Europa Oil & Gas (Holdings) plc /
Index: AIM / Epic: EOG / Sector: Oil & Gas
5 October 2015
Europa Oil & Gas (Holdings)
plc (‘Europa’ or ‘the Company’)
Final Results for the year to
31 July 2015
Europa Oil & Gas (Holdings) plc, the AIM listed oil and gas
exploration, development and production company focused on
Europe, announces its final
results for the 12 month period ended 31
July 2015.
The Company will be holding a conference call for analysts and
investors later today at 10:30
BST. To participate, please dial 0808 109 0701, or +44
(0) 20 3003 2701 if calling from outside of the UK, using access
code 7796336#. Please note that all lines will be muted with the
exception of the Europa Oil & Gas management. However the
Company invites shareholders to submit questions to its public
relations advisers, St Brides Partners Ltd, ahead of the call via
email to shareholderenquiries@stbridespartners.co.uk. The
management team will strive to answer as many questions as possible
during the course of the call.
To view a copy of the presentation online, please go to
www.meetingzone.com/presenter?partCEC=7796336 using 7796336 as the
participant pin. On the right hand side of the screen you
will find an option to submit questions during the call. The
presentation and the Q&A will only be made live once the call
has commenced. Unfortunately the online presenter programme
is not compatible with iPads and iPhones but if you are listening
to the call and would like to send questions during this time,
please email them to shareholderenquiries@stbridespartners.co.uk
referencing ‘Europa Oil & Gas’ in the subject line and these
will be passed onto the Company for you. If you have any
problems accessing the call, please contact St Brides Partners Ltd
on shareholderenquiries@stbridespartners.co.uk or on the telephone
number +44 (0) 20 7236 1177.
The full Annual Report and Accounts will be available today on
the Company’s website at www.europaoil.com and will be mailed to
those shareholders who have requested a paper copy later this
month.
Operational highlights
- 141 boepd produced from four UK onshore fields (2014: 165 boepd
from three fields)
- Competent Persons Report (“CPR”) produced by ERC Equipoise
(“ERCE”) estimated gross mean unrisked Prospective Resources of 1.5
billion boe in FEL 3/13 offshore Ireland
- 15% carried interest in FEL 3/13 assigned a net mean unrisked
NPV10 of US$1.6 billion by ERCE
- Discovered oil at Wressle in PEDL180, Lincolnshire, with
aggregate production from all payzones of 710 boepd during initial
testing operations
- Prepared and submitted new licence applications in 14th Onshore
Licensing Round UK, award outcome expected Q4 2015
- Farmed out Tarbes val d’Adour permit in onshore France to Vermillion for a 100% carry on a
€4.65 million work programme
- Drilled an exploration well at Kiln Lane on PEDL181 East
Lincolnshire
- Awarded block 41/24 licence in southern North Sea
- Raised £2.2 million net proceeds via a placing and open
offer
- Bill Adamson retired from the
Board and Colin Bousfield, an
existing Director, was appointed Chairman
Financial performance
- Group revenue of £2.2 million (2014: £3.9 million)
- Pre-tax loss excluding exploration write-off and impairment of
£0.8 million (2014: profit £0.5 million)
- Pre-tax loss of £4.1 million after £2.2 million exploration
write-off in PEDL181 and £1.1 million impairment against the West
Firsby field (2014: loss £0.7 million after a £1.2 million
impairment against the West Firsby field)
- Post-tax loss for the year £1.8 million (2014: profit £0.6
million)
- Cash used in continuing operations £0.3 million (2014: cash
generated £1.4 million)
- Net cash balance as at 31 July
2015 £3.2 million (31 July
2014: £4.5 million)
Post reporting date events
- Planning permission for the Holmwood exploration well surface
site granted in August 2015 following
a Planning Inquiry in April and June
2015 with planning permission for the underground well path
granted in September 2015
- Wressle EWT completed at Penistone Flags oil zone with positive
implications for reservoir volumes
- Prepared and submitted multiple new licence applications for
the Irish 2015 Atlantic Margin Licensing Round, award outcome
anticipated in H1 2016
- Kosmos Energy decided to exercise its option to withdraw from
both Irish offshore licences, Europa has applied to assume 100%
interest and operatorship
Europa’s CEO, Hugh Mackay said,
“Drilling wells, issuing CPRs, farming out licences, these are key
value drivers for an oil and gas company. The year under
review has seen Europa participate in all of these high impact
activities: two wells drilled onshore UK; discovery in East
Lincolnshire; farm-out secured for one of our licences onshore
France with Vermillion Energy; and
CPR issued estimating 1.5 billion barrels for one of our Irish
Licences. Equally importantly we have cash, we have revenue from
production and we have the opportunity to increase revenue through
the Wressle development.
“The year ahead promises more high impact activity: we
will look to bring the Wressle discovery into production and in the
process increase our revenues; issue a CPR for Wressle which will
significantly boost our reserves; advance plans to drill the 5.6
mmboe Holmwood prospect, which we believe is one of the best
undrilled conventional prospects onshore UK; commence the farm-out
of Holmwood and our Irish licences and continue ongoing discussions
with potential partners for our Bearn des Gaves permit. We
are also looking to add to our exploration portfolio having
participated in the latest onshore UK and Irish Altantic Margin
licensing rounds. We are working hard to generate value for
shareholders and look forward to the year ahead.”
Chairman's Statement
Europa is an exploration and production company with a portfolio
of multi-stage projects in three areas: onshore UK; offshore
Ireland; and onshore France. The year under review has seen
Europa:
- Participate in two wells drilled onshore UK as part of a
multi-well programme focused on proving up our prospect inventory
via the drill bit;
- Receive planning approval for the Holmwood well, which is in an
area of the Weald Basin which has seen much press coverage in
recent months for its high prospectivity;
- Undertake a thorough review of our Irish licences, resulting in
the completion of a CPR over FEL 3/13 indicating a total of 1.5
billion barrels of gross unrisked mean Prospective Resources with a
net unrisked NPV10 (for the equity and carry arrangements
applicable at the time) of US$1.6
billion;
- Manage its exploration licences in France with completion of a farm-out of our
Tarbes licence to Vermillion and a continuation of the programme to
farm-out our Berenx licence;
- Continue our programme of adding to the licence inventory with
new licence applications in both the UK 14th onshore round and the
Irish offshore round. In addition we have been awarded block
41/24 offshore UK in the southern North Sea. This is part of our
continuing strategy to work up our existing assets, whilst
selectively adding new opportunities in locations where we believe
we have a good understanding of the geology, fiscal and political
risks and where we feel we can add value to the Company;
- Work towards delivering on our objective to build a top
quartile AIM oil & gas company in terms of market
capitalisation. When this ojective was set Europa was in the fourth
quartile of the AIM oil & gas sector. As at 31 August 2015 we were ranked in the second
quartile and are showing continued progress towards our goal.
Our drilling campaign got off to a good start in July 2014 with the Wressle-1 exploration well in
East Lincolnshire, which was targeting a 2.1 mmbo conventional oil
prospect, finding hydrocarbons. We saw aggregate production from
all payzones of 710 boepd during testing operations. This was
followed up by an Extended Well Test (“EWT”) which will aid the
partners in determining the optimal development scheme ahead of a
formal application to the Oil and Gas Authority (“OGA”).
Wressle was followed by the drilling of the Kiln Lane prospect
on the neighbouring PEDL181 licence. The well was targeting a 2.9
mmboe prospect and was the first well drilled on the licence.
Whilst operations ran to budget and timetable and there was
evidence of hydrocarbons being present during drilling,
unfortunately the well was found to be water wet. The data
recovered will assist the further evaluation of the block ahead of
any further activity.
We were delighted that our efforts to obtain planning approval
in relation to drilling a temporary exploratory well at the
Holmwood prospect on the PEDL143 licence resulted in approval in
September 2015. PEDL143 is located in
the Weald Basin, Surrey and with
mean gross un-risked Prospective Resources of 5.6 mmbo, as
estimated in a CPR published in June
2012, and with a one in three chance of success we rate
Holmwood as being one of the best undrilled conventional prospects
onshore in the UK.
We see the UK as an excellent area in which to operate and we
will be looking to add to our existing production through
development of Wressle and further exploration activity. To
underline this we have participated in the 14th Onshore (Landward)
Oil and Gas Licensing Round and await announcement of the awards on
the areas we have applied for.
Whilst the UK portfolio has seen most activity over the last 12
months, we believe that there is significant potential value in
Europa’s Irish acreage.
Kosmos Energy Ireland, delivered a new prospect inventory based
on a 2,650 km2 3D seismic acquisition programme in Q4
2014. We are particularly pleased that the analysis of the state of
the art 3D seismic shot in late 2013 confirmed the presence of
significant prospects, reducing risk prior to drilling decisions
being made. We have undertaken a thorough review of our Irish
licences, identifying a number of prospects leading to the issue of
a CPR by ERCE which indicated a total of 1.5 billion barrels of
gross unrisked mean Prospective Resources with a net unrisked NPV10
of US$1.6 billion based on the Kosmos
carry arrangements and Europa’s 15% interest prevailing at that
time. Since the preparation of the CPR, Kosmos have informed Europa
of their decision to withdraw from Ireland which is expected to result in Europa
assuming a 100% interest. The Prospective Resources remain
unchanged at 1.5 billion barrels, but the value to Europa will need
to be adjusted to reflect any new farm-in arrangements. Europa
intends to seek a new partner for each licence following the
announcement of the results of the 2015 Atlantic Margin Licensing
Round that closed on 16 September
2015.
In France, work continued to
farm-out both of our onshore licences as a means of funding
exploration activity. Europa held 100% interests in the Béarn des
Gaves (‘Béarn’) and Tarbes val d’Adour (‘Tarbes’) permits, located
in the proven Aquitaine Basin. In February, we were able to
announce that Vermillion had agreed to join the Tarbes permit,
taking an 80% interest in return for up to €4.65m of exploration
expenditure. In the current oil price environment it has been
challenging to find quality farm-in partners, but we are delighted
that Vermillion, as the leading operator onshore France, has seen the potential of the Tarbes
licence and we await their detailed plans for the licence with
interest.
Béarn holds two potential company making prospects: the Berenx
Shallow gas prospect and the Berenx Deep gas appraisal prospect. We
continue to seek a farm-in partner with an intention to drill the
Shallow prospect and talks are on-going with a number of interested
parties, but the current economic climate in the oil and gas sector
has led to a reduction in appetite for farm-in opportunities.
Outlook
The year under review has been particularly difficult for the
oil and gas sector with oil prices falling significantly from
US$104.8/bbl on 1 August 2014 to US$52.2/bbl on 31 July 2015. We have seen
many of our peers struggle at low oil prices and overall
exploration and development activity levels have dropped off.
A number of companies have seen their market capitalisation reduce
significantly as their finances have come under strain and I would
like to acknowledge the support we have received from shareholders
through the placing and open offer during the course of the
year.
The CPR for offshore Ireland,
which confirmed the company-making potential of our licences both
in terms of prospective resource and value, indicates that the
Company has the potential to see very material growth in its market
capitalisation in the near term. This is one example of the
activities management are pursuing to provide shareholders with
tangible evidence of value creation.
We are well positioned, through the combination of existing
production, near term development at Wressle and exploration
opportunities at Holmwood in the UK and in Ireland and France. We hope to build on our existing
portfolio through participation in the UK and Irish licensing
rounds, and we will continue to evaluate new projects and ventures
that match our investment criteria. This is a challenging time but
shareholders can be assured that the Board and I will be working
hard to manage our resources carefully and maximise value from our
portfolio.
During the course of the year I took over the role of Chairman
from Bill Adamson, when he stepped
down from the Board to enable him to concentrate on his work in the
voluntary sector. Bill had been Chairman for just under five years,
during which time he presided over a period of transition for the
Company, including the appointment of Hugh
Mackay as Chief Executive. The Board and I would like
to thank Bill for his efforts during this period.
I would like to thank the management, operational teams, my
fellow Board members and our advisers for their hard work over the
year.
Finally I would like to reiterate my thanks to our shareholders
for their continued support during what has been a challenging year
for all of the oil and gas sector, but particularly small
exploration and production companies.
Colin Bousfield, Chairman
2 October 2015
Strategic report – Operations
Ireland
Exploration - Porcupine Basin Frontier Exploration Licences
(“FELs”) 2/13 and 3/13 - Europa (15%); Kosmos (85% and operator).
(Note that on 22 September 2015,
Europa announced that Kosmos intends to withdraw from the two
licences. Europa has applied to the Irish Authorities to assume
100% equity and operatorship).
The exploration model for these licences is the Cretaceous
stratigraphic play: comprising Early Cretaceous turbidite sandstone
reservoirs; charged by mature Late Jurassic and Early Cretaceous
source rocks and contained in stratigraphic traps with elements of
structural closure. The Cretaceous play in Ireland is essentially undrilled and is
considered to be analogous to the same play in the equatorial
Atlantic Margin province that has delivered the Jubilee and
Mahogany oil fields.
The key activity during the year has been interpretation of more
than 2,500 km2 of 3D seismic data over FEL 2/13 and
3/13. The data was acquired in H2 2013, the final processed data
set was delivered in Q2 2014 and the operator Kosmos delivered a
prospect inventory in Q4 2014 (see RNS of 8
December 2014).
Europa followed on from this work by Kosmos and conducted its
own independent prospect mapping over both licences. This mapping
provided the basis for a CPR by ERCE on the prospects and risks in
FEL 3/13. A summary of the CPR is tabulated below and was provided
to the market in an RNS dated 12 May 2015. The CPR identifies
gross mean un-risked Prospective Resources of approximately 1.5
billion barrels of oil equivalent (“boe”) across three prospects in
FEL 3/13 and gross mean risked Prospective Resources of 235 million
boe.
FEL 3/13 |
Gross Prospective Resources mmboe* |
Prospect |
Un-risked |
Mean |
Chance of Success |
1 in |
Gross mean Risked |
Low |
Best |
High |
Wilde |
61 |
239 |
952 |
428 |
19% |
5.3 |
81 |
Beckett |
109 |
424 |
1661 |
749 |
15% |
6.7 |
112 |
Shaw |
57 |
198 |
681 |
315 |
13% |
7.7 |
41 |
Total |
277 |
861 |
3,294 |
1,492 |
|
|
235 |
*million barrels of oil equivalent, using a conversion factor of
6 mscf per stb. The hydrocarbon system is considered an oil play.
However, due to significant uncertainties in the available
geological information, there is a possibility of a gas charge.
Note: the Total row is a deterministic sum.
The three prospects Beckett, Wilde and Shaw have Cretaceous
submarine fan sandstone reservoirs and are part of the Cretaceous
submarine fan hydrocarbon play. These new prospects replaced the
Kiernan prospect previously identified by Europa on historic 2D
seismic data (see RNS dated 16 January
2013). As a consequence of its detailed work in preparation
for the CPR, Europa has identified both a prospect and shotpoint
location for what would be a play-opening first well in FEL
3/13.
The CPR represents the culmination of substantial work by three
very experienced technical teams: Kosmos, Europa and ERCE. The work
has been subjected to robust and in-depth technical challenge.
Europa has utmost confidence in the quality of the work and the
Prospective Resources and risks derived from the work. These are
very significant volumes of hydrocarbons. Europa considers the
prospects to be at drillable prospect status. The CPR provides a
strong endorsement to Europa’s long held view that the Porcupine
Basin has the potential to become a major new North Atlantic
hydrocarbon province.
In addition to the CPR Europa also commissioned ERCE to complete
an independent assessment of the value of its interests in FEL
3/13. Although it is comparatively unusual for junior oil companies
to commission such third party valuation work at this early stage
in the exploration cycle, in view of the very large potential
Prospective Resources Europa feels it is important that investors
are provided with an independent and credible valuation. As with
the CPR, the valuation has been subjected to rigorous technical
challenge and scrutiny by ERCE.
The results of the study were released to the market in an RNS
on 16 June 2015 and ERCE estimated a
mean Unrisked Net Present Value at a 10% discount (“NPV10”) of
approximately US$1.6 billion to
Europa's 15% net interest in three prospects; Wilde, Beckett and
Shaw. On a risked basis the results of this study estimate a mean
risked NPV10 of US$251 million. These
prospects are at the pre-drill stage and realisation of this
potential value will require the drilling of exploration wells.
Note that the valuation was based on the Kosmos carry arrangements
and Europa’s 15% interest prevailing at the time. Since the
preparation of the CPR, Kosmos have informed Europa of their
decision to withdraw from Ireland
which is expected to result in Europa assuming 100% interest. The
Gross Un-risked Prospective Resources remain unchanged at 1.5
billion barrels, but the value to Europa will need to be adjusted
to reflect any new farm-in arrangements. Nevertheless the work
remains valid and the Directors believe that it provides a valid
benchmark for what a 15% carried interest could be worth. The NPV10
of a 15% carried interest as at 1 January
2015 for the Low, Best and High estimates of Prospective
Resources are tabulated below:
|
Gross Prospective Resources
mmboe* |
Net Un-risked NPV10 (US$ million) |
Chance
Of
Success |
Net
Risked
NPV10 (US$ million) |
Prospect |
Low |
Best |
High |
Low |
Best |
High |
Mean |
(%) |
Mean |
Wilde |
61 |
239 |
952 |
-10 |
109 |
1,227 |
408 |
19% |
78 |
Beckett |
109 |
424 |
1661 |
-10 |
400 |
2,366 |
867 |
15% |
130 |
Shaw |
57 |
198 |
681 |
-10 |
110 |
970 |
332 |
13% |
43 |
Total |
|
|
|
|
|
|
1,607 |
|
251 |
Notes:
1. The discounted cash flow analysis has been carried out
assuming exploration drilling results in discovery of oil.
However, due to the significant uncertainties in the available
geological information, there is the possibility that exploration
drilling will result in the discovery of gas.
2. mmboe means millions of barrels of oil plus gas converted to
oil using a conversion rate of six thousand cubic feet of gas for
each barrel of oil.
3. "Gross Oil and Gas Unrisked Prospective Resources" are 100%
of the volumes estimated to be recoverable from an undrilled
prospect before applying the geological chance of success
(“COS”).
4. The COS is an estimate of the probability that drilling the
prospect would result in a discovery.
5. Prospective Resources are "Unrisked" in that the volumes have
not been multiplied by the COS.
6. Net Unrisked NPV10 means the NPV10 at 10% discount rate as at
1 January 2015 attributable to
Europa's assumed 15% working interest in the Prospect before
multiplying by the COS.
7. Net Risked NPV10 means the NPV10 at 10% discount rate as at
1 January 2015 attributable to
Europa's assumed 15% working interest in the prospect after
multiplying by the COS; as under the Kosmos carry arrangements
Europa did not incur the cost of the exploration well, the Net
Risked NPV10 is equal to the Expected Monetary Value (“EMV”).
8. The analysis for the Best and High cases assumes the
successful drilling of an exploration well on each prospect in 2017
followed in each case by appraisal drilling and then
development.
9. The Low estimates of NPV10 for each prospect comprise the net
cost to Europa of an exploration and appraisal well, after allowing
for Europa's carry under the terms of the Kosmos farm-in; this is
because discounted cash flow modelling of each of the Low cases
resulted in a more negative NPV10.
10. The Mean estimate of the NPV10 for each prospect has been
calculated by adding the Low, Best and High estimates of NPV10
weighted by 0.3, 0.4 and 0.3 respectively (the Swanson's Mean).
11. The NPV10 estimates form an integral part of fair market
value estimations; without consideration for the exploration risk
factor (COS) and other economic criteria, including market
perception of risk, they are not to be construed as opinions of
fair market value.
12. Assumes an oil price of US$60
bbl in 2015 rising to US$92 bbl by
2018 and inflated at 2% thereafter.
The Beckett, Wilde and Shaw prospects are located SW of
Ireland, approximately 125 km from
shore. Due to water depths in excess of 1,000m each prospect
would be developed by a Floating, Production, Storage and
Offloading unit (“FPSO”) in the event of successful exploration
drilling. The prospects are located in challenging
environmental conditions, where high wave heights must be accounted
for in FPSO design. This in turn limits throughput
rates. Discovery size will also alter facility design,
particularly with respect to produced gas handling. ERCE has
accounted for these aspects in its forecasting work. ERCE
conducted an independent review of the production, operating
expenditure, capital and abandonment expenditure and associated
discounted cash flow analysis of two Prospects; Beckett and Wilde
and used that analysis to derive value for the Shaw Prospect.
Europa notes that costs used in the NPV10 calculation reflect
the US$100/bbl oil price prevailing
over much of the last five years. The Company hopes that a
continued period of lower oil prices might be reflected in lower
costs. Sensitivity analysis suggests that a 20% decrease in capital
expenditure might increase the net NPV10 by approximately 10-15%.
Whilst it is too early in the current low oil price cycle to
provide direct evidence of lower costs for development capital
expenditure there has been an immediate reduction in day rates for
drilling rigs. For example, while the valuation assumed a rig rate
of US$600,000 per day, currently rigs
capable of drilling offshore Ireland are available for around US$300,000 per day.
During the course of its independent mapping of FEL 2/13, Europa
has identified new prospects and leads at additional stratigraphic
levels. These are in addition to the Doyle A and Doyle B prospects
previously identified on the licence in the RNS of 8 December 2014 and with gross mean unrisked
Prospective Resources of 123 mmbo for Doyle A and 69 mmbo for Doyle
B.
The First Phase of both licences was for three years and is
scheduled to end in July 2016. The
work programme obligation for Phase 1 has been fulfilled with the
acquisition of the 2013 3D seismic survey. The Second Phase would
be for a four year term from July
2016 until July 2020 and the
work programme for each licence would include drilling a commitment
well. Europa is required to advise the Irish Authorities of its
intentions in April 2016.
The full CPR was not released into the public domain for reasons
of confidentiality arising from the 2015 Atlantic Margin Licensing
Round that closed in September 2015
and for which awards are anticipated during H1 2016.
Subsequent to the reporting period end Kosmos elected to
withdraw from FEL 2/13 and 3/13 and to exit from Ireland. Subject to Irish Government approval
Kosmos’ 85% equity and operatorship will be returned to Europa
bringing our interest to 100% in both licences. Europa will seek
new partners with whom to take the licences forward. As a
consequence of the substantial independent proprietary work already
invested, Europa is fully prepared to take over operatorship and to
resume farm-out of these licences.
2015 Atlantic Margin Licensing Round
Europa has made multiple applications in the 2015 Atlantic
Margin Licensing Round. Europa has been actively working Atlantic
Margin basins since 2011 and we firmly believe in the technical and
commercial case for exploration in this basin. Our applications
represent the culmination of all the technical and commercial
knowledge accumulated during this period. We have benefited from
our previous purchase of over 12,000 km of legacy 2D seismic data
and of critical importance are insights derived from our
interpretation of over 2,500 km2 of 3D seismic data
acquired over FEL 2/13 and 3/13.
Our performance in the 2011 Atlantic Margin round was strong:
within two years of award of two Licensing Options we farmed out,
converted to Frontier Exploration Licences and acquired the biggest
ever 3D survey offshore Ireland.
As a consequence of the very strong technical work supporting our
2015 applications we are confident that were we to be awarded any
new Licensing Options we would be able to rapidly progress and
exceed our 2011 performance.
The round closed on 16 September
2015 and the Irish Authorities reported they have received
43 applications from major, mid cap and small companies, the
largest number of applications ever received in any Irish offshore
licensing round. Given the record number of applications in the
round, and the significant values demonstrated by the CPR, the
Board is confident there will be interest in partnering with Europa
in both our existing licences in the Porcupine and any new
awards.
France
Tarbes val d’Adour – Europa (20%), Vermilion (80%
and operator)
In February 2015 Europa announced
a farm-out of the Tarbes val d’Adour permit (‘Tarbes’), to
Vermilion REP SAS, a wholly owned subsidiary of Vermilion Energy
Inc (`Vermilion') a Calgary based international oil and gas
producer. Post farm-out, Europa holds a 20% interest in Tarbes,
which is located in the Aquitaine Basin, onshore France.
Under the terms of the farm-out, Vermilion acquires an 80%
interest in, and operatorship of, Tarbes with Europa holding the
remaining 20% interest.
Vermilion will assume 100% of the cost of a work programme,
which may include seismic acquisition/reprocessing and drilling
operations up to a total of €4.65 million. Once costs above this
level are incurred, Europa will be responsible for its 20% share of
future costs.
The farm-out is subject to the relevant approvals being granted
by the French authorities - for the transfer of equity and
operatorship to Vermilion and obtaining an extension for the
permit. Both these approval processes started in H2 2014 and it is
hoped that approvals will be granted during H1 2016.
Vermilion have commenced technical work beginning with review
and compilation of all existing seismic and well data into a
consolidated database. Work will proceed with seismic reprocessing
and seismic interpretation leading to delivery of a new prospect
inventory in H2 2016. Further work will be programmed according to
the content of the prospect inventory and may include drilling.
Tarbes contains several oil accumulations that were previously
licensed by Elf but were abandoned in 1985 due to a combination of
technical issues and low oil prices. Two fields, Jacque and Osmets,
were drilled using vertical wells and generated modest
production.
Vermilion is the leading exploration and production company
currently active in France with
net production of approximately 12,500 boepd. They have an
excellent technical and operational track record with specific
experience of workovers, infill drilling, and secondary recovery
opportunities. They are the ideal partner for us on this
permit.
Béarn des Gaves 100%
Europa holds a 100% interest in the onshore Béarn des Gaves
permit in the Aquitaine basin. The permit contains two prospects:
Berenx Deep and Berenx Shallow. Berenx Deep is an appraisal
project having previously been explored and drilled by EssoRep with
two wells, Berenx-1 (1969) and Berenx-2 (1972), both encountering
strong gas shows over a 500m thick gas bearing zone. In 1975
Berenx-2 was re-entered, drill stem tested and flowed gas to
surface from the same carbonate reservoir that delivered 9 tcf and
2 tcf from nearby fields at Lacq and Meillon.
Europa’s in-house technical work indicates that the Berenx deep
appraisal prospect could hold in excess of 500 bcf of recoverable
gas resources. In a CPR dated 31 May
2012, ERC Equipoise estimated gross mean un-risked resources
of 277 bcf for the Berenx deep gas play. The difference between
Europa’s and ERC's assessment of resources reflects the confidence
of each party in mapping in a geologically complex terrain.
Europa was able to map a larger area of closure and as a
consequence larger resources.
Thorough re-evaluation and interpretation of existing seismic
and well data on the permit has resulted in the definition of a new
shallow gas prospect, Berenx Shallow with potential gross mean
un-risked resources of 107 bcf. Scoping economics suggests a value
of US$11.5/boe and NPV10 of
US$170 million.
The Company’s strategy for Béarn des Gaves is to farm-out, drill
a well on Berenx Shallow with the aim of delivering a commercial
flow rate and, on the back of commercial success, to further
appraise the shallow prospectivity and undertake work to de-risk
the Berenx Deep appraisal prospect. The Berenx Shallow
prospect can be tested with a comparatively simple exploration well
with an anticipated total depth of 2,500m.
The permit has been renewed for a period of five years from
22 March 2012 and carries an
expenditure commitment of approximately €2.5 million. A
farm-out process for the permit is currently underway in tandem
with well planning and permitting for a well location on Berenx
Shallow ahead of drilling in the next 18 months. A wellsite has
been identified and a lease has been prepared.
United
Kingdom
NE Lincolnshire - PEDL180 33.3%
(Wressle)
Following a partial relinquishment under the terms of the
licence, in June 2015, PEDL180 covers
an area of 40 km2 of the East Midlands Petroleum
Province 5 km southeast of the Europa operated Crosby Warren field
which has been producing oil for 29 years. Europa has a 33.3%
working interest in the block with its partners Egdon Resources
(operator, 25%), Celtique Energie Petroleum Ltd (33.3%) and Union
Jack Oil (8.3%).
The Wressle-1 exploration well was spudded in July 2014 and targeted a conventional oil
prospect, estimated by the operator to hold mean gross un-risked
recoverable resources of 2.1 mmbo. The well reached a total
depth of 2,240 metres (1,814 metres TVDSS) in August 2014.
Both the stratigraphy and reservoir horizons encountered by the
well were in accordance with the pre-drill geological forecast
which was based on 49 km2 of 3D seismic acquisition
acquired in 2012. Petro-physical evaluation indicated over 30
metres measured thickness of potential hydrocarbon pay in three
main intervals: Penistone Flags with up to 19.8 metres measured
thickness (15.9 metres vertical thickness) of potential hydrocarbon
pay; Wingfield Flags with up to 5.6 metres measured thickness (5.1
metres vertical thickness) of potential hydrocarbon pay; and
Ashover Grit with up to 6.1 metres measured thickness (5.8 metres
vertical thickness) of potential hydrocarbon pay.
Wressle was production tested with a dedicated test rig during
Q1 2015 and achieved the following results:
•
710 boepd aggregate from 4 tests in three sandstone reservoirs
•
Ashover Grit - 80 bopd and 47 mcfd, free flow
•
Wingfield Flags - up to 182 bopd and 0.456 mmcfd, free flow
•
Zone 3 Penistone Flags - up to 1.7 mmcfd and up to 12 bopd, free
flow
•
Zone 3a Penistone Flags - 77 bopd, swabbed
During June 2015 Extended Well
Test (“EWT”) operations commenced. The Penistone Flags Zone 3A
interval was pumped for a period of time and achieved average rates
over a three day period of 131 barrels of oil per day (“bopd”) and
222,000 cubic feet of gas, equating to 168 boepd. The average
producing gas oil ratio (“GOR”) was 1,700 cubic feet of gas per
barrel of oil (“scf/stb”). Due to increasing gas rates the pump was
stopped and the well allowed to naturally flow to surface on a
series of decreasing choke sizes from 12/64" down to 8/64" (being
the smallest available). Average rates over a two day period on the
8/64" choke were 105 bopd with 465,000 cubic feet of gas per day,
equating to 182 boepd with an average producing GOR of 4,450
scf/stb. During the course of this flow testing no associated
formation water was produced. The gas production rate increased to
the point where it approached the limits allowed under the
environmental permit and production from the interval was now been
halted.
During initial testing in Q1 2015, the Ashover Grit interval
achieved free flowing oil production rates equivalent to 80 bopd
and 47 thousand cubic feet (“mcf”) of gas per day during a 16 hour
main flow period. Analysis of the well test data indicates
that the flow rates were impaired due to a high ‘Skin Factor’ and
therefore were not representative of the flow rates that could be
attained from this interval when ‘cleaned up’. Unfortunately it was
not possible to re-establish flow rates from the Ashover Grit
interval during the EWT, due to either a mechanical problem with
the down-hole completion, an annular blockage, or an impairment of
the perforations caused by the well completion operation. .
The partners are examining options that could be implemented
to reduce the Skin Factor and increase production.
In parallel with this activity the partnership is reprocessing
the 3D to enable more detailed geophysical evaluation of the
producing horizons. This work will help inform both a new CPR for
the Wressle discovery and the Field Development Plan. Subject to
favourable outcomes to this work the intention is to commence early
production from Wressle.
NE Lincolnshire - PEDL182 33.3%
(Broughton)
Following a partial relinquishment under the terms of the
licence, in June 2015, PEDL182 covers
an area of 19 km2. The Broughton prospect was
previously drilled by BP and flowed oil. Broughton is located
on structural trend with the producing Crosby Warren oil field and
the Wressle prospect on PEDL180. The partnership is
reprocessing the 2012 3D survey and will be remapping the Crosby
Warren-Wressle trend. Interpretation of the 3D together with the
results of the Wressle discovery may result in new drillable
propects being matured on this trend.
NE Lincolnshire - PEDL181 50%
(Kiln Lane)
Europa has a 50% interest in and is the operator of the PEDL181
licence, with Egdon Resources UK Limited and Celtique Energie
Petroleum Ltd, each holding a 25% interest. PEDL181 is
located in the Carboniferous petroleum play and covers an area of
over 540 km2 in the Humber Basin.
Following acquisition of 2D seismic in 2013 and subsequent
interpretation and mapping, a conventional exploration well was
drilled at the Kiln Lane prospect in February 2015 and reached a total depth of 2,291m
in March 2015. Whilst Carboniferous
sandstone reservoirs were penetrated in accordance with the
pre-drill geological forecast these proved to be water wet. The
well was plugged and abandoned and the site has now been restored
and returned to agriculture. Whilst a disappointing outcome,
the well was drilled safely, on schedule, on budget and
demonstrated fast-track performance in terms of navigating the
planning and permissions process.
Europa is completing post-well analysis of the Kiln Lane-1 well,
in particular the impact of the well result on the remaining
prospectivity in the licence. The partnership will make a decision
regarding its continued activity in the licence during the upcoming
year.
Dorking area - PEDL143 40% (Holmwood)
The PEDL143 licence covers an area of 92 km2 of the Weald Basin,
Surrey. Europa is the operator and
has a 40% working interest in the licence with partners Warwick
Energy (20%), UK Oil & Gas (20% subject to approval), Egdon
Resources (18.4%), and Altwood Petroleum (1.6%).
The Holmwood prospect is a conventional Jurassic sandstone
reservoir with a low geological risk. The May 2012 CPR estimated Holmwood to hold gross
mean recoverable resources of 5.64 mmbo. Europa considers Holmwood
to be one of the best undrilled conventional exploration prospects
in the UK.
The prospect lies south of Dorking within the Surrey Hills Area
of Outstanding Natural Beauty. An application to construct a
temporary exploration well on the site was originally made in 2008.
This application was refused in 2011 by Surrey County Council
contrary to their planning officer’s recommendation to
approve. An appeal to overturn the decision was heard at a
public inquiry in July 2012. The appeal was dismissed on
26 September 2012.
Europa, along with its partners, applied for an order to quash
the decision of the Secretary of State for Communities and Local
Government’s appointed Inspector to dismiss the appeal. On
25 July 2013, the Royal Courts of
Justice gave judgment in favour of Europa and quashed the
Inspector’s decision. An appeal was submitted to the Court of
Appeal which was subsequently dismissed by the Court on 19 June
2014. As a result, Europa’s appeal against Surrey County
Council’s refusal to grant planning permission to drill one
exploratory borehole and undertake a short-term test for
conventional hydrocarbons at the Holmwood prospect was remitted to
the Planning Inspectorate for redetermination. A further
planning inquiry was conducted in April and June 2015 and the Planning Inspectorate issued a
decision to allow the appeal on 7 August
2015.
The intended Holmwood exploration well is a deviated well and as
a consequence of changes in regulations since submitting the
original planning application in 2008 planning permission is also
required for the underground well path. A planning application for
the underground well path only was submitted in May 2014 and was heard by the planning committee
on 23 September 2015 who approved the
application.
Europa and its joint venture partners will now commence detailed
well planning with the intent of conducting drilling operations in
2016/17. Europa and Warwick Energy will jointly farm-out some of
their combined 60% interest in the licence. This process has
already started.
Production (West Firsby 100%; Crosby Warren 100%; Whisby W4 well
65%)
The three UK fields, plus a small contribution from Wressle,
produced an average of 141 boepd (2014: 165 boepd) during the year
under review. The fields are in decline and whilst we are
maximizing opportunities to reduce downtime and decrease cost we
feel the best way to access more production is through the
exploration drill bit. The Wressle discovery offers an opportunity
to increase production.
14th Landward Licensing Round
Europa has submitted bids in the 14th Landward Licensing Round
in onshore UK. None of Europa’s applications were for blocks
awarded in Tranche 1 and announced in August
2015. We understand that Tranche 2 will be announced later
in 2015 and we hope that we will be successful.
Southern North Sea - block 41/24 50%
Europa bid with Arenite Petroleum Limited (50%) a private
Scottish company in the 28th Seaward Licensing Round and
was conditionally awarded a Promote Licence on block 41/24 in the
Southern North Sea in July 2015. The
block lies immediately offshore the town of Scarborough on the Yorkshire coast. Block 41/24 was previously
partly licensed to Europa Oil & Gas (100%) as a Traditional
Licence (P.1131) in the 21st Round. The licence was
relinquished at the end of the Initial Term as the Zechstein
discoveries were assessed as being small and sub-economic. The
focus of work during the Promote Licence phase is to investigate
the potential of the Carboniferous sequence which has largely been
overlooked as a viable target to date within block 41/24 but there
are numerous hydrocarbon accumulations in the onshore extension of
the Cleveland Basin and further
south in the East Midlands.
Financials
With a small contribution from Wressle our production this year
averaged 141 boepd and generated £2.2 million in revenues (2014:
165 boepd and £3.9 million). The average oil price achieved in the
year was $68.2/bbl (2014:
$107.7/bbl) with the second half of
the year $58.3/bbl (H1 $77.8/bbl) which we believe is more
representative of what we might expect next year.
As announced in January 2015, the
West Firsby 9 production well requires a recompletion, but at the
prevailing oil price it remains uneconomic to work the well over
for an incremental ~8 bopd. While most of the costs associated with
our production are fixed in nature we have implemented various cost
saving measures to help mitigate the effect of the falling oil
price and cost of sales excluding exploration write-off and
impairment was £1.9 million (2014: £2.3 million). We will continue
to review and implement cost saving initiatives across our whole
business over the coming year.
Administrative expenses of £977,000 (2014: £832,000) included:
£267,000 of expenditure on new licence applications in the UK
14th Landward Licensing Round and the Irish Atlantic
Margin Licensing Round (2014: £97,000); and £106,000 of costs
associated with the Tarbes farm-out.
Cash used in continuing operations for the year was £0.3 million
(2014: cash generated £1.4 million).
In July 2015, we completed a
placing of shares and an open offer to existing shareholders which
together raised £2.2 million after expenses. Our cash balance at
the period end stood at £3.2 million (2014: £4.5 million).
We recorded a £1.1 million (2014: £1.2 million) impairment of
the West Firsby field which arises from lower assumed oil prices
and lower recoverable reserves used in the cash flow model.
We also recorded a £2.2 million (2014: nil) write-off of
exploration expenditure associated with the Kiln Lane exploration
well on PEDL181.
Results for the year
The Group loss for the year after taxation from continuing
activities was £1,784,000 (2014 loss: £368,000, with a profit from
discontinued operations of £933,000).
Conclusion
This has been an active year. In the UK we have participated in
two exploration wells, made one oil discovery and obtained planning
permission for the Holmwood exploration well. We have
successfully farmed out our Tarbes permit in France and are working to farm-out the Bearn
des Gaves permit. We have completed substantial work on our Irish
licences leading to a CPR for FEL 3/13 with gross mean un-risked
Prospective Resources of 1.5 billion boe and for which a 15%
carried interest was ascribed a net mean un-risked NPV10 of
US$1.6 billion by ERCE. Further
information will emerge over the coming months as we progress our
application to assume 100% interest and operatorship and commence
farm-out activities. Europa is determined to expand its position in
Ireland and has submitted multiple
applications in the 2015 Atlantic Margin licensing Round with the
intention of building a strategic position. Irish awards are
anticipated in H1 2016. Europa has submitted several applications
in the 14th Landward Licensing Round onshore UK with award
anticipated in Q4 2015. We are evaluating plans for the
commercialization of the Wressle oil discovery. We are commencing
well planning for the Holmwood prospect. Together with our recently
awarded promote licence in Block 41/24 2016 promises to be an
exciting year as we realise the potential in our existing licences
and build our portfolio through new licence awards. In parallel
with this we will continue to actively review consolidation
opportunities and we will not hesitate to act provided this makes a
valid investment proposition for Europa shareholders.
Hugh Mackay, CEO
2 October 2015
The financial information set out below does not constitute the
company's statutory accounts for 2015 or 2014. The financial
information has been prepared in accordance with International
Financial Reporting Standards (IFRS) as adopted by the European
Union on a basis that is consistent with the accounting policies
applied by the group in its audited consolidated financial
statements for the year ended 31 July
2015. Statutory accounts for the years ended 31 July 2015 and 31 July
2014 have been reported on by the Independent Auditors.
The Independent Auditors' Report on the Annual Report and
Financial Statements for 2015 and 2014 were unqualified, did not
draw attention to any matters by way of emphasis, and did not
contain a statement under 498(2) or 498(3) of the Companies Act
2006.
Statutory accounts for the year ended 31
July 2014 have been filed with the Registrar of Companies.
The statutory accounts for the year ended 31
July 2015 will be delivered to the Registrar in due
course.
Consolidated statement of
comprehensive income
For the year ended 31 July |
|
2015 |
2014 |
|
Note |
£000 |
£000 |
|
|
|
|
Revenue |
|
2,205 |
3,878 |
Other cost of sales |
|
(1,900) |
(2,301) |
Exploration write-off |
1 |
(2,205) |
- |
Impairment of producing
fields |
2 |
(1,100) |
(1,203) |
Total cost of sales |
|
(5,205) |
(3,504) |
|
|
------------- |
------------- |
Gross (loss)/ profit |
|
(3,000) |
374 |
|
|
|
|
Administrative expenses |
|
(977) |
(832) |
Finance income |
|
55 |
20 |
Finance expense |
|
(208) |
(244) |
|
|
------------- |
------------- |
Loss before taxation |
|
(4,130) |
(682) |
|
|
|
|
Taxation credit |
|
2,346 |
314 |
|
|
------------ |
------------- |
Loss for the year from continuing
operations |
|
(1,784) |
(368) |
|
|
------------- |
------------- |
Discontinued operations |
|
|
|
Profit for the year from
discontinued operations |
|
- |
933 |
|
|
------------- |
------------- |
(Loss)/profit for the year
attributable to the equity shareholders of the parent |
|
(1,784) |
565 |
|
|
|
|
Other comprehensive loss |
|
|
|
Those that may be reclassified to
profit and loss: |
|
|
|
Recycling of foreign
currency translation reserve on disposal of operations |
|
- |
(417) |
|
|
-------------- |
------------- |
Total comprehensive (loss)/income
for the year attributable to the equity shareholders of the
parent |
|
(1,784) |
148 |
|
|
========== |
========== |
(Loss)/earnings per
share (LPS/EPS) attributable to the equity shareholders of the
parent |
Note |
Pence
per share |
Pence per
share |
Basic and diluted LPS from
continuing operations |
|
(0.86)p |
(0.21)p |
Basic and diluted EPS from
discontinued operations |
|
- |
0.53p |
Basic and diluted (LPS)/EPS from
continuing and discontinued operations |
|
(0.86)p |
0.32p |
Consolidated statement of financial
position
As at 31 July |
|
2015 |
2014 |
|
Note |
£000 |
£000 |
Assets |
|
|
|
Non-current assets |
|
|
|
Intangible assets |
1 |
4,839 |
3,553 |
Property, plant and equipment |
2 |
1,562 |
3,046 |
|
|
------------- |
------------- |
Total non-current assets |
|
6,401 |
6,599 |
|
|
------------- |
------------- |
Current assets |
|
|
|
Inventories |
|
13 |
32 |
Trade and other receivables |
|
374 |
456 |
Cash and cash equivalents |
|
3,151 |
4,501 |
|
|
------------- |
------------- |
|
|
3,538 |
4,989 |
|
|
------------- |
------------- |
Total
assets |
|
9,939 |
11,588 |
|
|
========== |
========== |
Liabilities |
|
|
|
Current liabilities |
|
|
|
Trade and other payables |
|
(1,043) |
(970) |
Current tax liabilities |
|
(141) |
(220) |
Derivative |
|
(32) |
(35) |
Short-term borrowings |
|
(23) |
(22) |
Short-term provisions |
|
- |
(4) |
|
|
------------- |
------------- |
Total current
liabilities |
|
(1,239) |
(1,251) |
|
|
------------- |
------------- |
Non-current liabilities |
|
|
|
Long-term borrowings |
|
(141) |
(164) |
Deferred tax liabilities |
|
(109) |
(2,371) |
Long-term provisions |
|
(2,143) |
(1,959) |
|
|
------------- |
------------- |
Total non-current
liabilities |
|
(2,393) |
(4,494) |
|
|
------------- |
------------- |
Total liabilities |
|
(3,632) |
(5,745) |
|
|
------------- |
------------- |
Net assets |
|
6,307 |
5,843 |
|
|
========== |
========== |
Capital and reserves
attributable to equity holders
of the parent |
|
|
|
Share capital |
3 |
2,449 |
2,049 |
Share premium |
|
15,901 |
14,080 |
Merger reserve |
|
2,868 |
2,868 |
Retained deficit |
|
(14,911) |
(13,154) |
|
|
------------- |
------------- |
Total equity |
|
6,307 |
5,843 |
|
|
========== |
========== |
These financial statements were approved by the Board of
Directors and authorised for issue on 2
October 2015 and signed on its behalf by:
P Greenhalgh, Finance Director
Company registration number 5217946
Consolidated statement of changes in
equity
Attributable to the equity holders of the parent
|
Share
capital |
Share
premium |
Merger
reserve |
Foreign
exchange
reserve |
Retained
deficit |
Total
equity |
|
|
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
|
Balance at 1 August 2013 |
1,379 |
13,160 |
2,868 |
417 |
(15,921) |
1,903 |
Issue of share capital (net of
costs, note 20) |
670 |
920 |
- |
- |
2,120 |
3,710 |
Profit for the year attributable to
the equity shareholders of the parent |
- |
- |
- |
- |
565 |
565 |
Other comprehensive loss for the
year |
- |
- |
- |
(417) |
- |
(417) |
Share based payment (note 21) |
- |
- |
- |
- |
82 |
82 |
|
------------- |
------------- |
------------- |
------------- |
------------- |
------------- |
Balance at 31 July 2014 |
2,049 |
14,080 |
2,868 |
- |
(13,154) |
5,843 |
|
========== |
========== |
========== |
========== |
========== |
==========
|
|
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
Balance at 1 August 2014 |
2,049 |
14,080 |
2,868 |
- |
(13,154) |
5,843 |
Issue of share capital (net of
costs, note 20) |
400 |
1,821 |
- |
- |
- |
2,221 |
Loss for the year attributable to
the equity shareholders of the parent |
- |
- |
- |
- |
(1,784) |
(1,784) |
Share based payment (note 21) |
- |
- |
- |
- |
27 |
27 |
|
------------- |
------------- |
------------- |
------------- |
------------- |
------------- |
Balance at 31 July 2015 |
2,449 |
15,901 |
2,868 |
- |
(14,911) |
6,307 |
|
========== |
========== |
========== |
========== |
========== |
========== |
Consolidated statement of cash
flows
For the year ended 31 July |
|
2015 |
2014 |
|
Note |
£000 |
£000 |
Cash flows from operating
activities |
|
|
|
Loss after tax from continuing
operations |
|
(1,784) |
(368) |
Adjustments for: |
|
|
|
Share based payments |
|
27 |
82 |
Depreciation |
|
386 |
475 |
Exploration write-off |
1 |
2,205 |
- |
Impairment of property, plant &
equipment |
2 |
1,100 |
1,203 |
Disposal of fixed asset |
2 |
2 |
- |
Finance income |
|
(55) |
(20) |
Finance expense |
|
208 |
244 |
Taxation credit |
|
(2,346) |
(314) |
Decrease in trade and other
receivables |
|
79 |
184 |
Decrease in inventories |
|
19 |
1 |
Decrease in trade and other
payables |
|
(102) |
(60) |
|
|
------------- |
------------- |
Cash (used in)/generated from
continuing operations |
|
(261) |
1,427 |
|
|
|
|
Profit after taxation from
discontinued operations |
|
- |
933 |
Adjustments for: |
|
|
|
Profit on disposal |
|
- |
(1,034) |
|
|
------------- |
------------- |
Cash used in discontinued
operations |
|
- |
(101) |
|
|
|
|
Income tax payment |
|
- |
(537) |
|
|
------------- |
------------- |
Net cash (used in)/from operating
activities |
|
(261) |
789 |
|
|
========== |
========== |
Cash flows from investing
activities |
|
|
|
Purchase of property, plant and
equipment |
|
(4) |
(3) |
Purchase of intangible assets |
|
(3,394) |
(514) |
Receipt of back costs in connection
with farm-in |
|
- |
300 |
Expenditure on well
decommissioning |
|
(4) |
(363) |
Interest received |
|
7 |
6 |
|
|
------------- |
------------- |
Net cash used in investing
activities |
|
(3,395) |
(574) |
|
|
========== |
========== |
Cash flows from financing
activities |
|
|
|
Proceeds from issue of share capital
(net of issue costs) |
3 |
2,221 |
3,710 |
Increase in payables relating to
share capital issue costs |
|
71 |
- |
Repayment of borrowings |
|
(22) |
(22) |
Finance costs |
|
(18) |
(25) |
|
|
------------- |
------------ |
Net cash from financing
activities |
|
2,252 |
3,663 |
|
|
========== |
========== |
|
|
|
|
Net (decrease)/increase in
cash and cash equivalents |
|
(1,404) |
3,878 |
Exchange gain/(loss) on cash and
cash equivalents |
|
54 |
(49) |
Cash and cash equivalents at
beginning of year |
|
4,501 |
672 |
|
|
------------- |
------------- |
Cash and cash equivalents at end
of year |
|
3,151 |
4,501 |
|
|
========== |
========== |
Notes
1
Intangible assets
Intangible assets - Group |
2015 |
2014 |
|
£000 |
£000 |
At 1 August |
3,553 |
2,446 |
Additions |
3,491 |
1,107 |
Exploration write-off |
(2,205) |
- |
|
------------- |
------------- |
At 31 July |
4,839 |
3,553 |
|
========== |
========== |
Intangible assets comprise the Group’s pre-production
expenditure on licence interests as follows:
|
2015
£000 |
2014
£000 |
France (Béarn des Gaves permit) |
1,160 |
1,083 |
Ireland (FEL 2/13) |
149 |
59 |
Ireland (FEL 3/13) |
318 |
106 |
UK PEDL143 (Holmwood) |
681 |
519 |
UK PEDL180 (Wressle) |
2,270 |
842 |
UK PEDL181 |
43 |
729 |
UK PEDL182 (Broughton) |
218 |
215 |
|
------------- |
------------- |
Total |
4,839 |
3,553 |
|
========== |
========== |
Exploration write-off |
|
|
PEDL181 (Kiln Lane) |
2,205 |
- |
|
- |
------------- |
Total |
2,205 |
- |
|
========== |
========== |
The UK PEDL143 exploration licence carries a well commitment in
2016. If the Group elects to continue with this licence, it will
need to fund the drilling of a well by raising funds or by farming
down. If the Group is not able to raise funds, farm-down, or extend
the PEDL143 licence; or elects not to continue in any other
licence, then the impact on the financial statements will be the
impairment of some or all of the intangible assets disclosed
above.
In PEDL181, the Kiln Lane exploration well spudded in
February 2015 and reached a total
depth of 2,291m in March 2015.
Sandstone reservoirs were penetrated in accordance with the
pre-drill geological forecast but these proved to be water wet. The
well was plugged and abandoned and the accumulated cost of seismic
and the well have been written off.
2
Property, plant and equipment
Property, plant & equipment - Group
|
Furniture &
computers |
Leasehold
building |
Producing
fields |
Total |
|
£000 |
£000 |
£000 |
£000 |
Cost |
|
|
|
|
At 1 August 2013 |
45 |
- |
10,785 |
10,830 |
Additions |
3 |
- |
- |
3 |
Transfer from assets held for
resale |
- |
437 |
- |
437 |
|
------------- |
------------- |
------------- |
------------- |
At 31 July 2014 |
48 |
437 |
10,785 |
11,270 |
|
|
|
|
|
Additions |
4 |
- |
- |
4 |
Disposal |
(2) |
- |
- |
(2) |
|
------------- |
------------- |
------------- |
------------- |
At 31 July 2015 |
50 |
437 |
10,785 |
11,272 |
|
========== |
========== |
========== |
========== |
Depreciation, depletion and
impairment |
|
|
|
|
At 1 August 2013 |
31 |
- |
6,416 |
6,447 |
Charge for year |
9 |
- |
466 |
475 |
Impairment in year |
- |
- |
1,203 |
1,203 |
Transfer from assets held for
resale |
- |
99 |
- |
99 |
|
------------- |
------------- |
------------- |
------------- |
At 31 July 2014 |
40 |
99 |
8,085 |
8,224 |
|
|
|
|
|
Charge for year |
4 |
23 |
359 |
386 |
Impairment |
- |
- |
1,100 |
1,100 |
|
------------- |
------------- |
------------- |
------------- |
At 31 July 2015 |
44 |
122 |
9,544 |
9,710 |
|
========== |
========== |
========== |
========== |
Net Book Value |
|
|
|
|
At 31 July 2013 |
14 |
- |
4,369 |
4,383 |
|
========== |
========== |
========== |
========== |
At 31 July 2014 |
8 |
338 |
2,700 |
3,046 |
|
========== |
========== |
========== |
========== |
At 31 July 2015 |
6 |
315 |
1,241 |
1,562 |
|
========== |
========== |
========== |
========== |
The producing fields referred to in the table above are the
production assets of the Group, namely the oilfields at Crosby
Warren and West Firsby, and the Group’s interest in the Whisby W4
well, representing three of the Group’s cash generating units.
The carrying value of each producing field was tested for
impairment by comparing the carrying value with the value in use.
The value in use was calculated using a discounted cash flow model
with production decline rates of 7-10%, Brent crude prices rising
from $65/bbl in 2016 to $110 in 2020 and a pre-tax discount rate of 37%.
The pre-tax discount rate is derived from a post-tax rate of 10%,
and is high because of the applicable rate of tax in the UK. Cash
flows were projected over the expected life of the fields which is
expected to be longer than 5 years.
There was an impairment of £1,100,000 (2014: £1,203,000)
relating to the West Firsby site but no impairment at the Crosby
Warren site or in respect of the Whisby W4 well. The main reason
for the impairment of the West Firsby site was lower assumed oil
prices combined with reduced reserves and production rate.
Sensitivity to key assumption changes
Variations to the key assumptions used
in the value in use calculation would cause further impairment of
the producing fields as follows:
|
Impairment of
producing fields
£000 |
Production decline rate (current
assumption 7-10%) |
|
10% |
112 |
15% |
521 |
Brent crude price per
barrel (current assumption US$65/bbl in 2016 rising
to US$110 in 2020) |
|
10% reduction in the assumed forward
price |
275 |
20% reduction in the assumed forward
price |
617 |
3 Called up
share capital
|
2015 |
2014 |
|
£000 |
£000 |
Allotted, called up and fully
paid ordinary shares of 1p |
|
|
At 1 August 204,883,024 shares
(2014: 137,855,504) |
2,049 |
1,379 |
Issued in the year 40,004,987 shares
(2014: 67,027,520) |
400 |
670 |
|
------------- |
------------- |
At 31 July 244,888,011 shares (2014:
204,883,024) |
2,449 |
2,049 |
|
========== |
========== |
|
Date |
Type of
issue |
Number of
shares |
Issue
price |
Raised net
of costs |
Nominal
value |
|
|
|
|
|
£000 |
£000 |
Ordinary shares issued 2015 |
10 July 2015 |
Placing |
20,000,000 |
6p |
1,059 |
200 |
|
24 July 2015 |
Placing |
2,630,000 |
6p |
150 |
26 |
|
24 July 2015 |
Open offer |
17,374,987 |
6p |
1,012 |
174 |
|
|
|
========== |
|
========== |
========== |
|
|
|
40,004,987 |
|
2,221 |
400 |
|
|
|
========== |
|
========== |
========== |
Ordinary shares issued 2014 |
10 January 2014 |
Placing |
47,694,665 |
6p |
2,597 |
477 |
|
21 January 2014 |
Open offer |
19,332,855 |
6p |
1,113 |
193 |
|
|
|
========== |
|
========== |
========== |
|
|
|
67,027,520 |
|
3,710 |
670 |
|
|
|
========== |
|
========== |
========== |
All of the allotted shares are ordinary shares of the same class
and rank pari passu.
* * ENDS * *
For further information please visit www.europaoil.com or
contact:
Hugh Mackay
Europa Oil & Gas (Holdings) plc
+44 (0) 20 7224
3770
Phil Greenhalgh
Europa Oil & Gas (Holdings) plc
+44 (0) 20 7224
3770
Matt Goode
finnCap Ltd
+44 (0) 20 7600 1658
Henrik Persson
finnCap Ltd
+44 (0) 20 7600 1658
Frank Buhagiar
St Brides Media and Finance Ltd
+44 (0) 20 7236
1177
Lottie Brocklehurst
St Brides Media and Finance Ltd
+44 (0) 20 7236
1177
Notes
Europa Oil & Gas (Holdings) plc has a diversified portfolio
of multi-stage hydrocarbon assets that includes production,
exploration and development interests, in countries that are
politically stable, have transparent licensing processes, and offer
attractive terms. In 2015 Europa produced 141 boepd.
Its highly prospective exploration projects include the
Wressle discovery (recently drilled and tested at an aggregate of
710 boepd from 4 zones) in the UK; 100% owned gas exploration
prospect (107 bcf) and appraisal project (CPR 277 bcf) in onshore
France a joint venture with
Vermillion Energy also in onshore France; and two licences in offshore
Ireland with the potential to host
gross mean un-risked Prospective Resources approximately 1.7
billion barrels across both licences.
Qualified Person Review
This release has been reviewed by Hugh
Mackay, Chief Executive of Europa, who is a petroleum
geologist with 30 years' experience in petroleum exploration and a
member of the Petroleum Exploration Society of Great Britain, American Association of
Petroleum Geologists and Fellow of the Geological Society. Mr
Mackay has consented to the inclusion of the technical information
in this release in the form and context in which it appears.