Europa Oil & Gas (Holdings) plc /
Index: AIM / Epic: EOG / Sector: Oil & Gas
17 October 2018
Europa Oil &
Gas (Holdings) plc (‘Europa’ or ‘the Company’)
Final Results for
the year to 31 July 2018
Europa Oil & Gas (Holdings) plc, the UK and Ireland focussed oil and gas exploration,
development and production company, announces its final results for
the 12 month period ended 31 July
2018.
The full Annual Report and Accounts will be available shortly on
the Company’s website at www.europaoil.com and will be mailed in
November 2018 to those shareholders
who have requested a paper copy.
Operational highlights
Offshore Ireland
- Six prospects with combined potential of 2.5 trillion cubic
feet (‘tcf’) of Gas Initially In Place (‘GIIP’) mapped on LO 16/20
in the Slyne basin.
- Completed Pre-Stack Depth Migration (‘PSDM’) reprocessing of
1,548km2 3D seismic covering FEL 1/17 and FEL 3/13, in the
South Porcupine. Prospect
inventory upgraded to 3.5 billion boe gross mean unrisked
prospective resources (‘GMUPR’) in six prospects.
- Completed PSDM reprocessing of 950 km2 3D seismic over FEL
2/13. Prospect inventory identified 817mmboe GMUPR in three top
ranked prospects.
- Porcupine virtual data room (‘VDR’) and farmout process
opened.
- Commenced PSDM reprocessing of 770 km2 3D seismic data over LO
16/20 and preliminary drilling planning for a possible 2019
exploration well on the Inishkea prospect.
- Completed 976 km2 3D seismic acquisition over Cairn Energy
operated LO 16/19.
UK
- PEDL180 (Wressle) the Planning Inspectorate rejected an appeal
against North Lincolnshire County Council Planning Committee’s
decision to reject a planning application for the Wressle oil
development. A new planning application for the Wressle oil
development has been submitted to North Lincolnshire County Council
and is in the review process.
- The application to extend planning permission at the Wressle
site was refused by the planning committee; an appeal against this
decision has been submitted to the Planning Inspectorate.
Financial
- Group revenue of £1.6m (2017: £1.6m)
- Exploration write-off £1.3m (2017: nil)
- Pre-tax loss of £2.3m (2017: loss £0.7m)
- Post-tax loss for the year £2.6m (2017: loss £0.5m)
- Cash used in operating activities £0.48m (2017: cash used
£0.26m)
- Net cash balance as at 31 July
2018 £1.8m (31 July 2017:
£3.6m)
Post reporting date events
- PEDL143 (Holmwood) the Secretary of State for Environment, Food
and Rural Affairs, decided not to renew the lease at Bury Hill
Wood, Coldharbour Lane leading to a withdrawal of the planning
application to drill from the site.
Europa’s CEO, Hugh Mackay, said
“Europa has made a large technical and financial investment across
virtually its whole Atlantic Ireland portfolio. This has involved
three substantial 3D PSDM seismic reprocessing projects that
started in January 2017 and will
complete in October 2018.
“Two South Porcupine reprocessing projects have been completed
and have resulted in new prospect inventories for our three
operated Porcupine licences, 4.3 billion barrels GMUPR and six
drill ready prospects. Our farmout process commenced in
July 2018 and the target market of
supermajors, majors and large independents are in the virtual and
physical datarooms (VDR and PDR). We are encouraged by the recent
farm-in of ExxonMobil to Nexen in FEL 3/18 and note that their 2019
Iolar well has the potential to de-risk 1 billion boe in five
Europa pre-rift prospects in the basin.
“Our Inishkea reprocessing project is nearing completion and the
new prospect inventory will be issued in December, at which point
the new VDR and PDR will be opened to potential farminees. We are
looking to drill as early as 2019, subject to industry or financial
partnering and we have been sufficiently encouraged by the
positive results to commence both the well planning and site survey
preparation necessary for a 2019 spud. With the Corrib gas field
going into decline and Ireland’s demand for both gas and
electricity forecast to increase in response to its vibrant economy
we believe there is a window of opportunity for gas that we must
seize at Inishkea.
“Elsewhere, our existing UK onshore production continues to
generate meaningful revenues which at current oil prices more than
cover our operational expenses. We are hopeful these are set
for a major boost in the year ahead should the planning application
to develop the Wressle oil discovery in the East Midlands be
approved. At an estimated gross rate of 500bopd, Wressle
would more than double our net output to around 240 bopd which, at
today’s oil prices, would provide us with a highly cash generative
platform with which to invest in other projects. This could include
new ventures which we are actively pursuing. Together with
ongoing discussions with potential partners for our Atlantic
Ireland licences, there is much activity taking place focused on
generating significant value for our shareholders.”
Chairman's statement
For an explorer and producer such as Europa, drilling wells is a
key value driving activity. While Europa did not participate
in drilling activity during the review period, considerable
technical work has been undertaken across our asset base to make
our prospects drill ready. We have initiated the planning phase for
drilling what could be a transformational well on our Inishkea
prospect in the Slyne Basin, offshore Ireland as early as 2019. Our intention
is to participate in not one, but a series of high impact wells
offshore Ireland and we have
therefore been focused on building a pipeline of drill-ready
opportunities, each of which has game-changing potential. I
am pleased to report that we are on target to exceed the six drill
ready prospects by the end of 2018 foreseen in our last Annual
Report and Accounts.
Offshore Ireland
With six licences covering an area of 4,985 km2 and containing
over 30 prospects that potentially hold GMUPR of more than 6.4
billion barrels of oil equivalent and 2.5 tcf of GIIP, Europa has
an industry-leading position in Atlantic Ireland. For an oil
and gas company of Europa’s size to be actively involved in opening
up an emerging hydrocarbon region alongside supermajors, majors and
large independents such as Exxon, Nexen, Equinor, TOTAL, Woodside
and Cairn Energy, is a considerable achievement and one which we
intend to build on.
During the year and post period end, technical work programmes
have been undertaken across our offshore Ireland portfolio. The objective, specifically
for our South Porcupine and Slyne
licences, has been to de-risk existing prospects and leads and
deliver drill-ready targets. Though work is ongoing, this programme
has been highly successful and today Europa has six drill-ready
targets, with more expected by the end of the year. We are
now in a position to embark on the next phase of exploration in
Atlantic Ireland, namely drilling.
In line with this, planning is underway to drill a potentially
transformational well as early as 2019 on LO 16/20 in the Slyne
Basin, the Group’s flagship licence where multiple structures with
potentially over 2.5 tcf GIIP have been mapped. The
combination of a robust geological model that has undergone
rigorous technical scrutiny, the targeting of a gas play that has
been proven up by the nearby producing Corrib field and the Shell
18/20-7 gas discovery well drilled in 2010, the close proximity to
infrastructure, and relatively low drilling costs due to shallow
water depths, all make LO 16/20 a compelling investment. We
are therefore focusing on securing industry or financial partners
at the project level to enable operations to commence as soon as
possible.
Elsewhere work on FELs 2/13, 3/13 and 1/17 in the South Porcupine has been centred on upgrading
previously mapped prospects to drill-ready status so that once
partners are in place, well planning and drilling can
commence. The results have exceeded expectations. Not
only has the multi-billion barrel prospectivity of the licences
been confirmed and drill-ready targets been defined for each of the
licences, but the definition of the structures and geology have
been greatly enhanced. The very positive response by the
industry to the formal launch of the farmout in July 2018 suggests we are not alone in being
impressed by the results.
Subject to farmouts being secured and in line with our strategy,
shareholders could soon be exposed to a series of high impact wells
offshore Ireland. Furthermore, following a major seismic
acquisition programme over the last few years, other operators are
moving forward with their own drilling plans. Nexen, for example,
is due to drill a well in FEL 3/18 during 2019. Our licences
feature all the plays being targeted, including the Cretaceous Fan
play (a prolific producer offshore West
Africa), the Cretaceous Shelf (which has yielded large
discoveries offshore Senegal), the
pre-rift play (from which 15 billion barrels have already been
produced from the UKCS Brent Province) and the Syn-Rift play (which
has attracted considerable investment offshore Newfoundland). As a result, Europa
stands to benefit from any and all successes in Atlantic
Ireland.
Onshore UK
During the year under review, Europa’s production averaged 94
boepd from three fields in the East Midlands petroleum province,
confirming Europa’s position as the third largest onshore UK oil
producer. We constantly strive to increase our production,
not just by making new discoveries, but also by evaluating and
implementing initiatives to increase production and recovery rates
at our existing oil fields. A number of operational
initiatives are underway and we hope to be in a position to report
the results later in 2018.
Bringing new discoveries online offers the potential to step up
production rates. With this in mind, we had hoped the Wressle
discovery would be brought onstream in the first half of 2018 at an
estimated rate of 500 bopd gross. At this level, our 30%
interest would have resulted in more than a doubling of our net
production to over 240 boepd. Following two unsuccessful
planning applications to develop the field in 2017, both of which
had been recommended by North Lincolnshire Council’s own planning
officers, Wressle remains undeveloped. A new application has since
been submitted by the operator, Egdon Resources, and a decision by
the Council’s Planning Committee is expected later in 2018.
The partners are confident that this latest plan comprehensively
deals with all outstanding issues and that this lucrative low risk
development opportunity will soon gain the necessary approvals to
enable it to be brought on stream without further delay.
There has been disappointment for our Holmwood prospect on
PEDL143 which lies close to the Horse Hill discovery and Brockham
field in the Weald Basin. Post period end the Secretary of State
for Environment, Food and Rural Affairs declined to renew the lease
for the drill site. As a consequence we have had to withdraw our
application to extend planning permission to drill from the Bury
Hill Wood site. The plan now is to evaluate PEDL143’s remaining
prospectivity and develop a forward plan for the licence in
conjunction with our partners.
New licence areas
In the year we have evaluated a number of new opportunities
outside our existing portfolio. These have been at various stages
of development and I am pleased to report that following completion
of a comprehensive new country screening study an application has
been made for a high impact exploration licence that has technical
synergy with our existing Atlantic margin portfolio. We shall
continue to seek projects that will add value, diversity and
strength to Europa’s portfolio.
Board Changes
In January 2018, changes were made
to the Board, including my appointment as Non-Executive Chairman
following Colin Bousfield’s decision to step down from this role. I
am a petroleum engineer with a background in senior oil and gas
management, deal evaluation and execution, fundraising and investor
relations most recently with Gemini Oil and Gas and Enterprise Oil.
Brian O’Cathain, a geologist and petroleum engineer, was also
appointed as a Non-Executive Director. He has held senior technical
and commercial roles in major E&P companies, including Shell
International, Enterprise Oil and Tullow Oil and gained first-hand
knowledge of Corrib and the Slyne Basin when he was Managing
Director of Enterprise Oil Ireland with responsibility for
advancing Corrib towards development. Together we look forward to
continuing our contribution to the exciting future of Europa.
Outlook
A significant part of Europa’s strategy is high impact
exploration centred on gaining early entry into new plays,
undertaking comprehensive technical work to identify and de-risk
targets to the point of drilling and then securing partners to take
licences forward. Having built up an industry leading licence
position in the emerging hydrocarbon hotspot that is Atlantic
Ireland and having subsequently established an inventory of
high-grade prospects in various plays that is attracting the
attention of industry heavyweights, Europa’s management and
technical teams have shown they can deliver. The Board is
therefore keen to replicate this success elsewhere and as a result
new ventures that complement Europa’s existing skillset and
portfolio offshore Ireland and
onshore UK licences are being pursued.
Much work still remains to be done across our existing assets,
notably securing partners with whom we can drill wells in the
South Porcupine and also
completing well planning in the proven Slyne Basin so that we are
in a position to drill. A considerable amount of activity is
taking place both inside and outside our existing portfolio and I
look forward to providing further updates during the year ahead, as
we focus on exposing our shareholders to multiple value additive
opportunities in a cost and risk efficient manner.
I would like to thank the management, employees, consultants and
operational personnel for their dedicated work and also the Board
for their support and help with the changes during the year.
Finally, may I thank our shareholders for their steadfast
support over the past year when we have seen the beginnings of a
recovery in our industry which I believe will be to the ultimate
benefit of Europa.
Simon Oddie
Chairman
Operations
Offshore Ireland:
Exploration
Europa’s portfolio of six licences in Atlantic Ireland covers an
area of over 4,985 km2, includes six play types in three basins and
contains over 30 prospects and leads that potentially hold over 6.4
billion barrels GMUPR of oil and 2.5 tcf of gas (GIIP).
The region has seen considerable activity and investment by
supermajors, majors and leading independents in recent years.
Specifically, ~30,000 km2 of 3D seismic has been acquired by blue
chip operators such as Exxon, Woodside, Nexen, Cairn and Equinor as
part of work programmes centred on de-risking a diverse range of
plays that have proven to be prolific elsewhere in the North and
South Atlantic margins. In the South Porcupine Basin, these include the
Cretaceous Fan and Shelf plays which are considered to be analogous
to the Jubilee and Mahogany oil fields in the equatorial Atlantic
Margin province and Cairn’s SNE discovery, offshore Senegal; the Pre-rift that is analogous to the
North Sea Brent Province and Syn-rift plays that are analogous to
the Flemish Pass play offshore Newfoundland. Meanwhile due to
the producing Corrib gas field, Triassic gas is a proven play in
the Slyne basin. Europa has a diversified prospect portfolio
and is exposed to all these hydrocarbon plays. Any success in the
region by other operators is therefore expected to have a positive
read across for the Company.
The acquisition and interpretation of substantial volumes of 3D
seismic data by the industry has taken place over the last five
years and represents the first phase of exploration in the Irish
Atlantic Margin. The next five-year stage is likely to involve a
sustained period of drilling activity, starting in 2019 with Nexen
testing the Iolar prospect on FEL 3/18. Europa intends to
play an active role in this drilling phase, initially at its
flagship Inishkea gas exploration project near the Corrib gas field
in LO 16/20. Here the Company has identified 2.5 tcf of GIIP across
six prospects on the licence. In parallel with ongoing work to
upgrade the prospects on LO 16/20 to drill ready status, planning
has commenced with a view to drilling a well in 2019.
Outside LO 16/20, during the period a substantial 2,498 km2
Pre-Stack Depth Migration (“PSDM”) 3D seismic reprocessing project
was completed over the Company’s three operated licences in the
South Porcupine, FELs 2/13, 3/13
and 1/17. Following this work, Europa now has six drill-ready
targets in the basin: Kiely East and
Kiely West in FEL 2/13, Beckett and
Wilde in FEL 3/13 and Edgeworth and Ervine in FEL 1/17. Our
top ranked prospects for site survey and drilling are Kiely East, Wilde and Edgeworth. A virtual data
room for prospective farminees was opened in July 2018 with the objective to secure partners
to drill wells on the Company’s Porcupine licences. Target
farminees are supermajors, majors and large independents and they
are currently active in both the physical and virtual data
rooms.
Slyne Basin: LO 16/20 (Inishkea)
LO 16/20 is located in the Slyne Basin adjacent to the producing
Corrib gas field. Unlike licences in the South Porcupine Basin, LO 16/20 is very much
exploration in a proven basin comprised of Triassic sandstone
reservoirs in tilted fault block structures, with gas generated
from Carboniferous source rocks. In 2010, Shell drilled the 18/20-7
exploration well into the Corrib North structure on LO 16/20, 7 km
from the Corrib gas field. Recently released well data has
revealed that the well encountered a 70m gas column in the same Triassic sandstone
reservoir as the Corrib field. As drilling was terminated in
the reservoir, Europa believes the full gas column could be up to
170m and the surface area of the
structure could extend to 5.75 km2. The presence of a gas reservoir
substantially de-risks not just Corrib North but other prospects on
the licence.
Based on the interpretation of historic 3D and 2D seismic,
Europa has to date identified 2.54 tcf GIIP in six prospects and
leads in the Triassic Gas hydrocarbon play on LO 16/20 (see
table):
Prospect |
GIIP (tcf) |
Corrib North discovery |
0.04 |
Inishkea |
1.10 |
Inishkea NW |
1.09 |
Inishkea W |
0.21 |
Corrib NW |
0.03 |
Bofin lead |
0.07 |
Total |
2.54 |
The over 2 tcf of prospective GIIP on LO 16/20 is likely to
result in significant prospective resources assuming the 80%
recovery factor achieved at Corrib is appropriate. The Inishkea
prospects are in relatively shallow water in a proven gas play some
18 km from the Corrib gas field and associated infrastructure
connecting it to the 350 million cubic feet of gas per day
Bellanaboy gas processing plant. The Corrib field production
is currently in decline and spare capacity may become available in
the Corrib gas infrastructure well before any LO 16/20 discovery
would be developed. LO 16/20 offers low risk, high impact
exploration prospects that can be potentially fast tracked to
commercialisation. As a result, during the year under review
the Inishkea prospects were upgraded by the Group to flagship
status.
The objective is to be able to drill a well on LO 16/20 in
2019. To get to this point, various work streams are being
run concurrently to upgrade the prospects to drill ready status,
oversee well planning, find a rig and secure funding
partners. PSDM reprocessing of the existing 3D seismic is
being undertaken to upgrade the quality of the data, deliver a new
prospect inventory and de-risk the prospects. Reprocessing started
in March 2018 and remains on course
to be completed on schedule and on budget in Q4 2018. At this
point and subject to the results, a drill location for an Inishkea
exploration well will be identified and we anticipate adding
further drill ready prospects to the six already identified in the
South Porcupine. OPC, a specialist
subsurface and production engineering group, has been engaged for
porosity and permeability modelling, development scenarios and
costings.
Given these circumstances, the Company is confident its dual
focused strategy to fund an Inishkea exploration well will be
successful either by securing industry partners via a conventional
farmout or financial partners investing directly into the Company’s
wholly owned subsidiary Europa Oil & Gas (Inishkea)
Limited.
South
Porcupine Basin: FELs 1/17, 2/13 and 3/13
Europa holds four licences in the South Porcupine Basin.
These include three operated licences, FELs 1/17, 2/13 and 3/13,
which are estimated to hold gross mean un-risked prospective
resources of 4.3 billion barrels of oil equivalent (boe) across our
top nine prospects, including firm drilling targets Edgeworth in
FEL 1/17, Wilde in 3/13 and Kiely
East in 2/13. The above volumetrics are utilise prospect
mapping based on the 2017 and 2018 reprocessed PSDM 3D seismic data
originally acquired in 2013. This has resulted in a marked
improvement in seismic quality and a substantial de-risking of the
prospect inventory. The table below summarises the GMUPR
across selected prospects in FELs 1/17, 2/13 and 3/13 in the
South Porcupine Basin:
Licence |
Prospect |
Play |
Gross Un-risked Prospective Resources |
|
mmboe* |
|
Low |
Best |
High |
Mean |
|
FEL 1/17 |
Ervine |
Pre-rift |
63 |
159 |
363 |
192 |
|
FEL 1/17 |
Edgeworth |
Pre-rift |
49 |
156 |
476 |
225 |
|
FEL 1/17 |
Egerton |
Syn-rift |
59 |
148 |
301 |
167 |
|
|
|
|
|
|
|
|
|
FEL 3/13 |
Beckett |
mid-Cretaceous
Fan |
111 |
758 |
4229 |
1719 |
|
FEL 3/13 |
Shaw+ |
mid-Cretaceous
Fan |
20 |
196 |
1726 |
747 |
|
FEL 3/13 |
Wilde |
Early Cretaceous
Fan |
45 |
241 |
1082 |
462 |
|
|
|
|
|
|
|
|
|
FEL 2/13 |
Kiely East + |
Pre-rift |
52 |
187 |
612 |
280 |
|
FEL 2/13 |
Kiely West + |
Pre-rift |
23 |
123 |
534 |
225 |
|
FEL 2/13 |
Kilroy+ |
Cret. Slope Apron |
37 |
177 |
734 |
312 |
|
|
|
|
|
|
|
|
|
Total |
4,329 |
|
*million barrels of oil equivalent. The hydrocarbon system
is considered an oil play and mmboe is used to take account of
associated gas. However, due to the significant uncertainties
in the available geological information, there is a possibility of
gas charge. |
|
|
+prospect extends outside licence, volumes are
on-licence |
|
The new PSDM datasets for FEL 3/13, FEL 1/17 and FEL 2/13 from
reprocessing completed in October
2017 and May 2018 has not only
resulted in changes to the respective prospect volumes but, by
significantly improving the accuracy of the maps, have
substantially increased the company’s confidence in the
numbers. For example, the reprocessed data provided new
insights into the Cretaceous fan prospects including the best
evidence yet of hydrocarbons including updip pinchout, a gas-oil
contact and conformance to structure.
The completion of the PSDM programme and new prospect inventory
acted as the trigger for the opening of a virtual data room for
prospective farminees to our three South
Porcupine licences. Despite only launching in July 2018, the company has been highly encouraged
by the numbers of companies who have already entered or are seeking
access to both the physical and virtual data rooms.
The 2019 Nexen well in FEL 3/18 will drill the Iolar prospect.
We understand that this is a pre-rift play. Europa has five
pre-rift prospects in FEL 2/13 and FEL 1/17 with combined GMUPR of
just over 1 billion boe. If Iolar is successful there may be
positive technical and commercial read across resulting in a
de-risking of Europa’s prospects.
South
Porcupine Basin: LO 16/19
Europa holds a 30% interest in the Cairn-operated LO 16/19 on
the west side of the South
Porcupine. 3D seismic was acquired in mid-2017 and delivery
of a final processed product is expected in Q4 2018 leading to a
prospect inventory in 2019. Following the farm-out in April 2017, Europa is carried on this work
programme by Cairn Energy up to a cap of US$6 million.
Padraig Basin: LO 16/22
LO16/22 is located in the Padraig Basin on the eastern margin of
the Rockall Trough. The most relevant analogue for Padraig, which
is a remnant Jurassic basin, is the conjugate margin play offshore
Newfoundland in the Flemish Pass
basin and which hosts the 300 million barrel Bay du Nord oil
discovery made in 2013. While the South
Porcupine Basin is also a possible analogue for the Flemish
Pass basin, Europa’s restoration of the conjugate margin prior to
the spreading of the Atlantic seafloor suggests Padraig could be a
better fit. Recent geochemical studies on light oil recovered from
seabed cores show the presence of the bisnorhopane biomarker and
indicates an affinity with Late Jurassic sourced oil similar to the
Dooish discovery in Rockall and West of Shetland oil
fields.
Structures of significant size have been mapped on 2D seismic
acquired in 1998, along with multiple leads in both pre-rift and
syn-rift hydrocarbon plays in water depths ranging from
800m to 2,000m. Gross mean un-risked indicative resources
are estimated to be approximately 500 million boe. Work is
underway to mature the leads to prospect status using historic 2D
seismic and building on the high-quality technical work previously
conducted by major oil companies.
Slyne Basin: LO 16/21
Following completion of the agreed work programme, including a
full technical assessment, Europa concluded that the prospectivity
of LO 16/21 was limited. Europa believes that the licence would
compete poorly with other prospects in Atlantic Ireland and be
unlikely to attract drilling funds in the short to medium term. On
that basis, we decided to relinquish the licence.
Relinquishment became effective 30 June
2018. Accumulated expenditure of £97,000 was written off in
the period.
UK - Onshore Production
East Midlands: West Firsby; Crosby
Warren; Whisby-4
Europa produces from three oilfields in the East Midlands: West
Firsby (100% working interest); Crosby Warren (100% working
interest); and the Whisby-4 well (65% non-operated interest).
During the twelve months to 31 July
2018, 94 boepd were recovered from the three fields (2017:
113 boepd) with all the oil transported by road to the Immingham
refinery. In terms of UK onshore oil production (excluding gas)
Europa ranks third behind the Wytch Farm Group and IGas.
At current oil prices the company’s existing production covers
our operating overhead. Initiatives are underway to increase
production at the existing operated oil fields at Crosby Warren and
West Firsby. This work is expected to be completed in the
fourth quarter of 2018.
UK - Development
East Midlands: PEDL180 (Wressle);
PEDL182 (Broughton North)
The Wressle oil discovery is located on PEDL180 which lies on
the same structural trend as, and 5km southeast of, Europa’s
producing Crosby Warren field. The Wressle-1 conventional
exploration well was drilled in August
2014 and production testing in 2015 delivered a combined
flowrate of over 700 boepd from three reservoir intervals: Ashover
Grit; Wingfield Flags; and Penistone Flags. Reservoir engineering
analyses indicate an initial production flow rate of 500 bopd gross
from the Ashover Grit interval at Wressle. The Broughton North
exploration prospect on PEDL182 lies adjacent and north of
PEDL180. In 1984, a well drilled by BP discovered oil at
Broughton.
A CPR undertaken in 2016 by ERCE assigned gross 2P reserves of
0.65 million boe to the Wressle structure in the Ashover and
Wingfield Flags and gross 2C contingent resources of 1.86 million
boe in the Penistone Flags. The CPR also assigned gross mean
un-risked prospective resources of 0.6 million boe and a geological
chance of success of 50% to Broughton North.
In January 2018 the Planning
Inspectorate rejected an appeal by the partnership against North
Lincolnshire Council Planning Committee’s decision to refuse
planning permission for the Wressle oil development. A new planning
application for the Wressle oil field development was submitted in
July 2018 by the operator Egdon
Resources. This is currently being processed by North Lincolnshire
Council’s planning officers ahead of their recommendation being
made to the Council’s Planning Committee, expected later in
2018. A separate application to extend planning consent at
the Wressle site to 1 August 2019 was
also submitted but, despite being recommended for approval by the
Council’s planning officers, was refused by the Planning Committee
in August 2018. The partners have submitted an appeal against
this refusal to the Planning Inspectorate.
We have considered the possible impairment of the PEDL180 asset
in the light of the planning decisions. The Council’s professional
planning officers have consistently recommended the development for
approval and we continue to believe that the case for a development
of the Wressle discovery is strong and the partnership is committed
to bringing the field into production.
Europa holds a 30% working interest in PEDLs 180 and 182. On
24 November 2016, Europa agreed the
sale of a 10% interest in the two licences to Upland
Resources. Completion of the sale was subject to planning and
Field Development Plan (“FDP”) approvals. Following the
decision by the Planning Inspector in January 2018 to reject the appeals by the
operator Egdon against the two planning refusals by North
Lincolnshire County Council’s Planning Committee, Upland elected to
withdraw from the sale agreement and Europa has repaid the £160,000
deposit to Upland in the period.
UK – Exploration
Weald Basin: PEDL143 (Holmwood)
Europa holds a 20% interest in and is the operator of PEDL143,
which lies in the Weald Basin, Surrey, 8km to the East of the Horse Hill
discovery. PEDL143 contains the Holmwood conventional oil prospect
which was assigned gross mean prospective resources of 5.6 million
boe.
In September 2015 planning
permission was granted to drill a temporary exploratory borehole
from the Bury Hill Wood site to a depth of 1,400m. In July
2018, the Environment Agency granted a permit to allow the
drilling and testing of a single well for the purposes of oil and
gas exploration. The initial term of PEDL143 was extended by the
Oil and Gas Authority to 30 September
2020.
Post period end, the Secretary of State for the Environment,
Food and Rural Affairs, refused an application to extend the site
lease and acting on behalf of the partnership, Europa withdrew its
application to extend planning permission to drill the Holmwood
exploration well from the Bury Hill Wood site. The partnership has
since re-instated the site. The remaining prospectivity of PEDL143
will now be considered which, in addition to the established
Portland sandstone reservoirs,
includes the Kimmeridge Limestone, an emerging play in the Weald
Basin. As evidence of possible impairment existed prior to
the reporting date, we have written down the value of the
intangible asset being largely the investment to date in obtaining
planning permission to drill from the Bury Hill Wood site, a charge
to income of £1,145,000.
East Midlands: PEDL299
(Hardstoft)
PEDL299 contains the Hardstoft oil field which was discovered in
1919 by the UK’s first ever exploration well. Hardstoft
produced 26,000 barrels of oil from Carboniferous limestone
reservoirs in the 1920s. We believe there is more oil in the
Hardstoft structure and gross 2C contingent resources of 3.1
million boe and gross 3C contingent resources of 18.5 million boe
were identified in a CPR issued by joint venture partner Upland
Resources. We believe that application of modern production
testing and drilling methodologies could well lead to commercial
oil flowrates being achieved. Europa’s interest in PEDL299, which
is restricted to the conventional prospectivity including
Hardstoft, is 25%, alongside Upland 25% and INEOS, the operator,
50%.
Cleveland Basin: PEDL343 (Cloughton)
PEDL343 contains the Cloughton gas discovery, which was
successfully drilled by Bow Valley in 1986 and flowed a small
amount of gas to surface on production test from conventional
Carboniferous sandstone reservoirs. Europa regards Cloughton as a
gas appraisal opportunity with the critical challenge being to
obtain commercial flowrates from future production testing
operations. Europa holds a 35% interest in PEDL343 alongside
Arenite 15%, Third Energy 20% (operator), Egdon Resources 17.5% and
Petrichor Energy 12.5%.
Southern North Sea: Block 41/24
In December 2017, Europa announced
the sale of its 50% interest in Promote Licence P2304 (UKCS Block
41/24) to Egdon along with joint venture partner Arenite Petroleum
Limited (“Arenite”) which also sold its 50% interest to Egdon as
part of the same transaction. P2304 is located to the immediate
south of Egdon’s 100% owned licence P1929 (UKCS Blocks 41/18 and
41/19) offshore North Yorkshire. £46,000 spent on the licence was
written off in the period.
East Midlands: PEDL181
PEDL181 provides exposure to the hydrocarbon potential of the
Humber basin. The licence has technical synergy with the adjacent
PEDL334 which was awarded to an Egdon Resources-led group in the
14th Round for the purpose of conventional and unconventional
exploration.
New Ventures
In the period, Europa has considered potential new venture
opportunities in seven countries outside of Ireland and the UK. These range from
greenfield exploration to brownfield re-development projects in
North Africa, Western Europe, and Central Europe. Only those opportunities which
stand up to robust technical and commercial scrutiny and which meet
the Company’s strict investment criteria, particularly in terms of
cost, strategic fit, political, security and regulatory risk, and
have clearly defined paths to value creation are being pursued. We
continue to screen possible new ventures in areas which fit well
with Europa’s strategy and technical skillset.
Non-financial KPIs
There were no reportable accidents or incidents in the year
(2017: zero). The Environment Agency completed the repermitting of
the Crosby Warren and West Firsby sites in the year.
There were no new licence awards in the year (2017: zero).
Financials
Revenue was £1.6 million (2017: £1.6 million). An improving oil
price offset the decline in production and unfavourable exchange
rates during the period. The average oil price achieved was
US$64.5/bbl (2017: US$48.9/bbl) and the average Sterling exchange
rate was US$1.35 (2017: US$1.27). An average of 94 boepd (2017: 113
boepd) was recovered from our three UK onshore fields, down as a
result of natural decline and the loss of around 10 boepd from the
West Firsby 6 well. Work aimed at restoring production from West
Firsby 6 is ongoing.
Stringent cost controls continue to be implemented. Cost of
sales was £1,365,000 (2017: £1,459,000).
Administrative expenses of £967,000 (2017: £553,000) included
£151,000 spent on projects and £229,000 on new licence evaluations.
In January 2018 salaries of head
office staff were restored to their 2016 levels.
Net cash spent on operating activities was £479,000 (2017: cash
spent £255,000).
Purchase of intangible fixed assets of £1.3 million (2017: £1.5
million) was largely spent advancing the Irish portfolio and on
Holmwood. The Holmwood intangible asset was subsequently largely
written off. As a result of the delay in receipt of planning
consent for the Wressle development, £160,000 was repaid to Upland
Resources.
A deferred tax asset in respect of accumulated tax losses of the
Group was de-recognised in the period, to the extent that it
exceeded the deferred tax liability, as the timing of
utilisation of those losses is uncertain. That resulted in a £0.7
million charge to the income statement.
The Group’s cash balance at 31 July
2018 was £1.8 million (31 July
2017: £3.6 million).
Conclusion and Outlook
The team’s confidence in the Company’s Atlantic Ireland licences
has never been stronger. The results of the technical work on
our three operated licences in the South
Porcupine are eye-catching and have already attracted the
target blue-chip audience to the recently opened data rooms.
Ongoing work in the proven Triassic gas play in the Slyne Basin
meanwhile has encouraged us to commence well planning so that we
are able to drill a well in 2019. With 2.5 tcf GIIP, a well
on LO 16/20 would target substantial commercial volumes of
gas. At a time when the decline of the nearby Corrib field is
expected to gather pace, a discovery on LO 16/20 could become a
major part of Ireland’s energy supply. Together with access
to existing infrastructure and a strong gas price outlook, the
Inishkea project is worthy of flagship status.
Nexen’s upcoming well in FEL 3/18 is anticipated to herald a new
wave of drilling activity in Atlantic Ireland. We are working hard
to ensure Europa does not merely watch from the sidelines in the
knowledge that our industry leading licence position, which
provides us with exposure to all the various plays being targeted,
will benefit from any success in the region. Europa has
played a pioneering role in Atlantic Ireland exploration and we
intend to continue doing so by being directly involved in the next
phase of activity, either by drilling wells as an operator or as a
partner alongside major industry players.
HGD Mackay
Chief Executive Officer
The financial information set out below does not constitute the
company's statutory accounts for 2018 or 2017. 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
2018. Statutory accounts for the years ended 31 July 2018 and 31 July
2017 have been reported on by the Independent Auditors.
The Independent Auditors' Report on the Annual Report and
Financial Statements for 2018 and 2017 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 2017 have been filed with the Registrar of Companies.
The statutory accounts for the year ended 31
July 2018 will be delivered to the Registrar in due
course.
Consolidated statement of
comprehensive income
For the year ended 31 July
note
2018
2017
£000
£000
Revenue
1,634
1,569
Cost of
sales
(1,365)
(1,459)
Impairment of producing
fields
2
(142)
-
Exploration
write-off
1
(1,289)
-
Total cost of
sales
(2,796)
(1,459)
---------
---------
Gross
(loss)/profit
(1,162)
110
Administrative
expenses
(967)
(553)
Finance
income
10
2
Finance
expense
(171)
(234)
---------
---------
Loss before
taxation
(2,290)
(675)
Taxation (charge)/credit
(341)
184
---------
---------
Total comprehensive loss for the year attributable to the equity
shareholders of the parent
(2,631)
(491)
Earnings per share (EPS) attributable to the equity shareholders
of the parent
Pence per share Pence per share
Basic and diluted EPS
(0.87)p
(0.19)p
Consolidated statement of financial
position
As at 31 July |
|
2018 |
2017 |
|
Note |
£000 |
£000 |
Assets |
|
|
|
Non-current assets |
|
|
|
Intangible assets |
1 |
5,959 |
5,276 |
Property, plant and equipment |
2 |
668 |
882 |
Deferred tax asset |
|
- |
341 |
|
|
---------------------------------- |
---------------------------------- |
Total non-current assets |
|
6,627 |
6,499 |
|
|
---------------------------------- |
---------------------------------- |
Current assets |
|
|
|
Inventories |
|
20 |
14 |
Trade and other receivables |
|
471 |
886 |
Cash and cash equivalents |
|
1,771 |
3,591 |
|
|
---------------------------------- |
---------------------------------- |
|
|
2,262 |
4,491 |
|
|
---------------------------------- |
---------------------------------- |
Total assets |
|
8,889 |
10,990 |
|
|
|
|
Liabilities |
|
|
|
Current liabilities |
|
|
|
Trade and other payables |
|
(1,299) |
(945) |
|
|
------------------------------------ |
------------------------------------ |
Total current liabilities |
|
(1,299) |
(945) |
|
|
------------------------------------ |
------------------------------------ |
Non-current liabilities |
|
|
|
Long-term provisions |
|
(2,735) |
(2,570) |
|
|
|
|
Total non-current liabilities |
|
(2,735) |
(2,570) |
|
|
----------- |
----------- |
Total liabilities |
|
(4,034) |
(3,515) |
|
|
----------- |
----------- |
Net assets |
|
4,855 |
7,475 |
|
|
|
|
|
|
|
|
Capital and reserves
attributable to equity holders
of the parent |
|
|
|
Share capital |
|
3,014 |
3,014 |
Share premium |
|
18,481 |
18,481 |
Merger reserve |
|
2,868 |
2,868 |
Retained deficit |
|
(19,508) |
(16,888) |
|
|
----------- |
----------- |
Total equity |
|
4,855 |
7,475 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
These financial statements were approved by the Board of
Directors and authorised for issue on 16
October 2018 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 £000 |
Share premium £000 |
Merger
reserve £000 |
Retained deficit
£000 |
Total
equity
£000 |
Balance at 1 August 2016 |
2,449 |
15,901 |
2,868 |
(16,536) |
4,682 |
Comprehensive loss for the year |
|
|
|
|
|
Total comprehensive
loss for the year |
- |
- |
- |
(491) |
(491) |
|
---------------------------------- |
---------------------------------- |
---------------------------------- |
--------------------------------- |
------------------------------ |
Total comprehensive
loss for the year |
- |
- |
- |
(491) |
(491) |
|
---------------------------------- |
---------------------------------- |
---------------------------------- |
--------------------------------- |
------------------------------ |
Contributions by and
distributions to owners |
|
|
|
|
|
Issue of share
capital |
565 |
2,603 |
- |
- |
3,168 |
Issue of share
options |
- |
(23) |
- |
23 |
- |
Share based payment |
- |
- |
- |
116 |
116 |
|
---------------------------------- |
---------------------------------- |
---------------------------------- |
--------------------------------- |
------------------------------ |
Total contributions by and
distributions to owners |
565 |
2,580 |
- |
139 |
3,284 |
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 31 July 2017 |
3,014 |
18,481 |
2,868 |
(16,888) |
7,475 |
|
Share
capital |
Share premium |
Merger
reserve |
Retained deficit |
Total
equity |
|
£000 |
£000 |
£000 |
£000 |
£000 |
Balance at 1 August 2017 |
3,014 |
18,481 |
2,868 |
(16,888) |
7,475 |
Comprehensive loss for the year |
|
|
|
|
|
Loss for the year
attributable to the equity shareholders of the parent |
- |
- |
- |
(2,631) |
(2,631) |
|
---------------------------------- |
---------------------------------- |
--------------------------------- |
------------------------------ |
------------------------------- |
Total comprehensive
loss for the year |
- |
- |
- |
(2,631) |
(2,631) |
|
---------------------------------- |
---------------------------------- |
--------------------------------- |
------------------------------ |
------------------------------- |
Contributions by and distributions
to owners |
|
|
|
|
|
Share based payment |
- |
- |
- |
11 |
11 |
|
---------------------------------- |
---------------------------------- |
---------------------------------- |
--------------------------------- |
------------------------------ |
Total contributions by and
distributions to owners |
- |
- |
- |
11 |
11 |
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 31 July 2018 |
3,014 |
18,481 |
2,868 |
(19,508) |
4,855 |
|
|
|
|
|
|
Consolidated statement of cash
flows
For the year ended 31 July |
|
2018 |
2017 |
|
Note |
£000 |
£000 |
Cash flows used in operating
activities |
|
|
|
Loss after tax from continuing
operations |
|
(2,631) |
(491) |
Adjustments for: |
|
|
|
Share based payments |
|
11 |
116 |
Depreciation |
2 |
72 |
184 |
Impairment of producing field |
2 |
142 |
- |
Exploration write-off |
1 |
1,289 |
- |
Finance income |
|
(10) |
(2) |
Finance expense |
|
171 |
234 |
Taxation charge/(credit) |
|
341 |
(184) |
Decrease/(increase) in trade and
other receivables |
|
69 |
(108) |
(Increase)/decrease in
inventories |
|
(6) |
9 |
Increase/(decrease) in trade and
other payables |
|
73 |
(13) |
|
|
------------- |
------------- |
Net cash used in operations |
|
(479) |
(255) |
|
|
|
|
Income taxes paid |
|
- |
(144) |
|
|
------------- |
------------- |
Net cash used in operating
activities |
|
(479) |
(399) |
|
|
|
|
Cash flows used in investing
activities |
|
|
|
Purchase of property, plant and
equipment |
|
- |
(6) |
Purchase of intangible assets |
|
(1,336) |
(1,491) |
Sale of part interest in
licence |
|
- |
600 |
Interest received |
|
10 |
2 |
|
|
----------------------------------- |
----------------------------------- |
Net cash used in investing
activities |
|
(1,326) |
(895) |
|
|
|
|
Cash flows (used in)/from financing
activities |
|
|
|
Proceeds from issue of share capital
(net of issue costs) |
|
- |
3,145 |
(Decrease)/increase in payables
relating to share capital issue costs |
|
(16) |
16 |
Option based equity movement on
share issue |
|
- |
23 |
Finance costs |
|
(3) |
(3) |
|
|
----------------------------------- |
----------------------------------- |
Net cash (used in)/from financing
activities |
|
(19) |
3,181 |
|
|
|
|
|
|
|
|
Net (decrease)/increase in cash and
cash equivalents |
|
(1,824) |
1,887 |
Exchange gain/(loss) on cash and
cash equivalents |
|
4 |
(14) |
Cash and cash equivalents at
beginning of year |
|
3,591 |
1,718 |
|
|
----------------------------------- |
----------------------------------- |
Cash and cash equivalents at end of
year |
|
1,771 |
3,591 |
|
|
|
|
Notes to the financial statements
- Intangible assets
Intangible assets |
2018 |
2017 |
|
£000 |
£000 |
At 1 August |
5,276 |
4,453 |
Additions |
1,972 |
1,423 |
Sale of 3.34% interest in PEDL180
and PEDL182 |
- |
(600) |
Exploration write-off |
(1,289) |
- |
|
--------------- |
------------- |
At 31 July |
5,959 |
5,276 |
|
|
|
Intangible assets comprise the Group’s pre-production
expenditure on licence interests as follows:
|
2018
£000 |
2017
£000 |
Ireland FEL 2/13 (Doyle A, B, C,
Kilroy, Keane & Kiely) |
799 |
340 |
Ireland FEL 3/13 (Beckett, Wilde,
Shaw) |
1,093 |
725 |
Ireland FEL 1/17 |
453 |
224 |
Ireland LO 16/19 |
71 |
61 |
Ireland LO 16/20 |
454 |
206 |
Ireland LO 16/21 |
- |
38 |
Ireland LO 16/22 |
125 |
48 |
UK PEDL143 (Holmwood) |
10 |
901 |
UK PEDL180 (Wressle) |
2,745 |
2,527 |
UK PEDL181 |
95 |
60 |
UK PEDL182 (Broughton North) |
26 |
24 |
UK PEDL299 (Hardstoft) |
12 |
12 |
UK PEDL343 (Cloughton) |
76 |
69 |
UK Block 41/24 |
- |
41 |
|
-------------------------------- |
-------------------------------- |
Total |
5,959 |
5,276 |
|
========= |
======== |
Exploration write-off |
|
|
UK PEDL143 (Holmwood) |
1,145 |
- |
Ireland LO 16/21 |
97 |
- |
UK Block 41/24 |
47 |
- |
|
----------------------------------- |
----------------------------------- |
Total |
1,289 |
- |
|
================================== |
================================= |
If the Group is not able to 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 2018 the interest and accumulated expenditure in respect of FEL
1/17 was transferred to the subsidiary company Europa Oil & Gas
(Ireland East) Limited and LO16/20 was transferred to Europa Oil
& Gas (Inishkea) Limited.
LO 16/21 was relinquished due to a lack of commercial prospects
and the £97,000 spent to date was written off.
2. Property, plant & equipment
|
Furniture & computers |
Producing
fields |
Total |
|
£000 |
£000 |
£000 |
Cost |
|
|
|
At 1 August 2016 |
51 |
10,785 |
10,836 |
Additions |
1 |
5 |
6 |
|
----------- |
------------- |
------------ |
At 31 July 2017 |
52 |
10,790 |
10,842 |
|
|
|
|
Additions |
- |
- |
- |
|
----------- |
------------- |
------------ |
At 31 July 2018 |
52 |
10,790 |
10,842 |
|
=============================== |
=============================== |
=============================== |
Depreciation, depletion and
impairment |
|
|
|
At 1 August 2016 |
47 |
9,729 |
9,776 |
Charge for year |
2 |
182 |
184 |
|
----------- |
------------- |
----------- |
At 31 July 2017 |
49 |
9,911 |
9,960 |
|
|
|
|
Charge for year |
2 |
70 |
72 |
Impairment in year |
- |
142 |
142 |
|
---------- |
----------- |
--------- |
At 31 July 2018 |
51 |
10,123 |
10,174 |
|
=============================== |
=============================== |
=============================== |
Net Book Value |
|
|
|
At 31 July 2016 |
4 |
1,056 |
1,060 |
|
=============================== |
=============================== |
=============================== |
At 31 July 2017 |
3 |
879 |
882 |
|
=============================== |
=============================== |
=============================== |
At 31 July 2018 |
1 |
667 |
668 |
|
=============================== |
=============================== |
=============================== |
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 the Group’s three 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 7.5-11%, Brent crude prices rising
from US$72 per barrel in 2019 to
US$77 per barrel in 2022 and a
pre-tax discount rate of 19%. The pre-tax discount rate is derived
from a post-tax rate of 10% and is high because of the applicable
rates 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 in the year of £142,000 relating to the
West Firsby site (2017: no impairment
* * ENDS * *
This announcement
contains inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014.
For further information please visit www.europaoil.com or
contact:
Hugh Mackay |
Europa |
+ 44 (0) 20 7224 3770 |
Phil Greenhalgh |
Europa |
+ 44 (0) 20 7224 3770 |
Matt Goode |
finnCap Ltd |
+ 44 (0) 20 7220 0500 |
Simon Hicks |
finnCap Ltd |
+ 44 (0) 20 7220 0500 |
Camille Gochez |
finnCap Ltd |
+ 44 (0) 20 7220 0500 |
Frank Buhagiar |
St Brides Partners Ltd |
+ 44 (0) 20 7236 1177 |
Susie Geliher |
St Brides Partners Ltd |
+ 44 (0) 20 7236 1177 |