REG - Beacon Energy PLC - Final Results and Publication of Annual Report
14/10/2024 07:15
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RNS Number : 9696H Beacon Energy PLC 14 October 2024
14 October 2024
Beacon Energy plc
("Beacon Energy" or the "Company")
Final Results and Publication of Annual Report
Beacon Energy (AIM:BCE), the full-cycle oil and gas company with a portfolio
of onshore German assets through its wholly-owned subsidiary, Rhein Petroleum
GmbH ("Rhein Petroleum"), announces its Final Results for the period
ended 31 December 2023.
Copies of the Annual Report and Accounts have today been posted to
shareholders and made available on the Company's website
at: https://beaconenergyplc.com/ (https://beaconenergyplc.com/)
Mark Rollins, Non-Executive Chairman of Beacon Energy, commented:
"During the year and subsequent period, the Board has worked tirelessly to
deliver the Company's strategy of pursuing value-enhancing opportunities to
develop and grow a self-funding upstream oil & gas company. Following the
completion of the transformational acquisition of Rhein Petroleum in April
2023, which was aligned with our growth strategy, we faced several operational
challenges during drilling and experienced varying flow rates from the
Schwarzbach-2 well.
Even with the challenges we have experienced, the Board remains convinced that
Erfelden is a material and potentially highly valuable onshore oil discovery,
with best estimated recoverable reserves of 7.2 million barrels.
On behalf of our shareholders, we will continue to assess all options to
realize maximum value from our assets. We thank our shareholders for their
support and patience during this time and look forward to providing updates on
our progress as we move through the rest of the year."
Enquiries:
Beacon Energy plc +44 (0)20 7466 5000
Stewart MacDonald (CEO)
Strand Hanson Limited (Financial and Nominated Adviser) +44 (0)20 7409 3494
Rory Murphy / James Bellman
+44 (0)20 7466 5000
Buchanan (Public Relations)
Ben Romney / Barry Archer / George Pope
+44 (0)20 7186 9030
Tennyson Securities Limited (Broker)
Peter Krens / Ed Haig-Thomas
CHAIRMAN'S REPORT
Dear fellow shareholders,
I am pleased to present the following statement in support of the annual
results of Beacon Energy plc (the "Company") for the year ended 31 December
2023.
During the year and subsequent period, the Board has worked tirelessly to
deliver the Company's strategy which is to pursue the acquisition of value
enhancing opportunities to develop and grow a self-funding upstream oil &
gas company.
In April 2023, the Company was pleased to complete the acquisition of Rhein
Petroleum GmbH ("Rhein Petroleum"), together with a £6 million fundraise and
simultaneous readmission to AIM following a period of suspension associated
with the reverse take-over (the "Transaction"). Rhein Petroleum is an
established full cycle E&P company with a portfolio of largely operated
production, development, appraisal and exploration assets located onshore
Germany. This acquisition represented a transformational transaction for
shareholders, which was fully aligned with Beacon Energy's growth strategy to
focus on assets with proven resources and therefore tangible value.
Immediately upon completion of the Transaction, the Company secured a drilling
rig to drill the Schwarzbach-2 development well on the Erfelden field.
Drilling operations commenced on 19 June 2023. Notwithstanding operational
issues encountered during drilling, the Schwarzbach-2(2.) ("SCHB-2(2.)") well
reached total drill depth of 2,255m metres (1,717 metres True Vertical Depth)
on 13 August 2023 with electric wireline well logging completed shortly
thereafter.
The wireline logs obtained confirmed that the SCHB-2(2.) well encountered a
34-metre gross interval containing 28 metres of oil-bearing net reservoirs in
the Pechelbronner-Schichten ("PBS") sandstones within the Stockstadt Mitte
segment of the Erfelden field. These oil-bearing reservoirs were encountered
approximately 25 metres higher and 10 metres thicker than prognosis, with
porosities averaging 18% in the Lower PBS and 21% in the Upper PBS, with no
water-bearing sands in the 42m hydrocarbon column.
As a result of the encouraging electronic log results, the Company completed
an over-subscribed £4.3 million fundraise in September 2023 and subsequently,
on 13 November 2023, the Company updated its assessment of potential reserves
in the central part of the Erfelden field to 7.2 mmbbls (Best Estimate Case),
with range of 4.7 to 10.2 mmbbls (Low Case to High Case). For comparison, the
Competent Person's Report for the Erfelden field, published at the time of the
Transaction, outlined a 2P reserve of 3.8 mmbbls.
Following installation of a rod pump, production from the well stabilised at a
disappointing 40 barrels of oil per day ("bopd") - materially below
expectations given the results of the electronic logs. The low production rate
indicated that the reservoir near the wellbore had been invaded with drilling
fluids, restricting flow rates.
In January 2024, the Company undertook a sand jetting operation, an
industry-standard stimulation technique, aimed at increasing production from
the SCHB-2(2.) well. While the sand jetting operation was unsuccessful, it
represented a low-cost opportunity which could be implemented within weeks,
and which had the potential to fully clean the well and deliver expected
production. In addition, the data obtained demonstrated that the reservoir
remains at original pressure of approximately 172 bar, consistent with the
neighbouring Stockstadt field prior to production, and that the well has a
significant "skin" or "damage" effect which impeded flow.
In February 2024, the Company completed a £2.6 million fundraise which would
allow the Company to undertake a side-track operation with the aim of
by-passing the invaded drilling fluids and damaged section of the reservoir. A
rig, all long-lead items and the relevant oil field service contractors were
secured.
The SCHB-2 side-track commenced in late April 2024. The side-track kicked off
from the original well bore at a depth of 2,145 metres and extended for an
additional 85 metres in length. In the Lower PBS, the SCHB-2 side-track is
estimated to be approximately 9 metres from the original wellbore. Following
insertion of the production liner, an electrical submersible pump ("ESP") was
successfully installed and tested. Following demobilisation of the rig, the
SCHB-2 well was reconnected to the Schwarzbach production facilities on 12
June 2024 to restart production, allow the well to clean-up, and allow a
long-term flow rate to be established.
From June through to August 2024, the SCHB-2 well intermittently produced a
combination of oil, gas and water using an ESP. The continued production of
water (which is likely to be completion fluid, spent acid and losses from the
side-track and original well bore) combined with pressure data suggests the
well continued to clean-up, albeit at a slow rate.
Following extensive analysis by our technical team, the most likely
explanation for the poor performance is a combination of residual reservoir
damage in the upper section of the Upper PBS reservoir (where the sidetrack
remains close to the original well bore which was invaded with drilling
fluids) and poor permeability in this particular area of the Erfelden field
in the Lower PBS reservoir.
Following the extended period of production during the summer, it became clear
that the intermittent production reflected the fact that the ESP was running
at the (lower) limit of its operating range. As a result, in early September
2024, a rod pump was installed with the aim of achieving a stabilised flow
rate. At the time of writing, a stabilised rate of 50-55 bopd has been
achieved from the SCHB-2 well. As a result of this low cost installation, we
have marginally increased production while materially increasing the
reliability of stable production volumes.
Outlook
The Company has undertaken a thorough review of the Rhein Petroleum cost base
in order to maximise cash generation. Cost reduction measures are actively
being pursued and these initiatives are anticipated to reduce Rhein
Petroleum's annual cash operating costs from approximately €2.5
million currently to approximately €1.3 million. Such cost reduction
measures are likely to be fully implemented by year end 2024.
As part of the Company's broader cost reduction measures, the directors
continue to defer or receive a significant proportion of their fees in shares.
In addition, Larry Bottomley and Stephen Whyte agreed to leave the
Company's board, effective 1 July 2024. We take this opportunity to thank
Larry and Steve for their valuable contributions to Board deliberations. Our
thanks go especially to Larry for stepping into the CEO role in early 2022 and
leading the Company through the reverse takeover and subsequent re-listing of
the Company in 2023. As a result, the board now comprises Mark
Rollins (Non-executive Chairman), Stewart MacDonald (CEO), Ross
Warner (Independent Non-executive Director) and Leo Koot (Non-executive
Director).
In order to provide more optionality for the Company as it seeks to establish
the optimum route forward, the Company engaged with approximately 90% of the
creditors of Rhein Petroleum with the aim of agreeing a reduction in
liabilities and a deferred payment plan based on future cash flow generation
of Rhein Petroleum. Unfortunately, agreement with creditors could not be
reached and as a result the Company took the decision to place Rhein Petroleum
into a formal process with its creditors (akin to US Chapter 11 bankruptcy
protection), as announced on 27 August 2024. This three-month process was
expected to conclude in early October although it has been extended by the
creditor's representative who is exploring options to maximise recovery of
value for creditors. As part of this process, the Company has put forward a
robust and fully financed restructuring plan aimed at maximising cash
generation from the Rhein Petroleum business and delivering value for
creditors. A resolution of the creditor process is expected during Q4 2024.
In summary, it has been a frustrating series of events given the operational
challenges encountered during the drill and subsequent flow rates from SCHB-2.
As a Board, we remain convinced that Erfelden is a material and potentially
highly valuable onshore oil discovery with Best Estimated recoverable reserves
of 7.2 mmbbl. On behalf of our shareholders, we will continue to assess all
options to realise maximum value from our assets. We thank shareholders for
their support and patience through this period and look forward to providing
updates on our progress as we move through the rest of the year.
Mark Rollins
Non-Executive Chairman
11 October 2024
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Note For the year ended For the 8 month period ended
31 December 2023
31 December 2022
US$'000 US$'000
Income:
Operating Income 5 962 -
Other income 10 -
Total Income 972 -
Cost of goods sold (279) -
Operating expenses 6 (3,637) -
Operating loss (2,944) -
-
Other administrative expenses 8 (3,830) (1,004)
Net loss before finance costs and taxation (6,774) (1,004)
Finance costs (362) (47)
Effects of exchange gain/loss 125 -
At acquisition negative goodwill 3,556 -
Loss before tax (3,455) (1,051)
Tax expense 12 (1) -
Loss after tax attributable to owners of the parent (3,456) (1,051)
Other comprehensive income
Exchange differences on translation of foreign operations (276) -
Total comprehensive loss for the year attributable to owners of the parent (3,732) (1,051)
Basic loss per share attributable to owners of the parent during the year
(expressed in US cents per share)
7 (0.04) (0.08)
The Statement of Comprehensive Income has been prepared on the basis that all
operations are continuing.
The accompanying notes form an integral part of these Financial Statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Note As at As at
31 December 2023
31 December 2022
US$'000 US$'000
Assets
Non-current assets
Property, plant & equipment 14 20,336 -
Intangible assets 29 -
Total non-current assets 20,365 -
Current assets
Other receivables 875 564
Restricted cash 16 2,075 -
Cash and cash equivalents 2,754 306
Total current assets 5,704 870
Total assets 26,069 870
Liabilities
Trade and other payables 17 (5,229) (411)
Non-current liability 18 (6,231) -
Total liabilities (11,460) (411)
Net assets 14,609 459
Equity attributable to the owners of the parent
Share premium 15 65,245 48,128
Share reserve 2,801 2,036
Foreign Currency Translation Reserve (276) -
Accumulated deficit (53,161) (49,705)
Total shareholder funds 14,609 459
The Financial Statements were approved and authorised for issue by the Board
of Directors on 11 October 2024 and were signed on its behalf by:
Director
The accompanying notes form an integral part of these Financial Statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share premium Share reserve Foreign Currency Accumulated Total
Translation deficit equity
reserve
US$'000 US$'000 US$'000 US$'000 US$'000
Balance at 1 May 2022 47,656 1,445 - (48,654) 447
Loss for the period to 31 December 2022 - - - (1,051) (1,051)
Total comprehensive income - - - (1,051) (1,051)
Transactions with equity shareholders of the parent
Proceeds from shares 490 - - - 490
issues
Cost of share issues (18) - - - (18)
Share based payments - 591 - - 591
Balance at 31 December 2022 48,128 2,036 - (49,705) 459
Loss for the year to 31 December 2023 - - - (3,456) (3,456)
Other comprehensive income
Exchange differences on translation of foreign operations - - (276) - (276)
Total comprehensive income - - (276) (3,456) (3,732)
Transactions with equity shareholders of the parent
Proceeds from shares 17,713 - - - 17,713
issued
Cost of shares issued (596) - - - (596)
Share based payments - 765 - - 765
Balance at 31 December 2023 65,245 2,801 (276) (53,161) 14,609
The accompanying notes form an integral part of these Financial Statements.
CONSOLIDATED CASH FLOW STATEMENT
For the year ended For the 8 month period ended
31 December 2023
31 December 2022
US$'000 US$'000
Cash flows from operating activities:
Net loss for the year (3,456) (1,051)
Adjustments for:
Share based payments 765 591
Depreciation on property plant and equipment 426 -
Negative Goodwill (3,556) -
Tax expense 1 -
Interest paid 362 -
Change in working capital items:
Decrease/(Increase) in other receivables 227 (475)
(Decrease)/Increase in trade and other payables 4615 107
Net cash used in operations (616) (828)
Cash flows from investing activities
Investment in subsidiary - cash balances acquired 2,492 -
Purchase of property, plant & equipment (9,673) -
Net cash used in investing activities (7,181) -
Cash flows from financing activities
Proceeds from issue of share capital 12,570 490
Share issue costs (596) (18)
Net cash generated by financing activities 11,974 472
Net (decrease)/increase in cash and cash equivalents 4,177 (356)
Cash and cash equivalents, at beginning of the year 306 662
Effect of foreign exchange rate changes 346 -
Cash and cash equivalents, at end of the year 4,829 306
The accompanying notes form an integral part of these Financial Statements.
NOTES TO FINANCIAL STATEMENTS
1 Reporting Entity
Beacon 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.
On 11 April 2023, the Company announced that it had successfully completed the
acquisition of 100% of the share capital of Rhein Petroleum GmbH and Beacon
Energy plc was re-admitted to trading on AIM. On the same date Stewart
MacDonald and Leo Koot were appointed as directors.
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 approved and authorised for issue by the Company's Board
of directors on 11 October 2024.
The comparatives are not entirely comparable and reflect the period from 1 May
2022 to 31 December 2022 whilst the current period figures represent the
period from 1 January 2023 to 31 December 2023. The change in period length
was to align the accounting period with the newly acquired subsidiary.
Details of the Group's accounting policies are included below:
Standards and amendments effective for periods beginning 1 January 2024 or
later
A number of new standards are effective for annual periods beginning after 1
January 2024 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:
· Non-current Liabilities with covenants - amendments to IAS 1
· Classification of Liabilities as Current or Non-current - Amendments
to IAS 1
· Lease Liability in a Sale and Leaseback - Amendments to IFRS 16
· Supplier Finance Arrangements - Amendments to IAS 7 and IFRS 7
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. 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 Other Comprehensive Income (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.
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 Group 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.
When proved reserves of oil and gas are identified and development is
sanctioned by management, the relevant capitalised expenditure is first
assessed for impairment and (if required) any impairment loss is recognised,
then the remaining balance is transferred to oil and gas properties.
Oil and gas properties and equipment are stated at cost, less accumulated
depreciation and accumulated impairment losses. The initial cost of an asset
comprises its purchase price or construction cost (if the asset was previously
classified as assets in development), any costs directly attributable to
bringing the asset into operation, the initial estimate of the decommissioning
obligation and, for qualifying assets (where relevant), borrowing costs. The
purchase price or construction cost is the aggregate amount paid and the fair
value of any other consideration given to acquire the asset.
Oil and gas properties are depreciated on a unit-of-production basis over the
total proved developed and undeveloped reserves of the field concerned, except
in the case of assets whose useful life is shorter than the lifetime of the
field, in which case, the straight-line method is applied.
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 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 Cash Generating
Unit (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. Operating Income
Operating income represents revenue from contracts with customers and is
recognised when control of the goods or services are transferred to the
customer at an amount that reflects the consideration to which the Group
expects to be entitled in exchange for those goods or services. The Group has
concluded that it is the principal in all of its revenue arrangements since it
controls the goods or services before transferring them to the customer.
J. Going concern
The financial statements have been prepared on a going concern basis.
The Group monitors its cash position, cash forecasts and liquidity on a
regular basis and takes a conservative approach to cash management.
As at 30 June 2024, the Company had available cash resources (excluding
restricted cash) of US$1.4 million.
Following disappointing production rates from SCHB-2, the Company engaged with
approximately 90% of the creditors of Rhein Petroleum with the aim of agreeing
a reduction in liabilities and a deferred payment plan based on future cash
flow generation of Rhein Petroleum. Unfortunately, agreement with creditors
could not be reached and as a result the Company took the decision to place
Rhein Petroleum into a formal process with its creditors (akin to US Chapter
11 bankruptcy protection). This three-month process was expected to conclude
in early October although it has been extended by the creditor's
representative who is exploring options to maximise recovery of value for
creditors. As part of this process, the Company has put forward a robust and
fully financed restructuring plan aimed at maximising cash generation from the
Rhein Petroleum business and delivering value for creditors. A resolution of
the creditor process is expected during Q4 2024.
Management's base case is that a suitable agreement will be reached with the
creditors of Rhein Petroleum and that, if the stabilised production can be
maintained, the Rhein Petroleum business will be self-funding going
forward.
Management have also considered a number of downside scenarios, including
scenarios where agreement cannot be reached with creditors, or where
production cannot be maintained at the current stabilised rate.
Under the base case forecast, the Group will have sufficient financial
headroom to meet forecast cash requirements for the 12 months from the date of
approval of these consolidated financial statements. However, in the downside
scenarios, in the absence of any mitigating actions, the Group may have
insufficient funds to meet its forecast cash requirements. Potential mitigants
include deferral and/or reduction of expenditure and raising additional
funding. It should be noted that Beacon Energy has not provided any parent
company guarantees related to the debts of Rhein Petroleum.
Accordingly, after making enquiries and considering the risks described above,
the Directors have assessed that the cash balance and forecast cash flows
provide the Group with adequate headroom for the following 12 months - as a
result, the Directors are of the opinion that the Group is able to operate as
a going concern for at least the next twelve months from the date of approval
of these financial statements.
Nonetheless, these conditions indicate the existence of a material uncertainty
which may cast doubt on the Group's ability to continue as a going concern.
The financial statements do not include the adjustments that would be required
if the Group were unable to continue as a going concern.
3 Functional and presentation currency
These consolidated financial statements are presented in US Dollars ("USD" or
"US$"), which is the Group'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 20 - consolidation: whether the Group has de facto control over an
investee.
- Note 14 - impairment considerations in relation to property, plant and
equipment.
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 11)
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.
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.
Decommissioning provision (note 18)
The Group has estimated the present value of the amounts that will be required
in relation to the future decommissioning of its oil and gas operation. This
is based on security amounts agreed with the mining authority in the
jurisdiction, however, there are estimation uncertainties in respect of the
inflation and discount rates used.
5 Operating income
All Group revenues arise from the oil and gas activities in Germany.
2023 2022
December December
US$'000 US$'000
Oil and gas activities 962 -
962 -
Contract balances
The opening and closing balances of receivables and contract assets from
contracts with customers are as follows:
2023 2022
December December
US$'000 US$'000
Trade receivables 111 -
111 -
6 Operating expenses
Operating expenses consist of the following:
2023 2022
December December
US$'000 US$'000
Raw materials, auxiliary materials and operating supplies 166 -
Operating services 439 -
Wages and salaries 958 -
Depreciation 426 -
Other operating expenses 1,648 -
Operating expenses 3,637 -
7 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 one operating segment comprising oil and gas exploration
and production operations in Germany. As a result, 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.
8 Administrative expenses
Administration fees and expenses consist of the following:
2023 2022
December December
US$'000 US$'000
Audit fees 47 20
Professional fees 418 103
Administration costs (largely associated with acquisition) 816 63
Employee share based payments (Note 11) 19 -
Director share based payments (Note 11) 1,010 425
Directors' fees (Note 11) 661 393
Travel and entertainment 28 -
Acquisition amounts written off 831 -
Other administrative expenses 3,830 1,004
9 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.
2023 2022
December December
Loss attributable to owners of the Group (USD thousands) (3,456) (1,051)
Weighted average number of ordinary shares in issue (thousands) 8,863,248 1,350,063
Loss per share (US cents) (0.04) (0.08)
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 10.
10 Share-based payment arrangements
The following is a summary of the share options and warrants outstanding and
exercisable as at 31 December 2023 and 31 December 2022, and the changes
during each year:
Number of options and warrants Weighted average exercise price (Pence)
Outstanding and exercisable at 1 May 2022 118,259,511 2.68
Outstanding and exercisable at 31 December 2022 613,268,824 0.43
Outstanding and exercisable at 31 December 2023 3,295,965,536 0.15
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 Issued Expired/ 31 December Exercise Price
2022 Cancelled 2022
Warrants
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
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
Consolidation (833,105,906) - 833,105,906 -
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 (80,067,627) - 44,916,232 (35,151,395)
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
26.07.22 27.07.25 - 500,000,000 - 500,000,000 0.13p
Options
01.10.18 01.10.23 4,500,000 - - 4,500,000 2.00p
01.02.20 01.02.25 31,250,000 - - 31,250,000 0.30p
01.02.20 01.02.25 31,250,000 - - 31,250,000 0.30p
Consolidation (60,300,000) - - (60,300,000)
19.04.21 19.01.26 27,110,000 - - 27,110,000 2.60p
17.03.22 17.03.27 30,000,000 - - 30,000,000 0.30p
118,259,511 500,000,000 (4,990,687) 613,268,824
Grant Date Expiry Date 31 December Issued Expired 31 December Exercise Price
2022 /Cancelled 2023
Warrants
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 (35,151,395) - 490,910 (34,660,485)
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
26.07.22 27.07.25 500,000,000 - - 500,000,000 0.13p
11.04.23 11.04.28 - 1,325,753,299 - 1,325,753,299 0.11p
20.09.23 20.09.28 - 116,700,000 - 116,700,000 0.15p
Options
01.10.18 01.10.23 4,500,000 - (4,500,000) - 2.00p
01.02.20 01.02.25 31,250,000 - (31,250,000) - 0.30p
01.02.20 01.02.25 31,250,000 - (31,250,000) - 0.30p
Consolidation (60,300,000) - 60,300,000 -
19.04.21 19.01.26 27,110,000 - (27,110,000) - 2.60p
17.03.22 17.03.27 30,000,000 - - 30,000,000 0.30p
19.12.22 19.12.27 - 188,803,430 - 188,803,430 0.00p
19.12.22 19.12.27 - 581,738,888 - 581,738,888 0.11p
20.12.23 20.12.28 - 266,972,202 - 266,972,202 0.15p
20.12.23 20.12.28 - 236,593,438 - 236,593,438 0.15p
613,268,824 2,716,561,257 (33,864,545) 3,295,965,536
The options and warrants issued during the period 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
19.12.22 0.175p 0.00p 237% 5 years 0% 3.503% 0.15p
19.12.22 0.175p 0.11p 237% 5 years 0% 3.503% 0.09p
20.12.23 0.95p 0.15p 98% 5 years 0% 3.525% 0.05p
The Group recognised US$765,000 (2022: US$591,000) relating to equity-settled
share-based payment transactions during the year arising from Option or
Warrant grants, which was charged US$nil (2022: US$Nil) in respect of services
performed in connection with the issue of new shares charged to share premium,
US$765,000 (2022: US$472,000) in respect of directors' fees and US$nil
reversed (2022: US$7,000) in respect of employee costs to the income
statement.
The 770,542,318 options granted on 19 December 2022 vested on 19 June 2023 and
19 December 2023 in equal amounts. Vesting of the options is subject to the
option holder providing continuous service during the vesting period and there
are no other performance conditions attached to the options.
The 503,565,640 options granted on 20 December 2023 will vest on 23 April 2024
and 23 October 2024. Vesting of the options is subject to the option holder
providing continuous service during the vesting period and there are no other
performance conditions attached to the options.
The 62,500,000 options granted on 1 February 2020 which were meant to vest on
1 February 2025 were cancelled. The 27,110,000 options granted on 19 April
2021 which were meant to vest on 19 January 2026 were cancelled. The share
option reserve recognized has been released to the profit and loss.
For the share options and warrants outstanding as at 31 December 2023, the
weighted average remaining contractual life is 4 years (2022: 4 years).
11 Employee benefits (including directors)
The group employed an average of 14 individuals during the period, including
the directors (2022: 4).
2023 2022
December December
US$'000 US$'000
Directors' remuneration (see below) 661 227
Wages cost 958 -
Share based payments - Directors (see below) 1,010 166
Share based payments - Employees 19 -
2,648 393
Key management of the Group are considered to be the Directors.
The remuneration of the directors during the period ended 31 December 2023 was
as follows:
Short term employee benefits Social security payments Share based payments
Pension contribution Total
2023
US$'000 US$'000 US$'000 US$'000 US$'000
Ross Warner 45 - - 71 116
Mark Rollins 75 - - 152 227
Stewart MacDonald 196 22 23 201 442
Steve Whyte 45 4 - 71 120
Larry Bottomley 200 21 - 515 736
Leo Koot 30 - - - 30
Total Key Management 591 47 23 1,010 1,671
The remuneration of the directors during the period ended 31 December 2022 was
as follows:
Short term employee benefits Social security payments Share based payments
Pension contribution Total
2022
US$'000 US$'000 US$'000 US$'000 US$'000
Ross Warner 33 - - 14 47
Mark Rollins 67 - - 70 137
Stephen West - (2) - - (2)
Steve Whyte 33 4 - 6 43
Larry Bottomley 88 4 - 76 168
Total Key Management 221 6 - 166 393
12 Income tax expense
The Parent Company is resident for tax purposes in the Isle of Man and is
subject to Isle of Man tax at the current rate of 0% (2022: 0%). During the
period and in the prior year, no subsidiaries were subject to material
corporation tax.
Taxation reconciliation
The charge for the year can be reconciled to the loss per the consolidated
statement of comprehensive income as follows:
2023 2022
December December
US$'000 US$'000
Loss before income tax (3,456) (1,051)
Tax on loss at the weighted average corporate tax rate of 0% (2022: 0%) - -
Tax - German authorities 1 -
Total income tax expense 1 -
The deferred tax asset has not been recognised, in accordance with IAS 12. The
Group does not have a material deferred tax liability at the year end.
13 Business combination
On 11 April 2023, the Company acquired the entire issued share capital of
Rhein Petroleum GmbH, an upstream oil and gas business operating in Germany.
This transaction can be best described as a business combination under IFRS3.
The acquisition consisted of equity consideration of 3,488,549,633 ordinary
shares and an associated consideration of 1,186,953,301 warrants at a price of
0.11 pence which is the fair value per share. On the basis that the net assets
acquired exceeded the consideration paid, negative goodwill arose. This
negative goodwill has been written off through the profit and loss. Details of
the purchase consideration and the net assets acquired are as follows:
Goodwill
$'000
Consideration transferred at Fair value 5,143
Less: Net identifiable liabilities at acquisition 18,769
Goodwill at acquisition 23,912
Less: adjustments of loan balance acquired (27,468)
Negative goodwill at reporting date (3,556)
Net liabilities at fair value:
Fair value recognised on acquisition
$'000
Property, plant and equipment 11,743
Receivables 536
Cash and cash equivalents 2,492
Total assets 14,771
Trade payables (759)
Non-current liabilities (32,781)
Total liabilities (33,540)
Total identifiable net liabilities at fair value (18,769)
The Group measured immaterial acquired lease liabilities using the present
value of the remaining lease payments at the date of acquisition. The related
right-of-use assets were measured at an amount equal to the lease liabilities
and adjusted to reflect the favourable terms of the lease relative to market
terms.
From the date of acquisition, Rhein Petroleum GmbH contributed $962,000 of
revenue and $1,357,000 to loss before tax from continuing operations of the
Group. If the combination had taken place at the beginning of 2023, the
Group's revenue from continuing operations would have been $1,464,000 and the
loss before tax from continuing operations would have been $3,843,000.
14 Property, plant and equipment
Oil and gas properties and equipment
US$'000
Cost
Cost at 1 January 2023 -
Acquired in year 20,762
Cost at 31 December 2023 20,762
Depreciation
Depreciation at 1 January 2023 -
Depreciation charge (426)
Depreciation at 31 December 2023 (426)
Net book value - 1 January 2023 -
Net book value - 31 December 2023 20,336
15 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 2022 1,027,614,008 47,656
26 July 2022-Equity placing 500,000,000 0.13 490
Cost of issue (18)
Balance at 31 December 2022 1,527,614,008 48,128
Cancelled shares (1,527,614,008)
11 April 2023-Equity placing 10,507,679,620 0.11 12,639
15 September 2023-Equity placing 2,867,000,000 0.15 5,074
Cost of issue (596)
Balance at 31 December 2023 13,374,679,620 65,245
16 Restricted cash
At reporting date, the Group had US$2,075,000 restricted cash, which is
backing guarantees to the mining authority related to future decommissioning.
This amount forms part of the US$2,496,000 cash balances acquired through the
Rhein Petroleum GmbH acquisition. The guarantees are included within the
provision for decommissioning shown in note 18.
17 Trade and other payables
Trade and other payables are obligations to pay for goods or services that
have been acquired in the ordinary course of business. Accounts payable are
classified as current liabilities if payment is due within one year or less
(or in the normal operating cycle of the business if longer). If not, they are
presented as non-current liabilities. Trade payables are recognised initially
at fair value, and subsequently measured at amortised cost using the effective
interest method.
2023 2022
December December
US$'000 US$'000
Trade payables 4,858 230
Accruals and other payables 371 181
5,229 411
18 Non-current liabilities
The non-current liabilities consist of a loan with Tulip Oil Holding B.V and
provisions in relation to future abandonment and decommissioning costs.
Audited Audited
Outstanding at 31 Dec 2023
Outstanding at 31 Dec 2022
US$'000 US$'000
Tulip Oil Holding loan payable 3,724 -
Provision for decommissioning 2,412 -
Other non-current liabilities 95 -
6,231 -
The loan between Rhein Petroleum GmbH and Tulip Oil Holding B.V. is secured on
the shares of Rhein Petroleum GmbH , incurs interest at a rate of 15% and is
repayable on 30 June 2025.
The provision for decommissioning is the estimated present value of the
amounts required to decommission the Group's oil and gas activities.
19 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$559,000 (2022: US$6,000) in the net assets of the Group.
B. Cash flow interest rate risk
The Group's cash and cash equivalents are invested at short term market
interest rates. As market rates are low, the Group is not subject to
significant cash flow interest rate risk and no sensitivity analysis is
provided. The Group is also not subject to significant fair value interest
rate risk.
2023 December 2022 December
US$'000 US$'000
Cash & Cash Equivalents
USD 3 294
GBP 2,640 12
EUR 2,186 -
Total Financial Assets 4,829 306
Trade & other payables
USD 249 181
GBP 128 184
EUR 4,852 46
Total Financial Liabilities 5,229 411
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 31 December 2023 (31 December 2022: 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. Should the Group enter 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.
20 List of subsidiaries and associates
The parent of the Group has shareholdings in the following entities:
Name Interest 2023 Interest 2022 Country of incorporation Nature of business
Advance Energy TL Limited 100% 100% UK Intermediate Hold Co
Eagle Gas Limited 25% 25% UK Oil and gas Exploration
Beacon Energy RP Limited 100% 100% Isle of Man Dormant
Rhein Petroleum GmbH 100% 0% Germany Oil and gas
21 Commitments
There were no capital commitments authorised by the Directors or contracted
other than those provided for in these financial statements as at 31 December
2023 (31 December 2022: None).
22 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 11 Directors
Remuneration. For details of any related party transactions entered into after
the year-end please refer to Note 23 Subsequent Events.
23 Subsequent events
On 29 February 2024, the company announced that it had successfully completed
its oversubscribed Placing with new and existing institutional investors and
the PrimaryBid Offer. The Company raised, in aggregate, approximately €3.0
million (approximately £2.6 million) (before expenses) via the issue of
5,137,000,000 shares.
On 2 April 2024, the company announced that Larry Bottomley, the Company's
Chief Executive Officer ("CEO"), has informed the board of his intention to
retire as CEO effective 1 June 2024. Larry was replaced as CEO by Stewart
MacDonald, the Company's then Chief Financial Officer ("CFO.")
On 28 June 2024, the Company announced that the Company had engaged with
approximately 90% of the creditors of Rhein Petroleum with the aim of agreeing
a reduction in liabilities and a deferred payment plan based on future cash
flow generation of Rhein Petroleum. The Company also announced that it
expected Rhein Petroleum to enter into a formal process with its creditors
which would provide for an up to three-month negotiation period. The company
had undertaken a thorough review of the Rhein Petroleum cost base in order to
maximise cash generation. Cost reduction measures are anticipated to reduce
Rhein Petroleum's annual cash operating costs from approximately €2.5m
currently to approximately €1.3m. Such cost reduction measures are likely to
take 3 - 6 months to realise. As part of the broader cost reduction measures,
Larry Bottomley and Stephen Whyte agreed to leave the Company's board.
Unfortunately an agreement with creditors of Rhein Petroleum could not be
reached and as a result the Company took the decision to place Rhein Petroleum
into a formal process with its creditors (akin to US Chapter 11 bankruptcy
protection).
On 1 July 2024, the Company requested that trading on AIM for the securities
be temporarily suspended.
On 27 August 2024, the Company announced that it had become clear that the
electrical submersible pump ("ESP") was running at the lower limit of its
operating range - approximately 50 bopd - and as such the SCHB-2 well had not
yet been able to achieve a stabilised flow rate. It also announced that plans
are well advanced to re-install a rod pump (at a cost of approximately
€75,000) to allow a stabilised flow rate to be achieved. This was
subsequently installed and a stabilised rate of 50 - 55 bopd achieved.
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