Baron Oil, the AIM-quoted oil and gas exploration and production company focused on opportunities in SE Asia, Latin America and the UK, is pleased to announce its audited financial results for the year ended 31 December 2019.

Operations

Chuditch PSC: The award in November of the TL-SO-19-16 Production Sharing Contract ("Chuditch PSC"), offshore Democratic Republic of Timor-Leste, marks a major step forward for the Company. Shell's internal analyses following the drilling of the Chuditch-1 discovery in 1999, indicate a Mean Gas Initially in Place (GIIP) for the surrounding group of prospects in the Chuditch PSC of 2,320 BCF, considered by Baron to be low-risk GIIP Pmean Prospective Resources (but not SPE PRMS compliant). Baron has an indirect interest of 25% in the Chuditch PSC, held through its shareholding in SundaGas (Timor-Leste Sahul) Pte. Ltd.

Block XXI: The Company continues to pursue efforts to drill the El Barco-3X well in Peru, including introducing a partner. However, plans for drilling are currently halted by COVID-19 issues, with strict movement restrictions including the inability to visit the site. Baron has a 100% interest.

Inner Moray Firth (UK): Initial subsurface work on Licence P2478, which contains the large Dunrobin and smaller Golspie prospects, is under review and further seismic reprocessing is planned. Licences P2470 and P2235 have been relinquished. Baron has a 15% interest in the Inner Moray Firth.

Dorset (UK): The latest analysis of the Colter South Prospect (on Licence P1918), in which oil was found during 2019, indicates that a further appraisal well is required to define the resources before development can be planned. The current oil price collapse and short remaining duration of the Licence mean efforts to bring in a new drilling partner are now unlikely to succeed. Hence, under IFRS6, the entire carrying amount for Colter has been impaired. The status of PEDL330 and PEDL345 onshore Licences, lying to the south of Wytch Farm oilfield, continue to be reviewed in light of the current business environment. Baron has an 8% interest in the Dorset Licences.

Financials

• Net result for the year was a loss before taxation of £1,674,000 (2018: loss of £3,280,000)
• Loss after taxation attributable to shareholders was £1,674,000 (2018: loss of £2,495,000)
• Exploration and evaluation expenditure of £1,207,000 (2018: £1,592,000)
• IFRS6 intangible asset impairment charge of £1,047,000, mainly relating to P1918 Colter (2018: IFRS6 charge of £1,360,000 relating to Block XXI, Peru) 
• Administration expenditure for the year was £442,000 (2018: £549,000), a 20% reduction
• The end of year free cash balance was £347,000 (2018: £1,709,000). Excluding the proceeds of a share placing in June 2019 amounting to £440,000 gross (£408,000 net), the overall cash outflow during the year amounted to £1,770,000.
• In Q1 2020, the Company undertook a further capital raise of £2.5m gross (£2.3m net) at 0.1p per share.

Commenting on the results, Malcolm Butler, Executive Chairman, said:
"The final award of the Chuditch PSC was a great result for your Company and marks a step-change in Baron's asset base. However, our industry is currently faced with the dual global impact of significantly lower oil prices and the rapid spread of the COVID-19 virus. While Baron is not insulated from the oil price shock, it should be noted that the Company's assets are all in the pre-cashflow exploration phase and, following the award of the Chuditch PSC, are now heavily weighted towards gas where regional markets play a much greater role in pricing.

In Timor-Leste, there is no obligation to drill before 2022 and any commercial production is unlikely to be achieved before 2025. There are no plans to fund drilling in the UK for the foreseeable future. In both cases, work on these projects over the next 12 months is desk and computer-based and should not be affected by current movement restrictions, although gaining access to the necessary data is being delayed.

As regards the El Barco-3X well in Peru, it is unclear how much local oil companies' appetite for drilling will be affected by oil price movements and although it is unlikely that local gas prices in this part of Peru will be affected by the drop in oil prices, it is impossible to predict the effects on short term gas demand of a COVID-19 related recession.

Critically for shareholders, following our £2.5m (gross) fund raise in Q1 2020, our proposed work programme for 2020 and into 2021 is funded."

KeyFacts Energy: Baron Oil UK country profile