Trap Oil announce its audited results for the year ended 31 December 2013
Trapoil (AIM: TRAP), the independent oil and gas exploration, appraisal and production company focused on the UK Continental Shelf (“UKCS”) region of the North Sea, is pleased to announce its audited results for the year ended 31 December 2013.
· Completed disposal of interests in Knockinnon, Lybster and certain other assets to Caithness Oil Limited for consideration of US$7.5m shares in IGas Energy plc, as part of the disposal of Caithness by its parent company to IGas.
· Entered into a Farm-out agreement relating to Valleys (Licence P2032, Blocks 21/8c, 21/10c, 21/14a & 21/15b) with Total E&P UK Limited (Total) whereby they acquired 30.625 per cent. of Trapoil’s 50 per cent. equity interest by funding 43.75 per cent. of certain costs up to and including the drilling of an exploration well. Trapoil’s new equity interest in the licence is 19.4 per cent. fully funded by Total and Noreco.
· The Group now holds a 100 per cent. working interest in the Surprise and Nutmeg oil discoveries (Licence P1267, Blocks 12/25a & 13/21b) following the transfer from Dana Petroleum (E&P) Limited and First Oil Exploration of their working interests. Trapoil will continue to seek partners for this potentially commercial discovery such that a well and development plan can be executed in the next twelve months.
· In aggregate costs for the 2012/13 drilling campaign have been only £2m for an average 12 per cent. equity position, compared to what would have been a real cost of £14m. This reflects the value of Trapoil’s carried interest model and careful risk management policy.
· Positive cash flow delivered from investing activities (including the receipt of £4.2m further to completion price adjustment for the Group’s equity interest in Athena) after accounting for capital expenditure.
· Strong revenue stream from Athena which helped the Group’s cash reserves (including restricted cash) increase to £16.4m at year end, with net positive cash flow for the year of £6.8m.
· Loss (before and after tax) for the year of £10.3m, of which £9.4m related to the disposal of assets to Caithness.
· Seeking to carefully manage and maximise the Group’s current and expected future cash reserves in order to secure and execute on a future drilling programme that will afford shareholders exposure to an asset base with significant potential to unlock shareholder value.
· Further development of the Group’s unconventional oil play with partners being sought to drill a proof of concept well, to unlock the potential value in this innovative oil play developed to date by the Group.
· As part of the Valleys farm-out transaction to Total, the Group negotiated the right to potentially take up a 35 per cent. equity interest in its Alfa prospect which remains under evaluation. The Group believes that its potential involvement in the drilling of the Alfa well will assist with unlocking the potential of the Romeo asset.
· The Group’s capital expenditure commitments remain low, with only the Niobe prospect having a firm well commitment obligation to the Department of Energy and Climate Change (“DECC”), with the well to be drilled in 2015 at an estimated cost of £2m net to the Group due to a partially carried interest.
· Management will continue to monitor and if necessary curtail expenditure. To recognise increased costs in the running of the business, in 2014, management have taken a 20 per cent. pay cut and staff levels have been trimmed as has administrative expenditure.
Mark Groves Gidney, Chief Executive Officer of Trapoil, commented:
“In what has continued to be a challenging industry and market environment, we were able to generate positive cash flows in 2013, primarily through our equity interest in Athena.
Our goal remains to carefully manage and maximise the Group’s cash reserves in order to establish a drilling programme that will afford shareholders exposure to an asset base that is capable of delivering increased value.
With our existing cash reserves and the in-house technical and operational ability to manage risks and secure carried interest positions, we will aim to deliver this strategy and hope to enhance the Group’s position with value driven new ventures.”