Prospex Oil and Gas Plc / Index: AIM / Epic: PXOG / Sector: Oil and Gas

3 May 2017

Prospex Oil and Gas Plc ('Prospex' or the 'Company')
Final Results

 

Prospex Oil and Gas Plc, the AIM quoted investment company, announces its final results for the year ended 31 December 2016.

 

Highlights:

·    Delivering on strategy to build a leading oil and gas investment company focused on high impact European opportunities with short timelines to production

·    Acquired 49% stake in Hutton Poland, which owns 100% of the 1,150 sq km Kolo Licence, onshore Poland

·    US$4.8m (£3.9m) valuation assigned to investment in Hutton Poland as at the year end (based on the competent person's report dated May 2016, although see Note 20 on Investment Valuation) - compares to overall cost of investment including Prospex's share of dry hole drilling costs of approximately £1.6m.

·    Identified a number of prospective targets on the Kolo licence, including the Boleslaw Prospect which was drilled in Q4 2016

·    Strong cash position of £0.4m - £2.52m raised during the period and £0.85 post

·    Continued focus on corporate overheads to ensure as much of the Company's funds as possible are invested in value adding activities

·    Evaluating multiple investment opportunities that meet management's investment criteria

 

Edward Dawson, Managing Director of Prospex, said, "Prospex is led by a management team focused on replicating the success it has had in generating value within the oil and gas sector.  We have a tried and tested strategy of identifying and acquiring overlooked assets; using advanced technologies and techniques to define new prospects; and taking part in well executed drilling operations.  The key is investing in the right assets on the right terms in proven and accommodating hydrocarbon jurisdictions.  We are currently assessing a number of highly prospective projects which fit this bill and are hopeful that we will secure at least one of these in time to deliver on our target to drill a well later this year."

 

The Financial Results for the year ended 31 December 2016 ("Accounts"), as set out below, are available to download on the Company's website together with the Notice of AGM ("AGM Notice").  The Accounts (which includes the Directors' Report) and AGM Notice will be posted to shareholders on or around 5 May 2017.

 

For further information visit www.prospexoilandgas.com or contact the following:

 

Edward Dawson	Prospex Oil and Gas Plc	Tel: +44 (0) 20 3586 1009
Rory Murphy Ritchie Balmer Jack Botros	Strand Hanson Limited	Tel: +44 (0) 20 7409 3494
Jon Belliss	Beaufort Securities Limited	Tel: +44 (0) 20 7382 8300
Lucy Williams Charles Goodfellow Eran Zucker	Peterhouse Corporate Finance	Tel: +44 (0) 20 7469 0932
Frank Buhagiar Charlotte Page	St Brides Partners Ltd	Tel: +44 (0) 20 7236 1177

 

Chairman's Statement

 

The year under review serves to demonstrate management's ability to deliver the strategy that has been put in place to transform Prospex into a leading multi-project oil and gas investment company.  It was an active year which started with us securing our first investment, fulfilling our investment policy, and culminated in the drilling of a low cost well on schedule and on budget.  While the end result of the well was not what we had hoped for, the steps we took and the short period of time during which they were taken provide a template for how we intend to build this company.

           

Our strategy is to acquire a portfolio of investments in oil and gas projects that are at various stages of the development cycle and which represent highly attractive opportunities on a risk / reward basis.  At the beginning of the review period the Company made its first investment under the new strategy: the acquisition for £32,000 in respect of a 49% interest in Hutton Poland Limited's share capital and £588,000 for a similar interest in its loan capital, which holds the Kolo licence onshore Poland. By the year end the Company had invested almost £1.6m. Prior to completion of the acquisition in April 2016, we had set about undertaking a detailed re-evaluation of the prospectivity on the licence by applying our expertise to re-work existing data.  This work resulted in the identification of a conventional gas prospect, Boleslaw, as well as a deeper oil play.  AGR TRACS ('AGR') were then commissioned as a Competent Person to scrutinise our work and provide an independent assessment.  In their report, AGR described Boleslaw as "a worthwhile and attractive exploration opportunity". Utilising this assessment, the Company's interest in Hutton Poland was valued at US$4.8m (£3.9m) in the financial statements as at 31 December 2016 (but see Note 20 on Investment Valuation).

           

Having established Boleslaw as a drill ready prospect the necessary permits to drill a low cost well were obtained by Hutton Poland.  Drilling operations commenced at the Boleslaw-1 well on time in December 2016.  For a discovery to be made a number of factors need to be in place: source rock; reservoir; trap; and migration.  Unfortunately, in the case of Boleslaw not all of these were present. As with all oil and gas exploration there is only so much that can be done to de-risk a prospect prior to drilling.  Only success with the drillbit proves up prospects.  As a result, when risks are assigned to drill-ready prospects these are typically between 1 in 5 and 1 in 3.  Boleslaw was a low cost well and based on our own technical work and that of our competent person it represented an attractive drilling opportunity on a risk / reward basis.

           

Prospect's interest in the Kolo licence was not exclusive to the Boleslaw prospect. The Company believes additional prospectivity exists on the licence, including a deeper oil lead.  Importantly the result of the Boleslaw-1 well has no bearing on this potential oil play. The well has validated elements of the deeper target's geological model and we are currently evaluating all the well data and updating the geological interpretation to ascertain the best way forward for the licence.

           

Hutton Poland is just the first of what we believe will be many investments under our investment strategy. We have an active pipeline of potential opportunities, which we believe offer near term value uplift in line with our strategy.  With this in mind, we are closely evaluating a number of projects which match our criteria: located in proven hydrocarbon jurisdictions; scope for multiple value trigger events within a short time frame; located close to market; and available to be acquired on attractive terms.  Furthermore, thanks, in part, to our team's proven track record of generating value in the oil and gas sector, people are approaching us with their projects.  We find many of these investment opportunities to be technically interesting and we are confident that new investments will be added to our portfolio in due course.

           

Once new projects have been secured, we will endeavour to move rapidly through the various development milestones with the aim of reaching a value trigger event such as drilling at the earliest opportunity, as we did with Boleslaw.  We are able to do this because we have ensured that Prospex has a strong capital base, that corporate overheads are kept to a reasonable level and that monthly cash burn is low.  This allows us to invest as much of our available funds as possible into our portfolio.

           

As announced on 28 March 2017, the Company wishes to amend its investment policy to remove the paragraph stating that the Company will undertake an acquisition or acquisitions within the natural resources and/or energy sector, which would likely constitute a reverse takeover under AIM Rule 14 of the AIM Rules for Companies, within 12 months of the date of that 11 May 2016 GM.  A resolution proposing this amendment will be put to shareholders at the Company's AGM to be held on 1 June 2017 and is set out in the AGM Notice.  Shareholders should note that the Board is actively evaluating a number of possible investments, any of which would add to its portfolio.

 

Outlook

Whether it was successful or not, Boleslaw was always going to be the first of many wells in which the Company invests.  We are working hard to secure additional projects on attractive terms for our shareholders, where we can apply our technical expertise to generate or review drill-ready prospects and leads.  Boleslaw was a potential company-maker.  Our aim is to build a portfolio of high impact prospects that are based on first class technical work, which have been rigorously scrutinised by respected third parties, have an attractive risk / reward trade off, and can be inexpensively drilled within short time frames.  With this in mind, we have been closely evaluating a number of exciting opportunities and remain confident that we will invest in at least one of these in the near term.  Our target is to participate in further drilling activity this year, as we look to deliver on our objective and generate value for all our shareholders.

 

I look forward to providing further updates on our progress in due course.  In the meantime, I would like to take this opportunity to thank our shareholders for their support of the Company and team.   

 

Bill Smith

Non-Executive Chairman

 

 

                                                                                                 

* * ENDS * *

 

 

 

STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2016
			2016		2015
	Notes		£		£
Continuing operations
Administrative expenses			(778,093)		(601,892)
			────────		────────
Operating loss	4		(778,093)		(601,892)
Surplus as a result of the CVA			-		98,885
			────────		────────
			(778,093)		(503,007)
Finance income	5		-		162
Financial assets at fair value through profit and loss	9		2,345,557		-
			────────		────────
Profit/(loss) before income taxation			1,567,464		(502,845)
Income tax expense	6		-		411
			────────		────────
Profit/(loss) on ordinary activities after taxation from continuing operations			1,567,464		(502,434)
Discontinued operations
Profit/(loss) for the year from discontinued operations			-		571,745
			────────		────────
Profit for the year and total comprehensive income attributable to owners of the parent			1,567,464		69,311
			════════		════════
Earnings/(loss) per share - basic and diluted	7
From continuing operations			0.96p		(1.64)p
From discontinued operations			-		1.86p
			════════		════════

 

 

STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2016
					2016		2015
			Notes		£		£
ASSETS
Non current assets
Tangible assets			8		849		1,274
Investments			9		4,142,200		100
					─────────		─────────
					4,143,049		1,374
Current assets
Trade and other receivables			10	31,766		155,909
Cash and cash equivalents			11	466,413		382,216
				─────────		─────────
				498,179		538,125
LIABILITIES
Current liabilities
Trade and other payables			12	(87,676)		(80,975)
				─────────		─────────
Net current assets					410,503		457,150
					─────────		─────────
Net assets					4,553,552		458,524
					═════════		═════════
EQUITY
Share capital			15		5,107,779		2,657,234
Share premium account					6,740,144		6,732,714
Capital redemption reserve					43,333		43,333
Merger reserve					2,416,667		2,416,667
Profit and loss account					(9,754,371)		(11,391,424)
					─────────		─────────
Total equity					4,553,552		458,524
					═════════		═════════
Approved by the Board and authorised for issue on .........................
..............................				..............................
Edward Dawson				Richard Mays
Director				Director
Company Registration No. 03896382