the Group entered into a Stock Purchase Agreement with Magellan Gold Corpora5on
(‘Magellan”), which resulted in the disposal of the majority of the Group’s ore processing mill in Mexico, together
with its associated assets, licences and agreements. See note 15. The considera5on for the transac5on, which
completed on 1 December 2017, included US$0.5 million in restricted common stock in Magellan. By reference
to the quoted price of Magellan stock, the Directors consider that the fair value of the stock at 31 December 2018
was US$0.2 million, which approximates to its market value at that date of US$0.31 million.

54

Annual Report and Financial Statements for the year ended 31 December 2018

Notes to the Financial Statements
con5nued

19.

Investments con5nued

On 27 November 2018, the Group announced that it had entered into an agreement with enCore Energy
Corpora5on (‘ENCORE’) in respect of its U.S.A. uranium explora5on project database. The database is comprised
of geological, geophysical and evalua5on data on the uranium breccia pipe district of northern Arizona. The
agreement gave ENCORE exclusive access to the Group’s database for an ini5al term of five years to enable them
to iden5fy explora5on projects which could be developed into commercial opera5ons. Under the terms of the
agreement ENCORE issued 3 million Ordinary Shares to the Group’s wholly owned subsidiary, VANE Minerals (US)
LLC, which represented approximately 2.1% of the exis5ng share capital of ENCORE. In addi5on, should any
prospects iden5fied by ENCORE reach development stage, the Group will have an opportunity to par5cipate in the
project up to a maximum 25% interest. The purchase price for this par5cipa5on will be 250% of the pro-rata
explora5on costs incurred on the project to advance it to the development stage and the Group would then be
responsible for the development expenditure rela5ng to its specific percentage interest. If the Group does not
elect to par5cipate in the projects in accordance with the agreement it will have no further rights in respect of
that par5cular project. Should the Group develop any of its exis5ng breccia pipe uranium projects, excluding the
North Wash project in Utah, which are currently held on care and maintenance, ENCORE would have the right to
par5cipate in these projects on the same terms that the Group can par5cipate in the ENCORE projects. In addi5on,
ENCORE will have the right of first refusal to acquire any of the projects the Group chooses to dispose of during
the term of the agreement. By reference to the quoted price of Encore stock, the Directors consider that the fair
value of the stock at 31 December 2018 was US$0.26 million, which has been recognised as other income during
the year ended 31 December 2018. See note 9.

The Company has a number of loans made to its subsidiaries which incur interest at a commercial rate, according
to the Group’s inter-company loan policy. For years beginning a%er 1 January 2018, changes to measurement
techniques on intercompany loans came into effect under IFRS 9. These changes require that intercompany loans
be recognised based on the recoverability of the discounted value of future cash flows with effec5ve interest
taken to the income statement and that any impairment should be recognised. The Board has assessed the
recoverability of the loans and investments based on the expected future cash flows arising to the Company from
its subsidiary en55es and consider that a provision of US$1.3 million (2017: US$5.8 million) should be recognised
in the period.

The Company had investments in the following subsidiary undertakings as at 31 December 2018:

Directly owned:
VANE Minerals (UK) Limited
Rose Petroleum (UK) Limited
Rose Cuba Limited
Rose Resources Limited

Indirectly owned:
VANE Minerals (US) LLC
Minerales VANE S.A. de C.V.
Naab Energie GmbH
Rose Petroleum (US) LLC
Rose Petroleum (Utah) LLC
Rose Gypsum Limited

Place of incorpora0on
(or registra0on)
and opera0on

Propor0on
of ownership
interest

Propor0on
of vo0ng
power held

UK
UK
UK
UK

U.S.A.
Mexico
Germany
U.S.A.
U.S.A.
UK

100%
100%
100%
100%

100%
100%
100%
100%
100%
100%

100%
100%
100%
100%

100%
100%
100%
100%
100%
100%

Principal ac0vity

Holding company
Holding company
Holding company
Holding company

Explora5on
Mining
Explora5on
Holding company
Explora5on
Holding company

Annual Report and Financial Statements for the year ended 31 December 2018

55

Rose
Petroleum plc

Notes to the Financial Statements
con5nued

19.

Investments con5nued

During the year ended 31 December 2018, the Group closed AVEN Associates LLC, which previously held the
Group’s U.S.A. copper assets. Expenditure incurred has been classified as discon5nued opera5ons, and primarily
comprise costs of cessa5on and recycling of foreign currency reserves through profit or loss. See note 15.

The registered office address of all companies incorporated in the United Kingdom is 20-22 Wenlock Road, London,
N1 7GU.

The registered office address for VANE Minerals (US) LLC is 8987 E. Tanque Verde Road, Tucson, Arizona 85749.

The registered office address for Minerales VANE S.A. de C.V. is Humboldt No. 121, Colonia del Valle, C.P. 78200,
San Luis Potosi, S.L.P.

The registered office address for Naab Energie GmbH is Merzhauser Strasse 4, D-79100 Freiburg, Germany.

The registered office address for Rose Petroleum (US) LLC and Rose Petroleum (Utah) LLC is 383 Inverness Parkway,
Ste 330, Englewood, CO 80112.

20.

Joint Opera0ons

Arizona Project
On 1 September 2008, the Group entered into a Mining Venture Agreement with Uranium One Americas Inc.
(“U1”). The terms of this agreement created a Joint Venture Agreement (“JVA”) between VANE Minerals (US) LLC
(“VANE”) and U1, who later sold their interest to Anfield Resources Inc. (“Anfield”), with each partner holding a
50 per cent interest.

The par5es have rights to the assets and obliga5ons for liabili5es rela5ng to the arrangement and the JVA had,
therefore, been accounted for as a joint opera5on recognising the Group’s relevant share of assets, liabili5es,
revenues and expenses as appropriate.

The JVA combined interests in over 60 breccia pipe targets, including 10 known mineralised pipes, in northern
Arizona and also secured access to U1’s Ticaboo Mill in Utah for ore developed on JV proper5es.

The Mining Venture Agreement was amended on 15 July 2013 to extend the terms of the agreement to 31
December 2017. Since 31 December 2017, the JVA has not been extended and each party has been reassigned
the assets originally contributed to the joint venture. The Group’s interest in these assets is now held within its
wholly owned subsidiary, VANE Minerals (US) LLC.

The aggregate amounts related to the joint opera5on included within the consolidated accounts are:

Net assets
Expenses

2018
US$’000

–
(3)

2017
US$’000

15
(4)

56

Annual Report and Financial Statements for the year ended 31 December 2018

Notes to the Financial Statements
con5nued

21. Trade and Other Receivables

Trade receivables
VAT recoverable
Tax recoverable
Other receivables
Prepayments & accrued income

Group

2018
US$’000

2017
US$’000

Company

2018
US$’000

2017
US$’000

–
28
48
267
83

426

246
55
92
107
83

583

–
17
–
195
52

264

–
23
–
–
58

81

At 31 December 2018, other receivables include the sum of US$0.2 million in respect of a loan made to Magellan,
which is non-interest bearing and is due for repayment when Magellan recovers indirect tax incurred in Mexico
upon acquisi5on of the Group’s ore processing mill in the year ended 31 December 2017. The Directors an5cipate
that the loan will be repaid within 12 months, and was made to facilitate comple5on of the sale of its Mexico
assets.

The Directors consider that the carrying amount of trade and other receivables approximates to their fair value,
and represents the Group’s maximum exposure to credit risk.

Receivables disclosed above do not include any amounts which are past due or impaired, and the Group has not
recognised a loss in profit or loss in respect of expected credit losses for the year ended 31 December 2018.

22. Cash and Cash Equivalents

Cash and cash equivalents held by the Group and the Company as at 31 December 2018 were US$0.6 million and
US$0.6 million respec5vely (2017: US$2.2 million, US$2.2 million). The Directors consider that the carrying amount
of these assets approximate to their fair value.

23. Trade and Other Payables

Trade payables
Taxes and social security
Other payables
Accruals

Group

2018
US$’000

2017
US$’000

Company

2018
US$’000

2017
US$’000

160
22
116
89

387

141
30
82
331

584

39
22
–
87

148

43
31
–
101

175

Trade payables and accruals principally comprise amounts outstanding for trade purchases and on-going costs.

At 31 December 2018, other payables (2017: included within accruals, US$0.1 million) represents the poten5al
liability due to the German licencing authori5es in respect of the relinquished hydrocarbon licences in south-
western Germany. The Group has con5nued to recognise the remaining poten5al liability although it con5nues
to nego5ate further reduc5ons with the German licencing authori5es.

No interest is generally charged on balances outstanding.

The Group has financial risk management policies to ensure that all payables are paid within the credit 5me frame.

The Directors consider that the carrying amount of trade and other payables approximates to their fair value.

Annual Report and Financial Statements for the year ended 31 December 2018

57

Rose
Petroleum plc

Notes to the Financial Statements
con5nued

24. Deferred Tax

There are unrecognised deferred tax assets in rela5on to:

UK tax losses
U.S.A. tax losses
Mexican tax losses

2018
US$’000

5,178
16,367
511

22,056

2017
US$’000

5,398
18,189
332

23,919

A reduc5on in the UK corpora5on tax rate from 21% to 20% (effec5ve from 1 April 2015) was substan5vely enacted
on 2 July 2013. Further reduc5ons to 19% (effec5ve from 1 April 2017) and to 18% (effec5ve 1 April 2020) were
substan5vely enacted on 26 October 2015, and an addi5onal reduc5on to 17% (effec5ve 1 April 2020) was
substan5vely enacted on 6 September 2016. This will reduce the Group’s future current tax charge accordingly.

25. Provisions

At 1 January
Discon5nued opera5ons
Foreign exchange

At 31 December

Current provision

Group
decommissioning

2018
US$’000

2017
US$’000

–
–
–

–

–

110
(120)
10

–

–

In accordance with the Group’s environmental policy and applicable legal requirements, the Group expects to
restore sites where it has carried on ac5vi5es, following final conclusion of those ac5vi5es.

As a result of the disposal of the Group’s ore processing mill the Group no longer has any obliga5on in respect of
decommissioning costs. See note 15.

Under the terms of the revised agreement with RSOC, the Group no longer has any restora5on obliga5ons in
respect of its O&G assets. See note 17.

58

Annual Report and Financial Statements for the year ended 31 December 2018

Notes to the Financial Statements
con5nued

26. Share Capital

Authorised
Ordinary Shares of 0.1p each
Deferred Shares of 9.9p each

Allo1ed, issued and fully paid
Ordinary Shares of 0.1p each
Deferred Shares of 9.9p each

Group and Company

2018

Number
‘000

7,779,297
227,753

8,007,050

143,414
227,753

371,167

US$’000

9,926
28,768

38,694

199
40,305

40,504

2017

Number
‘000

7,779,297
227,753

8,007,050

112,645
227,753

340,398

US$’000

10,514
30,473

40,987

158
40,305

40,463

The Deferred Shares are not listed on AIM, do not give the holders any right to receive no5ce of, or to a6end or
vote at, any general mee5ngs, have no en5tlement to receive a dividend or other distribu5on or any en5tlement
to receive a repayment of nominal amount paid up on a return of assets on a winding up nor to receive or
par5cipate in any property or assets of the Company. The Company may, at its op5on, at any 5me redeem all of
the Deferred Shares then in issue at a price not exceeding £0.01 from all Shareholders upon giving not less than
28 days’ no5ce in wri5ng.

On 18 September 2017, the Company consolidated every 100 Ordinary Shares at 0.1p each into one ‘consolidated
share’. Immediately following the consolida5on each ‘consolidated’ share was sub-divided into one New Ordinary
Share and one New Deferred Share. The sub-division was structured in such a way that each of the New Ordinary
Shares retained the nominal value of 0.1p each. The New Ordinary and New Deferred Shares have the same rights
as the exis5ng Ordinary and Deferred shares.

Issued Ordinary Share Capital
On 28 September 2017, the Company issued 60,000,000 Ordinary Shares of 0.1p each at a price of 4p per share,
raising gross proceeds of US$3.2 million (£2.4 million).

On 10 October 2017, the Company issued 15,000,000 Ordinary Shares of 0.1p each at a price of 4p per share,
raising gross proceeds of US$0.8 million (£0.6 million).

On 10 May 2018, the Company issued 11,264,000 Ordinary Shares of 0.1p each at a price of 3.25p per share,
raising gross proceeds of US$0.5 million (£0.4 million).

On 22 May 2018, the Company issued 19,505,231 Ordinary Shares of 0.1p each at a price of 3.25p per share,
raising gross proceeds of US$0.8 million (£0.6 million).

At 1 January 2017

Share consolida5on
Allotment of shares

At 1 January 2018
Allotment of shares

At 31 December 2018

Ordinary Shares
Number
‘000

Deferred Shares
Number
‘000

3,764,471

37,645
75,000

112,645
30,769

143,414

190,108

37,645
–

227,753
–

227,753

Annual Report and Financial Statements for the year ended 31 December 2018

59

Rose
Petroleum plc

Notes to the Financial Statements
con5nued

27. Warrant Reserve

In May 2018, the Company issued 30,769,231 Ordinary Shares of 0.1 each. See note 26. In addi5on to the placing
shares, subscribers were issued warrants to subscribe for 30,769,231 new Ordinary Shares, represen5ng one
warrant for each placing share. The warrants are exercisable at a price of 6.5p per Ordinary Share for a period of
two years from the date of issue.

The fair value of the subscriber warrants issued during the year has been calculated using the Black-Scholes model.
The significant inputs into the model for the IFRS 2 valua5on were as follows:

Exercise price (pence)
Expected vola5lity (%)
Expected life (years)
Risk free rates (%)
Expected dividends
Performance condi5on

Issued in year
30,769,231
warrants

6.5p
82
2
0.74-0.76
–
None

Expected vola5lity was calculated considering Rose Petroleum plc share price movements over a period
commensurate with the expected term immediately prior to the grant date.

The fair value of the warrants granted to subscribers during the year was US$0.3 million (2017: nil), and this has
been recognised out of gross proceeds as a warrant reserve within equity.

28. Reserves

The share premium account represents the sum paid, in excess of the nominal value, of shares allo6ed, net of the
costs of issue.

The warrant reserve represents accumulated charges made in respect of the issue of warrants to Shareholders.
See note 27.

The share-based payment reserve represents accumulated charges made under IFRS 2 in respect of share-based
payments.

The cumula5ve transla5on reserve represents foreign exchange differences arising on the transla5on of foreign
opera5ons and any net gain/(loss) on the hedge of net investment in foreign subsidiaries. The cumula5ve
transla5on reserve also represents the net effect of the fact that the func5onal currency of the parent undertaking
is GBP, whilst its repor5ng currency is US$, resul5ng in exchange differences on transla5on of the parent
undertakings equity.

The retained deficit includes all current and prior period retained losses.

60

Annual Report and Financial Statements for the year ended 31 December 2018

Notes to the Financial Statements
con5nued

29. Share-Based Payments

Equity Se1led Share Op0on Plan
The Company has a Share Op5on Plan, 2013 Share Op5on Plan Part A (employees) and 2013 Share Op5on Plan
Part B (non-employees), under which op5ons to subscribe for the Company’s shares have been granted to certain
Directors and to selected employees and consultants.

On 24 March 2017, the Company issued 2.45 million share op5ons with an exercise price of 14p per Ordinary
Share, which vest in three equal tranches on 24 March 2018, 2019 and 2020.

On 6 April 2018, the Company issued 7.9 million share op5ons with an exercise price of 3.5p per Ordinary Share,
which vest in three equal tranches on 6 April 2019, 2020 and 2021. The op5ons can be exercised up un5l the
tenth anniversary of the grant date.

At 31 December 2018, 11.3 million share op5ons had been granted under the terms of the Share Op5on Plans and
not exercised.

The Company has no legal or construc5ve obliga5on to repurchase or se6le the op5ons in cash. The latest date
for exercise of the op5ons is 24 March 2028 and, unless otherwise agreed, the op5ons are forfeited if the
employee or consultant leaves the Group before the op5ons vest, or if those op5ons which have vested are not
exercised within three months of leaving.

Details of the share op5ons outstanding at the end of the year were as follow:

Outstanding at 1 January
Granted
Forfeited/cancelled
Outstanding at 31 December
Exercisable at 31 December

Number
of op0ons
‘000

3,799
7,900
(432)
11,267
1,967

2018

Weighted
average exercise
price

2017

Number of
op0ons
‘000

Weighted
average exercise
price

189.0p
3.5p
60.65p
25.75p
120.82p

1,308
2,450
41
3,799
1,299

184.3p
14.0p
319.0p
76.0p
189.0p

The op5ons outstanding and not yet vested at 31 December 2018 had an es5mated weighted average remaining
contractual life of 1.17 years (2017: 1.23 years), with an exercise price ranging between 3.25p and 14p.

The fair value of the op5ons issued during the year has been calculated using the Black-Scholes model. The
significant inputs into the model for the IFRS 2 valua5on were as follows:

Exercise price (pence)
Expected vola5lity (%)
Expected life (years)
Risk free rates (%)
Expected dividends
Performance condi5on

Grants in year
7,900,000
Share op0ons

3.5p
98-103
5.5-6.5
1.12-1.2
–
None

Expected vola5lity was calculated considering Rose Petroleum plc share price movements over a period
commensurate with the expected term immediately prior to the grant date.

The fair value of the op5ons granted during the year was US$0.2 million (2017: US$0.2 million).

Annual Report and Financial Statements for the year ended 31 December 2018

61

Rose
Petroleum plc

Notes to the Financial Statements
con5nued

29. Share-Based Payments con5nued

In the year ended 31 December 2018, the Company recognised a total expense of US$0.2 million (2017: US$0.3
million) in respect of the Share Op5on Plan.

Share-Based Compensa0on
Under the terms of a contract of employment the Company agreed to issue Ordinary Shares in the Company to
a Director in return for services provided. The fair value of the services provided can be measured directly, and
accordingly, an expense of US$0.05 million was recognised in full in the year ended 31 December 2015.

Warrants
On 18 September 2017, the Company issued 3,625,000 warrants to TPI, in respect of broker services provided by
them in rela5on to the placing of the Company’s shares. The warrants permit the holder to subscribe for one new
Ordinary Share at a price of 7.125 pence per share and are exercisable at any 5me un5l 18 September 2020. The
fair value of the services provided to the Company can be measured directly and, therefore, the fair value of the
warrants issued during the year to TPI has been made with reference to the terms of the agreement which stated
that the number of warrants issued should be based on 5 per cent of the equity proceeds raised by TPI.

On 22 May 2018, the Company issued 1,538,461 warrants to TPI, in respect of broker services provided by them
in rela5on to the placing of the Company’s shares. The warrants permit the holder to subscribe for one new
Ordinary Share at a price of 6.5 pence per share and are exercisable at any 5me un5l 22 May 2020. The fair value
of the services provided to the Company can be measured directly and, therefore, the fair value of the warrants
issued during the year to TPI has been made with reference to the terms of the agreement which stated that the
number of warrants issued should be based on 5 per cent of the equity proceeds raised by TPI.

The fair value of the warrants issued during the year was US$0.06 million (2017: US$ 0.2 million). In accordance
with the Group’s accoun5ng policy, the costs of an equity transac5on are accounted for as a deduc5on from
equity to the extent that they are incremental costs directly a6ributable to the equity transac5on that would
otherwise have been avoided. As a result, there is no impact on the Group’s income statement during the year
ended 31 December 2018.

Details of the warrants included in share-based payments and outstanding at the end of the year were as follow:

At 1 January 2017

At 1 January 2017 share consolida5on (see note 26)
Granted

At 1 January 2018
Granted

At 31 December 2018

Number of
warrants

42,857,142

428,571
3,625,000

4,053,571
1,538,461

5,592,032

62

Annual Report and Financial Statements for the year ended 31 December 2018

Notes to the Financial Statements
con5nued

30. Commitments Under Opera0ng Leases

The Group has entered into commercial leases on certain proper5es. The future minimum rentals payable under
non-cancellable opera5ng leases are as follows:

Land and buildings
Amounts due within one year
Amounts due in 2-5 years

Group

2018
US$’000

2017
US$’000

Company

2018
US$’000

2017
US$’000

23
46

69

24
73

97

23
46

69

24
73

97

None of the opera5ng leases above have any con5ngency rent, renewal or purchases op5ons, escala5on clauses
nor have any restric5ons rela5ng to addi5onal debt or further leasing.

31. Financial Instruments

Financial Risk Management Objec0ves
Management provides services to the business, co-ordinates access to domes5c and interna5onal financial
markets and monitors and manages the financial risks rela5ng to the opera5ons of the Group. These risks include
foreign currency risk, credit risk, liquidity risk and cash flow interest rate risk.

The policies for managing these risks are regularly reviewed and agreed by the Board.

The Group does not enter into or trade financial instruments, including deriva5ve financial instruments, for
specula5ve purposes.

Capital Risk Management
The Group manages its capital to ensure that en55es in the Group will be able to con5nue as going concerns, while
maximising the return to Shareholders through the op5misa5on of the debt and equity balance. The Group’s
overall strategy remains unchanged from 2017.

The capital structure of the Group consists of cash and cash equivalents and equity a6ributable to equity holders
of the parent, comprising issued capital, reserves and retained earnings.

The Group is not subject to externally imposed capital requirements.

The Group plans its capital requirements on a regular basis and as part of this review the Directors consider the
cost of capital and the risks associated with each class of capital.

Significant Accoun0ng Policies
Details of the significant accoun5ng policies and methods adopted, including the criteria for recogni5on, the basis
of measurement, the basis on which income and expenses are recognised, in respect of each class of financial
asset, financial liability and equity instrument are disclosed in note 3.

Annual Report and Financial Statements for the year ended 31 December 2018

63

Rose
Petroleum plc

Notes to the Financial Statements
con5nued

31. Financial Instruments con5nued

Categories of Financial Instruments

Financial assets measured at amor0sed cost
Cash and cash equivalents
Trade receivables
Other receivables
Loans to subsidiary undertakings

Financial assets measured at fair value
Investments
Hierarchy, Level 1

Financial liabili0es measured at amor0sed cost
Trade payables
Other payables

Group

2018
US$’000

2017
US$’000

616
–
267
–

883

2,185
246
107
–

2,538

Group

2018
US$’000

2017
US$’000

2018
US$’000

598
–
195
13,024

13,817

2018
US$’000

Company

Company

2017
US$’000

2,156
–
–
18,250

20,406

2017
US$’000

464

500

200

500

Group

2018
US$’000

2017
US$’000

Company

2018
US$’000

2017
US$’000

160
116

276

141
82

223

39
–

39

43
–

55

Fair Value of Financial Instruments
The Directors consider that the carrying amount of its financial instruments approximates to their fair value.

Foreign Exchange Risk and Foreign Currency Risk Management
The Group undertakes certain transac5ons denominated in foreign currencies, with the result that exposure to
exchange rate fluctua5ons arise.

The Group does not normally hedge against the effects of movements in exchange rates. The Group policy is not
to repatriate any currency where there is the requirement or obliga5on to spend in the same denomina5on.
When foreign exchange is required the Group purchases using the best spot rate available. As a result, there is
limited currency risk within the Group other than cash and cash equivalents whose func5onal currency is different
to presenta5on currency.

The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabili5es at
the repor5ng date are as follows:

GBP

Liabili0es

Assets

2018
US$’000

116

2017
US$’000

–

2018
US$’000

354

2017
US$’000

1,266

64

Annual Report and Financial Statements for the year ended 31 December 2018

Notes to the Financial Statements
con5nued

31. Financial Instruments con5nued

Foreign currency sensi0vity analysis
The func5onal currencies of the Group are Pound Sterling (GBP), US dollars (US$), Euro (EUR) and Mexican Peso
(MXN). The financial statements of the Group’s foreign subsidiaries are denominated in foreign currencies.

The Group is exposed primarily to movements in US$ in respect of foreign currency risk arising from recognised
assets.

Sensi5vity analysis has been performed to indicate how the profit or loss would have been affected by changes
in the exchange rate between GBP and US$. The analysis is based on the weakening and strengthening of US$ by
five per cent. A movement of five per cent reflects a reasonably posi5ve sensi5vity when compared to historical
movements over a three to five-year 5meframe. The sensi5vity analysis includes only outstanding foreign currency
denominated monetary items and adjusts their transla5on at the period end for a five per cent change in foreign
currency rates.

The table below details the Group’s sensi5vity to a five per cent decrease in US$ against GBP. A posi5ve number
below indicates an increase in profit where US$ strengthens five per cent against GBP. For a five per cent
weakening of US$ there would be an equal and opposite impact on the profit, and the balance below would be
nega5ve.

Income statement

2018
US$’000

(988)

2017
US$’000

879

Interest Rate Risk Management
The Group’s policy on interest rate management is agreed at Board level and is reviewed on an on-going basis.

The Group has no substan5al exposure to fluctua5ng interest rates on its liabili5es. The Group has no liabili5es
which a6ract interest charges at 31 December 2018.

Liquidity Risk Management
Ul5mate responsibility for liquidity risk management rests with the Board of Directors, which has built an
appropriate liquidity risk management framework for the management of the Group’s short, medium and long-
term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate
cash reserves and by con5nuously monitoring forecast and actual cash flow.

Credit Risk Management
Credit risk refers to the risk that a counterparty will default on its contractual obliga5ons resul5ng in financial
loss to the Group. The Group does not have any significant credit risk exposure on trade and other receivables.

The Group has adopted a life5me expected loss allowance in es5ma5ng expected credit losses to trade receivables
through the use of a provisions matrix using fixed rates of credit loss provisioning. These provisions are considered
representa5ve across all customers of the Group based on recent sales experience, historical collec5on rates and
forward-looking informa5on that is available. Generally, trade receivables are wri6en off when there is no
reasonable expecta5on of recovery. Indicators of this include the failure of a debtor to engage in a repayment plan
and a failure to make contractual payments for a period greater than one year.

Annual Report and Financial Statements for the year ended 31 December 2018

65

Rose
Petroleum plc

Notes to the Financial Statements
con5nued

31. Financial Instruments con5nued

The maximum exposure to credit risk at the repor5ng date to recognised financial assets is the carrying amount,
net of any provisions for impairment of those assets. The Group does not hold any collateral.

Generally, financial assets are wri6en off when there is no reasonable expecta5on of recovery.

The credit risk on liquid funds (cash) is considered to be limited because the counterpar5es are financial
ins5tu5ons with high and good credit ra5ngs assigned by interna5onal credit-ra5ng agencies.

32. Related Party Transac0ons

Amounts due from subsidiaries
Group
Balances and transac5ons between the Company and its subsidiaries which are related par5es, have been
eliminated on consolida5on and are not disclosed in this note.

Company
The Company has entered into a number of unsecured related party transac5ons with subsidiary undertakings.
The most significant transac5ons carried out between the Company and their subsidiary undertakings are
management charges for services provided to the subsidiary company and long-term financing. Details of these
transac5ons are as follows:

Loans
Management charges
Interest (1.5% to 1.75%)
Capital contribu5on

2018

2017

Transac0ons
in the year
US$’000

1,164
749
685
(197)

Amounts
owing
US$’000

32,956
4,309
4,989
957

Transac0ons
in the year
US$’000

1,050
723
500
254

Amounts
owing
US$’000

33,675
3,806
4,591
1,223

Remunera0on of Key Management Personnel
The remunera5on of key management personnel of the Group is set out below in aggregate for each of the
categories specified in IAS 24 Related Party Disclosures.

Short-term employee benefits
Consultancy payments
Post-employment benefits
Share-based payments

2018

2017

Purchase
of services
US$’000

Amounts
owing
US$’000

Purchase
of services
US$’000

Amounts
owing
US$’000

444
54
34
107

639

–
6
2
–

8

447
16
57
274

794

–
1
11
–

12

The amounts outstanding are unsecured and will be se6led in cash. No guarantees have been given or received.

All transac5ons with related par5es have been conducted on an arm’s length basis.

66

Annual Report and Financial Statements for the year ended 31 December 2018

Notes to the Financial Statements
con5nued

32. Related Party Transac0ons con5nued

Directors’ Emoluments
Remunera5on paid to Directors during the year was as follows:

Execu0ve Directors

MC Idiens
KB Sco6
CJ Eadie

Non-execu0ve Directors

PE Jeffcock

Emoluments
en0tlement
US$’000

Emoluments1
taken
US$’000

Consultancy
US$’000

Pension
US$’000

Total
US$’000

2018

200
13
136

34

383

208
13
143

34

398

–
54
–

–

54

20
–
14

–

34

228
67
157

34

486

1 Emoluments include benefits-in-kind which are not included in emoluments en5tlement

Execu0ve Directors

MC Idiens
KK He%on
KB Sco6
CJ Eadie

Non-execu0ve Directors

PE Jeffcock

Emoluments
en0tlement
US$’000

2017

Emoluments1
taken
US$’000

Pension
US$’000

Total
US$’000

193
542
16
118

24

405

200
54
16
124

24

418

46
2
–
9

–

57

246
56
16
133

24

475

1 Emoluments include benefits-in-kind which are not included in emoluments en5tlement
2 Emolument to the date of resigna5on on 1 July 2017

The remunera5on of Directors and key execu5ves is decided by the remunera5on commi6ee having regard to
comparable market sta5s5cs.

Directors’ share op5ons are detailed in the Directors Report.

Directors’ pensions

The number of Directors to whom re5rement benefits are accruing
under money purchase schemes was

2018
No.

3

2017
No.

2

33. Post Balance Sheet Events

Equity Fundraise
On 24 May 2019, the Company raised gross proceeds of US$0.4 million (£0.3 million) by way of a placing of
25 million Ordinary Shares of 0.1p each at a price of 1.2 pence per share.

Annual Report and Financial Statements for the year ended 31 December 2018

67

Rose
Petroleum plc

No5ce of Annual General Mee5ng

NOTICE IS HEREBY GIVEN that the Annual General Mee5ng of Rose Petroleum plc (“Company”) will be held at the
offices of Allenby Capital Limited, 5 St Helen’s Place, London EC3A 6AB on 30 July 2019 at 12 noon to consider and,
if thought fit, pass the following resolu5ons (“Resolu0ons” and each a “Resolu0on”), of which Resolu5ons 1 to
7 (inclusive) will be proposed as ordinary resolu5ons and Resolu5on 8 will be proposed as a special resolu5on.

Ordinary Resolu0ons

1.

2.

3.

4.

5.

6.

7.

To receive and adopt the annual report and accounts for the year ended 31 December 2018, together with
the reports of the Directors and the auditor thereon.

To re-elect Mr Ma6hew Charles Idiens, who re5res by rota5on, as a Director.

To re-elect Mr John Colin Harrington as a Director.

To re-elect Mr Thomas Hamilton Reynolds as a Director.

To re-elect Mr Richard Lee Grant as a Director.

To re-appoint RSM UK Audit LLP as auditor to act as such un5l the conclusion of the next annual general
mee5ng of the Company at which the requirements of sec5on 437 of the Companies Act 2006 (“CA 2006”)
are complied with and to authorise the Directors of the Company to fix its remunera5on.

That the Directors be generally and uncondi5onally authorised in accordance with sec5on 551 of the CA
2006 to issue and allot ordinary shares of 0.1 pence each in the share capital of the Company (“Ordinary
Shares”) or grant rights to subscribe for or to convert any security into shares in the Company (together
“Rights”) up to a maximum nominal amount of £84,206.97 (represen5ng approximately 50 per cent. of the
issued share capital of the Company), to such persons at such 5mes and on such terms as they think proper,
provided that this authority shall, unless renewed, varied or revoked by the Company in general mee5ng,
expire on the date falling 15 months from the date of the passing of this Resolu5on, or if earlier, at the
conclusion of the annual general mee5ng of the Company in 2020, save that the Company may at any 5me
before such expiry make an offer or agreement which might require Ordinary Shares to be allo6ed or Rights
to be granted a%er such expiry and the Directors may allot Ordinary Shares or grant Rights in pursuance of
such offer or agreement notwithstanding that the authority hereby conferred has expired. This authority is
in subs5tu5on for all previous authori5es conferred on the Directors in accordance with sec5on 551 of the
CA 2006.

Special Resolu0on

8.

That, subject to and condi5onal upon the passing of Resolu5on 7 above, the Directors be generally
empowered pursuant to sec5on 570 of the CA 2006 to allot equity securi5es (as defined in sec5on 560 of the
CA 2006) for cash as if sec5on 561(1) of the CA 2006 did not apply to any such allotment pursuant to the
general authority conferred on them by Resolu5on 7 above (as varied from 5me to 5me by the Company in
general mee5ng) PROVIDED THAT such power shall be limited to:-

(a)

the allotment of equity securi5es in connec5on with a rights issue or any other offer to holders of
Ordinary Shares in propor5on (as nearly as may be prac5cable) to their respec5ve holdings and to
holders of other equity securi5es as required by the rights of those securi5es or as the Directors
otherwise consider necessary, but subject to such exclusions or other arrangements as the Directors may
deem necessary or expedient in rela5on to treasury shares, frac5onal en5tlements, record dates, legal
or prac5cal problems in or under the laws of any territory or the requirements of any regulatory body
or stock exchange in any territory;

68

Annual Report and Financial Statements for the year ended 31 December 2018

No5ce of Annual General Mee5ng
con5nued

(b)

(c)

the allotment of equity securi5es pursuant to the terms of any share schemes for Directors and
employees of the Company or any of its subsidiaries; and

the allotment otherwise than pursuant to sub paragraph (a) to (b) (inclusive) above of equity securi5es
up to an aggregate nominal amount of £33,682.78 represen5ng approximately 20 per cent of the issued
share capital of the Company,

and the power hereby conferred shall operate in subs5tu5on for and to the exclusion of any previous power
given to the Directors pursuant to sec5on 570 of the CA 2006 and shall expire on whichever is the earlier of
the conclusion of the annual general mee5ng of the Company in 2020 or the date falling 15 months from the
date of the passing of this Resolu5on (unless renewed varied or revoked by the Company prior to or on that
date) save that the Company may before such expiry make an offer or agreement which would or might
require equity securi5es to be allo6ed a%er such expiry and the Directors may allot equity securi5es in
pursuance of such offer or agreement notwithstanding that the power conferred by this Resolu5on has
expired.

Registered Office

20- 22 Wenlock Road
London
N1 7GU

On behalf of the Board

CJ Eadie
Chief Financial Officer

Annual Report and Financial Statements for the year ended 31 December 2018

69

Rose
Petroleum plc

No5ce of Annual General Mee5ng
con5nued

Notes:
En0tlement to a1end and vote
1

Only those members registered on the Company’s register of members at:

•

•

close of business on 26 July 2019; or,

if this annual general mee5ng is adjourned, as at close of business on the day two days prior to the adjourned
mee5ng,

shall be en5tled to a6end and vote at the annual general mee5ng.

Appointment of proxies
2

A member is en5tled to a6end, speak and vote at the above mee5ng and is en5tled to appoint one or more proxies to
a6end, speak and vote in his stead. A proxy need not be a member of the Company. You can only appoint a proxy using
the procedures set out in these notes and the notes to the proxy form. If you wish your proxy to speak on your behalf
at the annual general mee5ng you will need to appoint your own choice of proxy (not the Chairman) and give your
instruc5ons directly to them.

3

4

5

6

7

8

9

10

You may appoint more than one proxy provided each proxy is appointed to exercise rights a6ached to different shares.
You may not appoint more than one proxy to exercise rights a6ached to any one share. To appoint more than one proxy,
each different proxy appointment form must be received by Link Asset Services, The Registry, 34 Beckenham Road,
Beckenham, Kent BR3 4TU not less than 48 hours before the 5me appointed for the mee5ng.

A vote withheld is not a vote in law which means that the vote will not be counted in the calcula5on of votes for or
against the Resolu5on. If no vo5ng indica5on is given, your proxy will vote or abstain from vo5ng at his or her discre5on.
Your proxy will vote (or abstain from vo5ng) as he or she thinks fit in rela5on to any other ma6er which is put before the
annual general mee5ng.

A prepaid form of proxy is enclosed. To be valid any form of proxy and power of a6orney or other authority under which
it is signed or a notarially cer5fied or office copy of such power of authority must be lodged with the Company’s Registrars:
Link Asset Services, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU so as to be received not less than 48
hours before the 5me appointed for the mee5ng or any adjourned mee5ng.

CREST members who wish to appoint a proxy or proxies by u5lising the CREST electronic proxy appointment service may
do so for the annual general mee5ng and any adjournment(s) thereof by u5lising the procedures described in the CREST
manual. CREST personal members or other CREST sponsored members, and those CREST members who have appointed
a vo5ng service provider(s), should refer to their CREST sponsor or vo5ng service provider(s), who will be able to take
the appropriate ac5on on their behalf.

In order for a proxy appointment made by means of CREST to be valid, the appropriate CREST message (a CREST Proxy
Instruc5on) must be properly authen5cated in accordance with Euroclear UK & Ireland Limited’s (EUI) specifica5ons and
must contain the informa5on required for such instruc5ons, as described in the CREST manual. The message must be
transmi6ed so as to be received by the issuer’s agent (Link Asset Services, ID RA10) not less than 48 hours before the 5me
appointed for the mee5ng. For this purpose, the 5me of receipt will be taken to be the 5me (as determined by the
5mestamp applied to the message by the CREST applica5ons host) from which the issuer’s agent is able to retrieve the
message by enquiry to CREST in the manner prescribed by CREST.

CREST members and, where applicable, their CREST sponsors or vo5ng service providers should note that EUI does not
make available special procedures in CREST for any par5cular messages. Normal system 5mings and limita5ons will
therefore apply in rela5on to the input of CREST proxy instruc5ons. It is the responsibility of the CREST member concerned
to take (or, if the CREST member is a CREST personal member or sponsored member or has appointed a vo5ng service
provider(s), to procure that his CREST sponsor or vo5ng service provider(s) take(s)) such ac5on as shall be necessary to
ensure that a message is transmi6ed by means of the CREST system by any par5cular 5me. In this connec5on, CREST
members and, where applicable, their CREST sponsors or vo5ng service providers are referred, in par5cular, to those
sec5ons of the CREST manual concerning prac5cal limita5ons of the CREST system and 5mings.

The Company may treat as invalid a CREST proxy instruc5on in the circumstances set out in Regula5on 35(5)(a) of the
Uncer5ficated Securi5es Regula5ons 2001.

In the case of joint holders, where more than one of the joint holders purports to appoint a proxy, only the appointment
submi6ed by the most senior holder will be accepted. Seniority is determined by the order in which the names of the
joint holders appear in the Company’s register of members in respect of the joint holding (the first-named being the
most senior).

70

Annual Report and Financial Statements for the year ended 31 December 2018

No5ce of Annual General Mee5ng
con5nued

Changing proxy instruc0ons
11

To change your proxy instruc5ons simply submit a new proxy appointment using the methods set out above. Note that
the cut-off 5me for receipt of proxy appointments (see above) also apply in rela5on to amended instruc5ons; any
amended proxy appointment received a%er the relevant cut-off 5me will be disregarded.

12 Where you have appointed a proxy using the hard-copy proxy form and would like to change the instruc5ons using
another hard-copy proxy form, please contact Link Asset Services on 0871 664 0300 in the UK (Calls cost 12p per minute
plus your phone company’s access charge). If calling from overseas please call +44 (0) 371 664 0300 between 9.00 a.m.
– 5:30 p.m., Monday to Friday excluding public holidays in England and Wales. Calls outside the United Kingdom will be
charged at the applicable interna5onal rate.

13

If you submit more than one valid proxy appointment, the appointment received last before the latest 5me for the
receipt of proxies will take precedence.

Termina0on of proxy appointments
14

In order to revoke a proxy instruc5on, you will need to inform the Company by sending a signed hard copy no5ce clearly
sta5ng your inten5on to revoke your proxy appointment to Link Asset Services, The Registry, 34 Beckenham Road,
Beckenham, Kent BR3 4TU. In the case of a member which is a company, the revoca5on no5ce must be executed under
its common seal or signed on its behalf by an officer of the Company or an a6orney for the Company. Any power of
a6orney or any other authority under which the revoca5on no5ce is signed (or a duly cer5fied copy of such power or
authority) must be included with the revoca5on no5ce. The revoca5on no5ce must be received by Link Asset Services,
The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU no later than 48 hours prior to the mee5ng.

15

16

If you a6empt to revoke your proxy appointment but the revoca5on is received a%er the 5me specified then, subject to
the paragraph directly below, your proxy appointment will remain valid.

Appointment of a proxy does not preclude you from a6ending the annual general mee5ng and vo5ng in person. If you
have appointed a proxy and a6end the annual general mee5ng in person, your proxy appointment will automa5cally be
terminated.

Corporate representa0ves
17

A corpora5on which is a member can appoint one or more corporate representa5ves who may exercise, on its behalf,
all its powers as a member provided that no more than one corporate representa5ve exercises powers over the same
share.

Issued shares and total vo0ng rights
18

As at 6:00 p.m. on 25 June 2019, the Company’s issued share capital comprised 168,413,940 Ordinary Shares of 0.1p each.
Each Ordinary Share carries the right to one vote at a general mee5ng of the Company and, therefore, the total number
of vo5ng rights in the Company as at 6:00 p.m. on 25 June 2019 is 168,413,940.

Communica0on
Except as provided above, members who have general queries about the annual general mee5ng should contact the Company
Secretary at Rose Petroleum plc, 20-22 Wenlock Road, London N1 7GU or on +44 (0) 207 225 4590 (no other methods of
communica5on will be accepted). You may not use any electronic address provided either:

•

•

in this no5ce of annual general mee5ng; or

any related documents (including the Chairman’s le6er and proxy form),

to communicate with the Company for any purposes other than those expressly stated.

Annual Report and Financial Statements for the year ended 31 December 2018

71

Rose
Petroleum plc

No5ce of Annual General Mee5ng
con5nued

Appendix 1
Explanatory Notes to the No0ce of Annual General Mee0ng
The notes on the following pages give an explana5on of the proposed Resolu5ons.

Resolu5ons 1 to 7 are proposed as ordinary resolu5ons. This means that for each of those Resolu5ons to be passed, more than
half of the votes cast in person or by proxy must be in favour of the Resolu5on. Resolu5on 8 is proposed as a special resolu5on.
This means that for this Resolu5on to be passed, at least three-quarters of the votes cast must be in favour of the Resolu5on.

Resolu0on 1
This Resolu5on is to receive and adopt the Directors’ reports and accounts for the year ended 31 December 2018, which
accompany this document.

Resolu0ons 2 to 5
Mr Ma6hew Charles Idiens is re5ring as a Director by rota5on at the annual general mee5ng in accordance with the provisions
of the Company’s ar5cles of associa5on and is standing for re-appointment.

Mr John Colin Harrington, Mr Thomas Hamilton Reynolds and Mr Richard Lee Grant are also re5ring as Directors at the annual
general mee5ng and are each standing for re-appointment.

If each of these Resolu5ons are separately passed, the respec5ve individual will be re-appointed as a Director of the Company.

Resolu0on 6
This is a Resolu5on to appoint RSM UK Audit LLP as auditor of the Company for the financial year ending 31 December 2019
and to authorise the Directors to fix their remunera5on.

Resolu0on 7
This Resolu5on, if passed, would authorise the Directors to allot Ordinary Shares or grant Rights to subscribe for or convert
any securi5es into Ordinary Shares up to an aggregate nominal amount of £84,206.97, represen5ng approximately 50 per
cent of the current issued share capital.

The authority being sought in Resolu5on 7 replaces the authority granted on 21 May 2018.

The authority will expire on the earlier of 15 months from the date the Resolu5on is passed or the conclusion of the Company’s
annual general mee5ng in 2020.

Resolu0on 8
This Resolu5on, which is condi5onal upon Resolu5on 7 being passed, would give the Directors the authority to allot Ordinary
Shares (or sell any Ordinary Shares which the Company elects to hold in treasury) for cash without first offering them to
exis5ng Shareholders in propor5on to their exis5ng shareholding.

This authority would be limited to an aggregate nominal amount of £33,682.78 (represen5ng approximately 20 per cent. of
the issued ordinary share capital of the Company as at 27 June 2019, being the latest prac5cal date prior to the publica5on of
the no5ce of the annual general mee5ng).

As with Resolu5on 7, the authority being sought pursuant to Resolu5on 8, replaces the authority granted on 21 May 2018.

The authority and power pursuant to Resolu5on 8 will expire on the earlier of 15 months from the date of Resolu5on 8 being
passed or the conclusion of the Company’s annual general mee5ng in 2020.

72

Printed by Michael Searle & Son Limited

Annual Report and Financial Statements for the year ended 31 December 2018

Rose
Petroleum plc

Head Office:
First Floor
Newmarket House
Market Street
Newbury
Berkshire
RG14 5DP

www.rosepetroleum.com