REG - Orcadian Energy PLC - Results for the year ended 30 June 2024
16/12/2024 07:00
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RNS Number : 1268Q Orcadian Energy PLC 16 December 2024
16 December 2024
Orcadian Energy plc
("Orcadian" or the "Company")
Results for the year ended 30 June 2024
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 2024.
Highlights:
· Completed the sale of an 81.25% interest in Licence P2244 to Ping
Petroleum UK plc ("Ping"), leaving Orcadian with an 18.75% interest in the
Pilot Licence carried to first oil, gross reserves in Pilot are 78.8 MMbbl.
· Awarded three new licences in the 33(rd) Round:
o Licence P2634, in which Orcadian has a 50% interest, contains a large
viscous oil discovery, Fynn Beauly, which could provide a suitable feedstock
for anode grade cokers, which can create the synthetic graphite used for EV
anodes. Serica has recently announced the intended acquisition of Parkmead
(E&P) Ltd, the operator of this licence. The Company are delighted to
welcome Serica on to the licence and look forward to progressing this project
with Serica as operator.
o Licence P2650, in which Orcadian has a 50% interest and is operator. This
licence contains shallow gas prospects which can be drilled at low cost.
Prospective resources are some 269 bcf of gas.
o Licence P2680, in which Orcadian held 100% at 30 June 2024, that contains
the Earlham discovery (114 bcf, contingent) and the Orwell redevelopment
project (31 bcf, contingent), as well as the Clover gas prospect (153 bcf,
prospective).
· Since the end of the period under review:
o Agreement to sell a 50% interest in a sub-area of Licence P2680,
containing the Earlham and Orwell fields, to The Marine Low Carbon Power Ltd
("MLCP") leaving Orcadian with a 50% interest in the sub-area of the Licence
carried to first gas. Gross recoverable fuel gas contingent resources in
Earlham and Orwell are 145 bcf;
o Shell loan assigned to The Independent Power Corporation Ltd ("IPC") and
agreement to settle the loan as part of the proceeds from the sale of the
P2680 licence interest to MLCP;
o Acquisition of HALO Offshore UK Ltd ("HALO") and subsequent sale of a 50%
interest in HALO to IPC, with IPC providing access to acquisition finance; and
o New focus on acquiring producing licence interests on the UKCS through
HALO which has incurred £52.6 million of pre-trading capital expenditures
which should provide allowances to offset against tax payable on any producing
licence interests to be acquired.
The full financial statements are available at this link:
https://orcadian.energy/wp-content/uploads/2024/12/FY24-Financial-Statements-FINAL-fully-signed.pdf
Steve Brown, Orcadian's CEO, said:
"2024 has been a very busy period for the Company. We completed on the sale of
Pilot and are working with the operator to progress the project once
regulatory and fiscal clarity emerge in the Spring.
We also accepted all the licences that we applied for in the 33(rd) round and
had always seen Earlham as a project that we could move rapidly towards
development. Partnering with MLCP, who have been working on the design of an
offshore power station with integrated carbon capture for four years, made
great sense to us. We are delighted to be supporting MLCP in the delivery of
this project.
Finally, we acquired HALO Offshore UK Ltd and will bring IPC in as an equal
partner to enable HALO to acquire producing assets on the UKCS with an
objective of turning HALO into a dividend paying entity as soon as possible.
We look forward to the year ahead and progressing all these projects with our
partners."
Report and Accounts and Annual General Meeting
A copy of the annual report and accounts for the year ended 30 June 2024 will
be 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 19 December 2024.
The AGM will be held at the offices of Shakespeare Martineau, 60 Gracechurch
Street, London, EC3V 0HR at 10:30am on 15 January 2025.
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
Zeus (Nomad and Joint Broker) +44 20 3829 5000
Dan Bate / Alex Campbell-Harris (Investment Banking)
Simon Johnson (Corporate Broking)
Novum (Joint Broker) +44 207 399 9425
Colin Rowbury / Jon Belliss
Tavistock (PR) + 44 20 7920 3150
Nick Elwes / Simon Hudson orcadian@tavistock.co.uk (mailto:orcadian@tavistock.co.uk)
Qualified Person's Statement
Pursuant to the requirements of the AIM Rules and in particular, the AIM Note
for Mining and Oil and Gas Companies, Maurice Bamford has reviewed and
approved the technical information and resource reporting contained in this
announcement.
Maurice has more than 35 years' experience in the oil & gas industry and 3
years in academia. He holds a BSc in Geology from Queens University Belfast
and a PhD in Geology from the National University of Ireland. Maurice is a
Fellow of the Geological Society, London, and a member of the Geoscience
Energy Society of Great Britain. He is Exploration and Geoscience Manager at
Orcadian Energy.
About Orcadian Energy
Orcadian is a North Sea focused, low emissions, oil and gas exploration and
development company. 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 energy to the UK.
Orcadian's key asset is the Pilot oilfield, Pilot was discovered by PetroFina
in 1989 and has been well appraised. The field has excellent quality reservoir
and contains 263MMbbl of a viscous oil ranging in gravity from 17º API in the
South of the reservoir to 12º API in the North. In planning the Pilot
development, Orcadian has selected polymer flooding and wind power to
transform the production of viscous oil into a cleaner and greener process.
Polymer significantly reduces fluid handling requirements and hence energy
consumption as well as boosting recovery. Ithaca Energy, operator of the
Captain field in the Inner Moray Firth, has enjoyed consistent success in
applying polymer flood to the highly analogous Captain field. Following the
recent farm-down of Pilot, the project is now under the stewardship of Ping
Petroleum UK PLC ("Ping") and is intended to be amongst the lowest carbon
emitting oil production facilities in the world.
Ping is progressing a low-emissions, phased, field development plan for Pilot
based upon a polymer flood of the reservoir, a Floating Production Storage and
Offloading vessel (FPSO) and provision of power from a floating wind turbine
or a local wind farm.
Orcadian has an 18.75% fully carried interest in licence P2244 (block 21/27a)
and a 100% interest in licence P2482 (blocks 28/2a and 28/3a). Ping is
operator of P2244 and the Pilot development project.
Orcadian was awarded three licences in the 33(rd) round. The Mid-North Sea
High licence, P2650, contains shallow gas leads. Orcadian applied in
partnership with Triangle Energy, an Australian listed energy company.
Orcadian is licence administrator and holds 50% of the offered licence. The
Mid-North Sea High licence covers blocks 29/16, 29/17, 29/18, 29/19, 29/21,
29/22, 29/23, 29/27 and 29/28.
The Fynn licence, P2634, contains a very substantial heavy oil discovery.
About 88% of the resource on a best technical case is estimated to lie within
the area of the offered licence. Orcadian has a 50% working interest in the
Fynn licence which is operated by the Parkmead Group. The Fynn licence covers
blocks 14/15a, 14/20d and 15/11a.
The SNS licence, P2680, 50% Orcadian on completion of a proposed transaction,
contains the Earlham discovery, a low-calorie gas discovery with 114bcf of
methane resources on a P50 basis, the Clover prospect which has P50
prospective resources of 153bcf, and the decommissioned Orwell field which has
redevelopment potential, alongside a number of smaller prospects. The Marine
Low Carbon Power Company Ltd, an affiliate of IPC is intended to own the other
50% of P2680 and will carry Orcadian to first gas.
Chairman and CEO's Statement
The year to 30 June 2024 has been an important period in the development of
Orcadian. We closed on the farm-out of an interest in our Pilot discovery on
the 31 March 2024 and welcomed Ping Petroleum UK plc ("Ping") on board as
operator of the Pilot field. We retain a carried 18.75% interest in the field,
and we look forward to Ping progressing the development project once the
government's consultation on environmental impact statements is complete and
the process for development project approval becomes clear and probably most
important of all, the government consultation on the successor fiscal regime
post-EPL in 2030 clarifies the future fiscal framework.
In the meantime, Ping is focussed on the sub-surface aspects on the
development which provides the foundation of any field development plan. We
are delighted to have Ping on board and look forward to both fiscal and
environmental policy clarity so that the project can proceed.
In February 2024 we were awarded two Central North Sea licences and in May
2024 the NSTA announced a third tranche of licences which resulted in the
award of our first Southern North Sea licence. These awards were the direct
result of us following our strategy.
Our strategy stands on three legs.
Firstly we focus on discovered and appraised fields which lack a development
plan. Below is a representation of the process oil companies follow to
progress leads into prospects, prospects into exploration wells, and
discoveries into development projects. This process often takes unexpected
turns so that projects get recycled or even discarded. We love those discards.
We can make something of them, and indeed our success in farming out the Pilot
project proves the model works.
So, we build the portfolio by licensing discoveries. We prefer a fully
appraised field, that calls for innovation, to a great exploration prospect,
but we don't ignore great prospects. We will aim to farm out any exploration
wells in our work programmes as exploring with equity rather than cash flow is
folly.
Secondly, we always look for high quality reservoir rocks and aim to innovate
around tricky fluids. We have a big focus on viscous oils and have built up
considerable expertise in polymer flooding which can enable high recovery
factors and low emissions per barrel of oil produced.
We are also content that we can handle high inerts and low-pressure gas. A big
part of that is down to our development strategy for such discoveries. In
short, we aim to bring the power station to the field rather than take the gas
to the power station. That allows us to handle quite high levels of inert
gases without significant or expensive treatment systems. For low pressure
gas, as shallow gas almost always is, we don't have to compress the gas to
such a high pressure which saves energy and emissions.
Our deal with the Marine Low Carbon Power Company Ltd ("MLCP") documented in a
heads of agreement, announced on 12 December 2024, provides a clear pathway to
development for the Earlham discovery. We are delighted to be working with
MLCP to develop Earlham and Orwell and to have a second project where we are
carried to first production. The Earlham field will be developed with a couple
of horizontal wells and a downdip carbon dioxide injector. Orwell is likely a
single subsea well tied back to the Earlham WHP. The Earlham WHP will be
bridge linked to a Mobile Offshore Generating Unit ("MOGU") which will
generate up to 300MW of low-carbon power. Carbon dioxide separated from the
well fluids and captured from the generator exhausts will be re-injected
down-dip from Earlham. All of the above development planning is subject to
discussions with NSTA.
Finally, we focus on what we call the post-transition hydrocarbons: gas and
heavy oils with the potential to create more than just combustion products.
The Fynn discovery that we share with Parkmead epitomises a post-transition
hydrocarbon.
In 1977 BP concluded that in a sample of Fynn oil "the atmospheric residue
> 371ºC accounted for some 88.5% wt. of the crude, but was too aromatic to
be of much commercial use". Roll forward to 2022 and Digital Refining in the
Q4 magazine stated that "a highly aromatic feedstock must be used to produce
premium-quality, readily graphitisable needle coke". So Fynn could be a great
feedstock to make needle coke.
But of what use is this needle coke? It turns out that one of the "recent uses
[of needle coke] include the production of synthetic graphite for lithium-ion
battery anode material in electric vehicles EVs." So, production from Fynn
will not inevitably be combusted as Lord Leggatt asserted in the Finch
judgement. We estimate about 20% by mass will end up in the anodes of electric
car batteries.
So the awards in the 33(rd) round were completely consistent with our strategy
and we have been delighted with the progress we have been able to make in
farming out an interest in the Earlham discovery.
We have agreed to sell a 50% interest in a sub-area of Licence P2680 to The
Marine Low Carbon Power Company Ltd ("MLCP"). MLCP plan to develop Earlham and
Orwell to supply the first of MLCP's Mobile Offshore Generating Units
("MOGU"), which will in turn supply carbon free energy to MLCP customers and
to IPC New World Energy Ltd's ("IPCNWE") battery projects.
MLCP is a joint venture company owned by IPCNWE and Richmond Offshore Energy
Ltd. IPCNWE is part of the Independent Power Corporation PLC ("IPC") group
and is the largest developer of consented battery projects in the UK with 5.5
GW of capacity under development. MLCP has designed, in conjunction with GE
Vernova and Capsol Technologies of Norway, a 300 MW offshore power facility
with integrated carbon dioxide capture and distributed carbon dioxide storage
offshore in a reservoir, most likely within the Licence P2680 sub-area.
Shell Loan
As part of the overall arrangements IPC has acquired the loan advanced by
Shell International Trading and Shipping Company Limited ("Shell") to Orcadian
Energy (CNS) Ltd in August 2019. The amount owed to IPC and IPCNWE is US $1.5
million. IPCNWE has agreed to convert US $1.4 million of this into funding
part of the consideration for MLCP to acquire its 50 per cent stake in Earlham
and Orwell. The balance of US $100,000 will be exchanged for an Orcadian
loan note, dated 30 June 2026, and convertible into approximately 312,500
Ordinary shares in Orcadian at a conversion price of 25 pence per share,
Orcadian may require conversion of the loan note into Ordinary shares if
Orcadian's volume weighted average share price ("VWAP") in each of five
consecutive trading days is 35p or above.
Farm-out Terms
Orcadian has agreed the key terms of a farm-out agreement for a sub-area of
Licence P2680 with MLCP. The principal terms of the agreements have been
documented in a non-binding Heads of Agreement which defines the entire suite
of agreements that need to be finalised.
It is intended that the farm-out will be implemented as follows:
· MLCP will acquire from Orcadian a 50% interest in the Earlham
discovery and Orwell field redevelopment by acquiring a 50% interest in a
sub-area of Licence P2680, comprising blocks 50/26 and 49/30b.
· Orcadian will act as Licence Administrator through the Assessment
Phase and MLCP will become Licence Administrator for the Authorisation phase
which includes the preparation and submission of the Field Development Plan
("FDP") and the Environmental Statement.
· It is intended, subject to approval from the North Sea Transition
Authority ("NSTA approval"), that on FDP approval MLCP will become Licence
Operator for the project execution and operating phases of the project.
· This transaction is subject to NSTA approval and will be documented in
a fully termed Sale and Purchase Agreement and a Joint Operating Agreement;
· The purchase price of 50% of the sub-area of Licence P2680 has been
agreed to be US $2.2m, with US $1.4m payable on completion and two tranches of
US $400,000 payable on achieving fuel gas quality production rates in excess
of 50 MMscf/day for a 48 hour period, both 30 days after first gas and 120
days after first gas.
· Together with the convertible loan arrangements noted above, the
payment upon completion will offset in full the amounts owed by Orcadian to
IPC and IPCNWE;
· MLCP will carry Orcadian's share of expenditure through to first gas
on the development of Earlham and Orwell;
· The carry will be repayable through MLCP having an enhanced revenue
interest of 80% until the carry is fully repaid.
As a consequence of these arrangements, Orcadian will retain a 50% carried
interest in the development of Earlham and the redevelopment of Orwell, and
its debts to Shell and IPCNWE will be paid in full.
This is a provisional agreement and there can be no guarantee that the
transactions will all complete. Any deal is subject to, amongst other matters,
completion of due diligence, negotiation of detailed documentation, and
various regulatory consents as well as the Board approvals of MLCP and
Orcadian.
Financial Results
The Group incurred a loss for the year to 30 June 2024 of £938,471 (30 June
2023 - loss of £1,184,954).
The loss mainly arose from salaries, consulting and professional fees along
with general administration expenses, the impairment of intangible assets and
new business development.
Cash used in operations totalled £489,787 (30 June 2023 - £599,759). As at
30 June 2024, the Group had a cash balance of £214,977 (30 June 2023 -
£109,705). At the date of this announcement, the Group's cash balance was
£75,919.30.
Oil Price Outlook
Given the results of the US Presidential election and President Trump's
commitment to lower energy prices, we can expect that geology, not politics,
will be the constraint on US production which underpins the world's ability
to supply energy. Predicting oil and gas prices is futile, they will either go
up or down and most likely will go up and down. However, we can be confident
that the International Energy Agency ("IEA") will be surprised by the strength
of demand and OPEC will be surprised by the strength of supply, averaging
these two organisations projections is not a bad way to divine the future.
UK Oil and Gas Sector
The UKCS oil and gas sector has had a Field Development Plan ("FDP") approved
since the Victory gas field in January 2024 and the Rosebank oil field in
September 2023. The tally of a solitary field development plan approval in
2024 seems unlikely to be surpassed by the end of 2024. The year 2021,
blighted by COVID, had the same score, but we have to go back to the dawn of
the North Sea in 1975, when the Forties development was approved, to find
another occurrence of such a low number of FDP approvals.
The reason is clear - the government has enacted punitive taxes which limit
returns and the regulatory framework has been subjected to an incessant stream
of lawfare which culminated in the Finch ruling requiring every Environmental
Impact Assessment ("EIA") to take into account Scope 3 emissions.
From Orcadian's perspective, the Finch ruling does not raise concerns for us.
Quantifying the impact of Scope 3 emissions is a reasonable step, as their
effect is expected to be negligible. As an example, the Rosebank field will
produce about 300 MMbbl of oil, that when combusted will produce about 134
million tonnes of carbon dioxide, which will increase the carbon dioxide
concentration in the atmosphere by just under 0.02 parts per million, assuming
nature absorbs nothing - a very unlikely assumption given about half of the
carbon dioxide emitted from fossil fuels since the industrial revolution has
been so absorbed. Using the IPCC central estimate for the impact on global
temperatures of a doubling of the atmospheric carbon dioxide concentration -
3ºC - that increase in carbon dioxide concentration could increase global
temperature by less than two ten thousandths of a degree, far below the level
that any creature could perceive.
This is why action on climate change needs global agreement on actions to
reduce demand for fossil fuel energy. Constraining supply can only impact
demand by increasing the price of energy; increasing the price of energy will
undermine support for any climate action. So, politicians and engineers alike
need to focus on delivering low-carbon energy for the lowest cost possible.
That is why our Earlham project is so important. It will deliver low to no
carbon energy at an affordable cost and on a dispatchable basis. We hope to
learn from that project so that we can implement repeat projects at lower
costs.
Nevertheless, because of the Finch ruling both Shell's Jackdaw project and
Equinor's Rosebank project will have to be re-approved, and the government
will have to re-issue guidance on how EIA documents are prepared.
The industry awaits that guidance which is expected in the Spring. However,
the industry is also awaiting guidance on the successor fiscal regime from
2030 onwards. From FDP approval to first oil is typically at least three
years, the earliest we might see a new project FDP approved is late 2025 or
2026. What that means is that by far the bulk of the revenue from any new
project of substance will be taxed under the successor regime. So, operators'
hands are tied, they need regulatory clarity, and they need fiscal clarity.
From Orcadian's perspective, the Finch ruling is not a cause for concern.
There is no harm in quantifying the impact of Scope 3 emissions, as their
effect is expected to be negligible. As to emissions in the production process
we are confident that the right approach is to minimise those and to eliminate
the bulk of the transportation emissions by producing oil and gas in our own
backyard.
However, we will have to wait and see how government intends to tax the
industry in the longer term, and we hope for a balance between ensuring a fair
return for investors and maximising government revenues. It is probably true
to say that the current fiscal regime is demonstrating exactly how the Laffer
curve works in practice, we are on the wrong side of the Laffer curve, and in
fact government revenues will rise with a more attractive fiscal regime. We
are confident that sense will prevail, and the industry will have a bright
future in the UK. But we will all have to wait for the outcome of these
consultations before any company commits to a new development project of scale
and we are optimistic that Ping will move forward with its North Sea
development portfolio once the mists have cleared in Spring.
However, despite all the gloom we see great opportunity in the UK. The
pendulum always swings too far and this time taxes have gone too high, and the
hurdles development projects have to clear have become too many. Things will
change and there is hope that the companies that stick by the UK will
eventually prosper.
Business Outlook
Our near-term objectives are to complete the Earlham farm-out, and to secure
producing acquisition opportunities for HALO Offshore UK ltd ("HALO"), the
company we will jointly own with IPC.
Shareholders may have been surprised by this acquisition, but it has an
interesting fiscal history and we and our partners at IPC see great
opportunities to acquire producing licence interests which is why IPC is
funding HALO to pursue such opportunities. There are a good number of
companies looking to downsize or exit their UK portfolios, and not so many in
a position to acquire fields. We look forward to updating shareholders again
in due course.
Joseph Darby, Chairman, and Stephen Brown, CEO
13 December 2024
INDEPENDENT AUDITOR'S REPORT TO THE DIRECTOR'S OF ORCADIAN ENERGY PLC
Opinion
We have audited the financial statements of Orcadian Energy plc (the 'parent
company') and its subsidiaries (the 'group') for the year ended 30 June 2024
which comprise the Consolidated Statement of Comprehensive Income, the
Consolidated and Parent Company Statements of Financial Position, the
Consolidated and Parent Company Statements of Changes in Equity, the
Consolidated and Parent Company Statements of Cash flows and notes to the
financial statements, including significant accounting policies. The financial
reporting framework that has been applied in their preparation is applicable
law and UK-adopted international accounting standards and as regards the
parent company financial statements, as applied in accordance with the
provisions of the Companies Act 2006.
In our opinion:
· the financial statements give a true and fair view of the state of the
group's and of the parent company's affairs as at 30 June 2024 and of the
group's loss for the year then ended;
· the group financial statements have been properly prepared in
accordance with UK-adopted international accounting standards;
· the parent company financial statements have been properly prepared in
accordance with UK-adopted international accounting standards and as applied
in accordance with the provisions of the Companies Act 2006; and
· the financial statements have been prepared in accordance with the
requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor's responsibilities for the
audit of the financial statements section of our report. We are independent of
the company in accordance with the ethical requirements that are relevant to
our audit of the financial statements in the UK, including the FRC's Ethical
Standard as applied to listed entities, and we have fulfilled our other
ethical responsibilities in accordance with these requirements. We believe
that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Material uncertainty related to going concern
We draw attention to note 2.3 in the financial statements, which indicates
that the group and company are reliant on raising finance within the 12 months
following the date of approval of these financial statements in order to meet
its working capital requirements and continue to fund further exploration
expenditure over this period. As stated in note 2.3, these events or
conditions, along with the other matters as set forth that note, indicate that
a material uncertainty exists that may cast significant doubt on the Group and
Parent company's ability to continue as a going concern. Our opinion is not
modified in respect of this matter.
In auditing the financial statements, we have concluded that the director's
use of the going concern basis of accounting in the preparation of the
financial statements is appropriate. Our evaluation of the directors'
assessment of the Group and Company's ability to continue to adopt the going
concern basis of accounting included:
· Reviewing the accuracy of historical forecasts by comparison to the
actual results in the year to assess the accuracy of management's forecasting
process;
· Assessing and challenging the key inputs and assumptions in the
underlying cashflow forecasts prepared by management covering the going
concern period; and
· Discussing strategies regarding future availability of funding and
assessing the likelihood of the required funds being successfully raised by
considering the funds required and the Group's and Company's ability to raise
such funds. This has included obtaining and reviewing key terms of various
agreements entered into after the year end.
Our responsibilities and the responsibilities of the directors with respect to
going concern are described in the relevant sections of this report.
Our application of materiality
The scope of our audit was influenced by our application of materiality. The
quantitative and qualitative thresholds for materiality determine the scope of
our audit and the nature, timing and extent of our audit procedures. We also
determine a level of performance materiality which we use to assess the extent
of testing needed to reduce to an appropriately low level the probability that
the aggregate of uncorrected and undetected misstatements exceeds materiality
for the financial statements as a whole. In determining our overall audit
strategy, we assessed the level of uncorrected misstatements that would be
material for the financial statements as a whole.
Materiality for the consolidated financial statements was set as £79,000
(2023: £80,000) based upon net liabilities (2023: gross assets). There has
been a change in the benchmark in the current year in comparison to the prior
year. Given the stage of development of the group, at present the capitalised
exploration costs and borrowings of the group are considered to be the area of
most interest to users of the financial statements. Performance materiality
and the triviality threshold for the consolidated financial statements were
set at £55,300 (2023: £56,000) and £3,950 (2023: £4,000), respectively, a
level considered appropriate given our accumulated knowledge in respect of the
group and the assessed level of risk.
Materiality for the parent company was set as £78,000 (2023: £79,000) based
upon gross assets
(2023: gross assets). Gross assets were considered to be an appropriate basis
due to the fact that the most significant balance within the parent company is
the investment in the subsidiary, and the assets within this subsidiary will
determine the future success of the group. Performance materiality and the
triviality threshold for the company were set at £54,600 (2023: £55,300) and
£3,900 (2023: £3,950), respectively, a level considered appropriate given
our accumulated knowledge in respect of the group and the assessed level of
risk.
Component materiality applied to the subsidiary undertaking was £78,000
(2023: £79,000) based upon net liabilities (2023: gross assets). The reason
for this change in basis is noted above. Performance materiality and the
triviality threshold were set at £54,600 (2023: £55,300) and £3,900 (2023:
£3,950), respectively, for the same reasons as for the parent company.
We also agreed to report any other differences below that threshold that we
believe warranted reporting on qualitative grounds.
Our approach to the audit
In designing our audit, we determined materiality and assessed the risks of
material misstatement in the financial statements. In particular we looked at
areas involving significant accounting estimates and judgements by the
directors and considered future events that are inherently uncertain, such as
the recoverable value of the capitalised exploration expenditure within the
group and the recoverable value of the parent company's investment in the
subsidiary. We also addressed the risk of management override of internal
controls, including among other matters consideration of whether there was
evidence of bias that represented a risk of material misstatement due to
fraud.
A full scope audit was performed on the complete financial information of both
components of the group by us.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were
of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identified, including those
which had the greatest effect on: the overall audit strategy, the allocation
of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters. In addition to the matter
described in the Material uncertainty related to going concern section we have
determined the matters described below to be the key audit matters to be
communicated in our report.
Key Audit Matter How our scope addressed this matter
Carrying value and recoverability of intangible assets (refer to Notes 3 and
12)
As at 30 June 2024 and 30 June 2023 the carrying value of intangible assets Our work in this area included but was not limited to:
totalled £4,412,453 and £3,871,362, respectively. The intangible assets
relate to capitalised exploration and evaluation costs.
· Obtaining confirmation that the group has good title to the applicable
exploration licences, including any new licences or renewals obtained during
These capitalised costs fall within the scope of IFRS 6 Exploration for and the year;
evaluation of mineral resources and there is a risk that items have not been
capitalised during the year in accordance with this Standard and with the
group's accounting policy.
· Reviewing management's assessment of impairment and considering
whether there are any indicators of impairment as per IFRS 6;
The carrying value and recoverability of these assets is considered to be a
key audit matter due to the level of estimation and judgement required in
assessing whether or not these material assets are recoverable. · Reviewing the calculation of the impairment charge recorded during the
year, and understanding the circumstances leading to the impairment. Ensuring
this has been recorded at an appropriate amount;
On 2 April 2024, the Group completed a Sale and Purchase Agreement ('SPA') to
farm out of 81.25% of its 100% interest in the P2244 licence, which contains
the Pilot field. Following this, during the year, a joint operating agreement · Obtaining and reviewing key terms included within the SPA relating to
('JOA') was entered into by the two parties for the purposes of regulating the farm out of the 81.25% interest in licence P2244. Obtaining and reviewing
operations under the licence and of determining respective rights and key terms included within the JOA between the two participants to the licence
obligations of the parties. in order to conclude on the appropriateness of the group's accounting policy
and the accounting treatment and disclosures surrounding the transaction;
In the current year, the P2516 license has been returned and as a result the
Group recognised impairment charge amounting to £186,158 to bring the · Testing a sample of additions to ensure costs have been capitalised in
carrying value of the licences to £Nil. accordance with IFRS 6; and
· Reviewing disclosures in the financial statements to ensure that they
are in line with IFRS 6.
Following the farm out agreement relating to the key licence of the Group,
P2244, the group has adopted an appropriate accounting policy for the
treatment of this arrangement as disclosed in Note 3.
There are a number of judgements made by management in concluding on the
recoverability of the remaining intangible assets of £4,271,877 relating to
licence P2244 as at 30 June 2024. These judgements are disclosed in Note 3.
Should the operator under the JOA not continue to fund development activities
in accordance with the terms of the agreement, this could result in an
impairment to these assets.
Carrying value of investment in the subsidiary (refer to Note 15)
As at 30 June 2024 and 30 June 2023 the carrying value of investment in the Our work in this area included:
subsidiary totalled £5,968,544 and £5,404,044, respectively, within the
parent company Statement of Financial Position. The investment in the · Verifying ownership of investment held;
subsidiary relates to the initial cost of investment and subsequent amounts
advanced to the subsidiary that have been capitalised.
The carrying value of the investment is considered to be a key audit matter · Obtaining a list of additions in the year. Vouching all additions to
due to the material nature of the balance and the level of management bank and considering whether these advances are appropriate for
estimation and judgement required in assessing whether the investment is capitalisation;
impaired.
· Obtaining and reviewing the impairment assessment prepared by
management and challenging all key assumptions included therein; and
· Considering whether there is evidence of impairment in accordance with
IAS 36 Impairment of Assets, through reference to internal and external
indicators. Considering the results of procedures performed in respect of the
carrying value of exploration and evaluation assets as detailed above, given
that these are the underlying assets from which the company hopes to recover
the value of its investment.
Other information
The other information comprises the information included in the annual report,
other than the financial statements and our auditor's report thereon. The
directors are responsible for the other information contained within the
annual report. Our opinion on the financial statements does not cover the
other information and, except to the extent otherwise explicitly stated in our
report, we do not express any form of assurance conclusion thereon. Our
responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the course of the audit, or otherwise
appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to
determine whether this gives rise to a material misstatement in the financial
statements themselves. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we are
required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
· the information given in the strategic report and the directors'
report for the financial year for which the financial statements are prepared
is consistent with the financial statements; and
· the strategic report and the directors' report have been prepared in
accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the company and its
environment obtained in the course of the audit, we have not identified
material misstatements in the strategic report or the directors' report.
We have nothing to report in respect of the following matters in relation to
which the Companies Act 2006 requires us to report to you if, in our opinion:
· adequate accounting records have not been kept, or returns adequate
for our audit have not been received from branches not visited by us; or
· the financial statements are not in agreement with the accounting
records and returns; or
· certain disclosures of directors' remuneration specified by law are
not made; or
· we have not received all the information and explanations we require
for our audit.
Responsibilities of directors
As explained more fully in the Statement of Directors' Responsibilities, the
directors are responsible for the preparation of the financial statements and
for being satisfied that they give a true and fair view, and for such internal
control as the directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the directors are responsible for
assessing the company's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the company or
to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and
regulations. We design procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect of irregularities,
including fraud. The extent to which our procedures are capable of detecting
irregularities, including fraud is detailed below:
· We obtained an understanding of the company and the sector in which it
operates to identify laws and regulations that could reasonably be expected to
have a direct effect on the financial statements. We obtained our
understanding in this regard through discussions with management, industry
research, application of cumulative audit knowledge and experience of the
sector.
· We determined the principal laws and regulations relevant to the
company in this regard to be those arising from UK Company Law, local
environmental laws, rules applicable to issuers of the AIM Market and
UK-adopted international accounting standards.
· We designed our audit procedures to ensure the audit team considered
whether there were any indications of non-compliance by the company with those
laws and regulations. These procedures included, but were not limited to:
o Discussion with management regarding compliance with laws and regulations
by the parent company and its subsidiary;
o Reviewing board minutes;
o A review of legal expenses incurred in the year; and
o Review of regulatory news announcements during the year.
· We also identified the risks of material misstatement of the financial
statements due to fraud. We considered, in addition to the non-rebuttable
presumption of a risk of fraud arising from management override of controls,
that that the recoverable value of the capitalised exploration expenditure and
the investment in subsidiaries were areas susceptible to fraud and we
addressed this by challenging the assumptions and judgements made by
management when auditing these significant accounting estimates as disclosed
in the Key Audit Matters section above.
· As in all of our audits, we addressed the risk of fraud arising from
management override of controls by performing audit procedures which included,
but were not limited to: the testing of journals; reviewing accounting
estimates for evidence of bias; and evaluating the business rationale of any
significant transactions that are unusual or outside the normal course of
business.
Because of the inherent limitations of an audit, there is a risk that we will
not detect all irregularities, including those leading to a material
misstatement in the financial statements or non-compliance with regulation.
This risk increases the more that compliance with a law or regulation is
removed from the events and transactions reflected in the financial
statements, as we will be less likely to become aware of instances of
non-compliance. The risk is also greater regarding irregularities occurring
due to fraud rather than error, as fraud involves intentional concealment,
forgery, collusion, omission or misrepresentation.
A further description of our responsibilities for the audit of the financial
statements is located on the Financial Reporting Council's website at:
www.frc.org.uk/auditorsresponsibilities
(http://www.frc.org.uk/auditorsresponsibilities) . This description forms part
of our auditor's report.
Use of our report
This report is made solely to the company's members, as a body, in accordance
with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the company's members those matters we
are required to state to them in an auditor's report and for no other purpose.
To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone, other than the company and the company's members as
a body, for our audit work, for this report, or for the opinions we have
formed.
Imogen Massey (Senior Statutory Auditor)
15 Westferry Circus
For and on behalf of PKF Littlejohn LLP
Canary Wharf
Statutory Auditor
London E14 4HD
13 December 2024
CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS
FOR THE YEAR ENDED 30 JUNE 2024
2024 2023
Note £ £
Revenue - -
Administrative expenses 4 (610,940) (671,327)
Pre-acquisition licence expenses (40,071) (129,867)
Impairment of intangible assets 12 (186,158) (356,532)
Operating Loss (837,169) (1,157,726)
Net finance costs 8 (101,302) (77,228)
Other income 6 - 50,000
Loss before tax (938,471) (1,184,954)
Taxation 9 - -
Loss for the year (938,471) (1,184,954)
Other comprehensive income:
Items that will or may be reclassified to profit or loss:
Other comprehensive income - -
Total comprehensive income (938,471) (1,184,954)
Earnings per share (basic and diluted) - pence 10
(1.26) (1.72)
All operations are continuing.
The notes on pages 50 to 72 form part of these financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2024
2024 2023
Note £ £
Non-current assets
Property, plant and equipment 11 1,718 2,508
Intangible assets 12 4,412,453 3,871,362
4,414,171 3,873,870
Current assets
Trade and other receivables 13 19,230 48,828
Cash and cash equivalents 14 214,977 109,705
234,207 158,533
Total assets 4,648,378 4,032,403
Non-current liabilities
Borrowings 16 - -
- -
Current liabilities
Trade and other payables 17 (1,247,235) (567,629)
Borrowings 16 (1,095,679) (991,339)
(2,342,914) (1,558,968)
Total liabilities (2,342,914) (1,558,968)
Net assets 2,305,464 2,473,435
18 79,000 72,512
Equity
Ordinary share capital
Share premium reserve 18 6,080,544 5,316,532
Share warrants reserve 18 15,000 15,000
Other reserve 18 (38,848) (38,848)
Retained earnings (3,830,232) (2,891,761)
Total equity 2,305,464 2,473,435
The consolidated Financial Statements of Orcadian Energy PLC were approved by
the Board of Directors and authorised for issue on 13 December 2024.
Signed on behalf of the Board of Directors by:
Alan Hume
Director
The notes on pages 50 to 72 form part of these financial statements.
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2024
2024 2023
Note £ £
Non-current assets
Investment in subsidiary 15 5,968,544 5,404,044
5,968,544 5,404,044
Current assets
Trade and other receivables 13 - -
Cash and cash equivalents 14 212,597 2,779
- -
Total assets 6,181,141 5,406,823
Non-current liabilities
Borrowings 16 - -
- -
Current liabilities
Trade and other payables 17 - -
- -
Total liabilities - -
Net assets 6,181,141 5,406,823
18 79,000 72,512
Equity
Ordinary share capital
Share premium reserve 18 6,080,544 5,316,532
Share warrants reserve 18 15,000 15,000
Retained earnings 6,597 2,779
Total equity 6,181,141 5,406,823
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 profit attributable to
Orcadian Energy PLC for the year to 30 June 2024 was £3,818 which is
attributable to bank interest income (2023: £2,779), 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 13 December 2024.
Signed on behalf of the Board of Directors by:
Alan Hume
Director
The notes on pages 50 to 72 form part of these financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2024
Ordinary Share capital Share premium Share warrants reserve Other reserve Retained earnings Total
reserve Shares to be issued
Note £ £ £ £ £ £ £
Balance as at 1 July 2022 63,755 3,890,089 15,000 901,200 (38,848) (1,706,807) 3,124,389
Loss for the year and total comprehensive income - - (1,184,954) (1,184,954)
- - -
Issue of shares 18 8,757 1,581,243 - (1,000,000) - - 590,000
Share issue costs 18 - (154,800) - 98,800 - - (56,000)
Total transactions with owners 8,757 1,426,443 (901,200) - - 534,000
Balance as at 30 June 2023 72,512 5,316,532 15,000 - (38,848) (2,891,761) 2,473,435
Loss for the year and total comprehensive income - - (938,471) (938,471)
- - -
Issue of shares 18 6,488 843,512 - - - - 850,000
Share issue costs 18 - (79,500) - - - - (79,500)
- - - - -
Total transactions with owners 6,488 764,012 - - - 770,500
Balance as at 30 June 2024 79,000 6,080,544 15,000 - (38,848) (3,830,232) 2,305,464
Refer to note 18 for a description of the nature and purpose of each reserve
within equity.
The notes on pages 50 to 72 form part of these financial statements.
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2024
Ordinary Share capital Share premium Share warrants reserve Retained earnings Total
reserve Shares to be issued
Note £ £ £ £ £ £
Balance as at 1 July 2022 63,755 3,890,089 15,000 901,200 - 4,870,044
Profit for the year and total comprehensive income - - 2,779 2,779
- -
Issue of shares 18 8,757 1,581,243 - (1,000,000) - 590,000
Share issue costs 18 - (154,800) - 98,800 - (56,000)
Total transactions with owners - 1,426,443 - (901,200) - 534,000
Balance as at 30 June 2023 72,512 5,316,532 15,000 - 2,779 5,406,823
Profit for the year and total comprehensive income - - 3,818 3,818
- -
Issue of shares 18 6,488 843,512 - - - 850,000
Share issue costs 18 - (79,500) - - - (79,500)
- - - -
Total transactions with owners 6,488 764,012 - - 770,500
Balance as at 30 June 2024 79,000 6,080,544 15,000 - 6,597 6,181,141
Refer to note 18 for a description of the nature and purpose of each reserve
within equity.
The notes on pages 50 to 72 form part of these financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2024
2024 2023
Note £ £
Cash flows from operating activities
Loss before tax for the year (938,471) (1,184,954)
Adjustments for:
Depreciation 11 1,754 1,822
Unrealised foreign exchange (gain) (780) (44,852)
Impairment of intangible assets 12 186,158 356,532
Interest received 8 (3,818) (2,779)
Finance costs in the year 8 105,120 80,007
Decrease in trade and other receivables 13 29,598 7,001
Increase in trade and other payables 17 130,652 189,064
Cash used in from operations (489,787) (598,159)
Income taxes received - -
Net cash flows from operating activities (489,787) (598,159)
Investing activities
Interest received 8 3,818 2,779
Farm-out proceeds 12 332,349 -
Purchases of property, plant and equipment 11 (964) (916)
Purchases of exploration and evaluation assets 12 (510,644) (1,000,638)
Net cash used in investing activities (175,441) (998,775)
Financing activities
Proceeds from issue of ordinary share capital 18 850,000 1,590,000
Share issue costs paid 18 (79,500) (154,800)
Net cash provided by financing activities 770,500 1,435,200
Net increase / (decrease) in cash and cash equivalents 105,272 (161,734)
Cash and cash equivalents at beginning of period 14 109,705 271,439
Cash and cash equivalents and end of period 14 214,977 109,705
There were no significant non-cash transactions in the year to 30 June 2024.
The notes on pages 50 to 72 form part of these financial
statements.
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2024
2024 2023
Note £ £
Cash flows from operating activities
Profit for the year 3,818 2,779
Adjustments for:
Depreciation 11 - -
Interest income (3,818) (2,779)
Decrease in trade and other receivables 13 - -
Increase in trade and other payables 17 - -
Cash generated from operations - -
Income taxes paid - -
Net cash flows from operating activities - -
Investing activities
Interest received 3,818 2,779
Funds advanced to subsidiary 15 (564,500) (1,435,200)
Purchases of exploration and evaluation assets 12 - -
Net cash used in investing activities (560,682) (1,432,421)
Financing activities
Proceeds from issue of ordinary share capital 18 850,000 1,590,000
Share issue costs paid 18 (79,500) (154,800)
Net cash provided by financing activities 770,500 1,435,200
Net increase in cash and cash equivalents 209,818 2,779
Cash and cash equivalents at beginning of period 14 2,779 -
Cash and cash equivalents and end of period 14 212,597 2,779
There were no significant non-cash transactions in the year to 30 June 2024.
The notes on pages 50 to 72 form part of these financial statements.
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