Press / Press Releases

Final Results for the year ended 31 December 2016

Date: 8 Jun 2017

8 June 2017


Baron Oil plc

(“Baron” or “the Company”)


Final Results for the year ended 31 December 2016


The Board of Baron is pleased to announce its Final Results for the year ended 31 December 2016.




  • Group loss before taxation of £175,000 compared to loss of £1,775,000 in 2015.
  • Loss attributable to equity shareholders after accounting for minority interest of £32,000 (2015 £2,044,000).
  • Exploration and evaluation costs of £739,000, principally unsuccessful well on licence PL1/10 Northern Ireland.
  • Net impairment charges of £283,000.
  • Administration costs down to £700,000 from £1,137,000 in 2015.
  • Fall in value of Pound Sterling against the US Dollar after Brexit vote gives rise to gain of £1,131,000 (2015 gain of £271,000).
  • Net assets of £6,073,000, down from £6,651,000 at the end of 2015.
  • End of year cash balances of £5,231,000, of which £3,073,000 is held in escrow in respect of performance guarantees, leaving £2,158,000 of cash immediately available (2015 £3,010,000).


Commenting on the results, Chairman Bill Colvin said:

“2016 was a difficult and frustrating year for the Company and its shareholders.  Delays to exploration work in Peru block Z-34 continued while we wait for Union Oil & Gas Group (“UOGG”) to achieve a farm-out of their 80% interest, although the block remains in the Force Majeure period for the time being.  On the positive side, the new 2D seismic enabled us to define a drillable prospect in Peru block XXI and we hope to be able to drill on this block during 2017, subject to the availability of funds. However, the unexpected action by UOGG in failing to pay the US$2 million due on approval of the block Z-34 assignment was a setback after our year-end. We hope that we will receive the money owed by UOGG in the very near future and are also hopeful that a farm-out of Z-34 will be achieved by them, although current market and industry conditions continue to make this difficult. We have commissioned an independent technical study of the 3D seismic attributes on block Z-34, which should assist the farm-out effort and give Baron a better understanding of the numerous prospects within the large offshore block.

The joint venture with SundaGas has given us an accelerated view of new opportunities in SE Asia and we hope at least one of these can be firmed up within the next three months.  The Board continues to review new opportunities elsewhere and is also investigating possibilities for corporate activity.  These efforts will continue as we attempt to bring a transaction to fruition.  In the meantime, we continue to cut costs and salaries to conserve our cash.”


For further information:


Baron Oil Plc                                                             Tel: +44 (0)1892 838948

Malcolm Butler (CEO)


Cantor Fitzgerald Europe (Nominated Adviser and Broker)     Tel:  +44 (0) 20 7894 7000

Sarah Wharry (Corporate Finance)

Alex Pollen (Corporate Broking)


SP Angel (Joint Broker)                                               Tel:  +44 (0)20 7470 0470

Richard Hail / Richard Redmayne






The net result for the year was a loss before taxation of £175,000, which compares to a loss of £1,775,000 for the preceding financial year. After taking into account the minority interest in Colombia, the loss after taxation attributable to Baron Oil shareholders is £32,000.

Turnover for the year was zero compared to £1,048,000 in the preceding year. This arises from the cessation of production in July 2015 from the Nancy-Burdine-Maxine fields (“NBM”) and the expiry of the licence in October 2015. During 2016, it was necessary for the local staff of Inversiones Petroleras de Colombia SAS (“Invepetrol”) to administer the relinquishment of the licence, the clearance of equipment from the well site and to obtain all necessary environmental approvals. The total cost of this continued administration was £56,000 and, with all the tasks associated with the licence cessation complete, the final closure of Invepetrol is now under way. The Income Statement includes reversals in prior impairment charges of £365,000 in respect of property, plant and equipment and receivables, arising from local asset recoveries. While the directors believe that the Company will not have any further liabilities from Colombia, we retain sufficient provision in the Statement of Financial Position (“Balance Sheet”) against any unforeseen eventualities.

In June 2016, the Group disposed of its operations in the Gold Oil Colombia branch which primarily encompassed the Group’s interest in the Rosablanca and Azar licenses. This was done by way of a sale of the assets to our partner in Rosablanca, Projects and Investments Group, for US$100,000 and resulted in a gain on disposal of £31,000.

This year, the Income Statement includes a figure of £739,000 in respect of exploration and evaluation expenditure written off. This includes £630,000 in respect of the unsuccessful Woodburn Forest well in Northern Ireland on licence PL1/10, expenditure of £28,000 on offshore Block P2123 in Northern Ireland that we have now relinquished, and £81,000 in costs regarding the South East Asia Joint Study Agreement with SundaGas.

In Peru, the Group incurred expenditure totaling £258,000 on our 100%-owned onshore Block XXI. This expenditure arises from both direct costs and local staff and support costs, and includes £49,000 of non-recurring expenditure in respect of the closure of the Lima office (the total cost was £98,000 which is split equally between Blocks XXI and Z-34). In accordance with our accounting policy, the Group has been charging unsuccessful exploration costs direct to the Income Statement; however, the results of the 2015 2D seismic on Block XXI were encouraging and may lead to the drilling of an exploration well. Accordingly, the Board are of the view that this phase of exploration is ongoing and that the expenditure should remain on the Balance Sheet as capitalised exploration and evaluation expenditure until the results of any such well are known, the carrying amount being £1,325,000.

Also in Peru, there was expenditure totaling £234,000 in respect of offshore Block Z-34 of which £163,000 has been recharged to our partner, Union Oil & Gas Group (“UOGG”), under the farm-in arrangement. As the assignment of the 30% interest to UOGG has now been completed (see below), the Group has recognised a receivable of US$2,000,000 together with a related payable of US$640,000 for Peruvian tax that is expected to arise. Other than this, we are not carrying any value in the Balance Sheet for Z-34.

Administration expenditure for the year was £700,000, down from £1,137,000 in the preceding year, excluding the effects of exchange rate movements. This cost saving arises from the reduction in activities in Colombia at £389,000, with the remainder due to cost reductions at the UK Head Office.

The major changes in the exchange rate between the Pound Sterling and the US Dollar following the Brexit referendum have had a significant impact on the Income Statement. As most of the Group’s liquid assets are in US Dollars, this has given rise to a gain on exchange of £1,131,000, the previous year gain being £271,000.

At the end of the financial year, free cash reserves of the Group had reduced to £2,158,000 from a level at the preceding year end of £3,010,000 (excluding funds of £3,073,000 held in escrow in respect of performance guarantees). This reduction in cash reserves arises from (a) the settlement of liabilities in respect of Colombia NBM; (b) exploration and evaluation activities in Northern Ireland, Peru and South East Asia; and (c) administrative and listing expenditure; compensated by the positive impact of exchange rates on our US Dollar bank balances.

The Group continues to pursue a conservative view of its asset impairment policy, giving it a Balance Sheet that consists largely of net current assets and a realistic value for its remaining exploration assets. Given the limited cash resources, the Board will take a prudent approach in committing to new capital expenditures beyond those already committed to existing ventures.





Through its Peruvian subsidiary Gold Oil Peru SAC (“GOP”) , the Company currently owns a 20% carried interest in the contract for block Z-34, which is located in deep water adjacent to the prolific Talara Basin offshore North West Peru and covers an area totalling 2,968 square kilometres. The block is located close to existing producing fields in a basin that has already produced 1.7 billion barrels of oil. Most of the remaining potential in this area is believed to be located offshore.

In 2014 all the remaining exploration phases were consolidated into a one well drilling obligation. However due to the lack of drilling vessels capable of drilling in 1,800 metres of water and continuing negotiations on the regulatory framework for deep water drilling offshore Peru, both this block and the adjoining Z-38 block, operated by Karoon Gas, were placed into a Force Majeure (“FM”) contractual position by Perupetro in 2014, where Z-34 still remains. In effect this means that all the contractual time limits for drilling are suspended until the FM is lifted by Perupetro. GOP continues to be in a constant and constructive dialogue with Perupetro on this issue.

Following re-mapping of the 3D seismic by in-house and consulting geologists of UOGG, three substantial prospects have been identified in the northern half of block Z-34.  The latest estimates of Unrisked Prospective Resources are as follows:  Cuy – 413 million barrels of oil recoverable; Cuy Sur – 200 million barrels of oil recoverable; and Daphne – 272 million barrels of oil recoverable.  The Cuy prospect, in 1,757 metres of water, has been proposed as the first to be drilled and, following presentation of a detailed well prognosis, this location has been approved by Perupetro. The location lies around 10 miles offshore and is interpreted on the 3D seismic as having multiple stacked reservoir sections, each with amplitude anomalies, lying 2,700 to 4,175 metres below sea level,

Our partner in the block is UOGG, a subsidiary of the Uruguayan private equity firm Union Group, who own the remaining 80% interest but pay all the costs related to exploration and administration of the block. This carry arrangement lasts through all remaining exploration phases of block Z-34. The original transaction with UOGG was signed in April 2013, when they acquired the 50% interest previously held by Plectrum, and the Public Deed  to complete the transfer of the remaining 30% working interest in the block to UOGG was officially approved by the Peruvian President on 9 February 2017.

However, as previously announced, UOGG have not paid the US$2 million they were due to pay to GOP on completion of the approval process. The Board is unaware as to the exact reason why UOGG have refused to pay this liability, however they do not dispute the validity of our contractual claim. Indeed they continue to work hard to find a farm-in partner with the human and capital resources to take over their obligation and drill an exploration well on the CUY prospect . Baron’s overriding aim is to work with UOGG to get this well drilled . Therefore, we have agreed to allow UOGG until 30 June 2017 to pay the $2 million we are owed and to find a suitable partner to commit to take this highly prospective, deep water block forward. If the money is not paid by 30 June 2017 we will reconsider our position and may be forced to take legal action to recover the funds due to the Company.

As a result of the default on the Farm-In Agreement of 2013, the agreement signed with UOGG in June 2016, under which they assumed day to day operatorship of all the technical work on the block on a contract basis has been terminated.  GOP has now re-assumed full control of the operations.

As noted above, notwithstanding their obligation to carry the Company, UOGG have made it clear they will only drill a well if a large, better funded and experienced oil company farms in to the block. The Board is in regular dialogue with Perupetro and  UOGG to try and unlock value from this acreage. It is hoped that the current situation of low drilling day rates and relatively stable oil prices will be more conducive to finding a potential farm-in partner.

We continue to be frustrated by the unwillingness of UOGG to spend any money on third party studies of block Z-34, preferring to rely on the work and opinions of potential farmees. In spite of this, Baron has decided to go ahead with a detailed study of the potential reservoirs of the Cuy, Cuy South and Daphne prospects to get an independent specialist view of the nature, possible fluid/gas contents and size of these.  It is hoped this will be completed by the end of July 2017.

In any case, the Board does not envisage a well being drilled on this block until at least mid-2018 because of the long lead time necessary to gear up for drilling in these water depths.



The Company owns a 100% interest in the contract for block XXI through its Peruvian subsidiary GOP.  The block lies onshore in the Sechura Desert, close to the town of Piura, and covers a current area of 2,425 square kilometres.

Mapping of the 2D seismic data obtained in 2015/16 has enabled the definition of the El Barco prospect, lying to the northeast of the 1954 Minchales-1X well.  Amplitude anomalies indicating probable gas sands have been identified in the shallow section and several gas chimneys are clearly visible on the new seismic data. These chimneys are caused by small quantities of gas escaping from deeper reservoirs, probably in the fractured basement, causing velocity disruptions within overlying beds, which create vertically-oriented “fuzzy” zones on the seismic lines. Mapping of the El Barco prospect by GOP indicates the that Unrisked Prospective Resources are in the range of 6.4 billion cubic feet of recoverable gas and 7.1 million barrels of recoverable oil.  The potential gas lies in the shallow reservoirs and discussions have already been held with a nearby operation that may purchase any gas found.

The proposed El Barco-3X exploration well would be drilled down to 1,800 metres to test a basement high most likely consisting of fractured Palaeozoic rocks, which form the reservoir of the San Pedro oil field (250 million barrels in place) and several other oil and gas fields to the west of Block XXI. A formal well prognosis document is being submitted to Perupetro for approval in June 2017 and GOP is in the process of obtaining bids for a land rig and all the support services necessary to drill this well. However recent severe flooding in northern Peru has pushed back our plans to drill by several months. Perupetro have granted us a Force Majeure extension to the licence due to the extreme weather conditions. Discussions continue with a potential farm-in candidate and it is still the intention to bring in a partner to share the costs of drilling this well.  This is particularly important if there is a continuing delay to the payment from UOGG in relation to block Z-34, since the Group will not have funds available to drill.



During the year, the Group closed its offices in Lima, Peru, and made all staff, including the local country manager, redundant. The operations have now been outsourced to PAS Peru SAC, a local management services company with considerable experience in the oil and gas sector. This is expected to result in annual cost savings of around £80,000 going forward





Baron currently holds a 12.5% working interest in Licence PL1/10, onshore in the Antrim area of Northern Ireland.  The block covers an area of 332 square kilometres over the Larne Basin.  The Company paid 13.33% of the costs of the Woodburn Forest-1 well, which was plugged and abandoned at a depth of 2,000 metres in June 2016 and failed to encounter commercial hydrocarbons.  The joint venture partners are currently carrying out a review of the source rock potential of the area and re-mapping a prospect close to the coast.  However, reprocessing of the offshore data in adjacent Licence P2123 failed to identify any drillable prospects and notice to relinquish this licence was given to the Oil & Gas Authority in November 2016.



Baron has assisted Infrastrata plc to advance their strategically important gas storage project in Northern Ireland over the past 18 months by providing interim funding. Such funding has now ceased and all our capital and interest totaling £138,000 has been paid in full.  However,the Company remains entitled to receive up to £200,000 in the event of a sale or disposal of the Islandmagee project company by Infrastrata before 6 January 2019.




Baron entered into a joint study agreement in September 2016 with SundaGas Pte Ltd, based in Singapore.  The purpose was to give the Company accelerated access to a range of exploration and production activities in prospective areas of South East Asia without the need to increase its own staff and overhead.  The agreement ran for a six month period, to March 31, 2017, during which time the group considered a broad range of possibilities and entered into preliminary negotiations on several assets. If any of these negotiations are successful, Baron has the right to take an interest in the assets. Although progress has been delayed by unforeseen circumstances we hope that agreement can be reached within the next three months on a new continental shelf project which contains significant gas potential.




Since the cessation of the NBM licence in October 2015, all our staff in Colombia, except one, have been made redundant and we retain a minimal administrative presence in Bogota. As noted above, we disposed of our interests in Gold Oil Colombia branch in June 2016 with proceeds of US$100,000, which were received after the year end. The handover of the Nancy Burdine Maxine (“NBM”) oil field back to Government control took place during 2016. NBM was operated by Invepetrol in which we are 50% shareholders and in which control effectively passed to our partner, CI International Fuels, in 2017. Proceedings to wind up this company are expected to commence shortly.




2016 has been a difficult year for the Company. The continuing delays in Peru and in South East Asia have contributed to progress being much slower than we had planned. The unexpected action by UOGG following the approval of the block Z-34 farm-in has been both disappointing and frustrating. However, the Board has been active during the period in reviewing new opportunities and investigating possibilities for corporate activities.  We will continue in our attempts to bring a transaction to fruition.


The Board recognises that the ongoing delays in development activity are of concern to shareholders and, in recognition of the impact of these delays, have agreed to accept temporary salary reductions averaging 30% which will result in an annualised cost saving of £100,000.


I would like to personally thank our two executive directors, Malcolm Butler and Geoff Barnes, who are doing a huge amount of varied work in this small company. I would also like to thank our shareholders for their continued patience and support.



Bill Colvin



8 June 2017


Notes 2016 2015
£’000 £’000
Revenue  – 1,048
Cost of sales  – (611)
Gross profit  – 437
Exploration and evaluation expenditure (739)  –
Intangible asset impairment 11 (370) (1,312)
Property, plant and equipment impairment and depreciation 10 95 (9)
Goodwill impairment 12 (81)  –
Receivables and inventory impairment 3 73 (163)
Disposal of Colombia branch operations 31  –
Administration expenses (700) (1,137)
Profit on exchange 1,131 271
Other operating Income 4 319 65
Operating loss 3 (241) (1,848)
Finance cost 6 (35) (19)
Finance income 6 101 92
Loss on ordinary activities
    before taxation (175) (1,775)
Income tax expense 7 (113) (435)
Loss on ordinary activities
    after taxation (288) (2,210)
Dividends  –    –
Loss for the year (288) (2,210)
Loss on ordinary activities
    after taxation is attributable to:
Equity shareholders (32) (2,044)
Non-controlling interests (256) (166)
(288) (2,210)
Earnings per ordinary share – continuing 9
   Basic (0.002p) (0.150p)
   Diluted (0.002p) (0.150p)




Notes 2016 2015
£’000 £’000
Non current assets
Property plant and equipment
— oil and gas assets 10 3 4
— others 10
Intangibles 11 1,325 2,548
Goodwill 12  –
1,328 2,552
Current assets
Trade and other receivables 14 2,070 1,712
Cash and cash equivalents 15 5,231 5,452
7,301 7,164
Total assets 8,629 9,716
Equity and liabilities
Capital and reserves attributable to owners of the parent
Share capital 17 344 344
Share premium account 18 30,237 30,237
Share option reserve 18 81 286
Foreign exchange translation reserve 18 1,688 1,978
Retained earnings 18 (26,624) (26,797)
Capital and reserves attributable to non-controlling interests 19 347  603
Total equity 6,073 6,651
Current liabilities
Trade and other payables 16 1,054 1,747
Taxes payable 16 1,502 1,318
2,556 3,065
Total equity and liabilities 8,629 9,716


Foreign Non-
Share Share Retained Share option exchange controlling Total Equity
Capital Premium Earnings reserve translation interests
Group £’000 £’000 £’000 £’000 £’000 £’000 £’000
As at 1 January 2015 344 30,237 (24,753)  205 1,890  769 8,692
Shares issued  –  –  –  –  –  –
Transactions with owners  –  –  –  –  –  –
(Loss) for the year attributable to equity shareholders  –  – (2,044)  –  – (166) (2,210)
Share based payments  –  –  –  81  –  –  81
Foreign exchange translation adjustments  –  –  –  – 88  – 88
Total comprehensive income  for the period  –  – (2,044)  81  88 (166) (2,041)
As at 1 January 2016 344 30,237 (26,797) 286 1,978  603 6,651
Shares issued  –  –  –  –  –  –
Transactions with owners  –  –  –  –  –  –
(Loss) for the year attributable to equity shareholders  –  – (32)  – (256) (288)
Share based payments  –  – 205 (205)  –  –
Foreign exchange translation adjustments  –  –  –  – (290)  – (290)
Total comprehensive income  for the period  –  –  173  (205)  (290)  (256) (578)
As at 31 December 2016 344 30,237 (26,624) 81 1,688 347 6,073



        YEAR ENDED 31 DECEMBER 2016
Group Company Group Company
2016 2016 2015 2015
£’000 £’000 £’000 £’000
Operating activities (2,326) 284 (2,746) (1,311)
Investing activities
Return from investment and servicing of finance 101 90 92 72
Sale of Intangible assets  1,784  –  –  –
Disposal of tangible assets  82  82  227  304
Loan to subsidiary (advanced)/repaid  – (246)  – 381
Acquisition of intangible assets (492) (74) (1,732) (553)
Acquisition of tangible fixed assets (1)  – (12)  –
1,474 (148) (1,425) 204
Financing activities
Proceeds from issue of share capital  –  –  –  –
Net cash inflow (852) 136 (4,171) (1,107)
Cash and cash equivalents at the beginning of the year 3,010 1,944 7,181 3,051
Cash and cash equivalents at the end of the year 2,158 2,080 3,010 1,944
Reconciliation to Consolidated Statement of Financial Position
Cash not available for use 3,073 2,943 2,442 2,442
Cash and cash equivalents as shown in the Consolidated Statement of Financial Position 5,231 5,023 5,452 4,386


The Company will post its Annual Report and Accounts for the year ended 31 December 2016 to shareholders on Friday 9 June 2017.  Copies of the Company’s annual report will shortly be available on the Company’s website at