Final Results

Released : 15.06.2017

RNS Number : 1274I
Bahamas Petroleum Company PLC
15 June 2017
 

15 June 2017

 

Bahamas Petroleum Company plc

("Bahamas Petroleum" or the "Company")

 

Final Results for the year ended 31 December 2016

 

 

Bahamas Petroleum Company, the oil and gas exploration company with a significant prospective resource in licences in The Commonwealth of The Bahamas, is pleased to announce its final results for the year ended 31 December 2016 ("the Year").

 

 

Highlights 

·     Total cash on the balance sheet of $1.5m at year end, supplemented by a post year end placing raising $3.25m

·     The Company's singular focus remains to commence responsible and safe drilling operations as soon as possible on a potentially multi-billion-barrel prospect near the world's largest oil market, infrastructure and services, de-risked to the point of drilling

·      The Company is confident of being able to conclude a farm-out and has several parties presently engaged in late-stage commercial negotiations

Additional cash significantly enhances negotiating position with third parties

·      Regulatory clarity with new Petroleum Act and associated regulations promulgated during the year

·      Licence clarity with entry into the second exploration period through to mid 2018

Licence obligations, including commencement of well, postponed into 2018

·    New Environmental Authorisation process embarked on with Ministry as part of process to commence      exploration well

Environmental Impact Assessment previously accepted by Ministry and Environmental Management Plan substantially complete

·      Strict focus on cash expenditure with continued implementation of initiatives to reduce costs

The Board of the Company have agreed to defer 50% of its fee's and executives of the Company have agreed to defer 90% of total remuneration

Total operating loss decreased by 20%

·      Ongoing  engagement with local communities that have an interest in the project

 

Post Year end:

·      Additional capital raised from placing announced on 14th June 2017 to allow more time to conclude a  farm-out and bolster the Company's negotiation position

·      New government elected to power in Bahamas Government elections

 

The Annual Report and Financial Statements for the Year Ended 31 December 2016 are now available on the Company's website www.bpcplc.com and will be posted to shareholders shortly.

 

 

Simon Potter, Chief Executive Officer of Bahamas Petroleum Company, said:

"The Company and Board believes it has a world-class asset. Published independent analysis from a leading international petroleum consultant (Wood Mackenzie) identified the Company's anticipated exploration well as being ranked in the top 10 "Drilling and Future Wells by Prospect Size" (as measured by their estimate of pre-drill volumes - mmboe).

 

On the global front, there has been a general improvement in oil market sentiment, and the Company has noticed a distinct upturn in the level of interest, and pace of progress, with potential partners. In The Bahamas there is a new Government in place keen to grow the economy, the new Petroleum Act and associated Regulations have been fully enacted, and the Company's licences have been renewed and the work obligation and timing clarified.

 

I and the Board continue to be committed to the task in hand. This is self-evident given our continued undertaking to defer and commute our salaries and fees to stock, ultimately only to be remunerated if we are successful in achieving the financing necessary to commence an exploration well, and our expression of interest in participating in the recently announced placing once the close period trading rules allow us to do so.

 

Farm-in discussions remain ongoing with a number of parties, and with a recently strengthened balance sheet and negotiating position the Company remains confident that it will succeed in securing the required investment for drilling of an initial exploration well, on acceptable terms and within the required timeframe.

 

The Board would like to thank all shareholders for their continued support and perseverance.."

 

 

 

 

- Ends -

 

For further information, please contact:

 

 

Bahamas Petroleum Company plc

Simon Potter, Chief Executive Officer

 

Tel: +44 (0) 1624 647 882

Strand Hanson Limited - Nomad

Rory Murphy / James Spinney

 

Tel: +44 (0) 20 7409 3494

Shore Capital Stockbrokers Limited - Broker

Jerry Keen / Toby Gibbs

Tel: +44 (0) 207 408 4090

Canaccord Genuity Limited - Broker

Henry Fitzgerald-O'Connor

Tel: +44 (0) 207 050 6500

CAMARCO

Billy Clegg / James Crothers

Tel: +44 (0) 20 3757 4983

 

Notes to editors:

 

Bahamas Petroleum Company is an oil and gas exploration company with 100% owned offshore licences exclusively focused on the Commonwealth of The Bahamas. The Company has significant prospective resources, which have been de-risked through both extensive 2D and 3D seismic. The four Southern Licences, with a newly agreed well obligation date of April 2017, run until 2Q 2018 when the licences may be renewed a further two times. The Company is intent on delivering safe and environmentally responsible exploration.

 

www.bpcplc.com

 

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.

 

CHAIRMAN'S REPORT

 

Corporate Activities

 

Dear Shareholder,

 

Since my last report, there have been a number of developments relating to the Company's project that I would wish to briefly draw to shareholders' attention.

 

As I reported last year, the Company's Southern Licences were formally renewed by the Bahamian Government in June 2015 for a further three year period, in anticipation of the imminent passage of the long-awaited modernised and strengthened new Petroleum Act and associated Regulations. However, it then took a further 13 months until July 2016 for the Bahamian Ministry of Environment and Housing to finally sign into force the updated Petroleum Regulations. The full enactment of the new Petroleum Act and associated Regulations process thus ultimately took nearly four years, during which time the regulatory landscape for the industry going forward could not be clearly portrayed to potential investors, thus providing a considerable overhang to any discussions.

 

Recognising this considerable additional interregnum, in March 2017, the Government of The Bahamas granted a further 12 month extension to the licences and all obligations therein. The Company's well obligation is thus deferred, to commence the first exploration well during 2018.

 

In the same period of time (that is, while the Government was considering the final form of the new petroleum legislation and associated regulation) the price of crude oil fell sharply, and general oil industry sentiment weakened considerably. Of specific impact to the Company, industry capacity for frontier exploration investment risk (both above ground and below ground) contracted, and access to investment capital dried up. Notwithstanding this period of significant industry disruption, discussions with potential investors, as previously reported, continued uninterrupted, and are ongoing at the time of writing of this report, indeed, BPC is confident of being able to conclude a farm-out and several parties are presently engaged in late-stage commercial negotiations. This continuing interest reflects, we believe, the high technical quality, global scale and advantaged location of the Company's assets. However, the factors mentioned above have meant we have been unable as yet to progress those discussions to a finally concluded farm-out. It is no doubt disappointing to shareholders that these discussions have not yet produced a result, as it is to the Board.

 

Pending a successful outcome to the farm-out process, a number of further cost saving measures were implemented over the past year, such that the Company is now leaner than ever. As part of that the Board of the Company agreed to defer 50% of its fees, and the executive of the Company agreed to defer 90% of total remuneration, until such time as a farm-in or other financing sufficient for an initial exploration well is secured. In June 2017 the Board also took the decision to supplement the Company's available funds via a placing to raise approximately $3.25m. These funds will bolster the Company's balance sheet, as well as strengthen the negotiating position with potential partners.   The Board and I are interested in participating in the placing and will advise on any such decision once permitted to do so by the close period trading rules.

 

More recently, the industry outlook has become more positive. We have started to see a stabilization of global oil prices. The implementation of production restrictions by OPEC and Russia, along with modest economic growth driving a steady increase in demand, appears to have rebased the oil price around the $50 per barrel mark. That said, oil services companies continue to operate at low rates of asset utilisation, with record levels of rigs globally remaining stacked, and global exploration activity remains considerably curtailed.

 

In The Bahamas, a general election in May 2017 resulted in a change in government. The Board and I look forward to working with the new government in furthering our project, which we believe presents so much potential for the nation of The Bahamas as a whole.

 

In summary, despite the frustratingly slow progress in the core task of securing a farm-in partner, BPC's project continues to be of interest to oil majors and large independents alike. Given the sheer scale of the project's potential prize, coupled with technical ease of well execution and proximity to the world's largest hydrocarbon market, and now with the benefit of our licences extended, new legislation in place, and generally improving industry sentiment, we remain confident that we will eventually succeed in our objective, and I look forward to being able to report back to shareholders with more positive news in the coming year.

 

 

Yours sincerely,

Bill Schrader

Chairman

14 June 2017

 

CHIEF EXECUTIVE OFFICER'S REPORT

 

For the past 18 months, the Company's primary activity has been undertaking extensive efforts to secure the investment necessary to drill an initial exploration well on the company licences.

 

It is the Company's strategy to secure such investment via a "farm-in", whereby another entity (ideally, but not necessarily a major international oil and gas company) will acquire an interest in all or some of the licences, and in exchange will pay for all or a substantial part of the cost of drilling, whilst also reimbursing the Company some of the past costs incurred on those licences. This is a fairly typical structure for financing in the oil and gas industry.

 

Over the past 18 months, a considerable number of suitable partners have engaged with the Company on the farm-in process, including undertaking technical and commercial due diligence and entering into negotiations. On this basis, the Company had expected to have secured an acceptable farm-in with a suitable partner by this stage.

 

However, the process of securing a farm-in partner has been hampered by a number of factors, often referred to as "above ground" issues, and has thus taken much longer than anticipated. These "above ground" factors have included the substantial reduction in the oil price during 2016, which resulted in a freeze on consideration of new business opportunities in many large oil companies, particularly for opportunities perceived as "frontier" exploration. Additional delays were presented by the substantial time that it took to secure renewal of the Company's licences, and the time it took for The Government of The Bahamas to fully enact the new Bahamian Petroleum Act and attendant Petroleum Regulations - these  were only fully enacted in July 2016 - the governing legislative regime and its implementation being a key consideration for potential investors. Most recently The Bahamas has entered its latest election cycle with a significant regime change and an entirely new administration.

 

The fact remains that despite the best efforts of the Company and its executive, the process of securing a farm-in partner has not yet concluded, which is no doubt disappointing to shareholders. 

 

That said, discussions remain ongoing with a number of parties, with several having completed extensive technical evaluations and presently engaged in late stage commercial negotiations. The Company expects these discussions to be assisted by the early signs of a recovery in industry risk appetite, coming on the back of a stabilisation of global oil prices, which is seeing operators re-engaging with exploration opportunities.

 

Throughout the past 18 month period, at the same time as doing everything possible to progress the farm-in, the Company has also sought to maintain the integrity of its licences, reduce expenditures, and sustain the business pending a successful farm-in.

 

Specifically, in this regard, the Company secured an agreed 12 month extension with The Government of The Bahamas to its key licence obligation, such that the Company only need commence activity in respect of an initial exploration well by April 2018. Also of note, the Board of the Company agreed to defer 50% of its fees, and the executive of the Company agreed to defer 90% of total remuneration, until such time as a farm-in or other financing sufficient for an initial exploration well is secured. These deferrals have both maintained cash and better aligned the interests of Board and management with shareholders.

 

Notwithstanding the measures taken on 14 June 2017, the Company announced it had undertaken a placement of new shares to raise a total of approximately $3.25m. A part of this placement remains conditional on shareholder approval, for which an Extraordinary General Meeting of Shareholders will be held on 14 July 2017.

 

With the funds received from this placement, the Company's funding will allow additional time to complete the farm-in process on the best terms possible. Indeed, a stronger balance sheet makes for an improved negotiating position, as we are able to demonstrate the ability to maintain discussions with multiple parties for an extended period, should that prove necessary.

 

The majority of the funds raised via the placing - approx. 70%, - will go towards the various costs of  holding the Company and its licences in good order pending a successful farm-in. This includes licence payments, in country operations, local professional staff and other essential expenses. It is worth noting that less than 8% of the funds raised is allocated to Executive and Board remuneration, with the Board and myself continuing to defer and commute the bulk of our compensation until, and only until, a successful farm-in or other financing sufficient for the drilling of an initial well is concluded.

 

Financial Review

 

The Company's total operating loss for the period was $3.8 million, down 20% on the prior year and 10% on the 6 month period to June 2016 when compared on an annualised basis. These results reflect the efforts to constrain costs over the last few years to those only strictly necessary. The operating loss also includes $0.9m in "IFRS 2" charges relating to deferrals of directors fees, charges which are non-cash but are required to reflect the value of deferrals under the accounting standard. 

 

Broadly speaking then, the total loss for the year is made up of approximately 15% executive and Board compensation (on a cash basis, this item projected to fall to below 10% for 2017 as a whole), 25% in country operations costs, 25% non-cash items and 35% corporate and business running costs. 'Running' costs relate to those primary capital market facing activities to maintain the Company (AIM/corporate related, audit, Isle of Man office), expenditure pertaining to managing the farmout process or transactional costs (travel, accommodation, legal and advisors) and other business sustaining costs (IT, communications, insurances etc).

 

Outlook

 

Going forward, the Company and Board believes it has a world-class asset. Published independent analysis from a leading international petroleum consultant (Wood Mackenzie) identified the Company's anticipated exploration well as being ranked in the top 10 "Drilling and Future Wells by Prospect Size" (as measured by their estimate of pre-drill volumes - mmboe).

 

On the global front, there has been a general improvement in oil market sentiment, and the Company has noticed a distinct upturn in the level of interest, and pace of progress, with potential partners. In The Bahamas there is a new Government in place keen to grow the economy, the new Petroleum Act and associated Regulations have been fully enacted, and the Company's licences have been renewed and the work obligation and timing clarified.

 

I and the Board continue to be committed to the task in hand. This is self-evident given our continued undertaking to defer and commute our salaries and fees to stock, ultimately only to be remunerated if we are successful in achieving the drilling of an exploration well, and our expressed interest in participating personally in the announced placing once permitted to do so by close period trading rules.

 

Farm-in discussions remain ongoing with a number of parties, and with a recently strengthened balance sheet the Company remains confident that it will succeed in securing the required investment for drilling of an initial exploration well, on acceptable terms and within the required timeframe.

 

The Board would like to thank all shareholders for their continued support and perseverance.

 

 

Yours sincerely,

Simon Potter

Chief Executive Officer

14 June 2017 

 

 

Consolidated statement of comprehensive income for the year ended 31 December 2016

 

Note

 

2015

Group

$

Continuing operations

 

 

 

Employee benefit expense

7

(2,127,143)

Depreciation expense

12

(48,896)

Other expenses

8

(1,632,405)

(2,669,100)

 

 

 

Operating loss

 

(4,845,139)

 

 

 

 

Other income

 

48,122

57,000

Finance income

6

         3,835

        13,694

 

 

 

 

Loss before tax

 

(3,826,660)

(4,774,445)

 

 

 

 

Taxation

9

                -

                  -

 

 

 

 

Loss for the year

 

(3,826,660)

(4,774,445)

 

 

 

 

Total comprehensive loss for the year

 

(3,826,660)

(4,774,445)

 

 

 

 

 

 

 

 

 

 

 

 

Loss per share for loss attributable to owners of the Company:

 

 

 

Basic and diluted loss per share (expressed in cents

per share)

10

(0.31)

(0.39)

 

 

Consolidated balance sheet as at 31 December 2016

 

Note

2016

Group

$

2015

Group

$

ASSETS

 

 

 

 

 

 

Non-current assets

 

 

Intangible exploration and evaluation assets

13

47,859,256

Property, plant and equipment

12

63,732

Restricted cash

11

  36,972

544,529

 

 

 

 

Total non-current assets

 

48,134,174

48,467,517

 

 

 

 

Current assets

 

 

 

Other receivables

15

675,624

685,172

Restricted Cash

11

500,000

-

Cash and cash equivalents

14

970,021

5,048,800

 

 

 

 

Total assets

 

50,279,819

54,201,489

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

Current liabilities

 

 

 

Trade and other payables

16

618,460

1,283,881

 

 

 

 

Total liabilities

 

618,460

1,283,881

 

 

 

 

EQUITY

 

 

 

 

 

 

 

Share capital

17

37,253

37,253

Share premium reserve

17

78,185,102

78,185,102

Merger reserve

17

77,130,684

77,130,684

Reverse acquisition reserve

17

(53,846,526)

(53,846,526) 

Share based payment reserve

18

2,694,171

2,123,760

Retained earnings

 

(54,539,325)

(50,712,665)

 

 

 

 

Total equity

 

  49,661,359

52,917,608

 

 

 

 

Total equity and liabilities

 

  50,279,819

54,201,489

 

Consolidated statement of changes in equity for the year ended 31 December 2016

 

 

 

 

 

 

Note

 

 

Share capital

$

 

Share premium reserve

$

 

 

Merger reserve

$

 

Reverse acquisition reserve

$

Share based payment reserve

$

 

 

Retained earnings

$

 

 

Total

equity

$

Balance at 1 January 2015

 

 

37,253

 

78,185,102

 

77,130,684

 

(53,846,526)

 

1,850,473

 

(45,938,220)

 

57,418,766

 

 

 

 

 

 

 

 

 

Comprehensive

income

 

 

 

 

 

 

 

 

Total comprehensive loss for the year

 

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(4,774,445)

 

 

(4,774,445)

 

Total Comprehensive expense

 

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(4,774,445)

 

 

(4,774,445)

 

 

 

 

 

 

 

 

 

Transactions with owners

 

 

 

 

 

 

 

 

Share options - value of services

 

18

 

-

 

-

 

-

 

-

 

273,287

 

-

 

273,287

 

 

 

 

 

 

 

 

 

Total transactions with owners

 

 

 

-

 

 

-

 

 

-

 

 

-

 

 

273,287

 

 

-

 

 

273,287

 

 

 

 

 

 

 

 

 

Balance at 31 December 2015

 

 

37,253

 

78,185,102

 

77,130,684

 

(53,846,526)

 

2,123,760

 

(50,712,665)

 

52,917,608

 

 

 

 

 

 

 

 

 

Balance at 1 January 2016

 

 

37,253

 

78,185,102

 

77,130,684

 

(53,846,526)

 

2,123,760

 

(50,712,665)

 

52,917,608

 

 

 

 

 

 

 

 

 

Comprehensive income

 

 

 

 

 

 

 

 

Total comprehensive loss for the year

 

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(3,826,660)

 

 

(3,826,660)

 

 

 

 

 

 

 

 

 

Total Comprehensive expense

 

 

-

 

-

 

-

 

-

 

-

 

(3,826,660)

 

(3,826,660)

 

 

 

 

 

 

 

 

 

Transactions with owners

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share options - value of services

 

18

 

-

 

-

 

-

 

-

 

570,411

 

-

 

570,411

 

 

 

 

 

 

 

 

 

Total transactions with owners

 

 

 

-

 

 

-

 

 

-

 

 

-

 

 

570,411

 

 

-

 

 

570,411

 

 

 

 

 

 

 

 

 

Balance at 31 December 2016

 

 

37,253

 

78,185,102

 

77,130,684

 

(53,846,526)

 

2,694,171

 

(54,539,325)

 

49,661,359

 

 

Consolidated statement of cash flows for the year ended 31 December 2016

 

 

Note

 

 

2015

Group

$

Cash flows from operating activities

 

 

 

Cash used in operations

19

(3,100,458)

(4,198,241)

 

 

 

 

Net cash used in operating activities

 

(3,100,458)

(4,198,241)

 

 

 

 

Cash flows from investing activities

 

 

 

Purchase of property, plant and equipment

12

(12,535)

(5,226)

Proceeds from disposal of property, plant and equipment

 

-

5,500

Payments for exploration and evaluation assets

13

(963,401)

(310,328)

(Increase) in restricted cash

11

(16)

(500,000)

Other income received

 

48,122

57,000

Interest received

6

       3,835

       13,694

Net cash used in investing activities

 

 (923,995)

(739,360)

 

 

 

 

Net decrease in cash and cash equivalents

 

(4,024,453)

(4,937,601)

 

 

 

 

Cash and cash equivalents at the beginning of the year

14

5,048,800

10,032,127

 

 

 

 

Effects of exchange rate changes on cash and cash equivalents

 

(54,326)

   (45,726)

 

 

 

 

Cash and cash equivalents at the end of the year

14

970,021

5,048,800

 

 

 

 

 

1          General information

 

Bahamas Petroleum Company plc ("the Company") and its subsidiaries (together "the Group") is the holder of several oil & gas exploration licences issued by the Government of the Commonwealth of The Bahamas.

 

The Company is a limited liability company incorporated in the Isle of Man.  The address of its registered office is IOMA House, Hope Street, Douglas, Isle of Man.  The Company's review of operations and principal activities is set out in the Directors' Report.

 

Following simplification of the Group structure in previous years to remove legacy holding companies in the Falklands and Jersey, the Company has four directly and eleven indirectly 100% owned subsidiaries as follows:

 

Name

Country of Incorporation

Holding

BPC (A) Limited

Isle of Man

100% Direct

BPC (B) Limited

Isle of Man

100% Direct

BPC (C) Limited

Isle of Man

100% Direct

BPC (D) Limited

Isle of Man

100% Direct

BPC Limited

 

Bahamas

100% Indirect

BPC (A) Limited

Bahamas

100% Indirect

BPC (B) Limited

Bahamas

100% Indirect

BPC (C) Limited

Bahamas

100% Indirect

BPC (D) Limited

Bahamas

100% Indirect

Bahamas Offshore Petroleum Ltd

Bahamas

100% Indirect

Island Offshore Petroleum Ltd

Bahamas

100% Indirect

Sargasso Petroleum Ltd

Bahamas

100% Indirect

Privateer Petroleum Ltd

Bahamas

100% Indirect

Columbus Oil & Gas Limited

Bahamas

100% Indirect

Island Petroleum Limited

Bahamas

100% Indirect

 

2          Summary of significant accounting policies

 

The principal accounting policies applied in the preparation of these consolidated Financial Statements are set out below.  These policies have been consistently applied to all the periods presented, unless otherwise stated.

 

2.1          Basis of preparation

 

The consolidated Financial Statements of Bahamas Petroleum Company plc (the "Financial Statements") reflect the results and financial position of the Group for the year ended 31 December 2016, have been prepared in accordance with International Financial Reporting Standards ("IFRS") and IFRIC (International Financial Reporting Interpretations Committee) interpretations as adopted by the European Union ("EU").  These Financial Statements have been prepared under the historical cost convention and the requirements of the Isle of Man Companies Acts 1931 to 2004.

 

The preparation of Financial Statements in conformity with IFRS requires the use of certain critical accounting estimates.  It also requires management to exercise its judgment in the process of applying the Group's accounting policies.  The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the Financial Statements are disclosed in note 4.

 

Going concern

 

The Directors have, at the time of approving these Financial Statements, determined that the Group has more than adequate financial reserves and therefore these Financial Statements have been prepared on a going concern basis, which assumes that the Group will be able to meet its liabilities as and when they fall due.  See note 4 for further information.

 

Adoption of new and revised Standards

 

a)            New standards, amendments and interpretations adopted

 

No new standards, amendments or interpretations, effective for the first time for the financial year beginning on or after 1 January 2016 have had a material impact on the Group or Company.

 

 

b)            New standards, amendments and interpretations not yet adopted

 

A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 January 2016, and have not been applied in preparing these financial statements. None of these is expected to have a significant effect on the financial statements of the Group or Company, except the following, set out below:

 

IFRS 9, 'Financial instruments', addresses the classification, measurement and recognition of financial assets and financial liabilities. It replaces the guidance in IAS 39 that relates to the classification and measurement of financial instruments. IFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for financial assets: amortised cost, fair value through other comprehensive income and fair value through profit or loss. The basis of classification depends on the entity's business model and the contractual cash flow characteristics of the financial asset. There is now a new expected credit losses model that replaces the incurred loss impairment model used in IAS 39. For financial liabilities there were no changes to classification and measurement except for the recognition of changes in own credit risk in other comprehensive income, for liabilities designated at fair value through profit or loss. The standard is effective for accounting periods beginning on or after 1 January 2018. Early adoption is permitted. The impact of IFRS 9 is being assessed by management.

 

IFRS 16, 'Leases' addresses the definition of a lease, recognition and measurement of leases and establishes principles for reporting useful information to users of financial statements about the leasing activities of both lessees and lessors. A key change arising from IFRS 16 is that most operating leases will be accounted for on balance sheet for lessees. The standard replaces IAS 17 'Leases', and related interpretations. The standard is effective for annual periods beginning on or after 1 January 2019 and earlier application is permitted, subject to EU endorsement and the entity adopting IFRS 15 'Revenue from contracts with customers' at the same time. The full impact of IFRS 16 has not yet been assessed.

 

2.2       Basis of consolidation

 

The consolidated Financial Statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 December each year.  Control is achieved where the Company is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the Financial Statements of subsidiaries to bring the accounting policies used in line with those used by the Group.

All intra-group transactions, balances, income and expenses (including unrealised gains and losses on transactions

between group companies) are eliminated on consolidation.

Changes in the Group's interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions - that is, as transactions with owners in their capacity as owners.  Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to the Group.

 

The Financial Statements consolidate the results, cash flows and assets and liabilities of the Company and its wholly owned subsidiary undertakings.

 

2.3       Operating segments

 

All of the Group's business activities relate to oil & gas exploration activities in the Commonwealth of The Bahamas.  The business is managed as one business segment by the chief operating decision maker ("the CODM"), who has been identified as the Chief Executive Officer ("the CEO").  The CODM receives reports at a consolidated level and uses those reports to assess business performance.  It is not possible to assess performance properly using the financial information collected at the subsidiary level.

 

2.4       Foreign currency translation

 

(i)    Functional and presentation currency

 

Items included in the Financial Statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ("the functional currency").  The consolidated Financial Statements and company Financial Statements are presented in United States Dollars, which is the functional currency of the Company and all of the Group's entities, and the Group's and Company's presentation currency.

 

(ii)   Transactions and balances

 

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions.  Monetary assets and liabilities denoted in foreign currency are translated into the functional currency at exchange rates ruling at the year end.  Foreign exchange gains and losses resulting from the settlement of transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income.

 

2.5       Property, plant and equipment

 

Property, plant and equipment is stated at historical cost less depreciation.  Historical cost includes expenditure that is directly attributable to the acquisition of the items. 

 

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.  All other repairs and maintenance are charged to the statement of comprehensive income during the reporting period in which they are incurred.

 

Depreciation on assets is calculated using the straight‑line method to allocate their cost, net of their residual values, over their estimated useful economic lives, as follows:

 

 

- Computer equipment

3 years

Furniture, fittings and equipment

4 years

Motor vehicles

5 years

Leasehold improvements

Over the life of the lease

 

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

 

An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount with any impairment charge being taken to the statement of comprehensive income.

 

Gains and losses on disposals are determined by comparing proceeds with carrying amount and are recognised in the statement of comprehensive income. 

 

2.6       Intangible assets - exploration and evaluation assets

 

           Exploration and evaluation expenditure incurred which relates to more than one area of interest is allocated across the various areas of interest to which it relates on a proportionate basis.  Exploration and evaluation expenditure incurred by or on behalf of the Group is accumulated separately for each area of interest.  The area of interest adopted by the Group is defined as a petroleum title.

 

           Expenditure in the area of interest comprises direct costs and an appropriate portion of related overhead expenditure, but does not include general overheads or administrative expenditure not linked to a particular area of interest.

 

          As permitted under IFRS 6, exploration and evaluation expenditure for each area of interest, other than that acquired from the purchase of another entity, is carried forward as an asset at cost provided that one of the following conditions is met:

·      the costs are expected to be recouped through successful development and exploitation of the area of interest, or alternatively by its sale; or

·      exploration and/or evaluation activities in the area of interest have not, at the reporting date, reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in, or in relation to, the area of interest are continuing.

 

Exploration and evaluation expenditure which fails to meet at least one of the conditions outlined above is taken to the statement of comprehensive income.

 

Expenditure is not capitalised in respect of any area of interest unless the Group's right of tenure to that area of interest is current.

Intangible exploration and evaluation assets in relation to each area of interest are not amortised until the existence (or otherwise) of commercial reserves in the area of interest has been determined.

 

2.7       Impairment

 

        In accordance with IFRS 6, exploration and evaluation assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.  An impairment loss is recognised for the amount by which the asset's carrying value exceeds its recoverable amount.  The recoverable amount is the higher of an asset's fair value less costs to sell and value in use.  For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). 

 

2.8       Financial instruments

 

The Group classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivables and available for sale.  The classification depends on the purpose for which the financial assets were acquired.  The classification of financial assets is determined at initial recognition.

 

At 31 December 2016 and 2015 the Group did not have any financial assets held at fair value through profit or loss or classified as available for sale.  Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in any active market.  They are included in current assets, except for those with maturities greater than 12 months after the balance sheet date which are classified as non‑current assets.  Loans and receivables are stated initially at their fair value and subsequently at amortised cost using the effective interest rate method.  The Group's loans and receivables consist of 'cash and cash equivalents' at variable interest rates, 'restricted cash' and 'other receivables' excluding 'prepayments'.

The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a 'loss event') and that loss event or events has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

The Group classifies its financial liabilities in the following categories: at fair value through profit or loss and other liabilities.  As at 31 December 2016 and 2015 the Group did not have any financial liabilities at fair value through profit or loss.  Other liabilities are recognised initially at fair value and are subsequently measured at amortised cost using the effective interest method.  Other liabilities consist of 'trade and other payables'. These amounts represent liabilities for goods and services provided to the Group prior to the end of financial period which are unpaid.  The amounts are unsecured and are usually paid within 30 days of recognition.

 

2.9       Cash and cash equivalents

 

Cash and cash equivalents includes cash on hand and deposits held at call with financial institutions with original maturities of three months or less.  For the purposes of the cash flow statement, restricted cash is not included within cash and cash equivalents.

 

2.10     Share capital

 

Ordinary shares are classified as equity.  Incremental costs directly attributable to the issue of new shares or options are deducted, net of tax, from the proceeds.  Net proceeds are disclosed in the statement of changes in equity.

 

2.11     Employee benefits

(i)            Wages and salaries, annual leave and sick leave

 

Liabilities for wages and salaries, including non‑monetary benefits, expected to be settled within 12 months of the

reporting date are recognised in other payables in respect of employees' services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled.

 

(ii)           Share based payments

 

Where equity settled share options are awarded to employees or Directors, the fair value of the options at the date of grant is charged to the statement of comprehensive income over the vesting period.  Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each balance sheet date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest.  Market vesting conditions are factored into the fair value of the options granted.  As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied.  The cumulative expense is not adjusted for failure to achieve a market vesting condition.

 

Where equity instruments are granted to persons other than employees or Directors, the statement of comprehensive income is charged with the fair value of goods and services received.

 

(iii)          Bonuses

 

The Group recognises a liability and an expense for bonusesBonuses are approved by the Board and a number of factors are taken into consideration when determining the amount of any bonus payable, including the recipient's existing salary, length of service and merit.  The Group recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation.

 

(iv)           Pension obligations

 

For defined contribution plans, the Group pays contributions to privately administered pension plans. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as an employee benefit expense when they are due.

 

(v)            Termination benefits

 

Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it is demonstrably committed to a termination and when the entity has a detailed formal plan to terminate the employment of current employees without possibility of withdrawal. Benefits falling due more than 12 months after the end of the reporting period are discounted to their present value.

 

 

2.12     Interest Income

 

             Interest income is recognised on a time proportion basis using the effective interest method.

 

2.13     Leases

 

             Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee are classified as operating leases.  Payments made under operating leases (net of any incentives received from the lessor) are charged to the statement of comprehensive income on a straight‑line basis over the period of the lease.

 

 

3        Financial risk management in respect of financial instruments

 

3.1       Financial risk factors

 

The Group's activities expose it to a variety of financial risks: liquidity, market and credit risk.  The Group's overall risk management programme focuses on minimising potential adverse effects on the financial performance of the Group.

 

Risk management is carried out by the CEO under policies approved by the Board of Directors.  The CEO identifies, evaluates and addresses financial risks in close co‑operation with the Group's management.  The Board provides written principles for overall risk management, as well as written policies covering specific areas, such as mitigating foreign exchange risk, interest rate risk, credit risk and investing excess liquidity.

(i)            Liquidity risk

 

The Group monitors its rolling cashflow forecasts and liquidity requirements to ensure it has sufficient cash to meet its operational needs.  Surplus cash is invested in interest bearing current accounts and money market deposits.

 

No profit to date

 

The Group has incurred losses since its inception and it is therefore not possible to evaluate its prospects based on past performance.  Since the Group intends to continue investing in the exploration licences it currently holds an interest in, the Directors anticipate making further losses.  There can be no certainty that the Group will achieve or sustain profitability or achieve or sustain positive cash flows from its activities.

 

Future funding requirements

 

The Group intends to raise funding through the placing of ordinary shares and farm-outs of its licences.  There is no certainty that the Company will be able to raise funding on the equity markets or that the raising of sufficient funds through future farm outs will be possible at all or achievable on acceptable terms.  This could substantially dilute the Group's interest in the licences, however, given the size of the Group's existing holding it would be expected, although there is no guarantee, that the Group will retain a significant equity interest in the licences.

Financial liabilities

The Group's financial liabilities comprise entirely its trade and other payables which all fall due within 1 year.  The Group's payment policy is to settle amounts in accordance with agreed terms which is typically 30 days.

 

(ii)           Market risk

 

Foreign exchange risk

 

The Group operates internationally and therefore is exposed to foreign exchange risk arising from currency exposures, primarily with regard to UK Sterling.  The exposure to foreign exchange risk is managed by ensuring that the majority of the Group's assets, liabilities and expenditures are held or incurred in US Dollars, the functional currency of all entities in the Group. At 31 December 2016 the Group held $195,404 of cash in UK Sterling (31 December 2015: $352,807) and had an immaterial amount of trade and other payables denominated in UK Sterling.

 

At 31 December 2016, if the US Dollar currency had weakened/strengthened by 10% against UK Sterling with all other variables held constant, post-tax losses for the year and total equity would have been reduced/increased by approximately $20,000 (31 December 2015: reduced/increased by $35,000), mainly as a result of foreign exchange gains/losses on translation of UK Sterling denominated bank balances.

 

The Group also has operations denominated in the Bahamian dollar.  As the Bahamian dollar is pegged to the US dollar on a one for one basis these operations do not give rise to any currency exchange exposures.

 

Interest rate risk

 

The Group's exposure to interest rate risk relates to the Group's cash deposits which are linked to short term deposit rates and therefore affected by changes in bank base rates.  At 31 December 2016 and 2015 short term deposit rates were in the range of 0% to 1% and therefore the interest rate risk is not considered significant to the Group.  An increase in interest rate of 0.25% in the year would have had an immaterial effect of the Group's loss for the year.

 

(iii)          Credit risk

 

Credit risk is managed on a Group basis.  Credit risk arises from cash and cash equivalents and restricted cash.  For banks and financial institutions, only independently rated parties with a minimum rating of 'A' are accepted.  In order to mitigate credit risk arising from cash balances the Group holds cash reserves with more than one counterparty.

 

3.2       Capital risk management

 

Capital is defined by the Group as all equity reserves, including share capital and share premium.  The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to support the Group's business operations and maximise shareholder value.  The Group is not subject to any externally imposed capital requirements.

 

4        Critical accounting estimates and assumptions

 

        The Group makes estimates and assumptions concerning the future.  The resulting accounting estimates will, by definition,       seldom equal the related actual results.  The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

 

             (a)           Going concern

 

These Financial Statements have been prepared on a going concern basis, which assumes that the Group will continue in operation for the foreseeable future.

The Directors are of the opinion that, following the recently announced placing of new shares in the Company, the Group has adequate financial resources following the initial firm placement to meet its working capital needs for at least the next 12 months based on cash flow forecasts and management's ability to take action to reduce costs in the event that the conditional placement does not receive shareholder approval.

The Group's ability to meet its obligations beyond 2018 is dependent on the level of exploration and appraisal activities undertaken.  The next step in the Group's asset development programme requires the drilling of an exploration well on its prospects.  The ability of the Group to discharge this obligation is contingent on the successful completion of a farm in arrangement or equity raise.

 

(b)           Carrying value of exploration expenditure

 

Expenditure of $48,052,657 relating to the cost of exploration licences, geological and geophysical consultancy and seismic data acquisition and interpretation has been capitalised as at 31 December 2016 (2015: $47,859,256). 

Ultimate recoupment of exploration and evaluation assets capitalised is dependent on successful development and commercial exploitation, or alternatively, sale of the respective licence areas.  The carrying value of the Group's exploration and evaluation expenditure is reviewed at each balance sheet date and, if there is any indication that it is impaired, its recoverable amount is estimated.  Estimates of impairment are limited to an assessment by the Directors of any events or changes in circumstances that would indicate that the carrying value of the asset may not be fully recoverable.  Any impairment loss arising is charged to the statement of comprehensive income.

 

On 21 March 2017 the Government of The Bahamas extended the Group's four southern exploration licences in Bahamian waters and all their attendant obligations for a period of 12 months in recognition of delays imposed on the project by the time taken for new regulations to guide and govern industry operations to be legally implemented.  As a consequence the licence now requires the Group to commence an exploration well within the licence area by April 2018.

 

Renewal of the Miami licence remains under review as at the balance sheet date.

 

 

5        Segment information

        The Company is incorporated in the Isle of Man.  The total of non-current assets other than financial instruments located in the Isle of Man as at 31 December 2016 is $7,110 (31 December 2015: $3,854), and the total of such non-current assets located in The Bahamas is $48,090,092 (31 December 2015: $47,919,135).

 

6        Finance income

 

2016

Group

$

2015

Group

$

 

 

 

Finance income - interest income on short-term bank deposits

3,835

13,694

 

 

7        Employee benefit expense

 

 

2016

Group

$

2015

Group

$

 

 

 

Directors and employees salaries and fees

1,226,012

1,518,494

Social security costs

59,319

72,116

Pension costs - defined contribution

140,573

139,181

Share based payments (see note 18)

570,411

273,287

Other staff costs

218,175

   124,065

 

 

 

 

2,214,490

2,127,143

 

 

 

 

Effective 1 October 2014, the Directors agreed to forgo 20% of their remuneration which becomes repayable in shares only once the Company's farmout transaction is successfully completed

Effective 1 April 2016, the Directors agreed to increase the above fee deferral to 50% of their remuneration which becomes repayable in shares only once the Company's farmout transaction is successfully completed.  In the case of Mr Potter, CEO, this deferral is 90% of salary and is to be repaid in equal proportions of shares and cash on conclusion of a farmout transaction.  See note 18 for further details.

8          Other expenses

 

 

2016

Group

$

 

2015

Group

$

 

 

 

 

 

Travel and accommodation

 

193,053

 

334,557

Operating lease payments

 

250,084

 

349,090

Legal and professional

 

844,094

 

1,499,671

Net foreign exchange loss

 

39,046

 

28,912

Gain on disposal of fixed assets

 

-

 

(297)

Other

 

250,139

 

403,411

 

 

 

 

 

Fees payable to the Company's auditor for the audit of the parent company and consolidated Financial Statements

 

45,582

 

 

 

49,216

 

 

Fees payable to the Company's auditor for other services:

 

 

 

 

- Tax advisory services

10,407

 

4,540

 

Total auditor remuneration

 

55,989

 

53,756

 

 

 

 

 

Total other expenses

 

1,632,405

 

2,669,100

           

 

 

9        Taxation

 

The Company is incorporated and resident in the Isle of Man and subject to Isle of Man income tax at a rate of zero per cent.

 

All other group companies are within the tax free jurisdiction of the Commonwealth of The Bahamas. Under current Bahamian law, the Bahamian group companies are not required to pay taxes in The Bahamas on income or capital gains.

 

 

10     Basic and diluted loss per share

 

             (a)           Basic

 

             Basic loss per share is calculated by dividing the loss attributable to the equity holders of the Company by the weighted average number of ordinary shares in issue during the year.

 

 

2016

Group

2015

Group

 

 

 

Loss attributable to equity holders of the Company (US$)

(3,826,660)

(4,774,445)

Weighted average number of ordinary shares in issue (number)

1,230,479,096

1,230,479,096

Basic loss per share (US Cents per share)

(0.31)

(0.39)

 

 

 

 

(b)           Diluted

 

Diluted loss per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares.  The Company had one category of dilutive potential ordinary shares: share options.  For these share options, a calculation is performed to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company's shares) based on the monetary value of the subscription rights attached to outstanding share options.  The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options. Share options outstanding at the reporting date were as follows:

0      

 

 

 

2016

Group

 

 

2015

Group

 

 

 

Total share options in issue (number) (see note 18)

68,850,000

58,500,000

 

 

 

The effect of the above share options at 31 December 2016 and 2015 is anti-dilutive; as a result they have been omitted from the calculation of diluted loss per share.

 

 

 

11      Restricted cash

 

 

2016

Group

$

2015

Group

$

 

 

 

 

 

 

Bank performance bond

500,000

500,000

Bank deposits

  36,972

  44,529

 

 

 

 

536,972

544,529

 

 

 

 

 

 

The Bank performance bond emplaced during the prior year is in favour of the Government of the Bahamas.  The bond formed a condition of the 2015 licence renewal and will be released in 2017 given the Company has now satisfied the licence condition to undertake $750,000 of qualifying expenditure during the licence period .

 

Non-current bank deposits consist of funds held as security for Company credit card facilities.

 

12      Property, plant & equipment

 

Group

 

Leasehold improvements

Furniture, fittings and equipment

 

 

Motor vehicles

 

 

 

Total

 

$

$

$

$

At 1 January 2015

 

 

 

 

Cost

56,417

238,280

156,185

450,882

Accumulated depreciation

(47,623)

(210,400)

(80,254)

(338,277)

 

 

 

 

 

Net book amount

    8,794

    27,880

  75,931

  112,605

 

 

 

 

 

 

 

 

 

 

Year ended 31 December 2015

Opening net book amount

 

8,794

 

27,880

 

  75,931 

 

112,605

Additions

-

5,226

-

5,226

Disposals - cost

-

-

(58,496)

(58,496)

Depreciation charge

(4,058)

(20,771)

(24,067)

(48,896)

Disposals - Accumulated depreciation

          -

            -

  53,293

  53,293

 

 

 

 

 

 

 

 

 

 

Closing net book amount

  4,736

  12,335

  46,661

  63,732

 

At 31 December 2015

 

 

 

 

Cost

56,417

243,506

97,689

397,612

Accumulated depreciation

(51,681)

(231,171)

(51,028)

(333,880)

 

 

 

 

 

Net book amount

    4,736

    12,335

  46,661

    63,732

 

 

 

 

 

 

 

 

 

 

Year ended 31 December 2016

 

 

 

 

Opening net book amount

    4,736

    12,335

  46,661

    63,732

Additions

-

12,535

-

12,535

Depreciation charge

(4,058)

(12,424)

(15,240)

(31,722)

 

 

 

 

 

Closing net book amount

     678

12,446

  31,421

44,545

 

 

 

 

 

At 31 December 2016

 

 

 

 

Cost

56,417

256,041

97,689

410,147

Accumulated depreciation

(55,739)

(243,595)

(66,268)

(365,602)

 

 

 

 

 

Net book amount

       678

    12,446

  31,421

    44,545

 

 

 

 

 

            

            

13      Intangible exploration and evaluation assets

 

Group

 

 

 

 

Licence costs

Geological, Geophysical and Technical Analysis

 

 

 

Total

 

 

$

$

$

Year ended 31 December 2015

 

 

 

 

Opening cost / net book amount

 

2,081,250

44,697,678

46,778,928

Additions (note 20(iii))

 

   770,000

     310,328

1,080,328

 

 

 

 

 

Closing cost / net book amount

 

2,851,250

45,008,006

47,859,256

 

 

 

 

 

 

 

 

 

 

Year ended 31 December 2016

 

 

 

 

Opening cost / net book amount

 

2,851,250

45,008,006

47,859,256

Additions (note 20(iii))

 

               -

     193,401

     193,401

 

 

 

 

 

Closing cost / net book amount

 

2,851,250

45,201,407

48,052,657

 

Ultimate recoupment of intangible exploration and evaluation assets capitalised is dependent on successful development and commercial exploitation, or alternatively, sale of the respective licence areas (note 4(b)).

These assets are reviewed for impairment annually or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.  At present the Directors do not believe any such impairment indicators are present (note 4(b)).

 

14      Cash and cash equivalents

 

2016

Group

2015

Group

 

$

$

 

 

 

Cash at bank

970,021

5,048,800

 

 

 

             The 2016 balance includes interest bearing accounts at rates between 0% and 1% (2015: 0% to 1%).

 

            

Reconciliation of total cash balances

2016

Group

2015

Group

 

$

$

 

 

 

Cash at bank

970,021

5,048,800

Restricted cash (see note 11)

536,972

   544,529

 

Total cash

 

1,506,993

 

 

5,593,329

 

 

 

 

15      Other receivables

 

 

2016

Group

2015

Group

 

$

$

 

 

 

Other receivables (note (a))

51,043

65,027

Prepayments (note (b))

624,581

620,145

 

 

 

 

675,624

685,172

 

(a)           Other receivables

 

As at 31 December 2016 and 2015, these amounts predominantly consist of VAT recoverable. 

 

(b)           Prepayments

 

As at 31 December 2016 prepayments include $500,000 (2015: $500,000) in application fees paid to The Government of the Commonwealth of The Bahamas for five additional exploration licences.  During the prior year, two of these licence applications were withdrawn, consequently receipt of $200,000 against these applications is expected to be credited against future licence rental payments (see note 20(iii)).  The three retained applications remain pending award, in the event that the Group's applications are unsuccessful, 50% of the remaining $300,000 in application fees is refundable to the Group.  No provision has been made in the consolidated Financial Statements to write down the carrying value of these prepayments.

 

16      Trade and other payables

 

 

2016

Group

2015

Group

2014

Group

 

$

$

$

 

 

 

 

Exploration and evaluation liabilities (note 20 (iii))

-

770,000

-

Accruals

579,239

390,755

210,265

Trade payables

35,849

114,558

208,979

Other payables

    3,372

       8,568

  12,000  

 

 

 

 

 

618,460

1,283,881

431,244

         

The fair value of trade and other payables approximates to their carrying value as at 31 December 2016 and 2015.

 

 

17      Share capital, share premium, merger reserve and reverse acquisition reserve

 

 

 

 

 

Number of shares

 

 

Issue price

 

 

Ordinary shares

 

Share premium reserve

 

 

Merger reserve

 

Reverse acquisition reserve

Group

 

issued

$

$

$

$

$

 

 

 

 

 

 

 

 

 

 

At 1 January 2015

 

 

 

1,230,479,096

 

 

-

 

     

37,253

 

 

  78,185,102

 

 

77,130,684

 

 

(53,846,526)

 

 

 

 

 

 

 

 

At 31 December 2015 and 31 December 2016

 

 

1,230,479,096

 

-

 

37,253

 

78,185,102

 

77,130,684

 

(53,846,526)

 

 

 

 

 

 

 

 

                 

In 2008, BPC Jersey Limited acquired Falkland Gold and Minerals Limited ('FGML') via a reverse acquisition, giving rise to the reverse acquisition reserve.  BPC Jersey Limited was the acquirer of FGML although FGML became the legal parent of the Group on the acquisition date.  FGML subsequently changed its name to BPC Limited.

The merger reserve arose in 2010 as a result of the Group undergoing a Scheme of Arrangement which saw the shares in the then parent company BPC Limited replaced with shares in Bahamas Petroleum Company plc.

The total authorised number of ordinary shares at 31 December 2016 and 2015 was 5,000,000,000 shares with a par value of 0.002p per share.

 

All issued shares of 0.002 pence are fully paid.

 

18      Share based payments

Share options have been granted to Directors, selected employees and consultants to the Company.   

The Group had no legal or constructive obligation to repurchase or settle any options in cash.  Movements in the number of share options outstanding during the year are as follows:

 

                                                                                    2016

                                                                                     Group

 

2015

Group

 

 

Average exercise price per share

 

No. Options

 

Average exercise price per share

 

No. Options

 

 

 

 

 

At beginning of year

17.39p

58,500,000

17.32p

64,500,000

Relinquished

16.23p

(45,000,000)

14.97p

(6,000,000)

Expired

21.25p

(13,500,000)

-

-

Granted

2.22p

68,850,000

          -

                 -

At end of year

2.22p

68,850,000

17.39p

58,500,000

 

Exercisable at end of year

 

        -

 

 

                 -

 

21.25p

 

  6,750,000

 

The weighted average remaining contractual life of the options in issue at 31 December 2016 is 4.25 years (31 December 2015: 2.1 years).  The exercise price of these options are 2.22 pence per share.

 

On 12 April 2016,  all options previously granted on 12 April 2011 expired. On 4 April 2016 all other options previously granted over Company shares were cancelled by mutual election.

 

No adjustment was made to the share based payments reserve or charge for the year following the above forfeitures.

 

On 4 April 2016 68,850,000 options were granted all of which carried the following terms:

 

·      The options have an exercise price of 2.22 pence.

·      Half of the options become exercisable only once the Company secures a partnership or other arrangement sufficient to finance the Company's first exploration well (Tranche 1).

·      Half of the options become exercisable only once the Company's first exploration well is commenced (Tranche 2).

·      The options expire after 5 years.

·    Options granted to Directors and staff require the option holder to remain in office, with the provision of this service requirement to be waived at the discretion of the Company.

 

The fair value of the options granted in the year was estimated using the Black Scholes model.  The inputs and assumptions used in calculating the fair value of options granted in the year were as follows:

 

 

 

Options Granted on 4 April 2016

 

Tranche 1

Tranche 2

Number of options granted

34,425,000

34,425,000

Share price at date of grant

2.02p

2.02p

Exercise price

2.22p

2.22p

Expected volatility

20%

18%

Expected life

0.75 years

1.08 years

Risk free return

0.13%

0.13%

Dividend yield

Nil

Nil

Fair value per option

0.10 cents

0.11 cents

 

On 17 December 2014, the Directors entered into an agreement for the deferral of 20% of their salary and fees on the following terms:

·      20% of all directors' fees and the CEO's salary are to be forgone until a farmout or other arrangement sufficient to finance the first exploration well is completed.

·      The value of fees/salary forgone shall accrue at the end of each month as an entitlement to ordinary shares in the Company.

·      The number of ordinary shares accruing shall be calculated as the value of fees/salary forgone divided by the volume weighted average closing price of the Company shares over each month.

·      The "accrued shares" shall only be issued to the directors on completion of a farmout or other arrangement sufficient to finance the first exploration well.

·      The agreement is effective for all parties from 1 October 2014.

 

On 1 April 2016 the Directors entered into a further agreement for the deferral of 50% of their fees and Mr Potter entered into an agreement for the deferral of 90% of his salary on the following terms:

 

·      50% of all directors' fees and 90% of the CEO's salary are to be forgone until a farmout or other arrangement sufficient to finance the first exploration well is completed.

·      The value of Directors fees forgone shall accrue at the end of each month as an entitlement to ordinary shares in the Company.

·      50% of the value of the CEO's salary forgone shall accrue at the end of each month as an entitlement to ordinary shares in the Company.

·      50% of the value of the CEO's salary forgone shall be repayable in cash on settlement of the well financing criteria.

·      Receipt of the CEO's forgone salary is conditional on his continued employment by the Group up to the completion of a farmout or other financing arrangement.

·      All of the CEO share entitlements accrued under the agreement entered into on 1 October 2014 were forgone.

·      The number of ordinary shares accruing shall be calculated as the value of fees/salary forgone divided by the volume weighted average closing price of the Company shares over each month.

·      The "accrued shares" shall only be issued to the directors on completion of a farmout or other arrangement sufficient to finance the first exploration well.

·    The agreement is effective for all parties from 1 April 2016 and, in the case of Simon Potter, superceeds the agreement entered into on 17 December 2014.

 

Under IFRS 2, the above agreement constitutes the issuance of equity settled share based payment instruments with the following terms:

 

·      All instruments granted on 1 October 2014 and 1 April 2016 respectively.  Instruments granted to Simon Potter vest on the suceessfull conclusion of a farmout, estimated for the purposes of calculating the vesting period over which the fair value of the instrument should be released at 16 months from the date of grant.  For all other Directors, individual monthly tranches vest at the end of each month based on the monthly volume weighted average share price.

·    Total number of instruments granted estimated based on forecast fee deferral quantum and average Company share price over the preceding 15 months.

·      Instruments shall only be issued on conclusion of financing for the Group's first exploration well.

·      Estimated issue date of 31 December 2015 and consequent 15 month life of instruments.

·      Estimated fair value of instruments being the share price on the date of grant.

 

The value of the instruments has been estimated and shall be charged to the statement of total comprehensive income in monthly tranches over the estimated life of the instruments.

 

Expense arising from share based payment transactions

 

Total expense arising from equity-settled share based payment transactions:

 

 

2016

Group

2015

Group

 

$

$

 

Expense in relation to share based payment transactions

 

570,411

 

273,287

 

             Of the above amount $502,480 (2015: nil) relates to salary deferrals with the remainder relating to the issue of share options.

19        Cash used in operations

 

 

2016

Group

2015

Group

 

$

$

 

 

 

Loss after income tax

(3,826,660)

(4,774,445)

Adjustments for:

 

 

- Depreciation (note 12)

31,722

48,896

- Share based payment (note 18)

570,411

273,287

- Finance income (note 6)

(3,835)

(13,694)

- Other income received

(48,122)

(57,000)

- Gain on disposal of fixed assets

-

(297)

- Foreign exchange loss on operating activities (note 8)

39,046

28,912

Changes in working capital:

 

 

- Other receivables

85,945

264,283

- Trade and other payables

51,035

       31,817

 

Cash used in operations

 

(3,100,458)

 

 

(4,198,241)

       

 

20      Contingencies and commitments

 

             (i)            Contingencies

            

As at 31 December 2016, the Group had no contingent liabilities that require disclosure in these financial statements.

 

             (ii)           Expenditure commitments

 

The terms of the Groups licences, as extended on 21 March 2017, require the commencement of an exploration well in the licenced area by 30 April 2018.  As the Company does not have sufficient cash resources to discharge this commitment, an industry partnership or other financing arrangement will be required in order to meet this licence obligation.

 

(iii)          Annual rental commitments

 

The Group is required under the exploration licences to remit annual rentals in advance to the Government of the Commonwealth of The Bahamas in respect of the licenced areas.   

 

Under the terms of the Group's licences, a rental fee of $250,000 per licence per annum is payable, totalling $1,000,000 annually for all four licences held by the Group.  On 21 March 2017 the Government of the Bahamas issued a 12 month deferral for all obligations under the terms of the licence.  As such, no licence rentals become payable by the Company until 2018.

 

Renewal of the Group's Miami licence remains under review pending negotiations with the Bahamian Government regarding the terms of renewal. 

            

The Group leases various premises under non-cancellable operating lease agreements.  The leases have varying terms and renewal rights.

 

The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

 

 

2016

Group

2015

Group

 

$

$

 

 

 

No later than 1 year

61,950

243,300

Later than 1 year and no later than 5 years

          -

   60,450

 

 

61,950

 

 

303,750

 

On 1 January 2014 the Group entered into a four year lease to sublet a portion of unutilised office space in Nassau, Bahamas for $48,000 per annum.  The above minimum lease payment obligations are shown gross of this income source which is recognised as Other Income received in the Consolidated Statement of Comprehensive Income for the year.

 

 

21      Related party transactions

         

             Key Management Personnel

 

             Details of key management personnel during the current and prior year are as follows:

 

            

William Schrader

Non-Executive Chairman

James Smith

Non-Executive Deputy Chairman

Simon Potter

Director and Chief Executive Officer

Adrian Collins

Non-Executive Director

Ross McDonald

Non-Executive Director

Edward Shallcross

Non-Executive Director

 

 

             Key Management Compensation

            

 

2016

Group

2015

Group

 

$

$

 

 

 

Short term employee benefits

711,312

1,206,545

Share based payments (see note 18)

   546,879

   273,287

 

 

 

 

 1,258,191

1,479,832

       

               

 

Simon Potter's key remunerative terms as Chief Executive Officer of the Company are as follows:

 

·           Annual salary of $1,000,000 with minimum CPI indexation.

·           Mr Potter is entitled to receive pension contributions from the Company equal to 10% of his contracted annual salary.

·           The term of the contract expires on 31 March 2018.  Benefits arising from termination during the term range from nil to payment of salary over the full term, depending on the circumstances surrounding termination.

·           Effective 1 October 2014, Mr Potter agreed to defer 20% of his salary, equating to $200,000 annually, to be received in Company shares contingent on the successful conclusion of a farm out or other arrangement sufficient to finance the Company's first exploration well.  All amounts accruing to Mr Potter under this arrangement from 1 October 2014 to 31 March 2016 were forgone during the year as part of the agreement entered into effective 1 April 2016, see below.

·           Effective 1 April 2016, Mr Potter agreed to defer 90% of his salary, equating to $900,000 annually, to be received 50% in Company shares and 50% in cash contingent on the successful conclusion of a farm out or other arrangement sufficient to finance the Company's first exploration well.

 

Directors' remuneration

 

 

2016

Group

2015

Group

 

$

$

Simon Potter;

 

 

   - Salary (80% of contractual entitlement to 31 March 2016)

200,000

800,000

   - Salary (10% of contractual entitlement 1 April 2016 to 31 December 2016)

75,000

-

   - Accrued Pension liability (non-cash)

100,000

  100,000

   - Contractual Entitlements

141,667

            -

Total

516,667

900,000

William Schrader

50,877

80,235

James Smith

33,271

52,468

Adrian Collins

37,761

60,759

Ross McDonald

33,271

51,963

Edward Shallcross

39,465

61,120

Total

711,312

1,206,545

       

 

 

Effective 1 October 2014, the Directors agreed to forgo 20% of their remuneration which becomes repayable in shares only once the Company's first exploration well has been successfully financed.  Effective 1 April 2016 the Directors agreed to increase this fee deferral to 50% for Board members and 90% for the CEO.  See note 18 for further details.

 

Accumulated unpaid Contractual Entitlements totalling $141,667 relating to prior years were paid to Simon Potter at the start of the year.  No further contractual benefits are payable to Simon Potter until a farmout or other arrangement sufficient to finance the first exploration well is completed.

 

Cash payments totalling $158,333 were made in the current year related to Simon Potter's pension benefits entitlement which had accrued in prior years.  The remaining entitled amounts have accrued in the year and are included in accruals on the balance sheet as at 31 December 2016.

 

Share options granted to Directors during the year were as follows:

 

 

Number of options granted

Exercise price per Ordinary Share

 

Date of Grant

 

William Schrader

 

2,000,000

 

2.22p

 

4 April 2016

Simon Potter

39,000,000

2.22p

4 April 2016

James Smith

1,000,000

2.22p

4 April 2016

Adrian Collins

1,000,000

2.22p

4 April 2016

Edward Shallcross

1,000,000

2.22p

4 April 2016

Ross McDonald

1,000,000

2.22p

4 April 2016

 

 

Details of share options granted are disclosed in note 18 to these Financial Statements.

 

Other related party transactions

 

During the year the Company operated banking facilities with RBC Royal Bank (Bahamas) Limited in Nassau, The Bahamas.  Ross McDonald, a director of the Company, is also a director of RBC Royal Bank (Bahamas) Limited.   As at 31 December 2016, $78,184 was held on deposit with RBC Royal Bank (Bahamas) Limited (31 December 2015: $605,245).

 

22      Events After the Balance Sheet Date

In March 2017, the Government of the Bahamas provided the Company with a 12 month extension to its licences and all attendant obligations.  This extension was provided in recognition of the delays imposed on the Company by the time taken to implement the new Petroleum Regulations and to provide sufficient time to design the first exploration well in compliance with the standards set out in these new regulations.  As a consequence, the Company's licence obligation is now to commence an exploration well by April 2018.

 

On 14 June 2017 the Company announced the placing of 260,000,000 new shares in the Company raising a total of $3,250,000 in proceeds.  The placing is taking the form of a Firm Placing of 110,000,000 shares and Conditional Placing of 150,000,000 shares which is conditional on shareholder approval at an Extraordinary General Meeting to be held on 14 July 2017.  These funds are intended to meet the Company's working capital needs whilst efforts to conclude a partnership continue.

 

 


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