Audited Full Year Results to 31 December 2022

RNS Number : 5971T

Longboat Energy PLC

21 March 2023

 

Longboat Energy PLC

("Longboat Energy", the "Company" or "Longboat")

Audited Full Year Results to 31 December 2022

London, 21 March 2023  - Longboat Energy, the full cycle emerging E&P business, announces its full-year results for the period ended 31 December 2022.

Highlights

Operations Summary

· Five wells drilled over the period with two significant discoveries: Kveikje and Oswig

· Kveikje (Longboat 10%):

§ Encountered hydrocarbons at all four targets levels.

§ Discovered light oil in excellent quality injectitie reservoir in the main target reservoir.

§ Estimate of recoverable resources between 35 and 60 mmboe gross ¹⁾.

§ Operated by Equinor in prolific area to the north of the giant Troll field with significant infrastructure.

§ Likely to form part of the Ringvei Vest multi-hundred million barrel cluster development.

· Oswig (Longboat 20%):

§ Gas-condensate discovery in large fault block with Jurassic Tarbert formation reservoir.

§ Preliminary estimate of recoverable resources between 10 and 42 mmboe gross ²⁾ based on in-place volumes of 100 to 215 mmboe and condensate/gas ratio of 110-130 bbl/mmscf.

§ High pressure, high temperature find next to Equinor operated producing Tune and giant Oseberg fields with oil and gas export facilities.

§ Drill stem test in sidetrack well flowed approximately 2.1 mmscfd of gas and 280 bpd of condensate (approximately 650 boepd in aggregate) through a 10/64-inch choke.

§ Focus on identifying optimal well design for delivering economic flow rates, most likely by fracturing the well, to unlock the discovery.  

· Awarded three new licences in the 2022 Norwegian Award in Predefined Areas ('APA') Licensing Round:

§ Lotus (Longboat 30%) is located next to Kveikje and contains an analogous injectite low risk prospect, which has the potential to add significant value. The firm well is planned for 2024.

§ The Kveikje extension license (Longboat 10%) covers possible extensions of the Kveikje discovery to the west and east. 

§ Oswig South licence (Longboat 20%) contains the potential southerly extension of Oswig. The prospect has already been significantly de-risked by the Oswig discovery and has the potential to double the size of the existing discovery.

·     A warded the Norwegian non-operator "Explorer of the Year Award" by GEO365 for the exploration results including Kveikje and Oswig, which are amongst the five largest discoveries made in Norway in 2022

·   Entered Malaysia by successfully winning operatorship of a Production Sharing Agreement for Block 2A (Longboat 36.75%) in the Malaysian Bid Round 2022:

§ Exploration block offshore Sarawak in deep water covering an area of more than 12,000 km² with material exploration opportunities.

§ Low initial cost obligation and with three years until a drill decision.

§ Malaysia entry significantly expands Longboat's opportunity set.  

Financial Summary

§ Cash reserves of £12.1 million as at 31 December 2022 (31 December 2021: £26.3 milion) with borrowings under the EFF of £36.8 million (31 Dec 2021: £nil) and a tax rebate receivable of £40.8 million (31 December 2021: £8.1 million) due in November 2023. 

§ Exploration Finance Facility increased to NOK800m (approximately £67.5 million) available for 2023 and 2024.

· Loss after taxation of £(15.5) million (31 December 2021: £(4.7) million) which includes write down of four wells.

Outlook

·   Currently focused on monetisation and conversion of the value created by the exploration success into reserves, production and cash.

·     Velocette exploration well (Longboat 20%) expected to spud in Q3 targeting a large fault block with expected Cretaceous gas filled reservoir indicated by seismic amplitudes confined to structure.

· Acquisition and growth in 2P reserves and production remains a key objective.

· The strategy remains unchanged to build Longboat into a full-cycle E&P company with Norway remaining the core area.

Helge Hammer, Chief Executive Officer of Longboat Energy, commented:

"In 2022, Longboat was one of the most active independent exploration companies in Norway where we drilled five wells and made two significant discoveries. Kveikje and Oswig are among the largest discoveries made in Norway in 2022 and, going forward, we are focussing on maturing the assets technically, unlocking the commercial value of our discoveries, and growing reserves and production.

"While Norway remains of prime importance, we are delighted to have established a presence in Malaysia and in the coming year we will seek to build cashflow generating E&P portfolios in both Norway and Malaysia."

This announcement does not contain inside information

Footnotes:

1)  The range represents 2C to 3C resource estimate range from ERCE Competent Persons Report September 2022 

2)  Operator's estimate of the size of the discovery

Enquiries:
Longboat Energy	via FTI
Helge Hammer, Chief Executive Officer
Jon Cooper, Chief Financial Officer
Stifel (Nomad)	Tel: [phone]
Callum Stewart Jason Grossman Simon Mensley Ashton Clanfield
FTI Consulting (PR adviser)	Tel: [phone]
Ben Brewerton Rosie Corbett Catrin Trudgill	[e-mail]

Results

For the period to 31 December 2022, the Group's loss after taxation was £15.5 million.

 Dividends

It is the Board's policy that the Company should seek to generate capital growth for its shareholders but may recommend distributions at some future date when the investment portfolio matures, and production revenues are established and when it becomes commercially prudent to do so.

Statement of going concern

The Directors have completed the going concern assessment, including considering cash flow forecasts up to the end of 2024, sensitivities, and stress tests to assess whether the Group is a going concern.  Having undertaken careful enquiry, the Directors are of the view the Group will need to access additional funds during 2023 in order to fund on-going operations and pursue growth opportunities.  It is anticipated these funds will be sourced through asset disposals, farm downs, issuing new equity or combination of these actions. If this is not the case then the Group is forecast to have limited or no liquidity at the end of 2023, given continued drawing under the EFF during 2023.  The financial statements for the year to 31 December 2022 have been prepared assuming the Group will continue as a going concern.  In support of this, the directors believe the liquid nature of the Norwegian asset market combined with historical shareholder support, adequate funds can be accessed if and when required.  However, the ability to access funds is not guaranteed at the date of signing these financial statements. As a consequence, this funding requirement represents a material uncertainty that may cast significant doubt on the Group's ability to continue as a going concern.  The financial statements do not include any adjustments that would result from the basis of preparation being inappropriate.

Outlook

Our plan remains unchanged to build Longboat into a full-cycle E&P company with Norway remaining the core focus where the Company is now well established. In the period ahead, Longboat will be focused on monetisation and conversion of the value created within the exploration assets into reserves, production and cash. The acquisition of production remains our objective, although the difference between buyer and seller's expectations on commodity prices continues to impact the ability to transact in Norway.

A consequence of the seemingly ever increasing fiscal instability in the UK has made the Norwegian market even more appealing and thereby tighter, and after a year of strong oil and gas prices most companies are in good financial health with no need to divest production. While our focus remains on Norway, we are delighted to have established a presence in Malaysia and in the coming year we will seek to build cashflow generating E&P portfolios in both Norway and Malaysia.

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2022

	Notes	2022		2021
GROUP		£		£
Administrative expenses		(5,406,990)		(4,282,920)
Share based charge		(306,439)		(255,787)
Depreciation		(141,658)		(30,057)
Exploration and evaluation impairments	9	(42,877,022)		(6,399,134)
Operating loss	6	(48,732,109)		(10,967,898)
Finance income	5	150,869		11,412
Finance costs	8	(1,488,854)		(484,527)
Net foreign exchange gain/(loss)		681,746		(151,369)
Loss before taxation		(49,388,348)		(11,592,382)
Income tax credit	10	33,915,741		6,911,762
Loss for the year		(15,472,607)		(4,680,620)
Other comprehensive (expense)/income
Currency translation (expense)/income		(19,754)		580,447
Total items that may be reclassified to profit or loss		(19,754)		580,447
Total other comprehensive income for the year		(19,754)		580,447
Total comprehensive loss for the year		(15,492,360)		(4,100,173)
Loss per share	11	pence		pence
Basic		(27.30)		(12.97)
Diluted		(27.30)		(12.97)

Statement of financial position

As at 31 December 2022

	Notes	2022		2021
GROUP		£		£
Non-current assets
Exploration and evaluation assets	12	34,661,436		23,988,754
Property, plant and equipment	13	66,107		29,600
Trade and other receivables	15	98,368		-
Right of use asset	13	447,396		560,709
		35,273,307		24,579,063
Current assets
Cash and cash equivalents		12,059,561		26,282,067
Inventories	14	123,432		92,798
Trade and other receivables	15	934,918		1,136,081
Current tax recoverable	16	40,755,157		8,149,906
		53,873,068		35,660,852
Total assets		89,146,375		60,239,915
Current liabilities
Trade and other payables	17	5,225,497		4,772,167
Lease liabilities	18	122,612		96,172
Exploration Finance Facility bank borrowings	17	36,761,340		-
		42,109,449		4,868,339
Net current assets		11,763,619		30,792,513
Non-current liabilities
Leases liabilities	18	366,968		486,630
Deferred tax liabilities	19	25,736,898		18,766,424
		26,103,866		19,253,054
Total liabilities		68,213,315		24,121,393
Net assets		20,933,060		36,118,522
Equity
Called up share capital	22	5,666,665		5,666,665
Share premium account	23	35,570,411		35,570,411
Other reserves		450,000		450,000
Share option reserve	24	660,449		353,550
Currency translation reserve	25	561,242		580,996
Retained earnings		(21,975,707)		(6,503,100)
Total equity		20,933,060		36,118,522

The financial statements were approved by the board of directors and authorised for issue on 20 March 2023 and are signed on its behalf by:

....................................

Helge Hammer

Chief Executive

Statement of changes in equity

As at 31 December 2022

		Share Capital		Share Premium Account		Share option reserve		Currency translation reserve		Other reserves		Retained earnings		Total
		£		£		£		£		£		£		£
GROUP
Balance at 1 January 2021		1,000,000		7,808,660		97,763		549		450,000		(1,822,480)		7,534,492
Year ended 31 December 2021
Loss for the year		-		-		-		-		-		(4,680,620)		(4,680,620)
Other comprehensive income Issue of share capital		- 4,666,665		- 30,333,334		- -		580,447 -		- -		- -		580,447 34,999,999
Credit to equity for equity settled Share-based payments		-		-		255,787		-		-		-		255,787
Costs of share issue		-		(2,571,583)		-		-		-		-		(2,571,583)
Balance at 31 December 2021		5,666,665		35,570,411		353,550		580,996		450,000		(6,503,100)		36,118,522
Year ended 31 December 2022
Loss for the year		-		-		-		-		-		(15,472,607)		(15,472,607)
Other comprehensive expense		-		-		-		(19,754)		-		-		(19,754)
Credit to equity for equity settled
share-based payments		-		-		306,899		-		-		-		306,899
Balance at 31 December 2022		5,666,665		35,570,411		660,449		561,242		450,000		(21,975,707)		20,933,060

Consolidated statement of cash flows for the Year ended 31 December 2022			2022				2021
	Notes		£		£		£		£
GROUP
Cash flow from operating activities
Cash (absorbed by operations)	28				(3,562,988)				(3,749,247)
Tax refunded/(paid)					1,076,525				1,429,635
Net cash outflow from operating
activities					(2,486,463)				(2,319,612)
Investing activities
Purchase of exploration and evaluation
assets			(54,420,426)				(26,961,528)
Decrease in capital expenditure related payables			(657,027)
Tax refund relating to investing activity			8,280,919				17,173,053
Purchase of property, plant and
equipment			(59,903)				(25,769)
Interest received			150,869				11,412
Net cash (used in)/generated from
investing activities					(47,125,022)				(9,802,832)
Financing activities
Issue of ordinary shares			-				32,428,416
Loan drawdowns			36,761,340				-
Interest paid			(938,519)				(484,527)
Lease liabilities			(103,812)
Loan facility fees			(344,583)				(604,085)
Net cash generated from/(used in)
financing activities					35,374,426				31,339,804
Net increase/(decrease) in cash and
cash equivalents					(14,237,059)				19,217,360
Cash and cash equivalents at beginning
of year					26,282,067				7,016,199
Foreign exchange					14,553				48,508
Cash and cash equivalents at end of year					12,059,561				26,282,067
Relating to:
Bank balances and short term deposits					12,059,561				26,282,067

Notes to the financial statements

1.  Accounting policies

Company information

Longboat Energy plc is a public quoted company, limited by shares, incorporated in England and Wales. The registered office is 5th Floor One New Change, London, EC4M 9AF.

1.1.  Accounting convention

The financial statements have been prepared in accordance with UK adopted international accounting standards and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS, except as otherwise stated.

The 2022 Annual Report was approved by the Board of Directors on 20 March 2023. The financial information in this statement is audited but does not have the status of statutory accounts within the meaning of Section 434 of the Companies Act 2006. The auditors report was unqualified and did not contain statements under s498(2) or (3) Companies Act 2006, but it did contain a material uncertainty in relation to going concern.

The financial statements of Longboat Energy plc and the Company have been prepared in accordance with UK adopted international accounting standards in conformity with the requirements of the Companies Act 2006.

The financial statements have been prepared on the historical cost basis.

1.2.  Foreign currencies

The functional currency for the UK entity is sterling and the functional currency for Longboat Energy Norge AS is Norwegian kroner.

Transactions in foreign currencies during the year are recorded in the functional currency at the rate of exchange ruling at the date of the transaction. Monetary assets and liabilities are translated at the rate ruling on the Balance Sheet date and any gains and losses on translation are reflected in the Income Statement.

The assets and liabilities of foreign operations are translated into sterling at the rate of exchange ruling at the Balance Sheet date. Income and expenses are translated at the rate of exchange ruling at the date of the transaction.  The resulting exchange differences on assets and liabilities of such foreign operations are taken directly to a separate component of equity. On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that particular foreign operation is recognised in the Income Statement.

1.3.  Joint arrangements

Judgement is required to determine when the Group has joint control over an arrangement, which requires an assessment of the relevant activities and when the decisions in relation to those activities require unanimous consent. The Group has determined that the relevant activities for its joint arrangements are those relating to the operating and capital decisions of the arrangement, including the approval of the annual capital and operating expenditure work programme and budget for the joint arrangement, and the approval of chosen service providers for any major capital expenditure as required by the joint operating agreements applicable to the entity's joint arrangements. The considerations made in determining joint control are similar to those necessary to determine control over subsidiaries, as set out in Note 2. Judgement is also required to classify a joint arrangement. Classifying the arrangement requires the Group to assess their rights and obligations arising from the arrangement. Specifically, the Group considers:

· the structure of the joint arrangement; whether it is structured through a separate vehicle;

·     when the arrangement is structured through a separate vehicle, the Group also considers the rights and obligations arising therefrom.

1.3    Joint arrangements (continued)

· the legal form of the separate vehicle; the terms of the contractual arrangement, or other facts and circumstances, considered on a case by case basis.

This assessment often requires significant judgement. A different conclusion about both joint control and whether the arrangement is a joint operation or a joint venture, may materially impact the accounting.

A Joint Operation is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets and obligations for the liabilities, relating to the arrangements.

In relation to its interests in joint operations, the Group recognises its:

· assets, including its share of any assets held jointly;

· liabilities, including its share of any liabilities incurred jointly;

· revenue from the sale of its share of the output arising from the joint operation;

· share of the revenue from the sale of the output by the joint operation; and

· expenses, including its share of any expenses incurred jointly.

1.4.  Going concern

The Directors have completed the going concern assessment, including considering cash flow forecasts up to the end of 2024, sensitivities, and stress tests to assess whether the Group is a going concern.  Having undertaken careful enquiry, the Directors are of the view the Group will need to access additional funds during 2023 in order to fund on-going operations and pursue growth opportunities.  It is anticipated these funds will be sourced through asset disposals, farm downs, issuing new equity or combination of these actions. If this is not the case then the Group is forecast to have limited or no liquidity at the end of 2023, given continued drawing under the EFF during 2023.  The financial statements for the year to 31 December 2022 have been prepared assuming the Group will continue as a going concern.  In support of this, the directors believe the liquid nature of the Norwegian asset market combined with historical shareholder support, adequate funds can be accessed if and when required.  However, the ability to access funds is not guaranteed at the date of signing these financial statements. As a consequence, this funding requirement represents a material uncertainty that may cast significant doubt on the Group's ability to continue as a going concern.  The financial statements do not include any adjustments that would result from the basis of preparation being inappropriate.

1.5.  Medium term sustainability

In the medium term, new acquisitions and developments resulting from exploration success will require further equity capital and new debt facilities. In any of these circumstances the Company will require additional financing from the equity markets and the bank or credit markets. Availability of such financing is subject not only to market conditions but also a continued willingness of investors to finance oil and gas companies.

1.6.  Oil and Gas Assets

Capitalisation

Pre-acquisition costs on oil and gas assets are recognised in the Income Statement when incurred. Costs incurred after rights to explore have been obtained, such as geological and geophysical surveys, drilling and commercial appraisal costs and other directly attributable costs of exploration and appraisal including technical and administrative costs are capitalised as intangible exploration and evaluation ("E&E") assets. The assessment of what constitutes an individual E&E asset is based on technical criteria but essentially either a single licence area or contiguous licence areas with consistent geological features are designated as individual E&E assets.

E&E costs are not amortised prior to the conclusion of appraisal activities. Once active exploration is completed the asset is assessed for impairment. If commercial reserves are discovered then the carrying value of the E&E asset is reclassified as a development and production ("D&P") asset, following development sanction, but only after the carrying value is assessed for impairment and where appropriate the carrying value adjusted. If commercial reserves are not discovered the E&E asset is written off to the Income Statement.

Oil and gas assets include rights in respect of unproved properties. Property, plant and equipment, including expenditure on major inspections, and intangible assets are initially recognised in the Balance Sheet at cost where it is

1.6___ Oil and Gas Assets (continued)

probable that they will generate future economic benefits. This includes capitalisation of decommissioning and restoration costs associated with provisions for asset retirement.

Property, plant and equipment and intangible assets are subsequently carried at cost less accumulated depreciation, depletion and amortisation (including any impairment). Gains and losses on disposals are determined by comparing the proceeds with the carrying amounts of assets sold and are recognised in income, within interest and other income.

1.7.  License and Property Acquisition Costs

Exploration licence costs are capitalised in intangible assets. Licence and property acquisition costs are reviewed at each reporting date to confirm that there is no indication that the carrying amount exceeds the recoverable amount. This review includes confirming that exploration drilling is still under way or firmly planned, or that work is under way to determine that the discovery is economically viable. If no future activity is planned or the licence has been relinquished or has expired, the carrying value of the licence and property acquisition costs are written off through the statement of profit or loss and other comprehensive income. Upon recognition of proved reserves and internal approval for development, the relevant expenditure is transferred to oil and gas properties.

1.8.  Development Costs

Expenditure on the construction, installation or completion of infrastructure facilities such as platforms, pipelines and the drilling of development wells is capitalised within property, plant and equipment.

1.9.  Property, plant and equipment

Property, plant and equipment are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.

Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

Fixtures and fittings  20% straight line

Computers  33.33% straight line

The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the income statement.

1.10.  Non-current investments

A subsidiary is an entity controlled by the company. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.

1.11.  Impairment of tangible and intangible assets

At each reporting end date, the company reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs. Any evidence on the performance of the assets received following the end of the period, which could not have been established during the current period will be recognised in a subsequent period rather than in the current period.

1.11.  Impairment of tangible and intangible assets (continued)

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the 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 for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than the carrying amount, then the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of the recoverable amount, capped such that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

Impairment of intangible assets is assessed when facts and circumstances suggest that the carrying amount of an exploration and evaluation asset may exceed its recoverable amount. The facts and circumstances used are in accordance with those dictated by IFRS 6 and if any of those circumstances are present than and impairment test is performed in accordance with IAS 36 and any loss recognised. An exploratory well in progress at period end which is determined to be unsuccessful subsequent to the balance sheet date based on substantive evidence obtained during the drilling process in that subsequent period is treated as a non-adjusting subsequent event.

1.12.  Inventories

Materials and supplies inventories are valued at the lower of cost or net realisable value. The cost of materials is the purchase cost, determined on a first-in, first-out basis.

1.13.    Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held at call with banks, and other short-term liquid investments with original maturities of three months or less.

1.14.  Financial assets

Financial assets are recognised in the company's statement of financial position when the company becomes party to the contractual provisions of the instrument. Financial assets are classified into specified categories, depending on the nature and purpose of the financial assets.

At initial recognition, financial assets classified as fair value through profit and loss are measured at fair value and any transaction costs are recognised in profit or loss. Financial assets not classified as fair value through profit and loss are initially measured at fair value plus transaction costs.

Financial assets at fair value through profit or loss

When any of the above-mentioned conditions for classification of financial assets is not met, a financial asset is classified as measured at fair value through profit or loss. Financial assets measured at fair value through profit or loss are recognised initially at fair value and any transaction costs are recognised in profit or loss when incurred. A gain or loss on a financial asset measured at fair value through profit or loss is recognised in profit or loss and is included within finance income or finance costs in the statement of income for the reporting period in which it arises.

1.14.  Financial assets (continued)

Financial assets held at amortised cost

Financial instruments are classified as financial assets measured at amortised cost where the objective is to hold these assets in order to collect contractual cash flows, and the contractual cash flows are solely payments of principal and interest. They arise principally from the provision of goods and services to customers (eg trade receivables). They are initially recognised at fair value plus transaction costs directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment where necessary.

Financial assets at fair value through other comprehensive income

The Company has made an irrevocable election to recognise changes in fair value of investments in equity instruments through other comprehensive income, not through profit or loss. A gain or loss from fair value changes will be shown in other comprehensive income and will not be reclassified subsequently to profit or loss. Equity instruments measured at fair value through other comprehensive income are recognised initially at fair value plus transaction cost directly attributable to the asset. After initial recognition, each asset is measured at fair value, with changes in fair value included in other comprehensive income. Accumulated gains or losses recognised through other comprehensive income are directly transferred to retained earnings when an equity instrument is derecognised or its fair value substantially decreased. Dividends are recognised as finance income in profit or loss.

Impairment of financial assets

Financial assets, other than those measured at fair value through profit or loss, are assessed for impairment at each reporting end date.

For trade receivables and intercompany receivables, the Company applies a simplified approach in calculating ECLs. Therefore, the Company does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. Due to the nature of the balances the Company has determined that a provisions matrix is not appropriate and applies a scenario based approach to estimate lifetime ECL.

Derecognition of financial assets

Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership to another entity.

1.15.  Financial liabilities

The Company recognises financial debt when the Company becomes a party to the contractual provisions of the instruments. Financial liabilities are classified as either 'financial liabilities at fair value through profit or loss' or 'other financial liabilities'.

Financial liabilities at fair value through profit or loss

Financial liabilities are classified as measured at fair value through profit or loss when the financial liability is held for trading. A financial liability is classified as held for trading if:

· it has been incurred principally for the purpose of selling or repurchasing it in the near term, or

· on initial recognition it is part of a portfolio of identified financial instruments that the Company manages together and has a recent actual pattern of short-term profit taking, or

· it is a derivative that is not a financial guarantee contract or a designated and effective hedging instrument.

Financial liabilities at fair value through profit or loss are stated at fair value with any gains or losses arising on remeasurement recognised in profit or loss.

1.15.  Financial liabilities (continued)

Other financial liabilities

Other financial liabilities, including borrowings, trade payables and other short-term monetary liabilities, are initially measured at fair value net of transaction costs directly attributable to the issuance of the financial liability. They are subsequently measured at amortised cost using the effective interest method. For the purposes of each financial liability, interest expense includes initial transaction costs and any premium payable on redemption, as well as any interest or coupon payable while the liability is outstanding.

Derecognition of financial liabilities

Financial liabilities are derecognised when, and only when, the Company's obligations are discharged, cancelled, or they expire.

1.16.  Taxation

The tax expense represents the sum of the tax currently payable and deferred tax.

Current tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.

The Group benefits from tax legislation in Norway which allows tax to be reclaimed on specific exploration activity. This allows the Group to recognise a tax receivable.

Deferred tax

Deferred tax is the tax expected to be payable or recoverable 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 recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at each reporting end 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 is realised. Deferred tax is charged or credited in the income statement, 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 the Company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.

1.17.  Employee benefits

The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of inventories or non-current assets.

The cost of any unused holiday entitlement is recognised in the period in which the employee's services are received.

Termination benefits are recognised immediately as an expense when the Company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.

1.18.  Retirement benefits

Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.

1.19.  Leases

The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date plus any initial direct costs and an estimate of the cost of obligations to dismantle, remove, refurbish or restore the underlying asset and the site on which it is located, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of other property, plant and equipment. The right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are unpaid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company's incremental borrowing rate. Lease payments included in the measurement of the lease liability comprise fixed payments, variable lease payments that depend on an index or a rate, amounts expected to be payable under a residual value guarantee, and the cost of any options that the Company is reasonably certain to exercise, such as the exercise price under a purchase option, lease payments in an optional renewal period, or penalties for early termination of a lease.

The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in: future lease payments arising from a change in an index or rate; the Company's estimate of the amount expected to be payable under a residual value guarantee; or the Company's assessment of whether it will exercise a purchase, extension or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

All leases are accounted for by recognising a right-of-use asset and a lease liability except for:

· Leases of low value assets; and

· Leases with a duration of 12 months or less.

1.20.  Reserves

Share capital

Share capital represents the nominal value of shares issued less the nominal value of shares repurchased and cancelled.

Share premium

This reserve represents the difference between the issue price and the nominal value of shares at the date of issue, net of related issue costs and share premium cancelled.

Share based payment reserve

This reserve represents the potential liability for outstanding equity settled share options.

Retained earnings

Net revenue profits and losses of the Group which are revenue in nature are dealt with in this reserve.

Currency translation reserve

This reserve represents foreign exchange differences on the revaluation of the foreign subsidiary.

1.20.  Reserves (continued)

Other reserves

Other reserves relate to the nominal value of share capital repurchased and cancelled.Share based payments

Employees (including senior executives) of the Group receive remuneration in the form of share-based payment transactions which are equity settled. The cost of equity-settled transactions with employees is measured by reference to the fair value at the date on which they are granted. The fair value is determined by an external valuer using an appropriate pricing model.

The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (the "vesting date"). The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group's best estimate of the number of equity instruments that will ultimately vest. The Income Statement charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period.

The key areas of estimation regarding share based payments are: share price volatility; and estimated lapse rates.

No adjustments are made in respect of market conditions not being met, neither the number of instruments nor the grant-date fair value is adjusted if the outcome of the market condition differs from the initial estimate.

Where the terms of an equity-settled award are modified, the minimum expense recognised is the expense as if the terms had not been modified. An additional expense is recognised for any modification, which increases the total fair value of the share based payment arrangement, or is otherwise beneficial to the employee as measured at the date of modification.

Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph.

The dilutive effect of outstanding options is reflected as additional share dilution in the computation of earnings per share.

2.  Adoption of new and revised standards and changes in accounting policies

In the current year, the following new and revised Standards and Interpretations have been adopted by the company. None of these new and revised Standards and Interpretations had an effect on the current period or a prior period but may have an effect on future periods:

		Effective from:
IFRS 3 (Amendments)	Reference to the conceptual framework	1 January 2022
IAS 16 (Amendments)	Property, plant and equipment - proceeds before intended use	1 January 2022
IAS 37 (Amendments)	Onerous contracts - cost of fulfilling a contract	1 January 2022
Annual Improvements 2018-2020 cycle	Amendments to IFRS 1 (subsidiary as a first-time adopter), IFRS 9 (fees in the '10 percent' test for derecognition of financial liabilities), IFRS 16 (lease incentives), IAS 41 (taxation in the fair value measurements)	1 January 2022

Standards which are in issue but not yet effective

At the date of authorisation of these financial statements, the following Standards and Interpretations, which have not yet been applied in these financial statements, were in issue but not yet effective:

		Effective from:
IFRS 17	Insurance contracts	1 January 2023
IAS 1 and IFRS Practice Statement 2	Disclosure of accounting policies	1 January 2023
IAS 8 (Amendments)	Definition of accounting estimates	1 January 2023
IAS 12 (Amendments)	Deferred tax related to assets and liabilities arising from a single transaction	1 January 2023
IFRS 16 (Amendment)	Liability in a Sale and Leaseback	1 January 2024
IAS 1 (Amendments)	Classification of liabilities as current or non-current - deferral of effective date	1 January 2024
IAS 1 (Amendments)	Non-current Liabilities with covenants	1 January 2024

The Directors do not expect that the adoption of the Standards listed above will have a material impact on the financial statements of the Company aside from additional disclosures.

The Company plans to adopt the above standards when from the effective dates noted in the table above.

3.  Critical accounting estimates and judgements

In the application of the Group's accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised, if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are outlined below.

Exploration and evaluation assets (note 6 and 12)

Judgement is required to determine whether impairment indicators exist in respect of the Group's exploration assets recognised in the statement of financial position. The Group has to take into consideration whether the assets have suffered any impairment, taking into consideration the results of the drilling to date, and the likelihood of reserves being found. The Group relies upon information from third parties to take these decisions, and can be subject to change, if future information becomes available. As at 31 December 2022 the Group determined that impairment of £42.9 million was required in respect of the exploration licences detailed in note 6 and 12.

Post the period end the Egyptian Vulture licence was relinquished, with the partners being unable to agree on the way forward following extensive technical work. As the information that led to the decision to relinquish was established post year end, this is a non-adjusting post balance sheet event and is disclosed in the post balance sheet event note 27.  The balance of £11.4 million held in Intangibles at 31 December 2022 relating to Egyptian Vulture will be written off in 2023. 

Share-based payments (note 24)

Estimation is required in determining inputs to the share-based payment calculations, as detailed in note 24.

The fair value of the options were determined by an external valuation provider using an industry accepted pricing model. For the July and September 2020 awards, the vest date calculation required judgment to determine the point at which the Group and recipients had a shared mutual understanding of the terms of the awards. The Board consider that IPO Admission Document provided such a shared mutual understanding given the detailed disclosure of the terms of the scheme. Accordingly, the estimated fair value of the awards has been spread over the vesting period which commenced at IPO. For the awards issued during 2021 and 2022, the vesting period was seen to commence on date of issue.

Cost Allocation

In 2021 the issue of new shares needs to be treated in accordance with IAS 32. According to IAS 32, the costs of issuing new shares and a stock market listing should be accounted for as follows:

· Incremental costs that are directly attributable to issuing new shares should be deducted from equity, share premium, (net of any income tax benefit) - IAS 32.37; and

· Costs that relate to the stock market listing or are otherwise not incremental and directly attributable to issuing new shares, should be recorded as an expense in the statement of profit or loss and other comprehensive income.

3.  Critical accounting estimates and judgements (continued)

In 2021 the directors exercised judgement in allocation of the costs that relate to both share issuance and listing. These were allocated between those functions on a rational and consistent basis. In the absence of a more specific basis for apportionment, an allocation of common costs based on the proportion of new shares issued to the total number of (new and existing) shares listed is an acceptable approach. The total costs that were deducted from share premium in 2021 were £2.57 million. These are all directly attributable to the issue with the remainder of the costs (£0.45 million) being expensed in 2021 as they were related but not directly attributable. These are accounted for through administrative expenses in the 2021 Statement of Profit or Loss and Other Comprehensive Income.

4.  Employees

GROUP

The average monthly number of persons (including directors) employed by the group and company during the year was:

	2022		2021
	Number		Number
Executive Directors	3		3
Non-executive Directors	5		4
Staff	10		4
Total	18		11

Their aggregate remuneration comprised:

	2022		2021
	£		£
Wages and salaries	2,689,361		1,703,062
Social security costs	448,417		245,771
Pension costs	245,776		133,047
Foreign currency gains/(losses)	31,767		(33,844)
Share based payment charge	306,439		255,737
	3,721,760		2,303,773

Foreign currency gains arise on remuneration due to one of the executive director's salaries being declared in GBP and paid in NOK.

The remuneration of the highest paid director is shown below.

		Taxable	Annual
	Salary	Benefits	Bonus1	Pension	Total
Helge Hammer	294,643	1,749	55,580	23,553	375,525

¹  2021 performance bonus was not paid in 2021 but was paid in 2022 as it was conditional upon resolution of uncertainty around EFF facility following the tax changes in Norway

5.  Finance income

GROUP	2022		2021
	£		£
Interest income
Bank deposits	150,869		11,412

Total interest income for financial assets that are not held at fair value through profit or loss is £150,869 (2021: £11,412).

6.  Operating loss

GROUP	2022		2021
	£		£
Operating loss for the year is stated after charging/(crediting):
Exchange (gain)/loss	(703,935)		151,369
Fees payable to the company's auditors for the audit of the parent
company and consolidated financial statements	65,000		20,190
Fees payable to the company's auditors for the audit of the subsidiary	18,304		16,000
Other assurance services	23,000		126,000
Depreciation of property, plant and equipment	141,658		30,057
Costs associated with share issue	-		451,000
Share-based payments	306,439		255,787
Executive director's remuneration	831,772		799,860
Non-executive director remuneration	349,580		262,938
Wages and salaries	1,539,776		640,264
Pensions and payroll taxes	694,193		344,924

7.  Auditor's remuneration

	2022		2021
GROUP	£		£
Fees payable to the company's auditor and associates:
For audit services
Audit of the parent company and consolidated financial statements	65,000		20,190
Audit of subsidiary financial statements	18,304		16,000

During the year the auditor provided no non-audit services in relation to their work as Reporting Accountant.  In 2021 the auditors provided non-audit services as Reporting Accountant on the Re-Admission to AIM (2021: £110,000). The auditor provided non-audit services in relation to interim review of £23,000 (2021: £16,000)

8.  Finance costs

	2022		2021
GROUP	£		£
Interest on bank overdrafts and loans	938,519		160,701
Commitment fee	344,296		224,978
Amortised loan fees	206,039		98,848
	1,488,854		484,527

In 2021 the Group entered into a rolling exploration funding facility with 1 SR-Bank ASA and ING Bank N.V. in Norway to allow funding for exploration activities to take place. The loan interest charged on drawings under the facility is a margin of 2.50% p.a. plus NIBOR. For the undrawn loan amount, a commitment fee equal to 40% of the margin is charged.

On 9 January 2023 a new facility agreement was signed, see note 18 for further details.

9.  Exploration and evaluation impairments

	2022		2021
GROUP	£		£
Amounts written off on exploration activity	(42,877,022)		(6,399,134)

During the year, on completion of committed exploration activity, the Directors have evaluated the potential future cashflows from each licence. If drilling was completed, no commercial reserves discovered and no further prospectivity identified, then the license was deemed to be fully impaired.  For licenses where further appraisal would be required to confirm possible further prospectivity, a judgement has been made, based on operator/partnership interest in further appraisal, and on the likely outcome of possible appraisal/development activity, to assess whether the license should be written off.  On conclusion of this assessment the Directors have concluded it is appropriate to write off the value of the wells and associated licence costs for PL901 Rodhette; PL1060 Ginny/Hermine; PL1049 Cambozola, and PL1017 Copernicus. 

Further information in respect of subsequent events in relation to the carrying value of Egyptian Vulture can be found in note 27 and 12.

10.  Income tax (credit)/expense

	2022		2021
GROUP	£		£
Current tax (credit)
Foreign tax on losses for the current period	(41,029,957)		(25,971,588)
Deferred tax
Origination and reversal of temporary differences	7,114,216		19,059,826
Total tax (credit)	(33,915,741)		(6,911,762)

The charge for the year can be reconciled to the loss per the income statement as follows:

	2022		2021
	£		£
Loss before taxation	(49,388,347)		(11,592,382)
Expect tax credit based on a corporation tax rate of 19.00%
(2021: 19.00%)	(9,383,786)		(2,202,553)
Effect of expenses not deductible in determining taxable profit	2,577,668		581,294
Effect of overseas tax rates	6,443,339		1,353,298
Deferred tax not recognised	363,064		442,003
Foreign taxes and reliefs	(33,915,741)		(6,911,762)
Remeasurement of deferred tax for changes in tax rates	-		(172,264)
Fixed asset differences	(285)		(1,778)
Taxation credit for the year	(33,915,741)		(6,911,762)

Unused tax losses in the UK on which no deferred tax asset has been recognised as at 31 December 2022 was £4,783,533 (2021: £2,871,071) and the potential tax benefit was £1,195,884 (2021: £717,768, updated to £832,820 to reflect the effect of a change to the tax rate). Deferred tax assets, including those arising from temporary differences, are recognised only when it is considered more likely than not that they will be recovered, which is dependent on the generation of future assessable income of a nature and of an amount sufficient to enable the benefits to be utilised. The current tax (rebate) of £40.8 million (NOK 483.4 million) represents what will be paid out during 2023 according to Norwegian Tax Legislation. The deferred tax charge represents mainly the tax portion on capitalised intangibles being deductible for tax purposes.

11.  Earnings per share

	2022		2021
GROUP	£		£
Number of shares
Weighted average number of ordinary shares for basic earnings per
share	56,666,665		36,082,191
Earnings
Earnings for basic and diluted earnings per share being net loss
attributable to equity shareholders of the Company for continued
operations	(15,472,606)		(4,680,620)
Basic and diluted earnings per share (expressed in pence)
From continuing operations	(27.30)		(12.97)

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of shares outstanding during the period.

Diluted earnings per share is calculated using the weighted average number of shares adjusted to assume the conversion of all dilutive potential ordinary shares. 2,510,216 (2021: 2,281,667) of share options and awards are not included because they are anti-dilutive.

12.  Exploration and evaluation assets

	2022		2021
GROUP	£		£
Cost
At 1 January	23,988,754		-
Additions - purchased	53,588,635		29,716,850
Foreign currency adjustments	(38,932)		671,038
Exploration write-off	(42,877,021)		(6,399,134)
At 31 December	34,661,436		23,988,754
Carrying amount
At 31 December	34,661,436		23,988,754

During the year, the Group acquired working interests in two exploration wells on the Norwegian Continental Shelf, 20% in PL1100 ("Oswig") and a 40% in PL1016 ("Velocette"), which completed on 1 July 2022. 

On 11 January 2023, the Group were awarded 3 licenses under the Norwegian APA.

Details of licence write-offs in the year can be found in Note 9.

Post the period end the Egyptian Vulture licence was relinquished with the partners being unable to agree on the way forward following extensive technical work. As the information that led to the decision to relinquish was established post year end, this is a non-adjusting post balance sheet event and is disclosed in the post balance sheet event note 27.  The balance of £11.4 million held in Intangibles at 31 December 2022 relating to Egyptian Vulture will be written off in 2023. 

13.  Property, plant and equipment

		Right of use assets		Fixtures and fittings		Computers		Total
GROUP		£		£		£		£
Cost
At 1 January 2021		-		-		14,605		14,605
Additions Disposal Foreign currency adjustments		580,044 - -		3,340 - -		37,869 (15,322) (119)		621,253 (15,322) (119)
At 31 December 2021		580,044		3,340		37,033		620,417
Additions		-		42,570		17,333		59,903
Foreign currency adjustments		3,516		21		55		3,592
At 31 December 2022		583,560		45,931		54,421		683,912
Accumulated depreciations and
impairment
At 1 January 2021		-		-		2,807		2,807
Charge for the year Eliminated on disposal Foreign currency adjustments		20,015 - (680)		167 - -		9,875 (2,050) (26)		30,057 (2,050) (706)
At 31 December 2021		19,335		167		10,606		30,108
Charge for the year		117,099		7,772		16,787		141,658
Foreign currency adjustments		(270)		(343)		(744)		(1,357)
At 31 December 2022		136,164		7,596		26,649		170,409
Carrying amounts
At 31 December 2022		447,396		38,335		27,772		513,503
At 31 December 2021		560,709		3,173		26,427		590,309

14.  Inventories

	2022		2021
GROUP	£		£
Materials and supplies	123,432		92,798

Closing inventories are equal to their net realisable value.

15.  Trade and other receivables

	2022		2021
GROUP	£		£
Non-current
Prepayments	98,368		-
Current
Trade receivables	14,073		22,662
Taxes recoverable	182,160		81,737
Other receivables	23,144		40,462
Prepayments	715,541		991,220
	934,918		1,136,081
	1,033,286		1,136,081

16.  Current tax recoverable

	2022		2021
	£		£
GROUP
Current tax receivables	40,755,157		8,149,906

17.  Trade and other payables and current financial liabilities

	2022		2021
GROUP	£		£
Trade payables	2,840,806		580,084
Accruals	1,373,032		2,753,202
Social security and other taxation	302,900		239,922
Other payables	708,760		1,198,959
Trade and other payables	5,225,497		4,772,167
Exploration Financing Facility	36,761,340		-
Short term bank borrowing	36,761,340		-

The directors consider that the carrying amount of trade and other payables approximates to their fair value.

17.  Trade and other payables and current financial liabilities (continued)

Exploration Financing Facility (EFF)

During 2022 Longboat Energy Norge AS had access to the Exploration Financing Facility, with an aggregate commitment of NOK 600 million (approximately £50.6 million).  On 9 January 2023 an extension to the facility agreement was signed, with aggregate commitment of NOK 800 million (approximately £67.5 million) and a margin of 3.5% over NIBOR, drawdowns allowable until December 2024, repayment of final drawdowns due by November 2025.

Drawdowns can be made under the facility up to a balance equal to approximately 68% of the total exploration and G&A spend for the period.  On receipt of the 71.8% tax refund on exploration activity and G&A costs, received in November following the year of expenditure, the related drawdowns must be repaid in full.  

18.  Lease liabilities

GROUP

The Group has lease contracts for buildings used in its operations. The Group has a lease for its Stavanger office which was signed in September 2021. The Group's obligations under its leases are secured by the lessor's title to the leased assets.

Set out below are the carrying amounts of right of use assets recognised and the movements during the period:

	2022		2021
	£		£
At 1 January	560,709		-
Additions	-		585,706
Depreciation charge for the year	(117,099)		(20,015)
Foreign exchange	3,786		(4,982)
At 31 December	447,396		560,709

Set out below are the carrying value of lease liabilities and the movements.

	2022		2021
	£		£
At 1 January	582,802		-
Additions	-		585,706
Interest	14,510		2,758
Payments made	(103,812)		-
Foreign exchange	(3,920)		(5,662)
At 31 December	489,580		582,802

	2022		2021
	£		£
Within one year	122,612		96,172
In two to five years	366,968		486,630
	489,580		582,802

18.  Lease liabilities (continued)

	£		£
Maturity analysis
Within one year	134,971		111,799
In two to five years	382,419		514,273
Total undiscounted liabilities	517,390		626,072
Future finance charges and other adjustments	(27,810)		(43,270)
Lease liabilities in the financial statements	489,580		582,802

Amounts recognised in profit or loss include the following:	£		£
Depreciation expense of right of use assets	117,099		19,335
Foreign exchange on depreciation	-		680
Interest expense for right of use liabilities	(14,510)		2,758

19.  Deferred taxation

GROUP

The following are the deferred tax liabilities and assets recognised and movements thereon during the current and prior reporting period.

			ACAs
			£
Deferred tax balance at 1 January 2021			431
Deferred tax movements in prior year
Differences in tax basis for offset of tax losses in Norway Foreign exchange			19,059,825 (293,401)
Deferred tax liability at 31 December 2021			18,766,424
Deferred tax movements in current year
Differences in tax basis for offset of tax losses in Norway			7,114,216
Foreign exchange			(143,742)
Deferred tax liability at 31 December 2022			25,736,898

Deferred tax assets and liabilities are offset in the financial statements only where the company has a legally enforceable right to do so. The group has tax losses that arose within Longboat Energy Norge AS that are available indefinitely for offsetting against future taxable profits. These tax losses have not been recognised as a deferred tax asset on the basis that there are yet no future taxable profits available within the company which will allow it to be offset.  The value of the tax loss carry forward as per 31 December 2022 is £3.7 million.  

The Group has not recognised a deferred tax asset within Longboat Energy plc, as there is no evidence to support their recoverability in the near future.

20.  Financial risk management

The Group is exposed to financial risks through its various business activities. In particular, changes in interest rates and exchange rates can have an effect on the capital and financial situation of the Group. In addition, the Group is subject to credit risks.

The Group has adopted internal guidelines, which concern risk control processes and which regulate the use of financial instruments and thus provide a clear separation of the roles relating to operational financial activities, their implementation and accounting, and the auditing of financial instruments. The guidelines on which the Group's risk management processes are based are designed to ensure that the risks are identified and analysed across the Group. They also aim for a suitable limitation and control of the risks involved, as well as their monitoring.

The Group controls and monitors these risks primarily through its operational business and financing activities.

Credit Risks

The credit risk describes the risk from an economic loss that arises because a contracting party fails to fulfil their contractual payment obligations. The credit risk includes both the immediate default risk and the risk of credit deterioration, connected with the risk of the concentration of individual risks. For the Group, credit and default risks are concentrated in the financial institutions in which it places cash deposits.

The Group's policy is to place its cash with banks with an appropriate credit rating in accordance with the Company's Treasury Risk Management Policy.

Notwithstanding existing collateral, the amount of financial assets indicates the maximum default risk in the event that counterparties are unable to meet their contractual payment obligations. The maximum credit default risk amounted to £12,096,778 (2021: £26,345,191) at the balance sheet date, of which £12,059,561 (2021: £26,282,067) was cash on deposit at banks.

Liquidity Risks

Liquidity risk is defined as the risk that a company may not be able to fulfil its financial obligations. The Group manages its liquidity by maintaining cash and cash equivalents sufficient to meet its expected cash requirements. The Group has highlighted a material uncertainty around its liquidity in the audit report and the going concern note.

At 31 December 2022, the Group had cash on deposit of £12,059,561 (2021: £26,282,067).

Market Risks

Interest Rate Risks

Interest rate risks exist due to potential changes in market interest rates and can lead to a change in the fair value of fixed-interest bearing instruments, and to fluctuations in interest payment for variable interest rate financial instruments.

The Group is exposed to Interest rate risks through the Groups Exploration Facility in Norway.  The table below shows the impact in GBP on pre-tax profit and loss of a 10% increase/decrease in the interest rates, holding all other variables constant.:

	2022		2021
Interest rate increase/decrease by 10%	80,740		-

20.  Financial risk management (continued)

The Group is exposed to interest rate risks on cash held on deposit at banks. Interest income for the year to 31 December 2022 was £150,869 (2021: £11,412). These accounts are maintained for liquidity rather than investment, and the interest rate risk on deposits is not considered material to the Group.

Currency risks

The Group operates in the UK and Norway, incurs expenses in sterling, United States dollars and Norwegian kroner ("NOK"), and holds cash in sterling, US dollars and NOK. The Group incurs some expenditure in foreign currency when the investment policy requires services to be obtained overseas. The foreign exchange risk on these costs is not considered material to the Group.

The Group's exposure to foreign currency risk at the end of the reporting period is summarised below. All amounts are presented in GBP equivalent.

	2022		2021
Cash and cash equivalents	9,409,636		11,804,980
Trade and other receivables	41,309,057		1,104,580
Trade and other payables including borrowings	(41,129,225)		(4,693,250)
Lease liabilities	(489,580)		(582,803)
Net exposure	9,099,888		7,633,507

Sensitivity analysis

As shown in the table above, the Company is exposed to changes in exchange rates through its balances held in non-GBP. The table below shows the impact in GBP on pre-tax profit and loss of a 10% increase/decrease in the exchange rates, holding all other variables constant.

	2022		2021
Exchange rate increases by 10%	1,011,099		848,167
Exchange rate decrease by 10%	(827,263)		(693,955)

21.  Retirement benefit schemes

	2022		2021
GROUP	£		£
Defined contribution schemes
Charge to profit or loss in respect of defined contribution schemes	245,613		133,047

The Group does not operate any defined benefit contribution schemes.

22.  Share Capital

GROUP	2022	2021	2022	2021
	Number	Number	£	£
Ordinary share capital
Issued and fully paid
Ordinary of 10p each of 10p each	56,666,665	56,666,665	5,666,665	5,666,665

23.  Share premium account

	2022		2021
	£		£
At 1 January	35,570,411		7,808,660
Issues of new shares	-		30,333,334
Costs of share issues	-		(2,571,583)
At 31 December	35,570,411		35,570,411

24.  Share option reserve

	2022		2021
	£		£
At 1 January	353,550		97,763
Arising in the year	306,899		255,787
At 31 December	660,449		353,550

During the year, Longboat Petroleum plc operated three share incentive schemes: the Founder Incentive Plan (FIP), the Long-Term Incentive Plan (LTIP) and the Co-investment plan (CIP). Details of the schemes are summarised below:

Founder Incentive Plan

Under the FIP, the founders are eligible to receive 15% of the growth in returns of the Company from its Admission to AIM in November 2019 over a five year period. The awards are expressed as a percentage of the total maximum potential award, being 10% of the Company's issued share capital.

Should a hurdle of doubling of the Total Shareholder Return ("TSR") over the five-year period be met, the awards will be converted into nil cost options over ordinary shares of 10p each in the share capital Company. The hurdle is adjusted for any capital raises that occur during the performance period, including the share placing on 10 June 2021, and for any additional value to accrue to the founders, those placing shares will need to increase by the same hurdle but as adjusted for time to reflect the shorter period between the date of the placing and the original measurement dates in years three to five.

24.  Share option reserve (continued)

For the purpose of determining the fair value of an award, the following assumptions have been applied and a valuation calculation run through the Monte Carlo Model:

Grant date - 3 July 2020 and 24 September 2020	£
Weighted average share price at grant date	0.78
TSR performance	-
Risk free rate	-0.08%
Dividend yield	-
Volatility of Company share price	50.44%

The risk-free rate assumption has been set as the yield as at the calculation date on zero coupon government bonds of a term commensurate with the remaining performance period.

The historical 3 year volatility of the constituents of the FTSE AIM Oil & Gas supersector, as of the date of grant, was used to derive the volatility assumption.

The weighted average exercise price of outstanding options is nil.

The weighted average remaining contractual life as at 31 December 2022 is 15 months.

Co-Investment Plan (CIP) awards

The awards granted under the CIP are nil cost options to acquire Matching Shares being ordinary shares of 10p each in the share capital of the Company. The awards are subject to a share price performance condition, where the share price growth over the vesting period must be greater than 30%. No options will vest if this condition is not met.

For the purpose of determining the fair value of an award, the following assumptions have been applied and a valuation calculation run through the Monte Carlo Model:

Grant date	10 Feb 22 (Part A)	10 Feb 22 (Part B)	02 Jul 21
Performance period (years)	3	3	3
Share price at grant date	£0.57	£0.57	£0.70
Exercise price	£0.10	£0.10	£0.10
Risk free rate	1.35%	1.35%	15.00%
Dividend yield	0%	0%	0%
Volatility of Company share price	50%	50%	51.00%
Fair value per award	£0.19	£0.24	£0.38
	2022	2021	Weighted average fair
	No.	No.	value (£ per share)
Outstanding at beginning of the period	639,900	-	£0.38
Granted during the period	154,605	639,900	£0.21
Forfeited during the period	-	-	-
Exercised during the period	-	-	-
Expired during the period	-	-	-
Outstanding at the end of the period	794,505	639,900	£0.35
Exercisable at the end of the period	-	-	-

The weighted average exercise price of outstanding options is £0.10.

24.  Share option reserve (continued)

The weighted average remaining contractual life as at 31 December 2022 is 15 months.

Long Term Incentive Plan

The awards issued under the LTIP are nil-cost options to acquire ordinary shares in the Company, subject to a performance condition.

For the purpose of determining whether the condition has been met, the TSR of the Company is measured over the three year performance period, commencing at the grant date. The return index is averaged over the 30 dealing day period prior to the start of the performance period and over the final 30 days of the performance period.

The awards have been valued using the Monte Carlo model, which calculates a fair value based on a large number of randomly generated simulations of the Company's TSR.

Grant date	7 Jan 22	12 Aug 22	8 Nov 21	1 Oct 21	2 Jul 21	2 Jul 21	24 Sep 20
Weighted average share price at grant date	£0.624	£0.43	£0.705	£0.78	£0.72	£0.72	£0.885
TSR performance	-	-	-	-	-	-	-
Risk free rate	0.85%	1.96%	n/a	0.60%	0.09%	0.15%	-0.1%
Dividend yield	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%
Volatility of Company share price	50%	52%	n/a	50.00%	51.00%	51.00%	58.00%
Weighted average fair value	£0.27	£0.23	£0.33	£0.36	£0.27	£0.33	£0.33

The risk-free rate assumption has been set as the yield as at the calculation date on zero-coupon government bonds of a term commensurate with the remaining performance period.

The historical three year volatility of the constituents of the FTSE AIM Oil & Gas supersector, as of the date of grant, was used to derive the volatility assumption.

	2022		2021
Outstanding at 1 January	1,316,500		40,000
Awarded during the year	244,100		1,375,100
Exercised during the year	-		-
Expired during the year	-		(98,600)
Outstanding at the 31 December	1,560,600		1,316,500
Exercisable at the 31 December	-		-

The weighted average exercise price of outstanding options is £0.10.

The weighted average remaining contractual life as at 31 December 2021 is 18 months.

25.  Currency translation reserve

	2022		2021
GROUP	£			£
At the beginning of the year	580,996		549
Currency translation differences	(19,754)		580,447
At the end of the year	561,242		580,996

The currency translation reserve relates to the movement in translating operations denominated in currencies other than sterling into the presentation currency.

26.  Related party transactions 

Remuneration of key management personnel

Members of the Board of Directors are deemed to be key management personnel. Key management personnel compensation for the financial period is the same as the Director remuneration set out in the Corporate Governance Statement.

Other information

Directors' interests in the shares of the Company in the current and prior period, including family interests, were as follows:

Ordinary shares

	2022*	2021*
Helge Hammer	837,023	837,023
Jonathan Cooper	333,432	333,432
Graham Stewart	350,000	350,000
Jorunn Saetre	51,667	51,667
Nick Ingrassia	179,023	179,023
Julian Riddick (PDMR)	272,648	272,648
Hilde Salthe (PDMR)	11,805	11,805

*As at the date of publication of the Report and Accounts for each respective year

Under IAS 24 section 4, all intragroup transactions which have been eliminated on consolidation are exempt from being disclosed as the Group has prepared consolidated financial statements.

The Group does not have one controlling party.

27.  Subsequent Events

Post the period end the Egyptian Vulture licence was relinquished with the partners being unable to agree on the way forward following extensive technical work. As the information that led to the decision to relinquish was established post year end, this is a non-adjusting post balance sheet event. The balance of £11.4 million held in Intangibles at 31 December 2022 relating to Egyptian Vulture will be written off in 2023. 

On 9 January 2023 an extension to the Exploration Finance Facility (EFF) agreement was signed, with aggregate commitment of NOK 800 million (approximately £67.5 million), drawdowns allowable until December 2024, repayment of final drawdowns due by November 2025.

The 11 January 2023 Longboat Energy announced the award of 3 new licences under the Norwegian 2022 APA Licensing Round (Awards in Predefined Areas): PL1182 S Lotus Block 35/10 (Company 30%); PL1100C Oswig South Extension (Company 20%) and PL293 CS Kveikje Discovery Extensions (Company 10%). 

Under the Malaysian Bid Round ('MBR') 2022 Longboat, via its subsidiary Longboat Energy (2A) Limited, has been awarded by Petroliam Nasional Berhad ('PETRONAS') a Production Sharing Contract ("PSC") for Block 2A, a large exploration block offshore Sarawak. Longboat will become operator with a 36.75% interest in the PSC alongside partners Petronas Carigali Sdn. Bhd (40%), Petroleum Sarawak Exploration & Production Sdn. Bhd. (7.5%) and Topaz Number One Limited (15.75%).

28.  Cash absorbed by operations

	2022		2021
GROUP	£		£
Loss for the year after tax before other comprehensive income	(15,472,606)		(4,680,620)
Adjustments for
Unrealised Foreign Exchange	202,550		-
Taxation credited	(33,915,741)		(6,911,763)
Exploration write-off	42,877,022		6,399,134
Release of prepaid bank fees	206,039		103,517
Interest payable	1,283,102		481,769
Interest receivable	(150,869)		(11,412)
Depreciation	137,872		27,982
Lease interest	14,510		2,758
Equity settled share based payment expense	306,439		255,736
Movements in working capital:
Increase in inventories	(30,634)		(92,798)
Decrease in trade and other receivables	71,520		104,906
Increase in trade and other payables	907,808		571,544
Cash absorbed by operations	(3,562,988)		(3,749,247)

29.  Cash flows related to borrowing and debt

		Current bank borrowings		Finance lease liabilities			Total
At January 2022		-		582,802			582,802
Cash flows							-
Cash payments on lease		-		(103,812)			(103,812)
Loan drawdown		36,761,340		-			36,761,340
Interest and fees paid		(1,283,102)
Non-cash adjustments							-
Interest and fees accrued		1,283,102		10,590			10,590
At 31 December 2022		36,761,340		489,580			37,250,920

		Current bank borrowings		Finance lease liabilities		Total
At January 2021		-		-		-
Cash flows						-
Cash payments on lease		-				-
Loan drawdown		-		-		-
Interest and fees paid		(1,088,612)		-		(1,088,612)
Non-cash adjustments						-
Finance lease entered into		-		580,044		580,044
Interest and fees accrued		1,088,612		2,758		1,091,370
At 31 December 2021		-		582,802		582,802

Standard

Estimates of reserves and resources have been prepared in accordance with the June 2018 Petroleum Resources Management System ("PRMS") as the standard for classification and reporting with an effective date of 31 December 2020.

Review by Qualified Person

The technical information in this release has been reviewed by Hilde Salthe, Managing Director Norge, who is a qualified person for the purposes of the AIM Guidance Note for Mining, Oil and Gas Companies. Ms Salthe is a petroleum geologist with more than 20 years' experience in the oil and gas industry. Ms Salthe has a Masters Degree from Faculty of Applied Earth Sciences at the Norwegian University of Science and Technology in Trondheim.

Glossary

"boe"	Barrels of oil equivalent
"bpd"	Barrels per day
"mmboe"	Million barrels of oil equivalent
"mmscf"	Million standard cubic feet
"mmscfd"	Million standard cubic feet per day
"scf"	Standard cubic feet
"stb"	Stock tank barrels

 

END

 

 

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