NU-OIL AND GAS PLC
AIM symbol: 'NUOG'
21 December 2016
NU-Oil and Gas plc
("NU-Oil" or "the Company")
Results for the year ended 30 June 2016
NU-Oil, the independent Oil and Gas Company, today announces its results for the year ended 30 June 2016.
HIGHLIGHTS
Building a portfolio of Stranded Fields:
· Continuing focus on the development of stranded and marginal fields through the investment in, and relationship with, Marginal Field Development Company (MFDevCo) Ltd.(formerly ABT Oil and Gas Ltd.) in which the Company holds a 50% interest.
· MFDevCo has developed the MFD Consortium, which is a group of major industry service companies and equipment suppliers, including Aibel, Arup, Kongsberg, Frames and AGR as key members, which have the recognised expertise to deliver key aspects of the marginal field engineering solution.
· Strategy focused on utilising engineering solutions that reduce both Capex and Opex and are redeployable to build a portfolio of low risk, highly appraised marginal assets.
· The marginal field portfolio that was acquired before the oil price fall of 2014 was uneconomic at the current oil price and has been relinquished. The Company has provided for all liabilities with respect to these assets.
· The Company is actively seeking new assets in conjunction with MFDevCo.
Other Projects:
· Having considered the performance of the Group's Canadian assets in the year and the general economic environment affecting the sector, it is Management's view that the funds necessary to develop these assets are unavailable and therefore we have been seeking alternative means by which these assets can be taken forward.
· The Group has entered into Heads of Agreement for PL2002-01(A) and an Option Agreement for EL1070. The principle behind each transaction is that we remove the costs of our Canadian operations from our budgetary requirements, while still allowing investment into the project and an ability to share in any success generated by that investment.
Financial:
· Loss before tax for the year was £816,000 (2015: £5,274,000).
· The Group has a net liability position of £3,239,000 (2015: £2,899,000). The net liabilities mainly relate to the loan owed to Shard Capital Management and to related party creditors. At this time neither Shard nor related parties have sought to recover these debts and it is expected that they will continue to support the Group.
· The status of commercial discussions on a number of projects provide management with the confidence that the business model has global potential and that the Group can satisfy its liabilities and operate as a going concern.
· During the year the Company raised £435,000 (before expenses of £58,000) through the placement of shares.
· Post year end, the Company raised £1,232,000 (before expenses of £123,000) through the placement of shares.
OUTLOOK
· Clear focused strategy for commercialising stranded and marginal fields.
· Recent enquires provide directors and management with confidence regarding the viability of the business model and provide confidence that the Company can add further projects to its portfolio.
· The notice of Annual General Meeting ("AGM") will be posted today with the AGM to be held on 16 January 2017.
Nigel Burton, CEO of NU-Oil, commented:
"During 2015-16 and since, we have minimised costs so as to preserve resources against a difficult industry background. I would like to thank shareholders for their support, which has enabled us to raise sufficient funds to provide working capital for the Company and allow it to continue with its marginal field strategy. Significant progress has been made in establishing and strengthening the MFD Consortium and we are actively working on a number of significant opportunities to enable us to implement the MFD strategy."
The full Report and Accounts for the year ended 30 June 2016 and the notice of AGM is available to download from the Company's website at www.nu-oilandgas.co.uk and both documents will be posted to shareholders today.
Enquiries:
NU-Oil and Gas plc
Alan Minty, Executive Chairman Tel: + 44 161 817 7460
Nigel Burton, CEO Tel: +44 7785 234447
Beaufort Securities Limited Tel: +44 20 7382 8300
Jon Belliss
Elliot Hance
Strand Hanson Limited Tel: +44 20 7409 3494
Rory Murphy / Ritchie Balmer
St Brides Partners Limited Tel: +44 20 7236 1177
Elisabeth Cowell
Lottie Brocklehurst
The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR").
STRATEGIC REPORT
CHAIRMAN'S STATEMENT AND OPERATIONAL REVIEW
The last year has continued to be one of turmoil in the oil and gas sector, characterised by continued relatively low oil prices, reduced activity from operators and general retrenchment by oil companies; projects have been cancelled or deferred as the oil price volatility has continued and the downturn in activity has caused a number of high profile companies to enter administration. The offshore oil and gas sector has been especially hard hit because historically, their capex and opex has been one of the highest in the industry. However, despite these external pressures I believe that the Company is well positioned to generate significant value for shareholders over the coming periods from plans that were devised before the fall in the oil price.
Naturally, the Company has responded to these conditions over the period. Costs have been reduced to a bare minimum, particularly those at site in western Newfoundland and the cashflow has been managed to maintain the Company's focus on its marginal field strategy, led by the Marginal Field Development Company (MFDevCo) Ltd. ('MFDevCo') of which it is a founder and major shareholder. MFDevCo, which leads a consortium of specialist companies (the 'Consortium') which collaborate to develop marginal fields and includes Arup, Kongsberg and AGR plus others, reached agreement with Aibel who have invested significant services to secure the role of Partner EPC Contractor for consortium activities. In addition, the Directors have been trying to reposition the Company's Newfoundland assets and have negotiated the main points of definitive agreements for both of its Canadian assets which we expect to lead to new investment into both projects.
The Company also sought to strengthen its financial position in the final few months of 2016 and raised £1,252,000 through the placing of shares and the exercise of warrants. These funds will be used in the coming period to provide working capital for the Company and allow it to continue with its marginal field strategy.
Western Newfoundland
The Company has executed one and expects to finalise a further transaction shortly which will reinvigorate its assets in Western Newfoundland even though we do not anticipate them being part of the core strategy of the business as we progress. The principle behind each transaction is that we remove the costs of our Canadian operations from our budgetary requirements, while still allowing investment into the project and an ability to share in any success generated by that investment.
For Production Lease PL2002-01(A) we concluded a Heads of Terms with PVF Energy Services Inc.('PVF'), which will lead a consortium of Newfoundland based engineering service and equipment companies and invest into the Garden Hill Field Trend, which we still believe has large potential. We are still working on the Definitive Operating Agreement but expect that to be concluded on schedule. Key conditions of the Definitive Operating Agreement should include the transfer of all costs of operating the lease to PVF and its Consortium in exchange for a profit sharing arrangement and allowing them the opportunity to purchase an interest in the lease at a later date.
Exploration Licence EL1070 though, requires a significantly higher level of investment to resume activity. We have just concluded an Option Agreement (the 'Option'), under which the counterparty, G2 Energy Corp. must achieve a flow test for hydrocarbons on one or more of the wells on EL1070 and submit an application for a Significant Discovery Licence in order to execute the Option. In exchange for that investment the Company would retain a non-diluted 5% gross override in any returns generated, that is 5% of any revenue generated. As we are unable to raise any funds at this time for such an intervention it is logical that we allow those that are willing to invest to do so, whilst retaining an instrument that could yield significant upside.
Stranded Field Venture
The Company intends to implement its stranded and marginal field strategy via its investment in MFDevCo which leverages 'smart', low cost solutions to secure interests in assets and develop a portfolio.
MFDevCo has continued to strengthen its ties with members of its Consortium and most notably with Aibel who have invested to secure the role of Partner EPC Contractor for MFDevCo's marginal field initiative and future projects. In order to gain exclusive rights to provide project management, engineering and EPC services throughout the life of MFDevCo projects, Aibel committed to investing in establishing the working structure for the Consortium and supporting MFDevCo's business development activities through the provision of upfront engineering on target projects. In providing such support to the engineering specification of MFDevCo's existing solutions and their ongoing refinement, Aibel's commitment allows us to target fields in deeper water, further improve cost efficiencies and take advantage, in future, of emerging proven technologies. It will also, critically, improve our ability to demonstrate at an early evaluation stage the robust technical suitability of the solutions for a given field and, with a very high level of confidence, the associated costings.
The Company, following recent fundraising activity, and MFDevCo, following its agreement with Aibel, now possess the appropriate level of resources to embark on the initial stages of acquiring projects in a manner that is consistent with its strategy; a number of opportunities are currently being evaluated. The aim is to build a portfolio of projects and opportunities that do not expose the Company to exploration and appraisal risk. We simply seek to utilise proven solutions to change a project's cost base making it more economic with the potential for it to be extremely valuable should the oil price recover to anywhere close to those of recent times. Our approach enables viable resources to be developed rather than become stranded.
There has been a positive reaction within the industry and financial community to the strategy and solutions proposed by MFDevCo but in a period of industry consolidation, characterised by low risk appetite, projects naturally take significant time to secure. This is compounded by the inherent complexity of oil and gas projects both in terms of their size and the contractual framework in which they operate. In saying that, one of the advantages of MFDevCo's solutions is that they are smaller and more standardised than competing solutions.
A number of target projects that meet investment criteria have been identified, extensive communication has been undertaken and maintained with industry and regulatory bodies and discussions on specific projects have commenced. We hope to be able to secure a project in short order. It is plainly obvious that the successful acquisition of a project will be transformational to the Company in numerous ways, including in terms of shareholder value, credibility of the business model and profile of the business model's participants.
Outlook
As a consequence of the current macroeconomic environment the Company expects that the projects in which it will participate and invest, will be significant for the Company. Management is confident that we will be able to close a transaction through MFDevCo over the next period and we look forward to working on these projects. Continual engagement with MFDevCo and the Consortium, as well as our own market intelligence and increased profile, will enable us to do that.
The Directors and I strongly believe that the Company has developed a unique business and business model through MFDevCo that will attract investors making additional finance available to the Company to implement its plans.
It is my further belief that we have established a venture that has the potential to be a global initiative and we would not have attracted the interest we have if others within the industry did not have the same opinion. The outlook is very encouraging and, as a final thought, I would like to thank management and shareholders alike for their continued support and look forward to realising the rewards from the opportunities that have been created over the last few years.
Alan Minty
Chairman
FINANCIAL REVIEW
Revenue
No revenue was generated during the year ended 30 June 2016 as the Group sought to preserve its resources against a difficult industry background (2015: £27,000). Having carefully reviewed the status of the operations in western Newfoundland as well as the general macro-economic environment affecting the oil and gas sector it is Management's considered opinion that the work required to make the PAP#1 well profitable is not fundable in the current environment. However, management are actively seeking partners to invest in its western Newfoundland assets and has agreed terms on both assets that would provide new investment.
Loss before tax
Loss before tax for the year was £816,000 (2015: £5,274,000 loss). The main area of expense has been the continuing development of the foundations for the marginal field initiative. Management continued to significantly cut costs as they reposition the Group to focus on the opportunities offered by stranded assets.
Statement of Financial Position
Net liabilities at 30 June 2016 were £3,239,000 (2015: net liabilities of £2,899,000). The increase in net liabilities reflects the loss for the year and the effects of the share placing that occurred in the year. The majority of the Group's liabilities are due to related parties and to Shard Capital Management. It is the Group's view that these creditors are supportive of the Group.
At 30 June 2016, the Group had cash balances of £nil compared to £1,000 at 30 June 2015 and raised £1,232,000 before expenses through the placement of shares post year end. The Group had trade and other payables of £4,604,000 at 30 June 2016 (2015: £3,936,000). These cash balances when considered with the additional information provided in Note 1 to the financial statements (see full Report and Accounts for the year ended 30 June 2016) allow the Directors to conclude that the Group and Company should be treated as a going concern. The increase in trade and other payables is mainly caused by an accrual for the unpaid salaries of directors.
Cash flows
Cash outflows for the year were £1,000 compared to a net outflow of £522,000 in 2015. The Group's cash position was carefully managed during the year while it sought to implement its marginal field strategy.
Future funding and capital requirements
The Directors believe that the Company has developed a very attractive business model in choosing to focus on the development of stranded and marginal fields. It has concluded the necessary foundations and its global potential should see an upturn in activity in 2017. Implementation of the business plan will require an injection of additional capital to execute the business model but that may be achieved in ways that do not effect dilution, such as grant funding or new equity in MFDevCo. However, further shareholder dilution cannot be ruled out.
CONSOLIDATED INCOME STATEMENT
For the year ended 30 June 2016
| | 2016 £'000 | 2015 £'000 |
| Revenue | - | 27 |
| Cost of sales | - | - |
| Gross Profit | - | 27 |
| | | |
| Administrative expenses (including exceptional items) | (815) | (5,061) |
| Loss from operations | (815) | (5,034) |
| | | |
| Finance costs | (1) | (240) |
| Loss before tax | (816) | (5,274) |
| | | |
| Taxation | - | - |
| Loss for the year | (816) | (5,274) |
| | | |
| Loss per share (expressed in pence per share) | | |
| Basic | (0.3p) | (2.8p) |
| Diluted | (0.3p) | (2.8p) |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 June 2016
| | 2016 £'000 | 2015 £'000 |
| | | |
| Loss for the year | (816) | (5,274) |
| Other comprehensive expense: | | |
| Currency translation differences | 17 | (61) |
| Other comprehensive expense for the year, net of tax | 17 | (61) |
| Total comprehensive expense for the year | (799) | (5,335) |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2016
| | 2016 £'000 | 2015 £'000 |
| | | |
| Non-current assets | | |
| Tangible fixed assets | 868 | 851 |
| Intangible assets | 848 | 899 |
| Other long term assets | 479 | 426 |
| | 2,195 | 2,176 |
| | | |
| Current assets | | |
| Trade and other receivables | 1,150 | 899 |
| Cash and cash equivalents | - | 1 |
| | 1,150 | 900 |
| Total assets | 3,345 | 3,076 |
| | | |
| Current liabilities | | |
| Trade and other payables | (4,604) | (3,936) |
| Due to related parties | (1,514) | (1,623) |
| | (6,118) | (5,559) |
| | | |
| Non-current liabilities | | |
| Provisions | (466) | (416) |
| Total liabilities | (6,584) | (5,975) |
| Net liabilities | (3,239) | (2,899) |
| | | |
| Equity | | |
| Ordinary share capital | 2,022 | 1,857 |
| Share premium account | 26,431 | 26,137 |
| Reverse acquisition reserve | 9,364 | 9,364 |
| Other reserves | (2,487) | (2,487) |
| Warrant reserve | 355 | 355 |
| Accumulated losses | (38,924) | (38,125) |
| Total equity | (3,239) | (2,899) |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2016
| | | ||||||
| | Ordinary share capital £'000 | Share premium account £'000 | Reverse acquisition reserve £'000 |
Other reserves £'000(1) (2) |
Warrant reserve £'000(3) |
Accumulated Losses £'000 |
Total equity £'000 |
| | | | | | | | |
| Balance at 1 July 2014 | 1,857 | 26,137 | 9,364 | (2,487) | 355 | (32,790) | 2,436 |
| | | | | | | | |
| Comprehensive expense | | | | | | | |
| Loss for the year | - | - | - | - | - | (5,274) | (5,274) |
| | | | | | | | |
| Other comprehensive expense | | | | | | | |
| Currency translation differences | - | - | - | - | - | (61) | (61) |
| | | | | | | | |
| Total other comprehensive expense | - | - | - | - | - | (61) | (61) |
| Total comprehensive expense | - | - | - | - | - | (5,335) | (5,335) |
| | | | | | | | |
| | | | | | | | |
| Balance at 1 July 2015 | 1,857 | 26,137 | 9,364 | (2,487) | 355 | (38,125) | (2,899) |
| | | | | | | | |
| Comprehensive expense | | | | | | | |
| Loss for the year | - | - | - | - | - | (816) | (816) |
| | | | | | | | |
| Other comprehensive expense | | | | | | | |
| Currency translation differences | - | - | - | - | - | 17 | 17 |
| | | | | | | | |
| Total other comprehensive expense | - | - | - | - | - | 17 | 17 |
| Total comprehensive expense | - | - | - | - | - | (799) | (799) |
| | | | | | | | |
| Transactions with owners | | | | | | | |
| Effects of fundraisings | 165 | 294 | - | - | - | - | 459 |
| Total of transactions with owners | 165 | 294 | - | - | - | - | 459 |
| | | | | | | | |
| Balance at the 30 June 2016 | 2,022 | 26,431 | 9,364 | (2,487) | 355 | (38,924) | (3,239) |
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2016
| | | 2016 £'000 | 2015 £'000 |
| | | | |
| Cash flows from operating activities | | | |
| Cash used in operations | | (436) | (599) |
| Net cash used in operating activities | | (436) | (599) |
| | | | |
| Cash flows from investing activities | | | |
| Expenditure on intangible assets | | - | - |
| Net cash used in investing activities | | - | - |
| | | | |
| Cash flows from financing activities | | | |
| Share capital issued for cash | | 435 | - |
| Returned Deposits | | - | 77 |
| Net cash generated from financing activities | | 435 | 77 |
| | | | |
| Net decrease in cash and cash equivalents | | (1) | (522) |
| Cash and cash equivalents at the start of the year | | 1 | 232 |
| Exchange (losses) / gains | | - | 291 |
| Cash and cash equivalents at the end of the year | | - | 1 |
| | | | |
Basis of presentation
The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU), the Companies Act 2006 that applies to companies reporting under IFRS, and IFRIC interpretations. The consolidated financial statements have been prepared under the historical cost convention.
Basis of consolidation
The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest's proportionate share of the recognised amounts of acquiree's identifiable net assets.