REG - Enwell Energy PLC - 2025 Audited Results
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RNS Number : 0529E Enwell Energy PLC 13 May 2026
13 May 2026
ENWELL ENERGY PLC
2025 AUDITED RESULTS
Enwell Energy plc ("Enwell Energy" or the "Company", and together with its
subsidiaries, the "Group"), the AIM-quoted (AIM: ENW) oil and gas exploration
and production group, today announces its audited results for the year ended
31 December 2025.
2025 Highlights
Operational
· Aggregate average daily production of 1,865 boepd (2024: 2,288
boepd (in each case calculated on the days when the Group's fields were
actually in production))
· Aggregate production volumes for the year of 48,962 boe (2024:
722,753 boe)
Financial
· Revenue of $3.3 million (2024: $44.9 million), down 92%,
primarily as a result of significantly lower production following licence
suspensions by Ukrainian Government authorities
· Gross profit of $1.2 million (2024: $28.2 million), down 96%
· Operating loss of $1.5 million (2024: $29.1 million profit), down
105%, predominantly as a result of lower production following licence
suspensions by Ukrainian Government authorities
· Net loss of $4.5 million (2024: $23.7 million profit)
· Cash and cash equivalents of $97.1 million as at 31 December 2025
(2024: $99.4 million), and of $92.0 million as at 8 May 2026
· Average realised gas, condensate and oil prices in Ukraine were
$377/Mm(3) (UAH15,836/Mm(3)), $63/bbl and $64/bbl respectively, with no LPG
produced in the year (2024: $318/Mm(3) (UAH12,767/Mm(3)) gas, $101/bbl
condensate and $69/bbl oil)
Outlook
· The Russian invasion of Ukraine in February 2022 has had, and
continues to have, a significant impact on all aspects of life in Ukraine,
including the Group's business and operations. The scale and duration of
disruption to the Group's business continues to be difficult to predict, and
there remains significant uncertainty about the outcome of the war in Ukraine
· In November 2024, the Ukrainian authorities issued orders to
suspend the MEX-GOL, SV and VAS production licences for a period of ten years,
and consequently all work at these licences is currently suspended. This
followed similar regulatory action against the Group in April and May 2023,
when the VAS production licence and SC exploration licence were suspended from
May 2023 until June 2024
· Further work on the MEX-GOL, SV and VAS licences will remain
suspended until there is a resolution of the regulatory issues, including the
lifting of the suspension orders
· At the SC exploration licence area, development planning is
continuing, including planning for the drilling of the SC-5 exploration well,
and for the installation of new gas processing facilities and other surface
infrastructure as well as assessing the feasibility of an alternative option
of a connection to existing gas processing facilities. Additionally, temporary
gathering, separation and compression equipment is being installed, which will
enable gas and condensate from the SC-4 well to be separated, and the gas
compressed at site and then trucked to the Group's gas processing facilities
at its MEX-GOL and SV fields for treatment and sale
· The Group is continuing to pursue legal proceedings to challenge
the suspension orders and protect its business and assets, including
arbitration proceedings under the bilateral investment treaty between the
United Kingdom and Ukraine
· Currently, the Group retains a material proportion of its cash
outside Ukraine, which enhances the Group's ability to navigate the current
risk environment for the foreseeable future, and provides a material buffer to
any further disruptions to the Group's operations
· The Group's limited development programme for the remainder of
2026 and 2027 is expected to be funded from existing cash resources and
operational cash flow
Oleksiy Zayets, CEO, commented: "The regulatory actions of the Ukrainian
authorities resulting in the suspensions of our MEX-GOL, SV and VAS production
licences, coupled with the challenges of the ongoing war in Ukraine, meant
that 2025 was a difficult year for us. Nevertheless, we were able to progress
some development work at our SC exploration licence area, and we hope to
establish some limited production from that licence later in the year. The
lack of progress towards a resolution of the regulatory situation is
frustrating, and has meant that we have been obliged to take necessary steps
to protect our business and assets, including through arbitration proceedings
under the bilateral investment treaty between the United Kingdom and Ukraine."
The Annual Report and Financial Statements for 2025, together with the Notice
of Annual General Meeting, will be posted to shareholders and published on the
Company's website by 22 May 2026.
For further information, please contact:
Enwell Energy plc Tel: 020 3427 3550
Chuck Valceschini, Chairman
Oleksiy Zayets, Chief Executive Officer
Bruce Burrows, Finance Director
Strand Hanson Limited Tel: 020 7409 3494
Rory Murphy / Matthew Chandler
Zeus Capital Limited Tel: 020 7614 5900
Alex Slater (Corporate Finance)
Simon Johnson (Corporate Broking)
BlytheRay Tel: 020 7138 3204
Tim Blythe / Matthew Bowld
This announcement contains inside information for the purposes of Article 7 of
EU Regulation No. 596/2014, which forms part of United Kingdom domestic law by
virtue of the European Union (Withdrawal) Act 2018, as amended by virtue of
the Market Abuse (Amendment) (EU Exit) Regulations 2019.
Dr Gehrig Schultz, BSc Geophysical Engineering, PhD Geophysics, Member of the
European Association of Geophysical Engineers, Member of the Executive
Coordinating Committee of the Continental European Energy Council, and a
Non-Executive Director of the Company, has reviewed and approved the technical
information contained within this announcement in his capacity as a qualified
person, as required under the AIM Rules for Companies.
Glossary
AAPG American Association of Petroleum Geologists
Arkona LLC Arkona Gas-Energy
bbl barrel
bbl/d barrels per day
Bm(3) thousands of millions of cubic metres
boe barrels of oil equivalent
boepd barrels of oil equivalent per day
Bscf thousands of millions of scf
Company Enwell Energy plc
D&M DeGolyer and MacNaughton
€ Euro
Group Enwell Energy plc and its subsidiaries
km kilometre
km(2) square kilometres
LPG liquefied petroleum gas
MEX-GOL Mekhediviska-Golotvshinska
m(3) cubic metres
m³/d cubic metres per day
Mboe thousand barrels of oil equivalent
Mm³ thousand cubic metres
MMbbl million barrels
MMboe million barrels of oil equivalent
MMm(3) million cubic metres
MMscf million scf
MMscf/d million scf per day
Mtonnes thousand tonnes
% per cent.
QCA Code Quoted Companies Alliance Corporate Governance Code 2023
QHSE quality, health, safety and environment
SC Svystunivsko-Chervonolutskyi
scf standard cubic feet measured at 20 degrees Celsius and one atmosphere
SPE Society of Petroleum Engineers
SPEE Society of Petroleum Evaluation Engineers
SV Svyrydivske
Tscf trillion scf
$ United States Dollar
UAH Ukrainian Hryvnia
VAS Vasyschevskoye
VED Vvdenska
WPC World Petroleum Council
Chairman's Statement
The 2025 Annual Report and Financial Statements reflect a very challenging
period in the Group's business in Ukraine, driven primarily by the regulatory
actions of the Ukrainian Government authorities that led to the suspension of
the Group's production licences. Furthermore, the ongoing war in Ukraine
presents a difficult operating environment and worrying outlook, and I am
greatly saddened by these terrible events.
The war has had, and continues to have, a significant impact on all aspects of
life in Ukraine. The overall scale and duration of disruption to the Group's
business and operations continues to be difficult to predict, and there
remains significant uncertainty about the outcome of the war.
In November 2024, the MEX-GOL, SV and VAS production licences were suspended
by the Ukrainian authorities. The Group commenced legal proceedings to
challenge these suspensions, which resulted in interim rulings to temporarily
lift such suspensions, but unfortunately, the interim rulings in respect of
the MEX-GOL and SV licences were overturned in January 2025, and in respect of
the VAS licence in February 2025. Consequently, all operational activity is
currently suspended at these licences.
As a result of a lack of progress in resolving the issues relating to the
licence suspensions with the relevant Ukrainian authorities, in August 2025,
the Group commenced arbitration proceedings against Ukraine under the
Agreement Between the Government of the United Kingdom of Great Britain and
Northern Ireland and the Government of Ukraine for the Promotion and
Reciprocal Protection of Investments (the "Treaty"). The Treaty is an
international treaty designed to protect the rights of investors from the
United Kingdom or Ukraine who make investments in the other country. Within
the arbitration proceedings, the Company is claiming monetary damages for the
loss and damage it has suffered as a result of Ukraine's actions, as well as
the reinstatement of the MEX-GOL, SV and VAS production licences for the
remainder of their respective terms, and its costs.
In December 2025, the gas processing facilities at the VAS field were hit and
damaged by Russian military drones. As the facilities had been mothballed
since the reinstatement of the suspension of the VAS licence in February 2025,
there were only security staff on site, and most fortunately, there were no
casualties. A general assessment of the damage has been undertaken, power has
been restored, and site premises have been repaired. A more detailed
assessment of the damage to equipment will be undertaken to enable the
preparation of a detailed plan for the restoration of the facilities.
Notwithstanding the war and the Ukrainian authorities' regulatory actions,
during 2025, the Group continued with planning the development of the SC
exploration licence area. This included planning for the drilling of the SC-5
exploration well and for the installation of new gas processing facilities and
other surface infrastructure, as well as assessing the feasibility of an
alternative option of a connection to existing gas processing facilities.
Additionally, temporary gathering, separation and compression equipment is
being installed at the SC-4 well site, which will enable gas and condensate
from this well to be separated, the gas compressed at site, and then trucked
to the Group's gas processing facilities at its MEX-GOL and SV fields for
treatment and sale.
Aggregate average daily production (calculated for the days when the fields
were actually on production) from the MEX-GOL, SV and VAS fields during the
year was 1,865 boepd, which is lower than the aggregate daily production rate
of 2,288 boepd achieved during 2024 due to the disruption caused by the war,
natural field decline and the various suspensions of the MEX-GOL, SV and VAS
field operations during the year. The aggregate production volumes for the
year were 48,962 boe, which is lower than the aggregate production volumes of
722,753 boe in 2024 for the same reasons.
The suspension of the MEX-GOL, SV and VAS fields meant that production volumes
were significantly lower during the year, with the result that revenues were
much lower at $3.3 million (2024: $44.9 million). The Group made a net loss of
$4.5 million (2024: $23.7 million net profit), and an operating loss of $1.5
million (2024: $29.1 million profit). Despite this, the Group still generated
a small net cash inflow from operating activities of $0.1 million (2024: $34.6
million) enabled by the $9.2 million interest received from the Group's cash
resources.
Development activity was significantly impacted by the high level of risk and
regulatory issues faced by the Group in Ukraine.
There is significant disruption to the fiscal and economic environment in
Ukraine due to the ongoing war, but during the year, the economy grew, the
inflation rate decreased, and the Ukrainian Hryvnia remained stable against
other currencies. Nevertheless, it is likely that fiscal and economic
uncertainties will continue until the hostilities cease.
In recent years, the Ukrainian Government implemented a number of reforms in
the oil and gas sector, which include the deregulation of the gas supply
market and simplification of the regulatory procedures applicable to oil and
gas exploration and production activities in Ukraine. The deregulation of the
gas supply market, supported by electronic gas trading platforms, has improved
pricing transparency in Ukraine.
During 2025, Ukrainian gas prices strengthened as the Ukrainian gas market
adapted to the prevailing demand and supply conditions. However, condensate
and oil prices were lower by comparison to the previous year, and there was no
LPG production due to a delay in the issue of an LPG production licence.
Restructuring of Smart Holding Group
In January 2023, the Company was notified that there had been a restructuring
of the ownership of the PJSC Smart-Holding Group, a member of which held a
major shareholding in the Company, and which was ultimately controlled by Mr
Vadym Novynskyi ("Mr Novynskyi"). Under this restructuring, which occurred
with effect from 1 December 2022, Mr Novynskyi disposed of his major indirect
shareholding interest in the Company to two trusts registered in Cyprus named
the SMART Trust and the STEP Trust (the "Trusts"). Further information is
contained in the Company's announcement dated 17 January 2023, and the TR-1
Forms published on 26 January 2023, 31 July 2023, 20 March 2024 and 29
September 2025.
Regulatory Actions by Ukrainian Authorities and Suspensions of Licences
In early December 2022, the Ukrainian Government imposed sanctions on Mr
Novynskyi, as set out in the Company's announcement dated 9 December 2022.
As announced on 4 January 2023, new legislation, Law No. 2805-IX, relating to
the natural resources sector, was enacted in Ukraine, which came into force on
28 March 2023. This legislation was a substantial package of new procedures
and reforms designed to improve the regulatory process relating to the
exploration and development of natural resources in Ukraine. However, the
legislation included provisions that if the ultimate beneficial owner of a
mineral or hydrocarbon licence becomes the subject of sanctions in Ukraine,
then the State Geologic and Subsoil Survey of Ukraine (the "SGSS") may suspend
or revoke that licence.
Following Law No. 2805-IX coming into force on 28 March 2023, the Ukrainian
authorities have taken a series of regulatory actions against a number of the
Group's subsidiary companies in Ukraine.
As announced on 12 April 2023, such regulatory actions included conducting a
search at the Group's Yakhnyky office, from where the MEX-GOL and SV fields
are operated, and placing certain physical assets of the Ukrainian branch
(representative) office of Regal Petroleum Corporation Limited ("RPC") and LLC
Arkona Gas-Energy ("Arkona") (which respectively hold the MEX-GOL and SV
fields and the SC exploration licence) under seizure, thereby restricting any
actions that would change registration of the property rights relating to such
assets, although the use of such assets was not restricted and therefore the
Company was able to continue to operate the fields. In addition, the Ministry
of Justice of Ukraine (the "MoJ") made an order cancelling the registration
entry made on behalf of a subsidiary of the Company named LLC Regal Petroleum
Corporation (Ukraine) Limited in the Unified State Register of Legal Entities,
Individuals-entrepreneurs and Civil Institutions of Ukraine (the "State
Register") relating to the ultimate beneficial owners of such company, which
were stated as being the trustees (the "Trustees") of the Trusts as previously
notified to the Company, thereby restoring the previous entry in the State
Register, Mr Novynskyi.
On 2 May 2023, the MoJ made further orders cancelling the registration entry
made on behalf of three further Ukrainian subsidiaries of the Company named
LLC Prom-Enerho Produkt ("PEP"), Arkona and LLC Well Investum ("Well
Investum") respectively in the State Register relating to the ultimate
beneficial owners of such companies, which again were stated as being the
Trustees of the Trusts, thereby restoring the previous entry, Mr Novynskyi.
PEP holds the VAS production licence, Arkona holds the SC exploration licence,
and Well Investum is a dormant company.
Following the issuance of the abovementioned orders by the MoJ, Mr Novynskyi
was registered in the State Register as the ultimate beneficial owner of each
of PEP and Arkona, and was consequently recognised by the SGSS as the ultimate
beneficial owner of each of the VAS production licence and SC exploration
licence. As a result, on 4 May 2023, the SGSS issued orders suspending the VAS
production licence and SC exploration licence for a period of five years,
effective from that date.
However, on 26 June 2024, the SGSS issued orders to renew the validity of each
of the VAS production licence and SC exploration licence, thereby cancelling
the suspensions of those licences, and enabling the resumption of operational
activities at those licences. Further information is contained in the
Company's announcement dated 27 June 2024.
In September 2024, new legislation came into force, which requires that
branches (or representative offices) of foreign companies operating in Ukraine
register their ultimate beneficial owners in the State Register. RPC, which
holds the MEX-GOL and SV licences, operates such a branch and therefore
registered the Trustees of the Trusts as its ultimate beneficial owners in the
State Register, based on the notifications made by the Trustees to the Company
and published to the market on 26 January 2023, 31 July 2023 and 20 March
2024.
On 8 October 2024, the Ukrainian Government imposed sanctions on the Trustees,
as set out in the Company's announcement dated 11 October 2024.
On 15 November 2024, the SGSS issued orders to suspend the MEX-GOL, SV and VAS
production licences for a period of ten years, effective from 8 October 2024
pursuant to Law No. 2805-IX, based on the sanctions imposed on the Trustees of
the Trusts. Further information is contained in the Company's announcement
dated 18 November 2024.
Following receipt of the suspension orders, the Company issued legal
proceedings in the Poltava District Administrative Court in Ukraine to
challenge such orders, and within such proceedings, the Company obtained
interim rulings (the "Interim Rulings") to lift the suspensions of the
MEX-GOL, SV and VAS production licences pending determination of the
substantive issues in the legal proceedings, as set out in the Company's
announcement dated 26 November 2024. However, the SGSS appealed against the
Interim Rulings in the Second Appeal Administrative Court in Ukraine, and by a
decision dated 22 January 2025, the appeal against the Interim Ruling relating
to the MEX-GOL and SV licences was allowed, and by a decision dated 27
February 2025, the appeal against the Interim Ruling relating to the VAS
licence was also allowed. As a result, the respective suspension orders in
respect of the MEX-GOL, SV and VAS licences were reinstated, and the Company
ceased all field operations on those licences immediately following the
respective appeal decisions.
In light of these circumstances, as announced on 27 August 2025, the Group
commenced arbitration proceedings against Ukraine under the Treaty and in
accordance with the Convention on Settlement of Investment Disputes between
States and Nationals of Other States (the "ICSID Convention"). The arbitration
proceedings were registered in the International Centre for Settlement of
Investment Disputes ("ICSID"), and within such proceedings, the Company is
claiming monetary damages for the loss and damage it has suffered as a result
of Ukraine's actions, as well as the reinstatement of the MEX-GOL, SV and VAS
production licences for the remainder of their respective terms, and its
costs.
Board and Management Changes
In January 2025, Igor Basai stepped down as a Non-Executive Director and
Oleksandr Blyzniuk was appointed as a Non-Executive Director.
Outlook
The ongoing war creates a devastating humanitarian situation in Ukraine, as
well as extreme challenges to its social, fiscal, economic and business
environment. This has been exacerbated in respect of the Group by the
regulatory actions of the Ukrainian authorities, culminating in the suspension
of the MEX-GOL, SV and VAS production licences.
Under these circumstances, it is extremely difficult to plan future investment
and operational activities at the Group's fields. However, subject to
resolution of the current regulatory issues with the Ukrainian authorities,
and it being safe to do so, the Group is planning to undertake further limited
development activities during the remainder of 2026 and beyond in order to
continue the development of its fields. In doing so, the Group is taking and
will take all measures available to protect and safeguard its personnel and
business, with the safety and wellbeing of its personnel and contractors being
paramount. The Group retains a material proportion of its cash reserves
outside Ukraine, and this provides a material buffer to any further
disruptions to the Group's operations. This has enabled the Board to reach the
opinion that the Group has sufficient resources to navigate the current risk
environment for the foreseeable future.
In conclusion, on behalf of the Board, I would like to thank all of our staff
for their continued dedication and efforts during 2025, especially their
remarkable courage and fortitude during the ongoing hostilities in Ukraine. I
would also like to thank our shareholders for their perseverance during this
challenging period for the Group.
Chuck Valceschini
Chairman
Chief Executive Officer's Statement
Introduction
The ongoing war in Ukraine, as well as adverse regulatory actions by the
Ukrainian authorities, have materially disrupted the Group's development
activity at its Ukrainian fields during 2025, with the continued suspensions
of the MEX-GOL, SV and VAS licences preventing production operations for most
of the year. There are currently no production operations at these fields.
At the SC exploration licence, development planning continued, which included
planning for the drilling of a new exploration well and installation of new
gas processing facilities and other surface infrastructure, as well as
assessing the feasibility of an alternative option to connect to existing gas
processing facilities. In addition, temporary gathering, separation and
compression equipment is being installed at the SC-4 well site, which will
enable gas and condensate from this well to be separated, the gas compressed
at site, and then trucked to the Group's gas processing facilities at its
MEX-GOL and SV fields for treatment and sale.
Overall production in 2025 was lower than in 2024 due to the disruption to
production operations caused by the war in Ukraine, natural field decline and,
most significantly, the suspensions of the MEX-GOL, SV and VAS production
licences for most of the year.
Quality, Health, Safety and Environment ("QHSE")
The Group is committed to maintaining the highest QHSE standards and the
effective management of these areas is an intrinsic element of its overall
business ethos. The Group's QHSE policies and performance are overseen by the
Health, Safety and Environment Committee. Through strict enforcement of the
Group's QHSE policies, together with regular management meetings, training and
the appointment of dedicated safety professionals, the Group strives to ensure
that the impact of its business activities on its staff, contractors and the
environment is as low as is reasonably practicable. The Group reports safety
and environmental performance in accordance with industry practice and
guidelines.
I am greatly saddened to report that, while on secondment outside the Group,
one of our operational team members, Oleksandr Lysenko, was fatally injured in
a Russian missile and drone attack, and I express our heartfelt condolences to
Oleksandr's family.
Within the Group's operations, I can report that no Lost Time Incidents were
recorded in 2025, with a total of 357,945 safe man-hours worked during the
year. Cumulatively, the number of man-hours worked since the last Lost Time
Incident is now in excess of 5.8 million man-hours. No environmental incidents
were recorded during the year.
Production
The average daily production of gas, condensate and oil for the 23 days that
the MEX-GOL and SV fields were producing (356 days in 2024) and the 58 days
that the VAS field was producing (143 days in 2024), over the 2025 year, is
shown below:
Field Gas Condensate* LPG** Aggregate
(MMscf/d) (bbl/d) (boe/d) boepd
2025 2024 2025 2024 2025 2024 2025 2024
7.0 8.3 449 480 - 194 1,692 2,146
MEX-GOL & SV
0.9 0.7 6 6 - - 173 142
VAS
7.9 9.0 455 486 - 194 1,865 2,288
Total
* Condensate includes light oil from well MEX-102 which commenced production
in late October 2024
** There was no LPG production in 2025 due to a delay in the renewal of the
Group's LPG production licence
As a result of the continued operational disruptions caused by the war,
deferment of development work and, most significantly, regulatory actions by
the Ukrainian authorities, the Group's average daily production rate in 2025
declined. During the year, the regulatory actions resulted in the suspensions
of the MEX-GOL and SV licences from 22 January 2025 and the VAS licence from
27 February 2025, with, in each case, such suspensions currently continuing.
Accordingly, there is currently no production from these fields.
Aggregate production volumes for the year were 48,962 boe, which is lower than
the aggregate production volumes of 722,753 boe in 2024 for the reasons set
out above.
Operations
The war in Ukraine has significantly affected fiscal and economic stability in
Ukraine, and the oil and gas sector in country has been particularly affected
by interruptions to power supplies, the unavailability of oil field equipment
and services and disruptions to the markets, including weaker demand, for the
sale of gas, condensate, oil and LPG. These disruptions impacted the Group's
realised hydrocarbon prices in Ukraine, in turn impacting the Group's revenues
and profitability during the year.
During 2025, the Group continued to refine its geological subsurface models of
the MEX-GOL, SV and VAS fields, as well as the SC licence area, in order to
enhance its strategy for the further development of such fields and licence
area, including the timing and level of future capital investment required to
exploit the hydrocarbon resources therein.
At the MEX-GOL and SV fields, limited operational activities were undertaken
in the period up to the reinstatement of the suspensions of these licences on
22 January 2025, after which all operational activities were suspended. At
these fields, until the reinstatement of the suspensions, the Group continued
to operate each of the SV-2 and SV-12 wells under joint venture agreements
with PJSC Ukrnafta, the majority State-owned oil and gas producer. Under the
agreements, the gas and condensate produced from the respective wells is sold
under an equal net profit sharing arrangement between the Group and PJSC
Ukrnafta, with the Group accounting for the hydrocarbons produced and sold
from the wells as revenue, and the net profit share due to PJSC Ukrnafta being
treated as a lease expense in cost of sales. However, following the SV-2 well
experiencing water ingress, a workover of this well was undertaken to replace
the production string and remove obstructions in the well, but this work was
unsuccessful and further remedial work is not being considered at the present
time.
At the VAS field, production operations were undertaken in the period up to
the reinstatement of the suspension of this licence on 27 February 2025, after
which all operational activities were suspended. In December 2025, the gas
processing facilities at the field were hit by several Russian military
drones, which resulted in damage to the facilities. As the facilities had not
been operational since the reinstatement of the licence suspension, there were
only security staff on site, and most fortunately, there were no casualties. A
general assessment of the damage has been undertaken, mains power has been
restored and repairs have been made to site equipment and premises. In light
of the risks at site, critical and high-value equipment has been moved
elsewhere for further inspection and repair work. A more detailed assessment
of damage to other equipment is to be undertaken shortly to enable the
preparation of a detailed plan for the restoration of the facilities.
At the SC exploration licence area, development planning continued, and this
included planning for the drilling of the SC-5 exploration well, and
installation of new gas processing facilities and other surface infrastructure
as well as assessing the feasibility of an alternative option to connect to
existing gas processing facilities. Additionally, temporary gathering,
separation and compression equipment is being installed at the SC-4 well site,
which will enable gas and condensate from this well to be separated, the gas
compressed at site, and then trucked to the Group's gas processing facilities
at the MEX-GOL and SV fields for treatment and sale. The SC-4 well was
completed in October 2022 but production from the well cannot commence until
gas processing facilities are installed.
Outlook
The ongoing war in Ukraine has caused significant disruption to the country as
a whole and to the Group's business activities, and until there is a
resolution to the war, the disruption and uncertainty are likely to continue.
Subject to resolution of the current regulatory issues with the Ukrainian
authorities and it being safe to do so, during the remainder of 2026 and 2027
the Group plans to continue the development of its fields to the extent it is
possible to do so.
However, such work at the MEX-GOL, SV and VAS fields will remain suspended
until there is a resolution of the regulatory issues, including the lifting of
the suspension orders made in respect of those licences.
At the SC licence area, the work on development plans for the licence area
will continue, along with installation of the temporary production equipment.
Finally, I would like to add my thanks to all of our staff for the continued
hard work and dedication they have shown over the course of 2025, and to
especially recognise their continuing efforts and professionalism in the face
of the extremely challenging current situation in Ukraine. I would also like
to express my appreciation to our shareholders for their continued support
throughout this challenging period.
Oleksiy Zayets
Chief Executive Officer
Overview of Assets
Our assets comprise four fields in the Dnieper-Donets basin in north-eastern
Ukraine. Our fields have high potential for growth and longevity for future
production - a strong foundation for success.
MEX-GOL and SV fields
The MEX-GOL and SV fields are held under two adjacent production licences, but
are operated as one integrated asset, and have significant gas and condensate
reserves and potential resources of unconventional gas.
Production Licences
We hold a 100% working interest in, and are the operator of, the MEX-GOL and
SV fields. The production licences for the fields were granted to the Group in
July 2004 with an initial duration of 20 years, and the duration of these
licences have been extended to 2044 in order to fully develop the remaining
reserves. The economic life of these fields extend to 2038 and 2042
respectively pursuant to the most recent reserves and resources assessment by
DeGolyer and MacNaughton ("D&M") as at 31 December 2017.
The two licences, located in Ukraine's Poltava region, are adjacent and extend
over a combined area of 253 km², approximately 200 km east of Kyiv.
Geology
Geologically, the fields are located towards the middle of the Dnieper-Donets
sedimentary basin which extends across the major part of north-eastern
Ukraine. The vast majority of Ukrainian gas and condensate production comes
from this basin. The reservoirs comprise a series of gently dipping
Carboniferous sandstones of Visean age inter-bedded with shales at around
4,700 metres below the surface, with a gross thickness of between 800 and
1,000 metres.
Analysis suggests that the origin of these deposits ranges from fluvial to
deltaic, and much of the trapping at these fields is stratigraphic. Below
these reservoirs is a thick sequence of shale above deeper, similar,
sandstones at a depth of around 5,800 metres. These sands are of Tournasian
age and offer additional gas potential. Deeper sandstones of Devonian age have
also been penetrated in the fields.
Reserves
The development of the fields began in 1995 by the Ukrainian State company
Chernihivnaftogasgeologiya ("CNGG"), and shortly after this time, the Group
entered a joint venture with CNGG in respect of the exploration and
development of these fields.
The fields have been mapped with 3D seismic, and a geological subsurface model
has been developed and refined using data derived from high-level reprocessing
of such 3D seismic and new wells drilled on the fields.
The assessment undertaken by D&M as at 31 December 2017 estimated proved
plus probable (2P) reserves attributable to the fields of 50.0 MMboe, with 3C
contingent resources of 25.3 MMboe.
VAS field
The VAS field is a smaller field with interesting potential. The field has
assessed proved plus probable reserves in excess of 3 MMboe and substantial
contingent and prospective resources, as well as potential resources of
unconventional gas.
Production Licence
We hold a 100% working interest in, and are the operator of, the VAS field.
The production licence for the field was granted in August 2012 with a
duration of 20 years. The economic life of the field extends to 2032 pursuant
to the most recent reserves and resources assessment by D&M as at 31
December 2018.
The licence extends over an area of 33.2 km² and is located 17 km south-east
of Kharkiv, in the Kharkiv region of Ukraine. The field was discovered in
1981, and the first well on the licence area was drilled in 2004.
Geology
Geologically, the field is located towards the middle of the Dnieper-Donets
sedimentary basin in north-east Ukraine. The field is trapped in an anticlinal
structure broken into several faulted blocks, which are gently dipping to the
north, stretching from the north-east to south-west along a main bounding
fault. The gas is located in Carboniferous sandstones of Bashkirian,
Serpukhovian and Visean age.
The productive reservoirs are at depths between 3,370 and 3,700 metres.
Reserves
The field has been mapped with 3D seismic, and a geological subsurface model
has been developed and refined using data derived from such 3D seismic and new
wells drilled on the field.
The assessment undertaken by D&M as at 31 December 2018 estimated proved
plus probable (2P) reserves of 3.1 MMboe, with 3C contingent resources of 0.6
MMboe, and prospective resources of 7.7 MMboe in the VED area of the field.
The next well planned on the field is designed to explore the VED area of the
field.
SC Licence
The SC licence area is located near to and has similar characteristics to the
SV field, and is prospective for gas and condensate.
Exploration Licence
We hold a 100% working interest in, and are the operator of, the SC licence.
The licence was granted in May 2017 with a duration of 20 years.
The licence extends over an area of 97 km(2), and is located in the Poltava
region in north-eastern Ukraine, approximately 15 km east of the SV field.
Geology
Geologically, the field is located towards the middle of the Dnieper-Donets
sedimentary basin which extends across the major part of north-eastern
Ukraine. The vast majority of Ukrainian gas and condensate production comes
from this basin. The reservoirs comprise a series of gently dipping
Carboniferous sandstones of Visean age inter-bedded with shales at depth
between 4,600 and 6,000 metres.
Resources
The licence is prospective for gas and condensate, and has been the subject of
exploration since the 1980s, with five wells having been drilled on the
licence since then, although none of these wells are currently on
production.
The assessment undertaken by D&M as at 1 January 2021 estimated proved
plus probable (2P) reserves of 12.1 MMboe, with 3C contingent resources of
15.0 MMboe.
Overview of Reserves
1. MEX-GOL and SV fields
The Group's estimates of the remaining Reserves and Resources at the MEX-GOL
and SV fields are derived from an assessment undertaken by D&M, as at 31
December 2017 (the "MEX-GOL-SV Report"), which was announced on 31 July 2018.
During the period from 1 January 2018 to 31 December 2025, the Group has
produced 7.73 MMboe from these fields.
The MEX-GOL-SV Report estimated the remaining Reserves as at 31 December 2017
in the MEX-GOL and SV fields as follows:
Proved Proved + Probable Proved + Probable + Possible (3P)
(1P) (2P)
121.9 Bscf / 3.5 Bm(3) 218.3 Bscf / 6.2 Bm(3) 256.5 Bscf / 7.3 Bm(3)
Gas
4.3 MMbbl / 514 Mtonne 7.9 MMbbl / 943 Mtonne 9.2 MMbbl / 1,098 Mtonne
Condensate
2.8 MMbbl / 233 Mtonne 5.0 MMbbl / 418 Mtonne 5.8 MMbbl / 491 Mtonne
LPG
27.8 MMboe 50.0 MMboe 58.6 MMboe
Total
The MEX-GOL-SV Report estimated the Contingent Resources as at 31 December
2017 in the MEX-GOL and SV fields as follows:
Contingent Resources (1C) Contingent Resources (2C) Contingent Resources (3C)
14.7 Bscf / 0.42 Bm(3) 38.3 Bscf / 1.08 Bm(3) 105.9 Bscf / 3.00 Bm(3)
Gas
1.17 MMbbl / 144 Mtonne 2.8 MMbbl / 343 Mtonne 6.6 MMbbl / 812 Mtonne
Condensate
3.8 MMboe 9.6 MMboe 25.3 MMboe
Total
2. VAS field
The Group's estimates of the remaining Reserves and Resources at the VAS field
and the Prospective Resources at the VED prospect are derived from an
assessment undertaken by D&M as at 31 December 2018 (the "VAS Report"),
which was announced on 21 August 2019. During the period from 1 January 2019
to 31 December 2025, 0.83 MMboe were produced from the field.
The VAS Report estimated the remaining Reserves as at 31 December 2018 in the
VAS field as follows:
Proved Proved + Probable Proved + Probable + Possible (3P)
(1P) (2P)
9,114 MMscf / 258 MMm(3) 15,098 MMscf / 427 MMm(3) 18,816 MMscf / 533 MMm(3)
Gas
205 Mbbl / 25 Mtonne 346 Mbbl / 42 Mtonne 401 Mbbl / 48 Mtonne
Condensate
1.895 MMboe 3.145 MMboe 3.890 MMboe
Total
The VAS Report estimated the Contingent Resources as at 31 December 2018 in
the VAS field as follows:
Contingent Resources (1C) Contingent Resources (2C) Contingent Resources (3C)
- - 2,912 MMscf / 83 MMm(3)
Gas
- - 74 Mbbl / 9 Mtonne
Condensate
The VAS Report estimated the Prospective Resources as at 31 December 2018 in
the VED prospect as follows:
Low (1U) Best (2U) High (3U) Mean
23,721 MMscf / 672 MMm(3) 38,079 MMscf / 1,078 MMm(3) 62,293 MMscf / 1,764 MMm(3) 41,291 MMscf / 1,169 MMm(3)
Gas
3. SC Licence
The Group's estimates of the remaining Reserves and Contingent Resources at
the SC Licence are derived from an assessment undertaken by D&M as at 1
January 2021 (the "SC Report"), which was announced on 2 June 2021.
The SC Report estimated the remaining Reserves as at 1 January 2021 in the SC
licence area as follows:
Proved Proved + Probable Proved + Probable + Possible (3P)
(1P) (2P)
17.20 Bscf / 0.49 Bm(3) 65.16 Bscf / 1.85 Bm(3) 85.03 Bscf / 2.41 Bm(3)
Gas
145 Mbbl / 16 Mtonne 548 Mbbl / 61 Mtonne 716 Mbbl / 80 Mtonne
Condensate
3.2 MMboe 12.1 MMboe 15.7 MMboe
Total
The SC Report estimated the Contingent Resources as at 1 January 2021 in the
SC licence area as follows:
Contingent Resources (1C) Contingent Resources (2C) Contingent Resources (3C)
8.56 Bscf / 0.24 Bm(3) 14.18 Bscf / 0.40 Bm(3) 81.16 Bscf / 2.30 Bm(3)
Gas
72 Mbbl / 8 Mtonne 119 Mbbl / 13 Mtonne 682 Mbbl / 75 Mtonne
Condensate
1.6 MMboe 2.6 MMboe 15.0 MMboe
Total
Finance Review
The periods of suspension of its production licences and the resultant
significantly reduced production and sales volumes for much of 2025 resulted
in the Group making a net loss for the year of $4.5 million (2024: $23.7
million net profit).
Revenue for the year, derived from the sale of the Group's Ukrainian gas,
condensate and oil production, was down 92% at $3.3 million (2024: $44.9
million), primarily as a result of much lower production rates due to the
licence suspensions.
Aggregate production volumes for the year were 48,962 boe, which is 93% lower
than the aggregate production volumes of 722,753 boe in 2024, primarily due to
the suspension of the MEX-GOL, SV and VAS licences, as well as the disruption
to operations and ongoing reduced levels of field development as a result of
the war in Ukraine and natural field decline. Aggregate average daily
production for the year was down approximately 18% at 1,865 boepd (2024: 2,288
boepd), in each case calculated on the days when the Group's fields were
actually in production, for the same reasons.
During the year, while there was less volatility in global, and particularly
European, gas prices, the war in Ukraine continued to disrupt the Ukrainian
gas market. Nevertheless, there was an improvement in realised gas sales
prices, resulting in a 19% increase in average gas price realisations in the
period at $377/Mm(3) (UAH15,836/Mm(3)). Average sales prices for condensate
declined by 38% to $63/bbl. Following the successful workover of the MEX-102
well, oil production commenced during October 2024 with average realised oil
prices of $64/bbl. There were no LPG sales in the year due to a delay in the
renewal of the Group's LPG production licence. Since 1 March 2025, there have
been no hydrocarbons sales as a result of the suspension of the MEX-GOL, SV
and VAS production licences.
Gross profit for the year was also lower at $1.2 million (2024: $28.2 million)
due to the much lower production rates caused by the licence suspensions. Cash
generated from operations was negative at $7.7 million (2024: positive $33.0
million) for similar reasons.
Nevertheless, representing a major achievement in the circumstances, the Group
made a slightly positive net cash inflow from operating activities of $0.08
million (2024: $34.56 million).
Cost of sales for the year was also proportionately lower at $2.2 million
(2024: $16.7 million), with the significant decline in production resulting in
a decline in depreciation as well as reducing the revenue-related costs of
taxes and well rental.
The subsoil tax rates applicable to gas production were stable during the year
as follows:
(i) when gas prices are up to $150/Mm(3), the rate for wells
drilled prior to 1 January 2018 ("old wells") is 14.5% for gas produced from
deposits at depths shallower than 5,000 metres and 7% for gas produced from
deposits deeper than 5,000 metres, and for wells drilled after 1 January 2018
("new wells") is 6% for gas produced from deposits at depths shallower than
5,000 metres and 3% for gas produced from deposits deeper than 5,000 metres;
(ii) when gas prices are between $150/Mm(3) and $400/Mm(3),
the rate for old wells is 29% for gas produced from deposits at depths
shallower than 5,000 metres and 14% for gas produced from deposits deeper than
5,000 metres, and for new wells is 12% for gas produced from deposits at
depths shallower than 5,000 metres and 6% for gas produced from deposits
deeper than 5,000 metres;
(iii) when gas prices are more than $400/Mm(3), for the first
$400/Mm(3), the rate for old wells is 29% for gas produced from deposits at
depths shallower than 5,000 metres and 14% for gas produced from deposits
deeper than 5,000 metres, and for new wells is 12% for gas produced from
deposits at depths shallower than 5,000 metres and 6% for gas produced from
deposits deeper than 5,000 metres, and for the difference between $400/Mm(3)
and the actual price, the rate for old wells is 65% for gas produced from
deposits at depths shallower than 5,000 metres and 31% for gas produced from
deposits deeper than 5,000 metres, and for new wells is 36% for gas produced
from deposits at depths shallower than 5,000 metres and 18% for gas produced
from deposits deeper than 5,000 metres.
The subsoil tax rates applicable to condensate and oil production were 31% for
condensate and oil produced from deposits shallower than 5,000 metres and 16%
for condensate and oil produced from deposits deeper than 5,000 metres, for
both old and new wells.
As a direct result of the war in Ukraine, including the significant decline in
domestic consumption disrupting the previous supply, demand and pricing
dynamics, there was a divergence between domestic and European gas pricing,
and accordingly, the methodology (linked to European prices) used to determine
the reference gas price for the subsoil tax rates had a significantly
detrimental effect for domestic gas producers. In order to address this issue,
legislation was implemented in August 2022 which modified such methodology to
ensure that it operates as originally intended (with such reference price
being aligned with domestic prices).
Administrative expenses for the year were higher at $7.5 million (2024: $6.2
million) due to increased legal costs.
The tax charge for the year was lower at $2.0 million (2024: $6.7 million),
and comprised a current tax charge of $0.6 million (2024: $5.5 million) and a
deferred tax charge of $1.4 million (2024: $1.2 million).
A deferred tax asset relating to the Group's provision for decommissioning as
at 31 December 2025 of $0.7 million (2024: $0.6 million) was recognised on the
tax effect of the temporary differences of the Group's provision for
decommissioning at the MEX-GOL and SV fields, and its tax base. A deferred tax
liability relating to the Group's development and production assets at the
MEX-GOL and SV fields as at 31 December 2025 of $7.9 million (2024: $6.4
million) was recognised on the tax effect of the temporary differences between
the carrying value of the Group's development and production asset at the
MEX-GOL and SV fields, and its tax base.
A deferred tax asset relating to the Group's provision for decommissioning as
at 31 December 2025 of $0.2 million (2024: $0.4 million) was recognised on the
tax effect of the temporary differences on the Group's provision on
decommissioning at the VAS field, and its tax base. A deferred tax asset
relating to the Group's development and production assets at the VAS field as
at 31 December 2025 of $0.2 million (2024: $0.1 million) was recognised on the
tax effect of the temporary differences between the carrying value of the
Group's development and production asset at the VAS field, and its tax base.
Capital investment of $0.7 million reflects the greatly reduced investment in
the Group's oil and gas development and production assets during the year
(2024: $3.2 million). The low level of capital investment in the year is a
function of the deferral of certain aspects of the Group's development plans
necessitated by the ongoing war in Ukraine and the suspensions of the MEX-GOL,
SV and VAS licences.
A review of any indicators of impairment in the carrying value of the Group's
assets was undertaken at the year end and this review concluded that the
suspension of the MEX-GOL, SV and VAS production licences had resulted in such
an indicator. Impairment reviews were therefore conducted on the carrying
value of the Group's assets but did not result in the recognition of any
further impairment loss (2024: $nil).
Cash and cash equivalents held as at 31 December 2025 were slightly lower at
$97.1 million (2024: $99.4 million). The Group's cash and cash equivalents
balance as at 8 May 2026 was $92.0 million, held as to $77.9 million
equivalent in Ukrainian Hryvnia and the balance of $14.1 million equivalent
predominantly in US Dollars, Euros and Pounds Sterling.
During 2025, the Ukrainian Hryvnia was steady against the US Dollar, at
UAH42.0/$1.00 on 31 December 2024 and UAH42.4/$1.00 on 31 December 2025. The
impact of this was $1.3 million of foreign exchange loss (2024: $14.5 million
of foreign exchange loss). Increases and decreases in the value of the
Ukrainian Hryvnia against the US Dollar affect the carrying value of the
Group's assets. The official exchange rate of the Ukrainian Hryvnia to the US
Dollar on 8 May 2026 was UAH43.8/$1.00.
Cash from operations has funded the capital investment during the year, and
along with the Group's current cash position, are the sources from which the
Group plans to fund the limited development programmes for its assets over the
remainder of 2026 and beyond. This is coupled with the fact that the Group has
no debt covenants that may otherwise impede its ability to implement
contingency plans if domestic and/or global circumstances dictate. This
flexibility and ability to monitor and manage development plans and liquidity
is a cornerstone of our planning, and underpins our assessments of the future.
The annual running costs of less than $8 million are currently covered by
interest income from the Group's monetary resources at the end of the year of
$97.1 million, meaning that the Group remains in a very strong financial
position, notwithstanding the suspension of the MEX-GOL, SV and VAS production
licences, the impact of the current war in Ukraine and any local or global
shocks that may occur to the industry and/or the Group.
Bruce Burrows
Finance Director
Principal Risks and How We Manage Them
The Group has a risk evaluation methodology in place to assist in the review
of the risks across all material aspects of its business. This methodology
highlights external, operational and technical, financial and corporate risks
and assesses the level of risk and potential consequences. It is periodically
presented to the Audit Committee and the Board for review, to bring to their
attention potential risks and, where possible, propose mitigating actions. Key
risks recognised and mitigation factors are detailed below:-
Risk Mitigation
External risks
War in Ukraine
On 24 February 2022, Russia invaded Ukraine and there is currently a serious The Group has assets in the areas of conflict in the east of Ukraine, and the
and ongoing war within Ukraine. This war is having a huge impact on Ukraine war has disrupted its operations in those areas. The Group had been
and its population, with significant destruction of infrastructure and undertaking only limited field and production operations at the MEX-GOL, SV
buildings in the areas of conflict, as well as damage in other areas of and VAS fields, as well as at the SC licence area, until the suspension of the
Ukraine. The war is resulting in significant casualties and has caused a huge MEX-GOL, SV and VAS licences in November 2024. During production operations at
humanitarian catastrophe and refugee influx into neighbouring countries. The the fields, inventories of hydrocarbons are maintained at minimum levels. At
war is also impacting the fiscal and economic environment in Ukraine, as well the sites where operations are suspended, there are no staff permanently on
as the financial stability and banking system in Ukraine, including site, except for necessary security staff. Where possible, all other staff
restrictions on the transfer of funds outside Ukraine. The war is an work remotely and have been supplied with all necessary devices and software
escalation of the previous regional conflict risk faced by the business, a to facilitate remote working. Additionally, the Group aims to maintain a
dispute that has been going on since 2014 in parts of eastern Ukraine, and material proportion of its cash resources outside Ukraine. The Group continues
since that time Russia has continued to occupy Crimea. The current war is also to monitor the situation and endeavours to protect its assets and safeguard
having a significant adverse effect on the Ukrainian financial markets, its staff and contractors.
hampering the ability of Ukrainian companies and banks to obtain funding from
the international capital and debt markets. The war has disrupted the Group's
business and operations, with damage to certain facilities from military
drones and periods of suspension of field operations, and has also impacted
the supply of materials and equipment and the availability of contractors to
undertake field operations. At present, the war is ongoing and the scope and
duration of the war is uncertain.
Risk relating to Ukraine
Ukraine is an emerging market and as such the Group is exposed to greater The Group minimises this risk by continuously monitoring the market in Ukraine
regulatory, economic and political risks than it would be in other and by maintaining as strong a working relationship as possible with the
jurisdictions. Emerging economies are generally subject to a volatile Ukrainian regulatory authorities. The Group also maintains a material
political and economic environment, which makes them vulnerable to market proportion of its cash holdings in international banks outside Ukraine.
downturns elsewhere in the world and could adversely impact the Group's
ability to operate in the market. Furthermore, the war in Ukraine is impacting
the social, fiscal and economic environment, the financial and banking system,
and the economic stability of Ukraine. As a result, Ukraine will require
financial assistance and/or aid from international financial agencies to
provide economic support and assist with the reconstruction of infrastructure
and buildings damaged in the war.
Banking system in Ukraine
The banking system in Ukraine has been under great strain in recent years due The creditworthiness and potential risks relating to the banks in Ukraine are
to the weak level of capital, low asset quality caused by the economic regularly reviewed by the Group, but the geopolitical and economic events in
situation, currency depreciation, changing regulations and other economic Ukraine over recent years have significantly weakened the Ukrainian banking
pressures generally, and so the risks associated with the banks in Ukraine sector. This has been exacerbated by the current war in Ukraine. In light of
have been significant, including in relation to the banks with which the Group this, the Group has taken and continues to take steps to diversify its banking
has operated bank accounts. This situation was improving moderately following arrangements between a number of banks in Ukraine. These measures are designed
remedial action by the National Bank of Ukraine, but the current war has to spread the risks associated with each bank's creditworthiness, and the
significantly affected such improvements, and the National Bank of Ukraine has Group endeavours to use banks that have the best available creditworthiness.
imposed a number of restrictive measures designed to protect the banking Nevertheless, the Ukrainian banking sector remains weakly capitalised and so
system, including restrictions on the transfer of funds outside Ukraine the risks associated with the banks in Ukraine remain significant, including
(albeit that the Group aims to maintain a material proportion of its cash in relation to the banks with which the Group operates bank accounts. As a
resources outside Ukraine). In addition, Ukraine continues to be supported by consequence, the Group also maintains a material proportion of its cash
funding from the International Monetary Fund. holdings in international banks outside Ukraine.
Geopolitical environment in Ukraine
Although there were some improvements in recent years, there has not been a The Group continually monitors the market and business environment in Ukraine
final resolution of the political, fiscal and economic situation in Ukraine, and endeavours to recognise approaching risks and factors that may affect its
and the current war has had a severe detrimental effect on the economic business. However, the war in Ukraine creates material challenges in planning
situation in Ukraine. The ongoing effects of this are difficult to predict and future investment and operations. The Group is limiting its operational
likely to continue to affect the Ukrainian economy and potentially the Group's activities to minimise risk to its staff and contractors, and to limit its
business. This situation is currently affecting the Group's production and financial exposure.
field operations, and the ongoing instability is disrupting the Group's
development and operational planning for its assets.
Climate change
Any near and medium-term continued warming of the planet can have potentially The Group's plans include: assessing, reducing and/or mitigating its emissions
increasing negative social, economic and environmental consequences, from its operations; and identifying climate change-related risks and
generally, globally and regionally, and specifically in relation to the Group. assessing the degree to which they can affect its business, including
The potential impacts include: loss of market; and increased costs of financial implications. The HSE Committee is specifically tasked with
operations through increasing regulatory oversight and controls, including overseeing, measuring, benchmarking and mitigating the Group's environmental
potential effective or actual loss of licences to operate. As a diligent and climate impact, which will be reported on in future periods. At this
operator aware of and responsive to its good stewardship responsibilities, the stage, the Group does not consider climate change to have any material
Group not only needs to monitor and modify its business plans and operations implications on the Group's financial statements, including accounting
to react to changes, but also to ensure its environmental footprint is as estimates.
minimal as it can practicably be in managing the hydrocarbon resources the
Group produces.
Operational and technical risks
Quality, Health, Safety and Environment ("QHSE")
The oil and gas industry, by its nature, conducts activities which can cause The Group maintains QHSE policies and requires that management, staff and
health, safety, environmental and security incidents. Serious incidents can contractors adhere to these policies. The policies ensure that the Group meets
not only have a financial impact but can also damage the Group's reputation Ukrainian legislative standards in full and achieves international standards
and the opportunity to undertake further projects. The war in Ukraine poses to the maximum extent possible. As a consequence of the current war in Ukraine
significant risks to field operations, by way of potential threat to the lives and the periods of suspension of the Group's production licences, only limited
of employees and contractors, and damage to equipment and infrastructure. field and production operations have been undertaken at the Group's fields.
Only essential staff are located at site, and all other staff are working
remotely, either from areas away from the conflict areas or outside Ukraine.
The Group has invested in technology that allows many staff to work just as
effectively from remote locations.
Industry risks
The Group is exposed to risks which are generally associated with the oil and The Group has well qualified and experienced technical management staff to
gas industry. For example, the Group's ability to pursue and develop its plan and supervise operational activities. In addition, the Group engages with
projects and undertake development programmes depends on a number of suitably qualified local and international geological, geophysical and
uncertainties, including the availability of capital, seasonal conditions, engineering experts and contractors to supplement and broaden the pool of
regulatory approvals, gas, condensate, oil and LPG prices, development costs expertise available to the Group. Detailed planning of development activities
and drilling success. As a result of these uncertainties, it is unknown is undertaken with the aim of managing the inherent risks associated with oil
whether potential drilling locations identified on proposed projects will ever and gas exploration and production, as well as ensuring that appropriate
be drilled or whether these or any other potential drilling locations will be equipment and personnel are available for the operations, and that local
able to produce gas, condensate or oil. In addition, drilling activities are contractors are appropriately supervised.
subject to many risks, including the risk that commercially productive
reservoirs will not be discovered. Drilling for hydrocarbons can be
unprofitable, not only due to dry holes, but also as a result of productive
wells that do not produce sufficiently to be economic. In addition, drilling
and production operations are highly technical and complex activities and may
be curtailed, delayed or cancelled as a result of a variety of factors.
Production of hydrocarbons
Producing gas, condensate and oil reservoirs are generally characterised by In recent years, the Group has engaged external technical consultants to
declining production rates which vary depending upon reservoir characteristics undertake a comprehensive review and re-evaluation study of the MEX-GOL and SV
and other factors. Future production of the Group's gas, condensate and oil fields in order to gain an improved understanding of the geological aspects of
reserves, and therefore the Group's cash flow and income, are highly dependent the fields and reservoir engineering, drilling and completion techniques, and
on the Group's success in operating existing producing wells, drilling new the results of this study and further planned technical work are being used by
production wells and efficiently developing and exploiting any reserves, and the Group in the future development of these fields. The Group has established
finding or acquiring additional reserves. The Group may not be able to an ongoing relationship with such external technical consultants to ensure
develop, find or acquire reserves at acceptable costs. The experience gained that technical management and planning is of a high quality in respect of all
from drilling undertaken to date highlights such risks as the Group targets development activities on the Group's fields.
the appraisal and production of these hydrocarbons.
Risks relating to the further development and operation of the Group's gas,
condensate and oil fields in Ukraine
The planned development and operation of the Group's gas, condensate and oil The Group's technical management staff, in consultation with its external
fields in Ukraine is susceptible to appraisal, development and operational technical consultants, carefully plan and supervise development and
risk. This could include, but is not restricted to, delays in the delivery of operational activities with the aim of managing the risks associated with the
equipment in Ukraine, failure of key equipment, lower than expected production further development of the Group's fields in Ukraine. This includes detailed
from wells that are currently producing, or new wells that are brought review and consideration of available subsurface data, utilisation of modern
on-stream, problematic wells and complex geology which is difficult to drill geological software, and utilisation of engineering and completion techniques
or interpret. The generation of significant operational cash is dependent on developed for the fields. With regards to operational activities, the Group
the successful delivery and completion of the development and operation of the ensures that appropriate equipment and personnel are available for the
fields. The war in Ukraine is impacting planning and implementation of operations, and that operational contractors are appropriately supervised. In
development and operations at the Group's fields. addition, the Group performs a review of indicators of impairment of its oil
and gas assets on an annual basis, and considers whether an assessment of its
oil and gas assets by a suitably qualified independent assessor is appropriate
or required.
Drilling and workover operations
Due to the depth and nature of the reservoirs in the Group's fields, the The utilisation of detailed sub-surface analysis, careful well planning and
technical difficulty of drilling or re-entering wells in the Group's fields is engineering design in designing work programmes, along with appropriate
high, and this and the equipment limitations within Ukraine, can result in procurement procedures and competent on-site management, aims to minimise
unsuccessful or lower than expected outcomes for wells. these risks.
Maintenance of facilities
There is a risk that production or transportation facilities can fail due to The Group's facilities are operated and maintained at standards above the
inadequate maintenance, control or poor performance of the Group's suppliers. Ukrainian minimum requirements. Operations staff are experienced and receive
supplemental training to ensure that facilities are properly operated and
maintained. Service providers are rigorously reviewed at the tender stage and
are monitored during the contract period.
Financial risks
Exposure to cash flow and liquidity risk
There is a risk that insufficient funds are available to meet the Group's The Group maintains adequate cash reserves and closely monitors forecasted and
development obligations to commercialise the Group's oil and gas assets. Since actual cash flow, as well as short and longer-term funding requirements. The
a significant proportion of the future capital requirements of the Group is Group aims to maintain a material proportion of its cash resources outside
expected to be derived from operational cash generated from production, Ukraine. The Group does not currently have any external loans outstanding,
including from wells yet to be drilled, there is a risk that in the longer internal financial projections are regularly made based on the latest
term insufficient operational cash is generated, or that additional funding, estimates available, and various scenarios are run to assess the robustness of
should the need arise, cannot be secured. The war in Ukraine and regulatory the Group's liquidity. However, as the risk to future capital funding is
actions have disrupted production operations at the Group's fields, and inherent in the oil and gas exploration and development industry and reliant
consequently reduced anticipated cash flows from those fields, and this has in part on future development success, it is difficult for the Group to take
increased the risk regarding sufficiency of capital for development in the any other measures to further mitigate this risk, other than tailoring its
future. In addition, the war may disrupt the sales market for hydrocarbons development activities to its available capital funding from time to time. The
that are produced. In addition to the risk of operational cash shortfalls, Group aims to maintain as diverse a range of banking relationships as possible
there is a risk that even with strong cash flows and cash balances, the Group, to reduce the risks associated with limited accessibility to banking services
from time to time, can suffer from operational banking appetite for businesses which may exist from time to time.
such as the Group's business, which can ultimately manifest itself in having a
restricted access to banking services.
Ensuring appropriate business practices
The Group operates in Ukraine, an emerging market, where certain inappropriate The Group maintains anti-bribery and corruption policies in relation to all
business practices may, from time to time occur, such as corrupt business aspects of its business, and ensures that clear authority levels and robust
practices, bribery, appropriation of property and fraud, all of which can lead approval processes are in place, with stringent controls over cash management
to financial loss. and the tendering and procurement processes. In addition, office and site
protection is maintained to protect the Group's assets.
Hydrocarbon price risk
The Group derives its revenue principally from the sale of its Ukrainian The Group sells a proportion of Its hydrocarbon production through offtake
hydrocarbon production. These revenues are subject to commodity price arrangements, which include pricing formulae so as to ensure that it achieves
volatility and political influence. A prolonged period of low hydrocarbon market prices for its products, as well as utilising the electronic market
prices may impact the Group's ability to maintain its long-term investment platforms in Ukraine to achieve market prices for its remaining products.
programme with a consequent effect on its growth rate, which in turn may However, hydrocarbon prices in Ukraine are, in the longer-term, linked to
impact the Company's share price or any shareholder returns. Lower hydrocarbon world hydrocarbon prices and so the Group is subject to external price trends,
prices may not only decrease the Group's revenues per unit, but may also as well as shorter-term volatility in the Ukrainian hydrocarbon market.
reduce the amount of hydrocarbons which the Group can produce economically, as
would increases in costs associated with hydrocarbon production, such as
subsoil taxes and royalties. The overall economics of the Group's key assets
(being the net present value of the future cash flows from its Ukrainian
projects) are far more sensitive to long term hydrocarbon prices than
short-term price volatility. However, short-term volatility does affect
liquidity risk, as, in the early stage of the projects, income from production
revenues is offset by capital investment. In addition, the war in Ukraine has
disrupted the sales market for hydrocarbons.
Currency risk
Since the beginning of 2014, the Ukrainian Hryvnia significantly devalued The Group's sales proceeds are received in Ukrainian Hryvnia, and the majority
against major world currencies, including the US Dollar, where it has fallen of the capital expenditure costs for the current investment programme will be
from UAH8.3/$1.00 on 1 January 2014 to UAH42.4/$1.00 on 31 December 2025, and incurred in Ukrainian Hryvnia, thus the currency of revenue and costs are
UAH43.8/$1.00 on 8 May 2026. This devaluation has been a significant largely matched. In light of the previous devaluation and volatility of the
contributor to the imposition of banking restrictions by the National Bank of Ukrainian Hryvnia against major world currencies, and since the Ukrainian
Ukraine over recent years. In addition, the geopolitical events in Ukraine Hryvnia does not benefit from the range of currency hedging instruments which
over recent years and the current war in Ukraine are likely to continue to are available in more developed economies, the Group has adopted a policy
impact the valuation of the Ukrainian Hryvnia against major world currencies. that, where possible, funds not required for use in Ukraine be retained on
Further devaluation of the Ukrainian Hryvnia against the US Dollar will affect deposit in the United Kingdom and Europe, principally in US Dollars.
the carrying value of the Group's assets.
Counterparty and credit risk
The challenging political and economic environment in Ukraine and current war The Group monitors the financial position and credit quality of its
means that businesses can be subject to significant financial strain, which contractual counterparties and seeks to manage the risk associated with
can mean that the Group is exposed to increased counterparty risk if counterparties by contracting with creditworthy contractors and customers.
counterparties fail or default in their contractual obligations to the Group, Hydrocarbon production is sold on terms that limit supply credit and/or title
including in relation to the sale of its hydrocarbon production, resulting in transfer until payment is received.
financial loss to the Group.
Financial markets and economic outlook
The performance of the Group is influenced by global economic conditions and, The Group's sales proceeds are received in Ukrainian Hryvnia and a significant
in particular, the conditions prevailing in the United Kingdom and Ukraine. proportion of investment expenditure is made in Ukrainian Hryvnia, which
The economies in these regions have been subject to volatile pressures in minimises risks related to foreign exchange volatility. However, hydrocarbon
recent periods, with the global economy having experienced a long period of prices in Ukraine are implicitly linked to world hydrocarbon prices and so the
difficulty, the COVID pandemic, and more particularly the current war in Group is subject to external price movements. The Group holds a material
Ukraine. This has led to extreme foreign exchange movements in the Ukrainian proportion of its cash reserves in the United Kingdom and Europe, mostly in US
Hryvnia, high inflation and interest rates, and increased credit risk relating Dollars, with reputable financial institutions. The financial status of
to the Group's key counterparties. counterparties is carefully monitored to manage counterparty risks.
Nevertheless, the overall exposure that the Group faces as a result of these
risks cannot be predicted and many of these are outside of the Group's
control.
Corporate risks
Ukrainian production licences
The Group operates in a region where the right to production can be challenged The Group ensures compliance with commitments and regulations relating to its
by State and non-State parties. During 2010, this manifested itself in the production and exploration licences through Group procedures and controls or,
form of a Ministry Order instructing the Group to suspend all operations and where this is not immediately feasible for practical or logistical
production from its MEX-GOL and SV production licences, which was not resolved considerations, seeks to enter into dialogue with the relevant Government
until mid-2011. In 2013, new rules relating to the updating of production bodies with a view to agreeing a reasonable time frame for achieving
licences led to further challenges being raised by the Ukrainian authorities compliance or an alternative, mutually agreeable course of action. Work
to the production licences held by independent oil and gas producers in programmes are designed to ensure that all licence obligations are met and
Ukraine, including the Group. In March 2019, a Ministry Order was issued continual interaction with Government bodies is maintained in relation to
instructing the Group to suspend all operations and production from its VAS licence obligations and commitments.
production licence, which was not resolved until March 2023. In 2020, LLC
Arkona Gas-Energy ("Arkona") faced a challenge from PJSC Ukrnafta concerning
the validity of its SC exploration licence, which was not ultimately resolved
in Arkona's favour until February 2021. During 2023, the Ukrainian authorities
took a number of regulatory actions against the Group, which culminated in
Ministry Orders being made in May 2023 to suspend all operations and
production at the VAS production licence and SC exploration licence area,
which suspensions were not lifted until June 2024. In November 2024, a
Ministry Order was issued to suspend all operations and production at the
MEX-GOL, SV and VAS production licences, which suspensions, although
temporarily lifted, currently remain in force. Excepting the current
suspension orders made in respect of the MEX-GOL, SV and VAS production
licences, all such challenges affecting the Group have been successfully
defended through the Ukrainian legal system. The business environment is such
that these types of challenges may arise at any time in relation to the
Group's operations, licence history, compliance with licence commitments
and/or local regulations. In addition, production licences in Ukraine are
issued with and/or carry ongoing compliance obligations, which if not met, may
lead to the loss of a licence.
Risks relating to key personnel
The Group's success depends upon skilled management as well as technical The Group periodically reviews the compensation and contractual terms of its
expertise and administrative staff. The loss of service of critical members staff. In addition, the Group has developed relationships with a number of
from the Group's team could have an adverse effect on the business. The technical and other professional experts and advisers, who are used to provide
current war in Ukraine has meant that, as far as possible, the Group's staff specialist services as required. As a result of the war, only essential staff
have needed to move away from areas of conflict and work remotely. are located at site, and all other staff are working remotely, either from
areas away from the conflict areas or outside Ukraine. The Group has invested
in technology that allows many staff to work just as effectively from remote
locations.
Consolidated Income Statement
for the year ended 31 December 2025
2025 2024
Note $000 $000
Revenue 5 3,346 44,928
Cost of sales 6 (2,165) (16,693)
Gross profit 1,181 28,235
Administrative expenses 7 (7,494) (6,190)
Other operating gains/(losses), (net) 10 4,831 7,061
Operating (loss)/profit (1,482) 29,106
Finance income 11 177 7
Finance costs 12 (768) (663)
Net income from investments - 1,176
Net (losses)/gains on financial assets (368) 789
Other gains/(losses), (net) 13 (64) 4
(Loss)/profit before taxation (2,505) 30,419
Income tax expense 14 (1,980) (6,696)
(Loss)/profit for the year (4,485) 23,723
Earnings per share (cents)
Basic and diluted 16 (1.4)с 7.4с
The Notes set out below are an integral part of these consolidated financial
statements.
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2025
2025 2024
$000 $000
(Loss)/profit for the year (4,485) 23,723
Other comprehensive income/(loss):
Items that may be subsequently reclassified to profit or loss:
(1,274) (14,479)
Equity - foreign currency translation
Items that will not be subsequently reclassified to profit or loss:
Re-measurements of post-employment benefit obligations 22 75
Total other comprehensive loss (1,252) (14,404)
Total comprehensive (loss)/income for the year (5,737) 9,319
Company Statement of Comprehensive Income
for the year ended 31 December 2025
Note 2025 2024
$000 $000
Loss for the year 15 (28,141) (12,940)
Total comprehensive loss for the year (28,141) (12,940)
The Notes set out below are an integral part of these consolidated financial
statements.
Consolidated Balance Sheet
as at 31 December 2025
2025 2024
Note $000 $000
Assets
Non-current assets
Property, plant and equipment 17 67,431 72,083
Intangible assets 18 7,086 7,317
Deferred tax asset 26 427 363
Right-of-use assets 19 374 633
Prepayments for fixed assets 312 363
Non-current receivables 29 51
75,659 80,810
Current assets
Inventories 21 3,006 3,152
Trade and other receivables 22 5,480 7,648
Cash and cash equivalents 23 97,093 99,398
105,579 110,198
Total assets 181,238 191,008
Liabilities
Current liabilities
Trade and other payables 24 (2,012) (3,286)
Lease liabilities 19 (315) (343)
Corporation tax payable (205) (974)
(2,532) (4,603)
Net current assets 103,047 105,595
Non-current liabilities
Provision for decommissioning 25 (4,735) (8,276)
Deferred tax liability 26 (7,238) (5,796)
Loans (393) -
Defined benefit liability (340) (323)
Lease liabilities 19 (224) (492)
Other non-current liabilities (73) (78)
(13,003) (14,965)
Total liabilities (15,535) (19,568)
Net assets 165,703 171,440
Equity
Called up share capital 27 28,115 28,115
Foreign exchange reserve 28 (162,302) (161,028)
Merger reserve 28 (3,204) (3,204)
Capital contributions reserve 28 7,477 7,477
Retained earnings 295,617 300,080
Total equity 165,703 171,440
The Notes set out below are an integral part of these consolidated financial
statements.
Consolidated Statement of Changes in Equity
for the year ended 31 December 2025
Called Merger Capital contributions reserve Foreign exchange reserve* Retained earnings/(Accumulated losses) Total equity
up share capital reserve
$000 $000 $000 $000 $000 $000
As at 1 January 2024 28,115 (3,204) 7,477 (146,549) 276,282 162,121
Profit for the year - - - - 23,723 23,723
Other comprehensive income/(loss) - - - (14,479) - (14,479)
- exchange differences
- re-measurements of post-employment benefit obligations - - - - 75 75
Total comprehensive income/(loss) - - - (14,479) 23,798 9,319
As at 31 December 2024 28,115 (3,204) 7,477 (161,028) 300,080 171,440
Called Merger Capital contributions reserve Foreign exchange reserve* Retained earnings/(Accumulated losses) Total equity
up share capital reserve
$000 $000 $000 $000 $000 $000
As at 1 January 2025 28,115 (3,204) 7,477 (161,028) 300,080 171,440
Profit for the year - - - - (4,485) (4,485)
Other comprehensive income/(loss) - - - (1,274) - (1,274)
- exchange differences
- re-measurements of post-employment benefit obligations - - - - 22 22
Total comprehensive income/(loss) - - - (1,274) (4,463) (5,737)
As at 31 December 2025 28,115 (3,204) 7,477 (162,302) 295,617 165,703
* Predominantly as a result of exchange differences on non-monetary assets
and liabilities where the subsidiaries' functional currency is not the US
Dollar.
The Notes set out below are an integral part of these consolidated financial
statements.
Consolidated Cash Flow Statement
for the year ended 31 December 2025
2025 2024
Note $000 $000
Operating activities
Cash generated from operations 29 (7,662) 33,039
Charitable donations 13 (2) (18)
Income tax paid (1,471) (6,375)
Interest received 9,215 7,914
Net cash inflow from operating activities 80 34,560
Investing activities
Purchase of oil and gas development, production and other property, plant and (774) (3,324)
equipment
Purchase of oil and gas exploration and evaluation assets (569) (336)
Purchase of oil and gas development, production and other intangible assets (488) (277)
Proceeds from sale of property, plant and equipment 20 35
Net cash outflow from investing activities (1,811) (3,902)
Financing activities
Payment of principal portion of lease liabilities (366) (436)
Loans received 1,834 -
Loans issued (1,775) -
Dividend paid - -
Net cash outflow from financing activities (307) (436)
( ) ( ) ( ) ( )
Net (decrease)/increase in cash and cash equivalents (2,038) 30,222
Cash and cash equivalents at the beginning of the year 99,398 76,493
ECL* of cash and cash equivalents 18 (522)
Effect of foreign exchange rate changes (285) (6,795)
Cash and cash equivalents at the end of the year 23 97,093 99,398
*ECL - Expected credit losses
The Notes set out below are an integral part of these consolidated financial
statements.
Notes forming part of the financial statements
1. Statutory Accounts
The financial information set out above does not constitute the Company's
statutory accounts for the year ended 31 December 2025 or 2024, but is derived
from those accounts. The Auditor has reported on those accounts, and its
reports were unqualified and did not contain statements under sections 498(2)
or (3) of the Companies Act 2006. The auditors' report on the Group financial
statements included a material uncertainty in respect of the Group's ability
to continue as a going concern as explained in the section "Going Concern" in
Note 3 below.
The statutory accounts for 2025 will be delivered to the Registrar of
Companies following publication.
While the financial information included in this announcement has been
prepared in accordance with UK-adopted International Accounting Standards
("framework"), this announcement does not itself contain sufficient
information to comply with the framework. The Company expects to distribute
the full financial statements that comply with UK-adopted International
Accounting Standards by 22 May 2026.
2. General Information and Operational Environment
Enwell Energy plc (the "Company") and its subsidiaries (the "Group") is a gas,
condensate, oil and LPG production group.
The Company is a public limited company incorporated in England and Wales
under the Companies Act 2006, whose shares are quoted on the AIM Market of
London Stock Exchange plc. The Company's registered office is at 84 Brook
Street, London W1K 5EH, United Kingdom and its registered number is 4462555.
The principal activities of the Group and the nature of the Group's operations
are set out above.
As at 31 December 2025, the Company's immediate parent company was Smart
Energy (CY) Limited, which was 100% owned by Smart Holding (Cyprus) Limited,
which was 100% owned by Proteas Trustees Ltd as trustee of the STEP Trust, and
Proteas Trustee Services Ltd, Afroditi Loukaidou, Elena Iona and Argyrou Vaso
as trustees of the SMART Trust. Accordingly, the Company was ultimately
controlled by Proteas Trustees Ltd as trustee of the STEP Trust, and Proteas
Trustee Services Ltd, Afroditi Loukaidou, Elena Iona and Argyrou Vaso as
trustees of the SMART Trust.
As at 31 December 2024, the Company's immediate parent company was Smart
Energy (CY) Limited, which was 100% owned by Smart Holding (Cyprus) Limited,
which was 100% owned by Proteas Trustees Ltd as trustee of the STEP Trust, and
Proteas Trustee Services Ltd, Afroditi Loukaidou, Elena Iona and Maria
Sokratous as trustees of the SMART Trust. Accordingly, the Company was
ultimately controlled by Proteas Trustees Ltd as trustee of the STEP Trust,
and Proteas Trustee Services Ltd, Afroditi Loukaidou, Elena Iona and Maria
Sokratous as trustees of the SMART Trust.
The Group's gas, condensate, oil and LPG extraction and production facilities
are located in Ukraine.
Impact of the ongoing war in Ukraine
On 24 February 2022, Russia commenced a military invasion of Ukraine, and
since then there has been an ongoing war in Ukraine. Shortly after the
invasion, the Ukrainian Government imposed martial law, and the corresponding
introduction of related temporary restrictions that impact, amongst other
areas, the economic environment and business operations in Ukraine. The war
has caused significant economic and social challenges in Ukraine, which has
led to a deterioration of Ukrainian State finances, volatility of financial
markets, illiquidity on capital markets, higher inflation and a depreciation
of the national currency against major foreign currencies.
During 2022, the National Bank of Ukraine ("NBU") took a number of measures to
protect the Ukrainian economy, including significantly increasing its key
policy interest rate, introducing temporary restrictions on foreign currency
trades and limiting cross-border payments for non-critical imports and
repayment of debt to foreign creditors, apart from international institutions.
In addition, the Ukrainian Hryvnia exchange rate with the US Dollar was
effectively fixed on the foreign exchange market to ensure the stable
operation of Ukraine's financial system.
The NBU is now following an interest rate policy consistent with inflation
targets, and its key policy rate currently stands at 15.0%. The inflation rate
in Ukraine for 2025 was 8% (2024: 12%) according to the statistics published
by the State Statistics Service of Ukraine.
In October 2023, the NBU returned to a managed floating exchange rate for the
Ukrainian Hryvnia, and as at 31 December 2025, the Ukrainian Hryvnia exchange
rate with the US Dollar was UAH42.39/$1.00 (UAH42.04/$1.00 as at 31 December
2024).
During 2025, Ukrainian GDP increased by 2.2% compared with a 2.9% increase in
2024.
The nature of the situation in Ukraine and the unpredictability of the outcome
means it is impracticable to assess the full impact of the war on the economic
environment.
Overall, the final resolution and the ongoing effects of the war and political
and economic situation in Ukraine are difficult to predict, but they may have
further severe effects on the Ukrainian economy and the Group's business.
As at 8 May 2026, the official NBU exchange rate of the Ukrainian Hryvnia
against the US Dollar was UAH43.80/$1.00, compared with UAH42.39/$1.00 as at
31 December 2025.
Further details of risks relating to Ukraine can be found within the Principal
Risks section of the Strategic Report.
3. Accounting Policies
The principal accounting policies applied in the preparation of these
consolidated financial statements are set out below. These policies have been
consistently applied to all the years presented, unless otherwise stated.
Basis of Preparation
On 31 December 2020, IFRS as adopted by the European Union at that date was
brought into UK law and became UK-adopted International Accounting Standards,
with future changes being subject to endorsement by the UK Endorsement Board.
The Group and Company transitioned to UK-adopted International Accounting
Standards on 1 January 2021. This change constitutes a change in accounting
framework. However, there is no impact on recognition, measurement or
disclosure in the period reported as a result of the change in framework. The
consolidated financial statements of the Group and the financial statements of
the Company have been prepared in accordance with UK-adopted International
Accounting Standards and with the requirements of the Companies Act 2006 as
applicable to companies reporting under those standards.
These consolidated financial statements have been prepared in accordance with
UK-adopted International Accounting Standards under the historical cost
convention, as modified by the initial recognition of financial instruments
based on fair value, and by the revaluation of financial instruments
categorised at fair value through profit or loss ("FVTPL") and at fair value
through other comprehensive income ("FVOCI"). The principal accounting
policies applied in the preparation of these consolidated financial statements
are set out below. Apart from the accounting policy changes effective from 1
January 2022 these policies have been consistently applied to all the periods
presented, unless otherwise stated.
The preparation of financial statements in conformity with UK-adopted
International Accounting Standards requires the use of certain critical
accounting estimates. It also requires management to exercise its judgement in
the process of applying the Group's accounting policies. The areas involving a
higher degree of judgement or complexity, or areas where assumptions and
estimates are significant to the consolidated financial statements are
disclosed in Note 4. The consolidated financial statements are presented in
thousands of US Dollars.
Going Concern
The Group's business activities, together with the factors likely to affect
its future operations, performance and position are set out in the Chairman's
Statement, Chief Executive's Statement and Finance Review. The financial
position of the Group, its cash flows and liquidity position are set out in
these consolidated financial statements.
On 24 February 2022, Russia commenced a military invasion of Ukraine, and
since then there has been an ongoing war between Russia and Ukraine.
Immediately after the commencement of the war, the Ukrainian Government
imposed martial law and introduced a number of related temporary restrictions
that impacted the economic environment and business operations in Ukraine.
While a number of restrictions remain in place, improvements in the economic
environment have led the Ukrainian Government to relax a number of the
restrictions and stabilise the economic situation in Ukraine.
The production assets of the Group are located in the central and eastern part
of the country (Poltava and Kharkiv regions) which are controlled by the
Ukrainian Government. However, the licences relating to the Group's MEX-GOL
and SV assets in the Poltava region and VAS asset in the Kharkiv region are
suspended after the State Geologic and Subsoil Survey of Ukraine issued orders
on 15 November 2024 for the suspension of the MEX-GOL, SV and VAS production
licences for a period of ten years effective from 8 October 2024, and
consequently all field and production operations on these licences has ceased.
In December 2025, the gas processing facilities at the VAS field were hit and
damaged by Russian military drones. However, since the VAS field was not in
operation as a result of the licence suspension, there were only security
staff on site, and most fortunately, there were no casualties. A general
assessment of the damage has been undertaken, power has been restored and
repairs have been made to site premises. A more detailed assessment of damage
to equipment will be undertaken to enable the preparation of a detailed plan
for the restoration of the facilities. The Group's SC exploration licence is
not suspended and development work is ongoing on the licence area. The Gas
Transmission System Operator of Ukraine has maintained complete operational
and technological control over the operations of the Ukrainian Gas
Transmission System. However, as of the date of approval of these financial
statements, the war and the regulatory actions of the Ukrainian authorities
has had, and continues to have, a material impact on the production and sales
levels of the business and execution of the Group's 2026 budget.
The Group funds its operations from its own cash resources. Cash and cash
equivalents were $92.0 million as at 8 May 2026. The Directors maintain a
significant level of flexibility to modify the Group's development plans as
may be required to preserve cash resources for liquidity management. Absent
the potential impact of the war in Ukraine, the Directors are satisfied that
the Group and the Company are a going concern and will continue their
operations for the foreseeable future.
In assessing the impact of the war and the regulatory actions of the Ukrainian
authorities on the ability of the Group and the Company to continue as a going
concern, the Directors have analysed a number of possible scenarios of
economic and military developments and the impact on the expected cash flows
of the Group and Company for 2026 and 2027. This includes considering a
possible worst case scenario in which the Group has zero production as a
result of possible future military conflict and regulatory actions dictating
field operations being completely shut-in, and all other non-production
related costs being maintained at current levels with no reduction or
mitigating actions as would otherwise be possible. Even in this worst-case
scenario, the Directors are satisfied that the Group and the Company have
sufficient liquid resources to be able to meet their liabilities as they fall
due and to be able to continue as a going concern for the foreseeable future.
The corporate strategy for the near term is to:
· continue work for the development of the SC exploration licence
area, and moderating such development plans to reduce cash spend exposure
whilst the war and regulatory, operational and political uncertainty
continues;
· vigorously pursue legal initiatives to protect the Group's
assets, restore all licences and production, and seek compensation for losses
incurred to date and as may be incurred in the future; and
· tightly manage costs to ensure cash resources are maintained
at levels capable of sustaining the business through the continuing
uncertainty.
In respect of the Group's operations, staff and assets in Ukraine, the
potential short and long-term impact of the future development of the war is
inherently uncertain. Accordingly, this creates a material uncertainty related
to events or conditions that may cast significant doubt on the Group's ability
to continue as a going concern because of the potential impact on its ability
to continue its operations for the foreseeable future and realise its assets
in the normal course of business. The financial statements do not include the
adjustments that would result if the Group were unable to continue as a going
concern.
The Company is a UK-based investment holding company. The Company had cash and
cash equivalents of $14.1 million as at 8 May 2026, all of which are held
outside Ukraine, in US Dollars, Pounds Sterling and Euros. The Directors are
satisfied that the Company is a going concern and will be able to continue its
operations for the foreseeable future, and there is no material uncertainty in
respect of its ability to do so.
New and revised standards adopted by the Group
The Group has adopted the following new and revised standards for the first
time, effective for reporting periods beginning on or after 1 January 2025:
Amendments to IAS 21 "The Effects of Changes in Foreign Exchange Rates" -
"Lack of Exchangeability"
These amendments clarify the requirements for assessing whether a currency is
exchangeable into another currency and determining the exchange rate to be
used when exchangeability is lacking.
Furthermore, the amendments require the disclosure of additional information
when a currency is not exchangeable, in order to help users of financial
statements understand the impact of this fact on the entity's financial
performance and financial position.
Since the Group operates in conditions where there are no signs of a lack of
exchangeability of the functional currency, the Group's accounting policy has
not changed, no potential impacts on future periods are expected, the
amendments have not affected any line item of the financial statements, and
there were no adjustments for prior periods.
New and revised IFRSs have been issued but have not yet entered into force
In accordance with the requirements of IAS 8 Accounting Policies, Changes in
Accounting Estimates and Errors, the Group has considered all new and revised
standards that have been issued but are not yet effective at the date of
preparation of these financial statements. The list of such standards and
amendments includes:
Standards and Interpretations Effective date
Renewable Energy Contracts (Amendments to IFRS 9 and IFRS 7) 1 January 2026
Annual Improvements to IFRS - Volume 11 1 January 2026
Amendments to the classification and measurement of financial instruments 1 January 2026
(amendments to IFRS 9 and IFRS 7)
IFRS 18 "Presentation and Disclosure in Financial Statements" 1 January 2027
These new standards and interpretations are not expected to significantly
affect the Group's consolidated financial statements.
Exchange differences on intra-group balances with foreign operations
The Group has certain inter-company monetary balances of which the Company is
the beneficial owner. These monetary balances are payable by a subsidiary that
is a foreign operation and are eliminated on consolidation.
In the consolidated financial statements, exchange differences arising on such
payables because the transaction currency differs from the subsidiary's
functional currency are recognised initially in other comprehensive income if
the settlement of such payables is continuously deferred and is neither
planned nor likely to occur in the foreseeable future.
In such cases, the respective receivables of the Company are regarded as an
extension of the Company's net investment in that foreign operation, and the
cumulative amount of the abovementioned exchange differences recognised in
other comprehensive income is carried forward within the foreign exchange
reserve in equity and is reclassified to profit or loss only upon disposal of
the foreign operation.
When the subsidiary that is a foreign operation settles its quasi-equity
liability due to the Company, but the Company continues to possess the same
percentage of the subsidiary, i.e. there has been no change in its
proportionate ownership interest, such settlement is not regarded as a
disposal or a partial disposal, and therefore cumulative exchange differences
are not reclassified.
The designation of inter-company monetary balances as part of the net
investment in a foreign operation is re-assessed when management's
expectations and intentions on settlement change due to a change in
circumstances.
Where, because of a change in circumstances, a receivable balance, or part
thereof, previously designated as a net investment into a foreign operation is
intended to be settled, the receivable is de-designated and is no longer
regarded as part of the net investment.
In such cases, the exchange differences arising on the subsidiary's payable
following de-designation are recognised within finance costs / income in
profit or loss, similar to foreign exchange differences arising from
financing.
Foreign exchange gains and losses not related to intra-group balances are
recognised on a net basis as other gains or losses.
Basis of Consolidation
The consolidated financial statements incorporate the financial information of
the Company and entities controlled by the Company (and its subsidiaries) made
up to 31 December each year.
Subsidiaries
Subsidiaries are all entities (including structured entities) over which the
Group has control. The Group controls an entity when the Group is exposed to,
or has rights to variable returns from its involvement with the entity and has
the ability to affect those returns through its power over the entity.
Subsidiaries are fully consolidated from the date on which control is
transferred to the Group. They are deconsolidated from the date that control
ceases.
The Group applies the acquisition method to account for business combinations.
The consideration transferred for the acquisition of a subsidiary is the fair
value of the assets transferred, the liabilities incurred to the former owners
of the acquiree and the equity interests issued by the Group. The
consideration transferred includes the fair value of any asset or liability
resulting from a contingent consideration arrangement. Identifiable assets
acquired and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at the acquisition
date. The Group recognises any non-controlling interest in the acquiree on an
acquisition-by-acquisition basis at the non-controlling interest's
proportionate share of the recognised amounts of the acquiree's identifiable
net assets.
Acquisition-related costs are expensed as incurred.
If the business combination is achieved in stages, the acquisition date
carrying value of the acquirer's previously held equity interest in the
acquiree is re-measured to fair value at the acquisition date; any gains or
losses arising from such re-measurement are recognised in profit or loss.
Any contingent consideration to be transferred by the Group is recognised at
fair value at the acquisition date. Subsequent changes to the fair value of
the contingent consideration that is deemed to be an asset or liability is
recognised in accordance with IFRS 9 in profit or loss.
Inter-company transactions, balances and unrealised gains on transactions
between Group companies are eliminated. Unrealised losses are also eliminated.
When necessary, amounts reported by subsidiaries have been adjusted to conform
with the Group's accounting policies.
Segment reporting
The Group's only class of business activity is oil and gas exploration,
development and production. The Group's primary operations are located in
Ukraine, with its head office in the United Kingdom. The geographical
segments are the basis on which the Group reports its segment information to
management. Operating segments are reported in a manner consistent with the
internal reporting provided to the Board of Directors.
Commercial Reserves
Proved and probable oil and gas reserves are estimated quantities of
commercially producible hydrocarbons which the existing geological,
geophysical and engineering data show to be recoverable in future years from
known reservoirs. Proved reserves are those quantities of petroleum that, by
analysis of geoscience and engineering data, can be estimated with reasonable
certainty to be commercially recoverable from known reservoirs and under
defined technical and commercial conditions. Probable reserves are those
additional reserves which analysis of geoscience and engineering data indicate
are less likely to be recovered than proved reserves but more certain to be
recovered than possible reserves. The proved and probable reserves conform to
the definition approved by the Petroleum Resources Management System.
Oil and Gas Exploration/Evaluation and Development/Production Assets
The Group applies the successful efforts method of accounting for oil and gas
assets, having regard to the requirements of IFRS 6 Exploration for and
Evaluation of Mineral Resources.
Exploration costs are incurred to discover hydrocarbon resources. Evaluation
costs are incurred to assess the technical feasibility and commercial
viability of the resources found. Exploration, as defined in IFRS 6
Exploration and evaluation of mineral resources, starts when the legal rights
to explore have been obtained. Expenditure incurred before obtaining the legal
right to explore is generally expensed; an exception to this would be
separately acquired intangible assets such as payment for an option to obtain
legal rights.
Expenditures incurred in the exploration activities are expensed unless they
meet the definition of an asset. The Group recognises an asset when it is
probable that economic benefits will flow to the Group as a result of the
expenditure. The economic benefits might be available through commercial
exploitation of hydrocarbon reserves or sales of exploration findings or
further development rights. Exploration and evaluation ("E&E") assets are
recognised as either property, plant and equipment or intangible assets,
according to their nature, in single field cost centres.
The capitalisation point is the earlier of:
(a) the point at which the fair value less costs to sell the
property can be reliably determined as being higher than the total of the
expenses incurred and costs already capitalised (such as licence acquisition
costs); and
(b) an assessment of the property demonstrates that commercially
viable reserves are present and hence there are probable future economic
benefits from the continued development and production of the resource.
E&E assets are reclassified from Exploration and Evaluation when
evaluation procedures have been completed. E&E assets that are not
commercially viable are written down. E&E assets for which commercially
viable reserves have been identified are reclassified to Development and
Production assets. E&E assets are tested for impairment immediately prior
to reclassification out of E&E.
Once an E&E asset has been reclassified from E&E, it is subject to the
normal IFRS requirements. This includes impairment testing at the
cash-generating unit ("CGU") level and depreciation.
Abandonment and Retirement of Individual Items of Property, Plant and
Equipment
Normally, no gains or losses shall be recognised if only an individual item of
equipment is abandoned or retired or if only a single lease or other part of a
group of proved properties constituting the amortisation base is abandoned or
retired as long as the remainder of the property or group of properties
constituting the amortisation base continues to produce oil or gas. Instead,
the asset being abandoned or retired shall be deemed to be fully amortised,
and its costs shall be charged to accumulated depreciation, depletion or
amortisation. When the last well on an individual property (if that is the
amortisation base) or group of properties (if amortisation is determined on
the basis of an aggregation of properties with a common geological structure)
ceases to produce and the entire property or group of properties is abandoned,
a gain or loss shall be recognised. Occasionally, the partial abandonment or
retirement of a proved property or group of proved properties or the
abandonment or retirement of wells or related equipment or facilities may
result from a catastrophic event or other major abnormality. In those cases, a
loss shall be recognised at the time of abandonment or retirement.
Intangible Assets other than Oil and Gas Assets
Intangible assets other than oil and gas assets are stated at cost less
accumulated amortisation and any provision for impairment. These assets
represent exploration licences. Amortisation is charged so as to write off the
cost, less estimated residual value on a straight-line basis of 20-25% per
annum.
Depreciation, Depletion and Amortisation
All expenditure carried within each field is amortised from the commencement
of commercial production on a unit of production basis, which is the ratio of
gas production in the period to the estimated quantities of commercial
reserves at the end of the period plus the production in the period, generally
on a field by field basis. In certain circumstances, fields within a single
development area may be combined for depletion purposes. Costs used in the
unit of production calculation comprise the net book value of capitalised
costs plus the estimated future field development costs necessary to bring the
reserves into production.
Impairment
At each balance sheet date, the Group reviews the carrying amount of oil and
gas development and production assets to determine whether there is any
indication that those assets have suffered an impairment loss. This includes
exploration and appraisal costs capitalised which are assessed for impairment
in accordance with IFRS 6. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent of the
impairment loss.
For oil and gas development and production assets, the recoverable amount is
the greater of fair value less costs to dispose and value in use. In assessing
value in use, the estimated future cash flows are discounted to their present
value using an expected weighted average cost of capital. If the recoverable
amount of an asset is estimated to be less than its carrying amount, the
carrying amount of the asset is reduced to its recoverable amount. Impairment
losses are recognised as an expense immediately. The valuation method used for
determination of fair value less cost of disposal is based on unobservable
market data, which is within Level 3 of the fair value hierarchy.
Should an impairment loss subsequently reverse, the carrying amount of the
asset is increased to the revised estimate of its recoverable amount, but so
that the increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised for the
asset in prior years. A reversal of an impairment loss is recognised as income
immediately.
Decommissioning Provision
Where a material liability for the removal of existing production facilities
and site restoration at the end of the productive life of a field exists, a
provision for decommissioning is recognised. The amount recognised is the
present value of estimated future expenditure determined in accordance with
local conditions and requirements. The cost of the relevant property, plant
and equipment is increased with an amount equivalent to the provision and
depreciated on a unit of production basis. Changes in estimates are recognised
prospectively, with corresponding adjustments to the provision and the
associated fixed asset. The unwinding of the discount on the decommissioning
provision is included within finance costs.
Property, Plant and Equipment other than Oil and Gas Assets
Property, plant and equipment other than oil and gas assets (included in Other
fixed assets in Note 17 are stated at cost less accumulated depreciation and
any provision for impairment. Depreciation is charged so as to write off the
cost of assets on a straight-line basis over their useful lives as follows:
Useful lives in years
Buildings and constructions 10 to 20 years
Machinery and equipment 2 to 5 years
Vehicles 5 years
Office and other equipment 4 to 12 years
Spare parts and equipment purchased with the intention to be used in future
capital investment projects are recognised as oil and gas development and
production assets within property, plant and equipment.
Right-of-use assets
The Group leases various offices, equipment, wells and land. Contracts may
contain both lease and non-lease components. The Group allocates the
consideration in the contract to the lease and non-lease components based on
their relative stand-alone prices.
Assets arising from a lease are initially measured on a present value basis.
Right-of-use assets are measured at cost comprising the following:
● the amount of the initial measurement of lease
liability,
● any lease payments made at or before the commencement date
less any lease incentives received,
● any initial direct costs, and
● costs to restore the asset to the conditions required by
lease agreements.
Right-of-use assets are generally depreciated over the shorter of the asset's
useful life and the lease term on a straight-line basis. If the Group is
reasonably certain to exercise a purchase option, the right-of-use asset is
depreciated over the underlying assets' useful lives. Depreciation on the
items of the right-of-use assets is calculated using the straight-line method
over their estimated useful lives as follows:
Useful lives in years
Land 40 to 50 years
Wells 10 to 20 years
Properties:
Buildings and constructions 10 to 20 years
Machinery and equipment 2 to 5 years
Vehicles 5 years
Office and other equipment 4 to 12 years
Inventories
Inventories typically consist of materials, spare parts and hydrocarbons, and
are stated at the lower of cost and net realisable value. Cost of finished
goods is determined on the weighted average bases. Cost of other than finished
goods inventory is determined on the first in first out basis. Net realisable
value represents the estimated selling price less all estimated costs of
completion and costs to be incurred in marketing, selling and distribution.
Revenue Recognition
Revenue is income arising in the course of the Group's ordinary activities.
Revenue is recognised by the amount of the transaction price. Transaction
price is the amount of consideration to which the Group expects to be entitled
in exchange for transferring control over promised goods or services to a
customer, excluding the amounts collected on behalf of third parties.
Revenue is recognised net of indirect taxes and excise duties.
Sales of gas, condensate, oil and LPG are recognised when control of the good
has transferred, being when the goods are delivered to the customer, the
customer has full discretion over the goods, and there is no unfulfilled
obligation that could affect the customer's acceptance of the goods. Delivery
occurs when the goods have been shipped to the specific location, the risks of
obsolescence and loss have been transferred to the customer, and either the
customer has accepted the goods in accordance with the contract, the
acceptance provisions have lapsed, or the Group has objective evidence that
all criteria for acceptance have been satisfied.
A receivable is recognised when the goods are delivered as this is the point
in time that the consideration is unconditional because only the passage of
time is required before the payment is due.
The Group normally uses standardised contracts for the sale of gas,
condensate, oil and LPG, which define the point of control transfer. The price
and quantity of each sale transaction are indicated in the specifications to
the sales contracts.
The control over gas is transferred to a customer when the respective act of
acceptance is signed by the parties to a contract upon delivery of gas to the
point of sale specified in the contract, normally being a certain point in the
Ukrainian gas transportation system. Acts of acceptance of gas are signed and
the respective revenues are recognised on a monthly basis.
The control over condensate, oil and LPG is transferred to a customer when the
respective waybill is signed by the parties to a contract upon shipment of
goods at the point of sale specified in the contract, which is normally the
Group's production site.
Foreign Currencies
The Group's consolidated financial statements and those of the Company are
presented in US Dollars. The functional currency of the subsidiaries which
operate in Ukraine is Ukrainian Hryvnia. The remaining entities have US
Dollars as their functional currency.
The functional currency of individual companies is determined by the primary
economic environment in which the entity operates, normally the one in which
it primarily generates and expends cash. In preparing the financial statements
of the individual companies, transactions in currencies other than the
entity's functional currency ("foreign currencies") are recorded at the rates
of exchange prevailing on the dates of the transactions. At each balance sheet
date, monetary assets and liabilities that are denominated in foreign
currencies are retranslated at the rates prevailing on the balance sheet date.
Foreign exchange gains and losses resulting from the settlement of such
transactions and from the translation at year-end exchange rates of monetary
assets and liabilities denominated in foreign currencies are recognised in the
Income Statement. Non-monetary assets and liabilities carried at fair value
that are denominated in foreign currencies are translated at the rates
prevailing at the date when the fair value was determined. Non-monetary items
which are measured in terms of historical cost in a foreign currency are not
retranslated. Gains and losses arising on retranslation are included in net
profit or loss for the period, except for exchange differences arising on
balances which are considered long term investments where the changes in fair
value are recognised directly in other comprehensive income.
On consolidation, the assets and liabilities of the Group's subsidiaries which
do not use US Dollars as their functional currency are translated into US
Dollars as follows:
(a) assets and liabilities for each Balance Sheet presented are
translated at the closing rate at the date of that Balance Sheet;
(b) income and expenses for each Income Statement are translated at
average monthly exchange rates (unless this average is not a reasonable
approximation of the cumulative effect of the rates prevailing on the
transaction dates, in which case income and expenses are translated at the
rate on the dates of the transactions); and
(c) all resulting exchange differences are recognised in other
comprehensive income.
The principal rates of exchange used for translating foreign currency balances
as at 31 December 2025 were $1:UAH42.39 (2024: $1: UAH42.04), $1:£0.743
(2024: $1:£ 0.798), $1:€0.852 (2024: $1:€ 0.963), and the average rates
for the year were $1:UAH41.69 (2024: $1:UAH40.16), $1:£0.758 (2024: $1:£
0.783), $1:€0.885 (2024: $1:€ 0.925).
None of the Group's operations are considered to use the currency of a
hyperinflationary economy, however this is kept under review.
Pensions
The Group contributes to a local government pension scheme in Ukraine and
defined benefit plans. The Group has no further payment obligations towards
the local government pension scheme once the contributions have been paid.
Defined benefit plans define an amount of pension benefit that an employee
will receive on retirement, usually dependent on one or more factors such as
age, years of service and compensation.
The Group companies participate in a mandatory Ukrainian State-defined
retirement benefit plan, which provides for early pension benefits for
employees working in certain workplaces with hazardous and unhealthy working
conditions. The Group also provides lump sum benefits upon retirement subject
to certain conditions. The early pension benefit (in the form of a monthly
annuity) is payable by employers only until the employee has reached the
statutory retirement age. The pension scheme is based on a benefit formula
which depends on each individual member's average salary, his/her total length
of past service and total length of past service at specific types of
workplaces ("list II" category).
The liability recognised in the Balance Sheet in respect of defined benefit
pension plans is the present value of the defined benefit obligation at the
end of the reporting period less the fair value of plan assets. The defined
benefit obligation is calculated annually by independent actuaries using the
projected unit credit method. The present value of the defined benefit
obligation is determined by discounting the estimated future cash outflows
using interest rates of high-quality corporate bonds that are denominated in
the currency in which the benefits will be paid, and that have terms to
maturity approximating to the terms of the related pension obligation. Since
Ukraine has no deep market in such bonds, the market rates on government bonds
are used.
The current service cost of the defined benefit plan, recognised in the Income
Statement within the Cost of Sales in employee benefit expense, except where
included in the cost of an asset, reflects the increase in the defined benefit
obligation resulting from employee service in the current year, benefit
changes curtailments and settlements. Past-service costs are recognised
immediately in the Income Statement.
The net interest cost is calculated by applying the discount rate to the net
balance of the defined benefit obligation and the fair value of plan assets.
This cost is included in employee benefit expense in the Income Statement
within Cost of Sales.
Actuarial gains and losses arising from experience adjustments and changes in
actuarial assumptions are charged or credited to equity in other comprehensive
income in the period in which they arise.
Taxation
The tax expense represents the sum of the current tax and deferred tax.
Current tax, including UK corporation and overseas tax, is provided at amounts
expected to be paid (or recovered) using the tax rates and laws that have been
enacted or substantively enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the balance sheet liability method.
Deferred tax liabilities are generally recognised for all taxable temporary
differences and 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. Such assets and liabilities are not
recognised if the temporary difference arises from goodwill or from the
initial recognition (other than in a business combination) of other assets and
liabilities in a transaction that affects neither the tax profit nor the
accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences
arising on investments in subsidiaries and associates, and interests in joint
ventures, except where the Group is able to control the reversal of the
temporary difference and it is probable that the temporary difference will not
reverse in the foreseeable future.
Deferred tax is calculated at the tax rates which are expected to apply in the
period when the liability is settled or the asset is realised. Deferred tax is
charged or credited in the Income Statement, except when it relates to items
charged or credited directly to equity, in which case the deferred tax is also
dealt with in equity.
Other taxes which include recoverable value added tax, excise tax and custom
duties represent the amounts receivable or payable to local tax authorities in
the countries where the Group operates.
Value added tax
Output value added tax related to sales is payable to tax authorities on the
earlier of (a) collection of receivables from customers or (b) delivery of
goods or services to customers. Input VAT is generally recoverable against
output VAT upon receipt of the VAT invoice. The tax authorities permit the
settlement of VAT on a net basis. VAT related to sales and purchases is
recognised in the consolidated statement of financial position on a gross
basis for different entities of the Group and disclosed separately as an asset
and a liability. Where provision has been made for expected credit losses
("ECL") of receivables, the impairment loss is recorded for the gross amount
of the debtor, including VAT.
Financial Instruments
Financial instruments - key measurement terms. 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. The
best evidence of fair value is the price in an active market. An active market
is one in which transactions for the asset or liability take place with
sufficient frequency and volume to provide pricing information on an ongoing
basis.
Fair value of financial instruments traded in an active market is measured as
the product of the quoted price for the individual asset or liability and the
number of instruments held by the entity. This is the case even if a market's
normal daily trading volume is not sufficient to absorb the quantity held and
placing orders to sell the position in a single transaction might affect the
quoted price.
A portfolio of financial derivatives or other financial assets and liabilities
that are not traded in an active market is measured at the fair value of a
group of financial assets and financial liabilities on the basis of the price
that would be received to sell a net long position (i.e. an asset) for a
particular risk exposure or paid to transfer a net short position (i.e. a
liability) for a particular risk exposure in an orderly transaction between
market participants at the measurement date. This is applicable for assets
carried at fair value on a recurring basis if the Group: (a) manages the group
of financial assets and financial liabilities on the basis of the Group's net
exposure to a particular market risk (or risks) or to the credit risk of a
particular counterparty in accordance with the Group's documented risk
management or investment strategy; (b) it provides information on that basis
about the group of assets and liabilities to the Group's key management
personnel; and (c) the market risks, including duration of the Group's
exposure to a particular market risk (or risks) arising from the financial
assets and financial liabilities are substantially the same.
Valuation techniques such as discounted cash flow models or models based on
recent arm's length transactions or consideration of financial data of the
investees are used to measure fair value of certain financial instruments for
which external market pricing information is not available. Fair value
measurements are analysed by level in the fair value hierarchy as follows: (i)
level one are measurements at quoted prices (unadjusted) in active markets for
identical assets or liabilities, (ii) level two measurements are valuations
techniques with all material inputs observable for the asset or liability,
either directly (that is, as prices) or indirectly (that is, derived from
prices), and (iii) level three measurements are valuations not based on solely
observable market data (that is, the measurement requires significant
unobservable inputs).
Transaction costs are incremental costs that are directly attributable to the
acquisition, issue or disposal of a financial instrument. An incremental cost
is one that would not have been incurred if the transaction had not taken
place. Transaction costs include fees and commissions paid to agents
(including employees acting as selling agents), advisers, brokers and dealers,
levies by regulatory agencies and securities exchanges, and transfer taxes and
duties. Transaction costs do not include debt premiums or discounts, financing
costs or internal administrative or holding costs.
Fair value is the amount at which the financial instrument was recognised at
initial recognition, while amortised cost ("AC") is the amount at which the
financial instrument was subsequently measured after the initial recognition
less any principal repayments, plus accrued interest, and for financial assets
less any allowance for ECL. Accrued interest includes amortisation of
transaction costs deferred at initial recognition and of any premium or
discount to the maturity amount using the effective interest method. Accrued
interest income and accrued interest expense, including both accrued coupon
and amortised discount or premium (including fees deferred at origination, if
any), are not presented separately and are included in the carrying values of
the related items in the consolidated statement of financial position.
The effective interest method is a method of allocating interest income or
interest expense over the relevant period, so as to achieve a constant
periodic rate of interest (effective interest rate) on the carrying amount.
The effective interest rate is the rate that exactly discounts estimated
future cash payments or receipts (excluding future credit losses) through the
expected life of the financial instrument or a shorter period, if appropriate,
to the gross carrying amount of the financial instrument. The effective
interest rate discounts cash flows of variable interest instruments to the
next interest repricing date, except for the premium or discount which
reflects the credit spread over the floating rate specified in the instrument,
or other variables that are not reset to market rates. Such premiums or
discounts are amortised over the whole expected life of the instrument. The
present value calculation includes all fees paid or received between parties
to the contract that are an integral part of the effective interest rate. For
assets that are purchased or originated credit impaired ("POCI") at initial
recognition, the effective interest rate is adjusted for credit risk, i.e. it
is calculated based on the expected cash flows on initial recognition instead
of contractual payments.
Financial instruments - initial recognition. Financial instruments at fair
value through profit or loss ("FVTPL") are initially recorded at fair value.
All other financial instruments are initially recorded at fair value adjusted
for transaction costs. Fair value at initial recognition is best evidenced by
the transaction price. A gain or loss on initial recognition is only recorded
if there is a difference between fair value and transaction price which can be
evidenced by other observable current market transactions in the same
instrument or by a valuation technique whose inputs include only data from
observable markets. After the initial recognition, an ECL allowance is
recognised for financial assets measured at AC and investments in debt
instruments measured at fair value through other comprehensive income
("FVOCI"), resulting in an immediate accounting loss.
All purchases and sales of financial assets that require delivery within the
time frame established by regulation or market convention ("regular way"
purchases and sales) are recorded at the trade date, which is the date on
which the Group commits to deliver a financial asset. All other purchases are
recognised when the entity becomes a party to the contractual provisions of
the instrument.
Financial assets - classification and subsequent measurement - measurement
categories. The Group classifies financial assets in the following measurement
categories: FVTPL, FVOCI and AC. The classification and subsequent measurement
of debt financial assets depends on: (i) the Group's business model for
managing the related assets portfolio and (ii) the cash flow characteristics
of the asset. The Group's financial assets include cash and cash equivalents,
trade and other receivables and loans to subsidiary undertakings, all of which
are classified as AC in accordance with IFRS 9.
Financial assets - classification and subsequent measurement - business model.
The business model reflects how the Group manages the assets in order to
generate cash flows - whether the Group's objective is: (i) solely to collect
the contractual cash flows from the assets ("hold to collect contractual cash
flows"), or (ii) to collect both the contractual cash flows and the cash flows
arising from the sale of assets ("hold to collect contractual cash flows and
sell") or, if neither of (i) and (ii) is applicable, the financial assets are
classified as part of the "other" business model and measured at FVTPL.
Business model is determined for a group of assets (on a portfolio level)
based on all relevant evidence about the activities that the Group undertakes
to achieve the objective set out for the portfolio available at the date of
the assessment. Factors considered by the Group in determining the business
model include past experience on how the cash flows for the respective assets
were collected.
The Group's business model for financial assets is to collect the contractual
cash flows from the assets ("hold to collect contractual cash flows").
Financial assets - classification and subsequent measurement - cash flow
characteristics. Where the business model is to hold assets to collect
contractual cash flows or to hold contractual cash flows and sell, the Group
assesses whether the cash flows represent solely payments of principal and
interest ("SPPI"). Financial assets with embedded derivatives are considered
in their entirety when determining whether their cash flows are consistent
with the SPPI feature. In making this assessment, the Group considers whether
the contractual cash flows are consistent with a basic lending arrangement,
i.e. interest includes only consideration for credit risk, time value of
money, other basic lending risks and profit margin.
Where the contractual terms introduce exposure to risk or volatility that is
inconsistent with a basic lending arrangement, the financial asset is
classified and measured at FVTPL. The SPPI assessment is performed on initial
recognition of an asset and it is not subsequently reassessed.
Financial assets - reclassification. Financial instruments are reclassified
only when the business model for managing the portfolio as a whole changes.
The reclassification has a prospective effect and takes place from the
beginning of the first reporting period that follows after the change in the
business model. The Group did not change its business model during the current
and comparative period and did not make any reclassifications.
Financial assets impairment - credit loss allowance for ECL. The Group
assesses, on a forward-looking basis, the ECL for debt instruments measured at
AC and FVOCI and for the exposures arising for contractual assets. The Group
measures ECL and recognises Net impairment losses on financial and contractual
assets at each reporting date. The measurement of ECL reflects: (i) an
unbiased and probability weighted amount that is determined by evaluating a
range of possible outcomes, (ii) time value of money and (iii) all reasonable
and supportable information that is available without undue cost and effort at
the end of each reporting period about past events, current conditions and
forecasts of future conditions.
Debt instruments measured at AC and contractual assets are presented in the
consolidated statement of financial position net of the allowance for ECL. For
loan commitments and financial guarantees, a separate provision for ECL is
recognised as a liability in the consolidated statement of financial position.
The Group applies a simplified approach for impairment of cash and cash
equivalents, other short-term investments and trade and other receivables, by
recognising lifetime expected credit losses based on past default experience
and credit profiles, adjusted as appropriate for current observable data. For
other financial assets the Group applies a three stage model for impairment,
based on changes in credit quality since initial recognition. A financial
instrument that is not credit-impaired on initial recognition is classified in
Stage 1. Financial assets in Stage 1 have their ECL measured at an amount
equal to the portion of lifetime ECL that results from default events possible
within the next 12 months or until contractual maturity, if shorter ("12
Months ECL"). If the Group identifies a significant increase in credit risk
("SICR") since initial recognition, the asset is transferred to Stage 2 and
its ECL is measured based on ECL on a lifetime basis, that is, up until
contractual maturity but considering expected prepayments, if any ("Lifetime
ECL"). If the Group determines that a financial asset is credit-impaired, the
asset is transferred to Stage 3 and its ECL is measured as a Lifetime ECL. For
financial assets that are purchased or originated credit-impaired ("POCI
Assets"), the ECL is always measured as a Lifetime ECL.
Financial assets - write-off. Financial assets are written-off, in whole or in
part, when the Group has exhausted all practical recovery efforts and has
concluded that there is no reasonable expectation of recovery. The write-off
represents a derecognition event. The Group may write-off financial assets
that are still subject to enforcement activity when the Group seeks to recover
amounts that are contractually due, however, there is no reasonable
expectation of recovery.
Financial assets - derecognition. The Group derecognises financial assets when
(a) the assets are redeemed or the rights to cash flows from the assets
otherwise expire or (b) the Group has transferred the rights to the cash flows
from the financial assets or entered into a qualifying pass-through
arrangement whilst (i) also transferring substantially all the risks and
rewards of ownership of the assets or (ii) neither transferring nor retaining
substantially all the risks and rewards of ownership but not retaining
control.
Financial assets - modification. If the modified terms are substantially
different, the rights to cash flows from the original asset expire and the
Company derecognises the original financial asset and recognises a new asset
at its fair value. The date of renegotiation is considered to be the date of
initial recognition for subsequent impairment calculation purposes, including
determining whether a SICR has occurred. Any difference between the carrying
amount of the original asset derecognised and fair value of the new
substantially modified asset is recognised in profit or loss, unless the
substance of the difference is attributed to a capital transaction with
owners. If the modified asset is not substantially different from the
original asset and the modification does not result in derecognition. The
Group recalculates the gross carrying amount by discounting the modified
contractual cash flows by the original effective interest rate (or
credit-adjusted effective interest rate for POCI financial assets), and
recognises a modification gain or loss in profit or loss.
Financial liabilities - measurement categories. Financial liabilities are
classified as subsequently measured at AC, except for (i) financial
liabilities at FVTPL: this classification is applied to derivatives, financial
liabilities held for trading (e.g. short positions in securities), contingent
consideration recognised by an acquirer in a business combination and other
financial liabilities designated as such at initial recognition and (ii)
financial guarantee contracts and loan commitments. The Group's financial
liabilities include trade and other payables and lease liabilities, all of
which are classified as AC in accordance with IFRS 9.
Financial liabilities - derecognition. Financial liabilities are derecognised
when they are extinguished (i.e. when the obligation specified in the contract
is discharged, cancelled or expires).
Trade Receivables
Trade receivables are amounts due from customers for goods sold in the
ordinary course of business. If collection is expected in one year or less,
they are classified as current assets. If not, they are presented as
non-current assets.
Trade receivables are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method, less expected
credit losses.
Prepayments
Prepayments are carried at cost less provision for impairment. A prepayment is
classified as non-current when the goods or services relating to the
prepayment are expected to be obtained after one year, or when the prepayment
relates to an asset which will itself be classified as non-current upon
initial recognition. Prepayments to acquire assets are transferred to the
carrying amount of the asset once the Group has obtained control of the asset
and it is probable that future economic benefits associated with the asset
will flow to the Group. Other prepayments are written off to profit or loss
when the services relating to the prepayments are received. If there is an
indication that the assets, goods or services relating to a prepayment will
not be received, the carrying value of the prepayment is written down
accordingly and a corresponding impairment loss is recognised in profit or
loss for the year.
Investments in subsidiaries
Investments made by the Company in its subsidiaries are stated at cost in the
Company's financial statements and reviewed for impairment if there are
indications that the carrying value may not be recoverable.
Loans issued to subsidiaries
Loans issued by the Company to its subsidiaries are initially recognised in
the Company's financial statements at fair value and are subsequently carried
at amortised cost using the effective interest method, less credit loss
allowance. Net change in credit losses and foreign exchange differences on
loans issued are recognised in the Company's statement of profit or loss in
the period when incurred.
Trade and Other Payables
Trade payables are obligations to pay for goods or services that have been
acquired in the ordinary course of business from suppliers. Accounts payable
are classified as current liabilities if payment is due within one year or
less. If not, they are presented as non-current liabilities.
Trade payables are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method.
Lease liabilities
Liabilities arising from a lease are initially measured on a present value
basis. Lease liabilities include the net present value of the following lease
payments:
● fixed payments (including in-substance fixed payments),
less any lease incentives receivable,
● variable lease payments that are based on an index or a
rate, initially measured using the index or rate as at the commencement date,
● the exercise price of a purchase option if the Group is
reasonably certain to exercise that option, and
● payments of penalties for terminating the lease, if the
lease term reflects the Group exercising that option.
Extension and termination options are included in a number of property and
equipment leases across the Group. These terms are used to maximise
operational flexibility in terms of managing contracts. Extension options (or
period after termination options) are only included in the lease term if the
lease is reasonably certain to be extended (or not terminated). Lease payments
to be made under reasonably certain extension options are also included in the
measurement of the liability.
The lease payments are discounted using the interest rate implicit in the
lease. If that rate cannot be readily determined, which is generally the case
for leases of the Group, the Group's incremental borrowing rate is used, being
the rate that the Group would have to pay to borrow the funds necessary to
obtain an asset of similar value in a similar economic environment with
similar terms and conditions.
To determine the incremental borrowing rate, the Group:
● where possible, uses recent third-party financing received by
the individual lessee as a starting point, adjusted to reflect changes in
financing conditions since third party financing was received,
● uses a build-up approach that starts with a risk-free
interest rate adjusted for credit risk, and
● makes adjustments specific to the lease, e.g. term,
country, currency and collateral.
The Group is exposed to potential future increases in variable lease payments
based on an index or rate, which are not included in the lease liability until
they take effect. When adjustments to lease payments based on an index or rate
take effect, the lease liability is reassessed and adjusted against the
right-of-use asset.
Lease payments are allocated between principal and finance costs. The finance
costs are charged to profit or loss over the lease period so as to produce a
constant periodic rate of interest on the remaining balance of the liability
for each period.
Payments associated with short-term leases and all leases of low-value assets
under $5,000 are recognised on a straight-line basis as an expense in profit
or loss. Short-term leases are leases with a lease term of 12 months or less.
Equity Instruments
Ordinary shares are classified as equity. Equity instruments issued by the
Company and the Group are recorded at the proceeds received, net of direct
issue costs. Any excess of the fair value of consideration received over the
par value of shares issued is recorded as share premium in equity.
Cash and Cash Equivalents
Cash and cash equivalents comprise cash on hand and deposits held at call with
banks and other short-term highly liquid investments which are readily
convertible to a known amount of cash with insignificant risk of change in
value. Cash and cash equivalents are carried at amortised cost. Interest
income that relates to cash and cash equivalents on current and deposit
accounts is disclosed within operating cash flow.
Other short-term investments
Other short-term investments include current accounts and deposits held at
banks, which do not meet the cash and cash equivalents definition. Current
accounts and deposits held at banks, which do not meet the cash and cash
equivalents definition are measured initially at fair value and subsequently
carried at amortised cost using the effective interest method. Interest
received on other short-term investments is disclosed within operating cash
flow.
Interest income
Interest income is recognised as it accrues, taking into account the effective
yield on the asset. Interest income on current bank accounts and on demand
deposits or term deposits with a maturity of less than three months recognised
as part of cash and cash equivalents is recognised as other operating income.
Interest income on term deposits other than those classified as cash and cash
equivalents is recognised as finance income.
Certain reclassifications have been made in the comparative numbers for better
clarity and consistency of presentation.
4. Significant Accounting Judgements and Estimates
The Group makes estimates and judgements concerning the future. The resulting
accounting estimates will, by definition, seldom equal the related actual
results. The estimates and judgements which have a risk of causing material
adjustment to the carrying amounts of assets and liabilities within the next
financial year are discussed below.
Depreciation of Oil and Gas Development and Production Assets
Development and production assets held in property, plant and equipment are
depreciated on a unit of production basis at a rate calculated by reference to
proved and probable reserves at the end of the period plus the production in
the period, and incorporating the estimated future cost of developing and
extracting those reserves. Future development costs are estimated using
estimates about the number of wells required to produce those reserves, the
cost of the wells, future production facilities and operating costs, together
with assumptions on oil and gas realisations, and are revised annually. The
reserves estimates used are determined using estimates of gas in place,
recovery factors, future hydrocarbon prices and also take into consideration
the Group's latest development plan for the associated development and
production asset. The latest development plan and therefore the inputs used to
determine the depreciation charge for the MEX-GOL, SV and VAS fields continue
until the end of the economic life of the fields, which is assessed to be
2038, 2042 and 2033 respectively, based on the assessment contained in the
DeGolyer & MacNaughton reserves report for these fields. The licences for
the MEX-GOL and SV fields have recently been extended until 2044. Were the
estimated reserves at the beginning of the year to differ by 10% from previous
assumptions, the impact on depreciation for the year ended 31 December 2025
would be to increase it by $38,000 or decrease it by $31,000 (2024: increase
by $417,000 or decrease by $504,000).
Provision for Decommissioning
The Group has decommissioning obligations in respect of its Ukrainian assets.
The full extent to which the provision is required depends on the legal
requirements at the time of decommissioning, the costs and timing of any
decommissioning works and the discount rate applied to such costs.
A detailed assessment of gross decommissioning cost was undertaken on a
well-by-well basis using local data on day rates and equipment costs. The
discount rate applied on the decommissioning cost provision as at 31 December
2025 was 4.69% (31 December 2024: 4.67%). The discount rate is calculated in
real terms based on the yield to maturity of Ukrainian Government bonds
denominated in the currency in which the liability is expected to be settled
and with the settlement date that approximates the timing of settlement of
decommissioning obligations. An increase in the discount rate applied is
caused by the growth of the Ukrainian risk-free rate.
The change in estimate applied to calculate the provision as at 31 December
2025 resulted from the revision of the estimated costs of decommissioning
(decrease of $426,000 in provision), a change in the discount rate applied
(decrease of $25,000 in provision), revision of the economic life of the
MEX-GOL, SV and VAS fields (decrease of $3,473,000 in provision), and
resulting from the drilling of new development wells at the SC field (increase
of $3,000 in provision). The costs are expected to be incurred by 2048 on the
MEX-GOL field, by 2052 on the SV field, and by 2042 on the VAS field, which is
the end of the estimated economic life of the respective fields (Note 25).
Net Carrying Amount of Inter-Company Loans Receivable and Investments by the
Company into a Subsidiary
The Company has certain inter-company loans receivable from a subsidiary,
which are eliminated on consolidation. For the purpose of the Company's
financial statements, these receivable balances are carried at amortised cost
using the effective interest method, less credit loss allowance. Measurement
of lifetime expected credit losses on inter-company loans is a significant
judgment that involves models and data inputs including forward-looking
information, current conditions and forecasts of future conditions impacting
the estimated future cash flows that are expected to be recovered, time value
of money, etc. In previous years, significant impairment charges were recorded
against the carrying amount of the loans issued to subsidiaries as the present
value of estimated future cash flows discounted at the original effective
interest rate was less than the carrying amount of the loans, and the
resulting impairment losses were recognised in profit or loss in the Company's
financial statements.
For the purpose of assessment of the credit loss allowance as at 31 December
2025, the Company considered all reasonable and supportable forward-looking
information available as at that date without undue cost and effort, which
includes a range of factors, such as estimated future net cash flows to be
generated by the subsidiaries operating in Ukraine and cash flow management.
All these factors have a significant impact on the amounts subject to
repayment on the loans and investments. The estimated future discounted cash
flows generated by the subsidiaries operating in Ukraine are considered as a
primary source of repayment on the loans and investments. As at 31 December
2025, the present value of future net cash flows to be generated by the
subsidiaries operating in Ukraine during 2025 - 2029, adjusted for the
subsidiaries' working capital as at 31 December 2025 and estimated amounts
reserved by the Group for investment projects in the time horizon was
calculated.
The key assumptions used in the discounted cash flow model are:
· production levels for a period of five years assumed to
be: for the MEX-GOL, SV and VAS fields, no production during their respective
periods of suspension, and for the SC licence area, 2.05 MMboe;
· proved plus probable (2P) reserves at the beginning of
2026 at the MEX-GOL and SV fields of 42.9 MMboe, at the VAS field of 2.3 MMboe
and at the SC licence area of 12.1 MMboe;
· commodity prices - the model assumes gas prices of
$450/Mm(3) in 2026, $400/Mm(3) in 2027 and in subsequent years;
· discount rate applied is 17.80% in 2026, 14.33% in 2027,
10.87% in 2028 and beyond, determined in real terms;
· production taxes applicable to gas production at variable
rates under relevant legislation;
· capital expenditure allowance for maintenance and
development of: MEX-GOL and SV fields at the level of $750,000 per year, VAS
field at the level of $100,000 per year and SC licence area at the level of
$250,000 per year;
· future capital expenditures for a period of five years assumed
to be: for the MEX-GOL and SV fields at the level of $900,000, VAS field at
the level of $100,000 and SC licence area at the level of $116,300,000;
· life of field for the purpose of the assessment of loans - cash
flows were taken for a period of five years as management believes there is no
reasonably available information to build reliable expectations and
demonstrate the ability to settle the loans over a longer perspective;
· life of field for the purpose of the assessment of
investments - cash flows were taken for a period of the full economic life of
the respective CGUs.
The resulting amount, net of the carrying value of the Company's investments
in subsidiaries and loans, was compared to the discounted cash flows and net
financial assets of the subsidiaries as at 31 December 2025. As such, the
Company has recorded $33,905,000 of loss, being the net change in the expected
credit losses for loans issued to and investments in subsidiaries in the
Company's statement of profit or loss for the year ended 31 December 2025.
As with any economic forecast, the projections and likelihoods of occurrence
are subject to a high degree of inherent uncertainty, and therefore the actual
outcomes may be significantly different to those projected. The Company
considers these forecasts to represent its best estimate of the possible
outcomes.
5. Segmental Information
In line with the Group's internal reporting framework and management
structure, the key strategic and operating decisions are made by the Board of
Directors, who review internal monthly management reports, budget and forecast
information as part of this process. Accordingly, the Board of Directors is
deemed to be the Chief Operating Decision Maker within the Group.
The Group's only class of business activity is oil and gas exploration,
development and production. The Group's operations are located in Ukraine,
with its head office in the United Kingdom. These geographical regions are the
basis on which the Group reports its segment information. The segment results
as presented represent operating profit before depreciation, amortisation and
impairment of non-current assets.
Ukraine United Kingdom Total
2025 2025 2025
$000 $000 $000
Revenue
Gas sales 2,287 - 2,287
Condensate sales 486 - 486
Oil sales 433 - 433
Liquefied Petroleum Gas sales - - -
Other goods 140 - 140
Total revenue 3,346 - 3,346
Segment result (1,606) 2,612 1,006
Depreciation and amortisation of non-current assets (2,482) (6) (2,488)
Operating profit (1,482)
Segment assets 164,460 16,778 181,238
Capital additions* 1,353 - 1,353
*Comprises additions to property, plant and equipment (Note 17)
There are no inter-segment sales within the Group and all products are sold in
the geographical region in which they are produced. The Group is not
significantly impacted by seasonality. Revenue is recognised at a point in
time.
During 2025, 93% of all revenue generated by the Group was from sales to its
top five customers (2024: 78%).
Ukraine United Kingdom Total
2024 2024 2024
$000 $000 $000
Revenue
Gas sales 27,830 - 27,830
Condensate sales 11,153 - 11,153
Oil sales 424 - 424
Liquefied Petroleum Gas sales 5,521 - 5,521
Other goods - - -
Total revenue 44,928 - 44,928
Segment result 32,337 2,309 34,646
Depreciation and amortisation of non-current assets (5,534) (6) (5,540)
Operating profit 29,106
Segment assets 173,359 17,649 191,008
Capital additions* 3,660 - 3,660
*Comprises additions to property, plant and equipment (Note 17)
6. Cost of Sales
2025 2024
$000 $000
Production taxes 600 4,852
Depreciation of property, plant and equipment 365 4,540
Amortisation of mineral reserves (Note 18) 315 327
Staff costs (Note 9) 312 2,393
Cost of inventories recognised as an expense 210 1,315
Transmission tariff for Ukrainian gas system 77 234
Rent expenses (Note 19) 8 1,330
Cost of purchased gas 7 184
Other expenses 271 1,518
2,165 16,693
A transmission tariff for use of the Ukrainian gas transit system of
UAH464.37/Mm(3) of gas was applicable (2024: UAH101.93/Mm(3)).
7. Administrative Expenses
2025 2024
$000 $000
Staff costs (Note 9) 3,186 3,167
Consultancy fees 2,302 1,367
Amortisation of other intangible assets 340 193
Depreciation of other fixed assets 300 290
Professional services 164 168
Group Auditor's remuneration* 159 145
Rent expenses 127 118
Other expenses 916 742
7,494 6,190
*The Group's Auditor did not provide any non-audit services for the 2025 and
2024 audits.
8. Remuneration of Directors
2025 2024
$000 $000
Directors' emoluments 1,039 1,632
The emoluments of the individual Directors were as follows:
Total Total
emoluments emoluments
2025 2024
$000 $000
Executive Directors:
Bruce Burrows 528 470
Oleksiy Zayets 128 261
Sergii Glazunov - 348
Non-executive Directors:
Chuck Valceschini 204 189
Dr Gehrig Schultz 61 114
Alexey Pertin 59 72
Oleksandr Blyzniuk 54 -
Igor Basai 5 47
Yuliia Kirianova - 76
Chris Hopkinson - 55
1,039 1,632
The emoluments include base salary, bonuses and fees. According to the
Register of Directors' Interests, no rights to subscribe for shares in or
debentures of any Group companies were granted to any of the Directors or
their immediate families during the financial year, and there were no
outstanding options to Directors.
9. Staff Numbers and Costs
The average monthly number of employees during the year (including Executive
Directors) and the aggregate staff costs of such employees were as follows:
Number of employees
2025 2024
Group
Management / operational 159 167
Administrative support 107 112
266 279
2025 2024
$000 $000
Group
Wages and salaries 4,605 4,570
Security costs 1,160 1,229
5,765 5,799
10. Other Operating Gains/(Losses), (net)
2025 2024
$000 $000
Interest income on cash and cash equivalents 9,215 7,914
Write-off of accounts payable 194 63
Foreign exchange gain/(losses) 146 (121)
Staff costs (Note 9) (2,267) (239)
Depreciation and amortisation (Note 18) (1,168) (191)
Fines and penalties (2) (68)
Other operating losses, (net) (1,287) (297)
4,831 7,061
11. Finance Income
2025 2024
$000 $000
Financial instrument: unwinding of discount 177 7
177 7
12. Finance Costs
2025 2024
$000 $000
Unwinding of discount on provision for decommissioning (Note 25) 390 323
Unwinding of discount on financial liabilities and other financial costs 319 260
Interest expense on lease liabilities (Note 19) 59 80
768 663
13. Other Gains/(Losses), (net)
2025 2024
$000 $000
Foreign exchange losses (30) -
Charitable donations (2) (18)
Other (losses)/gains, (net) (32) 22
(64) 4
Charitable donations for the year ended 31 December 2025 and 2024 comprise
humanitarian aid for the population and armed forces of Ukraine.
14. Income Tax Expense
a) Income tax expense and (benefit):
2025 2024
$000 $000
Current tax
UK - current year - -
UK - prior year - -
Overseas - current year 562 5,459
Overseas - prior year - -
Deferred tax (Note 26)
UK - current year - -
UK - prior year - -
Overseas - current year 1,418 1,237
Income tax expense 1,980 6,696
b) Factors affecting tax charge for the year:
The corporation tax rate in the UK was 25.00% in 2025 (2024: 25.00%). The
expense for the year can be reconciled to the profit as per the Income
Statement as follows:
2025 2024
$000 $000
(Loss)/profit before taxation (2,505) 30,419
Tax charge at UK tax rate of 25.00% (2024: 25.00%) (626) 7,605
Tax effects of:
Lower foreign corporate tax rates in Ukraine (18.00%) (2024: 18.00%) (55) (2,326)
Disallowed expenses and non-taxable income 266 (1,677)
Previously unrecognised tax losses used to reduce income tax expense 2,395 3,094
Total tax expense for the year 1,980 6,696
The tax effect of disallowed expenses and non-taxable income are mainly
represented by foreign exchange differences of LLC Regal Petroleum Corporation
(Ukraine) Limited and the net change in credit loss allowance for loans issued
to subsidiaries and shares in subsidiary undertakings.
The tax effect of losses not recognised as deferred tax assets are mainly
represented by accumulated losses of LLC Regal Petroleum Corporation (Ukraine)
Limited.
15. Profit/(Loss) for the Year
The Company has taken advantage of the exemption allowed under section 408 of
the Companies Act 2006 and has not presented its own Income Statement in these
financial statements. The Parent Company loss after tax was $28,141,000 for
the year ended 31 December 2025 (2024: loss after tax of $12,940,000).
16. Earnings per Share
The calculation of basic earnings per ordinary share has been based on the
profit for the year and 320,637,836 (2024: 320,637,836) ordinary shares, being
the weighted average number of shares in issue for the year. There are no
dilutive instruments.
17. Property, Plant and Equipment
2025 2024
Oil and Gas Development and Production assets Oil and Gas Exploration and Evaluation Assets Other fixed Total Oil and Gas Development and Production assets Oil and Gas Exploration and Evaluation Assets Other fixed assets Total
Ukraine assets Ukraine
Group $000 $000 $000 $000 $000 $000 $000 $000
Cost
At the beginning of the year 132,674 12,939 1,992 147,605 141,902 13,944 2,181 158,027
Additions 699 569 85 1,353 3,232 336 92 3,660
Change in decommissioning provision (3,925) 5 - (3,920) 1,392 40 - 1,432
Disposals (229) - (110) (339) (114) - (120) (234)
Reclassification (53) 1 52 - (33) - 33 -
Exchange differences (1,035) (97) (31) (1,163) (13,705) (1,381) (194) (15,280)
At the end of the year 128,131 13,417 1,988 143,536 132,674 12,939 1,992 147,605
Accumulated depreciation and impairment
At the beginning of the year 72,544 1,478 1,500 75,522 75,619 1,635 1,496 78,750
Charge for year 1,321 - 126 1,447 4,535 - 218 4,753
Reclassification (14) - 14 - - - - -
Disposals (159) - (64) (223) (113) - (63) (176)
Exchange differences (614) (13) (14) (641) (7,497) (157) (151) (7,805)
At the end of the year 73,078 1,465 1,562 76,105 72,544 1,478 1,500 75,522
Net book value at the beginning of the year 60,130 11,461 492 72,083 66,283 12,309 685 79,277
Net book value at the end of the year 55,053 11,952 426 67,431 60,130 11,461 492 72,083
MEX-GOL, SV, SC and VAS gas and condensate fields
In accordance with the Group's accounting policies, oil and gas development
and producing assets are tested for an impairment loss at each balance sheet
date. As at 31 December 2025, an impairment indicator was identified by the
Group, and impairment tests were performed for the MEX-GOL, SV, SC and VAS
fields. These reviews concluded that no impairment to carrying value had
occurred on any Group asset (Note 4).
18. Intangible Assets
2025 2024
Mineral reserve rights Exploration and evaluation intangible assets Total Mineral reserve rights Exploration and evaluation intangible assets Other intangible assets Total
Other intangible assets
Group $000 $000 $000 $000 $000 $000 $000 $000
Cost
At the beginning of the year 4,419 5,585 1,025 11,029 4,891 6,190 914 11,995
Additions - - 488 488 - - 277 277
Disposals - - (82) (82) - - (74) (74)
Exchange differences (36) (47) (15) (98) (472) (605) (92) (1,169)
At the end of the year 4,383 5,538 1,416 11,337 4,419 5,585 1,025 11,029
Accumulated amortisation
At the beginning of the year 3,169 - 543 3,712 3,162 - 461 3,623
Charge for year 310 - 344 654 327 - 195 522
Disposals - - (80) (80) - - (74) (74)
Exchange differences (26) - (9) (35) (320) - (39) (359)
At the end of the year 3,453 - 798 4,251 3,169 - 543 3,712
Net book value at the beginning of the year 1,250 5,585 482 7,317 1,729 6,190 453 8,372
Net book value at the end of the year 930 5,538 618 7,086 1,250 5,585 482 7,317
Intangible assets consist mainly of the hydrocarbon production licence
relating to the VAS field which is held by one of the Group's subsidiaries,
LLC Prom-Enerho Produkt, and the SC hydrocarbon exploration licence, which is
held by LLC Arkona Gas-Energy. The Group amortises the hydrocarbon production
licence relating to the VAS field using the straight-line method over the term
of the economic life of the VAS field until 2028. The SC hydrocarbon
exploration licence is not amortised due to it being at an exploration and
evaluation stage.
In accordance with the Group's accounting policies, intangible assets are
tested for impairment at each balance sheet date as part of the impairment
testing of the Group's oil and gas development and production assets. As at 31
December 2025, an impairment indicator was identified by the Group, and
impairment tests were performed for the intangible assets. These reviews
concluded that no impairment to carrying value had occurred on any such
assets.
19. Right-of-use Assets
This note provides information for right-of-use assets and leases obligations
where the Group is a lessee.
Amount recognised in the balance sheet:
2025 2024
$000 $000
Right-of-use assets
Properties 222 469
Land 124 132
Wells 28 32
374 633
2025 2024
$000 $000
Lease liabilities
Current 315 343
Non-current 224 492
539 835
Additions to the right-of-use assets during the 2025 year were $3,000 (2024:
$790,000).
Amounts recognised in the statement of profit or loss:
2025 2024
$000 $000
Depreciation charge
Properties (246) (384)
Land (10) (10)
Wells (4) (4)
(260) (398)
Interest expense (included in finance cost) (Note 12) (59) (80)
Expense relating to short-term leases (included in cost of sales and
administrative expenses)
(131) (118)
Expense relating to variable lease payments not included in lease liabilities
(included in cost of sales) (Note 6)
(1) (1,282)
Expense relating to lease payments for land under wells not included in lease
liabilities (included in cost of sales) (Note 6)
(45) (48)
The total cash outflow for leases in 2025 was $599,000 (2024: $2,131,000).
20. Investments and Loans to Subsidiary Undertakings
Shares in subsidiary undertakings Loans to subsidiary undertakings Total
$000 $000 $000
Company
As at 1 January 2024 30,704 39,206 69,910
Additions including accrued interest - 2,795 2,795
Repayment of interest and loans - - -
Impairment (1,072) (8,962) (10,034)
Exchange differences - (2,869) (2,869)
As at 31 December 2024 29,632 30,170 59,802
Additions including accrued interest - 2,878 2,878
Repayment of interest and loans - - -
Impairment (4,266) (29,639) (33,905)
Exchange differences - 6,127 6,126
As at 31 December 2025 25,366 9,535 34,901
The Company has recorded a loss of $33,905,000, being the cumulative change in
expected credit losses for loans issued to subsidiaries and impairment in the
cost of investments in subsidiaries in the Company's statement of profit or
loss for the year ended 31 December 2025 (Note 4) (2024: $10,034,000).
The Company's discounted cash flow model used for the assessment of the
investments recoverability, flexed for sensitivities, produced the following
results:
31 December 2025 31 December 2024
$000 $000
Discount rate (increase)/decrease by 1% (38)/34 (552)/601
Change in gas price increase/(decrease) by 10% 6,570/(6,570) 5,047/(5,063)
The table presented below discloses the changes in the gross carrying amount
and credit loss allowance between the beginning and the end of the reporting
period for loans to subsidiary undertakings carried at amortised cost and
classified within a three-stage model for impairment assessment as at
31 December 2025:
Credit loss allowance Gross carrying amount
Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total
(12-months ECL) (lifetime ECL for SICR) (lifetime ECL for credit (12-months ECL) (lifetime ECL for SICR) (lifetime ECL for credit impaired)
impaired)
$000 $000 $000 $000 $000 $000 $000 $000
As at 1 January 2025 (7,272) - (31,662) (38,934) 19,154 - 49,950 69,104
Movements with impact on credit loss allowance charge for the year:
Modification of loans - - 5,183 5,183 - - (5,183) (5,183)
Additions including accrued interest
- - - - 960 - 1,918 2,878
Payment of interest - - - - - - - -
Repayment of loans - - - - - - - -
Exchange difference - - - - - - 6,126 6,126
Changes to ECL measurement model assumptions
(6,031) - (23,608) (29,639) - - - -
Total movements with impact on credit loss allowance charge for the year
(6,031) - (18,425) (24,456) 960 - 2,861 3,821
As at 31 December 2025
(13,303) - (50,087) (63,390) 20,114 - 52,811 72,925
ECL - Expected credit losses
SICR - Significant increase in credit risk
The table presented below discloses the changes in the gross carrying amount
and credit loss allowance between the beginning and the end of the reporting
period for loans to subsidiary undertakings carried at amortised cost and
classified within a three-stage model for impairment assessment as at
31 December 2024:
Credit loss allowance Gross carrying amount
Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total
(12-months ECL) (lifetime ECL for SICR) (lifetime ECL for credit (12-months ECL) (lifetime ECL for SICR) (lifetime ECL for credit impaired)
impaired)
$000 $000 $000 $000 $000 $000 $000 $000
As at 1 January 2024 (5,260) - (27,750) (33,010) 18,194 - 54,022 72,216
Movements with impact on credit loss allowance charge for the year:
Modification of loans - - 3,038 3,038 - - (3,038) (3,038)
Additions including accrued interest
- - - - 960 - 1,835 2,795
Payment of interest - - - - - - - -
Repayment of loans - - - - - - - -
Exchange difference - - - - - - (2,869) (2,869)
Changes to ECL measurement model assumptions
(2,011) - (6,950) (8,962) - - - -
Total movements with impact on credit loss allowance charge for the year
(2,011) - (3,912) (5,923) 960 - (4,072) (3,112)
As at 31 December 2024
(7,272) - (31,662) (38,934) 19,154 - 49,950 69,104
ECL - Expected credit losses
SICR - Significant increase in credit risk
Subsidiary undertakings
As at 31 December 2025 and 2024, the Company's subsidiary undertakings, all of
which are included in the consolidated financial statements, were:
Registered address Country of Country of operation Principal activity % of shares held
incorporation
31 December 2025 31 December 2024
Regal Petroleum Corporation Limited 3(rd) Floor, Charter Place, 23-27 Seaton Place, St Helier, Jersey, JE4 0WH Jersey Ukraine Oil & Natural Gas Extraction 100% 100%
Regal Petroleum Corporation Limited (Branch Office) 162 Shevchenko Str., Yakhnyky Village, Lokhvytsya District, Poltava Region, Ukraine Oil & Natural Gas Extraction
37212
LLC Arkona Gas-Energy 162 Shevchenko Str., Yakhnyky Village, Lokhvytsya District, Poltava Region, Ukraine Ukraine Exploration and Evaluation for Oil and Natural Gas 100% 100%
37212
LLC Regal 162 Shevchenko Str., Yakhnyky Village, Lokhvytsya District, Poltava Region, Ukraine Ukraine Holding Company 100% 100%
37212
Petroleum Corporation (Ukraine) Limited
LLC Prom-Enerho Produkt 3 Klemanska Str., Kiev, 02081 Ukraine Ukraine Oil & Natural Gas Extraction 100% 100%
Well Investum LLC 58 Yaroslavska str., Kyiv, 04071 Ukraine Ukraine Dormant Company 100% 100%
The Parent Company, Enwell Energy plc, holds direct interests in 100% of the
share capital of Regal Petroleum Corporation Limited, LLC Regal Petroleum
Corporation (Ukraine) Limited, LLC Arkona Gas-Energy and Well Investum LLC,
and a 100% indirect interest in LLC Prom-Enerho Produkt through its 100%
shareholding in LLC Regal Petroleum Corporation (Ukraine) Limited, which owns
all of the share capital of LLC Prom-Enerho Produkt.
21. Inventories
Group
2025 2024
$000 $000
Current
Materials and spare parts 2,457 2,465
Finished goods 549 687
3,006 3,152
Inventories consist of materials, spare parts and finished goods. Materials
and spare parts are represented by spare parts that were not assigned to any
new wells, production raw materials and fuel at the storage facility. Finished
goods consist of produced gas held in underground gas storage facilities and
condensate and LPG held at the processing facility prior to sale.
As at 31 December 2025, allowances for impairment of materials and spare parts
amounted to $532,000 (31 December 2024: $606,000).
All inventories are measured at the lower of cost or net realisable value.
There was no write off of inventory as at 31 December 2025 or 2024.
22. Trade and Other Receivables
Group Company
2025 2024 2025 2024
$000 $000 $000 $000
Trade receivables - 2,951 - -
Accounts receivable from accrued income
444 355 - -
Other financial receivables 1,472 1,308 766 600
Less credit loss allowance - (134) - -
Total financial receivables 1,916 4,480 766 600
Prepayments 649 665 412 253
Other receivables 3,680 3,057 955 946
Less credit loss allowance (765) (554) (727) (551)
Total trade and other receivables 5,480 7,648 1,406 1,248
Due to the short-term nature of the trade and other receivables, their
carrying amount is assumed to be the same as their fair value. All trade and
other financial receivables, except those provided for, are considered to be
of high credit quality.
As at 31 December 2024, 100% of the Group's trade receivables were denominated
in Ukrainian Hryvnia. A further description of financial receivables is
disclosed in Note 30.
Analysis by credit quality of financial trade and other receivables and
expected credit loss allowance as at 31 December 2025 is as follows:
Loss rate Gross carrying amount Life-time ECL Carrying amount Basis
$000 $000 $000
Prepayments - credit impaired 100% 189 (189) - number of days the asset is past due
Prepayments - other 66.14% 460 - 460 historical credit losses experienced
Other receivables - credit impaired 100% 576 (576) - number of days the asset is past due
Other receivables - other 66.14% 3,104 - 3,104 historical credit losses experienced
Total trade and other receivables for which individual approach for ECL is 4,329 (765) 3,564
used
Analysis by credit quality of financial trade and other receivables and
expected credit loss allowance as at 31 December 2024 is as follows:
Loss rate Gross carrying amount Life-time ECL Carrying amount Basis
$000 $000 $000
Trade receivables - credit impaired 100% 60 (60) - number of days the asset is past due
Trade receivables - other 37.96% 2,891 (74) 2,817 historical credit losses experienced
Prepayments - credit impaired 100% 3 (3) - number of days the asset is past due
Prepayments - other 37.96% 663 - 663 historical credit losses experienced
Other receivables - credit impaired 100% 551 (551) - number of days the asset is past due
Other receivables - other 37.96% 2,504 - 2,504 historical credit losses experienced
Total trade and other receivables for which individual approach for ECL is 6,672 (688) 5,984
used
ECL - Expected credit losses
The following table explains the changes in the credit loss allowance for
trade and other receivables under the simplified ECL model between the
beginning and the end of the year:
2025 2024
$000 $000
Trade and other receivables
Balance as at 1 January 688 323
New originated or purchased 492 483
Financial assets derecognised during the year (194) (249)
Changes in estimates and assumptions (223) 162
Foreign exchange movements 2 (31)
Balance as at 31 December 765 688
23. Cash and Cash Equivalents
Group Company
2025 2024 2025 2024
$000 $000 $000 $000
Cash and Cash Equivalents
Cash at bank 49,029 66,095 15,427 16,369
Demand deposits and term deposits with maturity of less than 3 months
48,064 33,303 - -
97,093 99,398 15,427 16,369
Cash at bank earns interest at fluctuating rates based on daily bank deposit
rates. Demand deposits are made for varying periods depending on the immediate
cash requirements of the Group and earn interest at the respective short-term
deposit rates. The terms and conditions upon which the Group's demand deposits
are intended to allow immediate access to all cash deposits, with no
significant loss of interest.
Group Company
2025 2024 2025 2024
$000 $000 $000 $000
Cash and Cash Equivalents
Ukrainian Hryvnia 81,666 83,026 - -
US Dollars 13,136 15,954 13,136 15,951
British Pounds 2,010 171 2,010 171
Euros 281 247 281 247
97,093 99,398 15,427 16,369
The credit quality of cash and cash equivalents balances may be summarised
based on Moody's ratings as follows as at 31 December:
Cash at bank and on hand Short-term deposits Demand deposits and term deposits with maturity less than 3 months Total cash and cash equivalents and other short-term investments
2025 2025 2025
$000 $000 $000
A- to A+ rated 22,836 47,844 - 70,680
B- to B+ rated 26,169 - - 26,169
C- to C+ rated 13 220 - 233
Unrated 11 - - 11
49,029 48,064 - 97,093
Cash at bank and on hand Short-term deposits Demand deposits and term deposits with maturity less than 3 months Total cash and cash equivalents and other short-term investments
2024 2024 2024
$000 $000 $000
A- to A+ rated 16,372 - - 16,372
B- to B+ rated - - - -
C- to C+ rated 23,114 - - 23,114
Unrated 26,609 33,303 - 59,912
66,095 33,303 - 99,398
For cash and cash equivalents, the Group assessed ECL based on the Moody's
rating for rated banks and based on the local national rating agencies as at
31 December 2025 for non-rated banks. Based on this assessment, the Group
concluded that the identified impairment loss was immaterial.
24. Trade and Other Payables
Group Company
2025 2024 2025 2024
$000 $000 $000 $000
Trade payables 334 315 174 46
Taxation and social security 35 1,035 27 25
Other payables 1,642 1,887 881 479
Advances received 1 49 - -
2,012 3,286 1,083 550
The carrying amounts of trade and other payables are assumed to be the same as
their fair values, due to their short-term nature. Financial payables are
disclosed in Note 30.
25. Provision for Decommissioning
2025 2024
$000 $000
Group
At the beginning of the year 8,276 7,305
Unwinding of discount 390 323
Change in estimate (3,920) 1,432
Effect of exchange difference (11) (784)
At the end of the year 4,735 8,276
The provision for decommissioning is based on the net present value of the
Group's estimated liability for the removal of the Ukrainian production
facilities and well site restoration at the end of production life.
The non-current provision of $4,735,000 (31 December 2024: $8,276,000)
represents a provision for the decommissioning of the Group's MEX-GOL, SV, VAS
and SC production and exploration facilities, including site restoration.
The change in estimates applied to calculate the provision as at 31 December
2025 is explained in Note 4.
The principal assumptions used are as follows:
31 December 2025 31 December 2024
Discount rate 4.69% 4.67%
Average cost of restoration per well ($000) 346 307
The sensitivity of the restoration provision to changes in the principal
assumptions to the provision balance and related asset is presented below:
31 December 2025 31 December 2024
$000 $000
Discount rate (increase)/decrease by 1% (890)/1,115 (961)/1,123
Change in average cost of well restoration increase/(decrease) by 10% 474/(474) 828/(828)
26. Deferred Tax
2025 2024
$000 $000
Deferred tax (liability)/asset recognised relating to oil and gas development
and production assets at the MEX-GOL-SV fields and provision for
decommissioning
At the beginning of the year (5,796) (4,976)
Charged to Income Statement - UK current year (1,487) (1,284)
Charged to Income Statement - UK prior year - -
Effect of exchange difference 45 464
At the end of the year (7,238) (5,796)
2025 2024
$000 $000
Deferred tax asset/(liability) recognised relating to development and
production assets at the VAS field and provision for decommissioning
At the beginning of the year 363 352
Credited to Income Statement - overseas current year 69 47
Effect of exchange difference (5) (36)
At the end of the year 427 363
There was a further $67,020,914 (31 December 2024: $68,480,000) of
unrecognised UK tax losses carried forward for which no deferred tax asset in
the amount of $16,755,229 has been recognised. These losses can be carried
forward indefinitely, subject to certain rules regarding capital transactions
and changes in the trade of the Company. However, as at the balance sheet
date, there is no evidence that taxable profit will be available against which
the unused tax losses can be realised.
The deferred tax asset relating to the Group's provision for decommissioning
as at 31 December 2025 of $715,000 (31 December 2024: $615,000) was
recognised on the tax effect of the temporary differences of the Group's
provision for decommissioning at the MEX-GOL and SV fields, and its tax base.
The deferred tax liability relating to the Group's development and production
assets at the MEX-GOL and SV fields as at 31 December 2025 of $7,953,000 (31
December 2024: $6,411,000) was recognised on the tax effect of the temporary
differences between the carrying value of the Group's development and
production asset at the MEX-GOL and SV fields, and its tax base. The deferred
tax liability will be settled more than twelve months after the reporting
period.
The deferred tax asset relating to the Group's provision for decommissioning
as at 31 December 2025 of $216,000 (31 December 2024: $355,000) was recognised
on the tax effect of the temporary differences on the Group's provision on
decommissioning at the VAS field, and its tax base. The deferred tax asset
relating to the Group's development and production assets at the VAS field as
at 31 December 2025 of $211,000 (31 December 2024: $8,000) was recognised on
the tax effect of the temporary differences between the carrying value of the
Group's development and production asset at the VAS field, and its tax base.
The deferred tax asset is expected to be recovered more than twelve months
after the reporting period.
Losses accumulated in a Ukrainian subsidiary service company of
UAH1,857,716,846 ($43,826,687) as at 31 December 2025 and UAH1,574,676,772
($37,457,522) as at 31 December 2024 mainly originated as foreign exchange
differences on inter-company loans and for which no deferred tax asset was
recognised as this subsidiary is not expected to have taxable profits to
utilise these losses in the future.
As at 31 December 2025 and 2024, the Group has not recorded a deferred tax
liability in respect of taxable temporary differences associated with
investments in subsidiaries as the Group is able to control the timing of the
reversal of those temporary differences and does not intend to reverse them in
the foreseeable future.
Double tax treaty
In accordance with the Double Tax Treaties between Ukraine and the United
Kingdom, the Group accrues and pays withholding tax on current amounts of
interest at the moment when such interest accrues and is paid.
27. Called Up Share Capital
2025 2024
Number $000 Number $000
Allotted, called up and fully paid
Opening balance as at 1 January 320,637,836 28,115 320,637,836 28,115
Issued during the year - - - -
Closing balance as at 31 December 320,637,836 28,115 320,637,836 28,115
There are no restrictions over any ordinary shares issued. The Company is a
public company limited by shares.
28. Other Reserves
The holders of ordinary shares are entitled to receive dividends as declared
and are entitled to one vote per share at any general meeting of shareholders.
Other reserves, the movements in which are shown in the statements of changes
in equity, comprise the following:
Capital contributions reserve
The capital contributions reserve is non-distributable and represents the
value of equity invested in subsidiary entities prior to the Company listing.
Merger reserve
The merger reserve represents the difference between the nominal value of
shares acquired by the Company and those issued to acquire subsidiary
undertakings. This balance relates wholly to the acquisition of Regal
Petroleum (Jersey) Limited and that company's acquisition of Regal Petroleum
Corporation Limited during 2002.
Foreign exchange reserve
Exchange reserve movement for the year attributable to currency fluctuations.
This balance predominantly represents the result of exchange differences on
non-monetary assets and liabilities where the subsidiaries' functional
currency is not the US Dollar.
29. Reconciliation of Operating Profit to Operating Cash Flow
2025 2024
$000 $000
Group
Operating (loss)/profit (1,482) 29,386
Depreciation and amortisation 2,051 5,674
Less interest income recorded within operating profit (9,215) (7,914)
Fines and penalties 2 68
Net (gain)/loss on sale of non-current assets (20) (35)
Change in working capital:
(Increase)/decrease in provisions (18) 522
Decrease/(increase) in inventory 100 (501)
Decrease in receivables 2,041 8,500
(Decrease) in payables (1,121) (2,661)
Cash (used)/generated from operations (7,662) 33,039
2025 2024
$000 $000
Company
Operating loss (37,136) (12,829)
Interest received (613) (920)
Depreciation 6 6
Change in working capital:
Movement in provisions (including impairment of subsidiary loans) 34,108 10,021
(Increase)/decrease in receivables (360) 101
Increase/(decrease) in payables 538 (1,307)
Cash used in operations (3,458) (4,928)
30. Financial Instruments
Capital Risk Management
The Group defines its capital as equity. As at 31 December 2025, net assets
were $165,703,000 (31 December 2024: $171,440,000). The primary source of the
Group's liquidity has been cash generated from operations. The Group's
objectives when managing capital are to safeguard the Group's and the
Company's ability to continue as a going concern in order to provide returns
for shareholders and benefits for other stakeholders and to maintain an
optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the
amount of dividends paid to shareholders, return capital to shareholders,
issue new shares or sell assets.
The capital structure of the Group consists of equity attributable to the
equity holders of the parent, comprising issued share capital, share premium,
reserves and retained earnings.
There are no capital requirements imposed on the Group.
Financial Risk Management
The Group's financial instruments comprise cash and cash equivalents and
various items such as debtors and creditors that arise directly from its
operations. The Group has bank accounts denominated in British Pounds, US
Dollars, Euros and Ukrainian Hryvnia. The Group does not have any external
borrowings. The main future risks arising from the Group's financial
instruments are currently currency risk, interest rate risk, liquidity risk
and credit risk.
The Group's financial assets and financial liabilities comprise the following:
Financial Assets
2025 2024
$000 $000
Group
Cash and cash equivalents 97,093 99,398
Trade and other financial receivables 1,916 4,125
Non-current receivables 29 51
99,038 103,574
2025 2024
$000 $000
Company
Cash and cash equivalents 15,427 16,369
Loans to subsidiary undertakings 9,535 30,170
24,962 46,539
Financial Liabilities
2025 2024
$000 $000
Group
Loans 393 -
Lease liabilities 539 835
Trade payables 334 315
Other financial liabilities 392 655
1,658 1,805
2025 2024
$000 $000
Company
Trade and other payables 491 245
491 245
Financial assets and financial liabilities are measured at amortised cost,
which approximates their fair value as the instruments are mostly short-term.
Assets and liabilities of the Group where fair value is disclosed are level 2
in the fair value hierarchy and valued using the current cost accounting
technique.
Financial instruments that potentially subject the Group to concentrations of
credit risk consist primarily of cash and cash equivalents and accounts
receivable, and financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of cash and cash equivalents
and loans to subsidiary undertakings.
Currency Risk
The functional currencies of the Group's entities are US Dollars and Ukrainian
Hryvnia. The following analysis of net monetary assets and liabilities shows
the Group's currency exposures. Exposures comprise the monetary assets and
liabilities of the Group that are not denominated in the functional currency
of the relevant entity.
2025 2024
Currency $000 $000
British Pounds 89 383
US Dollars - 1,363
Euros 279 242
Net monetary assets less liabilities 368 1,988
The sensitivity of the exchange rate of US Dollars is presented below:
31 December 2025 31 December 2024
$000 $000
Increase/(decrease) by 10% 37/(37) 63/(63)
The prior year comparative figures were amended to conform to the current year
presentation.
Interest Rate Risk Management
The Group is not exposed to interest rate risk on financial liabilities as
none of the entities in the Group have any external borrowings. The Group does
not use interest rate forward contracts and/or interest rate swap contracts as
part of its strategy.
The Group is exposed to interest rate risk on financial assets as entities in
the Group hold money market deposits at floating interest rates. The risk is
managed by fixing interest rates for a period of time when indications exist
that in the Group's opinion interest rates may move adversely.
The Group's exposure to interest rates on financial assets and financial
liabilities are detailed in the liquidity risk section below.
Interest Rate Sensitivity Analysis
The sensitivity analysis below has been determined based on exposure to
interest rates for non-derivative instruments at the balance sheet date. A
0.5% increase or decrease is used when reporting interest rate risk internally
to key management personnel and represents management's assessment of a
reasonably possible change in interest rates.
If interest rates earned on money market deposits had been 0.5% higher / lower
and all other variables were held constant, the Group's:
· profit for the year ended 31 December 2025 would increase by
$504,341 in the event of 0.5% higher interest rates and decrease by $504,341
in the event of 0.5% lower interest rates (profit for the year ended 31
December 2024 would increase by $372,385 in the event of 0.5% higher interest
rates and decrease by $372,385 in the event of 0.5% lower interest rates).
This is mainly attributable to the Group's exposure to interest rates on its
money market deposits; and
· other equity reserves would not be affected (2024: not
affected).
Interest payable on the Group's liabilities would have an immaterial effect on
the profit or loss for the year.
Liquidity Risk
The Group's objective throughout the year has been to ensure continuity of
funding. Operations have primarily been financed through revenue from its
Ukrainian operations.
The table below shows liabilities by their remaining contractual maturity. The
amounts disclosed in the maturity table are the contractual undiscounted cash
flows including future interest. Such undiscounted cash flows differ from the
amount included in the statement of financial position because the statement
of financial position amount is based on discounted cash flows and does not
include the interest that will be accrued in future periods.
When the amount payable is not fixed, the amount disclosed is determined by
reference to the conditions existing at the reporting date. Foreign currency
payments are translated using the spot exchange rate at the end of the
reporting period. The maturity analysis of financial liabilities as at 31
December 2025 is as follows:
As at 31 December 2025 On demand and less than 1 month From 1 to 3 months From 3 to 12 months From 12 months to 5 years More than 5 years Total
$000 $000 $000 $000 $000 $000
Liabilities
Loan - - - 1,919 - 1,919
Trade and other payables 334 - - - - 334
Lease liabilities 30 61 243 147 309 790
Other non-current liabilities - 18 - 73 110 201
Total future payments, including future principal and interest payments 364 79 243 2,139 419 3,244
The maturity analysis of financial liabilities as at 31 December 2024 is as
follows:
As at 31 December 2024 On demand and less than 1 month From 1 to 3 months From 3 to 12 months From 12 months to 5 years More than 5 years Total
$000 $000 $000 $000 $000 $000
Liabilities
Trade and other payables 315 - - - - 315
Lease liabilities 4 9 37 58 156 264
Other non-current liabilities - 18 - 92 112 222
Total future payments, including future principal and interest payments 319 27 37 150 268 801
Details of the Group's cash management policy are explained in Note 23.
Liquidity risk for the Group is further detailed under the Principal Risks
section above.
Credit Risk
Credit risk principally arises in respect of the Group's cash balance. For
balances held outside Ukraine, where $15,427,116 of the overall cash and cash
equivalents is held (31 December 2024: $16,368,991), the Group only deposits
cash surpluses with major banks of high quality credit standing (Note 23). As
at 31 December 2025, the remaining balance of $81,666,128 of cash and cash
equivalents was held in Ukraine (31 December 2024: $83,028,813 of cash and
cash equivalents was held in Ukraine). As at 31 December 2025, Standard &
Poor's affirmed Ukraine's sovereign credit rating of 'CCC', Outlook Positive.
There is no international credit rating information available for the specific
banks in Ukraine where the Group currently holds its cash and cash
equivalents.
The Group has taken steps to diversify its banking arrangements between a
number of banks in Ukraine and increased the quality of cash placed with UK
and European banking institutions. These measures are designed to spread the
risks associated with each bank's creditworthiness. Management considers the
credit risk to be immaterial.
Interest Rate Risk Profile of Financial Assets
The Group had the following cash and cash equivalent balances which are
included in financial assets as at 31 December with an exposure to interest
rate risk:
Currency Total Floating rate financial assets Fixed rate financial assets Total Floating rate financial assets Fixed rate financial assets
2025 2025 2025 2024 2024 2024
$000 $000 $000 $000 $000 $000
Euros 281 281 - 247 247 -
British Pounds 2,010 2,010 - 171 171 -
Ukrainian Hryvnia 81,666 - 81,666 83,026 - 83,026
US Dollars 13,136 13,136 - 15,954 15,954 -
97,093 15,427 81,666 99,398 16,372 83,026
Cash deposits included in the above balances comprise term deposits with
maturity less than 3 months of $48,064,000 (2024: term deposits with maturity
less than 3 months of $33,303,000).
As at 31 December 2025, cash and cash equivalents of the Company of
$13,417,000 were held in US Dollars and Euros at a floating rate (2024:
$16,199,000).
Interest Rate Risk Profile of Financial Liabilities
As at 31 December 2025 and 2024, the Group had no interest bearing financial
liabilities.
Borrowing Facilities
As at 31 December 2025 and 2024, the Group did not have any borrowing
facilities available to it.
Fair Value of Financial Assets and Liabilities
The fair value of all financial instruments is not materially different from
their book value.
31. Contingencies and Commitments
Amounts contracted in relation to the Group's 2025 investment programme in the
MEX-GOL, SV, VAS and SC fields in Ukraine, but not provided for in the
financial statements at 31 December 2025, were $7,326 related to Oil and Gas
Exploration and Evaluation assets and $314,955 related to Oil and Gas
Development and Production assets (2024: $0 related to Oil and Gas Exploration
and Evaluation assets and $461,000 related to Oil and Gas Development and
Production assets).
32. Related Party Disclosures
Key management personnel of the Group are considered to comprise only the
Directors. Details of Directors' remuneration are disclosed in Note 8.
During the year, Group companies entered into the following transactions with
related parties who are not members of the Group:
Total LLC Smart Energy Other Total LLC Smart Energy Other
2025 2025 2025 2024 2024 2024
$000 $000 $000 $000 $000 $000
Sale of goods/services 176 - 176 20 13 7
Purchase of goods/services (873) (40) (833) 824 258 566
Loans received from related parties (1,864) - (1,864) - - -
Loans made to related parties 1,525 - 1,525 - - -
Interest (55) - (55) - - -
Amounts owed by related parties 12 4 8 13 9 4
Amounts owed to related parties (148) (5) (143) 73 3 70
All related party transactions were with subsidiaries of the ultimate Parent
Company, and primarily relate to inter-group loans, as well as the sale of
gas, the rental of office facilities and a vehicle and the sale of equipment.
The amounts outstanding have been or will be settled in cash.
In the year, the Group made loans to and received loans from subsidiaries of
the ultimate Parent Company. These loans are nominated in Great British Pounds
with the maturity date of March 2028. The full value of the loans in the year
are as stated above and remained outstanding in accordance with their terms at
year end.
As at the date of this report, none of the Company's controlling parties
prepares consolidated financial statements available for public use.
33. Post Balance Sheet Events
The ongoing war in Ukraine means that the fiscal, economic and humanitarian
situation in Ukraine is unstable and extremely challenging and the final
resolution and consequences of the ongoing war are hard to predict, but they
may have a further serious impact on the Ukrainian economy and business of the
Group. Management continues to identify and mitigate, where possible, the
impact on the Group, but the majority of these factors are beyond their
control, including the duration and severity of war, as well as the further
actions of various governments and diplomacy.
34. Auditor's Limitation Liability Agreement
It is proposed that an Auditor's Limitation of Liability Agreement in respect
of the financial year ended 31 December 2025 between the Company and Zenith
Audit Ltd will be entered into following shareholders approval being obtained
at the next Annual General Meeting of the Company. The principal terms and
conditions of such Agreement are set out below:
- The Agreement limits the amount of any liability owed to the Company by
the Auditor in respect of any negligence, default, breach of duty or breach of
trust, occurring in the course of the audit of the Company's financial
statements for the year ended 31 December 2025, for which the Auditor may
otherwise be liable to the Company.
- The Agreement also stipulates the maximum aggregated amount payable in
event of any of the circumstances stated above.
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. END FR KZGMKVZZGVZM
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