Prospex Oil and Gas Plc / Index: AIM / Epic: PXOG / Sector: Oil and Gas
Prospex Oil and Gas Plc ('Prospex' or the 'Company')
2019 Final Results
Prospex Oil and Gas Plc, the AIM quoted investment company, is pleased to announce its audited annual results for the year ended 31 December 2019.
Advancing a portfolio of late stage, onshore European gas projects focused on the foredeep play
Portfolio Overview
· Podere Gallina Exploration Permit, onshore
o Preliminary award of production concession from the Italian Government in January 2019
o Post period end, formal technical environmental approval for the development of Selva from the Italian Environment Ministry
o Awaiting final sign off by Ministerial decree, the issuing of the required INTESA (intergovernmental agreement) and the final grant of a production concession from
o Expect early discussions regarding non equity funding of Prospex's c.
o Updated CPR confirming reserves and additional contingent resources at Selva's North and South flanks provides significant follow-up development opportunities
· EIV-1 Suceava Concession, onshore
o Revenue in line with 2019 budgeting - higher prices offset slightly lower than expected average production of 14,000m3 per day
o Enlargement of Suceava Exploration Concession to 984 sq.km
o Bainet-2 well targeting Bainet West, a lookalike Bainet gas prospect, drilled at all in cost of
o Ongoing evaluation of the concession's gas prospectivity to determine licence extension and next drilling targets
· Tesorillo Gas Project, onshore
o Multiple potential gas traps identified following reprocessing and interpretation of historic 2D seismic data
o Four promising leads identified in the northern half of the concession following integration of new structural maps and cross sections with well reinterpretation and satellite images
o Working towards decision to drill and increase stake to 49.9% from current 15%
· El Romeral, onshore
o Acquisition of 49.9% interest in El Romeral for net consideration of
o Significant potential to increase gas production via two development locations with 5 Bcf of gross contingent resources and 11 prospects with 90 Bcf of gross, unrisked prospective resources with high Chance of Success of >70% (in most cases)
o Power plant currently constrained to operating at c. 22% capacity due to current wells' tail production - offers significant upside potential from future discoveries
Financial Overview
· Total Assets of
· Administrative expenses, slightly down to
·
· Post period end,
o Certain Directors acquired new shares in the Company with an aggregate value of
Edward Dawson, Managing Director of Prospex, said, "The acquisition of a 49.9% interest in a fourth core asset, the integrated El Romeral gas and power project in
"Of course, there is no way of knowing what the true impact will be of the ongoing Covid-19 pandemic on the global economy and how long it will take for societies to recover. Timeframes for the development of certain of our projects may well therefore have to be extended. Since the turn of year Prospex has been in discussions with the various project operators who are adjusting to the current environment and taking a cautious approach to discretionary expenditure. Prospex itself has cut costs to its general and administrative since the start of March. This has been helped by a one third deferment of salaries from April to last during COVID-19 lockdown. Importantly the COVID-19 situation appears to be improving in
"Subject to final award of a production concession, the roadmap to a significant step-up in production and revenues is expected to start with the Selva gas field in
"Once this milestone has been achieved, and following the acquisition of a 49.9% interest in El Romeral, Prospex's portfolio of producing wells will stand at five which, combined, have the potential to produce over 7,800,000 scm net to Prospex in 2021. This in turn would generate material revenues which we would then look to deploy to fund further growth opportunities across our portfolio including the drilling of additional gas wells at El Romeral to bring electricity generation at the power plant closer to its 100% capacity. Together with multiple follow-up targets identified in
* * ENDS * *
For further information visit www.prospexoilandgas.com or contact the following:
Edward Dawson |
Prospex Oil and Gas Plc
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Tel: +44 (0) 20 3948 1619 |
Rory Murphy
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Strand Hanson Limited
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Tel: +44 (0) 20 7409 3494 |
Colin Rowbury Jon Belliss
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Novum Securities Limited |
Tel: +44 (0) 20 7399 9427 |
Duncan Vasey |
Peterhouse Corporate Finance
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Tel: +44 (0) 20 7469 0932 |
Frank Buhagiar Cosima Akerman
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St Brides Partners Ltd
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Tel: +44 (0) 20 7236 1177 |
Chairman's Report
12 months ago, Prospex Oil & Gas had a portfolio of three core onshore European projects; a 50% interest in one producing gas well on the Suceava Concession in
Of course, it is not just Prospex that has undergone substantial change over the last 12 months; the world today is a far different place to what it was a year ago. The global COVID-19 pandemic has led to measures, unprecedented during peacetime, being taken by governments all over the world to stem the spread of the virus. Countries across
In
Post period end in January 2020, a major milestone was achieved with the award of formal technical environmental approval for the development of Selva from the Italian Environment Ministry. Environmental approval is a precursor to final sign off by Ministerial decree, the issuing of the required INTESA (intergovernmental agreement) and the final grant of a production concession from
We, along with our partners in the licence, had hoped that all would be in place to commence production at Selva later this year. The severity of the COVID-19 outbreak in
Once the Selva field is brought into production, there is much more to go for across the licence. In addition, to reserves assigned to the Selva field, a CPR produced by geophysical services consultancy, CGG Services (
Once on stream, Selva is expected to generate free cash that can help fund the exploration and development of targets not just at Podere Gallina but across Prospex's wider portfolio including the recently acquired El Romeral project. Here, the major area of focus is to increase gas production and, in turn, electricity generation. El Romeral is comprised of three production licences on which three wells supply gas to a Project-owned 8.1 MW power station. The plant, which was constructed in 2001-2002 at a cost of c.
The revenues that El Romeral can generate without any further discoveries are of course welcome, but the real attraction of the asset lies in the 5 Bcf gross contingent resources and 90 Bcf gross prospective gas resources that have been identified at two development locations and 11 very-low risk prospects. These provide considerable scope to increase electricity generation at the plant towards its full capacity, which we believe could be achieved with the successful drilling of just one new well. As elsewhere in
Even before any new drilling campaign, the acquisition of a 49.9% interest in El Romeral and its three existing gas wells will lead to a step-up in Prospex's production profile to four producing wells which, once Selva is brought online, will increase to five. We calculate these five wells have the potential to produce over 7,800,000 scm net to Prospex in 2021. We are confident we can build on this considerably thanks to the above development opportunities at Podere Gallina and El Romeral, and also the potential that has been identified at our two remaining projects, Suceava in
In
Despite holding historic discoveries, including the 1957 Almarchal-1 discovery well, the 38,000ha Tesorillo Project in southern
To date results of technical and field activity, which has included reprocessing and interpreting historic 2D seismic data, have increased our confidence about the subsurface geometry of the exploration target - the Aljibe sandstone in the Lowermost Miocene. The results show this consists of several folds and thrust ramps of 3km to 5km length, which could be potential gas traps. In addition, work to integrate new structural maps and cross sections with well reinterpretation and satellite images has led to the identification of four very promising leads in the northern half of the concession. Further studies are required to enable the better imaging of the subsurface, but the initial results have been encouraging. The results of the work programme will inform our decision to take up the option to increase Prospex's interest in Tesorillo from 15% to 49.9%, though this does not have to be made until after a new location is ready for drilling.
In light of volatile markets, specifically the sharp fall in global crude prices seen in recent weeks, it is worth pointing out that all of our projects are gas focused. This is significant as historically gas prices have been less volatile than oil benchmarks, which has proved to be the case in today's markets. The relative outperformance of gas is partly down to the fuel typically being sold to local markets at prices agreed in multi-year contracts, providing a degree of visibility to revenues. In addition, as the cleanest hydrocarbon in terms of carbon emissions when combusted, gas is increasingly viewed as an important transition fuel as the world moves towards net zero emissions. In view of our focus on gas, it is intended that a resolution will be put forward to shareholders at the forthcoming AGM to change the Company's name to Prospex Energy. The Board believes the new name better reflects Prospex's focus on gas production, gas being the European transition fuel of choice, our desire to be increasingly aware of Environmental, Social and Governance issues on behalf of shareholders and, once the transfer of the El Romeral asset has been completed, electricity generation.
Financial Review
The Company is reporting Total Assets of
Unrealised losses arising on revaluation of Investments at fair value totalled
As at the 31 December 2019, the bulk of the Investments is comprised of the Company's investment in PXOG Marshall Ltd, the vehicle for the Company's Italian assets. In determining year end valuations, the Company takes a number of criteria into account at both a macro and micro level. At the macro level
Aside from the nominal cost of equity shares for the Company's Romanian and Spanish investments, which are included in Investments, as at 31 December 2019 the bulk of the carrying value of these assets is represented within loans made by the Company to the respective investment vehicles for the Romanian and Spanish assets and other receivables.
In
As at 31 December 2019, the fair value of the Company's investments stood at
Administrative expenses for the year totalled
The Company is reporting a net loss after taxation from continuing operations of
In March 2019, the Company raised
Outlook
Over the last few years, Prospex has been transformed into a multi-project, asset-backed, gas focused investment company. While not all our onshore European projects currently produce, all hold multiple growth opportunities that have the potential, both individually and collectively, to lead to a step-change in the Company's revenue profile. A number of these opportunities, specifically the development of Selva, are well advanced and low cost. We are keen to realise the underlying potential of our portfolio at the earliest opportunity and we remain confident Selva can be brought online in early 2021, although clearly exact timings will be determined by the course of the COVID-19 pandemic.
We will of course adhere to prevailing government advice to ensure the safety of our employees. This may have an impact on planned field work, however, with multiple projects in our portfolio, there is much deskwork for us to be getting on with such as mapping and de-risking prospectivity and, where appropriate, commencing the permitting process for new drilling activity. Our aim is to ensure that when it is safe to do so, we are in a position to move quickly on multiple fronts to deliver the step-change in our production and revenues that we are targeting, and in the process generate substantial value for our shareholders.
Finally, I would like to take this opportunity to thank the Board and the management team for their continued hard work and support over the course of the year. I look forward to providing further updates on the Company's activities in the year ahead. In the meantime, I wish all our shareholders and stakeholders well during these unprecedented times.
Bill Smith
Non-executive Chairman
21 May 2020
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Statement of Profit or Loss and Other Comprehensive Income |
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for the year ended 31 December 2019 |
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2019 |
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2018 |
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£ |
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£ |
CONTINUING OPERATIONS |
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Other operating income |
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198,528 |
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99,729 |
Administrative expenses |
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(1,091,871) |
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(1,103,279) |
OPERATING LOSS |
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(893,343) |
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(1,003,550) |
(Loss)/gain on revaluation of investments |
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(473,925) |
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1,710,418 |
Profit/(loss) on disposal of investment |
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40,462 |
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(8,407) |
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(1,326,806) |
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698,461 |
Finance income |
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76,612 |
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92,283 |
Finance costs |
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(50,475) |
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(10,840) |
(LOSS)/PROFIT BEFORE INCOME TAX |
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(1,300,669) |
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779,904 |
Income tax |
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- |
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- |
(LOSS)/PROFIT AFTER INCOME TAX |
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(1,300,669) |
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779,904 |
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OTHER COMPREHENSIVE INCOME |
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- |
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- |
TOTAL COMPREHENSIVE (LOSS)/PROFIT FOR THE YEAR |
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(1,300,669) |
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779,904 |
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(LOSS)/EARNINGS PER SHARE - BASIC AND DILUTED |
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(0.08p) |
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0.06p |
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Statement of Financial Position |
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31 December 2019 |
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2019 |
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2018 |
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£ |
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£ |
ASSETS |
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NON-CURRENT ASSETS |
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Property, plant and equipment |
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- |
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- |
Investments |
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3,998,388 |
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4,307,617 |
Loans and other financial assets |
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1,048,978 |
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1,013,129 |
Trade and other receivables |
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808,360 |
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897,371 |
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5,855,726 |
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6,218,117 |
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CURRENT ASSETS |
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Trade and other receivables |
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416,777 |
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396,626 |
Cash and cash equivalents |
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69,387 |
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233,138 |
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486,164 |
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629,764 |
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TOTAL ASSETS |
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6,341,890 |
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6,847,881 |
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EQUITY |
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SHAREHOLDERS' EQUITY |
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Called up share capital |
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6,435,587 |
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6,035,587 |
Share premium |
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10,095,358 |
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9,756,759 |
Merger reserve |
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2,416,667 |
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2,416,667 |
Capital redemption reserve |
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43,333 |
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43,333 |
Retained earnings |
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(13,260,713) |
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(11,955,212) |
TOTAL EQUITY |
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5,730,232 |
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6,297,134 |
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LIABILITIES |
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NON-CURRENT LIABILITIES |
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Financial liabilities - borrowings |
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- Interest bearing loans and borrowings |
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386,523 |
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360,000 |
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CURRENT LIABILITIES |
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Trade and other payables |
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96,294 |
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70,747 |
Financial liabilities - borrowings |
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- Interest bearing loans and borrowings |
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128,841 |
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120,000 |
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225,135 |
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190,747 |
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TOTAL LIABILITIES |
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611,658 |
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550,747 |
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TOTAL EQUITY AND LIABILITIES |
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6,341,890 |
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6,847,881 |
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Statements of Changes in Equity |
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for the year ended 31 December 2019 |
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Share capital |
Share premium |
Merger reserve |
Capital redemption reserve |
Retained earnings |
Total |
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£ |
£ |
£ |
£ |
£ |
£ |
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Balance at 1 January 2018 |
5,835,587 |
8,862,779 |
2,416,667 |
43,333 |
(12,735,116) |
4,423,250 |
Changes in equity |
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Profit for the year |
- |
- |
- |
- |
779,904 |
779,904 |
Issue of shares |
200,000 |
1,000,000 |
- |
- |
- |
1,200,000 |
Costs of shares issued |
- |
(106,020) |
- |
- |
- |
(106,020) |
Balance at 31 December 2018 |
6,035,587 |
9,756,759 |
2,416,667 |
43,333 |
(11,955,212) |
6,297,134 |
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Changes in equity |
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Loss for the year |
- |
- |
- |
- |
(1,300,669) |
(1,300,669) |
Issue of shares |
400,000 |
400,000 |
- |
- |
- |
800,000 |
Costs of shares issued |
- |
(66,233) |
- |
- |
- |
(66,233) |
Lapse of share options |
- |
10,142 |
- |
- |
(10,142) |
- |
Equity-settled share based payments |
- |
(5,310) |
- |
- |
5,310 |
- |
Balance at 31 December 2019 |
6,435,587 |
10,095,358 |
2,416,667 |
43,333 |
(13,260,713) |
5,730,232 |
Prospex Oil and Gas Plc |
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Statement of Cash Flows |
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for the year ended 31 December 2019 |
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2019 |
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2018 |
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£ |
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£ |
Cash flows from operations |
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(Loss)/profit before income tax |
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(1,300,669) |
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779,904 |
Depreciation of property, plant and equipment |
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- |
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429 |
Decrease/(increase) in trade and other receivables |
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105,929 |
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(1,057,746) |
Increase/(decrease) in trade and other payables |
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10,436 |
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(1,439) |
(Profit)/loss on sale of investments |
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(40,462) |
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8,407 |
Loss/(gain) on revaluation of fixed asset investments and loans |
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473,925 |
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(1,710,418) |
Finance income |
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(76,612) |
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(92,283) |
Finance costs |
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50,475 |
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10,840 |
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Net cash outflow from operations |
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(776,978) |
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(2,062,306) |
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Cash flows from investing activities |
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Proceeds from sale of investments |
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119,014 |
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67,223 |
Purchase of fixed asset investments |
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- |
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(246,040) |
Interest received |
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- |
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2 |
Dividend received |
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- |
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5,261 |
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Net cash outflow from investing activities |
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119,014 |
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(173,554) |
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Cash flows from financing activities |
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New loan notes |
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- |
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480,000 |
Loan (payment)/repayments |
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(239,554) |
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44,958 |
Share issue |
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800,000 |
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1,200,000 |
Costs of shares issued |
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(66,233) |
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(106,020) |
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Net cash inflow from financing activities |
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494,213 |
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1,618,938 |
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Decrease in cash and cash equivalents |
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(163,751) |
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(616,922) |
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Cash and cash equivalents at beginning of year |
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233,138 |
|
850,060 |
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Cash and cash equivalents at end of year |
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69,387 |
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233,138 |
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Notes to the financial information
Year ended 31 December 2019
1 Basis of preparation and Accounting Policies
Prospex Oil and Gas Plc is a public limited company, is registered in England and Wales and is quoted on the AIM Market of the London Stock Exchange Plc. The Company's registered office address is Stonebridge House, Chelmsford Road, Hatfield Heath, Essex CM22 7BD.
The audited financial information set out in this statement does not constitute the Company's statutory accounts for the years ended 31 December 2019 or 31 December 2018, as defined in section 434 of the Companies Act 2006.
Statutory accounts for 2018 have been delivered to the Registrar of Companies and those for 2019 will be delivered in due course. The Company's auditors, Adler Shine LLP, have reported on the 2019 accounts; their report was unqualified and did not contain statements under s498 (2) or (3) Companies Act 2006. Their report included a statement of material uncertainty relating to going concern, drawing attention to the Going Concern policy below, the reliance on future fund raising to continue the company's activities as budgeted and the significant doubt on the ability to continue as a going concern, should future fund raining be unsuccessful. Their opinion is not modified in this respect. Whilst the financial information included in this announcement has been computed in accordance with International Financial Reporting Standards as adopted by the EU ("IFRS") this announcement does not itself contain sufficient information to comply with IFRS.
The principal accounting policies used in preparing this preliminary results announcement are those that the Company applies in its statutory accounts for the year ended 31 December 2019 and are unchanged from those disclosed in the Company's Annual Report and Accounts for the year ended 31 December 2018 except for the adoption of new standards effective 1 January 2019 relating to IFRS 16 Leases. The adoption of IFRS 16 did not have a material impact on the financial statements.
2 Going concern
The current economic environment is challenging, and the Company has reported an operating loss for the year of
The Company regularly carries out fund-raising exercises in order that it can provide the necessary working capital and investment funds for the Company. Since the year end, the Company has raised
Furthermore, the directors have evaluated the impact to the company in respect of the COVID-19 (Coronavirus) pandemic ongoing at the time of approving these financial statements. The company's investment activities through its subsidiary undertakings take place in countries that have been impacted by the virus. Beyond a short-term energy price drop, mid to long term prices remain only marginally affected. The business has been affected but has been able to transfer office-based activities to a "working from home" in host countries in lock down. Fields activities so far have not been affected but are minimal anyway. The industry by its nature does, and is required to, interface with its regulators; to date regulators in host countries are still engaging, via email. Whilst it remains hard to assess the impact on timelines, the fact that civil servants remain engaged is taken as a positive in a negative environment. Financial markets remain volatile but have settled down from the extremes seen in March and April 2020. The company notes that the COVID-19 situation appears to be improving in Italy and Spain and the UK is a few weeks behind. Whilst market conditions, largely attributed to COVID-19, are currently tough the directors believe the quality and long-term nature of the underlying assets in the subsidiary undertakings will enable further financing as required. As a result, the directors do not consider there to be a material uncertainty to the company's ability to continue as a going concern as a result of COVID-19.
The Directors have prepared detailed financial forecasts and cash flows looking beyond 12 months from the date of the approval of these financial statements. In developing these forecasts, the Directors have made assumptions based upon their view of the current and future economic conditions that are expected to prevail over the forecast period. The Directors estimate that the cash held by the Company together with known receivables will be sufficient to support the current level of activities into the fourth quarter of 2020. The Directors are continuing to explore sources of finance available to the Company and based upon initial discussions with a number of existing and potential investors they have a reasonable expectation that they will be able to secure sufficient cash inflows for the Company to continue its activities for not less than 12 months from the date of approval of these financial statements; they have therefore prepared the financial statements on a going concern basis.
3 (Loss)/earnings per share
The loss and number of shares used in the calculation of earnings per ordinary share are set out below:
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2019 |
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2018 |
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£ |
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£ |
Basic: |
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(Loss)/profit for the financial period |
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(1,300,669) |
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779,904 |
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Weighted average number of shares |
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1,536,880,807 |
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1,202,086,287 |
(Loss)/earnings per share |
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(0.08p) |
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0.06p |
The loss and the weighted average number of shares used for calculating the diluted loss per share are identical to those for the basic loss per share. The outstanding share options and share warrants would have the effect of reducing the loss per share and would therefore not be dilutive under IAS 33 'Earnings per Share'.
4 Publication of report and accounts
Full financial statements for the year ended 31 December 2019 will be posted to shareholders in due course and are now available on the company's website www.prospexoilandgas.com.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.