TIDMTOM
RNS Number : 4992P
TomCo Energy PLC
18 February 2021
18 February 2021
TOMCO ENERGY PLC
("TomCo" or the "Company" or, with its subsidiaries, the "Group"
)
Final Results for the year ended 30 September 2020
TomCo Energy plc (AIM: TOM), the US operating oil development
group focused on using innovative technology to unlock
unconventional hydrocarbon resources, announces its audited results
for the year ended 30 September 2020.
The annual report and accounts will shortly be available on the
Company's website at www.tomcoenergy.com .
Enquiries:
TomCo Energy plc
Malcolm Groat (Chairman) / John Potter
(CEO) +44 (0)20 3823 3635
Strand Hanson Limited (Nominated
Adviser)
James Harris / Matthew Chandler /
Jack Botros +44 (0)20 7409 3494
Novum Securities Limited (Broker)
Charlie Brook-Partridge +44 (0)20 7399 9402
IFC Advisory Limited (Financial PR)
Tim Metcalfe / Graham Herring / Florence
Chandler +44 (0)20 3934 6630
For further information, please visit www.tomcoenergy.com .
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) 596/2014 as it forms part of UK
domestic law by virtue of the European Union (Withdrawal) Act
2018.
CHAIRMAN'S STATEMENT
I am pleased to be delivering my first Chairman's Statement to
the shareholders of TomCo Energy plc, together with the Annual
Report and Financial Statements for the year ended 30 September
2020.
Market Conditions
It has been an unprecedented year across all global markets.
Covid-19 has cast a dreadful shadow across the world and continues
to do at the time of writing this statement.
TurboShale RF Technology
When the Company issued its 2019 Annual Report, the COVID-19
pandemic was developing, and the Board decided to postpone the next
stage of the TurboShale field testing. A decision on when to
restart the field test programme is likely to be made in Q2
2021.
Greenfield Energy LLC
In December 2019, the Company signed a non-binding memorandum of
understanding ("MoU") with Valkor Technology LLC ("Valkor") to
explore the potential of oil sands situated on the Group's oil
shale leases in the Uintah Basin, Utah, USA (the "Leases"). Valkor
is an international engineering company that handles procurement,
construction and installation, and oil field operations, operating
in the USA, South America and Africa, both onshore and offshore. It
also owns and operates gas and oil fields in Trinidad, the USA,
Turkey and Ukraine. Valkor has been assisting with design
improvements to Petroteq Energy Inc's ("Petroteq") closed loop
system for use in the recovery of oil from oil sands (the "Oil
Sands Technology") and the Company's joint venture with Valkor,
Greenfield (as defined below), now holds a multi-site licence from
Petroteq to utilise the Oil Sands Technology in the USA.
Based on the results of the preliminary work undertaken in March
2020, and in accordance with the terms of the MoU, TomCo and Valkor
agreed, inter alia, to fund a Pre-FEED (Front-End Engineering and
Design) study. The initial draft of the study provided sufficient
evidence to TomCo's Board to justify establishing, in June 2020, a
50/50 joint venture with Valkor, being Greenfield Energy LLC
("Greenfield"). Greenfield has been established with the principal
aim of developing a FEED for a potential 10,000 barrels of oil per
day ("bopd") plant consisting of two 5,000 bopd trains utilising
the Oil Sands Technology. The final results of the Pre-FEED study
were released in September 2020, concluding that the likely cost of
production from a 10,000 bopd plant would be approximately US$30
per barrel. Steps along the agreed path have included Greenfield
temporarily taking over the operations and management of Petroteq's
oil sands plant (the "POSP") in order to complete certain upgrades
and improvements so as to enhance its reliability and increase its
capacity to approximately 500 bopd. In early December 2020, the
re-configured Petroteq plant works were completed, and, on 4
January 2021, mining work was started in preparation for the
re-start of the POSP. Ore-processing began on 10t January 2021 and
the POSP operations will be optimised with the target of producing
250 bopd per single shift during February 2021.
We expect the FEED to be completed in Q1 2021 following
third-party verification works. A potential site on which to build
Greenfield's first 10,000 bopd plant has been identified and is
being assessed which includes a pre-existing Large Mining Permit
and suitable site infrastructure to enable construction to commence
swiftly once funding has been secured. Although there will be
challenges ahead, our firm objective is to maintain momentum and
make significant progress with this project in the near future.
Corporate
Two equity fund-raises were completed during the financial year,
raising approximately GBP2.4 million gross. Following the financial
year-end, the Company raised a further GBP3.5 million gross in
November 2020. At the date of signing this report, TomCo has
sufficient cash to fund Greenfield's near-term requirements and to
cover TomCo's current working capital requirements and committed
capital expenditure.
A number of Board changes have taken place over the reporting
period and subsequently. Stephen West, who took over from Andrew
Jones as our Chairman during the financial year, stepped down after
the financial year end to pursue other opportunities. After four
years of distinguished service to the Company, and to allow him to
concentrate on his other business interests, Alex Benger also
retired as a Non-Executive Director. Richard Horsman and Robb
Kirchner have joined the Board as Non-Executive Directors. Both are
seasoned Directors of companies like ours, experienced in handling
the challenges ahead, and I am delighted to welcome them to the
team.
Outlook and Summary
The Directors would like to thank all shareholders and other
stakeholders for their continued support, and we look forward to
making further progress in the year ahead.
Malcolm Groat
Non-Executive Chairman
17 February 2021
DIRECTORS' REPORT
The Directors submit their report and the financial statements
of the Group for the year ended 30 September 2020.
Principal Activity
The principal activity of the Group is that of deploying
technology on its oil shale leases and other unconventional oil
resources for future production.
Risk Assessment
The Group's oil and gas activities are subject to a range of
financial and operational risks which can significantly impact on
its performance, with the key risks for the year ended 30 September
2020 set out below.
Operational risk
During the financial year, the Company entered into a new Joint
Venture with Valkor, an established EPCI, into which TomCo invested
the sum of US$1.625 million in order to produce a Pre-FEED and pay
for certain upgrade works to an existing third-party Oil Sands
separation test plant. The planned upgrade works undertaken by
Valkor were intended to enhance the operational reliability and
production rate of the plant. In projects of this nature there are
many engineering risks but Valkor, having spent more than 12 months
prior to commencement of the upgrade works investigating the
process as the operator, were able to minimise the degree of risk.
Further risks may be encountered during the optimisation process
such as the anticipated increased production run rate not being
achieved or from changes in the quality of ore used. Most of such
risks can be managed with a planned increase in throughput and slow
incremental increases to the production rate.
The results obtained from the upgrade works will then be
utilised to verify the design parameters for a FEED in respect of a
commercial scale plant in the order of 5,000 bopd. If the plant
upgrade works do not ultimately generate suitable data for the FEED
design, further works may be required at the test plant to achieve
the engineering design step up for a 5,000 bopd plant
operation.
A third-party verification exercise on the process is also
planned in order to check both the data from the upgraded plant and
the FEED.
Risks relating to environmental, health and safety and other
regulatory standards
The Group's future extraction activities are subject to various
US federal and state laws and regulations relating to the
protection of the environment including the obtaining of
appropriate permits and approvals by relevant environmental
authorities. Such regulations typically cover a wide variety of
matters including, without limitation, prevention of waste,
pollution and protection of the environment, labour regulations and
worker safety. Furthermore, the future introduction or enactment of
new laws, guidelines and regulations could serve to limit or
curtail the growth and development of the Group's business or have
an otherwise negative impact on its operations. The Group ensures
that it complies with the relevant laws and regulations in force in
the jurisdictions in which it operates.
Liquidity and interest rate risks
The Group is ultimately dependent on sources of equity and/or
debt funding to develop TurboShale and Greenfield or any other
recovery technology and in turn the Group's exploration assets and
to meet its day-to-day capital commitments and overheads. Cash
forecasts identifying the liquidity requirements of the Group are
produced frequently and are reviewed regularly by management and
the Board. This strategy will continually be reviewed in light of
developments with existing projects and new project opportunities
as they arise. For further information regarding the Group's cash
resources and future funding requirements, refer to the 'Going
Concern' section below.
Currency risk
Due to the limited income and expenses denominated in foreign
currencies, it was not considered cost effective to manage
transactional currency exposure on an active basis. However, as the
financial statements are reported in sterling, any movements in the
exchange rate of foreign currencies against sterling may affect the
Group's statements of comprehensive income and financial position.
The Group holds some cash in US dollars to mitigate the foreign
exchange risk and keeps its currency profile under review.
COVID-19 risk
While COVID-19 continues to have a significant negative impact
on the global economy, the Directors note that oil prices have
recovered much of the fall since the commencement of the pandemic.
The most significant effect of the pandemic on the Group's current
activities relates to the timing of the resumption of the
TurboShale field tests. The Directors intend to review this again
during Q2 2021.The Group's joint venture activity with respect to
Greenfield is not currently expected to be significantly affected
by COVID-19.
Financial instruments
It was not considered an appropriate policy for the Group to
enter any hedging activities or trade in any financial instruments.
Further information can be found in Note 19.
Results and Dividends
The statement of comprehensive income is set out below. The
Directors do not propose the payment of a dividend (2019:
GBPnil).
Review of the Key Events During the Year
TurboShale
There have been no further developments of the TurboShale
technology during the financial year. The board will review the
next steps for TurboShale during Q2 2021.
Greenfield Energy LLC
On 4 December 2019, the Company announced the signing of a
non-binding memorandum of understanding with Valkor to explore the
oil sands potential across the Group's oil shale leases within the
Uintah Basin, Utah, USA. Valkor is an international engineering,
procurement, construction and installation and oil field operations
company, with operations in the USA, South America and Africa, both
onshore and offshore, as well as being the owner and operator of
gas and oil fields in Trinidad, USA, Turkey and the Ukraine.
Through its subsidiary, CrossTrails LLC, Valkor has assisted with
the design improvements of Petroteq's closed loop system for use in
the recovery of oil from oil sands (the "Oil Sands Technology")
and, via Greenfield, has a licence from Petroteq to utilise the Oil
Sands Technology in the USA.
Based on the results of the preliminary work undertaken in
accordance with the MoU, TomCo entered into an Exclusivity
Agreement with Valkor, pursuant to which the Company and Valkor
agreed:
-- to study the potential to deploy the Oil Sands Technology at
a suitable location. A desktop study of the Group's Leases
determined that, whilst oil sands were present at depth, more
suitable third-party sites with near surface oil sand were situated
in the vicinity of the Leases such that these areas will be the
focus of the parties going forward;
-- to fund immediately a Pre-FEED study, to be undertaken by
Valkor and verified by a third party, to demonstrate the economic
viability of the Oil Sands Technology, with a gross budget of
US$250,000 to be funded equally by the parties;
-- to establish, subject to contract, a joint venture company
(the "JV Company") to pursue the development of a plant on land yet
to be determined; and
-- to negotiate with Petroteq for a licence to employ the Oil
Sands Technology in future oil sands plants to be developed by the
JV Company.
Greenfield Energy LLC was established in June 2020 pursuant to
the signing of a joint venture agreement between TomCo and Valkor
(the "JV Agreement") following the receipt of a draft of the
Pre-FEED study.
The results of the draft Pre-FEED study provided the TomCo Board
with sufficient comfort to enter into the JV Agreement to form and
regulate the operations of Greenfield in its pursuit of the
development of a plant utilising the Oil Sands Technology.
Greenfield is equally owned by TomCo and Valkor, with a Director
from each being appointed to Greenfield's Board, being John Potter
and Steve Byle respectively.
Under the terms of the JV Agreement, the Company has provided
initial funding to Greenfield of US$1.5 million, to enable
Greenfield to be able to complete the required upgrades to the POSP
and to cover TomCo's contribution to the FEED for a 5,000 bopd
plant. Valkor is providing the engineering knowhow pertaining to
the Oil Sands Technology required to complete the upgrades and has
provided services for the completion of the pre-FEED and will
provide services for the FEED up to a value of, in aggregate,
US$375,000.
Prior to the establishment of Greenfield, Valkor had entered
into an agreement to take over the management and operations of the
POSP (the "Work Order"), for an initial 12-month period, to ensure
the upgrade works could be completed in as short a period as
possible. With the establishment of Greenfield, Valkor transferred
the Work Order to it. The upgrade works were completed post the
Company's financial year end and the POSP restarted. A third-party
engineering firm will now be engaged to verify the process and
review the results against the FEED. In addition, a multi-site
licence in respect of the Petroteq technology has been negotiated
and entered into by Greenfield, post the financial year end.
Financing
During the financial year, TomCo completed two equity fund
raises involving the issue of, in aggregate, 517,307,692 new
ordinary shares and 258,653,846 new warrants, to raise a total of
GBP2.425 million (gross). The net proceeds were used for the
investment into Greenfield and for general working capital
purposes.
Since the end of the financial year, there has been a further
placing of 777,777,777 new ordinary shares, and the issue of
388,888,888 new warrants, raising GBP3,500,000 (gross). These funds
have been, or are intended to be, deployed as loans to Greenfield
to assist it in securing a site to further its development work and
secure a multi-site licence for deployment of the Oil Sands
Technology, as well as general working capital for the Group. Other
than the funds advanced since the year-end as loans to Greenfield
(US$500,000), the Group is not contractually committed at present
to any further expenditure in respect of Greenfield or TurboShale.
The timing and quantum of further expenditure on these projects
will depend in part on the availability of additional funding from
future fundraisings.
As at 9th February 2021, the Company had cash of approximately
GBP2.45 million and management's cash flow forecasts indicate that
the Group has sufficient funds to meet its currently foreseeable
working capital requirements through to at least the end of June
2022 as detailed further below undergoing Concern and in Note 1.1
to the financial statements.
Directors
The Directors who served on the Board during the year to 30
September 2020 and to date were as follows:
Stephen West (appointed 17 February 2020; resigned 30 September
2020)
Andrew Jones (resigned 16 March 2020)
Malcolm Groat
John Potter
Alexander Benger (resigned 30 September 2020)
Richard Horsman (appointed 1 November 2020)
Robert Kirchner (appointed 1 November 2020)
Directors' interests in the ordinary shares of the Company,
including family interests, as at 30 September 2020 were as
follows:
30 September 2020 30 September 2019 (or date of
appointment)
Ordinary Share Share Ordinary Share Share
shares warrants options shares warrants options
of nil of nil
par par
value value
--------------------- -------------------- ------------------- --------------------- -------------------- ------------------- --------------------
M. Groat 11,887 - 2,380,952 11,887 - 380,952
S. West
(resigned
30
September
2020) 3,076,923 - - 3,076,923 - -
J. Potter 26,500 - 7,714,285 26,500 - 1,714,285
A. Benger
(resigned
30
September
2020) 18,293 - 2,380,952 18,293 - 380,952
3,133,603 - 12,476,189 3,133,603 - 2,476,189
Details of the remuneration, share warrants and share options
can be found in the Remuneration Committee Report and Notes 6 , 17
and 19 to the financial statements.
Payments of payables
The Group's policy is to negotiate payment terms with its
suppliers in all sectors to ensure that they know the terms on
which payment will take place when the business is agreed and to
abide by those terms of payment.
Going Concern
The Directors have prepared cash flow forecasts for the period
to 30 June 2022. Those forecasts, which include any capital
expenditure committed at the date of this report, indicate that the
Group has sufficient resources to continue in operational existence
for the foreseeable future,
It is possible that additional capital expenditure beyond that
committed at the date of this report will be necessary in order to
maximise the opportunities presented by TurboShale and Greenfield.
Any such additional expenditure would be subject to funding, in
whole or in part, via additional debt or equity or a combination of
both.
The Directors note that COVID-19 has had a significant negative
impact on the global economy and oil prices have been volatile,
which may mean it is harder to secure additional funding than it
has historically been. Notwithstanding this, the Directors have a
reasonable expectation based on successful recent fundraisings,
that they can secure any additional funding that might be
required.
Directors' responsibilities
The Directors are responsible for keeping proper accounting
records that are sufficient to show and explain the Group's
transactions and disclose, with reasonable accuracy at any time,
the financial position of the Group and enable them to ensure that
financial statements may be prepared, in accordance with the Isle
of Man Companies Act 2006. They are also responsible for
safeguarding the assets of the Group and for taking steps for the
prevention and detection of fraud and other irregularities.
The Directors are required to prepare financial statements in
accordance with the rules of the London Stock Exchange for
companies with securities trading on the AIM market. In accordance
with those rules, the Directors have elected to prepare the Group's
financial statements in accordance with International Financial
Reporting Standards (IFRSs), as issued by the International
Accounting Standards Board. The Directors must not approve the
financial statements unless they are satisfied that they give a
true and fair view of the state of affairs of the Group and of the
profit or loss of the Group for that year. In preparing these
financial statements, the Directors are required to:
-- consistently select and apply appropriate accounting policies;
-- present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
-- provide additional disclosures when compliance with the
specific requirements in IFRSs is insufficient to enable users to
understand the impact of particular transactions, other events and
conditions on the entity's financial position and financial
performance; and
-- state that the Group has complied with IFRS, subject to any
material departures disclosed and explained in the financial
statements.
The Directors confirm that they have complied with these
requirements, and, having a reasonable expectation that the Group
has adequate resources to continue in operational existence for the
foreseeable future, have continued to adopt the going concern basis
in preparing the financial statements.
Auditors
All the current Directors have taken all the steps that they
ought to have taken to make themselves aware of any information
needed by the Company's auditors for the purposes of their audit
and to establish that the auditors are aware of that information.
The Directors are not aware of any relevant audit information of
which the auditors are unaware.
BDO LLP have expressed their willingness to continue in office
and a resolution to re-appoint them will be proposed at the annual
general meeting.
By order of the Board
John Potter
CEO
17 February 2021
CORPORATE GOVERNANCE STATEMENT
As Chairman, I am pleased to present the Company's Governance
Statement under the QCA Corporate Governance Code (the "QCA Code").
Establishing effective corporate governance structures that evolve
with the business and protect shareholder value is a key element of
my role, together with the Board as a whole. Set out below are
details of the Company's governance framework benchmarked against
the QCA Code principles.
The Board of Directors of TomCo (the "Board") monitors the
business affairs of the Company and its subsidiaries on behalf of
its shareholders. The Board currently consists of the Chief
Executive Officer and three Non-Executive Directors. None of the
Non-Executive Directors have previously held an executive position
with the Company. The Directors have responsibility for the overall
corporate governance of the Company and recognise the need for the
highest standards of behaviour and accountability. The Directors
are committed to the principles underlying best practice in
corporate governance and have adopted the QCA Code.
This statement explains, at a high level, how the QCA Code is
applied by the Company and how its application supports the
Company's medium to long-term success. Further information on the
application of the QCA Code can be found on the Company's website
at https://tomcoenergy.com/investors/governance/.
The Board is responsible for the stewardship of the Company
through consultation with the management of the Company. Management
represents the Executive Director. Any responsibility that is not
delegated to management or to the committees of the Board remains
with the Board, subject to the powers of shareholder meetings. The
frequency of Board meetings, as well as the nature of agenda items,
varies depending on the state of the Company's affairs and in light
of opportunities or risks which the Company faces. Members of the
Board are in frequent contact with one another and meetings of the
Board are held as deemed necessary.
Statement of compliance with the QCA Code
Throughout the year ended 30 September 2020, the Company has
been in compliance with the provisions set out in the QCA Code.
Application of the QCA Code principles
The Company has applied the principles set out in the QCA Code,
by complying with it as reported above. Further explanations of how
the principles have been applied is set out below.
Principle One - Business Model and Strategy
TomCo is an oil exploration and development company focused on
using innovative technology to unlock unconventional hydrocarbon
resources, initially in Utah, USA.
Its objective is to become the leading development company in
the use of RF technology in the extraction of oil and gas from oil
shale and to commercialise its current oil shale assets.
The Board believes that the RF technology, held through
TurboShale in which the Company has an 80% interest, will benefit
from being economically attractive, carrying significantly lower
costs than other methods of retorting and will be environmentally
benign. The Board believes this will prove to be a disruptive
technology and one with the potential to unlock TomCo's oil shale
assets. Details of key operational and strategic risks that impact
the delivery of the future strategy are set out in the Directors'
Report together with mitigating actions.
In order to diversify its interests, in December 2019, TomCo
announced a project in conjunction with the global EPCI company,
Valkor LLC, to develop a licensed scalable modular production plant
that could be used to cost effectively extract oil from the oil
sands. TomCo announced a formal JV with Valkor on 19 June 2020,
creating Greenfield Energy LLC, to make certain upgrades at
Petroteq's existing oil sands plant, with the ultimate objective of
developing a FEED for a 10,000 bopd plant based on Petroteq's oil
sands technology. The initial upgrade implementation phase has been
completed and the Board is currently examining the possibility with
Valkor of securing a site for the potential future construction of
a 10,000 bopd plant.
Principle Two - Understanding Shareholder Needs and
Expectations
The Board is committed to maintaining good communications and
having constructive dialogue with its shareholders. Shareholders
and analysts have the opportunity to discuss issues and provide
feedback at meetings with the Company and management.
All shareholders are encouraged to attend and participate in all
shareholder meetings called by the Company, in particular its
Annual General Meeting (AGM), subject to Covid-19 related
restrictions. Investors also have access to current information on
the Company and the Group through its website at:
www.tomcoenergy.com.
Principle Three - Considering wider stakeholder and social
responsibilities
The Board recognises that the long-term success of the Group is
reliant upon the efforts of the employees of the Group, its
partners, consultants, contractors, suppliers, regulators and other
stakeholders. The Board have put in place a range of processes and
systems to ensure that there is close oversight and contact with
its key stakeholders.
The Group is subject to oversight by a number of different U.S.
State and other regulatory bodies, who directly or indirectly are
involved with the permitting and approval process of its oil and
gas operations in Utah, including those conducted by Greenfield.
Additionally, given the nature of the Group's business, including
the activities of its joint venture, there are other parties who,
whilst not having regulatory power, nonetheless have an interest in
seeing that the Group conducts its operations in a safe,
environmentally responsible, ethical and conscientious manner.
The Group makes all reasonable efforts, directly or through its
advisers, to engage in and maintain active dialogue with each of
these governmental and non-governmental bodies, to ensure that any
issues faced by the Group, including but not limited to regulations
or proposed changes to regulations, are well understood and
ensuring to the fullest extent possible that the Group is in
compliance with all appropriate regulations, standards and specific
licensing obligations, including environmental, social and safety
aspects, at all times.
Principle Four - Risk Management
In addition to its other roles and responsibilities, the Board
is responsible for ensuring that procedures are in place and are
being implemented effectively to identify, evaluate and manage the
significant risks faced by the Group.
As a result of the process described above, a number of risks
have been identified. The principal risks and the manner in which
the Company and its Board seek to mitigate them are set out below.
The Board reviews the principal risks facing the business as part
of its meetings through the year and changes to those risks as the
Company develops. Where risks change or new risks are identified
the Board implements risk management strategies as applicable.
Risk Comment Mitigation
Operational risks See Directors' Report. The Company is reducing its reliance
on one recovery method with the development
of TurboShale and its RF technology,
together with the formation of Greenfield.
The Company has engaged with established
contractors to carry out the various
elements of its projects. The Board
carefully monitors performance and
the results of work being carried
out on an ongoing basis.
The Group relies on its JV partner
to manage the engineering and operational
risks of the works being undertaken
by Greenfield at the test site. With
travel to the USA still possible,
although difficult, on site checks
can still be made by the Board. If
travel to the USA were to be prohibited
altogether due to COVID-19 the Group
will be solely reliant on its JV
partner to manage the operational
risks.
------------------------ ----------------------------------------------
Environmental, See Directors' Report. The Company has engaged leading advisers
health and safety to assist it in securing relevant
and other regulatory permits or licences to operate.
standards
The Company maintains ongoing oversight
of health and safety and environmental
compliance.
------------------------ ----------------------------------------------
Liquidity risk See Directors' Report The Company maintains a detailed
including 'Going cashflow forecast and carefully monitors
Concern' section. expenditure and may seek to raise
additional funding as required and
as referred to in Note 1.1.
------------------------ ----------------------------------------------
Currency risk See Directors' Report. The Company aims to manage currency
exposures by holding funds in the
applicable currency to match anticipated
expenditure.
------------------------ ----------------------------------------------
The Board consider that an internal audit function is not
necessary or practical due to the size of the Group and the close
day to day control exercised by the Executive Director. However,
the Board will continue to monitor the need for an internal audit
function. The Executive Director has established appropriate
reporting and control mechanisms to ensure the effectiveness of the
Group's control systems for the size of the business and its
activities. The Board obtains regular updates on risks from the
Executive Director, which allows it to monitor the effectiveness of
risk management and through its regular engagement and review of
reporting on areas such as the status of the Company's projects,
budgets, results and cash flow position of the Company it considers
the effectiveness of controls on an ongoing basis.
Principle Five - A Well-Functioning Board of Directors
The Board currently comprises the Chief Executive, John Potter,
and three independent Non-Executive Directors, Malcolm Groat,
Richard Horsman and Robert Kirchner.
Biographies for each of the current Directors are set out on the
Company's website. Executive and Non-Executive Directors are
subject to re-election usually at the Company's Annual General
Meeting, at intervals of no more than three years.
The Board meets on a regular basis, typically at least once a
month.
The Board is responsible for formulating, reviewing and
approving the Group's strategy, budgets and corporate actions. As
such, the Company has established separate Audit and Remuneration
Committees.
The Audit Committee comprises Richard Horsman (Chairman) and
Malcolm Groat. The Audit Committee meets at least twice a year to
consider the integrity of the financial statements of the Company,
including its annual and interim accounts; the effectiveness of the
Company's internal controls and risk management systems; auditor
reports; and terms of appointment and remuneration for the
auditor.
The Company's Remuneration Committee comprises Robert Kirchner
(Chairman) and Malcolm Groat. The Remuneration Committee meets from
time to time, but not less than once a year, to review and
determine, amongst other matters, the remuneration of Executives on
the Board and any share incentive plans of the Company.
The QCA Code recommends that the Chairman must have adequate
separation from the day-to-day business to be able to make
independent decisions. Malcolm Groat is the Company's Non-Executive
Chairman and the Board believe that he has adequate separation from
the day-to-day business of the Company to be able to make
independent decisions. As the Board is comprised of only four
members, one of whom is Executive and three of whom are independent
Non-Executive Directors, including the Chairman, the Board does not
believe it is currently necessary to appoint a senior independent
director.
The Chief Executive is a full-time employee of the Company.
Whilst each of the Non-Executive Directors are considered to be
part time, they are expected to provide as much time to the Company
as is required. The attendance record of the Directors at Board and
committee meetings held during the year ended 30 September 2020 was
as follows:
Main Audit Remuneration
Board Committee Committee
Meetings held 11 2 2
-------- ------------ --------------
Attendance:
-------- ------------ --------------
Stephen West (appointed 17 February 2020;
resigned 30 September 2020) 9
-------- ------------ --------------
John Potter 11
-------- ------------ --------------
Alex Benger (resigned 30 September 2020) 11 2 2
-------- ------------ --------------
Malcom Groat 11 2 2
-------- ------------ --------------
Andrew Jones (resigned 16 March 2020) 2
-------- ------------ --------------
Principle Six - Appropriate Skills and Experience of the
Directors
The Board believes that the current balance of skills held by
the Board as a whole, reflects a very broad range of commercial and
professional skills across geographies and industries and each of
the Directors has previous experience of public markets.
The Board believes that the Directors are well suited to the
Company's fundamental objective of enhancing and preserving
long-term shareholder value and ensuring that the Group conducts
its business in an ethical and safe manner. The Board is considered
to be of a sufficient number to provide more than adequate
experience and perspective to its decision-making process and,
given the size and nature of the Group, the Board does not consider
at this time that it is appropriate to increase the size of the
Board or amend its composition.
As the Board is not currently anticipating any change to its
size or composition, it has not yet implemented a written policy
regarding the identification and nomination of female directors. In
the event that one of the existing members of the Board stands down
from their current position, the Company will, at that time, give
further consideration to the specific selection of a female member
of the Board and the adoption of a formal policy relating to the
positive appointment of additional female members of the Board for
future opportunities.
The Board is responsible for: (a) ensuring that all new
Directors receive a comprehensive orientation, that they fully
understand the role of the Board and its committees, as well as the
contribution individual directors are expected to make (including
the commitment of time and resources that the Company expects from
its directors) and that they understand the nature and operation of
the Group's business; and (b) providing continuing education
opportunities for all directors, so that individuals may maintain
or enhance their skills and abilities as directors, as well as to
ensure that their knowledge and understanding of the Group's
business remains current.
Given the size of the Company and the in-depth experience of its
Directors, the Board has not deemed it necessary to develop a
formal process of orientation for new Directors but encourages all
its Directors to visit the Group's operations to ensure familiarity
and proper understanding.
Skills & Experience of Board Members
Malcolm Groat
Malcolm is a Chartered Accountant and has a wide range of
experience in corporate life, with roles as Chairman, Non-Executive
Director, Chairman of Audit Committees, CEO, COO and CFO for a
number public companies. He is an adviser on compliance and
governance, strategy and operational improvement, and managing the
risks of rapid change.
John Potter
John is an accomplished Chief Executive and project manager with
many years' experience working within the energy sector. John
brings a wide range of skills, knowledge and industry connections.
His proficiencies in understanding and identifying best
technologies in projects and his proven abilities in developing
relationships with stakeholders, including operators, politicians,
financiers, technology providers and regulators, are well proven
and have brought great value to the companies he has previously
worked with.
Robert Kirchner
Robb is an experienced board and oil industry executive, having
spent over 30 years in senior roles in the industry. In recent
years, he has successfully brought several new energy technologies
to the market. He is currently CEO of Cornerstone Energy Africa
Ltd, an Africa focused oil exploration and production company, and
Managing Director of BCI International, a consulting and financial
advisory business focused on the energy sector. His previous roles
include being COO of African Power Corporation; CFO and Deputy CEO
of Kungur Oilfield Equipment and Services; and CEO of First Africa
Oil plc and Deputy CEO of Sibir Energy plc, when those companies
were quoted on AIM. Robert also spent 13 years with ExxonMobil
Corporation from 1988 to 2001 and worked extensively across Africa
and the FSU. He has dual US/UK nationality.
Richard Horsman
Richard is an experienced public company director and is
currently Non-Executive Chairman of Toople plc, a main market
listed provider of bespoke telecom solutions. He is also Executive
Chairman of privately held Gardien Group. He was previously senior
independent Non-Executive Director of Plethora Solutions Holdings
plc and CEO of Cybit Holdings plc, both on AIM. During his tenure
at Cybit the company grew, from inception, to revenues of GBP25
million and went through multiple acquisitions. Cybit was acquired
in a deal with a US based private equity firm at over a 100%
premium to the prevailing market price. Richard was also previously
Chairman and CEO of Atego Group, a private company providing
mission and safety critical software and consulting services to the
aerospace, military and automotive sectors.
Principle Seven - Evaluation of Board Performance
The Board has determined that it shall be responsible for
assessing the effectiveness and contributions of the Board as a
whole and its committees (which currently comprise the Audit
Committee and the Remuneration Committee). The small size of the
Board allows for open discussion. The Chairman has regular dialogue
with the Chief Executive whereby the Board's role and effectiveness
can be considered.
No formal assessments have been prepared in the year. However,
the Board assesses its effectiveness on an ongoing basis. The Board
will keep this matter under review and especially if either the
size of the Board or the number of committees increases, which in
turn may require a more formalised assessment and evaluation
process to be established to ensure continued effectiveness.
Principle Eight - Corporate Culture
The Board recognises that their decisions regarding strategy and
risk will impact the corporate culture of the Group as a whole and
that this will impact the performance of the Group. The Board is
very aware that the tone and culture set by the Board will greatly
impact all aspects of the Group. The corporate governance
arrangements that the Board has adopted are designed to ensure that
the Group delivers long-term value to its shareholders and that
shareholders have the opportunity to express their views and
expectations for the Company in a manner that encourages open
dialogue with the Board.
A large part of the Group's activities is centred upon what
needs to be an open and respectful dialogue with partners,
suppliers, consultants and other stakeholders. Therefore, the
importance of sound ethical values and behaviour is crucial to the
ability of the Group to successfully achieve its corporate
objectives.
The Directors consider that, at present, the Group has an open
culture facilitating comprehensive dialogue and feedback and
enabling positive and constructive challenge.
Principle Nine - Maintenance of Governance Structures and
Processes
Ultimate authority for all aspects of the Group's activities
rests with the Board, with the responsibilities of the Executive
Director arising as a consequence of delegation by the Board.
The Board has adopted appropriate delegations of authority which
set out matters which are reserved to the Board. The Chairman is
responsible for the effectiveness of the Board and compliance with
the QCA Code, while management of the Group's business and primary
contact with shareholders has been delegated by the Board to the
Chief Executive Officer.
Non-Executive Directors
The Board evaluates its performance and composition on a regular
basis and will make adjustments as and when indicated. When
assessing the independence of each Non-Executive Director, length
of service is one of the considerations. The Board will, when
assessing new appointments in the future, consider the need to
balance the experience and knowledge that each independent director
has of the Group and its operations, with the need to ensure that
independent directors can also bring new perspectives to the
business.
In accordance with the Isle of Man Companies Act 2006, the Board
complies with: a duty to act within their powers; a duty to promote
the success of the Company; a duty to exercise independent
judgement; a duty to exercise reasonable care, skill and diligence;
a duty to avoid conflicts of interest; a duty not to accept
benefits from third parties and a duty to declare any interest in a
proposed transaction or arrangement.
Principle Ten - Shareholder Communication
The Board is accountable to the Company's shareholders and, as
such, it is important for the Board to appreciate the aspirations
of the shareholders and equally that the shareholders understand
how the actions of the Board and short-term financial performance
relate to the achievement of the Group's longer-term goals.
The Board reports to the Company's shareholders on its
stewardship of the Group through the publication of interim and
final financial results. The Company announces significant
developments which are disseminated via various outlets including,
before anywhere else, RNS. In addition, the Company maintains a
website (www.tomcoenergy.com) on which RNS announcements, press
releases, corporate presentations and the Report and Financial
Statements are available to view.
Enquiries from individual shareholders on matters relating to
the business of the Group are welcomed. Shareholders and other
interested parties can subscribe to receive notification of news
updates and other documents from the Company via email.
The Annual General Meeting, and other meetings of shareholders
that may be called by the Company from time to time, provide an
opportunity for communication with all shareholders and the Board
encourages shareholders to attend and welcomes their participation.
The Board is committed to maintaining good communication and having
constructive dialogue with its shareholders. The Company has close
ongoing relationships with its private shareholders.
Malcolm Groat
Non-Executive Chairman
17 February 2021
AUDIT COMMITTEE REPORT
Overview
The Committee met twice during the year. The external auditor
also attended the meetings at the invitation of the Committee
Chairman.
Malcolm Groat was appointed Chairman of the Committee by the
Board, with the other Committee member being Alex Benger. Further
to the Board changes in late 2020, the Committee currently
comprises Richard Horsman (Chairman), Robert Kirchner and Malcolm
Groat.
Financial Reporting
The Committee monitored the integrity of the interim and annual
financial statements and reviewed the significant financial
reporting issues and accounting policies and disclosures in the
financial reports. The external auditor attended the Committee
meetings as part of the full year and interim accounts approval
process. The process included the consideration of reports from the
external auditor identifying the primary areas of accounting
judgements and key audit risks identified as being significant to
the 2020 accounts.
Audit Committee Effectiveness
The Board considers the effectiveness of the Committee on a
regular basis but not as part of a formal process.
External Audit
The Committee is responsible for managing the relationship with
the Company's external auditor, BDO LLP.
The objectivity and independence of the external auditor is
safeguarded by reviewing the auditor's formal declarations,
monitoring relationships between key audit staff and the Group and
reviewing the non-audit fees payable to the auditor. Non-audit
services are not performed by the auditor. During the year, audit
fees of GBP33,500 (2019: GBP31,000) were paid to BDO LLP.
Internal Audit
The Committee considered the requirement for an internal audit
function. The Committee considered the size of the Group, its
current activities and the close involvement of senior management.
Following the Committee's review, it did not deem it necessary to
operate an internal audit function during the year.
Richard Horsman
Chairman, Audit Committee
17 February 2021
REMUNERATION COMMITTEE REPORT
This report is on the activities of the remuneration committee
for the financial year ended 30 September 2020.
Following the appointment of Robert Kirchner and Richard Horsman
to the Board in late 2020, the Remuneration Committee now comprises
Robert Kirchner (Chairman), Richard Horsman and Malcolm Groat. The
Remuneration Committee meets from time to time, but not less than
once a year, to review and determine, amongst other matters, the
remuneration of the Executive(s) on the Board and any share
incentive plans of the Company.
The Group has no employees other than the Directors; whose
emoluments comprise fees paid for services. The amounts for their
services are detailed below:
Salaries Salaries
2020 2019
GBP'000 GBP'000
---------- ----------
M Groat 20 18
S West (appointed 17 February 27 -
2020; resigned 30 September
2020)
J Potter 91 74
A Benger (resigned 30 September
2020) 20 18
A Jones (resigned 16 March
2020: 2020 figure includes
compensation of GBP150,000) 250 98
As detailed in Note 19 , the Company has in place a share option
scheme for its Directors.
The Committee met twice during the year.
Robert Kirchner
Chairman, Remuneration Committee
17 February 2021
INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF TOMCO ENERGY PLC
Opinion
We have audited the financial statements of TomCo Energy Plc
(the 'Parent Company') and its subsidiaries (the 'Group') for the
year ended 30 September 2020 which comprise the consolidated
statement of comprehensive income, the consolidated statement of
financial position, the consolidated statement of changes in equity
and the consolidated statements of cash flows and notes to the
financial statements including a summary of significant accounting
policies. The financial reporting framework that has been applied
in the preparation of the financial statements is applicable law
and International Financial Reporting Standards (IFRSs) as adopted
by the International Accounting Standards Board.
In our opinion the financial statements:
-- give a true and fair view of the state of the Group's affairs
as at 30 September 2020 and of its loss for the year then ended;
and
-- have been properly prepared in accordance with IFRSs as
adopted by the International Accounting Standards Board;
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor's responsibilities for the audit of the financial
statements section of our report. We are independent of the Group
and the Parent Company in accordance with the ethical requirements
that are relevant to our audit of the financial statements in the
UK, including the FRC's Ethical Standard as applied to listed
entities, and we have fulfilled our other ethical responsibilities
in accordance with these requirements. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in
relation to which the ISAs (UK) require us to report to you
where:
-- the Directors' use of the going concern basis of accounting
in the preparation of the financial statements is not appropriate;
or
-- the Directors have not disclosed in the financial statements
any identified material uncertainties that may cast significant
doubt about the Group and Parent Company's ability to continue to
adopt the going concern basis of accounting for a period of at
least twelve months from the date when the financial statements are
authorised for issue.
Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) we identified, including those which had the greatest effect
on: the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters. The following
matters were identified as key audit matters:
Key Audit Carrying value of Exploration and Evaluation assets
Matter
As detailed in Notes 8 and 9 to the financial
statements, the Group has recognised significant
assets, relating to the exploration and evaluation
of the Group's oil shale licences, including TurboShale.
The Directors are required to assess these exploration
and evaluation assets for indicators of impairment
at each reporting date.
The assessment of whether or not there are any
indicators of impairment is described in the Group's
accounting policies in note 1.9 and includes making
estimates and judgments. These estimates and judgements
are set out in note 1.1 and the subjectivity of
these estimates and judgements along with the
material carrying value of the assets make this
a key area of focus for the audit.
How we addressed We have assessed management's review of whether
the Key Audit there are any indicators of impairment and our
Matter in procedures included the following:
the Audit * Reviewing the licence documentation to check that the
licences remained valid and to confirm the expiry
dates.
* Where licences are due to be renewed in the near
future, making enquiries of Management to confirm no
issues are foreseen with the renewal process.
* Considering the Competent persons report on
contingent and prospective resources to confirm that
it does not suggest there are any indicators of
impairment for the project.
* Assessing the independence and competence of the
Competent person as management's expert.
* Making specific enquires of management, reviewing
market announcements and reviewing Board minutes to
establish whether there was any evidence that the
Group did not plan to proceed with the exploration
and evaluation of its assets.
* Making enquiries of management to understand the
impact of COVID 19 and oil prices on the future of
the project and challenging management on whether
these factors are indicators of impairment.
We also evaluated the adequacy of the disclosures
provided within the financial statements in relation
to the impairment assessment against the requirements
of the accounting standards.
---------------------------------------------------------------
Key observations Based on the work performed we have no matters
to communicate in respect of management's assessment
of the carrying value of the group's exploration
and evaluation assets.
---------------------------------------------------------------
Key Audit Accounting treatment of the investment in Greenfield
Matter Energy LLC
As detailed in Note 10 to the financial statements,
the Group acquired a 50% shareholding in Greenfield,
and entered into a shareholder agreement with
Valkor, the other 50% shareholder, during the
year. As disclosed in note 1.1, this investment
has been assessed under IFRS 11 and has been determined
to be a joint venture.
The determination of whether or not Greenfield
is a jointly controlled venture depends on the
terms of the shareholder agreement and requires
judgement.
The expenditure incurred by Greenfield following
the investment by the Group relates to the development
and upgrade to the Petroteq Oil Sands Plant. Determining
the accounting treatment of this expenditure requires
judgement, specifically whether or not the costs
are eligible for capitalisation in accordance
IFRS. As disclosed in note 1.1, Management has
capitalised the development costs based on the
conclusion that the Greenfield project has passed
the research phase and is in the development phase.
Management deemed that the results of the Pre-Feed
study were sufficient to demonstrate the project
meets the definition of development.
The judgments involved in making these assessments
made this a key area of focus for the audit.
How we addressed We have assessed management's judgements regarding
the Key Audit the determination that Greenfield is a joint venture
Matter in and our audit procedures included:
the Audit * Reviewing the Shareholders' Agreement and challenging
management on the key terms to determine whether
these are indicative of Joint control and meet the
definition of a Joint Venture.
We reviewed management's assessment which concluded
that the Greenfield project is in the development
phase, and therefore the costs relating to the
development are capitalised within Greenfield,
and in doing so our work included:
* Substantively testing a sample of costs within
Greenfield and corroborating them to supporting
documentation.
* Corroborating the basis for Management's conclusions
to supporting evidence such as the Pre-FEED study
which supported Management's conclusion that the
project is commercially viable.
* Challenging management on the classification of
assets contributed to the joint investment and
determining whether these met the definition of
development costs under IAS 38 'intangible assets'.
We also evaluated the adequacy of the disclosures
provided within the financial statements in relation
to the investment against the requirements of
the accounting standards.
---------------------------------------------------------------
Key observations Based on the work performed we have no matters
to communicate in respect of management's assessment
of investment or the share of the loss recognised
in the group financial statements.
---------------------------------------------------------------
Key Audit Going concern
Matter
As detailed in note 1.1 to the financial statements
there are significant judgments made by management
in determining whether the group can continue
trading as a going concern. Given the significant
nature of these judgements along with the material
impact this assessment has on the financial statements,
we have considered this to be a key area of focus
for the audit.
How we addressed We have reviewed management's assessment of going
the Key Audit concern and our audit procedures in response to
Matter in this key audit matter included:
the Audit * Reviewing the latest cash flow forecasts for the
group, which covered the period to June 2022. Our
work included assessing the forecast cash outflows
again historical data and publicly stated plans for
the future development of the exploration assets and
joint venture.
* Verifying the receipt of the proceeds of the equity
placing post the year-end.
* Challenging management on their ability to raise
further financing in light of COVID-19 and
considering the future impact this could have on
further fundraises.
* Reviewing management's stress test on the cash flow
forecasts to understand whether these scenarios gave
rise to a material uncertainty.
* Reviewing the disclosures in note 1.1 to the
financial statements against the requirements of the
accounting standards to check that the disclosures
reflect the going concern position of the Group.
------------------------------------------------------------------------
Key observations Our observations in respect of going concern are
set out in the Conclusions relating to going concern
section above.
------------------------------------------------------------------------
Our application of materiality
We apply the concept of materiality both in planning and
performing our audit, and in evaluating the effect of
misstatements. We consider materiality to be the magnitude by which
misstatements, including omissions, could influence the economic
decisions of reasonable users that are taken on the basis of the
financial statements. Importantly, misstatements below these levels
will not necessarily be evaluated as immaterial, as we also take
account of the nature of identified misstatements, and the
particular circumstances of their occurrence, when evaluating their
effect on the financial statements as a whole.
Group materiality was set at GBP160,000 (2019: GBP150,000) being
1.5% of total assets. We considered total assets to be the most
significant determinant of the Group's financial performance by
users of the financial statements.
Performance materiality is the application of materiality at the
individual account or balance level set at an amount to reduce to
an appropriately low level the probability that the aggregate of
uncorrected and undetected misstatements exceeds materiality for
the financial statements as a whole. Performance materiality was
set at GBP120,000 (2019: GBP112,500), which represents 75% of the
above materiality level. The level of performance materiality was
set after considering a number of factors including the expected
value of known and likely misstatements and management's attitude
towards proposed adjustments.
Component materiality ranged from GBP80,000 to GBP144,000 (2019:
GBP75,000 to GBP130,000).
We agreed with the Audit Committee that we would report to them
individual audit differences identified during the course of our
audit in excess of GBP3,200 (2019: GBP3,000). We also agreed to
report differences below this threshold which warranted reporting
on qualitative grounds.
An overview of the scope of our audit
Our group audit scope focused on the group's principle operating
locations, being the United Kingdom and USA. We determined there to
be three significant components, TomCo Energy Plc, Greenfield
Energy LLC and TurboShale Inc.
The group audit team carried out a full scope audit on all
entities and performed all the work necessary to issue the group
audit opinion including undertaking all of the audit work on the
key audit matters and other risk areas.
Other information
The directors are responsible for the other information and
financial statements. The other information comprises the
information included in the annual report and financial statements,
other than the financial statements and our auditor's report
thereon. Our opinion on the financial statements does not cover the
other information and, except to the extent otherwise explicitly
stated in our report, we do not express any form of assurance
conclusion thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
audit or otherwise appears to be materially misstated. If we
identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a
material misstatement in the financial statements or a material
misstatement of the other information. If, based on the work we
have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact. We
have nothing to report in this regard.
Responsibilities of directors
As explained more fully in the directors' responsibilities
statement, within the directors' report, the directors are
responsible for the preparation of the financial statements and for
being satisfied that they give a true and fair view, and for such
internal control as the directors determine is necessary to enable
the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists.
Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users
taken on the basis of these financial statements.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial Reporting
Council's website at: www.frc.org.uk/auditorsresponsibilities .
This description forms part of our auditor's report.
Use of our report
This report is made solely to the Parent Company's Members, as a
body, in accordance with our engagement letter dated 23 October
2020. Our audit work has been undertaken so that we might state to
the Parent Company's Members those matters we are required to state
to them in an auditor's report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Parent Company and the
Parent Company's Members as a body, for our audit work, for this
report, or for the opinions we have formed.
BDO LLP
Chartered Accountants
London, UK
17 February 2021
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
Consolidated Statement of Comprehensive Income
for the financial year ended 30 September 2020
2020 2019
Note GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- ------ --------- --------- --------- ---------
Revenue 2 - -
Cost of sales 2 - -
-------------------------------------- ------ --------- --------- --------- ---------
Gross loss - -
Administrative expenses 2 (1,031) (778)
Operating loss 4 (1,031) (778)
Finance income/(costs) 3 1 (4)
Share of loss of joint venture 10 (40) -
-------------------------------------- ------ --------- --------- --------- ---------
Loss on ordinary activities
before taxation (1,070) (782)
Taxation 5 - -
-------------------------------------- ------ --------- --------- --------- ---------
Loss for the year attributable
to: (1,070) (782)
Equity shareholders of the
parent (1,028) (749)
Non-controlling interests 18 (42) (33)
-------------------------------------- ------ --------- --------- --------- ---------
(1,070) (782)
-------------------------------------- ------ --------- --------- --------- ---------
Items that may be reclassified
subsequently to profit or
loss
Exchange differences on
translation of foreign operations (350) 408
Items that will not be reclassified
subsequently to profit or
loss
Fair value gain on non-derivative
equity investment 10 - 2
Other comprehensive income
for the year attributable
to:
Equity shareholders of the
parent (356) 417
Non-controlling interests 18 6 (7)
Other comprehensive income (350) 410
Total comprehensive loss
attributable to:
Equity shareholders of the
parent (1,384) (332)
Non-controlling interests 18 (36) (40)
-------------------------------------- ------ --------- --------- --------- ---------
Total comprehensive loss (1,420) (372)
-------------------------------------- ------ --------- --------- --------- ---------
2020 2019
Pence Pence
Loss per share attributable per share per share
to the equity shareholders
of the parent
------------------------------ --- ----------- -----------
Basic & diluted loss per
share 7 (0.30) (0.73)
------------------------------ --- ----------- -----------
The Notes form part of these financial statements.
Consolidated Statement of Financial Position
as at 30 September 2020
Group Group
2020 2019
---------------------------------------------- ------ --------- ---------
Note GBP'000 GBP'000
---------------------------------------------- ------ --------- ---------
Assets
Non-current assets
Intangible assets 8 8,834 9,222
Property, plant and equipment 9 411 431
Investment in joint venture 10 1,224 -
Other receivables 11 26 27
---------------------------------------------- ------ --------- ---------
10,495 9,680
---------------------------------------------- ------ --------- ---------
Current assets
Trade and other receivables 11 118 97
Cash and cash equivalents 12 334 639
---------------------------------------------- ------ --------- ---------
452 736
---------------------------------------------- ------ --------- ---------
TOTAL ASSETS 10,947 10,416
---------------------------------------------- ------ --------- ---------
Liabilities
Current liabilities
Trade and other payables 13 (215) (615)
---------------------------------------------- ------ --------- ---------
(215) (615)
---------------------------------------------- ------ --------- ---------
Net current assets 237 121
---------------------------------------------- ------ --------- ---------
TOTAL LIABILITIES (215) (615)
---------------------------------------------- ------ --------- ---------
Total net assets 10,732 9,801
---------------------------------------------- ------ --------- ---------
Shareholders' equity
Share capital 15 - -
Share premium 16 29,222 28,247
Warrant reserve 17 1,288 65
Translation reserve 282 638
---------------------------------------------- ------ --------- ---------
Retained deficit (19,887) (19,012)
---------------------------------------------- ------ --------- ---------
Equity attributable to owners of the parent 10,905 9,938
Non-controlling interests 18 (173) (137)
---------------------------------------------- ------ --------- ---------
Total equity 10,732 9,801
---------------------------------------------- ------ --------- ---------
The financial statements were approved and authorised for issue
by the Board of Directors on 17 February 2021.
The Notes form part of these financial statements.
John Potter Malcolm Groat
Director Director
Consolidated Statement of Changes in Equity
for the financial year ended 30 September 2020
Group
Equity attributable to equity holders of the parent Total
Equity
-----------------
Note Share Share Warrant Translation Retained Total Non-controlling
capital premium reserve reserve Deficit interest
----------------- -------- --------- --------- --------- ------------- ---------- --------- -----------------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------- -------- --------- --------- --------- ------------- ---------- --------- ----------------- ---------
Balance at 1
October 2018 - 26,542 43 223 (18,393) 8,415 (97) 8,318
--------- --------- --------- ------------- ---------- --------- ----------------- ---------
Loss for the
year - - - - (749) (749) (33) (782)
Comprehensive
income for the
year - - - 415 2 417 (7) 410
----------------- -------- --------- --------- --------- ------------- ---------- --------- ----------------- ---------
Total
comprehensive
loss for the
year - - - 415 (747) (332) (40) (372)
Issue of shares
(net of costs) 15, 16 - 1,638 59 - - 1,697 - 1,697
Expiry of
warrants 17 - 67 (37) - 35 65 - 65
Share-based
payment charge 19 - - - - 93 93 - 93
At 30 September
2019 - 28,247 65 638 (19,012) 9,938 (137) 9,801
----------------- -------- --------- --------- --------- ------------- ---------- --------- -----------------
Loss for the
year - - - - (1,028) (1,028) (42) (1,070)
Comprehensive
income for the
year - - - (356) - (356) 6 (350)
----------------- -------- --------- --------- --------- ------------- ---------- --------- ----------------- ---------
Total
comprehensive
loss for the
year - - - (356) (1,028) (1,384) (36) (1,420)
Issue of shares
(net of costs) 15, 16 - 866 1,377 - - 2,243 - 2,243
Exercise of
warrants 17 - 109 (114) - 114 109 - 109
Expiry of
warrants 17 - - (43) - 43 - - -
Share-based
payment charge 19 - - 3 - (4) (1) - (1)
At 30 September
2020 - 29,222 1,288 282 (19,887) 10,905 (173) 10,732
----------------- -------- --------- --------- --------- ------------- ---------- --------- -----------------
The following describes the nature and purpose of each reserve
within owners' equity:
Reserve Descriptions and purpose
Share capital Amount subscribed for share capital at nominal value, together with transfers to share
premium upon redenomination of the shares to nil par value.
Share premium Amount subscribed for share capital in excess of nominal value, together with transfers
from share capital upon redenomination of the shares to nil par value.
Warrant reserve Amounts credited to equity in respect of warrants to acquire ordinary shares in the Group.
Translation reserve Gains and losses on the translation of foreign operations.
Retained deficit Cumulative net gains and losses recognised in the consolidated statement of comprehensive
income less transfers to retained deficit on expiry.
Non-controlling Non-controlling interest share of losses of TurboShale Inc., together with adjustments
interest associated with the initial recognition of, and changes in, the non-controlling interest.
Refer to Note 18.
The Notes form part of these financial statements.
Consolidated Statement of Cash Flows
for the financial year ended 30 September 2020
Note Group Group
-----------------------------------------------------------
2020 2019
-----------------------------------------------------------
GBP'000 GBP'000
----------------------------------------------------------- -------- --------- ---------
Cash flows from operating activities
Loss after tax 2 (1,070) (782)
Adjustments for:
Finance costs 3 (1) 4
Amortisation 6 6
Share based payment charge (1) 93
Unrealised foreign exchange losses 81 -
Costs settled by the issue of shares - 5
Share of loss of joint venture 40 -
Increase in trade and other receivables (21) (55)
(Decrease)/increase in trade and other payables (384) 232
Cash used in operations (1,350) (497)
----------------------------------------------------------- -------- --------- ---------
Interest received/(paid) 1 (4)
Net cash outflow from operating activities (1,349) (501)
Cash flows from investing activities
Investment in intangibles 8 (29) (642)
Sale of investments - 104
Investment in joint venture (1,279)
Purchase of property, plant and equipment 9 - (95)
----------------------------------------------------------- -------- --------- ---------
Net cash used in investing activities (1,308) (633)
----------------------------------------------------------- -------- --------- ---------
Cash flows from financing activities
Issue of equity instruments 15, 16 2,535 1,767
Costs of share issue (182) (109)
(Repayment)/receipt of loan finance - (150)
----------------------------------------------------------- -------- --------- ---------
Net cash generated from financing activities 2,353 1,508
----------------------------------------------------------- -------- --------- ---------
Net (decrease)/increase in cash and cash equivalents (304) 374
Cash and cash equivalents at beginning of financial year 639 262
Foreign currency translation differences (1) 3
Cash and cash equivalents at end of financial year 334 639
----------------------------------------------------------- -------- --------- ---------
The Notes form part of these financial statements.
Notes to the financial statements
for the financial year ended 30 September 2020
1. Accounting policies
The principal accounting policies adopted in the preparation of
these financial statements are set out below. These policies have
been consistently applied to all years presented, unless otherwise
stated.
1.1 Basis of preparation and going concern
The Group's financial statements have been prepared in
accordance with International Financial Reporting Standards
("IFRS") as issued by the International Accounting Standards Board
and International Financial Reporting Interpretations Committee
("IFRIC") interpretations and with those parts of the Isle of Man
Companies Act 2006 applicable to companies reporting under IFRS.
The financial statements have been prepared under the historic cost
convention.
The preparation of financial statements in conformity with IFRS
requires the use of estimates and assumptions. Although these
estimates are based on management's best knowledge of the amount,
event or actions, actual results ultimately may differ from those
estimates. Details of the Group's significant accounting judgments
are set out in these financial statements and include:
Judgements
- Impairment indicator assessment on intangible assets and
property, plant and equipment used in exploration and evaluation
activities
The Directors consider that tangible and intangible assets
employed in exploration and evaluation activities form part of a
single cash generating unit for the purposes of impairment
assessment. In determining whether indicators of impairment on such
assets existed judgment was required. The directors have considered
the remaining licence term and standing, future plans for
exploration, the measured resources within the mineral leases owned
by the Company; and the likelihood of commercially viable
extraction technology being developed and sufficient funding being
available to the Company to develop and exploit such technology.
The Board concluded that no impairment indicator existed as at 30
September 2020. Refer to Note 8.
- Internally generated development assets
Greenfield has incurred expenditure on researching and
developing the design and operation of a pilot plant and processes
that is not of a scale economically feasible for commercial
production. Judgement is required In determining what constitutes
research expenditure, to be expensed in profit and loss, and what
constitutes development expenditure that meets the criteria set out
in IAS 38, which must be capitalised. Qualifying expenditure is
capitalised from the point at which Greenfield's board are
satisfied as to the technical feasibility of the production
processes. The board have deemed that this was achieved when the
preliminary results of the Pre-Feed study were released, which
indicated the use of the Oil Sands Technology was likely to be
economically viable. Judgements on these matters affect the Group's
share of Greenfield's net assets and profits that are recognised
under the equity method.
- Joint arrangements
In assessing whether the Group is party to a joint arrangement
under IFRS 11, the Group considers whether decisions about relevant
activities of the investee entity require the unanimous consent of
the investors ("joint control"). Having established the existence
of joint control, judgement is required to establish whether the
structure of the arrangement, the contractual terms or other facts
and circumstances give the parties to the arrangement rights to the
assets and obligations for the liabilities of the investee entity.
In those circumstances, the entity is a joint operation. Having
evaluated the matter, the Group has determined that the parties to
the arrangement.do not have rights to the assets and obligations of
the investee entity and therefore the joint arrangement is a joint
venture.
Judgement is also required concerning the value at which
non-cash assets contributed by the joint venture partners are
recognised. The Group has contributed cash assets of US$1.625
million. In the judgement of the Directors, the value of
intellectual property and undertakings to deliver future services
provided by Valkor matched the value of the cash contributions made
by the Group
Estimates
- Share based payments
Estimates were required in determining the fair value of share
options and warrants granted in the year including future share
price volatility and the instrument life. Volatility is estimated
using TomCo's historic share prices for a period of time that
matches the exercise period of the warrant or option. This assumes
that historic share price volatility is the best estimate of future
volatility. The Black-Scholes model is used for valuing both
options and warrants. Estimates are also made of the likely time of
exercise of the options or warrants.
The Group has consistently applied all applicable accounting
standards.
Going concern
At 9(th) February 2021, the Group had cash of approximately
GBP2.45 million.
The Directors have prepared cash flow forecasts for the period
to 30 June 2022. Under the forecasts, the Group plans to engage a
third-party engineering evaluation of a commercial scale plant
design based on the Petroteq oil recovery system and potentially
secure a site on which to build a commercial scale plant. The
forecasts indicate that the Group has sufficient funds to complete
these tasks and to ensure its ability to continue in operational
existence for the foreseeable future and at least until 30 June
2022. On this basis, the Directors consider it appropriate to
prepare the financial statements on the going concern basis.
Further funding may be required if the Directors decide to
explore the opportunity to develop a commercial scale oil sands
plant or to further advance the RF technology.
The Directors note that COVID-19 has had a significant negative
impact on the global economy and oil prices have been volatile,
which may mean it is harder to secure additional funding than it
has historically been. Notwithstanding this, the Directors have a
reasonable expectation that they can secure additional funding,
based on recent successful fundraisings, should it be required.
1.2 Future changes in accounting standards
The IFRS financial information has been drawn up on the basis of
accounting standards, interpretations and amendments effective at
the beginning of the accounting period.
IFRS 16 "Leases" was effective for the first time in the year
ended 30 September 2020. The Group currently has no leases other
than short term or low value leases and therefore this standard
currently has no impact on the Group.
There are currently no new or revised standards, amendments and
interpretations to existing standards that are not effective for
the financial year ended 30 September 2020 and have not been
adopted early, which, when effective, might have an impact upon the
Group's financial statements.
1.3 Basis of consolidation
The Group accounts consolidate the accounts of the parent
company, TomCo Energy plc, and all of its subsidiary undertakings
drawn up to 30 September 2020. All intra-group transactions,
balances, income and expenses are eliminated on consolidation.
The acquisition of subsidiaries is accounted for on the purchase
basis. A subsidiary is consolidated where the Company has control
over an investee. The Group controls an investee if all three of
the following elements are present: power over the investee,
exposure to variable returns from the investee, and the ability of
the investor to use its power to affect those variable returns.
Control is reassessed whenever facts and circumstances indicate
that there may be a change in any of these elements of control. On
acquisition all of the subsidiary's assets and liabilities which
existed at the date of acquisition are recorded at their fair
values reflecting their condition at the time. If, after
re-assessment, the Group's interest in the net fair value of the
identifiable assets, liabilities and contingent liabilities exceeds
the cost of the business combination, the excess is recognised
immediately in the statement of comprehensive income.
Entities over which the Group has joint control are classified
as joint ventures and are accounted for using the equity method of
accounting. On initial recognition the investment in the joint
venture is recognised at cost. The carrying amount is increased or
decreased to recognise the Group's share of the profit or loss of
the joint venture after the date of acquisition.
1.4 Segmental reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision maker has been identified as the Board
of Directors.
Based on an analysis of risks and returns, the Directors
consider that the Group has two principal business segments based
on geographical location. The loss before taxation arises
principally within the UK and US. Net assets are principally in the
UK and the US.
1.5 Revenue
Revenue represents the Group's share of sales of oil during the
year, excluding sales tax and royalties. Income arises from the US
and is recognised when the oil is delivered to the customer. No
revenue has arisen in the current or prior year.
1.6 Finance Income Property, plant and equipment
Finance income is accounted for on an effective interest
basis.
1.7 Property, plant and equipment
Property, plant and equipment employed in exploration and
evaluation activities are carried at cost. No depreciation has been
provided on these assets as they had not been brought into use by
the end of the financial year. Subsequent depreciation will be
capitalised to exploration and development costs.
1.8 Intangible assets
Exploration and development licences
The Group applies the full cost method of accounting for oil and
gas operations. For evaluation properties, all mineral leases,
permits, acquisition costs, geological and geophysical costs and
other direct costs of exploration appraisal, renewals and
development are capitalised as intangible fixed assets in
appropriate cost pools, with the exception of tangible assets,
which are classed as property, plant and equipment. Costs relating
to unevaluated properties are held outside the relevant cost pool
and are not amortised until such time as the related property has
been fully appraised. When a cost pool reaches an evaluated and
bankable feasibility stage, the assets are transferred from
intangible to oil properties within property, plant and
equipment.
Technology licences
Amortisation is not charged on technology licences associated
with oil and gas assets until they are available for use.
Patents and patent applications
Patents and patent applications acquired in consideration for a
combination of cash and the issue of shares in subsidiary
undertakings are recognised at fair value, and amortised over their
expected useful lives, which is 12 years being the patent term.
1.9 Impairment
Exploration and development licences
Exploration and development assets are assessed for impairment
when facts and circumstances suggest that the carrying amount may
exceed the recoverable amount. In accordance with IFRS 6 the Group
firstly considers the following facts and circumstances in their
assessment of whether the Group's exploration and evaluation assets
may be impaired, whether:
-- the period for which the Group has the right to explore in a
specific area has expired during the period or will expire in the
near future, and is not expected to be renewed;
-- substantive expenditure on further exploration for and
evaluation of mineral resources in a specific area is neither
budgeted nor planned;
-- exploration for and evaluation of hydrocarbons in a specific
area have not led to the discovery of commercially viable
quantities of hydrocarbons and the Group has decided to discontinue
such activities in the specific area; and
-- sufficient data exists to indicate that although a
development in a specific area is likely to proceed, the carrying
amount of the exploration and evaluation assets is unlikely to be
recovered in full from successful development or by sale.
If any such facts or circumstances are noted, the Group performs
an impairment test in accordance with the provisions of IAS 36. The
aggregate carrying value is compared against the expected
recoverable amount of the cash generating unit, which is generally
the field, except that a number of field interests may be grouped
as a single cash generating unit where the cash flows are
interdependent. The recoverable amount is the higher of value in
use and the fair value less costs to sell.
Any impairment loss would be recognised in the income statement
and separately disclosed.
Technology licence
The carrying amount of the Group's other intangible asset, its
patents and technology licence, is reviewed at each reporting date
to determine whether there is any indication of impairment. If such
indication exists, the asset's recoverable amount is estimated. An
impairment loss is recognised whenever the carrying amount of an
asset exceeds its recoverable amount. Impairment losses are
recognised in the income statement.
Joint ventures
The Directors determine whether there is any objective evidence
that the net investment in Greenfield is impaired. Objective
evidence includes observable data about the following potential
loss events:
-- significant financial difficulty of Greenfield;
-- breach of contract, default or delinquency by Greenfield;
-- grant by the Group to Greenfield of concessions it would not
otherwise consider by reason of Greenfield's financial
difficulty;
-- the bankruptcy or financial reorganisation of Greenfield becoming probable; and
-- significant changes with an adverse effect that have taken
place in the technological, market, economic or legal environment
in which Greenfield operates.
If such evidence exists, the Directors assess the Group's net
investment in Greenfield for impairment. The Directors are
satisfied that there was no such evidence at 30 September 2020 (or
subsequently).
1.10 Taxation
Taxation expense represents the sum of current tax and deferred
tax.
Current tax is based on taxable profits for the financial period
using tax rates that have been enacted or substantively enacted by
the reporting date. Taxable profit differs from net profit as
reported in the statement of comprehensive income because it
excludes items of income or expenses that are taxable or deductible
in other years and it further excludes items that are never taxable
or deductible.
Deferred tax is provided in full, using the liability method, on
temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts for financial reporting
purposes. If deferred tax arises from initial recognition of an
asset or liability in a transaction other than a business
combination that at the time of the transaction affects neither
accounting nor taxable profit nor loss, it is not accounted for.
Deferred tax is determined using tax rates that have been enacted
or substantively enacted at the reporting date and that are
expected to apply when the related deferred income tax asset is
realised, or the deferred tax liability is settled.
Deferred tax assets are recognised to the extent that it is
probable that future taxable profit will be available against which
the temporary differences can be utilised.
Deferred tax is provided on temporary differences arising on
investments in subsidiaries, except where the timing of the
reversals of the temporary differences is controlled by the Group
and it is probable that the temporary differences will not reverse
in the foreseeable future.
Deferred tax is charged or credited in the statement of
comprehensive income, except when it relates to items charged or
credited directly to equity, in which case the deferred tax is also
dealt with in equity.
1.11 Foreign currencies
The accounts have been prepared in pounds sterling being the
presentational currency of the Group. The functional currency of
the holding company is also pounds sterling. The functional
currency of the US subsidiaries is US dollars. Assets and
liabilities held in the Group or overseas subsidiaries in
currencies other than the functional currency are translated into
the functional currency at the rate of exchange ruling at the
reporting date.
Transactions entered into by Group entities in a currency other
than the functional currency of the entity are recorded at the
rates ruling when the transactions occur. Exchange differences
arising from the settlement of monetary items are included in the
statement of comprehensive income for that period.
The assets and liabilities of subsidiaries and joint ventures
with functional currencies other than sterling are translated at
balance sheet date rates of exchange. Income and expense items are
translated at the average rates of exchange for the period.
Exchange differences arising are recognised in other comprehensive
income (attributed to the parent equity holder and non-controlling
interests as appropriate).
1.12 Leases
The Group is party as lessee only to low value or short term
leases. Rentals payable under such leases, net of lease incentives,
are charged to the statement of comprehensive income on a
straight-line basis over the period of the lease.
1.13 Non-derivative equity instruments
The Group classifies its non-derivative equity instruments as at
fair value through other comprehensive income. Gains or losses on
disposals of these items are recognised in other comprehensive
income.
1.14 Debt instruments at amortised cost
These assets are non-derivative financial assets which are held
in a business model whose objective is to collect contractual
cashflows and whose contractual terms give rise on specified dates
to cash flows that are solely payments of principal and interest on
the principal outstanding. They arise principally through types of
contractual monetary asset such as receivables. They are initially
recognised at fair value plus transaction costs that are directly
attributable to their acquisition or issue and are subsequently
carried at amortised cost using the effective interest rate method,
less provision for impairment. Impairment provisions are recognised
based on expected credit losses over the asset's life.
The Group's assets held at amortised cost comprise trade and
other receivables and cash and cash equivalents in the consolidated
statement of financial position.
1.15 Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at
the bank and other short-term liquid investments with original
maturities of three months or less.
1.16 Trade payables
Trade payables are recognised at amortised cost. All of the
trade payables are non-interest bearing.
1.17 Share capital
Ordinary shares are classified as equity. Shares issued in the
period are recognised at the fair value of the consideration
received.
1.18 Warrants
Warrants issued as part of financing transactions in which the
holder receives a fixed number of shares on exercise of the warrant
are fair valued at the date of grant and recorded within the
warrant reserve. Fair value is measured by the use of the
Black-Scholes model.
On expiry or exercise, the fair value of warrants is credited to
reserves as a change in equity.
1.19 Non-controlling interests
Non-controlling interests in subsidiaries are identified
separately from the Group's equity therein. Those interests of
non-controlling shareholders that are present ownership interests
entitling their holders to a proportionate share of net assets upon
liquidation may initially be measured at fair value or at the
non-controlling interests' proportionate share of the fair value of
the acquiree's identifiable net assets. The choice of measurement
is made on an acquisition-by-acquisition basis. Other
non-controlling interests are initially measured at fair value.
Subsequent to acquisition, the carrying amount of non-controlling
interests is the amount of those interests at initial recognition
plus the non-controlling interests' share of subsequent changes in
equity. Total comprehensive income is attributed to non-controlling
interests even if this results in the non-controlling interests
having a deficit balance.
Changes in the Group's interests in subsidiaries that do not
result in a loss of control are accounted for as equity
transactions. The carrying amount of the Group's interests and the
non-controlling interests are adjusted to reflect the changes in
their relative interests in the subsidiaries. Any difference
between the amount by which the non-controlling interests are
adjusted and the fair value of the consideration paid or received
is recognised directly in equity and attributed to the owners of
the Group.
Details concerning non-wholly owned subsidiaries of the Group
that have material non-controlling interests are set out in note 18
.
1.20 Joint ventures
Joint arrangements within the scope of IFRS 11 are assessed as
to whether they represent joint operations or joint ventures. Where
the structure of the arrangement, the contractual terms or other
facts and circumstances give the parties to the arrangement rights
to the assets and obligations for the liabilities of the investee
entity, the entity is a joint operation. Joint ventures are
recognised using the equity method of accounting. The initial cost
of investment is adjusted to reflect the Group's share of the joint
venture's profits and losses and other comprehensive income.
Investments in joint ventures are assessed for impairment where
there is objective evidence that the carrying value of the
investment may not be recoverable. Impairment is measured at the
difference between the carrying amount of the investment and the
higher of its FV less cost of disposal and its value in use.
1.21 Share-based payments
Equity-settled share-based payments to directors are measured at
the fair value of the equity instruments at the grant date. Details
regarding the determination of the fair value of equity-settled
share-based transactions is set out in Note 18 .
The fair value determined at the grant date is expensed on a
straight-line basis over the vesting period or periods, based on
the Group's estimate of equity instruments that will eventually
vest. At each balance sheet date, the Group revises its estimate of
the number of equity instruments expected to vest. The impact of
the revision of the original estimates, if any, is recognised in
profit or loss such that the cumulative expenses reflects the
revised estimate, with a corresponding adjustment to equity
reserves.
2. Segmental reporting - Analysis by geographical segment
The loss before taxation arises within principally the UK and
US. Net assets are principally in the UK and US. Based on an
analysis of risks and returns, the Directors consider that the
Group has two principal business segments based on geography, with
the UK primarily representing head office costs of the Group.
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision maker has been identified as the Board
of Directors. The Directors therefore consider that no further
segmentation is appropriate.
United United Eliminations United United Eliminations
States Kingdom Total States Kingdom Total
Year ended 30 September 2020 2020 2020 2020 2019 2019 2019 2019
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- --------- --------- -------------- --------- --------- --------- -------------- ---------
External revenue - - - - - -
Inter-segment sales 94 (94) - 94 (94) -
-------------------------------------- --------- --------- -------------- --------- --------- --------- -------------- ---------
Cost of sales - - - - - - -
-------------------------------------- --------- --------- -------------- --------- --------- --------- -------------- ---------
Gross profit/(loss) - 94 (94) - - 94 (94) -
-------------------------------------- --------- --------- -------------- --------- --------- --------- -------------- ---------
Impairment - - - - - -
Administrative expenses (241) (884) 94 (1,031) (177) (695) 94 (778)
-------------------------------------- --------- --------- -------------- --------- --------- --------- -------------- ---------
Operating loss (241) (790) - (1,031) (177) (601) - (778)
-------------------------------------- --------- --------- -------------- --------- --------- --------- -------------- ---------
Financial income - 1 - 1 - 1 - 1
Finance costs - - - - - (5) - (5)
-------------------------------------- --------- --------- -------------- --------- --------- --------- -------------- ---------
Share of loss of joint
venture (40) - - (40) - - -
-------------------------------------- --------- --------- -------------- --------- --------- --------- -------------- ---------
Loss before taxation (281) (789) - (1,070) (177) (605) - (782)
-------------------------------------- --------- --------- -------------- --------- --------- --------- -------------- ---------
Non-Current assets:
- Exploration and development
assets 8,819 - 8,819 9,200 - 9,200
- Other 26 - 26 27 - 27
- Property, plant and
equipment 411 - 411 431 - 431
- Patents 15 - 15 22 - 22
* Investments in joint venture 1,224 - - 1,224 - - - -
-------------------------------------- --------- --------- -------------- --------- --------- --------- -------------- ---------
10,495 - 10,495 9,680 - 9,680
-------------------------------------- --------- --------- -------------- --------- --------- --------- -------------- ---------
Current assets:
Trade and other receivables - 398 (280) 118 - 97 97
Cash and cash equivalents 4 330 334 21 618 639
-------------------------------------- --------- --------- -------------- --------- --------- --------- -------------- ---------
Total assets 10,499 728 (280) 10,947 9,701 715 10,416
-------------------------------------- --------- --------- -------------- --------- --------- --------- -------------- ---------
Current liabilities:
Trade and other payables (309) (186) 280 (215) (389) (226) (615)
-------------------------------------- --------- --------- -------------- --------- --------- --------- -------------- ---------
Total liabilities (309) (186) 280 (215) (389) (226) (615)
-------------------------------------- --------- --------- -------------- --------- --------- --------- -------------- ---------
3. Finance costs
2020 2019
GBP'000 GBP'000
------------------------------------------------- --------- ---------
Interest income (1) (1)
Loan note interest (Note 20 ) - 5
--------- ---------
Total finance income/(costs) for the financial
year (1) 4
------------------------------------------------- --------- ---------
4. Operating loss
The following items have been charged in arriving
at operating loss: 2020 2019
GBP'000 GBP'000
---------------------------------------------------- --------- ---------
Auditors' remuneration: audit services 33 31
Rentals payable in respect of land and buildings 52 37
5. Taxation
There is no tax charge in the year due to the loss for the
year.
Factors affecting the tax charge: 2020 2019
GBP'000 GBP'000
----------------------------------------------- -------- ---------
Loss on ordinary activities before tax (1,070) (782)
----------------------------------------------- -------- ---------
Loss on ordinary activities at standard rate
of corporation tax
in the UK of 19% (2019: 19%) (203) (149)
Effects of:
Group share of joint venture losses 7 -
Losses carried forward 196 149
----------------------------------------------- -------- ---------
Tax charge for the financial year - -
----------------------------------------------- -------- ---------
6. Employees and Directors
The Group has no employees other than the Directors, whose
emoluments comprise fees paid for services. The amounts for their
services are detailed below:
Share-based
Share-based payment
Salaries payment expense/(credit) Salaries expense
2020 2020 2019 2019
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- ------------ ---------------------------- ------------ -------------
S West (appointed 17 February
2020; resigned 30 September
2020) 27 4 -
J Potter 91 20 74 31
A Benger (resigned 30 September
2020) 20 5 18 7
M Groat 20 5 18 7
A Jones (resigned 16 March
2020) 250 (35) 98 48
L Read (resigned 28 June 2019) - - 12 -
Total remuneration 408 (1) 220 93
---------------------------------- ------------ ---------------------------- ------------ -------------
Remuneration for A Jones included compensation for loss of
office of GBP150,000. Unvested share options granted to Mr Jones
were outstanding on his resignation, and this has resulted in a
credit to profit and loss in respect of charges for share-based
payment previously recognised in respect of those options that have
been forfeited.
7. Loss per share
Basic loss per share is calculated by dividing the losses
attributable to ordinary shareholders by the weighted average
number of ordinary shares outstanding during the year.
Reconciliations of the losses and weighted average number of shares
used in the calculations are set out below.
Per share
Losses Amount
-----------------
Financial year ended 30 September 2020 GBP'000 Weighted Pence
average number
of shares
----------------------------------------------------- --------- ----------------- -----------
Basic and Diluted EPS
Losses attributable to ordinary shareholders
on continuing operations (1,028) 339,346,801 (0.30)
Total losses attributable to ordinary shareholders (1,028) 339,346,801 (0.30)
Financial year ended 30 September 2019
----------------------------------------------------- --------- ----------------- -----------
Basic and Diluted EPS
Losses attributable to ordinary shareholders
on continuing operations (749) 102,524,614 (0.73)
----------------------------------------------------- --------- ----------------- -----------
Total losses attributable to ordinary shareholders (749) 102,524,614 (0.73)
----------------------------------------------------- --------- ----------------- -----------
The warrants and share options which were issued or for which
entitlement to warrants was established in the current and prior
years (Notes 17 and 18) are anti-dilutive. As these instruments
would be anti-dilutive a separate diluted loss per share is not
presented.
8. Intangible assets
Oil & Gas Oil & Gas Oil & Gas Oil & Gas
Exploration and Patents and
development licences Technology licence patent applications Total
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- ----------------------- -------------------- ------------------------ -----------
Cost
At 1 October 2018 8,047 1,314 34 9,395
----------------------- -------------------- ------------------------ -----------
Additions 643 (1) 642
Translation differences 510 1 511
----------------------- -------------------- ------------------------ -----------
At 30 September 2019 9,200 1,314 34 10,548
----------------------- -------------------- ------------------------ -----------
Additions 29 - 29
Translation differences (410) - (1) (411)
----------------------- -------------------- ------------------------ -----------
At 30 September 2020 8,819 1,314 33 10,166
----------------------- -------------------- ------------------------ -----------
Amortisation/Impairment
At 1 October 2018 - 1,314 6 1,320
----------------------- -------------------- ------------------------ -----------
Amortisation - - 6 6
----------------------- -------------------- ------------------------ -----------
At 30 September 2019 - 1,314 12 1,326
----------------------- -------------------- ------------------------ -----------
Amortisation - - 6 6
----------------------- -------------------- ------------------------ -----------
At 30 September 2020 - 1,314 18 1,332
----------------------- -------------------- ------------------------ -----------
Net book value
At 30 September 2020 8,819 - 15 8,834
-------------------------- ----------------------- -------------------- ------------------------ -----------
At 30 September 2019 9,200 - 22 9,222
-------------------------- ----------------------- -------------------- ------------------------ -----------
At 30 September 2018 8,047 - 28 8,075
-------------------------- ----------------------- -------------------- ------------------------ -----------
The exploration and development licences comprise nine Utah oil
shale leases covering approximately 15,488 acres. In respect of
leases ML 49570 and ML 49571, independent natural resources
consultants SRK Consulting (Australasia) Pty Ltd, part of the
internationally recognised SRK Group, reported in March 2019 best
estimate Contingent Resources (2C) of, in aggregate, 131.3 million
barrels ("MM bbl") of oil assessed under Petroleum Resources
Management System ("PRMS") guidelines, plus a best estimate
Prospective Resource (2U) of, in aggregate, 442.8 MMbbl of oil
across the two leases. This included the Holliday A Block, where
two field tests have been undertaken to date, with 2C Contingent
Resources of 57.3 MMbbl of oil and 2U Prospective Resources of 84.7
MMbbl of oil. The Directors continue to consider the Holliday A
Block to be prospective and are seeking methods of extracting the
shale oil through development of TurboShale's RF technologies.
The claim areas and the Group's interest in them are as
follows:
Per cent Licence Licence
Asset Interest Status Expiry Date Area (Acres)
ML 49570 100 Prospect 31/12/2024 1,638.84
ML 49571 100 Prospect 31/12/2024 1,280.00
ML 48801 100 Prospect 01/10/2021 1,918.50
ML 48802 100 Prospect 01/10/2021 1,920.00
ML 48803 100 Prospect 01/10/2021 1,920.00
ML 48806 100 Prospect 01/12/2023 1,880.00
ML 49236 100 Prospect 01/12/2023 2,624.21
ML 49237 100 Prospect 01/12/2023 1,666.67
ML 50151 100 Prospect 30/11/2025 640.00
In performing an assessment of the carrying value of the
exploration licences at the reporting date, the Directors concluded
that it was not appropriate to book an impairment given the
measured resource, the licence term and the continued plans to
explore and develop the block, including the new technologies which
TurboShale is seeking to develop.
The outcome of ongoing exploration, and therefore whether the
carrying value of the exploration licences will ultimately be
recovered, is inherently uncertain and is dependent upon successful
development of commercially viable extraction technology. If the
required additional funding was not to be made available to the
Group or commercially viable extraction technologies cannot be
developed, the carrying value of the asset might need to be
impaired.
The Group continues to renew the leases set out above as and
when they expire and has no reason to believe that the leases will
not continue to be capable of renewal in the future.
Further field tests of the TurboShale technology were postponed
because of the Covid-19 pandemic. The Board intends to review the
position inQ2 2021 but has the intention to resume the testing
programme when conditions permit.
9. Property, plant and equipment
Exploration and evaluation
equipment
Total
GBP'000
---------------------------- ----------------------------
Cost at 30 September 2018 313
---------------------------- ----------------------------
Additions 95
Translation differences 23
---------------------------- ----------------------------
At 30 September 2019 431
---------------------------- ----------------------------
Additions -
Translation differences (20)
---------------------------- ----------------------------
At 30 September 2020 411
---------------------------- ----------------------------
At 30 September 2019 431
---------------------------- ----------------------------
At 30 September 2018 313
---------------------------- ----------------------------
10. Investment in joint venture
Carrying value under equity method GBP'000
----------------------------------------- ---------
At 1 October 2019 -
Cost 1,279
Share of loss of joint venture (40)
Other comprehensive income-translation
differences (15)
------------------------------------------- ---------
At 30 September 2020 1,224
At 30 September 2019 -
At 30 September 2018 -
------------------------------------------- ---------
During the year ended 30 September 2020, the Group formed a
joint venture, Greenfield Energy LLC ("Greenfield"), with Valkor
LLC ("Valkor"). Greenfield is incorporated in Utah, USA. Its
initial purpose is the development of a plant utilising technology
licensed or assigned to it by third parties for Valkor to recover
oil from oil sands in Utah, which is considered strategic to the
Group's activities. Both the Group and Valkor have 50% ownership
interests in Greenfield.
There is no quoted market price for the Group's investment in
Greenfield.
Summarised financial information for Greenfield at and for the
period ended 30 September 2020 is as follows:
2020
GBP'000
Revenue -
Loss from continuing operations (80)
------------------------------------- ---------
Other comprehensive income (30)
------------------------------------- ---------
Total comprehensive loss (110)
------------------------------------- ---------
Group share of total comprehensive
loss (50%) (55)
------------------------------------- ---------
Non-current assets 2,091
Current assets 507
------------------------------------- ---------
Total assets 2,598
------------------------------------- ---------
Trade and other payables (150)
------------------------------------- ---------
Net assets 2,448
------------------------------------- ---------
Group share of net assets (50%) 1,224
Greenfield has a different reporting date to that of the
Group.
11. Trade and other receivables
Group Group
2020 2019
Current GBP'000 GBP'000
--------------------------------- --------- ---------
Other receivables 64 50
Prepayments and accrued income 54 47
--------------------------------- --------- ---------
118 97
--------------------------------- --------- ---------
Non-current
Other receivables 26 27
Total Receivables 144 124
--------------------------------- --------- ---------
As at 30 September 2020, there were no receivables considered
past due (2019: GBPNil). The maximum exposure to credit risk at the
reporting date is the fair value of each class of receivable and
cash and cash equivalents as disclosed in Note 19.
All current receivable amounts are due within six months.
12. Cash and cash equivalents
Group Group
2020 2019
GBP'000 GBP'000
--------------------------- --------- ---------
Cash at bank and in hand 334 639
--------------------------- --------- ---------
The Group earns 0.05% (2019: 0.05%) interest on its cash
deposits, consequently the Group's exposure to interest rate
volatility is not considered material.
13. Trade and other payables
Group Group
2020 2019
Current GBP'000 GBP'000
----------------- ----------- -----------
Trade payables 28 408
Other payables 30 17
Accruals 157 190
----------------- ----------- -----------
215 615
----------------- ----------- -----------
All current amounts are payable within six months and the
Directors consider that the carrying values adequately represent
the fair value of all payables.
14. Deferred tax
Unrecognised losses
The Group has tax losses in respect of excess management
expenses of approximately GBP10.8 million (2019: GBP9.8 million)
available for offset against future Company income. Trading losses
of GBP1.9 million (2019: GBP1.3 million) are also available. This
gives rise to a potential deferred tax asset at the reporting date
of GBP2.4 million (2019: GBP1.9 million). No deferred tax asset has
been recognised in respect of the tax losses carried forward as the
recoverability of this benefit is dependent on the future
profitability of the Company, the timing of which cannot reasonably
be foreseen but the excess management expenses have no expiry date.
Subsidiary entities have accumulated losses of approximately
GBP900,000 for which no deferred tax asset is recorded given the
uncertainty of future profits.
15. Share capital
Number of shares 2019
in issue GBP
--------------------------------------------------- --------------------------------- ------
Issued and fully paid at 1 October 2018 - 62,117,799 -
shares of no par value
October 2018 - subscription of new ordinary 1,176,471 -
shares (note16)
December 2018 - placing of new ordinary shares 27,500,000 -
(note 16)
January 2019 - issue of shares in part settlement 5,000,000 -
of loan (note 16)
March 2019 - placing of new ordinary shares 21,818,182 -
(note 16)
May 2019 - exercise of warrants (notes 16 1,530,000 -
and 17)
July 2019 - exercise of warrants (notes 16 1,309,091 -
and 17)
August 2019 - placing of new ordinary shares 12,857,143 -
(note 16)
August 2019 - issue of shares in settlement 142,857 -
of professional fees (note 16)
--------------------------------------------------- --------------------------------- ------
At 30 September 2019 133,451,543 -
--------------------------------------------------- --------------------------------- ------
Number of shares 2020
in issue GBP
--------------------------------------------------- --------------------------------- ------
Issued and fully paid at 1 October 2019 - 133,451,543 -
shares of no par value
December 2019 - placing of new ordinary shares 142,307,692 -
(note16)
July 2020 - placing of new ordinary shares 375,000,000 -
(note 16)
July 2020 - exercise of warrants (notes 16 22,875,000 -
and 17)
At 30 September 2020 673,634,235 -
--------------------------------------------------- --------------------------------- ------
16. Share premium
2020 2019
GBP'000 GBP'000
---------------------------------------------------- --------- ---------
At 1 October 28,247 26,542
December 2019 - placing of new shares at 0.65 864 -
pence per share, net of costs
July 2020 - placing of new shares at 0.4 pence, 1,379 -
net of costs
July 2020 - exercise of warrants (note 17) 110 -
October 2018 - subscription of new shares at
8.5 pence per share - 100
December 2018 - placing of new ordinary shares
at 2 pence per share net of costs - 514
January 2019 - issue of shares in part settlement
of loan at 2 pence per share - 100
March 2019 - placing of new ordinary shares
at 2.75 pence per share net of costs - 559
May 2019 - exercise of warrants (note 17) - 31
July 2019 - exercise of warrants (note 17) - 36
August 2019 - placing of new ordinary shares
at 3.5 pence net of costs - 419
August 2019 - issue of shares in settlement
of professional fees at 3.5 pence - 5
Issue of warrants to placees (note 17) (1,223) -
Issue of warrants as part of placing fees (note
17) (155) (59)
At 30 September 29,222 28,247
---------------------------------------------------- --------- ---------
17. Warrants
At 30 September 2020, the following share warrants were
outstanding in respect of ordinary shares:
2020 2020 2019 2019
Weighted
average
Weighted average exercise
exercise price price
number Pence number Pence
Outstanding at 1 October 967,429 4.4 356,000 14.0
Expired during the year (196,000) (8.2) (160,000) (21.2)
Granted during the year 291,895,086 1.0 3,610,520 2.6
Exercised during the year (22,875,000) 0.5 (2,839,091) (2.3)
Outstanding at 30 September 269,791,515 1.0 967,429 4.4
------------------------------ -------------- ------------------ ------------- -----------
Exercisable at 30 September 269,791,515 1.0 967,429 4.4
------------------------------ -------------- ------------------ ------------- -----------
2020 2019
---------------------------------- ----------- -----------
Share price (pence) 0.64-0.65 2.32-3.75
Exercise price (pence) 0.4-1.5 2-3.5
Expected volatility 171% 98.8%
Risk-free rate 1% 0.82%
Expected period before exercise
(years) 2 2
---------------------------------- ----------- -----------
The inputs into the Black-Scholes model for calculating the
estimated fair value of warrants granted, at their grant date, were
as follows:
Expected volatility was determined by calculating the historical
volatility of the Company's share price. The expected life used in
the model has been adjusted, based on management's best estimate,
for the effects of non-transferability, exercise restrictions and
behavioural considerations.
Issue of Warrants
On completion of a placing on 2 October 2014, the Company issued
12,000,000 warrants with an exercise price of 0.5p and a
contractual life of 5 years. The exercise price of the warrants
adjusted to 6.25p and the number of warrants adjusted to 96,000
post a share consolidation in 2017. These warrants expired during
the year.
In April 2018, the Company issued 100,000 warrants with a life
of two years and an exercise price of 10p as part consideration for
the settlement of its contract with Venture Development Partners
Limited concerning a framework agreement relating to TurboShale
concluded in 2017. The fair value of these warrants was assessed to
be immaterial at approximately GBP1,000. These warrants expired
during the year.
3,610,520 warrants were issued during 2019 in connection with
the placing of new shares. The fair value of these warrants was
assessed at GBP59,000. Of the warrants issued during 2019, warrants
over 2,839,091 ordinary shares were exercised in 2019 and 771,429
warrants remain outstanding.
291,895,086 warrants were issued during the year ended 30
September 2020 at exercise prices ranging from 0.4p per share to
5.25p per share.22,875,000 of those warrants were exercised during
the year at exercise prices ranging from 0.4p per share to 0.8p per
share.
Each warrant in issue is governed by the provisions of warrant
instruments representing the warrants which have been adopted by
the Company. The rights conferred by the warrants are transferable
in whole or in part subject to and in accordance with the transfer
provisions set out in the Articles. The warrants outstanding at 30
September 2020 had a weighted average exercise price of 1p (2019:
4.4p) and a weighted average remaining contractual life of 1.59
years (2019: 1.55 years).
18. Non-controlling interests
Details of non-controlling interests are as follows:
Proportion
of ownership
interests and Total comprehensive
voting rights loss allocated Accumulated
held by non-controlling to non-controlling non-controlling
Name of subsidiary interests interest interest
2020 2019 2020 2019 2020 2019
% % GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ------------- ------------- ----------- ---------- ---------- ----------
TurboShale
Inc. 20 20 (36) (40) (173) (137)
Summarised financial information for Turboshale Inc is as
follows:
2020 2019
GBP'000 GBP'000
Revenue - -
Loss from continuing operations (209) (168)
------------------------------------- --------- ---------
Other comprehensive income 31 (35)
------------------------------------- --------- ---------
Total comprehensive loss (178) (203)
------------------------------------- --------- ---------
Group share of total comprehensive
loss (80%) (142) (163)
------------------------------------- --------- ---------
Non-current assets 1,266 1,301
Current assets-bank balances
and cash 4 17
------------------------------------- --------- ---------
Total assets 1,270 1,318
------------------------------------- --------- ---------
Trade and other payables (2,130) (2,002)
------------------------------------- --------- ---------
Net liabilities (860) (684)
19. Share-based payments
The Company implemented a share option scheme for its Directors
during the year ended 30 September 2018. A further issue of options
took place in June 2020.Options are exercisable at a price equal to
the quoted market price of the Company's shares at the date of
grant. The vesting period is between four months and 2.3 years. If
the options remain unexercised after a period of ten years from the
date of grant (5 years in the case of options granted in June 2020)
the options expire. Options are forfeited if the director leaves
the Company before the options vest.
Details of the share options issued during the year and
outstanding at the year-end are as follows:
2020 2020 2019 2019
Weighted average Weighted average
exercise price exercise price
number Pence number Pence
Outstanding at 1 October 5,142,855 5.25 5,142,855 5.25
Granted during the
year 14,000,000 0.60 - -
Lapsed during the
year (1,777,777) 5.25
Outstanding at 30
September 17,365,078 1.50 5,142,855 5.25
--------------------------- ------------- ------------------ ----------- ------------------
Exercisable at 30
September 2,539,682 1,714,286 5.25
--------------------------- ------------- ------------------ ----------- ------------------
Details of the options held by each Director are given in the
Directors' Report.
20. Financial instruments
The Group's financial instruments, other than its investments,
comprise cash and items arising directly from its operations such
as other receivables, and trade payables.
Management review the Group's exposure to currency risk,
interest rate risk, liquidity risk and credit risk on a regular
basis and consider that through this review they manage the
exposure of the Group. No formal policies have been put in place in
order to hedge the Group's activities to the exposure to currency
risk or interest risk, however, this is constantly under
review.
There is no material difference between the book value and fair
value of the Group and Company's cash and other financial
assets.
Currency risk
The Group has overseas subsidiaries which operate in the United
States and include expenses, assets and liabilities denominated in
US$. Foreign exchange risk is inherent in the Group's activities
and is accepted as such. The effect of a 10% strengthening or
weakening of the US dollar against sterling at the reporting date
on the dollar denominated balances would, all other variables held
constant, result in a gain or loss of approximately GBP1,000 (2019:
GBP10,000).
Interest rate risk
The Group and Company manage the interest rate risk associated
with the Group's cash assets by ensuring that interest rates are as
favourable as possible, whether this is through investment in
floating or fixed interest rate deposits, whilst managing the
access the Group requires to the funds for working capital
purposes.
The Group's cash and cash equivalents are subject to interest
rate exposure due to changes in interest rates. Short-term
receivables and payables are not exposed to interest rate risk. The
Group has no borrowings as at 30 September 2020.
A 1% increase or decrease in the floating rate attributable to
the cash balances held at the year-end would not result in a
significant difference on interest receivable.
Liquidity risk
At the year end the Group and Company had cash balances
comprising the following:
Group Group
2020 2019
Bank balances GBP'000 GBP'000
------------------ -------------- ----------
British Pounds 319 326
US Dollars 15 313
------------------ -------------- ----------
Total 334 639
------------------ -------------- ----------
All financial liabilities of the group mature in less than 12
months: details of the analysis of such liabilities is given in
Note 13.
Liquidity risk arises from the Group management of working
capital. It is the risk that the Group will encounter difficulty in
meeting its financial obligations as they fall due. Refer to Note
1.1 for details of going concern.
The Group policy is to ensure that it will always have
sufficient cash to allow it to meet its liabilities when they
become due. To achieve this aim, it seeks to maintain cash balances
(or agreed facilities) to meet expected requirements for a period
of at least 90 days.
Credit Risk
Credit risk is the risk of financial loss to the Group if a
customer or a counter party to a financial instrument fails to meet
its contractual obligations. The Group is principally exposed to
credit risk on cash and cash equivalents with banks and financial
institutions. For banks and financial institutions, only
independently rated parties with an acceptable rating are utilised.
There has been no significant change in credit risk since the
recognition of applicable assets and therefore no credit losses
have been recognised on financial assets.
Capital management policies
In managing its capital, the Group's primary objective is to
maintain a sufficient funding base to enable the Group to meet its
working capital and strategic investment needs. In making decisions
to adjust its capital structure to achieve these aims, through new
share issues or debt, the Group considers not only its short-term
position but also its long-term operational and strategic
objectives.
21. Changes in liabilities arising from financing activities
The table below details changes in the Group's liabilities
arising from financing activities, including both cash and non-cash
changes. Liabilities arising from financing activities are those
for which cash flows were, or future cash flows will be, classified
in the cash flow statement as cash flows from financing
activities:
Financing cash Non-cash transactions
1 October flows 30 September
Group 2020 GBP'000 GBP'000 GBP'000 GBP'000
------------- ----------- ---------------- ----------------------- --------------
Loans - - - -
Total - - - -
------------- ----------- ---------------- ----------------------- --------------
Group 2019
------------- ----------- ---------------- ----------------------- --------------
Loans 250 (150) (100) -
Total 250 (150) (100) -
------------- ----------- ---------------- ----------------------- --------------
Repayment of loans during the year ended 30 September 2019 was
partly financed by the issue of new equity with a fair value of
GBP100,000. Interest accrued of GBPnil (2019: GBP5,000) which was
paid in the year.
22. Related party disclosures
The Directors are Key Management and information in respect of
key management is given in Note 6.
Greenfield Energy LLC ("Greenfield") is a related party as the
investee entity in a joint venture. The Group made an equity
investment of US$1.65 million during the year into Greenfield.
Further details concerning Greenfield are given in note 10 .
23. Ultimate controlling party
As at 30 September 2020 and 30 September 2019 there was no
ultimate controlling party.
24. Operating lease commitments
At 30 September 2020, the Group had no operating lease
commitments (2019: GBP39,000). .
25. Subsequent events
In November 2020, the Company raised GBP3.5m gross of expenses
by way of a placing of 777,777,777 new ordinary shares at 0.45p per
share. 388,888,888 warrants were issued with the placing, entitling
the holders to purchase a further ordinary share at a subscription
price of 0.9p per share. A further 46,666,666 warrants were issued
to Novum Securities Limited, giving them the right to acquire the
same number of ordinary shares at an exercise price of 0.45p for
two years.
In order to facilitate the Company's future plans for
Greenfield, which assumes successful POSP trials and the completion
of the FEED study, the net proceeds of the Placing of approximately
GBP3.2 million have or will be specifically utilised as
follows:
- US$0.5 million (approximately GBP0.4 million) has been loaned
by the Company to Greenfield (the "Loan"), which together with the
US$1.5 million already provided by the Company to Greenfield to
upgrade the POSP, secured the new Petroteq Licence. Under the terms
of the Petroteq Licence, the US$0.5 million will be invested by
Greenfield into the POSP in order to satisfy the full consideration
for the Petroteq Licence. The Loan will be unsecured and has an
interest rate of 6% per annum payable at the same time as the
principal of the Loan is repaid. The Loan is repayable on the
second anniversary of the date of advance or earlier with the
consent of both Valkor and TomCo or immediately on an insolvency
event of Greenfield;
- Approximately GBP1.3 million will be utilised for the Group's
general working capital purposes over the period to 30 June 2022
and, if required, to provide further funding to Greenfield; and
- Approximately GBP1.5 million will be retained by the Company
with the intention that it is used, inter alia, to facilitate the
securing of a site by Greenfield for the first proposed commercial
10,000 bopd plant using Petroteq's Oil Sands Technology pursuant to
the Petroteq Licence. Once a suitable site has been identified, the
Company intends to provide a further loan to Greenfield, which will
be on the same terms as the Loan, which will be used to assist in
securing the site.
The upgrade works to the POSP were completed in December 2020
and operation of the plant started in January 2021 with
optimisation of the POSP planned to continue through February 2021
to seek to achieve the designed production rate of 250 bopd.
The inputs into the Black-Scholes model for calculating the
estimated fair value of options granted, at their grant date, were
as follows:
2020 2019
---------------------------------- -------- -------
Share price (pence) 0.6 5.25
Exercise price (pence) 0.6 5.25
Expected volatility 150% 98.8%
Risk-free rate 1% 0.82%
Expected period before exercise
(years) 1.5 3
---------------------------------- -------- -------
Expected volatility was determined by calculating the historical
volatility of the Company's share price. The expected life used in
the model has been adjusted, based on management's best estimate,
for the effects of non-transferability, exercise restrictions and
behavioural considerations.
The fair value of each option granted during the year was
estimated at 0.35 pence (2019: 3.2 pence) at the date of grant. The
weighted average unexpired life of the options at 30 September 2020
was 5.97 years (2019: 8.83 years).
The credit (2019: charge) recognised in profit or loss for 2020
was GBP1,000 (2019: GBP93,000). This included a credit for lapsed
options of GBP39,000.
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END
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