REG - Prospex Energy PLC - Final Results
26/05/2023 07:00
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RNS Number : 7023A Prospex Energy PLC 26 May 2023
Prospex Energy PLC / Index: AIM / Epic: PXEN / Sector: Oil and Gas
26 May 2023
Prospex Energy PLC
('Prospex' or the 'Company')
Final Results for Year ended 31 December 2022
and
Annual General Meeting
Prospex Energy plc, the AIM quoted investment company, is pleased to announce
its audited Final Results for the year ended 31 December 2022 and Notice of
Annual General Meeting ("AGM") on 20 June 2023.
Corporate and Financial Highlights (as at 31 December 2022)
· Total Assets of £16,064,640 from £6,697,305 in 2021, an increase of
240% reflecting the after-tax effect of the revaluation of the Company's
working interest in the Podere Gallina licence in Italy increasing to 37% from
17% which completed in April 2022.
· The combined value of these equity investments, current and
non-current loans is £21,561,316 up from £8,726,484 in 2021 a 221% increase.
· Successfully completed a placing of £2,454,800 in February at 3.5p
per share with no warrants.
· Raised debt/equity hybrid financing of £2,370,000 in aggregate from
the issue of convertible loan notes convertible at 4.25p per share and 5.5p
per share to existing and new investors, with participation of all the
directors of the Company.
· Hybrid financing enabled Prospex to fund fully its 37% share in the
Selva field development to the point of first gas then scheduled early in the
second quarter of 2023.
· Cash and cash equivalents at the year-end of £1,482,762 (2021:
£220,060).
Operational Highlights
· Selva Field
o During the year development work started at the Selva field in the Po
Valley region of northern Italy, operated by Po Valley Energy (ASX:PVE) ("Po
Valley" or "the operator").
o In January 2022, Po Valley, started and fully funded the installation of
the background seismic monitoring network to be operational ahead of the 12
months required by the regulators.
o In June 2022, the penultimate approval for the production concession at
the Podere Gallina licence was granted by the Emilia Romagna Regional
Council. This local government approval was a prerequisite for Italy's MITE
to grant the Final Production Concession at Selva Malvezzi.
o On 29 July 2022, full production concession approval was granted by the
MITE. In August 2022, contracts were awarded, and construction commenced of
the automated gas plant facilities, the installation of a 1,000 metre
four-inch pipeline and the connection to the national gas grid network
operated by SNAM.
o In September 2022, Po Valley completed the land acquisition required to
connect the pipeline from the suspended well at Selva Malvezzi to the SNAM gas
grid and purchased the required 1km of 4-inch steel pipe.
o In November 2022, final approvals were received to commence field
development works at the Selva Gas Field and gas plant construction and
pipeline installation started.
· El Romeral
o Operations continued at El Romeral in Andalucía, southern Spain through
the Company's investment in Tarba Energía, the operator.
o Gross monthly revenue from electricity generation at the El Romeral power
plant peaked at over €500,000 in March 2022.
o In March 2022, Tarba completed the El Romeral plant automation project
which started in December 2021 allowing 24/7 production operations.
o On 28 April 2022, Tarba completed the repayment of its outstanding loans
plus interest to the two co-owners Prospex Energy and Warrego Energy.
o In June 2022, Tarba commenced the first of two solar installation projects
at El Romeral, 'Project Apollo' the installation of solar panels on the power
station roof. The second solar project 'Project Helios' which involves the
installation of a 4.9MW solar farm adjacent to the power plant was recommended
for an investment decision and front-end engineering and design ('FEED')
studies commenced.
o By August 2022 the El Romeral asset was generating healthy revenues with
daily electricity spot prices averaging more than €180/MWhr in the quarter
to 30 June 2022.
o In August 2022, the installation of 83 solar panels on the roof of the
power plant was completed. Project Apollo has an estimated return on
investment of 3 - 4 years.
o By December 2022, the reinterpretation of the reprocessed 2D seismic lines
across the El Romeral Production Concessions started in May 2022, was nearing
completion with the aim of optimising the top 5 drilling targets for the
permitting application process as requested by MITECO, the Spanish regulator.
Post period highlights
· In February 2023, a joint Gas Sales agreement was signed to offtake
and sell gas from the Selva field in Italy.
· In May 2023, the gas plant construction at Selva was completed and is
ready for commissioning. The connections to the gas grid operated by SNAM
are complete, enabling the delivery of gas to the Italian gas grid. With the
SNAM connection and transmission arrangements finalised, Po Valley Operations
has initiated the process of recovering €757,000 performance bond funds
(100% basis - €280,090 net to Prospex), previously deposited with SNAM.
· In April 2023, the Company strengthened the board of directors with
the appointment of Andrew Hay as a Non-Executive Director.
Notice of Annual General Meeting
The Company also gives notice that its AGM will be held at the offices of
Shakespeare Martineau LLP, 6th Floor 60 Gracechurch Street, London, United
Kingdom, EC3V 0HR at 11.00 a.m. on 20 June 2023.
The Financial Results for the year ended 31 December 2022 together with the
Notice of AGM will be available to download today from the Company's website
and will also be posted to shareholders on or around 26 May 2023.
Commenting on the results, Mark Routh, Prospex's CEO, said:
"I am pleased with these strong results that have laid the foundation for
Prospex to progress to the next level, with increased gas production imminent
from the Selva field in Italy. 2023 is set to be a truly transformational
year for the Company. We are continuously looking for ways to improve our
current investments and we have made advancements at our Spanish plant with
Project Helios which would increase output from the plant by up to 60%. With
the completion of the project expected to take less than 12 months, it is an
exciting time in Prospex's history.
"Looking ahead, I expect to be reporting on the organic growth of the
Company's assets with several future planned wells proceeding through the
permitting process. We are continually monitoring other prospects for any
potential opportunities to expand the business but will remain technically
rigorous in our selection of growth opportunities that we believe will only
benefit the Company.
"Prospex is in a strong operational position with an experienced team who
remain committed to increase shareholder value."
* * ENDS * *
For further information visit www.prospex.energy (http://www.prospex.energy)
or contact the following:
Mark Routh Prospex Energy PLC Tel: +44 (0) 20 7236 1177
Ritchie Balmer Strand Hanson Limited Tel: +44 (0) 20 7409 3494
Rory Murphy
Andrew Monk (Corporate Broking) VSA Capital Limited Tel: +44 (0) 20 3005 5000
Andrew Raca/Alex Cabral (Corporate Finance)
Colin Rowbury Novum Securities Limited Tel: +44 (0) 20 7399 9427
Jon Belliss
Susie Geliher St Brides Partners Limited Tel: +44 (0) 20 7236 1177
Ana Ribeiro
Notes
About Selva:
The Podere Gallina Licence is in the Po Valley region of northern Italy. The
licence contains the currently shut‑in Selva gas-field as well as exciting
exploration and development opportunities. The Podere Maiar-1 well at Selva
was completed in December 2017 and successfully found a commercial gas
accumulation up-dip of the previous wells on the Selva field. The Company
has a 37% working interest in the Podere Gallina licence held via Prospex's
two wholly owned subsidiaries, PXOG Marshall Ltd (17% of the Licence) and UOG
Italia Srl (20% of the Licence).
The Podere Gallina Licence holds independently verified 2P gross reserves of
13.4 Bcf (5.0 Bcf net to Prospex at 37% WI) in Selva, gross Contingent 2C
Resources of 14.1 Bcf (5.2 Bcf net) and a further 88.2 Bcf of gross Best
Estimate Prospective Resources (un-risked) (32.6 Bcf net).( 1 )
An independent Competent Person's Report of the Podere Gallina Licence was
prepared by CGG Services (UK) Limited in January 2019 on behalf of the joint
venture.( 1 ) It attributed a total of 379 MMscm (13.4 Bcf) gross 2P reserves
for the Selva redevelopment project.
References:
( 1 ) Source: "Competent Person's Report Podere Gallina Licence, Italy"
prepared by CGG Services (UK) Limited in July 2022 [https://bit.ly/3JASCc2
(https://bit.ly/3JASCc2) ]
About El Romeral and Tarba
The El Romeral gas and power project in Spain, with gas production wells
supplying gas to an 8.1MW power plant near Carmona in Southern Spain is owned
and operated by Tarba. It is currently operating at about 30% of its full
capacity because Tarba is waiting on permits to drill further infill wells on
the concessions to increase production. Tarba is already categorised as a
hybrid energy provider with the successful installation of photovoltaic panels
on the roof of the plant in August 2022. Prospex owns a 49.9% working
interest in the El Romeral project via Tarba. The remaining 50.1% working
interest is owned by Warrego Energy Limited. Warrego Energy is now wholly
owned by Hancock Energy (PB) Pty Ltd. in Perth Western Australia. Tarba
sells electricity generated from the plant on the spot market in Spain. The
El Romeral licences comprise three contiguous production concessions.
Glossary:
scm Standard cubic metres
MMscm Million standard cubic metres
Bcf Billion standard cubic feet
MMscfd million standard cubic feet per day
MWh Mega Watt hour
Qualified Person Signoff
In accordance with the AIM notice for Mining and Oil and Gas Companies, the
Company discloses that Mark Routh, the CEO and a director of Prospex Energy
plc has reviewed the technical information contained herein. Mark Routh has
an MSc in Petroleum Engineering and has been a member of the Society of
Petroleum Engineers since 1985. He has over 40 years operating experience in
the upstream oil and gas industry. Mark Routh consents to the inclusion of
the information in the form and context in which it appears.
Chairman's Report
for the year ended 31 December 2022
During 2022 there was increased activity not only from ongoing operations in
Spain but also from the start of construction and development works on our
asset in Italy. Operations in the Company's investment portfolio were
carried out with an exemplary safety performance by our operators, contractors
and partners with no loss time incidents, health and safety or environmental
issues. The Company continues to monitor its HSE performance by promoting a
high level of HSE awareness and rewarding good practices and culture with its
partners, operators and subcontractors.
The 2022 financial and Corporate Highlights for Prospex Energy were underlined
by progress on a number of fronts plus strong commodity prices leading to a
very strong rise in the Company's share price - a rise of more than 300% in
the year. Subsequent to year end, commodity pricing has returned to lower
levels with a consequent reduction in share price.
In April 2022, the Company increased its stake in the Selva Gas Field in the
Po Valley in Italy to 37% following a successful fundraise of £2,454,800 from
the issue of shares at 3.5p. The fundraising was supported by existing
institutional and retail investors, as well as the Directors of the Company.
The increase in the net book value of investments to £16,064,640 from
£6,697,305 at the end of last year reflects the after-tax effect of the
revaluation of the Company's 37% (2021 : 17%) working interest in the Podere
Gallina licence in Italy.
We have applied the same valuation methodology which was used in the audited
financial statements at the end of 2021, consistently applied it to the
additional 20% working interest acquired in the current period and updated the
underlying future gas pricing assumptions to the European forward contract gas
prices applicable on 11 May 2023.
The current forward contract prices for European natural gas at the date of
preparation of these results remain above those at the end of 2021, upon which
the valuations to-date have been based, but below those at the current
reporting date of 31 December 2022.
Applying the more recent forward gas prices provides us with a more up-to-date
estimate of future revenues, and a valuation which we consider fair and
reasonable having taken into account all current market expectations.
In May 2022, the Company appointed VSA Capital Ltd as its Joint Corporate
Broker and Joint Financial Adviser.
In July 2022, £1.87 million was raised from the issue of Convertible Loan
Notes convertible at 4.25p per share to existing and new investors, with
participation of all of the Directors of the Company.
In September 2022, a further £0.5 million was raised from the issue of
Convertible Loan Notes convertible at 5.5p per share to existing investors.
This debt/equity hybrid financing of £2,370,000 in aggregate, meant that
Prospex was able to state that it had sufficient cash in hand to fund fully
its 37% share in the Selva field development to the point of first gas then
scheduled early in the second quarter of 2023.
This funding by the Company via Convertible Loan Notes from our existing
network of shareholders and supporters over the years plus a number of new
subscribers was undertaken without issuing warrants, with no fees to brokers
and at the prevailing market share price at the time or at a small premium.
A total of £4,824,800 was raised during the year via the issue of Convertible
Loan Notes and new equity. The interest and capital repayments on the
Convertible Loan Notes have been conservatively scheduled to fall well within
the expected post-tax, post-royalty cash flows from Selva, with the first
capital repayments scheduled on 30 September 2023, unless previously
converted. Part of the remaining cash flow generated from the Italian asset
will be earmarked for future drilling and seismic data acquisition on our
existing permits in both Italy and Spain.
The conversion of historic 3p warrants between April and October 2022
generated further funds of £730,000 and the exercise of management options at
4p generated £70,640.
Chairman's Report
for the year ended 31 December 2022
Operational Highlights:
Selva Field in Italy (37% working interest)
In January 2022, Po Valley Energy, the operator of the Selva field in the Po
Valley in Italy, starts and fully funds the installation of the background
seismic monitoring network to be operational ahead of the 12 months required
by the regulators.
In February 2022, the equity fund-raise of £2,454,800 at 3.5p per share
allowed the Company to complete the acquisition of the additional 20% of the
Selva Field in Italy which was agreed in August 2021 in a sale and purchase
agreement with UOG.
In April 2022, the acquisition of the extra 20% of the Selva Gas Field
completed, with the Ministry of Ecological Transition ("MITE") in Rome
approving Prospex's acquisition of UOG Italia Srl which owns 20% of the joint
venture in the licence. Together with the existing stake in the joint
venture held through PXOG Marshall, this brought the Company's stake in the
project to 37%.
The acquisition of 100% of UOG Italia increased the Company's holding in the
asset from 17% to 37% and therefore increased Prospex's share of Selva's
independently verified 2P gas reserves by 2.7 Bcf, from 2.3 Bcf to 5.0
Bcf( 1 ).
In June 2022, the penultimate approval for the production concession at the
Podere Gallina licence was granted by the Emilia Romagna Regional Council.
This local government approval was a prerequisite for Italy's MITE to grant
the Final Production Concession at Selva Malvezzi.
On 29 July 2022, full production concession approval was finally granted by
the MITE for the Selva Gas Field. This led to the awarding of contracts and
first payments made to the contractors for the construction of the automated
gas plant facilities, the installation of a 1,000 metre four-inch pipeline and
the connection to the national gas grid network operated by SNAM. Full
production concession approval was also the trigger for Prospex to pay its 37%
share of the €757,000 SNAM Bond (€280,090 net to Prospex) necessary to
procure the connection to the national gas grid with SNAM. The €757,000
had been advanced to SNAM by the operator Po Valley Energy on behalf of the
Joint Venture in February 2022.
On 8 August 2022, Po Valley Energy the operator signed a construction contract
with TESI Srl ('TESI') an Italian engineering firm, to install the gas plant
and pipeline to connect the suspended Podere Maiar-1 well at Selva to Italy's
gas grid. The contract secured development costs and timing with
construction costs €130,000 (£110,000) less than previously forecast.
Post period end, construction has completed and first gas is expected in Q2 of
2023.
Following the successful completion of funding through Convertible Loan Notes,
in September 2022, Prospex could now state that it was fully funded to first
gas at the Selva Field.
Also in September 2022, Po Valley the operator of Selva, completed the land
acquisition required to connect the pipeline from the suspended well at Selva
Malvezzi to the SNAM gas grid and purchased the required 1km of 4-inch steel
pipe.
In November 2022, final approvals were received to commence field development
works at the Selva Gas Field and gas plant construction and pipeline
installation started.
In December 2022, gas purchase and off-take agreements for the sale of gas
from the Selva field were nearing completion for the joint sale of the total
gas production from the asset.
Post period end: A Gas Sales agreement was signed in February 2023 and in
May 2023 the gas plant construction was completed and is ready for
commissioning. The connections to the gas grid operated by SNAM are
complete, enabling the delivery of gas to the Italian gas grid. With the
SNAM connection and transmission arrangements finalised, Po Valley Operations
has initiated the process of recovering €757,000 performance bond funds
(100% basis - €280,090 net to Prospex), previously deposited with SNAM.
( 1 ) Source: "Competent Person's Report Podere Gallina Licence, Italy"
prepared by CGG Services (UK) Limited in July 2022 https://bit.ly/3JASCc2
(https://bit.ly/3JASCc2)
Chairman's Report
for the year ended 31 December 2022
El Romeral in Spain (49.9% interest)
The El Romeral gas and power project in Spain, with gas production wells
supplying gas to an 8.1MW power plant near Carmona in Southern Spain is owned
and operated by Tarba Energía Srl the operating company. It is currently
operating at about 30% of its full capacity because Tarba is waiting on
permits to drill further infill wells on the concessions to increase
production. Prospex owns a 49.9% working interest in the El Romeral project
via Tarba. The remaining 50.1% working interest is owned by Warrego Energy
Limited. Tarba sells electricity generated from the plant on the spot market
in Spain. The El Romeral licences comprise three contiguous production
concessions.
In March 2022, Tarba completed the El Romeral plant automation project which
started in December 2021 allowing the live testing of 24/7 production
operations. A detailed reservoir modelling project was completed which
confirmed that continuous production operation was not only feasible but also
optimised ultimate gas recovery.
Gross monthly revenue from electricity generation at the El Romeral power
plant peaked at over €500,000 in March 2022.
By April 2022, the El Romeral power plant was generating electricity 24 hours
a day and 7 days per week and electricity sales were at record levels.
On 28 April 2022, Tarba completed the repayment of its outstanding loans plus
interest to the two co-owners Prospex Energy and Warrego Energy. The loans
repaid of €289,577, plus accrued interest of €19,092.97, equalled a total
of €308,669.97. Prospex's share of this is €153,698.64. The repayment
of loans held in the El Romeral asset totalled €589,577, plus accrued
interest of €19,092.97.
In May 2022, the reprocessing of 250km of 2D seismic lines was instigated to
improve the subsurface imaging across the three El Romeral Production
Concessions.
In June 2022, Tarba commenced the first of two solar installation projects at
El Romeral, 'Project Apollo' the installation of solar panels on the power
station roof. The second solar project 'Project Helios' which involves the
installation of a 4.9MW solar farm adjacent to the power plant was recommended
for an investment decision and front-end engineering and design ('FEED')
studies commenced.
In June 2022, the Spanish government announced that it would invoke a gas
price cap for companies selling gas for electricity generation of
€48.8/MWhr. As a result, Spanish daily electricity prices were expected to
average €150/MWhr for the next 12 months. Average prices remained or
exceeded this level until year end.
August 2022 saw the El Romeral asset continuing to generate healthy revenues
with daily electricity spot prices averaging more than €180/MWhr in the
quarter to 30 June 2022.
August 2022 also saw the completion of the installation of 83 solar panels on
the roof of the power plant. Project Apollo has an estimated return on
investment of 3 - 4 years.
By December 2022, the reinterpretation of the reprocessed 2D seismic lines
across the El Romeral Production Concessions was nearing completion with the
aim of optimising the top 5 drilling targets for the permitting application
process as requested by MITECO, the Spanish regulator.
By the year end, Prospex's JV partner in its assets in Spain, through Tarba,
Warrego Energy is subject to a takeover bid in Australia.
Post period end, Hancock Energy (PB) Pty Ltd completed the acquisition of 100%
of the shares of Warrego Energy Ltd, which was then de-listed from the ASX
exchange in Sydney, Australia.
Chairman's Report
for the year ended 31 December 2022
Financial Review
For the year ended 31 December 2022, the Company is reporting Total Assets of
£23,062,739 (2021: £8,984,437), the value of which largely comprises the
Company's investment in PXOG Marshall Ltd, the vehicle for the Company's
Italian assets. The 156.7% increase is dominated by a revaluation reflecting
measured recognition of positive changes in the forward curve of European gas
prices at 31 December 2022 and includes revaluations of the Company's
investments ('the Investments') as well as repayments and advances on loans
receivable from those investments. Unrealised gains arising on revaluation
of Investments at fair value amounted to £9,367,435 (2021: £3,076,415).
As at 31 December 2022, the fair value of the Company's investments stood at
£16,064,160 (2021: £6,697,305). The combined value of these equity
investments, current and non-current loans is £21,561,316 (2021:
£8,726,484).
This increase in the net book value of investments to £16,064,640 from
£6,697,305 at the end of last year reflects the after-tax effect of the
revaluation of the Company's working interest in the Podere Gallina licence in
Italy. In April 2022, the Company increased its stake in the Selva Gas Field
in the Po Valley in Italy to 37% following the acquisition of a further 20%
working interest in the licence from UOG.
The asset was also re-valued using the same valuation methodology which was
used in the audited financial statements at the end of 2021 but utilising the
underlying future gas pricing assumptions to the TTF European forward contract
gas prices applicable on 11 May 2023. The current forward contract prices
for European natural gas at the date of preparation of these results remain
above those at the end of 2021, upon which the valuations to-date have been
based, but below those at the current reporting date of 31 December 2022.
The Company continues to have significant asset backing relative to its market
capitalisation.
Administrative expenses for the full year totalled £975,725, a 9.4% increase
from 2021's £891,676.
As at 31 December 2022, the Company held cash and cash equivalents of
£1,482,762 (2021: £220,060).
Business Development
The financial year ended 2022 saw unprecedented volatility in both gas and
electricity prices on account of several dramatic events on the world stage.
The Company, through its Tarba investment, enjoyed record income from power
generation in the month of March 2022, but the combination of regulation,
attempts at price capping and the macro effects of the energy market supply
and demand forces have seen prices reducing and volatility normalising. In
evaluating business development opportunities, the Prospex Board applied a
conservative approach to forward energy pricing during the year. Several
data rooms were attended and assessed and discussions on many acquisitions
progressed to various degrees, but none was finalised during the year, with
the exception of the 20% acquisition from UOG of the Selva Joint Venture
detailed above, which was signed in August 2021 and finalised in April 2022.
The Company continues to focus on onshore natural gas and power assets in
Western Europe. The Company's leadership considers that this geographical
and product focus is an essential ingredient to setting Company strategy and
defining the boundaries within which we operate. Natural gas has been widely
recognised as the transition fuel as Europe progresses to rely upon less
carbon intensive energy sources. In 2022, the Company actively pursued
investments in renewable energy sources with two solar photovoltaic projects
at the El Romeral asset in Spain. This has already moved Prospex Energy to
be categorised as an integrated energy company with a business model of
utilising the traditional natural gas assets to expand into the renewable
energy space.
Chairman's Report
for the year ended 31 December 2022
Outlook
The outlook for Prospex remains one of consolidation and growth. With the
Selva asset generating cash flows from Q2-2023, the Company expects to deliver
organic growth in its two main assets in Spain and Italy. Subsurface
technical work and reprocessing of the 2D seismic lines is underway on the
Selva Malvezzi production concession in order to optimise the final well
locations for the next three wells to be drilled, Selva North, Selva South and
East Selva. In Spain on the Romeral production concessions, the
environmental impact assessment process has been initiated in order to be
granted the permits to drill five new wells which can be connected to Tarba's
local pipeline network so that the El Romeral power plant can re-establish
100% of its installed generation capacity. Currently running at just 30%
capacity with just one of the three engines generating electricity at a time,
it only needs two of the three proposed wells to be connected to the power
plant for the power station to have sufficient gas to run all three engines
and achieve the nameplate output capacity of 8.1MW.
Once the El Romeral concession wells are permitted, the Spanish regulator has
undertaken to address the issue of the suspended Tesorillo permit. The
owners of Tarba are ready to initiate the permitting process for the appraisal
well to be drilled on the permit once the licence has been converted into an
exploitation concession.
The year ahead promises to see major progress. I look forward to providing
further updates as developments occur.
The significant impacts of COVID were still with us at the beginning of 2022
and long-term effects continue. Our management, staff, contractors and
partners were steadfast in moving the Company ahead throughout this
challenging period and deserve our thanks. After the year end, Dr Richard
Mays, one of the founding directors of the Company, retired from the Board
after years of providing strong and insightful leadership. Andrew Hay agreed
to join the Board and has proved an excellent addition. I would like to take
this opportunity to thank our investors whose support has enabled the Company
to achieve a level of success and to our current and past directors, the Board
and management team for their continued hard work, commitment and support.
Bill Smith
Non-Executive Chairman
24 May 2023
Prospex Energy Plc
Statement of Profit or Loss and Other Comprehensive Income
for the year ended 31 December 2022
2022 2021
Notes £ £
CONTINUING OPERATIONS
Other operating income 5 - 86,604
Administrative expenses (975,725) (891,676)
Share-based payment charges 23 (187,417) -
OPERATING LOSS (1,163,142) (805,072)
Gain on revaluation of investments 12 9,367,435 3,076,415
8,204,293 2,271,343
Finance income 7 324,052 109,618
Finance costs 7 (173,023) (80,771)
PROFIT BEFORE INCOME TAX 8 8,355,322 2,300,190
Income tax 9 (1,218,415) (40,394)
PROFIT FOR THE YEAR 7,136,907 2,259,796
EARNINGS PER SHARE 10
Basic earnings pence per share 2.88p 1.61p
Diluted earnings pence per share 2.66p 1.61p
Prospex Energy Plc (Registered number: 03896382)
Statement of Financial Position
31 December 2022
2022 2021
Notes £ £
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment 11 - -
Investments 12 16,064,640 6,697,305
Trade and other receivables 13 - 1,225,570
16,064,640 7,922,875
CURRENT ASSETS
Trade and other receivables 13 5,515,237 841,502
Investments 14 100 -
Cash and cash equivalents 15 1,482,762 220,060
6,998,099 1,061,562
TOTAL ASSETS 23,062,739 8,984,437
EQUITY
SHAREHOLDERS' EQUITY
Called up share capital 16 7,225,893 7,124,355
Share premium 14,850,928 11,599,333
Merger reserve 2,416,667 2,416,667
Capital redemption reserve 43,333 43,333
Fair value reserve 14,755,732 6,067,267
Retained earnings (20,141,952) (18,748,005)
TOTAL EQUITY 19,150,601 8,502,950
LIABILITIES
NON-CURRENT LIABILITIES
Financial liabilities - borrowings
- Interest bearing loans and borrowings 18 799,145 247,232
Deferred taxation 19 1,258,809 40,394
2,057,954 287,626
CURRENT LIABILITIES
Trade and other payables 17 41,440 52,892
Financial liabilities - borrowings
- Interest bearing loans and borrowings 18 1,812,744 140,969
1,854,184 193,861
TOTAL LIABILITIES 3,912,138 481,487
TOTAL EQUITY AND LIABILITIES 23,062,739 8,984,437
The financial statements were approved by the Board of Directors and
authorised for issue on 24 May 2023 and were signed on its behalf by:
Mark Routh
Director
Prospex Energy Plc
Statement of Changes in Equity
for the year ended 31 December 2022
Share capital Share premium Merger reserve Capital redemption reserve Fair value reserve Retained earnings Total
£ £ £ £ £ £
Balance at 1 January 2021 7,035,589 10,185,819 2,416,667 43,333 - (14,965,030) 4,716,378
Changes in equity
Loss for the year - - - - - 2,259,796 2,259,796
Issue of shares 88,766 1,492,910 - - - - 1,581,676
Costs of shares issued - (54,900) - - - - (54,900)
Equity-settled share-based payments (24,496) - - - 24,496 -
Transfer to fair value reserve - - - - 6,067,267 (6,067,267) -
Balance at 31 December 2021 7,124,355 11,599,333 2,416,667 43,333 6,067,267 (18,748,005) 8,502,950
Changes in equity
Profit for the year - - - - - 7,136,907 7,136,907
Issue of shares 101,538 3,333,893 - - - - 3,435,431
Costs of shares issued - (112,104) - - - - (112,104)
Lapse of share options - 29,806 - - - (29,806) -
Equity-settled share-based payments - - - - - 187,417 187,417
Transfer to fair value reserve - - - - 8,688,465 (8,688,465) -
Balance at 31 December 2022 7,225,893 14,850,928 2,416,667 43,333 14,755,732 (20,141,952) 19,150,601
Share capital - The nominal value of the issued share capital
Share premium account - Amounts received in excess of the nominal value of the
issued share capital less costs associated with the issue of shares
Merger reserve - The difference between the nominal value of the share capital
issued by the Company and the fair value of the subsidiary at the date of
acquisition
Capital redemption reserve - The amounts transferred following the redemption
or purchase of the Company's own shares
Retained earnings - Accumulated comprehensive income for the year and prior
periods
Fair value reserve - the cumulative fair value changes of the company's fixed
asset investment, net of deferred tax
Prospex Energy Plc
Statement of Cash Flows
for the year ended 31 December 2022
2022 2021
Notes £ £
Cash outflow from operations 1 (4,113,537) (941,242)
Cash flows from investing activities
Interest received 2,247 -
Interest paid (124,338) (106,722)
Net cash outflow from investing activities (122,091) (106,722)
Cash flows from financing activities
New loan notes 2,370,000 -
Bank loan repayment (42,394) (7,238)
Loan repayments (131,353) (56,294)
Share issue 3,414,181 1,165,838
Costs of shares issued (112,104) (54,900)
Net cash inflow from financing activities 5,498,330 1,047,406
Increase/(decrease) in cash and cash equivalents 1,262,702 (558)
Cash and cash equivalents at beginning of year 2 220,060 220,618
Cash and cash equivalents at end of year 2 1,482,762 220,060
Prospex Energy Plc
Notes to the Statement of Cash Flows
for the year ended 31 December 2022
1. RECONCILIATION OF LOSS BEFORE INCOME TAX TO CASH GENERATED
FROM OPERATIONS
2022 2021
£ £
Cash flows from operations
Profit before income tax 8,355,322 2,300,190
Gain on revaluation of fixed asset investments (9,367,435) (3,076,415)
Finance income (324,052) (109,618)
Finance costs 173,023 80,771
Operating loss (1,163,142) (805,072)
Increase in trade and other receivables (3,126,358) (50,751)
Decrease in trade and other payables (11,454) (85,419)
Equity settled share-based payments 187,417 -
Net cash outflow from operations (4,113,537) (941,242)
2. CASH AND CASH EQUIVALENTS
The amounts disclosed on the Statement of Cash Flows in respect of cash and
cash equivalents are in respect of these Statement of Financial Position
amounts:
Year ended 31 December 2022 31.12.22 01.01.22
£ £
Cash and cash equivalents 1,482,762 220,060
Year ended 31 December 2021 31.12.21 01.01.21
£ £
Cash and cash equivalents 220,060 220,618
Prospex Energy Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2022
1. STATUTORY INFORMATION
Prospex Energy Plc is a public limited company, is registered in England and
Wales and is quoted on the AIM Market of the London Stock Exchange Plc. The
Company's registered number and registered office address can be found on the
Company Information page.
The presentation currency of the financial statements is the Pound Sterling
(£).
2. ACCOUNTING POLICIES
Basis of preparation
The Company's financial statements have been prepared in accordance with
International Accounting Standards in conformity with the requirements of the
Companies Act 2006 as they apply to the financial statements of the Company
for the year ended 31 December 2022 and as applied in accordance with the
provisions of the Companies Act 2006.
The Company financial statements have been prepared under the historical cost
convention or fair value where appropriate.
Preparation of consolidated financial statements
The Company is an investment entity and, as such, does not consolidate the
investment entities it controls. The Company's interests in subsidiaries are
recognised at fair value through profit and loss.
Going concern
The Company has reported an operating loss for the 2022 year of £1,163,142.
In 2023 it is expected that the Company will have increased receipts resulting
from first gas sales at its investment in Italy. These receipts will
initially be received as loan repayments together with interest charged,
reimbursing the Company for capital advances made in prior years which were
applied to acquisition, exploration and development costs. As a result, it
is expected that the Company will again record an operating loss during 2023,
but an increase in cash inflows and balance sheet strength.
The Directors have prepared detailed financial forecasts and cash flows
looking beyond 12 months from the date of the approval of these financial
statements. In developing these forecasts, the Directors have made
assumptions based upon their view of the current and future economic
conditions that are expected to prevail over the forecast period. The
Directors estimate that the cash held by the Company together with known
receivables and anticipated income from its Italian asset will be sufficient
to support the current level of activities beyond 2023. Furthermore, the
Company's asset in Spain is fully self-funding at current operating levels and
is expected to have sufficient cash resources and income to fund existing
operations beyond the end of 2023.
The Board expects to raise additional funding only as and when required to
cover any shortfall between the Group's own cash resources and its development
and expansion of activities. Should regulatory approval be received which
allows for an expansion of current operations, or appropriate new investment
opportunities arise which meet the Company's objectives and criteria, then the
Directors will explore all potential sources of funding available to meet such
shortfall. Based on the Company's track-record, assets and prospects, the
Directors have a reasonable expectation that they will be able to secure such
further funding should the need arise.
The Directors have therefore prepared the financial statements on a going
concern basis.
Property, plant and equipment
Depreciation is provided at the following annual rates in order to write off
the cost less estimated residual value of each asset over its estimated useful
life.
Computer equipment - 25% per annum on reducing balance
Financial instruments
Financial assets and financial liabilities are recognised on the balance sheet
when the Company becomes a party to the contractual provisions of the
instrument.
Loans and receivables
These assets are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market. The principal financial
assets of the Company are loans and receivables, which arise principally
through the provision of goods and services to customers (e.g. trade
receivables) but also incorporate other types of contractual monetary asset.
They are included in current assets, except for maturities greater than 12
months after the balance sheet date. These are classified as non-current
assets.
The Company's loans and receivables are recognised and carried at the lower of
their original amount less an allowance for any doubtful amounts. An
allowance is made when collection of the full amount is no longer considered
possible.
The Company's loans and receivables comprise trade and other receivables and
cash and cash equivalents in the consolidated statement of financial position.
Prospex Energy Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2022
2. ACCOUNTING POLICIES - continued
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the
substance of the contractual arrangements entered into. An equity instrument
is any contract that evidences a residual interest in the assets of the entity
after deducting all of its financial liabilities.
Where the contractual obligations of financial instruments (including share
capital) are equivalent to a similar debt instrument, those financial
instruments are classed as financial liabilities. Financial liabilities are
presented as such in the balance sheet. Finance costs and gains or losses
relating to financial liabilities are included in the profit and loss account.
Finance costs are calculated so as to produce a constant rate of return on
the outstanding liability.
Where the contractual terms of share capital do not have any terms meeting the
definition of a financial liability then this is classed as an equity
instrument. Dividends and distributions relating to equity instruments are
debited direct to equity.
Equity comprises the following:
- Share capital represents the nominal value of equity shares;
- Share premium represents the excess over nominal value of the fair value of
consideration received for equity shares, net of expenses of the share issue;
- Profit and loss reserve represents retained deficit;
- The capital redemption reserve arises on redemption of shares in previous
years and own share reserve;
- Merger reserve represents the difference between the nominal value of the
share capital issued by the Company and the fair value of the subsidiary at
the date of acquisition;
- Fair value reserve represents the cumulative fair value changes of the
company's fixed asset investment, net of deferred tax.
Leases
Leases are recognised as finance leases. The lease liability is
initially recognised at the present value of the lease payments which have not
yet been made and subsequently measured under the amortised cost method. The
initial cost of the right-of-use asset comprises the amount of the initial
measurement of the lease liability, lease payments made prior to the lease
commencement date, initial direct costs and the estimated costs of removing or
dismantling the underlying asset per the conditions of the contract.
Where ownership of the right-of-use asset transfers
to the lessee at the end of the lease term, the right-of-use asset is
depreciated over the asset's remaining useful life. If ownership of the
right-of-use asset does not transfer to the lessee at the end of the lease
term, depreciation is charged over the shorter of the useful life of the
right-of-use asset and the lease term.
Taxation
Current taxes are based on the results shown in the financial statements and
are calculated according to local tax rules, using tax rates enacted or
substantially enacted by the statement of financial position date.
Deferred tax is provided in full, using the liability method, on temporary
differences arising between the tax bases of assets and liabilities and their
carrying amounts for financial reporting purposes. Deferred tax is
determined using tax rates that have been enacted or substantially enacted at
the balance sheet date and are expected to apply when the related deferred
income tax asset is realised, or the deferred tax liability is settled.
Deferred tax is charged or credited in the income statement, except when it
relates to items charged or credited to equity, in which case the deferred tax
is also dealt with in equity. Deferred tax assets are only recognised to the
extent that it is probable that future taxable profit will be available
against which the asset can be utilised.
Cash and cash equivalents
Cash and cash equivalents include cash at bank and in hand and short-term
deposits with an original maturity of three months or less.
Trade and other payables
Trade and other payables are initially measured at fair value and subsequently
measured at amortised cost using the effective interest rate method.
Foreign currency translation
Items included in the Financial Statements are measured using the currency of
the primary economic environment in which the Company operates (the functional
currency) which is UK sterling (£). The Financial Statements are
accordingly presented in UK Sterling.
Prospex Energy Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2022
2. ACCOUNTING POLICIES - continued
Foreign currency translation - continued
Foreign currency transactions are translated into the functional currency
using the exchange rates prevailing at the dates of the transactions or at an
average rate for a period if the rates do not fluctuate significantly.
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
Statement of Profit or Loss. Non-monetary items that are measured in terms
of historical cost in a foreign currency are not retranslated.
Finance income and finance costs
Finance income is recognised when it is probable that the economic benefits
will flow to the Company and the amount of income can be measured reliably.
It is accrued on a time basis by reference to the principal outstanding and
at the effective interest rate applicable.
Borrowing costs are recognised as an expense in the period in which they are
incurred.
Equity-settled share-based payment
The Company makes equity-settled share-based payments. The fair value of
options granted is recognised as an expense, with a corresponding increase in
equity. The fair value is measured at grant date and spread over the vesting
period, which is the period over which all of the specified vesting conditions
are to be satisfied. The fair value of the options granted is measured based
on the Black-Scholes framework, taking into account the terms and conditions
upon which the instruments were granted. At each balance sheet date, the
Company revises its estimate of the number of options that are expected to
become exercisable. It recognises the impact of the revision to original
estimates, if any, in the income statement, with a corresponding adjustment to
equity.
Government grants
Grants that compensate the Company for expenses incurred are recognised in
profit or loss on a systematic basis in the periods in which the expenses are
recognised.
Accounting standards issued but not yet effective
and/or adopted
As at the date of approval of these financial statements, the following
standards were in issue but not yet effective. These standards have not been
adopted early by the Company as they are not expected to have a material
impact on the Company's financial statements.
Effective date (period beginning on or after)
IFRS 4 Amendments - Applying IFRS 9 'Financial Instruments' with IFRS 4 'Insurance 01/01/2023
Contracts'
IFRS 16 Amendment - Lease Liability in a Sale and Leaseback 01/01/2024
IAS 1 Amendment - Classification of Liabilities as Current or Non-Current 01/01/2023
IAS 1, IFRS Practice Statement 2 Amendment - Disclosure of accounting policies 01/01/2023
IAS 1 Amendment - Non-current Liabilities with Covenants 01/01/2024
IAS 8 Amendment - Definition of Accounting estimates 01/01/2023
IAS 12 Amendment - Deferred Taxation related to Assets and Liabilities arising from a 01/01/2023
Single Transaction
The International Financial Reporting Interpretations Committee has also
issued interpretations which the Company does not consider will have a
significant impact on the financial statements.
Revenue recognition
Revenue is measured at the fair value of consideration receivable, net of any
discounts and VAT. It is recognised to the extent that the transfer of
promised services to a customer has been satisfied and the revenue can be
reliably measured.
Revenue from the rendering of services to the customer is considered to have
been satisfied when the service has been undertaken.
Revenue which is not related to the principal activity of the Company is
recognised in the Statement of Profit or Loss as other operating income.
Such income includes consultancy fees and rent receivable.
Prospex Energy Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2022
3. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF
ESTIMATION UNCERTAINTY
The preparation of the financial information in conformity with IFRS requires
the use of certain critical accounting estimates that affect the reported
amounts of assets and liabilities at the date of the financial information and
the reported amounts of revenue and expenses during the reporting period.
Although these estimates are based on management's best knowledge of the
amounts, events or actions, actual results ultimately may differ from these
estimates. The estimates and underlying assumptions are as follows:
Investment entities
The judgements, assumptions and estimates involved in the Company's accounting
policies that are considered by the Board to be the most important to the
portrayal of its financial condition are the fair valuation of the investment
and the assessment regarding investment entities. The investment portfolio
is held at fair value. The Directors review the valuations policies, process
and application to individual investments.
Entities that meet the definition of an investment entity within IFRS 10 are
required to account for most investments in controlled entities, as well as
investments in associates and joint ventures, at fair value through profit and
loss. The Board has concluded that the Company continues to meet the
definition of an investment entity as its strategic objective of investing in
portfolio investments for the purpose of generating returns in the form of
investment income and capital appreciation remains unchanged
Fair value is the underlying principle and is defined as "the price that would
be received to sell an asset in an orderly transaction between market
participants at the measurement date". Fair value is therefore an estimate
and, as such, determining fair value requires the use of judgement. The
quoted assets in our portfolio are valued at their closing bid price at the
balance sheet date. The largest investment in the portfolio, however, is
represented by an unquoted investment.
Impairment of assets
The Company's principal investments are in wholly owned unquoted subsidiaries
which each have a minority interest in overseas entities with energy assets.
The Company is required to test, on an annual basis, whether its non-current
assets have suffered any impairment. Determining whether these assets are
impaired requires an estimation of the value in use of the cash-generating
units to which the assets have been allocated. The value in use calculation
requires the Directors to estimate the future cash flows expected to arise
from the cash-generating unit and a suitable discount rate to calculate the
present value. Subsequent changes to the cash generating unit allocation or
to the timing of cash flows could impact on the carrying value of the
respective assets.
The calculation of value-in-use for energy assets under development or in
production is most sensitive to the following assumptions:
- Commercial reserves
- production volumes;
- commodity prices;
- fixed and variable operating costs;
- capital expenditure; and
- discount rates.
A potential change in any of the above assumptions may cause the estimated
recoverable value to be lower than the carrying value, resulting in an
impairment loss. The assumptions which would have the greatest impact on the
recoverable amounts of the fields are production volumes and commodity prices
Share based payments
The estimates of share-based payments requires that management selects an
appropriate valuation model and make decisions on various inputs into the
model including the volatility of its own share price, the probable life of
the options before exercise and behavioural consideration of employees.
Deferred tax assets
Deferred taxation is provided for using the liability method. Deferred tax
assets are recognised in respect of tax losses where the Directors believe
that it is probable that future profits will be relieved by the benefit of tax
losses brought forward. The Board considers the likely utilisation of such
losses by reviewing budgets and medium-term plans for the Company. The
Directors have decided that no deferred tax asset should be recognised at 31
December 2022. If the actual profits earned by the Company differs from the
budgets and forecasts used then the value of such deferred tax assets may
differ from that shown in these financial statements.
Prospex Energy Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2022
4. REVENUE
Segmental reporting
The Company is an Investing Company. The results for this continuing
operation, all of which were carried out in the UK, are disclosed in the
Income Statement. The net assets as at 31 December 2022 as shown on the
Statement of Financial Position all relate to the Investment activity.
5. OTHER OPERATING INCOME
2022 2021
£ £
Consultancy fees - 29,150
Government grants - 57,454
- 86,604
6. EMPLOYEES AND DIRECTORS
2022 2021
£ £
Wages and salaries 484,633 460,249
Social security costs 56,425 49,550
Other pension costs 10,140 21,395
Share-based payments 179,971 -
731,169 531.194
The average number of employees during the year was as follows:
2022 2021
Number Number
Directors 4 6
Staff 3 4
7 10
Under the Pensions Act 2008, every employer must put certain staff into a
pension scheme and contribute to it. The Company auto-enrolled its eligible
employees in a defined contribution scheme. The charge to the Statement of
Profit or Loss represents the amounts paid to the scheme. At the year end,
the amount due to the pension scheme was £nil (2021: £nil).
Details of Directors' remuneration can be found in note 24.
7. NET FINANCE COSTS
2022 2021
£ £
Finance income
Interest receivable on group loan 321,805 109,618
Bank interest receivable 2,247 -
324,052 109,618
Finance costs
Loan interest payable 166,718 70,211
Bank loan interest 821 1,375
Other interest payable - 1,333
Interest on overdue tax 5,484 7,852
173,023 80,771
Net finance income 151,029 28,847
Prospex Energy Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2022
8. PROFIT BEFORE INCOME TAX
The profit before income tax is stated after charging:
2022 2021
£ £
Other operating leases - 9,744
Auditors' remuneration 27,000 25,000
Foreign exchange differences 1,733 3,743
9. INCOME TAX
2022 2021
£ £
Current tax charge
UK corporation tax on profit for the period at 19% (2021: 19%) - -
Deferred taxation 1,218,415 40,394
Tax charge for the year 1,218,415 40,394
Factors affecting the tax expense
The tax assessed for the year is higher than the standard rate of corporation
tax in the UK. The difference is explained below:
2022 2021
£ £
Factors affecting the tax charge for the year:
Profit before income tax 8,355,322 2,300,190
Profit before income tax multiplied by effective rate of UK corporation tax of 1,587,511 437,036
19.00% (2021: 19.00%)
Effects of
Non-deductible expenses 36,560 (3,366)
Losses used for group relief 17,638 1,792
Tax losses not utilised 138,104 149,057
Unrealised chargeable losses (1,779,813) (584,519)
Deferred taxation 1,218,415 40,394
(369,096) (396,642)
Current tax charge 1,218,415 40,394
There is no provision for UK Corporation Tax due to adjusted losses for tax
purposes, subject to agreement with HM Revenue and Customs. The deferred tax
asset, measured at the standard rate of 25%, of approximately £2.1m (2021:
25% - £1.9m) arising from the accumulated tax losses of approximately £8.4m
(2021: £7.6m) carried forward has been used to reduce the deferred tax charge
on the unrealised gain arising on the revaluation of investments. This will
be subject to agreement with HMRC.
The main UK corporation tax rate has changed from 19% to 25% with effect from
1 April 2023. The deferred tax liability arising on the revaluation of the
Company's fixed asset investments has been calculated using 25%, reduced by
the availability of tax losses.
Prospex Energy Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2022
10. EARNINGS PER SHARE
Year ended 31 December 2022 Year ended 31 December 2021
Earnings Number of shares Per share amount Earnings Number of shares Per share amount
£ £
Basic EPS
Profit for the year and earnings available to ordinary shareholders 7,136,907 247,635,519 2.88p 2,259,796 140,431,111 1.61p
Effect of dilutive securities
Options and warrants - 3,057,387 - 200,265
Convertible Loan Notes 129,734 22,291,906 - -
Diluted EPS
Adjusted earnings 7,266,641 272,984,812 2.66p 2,259,796 140,631,376 1.61p
The exercisable share options and warrants are deemed to be dilutive in nature
where their exercise price is less than the average share price for the
period.
11. PROPERTY, PLANT AND EQUIPMENT
Computer equipment
£
COST
At 1 January 2021 and 2022 and 31 December 2022 1,699
DEPRECIATION
At 1 January 2021 and 2022 and 31 December 2022 1,699
NET BOOK VALUE
At 31 December 2022 -
At 31 December 2021 -
12. INVESTMENTS
Shares in group undertakings Unlisted investments Total
£ £ £
COST
At 1 January 2021 3,570,890 50,000 3,620,890
Revaluations 3,076,415 - 3,076,415
At 31 December 2021 6,647,305 50,000 6,697,305
Revaluations 9,367,435 - 9,367,435
Reclassified to current asset investments (100) - (100)
At 31 December 2022 16,014,640 50,000 16,064,640
Shares in group undertakings represent investments in PXOG Marshall Limited of
£16,014,540 (2021: £6,647,205) and PXOG Muirhill Limited of £100 (2021:
£100).
The Company's investments at the Statement of Financial Position date in the
share capital of companies include the following:
Prospex Energy Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2022
12. INVESTMENTS - continued
PXOG Marshall Limited
Registered office: 60 Gracechurch Street, London EC3V 0HR
Nature of business: Investment entity % holding
Class of shares:
Ordinary shares 100.00
2022 2021
£ £
Aggregate capital and reserves 16,014,540 6,647,205
Profit for the year 9,367,335 3,076,415
The underlying value of PXOG Marshall Limited is based on the underlying value
of the Podere Gallina permit, Po Valley, Italy, of which it owned 37% at the
year end. Consistent with prior years, a discounted cash flow ("DCF") model
was produced at the year end, based on proved and probable (2P) reserves
supported by a Competent Person Report (CPR) produced in July 2022. The DCF
model has been updated to reflect forward gas prices as at 11 May 2023 using
the Dutch TTF Gas Futures contracts for 2023 and subsequent production
years. The DCF model has also been updated to account for an
accelerated annual production rate which shortens the cashflow period from 15
years to 10 years. The increased annual production rate is based on testing
carried out by the operator. The DCF cashflows were discounted at 10% p.a.
In addition, consistent with the prior year, a risked valuation of 2C
contingent resources in the Selva North and South fields in the 2022 CPR has
been updated and included.
PXOG Muirhill Limited
Registered office: 60 Gracechurch Street, London EC3V 0HR
Nature of business: Investment entity % holding
Class of shares:
Ordinary shares 100.00
2022 2021
£ £
Aggregate capital and reserves 17,311 (19,984)
Profit/(loss) for the year 37,295 (20,084)
PXOG Muirhill Limited holds its interests in the Tesorillo and El Romeral
projects through its holdings of A and B shares respectively in Tarba Energia
S.L. Consistent with the prior year, these investments are being held at the
cost of investment in Prospex Energy Limited and in PXOG Muirhill Limited.
All of the subsidiaries are incorporated in the UK and registered in England
& Wales.
Investments are recognised and de-recognised on the date when their purchase
or sale is subject to a relevant contract and the associated risks and rewards
have been transferred. The Company manages its investments with a view to
profiting from the receipt of investment income and capital appreciation from
changes in the fair value of investments.
All investments are initially recognised at the fair value of the
consideration given and are subsequently measured at fair value through profit
and loss.
Unquoted investments, including both equity and loans are designated at fair
value through profit and loss and are subsequently carried in the statement of
financial position at fair value. Fair value is determined in line with the
fair value guidelines under IFRS.
In accordance with IFRS 10, the proportion of the investment portfolio held by
the Company's unconsolidated subsidiaries is presented as part of the fair
value of investment entity subsidiaries, along with the fair value of their
other assets and liabilities.
The holding period of the Company's investment portfolio is on average greater
than one year. For this reason, the portfolio is classified as
non-current. It is not possible to identify with certainty investments that
will be sold within one year.
Investments in investment entity subsidiaries are accounted for as financial
instruments at fair value through profit and loss and are not consolidated in
accordance with IFRS10.
Prospex Energy Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2022
12. INVESTMENTS - continued
These entities hold the Company's interests in investments in portfolio
companies. The fair value can increase or reduce from either cash flows
to/from the investment entities or valuation movements in line with the
Company's valuation policy.
The fair value of these entities is their net asset values.
The Directors determine that in the ordinary course of business, the net asset
values of an investment entity subsidiary are considered to be the most
appropriate to determine fair value. At each reporting period, they consider
whether any additional fair value adjustments need to be made to the net asset
values of the investment entity subsidiaries. These adjustments may be
required to reflect market participants' considerations about fair value that
may include, but are not limited to, liquidity and the portfolio effect of
holding multiple investments within the investment entity subsidiary.
13. TRADE AND OTHER RECEIVABLES
2022 2021
£ £
Current:
Trade debtors - 22,470
Amounts owed by group undertakings 5,496,676 803,609
Other debtors 1,883 1,883
VAT 5,760 6,988
Prepayments and accrued income 10,918 6,552
5,515,237 841,502
Non-current:
Amounts owed by group undertakings - 1,225,570
Aggregate amounts 5,515,237 2,067,072
The Directors consider that the carrying amount of trade and other receivables
approximates to their fair value.
In 2018 the Company provided an interest-free loan to PXOG Marshall Limited, a
wholly owned subsidiary. The fair value of the financial element of the loan
has been calculated by discounting the future cash flow of the loan,
£1,056,391, at the market rate of 10%. The difference between the total
loan and the fair value of the loan i.e. the non-financial element of the
loan, has been accounted for as an addition to shares in group undertakings
(note 12).
Since 1 January 2022, the above loan has been amalgamated with further loans
provided to PXOG Marshall Limited, with interest charged at 10% per annum on
the total balance. These loans are repayable on demand.
14. CURRENT ASSET INVESTMENTS
2022 2021
Shares held for sale £ £
Shares in group undertakings 100 -
The investment in PXOG Massey Limited is held at £100, based on the SPA
agreement which is pending completion of sale to H2Oil Limited. In August
2020, Prospex signed a sale and purchase agreement ('SPA') with H2Oil Limited
('H2Oil') regarding the sale of the entire issued share capital of PXOG Massey
Limited ('Massey'). Under the terms of the SPA, the Company will receive up
to £215,000 in cash in respect of historical debt owed to the Company by
Massey and nominal consideration for shares in Massey of which 85% of the
funds (£182,650) had been received by Prospex by 31 December 2020. As at
the balance sheet date, although it is still expected, the final condition of
the SPA had not been met.
Prospex Energy Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2022
15. CASH AND CASH EQUIVALENTS
2022 2021
£ £
Bank accounts 1,482,762 220,060
The Directors consider that the carrying amount of cash and cash equivalents
approximates to their fair value. All of the Company's cash and cash
equivalents are at floating rates of interest.
16. CALLED UP SHARE CAPITAL
2022 2021 2022 2021
Number Number £ £
Allotted, called up and fully paid
Ordinary shares of 0.1p each - new 278,847,512 177,310,283 278,848 177,310
Deferred shares of 0.1p each 942,462,000 942,462,000 942,462 942,462
Deferred shares of £24 each 54,477 54,477 1,307,459 1,307,459
Deferred shares of 0.9p each 285,785,836 285,785,836 2,572,073 2,572,073
Deferred shares of £4.80 each 442,719 442,719 2,125,051 2,125,051
7,225,893 7,124,355
Share issues
In February 2022, the Company raised £2,454,800 before expenses by way of a
placing of 70,137,143 new ordinary shares of £0.001 each in the Company at a
price of 3.50 pence per share (the "Placing"). The net proceeds of the
Placing were primarily used to fund the acquisition of 20% of the Selva Field
in Italy through its subsidiary PXOG Marshall Limited and as development costs
of the Selva project.
In October 2022, £21,250 of the Convertible Loan Note 2022, were converted
into 500,000 new ordinary shares of £0.001 each at a price of 4.25 pence per
share
During the year, 1,920,000 new ordinary shares of £0.001 were issued at a
price of 2.25 pence each on the exercise of warrants, raising £43,200 before
expenses.
During the year, 24,325,955 new ordinary shares of £0.001 were issued at a
price of 3.00 pence each on the exercise of warrants, raising £729,779 before
expenses.
In September and October 2022, 4,654,131 new ordinary shares of £0.001 were
issued at a price of 4.00 pence each on the exercise of share options, raising
£186,165 before expenses.
Deferred shares rights
The deferred shares have no rights to vote, attend or speak at general
meetings of the Company or to receive any dividend or other distribution and
have limited rights to participate in any return of capital on a winding-up or
liquidation of the Company.
17. TRADE AND OTHER PAYABLES
2022 2021
£ £
Current:
Trade creditors - 8,423
Social security and other taxes 15,419 19,469
Accruals and deferred income 26,021 25,000
41,440 52,892
The Directors consider that the carrying amount of trade and other payables
approximates to their fair value.
Prospex Energy Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2022
18. FINANCIAL LIABILITIES - BORROWINGS
2022 2021
£ £
Current:
Bank loan - 9,616
Unsecured loan notes 1,812,744 131,353
1,812,744 140,969
2022 2021
£ £
Non-current:
Bank loan - 32,778
Unsecured loan notes 799,145 214,454
799,145 247,232
Terms and debt repayment schedule:
1 year or less 1-2 years 2-5 years Total
2022 £ £ £ £
Bank loan - - - -
Unsecured loan notes 1,812,744 799,145 - 2,611,889
1,812,744 799,145 - 2,611,889
1 year or less 1-2 years 2-5 years Total
2021 £ £ £ £
Bank loan 9,616 9,859 22,919 42,394
Unsecured loan notes 131,353 214,454 - 345,807
140,969 224,313 22,919 388,201
Loan notes
Loan notes
2018 2020 2021 2022 Total
£ £ £ £
At 1 January 2021 402,101 415,838 - - 817,939
Converted into shares - (415,838) - (415,838)
Transferred to new loan note (321,681) - 321,681 - -
Repaid in year (56,294) - - - (56,294)
At 31 December 2021 24,126 - 321,681 - 345,807
Issued in year - - - 2,370,000 2,370,000
Interest capitalised - - - 48,685 48,685
Converted into shares - - - (21,250) (21,250)
Repaid in year (24,126) - (107,227) - (131,353)
At 31 December 2022 - - 214,454 2,397,435 2,611,889
2018 Loan note
The 2018 Notes pay 10% interest biannually. Repayments of capital started in
December 2020 with final repayment due on 30 June 2022 (four equal payments).
See below for details of capital rolled into 2021 Loan note.
Prospex Energy Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2022
18. FINANCIAL LIABILITIES - BORROWINGS - continued
2020 Loan note
The 2020 Notes pay 10% interest per annum. The term of the 2020 Notes is 18
months with capital repayment of unconverted amounts due on 30 June 2022.
The 2020 Notes granted the subscribers the right but not the obligation to
convert the loan, on notice, into new ordinary shares in the Company each at
2.05 pence per share.
During 2021, the loan note subscribers converted their loans of £415,838 into
20,284,787 new ordinary shares of 0.1p per share at a price of 2.05p per
share.
2021 Non-Convertible Loan note
In June 2021, holders of £321,681 of the 2018 loan note agreed to rollover
their combined holdings into a new unsecured loan note ('the 2021 Loan Note').
The Company issued £321,681 of the 2021 Loan Note to existing holders of
the 2018 Loan Note ('the Subscribers'), including several directors of the
Company.
Under the terms of 2018 Loan Note, holders were entitled to the outstanding
capital returned in equal instalments in June 2021, December 2021 and June
2022. The terms of the 2021 Loan Note reflect those of the 2018 Loan Note
except all the capital repayment dates have effectively been extended by 18
months to December 2022, June 2023 and December 2023, while the annualised
interest rate is now 12% versus 10%. The 2021 Loan Note will pay 6% interest
every six months, with the first payment due on 31 December 2021. The 2021
Loan Note is not convertible.
July 2022 Convertible Loan note
The July 2022 Convertible Loan Notes totalling £1.87 million pay interest at
12% per annum, on a quarterly basis. The first interest payment on 30
September 2022 was capitalised and added to the loan principal.
The July 2022 Convertible Loan Notes are convertible at 4.25p per ordinary
share at any time at the election of the Noteholder. The Loan principal is
to be repaid in three equal tranches - 30 September 2023, 31 December 2023 and
31 March 2024.
September 2022 Convertible Loan note
The September 2022 Convertible Loan Notes totalling £0.5 million pay interest
at 15% per annum, on a quarterly basis. The first interest payment on 30
September 2022 was capitalised and added to the loan principal.
The September 2022 Convertible Loan Notes are convertible at 5.50p per
ordinary share at any time at the election of the Noteholder. The Loan
principal is to be repaid in three equal tranches - 30 September 2023, 31
December 2023 and 31 March 2024.
19 DEFERRED TAXATION
2022 2021
£ £
At 1 January 2022 40,394 -
On revaluation of investments 1,218,415 40,394
At 31 December 2022 1,258,809 40,394
20. FINANCIAL INSTRUMENTS
The principal financial instruments used by the Company, from which financial
instrument risk arises are as follows:
- Trade and other receivables
- Cash and cash equivalents
- Trade and other payables
A summary of the financial instruments held by category is provided below:
2022 2021
Financial assets measured at amortised costs: £ £
Trade and other receivables 7,643 37,893
Cash and cash equivalents 1,482,762 220,060
Amounts owing from group undertakings 5,496,676 2,029,179
6,987,081 2,287,132
Prospex Energy Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2022
20. FINANCIAL INSTRUMENTS - continued
2022 2021
Financial liabilities measured at amortised costs: £ £
Bank loans - 42,394
Unsecured loan notes 2,611,889 345,807
Trade and other payables 41,440 52,892
Total financial liabilities 2,653,329 441,093
Financial assets at fair value through profit or loss
Financial instruments that are measured at fair value are classified using a
fair value hierarchy that reflects the source of inputs used in deriving the
fair value. The three classification levels are:
- Level 1: quoted prices (unadjusted) in active markets for identical assets
or liabilities;
- Level 2: inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices); and
- Level 3: inputs for the asset or liability that are not based on observable
market data (unobservable market inputs).
The following table presents the Company's assets carried at fair value by
valuation method:
Financial assets at fair value through profit or loss:
Fair value measurement
Level 1 Level 2 Level 3
£ £ £
At 31 December 2022 - - 16,064,640
At 31 December 2021 - - 6,697,305
The financial assets at fair value through profit and loss are the Company's
holdings in subsidiary undertakings and one unquoted security and within
Level 3 of the fair value hierarchy.
The fair value is determined to be equal to the cost of the investment and is
reviewed periodically based on information available about the performance of
the underlying business. Where cost is deemed to be inappropriate, the
following table shows the valuation technique used in measuring Level 3 fair
values for financial instruments measured at fair value in the statement of
financial position, as well as the significant unobservable inputs used. The
only method used is that of NPV.
Valuation technique Significant unobservable inputs Inter-relationship between significant unobservable inputs and fair value
measurement
NPV - The valuation model considers the present value of expected receipts, Forecast annual revenue growth rate The estimated fair value would increase (decrease) if:
discounted using a risk-adjusted discount rate. The expected receipt is
determined by considering the possible scenarios of forecast revenue and gas Forecast gas prices - the annual revenue growth rate were higher (lower);
prices, the amount to be received under each scenario and the probability of
each scenario. Risk-adjusted discount rate - the gas prices were higher (lower); or
- the risk-adjusted discount rate were lower (higher).
Generally, a change in the any of the above variables would be accompanied by
a directionally similar change in revenue receipts and a consequential change
in the valuation of the investment
Prospex Energy Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2022
20. FINANCIAL INSTRUMENTS - continued
Financial risk management
The Company's activities expose it to a variety of risks including market risk
(foreign currency risk and interest rate risk), credit risk and liquidity
risk. The Company manages these risks through an effective risk management
programme and through this programme, the Board seeks to minimise potential
adverse effects on the Company's financial performance.
The Board provides written objectives, policies and procedures with regards to
managing currency and interest risk exposures, liquidity and credit risk
including guidance on the use of certain derivative and non-derivative
financial instruments.
Credit risk
Credit risk is the risk of financial loss to the Company if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations. The Company's credit risk is primarily attributable to its
receivables and its cash deposits. It is Company policy to assess the credit
risk of new customers before entering contracts. The credit risk on liquid
funds is limited because the counterparties are banks with high credit-ratings
assigned by international credit-rating agencies.
Liquidity risk and interest rate risk
Liquidity risk arises from the Company's management of working capital. It
is the risk that the Company will encounter difficulty in meeting its
financial obligations as they fall due. The Board regularly receives cash
flow projections for a minimum period of 12 months, together with information
regarding cash balances monthly.
The Company is principally funded by equity and invests in short-term
deposits, having access to these funds at short notice. The Company's policy
throughout the period has been to minimise interest rate risk by placing funds
in risk free cash deposits but also to maximise the return on funds placed on
deposit.
All cash deposits attract a floating rate of interest. The benchmark rate
for determining interest receivable and floating rate assets is linked to the
UK base rate.
Foreign currency exposure
At 31 December 2022, the Company's monetary assets and liabilities are
denominated in GBP Sterling, the functional currency of the Company and
therefore at the year end the company had no exposure to net currency gains
and losses.
Although the Company's subsidiary undertakings operate in the Eurozone and the
Company provides working capital to those companies, it has no formal policies
in place to hedge the Company's activities to the exposure to currency risk.
It is the Company's policy to ensure that it enters into transactions in its
functional currency wherever possible.
Management regularly monitor the currency profile and obtain informal advice
to ensure that the cash balances are held in currencies which minimise the
impact on the results and position of the Company from foreign exchange
movements.
21. RELATED PARTY DISCLOSURES
Included in loans to group undertakings is an amount of £13 (2021: £13) due
from PXOG Massey Limited, the Company's wholly owned subsidiary.
Included in trade and other receivables is an amount of £4,821,467 (2021:
£1,225,570) due from PXOG Marshall Limited, the Company's wholly owned
subsidiary. Interest receivable of £321,805 (2021: £109,618) has been
accounted for in the Statement of Profit or Loss.
Included in trade and other receivables is an amount of £675,196 (2021:
£803,596) due from PXOG Muirhill Limited, the Company's wholly owned
subsidiary.
Included in trade and other receivables is an amount of £nil (2021: £22,470)
due from Tarba Energia S.L. ("Tarba"). Mark Routh is a director of Tarba.
Prospex Energy Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2022
21. RELATED PARTY DISCLOSURES
At the balance sheet date, the Directors had the following interests in the
unsecured loan notes (note 18):
2022 2021
£ £
Mark Routh 51,164 -
Richard Mays 87,589 13,403
William Smith 51,164 40,210
Alasdair Buchanan 51,042 -
22. ULTIMATE CONTROLLING PARTY
In the opinion of the Directors, there is no ultimate controlling party.
23. SHARE-BASED PAYMENT TRANSACTIONS
Share options
At 31 December 2021 and 31 December 2022 outstanding awards to subscribe for
ordinary shares of 0.1p each in the Company, granted in accordance with the
rules of the share option scheme, were as follows:
Number of shares Weighted average remaining contractual life (years) Weighted average exercise price (pence)
2022
Brought forward 5,820,544 1.46 6.27
Granted during the year 10,300,000 -
Exercised during the year (4,654,131) -
Lapsed during the year (1,600) -
Carried forward 11,464,813 2.84 6.61
Number of shares Weighted average remaining contractual life (years) Weighted average exercise price (pence)
2021
Brought forward 5,820,544 2.46 6.27
Carried forward 5,820,544 1.46 6.27
Prospex Energy Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2022
23. SHARE-BASED PAYMENT TRANSACTIONS - continued
All options were exercisable at the year end. 4,654,131options were
exercised during the year.
The following share-based payment arrangements were in existence at the
year-end.
Options Number Expiry date Exercise price Fair value at grant date
1 Granted 16 April 2015 113,884 15/04/2025 76.25p 1.94p
2 Granted 1 June 2020 1,050,929 01/06/2023 4.00p 1.79p
3 Granted 18 March 2022 6,700,000 17/03/2025 5.00p 1.23p
4 Granted 23 September 2022 3,600,000 23/09/2027 8.15p 2.91p
The fair value of remaining share options has been calculated using the Black
Scholes model. The assumptions used in the calculation of the fair value of
the share options outstanding during the year are as follows:
Options Grant date share price Exercise price Expected volatility Expected option life (years) Risk-free interest rate
1 Granted 16 April 2015 100.00p 76.25p 71.50% 3.00 0.71%
2 Granted 1 June 2020 2.75p 4.00p 163.60% 3.00 0.64%
3 Granted 18 March 2022 3.85p 5.00p 89.40% 2.00 1.21%
4 Granted 23 September 2022 7.85p 8.15p 87.40% 2.00 4.03%
The fair value has been calculated assuming that there will be no dividend
yield.
Volatility was determined by reference to the standard deviation of expected
share price returns based on a statistical analysis of daily share prices over
a 3-year period to grant date. All of the above options are equity settled.
All of the share options are equity settled and the charge for the year is
£187,417 (2021: £nil).
Warrants
At 31 December 2021 and 31 December 2022, outstanding warrants to subscribe
for ordinary shares of 0.1p each in the Company, granted in accordance with
the warrant instruments issued by Prospex, were as follows:
Number of shares Weighted average remaining contractual life (years) Weighted average exercise price (pence)
2022
Brought forward 27,245,000 1.22 3.03
Exercised in the year (26,253,316) 3.02
Lapsed during the year (325,000) 10.00
Carried forward 666,684 0.23 3.00
Number of shares Weighted average remaining contractual life (years) Weighted average exercise price (pence)
2021
Brought forward 18,806,694 1.97 2.38
Granted during the year 26,920,000 2.95
Exercised during the year (18,481,694) 2.95
Carried forward 27,245,000 1.22 3.03
During 2022, 7,361 of Treasury Shares were used to satisfy the exercise of
warrants.
Prospex Energy Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2022
23. SHARE-BASED PAYMENT TRANSACTIONS - continued
Warrants - continued
All warrants were exercisable at the year end.
The following warrants were in existence at the year end.
Warrants Number Expiry date Exercise price Fair value at grant date
1 Granted 23 March 2021 666,684 23/03/2023 3.00p N/A
The fair value of the remaining warrants has been calculated using the
Black-Scholes model. The assumptions used in the calculation of the fair
value of the share options outstanding during the year are as follows:
Warrants Grant date share price Exercise price Expected volatility Expected option life (years) Risk-free interest rate
1 Granted 23 March 2021 1.65p 3.00p N/A 2.00 N/A
The fair value has been calculated assuming that there will be no dividend
yield.
Volatility was determined by reference to the standard deviation of expected
share price returns based on a statistical analysis of daily share prices over
a 3-year period to grant date. All of the above options are equity settled.
25m of the warrants granted on 23 March 2021 fell outside the scope of IFRS
and as such no charge was made. All of the share warrants are equity settled
and the charge for the year is £nil (2021: £24,496). As the warrants
relating to the charge for 2021 were all in consideration of shares issued
during the year, it was taken directly to equity and charged against the share
premium as costs in respect of the issue of shares.
24. DIRECTORS' EMOLUMENTS
Key management personnel are those persons having authority and responsibility
for planning, directing and controlling activities of the Company, including
all directors of the Company.
2022 2021
£ £
Salaries and other short-term employee benefits 254,833 192,072
Post-employment benefits - 11,267
Share-based payment 163,994 -
418,827 203,339
Prospex Energy Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2022
24. DIRECTORS' EMOLUMENTS - continued
Salaries and fees Benefits in kind Pension contributions Share-based payment 2022 2021
£ £ £ £ £ £
Mark Routh 200,833 - - 52,094 252,927 71,923
Richard Mays 15,000 - - 37,300 52,300 15,000
William Smith 24,000 - - 37,300 61,300 13,500
Alasdair Buchanan 15,000 - - 37,300 52,300 4,615
Edward Dawson - resigned 27/07/2021 - - - - - 89,551
James Smith - resigned 27/07/2021 - - - - - 8,750
254,833 - - 163,994 418,827 203,339
The number of directors for whom retirement benefits are accruing under money
purchase pension schemes amounted to nil (2021:1).
The Directors interests in share options as at 31 December 2022 are as
follows:
Director Number of shares Exercise price Date of grant First date of exercise Final date of exercise
Mark Routh 2,100,000 5.00p 18/03/2022 18/03/2022 17/03/2025
Mark Routh 900,000 8.15p 23/09/2022 23/09/2022 22/09/2027
3,000,000
Richard Mays 21,669 76.25p 14/04/2015 14/04/2015 13/04/2025
Richard Mays 900,000 5.00p 18/03/2022 18/03/2022 17/03/2025
Richard Mays 900,000 8.15p 23/09/2022 23/09/2022 22/09/2027
1,821,669
William Smith 21,669 76.25p 14/04/2015 14/04/2015 13/04/2025
William Smith 900,000 5.00p 18/03/2022 18/03/2022 17/03/2025
William Smith 900,000 8.15p 23/09/2022 23/09/2022 22/09/2027
1,821,669
Alasdair Buchanan 900,000 5.00p 18/03/2022 18/03/2022 17/03/2025
Alasdair Buchanan 900,000 8.15p 23/09/2022 23/09/2022 22/09/2027
1,800,000
The options awarded to Richard Mays are held in the name of Sallork Limited, a
company he owns and controls.
25. EVENTS AFTER THE REPORTING PERIOD
In February 2023, the Company granted 3,700,000 share options in the Company
to directors and other staff. The options were awarded at 12.25p per share,
vest on 1 June 2023 and are exercisable for a period of five years. The
options issued to the directors were:
Mark Routh 1,233,333
William Smith 370,000
Alasdair Buchanan 370,000
1,973,333
Between January and March 2023 £197,882 of the July 2022 Convertible Loan
Notes have been converted in to 4,656,073 ordinary shares of the company.
In February 666,484 3p warrants were exercised generating proceeds of
£20,000.
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