Europa Oil & Gas (Holdings) plc /
Index: AIM / Epic: EOG / Sector: Oil & Gas
13 October 2020
Europa Oil &
Gas (Holdings) plc (‘Europa’ or ‘the Company’)
Final Results for
the year to 31 July 2020
Europa Oil & Gas (Holdings) plc, the AIM traded Ireland, Morocco and UK focused oil and gas
exploration, development and production company, announces its
final results for the 12 month period ended 31 July 2020.
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 2020 to those shareholders
who have requested a paper copy.
Operational highlights
Onshore UK – production on course to
more than double to over 200bopd
- Wressle Development granted planning consent on appeal
- First oil at Wressle set to commence at an estimated gross rate
of 500bopd late 2020
- Estimated break-even oil price (excluding Europa’s corporate
overheads) of US$17.6 per barrel for
Wressle, well below current oil prices
- 92boepd produced from Europa’s three existing UK onshore fields
during the year – matches FY 2019 performance
Offshore Ireland - portfolio refocused on proven gas
play in the Slyne Basin
- Acquisition of a 100% interest in Frontier Exploration Licence
(‘FEL’) 3/19, offshore Ireland,
from DNO (pending regulatory approval)
- Located close to the ~1tcf producing Corrib gas field in the
Slyne basin and the 1.5 tcf Inishkea prospect on Europa’s
100%-owned FEL 4/19
- Includes the 1.2 tcf Edge prospect
- Applications submitted for the relinquishment of four licences
offshore Ireland where primary
prospectivity is oil - LO16/19, LO16/22, FEL2/13 and FEL3/13
- Total non-cash write-off of £4.0 million
- Forward plan to include FEL 3/19 in a relaunch of the farmout
of its strategic position in the Slyne Basin
Offshore Morocco - awarded 11,228 square km Inezgane
licence in the Agadir Basin
- Area equivalent to about 50 UKCS North Sea blocks
- 14 prospects and 16 leads with the potential to hold in
aggregate close to 10 billion barrels of unrisked oil resources
mapped in the Lower Cretaceous fan sand play, a prolific producer
in West Africa
- The 14 prospects each have mean resources in excess of 150
mmboe which add up to total resources in excess of 5 billion
barrels of oil equivalent
- The 827 mmboe Falcon and 204 mmboe Turtle prospects have been
assigned a geological chance of success of 20-35% by Europa
- Licence attracting interest from a number of operators looking
to farm-in
- Shell, ENI, Repsol, Hunt, Chariot, SDX, Sound, Schlumberger and
Genel are currently active in the area
COVID-19
- At the reporting date of 31 July
2020 there was minimal impact from Covid-19 on
operations
- Operations have continued at the three production sites
- Brent crude price fell dramatically (with Russia and Saudi
Arabia increasing production as the scale of the pandemic
became apparent) but recovered somewhat by period-end
- Directors, London based staff
and consultants have been working from home since March 2020, and agreed a temporary salary/rate
cut of 20% since 1 April 2020
- Given the success of home working, the Company has given notice
to terminate the London office
lease from December 2020, which will
further cut costs
Financial performance
- Revenue £1.2 million (2019: £1.7 million)
- Pre-tax loss before exploration write-off / write-back £1.2
million (2019: £0.9 million)
- Pre-tax loss of £5.4 million including write-offs taken
following relinquishment of Irish licences (see post period
reporting events below) (2019: pre-tax loss £0.7 million)
- Net cash used in operating activities £0.8 million (2019: £0.7
million)
- Cash balance: £0.8 million (31 July
2019: £2.9 million)
Board
- Hugh Mackay stepped down as CEO,
Simon Oddie was appointed as Interim
CEO and Executive Chairman
- Appointment of Stephen Williams
as independent Non-Executive director, replacing Roderick Corrie
Post reporting period events
- Commencement of site works at Wressle Oil Field
- Appointment of Simon Oddie as
CEO on a permanent basis
- Senior Independent non-executive Director Mr Brian O’Cathain appointed non-executive
Chairman
- Since 1 August 2020 the Board
increased the reduction in their salary and fees to 50%
Simon Oddie, CEO of Europa,
said: “The award of the Inezgane permit offshore Morocco, the granting of planning consent for
the Wressle Oil Field, the refocus of the Offshore Ireland
portfolio onto the proven gas play of the Slyne Basin following the
acquisition of FEL3/19 and the 1.2 tcf Edge prospect – much
progress has been made during the year under review. While
the ongoing pandemic and volatility in oil and gas prices may
impact exact timings of planned activity, we are confident that the
momentum behind our various projects will continue to build in the
year ahead.
“In Morocco, work carried out to date has seen our team map up
to 30 prospects and leads which we believe, in aggregate, have the
potential to hold close to 10 billion barrels of unrisked oil
resources. The size of 50 blocks in the UK North Sea, our
Inezgane licence had already attracted the attention of existing
operators in the area and, while there is more work to be done to
de-risk the prospectivity further, we are growing more and more
confident that this attention is set to increase as we build a
prospect inventory ahead of the launch of a farm-out. Onshore
UK, the Wressle Oil Field remains on track to be brought online at
an initial gross rate estimated at 500bopd in late 2020 following
the commencement of site works in the summer. At this rate
and with a c.$18 per barrel breakeven
oil price, Wressle will more than double Europa’s production to
over 200bopd and in the process transform the Company’s financial
profile. Offshore Ireland, once the acquisition of FEL 3/19
has been completed, Europa will own 100% of the most material gas
prospects that lie in the same play as Corrib, Ireland’s biggest
producing gas field. We will soon look to launch the farmout
of what we view as an unrivalled strategic position in offshore
Ireland’s only gas producing basin.
“Our objective is to expose our shareholders to significant
value creating opportunities while minimising risk. Our UK
production, which is set to dramatically increase once Wressle
comes online, provides us with a low risk cash flow generative
platform. Our offshore Ireland and offshore Morocco assets, which hold company-making
volumetrics, provide us with multiple opportunities to generate
significant value. We also intend to resume our efforts to add a
third leg to our business by securing a late stage appraisal
project, once market conditions improve. Our confidence in Europa’s
assets and team remains as high as ever and with this in mind, I
look forward to providing further updates on our progress in the
year ahead.”
Chairman's statement
COVID-19, lockdowns, volatile energy markets - the world is a
different place to what it was 12 months ago. Award of the
large Inezgane permit offshore Morocco, the pivot to gas offshore
Ireland, the granting of planning
permission for the development of the Wressle oil field in
North Lincolnshire – Europa is a
different junior oil and gas company to what it was 12 months
ago. Today, Europa’s portfolio of multistage licences is
exposed to three jurisdictions: onshore UK, offshore Ireland, and offshore Morocco. Our strategic position offshore
Ireland is now centred around the
proven gas play of the Slyne basin and includes 100% interests in
two prospects with the potential to hold 2.7tcf of gas, the most
material prospects that lie in the same play as the nearby
producing Corrib field.
The above is in line with our objective to expose shareholders
to potentially value creating events while minimising risk.
We intend to achieve this by building a production-based, cash flow
generative platform in the UK which covers both our low cost base
as well as exploration activity focused on de-risking prospects to
the point at which partners can be secured to drill high impact
wells. While the ongoing pandemic and measures taken to
combat it may affect timings, work streams in line with our
corporate objective are underway in all three of our licence
areas. As a result, I am confident that in 12 months’ time,
Europa will once again be a different junior oil and gas company to
the one it is today, one which has a financial profile that has
been transformed by the commencement of production at Wressle and
one that has a prospect inventory comprised of multiple
company-making targets located in not just one but two
jurisdictions.
Onshore UK
Europa produces oil from three fields in the East
Midlands. Due to the natural decline of the fields, net
production has been on a downward trajectory for a number of
years. Thanks to our active management programme, production
during the 12 months to 31 July 2020
averaged 92boepd, a rate slightly up on the previous year’s.
This is a highly creditable outcome and one which is testament to
our excellent operations and technical teams.
Active management of old fields can only go so far. To
achieve a step-change in production, new fields need to be brought
online. Following the granting of planning consent in
January 2020, the Wressle Development
Project on licences PEDL180 & 182 in North Lincolnshire, is one such new field
which is expected to lead to a step-change in Europa’s net
production. Work is currently underway at the site to bring
Wressle into production at an initial gross rate estimated at
500bopd in late 2020. At this rate, Wressle will more than
double Europa’s existing UK onshore production to over
200bopd. Moreover, production at Wressle is expected to be
highly geared to oil price recovery: a stress testing exercise of
the economic model demonstrated that, with an estimated break-even
oil price of US$17.6 per barrel
excluding Europa’s corporate overheads, the development plan for
the field is economically robust at today’s oil
prices.
While the focus is very much on bringing Wressle online, there
are a number of low cost/low risk follow-up opportunities on PEDLs
180 & 182. During testing at Wressle, a total of 710 barrels of
oil equivalent per day were recovered from three separate
reservoirs: the Ashover Grit; the Wingfield Flags; and the
Penistone Flags. Producing reserves in the Penistone Flags at
Wressle is one area of development which we, along with our
partners, expect to pursue in the future. PEDL 180 also holds
Broughton North, a prospect adjacent
to an historic discovery which was assigned gross mean un-risked
prospective resources of 0.6 million boe and a geological chance of
success of ~50% in a CPR. Wressle therefore does not just
represent a one-off scaling up of our production profile, but opens
up a series of potential step-ups going forward.
However, in the absence of incremental production from Wressle
in 2020, additional funding for the Company would be required,
either via the issuance of new shares, the addition of a layer of
debt funding or the sale of assets. If additional funding were not
able to be secured on satisfactory terms, there is a risk that
commitments could not be fulfilled, or that assets may be
relinquished.
Offshore Ireland
Even before the Irish Government took the decision in
September 2019 to phase out oil but
not gas exploration, our flagship project offshore Ireland was the 1.5 tcf Inishkea gas prospect
in Frontier Exploration Licence (‘FEL’) 4/19. Located in the
proven gas play of the Slyne Basin and close to the producing
Corrib field and associated processing facilities, we have long
viewed Inishkea as lower risk infrastructure-led exploration
compared to the higher risk unproven plays being targeted elsewhere
in the Irish Atlantic Margin. When the opportunity
arose to effectively double up our position in the Slyne for a
nominal sum by acquiring a 100% interest in FEL 3/19, which holds
the 1.2 tcf Edge prospect, we acted swiftly.
Following the acquisition, which is subject to regulatory
sign-off, Europa will hold 100% interests in the only two tcf+
prospects which lie in the same gas play that has yielded the
Corrib field. Corrib plays an important role in satisfying
Ireland’s energy needs, but the field is in decline. This
represents a major opportunity for Europa. With the Corrib
gas field already in decline, nearby existing processing facilities
are likely to have spare capacity in the future, which would
potentially have positive implications for development costs.
With gas being viewed by the Irish Government as a key transition
fuel as the economy moves towards net zero emissions, the
acquisition will give Europa an unrivalled strategic position, one
which has the potential to hold gross unrisked prospective
resources of 2.7 tcf. With the above in mind, our intention
is to relaunch the farm-out of our revamped position in the Slyne
Basin once the acquisition of FEL 3/19 has received regulatory
sign-off.
The flip side of the rebalance of our Irish portfolio towards
gas is the streamlining of the Company’s exposure to oil plays in
the Irish Atlantic Margin. In line with this we have elected
to relinquish all exploration licences offshore Ireland which were targeted on oil rather than
gas.
Offshore Morocco
The Inezgane block, which lies offshore Morocco, is at an earlier stage of development
when compared to Europa’s UK and Irish positions having only been
awarded the licence in September 2019. This has not however
prevented significant progress being made during the period in
terms of building a prospect inventory. In July 2020, we announced that technical work
centred around reprocessing and interpreting historic 3D seismic
data had resulted in the mapping of 14 prospects and 16 leads in
the Lower Cretaceous play, a prolific producer elsewhere in West
Africa. In aggregate these 30 targets have the potential to
hold close to 10 billion barrels of unrisked oil resources.
Two of the targets, the 827 mmboe Falcon and 204 mmboe Turtle
prospects, have been assigned a geological chance of success of
20-35% by Europa.
Work is underway to further de-risk the targets ahead of
launching a farm-out to secure partner(s) to drill wells. Europa
continues to maintain dialogue with potential partners, a number of
whom expressed an interest in Inezgane at the time of the
award.
Board Changes
Europa’s asset base is not the only area of the business to
undergo major change since last year’s Annual Report. The
Board too has seen a change in personnel culminating in my
appointment in August 2020 as
non-executive Chairman of the Company, replacing Simon Oddie who took on the role of Chief
Executive Officer on a permanent basis. Simon had temporarily
assumed this role in November 2019
following the departure of long-serving CEO Hugh Mackay. These were not the only
changes to the Board during the year. In March 2020, we announced that Roderick Corrie had decided to step down from
his position as non-executive Director after 12 years, and in
July 2020 Finance Director
Phil Greenhalgh informed the Board
of his intention to retire having held this role since January
2008. Stephen Williams, Co-CEO
of Reabold Resources plc (AIM: RBD), has been appointed to the
Board as an independent non-executive Director. Stephen has also
agreed to take on the role of Chairman of the Audit committee, and
Senior Independent Director. Following Phil’s departure, the
responsibilities of the Finance Director will for now be divided
and assigned to existing members of the Europa team.
Conclusions
This is my first Chairman’s Statement for Europa. Having
previously held the position of senior non-executive Director of
the Company, I was of course already very familiar with Europa:
with its focus on exposing shareholders to value creating events
while minimising risk; with its asset base which combines stable
production and high impact exploration; with its team, which has
done much to increase the industry’s understanding of Ireland’s
various basins and plays.
With Wressle on course to commence production by the end of the
year, the rebalancing of our Irish portfolio to gas, and the
excellent results of ongoing technical work offshore Morocco, I believe I have stepped up to the
role of Chairman at an exciting time in Europa’s development,
albeit one that is set against a backdrop dominated by COVID-19, an
unprecedented decline in global demand for oil and gas, and
consequently low commodity prices. However, we know that this
business is cyclical, and remain confident that demand and pricing
will recover. The wellbeing of all those involved with Europa is of
paramount importance to the Board and as we advance our various
workstreams we will at all times adhere to the prevailing
government advice and guidance.
Finally, on behalf of the Board I would like to thank the
management, employees and consultants for their hard work during
what has been and continues to be an unprecedented period for
everyone. I look forward to continuing working with the team
in the year ahead as we look to advance all our assets and at the
same time seek to add a late stage appraisal venture to our
portfolio so that Europa has exposure to all stages of the oil and
gas cycle.
Mr Brian O’Cathain (non-executive
Chairman)
Operations
Operational review
UK Production - East Midlands
Europa produces oil from three UK onshore fields: West Firsby;
Crosby Warren; Whisby-4. During the financial year ended
31 July 2020, an average of 92boepd
were recovered from the three fields. This is a similar
performance to the previous 12 month period and is testament to the
Company’s ongoing active management of the three fields which is
focused on maximising production.
A 1% interest in the West Firsby licence was assigned to
FourTrees Energy Limited following the successful workover of the
WF6 well.
UK Development – Wressle Oil Field
Planning consent for the development of Wressle in North Lincolnshire, which lies on licences
PEDL180 & 182 (‘the Licences’), was granted on 17 January
2020. Under the development plan, Wressle is expected to
commence production at an initial gross rate of 500bopd from the
Ashover Grit formation. As well as more than doubling Europa’s
existing UK onshore production to over 200bopd, oil recovered from
Wressle is expected to be highly profitable. In March 2020, the Company announced the results of
a stress testing exercise of the economic model undertaken by the
operator Egdon Resources in light of the current low oil price
environment. The results demonstrate that, with an estimated
break-even oil price of US$17.6 per
barrel (excluding Europa’s corporate overheads), the development
plan for the field is economically robust at today’s oil price
levels.
Wressle is expected to be brought online late 2020. Work
at the site is underway in line with the development plan which is
comprised of a number of key stages. These along with work
carried out to date are listed below:
- Key planning conditions have been discharged, detailed design
tendering is underway and all HSE documentation and procedures are
progressing in line with expectations
- Four groundwater boreholes have been installed and two rounds
of sampling and analysis undertaken to date
- Reconfiguration of the site - Site works are underway
- Installation and commissioning of surface facilities
- Sub-surface operations
- Commencement of production
The civil works contractor has commenced works to reconfigure
the Wressle production area. Works being undertaken include
the installation of a new High Density Polyethylene impermeable
membrane; a French drain system; an approved surface water
interceptor; the construction of a purpose-built bund area for
storage tanks; a tanker loading plinth; and an internal roadway
system.
Europa holds a 30% working interest in the Licences alongside
Egdon Resources (operator, 30%), and Union Jack Oil (40%). The
Wressle Oil Field was discovered by the Wressle-1 well in
2014. During testing, a total of 710 barrels of oil
equivalent per day were recovered from three separate reservoirs:
the Ashover Grit; the Wingfield Flags; and the Penistone Flags. In
September 2016, a Competent Person’s
Report provided independent estimates of reserves and contingent
and prospective oil and gas resources for the Wressle discovery of
2.15 million stock tank barrels classified as discovered (2P+2C).
There is additional development potential on the Licences including
Broughton North, a low risk
exploration prospect lying on the footwall side of a fault,
adjacent to the historic Broughton-B1 discovery made by BP in 1984
which the CPR assigned gross mean un-risked prospective resources
of 0.6 million boe and a geological chance of success of 49%
for the Penistone Flags and 40% for the Ashover Grit. Further
development of the Wressle field, including producing additional
reserves existing in the Penistone Flags formation, is expected in
the future.
During the period, £403,000 was received from North Lincolnshire
Council (‘NLC’) in settlement of gross costs incurred by the
partners in relation to the appeal process. This followed a
favourable ruling by the Planning Inspector regarding Egdon’s
application for costs against NLC when planning consent for Wressle
was granted on appeal on 17 January 2020. The gross sum has
been divided between the partners in Wressle proportionate with
their interests. As a result, Europa received £120,900.
Exploration: Offshore Ireland
During the period, the Company took the decision to rebalance
its portfolio of offshore Ireland
licences in favour of gas, specifically the proven gas play in the
Slyne Basin which is home to the producing Corrib gas field.
The Company regards this as lower risk infrastructure exploration
due to the close proximity of Corrib and associated processing
facilities. Furthermore, Europa’s flagship project is the
nearby 1.5tcf Inishkea gas prospect.
In line with the above, in June
2020 the Company announced the acquisition of a 100%
interest in Frontier Exploration Licence (‘FEL’) 3/19 from DNO. FEL
3/19, which holds the 1.2 tcf Edge prospect, lies close to Corrib
and Europa’s 100% owned FEL 4/19 which holds the 1.5 tcf Inishkea
prospect. The directors believe the acquisition, which is subject
to regulatory sign-off, will provide Europa with a key strategic
position in the proven gas play of the Slyne Basin. FEL3/19
was formerly the LO16/23 block which DNO acquired following the
acquisition of Faroe Petroleum. In 2016, CNOOC farmed into
the block, acquiring an 80% interest and operatorship. CNOOC has
since exited and having assumed CNOOC’s 80% interest, DNO is now
selling 100% of the licence to Europa for a nominal upfront
fee.
In tandem with the acquisition of FEL 3/19, the Company has
elected to reduce its position in more early stage and prospective
areas of the Irish Atlantic Margin where the primary target is
oil. This decision was taken following the Irish
Government’s announcement in September
2019 of its intention to phase out oil but not gas
exploration. In line with this and in addition to the
acquisition of FEL 3/19, during the period the Company announced
the relinquishment of four licences in the South Porcupine Basin
where the primary target was oil. FEL 1/17 has not yet been
relinquished pending a possible evaluation of gas potential.
Following these changes, Europa’s Irish portfolio consists of three
FELs with combined gross prospective resources of 2.7tcf of gas and
gross mean un-risked prospective resources of 3.9 billion barrels
oil equivalent.
Subject to the approval of the acquisition of FEL 3/19 by the
Irish authorities, the forward plan for Ireland is to launch a farm-out process for
both licences which combined have company-making gross unrisked
prospective resources of 2.7 tcf. In tandem with ongoing
farm-out discussions, the site survey process for a drilling
location at Inishkea continues to be advanced.
Further to the application to relinquish of licences LO16/19,
LO16/22, FEL2/13 and FEL 3/13, and the pending situation on FEL
1/17 the decision has been taken to write off the value of these
intangible assets, resulting in a non-cash charge to income of
£4,004,000.
Exploration: Offshore Morocco
In September 2019, Europa was
awarded a 75% interest in and operatorship of the Inezgane Offshore
licence with the remaining 25% interest held by the Moroccan
regulator, ONHYM (Office National des Hydrocarbures et des Mines).
Covering an area of 11,228 sq km, Inezgane is the equivalent of
approximately 50 UKCS North Sea blocks, or over half the size of
Wales. Europa’s focus is on the Lower Cretaceous fan sand
play, which is a prolific play in West
Africa but is highly under-explored offshore Morocco. Out of just 10 wells that have been
drilled in deepwater Morocco to
date, only three have penetrated a complete Lower Cretaceous
section. Despite this Europa has identified all the key elements of
source (including the world class Cenomanian-Turonian source rock),
reservoir and seal within the Inezgane licence.
The licence period commenced in November
2019 and since then work has been focused on reprocessing
and interpreting historic seismic data to de-risk large prospects
in the Lower Cretaceous play. Initial results have been
highly encouraging. To date, 14 prospects and 16 leads have
been mapped, which the Company estimates have the potential to hold
in aggregate close to 10 billion barrels of unrisked oil
resources. All the identified prospects have mean resources
in excess of 150 mmboe which taken together add up to total
resources in excess of 5 billion barrels of oil equivalent.
The prospects have stacked reservoir potential and include a wide
range of structural styles including for example 4-way dip closure
in the case of the 827 mmboe Falcon and 204 mmboe Turtle prospects.
Europa has assigned a geological chance of success to these
prospects of 20-35%. In addition, examples of shallow gas anomalies
have been seen on seismic data which is a positive indication of a
working petroleum system operating in the basin.
Ongoing work is focused on further de-risking these prospects
and leads while the forward plan is to build a robust prospect
inventory and, subject to the results, secure partner(s) to drill
wells. A farm-out process will be formally launched shortly,
however the Company has maintained dialogue with three companies,
all of whom have expressed interest in Inezgane.
A number of other oil and gas companies are currently active in
this area of Morocco, notably
Shell, ENI, Repsol, Hunt, Chariot, SDX, Sound, Schlumberger and
Genel.
The Inezgane Permit is of 8-years duration comprising three
phases of which the Initial Phase of the licence comprises 2-years.
The Initial Phase includes 3D seismic reprocessing as well as other
technical studies. At the end of the Initial Phase, Europa has the
option to commit to drilling an exploration well in the Second
Phase of the licence or to relinquish the licence.
Financials
Revenue was £1.2 million (2019: £1.7 million). The average oil
price achieved was US$48.0/bbl (2019:
US$66.7/bbl) and the average Sterling exchange rate was
US$1.27 (2019: US$1.29). An average of 92 boepd (2019: 91 boepd)
was recovered from our three UK onshore fields. Production was down
at West Firsby, relatively flat at Crosby Warren, but increased at
Whisby.
Stringent cost controls continue to be implemented. Cost of
sales was £1,438,000 (2019: £1,682,000).
Administrative expenses of £823,000 (2019: £811,000) included
£81,000 on new licence evaluations (2019: £102,000).
Net cash spent on operating activities was £844,000 (2019: cash
spent £661,000).
Purchase of intangible fixed assets of £1,148,000 (2019:
£1,973,000) was spent advancing the portfolio.
The Group’s cash balance at 31 July
2020 was £0.8 million (31 July
2019: £2.9 million), sufficient to fund Europa’s share of
the Wressle development.
Non-financial Key Performance Indicators (‘KPIs’)
There were no reportable accidents or incidents in the year
(2019: zero).
One new licence, the Morocco Inezgane Offshore exploration
permit, was signed in the year. (2019: zero).
Conclusion and Outlook
Despite the disruption caused by the ongoing pandemic, much has
been achieved across Europa’s asset base during the year. As
a result, the foundations are in place for further progress to be
made in the year ahead starting with first production at Wressle.
As well as doubling Europa’s net production to over 200boepd,
bringing the field on stream will open up a number of low risk
opportunities on the licence to build production further. By
scaling up Europa’s internally generated revenues and cash flows,
Wressle will put the Company in a strong position to pursue these
follow-up opportunities. In the absence of incremental production
from Wressle in 2020 additional funding for the Company would be
required, either via the issuance of new shares, the addition of a
layer of debt funding or the sale of assets. If additional funding
were not able to be secured on satisfactory terms, there is a risk
that commitments could not be fulfilled, or that assets may be
relinquished.
Outside the UK, farm-out will be the focus. Offshore
Ireland, a farm-out of Europa’s strategic position in the Slyne
Basin will be launched once the acquisition of FEL3/19 has been
approved. With combined gross prospective resources of 2.7
tcf and located close to the producing Corrib gas field, the Board
believes FELs 3/19 and 4/19 represent a compelling investment
opportunity and remains confident that one or more partners will be
secured to take these licences forward. Offshore Morocco,
once technical work has been completed to de-risk what is a
sizeable prospect inventory, a farm-out will be launched, although
discussions have been taking place with interested parties on an
informal basis ever since Inezgane was awarded to Europa.
Outside our existing portfolio, the Board remains keen to add a
third leg to the business, specifically a late stage appraisal
project to complete Europa’s exposure to the full oil and gas
cycle. While COVID-19 has delayed this process, together with
volatile oil and gas markets, it may yet generate opportunities as
assets are divested that may have not warranted Europa’s serious
attention prior to the onset of the pandemic. Importantly,
once Wressle is in production, Europa will have a much-improved
financial profile with which to secure a new venture and further
build the Company.
Qualified Person Review
This release has been reviewed by Rowland Thomas, geophysical advisor to Europa,
who is a geophysicist with over 39 years' experience in petroleum
exploration and a member of the Society of Exploration
Geophysicists, European Association of Geoscientists and Engineers
and the Petroleum Exploration Society of Great Britain, and has consented to the
inclusion of the technical information in this release in the form
and context in which it appears.
Simon Oddie (CEO)
The financial information set out below does not constitute the
company's statutory accounts for 2020 or 2019. 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
2020. Statutory accounts for the years ended 31 July 2019 and 31 July
2018 have been reported on by the Independent Auditors.
The Independent Auditors' Report on the Annual Report and
Financial Statements for 2020 and 2019 were unqualified, but
included a material uncertainty in relation to going concern, 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 2019 have been filed with the Registrar of Companies.
The statutory accounts for the year ended 31
July 2020 will be delivered to the Registrar in due
course.
Consolidated statement of comprehensive income
For the year ended 31 July
|
|
2020 |
2019 |
|
Note |
£000 |
£000 |
|
|
|
|
Revenue |
|
1,244 |
1,713 |
Cost of sales |
|
(1,438) |
(1,682) |
Impairment of producing
fields |
2 |
(160) |
- |
Total cost of sales |
|
(1,598) |
(1,682) |
|
|
------ |
------ |
Gross (loss)/profit |
|
(354) |
31 |
|
|
|
|
Exploration (write-off)/ write
back |
1 |
(4,004) |
270 |
Administrative expenses |
|
(823) |
(811) |
Finance income |
|
7 |
43 |
Finance expense |
|
(266) |
(187) |
|
|
-------- |
-------- |
Loss before taxation |
|
(5,440) |
(654) |
|
|
|
|
Taxation charge |
|
- |
- |
|
|
-------- |
-------- |
Loss for the
year |
|
(5,440) |
(654) |
|
|
====== |
====== |
Other comprehensive
income |
|
|
|
Items which will not
be reclassified to profit /(loss) |
|
|
|
Loss on investment
revaluation |
|
(197) |
(59) |
|
|
-------- |
-------- |
Total other
comprehensive loss |
|
(197) |
(59) |
|
|
====== |
====== |
Total comprehensive loss for the
year attributable to the equity shareholders of the parent |
|
(5,637) |
(713) |
|
|
====== |
====== |
|
|
|
|
Earnings
per share (EPS) attributable to the equity shareholders of the
parent |
|
Pence
per share |
Pence per
share |
Basic and diluted
EPS |
|
(1.22)p |
(0.17)p |
Consolidated statement of financial position
As at 31 July
|
|
2020 |
2019 |
|
Note |
£000 |
£000 |
Assets |
|
|
|
Non-current assets |
|
|
|
Intangible assets |
1 |
4,965 |
7,818 |
Property, plant and equipment |
2 |
476 |
575 |
|
|
------ |
------ |
Total non-current
assets |
|
5,441 |
8,393 |
|
|
------ |
------ |
Current
assets |
|
|
|
Investments |
|
44 |
241 |
Inventories |
|
12 |
19 |
Trade and other receivables |
|
234 |
315 |
Restricted cash |
|
245 |
251 |
Cash and cash equivalents |
|
768 |
2,905 |
|
|
------ |
------ |
Total current
assets |
|
1,303 |
3,731 |
|
|
------ |
------ |
Total
assets |
|
6,744 |
12,124 |
|
|
====== |
====== |
Liabilities |
|
|
|
Current liabilities |
|
|
|
Loans |
|
(2) |
- |
Trade and other payables |
|
(1,013) |
(1,086) |
|
|
-------- |
-------- |
Total current
liabilities |
|
(1,015) |
(1,086) |
|
|
-------- |
-------- |
Non-current
liabilities |
|
|
|
Loans |
|
(48) |
- |
Trade and other
payables |
|
(31) |
- |
Long-term provisions |
|
(3,163) |
(2,917) |
|
|
------ |
------ |
Total non-current
liabilities |
|
(3,242) |
(2,917) |
|
|
------ |
------ |
Total liabilities |
|
(4,257) |
(4,003) |
|
|
------- |
------- |
Net assets |
|
2,487 |
8,121 |
|
|
====== |
====== |
|
|
|
|
Capital
and reserves attributable to equity holders
of the parent |
|
|
|
Share capital |
|
4,447 |
4,447 |
Share premium |
|
21,010 |
21,010 |
Merger reserve |
|
2,868 |
2,868 |
Retained deficit |
|
(25,838) |
(20,204) |
|
|
------ |
------ |
Total
equity |
|
2,487 |
8,121 |
|
|
====== |
====== |
These financial statements were approved by the Board of
Directors and authorised for issue on 12
October 2020 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 |
Retained
deficit |
Total
equity |
|
£000 |
£000 |
£000 |
£000 |
£000 |
Balance at 1 August
2018 |
3,014 |
18,481 |
2,868 |
(19,508) |
4,855 |
Comprehensive loss for the year |
|
|
|
|
|
Loss for the year
attributable to the equity shareholders of the parent |
- |
- |
- |
(654) |
(654) |
Other comprehensive
loss attributable to the equity shareholders of the parent |
- |
- |
- |
(59) |
(59) |
|
------ |
------ |
-------- |
------- |
------ |
Total
comprehensive loss for the year |
- |
- |
- |
(713) |
(713) |
|
------ |
------ |
-------- |
------- |
------ |
Contributions by and
distributions to owners |
|
|
|
|
|
Issue of share
capital |
1,433 |
2,546 |
- |
- |
3,979 |
Issue of share
options(note 22) |
- |
(17) |
- |
17 |
- |
Share-based payments (note 23) |
- |
- |
- |
- |
- |
|
------ |
------ |
------ |
-------- |
------- |
Total contributions by and
distributions to owners |
1,433 |
2,529 |
- |
17 |
3,979 |
|
------ |
------ |
-------- |
------- |
------ |
Balance at 31 July 2019 |
4,447 |
21,010 |
2,868 |
(20,204) |
8,121 |
|
====== |
====== |
====== |
====== |
====== |
|
Share
capital |
Share
premium |
Merger
reserve |
Retained
deficit |
Total
equity |
|
£000 |
£000 |
£000 |
£000 |
£000 |
Balance at 1 August 2019 |
4,447 |
21,010 |
2,868 |
(20,204) |
8,121 |
Comprehensive loss for the
year |
|
|
|
|
|
Loss for the year
attributable to the equity shareholders of the parent |
- |
- |
- |
(5,440) |
(5,440) |
Other comprehensive
loss attributable to the equity shareholders of the parent |
- |
- |
- |
(197) |
(197) |
|
------ |
------ |
-------- |
------- |
------ |
Total comprehensive
loss for the year |
- |
- |
- |
(5,637) |
(5,637) |
|
------ |
------ |
-------- |
------- |
------ |
Contributions by and
distributions to owners |
|
|
|
|
|
Share-based payments (note 23) |
- |
- |
- |
3 |
3 |
|
------ |
------ |
------ |
-------- |
------- |
Total contributions by and
distributions to owners |
- |
- |
- |
3 |
3 |
|
------ |
------ |
-------- |
------- |
------ |
Balance at 31 July 2020 |
4,447 |
21,010 |
2,868 |
(25,838) |
2,487 |
|
====== |
====== |
====== |
====== |
====== |
Consolidated statement of cash flows
For the year ended 31 July
|
|
2020 |
2019 |
|
Note |
£000 |
£000 |
Cash flows used in operating
activities |
|
|
|
Loss after tax from continuing
operations |
|
(5,440) |
(654) |
Adjustments for: |
|
|
|
Share-based payments |
|
3 |
- |
Depreciation |
2 |
186 |
94 |
Impairment of producing field |
2 |
160 |
- |
Exploration write off/ (write
back) |
1 |
4,004 |
(270) |
Finance income |
|
(7) |
(43) |
Finance expense |
|
266 |
187 |
Decrease in trade and other
receivables |
|
72 |
7 |
Decrease in inventories |
|
7 |
1 |
(Decrease)/increase in trade and
other payables |
|
(95) |
17 |
|
|
-------- |
-------- |
Net cash used in
operations |
|
(844) |
(661) |
|
|
|
|
Income taxes paid |
|
- |
- |
|
|
-------- |
-------- |
Net cash used in operating
activities |
|
(844) |
(661) |
|
|
====== |
====== |
Cash flows used in
investing activities |
|
|
|
Purchase of property, plant and
equipment |
|
(100) |
(1) |
Purchase of intangible assets |
|
(1,148) |
(1,973) |
Cash guarantee re Morocco |
|
(1) |
(251) |
Sale of part interest in licence –
associated costs |
|
(12) |
(8) |
Interest received |
|
7 |
16 |
|
|
------- |
------- |
Net cash used in investing
activities |
|
(1,254) |
(2,217) |
|
|
====== |
====== |
Cash flows (used in)/ from financing
activities |
|
|
|
Gross proceeds from issue of share
capital |
|
- |
4,299 |
Costs incurred on issue of share
capital |
|
- |
(320) |
Proceeds from borrowings |
|
50 |
- |
Lease liability payments |
|
(73) |
- |
Lease liability interest
payments |
|
(3) |
|
Finance costs |
|
(1) |
(5) |
|
|
------- |
------- |
Net cash (used in)/from financing
activities |
|
(27) |
3,974 |
|
|
====== |
====== |
|
|
|
|
Net (decrease)/ increase in cash
and cash equivalents |
|
(2,125) |
1,096 |
Exchange (loss)/gain on cash and
cash equivalents |
|
(12) |
38 |
Cash and cash equivalents at
beginning of year |
|
2,905 |
1,771 |
|
|
------- |
------- |
Cash and cash equivalents at end
of year |
|
768 |
2,905 |
|
|
====== |
====== |
Notes to the financial statements
1
Intangible assets
Intangible assets – Group |
2020 |
2019 |
|
£000 |
£000 |
At 1 August |
7,818 |
5,959 |
Additions |
1,151 |
1,869 |
Disposal |
- |
(10) |
Exploration write-off |
(4,004) |
- |
|
------- |
------- |
At 31 July |
4,965 |
7,818 |
|
====== |
====== |
|
|
|
Intangible assets comprise the Group’s pre-production
expenditure on licence interests as follows:
|
2020
£000 |
2019
£000 |
Ireland FEL 2/13 (Doyle A, B, C,
Kilroy, Keane & Kiely) |
- |
1,280 |
Ireland FEL 3/13 (Beckett, Wilde,
Shaw) |
- |
1,255 |
Ireland FEL 1/17 |
- |
636 |
Ireland LO 16/19 |
- |
89 |
Ireland FEL 4/19 (Inishkea) |
1,482 |
1,259 |
Ireland LO 16/22 |
- |
213 |
UK PEDL180 (Wressle) |
2,947 |
2,867 |
UK PEDL181 |
118 |
101 |
UK PEDL182 (Broughton North) |
29 |
29 |
UK PEDL299 (Hardstoft) |
12 |
12 |
UK PEDL343 (Cloughton) |
78 |
77 |
Morocco (Inezgane) |
299 |
- |
|
------- |
------- |
Total |
4,965 |
7,818 |
|
====== |
====== |
Disposal |
|
|
UK PEDL143 (Holmwood) |
- |
10 |
|
====== |
====== |
Exploration write-off |
|
|
Ireland FEL 2/13 (Doyle A, B, C,
Kilroy, Keane & Kiely) |
1,445 |
- |
Ireland FEL 3/13 (Beckett, Wilde,
Shaw) |
1,343 |
- |
Ireland FEL 1/17 |
845 |
- |
Ireland LO 16/19 |
94 |
- |
Ireland LO 16/22 |
277 |
- |
|
------- |
------- |
Total |
4,004 |
- |
|
====== |
======= |
Exploration write-back
On 8 May 2019 the Group sold its
interest in PEDL143 (Holmwood) to UK Oil & Gas Plc (‘UKOG’) for
25,951,557 shares in UKOG at 1.156p per share.
|
2020 |
2019 |
|
£000 |
£000 |
Consideration for the PEDL143
interest |
- |
300 |
Disposal costs |
- |
(20) |
Book value of remaining
interest |
- |
(10) |
|
------- |
------- |
Exploration write-back |
- |
270 |
|
====== |
====== |
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. Further details of commitments are included in note 25.
Intangible assets - Company
|
2020
£000 |
2019
£000 |
At 1 August |
302 |
198 |
Additions |
69 |
106 |
Transfer to Group companies |
- |
(2) |
Exploration write-off |
(371) |
- |
|
------ |
------ |
At 31 July |
- |
302 |
|
====== |
====== |
Intangible assets comprise the Company’s pre-production
expenditure on licence interests as follows:
|
2020
£000 |
2019
£000 |
Ireland LO 16/19 |
- |
89 |
Ireland LO 16/22 |
- |
213 |
|
------ |
------ |
Total |
- |
302 |
|
====== |
====== |
|
|
|
Exploration write-off
|
|
|
|
2020
£000 |
2019
£000 |
Ireland LO 16/19 |
94 |
- |
Ireland LO 16/22 |
277 |
- |
|
------ |
------ |
Total |
371 |
- |
|
====== |
====== |
|
|
|
LO 16/22 and LO 16/19 were relinquished due to a lack of
commercial prospects and the £371,000 spent to date was written
off.
2
Property, plant & equipment
Property, plant & equipment - Group
|
Furniture &
computers |
Producing
fields |
Right of use
assets |
Total |
|
£000 |
£000 |
£000 |
£000 |
Cost |
|
|
|
|
At 1 August 2018 |
52 |
10,790 |
- |
10,842 |
Additions |
1 |
- |
- |
1 |
|
------ |
------ |
------ |
------ |
At 31 July 2019 |
53 |
10,790 |
- |
10,843 |
|
|
|
|
|
Additions |
3 |
97 |
- |
100 |
On transition |
- |
- |
147 |
147 |
Disposals |
(50) |
- |
- |
(50) |
|
------ |
------ |
------ |
------ |
At 31 July 2020 |
6 |
10,887 |
147 |
11,040 |
|
====== |
====== |
====== |
====== |
Depreciation, depletion and
impairment |
|
|
|
|
At 1 August 2018 |
51 |
10,123 |
- |
10,174 |
Charge for year |
1 |
93 |
- |
94 |
|
------ |
------ |
------ |
------ |
At 31 July 2019 |
52 |
10,216 |
- |
10,268 |
|
|
|
|
|
Charge for year |
1 |
112 |
73 |
186 |
Disposal |
(50) |
- |
- |
(50) |
Impairment in year |
- |
160 |
- |
160 |
|
------ |
------ |
------ |
------ |
At 31 July 2020 |
3 |
10,488 |
73 |
10,564 |
|
====== |
====== |
====== |
====== |
Net Book Value |
|
|
|
|
At 31 July 2018 |
1 |
667 |
- |
668 |
|
====== |
====== |
====== |
====== |
At 31 July 2019 |
1 |
574 |
- |
575 |
|
====== |
====== |
====== |
====== |
At 31 July 2020 |
3 |
399 |
74 |
476 |
|
====== |
====== |
====== |
====== |
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 5-12%, Brent crude prices rising
from US$48 per barrel in 2021 to
US$61 per barrel in 2023 and a
pre-tax discount rate of 13.4%. 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
five years. There was an impairment of £160,000 for the West Firsby
oilfield in the year (2019: No impairment).
Sensitivity to key assumption changes
Variations to the key assumptions used
in the value-in-use calculation would cause impairment of the
producing fields as follows:
|
Further
impairment
of producing fields
£000 |
Production decline rate (current
assumption 5-12%) |
|
12% |
55 |
15% |
279 |
Brent crude price per
barrel (current assumption US$42/bbl in 2021 rising to
US$61/bbl in 2023) |
|
$42 flat |
531 |
$50 flat |
111 |
Pre-tax discount
rate (current assumption 13.4%)
20% |
310 |
25% |
725 |
Property, plant & equipment - Company
|
Furniture &
computers |
Right of use assets |
Total |
|
|
£000 |
£000 |
£000 |
|
Cost |
|
|
|
|
At 1 August 2018 |
52 |
- |
52 |
|
Additions |
1 |
- |
1 |
|
|
------ |
------ |
------ |
|
At 31 July 2019 |
53 |
- |
53 |
|
At transition |
- |
117 |
117 |
|
Additions |
3 |
- |
3 |
Disposals |
(50) |
- |
(50) |
|
------ |
------ |
------ |
|
At 31 July 2020 |
6 |
117 |
123 |
|
====== |
====== |
====== |
Depreciation |
|
|
|
At 1 August 2018 |
51 |
- |
51 |
|
Charge for the year |
1 |
- |
1 |
|
|
------ |
------ |
------ |
|
At 31 July 2019 |
52 |
- |
52 |
|
Charge for year |
1 |
65 |
66 |
Disposals |
(50) |
- |
(50) |
|
------ |
------ |
------ |
At 31 July 2020 |
3 |
65 |
68 |
|
====== |
====== |
====== |
|
Net Book Value |
|
|
|
|
At 31 July 2018 |
1 |
- |
1 |
|
|
====== |
====== |
====== |
|
At 31 July 2019 |
1 |
- |
1 |
|
|
====== |
====== |
====== |
|
At 31 July
2020 |
3 |
52 |
55 |
|
|
====== |
====== |
====== |
|
* * ENDS * *
For further information please visit www.europaoil.com or
contact:
Simon Oddie |
Europa |
+44 (0) 20 7009 2010 |
Christopher Raggett / Simon Hicks /
Tim Harper |
finnCap Ltd |
+44 (0) 20 7220 0500 |
Frank Buhagiar / Megan Dennison |
St Brides Partners Ltd |
+44 (0) 20 7236 1177 |
The information communicated in this announcement contains
inside information for the purposes of Article 7 of the Market
Abuse Regulation (EU) No. 596/2014.