Overall, non cash items were GBP5,848,276 (2013: GBP2,501,309)
of which our share of the operating loss attributed to our indirect
interest in the Guyane Maritime Joint Venture (JV) was GBP5,023,059
(2013: GBP1,626,446). This included full impairment of costs
related to GM-ES-2, GM-ES-4 and GM-ES-5 and rig decommissioning
costs; GM-ES-3 having been impaired in full as at 30 June 2013. The
booked share of losses in joint ventures has been reduced by
GBP265,813 from the provision of GBP5,288,872 made for the first
half of the year. This is due to well and decommissioning costs
coming in below the level of cash advances called against Shell's
original budget.
In the consolidated balance sheet, for which Wessex follows a
Successful Efforts accounting policy, Wessex is now carrying the
Guyane investment at GBP3,467,422 (2013: GBP6,991,574) and Total
Equity is GBP5,337,215 (2013: GBP11,976,250). As shareholders will
be aware, Northpet follows a Full Cost accounting policy, and in
the past, the Parent Company Balance Sheet has incorporated the
Company's pro rata share of its equity investment in Northpet at
that Company's book value.
This year, the board has decided, that it would be prudent to
impair the value of the equity investment to our share of
Northpet's net assets as they would have been presented in that
Company's accounts, had Northpet adopted a Successful Efforts
policy. This adjustment has no impact on cash nor on the
consolidated balance sheet.
During the four months from October 2013, Wessex opted out of
GBP1.29m of funding requests in respect of operations in Guyane and
thereby reduced its ownership in Northpet from 50.00% to 44.11%.
Payments were recommenced February 2014 at the new pro-rata rate of
44.11% of Northpet, an effective interest in the Guyane Maritime JV
of 1.103%. It is the board's intention to maintain this effective
interest in Guyane in the foreseeable future.
At the end of June 2014, cash resources stood at GBP1.9m (2013:
GBP4.4m). Project spend was GBP1.67m in the year, 90% of it
committed in Guyane (GBP1.5m). Looking forward, our project
commitments for calendar year 2015 are minimal. As of the balance
sheet date, Wessex was holding 63% (2013: 55%) of its cash
resources in US$ .
Cash administration costs, at GBP729,331, were down 29% overall
in the year, with H1 2014 costs falling 44% over H1 2013 and H2
2014 down 7% compared with H2 2013. If the requisitioned General
Meeting costs (GBP54k paid in the financial year) are excluded then
the H2 2014 costs are down by almost 20% and overall costs for the
year are 34% lower.
The rise in expensed project costs reflects the fact that all of
our historic projects, save Guyane, have now been fully impaired,
so any further expenditure incurred is expensed.
Non cash items included GBP233,954 of share option expense and
an impairment charge of GBP591,263 (GBP214,752 on P1928; GBP374,153
on PEDL239; and GBP2,358 on SADR).
Breakdown of Administrative Expenses (2013 and 2014)
Year to 30 June 2014 2014 2014 2013 2013 2013
Expenses H1 H2 FY H1 H2 FY
Cash (GBP) (GBP) (GBP) (GBP) (GBP) (GBP)
Administration 341,156 388,175 729,331 608,720 416,720 1,025,440
Expensed Project 43,821 98,634 142,455 45,268 (4,169) 41,099
Forex 120,747 38,494 159,241 30,546 (94,226) (63,680)
Non-Cash
Share Options 201,432 32,522 233,954 156,455 203,786 360,241
Impairment 214,752 376,511 591,263 72,557 442,065 514,622
Total 921,908 934,336 1,856,244 913,546 964,176 1,877,722
Project Review
Guyane
INTEREST HOLDING
Wessex holds a 44.11% interest in Northpet Investments Limited
(Northpet), giving it a 1.103% beneficial interest in the Guyane
Maritime Permit. The remaining interest in Northpet is owned by
Northern Petroleum plc. Northpet holds a 2.5% interest in this
Permit in partnership with Shell (operator, 45%), Tullow (27.5%)
and Total SA (25%).
In December 2013, it was announced that GM-ES-5 had been
unsuccessful. This was the final well to be drilled under the
Shell-operated four-well drilling campaign which commenced in July
2012, and was designed partly to test the down-dip limit of the
accumulation in the initial Zaedyus (GM-ES-1) discovery. The Stena
Icemax drill ship was released from contract on 5 December 2013 and
much of the decommissioning activity on the associated
infrastructure was completed by the turn of the calendar year.
There have now been five wells drilled by the partnership in
2012 and 2013, the successful Zaedyus exploration well in September
2011, followed by 2 unsuccessful appraisal wells to Zaedyus and 2
unsuccessful exploration wells on the Eastern Slope.
Since last December, the partners have largely completed the
evaluation and interpretation of the valuable body of information
derived from drilling and from the new Central Area 3D seismic that
was delivered from processing in August 2013. A new portfolio of
leads and prospects has now been defined in the, so far untested,
Central Area. Discussion amongst partners on applying for a new
drilling permit (AOT), a prerequisite to drilling a further well,
is ongoing. However, given the long lead-time in determining an AOT
and subsequently securing a deep-water rig, it is unlikely that any
further drilling could occur before the end 2015. Any further well
would have to be drilled before the expiry of the exploration phase
of the Guyane Maritime Permit in June 2016, unless it can be
extended.
United Kingdom
INTEREST HOLDING
Wessex, as administrator of Promote Licence blocks 98/7b, 98/8a
and 98/12 (northern part), holds a 35% interest through its
wholly-owned subsidiary Wessex Hydrocarbons Limited. Its partner,
NWE Mirrabooka (UK) Pty. Ltd (a wholly-owned subsidiary of ASX
listed, Norwest Energy NL) has a 65% interest.
During the year, all three of our South of England licences were
relinquished, offshore P1928 in December 2013 and onshore PEDL 238
and PEDL 239 in April 2014. These licences were all due to expire
between February and July 2014 and the Norwest-operated group was
not in a position to make the drilling commitments necessary to
extend their lives. The group therefore adopted a strategy of early
relinquishment, after consultation with the UK's Department of
Energy & Climate Change (DECC), in order to allow the areas to
be included in the forthcoming 2014 Licensing Rounds.
Subsequent to the year end, the Company's subsidiary, Wessex
Hydrocarbons Limited, was awarded blocks 98/7b, 98/8a and 98/12
(northern part) in the 28th Seaward Round. However, it was decided
not to apply for new licences under the 14th Landward Round.
Subject to completion of licence documentation, the award will
allow Wessex and NWE to explore the Blocks for an initial period of
two years, during which existing 3D seismic data will be
reprocessed to pre-stack depth migration. At the end of this
initial period, the group must either commit to drill a well in the
remaining two years of the licence or relinquish it in full.
Juan de Nova
INTEREST HOLDING
Wessex will have the right to hold a 50% interest in a renewed
permit, under an agreement with its partner and operator, Jupiter
Petroleum Juan de Nova Limited (a wholly-owned subsidiary of Global
Petroleum Limited), which holds the remaining 50%.
The current Juan de Nova Permit expired on 30 December 2013 and
is suspended pending determination by the French Authorities of the
renewal application. Ahead of the renewal, a new Joint Venture
agreement was signed with Global granting it the operatorship and
giving Wessex the right to apply to take legal title to a 50%
working interest in the event that a renewal is successful.
The renewal acreage includes the northernmost and southernmost
parts of the original permit, which are considered to be the most
prospective. If successful, the initial work programme is expected
to be the acquisition of a grid of 2D seismic over the retained
areas. We anticipate news on the renewal during the first half of
2015.
Western Sahara (SADR)
INTEREST HOLDING
Maghreb Exploration Limited (a wholly-owned subsidiary of Wessex
Exploration PLC) and Comet Petroleum (SADR) Limited (a wholly-owned
subsidiary of Tower Resources plc) each hold a 50% interest in
three licence blocks under Assurance Agreements in the SADR -
Bojador, Guelta and Imlili.
The Assurance Agreements are valid for periods of up to ten
years and confer the right to convert to Production Sharing
Agreements upon the meeting of certain external conditions,
including the recognition of SADR sovereignty and formulation of
comprehensive tax laws. Agreement was reached with the SADR
authorities to renew the Imlili block for a period of 3 years in
October 2014. The Bojador and Guelta blocks also expire in the
relatively near future, and we have recently made a proposal to the
authorities to align the end dates and extend all three Assurance
Agreements to a uniform date in December 2020.
The areas covered by our licence blocks lie almost completely in
the zone controlled by Morocco since 1975 and there is currently no
possibility of access. However, exploration activity is reaching
the drilling stage in the licences awarded by Morocco over SADR
waters, with Kosmos expected to spud a well in Q4 2014 close to the
Company's Imlili and Guelta blocks. The Company hopes that success
will encourage the progress of diplomatic efforts to settle the
long-standing territorial dispute which has hampered exploration
progress in the past. We continue to believe holding these blocks
offers excellent prospectivity for oil and gas at minimal cost.
Philippines
INTEREST HOLDING
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