REG - Europa Oil & Gas - Final Results
23/10/2023 07:00
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RNS Number : 8590Q Europa Oil & Gas (Holdings) PLC 23 October 2023
Europa Oil & Gas (Holdings) plc / Index: AIM / Epic: EOG / Sector: Oil
& Gas
23 October 2023
Europa Oil & Gas (Holdings) plc
("Europa" or the "Company")
Final results for the year to 31 July 2023
Europa Oil & Gas (Holdings) plc, the AIM traded UK and Ireland focused oil
and gas exploration, development and production company, announces its final
audited results for the 12-month period ended 31 July 2023.
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.
Financial performance
· Revenue remained stable at £6.7 million despite a lower oil price
and weaker pound (2022: £6.6 million)
· Gross profit increased 53% to £3.4 million (2022: £2.2 million)
· Pre-tax loss of £0.9 million after non-cash impairment loss of £1.7
million (2022: pre-tax profit £1.4 million)
· Net cash generated in operating activities: £2.8 million (2022:
£2.5 million)
· Cash balance: £5.2 million (2022: £8.3 million)
Operational highlights - Building a balanced portfolio of exploration and
production assets
Onshore UK - net production increased 8% to 265 barrels of oil per day
("bopd") (2022: 245 bopd) following excellent Wressle performance
· Wressle continued to exceed expectations
o Gross production averaged 710 bopd throughout the period (2022: 597 bopd),
with Europa's net share equating to 213 bopd (2022: 179 bopd)
o Three microturbines were connected at the Wressle site during January and
February 2023, resulting in a 10% increase in oil production
o New seismic interpretation across the Wressle field has highlighted a
potentially significant increase in reserves from the Ashover Grit
o Gas monetisation project under development with potential for significant
oil production gains as a result
· Total net production of 265 bopd was produced from Europa's UK
onshore fields during the year with Wressle contributing roughly 81% of this
and the remainder coming from the three older fields
· Future potential for West Firsby to continue delivering revenue is
being assessed and studies are underway to identify activities which could
utilise the existing connection to the local power grid so that the site can
be repurposed to generate emission-free renewable energy. This is directly in
line with the Company's ESG strategy
· A reassessment of the estimated decommissioning liability for
Crosby Warren resulted in a reversal of amounts previously impaired of £177k.
Offshore Ireland - lower risk / very high reward infrastructure-led
exploration in proven gas play in the Slyne Basin
· The seismic reprocessing of the FEL 4/19 data has resulted in a
marked improvement in the imaging of both the Inishkea West and Inishkea
prospects, with the Inishkea West structure now being mapped as a large 4-way
closure, with a prospective resource Pmean of 1,554 BCF
· The reprocessed seismic has materially improved the subsurface
imaging and provided more confidence in the quality of the seal and trap at
Inishkea West, which in turn has increased the chance of success of the
prospect. In addition, Inishkea West is prognosed as a shallower structure by
some 900 meters which means that the reservoir quality will be better than at
Inishkea
· Inishkea West is within easy tie-back range of the Corrib gas field
situated some 18 kilometres to the southeast. This proximity to the Corrib
infrastructure, the mapped 4-way closure, the large prospective resource and
the reduced seal risk means that the Inishkea West prospect has become the
primary exploration target on the FEL 4/19 licence.
· Given the significant improvement seen in the reprocessed data, it is
expected that the subsurface imaging can be further enhanced by reprocessing
the data at 30Hz.
· The farm-out process has been paused until the further reprocessing
has been completed.
· In November 2022, DECC gave consent to extend the first phase of our
100% owned FEL 4/19 licence to 31 January 2024. Given the nature of the
reprocessing it has taken longer than expected to complete the work programme
and as a result we have since applied for a further extension to allow us to
continue with the reprocessing work and then find a suitable partner to drill
an exploration well.
Offshore UK - 25% interest in the Serenity discovery in the North Sea
· Progress continues with the development of the Serenity oil discovery
in the Central North Sea alongside our partner i3 Energy plc
· Despite drilling an appraisal well in October 2022 that failed to
encounter hydrocarbons, the partners believe that a one-well development in
the eastern area of the field around the discovery well is economically
viable. However, we believe that the Serenity field is geologically connected
to the neighbouring Tain field and together with i3 Energy we are assessing
the feasibility for unitisation of the two fields
· A number of potential development scenarios are available given local
infrastructure, with a future development potentially resulting in
approximately 1,000 bopd net to Europa's 25% interest
UK offshore licensing round
· Europa participated in the UK Government's 33rd offshore oil and gas
licensing round
Board
· Simon Oddie retired as CEO in March 2023, but remains on the Board as
a non-executive director
· William Holland was appointed as CEO in March 2023, having been CFO
since April 2022
· William Ahlefeldt retired as non-executive director in April 2023
· Alastair Stuart was appointed as COO and executive director in April
2023, having been a technical consultant to the Company since 2012
Post reporting period events
· Operations to install a jet pump for artificial lift on the Wressle-1
well are underway. The original completion was removed from the well and a new
completion, including the sub-surface pump, has been successfully run in the
well as of early October 2023. All that remains is for the required surface
pump and associated flowlines and electrics to be installed, which is expected
to be completed before the end of October.
· PEDL 181 was relinquished during September 2023. The asset was not
deemed to be adequately attractive. It had zero carrying value on the balance
sheet.
· Applied to DECC to extend licence FEL 4/19 from 31 January 2024 to
undertake further reprocessing and secure a farm-in partner.
William Holland, CEO of Europa, said:
"Europa made significant progress, both operationally and financially, during
the 2022/23 financial year, including continued development work at our
flagship asset, the Wressle oilfield, which consistently performs above
initial expectations. As planned, we have initiated multiple projects designed
to increase oil production and gas monetisation from the field, and in the
first half of the year, we executed the initial phase of the gas utilisation
project, which has led to a c. 10% increase in oil production. Even though
Wressle is already exceeding expectations, having produced 710 bopd during the
financial year, we remain focused on realising the full potential of the
field, with the completion of these additional projects and drilling the
Penistone horizon being one of Europa's priority medium-to-long-term projects.
In the year, we delivered revenue from operating activities of £6.7 million
and generated net cash from operating activities of £2.8 million,
demonstrating the financial resilience of the Company and maintaining our
strong track record of positive cash generation. It has been a year of
considerable administrative transition for Europa: we set up a new London
office, strengthened our in-house technical and managerial capabilities with
new staff members and expanded our business development activity levels; all
with the purpose of delivering our strategy faster and more efficiently.
We have impressed on both the Irish Government and Europa stakeholders the
significant role our offshore Ireland FEL 4/19 licence could play in
minimising Ireland's dependence on costly and carbon-intensive gas imports and
enhancing the country's strategic energy security. FEL 4/19 contains an
estimated prospective resource of 1.55 TCF of gas, and in June 2023, I
hand-delivered a document detailing our licence's potential to senior Irish
Government officials during an exclusive energy summit hosted by the Taoiseach
Leo Varadkar. We have continued to be proactive in both executing advanced
technical reprocessing work and seeking a suitable farm-in partner for our FEL
4/19 licence and remain committed to continuing our efforts to work
constructively with the Department of the Environment, Climate and
Communications to progress FEL 4/19 to drilling. In October 2023 we announced
the results of our seismic reprocessing which has materially improved the
subsurface imaging and provided more confidence in the quality of the seal and
trap at Inishkea West, which in turn has increased the chance of success of
the prospect whilst also increasing the size of the prospect to 1.55 TCF. In
addition, Inishkea West is prognosed as a shallower structure by some 900
meters which means that the reservoir quality will be better than at Inishkea
and as a result this has become our primary prospect on the licence.
Progress continues with the development of the Serenity oil discovery in the
Central North Sea, and we are collaborating with our partner i3 Energy to
determine the best strategic direction for the prospect, with a variety of
development scenarios being diligently considered including a development
incorporating the Tain discovery that could be tied back to the Blake field or
potentially developed with low-cost infrastructure as a standalone field.
In July 2023, we assumed operatorship of our onshore UK licence PEDL343, which
holds the Cloughton gas discovery. Our technical team has already performed an
audit of the existing subsurface data and established a range of gas in place
volumes with a Pmean of 192 bcf gross. Our team is now working on a conceptual
development plan for the field, which we expect will demonstrate the material
potential value of the licence. Concurrently we are engaged with stakeholders
to secure the necessary permits and approvals required to drill an appraisal
well, which we believe will demonstrate the reservoir can deliver the
production rates required for a commercial development of the field.
We are continually assessing opportunities to further diversify our asset
portfolio. We are encouraged by the reaffirmation of UK Government support for
offshore and onshore hydrocarbon exploration and production and remain
optimistic about our future growth prospects."
For further information, please visit www.europaoil.com
(http://www.europaoil.com/) or contact:
William Holland Europa Oil & Gas (Holdings) plc mail@europaoil.com
James Dance / James Spinney Strand Hanson Limited - Nominated & Financial Adviser +44 (0) 20 7409 3494
Peter Krens Tennyson Securities +44 (0) 20 7186 9033
Patrick d'Ancona / Finlay Thomson / Kendall Hill Vigo Consulting + 44 (0) 20 7390 0230
Chairman's Statement
The 2022/23 financial year was a productive period for Europa, underpinned by
continued operational progress and financial stability. Although the period
was not without its challenges, we managed to deliver on a number of our
strategic objectives and further demonstrated our financial resilience by
maintaining our balance sheet strength. Despite well-publicised trading
headwinds, we once again generated impressive levels of revenue from our
onshore UK producing assets, with our total average net production rate for
the period at 265 bopd.
Wressle is our leading production asset and currently the second most
productive onshore UK oilfield and remains central to our growth strategy.
During the year we continued to invest capital in improving the site and
making solid progress with the Field Development Plan. The war between Russia
and Ukraine is showing no signs of abating and as a result energy security
remains a key priority for countries across the globe. We have continued our
positive dialogue with the Irish Government, communicating the potential of
our offshore licence FEL 4/19 to help reduce the country's reliance on
imported gas and support the energy transition, and we welcomed its decision
to extend the first phase of our licence to 31 January 2024. The work
programme on FEL 4/19 has taken longer than expected to complete, given the
cutting-edge nature of the technology involved in the seismic reprocessing.
The results have also highlighted further enhancements that could be
undertaken to improve the sub-surface imaging. We have therefore applied for
an extension to conduct further reprocessing and continue with the farm-out
discussions, which have been put on hold until the reprocessing is complete.
We are very encouraged by the results of the reprocessing completed to date,
which have reduced the risk associated with an exploration well whilst
increasing the size of the primary Inishkea West prospect, and we believe that
the licence is now significantly more attractive to a potential farminee than
previously.
Elsewhere, we continue to assess development options for the offshore UK
Serenity oilfield with our partner i3 Energy. Europa holds a 25% working
interest in the Central North Sea licence and given Serenity's proximity to
local infrastructure, management believes developing the discovered reserve as
a joint development with the adjacent Tain Field could be a cost-effective
solution.
Looking ahead, we remain focused on building on the progress delivered in the
period and continuing to implement our prudent development plan for Wressle to
accelerate long-term production rates, access additional reserves within the
field and cement its position as a leading UK onshore oilfield.
Onshore UK
Since coming onstream in 2021, Wressle has been our best performing asset,
consistently delivering strong production rates and exceeding expectations.
During the year, Wressle's gross production rate was 710 bopd, which, taking
into account the impact of development operations at the field, represents yet
another excellent performance.
The first phase of the gas utilisation project was completed in January 2023,
whereby three microturbines were connected to provide site power which
resulted in a circa 10% increase in oil production. The next phase involves
the connection to a gas pipeline located approximately 600 metres from the
existing well site, which will be constructed as part of the Wressle
development drilling programme scheduled for 2024.
Planning for the Wressle development drilling programme, which will access the
Penistone reserves and leverage the existing infrastructure, is progressing
well and we continue to work in collaboration with our partners to optimise
the field's performance and maximise its efficiency, whilst also targeting
zero flaring.
Towards the end of the year, we announced that we had assumed operatorship of
licence PEDL343, which holds the Cloughton gas discovery. The Cloughton field
was discovered in 1986 and encountered gas throughout the Carboniferous
section. The well tested at rates of up to 28,000 scf/day on natural flow,
however with the right completion and production optimisation techniques the
Company believes that a well could flow up to 6 mmscf/day. Following an
internal review of the existing sub-surface data the Company concluded that
there is a Pmean GIIP of 192 BCF on the licence. We are therefore committed to
progressing the asset to appraisal drilling operations and capitalising on
this opportunity to potentially monetise the discovery in the long-term.
Offshore UK
We farmed into the Serenity field in the Central North Sea just over a year
ago and re-entered the UK offshore sphere for the first time since 2017. The
appraisal well spudded in Q3 2022 and unfortunately failed to encounter
oil-bearing sands. However we are continuing to explore a high-potential
opportunity to develop the discovered reserve via the adjacent Tain Field. The
Serenity and Tain discoveries benefit from having existing infrastructure
located in close proximity to our licence. In addition our investment in
Serenity has provided a shelter against the Energy Profits Levy for the income
generated across our asset base.
The UK Government remains supportive of North Sea exploration and production,
as epitomised by its recent commitment to grant hundreds of new offshore oil
and gas licences, and this continued investment represents a major boost to
our efforts to optimise the development of Serenity with our partner i3
Energy.
Offshore Ireland
During the year, we stepped up our efforts to attract a suitable farm-in
partner for the development of FEL 4/19, our 100%-owned offshore Ireland
licence. Within FEL 4/19 are the Inishkea and Inishkea West prospects, which
represent Europa's key gas exploration interests. These are located nearby the
already producing Corrib gas field and are, therefore, low-risk prospects
which we are aiming to explore when a farmin partner has been secured.
Inishkea West is our principal prospect which contains an estimated
prospective resource of 1.55 TCF of gas and could provide sufficient natural
gas to significantly extend the operational life of the Bellanaboy gas
processing terminal, potentially making a strong contribution to Irish energy
security, and maintaining the 180 skilled jobs at the gas terminal.
We maintain a strong working relationship with the Irish Government, in
particular the team at the Department of the Environment, Climate and
Communications ("DECC"), and were pleased that the minister agreed to extend
our licence to January 2024. We have been working diligently to complete the
committed seismic reprocessing work programme which has recently reduced
the risks associated with the Inishkea West prospect and indicated that
reprocessing at a higher frequency could further improve the sub-surface
resolution of the exploration targets. In order to undertake this work and
then continue with the farm-out process we have requested an extension to the
licence and hope to receive this in the coming months.
Ireland is currently conducting a major review of its energy security, and we
firmly believe our FEL 4/19 licence could play a key role in the country's
energy strategy going forward, especially given the fact that low
carbon-intensive indigenous gas is widely recognised as a key transition fuel
on the pathway to net zero.
Board Changes
After four years as chief executive officer of Europa, Simon Oddie decided to
retire as CEO in March 2023. The board conducted a formal process for a new
CEO, advised by a specialist executive search firm, which resulted in the
appointment of William Holland as CEO. Simon worked tirelessly to build a
strong platform from which to grow the Company and, on behalf of the board, I
would like to express my sincere thanks for his unwavering commitment to the
business during his tenure as CEO. Simon remains on the board as a
non-executive director and continues to provide strategic insight to support
the development of the business.
Our new CEO William Holland has had a significant impact on the Company
since joining us as Chief Financial Officer in 2022, and he has continued to
deliver considerable operational, organisational and financial progress in his
new role. We remain confident that Will has the skills required to continue to
drive the growth of the business as we strive to deliver on our strategic
priorities.
In April 2023, Alastair Stuart, who has been consulting as a petroleum
engineer for Europa since 2012, joined the Company on a permanent basis as COO
and as an executive director. Alastair's upstream experience has been
instrumental in the development of Wressle and we will continue to leverage
his technical expertise and extensive knowledge of our assets to enhance our
overarching business strategy and develop our project portfolio.
Following many years of loyal service and an invaluable contribution to
Europa, William Ahlefeldt retired as a director of Europa in April 2023. We
wish William well in his future endeavours and thank him for his long-standing
dedication to the Company.
Conclusion and Outlook
The 2022/23 financial year was another strong period for Europa, during which
we delivered considerable development progress at Wressle and maintained our
robust financial position. Our strong cash flows and healthy balance sheet
will enable us to continue to advance the production enhancement project at
Wressle, whilst supporting our plans to progress licence PEDL343 to appraisal
drilling.
Alongside our partners, we continue to assess options for developing the
discovered reserve at Serenity via the Tain field, which could be as a unified
development and potentially highly material to Europa. In addition, we remain
confident that we will be granted an extension for FEL 4/19, which will enable
us to complete the reprocessing work and find the ideal farm-in partner to
drill and develop the Inishkea West prospect. Europa participated in the UK
Government's 33(rd) offshore oil and gas licensing round and we remain
well-positioned to explore opportunities on and offshore UK.
The development programme being undertaken at Wressle demonstrates our
commitment to generating additional value for shareholders as we focus on
delivering on our long-term growth strategy and building an enviable portfolio
of assets across production, appraisal and exploration stages of the
development cycle.
Our new-look management team has worked tirelessly throughout the year to
fulfil our strategic aspirations and I would like to extend my thanks to them
for their hard work and perseverance on a diverse range of projects. The
entire board looks ahead with confidence to what we expect will be another
constructive year for the Company and one where we hope that we will see
strong progress at Wressle, Cloughton and FEL 4/19.
Qualified Person Review
This release has been reviewed by Alastair Stuart, Europa's Chief Operating
Officer, 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 2023 or 2022. 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 2023.
Statutory accounts for the years ended 31 July 2022 and 31 July 2021 have been
reported on by the Independent Auditors.
The Independent Auditors' Report on the Annual Report and Financial Statements
for 2023 and 2022 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 2022 have been filed with the Registrar of Companies. The
statutory accounts for the year ended 31 July 2023 will be delivered to the
Registrar in due course.
Consolidated statement of comprehensive income
For the year ended 31 July 2023 2022
Note £000 £000
Continuing operations
Revenue 2 6,653 6,584
Cost of sales 2 (3,448) (3,806)
Impairment of producing fields 12 177 (570)
Total cost of sales (3,271) (4,376)
---------------------------------- ----------------------------------
Gross profit 3,382 2,208
Exploration write-off 11 (1,686) -
Administrative expenses (1,872) (821)
Finance income 6 9 239
Finance expense 7 (717) (238)
------------------------------------ ------------------------------------
(Loss) / profit before taxation 3 (884) 1,388
Taxation expense 8 32 (32)
------------------------------------ ------------------------------------
(Loss) / profit for the year (852) 1,356
==================== ====================
Other comprehensive profit / (loss)
Items which will not be reclassified to profit /(loss)
Profit / (loss) on investment revaluation 9 5 (18)
------------------------------------ ------------------------------------
Total other comprehensive profit /(loss) 5 (18)
==================== ====================
Total comprehensive (loss) / income for the year attributable to the equity (847) 1,338
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 (0.09p) 0.19p
Diluted EPS (0.09p) 0.18p
The accompanying notes form part of these financial statements.
Consolidated statement of financial position
As at 31 July 2023 2022
Note £000 £000
Assets
Non-current assets
Intangible assets 11 7,146 3,785
Property, plant and equipment 12 2,417 3,021
---------------------------------- ----------------------------------
Total non-current assets 9,563 6,806
---------------------------------- ----------------------------------
Current assets
Investments 13 - 24
Inventories 14 19 36
Trade and other receivables 15 893 1,866
Restricted cash 16 - 6,884
Cash and cash equivalents 5,165 1,394
---------------------------------- ----------------------------------
Total current assets 6,077 10,204
---------------------------------- ----------------------------------
Total assets 15,640 17,010
==================== ====================
Liabilities
Current liabilities
Loans 18 - (40)
Trade and other payables 17 (781) (1,573)
------------------------------------ ------------------------------------
Total current liabilities (781) (1,613)
------------------------------------ ------------------------------------
Non-current liabilities
Trade and other payables 17 (12) (4)
Long-term provisions 21 (4,368) (4,164)
---------------------------------- ----------------------------------
Total non-current liabilities (4,380) (4,168)
---------------------------------- ----------------------------------
Total liabilities (5,161) (5,781)
----------------------------------- -----------------------------------
Net assets 10,479 11,229
==================== ====================
Capital and reserves attributable to equity holders
of the parent
Share capital 22 9,592 9,565
Share premium 22 23,682 23,660
Merger reserve 22 2,868 2,868
Retained deficit (25,663) (24,864)
---------------------------------- ----------------------------------
Total equity 10,479 11,229
====================== ======================
These financial statements were approved by the board of directors and
authorised for issue on 20 October 2023 and signed on its behalf by:
William Holland, CEO
Company registration number 05217946
The accompanying notes form part of these financial statements.
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 2021 5,665 21,157 2,868 (26,441) 3,249
Comprehensive loss 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
=================== =================== =================== ===================== ==================
Share Share premium Merger Retained deficit Total
capital
reserve equity
£000 £000 £000 £000 £000
Balance at 1 August 2022 9,565 23,660 2,868 (24,864) 11,229
Comprehensive loss for the year
Loss for the year attributable to the equity shareholders of the parent (852) (852)
- - -
Other comprehensive profit attributable to the equity shareholders of the 5 5
parent
- - -
---------------------------------- ---------------------------------- --------------------------------- ------------------------------ -------------------------------
Total comprehensive loss for the year - - - (847) (847)
---------------------------------- ---------------------------------- --------------------------------- ------------------------------ -------------------------------
Contributions by and distributions to owners
Issue of share capital (net of issue costs) 27 22 - - 49
Share-based payments (note 23) - - - 48 48
---------------------------------- ---------------------------------- ---------------------------------- --------------------------------- ------------------------------
Total contributions by and distributions to owners 27 22 - 48 97
---------------------------------- ---------------------------------- --------------------------------- ------------------------------ -------------------------------
Balance at 31 July 2023 9,592 23,682 2,868 (25,663) 10,479
=================== =================== =================== ===================== ==================
The accompanying notes form part of these financial statements.
Company statement of financial position
As at 31 July 2023 2022
£000 £000
Note
Assets
Non-current assets
Property, plant and equipment 12 49 26
Investments 13 2,343 2,343
Amounts due from Group companies 15,24 22,143 13,270
------------------------------------ ------------------------------------
Total non-current assets 24,535 15,639
------------------------------------ ------------------------------------
Current assets
Other receivables 15 129 163
Cash and cash equivalents 121 249
-------------------------------------- --------------------------------------
Total current assets 250 412
--------------------------------------- ---------------------------------------
Total assets 24,785 16,051
====================== =====================
Liabilities
Current liabilities
Loans 18 - (40)
Trade and other payables 17 (250) (546)
------------------------------------ ------------------------------------
Total current liabilities (250) (586)
------------------------------------ ------------------------------------
Trade and other payables 17 (12) (3)
------------------------------------ ------------------------------------
Total non-current liabilities (12) (3)
---------------------------------- ----------------------------------
Total liabilities (262) (589)
------------------------------------ ------------------------------------
Net assets 24,523 15,462
==================== ====================
Capital and reserves attributable to equity holders of the parent
Share capital 22 9,592 9,565
Share premium 22 23,682 23,660
Merger reserve 22 2,868 2,868
Retained deficit (11,619) (20,631)
-------------------------------------- --------------------------------------
Total equity 24,523 15,462
====================== ======================
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 £8,964,000 (2022: £6,238,000).
These financial statements were approved by the board of directors and
authorised for issue on 20 October 2023, and signed on its behalf by:
William Holland
CEO
Company registration number 05217946
The accompanying notes form part of these financial statements.
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 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
==================== =================== ================== ======================= =================
Share Share premium Merger Retained deficit Total
capital
reserve equity
£000 £000 £000 £000 £000
Balance at 1 August 2022 originally stated 9,565 23,660 2,868 (20,631) 15,462
Comprehensive profit for the year
Profit for the year attributable to the equity shareholders of the parent 8,964 8,964
- - -
---------------------------------- ---------------------------------- --------------------------------- ------------------------------ -------------------------------
Total comprehensive profit for the year - - - 8,964 8,964
Contributions by and distributions to owners
Issue of share capital (net of issue costs) 27 22 - - 49
Share-based payments (note 23) - - - 48 48
---------------------------------- ---------------------------------- ---------------------------------- --------------------------------- ------------------------------
Total contributions by and distributions to owners 27 22 - 48 97
---------------------------------- ---------------------------------- -------------------------------- ------------------------------ ----------------------------
Balance at 31 July 2023 9,592 23,682 2,868 (11,619) 24,523
==================== =================== ================== ======================= =================
The accompanying notes form part of these financial statements
Consolidated statement of cash flows
For the year ended 31 July 2023 2022
Note £000 £000
Cash flows from / (used in) operating activities
(Loss) / Profit after tax from continuing operations (852) 1,356
Adjustments for:
Share-based payments 23 48 20
Depreciation 12 1,133 1,618
(Reversal) / impairment of producing field 12 (177) 570
Exploration write-off 11 1,686 -
Finance expense 7 717 238
Taxation expense recognised in profit and loss 8 (32) 32
Decrease / (increase) in trade and other receivables 973 (1,344)
Decrease / (increase) in inventories 17 (13)
(Decrease) / increase in trade and other payables (765) 18
------------------------------------ ------------------------------------
Net cash generated by operations 2,748 2,495
Income taxes paid 32 (32)
------------------------------------ ------------------------------------
Net cash generated by operating activities 2,780 2,463
======================= =======================
Cash flows from / (used in) investing activities
Purchase of property, plant and equipment (564) (403)
Purchase of intangible assets (5,047) (1,246)
Cash escrow release re Morocco 263 -
Cash escrow release / (deposit) re Serenity 16 6,622 (6,621)
----------------------------------- -----------------------------------
Net cash from / (used in) investing activities 1,274 (8,270)
==================== ====================
Cash flows (used in) / from financing activities
Gross proceeds from issue of share capital 22 49 7,020
Costs incurred on issue of share capital - (398)
Proceeds from borrowings 1,000 -
Repayment of borrowings (1,040) (10)
Lease liability payments (20) (14)
Lease liability interest payments (2) (2)
Finance costs (35) (3)
Disposal of listed shares 29 -
----------------------------------- -----------------------------------
Net cash (used in) / from financing activities (19) 6,593
===================== =====================
Net increase in cash and cash equivalents 4,035 786
Exchange loss on cash and cash equivalents (264) (33)
Cash and cash equivalents at beginning of year 1,394 641
----------------------------------- -----------------------------------
Cash and cash equivalents at end of year 5,165 1,394
===================== =====================
The accompanying notes form part of these financial statements.
Company statement of cash flows
For the year ended 31 July 2023 2022
£000 £000
Cash flows used in operating activities Note
Profit after tax from continuing operations 8,964 6,238
Adjustments for:
Share-based payments 23 48 20
Depreciation 12 38 10
Movement in intercompany loan provision 24 (7,997) (5,720)
Finance income (1,928) (810)
Finance expense 13 2
Decrease/(increase) in trade and other receivables 36 (93)
Decrease in trade and other payables (273) (106)
----------------------------------- -----------------------------------
Net cash used in operating activities (1,099) (459)
======================= =======================
Cash flows from / (used in) investing activities
Purchase of property, plant and equipment (61) (13)
Movement on loans to Group companies 1,052 (6,152)
----------------------------------- -----------------------------------
Net cash flows from / (used in) investing activities 991 (6,165)
======================= =======================
Cash flows (used in)/ from financing activities
Gross proceeds from issue of share capital 22 49 7,020
Costs incurred on issue of share capital - (398)
Proceeds from borrowings 1,000 -
Repayment of borrowings (1,040) (10)
Lease liability principal payment (75) - (15) (8)
Lease liability interest payment (1) (1)
Finance costs (13) (2)
----------------------------------- -----------------------------------
Net cash (used in) / from financing activities (20) 6,601
======================= =======================
Net decrease in cash and cash equivalents (128) (23)
Cash and cash equivalents at beginning of year 249 272
----------------------------------- -----------------------------------
Cash and cash equivalents at end of year 121 249
===================== =====================
(15)
(8)
Lease liability interest payment
(1)
(1)
Finance costs
(13)
(2)
-----------------------------------
-----------------------------------
Net cash (used in) / from financing activities
(20)
6,601
=======================
=======================
Net decrease in cash and cash equivalents
(128)
(23)
Cash and cash equivalents at beginning of year
249
272
-----------------------------------
-----------------------------------
Cash and cash equivalents at end of year
121
249
=====================
=====================
The accompanying notes form part of these financial statements.
Notes to the financial statements
1 Accounting Policies
General information
Europa Oil & Gas (Holdings) plc is a public company incorporated and
domiciled in England and Wales, limited by shares, with registered number
05217946. The address of the registered office is 30 Newman Street, London,
W1T 1PT. The principal activity of the company is oil and gas exploration,
appraisal, development and production.
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 2023.
Going concern
The directors have prepared a cash flow forecast for the period ending 31
December 2024, which considers the continuing and forecast cash inflow from
the Group's producing assets, the cash held by the Group at October 2023, less
administrative expenses and planned capital expenditure. Oil price estimates
for the base case cash flow forecast are based upon a flat $75 per barrel,
whilst production estimates are sourced from the Group's internal modelling
for Wressle and recent actual production.
The directors have performed 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 also performed sensitivities on the cashflow allowing for
various severe downside scenarios including:
· a fall in the expected oil price from a base case price of $75 per
barrel to as low as $65 per barrel
· incurring development spend on two additional Wressle development
wells but with no production until 2025
· a deterioration of the US$ against the Pound Sterling to 1.50
These sensitivities have been modelled as a reverse stress test, and the
directors consider the likelihood of such movements to be very low. However,
should these scenarios occur, the Group would have to employ certain
predefined mitigations to remain cash positive.
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 or have decreased. A previously recognised impairment loss is
reversed only if there has been a change in the assumptions used to determine
the asset's or cash generating unit's recoverable amount since the last
impairment loss was recognised. The reversal is limited so that the carrying
amount of the asset or cash generating unit does not exceed either its
recoverable amount, or the carrying amount that would have been determined,
net of depreciation/amortisation, had no impairment loss been recognised for
the asset or cash generating unit in prior years. Such a reversal is credited
to cost of sales.
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 the
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:
Critical accounting judgements
· 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 2023 there was £1,686k write off (2022:
£Nil). The licence in Morocco expired in November 2022 and was not renewed.
Resultantly the full carrying value of the intangible asset of £1,686k was
impaired.
The Serenity appraisal well, drilled in the last quarter of 2022, did not find
oil bearing sands and as such the well was plugged and abandoned during the
year. All well costs have been capitalised within intangible assets. Well data
provided valuable insights into the reservoir structure and active work is now
being performed by the Company and the operator to assess the various
development options for the Serenity field. The directors considered the
unsuccessful appraisal well as a potential indicator of impairment. In the
directors' judgment the potential value of reserves that were discovered by
the discovery well, based on management's best estimate calculated on a
discounted cash flow basis, exceeds the carrying amount of the related
capitalised Serenity intangible asset as at 31 July 2023. There cannot however
be certainty that at the end of the evaluation period a commercial development
of Serenity volumes can be achieved.
The licence period for FEL 4/19 (Inishkea) expires on 31 January 2024. The
Company is presently in the process of applying for an extension to the
license. These financial statements do not include the adjustments that would
result if the licence was not renewed.
Critical accounting estimates
· 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. The directors estimates variables like
reserves volumes, future oil prices, future capital and operating expenditure
and discount rates. The directors rely on third party formal reports and
historical reservoir performance to establish the appropriate reserves volumes
and production profiles to use in estimating future cash flows. Future costs
are based internal or joint venture budgets, and discount rates are estimated
with reference to applicable external and internal data sources. The directors
utilise management's view on external analyst datasets in relation to oil and
gas price forecasts. At 31 July 2023 there was a reversal of amounts
previously impaired of £177k (2022: £570k impairment). This predominantly
related to the effect of the reduction in the estimated decommissioning
liability for Crosby Warren.
· 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 2023
UK Ireland Morocco New ventures Total
£000 £000 £'000 £000 £000
Revenue 6,653 - - - 6,653
Cost of sales (3,448) - - - (3,448)
Impairment of producing fields 177 - - - 177
Cost of sales (3,271) - - - (3,271)
--------------------------------- --------------------------------- --------------------------------- --------------------------------- ---------------------------------
Gross profit 3,382 - - - 3,382
Exploration write-off - - (1,686) - (1,686)
Administrative expenses (2,078) 227 - (21) (1,872)
Finance income (4) 4 9 - 9
Finance costs (717) - - - (717)
----------------------------------- --------------------------------- --------------------------------- --------------------------------- -----------------------------------
Loss before tax 582 232 (1,677) (21) (884)
Taxation 32 - - - 32
----------------------------------- --------------------------------- --------------------------------- --------------------------------- -----------------------------------
Loss for the year 615 231 (1,677) (21) (852)
Segmental assets and liabilities as at 31 July 2023
UK Ireland Morocco New Ventures Total
£000 £000 £000 £'000 £000
Non-current assets 7,380 2,183 - - 9,563
Current assets 6,077 - - - 6,077
----------------------------------- --------------------------------- ----------------------------------- -------------------------------- -----------------------------------
Total assets 13,457 2,183 - - 15,640
----------------------------------- ----------------------------------- ----------------------------------- -------------------------------- -----------------------------------
Non-current liabilities (4,380) - - - (4,380)
Current liabilities (762) (19) - - (781)
----------------------------------- ----------------------------------- ----------------------------------- --------------------------------- -----------------------------------
Total liabilities (5,142) (19) - - (5,161)
----------------------------------- ----------------------------------- ----------------------------------- -------------------------------- -----------------------------------
Other segment items
Capital expenditure - cash flow 4,925 387 299 - 5,611
Depreciation 1,133 - - - 1,133
Share-based payments 48 - - - 48
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 795 129 725 - 1,649
Depreciation 1,618 - - - 1,618
Share-based payments 20 - - - 20
100% of the total revenue (2022: 100%) relates to UK-based customers. Of
this figure, one end customer (2022: 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 £489,000 (2022: £353,000); Crosby Warren
£447,000 (2022: £651,000); Whisby £387,000 (2022: £696,000 ); and Wressle
£5,330,000 (2022:£4,884,000 ).
Positive values for administrative expenditure in the Ireland segment in both
2023 and 2022 relate to the reversal of certain accrued licence expenditure
which had previously been impaired.
3 Profit / loss before taxation
Profit / loss before taxation is stated after charging/ (crediting):
2023 2022
£000 £000
Depreciation and amortisation on property, plant & equipment 1,133 1,618
12
Staff costs including directors 5 1,371 806
Diesel 174 163
Business rates 37 43
Site safety and security 98 89
Exploration write-off 11 1,686 -
Impairment reversal / impairment 12 (177) 570
Fees payable to the auditor for the audit 78 70
Operating leases - land and buildings 44 43
========== =========
4 Directors' emoluments
Directors' salaries and fees - Company and Group 2023 2022
£000 £000
C Ahlefeldt-Laurvig (resigned 27 April 2023) 18 26
B O'Cathain 44 41
S Oddie 344 258
S Williams 33 31
W Holland 230 27
A Stuart (appointed 3 April 2023) 53 -
----------------------------------- -----------------------------------
722 383
===================== ===================
2023 2022
Directors' pensions £000 £000
W Holland 18 3
A Stuart (appointed 3 April 2023) 5 -
----------------------------------- -----------------------------------
23 3
===================== =====================
The above charge represents premiums paid to money purchase pension plans
during the year.
Directors' share-based payments 2023 2022
£000 £000
SG Oddie 4 9
BJ O'Cathain 1 2
S Williams 1 2
W Holland 38 6
----------------------------------- -----------------------------------
44 19
================== ================
The above represents the accounting charge in respect of share options. No
share options were exercised during the period (2022: none).
Directors' total emoluments
Salaries and fees Social security costs Pensions Share-based payments Total
2023
£000 £000 £000 £000 £000
CW Ahlefeldt-Laurvig (resigned 27 April 2023) 18 2 - - 20
BJ O'Cathain 44 5 - 1 50
SG Oddie 344 47 - 4 395
S Williams 33 3 - 1 37
W Holland 230 32 18 38 318
A Stuart (appointed 3 April 2023) 53 7 5 - 65
---------------------------------- ---------------------------------- ---------------------------------- ---------------------------------- ----------------------------------
722 96 23 44 885
================== ================== ================== ================== ==================
Salaries and fees Social security costs Pensions Share-based payments Total
2022
£000 £000 £000 £000 £000
CW Ahlefeldt-Laurvig (resigned 27 April 2023) 26 2 - - 28
BJ O'Cathain 41 5 - 2 48
SG Oddie 258 36 - 9 303
S Williams 31 3 - 2 36
W Holland 27 4 3 6 40
---------------------------------- ---------------------------------- ---------------------------------- ---------------------------------- ----------------------------------
383 50 3 19 455
================== ================== ================== ================== ==================
5 Employee information
Average monthly number of employees including directors - Group 2023 2022
Number Number
Management and technical 7 6
Field exploration and production 5 4
---------------------------------- ----------------------------------
12 10
=================== ===================
Staff costs - Group 2023 2022
£000 £000
Wages and salaries (including directors' emoluments) 1,133 676
Social security 137 83
Pensions 53 27
Share-based payments (note 23) 48 20
----------------------------------- -----------------------------------
1,371 806
=================== ====================
Average monthly number of employees including directors - Company 2023 Number 2022
Number
Management and technical 7 6
---------------------------------- ----------------------------------
7 6
==================== ==================
Staff costs - Company 2023 2022
£000 £000
Wages and salaries (including directors' emoluments) 881 463
Social security 113 60
Pensions 37 12
Share-based payment 48 20
----------------------------------- -----------------------------------
1,079 555
==================== ==================
6 Finance income
2023 2022
£000 £000
Bank interest received 9 -
Foreign exchange gains - 239
------------------------------ ------------------------------
9 239
================== ===================
7 Finance expense
2023 2022
£000 £000
Unwinding of discount on decommissioning provision (note 21) 416 233
Foreign exchange loss 264 -
Other finance expense 37 5
------------------------------------ ------------------------------------
717 238
=================== ====================
8 Taxation
2023 2022
£000 £000
Movement in deferred tax asset (note 20) 1,503 318
Movement in deferred tax liability (note 20) (1,503) (318)
Current tax - UK 32 (32)
------------------------------------ ------------------------------------
Tax credit/(expense) 32 (32)
==================== ==================
UK corporation tax is calculated at 40%
(2022: 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 UK tax, the Excess Profits Levy ("EPL") applies to
the Group, and it is levied at 25% of assessable EPL profits for the period
from 26 May 2022 to 31 December 2022, and at 35% from 1 January 2023 onwards.
The current tax credit for the year ended 31 July 2023 related exclusively to
carry back of current year EPL losses against the prior year EPL profit.
2023 2022
£000 £000
(Loss)/profit before tax (884) 1,388
================== ==================
Tax reconciliation
Loss / (profit) multiplied by the standard rate of corporation tax in the UK (354) 555
including Supplementary Charge of 40% (2022: 40%)
Expenses not deductible for tax purposes 1,003 430
Deferred tax asset not recognised 192 235
Accelerated capital allowances (1,802) -
Taxed at a different rate (3,995) -
Losses carried forward 5,172 -
Previously unrecognised tax losses utilised (266) (1,187)
Prior year adjustment 18 -
Other reconciling items - (1)
--------------------------------- ---------------------------------
Total tax (credit)/expense (32) 32
=================== =================
9 Other comprehensive income
2023 2022
£000 £000
Loss on investment revaluation 5 (18)
=================== ================
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. At the time of
the sale the shares were worth 1.156p each, resulting in a total value of
£300,000. An irrevocable election has been made to record gains and losses
arising on the shares as Other Comprehensive Income. The investment was
revalued at the year-end 2022 to £24,000 (0.09p per share) and was sold
during the year for £29,000 (0.11p per share)).
10 Earnings per share
Basic earnings per share ('EPS') has been calculated on the (loss)/profit
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 year, any
potentially dilutive instruments were considered to be anti-dilutive.
Therefore, the diluted EPS is equal to the basic EPS for the year. As at 31
July 2023 there were 19,724,154 (2022: £37,607,821 ) potentially dilutive
instruments in issue.
The calculation of the basic and diluted earnings per share is based on the
following:
2023 2022
£000 £000
(Loss)/Profit for the year attributable to the equity shareholders of the (852) 1,356
parent
======================= =======================
Weighted average number of shares
For the purposes of basic EPS 958,804,515 700,028,629
For the purpose of diluted EPS 958,804,515 737,636,450
11 Intangible assets
Intangible assets - Group 2023 2022
£000 £000
At 1 August 3,785 6,438
Additions 5,047 1,246
Transferred to property, plant and equipment (note 12) - (3,899)
Exploration write-off (1,686) -
-------------------------------------- -----------------------------------
At 31 July 7,146 3,785
======================= =====================
Intangible assets comprise the Group's pre-production expenditure on licence
interests as follows:
2023 2022
£000 £000
Ireland FEL 4/19 (Inishkea) 2,166 1,789
UK PEDL181 112 81
UK PEDL182 (Broughton North) 34 34
UK PEDL343 (Cloughton) 108 92
Morocco (Inezgane) - 1,379
Serenity 4,726 410
-------------------------------- --------------------------------
Total 7,146 3,785
======================= ===================
Exploration write-off 2023 2022
£000 £000
Morocco (Inezgane) 1,686 -
The licence in Morocco expired in November 2022 and was not renewed.
Resultantly the full carrying value of the intangible asset of £1,686k was
impaired.
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 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
Additions 38 290 24 352
------------------------------- ------------------------------- ------------------------------- -------------------------------
At 31 July 2023 56 16,004 91 16,151
==================== ==================== ================= ======================
Depreciation, depletion and impairment
At 31 July 2021 3 10,552 35 10,590
Charge for year 1 1,601 16 1,618
Impairment in year - 570 - 570
------------------------------- ------------------------------- ------------------------------- -------------------------------
At 31 July 2022 4 12,723 51 12,778
Charge for year 24 1,090 19 1,133
Impairment reversal in year - (177) - (177)
------------------------------- ------------------------------- ------------------------------- -------------------------------
At 31 July 2023 28 13,636 70 13,734
=================== ====================== ================= ====================
Net Book Value
At 31 July 2021 2 335 32 369
=============================== =============================== =============================== ===============================
At 31 July 2022 14 2,991 16 3,021
=============================== =============================== =============================== ===============================
At 31 July 2023 28 2,368 21 2,417
=============================== =============================== =============================== ===============================
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
price was based on a flat rate of $75 per barrel.
The post-tax discount rate of 10% (pre-tax 16.67%) 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, a net impairment reversal of £177,000
(2022: impairment of £570,000) was required. This was made up of a reversal
of amounts previously impaired in relation to Crosby Warren due to a downward
revision of the decommissioning liability, offset by an additional impairment
in relation to West Firsby due to an upward revision in the decommissioning
liability. The recoverable amount was calculated at a discount rate of 10%
(2022: 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
$65 flat -
$55 flat -
Pre-tax discount rate
20% -
25% -
None of the variations result in an impairment individually.
Property, plant & equipment - Company
Furniture & computers Right of use assets Total
£000 £000 £000
Cost
At 31 July 2021 5 37 42
Disposals (1) (80) (81)
------------------------------- ------------------------------- -------------------------------
At 31 July 2022 18 37 55
Additions 37 24 61
------------------------------- ------------------------------- -------------------------------
At 31 July 2023 55 61 116
==================== ====================== =======================
Depreciation
At 31 July 2021 3 16 19
Charge for year 1 9 10
------------------------------- ------------------------------- -------------------------------
At 31 July 2022 4 25 29
Charge for year 24 14 38
------------------------------- ------------------------------- -------------------------------
At 31 July 2023 28 39 67
==================== ================== ===================
Net Book Value
At 31 July 2021 2 21 23
=============================== =============================== ===============================
At 31 July 2022 14 12 26
=============================== =============================== ===============================
At 31 July 2023 27 22 49
=============================== =============================== ===============================
13 Investments - Group
Investment in shares 2023 2022
£000 £000
At 1 August 24 42
Write back/(write off) on revaluation 5 (18)
Disposal (29)
----------------------------------------- -----------------------------------------
At 31 July - 24
=================== ===================
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 entire investment was disposed of during
the current year. The investment was revalued on the date of the disposal to
the realised value of £29,000 (0.11p per share) (2022 year-end value:
£24,000 (0.09p per share) with the profit being recorded in Other
Comprehensive Income (note 9).
Investments - Company
Investment in subsidiaries 2023 2022
£000 £000
At 1 August 2,343 2,343
Current year additions - -
----------------------------------------- -----------------------------------------
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 previously held
the interest in the FEL 2/13 licence.
· Europa Oil & Gas (Ireland East) Limited, which previously 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 previously held the interest in FEL 3/19 licences.
· Europa Oil & Gas (New Ventures) Limited, which previously held
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
2023 2022
£000 £000
Oil in tanks 19 36
====================================== ======================================
15 Trade and other receivables
Group Company
2023 2022 2023 2022
Current trade and other receivables £000 £000 £000 £000
Trade receivables 556 1,476 - -
Other receivables 103 185 30 43
Corporation tax receivable 50 - - -
Prepayments 184 205 99 120
-------------------------------- -------------------------------- ----------------------------------- -----------------------------------
893 1,866 129 163
================= ================= ==================== ====================
Non-current other receivables
Owed by Group undertakings (note 24) - - 22,143 13,270
=================== =================== ================== ===================
16 Restricted cash
Group Company
2023 2022 2023 2022
£000 £000 £000 £000
Cash guarantee - 263 - -
Security escrow funds - 6,621 - -
-------------------------------- -------------------------------- ----------------------------------- -----------------------------------
- 6,884 - -
================= ==================== ==================== ===================
In the prior year, 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 2023 appraisal well.
During the current year funds were released from the escrow account in
relation to expenditure incurred on the Serenity well. Upon completion of well
operations all remaining escrow funds were released and transferred to the
Group's unrestricted cash accounts, and the escrow account was closed. The
escrow account was treated as restricted cash in the prior year.
The guarantee that was required by the petroleum agreement with the National
Office of Hydrocarbons and Mines ('ONHYM') in Morocco for $315,000 (£263,000)
(2022: $315,000 (£263,000)) was released and transferred to the Group's
unrestricted cash accounts during the year upon expiry of the licence. This
account was treated as restricted cash in the prior year.
17 Trade and other payables
Group Company
Current trade and other payables 2023 2022 2023 2022
£000 £000 £000 £000
Trade payables 454 1,234 175 480
Lease liabilities 10 13 8 8
Corporation tax payable - 32 - -
Other payables 317 294 67 58
-------------------------------------- -------------------------------------- --------------------------------------- ---------------------------------------
781 1,573 250 546
=================== =================== ==================== ====================
Non-current trade and other payables
Lease liabilities 12 4 12 3
18 Borrowings
Group Company
2023 2022 2023 2022
£000 £000 £000 £000
Loans repayable in less than 1 year
Bounce Back Loan - 40 - 40
-------------------------------------- -------------------------------------- --------------------------------------- ---------------------------------------
Total short-term borrowing 40 40 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 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.
19 Leases
Group Company
2023 2022 2023 2022
£000 £000 £000 £000
Amounts recognised in the statement of comprehensive income:
Interest on right of use liabilities (1) (2) (1) (1)
Amounts recognised in the statement of cash flows:
Repayment of lease liabilities - principal (20) (14) (15) (8)
Repayment of lease liabilities - interest (2) (2) (1) (1)
Maturity analysis (undiscounted):
Amounts due within one year (9) (14) (8) (8)
Amounts due after more than 1 year & less than 5 years (12) (2) (12) (2)
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 is
included within trade and other payables in the statement of financial
position (note 17).
20 Deferred Tax - Group
2023 2022
Recognised deferred tax asset: £000 £000
As at 1 August - -
Charged to statement of comprehensive income - -
------------------------------------------ ------------------------------------------
At 31 July - -
====================== =======================
The Group has a deferred tax liability of £2,935,000 (2022: £1,433,000)
arising from accelerated capital allowances and a deferred tax asset of
£2,935,000 (2022: £1,433,000) 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 (2022: £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 £7.3 million (2022:
£5.2 million), which arises in relation to ring-fenced UK trading losses of
£13.1 million (2022: £8.9 million), non-ring-fenced UK trading losses of
£11.7 million (2022: £5.2 million), EPL losses of £4.1 million (2022:
£nil) and subsidiary losses and carried forward capital expenditure of £7.3
million (2022: £6.7 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, timing and
the detailed scope of work required are uncertain.
Long-term provisions 2023 2022
£000 £000
As at 1 August 4,164 3,393
Charged to statement of comprehensive income (note 7) 416 233
Change in estimated phasing of cash flows (212) 538
-------------------------------- --------------------------------
At 31 July 4,368 4,164
=================== ====================
The decrease 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% (386)
5% 740
Discount rate (current assumption 10%)
5% 1,489
15% (890)
No provisions have been recognised in the Company.
22 Called up share capital
2023 2022
£000 £000
Allotted, called up and fully paid ordinary shares of 1p
At 1 August 2022: 956,466,985 shares (1 August 2021: 566,466,985) 9,565 5,665
Issued in the year: 2,717,193 shares (2022: 390,000,000 shares) 27 3,900
-------------------------------- --------------------------------
At 31 July 2023: 959,184,178 shares (2022: 956,466,985) 9,592 9,565
============ =============
Ordinary shares issued
Date Type of Number of shares Issue Raised gross Raised net Nominal
Issue price of costs value
£000 £000 £000
20 September 2022 Placing 2,717,193 0.018 49 49 27
--------------------------------------------------------- -------------------------------- -------------------------------- --------------------------------
Total 2,717,193 49 49 27
================= ========= ========= =========
The placing of ordinary shares during the year was to satisfy an exercise of
warrants. 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 41,550,628 ordinary 1p share options/warrants outstanding (2022:
41,207,821 ).
These are held as follows:
Holder 31 July 2023 31 July 2022
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 7,721,000 3,721,000
Employees of the Group 3,800,000 2,740,000
Consultants and advisers 15,379,628 20,096,821
--------------------------------------------------- ---------------------------------------------------
Total 41,550,628 41,207,821
==================== ====================
The fair values of options were determined using a Black Scholes Merton model
or, in the case of those 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 6,520,000 options/warrants were granted, 2,280,000 expired,
1,180,000 were forfeited, and 2,717,193 were exercised (2022: 15,863,667
granted, 2,223,458 expired, 685,000 forfeited, none exercised).
2023 2023 2022 2022
Number of options Average exercise price Number of options Average exercise price
Outstanding at the start of the year 41,207,821 2.23p 26,029,154 2.37p
Granted - employees/directors 6,520,000 1.14p 3,721,000 2.31p
Granted - advisors - - 12,142,667 1.80p
Exercised (2,717,193) 1.80p - -
Expired (2,280,000) 2.31p - -
Forfeited (1,180,000) 3.66p (685,000) 7.00p
------------------------------------------------- ----------------------------------- ------------------------------------------------- -----------------------------------
Outstanding at the end of the year 41,550,628 2.04p 41,207,821 2.02p
Exercisable at the end of the year 23,599,628 1.56p 18,096,821 1.64p
The 6,250,000 options granted in June 2023 vest in three tranches of
2,083,333, one tranche after each of 12, 24 and 36 months, and are exercisable
conditional upon the Europa Oil & Gas (Holdings) plc closing average
mid-market share price being above 2.836p for 30 consecutive trading days, and
expire on the sixth anniversary of the grant date. The inputs used to
determine their values are detailed in the table:
Grant date 22 March 2023
Number of options 6,250,000
Share price at grant 1.1p
Exercise price 1.25p
Volatility 70.81%
Dividend yield Nil
Risk free investment rate 3.326%
Option life in years 6
Fair value per option 0.71p
Based on the fair values above, the charge arising from employee share options
was £48,000 (2022: £20,000). The charge relating to non-employee share
options was £Nil (2022: £Nil). The charge allocated directly to equity,
relating to the issue of options on the issue of share capital, was £Nil
(2022: £219,000).
Share options/warrants outstanding at the end of the period have exercise
prices ranging from 1.14p to 8.9p and the weighted average remaining
contractual life at the end of the period was 2.7 years (2022: 3.4 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 - Group
Amortised cost Amortised cost Fair value through other comprehensive income Fair value through other comprehensive income
2023 2022 2023 2022
£000 £000 £000 £000
Investments - - - 24
Trade and other receivables 709 1,661 - -
Restricted cash - 6,884 - -
Cash and cash equivalents 5,165 1,394 - -
-------------------- -------------------- ----------------------- -----------------------
Total financial assets 5,874 9,939 - 24
================================ ================================ ===================================== =====================================
Financial assets - Company
Amortised cost Amortised cost Fair value through other comprehensive income Fair value through other comprehensive income
2023 2022 2023 2022
£000 £000 £000 £000
Investments 2,343 2,343 - 24
Trade and other receivables 30 43 - -
Restricted cash - - - -
Cash and cash equivalents 121 249 - -
-------------------- -------------------- ----------------------- -----------------------
Total financial assets 2,494 2,635 - 24
================================ ================================ ===================================== =====================================
Financial liabilities - Group
Amortised cost Amortised cost Fair value through other comprehensive income Fair value through other comprehensive income
2023 2022 2023 2022
£000 £000 £000 £000
Trade and other payables (771) (1,556) - -
Lease liabilities (22) (17) - -
Loans - (44) - -
-------------------- -------------------- --------------------- -----------------------
Total financial liabilities (793) (1,617) - -
================================ ================================ ===================================== =====================================
Financial liabilities - Company
Amortised cost Amortised cost Fair value through other comprehensive income Fair value through other comprehensive income
2023 2022 2023 2022
£000 £000 £000 £000
Trade and other payables (242) (538) - -
Lease liabilities (20) (11) - -
Loans - (40) - -
-------------------- -------------------- --------------------- -----------------------
Total financial liabilities (262) (589) - -
================================ ================================ ===================================== =====================================
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 2023 trade receivables were £556,000 (2022: £1,476,000 ). 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 £1,574,000 comprising mainly of two months of Wressle sales as at the end
of February 2023 (2022 maximum exposure: £1,433,000 ). 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 2023 2022 2023 2022
£000 £000 £000 £000
6 months or less 781 1,573 250 546
-------------------------------------- -------------------------------------- --------------------------------------- ---------------------------------------
Total 781 1,573 250 546
================================ ================================ ===================================== =====================================
Group Company
Loans Loans
At 31 July 2023 2022 2023 2022
£000 £000 £000 £000
6 to 12 months - 40 - 40
1 to 2 years - - - -
2 to 5 years - - - -
Over 5 years - - - -
-------------------------------------- -------------------------------------- -------------------------------------- ---------------------------------------
Total - 40 - 40
===================== ====================== ========================= ========================
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 no interest-bearing liabilities (note 18) and immaterial 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.
2023 2023 2022 2022
Price PBT Price PBT
Oil price Month US$/bbl £000 US$/bbl £000
Highest August 2022 $98.70 1,227 $122.40 1,723
Average $83.30 (2) $93.90 (208)
Lowest June 2023 $73.40 (791) $69.50 (1,864)
Foreign exchange risk
The Group's production of crude oil is invoiced in US$. 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.
2023 2023 2022 2022
Rate PBT Rate PBT
US Dollar Month US$/£ £000 US$/£ £000
Highest July 2023 1.286 (410) 1.376 (373)
Average 1.212 (30) 1.313 (76)
Lowest September 2022 1.117 535 1.216 443
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
2023 2022 2023 2022
Currency Item £000 £000 £000 £000
Euro Cash and cash equivalents 18 92 - 3
Trade and other payables (9) (13) (9) (13)
US Dollar Cash and cash equivalents 5,102 1,322 75 3
Trade and other receivables 556 1,435 - -
Trade and other payables (47) (5) (47) (5)
---------------------------- ---------------------------- ---------------------------- ----------------------------
Total 5,620 2,831 (19) (12)
==================== =================== ====================== ======================
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 party borrowings (£Nil at 31 July 2023). 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.
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 33% general wildcat exploration success rate, the
loans to Europa Oil & Gas Inishkea have thus been deemed 67% provided. As
a consequence of the Inezgane licence expiring and not being extended, the
loans to Europa Oil & Gas New Ventures have been provided for in full
(2022: provided 67%).
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 2023 there has been a marked increase in the
expected recoverable value of the Group's Crosby Warren producing asset,
mainly as a result of an anticipated new revenue stream from handling water
produced by the Wressle producing field. This led to a further 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 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
Movement in loan 1,027 (76) (153) 223 (145) 876
Loan balance at 31 July 2023 27,562 705 1,342 1,391 1,045 32,045
Provisions
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)
Movement in provision 8,165 76 153 (149) (248) 7,947
Provision at 31 July 2023 (5,878) (705) (1,342) (932) (1,045) (9,952)
Net loan balance at 1 August 2021 2012018 - - - 337 251 588
Net loan balance at 31 July 2022 12,492 - - 385 393 13,270
Net loan balance at 31 July 2023 21,684 - - 459 - 22,143
25 Capital commitments and guarantees
As part of the licence extension for FEL 4/19 there is an outstanding
commitment totalling €0.1 million that relates primarily to seismic
reprocessing.
For PEDL181 the partners have agreed to drill two development wells and to
construct a gas export line. These activities are contingent upon the budget
being approved by the JV partnership, the timing of environmental permitting
and the availability of a suitable rig. The total net cost to Europa for the
work programme is estimated to be £0.5 million in 2023 and £3.7 million in
2024.
26 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.
Future minimum lease payments are as follows:
2023 2022
£000 £000
Less than 1 year - 9
2-5 years - -
--------------------------------- ---------------------------------
Total - 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:
2023 2022
£000 £000
Europa Oil & Gas Limited 336 236
Europa Oil & Gas (Inishkea) Limited 102 42
Europa Oil & Gas (New Ventures) Limited 26 19
--------------------------------- ---------------------------------
Total 464 297
============ ==========
At the end of the year, after provisions, the Company was owed the following
amounts by subsidiaries:
2023 2022
£000 £000
Europa Oil & Gas Limited 21,684 12,492
Europa Oil & Gas (Inishkea) Limited 459 385
Europa Oil & Gas (New Ventures) Limited - 393
--------------------------------- ---------------------------------
Total 22,143 13,270
============ =============
28 Post reporting date events
· Operations to install a jet pump for artificial lift on the Wressle-1
well are underway. The original completion was removed from the well and a new
completion, including the sub-surface pump, has been successfully run in the
well as of early October 2023. All that remains is for the required surface
pump and associated flowlines and electrics to be installed, which is expected
to be completed before the end of October 2023.
· PEDL 181 was relinquished during September 2023. The asset was not
deemed to be adequately attractive. It had zero carrying value on the balance
sheet.
· Applied to DECC to extend licence FEL 4/19 from 31 January 2024 to
undertake further reprocessing and secure a farm-in partners.
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