Fastnet Oil & Gas plc – Annual Report 2013/media/Files/F/Fastnet-Oil-and-Gas/...Fastnet Oil & Gas plc Annual Report 2013 Fastnet Oil & Gas plc Annual Report 2013

Fastnet Oil & Gas plc Annual Report 2013

Fastnet O

il & G

as plc A

nnual Report 2013

www.fastnetoilandgas.com

ContentsOverviewIFC Corporate Statement01 Highlights02 Our Strategy03 Where We Operate

Business Review04 Chairman’s Statement05 Managing Director’s Review07 Operations Review

Corporate Governance16 Board of Directors17 Directors’ Report

Financial Statements24 Independent Auditor’s Report 25 Consolidated Statement of Comprehensive Income26 Consolidated Statement of Financial Position27 Consolidated Statement of Cash Flows28 Consolidated Statement of Changes in Equity29 Company Statement of Financial Position30 Company Statement of Cash Flows31 Company Statement of Changes in Equity32 Notes to the Financial Statements52 Company Information

Fastnet Oil & Gas plc (AIM: FAST, ESM: FOI) is an independent oil and gas exploration company focused on identifying early stage exploration and appraisal opportunities in underexplored and frontier territories. The Company has a portfolio of high impact exploration and appraisal assets offshore Ireland and in Morocco.


Financial Highlights – Strong balance sheet with £20.7 million cash reserves at 31 March 2013

– Oversubscribed share placings which raised £10.0 million and £15.0 million in June and November 2012, respectively

– Net loss for the year of £1.4 million inclusive of the acquisition costs of Pathfinder Hydrocarbon Ventures Limited and reverse takeover of Sterling Green Group plc

– Tight cost control measures in place to ensure efficiency of capital is maintained

Operational Highlights – Fully funded to meet all current licensing phase commitments and obligations, and subject to successful farm-outs, a non-obligatory drilling programme onshore Morocco and an exploration well in Foum Assaka in 2014

– Successful entry into offshore Morocco (Foum Assaka Licence) and onshore Morocco (Tendrara Lakbir)

– Established one of the largest, exploration-focused, acreage positions in the Celtic Sea of any independent

– Over 25,000 km2 under licence in two emerging exploration “hot spots”

– 2,577 km2 3D seismic survey in Foum Assaka completed and processed, de-risking multiple prospects for drilling in 2014

– 1,910 km2 of 3D seismic acquired in the Celtic Sea, the largest 3D seismic survey ever in the area and designed to accelerate potential targets for early drilling

Corporate Activity – Successful acquisition of Terra Energy Limited and admission to trading on AIM and ESM

– Acquisition of Pathfinder Hydrocarbon Ventures Limited with the accrued benefit of a carry through seismic acquisition and processing on the Foum Assaka Licence, capped at US$16.2 million

01

MOROCCO

IRELAND

The portfolio has been established as follows:

Morocco (Foum Assaka and Tendrara Lakbir)

Ireland (Molly Malone, Mizzen, Mizzen East, Shanagarry, Block 49/13 and Deep Kinsale)

– Focused on emerging and underexplored basins with proven petroleum systems and high impact exploration prospects and leads

– First mover strategy focused on identifying early stage exploration and appraisal opportunities in underexplored and frontier territories with attractive fiscal regimes

– Early monetisation strategy focused on de-risking assets to deliver potential upside through near-term drilling success creating opportunities for trade sales

– Balanced asset and risk portfolio with high rewards and surrounded by near-term drilling activity

– Experienced management team with track record of delivering results and creating medium term shareholder value through exploration success

– Well-established joint venture partnerships with successful multi-national explorers

Our Strategy

To build a portfolio of oil and gas exploration assets offshore Ireland and in Morocco where opportunities exist for early drilling and monetisation, under attractive fiscal regimes.


MoroccoAn emerging potentially world-class hydrocarbon basin

– Significant resource potential offshore Morocco in the Foum Assaka licence area with total net attributable best estimate resources of 184.9 MMbbl for Shell legacy prospects

– Offshore drilling expected H1-2014 to target new prospects developed by Kosmos Energy focused on Jubilee-type deep water turbidite fans (successfully drilled and produced in Ghana)

– Tendrara Lakbir, onshore Morocco is the largest licence (14,548 km2) in Morocco over the proven Triassic Tagi gas play (producing in the Meskala field in Morocco and in Algeria)

– Onshore drilling anticipated to commence in 2014

IrelandFocused on the Celtic Sea Basin, which hosts Ireland’s largest producing gas field and potentially its largest oil field (“Barryroe”)

– One of the largest acreage holders in the Celtic Sea, offshore Ireland with over 3,000 km2 under licence

– 1,910 km2 3D seismic acquisition completed with multi-well drilling programme planned for 2015 subject to a successful farm-out process which may be accelerated during 2013 following the preliminary results of the 3D seismic acquisition

– Significant unrisked gross in-place resources rivalling the Atlantic Margin in scale but easier to develop given shallower water depths; presence of infrastructure; and a long history of gas production in southeast Ireland from the Kinsale gas field

– Data room supporting on-going discussions with several international oil and gas companies who are potential farm-in candidates

Where We Operate

03

It has been an exciting and productive year for Fastnet Oil & Gas plc (“Fastnet” or the “Company”). Following admission to AIM and ESM in June 2012, the Company has moved quickly to establish a portfolio of material interests in potentially high impact exploration prospects in both Morocco and offshore Ireland. Fastnet now has over 25,000 km2 under licence in two emerging industry “hot spots”. The establishment of this balanced portfolio has driven initial shareholder value creation and the Company expects to deliver further growth by fast-tracking drilling programmes and farming down of its high quality exploration assets as the competition for acreage accelerates following an initial wave of licence awards over the most prospective basins in which Fastnet operates.

IPO and Reverse TakeoverFastnet was established following the reverse takeover by Terra Energy Limited (“Terra”) of AIM listed company, Sterling Green Group plc (“Sterling Green”) in June 2012. Sterling Green was subsequently renamed Fastnet Oil & Gas plc and was admitted to trading on AIM and ESM in June 2012.

Asset Portfolio DevelopmentFollowing the acquisition of Pathfinder Hydrocarbon Ventures Limited (“Pathfinder”) in July 2012, Fastnet holds an 18.75% economic (25% paying) interest in the Foum Assaka Petroleum Agreement offshore Morocco. In addition to adding a licence with significant resource potential, Paul Griffiths, the largest shareholder of Pathfinder joined Fastnet, initially, in the role of Executive Vice President of Exploration and, subsequently, Managing Director following the completion of the deal. Subsequent to the Company’s year-end, Fastnet expanded on its Moroccan presence by agreeing to farm-in to the Tendrara Lakbir Petroleum Agreement onshore Morocco, within which discovered gas, if successfully appraised, has the potential to create an opportunity to establish a pivotal position in the emerging Moroccan gas market adjacent to Western Europe thereby attracting the attention of the regional gas players.

The Company is focused on two geographical areas such that in addition to its Moroccan interests the Company has moved to secure significant acreage offshore Ireland in the Celtic Sea. The Company holds one of the largest acreage positions under licence in the Celtic Sea with an interest or option in place on six different licensing authorisations. Following the year-end, Fastnet completed a 3D seismic programme comprising 1,910 km2 and has an on-going farm-out programme in progress in relation to its Irish and offshore Morocco interests.

Financial ReviewFastnet is an early stage independent oil and gas exploration company with no revenue generated to date. The Group is reporting a loss for the year to 31 March 2013 of £1,394,000 (three months to 31 March 2012: £70,000). The increased loss reflects the transition of the Company from a private company focused on unconventional oil and gas resources to a publicly listed oil and gas exploration company focused on conventional resources in Morocco and offshore Ireland. The loss for the period comprises general and administrative costs of

£970,000, a share based payment charge of £258,000, reverse asset and other acquisition costs of £1,087,000 (this includes an accounting adjustment for a deemed cost of the business combination of Terra and Sterling Green of £809,000) and interest, other income and foreign exchange gains of £921,000.

In June 2012, as part of a share placing to coincide with the admission of the Company to AIM and ESM, Fastnet raised £10,000,000 (before expenses) through a placing of 90,909,091 new ordinary shares in the capital of the Company (“Ordinary Shares”) at 11 pence per share. In November 2012, the Company raised a further £14,960,000 (before expenses) through a placing of 68,000,000 new Ordinary Shares with new and existing investors at 22 pence per share, with both placings oversubscribed. As at 31 March 2013, the Group had cash balances of £20,736,000. Subject to the completion of the farm-out processes in relation to both its Irish Sea and Moroccan assets which the Group has underway, the Group is well funded for its current exploration programme for the medium term.

Board of Directors and ManagementIn October and November 2012, the Board was substantially strengthened with the appointments of Paul Griffiths as Managing Director and Carol Law as Executive Director. The Board now consists of Cathal Friel, Paul Griffiths and Carol Law in executive roles with Michael Nolan, Michael Edelson and Stephen Staley as non-executive Directors. Fastnet has in place an experienced management team with a track record of delivering exploration success and creating shareholder value.

OutlookThe Board’s strategy is to ensure that the Company retains a material interest in its portfolio of prospects that are being matured for drilling. This is the critical step to implementing Fastnet’s stated strategy of creating shareholder value through exposure to high impact exploration and appraisal opportunities. The Company is well placed, subject to successful farm-out agreements being concluded in relation to certain of its assets, to continue with the minimum work commitments in relation to its Moroccan and Irish licences and is de-risking its asset portfolio to a stage where major partners can be brought in for sustained value creating exploration work and drilling programmes in the near term future to support 2014 and 2015 drilling programmes.

The Board expects the key driver for shareholder value in the near term will be the execution of the Moroccan drilling programme and ensuring that the Company has a material interest in the programme to deliver maximum benefit for shareholders from any future exploration success. With this in mind, the Board looks to the future confident that the Company remains on track to execute its stated business development strategy.

Cathal FrielExecutive Chairman

16 August 2013

Chairman’s Statement


During the period under review and since, Fastnet has continued to execute its strategy of identifying early stage exploration and appraisal opportunities in underexplored and frontier territories. Since admission to AIM in June 2012, Fastnet has put in place an exciting portfolio of exploration assets offshore and onshore Morocco and offshore Ireland, comprising:

– Foum Assaka Licence (offshore Morocco)

– Farm-in option for Tendrara Lakbir Licence (onshore Morocco)

– Shanagarry, Mizzen, East Mizzen, Block 49/13 and Molly Malone Licences (offshore Ireland)

– Farm-in option for Deep Kinsale Prospect (offshore Ireland)

The Company is focused on de-risking these assets to deliver an early drilling programme to advance the opportunity for shareholder monetisation.

Acquisition of Pathfinder and farm-in option to Tendrara Lakbir LicenceThe Directors are excited about Fastnet’s entry into offshore Morocco, which is an emerging exploration frontier area on the West African Margin for the oil and gas industry with an attractive fiscal regime. Recent industry farm-in activity helps validate the perceived significant oil and gas potential of the region.

Fastnet was carried through the Foum Assaka Initial Exploration Period work programme based on a gross budget cap of US$16.2m. 2,577 km2 of 3D seismic acquisition was completed in April 2012, which exceeded the minimum work commitment of 500 km2. 15 Cretaceous deepwater fan prospects have been newly identified by the licence Operator, Kosmos Energy and the Directors anticipate that, subject to all necessary regulatory consents and the timing of rig availability, drilling of the first exploration well in Foum Assaka should commence in H1 2014.

The Company has also commenced a farm-out process in relation to its 18.75% net interest. Whilst this process is in its early stages, expressions of interest have already been received from several multi-national and national oil corporations and preferred terms are expected to include the reimbursement of past expenditures, including 3D seismic costs, and a carry for future drilling activities.

As announced in May 2013, Fastnet has agreed to farm-in to, subject to regulatory approvals, eight highly prospective exploration and appraisal blocks comprising the Tendrara Lakbir Petroleum Agreement onshore Morocco, covering 14,548 km2. This represents the largest licence in Morocco over the proven Triassic Tagi gas play. The Company anticipates the drilling of an appraisal/pre-development well in 2014, following which the Company’s gross interest in the Licence Area will be 50% (37.5% net interest).

Operating offshore IrelandFastnet has now established a material position in the Celtic Sea, where there has been renewed exploration interest following the recently successful Barryroe appraisal well in 2012. In June 2012, Fastnet was awarded two licensing options, Mizzen (Licensing Option 12/3) and Molly Malone (Licensing Option 12/2) in the Celtic Sea, offshore Ireland. In November 2012, Fastnet was granted a further Celtic Sea Licensing Option (“Block 49/13”) and also agreed to farm-in to Licensing Option 12/5 (“Shanagarry”). In February 2013, Fastnet executed an exclusive option agreement with PSE Kinsale Energy Limited, a wholly owned subsidiary of Petronas to farm-in to the “Deep Kinsale” Prospect from 4,000 feet subsea below the producing Kinsale gas field. In May 2013, the Company was awarded Licensing Option 13/3 (“East Mizzen Licensing Option”). The East Mizzen Licensing Option covers an area of 1,155 km2 and is contiguous with and extends eastwards from the Mizzen Licensing Option.

With an area of 4,028 km2 under licence, Fastnet during the year under review has one of the largest acreage positions of any independent in the Celtic Sea. The licences granted to Fastnet were selected due to their attractive petroleum geology, major reserves potential, existing seismic availability and based on our management’s past experience in these specific areas.

The Company began tendering for a 3D seismic vessel in Q1-2013 and following the award of the seismic contract to CGG (using the SR/V Vantage Vessel) the seismic programme commenced in April 2013. In June 2013 the 3D seismic programme concluded with 1,910 km2 of 3D seismic acquired for US$19 million (£12,492,000). This is the largest ever 3D seismic programme in the Celtic Sea. The Directors anticipate that this will de-risk and unlock resource potential and should increase the likelihood of attracting an industry major to participate in a future drilling programme given the scale and materiality of the prospective structures already identified. Final processing and interpretation of the data is expected to be completed by December 2013, with preliminary results now expected to be available from October 2013.

Managing Director’s Review

05

Managing Director’s Review continued

Having opened a data room in March 2013, the Company is now in advanced discussions with several targeted international oil and gas companies. The farm-out terms are anticipated to involve a significant contribution to past costs, including 3D seismic and a contribution to a drilling programme anticipated in 2015. The level of any contribution to drilling costs will be dependent on which prospects are sufficiently de-risked for drilling following the preliminary results of the 3D seismic. It is the Company’s objective to focus on potential partners that have a preference to help fund early drilling as this is consistent with the Board’s monetisation strategy for shareholders. The discussions are progressing well and the Board now expects these to be concluded in Q4 2013.

Project Acquisition and EvaluationThe Fastnet management and technical team have a proven track record of identifying and creating shareholder value by seeking early, opportunistic, entry into poorly evaluated assets in basins with proven petroleum systems that are suitable candidates to move towards “emerging frontier basin” status. During the year we put considerable effort into examining a number of potential additional projects consistent with our “emerging frontier basin” strategy. We have begun the process of de-risking the asset portfolio and adding value through 3D seismic acquisition. The Company will focus in the coming year on maturing its assets for early drilling and seeking industry partners to share the risk and cost of drilling.

OutlookThe Company will continue to execute its strategy for early monetisation of its assets by accelerating drilling activity through farm-out transactions. Accordingly, data rooms for both the Moroccan and Irish assets were opened in 2013. The Company is focused over the next 12 months on executing its drilling plans for onshore and offshore Morocco in 2014 and working towards a multi well drilling programme offshore Ireland for 2015. All of Fastnet’s highest ranked prospects for drilling are now covered by 3D seismic, drilling teams are being assembled and rig contracts are being negotiated to support future well operations. Fastnet’s management will work diligently and prudently to ensure the planned wells in Morocco are designed and executed in a manner consistent with our stated strategy of early monetisation of our assets. Morocco, in particular, offers an exciting opportunity to explore proven petroleum systems in a new African “hot spot”. Drilling by other operators is set to begin in Q4 2013 both offshore and onshore Morocco. Success in any or all of these wells is likely to boost the potential value of our acreage position.

Paul GriffithsManaging Director

16 August 2013


Morocco–Offshore

Foum Assaka – Offshore Morocco

HOLDER INTEREST

FASTNET 18.75%

KOSMOS (OPERATOR) 56.25%

ONHYM 25%

Fastnet acquired an 18.75% economic (25% paying) interest in the Foum Assaka Petroleum Agreement in the Agadir Basin, offshore Morocco in July 2012 following the acquisition of Pathfinder Hydrocarbon Ventures Limited (“Pathfinder”) from Pan Maghreb Oil and Gas Limited (“PMOG”, formerly Pathfinder Energy Maghreb plc). Prior to the acquisition of Pathfinder, PMOG entered into a royalty deed with Pathfinder, pursuant to which, in consideration of PMOG undertaking to discharge amounts due to directors and contractors of Pathfinder and certain third party liabilities, Pathfinder

granted a royalty interest to PMOG in relation to sales of oil and gas from the Foum Assaka licence area. A US$5 million cash payment is due to PMOG after receipt of funds from the first commercial hydrocarbon sale. In addition, a 1% sales royalty is payable by Fastnet on its interest in Foum Assaka, which increases to 3% after recovery of certain costs. For additional details see note 10.

Background on Foum AssakaThe northern half of the Foum Assaka licence area was previously held by Shell which relinquished the licence in 2006. Subsequently the Foum Assaka licence was applied for by Pathfinder and awarded to Pathfinder and Kosmos Energy Deepwater Morocco (“KEDM”) in July 2011 following the issue of the Joint Ministerial Order. KEDM is a subsidiary of Kosmos Energy Limited (NYSE: KOS) (“Kosmos”). The licence was awarded in equal part to Pathfinder and KEDM following an invitation from Pathfinder to Kosmos to join the Licence Application. The licence is held under the terms of the Moroccan Hydrocarbon Code.

Operations Review

MoroccoFastnet’s early entry timeline

• Shell relinquishes Cap Draa and Rimella Licences

• Island Oil & Gas/Paul Griffiths enters Moroccan onshore with Zag licence award and operatorship

• Onshore Tarafaya Licence awarded to Island Oil & Gas as operator

• Kosmos’ Jubilee Discovery in Ghana

• Production commences in Ghana at Jubilee field

• Island Oil & Gas enter Morocco offshore with Sidi Moussa & Foum Draa Licence awards and operatorship

• Kosmos joins with Pathfinder in Pathfinder’s application for the Foum Assaka Licence

• Kosmos lists on NYSE (US$7bn) and expands exploration acreage in West Africa

• Farm-out agreed with Kosmos on Foum Assaka in Q3 2011

• 2,577km2 of 3D seismic acquired on Foum Assaka

• Kosmos set up drilling base at Agadir

• Significant activity from operators including Cairn, Genel, Galp Pura Vida, San Leon, Longreach, Tangiers, Chevron and Chariot to secure licences offshore Morocco

•2006 •2007 •2009 •2010 •2011 •2012

07

Initially Pathfinder held a 37.5% economic interest (50% paying interest) in the Foum Assaka licence. In November 2011, Pathfinder entered into a farm-out agreement with KEDM under which:

– Pathfinder farmed out an 18.75% economic interest to KEDM; hence Pathfinder subsequently (and now) holds an 18.75% economic (25% paying) interest in the licence;

– Pathfinder received a payment of US$1 million; and

– KEDM agreed to carry Pathfinder through the initial exploration programme agreed with Office National des Hydrocarbons et des Mines (“ONHYM”) (the Moroccan state entity responsible for petroleum exploration and production), capped at a gross cost of US$16.2 million.

The Moroccan government approved, through the issue of a Joint Ministerial Order, the farm-down from Pathfinder to KEDM in October 2012.

The Foum Assaka licence covers four exploration permits over an area of 6,473 km2 in the offshore Agadir Basin in water depths ranging from 300 metres to 2,100 metres. KEDM is the licence operator with a 56.25% economic (75% paying) interest in the licence. ONHYM holds the remaining 25% economic (non-paying) interest in the licence.

Fastnet’s wholly owned subsidiary, Pathfinder, is currently in the Initial Exploration Period of the licence, which runs for 2½ years from 1 July 2011. The exploration phase may be extended to July 2019 upon election by the partners. In the event of commercial

success, Pathfinder has the right to develop and produce oil or gas for a period of 25 years from the grant of an Exploitation Concession by the Moroccan government.

There is a mandatory 25% relinquishment of the area under licence at the end of the Initial Exploration Period. During the Initial Exploration Period, KEDM and Pathfinder agreed to acquire, process and interpret 2,500 km2 of 3D seismic data, the minimum exploration work programme agreed with ONHYM was for 500 km2 of 3D data. A working petroleum system has been established in the onshore and near-shore area of the Agadir Basin based on onshore and shallow offshore wells. Well control, geological and geochemical studies suggest possible Cretaceous and Jurassic source rocks are located in the offshore Agadir Basin. The offshore basin sediments are interpreted to comprise thick sequences of Lower to Upper Cretaceous age formations consisting of deepwater channel and turbidite fan reservoirs. The interpreted prospects trapping styles are varied and include pre-salt ponded slope fans against salt domes, salt cored anticlines and sub-salt structures.

3D seismic acquisition has been completed and interpretation has led to the identification of 15 new Cretaceous deepwater fan prospects. The shelf slope mid-Cretaceous fan play has not been tested in the Agadir Basin and represents a major opportunity for increasing the resource potential of the basin. No wells have been drilled within the Foum Assaka permits to date, although two wells have been drilled in the outboard basin area to test primarily Tertiary reservoir objectives. We would expect drilling on the most prospective targets during the first half of 2014.

Operations Review continued


Morocco–Onshore

Tendrara Onshore Gas Project – Onshore MoroccoEquity after earn in well completion:

HOLDER INTEREST

FASTNET (OPERATOR) 37.5%

OIL AND GAS INVESTMENTS FuNDS (“OGIL”) 37.5%

ONHYM 25%

In May 2013, Fastnet agreed an option for a farm-in to eight exploration blocks comprising the Tendrara Lakbir licence area onshore Morocco (“Tendrara”). Tendrara covers an area of 14,548 km2 and the majority of the Tendrara basin in eastern Morocco, adjacent to the Algerian border, and is considered one of Morocco’s most prospective basins for Triassic gas.

Highlights of the Tendrara option are:

– Entrance fee of US$300,000 (£197,250), paid in May 2013

– Pay 100% of a pre-development well to be drilled by 28 February 2014 or later, by mutual agreement with OGIF

– On completion of the well, the Company will receive a 37.5% net interest in Tendrara on or before 30 September 2014 subject to regulatory consents and approvals

– Pay 100% of two additional wells to be drilled by 1 April 2015 and 1 April 2018

Tendrara Background and Work ProgrammeFive wells drilled within the licence area have encountered gas-bearing Triassic sands of the Tagi Formation (“Tagi”). The Tagi is the host reservoir of the producing Meskala gas field, along strike to the west in the Essaouira Basin. The gas discoveries have been charged from Silurian source rocks that form part of the proven Palaeozoic-Early Mesozoic petroleum systems covering large parts of Libya, Algeria and Morocco.

The licence area is south of the Maghreb-Europe gas pipeline that delivers gas supplies from north Africa and the Spanish/European market.

The Company anticipates drilling an appraisal / pre-development well in 2014. The objective is to engineer a well to potentially deliver 4 – 7 mm cfgpd on testing; achieving the predicted well deliverability will de-risk a gas development for the substantial amounts of gas already encountered in the TE-5 structure and evaluated by the previous operator by an extended well test in 2008.

Merada – Onshore MoroccoFastnet exercised an option for a 50% participating interest in a licence application onshore Morocco (the “Merada Licence Application”) that had been negotiated with ONYHM by Pathfinder prior to its acquisition by Fastnet. Fastnet’s option to participate in the Merada Licence Application was acquired as part of the terms of the acquisition of Pathfinder by Fastnet.

The option provides a 50% ground floor paying interest in the Merada Licence Application, with Drillbit Exploration Limited (“Drillbit Exploration”), a wholly owned subsidiary of PMOG, the former owner of Pathfinder. Fastnet will pay 50% of all exploration costs including a pro-rata share of a US$1.5 million (£986,000) guarantee in favour of the Moroccan government should the Merada Licence be awarded under the terms previously negotiated. In the event of the Licence being awarded Fastnet will pay 50% of the cost of the negotiated work programme (net interest 37.5% after sharing with Drillbit Exploration pro-rata the ONHYM carry).

At the time of taking up the option there were no back costs.

The area within the Merada Licence Application (the “Merada Project Area”) represents an opportunity to target a Miocene turbidite fan system which the Company believes can generate traps that are substantially larger than hydrocarbon traps in neighbouring licence areas.

The Miocene biogenic gas play is well developed in the Rharb Basin in northeast Morocco, west of the proposed Merada Project Area, where Circle Oil plc executed highly successful drilling programmes in the Sebou and Oulad N’zala blocks in 2008/9 and 2010/11, during which 10 gas discoveries were made from the drilling of 11 wells.

Fastnet has focused its resources on securing the Tendrara farm-in option during late 2012 and early 2013 as this represents a near-term opportunity for shareholder monetisation. With the completion of the Tendrara farm-in transaction Fastnet can now re-focus on its Merada application.

09

Ireland – Celtic Sea – 1,910 km2 3D seismic survey completed in June 2013

with multi-well drilling programme planned for 2015

– Largest seismic shoot in Celtic Sea

– Deep Kinsale and Shanagarry: attractive farm-in prospects for majors

– Huge unrisked gross in-place resources for Mizzen and Molly Malone


Deep KinsaleThe Company executed an exclusive option agreement with PSE Kinsale Energy Limited (“Kinsale Energy”), a subsidiary of Petronas, for a farm-in to the Kinsale Head prospect from 4,000 feet subsea below the producing Kinsale gas field; known as “Deep Kinsale” and defined by a sub-area within Petroleum Lease No. 1. Fastnet can earn up to a 60% interest in Deep Kinsale (reducing to a minimum 40% should our partner Kinsale Energy exercise certain back-in rights linked to cumulative produced BOE resources and an option to participate as a paying partner in the earn-in well) by drilling a well before 30 November 2015.

Deep Kinsale covers part of blocks 48/20, 48/25, 49/16 and 49/21. Fastnet agreed to acquire a minimum of 500 km2 of 3D seismic by 31 December 2013 and to complete geological and engineering studies.

In May 2013, SRL Consulting completed an independent assessment of the potential resources of Deep Kinsale. The following table has been prepared by the Company to summarise the un-risked prospective hydrocarbon resources in-place in Deep Kinsale and the associated geological probability of success (“GPoS”):


TRAP uN-RISKED IN-PLACE RESOuRCE ESTIMATES GPOS MAIN RISK

LOW BEST HIGH

MIDDLE WEALDEN OIL (MMBBL) 203.3 856.3 1,685.5 13% Migration

LOWER WEALDEN OIL (MMBBL) 219 530.1 1,089.1 15% Migration

BASAL WEALDEN OIL (MMBBL) 146.4 265 532.4 17% Migration & Trap

PuRBECK OIL (MMBBL) 352.4 713.6 1,555.8 15% Trap

Key: GPoS = geological probability of success; BCF = billion cubic feet of gas, MMbbl = million barrels of oil. 1,000ft3 of gas is equivalent to 0.1847 barrels of oil source: Wood Mackenzie).

Best estimate un-risked in-place oil volumes for the four reservoir units taken together are 2.365 billion barrels or 335.3 million barrels when accounting for the GPoS.

The independent assessment confirms that oil-bearing sands (based on well log analysis) encountered in the Middle and Lower Wealden wells drilled by Marathon Oil Corporation (“Marathon”) in the early 1970’s occur in the same geological structure that hosts the shallow producing gas sands in the Greensand and Upper Wealden in the Kinsale gas field.

In February 2013 the Company executed a contract with CGG Services SA to acquire 3D Seismic data over its acreage in the Celtic Sea, using the vessel SR/V Vantage in a programme valued at US$19 million (£12,492,000). As part of this programme 510 Km2 of 3D seismic were acquired in April and May 2013 over the Deep Kinsale Structure beneath the producing Kinsale gas field. Seismic operations included undershooting the Kinsale Alpha and Bravo platforms, which are protected by a 500 meter safety exclusion zone. This required mobilising a second 3D seismic vessel, the SR/V Angler, for a short period during the acquisition of the data. One of the geological targets is believed to be the same stratigraphic sequence that has been successfully tested at Barryroe by the 48/24-10z appraisal well. However initial seismic interpretation has also revealed the potential for deeper untested exploration targets which will be the focus of further evaluation following receipt of the initial 3D seismic results. This is the first 3D seismic survey over Kinsale Head to target the deeper oil and gas potential of the Kinsale structure. The intention is to de-risk the deep structure through potentially better seismic imaging of both the structure, to confirm the lack of significant fault compartmentalisation based on the existing older 2D seismic data, and to investigate the potential for thicker sands in a more basinal setting north of the existing well control.

Processing and interpretation of the data, which were acquired on schedule and under budget, is expected to be completed by the end of 2013 with preliminary results available by end October. The Company believes that the 3D seismic may help define a new exploration play in the Upper Purbeck, below the tested Barryroe reservoirs, where potential for lacustrine alluvial and turbidite fans may exist in an analogous geological setting to the East African Rift System.

The Fastnet farm-in option is exercisable before 30 September 2014, by commencing a well to provisionally 8,000 feet subsea on or before 30 November 2015 to test the Purbecko-Wealden reservoirs, that have already been proved productive in Barryroe, and deeper potential reservoirs. Upon completion of the well Fastnet will earn up to a 60% working interest in Deep Kinsale by funding the well drilling and testing costs (subject to the Kinsale Energy back-in rights below).

Kinsale Energy has a back-in option, exercisable at its discretion within a period of 30 business days of completion by Fastnet of the exercise of the Option, to increase its interest in Kinsale Deep by 10%, by paying for 16.667% of the drilling and testing costs of the farm-in well.

Also if there is a commercial development of Deep Kinsale, Kinsale Energy shall have the option to increase its working interest for no consideration, by a further 5% once production exceeds 150 MMBOE and by a further 5% once production exceeds 200 MMBOE subject to Kinsale Energy’s working interest not exceeding 60%.

11

Mizzen and Mizzen EastThe Company was awarded Licensing Option 12/3 over blocks 55/14 and 55/15 and part of blocks 55/9 and 55/10 in June 2012. These blocks are in the Mizzen Basin in the North Celtic Sea, offshore Ireland (the “Mizzen Licensing Option”).

Subsequently the Company applied for, and in May 2013 was awarded, Licensing Option 13/3 over part blocks 56/6, 56/7, 56/8, 56/9, 56/11, 56/12, 56/13 and 56/14 in the Mizzen Basin and the western end of the North Celtic Basin, offshore Ireland

(“East Mizzen Licensing Option”). The East Mizzen Licensing Option is valid from 1 May 2013 until 30 September 2014. It covers an area of 1,155 km2 and is contiguous with and extends eastwards from the Mizzen Licensing Option.

Fastnet is the designated operator and has 100% working interest in both the Mizzen Licensing Option and the East Mizzen Licensing Option.

SLR Consulting (“SLR”) published an independent technical report on the Mizzen Licensing Option in July 2012:

TRAP uN-RISKED IN-PLACE RESOuRCE ESTIMATES GPOS MAIN RISK

LOW BEST HIGH

WEALDEN OIL (MMBBL) 571.2 1,799.3 3,898.5 4% Source

WEALDEN GAS (BCF) 658.6 2,074.7 4,723.6 12% Seal

TRIASSIC GAS (BCF) 1,473.7 3,108.2 9,355.9 5% Seal & migration

Key: GPoS = geological probability of success; BCF = billion cubic feet of gas, MMbbl = million barrels of oil. 1,000ft3 of gas is equivalent to 0.1847 barrels of oil (source: Wood Mackenzie).

The Mizzen Basin is located in water depths of up to 160 metres and only one well, which encountered oil shows, has been drilled by Esso in 1975. Our reprocessing of the existing 2D seismic data has identified several large structures that are prospective for Triassic, Jurassic and Lower Cretaceous reservoir targets. A new play has been developed for potential Upper Purbeck lacustrine turbidites based on seismic character. It is believed that the Mizzen basin may extend westwards into the South Porcupine Basin and therefore should be considered as an Atlantic Margin sub-basin in which a Lower Cretaceous Petroleum system has been identified.

The resource estimates in the SLR report are large, however the GPoS figures are at levels which required a significant work programme to mature the prospects in order to de-risk and identify drill targets.

Following the results from the 2D seismic reconnaissance reprocessing undertaken by WesternGeco and in order to improve the understanding of the nature of the stratigraphic section in the Mizzen Basin, the Company conducted a 1,400 km2 3D seismic survey over the Mizzen and Mizzen East Licensing Options in May and June 2013. Processing and interpretation of the data is expected to be completed by end 2013 with preliminary results available by October.


Molly MaloneIn June 2012 Fastnet was awarded Licensing Option 12/2 over blocks 50/26 and part of blocks 49/25, 49/30, 50/22 in the Molly Malone Basin in the North Celtic Sea, offshore Ireland (“Molly Malone Licensing Option”).

The Molly Malone Basin is located within the South Celtic Sea Basin in water depths of up to 100 metres. The Company believes that this basin offers an opportunity to confirm the presence

of a working petroleum system with potential resources of as much as 1 billion barrels. No wells have been drilled on the Molly Malone Licensing Option area and there is only sparse 2D seismic data available.

In addition to their report on the Mizzen Basin SLR Consulting also published an independent technical report on the Molly Malone Basin in July 2012:


TRAP uNRISKED IN-PLACE RESOuRCE ESTIMATES – BEST ESTIMATE

GPOS MAIN RISK

NORTH PROSPECT GAS (BCF) 10,448.4 12% Maturity

SOuTH PROSPECT GAS (BCF) 9,127.9 8% Maturity

NORTH PROSPECT OIL (MMBBL) 6,677.3 9% Migration

SOuTH PROSPECT OIL (MMBBL) 5,833.4 5% Migration


Thick salt has developed over parts of the Molly Malone Basin which obscures the mapping of the prospective Triassic Sherwood Sands over the north-eastern part of the dominant structural lead mapped. Pre-stack time migration will assist in defining fault plane and Sherwood Sand reservoir geometry beneath the salt.

The Board is of the view that it is essential to improve the understanding of the nature of the stratigraphic section beneath the Triassic salt in the Molly Malone Basin, through the application of modern seismic reprocessing techniques and carrying out a programme of regional studies in order to design the appropriate

acquisition parameters for any potential 3D seismic survey. Additionally, further analysis of the existing seismic data is needed to examine the potential for north-eastern closure for the dominant prospective lead in the Molly Malone Basin before a significant financial commitment to a 3D seismic survey can be made.

The Company is in the process of refining the petroleum system model through interpretation of existing 2D seismic data and regional seismic correlation work. Subject to satisfactory results the Company would move to acquire 3D seismic data in 2014 but would seek a partner to fund the seismic.

ShanagarryThe Company agreed a farm-in for, an 82.35% working interest in Licensing Option 12/5 (“Shanagarry”) in November 2012. The Licensing Option is held by a joint venture group comprising Adriatic Oil plc, Carob Limited (consultants to Fastnet) and Petro-Celtex Consultancy Limited, a company established in the 1990’s by Paul Griffiths, now Managing Director of Fastnet.

The Shanagarry Licensing Option area lies to the south of the undeveloped Helvick oil field and northeast of the Old Head of Kinsale gas field and covers an area of 881 km2. The Licensing Option is for the period 1 December 2012 to 31 May 2014 and includes part-blocks 49/18, 49/19, 49/20, 49/23, 49/24 and 49/25 in the North Celtic Sea.

Marathon mapped a 120 km2 structure within the Licensing Option Area that proved to be hydrocarbon-bearing in well 49/19, drilled in 1984, after logging a gross combined oil and gas column of approximately 500 feet. Four viable petroleum systems were proven by the well results, with offset field analogues. The well was not fully tested at the time due to operational issues and poor gas economics, since at that time Kinsale satisfied the Irish domestic market and no gas connector existed to the UK.

Details of the farm-in agreementsThe Licensing Option application was originally made jointly by Adriatic, CRB and PCX (each as defined below) which, prior to the execution of the farm-in agreements (“Farm-in Agreements”) and the subsequent award of the Licensing Option, had the following economic interests:

HOLDER INTEREST

ADRIATIC OIL PLC (“ADRIATIC”) 80%

CAROB LIMITED (“CRB”) 10%

PETRO-CELTEx CONSuLTANCY LIMITED (“PCx”)

10%

The terms of the Farm-in Agreements, which received consent from the Minister for the Department of Communications, Energy and Natural resources (the “Department”) in April 2013, are as follows:

AdriaticAdriatic has agreed with Fastnet to farm-out 64.5% of its 80% interest in Shanagarry. Under the terms of the Farm-in Agreement, Fastnet must finance the acquisition and processing of 200 km2 of new 3D seismic over the area before 31st December 2014.

13

CRB and PCxSeparately, Fastnet has agreed to acquire an 8.925% working interest out of each of CRB’s and PCX’s 10% interests in the Licensing Option (representing a total farm-in of 17.85%). As consideration for this working interest, Fastnet has agreed to pay all costs and charges relating to both CRB’s and PCX’s remaining 1.075% share in Shanagarry up to and until the date of initial production of hydrocarbons from the first, and if appropriate the second, petroleum accumulation within Shanagarry that is developed and produced as a consequence of the submission of a separate detailed plan of development.

Following execution of the Farm-in Agreements, the holdings in the Licensing Option are:

HOLDER INTEREST

FASTNET (OPERATOR) 82.35%

ADRIATIC 15.5%

CRB 1.075%

PCx 1.075%

Details of ShanagarryThe Licensing Option has an 18 month initial term that can be extended by a further 18 months subject to a satisfactory work programme being agreed with the Petroleum Affairs Division of the Department of Communications, Energy and Natural Resources.

Should the Licensing Option be extended, Fastnet expects to acquire a minimum of 200 km2 of 3D seismic. Fastnet will operate the Licensing Option on behalf of its partners Adriatic, CRB and PCX.

The main elements of the work programme include reprocessing of 600 km of existing 2D seismic data, analysis of the drill stem test data for the Basal Wealden and Purbeck reservoir sequences and a regional analysis of the working petroleum systems encountered in the 49/19-1 well – Middle Jurassic, Upper Jurassic, Basal Wealden and Upper Wealden.

In April 2013 SLR Consulting completed an independent assessment of the prospective hydrocarbon resources in the 49/19-1 Shanagarry structure and the associated GPoS:

TRAP uNRISKED IN-PLACE RESOuRCE ESTIMATES – BEST ESTIMATE

GPOS

uPPER WEALDEN GAS (BCF) 135.9 12%

LOWER WEALDEN OIL (MMBBL) 796.6 14%

PuRBECK OIL (MMBBL) 501.6 12%

KIMMERIDGIAN-PORTLANDIAN GAS (BCF) 885.7 5%

uPPER/MIDDLE JuRASSIC GAS (BCF) 321.1 5%


The 49/19-1 structure covers an area of 123 km2, making it one of the more significant hydrocarbon-bearing structures in the North Celtic Sea. Four hydrocarbon-bearing intervals were encountered in 49/19-1, whilst the Upper Wealden may potentially be hydrocarbon-bearing up-dip from the well based on offset gas discoveries at Ardmore and Old Head. Purbeck and Lower Wealden reservoirs, oil-bearing in 49/19-1, form the lowest risked reservoir objectives.

The Kimmeridgian/Portlandian over-pressured “tight gas” and Middle/Upper Jurassic gas-bearing intervals have also been evaluated. Subject to a scoping well design to address the issue of collecting the data required to model the potential for sustainable commercial flow rates, the “tight gas” potential prospective resources could be a viable add-on to a development of the conventional oil and gas prospective resources in the 49/19-1 structure, as a result of economies of scale should the area become a “hub” for appraisal and development. In such a case a number of currently stranded gas assets could also be developed as satellite tie-backs to the hub.



Block 49/13The Company was awarded an 85% interest in licensing option 12/6 covering part blocks 49/7, 49/8, 49/9, 49/12 and 49/13 in November 2012. The first phase of the licensing option runs to 14 May 2014.

The holdings in the Licensing Option are:

HOLDER INTEREST

FASTNET (OPERATOR) 85%

CRB 7.5%

PCx 7.5%

The Licensing Option acreage lies in water depths of up to 100 metres in the North Celtic Sea basin. Marathon drilled two wells in the area of the Licensing Option in 1974 (49/13-1) and 1986 (with Ardmore Exploration Ltd 49/13-2).

Well 49/13-1 tested a shallow anticline generated by Tertiary basin inversion that could be identified at the time on the existing poor quality 2D seismic data. The well encountered oil-bearing Purbecko-Wealden sands over a gross interval of 300 feet, now considered to be stratigraphically analogous to the hydrocarbon-bearing reservoirs in the Barryroe oil field to the southwest. The interval was tested by Marathon but it did not flow oil as the test tool became plugged with sand.

Later seismic mapping, based on new 2D seismic acquisition in 1985 by Ardmore Exploration Limited (“Ardmore”), Marathon’s partner in the 49/13-2 well, showed that the 49/13-1 well was drilled significantly down-dip from the crest of the structure. Marathon and Ardmore drilled 49/13-2 in 1986 to test a down-faulted Upper Jurassic structural trap analogous to that successfully tested by Gulf Oil in 1983 (49/9-2, Helvick oil discovery). The well encountered oil in the Upper Jurassic over a gross interval of approximately 700 feet. Marathon tested the well but failed to flow any significant amounts of oil due to the low gravity of the oil. The potential for lighter oil exists in deeper Upper Jurassic sands updip from 49/13-2.

The large vertical extent of the hydrocarbon-bearing sections seen in the above two wells provides encouragement that significant in-place oil resources may exist within the area of the Licensing Option.

The Company is now re-interpreting the historic legacy well and 2D seismic data together with other information available and re-mapping the prospective structures. The work programme for the second phase of the Licensing Option will be determined after the above studies have been completed.

Data RoomThe Company opened a data room in March 2013 for its Celtic Sea assets and we are now in discussions with several targeted international oil and gas companies regarding the Company’s various assets. The Company is targeting partnerships and farm-outs that can deliver a 2015 multi well-drilling programme in the Celtic Sea.

15

Cathal Friel, Executive ChairmanCathal is managing director and one of the founders of Raglan Road Capital Limited (which trades as Raglan Capital), a Dublin and London based corporate finance and merchant banking group. Cathal has over 25 years of managerial, entrepreneurial and corporate finance experience, as well as successfully advising major UK and Irish companies on domestic and international transactions.

He was previously one of the founding directors of Dublin based Merrion Corporate Finance, where he helped build Merrion to becoming one of Ireland’s top three corporate finance and stockbroking firms in less than 6 years, before successfully selling it for approximately €100 million in 2006.

Paul Griffiths, Managing DirectorPaul is a petroleum geologist with over 37 years experience in early stage oil and gas prospecting. He was a founder and former CEO of Island Oil & Gas plc which drilled the first successful exploration well offshore south east Ireland in 16 years and was subsequently acquired by San Leon Energy. He has previous experience in both Gulf Oil and Libyan National Oil Corporation. Paul is a graduate of the Royal School of Mines (London) in Geology.

Carol Law, Executive DirectorCarol is a geologist by training and has over 28 years experience in the petroleum industry in exploration management, exploration geology, research, and consulting in a variety of geological settings worldwide. During her career Carol has been involved in exploration activities in more than 40 countries and has been a member of teams responsible for discoveries in Mozambique (Rovuma Gas), Ghana (Jubilee), Brazil (multiple Campos Basin discoveries), Alaska (Nikaitchuq), China (Bohai Bay) plus Angola, Gulf of Mexico, and others. Most recently Carol was Exploration Manager East Africa and Caribbean for Anadarko Petroleum Corporation, responsible for the play finding Prosperidade gas complex in Rovuma Area 1, offshore Mozambique. Carol previously held a number of senior roles with Kerr McGee and BP/Amoco. She holds a MSc in Geology from Virginia Polytechnic Institute and State University and a B.A. in Geology from the University of Montana.

Michael Nolan, Non-executive DirectorA founding director of Terra Energy Limited in 2008, Michael is a Chartered Accountant having worked in practice with Deloitte in Dublin. He is currently a non-executive Director of Cove Energy Limited, formerly an AIM quoted oil and gas exploration company focused on East Africa which was sold to PTTEP of Thailand in August 2012. He acts as a non-executive director of Vancouver based, Rathdowney Resources Limited, a private natural resource company operating in Europe and supported by the Hunter Dickinson group and listed on TSX-V. He is also a director of AIM quoted companies, Tiger Resource Finance plc and Orogen Gold plc. He acted as chief executive officer of AIM listed, mining company, Minmet plc from 1999 to 2007. He also serves on the Board of several resource exploration and investment companies.

Dr Stephen Staley, Non-executive DirectorStephen is a Fellow of the Geological Society holds a BSc (Hons.) in Geophysics from Edinburgh University, a PhD in Petroleum Geology from Sheffield University and an MBA from Warwick University. Stephen was founder and former Managing Director of Independent Resources plc and is founder and Managing Director of Derwent Resources Limited. Stephen has 27 years’ experience in the energy sector, including Conoco and BP, with considerable experience in the European, African and Asian oil, gas and power sectors.

Michael Edelson, Non-executive DirectorMichael has been a non-executive Director of Sterling Green Group plc (now Fastnet Oil & Gas plc) since he founded the Company (then called Hamilton Partners plc). Since 1990 he has founded and been on the board of many listed companies, largely on AIM, including ASOS (formerly Brindle plc), Magic Moments plc, Knutsford Group plc, Mercury Recycling Group plc, Prestbury Group plc and Singer & Friedlander AIM 3 VCT plc.

He has been a member of the board of Manchester United Football Club Limited since 1982.

Board of Directors


The Directors of Fastnet Oil & Gas plc (the “Company”) present their report and the Financial Statements of the Company and its subsidiary undertakings (together the “Group” or “Fastnet”) for the year ended 31 March 2013.

Principal Activity and Business ReviewFastnet is an independent oil and gas exploration company focused on identifying early stage exploration and appraisal opportunities in under-explored and frontier territories. The Group has a portfolio of prospective exploration assets offshore Ireland and both onshore and offshore Morocco.

Key Performance IndicatorsThe key indicators of performance for the Group are its success in identifying, acquiring, developing and divesting of investment in exploration projects so as to create shareholder value. The Group has an early exit strategy, during the exploration cycle, focused on de-risking assets to deliver potential upside and near-term results.

Since IPO in June 2012 the Company has moved quickly to assemble a portfolio of exploration prospects offshore and onshore Morocco and in the Celtic Sea, offshore Ireland.

In Morocco, the Group’s participation in the offshore Foum Assaka project and the recent option for a farm-in to the onshore Tendrara licence in May 2013 has cemented the Group’s position as a leading oil and gas exploration company in Morocco with a total licence area of 21,026 km2. In addition, the Group has an interest in five offshore Ireland licensing options and an exclusive option agreement for a farm-in to the Deep Kinsale Prospect.

Control of bank and cash balances is a priority of the Group and these are budgeted and monitored closely to ensure that the Group has access to sufficient funds to finance the initial stage exploration programmes on these licences. The Group also follows standard exploration industry practice of seeking to reduce its financial exposure to drilling and share risks by farming out.

At this stage of its development the Company’s performance is not measured using quantitative key performance measures. A qualitative review of the performance in the year is provided in the Chairman’s Statement and Managing Director’s Review.

Principal Risks and uncertaintiesThe Group is subject to various risks in the pursuit of its achievements of its business objectives including those that derive from oil and gas exploration which is inherently costly and risky.

The success of the Company will depend on its ability to engage in appropriate exploration projects and to attract sufficient funding and/or farm-outs to successfully develop these. The following summarises the principal risks and uncertainties of the Group:

Organisational RiskThe Group is dependent on the experience and skills of the Executive Directors and senior management to successfully execute its strategy; the loss of such key contributors would present a risk to the business. Staffing levels and development of business processes and policies are kept under regular review to ensure that they are appropriate and adequate for the scale and growth of the Group’s business.

Industry and Operational RiskThe Group’s activities are speculative and involve a high degree of risk. The Group’s exploration work involves both onshore and offshore geological work programmes. Interpretations of the results of these programmes are dependent on judgement and assessments that are speculative and these interpretations are applied in designing further work programmes to which the Group can commit significant resources. Work programmes often involve drilling and other geological work that presents significant engineering challenges that are subject to unexpected operational problems. The actual costs of such programmes can vary significantly from expectations as a result.

There is no assurance that the Group’s exploration activities will be successful. The Group continually seeks to manage this risk by controlling its funding and financing risk and in particular by bringing farm-in partners who demonstrate technical skills and experience in similar projects worldwide.

Directors’ ReportFor the year ended 31 March 2013

17

The Group participates in farm-in arrangements whereby it contributes towards its share of underlying exploration and evaluation projects. Due to the involvement of co-venturers in its exploration programmes the Group may be adversely affected by any commercial misalignment with these co-venturers.

The Group operates through subsidiary companies and has operations in Morocco and Ireland in addition to offices in Manchester and Dublin. The Group is subject to both taxation and other legislation in the countries that it operates and therefore may be affected by any adverse legislative changes in those jurisdictions. On a project level the Company operates in stable jurisdictions with undisputed authority. Ireland and Morocco have established minerals and exploration codes and fiscal regimes. Before engaging in any additional projects the Company ensures that a detailed due diligence process is undertaken.

Financial RiskThe financial risk management objectives and policies of the Group are detailed in note 20 of the Notes to the Financial Statements.

InsuranceThe Group has in place insurance protection, including Directors and Officers liability policy, for risk of loss where management deems appropriate and cost effective; however in some cases risks cannot be effectively covered by insurance and the cover in place may not be sufficient to cover the extent of potential liabilities.

Results and dividendsThe results for the year are set out on page 25.

The Directors do not recommend payment of a final dividend.

Corporate GovernanceThe Directors recognise the importance of sound corporate governance and although the Company, as an AIM and ESM quoted company, is not required to comply with the UK Corporate Governance Code (“The Code”) on corporate governance as issued by the Financial Reporting Council, the Company complies with the main provisions of the Code insofar as they are appropriate given the Company’s size and stage of development.

The Company does not fully comply with the Code, to the extent that, amongst other things, the Company does not have a Nomination Committee, as the Board does not consider it appropriate to establish one at this stage of the Company’s development.

The Company has established an Audit Committee and Remuneration Committee and their functions are set out below. Additionally, the Company has adopted a share dealing code for Directors and employees of the Company, which is appropriate for a Company with its shares trading on AIM and ESM. The Board will comply with Rule 21 of the AIM Rules and the ESM Rules relating to directors’ dealings and will ensure compliance by the Company’s “applicable employees” (as defined in the AIM Rules and the ESM Rules).

Board of Directors (“Board”)The Board’s main roles are to create value for shareholders, to provide entrepreneurial leadership to the Group and to develop and approve the Group’s strategic objectives. While operational and financial management are delegated to Executive Directors, key financial and compliance issues and significant operational and management matters are subject to Board approval. The Board is responsible for the determination of capital structure, communication with shareholders, Board and executive management appointments and major contracts and for ensuring that necessary financial and other resources are made available to the Group to meet its objectives.

Matters for which the Board is specifically responsible include setting and monitoring business strategy, evaluating exploration opportunities and risks, approving capital expenditure on exploration projects, approving investments and disposals, approving budgets and monitoring performance against budgets, reviewing the Group’s health and safety policy and considering and appointing new Directors and the Company Secretary.

Directors’ Report continued


The Board comprises an executive Chairman, two executive Directors (including a Managing Director) and three other non-executive Directors. The Board meets frequently to consider all aspects of the Group’s activities. All Directors are expected to attend the Board meetings. All Directors participate in preparing the agenda for Board meetings and receive relevant reports and documentation on matters to be discussed on a timely basis so as to ensure that they can fully participate in the discussion on the agenda items. The Directors have access to the Company Secretary and may obtain independent professional advice at the Group’s expense. The Directors have access to comprehensive financial, operational and strategic information to assist them in the discharge of their duties.

Under the terms of the Company’s Articles of Association, at least one third of the Board must seek re-election to the Board at the Annual General Meeting each year. All new Directors appointed since the previous Annual General Meeting are required to seek election at the next Annual General Meeting. The Directors required to seek re-election at the next Annual General Meeting are Michael Edelson, Carol Law and Paul Griffiths.

The Executive Directors who served on the Board during the year were as follows: Ian Aspinall (resigned 11 June 2012) Stephen Staley (appointed 11 June 2012, non-executive Director from 13 November 2012) Carol Law (appointed 7 October 2012) Cathal Friel (appointed 13 November 2012) Paul Griffiths (appointed 13 November 2012)

The Non-Executive Directors who served during the year were as follows: Michael Edelson Cathal Friel (appointed 11 June 2012, executive Director from 13 November 2012) Michael Nolan (appointed 11 June 2012) Stephen Staley (appointed 13 November 2012)

Board CommitteesThe Company has an Audit Committee and a Remuneration Committee with formally delegated duties and responsibilities. The composition of these committees may change over time as the composition of the Board changes.

Audit CommitteeThe Audit Committee comprises Michael Nolan and Cathal Friel, with Michael Nolan as chairman.

The Audit Committee is responsible for:

– the terms of engagement of the Group’s auditors and, in consultation with the auditors, the scope of the audit,

– the review of reports from management and the Group’s auditors relating to the interim and annual accounts and the accounting and internal control systems in use throughout the Group,

– compliance with legal and regulatory requirements.

Remuneration CommitteeThe remuneration committee comprises Michael Nolan, Cathal Friel and Michael Edelson, with Cathal Friel as chairman.

The remuneration committee is responsible for the scale and structure of the executive Directors’ and senior employees’ remuneration and the terms of their respective service or employment contracts, including share option schemes and other bonus arrangements.

The remuneration and terms and conditions of the non-executive Directors of the Company will be set by the executive members of the Board. No Director or manager is involved in any decision as to their own remuneration.

19

Directors’ Remuneration–Base FeesThe base annual fees as at 1 April 2012 (or date of appointment if later) that applied for the year to 31 March 2013 are detailed below.

Executive Directors

Annual fee, year to

31 March 2013

Cathal Friel £10,000Paul Griffiths £60,000Carol Law US$120,000

Non-executive Directors

Annual fee, year to

31 March 2013

Michael Nolan £10,000Michael Edelson £10,000Stephen StaleyA £10,000

A Stephen Staley served as an executive director from 11 June 2012 to 13 November 2012. His base annual fee was £65,000.

Directors’ Remuneration – Current YearThe remuneration of Directors for the year ended 31 March 2013 was as follows:

Base fees £‘000

Performance bonus £‘000

Loss of office £‘000

Total £‘000

Executive DirectorsCathal Friel 4 – – 4Paul Griffiths 23 – – 23Carol Law 37 – – 37Stephen Staley 45 15 16 76Ian Aspinall 3 – – 3

Non-executive DirectorsMichael Edelson 13 – – 13Michael Nolan 8 – – 8Stephen Staley 4 – – 4Cathal Friel 4 – – 4Total 141 15 16 172

Internal ControlsThe Directors are responsible for the Group’s system of internal controls, the setting of appropriate policies on these controls, and regular assurance that the system is functioning effectively and that it is effective in managing business risk.

The Audit Committee monitors the Group’s internal control procedures, reviews the internal control process and risk management procedures and reports its conclusions and recommendations to the Board.



Communications with ShareholdersGood and effective communication with shareholders has been given a high priority by the Board. We regard good communication with investors (both institutional and retail) and analysts as an essential part of the on-going operations of the Company. Fastnet is committed to providing up to date corporate information to existing and potential shareholders. The Group maintains a website (www.fastnetoilandgas.com) which contains an investor relations section whereby existing and potential investors can access Company information and reports, contact the Company and register to receive Company news alerts.

During the year, the senior management team conducted an extensive programme of face-to face communication. This included both one-on-one and group meetings with institutional investors in the UK, Ireland, and across Europe, as well as investor conferences in the UK.

Share Capital StructureThe Company has a single class of share capital, Ordinary Shares of 3.8 pence each. The Company’s Ordinary Shares are listed on the Alternative Investment Market (“AIM”) market of the London Stock Exchange (ticker: FAST.L) and the Enterprise Securities Market of the Irish Stock Exchange (ticker: FOI). At 31 March 2013, 273,940,493 Ordinary Shares were in issue. Details of share issues and changes to the capital structure during the year are set out in note 15.

Substantial Shareholdings

Rank InvestorNo of shares at

24 July 2013% of issued

capital

1 Pan Maghreb Oil and Gas LimitedA 40,688,212 14.852 Cathal FrielB 18,888,051 6.903 Standard Life Investments Limited 9,315,719 3.40

A Paul Griffiths is a director of Pan Maghreb Oil and Gas Limited and holds a 37.5% interest in the issued share capital of that company.

B 15,554,857 of these shares are held by Raglan Road Capital Limited, a company in which Cathal Friel and his wife, Pamela Iyer, have a 90% interest.

Directors and their InterestsAt 31 March 2013 and at the date of this report the Directors of the Company held the following interest in the Ordinary Shares and share options/warrants of Fastnet Oil & Gas plc:

DirectorOrdinary Shares of

£0.038 eachShare options of

£0.038 eachShare warrants of

£0.038 eachWeighted average

exercise price

Cathal Friel 18,888,051A – – –Paul Griffiths 18,813,473B – 666,667C 17pCarol Law – 5,000,000D – 21.45pMichael Nolan 3,341,243 1,777,697E – 5.2pMichael Edelson 922,384 131,578 – 3.8pStephen Staley 3,333,183 – – –

A 15,554,857 of these Ordinary Shares are held by Raglan Road Capital Limited, a company in which Cathal Friel and his wife, Pamela Iyer, have a 90% interest.

B Paul Griffith’s interest in the Ordinary Shares in the Company includes 1,777,697 Ordinary Shares held by Celtex Exploration Services Limited, a company in which Paul Griffiths has a beneficial interest, 1,777,697 Ordinary Shares held in the personal name of Paul Griffiths and 40,688,212 Ordinary Shares held by Pan Maghreb Oil and Gas Limited a company in which Paul Griffiths has a 37.5% interest.

C The share warrants are held through Petro-Celtex Consultancy Limited, a company 100% owned and controlled by Paul Griffiths.

D 3,000,000 of these share options become exercisable on the achievement of certain performance related milestones in relation to Fastnet’s exploration assets.

E These share options are held in a share appreciation agreement with JS Consult Limited.

See note 17 of the Financial Statements for further details of share options.

21

Going ConcernAfter making appropriate enquires, the Directors consider that the Company and the Group has adequate resources to continue in business for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the Financial Statements. As part of their enquires the Directors reviewed budgets, projected cash flows, and other relevant information for 12 months from the date of approval of the 2013 Annual Report.

The Company is focused over the next 12 months on executing its drilling plans for onshore and offshore Morocco in 2014 and working towards a multi well drilling programme offshore Ireland for 2015. The Group is fully funded to meet all current licensing phase commitments and obligations together, subject to successful farm-outs, with a non-obligatory drilling programme onshore Morocco and accelerated 3D seismic acquisition offshore Ireland in 2013. The Moroccan and Irish licences have been de-risked to a stage where major partners can be brought in, accordingly the Company has opened data rooms for both our Moroccan and Irish assets in 2013.

The Group’s forecasts and projections reflect the Directors’ plans for the coming year and include operating expenditures and capital expenditure on exploration. The Group performs sensitivity analysis on its projected cashflows and when performing sensitivities has taken into account reasonable changes in market conditions, potential upside from the receipt of farm-out funds and removed cash outflows from sources which are not yet contractually binding. The Group’s position as operator in its exploration activities onshore Morocco and offshore Ireland gives it flexibility in managing the maintenance and development of its asset portfolio.

The Group’s forecasts, taking into account reasonably possible changes as described above, show that the Group will be able to operate and have significant financial headroom for the 12 months from the date of approval of the 2013 Annual Report.

Events after the Reporting PeriodEvents after the reporting period are set out in note 22 to the Financial Statements.

Charitable and Political DonationsThe Group made no political or charitable donations during the current or previous period.

Suppliers Payment PolicyIt is the Group’s policy to fix the terms of payment with suppliers when agreeing the terms of each transaction and the Group abides by these terms of payment. The number of day’s purchases outstanding for payment by the Group at the year-end was 10.5.

AuditorsThe Board are recommending BDO LLP for re-appointment as auditor of the Company. BDO LLP have expressed their willingness to accept this appointment and a resolution re-appointing them will be submitted to the forthcoming Annual General Meeting.

Disclosure of Information to the AuditorsAll of the current Directors have taken all the steps that they ought to have taken to make themselves aware of any information needed by the Company’s auditors for the purposes of their audit and to establish that the auditors are aware of that information. The Directors are not aware of any relevant audit information of which the auditors are unaware.



Directors’ ResponsibilitiesThe Directors are responsible for preparing the Director’s Report and the Financial Statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare Financial Statements for each financial year. Under that law the Directors have elected to prepare the Group and Company Financial Statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. Under company law the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of the profit or loss of the Group for that period. The Directors are also required to prepare Financial Statements in accordance with the rules of the London Stock Exchange for companies trading securities on AIM.

In preparing these Financial Statements, the Directors are required to:

– select suitable accounting policies and then apply them consistently;

– make judgements and accounting estimates that are reasonable and prudent;

– state whether they have been prepared in accordance with IFRSs as adopted by the European Union, subject to any material departures disclosed and explained in the Financial Statements; and

– prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the Financial Statements comply with the requirements of the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Website PublicationThe Directors are responsible for ensuring the Annual Report and the Financial Statements are made available on a website. Financial Statements are published on the Company’s website in accordance with legislation in the United Kingdom governing the preparation and dissemination of Financial Statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company’s website is the responsibility of the Directors. The Directors’ responsibility also extends to the on-going integrity of the Financial Statements contained therein.

On behalf of the board

Cathal Friel Paul GriffithsDirector Director

Date 16 August 2013

23

Independent Auditor’s ReportFor the year ended 31 March 2013

Independent auditor’s report to the members of Fastnet Oil & Gas plcWe have audited the financial statements of Fastnet Oil & Gas plc for the year ended 31 March 2013 which comprise the consolidated statement of comprehensive income, the consolidated statement of financial position, the consolidated statement of cash flows, the consolidated statement of changes in equity, the company statement of financial position, the company statement of cash flows, the company statement of changes in equity and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006.

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditorsAs explained more fully in the statement of directors’ responsibilities, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

Scope of the audit of the financial statementsA description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website at www.frc.org.uk/auditscopeukprivate.

Opinion on financial statementsIn our opinion: – the financial statements give a true and fair view of the state of the group’s and the parent company’s affairs as at 31 March 2013

and of the group’s loss for the year then ended; – the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; – the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union

and as applied in accordance with the provisions of the Companies Act 2006; and – the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

Opinion on other matters prescribed by the Companies Act 2006In our opinion the information given in the directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements.

Matters on which we are required to report by exceptionWe have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: – adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received

from branches not visited by us; or – the parent company financial statements are not in agreement with the accounting records and returns; or – certain disclosures of directors’ remuneration specified by law are not made; or – we have not received all the information and explanations we require for our audit.

Mark Sykes (senior statutory auditor)For and on behalf of BDO LLP, statutory auditor Manchester United Kingdom

Date 16 August 2013

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).


Consolidated Statement of Comprehensive IncomeFor the year ended 31 March 2013

Notes

12 months to 31 March

2013 £’000


2012 £’000

Continuing operationsRevenue – –Operational costs – –Gross loss – –General and administrative costs (970) (73)Reverse asset and other acquisition costs 10 (1,087) –Other operating income 5 –Share based payments 17 (258) –Operating loss (2,310) (73)Finance revenue 6 210 3Net foreign exchange gain 706 –Loss on ordinary activities before taxation (1,394) (70)Tax on loss on ordinary activities 7 – –Loss and total comprehensive loss for the period attributable to the equity holders of the parent 4 (1,394) (70)

Loss per shareLoss per share – basic and diluted, attributable to ordinary equity holders of the parent (pence) 8 (0.72) (0.13)

25

Fastnet Oil & Gas plc (formerly Sterling Green Group plc) Financial Statements for the year ended 31 March 2013

Notes

31 March 2013

£’000

31 March 2012

£’000

AssetsNon-current assetsProperty, plant and equipment 11 8 1Exploration and evaluation assets 9 7,917 –Total non-current assets 7,925 1

Current assetsTrade and other receivables 13 73 85Cash and cash equivalents 14 20,736 646Total current assets 20,809 731Total assets 28,734 732

Equity and liabilitiesEquity attributable to owners of the parentShare capital 15 10,410 304Share premium 18,801 1,794Other reserves 609 (1,215)Retained earnings (1,640) (246)Total equity 28,180 637

Non-current liabilitiesLiability for share based payments 17 111 –Total non-current liabilities 111 –

Current liabilitiesTrade and other payables 18 443 95Total current liabilities 443 95Total liabilities 554 95Total equity and liabilities 28,734 732

The Financial Statements set out on pages 25 to 51 were approved and authorised for issue by the Directors on 16 August 2013.

They are signed on the Board’s behalf by:

Cathal Friel Paul Griffiths Company NumberDirector Director 5316808

Consolidated Statement of Financial PositionAs at 31 March 2013



Consolidated Statement of Cash FlowsFor the year ended 31 March 2013

Notes


2013 £’000


2012 £’000

Cash flows from operating activitiesGroup operating loss for the period (2,310) (73)Depreciation 11 3 1Share based payment expense 17 258 –Non-cash adjustment notional issue of shares 10 809 –Movement in working capital:Decrease/ (increase) in trade and other receivables 647 (80)(Decrease)/ increase in trade and other payables (115) 32Net cash flow from operating activities (708) (120)

Cash flow from investing activitiesPayments for property, plant and equipment 11 (10) –Expenditure on exploration and evaluation assets (2,312) –Net cash outflow on acquisition of subsidiary (642) –Net cash inflow on reverse asset acquisition 37 –Bank interest received 6 210 3Net cash flow from investing activities (2,717) 3

Cash flow from financing activitiesNet proceeds from issue of equity instruments 23,487 77Repayment of loan (678) –Net cash flow from financing activities 22,809 77Exchange and other movements 706 –

Net change in cash and cash equivalents 20,090 (40)Cash and cash equivalents at beginning of period 14 646 686Cash and cash equivalents at end of period 14 20,736 646

27


Notes

Share capital £’000

Share premium

£’000

Share based payment

reserve £’000

Merger reserve £’000

Reverse asset acquisition

reserve £’000

Capital reserve £’000

Retained earnings

£’000Total

£’000

Balance at 1 January 2012 304 1,794 – – (1,298) 6 (176) 630Loss for the period – – – – – – (70) (70)Issue of share capital 10 67 – – – – – 77Reclassification of reservesA (10) (67) – – 77 – – –Balance at 31 March 2012 304 1,794 – – (1,221) 6 (246) 637Balance at 1 April 2012 304 1,794 – – (1,221) 6 (246) 637Loss for the period – – – – – – (1,394) (1,394)Share based payments – (279) 448 – – – – 169Issue of share capital 15 10,106 17,286 – – – – – 27,392Acquisition of subsidiariesB – – – 7,547 – – – 7,547Reverse asset acquisitionA – – 9 – (6,180) – – (6,171)Balance at 31 March 2013 10,410 18,801 457 7,547 (7,401) 6 (1,640) 28,180

A Reverse asset acquisition reserve The reverse asset acquisition reserve arose during the year ended 31 March 2013 in respect of the acquisition by Fastnet Oil & Gas plc (formerly Sterling Green Group plc) of Fastnet Oil and Gas (Ireland) Limited (formerly Terra Energy Limited). Since the shareholders of Terra Energy Limited became the majority shareholders of the enlarged group the acquisition is accounted for as though there is a continuation of Terra Energy Limited’s Financial Statements. The reverse asset acquisition reserve is created to maintain the equity structure of Sterling Green Group plc in compliance with UK company law.

B Merger reserve The current year merger reserve was created on the acquisitions of Terra Energy Limited and Pathfinder Hydrocarbon Ventures Limited. Consideration on the acquisition of these subsidiaries included the issuance of shares. Under section 612 of the Companies Act 2006, the premium on these shares has been included in a merger reserve.

Consolidated Statement of Changes in Equity For the year ended 31 March 2013



Company Statement of Financial PositionAs at 31 March 2013

Notes

31 March 2013

£’000

31 March 2012

£’000

AssetsNon-current assetsInvestment in subsidiaries 12 14,965 –Total non-current assets 14,965 –

Current assetsTrade and other receivables 13 61 287Cash and cash equivalents 14 20,373 149Total current assets 20,434 436Total assets 35,399 436

Equity and liabilitiesEquity attributable to owners of the companyShare capital 15 10,410 304Share premium 18,801 1,794Other reserves 8,010 6Retained earnings (2,165) (1,942)Total equity 35,056 162

Non-current liabilitiesLiability for share based payments 17 111 –Total non-current liabilities 111 –

Current liabilitiesTrade and other payables 18 232 274Total current liabilities 232 274Total liabilities 343 274Total equity and liabilities 35,399 436

The Financial Statements set out on pages 25 to 51 were approved and authorised for issue by the Directors on 16 August 2013.

They are signed on the Board’s behalf by:

Cathal Friel Paul Griffiths Company NumberDirector Director 5316808

29


Notes


2013 £’000


2012 £’000

Cash flows from operating activitiesOperating loss for the period (1,180) (516)Share based payment expense 17 270 –Impairment loss on liquidation of subsidiary – 346Impairment loss on disposal of subsidiaries – 64Investment income – (105)Movements in working capital:Decrease/(increase) in trade and other receivables 13 226 (283)(Decrease)/increase in trade and other payables 18 (42) 247Net cash flow from operating activities (726) (247)

Cash flow from investing activitiesLoans repaid by subsidiaries – 585Loans to subsidiaries – (190)Net cash outflow on acquisition of subsidiary (1,395) –Net cash inflow on reverse asset acquisition (32) –Bank interest received 200 –Net cash flow from investing activities (1,227) 395

Cash flow from financing activitiesNet proceeds from issue of equity instruments 23,408 –Funds advanced to subsidiary companies 12 (1,988) –Net cash flow from financing activities 21,420 –Foreign exchange and other movements 757 –

Net change in cash and cash equivalents 20,224 148Cash and cash equivalents at beginning of period 14 149 1Cash and cash equivalents at end of period 14 20,373 149

Company Statement of Cash FlowsFor the year ended 31 March 2013



Company Statement of Changes in EquityFor the year ended 31 March 2013

Notes

Share capital £’000

Share premium

£’000

Share based payment

reserve £’000

Merger reserve £’000

Capital reserve £’000

Retained earnings

£’000Total

£’000

Balance at 1 April 2011 304 1,794 – 891 6 (2,317) 678Loss for the period – – – – – (516) (516)Reclassification of merger reserveA – – – (891) – 891 –Balance at 31 March 2012 304 1,794 – – 6 (1,942) 162

Balance at 1 April 2012 304 1,794 – – 6 (1,942) 162Loss for the period – – – – – (223) (223)Share based payments – (279) 457 – – – 178Issue of share capital 15 10,106 17,286 – – – – 27,392Acquisition of subsidiariesA – – – 7,547 – – 7,547Balance at 31 March 2013 10,410 18,801 457 7,547 6 (2,165) 35,056

A Merger reserve The merger reserve at 1 April 2011 was created on the acquisition of Sterling Green Limited. Following the appointment on 3 February 2012 of a liquidator for Sterling Green Limited, the merger reserve was reclassified to accumulated losses.

The current year merger reserve was created on the acquisitions of Terra Energy Limited and Pathfinder Hydrocarbon Ventures Limited. Consideration on the acquisition of these subsidiaries included the issuance of shares. Under section 612 of the Companies Act 2006, the premium on these shares has been included in a merger reserve.

31


1 General informationFastnet Oil & Gas plc (“Fastnet” or the “Company”) is a company incorporated in England and Wales. Details of the registered office, the officers and advisers to the Company are presented on the Company Information page at the end of this report. The Company’s offices are in Manchester and Dublin. The Company is listed on the AIM market of the London Stock Exchange (ticker: FAST.L) and the Enterprise Securities Market of the Irish Stock Exchange (ticker: FOI).

Fastnet was established following the reverse takeover by Terra Energy Limited of AIM listed Sterling Green Group plc (“Sterling Green”) in June 2012. Sterling Green was subsequently renamed Fastnet Oil & Gas plc with Terra Energy Limited renamed Fastnet Oil and Gas (Ireland) Limited. The principal activity of the Company is oil and gas exploration.

2 Accounting policiesBasis of preparationThe consolidated Financial Statements consolidate those of the Company and its subsidiaries (together the “Group”). The consolidated Financial Statements of the Group and the individual Financial Statements of the Company have been prepared on the basis of the recognition and measurement requirements of International Financial Reporting Standards (“IFRS”) and their interpretations issued by the International Accounting Standards Board (“IASB”) as adopted by the EU and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The IFRS adopted by the EU as applied by the Company and the Group in the preparation of these Financial Statements are those that were effective from 1 April 2012.

ConsolidationThe consolidated Financial Statements comprise the Financial Statements of the Company and its subsidiaries for the year ended 31 March 2013, this being the reporting date of all entities within the Group. Subsidiaries are entities controlled by the Group. Control exists when the Group has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In accessing control, potential voting rights that are currently exercisable or convertible are taken into account. Subsidiaries are fully consolidated from the date that control commences until the date that control ceases. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. Intergroup balances and any unrealised gains or losses or income or expenses arising from intergroup transactions are eliminated in preparing the consolidated Financial Statements.

Reverse asset acquisitionOn 11 June 2012 Sterling Green Group plc (“Sterling Green”) acquired 100% of the issued share capital of Terra Energy Limited (“Terra”) in a share for share transaction, and on the same date changed its name from Sterling Green to Fastnet Oil & Gas plc. Due to the relative size of the companies, Terra’s shareholders became the majority shareholders of the enlarged share capital (before a share placing on the same date). In addition, the Company’s continuing operations and executive management became those of Terra.

As Sterling Green was an AIM quoted investing company with no assets other than the cash on its Statement of Financial Position on the date of acquisition, under IFRS rules the acquisition constitutes a reverse asset acquisition of Sterling Green by Terra. It would normally be necessary for the Group’s consolidated Financial Statements to follow the legal form of the business combination – with Terra’s results from the acquisition date of 11 June 2012 consolidated into the Group results. In this case, the consolidated Financial Statements have been treated as being a continuation of the Financial Statements of Terra with Sterling Green being treated for accounting purposes as the acquired entity.

As the consolidated group results represent a continuation of the Financial Statements of the legal subsidiary, the assets and liabilities of Terra have been recognised and measured in the consolidated results at their pre-combination carrying amounts. The retained earnings and other equity balances recognised are the retained earnings and other equity balances of Terra immediately before the business combination and the amount recognised as issued equity instruments has been determined by adding to the issued equity of Terra immediately before the business combination the cost of the combination, being the value of notional shares issued by Terra. To comply with UK company law adjustments have been made to the consolidated reserves to reflect the equity structure of the legal parent company.

Notes to the Financial Statements



2 Accounting policies continued

Comparative informationThe comparative figures presented are those for Terra and relate to the 3 month period ended 31 March 2012. The prior year Financial Statements for Terra were prepared on a 3 month basis to 31 March 2012 and therefore do not cover a comparable period to the current period Financial Statements that have been prepared on a 12 month period basis. Terra was a start-up company in the prior period and since its date of incorporation in February 2008. Due to the company being in an early stage of development it didn’t incur significant costs in the periods prior to the 3 month period ending on 31 March 2012. The Directors considered that including any additional periods Statement of Comprehensive Income amounts on a pro-rata basis would not add to the comparability of the amounts being presented and have therefore presented the Group comparatives as the 3 month period to 31 March 2012 of Terra.

Functional and presentation currencyIAS 21 “The Effects of Changes in Foreign Exchange Rates”, describes functional currency as “the currency of the primary economic environment in which an entity operates”. Following the reverse asset acquisition in June 2012 the Company and subsidiaries have been funded in Pounds Sterling (“£”), alongside incurring costs in £, Euro (“€”) and US Dollars (“$”). Having considered the aggregate effect of all relevant factors, the Directors concluded that £ is the appropriate functional and presentational currency and the change was effective from 1 April 2012. The functional currency of Terra had previously been Euro. Upon review of the movements in relevant exchange rates in the prior period these were not considered to be significant, and balances and transactions have therefore been translated to £ at a rate of £1:€1.199, and as a result no foreign currency translation reserve has arisen on the translation. Values in the Financial Statements are rounded to the nearest thousand (£’000) except where otherwise indicated.

Changes in accounting policies and disclosuresThe accounting policies adopted are consistent with those of the previous financial year except as follows:

The Group has adopted the following new and amended IFRS and IFRIC interpretations as of 1 April 2012:

– IFRS7 (amendment) “Financial Instruments: Disclosures” – additional disclosures re transfers of financial assets, effective for reporting periods beginning after 1 July 2011; and

– IAS12 (amendment) “Income Taxes” – recovery of deferred tax on investment properties, effective 1 January 2012.

The impact of adopting the above amendments had no material impact on the Financial Statements of the Group.

33


Notes to the Financial Statements continued

2 Accounting policies continuedStandards issued but not yet effectiveThe following standards, amendments and interpretations applicable to the Group are in issue but are not yet effective and have not been early adopted in these Financial Statements:

Reference Title Summary Application date of standardApplication date

of Group

Amendments to IAS 34, IAS 32, IAS 16, IAS 1, IFRS 1

Amendments resulting from Annual Improvements 2009-2011 Cycle

Amendments resulting from Annual Improvements 2009-2011 Cycle

Annual periods beginning on or after 1 January 2013

1 April 2013

Amendments to IFRS 7

Amendments related to the offsetting of assets and liabilities

Guidance on offsetting of financial assets and financial liabilities

Annual periods beginning on or after 1 January 2013

1 April 2013

IFRS 9 Financial Instruments Revised standard for accounting for financial instruments

Periods commencing on or after 1 January 2015

1 April 2015

IFRS 10 Consolidated Financial Statements

Replaces IAS 27 section that addressed accounting for consolidated financial statements. Establishes a single control model applicable to all entities


1 April 2013

IFRS 11 Joint Arrangements Replaces IAS 31 Interests in Joint Ventures


1 April 2013

IFRS 12 Disclosure of Interests in Other Entities

Increases disclosure requirements in relation to an entity’s interests in subsidiaries, joint arrangements, associates and structured entities


1 April 2013

IFRS 13 Fair Value Measurement Guidance on how to measure fair value when fair value is required or permitted


1 April 2013

Amendments to IAS 1

Presentation of Financial Statements

Presentation of items within other comprehensive income

Periods commencing on or after 1 July 2012

1 April 2013

Amendments to IAS 19

Employee Benefits Revised standard for accounting for employee benefits


1 April 2013

IAS 27 (revised) Separate Financial Statements

Revised standard following issuance of IFRS 10 and IFRS 12


1 April 2013

IAS 28 (revised) Investments in Associates and Joint Ventures

Revised standard following issuance of IFRS 11 and IFRS 12


1 April 2013

IAS 36 Impairment of Assets Clarification on disclosures required for Non-Financial Assets


1 April 2014

IAS 39 Financial Instruments: Recognition and Measurement

Amendments for novations of derivatives


1 April 2014

IFRIC 21 Levies Guidance on when to recognise a liability for a levy imposed by a government


1 April 2014

The Directors anticipate that the adoption of these standards and the interpretations in future periods will have no material impact on the Financial Statements of the Group.



2 Accounting policies continuedPrincipal accounting policiesThe principal accounting policies are summarised below. They have been consistently applied throughout the period covered by the Financial Statements.

Financial instrumentsFinancial instruments are classified on initial recognition as financial assets, financial liabilities or equity instruments in accordance with the substance of the contractual arrangement. Financial instruments are recognised on the Statement of Financial Position at fair value when the Company becomes party to the contractual provisions of the instrument. Financial assets are reduced by appropriate allowances for estimated irrecoverable amounts. Interest earned from financial assets and interest paid on financial liabilities is recognised in the Statement of Comprehensive Income on an accruals basis over the term of the financial asset or liability using the effective rate of interest.

Trade and other receivables are stated at their nominal value, as the interest that would be recognised from discounting future cash receipts over the short credit period is not considered to be material.

Trade and other payables are stated at their original invoiced value, as the interest that would be recognised from discounting future cash payments over the short term payment period is not considered material.

Earnings per shareThe Group presents basic and diluted earnings per share (“EPS”) data for its Ordinary Shares. Basic EPS is calculated by dividing the profit or loss attributable to Ordinary Shareholders of the Company by the weighted average number of Ordinary Shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to Ordinary Shareholders and the weighted average number of Ordinary Shares outstanding for the effects of all dilutive potential Ordinary Shares, which comprise warrants and share options granted by the Company.

Cash and cash equivalentsCash comprises cash on hand and bank balances. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash, which are subject to an insignificant risk of changes in value and have a maturity of three months or less at the date of acquisition.

Foreign currency translationThe Company translates foreign currency transactions into its functional currency, Pounds Sterling (“£”), at the rate of exchange prevailing at the transaction date. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the rate of exchange prevailing at the Statement of Financial Position date. Exchange differences arising are taken to the Statement of Comprehensive Income except those incurred on borrowings specifically allocable to development projects which are capitalised as part of the cost of the asset.

Property, plant and equipmentProperty, plant and equipment comprise computer equipment and furniture and fittings. Depreciated is charged at 25% per annum on a straight line basis so as to write off the cost over four years.

35



2 Accounting policies continued

Exploration and evaluation assetsExploration and evaluation assets are measured using the cost method of recognition. Exploration and evaluation expenditure is capitalised and recognised as an exploration and evaluation asset when the rights to an area of interest are current, the expenditures are expected to be recouped through successful development and exploitation activities and the operations are current and have not reached such a stage that a reasonable assessment of recoverable reserves can be made.

Exploration and evaluation expenditure includes; acquisition of rights to explore, researching, analysing and collating of historical data, geological and geophysical costs, exploratory drilling, evaluation of technical feasibility and commercial viability and administrative and general overheads related to an area of interest.

Farm-in and farm-out arrangementsThe Group accounts for its expenditure under farm-in arrangements in the same way as directly incurred exploration and evaluation expenditure.

Where consideration is received as part of a farm-out arrangement, the Group does not recognise any gain or loss but re-designates any costs previously capitalised in relation to the whole interest as relating to the partial interest retained. Any cash consideration received is credited against costs previously capitalised in relation to the whole interest with any excess accounted for as a gain on disposal. The Group does not record any expenditure made by the farmee on its account.

Business combinationsBusiness combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. In the consolidated Financial Statements, acquisition costs incurred are expensed and included in general and administrative expenses.

Frequently, the acquisition of exploration licences is effected through a non-operating corporate structure. As these structures do not represent a business, it is considered that the transactions do not meet the definition of a business combination. Accordingly the transaction is accounted for as the acquisition of an asset. The net assets acquired are recognised at cost.

Investment in subsidiariesInvestments in subsidiaries are stated at cost less provision for any impairment in value.

ImpairmentAt each Statement of Financial Position date, the Company reviews the carrying amounts of its investments and exploration and evaluation assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. Where the asset does not generate cash flows that are independent from other assets, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. An intangible asset with an indefinite useful life is tested for impairment annually and whenever there is an indication that the asset may be impaired. Any impairment loss arising from the review is charged to the Statement of Comprehensive Income whenever the carrying amount of the asset exceeds its recoverable amount.

TaxesIncome tax comprises current and deferred tax. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the reporting date. Deferred tax assets or liabilities are recognised where the carrying value of an asset or liability in the Statement of Financial Position differs to its tax base, and is accounted for using the statement of financial liability method. Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the difference can be utilised.



2 Accounting policies continuedShare based paymentsThe Group issues share options as an incentive to certain key management and staff. The fair value of options granted is recognised as an expense with a corresponding credit to the share-based payment reserve. The fair value is measured at grant date and spread over the period during which the awards vest.

For equity-settled share-based payment transactions, the goods or services received and the corresponding increase in equity are measured directly at the fair value of the goods or services received, unless that fair value cannot be estimated reliably. If it is not possible to estimate reliably the fair value of the goods or services received, the fair value of the equity instruments granted is used as a proxy. For cash-settled share-based payments, a liability is recognised for the goods or services acquired, measured initially at the fair value of the liability. At each reporting date until the liability is settled, and at the date of settlement, the fair value of the liability is remeasured, with any changes in fair value recognised in profit or loss for the period.

The Group may issue warrants to key consultants, advisers and suppliers in payment or part payment for services or supplies provided to the Group. The fair value of warrants granted is recognised as an expense with a corresponding credit to the share-based payment reserve. The fair value is measured at grant date and spread over the period during which the warrants vest. The fair value is measured using the Black-Scholes model if the fair value of the services received cannot be measured reliably.

Critical accounting judgements and key sources of estimation uncertaintyThe preparation of Financial Statements in conformity with IFRS requires management to make estimates and judgements that affect the reported amounts of assets and liabilities as well as the disclosure of contingent assets and liabilities at the period end and the reported amounts of revenues and expenses during the reporting period. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The following are areas that involve significant estimation, uncertainty and critical judgement in applying the Company’s accounting policies:

Tax provisions and recovery of deferred tax assets (see note 7)Assessing the outcome of uncertain tax provisions requires judgements to be made regarding the result of negotiations with and enquiries from tax authorities in a number of jurisdictions. The assessments made are based on the advice from independent tax advisers and the status of on-going discussions with the relevant tax authorities.

Judgement is required in determining whether deferred tax assets are recognised on the Statement of Financial Position. Deferred tax assets, including those arising from unutilised tax losses require management to assess the likelihood that the Group will generate taxable earnings in future periods, in order to utilise recognised deferred tax assets. Estimates of future taxable income are based on forecast cash flows from operations and the application of existing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the Group to realise the net deferred tax assets recorded at the reporting date could be impacted.

Additionally, future changes in tax laws in the jurisdictions in which the Group operates could limit the ability of the Group to obtain tax deductions in future periods.

Exploration and evaluation expenditure (see note 9)The application of the Company’s accounting policy for exploration and evaluation expenditure requires judgement in determining whether it is likely that future economic benefits are likely either from future exploration or sale or where activities have not reached a stage which permits a reasonable assessment of the existence of reserves. The deferral policy requires management to make certain estimates and assumptions about future events or circumstances, in particular whether an economically viable extraction operation can be established. Estimates and assumptions made may change if new information becomes available. If, after expenditure is capitalised, information becomes available suggesting that the recovery of expenditure is unlikely, the amount capitalised is written off in the Statement of Comprehensive Income in the period when the new information becomes available.

37



2 Accounting policies continuedImpairment of assets (see note 9 & 12)The Group assesses each cash-generating unit annually to determine whether any indication of impairment exists. Where an indicator of impairment exists, a formal estimate of the recoverable amount is made, which is considered to be the higher of the fair value less costs to sell and value in use. These assessments require the use of estimates and assumptions such as long-term commodity prices, discount rates, future capital requirements, exploration potential and operating performance. Fair value is determined as the amount that would be obtained from the sale of the asset in an arm’s length transaction between knowledgeable and willing parties. Fair value for mineral assets is generally determined as the present value of estimated future cash flows arising from the continued use of the asset, which includes estimates such as the cost of future expansion plans and eventual disposal, using assumptions that an independent market participant may take into account. Cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Management has assessed its cash generating units as being an individual operating site, which is the lowest level for which cash inflows are largely independent of those of other assets.

Fair value of Royalty Deed (see note 10)The Group determines the fair value of financial instruments that are not quoted using valuation techniques and models which are significantly affected by the assumptions used. In that regard, the derived fair value estimates cannot always be substantiated by comparison with independent markets and, in many cases, may not be capable of being realised immediately. The methods and assumptions applied, and valuations models used are disclosed in notes 10.

Measurement of share based payments (see note 17)The fair value of share based payments recognised in the Statement of Comprehensive Income is measured by use of valuation models, which take into account conditions attached to the vesting and exercise of the equity instruments. The expected life used in the model is adjusted; based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. The share price volatility percentage factor used in the calculation is based on management’s best estimate of future share price behaviour and is selected based on past experience, future expectations and benchmarked against peer companies in the industry.

The preparation of the consolidated Financial Statements requires management to make estimates and assumptions concerning the future that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the Financial Statements and the reported amounts of revenues and expenses during the reporting periods. The resulting accounting estimates will, by definition, differ from the related actual results.



3 Segmental informationIn the opinion of the Directors the Group has one class of business, being oil and gas exploration.

The Group’s primary reporting format is determined by the geographical segment according to the location of the exploration asset. There are currently two geographic reporting segments: UK & Ireland, and Morocco. The geographical segment UK & Ireland includes the costs of the Company head office.

Segment information of the business is presented below:

12 months to 31 March 2013 3 months to 31 March 2012

UK & Ireland £’000

Morocco £’000

Total £’000

UK & Ireland £’000

Morocco £’000

Total £’000

Income StatementRevenue – – – – – –General and administrative costs (898) (72) (970) (73) – (73)Reverse asset and other acquisition costs (1,087) – (1,087) – – –Other operating income – 5 5 – – –Share based payment (258) – (258) – – –Operating loss (2,243) (67) (2,310) (73) – (73)Finance revenue 207 3 210 3 – 3Net foreign exchange gain 747 (41) 706 – – –Loss before taxation (1,289) (105) (1,394) (70) – (70)

Assets and LiabilitiesSegment Assets 22,295 6,439 28,734 732 – 732Segment Liabilities (410) (144) (554) (95) – (95)

21,885 6,295 28,180 637 – 637

4 Loss for the period

Group Company


2013 £’000


2012 £’000


2013 £’000


2012 £’000

Loss for the period is stated after charging: Fees payable to the Company’s auditor for audit of the Company’s annual accounts 8 1 8 14Fees payable to the Company’s auditor and its associates for other services:

The audit of the Company’s subsidiaries pursuant to legislation 14 – – –Tax compliance services 5 1 5 3Assurance services on corporate finance transactions 25 – 25 25Audit-related assurance services 5 – 5 –

Depreciation of property, plant and equipment 3 – – –

39



5 EmployeesIn addition to the Directors (details of numbers are contained in the Directors’ Report), the average number of employees during the period was 1 (2012: 1).

Aggregate remuneration comprised:

Group Company


2013 £’000


2012 £’000


2013 £’000


2012 £’000

Other wages and salaries 20 5 20 11Social security costs 6 1 6 4Directors remuneration 164 16 161 63Share based payments – Directors 174 – 178 –Total employee costs 364 22 365 78

6 Finance income


2013 £’000


2012 £’000

Bank interest received 210 3

7 Tax on ordinary activitiesNo UK Corporation Tax charge arises in the year ended 31 March 2013.

A reconciliation of the expected tax benefit computed by applying the tax rate applicable in the primary jurisdiction to the loss before tax to the actual tax (credit)/expense is as follows:


2013 £’000


2012 £’000

Loss before tax on continuing operations (1,394) (70)Tax credit at UK corporation tax rate of 23% (24%) (321) (17)Effect of:Losses unutilised 28 9Expenses not deductible for tax purposes 248 –Differences in overseas taxation rates 45 8Total tax charge on loss on ordinary activities – –

The Group has tax losses of £350,000 (2012: £240,000) to carry forward against future profits. The deferred tax asset on these tax losses at 23% of £80,000 (2012: £58,000) has not been recognised due to the uncertainty of the recovery.



8 Loss per share – basic and dilutedIn the current year the denominator in the Earnings/loss per share (“EPS”) calculation is derived by separately calculating and then combining the weighted average number of shares for the period post acquisition and the weighted average number of shares for the period post acquisition.

Calculation of EPSWeighted average number of shares for the period pre-acquisition (1 April 2012 to 11 June 2012): weighted average number of shares in issue in Terra Energy Limited (“Terra”) for the period pre-acquisition multiplied by the exchange ratio (32.28:1) of Sterling Green Group plc shares received by Terra shareholders as part of the acquisition and divided by the consolidation ratio (38:1) of shares in the enlarged share group. Result of calculation = 64,124,957.

Weighted average number of shares for the period post acquisition (12 June 2012 to 31 March 2013): weighted average number of shares in issue for Fastnet Oil & Gas plc for the period post acquisition. Result of calculation = 129,920,893.

The comparative EPS figure is based on Terra’s reported loss for the period divided by the weighted average number of shares in issue in Terra for the period multiplied by the exchange ratio (32.28:1) and divided by the consolidation ratio (38:1). Result of calculation = 54,604,467.

Issued share capital – Ordinary Shares of £0.038 each

Number of shares

Weighted average

shares

31 December 2011 52,931,274 38,649,890Issue of shares by Terra Energy Limited 11,113,39431 March 2012 64,044,668 54,604,467Issue of shares by Terra Energy Limited 84,943Share for share exchange on acquisition of Terra Energy Limited (64,129,611)Share placing and consolidation 163,030,160Issue of shares by Fastnet Oil & Gas plc 110,910,33331 March 2013 273,940,493 194,045,850

The calculation of loss per share is based on the following:


2013


2012

Loss after tax attributable to equity holders of the parent (£’000) (1,394) (70)Weighted average number of Ordinary Shares in issue 194,045,850 54,604,467Fully diluted average number of Ordinary Shares in issue 194,045,850 54,604,467Basic and diluted loss per share (pence) (0.72) (0.13)

Where a loss has occurred, basic and diluted EPS are the same because the outstanding share options and warrants are anti-dilutive. Accordingly, diluted EPS equals the basic EPS. The share options and warrants outstanding as at 31 March 2013 totalled 15,345,628 and are potentially dilutive.

41



9 Exploration and evaluation assets

Offshore Morocco

£’000

Offshore Ireland £’000

Total £’000

Cost At 1 January 2012 – – –Additions – – –At 31 March 2012 – – –Carrying value – – –Cost At 1 April 2012 – – –Acquisition of Pathfinder Hydrocarbon Ventures Limited 5,449 – 5,449Additions 795 1,673 2,468At 31 March 2013 6,244 1,673 7,917Carrying value 6,244 1,673 7,917

10 Business combinations and asset acquisitionsThe Terra Energy Limited/Sterling Green Group plc transactionAs detailed in note 2 the acquisition by Sterling Green of Terra has been treated for accounting purposes as a reverse asset acquisition by Terra of Sterling Green. In a reverse asset acquisition, the cost of the business combination is deemed to have been incurred by the legal subsidiary in the form of notional equity instruments issued to the owners of the legal parent. The value of the notional shares is calculated by reference to the proportion of shares that would be needed to be issued by Terra to Sterling Green if the old shareholder base of Sterling Green was to acquire the same percentage holding in Terra as it received in the combined Group.

The value of these notional shares issued by Terra was compared to the Net Asset value of Sterling Green on the date of acquisition and the excess (£809,000) was charged to the Statement of Comprehensive Income as a deemed cost of the business combination.

In addition, £278,000 in professional fees was charged to the Statement of Comprehensive Income in the current period as part of the costs associated with the reverse asset acquisition and acquisition of Pathfinder Hydrocarbon Ventures Limited (see details below). These costs include legal, due diligence, accounting and tax advisory and corporate finance.

Acquisition of Pathfinder Hydrocarbon Ventures limitedOn 17 July 2012 Fastnet acquired the entire issued share capital of Pathfinder Hydrocarbon Ventures Limited (“Pathfinder”) from Pan Maghreb Oil and Gas Limited (“PMOG”, formerly Pathfinder Energy Maghreb plc) for an initial consideration of US$8.0 million (£5,123,000). The consideration was satisfied by the payment of US$1.0 million (£647,000) in cash and by the issue of 40,688,212 new Ordinary Shares in the capital of the Company at a price of 11 pence per Ordinary Share. Additional contingent consideration of US$1.0 million is payable on the condition that Pathfinder receives payment from Kosmos Energy Deepwater Morocco (“KEDM”), a wholly owned subsidiary of Kosmos Energy Limited (“Kosmos”), of US$1.0 million receivable by Pathfinder under a farm-out agreement between the parties – this payment was made in October 2012, following the issuance of a Joint Ministerial Order by the Moroccan Government granting approval of the farm-down.



10 Business combinations and asset acquisitions continuedAssets acquired and liabilities assumed:

At date of acquisition

£’000

AssetsExploration and evaluation assets 5,449Cash and cash equivalents 630Trade and other receivables 647Total assets 6,726

LiabilitiesNon-current liabilitiesOther non-current loans 678Total non-current liabilities 678

Current liabilitiesAccounts payable and accrued liabilities 300Total current liabilities 300Total liabilities 978

Total net assets 5,748

ConsiderationIssue of 40,688,212 fully paid Ordinary Shares 4,476Cash consideration 647Contingent consideration 625Total consideration 5,748

Results for the periodPathfinder prepares Financial Statements to the 31 March each year. Its most recent financial year was for the 15 month period to 31 March 2013. During that period the company recorded a loss of £258,000. During the period from the date of acquisition (17 July 2012) to 31 March 2013, Pathfinder recorded a loss of £104,000.

43



10 Business combinations and asset acquisitions continued

Royalty DeedPrior to the acquisition of Pathfinder, PMOG entered into a royalty deed with its subsidiary, Pathfinder, pursuant to which, in consideration of PMOG undertaking to discharge amounts due to directors and contractors of Pathfinder and certain third party liabilities, Pathfinder granted a royalty interest to PMOG in relation to sales of oil and gas from the Foum Assaka licence area.

Salient features of the Royalty Deed are:

– US$5 million single cash payment to PMOG after receipt of funds from the first commercial hydrocarbon sale in the Foum Assaka Petroleum Agreement Area,

– 1% of gross revenues from oil and gas sales up until recovery of development costs and after Moroccan royalties and transport costs,

– 3% of gross revenues from oil and gas sales after recovery of development costs and after Moroccan royalties and transport costs,

– The Royalty Deed applies to each and every oil and/or gas accumulation developed through the submission of a separate Plan of Development for each Exploitation Concession.

Due to the uncertainty in relation to the underlying economic and commercial triggers that give rise to payments under the terms of the Royalty Deed a fair value calculation was performed using the value of the liabilities discharged by PMOG as the starting point. Following the completion of the valuation exercise no monetary value has been attributed to the Royalty Deed at the date of acquisition of Pathfinder or at the year end. The Group will review the valuation of the Royalty Deed at each Statement of Financial Position date.

11 Property, plant and equipment

Total £’000

Cost At 1 January 2012 2Additions –At 31 March 2012 2Accumulated depreciationAt 1 January 2012 –Depreciation charge 1At 31 March 2012 1Net book value 1Cost At 1 April 2012 2Additions 10At 31 March 2013 12Accumulated depreciationAt 1 April 2013 1Depreciation charge 3At 31 March 2013 4Net book value 8



12 Investment in subsidiaries

Equity in subsidiary

companies £’000

Funding for exploration

activities £’000

Total £’000

Cost At 1 January 2012 – – –Additions in the year – – –At 31 March 2012 – – –Additions in the year 12,977 1,988 14,965At 31 March 2013 12,977 1,988 14,965ImpairmentAt 1 January 2012 – – –At 31 March 2012 and 31 March 2013 – – –

Carrying valueAt 31 March 2012 – – –At 31 March 2013 12,977 1,988 14,965

List of Subsidiary Companies

Subsidiary Company Activities Incorporation

% holding 31 March

2013

% holding 31 March

2012

Pathfinder Hydrocarbon Ventures Limited Oil and Gas Exploration Jersey 100 –Fastnet Oil and Gas (Ireland) Limited Oil and Gas Exploration Ireland 100 –Sterling Green Commercial Finance Limited Dormant England and Wales 100 100

Sterling Green Commercial Finance as a dormant company is exempt from statutory audit.

13 Trade and other receivables

Group Company

31 March 2013 £’000

31 March 2012

£’000

31 March 2013

£’000

31 March 2012

£’000

Prepayments and accrued income 60 2 57 287VAT recoverable 13 4 4 –Unpaid share capital – 79 – –Trade and other receivables 73 85 61 287

45



14 Cash and cash equivalents

Group Company

31 March 2013

£’000

31 March 2012

£’000

31 March 2013

£’000

31 March 2012

£’000

Bank deposit accounts 17,732 586 17,521 –Bank current accounts 3,004 60 2,852 149Cash and cash equivalents 20,736 646 20,373 149

The Group balance includes guaranteed funds held with Barclays Bank plc totalling £168,000 (US$250,000) at 31 March 2013. The guarantee is in place in accordance with the Foum Assaka Petroleum agreement.

No notice is required to access funds held in deposit accounts.

15 Share capital–CompanyIssued share capital – Ordinary Shares

Number of shares Par ValueTotal Value

£’000

1 April 2011 and 1 April 2012 303,675,390 £0.001 each 304Share consolidation and subdivision (303,675,390) £0.001 each (304)Share consolidation and subdivision 7,991,458 £0.038 each 304Share for share exchange on acquisition of Terra Energy Limited 64,129,611 £0.038 each 2,437Issue of shares by Fastnet Oil & Gas plc 201,819,424 £0.038 each 7,66931 March 2013 273,940,493 £0.038 each 10,410

Share consolidation and acquisition of Terra Energy LimitedOn 11 June 2012, the Company effected a reorganisation of the existing share capital whereby each holding of 38 existing Ordinary Shares (par value £0.001), were consolidated into one new Ordinary Share (par value £0.038). This resulted in the issue of 7,991,458 new Ordinary Shares. On the same date, 64,129,611 Ordinary Shares were issued on the acquisition of 100% of the issued share capital of Terra Energy Limited.

Issue of Shares during the yearOn 11 June 2012, 90,909,091 new Ordinary Shares of £0.038 each were issued at £0.11 per share by way of share placing. The cash consideration received by the Company was £10,000,000 before fees and commission. Total costs associated with the share placing amounted to £705,000, these costs have been deducted from share premium.

On 19 June 2012, 1,777,697 new Ordinary Shares of £0.038 each were issued at par value to Paul Griffiths following the successful awards of the licensing options covering certain blocks in the Molly Malone and Mizzen Basins in the Celtic Sea offshore Ireland. The issue of the shares was pursuant to the agreement entered into between the Company and Petro-Celtex Consultancy Limited dated 14 May 2012. Petro-Celtex Consultancy Limited is 100% owned and controlled by Paul Griffiths.

On 18 July 2012, 40,688,212 new Ordinary Shares of £0.038 each were issued at £0.11 per share in part consideration for the acquisition of 100% of the issued share capital of Pathfinder Hydrocarbon Ventures Limited from Pan Maghreb Oil and Gas Limited.

On 30 July 2012, 444,424 new Ordinary Shares of £0.038 each were issued at par following the exercise of share options.

On 12 December 2012, 68,000,000 new Ordinary Shares of £0.038 each were issued at £0.22 per share by way of share placing. The cash consideration received by the Company was £14,960,000 before fees and commission. Total costs associated with the share placing amounted to £848,000, these costs have been included in share premium.



16 Statement of Comprehensive Income–CompanyIn accordance with the provisions of the Companies Act 2006, the Company has not presented a Statement of Comprehensive Income. The Company’s loss for the year was £223,000 (12 months to 31 March 2012: £516,000).

17 Share-based paymentsThe Company has issued share options as an incentive to certain key management and staff. In addition the Company has issued warrants to key consultants, advisers and suppliers in payment or part payment for services or supplies provided to the Group. Apart from the Share Appreciation Rights described below, each share option and warrant converts into one Ordinary Share of Fastnet Oil & Gas plc on exercise and are accounted for as equity-settled share-based payments. No amounts are paid or payable by the recipient and the options and warrants may be exercised at any time from the date of vesting to the date of their expiry. The equity instruments granted carry neither rights to dividends nor voting rights.

Share options and warrants in issue:

Share Options Warrants

Units

Weighted average

exercise price Units

Weighted average

exercise price

Balance at 1 April 2012 427,630 3.8p – –Granted during the year 10,372,121 17.5p 6,767,998 15.8pExercised during the year (444,424) 3.8p – –Lapsed during the year – – (1,777,697) 14.1pBalance at 31 March 2013 10,355,327 17.6p 4,990,301 16.4pExercisable at 31 March 2013 6,299,751 11.2p 4,990,301 16.4p

The fair value is estimated at the date of grant using the Black-Scholes pricing model, taking into account the terms and conditions attached to the grant. The following are the inputs to the model for the equity instruments granted during the year:

Share Options Ranges

Warrants Ranges

Expected life in days 365-1,460 1,095-1,825Volatility 61%-80% 60%-80%Risk free interest rate 0.71%-1.14% 0.65%-0.9%

During the year a total of 10,372,121 share options exercisable at a weighted average price of £0.175 were granted. The fair value of share options granted during the year was £860,000. The share options outstanding as at 31 March 2013 have a weighted remaining contractual life of 2.7 years with exercise prices ranging from £0.038 to £0.26.

During the year a total of 6,767,998 warrants exercisable at a weighted average price of £0.158 were granted. The fair value of warrants granted during the year was £521,000. The warrants outstanding as at 31 March 2013 have a weighted remaining contractual life of 3 years with exercise prices ranging from £0.11 to £0.22.

47



17 Share-based payments continuedThe value of share options and warrants charged to the Statement of Comprehensive Income during the year is as follows:

Group Company


2013 £’000


2012 £’000


2013 £’000


2012 £’000

Share options 151 – 159 –Warrants – – – –Share appreciation rights 107 – 111 –Total 258 – 270 –

In addition to the above charges, share-based payments of £254,000 (related to warrants) were charged to share premium in the period.

Share Appreciation RightsThe Company issued Share Appreciation Rights (“SAR”) to a non-executive Director that require the Company to pay the intrinsic value of the SAR to the Director at the date of exercise. To vest, the Fastnet Oil & Gas plc share price must show at least a 25% compound annual growth from the award price (£0.052) over the three years from the grant date. The Company has recorded a liability of £111,000 in the current year. Fair value of the SAR is estimated by using a Monte-Carlo simulation model, which is rerun at each Statement of Financial Position date. The fair value of the SAR at 31 March 2013 is £364,000.

Inputs to the Monte-Carlo simulation are detailed below:

Expected life in days 774Volatility 61%Risk free interest rate 0.92%

18 Trade and other payables

Group Company

31 March 2013

£’000

31 March 2012

£’000

31 March 2013 £’000

31 March 2012

£’000

Trade payables 216 79 47 6

Accrued expenses 221 15 185 266Social security costs and other taxes 6 1 – 2Trade and other payables 443 95 232 274



19 Related party transactionsKey management are those persons having authority and responsibility for planning, controlling and directing the activities of the Company. In the opinion of the Board, the Company’s key management are the Directors of Fastnet Oil & Gas plc.

Amounts included in the Financial Statements, in aggregate, by category of related party are as follows:

Group Company

Directors


2013 £’000


2012 £’000


2013 £’000


2012 £’000

Directors remuneration 164 16 161 63Share based payments 174 – 178 –Consulting fees 100 6 75 –Office facilities and administration 6 1 6 10Other fees 66 – 66 –Total 510 23 486 73

20 Financial risk managementThe Group’s operations expose it to some financial risks arising from its use of financial instruments, the most significant ones being liquidity, market risk and credit risk. The Board of Directors is responsible for the Company’s risk management policies and whilst retaining responsibility for them it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Group’s finance function. The main policies for managing these risks are as follows:

Liquidity riskThe Group’s objectives when managing capital are to safeguard the ability to continue as a going concern in order to provide returns for shareholders and benefits to other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. Working capital forecasts are prepared to ensure the Group has sufficient funds to complete contracted work commitments.

Market riskMarket risk arises from the use of interest bearing financial instruments and represents the risk that future cash flows of a financial instrument will fluctuate as a result of changes in interest rates. It is the Company’s policy to ensure that it enters into local transactions in its functional currency whenever possible and to maintain the majority of cash balances in the functional currency of the Company. The Company considers this policy minimises any unnecessary foreign exchange exposure. In order to monitor the continuing effectiveness of this policy the Board reviews the currency profile of cash balances and managements accounts.

During the year, the Group earned interest on its interest bearing financial assets at rates between 0.1% and 2.75%. The effect of a 1% change in interest rates obtainable during the year on cash and on short-term deposits would be to increase or decrease the Group loss before tax by £115,000.

In addition to cash balance maintained in pounds sterling, the Group had balances in US Dollars and EURO at year-end. A theoretical 5% adverse movement in the year end GBP:USD exchange rate would lead to an increase in the Group loss before tax by £627,000 with a corresponding reduction in the group loss before tax with a 5% favourable movement. A theoretical 5% adverse movement in GBP:EURO exchange rates would lead to an increase in the Group loss before tax by £7,000 with a corresponding reduction in the group loss before tax with a 5% favourable movement.

49



20 Financial risk management continuedCredit riskCredit risk is the risk that the counterparty will default on its contractual obligations resulting in financial loss. Credit risk arises from cash and cash equivalents and from exposure via deposits with the Company’s bankers. For cash and cash equivalents, the Company only uses recognised banks with high credit ratings.

Categories of Company financial instruments

Group Company

31 March 2013

£’000

31 March 2012

£’000

31 March 2013

£’000

31 March 2012

£’000

Financial assets:Cash and cash equivalents 20,736 646 20,373 149Total financial assets 20,736 646 20,373 149Financial liabilities:Trade and other payables (443) (95) (232) (272)Total financial liabilities (443) (95) (232) (272)Net 20,293 551 20,141 (123)

All financial assets are categorised as loans and receivables and all financial liabilities are categorised as financial liabilities measured at amortised cost. The amortised cost of all financial assets and liabilities shown above is considered to also be the fair value of the Group’s and the Company’s assets and liabilities.



21 Capital commitmentsFastnet has obligations to carry out agreed work programmes under the terms of award on its oil and gas licensing authorisations.

Commitments on the Group’s Moroccan assets and in relation to the offshore Ireland 3D seismic survey are detailed below. In addition, the Group has other less material minimum obligations under licensing options offshore Ireland.

Foum Assaka Petroleum AgreementFastnet’s wholly owned subsidiary, Pathfinder, is currently in the Initial Exploration Period of the licence, which runs for 2½ years from 1 July 2011. The exploration phase may be extended to July 2019 upon election by the partners. The first extension period runs for 2½ years and includes a commitment to drill an exploration well during the term. The Company expects drilling on the most prospective targets during first half 2014. On entering the Initial Extension Period a bank guarantee of US$5 million needs to be provided (US$12 million in the event that a drilling contact is not provided). Fastnet has a 25% paying interest in the Foum Assaka Petroleum Agreement.

Tendrara LakbirSubsequent to year end, in May 2013, Fastnet through its wholly owned subsidiary Pathfinder Hydrocarbon Ventures Limited (“Pathfinder”), executed an exclusive option agreement (the “Option Agreement”) with Oil and Gas Investments Funds (“OGIF”) to farm-in to eight Exploration Blocks comprising the Tendrara Lakbir Petroleum Agreement (the “Tendrara Lakbir Licence”) onshore Morocco. The entrance fee payable to OGIF on execution of the option agreement was US$300,000 (£197,250). Under the Agreement, Pathfinder has the option to pay 100% of the cost to drill, test and complete an appraisal/pre-development well on or before 28 February 2014. Upon completion of the well OGIF shall transfer on or before 30 September 2014 a Gross interest of 50% (a net interest of 37.5% after including the ONHYM carry through exploration of 25%) in the Tendrara Lakbir Licence to Pathfinder. Pathfinder shall assume the operatorship under the terms of the Petroleum Agreement and Association Contract, subject to all regulatory approvals being received. Upon the completion of the well and the closing of the transfer of equity interest in the Tendrara Licence, Pathfinder shall provide OGIF with a US$2.75 million irrevocable bank guarantee, which shall be returned to Pathfinder by OGIF upon completion of a further work programme whereby Pathfinder shall pay the costs of drilling two additional appraisal/pre-development wells by 1st April 2015 and 1st April 2018.

Offshore Ireland 3D Seismic ProgrammeThe Company began tendering for a seismic vessel in Q1-2013 and following the award of the 3D seismic contract to CGG Veritas the seismic programme commenced in April 2013. In June 2013 the 3D seismic programme concluded with 1,910 km2 of 3D seismic acquired for US$19 million (£12,492,000).

22 Events after the reporting periodOn 3 May 2013, Fastnet announced that it had been awarded Licensing Option 13/3 over part blocks 56/6, 56/7, 56/8, 56/9, 56/11, 56/12, 56/13 and 56/14 in the Mizzen Basin (“East Mizzen”) and the western end of the North Celtic Sea Basin, offshore Ireland (“East Mizzen Licensing Option”). The newly named East Mizzen Licensing Option is valid from 1 May 2013 until 30 September 2014. It covers an area of 1,155 sq. km., and is contiguous with and extending eastwards from the previously awarded Mizzen Licensing Option 12/3, announced on 12 June 2012. Fastnet is the designated operator and has a 100% working interest in the East Mizzen Licensing Option.

On 29 May 2013, Fastnet announced that through its wholly owned subsidiary Pathfinder Hydrocarbon Ventures Limited (“Pathfinder”) it has executed an exclusive option agreement (the “Option Agreement”) with Oil and Gas Investments Funds (“OGIF”) for a farm-in to eight Exploration Blocks comprising the Tendrara Lakbir Petroleum Agreement (the “Tendrara Lakbir Licence”) onshore Morocco. The Tendrara Lakbir Licence covers an area of 14,548 sq. km. It covers the majority of the Tendrara Basin, which lies between the Middle Atlas to the north and the High Atlas to the south.

51


Company Information

Registered office Number 14 The Embankment Vale Road Heaton Mersey Stockport Cheshire SK4 3GN

Company number 5316808

Directors Cathal Friel – Executive Chairman Paul Griffiths – Managing Director Carol Law – Executive Director Stephen Staley – Non-executive Director Michael Nolan – Non-executive Director Michael Edelson – Non-executive Director

Company Secretary Alan Mooney

Company Website www.fastnetoilandgas.com

AIM Nominated Adviser

Shore Capital and Corporate Limited Bond Street House 14 Clifford Street London W1S 4JU

Joint Broker Shore Capital Stockbrokers Limited Bond Street House 14 Clifford Street London W1S 4JU

Joint Broker Mirabaud Securities LLP 21 St James’s Square London, SW1Y 4JP

ESM Adviser and Joint Broker

Davy Stockbrokers Davy House 49 Dawson Street Dublin 2

Auditors BDO LLP 3 Hardman Street Spinningfields Manchester M3 3AT

Banker Allied Irish Bank (GB) Vantage Point Hardman Street Manchester M3 3PL

Allied Irish Bank Ashford House Tara Street Dublin 2

Solicitors Kuits Steinart Levy LLP 3 St Mary’s Parsonage Manchester M3 2RD

Mason Hayes+Curran South Bank House Barrow Street Dublin 4

Registrars Capita Registrars Limited The Registry 34 Beckenham Road Beckenham Kent BR3 4TU


Produced by Frontier Communications.

Fastnet Oil & Gas plc14 The Embankment Vale Road Heaton Mersey Stockport Cheshire SK4 3GN

Tel: +44 203 415 5730 www.fastnetoilandgas.com

Fastnet O

il & G

as plc A

nnual Report 2013

Documents

Fastnet Oil & Gas plc – Annual Report 2013/media/Files/F/Fastnet-Oil-and-Gas/...Fastnet Oil & Gas plc Annual Report 2013 Fastnet Oil & Gas plc Annual Report 2013