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Advance Energy PLC (ADV)

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Thursday 23 September, 2021

Advance Energy PLC

Final Results

RNS Number : 6191M
Advance Energy PLC
23 September 2021
 

 

23 September 2021

Advance Energy PLC

("Advance Energy" or the "Company")

Final Results for the Year Ended 30 April 2021

Advance Energy announces its audited results for the financial year ended 30 April 2021.

Copies of the Annual Report and Accounts will be posted to shareholders and made available on the Company's website at: www.advanceplc.com .

Enquiries:

 

Advance Energy plc

Leslie Peterkin (CEO) / Stephen West (CFO)

+44 (0)1624 681 250

 

 

 

Strand Hanson Limited (Financial and Nominated Adviser)

Rory Murphy / James Harris/ James Bellman

+44 (0)20 7409 3494

 

 

 

 

Buchanan (Public Relations)

Ben Romney / Jon Krinks 

+44 (0)20 7466 5000

 

   

Tennyson Securities Limited (Joint Broker)

Peter Krens / Ed Haig-Thomas

+44 (0)20 7186 9030

 

 

Optiva Securities Limited (Joint Broker)

Christian Dennis

+44 (0)20 3411 1881

 

 

 

 

 

CHAIRMAN'S REPORT

 

I'm pleased to provide the following statement to support the final results for the year ended 30 April 2021. This was the first full year of Advance Energy, having established the rebranded company in February 2020 and set out our strategic objectives in March 2020. Those objectives focused on growing the Company through strategic partnerships on compelling projects where we could identify and unlock material upside with a view to establishing near-term cash flow and significant value accretion. I'm pleased to report that the Company made big strides towards our long-term objectives in this first year.

The reverse takeover transaction that saw Advance Energy farm into the Buffalo Field in East Timor alongside Carnarvon Petroleum is the perfect embodiment of our strategy given the proven resources and the highly material cash flow that we believe can be unlocked from that asset. It also saw us establishing a 50/50 joint venture alongside an Operator with a strong track record in the region and a shared vision for the potential that remains in the Buffalo Field.

We were delighted to complete that transaction in April of this year, having completed an equity placing of £21.8m with new and existing shareholders.  The fact that we were able to raise that equity, at a time when the market conditions were particularly challenging, reflects the differentiated nature of our investment proposition and the quality of the opportunity that we presented to our shareholders and the market.

The focus since completion has been to work alongside Carnarvon Petroleum in order to prepare for the much anticipated Buffalo-10 well, which is designed to test the significant attic oil accumulation remaining after the original development, and to enable us to convert the 2C resources of 34.3 MMstb into 2P reserves following re-certification.  In that regard we were delighted to recently announce the signing of a rig contract with Valaris that will see the joint venture spudding the Buffalo-10 well in late October or early November 2021. In the event that this well is successful and validates the current technical evaluation, it will be truly transformational for the Company and deliver significant cash flow over a short time frame.

At the time of announcing the farm-in, the oil price was US$50/bbl Brent and the independently verified economics of the project were very compelling indeed. Pleasingly, the oil price has strengthened and stabilised through the calendar year, and at the current pricing of circa US$70/bbl the project economics are even more compelling, resulting in the potential for exceptional cash flow generation and rates of return in a success case.  The joint venture has also undertaken a lot of technical assessment with regards to the various development concepts that would be required to bring the Buffalo field on stream, including the possibility of a phased approach to deliver even earlier production and associated cash flow.

The Advance Energy team are, of course, pragmatic about the risks associated with the well. With multiple decades of combined industry experience between us, we are cognisant of the operational and geological hurdles in front of us. That said, the Buffalo project was selected on the strength of its risk versus reward ratio - with low geological risk relative to the upside achievable in the success case.

As well as progressing the Buffalo project to a drill ready status, the team has also been actively seeking to diversify the portfolio in line with the strategic vision.  To support this, we have relinquished the legacy assets that we inherited in the UK, whilst also focusing on business development of opportunities that meet our investment criteria. We are actively screening numerous opportunities and hope to bring some of these into fruition in the current fiscal year. The market drivers for our business development strategy remain the same, as IOCs and larger independents continue to divest of assets to conform with their energy transition strategies. Smaller industry players are also more focused on innovative and technical solutions to unlock hidden value from existing resources, and the Advance Energy team brings specific capabilities in this regard. As such, we continue to position the Company as a highly competent industry counterparty that can support the objectives of our partners and look forward to providing more information on our business development activities as our ongoing discussions progress.

From a corporate standpoint our focus has been on cost discipline and developing an appropriate ESG agenda. The first point is a core strategic objective for the Company, recognising the importance of cash preservation and financial efficiency. The second point is now a strategic priority for all companies, irrespective of sector, but is particularly important for energy companies given the increasing focus on climate change. Advance Energy seeks to balance its appreciation of climate change and commitment to environmental stewardship with the (still) growing demand for hydrocarbons and the positive socio-economic impact they play in developing economies such as Timor-Leste. It is for this reason that we prioritise ESG in our business development process, to ensure we are partnering with quality operators who have a firm commitment to operational excellence. We strive to consider all ESG factors when screening new opportunities to ensure they meet with our required standards and those of our wider stakeholders.

In summary, it has been a very eventful year for Advance Energy, and we are pleased to have delivered on all the objectives we set ourselves when we embarked on this journey in February 2020. The fact that we have managed to do so against the backdrop of a global pandemic and wildly volatile commodity environment is particularly satisfying and speaks volumes of the team we have assembled. We have built a good platform from which to grow and look forward to the future with much excitement and anticipation.  Finally, I'd like to thank all our shareholders for their support and faith in the management team and our strategy. We look forward to providing regular updates throughout the Buffalo-10 well and hope to be issuing good news around the end of the calendar year.

 

Mark Rollins

Non-Executive Chairman

21 September 2021

DIRECTORS' REPORT

 

The Directors present their report and the audited financial statements for the year ended 30 April 2021.

Principal activities, business review and future developments

The principal activity of Advance Energy plc during the year was oil appraisal and development in the Democratic Republic of Timor-Leste. Further details on the activities of the Group are provided in the Review of Operations. 

Impact of COVID-19

The global COVID-19 pandemic required us, like many of our peers, to alter our operational plans and implement strict safety protocols to protect our staff and our local community. Our operational activity was not affected. Ultimately the Company was able continue with the day to day activities with minimal affect. Whilst there are still certain restrictions imposed on our activities by the crisis, we are confident of our ability to adapt to this dynamic situation and continue our day to day activities.

Results and dividends

Loss on ordinary activities after taxation amounted to US$2,854,000 (30 April 2020: US$1,231,000). The Directors do not recommend the payment of a dividend (30 April 2020: US$Nil).

Review of Operations and Business Activity

On 1 June 2020 the Company appointed Mr Stephen West as Chief Financial Officer and Executive Director of the Company Board and Mr Graham Smith resigned as Non-Executive Director. In addition, Mr Ross Warner stepped down from his Executive Director position and assumed the role of Non-Executive Director on the same date.

 

On 14 September 2020 the Company announced that the Company's wholly owned subsidiary Resolute Oil & Gas (UK) Limited's 8% non-operated working interest in the P1918 Licence would expire, together with the other joint venture participant's interests, on 31 January 2021. This followed the completion of an earlier appraisal drilling programme by the Operator of the licence, Corallian Energy Limited, and a subsequent evaluation of the P1918 Licence which resulted in a recommendation to the joint venture that the licence not be renewed when the second term expires on 31 January 2021 based on the conclusion that the Colter South discovery could not be commercially developed.

 

On 7 October 2020 the Company announced that it had entered into a Deed of Termination and Release with PT Petroenim Betun-Selo and PT Celebes Artha Ventura in relation to the Operating Services & Option Agreement for production on the Betun-Selo KSO field in Sumatra, Indonesia.

 

On 12 November 2020 the Company announced that it had raised £300,000 through the issue of 136,363,636 new ordinary shares at a price of 0.22 pence per share. On the same date the Company agreed to issue 21,416,515 Ordinary Shares at 0.22 pence per share to various creditors to settle outstanding amounts.

 

On 17 December 2020 the Company announced that it had entered into a subscription agreement with Timor-Leste Petroleum Pty Ltd, a subsidiary of Carnarvon Petroleum Limited, pursuant to which the Company's wholly owned subsidiary, Advance Energy TL Limited ("AETL"), would, subject to certain conditions, subscribe for equity such that it will hold up to 50% of the total equity interest in Carnarvon Petroleum Timor Unipessoal Lda for consideration of up to US$20,000,000.

 

On 16 April 2021 the Company undertook a capital consolidation whereby every ten existing ordinary shares were consolidated into one new ordinary share.

 

On 19 April 2021 the Company announced that it had raised £21,842,600 through the issue of 840,100,000 ordinary shares at a price of 2.6 pence per share.  The net proceeds of the placing were utilised to fund the subscription by AETL for equity in Carnarvon Petroleum Timor Unipessoal Lda.  In addition, on the same date Mr Stephen Whyte and Mr Larry Bottomley were appointed to the Board as independent Non-Executive Directors.

Key Performance Indicators ("KPIs")

The Board monitors the activities and performance of the Group on a regular basis, including as part of the regular Board updates and Board meetings. During the year the principal focus of the Group was to divest legacy assets in the Republic of Indonesia and to acquire upstream E&P assets in line with the new company strategy. The KPIs being monitored by the Group as at the date of this report were as follows:

 

Cash management;

Business development; and

Project development.

Risks and uncertainties

The principal risks and uncertainties inherent in an Advance Energy's business strategy are summarised below:

Volatility of commodity prices which may impact investment decisions taken. The Group monitors price forecasts in Board meetings and reacts accordingly.

Foreign currency volatility impacts the potential cost base of projects and the Group monitors and assesses, as far as practicable, the impact on budgets and cash flows.

Operational risks relate to dealing with stakeholders on any potential project. The ability of partners to finance and support projects, customers or governments to approve projects can impact budgets and cash flows and the Group maintains and monitors its stakeholder relationships.

Availability of finance and funding is key to ensuring that there are funds available for working capital and to allow the Group to make strategic investment decisions. The Board is responsible for monitoring the cash flows and cash forecasts of the business. 

Financial Risk Management

The Group's operations expose it to a variety of financial risks that include the effect of changes in debt market prices, movements in foreign currency exchange rates, credit risk and liquidity risk. The Group has a risk management programme in place that seeks to limit the adverse effects on the financial performance of the Group by monitoring levels of debt finance and the related finance costs.  The Group does not use derivative financial instruments to manage interest rate or foreign exchange costs and, as such, no hedge accounting is applied.  Details of the Group's financial risk management policies are set out in Note 16 to the Financial Statements.

Internal Controls

The Board recognises the importance of both financial and non-financial controls and has reviewed the Group's control environment and any related shortfalls during the year. Since the Group was established, the Directors are satisfied that, given the current size and activities of the Group, adequate internal controls have been implemented. 

Going Concern

The financial statements have been prepared on a going concern basis. The Group has not yet earned revenues from its upstream E&P assets. The operations of the Group are currently financed from funds raised from shareholders. In common with many pre-production entities, the Group may need to raise further funds in order to progress the project into the production of revenues.

 

The Group has cash and cash equivalents of US$8,103,000 at 30 April 2021 and the Directors are of the view this is sufficient to fund the Group's committed expenditure over the next 12 months from the date of approval of these financial statements, without raising funds in this period.

 

The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing the financial statements.

Directors

The following Directors held office during the year and to the date of this report:

 

Mark Rollins (appointed 4 February 2020)

Leslie Peterkin (appointed 4 February 2020)

Ross Warner

Graham Smith (resigned 1 June 2020)

Stephen West (appointed 1 June 2020)

Stephen Whyte (appointed 19 April 2021)

Larry Bottomley (appointed 19 April 2021)

 

The Board considers the directors to be independent other than in respect of those directors with an interest as disclosed below.

 

Directors' interests

The beneficial and non-beneficial interests in the Company's shares of the Directors (who remain in office at the respective reporting dates) and their families, as at the date of approval of the financial statements are as follows:

 

 

2021

2020

2021

2020

 

Ordinary shares

Ordinary shares

Options (1)

Options

Mark Rollins

29,403,153

139,833,333

24,840,000

50,000,000

Leslie Peterkin

26,611,153

138,833,333

29,450,000

50,000,000

Ross Warner

205,287

2,052,875

5,180,000

12,500,000

Stephen West

4,943,590

-

22,340,000

-

Stephen Whyte

391,266

-

1,670,000

-

Larry Bottomley

-

-

1,670,000

-

Graham Smith

36,000

360,000

-

-

 

(1)   These relate to share options which were allocated to the Directors of the Company on 4 February 2020, 8 July 2020 and 19 April 2021. Various conditions attach to each option as to vesting periods and each option is subject to the option holder meeting service commitments during the vesting period. There are no other performance conditions attached to the options. 

 

Details of the Directors' remuneration are given in note 9 to the Financial Statements.

Provision of information to auditors

So far as each of the Directors is aware at the time this report is approved:

 

· there is no relevant audit information of which the Group's auditors are unaware; and

· the Directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information.

Auditor

Lubbock Fine LLP, who, being eligible, have expressed their willingness to continue in office in accordance with the Isle of Man Companies Act 2006.

 

This report was approved by the Board and signed on its behalf by:


Mark Rollins

21 September 2021

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 

 

 

Note

 For the year ended
30 April 2021

US$'000

 

For the year ended
30 April 2020

US$'000

Investment loss:

 

 

 

 

Unrealised loss on investments

12

-

 

(604)

Impairment of exploration asset

13

-

 

(267)

 

 

-

 

(871)

Other income

 

-

 

-

Asset evaluation expenses

6

(47)

 

(23)

Other administrative expenses

6

(2,539)

 

(293)

Net loss before finance costs and taxation

 

(2,586)

 

(1,187)

Finance costs

 

(256)

 

(44)

Share of net losses of associate accounted for using the equity method

 

 

(12)

 

 

-

Loss before tax

 

(2,854)

 

(1,231)

Tax expense

10

-

 

-

Loss after tax attributable to owners of the parent

 

(2,854)

 

(1,231)

 

Total comprehensive loss for the year attributable to owners of the parent

 

 

(2,854)

 

 

(1,231)

 

Basic and diluted loss per share attributable to owners of the parent during the year (expressed in US cents per share)

 

 

7

 

 

(1.51)

 

 

 

(0.11)

 

 

The Statement of Comprehensive Income has been prepared on the basis that all operations are continuing.


 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 

Note

As at
30 April 2021

US$'000

As at
30 April 2020

US$'000

 

Assets

 

 

 

 

Non-current assets

 

 

 

 

Investments accounted for using the equity method

11

20,262

-

 

Total non-current assets

 

20,262

-

 

 

 

 

 

 

Current assets

 

 

 

 

Other receivables

 

203

15

 

Cash and cash equivalents

 

8,103

562

 

Total current assets

 

8,306

577

 

Total assets

 

28,568

577

 

 

 

 

 

 

Liabilities

 

 

 

 

Current liabilities

 

 

 

 

Trade and other payables

15

(1,138)

(323)

 

Total liabilities

 

(1,138)

(323)

 

 

 

 

 

 

Net assets

 

27,430

254

 

 

 

 

 

 

Equity attributable to the owners of the parent

 

 

 

 

 

 

 

Share premium

 

47,656

18,665

 

Share reserve

 

1,039

-

 

Accumulated deficit

 

(21,265)

(18,411)

 

Total shareholder funds

 

27,430

254

 

 

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

 

 

 

 Share premium

 Share reserve

Accumulated

deficit

Total

equity

 

US$'000

US$'000

US$'000

US$'000

Balance at 1 May 2019

16,878

-

(17,131)

(253)

Loss for the year to 30 April 2020

-

-

(1,231)

(1,231)

Total comprehensive income

-

-

(1,231)

(1,231)

Transactions with equity shareholders of the parent

 

 

 

 

Proceeds from shares issued

1,833

-

-

1,833

Cost of share issue

(95)

-

-

(95)

Share based payments

49

-

(49)

-

Balance at 30 April 2020

18,665

-

(18,411)

254

 

 

 

 

 

Loss for the year to 30 April 2021

-

-

(2,854)

(2,854)

Total comprehensive income

-

-

(2,854)

(2,854)

Transactions with equity shareholders of the parent

 

 

 

 

Proceeds from shares issued

31,589

-

-

31,589

Cost of share issues

(2,598)

-

-

(2,598)

Share based payments

-

1,039

 

1,039

 

 

 

 

 

Balance at 30 April 2021

47,656

1,039

(21,265)

27,430

           

 

The accompanying notes form an integral part of these Financial Statements.

CONSOLIDATED CASH FLOW STATEMENT

 

For the year ended
30 April 2021

US$'000

 

For the year ended
30 April 2020

US$'000

Cash flows from operating activities:

 

 

 

Net loss for the year

(2,854)

 

(1,231)

Adjustments for :

 

 

 

Share of net loss of associate

12

 

-

Share based payments

1,039

 

-

Impairment of intangible asset

-

 

267

Change in working capital items:

 

 

 

(Increase)/Decrease in other receivables

(188)

 

59

Increase/(Decrease) in trade and other payables

815

 

(529)

Net cash used in operations

(1,176)

 

(1,434)

Cash flows from investing activities

 

 

 

Investment in associate

(20,274)

 

-

Other investments

-

 

-

Net cash used in investing activities

(20,274)

 

-

Cash flows from financing activities

 

 

 

Proceeds from issue of share capital

31,589

 

1,833

Share issue costs

(2,598)

 

(95)

Net cash generated by financing activities

28,991

 

1,738

Net increase in cash and cash equivalents

7,541

 

304

Cash and cash equivalents, at beginning of the year

562

 

258

Effect of foreign exchange rate changes

-

 

-

Cash and cash equivalents, at end of the year

8,103

 

562

 

Major Non-Cash Transactions

Details of major non-cash transactions are described in note 12.

 

The accompanying notes form an integral part of these Financial Statements.

 

NOTES TO FINANCIAL STATEMENTS

1  Reporting Entity


Advance Energy plc (the "Company") is domiciled in the Isle of Man. The Company's registered office is at 55 Athol Street, Douglas, Isle of Man IM1 1LA.  These consolidated financial statements comprise the Company and its subsidiaries (together referred to as the "Group"). The Group is primarily involved in the E&P business, focussed on the Democratic Republic of Timor-Leste.  The Company is listed on AIM of the London Stock Exchange.

 

2  Basis of accounting

 

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS").  They were authorised for issue by the Company's board of directors on 21 September 2021.

 

Details of the Group's accounting policies are included below:

 

Standards and amendments effective for periods beginning 1 January 2020 or later

 

A number of other new standards are effective from 1 January 2020 but they do not have a material effect on the Company's financial statements:

 

· Amendments to IFRS 3: Definition of a business

· Amendments to IFRS 7, IFRS 9 and IAS 39 Interest Rate Benchmark Reform

· Amendments to IAS 1 and IAS 8 Definition of Material

· Conceptual Framework for Financial Reporting issued on 29 March 2018

· Amendments to IFRS 16 COVID - 19 Related Rent Concessions

 

A number of new standards are effective for annual periods beginning after 1 January 2020 and earlier application is permitted; however, the Group has not early adopted the new or amended standards in preparing these consolidated financial statements.

 

The following amended standards and interpretations are not expected to have a significant impact on the Group's consolidated financial statements:

 

· IFRS 17 Insurance Contracts (effective on or after 1 January 2023)

· Amendments to IAS 1: Classification of Liabilities as Current or Non-current (effective on or after 1 January 2023) Reference to the Conceptual Framework - Amendments to IFRS 3 (effective on or after 1 January 2022)

· Property, Plant and Equipment: Proceeds before Intended Use - Amendments to IAS 16 (effective on or after 1 January 2022)

· Onerous Contracts - Costs of Fulfilling a Contract - Amendments to IAS 37 (effective on or after 1 January 2022)

· IFRS 1 First-time Adoption of International Financial Reporting Standards - Subsidiary as a first-time adopted (effective on or after 1 January 2022)

· IFRS 9 Financial Instruments - Fees in the '10 per cent' test for derecognition of financial liabilities (effective on or after 1 January 2022)

· IAS 41 Agriculture - Taxation in fair value measurements (effective on or after 1 January 2022)

 

 

A. Basis of consolidation

 

i. Subsidiaries

 

Subsidiaries are entities controlled by the Group. The Group 'controls' an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.

 

ii. Non-controlling interests ("NCI")

 

NCI are measured initially at their proportionate share of the acquiree's identifiable net assets at the date of acquisition. Changes in the Group's interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.

 

iii. Interests in equity-accounted investees

 

The Group's interests in equity-accounted investees comprise interests in associates.

 

Associates are those entities in which the Group has significant influence, but not control or joint control, over the financial and operating policies.

 

Interests in associates are accounted for using the equity method. They are initially recognised at cost, which includes transaction costs. Subsequent to initial recognition, the consolidated financial statements include the Group's share of the profit or loss and other comprehensive income ("OCI") of equity accounted investees, until the date on which significant influence ceases.

 

iv. Transactions eliminated on consolidation

 

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated. Unrealised gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group's interest in the investee.  Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

 

B. Foreign currency

 

i. Foreign currency transactions

 

Transactions in foreign currencies are translated into the respective functional currencies of Group companies at the exchange rates at the dates of the transactions.

 

Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value was determined. Non-monetary items that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Foreign currency differences are generally recognised in profit or loss and presented within finance costs.

 

However, foreign currency differences arising from the translation of the following items are

recognised in OCI:

 

an investment in equity securities designated as at FVOCI (except on impairment, in which case foreign currency differences that have been recognised in OCI are reclassified to profit or loss);

a financial liability designated as a hedge of the net investment in a foreign operation to the extent that the hedge is effective; and

qualifying cash flow hedges to the extent that the hedges are effective.

 

 

ii. Foreign operations

 

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated into USD at the exchange rates at the reporting date. The income and expenses of foreign operations are translated into USD at the exchange rates at the dates of the transactions.

 

Foreign currency differences are recognised in OCI and accumulated in the translation reserve, except to the extent that the translation difference is allocated to NCI.

 

When a foreign operation is disposed of in its entirety or partially such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. If the Group disposes of part of its interest in a subsidiary but retains control, then the relevant proportion of the cumulative amount is reattributed to NCI. When the Group disposes of only part of an associate or joint venture while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

 

C. Employee benefits

 

i. Short-term employee benefits

 

Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

 

ii. Share-based payment arrangements

 

The grant-date fair value of equity-settled share-based payment arrangements granted to employees and other service providers is generally recognised as an expense, with a corresponding increase in equity, over the vesting period of the awards. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognised is based on the number of awards that meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant-date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.

 

D. Income tax

 

Income tax expense comprises current and deferred tax. It is recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in OCI.

 

The Group has determined that interest and penalties related to income taxes, including uncertain tax treatments, do not meet the definition of income taxes, and therefore accounted for them under IAS 37 Provisions, Contingent Liabilities and Contingent Assets.

 

i. Current tax

 

Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date. Current tax also includes any tax arising from dividends.

 

Current tax assets and liabilities are offset only if certain criteria are met.

 

 

ii. Deferred tax

 

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.

Deferred tax is not recognised for:

 

temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss;

temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and

taxable temporary differences arising on the initial recognition of goodwill.

 

Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Future taxable profits are determined based on the reversal of relevant taxable temporary differences. If the amount of taxable temporary differences is insufficient to recognise a deferred tax asset in full, then future taxable profits, adjusted for reversals of existing temporary differences, are considered, based on the business plans for individual subsidiaries in the Group. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised; such reductions are reversed when the probability of future taxable profits improves.

 

Unrecognised deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable profits will be available against which they can be used.

 

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date, and reflects uncertainty related to income taxes, if any.

 

The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. For this purpose, the carrying amount of investment property measured at fair value is presumed to be recovered through sale, and the Group has not rebutted this presumption.

 

Deferred tax assets and liabilities are offset only if certain criteria are met.

 

E. Exploration expenditure

 

Costs incurred prior to acquiring the right to explore an area of interest are expensed as incurred. Exploration and evaluation assets are intangible assets.

 

Exploration and evaluation assets represent the costs incurred on the exploration and evaluation of potential hydrocarbon resources, and include costs such as seismic acquisition and processing, exploratory drilling, activities in relation to the evaluation of technical feasibility and commercial viability of extracting hydrocarbons, and general  administrative costs directly relating to the support of exploration and evaluation activities.

 

The Company assesses exploration and evaluation assets for impairment when facts and circumstances suggest that the carrying amount may exceed its recoverable amount. The recoverable amount is the higher of the assets fair value less costs to sell and value in use. Assets are allocated to cash generating units not larger than operating segments for impairment testing. Purchased exploration and evaluation assets are recognised as assets at their cost of acquisition or at fair value if purchased as part of a business combination. They are subsequently stated at cost less accumulated impairment. Exploration and evaluation assets are not amortised.

 

 

 

F. Share capital

 

Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity. Income tax relating to transaction costs of an equity transaction is accounted for in accordance with IAS 12.

 

G. Impairment

 

At each reporting date, the Group reviews the carrying amounts of its non-financial assets (other than biological assets, investment property, inventories, contract assets and deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated.

 

Impairment losses are recognised in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.


H. Fair value measurement

 

'Fair value' is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Group has access at that date. The fair value of a liability reflects its non-performance risk.

 

A number of the Group's accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities.

 

When one is available, the Group measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as 'active' if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.

 

If there is no quoted price in an active market, then the Group uses valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction.

 

If an asset or a liability measured at fair value has a bid price and an ask price, then the Group measures assets and long positions at a bid price and liabilities and short positions at an ask price.

 

The best evidence of the fair value of a financial instrument on initial recognition is normally the transaction price - i.e. the fair value of the consideration given or received. If the Group determines that the fair value on initial recognition differs from the transaction price and the fair value is evidenced neither by a quoted price in an active market for an identical asset or liability nor based on a valuation technique for which any unobservable inputs are judged to be insignificant in relation to the measurement, then the financial instrument is initially measured at fair value, adjusted to defer the difference between the fair value on initial recognition and the transaction price. Subsequently, that difference is recognised in profit or loss on an appropriate basis over the life of the instrument but no later than when the valuation is wholly supported by observable market data or the transaction is closed out.

 

I. Going concern

 

The financial statements have been prepared on a going concern basis. The Group has not yet earned revenues from its E&P assets. The operations of the Group are currently financed from funds raised from shareholders. In common with many pre-production entities, the Group may need to raise further funds in order to progress projects into the production of revenues.

 

The Group has cash and cash equivalents of US$ 8,103,000 at 30 April 2021 and the Directors are of the view this is sufficient to fund the Group's committed expenditure over the next 12 months from the date of approval of these financial statements, without raising funds in this period.

 

The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing the financial statements.

3   Functional and presentation currency

 

These consolidated financial statements are presented in US Dollars ("USD" or "US$"), which is the Company's functional currency. All amounts have been rounded to the nearest thousand, unless otherwise indicated.

4  Use of judgements and estimates

 

In preparing these consolidated financial statements, management has made judgements and estimates that affect the application of the Group's accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

 

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively.

 

A. Judgements

 

Information about judgements made in applying accounting policies that have the most significant effects on the amounts recognised in the financial statements is included in the following notes:

 

- Note 11 - equity-accounted investees: whether the Group has significant influence over an investee;

- Note 17 - consolidation: whether the Group has de facto control over an investee.

 

B. Assumptions and estimation uncertainties

 

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates.  It also requires management to exercise its judgement in the process of applying the group's accounting policies.  The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed below:

 

Share based payments (note 8)


The Group has made awards of options and warrants over its unissued capital. The valuation of these options and warrants involve making a number of estimates relating to price volatility, future dividend yields, expected life and forfeiture rates.

 

Acquisition of associate (Note 11)

 

The Group acquired a 50% holding in an associate during the year and has fair valued the assets acquired including the rights to the Buffalo Field.

 

Valuation of investments

 

The Group held two significant assets in the previous year: an intangible exploration asset in respect of the Colter licence (discussed in note 13) and an Incremental Production Agreement asset in respect of Betun Selo (note 12). The board reviewed the expected returns from both projects and determined that both projects should be fully impaired at the previous year-end.

 

 

 

i) Measurement of fair values

 

A number of the Group's accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities.  The Group has an established control framework with respect to the measurement of fair values.

 

When measuring the fair value of an asset or a liability, the Group uses observable market data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.

 

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

 

If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

 

The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

Level 3 inputs

The following table gives information about how the fair values of Group's investments are determined (in particular, the valuation techniques and inputs used).

Assets and liabilities

Nature of investment

Fair value as at 30 April 2021

Fair value as at 30 April 2020

Valuation techniques and key inputs

Significant unobservable input

Financial assets at fair value through profit or loss

25% of equity investment in Eagle Gas Ltd

Disposed

USD Nil

Recent purchase price and market knowledge

Expected realisable value from sale

Financial assets at fair value through profit or loss

20% of equity investment in Peelwood Pty Ltd

Disposed

USD Nil

Purchase price and market knowledge

Expected realisable value from sale

Financial assets at fair value through profit or loss

Production agreement returns from Betun Selo

Disposed

USD Nil

Cashflow forecasting

Future cash flows

5  Operating Segments


Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker ("CODM"). The CODM, who is responsible for allocating resources and assessing performance of the operating segments and make strategic decisions, has been identified as the Directors of the Group.  In the opinion of the Directors, the operations of the Group comprise two operating segments comprising firstly of that of developer of gas to power projects in the Republic of Indonesia and secondly with projects within the UK.  The Group considers that it only has one reportable segment and the Directors consider that the primary financial statements presented substantially reflect all the activities of the Company.

6  Administrative expenses

 

Administration fees and expenses consist of the following:

 

2021

 

2020

 

US$'000

 

US$'000

Audit fees

69

 

32

Bad debts

-

 

117

Professional fees

1,047

 

241

Administration costs

104

 

49

Employee costs

219

 

-

Directors' fees (Note 9)

1,100

 

(146)

Other administrative expenses

2,539

 

293

 

 

 

 

Office costs

30

 

13

Consulting and farm-in expenses

6

 

(36)

Travel and accommodation

11

 

46

Asset evaluation expenses

47

 

23

 

7  Earnings per share

 

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

 

2021

2020

 

 

 

(2,854)

(1,231)

Weighted average number of ordinary shares in issue (thousands)

188,796

1,107,577

Loss per share (US cents)

(1.51)

(0.11)

 

In accordance with International Accounting Standard 33 'Earnings per share', no diluted earnings per share is presented as the Group is loss making.  Details of potentially dilutive share instruments are detailed in notes 8 and 14.

 

8  Share-based payment arrangements

 

The following is a summary of the share options and warrants outstanding and exercisable as at 30 April 2021 and 30 April 2020 and the changes during each year:

 

Number of options and warrants

Weighted average exercise price (Pence)

Outstanding and exercisable at 1 May 2020

125,983,175

1.294

Cancelled options

(30,000,000)

(0.304)

Options granted as consideration

68,750,000

0.104

Warrants granted with share issue

32,904,758

0.026

Outstanding and exercisable at 30 April 2020

197,637,934

1.120

Cancelled options

(2,186,897)

(1.92)

Expired warrants

(3,529,413)

(5.00)

Options granted as consideration - pre consolidation

93,750,000

0.30

Warrants granted - pre consolidation

39,057,099

0.03

Consolidation - options

(150,300,000)

-

Consolidation - warrants

(142,432,339)

-

Options granted post consolidation

83,710,000

2.60

Warrants granted with share issue

45,553,120

2.60

Outstanding and exercisable at 30 April 2021

161,259,504

3.41

The above weighted average exercise prices have been expressed in pence and not cents due to the terms of the options and warrants. The following share options or warrants were outstanding and exercisable in respect of the ordinary shares:

Grant Date

Expiry Date

1 May

2019

Issued

Expired

 

30 April

2020

Exercise Price

Warrants

 

 

 

 

 

 

13.05.16

13.05.21

42,000,000

-

-

42,000,000

0.20p

31.01.17

31.01.22

10,000,000

-

-

10,000,000

0.20p

31.01.17

31.01.22

8,000,000

-

-

8,000,000

0.25p

31.01.17

31.01.22

6,666,666

-

-

6,666,666

0.30p

22.05.17

22.05.22

15,000,000

-

-

15,000,000

0.10p

22.05.17

22.05.22

35,000,000

-

-

35,000,000

0.10p

31.07.17

31.07.22

150,000,000

-

-

150,000,000

0.10p

19.08.17

19.08.22

90,769,231

-

-

90,769,231

0.06p

01.09.17

01.09.22

70,769,231

-

-

70,769,231

0.06p

06.12.17

06.12.22

638,569,604

-

-

638,569,604

0.05p

29.04.18

29.04.21

264,705,882

-

-

264,705,882

0.017p

03.08.18

02.08.21

300,000,000

-

-

300,000,000

1.00p

Consolidation

(1,598,851,001)

-

-

(1,598,851,001)

 

20.09.18

20.09.21

5,217,391

-

-

5,217,391

1.15p

20.09.18

20.09.21

34,782,608

-

-

34,782,608

2.00p

15.03.19

14.03.22

16,666,666

-

-

16,666,666

0.45p

21.06.19

20.06.22

-

18,059,856

-

18,059,856

0.155p

21.06.19

20.06.22

-

10,833,334

-

10,833,334

0.155p

02.07.19

01.07.22

-

3,178,235

-

3,178,235

0.157p

03.07.19

02.07.22

-

833,334

-

833,334

0.157p

 

Options

 

 

 

 

 

 

05.06.15

05.06.18

34,344,865

-

-

34,344,865

0.40p

Consolidation

(33,657,968)

-

-

(33,657,968)

 

01.10.18

01.10.23

36,000,000

-

(30,000,000)

6,000,000

2.00p

01.02.20

01.02.25

-

68,750,000

-

68,750,000

0.30p

 

 

125,983,175

101,654,759

(30,000,000)

197,637,934

 

 

 

Grant Date

Expiry Date

1 May

2020

Issued

Expired

 

30 April

2021

Exercise Price

Warrants

 

 

 

 

 

 

13.05.16

13.05.21

42,000,000

-

-

42,000,000

0.20p

31.01.17

31.01.22

10,000,000

-

-

10,000,000

0.20p

31.01.17

31.01.22

8,000,000

-

-

8,000,000

0.25p

31.01.17

31.01.22

6,666,666

-

-

6,666,666

0.30p

22.05.17

22.05.22

15,000,000

-

-

15,000,000

0.10p

22.05.17

22.05.22

35,000,000

-

-

35,000,000

0.10p

31.07.17

31.07.22

150,000,000

-

(150,000,000)

-

0.10p

19.08.17

19.08.22

90,769,231

-

-

90,769,231

0.06p

01.09.17

01.09.22

70,769,231

-

-

70,769,231

0.06p

06.12.17

06.12.22

638,569,604

-

-

638,569,604

0.05p

29.04.18

29.04.21

264,705,882

-

(264,705,882)

-

0.017p

03.08.18

02.08.21

300,000,000

-

-

300,000,000

0.02p

Consolidation

(1,598,851,001)

-

406,411,764

(1,192,439,237)

 

20.09.18

20.09.21

5,217,391

-

-

5,217,391

1.15p

20.09.18

20.09.21

34,782,608

-

-

34,782,608

2.00p

15.03.19

14.03.22

16,666,666

-

-

16,666,666

0.45p

21.06.19

20.06.22

18,059,856

-

-

18,059,856

0.155p

21.06.19

20.06.22

10,833,334

-

-

10,833,334

0.155p

02.07.19

01.07.22

3,178,235

-

-

3,178,235

0.157p

03.07.19

02.07.22

833,334

-

-

833,334

0.157p

10.12.20

09.12.23

-

545,455

-

545,455

0.22p

31.03.21

31.03.26

-

38,511,644

-

38,511,644

0.00p

Consolidation

 

 

(137,667,632)

(137,667,632)

 

19.04.21

19.04.24

-

21,488,500

-

21,488,500

2.60p

19.04.21

19.04.26

-

24,064,620

-

24,064,620

2.60p

 

Options

 

 

 

 

 

 

05.06.15

05.06.18

34,344,865

-

(34,344,865)

-

0.40p

Consolidation

(33,657,968)

-

33,657,968

-

 

01.10.18

01.10.23

6,000,000

-

(1,500,000)

4,500,000

2.00p

01.02.20

01.02.25

68,750,000

-

-

68,750,000

0.30p

01.02.20

01.02.25

-

68,750,000

-

68,750,000

0.30p

08.07.020

08.07.25

-

25,000,000

-

25,000,000

0.03p

Consolidation

 

 

(150,300,000)

(150,300,000)

 

19.04.21

19.04.26

-

83,710,000

-

83,710,000

2.60p

 

 

197,637,934

262,070,219

(298,448,647)

161,259,504

 

 

 

The options and warrants issued during year were valued using the Black-Scholes valuation method and the assumptions used are detailed below.  The expected future volatility has been determined by reference to the historical volatility:

 

Grant date

Share price at grant

Exercise price

Volatility

Option life

Dividend yield

Risk-free investment rate

Fair value per option

 

 

01.02.20

1.15p

3.00p

40%

5 years

0%

3%

0.13p

 

08.07.21

1.85p

3.00p

95%

5 years

0%

0.7%

1.19p

 

19.04.21

2.40p

2.60p

70%

5 years

0%

0.7%

1.33p

 

          

 

 

The Group recognised US$1,609,000 (30 April 2020: US$nil) relating to equity-settled share-based payment transactions during the year arising from Option or Warrant grants, which was charged US$838,000 (2020: US$nil) in respect of services performed in connection with the issue of new shares charged to share premium, US$667,000 (2020: US$nil) in respect of directors' fees and US$104,000 (2020: US$nil) in respect of employee costs to the income statement. Shares totalling US$570,000 were issued to three of the Directors following the share raise and re-admission to AIM on 19 April 2021 in relation to options earned during the period.

 

The 83,710,000 options granted on 19 April 2021 will vest on 1 January 2022 and 1 January 2023 in equal amounts.  Vesting of the options is subject to the option holder providing continuous service during the vesting period and there are no other performance conditions attached to the options.

 

There were 68,750,000 of unvested options at the 30 April 2020 held by current Directors and consultants, which vested on 1 February 2021. 

 

For the share options and warrants outstanding as at 30 April 2021, the weighted average remaining contractual life is 4.14 years (30 April 2020: 3.42 years).

9  Employee benefits (including directors)

 

The group employed an average of 4 individuals during the year, including the directors (2019: 5).

 

The group employed an average of 5 individuals during the year, including the directors (2020: 5).

 

 

 

 

2021

2020

 

 

 

US$'000

US$'000

Directors' remuneration (see below)

 

 

409

(149)

Share based payments - Directors (see below)

 

 

667

-

Share based payments - Employees

 

 

104

 

Directors' health insurance

 

 

24

3

Employees

 

 

115

-

 

 

 

1,319

(146)

 

Key management of the Group are considered to be the Directors.

 

The remuneration of the directors during the year ended 30 April 2021 was as follows:

 

 

 

Short term employee benefits

Social security payments

 

Pension contribution

Share based payments

 

Total

2021

 

 

US$'000

US$'000

US$'000

US$'000

US$'000

Ross Warner

 

60

-

-

4

64

Mark Rollins

 

71

-

-

231

302

Leslie Peterkin

 

139

-

3

234

376

Graham Smith

 

2

-

-

-

2

Stephen West

 

97

33

-

196

326

Steve Whyte

 

2

-

-

1

3

Larry Bottomley

 

2

-

-

1

3

Total Key Management

 

373

33

3

667

1,076

 

 

The remuneration of those in office during the year ended 30 April 2020 was as follows:

 

 

 

Short term employee benefits

Social security payments

 

Pension contribution

 

Waiver of fees

 

Total

2020

 

 

US$'000

US$'000

US$'000

US$'000

US$'000

Ross Warner

 

150

-

-

(248)

(98)

Simon Gorringe

 

135

-

-

(227)

(92)

Mark Rollins

 

15

-

-

 

15

Leslie Peterkin

 

30

-

-

 

30

Graham Smith

 

27

-

-

 

27

Robert Arnott

 

39

4

1

 

44

Daniel Jorgensen

 

12

-

-

(87)

(75)

Total Key Management

 

408

4

1

(562)

(149)

 

10  Income tax expense

 

The Company is resident for tax purposes in the Isle of Man and is subject to Isle of Man tax at the current rate of 0% (2020: 0%). 

 

Taxation reconciliation

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

 

2021

2020

 

US$'000

US$'000

 

Loss before income tax

(2,854)

(1,231)

 

 

 

Tax on loss at the weighted average corporate tax rate of 0% (2020: 0%)

 

-

 

-

 

Total income tax expense

-

-

 

The deferred tax asset has not been recognised for in accordance with IAS 12.  The Group does not have a material deferred tax liability at the year end.

 

 

11  Business combination

 

On 19 April 2021, Advance Energy plc, via its wholly owned subsidiary Advance Energy TL Limited, acquired a 50% equity interest in Carnarvon Petroleum Timor Unipessoal Lda which in turn is the holder of a 100% working interest in, and the contractor of, the Buffalo Production Sharing Contract ("PSC").

 

Details of the purchase consideration and the net assets acquired are as follows:

 

Purchase consideration

 

 

2021

 

 

US$'000

 

 

 

Cash paid

 

20,000

Purchase costs

 

274

Total

 

20,274

 

The assets and liabilities recognised as a result of the acquisition are as follows:

 

 

Fair value

2021

 

 

US$'000

 

 

 

Rights *

 

21,149

Buffalo exploration & appraisal

 

1,685

Property, plant and equipment

 

1

Cash

 

20,023

Creditors

 

(31)

Loan payable to Carnarvon

 

(2,278)

Net identifiable assets at acquisition

 

40,548

Less: Other interests

 

(20,274)

Goodwill

 

-

Net assets acquired

 

20,274

 

 

 

 

 

 

* Carnarvon Petroleum Timor Unipessoal Lda owns the Buffalo Oil Field re-development project located in the Buffalo PSC Contract Area (the "Buffalo Project") and is the Contractor and Operator of the Buffalo PSC.  The rights attached to this have been fair valued by Advance Energy in determining the purchase price apportionment.

 

Equity investment in associate

 

 

 

 

2021

2020

 

US$'000

US$'000

Carrying value at beginning of year

-

-

Additions

20,274

-

Share of losses post acquisition

(12)

-

Carrying value at year end

20,262

-

 

Summarised financial information for associate

 

The table below provide summarised financial information for those associates that are material to the group. The information disclosed reflects the amounts presented in the financial statements of the relevant associate and not Advance Energy's share of those amounts. They have been amended to reflect adjustments made by the entity when using the equity method, including fair value adjustments and modifications for differences in accounting policy.

 

 

 

2021

Summarised balance sheet at 30 April 2021

 

US$'000

 

 

 

Rights

 

21,148

Buffalo exploration & appraisal

 

1,794

Property, plant and equipment

 

1

Cash

 

20,023

Creditors

 

(58)

Loan payable to Carnarvon

 

(2,375)

Net assets

 

40,533

 

 

 

Group's share as a %

 

50%

 

Carrying amount

 

20,267

 

 

 

2021

Summarised statement of comprehensive income for the 12 months to 30 April 2021

 

US$'000

 

 

 

Revenue

 

-

Cost of sales

 

-

Gross profit

 

-

Administrative expenses

 

(391)

Operating loss

 

(391)

Finance costs

 

(1)

Loss on ordinary activities before taxation

 

(392)

Taxation

 

-

Loss from continuing operations

 

(392)

 

 

 

Group share of post acquisition losses

 

(12)

 

12  Financial assets at fair value through profit or loss

 

 

 

 

2021

2020

 

US$'000

US$'000

Fair value at beginning of year

-

-

Additions

-

604

Impairment

-

(604)

Fair value at year end

-

-

 

On 29 April 2018 the Company entered into a subscription agreement with Eagle Gas Limited, a UK private company that held licence P2112. Under this agreement the Company acquired a 14.75% interest in Eagle Gas Limited. During the year to 30 April 2019 the Company increased its holding in Eagle Gas Limited to a 25% interest. Management considered this to provide significant influence over the entity and the asset was reclassified to that of an associate investment.

 

Eagle Gas Limited, with support from its joint venture partner secured a 3-month extension to the P2112 licence but failed in the end to secure a farminee.  The licence was subsequently dropped, and the licence area has now been put back into the OGA's open acreage and will be available for application in the next licencing round.  As such, the investment was provided for in full during the prior year.

 

Eagle Gas Limited's wholly owned subsidiary Holywell Resources Limited ("Holywell") re-applied for acreage covering the Badger prospect as well as additional complementary areas in the 32nd Licence Round.  The OGA announced the results of the 32nd Round in September 2020, with the Company's wholly owned subsidiary Resolute Oil & Gas (UK) Limited and Holywell each being awarded, subject to documentation, a 50% working interest in block 43/25 and part-blocks 43/29, 43/30, 48/4 and 48/5.  Accordingly, Advance Energy holds a non-operated indirect 62.5% interest in these blocks once they have been formally issued. In November 2020 the Board decided not to proceed with these opportunities and expects the subsidiary Resolute (and therefore indirectly the North Sea Licences) will be sold to a third party for a nominal sum without further expenditure on such assets by the Company.

In June 2019 the Company entered into a Service Agreement for production on the Betun-Selo KSO field in Sumatra, Indonesia with PT Petroenim Betun-Selo and PT Celebes Artha Ventura. As a result of disappointing production performance of the field the company did not realise any incremental production beyond April 2020. The investment was fully impaired on 31 October 2020.

13  Other investments

 

2021

2020

 

US$'000

US$'000

Value at beginning of year

-

267

Additions

-

-

Impairment

-

(267)

Value at year end

-

-

 

The capitalised cost in the prior period related to the acquisition of an 8% interest in the Colter project via a farm-in. The agreement to farm-in to the Colter licences was entered into on 20 September 2018. The cost to Advance Energy of farming into the licence, included the funding of the back costs on the licence, together with the obligation to fund 10.67% of the forward costs related to this well. Following disappointing results in the area, all historic capitalised expenditure in relation to this amount was written off during the year to 30 April 2020.

14  Capital and reserves

All shares are Nil Coupon fully paid and each ordinary share carries one vote. No warrants have been exercised at the reporting date.

Allotted, called-up and fully paid:

Number

Pence per share

Share premium

US$'000

Balance at 30 April 2019

603,970,170

 

16,878

02/07/2019 - Equity Placing

373,333,333

0.150

705

Cost of issue

-

-

(73)

11/07/2019 - Equity Placing

66,666,666

0.150

126

Cost of issue

-

-

(6)

23/12/2019 - Equity Placing

166,666,667

0.150

320

Cost of issue

-

-

(16)

04/02/2020 - Equity Placing

349,999,998

0.150

683

Removal of warrants

-

-

48

Balance at 30 April 2020

1,560,636,834

 

18,665

12/11/2020 - Equity Placing

157,780,151

0.22

470

Cost of issue

-

-

(24)

19/04/2021 - Consolidation 1:10

(1,546,575,287)

-

-

19/04/2021  - Equity Placing

840,100,000

2.60

30,549

Cost of issue

-

-

(2,574)

19/04/2021 - Accrued Director fee shares

15,672,310

2.60

570

Balance at 30 April 2021

1,027,614,008

 

47,656

15  Trade and other payables

 

Trade and other payables are obligations to pay for goods or services that have been acquired in the ordinary course of business. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Trade payables are recognised initially at fair value, and subsequently measured at amortised cost using the effective interest method.

 

 

 

2021

2020

 

 

 

US$'000

US$'000

 

 

 

 

 

Trade payables

 

 

517

299

Accruals and other payables

 

 

621

24

 

 

 

1,138

323

16  Risk Management

Financial Risks

The Group's activities expose it to a variety of financial risks: market risk (including foreign currency exchange risk and interest rate risk), credit risk and liquidity risk. The Board of Directors seek to identify and evaluate financial risks.

Market risk

A.  Foreign currency exchange risk

Foreign exchange risk arises because the Group entities enter into transactions in currencies that are not the same as their functional currencies, resulting in gains and losses on retranslation into US Dollars. It is the Group's policy to ensure that individual Group entities enter into local transactions in their functional currency wherever possible and that only surplus funds over and above working capital requirements should be transferred to the treasury of the Parent Company. The Group and Company considers this policy minimises any unnecessary foreign exchange exposure.  Despite this policy the Group cannot avoid being exposed to gains or losses resulting from foreign exchange movements, at the reporting date a 5% decrease in the strength of the US Dollar would result in a corresponding reduction of US$373,000 (2020: US$18,000) in the net assets of the Group.

B.  Cash flow interest rate risk

The Group's cash and cash equivalents are invested at short term market interest rates. As market rates are low the Group is not subject to significant cash flow interest rate risk and no sensitivity analysis is provided.  The Group is also not subject to significant fair value interest rate risk.  No interest rate sensitivity has been presented in respect of the outstanding convertible loan note as it is considered not material.

 

 

2021

2020

 

US$'000

US$'000

Cash & Cash Equivalents

 

 

USD

646

11

GBP

7,457

551

Total Financial Assets

8,103

562

 

Trade & other payables

 

 

USD

858

310

CHF

-

1

GBP

219

12

AUD

61

-

Total Financial Liabilities

1,138

323

 

Credit risk

Credit risk arises on investments, cash balances and receivable balances. The amount of credit risk is equal to the amounts stated in the Statement of Financial Position for each of these assets. Cash balances and transactions are limited to high-credit-quality financial institutions. There are no impairment provisions as at 30 April 2021 (2020: nil).


Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. The Group has adopted a policy of maintaining surplus funds with approved financial institutions.


Management of liquidity risk is achieved by monitoring budgets and forecasts against actual cash flows.  Where the Group entered into borrowings during the year management monitor the repayment and servicing of these arrangements against the contractual terms and reviewed cash flows to ensure that sufficient cash reserves were maintained.

 

Capital Risks


The Directors determine the appropriate capital structure of the Group, specifically, how much is raised from shareholders (equity) and how much is borrowed from financial institutions (debt), in order to finance the Group's business strategy.  The Group's policy in the long term is to seek to maintain the level of equity capital and reserves to maintain an optimal financial position and gearing ratio which provides financial flexibility to continue as a going concern and to maximise shareholder value.  The capital structure of the Group consists of shareholders' equity together with net debt (where relevant). The Group's funding requirements are met through a combination of debt, equity and operational cash flow.

17  List of subsidiaries and associates

 

The parent of the Group has shareholdings in the following entities:

 

Name

Interest 2021

Interest

2020

Country of incorporation

Nature of business

 

 

 

 

 

Advance Energy TL Limited

100%

N/A

UK

Intermediate Hold Co

Carnarvon Petroleum Timor Unipessoal Lda

50%

N/A

Timor-Leste

Oil exploration

Resolute Oil & Gas (UK) Limited

100%

100%

UK

Trading subsidiary

Eagle Gas Limited

25%

25%

UK

Gas Exploration

18  Commitments

 

There were no capital commitments authorised by the Directors or contracted other than those provided for in these financial statements as at 30 April 2021 (30 April 2020: None).

19  Related parties

 

Parties are considered to be related to the Group if the Group has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Group and the party are subject to common control or common significant influence.

 

Related parties may be individuals (being members of key management personnel, significant shareholders and/or their close family members) or other entities and include entities which are under significant influence of related parties of the Group where those parties are individuals, and post-employment benefit plans which are for the benefit of employees of the Group or of any entity that is a related party of the Group.

 

Details of Directors remuneration are disclosed in Note 9 Directors Remuneration. For details of any related party transactions entered into after the year-end please refer to Note 20 Subsequent Events. 

 

As at 30 April 2021 the following balances were included in trade and other payables and were outstanding in respect of Directors remuneration or remuneration incurred prior to their appointment as a Director at the year end.

 

Outstanding at 30 April

2021

Outstanding at 30 April

2020

 

US$'000

US$'000

Daniel Jorgensen

-

12

Graham Smith

-

2

Total Key Management

-

14

20  Subsequent events

 

There were no events after the end of the reporting period which require adjustment to or disclosure within the financial statements.

 

 

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