Final Results
THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED BY THE COMPANY TO CONSTITUTE INSIDE INFORMATION AS STIPULATED UNDER THE MARKET ABUSE REGULATION (EU) NO. 596/2014 AS IT FORMS PART OF UK DOMESTIC LAW PURSUANT TO THE EUROPEAN UNION (WITHDRAWAL) ACT 2018, AS AMENDED. UPON THE PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE, THIS INFORMATION IS CONSIDERED TO BE IN THE PUBLIC DOMAIN.
18 December 2023
Orcadian Energy plc
("Orcadian Energy", "Orcadian" or the "Company")
Results for the Year ended 30 June 2023
Orcadian Energy (AIM:ORCA), the low-emissions North Sea oil and gas development company, is pleased to announce its audited results for the twelve months ended 30 June 2023.
Highlights:
· Three licence applications made in the 33rd Round with results expected soon.
· Since the end of the period under review:
o Execution of a conditional Sale and Purchase Agreement ("SPA") with Ping Petroleum UK plc ("Ping") for an 81.25% interest in Licence P2244, leaving Orcadian with a carried 18.75% interest in the Licence to first oil;
o Two year extension to the Second Term of the P2244 (Pilot) licence, subject to completion of the above transaction by end 1Q 2024
o Identified significant upside appraisal opportunities in Elke and Narwhal supported by seismic attribute analysis undertaken by TGS
o Requested an out of round process in partnership with Ping to apply for the area of Licence P2320 which was relinquished in May 2023
Steve Brown, Orcadian's CEO, said:
"We close the calendar year of 2023 with real satisfaction that we have signed an SPA with Ping and we look forward to progressing this deal in 1Q 2024, with shareholder approval, and to potentially taking the Pilot project forward under their new leadership. The Elke and Narwhal asset definition has been much enhanced by recent seismic work which we intend to build upon to maximise value from these assets.
"We are also looking forward to the potential award of up to three new licences as a result of the applications we made in January 2023. We are excited that, if granted, the new awards will enable us to bring forward new innovative projects that can contribute to both energy security and the Government's Net Zero target."
Report and Accounts and Annual General Meeting
A copy of the annual report and accounts for the year ended 30 June 2023 will be available on the Company's website (https://orcadian.energy) with effect from today. The Company will be posting its annual report and accounts and notice of Annual General Meeting ("AGM") to its shareholders on 19 December 2023.
The AGM will be held at the offices of Shakespeare Martineau, 60 Gracechurch Street, London, EC3V 0HR at 10:30am on the 17th January 2024.
For further information on the Company please visit the Company's website: https://orcadian.energy
Contact:
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Orcadian Energy plc |
+ 44 20 7920 3150 |
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Steve Brown, CEO Alan Hume, CFO |
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WH Ireland (Nomad and Broker) |
+44 20 7220 1666 |
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Katy Mitchell / Andrew de Andrade (Nomad) Harry Ansell / Fraser Marshall (Corporate Broking)
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Tavistock (PR) |
+ 44 20 7920 3150 |
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Nick Elwes / Simon Hudson |
About Orcadian Energy
Orcadian is a North Sea focused, low emissions, oil and gas development company. In planning its Pilot development, Orcadian has selected wind power to transform oil production into a cleaner and greener process. The Pilot project is moving towards approval and will be amongst the lowest carbon emitting oil production facilities in the world, despite being a viscous crude. Orcadian may be a small operator, but it is also nimble, and the Directors believe it has grasped opportunities that have eluded some of the much bigger companies. As we strike a balance between Net Zero and a sustainable energy supply, Orcadian intends to play its part to minimise the cost of Net Zero and to deliver reliable energy to the UK.
Orcadian Energy (CNS) Ltd, Orcadian's operating subsidiary, was founded in 2014 and is the sole licensee of P2244, which contains 78.0 MMbbl of 2P Reserves in the Pilot discovery, and of P2482, which contain a further 52.2 MMbbl of 2C Contingent Resources in the Elke and Narwhal discoveries (as audited by Sproule, with both numbers modified to take into account the TGS royalty, see the CPR in the Company's Admission Document for more details). Within these licences there are also 118 MMbbl of unrisked Prospective Resources (modified for TGS royalty). These licences are in blocks 21/27a, 28/2a and 28/3a, and lie 150 kms due East of Aberdeen.
Pilot, which is the field with the largest reserves in Orcadian's portfolio, was discovered by PetroFina in 1989 and has been well appraised. In total five wells and two sidetracks were drilled on Pilot, including a relatively short horizontal well which produced over 1,800 bbls/day on test. Orcadian's proposed low emissions, field development plan for Pilot is based upon a Floating Production Storage and Offloading vessel (FPSO), with over thirty wells to be drilled by a Jack-up rig and provision of power from a floating wind turbine.
Orcadian has entered into a conditional sale and purchase agreement with Ping Petroleum UK plc ("Ping") which details the terms under which Ping will farm-in to the Pilot development project. Upon conclusion of this deal Orcadian would have an 18.75% stake in the Pilot development with all pre-first oil development costs paid by Ping.
Emissions per barrel produced are expected to be about a tenth of the 2021 North Sea average, and less than half of the lowest emitting oil facility currently operating on the UKCS. On a global basis this places the Pilot field emissions at the low end of the lowest 5% of global oil production.
Chairman and CEO's Statement
Writing this statement in December 2023, and reviewing financial year 2022-2023, we can look back at eighteen months of activity which have culminated in the signature of a conditional Sale and Purchase agreement ("SPA") with Ping Petroleum UK PLC ("Ping") for our Pilot Licence. We believe this sets the Company on a path towards production from one of the most exciting oil development projects on the United Kingdom Continental Shelf (" UKCS").
This has been our objective since we founded Orcadian Energy (CNS) Ltd in 2014. We set the Company up to apply for the Pilot licence and bringing in a new operator and partner to develop the field has been our objective from the outset of our business. It has been a long process with many twists and turns, and, as we endured the slings and arrows of outrageous fortune, we did wonder if we would achieve our goal. Now, having been able to announce the conditional agreement to farm-out an interest in Pilot, we believe that it was all worth it.
We believe we started the process from a good place. When we first licensed Pilot in 2014 we were of the opinion we had great rocks. Great rocks make for great oil and gas projects and Pilot can be one of those projects. The only challenge with Pilot was that the oil was a tad viscous. At first we thought that steam could be the answer, indeed our subsidiary was originally called "The Steam Oil Production Company Limited". Steam would work very well on Pilot, Sproule, our reserve auditors, thought we could recover 113 MMbbl with a steam to oil ratio of three. But there were two issues with this approach, the first is that CO2 emissions from a steam flood are very high - a steam oil ratio of three typically equates to emissions of about 90kgCO2/bbl and without CO2 capture and storage that approach would not have been acceptable to our regulator; but the second issue is the volatility in gas prices which can rapidly render uneconomic a steam based approach.
Fortunately in 2019 when we started the Concept Select process we had followed the success of Chevron's polymer flood pilot on Captain which was published in a landmark paper in 2018 (Poulsen, 2018). The efficacy of the polymer flood approach in the trial, which had concluded in 2013, was astonishing. Pilot and Captain share many characteristics, principal among them being that both fields have great rocks. We had much to learn from the success of the Captain trial and we believed we had chosen the right path for Pilot when we attended an SNF hosted polymer conference in Aberdeen in February of 2023. Ithaca, who now operate Captain, reported "consistent success [applying polymer flood] across the Captain field".
It does not appear that the trial had been a fluke, nor a special case, rather we consider it had been the harbinger of great performance on the rest of the Captain field. This has been further confirmed when the Captain phase 2 polymer flood got approval from the North Sea Transition Authority ("NSTA") in October of 2023. Establishing that polymer flood works on viscous oil offshore, as well as in models and in the laboratory, is really important for two reasons:
· Firstly, in our view, polymer flood significantly reduces fluid handling requirements, indeed generally the higher the concentration of polymer the lower the total fluid handling requirement. By injecting a more viscous kind of water, breakthrough of water is postponed, and the oil can be produced with a more piston-like flood. This typically means that the scale of the production facilities can be much smaller than for a conventional water flood.
· Secondly, by significantly reducing fluid handling requirements we can reduce the energy consumed in pumping production wells and in re-injecting water back into the reservoir. Reducing energy consumption reduces emissions, and the key to securing NSTA & Offshore Petroleum Regulator for Environment and Decommissioning ("OPRED") approval of our Pilot field development plan is to minimise emissions.
As announced on 7 December 2023 (the "Announcement"), we have now signed a conditional Sale and Purchase Agreement ("SPA") with Ping, which details the terms of a potential farm-out of the Pilot development project. Signing the SPA enabled us to request NSTA approval for the assignment of an 81.25% interest in the licence to Ping and to request that NSTA approve the appointment of Ping as the operator of the licence. We believe this satisfies the first condition in the licence extension offered by NSTA, however to secure an extension until November 2025 the assignment to Ping has to complete by end March 2024. The details of the deal are set out in the Announcement, and the transaction is conditional on a number of matters including Orcadian shareholder approval, but we would draw to your attention that if approved we are not required to finance the pre-first oil development costs for our remaining 18.75% interest in the Pilot project.
So, we end calendar year 2023 on a high note, ready to progress with Ping and looking forward to the approval of the Pilot development project.
During the year NSTA declined to further extend the P2320 licence. That was a disappointment to us as we had identified significant prospectivity on that licence. In our interim results, announced on 30 March 2023, we wrote extensively on the seismic derivative parameter which we have found so useful in this area. The parameter is relative extended elastic impedance, or rEEI, and it effectively discriminates gas sands, oil sands and brine sands. At shallow depths which apply to most of our prospects, the parameter cannot distinguish between brine sands and shales, but we don't believe that matters. Together with Ping, we have requested an out-of-round licensing process for the acreage formerly covered by P2320 as we remain excited by the potential of this acreage and we believe the best way to manage associated gas produced with the Pilot oil is to use the gas cap on the Feugh reservoir, which was in P2320.
We also made a number of licence applications in the 33rd Round, as we write we await the results of that process. We made three licence applications, two in partnership with other companies and one on its own. One of the applications builds upon Orcadian's viscous oil experience whilst the other two applications are focused on gas opportunities, including a potential gas-to-wire project on an appraised discovery, with integrated carbon capture, which could deliver baseload electricity with minimal emissions. Early stage indications suggest that, net to Orcadian, the P50 sales gas resource applied for, across the two gas focused applications, could amount to 114 bcf (billion cubic feet) in a discovery, 153 bcf in a near drill-ready prospect and 377 bcf in leads and less mature prospects. These are management estimates of resources, are based upon seismic and well log data, are as presented to the NSTA in the Licence Applications, and are provided here for guidance purposes only.
We were pleased to hear that the government intend to run licence rounds on an annual basis, we think that will help deliver the twin objectives of maximising economic recovery and achieving net zero emissions by 2050.
Financial Results
The Group incurred a loss for the year to 30 June 2023 of £1,184,954 (30 June 2022 - loss of £1,586,727).
The loss mainly arose from salaries, consulting and professional fees along with general administration expenses, the impairment of intangible assets and new business development. The loss for the year to 30 June 2023 is below that of the previous year largely due to a foreign exchange gain of £42,000 in 2023 compared to a foreign exchange loss of £156,000 in 2022, and a reduction in expenditure in consultants and advisors in 2023.
Cash used in operations totalled £598,159 (30 June 2022 - £1,323,836). As at 30 June 2023, the Group had a cash balance of £109,705 (30 June 2022 - £271,439). At the date of this announcement, the Group's cash balance was £112,098.
Oil Price Outlook
From the beginning of July 2022 to the end of June 2023 the oil price fell from over $119/bbl to just over $74/bbl1. That was a dramatic fall, some 37%, but we believe an oil price of $74/bbl is still a good price for the industry. Since then, prices and volatility have risen as geopolitical tensions rise. Would that those tensions would evaporate and that peace could break out. We would all trade whatever political risk premium there is in the price of oil, for an end to the violence that has gripped the Middle East and Ukraine.
1www.eia.gov
We consider that in the long run the fundamental question for the oil market is when will the peak in production pass and whether decline from that peak is demand driven or supply driven. We believe global action on emissions reduction will surely impact demand, but probably a lot slower than those most concerned about climate would like; ultimately though we believe, geology will out and maintaining supply will become just as hard as growing supply once was.
If that happens, then we believe the world will become much more dependent on OPEC and Russian supply. In that environment we believe that prices will be robust and that investment in projects such as Pilot, if it was to progress, will enjoy strong returns, at least on a pre-tax basis.
UK Oil and Gas Sector
We consider the most pressing issue for the UK oil and gas sector is clarity on what the tax rate will be. In 2022, we believe the UK went from having one of the most competitive fiscal regimes in the world, appropriate for a maturing basin, to the worst. The UK may not have the highest tax rate, but with the Energy Profits Levy having been introduced as a temporary measure, which on the face of it had some merits, we believe its extension and increase in November 2022 confirmed that volatility in the fiscal regime would add to the volatility in commodity prices which oil and gas investors are inured to.
The irony is that we believe we need some more changes to the fiscal regime to fix the problem of uncertainty in the fiscal regime. We gave evidence to the Treasury review of the oil and gas fiscal regime and we are hopeful that a better fiscal framework will emerge.
We welcomed the announcement of annual licensing rounds in the King's Speech. Licensing rounds are the raw material that we work with to generate new projects. We made three licence applications in the 33rd round and, if granted, we are keen to get to work on those licences to see if there are drilling or project opportunities worthy of marketing to the industry.
Financial Condition
Clearly the Company needs to raise additional funds in the near term for working capital and to repay the STASCO loan which is currently due for repayment on 13 March 2024. We can confirm that we are in active discussions, both with Shell in respect of the loan, and with a number of financing counterparties in respect of these requirements. We will update shareholders as these discussions progress.
Business Outlook
The most important activity for the group in 2024 will be the progressing of the deal we signed with Ping in November 2023. If it completes, it will secure a two-year extension to the licence and define the terms under which we will participate in the Pilot project. Importantly we can achieve first oil on Pilot without having to pay for our share of the pre-first oil costs. We have huge confidence in the Pilot reservoir, the recovery mechanism proposed and in the potential of the surrounding acreage on the Western Platform.
We also look forward to securing some additional licences in the 33rd Round, we have innovative development concepts in mind and look forward to being able to conceive attractive projects and compelling prospects.
Joseph Darby, Chairman, and Stephen Brown, CEO
18 December 2023
Works Cited
Poulsen, A. S. (2018). Results of the UK Captain Field Interwell EOR Pilot. SPE Improved Oil Recovery Conference. Tulsa, Oklahoma, US.
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF ORCADIAN ENERGY PLC
Opinion
We have audited the financial statements of Orcadian Energy plc (the 'parent company') and its subsidiaries (the 'group') for the year ended 30 June 2023 which comprise the Consolidated Statement of Comprehensive Income, the Consolidated and Parent Company Statements of Financial Position, the Consolidated and Parent Company Statements of Changes in Equity, the Consolidated and Parent Company Statements of Cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and UK-adopted international accounting standards and as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006.
In our opinion:
· the financial statements give a true and fair view of the state of the group's and of the parent company's affairs as at 30 June 2023 and of the group's loss for the year then ended;
· the group financial statements have been properly prepared in accordance with UK-adopted international accounting standards;
· the parent company financial statements have been properly prepared in accordance with UK-adopted international accounting standards and as applied in accordance with the provisions of the Companies Act 2006; and
· the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Material uncertainty related to going concern
We draw attention to note 2.3 in the financial statements, which indicates that the group incurred a net loss of £1,184,954 during the year ended 30 June 2023 and that the group and company are reliant on raising finance within the 12 months following the date of approval of these financial statements in order to fund forecasted expenditure over this period. As stated in note 2.3, these events or conditions, along with the other matters as set forth that note, indicate that a material uncertainty exists that may cast significant doubt on the group and parent company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.
In auditing the financial statements, we have concluded that the director's use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors' assessment of the group and company's ability to continue to adopt the going concern basis of accounting included:
· Reviewing the accuracy of historical forecasts by comparison to the actual results in the year to assess the accuracy of management's forecasting process;
· Assessing and challenging the key inputs and assumptions in the underlying cashflow forecasts prepared by management covering the going concern period; and
· Discussing strategies regarding future availability of funding and assessing the likelihood of the required funds being successfully raised by considering the funds required and the group's and company's ability to raise such funds.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Our application of materiality
The scope of our audit was influenced by our application of materiality. The quantitative and qualitative thresholds for materiality determine the scope of our audit and the nature, timing and extent of our audit procedures. We also determine a level of performance materiality which we use to assess the extent of testing needed to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality for the financial statements as a whole. In determining our overall audit strategy, we assessed the level of uncorrected misstatements that would be material for the financial statements as a whole.
Materiality for the consolidated financial statements was set as £80,000 (2022: £73,000) based upon gross assets. Materiality has been based upon gross assets due to the group still being in the exploration phase and thus the key balance of interest is the capitalised exploration costs. Performance materiality and the triviality threshold for the consolidated financial statements were set at £56,000 (2022: £51,100) and £4,000 (2022: £3,650), respectively, due to our accumulated knowledge in respect of the group and the assessed level of risk.
Materiality for the parent company was set as £79,000 (2022: £72,000) based upon gross assets. Gross assets was considered to be an appropriate basis due to the fact that the most significant balance within the parent company is the investment in the subsidiary and incurred no expenditure in the year. Performance materiality and the triviality threshold for the company were set at £55,300 (2022: £50,400) and £3,950 (2022: £3,600), respectively, due to our accumulated knowledge in respect of the Company and the assessed level of risk.
Component materiality applied to the subsidiary undertaking was £79,000 (2022: £72,000) based upon gross assets. We believe assets to be the main drive of the business as the subsidiary is in the exploration stage and no revenues are currently being generated. Performance materiality and the triviality threshold were set at £55,300 (2022: £50,400) and £3,950 (2022: £3,600), respectively, for the same reasons as for the parent company.
We also agreed to report any other differences below that threshold that we believe warranted reporting on qualitative grounds.
Our approach to the audit
In designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular we looked at areas involving significant accounting estimates and judgements by the directors and considered future events that are inherently uncertain, such as the recoverable value of the capitalised exploration expenditure within the group and the recoverable value of the parent company's investment in the subsidiary. We also addressed the risk of management override of internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.
A full scope audit was performed on the complete financial information of both components of the group by us.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the Material uncertainty related to going concern section we have determined the matters described below to be the key audit matters to be communicated in our report.
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Key Audit Matter |
How our scope addressed this matter |
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Carrying value and recoverability of intangible assets (refer to Notes 3 and 13) |
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As at 30 June 2023 and 30 June 2022 the carrying value of intangible assets totalled £3,871,362 and £3,303,400, respectively within the Consolidated Statement of Financial Position. The intangible assets relate to capitalised exploration and evaluation costs.
These capitalised costs fall within the scope of IFRS 6 Exploration for and evaluation of mineral resources and there is a risk that items have not been capitalised during the year in accordance with this Standard, and with the group's accounting policy. given the materiality of the overall balance and the judgement required in respect of their capitalisation.
The carrying value of these assets is considered to be a key audit matter due to the level of management estimation and judgement required in assessing whether or not these material assets are recoverable.
During the current year, the renewal of licence P2320 has been denied and, as a result, the group recognised an impairment charge amounting to £356,532 to bring the carrying value of the license to nil.
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Our work in this area included:
· Testing a sample of additions to ensure costs have been capitalised in accordance with IFRS 6;
· Obtaining confirmation that the group has good title to the applicable exploration licences, including any new licences or renewals obtained during the year;
· Reviewing management's assessment of impairment and considering whether there are any indicators of impairment as per IFRS 6;
· Reviewing the calculation of the impairment charge recorded during the year, and understanding the circumstances leading to the impairment. Ensuring this has been recorded at an appropriate amount; and
· Reviewing disclosures in the financial statements to ensure that they are in line with IFRS 6. |
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Carrying value of investment in the subsidiary (refer to Note 16) |
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As at 30 June 2023 and 30 June 2022 the carrying value of investment in the subsidiary totalled £5,404,044 and £3,968,844, respectively within the Parent Company Statement of Financial Position. The investment in the subsidiary relates to the initial cost of investment and subsequent amounts advanced to the subsidiary that have been capitalised. There is a risk that the investment in the subsidiary is materially misstated as additions in the year may have been inappropriately capitalised. The carrying value of the investment is considered to be a key audit matter due to the material nature of the balance and the level of management estimation and judgement required in assessing whether the investment is impaired. |
Our work in this area included: · Verifying ownership of investment held;
· Obtaining a list of additions in the year. Vouching all additions to bank and considering whether these advances are appropriate for capitalisation;
· Obtaining and reviewing the impairment assessment prepared by management and challenging all key inputs and estimates included therein; and
· Considering whether there is evidence of impairment in accordance with IAS 36 Impairment of Assets, through reference to internal and external indicators. Considering the results of procedures performed in respect of the carrying value of exploration and evaluation assets as detailed above, given that these are the underlying assets from which the company hopes to recover the value of its investment. |
Other information
The other information comprises the information included in the annual report, other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
· the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
· the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
· adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
· the financial statements are not in agreement with the accounting records and returns; or
· certain disclosures of directors' remuneration specified by law are not made; or
· we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the Statement of directors' responsibilities, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
· We obtained an understanding of the company and the sector in which it operates to identify laws and regulations that could reasonably be expected to have a direct effect on the financial statements. We obtained our understanding in this regard through discussions with management, industry research, application of cumulative audit knowledge and experience of the sector.
· We determined the principal laws and regulations relevant to the company in this regard to be those arising from UK Company Law, local environmental laws, rules applicable to issuers of the AIM Market and UK-adopted international accounting standards.
· We designed our audit procedures to ensure the audit team considered whether there were any indications of non-compliance by the company with those laws and regulations. These procedures included, but were not limited to:
o Discussion with management regarding compliance with laws and regulations by the parent company and its subsidiary;
o Reviewing board minutes;
o A review of legal expenses incurred in the year; and
o Review of regulatory news announcements during the year.
· We also identified the risks of material misstatement of the financial statements due to fraud. We considered, in addition to the non-rebuttable presumption of a risk of fraud arising from management override of controls, that that the recoverable value of the capitalised exploration expenditure and the investment in subsidiaries were areas susceptible to fraud and we addressed this by challenging the assumptions and judgements made by management when auditing these significant accounting estimates.
· As in all of our audits, we addressed the risk of fraud arising from management override of controls by performing audit procedures which included, but were not limited to: the testing of journals; reviewing accounting estimates for evidence of bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our report
This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone, other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.
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Imogen Massey (Senior Statutory Auditor) |
15 West ferry Circus |
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For and on behalf of PKF Littlejohn LLP |
Canary Wharf |
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Statutory Auditor |
London E14 4HD |
18 December 2023
CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS
FOR THE YEAR ENDED 30 JUNE 2023
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|
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2023
|
2022
|
|
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Note |
£ |
£ |
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
- |
- |
|
|
|
|
|
|
Administrative expenses |
5 |
(671,327) |
(1,694,576) |
|
Pre-acquisition licence expenses |
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(129,867) |
- |
|
Impairment of intangible assets |
13 |
(356,532) |
- |
|
|
|
|
|
|
Operating Loss |
|
(1,157,726) |
(1,694,576) |
|
|
|
|
|
|
Finance costs |
9 |
(77,228) |
(41,869) |
|
Other income |
7 |
50,000 |
466,667 |
|
Listing costs |
|
- |
(316,949) |
|
Loss before tax |
|
(1,184,954) |
(1,586,727) |
|
|
|
|
|
|
Taxation |
10 |
- |
- |
|
|
|
|
|
|
Loss for the year |
|
(1,184,954) |
(1,586,727) |
|
|
|
|
|
|
Other comprehensive income: |
|
|
|
|
Items that will or may be reclassified to profit or loss: |
|
|
|
|
Other comprehensive income |
|
- |
- |
|
Total comprehensive income |
|
(1,184,954) |
(1,586,727) |
|
|
|
|
|
|
Earnings per share (basic and diluted) - pence |
11 |
(1.72) |
(2.51) |
|
|
|
|
|
|
|
|
|
|
All operations are continuing.
The notes below form part of these financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2023
|
|
|
2023 |
2022 |
|
|
Note |
£ |
£ |
|
Non-current assets |
|
|
|
|
Property, plant and equipment |
12 |
2,508 |
3,414 |
|
Intangible assets |
13 |
3,871,362 |
3,303,400 |
|
|
|
3,873,870 |
3,306,814 |
|
Current assets |
|
|
|
|
Trade and other receivables |
14 |
48,828 |
1,055,829 |
|
Cash and cash equivalents |
15 |
109,705 |
271,439 |
|
|
|
158,533 |
1,327,268 |
|
Total assets |
|
4,032,403 |
4,634,082 |
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
Borrowings |
17 |
- |
(956,184) |
|
|
|
- |
(956,184) |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
Trade and other payables |
18 |
(567,629) |
(553,509) |
|
Borrowings |
17 |
(991,339) |
- |
|
|
|
(1,558,968) |
(553,509) |
|
|
|
|
|
|
Total liabilities |
|
(1,558,968) |
(1,509,693) |
|
|
|
|
|
|
Net assets / (liabilities) |
|
2,473,435 |
3,124,389 |
|
Equity Ordinary share capital |
19 |
72,512 |
63,755 |
|
Share premium reserve |
19 |
5,316,532 |
3,890,089 |
|
Share warrants reserve |
19 |
15,000 |
15,000 |
|
Shares to be issued |
20 |
- |
901,200 |
|
Other reserve |
4 |
(38,848) |
(38,848) |
|
Retained earnings |
|
(2,891,761) |
(1,706,807) |
|
Total equity |
|
2,473,435 |
3,124,389 |
The consolidated Financial Statements of Orcadian Energy PLC were approved by the Board of Directors and authorised for issue on 18 December 2023.
Signed on behalf of the Board of Directors by:
Alan Hume
Director
The notes below form part of these financial statements.
COMPANY STATEMENT OF FINANCIAL POSITION
|
AS AT 30 JUNE 2023 |
|
2023 |
2022 |
|
|
Note |
£ |
£ |
|
Non-current assets |
|
|
|
|
Investment in subsidiary |
16 |
5,404,044 |
3,968,844 |
|
|
|
5,404,044 |
3,968,844 |
|
Current assets |
|
|
|
|
Trade and other receivables |
14 |
- |
1,000,000 |
|
Cash and cash equivalents |
15 |
2,779 |
- |
|
|
|
- |
- |
|
Total assets |
|
5,406,823 |
4,968,844 |
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
Borrowings |
17 |
- |
- |
|
|
|
- |
- |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
Trade and other payables |
18 |
- |
98,800 |
|
|
|
- |
98,800 |
|
|
|
|
|
|
Total liabilities |
|
- |
- |
|
|
|
|
|
|
Net assets |
|
5,406,823 |
4,870,044 |
|
Equity Ordinary share capital |
19 |
72,512 |
63,755 |
|
Share premium reserve |
19 |
5,316,532 |
3,890,089 |
|
Share warrants reserve |
19 |
15,000 |
15,000 |
|
Shares to be issued |
20 |
- |
901,200 |
|
Retained earnings |
|
2,779 |
- |
|
Total equity |
|
5,406,823 |
4,870,044 |
Orcadian Energy PLC, company number 13298968, has used the exemption granted under s408 of the Companies Act 2006 that allows for the non-disclosure of the Income Statement of the parent company. The after-tax profit attributable to Orcadian Energy PLC for the year to 30 June 2023 was £2,779 which is attributable to bank interest income (2022: £nil), as all costs within the group are borne by the subsidiary.
The Financial Statements were approved by the Board of Directors and authorised for issue on 18 December 2023.
Signed on behalf of the Board of Directors by:
Alan Hume
Director
The notes below form part of these financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2023
|
|
|
Ordinary Share capital |
Share premium reserve |
Share warrants reserve |
Shares to be issued |
Other reserve |
Retained earnings |
Total |
|
|
Note |
£ |
£ |
£ |
£ |
£ |
£ |
£ |
|
|
|
|
|
|
|
|
|
|
|
Balance as at 1 July 2021 |
|
52,202 |
- |
- |
- |
(38,848) |
(120,080) |
(106,726) |
|
Loss for the year and total comprehensive income |
|
- |
- |
- |
- |
- |
(1,586,727) |
(1,586,727) |
|
Issue of shares |
19 |
7,625 |
3,042,375 |
- |
- |
- |
- |
3,050,000 |
|
Conversion of loans |
17 |
3,928 |
1,096,072 |
|
- |
|
|
1,100,000 |
|
Shares to be issued - 30 June 2022 placing |
20 |
- |
- |
- |
901,200 |
- |
- |
901,200 |
|
Issue of warrants |
19 |
- |
(15,000) |
15,000 |
- |
- |
- |
- |
|
Share issue costs |
19 |
- |
(233,358) |
- |
- |
- |
- |
(233,358) |
|
Total transactions with owners |
|
11,553 |
3,890,089 |
15,000 |
901,200 |
- |
- |
4,817,842 |
|
Balance as at 30 June 2022 |
|
63,755 |
3,890,089 |
15,000 |
901,200 |
(38,848) |
(1,706,807) |
3,124,389 |
|
Loss for the year and total comprehensive income |
|
- |
- |
- |
- |
- |
(1,184,954) |
(1,184,954) |
|
Issue of shares |
19 |
8,757 |
1,581,243 |
- |
(1,000,000) |
- |
- |
590,000 |
|
Share issue costs |
19 |
- |
(154,800) |
- |
98,800 |
- |
- |
(56,000) |
|
Total transactions with owners |
|
8,757 |
1,426,443 |
|
(901,200) |
- |
- |
534,000 |
|
Balance as at 30 June 2023 |
|
72,512 |
5,316,532 |
15,000 |
- |
(38,848) |
(2,891,761) |
2,473,435 |
Refer to note 19 for a description of the nature and purpose of each reserve within equity.
The notes below form part of these financial statements.
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2023
|
|
|
Ordinary Share capital |
Share premium reserve |
Share warrants reserve |
Shares to be issued |
Retained earnings |
Total |
|
|
Note |
£ |
£ |
£ |
£ |
£ |
£ |
|
|
|
|
|
|
|
|
|
|
Balance as at 30 June 2021 |
|
52,202 |
- |
- |
- |
- |
52,202 |
|
Loss for the period and total comprehensive income |
|
- |
- |
- |
- |
- |
- |
|
Issue of shares |
19 |
7,625 |
3,042,375 |
- |
- |
- |
3,050,000 |
|
Conversion of loans |
17 |
3,928 |
1,096,072 |
|
- |
|
1,100,000 |
|
Shares to be issued - 30 June 2022 placing |
20 |
- |
- |
- |
901,200 |
- |
901,200 |
|
Issue of warrants |
19 |
- |
(15,000) |
15,000 |
- |
- |
- |
|
Share issue costs |
19 |
- |
(233,358) |
- |
- |
- |
(233,358) |
|
Total transactions with owners |
|
11,553 |
3,890,089 |
15,000 |
901,200 |
- |
4,817,842 |
|
Balance as at 30 June 2022 |
|
63,755 |
3,890,089 |
15,000 |
901,200 |
- |
4,870,044 |
|
profit for the year and total comprehensive income |
|
- |
- |
- |
- |
2,779 |
2,779 |
|
Issue of shares |
19 |
8,757 |
1,581,243 |
- |
(1,000,000) |
- |
590,000 |
|
Share issue costs |
19 |
- |
(154,800) |
- |
98,800 |
- |
(56,000) |
|
Total transactions with owners |
|
8,757 |
1,426,443 |
- |
(901,200) |
- |
534,000 |
|
Balance as at 30 June 2023 |
|
72,512 |
5,316,532 |
15,000 |
- |
2,779 |
5,406,823 |
Refer to note 19 for a description of the nature and purpose of each reserve within equity.
The notes below form part of these financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2023
|
|
|
2023
|
2022
|
|
|
Note |
£ |
£ |
|
Cash flows from operating activities |
|
|
|
|
Loss before tax for the year |
|
(1,184,954) |
(1,586,727) |
|
Adjustments for: |
|
|
|
|
Depreciation |
12 |
1,822 |
674 |
|
Unrealised foreign exchange (gain) / loss |
5 |
(44,852) |
151,629 |
|
Impairment of intangible assets |
13 |
356,532 |
- |
|
Interest received |
9 |
(2,779) |
- |
|
Finance costs in the year |
9 |
80,007 |
41,869 |
|
Decrease trade and other receivables |
14 |
7,001 |
32,720 |
|
Increase in trade and other payables |
18 |
189,064 |
36,000 |
|
Cash generated from operations |
|
(598,159) |
(1,323,836) |
|
Income taxes received |
|
- |
- |
|
Net cash flows from operating activities |
|
(598,159) |
(1,323,836) |
|
|
|
|
|
|
Investing activities |
|
|
|
|
Interest received |
9 |
2,779 |
- |
|
Purchases of property, plant and equipment |
12 |
(916) |
(2,246) |
|
Purchases of exploration and evaluation assets |
13 |
(1,000,638) |
(1,348,677) |
|
Net cash used in investing activities |
|
(998,775) |
(1,350,923) |
|
|
|
|
|
|
Financing activities |
|
|
|
|
Proceeds from issue of ordinary share capital |
19 |
1,590,000 |
3,000,000 |
|
Share issue costs paid |
19 |
(154,800) |
(233,358) |
|
Proceeds from issue of convertible loan notes |
17 |
- |
- |
|
Repayment of convertible loan notes |
17 |
- |
- |
|
Interest paid |
|
- |
- |
|
Net cash provided by financing activities |
|
1,435,200 |
2,766,642 |
|
|
|
|
|
|
Net increase in cash and cash equivalents |
|
(161,734) |
91,883 |
|
Cash and cash equivalents at beginning of period |
15 |
271,439 |
179,556 |
|
Cash and cash equivalents and end of period |
15 |
109,705 |
271,439 |
There were no significant non-cash transactions in the year to 30 June 2023.
The notes below form part of these financial statements.
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2023
|
|
|
2023
|
2022
|
|
|
Note |
£ |
£ |
|
Cash flows from operating activities |
|
|
|
|
Profit for the year |
|
2,779 |
- |
|
Adjustments for: |
|
|
|
|
Depreciation |
12 |
- |
- |
|
Interest received |
|
(2,779) |
- |
|
Decrease in trade and other receivables |
4 |
- |
- |
|
Increase in trade and other payables |
18 |
- |
- |
|
Cash generated from operations |
|
- |
- |
|
Income taxes paid |
|
- |
- |
|
Net cash flows from operating activities |
|
- |
- |
|
|
|
|
|
|
Investing activities |
|
|
|
|
Interest received |
|
2,779 |
- |
|
Funds advanced to subsidiary |
16 |
(1,435,200) |
(2,776,642) |
|
Purchases of exploration and evaluation assets |
13 |
- |
- |
|
Net cash used in investing activities |
|
(1,432,421) |
(2,776,642) |
|
|
|
|
|
|
Financing activities |
|
|
|
|
Proceeds from issue of ordinary share capital |
19 |
1,590,000 |
3,000,000 |
|
Share issue costs paid |
19 |
(154,800) |
(233,358) |
|
Net cash provided by financing activities |
|
1,435,200 |
2,776,642 |
|
|
|
|
|
|
Net increase in cash and cash equivalents |
|
2,779 |
- |
|
Cash and cash equivalents at beginning of period |
15 |
- |
- |
|
Cash and cash equivalents and end of period |
15 |
2,779 |
- |
There were no significant non-cash transactions in the year to 30 June 2023.
The notes below form part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
1. General Information
Orcadian Energy PLC (the "Company") is a public limited company which is domiciled and incorporated in England and Wales under the Companies Act 2006 with the registered number 13298968. The Company's registered office is 6th floor, 60 Gracechurch Street, London, EC3V 0HR, and its ordinary shares are admitted to trading on AIM, a market of the London Stock Exchange.
The principal activity of the Group is managing oil and gas assets and the Group holds a 100% interest in, and is licence administrator for, UKCS Seaward Licences P2244, which contains the Pilot and Harbour heavy oil discoveries and P2482 which contains the Elke and Narwhal discoveries. The Group also had a 50% working interest in P2516, which contains a small part of the Fynn discoveries. P2516 was administered by the Parkmead Group and covers blocks 14/20g and 15/16g, which lie midway between the Piper and Claymore fields. P2516 expired in November 2023.
The financial statements presented for Group are for the year ended 30 June 2023 and these have are shown alongside figures for the year ended 30 June 2022 for comparative purposes.
2. Summary of significant accounting policies
The principal accounting principles applied in the preparation of these financial statements are set out below. These principles have been consistently applied to all years presented, unless otherwise stated.
2.1. Basis of preparation
The financial statements have been prepared on a going concern basis using the historical cost convention and in accordance with the UK-Adopted International Accounting Standards, and in accordance with the provisions of the Companies Act 2006.
The financial statements have been prepared under the historical cost convention unless otherwise stated.
2.2. Consolidation and acquisitions
The financial statements consolidate the financial information of the Group and companies controlled by the Group (its subsidiaries) at each reporting date. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity, has the rights to variable returns from its involvement with the investee and has the ability to use its power to affect its returns. The results of subsidiaries acquired or sold are included in the financial information from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the results of acquired subsidiaries to bring their accounting policies into line with those used by the Group. All intra-Group transactions, balances, income and expenses are eliminated on consolidation. The financial statements of all Group companies are adjusted, where necessary, to ensure the use of consistent accounting policies.
The Company's shares were admitted to trading on AIM, a market operated by the London Stock Exchange, on 15 July 2021. In connection with the admission to AIM, in the financial year to 30 June 2021, the Group undertook a Group reorganisation of its corporate structure which resulted in the Company becoming the ultimate holding company of the Group. Prior to the reorganisation there was no ultimate holding company as Orcadian Energy (CNS) Ltd ("CNS") was a standalone entity. The transaction was accounted for as a capital reorganisation rather than a reverse acquisition since it did not meet the definition of a business combination under IFRS 3. In a capital reorganisation, the consolidated financial statements of the Group reflect the predecessor carrying amounts of CNS with comparative information of CNS presented for all periods since no substantive economic changes have occurred. The difference arising on acquisition has been accounted for with the recognition of a merger reserve on the balance sheet following the reorganisation of the share capital of the Group at the point of completion of the transaction.
2.3. Going concern
The financial statements have been prepared on a going concern basis. The Group is not yet revenue generating and an operating loss has been reported. The Group has historically been reliant on raising finance, both debt and equity, to enable it to meet its obligations as they fall due.
The Directors have reviewed a detailed forecast based on the funds expected to be raised and forecasted expenditure, including all required spend to meet licence requirements. This forecast has been stress tested by management in reaching their going concern conclusion. Having made due and careful enquiry, the Directors acknowledge that funds will need to be raised within the next 12 months to enable the Group to meets its obligations as they fall due, however, the Directors are confident that the required funds will successfully be raised through the equity market to fund its operations over the next 12 months.
The Directors, therefore, have made an informed judgement, at the time of approving financial statements, that the Group is a going concern but they acknowledge that the dependence on raising further funds during the next 12 months represents a material uncertainty.
2.4. Changes in accounting policies
2.4.1. New standards, amendments to standards and interpretations
i) New and amended standards adopted by the Group
The International Accounting Standards Board (IASB) issued various amendments and revisions to International Financial Reporting Standards and IFRIC interpretations. A number of amendments and revisions were applicable for the period ended 30 June 2023 but did not result in any material changes to the financial statements of the Group.
Of the other IFRS and IFRIC amendments, none are expected to have a material effect on the future Group Financial Statements.
ii) New and amended standards not yet adopted by the Group
The Directors do not believe that the implementation of new standards, amended standards and interpretations issued but not yet effective will have a material impact once implemented in future periods.
2.5. Foreign currency
2.5.1. Functional and presentation currency
Items in the company's financial statements are measured in the currency of the primary economic environment in which the entity operates (functional currency). Τhe functional currency of the Group and Company is Pounds sterling (£), which is also the presentation currency for these financial statements.
Monetary amounts in these financial statements are rounded to the nearest £.
2.5.2.Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. 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, except when deferred in other comprehensive income as qualifying cash flow hedges and qualifying net investment hedges. Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the income statement within 'finance income or costs.' All other foreign exchange gains and losses are presented in the income statement within 'Other (losses)/gains.'
Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss. Translation differences on non-monetary financial assets measure at fair value are included in other comprehensive income.
2.6. Other income
Grants are accounted for under the accruals model. Grants of a revenue nature are recognised in the Consolidated Statement of Comprehensive Income in the same period as the related expenditure, in accordance with the attached conditions.
2.7. Taxation
Tax currently payable is based on taxable profit for the period. Taxable profit differs from profit as reported in the income statement because it excludes items of income and expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
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 balance sheet 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 difference arises from initial recognition of 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. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each balance sheet 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 to profit or loss, except when it relates to items 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 Group intends to settle its current tax assets and liabilities on a net basis.
2.8. Leases
The Group assesses whether a contract is or contains a lease at the inception of the contract. The Group recognises a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets (such as tablets and personal computers, small items of office furniture and telephones). For these leases, the Group recognises the lease payments as an administrative expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed.
2.9. Intangible assets
Exploration and evaluation expenditures (E&E)
The Group applies the successful efforts method of accounting for oil and gas assets, having regard to the requirements of IFRS 6 'Exploration for and Evaluation of Mineral Resources'. Costs incurred prior to obtaining the legal rights to explore an area are expensed immediately to the Statement of Comprehensive Income.
All licence acquisitions, exploration and evaluation costs are capitalised, a share of administration costs is capitalised insofar as they relate to exploration, evaluation and development activities. These costs are written off to the Consolidated Statement of Comprehensive Loss unless commercial reserves have been established or the determination process has not been completed and there are no indications of impairment. If a project is deemed commercial all of the attributable costs are transferred into Property, Plant and Equipment. These costs will then be depreciated from the commencement of production on a unit of production basis.
2.10. Impairment of non-financial assets
The Group assesses at each reporting date whether there is an indication that an asset may be impaired. This includes consideration of the IFRS 6 impairment indicators for any intangible exploration and evaluation assets capitalised as intangible costs, and investment in the subsidiary. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset's recoverable amount.
An asset's recoverable amount is the higher of its fair value less costs to sell and its value in use. This is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or Groups of assets, and the asset's value in use cannot be estimated to be close to its fair value. In such cases, the asset is tested for impairment as part of the cash-generating unit to which it belongs. When the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, it is considered impaired and is written down to its recoverable amount.
In assessing value in use, estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses relating to continuing operations are recognised in those expense categories consistent with the function of the impaired asset, unless the asset is carried at revalued amount (in which case the impairment loss is treated as a revaluation decrease). An assessment is also made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated.
A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the Statement of Comprehensive Income unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase. After such a reversal, the depreciation charge is adjusted in future periods to allocate the asset's revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.
2.11. Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. Depreciation is provided on all property, plant and equipment to write off the cost less estimated residual value of each asset over its expected useful economic life on a straight-line basis at the following annual rates:
· Property, plant and equipment - 3 years straight line.
All assets are subject to annual impairment reviews.
2.12. Financial Instruments
2.12.1 Initial recognition
A financial asset or financial liability is recognised in the statement of financial position of the Group when it arises or when the Group becomes part of the contractual terms of the financial instrument.
2.12.2 Classification
Financial assets at amortised cost
The Group measures financial assets at amortised cost if both of the following conditions are met:
(1) the asset is held within a business model whose objective is to collect contractual cash flows; and
(2) the contractual terms of the financial asset generating cash flows at specified dates only pertain to capital and interest payments on the balance of the initial capital.
Financial assets which are measured at amortised cost, are measured using the Effective Interest Rate Method (EIR) and are subject to impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired.
There were no financial assets measured at fair value as at 30 June 2023, or 30 June 2022.
Financial liabilities at amortised cost
Financial liabilities measured at amortised cost using the effective interest rate method include current borrowings and trade and other payables that are short term in nature. Financial liabilities are derecognised if the Group's obligations specified in the contract expire or are discharged or cancelled.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate ("EIR"). The EIR amortisation is included as finance costs in profit or loss. Trade payables other payables are non-interest bearing and are stated at amortised cost using the effective interest method.
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. Gains or losses on liabilities held for trading are recognised in the statement of profit or loss and other comprehensive income.
2.12.3. Derecognition
A financial asset is derecognised when:
(1) the rights to receive cash flows from the asset have expired, or
(2) the Group has transferred its rights to receive cash flows from the asset or has undertaken the commitment to fully pay the cash flows received without significant delay to a third party under an arrangement and has either (a) transferred substantially all the risks and the assets of the asset or (b) has neither transferred nor held substantially all the risks and estimates of the asset but has transferred the control of the asset.
2.12.4 Impairment of financial assets
The Group recognises a provision for impairment for expected credit losses regarding all financial assets. Expected credit losses are based on the balance between all the payable contractual cash flows and all discounted cash flows that the Group expects to receive. Regarding trade receivables, the Group applies the IFRS 9 simplified approach in order to calculate expected credit losses. Therefore, at every reporting date, provision for losses regarding a financial instrument is measured at an amount equal to the expected credit losses over its lifetime without monitoring changes in credit risk. To measure expected credit losses, trade receivables and contract assets have been Grouped based on shared risk characteristics.
2.13. Trade and other receivables
Trade and other receivables are initially recognised at fair value when related amounts are invoiced then carried at this amount less any allowances for doubtful debts or provision made for impairment of these receivables.
2.14. Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand and are subject to an insignificant risk of changes in value.
2.15. 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.
2.16. Share premium
Share premium account represents the excess of the issue price over the par value on shares issued. Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, net of tax, from the proceeds.
2.17. Shares to be issued
Shares to be issued qualifies as equity as it satisfies the requirements under IAS 32, whereby subscription agreements for Ordinary shares ("the Obligation") represents a contract that will be settled by the Company delivering a fixed number of its Ordinary shares in exchange for a fixed amount of cash. When the Obligation arises the net value of share subscriptions to be received is recognised as an equity reserve, net of costs, with a corresponding receivable being recognised as an asset, and costs recorded as an accrued expense. Upon issue of the Ordinary shares, the Shares to be issued reserve is transferred to Share capital and Share premium. The receivable is discharged upon receipt of cash subscriptions from shareholders, and the accrued expense discharged upon payment to third party suppliers.
2.18. Trade payables
These financial liabilities are all non-interest bearing and are initially recognised at the fair value of the consideration payable.
2.19. Convertible loan notes and borrowings
Convertible loan notes classified as financial liabilities and borrowings are recognised initially at fair value, net of transaction costs incurred. After initial recognition, loans are measured at the amortised cost using the effective interest rate method. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest rate method.
2.20. Finance income and finance costs
Finance income comprises interest income on bank funds. Interest income is recognised as it accrues in profit or loss, using the effective interest method. Finance costs comprise interest expense on borrowings. Borrowing costs are recognised in profit or loss in the year in which they are incurred.
2.21. Earnings per share
Basic Earnings per share is calculated as profit attributable to equity holders of the parent for the period, adjusted to exclude any costs of servicing equity (other than dividends), divided by the weighted average number of ordinary shares, adjusted for any bonus element.
2.22. Operating segments
The Chief Operating Decision Maker (CODM) is considered to be the Board of Directors. They consider that the Group operates in a single segment, that of oil and gas exploration, appraisal and development, in a single geographical location, the North Sea of the United Kingdom. As a result, the financial information of the single segment is the same as set out in the statement of comprehensive income, statement of financial position, statement of Changes in Equity and Statement of Cashflows.
2.23. Investment in subsidiaries
The consolidated financial statements incorporate the financial statements of the company and entities controlled by the Group (its subsidiaries). Control is achieved where the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the year are included in total comprehensive income from the effective date of acquisition and up to the effective date of disposal, as appropriate using accounting policies consistent with those of the parent. All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.
Investments in subsidiaries are accounted for at cost less impairment in the individual financial statements. Advances that are made to the subsidiary that are not expected to be repaid in the short term are capitalised by the Company. All advances made for the year have been capitalised.
2.24. Share-based payments
The fair value of services received in exchange for the grant of share warrants is recognised as an expense in share premium or profit or loss, in accordance with the nature of the service provided. A corresponding increase is recognised in equity.
3. Significant accounting estimates and judgements, estimates and assumptions
The preparation of financial statements using accounting policies consistent with IFRS requires the Directors to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of income and expenses. The preparation of financial statements also requires the Directors to exercise judgement in the process of applying the accounting policies. Changes in estimates, assumptions and judgements can have a significant impact on the financial statements.
Recoverable value of intangible assets (refer to note 13)
As at 30 June 2023, the Group held oil and gas exploration and evaluation intangible assets of £3,871,362 (2022: £3,303,400). The carrying values of intangible assets are assessed for indications of impairment, as set out in IFRS 6, on an annual basis. As part of this impairment assessment, the recoverable value of the intangible assets is required to be estimated.
When estimating the recoverable value of the intangibles Management consider the proved, probable and potential resources per the latest CPR (https://orcadian.energy/wp-content/uploads/2021/07/110650.Orcadian.FinalReport.pdf), likely production costs and the forecasted oil prices.
The Group held 100% interest in UKCS Seaward Licence P2320 ("the Licence"), which contains the Blakeney, Feugh, Dandy & Crinan discoveries. The Licence had Phase A work commitments that were due to be completed by 14 May 2023. The Group applied to the North Sea Transition Authority ("NSTA") for an extension to completion time of Phase A work commitment. The NSTA declined the request for extension and the Licence determined on 14 May 2023. The Group has impaired the full value of the Licence recognised as an Intangible Asset on the Consolidated Statement of Financial Position with an impairment charge of £356,532 being charged to the Consolidated Statement of Comprehensive Loss.
As a result of the budget exploration costs, the licenses being valid and the assessed recoverable value of the intangibles being in excess of the carrying value, Management do not consider that any further impairment of intangible assets are impaired as at 30 June 2023, with the exception of the impairment charge detailed above.
These estimates and assumptions are subject to risk and uncertainty and therefore a possibility that changes in circumstances will impact the assessment of impairment indicators.
There was only one critical judgement identified, apart from those involving estimations (which are dealt with separately above) that the Directors have made in the process of applying the Group's accounting policies and that have the most significant effect on the amounts recognised in the financial statements.
4. Group reorganisation under common control
The acquisition in the year ended 30 June 2021 met the definition of a group reorganisation due to the Company and the subsidiary being under common control at the date of acquisition. As a result, and since Orcadian Energy Plc did not meet the definition of a business per IFRS 3, the acquisition fell outside of the scope of IFRS 3 and the predecessor value method was used to account for the acquisition.
These consolidated financial statements represent a continuation of the consolidated financial statements of Orcadian Energy (CNS) Ltd and include:
a. The assets and liabilities of Orcadian Energy (CNS) Ltd at their pre-acquisition carrying amounts and the results for both periods; and
b. The assets and liabilities of the Company as at 11 May 2021 and its results from 11 May to 30 June 2021.
On 11 May 2021, the Company issued 52,201,601 shares entire issued share capital of Orcadian Energy (CNS) Ltd.
The net assets of Orcadian Energy (CNS) Ltd at the date of acquisition was as follows:
|
|
£ |
|
Property Plant & Equipment |
1,357 |
|
Intangible Assets |
1,719,292 |
|
Current Assets |
447,425 |
|
Current Liabilities |
(284,745) |
|
Non-Current Liabilities |
(1,869,975) |
|
Net assets |
13,354 |
The reserve that arose from the acquisition is made up as follows:
|
|
Year ended 30 June 2021 |
|
|
£ |
|
As at start of year |
- |
|
Cost of the investment in Orcadian Energy (CNS) Ltd |
52,202 |
|
Less: net assets of Orcadian Energy (CNS) Ltd at acquisition |
(13,354) |
|
As at end of year |
38,848 |
5. Administrative expenses
|
|
2023 |
2022 |
|
|
£ |
£ |
|
Office costs, rates and services |
22,610 |
21,925 |
|
Wages and salaries* |
293,403 |
384,750 |
|
Consultants and advisers |
254,452 |
783,454 |
|
Audit fees (note 6) |
32,250 |
27,500 |
|
Insurance |
2,256 |
33,504 |
|
Other expenses |
39,432 |
181,402 |
|
National Insurance |
67,091 |
105,241 |
|
Foreign Exchange |
(41,989) |
156,126 |
|
Depreciation |
1,822 |
674 |
|
|
671,327 |
1,694,576 |
*refer to note 13 for details on wages and salaries capitalised to intangible assets.
6. Auditor's Remuneration
During the year, the Company obtained the following services from the Company's auditors and its associates:
|
|
2023 |
2022 |
|
|
£ |
£ |
|
Audit of the financial statements |
32,250 |
27,500 |
|
Transaction services |
- |
15,000 |
|
Informal interim review |
- |
1,750 |
|
|
32,250 |
44,250 |
7. Other Income
|
|
2023 |
2022 |
|
|
£ |
£ |
|
33rd licencing round income |
50,000 |
- |
|
OGA grant |
- |
466,667 |
|
Other Income |
50,000 |
466,667 |
In January 2023 the Company applied for certain licences in the 33rd Seward licencing round. One of the applications was in partnership with Triangle Energy Pty. To enter into the joint application Triangle Energy Pty paid the Company £50,000.
In December 2021 Orcadian was awarded a grant of £466,667 by the OGA (now NSTA) to evaluate an alternative concept for the electrification of key producing oil and gas fields in the Central Graben area of the North Sea. All attached conditions in respect of the grant were met during the year and therefore this income has been recognised in full as the underlying costs have been incurred in the year.
8. Staff numbers and costs
|
|
|
Group |
Group |
|
|
|
2023 |
2022 |
|
Staff costs (including directors) |
|
£ |
£ |
|
Wages and salaries |
|
599,375 |
790,000 |
|
Social security costs |
|
67,091 |
105,241 |
|
|
|
666,466 |
895,241 |
Refer to the Directors Remuneration Report for further information on Director wages and salaries.
Wages and salaries includes £305,972 that was capitalised to the value of the intangible asset (2022: £405,250) (refer to note 13).
No pension benefits are provided for any Directors (2022: £nil).
The average number of persons (including directors) employed by the Company during the year was:
|
Group and Company |
2023 |
2022 |
|
Management and Administration |
5 |
6 |
|
|
5 |
6 |
9. Finance costs
|
|
2023 |
2022 |
|
|
£ |
£ |
|
Interest received |
(2,779) |
- |
|
Interest expense |
80,007 |
41,869 |
|
|
77,228 |
41,869 |
10. Taxation
Analysis of charge for the year:
|
|
2023 £ |
2022 £ |
|
Current income tax charge |
- |
- |
|
R&D tax credits |
- |
- |
|
Deferred tax charge |
- |
- |
|
Total taxation credit/(charge) |
- |
- |
Taxation reconciliation
The below table reconciles the tax charge for the year to the theoretical charge based on the result for the year and the corporation tax rate.
|
|
2023 £ |
2022 |
|
Loss before income tax |
(1,184,954) |
(1,586,727) |
|
Tax at the applicable rate of 19% (2022: 19%) |
(225,141) |
(301,478) |
|
Effects of: |
|
|
|
R&D tax credits |
- |
- |
|
Expenses not deducted for tax purposes |
68,172 |
1,333 |
|
Unutilised tax losses |
156,969 |
300,145 |
|
Total income tax credit / (expense) |
- |
- |
As at 30 June 2023, the Group had potential deferred tax assets not recognised in respect of unused tax losses of £560,656 (2022: £439,912) which is due to uncertainty over the availability of future taxable profits to offset these losses against.
11. Earnings per share
The calculation of the basic and diluted earnings per share is calculated by dividing the loss for the year for continuing operations for the Company by the weighted average number of ordinary shares in issue during the year.
There is no difference between the basic and diluted earnings per share as the Group recorded a loss for the year, and where a loss is recorded the basic and diluted loss is the same. Refer to note 19 for details on details of warrants on issue as at 30 June 2023 that would have a dilutive effect on earnings per share.
|
|
2023 £ |
2022 |
|
|
|
|
|
Loss for the purposes of basic earnings per share being net loss attributable to the owners |
(1,184,954) |
(1,586,727) |
|
Weighted average number of Ordinary Shares |
68,876,857 |
63,278,315 |
|
|
|
|
|
Loss per share - pence |
(1.72p) |
(2.51p) |
12. Property, plant and equipment
|
|
|
||
|
|
IT hardware & software |
Office equipment |
Total |
|
|
£ |
£ |
£ |
|
Cost |
|
|
|
|
As at 30 June 2021 |
4,794 |
202 |
4,996 |
|
Additions |
2,246 |
- |
2,246 |
|
As at 30 June 2022 |
7,040 |
202 |
7,242 |
|
Additions |
916 |
- |
916 |
|
As at 30 June 2023 |
7,956 |
202 |
8,158 |
|
|
IT hardware & software |
Office equipment |
Total |
|
|
£ |
£ |
£ |
|
Depreciation |
|
|
|
|
As at 30 June 2021 |
2,952 |
202 |
3,154 |
|
Charged in the year |
674 |
- |
674 |
|
As at 30 June 2022 |
3,626 |
202 |
3,828 |
|
Charged in the year |
1,822 |
- |
1,822 |
|
As at 30 June 2023 |
5,448 |
202 |
5,650 |
|
|
|
|
|
|
Net book value as at 30 June 2023 |
2,508 |
- |
2,508 |
|
Net book value as at 30 June 2022 |
3,414 |
- |
3,414 |
The depreciation expense is recognised in administrative expenses as set out in note 5.
13. Intangible assets
|
|
Oil and gas exploration assets |
|
|
£ |
|
Cost |
|
|
As at 30 June 2021 |
1,814,615 |
|
Additions |
1,488,785 |
|
As at 30 June 2022 |
3,303,400 |
|
Additions |
924,494 |
|
Impairment |
(356,532) |
|
As at 30 June 2023 |
3,871,362 |
Wages and salaries totalling £305,972 (2022: £405,250) were capitalised during the year (refer to note 8).
The carrying value of the prospecting and exploration rights is supported by the estimated resource and current market values as contained in the Competent Person's Report date 1 April 2021 which was prepared by Sproule B.V.
https://orcadian.energy/wp-content/uploads/2021/07/110650.Orcadian.FinalReport.pdf
Refer to Note 3 for details of impairment charge.
14. Trade and other receivables
|
|
Group |
Group |
Company |
Company |
|
|
2023 |
2022 |
2023 |
2022 |
|
|
£ |
£ |
£ |
£ |
|
VAT receivable |
47,440 |
55,829 |
- |
- |
|
Other receivables |
1,388 |
1,000,000 |
- |
1,000,000 |
|
Prepayments relating to the issue of equity |
- |
- |
- |
- |
|
Prepayments other |
- |
- |
- |
- |
|
|
48,828 |
1,055,829 |
- |
1,000,000 |
Other receivables of £1,000,000 in the year to 30 June 2022 represented the gross value of share subscriptions receivable as at reporting date pursuant to a share placement that was announced on 30 June 2022 but for which shares were not formally issued until post-reporting date, in July 2022. There were £98,800 of share issue costs which were accrued for as at 30 June 2022 in respect of this placing. (Refer to notes 2.17 and 20).
The fair value of other receivables is the same as their carrying values as stated above.
The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above. The Company does not hold any collateral as security.
15. Cash and cash equivalents
|
|
Group |
Group |
Company |
Company |
|
|
2023 |
2022 |
2023 |
2022 |
|
|
£ |
£ |
£ |
£ |
|
Cash at bank and in hand |
109,705 |
271,439 |
2,779 |
- |
There is no material difference between the fair value of cash and cash equivalents and their book value.
16. Investment in subsidiary
|
Name |
Address of the registered office |
Nature of business |
Proportion of ordinary shares held directly by parent (%) |
|
Orcadian Energy (CNS) Ltd |
6th floor, 60 Gracechurch Street, London, EC3V 0HR |
Managing oil and gas assets |
100 |
The acquisition of Orcadian Energy (CNS) Ltd took place on 11 May 2021. Refer to note 4 for further details.
|
|
£ |
|
As at 30 June 2022 |
3,968,844 |
|
Additions |
1,435,200 |
|
As at 30 June 2023 |
5,404,044 |
The additions during the year were advances to enable the subsidiary to continue work on the oil and gas exploration assets owned directly by the subsidiary. These costs have been capitalised rather than treated as an intercompany loan as they represent capital contributions and hence increase in value of the parent's investment.
17. Borrowings
|
|
2023 |
|||
|
|
|
|
|
STASCO Loan £ |
|
As at 30 June 2022 |
|
|
|
956,184 |
|
Interest accrued |
|
|
|
80,007 |
|
Effect of foreign exchange |
|
|
|
(44,852) |
|
As at 30 June 2023 |
|
|
|
991,339 |
The STASCO loan was entered in to on 22 July 2019. The total loan facility was US$1,000,000 which has been fully drawn down. The term of the loan facility is 4 years and is subject to interest at LIBOR plus 5% which is accrued quarterly. The total interest charge for the year was US$98,427 £80,007 (2022: $57,118 (£41,869)), and a £44,852 unrealised foreign exchange gain (2022: loss of £151,629) was incurred in the year in respect of this loan. The loan is due to be repaid by 13 March 2024 (Refer to note 26 for further detail).
|
|
2022 |
|||
|
|
Convertible loan note 2020 £ |
Convertible loan note 2021 £ |
STASCO Loan £ |
Total £ |
|
As at 30 June 2021 |
380,000 |
720,000 |
762,686 |
1,862,686 |
|
Conversion in to ordinary shares |
(380,000) |
(720,000) |
- |
(1,100,000) |
|
Interest accrued |
- |
- |
41,869 |
41,869 |
|
Effect of foreign exchange |
- |
- |
151,629 |
151,629 |
|
As at 30 June 2022 |
- |
- |
956,184 |
956,184 |
On 15 July 2021, all Convertible Loan Notes ("CLNs") were converted in to ordinary shares at a price of 28 pence each, which was a 30% discount to the fundraise price. In total 3,928,572 ordinary shares were issued in full discharge of the CLNs. No interest was paid on the CLNs as they were converted in to ordinary shares.
On 15 July 2021, all CLNs were converted in to ordinary shares at a price of 28 pence each, which was a 30% discount to the fundraise price. In total 3,928,572 ordinary shares were issued in full discharge of the CLNs. No interest was paid on the CLNs as they were converted in to ordinary shares.
18. Trade and other payables - due within one year
|
|
Group |
Group |
Company |
Company |
|
|
2023 |
2022 |
2023 |
2022 |
|
|
£ |
£ |
£ |
£ |
|
Trade payables |
196,354 |
184,636 |
- |
- |
|
Accruals |
371,275 |
334,631 |
- |
98,800 |
|
Other creditor |
- |
34,242 |
- |
- |
|
|
567,629 |
553,509 |
- |
98,800 |
The carrying values of trade and other payables are considered to be a reasonable approximation of the fair value and are considered by the Directors as payable within one year.
19. Ordinary share capital and share premium
|
Group & Company |
|
|
|
|
Issued |
Number of shares |
Ordinary share capital £ |
Share premium £ |
|
As at 30 June 2021 |
52,201,601 |
52,202 |
- |
|
Issue of shares |
7,625,000 |
7,625 |
3,042,375 |
|
Share issue costs |
- |
- |
(233,358) |
|
Value of warrants issued |
- |
- |
(15,000) |
|
Conversion of loans |
3,928,572 |
3,928 |
1,096,072 |
|
As at 30 June 2022 |
63,755,174 |
63,755 |
3,890,089 |
|
|
|
|
|
|
Issue of shares |
8,757,143 |
8,757 |
1,581,243 |
|
Share issue costs |
- |
- |
(154,800) |
|
As at 30 June 2023 |
72,512,317 |
72,512 |
5,316,532 |
|
|
|
|
|
The ordinary shares confer the right to vote at general meetings of the Company, to a repayment of capital in the event of liquidation or winding up and certain other rights as set out in the Company's articles of association.
Share warrants
On 15 July 2021 the Company issued 75,000 broker warrants in connection with the Raise. These warrants are fully vested, have an exercise price of 40p and are exercisable for a period of three years.
The fair value of warrants is valued using the Black-Scholes pricing model. A fair value charge of £15,000 has been applied as a direct deduction to the Share Premium Reserve in the year to 30 June 2022.
The inputs into the Black-Scholes pricing model are as follows:
|
Grant date |
15 Jul 2021 |
|
|
|
Exercise price |
40.0 pence |
|
|
|
Expected life |
3 years |
|
|
|
Expected volatility |
77.32% |
|
|
|
Risk free rate of interest |
0.0242% |
|
|
|
Dividend yield |
Nil |
|
|
|
Fair value of option |
20.0 pence |
|
|
Volatility has been estimated based on the average historic volatility of the share prices of a selection of three peer companies for a period equal to the expected term from the grant date.
Nature and purpose of equity and reserves
|
Equity and Reserve |
Description and purpose |
|
Ordinary share capital |
Represents the nominal value of shares issued |
|
Share premium reserve |
Amount subscribed for share capital in excess of nominal value |
|
Share warrants reserve |
Value of warrants issued |
|
Shares to be issued |
Value of shares to be issued where share subscription agreements have been executed and the share placement completing post-reporting date. |
|
Other reserve
Retained earnings |
Reserve created in accordance with the acquisition of Orcadian Energy (CNS) Ltd on 11 May, 2021 (Refer to Note 4) Cumulative net gains and losses recognised in the Consolidated Statement of Comprehensive Income |
20. Shares to be issued
As at 30 June 2022 the Shares to be issued represented the issue of 2,857,143 shares at 35 pence each that completed on 6 July 2022. The value of the Shares to be issued reserve reflected the gross proceeds of the share placement of £1,000,000, less £98,800 of share issue costs which were accrued for at 30 June 2022. Upon completion the value of Shares to be issued were re-allocated to Share capital and Share premium (Refer to note 2.17 for the Group's accounting policy for Shares to be issued).
21. Related parties
21.1 Transactions with related parties
The Company had the following related party transactions:
(1) The Company makes use of an office at 70 Claremont Road which is currently provided to the Company by Mrs Julia Cane-Honeysett and Mr Stephen Brown at a rental of £1,000 per calendar month. The company pays for the services and business rates associated with the property.
21.3. Key management personnel
Directors of the Company are considered to be key management personnel. The remuneration of the Directors has been set out in note 8.
22. Ultimate controlling party
The Directors consider Stephen Brown and Julia Cane-Honeysett to be the ultimate controlling parties given their combined holding of 40.22% of the issued capital of the Company.
23. Financial instruments
The Company holds the following financial instruments:
Financial assets
|
|
Group |
Group |
Company |
Company |
|
|
2023 |
2022 |
2023 |
2022 |
|
Financial assets at amortised cost: |
£ |
£ |
£ |
£ |
|
Other receivables |
1,500 |
1,000,000 |
- |
1,000,000 |
|
Other financial assets at amortised cost |
- |
- |
- |
- |
|
Cash and cash equivalents |
109,705 |
271,439 |
2,779 |
- |
|
|
111,205 |
1,271,439 |
2,779 |
1,000,000 |
The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of financial assets mentioned above.
Financial liabilities
Group
|
|
2023 |
2022 |
|
Financial liabilities at amortised cost: |
£ |
£ |
|
Trade payables |
196,354 |
184,636 |
|
Borrowings - current |
991,339 |
- |
|
Borrowings - non-current |
- |
956,184 |
|
|
1,187,693 |
1,140,820 |
24. Financial risk management
24.1 Financial risk factors
The Group's activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance.
Risk management is carried out by the executive management team.
a) Market risk
The Group is exposed to market risk, primarily relating to interest rate, foreign exchange and commodity prices. The Group does not hedge against market risks as the exposure is not deemed sufficient to enter into forward contracts. The Group has not sensitised the figures for fluctuations in interest rates, foreign exchange or commodity prices as the Directors are of the opinion that these fluctuations would not have a significant impact on the Financial Statements at the present time. The Directors will continue to assess the effect of movements in market risks on the Group's financial operations and initiate suitable risk management measures where necessary.
b) Credit risk
Credit risk arises from cash and cash equivalents as well as outstanding receivables. To manage this risk, the Group periodically assesses the financial reliability of customers and counterparties.
The amount of exposure to any individual counter party is subject to a limit, which is assessed by the Board.
The Group considers the credit ratings of banks in which it holds funds in order to reduce exposure to credit risk. The Group will only keep its holdings of cash with institutions which have a minimum credit rating of 'A'.
c) Liquidity risk
The Group's continued future operations depend on the ability to raise sufficient working capital through the issue of equity share capital or debt. The Directors are reasonably confident that adequate funding will be forthcoming with which to finance operations. Controls over expenditure are carefully managed.
The following table summarizes the Group's significant remaining contractual maturities for financial liabilities at 30 June 2023, and 30 June 2022.
|
Contractual maturity analysis as at 30 June 2023 |
|||||
|
|
|
|
Less than 12 Months £ |
1 - 5 Years £ |
Total £ |
|
Accounts payable |
|
|
196,354 |
- |
196,354 |
|
Accrued liabilities |
|
|
371,275 |
- |
371,275 |
|
Other creditor |
|
|
- |
- |
- |
|
STASCO Loan |
|
|
991,339 |
- |
991,339 |
|
|
|
|
1,558,968 |
- |
1,558,968 |
|
There were no contractual liabilities with maturity of greater than 5 years as at 30 June 2023.
Contractual maturity analysis as at 30 June 2022
|
|||||
|
|
|
|
Less than 12 months £ |
1 - 5 years £ |
Total £ |
|
Accounts payable |
|
|
184,636 |
- |
184,636 |
|
Accrued liabilities |
|
|
334,631 |
- |
334,631 |
|
Other creditor |
|
|
34,242 |
- |
34,242 |
|
STASCO Loan |
|
|
- |
956,184 |
956,184 |
|
|
|
|
553,509 |
956,184 |
1,509,693 |
There were no contractual liabilities with maturity of greater than 5 years as at 30 June 2022.
d) Foreign exchange risk
Foreign exchange risk arises where the Group has financial assets and liabilities in a different currency to the functional currency of the Group. Where this arises the Group will be exposed to gains and losses that arise on movements in the base currency of the financial asset/liability and the functional currency of the Group. For the year ended 30 June 2023, the Group's borrowings were denominated in US Dollars and thus is exposed to gains and losses arising on the value of the US Dollar relative to Pound Sterling (Refer to note 17).
24.2 Capital risk management
The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern, in order to enable the Group to continue its exploration and development of oil and gas resources. In order to maintain or adjust the capital structure, the Group may adjust the issue of shares or sell assets to reduce debts.
The Group defines capital based on the total equity and reserves of the Group. The Group monitors its level of cash resources available against future planned operational activities and may issue new shares in order to raise further funds from time to time.
25. Commitments
The Group has the following non-cancellable ongoing commitments required in order to maintain the Group's licences in good standing:
|
|
2023 |
2022 |
|
|
£ |
£ |
|
Due within one year |
218,208 |
246,498 |
|
Later than one year but not later than five years |
1,407,168 |
1,360,821 |
|
Total commitments |
1,625,376 |
1,607,319 |
26. Events after the reporting period
On 23 August 2023, the Company announced that the US$1 million loan agreement with STASCO (refer to note 17) was extended to 13 September 2023.
On 13 September 2023, the Company announced that the US$1 million loan agreement with STASCO (refer to note 17) was extended to 13 March 2024.
On 18 September the Company announced that it had entered into a non-binding Heads of Agreement to farm out a 81.25% interest in the Pilot field development for a full carry to first oil and certain other payments.
On 2 October the Company announced that it had issued 2,916,666 ordinary shares at 12p per share to raise new funds of £350,000.
On 30 November 2023 P2516 expired and an impairment adjustment of £144,971 has been made in respect of the costs capitalised relating to the expired licence. As at reporting date the directors did not have sufficient reason to believe that the licence would expire and applied judgement that the most appropriate date to make the impairment was the date of expiry.
On 1 December 2023 the Company announced that it had submitted a request to the NSTA to
1. consent to an assignment under, and in accordance with, clause 40(1) of the Licence to the Operator; and
2. approval of appointment of the Operator as operator under, and in accordance with, clause 24 of the P2244 Licence.
On 7 December 2023 the Company announced the signature of an SPA for the disposal of an 81.25% interest in the Pilot field licence P2244 with Ping Petroleum UK PLC.
-ends-
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