TIDMENW

RNS Number : 1401Y

Enwell Energy PLC

29 December 2023

29 December 2023

ENWELL ENERGY PLC

2023 INTERIM RESULTS

Enwell Energy plc ("Enwell Energy" or the "Company", and together with its subsidiaries, the "Group"), the AIM-quoted (AIM: ENW) oil and gas exploration and production group, today announces its unaudited results for the six month period ended 30 June 2023.

Highlights

Operational

 
 --   Aggregate average daily production of 2,730 boepd (calculated 
       on the days when the Group's fields were actually in production) 
       (1H 2022: 3,026 boepd) 
 --   GOL-107 development well successfully completed in Q4 2023 
       and is undergoing long-term test production 
 

Financial

 
 --   Revenue of $33.1 million (1H 2022: $77.2 million) and gross 
       profit of $19.6 million (1H 2022: $51.5 million), down 
       primarily as a result of significantly lower gas prices 
 --   Operating profit of $17.2 million (1H 2022: $48.9 million), 
       down primarily as a result of significantly lower gas prices 
 --   Net profit of $12.5 million (1H 2022: $32.4 million) 
 --   Cash, cash equivalents of $33.8 million as at 30 June 2023 
       (1H 2022: $77.4 million), down as a result of the GBP48.1 
       million interim dividend paid in June 2023, and of $79.1 
       million as at 14 December 2023 
 --   Average realised gas, condensate and LPG prices in Ukraine 
       were significantly lower at $419/Mm(3) (UAH15,315/Mm(3) 
       ), $46/bbl and $92/bbl respectively (1H 2022: $1,165/Mm(3) 
       (UAH33,524/Mm(3) ) gas, $103/bbl condensate and $165/bbl 
       LPG) 
 --   Interim dividend of 15 pence per ordinary share, GBP48.1 
       million in aggregate, paid in June 2023 (1H 2022: nil) 
 

Outlook

 
 --   The Russian invasion of Ukraine in February 2022 has had 
       and continues to have a significant impact on all aspects 
       of life in Ukraine, including the Group's business and 
       operations. The scale and duration of future disruption 
       to the Group's business is currently unknown, and there 
       remains significant uncertainty about the outcome of the 
       war in Ukraine 
 --   In April and May 2023, the Ukrainian authorities took a 
       number of regulatory actions against the Group, which included 
       the suspension of the VAS production licence and SC exploration 
       licence, and consequently all work at these licences has 
       been suspended 
 --   Subject to the resolution of the regulatory issues and 
       the Group's ability to operate safely, development work 
       planned for 2024 at the MEX-GOL and SV fields includes 
       planning the deepening of the MEX-109 well to explore a 
       deeper horizon, investigating the hydraulic fracturing 
       of the SV-29 well, planning a workover of the MEX-102 well 
       to access a shallower horizon, investigating the possible 
       sidetracking of the MEX-119 well to access additional reserves, 
       installing additional compression equipment and upgrading 
       the flow-line network and other field infrastructure 
 --   Further work on the VAS field and SC licence area will 
       remain suspended until there is a resolution of the regulatory 
       issues, including the lifting of the suspension orders 
 --   Currently, the Group retains approximately a quarter of 
       its cash outside Ukraine, which enhances the Group's ability 
       to navigate the current risk environment for the foreseeable 
       future, and provides a material buffer to any further disruptions 
       to the Group's operations 
 --   Development programme for the remainder of 2023 and 2024 
       expected to be funded from existing cash resources and 
       operational cash flow 
 

This announcement contains inside information for the purposes of Article 7 of EU Regulation No. 596/2014, which forms part of United Kingdom domestic law by virtue of the European Union (Withdrawal) Act 2018, as amended.

For further information, please contact:

 
 Enwell Energy plc                          Tel: 020 3427 
                                             3550 
 Chris Hopkinson, Chairman 
 Sergii Glazunov, Chief Executive Officer 
 Bruce Burrows, Finance Director 
 
 Strand Hanson Limited                      Tel: 020 7409 
                                             3494 
 Rory Murphy / Matthew Chandler 
 
 Zeus Capital Limited                       Tel: 020 7614 
                                             5900 
 Alexandra Campbell-Harris (Corporate 
  Finance) 
 Simon Johnson (Corporate Broking) 
 
 Citigate Dewe Rogerson                     Tel: 020 7638 
                                             9571 
 Ellen Wilton 
 

Dr Gehrig Schultz, BSc Geophysical Engineering, PhD Geophysics, Member of the European Association of Geophysical Engineers, Member of the Executive Coordinating Committee of the Continental European Energy Council, and a Non-Executive Director of the Company, has reviewed and approved the technical information contained within this announcement in his capacity as a qualified person, as required under the AIM Rules for Companies.

 
 Definitions/Glossary 
 
 bbl                    barrel 
 bbl/d                  barrels per day 
 boe                    barrels of oil equivalent 
 boepd                  barrels of oil equivalent per day 
 Company                Enwell Energy plc 
 EUR                    Euro 
 GDP                    gross domestic product 
 Group                  Enwell Energy plc and its subsidiaries 
 km                     kilometre 
 km(2)                  square kilometre 
 LPG                    liquefied petroleum gas 
 MEX-GOL                Mekhediviska-Golotvshinska 
 m(3)                   cubic metres 
 Mm(3)                  thousand cubic metres 
 MMboe                  million barrels of oil equivalent 
 MMscf                  million scf 
 MMscf/d                million scf per day 
 %                      per cent. 
 QHSE                   quality, health, safety and environment 
 SC                     Svystunivsko-Chervonolutskyi 
 scf                    standard cubic feet measured at 20 degrees Celsius 
                         and one atmosphere 
 SV                     Svyrydivske 
 $                      United States Dollar 
 UAH                    Ukrainian Hryvnia 
 VAS                    Vasyschevskoye 
 VED                    Vvdenska 
 

Chairman's Statement

I present the results for the first half of 2023 in circumstances which are very challenging for the Group. The invasion of Ukraine by Russia in February 2022 and the ongoing conflict has created a very difficult and worrying outlook for both the current and future situation in Ukraine, and I am greatly saddened by the terrible events occurring there.

The invasion has had a significant impact on all aspects of life in Ukraine, including the Group's business and operations. The overall scale and duration of future disruption to the Group's business is currently unknown, and there remains significant uncertainty about the outcome of the ongoing war in Ukraine.

Notwithstanding the continued disruption caused by the war, during 2023, the Group continued with some development activities at the MEX-GOL, SV and VAS gas and condensate fields and SC licence in north-eastern Ukraine. At the MEX-GOL field, the GOL-107 development well was completed in late October 2023, and after initial testing demonstrated gas flows from the well, albeit at lower than expected rates, the well has now been hooked up to the gas processing facilities for longer-term testing to establish its optimal operating parameters and to assess whether stimulation may improve production rates. Additionally, at the MEX-GOL field, planning has continued for the deepening of the MEX-109 well to explore a deeper horizon, a workover of the MEX-102 well to access a shallower horizon and investigating the possible sidetracking of the MEX-119 well to access additional reserves. At the SV field, the possible hydraulic fracturing of the SV-29 development well remains under consideration. Drilling of the SC-4 appraisal well on the SC licence area was completed and testing of this well demonstrated strong flow rates of gas and condensate, and planning for the installation of surface facilities and pipelines has been undertaken. At the VAS field, planning for the further development of the field continued.

Aggregate average daily production (calculated on the days when the fields were actually in production) from the MEX-GOL, SV and VAS fields during the first half of 2023 was 2,730 boepd, which is lower than the aggregate daily production rate of 3,026 boepd achieved during 2022 due to the disruption caused by the war, natural field decline and a significant decrease in commodity prices.

The significant decrease in gas prices, coupled with the lower production volumes, during the period has meant that revenues were lower at $33.1 million (1H 2022: $77.2 million). The Group's net profit was also lower at $12.5 million (1H 2022: $32.4 million), operating profit was $17.2 million (1H 2022: $48.9 million), but cash generated from operations was steady at $12.4 million (1H 2022: $12.5 million).

There is significant disruption to the fiscal and economic environment in Ukraine due to the ongoing conflict resulting in a contraction in the economy, an increase in the rate of inflation and a weakening of the Ukrainian Hryvnia against other currencies. Furthermore, it is likely that fiscal and economic uncertainties will continue in the future until an acceptable resolution of the war occurs.

The Ukrainian Government has implemented a number of reforms in the oil and gas sector in recent years, which include the deregulation of the gas supply market in late 2015, and subsequently, the simplification of the regulatory procedures applicable to oil and gas exploration and production activities in Ukraine.

The deregulation of the gas supply market, supported by electronic gas trading platforms and improved pricing transparency, has meant that Ukrainian market prices for gas broadly correlated with imported gas prices. During 2023 to date, gas prices decreased significantly, reflecting a similar trend in European gas prices. Condensate and LPG prices were also lower by comparison to the previous year.

Restructuring of Smart Holding Group

In January 2023, the Company was notified that there had been a restructuring of the ownership of the PJSC Smart-Holding Group, a member of which held a major shareholding in the Company, and which was ultimately controlled by Mr Vadym Novynskyi ("Mr Novynskyi"). Under this restructuring, which occurred with effect from 1 December 2022, Mr Novynskyi disposed of his major indirect shareholding interest in the Company to two trusts registered in Cyprus named the SMART Trust and the STEP Trust. Further information is contained in the Company's announcement dated 17 January 2023, and the TR-1 Forms published on 26 January 2023.

Regulatory Actions by Ukrainian Authorities and Suspension of VAS and SC Licences

In early December 2022, the Ukrainian Government imposed sanctions on Mr Novynskyi, as set out in the Company's announcement dated 9 December 2022.

As announced on 4 January 2023, new legislation, Law No. 2805-IX, relating to the natural resources sector was enacted in Ukraine, which came into force on 28 March 2023. This legislation is a substantial package of new procedures and reforms designed to improve the regulatory process relating to the exploration and development of natural resources in Ukraine. However, the legislation includes provisions that if the ultimate beneficial owner of a mineral or hydrocarbon licence becomes the subject of sanctions in Ukraine, then the State Geologic and Subsoil Survey of Ukraine (the "SGSS") may suspend or revoke that licence.

Following Law No. 2805-IX coming into force on 28 March 2023 , the Ukrainian authorities have taken a number of regulatory actions against certain of the Group's subsidiary companies in Ukraine.

As announced on 12 April 2023, such regulatory actions included conducting a search at the Group's Yakhnyky office, from where the MEX-GOL and SV fields are operated, and placing certain physical assets of the Ukrainian branch (representative) office of Regal Petroleum Corporation Limited ("RPC") and LLC Arkona Gas-Energy ("Arkona") (which respectively hold the MEX-GOL and SV fields and the SC exploration licence) under seizure, thereby restricting any actions that would change registration of the property rights relating to such assets. However, the use of such assets was not restricted and therefore the Company has been able to continue to operate and produce gas and condensate from the MEX-GOL and SV fields. In addition, the Ministry of Justice of Ukraine (the "MoJ") made an Order cancelling the registration entry made on behalf of a subsidiary of the Company named LLC Regal Petroleum Corporation (Ukraine) Limited in the Unified State Register of Legal Entities, Individuals-entrepreneurs and Civil Institutions of Ukraine (the "State Register") relating to the ultimate beneficial owners of such company, which were stated as being the trustees of the SMART Trust and STEP Trust, as previously notified to the Company, thereby restoring the previous entry in the State Register, Mr Novynskyi. Furthermore, the SGSS issued an Order to RPC requiring that additional information be provided and/or violations be eliminated in the disclosures relating to the ultimate beneficial owners of the MEX-GOL and SV licences respectively.

On 2 May 2023, the MoJ made further Orders cancelling the registration entry made on behalf of three further Ukrainian subsidiaries of the Company named LLC Prom-Enerho Produkt ("PEP"), Arkona and LLC Well Investum ("Well Investum") respectively in the State Register relating to the ultimate beneficial owners of such companies, which again were stated as being the trustees of the SMART Trust and STEP Trust, thereby restoring the previous entry, Mr Novynskyi. PEP holds the VAS production licence, Arkona holds the SC exploration licence and Well Investum is a dormant company.

Following the issuance of the abovementioned Orders by the MoJ, Mr Novynskyi is registered in the State Register as the ultimate beneficial owner of each of PEP and Arkona, and is consequently recognised by the SGSS as the ultimate beneficial owner of each of the VAS production licence and SC exploration licence. As a result, on 4 May 2023, the SGSS issued orders suspending the VAS production licence and SC exploration licence for a period of 5 years effective from that date. Accordingly, the Company ceased all field and production operations on the VAS and SC licence areas.

New Auditor and Temporary Suspension from trading on AIM

In December 2022, as a result of the sanctions imposed on Mr Novynskyi, the Company's previous auditor resigned, but Zenith Audit Ltd were appointed as the Company's new auditor in September 2023. As the Company did not have an auditor prior to the appointment of Zenth Audit Ltd, it was not able to publish and post its audited 2022 Annual Report and Financial Statements to shareholders by the requisite deadline of 30 June 2023 as required by Rule 19 of the AIM Rules for Companies. As a result, trading in the Company's ordinary shares on AIM was suspended with effect from 3 July 2023 pending the Company's compliance with such requirements. However, following the publication of the Annual Report and Financial Statements for the year ended 31 December 2002 on 21 December 2023, and with the publication of these unaudited interim results for the six month period ended 30 June 2023, it is expected that the suspension from trading will be lifted shortly.

Interim Dividend

On 15 June 2023, the Company paid an interim dividend of 15 pence per ordinary share, aggregating to approximately GBP48.1 million, which was the Company's maiden dividend payment to its shareholders.

Outlook

The ongoing war in Ukraine means that there is a devastating humanitarian situation in Ukraine, as well as extreme challenges to the fiscal, economic and business environment. This has been exacerbated in respect of the Group by the regulatory actions of the Ukrainian authorities, culminating in the suspension of the VAS and SC licences.

These circumstances mean that it is extremely difficult to plan future investment and operational activities at the Group's fields but, subject to resolution of the current regulatory issues with the Ukrainian authorities, and subject to it being safe to do so, the Group is planning to undertake further limited development activities during the remainder of 2023 and beyond in order to continue the development of its fields. However, in doing so, the Group is taking and will take all measures available to protect and safeguard its personnel and business, with the safety and wellbeing of its personnel and contractors being paramount. The Group retains a pproximately a quarter of its cash reserves outside Ukraine, and this provides a material buffer to any further disruptions to the Group's operations. This has enabled the Board to reach the opinion that the Group has sufficient resources to navigate the current risk environment for the foreseeable future.

In conclusion, on behalf of the Board, I would like to thank all of our staff for the continued dedication and support they showed during this year, especially their remarkable fortitude since the invasion of Ukraine in February 2022.

Chris Hopkinson

Chairman

Chief Executive's Statement

Introduction

The war in Ukraine, coupled with regulatory actions by the Ukrainian authorities, materially disrupted the Group's development activity at its Ukrainian fields during the first half of 2023. At the MEX-GOL and SV fields, production operations and some limited field activities continued. The GOL-107 development well was completed in late October 2023 and, after initial testing of the well demonstrated gas flows, albeit at lower than expected rates, the well has now been hooked up to the gas processing facilities to undergo longer-term testing to establish its optimal operating parameters and assess whether stimulation of the well may improve flow rates.

On the SC licence area, after the SC-4 appraisal well was completed and successfully tested in October 2022, the well was suspended as a future production well. Planning for the development of the field was undertaken, which included planning for the installation of gas processing facilities and other surface infrastructure.

At the VAS field, production operations continued and planning for the further development of the field, as well as for a proposed new well to explore the VED prospect within the VAS licence area also continued.

However, as announced on 4 May 2023, as a result of regulatory actions by the Ukrainian authorities, the VAS production licence and the SC exploration licence were suspended for a period of five years.

Overall production in the first half of 2023 was lower than the corresponding period in 2022 due to the disruption to production operations caused by the war in Ukraine and natural field decline, as well as the suspension of the VAS production licence in May 2023.

Production

The average daily production of gas, condensate and LPG for the 181 days that the MEX-GOL and SV fields were producing and for the 124 days that the VAS field was producing, in each case, during the six month period ended 30 June 2023 is shown below:

 
   Field            Gas           Condensate            LPG            Aggregate 
                 (MMscf/d)          (bbl/d)           (bbl/d)            boepd 
              1H 202   1H 202   1H 202   1H 202   1H 202   1H 202   1H 202   1H 202 
                 3        2        3        2        3        2        3        2 
             -------  -------  -------  -------  -------  -------  -------  ------- 
 
   MEX-GOL 
   & SV        9.8     1 1.1     384      45 1     413      261     2,400    2,592 
             -------  -------  -------  -------  -------  -------  -------  ------- 
 
   VAS         1.7      2. 2      17      2 4       -        -       330      43 4 
             -------  -------  -------  -------  -------  -------  -------  ------- 
 
   Total       11.5    1 3.3     401      475      413      261     2,730    3,026 
             -------  -------  -------  -------  -------  -------  -------  ------- 
 

The disruptions to operations caused by the war, coupled with the regulatory actions taken by the Ukrainian authorities, have materially adversely affected the Group's average daily production in 2023 to date. Nevertheless, production is currently continuing at the MEX-GOL and SV fields at a rate of approximately 2,200 boepd.

Operations

In the period leading up to the Russian invasion of Ukraine in February 2022, there was relative fiscal and economic stability in Ukraine, as well as reductions in the subsoil tax rates and improvements in the regulatory procedures in the oil and gas sector in Ukraine. However, the war has caused significant disruption to the fiscal and economic conditions in Ukraine since then. During the first half of 2023, gas prices in Europe declined and this fed through to the Group's realised prices in Ukraine, which had adversely affected the Group's revenues and profitability during the period.

During 2023, the Group continued to refine its geological subsurface models of the MEX-GOL, SV and VAS fields, as well as the SC licence area, in order to enhance its strategy for the further development of such fields and licence area, including the timing and level of future capital investment required to exploit the hydrocarbon resources.

At the MEX-GOL field, drilling of the GOL-107 development well, targeting production from the V-20 and V-23 Visean formations, commenced in December 2022 and was completed in late October 2023, with the well having been drilled to a final depth of 5,190 metres. One interval, at a drilled depth of 5,140 - 5,143 metres, within the V-23 formation, was perforated and demonstrated gas flows, but at lower than anticipated rates. The well has now been hooked up to the gas processing facilities to undergo longer-term testing to establish its optimal operating parameters and assess whether stimulation of the well may improve flow rates.

The Group continued to operate each of the SV-2 and SV-12 wells under joint venture agreements with NJSC Ukrnafta, the majority State-owned oil and gas producer. Under the agreements, the gas and condensate produced from the respective wells is sold under an equal net profit sharing arrangement between the Group and NJSC Ukrnafta, with the Group accounting for the hydrocarbons produced and sold from the wells as revenue, and the net profit share due to NJSC Ukrnafta being treated as a lease expense in cost of sales. However, during Q4 2021, the SV-2 well experienced water ingress and consequently had to be taken off production. A workover of this well was undertaken to replace the production string and remove obstructions in the well, but this work was unsuccessful and further remedial work is being considered.

On the SC licence area, after completion and successful testing of the SC-4 well, the well was suspended as a future production well. The well is primarily an appraisal well, targeting production from the V-22 horizon, as well as exploring the V-16 and V-21 horizons, in the Visean formation. In testing, the well demonstrated stabilised flow rates of 3 MMscf/d of gas and 3 bbl/d of condensate (535 boepd in aggregate), and planning for the installation of gas processing facilities and other surface infrastructure has been undertaken.

At the VAS field, production operations continued, and planning for the further development of the field, as well as for a proposed new well to explore the VED prospect within the VAS licence area, was undertaken.

However, as announced on 4 May 2023, as a result of regulatory actions by the Ukrainian authorities, the VAS production licence and the SC exploration licence were suspended for a period of five years.

Outlook

The ongoing war in Ukraine has caused significant disruption to the country as a whole and to the Group's business activities, and until there is a satisfactory resolution to the conflict, the disruption and uncertainty are likely to continue. However, subject to resolution of the current regulatory issues with the Ukrainian authorities and it being safe to do so, during 2024, the Group plans to continue the development of its fields to the extent it is possible to do so.

At the MEX-GOL and SV fields, the development programme includes planning the deepening of the MEX-109 well to explore a deeper horizon in the Visean formation, investigating the hydraulic fracturing of the SV-29 well, planning a workover of the MEX-102 well to access a shallower horizon, investigating the possible sidetracking of the MEX-119 well to access additional reserves, installing additional compression equipment and upgrading and maintaining the flow-line network and pipelines and other field infrastructure, as well as planning for the further development of the fields.

Further work on the VAS and SC licence areas will remain suspended until there is a resolution of the regulatory issues, including the lifting of the suspension orders made in respect of those licences.

Finally, I would like to add my thanks to all of our staff for the continued hard work and dedication they have shown over the course of 2023, and to especially recognise their continuing efforts and professionalism in the face of the extremely challenging current situation in Ukraine.

Sergii Glazunov

Chief Executive Officer

Finance Review

Notwithstanding the significant disruption caused by the war in Ukraine, the Group was able to manage only a modest decline in production volumes during the first half of 2023. However, the significant decrease in gas prices in the period resulted in material reductions in revenue and profitability by comparison with the corresponding period in 2022. Nevertheless, the Group achieved a net profit for the period of $12.5 million (1H 2022: $32.4 million).

Revenue for the period, derived from the sale of the Group's Ukrainian gas, condensate and LPG production, was lower at $33.1 million (1H 2022: $77.2 million), primarily as a result of the decrease in commodity prices in the period.

Aggregate production for the first half of 2023 (calculated on the days when the Group's fields were actually in production) was down approximately 9.8% at 2,730 boepd (1H 2022: 3,026 boepd) due to the disruption to operations as a result of the war in Ukraine, natural field decline and the suspension of the VAS production licence in May 2023.

During 2023, global, and particularly European, commodity prices decreased significantly, and these decreases also occurred in Ukraine, and resulted in the 64% decline in average gas price realisations in the period at $419/Mm(3) (UAH15,315/Mm(3) ), with condensate and LPG average sales prices also down by 55% and 44% at $46/bbl and $92/bbl respectively (1H 2022: $1,165/Mm(3) (UAH33,524/Mm(3) ), $103/bbl and $165/bbl respectively).

During the period from 1 January 2023 to 14 December 2023, the average realised gas, condensate and LPG prices were $395/Mm(3) (UAH14,426/Mm(3) ), $71/bbl and $100/bbl respectively.

Gross profit for the period was lower at $19.6 million (1H 2022: $51.5 million).

Cost of sales for the period was lower at $13.6 million (1H 2022: $25.7 million).

The subsoil tax rates applicable to gas production were stable during the first six months of 2023 and were as follows:

 
 (i)     when gas prices are up to $150/Mm(3) , the rate for wells 
          drilled prior to 1 January 2018 ("old wells") is 14.5% for 
          gas produced from deposits at depths shallower than 5,000 
          metres and 7% for gas produced from deposits deeper than 5,000 
          metres, and for wells drilled after 1 January 2018 ("new wells") 
          is 6% for gas produced from deposits at depths shallower than 
          5,000 metres and 3% for gas produced from deposits deeper 
          than 5,000 metres; 
 (ii)    when gas prices are between $150/Mm(3) and $400/Mm(3) , the 
          rate for old wells is 29% for gas produced from deposits at 
          depths shallower than 5,000 metres and 14% for gas produced 
          from deposits deeper than 5,000 metres, and for new wells 
          is 12% for gas produced from deposits at depths shallower 
          than 5,000 metres and 6% for gas produced from deposits deeper 
          than 5,000 metres; 
 (iii)   when gas prices are more than $400/Mm(3) , for the first $400/Mm(3) 
          , the rate for old wells is 29% for gas produced from deposits 
          at depths shallower than 5,000 metres and 14% for gas produced 
          from deposits deeper than 5,000 metres, and for new wells 
          is 12% for gas produced from deposits at depths shallower 
          than 5,000 metres and 6% for gas produced from deposits deeper 
          than 5,000 metres, and for the difference between $400/Mm(3) 
          and the actual price, the rate for old wells is 65% for gas 
          produced from deposits at depths shallower than 5,000 metres 
          and 31% for gas produced from deposits deeper than 5,000 metres, 
          and for new wells is 36% for gas produced from deposits at 
          depths shallower than 5,000 metres and 18% for gas produced 
          from deposits deeper than 5,000 metres. 
 

The tax rates applicable to condensate production were 31% for condensate produced from deposits shallower than 5,000 metres and 16% for condensate produced from deposits deeper than 5,000 metres, for both old and new wells.

As a direct result of the war in Ukraine, including the significant decline in domestic consumption disrupting the previous supply, demand and pricing dynamics, there has been a divergence between domestic and European gas pricing, and accordingly, the methodology (linked to European prices) used to determine the reference gas price for the subsoil tax rates has had a significantly detrimental effect for domestic gas producers. In order to address this issue, the Ukrainian Parliament, in September 2022, passed legislation which modified such methodology to ensure that it operates as originally intended (with such reference price being aligned with domestic prices). This methodology had an implementation date of 1 August 2022.

In addition, the excise tax on LPG sales was suspended between 24 February 2022 and 30 September 2022, but was then reinstated, and the VAT rate applicable to condensate and LPG sales was reduced to 7% (from 20%) with effect from 18 March 2022.

Administrative expenses for the period were slightly higher at $3.7 million (1H 2022: $3.4 million). Other expenses in the period were $0.8 million (1H 2022: $5.2 million), down primarily due to the decrease in charitable donations during the period.

The tax charge for the six months ended 30 June 2023 was lower at $5.0 million (1H 2022: $10.4 million charge), and comprised a current tax charge of $3.1 million (1H 2022: $8.7 million charge) and a deferred tax charge of $1.9 million (1H 2022: $1.7 million charge).

A deferred tax asset relating to the Group's provision for decommissioning as at 30 June 2023 of $ 0.6 million (31 December 2022: $0.5 million) was recognised on the tax effect of the temporary differences of the Group's provision for decommissioning at the MEX-GOL and SV fields, and its tax base. A deferred tax liability relating to the Group's development and production assets at the MEX-GOL and SV fields as at 30 June 2023 of $ 6.2 million (31 December 2022: $3.7 million) was recognised on the tax effect of the temporary differences between the carrying value of the Group's development and production asset at the MEX-GOL and SV fields, and its tax base.

A deferred tax asset relating to the Group's provision for decommissioning as at 30 June 2023 of $ 0.3 million (31 December 2022: $0.3 million) was recognised on the tax effect of the temporary differences on the Group's provision on decommissioning at the VAS field, and its tax base. A deferred tax asset relating to the Group's development and production assets at the VAS field as at 30 June 2023 of $ 0.5 million (31 December 2022: deferred tax liability of $23,000) was recognised on the tax effect of the temporary differences between the carrying value of the Group's development and production asset at the VAS field, and its tax base.

Capital investment of $3.0 million reflects the investment in the Group's oil and gas development and production assets during the period (1H 2022: $12.0 million), primarily relating to the drilling of the GOL-107 well. This significant $9.0 million reduction in capital investment is a function of the deferral of certain aspect of the Group's development plans necessitated by the ongoing war in Ukraine.

As a result of the war, necessary payment term accommodations needed to be agreed with the Group's largest indirect off-taker pursuant to a contract facilitated by the Group's related party, LLC Smart Energy, with the consequence that trade receivables remained high at $44.9 million (1H 2022: $39.5 million). The trade receivables were all paid post period end.

Cash and cash equivalents held as at 30 June 2023 were lower at $33.8 million (1H 2022: $77.4 million), the decrease being predominantly as a result of the payment of the interim dividend of GBP48.1 million in June 2023. The Group's cash and cash equivalents balance as at 14 December 2023 was $79.1 million, held as to $58.5 million equivalent in Ukrainian Hryvnia and the balance of $20.6 million equivalent predominantly in US Dollars, Euros and Pounds Sterling.

During the first six months of 2023, the Ukrainian Hryvnia was stable against the US Dollar, at UAH36.6/$1.00 on 31 December 2022 and UAH36.6/$1.00 on 30 June 2023. The impact of this was $0.7 million of foreign exchange gain (1H 2022: $7.9 million of foreign exchange loss). Increases and decreases in the value of the Ukrainian Hryvnia against the US Dollar affect the carrying value of the Group's assets. The official exchange rate of the Ukrainian Hryvnia to the US Dollar on 14 December 2023 was UAH37.0/$1.00. This movement is not expected to have a material net impact on the Group, as its production and sales are dictated by (but not directly linked to) international commodity prices, which are expected to materially offset general cost increases that will result from such devaluation.

Cash from operations has funded the capital investment during the first six months of 2023, and the Group's current cash position and positive operating cash flow are the sources from which the Group plans to fund the development programmes for its assets over the remainder of 2023 and beyond. This is coupled with the fact that the Group is currently debt-free, and therefore has no debt covenants that may otherwise impede its ability to implement contingency plans if domestic and/or global circumstances dictate. This flexibility and ability to monitor and manage development plans and liquidity is a cornerstone of our planning, and underpins our assessments of the future. With monetary resources at the end of the period of $ 33.8 million equivalent, and annual running costs of less than $ 8 million, the Group remains in a very strong position, notwithstanding the impact of the current conflict in Ukraine, as well as any local or global shocks that may occur to the industry and/or the Group.

On 15 June 2023, the Company paid an interim dividend of 15 pence per ordinary share, approximately GBP48.1 million in aggregate, which was the Company's maiden dividend payment to its shareholders.

Bruce Burrows

Finance Director

Principal Risks and How We Manage Them

The Group has a risk evaluation methodology in place to assist in the review of the risks across all material aspects of its business. This methodology highlights external, operational and technical, financial and corporate risks and assesses the level of risk and potential consequences. It is periodically presented to the Audit Committee and the Board for review, to bring to their attention potential risks and, where possible, propose mitigating actions. Key risks recognised and mitigation factors are detailed below:-

 
 Risk                                             Mitigation 
 External risks 
                                                 ----------------------------------------------- 
 War in Ukraine 
                                                 ----------------------------------------------- 
 On 24 February 2022, Russia invaded              The Group has assets in the areas 
  Ukraine and there is currently                   of conflict in the east of Ukraine, 
  a serious and ongoing war within                 and the war has disrupted its operations 
  Ukraine. This war is having a huge               in those areas. The Group has been 
  impact on Ukraine and its population,            only undertaking limited field and 
  with significant destruction of                  production operations at the MEX-GOL, 
  infrastructure and buildings in                  SV and VAS fields and SC licence 
  the areas of conflict, as well                   area. At the fields, inventories 
  as damage in other areas of Ukraine.             of hydrocarbons are being maintained 
  The war is resulting in significant              at minimum levels. At the sites 
  casualties and has caused a huge                 where operations are suspended, 
  humanitarian catastrophe and refugee             there are no staff permanently on 
  influx into neighbouring countries.              site, except for necessary security 
  The war is also impacting the fiscal             staff. Where possible, all other 
  and economic environment in Ukraine,             staff work remotely and have been 
  as well as the financial stability               supplied with all necessary devices 
  and banking system in Ukraine,                   and software to facilitate remote 
  including restrictions on the transfer           working. Additionally, the Group 
  of funds outside Ukraine. The war                aims to maintain a significant proportion 
  is an escalation of the previous                 of its cash resources outside Ukraine. 
  regional conflict risk faced by                  The Group continues to monitor the 
  the business, a dispute that has                 situation and endeavours to protect 
  been going on since 2014 in parts                its assets and safeguard its staff 
  of eastern Ukraine, and since that               and contractors. 
  time Russia has continued to occupy 
  Crimea. The current war is also 
  having a significant adverse effect 
  on the Ukrainian financial markets, 
  hampering the ability of Ukrainian 
  companies and banks to obtain funding 
  from the international capital 
  and debt markets. The war has disrupted 
  the Group's business and operations, 
  causing the suspension of field 
  operations, albeit these recommenced 
  in March 2022 at the MEX-GOL and 
  SV fields, in July 2022 at the 
  SC licence area and in October 
  2022 at the VAS field, and has 
  also impacted the supply of materials 
  and equipment and the availability 
  of contractors to undertake field 
  operations. At present, the war 
  is ongoing and the scope and duration 
  of the war is uncertain. 
                                                 ----------------------------------------------- 
 Risk relating to Ukraine 
                                                 ----------------------------------------------- 
 Ukraine is an emerging market and                The Group minimises this risk by 
  as such the Group is exposed to                  continuously monitoring the market 
  greater regulatory, economic and                 in Ukraine and by maintaining as 
  political risks than it would be                 strong a working relationship as 
  in other jurisdictions. Emerging                 possible with the Ukrainian regulatory 
  economies are generally subject                  authorities. The Group also maintains 
  to a volatile political and economic             a significant proportion of its 
  environment, which makes them vulnerable         cash holdings in international banks 
  to market downturns elsewhere in                 outside Ukraine. 
  the world and could adversely impact 
  the Group's ability to operate 
  in the market. Furthermore, the 
  war in Ukraine is impacting the 
  fiscal and economic environment, 
  the financial and banking system, 
  and the economic stability of Ukraine. 
  As a result, Ukraine will require 
  financial assistance and/or aid 
  from international financial agencies 
  to provide economic support and 
  assist with the reconstruction 
  of infrastructure and buildings 
  damaged in the war. 
                                                 ----------------------------------------------- 
 Banking system in Ukraine 
                                                 ----------------------------------------------- 
 The banking system in Ukraine has                The creditworthiness and potential 
  been under great strain in recent                risks relating to the banks in Ukraine 
  years due to the weak level of                   are regularly reviewed by the Group, 
  capital, low asset quality caused                but the geopolitical and economic 
  by the economic situation, currency              events in Ukraine over recent years 
  depreciation, changing regulations               have significantly weakened the 
  and other economic pressures generally,          Ukrainian banking sector. This has 
  and so the risks associated with                 been exacerbated by the current 
  the banks in Ukraine have been                   war in Ukraine. In light of this, 
  significant, including in relation               the Group has taken and continues 
  to the banks with which the Group                to take steps to diversify its banking 
  has operated bank accounts. This                 arrangements between a number of 
  situation was improving moderately               banks in Ukraine. These measures 
  following remedial action by the                 are designed to spread the risks 
  National Bank of Ukraine, but the                associated with each bank's creditworthiness, 
  current war has significantly affected           and the Group endeavours to use 
  such improvements, and the National              banks that have the best available 
  Bank of Ukraine has imposed a number             creditworthiness. Nevertheless, 
  of restrictive measures designed                 and despite the recent improvements, 
  to protect the banking system,                   the Ukrainian banking sector remains 
  including restrictions o n the                   weakly capitalised and so the risks 
  transfer of funds outside Ukraine                associated with the banks in Ukraine 
  (albeit that the Group aims to                   remain significant, including in 
  maintain a significant proportion                relation to the banks with which 
  of its cash resources outside Ukraine.           the Group operates bank accounts. 
  In addition, Ukraine continues                   As a consequence, the Group also 
  to be supported by funding from                  maintains a significant proportion 
  the International Monetary Fund,                 of its cash holdings in international 
  and has requested further funding                banks outside Ukraine. 
  support from the International 
  Monetary Fund. 
                                                 ----------------------------------------------- 
 Geopolitical environment in Ukraine 
                                                 ----------------------------------------------- 
 Although there were some improvements            The Group continually monitors the 
  in recent years, there has not                   market and business environment 
  been a final resolution of the                   in Ukraine and endeavours to recognise 
  political, fiscal and economic                   approaching risks and factors that 
  situation in Ukraine, and the current            may affect its business. However, 
  war has had a severe detrimental                 the war in Ukraine creates material 
  effect on the economic situation                 challenges in planning future investment 
  in Ukraine. The ongoing effects                  and operations. The Group is limiting 
  of this are difficult to predict                 its operational activities to minimise 
  and likely to continue to affect                 risk to its staff and contractors, 
  the Ukrainian economy and potentially            and to limit its financial exposure. 
  the Group's business. This situation 
  is currently affecting the Group's 
  production and field operations, 
  and the ongoing instability is 
  disrupting the Group's development 
  and operational planning for its 
  assets. 
                                                 ----------------------------------------------- 
 Climate change 
                                                 ----------------------------------------------- 
 Any near and medium-term continued               The Group's plans include: assessing, 
  warming of the planet can have                   reducing and/or mitigating its emissions 
  potentially increasing negative                  in its operations ; and identifying 
  social, economic and environmental               climate change-related risks and 
  consequences, generally, globally                assessing the degree to which they 
  and regionally, and specifically                 can affect its business, including 
  in relation to the Group. The potential          financial implications. The HSE 
  impacts include: loss of market;                 Committee is specifically tasked 
  and increased costs of operations                with overseeing, measuring, benchmarking 
  through increasing regulatory oversight          and mitigating the Group's environmental 
  and controls, including potential                and climate impact, which will be 
  effective or actual loss of licences             reported on in future periods. At 
  to operate. As a diligent operator               this stage, the Group does not consider 
  aware of and responsive to its                   climate change to have any material 
  good stewardship responsibilities,               implications on the Group's financial 
  the Group not only needs to monitor              statements, including accounting 
  and modify its business plans and                estimates. 
  operations to react to changes, 
  but also to ensure its environmental 
  footprint is as minimal as it can 
  practicably be in managing the 
  hydrocarbon resources the Group 
  produces. 
                                                 ----------------------------------------------- 
 Operational and technical risks 
                                                 ----------------------------------------------- 
 Quality, Health, Safety and Environment 
  ("QHSE") 
                                                 ----------------------------------------------- 
 The oil and gas industry, by its                 The Group maintains QHSE policies 
  nature, conducts activities which                and requires that management, staff 
  can cause health, safety, environmental          and contractors adhere to these 
  and security incidents. Serious                  policies. The policies ensure that 
  incidents can not only have a financial          the Group meets Ukrainian legislative 
  impact but can also damage the                   standards in full and achieves international 
  Group's reputation and the opportunity           standards to the maximum extent 
  to undertake further projects.                   possible. As a result of the COVID-19 
  The war in Ukraine poses significant             pandemic the Group has implemented 
  risks to field operations, by way                processes and controls intended 
  of potential threat to the lives                 to ensure protection of all our 
  of employees and contractors, and                stakeholders and minimise any disruption 
  damage to equipment and infrastructure.          to our business. As a consequence 
                                                   of the current war in Ukraine, operations 
                                                   at the MEX-GOL, SV and VAS fields 
                                                   and SC licence area have been suspended 
                                                   for periods, and currently only 
                                                   limited field and production operations 
                                                   are continuing at the MEX-GOL and 
                                                   SV fields. Only essential staff 
                                                   are located at site, and all other 
                                                   staff are working remotely, either 
                                                   from areas away from the conflict 
                                                   areas or outside Ukraine. The Group 
                                                   has invested in technology that 
                                                   allows many staff to work just as 
                                                   effectively from remote locations. 
                                                 ----------------------------------------------- 
 Industry risks 
                                                 ----------------------------------------------- 
 The Group is exposed to risks which              The Group has well qualified and 
  are generally associated with the                experienced technical management 
  oil and gas industry. For example,               staff to plan and supervise operational 
  the Group's ability to pursue and                activities. In addition, the Group 
  develop its projects and undertake               engages with suitably qualified 
  development programmes depends                   local and international geological, 
  on a number of uncertainties, including          geophysical and engineering experts 
  the availability of capital, seasonal            and contractors to supplement and 
  conditions, regulatory approvals,                broaden the pool of expertise available 
  gas, oil, condensate and LPG prices,             to the Group. Detailed planning 
  development costs and drilling                   of development activities is undertaken 
  success. As a result of these uncertainties,     with the aim of managing the inherent 
  it is unknown whether potential                  risks associated with oil and gas 
  drilling locations identified on                 exploration and production, as well 
  proposed projects will ever be                   as ensuring that appropriate equipment 
  drilled or whether these or any                  and personnel are available for 
  other potential drilling locations               the operations, and that local contractors 
  will be able to produce gas, oil                 are appropriately supervised. 
  or condensate. In addition, drilling 
  activities are subject to many 
  risks, including the risk that 
  commercially productive reservoirs 
  will not be discovered. Drilling 
  for hydrocarbons can be unprofitable, 
  not only due to dry holes, but 
  also as a result of productive 
  wells that do not produce sufficiently 
  to be economic. In addition, drilling 
  and production operations are highly 
  technical and complex activities 
  and may be curtailed, delayed or 
  cancelled as a result of a variety 
  of factors. 
                                                 ----------------------------------------------- 
 Production of hydrocarbons 
                                                 ----------------------------------------------- 
 Producing gas and condensate reservoirs          In recent years, the Group has engaged 
  are generally characterised by                   external technical consultants to 
  declining production rates which                 undertake a comprehensive review 
  vary depending upon reservoir characteristics    and re-evaluation study of the MEX-GOL 
  and other factors. Future production             and SV fields in order to gain an 
  of the Group's gas and condensate                improved understanding of the geological 
  reserves, and therefore the Group's              aspects of the fields and reservoir 
  cash flow and income, are highly                 engineering, drilling and completion 
  dependent on the Group's success                 techniques, and the results of this 
  in operating existing producing                  study and further planned technical 
  wells, drilling new production                   work are being used by the Group 
  wells and efficiently developing                 in the future development of these 
  and exploiting any reserves, and                 fields. The Group has established 
  finding or acquiring additional                  an ongoing relationship with such 
  reserves. The Group may not be                   external technical consultants to 
  able to develop, find or acquire                 ensure that technical management 
  reserves at acceptable costs. The                and planning is of a high quality 
  experience gained from drilling                  in respect of all development activities 
  undertaken to date highlights such               on the Group's fields. 
  risks as the Group targets the 
  appraisal and production of these 
  hydrocarbons. 
                                                 ----------------------------------------------- 
 Risks relating to the further 
  development and operation of the 
  Group's gas and condensate fields 
  in Ukraine 
                                                 ----------------------------------------------- 
 The planned development and operation            The Group's technical management 
  of the Group's gas and condensate                staff, in consultation with its 
  fields in Ukraine is susceptible                 external technical consultants, 
  to appraisal, development and operational        carefully plan and supervise development 
  risk. This could include, but is                 and operational activities with 
  not restricted to, delays in the                 the aim of managing the risks associated 
  delivery of equipment in Ukraine,                with the further development of 
  failure of key equipment, lower                  the Group's fields in Ukraine. This 
  than expected production from wells              includes detailed review and consideration 
  that are currently producing, or                 of available subsurface data, utilisation 
  new wells that are brought on-stream,            of modern geological software, and 
  problematic wells and complex geology            utilisation of engineering and completion 
  which is difficult to drill or                   techniques developed for the fields. 
  interpret. The generation of significant         With regards to operational activities, 
  operational cash is dependent on                 the Group ensures that appropriate 
  the successful delivery and completion           equipment and personnel are available 
  of the development and operation                 for the operations, and that operational 
  of the fields. The war in Ukraine                contractors are appropriately supervised. 
  is impacting planning and implementation         In addition, the Group performs 
  of development and operations at                 a review of indicators of impairment 
  the Group's fields.                              of its oil and gas assets on an 
                                                   annual basis, and considers whether 
                                                   an assessment of its oil and gas 
                                                   assets by a suitably qualified independent 
                                                   assessor is appropriate or required. 
                                                 ----------------------------------------------- 
 Drilling and workover operations 
                                                 ----------------------------------------------- 
 Due to the depth and nature of                   The utilisation of detailed sub-surface 
  the reservoirs in the Group's fields,            analysis, careful well planning 
  the technical difficulty of drilling             and engineering design in designing 
  or re-entering wells in the Group's              work programmes, along with appropriate 
  fields is high, and this and the                 procurement procedures and competent 
  equipment limitations within Ukraine,            on-site management, aims to minimise 
  can result in unsuccessful or lower              these risks. 
  than expected outcomes for wells. 
                                                 ----------------------------------------------- 
 Maintenance of facilities 
                                                 ----------------------------------------------- 
 There is a risk that production                  The Group's facilities are operated 
  or transportation facilities can                 and maintained at standards above 
  fail due to non-adequate maintenance,            the Ukrainian minimum legal requirements. 
  control or poor performance of                   Operations staff are experienced 
  the Group's suppliers.                           and receive supplemental training 
                                                   to ensure that facilities are properly 
                                                   operated and maintained. Service 
                                                   providers are rigorously reviewed 
                                                   at the tender stage and are monitored 
                                                   during the contract period. 
                                                 ----------------------------------------------- 
 Financial risks 
                                                 ----------------------------------------------- 
 Exposure to cash flow and liquidity 
  risk 
                                                 ----------------------------------------------- 
 There is a risk that insufficient                The Group maintains adequate cash 
  funds are available to meet the                  reserves and closely monitors forecasted 
  Group's development obligations                  and actual cash flow, as well as 
  to commercialise the Group's oil                 short and longer-term funding requirements. 
  and gas assets. Since a significant              T he Group aims to maintain a significant 
  proportion of the future capital                 proportion of its cash resources 
  requirements of the Group is expected            outside Ukraine. The Group does 
  to be derived from operational                   not currently have any loans outstanding, 
  cash generated from production,                  internal financial projections are 
  including from wells yet to be                   regularly made based on the latest 
  drilled, there is a risk that in                 estimates available, and various 
  the longer term insufficient operational         scenarios are run to assess the 
  cash is generated, or that additional            robustness of the Group's liquidity. 
  funding, should the need arise,                  However, as the risk to future capital 
  cannot be secured. The war in Ukraine            funding is inherent in the oil and 
  has disrupted production operations              gas exploration and development 
  at the Group's fields, and consequently          industry and reliant in part on 
  reduced anticipated cash flows                   future development success, it is 
  from those fields, and this has                  difficult for the Group to take 
  increased the risk regarding sufficiency         any other measures to further mitigate 
  of capital for development. In                   this risk, other than tailoring 
  addition, the conflict may disrupt               its development activities to its 
  the sales market for hydrocarbons                available capital funding from time 
  that are produced. Currently, however,           to time. The Group aims to maintain 
  hydrocarbon prices are very high,                as diverse a range of banking relationships 
  which is ameliorating the potential              as possible to reduce the risks 
  reduction in cash flows, and the                 associated with limited accessibility 
  Group's sales counterparties are                 to banking services which may exist 
  meeting their financial obligations.             from time to time. 
  In addition to the risk of operational 
  cash shortfalls, there is a risk 
  that even with robust cash flows 
  and cash balances, the Group, from 
  time to time, can suffer from non-Ukrainian 
  operational banking appetite for 
  businesses such as the Group's 
  business, which can ultimately 
  manifest itself in having a restricted 
  access to banking services. 
                                                 ----------------------------------------------- 
 Ensuring appropriate business 
  practices 
                                                 ----------------------------------------------- 
 The Group operates in Ukraine,                   The Group maintains anti-bribery 
  an emerging market, where certain                and corruption policies in relation 
  inappropriate business practices                 to all aspects of its business, 
  may, from time to time occur, such               and ensures that clear authority 
  as corrupt business practices,                   levels and robust approval processes 
  bribery, appropriation of property               are in place, with stringent controls 
  and fraud, all of which can lead                 over cash management and the tendering 
  to financial loss.                               and procurement processes. In addition, 
                                                   office and site protection is maintained 
                                                   to protect the Group's assets. 
                                                 ----------------------------------------------- 
 Hydrocarbon price risk 
                                                 ----------------------------------------------- 
 The Group derives its revenue principally        The Group sells a proportion of 
  from the sale of its Ukrainian                   Its hydrocarbon production through 
  gas, condensate and LPG production.              offtake arrangements, which include 
  These revenues are subject to commodity          pricing formulae so as to ensure 
  price volatility and political                   that it achieves market prices for 
  influence. A prolonged period of                 its products, as well utilising 
  low gas, condensate and LPG prices               the electronic market platforms 
  may impact the Group's ability                   in Ukraine to achieve market prices 
  to maintain its long-term investment             for its remaining products. However, 
  programme with a consequent effect               hydrocarbon prices in Ukraine are 
  on its growth rate, which in turn                implicitly linked to world hydrocarbon 
  may impact the Company's share                   prices and so the Group is subject 
  price or any shareholder returns.                to external price trends. In January 
  Lower gas, condensate and LPG prices             2022, the Ukrainian Government imposed 
  may not only decrease the Group's                temporary partial gas price regulations 
  revenues per unit, but may also                  until 30 April 2022, designed to 
  reduce the amount of gas, condensate             support the production of certain 
  and LPG which the Group can produce              designated food products. Whilst 
  economically, as would increases                 an unhelpful interference in the 
  in costs associated with hydrocarbon             functioning of the deregulated gas 
  production, such as subsoil taxes                supply market in Ukraine, in its 
  and royalties. The overall economics             stated form and duration, this temporary 
  of the Group's key assets (being                 scheme is not a material risk to 
  the net present value of the future              the Company and its cash generation, 
  cash flows from its Ukrainian projects)          and has now expired. 
  are far more sensitive to long 
  term gas, condensate and LPG prices 
  than short-term price volatility. 
  However, short-term volatility 
  does affect liquidity risk, as, 
  in the early stage of the projects, 
  income from production revenues 
  is offset by capital investment. 
  In addition, t he war in Ukraine 
  may disrupt the sales market for 
  hydrocarbons, although, currently, 
  hydrocarbon prices are very high, 
  and the Group's sales counterparties 
  are meeting their financial obligations. 
                                                 ----------------------------------------------- 
 Currency risk 
                                                 ----------------------------------------------- 
 Since the beginning of 2014 , the                The Group's sales proceeds are received 
  Ukrainian Hryvnia significantly                  in Ukrainian Hryvnia, and the majority 
  devalued against major world currencies,         of the capital expenditure costs 
  including the US Dollar, where                   for the current investment programme 
  it has fallen from UAH8.3/$1.00                  will be incurred in Ukrainian Hryvnia, 
  on 1 January 2014 to UAH 36.6 /$1.00             thus the currency of revenue and 
  on 31 December 2022, and UAH 37.0                costs are largely matched. In light 
  /$1.00 on 14 December 2023. This                 of the previous devaluation and 
  devaluation has been a significant               volatility of the Ukrainian Hryvnia 
  contributor to the imposition of                 against major world currencies, 
  banking restrictions by the National             and since the Ukrainian Hryvnia 
  Bank of Ukraine over recent years.               does not benefit from the range 
  In addition, the geopolitical events             of currency hedging instruments 
  in Ukraine over recent years and                 which are available in more developed 
  the current war in Ukraine are                   economies, the Group has adopted 
  likely to continue to impact the                 a policy that, where possible, funds 
  valuation of the Ukrainian Hryvnia               not required for use in Ukraine 
  against major world currencies.                  be retained on deposit in the United 
  Further devaluation of the Ukrainian             Kingdom and Europe, principally 
  Hryvnia against the US Dollar will               in US Dollars. 
  affect the carrying value of the 
  Group's assets. 
                                                 ----------------------------------------------- 
 Counterparty and credit risk 
                                                 ----------------------------------------------- 
 The challenging political and economic           The Group monitors the financial 
  environment in Ukraine and current               position and credit quality of its 
  war means that businesses can be                 contractual counterparties and seeks 
  subject to significant financial                 to manage the risk associated with 
  strain, which can mean that the                  counterparties by contracting with 
  Group is exposed to increased counterparty       creditworthy contractors and customers. 
  risk if counterparties fail or                   Hydrocarbon production is sold on 
  default in their contractual obligations         terms that limit supply credit and/or 
  to the Group, including in relation              title transfer until payment is 
  to the sale of its hydrocarbon                   received . 
  production, resulting in financial 
  loss to the Group. 
                                                 ----------------------------------------------- 
 Financial markets and economic 
  outlook 
                                                 ----------------------------------------------- 
 The performance of the Group is                  The Group's sales proceeds are received 
  influenced by global economic conditions         in Ukrainian Hryvnia and a significant 
  and, in particular, the conditions               proportion of investment expenditure 
  prevailing in the United Kingdom                 is made in Ukrainian Hryvnia , which 
  and Ukraine. The economies in these              minimises risks related to foreign 
  regions have been subject to volatile            exchange volatility. However, hydrocarbon 
  pressures in recent periods, with                prices in Ukraine are implicitly 
  the global economy having experienced            linked to world hydrocarbon prices 
  a long period of difficulty, the                 and so the Group is subject to external 
  COVID pandemic, and more particularly            price movements. The Group holds 
  the current war in Ukraine. This                 a significant proportion of its 
  has led to extreme foreign exchange              cash reserves in the United Kingdom 
  movements in the Ukrainian Hryvnia               and Europe, mostly in US Dollars, 
  , high inflation and interest rates,             with reputable financial institutions. 
  and increased credit risk relating               The financial status of counterparties 
  to the Group's key counterparties.               is carefully monitored to manage 
                                                   counterparty risks. Nevertheless, 
                                                   the overall exposure that the Group 
                                                   faces as a result of these risks 
                                                   cannot be predicted and many of 
                                                   these are outside of the Group's 
                                                   control. 
                                                 ----------------------------------------------- 
 Corporate risks 
                                                 ----------------------------------------------- 
 Ukrainian production licences 
                                                 ----------------------------------------------- 
 The Group operates in a region                   The Group ensures compliance with 
  where the right to production can                commitments and regulations relating 
  be challenged by State and non-State             to its production licences through 
  parties. During 2010, this manifested            Group procedures and controls or, 
  itself in the form of a Ministry                 where this is not immediately feasible 
  Order instructing the Group to                   for practical or logistical considerations, 
  suspend all operations and production            seeks to enter into dialogue with 
  from its MEX-GOL and SV production               the relevant Government bodies with 
  licences, which was not resolved                 a view to agreeing a reasonable 
  until mid-2011. In 2013, new rules               time frame for achieving compliance 
  relating to the updating of production           or an alternative, mutually agreeable 
  licences led to further challenges               course of action. Work programmes 
  being raised by the Ukrainian authorities        are designed to ensure that all 
  to the production licences held                  licence obligations are met and 
  by independent oil and gas producers             continual interaction with Government 
  in Ukraine, including the Group.                 bodies is maintained in relation 
  In March 2019, a Ministry Order                  to licence obligations and commitments. 
  was issued instructing the Group 
  to suspend all operations and production 
  from its VAS production licence, 
  which was not resolved until March 
  2023. In 2020, LLC Arkona Gas-Energy 
  ("Arkona") faced a challenge from 
  PJSC Ukrnafta concerning the validity 
  of its SC production licence , 
  which was ultimately resolved in 
  Arkona's favour by a decision of 
  the Supreme Court of Ukraine in 
  February 2021. During 2023, the 
  Ukrainian authorities have taken 
  a number of regulatory actions 
  against the Group, which have culminated 
  in Ministry Orders being made in 
  May 2023 to suspend all operations 
  and production at the VAS production 
  licence and SC exploration licence. 
  Excepting the current suspension 
  O rders made in respect of the 
  VAS production licence and SC exploration 
  licence, all such challenges affecting 
  the Group have been successfully 
  defended through the Ukrainian 
  legal system. In July 2023, new 
  legislation was introduced in Ukraine, 
  which will come into force in September 
  2024, and which requires that branches 
  (or representative offices) of 
  foreign companies operating in 
  Ukraine register their ultimate 
  beneficial owners in Ukrainian 
  Registries. Regal Petroleum Corporation 
  Ltd ("RPC"), which holds the MEX-GOL 
  and SV licences, operates such 
  a branch and will therefore be 
  required to register its ultimate 
  beneficial owners from the implementation 
  of this law, which raises a potential 
  risk that such registration will 
  not be accepted by the Ukrainian 
  authorities, and possibly result 
  in regulatory action against RPC 
  and/or its licences and assets, 
  including suspension of the MEX-GOL 
  and SV licences. T he business 
  environment is such that these 
  types of challenges may arise at 
  any time in relation to the Group's 
  operations, licence history, compliance 
  with licence commitments and/or 
  local regulations. In addition, 
  production licences in Ukraine 
  are issued with and/or carry ongoing 
  compliance obligations, which if 
  not met, may lead to the loss of 
  a licence. 
                                                 ----------------------------------------------- 
 Risks relating to key personnel 
                                                 ----------------------------------------------- 
 The Group's success depends upon                 The Group periodically reviews the 
  skilled management as well as technical          compensation and contractual terms 
  expertise and administrative staff.              of its staff. In addition, the Group 
  The loss of service of critical                  has developed relationships with 
  members from the Group's team could              a number of technical and other 
  have an adverse effect on the business.          professional experts and advisers, 
  The current war in Ukraine has                   who are used to provide specialist 
  meant that, as far as possible,                  services as required. As a result 
  the Group's staff have needed to                 of the war, o nly essential staff 
  move away from areas of conflict                 are located at site, and all other 
  and work remotely.                               staff are working remotely, either 
                                                   from areas away from the conflict 
                                                   areas or outside Ukraine. The Group 
                                                   has invested in technology that 
                                                   allows many staff to work just as 
                                                   effectively from remote locations. 
                                                 ----------------------------------------------- 
 

Directors' Responsibility Statement

The Directors confirm that, to the best of their knowledge:

 
 a)   the unaudited condensed interim consolidated financial statements 
       have been prepared in accordance with UK-adopted International 
       Accounting Standard 34, 'Interim Financial Reporting' ("IAS 
       34") and the AIM Rules for Companies; and 
 b)   these unaudited interim results include: 
      (i)    a fair review of the information required (i.e. an indication 
              of important events and their impact and a description of 
              the principal risks and uncertainties for the remaining six 
              months of the financial year); and 
      (ii)   a fair review of the information required on related party 
              transactions. 
 

A list of current Directors is maintained on the Group's website, www.enwell-energy.com.

Condensed Interim Consolidated Income Statement

 
                                                                  6 months 
                                              6 months ended         ended 
                                                  30 Jun 2 3      30 Jun 2 
                                                                         2 
                                                 (unaudited)   (unaudited) 
                                       Note             $000          $000 
 
 Revenue                                  3           33,137        77,228 
 Cost of sales                            4         (13,577)      (25,690) 
------------------------------------  -----  ---------------  ------------ 
 Gross profit                                         19,560        51,538 
 Administrative expenses                             (3,684)       (3,428) 
 Other operating income , (net)           5            1,279           824 
 Operating profit                                     17,155        48,934 
 Net impairment losses on financial 
  assets                                               (184)         (679) 
 Other expenses, (net)                    6              780       (5,227) 
 Finance costs                                         (359)         (248) 
 Profit before taxation                               17,392        42,780 
 Income tax expense                       7          (4,918)      (10,408) 
------------------------------------  -----  ---------------  ------------ 
 Profit for the period                                12,474        32,372 
------------------------------------  -----  ---------------  ------------ 
 
   Earnings per share (cents) 
 Basic and diluted                        8             3.9c         10.1c 
------------------------------------  -----  ---------------  ------------ 
 

The Notes set out below are an integral part of these unaudited condensed interim consolidated financial statements.

Condensed Interim Consolidated Statement of Comprehensive Income

 
                                                   6 months      6 months 
                                                      ended         ended 
                                                  30 Jun 23      30 Jun 2 
                                                                        2 
                                                (unaudited)   (unaudited) 
                                                       $000          $000 
 
 Profit for the period                               12,474        32,372 
 
 Other comprehensive income: 
 Items that may be subsequently reclassified 
  to profit or loss: 
 Equity - foreign currency translation                  698       (7,943) 
---------------------------------------------  ------------  ------------ 
 Total other comprehensive (loss)/ income               698       (7,943) 
 Total comprehensive income for the period           13,172        24,429 
---------------------------------------------  ------------  ------------ 
 

The Notes set out below are an integral part of these unaudited condensed interim consolidated financial statements.

Condensed Interim Consolidated Balance Sheet

 
                                            30 Jun 2    31 Dec 2 
                                                   3           2 
                                         (unaudited)   (audited) 
                                  Note          $000        $000 
 
 Assets 
 Non-current assets 
 Property, plant and equipment     9          81,092      74,256 
 Intangible assets                 10          8,771       8,994 
 Right-of-use assets                             282         364 
 Prepayments for fixed assets                    926       5,385 
 Deferred tax asset                7             799         287 
                                              91,870     89, 286 
 
 Current assets 
 Inventories                                   2,706       3,358 
 Trade and other receivables      1 1         64,489      60,438 
 Cash and cash equivalents        1 4         33,831      88,652 
                                             101,026     152,448 
 Total assets                                192,896     241,734 
-------------------------------  -----  ------------  ---------- 
 
 Liabilities 
 Current liabilities 
 Trade and other payables                   (24,595)    (27,529) 
 Lease liabilities                             (150)       (229) 
 Corporation tax payable                     (1,165)     (2,447) 
-------------------------------  -----  ------------  ---------- 
                                            (25,910)    (30,205) 
-------------------------------  -----  ------------  ---------- 
 Net current assets                           75,116     122,243 
-------------------------------  -----  ------------  ---------- 
 
 Non-current liabilities 
 Provision for decommissioning    1 2        (7,130)     (6,964) 
 Lease liabilities                             (241)       (258) 
 Defined benefit liability                     (317)       (323) 
 Deferred tax liability            7         (5,613)     (3,232) 
 Other non-current liabilities    1 3           (81)        (93) 
                                            (13,382)    (10,870) 
 
 Total liabilities                          (39,292)    (41,075) 
-------------------------------  -----  ------------  ---------- 
 
 Net assets                                  153,604     200,659 
-------------------------------  -----  ------------  ---------- 
 
 Equity 
 Called up share capital                      28,115      28,115 
 Foreign exchange reserve                  (141,007)   (141,705) 
 Other reserve                               (3,204)     (3,204) 
 Capital contribution reserve                  7,477       7,477 
 Retained earnings                           262,223     309,976 
-------------------------------  -----  ------------  ---------- 
 Total equity                                153,604     200,659 
-------------------------------  -----  ------------  ---------- 
 

The Notes set out below are an integral part of these unaudited condensed interim consolidated financial statements.

Condensed Interim Consolidated Statement of Changes in Equity

 
                                 Called                     Merger          Capital     Foreign 
                               up share   Share premium    reserve    contributions    exchange    Retained      Total 
                                capital         account                     reserve    reserve*    earnings     equity 
                                   $000            $000       $000             $000        $000        $000       $000 
 
 As at 1 January 202 3 
  (audited)                      28,115               -    (3,204)            7,477   (141,705)     309,976    200,659 
 Profit for the period                -               -          -                -           -      12,474     12,474 
 Other comprehensive income 
  - exchange differences              -               -          -                -         698           -        698 
---------------------------  ----------  --------------  ---------  ---------------  ----------  ----------  --------- 
 Total comprehensive income           -               -          -                -         698      12,474     13,172 
 Distributed dividends                -               -          -                -           -    (60,227)   (60,227) 
 As at 30 June 202 3 
  (unaudited)                    28,115               -    (3,204)            7,477   (141,007)     262,223    153,604 
---------------------------  ----------  --------------  ---------  ---------------  ----------  ----------  --------- 
 
 
                                                             Merger          Capital     Foreign 
                               Called up   Share premium    reserve    contributions    exchange    Retained     Total 
                           share capital         account                     reserve    reserve*    earnings    equity 
                                    $000            $000       $000             $000        $000        $000      $000 
 
 As at 1 January 202 2                                                                    ( 10 3                  1 78 
  (audited)                       28,115               -    (3,204)            7,477     , 611 )    249, 740     , 517 
 Profit for the period                 -               -          -                -           -      32,372    32,372 
 Other comprehensive 
 income 
  - exchange 
   differences                         -               -          -                -     (7,943)           -   (7,943) 
-----------------------  ---------------  --------------  ---------  ---------------  ----------  ----------  -------- 
 Total comprehensive 
  income                               -               -          -                -     (7,943)      32,372    24,429 
 As at 30 June 202 2 
  (unaudited)                     28,115               -    (3,204)            7,477   (111,554)     282,112   202,946 
-----------------------  ---------------  --------------  ---------  ---------------  ----------  ----------  -------- 
 

* Predominantly as a result of exchange differences on retranslation, where the subsidiaries ' functional currency is not US Dollars

The Notes set out below are an integral part of these unaudited condensed interim consolidated financial statements.

Condensed Interim Consolidated Statement of Cash Flows

 
                                                         6 months      6 months 
                                                            ended         ended 
                                                         30 Jun 2      30 Jun 2 
                                                                3             2 
                                                      (unaudited)   (unaudited) 
                                               Note          $000          $000 
 
 Operating activities 
                                                  1 
 Cash generated from operations                   5      12 , 353      12 , 501 
 Charitable donations                                         (2)     (4 , 996) 
 Equipment rental income                                      133             - 
 Income tax paid                                        (4 , 233)     (9 , 143) 
 Interest received                                          1,585           536 
--------------------------------------------  -----  ------------  ------------ 
 Net cash (outflow)/inflow from operating                             ( 1 , 102 
  activities                                              9 , 836             ) 
--------------------------------------------  -----  ------------  ------------ 
 
 Investing activities 
                                                        ( 3 , 393    ( 12 , 074 
 Purchase of property, plant and equipment                      )             ) 
 Proceeds from disposal of other short-term 
  investments                                                   -       4 , 762 
                                                          ( 1,338 
 Purchase of intangible assets                                  )          (23) 
 Proceeds from return of prepayments 
  for shares                                                    -             - 
 Proceeds from sale of property, plant 
  and equipment                                                 1             2 
                                                        ( 4 , 730     ( 7 , 333 
 Net cash outflow from investing activities                     )             ) 
--------------------------------------------  -----  ------------  ------------ 
 
 Financing activities 
 Payment of dividends                                    (59,623)             - 
 Payment of principal portion of lease 
  liabilities                                             ( 137 )         (239) 
                                                         ( 59,760 
 Net cash outflow from financing activities                     )         (239) 
 
 Net (decrease)/increase in cash and                   ( 54 , 654     ( 8 , 674 
  cash equivalents                                              )             ) 
 Cash and cash equivalents at beginning 
  of the period                                  14     8 8 , 652      87 , 780 
 ECL* of cash and cash equivalents                             25         (223) 
 Effect of foreign exchange rate changes                  ( 192 )       (1,513) 
 Cash and cash equivalents at end of              1 
  the period                                      4      33 , 831      77 , 370 
--------------------------------------------  -----  ------------  ------------ 
 

*ECL - Expected credit losses

The Notes set out below are an integral part of these unaudited condensed interim consolidated financial statements.

Notes to the U naudited Condensed Interim Consolidated Financial Statements

   1.         General Information and Operational Environment 

Enwell Energy plc (the "Company") and its subsidiaries (together the "Group") is a gas, condensate and LPG production group.

Enwell Energy plc is a public limited company incorporated in England and Wales under the Companies Act 2006, whose shares are quoted on the AIM Market of London Stock Exchange plc. The Company's registered office is at 16 Old Queen Street, London SW1H 9HP, United Kingdom and its registered number is 4462555.

As at 30 June 2023, the Company's immediate parent company was Smart Energy (CY) Limited, which was 100% owned by Smart Holding (Cyprus) Limited, which was 100% owned by Proteas Trustees Ltd as trustee of the STEP Trust, and Proteas Trustee Services Ltd, Afroditi Loukaidou, Elena Iona and Charoula Sofokleous as trustees of the SMART Trust. Accordingly, the Company was ultimately controlled by Proteas Trustees Ltd as trustee of the STEP Trust, and Proteas Trustee Services Ltd, Afroditi Loukaidou, Elena Iona and Charoula Sofokleous as trustees of the SMART Trust.

The Group's gas, condensate and LPG extraction and production facilities are located in Ukraine.

Impact of the ongoing war in Ukraine

On 24 February 2022, Russia commenced a military invasion of Ukraine, and since then there has been an ongoing war in Ukraine. Shortly after the invasion, the Ukrainian Government imposed martial law, and the corresponding introduction of related temporary restrictions that impact, amongst other areas, the economic environment and business operations in Ukraine. The war has caused significant economic challenges in Ukraine, which has led to a deterioration of Ukrainian State finances, volatility of financial markets, illiquidity on capital markets, higher inflation and a depreciation of the national currency against major foreign currencies.

The war is continuing, causing very significant numbers of military and civilian casualties and significant dislocation of the Ukrainian population. The Russian army has occupied territories in the east and south of Ukraine, including the majority of the Kherson, Zaporizhzhia, Luhansk and Donetsk regions. Russian attacks have targeted and destroyed civilian infrastructure over wide areas of Ukraine, including hospitals and residential complexes.

On 3 June 2022, the National Bank of Ukraine ("NBU") increased the key policy interest rate to 25%, which was aimed at suspending price increases and strengthening the Ukrainian Hryvnia exchange rate. The NBU has also introduced temporary restrictions on foreign currency trades and limited the ability to perform cross-border payments for non-critical imports and repayment of debt to foreign creditors, apart from international institutions. Such measures have meant that commercial interbank quotes have remained close to the official NBU exchange rate. Despite the uncertainty and instability in the general situation within Ukraine, the banking system remains relatively stable, with sufficient liquidity even as martial law continues, and banking services are available to both legal entities and individual bank customers.

The Ukrainian Government has taken action to limit the negative effects of the war on the Ukrainian economic environment during the period of martial law and beyond, including but not limited to:

 
 --   the temporary easing of the tax regime until the end of martial 
       law, including the suspension of tax audits and the cancellation 
       of some penalties for violating the tax law; 
 --   gasoline, heavy distillates, liquefied gas, oil and petroleum 
       are subject to VAT at a reduced rate of 7%, and the excise tax 
       rate for the imported fuel group of products' is set at zero; 
 --   a number of measures were taken to limit prices for energy resources, 
       including prohibiting export of gas, setting a level of electricity 
       price on transactions a day ahead and intraday markets; and 
 --   the increase in the subsoil tax rate on natural gas production 
       during martial law, which action introduced a differentiated 
       subsoil tax rate on the production of natural gas depending on 
       sale prices for natural gas 
 

Additional financial support was received from a number of international institutions, including from the International Monetary Fund and European Bank for Reconstruction and Development, to support the economy and the population. Such financial support is critical for Ukraine to continue to service its debts in the foreseeable future.

Given the fast-moving nature of the situation in Ukraine and the unpredictability of the outcome, it is impracticable to assess the full impact of the war on the economic environment.

Overall, the final resolution and the ongoing effects of the war and political and economic situation in Ukraine are difficult to predict, but they may have further severe effects on the Ukrainian economy and the Group's business.

As at 14 December 2023, the official NBU exchange rate of the Ukrainian Hryvnia against the US Dollar was UAH37.0/$1.00, compared with UAH36.57/$1.00 as at 30 June 2023.

Further details of risks relating to Ukraine can be found within the Principal Risks and Uncertainties section earlier in this announcement.

   2.         Accounting Judgements and Estimates 

Basis of preparation

These unaudited condensed interim consolidated financial statements for the six month period ended 30 June 202 3 have been prepared in accordance with UK-adopted International Accounting Standard 34, 'Interim Financial Reporting' ("IAS 34") and the AIM Rules for Companies. The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period.

These unaudited condensed interim consolidated financial statements do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 202 2 were approved by the Board of Directors on 20 December 2023 and subsequently filed with the Registrar of Companies. The Auditors' Report on those accounts was not qualified and did not contain any statement under section 498 of the Companies Act 2006.

The unaudited condensed interim consolidated financial statements should be read in conjunction with the annual consolidated financial statements for the year ended 31 December 2022, which were prepared in accordance with UK-adopted International Accounting Standards.

The accounting policies and methods of computation and presentation used are consistent with those used in the Group's Annual Report and Financial Statements for the year ended 31 December 2022, with the exception of the new or revised standards and interpretations set out below.

New and amended standards adopted by the Group

The following new standards, amendments to standards and interpretations became effective for the Group on 1 January 2023 or afterwards (t hese standards, amendments to standards and interpretations did not have a material impact on this unaudited interim condensed consolidated financial information):

 
 --   IFRS 17 Insurance Contracts; 
 --   Amendments to IFRS 1 Presentation of Financial Statements: 
       Classification of Liabilities as Current or Non-current; 
 --   Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure 
       of Accounting Policies; 
 --   Amendments to IAS 8: Definition of Accounting Estimates; 
 --   Amendments to IAS 12: Deferred Tax related to Assets and Liabilities 
       arising from a Single Transaction. 
 

There are no other amended standards which the Group considers to have a material impact on these financial statements.

Going Concern

The Group's business activities, together with the factors likely to affect its future operations, performance and position are set out in the Chairman's Statement, Chief Executive's Statement and Finance Review. The financial position of the Group, its cash flows and liquidity position are set out in these consolidated financial statements.

On 24 February 2022, Russia commenced a military invasion of Ukraine. This was quickly followed by the enactment of martial law by the Ukrainian President's Decree, approved by the Parliament of Ukraine, and the corresponding introduction of related temporary restrictions that impact the economic environment and business operations in Ukraine.

The production assets of the Group are located in the central and eastern part of the country (Poltava and Kharkiv regions) which are controlled by the Ukrainian Government. Following a brief period of suspension, production and field operations, as well as construction work on upgrades to the gas processing facilities, at the MEX-GOL and SV fields recommenced. As of the date of approval of these financial statements, no assets of the Group have been damaged, and the Group continues to operate its MEX-GOL and SV assets in the Poltava region, while its SC asset in the Poltava region and all production and field operations at the VAS asset located in the Kharkiv region are suspended. No military activities have occurred at the Group's field locations. The Gas Transmission System Operator of Ukraine has maintained complete operational and technological control over the operations of the Ukrainian Gas Transmission System. However, as of the date of approval of these financial statements, the war has had, and continues to have, a material impact on the production and sales levels of the business and execution of the Group's 2023 budget.

The Group has no debt and funds its operations from its own cash resources. Cash and cash equivalents were $79.1 million as at 14 December 2023. The Directors maintain a significant level of flexibility to modify the Group's development plans as may be required to preserve cash resources for liquidity management. Absent the potential impact of the war in Ukraine, the Directors are satisfied that the Group and the Company are a going concern and will continue their operations for the foreseeable future.

In assessing the impact of the war on the ability of the Group and the Company to continue as a going concern, the Directors have analysed a number of possible scenarios of economic and military developments and the impact on the expected cash flows of the Group and Company for 2023 and 2024. This includes considering a possible (but in the view of the Directors, highly unlikely) worst case scenario in which the Group has zero production as a result of possible future military conflict dictating field operations being completely shut-in, and all other non-production related costs being maintained at current levels with no reduction or mitigating actions as would otherwise be possible. Even in this worst-case scenario, the Directors are satisfied that the Group and the Company have sufficient liquid resources to be able to meet their liabilities as they fall due and to be able to continue as a going concern for the foreseeable future.

The Company's corporate strategy for the near term is to:

 
 --   continue production from MEX-GOL and SV licences, generating 
       cash to cover Group costs and add to existing cash resources, 
       whilst moderating development plans to reduce cash spend exposure 
       whilst the war and operational/political issues continue; 
 --   vigorously pursue legal initiatives to protect the Group's 
       assets, restore all licences and production, and seek compensation 
       for losses incurred to date and as may be incurred in the 
       future; and 
 --   tightly manage costs to ensure cash resources are maintained 
       at levels capable of sustaining the business through the uncertainty 
       that lies ahead. 
 

In respect of the Group's operations, staff and assets in Ukraine, the potential short and long-term impact of the future development of the war is inherently uncertain. Accordingly, this creates a material uncertainty related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern because of the potential impact on its ability to continue its operations for the foreseeable future and realise its assets in the normal course of business. The financial statements do not include the adjustments that would result if the Group were unable to continue as a going concern.

The Company is a UK-based investment holding company. The Company had cash and cash equivalents of $20.6 million as at 14 December 2023, all of which are held outside of Ukraine, in US Dollars, Pounds Sterling and Euros. The Directors are satisfied that the Company is a going concern and will be able to continue its operations for the foreseeable future, and there is no material uncertainty in respect of its ability to do so.

Significant accounting judgements and estimates

The preparation of the unaudited condensed interim consolidated financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates.

In preparing these unaudited condensed interim consolidated financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were consistent with those that applied to the consolidated financial statements for the year ended 31 December 2022 with certain updates described below.

Estimates

Depreciation of Development and Production Assets

Development and production assets held in property, plant and equipment are depreciated on a unit of production basis at a rate calculated by reference to proven and probable reserves at the end of the period plus the production in the period, and incorporating the estimated future cost of developing and extracting those reserves. Future development costs are estimated using assumptions about the number of wells required to produce those reserves, the cost of the wells, future production facilities and operating costs, together with assumptions on oil and gas realisations, and are revised annually. The reserves estimates used are determined using estimates of gas in place, recovery factors, future hydrocarbon prices and also take into consideration the Group's latest development plan for the associated development and production asset. The latest development plan and therefore the inputs used to determine the depreciation charge for the MEX-GOL, SV and VAS fields continue until the end of the economic life of the fields, which is assessed to be 2038, 2042 and 2028 respectively, based on the assessment contained in the DeGolyer & MacNaughton reserves report for these fields. The licences for the MEX-GOL and SV fields have recently been extended until 2044. Were the estimated reserves at the beginning of the year to differ by 10% from previous assumptions, the impact on depreciation for the period ended 30 June 2023 would be to increase it by $616,000 or decrease it by $277,000 (31 December 2022: increase by $1,394,000 or decrease by $626,000).

   3.         Segmental Information 

In line with the Group's internal reporting framework and management structure, the key strategic and operating decisions are made by the Board of Directors, who review internal monthly management reports, budgets and forecast information as part of this process. Accordingly, the Board of Directors is deemed to be the Chief Operating Decision Maker within the Group.

The Group's only class of business activity is oil and gas exploration, development and production. The Group's operations are located in Ukraine, with its head office in the United Kingdom. These geographical regions are the basis on which the Group reports its segment information. The segment results as presented represent operating profit before depreciation and amortisation.

6 months ended 30 June 2023 (unaudited)

 
                                                               United 
                                                   Ukraine    Kingdom     Total 
                                                      $000       $000      $000 
 
 Revenue 
                                                                           24 , 
 Gas sales                                        24 , 568          -       568 
 Condensate sales                                  3 , 736          -   3 , 736 
 Liquefied Petroleum Gas sales                     4 , 833          -   4 , 833 
----------------------------------------------  ----------  ---------  -------- 
                                                                           33 , 
 Total revenue                                    33 , 137          -       137 
 
                                                                ( 146      20 , 
 Segment result                                   20 , 781          )       635 
 Depreciation and amortisation of non-current                              (3 , 
  assets                                         (3 , 480)          -      480) 
 Operating profit                                                        17 155 
----------------------------------------------  ----------  ---------  -------- 
 
                                                     170 ,       22 ,     192 , 
 Segment assets                                        674        222       896 
 
                                                                           10 , 
 Capital additions*                               10 , 171          -       171 
 

*Comprises additions to property, plant and equipment and intangible assets (Notes 9 and 1 0 ).

Year ended 31 December 20 2 2 (audited)

 
                                              United 
                                  Ukraine    Kingdom     Total 
                                     2022       2022      2022 
                                     $000       $000      $000 
 
 Revenue 
 Gas sales                        109,461          -   109,461 
 Condensate sales                  12,744          -    12,744 
 Liquefied Petroleum Gas sales     11,175          -    11,175 
-------------------------------  --------  ---------  -------- 
 Total revenue                    133,380          -   133,380 
 
 Segment result                    84,750    (1,140)    83,610 
 Depreciation and amortisation 
  of non-current assets           (7,837)          -   (7,837) 
 Operating profit                                       75,773 
 
 Segment assets                   158,982     82,752   241,734 
 
 Capital additions*                19,807          -    19,807 
 

6 months ended 30 June 20 2 2 (unaudited)

 
                                                               United 
                                                   Ukraine    Kingdom       Total 
                                                      $000       $000        $000 
 
 Revenue 
 Gas sales                                          64,106          -      64,106 
 Condensate sales                                    8,081          -       8,081 
 Liquefied Petroleum Gas sales                       5,041          -       5,041 
----------------------------------------------  ----------  ---------  ---------- 
 Total revenue                                      77,228          -      77,228 
 
 Segment result                                   53 , 588      (922)    52 , 666 
 Depreciation and amortisation of non-current 
  assets                                         (3 , 732)          -   (3 , 732) 
 Operating profit                                                          48 934 
----------------------------------------------  ----------  ---------  ---------- 
 
                                                                            224 , 
 Segment assets                                  165 , 139   59 , 088         227 
 
 Capital additions*                                9 , 724          -     9 , 724 
 

*Comprises additions to property, plant and equipment and intangible assets (Notes 9 and 1 0 ).

There are no inter-segment sales within the Group and all products are sold in the geographical region in which they are produced. The Group is not significantly impacted by seasonality.

   4.         Cost of Sales 
 
                                             6 months   6 months ended 
                                                ended       30 Jun 2 2 
                                             30 Jun 2 
                                                    3 
                                          (unaudited)      (unaudited) 
                                                 $000             $000 
 
 Production taxes                               5,772           12,931 
 Depreciation of property, plant and 
  equipment                                     3,163            3,251 
 Rent expenses                                  1,470            5,440 
 Staff costs                                    1,255            1,217 
 Cost of inventories recognised as an 
  expense                                         837              694 
 Transmission tariff for Ukrainian gas 
  system                                          174              267 
 Amortisation of mineral reserves                 180              227 
 Other expenses                                   726            1,663 
                                               13,577          25,6 90 
 
   5.         Other operating income/(expenses), (net) 
 
                                                    6 months   6 months ended 
                                                       ended       30 Jun 2 2 
                                                    30 Jun 2 
                                                           3 
                                                 (unaudited)      (unaudited) 
                                                        $000             $000 
 
 Interest income on cash and cash equivalents          1,585              536 
 Reversal of accruals                                    331              236 
 Contractor penalties applied                              1              110 
 Other operating (losses)/income, net                  (639)           ( 5 8) 
                                                       1,279              824 
 
   6.         Other income/(expenses), (net) 
 
                                           6 months   6 months ended 
                                              ended       30 Jun 2 2 
                                           30 Jun 2 
                                                  3 
                                        (unaudited)      (unaudited) 
                                               $000             $000 
 
 Charitable donations                           (2)          (4,996) 
 Net foreign exchange gains/(losses)            712              (2) 
 Other income/(expenses), (net)                  70            (229) 
                                              (780)          (5,227) 
 
   7.         Taxation 

The income tax charge of $4,918,000 for the six month period ended 30 June 2023 relates to a urrent tax charge of $3,049,000 and a deferred tax charge of $1,869,000 (1H 2022: current tax charge of $8,682,000 and deferred tax charge of $1,726,000).

The movement in the period was as follows:

 
                                                  6 months      6 months 
                                                     ended         ended 
                                                  30 Jun 2      30 Jun 2 
                                                         3             2 
                                               (unaudited)   (unaudited) 
                                                      $000          $000 
 Deferred tax (liability)/asset recognised 
  relating to development and production 
  assets at MEX-GOL-SV fields and provision 
  for decommissioning 
 At beginning of the period                        (3,232)       (5,197) 
 Charged to Income Statement - current 
  period                                           (2,381)       (1,740) 
 Effect of exchange difference                           -           818 
-------------------------------------------- 
 At end of the period                              (5,613)       (6,119) 
--------------------------------------------  ------------  ------------ 
 
 
 Deferred tax asset/( liability ) recognised 
  relating to development and production 
  assets at VAS field and provision for 
  decommissioning 
 At beginning of the period                     287   361 
 Credited to Income Statement - current 
  period                                        512    14 
 Effect of exchange difference                    -     - 
--------------------------------------------- 
 At end of the period                           799   375 
---------------------------------------------  ----  ---- 
 

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to the expected total annual profit or loss. The effective tax rate for the six month period ended 30 June 2023 was 25% (1H 2022: 25%).

The deferred tax asset relating to the Group's provision for decommissioning at 30 June 2023 of $595,000 (31 December 2022: $449,000) was recognised on the tax effect of the temporary differences of the Group's provision for decommissioning at the MEX-GOL and SV fields, and its tax base. The deferred tax liability relating to the Group's development and production assets at the MEX-GOL and SV fields at 30 June 2023 of $6,208,000 (31 December 2022: $3,681,000) was recognised on the tax effect of the temporary differences between the carrying value of the Group's development and production asset at the MEX-GOL and SV fields, and its tax base.

The deferred tax asset relating to the Group's provision for decommissioning at 30 June 2023 of $317,000 (31 December 2022: $310,000) was recognised on the tax effect of the temporary differences on the Group's provision on decommissioning at the VAS field, and its tax base. The deferred tax asset relating to the Group's development and production assets at the VAS field at 30 June 2023 of $482,000 (31 December 2022: The deferred tax liability of $23,000) was recognised on the tax effect of the temporary differences between the carrying value of the Group's development and production asset at the VAS field, and its tax base.

   8.         Earnings per Share 

The calculation of basic and diluted earnings per ordinary share has been based on the profit for the six month periods ended 30 June 2023 and 30 June 2022 and 320,637,836 ordinary shares, being the average number of shares in issue for the periods. There are no dilutive instruments.

   9.         Property, Plant and Equipment 
 
                               6 months ended 30 Jun 23                       6 months ended 30 Jun 2 2 
                                      (unaudited)                                     (unaudited) 
                        Oil and       Oil and     Other     Total       Oil and       Oil and     Other      Total 
                            gas           gas     fixed                     gas           gas     fixed 
                    development   exploration    assets             development   exploration    assets 
                            and           and                               and           and 
                     production    evaluation                        production    evaluation 
                         assets        assets                            assets        assets 
                        Ukraine                                         Ukraine 
                           $000          $000      $000      $000          $000          $000      $000       $000 
 Cost 
 At beginning of 
  the 
  period                135,255        13,093     1,968   150,316      1 63,170        10,110     2,631    175,911 
 Additions                8,905         1,125       124    10,154         6,469         3,027       185      9,681 
 Change in 
  decommissioning 
  provision                   -             -         -         -       (4,250)          (63)         -    (4,313) 
 Disposals                (204)             -      (28)     (232)          (57)             -      (25)       (82) 
 Exchange 
  differences                 -             -         -         -      (12,166)         (463)       857   (11,772) 
 At end of the 
  period                143,956        14,218     2,064   160,238       153,166        12,611     3,648    169,425 
 
 Accumulated 
 depreciation 
 and impairment 
 At beginning of 
  the 
  period                 73,108         1,677     1,275    76,060        87,070             -     1,423     88,493 
 Charge for the 
  period                  3,047             -       135     3,182         3,362             -       158      3,520 
 Disposals                 (86)             -      (10)      (96)          (21)             -      (22)       (43) 
 Exchange 
  differences                 -             -         -         -       (5,939)             -      (93)    (6,032) 
 At end of the 
  period                 76,069             -     1,400    79,146        84,472             -     1,466     85,938 
 Net book value 
  at 
  the beginning 
  of 
  the period             62,147        11,416       693    74,256        76,100        10,110     1,208     87,418 
-----------------  ------------  ------------  --------  --------  ------------  ------------  --------  --------- 
 Net book value 
  at 
  end of the 
  period                 67,887        12,541       664    81,092        68,694        12,611     2,182     83,487 
-----------------  ------------  ------------  --------  --------  ------------  ------------  --------  --------- 
 
 

At 30 June 2023, an impairment indicator was identified by the Group, and impairment tests were performed for the MEX-GOL, SV, SC and VAS fields. These reviews concluded that no impairment to carrying value had occurred on any Group asset.

   10.        Intangible Assets 
 
                             6 months ended 30 Jun 2 3                          6 months ended 30 Jun 2 2 
                                     (unaudited)                                       (unaudited) 
                 ------------------------------------------------  -------------------------------------------------- 
                   Mineral    Exploration          Other    Total    Mineral     Exploration          Other     Total 
                   reserve            and     intangible             reserve             and     intangible 
                    rights     evaluation         assets              rights      evaluation         assets 
                               intangible                                         intangible 
                                   assets                                             assets 
                      $000           $000           $000     $000       $000            $000           $000      $000 
 Cost 
 At beginning 
  of the period      5,080          6,433            860   12,373      6,810           8,651            752    16,213 
 Additions               -              -             17       17          -               -             43        43 
 Disposals               -              -           (23)     (23)          -               -              -         - 
 Exchange 
  differences            -              -              -        -      (460)           (590)           (50)   (1,100) 
---------------  ---------  -------------  -------------  -------  ---------  --------------  -------------  -------- 
 At end of the 
  period             5,080          6,433            854   12,367      6,350           8,061            745    15,156 
---------------  ---------  -------------  -------------  -------  ---------  --------------  -------------  -------- 
 
  Accumulated 
  amortisation 
  and 
  impairment 
 At beginning 
  of the period      2,925              -            454    3,379      3,439               -            434     3,873 
 Amortisation 
  charge for 
  the 
  period               180              -             59      239        224               -            113       337 
 Disposals               -              -           (22)     (22)          -               -              -         - 
 Exchange 
  differences            -              -              -        -      (232)               -           (28)     (260) 
---------------  ---------  -------------  -------------  -------  ---------  --------------  -------------  -------- 
 At end of the 
  period             3,105              -            491    3,596      3,431               -            519     3,950 
---------------  ---------  -------------  -------------  -------  ---------  --------------  -------------  -------- 
 Net book value 
  at beginning 
  of the period      2,155          6,433            406    8,994      3,371           8,651            318    12,340 
---------------  ---------  -------------  -------------  -------  ---------  --------------  -------------  -------- 
 Net book value 
  at end of the 
  period             1,975          6,433            363    8,771      2,919           8,061            226    11,206 
---------------  ---------  -------------  -------------  -------  ---------  --------------  -------------  -------- 
 
 

Intangible assets consist mainly of the hydrocarbon production licence relating to the VAS gas and condensate field, which is held by LLC Prom-Enerho Produkt, and the SC hydrocarbon exploration licence, which is held by LLC Arkona Gas-Energy. The Group amortises the hydrocarbon production licence relating to the VAS gas and condensate field using the straight-line method over the term of the economic life of the VAS field until 2028. The SC hydrocarbon exploration licence is not amortised due to it being at an exploration and evaluation stage.

As at 30 June 2023, an impairment indicator was identified by the Group, and impairment tests were performed for the MEX-GOL, SV, SC and VAS fields. These reviews concluded that no impairment to carrying value had occurred on any Group asset.

   11.        Trade and Other Receivables 
 
                                             30 Jun     31 Dec 2 
                                                2 3            2 
                                        (unaudited)    (audited) 
                                               $000         $000 
 
 Trade receivables                           50,933       46,188 
 Other financial receivables                    399          284 
 Financial aids                              11,199       11,316 
 Less credit loss allowance                   (514)        (433) 
-----------------------------------  --------------  ----------- 
 Total financial receivables               62 , 017       57,355 
 
 Prepayments and accrued income                 231          509 
 Other receivables                           2, 241        2,574 
 Total trade and other receivables           64,489       60,438 
 

Due to the short-term nature of the current trade and other financial receivables, their carrying amount is assumed to be the same as their fair value. All trade and other financial receivables, except those provided for, are considered to be of high credit quality.

The majority of the trade receivables are from a related party, LLC Smart Energy, that purchased all of the Group's gas production. The applicable payment terms, which were revised in the period, were payment for 35% of the monthly volume of gas by the 15th of the month following the month of delivery, and payment of the remaining balance by the end of that month (1H 2022: payment terms are payment for all of the monthly volume of gas by the 10(th) of the month following the month of delivery). This arrangement has now been terminated, and all outstanding sums have been received from LLC Smart Energy.

   12.        Provision for Decommissioning 
 
                                   6 months ended   6 months ended 
                                        30 Jun 23        30 Jun 22 
                                      (unaudited)      (unaudited) 
                                             $000             $000 
 
 At beginning of the period                 6,964            5,467 
 Amounts provided                               -                - 
 Unwinding of discount                       16 6              160 
 Change in estimate                             -          (4,313) 
 Effect of exchange difference                  -            (321) 
-------------------------------  ----------------  --------------- 
 At end of the period                       7,130              993 
 

The provision for decommissioning is based on the net present value of the Group's estimated liability for the removal of the Ukrainian production facilities and well site restoration at the end of production life.

The non-current provision of $ 7,130 ,000 (31 December 202 2 : $6,964,000) represents a provision for the decommissioning of the Group's MEX-GOL, SV , VAS and SC production and exploration facilities, including site restoration. None of the provision was utilised during the reporting period.

   13.        Other non-current liabilities 

Other non-current liabilities as at 30 June 2023 and 31 December 2022 consist of the long-term obligations for the Ukrainian State special purpose fund measured at amortised cost using an interest rate of 20%.

   14.        Financial Instruments 

The Group's financial instruments comprise cash and cash equivalents and various items such as debtors and creditors that arise directly from its operations. The Group has bank accounts denominated in British Pounds, US Dollars, Euros, and Ukrainian Hryvnia. The Group does not have any borrowings. The main future risks arising from the Group's financial instruments are currency risk, interest rate risk, liquidity risk and credit risk.

The Group's financial assets and financial liabilities, measured at amortised cost, which approximates their fair value, comprise the following:

 
 
                                    30 Jun 23    31 Dec 22 
                                  (unaudited)    (audited) 
                                         $000         $000 
 Financial assets 
 Cash and cash equivalents             33,831       88,652 
 Trade and other receivables           62,017       46,039 
                                       95,848      134,691 
 Financial liabilities 
 Lease liabilities                        391          487 
 Trade and other payables               2,160        1,079 
 Other financial liabilities           20,087       20,422 
                                               ----------- 
                                       22,638       21,988 
 
 

At 30 June 2023, the Group held cash and cash equivalents in the following currencies:

 
                        30 Jun 2 3     31 Dec 22 
                       (unaudited) 
                                       (audited) 
                              $000          $000 
 
 US Dollars                 21,273        81,274 
 Ukrainian Hryvnia          12,052         6,882 
 British Pounds                237           223 
 Euros                         268           273 
-------------------  -------------  ------------ 
                            33,831        88,652 
 
 

All of the cash and cash equivalents held in Ukrainian Hryvnia are held in banks within Ukraine, and all other cash and cash equivalents are held in banks within Europe, Ukraine and the United Kingdom.

   15.        Reconciliation of Operating Profit to Operating Cash Flow 
 
                                              6 months   6 months ended 
                                                 ended 
                                             30 Jun 23        30 Jun 22 
                                           (unaudited)      (unaudited) 
                                                  $000             $000 
 
 Operating profit                               17,155           48,934 
 
 Depreciation and amortisation                   3,589            3,882 
 Less interest income recorded within 
  operating profit                             (1,585)            (536) 
 Fines and penalties received                      (1)            (110) 
 Net (gain)/loss on sale of non-current 
  assets                                           (3)              (1) 
 Decrease in provisions                             25            (228) 
 Increase in inventory                             709            (497) 
 Increase in receivables                       (3,583)         (36,354) 
 (Decrease)/increase in payables               (3,953)          (2,589) 
----------------------------------------  ------------  --------------- 
 Cash generated from operations                 12,353           12,501 
 
   16.        Contingencies and Commitments 

Amounts related to works contracted but not yet undertaken in relation to the Group's 2023 investment programme at the MEX-GOL, SV, VAS and SC gas and condensate fields in Ukraine, but not recorded in the unaudited condensed interim consolidated financial statements at 30 June 2023, were $145,000 related to Oil and Gas Exploration and Evaluation assets and $2,344,000 related to Oil and Gas Development and Production assets (31 December 2022: $156,000 and $8,607,000 respectively).

Since 2010, the Group has been in dispute with the Ukrainian tax authorities in respect of VAT receivables on imported leased equipment, with a disputed liability of up to UAH 8,487,000 ($302,000) inclusive of penalties and other associated costs. There is a level of ambiguity in the interpretation of the relevant tax legislation, and the position adopted by the Group has been challenged by the Ukrainian tax authorities, which has led to legal proceedings to resolve the issue. The Group had been successful in three court cases in respect of this dispute in courts of different levels. On 20 September 2016, a hearing was held in the Supreme Court of Ukraine of an appeal of the Ukrainian tax authorities against the decision of the Higher Administrative Court of Ukraine, in which the appeal of the Ukrainian tax authorities was upheld. As a result of this appeal decision, all decisions of the lower courts were cancelled, and the case was remitted to the first instance court for a new trial. On 1 December 2016 and 7 March 2017 respectively, the Group received positive decisions in the first and second instance courts, but no appointment of hearings has been settled yet. No liability has been recognised in these consolidated financial statements for the year ended 30 June 2023 (31 December 2022: nil), as the Group has been successful in previous court cases in respect of this dispute in courts of different levels, the date of the next legal proceedings has not been set and as management believes that adequate defences exist to the claim.

In March 2019, the State Geologic and Subsoil Survey of Ukraine published an Order for suspension dated 11 March 2019 (the "VAS Order") in respect of the VAS production licence held by LLC Prom-Enerho Produkt ("PEP"). PEP disputed the VAS Order and issued legal proceedings in the Ukrainian Courts to challenge the VAS Order, and these legal proceedings progressed through the various levels of the Ukrainian Court system, with PEP being successful at each level. The proceedings ultimately reached the Supreme Court of Ukraine, which, by a decision dated 23 February 2023 upheld PEP's appeal and cancelled the VAS Order. The Supreme Court is the final appellate court in the legal proceedings and therefore this decision is final.

In September 2021, an entity named JV Boryslav Oil Company ("Boryslav"), which is 25.0999% owned by PJSC Ukrnafta ("Ukrnafta"), issued legal proceedings, claiming that irregular procedures were followed in the grant of the SC exploration licence, against the State Geologic and Subsoil Survey of Ukraine, the State Commission of Ukraine for Mineral Resources and LLC Arkona Gas-Energy ("Arkona"), as defendants, with Ukrnafta named as a third party. In this claim, the First Instance Court in Ukraine made a ruling in January 2022 in favour of Boryslav, and on 2 November 2022, the Appellate Administrative Court also made a ruling in favour of Boryslav to uphold the decision of the First Instance Court. Arkona appealed the decision of the Appellate Administrative Court to the Supreme Court, and on 3 May 2023, the Supreme Court published its decision to allow Arkona's appeal and overturn the ruling made by the Appellate Administrative Court. The Supreme Court represents the final appellate court in these legal proceedings, and accordingly, the decision of the Supreme Court is final.

   17.        Related Party Disclosures 

Key management personnel of the Group are considered to comprise only the Directors. Remuneration of the Directors for the six month period ended 30 June 202 3 was $ 407 ,000 (1H 202 2 : $ 583 ,000, and year ended 31 December 2022: $1,325,000).

During the period, Group companies entered into the following transactions with related parties which are not members of the Group:

 
                                    6 months ended   6 months ended 
                                         30 Jun 23        30 Jun 22 
                                       (unaudited)      (unaudited) 
                                              $000             $000 
 
 Sale of goods/services                     19,410           63,182 
 Purchase of goods/services                    348              515 
 Amounts owed by related parties            55,719           39,059 
 Amounts owed to related parties               185              627 
 

All related party transactions were with subsidiaries of the ultimate Parent Company, and primarily relate to the sale of gas to LLC Smart Energy, the rental of office facilities and vehicles and the sale of equipment. The amounts outstanding were unsecured and have been or will be settled in cash.

At the date of this announcement, none of the Company's controlling parties prepares consolidated financial statements available for public use.

   18.        Events occurring after the Reporting Period 

The ongoing war in Ukraine means that the fiscal, economic and humanitarian situation in Ukraine is unstable and extremely challenging and the final resolution and consequences of the ongoing war are hard to predict, but they may have a further serious impact on the Ukrainian economy and business of the Group. Management continues to identify and mitigate, where possible, the impact on the Group, but the majority of these factors are beyond their control, including the duration and severity of war, as well as the further actions of various governments and diplomacy.

In July 2023, new legislation was introduced in Ukraine, which will come into force in September 2024, and which requires that branches (or representative offices) of foreign companies operating in Ukraine register their ultimate beneficial owners in Ukrainian Registries. Regal Petroleum Corporation Ltd ("RPC"), which holds the MEX-GOL and SV licences, operates such a branch and will therefore be required to register its ultimate beneficial owners from the implementation of this law, which raises a potential risk that such registration will not be accepted by the Ukrainian authorities, and possibly result in regulatory action against RPC and/or its licences and assets, including suspension of the MEX-GOL and SV licences.

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