REG - Block Energy PLC - Final Results
11/05/2023 07:00
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RNS Number : 0242Z Block Energy PLC 11 May 2023
11(th) May 2023
Block Energy Plc
("Block" or the "Company")
Audited Results for the Year Ended 31(st) December 2022
Block Energy plc, the development and production company focused on Georgia,
is pleased to announce its audited results for the year ended 31(st) December
2022.
Highlights:
· Average production during the year increased 5% over the prior
year to 450boepd.
· Post-year end, Company production sees record levels at over 620
boepd (April average rate), reflecting the further success of well WR-B01Za.
· Production increase in 2022 primarily driven by the success of
well JKT-01Z and continued positive production from mature wells sustained by
the 23 well workover programme in the first half of the year.
· Material revenue growth in 2022, increasing 35% over 2021 to
$8.26m, driven by the increase in production, combined with improved oil
pricing.
· Total loss for 2022 decreased significantly to $1.16m (2021:
$4.58m) due to the increase in revenue and careful management of costs,
including a material decrease in G&A costs.
· Three successful wells in 2022 and post-year end, substantially
increasing production and proving the concept of un-swept oil in Georgia's
most prolific field.
· Successful farmout of non-core areas for a gross $3m work
programme, exposing the Company at no cost to Block. This provides the Company
with direct exposure to 3.1 TCF gas and 1,400 MMbbl oil unrisked prospective
resources within GOGL's portfolio, of which, the state of Georgia is a 22%
partner, via a cash investment into the project.
· All obligations under the minimum work programme for license XIF
completed, securing the licence until 2043.
· One minor lost time incident was reported across the 382,542
operational man-hours worked in 2022.
· Post-year end, secured additional funding through a senior
secured loan facility of up to $2m to accelerate Projects I and III.
Block Energy plc's Chief Executive Officer, Paul Haywood, said:
"Since announcing the Company's three project strategy approximately 12 months
ago, marking the start of concurrent development and appraisal activity, Block
has made material progress. It has successfully delivered on its operational
plans for 2022, which included increasing near-term production and cashflows
from Project I, proving the concept of un-swept oil in the Patardzueli field
under Project II and advancing the Project III high-impact 1 TCF contingent
gas resource opportunity. Additionally, Block secured a $3m farm-out of
non-core areas, establishing Project IV, providing the Company with direct
exposure to high-impact exploration".
"As revenue continues to grow, so can the Company. This is why we remain
focussed on accelerating our Projects which are intended to create significant
shareholder value and cash flow whilst providing the Georgian Government and
society with greater energy security. Our plan is clear, the strategy is
working, and the team is energised to execute operationally and strategically.
As we enter our next drilling phase, the Company has never been in a more
exciting position".
Stephen James BSc, MBA, PhD (Block Energy's Subsurface Manager) has reviewed
the reserve, resource and production information in this announcement. Dr
James is a geoscientist with over 40 years of experience in field development
and reservoir management.
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS STIPULATED UNDER THE UK
VERSION OF THE MARKET ABUSE REGULATION NO 596/2014 WHICH IS PART OF ENGLISH
LAW BY VIRTUE OF THE EUROPEAN (WITHDRAWAL) ACT 2018, AS AMENDED. ON
PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE, THIS
INFORMATION IS CONSIDERED TO BE IN THE PUBLIC DOMAIN.
For further information, please visit http://www.blockenergy.co.uk/
(http://www.blockenergy.co.uk/) or contact:
Paul Haywood Block Energy plc Tel: +44 (0)20 3468 9891
(Chief Executive Officer)
Neil Baldwin Spark Advisory Partners Limited Tel: +44 (0)20 3368 3554
(Nominated Adviser)
Peter Krens Tennyson Securities Tel: +44 (0)20 7186 9030
(Corporate Broker)
Philip Dennis / Mark Antelme / Ali AlQahtani Celicourt Communications Tel: +44 (0)20 8434 2643
(Financial PR)
Notes to editors
Block Energy plc is an AIM-listed independent oil and gas company focused on
production and development in Georgia, applying innovative technology to
realise the full potential of previously discovered fields.
Block has a 100% working interest in Georgian onshore licence blocks IX and
XIB. Licence block XIB is Georgia's most productive block. During the
mid-1980s, production peaked at 67,000 bopd and cumulative production reached
100 MMbbls and 80 MMbbls of oil from the Patardzeuli and Samgori fields,
respectively.
The remaining 2P reserves across block XIB are 64 MMboe, comprising 2P oil
reserves of 36 MMbbls and 2P gas reserves of 28 MMboe. (Source: CPR Bayphase
Limited: 1 July 2015). Additionally, following an internal technical study
designed to evaluate and quantify the undrained oil potential of the Middle
Eocene within the Patardzeuli field, the Company has estimated gross unrisked
2C contingent resources of 200 MMbbls of oil.
The Company has a 100% working interest in licence block XIF containing the
West Rustavi onshore oil and gas field. Multiple wells have tested oil and gas
from a range of geological horizons. The field has so far produced over 75
Mbbls of light sweet crude and has 0.9 MMbbls of gross2P oil reserves in the
Middle Eocene. It also has 38 MMbbls of unrisked 2C contingent resources of
oil and 608 Bcf of gross unrisked 2C contingent resources of gas in the
Middle, Upper and Lower Eocene formations (Source: CPR Gustavson Associates: 1
January 2018).
Block also holds 100% and 90% working interests, respectively, in the onshore
oil-producing Norio and Satskhenisi fields.
The Company offers a clear entry point for investors to gain exposure to
Georgia's growing economy and the strong regional demand for oil and gas.
Chairman's Statement
Dear Shareholder,
The Company's operations over the last year reflect the wider strategy to
create a solid springboard from which Block can deliver further growth by
unlocking the potential of its significant asset base in Georgia while
mitigating, through diversification, risks to shareholders and lenders,
including those related to operations, revenue and cashflows.
Block's portfolio of assets offers material potential to deliver on this
strategy, with opportunities to increase production and revenue in the near
and medium term and in the longer term through Company making opportunities in
substantial deep gas resources.
Along this journey, there will inevitably be operations that deliver better
results and returns than others. While this is a general feature of oil &
gas, it is particularly true for our business in Georgia, which is weighted
towards production rather than exploration due to the complexity of the
reservoirs when compared to many other regions of the world.
The best way to regard Block, therefore, is to consider the totality of the
opportunities in the planned portfolio of wells rather than on a well-by-well
basis. The best way to unlock the value is through multi-well operations.
Reflecting that approach in 2022, the Company introduced its four-project
strategy, initially focusing on developing production, revenues and cashflow
from Projects I & II. The results from Projects I and II to date have been
very encouraging, including the completion of two successful Project I wells,
one during the year and one in 2023, and of a successful Project II well,
which proved the concept of unswept oil in the Patardzeuli Field.
The success of these wells was based on the culmination of the knowledge
gained from previous wells, which have all added to the Company's
understanding of the sub-surface and its ability to build a model that informs
and supports future drilling. I am, therefore now confident that our
geoscientists can use 3D seismic attribute analysis to accurately locate the
natural fractures that give high levels of productivity and that our
operational staff can drill horizontal sidetracks through pressure-depleted,
faulted reservoirs with cost-effective efficiency.
The three successful wells are delivering a material increase in production
rate, which, along with higher crude oil and gas pricing and the benefit of a
successful workover campaign in the first half of the year, has already
contributed to a stronger financial performance. During 2022, the Company saw
the loss on the year reduce materially from $4,581k in 2021 to $1,160k. This
year-on-year performance improvement is continuing into 2023, and I am
confident that this year will see a profit for the first time.
All of this is only possible with a rigorous approach to managing and
mitigating the inevitable day-to-day risks facing the business, including
those of costs and financing, safety and the wider business environment, among
others.
Cost management is part of the Company's culture and has been effectively
delivered through improved efficiencies, aggressive supplier contracting,
careful and considered investment planning and by employing innovative
solutions to unforeseen problems, a good example of which being the use of
internal resources, to undertake very low-cost remedial operations on well
WR-B01Za, resulting in the Company's most successful producing well.
Effective management of the cost base not only improves the returns from
successful wells but also minimises the costs of those wells that could be
more successful. During 2022, the keen focus on cost management was reflected
in overall costs remaining relatively flat and G&A costs decreasing
substantially.
Of utmost importance to the Board is the safety of our people and our
contractors, the protection of the environment and the wellbeing of nearby
communities. The review of HSES management performance is always the first
agenda point at Board meetings. It is of paramount importance that our people
work in a safe environment, and it is also vital to the efficient operations
of the business. By taking the wellbeing of our people and local communities
seriously, along with the protection of the environment, we are best placed to
be able to attract and retain the best people and suppliers, and we limit the
chance of our operations being delayed or postponed, due to injury or the
influence of third parties.
The Company cannot influence a number of external factors, such as global
crude oil prices. During 2022, Block Energy enjoyed relatively high crude oil
prices, but markets are volatile, and accordingly, the Company puts in place
measures to mitigate this exposure.
The Company was otherwise able to operate during 2022 unfettered by external
influences. With the pandemic having receded, Block was no longer subject to
the restrictions imposed by it, and while the war in Ukraine has caused
terrible anxiety and harm for many, it has not impacted the Company's
operations.
Key to ensuring effective management of the business in the interest of all
stakeholders is governance. Block has always kept a keen focus on this, as
reflected in the structure and experience of the Board, along with the
regularity and structure in which Board meetings take place.
Alongside meeting of the whole board, Block has a rigorous system of
sub-committees covering key areas of the business, from finance and
nominations to ESG. These committees meet regularly and report to meetings of
the whole Board.
The balance of the Board was maintained despite changes that occurred,
including Ken Seymour moving from a non-executive to an executive management
position and William McAvock resigning as CFO and leaving the Board.
While 2022 was not without its challenges, the Company and team can be proud
of what has been delivered. With three successful wells, all adding materially
to production, the return on investment that has been achieved is significant.
Furthermore, as the enhanced levels of production continue to feed into a
stronger cash position, the Company will be increasingly well placed to
execute its multi-well strategy across its four projects and deliver
additional value at reduced risk without the need to dilute shareholders.
I would therefore like to take the opportunity to thank our team of 120 people
in Georgia and six in London for the consistent dedication and commitment they
show the Company. That of the operational and geoscience teams is obvious from
the increasing production rate. But they are kept safe and the environment
protected by our ever vigilant HSES team. Our commercial team negotiates
effective contracts with suppliers, sells the produced oil and gas into
limited local markets, procures the necessary permits and ensures that our
neighbours in the local communities are kept undisturbed by our operations.
Last but not least, our dedicated accountants maintain the accurate records
you see in this Annual Report.
We are also very grateful for the support and encouragement from all within
the Georgian state agencies with whom we interact.
Our Company now has a stronger platform on which to realise its potential. On
behalf of the Board, I would like to thank you all for your support. We look
forward to engaging with you with further updates as the rest of the year
unfolds.
Philip Dimmock
Non- Executive Chairman
Chief Executive Officer's Statement
Dear Shareholder,
Since announcing the Company's three project strategy approximately 12 months
ago, marking the start of concurrent development and appraisal activity, Block
has made material progress. This has included the safe and successful
delivery of multiple wells, increased production, material revenue growth, a
successful farm out, and fulfilling the XIF licence minimum work programme
("MWP") commitments.
The achievements would not have been possible without the continued hard work,
dedication, and experience of the Company's team. Since 2020 they have
successfully navigated macro and micro headwinds associated with a global
pandemic, a commodity price collapse, war, and significant cost inflation, all
while delivering on our operational and strategic plans.
Health, Safety and Environment
The safety of the Company's operations and team is of the highest importance
and central to delivering the Company's transformative growth strategy. Block
continues to focus on enhancing the effectiveness of its safety measures,
process and procedures whilst supporting personal development and rigorously
building and incentivising a culture of care for others.
The strength of our systems and procedures in place is reflected in the
Company's HSES record, with one minor lost time incident reported across the
382,542 operational man-hours worked in 2022.
We continued to build on our commitment to the environment and local
communities and established a board-level ESG committee. In line with our
commitment to the environment, the Company monitors its emissions to minimise
its CO(2) footprint, including targeting zero-flaring of gas from operations.
During the year, total reported emissions were 618.42 tCO(2) from operations,
mainly a result of the need to flare 283,802mᶟ of gas due to unplanned
shutdowns.
Operations
The Company delivered on its operational plans for 2022, which included
increasing near-term production and cashflows from Project I, proving the
concept of un-swept oil in the Patardzueli field under Project II and
advancing the Project III high-impact 1 TCF contingent gas resource
opportunity. Additionally, Block secured a farm-out of non-core areas within
XIB, establishing Project IV and providing the Company with direct exposure to
high-impact exploration.
Project I
Early in the year, the Company announced the safe and successful execution of
well JKT-01Z, which achieved a stable production rate of 310boepd, in line
with our guidance to the Market, significantly boosting the Company's total
production at that time.
JKT-01Z is performing in line with the 3P (or high) case, as presented in the
Project I Competent Person's Report ("CPR"), announced in August, which
attributed gross 3P field reserves of 3.01 MMbbls and a 3P NPV of $57m.
That CPR focused on part of the West Rustavi and Krtsanisi oil fields only,
auditing internal plans for the phase one, five-well development programme.
The Company's Contingent resource report ascribed 2C of 19.5 MMbbl to the
entire West Rustavi / Krtsanisi Middle Eocene reservoir, providing plenty of
scope for significant reserve upgrades in the future, on further drilling
success.
The planning and construction of facilities for WR-B01Za, the next well in the
five-well programme, was completed later in the year, enabling the rapid
monetisation of production from future wells. Post-year-end, well WR-B01Za was
successfully drilled, completed and tested at 269bopd. Since being tied into
the production facilities and handed over to the production team, the well
continues to perform, providing another material boost to total production.
Recent drilling success has significantly increased our confidence in Project
I. We plan to drill three further wells (as defined in the CPR), and will
prioritise this work programme moving forward. In parallel, the team is
working on a full field development plan consisting of five additional
back-to-back drilling phases.
Project II
In September, the Company commenced Project II with the drilling of well
JSR-01 and successfully proved the concept of un-swept oil within the
Patardzeuli oil field, Georgia's most prolific field. Well, JSR-01 was safely
drilled to the base of the 600m thick middle Eocene located at a depth of
approximately 2,800 metres, on plan and below budget. JSR-01 was brought into
production at a rate of 45boepd, proving recovery of commercial volumes of oil
and supporting plans to appraise additional targets.
Following these results, the drilling team upgraded the Company's service rig
to enable it to be better utilised across a multi-well drilling programme,
where four candidates have been risked, ranked, and prioritised. Following
this initiative, Project II can advance in parallel to planned drilling under
Project I.
Project III
Project III exposes the Company to a large undeveloped gas resource within the
Lower Eocene, Palaeocene and Upper Cretaceous reservoirs of licence blocks XIB
and XIF. Work throughout the period has focused on internal resource auditing,
producing a conceptual development plan, negotiating long-term gas sales
agreements with the state of Georgia and scoping out facility requirements to
handle a plateau phase one production rate of approximately 30 mmcf/d rising
to 60 mmcf/d within 18 - 24 months.
The appraisal and development plan will kick off with the side track of the
PatE1 well. This well is in close proximity (c. 8km) to the state-owned
Samgori South Dome Underground Gas Storage Project (SSDUGS). The $290m
Government-backed project is designed to store approximately 300 million cubic
metres of gas, equivalent to roughly 15% of Georgia's annual consumption. To
date, the State has assigned €150m to the SSDUGS. Success at Project III
will see Block deliver gas volumes to SSDUGS, the growing domestic gas market
and/or export to Europe via the southern caucuses pipeline.
Production
Production for the year was relatively stable, reflecting the success of well
JKT-01Z and the extensive 23-well workover programme in the first half of
2022, offset by natural decline. This resulted in average production during
the year of over 450 boepd, representing a 5 % increase over the prior year
(2021: 427boepd).
Post-year end, the Company sees record production levels of over 620 boepd in
April 2023, reflecting the added benefit of production from well WR-B01Za,
alongside stable and strong levels of production from well JKT-01Z and rapid
and efficient routine maintenance across other mature wells.
Corporate
As a result of the successful development of the XIF license, which included
geological studies, a 3D seismic campaign and the drilling of multiple wells,
Georgia's State Agency of Oil and Gas, confirmed that all requirements under
the XIF minimum work programme had been fulfilled. Integrity over the XIF
license is therefore secured until 2043.
The Company also completed the successful farm-out of 50% of the non-core
areas of licence XIB, to Georgia Oil & Gas Limited ("GOGL"), for a work
programme valued at c.$3m, which significantly advances the exploration
potential of non-core areas within the licence at no cost to Block. This
provides the Company with direct exposure to 3.1 TCF gas and 1,400 MMbbl oil
unrisked prospective resources within GOGL's portfolio, of which, the state of
Georgia is a 22% partner via a cash investment into the project.
Under the farm-out terms, the work programme committed by GOGL consists of
$2.5m of 2D seismic acquisition and $0.5m of seismic reprocessing. The
farm-out has no impact on the Company's current operator status, existing
production and/or development plans associated with Projects I, II or III.
Financials
Total Group revenue from the sale of oil & gas during 2022 was $8.26m,
representing a 35% increase over the prior year. Revenue was predominantly
from oil sales, which increased to c $7.5m during the year, with the remaining
$0.77m from the sale of gas.
The year's revenue increase, combined with relatively flat operating costs,
including a decrease in G&A, resulted in a significant decrease in the
operating loss for the year to $1.8m (2021: $4.7m).
Post reporting period, the Company secured additional funding through a senior
secured loan facility of $2.0m, with various shareholders and members of
Block's management team. The facility is in place to accelerate Project I and
III plans, and $1.06m has been drawn down.
Looking forward
As revenue grows, so can the Company. This is why we remain focussed on
accelerating the Project I development programme alongside Projects II, III
and IV. Success will create significant shareholder value and cash flow and
provide the Georgian Government and society with greater energy security.
Our plan is clear, the strategy is working, and the team is highly motivated
to execute operationally and strategically. As we enter our next drilling
phase, the Company has never been in a more exciting position.
I want to thank our shareholders for their continued support throughout a
challenging yet highly exciting year and finish by thanking the entire team at
Block Energy for their continued drive and passion towards delivering the plan
and growing our business.
Paul Haywood
Chief Executive Officer
Financial Review
Balance Sheet
On 30(th) November 2022, the Company announced that the outstanding
Consideration due to Schlumberger Production Management ("SLB"); (the seller
of XIB) had not been taken up and that the 108,000,000 nil-cost options issued
to SLB were to be cancelled. This decision has significantly improved the
Company's accumulated deficit, reducing the deficit to $16,349,000 (2021:
$21,548,000).
The Group's assets have remained stable, with non-current assets at
$24,815,000 (2021: $24,345,000). At the end of the year, the Group's cash
balance was $450,000 (2021: $1,244,000).
Income Statement
The Group's revenue from oil and gas sales increased to $8,262,000 (2021:
$6,114,000) and other income included $281,000 from an insurance claim. The
current year revenue from sales of crude oil of $7,492,000 (2021: $5,519,000)
comprised the sale of 89,900 barrels (2021: 86,700 barrels), which equated to
an average revenue of $83.34 (2021: $60.65) per barrel.
During the year, the Group produced 120,359 barrels of crude oil (2021:
108,000 barrels), with the increase in production primarily due to the JKT-01
well, which was brought online in January 2022. Gas production stood at 267
mmcf (2021: 288 mmcf). This gross production includes the State of Georgia's
share of production before cost recovery and profit sharing.
In addition, the Group had over 9,000 barrels of crude oil inventory as of
31(st) December 2022 (31(st) December 2021: 20,000 barrels). Following the
year end, during Q1 of 2023, the Group sold 13,300 barrels for net revenue of
$999,000 and additionally successfully tested WR-B01Za, the second of the
Project I development wells, which established stable production above
pre-drill estimates.
In the year, the Group sold gas to the value of $770,000 (2021: $596,000).
The total loss for the year was $1,160,000 (2021: $4,581,000), representing a
significant improvement on last year's results.
Liquidity, Counterparty Risk and Going Concern
The Group monitors its cash position, cash forecasts and liquidity regularly
and has a conservative approach to cash management, with surplus cash held on
term deposits with major financial institutions.
The directors have prepared cash flow forecasts for 24 months from the date of
signing these financial statements. The Group's forecasts are reviewed
regularly to assess whether actions to curtail expenditure or cut costs are
required.
The Group's operations presently generate sufficient revenues to cover
operating costs and capital expenditures, supporting the continued preparation
of the Group's accounts on a going concern basis.
The directors are conscious that oil prices have been volatile during the past
few years and could rise further but could also fall back in the year ahead
and that future production levels depend on both depletion rates from existing
wells and the success of future drilling. As part of
their going concern assessment, the directors have examined multiple
scenarios in which oil prices and/or future production levels fall
substantially and have concluded that it remains possible that future
revenues in at least some scenarios might not cover all operating costs and
planned capital expenditures, creating a material uncertainty that may cast
doubt over the Group's ability to continue as a going concern. Whilst
acknowledging this material uncertainty, the directors remain confident of
making cost savings if required; therefore, they consider it appropriate to
prepare the financial statements on a going concern basis. The financial
statements do not include the adjustments that would result if the Group were
unable to continue as a going concern.
Results and Dividends
The results for the year and the financial position of the Group are shown in
the following financial statements:
- The Group has incurred a pre-tax loss of $1,608,000 (2021: loss of
$4,783,000).
- The Group has net assets of $27,200,000 (2021: $27,065,000).
- The Directors do not recommend the payment of a dividend (2021:
$nil).
Financial Statements
Consolidated Statement of Comprehensive Income for the Year Ended 31st
December 2022
Note Year ended 31(st) December 2022 Year ended 31(st) December 2021
( )
Continuing operations $'000 $'000
Revenue 4 8,262 6,114
Other cost of sales (3,992) (2,982)
Depreciation and depletion of oil and gas assets 5 (1,956) (2,901)
Total cost of sales (5,948) (5,883)
Gross profit 2,314 231
Other administrative costs (3,040) (3,432)
Share based payments charge 22 (1,072) (1,494)
Total administrative expenses 6,7 (4,112) (4,926)
Foreign exchange movement (24) (6)
Operating loss (1,822) (4,701)
Other income 8 281 5
Finance expense 9 (67) (87)
Loss for the year before taxation (1,608) (4,783)
Taxation 10 - -
Loss for the year from continuing operations (attributable to the equity (1,608) (4,783)
holders of the parent)
Items that may be reclassified subsequently to profit and loss:
Exchange differences on translation of foreign operations 448 202
Total comprehensive loss for the year (attributable to the equity holders of (1,160) (4,581)
the parent)
Loss per share basic and diluted 11 (0.24)c (0.76)c
All activities relate to continuing operations.
The notes on pages 50 to 74 form part of these consolidated financial
statements.
Consolidated Statement of Financial Position as at 31st December 2022
31(st) December 2022 31(st) December 2021
Note $'000 $'000
Non-current assets
Property, plant and equipment 12 24,815 24,345
Current assets
Inventory 13 4,791 4,585
Trade and other receivables 14 560 752
Cash and cash equivalents 15 450 1,244
Total current assets 5,801 6,581
Total assets 30,616 30,926
Equity and liabilities
Capital and reserves attributable to equity holders of the Parent Company:
Share capital 18 3,565 3,482
Share premium 19 34,765 34,625
Other reserves 20 4,525 10,260
Foreign exchange reserve 694 246
Accumulated deficit (16,349) (21,548)
Total equity 27,200 27,065
Liabilities
Trade and other payables 16 1,693 1,556
Provisions 17 1,723 2,305
Total current liabilities 3,416 3,861
Total equity and liabilities 30,616 30,926
The financial statements were approved by the Board of Directors and
authorised for issue on 10(th) May 2023 and were signed on its behalf by:
Paul Haywood
Director
The notes on pages 50 to 74 form part of these consolidated financial
statement
Consolidated Statement of Changes in Equity as at 31st December 2022
Share Capital Share Premium Accumulated Deficit Other Reserves Foreign Exchange Reserve Total Equity
$'000 $'000 $'000 $'000 $'000 $'000
Balance at 31(st) December 2020 3,353 34,234 (17,057) 9,120 44 29,694
Loss for the year - - (4,783) - - (4,783)
Exchange differences on translation of foreign operations - - - - 202 202
Total comprehensive loss for the year - - (4,783) - 202 (4,581)
Issue of shares 52 255 - - - 307
Share based payments - - - 1,494 - 1,494
Options exercised 77 136 210 (272) - 151
Options expired - - 82 (82) - -
Total transactions with owners 129 391 292 1,140 - 1,952
Balance at 31(st) December 2021 3,482 34,625 (21,548) 10,260 246 27,065
Loss for the year - - (1,608) - - (1,608)
Exchange differences on translation of foreign operations - - - - 448 448
Total comprehensive loss for the year - - (1,608) - 448 (1,160)
Issue of shares 27 140 - - - 167
Share based payments - - - 1,072 - 1,072
Options exercised 56 - - - - 56
Options expired - - 418 (418) - -
Options relinquished - - 6,389 (6,389) - -
Total transactions with owners 83 140 6,807 (5,735) - 1,295
Balance at 31(st) December 2022 3,565 34,765 (16,349) 4,525 694 27,200
The notes on pages 50 to 74 form part of these consolidated financial
statements.
Consolidated Statement of Cashflows for the Year Ended 31st December 2022
Note Year ended Year ended
31(st) December 2022 31(st) December 2021
$'000 $'000
Cash flow from operating activities
Loss for the year before tax (1,608) (4,783)
Adjustments for:
Depreciation and depletion 5 1,956 2,901
Decommissioning finance charge 17 66 66
Disposal of PP&E at nil value - 49
Other income 8 (281) (5)
Finance expense 1 3
Creditors paid in shares 167 -
Share based payments expense 7 1,072 1,494
Foreign exchange movement (29) 6
Operating cash flows before movements in working capital
1,344 (269)
Decrease/ (increase) in trade and other receivables 192 (4)
Increase in trade and other payables 194 179
(Increase) in inventory (206) (471)
Net cash used in operating activities 1,524 (565)
Cash flow from investing activities
Cash received from acquisition of BRL - 278
Income received 281 5
Expenditure in respect of PP&E (2,730) (6,407)
Net cash used in investing activities (2,449) (6,124)
Cash flow from financing activities
Proceeds from issue of equity - 1,465
Interest paid (1) (3)
Net cash (outflow) /inflow from financing activities (1) 1,462
Net (decrease) in cash and cash equivalents in the year (926) (5,227)
Cash and cash equivalents at start of year 1,244 6,331
Effects of foreign exchange rate changes on cash and cash equivalents
132 140
Cash and cash equivalents at end of year 450 1,244
The notes on pages 50 to 74 form part of these consolidated financial
statements.
Significant non-cash transactions
The only significant non-cash transactions were the issue of shares and share
options detailed in notes 18 and 22.
Notes Forming Part of the Consolidated Financial Statements
Corporate Information
Block Energy plc ("Block Energy") gained admission to AIM on 11(th) June 2018,
trading under the symbol of BLOE.
The Consolidated financial statements of the Group, which comprises Block
Energy Plc and its subsidiaries, for the year ended 31(st) December 2022 were
authorised for issue in accordance with a resolution of the Directors on
10(th) May 2023. Block Energy is a Company incorporated in the UK whose shares
are publicly traded. The address of the registered office is given in the
officers and advisers section of this report. The Company's administrative
office is in London, UK.
The nature of the Company's operations and its principal activities are set
out in the Strategic Report on pages 4 to 22 and the Report of the Directors
on pages 23 to 25.
1. Significant Accounting policies
IAS 8 requires that management shall use its judgement in developing and
applying accounting policies that result in information which is relevant to
the economic decision-making needs of users, that are reliable, free from
bias, prudent, complete and represent faithfully the financial position,
financial performance and cash flows of the entity.
Basis of preparation
The principal accounting policies adopted in the preparation of these
consolidated financial statements are set out below. The policies have been
consistently applied to all the years presented, unless otherwise stated. All
amounts presented are in thousands of US dollars unless otherwise stated.
Foreign operations are included in accordance with the policies set out below.
The consolidated financial statements have been prepared in accordance with
UK-adopted international accounting standards and as regards the Company
financial statements, as applied in accordance with the requirements of the
Companies Act 2006. The Financial Statements have also been prepared under the
historical cost convention, as modified by the revaluation of financial assets
at fair value through profit or loss.
The preparation of financial statements in accordance with UK-adopted
international accounting standards requires management to make judgements,
estimates and assumptions that affect the application of policies and reported
amounts of assets and liabilities, income and expenses. The estimates and
associated assumptions are based on historical experience and factors that are
believed to be reasonable under the circumstances, the results of which form
the basis of making judgements about carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ
from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Changes in accounting estimates may be necessary if there are changes in the
circumstances on which the estimate was based, or as a result of new
information or more experience. Such changes are recognised in the period in
which the estimate is revised.
New and amended standards adopted by the Group
There were no new or amended accounting standards that required the Group to
change its accounting policies for the year ended 31(st) December 2022 and no
new standards, amendments or interpretations were adopted by the Group.
New accounting standards issued but not yet effective
The standards and interpretations that are relevant to the Group, issued, but
not yet effective, up to the date of the Financial Statements are listed
below. The Group intends to adopt these standards, if applicable, when they
become effective.
Standard Impact on initial application Effective date
IFRS 10 and IAS 28 (Amendments) Long term interests in associates and joint ventures Unknown
Amendments to IAS 1 Classification of liabilities as current or non- current 1(st) January 2023
Amendments to IAS 1 Disclosure of material rather than significant accounting policies. 1(st) January 2023
Amendments to IAS 8 Clarification on how companies should distinguish between changes in 1(st) January 2023
accounting policies and accounting estimates
Amendments to IFRS 12 Deferred tax assets and liabilities arising from a single transaction 1(st) January 2023
The Directors have evaluated the impact of transition to the above standards
and do not consider that there will be a material impact of transition on the
financial statements.
Basis of consolidation
Where the Company has control over an investee, it is classified as a
subsidiary. The Company controls an investee if all three of the following
elements are present: power over the investee, exposure to variable returns
from the investee, and the ability of the investor to use its power to affect
those variable returns. Control is reassessed whenever facts and circumstances
indicate that there may be a change in any of these elements of control.
De-facto control exists in situations where the Company has the practical
ability to direct the relevant activities of the investee without holding the
majority of the voting rights. In determining whether de-facto control exists
the Company considers all relevant facts and circumstances, including:
· The size of the Company's voting rights relative to both the size and
dispersion of other parties who hold voting rights;
· Substantive potential voting rights held by the Company and by other
parties;
· Other contractual arrangements; and
· Historic patterns in voting attendance.
Business combinations and goodwill
The consolidated financial statements incorporate the results of business
combinations using the purchase method. In the consolidated statement of
financial position, the acquiree's identifiable assets, liabilities and
contingent liabilities are initially recognised at their fair values at the
acquisition date. The difference between the consideration paid and the
acquired net assets is recognised as goodwill. The results of acquired
operations are included in the consolidated income statement from the date on
which control is obtained. Any difference arising between the fair value and
the tax base of the acquiree's assets and liabilities that give rise to a
deductible difference results in recognition of deferred tax liability. No
deferred tax liability is recognised on goodwill.
Acquisitions
The Group and Company measure consideration at the acquisition date as:
· The fair value of the consideration transferred; plus
· The recognised amount of any non-controlling interests in the
acquiree
· Plus, if the business combination is achieved in stages, the fair
value of the existing equity interest in the acquiree; less the net recognised
amount (generally fair value) of the identifiable assets acquired and
liabilities assumed.
When the excess is negative, a bargain purchase gain is recognised immediately
in profit or loss.
Cost related to the acquisition, other than those associated with the issue of
debt or equity securities, that the Group incurs in connection with a business
combination, are expensed as incurred.
Asset acquisition
Acquisitions of mineral exploration licences through the acquisition of
non-operational corporate structures that do not represent a business, and
therefore do not meet the definition of a business combination, are accounted
for as the acquisition of an asset. An example of such would be increases in
working interests in licences.
The consideration for the asset is allocated to the assets based on their
relative fair values at the date of acquisition.
Going concern
The Directors have prepared cash flow forecasts for a period of 24 months from
the date of signing these financial statements. The Group's forecasts are
reviewed regularly to assess whether any actions to curtail expenditure or cut
costs are required.
The Group's operations presently generate sufficient revenues to cover
operating costs and capital expenditures, supporting the continued preparation
of the Group's accounts on a going concern basis.
The Directors are nevertheless conscious that oil prices have been volatile
during the past few years, and could rise further but could also fall back in
the year ahead, and that future production levels depend on both depletion
rates from existing wells and the success of future drilling. As part of
their going concern assessment, the Directors have examined multiple
scenarios in which oil prices and/or future production levels fall
substantially and have concluded that it remains possible that future
revenues in at least some scenarios might not cover all operating costs and
planned capital expenditures, creating a material uncertainty that may cast
doubt over the Group's ability to continue as a going concern. Whilst
acknowledging this material uncertainty, the Directors remain confident of
making cost savings if required and, therefore, the Directors consider it
appropriate to prepare the financial statements on a going concern basis. The
financial statements do not include the adjustments that would result if the
Group were unable to continue as a going concern.
Intangible assets
Exploration and evaluation costs
The Group applies the full cost method of accounting for Exploration and
Evaluation (E&E) costs, having regard to the requirements of IFRS 6
'Exploration for and Evaluation of Mineral Resources'. Under the full cost
method of accounting, costs of exploring and evaluating properties are
accumulated and capitalised by reference to appropriate cash generating units
("CGUs"). Such CGU's are based on geographic areas such as a licence area,
type or a basin and are not larger than an operating segment - as defined by
IFRS 8 'Operating segments.
E&E costs are initially capitalised within 'Intangible assets'. Such
E&E costs may include costs of licence acquisition, technical services and
studies, seismic acquisition, exploration drilling and testing, but do not
include costs incurred prior to having obtained the legal rights to explore an
area, which are expensed directly to the statement of comprehensive income as
they are incurred. Plant and equipment assets acquired for use in exploration
and evaluation activities are classified as property, plant and equipment.
However, to the extent that such an asset is consumed in developing an
unproven oil and gas asset, the amount reflecting that consumption is recorded
as part of the cost of the unproven oil and gas asset.
Exploration and unproven oil and gas assets related to each exploration
license/prospect are not amortised but are carried forward until the technical
feasibility and commercial feasibility of extracting a mineral resource are
demonstrated.
Impairment of Exploration and Evaluation assets
All capitalised exploration and evaluation assets and property, plant and
equipment are monitored for indications of impairment. Where a potential
impairment is indicated, assessment is made for the Group of assets
representing a cash generating unit.
In accordance with IFRS 6 the Group firstly considers the following facts and
circumstances in their assessment of whether the Group's exploration and
evaluation assets may be impaired, whether:
· the period for which the Group has the right to explore in a specific
area has expired during the period or will expire in the near future, and is
not expected to be renewed;
· unexpected geological occurrences render the resource uneconomic;
· a significant fall in realised prices or oil and gas price benchmarks
render the project uneconomic; or
· an increase in operating costs occurs.
If any such facts or circumstances are noted, the Group perform an impairment
test in accordance with the provisions of IAS 36.
The aggregate carrying value is compared against the expected recoverable
amount of the cash generating unit. The recoverable amount is the higher of
value in use and the fair value less costs to sell. An impairment loss is
reversed if the asset's or cash-generating unit's recoverable amount exceeds
its carrying amount. A reversal of impairment loss is recognised in the profit
or loss immediately.
Property, plant and equipment - development and production (D&P) assets
Capitalisation
The costs associated with determining the existence of commercial reserves are
capitalised in accordance with the preceding policy and transferred to
property, plant and equipment as development assets following impairment
testing. All costs incurred after the technical feasibility and commercial
viability of producing hydrocarbons have been demonstrated are capitalised
within development assets on a field-by-field basis. Subsequent expenditure is
only capitalised where it either enhances the economic benefits of the
development asset or replaces part of the existing development asset (where
the remaining cost of the original part is expensed through the income
statement). Costs of borrowing related to the ongoing construction of
development and production assets and facilities are capitalised during the
construction phase. Capitalisation of interest ceases once an asset is ready
for production.
Depreciation
Capitalised oil assets are not subject to depreciation until commercial
production starts. Depreciation is calculated on a unit-of-production basis
in order to write off the cost of an asset as the reserves that it represents
are produced and sold. Any periodic reassessment of reserves will affect the
depreciation rate on a prospective basis. The unit-of-production depreciation
rate is calculated on a field-by-field basis using proved, developed reserves
as the denominator and capitalised costs as the numerator. The numerator
includes an estimate of the costs expected to be incurred to bring proved,
developed, not-producing reserves into production. Infrastructure that is
common to a number of fields, such as gathering systems, treatment plants and
pipelines are depreciated on a unit-of-production basis using an aggregate
measure of reserves or on a straight line basis depending on the expected
pattern of use of the underlying asset.
Proven oil and gas properties
Oil and gas properties are stated at cost less accumulated depreciation and
impairment losses. The initial cost comprises the purchase price or
construction cost including any directly attributable cost of bringing the
asset into operation and any estimated decommissioning provision.
Once a project reaches the stage of commercial production and production
permits are received, the carrying values of the relevant exploration and
evaluation asset are assessed for impairment and transferred to proven oil and
gas properties and included within property plant and equipment.
Proven oil and gas properties are accounted for in accordance with provisions
of the cost model under IAS 16 "Property Plant and Equipment" and are depleted
on unit of production basis based on the estimated proven and probable
reserves of the pool to which they relate.
Impairment of development and production assets
A review is performed for any indication that the value of the Group's D&P
assets may be impaired such as:
· significant changes with an adverse effect in the market or economic
conditions which will impact the assets; or
· obsolescence or physical damage of an asset; or
· an asset becoming idle or plans to dispose of the asset before the
previously expected date; or
· evidence is available from internal reporting that indicates that the
economic performance of an asset is or will be worse than expected.
For D&P assets when there are such indications, an impairment test is
carried out on the CGU. CGUs are identified in accordance with IAS 36
'Impairment of Assets', where cash flows are largely independent of other
significant asset Groups and are normally, but not always, single development
or production areas. When an impairment is identified, the depletion is
charged through the Consolidated Statement of Comprehensive Income if the net
book value of capitalised costs relating to the CGU exceeds the associated
estimated future discounted cash flows of the related commercial oil reserves.
The CGU's identified by the company are Corporate along with West Rustavi,
Rustaveli, Satskhenisi and Norio given they are independent projects under
individual Production Sharing Contracts ("PSCs"). An assessment is made at
each reporting as to whether there is any indication that previously
recognised impairment charges may no longer exist or may have decreased. If
such an indication exists, the Group estimates the recoverable amount. A
previously recognised impairment charge is reversed only if there has been a
change in the estimates used to determine the assets recoverable amount since
the last impairment charge was recognised. If this is the case the carrying
amount (javascript%3A;) of the asset is increased to its recoverable amount,
not to exceed the carrying amount that would have been determined, net of
depreciation (javascript%3A;) , had no impairment charges been recognised for
the asset in prior years.
Property, plant and equipment and depreciation
Property, plant and equipment which are awaiting use in the drilling
campaigns, and storage, are recorded at historical cost less accumulated
depreciation. Property, plant and equipment are depreciated using the
straight-line method over their estimated useful lives, as follows:
· PP&E - 6 years
The carrying value of Property, plant and equipment is assessed annually and
any impairment charge is charged to the Consolidated Statement of
Comprehensive income.
Leases
The Group assesses whether a contract is or contains a lease, at inception of
the contract. The Group recognises a right-of-use asset and a corresponding
lease liability with respect to all lease arrangements in which it is the
lessee, except for short-term leases (defined as leases with a lease term of
12 months or less) and leases of low value assets (such as tablets and
personal computers, small items of office furniture and telephones). For these
leases, the Group recognises the lease payments as an operating expense on a
straight-line basis over the term of the lease unless another systematic basis
is more representative of the time pattern in which economic benefits from the
leased assets are consumed.
Inventories
Crude oil inventories are stated at the lower of cost and net realisable
value. The cost of crude oil is the cost of production, including direct
labour and materials, depreciation and an appropriate portion of fixed
overheads allocated based on normal operating capacity of the production
facilities, determined on a weighted average cost basis. Net realisable value
of crude oil is based on the market price of similar crude oil at the balance
sheet date and costs to sell, adjusted if the sale of inventories after that
date gives additional evidence about its net realisable value at the balance
sheet date.
The cost of crude oil is expensed in the period in which the related revenue
is recognised.
Inventories of drilling tubulars and drilling chemicals are valued at the
lower of cost or net realisable value, where cost represents the weighted
average unit cost for inventory lines on a line by line basis. Cost comprises
all costs of purchase, costs of conversion and other costs incurred in
bringing the inventories to their present location and condition.
Decommissioning provision
Provisions for decommissioning are recognised in full when wells have been
suspended or facilities have been installed.
A corresponding amount equivalent to the provision is also recognised as part
of the cost of either the related oil and gas exploration and evaluation asset
or property, plant and equipment as appropriate. The amount recognised is the
estimated cost of decommissioning, discounted to its net present value, and
is reassessed each year in accordance with local conditions and requirements.
Changes in the estimated timing of decommissioning or decommissioning cost
estimates are dealt with prospectively by recording an adjustment to the
provision, and a corresponding adjustment to the related asset.
The unwinding of the discount on the decommissioning provision is included as
a finance cost.
Taxation and deferred tax
Income tax expense represents the sum of the current tax and deferred tax
charge for the period.
The Group's liability for current tax is calculated using tax rates that have
been enacted or substantively enacted by the reporting date.
Deferred tax is recognised on differences between the carrying amounts of
assets and liabilities in the financial information and the corresponding tax
bases and is accounted for using the balance sheet liability method.
Deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary
differences can be utilised.
Judgement is applied in making assumptions about future taxable income,
including oil and gas prices, production, rehabilitation costs and expenditure
to determine the extent to which the Group recognises deferred tax assets, as
well as the anticipated timing of the utilisation of the losses.
Deferred tax is calculated at the tax rates that have been enacted or
substantively enacted and are expected to apply in the period when the
liability is settled, or the asset realised. Deferred tax is charged or
credited to the statement of comprehensive income, except when it relates to
items charged or credited directly to equity, in which case the deferred tax
is also dealt with in equity.
Foreign currencies
Monetary assets and liabilities denominated in foreign currencies are
translated into US dollars at the rates of exchange prevailing at the
reporting date: $1.21/£1 (2021: $1.35/£1). Transactions in foreign
currencies are translated at the exchange rate ruling at the date of the
transaction. Exchange differences are taken to the Statement of Comprehensive
Income.
The Company's functional currency is the pound sterling and its presentational
currency is the US dollar and accordingly the financial statements have also
been prepared in US dollars. The functional currencies of Block Norioskhevi
Ltd, Satskhenisi Limited, Georgia New Ventures Inc and Block Rustaveli Limited
are the US dollar and the functional currencies of their branches in Georgia
are the Georgian Lari.
Foreign operations
The assets are translated into US dollars at the exchange rate at the
reporting date and income and expenses of the foreign operations are
translated at the average exchange rates. Exchange differences arising on
translation are recognised in other comprehensive income and presented in the
other reserves category in equity.
Determination of functional currency and presentational currency
The determination of an entity's functional currency is assessed on an entity
by entity basis. A company's functional currency is defined as the currency of
the primary economic environment in which the entity operates. The functional
currency of the Parent Company is the pound sterling, because it operates in
the UK, where the majority of its transactions are in pounds sterling. The
functional currencies of Block Norioskhevi Ltd, Satskhenisi Limited, Georgia
New Ventures Inc and Block Rustaveli Limited are the US dollar, because the
majority of their transactions by value is in US dollars, and the functional
currencies of their branches in Georgia are the Georgian Lari, because the
majority of their transactions by value is in Georgian Lari.
The presentational currency of the Group for year ended 31(st) December 2022
is US dollars. The presentational currency is an accounting policy choice.
Revenue
Revenue from contracts with customers is recognised when the Group satisfies
its performance obligation of transferring control of oil or gas to a
customer. Transfer of control is usually concurrent with both transfer of
title and the customer taking physical possession of the oil or gas, which is
determined by reference to the oil or gas sales agreement. This performance
obligation is satisfied at that point in time.
The transaction price is agreed between the Group and the customer, with the
amount of revenue recognised being determined by considering the terms of the
Production Sharing Contract ("PSC") and the oil sales agreement for each oil
sale or the gas sales agreement for each gas sale.
Finance income and expenses
Finance costs are accrued on a time basis, by reference to the principal
outstanding and at the effective interest rate applicable. Finance expenses
comprise interest or finance costs on borrowings.
Financial instruments
Financial assets and financial liabilities are recognised on the Group's
balance sheet when the Group becomes party to the contractual provisions of
the instrument.
Fair value
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. All assets and liabilities, for which fair value is
measured or disclosed in the Financial Statements, are categorised within
the fair value hierarchy, described as follows, based on the lowest-level
input that is significant to the fair value measurement as a whole:
Level 1 - quoted (unadjusted) market prices in active markets for identical
assets or liabilities;
Level 2 - valuation techniques for which the lowest-level input that is
significant to the fair value measurement is directly or indirectly
observable; and
Level 3 - valuation techniques for which the lowest-level input that is
significant to the fair value measurement is unobservable.
Financial assets
Financial assets are initially recognised at fair value, and subsequently
measured at amortised cost, less any allowances for losses using the expected
credit loss model, being the difference between all contractual cash flows
that are due to the Group in accordance with the contract and all the cash
flows that the Group expects to receive.
Impairment provisions for receivables from related parties and loans to
related parties are recognised based on a forward looking expected credit loss
model. The methodology used to determine the amount of the provision is based
on whether there has been a significant increase in credit risk since initial
recognition of the financial asset.
For those where the credit risk has not increased significantly since initial
recognition of the financial asset, twelve month expected credit losses along
with gross interest income are recognised. For those for which credit risk has
increased significantly, lifetime expected credit losses along with the gross
interest income are recognised. For those that are determined to be credit
impaired, lifetime expected credit losses along with interest income on a net
basis are recognised.
Financial liabilities
Financial liabilities are classified as either financial liabilities at fair
value through profit and loss ("FVTPL") or as other financial liabilities.
The Group derecognises financial liabilities when, and only when, the Group's
obligations are discharged or cancelled, or they expire.
Financial liabilities are classified at FVTPL when the financial liability is
either held for trading or it is designated at FVTPL. A financial liability is
classified as held for trading if it has been incurred principally for the
purpose of repurchasing it in the near term or is a derivative that is not a
designated or effective hedging instrument.
Financial liabilities at FVTPL are measured at fair value, with any gains or
losses arising on changes in fair value recognised in profit or loss. The net
gain or loss recognised in profit or loss incorporates any interest paid on
the financial liability.
Other financial liabilities, including borrowings, are initially measured at
fair value, net of transaction costs and are subsequently measured
at amortised cost using the effective interest method, with interest expense
recognised on an effective yield basis.
The effective interest method is a method of calculating the amortised cost of
a financial liability and of allocating interest expense over the relevant
period. The effective interest rate is the rate that exactly discounts
estimated future cash payments through the expected life of the financial
liability, or, where appropriate, a shorter period, to the net carrying amount
on initial recognition.
Share based payments
The fair value of options granted to Directors and others in respect of
services provided is recognised as an expense in the Statement of
Comprehensive Income with a corresponding increase in equity reserves - 'other
reserves'.
On exercise of, or expiry of unexercised share options, the proportion of
the share based payment reserve relevant to those options is transferred from
other reserves to the accumulated deficit. On exercise, equity is also
increased by the amount of the proceeds received.
The fair value is measured at grant date and charged over the accounting
periods which the option becomes unconditional.
The fair value of options are calculated using the Black-Scholes model, taking
into account the terms and conditions upon which the options were granted.
Vesting conditions are non-market and there are no market vesting conditions.
These vesting conditions are included in the assumptions about the number of
options that are expected to vest. At the end of each reporting period, the
Company revises its estimate of the number of options that are expected to
vest. The exercise price is fixed at the date of grant and no compensation is
due at the date of grant. Where equity instruments are granted to persons
other than employees, the statement of comprehensive income is charged with
the fair value of the goods and services received.
Warrants issued for services rendered are accounted for in accordance with
IFRS 2 recognising either the costs of the service if it can be reliably
measured or the fair value of the warrant (using the Black-Scholes model).
The fair value is recognised as an expense in the accounting period that the
warrant is granted and there is no revision to this estimate in future
accounting periods.
Warrants issued as part of share issues have been determined as equity
instruments under IAS 32. Since the fair value of the shares issued at the
same time is equal to the price paid, these warrants, by deduction, are
considered to have been issued at nil value.
2. Critical accounting judgments, estimates and assumptions
The Group makes estimates and assumptions regarding the future. Estimates and
judgements are continuously evaluated based on historical experiences and
other factors, including expectations of future events that are believed to be
reasonable under the circumstances. In the future, actual experience may
deviate from these estimates and assumptions. The key assumptions concerning
the future and other key sources of estimation uncertainty at the reporting
date that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year, are
described below.
Recoverable value of Development & Production assets -judgement, estimates
and assumptions
Costs capitalised in respect of the Group's development and production assets
are required to be assessed for impairment under the provisions of IAS 36.
Such an estimate requires the Group to exercise judgement in respect of the
indicators of impairment and also in respect of inputs used in the models
which are used to support the carrying value of the assets. Such inputs
include estimates of oil and gas reserves, production profiles, oil price, oil
quality discount, capital expenditure (including an allocation of salary
costs), inflation rates, and pre-tax discount rates that reflect current
market assessments of (a) the time value of money; and (b) the risks specific
to the asset for which the future cash flow estimates have not been adjusted.
The Directors concluded that there was no indication of impairment in the
current year.
Asset decommissioning provisions -estimates and assumptions
The Group's activities are subject to various laws and regulations governing
the protection of the environment. The Group recognises management's best
estimate of the asset decommissioning costs in the period in which they are
incurred. Such estimates of costs include pre-tax discount rates that reflect
current market assessments of (a) the time value of money; and (b) the risks
specific to the asset for which the future cash flow estimates have not been
adjusted. Actual costs incurred in future periods could differ materially from
the estimates.
Additionally, future changes to environmental laws and regulations, life of
development and production assets, estimates and discount rates could affect
the carrying amount of this provision. The Board assessed the extent of
decommissioning required as at 31(st) December 2022 and concluded that a
provision of $1,723,000 (2021: $2,040,000) should be recognised in respect of
future decommissioning obligations at Rustaveli, West Rustavi, Satskhenisi and
Norio (see note 17).
Share options - estimates and assumptions
Share options issued by the Group relates to the Block Energy plc Share Option
Plan. The grant date fair value of such options is calculated using a
Black-Scholes model whose input assumptions are derived from market and other
internal estimates.
The key estimates include volatility rates and the expected life of the
options, together with the likelihood of non-market performance conditions
being achieved (see note 22).
Impairment of investments and loans to subsidiaries - Parent Company only
The Company assesses at each reporting date whether there is any objective
evidence that investments/receivables in subsidiaries are impaired. To
determine whether there is objective evidence of impairment, a considerable
amount of estimation is required in assessing the ultimate realisation of
these investments/receivables, including valuation, creditworthiness and
future cashflow. No impairment of investments was indicated at year end.
In prior years the Company carried out an assessment of the expected credit
loss arising on intercompany receivables. This was calculated as a total loss
allowance of $3,710,000 and was provided for in the parent Company financial
statements. The Company has judged that as there has been no impairment of the
underlying assets then no further loss allowance is required in the current
year.
3. Segmental disclosures
IFRS 8 requires segmental information for the Group on the basis of
information reported to the chief operating decision maker for decision making
purposes. The Company considers this role as being performed by the Board of
Directors. The Group's operations are focused on oil and gas development and
production activities (Oil Extraction segment) in Georgia and has a corporate
head office in the UK (Corporate segment). Based on risks and returns the
Directors consider that there are two operating segments that they use to
assess the Group's performance and allocate resources being the Oil Extraction
in Georgia, and the corporate segment including unallocated costs.
The segmental results are as follows:
Oil Corporate Group
Extraction and other Total
Year ended 31(st) December 2022 $'000 $'000 $'000
Revenue 8,262 - 8,262
Cost of sales (3,992) - (3,992)
Depreciation and depletion (1,906) (50) (1,956)
Administrative costs (1,012) (3,100) (4,112)
Other income 18 263 281
Net Finance costs and Forex (82) (9) (91)
Profit/(loss) from operating activities 1,288 (2,896) (1,608)
Total non-current assets 24,814 1 24,815
Oil Corporate Group
Extraction and other Total
Year ended 31(st) December 2021 $'000 $'000 $'000
Revenue 6,114 - 6,114
Cost of sales (2,982) - (2,982)
Depreciation and depletion (2,896) (5) (2,901)
Administrative costs (1,201) (3,725) (4,926)
Other income 5 - 5
Net Finance costs and income (90) (3) (93)
Loss from operating activities (1,050) (3,733) (4,783)
Total non-current assets 24,341 4 24,345
31(st) December 2022 31(st) December 2021
Segmental Assets $'000 $'000
Oil exploration - Georgia 30,206 23,745
Corporate and other 410 7,181
30,616 30,926
Segmental Liabilities 31(st) December 2022 31(st) December 2021
$'000 $'000
Oil exploration - Georgia 2,591 3,087
Corporate and other 825 774
3,416 3,861
4. Revenue
Year ended Year ended
31(st) December
31(st) December
2022 2021
$'000 $'000
Crude oil revenue 7,492 5,519
Gas revenue 770 595
8,262 6,114
5. Depreciation and Depletion on Oil and Gas assets
Year ended Year ended
31(st) December
31(st) December
2022 2021
$'000 $'000
Depreciation of PP&E 273 238
Depletion of oil and gas assets 1,683 2,663
1,956 2,901
6. Expenses by nature
Year ended Year ended
31(st) December
31(st) December
2022 2021
$'000 $'000
Employee benefit expense 1,705 1,720
Share option charge 1,072 1,224
Warrants charge - 270
Security expense 15 162
Fees to Auditor in respect of the Group audit 96 93
Fees to Auditor for other non-audit services - 7
Regulatory fees 31 51
Operating lease expense 81 49
7. Directors and employees
Year ended Year ended
31(st) December
31(st) December
2022 2021
$'000 $'000
Employment costs (inc. Directors' remuneration):
Wages and salaries 1,563 1,453
Pensions 49 55
Social security costs 93 212
1,705 1,720
Share based payments 1,035 1,449
2,740 3,169
The share based payments comprised the fair value of options granted to
Directors and employees in respect of services provided.
Wages and salaries include amounts that are recharged between subsidiaries.
Some of these costs are then capitalised as development and production assets
and others are administration expenses.
The average monthly number of employees during 2022 was 168 (2021: 176) split
as follows:
Year ended Year ended
31(st) December
31(st) December
2022 2021
Management 9 18
Technical 129 135
Administration 30 23
168 176
Year ended Year ended
31(st) December
31(st) December
2022 2021
$'000 $'000
Amounts attributable to the highest paid Director:
Director's salary and bonus 426 358
Pension 25 27
Share based payments 104 183
555 568
Key management and personnel are considered to be the Directors.
8. Other income
Year ended Year ended
31(st) December
31(st) December
2022 2021
$'000 $'000
Sale of materials - 5
Insurance claim 281 -
281 5
In the prior year, materials to be used in the construction of the gas
pipeline from the Early Production Facility at West Rustavi were sold for
$5,000.
9. Finance expense
Year ended Year ended
31(st) December 2022 31(st) December 2021
$'000 $'000
Finance expense 67 87
67 87
10. Taxation
Based on the results for the year, there is no charge to UK or foreign tax.
This is reconciled to the accounting loss as follows:
Year ended Year ended
UK taxation 31(st) December 31(st) December
2022 2021
$'000 $'000
UK Group loss on ordinary activities (1,608) (4,783)
Loss before taxation at the average UK standard rate of 19% (2021:19%) (306) (909)
Effect of:
Zero tax rate income (1,570) (1,162)
Disallowable expenses 302 457
Tax losses for which no deferred income tax asset was recognised 2,876 5,488
Current tax - -
The Group offsets deferred tax assets and liabilities if, and only if, it has
a legally enforceable right to offset current tax assets and current tax
liabilities and the deferred tax assets and deferred tax liabilities related
to corporation taxes levied by the same tax authority. Due to the tax rates
applicable in the jurisdictions of the Group's subsidiary entities (being 0%)
no deferred tax liabilities or assets are considered to arise.
For any other jurisdictions which the Group has not recognised deferred income
tax assets for tax losses carried forward for entities in which it is not
considered probable that there will be sufficient future taxable profits
available for offset. Unrecognised deferred income tax assets related to
unused tax losses. The Company has UK corporation tax losses available to
carry forward against future profits of approximately $14,414,000 (2021:
$13,109,000 - estimated).
11. Loss per share
The calculation for loss per Ordinary Share (basic and diluted) is based on
the consolidated loss attributable to the equity shareholders of the Company
is as follows:
Year ended Year ended
31(st) December 2022 31(st) December 2021
Loss attributable to equity Shareholders ($'000) (1,608) (4,783)
Weighted average number of Ordinary Shares 660,223,772 630,629,894
Loss per Ordinary share ($/cents) (0.24)c (0.76)c
Loss and diluted loss per Ordinary Share are calculated using the weighted
average number of Ordinary Shares in issue during the year. Diluted share loss
per share has not been calculated as the options and warrants have no dilutive
effect given the loss arising in the year.
12. Property, Plant and Equipment
PPE/Computer / Office Equipment / Motor Vehicles Total
Development & Production Assets
$'000 $'000 $'000
Cost
At 1(st) January 2021 22,096 777 22,873
Reallocation of assets (780) 780 -
Additions 6,182 290 6,472
Disposals (38) (12) (50)
Reduction in BLO (see note 17) (498) - (498)
Foreign exchange movements - (33) (33)
At 31(st) December 2021 26,962 1,802 28,764
Additions 2,397 333 2,730
Disposals - (89) (89)
Reduction in BLO (see note 17) (265) - (265)
Foreign exchange movements 21 26 42
At 31(st) December 2022 29,115 2,072 31,187
Accumulated depreciation
At 1(st) January 2021 1,457 105 1,562
Reallocation of assets (91) 91 -
Disposals - (1) (1)
Charge for the year 2,663 238 2,901
Foreign exchange movements - (43) (43)
At 31(st) December 2021 4,029 390 4,419
Disposals - (2) (2)
Charge for the year 1,683 273 1,956
Foreign exchange movements (1) - (1)
At 31(st) December 2022 5,711 661 6,372
Carrying Amount
At 1(st) January 2022 22,933 1,412 24,345
At 31(st) December 2022 23,404 1,411 24,815
Carrying amount of property plant and equipment by cash generative unit:
Norio Satsk West Rustavi Corporate
henisi Rustaveli Total
$'000 $'000 $'000 $'000 $'000 $'000
Carrying amount
At 31(st) December 2022 2,126 174 14,625 402
7,488 24,815
At 31(st) December 2021 2,222 176 14,045 181
7,721 24,345
At the end of the current year, the Directors concluded there were no
impairment indicators in the current year that warranted impairment testing to
be prepared with respect to the carrying value of the assets of the Group.
13. Inventory
31(st) December 2022 31(st) December 2021
$'000 $'000
Spare parts and consumables 3,606 3,174
Crude oil 1,185 1,411
4,791 4,585
14. Trade and other receivables
31(st) December 2022 31(st) December 2021
$'000 $'000
Other receivables 347 657
Prepayments 213 95
560 752
The fair value at amortised cost is considered to be equivalent to the book
value as none of these receivables are considered to be impaired.
15. Cash and cash equivalents
31(st) December 31(st) December 2021
2022
$'000
$'000
Cash and cash equivalents 450 1,244
Cash and cash equivalents consist of balances in bank accounts used for normal
operational activities. The vast majority of the cash was held in an
institution with a Standard & Poor's credit rating of A-1.
16. Trade and other payables
31(st) December 31(st) December
2022 2021
$'000 $'000
Trade and other payables 1,182 845
Accruals 511 711
1,693 1,556
Trade and other payables principally comprise amounts outstanding for
corporate services and operational expenditure.
17. Provisions
31(st) December 2022 31(st) December 2021
$'000 $'000
Decommissioning provision 1,723 2,040
Baseline oil liability - 265
1,723 2,305
Decommissioning provision 31(st) December 2022 31(st) December 2021
$'000 $'000
Brought forward 2,040 1,917
Unwinding of discount on provision 66 -
Change in decommissioning provision in the year (383) 123
Carried forward 1,723 2,040
Baseline oil liability 31(st) December 2022 31(st) December 2021
$'000 $'000
Brought forward 265 745
Baseline oil liability reducing from the acquisition (265) (498)
Additional baseline oil liability provided in the year - 18
Carried forward - 265
Decommissioning provisions are based on management estimates of work and the
judgement of the Directors. By its nature, the detailed scope of work
required, and timing of such work is uncertain.
The baseline oil liability arose from the acquisition of BRL in 2020. Under
the production sharing contract for Block XIB, BRL was obliged to deliver a
certain quantity of oil to the State of Georgia in quarterly instalments by
May 2022. This was all delivered and there were no further liabilities at year
end.
18. Share capital
Called up, allotted, issued and fully paid No. Ordinary No. Deferred Nominal Value
$
Shares Shares
As at 1(st) January 2021 614,542,093 2,095,165,355 3,352,509
Issue of equity on 4(th) January 2021 617,571 - 2,098
Issue of equity on 12(th) January 2021 397,904 - 1,362
Issue of equity on 1(st) February 2021 839,996 - 2,937
Issue of equity on 15(th) February 2021 180,715 - 632
Issue of equity on 1(st) March 2021 232,248 - 800
Issue of equity on 12(th) March 2021 865,896 - 2,983
Issue of equity on 16(th) March 2021 6,590,707 - 22,752
Issue of equity on 7(th) April 2021 58,972 - 204
Issue of equity on 5(th) May 2021 171,715 - 611
Issue of equity on 7(th) June 2021 125,696 - 434
Issue of equity on 2(nd) July 2021 1,355,805 - 4,713
Issue of equity on 2(nd) September 2021 62,005 - 209
Issue of equity on 15(th) September 2021 24,877,230 - 83,684
Issue of equity on 4(th) October 2021 746,668 - 2,556
Issue of equity on 8(th) October 2021 299,412 - 1,025
Issue of equity on 2(nd) November 2021 262,403 - 873
Issue of equity on 5(th) December 2021 522,489 - 1,766
As at 31(st) December 2021 652,749,525 2,095,165,355 3,482,148
Issue of equity on 5(th) January 2022 324,102 - 1,087
Issue of equity on 2(nd) February 2022 1,768,705 - 5,903
Issue of equity on 3(rd) February 2022 233,232 - 778
Issue of equity on 11(th) February 2022 636,832 - 2,126
Issue of equity on 1(st) March 2022 400,219 - 1,313
Issue of equity on 2(nd) March 2022 280,117 - 919
Issue of equity on 1(st) April 2022 404,838 - 1,273
Issue of equity on 3(rd) April 2022 376,773 - 1,184
Issue of equity on 4(th) May 2022 636,077 - 2,004
Issue of equity on 1(st) June 2022 273,392 - 793
Issue of equity on 6(th) June 2022 586,133 - 1,700
Issue of equity on 6(th) July 2022 902,395 - 2,751
Issue of equity on 2(nd) August 2022 1,378,658 - 4,073
Issue of equity on 2(nd) September 2022 2,551,864 - 7,125
Issue of equity on 4(th) October 2022 1,632,875 - 4,698
Issue of equity on 14(th) October 2022 464,457 - 1,336
Issue of equity on 1(st) November 2022 233,047 - 506
Issue of equity on 2(nd) November 2022 656,382 - 1,889
Issue of equity on 1(st) December 2022 303,268 - 917
Issue of equity on 2(nd) December 2022 1,569,850 - 4,749
Issue of equity on 13(th) December 2022 12,000,000 - 36,303
As at 31(st) December 2022 680,362,741 2,095,165,355 3,565,575
On 5(th) January 2022, the Company issued 324,102 Ordinary Shares to two
service providers in lieu of cash settlement for services provided to the
Company with a total value of £3,033 ($4,067).
On 2(nd) February 2022, the Company issued 1,768,705 Ordinary Shares to three
Non-Executive Directors and a consultant, on exercise of their nil cost
options.
On 3(rd) February 2022, the Company issued 233,232 Ordinary Shares to two
service providers in lieu of cash settlement for services provided to the
Company with a total value of £3,033 ($4,049).
On 11(th) February 2022, the Company issued 636,832 Ordinary Shares to a
consultant on exercise of their nil cost options.
On 1(st) March 2022, the Company issued 400,219 Ordinary Shares to three
Non-Executive Directors on exercise of their nil cost options.
On 2(nd) March 2022, the Company issued 280,117 Ordinary Shares to two service
providers in lieu of cash settlement for services provided to the Company with
a total value of £3,033 ($3,981).
On 1(st) April 2022, the Company issued 404,838 Ordinary Shares to three
Non-Executive Directors on exercise of their nil cost options.
On 3(rd) April 2022, the Company issued 376,773 Ordinary Shares to three
service providers in lieu of cash settlement for services provided to the
Company with a total value of £4,033 ($5,071).
On 4(th) May 2022, the Company issued 329,458 Ordinary Shares to three
Non-Executive Directors on exercise of their nil cost options. Additionally on
this date, the Company issued 306,619 Ordinary Shares to three service
providers in lieu of cash settlement for services provided to the Company with
a total value of £4,033 ($5,081).
On 1(st) June 2022, the Company issued 273,392 Ordinary Shares to three
Non-Executive Directors on exercise of their nil cost options.
On 6(th) June 2022, the Company issued 586,133 Ordinary Shares to three
service providers in lieu of cash settlement for services provided to the
Company with a total value of £8,183 ($9,494).
On 6(th) July 2022, the Company issued 243,395 Ordinary Shares to three
Non-Executive Directors on exercise of their nil cost options. Additionally on
this date, the Company issued 659,000 Ordinary Shares to three service
providers in lieu of cash settlement for services provided to the Company with
a total value of £10, 641 ($12,976).
On 2(nd) August 2022, the Company issued 309,767 Ordinary Shares to three
Non-Executive Directors on exercise of their nil cost options. Additionally on
this date, the Company issued 671,722 Ordinary Shares to two service providers
in lieu of cash settlement for services provided to the Company with a total
value of £11,473 ($13,557) and 397,169 Ordinary Shares to a former consultant
following the exercise of their nil cost options.
On 2(nd) September 2022, the Company issued 307,978 Ordinary Shares to three
Non-Executive Directors on exercise of their nil cost options. Additionally on
this date, the Company issued 2,243,886 Ordinary Shares to three service
providers in lieu of cash settlement for services provided to the Company with
a total value of £31,400 ($35,070).
On 4(th) October 2022, the Company issued 233,192 Ordinary Shares to three
Non-Executive Directors on exercise of their nil cost options. Additionally on
this date, the Company issued 1,399,683 Ordinary Shares to three service
providers in lieu of cash settlement for services provided to the Company with
a total value of £21,950 ($25,262).
On 14(th) October 2022, the Company issued 464,457 Ordinary Shares to a
consultant on exercise of their nil cost options.
On 1(st) November 2022, the Company issued 233,047 Ordinary Shares to three
Non-Executive Directors on exercise of their nil cost options.
On 2(nd) November 2022, the Company issued 656,382 Ordinary Shares to a
service provider in lieu of cash settlement for services provided to the
Company with a total value of £12,198 ($14,038).
On 1(st) December 2022, the Company issued 303,268 Ordinary Shares to three
Non-Executive Directors on exercise of their nil cost options.
On 2(nd) December 2022, the Company issued 1,569,850 Ordinary Shares to three
service providers in lieu of cash settlement for services provided to the
Company with a total value of £28,640 ($34,657).
On 13(th) December 2022, the Company issued 12,000,000 Ordinary Shares to
Jindal Petroleum (Georgia) Limited on exercise of the nil cost options which
were granted in 2020 as part of the consideration for the acquisition of
Schlumberger Rustaveli Company Limited.
On 4(th) January 2021, the Company issued 617,571 Ordinary Shares to a service
provider in lieu of cash settlement for services provided to the Company with
a total value of £20,984 ($28,509).
On 12(th) January 2021, the Company issued 397,904 Ordinary Shares to a Chris
Brown, Non-executive Director, on exercise of his nil cost options.
On 1(st) February 2021, the Company issued 839,996 Ordinary Shares to six
service providers in lieu of cash settlement for services provided to the
Company with a total value of £29,251 ($40,914).
On 15(th) February 2021, the Company issued 180,715 Ordinary Shares to a
former employee/Director on exercise of their nil cost options.
On 1(st) March 2021, the Company issued 232,248 Ordinary Shares to four
service providers in lieu of cash settlement for services provided to the
Company with a total value of £7,542 ($10,395).
On 12(th) March 2021, the Company issued 865,896 Ordinary Shares to Philip
Dimmock, Chairman and a Contractor, on exercise of their nil cost options.
On 16(th) March 2021, the Company issued 4,400,000 Ordinary Shares to Paul
Haywood, Executive Director, on exercise of his options, at an exercise price
of 2.5 pence per share. Additionally on this date, the Company issued
2,190,707 Ordinary Shares to a service provider in lieu of cash settlement for
services provided to the Company with a total value of £72,134 ($100,000).
On 7(th) April 2021, the Company issued 58,972 Ordinary Shares to one service
provider in lieu of cash settlement for services provided to the Company with
a total value of £1,717 ($2,372).
On 5(th) May 2021, the Company issued 171,715 Ordinary Shares to two service
providers in lieu of cash settlement for services provided to the Company with
a total value of £4,751 ($6,765).
On 7(th) June 2021, the Company issued 125,696 Ordinary Shares to two service
providers in lieu of cash settlement for services provided to the Company with
a total value of £3,234 ($4,468).
On 2(nd) July 2021, the Company issued 1,355,805 Ordinary Shares to a former
employee on exercise of their nil cost options at a value of $44,269 to the
Company as it met the income tax cost of this issue.
On 2(nd) September 2021, the Company issued 62,005 Ordinary Shares to a
service provider in lieu of cash settlement for services provided to the
Company with a total value of £155 ($209).
On 15(th) September 2021, the Company issued 24,877,230 Ordinary Shares at
their nominal value to the Employee Benefit Trust.
On 4(th) October 2021, the Company issued 746,668 Ordinary Shares to four
service providers in lieu of cash settlement for services provided to the
Company with a total value of £20,148 ($27,589).
On 8(th) October 2021, the Company issued 299,412 Ordinary Shares to a former
Director, on exercise of their nil cost options.
On 2(nd) November 2021, the Company issued 262,403 Ordinary Shares to two
service providers in lieu of cash settlement for services provided to the
Company with a total value of £5,533 ($7,367).
On 5(th) December 2021, the Company issued 522,489 Ordinary Shares to two
service providers in lieu of cash settlement for services provided to the
Company with a total value of £8,033 ($10,863).
The Ordinary Shares consist of full voting, dividend and capital distribution
rights and they do not confer any rights for redemption. The Deferred Shares
have no entitlement to receive dividends or to participate in any way in the
income or profits of the Company, nor is there entitlement to receive notice
of, speak at, or vote at any general meeting or annual general meeting.
19. Share premium account
$'000
Balance at 1(st) January 2022 34,625
Premium arising on issue of equity shares 140
Share issue costs -
Balance at 31(st) December 2022 34,765
$'000
Balance at 1(st) January 2021 34,234
Premium arising on issue of equity shares 391
Share issue costs -
Balance at 31(st) December 2021 34,625
20. Reserves
The following describes the nature and purpose of each reserve within owners'
equity.
Reserves Description and purpose
Share capital Amount subscribed for share capital at nominal value.
Share premium account Amount subscribed for share capital in excess of nominal value, less
attributable costs.
Other reserves The other reserves comprises the fair value of all share options and warrants
which have been charged over the vesting period, net of the amount relating to
share options which have expired, been cancelled and have vested. It also
comprises of the fair value of the share options issued as part of the
consideration paid for the acquisition of the subsidiary BRL and subsequently
relinquished in the year. This movement has been shown in the Consolidated
Statement of the Changes in Equity and is also set out in the table below
Foreign exchange reserve Exchange differences on translating the net assets of foreign operations
Accumulated deficit Cumulative net gains and losses recognised in the income statement and in
respect of foreign exchange.
Other reserves $'000
Balance at 1(st) January 2022 10,260
Share based payments 1,072
Options movement (6,807)
Balance at 31(st) December 2022 4,525
$'000
Balance at 1(st) January 2021 9,120
Share based payments 1,494
Options movement (354)
Balance at 31(st) December 2021 10,260
On 30(th) November 2022, the Company announced that the outstanding
Consideration due to Schlumberger Production Management ("SLB"); (the seller
of XIB) had not been taken up and that the 108,000,000 nil-cost options issued
to SLB were to be relinquished. This decision has significantly improved the
Company's accumulated deficit, with $6,389,000 of the movement in options
being attributable to this relinquishment of options and their subsequent
recycling of this amount through the reserves.
21. Warrants
Number of Warrants 31(st) December 2022 weighted average exercise price Number of Warrants 31(st) December 2021 weighted average exercise price
Outstanding at the beginning of the year 16,820,502 6p 16,820,502 6p
Expired in the year (6,011,308) 11p - -
Outstanding at the end of the year 10,809,194 4p 16,820,502 6p
As at 31(st) December 2022, all warrants were available to exercise and were
exercisable at prices between 3p and 12.5p (31 December 2021: 3p and 12.5p).
The weighted average life of the warrants is 2.89 years (31 December 2021:
2.65 years). No new warrants were issued and no existing warrants were
exercised during the year. 6,011,308 warrants expired during the year. The
fair value of additions during the year was $nil (2021: $nil).
22. Share based payments
During the year, the Group operated a Block Energy plc Share Option Plan
(Share Option Scheme).
Under IFRS 2, an expense is recognised in the statement of comprehensive
income for share-based payments, to recognise their fair value at the date of
grant. The application of IFRS 2 gave rise to a charge of $1,072,000 for the
year ended 31(st) December 2022. The equivalent charge for the year ended
31(st) December 2021 was $1,494,000. The Group recognised total expenses (all
of which related to equity settled share-based payment transactions) under the
current plans of:
Year ended Year ended
31(st) December 31(st) December 2021
2022
$'000 $'000
Share option scheme 1,072 1,224
Warrants charge - 270
1,072 1,494
Share Option Scheme
The vesting period varies between 0 days to 3 years. The options expire if
they remain unexercised after the exercise period has lapsed and have been
valued using the Black Scholes model.
The following table sets out details of all outstanding options granted under
the Share Option Scheme.
2022 2022 2021 2021
Options Weighted average exercise price Options Weighted average exercise price
Outstanding at beginning of year 47,065,951 $0.05 31,338,713 $0.05
Granted during the year 85,637,597 $0.02 44,136,726 $0.02
Exercised during the year (15,111,350) $0.01 (25,211,024) $0.01
Expired during the year (17,486,046) $0.06 (3,198,464) $0.04
Outstanding at the end of the year 100,106,152 $0.02 47,065,951 $0.03
Exercisable at the end of the year 59,272,819 29,161,323
The weighted average exercise price of the share options exercisable at 31(st)
December 2022 is $0.02 (31(st) December 2021: $0.03). The weighted average
contractual life of the share-based payments outstanding at 31(st) December
2022 is 7.96 years (31(st) December 2021: 9.8 years).
The estimated fair values of these share options, and the inputs used in the
Black-Scholes model to calculate those fair values are as follows:
Date of grant Number Estimated Share Exercise price Expected volatility Expected life Risk free rate Expected dividends
of options fair value price
30(th) June 2017 1,200,000 $0.04 $0.01 $0.03 84% 5.5 years 1.16% 0%
6(th) April 2018 4,400,000 $0.05 $0.04 $0.03 84% 10 years 1.34% 0%
11(th) June 2018 18,098,332 $0.04 $0.05 $0.05 84% 10 years 1.23% 0%
21(st) October 2019 6,325,000 $0.05 $0.06 $0.15 109% 9.0 years 0.63% 0%
1(st) March 2021 10,800,00 $0.04 $0.04 $0.06 192% 9.5 years 0% 0%
8(th) April 2022 25,200,000 $0.01 $0.02 $0.02 105% 10 years 1.75% 0%
Warrants
31(st) December 2020 8,750,167 $0.04 $0.04 $0.04 190% 5 years 0% 0%
All share-based payment charges are calculated using the fair value of
options.
For the options granted prior to 30(th) June 2018, expected volatility was
determined by reviewing benchmark values from comparator companies. For the
options granted after 30(th) June 2018, expected volatility was determined by
reference to the volatility of historic trading prices of the Company's
shares.
23. Financial instruments
Capital risk management
The Company manages its capital to ensure that entities in the Group will be
able to continue as a going concern while maximising the return to
stakeholders. The overall strategy of the Company and the Group is to minimise
costs and liquidity risk.
The capital structure of the Group consists of equity attributable to equity
holders of the parent, comprising issued share capital, foreign exchange and
other reserves and retained earnings as disclosed in the Consolidated
Statement of Changes of Equity.
The Group is exposed to a number of risks through its normal operations, the
most significant of which are interest, credit, foreign exchange and liquidity
risks. The management of these risks is vested to the Board of Directors.
The sensitivity has been prepared assuming the liability outstanding was
outstanding for the whole period. In all cases presented, a negative number in
profit and loss represents an increase in finance expense / decrease in
interest income.
Credit risk
Credit risk is the risk that the Group will suffer a financial loss as a
result of another party failing to discharge an obligation and arises from
cash and other liquid investments deposited with banks and financial
institutions and receivables from the sale of crude oil.
For deposits lodged at banks and financial institutions these are all held
through a recognised financial institution. The maximum exposure to credit
risk is $450,000 (2021: $1,244,000). The Group does not hold any collateral as
security.
The carrying value of cash and cash equivalents and financial assets
represents the Group's maximum exposure to credit risk at year end. The Group
has no material financial assets that are past due.
The Company has made unsecured loans at a simple interest rate of 5% to its
subsidiary companies. Although the loans are repayable on demand, they are
unlikely to be repaid until the projects become successful and the
subsidiaries start to generate revenues. An assessment of the expected credit
loss arising on intercompany loans is detailed in note 6 to the parent Company
financial statements.
Market risk
Market risk is the risk that the fair value or future cash flows of a
financial instrument will fluctuate because of changes in market prices.
Market risk for the Company comprises of currency risk (discussed below) and
interest rate risk. Since there are no variable interest-bearing loans in
the Group. No risk is therefore identified.
Currency risk
Foreign currency risk can only arise on financial instruments that are
denominated in a currency other than the functional currency in which they are
measured. Translation-related risks are therefore not included in the
assessment of the entity's exposure to currency risks. Translation exposures
arise from financial and non-financial items held by an entity (for example, a
subsidiary) with a functional currency different from the Group's
presentational currency. However, foreign currency-denominated inter-company
receivables and payables which do not form part of a net investment in a
foreign operation would be included in the sensitivity analysis for foreign
currency risks; this is because, even though the balances eliminate in the
consolidated balance sheet, the effect on profit or loss of their revaluation
under IAS 21 is not fully eliminated.
A 10% increase in the strength of the pound sterling against the US dollar
would cause an estimated increase of $161,000 (2021: $480,000 increase) in the
loss after tax of the Group for the year ended 31 December 2022, with a 10%
weakening causing an equal and opposite decrease. The impact on equity is
the same as the impact on loss after tax.
The Group's cash and cash equivalents and liquid investments are mainly held
in US dollars, pounds sterling and Georgian Lari. At 31(st) December 2022, 12%
of the Group's cash and cash equivalents and liquid investments were held in
pounds sterling. 74% in Georgian Lari and the remainder in US dollars, Euros
and Canadian dollars (31(st) December 2021: 3% in pounds sterling, 88% in
Georgian Lari and the remainder in US dollars, Euros and Canadian dollars).
Liquidity risk
Liquidity risk arises from the possibility that the Group and its subsidiaries
might encounter difficulty in settling its debts or otherwise meeting its
obligations related to financial liabilities. In addition to equity funding,
additional borrowings have been secured in the past to finance operations. The
Company manages this risk by monitoring its financial resources and carefully
plans its expenditure programmes. Financial liabilities of the Group comprise
trade payables which mature in less than twelve months.
24. Categories of financial instruments
In terms of financial instruments, these solely comprise of those measured at
amortised cost and are as follows:
31(st) December 2022 31(st) December 2021
$'000 $'000
Liabilities at amortised cost 1,694 1,556
1,694 1,556
Cash and cash equivalents at amortised cost 450 1,244
Financial assets at amortised cost 347 657
798 1,901
No collateral has been pledged in relation thereto.
25. Subsidiaries
At 31(st) December 2022, the Group consists of the following subsidiaries,
which are wholly owned by the Company.
Country of Incorporation Proportion of voting rights and equity interest Proportion of voting rights and equity interest
Company
2022 2021
Block Norioskhevi Ltd British Virgin Islands 100% 100%
Satskhenisi Ltd Marshall Islands 100% 100%
Georgia New Ventures Inc. Bahamas 100% 100%
Block Operating Company LLC Georgia 100% 100%
Block Rustaveli Limited British Virgin Islands 100% 100%
South Samgori Limited British Virgin Islands 100% -
Didi Lilo & Nakarala Limited British Virgin Islands 100% -
Subsidiaries - Nature of business
The principal activity of Georgia New Ventures Inc, Satskhenisi Ltd, Block
Norioskhevi Ltd and Block Rustaveli Limited is oil and gas development and
production.
The principal activity of Block Operating Company LLC is to be the operator of
the oil and gas licenses held in Georgia.
The principal activity of South Samgori Limited and Didi Lilo & Nakarala
Limited is oil and gas exploration. These companies were both incorporated
on 28(th) October 2022.
Registered office
The registered office of Georgia New Ventures Inc. is Bolam House, King and
George Streets, P.O. Box CB 11.343, Nassau, Bahamas.
The registered office of Satskhenisi Ltd is Trust Company Complex, Ajeltake
road, Ajeltake Island, Majuro, Marshall Islands MH96960.
The registered office of Block Norioskhevi Ltd is Trident Chambers, P.O.Box
146, Road Town, Tortola, British Virgin Islands.
The registered office of Block Operating Company LLC is 13A Tamarashvili
Street, Tbilisi 0162, Georgia.
The registered office of Block Rustaveli Limited is Craigmuir Chambers, Road
Town, Tortola, VG1110, British Virgin Islands.
The registered office of South Samgori Limited and Didi Lilo & Nakarala
Limited is Woodbourne Hall, Road Town, Tortola, British Virgin Islands.
26. Commitments
Commitments at the reporting date that have not been provided for were as
follows:
Operating lease commitment
At 31(st) December 2022 and 31(st) December 2021, the total of future minimum
lease payments under non-cancellable operating leases for each of the
following periods was:
31(st) December 31(st) December 2021
2022
$'000
$'000
Within 1 year 269 -
Between 1 and 5 years - -
Total 269 -
Short term leases are leases with a lease term of 12 months or less without a
purchase option and are recognised on a straight-line basis as an expense in
the profit or loss account.
27. Related party transactions
Key management personnel comprises of the Directors and details of their
remuneration are set out in Note 7 and the Remuneration Report.
The Company secured a $2m loan facility after the year end (see note 28 for
more details). The draw down on this loan included the following related
parties:
Paul Haywood - $90,000
Key Seymour - $100,000
28. Events occurring after year end
On 10(th) January 2023, the Company announced that Ken Seymour had stood down
from the Board to take up a position as the Company's Chief Operating Officer.
On 2(nd) February 2023, the Company announced that it had secured additional
funding through a senior secured loan facility of $2m, of which US$1.06
million was drawn down with various existing shareholders and member of
Block's Management team. The facility is for a term of 18 months and carries
an interest rate of 16% per annum. Each lender will also receive warrants
with a 3 year expiry date and exercise price of 1.7p per Ordinary share. A
total of 25,330,249 warrants were issued in relation to this draw down.
On 9(th) March 2023, the Company announced that it had closed the farm-out of
part of XIB to GOGL.
On 3(rd) April 2023, the Company announced the successful test of well
WR-B01Za.
Parent Company Statement of Financial Position as at 31st December 2022
Company number: 05356303
Note
2022 2021
$'000 $'000
Non- current assets
Investments 4 6,209 6,939
Property, plant and equipment 5 1 4
6,210 6,943
Current assets
Trade and other receivables 6 25,340 25,628
Cash and cash equivalents 7 112 133
Total current assets 25,452 25,761
Total assets 31,662 32,704
Capital and reserves attributable to equity shareholders
Share capital 8 3,565 3,482
Share premium 34,765 34,625
Other reserves 4,525 10,260
Foreign exchange reserve (360) 366
Accumulated deficit (11,657) (16,803)
Total equity 30,838 31,930
Current liabilities
Trade and other payables 9 824 774
Total current liabilities 824 774
Total equity and liabilities 31,662 32,704
The Company has taken advantage of the exemption under section 408 of the
Companies Act 2006 by choosing not to present its individual Statement of
Comprehensive Income and related notes that form part of these approved
financial statements.
The Company's loss for the year from continuing operations is $1,661,000
(2021: loss of $4,384,000).
The financial statements were approved by the Board of Directors and
authorised for issue on 10(th) May 2023 and were signed on its behalf by:
Paul Haywood
Director
The notes on pages 78 to 82 form part of these financial statements.
Parent Company Statement of Changes in Equity as at 31st December 2022
Share capital Share premium Accumulated deficit Foreign currency reserve Total equity
Other reserve
$'000 $'000 $'000 $'000 $'000 $'000
Balance at 31(st) December 2020 3,336 34,234 (12,711) 9,121 449 34,429
Comprehensive income
Loss for the year - - (4,384) - - (4,384)
Exchange differences on translation of foreign operations - - - - (66) (66)
Total comprehensive income for the year - - (4,384) - (66) (4,450)
Transactions with owners recognised directly in equity
Shares issued 52 255 - - - 307
Foreign exchange rate correction 17 - - (1) (17) (1)
Share based payments - - - 1,494 - 1,494
Options exercised 77 136 210 (272) - 151
Options expired - - 82 (82) - -
Total transactions with owners 146 391 292 1,139 (17) 1,951
Balance at 31(st) December 2021 3,482 34,625 (16,803) 10,260 366 31,930
Comprehensive income
Loss for the year - - (1,661) - - (1,661)
Exchange differences on translation of foreign operations - - - - (726) (726)
Total comprehensive income for the year - - (1,661) - (726) (2,387)
Transactions with owners recognised directly in equity
Shares issued 27 140 - - - 167
Share based payments - - - 1,072 - 1,072
Options exercised 56 - - - - 56
Options relinquished - - 6,389 (6,389) - -
Options expired - - 418 (418) - -
Total transactions with owners 83 140 6,807 (5,735) - 1,295
Balance at 31(st) December 2022 3,565 34,765 (11,657) 4,525 (360) 30,838
Parent Company Statement of Cashflows for the Year Ended 31st December 2022
Note 2022 2021
$'000 $'000
Cash flow from operating activities
Loss for the year before income tax (1,661) (4,384)
Adjustments for:
Depreciation 3 5
Intercompany interest/ finance income (1,188) (2,558)
Increase in ECL provisions for loans - 3,205
Creditors paid in shares 167 -
Share based payments expense 2 1,035 1,449
Foreign exchange movement 9 4
Operating cash flows before movements in working capital (1,635) (2,279)
Decrease/(increase) in trade and other receivables 6 113 (9)
Increase/(decrease) in trade and other payables 9 52 (26)
Net cash used in operating activities (1,470) (2,314)
Cash flow from investing activities
Cash from acquisition of BRL - 278
Finance income - -
Expenditure in respect of property, plant and equipment - (1)
Inter-Group amounts received/ (drawn down) 1,452 (4,920)
Net cash used in investing activities 1,452 (4,643)
Cash flow from financing activities
Proceeds from issue of ordinary share capital - 1,465
Finance costs (1) -
Net cash inflow from financing activities (1) 1,465
Net (decrease) in cash and cash equivalents in the year (19) (5,492)
Cash and cash equivalents at start of year 133 5,657
Effects of foreign exchange (2) (32)
Cash and cash equivalents at end of year 7 112 133
Notes Forming Part of the Parent Company Financial Statements
1. Accounting policies
Basis of preparation
These financial statements have been prepared on a historical cost basis and
in accordance with UK-adopted international accounting standards and as
regards the Company financial statements, as applied in accordance with the
requirements of the Companies Act 2006. All accounting policies are consistent
with those adopted by the Group. These accounting policies are detailed in the
notes to the consolidated financial statements, note 1. Any deviations from
these Group policies by the Company are detailed below.
Going concern
The Directors have prepared cash flow forecasts for 24 months from the date of
signing these financial statements. The Group's forecasts are reviewed
regularly to assess whether any actions to curtail expenditure or cut costs
are required.
The Group's operations presently generate sufficient revenues to cover
operating costs and capital expenditures, supporting the continued preparation
of the Group's accounts on a going concern basis.
The directors are conscious that oil prices have been volatile during the past
few years and could rise further but could also fall back in the year ahead
and that future production levels depend on both depletion rates from existing
wells and the success of future drilling. As part of
their going concern assessment, the directors have examined multiple
scenarios in which oil prices and/or future production levels fall
substantially and have concluded that it remains possible that future
revenues in at least some scenarios might not cover all operating costs and
planned capital expenditures, creating a material uncertainty that may cast
doubt over the Group's ability to continue as a going concern. Whilst
acknowledging this material uncertainty, the directors remain confident of
making cost savings if required; therefore, they consider it appropriate to
prepare the financial statements on a going concern basis. The financial
statements do not include the adjustments that would result if the Group were
unable to continue as a going concern.
Investments in subsidiaries
Investments in subsidiaries are recorded at cost. The Company assesses
investments for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. If any such
indication of impairment exists, the Company makes an estimate of its
recoverable amount. Where the carrying amount of an investment exceeds its
recoverable amount, the investment is considered impaired and is written down
to its recoverable amount. Where these circumstances have reversed, the
impairment previously made is reversed to the extent of the original cost of
the investment.
2. Employees
Year ended Year ended
31(st) December
31(st) December
2022 2021
$'000 $'000
Employment costs consist of:
Wages and salaries 813 651
Pension 49 55
Share based payments 1,035 1,449
Social security costs 91 210
1,988 2,365
The average monthly number of employees during the year was 10 (2021: 13)
split as follows:
Year ended Year ended
31(st) December
31(st) December
2022 2021
$'000 $'000
Management 6 5
Technical 3 6
Administration 1 2
10 13
3. Directors' emoluments
Directors' Emoluments are disclosed in the Remuneration Report of the
consolidated financial statements.
4. Investments
Shares in Group undertakings 2022 2021
$'000 $'000
Balance at 1 January 6,939 7,027
FX movement on translation of assets (730) (88)
Balance at 31 December 6,209 6,939
Investments in subsidiaries are recorded at cost, which is the fair value of
the consideration paid.
At 31(st) December 2022, the carrying amount of the Company's net assets of
$30,838,000 exceeded the Group's net assets of $27,200,000. This is
identified by IAS 36 Impairment of Assets as an indicator that assets may be
impaired. Following a review of the assets held by the Company, the Directors
do not believe an impairment is necessary at this time, but will keep this
under review.
5. Property, plant and equipment
Computer Office Total
equipment equipment
$'000 $'000 $'000
Cost
At 1(st) January 2022 16 1 17
Additions - - -
At 31(st) December 2022 16 1 17
Depreciation
At 1(st) January 2022 (13) - (13)
Depreciation charge (3) - (3)
At 31(st) December 2022 (16) - (16)
Carrying amount
At 1(st) January 2022 3 1 4
At 31(st) December 2022 - 1 1
6. Trade and other receivables
2022 2021
$'000 $'000
Prepayments 195 27
Other receivables 102 383
Amounts due from Group undertakings 25,043 25,218
25,340 25,628
All of the above amounts are due within one year.
All trade and other receivables are denominated in pounds sterling. Amounts
due from Group undertakings are denominated in US dollars and repayable on
demand. The Company charges 5% interest per annum on intercompany loans.
Under IFRS 9, the Expected Credit Loss ("ECL") Model is required to be applied
to the intercompany loans receivable from subsidiary companies, which are held
at amortised cost. An assessment of the expected credit loss arising on
intercompany loans has been calculated and a loss allowance of $3,710,000 has
been provided for in the parent Company financial statements ($3,710,000 in
2021). No further impairment was indicated in the current year.
7. Cash at bank
2022 2021
$'000 $'000
Cash and cash equivalents 112 133
Cash and cash equivalents consist of balances in bank accounts used for normal
operational activities. The bank account is held within an institution with a
credit rating of A-1.
At 31 December 2022, 53% of the cash balances held by the Company were held in
US Dollars and the remained in UK sterling.
8. Share capital
Details of share capital and movements in the year are set out in note 18 to
the consolidated financial statements.
9. Trade and other payables
2022 2021
$'000 $'000
Trade and other payables 316 296
Accruals 508 478
824 774
Trade and other payables at 31(st) December 2022 comprised balances in US
dollars and pounds sterling.
10. Categories of financial instruments
In terms of financial instruments, these solely
comprise of those measured at amortised cost and are as follows:
31(st) December 2022 31(st) December 2021
$'000 $'000
Trade and other payables 824 774
Total financial liabilities at amortised cost 824 774
The carrying amounts of trade and other payables are considered to be the same
as their fair values due to their short-term nature.
31(st) December 2022 31(st) December 2021
$'000 $'000
Other receivables 102 383
Amounts due from Group undertakings 25,043 25,218
Cash and cash equivalents at amortised cost 112 133
Total financial assets at amortised cost 25,257 25,734
The amounts due from Group undertakings includes a loss allowance of
$3,710,000 (2021: $3,710,000). The loans are repayable on demand and include a
5% per annum interest rate charge. They are all denominated in US dollars,
which differs from the parent Company's functional currency of pounds
sterling, and therefore there is an exposure to foreign currency risk. There
is no exposure to price risk as the underlying investments are expected to be
held to maturity.
11. Financial and capital risk management
The Company's exposure to financial risks is managed as part of the Group.
Full details about the Group's exposure to financial risks and how these risks
could affect the Group's future financial performance are given in note 23 to
the consolidated financial statements. Information specific to the Company is
given below.
Credit risk
For deposits lodged at banks and financial institutions these are all held
through a recognised financial institution. The maximum exposure to credit
risk is $112,000 (2021: $133,000). The Company does not hold any collateral as
security.
The Company has made unsecured interest payable loans to its subsidiary
companies and repayments have commenced during the year. Although the loans
are repayable on demand, they are unlikely to be fully repaid until the
projects become more developed and the subsidiaries start to generate
increased revenues. An assessment of the expected credit loss arising on
intercompany loans has been calculated and a loss allowance of $3,710,000 has
been provided for in the parent Company financial statements.
Currency risk
Foreign currency risk is the risk that fair value or future cash flows of a
financial instrument will fluctuate because of changes in foreign exchange
rates.
The Company undertakes transactions denominated in currencies other than its
functional currency (which is the pound sterling). For transactions
denominated in US dollars, the Company manages this risk by holding US dollar
against actual or expected US dollar commitments to act as an economic hedge
against exchange rate movements.
The Company's cash and cash equivalents and liquid investments are mainly held
in pounds sterling and US dollars. At 31(st) December 2022, 47% of the Group's
cash and cash equivalents and liquid investments were held in pounds sterling.
A 10% movement in the strength of the pound sterling against the US dollar
would increase the net assets of the Company by $3,084,000.
The exposure to other foreign currency exchange movements is not material.
This sensitivity analysis includes foreign currency denominated monetary items
and assumes all other variables remain unchanged. Whilst the effect of any
movement in exchange rates upon revaluing foreign currency denominated
monetary items is charged or credited to the income statement, the economic
effect of holding pounds sterling against actual or expected commitments in
pounds sterling is an economic hedge against exchange rate movements.
Capital management
The capital of the Company is managed as part of the capital of the Group as a
whole. Full details, are contained in note 23 to the consolidated financial
statements.
12. Commitments
Commitments at the reporting date that have not been provided for were as
follows:
UK operating lease commitment
At 31(st) December, the total of future minimum lease payments under
non-cancellable operating leases for each of the following periods was:
2022 2021
$'000 $'000
Within 1 year 81 -
Between 1 and 5 years - -
Total 81 -
Short term leases are leases with a lease term of 12 months or less without a
purchase option and are recognised on a straight-line basis as an expense in
the profit or loss account.
13. Related party transactions
At 31(st) December 2022, the following subsidiaries owed the parent Company
for payments made and recovered on their behalf.
· Block Norioskhevi Ltd - $3,860,614 (31(st) December 2021: $3,815,000)
· Georgia New Ventures Inc - $19,950,781 (31(st) December 2021:
$18,212,000)
· Satskhenisi Ltd - $314,044 (31(st) December 2021: $310,000)
· Block Operating Company LLC - $2,029,351 (31(st) December 2021:
$1,819,000)
· Block Rustaveli Limited - (Debtor of: $1,115,554); (31(st) December
2021: $1,063,000)
· South Samgori Limited - $2,000
· Didi Lilo & Nakarala Limited - $2,000
A total loss allowance of $3,710,000 was recognised in prior year and no
further loss was recognised in the current year. This amount was recognised in
relation to the loans to Satskhenisi Ltd and Georgia New Ventures Inc. Further
detail on related party transactions can be found in note 27 to the
consolidated financial statements. The disclosure of fees paid to consultancy
companies for key management services can be seen in the Remuneration Report.
14. Information included in the notes to the consolidated financial
statements
Some of the information included in the notes to the consolidated financial
statements is directly relevant to the financial statements of the Company.
Please refer to the following:
Note 6 - Auditors' remuneration
Note 22 - Share based payments
Note 25 - Subsidiaries
Note 28 - Events occurring after the year end
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