BORDERS & SOUTHERN PETROLEUM PLC — Earnings Release 2016

Sep 26, 2016

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RNS Number : 7325K

Borders & Southern Petroleum plc

26 September 2016

26 September 2016

Borders & Southern Petroleum plc

("Borders & Southern" or "the Company")

Unaudited Results for the six months period ended 30 June 2016

Borders & Southern (AIM: BOR), the London based independent oil and gas exploration company with assets offshore the Falkland Islands, announces preliminary unaudited results for the half year ending 30 June 2016.

Highlights

·   Received extensions to the Company's Falkland Islands Production Licences and Discovery Area

·   Completed engineering studies, evaluated Darwin development options and acquired contractor cost estimates

·   Breakeven oil price for a phased FPSO development is $40 per barrel - commercially competitive against current global benchmarks

·   Cash balance at 30 June 2016: $12.2 million (31 December 2015: $14.0 million, 30 June 2015: $14.6 million)

For further information please visit www.bordersandsouthern.com or contact:

Howard Obee	Adam James / Atholl Tweedie
Borders & Southern Petroleum plc	Panmure Gordon (UK) Limited
Tel: 020 7661 9348	Tel: 020 7886 2500
Simon Hudson
Tavistock
Tel: 020 7920 3150

Notes:

Borders & Southern Petroleum plc is an oil & gas exploration company listed on the London Stock Exchange AIM (BOR). The Company operates and has a 100% interest in three Production Licences in the South Falkland Basin covering an area of nearly 10,000 square kilometres. The Company has acquired 2,862 km of 2D seismic, 2,517 square kilometres of 3D seismic and drilled two exploration wells, making a gas condensate discovery (Darwin) with its first well. Management's previously reported un-risked base case (P50) resource estimate for the combined Darwin East and Darwin West structures, incorporating all proven and potential reservoirs, is 354 million barrels of recoverable condensate.

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

Chief Executive's Statement

During this period of continued low oil prices, Borders & Southern has maintained a strategy of strict financial control and a focus on activities that will enhance the attractiveness of the Company's significant condensate discovery. Whilst we have not yet been able to secure a partner to help fund the appraisal drilling due to industry capital constraints, we have been able to demonstrate the commercial competitiveness of our Darwin discovery.

In the first half of the year we applied to the Falkland Islands Government for an extension to the Company's Production Licences and Discovery Area. In May we received confirmation that this had been approved. Production Licences PL018, PL019 and PL020 have been extended by a further three years without any additional work commitment. They will now expire in October 2020. The Darwin East discovery area has been extended for a further four years and will now expire in January 2022.

Two major technical projects were undertaken within the reporting period: a reservoir engineering study and a facilities engineering study. The results from these two pieces of work have been used to assess the commerciality of the Darwin discovery in a low oil price, but relatively low cost, environment and to determine how competitive it is against other global opportunities.

Several development options have been considered. Both full-field (Darwin East and Darwin West together) and phased developments have been evaluated. A development would involve sub-sea well completions tied back to a leased FPSO. The discovery is located in approximately 2000m of water but within 14 km to the south, water depths decrease to 1100m, allowing different engineering solutions to be assessed.

In the current economic environment, the Company's preferred development plan would be for a phased development, initially targeting 270 million barrels of condensate. This would require four production wells and three gas re-injection wells. Initial production rates would be 56,000 bopd.

Engineering contractors have provided up to date cost estimates for such a development, indicating a capex requirement of $1.36 billion (including a 25% contingency in recognition of the scoping level of the work). Based on these costs estimates, the Company's economic model indicates that the post appraisal breakeven oil price for the development would be $40 per barrel. This compares favourably with benchmark onshore US shale plays and many global offshore pre-sanction projects. These positive economic results are driven by: the attractive fiscal terms set by the Falkland Islands Government, the high quality reservoir which does not require a large number of development wells and a relatively straight-forward development plan using proven technology.

Financial results

The Company incurred a loss from operations of $934,000 for the six month period ending 30 June 2016, down slightly from the corresponding period last year ($964,000). This reflects lower administrative expenses.

The Company has no debt and has a cash balance of $12.2 million. The majority of the Company's cash reserves are held in Sterling to match its ongoing expenses. Due to the recent fall in the pound relative to the US dollar, the reported cash balance is lower than might have been anticipated. Expenditure however, has decreased during the period.

Outlook

The technical and commercial work undertaken during the first half of the year has demonstrated the quality of our discovered resource and its commercial competitiveness against other global opportunities. The Company is confident that this recent analysis will assist the farm-out process, so that we can take advantage of an upturn in the oil price and a return to increased capital expenditure in the industry, when it comes. Going forward, we will maintain a strong balance sheet and a disciplined budget. Our prime focus remains on securing partners and funding for Darwin's appraisal programme.

Borders & Southern Petroleum Plc

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 June 2016

		6 months ended 30 June 2016 (unaudited)	6 months ended 30 June 2015 (unaudited)	12 months ended 31 December 2015 (audited)
	Notes	$000	$000	$000
Administrative expenses		(934)	(964)	(1,968)
# loss from operations		(934)	(964)	(1,968)
Finance income	3	20	154	47
Finance expense		(193)	-	(679)
# LOSS BEFORE TAX		(1,107)	(810)	(2,600)
Tax  expense		-	-	-
# LOSS FOR THE PERIOD AND TOTAL COMPREHENSIVE LOSS FOR THE PERIOD ATTRIBUTABLE TO EQUITY OWNERS OF THE PARENT		(1,107)	(810)	(2,600)
# Loss per share - basic and diluted	2	(0.2) cents	(0.2) cents	(0.54) cents

Borders & Southern Petroleum Plc

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 30 June 2016

	At 30 June 2016 (unaudited) $000	At 30 June 2015 (unaudited) $000	At 31 December 2015 (audited) $000
ASSETS NON-CURRENT ASSETS
Property, plant and equipment	-	11	10
Exploration and Evaluation assets	289,840	290,453	289,590
Total non-current assets	289,840	290,464	289,600
CURRENT ASSETS
Other receivables	524	404	297
Cash and cash equivalents	12,222	14,595	14,011
TOTAL CURRENT ASSETS	12,746	14,999	14,308
TOTAL ASSETS	302,586	305,463	303,908
LIABILITIES CURRENT LIABILITIES
TOTAL LIABILITIES	(159)	(106)	(283)
TOTAL NET ASSETS	302,427	305,357	303,625
EQUITY
Share capital	8,530	8,530	8,530
Share premium account Other reserve	308,602 2,282	308,602 2,312	308,602 2,370
Retained deficit	(16,968)	(14,071)	(15,861)
Foreign currency reserve	(19)	(16)	(16)
TOTAL EQUITY	302,427	305,357	303,625

Borders & Southern Petroleum Plc

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2016

	Share capital $000	Share premium account $000	Other reserve $000	Retained Deficit $000	Foreign currency reserve $000	Total $000
Unaudited
Balance at 1 January 2016	8,530	308,602	2,370	(15,861)	(16)	303,625
Total comprehensive loss for the period	-	-	(88)	(1,107)	(3)	(1,198)
Recognition of share based payments	-	-	-	-	-	-
Balance at 30 June 2016	8,530	308,602	2,282	(16,968)	(19)	302,427
Unaudited
Balance at 1 January 2015	8,530	308,602	2,280	(13,261)	(16)	306,135
Total comprehensive income for the period	-	-	32	(810)	-	(778)
Recognition of share based payments	-	-	-	-	-	-
Balance at 30 June 2015	8,530	308,602	2,312	(14,071)	(16)	305,357
Audited
Balance at 1 January 2015	8,530	308,602	2,280	(13,261)	(16)	306,135
Total comprehensive loss for the year	-	-	-	(2,600)	-	(2,600)
Recognition of share based payments	-	-	90	-	-	90
Balance at 31 December 2015	8,530	308,602	2,370	(15,861)	(16)	303,625

Borders & Southern Petroleum Plc

CONSOLIDATED STATEMENT OF CASH FLOWS

For the six months ended 30 June 2016

	6 months ended 30 June 2016 (unaudited)	6 months ended 30 June 2015 (unaudited)	12 months ended 31 December 2015 (audited)
Cash flow from operating activities	$	$	$
loss  before tax Adjustments for:	(1,107)	(810)	(2,600)
Depreciation	-	-	1
Share-based payment	-	32	90
Net finance costs/(income)	173	(154)	632
Realised foreign exchange (losses)/gains	10	-	(8)
	(924)	(932)	(1,885)
(Increase)/decrease in trade and other receivables	(303)	(75)	32
Increase/ (decrease) in trade and other payables	21	(144)	33
Net cash outflow from operating activities	(1,206)	(1,151)	(1,820)
Cash flows used in investing activities
Interest received	19	24	47
Capitalised exploration and evaluation costs	(411)	(487)	(773)
Proceeds from disposal of intangible assets	-	-	1,149
Net cash used in investing activities	(392)	(463)	423
Net decrease in cash and cash equivalents	(1,598)	(1,614)	(1,397)
Cash, cash equivalents and restricted use cash at the beginning of the period	14,011	16,079	16,079
Exchange gains/ (losses)  on cash and cash equivalents	(191)	130	(671)
Cash , cash equivalents and restricted use cash at the end of the period	12,222	14,595	14,011

Borders & Southern Petroleum Plc

NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the six months ended 30 June 2016

1. Basis of preparation

The unaudited condensed consolidated interim financial statements have been prepared using the recognition and measurement principles of International Accounting Standards, International Reporting Standards and Interpretations adopted for use in the European Union (collectively EU IFRSs).  The Group has not elected to comply with IAS 34 "Interim Financial Reporting" as permitted. The principal accounting policies used in preparing the interim financial statements are unchanged from those disclosed in the Group's Annual Report for the year ended 31 December 2015 and are expected to be consistent with those policies that will be in effect at the year end. 

The condensed financial statements for the six months ended 30 June 2016 and 30 June 2015 are unreviewed and unaudited. The comparative financial information does not constitute statutory financial statements as defined by Section 435 of the Companies Act 2006. The comparative financial information for the year ended 31 December 2015 is not the company's full statutory accounts for that period. A copy of those statutory financial statements has been delivered to the Registrar of Companies. The auditors' report on those accounts was unqualified, did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain a statement under section 498(2)-(3) of the Companies Act 2006.

2. EARNINGS per share 

The calculation of the basic earnings per share is based on the profit attributable to ordinary shareholders divided by the weighted average number of shares in issue during the period. Diluted earnings per share are not stated as the dilution would relate only to share options and would not be material.

	Loss after tax for the period $000	Weighted average number of shares	Loss per share cent
basic and diluted
Six months ended 30 June 2016 (unaudited)	(1,107)	484,098,484	(0.2)
Six months ended 30 June 2015 (unaudited)	(778)	484,098,484	(0.2)
Twelve months ended 31 December 2015 (audited)	(2,600)	484,098,484	(0.54)

3. FINANCE INCOME AND EXPENSE

Net finance income/(expence)	6 months ended 30 June 2016 $000	6 months ended 30 June 2015 $000	12 months ended 31 December 2015 $000
Bank interest receivable	20	24	47
Foreign exchange gain / (loss)	(193)	130	(679)
	(173)	154	(632)

4. SHARE OPTIONS

During the period 50,000 share options granted to Howard Obee and Peter Fleming respectively expired.

-ends-

This information is provided by RNS

The company news service from the London Stock Exchange

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