TIDMCORO
RNS Number : 8031V
Coro Energy PLC
19 April 2021
19 April 2021
Coro Energy plc
("Coro", or the "Company")
Final Results
Coro Energy, the South East Asian energy company focused on
leading the regional transition to a low-carbon economy, announces
its final results for the year ended 31 December 2020.
Highlights:
South East Asia
-- Announced audited resource upgrade in May 2020 for the Mako
gas field, Duyung PSC - 79% increase in 2C (contingent) recoverable
resources to 495 Bcf (gross, full field)
-- Increased Mako resource estimates accepted by Indonesian
regulator, updated Plan of Development being prepared by the
Operator
-- Initiated revised South East Asian strategy in September 2020
to include renewables and other low-carbon energy sources and
related technologies which support the energy transition
-- Expanded our clean energy portfolio with acquisition of 20.3%
interest in ion Ventures in November 2020, a developer of clean,
flexible energy assets including energy storage.
Corporate
-- Implemented significant cost saving measures in response to
COVID-19 pandemic and challenging market conditions, reducing cash
outflow from operations by $2.2m compared to 2019
-- Continued divestment activities exploring options for
non-core Italian portfolio, subsequent to previous disposal
agreement with Zenith Energy Ltd having lapsed
Post Balance Sheet Events
-- Acquisition of a portfolio of early stage, operated renewable
energy projects in South East Asia through the acquisition of
Global Energy Partnership Limited in March 2021
-- Simultaneously, Board and executive team strengthened with
appointment of CEO with highly relevant experience and regional
knowledge
-- Raised net proceeds of $5.3m (GBP3.9m) in March 2021 through
share placing and open offer to fund transition energy strategy in
South East Asia
Certain of the information contained within this announcement is
deemed by the Company to constitute inside information as
stipulated under the UK version of the EU Market Abuse Regulation
(2014/596) which is part of UK law by virtue of the European Union
(Withdrawal) Act 2018, as amended and supplemented from time to
time.
For further information please contact:
Coro Energy plc Via Vigo Communications
Mark Hood Ltd
Cenkos Securities plc (Nominated Adviser) Tel: 44 (0)20 7397 8900
Ben Jeynes
Katy Birkin
Vigo Communications Ltd (IR/PR Advisor) Tel: 44 (0)20 7390 0230
Patrick d'Ancona
Chris McMahon
Tennyson Securities (Broker) Tel: 44 (0)20 7186 9030
Peter Krens
Ed Haig-Thomas
STATEMENT FROM THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER
The beginning of 2020 will go down as one of the most
challenging periods for junior exploration and production
companies, with the COVID-19 pandemic and other factors causing a
significant and rapid fall in oil prices and a resulting
deterioration in investor sentiment. In response, the Board acted
quickly and decisively to reduce overheads and preserve cash,
including reducing executive staffing, with Andrew Dennan stepping
aside as the Company's CFO but remaining as a Non-Executive
Director and the Company's former CEO leaving the Company. This
action led to a material $2.2m reduction in operating cash outflows
compared to the prior year.
Despite this challenging backdrop, 2020 was an important
transition year for the Company. We were pleased to report a
significant resource upgrade for our foundation gas asset, the
Duyung PSC, alongside the launch of our new, low-carbon energy
strategy and the first strategic investment in ion Ventures
Holdings Ltd ("ion Ventures"), a South East Asia and UK focused
developer. We continued the momentum post year-end, with the
acquisition of Global Energy Partnership Ltd ("GEPL"), alongside a
strategic fund raise. This latest acquisition delivered both a
portfolio of operated renewable energy projects across South East
Asia and the hiring of a renewables-experienced Chief Executive
Officer.
After this period of transition, the Company is now positioned
for an exciting 2021, with a broad opportunity set of clean energy
investments and an underpinning high-quality gas asset.
DUYUNG PSC - SIGNIFICANT RESOURCE UPGRADE
The Company's 15% interest in the Duyung PSC (operated by Conrad
Petroleum Ltd), which contains the Mako gas field, remains a key
pillar within our portfolio, with gas set to play a major role in
the energy transition as a lower carbon alternative to coal and
benefiting from a strong regional market. Following the successful
appraisal drilling campaign undertaken in Q4 2019, Gaffney Cline
& Associates ("GCA") were engaged by the PSC operator to
prepare an updated resource audit. This audit was completed in May
2020, with GCA confirming a significant 79% increase in 2C
resources (gross, full field) to 495 Bcf compared to their previous
estimate of 276 Bcf. This demonstrates the significant potential
scale of the Mako gas field, with further upside contained in the
certified 817 Bcf of 3C (contingent) resources, a 108% increase on
the previous 3C estimate of 392 Bcf. The operator's focus has now
turned to the commercial milestones including submission of an
updated Plan of Development and signature of a gas sales agreement,
in due course. Achievement of these milestones will be key to
upgrading contingent resources to reserves, and ultimately to
enabling the partners to take a Final Investment Decision
("FID").
BUILDING A CLEAN ENERGY PORTFOLIO - ION VENTURES INVESTMENT
In September 2020, we announced a revised South East Asian
strategy to include a specific focus on renewable energy assets and
related technologies, including battery storage. Shortly after, in
November 2020, we completed the acquisition of a 20.3% shareholding
in ion Ventures, a developer of flexible energy assets including
battery storage, with a pipeline of opportunities across South East
Asia and a mature UK portfolio. This deal accelerated our evolution
into a low-carbon energy company and aligned us with a team of
clean energy experts with the same regional focus. Another key
component of the deal was the acquisition of a right of first
refusal to invest in ion's pipeline of South East Asian projects,
and our rigorous screening of these opportunities continues.
CONTINUING THE MOMENTUM - GEPL ACQUISITION AND STRATEGIC
FUNDRAISE
After year-end, in March 2021, we completed the acquisition of
GEPL, an originator and developer of renewable energy projects in
South East Asia. This represents an important next step in our
strategic objective of building a regionally focused, low-carbon
energy company. With this acquisition, we secured a pipeline of
operated renewable energy projects across the region, with an
initial focus on the Philippines. We also welcomed Mark Hood,
co-founder of GEPL, to the Board of Directors, with Mark to serve
as the Company's CEO, thus securing an experienced clean energy
executive to lead the Company through the next stage of its
strategic journey. Mark also has oil and gas industry experience,
which will support Coro's continuing work on Duyung. The GEPL
acquisition also complements our ion Ventures investment, with
potential opportunities for co-development in South East Asia in
future.
Alongside the GEPL deal, we successfully raised net proceeds of
GBP3.9m ($5.3m at year-end exchange rates) through a share placing
and open offer with new and existing investors. These funds come at
a critical time for the Company and will enable us to continue to
fund our share of Duyung costs through to FID, as well as investing
in our pipeline of renewable energy projects in the region. The
fundraise also provides the Group with sufficient working capital
runway to achieve its near-term corporate goals including evolving
its capital structure ahead of the Eurobond redemption date in
April 2022.
DISPOSAL OF ITALIAN PORTFOLIO
Divestment of our non-core Italian portfolio remains a priority
for the Board, and we remain in discussions with multiple parties
regarding sale of the portfolio. The Board is confident a disposal
can be successfully concluded.
OUTLOOK
Coro not only managed to successfully weather the storm in 2020,
we progressed to an inflection point in our transition to becoming
a regionally focused, low-carbon energy company. We have an
exciting, blended portfolio of energy assets, with our operated
renewable energy portfolio sitting alongside our investments in the
non-operated Duyung PSC and ion Ventures. Having raised new capital
early in 2021, and with a strengthened executive team, we are
excited about the potential to add value for shareholders in the
next 12 months and beyond.
2020 RESULTS
As we announced last year, the Board continues to view our
portfolio of Italian gas assets as non-core to the Group's wider
strategy, and as a result we continue to market that portfolio for
sale. We were disappointed that the potential disposal of Coro
Europe Ltd to Zenith Energy Ltd did not complete in 2020 as
planned; however, management remain confident we will conclude a
disposal in the next 12 months. As a result, in accordance with
IFRS 5 Non-current assets held for sale and discontinued
operations, the assets and liabilities of the Italian business
continue to be classified as a disposal group held for sale. The
Italian business represents a separate geographical area of
operation for the Group so remains as a discontinued operation in
the statement of comprehensive income.
The 2020 loss before tax from continuing operations was $8.0m
(2019: loss $7.9m). The overall loss before tax was comparable to
the prior year, with reductions in general and administrative
("G&A") expenses offset by higher finance costs. Finance costs
increased by $2.3m due to a full year of amortisation of the
Group's Eurobond issued in April 2019, which totalled $3.8m (2019:
$2.3m). Losses on foreign exchange increased by $855k to $1.1m
(2019: $285k) primarily due to depreciation of the British Pound
Sterling ("GBP") against the Euro during the year, resulting in
unrealised losses in the Parent Company on retranslation of the
Eurobond, which arose due to the parent company using GBP as its
functional currency.
As noted above, we took decisive action in 2020 to reduce our
overhead cost base in response to the COVID-19 pandemic. This
resulted in total G&A expenses for the year decreasing by $2.2m
to $2.9m (2019: $5.1m). These cost savings are sustainable, and we
expect a recurring overhead cost base in the range of $1.7m to
$1.9m in 2021 inclusive of new CEO and COO salaries (but excluding
share-based payments and our share of Duyung venture G&A).
The 2020 loss before tax from discontinued operations was $1.3m
(2019: $8.8m). As noted in the Italy Operational Review, there was
a significant fall in Italian gas prices at the end of Q1 2020 due
to the COVID-19 pandemic, which mirrored commodity price falls
globally. Prevailing prices were lower than our break-even cost of
operation at Sillaro, Bezzecca and Casa Tiberi and, as a result,
production was suspended from those fields from early April.
Production continued at Rapagnano for the full year, which remains
profitable even at low prices. The production suspension led to a
significant fall in Coro's production entitlement for the year,
which was 5.4 MMscm compared to 12.7 MMscm in 2019. Gas was sold at
an average price of EUR0.14/scm (2019: EUR0.19/scm) resulting in a
70% reduction in revenues year-on-year.
Against this challenging backdrop, we focused heavily on
minimising costs, building on the actions taken in 2019, which
included merging our Italian subsidiaries, closing our Rome office
and reducing headcount. As a result of those initiatives, along
with our further cost focus in 2020, we achieved a reduction in
Italian G&A expenses of 63%. As a result, as shown in note 19
of the financial statements, operating cash outflows for the
Italian business unit were 63% lower than the prior year despite
the reduced revenue figure.
The accounting loss from discontinued operations was impacted by
an IFRS 5 impairment charge recorded against non-current assets
totalling $910k, and a deferred tax expense of $923k due to a
write-down of deferred tax assets. Partly offsetting these one-off
charges was a gain of $523k, due to a reduction in rehabilitation
provisions following re-estimate of these liabilities at
year-end.
2020 FINANCIAL POSITION
As discussed further below, the Group acquired a 20.3% interest
in ion Ventures in 2020. We have concluded that we exercise
significant influence over ion, and accordingly our investment is
classified as an investment in associate on the Group balance
sheet. Our share of ion losses for the two months from acquisition
date (1 November 2020) to balance sheet date was $16k.
Intangible exploration and evaluation assets relating to our 15%
interest in the Duyung PSC remain consistent with the prior year,
with the venture's capital expenditure for 2020 largely offset by
the impact of the operator reversing some over accrued drilling
expenses from the 2019 drilling campaign.
We saw an increase in the closing Eurobond liability to $25.0m
across current and non-current liabilities (2019: $19.8m). This was
partly due to amortisation of the bonds totalling $3.8m but was
also the result of significant strengthening of the Euro compared
to the prior year.
Net assets of the Italian business, treated as a disposal group
held for sale, totalled $496k at year-end (2019: $2.0m), with the
reduction due to the write-downs discussed above.
The Group ended the year with net liabilities of $4.9m (2019:
net assets $5.2m).
GOING CONCERN
The Group financial statements have been prepared under the
going concern assumption. This presumes that the Group will be able
to meet its obligations as they fall due for the foreseeable
future.
The Group ended 2020 with a cash balance of $1.7m (excluding
cash held in the disposal group). Post year-end, in March 2021, the
Company successfully completed a placing and open offer of new
ordinary shares to new and existing investors, which raised net
proceeds of GBP3.9m ($5.3m at year-end exchange rates).
The Company's EUR22.5m Eurobond is scheduled to mature in April
2022, within the going concern forecast period. The Directors have
a reasonable expectation that the Company can restructure its
balance sheet, which may include a restructuring of its bond
obligations in part or in full, to enable the Group to remain in
operation for at least 12 months from the date of signing these
financial statements. However, the ability of the Company to
successfully manage its capital structure is not guaranteed and
this represents a material uncertainty regarding the ability of the
Group to continue as a going concern. The Auditors' Report in the
2020 Annual Report & Accounts includes an emphasis of matter
that references this material uncertainty.
JAMES PARSONS
Non-Executive Chairman
Mark Hood
Chief Executive Officer
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2020
31 December 31 December
2020 2019
Notes $'000 $'000
-------------------------------------------------- ----- ----------- -----------
Continuing operations
General and administrative expenses 5 (2,942) (5,102)
Depreciation expense (114) (125)
Impairment losses - (37)
Other losses (19) -
Share of loss of associates (16) -
-------------------------------------------------- ----- ----------- -----------
Loss from operating activities (3,091) (5,264)
Finance income 7 28 54
Finance expense 7 (4,906) (2,652)
-------------------------------------------------- ----- ----------- -----------
Net finance (expense)/income (4,878) (2,598)
-------------------------------------------------- ----- ----------- -----------
Loss before income tax (7,969) (7,862)
Income tax benefit/(expense) 8 - -
-------------------------------------------------- ----- ----------- -----------
Loss for the period from continuing operations (7,969) (7,862)
Discontinued operations
Loss for the period from discontinued operations 19 (2,198) (8,773)
Total loss for the period (10,167) (16,635)
-------------------------------------------------- ----- ----------- -----------
Other comprehensive income/loss
Items that may be reclassified to profit and
loss
Exchange differences on translation of foreign
operations (840) (557)
-------------------------------------------------- ----- ----------- -----------
Total comprehensive loss for the period (11,007) (17,192)
-------------------------------------------------- ----- ----------- -----------
Loss attributable to:
Owners of the Company (10,167) (16,635)
-------------------------------------------------- ----- ----------- -----------
Total comprehensive loss attributable to:
Owners of the Company (11,007) (17,192)
-------------------------------------------------- ----- ----------- -----------
Basic loss per share from continuing operations
($) 9 (0.010) (0.010)
Diluted loss per share from continuing operations
($) 9 (0.010) (0.010)
-------------------------------------------------- ----- ----------- -----------
The consolidated statement of comprehensive income should be
read in conjunction with the accompanying notes.
CONSOLIDATED BALANCE SHEET
As at 31 December 2020
31 December 31 December
2020 2019
Notes $'000 $'000
-------------------------------------------- ----- ----------- -----------
Non-current assets
Trade and other receivables 11 - 150
Property, plant and equipment 12 16 50
Intangible assets 13 17,274 17,277
Right-of-use assets 16 - 259
Investment in associates 23 666 -
-------------------------------------------- ----- ----------- -----------
Total non-current assets 17,956 17,736
-------------------------------------------- ----- ----------- -----------
Current assets
Cash and cash equivalents 21 1,706 6,374
Trade and other receivables 11 118 226
Inventory 10 37 -
Derivative financial instruments 21 10 15
-------------------------------------------- ----- ----------- -----------
Total current assets 1,871 6,615
-------------------------------------------- ----- ----------- -----------
Assets of disposal group held for sale 19 11,417 14,313
-------------------------------------------- ----- ----------- -----------
Total assets 31,244 38,664
-------------------------------------------- ----- ----------- -----------
Liabilities and equity
Current liabilities
Trade and other payables 14 209 1,046
Lease liabilities 16 - 90
Borrowings 15 689 632
-------------------------------------------- ----- ----------- -----------
Total current liabilities 898 1,768
-------------------------------------------- ----- ----------- -----------
Non-current liabilities
Provisions - 13
Lease liabilities 16 - 158
Borrowings 15 24,360 19,211
-------------------------------------------- ----- ----------- -----------
Total non-current liabilities 24,360 19,382
-------------------------------------------- ----- ----------- -----------
Liabilities of disposal group held for sale 19 10,921 12,332
-------------------------------------------- ----- ----------- -----------
Total liabilities 36,179 33,482
-------------------------------------------- ----- ----------- -----------
Equity
Share capital 17 1,103 1,080
Share premium 17 45,786 45,679
Merger reserve 18 9,708 9,708
Other reserves 18 3,305 3,978
Accumulated losses (64,837) (55,263)
-------------------------------------------- ----- ----------- -----------
Total equity (4,935) 5,182
-------------------------------------------- ----- ----------- -----------
Total equity and liabilities 31,244 38,664
-------------------------------------------- ----- ----------- -----------
The consolidated balance sheet should be read in conjunction
with the accompanying notes.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2020
Attributable to equity shareholders of the Company
Share Merger Accumulated
capital Share premium reserve Other reserves losses Total
$'000 $'000 $'000 $'000 $'000 $'000
------------------------------ -------- ------------- -------- -------------- ----------- ---------
At 1 January 2019 988 43,619 9,708 2,059 (39,154) 17,220
Total comprehensive loss
for the period:
Loss for the period - - - - (16,635) (16,635)
Other comprehensive income - - - (557) - (557)
------------------------------ -------- ------------- -------- -------------- ----------- ---------
Total comprehensive loss
for the period - - - (557) (16,635) (17,192)
------------------------------ -------- ------------- -------- -------------- ----------- ---------
Transactions with owners
recorded directly in equity:
Issue of share capital 79 1,771 - - - 1,850
Share-based payments for
services rendered 13 289 - 995 - 1,297
Lapsed share options - - - (526) 526 -
Issue of warrants - - - 2,007 - 2,007
------------------------------ -------- ------------- -------- -------------- ----------- ---------
Total transactions with
owners recorded directly
in equity: 92 2,060 - 2,476 526 5,154
------------------------------ -------- ------------- -------- -------------- ----------- ---------
Balance at 31 December
2019 1,080 45,679 9,708 3,978 (55,263) 5,182
------------------------------ -------- ------------- -------- -------------- ----------- ---------
Attributable to equity shareholders of the Company
Share Merger Accumulated
capital Share premium reserve Other reserves losses Total
$'000 $'000 $'000 $'000 $'000 $'000
------------------------------ -------- ------------- -------- -------------- ----------- --------
At 1 January 2020 1,080 45,679 9,708 3,978 (55,263) 5,182
Total comprehensive loss
for the period:
Loss for the period - - - - (10,167) (10,167)
Other comprehensive income - - - (840) - (840)
------------------------------ -------- ------------- -------- -------------- ----------- --------
Total comprehensive loss
for the period - - - (840) (10,167) (11,007)
------------------------------ -------- ------------- -------- -------------- ----------- --------
Transactions with owners
recorded directly in equity:
Issue of share capital 23 107 - - - 130
Share-based payments for
services rendered - - - 760 - 760
Lapsed share options - - - (593) 593 -
------------------------------ -------- ------------- -------- -------------- ----------- --------
Total transactions with
owners recorded directly
in equity: 23 107 - 167 593 890
------------------------------ -------- ------------- -------- -------------- ----------- --------
Balance at 31 December
2020 1,103 45,786 9,708 3,305 (64,837) (4,935)
------------------------------ -------- ------------- -------- -------------- ----------- --------
The consolidated statement of changes in equity should be read
in conjunction with the accompanying notes.
CONSOLIDATED statement of cash flows
For the year ended 31 December 2020
31 December
2019
31 December
2020 $'000
Notes $'000 Restated
---------------------------------------------------- ----- ----------- -----------
Cash flows from operating activities
Receipts from customers 1,138 2,856
Payments to suppliers and employees (3,837) (8,291)
Interest paid 7 (632) (64)
Interest received 7 32 48
---------------------------------------------------- ----- ----------- -----------
Net cash used in operating activities (3,299) (5,451)
---------------------------------------------------- ----- ----------- -----------
Cash flow from investing activities
Payments for property, plant and equipment 12 - (1,058)
Payments for intangible assets 13 (486) (15,106)
(Payments)/reimbursements for rehabilitation
costs 19 - 33
Investment in equity accounted associates 26 (682) -
---------------------------------------------------- ----- ----------- -----------
Net cash used in investing activities (1,168) (16,131)
---------------------------------------------------- ----- ----------- -----------
Cash flows from financing activities
Proceeds from borrowings 15 - 19,211
Principal elements of lease payments 16 (207) (174)
---------------------------------------------------- ----- ----------- -----------
Net cash (used in)/provided by financing activities (207) 19,037
---------------------------------------------------- ----- ----------- -----------
Net decrease in cash and cash equivalents (4,674) (2,545)
Cash and cash equivalents brought forward 6,526 9,361
Effects of exchange rate changes on cash and
cash equivalents (91) (290)
---------------------------------------------------- ----- ----------- -----------
Cash and cash equivalents carried forward 1,761 6,526
---------------------------------------------------- ----- ----------- -----------
The consolidated statement of cash flows should be read in
conjunction with the accompanying notes, including the net debt
reconciliation in note 15.
Cash and cash equivalents carried forward at 31 December 2020
includes $55k relating to discontinued operations (2019: $152k).
Refer to note 21.
Notes to the financial statements
For the year ended 31 December 2020
NOTE 1: CORPORATE INFORMATION
Coro Energy plc (the "Company" and, together with its
subsidiaries, the "Group") is a company incorporated in England and
quoted on the AIM Market of the London Stock Exchange. The
Company's registered address is c/o Watson Farley & Williams
LLP, 15 Appold Street, London, England EC2A 2HB. The consolidated
financial statements for the year ended 31 December 2020 comprise
the Company and its interests in its 100% owned subsidiaries,
investments in associates and jointly controlled operations
(together referred to as the "Group").
NOTE 2: BASIS OF PREPARATION
(a) Statement of compliance
The financial statements are prepared in accordance with
International Financial Reporting Standards ("IFRS") in conformity
with the requirements of the Companies Act 2006.
(b) Basis of measurement
These financial statements have been prepared on the basis of
historical cost apart from non-current assets (or disposal groups)
held for sale, which are measured at fair value less costs of
disposal and derivative financial instruments recorded at fair
value through profit and loss.
(c) Going concern
The Group and Company financial statements have been prepared
under the going concern assumption, which presumes that the Group
and Company will be able to meet their obligations as they fall due
for the foreseeable future.
At 31 December 2020, the Group had cash reserves of $1.7m
(excluding cash recorded within assets of the Italian disposal
group held for sale). Post year-end, the Group increased its
available cash resources through a share placing and open offer,
which raised net proceeds of GBP3.9m ($5.3m at year-end exchange
rates). Management have prepared a consolidated cash flow forecast
for the period to 30 June 2022, which shows that the Group has
sufficient cash headroom to meet its obligations up to the
redemption date for the Group's Eurobond. The bonds are scheduled
to mature in April 2022 when principal of EUR22.5m ($27.6m at
year-end exchange rates) will become repayable in full, along with
accrued interest totalling EUR2.3m ($2.8m at year-end exchange
rates). The Directors have a reasonable expectation that the
Company can restructure its balance sheet, which may include a
restructuring of its bond obligations in part or in full, to enable
the Group to remain in operation for at least 12 months from the
date of signing these financial statements.
The ability of the Company to successfully manage its capital
structure over the next 12 months is not guaranteed. However, based
on the above, the Directors consider it appropriate to continue to
adopt the going concern basis of accounting in preparing the Group
and Company financial statements for the year ended 31 December
2020. Should the Group and Company be unable to continue trading,
adjustments would have to be made to reduce the value of the assets
to their recoverable amounts, to provide for further liabilities
that might arise and to classify fixed assets as current. The
auditors make reference to a material uncertainty in relation to
going concern within their Audit Report.
(d) Foreign currency transactions
The consolidated financial statements of the Group are presented
in United States Dollars ("USD"), rounded to the nearest
$1,000.
The functional currency of the Company and all UK domiciled
subsidiaries is British Pounds Sterling ("GBP"). The Group's
subsidiaries domiciled in Singapore have a functional currency of
USD. Apennine Energy SpA, the Group's Italian subsidiary, included
within the disposal group held for sale, has a functional currency
of Euros.
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at
year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in profit or loss
as finance income or expense. Non-monetary assets and liabilities
denominated in foreign currencies are translated at the date of
transaction and not retranslated.
The results and financial position of Group companies that have
a functional currency different from the presentation currency are
translated into the presentation currency as follows:
-- Assets and liabilities are translated at the closing rate;
-- Income and expenses are translated at average rates; and
-- Equity balances are not retranslated. All resulting exchange
differences are recognised in other comprehensive income.
(e) Use of estimates and judgements
The preparation of the financial statements requires management
to make judgments regarding the application of the Group's
accounting policies, and to use accounting estimates that impact
the reported amounts of assets, liabilities, income and expenses.
Actual results may differ from these estimates.
This note sets out the estimates and judgements taken by
management that are deemed to have a higher risk of causing a
material adjustment to the reported carrying amounts of assets and
liabilities in future years.
(i) Key accounting judgements
Accounting for investment in ion Ventures Holdings Limited
In November 2020, the Group acquired a 20.3% shareholding in ion
Ventures Holdings Limited ("IVHL") in exchange for cash
consideration of GBP500k ($682k). IVHL was founded in the UK in
2018 to exploit opportunities that arise from the increasing
complexity of energy systems, the shift to distributed generation
and more localised networks, and the need for flexible and
responsive solutions.
Under IFRS, the accounting for an interest in another entity
depends on the level of influence held over the investee by the
investor. Management have concluded that IVHL is an associate of
the Group, due to Coro exercising "significant influence" over
IVHL. With reference to the factors outlined in IAS 28 Investments
in associates and joint ventures, we concluded that significant
influence arises as a result of:
-- 20.3% shareholding in IVHL, which is above the 20% threshold
at which significant influence is presumed to exist under IFRS
(though this presumption can be rebutted);
-- Right to appoint one director (of five) to the Board of Directors of IVHL; and
-- Ability to exercise reserved powers under a Shareholder
Agreement to participate in the key strategic and operational
decisions of the investee, such as approval of annual budgets.
Associates are accounted for using the equity method, which is
described further in note 3a.
(ii) Key accounting estimates
Estimate of gas reserves and resources
The disclosed amount of the Group's gas reserves and resources
impacts a number of accounting estimates in the financial
statements including future cash flows used in asset impairment
reviews and timing of rehabilitation spend used to calculate
rehabilitation provisions.
In respect of the Group's Italian assets that are held for sale,
estimation of recoverable quantities of Proved and Probable
reserves is based on a number of factors including expected
commodity prices, discount rates, future capital expenditure and
operating costs impacting future cash flows. It also requires
interpretation of complex geological and geophysical models in
order to make an assessment of the size, shape, depth and quality
of reservoirs, and their anticipated recoveries. The economic,
geological and technical factors used to estimate reserves may
change from period to period.
The Group employs staff with the appropriate knowledge, skills
and experience to estimate reserves quantities. Periodically, the
Group's reserves calculations are also subject to independent
third-party certification by a competent person. The date of the
last Competent Person's Report issued in respect of the Group's
disclosed gas reserves and resources was as follows:
-- Italian assets (Sillaro and Rapagnano fields): effective date 31 December 2019
-- Italian assets (other fields): effective date 31 December 2017
-- Duyung PSC: effective date 22 May 2020
Gas reserves and resources are disclosed in the Strategic Report
in the Company's 2020 Annual Report & Accounts.
Measurement of non-current assets (and disposal groups)
classified as held for sale (note 19)
The Group classifies the assets and liabilities of its Italian
business as a disposal group held for sale following a decision by
the Board of Directors to prioritise full divestment of the Group's
Italian operations in the first half of 2019. Given the Italian
business represents a separate geographical area of operation for
the Group, the Italian results have also been treated as a
discontinued operation. In December 2019, the Group entered into a
binding, conditional sale and purchase agreement ("SPA") with
Zenith Energy Ltd to dispose of the Group's interest in its wholly
owned subsidiary, Coro Europe Limited, which in turn owns the
entire issued capital of Apennine Energy SpA, the subsidiary
holding the Group's portfolio of gas assets in Italy. The necessary
Italian regulatory approvals for the disposal were not obtained
prior to a long stop date of 31 July 2020 and, as such, the
disposal was mutually terminated by the parties. The Board remains
committed to divestment of our Italian portfolio and discussions
continue with other interested parties. The Board remains committed
to a sale and are confident a disposal can be achieved in the next
12 months and accordingly there is no change to the classification
of the Italian business as a disposal group held for sale.
Non-current assets were tested for impairment in line with IFRS
requirements. While a significant fall in gas prices was observed
in the second quarter of 2020 caused by a reduction in gas demand
due to COVID-19 lockdowns and the wider economic impact, prices had
recovered a significant proportion of those losses by the end of
the year, and the medium-term price outlook is similar to the
outlook at the end of 2019. Accordingly, while impairment testing
at the half-year saw us identify an impairment on the Bezzecca Cash
Generating Unit ("CGU") of $341k, the conditions that led to this
impairment, namely the sudden fall in gas prices, had reversed by
the year-end and so the impairment has been reversed. Therefore,
while the gas price outlook has deteriorated since the prior year,
this was not significant enough to result in impairments of the
Bezzecca CGU or other oil and gas assets. Under IFRS 5, non-current
assets are not depreciated once they are designated as held for
sale. As a result, impairments of $171k were recorded on other PPE
(office furniture and equipment) and right-of-use assets,
representing the amount that would have otherwise been depreciated
if IFRS 5 accounting was not applied.
A deferred tax expense of $923k arose due to a write down of the
deferred tax asset recorded by the Italian segment, as discussed
below.
As required by IFRS 5, the entire Italian business has been fair
valued at the balance sheet date to determine if any further
write-downs are required in addition to the impairments discussed
above. Management determined the fair value of the disposal group
with reference to indicative, non-binding offers discussed with
several counterparties since the Zenith Energy deal was terminated.
This led to an impairment of $739k, which has been allocated across
non-current assets on a pro-rata basis.
Assessment of indicators of impairment of intangible exploration
and evaluation assets (note 13)
The Group's exploration and evaluation assets, comprising assets
related to the Duyung PSC (and excluding Italian exploration and
evaluation assets held in disposal group), are assessed for
indicators of impairment under IFRS 6 - Exploration for, and
evaluation of, mineral resources. The Group acquired its 15%
interest in the Duyung PSC in April 2019. In Q4 2019, the operator
of the Duyung venture undertook a two-well campaign designed
primarily to appraise the Mako gas field.
Following completion of the drilling programme, the operator of
the Duyung venture engaged Gaffney, Cline and Associates ("GCA") to
complete an independent resource audit for the Mako gas field.
GCA completed their audit in May 2020 and confirmed a
significant resource upgrade for the Mako gas field compared to
their previous resource assessment released in January 2019 (the
"2019 GCA Audit"). 2C (contingent) recoverable resource estimates
were increased to 495 Bcf (gross), an increase of approximately 79%
compared with the 2019 GCA Audit. In the upside case, the 3C
(contingent) resources increased by approximately 108% compared
with the 2019 GCA Audit, to 817 Bcf (gross).
As a result of the resource upgrade, which was incorporated into
our own updated economic modelling for Duyung, no impairment
indicators were noted.
Impairment testing of exploration and evaluation assets recorded
as assets of a disposal group held for sale is discussed above.
Rehabilitation provisions (note 19)
Costs relating to rehabilitation of oil and gas fields recorded
within liabilities of a disposal group held for sale will be
incurred many years in the future and the precise requirements for
these activities are uncertain. Technologies and costs are
constantly changing, as well as political, environmental, safety
and public expectations. A change in the key assumptions used to
calculate rehabilitation provisions could have a material impact on
the carrying value of the provisions. Currently, the Group's
rehabilitation provisions relate solely to oil and gas fields in
Italy and are recorded within liabilities of a disposal group held
for sale.
The carrying value of these provisions in the financial
statements represents an estimate of the present value of the
future costs expected to be incurred to rehabilitate each field,
which are reviewed at least annually. Future costs are estimated by
internal experts, with external specialists engaged periodically to
assist management. These estimates are based on current price
observations, taking into account developments in technology and
changes to legal and contractual requirements. Expectations
regarding cost inflation are also incorporated. Future cost
estimates are discounted to present value using a rate that
approximates the time value of money, which ranges between 1.25%
and 1.75% (2019: 1.50% to 2.00%) depending on the expected year of
rehabilitation spend. The discount rate is based on the average
yield on Italian Government bonds of a duration that matches the
expected year of expenditures, incorporating a risk premium
appropriate to the nature of the liabilities.
Recoverability of deferred tax assets (note 19)
The recoverability of deferred tax assets recorded within assets
of a disposal group held for sale is dependent on the availability
of taxable profits in future years. The Group undertakes a
forecasting exercise at each reporting date to assess its expected
utilisation of these losses. The key areas of estimation
uncertainty in these forecasts are future gas prices, production
rates, capital and operating costs, and overhead expenses, all of
which could impact the generation of taxable profits by Italian
subsidiaries. The model used to calculate expected utilisation of
tax losses is prepared on a consistent basis to the DCF models used
to test for impairment, but with the inclusion of corporate
overheads and other, non-asset specific costs. The DTA was
partially written down in 2018. Given this lack of headroom, and
the lower gas price outlook compared to the prior year, a further
DTA write-down has been recorded in 2020 totalling $923k.
Assessment of indicators of impairment of investment in
associates (note 23)
The Company acquired a 20.3% interest in ion Ventures in
November 2020, as discussed above. No indicators of impairment
arose in the short period between investment date and year-end.
NOTE 3: SIGNIFICANT ACCOUNTING POLICIES
(a) Principles of consolidation
(i) Subsidiaries
The consolidated financial statements include the results of
Coro Energy plc and its subsidiary undertakings made up to the same
accounting date. Subsidiaries are entities controlled by the Group.
The Group controls an entity when it is exposed to, or has rights
to, variable returns from its involvement with the entity and has
the ability to affect those returns through its power over the
entity. The financial statements of subsidiaries are included in
the consolidated financial statements from the date that control
commences until the date that control ceases. The accounting
policies of subsidiaries have been changed when necessary to align
them with the policies adopted by the Group. All intra-group
balances, transactions, income and expenses are eliminated in full
on consolidation.
(ii) Interests in other entities
The Group classifies its interests in other entities based on
the level of control exercised by the Group over the entity.
Associates
Associates are all entities over which the Group has significant
influence but not control or joint control. This is generally the
case where the Group holds between 20% and 50% of the voting
rights. Investments in associates are accounted for using the
equity method of accounting.
Under the equity method of accounting, the investments are
initially recognised at cost, including any directly attributable
transaction costs, and adjusted thereafter to recognise the Group's
share of the post-acquisition profits or losses of the investee in
profit or loss. The Group's share of movements in other
comprehensive income of the investee are recognised in other
comprehensive income. Dividends received or receivable from
associates and joint ventures are recognised as a reduction in the
carrying amount of the investment.
Where the Group's share of losses in an equity-accounted
investment equals or exceeds its interest in the entity, the Group
does not recognise further losses, unless it has incurred
obligations or made payments on behalf of the other entity.
Unrealised gains on transactions between the Group and its
associates are eliminated to the extent of the Group's interest in
these entities. Unrealised losses are also eliminated unless the
transaction provides evidence of an impairment of the asset
transferred. Accounting policies of equity-accounted investees have
been changed where necessary to ensure consistency with the
policies adopted by the Group.
The carrying amount of equity-accounted investments is tested
for impairment at least annually.
Other investments
In a situation where the Group has direct contractual rights to
the assets, and obligations for the liabilities, of an entity but
does not share joint control, the Group accounts for its interest
in those assets, liabilities, revenues and expenses in accordance
with the accounting standards applicable to the underlying line
item. This is analogous to the "joint operator" method of
accounting outlined in IFRS 11 Joint arrangements.
(b) Taxation
Income tax expense or credit for the period is the tax payable
on the current period's taxable income, based on the applicable
income tax rate for each jurisdiction, adjusted by changes in
deferred tax assets and liabilities attributable to temporary
differences and to unused tax losses.
Current tax is the expected tax payable on the taxable income
for the year, using tax rates enacted or substantially enacted at
the date of the statement of financial position, and any adjustment
to tax payable in respect of previous years.
Deferred tax is provided using the balance sheet liability
method, providing for temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes
and the amounts used for taxation purposes. The following temporary
differences are not provided for: the initial recognition of assets
or liabilities that affect neither accounting nor taxable profit,
and differences relating to investments in subsidiaries to the
extent that the Group is able to control the timing of the reversal
of the temporary difference and it is probable that they will not
reverse in the foreseeable future. The amount of deferred tax
provided is based on the expected manner of realisation or
settlement of the carrying amount of assets and liabilities using
tax rates enacted at the date of the statement of financial
position.
A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against
which the asset can be utilised. Deferred tax assets are reduced to
the extent that it is no longer probable that the related tax
benefit will be realised.
Deferred tax assets and liabilities are offset where there is a
legally enforceable right to offset current tax assets and
liabilities and where the deferred tax balances relate to the same
taxation authority. Current tax assets and tax liabilities are
offset where the entity has a legally enforceable right to offset
and intends either to settle on a net basis, or to realise the
asset and settle the liability simultaneously.
(c) Property, plant and equipment
(i) Recognition and measurement
Property, plant and equipment comprises the Group's tangible oil
and gas assets together with office furniture and equipment. Items
of property, plant and equipment are recorded at cost less
accumulated depreciation, accumulated impairment losses and
pre-commissioning revenue and expenses. Cost includes expenditure
that is directly attributable to acquisition of the asset.
Gains and losses on disposal of an item of property, plant and
equipment are determined by comparing the proceeds from disposal
with the carrying amount of property, plant and equipment and are
recognised within "other income" in profit or loss.
(ii) Subsequent expenditure
Subsequent expenditure is capitalised only if it is probable
that the future economic benefits associated with expenditure will
flow to the Group.
(iii) Depreciation
Oil and gas assets
Oil and gas assets includes gas production facilities and the
accumulation of all exploration, evaluation, development and
acquisition costs in relation to areas of interest in which
production licences have been granted and the related project has
moved to the production phase.
Amortisation of oil and gas assets is calculated on the
units-of-production ("UOP") basis and is based on Proved and
Probable reserves. The use of the UOP method results in an
amortisation charge proportional to the depletion of economically
recoverable reserves. Amortisation commences when commercial levels
of production are achieved from a field or licence area.
The useful life of oil and gas assets, which is assessed at
least annually, has regard to both its physical life limitations
and present assessments of economically recoverable reserves of the
field at which the asset is located. These calculations require the
use of estimates and assumptions, including the amount of
recoverable reserves and estimates of future capital expenditure.
The calculation of the UOP rate of depreciation/amortisation will
be impacted to the extent that actual production in the future is
different from current forecast production based on total proved
reserves, or future capital expenditure estimates change.
Changes to recoverable reserves could arise due to changes in
the factors or assumptions used in estimating reserves,
including:
-- The effect of changes in commodity price assumptions; or
-- Unforeseen operational issues that impact expected recovery of hydrocarbons.
Assets designated as held for sale, or included in a disposal
group held for sale, are not depreciated.
Other property, plant and equipment
Depreciation is recognised in profit or loss on a straight-line
basis over the estimated useful lives of each part of an item of
property, plant and equipment. The depreciation will commence when
the asset is installed ready for use.
The estimated useful lives of each class of asset fall within
the following ranges:
Office furniture and equipment 3-5 years
The residual value, the useful life and the depreciation method
applied to an asset are reviewed at each reporting date.
(iv) Impairment
The Group assesses at each reporting date whether there is an
indication that an asset (or Cash Generating Unit - "CGU") may be
impaired. For oil and gas assets, management has assessed its CGUs
as being an individual field, which is the lowest level for which
cash inflows are largely independent of those of other assets. If
any indication exists, or when annual impairment testing for an
asset is required, the Group estimates the asset's or CGU's
recoverable amount. The recoverable amount is the higher of an
asset's or CGU's fair value less costs of disposal ("FVLCD") and
value in use ("VIU"). Where the carrying amount of an asset or CGU
exceeds its recoverable amount, the asset/CGU is considered
impaired and is written down to its recoverable amount.
The Group bases its impairment calculation on detailed budgets
and forecasts, which are prepared separately for each of the
Group's CGUs to which the individual assets are allocated. These
budgets and forecasts generally cover the forecasted life of the
CGUs. VIU does not reflect future cash flows associated with
improving or enhancing an asset's performance.
For assets/CGUs, an assessment is made at each reporting date to
determine whether there is an indication that previously recognised
impairment losses may no longer exist or may have decreased. If
such indication exists, the Group estimates the asset's or CGU's
recoverable amount. A previously recognised impairment loss is
reversed only if there has been a change in the assumptions used to
determine the asset's/CGU's recoverable amount since the last
impairment loss was recognised. The reversal is limited so that the
carrying amount of the asset/CGU does not exceed either its
recoverable amount, or the carrying amount that would have been
determined, net of depreciation/amortisation, had no impairment
loss been recognised for the asset/CGU in prior years. Such a
reversal is recognised in the income statement.
(d) Intangible assets
(i) Exploration and evaluation assets
Exploration and evaluation assets are carried at cost less
accumulated impairment losses in the statement of financial
position. Exploration and evaluation assets include the cost of oil
and gas licences, and subsequent exploration and evaluation
expenditure incurred in an area of interest.
Exploration and evaluation assets are not depreciated. When the
commercial and technical feasibility of an area of interest is
proved, capitalised costs in relation to that area of interest are
transferred to property, plant and equipment (oil and gas assets)
and depreciation commences in line with the depreciation policy
outlined above.
Exploration and evaluation assets are assessed for impairment if
sufficient data exists to determine technical feasibility and
commercial viability or facts and circumstances suggest that the
carrying value amount exceeds the recoverable amount.
Exploration and evaluation assets are tested for impairment when
any of the following facts and circumstances exist:
-- the term of the exploration licence in the specific area of
interest has expired during the reporting period or will expire in
the near future, and is not expected to be renewed;
-- substantive expenditure on further exploration for an
evaluation of mineral resources in the specific area is not
budgeted nor planned;
-- exploration for and evaluation of mineral resources in the
specific area have not led to the discovery of commercially viable
quantities of mineral resources and the decision was made to
discontinue such activities in the specific area; or
-- sufficient data exists to indicate that, although a
development in the specific area is likely to proceed, the carrying
amount of the exploration and evaluation asset is unlikely to be
recovered in full from successful development or by sale.
Areas of interest that no longer satisfy the above policy are
considered to be impaired and are measured at their recoverable
amount, with any subsequent impairment loss recognised in the
profit and loss.
(ii) Software
Costs for acquisition of software, including directly
attributable costs of implementation, are capitalised as intangible
assets and amortised over their expected useful life (currently
five years).
(iii) Goodwill
Goodwill arising from business combinations is included in
intangible assets.
Goodwill is not amortised but it is tested for impairment
annually, or more frequently if events or changes in circumstances
indicate that it might be impaired, and is carried at cost less
accumulated impairment losses.
Goodwill is allocated to cash-generating units for the purpose
of impairment testing. The allocation is made to those
cash-generating units or groups of cash-generating units that are
expected to benefit from the business combination in which the
goodwill arose.
(e) Inventory
Inventory is comprised of drilling equipment and spares and is
carried at the lower of cost and net realisable value. Any
impairment on value is taken to the income statement.
(f) Non-current assets (or disposal groups) held for sale and
discontinued operations
Non-current assets (or disposal groups) are classified as held
for sale if their carrying amount will be recovered principally
through a sale transaction rather than through continuing use and a
sale is considered highly probable. They are measured at the lower
of their carrying amount and fair value less costs to sell, except
for certain assets such as deferred tax assets, which are
specifically exempt from this requirement. An impairment loss is
recognised for any initial or subsequent write-down of the asset
(or disposal group) to fair value less costs to sell. A gain is
recognised for any subsequent increases in fair value less costs to
sell of an asset (or disposal group), but not in excess of any
cumulative impairment loss previously recognised. A gain or loss
not previously recognised by the date of the sale of the
non-current asset (or disposal group) is recognised at the date of
derecognition.
Non-current assets (including those that are part of a disposal
group) are not depreciated or amortised while they are classified
as held for sale. Interest and other expenses attributable to the
liabilities of a disposal group classified as held for sale
continue to be recognised.
Non-current assets classified as held for sale and the assets of
a disposal group classified as held for sale are presented
separately from the other assets in the balance sheet. The
liabilities of a disposal group classified as held for sale are
presented separately from other liabilities in the balance
sheet.
A discontinued operation is a component of the entity that has
been disposed of or is classified as held for sale and that
represents a separate major line of business or geographical area
of operations, is part of a single co-ordinated plan to dispose of
such a line of business or area of operations, or is a subsidiary
acquired exclusively with a view to resale. The results of
discontinued operations are presented separately in the statement
of profit or loss.
(g) Investments and financial assets
(i) Classification
The Group classifies its financial assets in the following
measurement categories:
-- those to be measured subsequently at fair value (either
through other comprehensive income or through profit or loss);
and
-- those to be measured at amortised cost.
The classification depends on the entity's business model for
managing the financial assets and the contractual terms of the cash
flows.
(ii) Recognition and measurement
A financial asset is recognised if the Group becomes a party to
the contractual provisions of the instrument. Financial assets are
derecognised if the Group's contractual rights to the cash flows
from the financial assets expire or if the Group transfers the
financial asset to another party without retaining control or
substantially all risks and rewards of the asset. Regular way
purchases and sales of financial assets are accounted for at trade
date, i.e. the date the Group commits itself to purchase or sell
the asset.
At initial recognition, the Group measures a financial asset at
its fair value plus, in the case of a financial asset not at fair
value through profit or loss ("FVTPL"), transaction costs that are
directly attributable to the acquisition of the financial asset.
Transaction costs of financial assets carried at FVTPL are expensed
in profit or loss.
Subsequent measurement of debt instruments depends on the
Group's business model for managing the asset and the cash flow
characteristics of the asset. Currently, the Group's financial
assets are all held for collection of contractual cash flows, which
are solely payments of principal and interest. Accordingly, the
Group's financial assets are measured subsequent to initial
recognition at amortised cost.
Cash and cash equivalents comprise cash balances and call
deposits. Bank overdrafts that are repayable on demand and form an
integral part of the Group's cash management are included as a
component of cash and cash equivalents for the purpose of the
statement of cash flows.
(iii) Impairment
On a forward-looking basis, the Group estimates the expected
credit losses associated with its receivables and other financial
assets carried at amortised cost and records a loss allowance for
these expected losses.
(iv) Investment in subsidiaries
In the Company balance sheet, investments in subsidiaries are
carried at cost less accumulated impairment.
(h) Derivatives
Derivatives are initially recognised at fair value on the date a
derivative contract is entered into, and they are subsequently
remeasured to their fair value at the end of each reporting
period.
(i) Provisions
(i) Rehabilitation provision
Rehabilitation obligations arise when the Group disturbs the
natural environment where its oil and gas assets are located and is
required by local laws/regulations to restore these sites.
Full provision for these obligations is made based on the
present value of the estimated costs to be incurred in dismantling
infrastructure, plugging and abandoning wells and restoring sites
to their original condition. Changes to future cost estimates are
capitalised and recorded in property, plant and equipment (oil and
gas assets) as rehabilitation assets, unless the carrying value of
these assets is not supportable, in which case changes to
rehabilitation provisions are recorded directly in the income
statement. Future cost estimates are inflated to the expected year
of rehabilitation activity and discounted to present value using a
market rate of interest that is deemed to approximate the time
value of money.
The estimated costs of rehabilitation are reviewed annually and
adjusted against the relevant rehabilitation asset or in the income
statement, as appropriate. Annual increases in the provision
relating to the unwind of the discount rate are accounted for in
the income statement as a finance expense.
(ii) Other provisions
Other provisions are measured at the present value of
management's best estimate of the expenditure required to settle
the present obligation at the end of the reporting period. The
provisions are discounted to present value using a market rate of
interest that is deemed to approximate the time value of money. The
increase in the provision due to the passage of time is recognised
as interest expense.
(j) Borrowings
Borrowings are initially recognised at fair value, net of
transaction costs incurred, and subsequently measured at amortised
cost. Any difference between the proceeds (net of transaction
costs) and the redemption amount is recognised in profit or loss
over the period of the borrowings using the effective interest
method. Loan fees paid on the establishment of loan facilities are
recognised as transaction costs of the loan and amortised over the
life of the borrowings.
Borrowings are classified as current liabilities unless the
Group has an unconditional right to defer settlement of the
liability for at least 12 months after the reporting period.
(k) Trade and other payables
Trade and other payables represent liabilities for goods and
services provided to the Group prior to the end of the financial
year that are unpaid. The amounts are unsecured and are usually
paid within 30 days of invoice date. Trade and other payables are
presented as current liabilities unless payment is not due within
12 months after the reporting period. They are recognised initially
at their fair value and subsequently measured at amortised cost
using the effective interest method.
(l) Share capital
Ordinary shares are classified as equity. Incremental costs
directly attributable to issue of shares are recognised as a
deduction from equity, net of any tax effects.
(m) Share-based payments
Share-based payments relate to transactions where the Group
receives services from employees or service providers and the terms
of the arrangements include payment of a part or whole of
consideration by issuing equity instruments to the counterparty.
The Group measures the services received from non-employees, and
the corresponding increase in equity, at the fair value of the
goods or services received. When the transactions are with
employees, the fair value is measured by reference to the fair
value of the shares issued. The expense is recognised over the
vesting period, which is the period over which all of the specified
vesting conditions are to be satisfied.
(n) Revenue
Under IFRS 15 Revenue from contracts with customers, there is a
five-step approach to revenue recognition:
Step 1: Identify the contract(s) with a customer;
Step 2: Identify the performance obligations in the
contract;
Step 3: Determine the transaction price;
Step 4: Allocate the transaction price to the performance
obligations in the contract; and
Step 5: Recognise revenue when (or as) the entity satisfies a
performance obligation.
The Group has one revenue stream, being the sale of gas
(recorded within loss from discontinued operations). Gas is sold to
wholesale customers under gas supply agreements, which have
different volume and price specifications (both fixed and
variable). Gas sales revenue is recognised when control of the gas
passes at the delivery point into the local gas pipeline network,
which is the only performance obligation. Revenue is presented net
of value added tax ("VAT"), rebates and discounts and after
eliminating intra-group sales.
(o) Leases
Leases are recognised as a right-of-use asset and a
corresponding lease liability at the date at which the leased asset
is available for use by the Group.
Assets and liabilities arising from a lease are initially
measured on a present value basis. Lease liabilities include the
net present value of the following lease payments:
-- Fixed payments (including in-substance fixed payments), less
any lease incentives receivable;
-- Variable lease payment that are based on an index or a rate,
initially measured using the index or rate as at the commencement
date;
-- Amounts expected to be payable by the Group under residual value guarantees;
-- The exercise price of a purchase option if the Group is
reasonably certain to exercise that option; and
-- Payments of penalties for terminating the lease, if the lease
term reflects the Group exercising that option.
Lease payments to be made under reasonably certain extension
options are also included in the measurement of the liability.
The lease payments are discounted using the interest rate
implicit in the lease. If that rate cannot be readily determined,
which is generally the case for leases in the Group, the lessee's
incremental borrowing rate is used, being the rate that the
individual lessee would have to pay to borrow the funds necessary
to obtain an asset of similar value to the right-of-use asset in a
similar economic environment with similar terms, security and
conditions.
Lease payments are allocated between principal and finance cost.
The finance cost is charged to profit or loss over the lease
period.
Right-of-use assets are measured at cost which comprises the
following:
-- The amount of the initial measurement of the lease liability;
-- Any lease payments made at or before the commencement date
less any lease incentives received;
-- Any initial direct costs; and
-- Restoration costs.
Right-of-use assets are generally depreciated over the shorter
of the asset's useful life and the lease term on a straight-line
basis. If the Group is reasonably certain to exercise a purchase
option, the right-of-use asset is depreciated over the underlying
asset's useful life.
Payments associated with short-term leases (term less than 12
months) and all leases of low-value assets (generally less than
$5k) are recognised on a straight-line basis as an expense in
profit or loss.
(p) Changes to accounting policies, disclosures, standards and
interpretations
(i) New and amended standards adopted by the Group
There were no new International Financial Reporting Standards
that were applicable for the current reporting period that
materially impacted the Group.
(ii) New standards not yet adopted
There are no new International Financial Reporting Standards and
Interpretations issued but not effective for the reporting period
ending 31 December 2020 that will materially impact the Group.
NOTE 4: SEGMENT INFORMATION
The Group's reportable segments as described below are based on
the Group's geographic business units. This includes the Group's
upstream gas operations in Italy and South East Asia, along with
the corporate head office in the United Kingdom. This reflects the
way information is presented to the Group's Chief Operating
Decision Maker, which was the Board of Directors during 2020,
following the departure of the Chief Executive Officer early in the
year. Results from the Group's Italian business are classified as a
discontinued operation in the income statement and reflected as
such in the table below. Refer to further disclosure in note
19.
Italy Asia UK Total
31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December
2020 2019 2020 2019 2020 2019 2020 2019
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
-------------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Depreciation
and
amortisation - - - - (114) (125) (114) (125)
Impairment
losses - - - - - (37) - (37)
Interest
expense - - - - (3,755) (2,335) (3,755) (2,335)
Share of loss
of
associates - - - - (16) - (16) -
Segment loss
before
tax from
continuing
operations - - (223) (370) (7,746) (7,492) (7,969) (7,862)
Segment loss
before
tax from
discontinued
operations (1,275) (8,773) - - - - (1,275) (8,773)
-------------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Italy Asia UK Total
31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December
2020 2019 2020 2019 2020 2019 2020 2019
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
-------------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Segment assets 11,417 14,313 17,511 18,297 2,316 6,054 31,244 38,664
Segment
liabilities (10,921) (12,332) (9) (579) (25,249) (20,571) (36,179) (33,482)
-------------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
NOTE 5: GENERAL AND ADMINISTRATIVE EXPENSES
31 December 31 December
2020 2019
$'000 $'000
----------------------------------- ----------- -----------
Employee benefits expense (note 6) 861 1,425
Business development 347 1,458
Corporate and compliance costs 501 635
Investor and public relations 215 329
G&A - Duyung venture 179 192
Other G&A 141 164
Share-based payments (note 22) 698 899
----------------------------------- ----------- -----------
2,942 5,102
----------------------------------- ----------- -----------
Auditor's remuneration
Services provided by the Group's auditor and its associates
During the year, the Group (including its overseas subsidiaries)
obtained the following services from the Company's auditor and its
associates:
31 December 31 December
2020 2019
$'000 $'000
------------------------------------------------------------- ----------- -----------
Fees payable to the Company's auditor for the audit
of the Parent Company and consolidated financial statements 40 37
Fees payable to the Company's auditor for other services:
Audit of subsidiaries 3 3
Audit-related assurance services - 15
Corporate finance services - 10
------------------------------------------------------------- ----------- -----------
NOTE 6: STAFF COSTS AND DIRECTORS' EMOLUMENTS
Group
31 December 31 December
2020 2019
Staff costs $'000 $'000
------------------------------------------------------- ----------- -----------
Wages and salaries 169 242
Pensions and other benefits 9 10
Social security costs 17 22
Share-based payments (note 22) 101 283
------------------------------------------------------- ----------- -----------
Total employee benefits 296 557
------------------------------------------------------- ----------- -----------
Average number of employees from continuing operations
(excluding Non-Executive Directors) 2 4
------------------------------------------------------- ----------- -----------
Group
31 December 31 December
2020 2019
Directors' emoluments $'000 $'000
------------------------------- ----------- -----------
Wages and salaries 592 992
Pensions and other benefits 11 32
Social security costs 63 127
Share-based payments (note 22) 597 616
------------------------------- ----------- -----------
Total employee benefits 1,263 1,767
------------------------------- ----------- -----------
The highest paid Director received aggregate emoluments of $281k
(2019: $558k).
NOTE 7: FINANCE INCOME/EXPENSE
Group
31 December 31 December
2020 2019
Finance income $'000 $'000
------------------------------------------------------ ----------- -----------
Interest income 28 39
Unrealised gain on foreign exchange forward contracts - 15
------------------------------------------------------ ----------- -----------
Total finance income 28 54
------------------------------------------------------ ----------- -----------
Group
31 December 31 December
2020 2019
Finance expense $'000 $'000
------------------------------------------------------ ----------- -----------
Interest on borrowings 3,755 2,335
Finance charge on lease liabilities 6 32
Unrealised loss on foreign exchange forward contracts 6 -
Foreign exchange loss 1,139 285
------------------------------------------------------ ----------- -----------
Total finance expense 4,906 2,652
------------------------------------------------------ ----------- -----------
NOTE 8: INCOME TAX
Income tax
Group
31 December 31 December
2020 2019
$'000 $'000
--------------------------------------- ----------- -----------
Current tax - -
--------------------------------------- ----------- -----------
Total current tax - -
--------------------------------------- ----------- -----------
Deferred tax (923) -
--------------------------------------- ----------- -----------
Total deferred tax (923) -
--------------------------------------- ----------- -----------
Total tax expense (923) -
--------------------------------------- ----------- -----------
Income tax expense is attributable to:
Loss from continuing operations - -
Loss from discontinued operations (923) -
--------------------------------------- ----------- -----------
(923) -
--------------------------------------- ----------- -----------
Numerical reconciliation of income tax result recognised in the
statement of comprehensive income to tax benefit/expense calculated
at the Group's statutory income tax rate is as follows:
Group
31 December 31 December
2020 2019
$'000 $'000
-------------------------------------------------------- ----------- -----------
Loss from continuing operations before tax (7,969) (7,862)
Loss from discontinued operations before tax (1,275) (8,773)
-------------------------------------------------------- ----------- -----------
Total loss before tax (9,244) (16,635)
-------------------------------------------------------- ----------- -----------
Income tax benefit using the Group's blended tax rate
of 20% (2019: 22%) 1,815 3,593
Non-deductible expenses (60) (1,167)
Non-taxable income - -
Prior year adjustment (139) (25)
Write-down of deferred tax assets (923) -
Current year losses and temporary differences for which
no deferred tax asset
was recognised (1,616) (2,401)
-------------------------------------------------------- ----------- -----------
Income tax benefit/(expense) (923) -
-------------------------------------------------------- ----------- -----------
Deferred tax
Deferred tax assets totalling $1.5m (2019: $2.2m) are recorded
within assets of the disposal group and have been recognised in
respect of tax losses and temporary differences based on management
assessment that future taxable profit will be available against
which the Italian subsidiary company can utilise the benefits. No
DTA in respect of carried forward tax losses has been recognised in
respect of any UK or Singapore domiciled Group company due to doubt
about the availability of future profits in these companies. Total
unrecognised losses (gross) in respect of continuing operations are
$13.1m (2019: $11.1m). Unrecognised losses (gross) relating to
discontinued operations total $99.2m (2019: $86.2m).
NOTE 9: LOSS PER SHARE
31 December 31 December
2020 2019
$'000 $'000
------------------------------------------------------ ----------- -----------
Basic loss per share from continuing operations ($) (0.010) (0.010)
Diluted loss per share from continuing operations ($) (0.010) (0.010)
Basic loss per share from discontinued operations ($) (0.003) (0.011)
Diluted loss per share from discontinued operations
($) (0.003) (0.011)
------------------------------------------------------ ----------- -----------
The calculation of basic loss per share from continuing
operations was based on the loss attributable to shareholders of
$8.0m (2019: $7.9m) and a weighted average number of Ordinary
Shares outstanding during the year of 793,502,096 (2019:
768,697,359).
Basic loss per share from discontinued operations was based on
the loss attributable to shareholders from discontinued operations
of $2.2m (2019: $8.8m).
Diluted loss per share from continuing and discontinued
operations for the current and comparative periods is equivalent to
basic loss per share since the effect of all dilutive potential
Ordinary Shares is anti-dilutive. The potential dilutive shares
includes warrants issued to Eurobond holders (note 15) and options
issued to Directors and management (note 22).
NOTE 10: INVENTORY
Group
31 December 31 December
2020 2019
$'000 $'000
---------------------- ----------- -----------
Inventory - Duyung PSC 37 -
---------------------- ----------- -----------
37 -
---------------------- ----------- -----------
Inventory represents the Group's share of inventory held by the
Duyung PSC, which is mainly comprised of drilling spares.
NOTE 11: TRADE AND OTHER RECEIVABLES
Group
31 December 31 December
2020 2019
$'000 $'000
-------------------------- ----------- -----------
Current:
Indirect taxes receivable 44 73
Prepayments 74 149
Other receivables - 4
-------------------------- ----------- -----------
118 226
-------------------------- ----------- -----------
Non-current:
Other receivables - 150
-------------------------- ----------- -----------
- 150
-------------------------- ----------- -----------
NOTE 12: PROPERTY, PLANT AND EQUIPMENT
Group
31 December 31 December
2020 2019
$'000 $'000
------------------------------- ----------- -----------
Office furniture and equipment 16 50
------------------------------- ----------- -----------
16 50
------------------------------- ----------- -----------
Reconciliation of the carrying amounts for each class of
property, plant and equipment are set out below:
Group
31 December 31 December
2020 2019
$'000 $'000
------------------------------------------------------ ----------- -----------
Office furniture and equipment:
Carrying amount at beginning of period 50 235
Additions - 12
Depreciation expense (13) (29)
Reclassification to assets of disposal group held for
sale - (170)
Disposals (20) -
Effect of foreign exchange (1) 2
------------------------------------------------------ ----------- -----------
Carrying amount at end of period 16 50
------------------------------------------------------ ----------- -----------
NOTE 13: INTANGIBLE ASSETS
Group
31 December 31 December
2020 2019
$'000 $'000
---------------------------------- ----------- -----------
Exploration and evaluation assets 17,251 17,247
Software 23 30
---------------------------------- ----------- -----------
17,274 17,277
---------------------------------- ----------- -----------
Reconciliation of the carrying amounts for each material class
of intangible assets are set out below:
Group
31 December 31 December
2020 2019
$'000 $'000
------------------------------------------------------ ----------- -----------
Exploration and evaluation assets:
Carrying amount at beginning of period 17,247 3,076
Additions 4 17,253
Reclassification to assets of disposal group held for
sale - (3,005)
Impact of foreign exchange - (77)
------------------------------------------------------ ----------- -----------
Carrying amount at end of period 17,251 17,247
------------------------------------------------------ ----------- -----------
Exploration and evaluation assets relate to the Group's interest
in the Duyung PSC. No indicators of impairment of these assets were
noted; see note 2e.
NOTE 14: TRADE AND OTHER PAYABLES
Group
31 December 31 December
2020 2019
$'000 $'000
--------------------------- ----------- -----------
Current:
Trade payables 105 184
Other payables 61 -
Accrued expenses 43 315
Payables to Duyung venture - 547
--------------------------- ----------- -----------
209 1,046
--------------------------- ----------- -----------
NOTE 15: BORROWINGS
31 December 31 December
2020 2019
$'000 $'000
------------ ----------- -----------
Current
Eurobond 689 632
------------ ----------- -----------
689 632
------------ ----------- -----------
Non-current
Eurobond 24,360 19,211
------------ ----------- -----------
24,360 19,211
------------ ----------- -----------
In 2019, the Group successfully completed the issue of EUR22.5m
three-year Eurobonds with attached warrants to key institutional
investors. The bonds were issued in two equal tranches A and B,
ranking pari passu, with Tranche A paying a 5% cash coupon annually
in arrears, and Tranche B accruing interest at 5% per annum payable
on redemption.
The Eurobonds mature on 12 April 2022 at 100% of par value plus
any accrued and unpaid coupon and may be repaid earlier by the
Company at its option at 100% of par plus any accrued and unpaid
coupon. Bond subscribers were issued with 41,357,500 warrants to
subscribe for ten new Ordinary Shares in the Company at an exercise
price of 4p per share at any time over the three-year term of the
bonds. An additional 6,000,000 warrants were issued to the firm
subscriber Lombard Odier Asset Management (Europe) Limited and
underwriter Pegasus Alternative Fund Ltd.
The warrants were valued on grant date at 3.3p per warrant using
the Black Scholes method, with the total fair value of warrants
($2.0m) treated as a transaction cost and amortised over the life
of the bonds.
The bonds were initially recognised at fair value and
subsequently are recorded at amortised cost, with an average
effective interest rate of 18.10%.
Net debt reconciliation
An analysis of net debt and the movements in net debt for each
of the periods presented is shown below:
Group
31 December 31 December
2020 2019
$'000 $'000
-------------------------- ----------- -----------
Cash and cash equivalents 1,706 6,374
Borrowings (25,049) (19,843)
Lease liabilities - (248)
-------------------------- ----------- -----------
Net debt (23,343) (13,717)
-------------------------- ----------- -----------
Cash and
cash equivalents Borrowings Lease liabilities Total
$'000 $'000 $'000 $'000
----------------------------------- ----------------- ---------- ----------------- --------
Net debt as at 1 January 2019 9,361 - - 9,361
----------------------------------- ----------------- ---------- ----------------- --------
Cash flows (2,545) (19,211) 174 (21,582)
New leases - - (636) (636)
Eurobond amortisation - (2,335) - (2,335)
Transaction costs on borrowings 2,007 - 2,007
Reclassification to disposal group (152) - 284 132
Effects of foreign exchange (290) (304) (70) (664)
----------------------------------- ----------------- ---------- ----------------- --------
Net debt as at 31 December 2019 6,374 (19,843) (248) (13,717)
----------------------------------- ----------------- ---------- ----------------- --------
Cash flows (4,563) 618 88 (3,857)
Eurobond amortisation - (3,755) - (3,755)
Lease terminations - - 158 158
Effects of foreign exchange (105) (2,069) 2 (2,172)
----------------------------------- ----------------- ---------- ----------------- --------
Net debt as at 31 December 2020 1,706 (25,049) - (23,343)
----------------------------------- ----------------- ---------- ----------------- --------
NOTE 16: LEASES
Lease assets and liabilities in the prior year related to the
Company's London head office. The lease was terminated in 2020
resulting in nil assets/liabilities at 31 December 2020.
31 December 31 December
2020 2019
$'000 $'000
-------------------- ----------- -----------
Right-of-use assets
Properties - 259
-------------------- ----------- -----------
Lease liabilities
Current - 90
Non-current - 158
-------------------- ----------- -----------
The total finance charge recorded on lease liabilities was $6k
(2019: $32k).
The total cash outflow for leases was $220k (2019: $238k), of
which $207k (2019: $174k) is shown in the cash flow statement as
repayment of principal, being $88k relating to continuing
operations (2019: $84k relating to continuing operations). The
remaining cash flow of $13k (2019: $64k) is related to the implicit
finance charge, of which $5k relates to continuing operations
(2019: $32k relating to continuing operations).
A maturity analysis of lease liabilities is included in note
21.
Right-of-use assets
A reconciliation of the carrying amount of each class of
right-of-use asset is as follows:
Group
31 December 31 December
2020 2019
$'000 $'000
------------------------------------------------------ ----------- -----------
Properties:
Opening balance 259 654
Depreciation (94) (125)
Reclassification to assets of disposal group held for
sale - (275)
Adjustment for change to lease term (158) -
Impact of foreign exchange (7) 5
------------------------------------------------------ ----------- -----------
- 259
------------------------------------------------------ ----------- -----------
NOTE 17: SHARE CAPITAL AND SHARE PREMIUM
31 December 31 December
2020 Nominal Share 2020
Number value premium Total
000's $'000 $'000 $'000
------------------------------------ ----------- ------- -------- -----------
As at 1 January 2020 789,586 1,080 45,679 46,759
------------------------------------ ----------- ------- -------- -----------
Shares issued during the period:
Issued for services rendered 17,322 23 107 130
------------------------------------ ----------- ------- -------- -----------
Closing balance at 31 December 2020 806,908 1,103 45,786 46,889
------------------------------------ ----------- ------- -------- -----------
31 December 31 December
2019 Nominal Share 2019
Number value premium Total
000's $'000 $'000 $'000
------------------------------------ ----------- ------- -------- -----------
As at 1 January 2019 718,522 988 43,619 44,607
------------------------------------ ----------- ------- -------- -----------
Shares issued during the period:
Issued to Duyung PSC vendors 60,905 79 1,771 1,850
Issued for services rendered 10,159 13 289 302
------------------------------------ ----------- ------- -------- -----------
Closing balance at 31 December 2019 789,586 1,080 45,679 46,759
------------------------------------ ----------- ------- -------- -----------
All Ordinary Shares are fully paid and carry one vote per share
and the right to dividends. In the event of winding up the Company,
ordinary shareholders rank after creditors. Ordinary Shares have a
par value of GBP0.001 per share. Share premium represents the issue
price of shares issued above their nominal value. As at the date of
these financial statements the Company has unused authority to
issue up to 728,934,000 new Ordinary Shares.
No dividends were paid or declared during the current period
(2019: nil).
NOTE 18: RESERVES
Merger reserve
The merger reserve of $9.7m relates to the reorganisation of
ownership of Northsun Italia S.p.A, which occurred in the first
half of 2017; being the difference between the value of shares
issued and the nominal value of the subsidiary's shares
received.
Other reserves
Share-based payments reserve
The increase in share-based payments reserve is attributable to
the current period charge relating to options issued to Directors
and management of the Company, which was $760k (2019: $899k). This
increase was partially offset by lapsed share options during the
year, which were recycled to accumulated losses ($593k).
Functional currency translation reserve
The translation reserve comprises all foreign currency
differences arising from translation of the financial position and
performance of the Parent Company and certain subsidiaries, which
have a functional currency different to the Group's presentation
currency of USD. The total loss on foreign exchange recorded in
other reserves for the period was $840k (2019: $557k loss).
NOTE 19: DISCONTINUED OPERATIONS
The Group classifies the assets and liabilities of its Italian
business as a disposal group held for sale following a decision by
the Board of Directors to prioritise full divestment of the Group's
Italian operations in the first half of 2019. Given the Italian
business represents a separate geographical area of operation for
the Group, the Italian results have also been treated as a
discontinued operation. In December 2019, the Group entered into a
binding, conditional sale and purchase agreement ("SPA") with
Zenith Energy Ltd to dispose of the Group's interest in its wholly
owned subsidiary, Coro Europe Limited, which in turn owns the
entire issued capital of Apennine Energy SpA, the subsidiary
holding the Group's portfolio of gas assets in Italy. The necessary
Italian regulatory approvals for the disposal were not obtained
prior to a long stop date of 31 July 2020 and, as such, the
disposal was mutually terminated by the parties. The Board remains
committed to divestment of our Italian portfolio and discussions
have been held with other interested parties. The Board remains
confident a disposal can be achieved in the next 12 months and,
accordingly, there is no change to the classification of the
Italian business as a disposal group held for sale.
The results of the Italian operations for the period are
presented below:
31 December 31 December
2020 2019
$'000 $'000
-------------------------------------- ----------- -----------
Revenue 803 2,692
Operating costs (1,010) (2,661)
Depreciation and amortisation expense - (283)
-------------------------------------- ----------- -----------
Gross profit/(loss) (207) (252)
-------------------------------------- ----------- -----------
Other income 41 44
General and administrative expenses (661) (1,794)
Depreciation expense - (42)
Change in rehabilitation provisions 523 206
Impairment losses (910) (6,571)
-------------------------------------- ----------- -----------
Loss from operating activities (1,214) (8,409)
-------------------------------------- ----------- -----------
Finance income 21 10
Finance expense (82) (374)
-------------------------------------- ----------- -----------
Loss before tax (1,275) (8,773)
-------------------------------------- ----------- -----------
Income tax benefit/(expense) (923) -
-------------------------------------- ----------- -----------
Loss for the period after tax (2,198) (8,773)
-------------------------------------- ----------- -----------
The major classes of assets and liabilities of the Italian
operations classified as held for sale as at 31 December 2020 are
as follows:
31 December 31 December
2020 2019
$'000 $'000
---------------------------------- ----------- -----------
Assets
Property, plant and equipment 4,622 4,759
Exploration and evaluation assets 1,992 1,978
Right-of-use assets 108 175
Land 1,927 2,021
Deferred tax assets 1,455 2,240
Inventories 300 306
Trade and other receivables 958 2,210
Other financial assets - 472
Cash 55 152
---------------------------------- ----------- -----------
Total assets 11,417 14,313
---------------------------------- ----------- -----------
Liabilities
Trade and other payables 1,702 2,990
Lease liabilities 62 125
Provisions 9,157 9,217
---------------------------------- ----------- -----------
Total liabilities 10,921 12,332
---------------------------------- ----------- -----------
Net assets 496 1,981
---------------------------------- ----------- -----------
The net cash flows of the Italian operations were as
follows:
31 December 31 December
2020 2019
$'000 $'000
---------------------------------------- ----------- -----------
Net cash flow from operating activities (533) (1,451)
Net cash flow from investing activities (58) (1,222)
Net cash flow from financing activities 480 2,558
---------------------------------------- ----------- -----------
Net cash inflow/(outflow) (111) (115)
---------------------------------------- ----------- -----------
As explained in note 2e, there were no specific impairments
recorded in 2020 to oil and gas assets (producing assets within PPE
and development assets within intangible assets). An impairment of
$171k was recorded on other PPE (office furniture and equipment)
and right-of-use assets, representing the amount that would have
otherwise been depreciated if IFRS 5 accounting was not applied.
The disposal group as a whole was tested for impairment as required
by IFRS 5. This resulted in an impairment of $739k, which was
allocated across non-current assets pro-rata.
Refer to note 14 for further discussion on the presentation of
balances owing to and from Sound Energy, which relate to the
disposal group.
NOTE 20: INVESTMENT IN SUBSIDIARIES
Company
2020 2019
$'000 $'000
--------------------------- -------- ---------
Cost
At 1 January 51,812 27,142
Additions - 24,670
Other adjustments (557) -
--------------------------- -------- ---------
At 31 December 51,255 51,812
--------------------------- -------- ---------
Accumulated impairment
At 1 January (32,222) (22,848)
Impairment (1,076) (9,374)
--------------------------- -------- ---------
At 31 December (33,298) (32,222)
--------------------------- -------- ---------
Impact of foreign exchange 730 177
--------------------------- -------- ---------
Net book value
At 31 December 18,687 19,767
--------------------------- -------- ---------
An impairment of $1.1m was recorded on the value of the
Company's investment in Apennine Energy SpA, which is held
indirectly through intermediate holding companies. This reflects
lower total consideration expected on disposal compared to the
prior year, as discussed in note 2e.
The Company's subsidiary undertakings at the date of issue of
these financial statements, which are all 100% owned, are set out
below:
Name Incorporated Principal activity Registered address
------------------------------ ------------ ------------------------ -------------------------
Apennine Energy S.p.A* Italy Exploration, development Via XXV Aprile 5,
and production company San Donato Milanese,
(MI) 2009, Italy
Coro Europe Limited* England Holding company c/o Watson Farley
& Williams, 15 Appold
Street, London, EC2A
2HB, United Kingdom
Coro Asia Limited* England Holding company c/o Watson Farley
& Williams, 15 Appold
Street, London, EC2A
2HB, United Kingdom
Coro Energy Asia Limited* England Holding company c/o Watson Farley
& Williams, 15 Appold
Street, London, EC2A
2HB, United Kingdom
Coro Energy Holdings Cell England Holding company c/o Watson Farley
A Limited & Williams, 15 Appold
Street, London, EC2A
2HB, United Kingdom
Coro Energy (Singapore) Singapore Holding company 80 Robinson Road #02-00,
Pte Ltd* Singapore 068898
Coro Energy Bulu (Singapore) Singapore Holding company 80 Robinson Road #02-00,
Pte Ltd* Singapore 068898
Coro Energy Duyung (Singapore) Singapore Exploration and 80 Robinson Road #02-00,
Pte Ltd* development company Singapore 068898
Global Energy Partnership Scotland Holding company 12 Traill Drive, Montrose
Limited DD10 8SW, Scotland
------------------------------ ------------ ------------------------ -------------------------
* Indirectly held
Acquisition completed on 17 March 2021
The following subsidiaries are exempt from audit for the 2020
financial year under s479A of the Companies Act 2006: Coro Asia
Limited, Coro Energy Asia Limited, Coro Energy Holdings Cell A
Limited.
NOTE 21: FINANCIAL INSTRUMENTS
Carrying amount versus fair value
The fair values of financial assets and financial liabilities,
together with the carrying amounts in the consolidated statement of
financial position, are as follows.
31 December 2020
Group
Carrying
amount Fair value
$'000 $'000
------------------------------------------------------ -------- ----------
Financial assets
Trade and other receivables (current and non-current) 43 43
Derivative financial instruments 10 10
Cash and cash equivalents 1,706 1,706
------------------------------------------------------ -------- ----------
Financial liabilities
Trade and other payables 209 209
Borrowings (current and non-current) 25,049 25,049
------------------------------------------------------ -------- ----------
31 December 2019
Group
Carrying
amount Fair value
$'000 $'000
------------------------------------------------------ -------- ----------
Financial assets
Trade and other receivables (current and non-current) 227 227
Derivative financial instruments 15 15
Cash and cash equivalents 6,374 6,374
------------------------------------------------------ -------- ----------
Financial liabilities
Trade and other payables 1,046 1,046
Lease liabilities (current and non-current) 248 248
Borrowings (current and non-current) 19,843 19,843
------------------------------------------------------ -------- ----------
Determination of fair values
All the Group's financial instruments are carried at amortised
cost with the exception of derivative financial instruments, which
are recorded at fair value through profit and loss. The carrying
value of trade and other receivables, cash and cash equivalents and
trade and other payables approximates their fair value. Borrowings
comprises the Group's Eurobond, which is listed on the Luxembourg
Stock Exchange. To date, no bonds have been traded so carrying
value is deemed to approximate fair value at the balance sheet
date.
Financial risk management
Exposure to credit, market and liquidity risks arise in the
normal course of the Group's business.
This note presents information about the Group's exposure to
each of the above risks, their objectives, policies and processes
for measuring and managing risk, and the management of capital.
Risk recognition and management are viewed as integral to the
Group's objectives of creating and maintaining shareholder value,
and the successful execution of the Group's strategy. The Board as
a whole is responsible for oversight of the processes by which risk
is considered for both ongoing operations and prospective actions.
In specific areas, it is assisted by the Audit Committee.
Management is responsible for establishing procedures that
provide assurance that major business risks are identified,
consistently assessed and appropriately addressed.
(i) Credit risk
The Group is exposed to credit risk on its cash and cash
equivalents, trade and other receivables and derivative financial
instruments. The maximum exposure to credit risk is represented by
the carrying amount of each financial asset as shown in the table
above and in note 19.
Credit risk with respect to cash is reduced through maintaining
banking relationships with financial intermediaries with acceptable
credit ratings. All banks with which the Group has a relationship
have an investment grade credit rating and a stable outlook
according to recognised credit rating agencies.
The Group undertakes credit checks for all material new
counterparties prior to entering into a contractual
relationship.
(ii) Market risk
Interest rate risk
The Group is primarily exposed to interest rate risk arising
from cash and cash equivalents that are interest-bearing. The
Group's Eurobond bears interest at a fixed rate. Interest rate risk
is currently not material for the Group.
Currency risk
The Group operates internationally and is exposed to foreign
exchange risk. Foreign exchange risk arises from future commercial
transactions and recognised assets and liabilities denominated in a
currency that is not the functional currency of the relevant Group
entity. The Group's primary currency exposure is to Euros, which is
the denomination of the Eurobond. The Group is also exposed to
changes in the Sterling exchange rate against the US Dollar. The
Group holds a majority of its cash in US Dollars, which is the
currency in which the Group's investment expenditures in South East
Asia are denominated. This gives rise to Sterling exposure due to a
predominantly Sterling cost base in the UK. The Group's policy is
to hedge up to 40% of Sterling exposure through simple forward
contracts, which are recorded as derivative financial instruments
in the balance sheet.
The Group's and Company's exposure to foreign currency risk at
the end of the reporting period is summarised below. All amounts
are presented in US Dollar equivalent.
Group
2020 2020 2019 2019
$'000 $'000 $'000 $'000
USD EUR USD EUR
------------------------------------- ------ -------- ------ --------
Cash and cash equivalents 1,299 172 4,983 235
Trade and other payables (4) (4) (41) -
Borrowings (current and non-current) - (25,049) - (19,843)
------------------------------------- ------ -------- ------ --------
Net exposure 1,295 (24,881) 4,942 (19,608)
------------------------------------- ------ -------- ------ --------
Sensitivity analysis
As shown in the table above, the Group is primarily exposed to
changes in the GBP:USD exchange rate through its cash balance held
in USD by the Company, and to changes in the GBP:EUR exchange rate
due to the Eurobond denominated in EUR. The table below shows the
impact in USD on pre-tax profit and loss of a 10% increase/decrease
in the GBP to USD exchange rate, holding all other variables
constant. Also shown is the impact of a 10% increase/decrease in
the GBP to EUR exchange rate, being the other primary currency
exposure.
Group
$'000
------------------------------------ -------
31 December 2020
USD:GBP exchange rate increases 10% 122
USD:GBP exchange rate decreases 10% (111)
EUR:GBP exchange rate increases 10% (2,340)
EUR:GBP exchange rate decreases 10% 2,127
------------------------------------ -------
31 December 2019
USD:GBP exchange rate increases 10% 494
USD:GBP exchange rate decreases 10% (449)
EUR:GBP exchange rate increases 10% (1,961)
EUR:GBP exchange rate decreases 10% 1,782
------------------------------------ -------
(iii) Capital management
The Group's policy is to maintain a strong capital base so as to
maintain creditor confidence and to sustain future development of
the business, safeguard the Group's ability to continue as a going
concern and provide returns for shareholders. As explained further
in note 26 and note 2c, post year-end the Company successfully
raised net proceeds of GBP3.9m, equivalent to $5.3m at year-end
exchange rates, through the issue of new shares to new and existing
investors. The Group's Eurobond matures in April 2022. The Eurobond
was issued with 47,357,500 attaching warrants that entitle warrant
holders to subscribe for ten new Ordinary Shares in the Company at
an exercise price of 4p per share at any time over the three-year
term of the bonds. Should the warrants be exercised, the exercise
proceeds would substantially cover the Eurobond repayment due on 12
April 2022 and recapitalise the Group. However, given the warrants
are significantly out of the money, management is expecting to look
at alternative options to optimise the Group's capital
structure.
(iv) Liquidity risk
The Group's approach to managing liquidity is to ensure that it
will always have sufficient liquidity to meet its liabilities when
due. Refer to the going concern statement in note 2c for further
commentary.
The table below analyses the Group's financial liabilities into
relevant maturity groupings based on their contractual maturities.
The amounts presented are the contractual undiscounted cash
flows.
Group
Between Between
Less than 6 to 12 1 and 2 2 and 5 Total contractual
6 months months years years cash flows
31 December 2020 $'000 $'000 $'000 $'000 $'000
------------------------- --------- ------- -------- -------- -----------------
Trade and other payables 209 - - - 209
Borrowings 689 - 24,360 - 25,049
------------------------- --------- ------- -------- -------- -----------------
Total 898 - 24,360 - 25,258
------------------------- --------- ------- -------- -------- -----------------
Group
Between Between
Less than 6 to 12 1 and 2 2 and 5 Total contractual
6 months months years years cash flows
31 December 2019 $'000 $'000 $'000 $'000 $'000
------------------------- --------- ------- -------- -------- -----------------
Trade and other payables 1,046 - - - 1,046
Lease liabilities 57 57 114 60 288
Borrowings 632 - 632 27,886 29,150
------------------------- --------- ------- -------- -------- -----------------
Total 1,735 57 746 27,946 30,484
------------------------- --------- ------- -------- -------- -----------------
NOTE 22: SHARE-BASED PAYMENTS
Ordinary Shares
During 2020, the Company issued 13,584,906 new Ordinary Shares
to Align Research Services in lieu of cash compensation for
services provided. The cost of the shares will be expensed over the
12-month contract life. 3,737,031 new shares were issued to
Directors and management in lieu of cash bonuses for the 2019
performance year. The associated expense was accrued in 2019.
Share options and warrants
The following equity settled share-based awards have been made
under the Company's discretionary share option plan:
31 December 2020 31 December 2019
Average
Average exercise
exercise price per
price per Number of option Number of
option (pence) options (pence) options
-------------------------------------- --------------- ------------ ---------- ----------
As at 1 January 4.38 83,000,000 4.38 73,000,000
Granted during the year 4.38 10,000,000 4.38 10,000,000
Exercised during the year - - - -
Forfeited during the year 4.38 (35,000,000) - -
-------------------------------------- --------------- ------------ ---------- ----------
As at 31 December 4.38 58,000,000 4.38 83,000,000
-------------------------------------- --------------- ------------ ---------- ----------
Vested and exercisable at 31 December - - - -
-------------------------------------- --------------- ------------ ---------- ----------
All options vest after three years of continuous service with
the Company. The fair value of services rendered in return for
share options is based on the fair value of share options granted
and was measured using the Black-Scholes model.
The inputs used in the measurement of the options granted during
the year are summarised in the table below, with the volatility
estimate of 50% based on the Company's historical volatility:
15 January
2020
five-year
option
------------------------------------------------------------ ----------
Fair value at grant date 0.40p
Share price at grant date 1.88p
Exercise price 4.38p
Expected volatility 50%
Option life 5 years
Risk-free interest rate (based on yield on five-year gilts) 1%
Expiry date 15 Jan 25
------------------------------------------------------------ ----------
p - British pence
The fair value of the options granted are spread over the
vesting period. The amount recognised in the income statement for
the year ended 31 December 2020 was $698k (2019: $899k).
This 2020 charge included the accelerated vesting of options
issued to two former directors who left the Company during the
period. According to their respective option deeds, the options
became immediately exercisable at their original exercise price of
4.38p per share for a period of three months following resignation.
The options were not exercised and have lapsed. The cumulative
expense recognised for lapsed options of $593k has been recycled to
accumulated losses (2019: $526k).
NOTE 23: INTERESTS IN OTHER ENTITIES
ion Ventures
As explained further in note 2e, the Company acquired a 20.3%
interest in ion Ventures Holdings Limited ("ion Ventures") during
the year. This investment is accounted for as an associate using
the equity method.
ion Ventures, incorporated and domiciled in the UK, is a South
East Asian and UK focused developer of clean energy projects,
primarily energy storage.
Summarised financial information for ion Ventures, which has a
financial year-end date of 31 December, is included below:
31 Dec 2020
Summarised balance sheet $'000
------------------------- -----------
Current assets 642
Non-current assets 2,869
Current liabilities (118)
Non-current liabilities (112)
Net assets 3,281
Group's share in % 20.3%
Group's share in $ 666
------------------------- -----------
Two months
ended 31
Dec 2020
Summarised statement of comprehensive income $'000
--------------------------------------------- ----------
Revenue 2
Loss from continuing operations (81)
Other comprehensive income -
Total comprehensive income (81)
--------------------------------------------- ----------
As required by IAS 28 Investment in associates, the excess
between the fair value of ion Ventures' net assets on acquisition
date and the consideration paid for Coro's investment has been
recorded as notional goodwill and is included within non-current
assets in the table above.
Duyung PSC
The Group's wholly owned subsidiary, Coro Energy Duyung
(Singapore) Pte Ltd, is the owner of a 15% interest in the Duyung
Production Sharing Contract ("PSC").
The Duyung PSC partners have entered into a Joint Operating
Agreement ("JOA"), which governs the arrangement. Through the JOA,
the Group has a direct right to the assets of the venture, and
direct obligation for its liabilities. Accordingly, Coro accounts
for its share of assets, liabilities and expenses of the venture in
accordance with the IFRSs applicable to the particular assets,
liabilities and expenses.
The operator of the venture is West Natuna Exploration Ltd
("WNEL"). WNEL is a company incorporated in the British Virgin
Islands and its principal place of business is Indonesia.
NOTE 24: CONTINGENCIES AND COMMITMENTS
Commitments
Coro's share of the 2021 Duyung Work Program and Budget is
estimated at $916k, which will be allocated between items of
capital expenditure and joint venture G&A.
Contingencies
The Group has no contingent liabilities.
NOTE 25: RELATED PARTY TRANSACTIONS
Key management personnel compensation
2020 2019
$'000 $'000
------------------------- ------ ------
Short-term benefits 596 1,026
Post-employment benefits 7 32
Share-based payments 597 616
------------------------- ------ ------
Key management personnel consists of the Directors of the
Company.
Other related party transactions
Echo Energy plc is considered a related party because two of the
Company's Directors, James Parsons and Marco Fumagalli, were also
directors of Echo Energy plc during 2020. All transactions entered
into between the companies are made on arm's length terms. There
were no transactions with Echo Energy in 2020. In 2019, Echo
recharged the Company $4k in respect of broadband internet for the
Company's head office.
CIP Merchant Capital Ltd ("CIP") is considered a related party
of the Group under IAS 24 Related party transactions by virtue of
its 18.7% shareholding and representation on the Board (one
Director). There were no transactions with CIP during the year. In
2019, CIP subscribed for EUR4.05m Tranche A Eurobonds with
7,444,305 warrants attached and continues to hold these instruments
as at the date of publication of these financial statements.
Post-year end, CIP's shareholding was reduced by dilution to
7.1%.
ion Ventures Holdings Limited is a new related party due to the
Company's 20.3% shareholding and ability to appoint one director to
the Board of Directors of ion. There were no transactions between
the two companies in 2020 with the exception of Coro's initial
GBP500k investment in ion.
Sound Energy plc is no longer considered a related party, with
only Marco Fumagalli as a director in common between the two
companies.
NOTE 26: SUBSEQUENT EVENTS
Acquisition of Global Energy Partnership Limited
On 17 March 2021, the Company completed the acquisition of 100%
of the issued capital of Global Energy Partnership Limited ("GEPL")
in exchange for 142.5 million new ordinary shares in the Company.
GEPL is incorporated in the United Kingdom and involved in the
origination and development of renewable energy projects in South
East Asia. On the same date, GEPL co-founders Mark Hood and Michael
Carrington joined the Company in the roles of CEO and COO
respectively, with Mark Hood also appointed as a director of the
Company.
Background to the acquisition
Since inception, GEPL has screened over 25 GW of renewable
energy projects and has identified a short list of priority
pipeline projects for investment across the Philippines, Vietnam
and Indonesia, with an initial focus on the Philippines.
For the financial period ended 31 January 2021, GEPL generated
no revenues, incurred a trivial net loss and had net liabilities of
GBP3k (approx. $4k).
The acquisition meets a number of key strategic objectives for
the Group, including:
-- Acquiring GEPL's pipeline of early-stage renewable energy
projects in South East Asia, with an initial focus on the
Philippines;
-- Securing an experienced executive team with a proven record
of originating and executing energy projects; and
-- Building on the Company's investment in ion Ventures in 2020,
acquiring a complementary business with opportunities for project
co-development in future.
Consideration for the acquisition
In exchange for acquiring 100% of the issued capital of GEPL,
the Company issued 142.5 million new ordinary shares to the former
GEPL shareholders. Based on the mid-market price of the Company's
shares on the date of the completion of the acquisition, the
consideration given is valued at GBP520k ($727k).
Fair value of assets and liabilities acquired
GEPL's projects are at an early stage, with the initial focus
being on two high graded opportunities in the Philippines: a 100 MW
solar project and 100 MW onshore wind project. Work done on the
projects to date has mainly comprised GEPL management's time
including pre-feasibility studies, understanding of relevant
laws/regulations, site visits, community engagement, liaising with
potential engineering contractors and financiers, and building
networks and partnerships locally. The Directors believe there is
significant latent value which can be unlocked by investing in
these Filipino opportunities however, at the date of acquisition,
there were no contractual rights associated with the projects and
accordingly, our preliminary assessment is that there were no
identifiable assets under IFRS. Similarly, GEPL had no liabilities,
with all creditors extinguished prior to acquisition
completion.
Accordingly, we expect the full purchase consideration to be
allocated to goodwill. While GEPL has identified opportunities in
Vietnam and Indonesia, we view the principal value in the company
as being its Philippines project pipeline and associated
intellectual property and we expect the goodwill to be allocated
accordingly.
Fundraise
Alongside the GEPL acquisition, the Company also completed a
fundraise through the issue of 1,162,214,632 new Ordinary Shares at
0.4p per share to new and existing investors, raising gross
proceeds of GBP4.6m ($6.3m at year-end exchange rates). Net
proceeds were GBP3.9m ($5.3m) after deducting directly attributable
financing costs.
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END
FR GPUBGCUPGUBM
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April 19, 2021 02:00 ET (06:00 GMT)
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