TIDMSCIR
RNS Number : 4611E
Scirocco Energy PLC
30 June 2023
30 June 2023
Scirocco Energy plc
("Scirocco Energy" or "the Company")
Publication of Annual Report and Final Results
Scirocco Energy (AIM: SCIR), the AIM investing company targeting
attractive assets within the European sustainable energy and
circular economy markets, is pleased to announce the publication of
its annual report and audited annual results for the period ended
31 December 2022. The Company will shortly be publishing its Notice
of AGM and a further announcement will be made in this regard.
The Annual Report & Accounts will be posted to the Company's
website at https://www.sciroccoenergy.com/ .
Highlights
-- Agreed in June 2022 to divest of 25% non-operated interest in
Ruvuma asset for up to $16 million
o Initial consideration of US$3 million payable on completion of
the disposal, which is now expected to be in Q3 2023
-- Ruvuma disposal approved by Shareholders at a general meeting held on 29th June 2022
-- In December 2022, the Tanzanian Fair Competition Commission
("FCC") granted its unconditional approval for the transaction and
issued the Company with the Merger Clearance Certificate - an
important step towards completion of the asset divestment.
-- Strong operational and financial performance from Greenan (GGL) through 2022 including:
o GGL delivered c. 4 million kWh during 12 month period of EAG
ownership
o Operational availability in excess of 93%
o EAG/GGL Revenue of GBP1,414k (2021:GBP1,163k)
o
o EAG/GGL EBITDA of GBP619k (2021: GBP352k)
o GBP295,000 of mechanical upgrades and improvements made to
future proof the GGL asset
Post Period Highlights
-- Scirocco and APT have executed amendments to extend the
longstop date of the proposed transaction from 30 June 2023 to 31
August 2023
-- Operational and financial performance at Greenan Generation
Limited ("GGL") remains on a positive trend
-- Board changes to reflect strategic evolution of business with
appointments of Matt Bower and Niall Roberts replacing Muir Miller
and the outgoing Don Nicolson
-- Continued focus on cost management to preserve cash and establish a sustainable burn-rate
Commenting on the Results, Alastair Ferguson, Non-Executive
Chairman, said:
"2022 was a year of strategic progress for the Group as we
worked towards completion of the divestment of legacy assets, in
particular Ruvuma, and continued the development of the Company's
sustainable energy investment strategy. This being said, it is
important to acknowledge the delay to the initially anticipated
timeline for completion of the Ruvuma divestment and its impact on
our strategic progress, we therefore thank our shareholders, new
and old, for their patience and for supporting the strategy to
build a business of scale that is capable of delivering long-term
growth and sustainable shareholder value."
For further information:
Scirocco Energy plc +44 (0) 20 7466
Tom Reynolds, CEO 5000
Strand Hanson Limited, Nominated Adviser
Ritchie Balmer / James Spinney / Robert +44 (0) 20 7409
Collins 3494
WH Ireland Limited, Broker +44 (0) 207
Harry Ansell / Katy Mitchell 220 1666
Buchanan, Financial PR +44 (0) 20 7466
Ben Romney / George Pope 5000
CHAIRMAN'S STATEMENT
FOR THE YEARED 31 DECEMBER 2022
On behalf of the Board of Directors, I hereby present the
financial statements of Scirocco Energy plc (the "Company") and its
subsidiaries (the "Group") for the year ended 31 December 2022.
2022 was a year of strategic progress for the Group as we worked
towards completion of the divestment of legacy assets, in
particular Ruvuma, and continued the development of the Company's
sustainable energy investment strategy. The macro backdrop
continues to support the new strategy as the importance of
delivering secure and sustainable energy solutions for the UK and
beyond becomes increasingly clear, while increased volatility in
the oil and gas markets, exacerbated by Russia's invasion of
Ukraine, has demonstrated the prudence of the Board and
shareholders' decision to pivot to an investment strategy that
offers a risk/reward profile better aligned to a company of
Scirocco's scale and ability to deliver sustainable long-term
returns.
With this in mind, in my capacity as Non-Executive Chairman of
the Group, I am pleased to provide a review of the 2022 financial
year along with an outlook for the current fiscal year and
beyond.
Strategy and Portfolio
During 2022 the Group made significant strides towards divesting
its legacy oil and gas assets in order to progress its strategy to
invest in sustainable and circular economy assets which meet our
criteria for value creation, such as the Company's ongoing
investment into Energy Acquisitions Group Limited ("EAG") and
support for its acquisition and subsequent operation of Greenan
Generation Limited ("GGL"), which EAG acquired in September
2021.
A significant amount of work was undertaken in the second half
of 2022 to identify and high grade potential portfolio
opportunities to build on what has been achieved in GGL. In line
with our strategy we continue to review opportunities across all
three target investment segments: energy, circular and vector.
Ruvuma Disposal
As initially announced to the market in the RNS dated 13 June
2022, the Group entered into a conditional binding agreement with
Wentworth Resources plc to divest its 25% non-operated interest in
the Ruvuma asset, Tanzania. Following this announcement, and in
accordance with the terms of the Joint Operating Agreement ("JOA")
associated with Ruvuma, ARA Petroleum Tanzania Limited ("APT")
informed the Company that it would be exercising its pre-emption
rights in relation to the sale of the Company's interest in the
asset for a total consideration of up to US$16 million comprised
of:
-- Initial consideration of US$3 million payable on completion
of the disposal, which is now expected to be in Q3 2023;
-- US$3 million payable upon final investment decision being
taken by the parties to the Ruvuma Asset Production Sharing
Agreement or the JOA as the case may be;
-- Deferred consideration of up to US$8 million payable in the
form of a 25% net revenue share from the point when Ruvuma
commences delivery of gas to the gas buyer;
-- Contingent consideration of US$2 million payable on gross
production reaching a level equal to or greater than 50Bcf.
In addition, APT would provide Scirocco with a loan of up to
ceiling $6,250,000 to meet all cash calls pursuant to the Ruvuma
JOA arising between 1 January 2022 and the expected completion date
- thereby removing the risk of default and possible relinquishment
of Scirocco's interest in the project. During the period between
signature of the sale agreements and completion the loan accrues as
cash calls are paid by APT on Scirocco's behalf. The consideration
payable at completion is also increased by the cash calls incurred.
At completion the accrued loan will be offset against the increased
consideration balance, cancelling out the loan. In March 2023,
Scirocco and APT agreed to increase the contractional longstop date
to 31 August 2023 from 30 June 2023.
The total potential consideration represents a significant
premium to Scirocco's prevailing market capitalisation and the deal
strengthens Scirocco's balance sheet and, critically, removed the
imminent need to raise capital to fund the Ruvuma work programme
during 2022 and into 2023 - which given the highly challenging
market backdrop was a genuine risk that the Board were committed to
avoid at all costs.
Pursuant to Rule 15 of the AIM Rules for Companies, the Proposed
Transaction was presented for shareholder approval by way of an
ordinary resolution at a General Meeting in June 2022, and the
resolution received the shareholders to approve the
transaction.
In December 2022, the Tanzanian Fair Competition Commission
("FCC") granted its unconditional approval for the transaction and
issued the Company with the Merger Clearance Certificate - an
important step towards completion of the asset divestment.
Following the end of the period we have seen significant progress
on the asset in terms of an accelerated timeline to first gas,
which we see as a positive step towards receiving the contingent
payments relating to FID and the deferred consideration linked to a
share of gas revenue.
As communicated to the market in an RNS dated 25 May 2023, the
Company and APT have extended the long stop date to 31 August 2023
and both parties expect to complete the transaction within this
timeframe. Completion of this divestment represents a material
strategic event for the Company and enables the business to move
forward with a clear strategic vision, a significantly strengthened
balance sheet and belief that the material upside associated with
contingent elements of that transaction will provide funds to
accelerate Scirocco's stated growth strategy
EAG/GGL
Following the acquisition of GGL in September 2021, EAG
implemented a number of operational and technical improvements to
the site, using their extensive experience of operating and
maintaining anaerobic digestion plants to minimise downtime and
maximise efficiency gains. As reported to the market in April 2023,
in Q4'22 GGL supported by wholesale power prices performed
strongly, exceeding the key performance indicators of production,
revenue and EBITDA achieved in Q4'21 and clearly demonstrating the
positive impact of EAG's operatorship and the overall approach to
optimisation of these low-risk, cash-generative assets.
During the period, Scirocco supported EAG's team in identifying
and reviewing a number of potential investments with similar
profiles to GGL and good progress continues to be made in the
screening and due diligence processes. That being said, factors
including the delayed completion of the Ruvuma divestment and the
absence of authority to issue new share capital have hindered more
substantial progress on these opportunities . However, the Board
remains confident of completing the Ruvuma transaction before the
newly extended long stop date of 31 August 2023 which will deliver
funds and potentially further contingent payments within the
remainder of 2023 that will provide capital for further
investment.
In parallel, Scirocco will continue to support EAG as it
investigates alternative sources of potential investment funds to
secure attractive acquisition opportunities currently under
consideration. Longer-term, as the EAG JV continues to forge a
track record for consistent delivery and value uplift from its
ownership and operatorship of Anaerobic Digestion installations, we
hope to broaden the appeal of our investment proposition.
Other Assets
Corallian Energy Limited
Under its previous investment policy, in 2018 Scirocco undertook
a minor investment in Corallian Energy Limited through the
subscription for 83,333 shares at a price of GBP1.50 per share. In
September 2022 Corallian's parent company, Reabold Resources plc,
announced the conditional sale of Corallian at a price of up to
GBP3.20 per share as a combination of initial cash plus contingent
payments, providing a profitable exit from a legacy investment for
Scirocco. The proceeds further strengthened the Company's balance
sheet and supported ongoing opportunity screening being undertaken
by the Joint Venture with EAG.
Helium One
During 1H 2022 Scirocco sold 1,550,000 shares of Helium One at
an average price of 6.7p/share.
Scirocco held its shares in an account with Pello Capital which
entered administration in October 2022. As a result, Scirocco's
Helium One shareholding was split into two tranches.
-- 1,906,088 shares held in a brokerage account.
-- 1,000,000 shares held within the general Pello Capital Crest
account which had not been credited to the Scirocco named
account
Scirocco has been engaged with the administrator, Evelyn
Partners, regarding the recovery of the 1 million shares. At 31
December 2022 Scirocco held 2,906,088 shares in Helium, 1 million
of which are the subject of ongoing recovery discussions with the
Pello Capital administrator.
I am pleased to see the monetisation of the Helium One
investment continue.
Governance/Shareholder Engagement
As we report on the first full year of implementing Scirocco's
reshaped investment strategy, and despite the overwhelming mandate
delivered by shareholders in support of this strategy in 2021, the
Board recognises that there remained some shareholder objections to
the pivot to investing in sustainable energy and the circular
economy which drove the strategic divestment of the legacy
investment in Ruvuma.
As a result, the Directors and I took part in several live
sessions, both virtual and in person, with shareholders throughout
2022 in order to better understand shareholder concerns. This
culminated in an investor event in December 2022 around the Group's
investment into EAG and its forward strategy which was positively
received by all attendees.
At the same time, the Board acknowledges the results of the
shareholder vote at the AGM in August 2022, especially on
Resolution 6 - Disapplication of Pre-emption Rights. As stated at
the time and above, we believe this has impacted the Group's
ability to execute swiftly on opportunities that meet our criteria
for value creation to the detriment of all stakeholders. In the
constructive spirit of shareholder engagement activity in 2022,
where appropriate the Board will continue its efforts to engage on
this topic with all shareholders to alleviate concerns, outline the
long- term growth strategy and emphasise how the decisions
undertaken by the Board support delivery of that strategy.
A final point on Governance, is the evolution of the Board
composition to reflect the change in strategic direction of
Scirocco. The Board recognises that it is of the utmost importance
that it retains the appropriate level of skills, experience and
independence in order to be able to execute its strategy on behalf
of its shareholders. In that regard, post-period, there have been a
number of changes with Muir Miller stepping down, and Don Nicolson
notifying of his intention to step down in due course. I'd like to
thank both Muir and Don for their good insights and guidance
through what has been a highly transitional and challenging period
for the Company.
Scirocco has been fortunate to replace these Directors with two
candidates put forward as representatives of our largest
shareholder G.P. Jersey in the form of Matt Bower and Niall Roberts
who join as Non-Executive Directors. Both Matt and Niall bring
directly applicable skills and experience within the broader
renewables/clean-tech space which will be invaluable to Scirocco
moving forward. Reflecting our commitment to good Governance, we
are in the process of recruiting a suitable independent
non-executive director with the requisite skills to assume the role
as Chairman of the Audit Committee which will come available
through the departure of Don Nicolson.
Outlook
While progress is being made across our strategic priorities, it
is important to acknowledge the delay to the initially anticipated
timeline for completion of the Ruvuma divestment and its impact on
our strategic progress. While this is not uncommon in transactions
of this nature in Tanzania, we understand and share shareholder
frustration and acknowledge there has been a knock-on impact on the
Company's ability to deploy capital for further investments in the
sustainable energy sector as rapidly as we would have liked.
As outlined above, the Company expects to complete the transfer
of ownership of its 25% interest in Ruvuma to APT by the longstop
date of 31 August 2023, which will deliver net funds immediately
upon completion and potentially further funds through contingent
payments during 2023 which will provide capital for further
investment within the sustainable energy and circular economy
sectors.
Recognising that growth will require funding, the Board
continues to investigate sources of parallel investment which would
reduce the call on Scirocco's balance sheet in the short term by
bringing in third party capital alongside Scirocco balance sheet
cash as we seek to build a self-sustaining business of scale.
Closing Remarks
The Group began 2022 with a mandate to pursue its strategy of
investing in sustainable energy and the circular economy while
removing the overhang of legacy investments in hydrocarbon
production.
Having secured an agreement to divest Ruvuma to APT and realised
significant upside in the Company's investment in Corallian Energy,
we have established a clear path to strengthen Scirocco's balance
sheet and, upon completion of the Ruvuma divestment, will have the
ability to fund follow on investments in the anaerobic digestion
space through the joint venture with EAG, as we seek to replicate
the success of Greenan over the past year and build a business of
scale for the benefit of all stakeholders.
The Company will continue to support EAG in its operatorship of
Greenan and its business development efforts, as it identifies,
screens and pursues potential acquisition targets and other growth
opportunities. EAG has a high quality team with a unique network
and pipeline of opportunities. I'd like to thank the EAG team for
their patience while Scirocco fully completes its strategic
re-positioning and are pleased to be aligned with them as we
jointly pursue value accretive opportunities that deliver a
multitude of stakeholder benefits in terms of UK's pathway to
net-zero.
I'd like to commend Tom Reynolds for his diligent work across
the various work-streams associated with the Ruvuma divestment, the
development of the investment strategy and the progression of the
EAG Joint Venture.
Finally, I'd like to thank our shareholders, new and old, for
their patience. There is no doubt that long-term shareholders in
the Company have had a tough ride and we fully recognise that,
despite our best efforts, things did not work out the way that they
had hoped when they invested in the Company on the basis of
Tanzania. That said, it is for exactly that reason that the Board
has changed the Company's investment strategy to reflect changing
market demand and broader macro drivers, and we see strong
opportunities ahead to build a business of scale and relevance that
is capable of delivering long-term growth and sustainable
shareholder value.
Section 172 (1) Statement
The Group was admitted to the AIM Market of the London Stock
Exchange on 12 April 2007 and has been a public company from this
date. The Group is required to provide a Section 172(1) statement
under the terms of its AIM listing. This disclosure aims to
describe how the Directors have acted to promote the success of the
company for the benefit of its members as a whole, taking into
account (amongst other matters) the matters set out in section
172(1)(a) to (f) of the Companies Act which are set out below.
(a) the likely consequences of any decision in the long term
As discussed above, the decision to propose and adopt the new
investment policy - approved and adopted by shareholder vote at the
AGM in July 2021 - the decision to sell the Ruvuma asset and the
investment made in EAG (which supported EAG to acquire GGL) have
been taken with the long term future of the company in mind. In
taking these decisions the Board has taken account of the relative
risk involved in each of the relevant investments and chosen a
sustainable course of action which allows the company to be
developed in a more predictable manner by targeting investment
assets with significantly lower levels of uncertainty and which
deliver cash flow in the short term which is then available to be
reinvested. The Group has not made any other decisions which will
likely affect the company in the long term in the current financial
year.
(b) the interests of the company's employees
Aside from the Directors, the Group has one employee and the
decisions to promote the success of the company for the benefit of
its members as a whole as described above are entirely consistent
with the interests of the company's employee.
(c) the need to foster the company's business relationships with
suppliers, customers and others
Aside from a small number of service providers, the success of
the Group's investment strategy will be driven in part by the
business relationships that exist between the Directors and the
management of the Group's investee companies and as such the
maintenance of such relationships is given a very high priority by
the Directors.
-
(d) the impact of the company's operations on the community and
the environment
During the current investment phase the Group has no operations.
The Directors are nevertheless cognisant of the potential impact of
future investments on affected communities and the environment and
such factors will continue to be considered as part of investment
appraisal and decision making.
(e) the desirability of the company maintaining a reputation for
high standards of business conduct
The Group's standing and reputation with other energy companies,
equity investors, providers of debt, advisers and the relevant
authorities are key in the Company achieving its investment
objectives and the Group's ethics and behaviour, as summarised in
the Group's Business Principle and Ethics, will continue to be
central to the conduct of the Directors. The Group is advised by
blue-chip experienced advisers which also assist in maintaining
high standards of conduct.
(f) the need to act fairly as between members of the company
The Directors will continue to act fairly between the members of
the Group as required under the Companies Act, the AIM Rules and
QCA corporate governance principles.
Alastair Ferguson
Non-Executive Chairman
Date: 29 June 2023
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2022
----------------------------------------------- --------------------------------------------------
2022 2021
Notes GBP000 GBP000
Share of profit in joint venture 5 40 -
Administrative expenses 6 (1,613) (1,892)
Operating loss (1,573) (1,892)
Other income 132 58
Other gains and losses 8 3 2,196
Profit before taxation (1,438) 362
Income tax expense 9 - -
Profit for the year from continuing operations (1,438) 362
Loss for the year from discontinued operations
10 (3,377) (4,053)
Loss and total comprehensive income for
the year (4,815) (3,691)
Earnings per share 11
Basic (0.53) (0.49)
Diluted (0.47) (0.43)
Earnings per share from continuing operations
Basic (0.16) 0.05
Diluted (0.14) 0.04
Earnings per share from discontinued
operations
Basic (0.38) (0.53)
Diluted (0.33) (0.47)
STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2022
----------------------------------- -----------------------------------------------------
2022 2021
GROUP Notes GBP000 GBP000
Non-current assets
Loan receivable from related party 16 1,448 1,244
Investment in joint venture 14 40 -
1,488 1,244
Current assets
Financial assets at fair value
through profit or loss 273 437
Trade and other receivables 16 210 153
Cash and cash equivalents 750 2,059
Assets held for sale 15 10,715 11,600
11,948 14,249
Total assets 13,436 15,493
Current liabilities
Trade and other payables 17 224 178
Liabilities held for sale 15 3,110 166
3,334 344
Net current assets 8,614 13,905
Net assets 10,102 15,149
Equity
Called up share capital 18 1,801 1,518
Share premium account 19 38,408 38,155
Deferred share capital 18 1,831 2,729
Share based payments 20 2,071 1,941
Retained earnings (34,009) (29,194)
Total equity 10,102 15,149
The notes on pages 45 to 82 form part of these financial
statements.
The financial statements were approved by the board of directors
and authorised for issue on 29 June 2023 and are signed on its
behalf by:
..............................
Mr Tom Reynolds
Director
STATEMENT OF FINANCIAL POSITION (CONTINUED)
AS AT 31 DECEMBER 2022
2022 2021
COMPANY Notes GBP000 GBP000
Non-current assets
Loan receivable from related
party 16 1,450 1,244
1,450 1,244
Current assets
Financial assets at fair value
through profit or loss 273 437
Trade and other receivables 16 210 153
Cash and cash equivalents 750 2,059
Assets held for sale 15 10,715 11,600
11,948 14,249
Total assets 13,398 15,493
Current liabilities
Trade and other payables 17 214 178
Liabilities held for sale 15 3,110 166
3,324 344
Net current assets 8,624 13,905
Net assets 10,074 15,149
Equity
Called up share capital 18 1,801 1,518
Share premium account 19 38,408 38,155
Deferred share capital 18 1,831 2,729
Share based payments 20 2,071 1,941
Retained earnings (34,037) (29,194)
Total equity 10,074 15,149
The notes on pages 45 to 82 form part of these financial
statements.
The company has taken advantage of the exemption under section
408 of the Companies act 2006 to not present a Company statement of
comprehensive income. Profit for the year for the Company was
GBP4,845k.
The financial statements were approved by the board of directors
and authorised for issue on 29 June 2023 and are signed on its
behalf by:
..............................
Mr Tom Reynolds
Director
STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2022
Share Share Deferred Share-based Retained earnings Total
capital premium share payments
account capital
Notes GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
GROUP
Balance at 1
January 2021 1,448 38,399 1,831 1,470 (25,503) 17,645
Year ended 31
December 2021:
Loss and total
comprehensive
income for
the year - - - - (3,691) (3,691)
Issue of share
capital 18,19 70 292 (362) - - -
Shares not
issued moved
to deferred
share
capital* 18,19 - (536) 536 - - -
Consideration
received for
shares to be
issued 18 - - 724 - - 724
Credit to
equity for
equity-settled
share-based
payments 20 - - - 471 - 471
-------
Balance at 31
December 2021 1,518 38,155 2,729 1,941 (29,194) 15,149
-------
Year ended 31
December 2022:
Loss and total
comprehensive
income for
the year - - - - (4,815) (4,815)
Issue of share
capital 283 253 - - - 536
Credit to
equity for
equity settled
share-based
payments 20 - - - 130 - 130
Repayment of
consideration
for shares not
issued 18 - - (898) - - (898)
-------
Balance at 31
December 2022 1,801 38,408 1,831 2,071 (34,009) 10,102
=======
The notes on pages 45 to 82 form part of these financial
statements.
* the adjustment is made to correct deferred shares incorrectly
recorded as share premium in the prior year
STATEMENT OF CHANGES IN EQUITY (CONTINUED)
FOR THE YEARED 31 DECEMBER 2022
Share Share Deferred Share-based Retained earnings Total
capital premium share payments
account capital
Notes GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
COMPANY
Balance at 1
January 2021 1,448 38,399 1,831 1,470 (25,503) 17,645
Year ended 31
December 2021:
Loss and total
comprehensive
income for
the year - - - - (3,691) (3,691)
Issue of share
capital 18,19 70 292 (362) - - -
Shares not
issued moved
to deferred
share
capital* 18,19 - (536) 536 - - -
Consideration
received for
shares to be
issued 18 - - 724 - - 724
Credit to
equity for
equity-settled
share-based
payments 20 - - - 471 - 471
-------
Balance at 31
December 2021 1,518 38,155 2,729 1,941 (29,194) 15,149
-------
Year ended 31
December 2022:
Loss and total
comprehensive
income for
the year - - - - (4,892) (4,892)
Issue of share
capital 283 253 - - - 536
Credit to
equity for
equity settled
share-based
payments 20 - - - 130 - 130
Repayment of
consideration
for shares not
issued 18 - - (898) - - (898)
-------
Balance at 31
December 2022 1,801 38,408 1,831 2,071 (34,086) 10,025
=======
The notes on pages 45 to 82 form part of these financial
statements.
* the adjustment is made to correct deferred shares incorrectly
recorded as share premium in the prior year
STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2022
2022 2021
Notes GBP000 GBP000 GBP000 GBP000
GROUP AND COMPANY
Cash flows from operating
activities
Cash absorbed by operations 26 (1,515) (1,417)
Net cash outflow from operating
activities (1,515) (1,417)
Investing activities
Cash movements in relation
to assets held for sale (2,467) (642)
Loans granted to related party (70) (1,200)
Proceeds from disposal of investments 161 3,426
Net cash (used in)/generated
from
investing activities (2,376) 1,584
Financing activities
Proceeds from issue of shares - 724
Cash settlement of deferred
shares not
issued (362) -
Loan proceeds in relation to
assets held for
sale 2,944 -
Net cash generated from financing
activities 2,582 724
Net (decrease)/increase in
cash and cash
equivalents (1,309) 891
Cash and cash equivalents at
beginning of year 2,059 1,168
Cash and cash equivalents at
end of year 750 2,059
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2022
1 Accounting policies Company information
Scirocco Energy plc ("Scirocco", the "Group") is a public listed
company incorporated in England & Wales. The address of its
registered office 1 Park Row, Leeds, United Kingdom, LS1 5AB. The
Company's ordinary shares are traded on the AIM Market operated by
the London Stock Exchange. The financial statements of Scirocco
Energy plc for the year ended 31 December 2022 were authorised for
issue by the Board on X and the statement of financial position is
signed on the Board's behalf by Mr Reynolds.
Investing policy
Scirocco's investing policy is to acquire a diverse portfolio of
direct and indirect interests in sustainable energy and circular
economy assets within the European energy market. The Board is
seeking to invest in opportunities which meet the following
criteria:
-- cash generative, with the potential to re-invest operational
cash flow in further growth;
-- situated within the European energy space;
-- acquisition targets within the low-carbon space, including
renewable energy, circular economy and energy storage and transfer
sectors;
-- assets which can attract the necessary investment capital,
taking appropriate account of growing investor sentiment towards
ESG and SRI indicators; and
-- assets which deliver stable returns, with lower exposure to global commodity prices.
The Company may invest by way of outright acquisition or by the
acquisition of assets, including the intellectual property, of a
relevant business, partnerships or joint venture arrangements. Such
investments may constitute a minority stake in the company (which
may be private or listed on a stock exchange, and which may be
pre-revenue) or project in question. The Company's investments may
take the form of equity, joint venture debt, convertible
instruments, licence rights, or other financial instruments as the
Directors deem appropriate.
Scirocco intends to be a long-term investor and the Directors
will place no minimum or maximum limit on the length of time that
any investment may be held. There is no limit on the number of
projects into which the Company may invest, nor the proportion of
the Company's gross assets that any investment may represent at any
time.
Statement of compliance with UK adopted IAS
The financial statements of the Group and the Company have been
prepared in accordance with UK-adopted international accounting
standards and as applied in accordance with the provisions of the
Companies Act 2006. The Directors have taken advantage of the
exemption available under Section 408 of the Companies Act 2006 and
not presented an income statement nor a statement of comprehensive
income for the Company alone. The principal accounting policies
adopted by the Group are set out below.
Accounting convention
The financial statements have been prepared on the historical
cost basis, except for the measurement to fair value of assets and
financial instruments as described in the accounting policies
below, and on a going concern basis.
The financial report is presented in Pound Sterling (GBP) and
all values are rounded to the nearest thousand pounds (GBP'000)
unless otherwise stated. The functional currency of the Group and
Company are also GBP.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARED 31 DECEMBER 2022
1 Accounting policies (Continued)
Going concern
The Directors note the losses that the Group has made for the
year ended 31 December 2022. The Directors have prepared cash flow
forecasts for the period ending 30 June 2023 which take account of
the current cost and operational structure of the Group. The base
case forecast takes account of the sale of Ruvuma to ARA Petroleum
Tanzania ("APT") and the loan structure provided within that
structure to cover cash calls arising from the asset. With the
Ruvuma cash calls covered following the approval of shareholders at
the general meeting on 29th June 2022, the remaining cost structure
of the Group comprises a proportion of discretionary spend and
therefore in the event that cash flows become constrained, costs
can be reduced to enable the Group to operate within its available
funding. These forecasts demonstrate that the Group has sufficient
cash funds available, on the assumption that further funds can be
sourced as and when needed, to allow it to continue in business for
a period of at least twelve months from the date of approval of
these financial statements.
Accordingly, the financial statements have been prepared on a
going concern basis. Comments on going concern are included in the
Operations report and note 1. Although the Ruvuma asset has been
sold, no guarantee can be made that the sale completes within 12
months of the approval of the financial statements. The critical
assumption in the going concern determination is that the Ruvuma
PSA and the costs associated with the development of the Ntoyra
natural gas discovery are met by the Group drawing against the loan
provided by APT for its 25% interest. Based on this, there is
material uncertainty present, given that draws on the facility
would become due in the event the sale does not complete. In the
event the sale did not complete, it is assumed that - if required -
the Group would be able to access additional funding. If additional
funding was not available there is a risk that commitments could
not be fulfilled, and assets would be relinquished.
Basis of consolidation
The consolidated financial statements comprise the financial
statements of the Company and its subsidiaries as at 31 December
2022. Control is achieved when the Group is exposed, or has rights,
to variable returns from its involvement with the investee and has
the ability to affect those returns through its power over the
investee. Specifically, the Group controls an investee if, and only
if, the Group has:
-- Power over the investee (i.e., existing rights that give it
the current ability to direct the relevant activities of the
investee)
-- Exposure, or rights, to variable returns from its involvement
with the investee
-- The ability to use its power over the investee to affect its
returns
Generally, there is a presumption that a majority of voting
rights results in control. To support this presumption and when the
Group has less than a majority of the voting or similar rights of
an investee, the Group considers all relevant facts and
circumstances in assessing whether it has power over an investee,
including:
-- The contractual arrangement(s) with the other vote holders of
the investee
-- Rights arising from other contractual arrangements
-- The Group's voting rights and potential voting rights
The Group re-assesses whether or not it controls an investee if
facts and circumstances indicate that there are changes to one or
more of the three elements of control. Consolidation of a
subsidiary begins when the Group obtains control over the
subsidiary and ceases when the Group loses control of the
subsidiary. Assets, liabilities, income and expenses of a
subsidiary acquired or disposed of during the year are included in
the consolidated financial statements from the date the Group gains
control until the date the Group ceases to control the
subsidiary.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARED 31 DECEMBER 2022
1 Accounting policies (Continued)
Profit or loss and each component of OCI are attributed to the
equity holders of the parent of the Group and to the
non-controlling interests, even if this results in the
non-controlling interests having a deficit balance. When necessary,
adjustments are made to the financial statements of subsidiaries to
bring their accounting policies in line with the Group's accounting
policies. All intra-group assets and liabilities, equity, income,
expenses and cash flows relating to transactions between members of
the Group are eliminated in full on consolidation.
A change in the ownership interest of a subsidiary, without a
loss of control, is accounted for as an equity transaction. If the
Group loses control over a subsidiary, it recognises the related
assets (including goodwill), liabilities, non-controlling interest
and other components of equity, while any resultant gain or loss is
recognised in profit or loss. Any investment retained is recognised
at fair value.
Investment in joint ventures
An associate is an entity over which the Group has significant
influence. Significant influence is the power to participate in the
financial and operating policy decisions of the investee but is not
control or joint control over those policies.
A joint venture is a type of joint arrangement whereby the
parties that have joint control of the arrangement have rights to
the net assets of the joint venture. Joint control is the
contractually agreed sharing of control of an arrangement, which
exists only when decisions about the relevant activities require
the unanimous consent of the parties sharing control.
The considerations made in determining significant influence or
joint control are similar to those necessary to determine control
over subsidiaries. The Group's investment in its associate and
joint venture are accounted for using the equity method.
Under the equity method, the investment in an associate or a
joint venture is initially recognised at cost. The carrying amount
of the investment is adjusted to recognise changes in the Group's
share of net assets of the associate or joint venture since the
acquisition date. Goodwill relating to the associate or joint
venture is included in the carrying amount of the investment and is
not tested for impairment separately.
The statement of profit or loss reflects the Group's share of
the results of operations of the associate or joint venture. Any
change in OCI of those investees is presented as part of the
Group's OCI. In addition, when there has been a change recognised
directly in the equity of the associate or joint venture, the Group
recognises its share of any changes, when applicable, in the
statement of changes in equity. Unrealised gains and losses
resulting from transactions between the Group and the associate or
joint venture are eliminated to the extent of the interest in the
associate or joint venture.
The aggregate of the Group's share of profit or loss of an
associate and a joint venture is shown on the face of the statement
of profit or loss as part of operating loss and represents profit
or loss after tax and non- controlling interests in the
subsidiaries of the associate or joint venture.
The financial statements of the associate or joint venture are
prepared for the same reporting period as the Group. When
necessary, adjustments are made to bring the accounting policies in
line with those of the Group.
After application of the equity method, the Group determines
whether it is necessary to recognise an impairment loss on its
investment in its associate or joint venture. At each reporting
date, the Group determines whether there is objective evidence that
the investment in the associate or joint venture is impaired. If
there is such evidence, the Group calculates the amount of
impairment as the difference between the recoverable amount of the
associate or joint venture and its carrying value, and then
recognises the loss within 'Share of profit of an associate and a
joint venture' in the statement of profit or loss.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARED 31 DECEMBER 2022
1 Accounting policies (Continued)
Current assets held for sale
Current assets are classified as assets held for sale when their
carrying amount is to be recovered principally through a sale
transaction and a sale is considered highly probable. They are
stated at the lower of carrying amount and fair value less costs to
sell.
Discontinued operations
In accordance with IFRS 5 'Non-current assets held for sale and
discontinued operations', the net results relating to the assets
held for sale are presented within discontinued operations in the
income statement (for which the comparatives have been restated)
and the assets and liabilities of these operations are presented
separately in the balance sheet. Refer to note 10 for further
details.
Fair value measurement
IFRS 13 establishes a single source of guidance for all fair
value measurements. IFRS 13 does not change when an entity is
required to use fair value, but rather provides guidance on how to
measure fair value under IFRS when fair value is required or
permitted. The resulting calculations under IFRS 13 affected the
principles that the Group uses to assess the fair value, but the
assessment of fair value under IFRS 13 has not materially changed
the fair values recognised or disclosed. IFRS 13 mainly impacts the
disclosures of the Group. It requires specific disclosures about
fair value measurements and disclosures of fair values, some of
which replace existing disclosure requirements in other
standards.
Cash and cash equivalents
Cash in the statement of financial position comprise cash at
banks and on hand, which are subject to an insignificant risk of
changes in value.
Financial instruments
Financial assets and financial liabilities are recognised on the
balance sheet when the Group has become a party to the contractual
provisions of the instrument.
Classification
The Group classifies its financial assets and liabilities in the
following measurement categories:
-- those to be measured subsequently at fair value (either
through Other Comprehensive Income or through profit or loss);
and
-- those to be measured at amortised cost.
The classification depends on the entity's business model for
managing the financial assets and the contractual terms of the cash
flows.
Recognition and measurement
A financial instrument is recognised if the Group becomes a
party to the contractual provisions of the instrument. Financial
assets are derecognised if the Group's contractual rights to the
cash flows from the financial assets expire or if the Group
transfers the financial asset to another party without retaining
control or substantially all risks and rewards of the asset.
Regular way purchases and sales of financial assets are accounted
for at trade date, i.e. the date the Group commits itself to
purchase or sell the asset.
At initial recognition, the Group measures a financial asset at
its fair value plus, in the case of a financial asset not at fair
value through profit or loss ("FVTPL"), transaction costs that are
directly attributable to the acquisition of the financial asset.
Transaction costs of financial assets carried at FVTPL are expensed
in profit or loss.
Subsequent measurement of debt instruments depends on the
Group's business model for managing the asset and the cash flow
characteristics of the asset. Currently, the Group's financial
assets are all held for collection of contractual cash flows, which
are solely payments of principal and interest. Accordingly, the
Group's financial assets are measured subsequent to initial
recognition at amortised cost.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARED 31 DECEMBER 2022
1 Accounting policies (Continued)
Impairment
On a forward-looking basis, the Group estimates the expected
credit losses associated with its receivables and other financial
assets carried at amortised cost, and records a loss allowance for
these expected losses.
Trade and other receivables
Trade and other receivables outside of normal payment terms
accrue interest at a rate determined by the operator and are stated
at their nominal value as reduced by appropriate allowances for
estimated irrecoverable amounts.
Financial liability and equity
Financial liabilities and equity instruments are classified
according to the substance of the contractual arrangements entered
into. An equity instrument is any contract that evidences a
residual interest in the assets of the Group after deducting all of
its liabilities.
Trade and other payables
Trade and other payables are non interest bearing and are stated
at their nominal value.
Equity instruments
Equity instruments issued by the Group are recorded at the
proceeds received, net of direct issue costs.
Financial assets at fair value through profit or loss
Financial assets are classified as at FVTPL when the financial
asset is held for trading. This is the case if:
-- the asset has been acquired principally for the purpose of
selling in the near term, or
-- on initial recognition it is part of a portfolio of
identified financial instruments that the company manages together
and has a recent actual pattern of short-term profit taking, or
-- it is a derivative that is not designated and effective as a
hedging instrument.
Financial assets at FVTPL are stated at fair value with any
gains or losses arising on remeasurement recognised in profit or
loss. The net gain or loss recognised in profit or loss
incorporates any dividend or interest earned on the financial
asset. Interest and dividends are included in 'Investment income'
and gains and losses on remeasurement included in 'other gains and
losses' in the statement of comprehensive income.
Equity reserves
Share capital is determined using the nominal value of shares
that have been issued.
The share premium account represents premiums received on the
initial issuing of the share capital. Any transaction costs
associated with the issuing of shares are deducted from share
premium, net of any related income tax benefits.
The share based payment reserve represents the cumulative amount
which has been expensed in the income statement in connection with
share based payments, less any amounts transferred to retained
earnings on the exercise of share options.
Retained earnings includes all current and prior period results
as disclosed in the income statement.
Deferred shares includes shares that have been allocated to
investment partners that will be converted to share capital when
certain future conditions are met
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARED 31 DECEMBER 2022
1 Accounting policies (Continued)
Derivatives
Derivatives are initially recognised at fair value at the date a
derivative contract is entered into and are subsequently remeasured
to fair value at each reporting end date. The resulting gain or
loss is recognised in profit or loss immediately unless the
derivative is designated and effective as a hedging instrument, in
which event the timing of the recognition in profit or loss depends
on the nature of the hedge relationship.
A derivative with a positive fair value is recognised as a
financial asset, whereas a derivative with a negative fair value is
recognised as a financial liability. A derivative is presented as a
non-current asset or liability if the remaining maturity of the
instrument is more than 12 months and it is not expected to be
realised or settled within 12 months. Other derivatives are
classified as current.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARED 31 DECEMBER 2022
1 Accounting policies (Continued)
Taxation
The tax expense represents the sum of the current tax and
deferred tax.
Current tax
The current tax is based on taxable profit for the period.
Taxable profit differs from net profit as reported in the income
statement because it excludes items of income or expense that are
taxable or deductible in other periods and it further excludes
items that are never taxable or deductible. The liability for
current tax is calculated by using tax rates that have been enacted
or substantively enacted by the balance sheet date.
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amount of assets and liabilities
in the financial statements and the corresponding tax bases used in
the computation of taxable profit, and is accounted for using the
balance sheet liability method. Deferred tax liabilities are
recognised for all taxable temporary differences and deferred tax
assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible
temporary differences can be utilised. Such assets and liabilities
are not recognised if the temporary difference arises from goodwill
or from the initial recognition (other than in a business
combination) of other assets and liabilities in a transaction which
affects neither the tax profit not the accounting profit.
Provisions
Provisions are recognised for liabilities of uncertain timings
or amounts that have arisen as a result of past transactions and
are discounted at a pre-tax rate reflecting current market
assessments of the time value of money and the risks specific to
the liability.
Share-based payments
Where share options are awarded to employees, the fair value of
the options at the date of grant is charged to the income statement
over the vesting period. Non-market vesting conditions are taken
into account by adjusting the number of equity instruments expected
to vest at each balance sheet date so that, ultimately, the
cumulative amount recognised over the vesting period is based on
the number of options that eventually vest. Market vesting
conditions are factored into the fair value of the options granted.
As long as all other vesting conditions are satisfied, a charge is
made irrespective of whether the market vesting conditions are
satisfied. The cumulative expense is not adjusted for failure to
achieve a market vesting condition.
Where the terms and conditions of options are modified before
they vest, the increase in the fair value of the options, measured
immediately before and after the modification, is also charged to
the income statement over the remaining vesting period.
Where equity instruments are granted to persons other than
employees, the income statement is charged with the fair value of
goods and services received. Equity-settled share-based payments
are measured at a fair value at the date of grant except if the
value of the service can be reliably established. The fair value
determined at the grant date of equity-settled share-based payments
is expensed on a straight-line basis over the vesting period, based
on the Group's estimate of shares that will eventually vest.
Foreign exchange
Transactions in currencies other than Sterling are recorded at
the rates of exchange prevailing on the dates of the transactions.
At each balance sheet date, monetary assets and liabilities that
are denominated in foreign currencies are retranslated at the rates
prevailing on the balance sheet date. Gains and losses arising on
retranslation are included in the income statement for the
period.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARED 31 DECEMBER 2022
1 Accounting policies (Continued)
Oil and gas properties and other property, plant and
equipment
-- Initial recognition
Oil and gas properties and other property, plant and equipment
are stated at cost, less accumulated depreciation and accumulated
impairment losses.
The initial cost of an asset comprises its purchase price or
construction cost, any costs directly attributable to bringing the
asset into operation, the initial estimate of the decommissioning
obligation and, for qualifying assets (where relevant), borrowing
costs. The purchase price or construction cost is the aggregate
amount paid and the fair value of any other consideration given to
acquire the asset. The capitalised value of a finance lease is also
included within property, plant and equipment.
When a development project moves into the production stage, the
capitalisation of certain construction/ development costs ceases,
and costs are either regarded as part of the cost of inventory or
expensed, except for costs which qualify for capitalisation
relating to oil and gas property asset additions, improvements or
new developments.
-- Depreciation/amortisation
Oil and gas properties are depreciated/amortised on a unit-of
production basis over the total proved developed and undeveloped
reserves of the field concerned, except in the case of assets whose
useful life is shorter than the lifetime of the field, in which
case the straight-line method is applied. Rights and concessions
are depleted on the unit-of-production basis over the total proved
developed and undeveloped reserves of the relevant area.
The unit-of production rate calculation for the
depreciation/amortisation of field development costs takes into
account expenditures incurred to date, together with sanctioned
future development expenditure. An item of property, plant and
equipment and any significant part initially recognised is
derecognised upon disposal or when no future economic benefits are
expected from its use or disposal. Any gain or loss arising on
derecognition of the asset (calculated as the difference between
the net disposal proceeds and the carrying amount of the asset) is
included in the statement of profit or loss and other comprehensive
income when the asset is derecognised.
The asset's residual values, useful lives and methods of
depreciation/amortisation are reviewed at each reporting period and
adjusted prospectively.
-- Major maintenance, inspection and repairs
Expenditure on major maintenance refits, inspections or repairs
comprises the cost of replacement assets or parts of asset,
inspection costs and overhaul costs. Where an asset, or part of an
asset that was separately depreciated and is now written off is
replaced and it is probably that future economic benefits
associated with the item will flow to the Group, the expenditure
will be capitalised. Where part of the asset replaced was not
separately considered as a component and therefore not depreciated
separately, the replacement value is used to estimate the carrying
amount of the replaced asset(s) and is immediately written off.
Inspection costs associated with major maintenance programmes are
capitalised and amortised over the period of the next inspection.
All other day-to-day repairs and maintenance costs are expensed as
incurred.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARED 31 DECEMBER 2022
1 Accounting policies (Continued)
Provision for rehabilitation / Decommissioning Liability
The Group recognises a decommissioning liability where it has a
present legal or constructive obligation as a result of past
events, and it is probably 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. When the
liability is initially recognised, the present value of the
estimated costs is capitalised by increasing the carrying amount of
the related oil and gas assets to the extent that it is incurred by
the development/construction of the field. Any decommissioning
obligations that arise through the production of inventory are
expensed when the inventory item is recognised in cost of goods
sold.
Changes in the estimated timing or cost of decommissioning are
dealt with prospectively by recording an adjustment to the
provision and a corresponding adjustment to oil and gas assets. Any
reduction in the decommissioning liability and, therefore, any
deduction from the asset to which it relates, may not exceed the
carrying amount of that asset. If it does, any excess over the
carrying value is taken immediately to the statement of profit or
loss and other comprehensive income.
Segmental reporting
A business segment is a group of assets or operations engaged in
providing services that are subject to risks and returns that are
different from those of other business segments. A geographical
segment is engaged in providing services within a particular
economic environment that is subject to different risks and returns
from other segments in other economic environments. The company has
two segments; corporate head office costs and Tanzania.
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker
(CODM). The CODM, who is responsible for allocating resources and
assessing performance of the operating segments, has been
identified as Thomas Reynolds that makes strategic decisions.
Segment results include items directly attributable to a segment as
well as those that can be allocated on a reasonable basis.
Investments
The Group's financial asset investments are classified and
measured at fair value, under IFRS 9, with changes in fair value
recognised in profit and loss as they arise.
Gains and losses on investments disposed of or identified are
included in the net profit or loss for the period.
Investments held by the Group are held for resale, therefore
where the Group's equity stake in an investee company is 20% or
more, equity accounting for these associates is not considered to
be appropriate.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARED 31 DECEMBER 2022
2 Adoption of new and revised standards and changes in
accounting policies
In the current year, the following new and revised Standards and
Interpretations have been adopted by the Company. The adoption of
these standards has had no impact on the current period however may
have an effect on future periods.
IFRS 3 (Amendments) Reference to the conceptual framework
1 January
2022
IAS 16 (Amendments) Property, plant and equipment - proceeds 1 January
before intended use 2022
----------------------------------------- ------------
IAS 37 (Amendments) Onerous contracts - cost of fulfilling 1 January
a contract 2022
----------------------------------------- ------------
IFRIC Amendments to IFRS 1 (subsidiary 1 January
as a first-time adopter), IFRS 9 2022
(fees in the '10 liabilities), IFRS
16 (lease incentives), IAS 41 (taxation
in the fair value measurements)
----------------------------------------- ------------
Standards which are in issue but not yet effective
At the date of authorisation of these financial statements, the
following Standards and Interpretations, which have not yet been
applied in these financial statements, were in issue but not yet
effective (and in some cases had not yet been adopted by the United
Kingdom):
IFRS 17 Insurance contracts 1 January 2023
Practice Statement 1 January 2023
IAS 1 and IFRS Disclosure of accounting
policies
--------------------------- ---------------
IAS 8 (Amendments) Definition of accounting 1 January 2023
estimates
--------------------------- ---------------
IAS 12 (Amendments) Deferred tax related 1 January 2023
to assets and liabilities
arising from a single
transaction
--------------------------- ---------------
IFRS 16 (Amendments) Liability in a Sale 1 January 2024
and Leaseback
--------------------------- ---------------
IAS 1 (Amendments) Classification of 1 January 2024
liabilities as current
or non-current deferral
of effective date
--------------------------- ---------------
IAS 1 (Amendments) Non-current liabilities 1 January 2024
with covenants
--------------------------- ---------------
The directors do not expect that the adoption of the other
Standards listed above will have a material impact on the financial
statements of the Company aside from additional disclosures.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARED 31 DECEMBER 2022
3 Critical accounting estimates and judgements
The Group makes estimates and assumptions regarding the future.
Estimates and judgements are continually evaluated based on
historical experience and other factors, including expectations of
future events that are believed to be reasonable under the
circumstances. In the future, actual experience may differ from
these estimates and assumptions. The estimates and assumptions that
have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next
financial year are discussed below.
The preparation of the Financial Statements in conformity with
IFRS requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amount of expenses during the
period. Actual results may vary from the estimates used to produce
these Financial Statements.
Estimates and judgements are regularly evaluated and are based
on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances.
Items subject to such estimates and assumptions, that have a
significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial years,
include but are not limited to:
Share-based payments (note 20)
The Group utilised an equity-settled share-based remuneration
scheme for employees. Employee services received, and the
corresponding increase in equity, are measured by reference to the
fair value of the equity instruments at the date of grant,
excluding the impact of any non-market vesting conditions. The fair
value of share options are estimated by using Black-Scholes
valuation method as at the date of grant. The assumptions used in
the valuation are described in Note 21 and include, among others,
the expected volatility, expected life of the options and number of
options expected to vest.
Deferred taxation (note 9)
Deferred tax assets are recognised when it is judged more likely
than not that they will be recovered. Deferred tax assets are
currently nil based on the likelihood of recovery.
Recoverability of assets held for sale (note 15)
The Company assesses assets held for sale each reporting period
to determine whether any indication of impairment exists. Where an
indicator of impairment exists, a formal estimate of the
recoverable amount is made, which is considered to be the fair
value less costs of sale. The assessments require the use of
estimates and assumptions such as long-term oil prices (considering
current and historical prices, price trends and related factors),
discount rates, operating costs, future capital requirements,
decommissioning costs, exploration potential reserves (see(a)
Hydrocarbon reserves and resource estimates above) and operating
performance (which includes production and sales volumes). These
estimates and assumptions are subject to risk and uncertainty.
Therefore, there is possibility that changes in circumstances will
impact these projections, which may impact the recoverable amount
of assets and/or CGUs.
Recoverability of loan receivable from joint venture (note
16)
The Company has determined that the loan to the joint venture is
fully recoverable and enforceable based on a signed loan agreement
and the value of the underlying company. At the time of signing the
financial statements the loan was repayable on demand, but will not
be callable within twelve months of the signing of the financial
statements. The loan has been classified as a non-current asset,
reflecting Management's intention.
Decommissioning provisions (note 15)
There is uncertainty around the cost of decommissioning as cost
estimates can vary in response to many factors, including changes
to the relevant legal requirements, the emergence of new technology
or experience at other assets. The expected timing, work scope and
amount and currency mix of expenditure may also change. Therefore,
significant estimates and assumptions are made in determining the
provision for decommissioning.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARED 31 DECEMBER 2022
-- Critical accounting estimates and judgements (Continued)
The estimated decommissioning costs are reviewed annually.
Provision for environmental clean-up and remediation costs is based
on current legal and contractual requirements, technology and
management's estimate of costs with reference to current price
levels. Future cost estimates are discounted to present value using
a rate that approximates the time value of money, which is
currently 5.89%. The discount rate is based on the average yield on
Tanzanian Government bonds for foreign currency loans of a duration
of more than 10 years. The company assess the reasonableness of the
decommissioning provision annually and believes it represents a
fair view of the potential liability.
-- Operating Segments
Based on risks and returned, the directors consider that the
primary reporting format is by business segment. The directors
consider that there are two business segments:
-- Head office support from the UK
-- Discontinued operations on its investments in Tanzania
Continuing Discontinued
Operations Operations
2022 UK Tanzania Total
GBP000 GBP000 GBP000
Revenue 40 - 40
Administrative expenses (1,613) - (1,613)
Interest income 134 - 134
Other gains and losses 3 (3,377) (3,374)
Other income (2) - (2)
(Loss) from operations per reportable
segment (1,438) (3,377) (4,815)
Additions to non-current assets 244 - 244
Reportable segment assets 2,477 10,715 13,192
Reportable segment liabilities 224 3,110 3,334
2021 Total Tanzania Total
GBP000 GBP000 GBP000
Administrative expenses (1,890) - (1,890)
Interest income - 12 12
Finance costs (2) - (2)
Other gains and losses 2,196 (4,065) (1,869)
Other income 58 - 58
Profit/(Loss) from operations per
reportable segment 362 (4,053) (3,691)
Additions to non-current assets 26 - 26
Reportable segment assets 3,846 11,600 15,446
Reportable segment liabilities 157 166 323
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARED 31 DECEMBER 2022
5 Revenue
2022 2021
GBP000 GBP000
40
Share of profit in joint venture Interest income - - 12
------ ----------
40 12
====== ==========
Contract balances 2022 2021
GBP000 GBP000
Trade receivables - -
Accrued income and interest - -
Trade receivables accrue interest for non payment. Outstanding
trade debtors accrue interest at a rate in accordance with the
joint venture agreement and are generally on terms of 30 days. In
2022, there is a provision of GBPnil (2021: nil) for expected
credit losses on trade receivables.
Interest income relates to interest charged on outstanding
invoices.
An operating segment is a distinguishable component of the
Company that engages in business activities from which it may earn
revenues and incur expenses, whose operating results are regularly
reviewed by the Company's chief operating decision maker to make
decisions about the allocation of resources and assessment of
performance and about which discrete financial information is
available.
6 Expenses by Nature
2022 2021
Continuing Operations GBP000 GBP000
Exchange (gains)/losses (169) 8
Fees payable to the Company's auditor for the audit
of the Company's financial statements 74 19
Professional, legal and consulting fees 752 920
AIM related costs including investor relations 134 157
Accounting related services 152 93
Travel and subsistence 18 -
Office and administrative expenses 104 87
Other expenses 2 38
Share-based payments 130 471
Directors remuneration 334 94
Wages and salaries and other related costs 82 5
------
1,613 1,892
======
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARED 31 DECEMBER 2022
7 Employees
The average number of employees (excluding executive directors)
was one (2021:1).
During the year ended 31 December 2022 the Directors opted to
receive remuneration in the form of share options in lieu of fees
(note 20).
2022 2021
GBP000 GBP000
Their aggregate remuneration comprised
:
Wages and salaries 44 11
======
Directors remuneration
Salary Share-based Termination Total
and payments payments
fees
GBP000 GBP000 GBP000 GBP000
Year ended 31 December
2022
Alastair Ferguson 75 25 - 100
Tom Reynolds 200 25 - 225
Donald Nicolson 33 41 - 74
Muir Miller (appointed
18 February 2021) 26 27 - 53
Doug Rycroft (senior
management) - 12 - 12
-------
334 130 464
=======
Salary Share-based Termination Total
and payments payments
fees
GBP000 GBP000 GBP000 GBP000
Year ended 31 December
2020
Jonathan Fitzpatrick
(resigned 9 July 2021) 36 - 36
Alastair Ferguson 7 140 - 133
Tom Reynolds 91 146 - 237
Donald Nicolson 10 89 - 99
Muir Miller (appointed
18 February 2021)
- - 35 - 35
Doug Rycroft (senior
management) - - 25 - 25
-------
94 471 - 565
=======
No directors received pension contributions
in 2022 or 2021.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARED 31 DECEMBER 2022
Other
gains
and
losses
8 2022 2021
GBP000 GBP000
Gain on sale of financial assets at fair value through profit
or loss 61
Impairment of financial assets at fair value through profit 2,196
or loss (58) -
3 2,196
9 Income 2021
tax
expense
2022
GBP000 GBP000
UK corporation tax on profits for the current period - -
-
Total UK current tax -
Deferred tax
Origination and reversal of temporary differences -
-
Total tax charge - -
The charge for the year can be reconciled to the loss per
the income statement as follows:
2022 2021
GBP000 GBP000
---------- --------
(Loss) before taxation (4,815) (3,692)
---------- --------
Expected tax credit
based on a corporation
tax rate of 19.00% (2021:
19.00%) (915) (701)
---------- --------
Effect of expenses not
deductible in determining
taxable profit 754 837
---------- --------
Income not taxable (35) (420)
---------- --------
Remeasurement of deferred
tax for changes in tax
rates 187 (45)
---------- --------
Chargeable gains 9 329
---------- --------
Taxation charge for -
the year -
---------- --------
No deferred tax asset has been recognised because there is
uncertainty of the timing of suitable future profits against which
they can be recovered. The company has losses carried forward of
GBP7,079k (2021 - GBP6,312k).
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARED 31 DECEMBER 2022
10 Discontinued operations
The Company has a 25% interest in a high-quality development
project in Tanzania which the Directors are actively seeking to
divest. This stake has been valued at $16m and operations relating
to this stake are detailed below. For details on the divestment
please refer to the Strategic Report.
The results of the discontinued business, which have been
included in the income statement, balance sheet and cash flow
statement, were as follows:
2022 2021
GBP000 GBP000
Impairment on fair value revaluation (3,377) (3,846)
Investment losses - (207)
Net loss attributable to discontinuation (3,377) (4,053)
The loss after tax on carrying value of assets held
for sale is made up as follows: 2022
GBP000
Fair value less costs to sell 7,605
Net book value of assets disposed: Intangible assets (18,368)
Oil and gas properties (380)
Loan to ARA Petroleum 2,944
Decommissioning provision 166
Impairment on fair value revaluation at 31 December
2021 4,656
(10,982)
Impairment on fair value revaluation at 31 December
2022 (3,377)
Loss per share impact from discontinued operations 2022 2021
Basic impact (pence) (0.38) (0.51)
Diluted impact (pence) (0.34) (0.45)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARED 31 DECEMBER 2022
10 Discontinued operations (Continued)
Cash flow statement 2022 2021
GBP000 GBP000
Net cash flows from financing activities 2,467 -
Net cash flows from investing activities (2,467) (642)
Net cash flows from discontinued operations - (642)
Remaining cash received from financing activities was used for
other operational expenses.
11 Earnings per share
The calculation of loss per share is based on the loss after
taxation divided by the weighted average number of shares in issue
during the year.
Number of shares 2022 2021
Weighted average number of ordinary shares for basic
profit/loss per share (000) 900,496 758,788
Weighted average number of ordinary shares for diluted
profit per share (000) 1,022,703 854,621
Earnings GBP000 GBP000
Continuing operations
Profit for the period from continued operations 1,939 361
Discontinued operations
(Loss) for the period from discontinued operations (6,754) (4,053)
Basic earnings per share
From continuing operations (pence per share) 0.22 0.05
From discontinued operations (pence per share) (0.75) (0.53)
(0.53) (0.49)
Diluted earnings per share
From continuing operations (pence per share) (0.14) 0.04
From discontinued operations (pence per share) (0.33) (0.47)
(0.47) (0.43)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARED 31 DECEMBER 2022
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARED 31 DECEMBER 2022
14 Joint ventures
The Group has a 50% (2021: 50%) interest in joint venture,
Energy Acquisitions Group Limited, a company incorporated in
Northern Ireland. The primary activity of Energy Acquisitions Group
Limited is to acquire and finance renewable energy assets in the
United Kingdom.
The Group's interest in EAG is accounted for using the equity
method in the consolidated financial statements. Summarised
financial information of the joint venture, and reconciliation with
the carrying amount of the investment in the consolidated financial
statements at 31 December 2022 are set out below:
Energy Acquisitions Group Limited consolidated summary statement
of financial position (unaudited)
2022 2021
GBP000 GBP000
Non-current assets 2,960 2,808
Current assets 593 445
Current liabilities (113) (411)
Non-current liabilities (3,360) (2,985)
The following amounts have been included in
the amounts above
Cash and cash equivalents 326 245
Current financial liabilities (113) (411)
Non-current financial liabilities (3,360) (2,985)
Net Assets (100%) 80 (143)
Group share of net assets (50%) 40 (72)
Energy Acquisitions Group Limited consolidated summary profit
and loss account (unaudited)
2022 2021
GBP000 GBP000
Revenue 1,414 1,164
Direct Costs (561) (557)
Overhead and administrative expenses (297) (232)
Interest payable and similar expenses (334) (655)
------ ------
Profit for the financial year 222 (80)
====== ======
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARED 31 DECEMBER 2022
14 Joint ventures (Continued)
The following amounts have been included in
the amounts above
Depreciation and amortisation 62 (223)
Interest income - -
Interest expense 334 655
Income tax expense - 52
There were no dividends received from the joint venture during
the year and there are no dividends forecast.
The joint venture had no contingent liabilities or commitments
as at 31 December 2022 and 221. The financial statements of the JV
are prepared for the same reporting period as the Group. When
necessary, adjustments are made to bring the accounting policies in
line with those of the Group. Presentation of the summarised
financial information has been made on the basis of the Joint
Venture's published financial statements.
15 Assets and liabilities classified as held for sale 2022 2021
GROUP AND COMPANY GBP000 GBP000
Intangible assets 10,714 11,246
Oil and gas properties - 354
------- ------
Total assets classified as held for sale 10,714 11,600
======= ======
Loan 2,944 -
Decommissioning provision 166 166
------- ------
Total liabilities classified as held for sale 3,110 166
======= ======
At the date of authorisation of the financial statements it was
determined that a sale would be highly probable (see note 10).
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARED 31 DECEMBER 2022
16 Trade and other receivables
2022 2021
GROUP GBP000 GBP000
Current
Other receivables 96 111
VAT recoverable 74 21
Prepayments 40 21
------ ------
Non current 210 153
Loan receivable from joint venture 1,448 1,244
====== ======
The directors have assessed the trade and other receivables for
impairment and consider that the carrying amount of trade and other
receivables approximates to their fair value.
2022 2021
COMPANY GBP000 GBP000
Other receivables 96 111
VAT recoverable 74 21
Prepayments 40 21
------ ------
Non current 210 153
Loan receivable from subsidiary 1,450 1,244
====== ======
The directors have assessed the trade and other receivables for
impairment and consider that the carrying amount of trade and other
receivables approximates to their fair value.
17 Trade and other payables 2022 2021
GROUP GBP000 GBP000
Trade payables 38 142
Accruals 65 36
Other payables 121 -
------ ------
224 178
====== ======
The directors consider that the carrying amount of trade
payables approximates to their fair value.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARED 31 DECEMBER 2022
17 Trade and other payables (Continued)
2022 2021
COMPANY GBP000 GBP000
Trade payables 38 142
Accruals 55 36
Other payables 121 -
------
214 178
======
The directors consider that the carrying amount of trade
payables approximates to their fair value.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARED 31 DECEMBER 2022
-- Total Share options in issue
During the year no incentive options were granted (2021: nil).
As at 31 December 2022 there were 51,419,781 incentive options in
issue (2021: 51,419,781)
During the year 26,733,539 (2021: 24,997,841) share options in
lieu of salary and/or fees due to the relevant option holders were
granted. As at 31 December 2022 there were 70,787,245 share options
in lieu of salary and/or fees in issue (2021: 44,053,706).
-- Total warrants in issue
All warrants lapsed in the year and no warrants were issued,
cancelled or exercised during the year (2021: no warrants were
issued).
As at 31 December 2022 there were no warrants outstanding (2021:
12,500,000).
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARED 31 DECEMBER 2022
20 Share based payment GROUP AND COMPANY
The Company has opted to remunerate the directors for the year
to 31 December 2022 by a grant of an option over the ordinary
shares of the capital of the Company as detailed in the deed of
option grants. The life of the options is 18 months. There are
three executive directors and two non-executive directors who are
members of the plan. The following table summarises the expense
recognised in the Statement of Comprehensive Income since the
options were granted.
2022 2021
GBP000 GBP000
Directors options 130 285
Incentive options - 186
------ ------
Credit to equity for equity-settled share-based payments 130 471
====== ======
During June 2020 (and the height of the Covid-19 pandemic) the
Company sought to put in place a strategy that would help to
conserve the Company's cash position in the near term and also to
maximise alignment between the Board, Management Team and
Shareholders.
Accordingly, the Company proposed to grant nominal cost options
over new Ordinary Shares of 0.2p (GBP0.0020) to Directors and
select members of the Management Team ("the Director Options"). The
Director Options were granted over a total of 26,733,539 (2021:
24,997,841) Ordinary Shares and have an aggregate value equal (on a
net basis, after deduction of the nominal exercise price per
Ordinary Share) to the fair value of salary and/or fees due to the
relevant option holders up to December 2022.
Members of the Management Team were also awarded options over
Ordinary Shares with an exercise price of
1.3p (GBP0.013) ("the Incentive Options"), which was
approximately a 24% premium to the closing midmarket price of the
Company's Ordinary Shares on 26 June 2020. Each Incentive Option is
ordinarily exercisable on the 2nd anniversary of the grant date
(being 30 June 2022), except in the event of specified corporate
events or, exceptionally, if the option holder leaves as a 'good
leaver'.
The Company used the Black-Scholes model to determine the value
of the incentive options and the inputs. The value of the options
and the inputs for the year ended 31 December 2022 were as
follows:
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARED 31 DECEMBER 2022
20 Share based payment (Continued)
Issue 30 June 2020
Incentive options
Share price at grant (pence) 1.09
Exercise price at grant (pence) 1.30
Expected volatility (%) 84.42
Expected life (years) 6
Risk free rate (%) 0.17
Expected dividends (pence) nil
Expected volatility was determined by using the Company's share
price for the preceding 3 years.
The total share-based payment expense in the year for the
Company was GBP86,806 in relation to the issue of incentive options
(2021: GBP186,013) and GBPnil finance charges in relation to
warrants (2021: GBPnil).
The Incentive Options granted represent approximately 7.9% of
the Company's issued share capital (excluding warrants issued to
Prolific Basins LLC). The Board has retained additional headroom
for future Incentive Options as it recognises that the future
performance of the Company will be dependent on its ability to
retain the services of key executives.
21 Financial instruments
GROUP
Categories of financial instruments
The following table combines information about:
* Classes of financial instruments based on their
nature and characteristics; and
* The carrying amounts of financial instruments.
2022 2021
GBP000 GBP000
Financial assets at amortised cost
Other debtors 96 111
Prepayments and accrued income 40 21
Cash and cash equivalents 750 2,059
Loan to joint venture 1,448 1,244
------ ------
2,334 3,435
====== ======
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARED 31 DECEMBER 2022
21 Financial instruments (Continued)
Book Value Fair Value Book Value Fair Value
2022 2022 2021 2021
GBP000 GBP000 GBP000 GBP000
Financial assets at fair
value
Non-current Investment -
Helium One 206 206 312 312
Non-current Investment -
Corallian Energy Limited 67 67 125 125
273 273 437 437
2022 2021
GBP000 GBP000
Financial liabilities at
amortised cost
Trade payables 38 142
Accruals and deferred income 65 36
Other payables 121 -
224 178
The table below analyses financial instruments carried at fair
value, by valuation method.
Fair values are categorised into different levels in a fair
value hierarchy based on the inputs used in the valuation
techniques as follows:
-- Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities.
-- Level 2: inputs other than quoted prices included in Level 1
that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e derived from prices).
-- Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
The fair values for the Company's assets and liabilities are not
materially different from their carrying values in the financial
statements.
The following table presents the Company's financial assets that
are measured at fair value:
Level 1 Level 2 Level 3 Total
GBP000 GBP000 GBP000 GBP000
Non-current Investment - Helium
One 206 - - 206
Non-current Investment - Corallian
Energy Limited - - 67 67
------
206 67 273
======
The Company does not have any liabilities measured at fair
value. There have been no transfers in to or transfers out of fair
value hierarchy levels in the period.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARED 31 DECEMBER 2022
21 Financial instruments (Continued)
Financial instruments in level 1
The fair value of financial instruments traded in active markets
is based on quoted market prices at the reporting date. A market is
regarded as active if quoted prices are readily and regularly
available from an exchange, dealer, broker, industry group, pricing
service, or regulatory agency, and those prices represent actual
and regularly occurring market transactions on an arm's length
basis. The quoted market price used for financial assets held by
the Company is the current bid price.
Financial instruments in level 2
The fair value of financial instruments that are not traded in
an active market is determined by using valuation techniques. These
valuation techniques maximise the use of observable market data
where it is available and rely as little as possible on entity
specific estimates. If all significant inputs required to fair
value an instrument are observable, the instrument is included in
level 2. No investments are valued using level 2 inputs in the
period.
Financial instruments in level 3
If one or more of the significant inputs is not based on
observable market data, the instrument is included in Level
3. Following the guidance of IFRS 9, these financial instruments
have been assessed to determine the fair value of the instrument.
In their assessment, the Directors have considered both external
and internal indicators to decide whether an impairment charge must
be made or whether there needs to be a fair value uplift on the
instrument. Instruments included in Level 3 comprise of the
Corallian investment. Details of this can be found at Note 12.
The carrying value of the Company's financial assets and
liabilities measured at amortised cost are approximately equal to
their fair value.
The Company is exposed through its operations to one or more of
the following financial risk:
-- Fair value or cash flow interest rate risk
-- Foreign currency risk
-- Liquidity risk
-- Liquidity risk in specific regard to sale of Ruvuma asset not
completing
-- Credit risk
-- Market risk
-- Expected credit losses
Policy for managing these risks is set by the Board. The policy
for each of the above risks is described in more detail below.
Fair value and cashflow interest rate risk
Generally the Company has a policy of holding debt at a floating
rate. The directors will revisit the appropriateness of this policy
should the Company's operations change in size or nature.
Operations are not permitted to borrow long-term from external
sources locally.
Foreign currency risk
Foreign exchange risk arises because the Company has operations
located in various parts of the world whose functional currency is
not the same as the functional currency in which the Company's
investments are operating. The Company's net assets are exposed to
currency risk giving rise to gains or losses on retranslation into
sterling. Only in exceptional circumstances will the Company
consider hedging its net investments in overseas operations as
generally it does not consider that the reduction in volatility in
net assets warrants the cash flow risk created from such hedging
techniques.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARED 31 DECEMBER 2022
21 Financial instruments (Continued)
The Company's exposure to foreign currency risk at the end of
the reporting period is summarised below. All amounts are presented
in GBP equivalent in the statement of financial position.
2022 2021
$000 $000
USD USD
Trade and other receivables 116 150
Cash and cash equivalents 878 1,415
Trade and other payables - (166)
----
Net exposure 994 1,399
====
Sensitivity analysis
As shown in the table above, the Company is primarily exposed to
changes in the GBP:USD exchange rate through its cash balance held
in USD and trading balances. The table below shows the impact in
GBP on pre-tax profit and loss of a 10% increase/decrease in the
GBP to USD exchange rate, holding all other variables constant.
2022 2021
GBP000 GBP000
GBP:USD exchange rate increases 10% 136 116
GBP:USD exchange rate decreases 10% (69) (142)
Liquidity risk
The liquidity risk of each entity is managed centrally by the
treasury function. Each operation has a facility with treasury, the
amount of the facility being based on budgets. The budgets are set
locally and agreed by the board annually in advance, enabling the
cash requirements to be anticipated. Where facilities of entities
need to be increased, approval must be sought from the finance
director. Where the amount of the facility is above a certain level
agreement of the board is needed.
All surplus cash is held centrally to maximise the returns on
deposits through economies of scale. The type of cash instrument
used and its maturity date will depend on the forecast cash
requirements.
The table below analyses the company's financial liabilities
into relevant maturity groupings based on their contractual
maturities. The amounts presented are the undiscounted cash
flows.
Less than 6 6 to 12 months Between Between
months 1 and 2
2 years and 5 years
GBP000 GBP000 GBP000 GBP000
31 December 2022
Trade and other payables 224 - - -
31 December 2021
Trade and other payables 178 - - -
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARED 31 DECEMBER 2022
21 Financial instruments (Continued)
Credit risk
The Company is mainly exposed to credit risk from credit sales.
It is Company policy, implemented locally, to access the credit
risk of new customers before entering contracts. Such credit
ratings are taken into account by local business practices.
The Company does not enter into complex derivatives to manage
credit risk, although in certain isolated cases may take steps to
mitigate such risks if it is sufficiently concentrated.
Market risk
As the Company is now investing in listed companies, the market
risk will be that of finding suitable investments for the Company
to invest in and the returns that those investments will return
given the markets that in which investments are made.
Expected credit losses
Allowances are recognised as required under the IFRS 9
impairment model and continue to be carried until there are
indicators that there is no reasonable expectation of recovery.
For trade and other receivables which do not contain a
significant financing component, the Company applies the simplified
approach. This approach requires the allowance for expected credit
losses to be recognised at an amount equal to lifetime expected
credit losses. For other debt financial assets the Company applies
the general approach to providing for expected credit losses as
prescribed by IFRS 9, which permits for the recognition of an
allowance for the estimated expected loss resulting from default in
the subsequent 12-month period. Exposure to credit loss is
monitored on a continual basis and, where material, the allowance
for expected credit losses is adjusted to reflect the risk of
default during the lifetime of the financial asset should a
significant change in credit risk be identified.
The majority of the Company's financial assets are expected to
have a low risk of default. A review of the historical occurrence
of credit losses indicates that credit losses are insignificant due
to the size of the Company's clients and the nature of the services
provided. The outlook for the oil and gas industry is not expected
to result in a significant change in the Company's exposure to
credit losses. As lifetime expected credit losses are not expected
to be significant the Company has opted not to adopt the practical
expedient available under IFRS 9 to utilise a provision matrix for
the recognition of lifetime expected credit losses on trade
receivables. Allowances are calculated on a case-by-case basis
based on the credit risk applicable to individual
counterparties.
Exposure to credit risk is continually monitored in order to
identify financial assets which experience a significant change in
credit risk. In assessing for significant changes in credit risk
the Company makes use of operational simplifications permitted by
IFRS 9. The Company considers a financial asset to have low credit
risk if the asset has a low risk of default; the counterparty has a
strong capacity to meet its contractual cash flow obligations in
the near term; and no adverse changes in economic or business
conditions have been identified which in the longer term may, but
will not necessarily, reduce the ability of the counterparty to
fulfil its contractual cash flow obligations. Where a financial
asset becomes more than 30 days past its due date additional
procedures are performed to determine the reasons for non-payment
in order to identify if a change in the exposure to credit risk has
occurred.
Should a significant change in the exposure to credit risk be
identified the allowance for expected credit losses is increased to
reflect the risk of expected default in the lifetime of the
financial asset. The Company continually monitors for indications
that a financial asset has become credit impaired with an allowance
for credit impairment recognised when the loss is incurred. Where a
financial asset becomes more than 90 days past its due date
additional procedures are performed to determine the reasons for
non-payment in order to identify if the asset has become credit
impaired.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARED 31 DECEMBER 2022
21 Financial instruments (Continued)
The Company considers an asset to be credit impaired once there
is evidence that a loss has been incurred. In addition to
recognising an allowance for expected credit loss, the Company
monitors for the occurrence of events that have a detrimental
impact on the recoverability of financial assets. Evidence of
credit impairment includes, but is not limited to, indications of
significant financial difficulty of the counterparty, a breach of
contract or failure to adhere to payment terms, bankruptcy or
financial reorganisation of a counterparty or the disappearance of
an active market for the financial asset.
A financial asset is only written off when there is no
reasonable expectation of recovery.
The Company employs the simplified approach to make an estimate
of ECL. There are no outstanding balances as at 31 December 2022
resulting in an ECL of GBPnil in the current year.
COMPANY
Categories of financial instruments
The following table combines information about:
* Classes of financial instruments based on their
nature and characteristics; and
* The carrying amounts of financial instruments.
2022 2021
GBP000 GBP000
Financial assets at amortised cost
Other debtors 96 111
Prepayments and accrued income 40 21
Cash and cash equivalents 750 2,059
Loan to subsidiary 1,450 1,244
------ ------
2,336 3,435
====== ======
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARED 31 DECEMBER 2022
21 Financial instruments (Continued)
Book Value Fair Value Book Value Fair Value
2022 2022 2021 2021
GBP000 GBP000 GBP000 GBP000
Financial assets at fair
value
Non-current Investment -
Helium One 206 206 312 312
Non-current Investment -
Corallian Energy Limited 67 67 125 125
273 273 437 437
2022 2021
GBP000 GBP000
Financial liabilities at
amortised cost
Trade payables 38 142
Accruals and deferred income 55 36
Other payables 121 -
214 178
The table below analyses financial instruments carried at fair
value, by valuation method.
Fair values are categorised into different levels in a fair
value hierarchy based on the inputs used in the valuation
techniques as follows:
-- Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities.
-- Level 2: inputs other than quoted prices included in Level 1
that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e derived from prices).
-- Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
The fair values for the Company's assets and liabilities are not
materially different from their carrying values in the financial
statements.
The following table presents the Company's financial assets that
are measured at fair value:
Level 1 Level 2 Level 3 Total
GBP000 GBP000 GBP000 GBP000
Non-current Investment - Helium
One 206 - - 206
Non-current Investment - Corallian
Energy Limited - - 67 67
------
206 - 67 273
======
The Company does not have any liabilities measured at fair
value. There have been no transfers in to or transfers out of fair
value hierarchy levels in the period.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARED 31 DECEMBER 2022
21 Financial instruments (Continued)
Financial instruments in level 1
The fair value of financial instruments traded in active markets
is based on quoted market prices at the reporting date. A market is
regarded as active if quoted prices are readily and regularly
available from an exchange, dealer, broker, industry group, pricing
service, or regulatory agency, and those prices represent actual
and regularly occurring market transactions on an arm's length
basis. The quoted market price used for financial assets held by
the Company is the current bid price.
Financial instruments in level 2
The fair value of financial instruments that are not traded in
an active market is determined by using valuation techniques. These
valuation techniques maximise the use of observable market data
where it is available and rely as little as possible on entity
specific estimates. If all significant inputs required to fair
value an instrument are observable, the instrument is included in
level 2. No investments are valued using level 2 inputs in the
period.
Financial instruments in level 3
If one or more of the significant inputs is not based on
observable market data, the instrument is included in Level
3. Following the guidance of IFRS 9, these financial instruments
have been assessed to determine the fair value of the instrument.
In their assessment, the Directors have considered both external
and internal indicators to decide whether an impairment charge must
be made or whether there needs to be a fair value uplift on the
instrument. Instruments included in Level 3 comprise of the
Corallian investment. Details of this can be found at Note 12.
The carrying value of the Company's financial assets and
liabilities measured at amortised cost are approximately equal to
their fair value.
The Company is exposed through its operations to one or more of
the following financial risk:
-- Fair value or cash flow interest rate risk
-- Foreign currency risk
-- Liquidity risk
-- Liquidity risk in specific regard to sale of Ruvuma asset not
completing
-- Credit risk
-- Market risk
-- Expected credit losses
Policy for managing these risks is set by the Board. The policy
for each of the above risks is described in more detail below.
Fair value and cashflow interest rate risk
Generally the Company has a policy of holding debt at a floating
rate. The directors will revisit the appropriateness of this policy
should the Company's operations change in size or nature.
Operations are not permitted to borrow long-term from external
sources locally.
Foreign currency risk
Foreign exchange risk arises because the Company has operations
located in various parts of the world whose functional currency is
not the same as the functional currency in which the Company's
investments are operating. The Company's net assets are exposed to
currency risk giving rise to gains or losses on retranslation into
sterling. Only in exceptional circumstances will the Company
consider hedging its net investments in overseas operations as
generally it does not consider that the reduction in volatility in
net assets warrants the cash flow risk created from such hedging
techniques.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARED 31 DECEMBER 2022
21 Financial instruments (Continued)
The Company's exposure to foreign currency risk at the end of
the reporting period is summarised below. All amounts are presented
in GBP equivalent in the statement of financial position.
2022 2021
$000 $000
USD USD
Trade and other receivables 116 150
Cash and cash equivalents 878 1,415
Trade and other payables - (166)
----
Net exposure 994 1,399
====
Sensitivity analysis
As shown in the table above, the Company is primarily exposed to
changes in the GBP:USD exchange rate through its cash balance held
in USD and trading balances. The table below shows the impact in
GBP on pre-tax profit and loss of a 10% increase/decrease in the
GBP to USD exchange rate, holding all other variables constant.
2022 2021
GBP000 GBP000
GBP:USD exchange rate increases 10% 136 116
GBP:USD exchange rate decreases 10% (69) (142)
Liquidity risk
The liquidity risk of each entity is managed centrally by the
treasury function. Each operation has a facility with treasury, the
amount of the facility being based on budgets. The budgets are set
locally and agreed by the board annually in advance, enabling the
cash requirements to be anticipated. Where facilities of entities
need to be increased, approval must be sought from the finance
director. Where the amount of the facility is above a certain level
agreement of the board is needed.
All surplus cash is held centrally to maximise the returns on
deposits through economies of scale. The type of cash instrument
used and its maturity date will depend on the forecast cash
requirements.
The table below analyses the company's financial liabilities
into relevant maturity groupings based on their contractual
maturities. The amounts presented are the undiscounted cash
flows.
Less than 6 6 to 12 Between Between
months months 1 and 2
2 years and 5 years
GBP000 GBP000 GBP000 GBP000
31 December 2022
Trade and other payables 214 - - -
31 December 2021
Trade and other payables 178 - - -
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARED 31 DECEMBER 2022
21 Financial instruments (Continued)
Credit risk
The Company is mainly exposed to credit risk from credit sales.
It is Company policy, implemented locally, to access the credit
risk of new customers before entering contracts. Such credit
ratings are taken into account by local business practices.
The Company does not enter into complex derivatives to manage
credit risk, although in certain isolated cases may take steps to
mitigate such risks if it is sufficiently concentrated.
Market risk
As the Company is now investing in listed companies, the market
risk will be that of finding suitable investments for the Company
to invest in and the returns that those investments will return
given the markets that in which investments are made.
Expected credit losses
Allowances are recognised as required under the IFRS 9
impairment model and continue to be carried until there are
indicators that there is no reasonable expectation of recovery.
For trade and other receivables which do not contain a
significant financing component, the Company applies the simplified
approach. This approach requires the allowance for expected credit
losses to be recognised at an amount equal to lifetime expected
credit losses. For other debt financial assets the Company applies
the general approach to providing for expected credit losses as
prescribed by IFRS 9, which permits for the recognition of an
allowance for the estimated expected loss resulting from default in
the subsequent 12-month period. Exposure to credit loss is
monitored on a continual basis and, where material, the allowance
for expected credit losses is adjusted to reflect the risk of
default during the lifetime of the financial asset should a
significant change in credit risk be identified.
The majority of the Company's financial assets are expected to
have a low risk of default. A review of the historical occurrence
of credit losses indicates that credit losses are insignificant due
to the size of the Company's clients and the nature of the services
provided. The outlook for the oil and gas industry is not expected
to result in a significant change in the Company's exposure to
credit losses. As lifetime expected credit losses are not expected
to be significant the Company has opted not to adopt the practical
expedient available under IFRS 9 to utilise a provision matrix for
the recognition of lifetime expected credit losses on trade
receivables. Allowances are calculated on a case-by-case basis
based on the credit risk applicable to individual
counterparties.
Exposure to credit risk is continually monitored in order to
identify financial assets which experience a significant change in
credit risk. In assessing for significant changes in credit risk
the Company makes use of operational simplifications permitted by
IFRS 9. The Company considers a financial asset to have low credit
risk if the asset has a low risk of default; the counterparty has a
strong capacity to meet its contractual cash flow obligations in
the near term; and no adverse changes in economic or business
conditions have been identified which in the longer term may, but
will not necessarily, reduce the ability of the counterparty to
fulfil its contractual cash flow obligations. Where a financial
asset becomes more than 30 days past its due date additional
procedures are performed to determine the reasons for non-payment
in order to identify if a change in the exposure to credit risk has
occurred.
Should a significant change in the exposure to credit risk be
identified the allowance for expected credit losses is increased to
reflect the risk of expected default in the lifetime of the
financial asset. The Company continually monitors for indications
that a financial asset has become credit impaired with an allowance
for credit impairment recognised when the loss is incurred. Where a
financial asset becomes more than 90 days past its due date
additional procedures are performed to determine the reasons for
non-payment in order to identify if the asset has become credit
impaired.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARED 31 DECEMBER 2022
21 Financial instruments (Continued)
The Company considers an asset to be credit impaired once there
is evidence that a loss has been incurred. In addition to
recognising an allowance for expected credit loss, the Company
monitors for the occurrence of events that have a detrimental
impact on the recoverability of financial assets. Evidence of
credit impairment includes, but is not limited to, indications of
significant financial difficulty of the counterparty, a breach of
contract or failure to adhere to payment terms, bankruptcy or
financial reorganisation of a counterparty or the disappearance of
an active market for the financial asset.
A financial asset is only written off when there is no
reasonable expectation of recovery.
The Company employs the simplified approach to make an estimate
of ECL. There are no outstanding balances as at 31 December 2022
resulting in an ECL of GBPnil in the current year.
-- Related party transactions GROUP
The Company had the following amounts outstanding from its
investee companies (Note 13) at 31 December:
2022 2021
GBP000 GBP000
Helium One opening balance - 73
Conversion to shares in Helium One - (73)
Balance at 31 December -
-
======
Details of director's remuneration, being key personnel,
are given in Note 7.
The Company entered into transactions with the following related
parties who have common directors during the current year:
2022 2021
GBP000 GBP000
Gneiss Energy Limited - provision of corporate
finance advisory
- common director Jonathan Fitzpatrick 489 606
Quixote Advisors Ltd - provision of management
services - common director Tom Reynolds - (19)
The primary contract with Gneiss Energy Limited has terminated.
The only remaining contract with the related party is in relation
to the sale of the Ruvuma asset which will terminate automatically
upon completion of the sale.
In the prior year, the Group loaned GBP1,200,000 to Energy
Acquisitions Group Limited, a 50% owned joint venture of the Group
and accrued interest of GBP134,000 (2021: GBP44,000). The loan is
repayable on demand but is not callable in the 12 months after the
date of signing these financial statements. Iinterest is payable
and accrued in accordance with the loan agreement. Outstanding
balance at 31 December 2022 is $1,448k (2021:
GBP1,244k)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARED 31 DECEMBER 2022
22 Related party transactions (Continued)
COMPANY
The Company had the following amounts outstanding from its
investee companies (Note 13) at 31 December:
2022 2021
GBP000 GBP000
Helium One opening balance - 73
Conversion to shares in Helium One - (73)
Balance at 31 December -
-
======
Details of director's remuneration, being key personnel,
are given in Note 7.
Amounts due from subsidiaries 2022 2021
GBP000 GBP000
Scirocco Energy (UK) Limited 1,451 1,244
======
Interest is payable and accrued in accordance with loan
agreement. Intercompany balances are repayable on demand.
The Company entered into transactions with the following related
parties who have common directors during the current year:
2022 2021
GBP000 GBP000
Gneiss Energy Limited - provision of corporate
finance advisory
- common director Jonathan Fitzpatrick 489 606
Quixote Advisors Ltd - provision of management
services - common director Tom Reynolds - (19)
The primary contract with Gneiss Energy Limited has terminated.
The only remaining contract with the related party is in relation
to the sale of the Ruvuma asset which will terminate automatically
upon completion of the sale.
In the prior year, the Company loaned GBP1,200,000 to Scirocco
Energy (UK) Limited, a 100% owned subsidiary of the Company and
accrued interest of GBP134,000 (2021: GBP44,000). The loan is
repayable on demand but is not callable in the twelve months from
the date of signing these financial statements, interest is payable
and accrued in accordance with the loan agreement. Outstanding
balance at 31 December 2022 is $1,448k (2021:
GBP1,244k)
23 Ultimate Controlling Party
In the opinion of the directors there is no controlling
party.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
24 Commitments
GROUP AND COMPANY
As at 31 December 2022, the Company had no material commitments
(2021: GBPnil).
25 Retirement benefit scheme GROUP AND COMPANY
The Company operates only the basic pension plan required under
UK legislation, contributions there to during the year amounted to
GBPnil (2021: GBPnil).
26 Cash generated from operations 2022 2021
GROUP GBP000 GBP000
(Loss)/profit for the year after tax for continuing
operations (1,438) 362
(Loss)/profit for the year after tax for discontinuing
operations (3,377) (4,053)
Adjustments for:
Unrealised gain on investments held 2 -
Impairment of investments 58 -
Loss on fair value revaluation of assets held
for sale 3,377 3,846
Gain from sale of investment (57) (2,196)
Interest accrued on loan to related party (134) (44)
Equity settled share based payment expense 130 471
Share of profit in joint venture (40) -
Movements in working capital:
(Increase)/decrease in trade and other receivables (82) 268
Increase/(decrease) in trade and other payables 46 (71)
Cash absorbed by operations (1,515) (1,417)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
27 Post balance sheet event
At the date these financial statements were approved, being 30
June 2022, the Directors would like to call attention to the below
post balance sheet events.
Sale of Tanzanian Assets
The sale of the 25% non-operating interest in the Ruvuma asset,
Tanzania, was originally announced in the prior period. An
agreement has been entered into for the sale of this asset with ARA
Petroleum Tanzania ("APT"). As communicated to the market in an RNS
dated 25 May 2023, the long stop date on this agreement has been
extended to 31 August 2023 and both parties expect to complete the
transaction within this timeframe although completion cannot be
guaranteed.
Part sale of Helium One shareholding
In June 2023 the Company sold 1,906,088 shares of Helium One for
an average price of 7.5p/share.
Sale of Corallian shareholding
In March 2023, the Company sold it's 25% holding in the
Corallian asset. Net proceeds for this sale amounted to GBP67k. The
asset has been reflected in the financial statements as at 31
December 2022 at this sales price which is considered to be
representative of fair market value.
Changes to Board of Directors
As announced in RNS dated 1st March, 16th March and 27th April,
to reflect the change in strategic direction of the Company, and to
retain the appropriate level of skills, experience, and
independence, there have been changes to the Board of Directors in
the period after the Balance Sheet date. Muir Miller has stepped
down from the Board effective 31 May 2023. In addition, Don
Nicolson has notified of his intention to step down in due course.
The Company has appointed directors Niall Roberts and Matt Bower
after consultation with significant shareholders who joined the
Board on 1st March 2023 and 27th April 2023, respectively. The
Company expects to identify and appoint a suitable independent
non-executive director to replace Don Nicolson in due course.
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END
FR VKLFLXQLLBBV
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June 30, 2023 02:00 ET (06:00 GMT)
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