REG - Europa Oil & Gas - Final Results
14/11/2022 07:00
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RNS Number : 2091G Europa Oil & Gas (Holdings) PLC 14 November 2022
Europa Oil & Gas (Holdings) plc / Index: AIM / Epic: EOG / Sector: Oil
& Gas
14 November 2022
Europa Oil & Gas (Holdings) plc
("Europa" or the "Company")
Final results for the year to 31 July 2022
Europa Oil & Gas (Holdings) plc, the AIM traded UK, Ireland and Morocco
focused oil and gas exploration, development, and production
company, announces its audited final results for the 12 month period ended 31
July 2022.
The full Annual Report and Accounts will be available shortly on the Company's
website at www.europaoil.com (http://www.europaoil.com) and will be mailed to
those shareholders who have requested a paper copy today.
Financial performance
· Revenue more than quadrupled to £6.6 million (2021: £1.4 million)
· Pre-tax profit of £1.4 million (2021: pre-tax loss £0.85 million)
· Net cash generated in operating activities £2.5 million (2021: used
in operations £0.5 million)
· Cash balance (including restricted cash): £8.3 million (2021: £0.9
million)
Operational highlights - building a balanced portfolio of exploration and
production assets
Onshore UK - net production increases 163% to 245 bopd following excellent
Wressle performance (2021: 93 bopd)
· First oil at Wressle achieved in January 2021
o Post proppant squeeze gross production rates of 500 bopd increased
throughout the period to over 750 bopd
o Net share of Wressle production at 597 bopd equates to 179 bopd (Europa 30%
interest)
o With an estimated break-even oil price (excluding Europa's corporate
overheads) of US$16.1 per barrel, Wressle production is highly profitable at
current oil prices
o Further resources in the Wingfield Flags and Penistone Flags reservoirs are
being planned for development and have the potential to materially increase
net reserves
o Gas monetisation project under development with potential for significant
oil production gains as a result
· Total net production of 245 boepd was produced from Europa's UK
onshore fields during the year with Wressle contributing roughly three
quarters of this and the remainder coming from the three older fields
· CausewayGT and geothermal project partner Baker Hughes identified
Europa's West Firsby oil field in the East Midlands as a potential candidate
for developing a closed-loop geothermal system
· Future potential for West Firsby to continue delivering revenue and
for additional well stock to be repurposed to generate emission-free
geothermal energy, directly in line with the Company's ESG strategy
Offshore UK - acquisition of a 25% interest in the Serenity discovery in the
North Sea
· In March 2022, we announced the proposed farm-in to the Serenity
appraisal well from i3 Energy plc which involved acquiring a 25% interest by
paying 46.25% of the cost of the well
· This was accompanied by a successful equity raise of £7 million at a
price of 1.8 pence per share
· This fulfilled the Company's promised goal of adding an appraisal
asset to the Europa portfolio and is in line with our long-term strategy to
create a balanced portfolio of high-quality assets
Offshore Morocco - farm-out of Inezgane Licence in the Agadir Basin
· Europa has a 75% interest in Inezgane and operatorship of the Licence
covering an area of 11,228 km(2)
· Inezgane represents a high-impact exploration opportunity in a highly
underexplored area of the world - complementing Europa's strategy of building
a balanced portfolio of assets
· Recent evaluation identified a significant volume of unrisked
recoverable resources, in excess of 1 billion barrels (oil equivalent), in the
top five ranked prospects alone
· Morocco offers an attractive investment opportunity with excellent
fiscal terms. Several major and mid-cap companies already hold acreage there,
including ENI, Hunt and Genel
· One year extension to initial phase of the licence to November 2022
granted to allow for time lost as a result of Covid-19
· Farm-out exercise has continued throughout the year
Offshore Ireland - lower risk / very high reward infrastructure-led
exploration in proven gas play in the Slyne Basin
· Farm-out initiative is continuing on 100%-owned Licence FEL 4/19
which holds the flagship 1.5 tcf Inishkea prospect adjacent to existing
infrastructure at the producing Corrib gas field
· Completed all work commitments for the first phase of the licence.
Board
· Appointment of Will Holland as CFO and Executive Director in June
2022
Post reporting period events
· The Serenity appraisal well commenced drilling in September and was
completed in early October. The well did not encounter any oil-bearing sands
but has provided valuable technical data and furthered our understanding of
the field. The Company, in conjunction with Operator i3 Energy plc, is
currently assessing development options for the field
· The net cost to Europa of the Serenity well is forecast to be £4.8
million (£2 million below budget net to Europa), which is expected to provide
tax relief against the Energy Profits Levy (Windfall Tax) on the Company's
profits generated from its ongoing onshore production
· Consent granted by the Irish authorities to extend the first phase of
licence FEL 4/19 to 31 January 2024
· The extension will enable further technical work and allow more time
to secure a partner to advance development of the licence.
· On 8 September 2022 the Company entered into a loan agreement with
Union Jack Oil plc ("UJO"). The key features of the loan were: £1 million
loan amount, 18-month term, interest rate of 11% per annum, repayable at any
point during the term without penalty and secured against 10% interest in the
Wressle field (PEDL180, and PEDL182). The loan was to provide additional
liquidity during the drilling of the Serenity appraisal well. The loan was
repaid in full on 18 October 2022.
Simon Oddie, CEO of Europa, said:
"The 2021/2022 period has seen significant change at Europa and this is
clearly demonstrated in our numbers. Revenue from operating activities has
quadrupled and net cash generated for the period is £2.5 million, resulting
in a healthy balance sheet on which to continue to execute on our stated
strategy of building a more balance portfolio of assets.
Wressle continues to perform above expectations and further development
activities to increase production through implementing a gas solution and
drilling the Penistone horizon within the Wressle field are planned over the
next 12-18 months. In addition, we plan to drill the Broughton North prospect,
which is a Wressle lookalike and can be produced through the existing
infrastructure at Wressle.
We will also continue to seek new appraisal opportunities to add to our
portfolio. The Serenity appraisal well was disappointing, but the data that we
have acquired will help optimise the development of the field and the funds
spent on the appraisal well will now go to offset our exposure to the Energy
Profits Levy.
Our assets all supply (or will supply when in production) local markets and as
such help to satisfy local demand for hydrocarbons with minimal total
emissions. This is epitomised by our Inishkea exploration prospect offshore
Ireland, which could be tied into the existing infrastructure at Corrib and
has the potential to meet Ireland's domestic retail demand for the next 17
years. This would displace imported gas and significantly reduce the emissions
associated with Ireland's gas consumption.
These are exciting times for Europa with plenty of operational activities that
can all deliver additional shareholder value whilst we continue to build on
our existing asset base."
For further information, please visit www.europaoil.com
(http://www.europaoil.com/) or contact:
Simon Oddie / William Holland Europa mail@europaoil.com
James Dance / James Spinney Strand Hanson Limited +44 (0) 20 7409 3494
Peter Krens Tennyson Securities +44 (0) 20 7186 9033
Patrick d'Ancona / Finlay Thomson Vigo Consulting + 44 (0) 20 7390 0230
Chairman's Statement
The financial year 2021/22 has been an exceptionally busy period for Europa
and positions the Company very strongly for the future. Despite the ongoing
Covid-19 pandemic, the onset of war between Russia and Ukraine, and continuing
global economic volatility, the period delivered outstanding operational
results for Europa. Our onshore UK Wressle oilfield came onstream in January
2021 and has continued to outperform expectations, it has been the backbone of
our production where our total average net rate for the period is 245 bopd,
boosting revenues and strengthening our balance sheet.
As well as our onshore operational success at Wressle, we also farmed into the
Serenity field offshore UK, taking a 25% interest in the Serenity oil
discovery operated by i3 Energy ("i3E"). The appraisal well was disappointing
and did not encounter oil-bearing sands; however, together with our partner
i3E, we are assessing the various development options to bring the field into
production.
Looking forward, we are excited about undertaking further development on the
Wressle field with a planned gas project unlocking further upside potential
for oil production rates and gas sales from the field. This could add an
additional 50% to oil production rates, further boosting Europa's revenues. We
continue to investigate the potential of the West Firsby field as a geothermal
production site, providing a future role for our mature oil fields. Within our
offshore Ireland acreage, the Inishkea prospect alone has potential to
entirely satisfy the Irish domestic retail gas requirements for the next 17
years, and I am delighted that our application to extend the first phase of
the licence to 31 January 2024 has been granted. This will enable us to
continue with our technical studies and provide more time to find a project
partner for FEL 4/19.
Onshore UK
The past year has seen Europa's net oil production increase materially thanks
to the proppant squeeze operation at our fourth onshore field, Wressle, in the
West Midlands. Following the successful execution of the field development
plan in 2020/21, which included the safe completion of operations to
recomplete the Wressle-1 well, followed by the reperforation of the Ashover
Grit reservoir interval and the proppant squeeze, Wressle hit an initial gross
production rate in August 2021 of over 500 bopd, exceeding the pre-operations
target. Following upgrades to the production facilities, these initial gross
flow rates continued to grow, reaching the current rate of 700-750 bopd, or
net 210-225 bopd to Europa. At current oil prices, this is having a materially
positive impact on our balance sheet.
At the moment, oil production is constrained by the limits imposed on the
incineration of gas from the field of ten tonnes per day. However, alongside
our partners we plan to market the gas contained within the reservoir, with
various monetisation options being considered including gas to power and a
short pipeline (approximately 600 metres) into the local gas distribution
network. Once a gas monetisation solution is in place, the well will be able
to produce at unrestricted oil rates which will materially impact the cash
flows associated with the field. This will also allow the field to be further
developed by targeting the contingent resources located in the Penistone Flags
reservoir and the Broughton North prospect which is a Wressle lookalike.
We continue to develop our strategy of contributing to the clean energy
transition in the UK following the Memorandum of Understanding ("MOU") we
signed with Causeway Geothermal in June 2021. The collaboration will explore
utilising existing infrastructure and wells for geothermal applications at
West Firsby to deliver clean, reliable, and cheap sources of heat. Studies
will determine if commercial deployment of geothermal technologies are viable
at the site. We have the potential to convert onshore legacy oilfields into
sources of clean and reliable energy forms as part of our ESG strategy and
Europa's stated desire to participate in the national energy transition. A
successful project would deliver long term benefits to our shareholders, the
UK's national energy grid and the local community in West Firsby.
Offshore UK
Europa moved into the UK offshore arena by farming into the Serenity field in
the Central North Sea. In March 2022, we announced that we were acquiring a
25% interest in the Serenity oil discovery, operated by i3E, which was funded
by a highly successful equity raise of £7 million. Unfortunately, the
appraisal well encountered water-wet sands but that data from the well has
significantly improved our understanding of the field as a whole and we are
now working with i3E to optimise the development of the field, which may
include a tie-back to existing infrastructure.
Offshore Morocco
We continue to work on the proposed farm-out of the Inezgane offshore permit
located in the Agadir Basin in Morocco. Europa has a 75% interest in Inezgane
and operatorship of the Licence covering an area of 11,228 km(2). Inezgane
represents a high-impact exploration opportunity in an underexplored area of
the world and our recent evaluation identified a significant volume of
unrisked recoverable resources.
Offshore Ireland
Offshore Ireland, the Company's focus remains on its gas interests in the
Irish Atlantic located in close proximity to the already producing Corrib gas
field. The Company has completed all work commitments for the first phase of
its 100%-owned FEL 4/19 licence, and in March 2022 applied to the Department
of the Environment, Climate and Communications ("DECC") for an extension to
the first phase in order to carry out further technical studies and allow more
time to secure a farm-out of the licence. The application to extend the
licence to 31 January 2024 was granted on 2 November 2022.
FEL 4/19 contains the large, low risk, Inishkea gas prospect and is a
strategic asset that can potentially provide a reliable source of low emission
energy for Ireland and play a key role in the transition to renewable green
power. A successful discovery at Inishkea could satisfy the Irish domestic
retail gas demand for the next 17 years. Gas from the Corrib field, adjacent
to the Inishkea prospect, is one of the lowest carbon-intensity gases in
Europe, much lower than long distance pipeline gas from Norway, the UK or the
Russian gas previously piped to Europe. Given that Ireland will continue to
require gas into the foreseeable future, having recently agreed plans to build
new gas-powered electricity plants, it makes sense to keep this potentially
valuable source of indigenous gas available. We are therefore delighted that
the requested licence extension was granted, which will allow the Company to
carry out further technical studies and seek a project partner.
Board Changes
This past year we have seen one major change at senior management and board
level with the appointment of Will Holland as permanent CFO in June 2022. Will
brings a wealth of corporate, financial and M&A experience in the upstream
sector that will be of crucial importance as we continue to grow the business,
and I look forward to working with him at this very exciting time for the
Company.
Conclusion and Outlook
The Company has been very active during this financial year and we are
starting to reap the rewards of executing on our strategic vision. We have
strong cash flows from our onshore production, further development
opportunities at Wressle and Serenity as well as material upside potential
with our exploration assets. The oil price has remained strong and traded
above $100/bbl for much of the period resulting in record cash flow for
Europa.
Our stated goal to add further appraisal assets to the portfolio resulted in
the Serenity farm-in announced in March. Although the subsequent appraisal
well was disappointing it has provided us with valuable sub-surface data that
will be incorporated into our reservoir model and we look forward to working
with i3E on how best to develop the existing discovery. The Board continues to
believe that the Company would benefit from further appraisal and early
development assets in our portfolio and supported by our strong cash flows we
will continue to seek opportunities to acquire these types of assets. Our aim
remains to engage in potentially high reward activity without putting the
Company's balance sheet at risk.
Having come through the Covid-19 restrictions we have opened a new London
office from where we will continue to develop our existing assets and grow the
portfolio. The hydrocarbons that we produce and new fields that we develop all
contribute to supplying the domestic demand of their local regions and as such
displace imported hydrocarbons and reduce the emissions associated with
hydrocarbon consumption. This strategy to supply local demand will continue to
drive our activities as we focus on growing our existing portfolio both
organically and via acquisitions which may add to our existing assets to
create a more balanced portfolio.
Finally, on behalf of the Board, I would like to thank the management,
employees and consultants for their hard work on behalf of our shareholders
and stakeholders during the past year. We have achieved a lot and will
continue to build on the solid foundations that we now have in place.
Qualified Person Review
This release has been reviewed by Alastair Stuart, engineering advisor to
Europa, who is a petroleum engineer with over 35 years' experience and a
member of the Society of Petroleum Engineers and has consented to the
inclusion of the technical information in this release in the form and context
in which it appears.
The financial information set out below does not constitute the company's
statutory accounts for 2022 or 2021. The financial information has been
prepared in accordance with UK adopted international accounting standards on a
basis that is consistent with the accounting policies applied by the group in
its audited consolidated financial statements for the year ended 31 July 2022.
Statutory accounts for the years ended 31 July 2021 and 31 July 2020 have been
reported on by the Independent Auditors.
The Independent Auditors' Report on the Annual Report and Financial Statements
for 2022 and 2021 were unqualified and did not contain a statement under
498(2) or 498(3) of the Companies Act 2006. Statutory accounts for the year
ended 31 July 2021 have been filed with the Registrar of Companies. The
statutory accounts for the year ended 31 July 2022 will be delivered to the
Registrar in due course.
Consolidated statement of comprehensive income
For the year ended 31 July 2022 2021
Note £000 £000
Revenue 2 6,584 1,372
Cost of sales 2 (3,806) (1,249)
Impairment of producing fields 12 (570) -
Total cost of sales (4,376) (1,249)
---------------------------------- ----------------------------------
Gross profit 2,208 123
Exploration write-off 11 - (12)
Administrative expenses (821) (717)
Finance income 6 239 3
Finance expense 7 (238) (242)
------------------------------------ ------------------------------------
Profit/(loss) before taxation 3 1,388 (845)
Taxation (expense)/credit 8 (32) 127
------------------------------------ ------------------------------------
Profit/(loss) for the year from continuing operations 1,356 (718)
==================== ====================
Other comprehensive loss
Items which will not be reclassified to profit /(loss)
Loss on investment revaluation 9 (18) (2)
------------------------------------ ------------------------------------
Total other comprehensive loss (18) (2)
==================== ====================
Total comprehensive income/(loss) for the year attributable to the equity 1,338 (720)
shareholders of the parent
=================== ===================
Earnings per share (EPS) attributable to the equity shareholders of the parent Note Pence per share Pence per share
from continuing operations
Basic EPS 10 0.19p (0.15)p
Diluted EPS 0.18p (0.15)p
Consolidated statement of financial position
As at 31 July 2022 2021
Note £000 £000
Assets
Non-current assets
Intangible assets 11 3,785 6,438
Property, plant and equipment 12 3,021 369
---------------------------------- ----------------------------------
Total non-current assets 6,806 6,807
---------------------------------- ----------------------------------
Current assets
Investments 13 24 42
Inventories 14 36 23
Trade and other receivables 15 1,866 522
Restricted cash 16 6,884 230
Cash and cash equivalents 1,394 641
---------------------------------- ----------------------------------
Total current assets 10,204 1,458
---------------------------------- ----------------------------------
Total assets 17,010 8,265
==================== ====================
Liabilities
Current liabilities
Loans 18 (40) (10)
Trade and other payables 17 (1,573) (1,556)
------------------------------------ ------------------------------------
Total current liabilities (1,613) (1,566)
------------------------------------ ------------------------------------
Non-current liabilities
Loans 18 - (40)
Trade and other payables 17 (4) (17)
Long-term provisions 21 (4,164) (3,393)
---------------------------------- ----------------------------------
Total non-current liabilities (4,168) (3,450)
---------------------------------- ----------------------------------
Total liabilities (5,781) (5,016)
----------------------------------- -----------------------------------
Net assets 11,229 3,249
==================== ====================
Capital and reserves attributable to equity holders
of the parent
Share capital 22 9,565 5,665
Share premium 22 23,660 21,157
Merger reserve 22 2,868 2,868
Retained deficit (24,864) (26,441)
---------------------------------- ----------------------------------
Total equity 11,229 3,249
====================== ======================
These financial statements were approved by the Board of Directors and
authorised for issue on 9(th) November 2022 and signed on its behalf by:
William Holland, CFO
Company registration number 05217946
Consolidated statement of changes in equity
Attributable to the equity holders of the parent
Share Share premium Merger Retained deficit Total
capital
reserve equity
£000 £000 £000 £000 £000
Balance at 1 August 2020 4,447 21,010 2,868 (25,838) 2,487
Comprehensive loss for the year
Loss for the year attributable to the equity shareholders of the parent (718) (718)
- - -
Other comprehensive loss attributable to the equity shareholders of the parent (2) (2)
- - -
---------------------------------- ---------------------------------- --------------------------------- ------------------------------ -------------------------------
Total comprehensive loss for the year - - - (720) (720)
---------------------------------- ---------------------------------- --------------------------------- ------------------------------ -------------------------------
Contributions by and distributions to owners
Issue of share capital (net of issue costs) 1,218 225 - - 1,443
Issue of share warrants(note 23) - (78) - 78 -
Share-based payments (note 23) - - - 39 39
---------------------------------- ---------------------------------- ---------------------------------- --------------------------------- ------------------------------
Total contributions by and distributions to owners 1,218 147 - 117 1,482
---------------------------------- ---------------------------------- --------------------------------- ------------------------------ -------------------------------
Balance at 31 July 2021 5,665 21,157 2,868 (26,441) 3,249
=================== =================== =================== ===================== ==================
Share Share premium Merger Retained deficit Total
capital
reserve equity
£000 £000 £000 £000 £000
Balance at 1 August 2021 5,665 21,157 2,868 (26,441) 3,249
Comprehensive profit for the year
Profit for the year attributable to the equity shareholders of the parent 1,356 1,356
- - -
Other comprehensive loss attributable to the equity shareholders of the parent (18) (18)
- - -
---------------------------------- ---------------------------------- --------------------------------- ------------------------------ -------------------------------
Total comprehensive profit for the year - - - 1,338 1,338
---------------------------------- ---------------------------------- --------------------------------- ------------------------------ -------------------------------
Contributions by and distributions to owners
Issue of share capital (net of issue costs) 3,900 2,722 - - 6,622
Issue of share warrants(note 23) - (219) - 219 -
Share-based payments (note 23) - - - 20 20
---------------------------------- ---------------------------------- ---------------------------------- --------------------------------- ------------------------------
Total contributions by and distributions to owners 3,900 2,503 - 239 6,642
---------------------------------- ---------------------------------- --------------------------------- ------------------------------ -------------------------------
Balance at 31 July 2022 9,565 23,660 2,868 (24,864) 11,229
=================== =================== =================== ===================== ==================
Company statement of financial position
As at 31 July 2022 2021
£000 £000
Note
Assets
Non-current assets
Property, plant and equipment 12 26 23
Investments 13 2,343 2,343
Amounts due from Group companies 15,24 13,270 588
------------------------------------ ------------------------------------
Total non-current assets 15,639 2,954
------------------------------------ ------------------------------------
Current assets
Other receivables 15 163 69
Cash and cash equivalents 249 272
-------------------------------------- --------------------------------------
Total current assets 412 341
--------------------------------------- ---------------------------------------
Total assets 16,051 3,295
====================== =====================
Liabilities
Current liabilities
Loans 18 (40) (10)
Trade and other payables 17 (546) (652)
------------------------------------ ------------------------------------
Total current liabilities (586) (662)
------------------------------------ ------------------------------------
Loans 18 - (40)
Trade and other payables 17 (3) (11)
------------------------------------ ------------------------------------
Total non-current liabilities (3) (51)
---------------------------------- ----------------------------------
Total liabilities (589) (713)
------------------------------------ ------------------------------------
Net assets 15,462 2,582
==================== ====================
Capital and reserves attributable to equity holders of the parent
Share capital 22 9,565 5,665
Share premium 22 23,660 21,157
Merger reserve 22 2,868 2,868
Retained deficit (20,631) (27,108)
-------------------------------------- --------------------------------------
Total equity 15,462 2,582
====================== ======================
The Company has taken advantage of the exemption provided under Section 408 of
the Companies Act 2006 not to publish its individual statement of
comprehensive income and related notes. The profit dealt with in the financial
statements of the parent Company is £6,238,000 (2021: loss of £1,485,000).
These financial statements were approved by the Board of Directors and
authorised for issue on 9(th) November 2022, and signed on its behalf by:
William Holland
CFO
Company registration number 05217946
Company statement of changes in equity
Share Share premium Merger Retained deficit Total
capital
reserve equity
£000 £000 £000 £000 £000
Balance at 1 August 2020 originally stated 4,447 21,010 2,868 (25,740) 2,585
Comprehensive loss for the year
Loss for the year attributable to the equity shareholders of the parent (1,485) (1,485)
- - -
---------------------------------- ---------------------------------- --------------------------------- ------------------------------ -------------------------------
Total comprehensive loss for the year - - - (1,485) (1,485)
Contributions by and distributions to owners
Issue of share capital (net of issue costs) 1,218 225 - - 1,443
Issue of share warrants(note 23) - (78) - 78 -
Share-based payments (note 23) - - - 39 39
---------------------------------- ---------------------------------- ---------------------------------- --------------------------------- ------------------------------
Total contributions by and distributions to owners 1,218 147 - 117 1,482
---------------------------------- ---------------------------------- --------------------------------- ------------------------------ -------------------------------
Balance at 31 July 2021 5,665 21,157 2,868 (27,108) 2,582
==================== =================== ================== ======================= =================
Share Share premium Merger Retained deficit Total
capital
reserve equity
£000 £000 £000 £000 £000
Balance at 1 August 2021 originally stated 5,665 21,157 2,868 (27,108) 2,582
Comprehensive profit for the year
Profit for the year attributable to the equity shareholders of the parent 6,238 6,238
- - -
---------------------------------- ---------------------------------- --------------------------------- ------------------------------ -------------------------------
Total comprehensive profit for the year - - - 6,238 6,238
Contributions by and distributions to owners
Issue of share capital (net of issue costs) 3,900 2,722 - - 6,622
Issue of share warrants(note 23) - (219) - 219 -
Share-based payments (note 23) - - - 20 20
---------------------------------- ---------------------------------- ---------------------------------- --------------------------------- ------------------------------
Total contributions by and distributions to owners 3,900 2,503 - 239 6,642
---------------------------------- ---------------------------------- -------------------------------- ------------------------------ ----------------------------
Balance at 31 July 2022 9,565 23,660 2,868 (20,631) 15,462
==================== =================== ================== ======================= =================
Consolidated statement of cash flows
For the year ended 31 July 2022 2021
Note £000 £000
Cash flows from / (used in) operating activities
Profit/(loss) after tax from continuing operations 1,356 (718)
Adjustments for:
Share-based payments 23 20 39
Depreciation 12 1,618 107
Impairment of producing field 12 570 -
Exploration write off 11 - 12
Finance income 6 - (3)
Finance expense 7 238 242
Taxation credit recognised in profit and loss 8 32 (127)
Increase in trade and other receivables (1,344) (288)
Increase in inventories (13) (11)
Increase in trade and other payables 18 85
------------------------------------ ------------------------------------
Net cash generated by/(used) in operations 2,495 (662)
Income taxes (paid)/ repayment received (32) 127
------------------------------------ ------------------------------------
Net cash generated by/(used) in operating activities 2,463 (535)
======================= =======================
Cash flows used in investing activities
Purchase of property, plant and equipment (403) -
Purchase of intangible assets (1,246) (985)
Cash guarantee re Morocco 16 - (4)
Cash escrow deposit re Serenity 16 (6,621) -
Interest received - 3
----------------------------------- -----------------------------------
Net cash used in investing activities (8,270) (986)
==================== ====================
Cash flows from financing activities
Gross proceeds from issue of share capital 22 7,020 1,583
Costs incurred on issue of share capital (398) (140)
Proceeds from borrowings - 225
Repayment of borrowings (10) (225)
Lease liability payments (14) (35)
Lease liability interest payments (2) (2)
Finance costs (3) (7)
----------------------------------- -----------------------------------
Net cash from financing activities 6,593 1,399
===================== =====================
Net increase/(decrease) in cash and cash equivalents 786 (122)
Exchange gain/(loss) on cash and cash equivalents (33) (5)
Cash and cash equivalents at beginning of year 641 768
----------------------------------- -----------------------------------
Cash and cash equivalents at end of year 1,394 641
===================== =====================
Company statement of cash flows
For the year ended 31 July 2022 2021
£000 £000
Cash flows from / (used in) operating activities Note
Profit / (loss) after tax from continuing operations 6,238 (1,485)
Adjustments for:
Share-based payments 23 20 39
Depreciation 12 10 32
Movement in intercompany loan provision 24 (5,720) 1,921
Finance income (810) (654)
Finance expense 2 5
Increase in trade and other receivables (93) (16)
(Decrease)/increase in trade and other payables (106) 36
----------------------------------- -----------------------------------
Net cash used in operating activities (459) (122)
======================= =======================
Cash flows used in investing activities
Purchase of property, plant and equipment (13) -
Movement on loans to Group companies (6,152) (1,306)
----------------------------------- -----------------------------------
Net cash used in investing activities (6,165) (1,306)
======================= =======================
Cash flows from/(used in) financing activities
Gross proceeds from issue of share capital 22 7,020 1,583
Costs incurred on issue of share capital (398) (140)
Proceeds from borrowings - 225
Repayment of borrowings (10) (225)
Lease liability principal payment (8) (26)
Lease liability interest payment (1) (1)
Finance costs (2) (4)
----------------------------------- -----------------------------------
Net cash from financing activities 6,601 1,412
======================= =======================
Net decrease in cash and cash equivalents (23) (16)
Cash and cash equivalents at beginning of year 272 288
----------------------------------- -----------------------------------
Cash and cash equivalents at end of year 249 272
===================== =====================
(8)
(26)
Lease liability interest payment
(1)
(1)
Finance costs
(2)
(4)
-----------------------------------
-----------------------------------
Net cash from financing activities
6,601
1,412
=======================
=======================
Net decrease in cash and cash equivalents
(23)
(16)
Cash and cash equivalents at beginning of year
272
288
-----------------------------------
-----------------------------------
Cash and cash equivalents at end of year
249
272
=====================
=====================
Notes to the financial statements
1 Accounting Policies
General information
Europa Oil & Gas (Holdings) plc is a Company incorporated and domiciled in
England and Wales with registered number 05217946. The address of the
registered office is 30 Newman Street, London, W1T 1PT.
The functional and presentational currency of the Company is Sterling (UK£).
Basis of accounting
The consolidated and individual Company financial statements have been
prepared in accordance with applicable UK adopted International Accounting
Standards.
The accounting policies that have been applied in the opening statement of
financial position have also been applied throughout all periods presented in
these financial statements. These accounting policies comply with each IFRS
that is mandatory for accounting periods ending on 31 July 2022.
Going concern
The Directors have prepared a cash flow forecast for the period ending
31December 2023, which considers the continuing and forecast cash inflow from
the Group's producing assets, the cash held by the Group at October 2022, less
administrative expenses and planned capital expenditure.
The Directors performed sensitivities on the cashflow allowing for a 30% fall
in the expected oil price from a base case price of $85 per barrel 5 year
average and, separately, a 15% fall in the expected overall production across
all field from a base case of 225 barrels per day during the 2023 fiscal year
net to Europa. Oil price estimates are based upon industry analyst
expectations, whilst production estimates are sourced from the Group's
internal modelling for Wressle and recent actual production.
These sensitivities have been modelled as a reverse stress test, and the
Directors consider the likelihood of such movements to be very low. The
Directors have also run sensitivities allowing for reasonably possible
simultaneous falls in oil price and in Wressle production, and the Group and
Company had sufficient cash resources to meet their obligations.
The Directors have concluded, as at the date of approval of these financial
statements, that there is a reasonable expectation that the Group and Company
will still have sufficient cash resources to be able to continue as a going
concern and meet its obligations as and when they fall due over the going
concern period.
Basis of consolidation
Where the Company has control over an investee, it is classified as a
subsidiary. The Company controls an investee if all three of the following
elements are present: power over the investee, exposure to variable returns
from the investee, and the ability of the investor to use its power to affect
those variable returns. Control is reassessed whenever facts and circumstances
indicate that there may be a change in any of these elements of control. Intra
Group balances are eliminated on consolidation. Unrealised gains on
transactions between the Group and its subsidiaries are eliminated. Unrealised
losses are also eliminated unless the transaction provides evidence of an
impairment of the asset transferred. Amounts reported in the financial
statements of subsidiaries have been adjusted where necessary to ensure
consistency with the accounting policies adopted by the Group.
The Group is engaged in oil and gas exploration, development and production
through unincorporated joint operations.
Joint arrangements
Joint arrangements are those arrangements in which the Group holds an interest
on a long-term basis which are jointly controlled by the Group and one or more
venturers under a contractual arrangement. When these arrangements do not
constitute entities in their own right, the consolidated financial statements
reflect the relevant proportion of costs, revenues, assets and liabilities
applicable to the Group's interests in accordance with IFRS 11. The Group's
exploration, development and production activities are presently conducted
jointly with other companies in this way.
For the licences where the Group does not hold 100% equity (refer to the
licence interests table on page 7) a joint arrangement exists. The equity and
voting interest of the Group is disclosed in the table, activities are typical
for activities in the oil and gas sector and are strategic to the Group's
activities. The principal place of business for all the joint arrangements is
the UK.
Revenue recognition
The Group follows IFRS 15. The standard provides a single comprehensive model
for revenue recognition. The core principle of the standard is that an entity
shall recognise revenue when control passes on the transfer of promised goods
or services to customers at an amount that reflects the consideration to
which the entity expects to be entitled in exchange for those goods or
services. The standard introduced a new contract-based revenue recognition
model with a measurement approach that is based on an allocation of the
transaction price. This is described further in the accounting policies below.
Contracts with customers are presented in an entity's balance sheet as a
contract liability, a contract asset, or a receivable, depending on the
relationship between the entity's performance and the customer's payment. The
Group's accounting policy under IFRS 15 is that revenue is recognised when the
Group satisfies a performance obligation by transferring oil to a customer.
The title to oil and gas typically transfers to a customer at the same time as
the customer takes physical possession of the oil or gas. Typically, at this
point in time, the performance obligations of the Group are fully satisfied.
Revenue is measured based on the consideration to which the Group expects to
be entitled under the terms of a contract with a customer. The consideration
is determined by the quantity and price of oil and gas delivered to the
customer at the end of each month.
Non-current assets
Oil and gas interests
The financial statements with regard to oil and gas exploration and appraisal
expenditure have been prepared under the full cost basis. This accords with
IFRS 6 which permits the continued application of a previously adopted
accounting policy. The unit of account for exploration and evaluation assets
is the individual licence.
Pre-production assets
Pre-production assets are categorised as intangible assets on the statement of
financial position. Pre-licence expenditure is expensed as directed by IFRS 6.
Expenditure on licence acquisition costs, geological and geophysical costs,
costs of drilling exploration, appraisal and development wells, and an
appropriate share of overheads (including Directors' costs) are capitalised
and accumulated on a licence-by-licence basis. These costs which relate to the
exploration, appraisal and development of oil and gas interests are initially
held as intangible non-current assets pending determination of technical
feasibility and commercial viability. On commencement of production these
costs are tested for impairment prior to transfer to production assets. If
licences are relinquished, or assets are not deemed technically feasible or
commercially viable, accumulated costs are written off to cost of sales.
Production assets
Production assets are categorised within property, plant and equipment on the
statement of financial position. With the determination of commercial
viability and approval of an oil and gas project the related pre-production
assets are transferred from intangible non-current assets to tangible
non-current assets and depreciated upon commencement of production within the
appropriate cash generating unit.
Impairment tests
For the purposes of assessing impairment, assets are grouped at the lowest
levels for which there are separately identifiable cash flows (cash generating
units) as disclosed in notes 11 and 12. As a result, some assets are tested
individually for impairment and some are tested at cash generating unit level.
Impairment tests are performed when indicators as described in IAS 36 are
identified. In addition, indicators such as a lack of funding or farmout
options for a licence which is approaching termination or the implied value of
a farm-out transaction are considered as indicators of impairment.
An impairment loss is recognised and charged to cost of sales for the amount
by which the asset's or cash generating unit's carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of fair value,
reflecting market conditions less costs to sell, and value in use based on an
internal discounted cash flow evaluation. All assets are subsequently
reassessed for indications that an impairment loss previously recognised may
no longer exist.
Property, plant and equipment
Items of property, plant and equipment are initially recognised at cost. As
well as the purchase price, cost includes directly attributable costs and the
estimated present value of any future unavoidable costs of dismantling and
removing items. The corresponding liability is recognised within provisions.
Depreciation
All expenditure within tangible non-current assets is depreciated from the
commencement of production, on a unit of production basis, which is the ratio
of oil and gas production in the period to the estimated quantities of proven
plus probable commercial reserves at the end of the period, plus the
production in the period. Costs used in the unit of production calculation
comprise the net book value of capitalised costs. Changes in the estimates of
commercial reserves or future field development costs are dealt with
prospectively.
Furniture and computers are depreciated on a 25% per annum straight line
basis.
Reserves
Proven and probable oil and gas reserves are estimated quantities of
commercially producible hydrocarbons which the existing geological,
geophysical and engineering data shows to be recoverable in future years. The
proven reserves included herein conform to the definition approved by the
Society of Petroleum Engineers (SPE) and the World Petroleum Congress (WPC).
The probable and possible reserves conform to definitions of probable and
possible approved by the SPE/WPC using the deterministic methodology. Reserves
used in accounting estimates for depreciation are updated periodically to
reflect management's view of reserves in conjunction with third party formal
reports. Reserves are reviewed at the time of formal updates or as a
consequence of operational performance, plans and the business environment at
that time.
Reserves are adjusted in the year that formal updates are undertaken or as a
consequence of operational performance and plans, and the business environment
at that time, with any resulting changes not applied retrospectively.
Future decommissioning costs
A provision for decommissioning is recognised in full at the point that the
Group has an obligation to decommission an appraisal, development or producing
well. A corresponding non-current asset (included within producing fields in
note 12) of an amount equivalent to the provision is also created. The amount
recognised is the estimated cost of decommissioning, discounted to its net
present value and is reassessed each year in accordance with local conditions
and requirements. The discount rate used is the risk free rate, adjusted for
risks that are not already included in the forecast cash flows. For producing
wells, the asset is subsequently depreciated as part of the capital costs of
production facilities within tangible non-current assets, on a unit of
production basis. Any decommissioning obligation in respect of a
pre-production asset is carried forward as part of its cost and tested
annually for impairment in accordance with the above policy.
Changes in the estimates of commercial reserves or decommissioning cost
estimates are dealt with prospectively by recording an adjustment to the
provision, and a corresponding adjustment to the decommissioning asset. The
unwinding of the discount on the decommissioning provision is included within
finance expense.
Acquisitions of exploration licences
Acquisitions of exploration licences through acquisition of non-operational
corporate structures that do not represent a business, and therefore do not
meet the definition of a business combination, are accounted for as the
acquisition of an asset. Related future consideration that is contingent is
not recognised as an asset or liability until the contingent event has
occurred.
Taxation
Current tax is the tax payable based on taxable profit/(loss) for the year.
Deferred income taxes are calculated using the balance sheet liability method
on temporary differences. Deferred tax is generally provided on the difference
between the carrying amounts of assets and liabilities and their tax bases.
However, deferred tax is not provided on the initial recognition of goodwill,
nor on the initial recognition of an asset or liability unless the related
transaction is a business combination or affects tax or accounting profit.
Deferred tax on temporary differences associated with shares in subsidiaries
and joint ventures is not provided if reversal of these temporary differences
can be controlled by the Group and it is probable that reversal will not occur
in the foreseeable future. Tax losses available to be carried forward as well
as other income tax credits to the Group are assessed for recognition as
deferred tax assets.
Deferred tax liabilities are provided in full, with no discounting. Deferred
tax assets are recognised to the extent that it is probable that the
underlying deductible temporary difference will be able to be offset against
future taxable income. Current and deferred tax assets and liabilities are
calculated at tax rates that are expected to apply to their respective period
of realisation, provided they are enacted or substantively enacted at the
reporting date.
Changes in deferred tax assets or liabilities are recognised as a component of
tax expense in the statement of comprehensive income, except where they relate
to items that are charged or credited directly to equity in which case the
related deferred tax is also charged or credited directly to equity.
Foreign currency
The Group and Company prepare their financial statements in Sterling.
Transactions denominated in foreign currencies are translated at the rates of
exchange ruling at the date of the transaction. Monetary assets and
liabilities in foreign currencies are translated at the rates of exchange
ruling at the reporting date. Non-monetary items that are measured at
historical cost in a foreign currency are translated at the exchange rate at
the date of transaction. Non-monetary items that are measured at fair value in
a foreign currency are translated using the exchange rates at the date the
fair value was determined.
Any exchange differences arising on the settlement of items or on translating
items at rates different from those at which they were initially recorded are
recognised in the Statement of comprehensive income in the period in which
they arise. Exchange differences on non-monetary items are recognised in the
Statement of changes in equity to the extent that they relate to a gain or
loss on that non-monetary item taken to the Statement of changes in equity,
otherwise such gains and losses are recognised in the Statement of
comprehensive income.
Europa Oil & Gas (Holdings) plc is domiciled in the UK, which is its
primary economic environment and the Company's functional currency is
Sterling. The Group's current operations are based in the UK and Ireland and
the functional currencies of the Group's entities are the prevailing local
currencies in each jurisdiction. Given that the functional currency of the
Company is Sterling, management has elected to continue to present the
consolidated financial statements of the Group and Company in Sterling.
Investments
Investments, which are only investments in subsidiaries, are carried at cost
less any impairment. Additions include the net value of share options issued
to employees of subsidiary companies less any lapsed, unvested options.
Financial instruments
Financial assets and financial liabilities are recognised in the statement of
financial position when the Group becomes a party to the contractual
provisions of the instrument.
Financial assets
Financial assets are classified as either financial assets at amortised cost,
at fair value through other comprehensive income ('FVTOCI') or at fair value
through profit or loss ('FVPL') depending upon the business model for managing
the financial assets and the nature of the contractual cash flow
characteristics of the financial asset.
A loss allowance for expected credit losses is determined for all financial
assets, other than those at FVPL, at the end of each reporting period. The
Group applies a simplified approach to measure the credit loss allowance for
trade receivables using the lifetime expected credit loss provision. The
lifetime expected credit loss is evaluated for each trade receivable taking
into account payment history, payments made subsequent to year end and prior
to reporting, past default experience and the impact of any other relevant and
current observable data. The group applies a general approach on all other
receivables classified as financial assets. The general approach recognises
lifetime expected credit losses when there has been a significant increase in
credit risk since initial recognition.
The Group derecognises a financial asset when the contractual rights to the
cash flows from the asset expire, or when it transfers the financial asset and
substantially all the risks and rewards of ownership of the asset to another
party. The Group derecognises financial liabilities when the Group's
obligations are discharged, cancelled or have expired.
Fair value through other comprehensive income
The Group has a number of strategic investments in listed and unlisted
entities which are not accounted for as subsidiaries, associates or jointly
controlled entities. For those investments, the Group has made an irrevocable
election to classify the investments at fair value through other comprehensive
income rather than through profit or loss as the Group considers this
measurement to be the most representative of the business model for these
assets. They are carried at fair value with changes in fair value recognised
in other comprehensive income and accumulated in the fair value through other
comprehensive income reserve. Upon disposal any balance within fair value
through other comprehensive income reserve is reclassified directly to
retained earnings and is not reclassified to profit or loss.
Dividends are recognised in profit or loss, unless the dividend clearly
represents a recovery of part of the cost of the investment, in which case the
full or partial amount of the dividend is recorded against the associated
investment's carrying amount.
Purchases and sales of financial assets measured at fair value through other
comprehensive income are recognised on settlement date with any change in fair
value between trade date and settlement date being recognised in the fair
value through other comprehensive income reserve.
Amortised cost
This category is the most relevant to the Company. Loans and receivables are
non-derivative financial assets with fixed or determinable payments that are
not quoted in an active market. The losses arising from impairment are
recognised in a separate line in the income statement. This category generally
applies to trade and other receivables.
Cash and cash equivalents
Cash and cash equivalents are carried at cost and include all highly liquid
investments with a maturity of three months or less.
Restricted cash are those amounts held by third parties on behalf of the Group
and are not available for the Group's use; these are recognised separately
from cash and cash equivalents on the balance sheet.
Financial Liabilities
The classification of financial liabilities at initial recognition depends on
the purpose for which the financial liability was issued and its
characteristics. All purchases of financial liabilities are recorded on trade
date, being the date on which the Group becomes party to the contractual
requirements of the financial liability. Unless otherwise indicated the
carrying amounts of the Group's financial liabilities approximate to their
fair values. The Group's financial liabilities consist of financial
liabilities measured at amortised cost and financial liabilities at fair value
through profit or loss.
Trade and other payables
Trade and other payables are initially recorded at fair value and subsequently
carried at amortised cost.
Derecognition of financial liabilities
A financial liability (in whole or in part) is derecognised when the Group has
extinguished its contractual obligations, it expires or is cancelled. Any gain
or loss on derecognition is taken to the statement of comprehensive income.
Treatment of finance costs
All finance costs are expensed through the income statement. The Group does
not incur any finance costs that qualify for capitalisation.
Defined contribution pension schemes
The pension costs charged against profits are the contributions payable to the
scheme in respect of the accounting period.
Inventories
Inventories comprise oil in tanks stated at the lower of cost and net
realisable value. Cost is determined by reference to the actual cost of
production in the period.
Share-based payments
All goods and services received in exchange for the grant of any share-based
payment are measured at their fair values. Where employees are rewarded using
share-based payments, the fair values of employees' services are determined
indirectly by reference to the fair value of the instrument granted to the
employee. This fair value is appraised at the grant date and excludes the
impact of non-market vesting conditions (for example, profitability and sales
growth targets).
All equity-settled share-based payments are ultimately recognised as an
expense in the statement of comprehensive income with a corresponding credit
to reserves. Where options over the parent Company's shares are granted to
employees of subsidiaries of the parent, the charge is recognised in the
statement of comprehensive income of the subsidiary. In the parent Company
accounts there is an increase in the cost of the investment in the subsidiary
receiving the benefit.
If vesting periods or other non-market vesting conditions apply, the expense
is allocated over the vesting period, based on the best available estimate of
the number of share options expected to vest. Estimates are subsequently
revised if there is any indication that the number of share options expected
to vest differs from previous estimates. Any cumulative adjustment prior to
vesting is recognised in the current period. No adjustment is made to any
expense recognised in prior periods if the number of share options ultimately
exercised is different to that initially estimated.
Upon exercise of share options, the proceeds received, net of attributable
transaction costs, are credited to share capital, and where appropriate share
premium.
Critical accounting judgements and key sources of estimation uncertainty
Details of the Group's significant accounting judgements and critical
accounting estimates are set out in these financial statements and include:
· Carrying value of intangible assets (note 11) - carrying values are
justified with reference to indicators of impairment as set out in IFRS 6.
Based on judgements at 31 July 2022 there was £nil write off (2021: £12k
write off of costs on the PEDL 299 licence). The licence in Morocco expires in
November 2022 and its renewal is dependent on finding a farm-in partner. These
financial statements do not include the adjustments that would result if the
licence was not renewed.
· Carrying value of property, plant and equipment (note 12) - carrying
values are justified by reference to future estimates of cash flows,
discounted at appropriate rates. At 31 July 2022 there was £570k write off
related to West Firsby and Crosby Warren, which predominantly related to the
impairment of the additional decommissioning assets created by a commensurate
increase in the decommissioning liability for these producing assets.
· Deferred taxation (note 20) - assumptions regarding the future
profitability of the Group and whether the deferred tax assets will be
recovered.
· Decommissioning provision (note 21) - inflation and discount rate
estimates (3% and 10% respectively) are used in calculating the provision,
along with third party estimates of remediation costs.
· Share based payments (note 23) - measurement of the fair value of
options granted uses valuation techniques where active market quotes are not
available. This involves developing estimates and assumptions consistent with
how market participants would price the instrument. Management bases its
assumptions on observable data as far as possible but this is not always
available. In that case, management uses the best information available.
Estimated fair values may vary from the actual prices that would be achieved
in an arm's length transaction at the reporting date.
· Reserves and resources (note 12) - reserves and resources are
estimated based on management's view and third party formal reports and these
estimates directly impact the recoverability of asset carrying values that are
reported in the financial statements.
2 Operating segment analysis
In the opinion of the Directors the Group has four reportable segments as
reported to the Chief Executive Officer, being the UK, Ireland, Morocco and
new ventures.
The reporting on these segments to management focuses on revenue, operating
costs and capital expenditure. The impact of such criteria is discussed
further in the Chairman's statement and strategic report of this annual
report.
Income statement for the year ended 31 July 2022
UK Ireland Morocco New ventures Total
£000 £000 £'000 £000 £000
Revenue 6,584 - - - 6,584
Cost of sales (3,806) - - - (3,806)
Impairment of producing fields (570) - - - (570)
Cost of sales (4,376) - - - (4,376)
--------------------------------- --------------------------------- --------------------------------- --------------------------------- ---------------------------------
Gross profit 2,208 - - - 2,208
Exploration write-off - - - - -
Administrative expenses (1,082) 268 - (7) (821)
Finance income 205 1 33 - 239
Finance costs (238) - - - (238)
----------------------------------- --------------------------------- --------------------------------- --------------------------------- -----------------------------------
Profit before tax 1,093 269 33 (7) 1,388
Taxation (32) - - - (32)
----------------------------------- --------------------------------- --------------------------------- --------------------------------- -----------------------------------
Profit for the year 1,061 269 33 (7) 1,356
Segmental assets and liabilities as at 31 July 2022
UK Ireland Morocco New Ventures Total
£000 £000 £000 £'000 £000
Non-current assets 3,624 1,796 1,386 - 6,806
Current assets 9,941 - 263 - 10,204
----------------------------------- --------------------------------- ----------------------------------- -------------------------------- -----------------------------------
Total assets 13,565 1,796 1,649 - 17,010
----------------------------------- ----------------------------------- ----------------------------------- -------------------------------- -----------------------------------
Non-current liabilities (4,168) - - - (4,168)
Current liabilities (1,594) (19) - - (1,613)
----------------------------------- ----------------------------------- ----------------------------------- --------------------------------- -----------------------------------
Total liabilities (5,762) (19) - - (5,781)
----------------------------------- ----------------------------------- ----------------------------------- -------------------------------- -----------------------------------
Other segment items
Capital expenditure - cashflow 795 129 725 - 1,649
Depreciation 1,618 - - - 1,618
Share-based payments 20 - - - 20
Income statement for the year ended 31 July 2021
UK Ireland Morocco New ventures Total
£000 £000 £'000 £000 £000
Revenue 1,372 - - - 1,372
Cost of sales (1,249) - - - (1,249)
Impairment of producing fields - - - - -
Cost of sales (1,249) - - - (1,249)
--------------------------------- --------------------------------- --------------------------------- --------------------------------- ---------------------------------
Gross profit 123 - - - 123
Exploration write-off (12) - - - (12)
Administrative expenses (545) (109) (1) (62) (717)
Finance income 3 - - - 3
Finance costs (242) - - - (242)
----------------------------------- --------------------------------- --------------------------------- --------------------------------- -----------------------------------
Loss before tax (673) (109) (1) (62) (845)
Taxation - 127 - - 127
----------------------------------- --------------------------------- --------------------------------- --------------------------------- -----------------------------------
Loss for the year (673) 18 (1) (62) (718)
Segmental assets and liabilities as at 31 July 2021
UK Ireland Morocco New Ventures Total
£000 £000 £000 £'000 £000
Non-current assets 4,489 1,661 657 - 6,807
Current assets 1,228 - 230 - 1,458
----------------------------------- ----------------------------------- ----------------------------------- -------------------------------- -----------------------------------
Total assets 5,717 1,661 887 - 8,265
----------------------------------- ----------------------------------- ----------------------------------- -------------------------------- -----------------------------------
Non-current liabilities (3,450) - - - (3,450)
Current liabilities (1,203) (363) - - (1,566)
----------------------------------- ----------------------------------- ----------------------------------- --------------------------------- -----------------------------------
Total liabilities (4,653) (363) - - (5,016)
----------------------------------- ----------------------------------- ----------------------------------- -------------------------------- -----------------------------------
Other segment items
Capital expenditure 644 105 236 - 985
Depreciation 107 - - - 107
Share-based payments 117 - - - 117
100% of the total revenue (2021: 100%) relates to UK based customers. Of
this figure, one end customer (2021: one) commands more than 99% of the total,
including sales made through operators to the end customer. UK revenue by site
was as follows: West Firsby £353,000 (2021: £321,000); Crosby Warren
£651,000 (2021: £390,000); Whisby £696,000 (2021: £487,000); and Wressle
£4,884,000 (2021: £174,000).
3 Profit / loss before taxation
Profit / loss before taxation is stated after charging/ (crediting):
2022 2021
£000 £000
Depreciation and amortisation on property, plant & equipment 1,618 107
12
Staff costs including Directors 5 806 652
Diesel 163 104
Business rates 43 52
Site safety and security 89 68
Exploration write-off 11 - 12
Impairment 12 570 -
Fees payable to the auditor for the audit 70 55
Operating leases - land and buildings 43 42
Foreign exchange (gain)/loss (239) 3
========== =========
4 Directors' emoluments
Directors' salaries and fees - Company and Group 2022 2021
£000 £000
CW Ahlefeldt-Laurvig 26 18
P Greenhalgh (to 14 October 2020) - 32
BJ O'Cathain 41 28
SG Oddie 258 146
S Williams 31 21
W Holland (appointed 1 June 2022) 27 -
----------------------------------- -----------------------------------
383 245
===================== ===================
2022 2021
Directors' pensions £000 £000
P Greenhalgh (to 14 October 2020) - 3
W Holland (appointed 1 June 2022) 3 -
----------------------------------- -----------------------------------
3 3
===================== =====================
The above charge represents premiums paid to money purchase pension plans
during the year.
Directors' share-based payments 2022 2021
£000 £000
SG Oddie 9 20
BJ O'Cathain 2 4
S Williams 2 4
W Holland 6 -
----------------------------------- -----------------------------------
19 28
================== ================
The above represents the accounting charge in respect of share options. No
share options were exercised during the period (2021: none).
Directors' total emoluments 2022 2021
£000 £000
Salaries and fees 383 245
Social security costs 50 28
Pensions 3 3
Share-based payments 19 28
---------------------------------- ----------------------------------
455 304
================== ==================
5 Employee information
Average monthly number of employees including Directors - Group 2022 2021
Number Number
Management and technical 6 7
Field exploration and production 4 4
---------------------------------- ----------------------------------
10 11
=================== ===================
Staff costs - Group 2022 2021
£000 £000
Wages and salaries (including Directors' emoluments) 676 528
Social security 83 62
Pensions 27 27
Share-based payments (note 23) 20 35
----------------------------------- -----------------------------------
806 652
=================== ====================
Average monthly number of employees including Directors - Company 2022 Number 2021
Number
Management and technical 6 7
---------------------------------- ----------------------------------
6 7
==================== ==================
Staff costs - Company 2022 2021
£000 £000
Wages and salaries (including Directors' emoluments) 463 345
Social security 60 39
Pensions 12 12
Share-based payment 20 33
----------------------------------- -----------------------------------
555 429
==================== ==================
6 Finance income
2022 2021
£000 £000
Bank interest received - 3
Foreign exchange gains 239 -
------------------------------ ------------------------------
239 3
================== ===================
7 Finance expense
2022 2021
£000 £000
Unwinding of discount on decommissioning provision (note 21) 233 230
Other finance expense 5 12
------------------------------------ ------------------------------------
238 242
=================== ====================
8 Taxation
2022 2021
£000 £000
Movement in deferred tax asset (note 20) 318 (176)
Movement in deferred tax liability (note 20) (318) 176
Current tax - UK (32) -
R&D tax credits - Ireland - 127
------------------------------------ ------------------------------------
Tax (expense)credit (32) 127
==================== ==================
UK corporation tax is calculated at 40%
(2021: 40%) of the estimated assessable profit for the year being the
applicable rate for a ring-fence trade including the Supplementary Charge of
10%. From 24 May 2022 a new U.K. tax, the Excess Profits Levy ("EPL") applies
to the Group, and it is levied at 25% of assessable EPL profits. The current
tax expense for the year ending 31 July 2022 related exclusively to EPL.
2022 2021
£000 £000
Profit/(loss) before tax 1,388 (845)
================== =====================
Tax reconciliation
Profit / (loss) multiplied by the standard rate of corporation tax in the UK 555 (338)
including Supplementary Charge of 40% (2021: 40%)
Expenses not deductible for tax purposes 430 94
Deferred tax asset not recognised 235 99
R&D tax credit received re prior years - 127
Previously unrecognised tax losses utilised (1,187) -
Other reconciling items (1) (109)
--------------------------------- ---------------------------------
Total tax expense/(credit) 32 (127)
=================== =================
Future changes to tax rates
The Finance Act 2021 increased the UK corporation tax rate from 19% to 25%
effective 1 April 2023 for companies with profits in excess of GBP 250,000.
The impact of this rate change on the Group is limited to the increase in the
potential value of non-ring-fence UK trading losses which are currently not
recognised (note 20).
9 Other comprehensive income
2022 2021
£000 £000
Loss on investment revaluation (18) (2)
=================== ================
On 8 May 2019, the Group disposed of its interest in PEDL143 to UK Oil &
Gas Plc ('UKOG') for consideration of 25,951,557 UKOG shares, which it still
holds. At the time of the sale the shares were worth 1.156p each, resulting
in a total value of £300,000. The investment was revalued at the year end
to £24,000 (0.09p per share (2021: £42,000 (0.163p per share)). An
irrevocable election has been made to record gains and losses arising on the
shares as Other Comprehensive Income.
10 Earnings per share
Basic earnings per share ('EPS') has been calculated on the loss after
taxation divided by the weighted average number of shares in issue during the
period. Diluted EPS uses an average number of shares adjusted to allow for the
issue of shares on the assumed conversion of all in-the-money options.
As the Group made a loss from continuing operations in the prior year, any
potentially dilutive instruments were considered to be anti-dilutive for that
year. Therefore, the diluted EPS is equal to the basic EPS for the prior year.
As at 31 July 2022 there were 37,607,821(2021: 26,029,154) potentially
dilutive instruments in issue.
The calculation of the basic and diluted earnings per share is based on the
following:
2022 2021
£000 £000
Profit/(Loss) for the year attributable to the equity shareholders of the 1,356 (718)
parent
======================= ==========================
Weighted average number of shares
For the purposes of basic EPS 700,028,629 494,420,476
For the purpose of diluted EPS 737,636,450 494,420,476
11 Intangible assets
Intangible assets - Group 2022 2021
£000 £000
At 1 August 6,438 4,965
Additions 1,246 1,485
Transferred to property, plant and equipment (note 12) (3,899) -
Exploration write-off - (12)
----------------------------------- -----------------------------------
At 31 July 3,785 6,438
======================= =====================
Intangible assets comprise the Group's pre-production expenditure on licence
interests as follows:
2022 2021
£000 £000
Ireland FEL 4/19 (Inishkea) 1,789 1,662
UK PEDL180 (Wressle - transferred to tangible assets) - 3,893
UK PEDL181 81 113
UK PEDL182 (Broughton North) 34 34
UK PEDL343 (Cloughton) 92 79
Morocco (Inezgane) 1,379 657
Serenity 410 -
-------------------------------- --------------------------------
Total 3,785 6,438
======================= ===================
Exploration write-off 2022 2021
£000 £000
UK PEDL299 (Hardstoft) - 12
----------------------------------- -----------------------------------
Total - 12
================== ===================
In July 2022 the Group completed a farm-in agreement with i3 Energy plc in
relation to UK offshore licence P.2358, Block 13/23c ("Serenity"). Under the
farm-in agreement the Group will earn a participating interest of 25% by
paying 46.25% of the cost of a single appraisal well (see note 28).
If the Group elects not to continue in any other licence, then the impact on
the financial statements will be the impairment of some or all of the
intangible assets disclosed above. Details of commitments are included in note
25.
12 Property, plant & equipment
Property, plant & equipment - Group
Furniture & computers Producing Right of use assets Total
fields
£000 £000 £000 £000
Cost
At 31 July 2020 6 10,887 147 11,040
Additions - - - -
Disposals (1) - (80) (81)
------------------------------- ------------------------------- ------------------------------- -------------------------------
At 31 July 2021 5 10,887 67 10,959
Additions 13 928 - 941
Transferred from intangible assets (note 11) - 3,899 - 3,899
------------------------------- ------------------------------- ------------------------------- -------------------------------
At 31 July 2022 18 15,714 67 15,799
==================== ==================== ================= ======================
Depreciation, depletion and impairment
At 31 July 2020 3 10,488 73 10,564
Charge for year 1 64 42 107
Disposal (1) - (80) (81)
------------------------------- ------------------------------- ------------------------------- -------------------------------
At 31 July 2021 3 10,552 35 10,590
Charge for year 1 1,601 16 1,618
Disposal - - - -
Impairment in year - 570 - 570
------------------------------- ------------------------------- ------------------------------- -------------------------------
At 31 July 2022 4 12,723 51 12,778
=================== ====================== ================= ====================
Net Book Value
At 31 July 2020 3 399 74 476
=============================== =============================== =============================== ===============================
At 31 July 2021 2 335 32 369
=============================== =============================== =============================== ===============================
At 31 July 2022 14 2,991 16 3,021
=============================== =============================== =============================== ===============================
The producing fields referred to in the table above are the production assets
of the Group, namely the oilfields at Wressle, Crosby Warren and West Firsby,
and the Group's interest in the Whisby W4 well.
The carrying value of each producing field was tested for impairment by
comparing the carrying value with the value-in-use. The value-in-use was
calculated using a discounted cash flow model with production decline rates
based on engineering estimates and recent production experience. Brent crude
prices was based on the average of forecasts by 4 international firms of
specialist oil and gas reserves auditors and a Big 4 accounting firm and
ranged from:
2023: US$94 per barrel
2024: US$86 per barrel
2025: US$80 per barrel
2026 onwards: US$82 to $90 per barrel
The post-tax discount rate of 10% is high because of the applicable rates of
tax in the UK. Cash flows were projected over the expected life of the fields
which is expected to be longer than five years.
Based on the assumptions set out above, an impairment of £570,000 was
required in relation to the West Firsby and Crosby Warren fields (2021: no
impairment was required). The recoverable amount was calculated at a
discount rate of 10% (2021: 10%).
Sensitivity to key assumption changes
Variations to the key assumptions used in the value-in-use calculation, as
outlined above, would cause impairment of the producing fields as follows:
Impairment of producing fields £000
Production decline rate
+10% -
-10% -
Brent crude price per barrel
$75 flat -
$65 flat -
Pre-tax discount rate
20% -
25% -
Property, plant & equipment - Company
Furniture & computers Right of use assets Total
£000 £000 £000
Cost
At 31 July 2020 6 117 123
Disposals (1) (80) (81)
------------------------------- ------------------------------- -------------------------------
At 31 July 2021 5 37 42
Additions 13 - 13
------------------------------- ------------------------------- -------------------------------
At 31 July 2022 18 37 55
==================== ====================== =======================
Depreciation
At 31 July 2020 3 65 68
Charge for year 1 31 32
Disposals (1) (80) (81)
------------------------------- ------------------------------- -------------------------------
At 31 July 2021 3 16 19
Charge for year 1 9 10
------------------------------- ------------------------------- -------------------------------
At 31 July 2022 4 25 29
==================== ================== ===================
Net Book Value
At 31 July 2020 3 52 55
=============================== =============================== ===============================
At 31 July 2021 2 21 23
=============================== =============================== ===============================
At 31 July 2022 14 12 26
.
=============================== =============================== ===============================
13 Investments - Group
Investment in shares 2022 2021
£000 £000
At 1 August 42 44
Current year additions - -
Write off on revaluation (18) (2)
----------------------------------------- -----------------------------------------
At 31 July 24 42
=================== ===================
On 8 May 2019, the Group disposed of its interest in PEDL143 to UK Oil &
Gas Plc ('UKOG') for consideration of 25,951,557 UKOG shares, which it still
holds. At the time of the sale the shares were worth 1.156p each, resulting
in a total value of £300,000. The investment was revalued at the year end
to the value of £24,000 (0.09p per share) (2021: £42,000 (0.163p per share)
with the loss being recorded in Other Comprehensive Income (note 9).
Investments - Company
Investment in subsidiaries 2022 2021
£000 £000
At 1 August 2,343 2,341
Current year additions - 2
----------------------------------------- -----------------------------------
At 31 July 2,343 2,343
======================= ===================
The Company's investments at the reporting date include 100% of the share
capital in the following unlisted companies:
· Europa Oil & Gas Limited, which undertakes oil and gas
exploration, development and production in the UK.
· Europa Oil & Gas (West Firsby) Limited, which is non-trading.
· Europa Oil & Gas (Ireland West) Limited, which held the interest
in the FEL 2/13 licence.
· Europa Oil & Gas (Ireland East) Limited, which held the interest
in the FEL 3/13 and FEL 1/17 licences.
· Europa Oil & Gas (Inishkea) Limited, which holds the interest in
the FEL 4/19 and held the interest in FEL 3/19 licences.
· Europa Oil & Gas (New Ventures) Limited, which holds the interest
in the Moroccan licence.
All six companies are registered in England and Wales, all having their
registered office at 30 Newman Street, London W1T 1PT.
The results of the six companies have been included in the consolidated
accounts.
Europa Oil & Gas Limited owns 100% of the ordinary share capital of Europa
Oil & Gas (UK) Limited (registered in England and Wales with registered
office at 30 Newman Street, London W1T 1PT and is non-trading).
14 Inventories - Group
2022 2021
£000 £000
Oil in tanks 36 23
====================================== ======================================
15 Trade and other receivables
Group Company
2022 2021 2022 2021
Current trade and other receivables £000 £000 £000 £000
Trade receivables 1,476 330 - -
Other receivables 185 67 43 11
Prepayments 205 125 120 58
-------------------------------- ----------------------------------- ----------------------------------- -----------------------------------
1,866 522 163 69
================= ==================== ==================== ===================
Non-current other receivables
Owed by Group undertakings (note 24) - - 13,270 588
=================== =================== ================== ===================
16 Restricted cash
Group Company
2022 2021 2022 2021
£000 £000 £000 £000
Cash guarantee 263 230 - -
Security escrow funds 6,621 - - -
-------------------------------- ----------------------------------- ----------------------------------- -----------------------------------
6,884 230 - -
================= ==================== ==================== ===================
Pursuant to the requirements of the farm-in agreement with i3 Energy plc in
relation to UK offshore licence P.2358, Block 13/23c ("Serenity"), the Group
deposited into an escrow account the full remaining committed funding
requirement for its paying share of the 2022 appraisal well. i3 Energy plc is
able to draw funds actually incurred on the Serenity well from the escrow
account and the account cannot be used for any other purpose. The escrow
account is treated as restricted cash.
A requirement of the petroleum agreement with the National Office of
Hydrocarbons and Mines ('ONHYM'), was the setting up of a guarantee for
$315,000 (£263,000) (2021: $315,000 (£230,000)). This is treated as
restricted cash.
17 Trade and other payables
Group Company
Current trade and other payables 2022 2021 2022 2021
£000 £000 £000 £000
Trade payables 1,234 963 480 503
Lease liabilities 13 31 8 19
Corporation tax payable 32 - - -
Other payables 294 562 58 130
-------------------------------------- -------------------------------------- --------------------------------------- ---------------------------------------
1,573 1,556 546 652
=================== =================== ==================== ====================
Non-current trade and other payables
Lease liabilities 4 17 3 11
18 Borrowings
Group Company
2022 2021 2022 2021
£000 £000 £000 £000
Loans repayable in less than 1 year
Bounce Back Loan 40 10 40 10
-------------------------------------- -------------------------------------- --------------------------------------- ---------------------------------------
Total short-term borrowing 40 10 40 10
================== ================== ====================== ======================
Loans repayable in 1 to 2 years
Bounce Back Loan - 10 - 10
Loans repayable in 2 to 5 years
Bounce Back Loan - 30 - 30
Loans repayable in over 5 years
Bounce Back Loan - - - -
-------------------------------------- -------------------------------------- --------------------------------------- ---------------------------------------
Total long-term borrowing - 40 - 40
===================== ==================== ======================== =======================
In June 2020 the Group drew down on a Bounce Back loan for £50,000 under the
Government's Covid 19 policies. The loan is repayable within 6 years of
drawdown but with a 12-month holiday and repayments started in July 2021.
The annual rate of interest is 2.5%. The loan was repaid in full in August
2022.
On 19th January 2021 the Group entered into a related party loan agreement
with CW Ahlefeldt-Laurvig (a Group Non-Executive director and shareholder).
Under this agreement, Europa Oil & Gas drew funds of £225,000 on 20th
January 2021 for a term of 4 months (with the option of early repayment). The
loan was unsecured and interest accrued on a daily basis at an effective
interest rate of 12.57% per annum. The loan and accrued interest was fully
repaid in March 2021.
19 Leases
Group Company
2022 2021 2022 2021
£000 £000 £000 £000
Amounts recognised in the statement of comprehensive income:
Interest on right of use liabilities (2) (2) (1) (1)
Amounts recognised in the statement of cash flows:
Repayment of lease liabilities - principal (14) (35) (8) (8)
Repayment of lease liabilities - interest (2) (2) (1) (1)
Maturity analysis (undiscounted):
Amounts due within one year (14) (6) (8) (9)
Amounts due after more than 1 year & less than 5 years (2) (6) (2) (11)
Amounts due after more than 5 years - - - -
The Group's right of use asset comprises the lease of 4 vehicles (note 12).
The corresponding lease liability for the right to use leased assets are
included within trade and other payables in the statement of financial
position (note 17).
20 Deferred Tax - Group
2022 2021
Recognised deferred tax asset: £000 £000
As at 1 August - -
(Charged)/credited to statement of comprehensive income - -
------------------------------------------ ------------------------------------------
At 31 July - -
====================== =======================
The Group has a deferred tax liability of £1,433,000 (2021: £1,290,000)
arising from accelerated capital allowances and a deferred tax asset of
£1,433,000 (2021: £1,290,000) arising from trading losses which will be
utilised against future taxable profits. These were offset against each other
resulting in a £nil net asset/liability (2021: £nil net asset/liability).
This offsetting was required because the Group settles current tax assets and
liabilities on a net basis.
Non-recognised long-term deferred tax asset
The Group has a non-recognised deferred tax asset of £5,222,000 (2021:
£4,259,000), which arises in relation to ring-fence UK trading losses of
£8.9 million (2021: £4.8 million), non-ring-fence UK trading losses of
£12.2 million (2021: £11.7 million) and subsidiary losses and carried
forward capital expenditure of £6.7 million (2021: subsidiary losses of £1.8
million) that have not been recognised in the accounts as the timing of the
utilisation of the losses is considered uncertain.
No deferred tax assets or liabilities are recognised in the Company.
21 Provisions - Group
Decommissioning provisions are based on third party estimates of work which
will be required and the judgement of Directors. By their nature, the detailed
scope of work required and timing are uncertain.
Long-term provisions 2022 2021
£000 £000
As at 1 August 3,393 3,163
Charged to statement of comprehensive income (note 7) 233 230
Change in estimated phasing of cash flows 538 -
-------------------------------- --------------------------------
At 31 July 4,164 3,393
=================== ====================
The increase in the estimated decommissioning provision resulted mainly from a
reassessment of the estimated timings of when such decommissioning activities
are undertaken at the end of their economic lives.
Sensitivity to key assumption changes
Variations to the key assumptions used in the decommissioning provision
estimates would cause increases / (reductions) to the provision as follows:
Further decommissioning provision £000
Inflation rate (current assumption 3%)
2% (134)
5% 215
Discount rate (current assumption 10%)
5% 776
15% (550)
No provisions have been recognised in the Company.
22 Called up share capital
2022 2021
£000 £000
Allotted, called up and fully paid ordinary shares of 1p
At 1 August 2021: 566,466,985 shares (1 August 2020: 444,691,599) 5,665 4,447
Issued in the year: 390,000,000 shares (2021: 121,775,386 shares) 3,900 1,218
-------------------------------- --------------------------------
At 31 July: 956,466,985 shares (2021: 566,466,985) 9,565 5,665
============ =============
Ordinary shares issued
Date Type of Number of shares Issue Raised gross Raised net Nominal
Issue price of costs value
£000 £000 £000
28 March 2022 Placing 390,000,000 0.018 7,020 6,622 3,900
--------------------------------------------------------- -------------------------------- -------------------------------- --------------------------------
Total 390,000,000 7,020 6,622 3,900
================= ========= ========= =========
The costs of £398,000 incurred on the issue of share capital include
£219,000 of non-cash expenses. All of the allotted shares are ordinary shares
of the same class and rank pari passu. The following describes the purpose of
each reserve within owners' equity:
Reserve Description and purpose
Share premium Amount subscribed for share capital in excess of nominal value
Merger reserve Reserve created on issue of shares on acquisition of subsidiaries in prior
years
Retained deficit Cumulative net gains and losses recognised in the consolidated statement of
comprehensive income
23 Share-based payments
The Group operates an approved Enterprise Management Incentive ('EMI') share
option scheme for employees and an unapproved scheme for grants in excess of
EMI limits and for non-employees. Both schemes are equity-settled share-based
payments as defined in IFRS 2 Share-based payments. A recognised valuation
methodology is employed to determine the fair value of options granted as set
out in the standard. The charge incurred relating to these options is
recognised within operating costs.
Combined information for the two schemes operated by the Group is set out
below.
There are 41,207,821 ordinary 1p share options/warrants outstanding (2021:
26,029,154).
These are held as follows:
Holder 31 July 2022 31 July 2021
BJ O'Cathain 2,950,000 2,950,000
SG Oddie 9,200,000 9,200,000
SA Williams 2,500,000 2,500,000
W Holland 3,721,000 -
Employees of the Group 2,740,000 3,425,000
Consultants and advisers 20,096,821 7,954,154
--------------------------------------------------- ---------------------------------------------------
Total 41,207,821 26,029,154
==================== ====================
The fair values of options were determined using a Black Scholes Merton model
or, in the case of ones issued to advisors as part of the share issue, the
fair value was deemed to be the share issue price. Volatility is based on the
Company's share price volatility since flotation.
In the year 15,863,667 options/warrants were granted, nil expired, 685,000
were forfeited, and none were exercised (2021: 21,404,154 granted, 2,223,458
expired, 17,355,000 forfeited, none exercised).
2022 2022 2021 2021
Number of options Average exercise price Number of options Average exercise price
Outstanding at the start of the year 26,029,154 2.37p 24,203,458 8.15p
Granted - employees/directors 3,721,000 2.31p 13,450,000 1.23p
Granted - consultants - - 2,000,000 1.23p
Granted - advisors 12,142,667 1.80p 5,954,154 1.3p
Expired - - (2,223,458) 2.8p
Forfeited (685,000) 7.00p (17,355,000) 12.85p
------------------------------------------------- ----------------------------------- ------------------------------------------------- -----------------------------------
Outstanding at the end of the year 41,207,821 2.02p 26,029,154 2.37p
Exercisable at the end of the year 18,096,821 1.64p 9,814,154 2.84p
The 3,721,000 options granted in June 2022 vest 1,240,333 after each of 12, 24
and 36 months, are exercisable conditional upon the Europa Oil & Gas
(Holdings) plc closing average mid-market share price being above 4.62p for 30
consecutive trading day and expire on the 6(th) anniversary of the grant date.
The inputs used to determine their values are detailed in the table:
Grant date 1 June 2022
Number of options 3,721,000
Share price at grant 2.5p
Exercise price 2.31p
Volatility 62.8%
Dividend yield Nil
Risk free investment rate 1.791%
Option life in years 6
Fair value per option 1.50p
The 12,142,667 warrants issued in March 2022 were issued to advisors as part
of their compensation for services in relation to the share fund raise. The
fair value to the options warrants was estimated to be 1.8p per warrant.
Based on the fair values above, the charge arising from employee share options
was £20,000 (2021: £35,000). The charge relating to non-employee share
options was £Nil (2021: £4,000). The charge allocated direct to equity,
relating to the issue of options on the issue of share capital, was £219,000
(2021: £78,000).
Share options/warrants outstanding at the end of the period have exercise
prices ranging from 1.23p to 10.0p and the weighted average remaining
contractual life at the end of the period was 3.4 years (2021: 3.8 years).
24 Financial instruments
The Group's and Company's financial instruments comprise cash and cash
equivalents, bank borrowings, loans, and items such as trade and other
receivables and trade and other payables which arise directly from its
operations. Europa's activities are subject to a range of financial risks, the
main ones being credit; liquidity; interest rates; commodity prices; foreign
exchange; and capital. These risks are managed through ongoing review
considering the operational, business and economic circumstances at that time.
Financial assets
Amortised cost Amortised cost Fair value through other comprehensive income Fair value through other comprehensive income
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Investments - - 24 42
Trade and other receivables 1,661 397 - -
Restricted cash 6,884 230 - -
Cash and cash equivalents 1,394 641 - -
-------------------- -------------------- ----------------------- -----------------------
Total financial assets 9,939 1,268 24 42
================================ ================================ ===================================== =====================================
Financial liabilities
Amortised cost Amortised cost Fair value through other comprehensive income Fair value through other comprehensive income
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Trade and other payables (1,577) (1,573) - -
Loans (40) (50) - -
-------------------- -------------------- --------------------- -----------------------
Total financial liabilities (1,617) (1,623) - -
================================ ================================ ===================================== =====================================
Credit risk
The Group is exposed to credit risk as all crude oil production is effectively
sold to one multinational oil company. The customer is invoiced monthly for
the oil delivered to the refinery in the previous month and invoices are
generally settled in full within the same month that invoices are issued. At
31 July 2022 trade receivables were £1,476,000 (2021: £330,000). The fair
value of trade receivables and payables approximates to their carrying value
because of their short maturity. Any surplus cash is held on short-term
deposit with Royal Bank of Scotland. The maximum credit exposure in the year
was £1,433,000 comprising of mainly two months of Wressle sales, due the
invoice for June deliveries only being received on 1 August 2022 (2021:
£175,000). The Company exposure to third party credit risk is negligible. The
intercompany balances with its subsidiaries have been appropriately provided
for to account for potential impairments.
Liquidity risk
The Company currently has no overdraft or overdraft facility with its bankers.
The Group and Company monitor their levels of working capital to ensure they
can meet liabilities as they fall due. The following table shows the
contractual maturities (representing the undiscounted cash flows) of the
Group's and Company's financial liabilities.
Group Company
Trade and other payables Trade and other payables
At 31 July 2022 2021 2022 2021
£000 £000 £000 £000
6 months or less 1,573 1,556 546 652
-------------------------------------- -------------------------------------- --------------------------------------- ---------------------------------------
Total 1,573 1,556 546 652
================================ ================================ ===================================== =====================================
Group Company
Loans Loans
At 31 July 2022 2021 2022 2021
£000 £000 £000 £000
6 to 12 months 40 5 40 5
1 to 2 years - 5 - 5
2 to 5 years - 10 - 10
Over 5 years - 30 - 30
-------------------------------------- -------------------------------------- --------------------------------------- ---------------------------------------
Total 40 50 40 50
===================== ====================== ========================= ========================
Cash and cash equivalents in both Group and Company are all available at short
notice.
Trade and other payables do not normally incur interest charges. There is no
difference between the fair value of the trade and other payables and their
carrying amounts.
Interest rate risk
The Group has immaterial interest-bearing liabilities (note 18) and leases
(note 19). All loans and leases are at fixed rates of interest and the Group
and Company is not exposed to changes in interest rates.
Commodity price risk
The selling price of the Group's production of crude oil is set at a small
discount to Brent prices. The table below shows the range of prices achieved
in the year and the sensitivity of the Group's loss before taxation ('LBT') or
profit before tax ('PBT') to such movements in oil price. There would be a
corresponding increase or decrease to net assets. There is no commodity price
risk in the Company.
2022 2022 2021 2021
Price PBT Price LBT
Oil price Month US$/bbl £000 US$/bbl £000
Highest June 2022 $122.40 1,723 $73.60 (420)
Average $93.90 (208) $55.80 (845)
Lowest August 2021 $69.50 (1,864) $39.10 (1,262)
Foreign exchange risk
The Group's production of crude oil is invoiced in US$. Revenue is translated
into Sterling using a monthly exchange rate set by reference to the market
rate. The table below shows the range of average monthly US$ exchange rates
used in the year and the sensitivity of the Group's PBT / LBT to similar
movements in US$ exchange. There would be a corresponding increase or decrease
in net assets.
2022 2022 2021 2021
Rate PBT Rate LBT
US Dollar Month US$/£ £000 US$/£ £000
Highest August 2021 1.376 (373) 1.418 (902)
Average 1.313 (76) 1.271 (845)
Lowest July 2022 1.216 443 1.292 (775)
The table below shows the Group's currency exposures. Exposures comprise the
net financial assets and liabilities of the Group that are not denominated in
the functional currency.
Group Company
2022 2021 2022 2021
Currency Item £000 £000 £000 £000
Euro Cash and cash equivalents 92 2 3 2
Trade and other payables (13) (458) (13) (397)
US Dollar Cash and cash equivalents 1,322 339 3 6
Trade and other receivables 1,435 290 - -
Trade and other payables (5) - (5) -
---------------------------- ---------------------------- ---------------------------- ----------------------------
Total 2,831 173 (12) (389)
==================== =================== ====================== ======================
Capital risk management
The Group's objectives when managing capital are to safeguard the Group's
ability to continue as a going concern in order to provide returns for
shareholders and maintain an optimal capital structure to reduce the cost of
capital. The Group defines capital as being the consolidated shareholder
equity (note 22) and third borrowings (£40,000 at 31 July 2022). The Board
monitors the level of capital as compared to the Group's long-term debt
commitments and adjusts the ratio of debt to capital as is determined to be
necessary, by issuing new shares, reducing or increasing debt, paying
dividends and returning capital to shareholders. The Group has a £40k loan
subject to an annual 2.5% interest charge and contractually repayable over 6
years with a 1-year holiday and no early repayment penalty. Repayments
commenced in July 2021 and the loan was fully repaid in August 2022.
Intercompany loans
The loans to the subsidiaries are not classified as repayable on demand. IFRS
9 requires consideration of the expected credit risk associated with the loan.
As the subsidiary company does not have any liquid assets to sell to repay the
loan, should it be recalled, the conclusion reached was that the loan should
be categorised as stage 3.
As part of the assessment of expected credit losses of the intercompany loan
receivable, the Directors have considered the published chance of success for
Inishkea, and applying the same 33% general wildcat exploration success rate
to Inezgane, the loans to Europa Oil & Gas Inishkea and Europa Oil &
Gas New Ventures have thus been 67% provided.
The loan to Europa Oil & Gas (Ireland West) and Europa Oil & Gas
(Ireland East) have been provided in full due to the relinquishment of the
licence held by the subsidiaries.
During the year to 31 July 2022 there has been a marked increase in the
expected recoverable reserves of the Group's Wressel producing asset which led
to a partial reversal of previous provisions for impairment that had been made
in relation to loans to Europa Oil Gas Ltd.
The movement in the provision was as follows:
Europa Oil & Gas Limited Europa Oil & Gas (Ireland West) Limited Europa Oil & Gas (Ireland East) Limited Europa Oil & Gas (Inishkea) Limited Europa Oil & Gas (New Ventures) Limited Total
£000 £000 £000 £000 £000 £000
============= ============= ============= ============= ============= =============
Gross loan balances
Loan balance at 31 July 2020 18,585 763 1,480 796 504 22,128
Movement in loan 1,593 - - 228 258 2,079
Loan balance at 31 July 2021 20,178 763 1,480 1,024 762 24,207
Movement in loan 6,357 18 15 144 428 6,962
Loan balance at 31 July 2022 26,535 781 1,495 1,168 1,190 31,169
Provisions
Provision at 31 July 2020 (18,585) (763) (1,480) (533) (337) (21,698)
Movement in provision (1,593) - - (154) (174) (1,921)
Provision at 31 July 2021 (20,178) (763) (1,480) (687) (511) (23,619)
Movement in provision 6,135 (18) (15) (96) (286) 5,720
Provision at 31 July 2022 (14,043) (781) (1,495) (783) (797) (17,899)
Net loan balance at 1 August 2020 2012018 - - - 263 167 430
Net loan balance at 31 July 2021 - - - 337 251 588
Net loan balance at 31 July 2022 12,492 - - 385 393 13,270
25 Capital commitments and guarantees
Following completion of the farm-in to Production Licence P.2358, Block 13/23c
("Serenity") £6.9m was transferred into an escrow account held under an
agreement with Law Debentures to cover the commitment to pay 46.25% of the
appraisal well costs.
As part of the 18-month licence extension for FEL 4/19 there is an outstanding
commitment totalling €0.6m that relates primarily to seismic reprocessing.
To satisfy the terms of the Inezgane licence there is an outstanding
commitment totalling £0.4m that relates to the completion of the initial
phase work programme mainly comprising seismic inversion and basin modelling.
In addition, there is a commitment to provide a $0.1m training contribution to
ONHYM.
For PEDL181 there is a contingent commitment to drill two development wells
into the Penistone formation, an exploration well for Broughton North and a
gas to power project. These activities are contingent upon the budget being
approved by the JV partnership. The total net cost to Europa for the work
programme is estimated to be £1.35m in 2023 and £3.66m in 2024.
26 Operating lease commitments
Europa Oil & Gas Limited pays annual site rentals for the land upon which
the West Firsby and Crosby Warren oil field facilities are located.
· The West Firsby lease runs until September 2022 and can be terminated
on two months' notice. The annual cost is currently £22,000 (2021: £22,000)
increasing annually in line with the retail price index.
· The Crosby Warren lease runs until December 2022 and can be
terminated on three months' notice. The annual cost is currently £20,000
(2021: £20,000).
Future minimum lease payments are as follows:
2022 2021
£000 £000
Less than 1 year 9 9
2-5 years - -
--------------------------------- ---------------------------------
Total 9 9
============ =============
27 Related party transactions
Key management are those persons having authority and responsibility for
planning, controlling and directing the activities of the Group. In the
opinion of the Board, the Group's and the Company's key management are the
Directors of Europa Oil & Gas (Holdings) plc. Information regarding their
compensation is given in note 4.
During the year, the Company provided services to subsidiary companies as
follows:
2022 2021
£000 £000
Europa Oil & Gas Limited 236 1,208
Europa Oil & Gas (Inishkea) Limited 42 38
Europa Oil & Gas (New Ventures) Limited 19 25
--------------------------------- ---------------------------------
Total 297 1,271
============ ==========
At the end of the year, after provisions, the Company was owed the following
amounts by subsidiaries:
2022 2021
£000 £000
Europa Oil & Gas Limited 12,492 -
Europa Oil & Gas (Inishkea) Limited 385 337
Europa Oil & Gas (New Ventures) Limited 393 251
--------------------------------- ---------------------------------
Total 13,270 588
============ =============
On 19th January 2021, the Group entered into a related party loan agreement
with CW Ahlefeldt-Laurvig (a Group Non-Executive director and shareholder).
Under this agreement, Europa Oil & Gas drew funds of £225,000 on 20th
January 2021 for a term of 4 months (with the option of early repayment). The
loan was unsecured and interest accrued on a daily basis at an effective
interest rate of 12.57% per annum. The loan and accrued interest was fully
repaid in March 2021.
28 Post reporting date events
· The Serenity appraisal well did not find oil bearing sands and as
such the well was plugged and abandoned for a forecast gross well cost of
£10.4m resulting in an estimated total cost to Europa of £4.8m. The
remaining £2m held in the escrow fund will be released to Europa and will no
longer be restricted. The various development options of the Serenity field
will now be assessed by the Company and i3E in order to maximise the value of
the field.
· On 2 November 2022 the Company's application to the Department of the
Environment, Climate and Communications ("DECC") for an extension to the first
phase of its 100%-owned FEL 4/19 licence was granted and as such the licence
is now live until 31 January 2024.
· On 8 September 2022 the Company entered into a loan agreement with
Union Jack Oil plc ("UJO"). The key features of the loan were: £1 million
loan amount, 18-month term, interest rate of 11% per annum, repayable at any
point during the term without penalty and secured against 10% interest in the
Wressle field (PEDL180, and PEDL182). The loan was to provide additional
liquidity during the drilling of the Serenity appraisal well. The loan was
repaid in full on 18 October 2022.
* * ENDS * *
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