REG - Nostra Terra O&G Co - Final Results
31/05/2024 07:00
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RNS Number : 5465Q Nostra Terra Oil & Gas Company PLC 31 May 2024
31 May 2024
Nostra Terra Oil and Gas Company Plc
("Nostra Terra" or "the Company")
2023 Audited Annual Results
Notice of AGM
Nostra Terra (AIM: NTOG), the oil & gas exploration and production company
with a portfolio of development and production assets in Texas, USA, is
pleased to announce its final results for the year ended 31 December 2023 (the
"Results"). A copy of the Results, along with a Notice of AGM, is being posted
to Shareholders and is available on the Company's website, www.ntog.co.uk .
The AGM will be held at the offices of Druces LLP at Salisbury House, London
Wal, London EC2M 5PS at 10.00 a.m. on 27 June 2024. Extracts from the Results
are set out below.
This announcement contains information for the purposes of Article 7 of the EU
Regulation 596/2014.
For further information, contact:
Nostra Terra Oil and Gas Company plc Tel: +1 214 234 3306
Paul Welch, CEO
Beaumont Cornish Limited Tel: +44 (0) 20 7628 3396
(Nominated Adviser)
James Biddle/ Roland Cornish
Novum Securities Limited (Broker) Tel: +44 (0) 207 399 9425
Jon Belliss
Extracts of the Results are set out below:
Chairman's Report
2023 - A year of reflection and change.
It is my pleasure to introduce Nostra Terra Oil & Gas Company PLC's annual
report for the year ending 31 December 2023.
Over the past year, we have seen an escalation in turmoil across the globe,
with the start-up of a conflict in the Middle East while the war in Ukraine
continued unabated. Against this uncertain macro backdrop, the Company
maintained its focus on its US domestic market activities with a renewed
emphasis on cost controls and cash flow generation. This was important
because oil prices were generally flat for the year while inflation increased
our overall cost base.
The Company didn't drill or participate in any new wells in 2023 but did
benefit from a favourable ruling from the Texas Railroad Commission on the
Fouke Field. The Commission approved the operator's request to increase the
field allowable production rate from 82 bopd to 124 bopd, allowing these wells
to maintain their high production rates. As a result, the Company negotiated
an agreement to review the existing 3D seismic data over the Pine Mills
acreage and beyond, some 88,000 acres, looking for new opportunities similar
to Fouke. This technical work is now nearing completion, and I'm optimistic
about the results and the potential for further development opportunities in
and around our Pine Mills asset.
Also, in line with our strategy for 2023, the treatment facilities at Pine
Mills were expanded to increase their water handling and injection
capabilities. These are mature facilities, and due to the high-oil price
environment in 2022, a year in which we saw our highest corporate production
levels, some maintenance activity was deferred. This work is almost complete,
and I anticipate increasing volumes from the legacy Pine Mills wells in 2024.
Overall, 2023 was a year in which we undertook activities focused on improving
our cost structure and technical understanding of our asset base. We also
initiated reviews of each asset within the portfolio to determine whether they
generated sufficient cash flow to be retained and, if not, what could be done
to improve their performance. This work continues today, and I anticipate
changes in the asset portfolio in 2024 that will enhance the Company's overall
profitability.
The WAFD capital facility provided to Nostra Terra has been a valuable tool
for the business, allowing us to undertake a range of activities without
shareholder dilution. However, the increase in interest rates has raised the
cost of this facility, and we plan to reduce our outstanding balance over the
course of 2024. This reduction will allow us to continue reducing our overall
operating costs and improve our profitability.
Finally, post-period, Matt Lofgran, our long-serving CEO, stepped down to
pursue other activities beyond NTOG. I wish him the best in his future
activities. I was pleased that Paul Welch, a current member of the board and
someone with a deep understanding of NTOG and the sector, agreed to take up
the role. I look forward to working with Paul on the next phase of NTOG's
development.
As always, I want to thank you for your continuing support throughout the last
year.
Dr Stephen Staley
Non-Executive Chairman
31 May 2024
Chief Executive Officer's Report
In 2023, the Company focused on creating new opportunities from its existing
asset base whilst reviewing asset performance. This was done to increase
corporate cash flows in a flat commodity price environment with increased
costs due to inflation.
The continued success in the Fouke area indicated that there was potentially a
significant yet undeveloped opportunity in our Pine Mills asset. This led us
to enter into a strategic agreement with our partner in the Fouke wells,
providing the Company with access to 80,000 acres (324 km(2)) of 3D seismic to
locate Fouke analogue locations. The first results of this undertaking are now
being received. The initial focus of this effort was on the Pine Mills field
acreage, where the Company has a 100% working interest. I expect that we
will have several locations to develop, subject to additional funding, in the
very near term.
In addition to this technical effort, we took an opportunity to invest in the
Pine Mills facilities to improve their efficiency and their ability to handle
increased fluid volumes in the future. This will allow any future Fouke
analogue wells to be tied in immediately after drilling, should they be
successful. This is especially important because, as Steve mentioned, our
partner successfully increased the field allowable to +120 bopd, making any
future Fouke well potentially 50% more productive.
Finally, we initiated an asset performance review to better understand how
efficiently the assets were contributing to our cash flow generation and what
could be done to improve their performance. This review is still underway
today, but early indications suggest that several assets can be significantly
improved while others probably cannot. Once concluded, I anticipate that the
changes we make in our investment activities will enhance our ability to
generate cash flow from our asset base more efficiently.
Revenues for the year were $2,816,000, a 30% decrease from $4,021,000 in 2022.
This reflects a combination of a 13% decrease in production sales and a
deterioration in the commodity price environment (average $73.38 per barrel
sold in 2023 compared to $91.17 in 2022). Gross profit before non-cash items
(depreciation, depletion, and amortization) was $1,408,000, a reduction from
$2,242,000 in 2022.
United States
All of Nostra Terra's operations in the US target conventional reservoirs
(i.e., not shale), typically with lower lifting costs and longer-life reserves
than unconventional ones.
Area 2023 Production Percentage of Portfolio by sales
(Barrels sold)
East Texas 33,375 87.0%
West Texas 3,347 8.7%
South Texas 1,651 4.3%
East Texas (33- 100% WI)
Nostra Terra's core asset is the Pine Mills Field (100% WI), which provides a
baseline of low decline production of +/- 70 bopd. In 2023, production from
the area accounted for 87% of the Company's sales. Production remained flat
throughout the year from the core producing area. Within this core, the
search for the Fouke analogue wells was initiated in 2023.
Chief Executive Officer's Report (continued)
West Texas (50 - 100% WI)
In 2023, production from the area accounted for 8.7% of the Company's sales
(50-75% WI). During 2023, the Company completed a technical study of the
completion operations and found that offset water injection had created a
series of high-pressured water-filled zones that were frac'd when the Grant
East #1 (GE#1) well was completed. The fluid contribution from these zones
made the completion of the GE#1 subeconomic and a challenge for the remainder
of the locations within the Grant East acreage. As a result, post-period, the
Grant East lease was not renewed for another year.
South Texas (100% WI)
The Caballos Creek asset, comprising two leases, did not perform well in 2023.
Numerous equipment and technical issues caused problems, and after a detailed
review of the operations, NTOG decided not to invest further in these assets
and is now actively looking to divest them.
Senior Lending Facility
The facility is currently close to its maximum level of US$4,250,000. As
Steve mentioned, the cost of this facility has increased as interest rates
have risen, and it's the desire of the BOD to decrease the cost of this
facility throughout 2024 with a reduction in the facility amount and a
forecast decrease in interest rates. The facility is a valuable tool for our
business, but with the change in interest rates, its costs are higher than I
would like. The planned reduction in size will free up cash in future
periods that can be invested more efficiently into the assets.
Outlook
The Company intends to focus on reducing costs and generating cash flow from
its existing asset base. Additionally, we intend to complete our technical
studies and asset reviews and take the appropriate actions to improve the
performance of our assets. Finally, we intend to reduce the Company's debt
levels, further reducing our operating costs, with any cash surplus being used
to grow our production volumes efficiently.
I'm very grateful for the warm reception that I've received from our
shareholders since my arrival. It's been much appreciated. On behalf of the
entire team at Nostra Terra, I want to thank you for your support, and I look
forward to delivering value to everyone in the future.
Paul Welch
Chief Executive Officer
31 May 2024
Consolidated Income Statement
For the year ended 31 December 2023
2023 2022
Notes $'000 $'000
Continuing operations
REVENUE 2,816 4,021
COST OF SALES
Production costs (1,408) (1,779)
Exploration - -
Well impairment - (897)
Depletion, depreciation, amortisation (617) (539)
Total cost of sales (2,025) (3,215)
GROSS PROFIT 791 806
Share based payment (41) (156)
Administrative expenses (870) (1,074)
Foreign exchange (loss) / gain (6) 26
OPERATING LOSS 7 (126) (398)
Finance costs 5 (368) (199)
Other income 6 22 51
LOSS BEFORE TAX (472) (546)
Income tax 8 - -
LOSS FOR THE YEAR (472) (546)
ATTRIBUTABLE TO:
Owners of the company (472) (546)
EARNINGS PER SHARE
Continued operations
Basic & diluted (cents per share) 10 (0.06) (0.07)
The accompanying accounting policies and notes are an integral part of these financial statement
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2023
2023 2022
$'000 $'000
LOSS FOR THE PERIOD (472) (546)
OTHER COMPREHENSIVE INCOME:
Currency translation differences - -
Total comprehensive income for the year (472) (546)
TOTAL COMPREHENSIVE LOSS FOR THE YEAR ATTRIBUTABLE TO:
Owners of the company (472) (546)
The accompanying accounting policies and notes are an integral part of these
financial statements
Consolidated Statement of Financial Position
As at 31 December 2023
2023 2022
Notes $'000 $'000
ASSETS
NON-CURRENT ASSETS
Intangible assets 11 2,389 2,224
Property, plant and equipment, Oil and gas assets 12 1,230 1,308
Total non-current assets 3,619 3,532
CURRENT ASSETS
Trade and other receivables 15 548 558
Deposits and prepayments 28 66
Cash and cash equivalents 16 26 132
Total current assets 602 756
LIABILITIES
CURRENT LIABILITIES
Trade and other payables 17 924 1,051
Borrowings 18 110 94
Lease liabilities 13 - -
Total current liabilities 1,034 1,145
NET CURRENT LIABILITIES (432) (389)
NON-CURRENT LIABILITIES
Decommissioning liabilities 17 382 340
Borrowings 18 4,319 3,886
Lease liabilities 13 - -
Total non-current liabilities 4,701 4,226
NET LIABILITIES (1,514) (1,083)
EQUITY
Share capital 19 8,142 8,142
Share premium 22,115 22,115
Share based payment reserve 464 423
Translation reserve (676) (676)
Retained losses (31,559) (31,087)
Total equity (1,514) (1,083)
The financial statements were approved and authorised for issue by the Board
of Directors on 31 May 2024 and were signed on its behalf by:
Paul Welch
Director
Company registration number: 05338258
The accompanying accounting policies and notes are an integral part of these
financial statements.
Company Statement of Financial Position
As at 31 December 2023
2023 2022
Notes $'000 $'000
ASSETS
NON-CURRENT ASSETS
Fixed asset investments 14 - -
Intangible assets 11 263 305
Property, plant and equipment, Oil and gas assets 12 130 144
Total non-current assets 393 449
CURRENT ASSETS
Trade and other receivables 15 24 22
Cash and cash equivalents 16 3 17
Total current assets 27 39
LIABILITIES
CURRENT LIABILITIES
Trade and other payables 17 3,802 2,842
Borrowings 18 110 94
Total current liabilities 3,912 2,936
NET CURRENT LIABILITIES (3,885) (2,897)
NON-CURRENT LIABILITIES
Decommissioning liabilities 17 30 22
Borrowings 18 72 130
Total non-current liabilities 102 152
NET LIABILITIES (3,594) (2,600)
EQUITY
Share capital 19 8,142 8,142
Share premium 22,115 22,115
Share based payment reserve 464 423
Translation reserve (676) (676)
Retained losses (33,639) (32,604)
Total equity (3,594) (2,600)
The parent company's loss for the financial year was $1,035,000 (2022:
$1,242,000).
The financial statements were approved and authorised for issue by the Board
of Directors on 31 May 2024 and were signed on its behalf by:
Paul Welch
Director
Company registration number: 05338258
The accompanying accounting policies and notes are an integral part of these
financial statements.
Consolidated Statement of Changes in Equity
For the year ended 31 December 2023
Share Deferred shares Share Share option reserve Translation reserve Retained Total
capital premium losses
$'000 $'000 $'000 $'000 $'000 $'000 $'000
As at 1 January 2022 1,538 6,549 21,976 306 (676) (30,579) (886)
Loss for the year - - - - - (546) (546)
Total comprehensive loss for the year - - - - - (546) (546)
Shares issued 55 - 139 - - - 194
Cost of shares issued - - - - - - -
Exercise of warrants - - - (38) - 38 -
Share based payments - - - 155 - - 155
As at 31 December 2022 1,593 6,549 22,115 423 (676) (31,087) (1,083)
Loss for the year - - - - - (472) (472)
Total comprehensive loss for the year - - - - - (472) (472)
Shares issued - - - - - - -
Cost of shares issued - - - - - - -
Expired options & warrants - - - - - - -
Share based payments - - - 41 - - 41
As at 31 December 2023 1,593 6,549 22,115 464 (676) (31,559) (1, 514)
The accompanying accounting policies and notes are an integral part of these
financial statements.
Share capital is the amount subscribed for shares at nominal value.
Share premium represents the excess of the amount subscribed for share capital
over the nominal value of those shares net of share issue expenses. Share
issue expenses in the year comprise costs incurred in respect of the issue of
new shares.
Share based payment reserve is a reserve used to recognize the cost and equity
associated with the fair value of issues of share options and warrants.
Translation reserves arose due to the adoption of US dollars as the
presentational currency at the start of a prior accounting period.
Retained loss represents the cumulative losses of the company attributable to
owners of the company.
Company Statement of Changes in Equity
For the year ended 31 December 2023
Share Deferred shares Share Share option reserve Translation reserve Retained losses Total
capital premium
$'000 $'000 $'000 $'000 $'000 $'000 $'000
As at 1 January 2022 1,538 6,549 21,976 306 (676) (31,400) (1,707)
Loss for the year - - - - - (1,242) (1,242)
Total comprehensive loss for the year - - - - - (1,242) (1,242)
Shares issued 55 - 139 - - - 194
Cost of shares issued - - - - - - -
Exercise of warrants - - - (38) - 38 -
Share based payments - - - 155 - - 155
As at 31 December 2022 1,593 6,549 22,115 423 (676) (32,604) (2,600)
Loss for the year - - - - - (1,035) (1,035)
Total comprehensive loss for the year - - - - - (1,035) (1,035)
Shares issued - - - - - - -
Cost of shares issued - - - - - - -
Expired options & warrants - - - - - - -
Share based payments - - - 41 - - 41
As at 31 December 2023 1,593 6,549 22,115 464 (676) (33,641) (3,596)
The accompanying accounting policies and notes are an integral part of these
financial statements.
Share capital is the amount subscribed for shares at nominal value.
Share premium represents the excess of the amount subscribed for share capital
over the nominal value of those shares net of share issue expenses. Share
issue expenses in the year comprise costs incurred in respect of the issue of
new shares.
Share based payment reserve is a reserve used to recognize the cost and equity
associated with the fair value of issues of share options and warrants.
Translation reserves arose due to the adoption of US dollars as the
presentational currency at the start of a prior accounting period.
Retained loss represents the cumulative losses of the company attributable to
owners of the company.
Consolidated and Company Statement of Cash Flows
For the year ended 31 December 2023
GROUP COMPANY
2023 2022 2023 2022
$'000 $'000 $'000 $'000
LOSS FOR THE YEAR (473) (546) (1,035) (1,242)
ADJUSTMENTS FOR:
Depreciation 324 299 18 18
Amortisation 251 202 42 40
Depletion 42 38 9 8
Well impairment - 897 - -
Foreign exchange 6 26 4 28
Share based payments 41 156 41 156
Other income (22) (51) - -
Operating cash flows 169 1,021 (921) (992)
Decrease/(increase) in receivables 19 (211) (3) (13)
(Decrease)/increase in payables (89) 105 947 1,543
(Increase)/decrease in deposits & prepayments 38 (50) - -
Interest paid 369 199 17 26
Net cash from operating activities 506 1,064 40 564
Cash flows from investing activities:
Purchase of plant and equipment (248) (719) (4) (50)
Purchase of intangibles (416) (1,318) - -
Disposals 2 40 - -
Increase in decommissioning liabilities 42 38 9 9
Net cash from/(used) in (620) (1,959)
investing activities 5 (41)
Cash flows from financing activities
Shares issued - 194 - 194
Costs of shares issued - - - -
Net borrowing 377 1,003 (42) (690)
Finance costs (369) (199) (17) (26)
Lease payments - (16) - -
Net cash from/ (used) in financing activities 8 982 (59) (522)
Net (decrease)/increase in cash and cash equivalents (106) 87 (14) 1
Cash and cash equivalents at the beginning of the year 132 45 17 16
Cash and cash equivalents at the end of the year 26 132 3 17
The accompanying accounting policies and notes are an integral part of these
financial statements.
Notes to the Financial Statements
For the year ended 31 December 2023
General Information
Nostra Terra Oil and Gas Company plc (Nostra Terra) is a company incorporated
in England and Wales and quoted on the AIM market of the London Stock
Exchange. The address of the registered office is disclosed on the company
information page of this annual report. The principal activity of the Group
is described in the directors' report.
1. Summary of significant accounting policies
The financial statements are presented in United States Dollars, rounded to
the nearest $'000, as that is the currency of the primary environment in which
the Group operates.
The principal accounting policies applied in the preparation of these
financial statements are set out below. These policies have been
consistently applied to all the years presented, unless otherwise stated.
Basis of preparation
These financial statements have been prepared in accordance with UK adopted
International Financial Reporting Standards and IFRIC interpretations issued
by the International Accounting Standards Board (IASB) (IFRS) and with those
parts of the Companies Act 2006 applicable to companies reporting under IFRS.
The financial statements have been prepared under the historical cost
convention.
The preparation of financial statements in conformity with IFRS requires the
use of certain critical accounting estimates. It also requires management to
exercise its judgement in the process of applying the accounting policies. The
areas involving a higher degree of judgement or complexity, or areas where
assumptions and estimates are significant to the financial statements, are
disclosed in note 2.
Going concern
The financial statements have been prepared on the assumption that the Group
is a going concern. When assessing the foreseeable future, the directors have
looked at a period of 12 months from the date of approval of this report.
The Group's business activities, together with the factors likely to affect
its future development, performance and position are set out in the Chief
Executive Officer's report and Directors' report. In addition, note 20 to the
financial statements includes the Group's objectives, policies and processes
for managing its capital, its financial risk management objectives and its
exposures to credit risk and liquidity risk.
The Group's forecasts and projections, taking account of reasonable possible
changes in trading performance, show that the Group should be able to operate
within the level of its current cash resources, however a material uncertainty
exists in relation to the Group's ability to repay its liabilities as they
become due. We note that as at the balance sheet date, the Group has net
current liabilities of $432,000 and net liabilities of $1,514,000.
The directors prepare annual budgets and cash flow projections that extend
beyond 12 months from the date of this report. These projections include the
proceeds of future fundraising necessary within the next 12 months to meet the
Company's and Group's overheads and planned discretionary project expenditures
and to maintain the Company and Group as going concerns. Although the Company
has been successful in raising finance in the past, there is no assurance that
it will obtain adequate finance in the future. This represents a material
uncertainty related to events or conditions which may cast significant doubt
on the Group's and Company's ability to continue as going concerns and,
therefore, that they may be unable to realise their assets and discharge their
liabilities in the normal course of business. However, the directors have a
reasonable expectation that they will secure additional funding when required
to continue meeting corporate overheads and exploration costs for the
foreseeable future and therefore the directors believe that the going concern
basis is appropriate for the preparation of the financial statements.
After making enquiries, the directors have a reasonable expectation that the
Company and Group have adequate resources to continue in operational existence
for the foreseeable future. They continue to adopt the going concern basis in
preparing the annual report and financial statements, however as noted above a
material uncertainty exists which may cast significant doubt on the Group's
ability to continue operating as a going concern.
Notes to the Financial Statements (continued)
For the year ended 31 December 2023
1. Summary of significant accounting policies (continued)
New standards, amendments and interpretations adopted by the Group and
Company
The following IFRS or IFRIC interpretations were effective for the first time
for the financial year beginning 1 January 2023. Their adoption has not had
any material impact on the disclosures or on the amounts reported in these
financial statements:
Standards /interpretations Application
IAS 1 amendments Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure
of Accounting Policies
IAS 8 amendments Changes in Accounting Estimates and Errors: Definition of Accounting estimates
IAS 12 amendments Deferred Tax related to Assets and Liabilities
arising from a Single Transaction
IFRS 17 Insurance Contracts
New standards, amendments and interpretations not yet adopted
Standards /interpretations Application
IAS 1 amendments Presentation of Financial Statements: Classification of Liabilities as Current
or Non-Current and Non-Current Liabilities with Covenants Date: Effective 1
January 2024
IFRS 16 amendments Lease Liability in a Sale and Leaseback: Effective 1 January 2024
There are no IFRS's or IFRIC interpretations that are not yet effective that
would be expected to have a material impact on the Company or Group.
Basis of consolidation
Where the Company has the power, either directly or indirectly, to govern the
financial and operating policies of another entity or business so as to obtain
benefits from its activities, it is classified as a subsidiary. The
consolidated financial statements present the results of the Company and its
subsidiaries ("the Group") as if they formed a single entity. Intercompany
transactions and balances between Group companies are therefore eliminated in
full.
The consolidated financial statements incorporate the results of business
combinations using the purchase method. In the statement of financial
position, the acquiree's identifiable assets, liabilities and contingent
liabilities are initially recognised at their fair values at the acquisition
date. The results of acquired operations are included in the consolidated
statement of comprehensive income from the date on which control is obtained.
They are deconsolidated from the date control ceases.
Notes to the Financial Statements (continued)
For the year ended 31 December 2023
1. Summary of significant accounting policies (continued)
Subsidiaries
The purchase method of accounting is used to account for the acquisition of
subsidiaries by the Group. The cost of an acquisition is measured as the fair
value of the assets given, equity instruments issued, and liabilities incurred
or assumed at the date of exchange, plus costs directly attributable to the
acquisition. Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are measured initially at their
fair values at the acquisition date, irrespective of the extent of any
minority interest. The excess of the cost of acquisition over the fair value
of the Group's share of the identifiable net assets acquired is recorded as
goodwill. If the cost of acquisition is less than the fair value of the net
assets of the subsidiary acquired, the difference is recognised directly in
the income statement.
Inter-company transactions, balances and unrealised gains on transactions
between Group companies are eliminated. Unrealised losses are also eliminated
but considered an impairment indicator of the asset transferred. Accounting
policies of subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the Group.
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair
value of the Group's share of the net identifiable assets of the acquired
subsidiary or associate at the date of acquisition. Goodwill on acquisitions
of subsidiaries is included in 'intangible assets'. Separately recognised
goodwill is tested annually for impairment and carried at cost less
accumulated impairment losses. Impairment losses on goodwill are not reversed.
Gains and losses on the disposal of an entity include the carrying amount of
goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose of impairment
testing. The allocation is made to those cash-generating units or groups of
cash-generating units that are expected to benefit from the business
combination in which the goodwill arose. The Group allocates goodwill to each
business segment in each country in which it operates.
Impairment of non-financial assets
Assets that have an indefinite useful life, for example goodwill, are not
subject to amortisation and are tested annually for impairment. Assets that
are subject to amortisation are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by which the
asset's carrying amount exceeds its recoverable amount. The recoverable amount
is the higher of an asset's fair value less costs to sell and value in use.
For the purposes of assessing impairment, assets are grouped at the lowest
levels for which there are separately identifiable cash flows (cash-generating
units). Non-financial assets other than goodwill that suffered impairment are
reviewed for possible reversal of the impairment at each reporting date.
Where an impairment loss subsequently reverses, the carrying amount of the
asset (cash-generating unit) is increased to the revised estimated of its
recoverable amount, but so that the increased carrying amount does not exceed
the carrying amount that would have been determined had no impairment loss
been recognised for the asset (cash-generating unit) in prior years.
A reversal of an impairment loss is recognised as income immediately, unless
the relevant asset is carried art a revalued amount in which case the reversal
of impairment loss is treated a revaluation increase.
Notes to the Financial Statements (continued)
For the year ended 31 December 2023
1. Summary of significant accounting policies (continued)
Property, plant and equipment
Tangible non-current assets are stated at historical cost less depreciation.
Historical cost includes expenditure that is directly attributable to the
acquisition of the items.
Subsequent costs are included in the asset's carrying amount or recognised as
a separate asset, as appropriate, only when it is probable that future
economic benefits associated with the item will flow to the Group and the cost
of the item can be measured reliably. The carrying amount of the replaced part
is derecognised. All other repairs and maintenance are charged to the income
statement during the financial year in which they are incurred. Depreciation
is provided at the following annual rates in order to write off each asset
over its estimated useful life:
Plant and machinery - over 7 years
The assets' residual values and useful economic lives are reviewed, and
adjusted if appropriate, at each statement of financial position date. An
asset's carrying amount is written down immediately to its recoverable amount
if the asset's carrying amount is greater than its estimated recoverable
value. Gains and losses on disposals are determined by comparing the proceeds
with the carrying amount and are recognised within other (losses) or gains in
the income statement. When revalued assets are sold, the amounts included in
other reserves are transferred to retained earnings.
Investments
Investments are stated at cost less provision for any impairment value.
Cash and cash equivalents
Included in the statement of financial position comprise cash at bank and in
hand and other short-term highly liquid investments with original maturities
of three months or less.
For the purposes of the statement of cash flows, cash and cash equivalents
consist of cash and cash equivalents as defined above, net of outstanding bank
overdrafts.
Trade receivables
Trade receivables are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method, less provision
for impairment. A provision for impairment is established when there is
objective evidence that the Group will not be able to collect all amounts due
according to the original terms of the receivables. Significant financial
difficulties of the debtor, probability that the debtor will enter bankruptcy
or financial reorganisation, and default or delinquency in payments are
considered indicators that the trade receivable is impaired.
Trade payables
Trade payables are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method.
Notes to the Financial Statements (continued)
For the year ended 31 December 2023
1. Summary of significant accounting policies (continued)
Borrowings
Borrowings are recognised initially at fair value, net of transaction costs
incurred. Borrowings are subsequently stated at amortised cost; any difference
between the proceeds (net of transaction costs) and the redemption value is
recognised in the income statement over the year of the borrowings using the
effective interest method.
Borrowings are classified as current liabilities unless the Group has an
unconditional right to defer settlement of the liability for at least 12
months after the balance sheet date.
Functional currency translation
(i) Functional and presentation currency
Items included in the financial statements of the Group are measured using the
currency of the primary economic environment in which the entity operates (the
functional currency), which is mainly United States Dollars (US$). The
financial statements are presented in United States Dollars (US$), which is
the Group's presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the presentational currency
using exchange rates prevailing at the dates of the transactions. Foreign
exchange gains and losses resulting from the settlement of such transactions
and from the translation at year-end exchange rates of monetary assets and
liabilities denominated in foreign currencies are recognised in the income
statement.
(iii) Group Companies
All consolidated entities are presented in US$ and so no translation is
required on consolidation.
Share capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options
are shown in equity as a deduction, net of tax, from the proceeds.
Taxation
The tax expense represents the sum of the tax currently payable and deferred
tax. The tax currently payable is based on the taxable profit for the year.
Taxable profit differed from net profit as reported in the income statement
because it excludes items of income or expense that are taxable or deductible
in other years and it further excludes items that are never taxable or
deductible. The entity's liability for current tax is calculated using tax
rates that have been enacted or substantively enacted by the statement of
financial position date.
Notes to the Financial Statements (continued)
For the year ended 31 December 2023
1. Summary of significant accounting policies (continued)
Deferred tax
Deferred tax is recognised on differences between the carrying amounts of
assets and liabilities in the financial statements and the corresponding tax
bases used in the computation of taxable profit, and is accounted for using
the statement of financial position liability method. Deferred tax liabilities
are generally recognised for all taxable temporary differences and deferred
tax assets are recognised to the extent that it is probable that taxable
profits will be available against which deductible temporary differences can
be utilised. Such assets and liabilities are not recognised if the temporary
arises from goodwill or from the initial recognition) other than in a business
combination) of other assets and liabilities in a transaction that affects
neither the taxable profit nor the accounting profit.
The carrying amount of deferred tax is reviewed at each statement of financial
position date and reduced to the extent that it is no longer probable that
sufficient taxable profits will be available to allow all or part of the asset
to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset realised. Deferred tax is
charged or credited directly to equity; in which case the deferred tax is
also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to set off current tax assets against current tax
liabilities and when they relate to income taxes levied by the same taxation
authority and the Company intends to settle its current tax assets and
liabilities on a net basis.
Financial instruments
Financial assets and financial liabilities are initially classified as
measured at amortised cost, fair value through other comprehensive income, or
fair value through profit and loss when the Group becomes a party to the
contractual provisions of the instrument. Financial assets are derecognised
when the contractual rights to the cash flows expire, or the Group no longer
retains the significant risks or rewards of ownership of the financial asset.
Financial liabilities are derecognised when the obligation is discharged,
cancelled or expires.
Financial assets are classified dependent on the Group's business model for
managing the financial and the cash flow characteristics of the asset.
Financial liabilities are classified and measured at amortised cost except for
trading liabilities, or where designated at original recognition to achieve
more relevant presentation. The Group classifies its financial assets and
liabilities into the following categories:
Financial assets at amortised cost
The Group's financial assets at amortised cost comprise trade and other
receivables. These represent debt instruments with fixed or determinable
payments that represent principal or interest and where the intention is to
hold to collect these contractual cash flows. They are initially recognised
at fair value, included in current and non-current assets, depending on the
nature of the transaction, and are subsequently measured at amortised cost
using the effective interest method less any provision for impairment.
Financial liabilities at amortised cost
Financial liabilities at amortised cost comprise finance lease obligations and
trade and other payables. They are classified as current and non-current
liabilities depending on the nature of the transaction, are subsequently
measured at amortised cost using the effective interest method.
Notes to the Financial Statements (continued)
For the year ended 31 December 2023
1. Summary of significant accounting policies (continued)
Financial instruments (continued)
Financial assets at fair value through profit and loss
The Group holds a derivative against the price of oil held for operation
purposes. These are recognised and measured at fair value using the most
recent available market price with gains and losses recognised immediately in
the profit and loss.
The fair value measurement of the Group's financial and non- financial assets
and liabilities utilises market observable inputs and data as far as possible.
Inputs used in determining fair value measurements are categorised into
different levels based on how observable the inputs used in the valuation
technique utilised are (the 'fair value hierarchy').
Level 1 Quoted prices in active markets
Level 2 Observable direct or indirect inputs other than Level 1 inputs
Level 3 Inputs that are not based on observable market data
The Group measures financial instruments relating to platform holdings at fair
value using Level 1.
The Company provides financial guarantees to licensed banks for credit
facilities extended to a subsidiary company. The fair value of such financial
guarantees is not expected to be significantly different as the probability of
the subsidiary company defaulting on the credit lines is remote.
Impairment of trade and other receivables
In accordance with IFRS 9 an expected loss provisioning model is used to
calculate an impairment provision. We have implemented the IFRS 9 simplified
approach to measuring expected credit losses arising from trade and other
receivables, being a lifetime expected credit loss. This is calculated based
on an evaluation of our historic experience plus an adjustment based on our
judgement of whether this historic experience is likely reflective of our view
of the future at the balance sheet date. In the previous year the incurred
loss model is used to calculate the impairment provision.
Oil and gas assets
The Group applies the successful efforts method of accounting for oil and gas
assets and has adopted IFRS 6 Exploration for and evaluation of mineral
resources.
Exploration and evaluation ("E&E") assets
Under the successful efforts method of accounting, all licence acquisition,
exploration and appraisal costs are initially capitalised in well, field or
specific exploration cost centres as appropriate, pending determination.
Expenditure incurred during the various exploration and appraisal phases is
then written off unless commercial reserves have been established or the
determination process has not been completed.
Pre-licence costs
Costs incurred prior to having obtained the legal rights to explore an area
are expensed directly to the income statement as they are incurred.
Notes to the Financial Statements (continued)
For the year ended 31 December 2023
1. Summary of significant accounting policies (continued)
Exploration and evaluation ("E&E") costs
Costs of E&E are initially capitalised as E&E assets. Payments to
acquire the legal right to explore, together with the directly related costs
of technical services and studies, seismic acquisition, exploratory drilling
and testing are capitalised as intangible E&E assets.
Tangible assets used in E&E activities (such as the Group's drilling rigs,
seismic equipment and other property, plant and equipment used by the
company's exploration function) are classified as property, plant and
equipment. However, to the extent that such a tangible asset is consumed in
developing an intangible E&E asset, the amount reflecting that consumption
is recorded as part of the cost of the intangible asset. Such intangible costs
include directly attributable overheads, including the depreciation of
property, plant and equipment utilised in E&E activities, together with
the cost of other materials consumed during the exploration and evaluation
phases.
E&E costs are not amortised prior to the conclusion of appraisal
activities.
Treatment of E&E assets at conclusion of appraisal activities
Intangible E&E assets relating to each exploration licence/prospect are
carried forward until the existence (or otherwise) of commercial reserves has
been determined, subject to certain limitations including review for
indications of impairment. If commercial reserves are discovered the carrying
value, after any impairment loss of the relevant E&E assets, is then
reclassified as development and production assets. If, however, commercial
reserves are not found, the capitalised costs are charged to expense after
conclusion of appraisal activities.
Development and production assets
Development and production assets are accumulated generally on a
field-by-field basis and represent the cost of developing the commercial
reserves discovered and bringing them into production, together with the
E&E expenditures incurred in finding commercial reserves transferred from
intangible E&E assets as outlined above.
The cost of development and production assets also includes the cost of
acquisitions and purchases of such assets, directly attributable overheads and
the cost of recognising provisions for future restoration and decommissioning.
Decommissioning liability
Where a material liability for the removal of production facilities and site
restoration at the end of the productive life of the assets exist, a provision
for decommissioning liability is recognised. The amount recognised is the
present value of estimated future expenditure determined in accordance with
local conditions and requirements. An intangible asset of an amount equivalent
to the provision is recognised and depreciated on a unit production basis.
Changes in estimates are recognised prospectively, with corresponding
adjustments to the provision and the associated intangible asset. Period
changes in the present value arising from discounting are included in
depletion, depreciation and amortisation cost in cost of sales.
Commercial reserves
Commercial reserves are proven and probable oil and gas reserves, which are
defined as the estimated quantities of crude oil, natural gas and natural gas
liquids which geological, geophysical and engineering data demonstrate with a
specified degree of certainty to be recoverable in future years from known
reservoirs and which are considered commercially producible.
Notes to the Financial Statements (continued)
For the year ended 31 December 2023
1. Summary of significant accounting policies (continued)
Depletion, amortisation and impairment of oil and gas assets
All expenditure carried within each field is amortised from the commencement
of production on a unit of production basis, which is the ratio of oil and gas
production in the period to the estimated quantities of commercial reserves at
the end of the period plus the production in the period, on a field-by-field
basis. Costs used in the unit of production calculation comprise the net book
value of capitalised costs plus the estimated future field development costs
to access the related commercial reserves. Changes in the estimates of
commercial reserves or future field development costs are dealt with
prospectively.
Where there has been a change in economic conditions that indicates a possible
impairment in an oil and gas asset, the recoverability of the net book value
relating to that field is assessed by comparison with the estimated discounted
future cash flows based on management's expectations of future oil and gas
prices and future costs. Any impairment identified is charged to the income
statement as additional depletion and amortisation. Where conditions giving
rise to impairment subsequently reverse, the effect of the impairment charge
is also reversed as a credit to the income statement, net of any depreciation
that would have been charged since the impairment.
Depletion, amortisation and impairment of oil and gas assets
All expenditure carried within each field is amortised from the commencement
of production on a unit of production basis, which is the ratio of oil and gas
production in the period to the estimated quantities of commercial reserves at
the end of the period plus the production in the period, on a field-by-field
basis. Costs used in the unit of production calculation comprise the net book
value of capitalised costs plus the estimated future field development costs
to access the related commercial reserves. Changes in the estimates of
commercial reserves or future field development costs are dealt with
prospectively.
Where there has been a change in economic conditions that indicates a possible
impairment in an oil and gas asset, the recoverability of the net book value
relating to that field is assessed by comparison with the estimated discounted
future cash flows based on management's expectations of future oil and gas
prices and future costs. Any impairment identified is charged to the income
statement as additional depletion and amortisation. Where conditions giving
rise to impairment subsequently reverse, the effect of the impairment charge
is also reversed as a credit to the income statement, net of any depreciation
that would have been charged since the impairment.
Share-based compensation
The fair value of the employee and suppliers' services received in exchange
for the grant of the options is recognised as an expense. The total amount to
be expensed over the vesting year is determined by reference to the fair value
of the options granted, excluding the impact of any non-market vesting
conditions (for example, profitability and sales growth targets).
Non-market vesting conditions are included in assumptions about the number of
options that are expected to vest. At each statement of financial position
date, the entity revises its estimates of the number of options that are
expected to vest. It recognises the impact of the revision to original
estimates, if any, in the income statement, with a corresponding adjustment to
equity. The proceeds received net of any directly attributable transaction
costs are credited to share capital (nominal value) and share premium when the
options are exercised.
Notes to the Financial Statements (continued)
For the year ended 31 December 2023
1. Summary of significant accounting policies (continued)
Share-based compensation (continued)
The fair value of share-based payments recognised in the statement of
comprehensive income is measured by use of the Black Scholes model, which
takes into account conditions attached to the vesting and exercise of the
equity instruments. The expected life used in the model is adjusted; based on
management's best estimate, for the effects of non-transferability, exercise
restrictions and behavioural considerations. The share price volatility
percentage factor used in the calculation is based on management's best
estimate of future share price behaviour and is selected based on past
experience, future expectations and benchmarks against peer companies in
the industry.
The Group does not operate any cash-settled share-based payments and as such
are not affected by the amendments to IFRS 2 - Share-based payments.
Revenue recognition
Revenue comprises the fair value of the consideration received or receivable
in relation to the proceeds by the prospects which the company has a working
interest in. Revenue is shown net of value-added tax, returns, rebates and
discounts and after eliminating sales within the Group. Revenue is recognised
when the oil and gas produced is despatched and received by the customers. The
directors consider this the point when the Company's performance obligation
is satisfied.
The directors consider that revenue generation is exclusively for oil
production in the US and so no further segmentation is required.
Leased assets
The Group as a lessee
A lease is defined as 'a contract, or part of a contract, that conveys the
right to use an asset (the underlying asset) for a period of time in exchange
for consideration'.
To apply this definition the Group assesses whether the contract meets three
key evaluations which are whether:
· the contract contains an identified asset, which is either
explicitly identified in the contract or implicitly specified by being
identified at the time the asset is made available to the Group
· the Group has the right to obtain substantially all of the
economic benefits from use of the identified asset throughout the period of
use, considering its rights within the defined scope of the contract
· the Group has the right to direct the use of the identified asset
throughout the period of use. The Group assess whether it has the right to
direct 'how and for what purpose' the asset is used throughout the period of
use.
Measurement and recognition of leases as a lessee
At lease commencement date, the Group recognises a right-of-use asset and a
lease liability on the balance sheet. The right-of-use asset is measured at
cost, which is made up of the initial measurement of the lease liability, any
initial direct costs incurred by the Group, an estimate of any costs to
dismantle and remove the asset at the end of the lease, and any lease payments
made in advance of the lease commencement date (net of any incentives
received).
The Group depreciates the right-of-use assets on a straight-line basis from
the lease commencement date to the earlier of the end of the useful life of
the right-of-use asset or the end of the lease term. The Group also assesses
the right-of-use asset for impairment when such indicators exist.
Notes to the Financial Statements (continued)
For the year ended 31 December 2023
1. Summary of significant accounting policies (continued)
Measurement and recognition of leases as a lessee (continued)
At lease commencement date, the Group recognises a right-of-use asset and a
lease liability on the balance sheet. The right-of-use asset is measured at
cost, which is made up of the initial measurement of the lease liability, any
initial direct costs incurred by the Group, an estimate of any costs to
dismantle and remove the asset at the end of the lease, and any lease payments
made in advance of the lease commencement date (net of any incentives
received).
The Group depreciates the right-of-use assets on a straight-line basis from
the lease commencement date to the earlier of the end of the useful life of
the right-of-use asset or the end of the lease term. The Group also assesses
the right-of-use asset for impairment when such indicators exist.
At the commencement date, the Group measures the lease liability at the
present value of the lease payments unpaid at that date, discounted using the
interest rate implicit in the lease if that rate is readily available or the
Group's incremental borrowing rate.
Lease payments included in the measurement of the lease liability are made up
of fixed payments (including in substance fixed), variable payments based on
an index or rate, amounts expected to be payable under a residual value
guarantee and payments arising from options reasonably certain to be
exercised.
Subsequent to initial measurement, the liability will be reduced for payments
made and increased for interest. It is remeasured to reflect any reassessment
or modification, or if there are changes in in-substance fixed payments.
When the lease liability is remeasured, the corresponding adjustment is
reflected in the right-of-use asset, or profit and loss if the right-of-use
asset is already reduced to zero.
The Group has elected to account for short-term leases and leases of low-value
assets using the practical expedients. Instead of recognising a right-of-use
asset and lease liability, the payments in relation to these are recognised as
an expense in profit or loss on a straight-line basis over the lease term.
On the statement of financial position, right-of-use assets have been included
in property, plant and equipment and lease liabilities have been included in
trade and other payables.
2. Critical accounting estimates and judgements
The preparation of consolidated financial statements requires the Group to
make estimates and assumptions that affect the application of policies and
reported amounts. Estimates and judgments are continually evaluated and are
based on historical experience and other factors including expectations of
future events that are believed to be reasonable under the circumstances.
Actual results may differ from these estimates. The estimates and assumptions
which have a significant risk of causing a material adjustment to the carrying
amount of assets and liabilities are discussed below:
Impairment of property, plant and equipment
Property, plant and equipment are reviewed for impairment if events or changes
in circumstances indicate that the carrying amount may not be recoverable.
When a review for impairment is conducted, the recoverable amount is
determined based on value in use calculations prepared on the basis of
management's assumptions and estimates.
Recoverability of exploration and evaluation costs
E&E assets are assessed for impairment when circumstances suggest that the
carrying amount may exceed its recoverable value including decommissioning
costs. This assessment involves judgment as to (i) the likely future
commerciality of the asset and when such commerciality should be determined,
and (ii) future revenues and costs pertaining to the asset in question, and
the discount rate to be applied to such revenues and costs for the purpose of
deriving a recoverable value.
Notes to the Financial Statements (continued)
For the year ended 31 December 2023
2. Critical accounting estimates and judgements (continued)
Share-based payments
Note 1 sets out the Group's accounting policy on share-based payments,
specifically in relation to the share options and warrants that the Company
has granted. The key assumptions underlying the fair value of such share-based
payments are discussed in note 23. The fair value amounts used by the Group
have been derived by external consultants using standard recognised valuation
techniques.
3. Segmental analysis
In the opinion of the directors, the Group has one class of business, being
the exploitation of hydrocarbon resources.
The Group's primary reporting format is determined by geographical segment
according to the location of the hydrocarbon assets. The Group's reportable
segments under IFRS 8 in the year are as follows:
United Kingdom - being the location of the head office.
US Mid-Continent properties at year end included the following:
· East Texas: 100% working interest in the Pine Mills oilfield
· East Texas: 32.5% working interest in the Cypress farmout area of
Pine Mills
· West Texas: 50-100% working interest leases located in the
Permian Basin
· South Texas: 100% working interest in the Caballos Creek oilfield
The chief operating decision maker's internal report for the year ended 31
December 2023 is based on the location of the oil properties as disclosed in
the below table:
SEGMENTAL RESULTS US mid-continent 2023 Head office Total
$'000 2023 2023
$'000 $'000
Revenue 2,816 - 2,816
Operating profit (loss) before depreciation, well impairment, share-based 1,470 (974) 496
payment charges, restructuring costs and gain (loss) on sale of assets and
foreign exchange:
Depreciation of tangibles (324) - (324)
Amortisation of intangibles (251) - (251)
Share based payments - (41) (41)
Foreign exchange gain (2) (4) (6)
Operating profit/(loss) 893 (1,019) (126)
Finance expense (351) (17) (368)
Other income 22 - 22
Profit/(loss) before taxation 563 (1,035) (472)
Notes to the Financial Statements (continued)
For the year ended 31 December 2023
3. Segmental analysis (continued)
SEGMENTAL ASSETS US mid-continent 2023 Head office Total
$'000 2023 2023
$'000 $'000
Property, plant and equipment 1,230 - 1,230
Intangible assets 2,389 - 2,389
Cash and cash equivalents 23 3 26
Trade and other receivables 552 24 576
4,194 27 4,221
The chief operating decision maker's internal report for the year ended 31
December 2022 is based on the location of the oil properties as disclosed in
the below table:
SEGMENTAL RESULTS US mid-continent 2022 Head office Total
$'000 2022 2022
$'000 $'000
Revenue 4,021 - 4,021
Operating profit (loss) before depreciation, well impairment, share-based 2,217 (1,087) 1,130
payment charges, restructuring costs and gain (loss) on sale of assets and
foreign exchange:
Depreciation of tangibles (299) - (299)
Amortisation of intangibles (202) - (202)
Well impairment (897) - (897)
Share based payments - (156) (156)
Foreign exchange gain (loss) (2) 28 26
Operating profit/(loss) 817 (1,215) (398)
Finance expense (172) (27) (199)
Other income 51 - 51
Profit/(loss) before taxation 696 (1,242) (546)
SEGMENTAL ASSETS
Property, plant and equipment 1,308 - 1,308
Intangible assets 2,224 - 2,224
Cash and cash equivalents 115 17 132
Trade and other receivables 602 22 624
4,249 39 4,288
Notes to the Financial Statements (continued)
For the year ended 31 December 2023
4. Employees and Directors
2023 2022
$'000 $'000
Directors' fees 147 127
Directors' remuneration 190 275
Social security costs 13 14
350 416
2023 2022
Number Number
The average monthly number of employees (including directors)
during the year was as follows:
Directors 4 4
Directors' remuneration
Other than the directors, the Group had no other employees. Total remuneration
paid to directors during the year was as listed above.
The director's emoluments and other benefits for the year ended 31 December
2023 is as follows:
2023 2022
$'000 $'000
M B Lofgran 190 275
5. Finance expense
2023 2022
$'000 $'000
Finance expense 369 199
Finance expense relates to interest charged on borrowings. Further details for
which can be found in note 18.
6. Other income
2023 2022
$'000 $'000
Other income 22 51
22 51
Other income relates to sundry income received from operating oil wells in
addition to the oil sales.
Notes to the Financial Statements (continued)
For the year ended 31 December 2023
7. Operating loss
2023 2022
$'000 $'000
The operating loss the year ended 31 December is stated after
charging/ (crediting)
Depreciation of property, plant, and equipment 324 299
Amortisation of intangibles 251 202
Well impairment - 897
The analysis of administrative expenses in the consolidated income statement
by nature of expense:
Directors' remuneration 190 275
Depreciation on ROU asset - -
Social security costs 13 14
Directors' fees 147 127
Travelling and entertainment 9 23
Accountancy fees 82 81
Legal and professional fees 252 218
Auditors' remuneration 22 27
Bad debt costs - -
Other expenses 155 309
870 1,074
8. Income tax
The income tax charge for the year was as follows: 2023 2022
$'000 $'000
Current tax - -
Corporation tax - -
Overseas corporation tax - -
TOTAL - -
Loss before tax (472) (546)
Loss on ordinary activities before taxation multiplied by the
standard rate of UK corporation tax of 25% (2022:19%) (118) (104)
Effects of:
Non-deductible expenses 10 30
Other tax adjustments 108 74
CURRENT TAX CHARGE - -
At 31 December 2023, the Company had an estimated excess management expenses
to carry forward of $6,375,110 (2022: $5,942,883). The deferred tax asset
at 25% (2022: 19%) on these tax losses of $1,593,778 (2022: $1,129,000) has
not been recognised due to the uncertainty of recovery. The current US
corporate tax rate is 21%.
Notes to the Financial Statements (continued)
For the year ended 31 December 2023
9. Loss of Parent Company
As permitted by Section 408 of the Companies Act 2006, the income statement of
the parent company is not presented as part of these financial statements. The
parent company's loss for the financial year was $1,035,000 (2022:
$1,242,000).
10. Earnings per share
The calculation of earnings per ordinary share is based on earnings after tax
and the weighted average number of ordinary shares in issue during the year.
For diluted earnings per share, the weighted average number of ordinary shares
in issue is adjusted to assume conversion of all dilutive potential
ordinary shares. The Group had two classes of dilutive potential ordinary
shares, being those share options granted to employees and suppliers where the
exercise price is less than the average market price of the Group's ordinary
shares during the year, and warrants granted to directors and one former
adviser.
Details of the adjusted earnings per share are set out below:
2023 2022
GROUP
Loss attributable to ordinary shareholders ($'000) (472) (546)
Weighted average number of shares 746,520,534 732,742,452
CONTINUED OPERATIONS: (0.06) (0.07)
BASIC AND DILUTED EPS - LOSS (cents)
The diluted loss per share is the same as the basic loss per share as the loss
for the year has an antidilutive effect.
2023 2022
$'000 $'000
Gross profit before depreciation, depletion, amortisation and impairment 1,408 2,242
EPS on gross profit before depreciation, depletion, amortisation and 0.19 0.30
impairment (cents)
RECONCILIATION FROM GROSS PROFIT TO GROSS PROFIT BEFORE DEPLETION,
DEPRECIATION, AMORTISATION AND IMPAIRMENT
Gross profit 791 806
ADD BACK:
Exploration - -
Well impairment - 897
Depletion, depreciation and amortisation 617 539
Gross profit before depletion, depreciation, amortisation and impairment 1,408 2,242
Notes to the Financial Statements (continued)
For the year ended 31 December 2023
11. Intangible assets
GROUP Licences Exploration & evaluation assets Development & production assets Total
$'000 $'000 $'000 $'000
COST
At 1 January 2022 524 1,949 2,973 5,446
Additions - - 1,319 1,319
Disposals - (10) - (10)
At 31 December 2022 524 1,939 4,292 6,755
Additions - - 416 416
Disposals - - - -
At 31 December 2023 524 1,939 4,708 7,171
PROVISION
At 1 January 2022 524 1,939 969 3,432
Charge for the year - - 202 202
Impairment - - 897 897
Disposals - - - -
At 31 December 2022 524 1,939 2,068 4,531
Charge for the year - - 251 251
Impairment - - - -
Disposals - - - -
At 31 December 2023 524 1,939 2,319 4,782
CARRYING VALUE - - 2,389 2,389
At 31 December 2023
At 31 December 2022 - - 2,224 2,224
The Group assesses at each reporting date whether there is an indication that
the intangible assets may be impaired, by considering the net present value of
discounted cash flows forecasts. If an indication exists an impairment
review is carried out by reference to available engineering information. At
the year-end, $nil (2022: $897,000) was provided for the well at Grant East
#1.
Amortisation, impairment charges and any profit or loss on disposal of the
capitalised intangible costs is included within cost of sales in the
consolidated income statement.
Notes to the Financial Statements (continued)
For the year ended 31 December 2023
11. Intangible assets (continued)
COMPANY Development & production assets Total
$'000 $'000
COST
At 1 January 2022 398 398
Additions - -
Disposals - -
At 31 December 2022 398 398
Additions - -
Disposals - -
At 31 December 2023 398 398
PROVISION
At 1 January 2022 53 53
Charge for the year 40 40
Impairment - -
Disposals - -
At 31 December 2022 93 93
Charge for the year 42 42
Impairment - -
Disposals - -
At 31 December 2023 135 135
CARRYING VALUE 263 263
At 31 December 2023
At 31 December 2022 305 305
The Company assesses at each reporting date whether there is an indication
that the intangible assets may be impaired, by considering the net present
value of discounted cash flows forecasts. If an indication exists an
impairment review is carried out by reference to available engineering
information. At the year-end, $nil (2022: $nil) was provided.
Amortisation, impairment charges and any profit or loss on disposal of the
capitalised intangible costs is included within cost of sales in the
consolidated income statement.
Notes to the Financial Statements (continued)
For the year ended 31 December 2023
12. Property, plant and equipment
GROUP Office space - Plant & equipment - oil and gas assets Total
right of use $'000 $'000
$'000
COST
At 1 January 2022 48 1,568 1,616
Additions - 719 719
Disposals - (30) (30)
At 31 December 2022 48 2,257 2,305
Additions - 248 248
Disposals - (2) (2)
At 31 December 2023 48 2,503 2,551
DEPRECIATION
At 1 January 2022 48 650 698
Charge for the year - 299 299
Disposals - - -
At 31 December 2022 48 949 997
Charge for the year - 324 324
Disposals - - -
At 31 December 2023 48 1,273 1,321
CARRYING VALUE
At 31 December 2023 - 1,230 1,230
At 31 December 2022 - 1,308 1,308
Depreciation charges are included within cost of sales in the Consolidated
Income Statement.
In addition, the directors are of the opinion that no impairment should be
provided.
Notes to the Financial Statements (continued)
For the year ended 31 December 2023
12. Property, plant and equipment (continued)
COMPANY Plant & equipment - oil and gas assets Total
$'000 $'000
COST
At 1 January 2022 128 128
Additions 50 50
Disposals - -
At 31 December 2022 178 178
Additions 4 4
Disposals - -
At 31 December 2023 182 182
DEPRECIATION
At 1 January 2022 16 16
Charge for the year 18 18
Disposals - -
At 31 December 2022 34 34
Charge for the year 18 18
Disposals - -
At 31 December 2023 52 52
CARRYING VALUE
At 31 December 2023 130 130
At 31 December 2022 144 144
Depreciation charges are included within cost of sales in the Consolidated
Income Statement.
In addition, the directors are of the opinion that no impairment should be
provided.
Notes to the Financial Statements (continued)
For the year ended 31 December 2023
13. Leases
Lease liabilities are presented in the statement of financial position as
follows:
2023 2022
$'000 $'000
Current - within 1 year - -
Non-current - within 1 - 2 years - -
- -
The Group has a lease for the office space in Dallas, Texas, USA. The
Company has entered into short-term lease effective from 1 February 2023 and
is annually renewed. The Group does not hold any other office leases.
14. Fixed Asset Investments
COMPANY Investment in subsidiaries Loans to subsidiaries Total
$'000 $'000 $'000
COST
At 1 January 2022 1 15,434 15,435
Additions - - -
Reductions - - -
At 31 December 2022 1 15,434 15,435
Additions - - -
Disposals - - -
At 31 December 2023 1 15,434 15,435
PROVISON
At 1 January 2022 1 (15,434) (15,435)
Charge for the year - - -
Reductions - - -
At 31 December 2022 1 (15,434) (15,435)
Charge for the year
At 31 December 2023 1 (15,434) (15,435)
CARRYING VALUE
At 31 December 2023 - - -
At 31 December 2022 - - -
Notes to the Financial Statements (continued)
For the year ended 31 December 2023
14. Fixed Asset Investments (continued)
In the opinion of the directors, the aggregate value of the Company's
investment in subsidiary undertakings is not less than the amount included in
the statement of financial position.
Historically, loans to participating interests are reported as in increase in
the Company's investment in the joint venture but have been provided for. As
the Group acquired 100% shareholding in the joint venture in 2017 this balance
had been transferred to loan to subsidiaries.
The details of the subsidiaries held at 31 December 2023 are as set
out below:
Shareholding Country of incorporation Nature of business
New Horizon Energy 1 LLC (NHE) 100% USA Oil & gas exploration
Buccaneer Operating, LLC (Buccaneer) 100% USA Oil & gas exploration
15. Trade and other receivables
GROUP COMPANY
2023 2022 2023 2022
$'000 $'000 $'000 $'000
CURRENT
Trade and other receivables 143 52 - -
Other taxes and receivables 405 506 24 22
548 558 24 22
The directors consider the carrying value of the receivables to approximate
their fair value.
16. Cash and cash equivalents
GROUP COMPANY
2023 2022 2023 2022
$'000 $'000 $'000 $'000
Bank current accounts 26 132 3 17
Notes to the Financial Statements (continued)
For the year ended 31 December 2023
17. Trade and other payables
GROUP COMPANY
2023 2022 2023 2022
$'000 $'000 $'000 $'000
CURRENT
Trade payables 779 777 3,702 2,771
Accruals and deferred income 86 273 52 70
Other taxes payables 3 1 3 1
Other payables 56 - 45 -
924 1,051 3,802 2,842
Decommissioning liability 382 340 30 22
Trade payables and accruals principally comprise amounts outstanding for trade
purchases and on-going expenses. The directors consider that the carrying
amount of trade and other payables approximates their fair value.
Trade payables and accruals principally comprise amounts outstanding for trade
purchases and on-going expenses. The directors consider that the carrying
amount of trade and other payables approximates their fair value.
Included in trade payables is the decommissioning liability, this has been
calculated at a discount rate of 10% and an inflation factor of 3%. This is
comparable to the Group's options at the time of the well in-service dates.
18. Financial liabilities - borrowing
GROUP COMPANY
Maturity of the borrowings is as follows: 2023 2022 2023 2022
$'000 $'000 $'000 $'000
Repayable within one year
Bank loan - - - -
Other loans 110 94 110 94
Repayable after one year
Bank loan 4,247 3,756 - -
Other loans 72 130 72 130
4,429 3,980 182 224
Borrowings include a facility where the loans are secured against the Group's
interest in its assets. At the year end the outstanding balance was $4,247,000
(2022: $3,756,000). Interest is currently charged for any day per annum at
8.75%. In September 2021 the facility was extended by three years to 29
January 2025 and the nominal facility size was increased to $10 million. The
Borrowing Base has been reduced to US$4,250,000 based on improved production
and cashflow during 2023. The size of the Facility and Borrowing Base will be
reassessed at least twice yearly. The Board anticipates the Facility and
Borrowing Base will increase as the Company's production and reserves
increase.
The Group also has a loan agreement in place with related parties, with a
total outstanding balance as at the year-end of $182,000 (2022: $224,000).
Further details can be found in Note 22.
Notes to the Financial Statements (continued)
For the year ended 31 December 2023
19. Share capital
Number Class Nominal 2023 2022
value $'000 $'000
746 million (2022: 746 million) Ordinary 0.1 1,593 1,593
4,110 million (2022: 4,110 million) Deferred 0.098p 6,549 6,549
There were no share issuance during the year.
20. Risk and sensitivity analysis
The Group's activities expose it to a variety of financial risks: interest
rate risk, liquidity risk, foreign currency risk, capital risk and credit
risk. The Group's activities also expose it to non-financial risks: market,
legal and environment risk. The Group's overall risk management programme
focuses on unpredictability and seeks to minimise the potential adverse
effects on the Group's financial performance. The board, on a regular basis,
reviews key risks and, where appropriate, actions are taken to mitigate
the key risks identified.
Capital risk
The Group's objectives when managing capital are to safeguard the ability to
continue as a going concern in order to provide returns for shareholders and
benefits to other stakeholders and to maintain an optimal capital structure to
reduce the cost of capital.
Market risk
The Group also faces risks in conducting operations in US mid-continent, which
include but are not limited to:
· Fluctuations in the global economy could disrupt the Group's
ability to operate its business in the US Mid-Continent and could discourage
foreign and local investment and spending, which could adversely affect its
production.
Environmental risk
The Group faces environmental risks in conducting operations in the US
Mid-Continent which include but are not limited to:
· If the Group is found not to be in compliance with applicable
laws or regulations, it could be exposed to additional costs, which might
hinder the Group's ability to operate its business.
Credit risk
The Group's principal financial assets are bank balances and cash, trade and
other receivables. The Group's credit risk is primarily attributable to its
trade receivables. The amounts presented in the balance sheet are net of
allowances for doubtful receivables. An allowance for impairment is made where
there is an identified loss which, based on previous experience, is evidence
of a reduction in the recoverability of the cash flows.
Notes to the Financial Statements (continued)
For the year ended 31 December 2023
20. Risk and sensitivity analysis (continued)
Volatility of crude oil prices
A material part of the Group's revenue will be derived from the sale of oil
that it expects to produce. A substantial or extended decline in prices for
crude oil and refined products could adversely affect the Group's revenues,
cash flows, profitability and ability to finance its planned capital
expenditure. West Texas Intermediate ("WTI") oil prices ranged from $70.25 to
$89.43 in 2023 and $73.17 to $120.93 in 2022. The Group had no hedging
activity during 2023.
Interest rate risk
The Group does not hedge this risk. At 31 December 2023, the Group had
borrowings of $4,429,000(2022: $3,980,000), with total interest for the year
of $369,000 (2022: $199,000). A 100-basis point change in the rates will
increase finance costs by $44,000.
Liquidity risk
The Group expects to fund its exploration and development programme, as well
as its administrative and operating expenses throughout 2023, principally
using existing working capital and expected proceeds from the sale of future
crude oil production. The Group had a bank balance of approximately $25,622
at 31 December 2023 (2022: $132,000).
Cash flow risk
The Group expects to have sufficient working capital to continue operations
and to remain cash flow positive through 2023. This will be continuously
monitored and reviewed by the directors through the inclusion of regular cash
flow forecasts in management reports.
21. Financial commitments
Capital commitments
The Group had no material capital commitments at the year-end.
22. Related party transactions
Group
No related party transactions other than those highlighted below.
Company
At the year end, the Company owed its subsidiaries $3,108,000 (2022:
$2,246,000) in respect of intercompany loans that are unsecured and
interest-free.
The Company has the following loans outstanding with related parties:
In December 2023, the Company obtained short-term loans from a director
totalling $45,000 (2022: $nil) which remains outstanding as of year-end. The
loan is unsecured and bears interest free and repayable upon demand.
Notes to the Financial Statements (continued)
For the year ended 31 December 2023
23. Share-based payments
The Group has a share-ownership compensation scheme for senior executives
of the Group whereby senior executives may be granted options to purchase
ordinary shares in the Company. The Group has previously issued warrants to
senior executives as a welcome incentive and to third parties as consideration
for their services. A share-based payment charge of $40,481 (2022: $155,000)
for share options was expensed during the year.
Date of grant At 31.12.22 Granted Exercised Expired At 31.12.23 Exercise price Exercise/
vesting date
pence From To
Warrants
08/04/20 73,611,000 - - (73,611,000) - 0.60 08/04/20 08/04/23
08/01/21 108,000,000 - - (108,000,000) - 0.85 08/01/21 08/01/23
Options
29/10/14 675,000 - - (375,000) 300,000 0.4 29/10/14 28/10/24
04/06/18 9,500,000 - - - 9,500,000 5 04/06/18 03/06/25
29/09/20 5,000,000 - - - 5,000,000 0.5 29/09/20 29/09/27
29/09/20 5,000,000 - - - 5,000,000 0.75 29/09/20 29/09/27
29/09/20 5,000,000 - - - 5,000,000 1 29/09/20 29/09/27
29/09/20 733,333 - - - 733,333 0.5 29/09/20 29/09/27
29/09/20 733,333 - - - 733,333 0.75 29/09/20 29/09/27
29/09/20 733,334 - - - 733,334 1 29/09/20 29/09/27
29/09/20 1,666,666 - - - 1,666,666 0.5 29/09/20 29/09/27
29/09/20 1,666,667 - - - 1,666,667 0.75 29/09/20 29/09/27
29/09/20 1,666,667 - - - 1,666,667 1 29/09/20 29/09/27
29/09/20 1,333,333 - - - 1,333,333 0.5 29/09/20 29/09/27
29/09/20 1,333,333 - - - 1,333,333 0.75 29/09/20 29/09/27
29/09/20 1,333,334 - - - 1,333,334 1 29/09/20 29/09/27
Notes to the Financial Statements (continued)
For the year ended 31 December 2023
23. Share-based payments (continued)
The total number of options and warrants outstanding at 31 December 2023 and
31 December 2022 are as follows:
Total at 31 December 2023: 36,000,000
Total at 31 December 2022: 217,986,000
The number of options and warrants outstanding to the directors at the
year-end were as follows:
Director Warrants Options Total Warrants & Options
2023 2022 2023 2022 2023 2022
M Lofgran - 16,000,000 21,300,000 21,600,000 21,300,000 37,600,000
S Staley - 2,000,000 5,000,000 5,000,000 5,000,000 7,000,000
J Stafford - - 5,500,000 5,500,000 5,500,000 5,500,000
Total - 18,000,000 31,800,000 32,100,000 31,800,000 50,100,000
The estimated fair value of the warrants issued in previous years was
calculated by applying the Black-Scholes option pricing model. Volatility is
based on historic share prices of the Company. The assumptions used in the
calculation were as follows (the warrants issued on 8 April 2020 were to
subscribers of shares in a fundraising and are not considered to be share
based payments):
Warrants 7 Feb 2017 02 Sep 2020 25 Sep 2020 8 Jan 2021
Share price at grant date 2.53p 0.23p 0.3p 0.53p
Exercise price 2.55p 0.6p 0.35p 0.85p
Option life in years 5 years 2 years 2 years 2 years
Risk free rate 1% 1% 1% 0.5%
Expected volatility 50% 50% 50% 50%
Expected dividend yield 0% 0% 0% 0%
Fair value of option/warrant 1.08p 0.01p 0.07p 0.07p
Weighted average remaining life (years) - - - -
Notes to the Financial Statements (continued)
For the year ended 31 December 2023
23. Share-based payments (continued)
Options 28 Oct 2014 21 July 2017 21 July 2017 21 July 2017
Share price at grant date 2.65p 1.55p 1.55p 1.55p
Exercise price 0.4p 3p 4.5p 6p
Option life in years 10 years 5 years 5 years 5 years
Risk free rate 1% 1% 1% 1%
Expected volatility 50% 50% 50% 50%
Expected dividend yield 0% 0% 0% 0%
Fair value of option/warrant 0.13p 0.52p 0.35p 0.25p
Weighted average remaining life (years) 0.83 - - -
Options 4 June 2018 - Directors 29 Sep 2020 29 Sep 2020 29 Sep 2020
Share price at grant date 2.50p 0.38p 0.38p 0.38p
Exercise price 5p 0.5p 0.75p 1p
Option life in years 7 years 7 years 7 years 7 years
Risk free rate 1% 1% 1% 1%
Expected volatility 50% 50% 50% 50%
Expected dividend yield 0% 0% 0% 0%
Fair value of option/warrant 1.85p 0.16p 0.50p 0.26p
Weighted average remaining life (years) 1.43 3.75 3.75 3.75
Notes to the Financial Statements (continued)
For the year ended 31 December 2023
24. Contingent liabilities and guarantees
The Group has no contingent liabilities in respect of legal claims arising
from the ordinary course of business and it is not anticipated that any
material liabilities will arise from contingent liabilities other than those
provided for.
25. Ultimate controlling party
The Company is quoted on the AIM market of the London Stock Exchange. At the
date of the annual report there was no one controlling party.
26. Events after the reporting period
On 11 January 2024 the Company raised £300,000 (before expenses) through a
subscription and placing of 250,000,000 new ordinary shares at a price of
0.12p per share.
After the year end the Group sold the Coleman and Raschke assets for
approximately $40,000.
END.
Nominated Adviser
Beaumont Cornish Limited ("Beaumont Cornish") is the Company's Nominated
Adviser and is authorised and regulated by the FCA. Beaumont Cornish's
responsibilities as the Company's Nominated Adviser, including a
responsibility to advise and guide the Company on its responsibilities under
the AIM Rules for Companies and AIM Rules for Nominated Advisers, are owed
solely to the London Stock Exchange. Beaumont Cornish is not acting for and
will not be responsible to any other persons for providing protections
afforded to customers of Beaumont Cornish nor for advising them in relation to
the proposed arrangements described in this announcement or any matter
referred to in it.
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