REG - Angus Energy PLC - Interim Results and Proposed Bridge Financing
30/06/2023 11:00
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RNS Number : 5630E Angus Energy PLC 30 June 2023
THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED BY THE COMPANY TO
CONSTITUTE INSIDE INFORMATION AS STIPULATED UNDER THE MARKET ABUSE REGULATION
(EU) NO. 596/2014 AS IT FORMS PART OF UK DOMESTIC LAW PURSUANT TO THE EUROPEAN
UNION (WITHDRAWAL) ACT 2018, AS AMENDED. UPON THE PUBLICATION OF THIS
ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE, THIS INFORMATION IS
CONSIDERED TO BE IN THE PUBLIC DOMAIN.
30 June 2023
Angus Energy Plc
("Angus Energy", the "Company" or together with its subsidiaries, the "Group")
(AIM:ANGS)
· Interim accounts published
· Bridge Facility rolled and upsized by £6m
· Evaluation of asset acquisitions and M&A
· Storage continues to be evaluated at Saltfleetby
Interim Accounts for the six months ended 31 March 2023 and proposed £6m
bridge financing
Angus Energy is pleased to announce its interim accounts for the six months
ended 31 March 2023 as set out below. A copy of the Interims is available on
the Company's website www.angusenergy.co.uk (http://www.angusenergy.co.uk)
As noted in the accounts our production target of 9.5 mmscfd has been met
which is approximately equivalent to a sales volume of 3 mm therms a month.
The forward Heren NBP gas price curve is presently averaging over £1.00 per
therm over the next six months.
Additionally the Directors have entered into heads of terms for a further 6
month bridge facility of £6m which, whilst the final terms are to be agreed,
they expect will be on substantially the same terms as those announced on 28
March for the £3m bridge facility, which has itself been rolled according to
its terms by a further three months. The £6m facility is expected to be
agreed next week and further details will be announced at that time.
The combined facilities will provide working capital allowing Angus to close
out the final rolled hedges arising from late production in Q3 2022 as well as
funding to evaluate acquisitions and the development of storage at
Saltfleetby. This capital demonstrates the continued support of our pillar
investors and the direction of the new management to deliver returns and
growth.
END
For further information on the Company, please visit www.angusenergy.co.uk
(http://www.angusenergy.co.uk) or contact:
Enquiries:
Angus Energy Plc
www.angusenergy.co.uk
(http://www.angusenergy.co.uk)
George Lucan
Tel: +44 (0) 208 899 6380
Beaumont Cornish Limited (Nomad) www.beaumontcornish.com
(http://www.beaumontcornish.com)
James Biddle / Roland Cornish Tel: +44 (0)
207 628 3396
WH Ireland Limited (Broker)
Katy Mitchell / Harry Ansell
Tel: +44 (0) 207 220 1666
Flagstaff PR/IR
angus@flagstaffcomms.com
Tim Thompson / Fergus Mellon Tel: +44 (0) 207
129 1474
Aleph Commodities
info@alephcommodities.com
Disclaimers - this Announcement includes statements that are, or may be deemed
to be, "forward-looking statements". These forward-looking statements can be
identified by the use of forward-looking terminology, including the terms
"believes", "estimates", "forecasts", "plans", "prepares", "anticipates",
"projects", "expects", "intends", "may", "will", "seeks", "should" or, in each
case, their negative or other variations or comparable terminology, or by
discussions of strategy, plans, objectives, goals, future events or
intentions. These forward-looking statements include all matters that are not
historical facts. They appear in a number of places throughout this
Announcement and include statements regarding the Company's and the Directors'
intentions, beliefs or current expectations concerning, amongst other things,
the Company's prospects, growth and strategy. By their nature, forward-looking
statements involve risks and uncertainties because they relate to events and
depend on circumstances that may or may not occur in the future.
Forward-looking statements are not guarantees of future performance. The
Company's actual performance, achievements and financial condition may differ
materially from those expressed or implied by the forward-looking statements
in this Announcement. In addition, even if the Company's results of
operations, performance, achievements and financial condition are consistent
with the forward-looking statements in this Announcement, those results or
developments may not be indicative of results or developments in subsequent
periods. Any forward-looking statements that the Company makes in this
Announcement speak only as of the date of such statement and (other than in
accordance with their legal or regulatory obligations) neither the Company,
nor the Bookrunner nor Beaumont Cornish nor any of their respective
associates, directors, officers or advisers shall be obliged to update such
statements. Comparisons of results for current and any prior periods are not
intended to express any future trends or indications of future performance,
unless expressed as such, and should only be viewed as historical data.
Beaumont Cornish Limited, which is authorised and regulated in the United
Kingdom by the Financial Conduct Authority, is acting as nominated adviser to
the Company in relation to the matters referred herein. Beaumont Cornish
Limited is acting exclusively for the Company and for no one else in relation
to the matters described in this announcement and is not advising any other
person and accordingly will not be responsible to anyone other than the
Company for providing the protections afforded to clients of Beaumont Cornish
Limited, or for providing advice in relation to the contents of this
announcement or any matter referred to in it.
The Interims
Chairman's Statement
Dear Shareholders,
I am pleased to share with you the interim results for the six months ended 31
March 2023.
We have had a busy six months which has culminated in three producing wells at
our Saltfleetby Field flowing gas to the National Grid with average daily
production of up to 9.5 mmscfd, which level is a little over 100,000 therms a
day.
The UK's natural gas price for spot delivery at the National Balancing Point
fell from the brief but extraordinary highs of above 400 pence per therm at
the beginning of the period to around 80 pence a therm at the end, since which
time it has oscillated between 50 pence a therm and 110 pence a therm which is
comfortably above the pre-crisis average for traditionally subdued summer gas
prices. Forward pricing for this coming winter remains well above 110 pence
a therm and bodes well for our winter cash flows.
The unrealised profit during the period of account on the derivative
instrument reduces the future liability on this gas derivative instrument on
our balance sheet from £158.7 million as at 30 September 2022 to £37.5
million as at 31 March 2023. This reduction is derived from the gas price
movements during the period and was in part responsible for the significant
profit for the period of £115.298 million. This figure included a gain of
£109.668 million for the derivative instrument and operating profits of
£6.486 million (2022: loss of £1.238 million). The Group recorded a net
cash inflow from operating activities of £6.290 million (2022: cash outflow
of £3.614 million).
We were particularly pleased to have appointed as CEO, Mr Richard Herbert,
former head of Exploration at BP amongst other leading positions in the energy
industry. With his appointment I was pleased to step down as CEO, an office
which I assumed on an interim basis in January 2019, and take on my current
role of Executive Chairman. Simultaneously Patrick Clanwilliam stepped down
as Chairman to become Senior Independent Non-Executive Director.
The period also saw yet further changes in the UK's taxation of oil and gas
profits with the increase in the Energy Profits Levy to 35% and further
restrictions on reliefs and without any graduated rate. This brings the total
marginal rate of tax up to a punitive 75% even as crude oil prices are back
well within their 7 year historical range, and current gas prices are, whilst
looking to remain higher for longer, back within a range which the UK has
experienced over the last two decades without calls for such taxation.
Moreover, little let-up is in sight for the domestic industry, onshore and
offshore, with further restrictions planned by the shadow Labour cabinet in
advance of elections expected in early 2025.
The arguments for domestic hydrocarbon production over imports from an
environmental and energy security perspective are obvious and we won't
rehearse them here. We would seek to join our voice with those of many
others in the energy industry in calling for a cross-party committee to
formulate or, at least, advise on and review a national medium- and long-term
energy strategy.
Operational Highlights
Saltfleetby
On 31 August 2022, the Company was pleased to announce it had made its first
nominations for gas export and sale to Shell via National Grid beginning with
the Gas Day of Tuesday 30 August 2022.
During the period the Company successfully completed the drilling of the SF7v
sidetrack at the Saltfleetby Field, reaching a total measured depth of 2746
meters in the Westphalian 1D reservoir.
On 15 May 2023, the Company announced that, as planned, the second compressor
at Saltfleetby Field was successfully commissioned. The Field has operated
in dual compressor mode since then with three producing wells, B2, A4 and the
new B7T well, which have been flowing gas to the National Grid at the combined
average daily rate of up to 9.5 mmscfd since then. This represents more than a
75% increase in production over that achieved in the first quarter of this
year.
Potential Future Drilling and Gas Storage
The Company has also engaged planning consultants to submit a further planning
permission to provide the option for an expanded site at Saltfleetby to
encompass a number of new wells and process plant. This initiative would
seek to address the Namurian reservoir as a commercial source of natural gas,
but any wells would also be designed to be repurposed as potential injection
wells for gas storage (natural gas, hydrogen or CO2), for which further
planning permissions at national level would be sought.
The Namurian reservoir, which sits below the Westphalian from which the
Company currently extracts natural gas, has produced 1.5 bcf to date but a
wide variation amongst previous Operators exists as to estimates of
recoverables, with contingent 3C resources of 4 bcf estimated by our own 2020
CPR. To date no detailed interpretation of the Namurian, separately from the
Westphalian, has been undertaken and accordingly a full third party
re-interpretation of both reservoirs is presently underway, expected to
complete in October.
Former Operator, Gazprom-Wintershall, estimated the storage capacity of the
Saltfleetby Field to be between 700 and 800 million cubic metres, making it
easily the largest onshore storage facility in the UK and all of the wells
contemplated by the forthcoming application can be recompleted in the
Westphalian. Estimates by Angus of storage capacity are somewhat higher and
do not include the Namurian.
Geothermal
During the year the Company continued to progress the option of becoming a
low-cost UK producer of baseload geothermal power. Based on the acquired land
gravity and radiometrics as well as the desk top study on overall project
economics the company has produced a detailed Geothermal Development Plan. The
Geothermal Development Plan is split over 2 focused areas, with each area's
work program broken down into 4 Phases. The program kicks off with further
2D/3D gravity and heat flow modelling, a comprehensive seismic survey, shallow
drilling and finally a third party Feasibility Study.
Brockham
The Field has been shut in during the period, awaiting essential maintenance
and overhaul of equipment. Plans are being made to restart production in the
second half of 2023.
Balcombe
Despite the West Sussex County Council Planning Officer's decision to
recommend approval of the Company's application for a one year extended well
test at the Company's oilfield site at Balcombe the West Sussex County
Council's Planning Committee rejected the Company's planning application for
an Extended Well Test. Angus strongly disagrees with their opinion and an
application to appeal was submitted in October 2021.
On 14 February 2023, our appeal against the decision was upheld by the
Planning Inspectorate. In early March a local residents' association announced
its intention to challenge the Inspector's decision and a hearing is due to be
held to determine the merits of this judicial review in July 2023. If the
challenge is not upheld, the Company will be capable of pursuing this well
test subject to satisfaction of planning conditions noted in the Appeal
Decision as well as the determination of the variation to the Environmental
Permit by the Environment Agency which we understand to be imminent.
Lidsey
The Lidsey Field has been shut in during the period, waiting on the resumption
of Brockham production in order to evaluate options for combined operations.
Financial Highlights
On 24 October 2022, the Company agreed the grant of 165.5 million share
options under the Company's existing Employee Incentive Scheme to Directors
and other staff. The share options have an exercise price of 2 pence per share
(being a premium of 23% to the closing price on 21 October 2022) and vest as
to 100 per cent., upon the closing mid‐market price of the Ordinary Shares
being 3 pence or above. The options have a 4 year term from the date of issue.
On 19 December 2022 the Company announced that it had successfully raised
gross proceeds of approximately £7 million by means of a placing to certain
institutional and other investors to raise approximately £2 million, and a
direct subscription to raise approximately £5 million, in each case at a
price of 1.65 pence per share.
The Fundraising was conducted in two tranches, with the initial tranche of new
Ordinary Shares under the Fundraising (comprising in aggregate 341,219,000
Ordinary Shares, being the shares issued under the Placing and 226,219,000
shares issued under the Subscription) being issued under the Company's
pre-existing share capital authorities, and the second tranche of 89,781,000
new Ordinary Shares, together with 311,250,000 warrants in respect of the
entire Fundraising ("Warrants"), being subject to shareholders passing certain
resolutions at a General Meeting.
In addition, and conditional upon the passing of the Resolutions, Forum Energy
Services Ltd agreed to accept the allotment and issue of 60,606,061 new
Ordinary Shares at the Fundraising Price (together with the issue of
30,303,030 warrants on the same basis as applicable to the Fundraising in
settlement of the Company's obligation to pay certain deferred consideration
of £1,000,000 to Forum in accordance with the Saltfleetby SPA as announced on
24 May 2022.
On 28 March 2023, the company entered into a £3 million Bridge Facility
provided by the Company's 9.91% shareholder Kemexon Limited. The Bridge
Facility has an initial term of three months, extendable with the payment of a
3% roll fee for a further three months. The Bridge Facility is priced at
SONIA + 15% and includes the issue 150 million warrants, struck at the
previous placement level of 1.65p/share.
Revenues from the existing operations and the sidetrack are expected to repay
both the senior and junior facilities. The Company has the option to repay the
junior loan in shares at a 25% discount to the 30 day VWAP, subject to a floor
at 1p and this same option is also available to the lender but only in the
event of default.
Furthermore, through a separate agreement, Aleph Commodities Limited ("ACL")
acted as the arranger of the Bridge Facility. In lieu of fees ACL were
issued 10,998,719 shares at the 30 day VWAP price of 1.36379 pence prior to
the date of issue of the facility.
On 28 March 2023, Knowe Properties Limited ("Knowe") gave notice for the
conversion of the £1.4 million Convertible Loan Note dated 17 April 2020 plus
accrued interest of £52,931 into Ordinary Shares at 1p each. Accordingly, the
Company issued 145,293,100 Ordinary Shares ("New Ordinary Shares") to Knowe
which will result in Knowe holding 241,777,556 Ordinary Shares in the Company
representing 6.73% of the issued share capital.
During the period, Company issued 177,425,105 ordinary shares at varying
prices being 173,100,000 shares at 1.0989 pence per share, 3,216,230 shares at
1.2 pence per share, 554,438 shares at 1.35 pence per share and 554,438 shares
at 1.5 pence per share. They were issued in relation of exercise of the
Company Warrants.
As at 31 March 2023, Angus Energy recognised 100% of the profit/liabilities of
the Debt Facility and Derivative Instruments relating to the Saltfleetby
Field, thereby reporting profit of £109 million under the Debt Facility.
As at 31 March 2023 the Group had cash of £3.171m.
Outlook
With the Saltfleetby project completed, we look forward to steady production
and cash flow from operations. The new management team can now turn
attention to both organic and inorganic growth opportunities.
With kind regards,
George Lucan
Executive Chairman
30 June 2023
ANGUS ENERGY PLC
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the period ended 31 March 2023
Note Six months Six months
31 March 31 March
2023 2022
Unaudited Unaudited
£'000 £'000
Revenue 4 16,466 27
Cost of sales (2,356) (37)
Depletion cost (5,162) -
Gross profit / (loss) 8,948 (10)
Administrative expenses (1,499) (1,228)
Share based payment charge (963) -
Operating profit / (loss) 6,486 (1,238)
Derivative financial instrument gain / (loss) 11 121,222 (30,459)
Crystalised paid derivative costs 11 (11,554)
Finance cost (856) (53)
Profit / (Loss) on ordinary activities before taxation 115,298 (31,750)
Income tax expense - -
Profit / (Loss) for the period attributable to the 115,298 (31,750)
equity holder of the Company
Profit / (Loss) per share (EPS): £ £
Basic and diluted (whole £'s) 12 0.0315 (0.029)
ANGUS ENERGY PLC
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 31 March 2023
As at As at As at
31 March 31 March 30 September
2023 2022 2022
Unaudited Unaudited Audited
Note £'000 £'000 £'000
Non-current assets
Property, plant and equipment 5 20 9 27
Exploration and evaluation assets 6 5,619 16,465 5,572
Oil and gas production assets 7 85,656 6,572 80,792
Leases 31 11 48
Trade and other receivables 8 - 20,139 -
91,326 43,196 86,439
Current assets
Trade and other receivables 8 3,266 28,386 4,107
AFS finance investments 13 27 20
Leases assets 33 - 33
Inventory - - 3
Cash and bank balances 3,171 1,441 747
6,483 29,854 4,910
Total Assets 97,809 73,050 91,349
Equity
Share capital 13 6,868 2,615 5,529
Share premium 13 46,598 25,251 38,708
Merger reserve (200) (200) (200)
Loan Note reserve 106 106 106
Accumulated loss (22,048) (59,213) (138,599)
Total Equity 31,324 (31,441) (94,456)
Current liabilities
Trade and other payables 9 15,151 2,632 11,154
Loan payable - current 10 4,200 3,600 5,250
Derivative liability - current 11 20,319 44,393 86,583
39,670 50,625 102,987
Non-current liabilities
Provisions 16 4,369 3,007 4,369
Trade and other payables 57 1,359 52
Loan payable - non current 10 5,250 8,400 6,300
Derivatives Liability - non current 11 17,139 41,100 72,097
Total non-current liabilities 26,815 53,866 82,818
Total liabilities 66,485 104,491 185,805
97,809 73,050
Total Equity and Liabilities 91,349
ANGUS ENERGY PLC
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the period ended 31 March 2023
Share Share premium Merger Total
Capital Reserve Loan Note reserve Retained equity
Earnings
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 October 2021 1,933 23,605 (200) (27,463) (2,019)
106
- - - (31,750) (31,750)
Loss for the period -
Total comprehensive income - - - (31,750) (31,750)
for the period -
Transaction with owners:
Issue of placing shares 682 1,802 - - - 2,484
Less: issuance costs - (156) - - - (156)
Balance at 31 March 2022 2,615 25,251 (200) (59,213) (31,441)
106
Balance at 1 October 2021 1,933 23,605 (200) 106 (27,463) (2,019)
- - - (111,947) (111,947)
Loss for the year -
Total comprehensive income - - - (111,947) (111,947)
for the year -
Transaction with owners:
Issue of shares 3,596 15,615 - - - 19,211
Less: issuance cost - (512) - - - (512)
Granted of share option - - - - 811 811
Balance at 30 September 2022 5,529 38,708 (200) (138,599) (94,456)
106
- - - 115,298 115,298
Loss for the period -
Total comprehensive income - - - 115,298 115,298
for the period -
Transaction with owners:
Issue of placing shares 1,339 8,740 - - - 10,079
Less: issuance costs - (560) - - - (560)
Granted of options - - - 963 963
Granted of warrants as fund raising cost (290) 290 -
6,868 46,598 (200) (22,048) 31,324
Balance at 31 March 2023 106
ANGUS ENERGY PLC
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the period ended 31 March 2023
Six months 31 March Six months 31 March
2023 Unaudited 2022
Unaudited
£'000 £'000
Cash flow from operating activities
Profit/Loss before taxation 115,298 (31,750)
Adjustment for:
Unrealised derivative financial instrument (gain)/loss (122,936) 30,459
Interest payable 394 53
Share based payment charge 962 -
Depletion charges 5,162 -
Depreciation and amortisation charges 6 2
Write-off of Inventory 4 -
Revaluation of Investment 7 -
Lease amortisation charges 22 -
(1,081) (1,236)
Operating cash flows before movements in working capital
Change in trade and other receivables 841 (3,011)
Change in trade and other payables 3,526 633
Cash used in operating activities 3,286 (3,614)
Income tax paid - -
Net cash used in operating activities 3,286 (3,614)
Cash flows from investing activities
Changes in Investment in share - 1
Changes in trade and other payable (196) -
Acquisition of exploration and evaluation assets (47) (3,392)
Acquisition of fixed assets and oil production assets (10,025) (42)
Net cash used in investing activities (10,268) (3,433)
Cash flows from financing activities
Loan facility repayment (2,100) -
Bridging loan finance 3,004
Lease principal repayment (18) -
Net proceeds from issue of share capital 8,520 2,328
Net cash generated from financing activities 9,406 2,328
Net increase in cash & cash equivalents 2,424 (4,719)
Cash and equivalent at beginning of year 747 6,160
Cash and equivalent at end of period 3,171 1,441
NOTES TO THE FINANCIAL INFORMATION
1. GENERAL INFORMATION AND PRINCIPAL ACTIVITIES
Angus Energy Plc (the "Company") was incorporated in United Kingdom as a
limited company with company number 09616076. The registered office of the
Company is Building 3, Chiswick Park, 566 Chiswick High Road, London, W4 5YA,
UK.
This financial information is for the Company and its subsidiaries
undertakings (together, the "Group").
The principal activities of the entities of the Group are as follows:
Country of
Name of Company Incorporation Principal Activities
i) Angus Energy Holdings UK Limited United Kingdom Investment holding company
ii) Angus Energy Weald Basin No. 1 Limited United Kingdom Investment holding company
iii) Angus Energy Weald Basin No. 2 Limited United Kingdom Investment holding company
iv) Angus Energy Weald Basin No. 3 Limited United Kingdom Oil & Gas extraction for distribution to third parties
v) Saltfleetby Energy Limited United Kingdom Natural Gas Extraction
The principal place of business of the Group is in United Kingdom.
The interim consolidated financial information is presented in the nearest
thousands of Pound Sterling (£'000), which is the presentation currency of
the group. The functional currency of each of the individual entity is the
local currency of each individual entity.
2. BASIS OF PREPARATION
The interim consolidated financial information for the six months ended 31
March 2023 and 31 March 2022 have been prepared in accordance with IAS 34,
Interim Financial Reporting which are unaudited and do not constitute a set of
statutory financial statements.
The principal accounting policies used in preparing the interim results are
the same as those applied in the Group's financial statements as at and for
the year ended 30 September 2022, which have been prepared in accordance with
International Accounting Standards in conformity with the requirements of the
Companies Act 2006. The auditors' report on those accounts was unqualified and
did not draw attention to any matters by way of emphasis.
A copy of the audited consolidated financial statements for the year ended 30
September 2022 is available on the Company's website.
The interim report for the six months ended 31 March 2023 was approved by the
Directors on 30 June 2023.
Going Concern
The Group made a profit for the period of £115.298 million which included a
gain of £109.668 million for the derivative instrument resulting and an
operating profit of £6.486 million (2022: loss of £1.238 million) and
recorded a net cash inflow from operating activities of £6.290 million (2022:
cash outflow of £3.614 million). The Group meets its day to day working
capital requirements through revenue from oil and gas sales and existing cash
reserves. At 31 March 2023, the Group had £3.171 million of available cash.
The Directors have assessed the Group's working capital forecasts for a
minimum of 12 months from the date of the approval of these financial
statements. In undertaking this assessment, the Directors have reviewed the
underlying business risks, and the potential implications these risks would
have on the Group's liquidity and its business model over the assessment
period. This assessment included a detailed cash flow analysis prepared by the
management, and they also considered several reasonably plausible downside
scenarios. The scenarios included potential delays to expected future
revenues. In particular the Directors have a noted payment due under the
derivative instrument by 20 July 2023 of approximately £3.5million.
Discussions with the lenders are ongoing as well as various parties to secure
debt funding to meet this liability which the Directors believe will conclude
shortly. In making their overall assessment the Directors took into account
the advanced stage of the development of the Saltfleetby gas field and the
impact of the derivative instrument if there were delays in gas production. As
outlined in note 11, the Group has committed to future cash flows as a result
of the derivatives in place which are due even if gas is delayed.
Forecast cashflows place reliance on there not being a suspension of gas
production for an unforeseen significant period. Current production levels
are in excess of derivative requirements. There are no present operational
concerns and whilst there are mitigating steps that could be taken, the
contracted derivative will need to be settled at a fixed point in time. In the
event of any significant delay this would be subject to further negotiation
with the derivative holder or further funding may be required.. The Directors
have therefore identified a material uncertainty which may cast doubt over the
Group's ability to continue as a going concern.
Based on the current management's plan, management considered that the working
capital from the expected revenue generation are sufficient for the
expenditure to date as well as the planned forecast expenditure for the
forthcoming twelve months from the date of the approval of this financial
statement. As a result of that review the Directors consider that it is
appropriate to adopt the going concern basis preparation, notwithstanding the
material uncertainty as outlined above. The Director has assessed the
company's ability to continue as a going concern and have reasonable
expectation that the company has adequate resources to continue operations for
a period of at least 12 months from the date of approval of these financial
statements.
These financial statements do not include any adjustment that may result from
any significant changes in the assumption used.
3. CRITICAL ACCOUNTING ESTIMATES AND SOURCES OF
ESTIMATION UNCERTAINTY
In applying the accounting policies, the directors may at times require to
make critical accounting judgements and estimates about the carrying amount of
assets and liabilities. These estimates and assumptions, when made, are based
on historical experience and other factors that the directors consider are
relevant.
The key estimates and assumptions concerning the future and other key sources
of estimation uncertainty at the end of the financial year, that have
significant risk of causing a material adjustment to the carrying amounts of
assets and liabilities within the next financial year are reviewed are as
stated below.
Key accounting judgements
(a) Impairment of non-current asset
The group's non-current assets represent its most significant assets,
comprising of oil production assets, exploration and evaluation (E&E)
assets on its onshore site.
Management is required to assess exploration and evaluation (E&E) assets
for indicators of impairment and has considered the economic value of
individual E&E assets. The carrying amount of the E&E asset are
subject to a separate review for indicators if impairment, by reference of the
impairment indicators set out in IFRS 6, which is inherently judgemental.
Processing operations are large, scarce assets requiring significant technical
and financial resources to operate. Their value may be sensitive to a range of
characteristics unique to each asset and key sources of estimation uncertainty
include proved reserve estimates, future cash flow expected to arise from the
cash-generating unit and a suitable discount rate.
In performing impairment reviews, the Group assesses the recoverable amount of
its operating assets principally with reference to the Group's independent
competent person's report, estimates of future oil prices, operating costs,
capital expenditure necessary to extract those reserves and the discount rate
to be applied to such revenues and costs for the purpose of deriving a
recoverable value.
As detailed in note 6 and 7, the carrying value amount of the Group's E&E
assets and Oil production assets at 31 March 2023 were approximately £5.619m
and £85.656m respectively. No impairments were made during the interim
period.
4. OPERATING SEGMENTS
Operating segments are prepared in a manner consistent with the internal
reporting provided to the management as its chief operating decision maker in
order to allocate resources to segments and to assess their performance.
Currently, the Group's principal revenue is derived from the sale of natural
gas and condensate oil. All revenue arose from continuing operations within
the United Kingdom. Therefore, management considers no detail of operating and
geographical segments information is to be reported. Nonetheless, the Group's
revenue can be classified into the following streams:
31 March 31 March
2023 2022
£'000 £'000
Sale of oil 735 27
Sales of natural gas 15,731 -
Total Revenue 16,466 27
All the non-current assets of the Group are located in the United Kingdom.
All revenue arising from the sale of natural gas is derived from sales to
Shell plc and represents over 96% of the Company's revenue.
5. PROPERTY, PLANT AND Equipment
During the period, the Group did not incur any additions to property, plant
and equipment (1H 2022: £3,215). The depreciation charge for the period on
the Group's property, plant and equipment was £6,208 (1H 2022: £2,478).
6. EXPLORATion ANd evALUaTion ASSETS
Total
£'000
Cost or valuation
At 31 March 2022 16,465
Additions 8,946
Increase in abandonment provision 12
Acquisition Saltfleetby Energy Limited 54,535
Transfer to Oil and Gas Production Asset (74,386)
-------------------------------------
At 30 September 2022 5,572
Additions 47
-------------------------------------
At 31 March 2023 5,619
-------------------------------------
Amortisation
At 30 September 2022 -
Charge for the period -
-------------------------------------
At 31 March 2023 -
------------------------
Net book value
At 30 September 2022 5,572
==============================
At 31 March 2022 16,465
==============================
At 31 March 2023 5,619
==============================
Saltfleetby Energy Limited was acquired by the Group on 24 May 2022, with its
49% participating interest in Saltfleetby field, and the field went into
production on 30 August 2022. In line with the company's accounting policy,
the Saltfleetby field asset has been reclassified as an Oil & Gas
Production Asset in 2022. This relates to the £74.386m in the above note.
7. OIL AND GAS PRODUCTION ASSETS
Total
£'000
Cost or valuation
At 30 September 2021 7,501
Additions 38
-------------------------------------
At 31 March 2022 7,539
Additions 238
Increase in abandonment provision 125
Acquisition of Saltfleetby Energy Limited 54,535
Transfer from Exploration and Evaluation assets 19,851
-------------------------------------
At 30 September 2022 82,288
Additions 10,025
-------------------------------------
At 31 March 2023 92,313
-------------------------------------
Depreciation and impairment
At 30 September 2021 967
Charge for the period -
-------------------------------------
At 31 March 2022 967
Charge for the period 529
Impairment for the period -
-------------------------------------
At 30 September 2022 1,496
Charge for the period 5,161
-------------------------------------
At 31 March 2023 6,657
-------------------------------------
Net book value
At 30 September 2022 80,792
==============================
At 31 March 2022 6,572
==============================
At 31 March 2023 85,656
==============================
As of 31 March 2023, the Group retained 100% interest in Saltfleetby Field,
80% interest in Lidsey field and 80% in Brockham field and is still the
operator of all the fields.
8. TRADE AND OTHER RECEIVABLES
31 March 31 March 30 September 2022
2023 2022
£'000 £'000 £'000
Non-current
Contract Debtor - derivative - 20,139 -
- - -
Current
Contract debtor - derivative - 21,753 -
Accrued sales income 2,065 2,975
VAT recoverable 477 167 206
Amount due from farmees 611 6,372 3
Rent deposit 6 - 4
Other receivables 107 94 919
------------------------------- ----------------------------- -----------------------------
3,266 28,386 4,107
------------------------------- ----------------------------- -----------------------------
3,266 48,525 4,107
On 31 March 2022, the receivables from Contract Debtors amounting to £20,139m
was recognised in the statement of financial position. It represented the 49%
share of Saltfleetby Energy Limited on the Derivative Liability as a result of
a fair value valuation on the instruments. Due to the acquisition of
Saltfleetby Energy Limited in May 2022, this has been removed on
consolidation.
The carrying amount of trade and other receivables approximates to their fair
value.
9. TRADE AND OTHER PAYABLES
31 March 31 March 30 September
2023 2022 2022
£'000 £'000 £'000
Trade payables 4,487 2,273 2,319
Convertible loan notes 1,347 - 1,319
Bridge loan 3,004 - -
Other taxation 251 179 -
Deferred consideration on Saltfleetby Energy Limited acquisition 5,538 -
6,734
Accruals 137 173 62
Other payables 3 7 293
Interest payable - loan 366 - 392
Lease Liability 18 - 35
------------------------------- ----------------------------- -----------------------------
15,151 2,632 11,154
------------------------------- ----------------------------- -----------------------------
10. LOAN PAYABLE
On 17 May 2021, the Group signed a Loan Facility, conditional on the setting
of the derivative and regulatory approval of the royalty from the Oil and Gas
Authority, between Angus Energy and Saltfleetby Energy Limited and Mercuria
Energy Trading Limited and Aleph Saltfleetby Limited as the co-Lender. The
term of the Loan Facility provides for a four year amortisation loan facility
of up to £12 million with a 12% margin over LIBOR, a 3% commitment fee
payable out of the facility, a share granted of 30 million shares in Angus,
issued over the life of the facility and an override of 8% of gross revenue
following the repayment of the facility.
The £12 million facility is required for the re-development of the
Saltfleetby Gas Field and the drilling of the side-track well in line with the
Field Development Plan and the Plans for the acceleration of production
through the fast-tracking of the side-track well.
31 March 31 March 30 September
2023 2022 2022
Repayment date schedule were as follows: £'000 £'000 £'000
Current
1(st) year 4,200 3,600 5,250
Non-Current
2(nd) year 5,250 4,200 4,200
3(rd) year - 4,200 2,100
Total Facility Loan £9,450 12,000 £11,550
11. DERIVATIVES LIABILITY
On 01 June 2021, Angus Energy Weald Basin no. 3 Limited (AWB3) entered into a
derivative agreement with Mercuria Energy Trading SA (METS) under a Swap
contract as part of the condition of the Loan Facility (see Note 23). The
derivative instrument was used to mitigate price risk on the expected future
cash flow from the production of Saltfleetby Gas Field. Under the Swap
contract, AWB3 will pay METS the floating price while METS will pay AWB3 the
fixed price on the sale of gas from the field.
Further details of the contract as at 31 March 2023 are as below:
Period of Gas Production Quantity in Therms Fixed price in pence per Therms
1-Apr-23 30-Jun-23 5,250,000 37.55
1-Apr-23 30-Jun-23 843,750 315.00
1-Jul-23 30-Sep-23 4,500,000 37.55
1-Oct-23 31-Mar-24 9,000,000 46.55
1-Apr-24 30-Jun-24 4,500,000 35.60
1-Jul-24 30-Sep-24 3,750,000 35.60
1-Oct-24 31-Mar-25 7,500,000 45.00
1-Apr-25 31-Jun-25 3,750,000 45.00
39,093,750
As of the reporting date, the expected cash flow on the sale of natural gas
amounted to £55.6m (1H 2022: £107.84m) resulting in a derivative liability
of £37.458m (1H 2022: £85.493m) of which the Groups has now recorded 100%
share on its new working interest due to the acquisition of Saltfleetby Energy
Limited. Included in the £37.458m is a payment due under the derivative
instrument by 20 July 2023 of approximately £3.5million. Discussions with the
lenders are ongoing as well as various parties to secure debt funding to meet
this liability which the Directors believe will conclude shortly.
Cash Flow of Derivative Instruments 31 March 2024 31 March 2025 30 June 2025 Total
£'000 £'000 £'000 £'000
Cash Inflow 10,508 6,312 1,322 18,142
Cash Outflow (30,827) (20,805) (3,968) (55,600)
Net Liability on Swap Contract (20,319) (14,493) (2,646) (37,458)
Specific valuation technique used to value the financial instruments includes
fair value measurement derived from inputs other than quoted prices included
within Level 1 of fair value hierarchy valuation, that are observable for the
instrument either directly or indirectly (see accounting policy for
Derivatives Instrument).
The carrying value of the financial instrument approximates their fair value
and was valued using Level 2 fair value hierarchy valuation. The fair value
has been determined with reference to commodity yield curves, as adjusted for
liquidity and trading volumes as at the reporting date supplied by the Group's
derivative partner, Mercuria Energy Trading. Management considered that the
value provided by Mercuria Energy Trading best represented the fair value of
these arrangements as the forward pricing curves did not take into account
other market conditions.
The nature of these arrangements in the present environment is such that
material fluctuations in the value of the derivatives are occurring on a daily
basis. Wholesale gas prices have increased substantially, but remain highly
volatile, this year and as a result, the loss on these contracts has also
increased significantly.
The adjusted loss on these hedging contracts as of 31 March 2023 represents
the forecasted spot-price value of the gas to be extracted against the value
fixed provided to the Group. Under projected gas production volumes, these
arrangements will fix the amount payable to the group for the contracted
volumes, with any excess volume being able to be sold at the available spot
price.
The valuation of financial instruments as of the period resulted in a gain of
£121.222m (1H 2022: loss £30.459m) as a result of a decrease in forward
pricing as at 31 March 2023. An amount of £11.554m of crystalised in the
period was paid to Mecuria Energy trading.
In the event that the Group does not meet its production timetable, the swaps
will crystallise as a liability at the dates at the proposed periods of gas
production in the swap agreements.
12. EARNINGS PER SHARE
Basic EPS amounts are calculated by dividing the loss for the year
attributable to equity holders of the Group by the weighted average number of
ordinary shares outstanding during the period.
Diluted EPS amounts are calculated by dividing the loss for the year
attributable to equity holders of the Group by the weighted average number of
ordinary shares outstanding during the period plus the weighted average number
of ordinary shares that would be issued on conversion of all the dilutive
potential ordinary shares into ordinary shares.
The following reflects the income and share data
used in the basic and diluted EPS computations:
31 March 31 March
2023 2022
Net gain / (loss) attributable to equity holders of the Group 115,297,958 (31,750,000)
Weighted average number of ordinary shares 3,655,793,215 1,088,669,800
Basic and diluted gain / (loss) per share 0.0315 (0.029)
The diluted gain / (loss) per share is the same as the basic loss per share as
there were no dilutive potential ordinary shares outstanding at the end of the
reporting period.
13. Share Capital AND RESERVE
Number Ordinary shares £'000 Share Premium £'000
of shares
Issued:
As at 30 September 2021 966,502,268 1,933 23,605
19 October 2021 - issue of shares 11,200,000 22 -
6 December 2021- issue of shares 115,384,611 232 519
8 February 2022 - issue of shares 175,000,000 350 1,050
21 March 2022 - issue shares 39,200,000 78 233
Less: Issuance of cost (156)
As at 31 March 2022 1,307,286,879 2,615 25,251
Issue of shares 11 April 2022 61,363,634 122 552
Issue of shares 24 May 2022 91,000,000 182 818
Issue of shares 24 May 2022 546,000,000 1,092 5,460
Issue of shares 24 May 2022 273,000,000 546 2,454
Issue of shares 24 May 2022 5,000,000 10 37
Issue of shares 4 July 2022 273,000,000 546 2,454
Issue of shares 12 July 2022 27,300,000 54 245
Issue of shares 13 July 2022 403,226 2 4
Issue of shares 13 July 2022 150,000 1 1
Issue of shares 13 July 2022 5,250,000 10 53
Issue of shares 5 September 2022 3,461,538 7 15
Issue of shares 5 September 2022 8,750,000 17 52
Issue of shares 5 September 2022 5,405,555 11 38
Issue of shares 5 September 2022 3,068,182 6 28
Issue of shares 5 September 2022 8,750,000 18 88
Issue of shares 5 September 2022 4,375,000 9 50
Issue of shares 5 September 2022 4,375,000 9 56
Issue of shares 13 September 2022 18,025,596 36 140
Issue of shares 13 September 2022 5,370,967 11 53
Issue of shares 13 September 2022 1,193,549 2 14
Issue of shares 13 September 2022 2,685,484 5 35
Issue of shares 16 September 2022 15,000,000 30 120
Issue of shares 16 September 2022 25,774,375 52 257
Issue of shares 16 September 2022 12,731,187 25 146
Issue of shares 16 September 2022 11,731,188 23 153
Issue of shares 23 September 2022 21,100,000 42 211
Issue of shares 23 September 2022 12,162,903 24 140
Issue of shares 23 September 2022 10,550,000 22 139
Less: Issuance of costs (356)
As at 30 September 2022 2,764,264,264 5,529 38,708
13 October 2022 - issue of shares 127,400,127 255 1,156
28 October 2022 - issue of shares 10,193,759 20 86
2 November 2022 - issue of shares 36,599,864 73 329
21 November 2022 - issue of shares 312,000 1 2
8 December 2022 - issue of shares 500,000 2 4
19 December 2022 - issue of shares 341,219,000 682 4,948
20 January 2023 - issue of shares 89,781,000 179 1,303
20 January 2023 - issue of shares 60,606,061 121 878
25 January 2023 - issue of shares 1,612,904 3 17
2 February 2023 - issue of shares 1,612,903 3 17
Less: Issuance of cost (560)
Less: Grant of warrant as fund raising cost (290)
As at 31 March 2023 3,434,101,882 6,868 46,598
On 13 October 2022, the Company issued 127,400,127 ordinary shares at 1.0989
pence per share. There were issued in relation of exercise of the Company
Warrants.
On 28 October 2022, the Company issued 10,193,759 ordinary shares at varying
prices of 9,100,009 shares at 1.0989 pence per share, 546,875 shares at 1.2
pence per share, 273,437 shares at 1.35 pence per share and 273,437 shares 1.5
pence per share. They were issued in relation of exercise of the Company
Warrants.
On 2 November 2022, the Company issued 36,599,864 ordinary shares at 1.0989
pence per share. They were issued in relation of exercise of the Company
Warrants.
On 21 November 2022, the Company issued 312,000 ordinary shares at varying
prices of 156,000 shares at 1.35 pence per share and 156,000 shares at 1.5
pence per share. They were issued in relation of exercise of the Company
Warrants.
On 8 December 2022, the Company issued 500,000 ordinary shares at varying
prices of 250,000 shares at 1.2 pence, 125,000 shares at 1.35 pence per share
and 125,000 shares at 1.5 pence per share. They were issued in relation of
exercise of the Company Warrants.
On 19 December 2022 the Company announced that it had successfully raised
gross proceeds of approximately £7 million by means of a placing to certain
institutional and other investors to raise approximately £2 million, (the
"Placing") and a direct subscription to raise approximately £5 million (the
"Subscription") (together, the "Fundraising"), in each case at a price of 1.65
pence per share (the "Fundraising Price"). The Fundraising was conducted in
two tranches, with the initial tranche of new Ordinary Shares under the
Fundraising (comprising in aggregate 341,219,000 Ordinary Shares, being the
shares issued under the Placing and 226,219,000 shares issued under the
Subscription) being issued under the Company's pre-existing share capital
authorities, and the second tranche of 89,781,000 new Ordinary Shares
("Conditional Subscription"), together with 311,250,000 warrants in respect of
the entire Fundraising ("Warrants"), being subject to shareholders passing the
certain resolutions ("Resolutions") at a General Meeting ("GM").
On 20 January 2023, Forum Energy Services Ltd ("Forum") has agreed to accept
the allotment and issue of 60,606,061 new Ordinary Shares (the "Forum Share
Issue") at the Fundraising Price (together with the issue of 30,303,030
warrants on the same basis as applicable to the Fundraising ("Forum Warrants")
in settlement of the Company's obligation to pay certain deferred
consideration of £1,000,000 to Forum in accordance with the Saltfleetby SPA
as announced on 24 May 2022.
On 25 January 2023, the Company issued 1,612,904 ordinary shares at varying
price of 806,452 at 1.2 pence per share and 403,226 shares at 1.5 pence per
share. They were issue in relation of exercise of the Company Warrant.
On 2 February 2023, the Company issued 1,612,903 ordinary shares at 1.2 pence
per share. They were issue in relation of exercise of the Company Warrant.
14. SHARE OPTIONS AND WARRANTS
On 13 October 2016, the Group implemented an Enterprise Management Incentive
Scheme followed by a
NED and Consultant Share Option Scheme (The Scheme).
At 30 September 2022, the Group had 76,600,892 share options and 216,897,121
warrants outstanding in respect of ordinary shares.
During the period ended 31 March 2023 the Group has issued 165,500,000 options
and 461,483,886 warrants. The outstanding and exercisable total of the share
options and warrants was 703,584,778 with a weighted average price of £0.019
at 31 March 2023.
The inputs into the model were as follows:
Options Warrants Warrants Warrants
Stock price 1.95p 1.5p 1.5p 1.6p
Exercise price 2p 1.65p 1.65p 1.0989p
Interest rate 0.5% 0.5% 0.5% 0.5%
Volatility 30% 30% 30% 30%
Time to maturity 4 years 3.5 years 3.5 years 3 years
15. SEASONALITY OF GROUP BUSINESS
There are no seasonal factors that materially affect the operations of any
company in the Group.
16. PROVISIONS FOR OTHER LIABILITIES AND CHANGES
31 March 31 March 30 September
2023 2022 2022
£'000 £'000 £'000
4,369 3,007
Abandonment costs 4,369
--------------------------------------- --------------------------------------- ---------------------------------------
The Group makes full provision for the future costs of decommissioning oil
production facilities and pipelines on the installation of those facilities.
The amount provision is expected to be incurred up to 2029 when the producing
oil and gas properties are expected to cease operations.
These provisions have been created based on the Group's internal estimates and
expectation of the decommissioning costs likely to incur in the future. For
the period under review, the directors have assessed that the discount rate
and inflation rate to be applied to the current cost of decommissioning to be
similar. On this basis, the current cost is considered to be similar to the
discounted net present value.
17. SUBSEQUENT EVENTS
On 15 May 2023, the Company announced that, as
planned, the second compressor at Saltfleetby Field was successfully
commissioned in dual compressor mode and the 3 producing wells in the field,
B2, A4 and the new B7T well, have been flowing gas to the National Grid at the
combined average daily rate of 9.5 mmscfd since then. This represents more
than a 75% increase in production over that achieved in the first quarter of
this year.
On 19 May 2023, the Company finalised the
appointment of Richard Herbert as Chief Executive Director, George Lucan as
Executive Chairman and Patrick Clanwilliam as Non-Executive Director.
On 19 May 2023, the Company agreed the grant of
103 million share options, representing 2.87% of the Company's issued share
capital, under the Company's existing Employee Incentive Schemes (the
"Options") to Directors and other members of staff.
The share options to be granted were proposed
by the remuneration committee and approved by the Board as part of the
Company's annual share option grants; the most recent grant of which was on 24
October 2022. The conditional share options are as follows:
Richard Herbert*
70,000,000
Other employees
33,000,000
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