Final Results for the year ended 31 December 2019

6 May 2020

 

Jersey Oil and Gas plc

("Jersey Oil & Gas", "JOG" or the "Company")

 

Final Results for the year ended 31 December 2019

 

Jersey Oil & Gas (AIM: JOG), an independent upstream oil and gas company ‎focused on the UK Continental Shelf ("UKCS") region of the North Sea, is pleased to announce its audited results for the year ended 31 December 2019.

 

Highlights

·     Significantly increased net discovered and recoverable resource estimates owned by the Company to more than 120 million barrels of oil equivalent ("mmboe") following transformational awards of licences in the Greater Buchan Area ("GBA") as part of the Oil and Gas Authority's 31st Supplementary Offshore Licensing Round

 

·    As part of the licence awards, the Company now owns a 100% equity interest in the Buchan field as well as the J2 and Glenn discoveries, in addition to its interest in the Verbier discovery

 

·      Began work on a unique and major new North Sea Development Plan with a focus on delivering a low-carbon development of the GBA

 

·   Commitment to the highest levels of environmental, social and corporate governance across the business with the Company currently looking into opportunities to achieve a low carbon emissions production facility for the GBA

 

·    Strong year-end cash position of £12.3 million, with no debt, resulting in the Company being fully funded through concept selection and to at least the end of 2021

 

·     Verbier Appraisal Well drilled safely and within budget, and, although the well did not encounter Upper Jurassic sands as anticipated, our contingent resource estimate for the earlier Verbier discovery remain at 25 mmboe

 

Post year end

 

·   Acquired an additional 70% interest in and operatorship of Licence P2170, which includes the Verbier oil discovery, increasing total 2C discovered resources across the GBA to an estimated 142 mmboe net to the Company

 

·      The Verbier oil discovery is now a prime candidate for a tie back into the proposed GBA Hub

 

·      Significant exploration upside across the GBA, with estimated prospective resources of 232 mmboe net to the Company 

 

·    Established the Greater Buchan Area Joint Integrated Studies Agreement between neighbouring field operators to undertake and complete technical and commercial evaluation studies for a collaborative development of the wider GBA

 

Outlook

 

·     JOG has a commanding position across the prolific GBA with ownership of 5 discovered fields and 8 exploration prospects within 4 operated licences

 

·     Project lifetime cash flows for the GBA forecast to be in excess of US$3bn, with an estimated project value of approximately US$1.2bn

 

·     On track to reach concept selection by Summer 2020, which will define the most prudent and commercially attractive way to achieve first oil from the GBA

 

·      Prudent cash management being maintained

 

·     Sales process expected to be launched post concept selection to attract a new industry partner(s) to join JOG in unlocking the potential significant value that exists within the GBA

 

·      GBA development workstreams remain on track with the Company and contract staff working remotely in response to the COVID-19 pandemic

 

 

Andrew Benitz, CEO of Jersey Oil & Gas, commented:

"Our efforts during 2019 resulted in transformational asset growth for our Company. Our successful application in the 31 SLR has provided our business with a vastly increased portfolio and the potential to develop a highly valuable business for all of our stakeholders. The GBA Project promises to be the largest new area hub development in the UK Central North Sea in recent times.

"The Company is currently entirely focused on the timely delivery of concept selection for this major new area hub that has the potential to create significant value for stakeholders.

 

"JOG has assembled a team with the right skills, experience and track record to implement its GBA development plan.  I would like to thank this team for adapting seamlessly to a new remote working environment as a result of the COVID-19 pandemic, such that we continue to remain on track with our current development plans."

 

 

Enquiries:

Jersey Oil and Gas plc	Andrew Benitz, CEO		C/o Camarco: Tel: 020 3757 4983
Strand Hanson Limited	James Harris Matthew Chandler James Bellman		Tel: 020 7409 3494
Arden Partners plc	Paul Shackleton Benjamin Cryer		Tel: 020 7614 5900
BMO Capital Markets Limited	Jeremy Low Tom Rider		Tel: 020 7236 1010
Camarco	Billy Clegg James Crothers		Tel: 020 3757 4983

 

Notes to Editors:

Jersey Oil & Gas is a UK E&P company focused on building an upstream oil and gas business in the North Sea. The Company holds a significant acreage position within the Central North Sea referred to as the Greater Buchan Area, which includes operatorship and 100% working interests in blocks that contain the Buchan oil field and J2 and Glenn oil discoveries, and, following the acquisition of an additional 70% working interest announced in late January 2020 will, subject to completion, also assume operatorship of and hold an 88% working interest in the P2170 Licence, Blocks 20/5b & 21/1d,  that contains the Verbier oil discovery.

 

JOG's acreage is estimated by management to contain more than 140 million barrels of oil equivalent ("boe") of discovered mean recoverable resources net to JOG, in addition to significant exploration upside potential.  JOG is currently progressing the concept select phase of a Field Development Plan ("FDP") for the Greater Buchan Area.

 

JOG is focused on delivering shareholder value and growth through creative deal-making, operational success and licensing rounds. Its management is convinced that opportunity exists within the UK North Sea to deliver on this strategy and the Company has a solid track-record of tangible success.

 

 

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014.

 

 

CHAIRMAN'S STATEMENT

 

Overview

This past year has been an exceptional one for Jersey Oil and Gas ('JOG'). We started the year with an inventory of less than 5 million barrels of oil equivalent ('mmboe') discovered recoverable resources net to our 18% interest in the Verbier discovery located on Licence P2170. The year had potential for growth given we had an appraisal well planned at Verbier and were participating in the OGA's 31st Supplementary Offshore Licensing Round ('31 SLR'). We ended the year with more than 120 mmboe of discovered recoverable oil equivalent resources net to JOG. Post year end we took this figure to over 140 mmboe with our acquisition of Equinor's interest in Licence P2170 (Verbier), representing a 30-fold increase on our 2019 starting position, which was a transformational result for JOG.

 

For much of 2018 and the first half of 2019, we were working extensively on our application for further licence interests under the 31 SLR, a round solely dedicated to what is known as the Greater Buchan Area ('GBA'). I am glad to report that as a result of the JOG team's well thought out strategy, and planning detail for the development of the GBA, in July 2019 the Oil and Gas Authority ('OGA') announced the award to JOG of two licences in the GBA surrounding our Verbier discovery. A further acreage award was made in August 2019, resulting in a total of three licence awards and four blocks, with each licence awarded on a 100% equity interest basis. Against this backdrop, the Verbier appraisal well drilled in 2019, did not encounter the anticipated Upper Jurassic sands. This was an unexpected result for us and, as a result, we lowered our estimate of gross recoverable resources for the Verbier discovery down to the lower end of the initial resource estimate of 25 mmboe (as estimated by Equinor following the initial discovery well result in October 2017). Nonetheless, in our view there remains significant prospectivity (>160 mmboe gross) across the P2170 licence area and, subsequent to the year end, we were pleased to have acquired an additional 70% interest in this licence, bringing our total interest in Licence P2170 up to 88% on completion. This is particularly important to JOG given that Verbier and any other discoveries in the licence are within the heart of the GBA and therefore will be prime candidates for tying back to the planned Buchan hub, for which we are currently working on the concept select phase of this new development project.

 

Economic Environment

For 2019, Brent Crude Oil started the year trading at a price of approximately $52 per barrel and ended the year at a price of $65 per barrel, with a sizeable level of volatility in the second half of the year. Since then the spot oil price has fallen dramatically as a result of falling demand due to the Covid-19 outbreak and excess supply notwithstanding cuts from OPEC+. At the end of April 2020 Brent was trading at around $23 per barrel.

 

As regards our own position, we do not currently have any production, nor do we have any debt. First oil from the GBA development project is currently planned for 2025 and we, along with all the major market commentators, believe that the effects of both the Covid-19 outbreak and the current reduction in demand for oil will have ended by that time, with the Brent spot price returning to materially higher levels. At the end of April 2020, the January 2025 forward price for Brent was approximately $48 per barrel with prices increasing for longer term contracts and many market commentators looking at forward prices of $60+.

 

As a result, we believe the best course of action is to carry on with the various workstreams needed to take the GBA project through, and past, the Concept Select phase.

 

Environmental, Social and Corporate Governance

We continue to embrace the energy transition and fully support the UK Government's commitment to net zero emissions by 2050, which the OGA are integrating into their regulatory policies. Nonetheless, we believe that these initiatives will take time to implement and that in the interim oil and gas will continue to be a vital part of the UK and broader global energy mix. Our role in this process is therefore to provide our energy product in a way that is best in class for both operational issues, such as health and safety, environmental compliance and our workplace needs and for longer term issues such as reducing the climate change risks associated with our business, in addition to reducing the carbon emissions from developing the GBA. With a new greenfield development in the North Sea, we are well placed to use the latest engineering and operational techniques to bring down its carbon emissions, in a safe and efficient manner.

 

Our maiden statement on JOG's approach to Environmental, Social and Governance matters is set out in the full Annual Report.

 

During 2018 we adopted the Quoted Companies Alliance Corporate Governance Code, which codifies our belief that a strong and transparent governance policy is a key ingredient to our success. Underlying this approach is the recognition that good corporate governance is based on culture rather than procedure.  A separate report on the principles that we strive to implement, without constraining the entrepreneurial spirit in which the Company was created, is also set out in the full Annual Report. 

 

The Covid-19 Virus Outbreak

As will be well understood by all, countries, businesses, organisations, individuals and families are having to change the way they operate and behave following the Covid-19 virus outbreak. As a company, we continue to place the highest priority on the safety and wellbeing of our employees. As a result, all of our employees now work from home and will continue to do so until it is safe for them to return to an office environment.

 

This work from home approach is working well, with all employees continuing with their respective workstreams remotely, alongside a similar approach being adopted by our contractors. We currently see the GBA Concept Select key stages largely proceeding to their original timelines of summer 2020, although this may change, depending on how events unfold.

 

Outlook

JOG ended 2019 in a strong position, with substantial contingent and prospective reserves, which were then increased through the 2020 acquisition of an additional 70% interest in Licence P2170 (Verbier). The GBA licences, which can now be regarded as including the Verbier licence area, should generate substantial cash flows once we reach first oil, which we currently estimate to be in 2025. We are moving ahead, at speed, through the planning phases of this development and, at the time of this statement, we will be approaching the concluding parts of the Concept Select phase. Nonetheless, the costs of developing the GBA area will be substantial and once we have passed through the key stages of Concept Select we will launch a process to attract industry partners and additional providers of capital in order to advance this important project, taking into account market conditions at that time.

 

We very much hope that the Covid-19 outbreak will pass, in due course. In the interim the safety of our employees remains our highest priority.

 

We believe that the current historically low oil price is not sustainable and that by the time we reach first oil for the GBA development project, oil prices will have returned to substantially higher levels, in part due to underinvestment in conventional growth projects.

 

On behalf of the Board, I would like to thank all of our employees, both old and new, for the continuing hard work that is being put into the development of the GBA, with all of us now working in difficult circumstances, outside of our normal office environment.

 

As always, I would also thank our Shareholders for their continuing support.

 

Marcus Stanton

Non-Executive Chairman

6 May 2020

 

CHIEF EXECUTIVE OFFICER'S REPORT

 

Our efforts during 2019 resulted in transformational asset growth for our Company. Our winning application in the 31 SLR has provided our business with a vastly increased portfolio and the potential to develop a highly valuable business for all of our stakeholders. The GBA Project promises to be the largest new area hub development by reserves in the UK Central North Sea in recent times. JOG is now focused on the timely delivery of selecting the development concept for this major new area hub development that has an estimated current project value of $1.2 bn. and has the potential to deliver free cash flow in excess of $3 bn.

 

Having grown our discovered oil resources 30-fold, we are now operating a project which is estimated to contain net to JOG approximately 140 million barrels of discovered and recoverable oil and over 200 million barrels of highly prospective exploration upside. At the core of the GBA is the Buchan oil field that benefits from 36 years of production history and once production resumes on this field we estimate more than 80 million barrels of oil is yet to be recovered from this remarkable field, that was often referred to as the field that kept on delivering. We are making excellent progress on defining not only the core hub volumes that JOG owns, but also third-party regional volumes. We have established and are leading the Greater Buchan Area Joint Integrated Studies Agreement ('JISA'). This agreement, between neighbouring field operators, will see JOG undertake and complete technical and commercial evaluation studies for a collaborative development of the wider GBA, together with other regional operators. The wider area contains discovered oil and gas resources in excess of 200 million barrels of oil equivalent.

 

A key objective of the JISA is to establish whether a collaborative development involving regional field operators would lead to a single new production hub in the area, potentially reducing development costs for all of the operators and delivering on the OGA's objective of Maximising Economic Recovery ('MER').

 

Our industry is at an inflexion point with respect to energy transition. We believe that oil and gas will remain an important part of the UK's energy mix for the foreseeable future and projects such as GBA will be a vital resource for retaining the UK's energy security as we transition to net zero. It is JOG's vision to provide cleaner, safer energy in the most responsible way. JOG is now a proud signatory of the United Nations Global Compact, the world's largest corporate sustainability initiative. We have put energy transition at the forefront of our strategic thinking, seeing this as an opportunity rather than a challenge, with the potential to unlock significant value in the GBA for JOG.

 

Financial Results

JOG continues to benefit from a straightforward capital structure, with a strong cash position that more than covers our current contracted work programme for the Concept Select phase of the GBA Project. We have no debt and no decommissioning liabilities. Our pre-tax loss for the year amounted to £2.1m as compared to a £2.0m loss in 2018.

 

Cash at year end was £12.3m, down from £19.8m at the end of 2018, largely due to our share of the costs of drilling the Verbier appraisal well in 2019.

 

JOG remains fully funded to deliver the Concept Select work we are progressing on our GBA development and we have implemented cost saving initiatives to cut our 2020 budget guidance by more than £3m from £10.6m to £7.5m. The Company has sufficient working capital through to at least the end of 2021, prior to any proceeds from our planned sale of a part interest in our GBA Project, the process for which is expected to be launched later this year. Cost control continues to be monitored closely by our Board.

 

People

We continue to build a strong and focused team in order to progress the development of the GBA Project through to first oil or, more accurately, second oil, given the Buchan field's production history. These talented industry professionals bring many skills to JOG ranging from extensive North Sea relevant field development experience through to expertise in health, safety, environment and social responsibility matters. The project team's experience has been gained from working on projects including Buzzard, Golden Eagle, Tolmount, Gannett and Goliat. This is further supplemented through the extensive project development track record of our recently appointed Board adviser. We welcome all of these individuals into the Company. We have also leased some new office space in London which enables our UK-based employees to work from the same location.

 

Looking Forward

Notwithstanding the very real challenges that Covid-19 is providing, JOG remains committed to building a profitable, full-cycle upstream oil and gas business. Fortunately the Government lockdown is having minimal impact on our activities, which are continuing apace despite working remotely.

 

JOG has delivered the GBA opportunity with a nimble and creative team, with a philosophy of a can-do attitude. We are building out the team capabilities with a broad range of industry and commercial skills and we are well placed to move forward and create further value for our Shareholders.

 

We are pleased to be active in an area where there is a proactive, industry facing regulator, the OGA, and we are fully aligned with the OGA's objective of MER, evidenced through our approach to progressing area collaboration initiatives across the wider GBA.

 

JOG has a very low current and historic carbon footprint. We have an opportunity to showcase the GBA Project as a low carbon, sustainable development and highlight JOG as a leader in the UKCS on sustainability. We fully embrace the UK Government's initiative to be carbon net zero by 2050 and are actively investigating energy transition initiatives such as platform electrification and see the potential for the GBA Project to not only be a new production hub, but potentially also a power hub. We are well placed to progress our development plans through Concept Select, before launching a process later this year to attract industry partners to join us in unlocking the significant value that exists within the GBA.

 

We are making good progress to deliver on our strategy, while adapting to an investment environment that is changing fast. We have an excellent team at JOG and I would like to thank them all for their continued dedication and relentless commitment to advancing our activities across our asset base.

 

Andrew Benitz

Chief Executive Officer

6 May 2020

 

 

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2019

 

				2019		2018
		Note		£		£
Revenue		3		-		-
Cost of sales				(666,053)		(609,925)
GROSS LOSS				(666,053)		(609,925)
Other income		6		750,000		12,037
Loss on sale of assets				(17,975)		-
Administrative expenses				(2,237,429)		(1,447,383)
OPERATING LOSS				(2,171,457)		(2,045,271)
Finance income		7		106,867		48,971
Finance expense		7		(419)		-
LOSS BEFORE TAX		8		(2,065,009)		(1,996,300)
Tax		9		-		-
LOSS FOR THE YEAR				(2,065,009)		(1,996,300)
TOTAL COMPREHENSIVE LOSS FOR THE YEAR				(2,065,009)		(1,996,300)
Total comprehensive loss for the year attributable to:
Owners of the parent				(2,065,009)		(1,996,300)
Loss per share expressed in pence per share:
Basic		10		(9.46)		(9.15)
Diluted		10		(9.46)		(9.15)
The total comprehensive loss for the year was derived wholly from continuing operations.

 

 

 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 December 2019

 

 

				2019		2018
		Note		£		£
NON-CURRENT ASSETS
Intangible assets		11		10,092,564		4,306,589
Property, plant and equipment		12		13,661		30,264
Right-of-use assets		13		164,125		-
Deposits				28,420		-
				10,298,700		4,336,853
CURRENT ASSETS
Trade and other receivables		14		428,310		80,594
Cash and cash equivalents		15		12,318,536		19,782,511
				12,746,846		19,863,105
TOTAL ASSETS				23,045,616		24,199,958
EQUITY
Called up share capital		16		2,466,144		2,466,144
Share premium account				93,851,526		93,851,526
Share options reserve		20		1,928,099		1,491,019
Accumulated losses				(75,727,888	)	(73,662,879)
Reorganisation reserve				(382,543)		(382,543)
TOTAL EQUITY				22,135,338		23,763,267
LIABILITIES
NON-CURRENT LIABILITIES
Lease Liabilities		18		154,208		-
				154,208		-
CURRENT LIABILITIES
Trade and other payables		17		742,166		436,691
Lease Liabilities		13		13,904		-
				756,070		436,691
TOTAL LIABILITIES				910,278		436,691
TOTAL EQUITY AND LIABILITIES				23,045,616		24,199,958

 

Vicary Gibbs

Chief Financial Officer

6 May 2020

 

Company Registration Number: 07503957

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2019

	Called up		Share		Share
	share		premium		options		Accumulated		Reorganisation			Total
	capital		account		reserve		losses		reserve			equity
	£		£		£		£		£			£
At 1 January 2018	2,466,144		93,851,526		1,231,055		(71,666,579)		(382,543)			25,499,603
Loss and total comprehensive loss for the year	-		-		-		(1,996,300)		-			(1,996,300)
Share-based payments	-		-		259,964		-		-			259,964
At 31 December 2018 and 1 January 2019	2,466,144		93,851,526		1,491,019		(73,662,879)		(382,543)			23,763,267
Loss and total comprehensive loss for the year	-		-		-		(2,065,009)		-			(2,065,009)
Share-based payments	-		-		437,080		-		-			437,080
At 31 December 2019	2,466,144		93,851,526		1,928,099		(75,727,888)		(382,543)			22,135,338

 

 

 

The following describes the nature and purpose of each reserve within owners' equity:

 

 

Reserve	Description and purpose
Called up share capital	Represents the nominal value of shares issued
Share premium account	Amounts subscribed for share capital in excess of nominal value
Share options reserve	Represents the accumulated balance of share-based payment charges recognised in respect of share options granted by the Company less transfers to accumulated deficit in respect of options exercised or cancelled/lapsed
Accumulated losses	Cumulative net gains and losses in the Consolidated Statement of Comprehensive Income
Reorganisation reserve	Amounts resulting from the restructuring of the Group at the time of the Initial Public Offering (IPO) in 2011

 

 

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 December 2019

 

 

				2019		2018
		Note		£		£
Cash flows from operating activities
Cash used in operations		22		(1,769,004)		(2,698,361)
Net interest received		7		106,867		48,971
Net interest paid		7		(419)		-
Net cash used in operating activities				(1,662,556)		(2,649,390)
Cash flows from investing activities
Proceeds on sale of tangible assets				3,603		-
Purchase of intangible assets		11		(5,785,975)		(2,948,630)
Purchase of tangible assets		12		(19,047)		(34,879)
Net cash used in investing activities				(5,801,419)		(2,983,509)
Net cash generated from financing activities				-		-
Decrease in cash and cash equivalents		22		(7,463,975)		(5,632,899)
Cash and cash equivalents at beginning of year		22		19,782,511		25,415,410
Cash and cash equivalents at end of year		22		12,318,536		19,782,511

 

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2019

 

 

1. GENERAL INFORMATION

Jersey Oil and Gas plc (the "Company") and its subsidiaries (together, the "Group") are involved in the upstream oil and gas business in the UK.

 

The Company is a public limited company incorporated and domiciled in the United Kingdom and quoted on AIM, a market operated by London Stock Exchange plc. The address of its registered office is 10 The Triangle, ng2 Business Park, Nottingham, NG2 1AE.

 

2. 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.

 

Basis of Accounting

These financial statements have been prepared under the historic cost convention, in accordance with International Financial Reporting Standards and IFRS IC interpretations as adopted by the European Union ("IFRSs") and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

 

Going Concern

The Company is required to have sufficient resources to cover the expected running costs of the business for a period of at least 12 months after the issue of these financial statements. Further to completion of the detailed studies in connection with the GBA Concept Select contracted work programmes, there are currently no firm work commitments on any of the Group's licences, other than ongoing Operator overheads and licence fees. Other work that the Company is undertaking in respect of the GBA licences and surrounding areas is modest relative to its current cash reserves. The Company's current cash reserves are therefore expected to more than exceed its estimated liabilities for at least 12 months following the date of issue of the financial statements. Based on these circumstances, the Directors have considered it appropriate to adopt the going concern basis of accounting in preparing the Company's consolidated financial statements.

 

Changes in Accounting Policies and Disclosures

(a) New and amended standards adopted by the Company:

 

At the start of the year the following standards were adopted:

•       IFRS 16, 'Leases';

•       Prepayment Features with Negative Compensation - Amendments to IFRS 9;

•       Long-term Interests in Associates and Joint Ventures - Amendments to IAS 28;

•       Annual Improvements to IFRS Standards 2015-2017 Cycle;

•       Plan Amendment, Curtailment or Settlement - Amendments to IAS 19; and

•       Interpretation 23 'Uncertainty over Income Tax Treatments'.

 

The Group had to change its accounting policies as a result of adopting IFRS 16. From 1 January 2019, leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. The Group adopted the practical expedient available to not apply IFRS 16 to leases less than £5,000 in value or less than 12 month in lease term. The other amendments listed above did not have any impact on the amounts recognised in prior periods. At 1 January 2019 the Group had no lease arrangements applicable for IFRS 16 so no transition adjustment was recognised.

 

(b) Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2019 reporting periods and have not been early adopted by the Group. These standards are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.

 

Significant Accounting Judgements and Estimates

The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities at the date of the financial statements. If in future such estimates and assumptions, which are based on management's best judgement at the date of the financial statements, deviate from the actual circumstances, the original estimates and assumptions will be modified as appropriate in the period in which the circumstances change. The Group's accounting policies make use of accounting estimates and judgements in the following areas:

 

•       The assessment of the existence of impairment triggers (note 11).

•       The estimation of share-based payment costs (note 20).

 

Impairments

The Group tests its capitalised exploration licence costs for impairment when facts and circumstances suggest that the carrying amount exceeds the recoverable amount. The recoverable amounts of Cash Generating Units are determined based on fair value less costs of disposal calculations. There were no impairment triggers in 2019 and no impairment charge has been recorded.

 

Share-Based Payments

The Group currently has a number of share schemes that give rise to share-based charges. The charge to operating profit for these schemes amounted to £437,080 (2018: £259,964). For the purposes of calculating the fair value of the share options, a Black- Scholes option pricing model has been used. Based on past experience, it has been assumed that options will be exercised, on average, at the mid-point between vesting and expiring. The share price volatility used in the calculation is based on the actual volatility of the Company's shares, since 1 January 2017. The risk-free rate of return is based on the implied yield available on zero coupon gilts with a term remaining equal to the expected lifetime of the options at the date of grant.

 

Basis of Consolidation

(a) Subsidiaries

Subsidiaries are all entities over which the Group has the power to govern their financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. The Group also assesses existence of control where it does not have more than 50% of the voting power but is able to govern the financial and operating policies by virtue of de facto control. De facto control may arise in circumstances where the size of the Group's voting rights relative to the size and dispersion of holdings of other Shareholders give the Group the power to govern the financial and operating policies.

 

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date the Group ceases to have control.

 

The Group applies the acquisition method of accounting 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 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 value 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 the acquiree's identifiable net assets.

 

Acquisition related costs are expensed as incurred.

 

If the business combination is achieved in stages, the acquisition date fair value of the acquirer's previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss.

 

Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability are recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not remeasured, and its subsequent settlement is accounted for within equity.

 

Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss.

 

Inter-company transactions, balances, income and expenses on transactions between Group companies are eliminated. Profits and losses resulting from inter-company transactions that are recognised in assets are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

 

(b) Changes in ownership interests in subsidiaries without change of control

Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions - that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

 

(c) Disposal of subsidiaries

When the Group ceases to have control any retained interest in the entity is remeasured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.

 

Acquisitions, Asset Purchases and Disposals

Acquisitions of oil and gas properties are accounted for under the purchase method where the acquisitions meet the definition of a business combination.

 

Transactions involving the purchase of an individual field interest, farm-ins, farm-outs, or acquisitions of exploration and evaluation licences for which a development decision has not yet been made that do not qualify as a business combination, are treated as asset purchases. Accordingly, no goodwill or deferred tax arises. The purchase consideration is allocated to the assets and liabilities purchased on an appropriate basis. Proceeds on disposal (including farm-ins/farm-outs) are applied to the carrying amount of the specific intangible asset or development and production assets disposed of and any surplus is recorded as a gain on disposal in the Consolidated Statement of Comprehensive Income.

 

Exploration and Evaluation Costs

The Group accounts for oil and gas exploration and evaluation costs using IFRS 6 "Exploration for and Evaluation of Mineral Resources". Such costs are initially capitalised as Intangible Assets and include payments to acquire the legal right to explore, together with the directly related costs of technical services and studies, seismic acquisition, exploratory drilling and testing. The Group only capitalises costs as intangible assets once the legal right to explore an area has been obtained. The Group assesses the intangible assets for indicators of impairment at each reporting date.

 

Potential indicators of impairment include but are not limited to:

 

a.  the period for which the Group has the right to explore in the specific area has expired during the period or will expire in the near future, and is not expected to be renewed.

b.  substantive expenditure on further exploration for and evaluation of oil and gas reserves in the specific area is neither budgeted nor planned.

c.  exploration for and evaluation of oil and gas reserves in the specific area have not led to the discovery of commercially viable quantities of oil and gas reserves and the entity has decided to discontinue such activities in the specific area.

d.  sufficient data exists to indicate that, although a development in the specific area is likely to proceed, the carrying amount of the exploration and evaluation asset is unlikely to be recovered in full from successful development or by sale.

 

In the event an impairment trigger is identified the Group performs a full impairment test for the asset under the requirements of IAS 36 Impairment of assets. An impairment loss is recognised for the amount by which the exploration and evaluation assets' carrying amount exceeds their recoverable amount. The recoverable amount is the higher of the exploration and evaluation assets' fair value less costs to sell and their value in use.

 

Cost of Sales

Within the statement of comprehensive income, costs directly associated with generating revenue are included in cost of sales. The Group only capitalises costs as intangible assets once the legal right to explore an area has been obtained, any costs incurred prior to the date of acquisition are recognised as cost of sales within the Statement of Comprehensive Income.

Property, Plant and Equipment

Property, plant and equipment is stated at historic purchase cost less accumulated depreciation. Asset lives and residual amounts are reassessed each year. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use.

Depreciation on these assets is calculated on a straight-line basis as follows:

-       Computer & office equipment               3 years

Leases

Until this financial year, leases of property, plant and equipment were classified as either finance leases or operating leases. From 1 January 2019, leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group.

 

Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:

 

•     fixed payments (including in-substance fixed payments), less any lease incentives receivable;

•     variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the commencement date;

•     amounts expected to be payable by the Group under residual value guarantees;

•     the exercise price of a purchase option if the Group is reasonably certain to exercise that option; and

•     payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option.

 

Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.

 

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the Group, the lessee's incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.

 

To determine the incremental borrowing rate, the Group where possible, uses recent third-party financing received by the individual lessee as a starting point, adjusted to reflect changes in financing conditions since third party financing was received.

 

Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

 

Right-of-use assets are measured at cost comprising the following:

 

•  the amount of the initial measurement of lease liability;

•  any lease payments made at or before the commencement date less any lease incentives received;

•  any initial direct costs; and

•  restoration costs.

Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. If the Group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset's useful life.

 

Payments associated with short-term leases of equipment and vehicles and all leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise any lease with a value of £5,000 or less.

 

Joint Ventures

The Group participates in joint venture/operation agreements with strategic partners. The Group accounts for its share of assets, liabilities, income and expenditure of these joint venture agreements and discloses the details in the appropriate Statement of Financial Position and Statement of Comprehensive Income headings in the proportion that relates to the Group per the joint venture agreement.

 

Investments

Fixed asset investments in subsidiaries are stated at cost less accumulated impairment in the Company's Statement of Financial

Position and reviewed for impairment if there are any indications that the carrying value may not be recoverable.

 

Financial Instruments

Financial assets and financial liabilities are recognised in the Group's Statement of Financial Position when the Group becomes party to the contractual provisions of the instrument. The Group does not have any derivative financial instruments.

 

Cash and cash equivalents include cash in hand and deposits held on call with banks with a maturity of three months or less.

 

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less any expected credit loss. The Company recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Company expects to receive, discounted at an approximation of the original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss will be recognised in the Consolidated Statement of Comprehensive Income within administrative expenses. Subsequent recoveries of amounts previously provided for are credited against administrative expenses in the Consolidated Statement of Comprehensive Income.

 

Trade payables are stated initially at fair value and subsequently measured at amortised cost.

 

Exceptional Items

Exceptional items are disclosed separately in the financial statements where it is necessary to do so to provide further understanding of the financial performance of the Group. They are material items of income or expense that have been shown separately due to the significance of their nature or amount.

 

Deferred Tax

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred taxation liabilities are provided, using the liability method, on all taxable temporary differences at the reporting date. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

 

Deferred income tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. The carrying amount of deferred tax assets is reviewed at each reporting date.

Foreign Currencies

The functional currency of the Group is Sterling. Monetary assets and liabilities in foreign currencies are translated into Sterling at the rates of exchange ruling at the reporting date. Transactions in foreign currencies are translated into Sterling at the rate of exchange ruling at the date of the transaction. Gains and losses arising on retranslation are recognised in the Consolidated Statement of Comprehensive Income for the year.

 

Employee Benefit Costs

Payments to defined contribution retirement benefit schemes are recognised as an expense when employees have rendered service entitling them to contributions.

Share-Based Payments

Equity settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. The total amount to be expensed is determined by reference to the fair value of the options granted:

 

•     including any market performance conditions (for example, an entity's share price);

•  excluding the impact of any service and non-market performance vesting conditions (for example, profitability, sales growth targets and remaining an employee of the entity over a specified time period); and

•     including the impact of any non-vesting conditions (for example, the requirement for employees to save).

 

The fair value determined at the grant date of the equity settled share-based payments is expensed on a straight line basis over the vesting period, based on the Group's estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the equity settled employee benefits reserve.

 

Equity settled share-based payment transactions with parties other than employees are measured at the fair value of the goods or services received, except where that fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service.

 

Exercise proceeds net of directly attributable costs are credited to share capital and share premium.

 

Other Income

Other income relates to proceeds received from settlements and is only recognised in the statement of comprehensive income when it is virtually certain the economic benefits will flow to the Group.

Share Capital

Ordinary shares are classified as equity.

 

Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, net of tax, from the proceeds.

 

3. SEGMENTAL REPORTING

Operating segments are reported in a manner consistent with the internal reporting provided to the Board of Directors.

 

The Board considers that the Group operates in a single segment, that of oil and gas exploration, appraisal, development and production, in a single geographical location, the North Sea of the United Kingdom and do not consider it appropriate to disaggregate data further from that disclosed.

 

The Board is the Group's chief operating decision maker within the meaning of IFRS 8 "Operating Segments".

 

During 2019 and 2018 the Group had no turnover. During the 2019 year the Group did receive £750,000 from TEPUK in relation to TEPUK's termination of its 2013 farm-in to licence P2032 (Blocks 21/8c, 21/9c, 21/10c, 21/14a and 21/15b), which has been recognised in the Income Statement as Other Income. (2018: £12,037) from carried cost reimbursements from co-venturers which is also shown in Other Income.

 

4. FINANCIAL RISK MANAGEMENT

 

The Group's activities expose it to financial risks and its overall risk management programme focuses on minimising potential adverse effects on the financial performance of the Group. The Company's activities are also exposed to risks through its investments in subsidiaries and it is accordingly exposed to similar financial and capital risks as the Group.

 

Risk management is carried out by the Directors and they identify, evaluate and address 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 risks and investing excess liquidity.

 

Credit Risk

The Group's credit risk primarily relates to its trade receivables. Responsibility for managing credit risks lies with the Group's management.

 

A debtor evaluation is typically obtained from an appropriate credit rating agency. Where required, appropriate trade finance instruments such as letters of credit, bonds, guarantees and credit insurance will be used to manage credit risk.

 

The Group also has a number of joint venture arrangements where co-venturers have made commitments to fund certain expenditure. Management evaluate the credit risk associated with each contract at the time of signing and regularly monitor the creditworthiness of our partners.

 

Liquidity Risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they become due. The Group manages its liquidity through continuous monitoring of cash flows from operating activities, review of actual capital expenditure programmes, and managing maturity profiles of financial assets and financial liabilities.

 

Capital Risk Management

The Group seeks to maintain an optimal capital structure. The Group considers its capital to comprise both equity and net debt.

 

The Group monitors its capital needs on the basis of suitability of the type of capital available at a given stage to the quantum required for that stage of its asset base. Earlier stage assets (pre-production) typically require equity rather than debt given the absence of cash flow to service debt. As the asset mix becomes biased to production then typically more debt is available. The Group seeks to maintain progress in developing its assets in a timely fashion. Given the Group's current cash position is insufficient to progress its assets to first oil it will be seeking to bring an industry partner into its assets in return for a capital (equity) contribution. This may be in the form of either cash or payment of some or all the Group's development expenditures. As the development progresses towards first oil, debt becomes available and will be sought in order to enhance equity returns. JOG's debt today is nil.

 

The Group monitors its capital structure by reference to its net debt to equity ratio. Net debt to equity ratio is calculated as net debt divided by total equity. Net debt is calculated as borrowings less cash and cash equivalents. Total equity comprises all components of equity.

 

The ratio of net debt to equity as at 31 December 2019 is Nil (2018: Nil).

 

Maturity analysis of financial assets and liabilities

 

 

Financial Assets

	2019		2018
	£		£
Up to 3 months	439,014		80,595
3 to 6 months	10,704		-
Over 6 months	171,137		-
	620,855		80,595

 

Financial Liabilities

	2019		2018
	£		£
Up to 3 months	718,614		436,691
3 to 6 months	1,274		-
Over 6 months	165,574		-
	885,462		436,691

 

5.	EMPLOYEES AND DIRECTORS
		2019		2018
		£		£
	Wages and salaries	1,519,588		956,915
	Social security costs	138,859		76,119
	Share-based payments (note 20)	437,080		259,964
	Other pensions costs	31,462		66,984
		2,126,989		1,359,982

 

Other pension costs include employee and Company contributions to money purchase pension schemes.

 

The average monthly number of employees during the year was as follows:

		2019		2018
	Directors	5		5
	Employees - Finance	1		1
	Employees - Technical	5		5
				`
		11		11

 

		2019			2018
		£			£
	Directors' remuneration	914,933			557,341
	Directors' pension contributions to money purchase schemes	1,012			24,702
	Benefits	13,108			2,992
		929,053			585,035
	The average number of Directors to whom retirement benefits were accruing was as follows:
			2019		2018
	Money purchase schemes	1			2

 

	Information regarding the highest paid Director is as follows:	2019		2018
		£		£
	Aggregate emoluments and benefits	300,500		167,800
	Share-based payment	40,810		54,088
	Pension contributions	-		7,500
		341,310		229,388
	The Directors did not exercise any share options during the year.

 

             Key management compensation

 

Key management includes Directors (Executive and Non-Executive) and the Company Secretary in 2018.  In 2019 the Company Secretarial services were outsourced following the retirement of this employee at the end of January 2019. The compensation paid or payable to key management for employee services is shown below:

		2019		2018
		£		£
	Wages and short-term employee benefits	917,183		584,341
	Share-based payments (note 20)	371,449		118,423
	Pension Contributions	1,262		30,702
		1,289,894		733,466

 

6.          OTHER INCOME

	2019		2018
	£		£
Settlement agreement with Total E&P UK Limited	750,000		-
Carried costs reimbursement	-		12,037
	750,000		12,037

Carried costs reimbursement:  Reimbursement of well-related costs received as a result of the carried                   interest arrangement.

 

Settlement agreement with Total E&P UK Limited:  Funds received from TEPUK in relation to TEPUK's termination of its 2013 farm-in to licence P2032 (Blocks 21/8c, 21/9c, 21/10c, 21/14a and 21/15b) received in May 2019.

 

7.	NET FINANCE INCOME
		2019		2018
		£		£
	Finance income:
	Interest received	106,867		48,971
		106,867		48,971
	Finance costs:	(419)		-
	Net finance income	106,448		48,971

 

 

8.	LOSS BEFORE TAX
	The loss before tax is stated after charging/(crediting):
		2019		2018
		£		£
	Depreciation tangible assets	14,067		4,615
	Depreciation right-of-use asset	3,568		-
	Auditors' remuneration - audit of parent company and consolidation	51,800		35,000
	Auditors' remuneration - audit of subsidiaries	18,700		12,500
	Auditors' remuneration - non-audit work	-		8,700
	Foreign exchange (gain)/loss	(2,722)		9,678

 

9.          TAX

 

	Reconciliation of tax charge
		2019		2018
		£		£
	Loss before tax	(2,065,009)		(1,996,300)
	Tax at the domestic rate of 19% (2018: 19%)	(392,352)		(379,297)
	Capital allowances in excess of depreciation	(1,121,121)		(589,363)
	Expenses not deductible for tax purposes and non-taxable income	110,834		51,292
	Deferred tax asset not recognised	1,402,639		917,368
	Total tax expense reported in the Consolidated Statement of Comprehensive Income	-		-

 

No liability to UK corporation tax arose on ordinary activities for the year ended 31 December 2019 or for the year ended 31 December 2018.

 

The Group has not recognised a deferred tax asset due to the uncertainty over when the tax losses can be utilised. At the year end the usable tax losses within the Group were approximately £39 million.

 

10.       LOSS PER SHARE

 

Basic loss per share is calculated by dividing the losses attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year.

 

Diluted loss per share is calculated using the weighted average number of shares adjusted to assume the conversion of all dilutive potential ordinary shares.

 

                                                                                                                                         Loss                Weighted

                                                                                                                                    attributable           average

                                                                                                                                    to ordinary            number                 Per share

                                                                                                                                  shareholders               of                       amount

                                                                                                                                             £                      shares                    pence

Year ended 31 December 2019

Basic and Diluted EPS

Basic & Diluted                                                                                                          (2,065,009)          21,829,227               (9.46)

Year ended 31 December 2018

Basic and Diluted EPS

Basic & Diluted                                                                                                          (1,996,300)          21,829,227           (9.15)

11.        INTANGIBLE ASSETS

						Exploration costs
						£
COST
At 1 January 2018						1,533,200
Additions						2,948,630
At 31 December 2018						4,481,830
Additions						5,785,975
At 31 December 2019						10,267,805
ACCUMULATED AMORTISATION
At 1 January 2018						175,241
Charge for the year						-
Amortisation on disposal						-
At 31 December 2018						175,241
At 31 December 2019						175,241
NET BOOK VALUE
At 31 December 2019						10,092,564
At 31 December 2018						4,306,589
At 31 December 2017						1,357,959

During 2019, the Group retained an 18% equity interest in licence P2170 (Verbier) and was awarded three additional licences with 100% working interests in the OGA's 31 SLR, Licence P2498 (Buchan and J2), Licence P2499 (Glenn) and Licence P2497 (Zermatt).

 

In line with the requirements of IFRS 6, we have considered whether there are any indicators of impairment on the exploration and development assets. Based on our assessment, as at 31 December 2019 there are not deemed to be indicators that the licences are not commercial and the carrying value of £10,092,564 continues to be supported by ongoing exploration work on the licence area with no further impairments considered necessary.

 

12.        PROPERTY, PLANT AND EQUIPMENT

						Computer and office equipment
						£
COST
At 1 January 2018						125,786
Additions						34,879
At 31 December 2018						160,665
Additions						19,047
Disposals						(36,130)
At 31 December 2019						143,582
ACCUMULATED DEPRECIATION
At 1 January 2018						125,786
Charge for the year						4,615
At 31 December 2018						130,401
Charge for the year						14,067
Disposals						(14,547)
At 31 December 2019						129,921
NET BOOK VALUE
At 31 December 2019						13,661
At 31 December 2018						30,264
At 31 December 2017						-

            

13.        LEASES              

 

Amounts Recognised in the Statement of financial position

		2019		2018
		£		£
	Right-of-use Assets
	Buildings	164,125		-
	Equipment	-		-
	Vehicles	-		-
	Other	-		-
		164,125		-

 

	Lease liabilities
	Current	13,904		-
	Non-Current	154,208		-
		168,112		-

 

On adoption of IFRS 16, the Group recognised lease liabilities in relation to leases which had previously been classified as 'operating leases' under the principles of IAS 17, 'Leases'. These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee's incremental borrowing rate as of 1 January 2019. The weighted average lessee's incremental borrowing rate applied to the lease liabilities on 1 January 2019 was 3%.

 

At 1 January 2019 the Group held no leases which required restating.

 

Amounts Recognised in the Statement of comprehensive income

		2019		2018
		£		£
	Depreciation charge of right-of-use asset
	Buildings	3,568		-
	Equipment	-		-
	Vehicles	-		-
	Other	-		-
		3,568		-

 

Interest expenses (included in finance cost)

(419)

-

 

 

14.        TRADE AND OTHER RECEIVABLES

		2019		2018
	Current:	£		£
	Trade receivables (net)	-		-
	Other receivables	135,548		67
	Value added tax	171,344		63,818
	Prepayments and accrued revenue	121,418		16,709
		428,310		80,594
	As at 31 December 2019 there were no trade receivables past due nor impaired. There are no expected credit losses recognised on these balances.

15.        CASH AND CASH EQUIVALENTS

		2019		2018
		£		£
	Unrestricted cash in bank accounts	4,318,536		19,782,511
	Cash in 65-day notice bank accounts	8,000,000		-
		12,318,536		19,782,511
	The cash balances are placed with a creditworthy financial institution.

16.        CALLED UP SHARE CAPITAL

 

Issued and fully paid:

	Number:	Class	Nominal		2019		2018
			value		£		£
	21,829,227 (2018:21,829,227)	Ordinary	1p		2,466,144		2,466,144

17.        TRADE AND OTHER PAYABLES

		2019		2018
	Current:	£		£
	Trade payables	399,791		142,565
	Accrued expenses	131,706		140,932
	Other payables	74,298		130,905
	Taxation and Social Security	136,371		22,289
		742,166		436,691

 

18.    NON-CURRENT LIABILITIES

		2019		2018
	Non-Current:	£		£
	Lease Liabilities	154,208		-
		154,208		-

 

 

19.        CONTINGENT LIABILITY

 

In accordance with a 2015 settlement agreement reached with the Athena Consortium, although Jersey Petroleum Limited remains a Licensee in the joint venture, any past or future liabilities in respect of its interest can only be satisfied from the Group's share of the revenue that the Athena Oil Field generates and up to 60% of net disposal proceeds or net petroleum profits from the Group's interest in the P2170 licence which is the only remaining asset still held that was in the Group at the time of the agreement with the Athena Consortium who hold security over this asset. Any future repayments, capped at the unpaid liability associated with the Athena Oil Field, cannot be calculated with any certainty, and any remaining liability still in existence once the Athena Oil Field has been decommissioned will be written off. A payment was made in 2016 to the Athena Consortium in line with this agreement following the farm-out of P2170 (Verbier) to Equinor and the subsequent receipt of monies relating to that farm-out.

 

JOG is currently contesting a fee for an uplift payment of $479,240 with TGS-NOPEC Geophysical Company ASA (TGS). In February 2018 JOG licensed 185 sq km of TGS MF CFI 3D seismic data. In November 2018 the P2170 Licence Group made a mandatory relinquishment of part of the P2170 acreage including an area that subsequently became block 20/5a.

 

In July 2019, JOG was awarded in the 31 SLR, as part of Licence P2498, Block 20/5a. TGS consider that as a consequence of that award an uplift payment is due. JOG disputes the validity of the uplift payment given that the TGS 3D data was obtained for use by the Verbier owners for the sole purpose of locating the Verbier appraisal well. The data was not used by the Group for the 31 SLR application and the licence granted under Clause 2 of the Supplemental Agreement does not apply to individual use by JOG. The Master Licence Agreement ('MLA') between TGS and JOG applies to the use of data by a 'Related Entity', such as Jersey Petroleum Ltd, and permits its use. In the MLA the Related Entity becomes bound when it uses the data and by doing so would trigger the uplift liability. The JOG subsidiary did not use the data and so has not become bound to pay the uplift.

 

 

20.     SHARE-BASED PAYMENTS

The Group operates a number of share option schemes. Options are exercisable at the prices set out in the table below. Options are forfeited if the employee leaves the Group through resignation or dismissal before the options vest.

 

Equity settled share-based payments are measured at fair value at the date of grant and expensed on a straight-line basis over the vesting period, based upon the Group's estimate of shares that will eventually vest.

 

The Group's share option schemes are for Directors, Officers and employees. The charge for the year was £437,080 (2018: £259,964) and details of outstanding options are set out in the table below.

Date of Grant	Exercise price (pence)	Vesting date	Expiry date	No. of shares for which options outstanding at 1 Jan 2019	Options issued	Options Exercised	Options lapsed/non vesting during the year	No. of shares for which options outstanding at 31 Dec 2019
Mar 2011	100	Vested	Mar 2021	3,164	-	-	-	3,164
Mar 2011	4,300	Vested	Mar 2021	5,809	-	-	-	5,809
Mar 2011	4,300	Mar 2014	Mar 2021	4,355	-	-	-	4,355
Mar 2011	4,300	Mar 2015	Mar 2021	5,809	-	-	-	5,809
Jul 2011	4,300	Jul 2011	Jul 2021	523	-	-	-	523
Jul 2011	4,300	Jul 2012	Jul 2021	523	-	-	-	523
Jul 2011	4,300	Jul 2014	Jul 2021	523	-	-	-	523
Dec 2011	2,712	Dec 2012	Dec 2021	1,650	-	-	-	1,650
Dec 2011	2,712	Dec 2014	Dec 2021	1,650	-	-	-	1,650
May 2013	1,500	May 2014	May 2023	9,500	-	-	-	9,500
May 2013	1,500	May 2015	May 2023	9,500	-	-	-	9,500
Nov 2016	110	Nov 2016	Nov 2021	246,667	-	-	-	246,667
Nov 2016	110	Nov 2017	Nov 2021	246,667	-	-	-	246,667
Nov 2016	110	Nov 2018	Nov 2021	246,667	-	-	-	246,667
Apr 2017	310	Apr 2017	Apr 2022	20,000	-	-	-	20,000
Apr 2017	310	Apr 2018	Apr 2022	20,000	-	-	-	20,000
Apr 2017	310	Apr 2019	Apr 2022	20,000	-	-	-	20,000
Jan 2018	200	Jan 2021	Jan 2025	420,000	-	-	-	420,000
Jan 2018	200	Jan 2018	Jan 2023	76,666	-	-	-	76,666
Jan 2018	200	Jan 2019	Jan 2023	76,667	-	-	-	76,667
Jan 2018	200	Jan 2020	Jan 2023	76,667	-	-	-	76,667
Nov 2018	172	Nov 2021	Nov 2025	150,000	-	-	-	150,000
Jan 2019	175	Jan 2020	Jan 2026	-	88,333	-	-	88,333
Jan 2019	175	Jan 2021	Jan 2026	-	88,333	-	-	88,333
Jan 2019	175	Jan 2022	Jan 2026	-	88,333	-	-	88,333
Jan 2019	175	Jan 2020	Jan 2024	-	11,667	-	-	11,667
Jan 2019	175	Jan 2021	Jan 2024	-	11,667	-	-	11,667
Jan 2019	175	Jan 2022	Jan 2024	-	11,667	-	-	11,667
Apr 2019	200	Jan 2021	Jan 2025		120,000			120,000
							Total	2,063,007

 

The weighted average fair value of options granted during the year was determined using the Black-Scholes valuation. The significant inputs into the model were the mid-market share price on the day of grant as shown above and an annual risk-free interest rate of 2%. The volatility measured at the standard deviation of continuously compounded share returns is based on a statistical analysis of daily share prices from the date of admission to AIM to the date of grant on an annualised basis. The weighted average exercise price for the options granted in 2019 was 182 pence, the weighted average remaining contractural life of the options was 5 years, the weighted average volatility rates was 62.86% and the dividend yield was nil. For schemes and scheme rules, please refer to the Remuneration Report in the full Annual Report.

 

21.        RELATED UNDERTAKINGS AND ULTIMATE CONTROLLING PARTY

 

The Group and Company do not have an ultimate controlling party or parent Company.

	Subsidiary		% owned	County of Incorporation	Principal Activity		Registered Office
	Jersey North Sea Holdings Ltd		100%	England & Wales	Non-Trading		1
		Jersey Petroleum Ltd	100%	England & Wales	Oil Exploration		1
	Jersey E & P Ltd		100%	Scotland	Non-Trading		2
		Jersey Oil Ltd	100%	Scotland	Non-Trading		2
		Jersey Exploration Ltd	100%	Scotland	Non-Trading		2
	Jersey Oil & Gas E & P Ltd		100%	Jersey	Management services		3

 

             Registered Offices

                   1     10 The Triangle, ng2 Business Park, Nottingham, NG2 1AE

                   2     6 Rubislaw Terrace, Aberdeen, AB10 1XE

             3     First Floor, 17 The Esplanade, St Helier, Jersey JE2 3QA

 

22.       NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS

 

             RECONCILIATION OF LOSS BEFORE TAX TO CASH USED IN OPERATIONS

		2019		2018
		£		£
	Loss for the year before tax	(2,065,009)		(1,996,300)
	Adjusted for:
	Amortisation, impairments, depletion and depreciation	14,067		4,615
	Depreciation right-of-use asset	3,568		-
	Share-based payments (net)	437,080		259,964
	Loss on disposal of assets	17,980		-
	Finance costs	419		-
	Finance income	(106,867)		(48,971)
		(1,698,762)		(1,780,692)
	(Increase)/Decrease in trade and other receivables	(543,829)		275,513
	Increase/(Decrease) in trade and other payables	473,587		(1,193,182)
	Cash used in operations	(1,769,004)		(2,698,361)

 

             CASH AND CASH EQUIVALENTS

 

The amounts disclosed on the consolidated Statement of Cash Flows in respect of Cash and cash equivalents are in respect of these statements of financial position amounts:

 

Year ended 2019

		31 Dec 2019		1 Jan 2019
		£		£
	Cash and cash equivalents	12,318,536		19,782,511

Year ended 2018

		31 Dec 2018		1 Jan 2018
		£		£
	Cash and cash equivalents	19,782,511		25,415,410

                                                                                                                                                        Analysis of net cash

                                                                                                                                  At 1 Jan 2019        Cash flow       At 31 Dec 2019

 

                                                                                                                                             £                          £                          £

Cash and cash equivalents                                                                                    19,782,511            (7,463,975)          12,318,536

Net cash                                                                                                                    19,782,511            (7,463,975)          12,318,536

 

23. POST BALANCE SHEET EVENTS

On 27 January 2020 JOG entered into a conditional Sale and Purchase Agreement (SPA) to acquire operatorship and an additional 70% working interest on Licence P2170 (Blocks 20/5b and 21/1d) from Equinor UK Limited. The consideration for the Acquisition consists of two milestone payments and a royalty based on potential future oil volumes produced and sold from the Verbier Upper Jurassic (J62-J64) reservoir oil discovery (the Verbier Field).

 

Contingent payments of:

 

•     US$3 million upon sanctioning by the UK's Oil & Gas Authority ("OGA") of a Field Development Plan ("FDP") in respect of the

Verbier Field; and US$5 million upon first oil from the Verbier Field

•     Certain royalty payments on the first 35 million barrels of oil produced and sold from the Verbier Field calculated on the basis of a 70% working interest for on-block volumes

 

In February 2020 a new lease agreement was signed for offices in 10 Arthur Street, London EC4R 9AY, this is a 19 month lease which expires in September 2021. The total rent for the property is £109,000 per annum.

 

After the balance sheet date, we have seen macro-economic uncertainty with regards to prices and demand for oil and gas as a result of the Covid-19 outbreak. Furthermore, recent global developments and uncertainty in oil supply in March and April have caused further abnormally large volatility in commodity markets. The scale and duration of these developments remain uncertain but could impact on the progress of our GBA development project.

 

The Group consider all matters above to be non-adjusting post balance sheet events.

 

24. Availability of the annual report 2019

A copy of the full 2019 Annual Report will be made available for inspection at the Company's registered office during normal business hours on any weekday. The Company's registered office is at 10 The Triangle, ng2 Business Park, Nottingham NG2 1AE. A copy can also be downloaded from the Company's website at www.jerseyoilandgas.com. Jersey Oil and Gas plc is registered in England and Wales with registration number 7503957.