REG - Block Energy PLC - Final Results
23/05/2024 07:00
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RNS Number : 6244P Block Energy PLC 23 May 2024
23 May 2024
Block Energy Plc
("Block" or the "Company")
Audited Results for the Year Ended 31(st) December 2023
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
2023.
Highlights:
Block made good progress in executing its four Project strategy:
· Delivered 299,824 operational man-hours with one Lost Time Incident
("LTI"); (2022: 382,542 with no LTIs).
· Significantly increased EBITDA to $1,469,000 from $158,000.
· Reduced cost of sales and administrative costs (excluding
depreciation and depletion) in the year from 2022 by $549,000.
· Maintained a disciplined approach to capital allocation across the
Company's portfolio.
· Successfully and safely drilled wells WR-B01Za and WR-34Z.
· Increased oil production to 151,184 bbls (2022: 120,359 bbls) and gas
production to 283 MMCF (2022: 267 MMCF), resulting in an average daily
production rate of 543 boepd (2022: 452 boepd).
· Raised $2.0 million via a secured loan to undertake drilling
operations on Project I.
· Completed the Project IV farm-out, achieving a carried work programme
valued at over $3 million (gross).
· Completed the internal evaluation of Project III, covering the
Patardzueli-Samgori, Rustavi and Teleti fields at Lower Eocene and Upper
Cretaceous level. This work was subsequently (on the Patardzueli-Samgori
field) audited to Petroleum Resource Management System ("PRMS") standards by a
leading technical consulting firm and forms the basis for the farm-out
campaign.
· Signed a Memorandum of Understanding with the Ministry of Economy and
Sustainability covering, amongst other items, the strategic importance of
Project III
· Commenced work on the CCS opportunity with the independent evaluation
being published in 2024.
Block Energy plc's Chief Executive Officer, Paul Haywood, said:
"2023 stands out as a pivotal year for our Company. Bolstered by solid
production, a focus on costs and a supportive oil price environment, we have
seen a strong improvement in our financial position. We were also able to
focus on advancing our high impact projects, in particular Project III, and
the generation and independent verification of a carbon capture storage
("CCS") project.
As we look forward, we're excited about the Company's prospects. The farmout
of Project III is already underway and we're seeing continued momentum in
developing Projects II and IV, supported by production and cashflows from
Project I and disciplined capital management. The Company remains cashflow
positive and financially stable at current oil prices and production levels,
and I look forward to continuing to deliver on our objectives throughout
2024".
For further information, please visit http://www.blockenergy.co.uk/
(http://www.blockenergy.co.uk/) or contact:
**ENDS**
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 7770 6424
(Financial PR)
Notes to editors
Block Energy plc is an AIM quoted independent oil and gas production and
development company with a strategic focus on unlocking the energy potential
of Georgia. With interests in seven Production Sharing Contracts in central
Georgia, covering an area of 4,256 km(2), including the XIB licence which has
over 2.77TCF of 2C contingent gas resources, with an estimated Net Present
Value (10) ("NPV") of USD 1.65 billion, in the Patardzueli-Samgori, Rustavi
and Teleti fields. (Source: IER, OPC 2024 & Internal estimates).
The Company has structured its operations around a four-project strategy.
These projects, characterized by development stage, hydrocarbon type, and
reservoir, are pursued concurrently to achieve multiple objectives. This
includes increasing existing production, redeveloping fields, discovering new
oil and gas deposits, and capitalizing on the substantial, yet untapped, gas
resource across its licences. The goal is to deliver on multi TCF gas assets,
strategically well located for the key EU market, supported by partner funding
and cash from existing producing assets.
Located near the Georgian capital of Tbilisi, Block Energy is well-positioned
to contribute significantly to the region's energy landscape. This proximity
facilitates seamless operations and underscores our commitment to the economic
and energy development of Georgia.
Chairman's Statement
Dear Shareholder,
2023 was a landmark year for our Company. Solid production, a laser focus on
costs, and a supportive oil price environment has transformed our financial
position, with EBITDA rising to $1,469,000, up from $158,000 in 2022, and
income from operating activities (before impairment) moving to a positive
$74,000 from a negative $1,822,000 in 2022.
Supported by robust finances we took a major step forward to unlocking the
potential of the multi-TCF gas resource across our licences, launching a
farm-out process to accelerate the development of an asset declared a
strategic resource by the government of Georgia. We reported that our assets
may also hold potential for a major CCS opportunity, publishing an independent
study indicating the Patardzeuli-Samgori licence has the geological and
geographical conditions to support one of the biggest CO(2) storage facilities
in Europe. And we have made progress towards realising a third exciting
development, Project IV, where a farm-out led to two seismic surveys that
formed the basis for an independent prospective resource report that has
attracted several interested parties to the data room.
Our focus on these high impact opportunities has been made possible by
continued progress with Project I, which has seen the drilling of three
successful wells and a well maintenance programme, and the ongoing reduction
of the Company's cost base through unrelenting focus on the optimal allocation
of capital, and scrupulous attention to operational efficiency.
Our drive for operational efficiency continues to respect our absolute
commitment to excellent HSSE and sustainability. HSSE remains the first item
on the agenda at both Board and daily operations meetings, entrenching and
refining best practice through proven monitoring and training processes.
We continue to maintain and develop excellent relationships both with our
business partners in Georgia and the country's regulatory authorities. Georgia
maintains conditions for long-term investment through its robust fiscal
framework, sympathetic regulatory environment, and established pipeline
network proximate to the Company's licence areas connected to domestic and
export markets. The country has further strengthened its ties with the
international community, in 2023 achieving acceptance as an EU candidate
nation and attracting new foreign direct investment, notably through
participation in China's Belt and Road initiative.
Block continues to be led by a highly engaged and active Board with deep and
wide experience of the Caucasus and the international energy sector, able to
offer strong leadership and enforce rigorous corporate governance across the
organisation.
I would like to thank all of our team for their professional contribution to
our progress through 2023. I have every confidence both in our strategy and
our ability to deliver it, and look forward to continuing to represent the
Company as we pursue an ever more extensive and prospective range of
projects.
Philip Dimmock
Non- Executive Chairman
Chief Executive Officer's Statement
Dear Shareholder,
Our progress through 2023 demonstrated the promise of our four-project
strategy to deliver strong finances and open exciting new opportunities.
The Company is cashflow positive, achieved through solid production from our
Project I wells and disciplined capital allocation. The farm-out of the
multi-TCF gas opportunity identified by Project III is underway. The full
potential of Project II is becoming clear. We have identified and progressed a
major CCS opportunity with partners Indorama Corporation Pte Ltd. And we have
maintained our excellent HSES record. We have much to look forward to through
2024 as we continue to work to deliver value for all shareholders.
HSES and Sustainability
The Company continued its record of delivering safe operations in 2023.
Despite an intensive work programme in which more than 299,824 man hours were
worked, only one minor Lost Time Incident ("LTI") was recorded over the
12-month period.
This achievement highlights the strength of our management structures, our
uncompromising focus on HSES practices, and the safety culture embedded within
the Company: we have a stand-alone HSES department with its own budget; we
follow the safety triangle approach; and we operate an observation/stop card
system together with permits-to-work.
We continue to minimise our environmental footprint, designing every operation
to mitigate the risk of oil spills, gas flaring or other environmental damage.
In 2023 we demonstrated our ongoing commitment to local communities by
offering significant employment and training opportunities, as well as working
with local authorities to deliver social programmes to complement our drilling
and workover campaigns.
Operations
Project III took a major leap forward in 2023. We continued to define the
Project's potential through a comprehensive field development study,
amalgamation and interpretation of various 3D seismic surveys, and third-party
conceptual development engineering before signing an MoU with the state of
Georgia which, declared the Project's strategic importance and supported the
concept of a long-term gas offtake. An independent engineering report by
leading geoscience consultancy OPC, published in Q1 2024, attributed more than
1 TCF of 2C contingent resources to the Project's Patardzueli-Samgori field,
with an NPV exceeding $500 million. An internal 2C resource upgrade for the
Rustavi and Teleti fields boosted Project III's resource potential by a
further 1.77 TCF, taking the reports' collective estimate for the
Patardzueli-Samgori, Rustavi and Teleti fields to 2.77 TCF, with an NPV(10) of
$1.65 billion.
We commenced a farmout process for Project III in Q1 2024 facilitated by a
leading independent energy consultancy with an international network of
contacts encompassing the key Asian and US markets. With its estimated
resource, fully costed appraisal programme, and connectivity to Europe's
pipeline infrastructure, Project III promises to make a major contribution to
the region's growing energy needs. The level of interest we have received so
far is encouraging and we look forward to providing further updates as we
progress.
The value of Block's assets was further confirmed by the publication of an
independent study indicating the presence of a major CCS opportunity. With an
estimated reservoir scale storage of 256 million metric tonnes, and basin
scale capacity of up to 8.7 gigatonnes, the Middle Eocene reservoir within our
Patardzeuli-Samgori licence has the right geology and geography to support one
of the biggest CO(2) storage facilities in Europe. It offers the ideal
conditions for mineralisation, a highly efficient and proven form of
sequestration already being used for a leading CCS project in Iceland. And the
reservoir's location in central Georgia make it ideally placed to serve as a
regional net-zero hub.
A Memorandum of Understanding was signed post-period with the Georgian
subsidiary of Indorama Corporation, one of Asia's leading chemical companies,
with which Block is working to define a pilot CO(2) injection project. With EU
Emissions Trading Scheme ("ETS") prices at around $60/ton, and an estimated
cost to store of approximately $12 per ton, the agreement is a significant
step forward to developing a commercial pathway toward project development.
With upstream and downstream synergies critical for any CCS project,
brownfield infrastructure available for re-use, and the conditions for
low-cost proven technology, we are excited by how quickly this project
continues to develop.
Project IV also saw good progress through the completion of the farmout
agreement for the Didi Lilo and South Samgori areas of License XIB to Georgia
Oil & Gas (GOG). Under the terms of the agreement the Company farmed-out
50% of the licences for a work programme valued at over $3 million. This
included the acquisition and processing of 210 km of 2D seismic data and the
reprocessing of 1,000 km of existing seismic data. GOG has subsequently met
the requirements of this work programme, further enhancing our understanding
of the Project's potential. A DeGoyler MacNaughton independent prospective
resource report was completed by GOG in the year, attributing 2U unrisked
prospective resources of 239.4 MMbbl and 193.3 BCF gas.
While much of the emphasis in 2023 was on Projects III and IV, and the CCS
opportunity, we continue to look forward to developing Project II, which will
be a key focus for our subsurface team in 2024.
Promotion of our high impact opportunities has been underpinned by the
continued progress of Project I. In 2023 average production increased to 543
boepd, up from 452 boepd in 2022, driven by the safe drilling of WR-B01Za and
WR-34Z, and a programme of well maintenance encompassing 10 workovers and
operational initiatives which significantly reduced non-productive time from
key production wells. All this was pursued with an unrelenting focus on the
optimal allocation of capital, and focus on driving operational efficiency.
We would like to pay special thanks to Guram Maisuradze, promoted in 2023 to
Chief Operating Officer, for leading these efforts. As the year progressed,
with our revenues supported by good production performance and commodity
prices, we decided to pause Project I drilling to dedicate resources to
progressing our high-impact gas resource and CCS projects.
Sales
Over the period the Company sold 106 MMbbls of oil in 2023 (2022: 90 MMbbls),
at an average price per barrel of $67.53, and 199 MMCF of gas (2022: 170 MMcf)
at an average price of $4.76/MCF.
Despite the increase in production, our revenue was broadly flat at $8,366,000
(2022: $8,262,000) owing to average Brent prices decreasing in the year from
$100.93 to $82.49. As at the period end, the Company had 16 Mbbls of oil in
storage (2022: 9 Mbbls).
Financials
Block saw its financial position much improve in 2023, with the Company seeing
results from operating activities (before impairment) move positive for the
first time in the Company's history, a positive $74,000 in 2023 against a
negative $1,822,000 in 2022.
We decided to fully impair the carrying value of the Norio and Satskhenisi
assets on the balance sheet to reflect these assets' non-core status within
the portfolio. Whilst they remain in production, recording a modest positive
cash-flow, we currently do not plan to develop them, taking a prudent approach
to accounting for them as explained in our Financial Review. We have,
therefore, taken an impairment charge of $2,210,000 (2022: nil), which sees
the total comprehensive loss for the year increase from $1,160,000 (2022) to
$2,139,000 (2023). The underlying accounts, however, reflect the substantial
improvement in overall financial and operating performance that was achieved
in the year.
EBITDA grew substantially in the year, from $158,000 (2022) to $1,469,000 in
2023. This was achieved on broadly flat revenues; reflecting the very
significant amount of work that was undertaken in 2023 to improve netbacks and
reduce costs.
Our cash position also improved, with the Company ending the year with
$713,000 (2022: $450,000) in cash and $971,000 in trade receivables (2022:
$560,000). As well as an increase in cash and receivables, payables
significantly decreased to $1,176,000 from $1,693,000 in 2022.
We reduced the cost of sales (before depreciation and depletion of oil and gas
assets), administrative costs, and share-based payments, ending the year in a
substantially stronger position than we entered it.
We closed a senior secured $2.0 million loan during the year with various
existing shareholders and members of the Block management team, which was used
to fund Project I development drilling, including WR-B01Za, WR-34Z and the
procurement of various long-lead items for the next planned well, KRT-45Z. All
interest payments were made on time.
Outlook
Block's focus remains on delivering value from its high-impact assets,
supported by cashflows from Project I. Our immediate focus is to progress the
Project III farm-out and the CCS project. Work is also underway to secure
partners for Project IV and, in due course, Project II.
I would like to thank all of our shareholders for joining us on our exciting
journey through 2023, and I look forward to reporting on our progress against
plan throughout 2024.
Paul Haywood
Chief Executive Officer
Financial Review
Impairment
Following a review of the Company's assets and strategy, we elected to fully
impair the carrying value of both Norio and Satskhenisi. The review concluded
that it was unlikely that significant capital would be deployed to develop
these assets given that significantly higher quality and impact opportunities
are available across other assets within the Company's portfolio. Both Norio
and Satskhenisi are cashflow positive and contribute to the overall Group
positive cashflow, however the carrying value was, to some extent, based upon
additional work programmes, such as drilling of new wells and additional
workovers, which required capital now being allocated to other higher impact
projects.
The Company believes that there is potential remaining within both assets,
particularly in the sphere of unconventional oil; however, given the four
Project strategy, these assets have been assessed as non-core and will in due
course, be subject to farmout or sale. Therefore, for prudent financial
reporting reasons, their carrying value has been fully impaired.
Cash Generative Units
The Company currently reports on the basis of Cash Generative Units ("CGUs")
associated with West Rustavi, Rustaveli, Norio and Satskhenisi.
In light of the impairment of both Norio and Satskhenisi, as well as the
Company's well-communicated multi Project strategy, with the phase one of
Project I, development being the West Rustavi/Krtsanisi field straddling
licences XIB and XIF and Project III also incorporating assets within
licences XIB and XIF (and therefore within both the West Rustavi and
Rustaveli CGUs), the Company is reviewing its financial reporting process and
it is likely that for 2024 the Company will either report on the basis of a
singular CGU in Georgia (owing to the proximity of the licences and fields) or
alternatively on a Projects basis (owing to the different stage of development
between Projects I, II, III, IV and CCS).
Income Statement
The Group's revenue from oil and gas sales increased to $8,366,000 (2022:
$8,262,000). The current year revenue from sales of crude oil of $7,413,000
(2022: $7,492,000) comprised the sale of 106,000 barrels (2022: 89,900
barrels), which equated to an average revenue per barrel of $69.93 (2022:
$83.34). The lower revenue was associated by a fall in the benchmark Brent
price between 2022 and 2023.
During the year, the Group produced 151,185 barrels of crude oil (2022:
120,369 barrels), with the increase in production being primarily due to the
WR-B01Za well which was brought onto stabilised production in late March 2023.
Performance from existing wellstock was also good during the year. Gas
production stood at 282 MMCF (2022: 267 MMCF). This gross production figure
includes the State of Georgia's share of production before cost recovery and
profit sharing.
In addition, the Group had 16,611 barrels of crude oil inventory as at 31
December 2023 (31 December 2022: 9,000 barrels).
In the year, the Group sold gas to the value of $953,000 (2022: $770,000).
The total comprehensive loss for the year was $2,139,000 (2022: $1,160,000);
the underlying cause of this is the $2,210,000 impairment charge associated
with the decision to fully impair Norio and Satskhenisi.
With respect to operating activities before impairment, the Group delivered a
profit of $74,000 (2022: loss of $1,822,000). EBITDA significantly improved to
$1,469,000 (2022: $158,000) and this was achieved on broadly flat revenues,
highlighting the Company's hard work and commitment to cost control and
spending discipline during the year. Cost of sales (before depreciation and
depletion of oil and gas assets) fell by $166,000. Other administrative costs
fell by $383,000 (despite the end of salary sacrifice). Share based payments
also fell by $658,000 in the year.
Overall, in 2023 the Company's financial performance strengthened
significantly and the Company is well positioned for growth.
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 a period of 12 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.
The directors also recognise that the outstanding $2.0 million secured loan is
due for full redemption in August 2024 and that there are scenarios in which
the Company may not be in a position to settle this liability on time.
Nonetheless, the directors remain confident that the loan can either be
repaid, or renegotiated, or that new lenders could take a portion, or that
other financing options will be available to the Company, and therefore judge
that the Company retains sufficient flexibility and optionality around the
loan to prepare the accounts on a going concern basis.
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 further 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.
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 $2,213,000 (2022: loss of
$1,608,000).
· The Group achieved positive EBITDA of $1,469,000 (2022: $158,000).
· The Group has net assets of $25,706,000 (2022: $27,200,000).
· The Directors do not recommend the payment of a dividend (2022:
$nil).
Financial Statements
Consolidated Statement of Consolidated Income for the Year Ended 31(st) December 2023
Note Year ended 31 December 2023 Year ended 31 December 2022
Continuing operations $'000 $'000
Revenue 4 8,366 8,262
Cost of sales 3 (3,826) (3,992)
Depreciation and depletion of oil and gas assets 5 (1,374) (1,956)
Total cost of sales (5,200) (5,948)
Gross profit 3,166 2,314
Other administrative costs (2,657) (3,040)
Share based payments charge 22 (414) (1,072)
Foreign exchange movement (21) (24)
Results from operating activities before impairment 74 (1,822)
Impairment on non-core oil and gas assets 12 (2,210) -
Total operating loss (2,136) (1,822)
Other income 8 26 281
Finance income 7 -
Finance expense 9 (110) (67)
(77) 214
Loss for the year before taxation (2,213) (1,608)
Taxation 10 - -
Loss for the year from continuing operations (attributable to the equity (2,213) (1,608)
holders of the parent)
Items that may be reclassified subsequently to profit and loss:
Exchange differences on translation of foreign operations 74 448
Total comprehensive loss for the year (attributable to the equity holders of (2,139) (1,160)
the parent)
Loss per share basic and diluted 11 (0.31)c (0.24)c
Earnings before interest, tax, depreciation and amortisation (EBITDA) 3a 1,469 158
All activities relate to continuing operations.
The notes on pages 53 to 78 form part of these consolidated financial
statements.
Consolidated Statement of Financial Position for the Year Ended 31(st) December 2023
31 December 2023 31 December 2022
Note $'000 $'000
Non-current assets
Intangible assets 50 -
Property, plant and equipment 12 23,851 24,815
Total non-current assets 23,901 24,815
Current assets
Inventory 13 4,377 4,791
Trade and other receivables 14 971 560
Cash and cash equivalents 15 713 450
Total current assets 6,061 5,801
Total assets 29,962 30,616
Equity and liabilities
Capital and reserves attributable to equity holders of the Parent Company:
Share capital 18 3,705 3,565
Share premium 19 34,856 34,765
Other reserves 20 4,766 4,525
Foreign exchange reserve 768 694
Accumulated deficit (18,389) (16,349)
Total equity 25,706 27,200
Liabilities
Trade and other payables 16 1,176 1,693
Provisions 17 1,080 1,723
Borrowings 16 2,000 -
Total current liabilities 4,256 3,416
Total equity and liabilities 29,962 30,616
The financial statements were approved by the Board of Directors and
authorised for issue on 22 May 2024 and were signed on its behalf by:
Paul Haywood
Director
The notes on pages 53 to 78 form part of these consolidated financial
statement
Consolidated Statement of Changes in Equity for the Year Ended 31(st) December 2023
Share Capital Share Premium Accumulated Deficit Other Reserves Foreign Exchange Reserve Total Equity
$'000 $'000 $'000 $'000 $'000 $'000
Balance at 31 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 December 2022 3,565 34,765 (16,349) 4,525 694 27,200
Loss for the year - - (2,213) - - (2,213)
Exchange differences on translation of foreign operations - - - - 74 74
Total comprehensive loss for the year - - (2,213) - 74 (2,139)
Issue of shares 133 91 - - - 224
Share based payments - - - 414 - 414
Options exercised 7 - - - - 7
Options expired - - 173 (173) - -
Total transactions with owners 140 91 173 241 - 645
Balance at 31 December 2023 3,705 34,856 (18,389) 4,766 768 25,706
The notes on pages 53 to 78 form part of these consolidated financial
statements.
Consolidated Statement of Cashflows for the Year Ended 31(st) December 2023
Note Year ended Year ended
31 December 2023 31 December 2022
$'000 $'000
Cash flow from operating activities
Loss for the year before tax (2,213) (1,608)
Adjustments for:
Depreciation and depletion 5 1,374 1,956
Impairment 12 2,210 -
Decommissioning finance charge and finance expense 110 67
Disposal of PP&E at nil value 12 89 -
Finance income (7) -
Other income and finance income 8 (26) (281)
Creditors paid in shares 108 167
Share based payments expense 7 414 1,072
Foreign exchange movement 22 (29)
Operating cash flows before movements in working capital
2,081 1,344
(Increase)/decrease in trade and other receivables (411) 192
(Decrease)/increase in trade and other payables (516) 194
Decrease/(increase) in inventory 414 (206)
Net cash flow from operating activities 1,568 1,524
Cash flow from investing activities
Income received 33 281
Expenditure in respect of Intangible assets (50) -
Expenditure in respect of PP&E 12 (3,040) (2,730)
Net cash used in investing activities (3,057) (2,449)
Cash flow from financing activities
Proceeds from Borrowings 16 2,000 -
Interest paid 9 (248) (1)
Net cash inflow/(outflow) from financing activities 1,752 (1)
Net increase/(decrease) in cash and cash equivalents in the year 263 (926)
Cash and cash equivalents at start of year 450 1,244
Effects of foreign exchange rate changes on cash and cash equivalents
- 132
Cash and cash equivalents at end of year 713 450
The notes on pages 53 to 78 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 December 2023 were
authorised for issue in accordance with a resolution of the Directors on 22
May 2024. 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 3 to 11 and the Report of the Directors
on pages 28 to 31.
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 December 2023 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 Effective date Overview
Amendments to IAS 1 1 January 2024 (early adoption permitted) The standard has been amended to clarify that the classification of
liabilities as current or non-current should be based on rights that exist at
the end of the reporting period.
Classification of Liabilities as Current or Non-current
In order to conclude a liability is non-current, the right to defer settlement
of a liability for at least 12 months after the reporting date must exist as
at the end of the reporting period.
The amendments also clarify that (for the purposes of classification as
current or non-current), settlement is the transfer of cash, the entity's own
equity instruments (except as described below), other assets or services.
Amendments to IAS 1 1 January 2024 (early adoption permitted) The standard confirms that only those covenants with which an entity must
comply on or before the end of the reporting period affect the classification
of a liability as current or non-current.
Non-current Liabilities with Covenants
Amendments to IFRS 16 1 January 2024 (early adoption permitted) The amendments address the accounting that should be applied by a
seller-lessee in a sale and leaseback transaction when the leaseback contains
variable lease payments, such as turnover rentals, that do not depend on an
index or rate.
Lease Liability in a Sale and Leaseback
Specifically, they confirm that the 'lease payments' or the 'revised lease
payments' arising from the leaseback arrangement are measured in such a way
that no gain or loss is recognised on the right of use retained by the
seller-lessee.
Amendments to IAS 7 and IFRS 7 1 January 2024 (early adoption permitted) The amendments require an entity to disclose information about its supplier
finance arrangements to enable users of financial statements to assess the
effects of those arrangements on the entity's liabilities and cash flows and
on the entity's exposure to liquidity risk.
Supplier Finance Arrangements
Amendments to IAS 21 - Lack of Exchangeability 1 January 2025 (early adoption permitted) The amendments have been made to clarify:
- when a currency is exchangeable into another currency; and
- how a company estimates a spot rate when a currency lacks exchangeability.
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
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 12 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.
The directors also recognise that the outstanding $2.0m secured loan is due
for full redemption in August 2024 and that there are scenarios in which the
Company may not be in a position to settle this liability on time.
Nonetheless, the directors remain confident that the loan can either be
repaid, or renegotiated, or that new lenders could take a portion, or that
other financing options will be available to the Company, and therefore judge
that the Company retains sufficient flexibility and optionality around the
loan to prepare the accounts on a going concern basis.
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 further 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 date 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 of the asset is increased to its recoverable amount, not to exceed the
carrying amount that would have been determined, net of depreciation
(javascript:;) , 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. 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.
Borrowing Costs
General and specific borrowing costs that are directly attributable to the
acquisition, construction or production of a qualifying asset are capitalised
during the period of time that is required to complete and prepare the asset
for its intended use or sale. Qualifying assets are assets that necessarily
take over one accounting period to get ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings,
pending their expenditure on qualifying assets, is deducted from the borrowing
costs eligible for capitalisation.
Other borrowing costs are expensed in the period in which they are incurred.
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: $1.27 /£1 (2022: $1.21/£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 December 2023 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 an indication of impairment at
Satskhenisi and Norio, as these assets are being held as non-core assets and
are considered to be cash flow neutral. A one-off impairment charge of $2.2m
has been charged to the profit and loss account in the year and these oil and
gas assets have been written down to nil.
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 December 2023 and concluded that a provision
of $1,080,000 (2021: $1,723,000) should be recognised in respect of future
decommissioning obligations at Rustaveli, West Rustavi, Satskhenisi and Norio
(see note 17).
Share Options and Warrants - Estimates and Assumptions
Share options issued by the Group relate to the Block Energy Plc Share Option
Plan and warrants issued relates to the cost of borrowing. The grant date fair
value of such options and warrants 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. Although no impairment of investments was indicated at year
end the Company identified certain intercompany receivables as being impaired.
During the year the Company carried out an assessment of the expected credit
loss arising on intercompany receivables. This was calculated as a total loss
allowance of $8,097,000 (2022: $3,710,000) therefore an additional amount of
$4,387,00 (2022: nil) was provided for in the current year parent company
financial statements.
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 and Gas 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 and
Gas Extraction in Georgia, and the corporate segment including unallocated
costs.
The Board of Directors primarily uses a measure of adjusted earnings before
interest, tax, depreciation and amortisation (EBITDA), see below, to assess
the performance of the operating sectors.
3 a) Adjusted EBITDA
Adjusted EBITDA excludes discontinued operations and the effects of
significant items of income and expenditure which might have an impact on the
quality of earnings, such as restructuring costs, legal expenses, and
impairments where the impairment is the result of an isolated, non-recurring
event.
31 December 2023 31 December 2022
Adjusted EBITDA $'000 $'000
Oil and Gas exploration - Georgia 3,331 3,258
Corporate and other (1,862) (3,100)
Total adjusted EBITDA 1,469 158
Adjusted EBITDA reconciles to operating profit before income tax as follows:
31 December 2023 31 December 2022
$'000 $'000
Total adjusted EBITDA 1,469 158
Depreciation and depletion (1,374) (1,956)
Impairment (2,210) -
Finance and other income 33 281
Finance costs and foreign exchange (131) (91)
Loss before income tax from continuing operations (2,213) (1,608)
3 b) Other profit and loss disclosures
Oil and Gas Corporate Group
Extraction and other Total
Year ended 31 December 2023 $'000 $'000 $'000
Revenue 8,366 - 8,366
Cost of sales (3,826) - (3,826)
Depreciation and depletion (1,373) (1) (1,374)
Impairment (2,210) - (2,210)
Administrative costs (1,209) (1,862) (3,071)
Finance and other income 19 14 33
Net Finance costs and Forex (69) (62) (131)
Loss from operating activities (302) (1,911) (2,213)
Total non-current assets 23,901 - 23,901
Oil and Gas Corporate Group
Extraction and other Total
Year ended 31 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
3 c) Segment assets and liabilities
31 December 2023 31 December 2022
Segmental Assets $'000 $'000
Oil exploration - Georgia 29,452 30,206
Corporate and other 510 410
29,962 30,616
Segmental Liabilities 31 December 2023 31 December 2022
$'000 $'000
Oil exploration - Georgia 1,522 2,591
Corporate and other 2,734 825
4,256 3,416
4. Revenue
Year ended Year ended
31 December
31 December
2023 2022
$'000 $'000
Crude oil revenue 7,413 7,492
Gas revenue 953 770
8,366 8,262
5. Depreciation and Depletion on Oil and Gas assets
Year ended Year ended
31 December
31 December
2023 2022
$'000 $'000
Depreciation of PP&E 307 273
Depletion of oil and gas assets 1,067 1,683
1,374 1,956
6. Expenses by nature
Year ended Year ended
31 December
31 December
2023 2022
$'000 $'000
Employee benefit expense 1,413 1,705
Share option charge 414 1,072
Security expense - 15
Fees to Auditor in respect of the Group audit 97 96
Regulatory fees 30 31
Operating lease expense 68 81
7. Directors and employees
Year ended Year ended
31 December
31 December
2023 2022
$'000 $'000
Employment costs (inc. Directors' remuneration):
Wages and salaries 1,286 1,563
Pensions 30 49
Social security costs 97 93
1,413 1,705
Share based payments 414 1,035
1,827 2,740
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 (as shown above).
The average monthly number of employees during 2023 was 147 (2022: 168) split
as follows:
Year ended Year ended
31 December
31 December
2023 2022
Management 8 9
Technical 110 129
Administration 29 30
147 168
Year ended Year ended
31 December
31 December
2023 2022
$'000 $'000
Amounts attributable to the highest paid Director:
Director's salary and bonus 466 426
Pension 15 25
Share based payments 67 104
548 555
Key management and personnel are considered to be the Directors.
8. Other income
Year ended Year ended
31 December
31 December
2023 2022
$'000 $'000
Other income 26 -
Insurance claim - 281
26 281
9. Finance Expense
Year ended Year ended
31 December 2023 31 December 2022
$'000 $'000
Interest paid and payable on borrowings (note 16) 248 -
Warrant cost of borrowings (note 21) 125 -
Arrangement fee 55 -
428 -
Less borrowing costs capitalised (note 12) (361) -
67 -
Unwinding of decommissioning provision (note 17) 43 67
110 67
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 December 31 December
2023 2022
$'000 $'000
UK Group loss on ordinary activities (2,213) (1,608)
Loss before taxation at the average UK standard rate of 23.5% (2021:19%) (520) (306)
Effect of:
Zero tax rate income (1,966) (1,570)
Disallowable expenses 125 302
Tax losses for which no deferred income tax asset was recognised 4,304 2,876
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.
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
$16,627,000 (2022: $14,414,000 - estimated).
11. Loss Per Share
The calculation for loss per Ordinary Share (basic and diluted) is based on
the consolidated loss attributable to the equity shareholders of the Company
is as follows:
Year ended Year ended
31 December 2023 31 December 2022
Loss attributable to equity Shareholders ($'000) (2,213) (1,608)
Weighted average number of Ordinary Shares 702,875,778 660,223,772
Loss per Ordinary share ($/cents) (0.31)c (0.24)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
Development & Production Assets PPE/Computer / Office Equipment / Motor Vehicles Total
$'000 $'000 $'000
Cost
At 1 January 2022 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 47
At 31 December 2022 29,115 2,072 31,187
Additions* 3,286 115 3,401
Disposals - (151) (151)
Change in decommissioning provision (686) - (686)
Foreign exchange movements 4 (4) -
At 31 December 2023 31,719 2,032 33,751
Accumulated depreciation
At 1 January 2022 4,029 390 4,419
Disposals - (2) (2)
Charge for the year 1,683 273 1,956
Foreign exchange movements (1) - (1)
At 31 December 2022 5,711 661 6,372
Disposals (3) (54) (57)
Charge for the year 1,067 307 1,374
Impairment 2,210 - 2,210
Foreign exchange movements (1) - (1)
At 31 December 2023 8,986 914 9,899
Carrying Amount
At 31 December 2022 23,404 1,411 24,815
At 31 December 2023 22,733 1,118 23,851
*This includes additions of $361,000 which relates to capitalised borrowing
costs.
Carrying amount of property plant and equipment by cash generative unit (CGU):
Norio Satsk West Rustavi Corporate
henisi Rustaveli Total
$'000 $'000 $'000 $'000 $'000 $'000
Carrying amount
At 31 December 2023 14 28 16,967 439
6,403 23,851
At 31 December 2022 2,126 174 14,625 402
7,488 24,815
The impairment charge of $2.2m (2022: £nil) arose on the production and
development assets held by Norio and Satskhenisi following a decision to
define these assets as non-core to the business operations. This was a result
of an extensive review of the cost of operations and decision not to allocate
additional capital for the further development of these CGUs. Following this
decision, the oil and gas assets at Norio and Satskhenisi were written down to
£nil (2022: $2.3m). The remaining assets within this CGU relate to non-oil
and gas assets only.
13. Inventory
31 December 2023 31 December 2022
$'000 $'000
Spare parts and consumables 3,286 3,606
Crude oil 1,091 1,185
4,377 4,791
14. Trade and Other Receivables
31 December 2023 31 December 2022
$'000 $'000
Trade debtors 233 -
Other receivables 420 347
Prepayments 318 213
971 560
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 December 31 December 2022
2023
$'000
$'000
Cash and cash equivalents 713 450
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 December 31 December
2023 2022
$'000 $'000
Trade and other payables 1,041 1,182
Accruals 135 511
1,176 1,693
Trade and other payables principally comprise amounts outstanding for
corporate services and operational expenditure.
During the year the Company entered into a $2,000,000 (2022: $nil) loan with a
simple interest rate of 16% becoming payable every quarter. This was drawn
down in two tranches, with $1,060,000 being drawn down on 1 February 2023 and
the remainder of $940,000 being drawn down on 10 May 2023. The maturity date
of this loan is set at 18 months from the date of the drawdowns and has been
recognised as a short-term loan.
The loan was advanced for the purpose of the drilling of side tracks and
associated works as part of the Company's Project development strategy in
relation to the development of the Middle Eocene reservoir within West
Rustavi/Krtsanisi.
The Company also granted warrants in consideration for this loan for 50% of
the commitment, exercisable for three years from the drawdown at the price of
1.7p and 1.9p for the two respective tranches. . See note 21 for further
details on the number of warrants issued and their valuation. A portion of
these costs were capitalised as part of the borrowing costs (see note 9).
17. Provisions
31 December 31 December 2022
2023 $'000
$'000
Decommissioning provision 1,080 1,723
Baseline oil liability - -
1,080 1,723
Decommissioning provision 31 December 31 December 2022
2023 $'000
$'000
Brought forward 1,723 2,040
Unwinding of discount on provision 43 66
Change in decommissioning provision in the year (686) (383)
Carried forward 1,080 1,723
Baseline oil liability 31 December 31 December 2022
2023 $'000
$'000
Brought forward - 265
Baseline oil liability reducing from the acquisition - (265)
Additional baseline oil liability provided in the year - -
Carried forward - -
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 January 2022 652,749,525 2,095,165,355 3,482,148
Issue of equity on 5 January 2022 324,102 - 1,087
Issue of equity on 2 February 2022 1,768,705 - 5,903
Issue of equity on 3 February 2022 233,232 - 778
Issue of equity on 11 February 2022 636,832 - 2,126
Issue of equity on 1 March 2022 400,219 - 1,313
Issue of equity on 2 March 2022 280,117 - 919
Issue of equity on 1 April 2022 404,838 - 1,273
Issue of equity on 3 April 2022 376,773 - 1,184
Issue of equity on 4 May 2022 636,077 - 2,004
Issue of equity on 1 June 2022 273,392 - 793
Issue of equity on 6 June 2022 586,133 - 1,700
Issue of equity on 6 July 2022 902,395 - 2,751
Issue of equity on 2 August 2022 1,378,658 - 4,073
Issue of equity on 2 September 2022 2,551,864 - 7,125
Issue of equity on 4 October 2022 1,632,875 - 4,698
Issue of equity on 14 October 2022 464,457 - 1,336
Issue of equity on 1 November 2022 233,047 - 506
Issue of equity on 2 November 2022 656,382 - 1,889
Issue of equity on 1 December 2022 303,268 - 917
Issue of equity on 2 December 2022 1,569,850 - 4,749
Issue of equity on 13 December 2022 12,000,000 - 36,303
As at 31 December 2022 680,362,741 2,095,165,355 3,565,575
Issue of equity on 4 January 2023 764,340 - 2,353
Issue of equity on 6 February 2023 5,622,613 - 16,922
Issue of equity on 7 March 2023 924,997 - 2,855
Issue of equity on 5 April 2023 1,876,413 - 5,896
Issue of equity on 03 August 2023 35,124,708 - 111,798
As at 31 December 2023 724,675,812 2,095,165,355 3,705,399
On 4 January 2023, the Company issued 414,879 Ordinary Shares to two service
providers in lieu of cash settlement for services provided to the Company with
a total value of £5,145 ($6,335).
On 4 January 2023, the Company issued 349,461 Ordinary Shares to three
Non-Executive Directors, on exercise of their nil cost options.
On 3 February 2023, the Company issued 296,556 Ordinary Shares to three
Non-Executive Directors on exercise of their nil cost options.
On 6 February 2023, the Company issued 5,173,662 Ordinary Shares to the
Employee Benefit Trust at par value.
On 6 February 2023, the Company issued 152,395 Ordinary Shares to two service
providers in lieu of cash settlement for services provided to the Company with
a total value of £2,421 ($2,915).
On 7 March 2023, the Company issued 646,849 Ordinary Shares to two service
providers in lieu of cash settlement for services provided to the Company with
a total value of £7,783 ($9,608).
On 7 March, the Company issued 278,148 Ordinary Shares to two Non-Executive
Directors, on exercise of their nil cost options.
On 5 April 2023, the Company issued 1,400,025 Ordinary Shares to two
Non-Executive Directors, on exercise of their nil cost options.
On 5 April 2023, the Company issued 476,388 Ordinary Shares to two service
providers in lieu of cash settlement for services provided to the Company with
a total value of £4,783 ($6,011).
On 3 August, the Company issued 30,000,000 Ordinary shares to the Employment
Benefit Trust at par value.
On 3 August, the Company issued 5,124,708 Ordinary shares to three service
providers in lieu of cash settlement for services provided to the Company with
a total value of £68,589 ($87,326).
---
On 5 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 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 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 February 2022, the Company issued 636,832 Ordinary Shares to a
consultant on exercise of their nil cost options.
On 1 March 2022, the Company issued 400,219 Ordinary Shares to three
Non-Executive Directors on exercise of their nil cost options.
On 2 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 April 2022, the Company issued 404,838 Ordinary Shares to three
Non-Executive Directors on exercise of their nil cost options.
On 3 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 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 June 2022, the Company issued 273,392 Ordinary Shares to three
Non-Executive Directors on exercise of their nil cost options.
On 6 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 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 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 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 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 October 2022, the Company issued 464,457 Ordinary Shares to a consultant
on exercise of their nil cost options.
On 1 November 2022, the Company issued 233,047 Ordinary Shares to three
Non-Executive Directors on exercise of their nil cost options.
On 2 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 December 2022, the Company issued 303,268 Ordinary Shares to three
Non-Executive Directors on exercise of their nil cost options.
On 2 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 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.
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 January 2023 34,765
Premium arising on issue of equity shares 91
Share issue costs -
Balance at 31 December 2023 34,856
$'000
Balance at 1 January 2022 34,625
Premium arising on issue of equity shares 140
Share issue costs -
Balance at 31 December 2022 34,765
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 January 2023 4,525
Share based payments 414
Options movement (173)
Balance at 31 December 2023 4,766
$'000
Balance at 1 January 2022 10,260
Share based payments 1,072
Options movement (6,807)
Balance at 31 December 2022 4,525
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 December 2023 weighted average exercise price Number of Warrants 31 December 2022 weighted average exercise price
Outstanding at the beginning of the year 10,809,194 4p 16,820,502 6p
Granted in the year 44,682,643 1.8p - -
Expired in the year (1,250,000) 4p (6,011,308) 11p
Outstanding at the end of the year 54,241,837 2.2p 10,809,194 4p
As at 31 December 2023, all warrants were available to exercise and were
exercisable at prices between 1.7p and 12.5p (31 December 2022: 3p and 12.5p).
The weighted average life of the warrants is 2.1 years (31 December 2022: 2.8
years). 44,682,643 warrants were issued during the year, nil were exercised
and 1,250,000 warrants expired.
The warrants granted during the year related to the cost of borrowing and
therefore a fair value was calculated using the Black Scholes Model. This
resulted in fair value charge of $125,000 being assigned to the warrants
granted to the lenders. The inputs used for the model are shown below in
note 22.
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 $414,000 for the
year ended 31 December 2023. The equivalent charge for the year ended 31
December 2022 was $1,072,000. 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 December 31 December 2022
2023
$'000 $'000
Share option scheme 414 1,072
414 1,072
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.
2023 2023 2022 2022
Options Weighted average exercise price Options Weighted average exercise price
Outstanding at beginning of year 100,106,152 $0.02 47,065,951 $0.05
Granted during the year 26,701,508 $0.01 85,637,597 $0.02
Exercised during the year 8,540,800 $0.00 (15,111,350) $0.01
Expired during the year 18,481,019 $0.03 (17,486,046) $0.06
Outstanding at the end of the year 99,785,841 $0.01 100,106,152 $0.02
Exercisable at the end of the year 83,823,460 59,272,819
The weighted average exercise price of the share options exercisable at 31
December 2023 is $0.01 (31 December 2022: $0.02). The weighted average
contractual life of the share based payments outstanding at 31 December 2023
is 9.16 years (31 December 2022: 7.96 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 June 2017 1,200,000 $0.04 $0.01 $0.03 84% 5.5 years 1.16% 0%
6 April 2018 4,400,000 $0.05 $0.04 $0.03 84% 10 years 1.34% 0%
11 June 2018 18,098,332 $0.04 $0.05 $0.05 84% 10 years 1.23% 0%
21 October 2019 6,325,000 $0.05 $0.06 $0.15 109% 9.0 years 0.63% 0%
1 March 2021 10,800,00 $0.04 $0.04 $0.06 192% 9.5 years 0% 0%
8 April 2022 25,200,000 $0.01 $0.02 $0.02 105% 10 years 1.75% 0%
Warrants
31 December 2020 8,750,167 $0.04 $0.04 $0.04 190% 5 years 0% 0%
1 February 2023 25,330,249 $0.003 $0.012 $0.017 70.5% 3 years 3.76% 0%
10 May 2023 19,352,394 $0.003 $0.013 $0.019 70.5% 3 years 3.57% 0%
All share-based payment charges are calculated using the fair value of
options.
For the options and warrants granted in 2023, expected volatility was
determined by reviewing benchmark values from comparator companies. For the
options granted prior to 2023, 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 $713,000 (2022: $ 450,000). 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 (the Group Borrowings are set at a fixed rate of 16%), 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 $221,000 (2022: $161,000 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 December 2023, 16% of
the Group's cash and cash equivalents and liquid investments were held in
pounds sterling. 78% in Georgian Lari and the remainder in US dollars (31
December 2022: 12% in pounds sterling, 74% 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 December 2023 31 December 2022
$'000 $'000
Liabilities at amortised cost 1,042 1,694
Borrowings at amortised cost 2,000 -
3,042 1,694
Cash and cash equivalents at amortised cost 713 450
Financial assets at amortised cost 971 347
1,684 789
A fixed and floating charge has been placed over the assets owned by the Group
as security for the $2m borrowings taken out in the year. This will be
discharged in full on payment of these secured liabilities.
25. Subsidiaries
At 31 December 2023, 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
2023 2022
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%
Didi Lilo & Nakarala Limited British Virgin Islands 100% 100%
South Samgori Limited British Virgin Islands 0% 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 October 2022. South Samgori was disposed of in the first quarter of
2023 for nil consideration, as part of a Farm out Agreement, involving
exploration licences being split between Didi Lilo & Nakarala with Georgia
Oil & Gas Limited (GOG). These licences will continue to be explored by
the Group as part of a Joint Operating Agreement with GOG.
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 year end the total of future minimum lease payments under non-cancellable
operating leases for each of the following periods was:
31 December 31 December 2022
2023
$'000
$'000
Within 1 year 81 269
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
The Directors consider that there is no ultimate controlling party.
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 during the year and the draw down on
this loan included the following related parties, who also received warrants
as set out below:
Paul Haywood - $115,000 2,665,373
warrants at a fair value cost of $7,569
Ken Seymour - $125,000
2,904,337 warrants at a fair value cost of $8,241
28. Events Occurring After Year End
On the 16(th) January 2024, the Company announced the results of a study into
the carbon storage potential of the Patardzueli-Samgori Middle Eocene
reservoir.
On the 8(th) February 2024, the Company announced an Independent Engineering
Report covering Contingent Gas Resources associated with Patardzueli-Samgori
Lower Eocene and Upper Cretaceous Reservoirs.
On the 12(th) February 2024, the Company announced the formal commencement of
the Project III farm out campaign.
On the 4(th) March 2024, the Company announced results of an internal study
into the Contingent Gas Resources associated with the Teleti and Rustavi
fields at Lower Eocene and Upper Cretaceous reservoir.
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