TIDMECO
RNS Number : 2228M
Eco (Atlantic) Oil and Gas Ltd.
27 July 2017
27 July 2017
ECO (ATLANTIC) OIL & GAS LTD.
("Eco Atlantic", the "Company" or, together with its
subsidiaries, the "Group")
Final Results for the year ended 31 March 2017
Eco (Atlantic) Oil & Gas Ltd. (AIM: ECO, TSX-V:EOG), the oil
and gas exploration company with licences in highly prospective
regions in South America and Africa, is pleased to announce its
preliminary results for the year ended 31 March 2017.
Operational Highlights:
-- Together with its Operating Partner, Tullow Oil plc
("Tullow"), the Company is commencing a circa 2,550 km(2) 3D
seismic survey on the 1,800 km(2) Orinduik Block, offshore Guyana,
almost two years ahead of schedule, thereby seeking to de-risk the
existing defined targets located up dip and in close proximity to
Exxon Mobil Corporation's ("Exxon") recent Liza, Snoek, and Payara
discoveries on the Stabroek block estimated to contain oil
recoverable resources of between 2.25 and 2.75 billion
oil-equivalent barrels
-- Extension of the Cooper, Sharon and Guy Licenses into the
first renewal period, until March 2018 - the second renewal phase
under the petroleum agreement for each license is until March
2020
-- Advancement of the 3D interpretation on Cooper and Guy blocks
offshore Namibia and application for drilling permits and pre and
post drilling EIA surveys underway
-- Sale of the Company's Ghana subsidiary in order to
significantly reduce potential financial liabilities
-- Strengthened the Board following the appointment of Mr. Derek
Linfield as Non-Executive Director and Mr. Gadi Levin as Chief
Financial Officer
Financial Highlights:
-- Successful admission to AIM in February 2017, following an
oversubscribed placing and financing of GBP5.09 million
(c.C$8.4m)
-- Healthy balance sheet end of the period with over C$6m in cash
-- Continued reduction in general and administration costs,
compensation costs, and professional fees
o General and administrative expenses down 22% to C$385,568
(2016: C$497,009)
o Compensation down 25% to C$483,458 (2016: C$642,035)
o Professional fees down 12% to C$286,717 (2016: C$325,338)
o Travel expenses down 26% to C$132,348 (2016: 178,802)
o Occupancy and office expenses down 72% to C$82,332 (2016:
295,438)
o Operating costs up 5% to C$2,169,940 (2016: C$2,508,497)
Gil Holzman, President and Chief Executive Officer of Eco
Atlantic, commented:
"We are pleased to present yet another successful and extremely
busy financial year-end report. The highlights speak for
themselves, where on one hand we made progress on all of our
licenses, and on the other managed to significantly reduce
non-operational expenses. The concurrent AIM listing and financing
coupled with the significant developments on our core assets in
Guyana and Namibia are compelling. Our strong balance sheet now
enables us to execute on our critical short-term milestones, which
we believe we will be able to achieve in the coming year, in
preparation for hopefully high impact drilling campaigns in both
Namibia and Guyana towards the fiscal year 2018."
The Company's financial results for the year ended 31 March
2017, together with Management's Discussion and Analysis [and
Annual Information Form?] as at 31 March 2017, are available to
download on the Company's website at www.ecooilandgas.com and on
Sedar at www.sedar.com.
CEO's Statement
2017 was a transformational year for Eco Atlantic, which saw the
business successfully list on AIM in February having raised GBP5.09
million (C$8.4 million) in an oversubscribed placing. Our dual
TSX-V and AIM listing means that we now have access to two key
capital markets, providing wider access to capital to accelerate
work programmes on our licence blocks located offshore Guyana and
Namibia, both of which are prospective regions where significant
oil discoveries have been made.
In Guyana, we note with interest the continuous flow of
discoveries in the Guyana-Suriname basin that have been announced
over the last few months by oil and gas majors in the region.
Following the world-class Liza oil discovery in 2015, where Exxon
reported that recoverable resources could hold as much as 1.4
Billion barrels; a second significant discovery was made in January
2017. Exxon reported this second oil discovery, from the Payara-1
well, indicated 95 feet of high quality oil bearing sandstone
reservoirs. Later on, in March 2017, ExxonMobil announced a further
new oil discovery on its Snoek Oil Prospect, which consists of 82
feet of high quality oil-bearing sandstone reservoir on the
Stabroek Block, just five miles southeast of the Liza 1 discovery
and in very close proximity to our 1,800 km(2) Orinduik Block.
Exxon and its partners recently reported over 2.5 billion barrels
of recoverable oil on the Stabroek Block and announced that first
production is expected at the beginning of 2020, at a rate of
100,000 BOD.
On the heels of these close-proximity discoveries, we, together
with the operating partner, Tullow, completed the first phase of
exploration on our Orinduik Block, which included evaluating all
existing and regional 2D data. Following the results of this study
and the ongoing regional success, we agreed to accelerate and
significantly increase the originally proposed 1,000km(2) 3D survey
commitment on the block to circa 2,550km(2) , thus covering the
entire block area, fully overlapping current prospective 2D leads
and downdip trends. As part of our agreement with Tullow, Tullow
will carry our share of the originally proposed 1,000 km(2) of the
survey, at a cap of US$1.25mm, with the balance of the programme
being funded by both parties on a pro-rata basis for which the
Group is already funded from its existing cash reserves.
In Namibia, we have secured the required extensions on our three
licenses, Guy, Cooper and Sharon, and we are encouraged by the
recent news that Tullow, our partner on our Cooper license, has
farmed down a 30% Working Interest of PEL 037 to Oil and Natural
Gas Corporation Limited ("ONGC") of India. It is highly probable
that an exploration well will be drilled at PEL 037 in first
quarter of 2018, which is located immediately south of the Cooper
license (in which we currently own a 32.5% interest). This news
supports our long-time belief of the oil potential in the Walvis
Basin, Namibia.
We have completed the 3D seismic surveys on our Cooper and Guy
license interests in Namibia. On Cooper, the interpretation will
remain underway until we and the Block partners will decide on our
first exploration well in the first half of 2018. We are currently
in the process of filing drilling permits and conducting pre and
post drilling EIA surveys. On the Guy licence, processing and
interpretation is underway and is likely to be completed the end of
the calendar year 2018.
Conclusion
I would like to thank our Chairman, our fellow members of the
board of directors, the executive management team and the partners
on our licenses for the continued hard work and support, which has
contributed to the success of the Company. I look forward to
reporting on the developments and progress we make in Guyana and
Namibia in due course.
Gil Holzman,
Chief Executive Office
27 July 2017
Independent Auditors' Report
To the Shareholders of Eco (Atlantic) Oil & Gas Ltd.:
Report on the Consolidated Financial Statements
We have audited the accompanying consolidated financial
statements of Eco (Atlantic) Oil & Gas Ltd., which comprise the
consolidated statements of financial position as at March 31, 2017
and 2016, and the consolidated statements of operations and
comprehensive loss, equity, and cash flows for the years then
ended, and a summary of significant accounting policies and other
explanatory information.
Management's Responsibility for the Consolidated Financial
Statements
Management is responsible for the preparation and fair
presentation of these consolidated financial statements in
accordance with International Financial Reporting Standards
("IFRS"), and for such internal control as management determines is
necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or
error.
Auditors' Responsibility
Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. We conducted
our audits in accordance with Canadian generally accepted auditing
standards. Those standards require that we comply with ethical
requirements and plan and perform the audits to obtain reasonable
assurance about whether the consolidated financial statements are
free from material misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on the auditor's
judgment, including the assessment of the risks of material
misstatement of the consolidated financial statements, whether due
to fraud or error. In making those risk assessments, the auditor
considers internal controls relevant to the entity's preparation
and fair presentation of the consolidated financial statements in
order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity's internal control. An audit also
includes evaluating the appropriateness of accounting policies used
and the reasonableness of accounting estimates made by management,
as well as evaluating the overall presentation of the consolidated
financial statements.
We believe that the audit evidence we have obtained in our
audits is sufficient and appropriate to provide a basis for our
audit opinion on the consolidated financial statements.
Opinion
In our opinion, the consolidated financial statements present
fairly, in all material respects, the financial position of Eco
(Atlantic) Oil & Gas Ltd. as at March 31, 2017 and 2016, and
its financial performance and its cash flows for the years then
ended in accordance with International Financial Reporting
Standards.
Emphasis of Matter
Without modifying our opinion, we draw attention to Note 2 to
the consolidated financial statements which describes a material
uncertainty that raises significant doubt about the Company's
ability to continue as a going concern.
Consolidated Statements of Financial Position
March 31, March 31,
------------------------------------------------------------------------
2017 2016
------------------------------------------------------------------------ ------------- -------------
Assets
Current assets
Cash and cash equivalents $6,088,567 $3,463,178
Short-term investments (Note 5) 49,818 100,000
Government receivable 26,609 23,284
Accounts receivable and prepaid expenses (Note 19) 1,100,491 622,858
------------------------------------------------------------------------ ------------- -------------
7,265,485 4,209,320
Petroleum and natural gas licenses (Note 6) 1,489,971 3,102,353
Equipment (Note 7) - 1,101
------------------------------------------------------------------------ ------------- -------------
Total Assets $8,755,456 $7,312,774
------------------------------------------------------------------------ ------------- -------------
Liabilities
Current liabilities
Accounts payable and accrued liabilities (Note 8) $630,761 $2,027,876
Advances from and amounts owing to license partners (Note 6) 169,868 510,703
800,629 2,538,579
Equity
Share capital (Note 9) 26,961,675 20,838,056
Shares to be issued (Note 9) 184,029 392,694
Warrants (Note 10) 237,267 -
Stock options (Note 11) 2,985,732 2,400,735
Non-controlling interest (76,288) (68,323)
Accumulated deficit (22,337,588) (18,788,967)
------------------------------------------------------------------------ ------------- -------------
Total Equity 7,954,827 4,774,195
------------------------------------------------------------------------ ------------- -------------
Total Liabilities and Equity $8,755,456 $7,312,774
------------------------------------------------------------------------ ------------- -------------
Consolidated Statements of Operations and Comprehensive Loss
Year Ended
March 31,
------------------------------
2017 2016
-------------- --------------
Revenue
Income from farm-out agreements $- $554,400
Interest income 15,820 11,801
-------------- --------------
15,820 566,201
Operating expenses:
Compensation costs (Note 8) 483,458 642,035
Professional fees 286,717 325,338
Operating costs (Notes 8 and 17) 2,169,940 2,058,497
General and administrative costs (Note 18) 385,568 497,009
Share-based compensation (Notes 8, 9(iii) and 11) 730,171 251,475
Foreign exchange loss (gain) 5,025 (629,687)
Total expenses 4,060,879 3,144,667
-------------- --------------
Loss before loss on revaluation on warrant liability and write-down of license (4,045,059) (2,578,466)
Write-down of license (Note 6) - (1,195,684)
-------------- --------------
Net loss and comprehensive loss from continuing operations (4,045,059) (3,774,150)
Discontinued operations income (loss) (Note 19) 488,473 (1,333,346)
--------------
Net loss and comprehensive loss $(3,556,586) $(5,107,496)
============== ==============
Net comprehensive loss attributed to:
Equity holders of the parent $(3,548,621) $(5,105,810)
Non-controlling interests (7,965) (1,686)
-------------- --------------
$(3,556,586) $(5,107,496)
============== ==============
Basic and diluted net loss per share form continuing operations $(0.05) $(0.04)
============== ==============
Basic and diluted net profit (loss) per share from discontinuing operations $0.01 $(0.02)
============== ==============
Basic and diluted net loss per share attributable to equity holders of the parent $(0.04) $(0.06)
============== ==============
Weighted average number of ordinary shares used in computing basic and diluted
net loss per
share 87,906,110 88,601,681
============== ==============
Consolidated Statements of Equity
Number Capital Shares Warrants Stock Deficit Non-controlling Equity
$ $ to be $ Options $ Interest $
issued $ $
$
Balance, March
31, 2015 91,162,025 20,636,597 200,183 965,000 2,343,619 (13,683,157) (66,637) 10,395,605
Shares issued
on vesting of
Restricted Share
Units (Note
9(i)) 250,000 23,602 192,511 - - - 216,113
Stock options
expensed - - - - 57,116 - - 57,116
Share repurchase - (787,143) - - - - - (787,143)
Expiry of options - 965,000 - (965,000) - - - -
Cancellation (6,368,000) - - - - - - -
of shares
Net loss for
the year - - - - - (5,105,810) (1,686) (5,107,496)
Balance, March
31, 2016 85,044,025 20,838,056 392,694 - 2,400,735 (18,788,967) (68,323) 4,774,195
Cancellation (1,823,500) - - - - - - -
of shares (Note
9(ii))
Shares repurchase
(Note 9(ii)) - (338,257) - - - - - (338,257)
Shares issued
on vesting of
Restricted Share
Units (Note
9(iii)(a)) 708,700 136,079 (136,079) - - - - -
Shares issued
on vesting of
Restricted Share
Units (Note
9(iii)(b)) 216,736 41,180 3,420 - - - - 44,600
Non-vested
Restricted
Share Units
(Note 9(iii)(c)) - - 100,574 - - - - 100,574
Proceeds from
shares issued
on listing on
AIM, net (Note
9(iv))(*) 32,900,498 6,108,037 - 237,267 - - - 6,345,304
Extension of
Stock options
(Note 11(i)) - - - - 416,324 - - 416,324
Stock options
expensed (Note
11(ii)) - - - - 168,673 - - 168,673
Shares issued
from Pan African
Oil Amalgamation
(Note 9) 1,203,374 176,580 (176,580) - - - - -
Net loss for
the year - - - - - (3,548,621) (7,965) (3,556,586)
Balance, March
31, 2017 118,249,833 26,961,675 184,029 237,267 2,985,732 (22,337,588) (76,288) 7,954,827
Consolidated Statements of Cash Flows
Year Ended
March 31,
------------------------------
2017 2016
-------------- --------------
Cash flow from operating activities
Net loss from continued operations $(4,045,059) $(3,774,150)
Net loss from discontinued operations 488,473 (1,333,346)
Items not affecting cash:
Write-down of license - 1,195,684
Share-based compensation 730,171 247,939
Depreciation 1,101 6,471
Changes in non--cash working capital:
Government receivable (3,325) 1,168,560
Accounts payable and accrued liabilities (2,730,542) (1,526,148)
Accounts receivable and prepaid expenses (477,633) (509,854)
Advance from and amounts owing to license
partners (340,835) (1,444,168)
---------------------------------------------- -------------- --------------
(6,377,649) (5,969,012)
---------------------------------------------- -------------- --------------
Net change in non-cash working capital
items relating to discontinued operations 1,333,427 1,340,897
Cash flow from investing activities
Short-term investments 50,182 -
---------------------------------------------- -------------- --------------
50,182 -
---------------------------------------------- -------------- --------------
Net change in investment activities
relating to discontinued operations 1,612,382 (1,612,382)
Cash flow from financing activities
Proceeds from AIM Listing 8,390,250 -
Costs incurred on AIM Listing (2,044,946) -
Share repurchases (338,257) (787,143)
---------------------------------------------- -------------- --------------
6,007,047 (787,143)
---------------------------------------------- -------------- --------------
Increase (decrease) in cash and cash
equivalents 2,625,389 (7,027,640)
Cash and cash equivalents, beginning
of year 3,463,178 10,490,818
---------------------------------------------- -------------- --------------
Cash and cash equivalents, end of year $6,088,567 $3,463,178
---------------------------------------------- -------------- --------------
1. Nature of Operations
The Company's business is to identify, acquire, explore and
develop petroleum, natural gas, and shale gas properties. The
Company primarily operates in the Co-Operative Republic of Guyana
("Guyana") and the Republic of Namibia ("Namibia"). The head office
of the Company is located at 181 Bay Street, Suite 320, Toronto,
ON, Canada, M5J 2T3.
As used herein, the term "Company" means individually and
collectively, as the context may require, Eco (Atlantic) Oil and
Gas Ltd. and its subsidiaries.
These consolidated financial statements were approved by the
Board of Directors of the Company on July 26, 2017.
2. Basis of Preparation and Going Concern
These consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards
("IFRS") on a going concern basis, which assumes the realization of
assets and liquidation of liabilities in the normal course of
business. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair
statement of results in accordance with IFRS have been
included.
The ability of the Company to continue as a going concern
depends upon the discovery of economically recoverable petroleum
and natural gas licenses, the ability of the Company to obtain
financing to complete development, and upon future profitable
operations from the licenses or profitable proceeds from their
disposition. These consolidated financial statements do not reflect
any adjustments to the carrying value of assets and liabilities
that would be necessary if the Company were unable to achieve
profitable operations or obtain adequate financing.
There can be no assurance that the Company will be able to raise
funds in the future, in which case the Company may be unable to
meet its future obligations. These matters raise significant doubt
about the Company's ability to continue as a going concern. In the
event the Company is unable to continue as a going concern, the net
realizable value of its assets may be materially less than the
amounts recorded on its consolidated statements of financial
position.
The Company has accumulated a deficit of $22,337,588 since its
inception and expects to incur further losses in the development of
its business.
3. Summary of Significant Accounting Policies
Statement of compliance
The Company applies International Financial Reporting Standards
as issued by the International Accounting Standards Board ("IASB")
and interpretations issued by the IFRS Interpretations Committee
("IFRIC").
The policies applied in these consolidated financial statements
are based on IFRS issued and outstanding as of March 31, 2017.
The significant accounting policies followed by the Company are
summarized as follows:
Basis of consolidation
These consolidated financial statements include the accounts of
the Company and its directly and indirectly owned subsidiaries, as
follows:
Subsidiary Ownership
---------------------------------------------- ---------
Eco (BVI) Oil & Gas Ltd. ("EBVI") 100%
Eco (Barbados) Oil & Gas Holdings Ltd.
("EBARB") 100%
Eco Namibia Oil & Gas (Barbados) Ltd.
("ENBARB") 100%
Eco Oil and Gas (Namibia) (Pty) Ltd. ("EOGN") 100%
Eco Oil and Gas Services (Pty) Ltd. ("EOGS") 100%
Eco Atlantic Holdings Ltd. 100%
Pan African Oil Namibia Holdings (Pty)
Ltd. ("PAO Holdings") 100%
Pan African Oil Namibia (Pty) Ltd. ("PAO
Namibia") 90%
Eco Atlantic Guyana Offshore Inc. 100%
Eco (Atlantic) Guyana Inc. 94%
On October 21, 2016, the Company sold its wholly owned
subsidiary, Eco Atlantic (Ghana) Ltd. (Note 19).
Foreign currencies
The functional and presentation currency of the Company and its
subsidiaries is the Canadian dollar.
Transactions in currencies other than the functional currency
are recorded at the rates of exchange prevailing at the dates of
transactions. At the end of each reporting period, monetary assets
and liabilities that are denominated in foreign currencies are
translated at the rates prevailing at that time. Non--monetary
items that are measured in terms of historical cost in a foreign
currency are not retranslated. Exchange gains and losses are
recognized in profit or loss.
Financial instruments
Financial instruments are required to be classified as one of
the following: held-to-maturity; loans and receivables; fair value
through profit or loss; available-for-sale or other financial
liabilities.
The Company's financial instruments include cash and cash
equivalents, short-term investments, accounts receivable, accounts
payable and accrued liabilities and advances from and amounts owing
to license partners. The Company designated its cash and cash
equivalents and short-term investments as fair value through profit
or loss. The Company designated its accounts receivable as loans
and receivables, accounts payable and accrued liabilities and
advances from and amounts owing to license partners as other
financial liabilities, all of which are measured at amortized
cost.
Fair value through profit or loss financial assets are measured
at fair value, with gains and losses recognized in operations.
Financial assets held-to-maturity, loans and receivables and other
financial liabilities are measured at amortized cost.
Available-for-sale financial assets are measured at fair value with
unrealized gains and losses recognized in other comprehensive
loss.
The fair value of a financial instrument is the amount of
consideration that would be agreed upon in an arm's length
transaction between knowledgeable, willing parties who are under no
compulsion to act. The fair value of a financial instrument on
initial recognition is the transaction price, which is the fair
value of the consideration given or received. Subsequent to initial
recognition, the fair value of a financial instrument that is
quoted in active markets is based on the bid price for a financial
asset held and the offer price for a financial liability. When an
independent price is not available, fair value is determined by
using a valuation which refers to observable market data. Such a
valuation technique includes comparisons with a similar financial
instrument where an observable market price, discounted cash flow
analysis, option pricing models and other valuation techniques
commonly used by market participants exist.
Exploration and evaluation assets and expenditures
i) Expenditures
For oil and gas prospects not commercially viable and
financially feasible, the Company expenses exploration and
evaluation expenditures as incurred. Exploration and evaluation
expenditures include acquisition costs of oil and gas prospects,
property option payments and evaluation activities. Exploration and
evaluation expenditures are capitalized only when associated with a
business combination or asset acquisition or the Company can
demonstrate that these expenditures meet the criteria of an
identifiable intangible asset.
Once a project has been established as commercially viable and
technically feasible, related development expenditures are
capitalized. This includes costs incurred in preparing the site for
production operations. Capitalization ceases when the oil and
natural gas reserves are capable of commercial production, with the
exception of development costs that give rise to a future
benefit.
ii) Depletion and depreciation
Capitalized costs related to each cost center from which there
is production will be depleted using the unit--of--production
method based on proven petroleum and natural gas reserves, as
determined by independent consulting engineers.
iii) Farm-out arrangements
The Company, as farmor, accounts for the farm-out arrangements
as follows; the farmor does not record any expenditure made by the
farmee on its behalf, and recognizes its expenditures under
farm-out arrangements in respect of its own interest when the costs
are incurred. Any cash consideration received as reimbursements of
expenditures incurred in prior years and is recorded as income from
farm-out agreements in profit or loss. Any cash consideration
received as reimbursements of expenditures incurred in the current
year is offset against related expenditures in operating costs and
general and administrative costs in profit or loss. Any cash
consideration received in advance of underlying expenditures is
capitalized to advance from license partners until the applicable
expenditures have been incurred, at which point the recovery is
transferred to income from farm-out agreements in profit or loss.
Any cash received without an underlying commitment to incur
expenditures is recorded as income from farm-out agreements in
profit or loss.
(iv) Impairment
At the end of each reporting period, the Company reviews the
carrying amounts of its non--financial assets with finite lives, to
determine whether there are facts and circumstances suggest that
the carrying amount exceeds the recoverable amount. Where such an
indication exists, the recoverable amount of the asset is estimated
in order to determine the extent of the impairment loss. The
recoverable amount is the higher of an asset's fair value, less
cost to sell or its value in use. In addition, long--lived assets
that are not amortized are subject to an annual impairment
assessment.
(v) Asset retirement obligations
Asset retirement obligations are measured at the present value
of the expenditure expected to be incurred using a risk--free
discount rate. The associated asset retirement cost is capitalized
as part of the cost of the related long--lived asset. Changes in
the estimated obligation resulting from revisions to estimated
timing, amount of cash flows, or changes in the discount rate are
recognized as a change in the asset retirement obligation and the
related asset retirement cost. Increases in asset retirement
obligations resulting from the passage of time are recorded as
accretion of asset retirement obligation in the consolidated
statement of operations as a financial cost. Actual expenditures
incurred are charged against the accumulated asset retirement
obligation as incurred.
The Company currently does not have any asset retirement
obligations.
Income taxes
Income tax expense consists of current and deferred tax expense.
Current and deferred tax are recognized in profit or loss except to
the extent that they related to items recognized in equity or other
comprehensive income.
Current tax is recognized and measured at the amount expected to
be recovered from or payable to the taxation authorities based on
the income tax rates enacted or substantively enacted at the end of
the reporting period and includes any adjustment to taxes payable
in respect of previous years.
Deferred tax is recognized on any temporary differences between
the carrying amounts of assets and liabilities in the consolidated
financial statements and the corresponding tax bases used in the
computation of taxable earnings. Deferred tax assets and
liabilities are measured at the tax rates that are expected to
apply in the period when the asset is realized and liability is
settled. The effect of a change in the enacted or substantively
enacted tax rates is recognized in net earnings and comprehensive
income or in equity depending on the item to which the adjustment
relates.
Deferred tax assets are recognized to the extent future recovery
is probable. At each reporting period end, deferred tax assets are
reduced to the extent that it is no longer probable that sufficient
taxable earnings will be available to allow all or part of the
asset to be recovered.
Revenue recognition
Revenue from the sale of petroleum and natural gas is recognized
when the risks and rewards of ownership pass to the purchaser,
including delivery of the product, the selling price is fixed or
determinable and collection is reasonably assured. Oil and natural
gas royalty revenue is recognized when received.
Loss per share
Basic loss per share is computed based on the weighted average
number of common shares outstanding during the year. In calculating
the diluted loss per share, the weighted average number of common
shares outstanding assumes that the proceeds to be received on the
exercise of dilutive share options and warrants are used to
repurchase common shares at the average market price during the
year.
Segment reporting
The Company operates in one segment, the oil and gas business
and conducts its operations in Namibia and Guyana with its head
office in Canada. Substantially all the Company's oil and gas
assets are located in Namibia and Guyana.
Significant accounting judgments and estimates
The preparation of the consolidated financial statements using
accounting policies consistent with IFRS requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and
liabilities, the reported amounts of revenues and expenses and to
exercise judgment in the process of applying the accounting
policies.
Critical accounting estimates
Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognized
prospectively from the period in which the estimates are revised.
The following are the key estimate and assumption uncertainties,
considered by management.
i) Impairment of assets
When there are indications that an asset may be impaired, the
Company is required to estimate the asset's recoverable amount. The
recoverable amount is the greater of value in use and fair value
less costs to sell. Determining the value in use requires the
Company to estimate expected future cash flows associated with the
assets and a suitable discount rate in order to calculate present
value. During the year ended March 31, 2017, an impairment
write-down of a petroleum and natural gas license in the amount of
$Nil (March 31, 2016 - $1,195,684) was reflected in the
consolidated statements of operations and comprehensive loss (Note
6).
4. Future Accounting and Reporting Changes
The IASB issued new standards and amendments not yet
effective.
IFRS 9, Financial Instruments ("IFRS 9") was initially issued by
the IASB on November 12, 2009 and issued in its completed version
in July 2014, and will replace IAS 39, "Financial Instruments:
Recognition and Measurement" ("IAS 39"). IFRS 9 replaces the
multiple rules in IAS 39 with a single approach to determine
whether a financial asset is measured at amortized cost or fair
value and a new mixed measurement model for debt instruments having
only two categories: amortized cost and fair value. The approach in
IFRS 9 is based on how an entity manages its financial instruments
in the context of its business model and the contractual cash flow
characteristics of the financial assets. The new standard also
requires a single impairment method to be used, replacing the
multiple impairment methods in IAS 39. IFRS 9 is effective for
financial years beginning on or after January 1, 2018. The Company
is currently assessing the effects of IFRS 9 and intends to adopt
on its effective date.
IFRS 15, Revenue from Contracts with Customers ("IFRS 15") was
issued by the IASB in May 2014 and clarifies the principles for
recognizing revenue from contracts with customers. IFRS 15 will
result in enhanced disclosures about revenue, provide guidance for
transactions that were not previously addressed comprehensively
(i.e. service revenue and contract modifications) and improve
guidance for multiple-element arrangements. IFRS 15 is effective
for periods beginning on or after January 1, 2018 and is to be
applied retrospectively. The Company's preliminary assessment of
IFRS 15 has determined there will not be a significant impact to
the consolidated financial statements as a result of the adoption
of this standard.
IFRS 16, Leases ("IFRS 16") was issued by the IASB in January
2016 and specifies how an IFRS reporter will recognize, measure,
present and disclose leases. The standard provides a single lessee
accounting model, requiring lessees to recognize assets and
liabilities for all leases unless the lease term is 12 months or
less or the underlying asset has a low value. Lessors continue to
classify leases as operating or finance, with IFRS 16's approach to
lessor accounting substantially unchanged from its predecessor, IAS
17. An entity applies IFRS 16 for annual periods beginning on or
after January 1, 2019. Earlier application is permitted if IFRS 15
Revenue from Contracts with Customers has also been applied. A
lessee shall either apply IFRS 16 with full retrospective effect or
alternatively not restate comparative information but recognize the
cumulative effect of initially applying IFRS 16 as an adjustment to
opening equity at the date of initial application. The Company is
currently assessing the effects of IFRS 16 and intends to adopt on
its effective date.
5. Short-term Investments
The Company's short-term investments comprise interest bearing
deposits with its primary bank of $49,818 (March 31, 2016 -
$100,000), which are held as collateral for credit-card lines of
credit.
6. Petroleum and Natural Gas Licenses
Balance Impairment, Sale Balance
April 1, and March 31,
2016 Additions Abandonment 2017
Licenses $ 3,102,353 $ (-) $ (*) (1,612,382) $ 1,489,971
Balance Impairment, Sale Balance
April 1, and March 31,
2015 Additions Abandonment 2016
Licenses $ 2,685,655 $ 1,612,382 $ (1,195,684) $ 3,102,353
(*) see Note 19
The oil and gas interests of the Company are located both
offshore in Guyana and offshore in Namibia.
(ii) Guyana
i. The Guyana License is located in the Orinduik block, offshore
Guyana. The Orinduik block is situated in shallow water, 175
kilometers offshore Guyana in the Suriname Guyana basin.
ii. In January 2016, the Company and Tullow Oil plc ("Tullow")
signed a Petroleum Agreement ("Guyana Petroleum Agreement") and
became party to an Offshore Petroleum License with the Government
of Guyana, Tullow Oil plc. and for the Orinduik Block offshore
Guyana. Orinduik, is situated in shallow water, 170 kilometers
offshore Guyana in the Suriname Guyana basin, and is located very
close up to the recent Exxon Lisa and Payara discoveries.
iii. In accordance with the Guyana Petroleum Agreement, the
Company holds a 40% working interest in the Guyana Licenses and
Tullow holds the balance 60% interest. Under the Guyana Petroleum
Agreement, Tullow will act as operator. Tullow will also carry the
Company's share of costs of 1,000 square kilometers 3D survey as
required under the work program for the Guyana License (and up to
US$1,250,000). Subsequent to the year end, on June 8, 2017, the
Company and Tullow approved 2,550 square kilometers 3D survey.
As at March 31, 2017, the outstanding Exploration Activities and
the aggregate expenditure as estimated by management based on
current costs for the Guyana License for is as follows:
Exploration Activities(1) Expenditure Company's
share of
(US$) Expenditure
(US$)
---------------------------------------------------------- ------------ -------------
By January 2020 3,000,000 -
* Review existing regional 2D data - completed
* Complete 3D survey and interpret 1,000 square
kilometer 3D seismic survey(2)
---------------------------------------------------------- ------------ -------------
By January 2023
* 1(st) renewal period - Drill one exploration well
(contingent) 35,000,000 14,000,000
---------------------------------------------------------- ------------ -------------
By January 2026 - -
* 2(nd) renewal period - Drill one exploration well
(contingent)
---------------------------------------------------------- ------------ -------------
Total 38,000,000 14,000,000
---------------------------------------------------------- ------------ -------------
(1) Exploration Activities are not currently committed and cost
estimates are based on management estimates for the costs if the
relevant Exploration Activity was to be undertaken as at the date
of this document.
(2) Subsequent to the year end, on June 8, 2017 the Company and
Tullow approved a 2,550 square kilometers 3D survey and therefore,
the Company's expected shares of the 3D Seismic program is expected
to be $2,000,000.
(iii) Namibia
i. The Company holds four offshore petroleum licenses in the
Republic of Namibia being petroleum exploration license number 0030
(the "Cooper License"), petroleum exploration license number 0033
(the "Sharon License"), petroleum exploration license number 0034
(the "Guy License", together with the Sharon License and the Cooper
License, the "ECO Offshore Licenses"), and petroleum exploration
license number 0050 (the "Tamar License").
ii. The terms of the Eco Offshore Licenses are governed by a
petroleum agreement for each of those licenses (each, an "Eco
Petroleum Agreement"), dated March 7, 2011, as amended from time to
time, between the Company and the Namibian Ministry of Mines and
Energy (the "Ministry"). The terms of the Tamar License are
governed by the Tamar Petroleum Agreement ("Tamar Petroleum
Agreement"), dated October 28, 2011, between the Company and the
Ministry. Pursuant to the Eco Petroleum Agreement and the Tamar
Petroleum Agreement, the Company is required to undertake specific
exploration activities on each of the Licenses during each phase of
development (each, an "Exploration Activity").
iii. In the Eco Petroleum Agreements and the Tamar Petroleum
Agreement, monetary values have been allocated to each Exploration
Activity based on information available at the time of their
execution. In the Eco Petroleum Agreements, the Company will be
relieved of quoted expenditures for a given Exploration Activity if
the Company completes the Exploration Activity at a lower cost.
Based on recent exploration activity in Namibia and the current oil
services market, management expects the actual expenditures on the
Exploration Activities to be less than that provided in the Eco
Petroleum Agreements.
All Licenses are initially issued for four years with two
renewal options of two years each, after which time the licenses
revert back to the government, unless a production license is
granted at any time within the eight year period. Production
licenses are generally granted for a 25-year term. The Licenses are
subject to license agreements entered between the Company and the
Ministry.
iv. The exploration activity on the ECO Offshore Licenses is
performed in the framework of joint operating agreements ("JOAs"),
pursuant to which the Company is designated the operator. Under the
JOAs covering the Guy License and the Sharon License (the "Guy and
Sharon JOAs") entered into between Azimuth, the National Petroleum
Corporation of Namibia ("NAMCOR") and the Company effective January
28, 2013 and the amended and restated joint operating agreement
covering the Cooper License, (the "Cooper JOA") entered into
between Tullow, Azimuth, NAMCOR and the Company effective September
24, 2014, certain operating, general and administrative expenses
and compensation and professional fees incurred by the Company are
recoverable from Tullow and Azimuth.
(iv) The Cooper License
i. The Cooper License covers approximately 5,000 square
kilometers (March 31, 2016 - 5,800 square kilometers) (gross area =
1,433,000 acres; net area = 1,003,100 acres) and is located in
license area 2012A offshore in the economical waters of Namibia
(the "Cooper Block"). The Company holds a 32.5% working interest in
the Cooper License, NAMCOR holds a 10% working interest (carried by
the Company and Tullow collectively), AziNam Ltd. ("AziNam"), holds
a 32.5% working interest, and Tullow Namibia Limited, a wholly
owned subsidiary of Tullow Oil plc ("Tullow"), holds a 25% working
interest.
ii. Pursuant to the AziNam Farm-out Agreement, AziNam funded 40%
of the Company's share cost for the first 500 square kilometer of a
1,000 square kilometer 3D seismic survey on the Cooper Block
(capped at US$2,080,000).
iii. On July 17, 2014, the Company entered into a farm-out
agreement with a wholly owned subsidiary of Tullow, pursuant to
which Tullow acquired a 25% working interest in the Cooper License
in return for a carry (capped at US$4,103,000), of the Company's
share of costs to execute and process a 1,097 square kilometers 3D
seismic survey and the reimbursement of 25% of the Company's past
costs to March 31, 2014 (the "First Tullow Transfer").
iv. Tullow has an option to acquire an additional 15% working
interest in the Cooper License in return for a carry of the
Company's share of costs to drill an exploration well on the Cooper
Block (capped at $18.17 million) and the reimbursement of 17.14% of
the Company's past costs (the "Tullow Option"). There is no
guarantee that Tullow will exercise the Tullow Option.
v. In connection with the completion of the First Tullow
Transfer, the Company's work commitments on the Cooper License were
further amended.
vi. Pursuant to the Company's farmout agreement with Tullow
Namibia Limited ("Tullow"), as amended on February 1, 2017 (the
"Tullow Amended Farmout Agreement"), if Tullow elects to proceed
into the second renewal exploration period or commits to drill an
exploration well on the Cooper License before such time, Tullow
will acquire from the Company an additional up to 15% working
interest in the Cooper License and become the Operator of the
Cooper License. In addition, subject to a minimum contribution of
US $2.25 million by the Company, Tullow will carry the Company in
respect of the Company's share of any drilling costs in relation to
the first exploration well (if proposed and drilled by Tullow) up
to a total well cost of US $35 million.
vii. In addition, Tullow will reimburse the Company for 17.14%
of all past costs incurred and paid for by the Company in respect
of the Cooper License. If Tullow elects not to proceed into the
second renewal exploration period, then it will be deemed to have
transferred back to the Company its entire 25% working interest and
will remain obliged to carry the Company in respect of: (i) the
Company's working interest share of the costs, which the Company
has agreed to participate in and which were approved by the
operating committee and the parties to the Cooper JOA (as
hereinafter defined); and (ii) the seismic carry (to the same
extent Tullow would have been liable for had it not elected to
transfer its working interest).
viii. On April 15, 2016, the Ministry approved the entering the
next phase of the Cooper License which has been extended into the
first Renewal Phase until March 14, 2018. The Second Renewal phase
is until March 2020. The Ministry also waived the relinquishment
requirement (as stipulated in the Petroleum Agreement), and the
partners will continue the exploration work on the entire block
area.
ix. As of March 31, 2017, the outstanding Exploration Activities
and the aggregate expenditure as estimated by management based on
current costs for the Cooper License is as follows:
Exploration Activities(1) Expenditure Company's
share of
(US$) Expenditure
(US$)(2)
------------------------------------------------------------- ------------ ----------------
By March 31, 2018 - -
* Resource assessment and production assessment -
completed
------------------------------------------------------------- ------------ ----------------
By March 31, 2020
* After interpretation of 3D survey, drill exploratory 35,000,000 2,250,000
well 500,000 125,000
* Offtake/production engineering
------------------------------------------------------------- ------------ ----------------
By March 31, 2021
* Complete and interpret a 500 square kilometers 3D
seismic survey 1,400,000 350,000
------------------------------------------------------------- ------------ ----------------
Total 35,750,000 2,725,000
------------------------------------------------------------- ------------ ----------------
Notes:
(1) Exploration Activities are not currently committed
and cost estimates are based on management estimates for
the costs if the relevant Exploration Activity was to be
undertaken as at the date of this document.
(2) These numbers assume that the Second Transfer will
be completed and the Company's working interest will be
25%. There is no guarantee that the Second Transfer will
be completed. If the Second Transfer is not completed,
the Company's share of the Expenditure will be 63.9%.
(v) The Sharon License
i. The Sharon License covers 5,000 square kilometers and is
located in license area 2213A and 2213B offshore in the economical
waters of Namibia (the "Sharon Blocks"). The Company holds a 60%
working interest in the Sharon License, NAMCOR holds a 10% carried
interest (by the Company), and AziNam holds a 30% interest.
ii. On April 15, 2016, the Ministry approved the entering the
next phase of the Sharon License, which has been extended into the
first Renewal Phase until March 14, 2018. The Second Renewal phase
is until March 2020. The Ministry further approved the Company's
request to terminate 50% of its licensing obligation corresponding
with the relinquishment of 50% of the acreage in the license which
was a requirement of the Petroleum Agreement. This relinquishment
pertains to the eastern half of the Sharon Block. The Company
considers this shallow section non-prospective.
iii. Pursuant to the Azimuth Farm-out Agreement, Azimuth funded
100% of the 3,000 kilometer 2D seismic survey recently acquired for
the Sharon Block. Furthermore, Azimuth will fund 55% of a 1,000
kilometer square 3D seismic survey on the Sharon Block.
iv. As of of March 31, 2017, the outstanding Exploration
Activities and the aggregate expenditure as estimated by management
based on current costs for the Sharon License is as follows:
Exploration Activities(1) Expenditure Company's
share of
(US$) Expenditure
(US$)
------------------------------------------------------------ ------------- -------------
By March 31, 2018
* Complete and interpret a 500 square kilometers 3D
seismic survey
* Resource assessment and production assessment -
completed 3,500,000 1,575,000
------------------------------------------------------------ ------------- -------------
By March 31, 2019 and 2020
* Assuming a target has been defined after
interpretation of 3D survey, drill exploratory well
30,000,000 20,010,000
* Offtake/production engineering 500,000 333,500
------------------------------------------------------------ ------------- -------------
By March 31, 2021
* Complete and interpret a 500 square kilometers 3D
seismic survey 1,400,000 933,800
------------------------------------------------------------ ------------- -------------
Total 34,500,000 22,852,300
------------------------------------------------------------ ------------- -------------
(1) Exploration Activities are not currently committed and cost
estimates are based on management estimates for the costs if the
relevant Exploration Activity was to be undertaken as at the date
of this document.
(vi) The Guy License
i. The Guy License covers 5,000 square kilometers and is located
in license area 2111B and 2211A offshore in the economical waters
of Namibia (the "Guy Block"). The Company holds a 50% working
interest in the Guy License, NAMCOR holds a 10% carried interest
(by the Company) and AziNam holds a 40% interest. The Company and
AziNam proportionally carries NAMCOR's working interest during the
exploration period. As of July 1, 2015, AziNam assumed the role of
operator with respect to the Guy License.
ii. On May 12, 2016, the Ministry approved the entering the next
phase of the Guy License, which has been extended into the first
Renewal Phase until March 14, 2018. The Second Renewal phase is
until March 2020. The Ministry further approved the Company's
request to terminate 50% of its licensing obligation corresponding
with the relinquishment of 50% of the acreage in the license which
was a requirement of the Petroleum Act. This relinquishment
pertains to the western portion of the Guy block in the ultra-deep
section that the Company and its operating partner, AziNam,
consider non-prospective.
iii. Pursuant to the Azimuth Farm-out Agreement, Azimuth funded
100% of the cost for the shooting and processing of the completed
1,000 kilometer 2D seismic survey on the Guy Block. Additionally,
Azimuth funded 66.44% of the costs of an 8,700 square kilometer 3D
seismic survey on the Guy Block.
The execution of the 3D seismic survey is complete and
processing and interpretation of the Guy Survey is due to be
completed during the fourth calendar quarter of 2017.
iv. As of March 31, 2017, the outstanding Exploration Activities
and the aggregate expenditure as estimated by management based on
current costs for the Guy License is as follows:
Exploration Activities(1) Expenditure Company's
(US$) share of
Expenditure
(US$)
------------------------------------------------------------ ------------- -------------
By March 31, 2018
* Resource assessment and production assessment - - -
completed
------------------------------------------------------------ ------------- -------------
By March 31, 2019 and 2020
* Assuming a target has been defined after
interpretation of 3D survey, drill exploratory well
35,000,000 19,460,000
* Offtake/production engineering 500,000 278,000
------------------------------------------------------------ ------------- -------------
By March 31, 2021
* Complete and interpret a 500 square kilometers 3D
seismic survey 1,400,000 778,400
------------------------------------------------------------ ------------- -------------
Total 36,900,000 20,516,400
------------------------------------------------------------ ------------- -------------
(1) Exploration Activities are not currently committed and cost
estimates are based on management estimates for the costs if the
relevant Exploration Activity was to be undertaken as at the date
of this document.
(vii) The Tamar License
i. The Tamar License covers approximately 7,500 square
kilometres and is located in license areas 2211B and 2311A offshore
in the economical waters of the Republic of Namibia. PAO Namibia
holds an 80% working interest in the Tamar License (the Company's
net interest is 72% due to its 90% ownership of PAO Namibia),
Spectrum Geo Ltd. holds a 10% working interest, and NAMCOR holds a
10% working interest.
The first exploration period for the Tamar Licence expired in
March 2016 and has not yet been formally extended, however, the
Directors believe that the Group still retains the Tamar Licence
and it has received a letter from the Petroleum Commissioner of
Namibia confirming that all work required the first exploration
period on the Tamar Licence was completed.
ii. As of March 31, 2017, the outstanding Exploration Activities
and the aggregate expenditure as estimated by management based on
current costs for the Tamar License is as follows:
Exploration Activities(1) Expenditure Company's
(US$) share of
Expenditure
(US$)
------------------------------------------------------------ ------------ -------------
By March 31. 2018
* Complete and interpret 500 kilometers(2) 3D seismic
survey
* Evaluation of farm-out and relinquishment of part
(original 25%) or all of the Tamar Block 1,400,000 1,400,000
------------------------------------------------------------ ------------ -------------
By October 31, 2019
* Drill exploratory well (subject to the availability
of adequate drilling rigs) 35,000,000 35,000,000
------------------------------------------------------------ ------------ -------------
Total 36,400,000 36,400,000
------------------------------------------------------------ ------------ -------------
(1) Exploration Activities are not currently committed and cost
estimates are based on management estimates for the costs if the
relevant Exploration Activity was to be undertaken as at the date
of this document.
(viii) The PAO 51 License
i. The PAO 51 License covers approximately 4,867 square
kilometers and was located in license area 2612A offshore in the
economical water of the Republic of Namibia. PAO held a 90% working
interest in the PAO 51 License and NAMCOR held a 10% working
interest.
ii. On September 15, 2015, the Company advised the Ministry of
its intension to relinquish the PAO 51 Licenses and on March 1,
2016, the Company received approval for such relinquishment.
(ix) Daniel License
i. The Daniel License covers approximately 23,000 square
kilometers and was located in license area 2013B, 2014B and 2114 in
Namibia. The Company held a 90% working interest in the Daniel
License and NAMCOR held a 10% carried interest.
ii. On September 15, 2015, the Company advised the Ministry of
its intention to relinquish the Daniel License and on March 1,
2016, the Company received approval for such relinquishment. During
the year ended March 31, 2016, an impairment write-down of the
Daniel License in the amount of $1,195,684 was reflected in the
consolidated statements of operations and comprehensive loss.
(x) As of March 31, 2017, the Company has recorded $169,868
(March 31, 2016 - $510,703) as advance from license partners
related to funds received in advance of the Company incurring
applicable operating costs to which the advances can be
applied.
7. Equipment
Year Ended
March 31,
--------------------
2017 2016
--------- ---------
Cost $34,307 $34,307
Accumulated Depreciation $34,307 $33,206
Net Book Value - $1,101
========= =========
8. Related Party Transactions and Balances
The following are the expenses incurred with related parties for
the years ended March 31, 2017 and 2016 and the balances owing as
of March 31, 2017 and 2016:
Year Ended
March 31,
----------------------
2017 2016
---------- ----------
Salaries, operating and consulting fees and benefits 789,610 $668,811
Stock-based compensation 485,548 87,387
1,275,159 $756,198
========== ==========
Number of people 7 6
========== ==========
Remuneration of the Company's executive directors and its Chief
Executive Officer, Chief Financial Officer, Chief Operating Officer
and its Executive Vice President was as follows:
March 31,
----------------------
2017 2016
---------- ----------
Amount paid for exploration services to a company controlled by the COO of the Company $475,538 $700,489
Amount outstanding at the end of the year $32,000 $97,286
Fees for management services paid to a company controlled by the President and CEO of
the
Company $320,948 $352,606
Amount outstanding at the end of the year $24,840 $8,020
Fees paid to a company controlled by the CFO of the Company $18,000 $25,850
Amount outstanding at the end of the year $1,500 -
Fees for management services paid to a company controlled by the Executive Vice
President
of the Company $120,000 $120,000
Amount outstanding at the end of the year $10,000 $3,390
Fees paid to a company controlled by the Chairman of Company $90,664 $66,980
Amount outstanding at the end of the year $21,981 -
9. Share Capital
Authorized: Unlimited Common Shares
Shares to be
Common Shares Amount issued
Issued $ $
---------------------------------------------------- ----------- --------------- ----------- -----------------
Balance, April 1, 2015 91,162,025 20,636,597 200,183
----------------------------------------------------------------- --------------- ----------- -----------------
Shares issued on vesting of Restricted Share Units (i) 250,000 23,602 192,511
Expiry of Warrants Note 11 - 965,000 -
Repurchase and cancellation of shares (ii) (6,368,000) (787,143) -
---------------------------------------------------- ----------- --------------- ----------- -----------------
Balance, March 31, 2016 85,044,025 20,838,056 392,694
Repurchase and cancellation of Shares (ii) (1,823,500) (338,257) -
Shares issued on vesting of Restricted Share Units
From March 23, 2016 (iii)(a) 708,700 136,079 (136,079)
From August 5, 2016 (iii)(b) 216,736 41,180 3,420
From November 28, 2016 (iii)(c) - - 100,574
Shares issued in AIM listing (iv) 32,900,498 6,108,037
Pan African Oil Amalgamation shares issued (v) 1,203,374 176,580 (176,580)
Balance, March 31, 2017 118,249,833 26,961,675 184,029
----------------------------------------------------------------- --------------- ----------- -----------------
(i) On January 28, 2015, 500,000 RSU's were granted to an
officer of the Company. The RSU's vested immediately on the grant
date. These RSU's had a fair value of $0.09 per unit based on the
volume weighted average market price of the Common Shares for the
five preceding days before the grant date. As at March 31, 2015,
250,000 shares were issued with the remaining 250,000 recorded as
shares to be issued. During the year ended March 31, 2016, the
remaining 250,000 shares were issued and $23,602 was reclassified
from shares to be issued to share capital.
(ii) On February 20, 2015, the Company's Board of Directors
authorized a share repurchase program (the "2015 Issuer Bid") of up
to 10 percent of the Company's outstanding common shares through a
normal course issuer bid (up to 6,171,724 common shares) ("ECO
Share Repurchase Program"). Shares could be repurchased from time
to time on the open market commencing March 2, 2015 through March
1, 2016, or such earlier time as the Issuer Bid is completed or
terminated at the option of the Company, at prevailing market
prices. The timing and amount of purchases under the program are
dependent upon the availability and alternative uses of capital,
market conditions, and applicable Canadian regulations and other
factors. On March 10, 2016, the Company announced that it had
received an additional Exchange approval for its intended normal
course issuer bid (the "2016 Issuer Bid"). Under the terms of the
2016 Issuer Bid, the Company may acquire up to 6,491,870 Common
Shares from time to time in accordance with Exchange procedures,
representing approximately 10% of the total number of the Common
Shares held by public shareholders as at the date of the Exchange
approval.
(iii) As at March 31, 2017, the Company repurchased a total of
8,454,000, of which 8,191,500 have been cancelled. The Company held
shares, as of March 31, 2017, valued at $52,805 (March 31, 2016 -
$29,937) in treasury.
(iv) During the year ended March 31, 2017, the Company issued the following RSU's:
a. 708,700 of the 1,002,600 RSU's, granted on March 23, 2016
were issued, and the fair value of those RSU's ($136,079) were
released from Shares to be Issued in the Statement of Equity to
Contributed Surplus.
b. On August 5, 2016, 234,736 RSU's were granted to certain
directors, officers and consultants of the Company. The RSU's
vested immediately on the grant date. These RSU's had a fair value
of $0.19 per unit based on the volume weighted average market price
of the Common Shares for the five preceding days before the grant
date. The total fair value of the RSU's amounted to $44,600. As
18,000 underlying shares, have not yet been issued, $41,180 was
recognized as share-based compensation expense for the year ended
March 31, 2017 and $3,420 has been recorded as shares to be issued
the Statement of Equity as at March 31, 2017.
c. On November 28, 2016, 833,600 RSU's were granted to certain
officers and consultants of the Company. These RSU's had a fair
value of $0.22 per unit based on the volume weighted average market
price of the Common Shares for the five preceding days before the
grant date. The total fair value of the RSU's amounted to
$183,392.
i. 433,600 RSU's vested immediately on the grant date, however,
as of March 31, 2017, these shares have not been issued. As such,
$95,392 was recognized as share-based compensation expense for the
year ended March 31, 2017 with a corresponding credit to Shares to
be issued in the Statement of Equity.
ii. 400,000 RSU's will vest upon the achievement of certain
milestones and expire on November 27, 2026. Management estimates
that there is currently a 100% probability that the milestone will
be achieved, and as such, the fair value of the RSU's was charged
to share-based compensation over the vesting period of the RSU.
$5,182 was recognized as share-based compensation expense for the
year ended March 31, 2017 with a corresponding credit to Shares to
be issued in the Statement of Equity.
(v) On February 8, 2017, the Company completed an admission and
listing on the AIM market of the London Stock Exchange ("AIM"). The
Company raised $8,390,250 (GBP5,085,000) before expenses by placing
31,781,250 new Common Shares (the "UK Placing") with investors at a
placing price of GBP0.16 per share ($0.265 per share (the "Placing
Price") (the "Placing"). AIM listing expenses including, cash
expenses, comprising primarily commissions and professional fees in
the amount of $2,044,946 and the fair value of warrants issued to
brokers' (see Note 11) in the amount of $237,267.
In addition to securities issued pursuant to the UK Placing,
common shares and warrants were issued to the UK advisors in
relation to the Company's Admission to AIM in the aggregate amount
of 812,500 common shares and 3,702,935 warrants and one Canadian
service provider subscribed for 306,748 common shares at CDN$0.26
per share for total cash consideration of $79,754. The exercise
period for the warrants includes 12, 24, and 30 months and the
related exercise prices are 17.6, 19.2 and 16 pence per share,
respectively ($0.29, $0.32 and $0.27 per share, respectively)
("Broker Warrants").
The fair value of the warrants was $237,267 (Note 10).
Gross proceeds, less issuance costs paid in cash (including
payments to the UK Advisors of GBP215,000 ($356,126) and cash
commissions of GBP256,950 ($425,612)) and less the total fair value
of the Broker Warrants were charged against share capital in the
statement of equity.
All common shares being issued by the Company pursuant to this
offering will be freely transferable outside of Canada, however
these shares are subject to a four-month restricted hold period in
Canada which will prevent such common shares from being resold in
Canada, through a Canadian exchange or otherwise, during the
restricted period without an exemption from the Canadian prospectus
requirement.
(v) In connection with the Amalgamation completed on January 28,
2015, the Company authorized for issuance 18,830,738 Common Shares.
In order to obtain their Common Shares in the Company, former
shareholders of Pan African Oil ("PAO") were required to surrender
for cancellation the certificates representing their PAO shares
(the "Certificates"). As at March 31, 2017, 17,972,764 shares were
issued to former PAO shareholders.
10. Warrants
A summary of warrants outstanding at March 31, 2017 was as
follows:
Weighted Average Exercise Price
Number of Warrants ($)
----------------------------------------------- ------------------- --------------------------------
Balance, April 1, 2015 4,937,341 1.00
Expiry of warrants (i) (4,937,341) 1.00
-------------------
Balance, March 31, 2016 - -
Granted during the AIM listing (Note 9 (iv))) 3,702,935 0.29
Balance, March 31, 2017 3,702,935 0.29
------------------------------------------------ ------------------- --------------------------------
(i) The 4,937,341 warrants were originally due to expire on July
6, 2013. On July 5, 2015, their term was extended for 12 months and
on June 24, 2014, the Company received consent from the TSX Venture
Exchange to extend the expiry date of the 4,937,341 warrants for a
further 12 months. The warrants expired on July 6, 2016.
On February 8, 2017, the Company issued 3,702,935 warrants to
three brokers as part of the Placing (Note 9 (iv)). The warrants
were valued at $237,267 at the time of issuance. The Black-Scholes
option pricing model was used to measure the warrant with the
following assumptions:
Brandon Strand Hanson Peterhouse
Hill
Number of Warrants 975,750 1,164,685 1,562,500
Exercise price GBP 0.192 GBP 0.160 GBP 0.176
(GBP)(*)
Exercise price
CDN $ 0.32 $ 0.27 $ 0.29
Expected life 2 years 2.5 years 1 years
Risk-free interest
rate 0.75% 0.75% 0.75%
Dividend yield 0.00% 0.00% 0.00%
Foreign exchange
rate (GBP/CAD) 1.649 1.649 1.649
Expected volatility 54.50% 54.61% 51.83%
(*) The exercise price of these warrants is denominated in
British Pounds and was translated to Canadian Dollars in the table
above using the exchange rate as of March 31, 2017.
11. Stock Options
The Company maintains a stock option plan (the "Plan") for the
directors, officers, consultants and employees of the Company and
its subsidiary companies. The maximum number of options issuable
under the Plan shall be equal to ten percent (10%) of the
outstanding shares of the Company less the aggregate number of
shares reserved for issuance or issuable under any other security
based compensation arrangement of the Company.
A summary of the status of the Plan as at March 31, 2017 and
changes during the year is as follows:
Number of stock options Weighted average exercise price Remaining contractual life -
$ years
------------------------ ----------------------- ------------------------------- -------------------------------
Balance, April 1, 2015 8,473,400 0.54 2.51
Granted (i) 650,000 0.30 -
Balance, March 31, 2016 9,123,400 0.53 1.76
Cancelled (iv) (1,098,000) 1.21 -
Expired (iv) (155,400) 0.59 -
------------------------- ----------------------- ------------------------------- -------------------------------
Balance, March 31, 2017 7,870,000 0.30 4.15
------------------------- ----------------------- ------------------------------- -------------------------------
(i) On March 23, 2016, 650,000 options were issued to officers,
directors and consultants of the Company. These options are
exercisable for a maximum period of five years from the date of the
grant and vest as to one third on grant date and one third on each
anniversary date of the grant for the following two years. The fair
value of the options granted was estimated at $67,175 using the
Black-Scholes option pricing model, using the following
assumptions:
Expected option life 5 years
Volatility 65.36%
Risk-free interest rate 0.64%
Dividend yield 0%
(ii) On October 11, 2016, the Company approved amendments of the
expiry date of 5,670,000 incentive stock options granted to
directors and officers (the "Options"). The Options were originally
set to expire on January 12, 2017, May 16, 2017 and December 24,
2017. Following the amendments, the Options are set to expire on
January 12, 2022, May 16, 2022 and December 24, 2022 respectively.
The fair value of the options at the amendment date was estimated
at $416,324 using the Black-Scholes option pricing model, using the
following assumptions: Expected option life 5 years and 3 months, 5
years and 8 months and 5 years and 6 years and 2 months, Volatility
65.36%, Risk-free interest rate 0.64%, Dividend yield 0%. During
the year ended March 31, 2017, $416,324 was recognized in
share-based compensation in the consolidated statements of
operations and comprehensive loss.
(iii) Share-based compensation expense is recognized over the
vesting period of options. During the year ended March 31, 2017,
share-based compensation of $168,673 (March 31, 2016 - $57,116) was
recognized based on options vesting during the year.
(iv) During the year ended March 31, 2017, 155,400 (March 31,
2016 - Nil) options expired and 1,098,000 (March 31, 2016- Nil)
stock options were cancelled due to various directors, consultants
and employees terminating services and/or employment.
(v) As at March 31, 2017, 7,653,333 options were exercisable
(March 31, 2016 - 8,516,733).
12. Income Taxes
The reconciliation of the combined Canadian federal and
provincial statutory income tax rate of 26.5% (2016 - 26.5%) to the
effective rate is as follows:
March 31, March 31,
2017 2016
$ $
----------------------------------------------- ---------- ------------
Net loss before recovery of income
taxes 3,556,585 5,107,496
----------------------------------------------- ---------- ------------
Expected income tax recovery (942,495) (1,353,490)
Difference in foreign tax rates (177,188) 202,000
Tax rate changes and other adjustments (828,782) (57,470)
Non-deductible expenses (331,862) 70,270
Discontinued operations 653,122 -
Unrealized foreign exchange - 72,290
Change in tax benefits not recognized 1,627,205 1,066,400
----------------------------------------------- ---------- ------------
Income tax recovery reflected in the - -
statements of operations and comprehensive
loss
----------------------------------------------- ---------- ------------
Unrecognized Deferred Tax Assets
Deferred taxes are provided as a result of temporary differences
that arise due to the differences between the income tax values and
the carrying amount of assets and liabilities. Deferred tax assets
have not been recognized in respect of the following deductible
temporary differences:
March 31, 2017 March 31, 2016
$ $
---------------------------------------------------------------- --------------- ---------------
Deferred Tax Assets
Non-capital losses - Canada 4,507,823 3,811,317
Non-capital losses - Ghana - 1,849,218
Non-capital losses - Namibia 7,682,221 3,642,423
Non-capital loses - Guyana 199,621 114,261
Share issue and financing costs 1,635,957 -
Resource pools - Petroleum, natural gas and shale gas property 848,464 -
Other deductible temporary difference 257,518 318,077
The Canadian non-capital loss carry forwards expire as noted in
the table below. The remaining deductible temporary differences may
be carried forward indefinitely. Deferred tax assets have not been
recognized in respect of these items because it is not probable
that future taxable profit will be available against which the
group can utilize the benefit therefrom.
The Company's Canadian non-capital loss carry forwards expire as
follows:
2031 96,680
2032 845,268
2033 1,471,522
2034 1,265,509
2037 828,844
----------- ----------
$ 4,507,823
---------- ----------
13. Asset Retirement Obligations ("ARO")
The Company is legally required to restore its properties to
their original condition. Estimated future site restoration costs
will be based upon engineering estimates of the anticipated method
and the extent of site restoration required in accordance with
current legislation and industry practices in the various locations
in which the Company has properties.
As of March 31, 2017 and 2016, the Company did not operate any
properties, accordingly, no ARO was required.
14. Capital Management
The Company considers its capital structure to consist of share
capital, deficit and reserves. The Company manages its capital
structure and makes adjustments to it, in order to have the funds
available to support the acquisition, exploration and development
of its licenses. The Board of Directors does not establish
quantitative return on capital criteria for management, but rather
relies on the expertise of the Company's management to sustain
future development of the business.
The Company is a development stage entity; as such the Company
is dependent on external equity financing to fund its activities.
In order to carry out the planned exploration and pay for
administrative costs, the Company will spend its existing working
capital and raise additional amounts as needed. Management reviews
its capital management approach on an ongoing basis and believes
that this approach, given the relative size of the Company, is
reasonable.
There were no changes in the Company's approach to capital
management during the year ended March 31, 2017. Neither the
Company nor its subsidiaries are subject to externally imposed
capital requirements.
The Company's objective when managing capital is to safeguard
the Company's ability to continue as a going concern. The Company's
ability to raise future capital is subject to uncertainty and the
inability to raise such capital may have an adverse impact over the
Company's ability to continue as a going concern (Note 2).
15. Risk Management
a) Credit risk
The Company's credit risk is primarily attributable to
short-term investments and amounts receivable. The Company has no
significant concentration of credit risk arising from operations.
Short-term investments consist of deposits with Schedule 1 banks,
from which management believes the risk of loss to be remote.
Amounts receivable consist of advances to suppliers and harmonized
sales tax due from the Federal Government of Canada. Government
receivable consists of value added tax due from the Namibian
government which has been collected subsequent to year end.
Management believes that the credit risk concentration with respect
to amounts receivable is remote. The Company does not hold any
non-bank asset backed commercial paper.
b) Interest rate risk
The Company has cash balances, cash on deposit and no interest
bearing debt. It does not have a material exposure to this
risk.
c) Liquidity risk
The Company ensures, as far as possible, that it will have
sufficient liquidity to meet its liabilities when due, without
incurring unacceptable losses or harm to the Company's
reputation.
As at March 31, 2017, the Company had cash and cash equivalents
and on deposit of $6,088,567. (March 31, 2016 - $3,463,178) and
short-term investments of $49,818 (March 31, 2016 - $100,000) to
settle current liabilities of $800,629 (March 31, 2016 -
$2,538,579).
The Company utilizes authorization for expenditures to further
manage capital expenditures and attempts to match its payment cycle
with available cash resources. Accounts payable and accrued
liabilities at March 31, 2017 all have contractual maturities of
less than 90 days and are subject to normal trade terms.
d) Foreign currency risk
The Company is exposed to foreign currency fluctuations on its
operations in Namibia, which are denominated in Namibian dollars.
Sensitivity to a plus or minus 10% change in rates would not have a
significant effect on the net income (loss) of the Company, given
the Company's minimal assets and liabilities designated in Namibian
dollars as at March 31, 2017.
16. Commitments
Licenses
The Company is committed to meeting all of the conditions of its
licenses including annual lease renewal or extension fees as
needed.
The Company submitted work plans for the development of the
Namibian licenses, see Note 6 for details.
17. Operating Costs
Operating costs consist of the following:
Year Ended
March 31,
---------------------------
2017 2016
------------ -------------
Exploration data acquisition and interpretation and technical consulting $2,281,364 $4,273,189
Exploration license fees 173,817 364,404
Travel 232,615 124,219
Recovered under JOAs (517,856) (2,703,315)
$ 2,169,940 $ 2,058,497
============ =============
18. General and Administrative Costs
General and administrative costs consist of the following:
Year Ended
March 31,
----------------------
2017 2016
---------- ----------
Occupancy and office expenses $82,332 $295,438
Travel expenses 132,348 178,802
Public company costs 113,103 47,796
Insurance 59,566 52,471
Financial services 10,875 14,102
Advertising and communication 8,515 3,509
Depreciation 1,101 2,565
Recovered under JOAs (22,272) (97,674)
$ 385,568 $ 497,009
========== ==========
19. Discontinued Operations
a) On July 29, 2014, the Company, through its wholly-owned
subsidiary, Eco Atlantic (Ghana) Ltd. ("Eco Ghana"), acquired a
50.51% interest in the Deepwater Cape Three Points West Block,
located in the Tano Cape Three Points Basin, offshore Ghana (the
"Ghana Block"). The parties to the GPA include the Company, the
Ghana National Petroleum Company ("GNPC"), GNPC Exploration and
Production Company Limited ("GNPCEPCL"), A-Z Petroleum Products
Ghana Limited ("A-Z"), and PetroGulf Limited ("PetroGulf").
b) On November 21, 2016, the Company received the necessary
approvals from GNPC and GNPC Exploration and Production Company to
execute a Share Purchase and Sale Agreement (the "Ghana Agreement")
to which the Company sold its total interest in Eco Ghana to
PetroGulf for proceeds of $1 USD. Pursuant to the Ghana Agreement,
the Company is entitled to receive US$576,580 as reimbursement for
past operating expenditures owed to the company on the Ghana Block
("Ghana Reimbursement"). As a result of the Ghana Agreement, the
Company will have no remaining obligations in Ghana, and in the
Ghana Block, specifically, as PetroGulf has fully assumed all
obligations of Eco Ghana. As of the date hereof, the Ghana
Reimbursement has not been received.
c) The carrying value of Eco Ghana was $853,362 at the date of
sale. Proceeds on the sale were $1 USD ($1 CDN) resulting in a gain
on disposition of $853,361.
d) The Company's operating results from discontinued operations
in Eco Atlantic (Ghana) Ltd. are summarized as follows:
Year Ended
March 31,
----------------------------
2017 2016
------------ --------------
Revenues
Operator Fees $11,804 $7,551
Expenses
Professional Fees 131,517 66,783
Operating costs 225,781 1,265,387
General and administrative costs 19,708 12,263
Foreign exchange (314) (3,536)
Pre-tax operating loss from discontinued operations $(364,888) $(1,333,346)
Income tax on operations - -
Operating loss from discontinued operations $(364,888) $(1,333,346)
Gain of sale of operations 853,361 -
Profit (loss) on sale of discontinued operations $488,473 $(1,333,346)
20. Earnings per Share
The Company's 7,870,000 (March 31, 2016 - 9,123,400) options and
3,702,935 (March 31, 2016 - Nil) warrants have been excluded from
the calculation of dilutive earnings per share as their inclusion
would be antidilutive.
21. Comparative Figures
The comparative figures have been adjusted to reflect the
current year's presentation.
22. Subsequent Events
i. On June 8, 2017, the Company granted a total of 250,000 stock
options (the "Options") to a Non-Executive Director of the Company
as part of his compensation package for his services to the
Company. Terms of the Options include an exercise price of $0.36
per common share in the Company ("Common Share"), and a vesting
schedule allowing for the vesting of the Options in three equal
installments, with 1/3 vesting June 8, 2017; 1/3 vesting June 8,
2018 and 1/3 vesting June 8, 2019. The Options expire on June 7,
2022.
ii. The Company has also granted 3,500,000 Restricted Shares
Units (the "RSUs") pursuant to the Company's Restricted Share Units
Plan of which 3,350,000 RSUs were granted to Directors of the
Company as compensation and success fees in relation with the AIM
admission and Company's portfolio and operational developments.
iii. On April 4, 2017, the Company issued 433,600 shares in
respect of the RSU's granted On November 28, 2016 (Note 9
(iii)(c)(i)). Following the issuance of these shares, the company
has 118,683,433 shares outstanding.
**ENDS**
For more information, please visit www.ecooilandgas.com or
contact the following:
Eco Atlantic Oil and Gas +1 (416) 250 1955
Gil Holzman, CEO
Colin Kinley, COO
Alan Friedman, VP
Finlay Thomson, UK and IR manager +44 (0) 7976 248471
Strand Hanson Limited (Financial & Nominated
Adviser) +44 (0) 20 7409 3494
James Harris
Rory Murphy
James Bellman
Brandon Hill Capital Limited (Joint Broker) +44 (0) 20 3463 5000
Alex Walker
Jonathan Evans
Robert Beenstock
Peterhouse Corporate Finance (Joint Broker) +44 (0) 20 7469 0930
Eran Zucker
Duncan Vasey
Lucy Williams
Yellow Jersey PR +44 (0) 7768 537 739
Felicity Winkles
Harriet Jackson
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014.
Notes to editors
Eco Atlantic is a TSX-V and AIM listed Oil & Gas exploration
and production Company with interests in Guyana and Namibia where
significant oil discoveries have been made.
The Group aims to deliver material value for its stakeholders
through oil exploration, appraisal and development activities in
stable emerging markets, in partnership with major oil companies,
including Tullow and AziNam.
In Guyana, Eco Guyana holds a 40% working interest alongside
Tullow Oil (60%) in the 1,800 km(2) Orinduik Block in the shallow
water of the prospective Suriname Guyana basin. The Orinduik Block
is adjacent and updip to the deep-water Liza Field, recently
discovered by ExxonMobil and Hess, which is estimated to contain as
much as 1.4 billion barrels of oil equivalent, making it one of a
handful of billion-barrel discoveries in the last half-decade.
In Namibia, the Company holds interests in four offshore
petroleum licences totaling approximately 25,000 km(2) with over
2.3 billion barrels of prospective P50 resources in the Wallis and
Lüderitz Basins. These four licences, Cooper, Guy, Sharon and Tamar
are being developed alongside partners, which include Tullow Oil,
AziNam and NAMCOR. Significant 3D and 2D surveys and interpretation
have been completed with drilling preparations expected to begin in
2018.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR LFFEIDLIRFID
(END) Dow Jones Newswires
July 27, 2017 02:02 ET (06:02 GMT)
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