Full Year Results

RNS Number : 4519R

ADM Energy PLC

30 June 2020

 

Prior to publication, the information contained within this announcement was deemed by the  Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR"). With the publication of this announcement, this information is now considered to be in the public domain.

30 June 2020

ADM Energy plc

("ADM", the "Group" or "Company")

Full Year Results

Publication of Annual Report and Notice of AGM

ADM Energy plc (AIM: ADME), an oil and gas investing company quoted on AIM, announces its audited full year results for the year ended 31 December 2019.

OML 113 Investment Highlights

· Aje Field asset in OML 113 continued to perform well:

o  Oil is being produced at a stable rate from two wells in the Aje Field (Aje-4 and Aje-5ST2)

o  Two wells achieved a total produced volume of 890,203 barrels of oil in 2019

o  Combined average barrels of oil per day from the two wells of 2,967 bopd (148 bopd net to ADM)

o  Field Development Plan for the Turonian Aje gas project is in the initial planning stages with the partners, aimed at tripling production to 9,000 bpd

o  An increase in reserves outlined by the Competent Person's Report updated in April 2019

· Aje partnership fully paid the $9.8m licence renewal fee, securing a 20-year extension of the OML 113 licence

Financial and Corporate Highlights

· Revenue was £2.5m (2018: £3.1m)

· Loss after tax £1.7m (2018: £1.0 loss)

· Successfully raised additional equity of £2.0 million in three fundraisings in 2019

· Strengthened Board and Management team with the following appointments:

o  Osamede Okhomina as CEO in July 2019

o  Peter Francis as Non-Executive Chairman and Manuel Lamboley as Non-Executive Director in October 2019

Post Period

· In February 2020, entered into an agreement with EER (Colobos) Nigeria Limited to increase its revenue interest in OML 113 from 5% to 9.2%, significantly increasing ADM's net 2P reserves from 8.9 MMboe to 16.4 MMboe, expected to complete in Q3 2020  

· Signed MoU in February 2020 with Trafigura Pte Ltd for strategic alliance to develop investment opportunities in the African energy sector

· OML 113 operational costs reduced by 37.5% - break even reduced to US$28 per barrel

· In H1 2020, raised £250k in two fundraisings for working capital and converted £152k of debt to equity

· In June 2020, added dual listings on the Berlin and Frankfurt stock exchanges to support growth and broaden investor base

Osamede Okhomina, CEO of ADM Energy, stated: "2019 was an important year to lay the foundation for our growth strategy which is focused on highly accretive 2P reserves assets in West Africa along with our quality producing asset at the Aje Field. We have made excellent progress at Aje with operations continuing largely uninterrupted despite COVID-19. We reached an agreement to increase our stake from 5% to over 9%, brought break even costs down to $28 per barrel, and with plans to triple production from 3,000 bpd to 9,000 bpd in 2021 and thus  we believe  we  have set an excellent foundation upon which to drive our  growth strategy expand our investment portfolio. 

"COVID-19 has undoubtedly had a big impact on global markets, but as economies re-open around the world we are beginning to see an upturn in oil prices from previous lows, our strategy firmly  remains to increase 2P reserves and production, ADM is well positioned to take advantage of the recovery. Furthermore, as upstream majors continue to seek exit strategies in West Africa, greater opportunities are emerging at low and attractive valuations, even more so in the current macro environment.

"In addition, ADM shares were recently admitted to trade on the Frankfurt and Berlin Stock Exchanges, which will further increase the visibility of ADM Energy's shares in continental Europe and enable us to build relationships with a wider group of new investors, this dual listing is intended to compliment , our main quotation which is on the AIM Market of the London Stock Exchange where our core investors trade. "

-Ends-

For further information please contact:

ADM Energy plc	[phone]
Osamede Okhomina, CEO
www.admenergyplc.com
Cairn Financial Advisers LLP	[phone]
(Nominated Adviser)
Jo Turner, James Caithie
Hybridan LLP	[phone]
(Lead Broker)
Claire Louise Noyce
Pello Capital Limited	[phone]
(Joint Broker)
Dan Gee
Luther Pendragon	[phone]
(Financial PR) Harry Chathli, Alexis Gore, Joe Quinlan

 

Operating Review 

ADM has continued to pursue its strategy as an oil and gas investing company and is focused principally on its investment in Nigeria, the Aje Field, where the two wells within block OML 113 have continued to produce at very steady rates with limited decline. 

With a focus on West Africa and a quality oil producing asset offshore Nigeria, ADM has an aggressive growth strategy to increase shareholder value by acquiring undervalued 2P reserves without the risks associated with high cost exploration. The Board and management team evaluate investments at various stages of the production cycle focused on appraisal, development and producing assets where the risk factor is significantly reduced. New opportunities are continuously being evaluated in order to expand the portfolio of the Company.

Aje Field

The Aje Field in OML 113 offshore Nigeria is an oil producing asset which is rich in gas and condensate reserves. It is strategically located 24km offshore Lagos where it benefits from increasing local energy demand, particularly for gas which is viewed as a replacement fuel for diesel and commands a premium. The field is also within close proximity to the West African Gas Pipeline which presents a potential opportunity for gas monetisation in neighbouring countries such as Benin and Togo.

In February 2020, the Group entered into an agreement with EER (Colobos) Nigeria Limited, subject to completion, to increase its revenue interest in OML 113 from 5% to 9.2%. Upon completion, ADM's net 2P reserves will increase from 8.9 MMboe to 16.4 MMboe with net daily reserves, based on current production, rising from 148 barrels of oil per day ("bopd") to approximately 273 bopd. 

Operations

Oil continues to flow at a stable rate from the two producing wells, Aje-4 and Aje-5ST2. Annual net production in 2019 totalled 890,203 barrels of oil (2018: 1,200,000 barrels). The reduction was caused by both routine maintenance work on the floating production storage and offloading facility ("FPSO") and significant equipment upgrades on the gas lift modules in the second half of the year. Average bopd was 2,967 (2018: 3,100 bopd), of which 148 bopd was net to ADM (2018:155 bopd).

In 2019, the joint venture partners successfully reduced operating costs to mid-US$30 per barrel. In light of the unprecedented macro conditions post period, the partners successfully reduced operational and maintenance costs by 35%, and FPSO lease costs by 40%. As a result, the breakeven cost of production decreased to US$28 per barrel, while operations have continued largely uninterrupted. The Directors anticipate a recovery in crude oil prices in Q3-Q4 2020 and production is therefore currently being stored on the FPSO, which has up to 755,808 barrels of storage capacity, in order to benefit from a positive forward curve in the oil price. 

Field Development Plan

A new Field Development Plan for the Turonian Aje gas project is in the initial planning stages with the joint venture partners. By drilling three wells in 2021, the partners intend to triple daily production of oil and gas liquids from 3,000 bpd to 9,000 bpd and thereafter develop the dry gas which could be supplied to the Lagos market and sold to the West Africa Gas Pipeline.

In Q4 2019, PetroNor acquired a 12.2% revenue interest in OML 113 (subject to completion) and formed a special purpose vehicle with the operator, Yinka Folawiyo Petroleum, to focus on the revitalisation and further development of the Aje Field. PetroNor brings renewed impetus to the project, adding technical expertise and de-risking the execution of the Field Development Plan.

Updated CPR: Aje Recoverable Oil Reserve

In April 2019, the Company received an updated Competent Person's Report ("CPR") completed by AGR Tracs International Limited ("AGR TRACS") which updated its previous CPR with the production data from May 2016 to 31 December 2018 from its two producing wells. The CPR reported that 2P Proven and Probable Reserves showed an increase from 127.1 MMboe gross to 138.2 MMboe gross.

Corporate Development and Strategy

The Group restructured its Board and management team in 2019 to take advantage of the substantial oil and gas opportunities being made available across Nigeria and West Africa. Osamede Okhomina was appointed as CEO in July 2019, bringing his expertise and contacts with a track record of originating, structuring and closing deals across Africa.  Then in October 2019, Peter Francis, whose background years of experience with the oil majors strengthens the Group's position in negotiations with them, was appointed Non-Executive Chairman, and Manuel Lamboley, a seasoned Swiss financier, was appointed as a Non-Executive Director. The Group will look to maximise and leverage the experience and network these high-calibre appointments bring to the Group's stated growth strategy of acquiring highly accretive 2P reserve assets. The Board is confident that their industry expertise and experience will accelerate the Group to its next phase of growth. 

By leveraging its extensive network across Africa, the new management team has identified a number of investment opportunities. This includes assets from both IOC divestment programmes and the Nigerian government's Marginal Oil field round. The Group is continuing to evaluate new potential investments in assets at varying stages of the production cycle focusing on appraisal, development and producing assets. These asset types are preferable as they offer significant investment returns with a decreased level of geological risk. ADM has also actively engaged in conversations with a number of parties including potential funding partners, off-takers and local project partners to further support the Company in the development of its asset portfolio.

A key development in the Group's phased growth strategy has been the strategic partnership signed with Trafigura in February of 2020. The new management team agreed a memorandum of understanding with the multi-billion dollar global trading house to provide up to US$100 million in approved project finance and up to US$20 million of convertible loan notes. This endorsement with such a high-profile partner has given the Group confidence to evaluate and acquire highly accretive assets as well as making progress on the new Field Development Plan at Aje.

To date, the Group has made its first highly accretive acquisition under new management: the increased stake in OML 113, which it expects to complete in Q3 2020. Guided by its strategy of purchasing producing and near-term production assets, the Group is in negotiations with multiple other parties as it seeks low-risk, highly-accretive assets.

Post Period Event

As announced on 25 June 2020, the Group added dual listings on the Berlin and Frankfurt stock exchanges to support its growth and enable ADM to broaden its investor base and create new demand centres for the Group's shares. As a result, the Company is in a strengthened position to withstand the current market uncertainties and grow its investment portfolio in the year ahead. 

Financial Review

Results and Dividends

For the year ended 31 December 2019, the Group's revenue decreased by 19% to £2.5 million (2018: £3.1 million). The loss after taxation increased to £1.7 million (2018: £1.0 million loss). The Directors do not propose a dividend (2018: £nil). As of 12 June 2020, the Group had cash and cash equivalents of £200,000 with access to a further £100,000 from a new loan facility (31 December 2019: £15,000; 31 December 2018: £216,000). 

Funding

During the period, the Group raised additional equity of £2.0 million in three fundraisings. In April 2019, the Group raised £680,000, before expenses, through a subscription for general working capital purposes. In August, the Group raised c.£500,000 gross from a placing with Pello Capital Limited and PrimaryBid offer, and a further £832,000 gross from a conditional subscription by Zark Capital Limited ("Zark") and other investors in September 2019. 

Post period, On 27 April 2020, the Group announced a loan facility of £200,000 before expenses, a £50,000 equity subscription by certain Directors and the conversion of £152,000 of debt to equity.

Going Concern

Since the year end, the Group has raised additional equity funding of £50,000 and has agreed a loan facility of £200,000 to provide for its immediate working capital requirements and converted £152,000 of debt to equity, and the Directors have prepared cashflow forecasts for twelve months following the date of approval of these financial statements to assess whether the use of the going concern basis of their preparation is appropriate. In the short term, the Group will require further additional funding in order to meet its liabilities as they fall due. The Directors have taken into consideration the level and timing of the Group's working capital requirements and have also considered the likelihood of successfully securing funding to meet these needs. In particular, consideration has been given to ongoing discussions around further third-party investment and the extent to which these discussions are advanced both in respect of short and longer term funding. The Directors acknowledge that while they have an expectation that funding will be secured based on this assessment, at the date of approval of these financial statements, no such funding has been unconditionally committed. Therefore, as disclosed in Note 2, while the Directors have a reasonable expectation that the Group has the ability to raise the additional finance required in order to continue in operational existence for the foreseeable future, the uncertainty surrounding the ability and likely timing of securing such finance indicates that a material uncertainty exists that may cast significant doubt on the Group's ability to continue as a going concern. Were no such funding to be secured, the Group would have no realistic alternative but to halt operations and prepare its financial statements on a non-going concern basis.

Annual Report and Accounts and Notice of Annual General Meeting ("AGM")

The Company will shortly be publishing its Annual Report and Accounts including a Notice of AGM. These will be made available on the Company's investor relations website at www.admenergyplc.com. The AGM is to be held at 11.00 am on Wednesday 29 July 2020 at the offices of at the offices of Shakespeare Martineau LLP, 60 Gracechurch Street, London, EC3V 0HR.

In light of Government's advice surrounding social distancing, it has become necessary to restrict physical participation at the AGM in line with our Articles of Association and current guidance and legislation. Shareholders will still be able to ask questions by email ahead of the meeting. As such, we invite Shareholders to submit any questions in advance of the AGM. Any specific questions on the business of the AGM and Resolutions can be submitted ahead of the AGM by e-mail to [e-mail] (marked for the attention of the Company Secretary).Shareholders who wish to vote are strongly encouraged to submit their votes by proxy as soon as possible and, in any event, by no later than at 11:00 a.m. on 27 July 2020.

COVID-19 and Outlook

COVID-19 represents an unprecedented global public health emergency which has impacted many aspects of our daily lives and which ADM hopes to see resolved quickly. The primary concern and focus for the Company is the health and safety of its employees, contractors and other stakeholders.

The Company has taken action to cut costs at both the FPSO Front Puffin operating level and at Headquarters, including reductions in Director pay. This has put ADM in a position to withstand market uncertainties with cash reserves to enable safe operations through to the end of 2020.

While COVID-19 has had a devastating impact globally including oil markets, as economies begin to re-open oil prices are beginning to recover from their recent lows. With the Company's strategy to increase oil and gas reserves and production, ADM is well positioned to take advantage of the recovery. In addition, as oil majors continue to look to divest assets, attractive opportunities are emerging at depressed valuations, even more so in the current macro environment.

Production at the Aje Field asset continues at a stable rate, with progress in the Field Development Plan for 2021 reiterating the near-term potential of the oil and gas field. Based on the current performance of wells Aje-4 and Aje-5ST2, the Group is confident of the commercial viability of further development, and this is further supported by the abundance of reserves as well the very low geological risk associated with the Aje Field. This asset provides the Group with the a very stable base from which to build a wider portfolio of highly accretive assets and take advantage of current market conditions to aggressively build up production and reserves at an attractive price.

Group Income Statement and Statement of Comprehensive Income

For the year ended 31 December 2019

		2019	2018
			*Restated
		£'000	£'000
Continuing operations
Revenue		2,519	3,127
Operating costs		(2,444)	(2,356)
Administrative expenses		(1,721)	(1,739)
Operating loss		(1,646)	(968)
Finance costs		(27)	-
Loss on ordinary activities before taxation		(1,673)	(968)
Taxation		-	-
Loss for the year		(1,673)	(968)
Other Comprehensive income:
Exchange translation movement		(272)	401
Total comprehensive income for the year		(1,945)	(567)
Basic and diluted loss per share:
From continuing and total operations		(3.8)p	(5.0)p

*The 2018 comparative figures have been restated as a result of a change in accounting policy, adopted retrospectively, as explained in note 2.

 

Group and Company Statements of Financial Position
as at 31 December 2019

		GROUP		COMPANY
		2019	2018	2019	2018
			*Restated
		£'000	£'000	£'000	£'000
NON-CURRENT ASSETS
Intangible assets		15,708	16,106	-	-
Investment in subsidiaries		-	-	14,983	14,738
		15,708	16,106	14,983	14,738
CURRENT ASSETS
Investments held for trading		200	200	200	200
Trade and other receivables		562	29	562	29
Cash and cash equivalents		15	216	15	216
		777	445	777	445
CURRENT LIABILITIES
Trade and other payables		1,555	1,643	1,331	1,104
		1,555	1,643	1,331	1,104
NET CURRENT LIABILITIES		(778)	(1,198)	(554)	(659)
NET ASSETS		14,930	14,908	14,429	14,079
EQUITY
Share capital		8,817	8,499	8,817	8,499
Share premium		34,012	32,833	34,012	32,833
Shares to be issued		150	-	150	-
Reserve for options granted		-	172	-	172
Reserve for warrants issued		720	783	720	783
Currency translation reserve		(617)	(345)	-	-
Retained deficit		(28,152)	(27,034)	(29,270)	(28,208)
Equity attributable to owners of the Company and total equity		14,930	14,908	14,429	14,079

*The 2018 comparative figures for the Group have been restated as a result of a change in accounting policy, adopted retrospectively, as explained in note 2.
 

Group Statement of Changes in Equity

For the year ended 31 December 2019

	Share  capital	Share premium	Shares to be issued	Reserve for options granted	Reserve for warrants issued	Exchange translation reserve	Retained deficit	Total equity
						*restated	*restated	*restated
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 January 2018	8,389	31,533	-	172	783	(746)	(25,932)	14,199
*Adjustment (see note below)	-	-	-	-	-	-	(134)	(134)
At 1 January 2018 (restated)	8,389	31,533	-	172	783	(746)	(26,066)	14,065
Loss for the year	-	-	-	-	-	-	(968)	(968)
Exchange translation movement	-	-	-	-	-	401	-	401
Total comprehensive expense for the year	-	-	-	-	-	401	(968)	(567)
Issue of new shares	110	1,390	-	-	-	-	-	1,500
Share issue costs	-	(90)	-	-	-	-	-	(90)
At 31 December 2018	8,499	32,833	-	172	783	(345)	(27,034)	14,908
Loss for the year	-	-	-	-	-	-	(1,673)	(1,673)
Exchange translation movement	-	-	-	-	-	(272)	-	(272)
Total comprehensive expense for the year	-	-	-	-	-	(272)	(1,673)	(1,945)
Issue of new shares	318	1,322	150	-	299	-	-	2,089
Share issue costs	-	(143)	-	-	21	-	-	(122)
Share options lapsed	-	-	-	(172)	-	-	172	-
Share warrants lapsed/cancelled	-	-	-	-	(383)	-	383	-
At 31 December 2019	8,817	34,012	150	-	720	(617)	(28,152)	14,930

*The 2018 figures for "Exchange translation reserve", "Retained deficit" and "Total equity" have been restated as a result of a change in accounting policy, adopted retrospectively, as explained in note 2.

 

Company Statement of Changes in Equity

For the year ended 31 December 2019

	Share  capital	Share premium	Shares to be issued	Reserve for options granted	Reserve for warrants issued	Retained deficit	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 January 2018	8,389	31,533	-	172	783	(26,588)	14,289
Loss for the period and total comprehensive expense	-	-	-	-	-	(1,620)	(1,620)
Issue of new shares	110	1,390	-	-	-	-	1,500
Share issue costs	-	(90)	-	-	-	-	(90)
At 31 December 2018	8,499	32,833	-	172	783	(28,208)	14,079
Loss for the period and total comprehensive expense	-	-	-	-	-	(1,617)	(1,617)
Issue of new shares	318	1,322	150	-	299	-	2,089
Share issue costs	-	(143)	-	-	21	-	(122)
Share options lapsed	-	-	-	(172)	-	172	-
Share warrants lapsed/cancelled	-	-	-	-	(383)	383	-
At 31 December 2019	8,817	34,012	150	-	720	(29,270)	14,429

 

Group and Company Statements of cash flows

For the year ended 31 December 2019

		GROUP		COMPANY
		2019	2018	2019	2018
			*Restated
		£'000	£'000	£'000	£'000
OPERATING ACTIVITIES
Loss for the period		(1,673)	(968)	(1,617)	(1,620)
Adjustments for:
Finance costs		27	-	27	-
Depreciation and amortisation		112	119	-	-
Operating cashflow before working capital changes		(1,534)	(849)	(1,590)	(1,620)
Decrease in receivables		(383)	6	(383)	6
Increase/(decrease) in trade and other payables		(115)	593	200	495
Net cash outflow from operating activities		(2,032)	(250)	(1,773)	(1,119)
INVESTMENT ACTIVITIES
Proceeds from disposal of investments		-	4	-	4
Purchase of investments held for trading		-	(25)	-	(25)
Development costs		-	(952)	-	-
Loans to subsidiary operation		-	-	(245)	(104)
Net cash outflow from investment activities		-	(973)	(245)	(125)
FINANCING ACTIVITIES
Continuing operations:
Issue of ordinary share capital		1,939	1,500	1,939	1,500
Share issue costs		(122)	(90)	(122)	(90)
Net cash inflow from financing activities		1,817	1,410	1,817	1,410
Net (decrease)/increase in cash and cash equivalents from continuing and total operations		(215)	188	(201)	166
Exchange translation difference		14	(22)	-	-
Cash and cash equivalents at beginning of period		216	50	216	50
Cash and cash equivalents at end of period		15	216	15	216

*The 2018 comparative figures for the Group have been restated as a result of a change in accounting policy, adopted retrospectively, as explained in note 2.

Notes to the financial statements

For the year ended 31 December 2019

1	general information
	The Company is a public limited company incorporated in the United Kingdom and its shares are listed on the AIM market of the London Stock Exchange. The Company is an investment company, mainly investing in natural resources, minerals, metals, and oil and gas projects. The registered office of the Company is as detailed in the Company Information on page 2 of the Annual Report and Accounts published today. The information included in this announcement has been extracted from the Company's report and accounts and therefore information such as references and page numbers may be incorrect.  Shareholder should read the Company's report and accounts in full which can be found on its website.
2	PRINCIPAL ACCOUNTING POLICIES
	The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied throughout all periods presented in the financial statements. As in prior periods, the Group financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union.  The financial statements have been prepared using the measurement bases specified by IFRS for each type of asset, liability, income and expense. The measurement bases are more fully described in the accounting policies below. The current period covered by these financial statements is the year to 31 December 2019.  The comparative figures relate to the year ended 31 December 2018. The financial statements are presented in pounds sterling (£) which is the functional currency of the Group. An overview of standards, amendments and interpretations to IFRSs issued but not yet effective, and which have not been adopted early by the Group are presented below under 'Statement of Compliance'. Change in accounting policy and restatement of comparative figures During the year the Group enacted a change in accounting policy relating to licence and development costs treated as intangible assets. In accordance with IAS 38: Intangible assets, such assets were previously carried at fair value based on their expected realisable value with reference to an active market. During the course of the year, the Directors assessed there was no longer sufficient market liquidity to provide a reliable indication of fair value.  As a result the Company has retrospectively adopted a policy of measuring intangible assets at historic cost less amortisation which is now considered to represent a more appropriate basis of remeasurement. The adoption of this policy has resulted in amortisation charges for 2016, 2017 and 2018. The resulting adjustments to the accounts are as follows:
				As previously reported £'000	Adjustment £'000	As restated £'000
		2016	Amortisation charge Intangible assets	- 14,461	33 (33)	33 14,428
		2017	Amortisation charge Intangible assets	- 14,984	101 (134)	101 14,850
		2018	Amortisation charge Intangible assets	- 16,362	119 (257)	119 16,105

GOING CONCERN

At 31 December 2019, the Group recorded a loss for the year of £1,673,000 and had net current liabilities of £778,000, after allowing for cash balances of £15,000. Since the year end, the Group has raised additional equity funding of £50,000 and has agreed a loan facility of £200,000 to provide for ongoing working capital and the Directors have prepared cashflow forecasts for twelve months following the date of approval of these financial statements to assess whether the use of the going concern basis of their preparation is appropriate. However, in the short term the Group will require further additional funding in order to meet its liabilities as they fall due. The Directors have taken into consideration the level and timing of the Group's working capital requirements and have also considered the likelihood of successfully securing funding to meet these needs. In particular, consideration has been given to ongoing discussions around further third-party investment and the extent to which these discussions are advanced both in respect of short and longer term funding. The Directors acknowledge that while they have an expectation that funding will be secured based on this assessment, at the date of approval of these financial statements, no such funding has been unconditionally committed. Therefore, while the Directors have a reasonable expectation that the Group has the ability to raise the additional finance required in order to continue in operational existence for the foreseeable future, the uncertainty surrounding the ability and likely timing of securing such finance indicates that a material uncertainty exists that may cast significant doubt on the Group's ability to continue as a going concern. Were no such funding to be secured, the Group would have no realistic alternative but to halt operations and prepare its financial statements on a non-going concern basis.

2	PRINCIPAL ACCOUNTING POLICIES (continued)
	STATEMENT OF COMPLIANCE New standards, amendments and interpretations adopted by the Company The company has applied the following standards and amendments for the first time for its annual reporting period commencing 1 January 2019: · IFRS 16, 'Leases'; The re are several standards, amendments to standards and interpretations which have been issued by the IASB that are effective in future accounting periods that the Group has not yet adopted. The most significant of these are as follows, which are all effective for the period beginning 1 January 2020: · Prepayment Features with Negative Compensation - Amendments to IFRS 9; · Long-term Interests in Associates and Joint Ventures - Amendments to IAS 28; · Annual Improvements to IFRS Standards 2015-2017 Cycle; · Plan Amendments, Curtailment or Settlement - Amendments to IAS 19; · Interpretation 23 'Uncertainty over Income Tax Treatments'; and · Definition of Material - Amendments to IAS 1 and IAS 8. The amendments listed above did not have any impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future periods. New standards and interpretations not yet adopted A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 January 2020 and have not been applied in preparing these financial statements. None of these are expected to have a significant effect on the financial statements of the Company. There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Company.
		KEY ESTIMATES AND ASSUMPTIONS Estimates and assumptions used in preparing the financial statements are reviewed on an ongoing basis and are based on historical experience and various other factors that are believed to be reasonable under the circumstances.  The results of these estimates and assumptions form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. USEFUL ECONOMIC LIFE OF INTANGIBLE ASSETS The Group's intangible assets relate to oil field development expenditure which is considered capital in nature. Intangible assets are amortised over their useful economic life in accordance with the expected pattern of consumption of the benefits arising from the Group's interest in OML 113 license (the Unit of Production method). The timing and pattern of production represents an estimation made with reference to according research performed by third parties and the Directors assessment of the timing and level of activity over the life of developed assets. AVAILABLE FOR SALE INVESTMENTS Note 10 summarises the Group's indirect investment in the Aje Field.  The Directors have reviewed the value of the Group's investment and consider that the fair value of this investment should be stated at the original cost of the investment plus the value of the cash calls that the Group has paid and is liable for as at the year-end, which the Directors consider represents the fair value of the Group's interest.  INVESTMENTS HELD FOR TRADING Investments held for trading are held at fair value through profit and loss. They are considered Level 3 investments whereby their valuation is determined by whole or in part using valuation techniques based on assumptions that are not supported by observable prices in comparable market transactions in the same instrument or similar observable data. The Directors regularly review the valuation of such investments against both ongoing results of the business in which it has made investments and the price at which any further investment has taken place.
2		PRINCIPAL ACCOUNTING POLICIES ( continued)
		KEY ESTIMATES AND ASSUMPTIONS (continued) SHARE BASED PAYMENTS The Group has made awards of options and warrants over its unissued share capital to certain Directors, employees and professional advisers as part of their remuneration.  The fair value of options is determined by reference to the fair value of the options granted, excluding the impact of any non-market vesting conditions. In accordance with IFRS 2 'Share Based Payments', the Group has recognised the fair value of options, calculated using the Black-Scholes option pricing model. The Directors have made assumptions particularly regarding the volatility of the share price at the grant date in order to reach a fair value. Further information is disclosed in Note 18.
		SALES REVENUE Sales of petroleum production are recognised when goods are delivered or the title has passed to the customer.
		TAXATION UK taxes Current income tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities relating to the current or prior reporting period, that are unpaid at the statement of financial position date. They are calculated according to the tax rates and tax laws applicable to the fiscal periods to which they relate, based on the taxable result for the year. All changes to current tax assets or liabilities are recognised as a component of tax expense in the income statement. Deferred income taxes are calculated using the liability method on temporary differences. This involves the comparison of the carrying amounts of assets and liabilities in the consolidated financial statements with their respective tax bases.  However, deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability, unless the related transaction is a business combination or affects tax or accounting profit.  In addition, tax losses available to be carried forward as well as other income tax credits to the Group are assessed for recognition as deferred tax assets. Deferred income taxes are calculated using the liability method on temporary differences. This involves the comparison of the carrying amounts of assets and liabilities in the consolidated financial statements with their respective tax bases.  However, deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability, unless the related transaction is a business combination or affects tax or accounting profit.  In addition, tax losses available to be carried forward as well as other income tax credits to the Group are assessed for recognition as deferred tax assets. Deferred tax liabilities are always provided for in full. Deferred tax assets are recognised to the extent that it is probable that they will be able to be offset against future taxable income. Deferred tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the statement of financial position date. Most changes in deferred tax assets or liabilities are recognised as a component of tax expense in the income statement. Only changes in deferred tax assets or liabilities that relate to a change in value of assets or liabilities that is charged directly to equity are charged or credited directly to equity. Nigerian taxes The Company's subsidiary, P R Oil & Gas Nigeria Ltd operates offshore Nigeria and is subject to the tax regulations of that country Current income tax assets and liabilities for current period are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws are those that are enacted or substantially enacted at the reporting date. The Company engaged in exploration and production of crude oil (upstream activity). Therefore, its profits are taxable under the Petroleum Profit Tax Act.

2	PRINCIPAL ACCOUNTING POLICIES (continued)
	INTANGIBLE ASSETS Intangible assets relate to expenditure incurred on the development and evaluation of mineral resources. These costs are recorded as intangible assets until the mineral resource reaches the production stage. Upon completion of development and commencement of production, capitalised development costs as well as evaluation expenditures are depreciated generally on a field-by-field basis using the unit-of-production method by reference to the ratio of production in the year and the related commercial (proved and probable) reserves of the field, taking into account future development expenditures necessary to bring those reserves into production. Development costs incurred on specific projects are capitalised when all the following conditions are satisfied : · completion of the intangible asset is technically feasible so that it will be available for use or sale · the Group intends to complete the intangible asset and use or sell it · the Group has the ability to use or sell the intangible asset · the intangible asset will generate probable future economic benefits · there are adequate technical, financial and other resources to complete the development and to use or sell the intangible asset, and · the expenditure attributable to the intangible asset during its development can be measured reliabl y. Other development expenditure that does not meet these criteria is recognised as an expense as incurred.  Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.  There were no development costs recognised as an expense during the year.
	FINANCIAL ASSETS Financial assets are recognised in the Group's statement of financial position when the Group becomes a party to the contractual provisions of the instrument. The Group's financial assets are classified into the following specific categories: 'investments held for trading', and 'loans and receivables'.  The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. All Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as 'loans and receivables'.  Loans and receivables are measured at amortised cost using the effective interest method, less any impairment.  Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.
	INVESTMENTS HELD FOR TRADING All investments determined upon initial recognition as held at fair value through profit or loss were designated as investments held for trading.  Investment transactions are accounted for on a trade date basis.  Assets are de-recognised at the trade date of the disposal. Assets are sold at their fair value, which comprises the proceeds of sale less any transaction cost. The fair value of the financial instruments in the statement of financial position is based on the quoted bid price at the statement of financial position date , with no deduction for any estimated future selling cost. Unquoted investments are valued by the directors using primary valuation techniques such as recent transactions, last price and net asset value. Changes in the fair value of investments held at fair value through profit or loss and gains and losses on disposal are recognised in the consolidated statement of comprehensive income as "Net gains on investments". Investments are initially measured at fair value plus incidental acquisition costs. Subsequently, they are measured at fair value in accordance with IAS 39. This is either the bid price or the last traded price, depending on the convention of the exchange on which the investment is quoted.

2	PRINCIPAL ACCOUNTING POLICIES (continued)
	BASIS OF CONSOLIDATION The consolidated financial statements present the results of ADM Energy plc and its subsidiaries ("the Group") as if they formed a single entity. Intercompany transactions and balances between Group companies are therefore eliminated in full. T he 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 Income Statement
	CASH AND CASH EQUIVALENTS Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.
	EQUITY An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds received net of direct issue costs. Equity comprises the following: · Share capital represents the nominal value of equity shares issued. · The share premium account represents premiums received on the initial issuing of the share capital. Any transaction costs associated with the issuing of shares are deducted from share premium, net of any related income tax benefits. · Option reserve represents the cumulative cost of share based payments in respect of options granted. · Warrant reserve represents the cumulative cost of share based payments in respect of warrants issued. · Retained earnings include all current and prior period results as disclosed in the statement of comprehensive income.

 

2	PRINCIPAL ACCOUNTING POLICIES (continued)
	FINANCIAL LIABILITIES Financial liabilities are recognised in the Group's statement of financial position when the Group becomes a party to the contractual provisions of the instrument.  All interest related charges are recognised as an expense in finance cost in the income statement using the effective interest rate method.  The Group's financial liabilities comprise trade and other payables.  Trade payables are recognised initially at their fair value and subsequently measured at amortised cost less settlement payments.
	SHARE BASED PAYMENTS Where share options are awarded, or warrants issued to employees, the fair value of the options/warrants at the date of grant is charged to the statement of comprehensive income over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognized over the vesting period is based on the number of options/warrants that eventually vest. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition. Where warrants or options are issued for services provided to the Group, the fair value of the service is charged to the statement of comprehensive income or against share premium where the warrants or options were issued in exchange for services in connection with share issues. Where the fair value of the services cannot be reliably measured, the service is valued using Black Scholes valuation methodology taking into consideration the market and non-market conditions described above. Where the share options are cancelled before they vest, the remaining unvested fair value is immediately charged to the statement of comprehensive income.
	FOREIGN CURRENCIES The Directors consider Sterling to be the currency that most faithfully represents the economic effects of the underlying transactions, events and conditions.  The financial statements are presented in Sterling, which is the Group's functional and presentation currency. Foreign currency transactions are translated into Sterling using the exchange rates prevailing at the date of the transactions. Foreign currency exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are recognised in the income statement.  Non-monetary items that are measured at historical costs in a foreign currency are translated at the exchange rate at the date of the transaction.  Non-monetary items that are measured at fair value in a foreign currency are translated into the functional currency using the exchange rates at the date when the fair value was determined.
	SEGMENTAL REPORTING A segment is a distinguishable component of the Group's activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the Group's chief operating decision maker to make decisions about the allocation of resources and assessment of performance and about which discrete financial information is available. As the chief operating decision maker reviews financial information for and makes decisions about the Group's investment activities as a whole, the directors have identified a single operating segment, that of holding and trading in investments in natural resources, minerals, metals, and oil and gas projects.  The Directors consider that it would not be appropriate to disclose any geographical analysis of the Group's investments. No segmental analysis has been provided in the financial statements as the Directors consider that the Group's operations comprise one segment.

3

EARNINGS AND NET ASSET VALUE PER SHARE   Earnings The basic and diluted earnings per share is calculated by dividing the loss attributable to owners of the Group by the weighted average number of ordinary shares in issue during the year. 2019 2018 £'000 £'000 Loss attributable to owners of the Group - Continuing operations (1,673) (968) Continuing and discontinued operations (1,673) (968) 2019 2018 Weighted average number of shares for calculating basic and fully diluted earnings per share 44,280,670 19,491,579 2019 2018 pence pence Earnings per share: Loss per share from continuing and total operations (3.8) (5.0) The weighted average number of shares used for calculating the diluted loss per share for 2019 and 2018 was the same as that used for calculating the basic loss per share as the effect of exercise of the outstanding share options was anti-dilutive. Comparative information presented for the year ended 31 December 2018 has been adjusted to take into account the 100:1 share consolidation of enacted during the course of the year ended 31 December 2019. Net asset value per share ("NAV") The basic NAV is calculated by dividing the loss total net assets attributable to the owners of the Group by the number of ordinary shares in issue at the reporting date.  The fully diluted NAV is calculated by adding the cost of exercising any extant warrants and options to the total net assets and dividing the resulting total by the sum of the number of shares in issue  and the number of warrants and options extant at the reporting date. 2019 2018 £'000 £'000 Total net assets of the Group 14,930,253 Cost of exercise of warrants 1,261,128 (968) Total net assets for calculation of fully diluted NAV 16,191,381 (968) 2019 2018 Number of shares in issue at the reporting date 59,501,210 27,713,496 Number of extant warrants (see note below) 18,801,601 - Total number of shares for calculation of fully diluted NAV 78,302,811 27,713,496 2019 2018 NAV - Basic (pence per share) 25.1p 53.8p NAV - Fully diluted (pence per share) 20.7p 53.8p No extant warrants are included for 2018 as the exercise of the warrants would be antidilutive.

 

END

 

 

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