REG - Reabold Resources - Full Year Results for year ended 31 December 2022
30/05/2023 07:00
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RNS Number : 8567A Reabold Resources PLC 30 May 2023
30 May 2023
Reabold Resources plc
("Reabold" or the "Company")
Full Year Results for the year ended 31 December 2022
Reabold, the oil & gas investing company with a diversified portfolio of
exploration, appraisal and development projects, today announces its audited
financial results for the year ended 31 December 2022 and the Annual Report is
publicly available at www.reabold.com/investors/reports-presentations/
(http://www.reabold.com/investors/reports-presentations/)
Reporting period highlights
Portfolio developments
· Sale of Corallian and its Victory licence in which Reabold held a
49.99% interest to Shell U.K. Limited in November 2022 for gross cash
consideration of £32 million; Reabold's share of net proceeds c. £12.7
million after fees and other costs
· Acquisition of Corallian's six North Sea licences by Reabold for
£250,000 in May 2022
· West Newton developments: planning granted and Competent Person's
Report ("CPR") confirmed gross 2C unrisked technically recoverable resources
of 197.6 bcf of sales gas, with an estimated 86% geological chance of success.
Technical analysis confirmed future exploratory drilling at the West Newton
B site
· Reabold's California assets exchanged for a 42% stake in Daybreak
Oil & Gas Inc
Board and balance sheet
· Appointment of Chief Financial Officer Chris Connolly in March
2022; former Finance Director Anthony Samaha appointed as Non-Executive
Director
· Cash of £5.5 million at year end, no debt
· Net assets of £46.5 million
Post period end highlights
· Acquisition of Simwell Resources Limited for £1 million which
includes interests in four Southern North Sea licences east of onshore West
Newton, providing interesting exploration opportunities and valuable
geological insight for our understanding of West Newton
· CPR released on four of Reabold's North Sea licences including P2478,
which includes the West Dunrobin prospect confirming significant resource
potential
· Rathlin to potentially bring in an industry partner to support licence
activity, with West Newton B-2 drilling targeted for Q4 2023, subject to final
regulatory approvals and rig availability
· Potentially highly significant discovery in Crawberry Hill, part of
the PEDL 183 licence
· Share buyback programme commenced during April 2023
· Acquired a 3.1% interest in LNEnergy for cash consideration of
£250,000, receiving options to acquire further shares in LNEnergy which, if
exercised, would result in Reabold holding a 25.0% shareholding in LNEnergy
for aggregate cash and equity consideration of £3.8 million.
Strand Hanson Limited - Nominated & Financial Adviser +44 (0) 20 7409 3494
James Spinney
James Dance
Rob Patrick
Stifel Nicolaus Europe Limited - Joint Broker +44 (0) 20 7710 7600
Callum Stewart
Simon Mensley
Ashton Clanfield
finnCap Ltd - Joint Broker +44 (0) 20 7220 0500
Christopher Raggett
Barney Hayward
Camarco +44 (0) 20 3757 4980
Billy Clegg
Rebecca Waterworth
Notes to Editors
Reabold Resources plc has a diversified portfolio of exploration, appraisal
and development oil & gas projects. Reabold's strategy is to invest in
low-risk, near-term projects which it considers to have significant valuation
uplift potential, with a clear monetisation plan, where receipt of such
proceeds will be returned to shareholders and re-invested into further growth
projects. This strategy is illustrated by the recent sale of the undeveloped
Victory gas field to Shell, the proceeds of which are being returned to
shareholders and re-invested.
Strategic Report
Chair's letter
We are pleased to report that the financial year ending 31(st) December 2022
saw significant progress in evolving the portfolio of the company. The sale
of Corallian, which held the Victory gas discovery in the West of Shetland, to
Shell in November 2022 was a key milestone for us. The sale is an encouraging
demonstration of our ability to monetise assets at a higher valuation, execute
successfully with large oil companies and use the flexibility of our
investment model to achieve a value-enhancing transaction. Importantly, the
sale also enabled Reabold to acquire six additional North Sea licences
contained in the Corallian portfolio, expanding its UK acreage for a minimal
sum of £250,000. The CPR published on four of the licences post year end is
encouraging.
At West Newton, planning was granted for drilling and production at Rathlin's
West Newton A site, as well as an extension for further exploratory drilling
at the West Newton B site. We announced our conceptual development plan and
a CPR which confirmed gross 2C unrisked technically recoverable resources of
197.6 bcf of sales gas, with an estimated 86% geological chance of success.
Given the significant technical analysis that has been completed to date,
culminating in the JV partnership agreeing the well path for West Newton B-2,
and in line with prudent risk management, Rathlin has decided to potentially
reduce its significant working interest position in PEDL 183 by bringing in an
industry partner to participate in drilling on PEDL 183. Reabold's balance
sheet has more than sufficient funding for its direct share of the planned
drilling on the licence and we will support Rathlin in exploring funding
options to enable the drilling of this well in Q4 2023. There is potential
for Reabold to fund Rathlin's share upon receipt of the second tranche of the
Corallian sale proceeds later in 2023 but this decision has not been made.
Our insight into the emerging Zechstein trend eastwards and offshore of PEDL
183 (which holds the West Newton licence) has been enhanced through the
acquisition of Simwell Resources for £1 million, which completed in January
2023. Simwell has high quality 3D seismic data over this offshore area and
this provides further exploration opportunities and geological insight
valuable for our understanding of West Newton. Post year end it was exciting
to announce, in April 2023, the potentially highly significant existing
discovery in Crawberry Hill, which was originally drilled by Rathlin in 2013.
The potential discovery could add materially to the already sizeable resource
offered from the West Newton trend.
The corporate activity we pursued in 2022 increased the exposure of our
portfolio to the UK and it is encouraging to see that the security of UK oil
and gas production remains a key part of the British Government's plan to
transition to a lower carbon economy, as published in the recent 'Powering up
Britain' review.
In the US we converted drilling and production success in Reabold California
LLC into a 42% stake in Daybreak Oil & Gas Inc ("Daybreak", an OTC traded,
Californian oil and gas operator). The transaction in May 2022 creates
liquidity for Reabold and formed a new, cash flow producing business with
growth and investment prospects which we expect will evolve over the next few
years.
Overall, 2022 saw some significant milestones for Reabold. As we progress into
2023 it is clear that the trajectory of this business has various catalysts to
drive value including the receipt of funds from Shell, the confirmation of
funding for Rathlin's share of the West Newton project drilling and the
progression of our other assets such as a farm out of some of our North Sea
licences. As a Board, we are encouraged by the strength of our balance sheet
(£5.5 million cash at end FY 2022 and no debt) and our approach to the
diversification of investment risk. We will always consider this when making
capital allocation decisions and we are pleased that we have started to return
cash to shareholders via a share buyback, whilst retaining the financial
flexibility to continue investing in our assets to generate attractive
monetisation opportunities.
Jeremy Edelman
Chair
26 May 2023
Strategy and business model
Reabold is an oil and gas investing company with a diversified portfolio of
exploration, appraisal and development projects . Reabold's strategy is to
invest in low-risk, near-term projects which it considers to have significant
valuation uplift potential, with a clear monetisation plan and where receipt
of such proceeds will be returned to shareholders and re-invested into further
growth projects.
The sale of Reabold's share in Corallian and its Victory licence in 2022 for
net consideration of £12.7 million demonstrates the Reabold model:
· Reabold's share of net proceeds £12.7 million after fees and
other costs
· Victory asset valuation a significant uplift on Reabold's total
investment of £7.5 million in Corallian
· Acquisition of North Sea licences from Corallian for very
attractive price of £250,000
· Quality of counterparty reflects Reabold management's strong
capabilities in identifying, advancing and monetising undervalued, strategic
assets
· Reabold proposes to return a share of the net sale proceeds to
shareholders in 2023 and re-invest into further growth projects. A share
buyback programme commenced in April 2023
Each investment the company makes must have low geological risk and clear exit
opportunities.
We primarily identify oil & gas assets at the appraisal stage where there
is a clear value creation opportunity between the investment required to
progress the asset and the asset's value at the point of monetisation. We
invest in and provide modest funding for a diverse range of low risk, high
impact projects with near term catalysts to create value. We are disciplined
in our exit routes and consider selling assets prior to full project
development in order to maximise the value of the whole Reabold portfolio.
Our strict investment criteria drives our portfolio potential. We focus on:
Geology
Reabold invests in projects that are substantially de-risked from a technical
perspective due to previous drilling. Each project should have existing
regional production and historic discovery wells nearby or on the asset. Each
asset must also possess sufficient running room to turn initially small
projects into substantial regional businesses.
Economics
Each project must deliver extremely attractive returns at current and lower
commodity price levels. Reabold seeks robust, fast cycle projects that require
limited capital expenditure and have low geopolitical risks. As projects are
low cost, they typically exhibit materially lower carbon intensity than the
industry average. Reabold's non-operator model helps to keep costs low and
allows the company to manage a diversified portfolio.
Investment Returns
Investment returns are key for Reabold. Projects must demonstrate the
potential to deliver high returns over a short time frame and the opportunity
to scale up and increase project returns beyond our initial project period.
Exit
Identifying the optimal time to exit a project is critical to Reabold's
strategy. Doing so effectively will allow the company to scale and deploy more
capital over time.
Reabold has a highly-experienced small executive team with significant
investment experience in oil and gas projects, company evaluation and
commercial industry expertise. Reabold's highly qualified Board of Directors
bring significant public oil and gas company experience. The biographies of
the Board are summarised on pages 16 and 17.
Key performance indicators (KPIs)
The group's main business is to invest in direct and indirect interests in
exploration and producing projects. Reabold's long-term strategy is to
re-invest capital generated through monetisation of its investments into new
projects in order to grow the company and create value for its
shareholders. The company tracks its new business development objectives
through the building of a risk-balanced portfolio of assets. The company
reviews its KPIs on an ongoing basis as it moves through the lifecycle of its
strategy to ensure they continue to serve as a useful measure of our strategic
performance.
The Board assesses the performance of the group across measures and indicators
that our consistent with the Reabold's strategy and investor proposition.
The KPIs are:
KPI Definition Performance
KPI 1 Portfolio enhancements · Six North Sea licences acquired from Corallian. The licences
provide Reabold significant prospective resources and opportunities to create
Grow value through material investments, project delivery and commercial value.
discoveries
KPI 2 Future financial prosperity · Sale of Corallian and its Victory licence in which Reabold held a
49.99% interest to Shell plc in September 2022 for gross cash of £32 million;
Liquidity events, and successful fundraising Reabold's share of net proceeds c £12.7 million
KPI 3 Financial discipline · Cash position as at 31 December 2022 was £5.5 million. Reabold
is fully funded for all intended activities and commitments in 2023.
Ensuring business is run to budget via accurate forecasting, maintaining
significant cash buffer and resilient balance sheet · Net assets as at 31 December 2022 were £46.5 million
KPI 4 Growth in NAV per share · Broker risked NAV increased from 0.71 - 0.86p/share in March 2022
to 1.2p/share in March 2023
KPI 5 Total shareholder return over a calendar year · The share price started the year at 0.18p and finished the year
at 0.21p
KPI 6 Risk and controls · The company did not have any recordable incidents or injuries in
2022. There were no instances of misconduct, breeches of laws or regulations,
Zero recordable incidents, ethical misconduct, breeches of laws or regulatory actions or penalties. The company was compliant with all its
regulations, penalties. Accurate and compliant financial resources data financial reporting deadlines and shared resource data via CPRs prepared by
RPS Energy on its PEDL 183 licence and Dunrobin prospect.
Co-Chief Executive Officers' Review of Operations
We have had an active year and have evolved the portfolio significantly: the
sale of Corallian to Shell, exchanging Reabold California for a 42% stake in
Daybreak, acquiring new licences in the North Sea, and in 2023, the
acquisition of Simwell, whilst increasing our cash balance to £5.5 million.
We will discuss the details of each project below.
UK Onshore
Rathlin Energy (UK) Limited and West Newton - PEDL183
West Newton is an onshore hydrocarbon discovery located north of Hull,
England. To date, three wells have been drilled at West Newton (A-1, A-2 and
B-1Z) confirming a major discovery - potentially one of the largest
hydrocarbon fields discovered onshore UK. Rathlin Energy (UK) Limited
("Rathlin") is the operator of the licence and holds a 66.67% interest.
Reabold has a 59.5% shareholding in Rathlin and a direct 16.67% in the licence
giving the company an aggregate c. 56% economic interest in West Newton.
During 2022, the conceptual development plan for West Newton progressed well,
following extensive third-party technical analysis and confirmation of the
resource potential. The development plan consists of an initial five well
development drilling campaign with first gas anticipated mid-2026. The Joint
Operation intends to drill the low-cost wells in a manner which phases the
development cost, significantly de-risking the financial profile of the
project. The first development well, planned for Q4 2023, will materially
de-risk the project at modest cost.
In addition, Rathlin commissioned a CPR effective 30 June 2022 to evaluate the
oil and gas resources contained within PEDL 183. The report was finalised and
announced on 29 September 2022, which identified the following:
· Estimated geological chance of success at West Newton of 86%
· Gross 2C unrisked technically recoverable resource of 197.6 bcf
of sales gas
· Prospective resource potential from adjacent sites at Spring
Hill, Withernsea and Ellerby of a combined gross 2U unrisked recoverable
resource of 363.7 bcf of sales gas
· Estimated geological chance of success at Spring Hill, Withernsea
and Ellerby of 43%
· NPV10 of US$396 million on a 100% basis for West Newton equating
to US$222 million net for Reabold's economic interest.
The full CPR can be found on our website: www.Reabold.com
(http://www.Reabold.com) .
Based on the reservoir characterisation and modelling work completed by RPS,
horizontal wells extending approximately 1,500 metres through the Kirkham
Abbey reservoir are the preferred development drilling method. Horizontal
wells have a greater likelihood of encountering reservoir "sweet spots" and
sections of reservoir with natural fractures that will enhance the productive
capability of future wells. This is consistent with the development methods
employed in European equivalents to the Kirkham Abbey Formation, especially in
the northeast Netherlands fields.
Reabold and the partners to the joint operation, have determined the optimum
location and orientation for a horizontal well which is intended to be drilled
at West Newton B site in Q4 2023.
Rathlin has made applications to the Environment Agency ("EA") for the use of
oil-based fluids for drilling operations through the hydrocarbon-bearing
Permian strata. Analyses undertaken by CoreLab have determined that the
Kirkham Abbey Formation is sensitive to water-based fluids and that these
fluids are a significant source of formation damage. Approval of the
applications associated with the West Newton A site and the West Newton B site
are still pending.
Also, during 2022, Rathlin submitted proposals to the North Sea Transition
Authority ("NSTA") to modify the work programme for PEDL 183. The NSTA has
formally agreed with Rathlin's proposal to reduce the PEDL 183 licence area to
a single retention area and substitute the outstanding seismic commitment for
the drilling operations that took place at WNB-1 and WNB-1Z, thus fulfilling
the obligation. In a subsequent application made to the NSTA, during December
2022, Rathlin proposed to reorder the additional components of the PEDL 183
work programme such that the drilling and testing of a new Kirkham Abbey
deviated or horizontal appraisal well will be undertaken by June 2024, the
recompletion or sidetrack and testing of the WNA-1, WNA-2, or WNB-1Z well also
be completed in that same timeframe, and a field development plan be submitted
by June 2025. Formal approval of this application was received in Q1 2023, and
Reabold and its partners are actively working on plans to meet these work
commitments.
In the first half of 2023, Reabold has continued to appraise other
opportunities within the PEDL 183 licence. Reabold has undertaken a technical
review of its Zechstein play prospectivity in the UK, including the licences
acquired through the Simwell transaction and PEDL 183, combining the
significant quantity of seismic data, historical wells, core analysis and
other proprietary data and analysis assembled by the company.
Through this analysis, Reabold has identified on PEDL 183 a significant
potential discovery, Crawberry Hill, which was drilled by Rathlin in 2013. The
company's priority now is to develop plans with the aim of making this a
drill-ready appraisal opportunity. This could add materially to the already
significant resource within PEDL 183 offered from the West Newton trend. The
Crawberry Hill-1 well, drilled in 2013, intersected 141m of Kirkham Abbey
Formation with good indications of gas shows and porosity. The well was
originally drilled to test a deeper target and does not have a full suite of
logs over the Kirkham Abbey interval.
ERC Equipoise Ltd (ERCE) has undertaken a petrophysical analysis of the
conventional reservoir of the Kirkham Abbey formation in the Crawberry Hill
and Risby-1 wells and interprets average porosities greater than 15% in the
top 20m of the Kirkham Abbey formation in Crawberry Hill-1. ERCE also
interprets probable gas saturations in the top 6m of the Kirkham Abbey
formation in the Crawberry Hill-1 well.
The Risby-1 well was drilled in the water leg but good porosity was calculated
from the well logs and the potentially very good permeability indicated from
well cuttings, which is supported by a drill-stem test in the Kirkham Abbey
Formation. Detailed seismic mapping is underway to define the extent of the
Crawberry Hill accumulation, which could add materially to the already
significant resource within PEDL 183 offered from the West Newton trend.
In conclusion, Reabold believes the apparent discovery at Crawberry Hill to be
an exciting appraisal opportunity potentially significantly enhancing the
already strategic asset that is PEDL 183.
Given the significant technical analysis that has been completed to date,
culminating in the JV partnership agreeing the well path for WN B-2 and the
emergence of the Crawberry Hill opportunity, and in line with prudent risk
management, Rathlin has decided to reduce its significant working interest
position in PEDL 183 with the aim of potentially bringing in an industry
partner to participate in drilling on PEDL 183.
Rathlin holds a 66.67% licence interest in and is operator of PEDL 183.
Reabold has a c. 56% economic interest in PEDL 183 via its 16.665% direct
licence interest and through its c. 59% equity ownership of Rathlin. Reabold
is sufficiently funded for its 16.665% direct share of the costs for this well
with its existing cash resources.
Should Rathlin's efforts to reduce their working interest position not fully
meet their objective, Reabold could provide additional funding for Rathlin
upon receipt of the second tranche payment from Shell relating to the sale of
the Victory asset, which would allow WN B-2 to be drilled at the earliest
opportunity, subject to Environment Agency permit approvals and rig
availability. The exact timing and amount of the second tranche payment
from Shell is currently uncertain, however the second tranche payment will be
c. £9.5 million, assuming the development and production consent for the
Victory gas field is secured from the North Sea Transition Authority by 1
December 2023. If consent has not been received by this date, then Reabold
expects to receive £5.2 million within 3 business days of this date, with
the balancing payment to come at a later consent date. The net proceeds to be
received by Reabold would be sufficient to meet Rathlin's share of the
drilling costs of WN B-2, leaving Reabold financial flexibility for its
capital allocation strategy of balancing portfolio investment with shareholder
returns.
UK Offshore - Northern Area Licences
Corallian Energy Limited - 49.99% interest (sold 1 November 2022)
Licences - P2605, P2493, P2464, P2504 (all 100%) and P2478 (36%)
During 2022, the Board of Directors of Corallian agreed to sell the entire
issued share capital of Corallian to Shell U.K. Limited for a gross
consideration of £32 million, with Reabold's share of net proceeds being
£12.7 million.
The sale completed on 1 November 2022 and is a major milestone for the company
in demonstrating the execution of its strategy by way of monetising its
investment.
The payment of the consideration from Shell is staged, related to progress of
the Victory gas field development. On completion of the transaction, Shell
paid an initial consideration of £10 million (£3.2 million net to Reabold).
This will be followed by a further single payment of £22 million (£9.5
million net to Reabold), assuming that the development and production consent
for the Victory gas field is secured from the NSTA, on or before 1 December
2023. If consent has not been granted by this date, then Shell will have the
option to either: i) pay £12 million (£5.1 million net to Reabold), with the
remaining £10 million (£4.4 million net to Reabold) being paid at a later
consent date; or ii) offer to transfer-back the Victory licence to the current
Corallian shareholders for £1 consideration. The transfer-back offer
protection has been added for Corallian shareholders' benefit, to mitigate
against the highly unlikely event of the Victory project not being progressed
sufficiently. The Corallian sale valuation represents a significant uplift on
Reabold's total investment of £7.5 million in Corallian since late 2017.
Prior to the sale of Corallian and the Victory licence, Reabold acquired
Corallian's remaining six exploration and appraisal assets for £250,000 with
an economic effective date of 4 May 2022. On 15 September 2022, Reabold
announced the completion of the acquisition of the licences being P2396,
P2464, P2493, P2504 and P2605 (all at 100% working interest) and P2478 (36%
working interest). Reabold subsequently relinquished licence P2396.
Four of the licences are located near existing infrastructure and adjacent to
analogue fields. There are significant prospective resources and opportunities
to create value. The company believes that the prospects represent low to
moderate geological risk with relatively low drilling costs and are strong
candidates for farmout opportunities.
Reabold commissioned a CPR on licence P2478 which was released in Q1 2023. The
key points from the CPR are set out below:
· 201 mmboe(1) aggregate gross unrisked(2) Pmean Prospective
Resources on licence P2478
· The Dunrobin West prospect ("Dunrobin West"), agreed by the JV to
be the proposed location of the first exploration well on the licence, would
target 119 mmboe aggregate gross unrisked Pmean Prospective Resources(3)
· 34% Chance of Geologic Discovery (Pg) on Dunrobin West Jurassic
primary target
· Secondary Triassic target at Dunrobin West, which along with the
Jurassic can be tested by a single vertical borehole, included in formal
resource assessment for the first time with a Pg of 12%
· Dunrobin West dry hole drilling costs to a total depth of 800
metres estimated by the JV to be £8.6 million gross
· The company believes that Dunrobin West is geologically analogous
to the Beatrice field, which produced 164 mmboe
· Success at Dunrobin West would significantly de-risk Dunrobin
Central & East and Golspie analogous prospects
· Reabold's acquisition of, inter alia, licence P2478
from Corallian has provided the company with additional net unrisked Pmean
Prospective Resources from P2478 of 72 mmboe
( )
In addition to the separate CPR on P2478 published in February 2023, Reabold
commissioned a CPR covering licences P2464, P2504 and P2605 and includes the
CPR covering P2478. The CPR highlights the potential across all of Reabold's
key central and northern North Sea assets, namely: the Inner Moray
Firth, East Shetland Basin and the North West of Shetland. The
opportunities comprise a number of play types of both gas and oil with proven
potential from analogue fields. The full CPR can be found on Reabold's website
at www.Reabold.com.
( )
(1) The CPR reports oil and gas Prospective Resources. The oil equivalent
value of the gas resources has been estimated by the company using a factor of
5.8bcf per mmboe.
(2) The unrisked aggregation was performed by the company and assumes that
all prospects at all levels are successful.
(3) The unrisked aggregation of Dunrobin West was performed by the company.
The volumes were presented for each reservoir in the CPR and, at the company
request, were not aggregated probabilistically.
UK Offshore - Southern Area Licences
Licences - P2332 (30%) P2329, P2427, P2486 (all 10%)
Reabold completed the acquisition of Simwell Resources Limited in January 2023
which includes interests in four Southern North Sea licences: P2332 (Reabold
30%, Shell U.K Limited 70%, operator) and P2329, P2427 and P2486 (Reabold 10%,
Horizon Energy Partners Ltd 77.5%, operator and Ardent Oil Ltd 12.5%). The
transaction substantially increases Reabold's footprint in the emerging
Zechstein trend, complementing its onshore position in PEDL183, including the
West Newton project. The licences have a number of prospects covered with high
quality 3D seismic data.
The breakdown of the consideration paid was as follows:
· £363,835.76, by way of initial consideration, satisfied through
the issue of 134,753,985 new Ordinary Shares
· £305,157.71 to certain Simwell creditors satisfied by the issue
of 113,021,374 new Ordinary Shares
· £373,398.36 paid in cash to certain Simwell creditors
A contingent deferred consideration of £150,000 is payable to the sellers
if, inter alia, the operator of licence P2332 undertakes to the NSTA that
the licensees will commit to drill a well pursuant to a defined work programme
and within the applicable timescales.
Romania - Danube Petroleum Limited
Reabold has a 50.8% equity position in Danube Petroleum Limited ("Danube"),
with ASX listed ADX Energy Ltd ("ADX") holding the remaining 49.2%. Danube has
a 100% interest in the Parta exploration and Iecea Mare production licence in
Western Romania, which include the IMIC-1 discovery and the IMIC-2 prospect.
During 2022, the partnership continued to seek further industry funding
through farmout discussions with third parties for both the exploration area
(Parta) and the production licence (Iecea Mare) for infill opportunities.
Several very low risk oil and gas infill and side-track opportunities have
been identified within the licence area. The operator has also commenced
investigating geothermal opportunities within the Parta Exploration and Iecea
Mare licences. The very high geothermal gradient (6 degrees/100 meters) in
several parts of the Parta licence could make electrical power generation from
geothermal energy feasible and, given the very high trends in electricity
prices, highly economic. The operator has been approached by several local
communities in relation to geothermal projects mainly for district heating,
given its drilling experience and extensive 2D and 3D seismic database in the
area. This energy source is expected to receive increasing investment funding
in Romania from the EU.
In the second half of the year, the operator engaged with the Romanian
authorities in order to compile an application to extend the Parta licence
term without any further commitments. The technical focus was on the Iecea
Mare production licence where available 3D seismic covers the IMIC-2
exploration prospect. (Note: The total validity of the Iecea Mare production
licence is 20 years and is not affected). The governing authority, the
National Agency of Mineral Resources (NAMR) is supporting the extension which
can be granted through a government process.
USA - Daybreak
On 26 May 2022, Reabold announced the completion of the equity exchange
agreement with Daybreak. Reabold California LLC, which holds, inter alia,
licence interests in California, became a wholly owned subsidiary of Daybreak,
which, in exchange, issued 160,964,489 new Daybreak shares to Reabold,
equating to 42% of Daybreak's currently issued share capital. The transaction
has created a self-funded, OTC traded, Californian oil and gas operator with
significant growth potential. Daybreak will utilise its existing in-state
management team and expertise to grow the portfolio through development of
existing licences as well as considering strategic acquisition opportunities.
For more information see Note 3 and Note 15.
Production from the Californian licences, West Brentwood and Monroe Swell, in
which Reabold had a 50% working interest, for the period from 1 January 2022
to 25 May 2022 (the day prior to the completion of the equity exchange
agreement) was 7,587boe net to Reabold, generating revenues of US$736,000 (or
£560,000 using the average rate between 1 January 2022 and 25 May 2022).
Sachin Oza Stephen Williams
Co-Chief Executive Officer Co-Chief Executive Officer
26 May 2023
Financial review
Group Income Statement
The group's loss for the year ended 31 December 2022 was £45,000 (2021: loss
of £2,675,000).
Net sales volumes for the year comprised 7,587boe (2021: 24,457boe). The
reduced volumes were primarily due to the fact that Reabold held a direct 50%
working interest in the Californian licences for the first five months only in
2022 as a result of the completion of the equity exchange agreement in May
2022. The sales volumes generated total 2022 revenues of £0.6 million (2021:
£1.2 million). This represented an average realised sales price of
US$97.0/boe (2021: US$65.4/boe).
The gross loss for 2022 of £0.3 million (2021: gross loss of £0.2 million)
was after overall cost of sales of £0.8 million (2021: £1.3 million). This
comprised £0.4 million of production costs (2021: £0.7 million), royalties
of £0.1 million (2021: £0.2 million) and £0.3 million of non-cash
depreciation charges on oil and gas assets (2021: £0.4 million).
The gain in respect of the disposal of the entire 49.99% interest in Corallian
Energy Limited was £7.3 million. Proceeds received from the disposal of
Corallian in 2022 were £3.2 million. The carrying amount of Reabold's
investment in Corallian prior to disposal was £4.6 million. At 31 December
2022, contingent consideration relating to the disposal of Corallian amounted
to £8.7 million receivable within one year.
As a result of the completion of the equity exchange agreement with Daybreak
on 26 May 2022, Reabold no longer consolidates Reabold California LLC from
that date. On the date of completion, Reabold recognised the fair value of its
investment in Daybreak, treating it prospectively as a financial asset at fair
value. The resulting loss attributable to the equity exchange agreement in May
2022 was £2.3 million. The fair value loss of Reabold's investment in
Daybreak since completion to 31 December 2022 was £1.9 million.
Reabold's share of loss of associates was £1.6 million (2021: £0.8 million).
The increase was largely due to non-cash impairment charges in Corallian. See
Note 14 for more information.
Administrative expenses were in line with prior year at £1.7 million (2021:
£1.7 million).
In 2022, Reabold incurred £0.2 million, classed as non-underlying items (see
Note 25), in legal and professional fees in relation to the successful defence
from the attempt, from a group of five beneficial shareholders, to remove the
entire Board of directors of Reabold and replace them with four new directors.
All resolutions proposed by the requisitioning shareholders were rejected at a
General Meeting held in November 2022.
Currency gains of £635,000 (2021: £47,000), arose on US dollar denominated
loan receivables and financial assets.
Group Balance Sheet
At completion of the equity exchange agreement, Reabold no longer had
"control" over Reabold California as set out under UK adopted international
accounting standards. As a result, net assets of £7.7 million including
exploration and evaluation assets of £3.5 million and oil and gas assets of
£4.5 million were derecognised from the balance sheet and the fair value of
the investment in Daybreak was recognised. At 31 December 2022, the value of
Reabold's investment in Daybreak was £3.5 million.
Exploration and evaluation assets of £6.8 million showed a decrease from
£9.1 million at the end of 2021 reflecting the divestment of Reabold
California, offset by £0.3 million as a result the acquisition of six North
Sea licences from Corallian, £0.3 million of additions at West Newton and
£0.4 million as a result of decommissioning and exchange adjustments.
Property, plant and equipment decreased from £4.3 million at year end 2021 to
£nil as a result of the divestment of Reabold California.
Other balance sheet items that showed reductions since December 2021 as a
result of the equity exchange with Daybreak were goodwill (decrease of £0.3
million), restricted cash (decrease of £0.2 million), trade and other
payables (decrease of £0.1 million) and deferred tax liabilities (decrease of
£0.3 million).
Total investment in associates decreased from £27.7 million at year end 2021
to £22.3 million at 31 December 2022, primarily as a result of the disposal
of Corallian during the year. See Note 14 for further information.
The group recognised £8.7 million of deferred contingent consideration
receivable relating to the disposal of Corallian. See Note 15 for further
information.
The decommissioning provision at PEDL 183 increased from £0.2 million to
£0.4 million as a result of changes to the underlying assumptions around
inflation and discount rates.
The group does not have any other significant liabilities.
Overall, net assets have remained steady at £46.5 million (2021: £46.5
million).
Group cash flow statement
Net cash used in operating activities for the year ended 31 December 2022 was
£1.8 million, £0.7 million higher than in 2021 reflecting reduced revenues
as a result of the deconsolidation of Reabold's revenue generating California
business in May 2022, as part of the equity exchange agreement with Daybreak.
The group generated net cash of £2.4 million from investing activities, a
£4.5 million net increase from 31 December 2021. This was primarily due to
the £3.2 million initial proceeds received from the sale of Corallian, as
well as reduced capital expenditure at West Newton.
The group did not generate or use any cash related to financing activities in
2022. Net cash provided by financing activities for the year ended 31 December
2021 was £6.9 reflecting the issuance of 1,363,636,363 new ordinary shares at
0.55 pence per share, for gross proceeds of £7.5 million (£6.9 million net
of issuance costs). The proceeds were primarily used to fund additional
appraisal activity at West Newton as well as to provide additional contingency
across the group's investment portfolio.
Liquidity
Cash balances increased from £4.9 million at 31 December 2021 to £5.5
million at 31 December 2022. The group has no debt.
Commitments
The group does not have any signed contractual capital commitments as at 31
December 2022 (2021: nil), however the group does have obligations to carry
out defined work programmes on its licences, under the terms of the award of
rights to these licences. The company is not obliged to meet other joint
venture partner shares of these programmes.
PEDL 183
The Joint operation between Rathlin, Reabold and Union Jack have a commitment
to drill and test a new Kirkham Abbey deviated or horizontal appraisal well by
June 2024. The company estimates it's 16.67% share of costs to be c.£1.4
million for drilling a new well and £0.6 million for testing the well.
UK North Sea
Reabold estimates its share of firm exploration and appraisal work commitments
on its North Sea portfolio to be c.£0.5 million over the next 2 years. The
company has not yet taken a decision on whether to drill on any of its North
Sea licences.
Principal risks and uncertainties
Reabold operates in an environment subject to inherent risks and
uncertainties. The Board regularly considers the principal risks to which the
group is exposed and monitors any agreed mitigating actions. The overall
strategy for the protection of shareholder value against these risks is to
carry a broad portfolio of assets with varied risk/reward profiles, and to
retain adequate working capital.
The risks discussed below, separately or in combination, could have a material
adverse effect on the implementation of our strategy, our business, financial
performance, liquidity, prospects, shareholder value and returns and
reputation.
Risks Mitigation
Strategic and Commercial risks
Investment Returns: Stock market support may be eroded, lowering investor · Management regularly communicates its strategy to shareholders.
appetite and obstructing fundraising if we fail to scale our business at pace,
make poor investment choices or fail to sustain and develop a high-quality · Focus is placed on building a diverse and resilient asset
portfolio of assets. portfolio capable of offering prospectivity throughout the business cycle. The
group continually reviews its portfolio of assets to identify internal growth
opportunities.
· The company seeks to limit its financial dependence on any one
single asset by holding a diversified portfolio and re-investing capital
generated through monetisation of its investments into new projects in order
to grow the company and create value for its shareholders.
· The group engages with a range of advisers and active competitor
monitoring to provide a range of opportunities for screening.
· The group also engages third-party assurance experts to review,
challenge and, where appropriate, make recommendations to improve the
processes for project management, cost control and governance of projects.
Prices and Markets: Decreases in oil and/or gas prices could have an adverse · Contingency is built into the evaluation, planning and budgeting
effect on the demand for oil and/or gas. If these reductions are significant process to allow for the downside movements in commodity prices.
or for a prolonged period, we may have to write down assets and investments
and reassess the viability of certain projects, which may impact future cash · Reabold's business model is to invest in undervalued oil and gas
flows, profit, capital expenditure, the ability to work within our financial assets that would be able to deliver profitably under any reasonable oil/gas
frame and maintain our investment programme. price assumptions, are at the lower end of the industry cost curve and will be
competitive against other sources of hydrocarbons.
Accessing, progressing and delivering hydrocarbon projects: Inability to · The group and its investee companies undertake extensive analysis
access and progress hydrocarbon resources could adversely affect delivery of of available technical information to determine work programmes.
our strategy.
· Appraisal programmes are designed to de-risk the overall field
development. Well and seismic data is continually reviewed to best allocate
capital and make drilling decisions.
· Downside risk can be reduced by entering into risk sharing
arrangements.
· The group retains working capital reserves to cover any delays or
cost overruns
Liquidity, financial capacity and financial exposure: Insufficient liquidity · Management has a clear strategy for value realisation and
and funding capacity of the group and its investee companies could adversely creation as evidenced by the realisation of value from the Corallian sale in
impact the implementation of the group's strategy and restrict work programmes 2022
due to lack of capital.
· The group maintains a strong balance sheet by maximising cash to
ensure sufficient liquidity within the business. The group has no debt.
· Cash forecasts are monitored including considering multiple
scenarios.
· The company has demonstrated it can raise incremental capital if
needed
· The group continually monitors its capital allocation and will
only pursue programs that are of appropriate size and risk relative to the
group's capital resources.
Joint arrangements: Varying levels of control over the standards, operations · The group continually engages with its operating partners and
and compliance of our partners could result in legal liability and closely monitors the operation of its assets.
reputational damage.
· The group completes thorough due diligence reviews before
entering future partnerships to ensure that their strategic and operational
objectives are aligned with those of the group.
Climate change: A global transition to alternative energy sources could have · Management looks for opportunities to deliver low carbon
an adverse impact on demand for oil and gas, commodity prices and/or the intensity production into the UK market by using low carbon intensity
group's access to and cost of capital. Developments in policy, law, facilities, including potential re-use of existing infrastructure.
regulation, technology and markets including societal and investor sentiment,
related to the issue of climate change and the transition to a lower carbon · The group's "investment horizon" is considered to fall within
economy could increase costs, constrain our operations and affect our business time frames too short to be materially affected by the Paris Agreement 2˚C
plans and financial performance. scenario.
· The group's resources are weighted towards gas which is playing a
key role in the national energy transition.
Talent and capability: Inability to attract, develop and retain people with · Recruitment and retention of key staff through providing
necessary skills and capabilities could negatively impact delivery of our competitive remuneration packages and stimulating and safe working
strategy. environment. Balancing salary with longer term incentive plans.
Geopolitical: Exposure to a range of political developments and consequent · Management maintains regular communication with regulatory
changes to the operating and regulatory environment (including the continued authorities.
impact of COVID-19 and events relating to the Russia-Ukraine conflict) could
cause business disruption. · The company aligns its standards and objectives with government
policies as closely as possible.
· Reabold demonstrates a flexible approach to working from home
whilst supporting appropriate working practices in London office spaces.
· The group does not consider that it has a material adverse
exposure to the geopolitical situation with respect to the sanctions imposed
on Russia, although recognises the evolving situation is causing price
volatility. The group will continue to monitor its position to ensure it
remains compliant with any sanctions in place.
Digital infrastructure, cyber security and data protection: Breach or failure · The group employs specialist support to detect and monitor
of our third parties' digital infrastructure or cyber security, including loss threats using security protection tools.
or misuse of sensitive information could damage our operations, increase costs
and damage our reputation. · We build awareness with our employees and share information for
continuous learning
Compliance and control risks
Regulation: Changes in the law and regulation in countries in which Reabold · Our business seeks to identify, assess and manage legal and
has a presence with partners could increase costs, constrain our operations regulatory risk relevant to our operations, strategy, business plans and
and affect our strategy, business plans and financial performance. The UKCS financial performance. To support this work, we seek to develop co-operative
licensing regime under which most of Reabold's operational rights and relationships with governmental authorities to allow appropriate focus on
obligations are defined may be subject to future change. areas of potential risk or uncertainty while also protecting Reabold's
interests within the law.
Reporting: Failure to accurately report our data could lead to regulatory · Our finance team provide assurance of the control environment and
action, legal liability and reputational damage. are accountable for building control and compliance into finance processes and
digital systems
Corporate Governance
Board of Directors
Jeremy Edelman
Non-Executive Chairman
Appointed: 19 December 2012
Jeremy Edelman holds Bachelor degrees in Commerce and Law together with a
Master's degree in Applied Finance. Jeremy is admitted as a solicitor to the
Supreme Courts of Western Australia and New South Wales. Jeremy subsequently
worked for some of the world's leading investment banks, including Bankers
Trust and UBS Warburg in debt and acquisition finance. He has held consulting
and director positions in listed companies in the UK and Australia, such as Mt
Grace Resources NL, with a focus on resource exploration and development,
including investment companies established with the specific objective of
investing in resources projects. He also has corporate finance experience,
having been responsible for co-coordinating a number of companies in making
acquisitions in a variety of resource sectors, including oil and gas, uranium,
molybdenum, base metals and coal. He has worked in various regions of the
world, including the Republic of Kazakhstan, Russia, South Africa and
Australia. Jeremy served as a Non-Executive Director of Leni Gas Cuba Limited
until 12 July 2016, a Director of Altona Energy Plc (also known as Altona
Resources Plc) until 4 July 2006, Executive Director of Leni Gas & Oil PLC
from August 2006 to December 2010 and Director of Braemore Resources Plc until
27 July 2005.
Sachin Oza
Co-Chief Executive Officer
Appointed: 19 October 2017
Sachin Oza has 19 years of investment experience, including 15 years covering
the energy sector. He joined Guinness Asset Management in April 2016, having
previously worked as an investment analyst at M&G Investments for 13
years, where he covered the Utility, Transport, Mining and Oil & Gas
sectors on a global basis. Sachin has also held investment analyst roles at
Tokyo Mitsubishi Asset Management and JP Morgan Asset Management.
Stephen Williams
Co-Chief Executive Officer
Appointed: 19 October 2017
Stephen Williams has 18 years of experience in the energy sector. He joined
Guinness Asset Management in April 2016, having previously worked as an
investment analyst at M&G between 2010 and 2016, where he focussed on
energy and resources. Prior to this, Stephen worked as an energy investment
analyst for Simmons & Company International between 2005 and 2010 and from
2003 to 2005 he worked as an analyst at ExxonMobil.
Anthony Samaha
Non-Executive Director
Appointed: Board: 19 December 2012; Non-Executive Director: 1 July 2022
Anthony Samaha is a Chartered Accountant who has over 30 years' experience in
accounting and corporate finance, including resources development. Anthony
worked for over 10 years with international accounting firms, including Ernst
& Young, principally in corporate finance, gaining significant experience
in valuations, IPOs, independent expert reports, and mergers and acquisitions.
Anthony has extensive experience in the listing and management of AIM quoted
companies and served as Finance Director for the company up until 30 June 2022
before becoming a Non-Executive Director on 1 July 2022.
Mike Felton
Non-Executive Director
Appointed: 17 September 2018
Mike Felton is an experienced fund manager in the City and brings over 30
years of financial expertise to the company. Mike previously served as Head
of UK Retail Equities at M&G Investments and was Manager of the M&G UK
Select Fund, growing the fund's assets from £110m to c. £550m at its peak.
Mike has also previously served as Joint Head of Equities at ISIS Asset
Management and Manager of ISIS UK Prime Fund, as well as Chief Investment
Officer at Lumin Wealth, a position he still retains part-time. Mr Felton
sits on the International Tennis Federation's Investment Advisory Panel and is
a Business Ambassador for Anthony Nolan, the UK's blood cancer charity and
bone marrow register.
Marcos Mozetic
Non-Executive Director
Appointed: 17 September 2018
Marcos Mozetic, an exploration geologist, brings over 43 years of
international technical experience in the oil and gas industry to the company.
His most recent experience was in designing, implementing and leading Repsol
S.A's exploration strategy between 2004 and 2016. During this period, Repsol
become a leader in reserve replacement and participated in some of the most
exciting discoveries worldwide. Previous to this, Marcos worked as a
development geologist in 1975 with Bridas, before moving into the exploration
department, which he later led. Following this, Marcos worked for BHP
Petroleum and BHP Minerals as Chief Geologist for Argentina and later Country
Leader. Marcos holds a BSc and Post-Graduate degree in Petroleum Geology
from the University of Buenos Aires.
Corporate Governance
Directors' report for the year ended 31 December 2022
The Directors submit their report and the audited financial statements of the
group and company for the year ended 31 December 2022.
Principal activities
The principal activity of the group and company is investment in pre-cash flow
upstream oil and gas projects, primarily as significant interests in unlisted
oil and gas companies or majority interests in unlisted oil and gas companies
with non-operating positions on licences.
Business Review and Future Developments
A review of the business and the future developments of the group is presented
in the Strategic Report (including a Review of Operations and Financial
Review) and Chair's letter (all of which, together with the Corporate
Governance Statement, are incorporated by reference into this Directors'
Report).
Engagement with Employees, Suppliers and Customers
Information regarding Reabold's engagement with employees, suppliers and
customers is included in the Section 172 statement on pages 24 to 26.
Results and dividends
The loss for the year was £45,000 (2021: loss of £2,675,000) The company has
not declared any dividends during the year (2021: £nil). The Directors do not
propose the payment of a final dividend.
Financial Instruments
The group's financial risk management objectives and policies are discussed in
note 20.
Events since Balance Sheet Date
Details of post reporting date events are disclosed in Note 26 of the
financial statements.
Directors and their interests
The names of the Directors who held office during the year and their
shareholdings are shown below.
Director At 31 December 2022 At 1 January 2022
Jeremy Edelman * 173,545,454 173,545,454
Sachin Oza 75,750,299 36,551,821
Stephen Williams 47,304,697 29,643,953
Michael Felton 25,240,599 25,240,599
Anthony Samaha 7,818,182 7,818,182
Marcos Mozetic 4,545,454 4,545,454
* includes 173,545,454 shares held by Saltwind Enterprises Ltd, a company
connected with Jeremy Edelman.
Details of Directors' share options are included in the Directors Remuneration
Report and Note 22.
Indemnity provisions
The company maintains a directors' and officers' liability policy on normal
commercial terms which includes third party indemnity provisions.
Political and charitable contributions
The company made no contributions to charitable or political bodies during the
year (2021: £Nil).
Auditor
In accordance with section 489 of the Companies Act 2006, a resolution to
reappoint Mazars LLP was put to the Annual General Meeting held on 29 June
2022 and was approved. The auditor, Mazars LLP, will be proposed for
reappointment in accordance with Section 485 of the Companies Act 2006.
Mazars LLP has signified its willingness to continue in office as auditor.
Statement of disclosure to auditor
So far as the Directors are aware, there is no relevant audit information of
which the company's auditor is unaware, and they have taken all the steps that
they ought to have taken as Directors in order to make themselves aware of any
relevant audit information and to establish that the company's auditor is
aware of that information.
The Directors' report was approved by the Board and signed on its behalf by
Chris Connolly, company secretary, on 26 May 2023.
Corporate Governance
Corporate Governance Report
Chair's Corporate Governance Statement
During 2022 we saw good strategic progress with the completion of the equity
exchange with Daybreak, the acquisition of six North Sea licences from
Corallian, the sale of Corallian to Shell, and in the first half of 2023, the
acquisition of Simwell Resources and the initial investment in LNEnergy.
The importance of maintaining strong relationships and engaging with our
shareholders continues and underpins the success of the business. The Board
strives to ensure that there are numerous opportunities for investors to
engage with both the Board and Executive Directors. During 2022 the Board
welcomed shareholders in person at the Annual General Meeting. The company
also held a General Meeting in November 2022 and early 2023. This provided
shareholders with an opportunity to raise questions in connection with the
company's strategy and express their support for Reabold's Board.
I am pleased with the productive working relationship that exists between the
Board and the leadership team. We have found the high degree of trust between
them allows for greater constructive challenge, rigour and scrutiny. It has
also made our decision-making processes swifter, allowing us to be more
responsive to challenging circumstances.
I would like to thank Reabold's shareholders for placing your faith in Reabold
during 2022, and for the engagement we have had with you. The Board will work
to retain and repay that faith.
The company adopts the QCA Code which it believes to be the most appropriate
recognised corporate governance code for the company. The QCA has ten
principles which the company is required to adhere to and to make certain
disclosures both within this report and on its website. These principles are:
1) Principle One: Establish a strategy and business model which promote
long-term value for shareholders
Please see Reabold's strategy and business model on page 4.
2) Principle Two: Seek to understand and meet shareholder needs and
expectations
We value the feedback we receive from our shareholders, and we take every
opportunity to ensure that where possible their wishes are duly
considered. The Board engages with shareholders to understand their
priorities and concerns through a range of engagement activities. In 2022,
management made a commitment to improve communication with shareholders.
Management is now committed to shareholder engagement events every two months.
This could take the form of corporate presentations published on our website,
live online interactive presentations or investor events subsequently shared
on our website. In Q1 2023, the company launched a new website so that
shareholders and other stakeholders can more easily navigate company updates
and communications. The website includes a Q&A page which answers some of
the most common investor questions.
All shareholders are encouraged to attend the company's Annual General Meeting
and any general meetings held by the company, which present an opportunity for
shareholders to speak with the Executive Directors in a formal environment and
in more informal one to one meetings.
The primary communication tool with our shareholders is through the Regulatory
News Service ("RNS") on regulatory matters and matters of material substance.
The company's new website, launched in March 2023, provides details of the
business, investor presentations and details of the Board, changes to major
shareholder information and QCA Code disclosure updates under AIM Rule 26.
Changes are promptly published on the website to enable the shareholders to be
kept abreast of company's affairs. The company's Annual Report and Notice of
Annual General Meetings are available to all shareholders. The Interim Report
and investor presentations are also available on our website.
Investor events are held with shareholders throughout the year. By providing a
variety of ways to communicate with investors the company feels that it
reaches out to engage with a wide range of its stakeholders.
3) Principle Three: Take into account wider stakeholder and social
responsibilities and their implications for long-term success
The Board recognises that the long term success of the company is reliant upon
the efforts of the employees of the company and its contractors, suppliers,
regulators and other stakeholders. The Board has put in place a range of
processes and systems to ensure that there is close oversight and contact with
its key resources and relationships. The company has close ongoing
relationships with a broad range of its stakeholders and provides them with
the opportunity to raise issues and provide feedback to the company. A
description of how the group considers key stakeholders in its decision-making
is included in the section 172 statement on page 24. The company's ESG
statement is on page 30.
4) Principle Four: Embed effective risk management, considering
both opportunities and threats, throughout the organisation
The Board ensures that procedures are in place and such procedures are being
implemented effectively to identify, evaluate and manage the significant risks
faced by the company. Key business challenges and risks are detailed on pages
13 and 14.
The Executive Directors have regular conference calls with the company's
Nominated Adviser and, when relevant, the company's corporate communications
advisers to discuss - amongst other items - operations, key risks, and other
relevant matters. Additionally, the group also has structured weekly
operational and management conference calls with its JV partners to identify
and discuss key business challenges and risk areas. The Board believes that
this regular programme of internal communications provides an effective
opportunity for potential or real-time risks to be identified, considered and
- where necessary - addressed in a timely manner. Given the company's current
size, the Board considers that the Executive Management team-with oversight
from the Non-Executive Board of Directors and relevant advisers, is sufficient
to identify risks applicable to the company and its operations and to
implement an appropriate system of controls. Accepting that no systems of
control can provide absolute assurance against material misstatement or loss,
the Directors believe that the established systems for internal control within
the group are appropriate to the size and cost structure of the business. An
internal audit function is not considered necessary or practical due to the
size of the company and the close day to day control exercised by the
Executive Directors. However, the Board will continue to monitor the need
for an internal audit function. The Board has established appropriate
reporting and control mechanisms to ensure the effectiveness of its control
systems.
5) Principle Five: Maintain the Board as a well-functioning,
balanced team led by the chair
As at the date of publication, the Board comprised of Jeremy Edelman as the
Non-Executive Chairman, Marcos Mozetic, Michael Felton and Anthony Samaha as
Non-Executive Directors and Sachin Oza and Stephen Williams, the Co-Chief
Executive Directors. Biographical details of the current Directors are set out
on pages 16 and 17 of this Annual Report.
The Executive and Non-Executive Directors are subject to re-election at the
second annual general meeting of the company after their last appointment or
reappointment, if not before.
The Board retains ultimate accountability for ensuring that the company has a
robust governance framework in place, ensuring that governance is
appropriately embedded throughout the business. The Board meets at least six
times per annum. The Board has agreed that appointments to the Board are
made by the Board as a whole and so has not yet created a Nominations
Committee.
The Chair has overall responsibility for the management of the Board which in
turn oversees the company's strategy and operational and financial
performance. The role of the Chairman is to provide leadership of the Board
and ensure its effectiveness on all aspects of its remit to maintain control
of the company. In addition, the Chairman is responsible for the
implementation and practice of sound corporate governance. The Chairman is
considered to have adequate separation from the day-to-day running of the
company.
Michael Felton and Marcos Mozetic are considered to be Independent Directors.
The Board notes that the QCA recommends a balance between executive and
non-executive Directors and recommends that there be two independent
non-executives. The Board will review further appointments as scale and
complexity grows.
The company has adopted a share dealing code and policy which the Board
regards as appropriate for an AIM quoted company and is compliant with the UK
Market Abuse Regulations. The company takes all reasonable steps to ensure it
is compliant with Market Abuse Regulations and AIM Rules.
The Board has two committees as detailed below.
Audit Committee
The Audit Committee consists of Michael Felton as Chairman, Jeremy Edelman and
Anthony Samaha. This Committee provides a forum through which the group's
finance functions and auditors, report to the non-executive Directors.
Meetings may be attended, by invitation, by the company's Nominated Adviser,
company Secretary, other directors and the company's auditors. The principal
duties and responsibilities of the Audit Committee include:
· overseeing the group's financial reporting disclosure process; this
includes the choice of appropriate accounting policies;
· monitoring the group's internal financial controls and assess their
adequacy;
· reviewing key estimates, judgements and assumptions applied by
management in preparing published financial statements;
· annually assessing the auditor's independence and objectivity; and
· making recommendations in relation to the appointment, re-appointment
and removal of the company's external auditor.
The Board has not published an audit committee report, which the Board
considers to be appropriate given the size and stage of development of the
company.
Remuneration Committee
Detailed information on the remuneration committee can be found on pages 27 to
29.
The Board will implement a Nomination committee at the appropriate time in
line with changes to the structure, size and composition of the Board.
6) Principle Six: Ensure that between them the directors have the
necessary up-to-date experience, skills and capabilities
The Board currently consists of six Directors. The company believes that the
current balance of skills in the Board as a whole, reflects a very broad range
of commercial and professional skills across geographies and industry sectors.
The complementary skills and experience of our Board are included on pages 16
and 17. If the company identifies an area where additional skills are
required, the company will often contract an appropriately qualified third
party to advise as required.
The Board recognises that it currently has a limited diversity, including a
lack of gender balance, and this will form a part of any future recruitment
consideration if the Board concludes that replacement or additional directors
are required.
The Board shall review annually the appropriateness and opportunity for
continuing professional development whether formal or informal. The company
secretary supports the chairman and executives in addressing the training and
development needs of Directors, and their membership of appropriate
professional and industry associations. These professional associations have
ongoing professional development requirements, which the company supports. The
company's Nominated Adviser provides training on AIM Rules and the UK Takeover
Code when required.
The Board regularly consults with its legal advisers to ensure compliance with
the Companies Act and other relevant legislation.
7) Principle Seven: Evaluate Board performance based on clear and
relevant objectives, seeking continuous improvement
Internal evaluation of the Board and individual Directors is undertaken on an
annual basis in the form of peer appraisal and discussions to determine the
effectiveness and performance in various applicable areas to their role as
well as the Directors' continued independence.
The results and recommendations that come out of the appraisals for the
Directors shall identify the key corporate and financial targets that are
relevant to each Director and their personal targets in terms of career
development and training. Progress against previous targets shall also be
assessed where relevant.
During the reporting period, the Board undertook a performance evaluation of
the Executive Directors. For the 2022 performance period it was determined
that no bonuses would be paid to the executive directors. Please see the
Directors' remuneration report on page 27. In Q1 2023, the Remuneration
Committee undertook a thorough and robust engagement process with independent
remuneration specialists to design a share plan and incentive scheme for the
executive directors and senior management. Please see note 26 post balance
sheet events - Long Term Incentive Plan Awards for further details.
The Board performance evaluation is to be undertaken annually and includes an
assessment of achievement of KPIs by Executive Directors. The Remuneration
Committee undertakes a review of the remuneration of Executive Directors at
least annually and may consult with external consultants to assist in the
evaluation and determination of appropriate compensation and incentivisation
schemes to ensure the company remains competitive in retaining management.
There is a strong flow of communication between the Directors, and in
particular between the Co-Chief Executive Officers, Chief Financial Officer
and the Chair, with consideration being given to the strategic and operational
needs of the business. Minutes are drawn up to reflect the true record of the
discussions and decisions made.
The Directors have a wide knowledge of the company's business and understand
their duties as directors of a quoted company. The Directors have access to
the company's Nominated Adviser, auditors and solicitors as and when required.
The company's Nominated Adviser provides Board room training on applicable
matters. These advisors are available to provide formal support and advice to
the Board from time to time and do so in accordance with good practice.
The company secretary, who is also the Chief Financial Officer, helps keep the
Board up to date with developments in corporate governance and liaises with
the Nominated Adviser on areas of AIM requirements. The company secretary has
frequent communication with the Chair, Co- Chief Executive Officers and chairs
of the Committees and is available to other members of the Board as required.
The Directors are also able, at the company's expense, to obtain advice from
external advisers if required.
The Board is to consider periodically a succession plan. Executive Directors
are to have sufficient length of notice periods to ensure the appointment of
new personnel and ensure sufficient time to handover responsibilities.
8) Principle Eight: Promote a corporate culture that is based on
ethical values and behaviours
The Board recognises that their decisions regarding strategy and risk will
impact the corporate culture of the company as a whole and that this will
impact the performance of the company.
The Board is very aware that the tone and culture set by the Board will
greatly impact all aspects of the company as a whole and the way that
employees behave. The corporate governance arrangements that the Board has
adopted are designed to ensure that the company delivers long term value to
its shareholders and that shareholders have the opportunity to express their
views and expectations for the company in a manner that encourages open
dialogue with the Board. A large part of the company's activities is centred
upon what needs to be an open and respectful dialogue with employees, clients
and other stakeholders. Therefore, the importance of sound ethical values
and behaviours is crucial to the ability of the company to successfully
achieve its corporate objectives. The Board places great importance on this
aspect of corporate life and seeks to ensure that this flows through all that
the company does.
The Board considers that at present the company has an open culture
facilitating comprehensive dialogue and feedback and enabling positive and
constructive challenge. The company has a code for Directors' and employees'
dealings in the company's securities, which was updated in 2022, and is
appropriate for a company whose securities are traded on AIM and is in
accordance with the requirements of the UK Market Abuse Regulation. The
company takes all reasonable steps to ensure it is compliant with the Market
Abuse Regulations and AIM Rules.
9) Principle Nine: Maintain governance structures and processes
that are fit for purpose and support good decision-making by the Board
Ultimate authority for all aspects of the company's activities rests with the
Board with the respective responsibilities of the Chair and the Executive
Directors arising as a consequence of delegation by the Board. The Board has
adopted appropriate delegations of authority which set out matters which are
reserved to the Board. The Chair is responsible for the effectiveness of the
Board, while management of the company's business and primary contact with
shareholders has been delegated by the Board to the Co-Chief Executive
Directors.
In accordance with the Companies Act 2006, the Board complies with: a duty to
act within their powers; a duty to promote the success of the company; a duty
to exercise independent judgement; a duty to exercise reasonable care, skill
and diligence; a duty to avoid conflicts of interest; a duty not to accept
benefits from third parties and a duty to declare any interest in a proposed
transaction or arrangement.
The role of the Chair is to provide leadership of the Board and ensure its
effectiveness on all aspects of its remit to maintain control of the
company. In addition, the Chair is responsible for the implementation and
practice of sound corporate governance. The Chair is considered to have
adequate separation from the day-to-day running of the company.
Details of the Audit Committee and the Remuneration Committee are provided
under principle 5.
The Board of Directors is responsible for the success of the group, but given
the size and complexity of its operations the day-to-day operations of the
group are managed on a delegated basis by the Executive Directors. The
schedule of matters reserved for the Board include:
· approval of the group's strategic plan, oversight of the group's
operations and review of performance in the view of the group's strategy,
objectives, business plans and budgets, and ensuring that any necessary
corrective action is taken;
· ultimate oversight of risk, including determining the group's risk
profile and risk appetite;
· culture and succession planning;
· investments, acquisitions, divestments and other transactions outside
delegated limits;
· financial reporting and controls, including approval of the half-year
interim results, full-year results, approval of the Annual Report and
Financial Statements, approval of any significant changes in accounting
policies or practices and ensuring maintenance of appropriate internal control
and risk management systems;
· ensuring the Annual Report and Financial Statements present a fair,
balanced and understandable assessment of the group's position and prospects;
· assessment of the group's ability to continue as a going concern;
· capital expenditure, including the annual approval of the capital
expenditure budgets and any material changes to them in line with the
group-wide policy on capital expenditure;
· dividend policy, including the annual review of the dividend policy
and recommendation and declaration of any dividend;
· appointment of Directors;
· shareholder documentation, including approval of resolutions and
corresponding documentation to be put to shareholders and approval of all
material press releases concerning matters decided by the Board;
· terms of reference of Board committees and appointment of members to
the committees; and
· key business policies, including approval of remuneration policies.
The Board considers its current governance structures and processes to be in
line and appropriate for its current size and complexity, as well as its
current capacity, appetite and tolerance for risk. The Board will continue
to monitor the appropriateness of its governance structures and processed
towards their evolution over time in parallel with the group's objectives,
strategy and business model to reflect the development of the group.
Attendance at Board and Committee Meetings
In order to be efficient, the Board meets formally and informally both in
person and by telephone. To date there have been at least bimonthly meetings
of the Board, and the volume and frequency of such meetings is expected to
continue at least at this rate. The company had 13 Board meetings during the
year and reports below on the number of Board and committee meetings attended
by Directors.
Board Audit Committee Remuneration Committee
Jeremy Edelman 12 2 1
Sachin Oza 13 - -
Stephen Williams 13 - -
Anthony Samaha 12 1 -
Marcos Mozetic 11 - 1
Michael Felton 11 2 1
10) Principle Ten: Communicate how the company is governed and is
performing by maintaining a dialogue with shareholders and other relevant
stakeholders
The Board is committed to maintaining good communication and having
constructive dialogue with its shareholders. The company has close ongoing
relationships with its private shareholders. Institutional shareholders and
analysts have the opportunity to discuss issues and provide feedback at
meetings with the company. Page 24 of this Annual Report provides a section
172 statement which discusses how the group considers the interests of
shareholders and other relevant stakeholders in its decision making.
All shareholders are encouraged to attend the company's Annual General Meeting
and any general meetings held by the company.
The company's financial and operational performance is summarised in the
Annual Report and the Interim Report, with regular updates provided to
stakeholders in other forums through the year, including press releases and
regular updates to the company's website.
Jeremy Edelman
Chair
26 May 2023
Section 172(1) statement
In accordance with the requirements of Section 172 of the Companies Act 2006,
the directors consider that, during the financial year ended 31 December 2021,
they have acted in a way that they consider, in good faith, would most likely
promote the success of the company for the benefit of the members as a whole,
having regard to the likely consequences of any decision in the long term and
the broader interests of other stakeholders, as required by the Act. The Board
delegates day-to-day management of the business of the company to the Co-CEOs,
save for those matters which are reserved for the Board's approval. More
information on how the Board has regard to the Section 172 factors are
outlined below.
S172(1) (A) "The likely consequences of any decision in the long term"
The Board of Directors is collectively responsible for the decisions made
towards the long-term success of the company and the way in which the
strategic, operational and risk management decisions have been implemented
throughout the business is detailed in our Strategy and business model on page
4 and throughout the Strategic Report.
S172(1) (B) "The interests of the company's employees"
At the end of 2022, the company had 4 employees: two Co-Chief Executive
Officers, the CFO and a technical manager. Our people are crucial to
delivering our strategy. We aim to recruit talented people and in 2022, we
recruited Chris Connolly as CFO. Chris has over 16 years' experience in the
extractive industries sector, primarily in oil and gas. Chris joined us from
EnQuest PLC where he was Group Financial Controller. We also added Donal
O'Driscoll, our technical manager to the team. Donal has worked for 38 years
as a petroleum geologist/technical manager with operating oil companies in the
UK, contributing to drilling over 50 offshore wells and developing 16 oil and
gas fields, which have produced over 2 billion barrels of oil equivalent.
Donal has a Ba(mod) Geology, MSC Petroleum Geology and MSC business
strategy. We focus our attraction, recruitment, development and retention
activities to provide the support and skills our employees need in order to
help Reabold thrive and succeed.
In April 2023, we launched the Reabold Resources plc long-term incentive plan
for our full-time senior management team. Reabold aims to invest in
competitive rewards for our people.
Our employees are one of the primary assets of our business and the Board
recognises that our employees are the key resource which enables the delivery
of the company's vision and goals.
We ensure that:
• Health, Safety and the Environment are considered paramount throughout the
organisation (both on-shore and off-shore).
• Annual pay and benefit reviews are carried out to determine whether all
levels of employees are benefitting fairly and to retain and encourage skills
vital for the business.
• There are freely available company policies and procedures.
• Personal development reviews and work appraisals are conducted.
• Employees are informed of the results and important business decisions and
are encouraged to feel engaged
• Working conditions are favourable
The Remuneration Committee oversees and makes recommendations of executive
remuneration and any long-term share awards.
S172(1) (C) "The need to foster the company's business relationships with
suppliers, customers and others"
Delivering our strategy requires strong mutually beneficial relationships with
suppliers, customers, governments, and joint-venture partners. We aim to have
a positive and enduring impact on the communities in which we operate, through
partnering with national and local suppliers, and through payments to
governments in taxes and other fees. The group values all of its suppliers
and aims to build strong positive relationships through open communication and
adherence to trade terms. The group is committed to being a responsible
entity and doing the right thing for its customers, suppliers and business
partners. The Board upholds ethical business behaviour across all of the
company's activities and encourages management to seek comparable business
practices from all suppliers and customers doing business with the company. We
value the feedback we receive from our stakeholders and we take every
opportunity to ensure that where possible their wishes are duly
considered. The Board engages with stakeholders to understand their
priorities and concerns through a range of engagement activities. In 2022,
management made a commitment to improve communication with shareholders.
Management is now committed to shareholder engagement events every two months.
This could take the form of corporate presentations published on our website,
live online interactive presentations, investor events subsequently shared on
our website. In Q1 2023 the company launched a new website so that
shareholders and other stakeholders can more easily navigate company updates
and communications. The website includes a Q&A page which answers some of
the most common investor questions.
Ultimately, Board decisions are taken against the backdrop of what it
considers to be in the best interest of the long-term financial success of the
group and its stakeholders, including shareholders, employees, the community
and environment, our suppliers and customers. We value our customer
relationships and aim to work closely with our customers to develop and
maintain strong relationships and understand their evolving needs so that we
can improve and adapt to meet them.
Further information can be found within our Environmental, Social and
Governance (ESG) Statement on page 30.
S172(1) (D) "The impact of the company's operations on the community and the
environment"
This aspect is inherent in our strategic ambitions, most notably on our
ambitions to thrive through the energy transition and to sustain a strong
societal licence to operate. As such, the Board receives information on these
topics to provide relevant information for specific Board decisions.
Executive Directors conduct site visits of various investee company operations
and hold external stakeholder engagements, where feasible.
At present Reabold does not 'operate' any of the assets in its portfolio. Our
operational assets are managed by our associate companies who are responsible
for the adequacy of standards, operations and compliance. Reabold seeks to
influence how risk is managed in arrangements where we are not operator by
ensuring we have a member of the executive team on the Board of our associate
companies. This gives Reabold assurance that operations are and will be
carried out in a sustainable and safe manner.
Further information can be found within our ESG Statement on page 30, and
within the principal risks and uncertainties section on page 13.
S172(1) (E) "The desirability of the company maintaining a reputation for high
standards of business conduct"
The company is incorporated in the UK and governed by the Companies Act 2006.
The company has adopted the Quoted Companies Alliance Corporate Governance
Code 2018 (the "QCA Code") and the Board recognises the importance of
maintaining a good level of corporate governance, which together with the
requirements to comply with the AIM Rules ensures that the interests of the
company's stakeholders are safeguarded. Please see the Chair's Corporate
Governance statement on pages 19 to 23.
Reabold aims to achieve the production of hydrocarbons that meet the world's
growing need for energy solutions in ways which are economically,
environmentally and socially responsible. The Board periodically reviews and
approves clear frameworks, such as Reabold's Code of Conduct, and specific
Ethics & Compliance policies, to ensure that its high standards are
maintained both within Reabold and the business relationships we maintain.
This, complemented by the various ways the Board is informed and monitors
compliance with relevant governance standards, help ensure its decisions are
taken, and that Reabold investee companies act in, ways that promote high
standards of business conduct.
S172(1) (F) "The need to act fairly as between members of the company"
The Board is committed to maintaining good communication and having
constructive dialogue with its shareholders. The company has close ongoing
relationships with its private shareholders. Institutional shareholders and
analysts have the opportunity to discuss issues and provide feedback at
meetings with the company. All shareholders are encouraged to attend the
company's Annual General Meeting and any general meetings held by the company,
which present an opportunity for shareholders to speak with the Executive
Directors in a formal environment and in more informal one to one meetings.
The primary communication tool with our shareholders is through the Regulatory
News Service ("RNS") on regulatory matters and matters of material substance.
The company's new website launched in March 2023 provides details of the
business, investor presentations and details of the Board, changes to major
shareholder information and QCA Code disclosure updates under AIM Rule 26.
Changes are promptly published on the website to enable the shareholders to be
kept abreast of company's affairs. The company's Annual Report and Notice of
Annual General Meetings are available to all shareholders. The Interim Report
and investor presentations are also available on our website.
Investor events are held with shareholders throughout the year. By providing a
variety of ways to communicate with investors the company feels that it
reaches out to engage with a wide range of its stakeholders.
Key decisions made
The Board delegates day-to-day management of the business of the company to
the Co-CEOs. The responsibility for the execution of this delegation of
authority, including regularly monitoring it, is retained by the Board. We
outline some of the principal decisions made by the Board over the year, and
how directors have performed their duty under Section 172.
Sale of Corallian
We completed the sale of Corallian Energy Limited in November 2022. The Board
discussed the sale with the executive team throughout 2022 as the opportunity
matured in order to review the proposed terms. The Board recognised that this
sale would be a significant valuation uplift on Reabold's investment in
Corallian and would allow Reabold to progress its strategy given the improved
financial flexibility. Reabold is now comfortably fully funded for its share
of the West Newton development well and is able to make shareholder
distributions.
Acquisition of North Sea Licences
We completed the acquisition of six North Sea licences in 2022 for £250,000.
The Board discussed the acquisition with the executive team throughout 2022 as
the opportunity matured in order to review the business case and what it
offered. The Board recognised with these licences, there was a low cost
opportunity to expand Reabold's presence in the North Sea. The Board saw the
acquisition as an exciting opportunity to create value from a number of
prospects with significant resource potential and relatively low geological
risk.
Acquisition of Simwell Resources Limited
Reabold completed the acquisition of Simwell Resources Limited in January
2023. The Board discussed the acquisition through the second half of 2022. The
Board recognised the acquisition would significantly increase Reabold's
footprint in the emerging Zechstein trend, complementing its onshore position
in PEDL 183, including the West Newton project. See note 26 for further
details.
Investment in LNEnergy
On 9 May 2023, Reabold announced it acquired a 3.1% interest in LNEnergy for
cash consideration of £250,000, receiving options to acquire further shares
in LNEnergy which, if exercised, would result in Reabold holding a 25.0%
shareholding in LNEnergy for aggregate cash and equity consideration of £3.8
million. The Board agreed the investment was in line with Reabold's strategy
to progress high quality pre-cash flow projects that can deliver material
returns to shareholders. LNEnergy's primary asset is an option over a 90%
interest in the Colle Santo gas field, onshore Italy in the Abruzzo region.
With 65Bcf of 2P reserves, as estimated by RPS as of 30 September 2022, this
is a highly material undeveloped onshore gas resource, particularly in the
context of onshore Western Europe, and subject to the necessary approvals and
permits, is development ready with no additional drilling required. First gas
is targeted for early 2025. See note 26 for further details.
Corporate Governance
Director's Remuneration Report
Role of the remuneration committee
The role of the committee is to determine and recommend to the Board the
remuneration of the Chair, executive directors and CFO. The remuneration
committee reviews remuneration policy, share schemes and the incentivisation
of the workforce. The Committee assists the Board in discharging its oversight
responsibilities relating to the attraction, compensation, evaluation and
retention of Executive Directors and senior management. The Committee aims to
ensure that the company has the right skills and expertise needed to enable
the company to achieve its goals and strategies and that fair and competitive
compensation is awarded with appropriate performance incentives across the
company.
Key responsibilities
· Recommend to the Board the remuneration principles and policies
for the executive directors and CFO.
· Set and approve the terms of engagement, remuneration, benefits
and termination of employment for the executive directors and CFO.
· Prepare the remuneration report.
· Approve the principles of any equity plan.
· Ensure termination terms and payments to executive directors and
CFO are appropriate.
Membership
Marcos Mozetic
Member and chair since September 2018
Jeremy Edelman
Member
Michael Felton
Member
Meetings and attendance
The committee met once during the year. All members attended the meeting.
Executive Directors' pay for the year ended 31 December 2022
Sachin Oza Stephen Williams Anthony Samaha(b) Sachin Oza Stephen Williams Anthony Samaha
Co-CEO 2022 Co-CEO FD Co-CEO 2021 Co-CEO FD
2022 2022 2021 2021
Salary £230,875 £230,875 £50,000 £230,875 £230,875 £73,333
Annual bonus(a) Nil Nil Nil £50,000 £50,000 Nil
Benefits Nil Nil Nil Nil Nil Nil
Pension £11,419 £11,419 £1,250 £11,419 £11,419 Nil
Performance shares Nil Nil Nil Nil Nil Nil
Total remuneration £242,294 £242,294 £51,250 £292,294 £292,294 £73,333
(a) The annual bonus paid in 2021 related to the 2020 performance year. From
2022, annual bonuses are accrued in the
year in which they are earned.
(b) Anthony Samaha resigned as finance director on 30 June 2022
Overview of outcomes
Sachin Oza's and Stephen Williams' salaries were not increased in 2022. No
bonuses were awarded for either the 2022 or 2021 performance year (see
footnote a above). The directors receive no benefits from the company apart
from the pension contributions shown in the table above. The directors have
never been awarded shares in the company as part of share option plans (see
share option plans below).
Executive directors service contracts
The company's policies on directors' service contracts are indicated below:
Director Effective Term Notice period
Sachin Oza 5 September 2018 6 months
Stephen Williams 5 September 2018 6 months
Share option plans
As at 31 December 2022, 125,000,000 options granted by the company were
outstanding. These options were originally granted in March 2018. No options
were granted in 2022.
Director At 1 Jan 2022 Granted Exercised Expired At 31 Dec 2022 Option price Date from which first exercisable Expiry date
Sachin Oza 20,000,000 - - - 20,000,000 0.60p 30 Sep 2022 19 Mar 2023(a)
Sachin Oza 20,000,000 - - - 20,000,000 0.90p 31 Dec 2022 19 Mar 2023 (a)
Sachin Oza 20,000,000 - - - 20,000,000 1.20p 31 Dec 2022 19 Mar 2023 (a)
Sachin Oza 30,000,000 - - (30,000,000) - 0.50p 30 Sep 2021 19 Oct 2022
Sachin Oza 30,000,000 - - (30,000,000) - 0.75p 31 Dec 2021 19 Oct 2022
Sachin Oza 30,000,000 - - (30,000,000) - 1.00p 31 Mar 2022 19 Oct 2022
Stephen Williams 20,000,000 - - - 20,000,000 0.60p 30 Sep 2022 19 Mar 2023 (a)
Stephen Williams 20,000,000 - - - 20,000,000 0.90p 31 Dec 2022 19 Mar 2023 (a)
Stephen Williams 20,000,000 - - - 20,000,000 1.20p 31 Dec 2022 19 Mar 2023 (a)
Stephen Williams 30,000,000 - - (30,000,000) - 0.50p 30 Sep 2021 19 Oct 2022
Stephen Williams 30,000,000 - - (30,000,000) - 0.75p 31 Dec 2021 19 Oct 2022
Stephen Williams 30,000,000 - - (30,000,000) - 1.00p 31 Mar 2022 19 Oct 2022
Anthony Samaha 10,000,000 - - (10,000,000) - 0.50p 30 Sep 2021 19 Oct 2022
Anthony Samaha 10,000,000 - - (10,000,000) - 1.00p 31 Dec 2021 19 Oct 2022
Anthony Samaha 5,000,000 - - - 5,000,000 0.60p 30 Sep 2022 19 Mar 2023 (a)
125,000,000
(a) The company amended the expiry date and vesting conditions of 125,000,000
existing options on 17 February 2022, such that their expiry dates were
extended by 12 months to 19 March 2023.
As at the date of publication of this report, all of the above options have
expired. The directors have never been awarded shares in the company to date.
Directors' shareholdings
The directors' have built personal shareholdings in the company as shown
below:
Director At 31 December 2022 At 1 January 2022
Jeremy Edelman * 173,545,454 173,545,454
Sachin Oza 75,750,299 36,551,821
Stephen Williams 47,304,697 29,643,953
Michael Felton 25,240,599 25,240,599
Anthony Samaha 7,818,182 7,818,182
Marcos Mozetic 4,545,454 4,545,454
* includes 173,545,454 shares held by Saltwind Enterprises Ltd, a company
connected with Jeremy Edelman.
Key areas of focus for 2023
· Undertake a thorough and robust engagement process with
independent remuneration specialists to design a share plan and incentive
scheme for the executive directors and senior management
· Design and implement directors and senior management scorecards
· Agree a framework for the 2023 bonus plan
· Consider and agree a programme for the grant of any LTIP awards
for 2023
Chair and non-executive directors' remuneration
Fees (£)
2022 2021
Jeremy Edelman (Chair) 66,000 60,000
Michael Felton 38,000 35,000
Macros Mozetic 38,000 35,000
Anthony Samaha(a) 20,500 -
(b) Anthony Samaha was appointed as non-executive director on 1 July 2022
External appointments
The Board supports executive directors taking up appointments outside the
company to broaden their knowledge and experience. Each executive director is
permitted to retain any fee from their external appointments. Such external
appointments are subject to agreement by the chair and reported to the Board.
Any external appointment must not conflict with a director's duties and
commitments to Reabold. Details of appointments as non-executive directors of
publicly listed companies during 2022 are shown below.
Appointee company Additional position held at appropriate company Total fees (£)
Stephen Williams Europa Oil & Gas (Holdings) plc Director 31,000
The directors' remuneration report was approved by the Board and signed on its
behalf by Chris Connolly, company secretary on 26 May 2023.
Corporate Governance
Environmental, Social & Governance
Environmental, Social and Governance (ESG) Statement
Reabold is committed to the highest standards of environmental, social and
governance processes and we incorporate these responsibilities into our
operational decision-making and investments. We regularly review our approach,
policies, and processes across key areas.
At present Reabold does not 'operate' any of the assets in its portfolio. Our
operational assets are managed by our associate companies who are responsible
for the adequacy of standards, operations and compliance. The group does not
have any assets that are yet in the development or production stage and
therefore the business has no scope 1 or scope 2 greenhouse gas emissions.
Environment
Reabold is committed to preserving and protecting our natural environment for
future generations.
Reabold complies with the standards of the international oil industry,
environmental laws and regulations. We recognise and support the basis of the
Paris Agreement to strengthen the global response to the threat of climate
change.
Our focus is on minimising carbon emissions and the environmental footprint of
the projects we invest in, whilst continuing to contribute positively to the
demand for energy and products that require hydrocarbons in the supply chain.
The pace of transition to a lower carbon economy and cleaner fuels is
uncertain, but oil and natural gas demand is expected to remain a key element
of the energy mix for many years based on stated government policies,
commitments and announced pledges to reduce emissions. The challenge is to
meet the world's energy needs sustainably and efficiently, which requires
managing and reducing harmful emissions.
Reabold actively encourages and expects its investee companies / operators of
its oil and gas interests to respond to this by continuously striving to
minimise the potential environmental impact of operations by:
· Implementing controls to identify and prevent potential
environmental risks
· Implementing controls during operations to avoid accidental
spills, or leaks of polluting materials
· Managing water with due consideration
· Targeting high energy efficiency levels in drilling and other
activities
· Limiting unnecessary wastage
· Handling waste products in an environmentally responsible manner
· Regularly assessing the environmental consequences of operations
The operators have developed systems, controls and processes to integrate
climate related considerations, in order to meet these objectives. For example
one can read the approach and policies of Rathlin Energy, operator of the West
Newton PEDL 183 licence, on its website at www.rathlin-energy.co.uk
(http://www.rathlin-energy.co.uk) .
Focus on energy efficient extraction and drilling to reduce carbon intensity
Reabold's assets are primarily small to medium sized, proven oil and gas
fields at relatively shallow depth. As such, the intensity of drilling
required is considered low relative to industry standards and we do not
conduct energy intensive prospecting activities, reducing the impact on the
environment. We encourage the operators of our assets to use the most energy
efficient drilling methods. As the energy mix evolves towards a higher
percentage of renewables in the countries in which we operate (e.g. increasing
wind power in the UK and Romania, solar in California), we anticipate a
greater share of our energy consumption will be purchased from green sources.
United Kingdom
Our investee company sites in the United Kingdom are located close to areas
with a high demand for energy. Consequently, we expect that hydrocarbons
produced locally and consumed locally will displace imported hydrocarbons
thereby resulting in lower carbon emissions overall. This will provide greater
security of supply to the UK as well as providing jobs and supporting UK
industry, compared to the alternative of importing fuel. The COVID-19 pandemic
highlighted the importance of our critical national infrastructure and this
has become even more apparent in recent times with the war in Ukraine.
We believe that natural gas has an important role to play in the energy
transition, bridging the gap on the journey from fossil fuels to a renewable,
zero-carbon future and helping to supply stable and affordable energy to UK
homes and businesses as part of a lower-carbon energy supply mix. To that end,
we continue to explore ways to invest in gas projects such as the Victory
project, which was subsequently sold to Shell in November 2022.
Reabold is committed to being part of the overall reduction in carbon
intensity in the UK. As part of this objective, we were very pleased with the
West Newton development plan being given an AA rating by GaffneyCline in 2020
for carbon intensity, the best possible grade for low carbon emissions from
potential upstream crude oil production. The study stated that the West Newton
field has carbon intensities "significantly lower than the UK average and also
compared to onshore analogues". Based on the study, GaffneyCline estimated
that West Newton could produce the equivalent of just 5 grams of CO2 per
megajoule of energy created ("gCO2eq./MJ"). The study did not include the
review of any carbon offsetting measures, which could further limit West
Newton's net carbon emissions. The study also highlighted that this number
could be further reduced to just 3.5 gCO2eq./MJ by applying, inter alia, gas
to grid technologies. The study used specific West Newton reservoir and fluid
parameters, notional development plans and analogous field development plans.
The result of this study was benchmarked against other field analogues using
the Global field database. Reabold intends that the development at West Newton
will seek to utilise the best fit for purpose technologies, including gas to
grid technologies, and tight leak-rate specifications to minimise any venting,
flaring or fugitive emissions.
Daybreak, USA
Daybreak's production sites are located in California, a state with very high
renewable energy generation which feeds into the energy required for
hydrocarbon extraction. By industry standards, our oil and gas activities
require a very low level of energy to extract the hydrocarbons, ensuring it is
one of the most energy efficient of its type in California.
Romania
Romania is in the midst of creating a more sustainable energy mix by
transitioning away from coal fired generation and ageing nuclear plants
towards renewable energy sources. However, during this transition period, the
country needs indigenously sourced natural gas as a fuel to ensure the
security of supply of energy. By developing and producing gas from the Parta
site, Danube Petroleum Limited is able to contribute to the country's efforts
to implement this energy strategy. In 2022, a regional geothermal study was
conducted over the Parta licence, and a detailed report was completed for the
Iecea Mare production licence with a special focus on the IMIC-1 well. The
operator has been approached by several local communities in relation to
geothermal projects mainly for district heating, given its drilling experience
and extensive 2D and 3D seismic database in the area. A very high geothermal
gradient was encountered while drilling the well in the order of 6°C per 100
metres which is of interest for a potentially viable geothermal project.
Managing our environmental footprint and reducing our emissions are important
objectives for Reabold Resources. We regularly review and revise our policies,
as necessary.
Health & Safety
Reabold wishes to build value through developing sustainable relationships
with partners and the community.
We comply with all applicable legislation; and design and manage our
activities to prevent pollution, minimize environmental and health impact and
provide workplaces free of safety hazards.
The company is committed to high standards of health, safety and environmental
protection; these aspects command equal prominence with other business
considerations in the decision-making process.
Health, safety and environmental protection are responsibilities shared by
everyone working for the company and the full support of all staff, partners
and contractors is vital to the successful implementation of the policy. We
ensure, as far as reasonably practicable, that all personnel are aware of
their delegated health, safety and environmental responsibilities and are
properly trained to undertake these.
We strive for continuous improvement in our HSE performance and measure this
by setting objectives and targets consistent with the aims of this policy.
HSE performance is routinely monitored and reported regularly to the Board of
Directors, which will ensure that the necessary resources are provided to
support this policy fully.
Governance
As an AIM-quoted company, Reabold is required to apply a recognised corporate
governance code, demonstrating how the company complies with such corporate
governance code and where it departs from it.
The Directors of the company have formally applied the QCA Code. The Board
recognises the principles of the QCA Code, which focus on the creation of
medium to long-term value for shareholders without stifling the
entrepreneurial spirit in which small to medium sized companies, such as
Reabold, have been created. Please see pages 19 to 23 for the Chair's
corporate governance statement and how Reabold has applied the 10 principles
of the QCA code.
Statement of Director's Responsibilities
The Directors are responsible for preparing the Strategic report, the
Directors' report and the financial statements in accordance with applicable
law and regulations.
UK company law requires the Directors to prepare financial statements for each
financial year. Under such law the Directors have elected to prepare
financial statements in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006. Under company
law the Directors must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of affairs of the
group and company and of the profit or loss of the group for that period.
The directors are also required to prepare financial statements in accordance
with the rules of the London Stock Exchange for companies trading securities
on AIM.
In preparing these financial statements, the Directors are required to:
· select suitable accounting policies and then apply them
consistently;
· make judgements and accounting estimates that are reasonable
and prudent;
· state whether the financial statements comply with
international accounting standards in conformity with the requirements of the
Companies Act 2006; and
· prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the company will continue in
business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the company's transactions and disclose with
reasonable accuracy at any time the financial position of the company and
enable them to ensure that the financial statements comply with the Companies
Act 2006. They are also responsible for safeguarding the assets of the company
and hence for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
The Directors are responsible for ensuring the annual report and the financial
statements are made available on a website. Financial statements are
published on the company's website in accordance with legislation in the
United Kingdom governing the preparation and dissemination of financial
statements, which may vary from legislation in other jurisdictions. The
maintenance and integrity of the company's website is the responsibility of
the Directors. The Directors' responsibility also extends to the ongoing
integrity of the financial statements contained therein.
Independent auditor's report to the members of Reabold Resources Plc
Opinion
We have audited the financial statements of Reabold Resources PLC (the 'parent
company') and its subsidiaries (the 'group') for the year ended 31 December
2022 which comprise the Group Statements of Comprehensive Income, the Group
Statements of Financial Position, the Company Statement of Financial Position,
the Group Statements of Cash Flows, the Company Statements of Cash Flows, the
Group Statements of changes in equity, the company statement of changes in
equity and notes to the financial statements, including a summary of
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 31 December 2022 and of the group's loss for
the year then ended; and
· have been properly prepared in accordance with 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; and
· 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 group and the parent 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.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors'
use of the going concern basis of accounting in the preparation of the
financial statements is appropriate.
Our audit procedures to evaluate the directors' assessment of the group's and
the parent company's ability to continue to adopt the going concern basis of
accounting included but were not limited to:
· Obtaining management's formal going concern assessment;
· Critically assessed and challenged the key assumptions,
corroborating to supporting documentation where applicable;
· Considering the impact of climate change and the current
socio-political environment on the value of the group's assets; and
· Reviewing the disclosures included in the financial statements
related to going concern to endure consistent with our findings.
Based on the work we have performed, we have not identified any material
uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the group's and the parent
company's ability to continue as a going concern for a period of at least
twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to
going concern are described in the relevant sections of this report.
Key audit matters
Key audit matters are those matters that, in our professional judgement, 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.
We summarise below the key audit matter in forming our opinion above, together
with an overview of the principal audit procedures performed to address each
matter and our key observations arising from those procedures.
These matters, together with our findings, were communicated to those charged
with governance through our Audit Completion Report.
Key Audit Matter How our scope addressed this matter
Carrying value of exploration & evaluation (E&E) assets and oil & Our procedures included, but were not limited to, the following:
gas assets (group and parent company risk)
• reviewing the accounting policy in place to ensure
that the point at which exploration and evaluation assets are recognised is
reasonable and in line with IFRS 6 requirements;
The carrying value of exploration & evaluation and oil & gas assets in
the Group accounts total £6,815k (2021: £9,123k). The parent company has a • critically assessing a sample of transactions
carrying value £6,451k (2021: £5,968k). throughout the company, subsidiary and associated companies to ensure
additions have been treated in accordance with the accounting policy;
• reviewing the status of specific on-going projects,
The group's accounting policy in respect of this area is set out in the with specific reference to any external market information, to gain assurance
accounting policy notes in the accounts. over the recoverability of capitalised exploration and evaluation expenditure;
• making enquires of management of the potential impact
of socio-economic and climate related factors on determining the carrying
The Group is involved in the extraction of oil values of the assets;
and gas. Under IFRS 6, Exploration for and • holding discussions with component auditors and
reviewing their work performed on E&E assets to ensure appropriate and
Evaluation of Mineral Resources, management sufficient audit evidence had been obtained around the carrying value of oil
& gas assets by associated undertaking; and
must establish an accounting policy specifying
• Obtaining and challenging management's assessments as
which expenditures are recognised as to whether there were indicators of impairment.
exploration and evaluation assets and apply it
consistently. The risk is associated with the Our observations
valuation, both initial recognition and impairment, of the assets. Based on the results of our procedures performed we consider that the value of
exploration &evaluation and oil & gas assets are appropriate. We have
not identified material misstatements in the disclosure of these assets in the
financial statements.
Our application of materiality and an overview of the scope of our audit
The scope of our audit was influenced by our application of materiality. We
set certain quantitative thresholds for materiality. These, together with
qualitative considerations, helped us to determine the scope of our audit and
the nature, timing and extent of our audit procedures on the individual
financial statement line items and disclosures and in evaluating the effect of
misstatements, both individually and on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the
financial statements as a whole as follows:
Materiality
Overall materiality Consolidated group; £707,000
Parent company; £707,000
How we determined it This has been calculated with reference to total assets, of which it
represents approximately 1.5% for the group company.
Rationale for benchmark applied Total assets have been identified as the principal benchmark within the
financial statements as it is considered to be the focus of the shareholders
due to the investments, namely the subsidiaries and associated entities, being
at an early stage of revenue generation.
1.5% has been chosen to reflect the level of understanding of the stakeholders
of the group in relation to the inherent uncertainties around accounting
estimates and judgements.
Performance materiality Performance materiality is set to reduce to an appropriately low level the
probability that the aggregate of uncorrected and undetected misstatements in
the financial statements exceeds materiality for the financial statements as a
whole.
We set performance materiality at £565,600 for both the Group and the parent
company, which represents 80% of overall materiality in both cases. This
percentage was applied due to the experience we have in auditing the group and
the parent company, our assessment of the group's and the parent company's
control environment, and the volume of transactions.
Reporting threshold We agreed with the directors that we would report to them misstatements
identified during our audit above £21,200 for both the group and parent
company as well as misstatements below that amount that, in our view,
warranted reporting for qualitative reasons. This threshold represents 3% of
financial materiality.
For each component in the scope of the Group audit, we allocated a materiality
that was less than our overall Group materiality. The range of performance
materiality allocated across the components was between £184,000 and
£565,500.
As part of designing our audit, we assessed the risk of material misstatement
in the financial statements, whether due to fraud or error, and then designed
and performed audit procedures responsive to those risks. In particular, we
looked at where the directors made subjective judgements, such as assumptions
on significant accounting estimates.
We tailored the scope of our audit to ensure that we performed sufficient work
to be able to give an opinion on the financial statements as a whole. We used
the outputs of our risk assessment, our understanding of the group and the
parent company, their environment, controls, and critical business processes,
to consider qualitative factors to ensure that we obtained sufficient coverage
across all financial statement line items.
Our group audit scope included an audit of the group and the parent company
financial statements of Reabold Resources Plc. Based on our risk assessment,
all entities within the group, except for Reabold Resources Limited and Gaelic
Resources Limited (which are holding companies with no impact on the
consolidated financial statements) were subject to full scope audit, which was
performed by the group audit team. Two of the group's associated undertakings
were subject to audit procedures by component auditors. Group instructions
were sent to these component auditors by the group audit team. Discussions
were held with the component auditors and specific component audit working
papers were reviewed by senior members of the group audit team to assess the
sufficiency and appropriateness of their audit procedures for the purposes of
the group audit opinion. Audit procedures in relation to the other associated
undertaking was completed by the group engagement team.
At the parent company level, the group audit team also tested the
consolidation process and carried out analytical procedures to confirm our
conclusion that there were no significant risks of material misstatement of
the aggregated financial information.
Other information
The other information comprises the information included in the Annual Report
and Financial Statements, other than the financial statements and our
auditor's report thereon. The directors are responsible for the other
information. 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 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 light of the knowledge and understanding of the group and the parent
company and their 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 by the parent company,
or returns adequate for our audit have not been received from branches not
visited by us; or
· the parent company 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 directors' responsibilities statement set out
on page 32, 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 group's and the parent 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 group or the parent 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.
The extent to which our procedures are capable of detecting irregularities,
including fraud is detailed below.
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.
Based on our understanding of the group and the parent company and their
industry, we considered that non-compliance with the following laws and
regulations might have a material effect on the financial statements:
employment regulation, health and safety regulation, oil and gas laws and
regulations, anti-money laundering regulation, AIM listing rules and GDPR
regulations.
To help us identify instances of non-compliance with these laws and
regulations, and in identifying and assessing the risks of material
misstatement in respect to non-compliance, our procedures included, but were
not limited to:
· Gaining an understanding of the legal and regulatory framework
applicable to the group and the parent company, the industry in which they
operate, and the structure of the group, and considering the risk of acts by
the group and the parent company which were contrary to the applicable laws
and regulations, including fraud;
· Inquiring of the directors, management and, where appropriate, those
charged with governance, as to whether the group and the parent company is in
compliance with laws and regulations, and discussing their policies and
procedures regarding compliance with laws and regulations;
· Inspecting correspondence with relevant licensing or regulatory
authorities;
· Reviewing minutes of directors' meetings in the year;
· Discussing amongst the engagement team the laws and regulations
listed above, and remaining alert to any indications of non-compliance; and
· Considering the risk of acts by the group and the parent company
which were contrary to applicable laws and regulations, including fraud.
We also considered those laws and regulations that have a direct effect on the
preparation of the financial statements, such as tax legislation, AIM Rules
and the Companies Act 2006.
In addition, we evaluated the directors' and management's incentives and
opportunities for fraudulent manipulation of the financial statements,
including the risk of management override of controls, and determined that the
principal risks related to posting manual journal entries to manipulate
financial performance, management bias through judgements and assumptions in
significant accounting estimates, in particular in relation to relation to
the carrying value of exploration and evaluation and oil & gas assets,
revenue recognition (which we pinpointed to the occurrence assertion), and
significant one-off or unusual transactions.
Our audit procedures in relation to fraud included but were not limited to:
· Making enquiries of the directors and management on whether they had
knowledge of any actual, suspected or alleged fraud;
· Gaining an understanding of the internal controls established to
mitigate risks related to fraud;
· Discussing amongst the engagement team the risks of fraud;
· Addressing the risks of fraud through management override of controls
by performing journal entry testing;
Our audit procedures in relation to fraud through revenue recognition,
specific to occurrence included, but were not limited to:
· Recalculating 100% of the Group's share of revenue in the year
based on the contractual terms of the production sharing contract and each
monthly third party oil statement.
There are inherent limitations in the audit procedures described above and the
primary responsibility for the prevention and detection of irregularities,
including fraud, rests with both those charged with governance and management.
As with any audit, there remained a risk of non-detection of irregularities,
as these may involve collusion, forgery, intentional omissions,
misrepresentations or the override of internal controls.
The risks of material misstatement that had the greatest effect on our audit
are discussed in the "Key audit matters" section of this report.
A further description of our responsibilities is available 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 the audit 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.
Stephen Brown (Senior Statutory Auditor) for and on behalf of Mazars LLP
Chartered Accountants and Statutory Auditor
The Pinnacle
160 Midsummer Boulevard
Milton Keynes
MK9 1FF
26 May 2023
Group Income Statement
For the year ended 31 December
Note 2021 £000
2022 £000
Continuing operations
Revenue 4 560 1,160
Cost of sales 5 (834) (1,312)
Gross loss (274) (152)
Net (loss) gain in financial assets measured at fair value through profit or 15 (1,851) 55
loss
Other income 50 51
Share of losses of associates 14 (1,576) (801)
Other expenses (89) -
Net gains on sale of businesses 2 4,997 -
Exploration expense (74) -
Administration expenses (1,702) (1,710)
Non-underlying items 25 (191) -
Share based payments expense 22 (22) (152)
Foreign exchange gains 635 47
Operating loss (97) (2,662)
Finance costs - unwinding of discount on decommissioning provisions (16) (14)
Finance income 68 1
(Loss) before tax for the year (45) (2,675)
Taxation 9 - -
(Loss) for the year (45) (2,675)
Attributable to:
Reabold shareholders (45) (2,675)
(45) (2,675)
Earnings per share
(Loss) for the year attributable to Reabold shareholders
Per ordinary share (pence)
Basic 10 (0.0005) (0.0341)
Diluted 10 (0.0005) (0.0341)
Group statement of comprehensive income
For the year ended 31 December
_____________________________________________________________________________________
Note 2022 £000 2021 £000
Loss for the year (45) (2,675)
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Currency translation differences 71 48
Exchange (gains) on translation of foreign operations reclassified
to loss on sale of business 2 (80) -
Other comprehensive income (9) 48
Total comprehensive income (54) (2,627)
Attributable to
Reabold Shareholders (54) (2,627)
Balance sheet as at 31
December
_____________________________________________________________________________________
Group Company
Note 2022 2021 2022 2021
Registered Number: 3542727 £000 £000 £000 £000
Non-current assets
Exploration & evaluation assets 11 6,815 9,123 6,451 5,968
Property, plant & equipment 12 - 4,303 - -
Investments in associates 14 22,272 27,716 22,272 27,716
Goodwill on acquisition 2 - 329 - -
Investments in subsidiaries 13 - - 3,470 3,536
Other investments 15 3,484 570 15 570
32,571 42,041 32,208 37,790
Current assets
Inventory - 20 - -
Prepayments 120 79 116 79
Trade and other receivables 16 181 172 629 4,842
Other investments 15 8,728 - 8,728 -
Restricted cash 17 25 211 25 25
Cash and cash equivalents 17 5,511 4,883 5,511 4,622
14,565 5,365 15,009 9,568
Total assets 47,136 47,406 47,217 47,358
Current liabilities
Trade and other payables 18 198 314 198 16
Accruals 111 83 111 83
309 397 309 99
Non-Current liabilities
Deferred tax liability 2 - 329 - -
Provision for decommissioning 19 367 188 367 146
367 517 367 146
Total liabilities 676 914 676 245
Net assets 46,460 46,492 46,541 47,113
EQUITY
Share capital 21 9,044 9,044 9,044 9,044
Share premium account 29,033 29,033 29,033 29,033
Capital redemption reserve 200 200 200 200
Share based payment reserve 22 1,920 1,898 1,920 1,898
Foreign currency translation reserve - 9 - -
Retained 6,263 6,308 6,344 6,938
earnings
Total Equity 46,460 46,492 46,541 47,113
The loss for the company was £0.59 million for the year ended 31 December
2022 (2021: loss of £2.43 million). In accordance with the exemption granted
under section 408 of the Companies Act 2006, a separate income statement for
the company has not been presented.
Approved by the Board on 26 May 2023
Sachin Oza Stephen Williams
Co-Chief Executive Officer Co-Chief Executive Officer
Statement of changes in equity for the year ended 31 December
_____________________________________________________________________________________
Group Note Share capital Share premium account Capital redemption reserve Share based payments reserve Foreign currency translation reserve Retained earnings Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2021 7,211 20,819 200 1,746 (39) 8,983 38,920
Loss for the year - - - - - (2,675) (2,675)
Other comprehensive income - - - - 48 - 48
Total comprehensive income - - - - 48 (2,675) (2,627)
Share-based payments 22 - - - 152 - - 152
Issue of share capital, net of direct issue costs 1,833 8,214 - - - - 10,047
At 31 December 2021 9,044 29,033 200 1,898 9 6,308 46,492
Loss for the - - - - - (45) (45)
year
Other comprehensive income - - - - (9) - (9)
Total comprehensive income - - - - (9) (45) (54)
Share-based payments 22 - - - 22 - - 22
At 31 December 2022 9,044 29,033 200 1,920 - 6,263 46,460
Company Note Share capital Share premium account Capital redemption reserve Share based payments reserve Retained earnings Total
£'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2021 7,211 20,819 200 1,746 9,368 39,344
Loss for the year - - - - (2,430) (2,430)
Total comprehensive income - - - - (2,430) (2,430)
Share-based payments 22 - - - 152 - 152
Issue of share capital, net of direct issue costs 1,833 8,214 - - - 10,047
At 31 December 2021 9,044 29,033 200 1,898 6,938 47,113
Loss for the - - - - (594) (594)
year
Total comprehensive income - - - - (594) (594)
Share-based payments 22 - - - 22 - 22
At 31 December 2022 9,044 29,033 200 1,920 6,344 46,541
Share Capital
The balance on the share capital account represents the aggregate nominal
value of all ordinary and preference shares in issue.
Share premium account
The balance on the share premium account represents the amounts received in
excess of the nominal value of the ordinary and preference shares.
Capital redemption reserve
The balance on the capital redemption reserve represents the aggregate nominal
value of all the ordinary shares repurchased and cancelled.
Share based payments reserve
The share-based payments reserve is used to recognise the value of
equity-settled share-based payments provided to employees, including key
management personnel, as part of their remuneration. Refer to Note 22 for
further details of these plans.
Foreign currency translation reserve
The foreign currency translation reserve records exchange differences arising
from the translation of the financial statements of foreign operations. Upon
disposal of foreign operations, the related accumulated exchange differences
are reclassified to the income statement. Following the equity exchange with
Daybreak, £80,000 was reclassified to the income statement. See Note 2 -
Disposals.
Retained earnings
The balance held on this reserve is the accumulated retained profits and
losses of the group/company
Cash flow statement for the year ended 31 December
_____________________________________________________________________________________
Group Company
2022 2021 2022 2021
Note £000 £000 £000 £000
Operating activities
(Loss) for the period (45) (2,675) (594) (2,430)
Adjustments to reconcile loss for the period to net cash used in operating
activities
Depreciation 5 318 358 - -
Impairment of investments in subsidiaries 13 - - 5,163 -
Net loss (gain) on financial assets at fair value through 15 1,851 (55) (75) (55)
profit or loss
Net gain on sale of businesses 2 (4,997) - (7,342) -
Share of losses from associates 14 1,576 801 1,576 801
Net finance (income) costs (52) 13 (72) 2
Share-based payments expense 22 22 152 22 152
Other non-cash movements 89 - - -
Unrealised currency translation (gains) (616) - - -
Net cash used in operating activities before working capital movements (1,854) (1,406) (1,322) (1,530)
(Increase) decrease in inventories (24) 14 - -
(Increase) decrease in other current assets (149) 214 (426) 205
Increase in other current liabilities 243 140 210 25
Net cash used in operating activities (1,784) (1,038) (1,538) (1,300)
Investing activities
Expenditure on oil and gas assets (8) (40) - -
Expenditure on exploration & evaluation assets (366) (1,497) (276) (1,412)
Acquisition of North Sea Licences 11 (343) - -
Investments in associates - (16) - (16)
Total cash capital expenditure (717) (1,553) (276) (1,428)
Proceeds from disposal of associate 2 3,175 - 3,175 -
Interest received 6 1 6 1
Acquisition of convertible loan notes - (1,000) - (1,000)
Sale of convertible loan notes - 500 - 500
Movements in restricted cash (33) - - -
Net cash disposed from sale of business (16) - - -
Loan to subsidiary - - (479) (92)
Net cash generated by (used in) investment activities 2,415 (2,052) 2,426 (2,019)
Financing activities
Share placement net proceeds - 6,881 - 6,881
Net cash provided by financing activities - 6,881 - 6,881
Currency translation differences relating to cash and cash equivalents (3) (47) 1 -
Increase in cash and cash equivalents 628 3,744 888 3,562
Cash and cash equivalents at the beginning of the period 17 4,883 1,139 4,622 1,060
Cash and cash equivalents at the end of the period 17 5,511 4,883 5,511 4,622
Notes to the financial statements
1. Significant accounting policies, judgements, estimates and
assumptions
Authorisation of financial statements and statement of compliance with
International Financial Reporting Standards
The consolidated financial statements of Reabold Resources PLC and its
subsidiaries (collectively referred to as Reabold or the group) for the year
ended 31 December 2022 were approved and signed by the Co-Chief Executive
Officers on 26 May 2023 having been duly authorised to do so by the board of
directors. Reabold is a public limited company incorporated and domiciled in
England and Wales with its registered office at 20 Primrose Street, London,
EC2A 2EW. The principal activity of the company and the group is to invest in
pre-cash flow upstream oil and gas projects to create value and generate
returns. The company's ordinary shares are traded on AIM. The group's and
company's financial statements have been prepared in accordance with
UK-adopted International Accounting Standards in conformity with the
requirements of the Companies Act 2006. The significant accounting policies
and accounting judgements, estimates and assumptions of the group are set out
below.
Basis of preparation
The financial statements for the group and company have been prepared on a
going concern basis and in accordance with IFRS and IFRS Interpretations
Committee (IFRIC) interpretations issued and effective for the year ended
31 December 2022. The accounting policies that follow have been consistently
applied to all years presented, except where otherwise indicated. The
consolidated financial statements have been prepared on a historical cost
basis, except for the fair value remeasurement of certain financial
instruments as set out in the accounting policies, and are presented in £
sterling and all values are rounded to the nearest thousand pounds (£000),
except where otherwise indicated.
Going concern
The directors consider it appropriate to adopt the going concern basis of
accounting in preparing the financial statements. At 31 December 2022, the
group held cash and cash equivalents of £5.5 million with a further £9.5
million expected in 2023 as part of the consideration for the sale of
Corallian.
The group regularly monitors its cash, funding and liquidity position. Near
term cash projections are revised and underlying assumptions reviewed.
Longer-term projections are also updated regularly. Reabold has no borrowings
and its capital commitments can be funded from existing cash resources. In
assessing the appropriateness of the going concern assumption over the going
concern period, management have stress tested Reabold's most recent financial
projections to incorporate a range of potential future outcomes by considering
Reabold's principal risks. The group's financial forecasts demonstrate that
the group believes that it has sufficient financial resources to meet its
obligations as they fall due indicating the group will continue to operate as
a going concern for at least 12 months from the date of approval of the
financial statements. As such, the Financial Statements continue to be
prepared on the going concern basis.
Significant accounting policies: use of judgements, estimates and assumptions
Inherent in the application of many of the accounting policies used in
preparing the consolidated financial statements is the need for Reabold
management to make judgements, estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent
assets and liabilities, and the reported amounts of revenues and expenses.
Actual outcomes could differ from the estimates and assumptions used. The
accounting judgements and estimates that have a significant impact on the
results of the group, including, where potentially significant, the impact of
climate change and the transition to a lower carbon economy on the
consolidated financial statements are set out below, and should be read in
conjunction with the information provided in the Notes on financial
statements.
Sources of estimation uncertainty
Determining the fair value of contingent consideration receivable
The contingent consideration relates to the disposal of Corallian which is a
financial asset classified as measured at fair value through profit or loss.
The fair value is determined using an estimate of discounted future cash flows
that are expected to be received based on the contractual terms and is
considered a level 3 valuation under the fair value hierarchy. The deferred
consideration receivable is modelled using the maximum available external
information. The discount rate used is based on a risk-free rate adjusted for
asset-specific risks. (See note 15 for further information).
Decommissioning provision
Amounts used in recording a provision for decommissioning are estimates based
on current legal and constructive requirements and current technology and
price levels for the removal of facilities and plugging and abandoning of
wells. Due to changes in relation to these items, the future actual cash
outflows in relation to decommissioning are likely to differ in practice. To
reflect the effects due to changes in legislation, requirements and technology
and price levels, the carrying amounts of decommissioning provisions are
reviewed on a regular basis. The effects of changes in estimates do not give
rise to prior year adjustments and are dealt with prospectively. While the
group uses its best estimates and judgement, actual results could differ from
these estimates (see note 19 for further information).
Use of judgements
Assessment as not an investment entity
Entities that meet the definition of an investment entity within IFRS 10 are
required to measure their subsidiaries at FVPL rather than consolidate them.
The criteria which define an investment entity are, as follows:
· An entity that obtains funds from one or more investors for the
purpose of providing those investors with investment management services
· An entity that commits to its investors that its business purpose
is to invest funds solely for returns from capital appreciation, investment
income, or both
· An entity that measures and evaluates the performance of
substantially all of its investments on a fair value basis
Reabold holds direct interests in several exploration and appraisal assets.
How these assets will be monetised is not determined at the outset, and could
take several forms e.g a sale, an IPO, a farmout or taking the assets through
to production. Reabold does not commit to its investors that its business
purpose is to invest funds solely for returns from capital appreciation or
investment income.
The Board has concluded that the business does not meet the definition of an
investment entity. These conclusions will be reassessed on a continuous basis,
if any of these criteria or characteristics change.
Investments in Daybreak, Rathlin and Danube
Judgement is required in assessing the level of control or influence over
another entity in which the group holds an interest. For Reabold, the
judgements that the group does not have significant influence over Daybreak,
and continues to have significant influence over Rathlin and Danube are
significant.
Significant influence is defined in IFRS as the power to participate in the
financial and operating policy decisions of the investee but is not control or
joint control of those policies. Significant influence is presumed when an
entity owns 20% or more of the voting power of the investee. Significant
influence is presumed not to be present when an entity owns less than 20% of
the voting power of the investee. IFRS identifies several indicators that may
provide evidence of significant influence, including representation on the
board of directors of the investee and participation in policy-making
processes.
Daybreak
Following Reabold's announcement on 26 May 2022 regarding the completion of
the equity exchange agreement with Daybreak, Reabold assessed whether it has
significant influence over Daybreak. Judgement is required in assessing the
level of control or influence over another entity in which the group holds an
interest. For Reabold, the judgement that the group does not have significant
influence over Daybreak even though it holds 42% of the voting rights is
significant.
Reabold does not have any directors on the Board of Daybreak, nor can it
appoint any directors and it does not actively participate in the financial
and operating policy decisions of Daybreak. All significant decisions are
taken by the executive management team of Daybreak, which does not include any
director, employee or contractor of Reabold. Reabold does not exchange
technical information with Daybreak nor is there any interchange of managerial
personnel. Reabold is a passive investor and does not have the ability to
exercise significant influence over the operating and financial policies of
Daybreak. Reabold's management considers, therefore, that the group does not
have significant influence over Daybreak, as defined by IFRS. As a consequence
of this judgement, Reabold accounts for its interest in Daybreak as a
financial asset measured at fair value within 'Other investments'. See Note 15
for further information.
Rathlin
Whilst Reabold holds an equity stake in Rathlin of 59.5%, it is considered to
only have significant influence and not control over Rathlin. Pursuant to the
existing Rathlin Shareholders' Agreement, Reabold has the right to appoint
only one director to the Board of Rathlin, which comprises five directors.
Reabold's 59.5% interest in Rathlin is as a result of Rathlin's funding
requirements and Reabold's desire to increase its economic interest in the
West Newton Project, rather than an objective by Reabold to seek control over
Rathlin. As a consequence of this judgement, Reabold does not consolidate
Rathlin as a subsidiary, but instead treats Rathlin as an associate and
incorporates the results, assets and liabilities of Rathlin in the
consolidated financial statements using the equity method of accounting.
Danube
Reabold holds an equity stake in Danube of 50.8%, it is considered to only
have significant influence and not control over Danube. Pursuant to the
existing Danube Shareholders' Agreement, Reabold has the right to appoint only
one director to the Board of Danube, which comprises three directors.
Reabold's 50.8% interest in Danube is as a result of Danube's funding
requirements and Reabold's desire to increase its economic interest in
Danube's projects in Romania, rather than an objective by Reabold to seek
control over Danube. As a consequence of this judgement, Reabold does not
consolidate Danube as a subsidiary, but instead treats Danube as an associate
and incorporates the results, assets and liabilities of Danube in the
consolidated financial statements using the equity method of accounting.
Exploration and appraisal intangible assets
Judgement is required to determine whether it is appropriate to continue to
carry costs associated with exploration wells on the balance sheet. This
includes costs relating to exploration licences. It is not unusual to have
such costs remaining suspended on the balance sheet for several years while
additional appraisal drilling and seismic work on the potential oil and
natural gas field is performed or while the optimum development plans and
timing are established. The costs are carried based on the current regulatory
and political environment or any known changes to that environment. All such
carried costs are subject to regular technical, commercial and management
review on at least an annual basis to confirm the continued intent to develop,
or otherwise extract value from, the discovery. Where this is no longer the
case, the costs are immediately expensed.
The carrying amount of capitalised costs are included in note 11.
The energy transition may affect the future development or viability of
exploration prospects. The recoverability of intangibles was considered during
2022 and no write-offs were identified. These assets will continue to be
assessed as the energy transition progresses.
Basis of consolidation
The consolidated group financial statements consolidate the financial
statements of Reabold Resources PLC and its subsidiaries drawn up to
31 December each year. Subsidiaries are consolidated from the date of their
acquisition, being the date on which the group obtains control, including when
control is obtained via potential voting rights, and continue to be
consolidated until the date that control ceases.
The financial statements of subsidiaries are prepared for the same reporting
year as the parent company, using consistent accounting policies. Intragroup
balances and transactions have been eliminated.
If the group loses control over a subsidiary, it derecognises the related
assets (including goodwill), liabilities, other components of equity while any
resultant gain or loss is recognised in profit or loss. Any investment
retained is recognised at fair value.
Interests in other entities
Business combinations and goodwill
Business combinations are accounted for using the acquisition method. The
identifiable assets acquired and liabilities assumed are recognised at their
fair values at the acquisition date.
Goodwill is initially measured as the excess of the aggregate of the
consideration transferred, the amount recognised for any non-controlling
interest and the acquisition-date fair values of any previously held interest
in the acquiree over the fair value of the identifiable assets acquired and
liabilities assumed at the acquisition date. The amount recognised for any
non-controlling interest is measured at the present ownership's proportionate
share in the recognised amounts of the acquiree's identifiable net assets. At
the acquisition date, any goodwill acquired is allocated to each of the cash
generating units, or groups of cash-generating units, expected to benefit from
the combination's synergies. Following initial recognition, goodwill is
measured at cost less any accumulated impairment losses.
Goodwill may arise upon investments in joint ventures and associates, being
the surplus of the cost of investment over the group's share of the net fair
value of the identifiable assets and liabilities. Any such goodwill is
recorded within the corresponding investment in joint ventures and associates.
Goodwill may also arise upon acquisition of interests in joint operations that
meet the definition of a business. The amount of goodwill separately
recognised is the excess of the consideration transferred over the group's
share of the net fair value of the identifiable assets and liabilities.
Acquisitions, Asset Purchases and Disposals
Acquisitions of oil and gas properties are accounted for under the acquisition
method when the assets acquired and liabilities assumed constitute a business.
Transactions involving the purchase of an individual field interest, or a
group of field interests, that do not constitute a business, are treated as
asset purchases. Accordingly, no goodwill and no deferred tax gross up arises,
and the consideration is allocated to the assets and liabilities purchased on
an appropriate basis. Proceeds from the entire disposal of a development and
production asset, or any part thereof, are taken to the income statement
together with the requisite proportional net book value of the asset, or part
thereof, being sold.
Interests in joint arrangements
Certain of the group's activities are conducted through joint operations.
Reabold recognises, on a line-by-line basis in the consolidated financial
statements, its share of the assets, liabilities and expenses of these joint
operations incurred jointly with the other partners, along with the group's
income from the sale of its share of the output and any liabilities and
expenses that the group has incurred in relation to the joint operation.
Full details of Reabold's working interests in those petroleum and natural gas
exploration and production activities classified as joint operations are
included in the Review of Operations.
Interests in associates
The results, assets and liabilities of associates are incorporated in these
consolidated financial statements using the equity method of accounting as
described below.
The equity method of accounting
Under the equity method, an investment is carried on the balance sheet at cost
plus post-acquisition changes in the group's share of net assets of the
entity, less distributions received and less any impairment in value of the
investment. The group income statement reflects the group's share of the
results after tax of the equity-accounted entity. The group's share of amounts
recognised directly in equity by an equity-accounted entity is recognised in
the group's statement of changes in equity. Financial statements of
equity-accounted entities are prepared for the same reporting year as the
group.
The group assesses investments in equity-accounted entities for impairment
whenever there is objective evidence that the investment is impaired. If any
such objective evidence of impairment exists, the carrying amount of the
investment is compared with its recoverable amount, being the higher of its
fair value less costs of disposal and value in use. If the carrying amount
exceeds the recoverable amount, the investment is written down to its
recoverable amount.
Segmental reporting
The group's operating segments are established on the basis of those
components of the group that are evaluated regularly by the co-chief executive
officers, Reabold's chief decision makers, in deciding how to allocate
resources and in assessing performance. The accounting policies of the
operating segments are the same as the group's accounting policies described
in this note.
Foreign currency translation
In individual subsidiaries and associates, transactions in foreign currencies
are initially recorded in the functional currency of those entities at the
spot exchange rate on the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies are retranslated into the
functional currency at the spot exchange rate on the balance sheet date. Any
resulting exchange differences are included in the income statement.
Non-monetary items, other than those measured at fair value, are not
retranslated subsequent to initial recognition.
In the consolidated financial statements, the assets and liabilities of non-£
sterling functional currency subsidiaries and related goodwill, are translated
into £ sterling at the spot exchange rate on the balance sheet date. The
results and cash flows of non-£ sterling functional currency subsidiaries are
translated into £ sterling using average rates of exchange. In the
consolidated financial statements, exchange adjustments arising when the
opening net assets and the profits for the year retained by non-£ sterling
functional currency subsidiaries are translated into US dollars are recognised
in a separate component of equity and reported in other comprehensive income.
On disposal of a non-£ sterling functional currency subsidiary, the related
accumulated exchange gains and losses recognised in equity are reclassified
from equity to the income statement.
Intangible assets - Oil and gas exploration and evaluation expenditure
Oil and gas exploration and evaluation expenditure is accounted for using the
successful efforts method of accounting.
Pre-licence costs
Pre-licence costs are expensed in the period in which they are incurred.
Licence and property acquisition costs
Exploration licence and acquisition costs are capitalised in intangible
assets. Licence costs paid in connection with a right to explore in an
existing exploration area are capitalised and are reviewed at each reporting
date to confirm that there is no indication that the carrying amount exceeds
the recoverable amount. This review includes confirming that exploration
drilling is still under way or firmly planned, or that it has been determined,
or work is under way to determine that the discovery is economically viable
based on a range of technical and commercial considerations and that
sufficient progress is being made on establishing development plans and
timing. If no future activity is planned or the licence has been relinquished
or has expired, the carrying value of the licence and property acquisition
costs are written off. Upon recognition of proved reserves and internal
approval for development, the relevant expenditure is transferred to oil and
gas properties.
Exploration and evaluation costs
Exploration and evaluation activity involves the search for hydrocarbon
resources, the determination of technical feasibility and the assessment of
commercial viability of an identified resource. Once the legal right to
explore has been acquired, costs directly associated with an exploration well
are capitalised as exploration and evaluation intangible assets until the
drilling of the well is complete and the results have been evaluated. These
costs include directly attributable employee remuneration, materials and fuel
used, rig costs and payments made to contractors. Geological and geophysical
costs are recognised in the statement of profit or loss and other
comprehensive income, as incurred. If no potentially commercial hydrocarbons
are discovered, the exploration asset is expensed.
If extractable hydrocarbons are found and, subject to further appraisal
activity (e.g., the drilling of additional wells), it is probable that they
can be commercially developed, the costs continue to be carried as an
intangible asset while sufficient/continued progress is made in assessing the
commerciality of the hydrocarbons. Costs directly associated with appraisal
activity undertaken to determine the size, characteristics and commercial
potential of a reservoir following the initial discovery of hydrocarbons,
including the costs of appraisal wells where hydrocarbons were not found, are
initially capitalised as an intangible asset. All such capitalised costs are
subject to technical, commercial and management review, as well as review for
indicators of impairment at least once a year. This is to confirm the
continued intent to develop or otherwise extract value from the discovery.
When this is no longer the case, the costs are expensed.
When proved reserves of oil and gas are identified and development is
sanctioned by management, the relevant capitalised expenditure is first
assessed for impairment and (if required) any impairment loss is recognised,
then the remaining balance is transferred to oil and gas properties.
Property, plant and equipment - Oil and gas assets
Capitalisation
Oil and gas properties are stated at cost, less any accumulated depreciation
and accumulated impairment losses. Oil and gas properties are generally
accumulated into single field cost centres and represent the cost of
developing the commercial reserves and bringing them into production together
with the E&E expenditures incurred in finding commercial reserves
previously transferred from E&E assets as outlined in the policy above.
Depreciation
The net book values of producing assets are depreciated generally on a
field-by-field basis using the unit-of-production method by reference to the
ratio of production in the year and the related commercial reserves of the
field, taking into account the future development expenditure necessary to
bring those reserves into production.
Impairment of property, plant and equipment and intangible assets (oil and gas
exploration and evaluation expenditure)
The group assesses assets or groups of assets, called cash-generating units
(CGUs), for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset or CGU may not be recoverable; for
example, changes in the group's business plans to dispose rather than retain
assets, changes in the group's assumptions about commodity prices, evidence of
physical damage or, for oil and gas assets, significant downward revisions of
estimated reserves or increases in estimated future development expenditure or
decommissioning costs. If any such indication of impairment exists, the group
makes an estimate of the asset's or CGU's recoverable amount. Individual
assets are grouped into CGUs for impairment assessment purposes at the lowest
level at which there are identifiable cash inflows that are largely
independent of the cash inflows of other groups of assets. A CGU's recoverable
amount is the higher of its fair value less costs of disposal and its value in
use. If it is probable that the value of the CGU will be primarily recovered
through a disposal transaction, the expected disposal proceeds are considered
in determining the recoverable amount. Where the carrying amount of a CGU
exceeds its recoverable amount, the CGU is considered impaired and is written
down to its recoverable amount.
Inventories
Inventories are valued at the lower of cost and net realisable value. Cost of
consumable materials is determined using the weighted average method and
includes expenditures incurred in acquiring the stocks, and other costs
incurred in bringing them to their existing location and condition. Net
realisable value is the estimated selling price in the ordinary course of
business, less the estimated costs of completion and selling expenses.
Investments
In its separate financial statements the company recognises its investments in
subsidiaries at cost less any provision for impairment.
Financial assets
Financial assets are recognised initially at fair value, normally being the
transaction price. In the case of financial assets not measured at fair value
through profit or loss, directly attributable transaction costs are also
included. The subsequent measurement of financial assets depends on their
classification, as set out below. The group derecognises financial assets when
the contractual rights to the cash flows expire or the rights to receive cash
flows have been transferred to a third party and either substantially all of
the risks and rewards of the asset have been transferred, or substantially all
the risks and rewards of the asset have neither been retained nor transferred
but control of the asset has been transferred. The group classifies its
financial assets as measured at amortised cost, fair value through other
comprehensive income or fair value through profit or loss. The classification
depends on the business model for managing the financial assets and the
contractual cash flow characteristics of the financial asset.
Financial assets measured at amortised cost
Financial assets are classified as measured at amortised cost when they are
held in a business model the objective of which is to collect contractual cash
flows and the contractual cash flows represent solely payments of principal
and interest. Gains and losses are recognised in profit or loss when the
assets are derecognised or impaired. This category of financial assets
includes trade and other receivables.
Financial assets measured at fair value through other comprehensive income
Financial assets are classified as measured at fair value through other
comprehensive income when they are held in a business model the objective of
which is both to collect contractual cash flows and sell the financial assets,
and the contractual cash flows represent solely payments of principal and
interest. The group does not measure any financial assets at fair value
through other comprehensive income.
Financial assets measured at fair value through profit or loss
Financial assets are classified as measured at fair value through profit or
loss when the asset does not meet the criteria to be measured at amortised
cost or fair value through other comprehensive income. Such assets are carried
on the balance sheet at fair value with gains or losses recognised in the
income statement.
Investments in equity instruments
Investments in equity instruments are subsequently measured at fair value
through profit or loss.
Cash and cash equivalents
Cash and cash equivalents include balances with banks and short-term
investments with original maturities of three months or less at the date
acquired.
Equity instruments
Equity instruments issued by the company are recorded in equity at the
proceeds received, net of direct issue costs.
Financial liabilities
Financial liabilities are recognised when the group becomes party to the
contractual provisions of the instrument. The group derecognises financial
liabilities when the obligation specified in the contract is discharged,
cancelled or expired. The measurement of financial liabilities depends on
their classification. The group's financial liabilities include trade and
other payables and accruals which are measured at amortised cost.
Financial liabilities measured at amortised cost
The group's financial liabilities are initially recognised at fair value, net
of directly attributable transaction costs. The group's financial liabilities
currently include trade and other payables and accruals. Obligations for loans
and borrowings are recognised when the group becomes party to the related
contracts and are measured initially at the fair value of consideration
received less directly attributable transaction costs. After initial
recognition, interest-bearing loans and borrowings are subsequently measured
at amortised cost using the effective interest method. Gains and losses are
recognised in the income statement when the liabilities are derecognised as
well as through the amortisation process.
Fair value measurement
Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants.
The group categorises assets and liabilities measured at fair value into one
of three levels depending on the ability to observe inputs employed in their
measurement. Level 1 inputs are quoted prices in active markets for identical
assets or liabilities. Level 2 inputs that are observable, either directly or
indirectly, other than quoted prices included within level1 for the asset or
liability. Level 3 inputs are unobservable inputs for the asset or liability
reflecting significant modifications to observable related market data or
Reabold's assumptions about pricing by market participants.
Provisions
Provisions are recognised when the group has a present legal or constructive
obligation as a result of past events, it is probable that an outflow of
resources will be required to settle the obligation, and a reliable estimate
can be made of the amount of the obligation.
Decommissioning
Liabilities for decommissioning costs are recognised when the group has an
obligation to plug and abandon a well, dismantle and remove a facility or an
item of plant and to restore the site on which it is located. Liabilities may
arise upon construction of such facilities, upon acquisition or through a
subsequent change in legislation or regulations. The amount recognised is the
estimated present value of future expenditure determined in accordance with
local conditions and requirements. An amount equivalent to the decommissioning
provision is recognised as part of the corresponding intangible asset (in the
case of an exploration or appraisal well) or property, plant and equipment.
The decommissioning portion of the property, plant and equipment is
subsequently depreciated at the same rate as the rest of the asset. Other than
the unwinding of discount on or utilisation of the provision, any change in
the present value of the estimated expenditure is reflected as an adjustment
to the provision and the corresponding asset where that asset is generating or
is expected to generate future economic benefits.
Share-based payments
Equity-settled transactions
The cost of equity-settled transactions with employees is measured by
reference to the fair value of the equity instruments on the date on which
they are granted and is recognised as an expense over the vesting period,
which ends on the date on which the employees become fully entitled to the
award. A corresponding credit is recognised within equity. Fair value is
determined by using an appropriate, widely used, valuation model. In valuing
equity-settled transactions, no account is taken of any vesting conditions,
other than conditions linked to the price of the shares of the company (market
conditions). Non-vesting conditions are taken into account in the grant-date
fair value, and failure to meet a non-vesting condition, where this is within
the control of the employee is treated as a cancellation and any remaining
unrecognised cost is expensed.
Income taxes
The tax charge represents the sum of current and deferred tax.
Current tax payable is based on taxable profits for the year. Taxable profits
differ from net profits as reported in the income statement because it
excludes items that are taxable or deductible in other years and items that
are not taxable or deductible. The company's liability for current tax is
calculated using tax rates that have been enacted or substantively enacted at
the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the liability method. Deferred tax
liabilities are recognised for all temporary differences and deferred tax
assets are recognised to the extent that it is probable that taxable profits
will be available against which temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be
recovered. Deferred tax assets are offset when there is a legally enforceable
right to offset current tax assets against current liabilities and when
deferred tax assets and deferred tax liabilities relate to income taxes levied
by the same tax authority on either the same taxable entity or different
taxable entity where there is an intention to settle on a net basis.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability or the asset is realised.
Revenue from contracts with customers
Revenue from contracts with customers is recognised when control of the goods
or services are transferred to the customer at an amount that reflects the
consideration to which the group expects to be entitled to in exchange for
those goods or services. Revenue is measured at the fair value of the
consideration received or receivable and represents amounts receivable for
goods provided in the normal course of business, net of discounts, customs
duties and sales taxes. The group has concluded that it is the principal in
its revenue arrangements because it typically controls the goods or services
before transferring them to the customer.
The sale of crude oil, gas or condensate represents a single performance
obligation. This generally occurs when the product is physically transferred
into the customer's tanker, pipeline or other delivery mechanism. Revenue is
accordingly recognised for this performance obligation when control over the
corresponding commodity is transferred to the customer.
Finance income
Finance revenue chiefly comprises interest income from cash deposits on the
basis of the effective interest rate method and is disclosed separately on the
face of the income statement.
Earnings per share
Earnings per share is calculated using the weighted average number of ordinary
shares outstanding during the period. Diluted earnings per share is calculated
based on the weighted average number of ordinary shares outstanding during the
period plus the weighted average number of shares that would be issued on the
conversion of all relevant potentially dilutive shares to ordinary shares.
Where the impact of converted shares would be anti-dilutive, these are
excluded from the calculation of diluted earnings.
New and amended standards and interpretations
There are no new or amended standards or interpretations adopted from 1
January 2022 onwards that have a significant impact on the financial
information.
Standards issued but not yet effective
There are no standards, amendments or interpretations in issue but not yet
effective that the directors anticipate will have a material effect on the
reported income or net assets of the group.
2. Disposals
Group Company
2022 2021 2022 2021
£000 £000 £000 £000
Gain on sale of businesses
Disposal of Corallian 7,342 - 7,342 -
7,342 - 7,342 -
Loss on sale of business
Disposal of Reabold California (2,345) - - -
(2,345) - -
Net gains on sale of businesses 4,997 - 7,342 -
The net gain in respect of the disposal of the company's entire 49.99%
interest in Corallian Energy Limited was £7.3 million. Proceeds from the
disposal of Corallian in 2022 were £3.2 million. The carrying amount of
Reabold's investment in Corallian prior to disposal was £4.5 million. At 31
December 2022, contingent consideration relating to the disposal of Corallian
amounted to £8.7 million receivable within one year. The undiscounted
contingent consideration receivable amounts to £9.5 million. Contingent
consideration is reported within Other investments on the balance sheet - see
Note 15 for further information.
On 26 May 2022, Reabold announced the completion of the equity exchange
agreement with Daybreak. At completion of the equity exchange agreement,
Reabold no longer had "control" over Reabold California as set out under UK
adopted international accounting standards. As a result, net assets of £7.7
million, including goodwill of £329,000 and an associated deferred tax
liability of £329,000, were derecognised from the balance sheet of the group
and the fair value of the investment in Daybreak was recognised at completion
at £5.3 million. In addition, accumulated exchange gains of £80,000 which
were previously charged to equity were reclassified to the income statement
resulting in a loss on sale of business of £2.3 million.
3. Segmental analysis
The Directors consider the group to have two segments, being Business Stream 1
(which encompasses the UK/European based investments in Corallian, Danube,
Rathlin and PEDL183) and Business Stream 2 (which encompasses the USA).
Corporate costs relate to the administration and financing costs of the
company and are not directly attributable to the individual investments and
projects.
Year ended 31 December 2022 Business Stream1 UK/Europe Business Stream 2 USA Corporate Consolidation adjustments and eliminations Total
£000 £000 £000 £000 £000
Revenue - 560 - - 560
Cost of Sales(a) - (834) - - (834)
Net (loss) gain in financial assets measured at fair value through profit or 75 (1,926) - - (1,851)
loss
Other income - - 61 (11) 50
Other expenses - (89) - - (89)
Net gain (loss) on sale of businesses 7,342 (2,345) - - 4,997
Exploration expense (74) - - - (74)
Administration expenses - (12) (1,892) 11 (1,893)
Share based payments expense - - (22) - (22)
Foreign exchange gain - - 635 - 635
Profit (loss) on ordinary activities 7,343 (4,646) (1,218) - 1,479
Share of losses of associates (1,576) - - - (1,576)
Finance costs - unwinding of discount on decommissioning provisions (16) - - - (16)
Finance income 63 - 5 - 68
Profit (loss) before tax for the year 5,814 (4,646) (1,213) - (45)
Taxation - - - - -
Profit (loss) for the year 5,814 (4,646) (1,213) - (45)
Segment assets 38,155 3,470 5,511 47,136
Segment liabilities (439) - (237) (676)
Additions to non-current assets(b) 1,483 247 - - 1,730
( )
(a) Cost of sales of Business Stream 2 includes depreciation of oil and gas
assets of £318,000.
(b) Includes additions to property, plant and equipment; goodwill; intangible
assets; investments in joint ventures; and investments in associates.
Business Stream 1 UK/Europe Business Stream 2 USA Corporate Consolidation adjustments and eliminations Total
Year ended 31 December 2021 £'000 £'000 £'000 £000 £'000
Revenue - 1,160 - - 1,160
Cost of sales(a) - (1,312) - - (1,312)
Other income - - 51 - 51
Net gain on financial assets measured at FVTPL - - 55 - 55
General and administration expenses - (92) (1,571) - (1,663)
Share based payments expense - - (152) - (152)
(Loss) on ordinary activities - (244) (1,617) - (1,861)
Share of losses of associates (801) - - - (801)
Finance costs (14) - - - (14)
Finance income - - 1 - 1
(Loss) before tax for the year (815) (244) (1,616) - (2,675)
Taxation - - - - -
(Loss) for the year (815) (244) (1,616) - (2,675)
Segment assets 34,279 8,044 9,873 (4,790) 47,406
Segment liabilities (146) (5,129) (429) 4,790 (914)
Additions to non-current assets(b) 4,594 125 - - 4,719
( )
(a) Cost of sales of Business Stream 2 includes depreciation of oil and gas
assets of £358,000.
(b) Includes additions to property, plant and equipment; goodwill; intangible
assets; investments in joint ventures; and investments in associates.
4. Revenue
2022 2021
£000 £000
Oil sales 552 1,140
Gas Sales 8 20
560 1,160
Of the total oil and gas sales, 99% were sold to a single customer in 2022:
2021: 98%.
5. Cost of Sales
2022 2021
£000 £000
Production costs 404 722
Royalties 112 232
Depreciation of oil and gas assets (see note 12) 318 358
834 1,312
6. Auditor's Remuneration
2022 2021
£000 £000
Total audit fees 83 75
No fees were paid to Mazars LLP for non-audit services in 2022 or 2021.
7. Remuneration of senior management and non-executive directors
Remuneration of directors
Group and company 2022 2021
£000 £000
Total for all directors
Emoluments 698 788
Amounts received under incentive schemes - -
Total 698 788
Emoluments
These amounts comprise fees paid to the non-executive chair and the
non-executive directors and, for executive directors, salary and benefits
earned during the relevant financial year, plus cash bonuses awarded for the
year.
Further information
Full details of individual Directors' remuneration are given in the Directors'
remuneration report on page 27.
Remuneration of directors and senior management
Group and company 2022 2021
£000 £000
Total for all senior management and non-executive directors
Short-term employee benefits 781 765
Pension costs 29 23
Share-based payments 22 152
Total 832 940
Senior management comprises the executive directors, finance director and
chief financial officer. Anthony Samaha resigned as finance director on 30
June 2022, at which point he was appointed a non-executive director. Chris
Connolly, the current CFO, joined the senior management team on 28 March 2022.
Short-term employee benefits
These amounts comprise fees and benefits paid to the non-executive chair and
non-executive directors, as well as salary, benefits and cash bonuses for
senior management.
Pensions
The amounts represent the cost to the group of providing pensions to senior
management in respect of the current year of service.
Share-based payments
This is the cost to the group of senior management's participation in
share-based payment plans, as measured by the fair value of options and shares
granted, accounted for in accordance with IFRS 2 'Share-based Payments'.
8. Employee costs and numbers
Group and company 2022 2021
£000 £000
Wages and Salaries 649 635
Social security costs 84 84
Pension costs 30 23
Share-based payments 22 152
785 894
Employee costs do not include fees paid to non-executive directors.
Pension benefits are provided through defined contribution plans.
The average number of persons employed by the group and company during the
year was 4 (2021:3), with 3 in senior management functions (2021:3) and 1 in
technical functions (2021:nil). All employees are based in the UK.
The employee costs noted above relate to those employees with contracts of
employment in the name of Reabold Resources PLC. Of these costs, £35,000 are
borne by other undertakings within the group.
9. Taxation
Tax charged in the income statement
2022 2021
£000 £000
Current tax - -
Deferred tax - -
Tax charge in the income statement - -
Reconciliation of the total tax charge
2022 2021
£000 £000
Accounting profit (loss) before taxation (45) (2,675)
Statutory rate of corporation tax in the UK of 19% (2021: 19%) (9) (508)
Share of operating loss of associates not taxable 299 152
Expenses not deductible for tax purposes 4 51
Overseas tax impacts 52 -
Gain on sale not taxable (949) -
Deferred tax asset not recognised 603 305
Tax charge reported in income statement - -
Unrecognised tax losses
The group has total unused UK tax losses of £12.5 million (2021: £9.2
million) for which no deferred tax asset has been recognised at the balance
sheet date due to the uncertainty of recovery of these losses. The unused tax
losses have no fixed expiry date.
Changes to UK corporation tax legislation
On July 14, 2022, the Energy (Oil & Gas) Profits Levy Act 2022 (EPL) was
enacted in the UK which applies an additional tax of 25% on the profits earned
by oil and gas companies from the production of oil and gas on the United
Kingdom Continental Shelf. In the fourth quarter 2022, the EPL percentage was
increased to 35% and the end date was extended from December 31, 2025 to March
31, 2028. The enactment of the EPL has no impact on the current or deferred
tax position of the group or company.
Company
The company has £10.5 million (2021: £9.2 million) of UK corporation tax
losses which are not recognised as deferred tax assets. The unused tax losses
have no fixed expiry date.
10. Earnings per share
Basic earnings or loss per ordinary share amounts are calculated by dividing
net profit or loss for the year attributable to ordinary equity holders of the
parent by the weighted average number of ordinary shares outstanding during
the year. Diluted earnings per share amounts are calculated by dividing the
net profit attributable to ordinary equity holders of the company by the
weighted average number of ordinary shares outstanding during the year plus
the weighted average number of ordinary shares that would be issued on the
conversion of dilutive potential ordinary shares granted under share-based
payment plans (see note 22) into ordinary shares. If the inclusion of
potentially issuable shares would decrease loss per share, the potentially
issuable shares are excluded from the weighted average number of shares
outstanding used to calculate diluted earnings per share. The following
reflects the income and share data used in the basic and diluted earnings per
share computations:
2022 2021
£000 £000
Profit (loss) for the year attributable to Reabold ordinary shareholders (45) (2,675)
2022 2021
Number 000 Number 000
Basic weighted average number of ordinary shares 8,929,613 8,599,375
Potential dilutive effect of ordinary shares issuable under employee - -
share-based payment plans
Weighted average number of ordinary shares outstanding used to calculate 8,929,613 8,599,375
diluted earnings per share
2022 2021
Pence per share Pence per share
Basic earnings per share (0.00) (0.03)
Diluted earnings per share (0.00) (0.03)
The number of ordinary shares outstanding at 31 December 2022 was
8,929,612,550. Between 31 December 2021 and 25 May 2023, the latest
practicable date before the completion of these financial statements, there
was an increase of 247,775,359 of ordinary shares as a result of the
acquisition of Simwell Resources Limited (see note 26).
11. Exploration and evaluation assets
Group Company
2022 2021 2022 2021
£000 £000 £000 £000
At 1 January 9,123 7,586 5,968 4,556
Exchange adjustments 240 40 - -
Acquisitions 343 - - -
Additions 572 1,497 483 1,412
Disposals (3,463) - - -
At 31 December 6,815 9,123 6,451 5,968
Group
The 2022 disposal of £3.5 million represents the derecognition of E&E
assets in California as a result of the equity exchange agreement with
Daybreak.
The 2022 acquisition represents the acquisition of North Sea licences from
Corallian.
Additions at 31 December 2022 include £504,000 in the UK primarily relating
to the PEDL 183 licence at West Newton and £68,000 in the US relating to the
California assets (2021: £1,412,000 in the UK relating to the PEDL 183
licence at West Newton and £85,000 in the US relating to the California
assets).
Company
Additions at 31 December 2022 include £483,000 in the UK relating to the PEDL
183 licence at West Newton (2021: £1,412,000).
For information on significant judgements made in relation to oil and natural
gas accounting see Oil and gas exploration and evaluation expenditure in Note
1.
12. Property, Plant and Equipment
Oil and gas properties £000
Cost
At 1 January 2021 5,502
Exchange adjustments 71
Additions 40
At 31 December 2021 5,613
Exchange adjustments 429
Additions 179
Disposals (6,221)
At 31 December 2022 -
Depreciation
At 1 January 2021 933
Exchange adjustments 19
Charge for the period (note 5) 358
At 31 December 2021 1,310
Exchange adjustments 114
Charge for the period (note 5) 318
Disposals (1,742)
At 31 December 2022 -
Net book amount
At 31 December 2022 -
At 31 December 2021 4,303
At 1 January 2021 4,569
The entire disposal amount in 2022 represents the derecognition of oil and gas
properties in California as a result of the equity exchange agreement with
Daybreak.
Company
The company has no property, plant or equipment.
13. Investments in Subsidiaries
Company - Investment in Subsidiaries Total
£000
Cost
At 1 January 2021 1,933
Additions 1,603
At 31 December 2021 3,536
Additions 5,097
At 31 December 2022 8,633
Amounts provided
At 1 January 2021 -
Additions -
At 31 December 2021 -
Additions 5,163
At 31 December 2022 5,163
Net book amount:
31 December 2022 3,470
31 December 2021 3,536
31 December 2020 1.933
In 2022 £5.1 million of the loan to Reabold California was assigned to Gaelic
Resources Limited and subsequently capitalised (2021: £1.6 million). An
impairment charge of £5.2 million was recognised in 2022 (2021: nil)
following an impairment review in line with the requirements of IAS 36. Taking
into account the decrease in the market value of Daybreak, management
concluded that an impairment was necessary in terms of a deterioration of fair
value less costs to dispose. The impairment charge related to the company's
investment in Gaelic Resources Limited.
( )
Details of the company's subsidiaries as at 31 December 2022 are shown below:
Subsidiaries % Country of incorporation Principal activities
Reabold North Sea Limited 100 England & Wales Exploration and Evaluation
Reabold Resourcing Limited 100 England & Wales Investment holding
Gaelic Resources Limited 100 Isle of Man Investment holding
The registered office of the company subsidiaries incorporated in England
& Wales is The Broadgate Tower 8th Floor, Primrose Street, London,
England, EC2A 2EW.
The registered office of Gaelic Resources is 14 Albert Street, Douglas, Isle
of Man, IM1 2QA.
On 3 January 2023, the company acquired 100% of the issued share capital of
Reabold Southern North Sea Limited (formerly Simwell Resources Limited).
Reabold Southern North Sea Limited is an Exploration company incorporated in
England and Wales. See note 26 for further details.
14. Investments in associates
The movement in investments in associates for the group and company including
the amounts recognised in the income statement (losses from associates) and
balance sheet (investment in associate at 31 December) are shown below. On 30
June 2022, Reabold classified its investment in Corallian as held for sale and
equity accounting for Corallian ceased at this point, therefore the amounts
recognised in the income statement as it relates to Corallian represent the
first 6 months to 30 June 2022. The additions in Corallian in the year
represent the conversion of loan notes into equity of Corallian - see note 15
for further information. The disposal of Corallian completed on 1 November
2022. See Note 2 Disposals, for further information. For further information
on the judgements in respect of investments in associates see Note 1 -
Investment in Daybreak, Rathlin and Danube.
£000
2022 2021
Rathlin Danube Corallian Total Rathlin Danube Corallian Total
Investment in associate at 1 January 18,342 4,744 4,630 27,716 18,922 4,835 1,578 25,335
Additions - - 636 636 - - 3,182 3,182
Losses from associates (738) (76) (762) (1,576) (580) (91) (130) (801)
Disposals - - (4,504) (4,504) - - - -
Investment in associate at 31 December 17,604 4,668 - 22,272 18,342 4,744 4,630 27,716
The following table provides summarised financial information for the group's
and company's associates for 2022 and 2021. The information is presented on a
100% basis.
£000
Gross amount
2022 2021
Rathlin Danube Rathlin Danube Corallian
Revenue - - - - -
Profit (loss) for the year (1,034) (149) (976) (178) (280)
Non-current assets 20,538 8,658 19,800 8,256 2,687
Current assets 4,232 340 6,142 586 639
Total assets 24,770 8,998 25,942 8,842 3,326
Current liabilities 580 112 939 14 1,025
Non-current liabilities 1,493 366 1,324 289 -
Total liabilities 2,073 478 2,263 303 1,025
Net assets 22,697 8,520 23,679 8,539 2,301
Group's share in equity 13,504 4,328 14,089 4,338 1,551
Goodwill attributable to Reabold's share of associate 4,253 406 4,253 406 3,079
Reabold's share of currency translation differences - (66) - - -
Reabold's share of share-based payments (154) - - - -
Group's carrying amount of investment 17,604 4,668 18,342 4,744 4,630
Transactions between the group and its associates are summarised below.
£000
Sales to associates 2022 2021
Sales Amount receivable at 31 December Sales Amount receivable at 31 December
Consultancy services 50 14 51 12
£000
Purchases from associates 2022 2021
Purchases Amount payable at 31 December Purchases Amount payable at 31 December
Exploration and evaluation assets 275 - 1,412 -
Reabold enters into arm's length transactions with its associates including
consultancy services. These amounts are recognised within other income on the
income statement.
The terms of outstanding balances receivable from associates are 30 days. The
balances are unsecured and will be settled in cash. There are no provisions
for doubtful debts relating to these balances and no expenses recognised in
the income statement in respect of bad or doubtful debts.
The purchases from associates relate to Reabold's 16.67% share of expenditure
on the PEDL183 licence as part of the joint operation with Rathlin and Union
Jack Oil. These amounts are recognised within exploration and evaluation on
the balance sheet. Rathlin, the operator of the licence, is also an associate
of Reabold by virtue of Reabold's 59.5% interest in Rathlin.
For information on capital commitments in relation to associates see Note 23.
Reabold's share of impairment charges taken by associates in 2022 was
£688,000 and forms part of share of losses of associates in the income
statement. This amount related to writing down the 'non-Victory' assets to
their recoverable amount in light of the disposal proceeds Corallian received
from Reabold for the acquisition of the licences as detailed on pages 8 and 9.
Details of the company's associates as at 31 December 2022 are shown below:
Associates % Country of incorporation Principal activities
Rathlin Energy (UK) Limited 59.5 England & Wales Exploration and Evaluation
Danube Petroleum Limited 50.8 England & Wales Exploration and Evaluation
15. Other investments
£000
2022 2021
current Non-current current Non-current
Investment in Connaught Oil and Gas Ltd - 15 - 15
Convertible loan notes - - - 555
Contingent consideration 8,728 - - -
Investment in Daybreak - 3,469 - -
8,728 3,484 - 570
The convertible loan notes issued by Corallian in 2021 are financial assets
measured at fair value through profit or loss and are considered a level 3
valuation under the fair value hierarchy. As a result of the sale of Corallian
in Q4 2022, the loan notes converted at £3.20 per share, adding £636,000 to
the investment in Corallian. The investment in Corallian at the date of
disposal was £4.6 million. See note 2 Disposals for further details.
The contingent consideration relates to amounts arising on the disposal of
Corallian which are financial assets classified as measured at fair value
through profit or loss. The payment of the contingent consideration from Shell
will be staged as follows:
A single payment of £22 million (£9.5 million net to Reabold) will be made,
assuming the development and production consent for the Victory gas field is
secured from the North Sea Transition Authority, on or before 1 December 2023.
If consent has not been granted by this date, then Shell will have the option
to either: i) pay £12 million (£5.1 million net to Reabold), with the
remaining £10 million (£4.4 million net to Reabold) being paid at a later
consent date; or ii) offer to transfer-back the Victory licence to the current
Corallian shareholders for £1 consideration.
The fair value is determined using an estimate of discounted future cash flows
that are expected to be received and is considered a level 3 valuation under
the fair value hierarchy. The future cash flows are estimated based on the
terms of the sales contract and management's best estimate of the expected
consideration receivable. The discount rate used is based on a risk-free rate
adjusted for asset-specific risks. A reasonably possible change in the
assumptions used would not have a material impact on the net assets of the
group primarily because it is the only the timing of the development and
production consent from the North Sea Transition Authority which is considered
reasonably uncertain. Making reasonable changes to this assumption would not
have a material effect on the net assets of the group.
The investment in Daybreak completed on 26 May 2022. On the date of completion
Reabold recognised the fair value of its investment in Daybreak, treating it
prospectively as a financial asset at fair value. The market value of Daybreak
is based on level one of the fair value hierarchy, its market price.
The table below summarises the change in fair value of other investments as
reported in the income statement.
Change in fair value
2022 2021
£000 £000
Investment in Connaught Oil and Gas Ltd - -
Convertible loan notes 18 55
Contingent consideration 57 -
Investment in Daybreak (1,926) -
(1,851) 55
16. Trade and other receivables
( )
Group Company
2022 2021 2022 2021
£000 £000 £000 £000
Due within one year
Amounts owed by group undertakings - - 479 4,790
Trade receivables - 119 -
Amounts recoverable from JV partners 16 - - -
Amounts receivable from associates 15 12 15 12
VAT recoverable 102 41 87 40
Other receivables 48 - 48 -
181 172 629 4,842
( )
None of the group's receivables are considered impaired and there are no
financial assets past due but not impaired at the year end. The Directors
consider the carrying amount of trade and other receivables approximates to
their fair value.
Management considers that there are no unreasonable concentrations of credit
risk within the group or company.
In May 2022, prior to the equity exchange with Daybreak, £5.1 million of the
receivable from Reabold California to the company was assigned to Gaelic
Resources Limited and subsequently capitalised (2021: £1.6 million). The
remainder of the receivable, c.£232,000 was repaid in cash by Reabold
California in H2 2022 following the completion of the equity exchange
agreement with Daybreak.
The amounts receivable by group undertakings in 31 December 2022 represent
amounts receivable from Reabold North Sea Limited.
The amounts owed by group undertakings at 31 December 2022 have not been
secured, have no maturity and bear no interest.
17. Cash and cash equivalents and Restricted cash
Group Company
2022 2021 2022 2021
£000 £000 £000 £000
Cash and cash equivalents 5,511 4,883 5,511 4,622
Restricted cash 25 211 25 25
Cash and cash equivalents earn interest at floating rates based on daily bank
deposit rates.
The restricted cash is in respect of surety bonds in the amount of £25,000
(2021: £25,000) to cover restoration of the PEDL183 West Newton site.
The group's exposure to credit risk arises from potential default of a
counterparty, with a maximum exposure equal to the carrying amount. The group
seeks to minimise counterparty credit risks by only depositing cash surpluses
with major banks of high quality credit standing.
Financial institutions, and their credit ratings, which held greater than 10%
of the group's cash and short-term deposits at the balance sheet date were as
follows:
Group Company
S&P rating 2022 2021 2022 2021
£000 £000 £000 £000
Barclays Bank plc A-1 5,511 4,622 5,511 4,622
18. Trade and other payables
Group Company
2022 2021 2022 2021
£000 £000 £000 £000
Current:
Trade payables 164 92 164 16
Other payables 34 222 34 -
198 314 198 16
Trade payables are non-interest bearing and are generally on 15 to 30 day
terms.
The Directors consider the carrying amount of trade and other payables
approximates to their fair value.
19. Provision for decommissioning
Group Company
£000 £000
At 1 January 2022 188 146
Exchange adjustments 3 -
Revisions during the year 479 207
Unwinding of discount 16 14
Deletions (319) -
At 31 December 2022 367 367
Classified as:
Current - -
Non-current 367 367
The decommissioning provision at 31 December 2022 comprises the future costs
of decommissioning the group's 16.67% interest in wells at West Newton. The
costs are expected to be incurred in 2033. The liability has been discounted
at a rate of 4% (2021: 10%) and the unwinding of discount has been classified
as a finance cost. The estimation of costs, inflation and discount rates are
considered to be judgemental although changes in single variables are not
individually considered to have a significant impact. A 1.0 percentage point
increase in the nominal discount rate applied, could decrease the group's
provision balance by approximately £37,000 (2021: £21,000)
20. Financial instruments and financial risk factors
The accounting classification of each category of financial instruments and
their carrying amounts are set out below:
Group Company
£000 £000
At 31 December 2022 Note Measured at amortised cost Measured at fair value through profit or loss Total carrying amount Measured at amortised cost Measured at fair value through profit or loss Total carrying amount
Financial assets
Other investments 15 - 12,213 12,213 - 8,743 8,743
Trade and other receivables 16 181 - 181 629 - 629
Cash and cash equivalents 17 5,511 - 5,511 5,511 - 5,511
Restricted cash 17 25 25 25 - 25
Financial liabilities
Trade and other payables 18 (198) - (198) (198) - (198)
Accruals (111) - (111) (111) - (111)
5,408 12,213 17,621 5,856 8,743 14,599
Group Company
£000 £000
At 31 December 2021 Note Measured at amortised cost Measured at fair value through profit or loss Total carrying amount Measured at amortised cost Measured at fair value through profit or loss Total carrying amount
Financial assets
Other investments 15 - 570 570 - 570 570
Trade and other receivables 16 172 - 172 4,842 - 4,842
Cash and cash equivalents 17 4,883 - 4,883 4,622 - 4,622
Restricted cash 17 211 - 211 25 - 25
Financial liabilities
Trade and other payables 18 (314) - (314) (16) - (16)
Accruals (83) - (83) (83) - (83)
4,869 570 5,439 9,390 570 9,960
For all financial instruments within the scope of IFRS 9, the carrying amount
is either the fair value, or approximates the fair value.
Financial risk factors
It is management's opinion that the group is not exposed to significant
interest, credit or currency risks arising from its financial instruments
other than as discussed below:
· Cash credit risks are mitigated through placing funds with
institutions carrying acceptable published credit ratings to minimise
counterparty risk.
· Reabold has no history of non-payment of trade receivables. Where
Reabold operates joint ventures on behalf of partners it seeks to recover the
appropriate share of costs from these third parties. The majority of partners
in these ventures are established oil and gas companies. In the event of
non-payment, operating agreements typically provide recourse through increased
venture shares.
· Reabold retains certain non-£ cash holdings and other financial
instruments relating to its operations. The £ reporting currency value of
these may fluctuate from time to time causing reported foreign exchange gains
and losses. Reabold maintains a broad strategy of matching the currency of
funds held on deposit with the expected expenditures in those currencies.
Management believes that this mitigates most of any actual potential currency
risk from financial instruments.
(a) Market Risk
Market risk is the risk or uncertainty arising from possible market price
movements and their impact on the future performance of a business.
The components of market risk for Reabold are foreign currency exchange risk
and interest rate risk, each of which is discussed below:
(i) Foreign currency exchange risk
The group enters into transactions denominated in currencies other than its
GBP£ reporting currency. Non-GBP denominated balances, subject to exchange
rate fluctuations, at year-end were as follows:
Group Company
2022 2021 2022 2021
£000 £000 £000 £000
Other investments 3,469 - - -
Cash and cash equivalents (US Dollar) 132 261 132 1
Restricted cash (US Dollar) - 186 - -
Trade and other receivables (US Dollar) - 120 - 4,790
Trade and other payables (US Dollar) - (298) - -
The following table demonstrates the group's sensitivity to a 10% increase or
decrease in the US Dollar against the Pound sterling. The sensitivity analysis
includes only foreign currency denominated monetary items and adjusts their
translation at the year-end for a 10% change in the foreign currency rate.
Effect on profit before tax 2022 Effect on profit before tax 2021
£000 £000
Increase/decrease in foreign exchange rate
10% strengthening of £ against US$ (360) (27)
10% weakening of £ against US$ 360 27
(ii) Interest rate risk
The group's intertest rate risk is minimal as the group has no debt. The group
is exposed to interest rate movements through its cash and cash equivalents.
If interest rates were to have changed by one percentage point, assuming the
cash balance at the balance sheet date was constant throughout the whole year,
and all other variables were held constant, the group's and company's finance
income for 2022 would have changed by approximately £55,000.
(b) Credit Risk
Credit risk is the risk that a customer or counterparty to a financial
instrument will fail to perform or fail to pay amounts due causing financial
loss to the group. The group's and company's exposure to credit risk is equal
to the carrying value as at the balance sheet date. Cash and treasury credit
risks are mitigated through the placement of funds at institutions carrying
acceptable published credit ratings to minimise counterparty risk. Where
Reabold operates joint ventures on behalf of partners, it seeks to recover the
appropriate share of costs from the third-party counterparties. The partners
in these ventures are established oil and gas companies. In the event of
non-payment, operating agreements typically provide recourse through increased
venture shares. Receivable balances are monitored on an ongoing basis with
appropriate follow-up action taken where necessary.
(c) Liquidity Risk
Liquidity risk is the risk that suitable sources of funding for the group's
business activities may not be available. The group's liquidity is managed
centrally by the treasury function which will arrange to fund subsidiaries'
requirements.
The group continues to maintain suitable levels of cash and cash equivalents,
amounting to £5.5 million at 31 December 2022 (2021: £4.9 million), invested
with highly rated banks and readily accessible at immediate and short notice.
The group and company has no debt.
The table below summarises the maturity profile of the group and company's
financial liabilities based on contractual undiscounted payments.
Group Within 1 year Total
Year ended 31 December 2022 £000 £000
Trade and other payables 198 198
Accruals 111 111
Within 1 year Total
Year ended 31 December 2021 £000 £000
Trade and other payables 314 314
Accruals 83 83
Company Within 1 year Total
Year ended 31 December 2022 £000 £000
Trade and other payables 198 198
Accruals 111 111
Within 1 year Total
Year ended 31 December 2021 £000 £000
Trade and other payables 16 16
Accruals 83 83
Capital Management
The primary objective of the group's capital management is to maintain
appropriate levels of funding to meet the commitments of its forward programme
of exploration, development and investment expenditure, and to safeguard the
entity's ability to continue as a going concern and create shareholder value.
At 31 December 2022, capital employed of the group amounted to £46.5 million
(comprised of £46.5 million of equity shareholders' funds and £nil of
borrowings), compared to £46.5 million at 31 December 2021 (comprised of
£46.5 million of equity shareholders' funds and £nil of borrowings).
At 31 December 2022, capital employed of the company amounted to £46.5
million (comprised of £46.5 million of equity shareholders' funds and £nil
of borrowings), compared to £47.1 million at 31 December 2021 (comprised of
£47.1 million of equity shareholders' funds and £nil of borrowings).
21. Called-up Share Capital
The allotted, called-up and fully paid share capital at 31 December was as
follows:
2022 2021
Issued (Group and company) Shares thousand £000 Shares thousand £000
"A" deferred shares of 1.65p 6,916 114 6,916 114
Ordinary shares of 0.1 pence each
At 1 January 8,929,613 8,930 7,096,982 7,097
Placing and subscription - - 1,363,637 1,364
Acquisition for shares - - 468,994 469
At 31 December 8,929,613 8,930 8,929,613 8,930
Total 8,936,529 9,044 8,936,529 9,044
The holders of ordinary shares are entitled to one vote per share at the
meetings of the company and to dividends as declared in proportion to the
amounts paid up on the ordinary shares. No shares of the company are currently
redeemable or liable to be redeemable at the option of the holder or the
company.
The "A" deferred shares carry no voting rights. The holders of "A" deferred
shares do not have any right to receive written notice of or attend, speak or
vote at any general meeting of the company, or to any dividend declared by the
company. They may however be redeemed by the company at any time at its option
for one penny for all the "A" Deferred shares without obtaining sanction of
such holders.
As of 25 May 2023, the latest practicable date before completion of these
financial statements, 248 million further ordinary shares were issued in
relation to the acquisition of Simwell Resources Limited on 3 January 2023,
see note 26.
22. Share-Based Payments
As at 31 December 2022, 125,000,000 options granted by the company were
outstanding. These options were granted in March 2018. No options were granted
in 2022. The options vest on the vesting dates shown in the table below and
can be exercised at any time after vesting, prior to the expiry date, based on
the exercise prices shown in the table below. There are no other vesting
conditions.
In 2021 10,000,000 options (2020: nil) were granted to Anthony Samaha, the
company's Finance Director, exercisable at 1.0p, on or before 19 October 2022,
vesting on 31 December 2021. The exercise price represented a premium of 72%
to the company's closing share price of 0.58p on the date prior to grant of 25
February 2021. These options expired on 19 October 2022.
On 17 February 2022, the company announced amendments to the terms of certain
existing options currently held by the Executive Directors. In common with
many businesses, the COVID-19 pandemic significantly constrained the company's
activities, delaying management's ability to continue the successful
implementation of its medium-term strategy. Therefore, in order to further
incentivise the executive management of the company and further align their
interests with shareholders, Reabold's Remuneration Committee amended the
following Existing Options such that their expiry dates were extended by 12
months, to 19 March 2023, and additional extended vesting terms are
applicable, as outlined below. The exercise prices of the Existing Options
remain unchanged. The incremental fair value granted as a result of the
modifications was £10,833. The options below represent the only options
outstanding as at 31 December 2022. As at the date of publication this report,
all options granted to directors prior to 31 December 2022 have now expired.
Further information can be found in the Directors' remuneration report on
pages 27 to 29.
Executive Position Existing Options Exercise Price Current Amended Current Amended
Held Expiry Expiry Vesting Status Vesting
Dates
Sachin Oza Co-CEO 20,000,000 0.60p 19-Mar-22 19-Mar-23 Vested 30-Sep-22
20,000,000 0.90p 19-Mar-22 19-Mar-23 Vested 31-Dec-22
20,000,000 1.20p 19-Mar-22 19-Mar-23 Vested 31-Dec-22
Stephen Williams Co-CEO 20,000,000 0.60p 19-Mar-22 19-Mar-23 Vested 30-Sep-22
20,000,000 0.90p 19-Mar-22 19-Mar-23 Vested 31-Dec-22
20,000,000 1.20p 19-Mar-22 19-Mar-23 Vested 31-Dec-22
Anthony Samaha Finance Director 5,000,000 0.60p 19-Mar-22 19-Mar-23 Vested 30-Sep-22
The following table illustrates the number and weighted average exercise
prices (WAEP) of, and movements in, share options during the year:
2022 2022 2021 2021
Number WAEP Number WAEP
pence pence
Outstanding as at 1 January 325,000,000 0.78 315,000,000 0.80
Granted during the year - - 10,000,000 0.10
Expired during the year (200,000,000) 0.71 - -
Exercised during the year - - - -
Outstanding as at 31 December 125,000,000 0.89 325,000,000 0.78
Exercisable at 31 December 125,000,000 0.89 265,000,000 0.72
The weighted average remaining contractual life of options outstanding as at
31 December 2022 is 0.2 years (2021: 0.6 years).
For the options amended on 17 February 2022, the fair values were calculated
using the Black-Scholes model. The key inputs into the model were as follows:
Risk free rate Share price volatility Expected life Share price at date of grant
Amended 17 February 2022 0.15% 69.45% 1.08 years 0.26p
Expected volatility was determined by calculating the historical volatility of
the company's share price.
The company recognised total expenses relating to equity-settled share-based
payment transactions during the year of £22,000 (2021: £152,000). The
balance on the share-based payments reserve at 31 December 2022 is £1.9
million (2021: £1.9 million).
23. Capital Commitments
Authorised future capital expenditure by group companies for which contracts
had been signed at 31 December 2022 amounted to £nil (2021: £nil). However,
the group does have obligations to carry out defined work programmes on its
licences, under the terms of the award of rights to these licences. The
company is not obliged to meet other joint venture partner shares of these
programmes.
PEDL 183
The Joint operation between Rathlin, Reabold and Union Jack have a commitment
to drill and test a new Kirkham Abbey deviated or horizontal appraisal well by
June 2024. The company estimates it's 16.67% share of costs to be c.£1.4
million for drilling a new well and £0.6 million for testing the well.
UK North Sea
Reabold estimates its share of firm exploration and appraisal work commitments
on its North Sea portfolio to be c.£0.5 million over the next 2 years. The
company has not yet taken a decision on whether to drill any of its North Sea
licences.
24. Related Party Transactions and Transactions with Directors
Transactions between the group and its associates is disclosed in Note 14.
There are no related party transactions, or transactions with Directors that
require disclosure except for the remuneration items disclosed in the
Directors Remuneration Report and note 7 above. The disclosures in note 7
include the compensation of key management personnel. The company's related
parties consist of its subsidiaries and the transactions and amounts due
to/due from them are disclosed in the accompanying notes to the company
financial statements.
25. Non-underlying items
Non-underlying items are charges or credits included in the financial
statements that Reabold has decided to disclose separately because it
considers such disclosure to be meaningful and relevant to investors. They are
items that management considers not to be part of underlying business
operations and are disclosed in order to enable investors to understand better
and evaluate the group's financial performance. In 2022, Reabold incurred
£191,000 in legal and professional fees in relation to the successful defence
from the attempt, from a group of five beneficial shareholders, to remove the
entire Board of directors of Reabold and replace them with four new directors.
All resolutions proposed by the requisitioning shareholders were rejected at a
General Meeting held in November 2022.
26. Events after the reporting period
Acquisition of Simwell Resources Limited
On 3 January 2023, Reabold completed the acquisition of the entire issued
share capital Simwell Resources Limited (now Reabold Southern North Sea
Limited) in January 2023. which includes interests in four Southern North Sea
licences - P2332 (Reabold 30%, Shell U.K Ltd 70%, operator) and P2329, P2427
and P2486 (Reabold 10%, Horizon Energy Partners Ltd 77.5%, operator and Ardent
Oil Ltd 12.5%). The transaction substantially increases Reabold's footprint in
the emerging Zechstein trend, complementing its onshore position in PEDL183,
including the West Newton project. The licences have a number of prospects
covered with high quality 3D seismic data.
The breakdown of the consideration paid was as follows:
· £363,835.76, by way of initial consideration, satisfied through
the issue of 134,753,985 new Ordinary Shares
· £305,157.71 to certain Simwell creditors satisfied by the issue
of 113,021,374 new Ordinary Shares
· £373,398.36 paid in cash to certain Simwell creditors.
A contingent deferred consideration of £150,000 is payable to the sellers
if, inter alia, the operator of licence P2332 undertakes to the NSTA that
the licensees will commit to drill a well pursuant to a defined work programme
and within the applicable timescales.
Authority to buyback shares and capital reduction
On 28 February 2023, the company held a general meeting at which shareholders
granted the company authority to make market purchases of up to 2,294,346,977
ordinary shares of £0.001 each in the capital of the company and approved the
cancellation of the company's share premium account. The court approved the
cancellation of the company's share premium account on 28 March 2023.
Commencement of a share buyback programme of up to £750,000.
On 28 April 2023, the company announced the commencement of a share buyback
programme of up to £750,000 in accordance with the authority granted by
shareholders at the company's General Meeting on 28 February 2023.
Reabold's Board believes that the current market value of the company's
ordinary shares makes the buyback an attractive investment. Furthermore, the
quantum of the buyback programme has been set by the Board after having
considered the current capital position and future capital needs of the
company, such that it retains financial flexibility whilst maintaining an
efficient balance sheet.
The Board will keep the Programme under review to ensure that it continues as
an efficient and effective means of generating value for Reabold shareholders.
While the company has launched the Programme, there is no certainty on the
volume of shares that may be acquired, nor any certainty on the pace and
quantum of acquisitions.
The Ordinary Shares repurchased will be held in Treasury, to meet the
obligations from employee share option programmes or other allocations of
shares to employees of the company, or to re-issue such Ordinary Shares held
in Treasury outside of a pre-emptive offer.
The Programme is expected to continue until the company's next Annual General
Meeting, which will be held on 29 June 2023.
Operational Update
On 28 April 2023, the company announced an operational update on its UK
onshore and offshore assets, all of which is detailed in the review of
operations on pages 7 to 10.
Long Term Incentive Plan Awards
On 28 April 2023, the company announced it had granted nil cost options over a
total of 390,000,000 ordinary shares of 0.1p each ("Ordinary Shares")
(representing approximately 4.25% of the company's issued share capital) in
accordance with the rules of the new Reabold Resources plc 2023 Long Term
Incentive Plan ("LTIP"). The award has been made to members of the group's
executive team and senior management. All previous share option plans in the
company expired on 19 March 2023.
These awards include a total of 150,000,000 Ordinary Shares to each of the
Co-Chief Executive Officers and 90,000,000 Ordinary Shares to the Chief
Financial Officer, as set out in the table below and are subject to vesting
criteria that are designed to incentivise performance that delivers value for
all shareholders. Awards are subject to standard malus and clawback
provisions.
The vesting criteria is based on Total Shareholder Return ("TSR") over a
three-to-five-year period. For the awards to vest in full, the TSR of a share
must be at or more than six times (6x) the market value of a share at the
grant date using a 30-trading day average. The first measurement date shall be
at the end of year three, the second measurement date at the end of year four
and the final measurement date at the end of year five. If TSR is less than
2.5x market value, 0% of the award vests. If TSR is at 2.5x market value, 30%
of the award vests and if TSR is at 4x market value, 60% of the award vests.
Performance between TSR thresholds shall be calculated on a straight-line
basis.
Director/PDMR Position Number of Ordinary Shares awarded
Sachin Oza Co-Chief Executive Officer 150,000,000
Stephen Williams Co-Chief Executive Officer 150,000,000
Chris Connolly Chief Financial Officer 90,000,000
Investment in LNEnergy
On 9 May 2023, Reabold announced that it had entered into a conditional
subscription and option agreement (the "Subscription Agreement")
with LNEnergy Limited ("LNEnergy") and a conditional shareholder option
agreement with certain existing shareholders of LNEnergy (the "Shareholder
Option Agreement") (together, the "Agreements"). Pursuant to the terms of the
Agreements, Reabold will initially acquire an interest of 3.1% of LNEnergy for
cash consideration of £250,000, and receive options to acquire, at its sole
discretion, further shares in LNEnergy which, if exercised, would result in
Reabold holding a 25.0% shareholding in LNEnergy for aggregate cash and equity
consideration of £3.8 million.
LNEnergy's primary asset is an option over a 90% interest in the Colle Santo
gas field, onshore Italy in the Abruzzo region. With 65Bcf of 2P reserves,
as estimated by RPS as of 30 September 2022, this is a highly material
undeveloped onshore gas resource, particularly in the context of
onshore Western Europe, and subject to the necessary approvals and permits,
is development ready with no additional drilling required. First gas is
targeted for early 2025. This project is aligned with Reabold's strategy to
help to progress high quality pre-cash flow projects that can deliver material
returns to shareholders.
Under the terms of the Subscription Agreement, Reabold has initially
subscribed for 32 new LNEnergy shares (representing 3.1% of LNEnergy's
enlarged share capital) for an aggregate consideration of £250,000 (the
"Initial Subscription"), to be satisfied through existing cash resources. In
addition, Reabold will receive an option to acquire a further 36 new LNEnergy
shares (representing 3.3% of LNEnergy's enlarged share capital at such time)
for an aggregate cash consideration of £500,000 (the "First Option") and a
second option to acquire a further 127 new LNEnergy shares (representing 10.5%
of LNEnergy's enlarged share capital at such time) for an aggregate cash
consideration of £1,800,000 (the "Second Option"), each of which would be
satisfied through existing cash resources in the event that they are
exercised.
In conjunction with the Subscription Agreement, Reabold has entered into the
Shareholder Option Agreement, whereby Reabold will receive an option to
acquire 108 existing LNEnergy shares (representing 10.0% of LNEnergy's
enlarged share capital at such time) from certain LNEnergy shareholders for an
aggregate consideration of £1,500,000, payable through the issue of new
ordinary shares in the capital of the company (the "Shareholder Option"),
which must be exercised simultaneously with the First Option in order to
enable the First Option to be exercised.
Under the terms of the Agreements, which are inter-conditional, Reabold is
only committed to the Initial Subscription, whereas the First Option,
Shareholder Option and Second Option are all exercisable at the company's sole
discretion. Should they be exercised, the First Option, Shareholder Option and
Second Option can only be exercised in full. The First Option and Shareholder
Option will expire on 31 May 2023 and the Second Option will expire on 30
November 2023.
Glossary
2C resources, 2C
Best estimate contingent resource, being quantities of hydrocarbons which are
estimated, on a given date, to be potentially recoverable from known
accumulations but which are not currently considered to be commercially
recoverable.
bcf
Billion standard cubic feet.
boe
Barrels of oil equivalent.
boe/d
Barrels of oil equivalent per day.
CPR
Competent Persons Report.
ESG
Environmental, Social and Governance.
IFRS
International Financial Reporting Standards.
mmboe
million barrels of oil equivalent
UKCS
United Kingdom Continental Shelf
Corporate Information
Registered Office Company Secretary
20 Primrose Street Anthony Samaha (resigned 9 May 2022)
London Christopher Connolly (appointed 9 May 2022)
EC2A 2EW
Registrar
Nominated Neville Registrars Limited
Adviser
18 Laurel Lane
Strand Hanson Limited
Halesowen
26 Mount Row
West Midlands
London
B63 3DA
W1K 3SQ
Legal adviser
Brokers
Hill Dickinson LLP
Stifel Nicolaus Europe Limited
20 Primrose Street
150 Cheapside
London
London
EC2A 2EW
EC2V 6ET
Public Market Admission
finnCap Ltd
AIM, London
1 Bartholomew Close
Symbol: RBD
London
England
Website
EC1A 7BL
www.reabold.com (http://www.reabold.com)
Auditor
Company Number
Mazars LLP
3542727
The Pinnacle
160 Midsummer Boulevard
Milton Keynes
MK9 1FF
Bankers
Barclays
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