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Preliminary Results for the year ended 31 December 2016

30^th June 2017

Lansdowne Oil & Gas ("Lansdowne" or "the Company") is pleased to announce its audited results, for the year ended 31 December 2016. Lansdowne is an upstream oil and gas company, focused on exploration and appraisal activities in the North Celtic Sea Basin, off the south coast of Ireland. The Company has targeted the Irish offshore shelf areas close to existing operating infrastructure for exploration, as these provide shallow water (generally less than 100 metres), and relatively low drilling costs and the Directors believe that these factors, combined with favourable fiscal terms, have the potential to deliver high value reserves.

Lord Torrington, Chairman commented:

"The long running litigation with Transocean, with the requirement to make substantial payments, dominated events in 2016. However, the Company was successful in its re-financing and all issues relating to the litigation have concluded.

The focus now is to create value from our 20% interest in the Barryroe oilfield, which is by any standards a significant resource, with attractive costs of development and production, against a background of greatly reduced drilling and operating costs. With the recovery of the oil price, activity within the industry has started to recover and the Barryroe Farm-Out process is continuing with discussions ongoing with a number of parties."

Operational highlights

·     Barryroe Oil Field

o  In April 2016, a judgement was handed down by the Court of Appeal overturning an earlier ruling against Transocean, in a dispute relating to the use of semi-submersible drilling unit, the Arctic III, on the Barryroe oilfield in 2011/2012.

o  In line with its 20 per cent working interest in the field, Lansdowne was liable for c US $1.4 million

o  In order to satisfy these obligations and to meet its working capital requirements, in June 2016 the Company issued 210 million shares at 1p each to raise £2.1 million before expenses.

o  Coincident with the placing a portion (£930,000) of the LC Master Fund loan was converted into equity at a placing price of 1p pershare, the remaining loan was extended to the end of June 2017 and the interest rate was reduced from 10% per annum to 5% per annum

o  In October 2016 the issue of costs in the dispute with Transocean was addressed in the Commercial Court in London. Transocean were awarded a portion, c. 40% of the costs they were claiming.

o  In December 2016, the Company triggered its option agreement with Brandon Hill Capital and placed 30,000,000 new ordinary shares ("Additional Placing Shares") at a Placing Price of 1p per share to raise £300,000 before costs to settle its share of the Transocean costs award and to provide general working capital

o  All litigation issues with Transocean have now concluded 

o  Providence Resources continued its farm-out efforts on behalf of the partners in the Barryroe oil field (Lansdowne 20%) and discussions are continuing with a number of parties.

·     Standard Exploration Licence 4/07

o  Post well studies confirmed the Midleton gas discovery was considered too small to be commercial

o  Following a comprehensive review, it was concluded that none of the other prospective structures on the acreage were attractive enough to offer drillable targets and the Licence was relinquished with effect from 31 December 2016.

Board Changes

·     In addition to portfolio rationalisation, the Company took other actions to further reduce running costs, with Richard Slape, Commercial Director, leaving after the successful completion of the refinancing and Johnny Greenall, Chairman, retiring at the AGM on 20 July 2016.

Financial

·     Cash balances at 31 December 2016 of £0.17 million (2015: £0.32 million).

·     Operating expenses for the year were £0.7 million (2015: £1.05 million).

·     Loss for the year after tax of £1.2 million (2015: loss £15.1 million).

·     Loss per share of 0.4 pence (2015: loss 10.2 pence).

Results for the year ended 31 December 2016

Chairman's Statement

Introduction

This year proved to be very challenging for the Company. Oil prices continued to decline, reaching a low-point below $30/bbl in the first quarter. Furthermore, on 13 April 2016, a judgement was handed down by the Court of Appeal overturning an earlier ruling against Transocean in a dispute with Providence Resources ("Providence") about certain spread costs.

The case related to amounts claimed by Transocean against Providence regarding the use of the semi-submersible drilling unit, the Arctic III, in 2011/12 on the Barryroe oilfield, offshore Ireland. The total claim, which was made by Transocean in 2012, amounted to approximately US$19 million. Providence, in defence of its position, counterclaimed against Transocean. The Hon. Mr Justice Popplewell, in his judgement of 19 December 2014 in the Commercial Court in London, found that Transocean was in breach of contract for failing to maintain various parts of its sub-sea equipment and that Transocean was not, therefore, entitled to the full amount claimed. The ruling also supported Providence's position that Providence was entitled to set off certain spread costs against Transocean's claim.

Transocean sought and was granted the right to appeal one aspect of Mr Justice Popplewell's judgement. This specifically related to Providence's right of set off and the appeal turned on the Court's interpretation of the wording of the consequential loss clause in the rig contract. The appeal was heard in March 2016. 

The financial implications of the Court of Appeal's judgement resulted in the payment of approximately US$7 million (excluding interest and costs) to Transocean by the Barryroe partners. In line with its working interest in the field, Lansdowne was liable for 20% of this amount (c. US $1.4 million) and any amounts to be paid in the future.  

Given the financial implications of this, Lansdowne shares were suspended pending clarification of the Company's financial position. The Company moved to address the situation and a General Meeting held on 9 June 2016 gave shareholder approval to allot new shares and for a necessary share capital re-organisation. A placing was then completed to raise £2.1 million to settle the outstanding amounts due and to provide working capital and Lansdowne's shares returned to trading on 22 June 2016.

Coincident with the placing, a portion (£930,000) of the LC Capital Master Fund loan was converted into equity at a placing price of 1p pershare, the remaining loan was extended to the end of June 2017 and the interest rate was reduced from 10% per annum to 5% per annum.

In addition, the Company entered into an option, exercisable on one or more occasions at any time for 12 months from June 2016, to require Brandon Hill Capital to use its reasonable endeavours to procure subscribers for new ordinary shares in the capital of the Company to raise up to an aggregate additional £500,000 (the "Additional Placing").  Exercise of the option was conditional, inter alia, upon the Company being required to reimburse Providence Resources in respect of further costs and/or awards associated with the Transocean dispute.

A hearing of Transocean's application in respect of Part 36 of the English Civil Procedure Rules was heard by Mr Justice Popplewell in the Commercial Court in London on 14 October 2016 and Judgement was handed down on 20 October 2016.

The Judgement stated that, as a result of the decision of the Court of Appeal in April 2016, Transocean was entitled to its costs of the first instance proceedings from 30 August 2014 on the Standard Basis (i.e. approximately 70%) but that the other Part 36 cost consequences in relation to obtaining costs on the indemnity basis, interest on costs and the principal sum and the surcharge of £75,000 did not apply. Based on the Judgement, Providence paid Transocean a sum amounting to some 40% of Transocean's claim for costs.  Under the Joint Operating Agreement, Lansdowne reimbursed Providence for its 20% share of these costs.

On 9 November 2016, the Company announced that the Supreme Court ordered that permission to appeal be refused as the appeal does not raise a point of law of general public importance.

This dispute arose as a result of the failure of equipment on the rig whilst drilling the Barryroe appraisal well, leading to extensive delay and cost over-run. The long-running litigation has been a painful and distracting experience for the Company and it is a great relief to finally put this behind us.

In December 2016, the Company triggered its outstanding option agreement with Brandon Hill Capital and placed 30,000,000 new ordinary shares ("Additional Placing Shares") at a Placing Price of 1p per share to raise £300,000 before costs to settle its share of costs and to provide general working capital.

Standard Exploration Licence 4/07 was relinquished with effect from 31 December 2016.

Lansdowne retained a 20% interest in the licence after farming out to PSE Kinsale Energy Limited ("Kinsale Energy"), who acquired an 80% interest and operatorship and who drilled the 49/11-3 well on the Midleton Prospect in 2015. The well found gas in the Greensand, the main reservoir target, but the volume was considered too small to be commercial.

Kinsale Energy conducted a comprehensive post-well evaluation of the other prospective structures on the acreage, but concluded that, based on the current data available, none of these were attractive enough in terms of risk and reward to offer drillable targets.

Midleton was considered the prime prospect on SEL 4/07 and, following the disappointing results of the 49/11-3 well, it made sense to relinquish the acreage. This further portfolio rationalisation reduced Lansdowne's running costs and allowed the Company to focus all its resources upon the Barryroe Field where substantial 2C resources have been established.

In addition to portfolio rationalisation, the Company has taken other actions to further reduce running costs, with Richard Slape, Commercial Director, leaving after the successful completion of the re-financing and Johnny Greenall, Chairman, retiring at the AGM on 20 July 2016.

I would like to thank both of them for all their efforts and wish them the very best for the future.  

Financial Results

The Group recorded an after tax loss of £1.2 million for the year ended 31 December 2016 compared to a loss of £15.1 million for the year ended 31 December 2015.

Group operating expenses for the year were £0.7 million, compared to £1.0 million in 2015.

Net finance expense for the year was £571,000 (2015: £129,000).

Cash balances of £0.17 million (2015: £0.32 million) were held at the end of the financial year.

Total equity attributable to the ordinary shareholders of the Group has increased to £12.5 million as at 31 December 2016 from £10.4 million as at 31 December 2015.

Outlook

The Court of Appeal ruling posed a real problem at what was already a difficult time for your Company. However, the Company was successful in its re-financing efforts and I would like to thank all that took part, but in particular the support of Brandon Hill Capital, Beaufort Securities and LC Capital, was essential to providing a successful outcome. I would also like to thank LC Capital for further extending the LC Capital Master Fund Load to 1 July 2018.

Now that the immediate problems associated with the litigation payment have been resolved, it is time to look forward to creating value from our 20% interest in Barryroe. This is by any standards a significant resource with attractive costs of development and production and our entire focus is to move this project forward against a background of greatly reduced drilling and operating costs and a stabilising oil price environment.

With the recovery of the oil price, farm-in activity within the industry has started to recover and the Barryroe Farm Out process is continuing.  

Again, I would like to thank all our shareholders for your continued support.

Tim Torrington

Chairman