TIDMPANR
RNS Number : 9843M
Pantheon Resources PLC
27 January 2021
27 January, 2021
Pantheon Resources plc
Final Results for the Year Ended 30 June 2020
Pantheon Resources plc ("Pantheon" or the "Company" or the
"Group"), the AIM-quoted oil and gas exploration company with 100%
working interest in approximately 160,000 acres located adjacent to
transportation and pipeline infrastructure on State Land on the
Alaska North Slope, is pleased to announce its results for the year
ended 30 June 2020.
Operational Highlights for the year ended 30 June 2020 and until
the present time
-- A period of great achievement for Pantheon, strengthening its
portfolio and establishing itself as a significant stakeholder on
the Alaskan North Slope;
o +$200m invested on the assets to date
o Approx. 1,000 square miles of mostly proprietary 3D
seismic
o Independent Expert Report received on the Alkaid project
confirming 76.5 million barrels of oil contingent resource
recoverable
o Independent Expert Report received on the Talitha project
confirming 302 million barrels of oil Prospective Resource
recoverable
o Formal granting of the 'Alkaid Unit' (22,804 acres) and the
'Taliha Unit' (44,463 acres) by the State of Alaska
-- A continued refocusing of the Group, firmly establishing
Alaska as the primary asset. Pantheon will exit its East Texas
operations in 2021
-- Continued advancements in geological mapping and
understanding of our regional play. This culminated, post year end,
in the successful acquisition of c.66,000 acreas in the State of
Alaska areawide lease sales, contiguous to the Talitha and Theta
West projects
-- Farmout process was heavily impacted by the COVID pandemic -
with curtailments in travel, uncertainties about the US election,
and severely weaker oil and gas prices slowing the process.
Accordingly, post year end, Pantheon raised gross $30m to fund
drilling of the Talitha #A well itself on materially less dilutive
terms than expected to be achieved in a farmout given prevailing
macroeconimic environment
-- Post year end, the Company appointed Canaccord Genuity
Limited as its sole broker and NOMAD. Canaccord has a strong
franchise in the natural resources sector and a presence in North
America
-- Post year end Pantheon acquired the remaining 10.8% working
interest in the Talitha project. Upon conclusion of the transaction
Pantheon will own a 100% working interest in Talitha
-- In January 2021, the Talitha #A well was spudded, targeting
four independent horizons which management believe offers
cumulative potential in a success case in the region of one billion
barrels of oil recoverable. The independent Expert's Report on the
updip section of the Shelf Margin Deltaic, the primary target at
Talitha #A, confirmed a Prospective Resource of 302 million barrels
of recoverable oil. Formal delineation of the ultimate potential of
the lower, secondary targets required additional analysis
Financial & Corporate Highlights
-- Revenues: $0.1m (2019: $0.7m)
-- Cost of sales: $0.0m (2019: $0.7m)
-- Loss for the year: $17.0m (2019: $35.5m profit) dominated by
the full impairment of the East Texas properties
-- Non-cash items: Impairments of the East Texas assets $16.5m
(2019: $48.6m) reflecting a full write down of East Texas
properties following the COVID related commodity price falls in
2020 and the Group's strategy to prioritise its Alaskan assets over
its East Texas assets. Pantheon to exit East Texas entirely in
2021
-- G&A: $4.1m (2019: $3.4m)
-- Vision costs: $0.8m (2019: $1.7m). Post year end East Texas now a discontinued operation
-- Cash and Cash equivalents at 30 June 2020: $4.8m (2019: $1.9m)
-- In November, 2020 Pantheon completed a capital raising of
73,756,314 new Ordinary Shares raising approximately $30.2 million
(before expenses) at an issue price of 31 pence per share
-- Cash on hand, 21 January 2021: $28.8m
Outlook
-- Talitha #A well currently being drilled, assessing four independent horizons
-- Following the outcome of the well, Pantheon may commission an
independent experts report on the Talitha project, and may
recommence farmout discussions or pursue other strategies to
develop the asset
Jay Cheatham, CEO, said:
"Despite the well documented challenges of COVID on the oil and
gas sector globally, Pantheon had a period of great achievement.
We've now commenced drilling of Talitha, which if successful will
significantly change our Company. At the same time, our other
projects, in particular Theta West, continue to grow in quality,
size and scale. We enter 2021 with great optimism . "
Annual report and Accounts
The Annual Report and Accounts for the financial year ended
30(th) June 2020 will be posted to shareholders shortly, together
with a Notice of Annual General Meeting. Copies will be available
today on the Company's website at: www.pantheonresources.com
-S-
Further information:
Pantheon Resources plc +44 20 7484 5361
Jay Cheatham, CEO
Justin Hondris, Director, Finance and Corporate
Development
Canaccord Genuity plc (Nominated Adviser and
broker)
Henry Fitzgerald-O'Connor
James Asensio
Angelos Vlatakis +44 20 7523 8000
Blytheweigh
Tim Blythe, Megan Ray, Alice McLaren, Madeleine
Gordon-Foxwell +44 20 7138 3204
CHAIRMAN'S STATEMENT
FOR THE YEARED 30 JUNE 2020
The global petroleum industry has been heavily impacted by the
COVID-19 pandemic over the past 12 months. Reduced demand for oil,
coupled with factional disputes within OPEC, resulted in a severe
drop in crude oil and distillate prices globally. The entire
industry, including explorers, producers and service providers,
suffered heavily, with project impairments and reduced appetite for
new business resulting in vastly lower profits, significant
redundancies, and curtailment of capital expenditures, and
suffering material impairments to projects, the likes of which we
have not seen for many years. Scores of E&P companies in the US
and internationally have filed for bankruptcy protection and there
have been a number of recent consolidations; Chevron/Noble,
Devon/WPX, Conoco/Concho and Pioneer/Parsley. I'm sure more will
come.
COVID-19 and the associated fallout also impacted our farm out
process for a number of reasons:
-- Given all potential farminees were already exposed to the oil
sector, the severe fall in the oil price and global economic
uncertainty caused many companies to assess how their own Company
was impacted, resulting in many companies deferring capital
investment/new project decisions for an indefinite period. Travel
bans and enforced quarantine periods meant that our physical data
room was no longer a viable option. We worked hard to transform it
into a virtual data room but this was not nearly as effective as
the one on one interaction achieved when technical teams are
together in a physical data room.
-- The severity of the oil price falls resulted in catastrophic
share price falls for many companies. To ensure survival, many
companies were forced to divest of projects as a source of
financing, resulting in a dramatic rise in the number of competing
projects for sale/farmout.
-- Affordability - companies simply didn't have the budget or
the ability to raise new finance in order to fund
acquisitions/farmins.
Despite these challenges, Pantheon reacted swiftly and
decisively to the changed landscape of the industry. We reduced
staff and cut salaries from top to bottom. We appointed a larger,
resource focused international broker and NOMAD and implemented a
number of other initiatives. Notwithstanding these forces, and
their very real impact on our company, Pantheon found itself in a
situation where its understanding and belief in the prospectivity
of our Alaskan projects was growing significantly. At a time when
potential farm in companies could afford to pay less, Pantheon's
value assessment of our projects was rising. Pantheon was
determined to drill the Talitha A well in early 2021, and
ultimately decided to equity fund the well itself, raising $30.2m
(before costs) in late November at only 12% equity dilution; a far
lower dilution than would have been achieved in a farmout. See note
27 in the Notes to the Financial Statements for more details of the
equity fund raising.
In what was an extremely challenging year for the sector, I am
proud that Pantheon was one of the best performing oil stocks on
AIM in 2020, finishing the calendar year with a share price some
265% higher. And only last week we successfully executed the final
step in our leasehold strategy, acquiring 66,000 acres contiguous
to our Theta West and Talitha projects. This time last year we had
a large lease position with tremendous potential, but with leases
that were aging. Today, we have over 160,000 acres of contiguous
leases, with even more potential, mostly covered by the recently
awarded units at Alkaid and Talitha, or by leases with remaining
terms of 9 to 10 years.
With all of our Alaskan leases on State land, I am very pleased
to report that Pantheon is unaffected by President Biden's
decision, on his first day of presidency, to impose a 60-day
moratorium on all oil and gas related leasing and permitting
actions on federal land.
It has been a year of great accomplishment for Pantheon.
Phillip Gobe
Chairman
26 January 2021
CHIEF EXECUTIVE OFFICER'S STATEMENT AND OPERATIONAL REVIEW
FOR THE YEARED 30 JUNE 2020
As our Chairman Phillip stated, it has been a year of
accomplishment for Pantheon. During the year under review and
beyond we have achieved a number of significant milestones as
detailed below:
Receipt of Independent Experts Report at the Greater Alkaid
Project
In January, 2020, Lee Keeling & Assoc. ("LKA") completed an
Independent Expert Report and ascribed a Contingent Resource of
76.5 million barrels of oil ("MMBO") to our project, with a
modelled NPV 10 of $595 million at that time (based upon a realized
oil price of $55/barrel). The modelling estimates that peak
production reaches 30,000 BOPD and the average EUR (Economic
Ultimate Recovery) per well was estimated to be 2.25 MMBO.
Receipt of Independent Experts Report at the Talitha Project
Subsequent to year end, in September 2020, LKA completed an
Independent Experts Report on the Talitha Shelf Margin Deltaic
("SMD"). Importantly, the SMD is only one of four targeted zones
the Talitha #A well will penetrate. LKA ascribed a Prospective
Resource of 304 MMBO to the up-dip portion only of the SMD,
estimating an NPV 10 of $2.7 billion using the oil price curve
current at that time. Peak average production was modelled at
85,000 BOPD and the average well EUR was estimated to be 3.32
MMBO.
Awarding of Units at Alkaid and Talitha
After working with the State of Alaska for several months, our
unit applications on Alkaid (22,804 acres) and Talitha (44,373
acres) were deemed completed and were subsequently awarded in
November 2020. The award of these units is a major milestone for
us, providing tenure over the leases (subject to us as adhering to
certain commitments as previously outlined in our RNS's at the
time). This was a collaborative process with the State Department
of Natural Resources who have their own geologists, geophysicists,
engineers and evaluators to ensure the unit has the technical and
economic merit to reach production, so awarding a unit is
affirmation of our own technical and engineering work.
Spudding of the Talitha #A well
The recently spudded Talitha #A well is designed to intersect
four targeted horizons; (i) the SMD, which is the primary target,
and the three secondary targets: (ii) the Slope Fan System; (iii)
the Basin Floor Fan and (iv) Kuparuk formations. All four of these
reservoir intervals are independent and each is a huge target which
management believe have the potential to contain several hundred
million barrels of recoverable oil. Management believe that as a
whole, the well is potentially targeting in the region of 1 billion
barrels of gross prospective oil resource across those multiple
stacked objectives. Whilst a formal third party resource assessment
has only been provided on the SMD to date, Pantheon would
anticipate updating this and commissioning further formal resource
estimates across the other horizons where appropriate after
drilling of the well. The stratigraphic trap that contains the SMD
and Slope Fan system has a 2,000 foot oil column in the nearby
Pipeline State #1 analogue well. Much of our work on Talitha is
keyed off that well which was drilled in 1988 when drilling,
completion, and imaging technologies were not as advanced as modern
day practices.
We prioritized the location of Talitha #A to intersect our the
primary SMD objective in the optimum location, structurally higher
(updip) from the discovery well at Pipeline State #1. In optimizing
the location of the well for the primary target, the corollary is
that the well is not optimally positioned for the secondary zones,
all of which are independent of one another. Nevertheless, the
location should still enable assessment of the 3 secondary zones,
if warranted.
Acquisition of 10.8% working interest ("WI") in Talitha,
bringing Pantheon's WI to 100%
In January 2021 Pantheon announced that it had reached agreement
with Otto Energy Alaska LLC to acquire 100% ownership of Borealis
Alaska LLC. Borealis owns a 10.8% working interest ("WI") in all 16
leases in the 44,463 acre Talitha Unit. Upon completion of the
acquisition Pantheon will increase its WI from 89.2% to 100%, and
will have a net revenue interest of 86% in the Talitha unit, for a
consideration of 14,272,592 fully paid shares in Pantheon, which
will be subject to lock up from sale until 30 June 2021. The
transfer of ownership is conditional upon approval by the Alaska
Department of Natural Resources.
Successful acquisition of approximately 66,000 acres with a
10-year term
In January 2021 Pantheon was successful in acquiring
approximately 66,000 acres adjoining the Talitha and Theta West
projects in the State of Alaska's North Slope Area Wide Lease Sale.
The new leases are strategically positioned in two areas contiguous
to our current acreage. Pantheon's acreage now totals approximately
160,000 contiguous acres. The leases have a 10-year term with
royalties ranging from 12.5% to 16.7%. Pantheon has proprietary 3D
Seismic over all the acreage acquired and had undertaken detailed
analysis of the acreage position. Management believe the
acquisition of this acreage adds material value to the Group and
expect to provide an estimate of resource potential later in the
year.
Successful completion of fundraisings
In July 2019 the Company raised $10.7m before costs at an issue
price of GBP0.18/share, and subsequent to year end, in November
2020, the Company raised $30.2m before costs at a price of
GBP0.31/share.
Other
Over the past 2 years East Texas has taken a back seat to Alaska
given the materially larger size, scale and potential. We simply
don't have the resources to pursue both projects and Alaska is our
priority. When natural gas price net backs fell below $1.50/MMBTU
earlier last year, we decided to shut in the East Texas wells and
laid off our production foreman and support staff. The severity of
the COVID-induced downturn in the oil and gas sector forced
Pantheon, like many companies globally, to make some difficult
decisions. Subsequent to the year end, in late 2020, Pantheon
announced its intention to exit its East Texas portfolio to
concentrate solely on Alaska, where the size and quality of the
opportunity warrants our undivided attention. Accordingly, we have
impaired the remainder of our carrying value for our East Texas
properties.
Summary
Even despite the impacts that COVID had on us and on the
industry, it has been a great year for Pantheon. Two Independent
Expert Reports on the Alkaid and Talitha projects, the award by the
State of Alaska of two Units over Alkaid and Talitha, and we raised
approximately $30 million allowing us to contract the Nordic
Calista #3 rig to drill Talitha #A which spudded recently,
approximately two weeks ahead of schedule, and we successfully
increased our working interest ownership of the Talitha Unit to
100%. I am particularly proud of our achievements in land/lease
management since the end of last year. We now have 160,000
contiguous acres, offering greater potential than ever before, but
crucially all on very young leases, or even better, on units.
I'm confident we have a world class opportunity at our Talitha
project. Nothing is certain in oil and gas, but in my 50+ year
career in the sector I can assure shareholders that the quality of
the work and analysis has been as good as anything I have seen. We
have built a fantastic team at Pantheon and the size and scale of
the opportunity set within our portfolio is truly impressive. The
progress we have made since acquiring Great Bear Petroleum two
years ago has been beyond what we expected and I am grateful for
the incredible work of our small but talented team. Over 10 years
and over $200m has been invested into developing our Alaskan
portfolio so it is with great excitement that we observe the
Talitha well over the coming months.
Jay Cheatham
Chief Executive Officer
26 January 2021
SECTION 172 STATEMENT
FOR THE YEARED 30 JUNE 2020
Section 172 of the Companies Act 2006 requires Directors to take
into consideration the interests of stakeholders and other matters
in their decision making. The Directors continue to have regard to
the interests of the Company's employees and other stakeholders,
the impact of its activities on the community, the environment and
the Company's reputation for good business conduct, when making
decisions. In this context, acting in good faith and fairly, the
Directors consider what is most likely to promote the success of
the Company for its members in the long term. We explain in this
annual report how the Board engages with stakeholders.
-- The Directors are fully aware of their responsibilities to
promote the success of the Company in accordance with section 172
of the Companies Act 2006. Furthermore, the Directors have had
refresher training with their NOMAD of Director responsibilities in
the application of AIM rules. This process encourages the Board to
reflect on how the Company engages with its stakeholders and to
identify opportunities for enhancement in the future and was
considered at the Company's board meetings. As required, the
Company's external lawyers and the Company Secretary can provide
support to the Board to help ensure that sufficient consideration
is given to issues relating to the matters set out in
s172(1)(a)-(f).
-- As part of its ongoing business, the Board regularly
considers the Company's principal stakeholders and how it engages
with them. This is achieved through information provided by
management via Regulatory News Service announcements, Corporate
Presentations, and Shareholder Meetings and teleconferences and
also by direct engagement with stakeholders themselves.
-- The Company aims to work responsibly with key identified
stakeholders; shareholders, employees, consultants, suppliers,
advisors, government bodies and local communities where exploration
and production activities take place.
-- Key Board decisions made in the year are set out below:
Key s172 Stakeholders
Significant Actions and Consequences affected
events/decisions
Advancement of Shareholders, Employees
geological and Business * The Board implemented an in-depth geological review
understanding of the Relationships of its Alaska North Slope assets.
Alaskan assets
* The consequences of this decision were to
significantly increase the resource potential of the
projects. Pantheon received an independent Experts
report on its Greater Alkaid asset certifying a
Contingent Resource of 76.5 million barrels of oil
(recoverable). Subsequent to year end Pantheon
received an Independent Experts Report on the Shelf
Margin Deltaic horizon of its Talitha project which
certified a Prospective Resource of 304 million
barrels of oil (recoverable).
------------------------- -----------------------------------------------------------------
High Grading of Shareholders, State of
Alaskan lease acreage Alaska, Business * The Group successfully acquired new lease acreages
Relationships covering the Leonis & Theta West projects, and
additionally voluntarily relinquished to the State of
Alaska acreages which were considered non-core.
* The consequence of this decision was to high grade
the Group's portfolio to key areas of focus, while at
the same time voluntarily relinquishing non-core
acreages to the State to allow them to potentially
offer them for lease to the wider public which would
benefit the state.
* Subsequent to year end the Group successfully
acquired 66,000 acres contiguous to its Talitha and
Theta West projects.
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Implementation of Employees, long term
staff share option consultants * Implementation of staff share option plan
plan
* The consequence of this decision was to deliver a
share option plan to allow staff to benefit from
share price outperformance, aligning staff interests
with that of shareholders, and to help management
retain and attract the highest quality personnel.
------------------------- -----------------------------------------------------------------
Implementation of 20% Shareholders, Employees
salary reductions and * The Board implemented salary reductions for directors
other cost cutting and employees for a 7 month period in response to
initiatives economic uncertainties caused by COVID 19 and the oil
price falls.
* The consequence of this decision was to preserve
capital for the benefit of all stakeholders
------------------------- -----------------------------------------------------------------
Increased interaction Shareholders,
with key stakeholders Employees, State of * The Board conducted a number of shareholder
Alaska, Other Business presentations outside of the traditional AGM, which
Relationships all shareholders were invited to attend. More
recently the Company has held 2 webinars, which all
shareholders, interested parties and other
stakeholders were invited to attend, in addition to a
number of video interviews. The Group also held a
number of technical presentations with the State of
Alaska, working with them to ensure they are fully
appraised of the Group's intended plans.
* The consequence of these actions was to create a
greater level of understanding of the Group's
projects and intended activities and to strengthen
relationships with stakeholders.
------------------------- -----------------------------------------------------------------
Finally, to you, our shareholders, thank you for your trust,
belief and support in what has been a year of great achievement for
our Company. Your continued support is appreciated by your board,
our wider internal team and our external advisory group.
This report was approved by the board on 26 January 2021 and
signed on its behalf.
Jay Cheatham
Chief Executive Officer
FINANCE DIRECTOR'S REPORT
FOR THE YEARED 30 JUNE 2020
Financial Review
The Group made a total comprehensive loss for the financial year
ended 30 June 2020 of $17.0m (2019: profit $35.3m). All but $4.1m
of this loss was attributable to the impairment charges and other
costs related to the East Texas assets of the Group. Subsequent to
year end, in late 2020, the Group made a decision to exit its East
Texas portfolio entirely, reflecting the previously announced
strategic decision of the Group to prioritise its Alaska North
Slope asset portfolio, given its significantly larger size, scale
and resource potential. . The decision to fully impair the carrying
value of the East Texas properties at 30 June 2020 was driven by
the severe falls in oil and gas prices resulting from the economic
impacts of the pandemic, which had devastating effects on the US
oil and gas sector. Whilst there has been some recovery in prices
since June 30, they were not considered enough to justify continued
investment into East Texas as it was concluded that capital could
be better applied towards Alaska. Accordingly, the Group will not
renew key leases in East Texas going forward. With respect to the
2019 comparatives, the accounting standards require that the assets
and liabilities acquired in the acquisitions of the Great Bear
Companies and of Vision Resources LLC during the prior year be
recorded at their fair value at the acquisition date and measured
against the consideration paid. To the extent that the fair value
of the assets acquired exceeded the purchase consideration paid, a
'bargain purchase' was brought to account, and conversely where the
fair value was less than the consideration paid then that amount
was accounted for in the prior year as goodwill. The total
operating loss for the year, including all impairments, was $21.8m
(2019: Loss $55.2.m including all impairments but excluding the
gain on bargain purchase).
Production, Revenue and Cost of Sales
The Group's net total sales production for the financial year
ended 30 June 2020 amounted to 57,420 (2019: 191,024) mcf of
natural gas and 158 (2019: 2,317) bbl of oil. Average realisations
for the year for natural gas and oil were US$1.81 (2019: $2.58) per
mcf and US$59.93 (2019: $62.54) per barrel respectively.
Revenues for the year ended 30 June 2020 were $85,312 (2019:
$724,589). The year on year decrease reflects the poor operational
performance of the East Texas wells and the deterioration in
commodity prices which resulted in the wells being shut-in for
extended periods.
Cost of sales for the year ended 30 June 2020 were $6,273 (2019:
$737,208). The year on year decrease in costs reflects the poor
operational performance of the East Texas wells. "Production
royalties" for the year ended 30 June 2020 was $24,580 (2019:
$205,458). "Depletion of developed oil & gas assets" for the
year ended 30 June 2020 was $27,800 (2019: $148,485).
Impairments
In accordance with International Financial Reporting Standard 6
'Exploration for and Evaluation of Mineral Resources' (IFRS 6),
exploration and evaluation assets are reviewed for indicators of
impairment. Should indicators of impairment be identified an
impairment test is performed.
The Group has reviewed these assets for indications of
impairment. Where impairment indications have been found we have
performed impairment tests. Impairments losses have been measured,
presented and disclosed in accordance with IAS 36.
Reflecting the Group's previously announced strategic decision
to exit East Texas to concentrate solely on its Alaska North Slope
assets and in light of the material fall in oil and gas prices in
2020, the Company has fully impaired the carrying value of its East
Texas oil and gas interests. Accordingly, an impairment charge of
$16.6m (2019: $48.6m) has been taken against the Company's East
Texas assets.
Capital structure
The Company completed a placing during the year and issued
48,228,247 new fully paid ordinary shares during the year with a
nominal value of GBP0.01, raising gross proceeds of c. $10.7m
before expenses at an issue price of 18 pence per share.
As at 30 June 2020 total shares in issue, both ordinary and
non-voting, was 605,229,768 (2019: 557,001,521).
As at 30 June 2020 the Company had 9,607,843 warrants
outstanding to acquire non-voting convertible shares (2019:
9,607,843). The warrants have an exercise price of GBP0.30 per
share, are convertible on a 1:1 basis into ordinary fully paid
shares and expire on 30 September 2024. They are all fully
vested.
As at 30 June 2020 the Company had 10,000,000 options
outstanding to acquire ordinary shares (2019: 10,000,000) at an
exercise price of GBP0.30 per share and expire on 30 September
2024. At year end all share options were fully vested.
Going concern
The Directors are satisfied with the Group's ability to operate
as a going concern for the next 12 months, as documented further in
Note 1.4.
Taxation
The Group incurred a loss for the year and has recorded a
taxation charge of $4.7m (2019: $18.7m). Accordingly, the Directors
have adjusted deferred tax liability by the same amount.
Risk assessment
The Group's oil and gas activities are subject to a variety of
risks, both financial and operational, including but not limited to
those outlined below. These and other risks have the potential to
materially affect the financial performance of the Group. For
additional detail see section Key Operational Risks and
Uncertainties in the Strategic Report.
Liquidity and Interest Rate Risk
Liquidity risk remains elevated for many companies in the
natural resources sector for a number of reasons including but not
limited to global macro-economic conditions, the volatility in
commodity prices, recent political and other influences, which have
impacted energy prices and created economic uncertainty.
Oil & Gas Price Risk
Future oil and gas sales revenues are subject to the volatility
of the underlying commodity prices throughout the year. Over the
past year the energy sector has been impacted by volatility in
commodity prices, which may continue to impact the Group going
forward. The Group did not engage in any commodity price hedging
activity during the year.
Currency Risk
Almost all capital expenditure and operational revenues for the
year were denominated in US dollars. The Group keeps the majority
of its cash resources denominated in US dollars to minimise
volatility and foreign currency risk. The Group did not engage in
any foreign currency hedging activity during the year.
Financial Instruments
At this stage of the Group's activities it has not been
considered appropriate or necessary to enter into any derivatives
strategies or hedging. Once the Group's production revenues
increase substantially, such strategies will be reviewed on a more
regular basis.
Justin Hondris
Director
26 January 2021
STRATEGIC REPORT
FOR THE YEARED 30 JUNE 2020
Principal activity
The Company is registered in England and Wales, having been
incorporated under the Companies Act with registered number
05385506 as a public company limited by shares. The principal
activity of the Group is the investment in oil and gas exploration
and development. The Group operates in the U.K. through its parent
undertaking and in the U.S.A. through subsidiary companies, details
of which are set out in the Note 9 to these accounts.
Review of the Business and Key Performance Indicators
2019/2020 KPI Measurement 2019/2020 Performance
--------------------------------------
Pursue farmout opportunities for Completion of farmout process The onset of COVID-19 and the
East Texas assets dramatic collapse in global oil
prices in early 2020 resulted
in a materially deteriorated
macroeconomic environment for oil
and gas companies. Many USA
oil companies have filed for
bankruptcy and many others have seen
severe share price falls,
reducing the pool of potential
farmin partners who had the capacity
to farm into oil and gas
projects generally. With the fall in
oil and gas prices Pantheon's East
Texas assets are not
forecast to be profitable and
Pantheon sees it as unlikely to
attract a farm in partner.
Therefore,
Pantheon has fully impaired the
carrying value of these assets and
does not intend to commit
further funds to the project
following a decision post year end
to exit East Texas in due
course to focus on the superior
opportunity in Alaska.
-------------------------------------- -------------------------------------- --------------------------------------
Ensure business adequately funded Fund raise where appropriate Successful fund raisings announced
in July 2019 and subsequent to year
end in November 2020.
-------------------------------------- -------------------------------------- --------------------------------------
Operational activity in Alaska Drilling / testing wells The Alkaid Well successfully flow
tested in 2019, resulting in a
Contingent Recoverable Resource
of 76.5MMBO by an independent
expert. Additionally, an Independent
Expert Report was received
post year end, covering the Shelf
Margin Deltaic horizon of the
Talitha project, which estimated
a Prospective Resource (recoverable)
of 302 million barrels of oil.
Pantheon intends to drill
the Talitha #A well in Q1 2021.
-------------------------------------- -------------------------------------- --------------------------------------
Pursue farmout of Alaskan assets Completion and opening of data room. Following the deterioration in the
Admission of potentially interested oil price and other difficulties
parties into data associated with COVID19,
room farmout discussions became
protracted in 2020. At the same
time, Pantheon's understanding
of the geological potential (and
therefore potential value) of the
assets increased materially.
Post year end, in November 2020
Pantheon raised $30.2m in equity
funding at a dilution of
less than 13% to drill Talitha A on
its own, on far less dilutive terms
than those being mooted
by potential farminees.
-------------------------------------- -------------------------------------- --------------------------------------
Ensuring continued high-quality Establish and maintain relationships Pantheon's technical team has been
technical consultant relationships with industry experts and review further strengthened in the year
performance under review. Experts
such as eSeis and others remain
contracted.
-------------------------------------- -------------------------------------- --------------------------------------
Financial Position and Future Prospects
Please refer to the Director's Report for additional information
on strategy and the business model.
Key operational risks and uncertainties
The Group may be unable to meet its lease obligations
In general, the Group's properties are held under oil and gas
leases. The terms of the Group's leases often provide for yearly
rental payments. Such yearly rentals may vary depending upon the
particular lease and whether the Group has commenced activities in
the property. If the Group defaults on its lease payments, its
leases may be automatically terminated. If the Group is unable to
make these payments and its leases are terminated, there could be a
material adverse effect on its business, financial condition and
results of operations. Managing the lease position is of material
importance for the Group, and management devote considerable time
to lease management, budgeting and planning, consulting with the
State of Alaska where required. In 2020 Pantheon was awarded Units
on the Alkaid and Talitha projects and has been an active
participant in the annual lease sales over the past 2 years,
significantly strengthening Pantheon's lease portfolio. The 66,000
leases acquired in the January 2021 have a 10-year life, $10 per
acre rentals and low royalties of between 12.5% - 16.7%.
The Group may be unable to renew and/or extend its leases once
they expire
The Group's lease agreements contain terms whereby the lease may
be terminated if the Group does not fulfil certain obligations.
These obligations include conducting exploration and/or production
activities. If the Group is unable to satisfy these conditions on a
timely basis, it may lose its rights in these properties. In
addition, given that it may not be able to renew certain leases
unless it begins exploration or production activities within
specific timeframes, the Group may be required to invest
significant funds at timetables not optimal to it in order to meet
the capital requirements required under the terms of the leases. If
the Group is unable to meet its obligations under the terms of its
leases, there could be a material adverse effect on its business,
financial condition and results of operations. To mitigate this
risk the Group has successfully applied for and been granted
unitization for the leases that comprise its Talitha and Alkaid
discoveries. Unitization recognizes that the Group has established
to the State's satisfaction that all or part of multiple potential
hydrocarbon accumulations are included in the unit areas and allows
the leases to potentially be held beyond the initial lease term.
Most of Pantheon's lease position in now covered by these units or
leases of between 9 and 10 years of remaining life. Management has
materially reduced the risk of lease expiry.
Our operations require the Group to obtain licensing, planning
permissions and other consents
The development of its current and future leases may be
dependent on the receipt of planning permission from the
appropriate local authorities as well as other necessary consents
such as environmental permits and regulatory consents. Obtaining
the necessary consents and approvals may be costly, and they may
not be granted or may be withdrawn or made subject to limitations
and conditions. Certain permits and consents may also become
contentious in the future, which may lead to these not being
granted or withdrawn. For instance, in 2015, Repsol only received
approval from the North Slope Borough (local government) for a
portion of its requested drill sites on the North Slope of Alaska.
The failure to gain such permissions or gain such permissions on
terms or at a cost acceptable to the Group, may limit the Group in
its ability to develop and extract value from its leases and could
have a material adverse effect on its business, results of
operations, financial conditions and prospects. To manage the risk,
the Group employees experienced and qualified personnel who have
successfully obtained licenses and permits in the past, and who
maintain working relationships with regulatory agencies.
Political conditions and government regulations could change and
have a material effect on the Group's results of operations
Although political conditions in the Northern Slope Borough, the
State of Alaska, the State of Texas and the United States federal
government are generally stable, changes may occur in their
political, fiscal and/or legal systems, which might adversely
affect the Group's operations. The Group's strategy has been
formulated in the light of the current regulatory environment and
probable future changes to the regulatory regime.
Although the Group believes that its activities are currently
carried out in accordance with all applicable rules and
regulations, no assurance can be given that new rules, laws and
regulations will not be enacted or that existing or future rules
and regulations will not be applied in a manner which could serve
to limit or curtail exploration or development of the Group's
business or have an otherwise negative impact on its activities.
Amendments to existing rules, laws and regulations governing the
Group's operations and activities, or increases in or more
stringent enforcement, implementation or interpretation thereof,
could have a material adverse impact on the Group's business,
results of operations and financial condition.
Future legal proceedings could adversely affect the Group's
business, results of operations or financial condition
The Group may face legal proceedings that may result in the
Group having to pay material damages and/or other remedies. While
the Group would assess the merits of each legal proceeding and
defend the Group accordingly, it may be required to incur
significant expenses or devote significant resources to defend
against such legal proceedings. In addition, legal proceedings are
also difficult to predict, which may force the Group to enter into
settlement arrangements even in the absence of any culpability from
its part.
Furthermore, the adverse publicity surrounding legal proceedings
may negatively affect the Group's relation with local communities,
government and non-government organizations, which could also
impact the Group's activities. As a result, legal proceedings could
have a material adverse effect on the Group's business, financial
condition, results of operations and prospects. To manage this risk
the Group consults legal counsel when it faces potential legal
proceedings. The board and management consult legal counsel when
conducting activities or entering into agreements that are viewed
to have the potential to give rise to material legal
proceedings.
Failure to manage relationships with local communities,
environmental groups and non-government organizations could
adversely affect the Group's future growth potential
The activities of oil and gas companies often face scrutiny from
the public and receive negative publicity. Although the Group's
operations are not located in or near large communities, the
Group's ability to further expand its operation may be hindered by
communities that may regard oil and gas activities as detrimental
to their environmental, economic or social circumstances.
Furthermore, oil and gas companies are also increasingly facing
scrutiny by environmental groups regarding the effect operations
may have on the animal life in the region. Negative reaction to its
operations could have a material adverse impact on the cost,
profitability, ability to finance or even the viability of an
operation. Such events could give rise to material reputational
damage.
These disputes are not always predictable and may cause
disruption to projects or operations. Failure to manage
relationships with local communities, environmental groups and
non-government organisations may adversely affect the Group's
reputation, as well as its ability to commence production projects
in certain locations, which could in turn affect its long-term
prospects and the Group's business, financial condition and results
of operations. The Group's current leased acreage is not in the
immediate vicinity of any local community. To manage this risk the
Group ensures it conducts operations in a legal and responsible
manner and complies with rules and regulations.
Any change to government regulation/administrative practices may
have a negative impact on the Group's ability to operate and its
future profitability
The business of oil and gas exploration and development is
subject to substantial regulation under federal, state, local laws
relating to the exploration for, and the development, upgrading,
marketing, pricing, taxation, and transportation of oil and gas and
related products and other matters. Amendments to current laws and
regulations governing operations and activities of oil and gas
exploration and development operations could have a material
adverse impact on the Group's business. In addition, there can be
no assurance that tax laws, royalty regulations and government
incentive programs related to the Group's oil and gas properties
and the oil and gas industry generally, will not be changed in a
manner which may adversely affect the Group's prospects and cause
delays, inability to explore and develop or abandonment of these
interests.
Furthermore, permits, leases, licenses, and approvals are
required from a variety of regulatory authorities at various stages
of exploration and development. There can be no assurance that the
various government permits, leases, licenses and approvals sought
will be granted in respect of the Group's activities or, if
granted, will not be cancelled or will be renewed upon expiry.
There is no assurance that such permits, leases, licenses, and
approvals will not contain terms and provisions which may adversely
affect the Group's exploration and development activities. If any
of the forgoing were to occur, it could have a material adverse
effect on the Group's business, financial condition and results of
operations. To manage the risk, the Group employs experienced
personnel and contractors who have successfully obtained licenses
and permits in the past, and who maintain working relationships
with regulatory agencies and monitor changes that could impact the
Group.
By order of the board.
Justin Hondris
Director
26 January 2021
DIRECTORS' REPORT
FOR THE YEARED 30 JUNE 2020
The Directors present their report together with the audited
accounts of Pantheon Resources plc ("Pantheon" or the "Company")
and its subsidiary undertakings (together the "Group") for the year
ended 30 June 2020.
Results and dividends
The Group results for the period are set out under the
Consolidated Statement of Comprehensive Income. The Directors do
not propose to recommend any distribution by way of a dividend for
the year ended 30 June 2020.
Streamlined Energy and Carbon Reporting (SECR)
The Regulation requires large companies that have consumed (in
the UK), more than 40,000 kilowatt-hours (kWh) of energy in the
reporting period to include energy and carbon information. The
Group's energy consumption is for the year is considerably less
than 40,000 kilowatt-hours (kWh) of energy so is currently exempt
from this reporting requirement. The Group's energy consumption
during the year was due to two small offices and a data room. No
drilling was conducted in the year ended 30 June 2020.
Information to shareholders - website
The Group maintains its own website (www.pantheonresources.com)
to facilitate provision of information to external stakeholders and
potential investors and to comply with Rule 26 of the AIM Rules for
Companies.
Group structure and changes in share capital
Details of the Group structure and the Company's share capital
during the period are set out in Notes 9 and 18 to these
accounts.
Directors
The Directors who served at any time during the year were:
Name Role Note
--------------------------
Phillip Gobe Non-Executive Chairman
John Cheatham Chief Executive Officer
Justin Hondris Director, Finance & Corporate
Development
Robert Rosenthal Technical Director
Jeremy Brest Non-Executive Director Appointed 2 October 2019
----------------- ------------------------------- --------------------------
Directors' interests
The beneficial and non-beneficial interests in the Company's
shares of the Directors and their families were as follows:
Name Number of Ordinary shares of GBP0.01
30 June 2020
-----------------------------------------------
Phillip Gobe 230,881
John Cheatham 2,939,142
Justin Hondris* 1,378,233
Robert Rosenthal 647,622
Jeremy Brest See note 1 below
------------------- -----------------------------------------------
*Some of these ordinary shares are beneficially owned by the
spouse of J Hondris.
Note 1
At the year end, Mr Brest does not have a direct interest in
Pantheon and has an indirect interest in the Company as described
below:
Mr Brest's interest results from the direct and indirect holding
of Pantheon by Westman Management Limited ("Westman"), of which Mr
Brest is the sole director. Westman holds 327,869 ordinary shares
of Pantheon and holds approximately 5.3% interest in Ursa Major
Holdings LLC ("UMH"). UMH has an indirect interest in Pantheon
through Great Bear Petroleum Operating LLC ("GBPO") as a result of
the acquisition of the Great Bear Companies by Pantheon announced
on 21 December 2018. UMH holds an approximately 50% interest in
GBPO. GBPO has a beneficial interest in approximately 28 million
ordinary shares. 26 million of these ordinary shares are held by
CHONS LLC on behalf of GBPO. GBPO also owns approximately 88
million non-voting shares convertible into ordinary shares, 4.8
million warrants exercisable into convertible non-voting shares in
the Company with strike price of GBP0.30 per share, and options
over approximately 49 million shares in the Company presently owned
by CHONS LLC, of which approximately 30.7 million are currently
exercisable into ordinary shares and 13.3 million are exercisable
into convertible non-voting shares.
Mr Brest's interest in the shares held by GBPO is variable based
on the distribution mechanisms established by the limited liability
company agreements of UMH and Great Bear Petroleum Holdings LLC
("GBPH", a parent company of GBPO). This interest changes with
fluctuations of exchange rates, the Company's share price, and
other factors.
Share options
The Directors held the following share options for Ordinary
shares of GBP0.01, at the beginning and end of the year:
Director At 30 June Granted during At 30 June Exercise Latest date
2019 the year 2020 price of exercise
-------------
30 Sept
John Cheatham 4,385,000 - 4,385,000 GBP0.30 2024
30 Sept
Justin Hondris 3,865,000 - 3,865,000 GBP0.30 2024
----------------- ----------- --------------- ----------- --------- -------------
Total 8,250,000 8,250,000
----------------- ----------- --------------- ----------- --------- -------------
These are 100% vested as at 30 June 2020
--------------------------------------------------------------------------------------
Former Directors held the following share options for Ordinary
shares of GBP0.01, at the beginning and end of the year:
Director At 30 June Granted during At 30 June Exercise Latest date
2019 the year 2020 price of exercise
-------------
30 Sept
J Walmsley 1,000,000 - 1,000,000 GBP0.30 2024
Total 1,000,000 1,000,000
-------------
These are 100% vested as at 30 June 2020
----------------------------------------------------------------------------------
Report on Directors' remuneration and service contracts
The service contracts of all the Directors are subject to a
six-month termination period.
Directors' remuneration
Director Fees/basic Share-based Pension Health 2020 Total 2019 Total
salary payments Contributions Insurance
(US$) (US$) (US$) (US$) (US$) (US$)
------------
J Cheatham 432,940 - - - 432,940 496,820
J Hondris 338,600 - 16,172 5,135 359,907 387,399
J Brest 29,851 - - - 29,851 -
P Gobe 93,646 - - - 93,646 62,132
R Rosenthal 149,863 - - - 149,863 31,592
-------------- ----------------- ----------------- ----------------- ----------------- ------------ ------------
Total 1,044,900 - 16,172 5,135 1,066,207 977,943
-------------- ----------------- ----------------- ----------------- ----------------- ------------ ------------
Director incentive scheme
In 2012 the Company implemented a short-term executive director
incentive scheme (the "scheme") developed in conjunction with
executive remuneration specialists at Deloitte LLP. Any incentive
bonus resulting from the scheme will be shared by executive
Directors and will be calculated as 2.25% of the value of
"net-booked reserves" for a period (deducting any net-booked
reserves recognized in earlier periods for this purpose). For the
purposes of the scheme, net-booked reserves will include 100% of
proved reserves and 25% of probable reserves booked to the Group,
as determined by an independent third party, where relevant, in
accordance with the classification definitions as mandated by the
Society of Petroleum Engineers.
The remuneration committee will determine the extent to which
any annual bonus resulting from the scheme will be settled in cash
or share options with a discounted exercise price. The cash
component will be at least one third of the total and there is no
obligation to pay any of the annual bonus by way of share options.
In the event of a sale of the Company or other change of control,
the calculation will be undertaken by reference to the equity value
of the Company (less the value of net booked reserves recognized in
earlier periods). The remuneration committee believed that the
scheme, together with the granting of share options provides an
appropriate and reasonable structure to reward and motivate the
executive Directors for performance that is aligned to the
interests of shareholders and provides a balance of long term and
short-term performance measurement. Any potential benefit from the
scheme is linked to the booking of net-booked reserves which is
considered to be a key milestone reflecting potential "value add"
for the benefit of shareholders. The value of share options is
directly linked to the longer-term share price performance and is
therefore also considered to be a suitable metric as a basis for
executive remuneration.
Given the Group's executive team has grown and given the Group's
strategy has shifted from East Texas to Alaska, the directors view
that evaluating the current plan consistent with the new strategy
is appropriate and should take into account other members of
management participating, in addition to executive directors. Any
review would include consultation with the remuneration experts at
Deloitte LLP. No awards have been paid from this scheme since
inception in 2012.
In July 2019, the Board announced its intention to implement a
Share Option Plan ("the Plan") for the benefit of all staff and
permanent consultants. The Plan comprised two components: (i) an
initial award of up to 13.7m share options to management and all
staff at an exercise price of GBP0.27p, a premium of 50% above the
most recent fundraising price in July 2019 and (ii) future annual
grants of share options to all staff to be issued on or about the
time of publication of the Company's Annual Report at the
prevailing share price, in respect of the respective financial year
reported upon. In respect of this annual component, on 19 November
2020 Pantheon announced its intention to award share options award
representing c.2.25% of its ordinary share capital (voting and
non-voting) to directors and all staff under the Company's Share
Option Plan at the Fundraising Price of GBP0.31. It is anticipated
that this award will occur subsequent to the publication of this
Annual Report.
Subsequent events
Details of subsequent events can be found at Note 27
Substantial shareholders
The Company has been notified, in accordance with Chapter 5 of
the FCA Disclosure and Transparency Rules, of the under noted
interests in its ordinary shares as at 21 January 2021:
Shareholder Ordinary Shares % of Share Capital
Goldman Sachs Securities (Nominees)
Limited 101,007,285 17.52
Vidacos Nominees Limited 66,863,835 11.60
The Bank of New York (Nominees)
Limited 49,186,376 8.53
Lynchwood Nominees Limited 33,643,101 5.84
----------------- --------------------
Political and charitable contributions
There were no political or charitable contributions during the
year.
CORPORATE GOVERNANCE STATEMENT
The Company has adopted the Quoted Companies Alliance Corporate
Governance Code 2018 (the "QCA Code"). This statement sets out how
the Company complies with the 10 principles of the QCA Code.
The Board recognises the principles of the QCA Corporate
Governance Code, which focus on the medium to long term value for
shareholders without stifling the entrepreneurial spirit in which
small to medium sized companies such as Pantheon, have been
created. The Company sets out below its annual update on its
compliance with the QCA Code.
The QCA Code outlines 10 core principles that should be applied.
These are listed below together with a short explanation of how the
Company applies each of the principles. The Company has adopted a
share dealing code for the Board and employees of the Company.
PANTHEON RESOURCES QCA CORPORATE GOVERNANCE COMPLIANCE
STRATEGY & BUSINESS MODEL
Pantheon's strategy is to focus on hydrocarbon exploration and
production, onshore USA, in a region of low sovereign risk where
our specialist expertise lies. We run a lean organisation that is
focused on maximising the potential returns to shareholders through
carefully targeted exploration, appraisal and where relevant,
development in established and highly prospective areas underpinned
by detailed geological analysis where applicable. Where appropriate
the Group will also undertake value accretive acquisitions or
divestitures of assets, following careful analysis and, as
appropriate, shareholder engagement. The Group, as appropriate,
uses a combination of in-house expertise and external consultants
to manage operations.
Pantheon seeks to keep corporate overhead costs to a minimum,
whilst balancing the need to hire and retain the best personnel and
advisors, so as to maximise the potential returns to shareholders
in the event of success. Given the current scale of the Group,
corporate and operating costs are monitored by management to ensure
appropriate levels of spending.
The Board of Directors meet on a regular basis to discuss the
strategic direction and operational status of the Group, and any
significant deviation or change will be highlighted to the board
promptly should this occur.
UNDERSTANDING AND MEETING SHAREHOLDER NEEDS AND EXPECTATIONS
Group progress on achieving its key targets are regularly
communicated to investors through stock exchange announcements
which can be found under the 'News and Media' section of the
Company website. The Company retains the services of a corporate
communications firm who actively engage with press, investors and
analysts, as well as a Corporate Broker, to ensure shareholders
understand the Group's operations and activities. The Group will
consider the use of commissioned research as a medium for
shareholder education.
The Company also utilises professional advisors such as a
Broker, NOMAD, Corporate Communications specialists and Company
Secretarial services to provide advice and recommendations on
various shareholder considerations where relevant. The Company
hosts a weekly conference call with all directors, our
Nomad/broker, and when appropriate our corporate communications
advisors. During the call any shareholder considerations identified
over the course of the week can be tabled and responded to
accordingly.
The Company regards the Annual General Meeting as a good
opportunity to communicate directly with shareholders via detailed
presentations and an open question and answer session.
Additionally, the Company has also commenced holding webinars as
and when relevant, open to all shareholders, typically providing an
investor presentation and an opportunity for Q&A with
management. The Company also undertakes investor roadshows as and
when appropriate, arranged through its Broker. Over the past year,
the Company considers that it has communicated with a significant
portion of its shareholder base and has a clear understanding of
shareholder expectations. Contact details are provided on the
Company's website and within public documents should shareholders
wish to communicate with the Company.
TAKING INTO ACCOUNT WIDER STAKEHOLDER & SOCIAL
RESPONSIBILITIES AND THEIR IMPLICATIONS FOR LONG-TERM SUCCESS
The Directors recognise their responsibilities to stakeholders
including the State of Alaska, North Slope Borough, staff,
partners, suppliers, vendors, and residents within the areas it
operates. Given the current size of the Company, stakeholders are
easily able to communicate directly with executive management and
staff members, allowing the Board to act appropriately on such
feedback. A description of how the Group considers key stakeholders
in its decision making is provided in the section 172
Statement.
The Company is conscious of its impact on the geological,
archeological, and biological resources in its operating
environment, and has implemented measures to ensure that each
person working on our projects, including company personnel,
contractors and subcontractors, are informed of the environmental,
social, and cultural concerns that relate to that person's job, so
we can minimise any negative impacts.
Stakeholders can contact the Company via the website, contact
our Alaska operating company directly, or can contact the Company's
retained corporate communications advisers where required.
EMBEDDING EFFECTIVE RISK MANAGEMENT
The Board has weekly conference calls to discuss operations,
identify key risks and other relevant matters. The Company's Nomad
and, when relevant, the Company's corporate communications advisers
also attend the weekly conference calls. Additionally, the Group
also has a policy of structured weekly or fortnightly operational
and management conference calls to identify and discuss key
business challenges and risk areas. The Board believes that this
regular programme of internal communications provides an effective
opportunity for potential or real-time risks to be identified,
considered and where necessary addresses in a timely manner. Refer
to the section 172 Statement for additional description of how the
Group considers Stakeholder interests in decision making. The
Group's oil and gas activities are subject to a variety of risks,
both financial and operational, more information on risk can be
found in the Strategic Report of the Company's 2020 Annual
Report.
Given the Company's current size, the Board considers that the
Executive Management team, with oversight from the Non-Executive
Board of Directors and relevant advisers are sufficient to identify
risks applicable to the Company and its operations and implement an
appropriate system of controls. Accepting that no systems of
control can provide absolute assurance against material
misstatement or loss, the directors believe that the established
systems for internal control within the group are appropriate to
the size and cost structure of the business. An internal audit
function is not considered necessary or practical due to the size
of the Company and the close day to day control exercised by the
executive directors.
The audit committee meets at least twice per year where these
internal and financial controls are reviewed as required and assets
are also assessed for impairment considerations.
MAINTAINING A BALANCED AND WELL-FUNCTIONING BOARD
The Directors acknowledge their responsibility for, and
recognise the importance of implementing and maintaining, high
standards of corporate governance. The Board is responsible for
establishing and maintaining the system of internal controls. The
effectiveness of the Group's system of internal control is reviewed
annually by the Audit Committee of the Board.
The Board
The Board currently comprises two non-executive Directors, one
of whom is the Chairman, and three executive Directors. This
composition is considered to be an appropriate balance given the
Group's current size, however the Board may look to appoint an
additional independent director in due course if considered
appropriate. The Board is responsible to the shareholders for the
proper management of the Group. It meets regularly to set and
monitor strategy, examine opportunities, identify and consider key
risks, consider (and where appropriate approve) capital expenditure
projects and other significant financing matters and report to
shareholders. The Board delegates authority to the management for
day-to-day business matters including: drilling, geological and
operational matters, purchasing procedures, financial authority
limits, contract approval procedures and the hiring of full time
and temporary staff and consultants. Matters reserved for the Board
are communicated in advance of formal meetings. In addition to
formal board meetings, the directors hold weekly conference calls,
which the Company's NOMAD is invited to attend, in order to keep
the board fully informed with operational matters and potential
issues. Biographical details of the directors can be found on the
'About Pantheon' section of the company's website.
The QCA Code does not offer a definition of independence with
respect to directors, so in forming a view on the independence of
directors the Company has sought guidance by reference to the
guidelines outlined in the FCA's UK Corporate Governance Code. In
any event, the Board exercises discretion in making the
determination of director independence which is kept under review
on an annual basis. The non-executive Chairman, Phillip Gobe, is
currently considered to be independent.
The board has a number of committees as explained below.
Audit Committee
The Audit Committee consists of Phillip Gobe as Chairman, Jay
Cheatham and Jeremy Brest. This Committee provides a forum through
which the Group's finance functions and auditors report to the
non-executive Directors. Meetings may be attended, by invitation,
by the Company's Nomad, Company Secretary, other Directors and the
Company's auditors.
The Audit Committee meets at least twice a year. Its terms of
reference include the review of the Annual and Interim Accounts,
consideration of the Company and Group's accounting policies, the
review of internal control, risk management and compliance
procedures, and consideration of all issues surrounding publication
of interim and annual financial results and the annual audit. The
Audit Committee will also interact with the auditors and review
their reports relating to accounts and internal control
systems.
Remuneration Committee
The Remuneration and Nomination Committee consist of Phillip
Gobe as Chairman, Jeremy Brest, Jay Cheatham and Justin Hondris.
The Committee meets as and when required. Its role is to determine
the remuneration arrangements and contracts of executive Directors
and senior employees, and the appointment or re-appointment of
Directors. It also has the responsibility for reviewing the
performance of the executive Directors and for oversight of the
Company's incentive schemes. No Director is involved in deciding
their own remuneration.
Conflicts Committee
The Company has established a Conflicts Committee which consists
of Phillip Gobe as Chairman, Jeremy Brest, Justin Hondris and Jay
Cheatham. The role of the Conflicts Committee is to assist the
Board in monitoring actual and potential conflicts of interest
under the definitions of the Companies Act 2006. Under the
Companies Act 2006 Directors are responsible for their individual
disclosures of actual or potential conflict. To follow best
practice, the Conflicts Committee holds discussions where
appropriate, with the Company's UK lawyers.
Anti-Corruption & Bribery Committee
The Company has established an Anti-Corruption & Bribery
Committee. This committee consists of Justin Hondris as Chairman,
Jeremy Brest, Jay Cheatham and Phillip Gobe. The purpose of the
Anti-Corruption & Bribery Committee is to ensure the Company's
compliance with the Bribery Act 2010.
HAVING APPROPRIATE EXPERIENCE, SKILLS AND CAPABILITIES ON THE
BOARD
The Board of directors has a mix of experience, skills, both
technical and commercial, and personal qualities that seek to
deliver the strategy of the Company. The Company will ensure that
the directors have the necessary up-to-date experience, skills and
capabilities to deliver the Company strategy and targets. If the
Company identifies an area where additional skills are required,
the Company will often contract an appropriately qualified third
party to advise as required. Each director is listed on the 'About
Pantheon' section of the Company's website and in the annual report
along with a clear description of their role and experience. The
Company recognises that it currently has a limited diversity,
including a lack of gender balance, and this will be considered in
future recruitment decisions if the board decides that additional
directors are required.
EVALUATING BOARD PERFORMANCE
Given the Company's current size, the Board has not considered
it necessary to undertake a formal assessment of the board
performance and effectiveness, however, any deficiencies in Board
performance and effectiveness would be identified on an ad hoc
basis. The board contracts the executive remuneration specialist at
Deloitte for matters concerning management incentive schemes.
ETHICAL VALUES & BEHAVIOURS
The Company operates a corporate culture that is based on
ethical values and behaviors and treats operational stakeholders
fairly and with respect. It will maintain a quality system
appropriate to the standards required for a Company of its size.
The board communicates regularly with staff through meetings, team
conference calls and presentations, individual telephone calls and
messages and advocates respectful and open dialogue with employees,
consultants and other stakeholders.
MAINTAINING GOVERNANCE STRUCTURES AND PROCESSES
Ultimate authority for all aspects of the Company's activities
resides with the Board, with the respective responsibilities of the
Chairman, the Executive Directors and the various committees
arising as a result of delegation by the Board. Given the
constraints of a balancing a small, cost conscious Board with a
desire to maintain high standards of Corporate Governance, the
Board has active, structured and regular internal communication,
including a standing weekly conference call between the entire
board and its NOMAD where significant matters are tabled and
discussed. All of the executive directors have designated roles and
areas of responsibility and engage with the Company's shareholders
and stakeholders in accordance with relevant regulatory guidelines.
There are a number of matters reserved for the Board's review and
approval including, Group strategy, approval of major capital
expenditure projects, approval of the annual and interim results,
fundraising, dividend policy and Board structure. It monitors the
exposure to key business and operational risks and reviews the
strategic direction of the group and its operations. The Board
delegates day-to-day responsibility for managing the business to
the Executive Directors/senior management team. The Board considers
its current governance structures and processes as appropriate in
the context of its current size, headcount and complexity.
The audit committee meets at least twice per year where internal
and financial controls are reviewed as required and assets are also
assessed for impairment considerations.
COMMUNICATING WITH SHAREHOLDERS AND OTHER RELEVANT
STAKEHOLDERS
This Annual Report provides a section 172 Statement which
discusses how the Group considers the interests of shareholders and
other relevant stakeholders in its decision making.
Additionally, Under AIM Rule 26 the Company publishes historical
annual reports, notices of meetings and other publications,
including regular operational newsflow, over a minimum of the five
previous years which can be found under the 'Financial Reports' and
other sections of the Company website.
The Board is committed to maintaining good communication and
having dialogue with private and institutional shareholders, as
well as analysts. In addition to the Annual General Meeting, the
Company endeavors to arrange shareholder presentations (in person
or my Webinar), allowing shareholders to discuss issues and provide
feedback as appropriate. The Company also retains the services of a
specialist corporate communications advisor to assist in promoting
awareness of the Company's activities to its shareholders and wider
audience.
The Board have not published an audit committee or remuneration
committee report, which the Board considers to be appropriate given
the size and stage of development of the Company.
In regard to a general meeting of the Company, upon the
conclusion of that meeting the results of the meeting are released
through a regulatory news service and a copy of the announcement is
posted on the Company's website. In a situation such as where a
significant proportion of votes cast against a resolution then,
where relevant, an explanation would be provided.
EU Market Abuse Regulations
The EU Market Abuse Regulation came into effect in the UK on 3
July 2016 and the company has implemented relevant policies and
procedures to ensure compliance with the requirements of the
regime. The Company administers compliance in-house, consulting
with NOMAD and legal counsel regularly.
Statement of Directors' responsibilities
The Directors are responsible for preparing the financial
statements in accordance with applicable laws and International
Financial Reporting Standards ("IFRS") as adopted by the European
Union. Company Law requires the Directors to prepare financial
statements for each financial period which give a true and fair
view of the state of affairs of the Group and of the Company and of
the profit or loss of the Group for that period. In preparing those
financial statements, the Directors are required to:
a) select suitable accounting policies and then apply them consistently;
b) make judgements and estimates that are reasonable and prudent;
c) prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group will continue
in business; and
d) state whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements.
The Directors confirm that the financial statements comply with
the above requirements.
The Directors are responsible for keeping adequate accounting
records which disclose with reasonable accuracy at any time the
financial position of the Group and Company and to enable them to
ensure that the financial statements comply with the Companies Act
2006. The Directors are also responsible for safeguarding the
assets of the Group and hence for taking steps for the prevention
and detection of fraud and other irregularities. The Directors are
responsible for the maintenance and integrity of the corporate and
financial information included on the Company's website.
Statement of disclosure to the auditors
So far as the Directors are aware:
a) there is no relevant audit information of which the Company's auditors are unaware; and
b) all the Directors have taken all the steps that they ought to
have taken to make themselves aware of any relevant audit
information and to establish that the auditors are aware of that
information.
Auditors
In accordance with Section 489 of the Companies Act 2006, a
resolution proposing that UHY Hacker Young be reappointed as
auditors of the Company and that the Directors be authorised to
determine their remuneration will be put to the next Annual General
Meeting.
By order of the board
Justin Hondris
Director
26 January 2021
DIRECTORS' BIOGRAPHIES
FOR THE YEARED 30 JUNE 2020
Phillip Gobe, Non Executive Chairman
Phillip Gobe has over 40 years' experience in the oil and gas
business both in the U.S.A. and internationally. Phillip has held
senior positions in Energy Partners Ltd (President & COO),
Nuevo Energy Co. (COO), Vastar Resources (COO) and several senior
positions with Atlantic Richfield Company, including a role as
Operations Manager of Prudhoe Bay in Alaska, the largest oilfield
in the USA. Throughout his career Phillip has successfully overseen
several corporate exits at substantial premiums to pre-deal
valuations. Phillip also has a background in drilling, human
resources and health & safety. He is currently a non-executive
director of the S&P 500 company, Pioneer Natural Resources and
Scientific Drilling International Inc, the fifth largest provider
of directional drilling and measurement equipment and operational
services. He is also Executive Chairman of ProPetro, a Texas-based
oil services group providing hydraulic fracturing and other
services. Phillip acts as Chairman of Pantheon's Remuneration and
Nominations Committee, Audit Committee, and Conflicts
Committee.
Jay Cheatham, Chief Executive Officer
Jay Cheatham has more than 50 years' experience in all aspects
of the petroleum business. He has extensive international
experience in both oil and natural gas, primarily for ARCO. At
ARCO, Jay held a series of senior appointments. These include
Senior Vice President and District Manager (ARCO eastern District)
with direct responsibility for Gulf Coast US operations and
exploration and President of ARCO International where he had
responsibility for all exploration and production outside the U.S.
Jay's most recent appointment was as President and CEO of
Rolls-Royce Power Ventures, where he had the key responsibility for
restructuring the Company.
Jay also has considerable financial skills in addition to his
corporate and operational expertise. He has acted as Chief
Financial Officer for ARCO's US oil and natural gas company (ARCO
Oil & Gas). Moreover, he has understanding of the capital
markets through his past position as CEO to the Petrogen Fund, a
private equity fund.
Justin Hondris, Director, Finance and Corporate Development
Justin Hondris has over 15 years' experience in public company
management in the upstream oil and gas sector and has wide ranging
experience in corporate finance, private equity and capital markets
in the UK and abroad. Prior to Pantheon, Justin was involved in the
private equity sector where he gained valuable experience in both
investment and exit strategies for growth companies.
He is responsible for the financial, legal, administrative and
corporate development functions of the company.
Robert (Bob) Rosenthal, Technical Director
Bob Rosenthal has over 40 years' experience in the oil and gas
industry globally as an Exploration Geologist and Geophysicist. He
has held various senior exploration positions and spent a large
part of his career at Exxon and at BP, where he gained key relevant
regional experience in the geology of North Slope of Alaska and of
Texas. Since 1999, Bob has run his own successful consulting
business and has led the exportation efforts of a number of private
and public companies.
Jeremy Brest, Non-executive Director
Jeremy has more than 20 years' experience in investment banking
and financial advisory. Jeremy is the founder of Framework Capital
Solutions, a boutique Singapore-based advisory firm specialized in
structuring and execution of private transactions. Prior to
founding Framework, Jeremy was the head of structuring for
Indonesia at Credit Suisse and a derivatives trader at Goldman
Sachs.
INDEPENT AUDITORS' REPORT
TO THE MEMBERS OF PANTHEON RESOURCES PLC
FOR THE YEARED 30 JUNE 2020
Opinion
We have audited the financial statements of Pantheon Resources
plc (the "Parent Company") and its subsidiaries (the "Group") for
the year ended 30 June 2020, which comprise the Consolidated
Statement of Comprehensive Income, the Consolidated and Company
Statement of Changes in Equity, the Consolidated Statement of
Financial Position, the Company Statement of Financial Position,
the Consolidated Statement of Cash Flows, the Company Statement of
Cash Flows and the related notes to the financial statements. The
financial reporting framework that has been applied in the
preparation of the consolidated financial statements is applicable
law and International Financial Reporting Standards as adopted by
the European Union (IFRSs).
In our opinion:
-- the financial statements give a true and fair view of the
state of the Group's and of the Parent Company's affairs as at 30
June 2020 and of the Group's loss for the year then ended;
-- financial statements have been properly prepared in
accordance with IFRSs, as adopted by the European Union;
-- the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor's responsibilities for the audit of the financial
statements section of our report. We are independent of the Company
in accordance with the ethical requirements that are relevant to
our audit of the financial statements in the UK, including the
FRC's Ethical Standard as applied to listed entities, and we have
fulfilled our other ethical responsibilities in accordance with
these requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our
opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in
relation to which the ISAs (UK) require us to report to you
where:
-- the directors' use of the going concern basis of accounting
in the preparation of the financial statements is not appropriate;
or
-- the directors have not disclosed in the financial statements
any identified material uncertainties that may cast significant
doubt about the company's ability to continue to adopt the going
concern basis of accounting for a period of at least twelve months
from the date when the financial statements are authorised for
issue.
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) we identified, including those which had the greatest effect
on: the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
Key audit matter How the matter was addressed during
the audit
Valuation and Impairment Our audit work included, but was not
of exploration and evaluation restricted to:
assets in the Group
* Discussing both the East Texas and Alaskan
The Group has capitalised exploration assets with the directors and evaluating
costs in respect of the their impairment assessment in conjunction with the
Group's exploration interests independent reports available for each exploration
in accordance with IFRS project and reviewing available information to assess
6 'Exploration for and whether the leases remain in good standing.
Evaluation of Mineral Resources'
(IFRS 6). The Directors
need to assess the exploration * In respect of the Alaskan exploration assets that
assets for indicators of have not been impaired, we confirmed there is an
impairment and where they ongoing plan to develop each prospect and assessed
exist to undertake a full the future plans of the projects in respect of
review to assess the need funding, the right to explore and development to
for impairment charges. assess whether there were any indicators of
This involves significant impairment in line with IFRS 6.
judgements and assumptions
such as the timing and
extent and probability * We discussed the key leases with the directors and
of future cash flow. considered their assessment in conjunction with the
independent reports on the portfolio of leases
We therefore identified available and reviewed other available information to
the impairment of exploration assess whether the leases remain in good standing or
and evaluation assets as are in the process of renewal.
a key audit matter, which
was one of the most significant
assessed risks of material Key observations
misstatement. Indicators of impairment were identified
this year. The reduction in commodity
prices and subsequent to the year end
a change in strategy to focus on the
Alaskan assets have lead to impairments
of $7.8m being recognised in the income
statement.
With respect to the Alaskan exploration
assets, no indicators of impairment
were identified in respect of the carrying
values of exploration and evaluation
assets at the year end.
--------------------------------------------------------------
Impairment of developed Our audit work included, but was not
oil & gas properties in restricted to:
the Group
* Assessing whether the leased acreage in East Texas
Developed oil & gas assets was correctly pooled together in line with IAS 36.
in East Texas were impaired
down to their disposal
value in the current year. * Discussing the East Texas assets with the directors
The timing and value of and evaluating their impairment assessment
the impairment requires conclusions in conjunction with available
judgement and the directors information.
are required to consider
the oil & gas properties
impairment in line with * Evaluating the value in use of the developed oil &
the relative standards gas properties in line with IAS 36.
of IFRS 6 and IAS 36.
We therefore identified * Assessing the future plans of the projects to ensure
the impairment of developed they are consistent with the impairments recognised
oil & gas properties as in the year.
a key audit matter, which
was one of the most significant
assessed risks of material Key observations
misstatement. Impairments of $6.9m in relation to
the East Texas developed oil & gas
assets and $1.9m in respect of property
plant and equipment assets were processed
in the year owing to the reduced commodity
prices and subsequently following the
group's change of strategy to focus
on the Alaskan assets.
--------------------------------------------------------------
Impairment of investments Our audit work included, but was not
and loans due from subsidiary restricted to:
companies in the Parent
Company * Reviewing the investments balances for indicators of
impairment in accordance with IAS 36;
Under International Accounting
Standard 36 'Impairment
of Assets', companies are * Assessing the appropriateness of the methodology
required to assess whether applied by management in their assessment of the
there is any indication recoverable amount of intragroup loans by comparing
that an asset may be impaired it to the Group's accounting policy and IAS 36;
at each reporting date.
Management assessment involves * Assessing management's evaluation of the recoverable
significant judgements amounts of intragroup loans including review the
and assumptions such as impairment provisions and net asset values of
the timing and extent and components that have intercompany debt;
probability of future cash
flow.
* Checking that intragroup loans have been reconciled
The Parent Company has and confirming that there are no material
loans due from subsidiary differences.
companies of $139.7m (2019:
$135m). The investments
represent the primary balance
on the Company balance Key observations
sheet and there is a risk The majority of the investment balances
it could be impaired and correlate with the exploration assets
that intragroup loans may held by that subsidiary and our impairment
not be recoverable as a review was therefore linked to our
result of the subsidiary assessment of indicators of impairment
companies incurring losses. on the corresponding exploration licences.
We therefore identified As at the year end the carrying value
the impairment of loans of the Alaskan assets held by the subsidiaries
due from subsidiary companies to which the funds had been lent were
as a key audit matter in in excess of the intercompany loans
the Parent Company financial therefore no indications of impairment
statements, which was one were identified.
of the most significant
assessed risks of material
misstatement.
--------------------------------------------------------------
Going concern Our audit work included, but was not
restricted to:
The Group's ability to
maintain sufficient working * Assessing the transparency, completeness and accuracy
capital in order to continue of the matters covered in the going concern
to meet its liabilities disclosure by evaluating management's cash flow
as they fall due remains projections for the next 12 months and the underlying
dependent upon the existing assumptions.
cash reserves and the ability
to raise finance either
through the issue of debt * We obtained budgets and cash flow forecasts, reviewed
and/or equity or farming the methodology behind these, ensured arithmetically
out part of their exploration correct and challenged the assumptions.
assets.
We therefore identified * We completed sensitivity analysis on the budgets
the going concern as a provided to assess the change in costs that would
key audit matter. need to occur to push the Group into a cash negative
position.
* We discussed plans for the Group going forward with
management, ensuring these had been incorporated into
the budgeting and would not have an impact on the
going concern status of the Group.
Key observations
The Group had cash reserves of $4.8m
at the year-end and has also raised
an additional $30.2m in cash through
an equity placing in November 2020.
On discussion with management and review
of the projections we understand that
based purely on committed spend, then
the Group will maintain a positive
cash balance throughout the next 12
months.
An additional $7.5m has been included
for the Talitha Unit well expenditure
which is contingent on the Group having
sufficient cash or raising additional
funds through further equity financing.
This additional spend will only be
incurred in a success case where the
resource estimates are proven. As this
cost is not a commitment, this can
be delayed or avoided if there are
insufficient funds available to continue
exploration.
The level of exploration is discretionary
due to the Pantheon Group having control
over the operatorship over its exploration
interests in Alaska.
We are satisfied that the disclosures
provided within the financial statements
are sufficient to provide the users
with a full understanding of basis
of preparation in this regard.
--------------------------------------------------------------
Our application of materiality
The scope and focus of our audit was influenced by our
assessment and application of materiality. We apply the concept of
materiality both in planning and performing our audit, and in
evaluating the effect of misstatements on our audit and on the
financial statements.
We define financial statement materiality as the magnitude by
which misstatements, including omissions, could reasonably be
expected to influence the economic decisions taken on the basis of
the financial statements by reasonably knowledgeable users.
We also determine a level of performance materiality which we
use to determine the extent of testing needed to reduce to an
appropriately low level the probability that the aggregate of
uncorrected and undetected misstatements exceeds materiality for
the financial statements as a whole.
Materiality Measure Group Parent
Overall materiality We determined materiality for the financial
statements to be:
----------------------------------------------------------------
$1,545,000 (2019: $1,670,000) $1,082,000 (2019: $1,169,000)
------------------------------- -------------------------------
How we determine Based on the main key 1% of net assets of the
it indicator, being 1% of Parent Company exceeded
net assets of the Group. the Group materiality
amount therefore this
was capped at 70% of
Group materiality.
------------------------------- -------------------------------
Rationale for We believe the net assets are the most appropriate
benchmarks applied benchmark due to the size and stage of development
of the Company and Group and due to the Group
not yet generating any material revenue.
----------------------------------------------------------------
Performance materiality On the basis of our risk assessment, together
with our assessment of the Group and Company's
control environment, our judgement is that performance
materiality for the financial statements should
be 75% of materiality being:
----------------------------------------------------------------
$1,159,000 (2019: $1,252,500) $812,000 (2019: $877,000)
------------------------------- -------------------------------
Reporting threshold We agreed with the Audit Committee that we would
report to them all misstatements over 5% of
Group and company materiality identified during
the audit as set out below, as well as differences
below that threshold that, in our view, warrant
reporting on qualitative grounds. We also report
to the Audit Committee on disclosure matters
that we identified when assessing the overall
presentation of the financial statements.
----------------------------------------------------------------
$77,000 (2019: $83,500) $54,000 (2019: $58,500)
------------------------------- -------------------------------
An overview of the scope of our audit
As part of designing our audit, we determined materiality and
assessed the risks of material misstatement in the financial
statements. In particular, we looked at where the directors made
subjective judgements and assumptions in respect of the
capitalisation or impairment of the costs attributable to the
Group's exploration and development oil and gas assets and where
there were future events that are inherently uncertain.
We tailored the scope of our audit to ensure that we performed
enough work to be able to give an opinion on the financial
statements as a whole, taking into account an understanding of the
structure of the Company and the Group, their activities, the
accounting processes and controls, and the industry in which they
operate. Our planned audit testing was directed accordingly and was
focused on areas where we assessed there to be the highest risk of
material misstatement.
Our Group audit scope includes all of the group companies. At
the parent company level, we also tested the consolidation
procedures. The audit team communicated regularly throughout the
audit with the Finance personnel in order to ensure we had a good
knowledge of the business of the Group. During the audit we
reassessed and re-evaluated audit risks and tailored our approach
accordingly.
The audit testing included substantive testing on significant
transactions, balances and disclosures, the extent of which was
based on various factors such as our overall assessment of the
control environment, the effectiveness of controls and the
management of specific risk.
We communicate with those charged with governance regarding,
among other matters, the planned scope and timing of the audit and
significant findings, including any significant deficiencies in
internal control that we identify during the audit.
Other information
The directors are responsible for the other information. The
other information comprises the information included in the annual
report, other than the financial statements and our auditors'
report thereon. Our opinion on the financial statements does not
cover the other information and, except to the extent otherwise
explicitly stated in our report, we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
audit or otherwise appears to be materially misstated. If we
identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a
material misstatement in the financial statements or a material
misstatement of the other information.
If, based on the work we have performed, we conclude that there
is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this
regard.
Opinions on other matters prescribed by the Companies Act
2006
In our opinion, based on the work undertaken in the course of
the audit:
-- the information given in the strategic report and the
directors' report for the financial year for which the financial
statements are prepared is consistent with the financial
statements; and
-- the strategic report and the directors' report have been
prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Company
and its environment obtained in the course of the audit, we have
not identified material misstatements in the strategic report or
the directors' report.
We have nothing to report in respect of the following matters in
relation to which the Companies Act 2006 requires us to report to
you if, in our opinion:
-- adequate accounting records have not been kept by the
Company, or returns adequate for our audit have not been received
from branches not visited by us; or
-- the financial statements are not in agreement with the accounting records and returns; or
-- certain disclosures of directors' remuneration specified by law are not made; or
-- we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the statement of directors'
responsibilities, the directors are responsible for the preparation
of the financial statements and for being satisfied that they give
a true and fair view, and for such internal control as the
directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the Company or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs (UK) will
always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of
these financial statements.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial Reporting
Council's website at www.frc.org.uk/auditorsresponsibilities .This
description forms part of our auditor's report.
Use of our report
This report is made solely to the Company's members, as a body,
in accordance with part 3 of Chapter 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
Company's members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the Company and the Company's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
Daniel Hutson (Senior Statutory Auditor)
For and on behalf of
UHY Hacker Young
Chartered Accountants
Statutory Auditor
Quadrant House
4 Thomas More Square
London E1W 1YW
26 January 2021
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 30 JUNE 2020
Notes 2020 2019
$ $
Continuing operations
Revenue 4 85,312 724,589
Production royalties (24,580) (205,458)
Depletion of developed oil & gas
assets (27,800) (148,485)
Cost of sales (6,273) (737,208)
Gross profit/(loss) 26,659 (366,562)
Administration expenses (4,088,948) (3,438,239)
General & Administrative expenses
- Vision (814,762) (1,744,730)
Impairment of exploration & evaluation
assets 14.1 (7,808,912) (34,138,156)
Impairment of developed oil & gas
assets 14.2 (6,933,644) (13,092,684)
Impairment of property plant and
equipment 14.3 (1,907,966) (1,397,950)
Impairment of Goodwill 14.4 - (796,236)
Bad Debt Expense 3 (318,786) -
Depreciation of production & pipeline
facilities - (275,665)
Operating loss 5 (21,846,359) (55,250,222)
Gain on disposal of subsidiary
undertaking 3 109,417 -
Gain on bargain purchase - 100,757,286
Less: deferred tax thereon - (28,783,396)
Interest receivable 7 25,880 25,781
(Loss) / profit before taxation (21,711,062) 16,749,449
Taxation 8 4,732,467 18,757,633
(Loss) / profit for the year (16,978,595) 35,507,082
Other comprehensive income for
the year
Exchange differences from translating
foreign operations (47,800) (179,284)
Total comprehensive (loss) / income
for the year (17,026,395) 35,327,798
(Loss) / profit per share
(Loss) / profit per ordinary share
- basic and diluted from continuing
operations 2 (3.39)c 10.54c
The loss for the current and profit for the prior year and the
total comprehensive loss for the current and profit for the prior
year are wholly attributable to the equity holders of the parent
company, Pantheon Resources Plc.
CONSOLIDATED AND COMPANY STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARED 30 JUNE 2020
Share Share Retained Currency Share Non Total
capital premium losses reserve based controlling equity
payment Interests
$ $ $ $ $ $ $
Group
At 1 July 2019 7,966,075 164,044,720 (12,630,316) (220,838) 2,163,898 (54,708) 161,268,831
Net (loss)
for the year - - (16,978,595) - - - (16,978,595)
Other
comprehensive
income:
Foreign
currency
translation - - - (47,799) - - (47,799)
Total
comprehensive
income for
the year - - (16,978,595) (47,799) - - (17,026,394)
Capital
Raising
Issue of
shares 602,646 10,244,977 - - - - 10,847,623
Issue of
shares
in lieu of
fees - (31,239) - - - - (31,239)
Issue costs - (571,366) - - - - (571,366)
Disposals - - - - - 54,708 54,708
Balance at
30 June 2020 8,568,721 173,687,092 (29,608,911) (268,637) 2,163,898 - 154,542,163
Share Share Retained Currency Share Non Total
capital premium losses reserve based controlling equity
payment Interests
$ $ $ $ $ $ $
Group
At 1 July 2018 3,852,673 106,678,805 (48,137,398) (41,554) 902,854 - 63,255,380
Net profit
for the year - - 35,507,082 - - - 35,507,082
Other
comprehensive
income:
Foreign
currency
translation - - - (179,284) - - (179,284)
------------- --------------- ---------------- ------------- ------------- ------------- --------------
Total
comprehensive
income for
the year - - 35,507,082 (179,284) - - 35,327,798
------------- --------------- ---------------- ------------- ------------- ------------- --------------
Capital
Raising
Issue of
shares 1,394,037 19,865,021 - - - - 21,259,058
Issue of
shares
in lieu of
fees 23,753 (23,753) - - - - -
Issue costs - (890,304) - - - - (890,304)
Acquisitions
Issue of
shares 2,693,665 38,384,733 - - 1,261,044 - 42,339,442
Other
Shares issued
in lieu of
fees 1,947 30,218 - - - - 32,165
Business
Combination
Business
combination - - - - - (54,708) (54,708)
Balance at
30 June 2019 7,966,075 164,044,720 (12,630,316) (220,838) 2,163,898 (54,708) 161,268,831
============= =============== ================ ============= ============= ============= ==============
Share Share Retained Currency Share Total
capital premium losses reserve based equity
payment
$ $ $ $ $ $
Company
At 1 July 2019 7,966,075 164,044,720 (21,300,988) (16,867,113) 2,163,898 136,006,592
Net (loss)
for the year - - (1,286,510) - - (1,286,510)
Other
comprehensive
income: Foreign
currency
translation - - - (3,792,477) - (3,792,477)
------------- -------------- ---------------- ---------------- ------------- ---------------
Total
comprehensive
income for
the year - - (1,286,510) (3,792,477) - (5,078,987)
------------- -------------- ---------------- ---------------- ------------- ---------------
Capital Raising
Issue of shares 602,646 10,244,977 - - - 10,847,623
Issue of shares
in lieu of
fees - (31,239) - - - (31,239)
Issue costs - (571,366) - - - (571,366)
Balance at
30 June 2020 8,568,721 173,687,092 (22,587,498) (20,659,590) 2,163,898 141,172,623
------------- -------------- ---------------- ---------------- ------------- ---------------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2020
Notes 2020 2019
$ $
ASSETS
Non-current assets
Exploration and evaluation assets 15 156,097,609 160,887,260
Developed oil & gas assets 17 - 6,961,445
Property, plant and equipment 17 658,898 2,494,464
156,756,507 170,343,169
-------------- --------------
Current assets
Trade and other receivables 10 74,167 1,843,649
Cash and cash equivalents 11 4,802,965 1,853,986
4,877,132 3,697,635
-------------- --------------
Total assets 161,633,639 174,040,804
-------------- --------------
LIABILITIES
Current liabilities
Trade and other payables 12 388,092 1,410,347
Provisions 13 1,335,863 1,335,863
Lease Liabilities 16 46,311 -
Deferred tax liability 8 5,293,296 10,025,763
-------------- --------------
7,063,562 12,771,973
-------------- --------------
Non-current liabilities
Lease Liabilities 16 27,914 -
27,914 -
-------------- --------------
Total liabilities 7,091,476 12,771,973
-------------- --------------
Net assets 154,542,163 161,268,831
============== ==============
EQUITY
Capital and reserves
Share capital 18 8,568,721 7,966,075
Share premium 173,687,092 164,044,720
Retained losses (29,608,911) (12,630,316)
Currency reserve (268,637) (220,838)
Share based payment reserve 24 2,163,898 2,163,898
Non controlling interests 3 - (54,708)
-------------- --------------
Shareholders' equity 154,542,163 161,268,831
============== ==============
The financial statements were approved by the Board of Directors
and authorised for issue on the 26 January 2021 and signed on its
behalf by
Justin Hondris
Director
Company Number 05385506
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2020
Notes 2020 2019
$ $
ASSETS
Non-current assets
Property, plant and equipment 17 73,035 635
Loans to subsidiaries 10 139,661,971 134,985,268
-------------- --------------
139,735,006 134,985,903
-------------- --------------
Current assets
Trade and other receivables 10 68,807 57,167
Cash and cash equivalents 11 1,745,834 1,312,164
-------------- --------------
1,814,641 1,369,331
-------------- --------------
Total assets 141,549,647 136,355,234
-------------- --------------
LIABILITIES
Current liabilities
Trade and other payables 12 302,799 348,642
Lease Liability - Right of use
assets 16 46,311 -
-------------- --------------
349,110 348,642
-------------- --------------
Non-current liabilities
Lease Liabilities 16 27,914 -
27,914 -
-------------- --------------
Total liabilities 377,024 348,642
-------------- --------------
Net assets 141,172,623 136,006,592
============== ==============
EQUITY
Capital and reserves
Share capital 18 8,568,721 7,966,075
Share premium 173,687,092 164,044,720
Retained losses (22,587,498) (21,300,988)
Currency reserve (20,659,590) (16,867,113)
Share based payment reserve 24 2,163,898 2,163,898
-------------- --------------
Shareholders' equity 141,172,623 136,006,592
============== ==============
In accordance with the provisions of Section 408 of the
Companies Act 2006, the Company has not presented an income
statement. A loss for the year ended 30 June 2020 of $1,286,510
(2019: loss of $1,463,533) has been included in the consolidated
income statement.
The financial statements were approved by the Board of Directors
and authorised for issue on 26 January 2021 and signed on its
behalf by:
Justin Hondris
Director
Company Number 05385506
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 30 JUNE 2020
Notes 2020 2019
$ $
Net outflow from operating activities 19 (5,707,802) (5,513,085)
------------- --------------
Cash flows from investing activities
Interest received 25,881 25,781
Funds used for drilling, exploration
and leases (1,591,591) (10,579,750)
Developed oil & gas assets - (523,934)
Decommissioning Provision (Exploration
& Evaluation) - 676,464
Decommissioning Provision (Developed
Oil & Gas Assets) - 409,400
Property, plant & equipment - (312,637)
Acquisition of a subsidiary (Great
Bear), net of cash acquired 3 - (6,098,215)
Acquisition of a subsidiary, (Vision
Resources LLC) net of cash acquired 3 - 1,920
Disposal 3 (1,134) -
Net cash outflow from investing activities (1,566,844) (16,400,971)
------------- --------------
Cash flows from financing activities
Proceeds from share issues 18 10,816,383 21,259,057
Issue costs paid in cash (571,364) (890,304)
Repayment of borrowing and leasing
liabilities (21,394) -
------------- --------------
Net cash inflow from financing activities 10,223,625 20,368,753
------------- --------------
Increase / (decrease) in cash & cash
equivalents 2,948,979 (1,545,304)
Cash and cash equivalents at the beginning
of the year 1,853,986 3,399,290
Cash and cash equivalents at the end
of the year 11 4,802,965 1,853,986
============= ==============
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEARED 30 JUNE 2020
Notes 2020 2019
$ $
Net cash outflow from operating activities 19 (5,137,011) (4,894,845)
------------- --------------
Cash flows from investing activities
Interest received 23,759 25,674
Loans to subsidiary companies (4,676,703) (14,875,186)
------------- --------------
Net cash outflow from investing activities (4,652,944) (14,849,512)
------------- --------------
Cash flows from financing activities
Proceeds from share issues 18 10,816,383 21,259,057
Issue costs paid in cash (571,364) (890,304)
Lease payments - right of use assets (21,394) -
------------- --------------
Net cash inflow from financing activities 10,223,625 20,368,753
------------- --------------
Increase in cash and cash equivalents 433,670 624,396
Cash and cash equivalents at the beginning
of the year 1,312,164 687,768
Cash and cash equivalents at the end
of the year 11 1,745,834 1,312,164
============= ==============
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARED 30 JUNE 2020
1. Accounting policies
A summary of the principal accounting policies, all of which
have been applied consistently throughout the year, is set out
below.
1.1 Basis of preparation
The financial statements have been prepared on a going concern
basis using the historical cost convention and in accordance with
the International Financial Reporting Standards ("IFRSs"),
including IFRS 6, 'Exploration for and Evaluation of Mineral
Resources', as adopted by the European Union ("EU") and in
accordance with the provisions of the Companies Act 2006.
The Group's financial statements for the year ended 30 June 2020
were authorised for issue by the board of Directors on 26 January
2021 and were signed on the Board's behalf by Mr J Hondris.
The Group and Company financial statements are presented in US
dollars.
1.2 Basis of consolidation
Subsidiaries are fully consolidated from the date on which
control is transferred to the Group. They are de-consolidated from
the date that control ceases. The purchase method of accounting is
used to account for the acquisition of subsidiaries by the Group.
The cost of an acquisition is measured as the fair value of the
assets given, equity instruments issued, and liabilities incurred
or assumed at the date of exchange. Identifiable assets acquired
and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at the
acquisition date, irrespective of the extent of any minority
interest. The excess of the cost of acquisition over the fair value
of the Group's share of the identifiable net assets acquired is
recorded as goodwill. Goodwill arising on acquisitions is
capitalised and subject to impairment review, both annually and
when there are indications that the carrying value may not be
recoverable.
Inter-company transactions, balances and unrealised gains on
transactions between group companies are eliminated.
All the companies over which the Company has control apply,
where appropriate, the same accounting policies as the Company.
1.3 Interests in joint arrangements
IFRS 11 defines a joint arrangement as an arrangement over which
two or more parties have joint control. Joint control is the
contractually agreed sharing of control of an arrangement, which
exists only when decisions about the relevant activities (being
those that significantly affect the returns of the arrangement)
require unanimous consent of the parties sharing control.
Joint operations
A joint operation is a type of joint arrangement whereby the
parties that have joint control of the arrangement have rights to
the assets and obligations for the liabilities, relating to the
arrangement. In relation to its interests in joint operations, the
Group recognises its:
- Assets, including its share of any assets held jointly
- Liabilities, including its share of any liabilities incurred jointly
- Revenue from the sale of its share of the output arising from the joint operation
- Share of the revenue from the sale of the output by the joint operation
- Expenses, including its share of any expenses incurred jointly
1.4 Going concern
The Directors have reviewed the Group's overall position and
outlook and are of the opinion that the Group is able to operate as
a going concern for at least the next twelve months from the date
of approval of these financial statements.
Subsequent to the year end, in November 2020, the Company raised
c. $30.2m through an equity fundraising at a price of GBP0.31 per
share.
The 16 leases in the Talitha Unit (formally awarded to Pantheon
in November, 2020) are subject to a contractual work commitment as
follows:
1. posting a performance bond in the amount of $3.3 million no
later than September 15, 2021, and
2. drill either
a. one well in the Unit by the second anniversary of the Unit effective date, or
b. two wells in the Unit by the fifth anniversary of the effective date.
Upon completion of either well commitment, the performance bond
will be returned (if a well is drilled prior to September 15, 2021,
the bond will not be required). Failure to meet the first
(performance bond) requirement will result in immediate termination
of the Unit. Failure to meet the drilling commitment will result in
termination of the Unit after the fifth anniversary and forfeiture
of any performance bond. If the proposed Talitha #A well is drilled
in Q1 2021 as planned, it will satisfy both aspects of the work
commitment.
Subsequent to year end, in November 2020, the Company
successfully raised $30.2m before costs through the issuance of
ordinary shares to subscribers. The Company estimates a maximum
$24.5m cost to drill the Talitha #A well in a success case, which
would involve completing and testing all 4 independent zones. If
successful, the well has the potential to generate material value
for shareholders and the Company believes that it would be able to
raise additional funding in such a situation. Funding options would
include farmout (the Company believes proving up the Talitha A well
would generate significant interest in the asset and attractive
economic terms for Pantheon), equity or debt. Should preliminary
well data not warrant completing and testing of any or all of the 4
independent targeted zones, then the well would be expected to cost
less than $24.5m as approximately $7.5m of the well cost was
budgeted for completion and testing of the 4 targeted zones. The
Group has no firm obligations to drill any more wells or undertake
more testing than it determines necessary; all drilling decisions
are at the Group's discretion. Additionally, the Group was
successful in acquiring 66,000 leases in January 2021. The Group
paid a non-refundable deposit of $0.65m for the leases with a
balance of $2.6m due upon grant, estimated in Q3 2021. Following
the completion of operations at Talitha #A a decision will be made
whether to farm out or sell a working interest in the well, or to
seek alternate finance such as debt or equity to fund future
operations.
Given the discretionary nature of some of the commitments, the
Directors believe that the Group is sufficiently funded and believe
the use of the going concern basis is appropriate. Accordingly, the
Directors have prepared the financial statements on a going concern
basis.
1.5 Revenue
The Group is engaged in the business of extracting oil and gas.
Revenue from contracts with customers is recognised in accordance
with IFRS15 at an amount that reflects the consideration to which
the Group expects to be entitled in exchange for those goods.
Contract balances
A contract asset is the right to consideration in exchange for
goods transferred to the customer. If the Group performs by
transferring goods to a customer before the customer pays
consideration or before payment is due, a contract asset is
recognised for the earned consideration that is conditional. The
Group does not have any contract assets as performance and a right
to consideration occurs within a short period of time and all
rights to consideration are unconditional.
Interest revenue is recognised on a proportional basis taking
into account the interest rates applicable to the financial
assets.
1.6 Foreign currency translation
(i) Functional and presentational currency
The financial statements are presented in US Dollars ("$"),
which is the functional currency of the Company and is the Group's
presentation currency.
(ii) Transactions and balances
Transactions in foreign currencies are translated into US
dollars at the average exchange rate for the year. Monetary assets
and liabilities denominated in foreign currencies are translated at
the rate of exchange ruling at the balance sheet date. The
resulting exchange gain or loss is dealt with in the income
statement.
The assets, liabilities and the results of the foreign
subsidiary undertakings are translated into US dollars at the rates
of exchange ruling at the year end. Exchange differences resulting
from the retranslation of net investments in subsidiary
undertakings are treated as movements on reserves.
1.7 Cash and cash equivalents
The Company considers all highly liquid investments, with a
maturity of 90 days or less to be cash equivalents, carried at the
lower of cost or market value.
1.8 Deferred taxation
Deferred tax is provided in full, using the liability method, on
temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the financial statements.
Deferred tax is determined using tax rates (and laws) that have
been enacted or substantially enacted by the balance sheet date and
expected to apply when the related deferred tax is realised, or the
deferred liability is settled.
Deferred tax assets are recognised to the extent that it is
probable that the future taxable profit will be available against
which the temporary differences can be utilized.
1.9 Exploration and evaluation costs and developed oil and gas properties
The Group follows the 'successful efforts' method of accounting
for exploration and evaluation costs. At the point of production,
all costs associated with oil, gas and mineral exploration and
investments are classified into and capitalised on a 'cash
generating unit' ("CGU") basis, in accordance with IAS 36. Costs
incurred include appropriate technical and administrative expenses
but not general corporate overheads. If an exploration project is
successful, the related expenditures will be transferred to
Developed Oil and Gas Properties and amortised over the estimated
life of the commercial reserves on a 'unit of production'
basis.
The recoverability of all exploration and evaluation costs is
dependent upon the discovery of economically recoverable reserves,
the ability of the Group to obtain necessary financing to complete
the development of the reserves and future profitable production or
proceeds from the disposition thereof. All balance sheet carrying
values are reviewed for indicators of impairment at least twice
yearly. The prospect acreage has been classified into discrete
"prospects" or CGU's. When production commences the accumulated
costs for the specific CGU is transferred from intangible fixed
assets to tangible fixed assets i.e., 'Developed Oil & Gas
Properties' or 'Production Facilities and Equipment', as
appropriate. Amounts recorded for these assets represent historical
costs and are not intended to reflect present or future values.
1.10 Impairment of exploration costs and developed oil and gas
properties, depreciation of assets, plug & abandonment and
goodwill
In accordance with IFRS 6 'Exploration for and Evaluation of
Mineral Resources' (IFRS 6), exploration and evaluation assets are
reviewed for indicators of impairment. Should indicators of
impairment be identified an impairment test is performed.
In accordance with IAS 36, the Group is required to perform an
"impairment test" on assets when an assessment of specific facts
and circumstances indicate there may be an indication of
impairment, specifically to ensure that the assets are carried at
no more than their recoverable amount. Where an impairment test is
required, any impairment loss is measured, presented and disclosed
in accordance with IAS 36.
In accordance with IAS 36 the Group has determined an accounting
policy for allocating exploration and evaluation assets to specific
'cash-generating units' ("CGU") where applicable.
Exploration and evaluation costs
Consistent with Pantheon's intention to exit its East Texas
portfolio to focus solely on its Alaska North Slope assets, the
Group has fully impaired the carrying values of its East Texas
projects. Given the material fall in oil and gas prices in North
America in 2020, the East Texas assets are forecast to be NPV
negative. Accordingly, the Directors believe it unlikely that they
could be sold for a material sum and have fully impaired the
carrying value of the East Texas properties. The Alaskan
exploration and evaluation leasehold assets were fair valued as at
the date of acquisition of Great Bear. The carrying value at 30
June 2020 represents the cost of acquisition plus the fair value
adjustment and subsequent capitalised costs, in accordance with
IFRS.
Decommissioning Charges
Decommissioning costs will be incurred by the Group at the end
of the operating life of some of the Group's facilities and
properties. The Group assesses its decommissioning provision at
each reporting date. The ultimate decommissioning costs are
uncertain and cost estimates can vary in response to many factors,
including changes to relevant legal requirements, the emergence of
new restoration techniques or experience at other production sites.
The expected timing, extent and amount of expenditure may also
change - for example, in response to changes in reserves or changes
in laws and regulations or their interpretation. Therefore,
significant estimates and assumptions are made in determining the
provision for decommissioning. As a result, there could be
significant adjustments to the provisions established which would
affect future financial results. The provision at reporting date
represents management's best estimate of the present value of the
future decommissioning costs required.
For all wells the Group has adopted a Decommissioning Policy in
which all decommissioning costs are recognised when a well is
either completed, abandoned, suspended or a decision taken that the
well will likely be plugged and abandoned in due course. For
completed or suspended wells, the decommissioning charge is
provided for and subsequently depleted over the useful life of well
using unit of production method.
Goodwill
Goodwill, when carried, is tested for impairment annually (as at
30 June) and when circumstances indicate that the carrying value
may be impaired. Impairment is determined for goodwill by assessing
the recoverable amount of the asset or group of assets to which the
goodwill relates. Where the recoverable amount is less than its
carrying amount, an impairment loss is recognised. If an impairment
is recognised it is reflected in the statement of profit or loss
and other comprehensive income as part of other operating
expenses.
Developed Oil and Gas Properties
Developed Oil and Gas Properties only represent the capitalised
costs associated with oil and gas properties, assessed on a CGU
(cash generating basis) which have been transferred from
"Exploration and Evaluation costs" to "Developed Oil & Gas
properties" when the well was commissioned. Wells are depleted over
the estimated life of the commercial reserves based on the "Unit of
production basis" based upon a typeset P50 well estimated at
1.4Mmboe P50 prospective resource (recoverable). The carrying
values of Developed Oil and Gas properties are tested for
indicators of impairment, and the higher of the asset's fair value
less costs to sell and value in use, is compared to the asset's
carrying value. Any excess of the asset's carrying value over its
recoverable amount is expensed to the income statement. During the
year, all historical East Texas wells were impaired to zero,
reflecting their poor performance and the decision to exit the East
Texas portfolio.
Other property, plant and equipment
Other property, plant and equipment are stated at historical
cost less depreciation. Depreciation is provided at rates
calculated to write off the costs less estimated residual value of
each asset over its estimated useful life as follows:
- Production facilities and equipment are depreciated by equal
instalments over their expected useful lives, ranging from 3 to 30
years. Pipeline and associated costs are depreciated over 30 years;
tankage, generators and generator systems over 20 years and
equipment associated with the Gas Plant over 3 years.
- Office equipment is depreciated by equal annual instalments
over their expected useful lives, being three years.
1.11 Financial instruments
IFRS 7 requires information to be disclosed about the impact of
financial instruments on the Group's risk profile, how the risks
arising from financial instruments might affect the entity's
performance, and how these risks are being managed.
The Group's policies include that no trading in derivative
financial instruments shall be undertaken. These disclosures have
been made in Note 23 to the accounts.
1.12 Leases
The Group has applied IFRS 16 using the modified retrospective
approach and therefore comparative information has not been
restated and is presented under IAS 17. The details of accounting
policies under both IAS 17 and IFRS 16 are presented separately
below.
Policy applicable from 1 July 2019
All contracts entered into by the group are assessed to
determine if they are either a lease contract or contain a lease
contract. Where a lease is identified the Group recognises a right
of use asset and a corresponding lease liability with respect to
all lease arrangements in which it is a lessee.
There are three key evaluations in determining a lease
contract:
I. The contract contains an identified asset, which is either
explicitly identified in the contract or implicitly specified by
being identified at the time the asset is made available to the
group.
II. The Group has the right to obtain substantially all of the
economic benefits from use of the identified assets throughout the
period of use, considering rights within the defined scope of the
contract.
III. The Group has the right to direct the use of the identified
asset throughout the period of use.
Lease liabilities are initially measured at the discounted
present value of all future lease payments, excluding prepayments
made up to and including the commencement date of the lease. The
discount rate used is either the rate implicit in the lease, or if
that is not readily determined, the incremental borrowing rate.
The lease liability is presented as a separate line item in the
balance sheet.
Subsequent measurement of the lease liability includes increases
to the carrying amount of the liability to reflect the interest on
the lease liability (using the effective interest method) and by
reducing the carrying amount for the lease payments made.
The Group remeasures the lease liability (and makes a
corresponding adjustment to the related right-of-use asset)
whenever:
A. There is a change in the lease term. In such cases the lease
liability is remeasured by discounting the revised lease payments
using the revised discount rate.
B. Change of lease payments (due to changes in the reference
index or rate) or any changes in expected payments under a
guaranteed residual value. In such instances the lease liability is
remeasured using unchanged discount rates; a revised discount rate
is used where the lease payments are changed due to a change in a
floating interest rate.
C. Where a lease modification is not accounted for as a separate
lease. In such a case the lease liability is remeasured bases on
the modified lease term, using the revised discount rate at the
date of the modification.
The initial carrying value of a right of use assets consists
of:
-- The corresponding lease liability
-- All and any prepayments prior to the lease commencement.
-- Less: Any lease incentive received by the lessee
-- Less: Any initial direct costs incurred by the lessee.
Right-of-use assets are depreciated over the shorter period of
lease term and useful life of the underlying asset. The
depreciation starts at the commencement date of the lease. The
asset is subsequently measured at initial carrying value less
accumulated depreciation and impairment losses.
Where an impairment indictor has been identified, an impairment
test is conducted. In assessing whether an impairment is required,
the carrying value of the asset is compared with its recoverable
value. The recoverable amount is the higher of the assets fair
value less the costs to sell and value in use.
Policy applicable prior to 1 July 2019
Leases where substantially all of risks and rewards of ownership
where not transferred to the lessee where classified as an
"operating lease". Payable amounts, under the lease terms, where
charged to the profit and loss account over the lease term.
1.13 Critical accounting estimates and judgements
The preparation of financial statements in conformity with
International Financial Reporting Standards requires the use of
accounting estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during
the reporting period. Although these estimates are based on
management's best knowledge of current events and actions, actual
results ultimately may differ from those estimates. IFRSs also
require management to exercise its judgement in the process of
applying the Group's accounting policies.
The areas involving a higher degree of judgement or complexity,
or areas where assumptions and estimates are significant to the
financial statements are as follows:
Impairment of tangible and intangible assets
The first stage of the impairment process is the identification
of an indication of impairment. Such indications can include
production difficulties, significant reductions in estimates of
resources, significant falls in commodity prices, a significant
revision of Group Strategy or of the plan for the development of a
field, operational issues which may require significant capital
expenditure to remediate and others. This list is not exhaustive
and management judgement is required to decide if an indicator of
impairment exists. The Group regularly assesses the tangible and
non-tangible assets for indicators of impairment. When an
impairment indicator exists an impairment test is performed; the
recoverable amount of the asset, being the higher of the asset's
fair value less costs to sell and value in use, is compared to the
asset's carrying value. Any excess of the asset's carrying value
over its recoverable amount is expensed to the income
statement.
Contingent liabilities
Pursuant to IAS37, A contingent liability is either: (1) a
possible obligation arising from past events whose existence will
be confirmed only by the occurrence or non-occurrence of some
uncertain future event not wholly within the entity's control, or
(2) a present obligation that arises from a past event but is not
recognized because either: (i) it is not probable that an outflow
of resources embodying economic benefits will be required to settle
the obligation, or (ii) the amount of the obligation cannot be
measured with sufficient reliability.
A gas processing plant from Kinder Morgan was commissioned by
Vision. Pantheon was not a signatory to the gas processing
agreement, is not named in the agreement, and explicitly declined
to provide any financial support in relation to the original
agreement. Pantheon has taken legal advice on the matter and
believes it has no liability to the service provider. Accordingly,
Pantheon do not consider a provision should be included with the
final statements and will contest any claim made.
Value of exploration assets on acquisition
In accordance with IFRS 3 Business Combinations, exploration
assets acquired as part of a business acquisition, and hence
combination, are recorded at their fair value as opposed to the
fair value of the consideration paid. For more detail on the basis
of the fair value calculation of the Great Bear Petroleum
exploration assets in January 2019 refer to note 3.
Developed Oil & Gas Properties
Developed Oil & Gas Properties are amortised over the life
of the area according to the unit of production method. If the
amount of economically recoverable reserves varies, this will
impact on the amount of the asset which should be carried on the
balance sheet. The group categorises its leases (intangible assets)
and its Developed Oil and Gas Properties (tangible assets) into a
few discreet geological prospects ("cash generating units" or
"CGU's").
Share-based payments
The Group records charges for share-based payments.
For option-based share-based payments, to determine the value of
the options management estimate certain factors used in the option
pricing model, including volatility, vesting date, exercise date of
options and the number of options likely to vest. At each reporting
date during the vesting period management estimate the number of
shares that will vest after considering the vesting criteria. If
these estimates vary from actual occurrence, this will impact on
the value of the equity carried in the reserves.
1.14 New and amended International Financial Reporting Standards adopted by the Group
The Group has adopted the following standard, which is effective
for the first time this year. The impact is shown below
New/Revised International Effective Date: EU adopted Impact on the Group
Financial Reporting Annual periods
Standards beginning on or
after:
IFRS - Leases 1 January 2019 Yes See below
------------------ ------------ ---------------------
The introduction of amendments to IFRS 16 (Leases) significantly
change the way to account for leases. The changes effectively
remove the distinction between operating leases (where payments are
expensed to the statement of comprehensive income) and finance
leases; where the lease to be recognised results a right of use
asset and lease liability in the balance sheet, with the statement
of comprehensive income reflecting depreciation of the right of use
asset and the interest charge on the lease liability. All leases
(subject to exemptions) are to be accounted for effectively as
finance leases.
The adoption of this new Standard has resulted in the Group
recognising a right-of-use asset and related lease liability in
connection with the former operating lease.
The new Standard has been applied using the modified
retrospective approach, with right of use asset and corresponding
liability recognised as an adjustment in the current period. At
this date, the Group has also elected to measure the right-of-use
assets at an amount equal to the lease liability adjusted for any
prepaid or accrued lease payments that existed at the date of
transition. Prior periods have not been restated.
The Group has elected not to include initial direct costs in the
measurement of the right-of-use asset for operating leases in
existence at the date of initial application of IFRS 16, being 1
July 2019.
Instead of performing an impairment review on the right-of-use
assets at the date of initial application, the Group has relied on
its historic assessment as to whether leases were onerous
immediately before the date of initial application of IFRS 16.
The impact of the implementation of this standard is set out
below:
-- Recognition of lease liabilities and right of use assets, the
initial impact of which is an increase in property, plant and
equipment and in total liabilities
-- A new finance expense due to the lease finance charge
-- Increased annual depreciation of property, plant and
equipment for the duration of the leases
-- Elimination of the former operating lease rental expense
New standards and interpretations not applied
As of the date of these financial statements the IASB and IFRIC
have issued a number of new standards, amendments and
interpretations. These new Standards, Amendments and
Interpretations are effective for accounting periods beginning on
or after the dates shown below. Of these, only the following are
expected to be relevant to the Group:
Standard Impact on initial application Effective date
IFRS 3* Business Combination 1 January 2020
-------------------------------------- ---------------------
IAS 1* Presentation of Financial Statements 1 January 2020
-------------------------------------- ---------------------
IAS 8* Accounting Policies, Changes in 1 January 2020
Accounting Estimates and Errors
-------------------------------------- ---------------------
IAS 16* Property, Plant & Equipment 1 January 2022
-------------------------------------- ---------------------
IAS 37* Provisions, Contingent Liabilities 1 January 2022
and Contingent Assets
-------------------------------------- ---------------------
* Amendments
-------------------------------------- ---------------------
The Group does not anticipate that the adoption of these
standards will have a material effect on its financial statements
in the period of initial adoption.
1.15 Share based payments
On occasion, the Company has made share-based payments to
certain Directors and advisers by way of issue of ordinary shares
and share options. In the case of share options, the fair value of
these payments is calculated by the Company using the Black-Scholes
option pricing model. The expense is recognised on a straight-line
basis over the period from the date of award to the date of
vesting, based on the Company's best estimate of the number of
shares that will eventually vest.
During the year, no share-based payments were made.
2. (Loss)/Profit per share
The total loss per ordinary share for the group of 3.4 US cents
(2019: 10.54 US cents - Profit) is calculated by dividing the loss
for the year from continuing operations by the weighted average
number of ordinary shares in issue of 500,386,832 (2019:
336,744,317).
The diluted profit per share has been kept the same as the basic
profit per share because the 19,607,843 options in issue were out
of the money as at 30 June 2020 and as a result have not been
included in the weighted average number of shares number.
The diluted weighted average number of shares in issue is
500,386,832 (2019: 336,744,317).
3. Acquisitions and Disposals
On 28 April 2020 Vision Resources LLC filed Chapter 7 Bankruptcy
in the United States Bankruptcy Court for the Southern District of
Texas Houston Division. At this time control of the company was
transferred to a court appointed bankruptcy trustee. At 30 June
2019 the group recognized an impairment of its $0.7 million
investment in Vision Resources LLC and a $0.3m bad debt relating to
Oil & Gas receipts not received. For the years ended 30 June
2020 and 2019 Vision Resources LLC contributed $Nil to the group
income/loss.
The de-consolidation of Vision Resources LLC has resulted
in:
-- $0.1m Gain on disposal of a subsidiary undertaking, which has
been recognised in the Consolidated Statement of Comprehensive
Income for the year ending 30 June 2020.
-- The elimination of a non-controlling interest in the
Consolidated Statement of Financial Position for the year ending 30
June 2020.
Vision Resources LLC - Acquisition
-- During the previous year ended 2019, the Group acquired a
66.6% interest in Vision Resources LLC ("Vision"). As
consideration, Pantheon issued 3.5m (US$0.7m) new fully paid
ordinary shares as full and final payment. The acquisition, which
was completed on 14 January 2019, followed the death of the
Principal of the Vision companies in 2018.
-- The provisional fair values of the total net identifiable
assets and liabilities of Vision was ($164,215). The identifiable
net assets at fair value attributable Pantheon Group was ($109,417)
after taking into account the minority interest of $54,708. The
total consideration of $686,819 resulted in Goodwill arising on
acquisition of $796,236. Net cash acquired with the subsidiary was
$1,920.
-- The consideration for Vision in the prior year was 3.5m new
fully paid ordinary shares (US$0.7m).
-- From the acquisition date, 14 January 2019, to 30 June 2019,
Vision Resources LLC contributed US$ Nil to the Group loss. This is
because Vision Resources LLC acts as a General Partner and does not
engage in day to day operations. During the period, Pantheon
incurred expenditures of $1.7m through Vision, relating to the East
Texas assets. Following the death of the principal of Vision in
2018, significant uncertainty and disruption occurred, and Vision's
capacity to continue to participate in the project was assessed as
being unlikely. It is expected that the costs will drop
significantly going forward, now that Pantheon has, post year end,
decided to exit its involvement in East Texas.
-- One third of Vision Resources LLC (33.3%) is not owned by the
Pantheon Group. For accounting purposes, this portion is termed a
non-controlling interest ("NCI"). A NCI of ($54,708) is shown in
the consolidated statement of financial position which is made up
of a NCI of ($54,708) on the total fair value of net assets on the
acquisition, and a current year NCI of Nil as shown in the
consolidated statement of comprehensive income.
-- The goodwill on acquisition of US$796,236 arose principally
because Vision Resources LLC had an excess of liabilities over
assets of US$164,125 on 14 January 2019 on a fair value basis.
Pantheon paid US$0.7m in new shares to acquire the 66% interest in
Vision Resources LLC. None of the goodwill recognised is expected
to be deductible for income tax purposes.
Great Bear Petroleum Ventures I LLC & Great Bear Petroleum
Ventures II LLC
In January, 2019, the Group acquired 100% of the share capital
of Great Bear Petroleum Ventures I LLC and Great Bear Petroleum
Ventures II LLC companies (together "Great Bear" or "the Great Bear
companies"). The principal assets of Great Bear are leases with the
rights to explore for hydrocarbons in the State of Alaska. At the
date of acquisition these leases were estimated to offer potential
for over 2 billion barrels of oil in place across the existing
project inventory plus the additional exploratory potential
identified in these leases. Additionally, Great Bear had around
1,000 square miles of proprietary 3D seismic data which was
acquired, as well as intellectual property and technical data
relating to the properties under lease. Prior to Pantheon's
acquisition, Great Bear and its partners had invested over US$200m
on acquiring and evaluating the hydrocarbon potential of its
Alaskan acreage.
In addition to the acquisition of the Great Bear companies and
the projects identified in the Alaskan portfolio, Pantheon acquired
a highly talented technical and commercial team which the Directors
believe were of great value to the Group in both Alaska and
Texas.
The provisional fair values of the identifiable assets and
liabilities of Great Bear are:
Provisional
fair value
-------------
US$ million
Exploration and evaluation assets (Note 15) 148.5
-------------
148.5
-------------
Total identifiable net assets at fair value 148.5
=============
Bargain purchase 100.8
-------------
Total consideration 47.8
=============
The cash outflow on acquisition is as follows:
Cash paid 6.1
Net cash acquired with the subsidiary -
-------------
Net consolidated cash outflow 6.1
=============
Total consideration for the Great Bear Companies totalled
US$47.8m as follows: Cash consideration of US$6.1m, 103.3m new
fully paid ordinary shares (US$20.3m) valued at 15.25 pence per
share, 102.5m new fully paid non-voting B-class shares (US$20.1m)
valued at 15.25 pence per share, and 9.6m new warrants (US$1.3m).
The warrants have an exercise price of GBP0.30 per warrant, expire
in September 2024 and mirror the terms of the Company's existing
share options except they are only convertible into non-voting
convertible shares, convertible on a 1:1 basis into ordinary fully
paid shares.
Pursuant to IFRS3, the Directors undertook a fair value
assessment of the assets acquired in the Great Bear acquisition. No
liabilities were acquired in the acquisition. For accounting
purposes, the Directors adopted a conservative methodology in
making a fair value assessment of the assets acquired. Whilst this
approach is prudent from an accounting perspective, in reality
these are accounting judgements and the real commercial value of
those assets acquired may differ significantly from these
accounting judgements over the fullness of time. In determining the
appropriate fair value, consideration was given to a number of
risks associated with the various projects, which have then been
'discounted' or 'risked' in three primary categories:
1) Geological Risk - the chance of finding oil or successfully
appraising the existing discoveries.
2) Commercial Risk - involves the risk factors associated with
commercialising the discovered oil. Not all oil discoveries are
commercially viable. These risk factors relate to the technical
factors affecting the extraction of the oil and also the logistical
factors relating to the geographical location and fiscal regime of
the region.
3) Funding Risk - relates to the ability of Pantheon to attract
partners and raise sufficient capital to undertake the evaluation
and development of the oil. These factors include oil prices and
the state of equity and debt markets.
In making a fair value assessment of the various projects in the
portfolio, the Directors adopted a rigorous high-grading exercise,
only applying a fair value to the projects reasonably expected (at
that time) to be funded and drilled within the lease term. This is
because at the time of acquisition, certain leases had lease terms
remaining of less than 18 months and there was no certainty that
the Group will have activity on those leases or renew those leases
upon expiry. A key consideration in this process was the fact that
the Group was undertaking a farmout to assist funding operations.
Given the uncertainty in predicting the financial capacity and
likely drilling programme desired by a future farm-in partner, the
Directors undertook the fair value assessment on the basis that any
funding would be applied to either the Greater Alkaid or Talitha
projects only at this early stage and no value applied to the
remaining exploration acreage. At the time Pantheon believed it
prudent to prioritise Greater Alkaid and Talitha, having lower risk
potential for earlier cashflows due the close proximity to existing
infrastructure. The Group adopted a conservative approach in making
these accounting judgements, and at Greater Alkaid applied a 70%
Commercial Risk and a further 50% funding risk, reflecting the fact
that the farmout process was not at the time completed and that the
introduction of a farm-in would involve the Company reducing its
working interest. The discovered oil at Greater Alkaid was then
evaluated through a conceptual development plan resulting in a Net
Present Value (NPV) per barrel of oil of $8, lower than the $8.50
per barrel of oil NPV estimated by the independent experts at LKA,
reflecting management conservatism in accounting judgements. At
Talitha, a 50% Geological Risk was applied reflecting the fact that
despite ARCO having encountered oil at this location in 1988, the
well was not production tested at the time. This is a conservative,
yet prudent approach, given the Pipeline State-1 well was drilled
and logged, on our acreage. A 75% Commercial Risk was then applied
due the uncertainty of the reservoir parameters and hence
production performance of the oilfield, and a further 70% discount
applied for Funding risk which incorporates the numerous variables
associated with financing this oil accumulation. The modelled
Funding Risk was higher than at Alkaid, reflecting the projects'
greater level of uncertainty on the technical parameters and
geographic location in relation to its distance from the road and
pipeline. An NPV per barrel of oil of $5 - $6 was applied for the 2
key horizons, reflecting certain geological factors and its
location as described above which would result in higher
development costs.
After application of the aforementioned assumptions and risk
parameters, the fair value assessment of the bargain purchase of
Great Bear Petroleum Ventures I, LLC and Great Bear Petroleum
Ventures II, LLC (the "Ventures Entities") for US$100.8m arose
principally because of the following factors:
1. Great Bear Petroleum Operating, LLC ("GBPO") was a
financially distressed seller of Great Bear Ventures I and II,
having borrowed against encashable production tax credits issued by
the State of Alaska. The State of Alaska did not appropriate
sufficient funds for the encashment of tax credits, resulting in
GBPO going into payment default under its borrowings.
2. Key leases of the Ventures Entities in Greater Alkaid were
set to expire if testing operations did not occur within the
Winter/Spring drilling season of 2018/2019. The time pressure for
the Ventures Entities to secure funding for these operations was
another factor in Pantheon's bargaining position.
3. Pantheon's existing team had significant Alaskan expertise,
and was able to quickly and efficiently evaluate the attractiveness
of the prospective investment.
4. The existing owners of GBPO wanted to maintain exposure to
the Ventures Entities' assets, hence a primarily equity transaction
was undertaken, which resulted in Pantheon completing the
transaction, raising funding and preserving the Greater Alkaid
leases through the, ultimately successful, 2019 testing campaign.
Additionally, all Great Bear shareholders have maintained their
exposure to the Alaskan assets through Pantheon.
5. In light of the above, Pantheon was able to negotiate an
attractive acquisition price for the Ventures Entities.
4. Segmental information
The Group's activities involve production of and exploration for
oil and gas. There are three reportable operating segments: USA
(Texas), USA (Alaska) and Head Office. Non-current assets, income
and operating liabilities are attributable to the USA, whilst most
of the corporate administration is conducted through Head
Office.
Each reportable segment adopts the same accounting policies.
In compliance with IFRS 8 'Operating Segments', the following
tables reconcile the operational loss and the assets and
liabilities of each reportable segment with the consolidated
figures presented in these Financial Statements, together with
comparative figures for the year ended 30 June 2019.
Oil and Gas production commenced in East Texas in late 2017 and
ceased in early 2020 and is unlikely to continue given the Group's
decision to exit the East Texas portfolio.
The Group's net total sales production for the financial year
ended 30 June 2020 amounted to 57,420 (2019: 191,024) mcf of
natural gas and 158 (2019: 2,317) bbl. of oil. Average realisations
for the year for natural gas and oil were US$1.81 (2019: $2.58) per
mcf and US$59.93 (2019: $62.54) per barrel of oil respectively.
Revenues for the year ended 30 June 2020 were $85,312 (2019:
$724,589).
Year ended 30 June 2020
Geographical segment (Group) Head Office Texas Alaska Consolidated
$ $ $ $
Revenue - 85,312 - 85,312
Production royalties - (24,580) - (24,580)
Depletion of developed oil
& gas assets - (27,800) - (27,800)
Cost of sales - (6,273) - (6,273)
Administration expenses (1,310,268) (976,970) (1,801,710) (4,088,948)
General & Administrative
expenses - Vision - (814,762) - (814,762)
Impairment of intangible
assets - E&E (7,678,800) (130,112) (7,808,912)
Impairment developed oil
& gas assets - (6,933,644) - (6,933,644)
Impairment PP&E - (1,907,966) - (1,907,966)
Bad debt expense - (318,786) - (318,786)
Interest receivable 23,759 2,121 - 25,880
Gain on disposal of subsidiary
undertaking - 109,417 - 109,417
Taxation - - 4,732,467 4,732,467
------------- --------------- ------------- --------------
Loss by reportable segment (1,286,509) (18,492,731) 2,800,645 (16,978,595)
============= =============== ============= ==============
Exploration & evaluation
assets - - 156,097,608 156,097,608
Property, plant & equipment 73,035 585,863 - 658,898
Trade and other receivables 68,807 5,360 - 74,167
Cash and cash equivalents 1,745,834 3,026,492 30,639 4,802,965
Intercompany balances 139,661,971 (130,145,522) (9,516,449) -
------------- --------------- ------------- --------------
Total assets by reportable
segment 141,549,647 (126,527,805) 146,611,798 161,633,639
------------- --------------- ------------- --------------
Total liabilities by reportable
segment (377,024) (836,570) (5,877,883) (7,091,476)
============= =============== ============= ==============
Net assets by reportable
segment 141,172,623 (127,364,375) 140,733,915 154,542,163
============= =============== ============= ==============
Year ended 30 June 2019
Geographical segment (Group) Head Office Texas Alaska Consolidated
$ $ $ $
Revenue - 724,589 - 724,589
Production royalties - (205,458) - (205,458)
Depletion of developed
oil & gas assets - (148,485) - (148,485)
Cost of sales - (737,208) - (737,208)
Administration expenses (1,489,204) (1,400,323) (549,092) (3,438,619)
General & Administrative
expenses - Vision - (1,744,730) - (1,744,730)
Impairment of intangible
assets - Goodwill - (796,236) - (796,236)
Impairment of intangible
assets - E&E (34,138,156) - (34,138,156)
Impairment developed oil
& gas assets - (13,092,684) - (13,092,684)
Impairment PP&E - (1,397,950) - (1,397,950)
Plug & abandonment costs - 380 - 380
Depreciation of production
& pipeline facilities - (275,665) - (275,665)
Interest receivable 25,671 110 - 25,781
Un-realised gains - - 100,757,286 100,757,286
Less: deferred tax thereon - - (28,783,396) (28,783,396)
Taxation - - 18,757,633 18,757,633
------------- --------------- -------------- --------------
Loss by reportable segment (1,463,533) (53,211,816) 90,182,431 35,507,083
============= =============== ============== ==============
Exploration & evaluation
assets - 7,303,800 153,583,460 160,887,260
Developed oil & gas assets - 6,961,445 - 6,961,445
Property, plant & equipment 635 2,493,829 - 2,494,464
Trade and other receivables 57,167 358,813 1,427,669 1,843,649
Cash and cash equivalents 1,312,164 541,445 377 1,853,986
Intercompany balances 134,985,268 (128,981,374) (6,003,894) -
------------- --------------- -------------- --------------
Total assets by reportable
segment 136,355,234 (111,322,042) 149,007,612 174,040,804
------------- --------------- -------------- --------------
Total liabilities by reportable
segment (348,642) (1,348,989) (11,074,342) (12,771,973)
============= =============== ============== ==============
Net assets by reportable
segment 136,006,592 (112,671,031) 137,933,270 161,268,831
============= =============== ============== ==============
5. Operating loss
2020 2019
$ $
Operating loss is stated after charging:
Depreciation - production facilities
& equipment - 275,665
Depreciation - office equipment 420 431
Depreciation Right of use assets 19,558 -
Auditor's remuneration
- group and parent company audit
services 50,000 85,000
Auditor's remuneration for non-audit
services
- taxation services and compliance
services 10,500 12,000
-------- ---------
6. Employment costs
The employee costs of the Group, including Directors'
remuneration, are as follows:
2020 2019
$ $
Wages and salaries 1,237,242 1,187,223
Social security costs 70,541 68,082
Statutory pension costs 16,172 22,693
----------- -----------
1,323,955 1,277,998
=========== ===========
The summary of the directors' remuneration is shown in the
directors' report.
2020 2019
Number of employees (including Executive number number
Directors) at the end of the year
Management and administration 9 5
-------- --------
7. Interest receivable
2020 2019
$ $
Bank interest received 25,880 25,781
======== ========
8. Taxation
2020 2019
$ $
Current tax
US federal corporate tax - -
US state and local tax - -
UK corporate tax - -
============== ==============
Factors affecting the tax charge for the period - -
Income (loss) on ordinary activities before
taxation (21,711,062) 16,749,449
-------------- --------------
Income (loss) on ordinary activities before
taxation multiplied by the standard US corporate
tax rate of 21% (2019: US corporate tax rate
of 21%) (4,559,323) 3,517,384
Effects of:
State of Alaska tax benefits associated with
temporary book-to-tax differences (173,144) (51,615)
US federal tax benefit associated with temporary
book-to-tax differences - (14,267,460)
US federal tax benefit associated with reassessed
future utilization of loss carryforward - (7,955,942)
Total tax charge (4,732,467) (18,757,633)
-------------- --------------
Factors that may affect future tax charges
The Group's deferred tax assets and liabilities as at 30 June
2020 have been measured at 21% for items subject to US federal
income tax only, items subject to state of Alaska and US federal
income tax are reflected at an Alaska rate of 9.4% and a US federal
rate, net of state of Alaska tax deduction, of 28.426%.
At the year-end date, the Group has unused losses carried
forward of $59.8m (2019: $47.6m) available for offset against
suitable future profits. Unused US tax losses incurred prior to
January 1, 2018 expire in general within 20 years of the year in
which they are sustained. Losses sustained after December 31, 2017
do not expire.
At June 30, 2020, given the deferred tax liabilities recognized
in conjunction with the Great Bear Acquisition, the directors
believe it is appropriate to recognize the previously unrecognized
deferred tax asset associated with losses carried forward. This
recognition resulted in a deferred tax benefit of $4,732,677
reflected in the results for year ended June 30, 2020
9. Subsidiary entities
The Company currently has the following wholly owned
subsidiaries:
Name Country of Incorporation Percentage Activity
ownership
-----------------------
Hadrian Oil & Gas LLC United States 100% Holding Company
Agrippa LLC United States 100% Holding Company
Pantheon Oil & Gas LP United States 100% Oil & Gas exploration
Great Bear Petroleum United States 100% Lease Holding Company
Ventures I, LLC
Great Bear Petroleum United States 100% Lease Holding Company
Ventures II, LLC
Great Bear Pantheon, United States 100% Holding Company
LLC
Pantheon East Texas, United States 100% Holding Company
LLC
Pantheon Operating Company, United States 100% Operating Company
LLC
----------------------------- -------------------------- ------------ -----------------------
Pantheon Oil & Gas LP is 99% owned by Agrippa LLC as its
limited partner and 1% by Hadrian Oil & Gas LLC as its general
partner.
10. Trade and other receivables
Group Group Company Company
2020 2019 2020 2019
$ $ $ $
Amounts falling due within
one year:
Prepayments & accrued income 29,906 332,000 27,207 13,214
Other receivables 44,261 1,511,649 41,600 43,953
Total 74,167 1,843,649 68,807 57,167
======== =========== ========= =========
Group Group Company Company
2020 2019 2020 2019
$ $ $ $
Amounts falling due after one
year:
Loans to subsidiaries - - 139,661,971 134,985,268
======== ======== ============= =============
An annual impairment review of the amount due from subsidiary
undertakings (loans to subsidiaries) is performed by comparing the
expected recoverable amount of the subsidiary's underlying tangible
and intangible assets to the carrying value of the loan in the
Company's statement of financial position. This has been assessed
in line with IFRS 9 for credit losses however recoverability is
supported by the underlying assets.
The Company fully transitioned from IAS 39 and adopted IFRS 9
from 1 July 2018 onwards. The adoption of standard has not required
any restatement of comparative information. On the basis of ongoing
annual assessments, the lifetime expected credit losses are
recognised against loans and receivables when they are identified
and are recorded in the statement of comprehensive income.
11. Cash and cash equivalents
Group Group Company Company
2020 2019 2020 2019
$ $ $ $
Cash at bank and in hand 4,802,965 1,853,986 1,745,834 1,312,164
=========== =========== =========== ===========
12. Trade and other payables
Group Group Company Company
2020 2019 2020 2019
$ $ $ $
Trade creditors 172,630 398,312 87,451 174,690
Accruals 215,462 1,012,035 215,347 173,952
--------- ----------- --------- ---------
Total 388,092 1,410,347 302,799 348,642
========= =========== ========= =========
13. Provisions
Plug and Abandonment Provision
The Group recognises a decommissioning liability where it has a
present legal or constructive obligation as a result of past
events, and it is probable that an outflow of resources will be
required to settle the obligation, and a reliable estimate of the
amount of obligation can be made. The obligation generally arises
when the asset is installed, or the ground/environment is disturbed
at the field location. A breakdown of these costs is detailed at
Note 21.
Legal Costs
Legal costs have been provided for due to an ongoing dispute
with a third-party vendor.
Group Group Company Company
2020 2019 2020 2019
$ $ $ $
Plug and Abandonment 1,085,863 1,085,863 - -
Legal costs 250,000 250,000
Total 1,335,863 1,335,863 - -
=========== =========== ========= =========
14. Impairments
14.1 Impairment of non-current assets - exploration and evaluation assets
The combined impacts of COVID-19 and the severe falls to oil and
gas prices had a destructive impact on the oil and gas industry
globally. As a result of this and as a result of the tremendous
advancements in the geological understanding and resource potential
of Pantheon's Alaskan portfolio since last year, Pantheon announced
subsequent to year end, its intention to exit its East Texas assets
to concentrate solely on the Alaska North Slope assets.
Accordingly, the Group has impaired the total carrying value of the
East Texas properties to nil.
During the year ended 30 June 2020 impairment charges of US$7.8m
(2019: $34.1m) were recognised in respect of exploration and
evaluation assets, comprising US$7.7m (2019: $34.1m) in East Texas
and US$0.1m (2019: $Nil) in Alaska, primarily reflecting the
impairment of the East Texas leasehold. Where impairment
indications were identified, impairment tests were performed. The
indicator for impairment was the Group's strategic decision to exit
East Texas and to solely focus the Group's efforts on Alaska where
the size and scale of the Group's opportunity is an order of
magnitude greater. Additionally, the severity of the COVID induced
fall in oil and gas prices materially diminished the fair value
assessment of the assets when compared to the previous year. Where
impairment indications have been found we have performed impairment
tests. Impairment losses have been measured, presented and
disclosed in accordance with IAS 36. In assessing whether an
impairment was required, the carrying value of the asset is
compared with its recoverable amount. The recoverable amount is the
higher of the assets fair value less costs to sell and value in
use.
Impairment losses - exploration and
evaluation assets 2020 2019
$ $
West AA Prospect - CGU (Texas)
West AA (prospect A leased acreage)
- Polk County 1,870,200 10,312,298
VOBM#5 Well - Polk County - 3,445,153
Austin Chalk (back costs) - Polk County - 5,751,637
Kara Farms (previously leased acreage)
- Polk County - 139,757
West West AA Prospect - CGU (Texas)
West West AA (prospect D leased acreage)
- Polk County 908,250 1,980,518
Prospect E - CGU (Texas)
Prospect E (leased acreage) - Polk
County - 57,204
Core Offset Prospect (aka Prospect
B&C) - CGU (Texas)
Core Offset (prospect B&C leased acreage)
- Tyler County 4,845,750 8,343,593
LP2 Offset - CGU (Texas)
LP2 offset (leased acreage) - Tyler
County 54,600 955,517
VOBM#4 Well - Tyler County - 3,152,480
Alaska
Acreage 130,112 -
Total 7,808,912 34,138,157
----------- ------------
14.2 Impairment of non-current assets - developed oil and gas assets
Impairment losses of US$6.9m (2019 $13.1m) were recognised in
respect of the producing oil and gas properties within East Texas.
The Group has previously announced a strategic decision to exit
East Texas and concentrate solely on its Alaskan Assets. In light
of the material fall in oil and gas prices in 2020, the company has
fully impaired the carrying value of the Oil and Gas producing
properties.
Impairment losses - developed oil and gas assets 2020 2019
$ $
VOS#1 Well 6,933,644 -
VOBM#2H Well - 7,426,917
VOBM#1 Well - 2,533,041
VOBM#3 Well - 3,076,644
Acreage - 56,082
Total 6,933,644 13,092,684
----------- ------------
14.3 Impairment of non-current assets - Property Plant & Equipment
Consistent with the Group's strategic decision to focus solely
on the Alaskan North Slope assets, the carrying values of all East
Texas property, plant and equipment have now been written down,
resulting in impairment charges of US$1.9m (2019: $1.4m). This
charge relates to the impairment of the capitalised costs relating
to Pantheon's share of the gas processing plant and the pipeline
associated with the VOS#1 well. These assets have been written down
to their current recoverable amount less costs to sell.
Impairment losses - Property Plant & Equipment 2020 2019
$ $
Polk County
Polk County Gas Plant 22,680 1,397,950
Pipeline 1,885,286 -
Total 1,907,966 1,397,950
----------- -----------
14.4 Impairment of non-current assets - Goodwill
There were no impairment losses in respect of goodwill during
the year (2019: $0.8m). For the year ended 30 June 2019 goodwill
was recorded as a result of the acquisition of 66% of Vision
Resources LLC and was fully impaired in that year.
Impairment of Goodwill 2020 2019
$ $
Impairment goodwill - Vision - 796,236
- 796,236
--------------------------------------- ---------
15. Exploration and evaluation assets
Group 2020 2019
$ $
Cost
At 1 July 201,830,954 50,303,959
Additions 3,019,261 10,579,750
Acquisitions - 148,508,125
Transfer to developed oil &
gas assets - (7,560,880)
Transfer to production facilities
& equipment - -
At 30 June 204,850,215 201,830,954
------------- -------------
Impairment
As at 1 July 40,943,694 6,805,537
Charge for year 7,808,912 34,138,157
------------- -------------
At 30 June 48,752,606 40,943,694
------------- -------------
Net book value
------------- -------------
At 30 June 156,097,609 160,887,260
============= =============
The Group additions for the year comprise the direct costs
associated with the preparation of drilling of oil and gas wells,
together with costs associated with leases and seismic acquisition
and processing.
Details of the impairments for the year are disclosed in note
14.
16. Disclosure required by IRFS 16 - Leases
Right of use assets
The Group used leasing arrangements relating to property, plant
and equipment. As the Group has the right of use of the asset for
the duration of the lease arrangement, a "right of use" asset is
recognised within property, plant and equipment.
When a lease begins, a liability and right of use asset are
recognised based on the present value of the lease payments.
Group
2020
$
Interest expense on lease liabilities 3,260
Total cash outflow for leases (21,394)
Additions to right-of-use assets 91,995
Depreciation charge - right of use assets (19,558)
Foreign exchange movement on right of use assets 392
----------
Carrying amount at the end of the year:
Right of use assets 72,829
----------
Lease liabilities
Group
2020
$
Current 46,311
Non-current 27,914
--------
74,225
--------
Disclosure required by IAS 17
Operating leases
Minimum lease payments under non-cancellable operating leases
fall due as follows:
Land and buildings
Group
2019
$
Less than one year 26,005
Between on and five years -
--------
26,005
--------
During 2019, $46,670 was recognised as an expense in the income
statement in relation to operating leases.
17. Property, plant and equipment and Developed Oil & Gas Properties
Developed Production
Oil & Gas Facilities Office Right of
Group Properties & Equipment Equipment Use Assets Total
$ $ $ $
Cost
At 30 June 2018 13,824,300 2,382,115 16,099 - 16,222,514
Additions 523,934 312,637 - - 836,571
Transfer from exploration
& evaluation assets 7,560,880 - - - 7,560,880
Transfer from developed
oil & gas assets (1,618,208) 1,618,208 - - -
------------- -------------- ------------ ------------- ------------
At 30 June 2019 20,290,906 4,312,960 16,099 - 24,619,965
Transition to IFRS 16 - - - 91,995 91,995
At 30 June 2020 20,290,906 4,312,960 16,099 91,995 24,711,960
------------- -------------- ------------ ------------- ------------
Depreciation
At 30 June 2018 - 145,516 15,000 - 160,516
Depreciation for the
year - 275,665 431 - 276,096
Exchange difference - - 33 - 33
------------- -------------- ------------ ------------- ------------
At 30 June 2019 - 421,181 15,464 - 436,645
Depreciation for the
year - - 420 19,558 19,978
Exchange difference - - 9 (392) (383)
------------- -------------- ------------ ------------- ------------
At 30 June 2020 - 421,181 15,893 19,166 456,240
------------- -------------- ------------ ------------- ------------
Depletion
At 30 June 2018 88,293 - - - 88,293
Depletion for the year 148,485 - - - 148,485
------------- -------------- ------------ ------------- ------------
At 30 June 2019 236,778 - - - 236,778
Depletion for the year 27,800 - - - 27,800
------------- -------------- ------------ ------------- ------------
At 30 June 2020 264,578 - - - 264,578
------------- -------------- ------------ ------------- ------------
Impairments
At 30 June 2018 - - - - -
Impairment for the year 13,092,684 1,397,950 - - 14,490,634
------------- -------------- ------------ ------------- ------------
At 30 June 2019 13,092,684 1,397,950 - - 14,490,634
Impairment for the year 6,933,644 1,907,966 - - 8,841,610
------------- -------------- ------------ ------------- ------------
At 30 June 2020 20,026,328 3,305,916 - - 23,332,244
------------- -------------- ------------ ------------- ------------
Net book value
As at 30 June 2020 - 585,863 206 72,829 658,898
============= ============== ============ ============= ============
As at 30 June 2019 6,961,444 2,493,829 635 - 9,455,908
============= ============== ============ ============= ============
All 'Developed oil & gas properties' relate to East Texas.
All prior East Texas wells have now been fully impaired.
Company
The Property, Plant and Equipment for the Company comprises of
Office Equipment $206 and Right of Use assets $72,829 as shown
above, resulting in a total of $73,035.
18. Share Capital
2020 2019
$ $
Allotted, issued and fully paid:
502,758,713 (2019:454,530,466) ordinary
shares of GBP0.01 each 7,250,204 6,647,498
102,471,055 (2019: 102,471,055) non-voting
convertible shares of GBP0.01 each 1,318,517 1,318,517
============= =============
Issued and
fully paid
Issued share capital: Number capital
As at 30 June 2020
502,758,713 ordinary shares of GBP0.01
each (2019: 454,530,466) 502,758,713 7,250,144
102,471,055 non-voting convertible
shares of GBP0.01 each (2019: 102,471,055) 102,471,055 1,318,576
------------- -------------
Total 605,229,768 8,568,720
------------- -------------
The Company issued a total of 48,228,247 new fully paid ordinary
shares during the year.
The ordinary shares rank pari passu in all respects including
the right to receive dividends and other distributions declared,
made or paid.
As at 30 June 2020 there were 502,758,713 ordinary shares (2019:
454,530,466) and 102,471,055 non-voting convertible shares (2019:
102,471,055) in issue.
19. Net cash outflow from operating activities
Group Group
2020 2019
$ $
(Loss) / profit for the year (16,978,595) 35,507,082
Net interest received (25,881) (25,781)
Unrealised gains - (100,757,286)
Less: deferred tax thereon - 28,783,396
Gain on disposal of subsidiary undertaking (109,417) -
Impairment of intangible assets -
Goodwill - 796,236
Impairment of intangible assets -
E&E 7,808,912 34,138,156
Impairment developed oil & gas assets 6,933,644 13,092,684
Impairment of PP&E 1,907,966 1,397,950
Bad debt expense 318,786 -
Plug & abandonment costs - (380)
Legal costs provision - 250,000
Vision General & Administrative costs
(non-cash) - 682,125
Depreciation of office equipment 420 431
Depreciation of right of use assets 19,559 -
Charge on Lease - right of use assets 3,260 -
Depletion of developed oil & gas assets 27,800 148,485
Depreciation of production & pipeline
facilities - 275,665
Decrease/(increase) in trade and other
receivables 21,002 (1,823,240)
(Decrease)/increase in trade and other
payables (854,972) 926,109
Shares issued in lieu of fees - 32,166
Effect of translation differences
(fixed assets) 10 34
Effect of translation differences (29) -
(right of use assets)
Effect of translation differences (47,800) (179,284)
Taxation (4,732,467) (18,757,633)
-------------- ---------------
Net cash outflow from operating activities (5,707,802) (5,513,085)
============== ===============
Company Company
2020 2019
$ $
Loss for the year (1,286,509) (1,463,533)
Net interest received (23,759) (25,671)
Depreciation 420 431
Depreciation of right of use assets 19,559 -
Interest charge on right of use assets 3,260 -
(Increase)/decrease in trade and other
receivables (11,639) 42,942
(Decrease)/increase in trade and other
payables (45,844) 144,321
Shares issued in lieu of fees - 32,166
Effect of translation differences
(fixed assets) 9 33
Effect of translation differences (29) -
(right of use assets)
Effect of translation differences (3,792,479) (3,625,534)
------------- -------------
Net cash outflow from operating activities (5,137,011) (4,894,845)
============= =============
20. Control
No one party controls the Company.
21. Decommissioning expenditure
Plug & Abandonment
The Directors have considered the environmental issues and the
need for any necessary provision for the cost of rectifying any
environmental damage, as might be required under local legislation.
As at 30 June 2020 the Group has fully provided for the future plug
and abandonment charges in relation to all of its wells in both
East Texas and on the Alaskan North Slope.
Alaska
Greater Alkaid #1 test well 500,000
500,000
Texas - Polk County
VOBM#1 well 95,579
VOBM#2H well 111,861
VOBM#3 well 98,141
VOBM#4 well 81,162
VOBM#5 well 95,302
482,045
Texas - Tyler County
VOS#1 well 103,438
103,438
1,085,483
As at 30 June 2019 and 2020
22. Exploration and evaluation commitments
There were no firm drilling commitments at 30 June, 2020.
23. Financial instruments
The Group's principal financial instruments comprise cash and
cash equivalents, trade and other receivables and trade and other
payables. Financial assets and liabilities are initially measured
at fair value plus transaction costs.
The main purpose of cash and cash equivalents financial
instruments is to finance the Group's operations. The Group's other
financial assets and liabilities such as receivables and trade
payables, arise directly from its operations. It is, and has been
throughout the entire period, the Group's policy that no trading in
financial instruments shall be undertaken.
The main risk arising from the Group's financial instruments is
market risk. Other minor risks are summarised below. The Board
reviews and agrees policies for managing each of these risks.
Market risk
Market risk is the risk that changes in market prices, and
market factors such as foreign exchange rates and interest rates
will affect the entity's income or the value of its holdings of
financial instruments.
The objective of market risk management is to manage and control
market risk exposures within acceptable parameters while optimising
the return.
Interest rate risk
The Group's exposure to the risks of changes in market interest
rates relates primarily to the Group's cash and cash equivalents
with a floating interest rate. These financial assets with variable
rates expose the Group to cash flow interest rate risk. All other
financial assets and liabilities in the form of receivables and
payables are non-interest bearing. The Group does not engage in any
hedging or derivative transactions to manage interest rate
risk.
In regard to its interest rate risk, the Group continuously
analyses its exposure. Within this analysis consideration is given
to potential renewals of existing positions, alternative
investments and the mix of fixed and variable interest rates. The
Group has no policy as to maximum or minimum level of fixed or
floating instruments.
Interest rate risk is measured as the value of assets and
liabilities at fixed rate compared to those at variable rate.
Weighted average Fixed Non - interest
interest rate interest rate bearing
2020 2020 2020
Financial assets: % $ $
Cash on deposit 0.05 - -
Trade and other receivables - - -
Net fair value
The net fair value of financial assets and financial liabilities
approximates to their carrying amount as disclosed in the statement
of financial position and in the related notes.
Currency risk
The functional currency for the Group's operating activities and
exploration activities is the US dollar. The Group incurs modest
headquarters and advisory expenses in Pounds Sterling. The Group
does not use derivative products to hedge foreign exchange risk and
has exposure to foreign exchange rates prevailing up to the dates
when funds are transferred into different currencies. The Group
raises equity capital in Pounds Sterling and converts the majority
of this to US dollars shortly after receipt of funds to minimise
currency risk. The Group continues to keep the matter under
review.
Financial risk management
The Directors recognise that this is an area in which they may
need to develop specific policies should the Group become exposed
to wider financial risks as the business develops.
Liquidity risk
Prudent liquidity risk management includes maintaining
sufficient cash balances to ensure the Group can meet liabilities
as they fall due.
In managing liquidity risk, the main objective of the Group is
therefore to ensure that it has the ability to pay all of its
liabilities as they fall due. The Group monitors its levels of
working capital to ensure that it can meet its debt repayments as
they fall due. The Group monitors its liquidity position carefully
and would consider equity fundraising, debt or farmouts when
capital additional liquidity is required.
The table below shows the undiscounted cash flows on the Groups
financial liabilities as at 30 June 2020 and 2019, on the basis of
their earliest possible contractual maturity.
Greater
Payable Within Within Within 6-12 than 1
Total on demand 1-3 months 3-6 months months year
$ $ $ $ $ $
As at 30 June
2020
Trade creditors 172,630 - 172,630 - - -
Accruals 215,462 - 215,462 - - -
Lease liabilities 79,666 - 12,579 12,579 25,158 29,350
Provision for
plug and abandonment 1,085,863 - - - - 1,085,863
1,553,621 - 400,671 12,579 25,158 1,115,213
=========== ============ ============= ============= ============= ===========
As at 30 June
2019
Trade creditors 398,312 - 398,312 - - -
Accruals 1,012,035 - 1,012,035 - - -
Provision for
plug and abandonment 1,085,863 - - - - 1,085,863
2,496,210 - 1,410,347 - - 1,085,863
=========== ============ ============= ============= ============= ===========
Credit risk management
Credit risk refers to the risk that a counterparty will default
on its contractual obligations resulting in financial loss to the
Group.
The Group has adopted a policy of only dealing with what it
believes to be creditworthy counterparties and would consider
obtaining sufficient collateral where appropriate, as a means of
mitigating the risk of financial loss from defaults. The Group's
exposure and the credit ratings of its counterparties are
continuously monitored, and the aggregate value of transactions
concluded is spread amongst approved counterparties.
Capital management
The Group's capital management objectives are:
-- To provide long-term returns to shareholders
-- To ensure the Group's ability to continue as a going concern
The Group defines and monitors capital to ensure that the
Company meets its objectives above, focussing on long-term share
price growth and a short term requirement to ensure a going
concern.
The Board of Directors monitors the available capital as well as
the Group's commitments and adjusts the level of capital as is
determined to be necessary by issuing new share if necessary. The
Group is not subject to any externally imposed capital
requirements.
These policies have not changed in the year. The Directors
believe that they have been able to meet their objectives in
managing the capital of the Group.
24. Share-based payments
Movements in share options
and share warrants in issue
Exercise price Number of Issued during Expired during Number of
options and year year options and warrants
warrants issued issued
as of 30 June as of 30 June
2019 2020
GBP0.30 10,000,000 - - 10,000,000
GBP0.30 9,607,843 - - 9,607,843
Total 19,607,843 - - 19,607,843
================== =============== ================ =======================
The Group has previously issued share options to directors and
employees. These are equity settled share-based payments as defined
in IFRS 2 Share-based payments. A recognised valuation methodology
(using the Black & Scholes valuation model) was employed to
determine the fair value of options granted as set out in the
standard. The charge incurred relating to these options was
recognised within operating costs. All share options have been
fully expensed as at 30 June 2020. The weighted average exercise
price of share options outstanding and exercisable at the end of
the period was GBP0.30 (2019: GBP0.30).
In January, 2019, the Group previously issued 9,607,843 warrants
as part of the consideration for the acquisition of Great Bear
Petroleum. The terms of these warrants mirror the terms of the
current share options in issue, however if exercised they convert
to non-voting shares as opposed to ordinary shares. All 19,607,843
shares options and warrants detailed in the table above are fully
vested and expire in September 2024.
The Equity reserve account represents expired share options that
were originally expensed through the profit and loss account.
25. Related party transactions
There were no related party transactions during the year other
than the payment of remuneration to Directors and key management
personnel. Total key management personnel compensation, including
directors and staff, was $1,857,169.
26. Contingent Liabilities
Vision Operating Company LLC ("VOC") is in dispute with a
third-party service provider, Kinder Morgan Treating L.P. ("Kinder
Morgan") over the intended early termination of a gas processing
agreement in East Texas. VOC ceased making payments to the service
provider in July 2019. The service provider subsequently issued a
demand to VOC and in January 2021 served Pantheon Resources plc
with a petition, seeking a payment of not less than $3.35m in
respect of this VOC contract. Pantheon held ownership of less than
0.1% of VOC via a 66.6% interest in Vision Resources LLC. Both
Vision Resources LLC and VOC filed for Chapter 7 Bankruptcy in the
United States Bankruptcy Court for the Southern District of Texas
Houston Division at 28 April 2020
Pantheon was not a signatory to the gas processing agreement, is
not named in the agreement, and explicitly declined to provide any
financial support in relation to the agreement. Pantheon has taken
legal advice on the matter and believes it has no liability to the
service provider. Accordingly, Pantheon do not consider a provision
should be included with the final statements and will contest any
claim made.
27. Subsequent events
Capital Raising - November 2020
In November, 2020 Pantheon completed a capital raising of
73,756,314 new Ordinary Shares raising approximately $30.2 million
(before expenses) at an issue price of 31 pence per share.
The funds raised will allow the Company to drill and, if deemed
appropriate, test up to four zones at the Talitha #A well, intended
to be spudded in January 2021. The Talitha #A well design includes
provision for the drilling of a horizontal section into the primary
target, Shelf Margin Deltaic sequence, if deemed appropriate.
Change of Advisor - October 2020
Canaccord Genuity Limited was appointed as its sole broker and
Nominated Adviser to the Company.
Receipt of Independent Experts Report and confirmation of
Prospective Resource at Talitha
In September 2020 the Group received an Independent Experts
Report and Resource Statement from the International Petroleum
Consultants Lee Keeling & Associates which confirmed a
Prospective Resource of 302 million Barrels of oil for the updip
section of the Shelf Margin Deltaic horizon at Talitha.
Issuance of Share Options to Directors and staff - July 2020
In July 2019 the Company announced the intention to issue up to
13.7m share options to Directors and to all staff which were
subsequently issued in July 2020. The options have an exercise
price of GBP0.27, which represented a premium of 93% to the closing
share price of GBP0.14 on the day of issue (7(th) July 2020). 50%
of the share options granted vested 90 days from the issue date,
and the remaining 50% vested upon the spudding of the Talitha #A on
the Company's Alaskan acreage. These were the first share options
issued to staff since 2014. In relation to the grant, the Company
has implemented a share option grant which is comprised of two
components; (i) an up-front issue of out of the money share options
(represented by this grant in July 2020), and an annual grant of
share options typically issued at or around the time of issuance of
the Annual Report, in respect of the year just passed. On 19
November 2020 at the time of the November fundraising, Pantheon
announced its intention to issue share options under the annual
grant component of the plan representing 2.25% of share capital
(voting and nonvoting) at the issue price. It is anticipated that
this will occur shortly after publication of the annual report.
Details of the July 2020 share option awards to Directors and
PDMRs are presented in the following table:
Director Number of Exercise Options as a per
options granted(2) Price cent of issued
per Share Share Capital
option following the
Placing(1)
John Cheatham 1,500,000 27 pence 0.25%
--------------------- ------------ ------------------
Robert Rosenthal 1,500,000 27 pence 0.25%
--------------------- ------------ ------------------
Justin Hondris 1,500,000 27 pence 0.25%
--------------------- ------------ ------------------
1. Issued share capital includes all voting shares as at 30 June
2020 and 102.4m non-voting shares.
2. Terms: GBP0.27 exercise price, 10-year life and vested in 2
equal tranches; 50% subject to a time based condition (90 days from
grant) and 50% subject to a performance milestone (spudding of the
Talitha #A well, in Alaska).
Formal Approval of the Alkaid Unit
As part of the now granted Alkaid unit application (22,804
acres), Pantheon submitted a First Plan of Exploration ("POE")
outlining its proposed activities in relation to the unit. These
include a commitment to the reprocessing of approximately 50 Square
miles of 3D seismic as well as engagement of 3(rd) party
specialists to produce an engineering study on a conceptual
'hot-tap' into the Trans Alaska Pipeline System ("TAPS"). There are
no firm drilling commitments, however the POE proposes the drilling
of two wells from gravel pads located adjacent to the Dalton
Highway to allow year round activity. Under the POE, drilling and
long-term production testing on the first of these wells, the
Alkaid #2 well, is targeted for as early as Spring/Summer 2021,
subject to funding. Dependent upon the results of Alkaid #2, the
POE anticipates the drilling and testing of the Alkaid#3 well to
commence in 2022.
Formal Approval of the Talitha Unit
The Company's application to form the Talitha Area Unit has been
formally approved by the State of Alaska, Department of Natural
Resources ("DNR"). The Talitha Area Unit encompasses 44,463 acres
of State Leases in the central Alaska North Slope area, located
adjacent to both the Trans Alaska Pipeline System ("TAPS") and the
Dalton Highway. The unit lies directly adjacent to the southern
border of the recently-approved Alkaid Unit, 20 miles south of the
Prudhoe Bay Unit, and 25 miles southeast of Kuparuk River Unit and
has an effective date of November 10(th) 2020.
Acquisition of New Acreage
In January 2021, Pantheon announced the successful acquisition
of a 100% interest in approximately 66,000 acres in the State of
Alaska's North Slope Areawide Lease Sale. The new leases are
strategically positioned in two areas contiguous to our current
acreage on our northwestern, western, and eastern boundaries.
Pantheon's acreage now totals approximately 160,000 contiguous
acres.
Dispute Update - East Texas
Kinder Morgan Treating L.P. ("Kinder Morgan") has filed a
petition against Pantheon, seeking payment of c.$3.35m with respect
to the early termination of a Gas Treating Agreement entered into
between Kinder Morgan and Vision Operating Company LLC ("VOC").
Refer note 26 for more detail.
Spudding of the Talitha #A well, North Slope of Alaska, 100%
working interest
The Talitha #A appraisal well spudded ahead of schedule on 13
January, 2021, with drilling planned to a total vertical depth of
approximately 10,000 feet. The well will target the shallowest
Shelf Margin Deltaic horizon as the primary objective and will also
drill through a number of secondary objectives including: (i) the
'Slope Fan System', (ii) the 'Basin Floor Fan', and (iii) the
'Kuparuk' horizons.
Drilling and testing operations at Talitha #A must be completed
prior to the onset of Spring when temperatures warm up and the ice
road begins to thaw. Historically, the drilling season has ended
near the end of March. Given the number of targeted formations, and
subject to positive results, Pantheon intends to make full use of
the available drilling window, undertaking drilling and testing
operations as long as weather permits. As of 1730 Alaskan time on
13 January the well was drilling ahead at a depth of 225 feet.
Following the acquisition in January 2021 of an additional 10.8%
working interest discussed below, Pantheon moves from 89.2% to 100%
working interest in the Talitha unit.
Acquisition of 100% of Borealis Alaska LLC and its 10.8% working
interest in the Talitha Unit
In January 2021, Pantheon acquired 100% of Borealis Alaska LLC.
Borealis owned a 10.8% working interest in the Talitha Unit. Upon
completion of the transaction, which is subject to approval by the
Alaska Department of Natural Resources, Pantheon will own a 100%
working interest in the Talitha Unit. Pantheon will issued
14,272,592 ordinary fully paid shares in consideration for the
transaction, which are subject to a lock in agreement and are not
available for sale until 30 June 2021, in full and final
consideration for the 10.8% working interest.
GLOSSARY
bbl barrel of oil mcfd thousand cubic feet per day
bopd barrels of oil per day Mmbeo million barrels of oil equivalent
mmbo million barrels of oil NPV net present value
boepd barrels of oil equivalent NVP10 net present value at 10% pa
per day discount rate
mcf thousand cubic feet $ United States dollar
NCI non-controlling interest OIP Oil in place
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January 27, 2021 02:00 ET (07:00 GMT)
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