REG - Orcadian Energy PLC - Results for the Year ended 30 June 2022
16/12/2022 07:00
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RNS Number : 9757J Orcadian Energy PLC 16 December 2022
16 December 2022
Orcadian Energy plc
("Orcadian Energy", "Orcadian" or the "Company")
Results for the Year ended 30 June 2022
Orcadian Energy (AIM:ORCA), the low-emissions North Sea oil and gas
development company, is pleased to announce its audited results for the twelve
months ended 30 June 2022.
Highlights since last Annual Report:
· "Letter of no objection" received from North Sea Transition Authority
("NSTA") in respect of Orcadian's proposed low emission development concept
for Pilot
· Twelve month extensions to both the Second Term of our P2244 (Pilot)
licence (after period end) and Phase A of P2320 (Blakeney) agreed by NSTA,
P2482 (Elke) licence continued into Phase B
· Significant progress made in defining the sub-surface opportunity at
Pilot with the newly reprocessed TGS owned seismic dataset noting a 10% uplift
to the developed area oil-in-place
· Multiple geological models built which provide further confidence to
simplify and optimise Pilot development plan
· Innovative commercial arrangement with TGS to access over 2,000 sq km
of newly reprocessed, and to be reprocessed, 3D seismic - also enabling
Orcadian to acquire new seismic over Elke and Narwhal subject to the Pilot
project achieving FDP approval.
· Since end of the period under review, SLB (formerly Schlumberger)
selected as preferred well service provider with MoU signed
· Discussions continue with preferred FPSO provider - also exploring
alternative concepts which could significantly reduce upfront capital
requirements
· Launch of the Carra farm-out process, in partnership with Carrick
Resources once the 33(rd) Round is closed
· Plan to participate in the 33rd Seaward Licensing round.
Steve Brown, Orcadian's CEO, said:
"The last year has seen a seismic shift in sentiment surrounding the oil and
gas sector. Energy security is now rightly at the forefront of the agenda.
We believe the Pilot project has the potential to significantly contribute to
this for the UK, whilst being a flagship project demonstrating how to reduce
global emissions and make a contribution to a secure transition to net zero.
"We therefore believe the year ahead promises to be a significant year for the
Company as we look to progress Pilot and deliver the value that we believe is
inherent in the project. We would like to thank all our shareholders for
their continued support and look forward to providing further updates in the
coming year."
Report and Accounts and Annual General Meeting
A copy of the annual report and accounts for the year ended 30 June 2022 is
available on the Company's website (https://orcadian.energy
(https://orcadian.energy/) ) with effect from today. The Company will be
posting its annual report and accounts and notice of Annual General Meeting
("AGM") to its shareholders on 21 December 2022. A further announcement will
be made at that time confirming the details of the AGM.
For further information on the Company please visit the Company's website:
https://orcadian.energy (https://orcadian.energy)
Contact:
Orcadian Energy plc + 44 20 7920 3150
Steve Brown, CEO
Alan Hume, CFO
WH Ireland (Nomad and Joint Broker) +44 20 7220 1666
Katy Mitchell / Andrew de Andrade (Nomad)
Harry Ansell / Fraser Marshall (Corporate Broking)
Shore Capital (Joint Broker) +44 20 7408 4090
Toby Gibbs (Corporate Advisory)
Tavistock (PR) + 44 20 7920 3150
Nick Elwes / Simon Hudson orcadian@tavistock.co.uk (mailto:orcadian@tavistock.co.uk)
Charlesbye (PR) + 44 7403 050525
Lee Cain / Lucia Hodgson
About Orcadian Energy
Orcadian is a North Sea focused, low emissions, oil and gas development
company. In planning its Pilot development, Orcadian has selected wind power
to transform oil production into a cleaner and greener process. The Pilot
project is moving towards approval and will be amongst the lowest carbon
emitting oil production facilities in the world, despite being a viscous
crude. Orcadian may be a small operator, but it is also nimble, and the
Directors believe it has grasped opportunities that have eluded some of the
much bigger companies. As we strike a balance between Net Zero and a
sustainable energy supply, Orcadian intends to play its part to minimise the
cost of Net Zero and to deliver reliable organic energy.
Orcadian Energy (CNS) Ltd ("CNS"), Orcadian's operating subsidiary, was
founded in 2014 and is the sole licensee of P2244, which contains 78.8 MMbbl
of 2P Reserves in the Pilot discovery, and of P2320 and P2482, which contain a
further 77.8 MMbbl of 2C Contingent Resources in the Elke, Narwhal and
Blakeney discoveries (as audited by Sproule, see the CPR in the Company's
Admission Document for more details). Within these licences there are also 191
MMbbl of unrisked Prospective Resources. These licences are in blocks 21/27,
21/28, 28/2 and 28/3, and lie 150 kms due East of Aberdeen. The Company also
has a 50% working interest in P2516, which contains the Fynn discoveries.
P2516 is administered by the Parkmead Group and covers blocks 14/20g and
15/16g, which lie midway between the Piper and Claymore fields, 180 kms due
East of Wick.
Pilot, which is the largest oilfield in Orcadian's portfolio, was discovered
by Fina in 1989 and has been well appraised. In total five wells and two
sidetracks were drilled on Pilot, including a relatively short horizontal well
which produced over 1,800 bbls/day on test. Orcadian's proposed low emissions,
field development plan for Pilot is based upon a Floating Production Storage
and Offloading vessel (FPSO), with over thirty wells to be drilled by a
Jack-up rig through a pair of well head platforms and provision of power from
a floating wind turbine.
Emissions per barrel produced are expected to be about a tenth of the 2021
North Sea average, and less than half of the lowest emitting oil facility
currently operating on the UKCS. On a global basis this places the Pilot field
emissions at the low end of the lowest 5% of global oil production.
Chairman and CEO's Statement
The year ended 30 June 2022 has been remarkable for the shift in sentiment
towards the oil and gas sector. A fortnight into our financial year on 15 July
2021, we listed the Company amidst growing concern about the future of the
North Sea oil and gas sector as the UK approached COP26. Our assessment is
that the nation's focus is now energy security and to deliver that, the
country will need as much oil and gas as the UK continental shelf can produce,
so that we have a secure transition to a lower emissions future.
Orcadian is here to do its part: we have conceived and detailed a development
plan for the Pilot oilfield which we believe can open the door for the
development of very significant volumes of already discovered viscous oil; we
continue to seek a development partner that shares our vision and who has the
financial and operational capacity to deliver the Pilot project; we have
supported the North Sea Transition Authority's ("NSTA") electrification agenda
and detailed an off-grid approach to electrification; and we have supported a
wind farm developer with a "Letter of Intent" for Crown Estate Scotland's
Innovation and Targeted Oil and Gas wind farm leasing round. We also intend to
participate in the 33(rd) Seaward Licensing round.
Of all these activities the most critical to deliver value to shareholders is
securing a development partner for the Pilot field. This has been a tumultuous
year with much uncertainty around the UK's fiscal regime. We consider it has
always been the case that the UK government has adjusted upstream energy taxes
in response to market conditions, a tad quicker to raise rates than lower
them, but responsive nonetheless. We believe such volatility has induced
uncertainty and a degree of caution in making a commitment to spend large sums
of capital on new developments. However, we also believe the structure of the
Energy Profits Levy will massively encourage investment in new production so
with that support confirmed in the Autumn Statement, we expect 2023 to be a
better environment for our continuing farm-out process.
During 2022 we have made significant progress in defining the sub-surface
opportunity. We have interpreted the newly reprocessed TGS owned seismic
dataset and noted a 10% uplift to the developed area oil-in-place which could
result in a similar uplift to proven, probable and possible reserves on Pilot
when we next update the independent Competent Person's Report ("CPR"),
expected to occur during 2023. We have also built multiple geological models
to incorporate the range of heterogeneity we see as possible across the Pilot
field, and we have built new full-field reservoir models which have been
calibrated to the results of our polymer core flood experimental results.
These models have been tested with both exciting upside, and difficult
downside, possibilities for multiple parameters and from that work we have
derived a statistical range of developed area recovery factors which is highly
consistent with the range of recovery factors adopted by Sproule in the CPR.
This convergence gives us great confidence in our latest range of reserve
estimates as they have been arrived at from two entirely different routes: a
stochastic reservoir simulation approach and by comparison with analogue
fields.
We now intend to use these models to simplify and optimise our development
plan. We firmly believe that polymer flooding is by far the best approach to
both maximise recovery and minimise emissions. But as an example of how we
might simplify the project, with the benefit of our more rigorous modelling
approach we have determined that the economic benefit of incorporating low
salinity water is diminished by the ability of recycled polymer to contribute
to our target water viscosity. The operational simplicity, and capital cost
reduction, available by deleting the low salinity plant may well outweigh the
potential polymer cost savings.
Through the year we have conducted a number of market engagements and we
received an excellent proposal for a Floating Production Storage and
Offloading ("FPSO") redeployment candidate, which would provide the perfect
donor vessel to upgrade to become the Pilot FPSO. However, we are conscious
that the FPSO market is tightening and in parallel with continuing discussions
with our preferred FPSO contractor, we intend to explore alternative concepts
which we believe could significantly reduce upfront capital requirements.
As announced after the end of the period under review, we have also selected
SLB (formerly Schlumberger) as our preferred well service contractor. SLB will
provide subsurface petro-technical expertise, production technology, well and
completions engineering resources to identify, design, and deploy the right
subsurface, surface and wellbore technologies for Pilot. This alliance with
SLB provides Orcadian with access to first class reservoir management and well
construction capabilities, to work alongside Petrofac, our preferred well
operator, and provide certainty to potential farm-in partners that the supply
chain can deliver on the technologies required to make the best of Pilot.
In SLB, we believe we now have a global technology company driving energy
innovation committed to making the Pilot project a success and we intend to
work with SLB on project optimisation to explore opportunities to reduce well
cost, facilities cost and to boost recovery as well as to minimise emissions.
We continue to project very low emissions from the Pilot development: expected
Scope 1 emissions from the Pilot development are just 2.6 kgCO(2e)/bbl, a
performance which would place the Pilot development at the low end of the
lowest 5% of global oil production. We believe refreshing the UK's stock of
oil producing assets is critical to reducing the emissions associated with the
UK's consumption of oil and gas. Absent new, clean production we are of the
view that the UK will either have to keep old high emissions platforms
producing or import oil from overseas, both of which will result in much
higher emissions.
Our engagement with the North Sea Transition Authority has also been highly
productive, in November 2021 we received a "Letter of No Objection" to our
proposed development concept and we submitted a draft Field Development Plan
in June of 2022. We were delighted that NSTA have agreed a twelve month
extension to the Second Term of our P2244 licence in November 2022 and a one
year extension to Phase A of P2320 in March 2022.
In August 2022, after the period under review, we also struck what we consider
to be a very innovative commercial arrangement with TGS to access over 2,000
sq km of newly reprocessed, and to be reprocessed, 3D seismic, this
reprocessing work is ongoing and we are targeting a launch of the Carra
farm-out process, in partnership with Carrick Resources, just as soon as the
doors close on the 33(rd) Round. This arrangement with TGS will also enable us
to acquire new seismic over Elke and Narwhal subject to the Pilot project
achieving FDP approval.
Financial Results
The financial results of the Group largely reflect the investment in
progressing the Pilot field and the costs of completing the admission to AIM.
The Group incurred a loss for the year to 30 June 2022 of £1,586,727 (30 June
2021 - loss of £296,338).
In the year to 30 June 2022 the loss mainly arose from salaries, consulting
and professional fees along with general administration expenses, and expenses
in connection to the transaction, costs associated with the admission process
including Advisory and Consultancy Fees. These expenses have been met from the
proceeds of the issue of shares.
Cash used in operations totalled £1,323,836 (30 June 2021 - £312,189). As
at 30 June 2022, the Group had a cash balance of £271,439 (30 June 2021 -
£179,556). At the date of this announcement, the Group's cash balance was
£303,000. Self-evidently, the Group will need to source further funding in
the near term. A further update will be provided in due course.
Oil Price Outlook
The oil price continues to be volatile, that is the one thing we can all rely
upon. At the time of publication Brent was trading under $80/bbl, having
reached almost $130/bbl just after Russia invaded Ukraine. The ramifications
of this agonizing war are still unfolding and with the world teetering on the
verge of a recession, we consider that the immediate direction of the oil
price is unclear. However, stepping back from the recent gyrations, it is
clear that Anatole Kaletsky's assertion in 2015 that "$50/bbl should be viewed
as a probable ceiling for a much lower oil price trading range, which may
stretch all the way down toward $20" was wrong. Of course he was right in that
the oil price plumbed deeper depths than we could have imagined at the height
of COVID, but in the long run we consider that $50/bbl has emerged as more of
a floor than a ceiling.
Where the ceiling lies is anyone's guess: gas prices have been as high as
£8.75/therm, which in energy equivalent terms is over $600/boe. The lesson
that we believe one can take from that is that energy is essential and
constraining the supply of energy is economically dangerous. Indeed it is our
contention that, to achieve a secure transition to a low emissions world,
governments should focus on reducing demand for carbon dioxide emitting fuels
rather than trying to limit supply of new oil and gas. If supply is somehow
constrained then we believe the transition will be painful indeed. If demand
shrinks, prices will be low and the pain will be confined to oil and gas
producers. But it seems politically much harder to exhort or compel reductions
in demand, much easier to berate oil companies for producing the energy that
powers civilisation. We remain convinced that between a somewhat hamstrung US
shale business and a more cohesive OPEC+ group the supply demand balance will
be maintained so that oil prices will be firm.
Notwithstanding the above, the oil price will be what the oil price will be.
Our focus is on keeping the overall cost of the Pilot development as low as
possible and thereby ensuring that potential partners are keen to participate
in the project.
UK Oil and Gas Sector
On 7 April 2022, the Government published the British Energy Security Strategy
which paved the way for the launch of the 33(rd) Licensing Round on 7 October
2022. We believe the Government's commitment to the oil and gas sector is now
clear, energy security is recognised as a vital national interest, and we
expect good support for progressing the key Pilot development project into
production.
At the same time the industry suffered a blow to its cash flow in the form of
the Energy Profits Levy. No one enjoys the prospect of a higher tax rate, but
we consider the EPL has been well designed and we believe it will encourage
producing oil and gas companies to invest in new projects. We would call on
the government to be even-handed with non-producing companies and to offer tax
credits to these companies. The Norwegians adopted this model in 2005 to
encourage exploration, with great success. We believe a similar approach could
unleash a wave of new developments on the UKCS.
Business Outlook
The key challenges for the Group remain our financial condition and the
financing of the Pilot project. The value for all shareholders in achieving
FDP approval on Pilot could be immense, shareholders can remain assured that
the Board will leave no stone unturned in our quest for the right partners for
Pilot.
Joseph Darby, Chairman, and Stephen Brown, CEO
15 December 2022
CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS
FOR THE YEAR ENDED 30 JUNE 2022
2022 2021
Note £ £
Revenue - -
Administrative expenses 5 (1,694,576) (258,909)
Operating Loss (1,694,576) (258,909)
Finance costs 9 (41,869) (44,349)
Other income 7 466,667 3,000
Listing costs (316,949) (76,500)
Loss before tax (1,586,727) (376,758)
Taxation 10 - 80,420
Loss for the year (1,586,727) (296,338)
Other comprehensive income:
Items that will or may be reclassified to profit or loss:
Other comprehensive income - -
Total comprehensive income (1,586,727) (296,338)
Earnings per share (basic and diluted) - pence 11
(2.51) (1.34)
All operations are continuing.
The notes on below form part of these financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2022
2022 2021
Note £ £
Non-current assets
Property, plant and equipment 12 3,414 1,842
Intangible assets 13 3,303,400 1,814,615
3,306,814 1,816,457
Current assets
Trade and other receivables 14 1,055,829 88,548
Cash and cash equivalents 15 271,439 179,556
1,327,268 268,104
Total assets 4,634,082 2,084,561
Non-current liabilities
Borrowings 17 (956,184) (762,686)
(956,184) (762,686)
Current liabilities
Trade and other payables 18 (553,509) (328,601)
Borrowings 17 - (1,100,000)
(553,509) (1,428,601)
Total liabilities (1,509,693) (2,191,287)
Net assets / (liabilities) 3,124,389 (106,726)
19 63,755 52,202
Equity
Ordinary share capital
Share premium reserve 19 3,890,089 -
Share warrants reserve 19 15,000 -
Shares to be issued 20 901,200 -
Other reserve 4 (38,848) (38,848)
Retained earnings (1,706,807) (120,080)
Total equity 3,124,389 (106,726)
The consolidated Financial Statements of Orcadian Energy PLC were approved by
the Board of Directors and authorised for issue on 15 December 2022.
Signed on behalf of the Board of Directors by:
Alan Hume
Director
The notes below form part of these financial statements.
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2022 2022 2021
Note £ £
Non-current assets
Investment in subsidiary 16 3,968,844 52,202
3,968,844 52,202
Current assets
Trade and other receivables 14 1,000,000 -
Cash and cash equivalents 15 - -
- -
Total assets 4,968,844 52,202
Non-current liabilities
Borrowings 17 - -
- -
Current liabilities
Trade and other payables 18 98,800 -
- -
Total liabilities - -
Net assets 4,870,044 52,202
19 63,755 52,202
Equity
Ordinary share capital
Share premium reserve 19 3,890,089 -
Share warrants reserve 19 15,000 -
Shares to be issued 20 901,200 -
Retained earnings - -
Total equity 4,870,044 52,202
Orcadian Energy PLC, company number 13298968, has used the exemption granted
under s408 of the Companies Act 2006 that allows for the non-disclosure of the
Income Statement of the parent company. The after-tax loss attributable to
Orcadian Energy PLC for the year to 30 June 2022 was £nil (2021: £nil) as
all costs within the group are borne by the subsidiary.
The Financial Statements were approved by the Board of Directors and
authorised for issue on 15 December 2022.
Signed on behalf of the Board of Directors by:
Alan Hume
Director
The notes below form part of these financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED 30 JUNE 2022
Ordinary Share capital Share premium Share warrants reserve Other reserve Retained earnings Total
reserve Shares to be issued
Note £ £ £ £ £ £ £
Balance as at 1 July 2020 17,401 563,561 - - - (391,350) 189,612
Loss for the year and total comprehensive income - - (296,338) (296,338)
- - -
Bonus issue of shares 19 34,801 (34,801) - - - - -
Issue of shares 19 52,202 - - - (52,202) - -
Transfer to other reserve 4 (52,202) (528,760) - - 13,354 567,608 -
Balance as at 30 June 2021 52,202 - - - (38,848) (120,080) (106,726)
Loss for the year and total comprehensive income - - (1,586,727) (1,586,727)
- - -
Issue of shares 19 7,625 3,042,375 - - - - 3,050,000
Conversion of loans 17 3,928 1,096,072 - 1,100,000
Shares to be issued - 30 June 2022 placing 20 - - - 901,200
- 901,200 -
Issue of warrants 19 - (15,000) 15,000 - - - -
Share issue costs 19 - (233,358) - - - - (233,358)
Balance as at 30 June 2022 63,755 3,890,089 15,000 901,200 (38,848) (1,706,807) 3,124,389
Refer to note 19 for a description of the nature and purpose of each reserve
within equity.
The notes below form part of these financial statements.
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED 30 JUNE 2022
Ordinary Share capital Share premium Share warrants reserve Retained earnings Total
reserve Shares to be issued
Note £ £ £ £ £ £
Balance as at Incorporation 29 March 2021 - - - -
- -
Loss for the period and total comprehensive income - - - -
- -
Issue of shares upon acquisition of subsidiary 19 52,202 - - 52,202
- -
Balance as at 30 June 2021 52,202 - - - - 52,202
Loss for the year and total comprehensive income - - - -
- -
Issue of shares 19 7,625 3,042,375 - - - 3,050,000
Conversion of loans 17 3,928 1,096,072 - 1,100,000
Shares to be issued - 30 June 2022 placing 20 - - - 901,200
- 901,200
Issue of warrants 19 - (15,000) 15,000 - - -
Share issue costs 19 - (233,358) - - - (233,358)
Balance as at 30 June 2022 63,755 3,890,089 15,000 901,200 - 4,870,044
Refer to note 19 for a description of the nature and purpose of each reserve
within equity.
The notes below form part of these financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED 30 JUNE 2022
2022 2021
Note £ £
Cash flows from operating activities
Loss before tax for the year (1,586,727) (376,758)
Adjustments for:
Depreciation 12 674 217
Unrealised foreign exchange loss / (gain) 5 151,629 (129,511)
Decrease / (increase) trade and other receivables 14 32,720 (10,409)
(Decrease) / Increase in trade and other payables 18 36,000 79,504
Finance costs in the year 9 41,869 44,349
Cash generated from operations (1,323,836) (392,608)
Income taxes received - 80,420
Net cash flows from operating activities (1,323,836) (312,188)
Investing activities
Purchases of property, plant and equipment 14 (2,246) (1,952)
Purchases of exploration and evaluation assets 13 (1,348,677) (530,818)
Net cash used in investing activities (1,350,923) (532,770)
Financing activities
Proceeds from issue of ordinary share capital 19 3,000,000 -
Share issue costs paid 19 (233,358) -
Proceeds from issue of convertible loan notes 17 - 1,100,000
Repayment of convertible loan notes 17 - (100,000)
Interest paid - (6,804)
Net cash provided by financing activities 2,766,642 993,196
Net increase in cash and cash equivalents 91,883 148,238
Cash and cash equivalents at beginning of period 15 179,556 31,318
Cash and cash equivalents and end of period 15 271,439 179,556
Significant non-cash transactions in the year to 30 June 2022:
During the year £50,000 of third party supplier invoices were settled through
the issue of 125,000 Ordinary shares at 40 pence each.
During the year convertible loans totalling £1,100,000 were settled in full
through the issue of 3,928,572 Ordinary shares (Refer to note 17).
The notes below form part of these financial statements.
COMPANY STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED 30 JUNE 2022
2022 2021
Note £ £
Cash flows from operating activities
Loss for the year - -
Adjustments for:
Depreciation 12 - -
Decrease in trade and other receivables 4 - -
Increase in trade and other payables 18 - -
Finance costs in the year - -
Cash generated from operations - -
Income taxes paid - -
Net cash flows from operating activities - -
Investing activities
Funds advanced to subsidiary 16 (2,776,642) -
Purchases of exploration and evaluation assets 13 - -
Net cash used in investing activities (2,776,642) -
Financing activities
Proceeds from issue of ordinary share capital 19 3,000,000 -
Share issue costs paid 19 (233,358) -
Net cash provided by financing activities 2,776,642 -
Net increase in cash and cash equivalents - -
Cash and cash equivalents at beginning of period 15 - -
Cash and cash equivalents and end of period 15 - -
No cash was held by the Company during the year to 30 June 2022
The notes below form part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
1. General Information
Orcadian Energy PLC (the "Company") is a public limited company which is
domiciled and incorporated in England and Wales under the Companies Act 2006
with the registered number 13298968. The Company's registered office is 6(th)
floor, 60 Gracechurch Street, London, EC3V 0HR, and it ordinary shares are
admitted to trading on AIM, a market of the London Stock Exchange.
The principal activity of the Group is managing oil and gas assets and the
Group holds a 100% interest in, and is licence administrator for, UKCS Seaward
Licences P2244, which contains the Pilot and Harbour heavy oil discoveries,
P2320, which contains the Blakeney, Feugh, Dandy & Crinan discoveries and
P2482 which contains the Elke and Narwhal discoveries. The Group also has a
50% working interest in P2516, which contains the Fynn discoveries. P2516 is
administered by the Parkmead Group and covers blocks 14/20g and 15/16g, which
lie midway between the Piper and Claymore fields.
The financial statements presented for Group are for the year ended 30 June
2022 and these have are shown alongside figures for the year ended 30 June
2021 for comparative purposes.
2. Summary of significant accounting policies
The principal accounting principles applied in the preparation of these
financial statements are set out below. These principles have been
consistently applied to all years presented, unless otherwise stated.
2.1. Basis of preparation
The financial statements have been prepared on a going concern basis using the
historical cost convention and in accordance with the UK-Adopted International
Accounting Standards, and in accordance with the provisions of the Companies
Act 2006.
The financial statements have been prepared under the historical cost
convention unless otherwise stated.
2.2. Consolidation and acquisitions
The financial statements consolidate the financial information of the Group
and companies controlled by the Group (its subsidiaries) at each reporting
date. Control is achieved where the Company has the power to govern the
financial and operating policies of an investee entity, has the rights to
variable returns from its involvement with the investee and has the ability to
use its power to affect its returns. The results of subsidiaries acquired or
sold are included in the financial information from the effective date of
acquisition or up to the effective date of disposal, as appropriate. Where
necessary, adjustments are made to the results of acquired subsidiaries to
bring their accounting policies into line with those used by the Group. All
intra-Group transactions, balances, income and expenses are eliminated on
consolidation. The financial statements of all Group companies are adjusted,
where necessary, to ensure the use of consistent accounting policies.
The Company's shares were admitted to trading on AIM, a market operated by the
London Stock Exchange, on 15 July 2021. In connection with the admission to
AIM, in the financial year to 30 June 2021, the Group undertook a Group
reorganisation of its corporate structure which resulted in the Company
becoming the ultimate holding company of the Group. Prior to the
reorganisation there was no ultimate holding company as Orcadian Energy (CNS)
Ltd ("CNS") was a standalone entity. The transaction was accounted for as a
capital reorganisation rather than a reverse acquisition since it did not meet
the definition of a business combination under IFRS 3. In a capital
reorganisation, the consolidated financial statements of the Group reflect the
predecessor carrying amounts of CNS with comparative information of CNS
presented for all periods since no substantive economic changes have occurred.
The difference arising on acquisition has been accounted for with the
recognition of a merger reserve on the balance sheet following the
reorganisation of the share capital of the Group at the point of completion of
the transaction.
2.3. Going concern
The financial statements have been prepared on a going concern basis. The
Group is not yet revenue generating and an operating loss has been reported.
The Group has historically been reliant on raising finance, both debt and
equity, to enable it to meet its obligations as they fall due.
The Directors have reviewed a detailed forecast based on the funds expected to
be raised and forecasted expenditure, including all required spend to meet
licence requirements. This forecast has been stress tested by management in
reaching their going concern conclusion. Having made due and careful enquiry,
the Directors acknowledge that funds will need to be raised within the next 12
months to enable the Group to meets its obligations as they fall due, however,
the Directors are confident that the required funds will successfully be
raised through the equity market to funds its operations over the next 12
months.
The Directors, therefore, have made an informed judgement, at the time of
approving financial statements, that the Group is a going concern but they
acknowledge that the dependence on raising further funds during the next 12
months represents a material uncertainty.
2.4. Changes in accounting policies
2.4.1. New standards, amendments to standards and interpretations
i) New and amended standards adopted by the Group
The International Accounting Standards Board (IASB) issued various amendments
and revisions to International Financial Reporting Standards and IFRIC
interpretations. The amendments and revisions were applicable for the period
ended 30 June 2022 but did not result in any material changes to the financial
statements of the Group.
Of the other IFRS and IFRIC amendments, none are expected to have a material
effect on the future Group Financial Statements.
ii) New and amended standards not yet adopted by the Group
The Directors do not believe that the implementation of new standards, amended
standards and interpretations issued but not yet effective and have not been
early adopted early will have a material impact once implemented in future
periods
2.5. Foreign currency
2.5.1. Functional and presentation currency
Items in the company's financial statements are measured in the currency of
the primary economic environment in which the entity operates (functional
currency). Τhe functional currency of the Company is Pounds sterling (£).
Monetary amounts in these financial statements are rounded to the nearest £.
2.5.2.Transactions and balances
Foreign currency transactions are translated into the functional currency
using the exchange rates prevailing at the dates of the transactions or
valuation where items are re-measured. Foreign exchange gains and losses
resulting from the settlement of such transactions and from the translation at
year-end exchange rates of monetary assets and liabilities denominated in
foreign currencies are recognised in the income statement, except when
deferred in other comprehensive income as qualifying cash flow hedges and
qualifying net investment hedges. Foreign exchange gains and losses that
relate to borrowings and cash and cash equivalents are presented in the income
statement within 'finance income or costs.' All other foreign exchange gains
and losses are presented in the income statement within 'Other
(losses)/gains.'
Translation differences on non-monetary financial assets and liabilities such
as equities held at fair value through profit or loss are recognised in profit
or loss as part of the fair value gain or loss. Translation differences on
non-monetary financial assets measure at fair value are included in other
comprehensive income.
2.6. Other income
Grants are accounted for under the accruals model. Grants of a revenue nature
are recognised in the Consolidated Statement of Comprehensive Income in the
same period as the related expenditure, in accordance with the attached
conditions.
2.7. Taxation
Tax currently payable is based on taxable profit for the period. Taxable
profit differs from profit as reported in the income statement because it
excludes items of income and expense that are taxable or deductible in other
years and it further excludes items that are never taxable or deductible. The
Group's liability for current tax is calculated using tax rates that have been
enacted or substantively enacted by the balance sheet date.
Deferred tax is recognised on differences between the carrying amounts of
assets and liabilities in the financial statements and the corresponding tax
bases used in the computation of taxable profit, and is accounted for using
the balance sheet liability method. Deferred tax liabilities are generally
recognised for all taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits will be
available against which deductible temporary differences can be utilised. Such
assets and liabilities are not recognised if the temporary difference arises
from initial recognition of goodwill or from the initial recognition (other
than in a business combination) of other assets and liabilities in a
transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences
arising on investments in subsidiaries and associates, and interests in joint
ventures, except where the Group is able to control the reversal of the
temporary difference and it is probable that the temporary difference will not
reverse in the foreseeable future. The carrying amount of deferred tax assets
is reviewed at each balance sheet date and reduced to the extent that it is no
longer probable that sufficient taxable profits will be available to allow all
or part of the asset to be recovered. Deferred tax is calculated at the tax
rates that are expected to apply in the period when the liability is settled,
or the asset realised. Deferred tax is charged or credited to profit or loss,
except when it relates to items charged or credited directly to equity, in
which case the deferred tax is also dealt with in equity. Deferred tax assets
and liabilities are offset when there is a legally enforceable right to set
off current tax assets against current tax liabilities and when they relate to
income taxes levied by the same taxation authority and the Group intends to
settle its current tax assets and liabilities on a net basis.
R&D tax credits are recognised through the Consolidated Statement of
Comprehensive Income upon receipt of funds.
2.8. Leases
The Group assesses whether a contract is or contains a lease at the inception
of the contract. The Group recognises a right-of-use asset and a corresponding
lease liability with respect to all lease arrangements in which it is the
lessee, except for short-term leases (defined as leases with a lease term of
12 months or less) and leases of low value assets (such as tablets and
personal computers, small items of office furniture and telephones). For these
leases, the Group recognises the lease payments as an administrative expense
on a straight-line basis over the term of the lease unless another systematic
basis is more representative of the time pattern in which economic benefits
from the leased assets are consumed.
2.9. Intangible assets
Exploration and evaluation expenditures (E&E)
The Group applies the successful efforts method of accounting for oil and gas
assets, having regard to the requirements of IFRS 6 'Exploration for and
Evaluation of Mineral Resources'. Costs incurred prior to obtaining the legal
rights to explore an area are expensed immediately to the Statement of
Comprehensive Income.
All licence acquisitions, exploration and evaluation costs are capitalised, a
share of administration costs is capitalised insofar as they relate to
exploration, evaluation and development activities. These costs are written
off unless commercial reserves have been established or the determination
process has not been completed and there are no indications of impairment. If
a project is deemed commercial all of the attributable costs are transferred
into Property, Plant and Equipment. These costs are then depreciated from the
commencement of production on a unit of production basis.
2.10. Impairment of non-financial assets
The Group assesses at each reporting date whether there is an indication that
an asset may be impaired. This includes consideration of the IFRS 6 impairment
indicators for any intangible exploration and evaluation assets capitalised as
intangible costs. If any such indication exists, or when annual impairment
testing for an asset is required, the Group makes an estimate of the asset's
recoverable amount.
An asset's recoverable amount is the higher of its fair value less costs to
sell and its value in use. This is determined for an individual asset, unless
the asset does not generate cash inflows that are largely independent of those
from other assets or Groups of assets, and the asset's value in use cannot be
estimated to be close to its fair value. In such cases, the asset is tested
for impairment as part of the cash-generating unit to which it belongs. When
the carrying amount of an asset or cash-generating unit exceeds its
recoverable amount, it is considered impaired and is written down to its
recoverable amount.
In assessing value in use, estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset.
Impairment losses relating to continuing operations are recognised in those
expense categories consistent with the function of the impaired asset, unless
the asset is carried at revalued amount (in which case the impairment loss is
treated as a revaluation decrease). An assessment is also made at each
reporting date as to whether there is any indication that previously
recognised impairment losses may no longer exist or may have decreased. If
such indication exists, the recoverable amount is estimated.
A previously recognised impairment loss is reversed only if there has been a
change in the estimates used to determine the asset's recoverable amount since
the last impairment loss was recognised. If that is the case, the carrying
amount of the asset is increased to its recoverable amount. That increased
amount cannot exceed the carrying amount that would have been determined, net
of depreciation, had no impairment loss been recognised for the asset in prior
years. Such reversal is recognised in the Statement of Comprehensive Income
unless the asset is carried at revalued amount, in which case the reversal is
treated as a revaluation increase. After such a reversal, the depreciation
charge is adjusted in future periods to allocate the asset's revised carrying
amount, less any residual value, on a systematic basis over its remaining
useful life.
2.11. Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation
and any accumulated impairment losses. Depreciation is provided on all
property, plant and equipment to write off the cost less estimated residual
value of each asset over its expected useful economic life on a straight-line
basis at the following annual rates:
· Property, plant and equipment - 3 years straight line.
All assets are subject to annual impairment reviews.
2.12. Financial Instruments
2.12.1 Initial recognition
A financial asset or financial liability is recognised in the statement of
financial position of the Group when it arises or when the Group becomes part
of the contractual terms of the financial instrument.
2.12.2 Classification
Financial assets at amortised cost
The Group measures financial assets at amortised cost if both of the following
conditions are met:
(1) the asset is held within a business model whose objective is to collect
contractual cash flows; and
(2) the contractual terms of the financial asset generating cash flows at
specified dates only pertain to capital and interest payments on the balance
of the initial capital.
Financial assets which are measured at amortised cost, are measured using the
Effective Interest Rate Method (EIR) and are subject to impairment. Gains and
losses are recognised in profit or loss when the asset is derecognised,
modified or impaired.
There were no financial assets measured at fair value as at 30 June 2022, or
30 June 2021.
Financial liabilities at amortised cost
Financial liabilities measured at amortised cost using the effective interest
rate method include current borrowings and trade and other payables that are
short term in nature. Financial liabilities are derecognised if the Group's
obligations specified in the contract expire or are discharged or cancelled.
Amortised cost is calculated by taking into account any discount or premium on
acquisition and fees or costs that are an integral part of the effective
interest rate ("EIR"). The EIR amortisation is included as finance costs in
profit or loss. Trade payables other payables are non-interest bearing and are
stated at amortised cost using the effective interest method.
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial
liabilities held for trading and financial liabilities designated upon initial
recognition as at fair value through profit or loss. Financial liabilities are
classified as held for trading if they are incurred for the purpose of
repurchasing in the near term. Gains or losses on liabilities held for trading
are recognised in the statement of profit or loss and other comprehensive
income.
2.12.3. Derecognition
A financial asset is derecognised when:
(1) the rights to receive cash flows from the asset have expired, or
(2) the Group has transferred its rights to receive cash flows from the
asset or has undertaken the commitment to fully pay the cash flows received
without significant delay to a third party under an arrangement and has either
(a) transferred substantially all the risks and the assets of the asset or (b)
has neither transferred nor held substantially all the risks and estimates of
the asset but has transferred the control of the asset.
2.12.4 Impairment
The Group recognises a provision for impairment for expected credit losses
regarding all financial assets. Expected credit losses are based on the
balance between all the payable contractual cash flows and all discounted cash
flows that the Group expects to receive. Regarding trade receivables, the
Group applies the IFRS 9 simplified approach in order to calculate expected
credit losses. Therefore, at every reporting date, provision for losses
regarding a financial instrument is measured at an amount equal to the
expected credit losses over its lifetime without monitoring changes in credit
risk. To measure expected credit losses, trade receivables and contract assets
have been Grouped based on shared risk characteristics.
2.13. Trade and other receivables
Trade and other receivables are initially recognised at fair value when
related amounts are invoiced then carried at this amount less any allowances
for doubtful debts or provision made for impairment of these receivables.
2.14. Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand and are subject to
an insignificant risk of changes in value.
2.15. Share capital
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of new shares or options are shown in equity as a
deduction, net of tax, from the proceeds.
2.16. Share premium
Share premium account represents the excess of the issue price over the par
value on shares issued. Incremental costs directly attributable to the issue
of new ordinary shares or options are shown in equity as a deduction, net of
tax, from the proceeds.
2.17. Shares to be issued
Shares to be issued qualifies as equity as it satisfies the fix rule under IAS
32, whereby subscription agreements for Ordinary shares ("the Obligation")
represents a contract that will be settled by the Company delivering a fixed
number of its Ordinary shares in exchange for a fixed amount of cash. When the
Obligation arises the net value of share subscriptions to be received is
recognised as an equity reserve, net of costs, with a corresponding receivable
being recognised as an asset, and costs recorded as an accrued expense. Upon
issue of the Ordinary shares, the Shares to be issued reserve is transferred
to Share capital and Share premium. The receivable is discharged upon receipt
of cash subscriptions from shareholders, and the accrued expense discharged
upon payment to third party suppliers.
2.18. Trade payables
These financial liabilities are all non-interest bearing and are initially
recognised at the fair value of the consideration payable.
2.19. Convertible loan notes and borrowings
Convertible loan notes classified as financial liabilities and borrowings are
recognised initially at fair value, net of transaction costs incurred. After
initial recognition, loans are measured at the amortised cost using the
effective interest rate method. Any difference between the proceeds (net of
transaction costs) and the redemption value is recognised in the income
statement over the period of the borrowings using the effective interest rate
method.
2.20. Finance income and finance costs
Finance income comprises interest income on bank funds. Interest income is
recognised as it accrues in profit or loss, using the effective interest
method. Finance costs comprise interest expense on borrowings. Borrowing costs
are recognised in profit or loss in the year in which they are incurred.
2.21. Earnings per share
Basic Earnings per share is calculated as profit attributable to equity
holders of the parent for the period, adjusted to exclude any costs of
servicing equity (other than dividends), divided by the weighted average
number of ordinary shares, adjusted for any bonus element.
2.22. Operating segments
The Chief Operating Decision Maker (CODM) is considered to be the Board of
Directors. They consider that the Group operates in a single segment, that of
oil and gas exploration, appraisal and development, in a single geographical
location, the North Sea of the United Kingdom. As a result, the financial
information of the single segment is the same as set out in the statement of
comprehensive income, statement of financial position, statement of Changes in
Equity and Statement of Cashflows.
2.23. Investment in subsidiaries
The consolidated financial statements incorporate the financial statements of
the company and entities controlled by the Group (its subsidiaries). Control
is achieved where the Group has the power to govern the financial and
operating policies of an entity so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the year are
included in total comprehensive income from the effective date of acquisition
and up to the effective date of disposal, as appropriate using accounting
policies consistent with those of the parent. All intra-group transactions,
balances, income and expenses are eliminated in full on consolidation.
Investments in subsidiaries are accounted for at cost less impairment in the
individual financial statements. Advances that are made to the subsidiary that
are not expected to be repaid in the short term are capitalised by the
Company. All advances made for the year have been capitalised.
2.24. Share-based payments
The fair value of services received in exchange for the grant of share
warrants is recognised as an expense in share premium or profit or loss, in
accordance with the nature of the service provided. A corresponding increase
is recognised in equity.
3. Significant accounting estimates and judgements, estimates and
assumptions
The preparation of financial statements using accounting policies consistent
with IFRS requires the Directors to make estimates and assumptions that affect
the reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities and the reported amounts of income and expenses. The
preparation of financial statements also requires the Directors to exercise
judgement in the process of applying the accounting policies. Changes in
estimates, assumptions and judgements can have a significant impact on the
financial statements.
Recoverable value of intangible assets (refer to note 13)
As at 30 June 2022, the Group held oil and gas exploration and evaluation
intangible assets of £3,303,399 (2021: £1,814,615). The carrying values of
intangible assets are assessed for indications of impairment, as set out in
IFRS 6, on an annual basis. As part of this impairment assessment, the
recoverable value of the intangible assets is required to be estimated.
When estimating the recoverable value of the intangibles Management consider
the proved, probably and potential resources per the latest CPR
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), likely production costs and the forecasted oil prices.
As a result of the budget exploration costs, the licenses being valid and the
assessed recoverable value of the intangibles being in excess of the carrying
value, Management do not consider that any intangible assets are impaired as
at 30 June 2022.
These estimates and assumptions are subject to risk and uncertainty and
therefore a possibility that changes in circumstances will impact the
assessment of impairment indicators.
There was only one critical judgement identified, apart from those involving
estimations (which are dealt with separately above) that the Directors have
made in the process of applying the Group's accounting policies and that have
the most significant effect on the amounts recognised in the financial
statements.
Fair value of share based payments
The Company has made awards of broker warrants over its unissued share capital
in connection with the Initial Public Offering completed on 15 July 2021.
The valuation of these options involves making a number of critical estimates
relating to price volatility, future dividend yields, expected life of the
options and forfeiture rates. The key judgement involved the determination
of an appropriate of volatility, which has been estimated based on the average
historic volatility of the share prices of a selection of three peer companies
for a period equal to the expected term from the grant date. Further detail on
the assumptions has been described in more detail in note 19 to these Group
Financial Statements.
4. Group reorganisation under common control
The acquisition in the year ended 30 June 2021 met the definition of a group
reorganisation due to the Company and the subsidiary being under common
control at the date of acquisition. As a result, and since Orcadian Energy Plc
did not meet the definition of a business per IFRS 3, the acquisition fell
outside of the scope of IFRS 3 and the predecessor value method was used to
account for the acquisition.
These consolidated financial statements represent a continuation of the
consolidated financial statements of Orcadian Energy (CNS) Ltd and include:
a. The assets and liabilities of Orcadian Energy (CNS) Ltd at their
pre-acquisition carrying amounts and the results for both periods; and
b. The assets and liabilities of the Company as at 11 May 2021 and it's
results from 11 May to 30 June 2021.
On 11 May 2021, the Company issued 52,201,601 shares entire issued share
capital of Orcadian Energy (CNS) Ltd.
The net assets of Orcadian Energy (CNS) Ltd at the date of acquisition was as
follows:
£
Property Plant & Equipment 1,357
Intangible Assets 1,719,292
Current Assets 447,425
Current Liabilities (284,745)
Non-Current Liabilities (1,869,975)
Net assets 13,354
The reserve that arose from the acquisition is made up as follows:
Year ended 30 June 2021
£
As at start of year -
Cost of the investment in Orcadian Energy (CNS) Ltd 52,202
Less: net assets of Orcadian Energy (CNS) Ltd at acquisition (13,354)
As at end of year 38,848
5. Administrative expenses
2022 2021
£ £
Office costs, rates and services 21,925 18,672
Wages and salaries* 384,750 128,125
Consultants and advisers 783,454 56,113
Audit fees (note 6) 27,500 38,090
Insurance 33,504 44,466
Other expenses 181,402 65,234
National Insurance 105,241 35,594
Foreign Exchange 156,126 (127,603)
Depreciation 674 217
1,694,576 258,909
*refer to note 13 for details on wages and salaries capitalised to intangible
assets.
6. Auditor's Remuneration
During the year, the Company obtained the following services from the
Company's auditors and its associates:
2022 2021
£ £
Audit of the financial statements 27,500 25,000
Transaction services 15,000 50,000
Informal interim review 1,750 -
44,250 75,000
7. Other Income
2022 2021
£ £
OGA grant 466,667 -
Consulting fees - 3,000
Other Income 466,667 3,000
In December 2021 Orcadian was awarded a grant of £466,667 by the OGA (now
NSTA) to evaluate an alternative concept for the electrification of key
producing oil and gas fields in the Central Graben area of the North Sea. All
attached conditions in respect of the grant were met during the year and
therefore this income has been recognised in full as the underlying costs have
been incurred in the year.
The Company did not record any consultancy revenue during the year. In the
year to 30 June 2021 the Company undertook a minor consulting role during the
year for which it billed £3,000.
8. Staff numbers and costs
Group Group
2022 2021
Staff costs (including directors) £ £
Wages and salaries 790,000 308,925
Social security costs 105,241 35,594
895,241 344,519
Refer to the Directors Remuneration Report for further information on Director
wages and salaries.
Wages and salaries includes £405,250 that was capitalised to the value of the
intangible asset (2021: £180,800) (refer to note 13).
No pension benefits are provided for any Directors (2021: £nil).
The average number of persons (including directors) employed by the Company
during the year was:
Group and Company 2022 2021
Management and Administration 6 5
6 5
9. Finance costs
2022 2021
£ £
Interest paid 41,869 44,349
41,869 44,349
10. Taxation
Analysis of charge for the year:
2022 2021
£ £
Current income tax charge - -
R&D tax credits - 80,420
Deferred tax charge - -
Total taxation credit/(charge) - 80,420
Taxation reconciliation
The below table reconciles the tax charge for the year to the theoretical
charge based on the result for the year and the corporation tax rate.
2022 2021
£
£
Loss before income tax (1,586,727) (296,338)
Tax at the applicable rate of 19% (2021: 19%) (301,478) (56,304)
Effects of:
R&D tax credits - 80,420
Expenses not deducted for tax purposes 1,333 -
Unutilised tax losses 300,145 56,304
Total income tax credit / (expense) - 80,420
As at 30 June 2022, the Group had potential deferred tax assets not recognised
in respect of unused tax losses of £439,912 (2021: £139,767) which is due to
uncertainty over the availability of future taxable profits to offset these
losses against.
11. Earnings per share
The calculation of the basic and diluted earnings per share is calculated by
dividing the loss for the year for continuing operations for the Company by
the weighted average number of ordinary shares in issue during the year.
There is no difference between the basic and diluted earnings per share as the
Group recorded a loss for the year, and where a loss is recorded the basic and
diluted loss is the same. Refer to note 19 for details on details of warrants
on issue as at 30 June 2022 that would have a dilutive effect on earnings per
share.
2022 2021
£
£
Loss for the purposes of basic earnings per share being net loss attributable (1,586,727) (296,338)
to the owners
Weighted average number of Ordinary Shares 63,278,315 22,167,804
Loss per share - pence (2.51p) (1.34p)
The weighted average number of shares is adjusted for the impact of the
acquisition as follows:
- Prior to the acquisition, the number of shares is based on Orcadian Energy
(CNS) Ltd, adjusted using the share exchange ratio arising on the acquisition;
and
- From the date of the acquisition, the number of shares is based on the
Company.
12. Property, plant and equipment
IT hardware & software Office equipment Total
£ £ £
Cost
As at 30 June 2020 2,842 202 3,044
Additions 1,952 - 1,952
As at 30 June 2021 4,794 202 4,996
Additions 2,246 - 2,246
As at 30 June 2022 7,040 202 7,242
IT hardware & software Office equipment Total
£ £ £
Depreciation
As at 30 June 2020 2,735 202 2,937
Charged in the year 217 - 217
As at 30 June 2021 2,952 202 3,154
Charged in the year 674 - 674
As at 30 June 2022 3,626 202 3,828
Net book value as at 30 June 2022 3,414 - 3,414
Net book value as at 30 June 2021 1,842 - 1,842
The depreciation expense is recognised in administrative expenses as set out
in note 5.
13. Intangible assets
Oil and gas exploration assets
£
Cost
As at 30 June 2020 1,283,797
Additions 530,818
As at 30 June 2021 1,814,615
Additions 1,488,785
As at 30 June 2022 3,303,400
Wages and salaries totalling £405,250 (2021: £180,800) were capitalised
during the year (refer to note 8).
The carrying value of the prospecting and exploration rights is supported by
the estimated resource and current market values as contained in the Competent
Person's Report date 1 April 2021 which was prepared by Sproule B.V.
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14. Trade and other receivables
Group Group Company Company
2022 2021 2022 2021
£ £ £ £
VAT receivable 55,829 50,925 - -
Other receivables 1,000,000 - 1,000,000 -
Prepayments relating to the issue of equity - 13,500 - -
Prepayments other - 24,123 - -
1,055,829 88,548 1,000,000 -
Other receivables of £1,000,000 represents the gross value of share
subscriptions receivable as at reporting date pursuant to a share placement
that was announced on 30 June 2022 but for which shares were not formally
issued until post-reporting date, in July 2022. There were £98,800 of share
issue costs which have been accrued for as at 30 June 2022 in respect of this
placing. (Refer to notes 2.17, 20 and 26 for further detail).
The fair value of other receivables is the same as their carrying values as
stated above.
The maximum exposure to credit risk at the reporting date is the carrying
value of each class of receivable mentioned above. The Company does not hold
any collateral as security.
15. Cash and cash equivalents
Group 2022 2021
£ £
Cash at bank and in hand 271,439 179,556
271,439 179,556
There is no material difference between the fair value of cash and cash
equivalents and their book value.
16. Investment in subsidiary
Name Address of the registered office Nature of business Proportion of ordinary shares held directly by parent (%)
Orcadian Energy (CNS) Ltd 6(th) floor, 60 Gracechurch Street, London, EC3V 0HR Managing oil and gas assets 100
The acquisition of Orcadian Energy (CNS) Ltd took place on 11 May 2021. Refer
to note 4 for further details.
£
As at 30 June 2021 52,202
Additions 3,916,642
As at 30 June 2022 3,968,844
The additions during the year were advances to enable the subsidiary to
continue work on the oil and gas exploration assets owned directly by the
subsidiary. These costs have been capitalised rather than treated as an
intercompany loan as they represent capital contributions and hence increase
in value of the parent's investment.
17. Borrowings
2022
Convertible loan note 2020 Convertible loan note 2021
£ STASCO Loan £
£ Total
£
As at 30 June 2021 380,000 762,686 720,000 1,862,686
Conversion in to ordinary shares (380,000) - (720,000) (1,100,000)
Interest accrued - 41,869 - 41,869
Effect of foreign exchange - 151,629 - 151,629
As at 30 June 2022 - 956,184 - 956,184
The STASCO loan was entered in to on 22 July 2019. The total loan facility was
US$1,000,000 which has been fully drawn down. The term of the loan facility is
4 years and is subject to interest at LIBOR plus 5% which is accrued
quarterly. The total interest charge for the year was US$57,118 £41,869
(2021: $53,885 (£39,045)), and a £151,629 unrealised foreign exchange loss
(2021: gain of £129,511) was incurred in the year in respect of this loan.
On 15 July 2021, all Convertible Loan Notes ("CLNs") were converted in to
ordinary shares at a price of 28 pence each, which was a 30% discount to the
fundraise price. In total 3,928,572 ordinary shares were issued in full
discharge of the CLNs. No interest was paid on the CLNs as they were converted
in to ordinary shares.
2021
Convertible loan note 2020 Convertible loan note 2021
£ STASCO Loan £
£ Total
£
As at 30 June 2020 100,000 853,152 - 953,152
Convertible loan note issues 380,000 - 720,000 1,100,000
Convertible loan note repayments (100,000) - - (100,000)
Interest accrued - 39,045 - 39,045
Effect of foreign exchange - (129,511) - (129,511)
As at 30 June 2021 380,000 762,686 720,000 1,862,686
Between July and December 2020 the Company issued £380,000 of convertible
loan notes. In January 2021 £100,000 of convertible loan notes were repaid in
cash and a further CLN for £100,000 was issued to a further lender. The term
for these CLNs was three years with an interest rate of 12% per annum if they
were redeemed. If conversion to Ordinary Shares no interest is applied. (Refer
to note 21 for details of CLNs outstanding from Directors as at 30 June 2021,
that were settled for Ordinary shares during the year to 30 June 2022.)
In March 2021 the Company issued £705,000 of convertible loan notes, and in
June 2021 the Company issued £15,000 of convertible loan notes. These CLN's
had a term of one year and a zero interest rate.
On 15 July 2021, all CLNs were converted in to ordinary shares at a price of
28 pence each, which was a 30% discount to the fundraise price. In total
3,928,572 ordinary shares were issued in full discharge of the CLNs. No
interest was paid on the CLNs as they were converted in to ordinary shares.
18. Trade and other payables - due within one year
Group Group Company Company
2022 2021 2022 2021
£ £ £ £
Trade payables 184,636 35,443 - -
Accruals 334,631 276,133 98,800 -
Other creditor 34,242 17,025 - -
553,509 328,601 98,800 -
The carrying values of trade and other payables are considered to be a
reasonable approximation of the fair value and are considered by the Directors
as payable within one year.
19. Ordinary share capital and share premium
Group
Issued Number of shares Ordinary share capital Share
£ premium
£
As at 30 June 2020 17,400,534 17,401 563,561
Transfer between reserves - 34,801 (34,801)
Issued capital of Company at acquisition 1 - -
Issue of shares upon acquisition of subsidiary 52,201,601 52,202 -
Transfer of Orcadian Energy (CNS) Ltd paid up capital to reverse acquisition
reserve
(17,400,534) (52,202) (528,760)
As at 30 June 2021 52,201,601 52,202 -
Issue of shares 7,625,000 7,625 3,042,375
Share issue costs - - (233,358)
Value of warrants issued - - (15,000)
Conversion of loans 3,928,572 3,928 1,096,072
As at 30 June 2022 63,755,174 63,755 3,890,089
The issued capital of the Group for the period 1 July 2020 to 11 May 2021 is
that of Orcadian Energy (CNS) Ltd. Upon completion of the acquisition the
share capital of Orcadian Energy (CNS) Ltd was transferred to the Acquisition
reserve (Refer to note 4) and the share capital of Orcadian Energy PLC was
brought to account.
The ordinary shares confer the right to vote at general meetings of the
Company, to a repayment of capital in the event of liquidation or winding up
and certain other rights as set out in the Company's articles of association.
Company
Issued Number of shares Share capital Share
£ premium
£
Balance as at Incorporation 29 March 2021 1 - -
Issue of shares upon acquisition of subsidiary 52,201,601 52,202 -
As at 30 June 2021 52,202,602 52,202 -
Issue of shares 7,625,000 7,625 3,042,375
Share issue costs - - (233,358)
Value of warrants issued - - (15,000)
Conversion of loans 3,928,572 3,928 1,096,072
As at 30 June 2022 63,755,174 63,755 3,890,089
On 15 July 2021 the Company placed 7,500,000 New Ordinary Shares ("the Raise")
at 40p each to raise gross proceeds of £3,000,000, and also issued 125,000
new shares at 40p each to a supplier in part payment of an outstanding bill.
On 15 July all Convertible Loan Notes ("CLNs") were converted in to ordinary
shares at a price of 28 pence each. In total 3,928,572 ordinary shares were
issued in full discharge of the CLNs (Refer to Note 17).
On 11 May 2021, the Company issued 52,202,601 new ordinary shares of £0.001
each at nominal value for the acquisition of 100% of the issued capital of
Orcadian Energy (CNS) Ltd pursuant to a share swap arrangement (Refer to Note
4).
On 29 March 2021, the Company issued one new ordinary shares of £0.001 upon
incorporation.
Share warrants
On 15 July 2021 the Company issued 75,000 broker warrants in connection with
the Raise. These warrants are fully vested, have an exercise price of 40p and
are exercisable for a period of three years.
The fair value of warrants is valued using the Black-Scholes pricing model. A
fair value charge of £15,000 has been applied as a direct deduction to the
Share Premium Reserve.
The inputs into the Black-Scholes pricing model are as follows:
Grant date 15 Jul 2022
Exercise price 40.0 pence
Expected life 3 years
Expected volatility 77.32%
Risk free rate of interest 0.0242%
Dividend yield Nil
Fair value of option 20.0 pence
Volatility has been estimated based on the average historic volatility of the
share prices of a selection of three peer companies for a period equal to the
expected term from the grant date.
Nature and purpose of equity and reserves
Equity and Reserve Description and purpose
Ordinary share capital Represents the nominal value of shares issued
Share premium reserve Amount subscribed for share capital in excess of nominal value
Share warrants reserve Value of warrants issued
Shares to be issued Value of shares to be issued where share subscription agreements have been
executed and the share placement completing post-reporting date.
Other reserve Reserve created in accordance with the acquisition of Orcadian Energy (CNS)
Ltd on 11 May, 2021 (Refer to Note 4)
Cumulative net gains and losses recognised in the Consolidated Statement of
Retained earnings Comprehensive Income
20. Shares to be issued
The Shares to be issued represents the issue of 2,857,143 shares at 35 pence
each that completed post-reporting date, on 6 July 2022. The value of the
Shares to be issued reserve reflects the gross proceeds of the share placement
of £1,000,000, less £98,800 of share issue costs which have been accrued for
at 30 June 2022. Upon completion the value of Shares to be issued will be
re-allocated to Share capital and Share premium (Refer to note 2.17 for the
Group's accounting policy for Shares to be issued, and refer to note 26).
21. Related parties
21.1 Transactions with related parties
The Company had the following related party transactions:
(1) The Company makes use of an office at 70 Claremont Road which is
currently provided to the Company by Mrs Julia Cane-Honeysett and Mr Stephen
Brown at a rental of £1,000 per calendar month. The company pays for the
services and business rates associated with the property.
21.2 Loans to/from related parties
During the year, several Directors and shareholders provided funds to the
Company as a working capital injection.
The following balances are outstanding at the end of the reporting period in
relation to these transactions:
Amount due (to)/from related parties
£
As at 30 June 2021 (135,000)
Conversion in to ordinary shares 135,000
As at 30 June 2022 -
As at 30 June 2021 the Company had issued convertible loan notes (CLNs") from
Company Director Alan Hume totalling £135,000. These CLNs were converted in
to 482,142 ordinary shares on 15 July 2021 at 28 pence per share.
21.3. Key management personnel
Directors of the Company are considered to be key management personnel. The
remuneration of the Directors has been set out in note 8.
22. Ultimate controlling party
The Directors consider Stephen Brown and Julia Cane-Honeysett to be the
ultimate controlling parties given their combined holding of 43.78% of the
issued capital of the Company.
23. Financial instruments
The Company holds the following financial instruments:
Financial assets
Group Group Company Company
2022 2021 2022 2021
Financial assets at amortised cost: £ £ £ £
Other receivables 1,000,000 - 1,000,000 -
Other financial assets at amortised cost - - - -
Cash and cash equivalents 271,439 179,556 - -
1,271,439 179,556 1,000,000 -
The maximum exposure to credit risk at the end of the reporting period is the
carrying amount of each class of financial assets mentioned above.
Financial liabilities
Group
2022 2021
Financial liabilities at amortised cost: £ £
Trade payables 184,636 35,443
Borrowings - non-current 956,184 762,686
1,140,820 798,129
Group 2022 2021
Financial liabilities at fair value through profit and loss
£ £
Borrowings - 1,100,000
- 1,100,000
24. Financial risk management
24.1 Financial risk factors
The Group's activities expose it to a variety of financial risks: market risk,
credit risk and liquidity risk. The Group's overall risk management programme
focuses on the unpredictability of financial markets and seeks to minimise
potential adverse effects on the Group's financial performance.
Risk management is carried out by the executive management team.
a) Market risk
The Group is exposed to market risk, primarily relating to interest rate,
foreign exchange and commodity prices. The Group does not hedge against market
risks as the exposure is not deemed sufficient to enter into forward
contracts. The Group has not sensitised the figures for fluctuations in
interest rates, foreign exchange or commodity prices as the Directors are of
the opinion that these fluctuations would not have a significant impact on the
Financial Statements at the present time. The Directors will continue to
assess the effect of movements in market risks on the Group's financial
operations and initiate suitable risk management measures where necessary.
b) Credit risk
Credit risk arises from cash and cash equivalents as well as outstanding
receivables. To manage this risk, the Group periodically assesses the
financial reliability of customers and counterparties.
The amount of exposure to any individual counter party is subject to a limit,
which is assessed by the Board.
The Group considers the credit ratings of banks in which it holds funds in
order to reduce exposure to credit risk. The Group will only keep its holdings
of cash with institutions which have a minimum credit rating of 'A'.
c) Liquidity risk
The Group's continued future operations depend on the ability to raise
sufficient working capital through the issue of equity share capital or debt.
The Directors are reasonably confident that adequate funding will be
forthcoming with which to finance operations. Controls over expenditure are
carefully managed.
The following table summarizes the Group's significant remaining contractual
maturities for financial liabilities at 30 June 2022, and 30 June 2021.
Contractual maturity analysis as at 30 June 2022
Less than 12
Months 1 - 5 Total
£ Years £
£
Accounts payable 184,636 - 184,636
Accrued liabilities 334,631 - 334,631
Other creditor 34,242 - 34,242
STASCO Loan - 956,184 956,184
553,509 956,184 1,509,693
There were no contractual liabilities with maturity of greater than 5 years as
at 30 June 2022.
Contractual maturity analysis as at 30 June 2021
Less than 12 months
£ 1 - 5 years Total
£ £
Accounts payable 35,443 - 35,443
Accrued liabilities 276,133 - 293,158
Other creditor 17,025 - 17,025
STASCO Loan - 762,686 762,686
328,601 762,686 1,091,287
There were no contractual liabilities with maturity of greater than 5 years as
at 30 June 2021.
d) Foreign exchange risk
Foreign exchange risk arises where the Group has financial assets and
liabilities in a different currency to the functional currency of the Group.
Where this arises the Group will be exposed to gains and losses that arise on
movements in the base currency of the financial asset/liability and the
functional currency of the Group. For the year ended 30 June 2022, the Group's
borrowings were denominated in US Dollars and thus is exposed to gains and
losses arising on the value of the US Dollar relative to Pound Sterling (Refer
to note 17).
24.2 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 enable the Group to
continue its exploration and development of oil and gas resources. In order to
maintain or adjust the capital structure, the Group may adjust the issue of
shares or sell assets to reduce debts.
The Group defines capital based on the total equity and reserves of the Group.
The Group monitors its level of cash resources available against future
planned operational activities and may issue new shares in order to raise
further funds from time to time.
25. Commitments
The Group has entered into the following non-cancellable commitments in
respect of exploration licences:
2022 2021
£ £
Due within one year 246,498 197,771
Later than one year but not later than five years 1,360,821 112,729
Total commitments 1,607,319 310,500
26. Events after the reporting period
On 6 July 2022, the Company completed a share placement raising £1,000,000
before costs through the issue of 2,857,143 Ordinary shares at 35 pence per
share. Total costs of the share issue were £98,800.
On 15 November 2022 the Company announced that it had been awarded a one year
extension to the second term of the P2244 licence. That licence will now
expire at the end of November 2023.
On the 28 November 2022, the Company signed a Memorandum Of Understanding with
SLB, formerly known as Schlumberger, for the provision of core services on the
wells of the Company's Pilot project.
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