rns number : 8257a mediterranean oil & gas plc 25 february
TRANSCRIPT
RNS Number : 8257AMediterranean Oil & Gas Plc25 February 2014
25 February 2014
Mediterranean Oil and Gas Plc("the Company" or together with its subsidiaries the "Group")
(AIM: MOG)
Final Results for the year ending 31 December 2013 and Notice of AGM The Directors of Mediterranean Oil & Gas Plc are pleased to present the Company'sfinal results and financial statements for the year ending 31 December 2013. HIGHLIGHTS Corporate and Operational: Ø Total production of 1.0 Bcf, a 42% decrease relative to the prior year (2012: 1.7
Bcf)o Production performance negatively impacted by shutin of two damaged
production wells at GuendalinaØ Completion in February 2013 of a transaction with Genel Energy plc ('Genel') for the
sale of a 75% interest in offshore Malta Area 4 for:o An immediate cash payment of US$10 milliono 100% carry of the cost for the first exploration well Hagar Qim 1o 100% carry of the cost for the second exploration well up to a maximum of
US$30 millionØ Technical progress achieved in advancing the Production Concession application
for Ombrina Mare, Italy:o Commission charged by the Ministry of Environment and of Protection of
Land and Sea ('MEPLS') ruled in favour of MOG's Environmental ImpactAssessment ('EIA') submission
o EIA approval delayed pending resolution of dispute with MEPLSØ Entry into new exploration acreage offshore Malta Area 3 Blocks 1, 2 and 3
o Low cost entry into Exploration Study Agreement ('ESA')o 40% Working Interest with option to proceed into Production Sharing
Contract after two or three years of ESAo Exploring for prospects on the southern margin of the proven Sicily/Sicily
Channel basinØ Gas sales agreement with Repower Italia SpA renewed the bulk of the offtake of
the Company's gas production until 30 September 2014Ø Continued optimisation of the Group's 2P reserves of 5.3 Bcf of gas and best
estimate contingent resources of 26.0 MMbbls of oil and 32.4 Bcf of gas (at yearend 2013):o Completion of new Competent Person Report ('CPR') for Ombrina Mare
establishes baseline for development and upside potentialo Decision made to develop Aglavizza, onshore central Italy where MOG has
a 100% interest, with first gas forecast in Q3 2015o Value of the portfolio clearly defined with the certification of the majority of
our fields and Prospects by ERC Equipoise Limited ('ERCE') Financial: Ø Revenues from sales of gas and condensate and operatorship income decreased
from €16.3 million in 2012 to €8.4 million(1) in 2013.Ø Loss from operations of €4.4 million (2012: €4.1 million profit)(1)Ø Cash and cash equivalents of €12.4 million (2012: €8.7million) (1) Excluding discontinued operations.
Outlook: Ø Drilling of first exploration well, Hagar Qim 1 offshore Malta in Area 4 planned for
H1 2014Ø Continue to actively pursue award of EIA and Production Concession for Ombrina
MareØ Post award of a Production Concession, the Company plans to drill a pilot
appraisal well at Ombrina MareØ Extract value from other operating assets and derisk prospective and contingent
resourcesØ Continue to actively pursue exploration and strategic growth opportunities Dr. Bill Higgs, Chief Executive of Mediterranean Oil & Gas, commented: "2013 was a challenging year for the Group due to the production problems at theGuendalina Field and the continued delays at Ombrina Mare. However, we ended theyear with no debt and a higher year end cash position of €12.4 million, which willenable us to continue to develop our portfolio." "Our goal over the next year is to continue to develop and derisk the resources andreserves within our portfolio. To that end, we look forward to drilling two explorationwells, one offshore Malta and one onshore Italy, which will enable us to evaluate keyProspective Resources. We will progress the Aglavizza development onshore Italyand hopefully achieve a way forward for the Ombrina Mare development. In addition,we will acquire 1500km of 2D seismic offshore Malta in Area 3, which could addProspective Resources by the end of 2014. 2014 is an important year for theCompany as this will be the first drilling and seismic activity for us since 2011." A copy of the Company's Annual Report and the notice convening the Annual GeneralMeeting will be posted to shareholders on 6 March 2014 and will be available on theCompany's website at www.medoilgas.com. The Company's Annual General Meetingwill be held at 11.00am on 2 April 2014 at Prince Philip House, The Royal Academyof Engineering, 3 Carlton House Terrace, London SW1Y 5DG. ENQUIRIES:Mediterranean Oil & Gas Plcwww.medoilgas.comBill Higgs, Chief Executive/Chris Kelsall, FinanceDirector
Tel: +44 (0)207 959 2322
Liberum Capital Limited (Nominated Adviser andJoint Broker)Clayton Bush/Ryan de Franck/Tim Graham
Tel: +44 (0)20 3100 2222
RBC Capital Markets (Joint Broker)Matthew Coakes/Jeremy Low /Jonny Hardy
Tel: +44 (0)207 653 4000
FTI Consulting (Public Relations)Ben Brewerton/Alex Beagley/Georgia Mann
Tel: +44 (0)207 831 3113
CHAIRMAN'S STATEMENT Dear Shareholder, On behalf of the Board of Mediterranean Oil & Gas Plc, I am pleased to announce theCompany's 2013 results.
A significant challenge for the Company in 2013 was the sudden loss of productionfrom two of our key production wells at the Guendalina Field, offshore Italy, whichresulted in us missing our production expectations by over 40%. I am pleased toreport that, following a well cleanup operation at the start of 2014, production hasbeen restored at GUE 3SS, and that the updated reservoir analysis carried out duringthis exercise indicates the reservoir is in better condition and less depleted than wethought at the time of our Interim Results statement. As such, in these results, weare able to reverse €1.2 million of the €1.8 million impairment of the Guendalina Fieldreported in September 2013. We look forward to continued safe and reliableoperations at the Guendalina Field, which remains our main source of revenue. Total annual production was 27.6 MMscm (175,420 boe) and total revenue was€8.4m. Cash and cash equivalents at the period end was €12.4m. Net cash flow fromoperations in 2013 was an outflow of €1.2m, down from €6.5m inflow in 2012. We were informed at the start of 2013 that Italy's Environmental Impact Assessment('EIA') Commission, charged by the Ministry of Environment to rule on the OmbrinaMare oil and gas field development EIA, had ruled in favour of the Company'ssubmission. This positive news slowly turned to disappointment as the yearprogressed, with the Minister declining to sign the resulting EIA Decree that waspresented to him for signature in February 2013. The MOG team, together with ouradvisers, have invested very considerable time and effort, often behind the scenes,to engage with all key stakeholders. Despite our many attempts at the highest levelsto resolve this matter, ultimately we have been obliged to lodge an appeal with theItalian courts. Post this reporting period our legal appeal against the actions of theMinister was heard at a tribunal hearing held on 9 January 2014 at the AdministrativeCourt in Rome. The Company is presently awaiting the decision of the appeal. Weremain convinced that the development of the Ombrina Mare Field will benefit theAbruzzo region and we are resolute that we will protect our shareholders' interests inwhat is a very important asset within our portfolio. On a more positive note, we have made good progress preparing for our upcomingdrilling activities offshore Malta in Area 4. All of the necessary logistics and contractsare in place and we are now awaiting arrival of the rig and final clearances to startdrilling. Post this reporting period, we received an extension of six months to the firstexploration period to July 2014, enabling sufficient time to complete the drillingactivities. In 2012 the Board implemented a revised remuneration policy for the executives andall staff that more closely aligns their total reward based on a weighted combination oftheir individual performance, and the overall performance of the Company ascompared with our peers. At the end of 2012, the Company was in the top quartile interms of share value growth when compared with over 100 E&P companies listed onAIM, and this report reflects the executive and staff bonuses for 2012 performancethat were awarded in January 2013. As a result of the general underperformance ofour share price during the last twelve months, no executive bonuses or options wereawarded for 2013. Outlook There is no doubt that 2014 will be an important year in the growth of the Company.We are excited to have two exploration wells and 1,500km of 2D seismic acquisitionplanned for the first half of the year. The drilling of the first exploration well, HagarQim, offshore Malta Area 4, has the potential to open up a new hydrocarbon basin.The onshore Italy Faseto 1 exploration well, while not a highimpact well like HagarQim, is an opportunity for rapid implementation as the development options havealready been preapproved. During 2013 significant time, effort and resources have been spent by the Companyin preparing to defend the interests of our shareholders against the claim andproceedings initiated by Leni Oil & Gas Plc ('LGO') in January 2013. The Companycontinues to refute the various claims that have been made by LGO. The allegationsmade are unfounded and the Company will defend itself and the interests of itsshareholders rigorously. The case is due to come before the Commercial High Courtin London in early March 2014. Particularly given the production challenges of 2013, we have maintained a strongfocus on the cost of our operations, and our corporate overheads. At the close of the
year we moved our fourperson London head quarters to a small serviced office and,at the beginning of January, we announced that two of our NonExecutive Directors,Jake Ulrich and Matthew Clarke, had stepped down from the Board. I am very gratefulto Jake and Matthew for their guidance and I know that they remain strong supportersof the Company. I am confident we have a Board of Directors that is well placed toguide the Company through its next phase of development. Mediterranean Oil & Gas continues to build up a very experienced technical andmanagement team highly capable of exploring and developing oil and gas assets. Tothat end the Board remains focused and committed to growing the Company and weare actively seeking additional opportunities to expand our current portfolio. On behalf of the Board, I would like thank our shareholders and our employees fortheir continued support. Keith HenryChairman24 February 2014
CHIEF EXECUTIVE'S REPORT At the beginning of 2013 we were looking forward to another full year of productionfrom the Guendalina Field. Sadly this was not to be, with production being shutin firstat GUE 2SS in March and then GUE 3SS in August our annual production fell over40% short of our 2013 expectations. The Group delivered total sales revenue of €8.4million and had a cash and cash equivalents position of €12.4 million at 31 December2013. We were pleased to note that the GUE 3SS restarted production after the operator(ENI) initiated remedial operations on 24 December 2013. These operations werehampered by difficult weather conditions in the Adriatic. The intervention wascompleted successfully on 11 January 2014 and the well returned to lowrateproduction. The well is now on stable production of approximately 5,500scm per daynet to MOG. In addition, the updated analysis of the reservoir by ERCE hasconfirmed our view that the reservoir is more substantial and in a better condition thanwe had assumed for the 2013 Interim Results statement. Using this latest analysiswe are able to reverse €1.2 million of the €1.8 million impairment of the GuendalinaField reported in September 2013. Our critical commercial objective for 2013 was to seek the approval of theEnvironmental Impact Assessment ('EIA') for our Ombrina Mare Field. The yearstarted well with the EIA Commission, charged by the Ministry to rule on the OmbrinaMare oil and gas field development EIA, ruling positively in favour of MOG'ssubmission. The resulting EIA Decree was presented to the Minister of Environmentfor signature in February 2013, where it has remained unsigned, despite continuedlobbying from the Company with all key stakeholders, ever since. Once the EIADecree is countersigned by the Minister of MEPLS, and by the Minister of Heritageand Cultural Activities, MOG will be able to seek award of the d30 BC MD OmbrinaMare Production Concession from the Ministry of Economic Development. TheMinistry granted technical approval of the Field Development Plan for Ombrina Marein June 2009. In 2013 we acquired a 40% working interest in the Exploration Study Agreement foroffshore Malta Area 3 Blocks 1, 2, and 3. We believe that this region is acomplementary asset to offshore Malta Area 4, as it lies on the margin of a provenhydrocarbon province. We have also made good progress in preparing for ourupcoming drilling activities offshore Malta in Area 4. All of the necessary logistics andcontracts are in place and we are now awaiting arrival of the Noble rig 'Paul Romano',which is finalising refurbishments in Malta. Post the reporting period we received anextension of six months to the first exploration period to enable sufficient time tocomplete the drilling activities. The Company has a broad asset base across the exploration, development andproduction phases of the business. These assets have significant upside potentialand we are looking ahead to derisk and mature these assets over the coming years,while also looking for valuable opportunities for asset acquisition.
Gas Production and Prices All gas production of the Group is currently from onshore and offshore Italy. In 2013, total gas production was 0.97 Bcf (27.6 MMscm), which represented a 42%reduction relative to the prior year (2012: 1.69 Bcf). This was largely due to thereduction in gas production at the Guendalina gas field caused by the shutin of wellsGUE 2SS and GUE 3SS. During 2012, the Brent oil price has fluctuated around $100110/bbl, while the Euroversus US Dollar exchange rate has experienced significant volatility which hasinfluenced gas prices. The average gas sales price achieved by the Group during theperiod was €0.30/scm (USD 11.2/mcf). The Company's forecasts for future gas prices indicate continued downward pressurein 2014 and 2015 and the Italian gas price is expected to remain between 28.1 and29.3 Euro cents per scm which is below the long run average gas price, due to theexcess of gas supply relative to gas demand in the Italian market. What Happened at Guendalina The problems encountered at the Guendalina Field in 2013 are still underinvestigation, but appear to have their origins in the spring of 2012 when the operatingconditions of the two wells GUE 2SS and GUE 3SS changed in late May 2012. In the case of GUE 2SS, both the production rate and the flowing wellhead pressureincreased, which at the time was (correctly) interpreted as a cleaning up of the welland the unexpected addition of incremental production from sand intervals notoriginally connected to the well. In September 2012, after a short well shutin, GUE2SS had a sudden deterioration in gas rate as well as wellhead tubing pressure.Unfortunately on 5 March 2013, after several months of decline, GUE 2SS was takenoffline to determine the cause of an influx of water that resulted in the well ceasingproduction. The probable cause of the well shutin is the premature waterbreakthrough from the bottom aquifer associated with the additional sand intervalsthat started contributing in May 2012. This well is currently shutin and will remainshutin for the foreseeable future. However, the gas level completed for production atGUE 2SS is being produced from well GUE 3LS, which is in an up dip location. In the case of GUE 3SS, the production rate increased and the flowing well headpressure decreased. Once again, the characteristics of the well indicate cleaning upof the completion and, in this case, an increase in the drawdown of the reservoir. InJuly and August 2013 production rate on GUE 3SS started to decline more rapidlyand the well taken offline on 30 August 2013 due to low pressure at the manifold.Subsequent analysis indicated that the reservoir was in good condition and at ahigher static pressure than predicted. With these new data it was possible todemonstrate that the well performance had been progressively deteriorating since lateMay 2012 event and that the observed increased 'skin' to the well was probably theconsequence of the migration of fine grained material towards the wellbore, whichprogressively reduced productivity. This was unknowable during the period of timethat the well was on production. With these new data the operator (ENI) designed andexecuted a remedial treatment of the well to remove the fines. The well was broughtback onto lowrate production on 11 January 2014. The well continues to clean up andis currently achieving stable production of approximately 5,500 scm per day net to theCompany. Well GUE 3LS has maintained its operating conditions throughout 2012 and 2013.GUE 3LS has been performing in line with expectations and is currently producingabout 31,000 scm per day net to the Company. The knockon effects of the damage to these two wells cannot be understated. Wequickly went from a cash flow positive to cash flow negative business when includingall operating and capital costs. This has placed downward pressure on the share priceand created sufficient uncertainty in our future cash flows that it has been verydifficult to undertake any accretive transactions. Oil & Gas Reserves and Resources
In 2013 the Company selected ERCE to undertake an audit of the Group's reservesand resources. This analysis, which has been detailed and robust, has resulted insome significant movement and reductions on our Reserves and Resources ledger.The changes year onyear are highlighted below. Importantly, we can now beconfident in the assessment and therefore value of our Reserves and Resources. As at 31 December 2013, the Company recorded 2P reserves of 5.3 Bcf (net) of gas(1.0 MMboe) and 2,376 boe of condensate. Best estimate contingent resources were26 MMbbls oil (net) and 32.4 Bcf (net) of gas. The tables below summarise the evolution of the Group's hydrocarbon Reserves andResources since 2006 and include the latest update, as at 31 December 2013.
> 2P Oil Reserves were reduced with the movement of the Ombrina Mare Fieldinto the Contingent Resources Category
> The Company's 2P RRR was 129%, which was caused by a negative revision
of Reserves > The Company's 2P Reserves to Production ('R/P') ratio for gas has dropped to
5.5 > Prospective Resources for the Monte Grosso prospect have been certified as
9.8 MMbbls (1E), 29.9 MMbbls (2E) and 85.3 MMbbls (3E) with a mean of 41.5MMbbls
> The Company is committed to derisk and mature resources, to progressively
replace reserves, maintaining the 2P RRR at around 100% and targeting anR/P ratio of approximately 9
Net Oil Reserves & Resources in MMbbls
Prospective ProspectiveReserves Contingent Contingent Resources Resources
Proven Plus Resources Resources (unrisked) (unrisked)Probable Best High Best High
(2P) Estimate Estimate Estimate EstimateMMbbls MMbbls MMbbls MMbbls MMbbls
1 July 2006 01 292 702 1,5773 4,4473
30 June 2007 01 292 702 1,2914 3,6144
30 June 2008 201 122 192 1,4194 3,9514
31 December 2008 201 122 192 1,4194 3,9514
31 December 2009 201 122 192 1,4194 3,9514
31 December 2010 401 122 192 1,4054 3,9204
31 December 2011 401 122 212 1,4054 3,9204
31 December 2012 401 172 312 4706 1,2006
31 December 2013 05 265 665 4246 1,20061: Independent certification by SIM.2: Company assessment.3: Independent certification by RPS.4: Independent certification by RPS.5: Independent certification by ERC Equipoise6: Independent certification by ERC Equipoise and Company Assessment Net Gas Reserves & Resources in Bcf
Prospective ProspectiveReserves Contingent Contingent Resources Resources
Proven Plus Resources Resources (unrisked) (unrisked)Probable Best High Best High
(2P) Estimate Estimate Estimate Estimate(Bcf) (Bcf) (Bcf) (Bcf) (Bcf)
1 July 2006 121 212 502 202 442
30 June 2007 111 252 612 702 1382
30 June 2008 101 252 552 932 1582
31 December 2008 171 252 552 932 1582
31 December 2009 16.51 252 552 932 1582
31 December 2010 17.61 252 552 482 1202
31 December 2011 18.41 22.32 482 862 1562
31 December 2012 15.31 22.32 482 1142 2162
31 December 2013 5.33 32.44 73.44 1444 28641: Independent certifications by SIM and RPS (Guendalina 2012 only).2: Company assessment.3: Independent certification by ERC Equipoise4: Independent certification by ERC Equipoise and Company Assessment Asset Overview Exploration, Development and Production Italy Offshore Northern Adriatic The Company's efforts during the period under review were mostly focused onunderstanding the production challenges at the Guendalina gas field offshore Italy inthe northern Adriatic. Other North Adriatic Gas Discoveries (MOG WI 15%, ENI WI 85% and Operator) The Guendalina project is located in one of the most important gas exploration andproduction areas in Italy and is situated 70km south of four other discovered, but stillundeveloped, offshore gas fields in which the Group has a 15% interest. These four gas discoveries amount to between 10 to 50 Bcf net contingent gasresources to the Group and represent an important growth opportunity for theCompany. Their reclassification from 2C (Contingent Resources) to 2P reserves isexpected to take place following authorisation of the development plans for the fields. Development activity for these fields was frozen from 2001, initially pending theresolution of environmental concerns about subsidence caused by developing theoffshore region. The Italian Government indicated in 2009 that it is in favour of apositive resolution of these issues in this area of the Northern Adriatic. As a portion ofthe Company's AC19 PI concession lies within 12 miles of nature reserves it wasimpacted by the 2010 offshore restrictions introduced by the Italian Government forthe offshore E&P activities. On 7 August 2012 the Italian Parliament issued the Law134/2012 containing Article 35, which relates to offshore exploration and productionactivities. The Article states that the restrictions introduced under Decree DLGS128/2010 would no longer be applicable for the preexisting offshore E&P activitiessuch as concession AC19 PI. The Company can now work with ENI to increase thepriority of the development of the Northern Adriatic discoveries within AC19 PI. Italy Onshore Foredeep Gas In Italy, the Company has focused its footprint of onshore production and explorationgas assets that target gas traps in the Pliocene aged sand deposits of the ApenninesForedeep with the completion of the sale of 13 noncore assets to CanoelInternational Energy Limited. In our remaining E&P acreage the existing production isnot the only value. In fact, several interesting development and exploration projectsare also present, mainly within existing production concessions that have thepotential to unlock approximately 26 to 64 Bcf net unrisked prospective resources tothe Group and achieve new near to midterm gas production. In December 2012, we received the award of the Aglavizza Production Concessiononshore central Italy where we have a 100% interest in the 7km2 concession thatincludes the Civita 1 discovery with estimated proved and probable reserves close to1 Bcf. Post the award, we safely conducted a production test of Civita 1 thatconfirmed excellent permeability and no nearwell bore formation damage. In Q3 2013the Board made the final investment decision for the Aglavizza development. Firstgas is expected in Q3 2015 and over the twoyear development cycle the company
will invest €2.8 million. The asset is expected to start with production rates of 18,000to 20,000 scm per day.Net Oil Reserves & Resources in MMbbls Italy Ombrina Mare Oil & Gas Discovery (MOG WI 100%) The Ombrina Mare discovery is an important asset for the Company that representsan important future growth opportunity. Following the successful drilling of two exploration/appraisal wells in 2008, thecompletion of a well as an oil producer and the set up of a tripod platform inpreparation for the development phase, the Company applied for a productionConcession (d 30 B.CMD) in December 2008. In the reporting period the Companyworked with ERCE to complete a revised independent certification of Ombrina Mareon the expectation that we would be soon moving forwards with the development.Because of the continued delay to the award of the EIA for the project and the needfor further appraisal drilling to fully assess the potential of the asset, ERCE certifiedOmbrina Mare oil and gas into the Contingent Resources category with 9.8 MMboe oiland 4.03 Bcf gas (1C), 25.1 MMboe oil and 8.04 Bcf gas (2C), and 62.8 MMboe oiland 17.2 Bcf gas (3C). We plan on drilling a pilot development well as soon aslogistically and safely possible post the award of the production concession. Thegoals of the pilot appraisal well would be:
> To assess the potential for a hydrodynamic or tilted oilwater contact > To assess net reservoir distribution to the north away from the crest of the
structure > To test the hydrodynamic performance of the reservoir > To test the potential of the Cretaceous interval to contribute to the productivity
The year started well with the EIA Commission, charged by the Ministry to rule on theOmbrina Mare oil and gas field development EIA, ruling positively in favour of MOG'ssubmission. The resulting EIA Decree was presented to the Minister for signature inFebruary 2013, where it has remained unsigned ever since. Significant effort andresources have been directed at creating the correct environment for the Italianauthorities to make a positive decision. We have engaged with the local communitiesonshore from the proposed development location including the opening of a new officein the important port town of Ortona. We have taken all necessary steps, includinglegal action, to protect shareholders' interests. We will continue our active dialoguewith the Italian Government, with a view to securing approval of the EIA for OmbrinaMare and the award of the associated Production Concession. Once the EIA Decreeis countersigned by the Minister of Environment and the Minister of Heritage andCultural Activities, MOG will be able to seek award of the d30 BC MD Ombrina MareProduction Concession from the Ministry of Economic Development. The Ministryhas already granted technical approval of the Field Development Plan for OmbrinaMare in June 2009. Wildcat Exploration Italy Southern Apennines In the Southern Apennines, the Group operates the Monte Grosso project, holding a22.89% interest. The project is a high quality near field exploration opportunity closeto one of the largest onshore oil producing areas in western Europe. The MonteGrosso exploration project presently remains on hold, pending resolution of residualpermitting issues, which the Group presently believes should be positively resolvedand allow a project startup in late 2015 (subject to rig availability). The Monte Grosso2 well is targeting 181 MMbbls of unrisked mean Prospective Resources (41.5MMbbls net to the Group) at a depth of 6,800m. Permitting and existing well sitemaintenance works were the main activities conducted during the period. Malta Offshore Area 4 The Group operates Offshore Area 4, which comprises 5,700km2 of deep water
acreage north of the internationally recognised border between Malta and Libya. During the period:
> We completed the sale of a 75% interest in Malta offshore Area 4 to Genel for: > US$10 million cash payment (received in February 2013); > 100% carry on the first exploration well, and a 100% carry on the second
exploration well up to US$30 million gross expenditure; > At MOG's option, should the costs of the second well exceed US$30 million,
Genel will provide a financing arrangement to fund MOG's 25% share of anyadditional expenditure, at an interest rate equivalent to 3 Month LIBOR plus400 bps.
> We completed the logistics, contract awards and procurement required to
support the drilling of the first exploration well, which is expected to spud in Q12014.
The area is frontier exploration where no drilling activity has occurred and it is one ofthe rare areas that still remains to be explored in the Mediterranean basin. Thetransaction with Genel means that a minimum of two exploration wells are now fullyfunded. Post period the Company received an extension of the first exploration period by 6months until 17 July 2014 to enable completion of the drilling activity. In addition, theCompany modified the terms of its sale to Genel such that the two parties are now ina Joint Venture partnership, with a Joint Operating Agreement. Offshore Area 4 is a high risk, but potentially a high reward, geological environmentwhere nine prospects and leads have been certified by ERCE and RPS with a total of381 million bbls of unrisked prospective oil resources net to MOG. Malta Offshore Area 3 In June 2013 MOG reached agreement with Transunion Petroleum Ltd ('Transunion')and Nautical Petroleum Ltd, a subsidiary of Cairn Energy PLC ('Cairn'), to join Cairn inthe exploration of offshore Malta Area 3 Blocks 1, 2 and 3 ('Area 3'). In December 2012 Cairn entered into a threeyear Exploration Study Agreement ('SA')with the Government of Malta for Area 3, which is located in the Sicily Channelcovering an area of approximately 6,000km2 and containing a number of prospectiveleads. The ESA covers an initial two year period with geological studies, thereprocessing of existing 2D seismic data, the acquisition of new 2D seismic data andlimited capital works. The agreement provides the right to negotiate a productionsharing contract and it can be extended to a third year to acquire 3D seismic. Theassignment of an interest in the ESA to Melita Exploration Company Ltd, a whollyowned subsidiary of the Company, was approved by the Government of Malta in July2013. The joint venture has approved the acquisition of approximately 1,500km broadband2D seismic in H1 2014 and the operator is finalising the preparation of the seismiccampaign. France St Laurent The St Laurent permit is located in southern France in a known gas and oil proneprovince. The Company has an 11% WI in this asset. There has been little activity onthe permit in 2013. The joint venture partners are seeking an extension to theexploration period from the French authorities. Health, Safety and the Environment The Company continues to be committed to maintaining the highest standards inHSE management. No safety or environmental incidents have been reported for theperiod under review.
Operational Overview MOG has a broad portfolio of production, development and exploration assets. Over the next 12 months, MOG intends to progress its key assets and pursueattractive and material strategic growth opportunities that we expect to identify. One of the strengths of the Company is the wide international experience of its seniormanagers, in particular in the Mediterranean area and the operational capability of itsstaff and organisation. William HiggsChief Executive24 February 2013 Qualified Person: In accordance with the guidelines of the AIM Market of the London Stock Exchange,Dr. Bill Higgs, Chief Executive of Mediterranean Oil & Gas Plc, a geologist,explorationist and reservoir manager with over 24 years' oil and gas industryexperience, is the qualified person as defined in the London Stock Exchange'sGuidance Note for Mining and Oil and Gas companies, who has reviewed andapproved the technical information contained in this announcement. Glossary Bcf Billion cubic feet of gasContingent oil/gasresources
Has the meaning ascribed by the SPE/WPC Standard
EIA Environmental Impact AssessmentE&P Exploration and ProductionHSE Health, Safety and the EnvironmentMMbbls Million stock tank barrels of oilMMboe Million stock tank barrels of oil equivalentMMscm Million standard cubic metresP1 & P2 Reserves Proven plus probable reserves as defined in the SPE/WPC StandardProspective oil/gasresources
Has the meaning ascribed by the SPE/WPC Standard
RRR Reserve Replacement RatioR/P Reserves to Production RatioScm Standard cubic metreSOP Standard Operating ProcedureSPE/WPC Society of Petroleum Engineers/World Petroleum Congress SPE/WPC
Standard Definitions and methodology for certifying hydrocarbon reservesand resources adopted by the SPE/WPC from time to time which presentlyrequires the application of the 2007 Petroleum Resources ManagementSystem standards
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFor the year ended 31 December 2013
2013 2012Note €'000 €'000
Revenue 6 8,416 16,254Cost of sales (4,168) (3,837)Gross profit 4,248 12,417Other income 7 569 152Administrative expensesDepreciation, depletion and amortisation 3, 4 (2,596) (4,483)Impairment 3 (600) Other administrative expenses (6,023) (4,031)
Total administrative expenses (9,219) (8,514)(Loss)/Profit from operations 7 (4,402) 4,055Finance expense (1,234) (894)Finance income 43 463(Loss)/Profit before tax from continuing operations (5,593) 3,624Tax expense (514) (1,867)(Loss)/Profit for the year after tax from continuing operations (6,107) 1,757Gain on disposal of 'Held for sale' non current assets net of tax 5(a) 2,754 Profit/(Loss) on discontinued operations net of tax 5(b) 103 (864)(Loss)/Profit for the year after tax and total comprehensive incomeattributable to the equity holders of the parent (3,250) 893Loss/(earnings) per share on continuing operations
Basic 2(1.41)cents
0.41cents
Diluted 2(1.41)cents
0.41cents
Earnings/(loss) per share on discontinued operations
Basic 20.66
cents(0.20)cents
Diluted 20.66
cents(0.20)cents
Loss/(earnings) per share attributable to the equity holders of the parent
Basic 2(0.75)cents
0.21cents
Diluted 2(0.75)cents
0.21cents
CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFor the year ended 31 December 2013
ShareCapital
Deferredshares
Sharepremium
Contributedequity
reserve
Warrantand share
optionreserve
RetainedDeficit Total
€'000 €'000 €'000 €'000 €'000 €'000 €'000GroupAs at 1 January 2012 5,058 10,721 40,711 8,111 729 (13,771) 51,559Total comprehensive income forthe year 893 893
Shares issued fundraising (net ofissue costs) 8 41 49
Sharebased payment 563 563As at 31 December 2012 5,066 10,721 40,752 8,111 1,292 (12,878) 53,064Total comprehensive income forthe year (3,250) (3,250)
Shares issued fundraising (net ofissue costs) 9 46 55
Sharebased payment 620 620Lapse of options (664) 664 As at 31 December 2013 5,075 10,721 40,798 8,111 1,248 (15,464) 50,489
The following describes the nature and purpose of each reserve within owners' equity: Reserve Description and purposeShare capital Amount subscribed for ordinary share capital at nominal value.Deferred shares Amount representing ordinary 19p shares following split of shares as
part of recapitalisation exercise undertaken in May 2011.Share premium Amount subscribed for share capital in excess of nominal value.
Contributed equity reserve An amount representing equity contributed directly by shareholders.Warrant and share option reserve Cumulative fair value of warrants, options and share awards under
employee share plan, adjusted for transfers on exercise or lapse ofthe shares, options and warrants.
Retained deficit Cumulative net gains and losses recognised in the consolidatedincome statement, adjusted for transfers on exercise or lapse ofshare options and shares awarded under the employee share plan.
CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAt 31 December 2013
2013 2012Note €'000 €'000
AssetsNoncurrent assetsProperty, plant and equipment 3 16,730 20,379Exploration and evaluation assets 3 24,132 19,801Available for sale investment 34 34Other noncurrent receivables 466 804Deferred tax asset 1,925 3,095Total noncurrent assets 43,287 44,113Current assetsInventories 405 408Trade and other receivables 3,860 5,339Cash and cash equivalents 12,353 8,668Noncurrent assets classified as 'Held for Sale' 8,017Total current assets 16,618 22,432Total assets 59,905 66,545LiabilitiesCurrent liabilitiesTrade and other payables 3,594 4,884Corporation tax liability 1,568Noncurrent liabilities classified as 'Held for Sale' 5 1,250Total current liabilities 3,594 7,702Noncurrent liabilitiesProvisions 5,822 5,779Total noncurrent liabilities 5,822 5,779Total liabilities 9,416 13,481Net Assets 50,489 53,064Capital and reserves attributable to equity holders of thecompany
Share capital 5,075 5,066Deferred shares 10,721 10,721Share premium 40,798 40,752Warrant and share option reserve 1,248 1,292Contributed equity reserve 8,111 8,111Retained deficit (15,464) (12,878)Total Equity 50,489 53,064
CONSOLIDATED STATEMENT OF CASH FLOWSFor the year ended 31 December 2013
2013 2012Note €'000 €'000
Cash flows from operating activitiesProfit for the year (6,107) 1,757Adjustments for:Non cash income and adjustments (246) Impairment 600 Depreciation, depletion and amortisation 2,596 4,483Sharebased payments expense 620 563Finance expense (income) (43) (463)Tax expense 514 1,867Bank interest 21 Foreign exchange loss 674 403Unwinding of discount on provision 539 491Cash flows (used in)/from operating activities before changes inworking capital and provisions (832) 9,101Decrease in inventories 3 2(Decrease) in trade and other receivables 1,479 3,075(Decrease) in trade and other payables (1,290) (5,333)Increase/(decrease) for provisions and noncurrent receivables 94 (305)Taxes paid (650) (84)Net cash flows (used in)/from operating activities (1,196) 6,456Net cash flows (used in)/from discontinued operations 5(b) (1,147) 454 Investing activitiesPurchase of property, plant and equipment 3 (620) (211)Exploration costs incurred 4 (1,853) (1,525)Proceeds from disposal of assets 'Held for Sale' 8,902 Net cash flows from/(used in) investing activities 6,429 (1,736) Financing activitiesIssue of new shares cash received 55 49Interest received Interest paid (21) (52)Drawdown of loan from OchZiff 8 2,000Repayment of loan to OchZiff 8 (2,000)Net cash generated (used in)/from financing activities 34 (3)Net increase in cash and cash equivalents 4,120 5,171Cash and cash equivalents at the beginning of the year 8,668 3,703Foreign exchange losses on cash and cash equivalents (435) (206)Cash and cash equivalents at the end of the year 12,353 8,668
NOTES 1 Accounting policies
Basis of preparation The principal accounting policies adopted in the preparation of the financialstatements are set out below. The policies have been consistently applied to all theperiods presented, unless otherwise stated. These financial statements have been prepared in accordance with InternationalFinancial Reporting Standards (IFRSs and IFRIC interpretations) issued by theInternational Accounting Standards Board (IASB) as adopted by the European Unionand with those parts of the Companies Act 2006 applicable to companies preparingtheir accounts under IFRS. The Company's functional currency is the Euro and it has
adopted the Euro as its presentational currency. The Group has adopted the Euro asits presentational currency.
The financial information for the years ended 31 December 2013 and 31 December2012 does not constitute statutory accounts as defined by section 435 of theCompanies Act 2006 but is extracted from the audited accounts for those years. The31 December 2012 accounts have been delivered to the Registrar of Companies. The31 December 2013 accounts will be delivered to Companies House within thestatutory filing deadline. The auditors have reported on those accounts. Their reportwas unqualified and did not contain statements under Section 498 (2) and (3) of theCompanies Act 2006. Going concern The Directors consider that it is appropriate for the accounts to be prepared on agoing concern basis. At 31 December 2013, the Group had net assets of €50.5m(2012: €53.1m) and net current assets of €13.0m (2012: € 6.7m excluding Non currentAssets Held for Sale of €8.0m reported within the total of € 14.7m). Key in our assessment of going concern is the financial effect of the transaction withGenel Energy plc ("Genel") on which more information is given below. On 21 December 2012, Mediterranean Oil & Gas Plc ('MOG') signed a share sale andpurchase agreement (the 'Share Sale Agreement') with Genel Energy plc ('Genel')which provided for the acquisition by Genel of a 75% interest in MOG's wholly ownedsubsidiary, Phoenicia Energy Company Limited ('PECL'). The Share Sale Agreementcompleted on 28 February 2013, resulting in MOG receiving, among other things, aUS$10 million cash payment, 100% carry on the first exploration well, and a 100%carry on the second exploration well, up to US$30 million gross expenditure, inrelation to the PSC (the 'Transaction'). A decision on the timing to drill the second wellwill be made after the first well has reached total depth. On 9 January 2014, following the issuance of Maltese Government consent, PECLwhich wholly owned the rights to the PSC, assigned a 25% working interest in thePSC to Melita Exploration Company Ltd ('MECL'), a wholly owned subsidiary of MOG.Concurrently with this assignment, MOG transferred its remaining 25% interest inPECL to Genel Energy Holdings Ltd. Following these transfers, PECL holds 75%working interest in the PSC and MECL a 25% working interest. As previously reported, on 3 January 2013, Leni Gas & Oil Investments Limited('LGOI') and Leni Gas & Oil plc (collectively, the 'Claimants') commenced legalproceedings in the Queen's Bench Division of the Commercial Court of the High Courtof Justice in England and Wales (the 'High Court'), against Malta Oil Pty Limited('MOL') and Phoenicia Energy Company Limited ('PECL') (together, the 'Defendants').MOL is a subsidiary of the Company. The Company held a 25% interest in PECL, asat period end. The proceedings relate to the purchase by PECL of LGOI's 10%interest previously held in the Malta Offshore Area 4 PSC (the 'PSC'). The Claimantsseek: rescission of the sale agreement dated 31 July 2012 under which LGOI sold its10% interest in the PSC to PECL, further or alternatively, damages for fraudulentmisrepresentation, and interest on any sums which are found to be due. TheDefendants and the Company's Board of Directors continue to refute the variousclaims which have been made by the Claimants. The Group will defend itself and theinterests of its shareholders rigorously. The outcome of this claim and the potentialfinancial impact cannot be determined at this stage and therefore no provision hasbeen made in the financial statements. The High Court hearing is scheduled tocommence on 3 March 2013. In drawing its conclusions of the going concern assessment performed, managementhas prepared cash flow projections reflecting the effect of completion of theTransaction on its future funding needs, together with the known effect of thecashflow requirements of other Group operations and development plans along withthe Directors' expectations, based on professional advice, relating to thecontingencies facing the Group. The detailed assessment performed by the Directorsindicates that the Group can continue to meet its liabilities as they fall due and meetits minimum spend commitments on its licenses for a period of not less than 12months from the date of the financial statements.
2 (Loss)/earnings per share
2013 2012€'000 €'000
Numerator(Loss)/Profit for the year (3,250) 893DenominatorWeighted average number of shares used in basic (LPS)/EPS 430,397,609429,211,517Dilutive effect of share awards and options outstanding at 31 December 6,564,280 4,143,237Weighted average number of shares used in diluted (LPS)/EPS 436,961,889433,354,754(Loss)/Earnings per share on continuing operations Basic (1.41) cents 0.41 cents Diluted (1.41) cents 0.41 centsEarnings per share on discontinued operations Basic 0.66 cents (0.20) cents Diluted 0.66 cents (0.20) cents(Loss)/Earnings per share attributable to the equity holders of the parent Basic (0.75) cents 0.21 cents Diluted (0.75) cents 0.21 cents
3 Property, plant and equipment
Plant andOil and
GasEquipment Assets Total
€'000 €'000 €'000GroupCostAt 1 January 2012 1,391 30,318 31,709Transfers from inventory*1 2,123 2,123Revised balance at 1 January 2012 32,441 33,832Additions 76 135 211Transfers from intangible assets*2 2,176 2,176Transfer to Assets Held for Sale (note 5) (184) (184)Movement on decommissioning assets 39 39At 31 December 2012 1,467 34,607 36,074Additions 38 582 620Adjustment for exchange differences and other items (347) (347)Movement on decommissioning assets (753) (753)At 31 December 2013 1,505 34,089 35,594Depreciation, depletion and impairmentAt 1 January 2012 (1,189) (10,020) (11,209)Charge for the year (12) (4,474) (4,486)At 31 December 2012 (1,201) (14,494) (15,695)Charge for the year (30) (2,539) (2,569)Impairments (600) (600)At 31 December 2013 (1,231) (17,633) (18,864)Net book valueAt 31 December 2013 274 16,456 16,730At 31 December 2012 266 20,113 20,379At 1 January 2012 202 20,298 20,500
*1 Following the revision to IAS 16, the Group has reclassified inventory as PPEand adjusted the opening balance as at 1 January 2012 by €2.123m. There isno impact on the income statement in any period.
*2 PPE increase in 2012 includes €2.176m for transfer of Aglavizza fromintangibles due to grant of the production concession.
The assets affected by impairment losses are oil and gas properties. Managementreviewed the carrying values of all properties classified as PPE to ascertain therecoverability of values in respect of concessions where facts and circumstancessuggest that the carrying amount may exceed its recoverable amount. Recoverableamount is based on value in use. A discount rate of 10% posttax has been used inthe value in use calculation which has been deemed appropriate given the risk profileof the Group.
As a result of this exercise, an impairment loss of €0.6m was recognised onGuendalina during the year (2012: €nil).
4 Intangible assets
Gas storage Explorationasset assets Total€'000 €'000 €'000
CostAt 1 January 2012 2,693 31,209 33,902Additions 1,525 1,525Transfers to PPE (2,176) (2,176)Transfer to Assets Held for Sale (note 5a) (8,017) (8,017)Transfer to Assets Held for Sale (note 5b) (2,219) (2,219)Movement on decommissioning asset (119) (119)At 31 December 2012 2,693 20,203 22,896Additions 1,853 1,853Transfer from Assets Held for Sale (note 5a) 2,505 2,505Movement on decommissioning assets
At 31 December 2013 2,693 24,561 27,254Amortisation and ImpairmentAt 1 January 2012 (2,693) (361) (3,054)Charge for the year (41) (41)At 31 December 2012 (2,693) (402) (3,095)Charge for the year (27) (27)At 31 December 2013 (2,693) (429) (3,122)Net book valueAt 31 December 2013 24,132 24,132At 31 December 2012 19,801 19,801At 1 January 2012 30,848 30,848
The intangible assets include all those costs incurred for the exploration andeconomic evaluation of potentially productive fields. In the prior periods a gas storageasset held as intangible was written off to nil.
Management review the carrying values of exploration and evaluation assets,classified as intangible assets pending evaluation of commercially viable reserves, toascertain the recoverability of values in respect of concessions where facts andcircumstances suggest that the carrying amount may exceed its recoverable amount.Recoverable amount is based on value in use. A discount rate of 10% posttax hasbeen used in the value in use calculation which is deemed appropriate given the riskprofile of the Group.
Detail of our exploration activities in the period, developments and the legal andregulatory status of these assets is included in the Chief Executives report.
5 Assets Held for Sale
(a) Non current assets held for sale
2013 2012€'000 €'000
Assets
Exploration and evaluation assets 8,017IncomeGain on disposal 2,754
On 21 December 2012, the Group announced that it had signed the two key contractswith Genel Energy plc ('Genel') that enabled Genel's acquisition of a 75% workinginterest in Offshore Malta Area 4 Production Sharing Contract (the 'PSC'). Thesecontracts were: (1) a Share Sale Agreement which resulted in Genel acquiring 75% ofthe issued share capital of the Group wholly owned subsidiary, Phoenicia EnergyCompany Limited ('PECL') on completion, and (2) a Shareholders' Agreement, whichgoverns the operation of PECL in relation to its execution of obligations under thePSC and the rights and obligations of the shareholders of PECL, being MediterraneanOil & Gas Plc and a subsidiary of Genel. Completion of the Share Sale Agreementoccurred on 28 February 2013.
Detail of our exploration activities in the period, developments and the legal andregulatory status of these assets is included in the Chief Executives report.
Under IFRS, noncurrent assets are classified separately as 'Held for Sale' in thestatement of financial position when their carrying amount will be recovered through asale rather than continuing use. This condition is only met when the sale is highlyprobable, assets are available for immediate sale in their current condition, and themanagement is committed to the sale which should be completed within one year ofthe classification. Liabilities directly associated with the assets classified as held forsale and expected to be included as part of the sale transactions are correspondinglyalso classified separately. Property, plant and equipment once classified as held forsale are not subject to depreciation or amortisation. The net assets and liabilities of adisposal group classified as held for sale are measured at the lower of their carryingamount and fair value less cost to sell.
At 31 December 2012, the total carrying amount related to the PSC was classified as'Held for sale'. The Group has in accounting for this transaction concluded that all ofthe carrying amount should not be derecognised and therefore a gain on disposal ofthe 75% interest only has been recorded and the remaining carrying amount,€2,505,000 included in Intangible Assets.
(b) Non current liabilities held for sale
2013 2012€'000 €'000
AssetsProperty, plant and equipment 184Exploration and evaluation assets 2,219Impairment of assets to net realisable value (2,403)Noncurrent assets held for sale
Decommissioning provision (2,638)Release of decommissioning provision 1,388Noncurrent liabilities held for sale (1,250)
On 6 September 2012, the Group had entered into a sale and purchase agreementwith Canoel International Energy Limited ('CIL') to transfer to CIL and/or its nominatedsubsidiary, the Group's entire working interest in 13 exploration and production gasassets onshore Italy (the 'Sale and Purchase Agreement') comprising: MasseriaGrottavecchia, San Teodoro, Torrente Cigno, Misano Adriatico, Sant'Andrea,Masserai Petrilli, Masseria Acquasalsa, Lucera, San Mauro, Montalbano, Serra deiGatti, Villa Carbone and Colle dei Nidi (the 'Assets'). As part of this agreement theGroup was required to pay €1.25m to CIL at completion as partial contribution towardsfuture plug, abandonment and site remediation cost for these assets. In June 2013,the Italian Ministry of Economic Development issued preliminary authorisation to CILand MOG to sign the notarised transfer of the interest to CIL. CIL and MOG receivedthe final decree authorising the transfer from the Ministry of Economic Developmenton 28 June 2013, as published in the Official Hydrocarbon Gazette on 30 June 2013.
At 31 December 2012, the Assets are presented in the Consolidated Statement ofFinancial Position as noncurrent assets 'held for sale' in accordance with IFRS 5Noncurrent assets held for sale and in the income statement as discontinued
operations.
The movements of this operation in the consolidated income statement can besummarised as follows:
2013 2012€'000 €'000
Revenue 558 1,150Cost of sales (455) (696)Unwinding of discount on decommissioning provision (125) (259)Depreciation, depletion and amortisation (44)Impairment of assets to net realisable value (2,403)Release of decommissioning provision 125 1,388(Loss) for the year net of tax from discontinued operations 103 (864)
The cash flow on discontinued operations is summarised as follows:
2013 2012€'000 €'000
Profit/(Loss) on discontinued operations net of tax 103 (864)Noncash adjustments (125) 1,015Payment to CIL (1,250) Unwinding of discount on decommissioning provision 125 259Depreciation, depletion and amortisation 44Net cash flows from discontinued operations (1,147) 454
6 Segmental reporting
In the opinion of the Directors, the operations of the Group companies comprise threeoperating segments conducting exploration, production, and corporate activities.
The Group operates in one geographic area, being Mediterranean Europe. TheGroup's oil and gas revenues are generated entirely in Italy and result from sales toEuropean based customers. 99% of Group revenue is generated from sales of gasand condensate to two customers (2012: 92% from four customers). The reportablesegments have been identified on the basis that these operating segments form themain identifiable cost centres for the group as reported to the Chief OperatingDecision Maker (CODM). The CODM is defined as the Board of Directors.
The top four customers contributed the following proportions to Group oil and gasrevenues:
2013 2012Customer 1 85% 60%Customer 2 14% 15%Customer 3 13%Customer 4 4%
The primary financial statements presented reflect all the activities of these threeoperating segments. For the Group's operating segments these are the key reportableitems:
ProductionExplorationCorporate Total2013 €'000 €'000 €'000 €'000Total revenues 8,416 8,416Profit before tax 327 (259) (5,661) (5,593)Noncurrent assets 17,300 24,883 1,104 43,287Noncurrent liabilities 3,413 2,294 115 5,822Capital expenditure 620 1,853 2,473Depreciation 2,596 2,596Impairment charge 600 600
Taxation 514 184
Production Exploration Corporate Total2012 €'000 €'000 €'000 €'000Total revenues 16,254 16,254Profit before tax 5,157 (752) (781) 3,624Noncurrent assets 19,804 21,349 837 41,990Noncurrent liabilities 3,389 2,278 112 5,779Capital expenditure 211 1,525 1,736Depreciation 4,483 4,483Taxation 1,867 1,867
NonCurrent Assets comprise investment in oil and gas assets (see Notes 4 and 5)and other noncurrent receivables.
7 (Loss)/profit from operations
2013 2012€'000 €'000
This has been arrived at after charging:Other income from sales of oil and gas services 569 152Royalties 215 945Gas treatment and transport costs 470 586Development and production costs excluding staff costs 1,445 611Depreciation, depletion and amortisation 2,596 4,483Impairment (see Notes 3 and 4) 600 Staff costs total including those allocated to Cost of Sales 4,464 3,606Legal costs for the dispute with LGOI 971 165Operating lease expense 432 424Services provided by the auditor:
Audit fee for the Company 22 25 Audit fee for the Group 51 57 Audit of accounts of associates of the company under legislation 43 31 Other taxation services 13 18 8 Related parties The Company has entered into a number of unsecured related party transactions withits subsidiary undertakings. The transactions carried out between the Company andits subsidiary undertakings are for short and longterm financing, and informationregarding the remuneration of key management personnel and their connectedpersons is disclosed in the full statutory accounts which will be published shortly. On 8 November 2011, the Company entered into a shortterm secured loan facilitywith affiliates of certain of its substantial shareholders, namely affiliated investmentfunds of OchZiff Capital Management Group ('Och Ziff'), for up to €3.5m (the 'LoanFacility') to assist the Company in relation to its licence commitment at Area 4Offshore Malta. On 7 February 2012, the Company borrowed €2.0m (the 'Principal') under the LoanFacility. Repayment of the entire Principal and accrued interest thereon wascompleted on 26 April 2012. The Loan constituted a Related Party Transactionpursuant to the AIM Rules. The Directors of MOG consider, having consulted withPanmure Gordon (UK) Limited, MOG's nominated adviser, that the terms of the Loan,as set out, are fair and reasonable insofar as its shareholders are concerned. 9 Events after the reporting period Board appointments
Mathew Clarke and Jake Ulrich, both NonExecutive Directors of the Company,resigned down from the Board on 8 January 2014. Malta offshore Area 4 PSC On 9 January 2014, the Company entered an agreement with the Government ofMalta for a six month extension to the Production Sharing Contract ('PSC') coveringArea 4 Blocks 4, 5, 6 & 7 ('Area 4'). This extension will enable the contractors to thePSC to have sufficient time to complete the exploration drilling activities that areforecast to start in Q1 2014. With this extension, the expiry of the first explorationperiod to the PSC is now 17 July 2014. The Maltese Government also gave itsconsent for Phoenicia Energy Company Ltd ('PECL'), which wholly owned the rights tothe PSC, to assign 25% of its interest in the PSC to Melita Exploration Company Ltd('MECL'), a wholly owned subsidiary of MOG. Concurrently with this assignment,MOG transferred its remaining 25% interest in PECL to Genel Energy Holdings Ltd.Consequently, PECL is now a wholly owned subsidiary of Genel Energy Holdings Ltd.MECL and PECL have entered into a Joint Operating Agreement, in which PECL hasbeen appointed Operator on behalf of the joint venture parties. Following thesetransfers, PECL will hold 75% working interest in Area 4 and MECL 25% workinginterest in Area 4 and are jointly the contractors to the PSC. Ombrina Mare (Italy) Exploration Permit On 13 January 2014, the Company announced that, further to the appeal filed on the8 August 2013 (the 'Appeal') aimed at obtaining the annulment of the letter dated 9July 2013 from Ministry of the Environment and of Protection of Land and Sea('MEPLS') requesting the Company to apply for and obtain an IntegratedEnvironmental Authorisation ('AIA') as a precondition for MEPLS' approval of theEnvironmental Impact Assessment ('EIA') for Ombrina Mare, a tribunal hearing washeld on 9 January 2014 at the Administrative Court in Rome. The Company is nowawaiting the decision of the Appeal and a further update will be provided in duecourse. The Company is in continuing dialogue with the Italian Government and otherkey stakeholders to seek resolution on a way forward for the project outside of theCourts. In the Board's view, such discussions are not hindered by the Appeal. 10 Contingent liability LGOI On 3 January 2013, Leni Gas & Oil Investments Limited ('LGOI') and Leni Gas & Oilplc (collectively, the 'Claimants') commenced legal proceedings in the Queen's BenchDivision of the Commercial Court of the High Court of Justice in England and Wales(the 'High Court'), against Malta Oil Pty Limited ('MOL') and Phoenicia EnergyCompany Limited ('PECL') (together, the 'Defendants'). MOL is a subsidiary of theCompany. The Company held a 25% interest in PECL, as at period end. The proceedings relate to the purchase by PECL of LGOI's 10% interest previouslyheld in the Malta Offshore Area 4 PSC (the 'PSC'). The Claimants seek: rescission ofthe sale agreement dated 31 July 2012 under which LGOI sold its 10% interest in thePSC to PECL, further or alternatively, damages for fraudulent misrepresentation, andinterest on any sums which are found to be due. On 25 February 2013, the Defendants filed a Defence with the High Court. TheDefendants and the Company's Board of Directors continue to refute the variousclaims which have been made by the Claimants. The Group will defend itself and theinterests of its shareholders rigorously. The outcome of this claim and the potentialfinancial impact cannot be determined at this stage and therefore no provision hasbeen made in the financial statements. The High Court hearing is scheduled tocommence on 3 March 2014. The Genel Energy Plc transaction announced by the Company on 21 December 2012,which completed on 28 February 2013 and the proposed Malta work programme areunaffected by this dispute.
This information is provided by RNSThe company news service from the London Stock Exchange
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RNS Number : 8253AMediterranean Oil & Gas Plc25 February 2014
25 February 2014
Mediterranean Oil & Gas Plc(the "Company" or "MOG")
Yearend 2013 Reserves and Resources Update
The Board of Mediterranean Oil & Gas Plc (AIM: MOG) is pleased toannounce the following update of the Reserves and Resources of theCompany as at 31 December 2013. MOG's technical team has reviewedthe entire portfolio and worked closely with our Corporate Reservesauditors, ERC Equipoise Ltd ("ERCE"), to enable ERCE to certify themajority of our fields and Prospects. MOG Total Reserves:
Total Proved and Probable ("2P") Reserves are 5.3 Bcf (0.96 MMboe) ofgas and 2,376 bbls of associated condensate. 2P Reserves weresignificantly reduced compared to yearend 2012 following theannouncement of the movement of Ombrina Mare Reserves toContingent Resources in October 2013.
Considering gas Reserves only, after adjustment for 2013 production, 2PReserves dropped by 1.3 Bcf, which is a downward adjustment of 19%compared to the equivalent 2P Reserves at yearend 2012. The bulk ofthis revision is in the Onshore Italy Foredeep assets of San Basile andTorrente Celone where previously Reserves were reclassified asContingent Resources pending approval of work programmes required tocommercialise the resources.
Despite the production challenges at the Guendalina Field in 2013,Guendalina 2P Reserves net to MOG have only decreased by 7%, to 3.7Bcf, compared to the production adjusted booking at yearend 2012. MOG Total Contingent Resources: Total most likely Contingent Resources ("2C") are 32.4 Bcf (5.81 MMboe)of gas and 25.99 MMbbls of oil. Gas 2C Contingent Resources have increased by 10.1 Bcf compared toyearend 2012, driven by the movement of booked Reserves toContingent Resources at Ombrina Mare, San Basile and TorrenteCelone. As noted above, these resources will move back to Reserveswhen there is commercial progress on the assets. Oil 2C Contingent Resources have increased by 9.10 MMbbls comparedto yearend 2012, driven by the movement of previously bookedReserves to Contingent Resources at Ombrina Mare. ERCE'scertification of Ombrina Mare also resulted in a significant movement ofresources from 2C to the high estimate "3C" category. The oil 3CContingent Resources have increased by 34.80 MMbls to 65.81 MMbbls. MOG Total Prospective Resources: Total most likely Prospective Resources ("2E") are 144.3 Bcf (25.34
MMboe) of gas and 424.09 MMbbls of oil. Gas 2E Prospective Resources have increased by 30.6 Bcf compared toyearend 2012, driven by the addition of associated gas for the MonteGrosso Prospect in the Southern Apennines. ERCE having certified 26.7Bcf (19%) of those resources, will continue to work with the Company toreview the remaining assets by year end 2014. Oil 2E Prospective Resources have decreased by 46.37 MMbblscompared to yearend 2012 driven by the downward adjustment of thecertified Resources for the Monte Grosso Prospect in the SouthernApennines. ERCE has certified low estimate ("1E") of 9.84 MMbbls, 2Eof 29.87 MMbbls and high estimate ("3E") of 85.33 MMbbls, net to MOGfor the Monte Grosso Prospect. In addition, the Company estimates thatMonte Grosso has associated gas resources of 1E of 10.0 Bcf, 2E of20.7 Bcf and 3E of 56.8 Bcf. The Monte Grosso Prospect has a meanunrisked size of 48.8 MMboe net to the Company (213 MMboe grossresources) and continues to be a substantial prospect within MOG'sportfolio. ERCE has certified 96.7 MMbbls (23%) of those resources andwill work with the Company to review the remaining assets as theymature. The tables below summarise the comparison of oil and gas Reserves andResources net to MOG for yearend 2012 and yearend 2013. Net Oil Reserves & Resources in MMbbls
Prospective ProspectiveReserves Contingent Contingent Resources Resources
Proven Plus Resources Resources (unrisked) (unrisked)Probable Best High Best High
(2P) Estimate Estimate Estimate EstimateMMbbls MMbbls MMbbls MMbbls MMbbls
31 December 2012 401 172 312 4704 1,2004
31 December 2013 03 263 663 4244 1,2004 1: Independent certification by SIM.2: Company assessment.3: Independent certification by ERCE4: Independent certification by ERCE and Company Assessment Net Gas Reserves & Resources in Bcf
Prospective ProspectiveReserves Contingent Contingent Resources Resources
Proven Plus Resources Resources (unrisked) (unrisked)Probable Best High Best High
(2P) Estimate Estimate Estimate Estimate(Bcf) (Bcf) (Bcf) (Bcf) (Bcf)
31 December 2012 15.31 22.32 482 1142 2162
31 December 2013 5.33 32.44 73.44 1444 2864 1: Independent certifications by SIM and RPS (Guendalina 2012 only).2: Company assessment.3: Independent certification by ERCE4: Independent certification by ERCE and Company Assessment Dr. Bill Higgs, Chief Executive of Mediterranean Oil and Gas,commented: "In 2013 we set ourselves the goal to revisit the key elements of ourportfolio and standardise the certification of our assets. We have workedvery closely with ERCE on this project and we believe that the resultprovides additional confidence in the value of our portfolio.
In 2014 we look forward to drilling two exploration wells, one offshoreMalta and one onshore Italy, which will enable us to evaluate keyProspective Resources. In addition we are acquiring 1500km of 2Dseismic offshore Malta in Area 3, which could add additional ProspectiveResources by the end of 2014." QUALIFIED PERSONIn accordance with the guidelines of the AIM Market of the London StockExchange, Dr Bill Higgs, Chief Executive Officer of Mediterranean Oil &Gas Plc, a geologist, explorationist and reservoir manager with over 24years oil & gas industry experience, is the qualified person as defined inthe London Stock Exchange's Guidance Note for Mining and Oil and Gascompanies, who has reviewed and approved the technical informationcontained in this announcement. ENQUIRIES: Mediterranean Oil & Gas Plcwww.medoilgas.comBill Higgs, Chief Executive/Chris Kelsall,Finance Director
Tel: +44 (0)207 9592322
Liberum Capital Limited (NominatedAdviser and Joint Broker)Clayton Bush/Ryan de Franck/Tim Graham
Tel: +44 (0)20 31002222
RBC Capital Markets (Joint Broker)Matthew Coakes/Jeremy Low /Jonny Hardy
Tel: +44 (0)207 6534000
FTI Consulting (Public Relations)Ben Brewerton/Alex Beagley/Georgia Mann
Tel: +44 (0)207 8313113
Glossary
· scm: Standard cubic meter· MMscm: Million standard cubic meters· scf: Standard cubic feet· MMscf: Million standard cubic feet· Bcf: Billion standard cubic feet· bbls Stock tank barrels of oil· MMbbls Million stock tank barrels of oil· boe Stock tank barrels of oil equivalent· MMboe Million stock tank barrels of oil equivalent
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