REG - Reabold Resources - FY Results for the year ended 31 December 2023
31/05/2024 07:00
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RNS Number : 5574Q Reabold Resources PLC 31 May 2024
31 May 2024
Reabold Resources plc
("Reabold" or the "Company")
Full Year Results for the year ended 31 December 2023
Reabold Resources plc, the investing company focussed on developing strategic
gas projects for European energy security, today announces its audited
financial results for the year ended 31 December 2023 and the Annual Report is
publicly available at www.reabold.com/investors/reports-presentations/
(http://www.reabold.com/investors/reports-presentations/) .
Reporting period ended 31 December 2023 Highlights
Portfolio developments
· Acquisition of a 26.1% interest in LNEnergy Limited ("LNEnergy"),
built in stages throughout 2023 for a total consideration of £4.3m (£1.9
million of which was in cash and the balance in 1,297,297,298 new Reabold
shares). LNEnergy's primary asset is an exclusive option over a 90% interest
in the Colle Santo gas field, a highly material gas resource with an estimated
65bcf of 2P reserves
(https://polaris.brighterir.com/public/reabold_resources/news/rns/story/xennmyx#_ftn1)
, with two production wells already drilled and a development-ready field,
subject to approvals and permits. Financing and approvals are progressing well
for the liquified natural gas ("LNG") field development.
Balance sheet and capital allocation
· Cash of £5.4 million as at 31 December 2023; net assets of
£42.2 million
· Cash proceeds of £5.2 million received during the financial year
for second tranche proceeds from the sale of Corallian
· £263,000 returned to shareholders through share buybacks as part
of the distribution of Corallian sale proceeds, with a further £75,000
returned post period end.
Post Period End Highlights
· Final tranche cash proceeds of £4.4 million for the sale of
Corallian, received from Shell in January 2024; Reabold net cash of £8.2
million as at 30 April 2024
· At West Newton, a Gas Export Feasibility study completed by
independent energy consultants, CNG Services Limited, concluded that as a
precursor to the intended West Newton full field development, an initial
single well development and gas export plan can accelerate production and cash
flow whilst requiring limited capital expenditure, giving the joint venture
the ability to drill future wells out of cash flow. See Review of Operations
section for further details.
· Execution of a non-binding Heads of Agreement between Gunvor
International B.V. ("Gunvor") and LNEnergy for the purchase of LNG by Gunvor
from LNEnergy from the Colle Santo gas field.
ENDS
For further information, contact:
Reabold Resources plc c/o Camarco
Sachin Oza +44 (0) 20 3757 4980
Stephen Williams
Strand Hanson Limited - Nominated & Financial Adviser +44 (0) 20 7409 3494
James Spinney
James Dance
Rob Patrick
Cavendish - Broker
Neil McDonald +44 (0) 20 7220 0500
Pearl Kellie
Camarco +44 (0) 20 3757 4980
Billy Clegg
Rebecca Waterworth
Sam Morris
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
In the financial year ended 31 December 2023, Reabold continued with its
strategy of identifying, investing in, maturing and monetising undeveloped gas
discoveries with significant resources and near-term production potential. Our
emphasis is on investing in UK and European gas assets to enhance domestic
energy supply and security, which has been exposed in recent years by the
Ukraine war. The sale of the Victory strategic gas project to Shell U.K.
Limited ("Shell") in late 2022 reaffirmed our view that there is further
opportunity for value creation by applying our strategy to similar assets.
Portfolio activity undertaken in 2023 reflects this approach; Reabold
reinvested some of the proceeds from the Victory transaction into a
significant new opportunity in Italy, the Colle Santo onshore gas field, and
continued to commit resources to and develop the attractive prospects of the
PEDL183 onshore licence at West Newton in the UK. Other investments in the
Reabold portfolio, such as the Romanian licences, continue to hold attractive
optional value in the long-term but were not a capital allocation priority in
2023.
At West Newton, we were pleased to receive approval permits from the
Environment Agency, a key step forward in enabling further licence activity.
We were however disappointed with the delay in drilling of the first
development well, which had been targeted for the second half of 2023.
Rathlin, the site operator, was unable to resolve funding for its own share in
2023, which we believe is a consequence of the fiscal and political
instability in the UK. With a strong balance sheet throughout the year and
£8.2 million of cash as at 30 April 2024, Reabold has more than sufficient
funding for its direct share of the planned drilling on the licence. And
having confirmed a materially lower phased capital expenditure plan for a
single well development and early cash flow from production, ahead of the full
field development longer-term, we now look forward to an enhanced level of
interest and the resolution of Rathlin's funding situation in 2024 through a
potential farm-out arrangement or other sources of capital. As a Board, we
remain confident in the prospects for West Newton and are fully focused on
realising the asset's significant value potential for shareholders.
Outside the UK, we took the decision to build a significant stake (26.1% by
the end of 2023) in LNEnergy for a total cost of £4.3 million (£1.9 million
in cash and £2.4 million via the issuance of 1,297,297,298 new ordinary
shares). We were attracted to LNEnergy because of the exclusive option it has
over a 90% interest in the Colle Santo gas field, a highly material onshore
gas resource in central Italy, with two production wells already drilled and a
field that is development ready, subject to the approvals process. The primary
focus for this asset in 2023 was to progress the necessary regional and
national approvals required to begin operations. We are encouraged by the
favourable momentum in this approvals process throughout 2023 and into the
current financial year, helped by the political desire to improve domestic
energy security. LNEnergy is working towards securing all necessary permits in
the near future. It is also pleasing to report that LNEnergy has secured a
well-known, highly experienced technical partner, Italfluid, to act as
contract operator and, since the period end, has signed a Heads of Agreement
with Gunvor, a leading global LNG trader, for the purchase of LNG from the
Colle Santo production facility. 2024 will be an important year in gaining all
the formal approvals and operationalising the site to start producing first
gas and generating early cash flow, currently targeted for 2025.
From a corporate and governance perspective, 2023 was a year of mixed fortunes
and outcomes. The Board and management team had to deal once again with the
unwelcome distraction of a second unsuccessful general meeting requisition,
driven by Kamran Sattar of Portillion Capital. This consumed valuable time and
resource from our efforts to progress our two key assets in the UK and Italy,
as described above. With the cash proceeds from the Victory asset sale on our
balance sheet, we initiated a share buyback programme - returning £263,000 to
shareholders in 2023 and a further £75,000 post period end. Our net assets on
the balance sheet were £42.2 million, well above the market capitalisation of
the Company at the time of writing. It is now our duty to ensure the full
potential and value of Reabold's portfolio is delivered to shareholders. As a
Board, we remain confident that this can be achieved, and we look forward to
updating you on our progress throughout the year.
Jeremy Edelman
Chair
30 May 2024
Strategy and business model
Reabold is an investing company focussed on developing strategic European gas
assets to secure European gas supply and energy security. Reabold has a
diversified portfolio of gas assets comprised of development, appraisal and
exploration projects. Reabold aims to generate shareholder value by making
disciplined and focused investments to grow our business. Reabold's strategy
is to invest in existing undeveloped gas discoveries with significant
resources and near-term production potential, which have considerable
valuation uplift potential and a clear monetisation plan. Proceeds from
monetisation events are balanced between shareholder returns and re-investment
into new and existing projects.
We are preparing for the future and responding to the increased focus on
energy security brought about by the rise in geopolitical conflict and
instability in the region, and globally. Concern about energy shortages and
vulnerability to geopolitical events has prompted many governments to
prioritise access to more domestically produced energy and reduce their
dependency on imported gas. Reabold aims to contribute to Europe's energy
security by unlocking potential sources of near-term domestic gas supply, at a
time when the continent is exposed to potentially significant gas supply
disruptions. In this regard, the Company identified, matured and sold the
strategic Victory gas project in the UK to Shell for £32.0m (£12.7m net
to Reabold).
We are focused on the disciplined allocation of capital to deliver on our
strategic objectives. Reabold's current focus is on its two key gas assets
that have strong parallels with Victory: West Newton (UK onshore) & Colle
Santo (Italy onshore). Similar to Victory, both assets are highly material,
undeveloped gas discoveries in Europe. Full details of these operations are
included in the Review of Operations.
Key performance indicators (KPIs)
The Group's main business is to invest in direct and indirect interests in
exploration and development gas 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 are consistent with Reabold's strategy and investor proposition.
The KPIs are:
KPI Definition Performance
KPI 1 Portfolio enhancements · Accumulated a 26.1% interest in LNEnergy in 2023 whose primary
asset is an exclusive option over a 90% interest in the Colle Santo gas field
Grow value through material investments, project delivery and commercial onshore Italy. The Colle Santo gas field is a highly material gas resource
discoveries with an estimated 65Bcf of 2P reserves, with two production wells already
drilled and flow-tested, making the field development ready. LNEnergy believes
that the field has the potential to generate an estimated €11-12m of gross
post-tax free cash flow per annum.
KPI 2 Future financial prosperity · Reabold received £5.2 million in cash in 2023 which represented
the second tranche of the consideration from the Corallian disposal, following
Liquidity events, and successful fundraising Shell's decision to continue to pursue the development of the Victory gas
field. A further £4.4 million was received in January 2024.
KPI 3 Financial discipline · Cash position as at 31 December 2023 was £5.4 million (£8.2
million at 30 April 2024). Reabold is fully funded for all intended activities
Ensuring business is run to budget via accurate forecasting, maintaining and commitments in 2024.
significant cash buffer and resilient balance sheet
· Net assets as at 31 December 2023 were £42.2 million.
KPI 4 Growth in NAV per share · Broker risked NAV remains unchanged at 1.2p/sh
KPI 5 Total shareholder return over a calendar year · The share price started the year at 0.21p and finished the year
at 0.11p
KPI 6 Risk and controls · The Company did not have any recordable incidents or injuries in
2023. There were no instances of misconduct, breaches of laws or regulations,
Zero recordable incidents, ethical misconduct, breaches 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.
Co-Chief Executive Officers' Review of Operations
In 2023, it became even clearer that Europe needs a secure, affordable and
lower carbon energy system. The Russia-Ukraine war continued in 2023 and
renewed conflict in the Middle East has raised political tensions. Reabold's
strategy is to improve Europe's energy security by unlocking potential sources
of near-term domestic gas supply, at a time when Europe is exposed to
potentially significant gas supply disruptions. In this regard, the Company
identified, matured and sold the strategic Victory gas project to Shell
for £32.0m (£12.7m net to Reabold).
The last few years were about generating options. In 2024, and as we drive to
2025, we will focus on our two key gas assets that have strong parallels with
Victory, namely West Newton in the UK and Colle Santo in Italy, where
the Company plans to apply the same successful strategy demonstrated with
Victory. 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 successful 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 in which it holds a 66.67%
interest. Reabold has a 59.5% shareholding in Rathlin and a direct 16.67%
interest in the licence, giving the Company an aggregate c. 56% economic
interest in West Newton. The other co-venturer on the licence is Union Jack
Oil with a 16.67% direct interest.
A Gas Export Feasibility study completed by CNG Services Limited in the first
half of 2024, concludes that, as a precursor to the intended West Newton full
field development, an initial single well development and gas export plan can
accelerate production and cash flow whilst requiring limited capital
expenditure. With the industry currently suffering from a lack of available
development capital, the ability to achieve early production with limited
capex is strategically extremely valuable. Initial gas production will be from
a single horizontal well, processed through a modular plant, tied in from the
A site to the National Transmission System at an existing above ground
installation via a pipeline. The single well development plan benefits from
early cash generation with the ability to drill future wells out of cash flow.
Drilling of the next well at West Newton is subject to Rathlin funding and
regulatory approval. Following drilling and testing of this horizontal well,
first gas is expected 18 months later with an associated development capex
estimated to be c.£12 million. Although early production from the single well
development demonstrates highly attractive standalone economics and would
support future wells being drilled from cashflow, it is envisaged that it will
be a precursor to the full field conceptual development plan which had an
associated pre-tax NPV(10) of US$222 million, net to Reabold, based on the
PEDL183 CPR effective 30 June 2022.
In May 2024, Reabold commissioned GaffneyCline to perform a carbon intensity
study for the West Newton field. The GaffneyCline study highlighted the
following:
· The West Newton project has an AA rating for Carbon Intensity for
its potential upstream gas and condensate production, the lowest possible
carbon intensity rating category on GaffneyCline's scale
· The West Newton field has a Carbon Intensity significantly lower
than the UK average and onshore and offshore analogues. It is also
significantly lower than the average imported LNG, based on the NSTA Natural
Carbon Footprint Analysis published in July 2023
· Based on the study, GaffneyCline estimates that West Newton could
produce the equivalent of just 2.87 grams of CO2 per megajoule of energy
developed (gCO2eq./MJ)
· As the development proceeds and project knowledge increases,
there is potential to improve the Carbon Intensity by further reducing
fugitive, flaring and venting emissions and by gas-to-grid development,
reducing on site gas and condensate processing, and using the shortest
possible route to the National Grid
The AA rating demonstrates the low carbon credentials of the West Newton
project and is an example of the opportunities available in the UK to power
the country through lower carbon, home grown energy, rather than relying on
expensive and more carbon intensive imports. For more information, please see
the ESG section of this report on pages 15-17.
The joint venture has a commitment to the North Sea Transition Authority
("NSTA") to drill and test a new Kirkham Abbey deviated or horizontal well by
June 2024 and to recomplete or sidetrack and test one of the existing wells in
that same timeframe. As mentioned above, drilling of the first development
well is subject to Rathlin securing funding. There is an active process
underway to assess options to source funding for Rathlin's share of the cost,
including through a farmout, or through further investment from Reabold,
which, following the receipt of the proceeds from Shell, the Company could
potentially provide, in addition to funding its own share. As a result of
Rathlin's funding shortfall, drilling of the first development well will not
be completed prior to June 2024. Rathlin, as operator, has initiated
discussions with the NSTA to defer the deadlines for these commitments.
Italy - LNEnergy
Colle Santo Gas Field
In May 2023, Reabold acquired a 3.1% interest in LNEnergy for cash
consideration of £250,000 and received options to acquire, at its sole
discretion, further shares in LNEnergy. In June 2023, Reabold exercised
certain of these options to increase the Company's stake in LNEnergy to 16.2%
through a cash consideration of £500,000 and the issuance of 810,810,811 new
ordinary shares as consideration for the increased investment. In September
2023, Reabold increased its stake in LNEnergy to 17.6% for a further cash
consideration of £250,000. In November 2023, Reabold increased its interest
in LNENergy by 0.8% to 18.4% through a partial exercise of the remaining
option for a cash consideration of £150,000. In December 2023, Reabold
exercised the remainder of the final option to increase its stake in LNEnergy
to 26.1% through a cash consideration of £750,000 and the issuance of
486,486,487 new ordinary shares as consideration for the increased
investment.
LNEnergy's primary asset is an exclusive option over a 90% interest in the
onshore Colle Santo gas field in Abruzzo, Italy. With 65bcf of 2P reserves, as
estimated by RPS as of 30 September 2022, this is a highly material
undeveloped onshore gas resource. Reabold believes this is the largest onshore
proven undeveloped gas field in mainland Western Europe. The field is
development ready subject to permits and approvals. Two wells have already
been drilled and are available for production, with no additional drilling
being required. The development will consist of a small-scale LNG facility to
produce initially at 10mmcf/d from the existing two wells with over 20 years
of ultimate production. LNEnergy believes that the field has the potential to
generate an estimated €11-12m of gross post-tax free cash flow per annum.
First gas is targeted for 2025.
Demand for LNG is expected to continue to grow. LNG is critical to the energy
transition and plays an important role in enabling countries to replace
coal-fired power generation with a less carbon-intensive alternative, and
provides grid stability alongside wind and solar power in electricity
generation. The Italian government has recently approved a decree, which was
converted into law in February 2024, to boost the country's renewable energy
production and energy security. The decree provides incentives to build plants
for energy production from renewable sources, such as the liquefaction of
natural gas; the release of new licences for the exploitation of gas fields
aimed at providing gas to industries with high gas consumption, at competitive
prices; incentives for LNG terminals and incentives for carbon dioxide storage
programmes.
In August 2023, Reabold announced that LNEnergy had received a letter from the
head of the Italian National Bureau of Hydrocarbons and Georesources
("UNMIG"), the minerals division of Italian Ministry of Environment and Energy
Security ("MASE"), giving permission to carry out well integrity and well
service testing on the two existing wells and to start work on the
installation and commissioning of the monitoring network at the Colle Santo
gas field. The letter is a positive indication of support for the development
of the Colle Santo gas field and the next stage is to receive a formal decree
from MASE to conduct the work.
In December 2023, LNEnergy reported that it had filed the Environmental Impact
Study ("EIS") for the new small-scale LNG development plan at the Colle Santo
gas field with MASE. This is a further step towards achieving the granting of
a production concession at Colle Santo. The study was performed on behalf of
LNEnergy by its technical partner Italfluid, and various subsidiary companies
of Italfluid, along with several independent technical specialists.
The Company also notes that LNEnergy's application for concession has been
recognised by MASE, as a project that meets the requirements of the Italian
government's National Integrated Plan for Energy and Climate and National Plan
for Economic Recovery, for which €12 billion in grants and economic
incentives have been made available by executive decree.
On 2 May 2024, Reabold announced the execution of a non-binding Heads of
Agreement ("HoA") between Gunvor and LNEnergy for the purchase of LNG by
Gunvor from LNEnergy from the Colle Santo gas field. The HoA provides the
terms on which Gunvor will purchase LNG from LNEnergy at its planned
small-scale LNG production facility at the Colle Santo gas field. Gunvor will
purchase approximately 44,000 tonnes of LNG per annum. The point of sale will
be the truck loading flange at the small-scale LNG plant, and the LNG will
then be delivered by truck in Italy. The price for the LNG will be aligned
with the Italian PSV price. The contract term will be for an indefinite period
with a minimum term of five years.
The HoA also provides for a potential prepayment by Gunvor for a portion of
the first five years of deliveries, with such amounts subject to prepayment
being a total of approximately 66,000 tonnes of LNG, or 999,000 MWh. The
average forward Italian PSV gas price for the years 2025-2030 is currently
approximately €30 / MWh. The prepayment is conditional on agreeing
definitive transaction documentation and LNEnergy obtaining the required
permits to construct and operate the LNG production facility.
On the basis of the HoA, LNEnergy and Gunvor intend to negotiate a
fully-termed LNG sale and purchase agreement over the next six months. During
such time, LNEnergy will exclusively discuss the sale and purchase of LNG
from Colle Santo with Gunvor, whilst concurrently focusing its efforts on
obtaining the required permits to construct and operate the LNG production
facility.
UK Offshore
Victory contingent consideration receivable
Following the receipt of the initial £3.2 million net to Reabold in
November 2022, for the sale of Corallian, Reabold received a further £5.2
million in December 2023. In January 2024, Reabold received the final tranche
payment, following Shell's receipt of development and production consent for
the Victory gas field from the North Sea Transition Authority, taking
Reabold's final proceeds for the sale of its 49.99% interest in Corallian to
£12.7 million.
Licences retained - P2605, P2504 (both 100%) and P2486 (10%)
In 2023, Reabold relinquished interests in five North Sea licences: (P2464 and
P2493 (both 100%), P2332 (30%), P2329 and P2427 (10%)). Reabold relinquished
its 36% interest in licence P2478 in March 2024.
Discussions to farm down Reabold's remaining North Sea licences to help fund
the de-risking and value creation process continues, however, the energy
profits levy and political uncertainty in the UK has created difficulties for
the farmout process.
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 the reporting period, following several positive meetings with the
governing authority, ADX has submitted technical and financial documents in
relation to the Parta Exploration Licence to the relevant Romanian authorities
for the possible extension of the current licence period (note: the validity
of the Iecea Mare production licence is 20 years and not affected). The
governing authority is the National Agency for Mineral Resources (NAMR) which
is supporting the extension which can be granted through a government process.
ADX is currently providing several reports to assist NAMR with documenting the
extensive past activity with the objective of receiving a de facto waiver on
the fulfilment of the obligatory work programme.
With regards to the Iecea Mare Production Licence, ADX has forwarded the 2024
work programme to the government agency and is reviewing options to convert
part of the licence into a geothermal prospecting area.
USA - Daybreak
Reabold has a 42% shareholding in Daybreak Oil and Gas Inc ("Daybreak").
Daybreak is an OTC traded oil and gas company engaged in the exploration,
development and production of onshore crude oil and natural gas, primarily in
California. Further details on Daybreak can be found on its website at
www.daybreakoilandgas.com/ (http://www.daybreakoilandgas.com/) .
Sachin Oza Stephen Williams
Co-Chief Executive Officer Co-Chief Executive Officer
30 May 2024
Financial review
Group Income Statement
The Group's loss for the year ended 31 December 2023 was £7.2 million (2022:
£45,000).
The Group incurred a loss of £2.7 million on financial assets (2022: £1.9
million) The loss primarily arose from a decline in the market value of
Daybreak's shares (£3.5 million), partly offset by an increase in the fair
value of contingent consideration receivable (£0.8 million) from the sale of
Corallian in 2022.
Reabold's share of loss of associates was £0.6 million (2022: £1.6 million).
The decrease was largely due to the absence of non-cash impairment charges
which Corallian had incurred in 2022. See Note 15 for more information.
Reabold received cash proceeds of £5.2 million in 2023 related to the sale of
Corallian to Shell in 2022, however the gain on this sale was recorded in
2022, when the sale completed, and as such no gains were recorded in the
income statement in 2023. In 2022, the net gains on sale of businesses of
£5.0 million related to the gain on sale of Corallian (£7.3 million) offset
by a loss on disposal of Reabold California (£2.3 million).
Exploration expenses of £1.6 million were incurred in 2023 (2022: £74,000).
The increase in 2023 was principally related to exploration expenditure
written off as a result of the relinquishment of several North Sea licences.
See Notes 7 and 13 for further details.
Administrative expenses for the year were £2.2 million (2022: £1.7 million).
The increase was mainly driven by an increase in legal fees in relation to the
step acquisitions of LNEnergy, as well as inflationary impacts across the
majority of suppliers.
In 2023, Reabold incurred £190,000 (2022: £191,000) in legal and
professional fees, which Rebold has classified as non-underlying items, in
relation to the successful defence from a second attempt, from a group of
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 January
2024 (2022: rejected at a general meeting held in November 2022).
Group Balance Sheet
Exploration and evaluation assets increased by £0.2 million from £6.8
million at 31 December 2022 to £7.0 million at 31 December 2023. Additions at
West Newton of £0.3 million and the acquisition of four Southern North Sea
licences for £1.2 million as part of the acquisition of Simwell Resources
were offset by exploration write-offs of £1.4 million.
Investments in associates increased from £22.3 million at year end 2022 to
£26.1 million at year end 2023, primarily as a result of the step
acquisitions of LNEnergy during the year. See Note 15 for further information.
Other long-term investments decreased by £3.5 million as a result of the
decline in value of Daybreak's shares. Other short-term investments decreased
from £8.7 million to £4.4 million following the receipt of £5.2 million of
contingent consideration for the sale of Corallian to Shell in 2022. The
movement in short-term investments also included favourable movements of £0.8
million due to the fair value accounting of contingent consideration. See Note
16 for further information.
The increase in share capital from £9.0 million to £10.6 million arose from
shares issued as consideration for the acquisition of Simwell Resources
Limited (£0.2 million) and shares issued as part of the investment into
LNEnergy (£1.3 million). The decrease in the share premium account from
£29.0 million to £1.1 million relates to a capital reduction of £29.4
million, offset by the premium on shares issued as part of the consideration
for Simwell Resources Limited (£0.4 million) and the premium on shares issued
as part of the investment in LNEnergy (£1.1 million). The capital reduction
ensures the Company has sufficient distributable reserves to make
distributions to shareholders.
Overall, net assets decreased from £46.5 million at 31 December 2022 to
£42.2 million at 31 December 2023.
Group cash flow statement
Net cash used in operating activities was £2.2 million in 2023, compared with
£1.8 million in 2022. The net cash used in operating activities was primarily
driven by administration expenses of £2.2 million.
Cash flow from investing activities was an inflow of £2.3 million, compared
with an inflow of £2.4 million in 2022. The cash flow from investing
activities in 2023 included cash capital expenditure of £2.9 million
(compared with cash capital expenditure of £0.7 million in 2022). The
increase in cash capital expenditure was primarily driven by the acquisition
of Simwell Resources Limited and the step acquisitions of LNEnergy. Divestment
proceeds in 2023 were £5.2 million compared with £3.2 million in 2022 - both
amounts relate to cash receipts from the sale of Corallian to Shell in
2022.
Cash flow from financing activities in 2023 was an outflow of £0.3 million,
compared with nil in 2022, due to the repurchase of shares in 2023.
Liquidity
Cash and cash equivalents were £5.4 million at 31 December 2023 (2022: £5.5
million). The Group has no debt.
Commitments
The Group does not have any signed contractual capital commitments as at 31
December 2023 (2022: 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 joint venture has also committed to recomplete or sidetrack and
test one of the WNA-1, WNA-2 or WNB-1Z wells in that same timeframe. The
Company estimates its 16.67% share of costs for these commitments to be
c.£2.2 million. Rathlin, the operator of PEDL183, is working with the NSTA to
defer these commitments to allow the time necessary for Rathlin to obtain
sufficient funding for its share of the commitments.
UK North Sea
Reabold estimates its share of firm exploration and appraisal work commitments
on its North Sea portfolio to be c.£50,000 over the course of 2024. 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 faced by the Company can, and are
likely to, change with progress in the Company's strategy and developments in
the external business environment.
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, Commercial and Operational 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.
· The Directors regularly monitor the appropriateness of the
strategy taking into account both internal and external factors, and the
progress in implementing the strategy, and may modify the strategy based on
developments.
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 current reasonable
frame and maintain our investment programme. oil/gas 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. Challenging operational environments and other uncertainties
could impact drilling and production activities. Challenges include uncertain · Appraisal programmes are designed to de-risk the overall field
geology; the existence and availability of necessary technology and development. Well and seismic data is continually reviewed to best allocate
engineering resources; the availability of skilled labour; the existence of capital and make drilling decisions.
transport infrastructure; project delays; the expiration of licences; delays
in obtaining required permits; potential cost overruns; and technical, fiscal, · Downside risk can be reduced by entering into risk sharing
regulatory, political and other conditions. arrangements.
· The Group retains working capital reserves to cover any delays or
cost overruns
Liquidity, financial capacity and financial exposure: External market · Management has a clear strategy for value realisation and
conditions can impact our financial performance. Insufficient liquidity and creation as evidenced by the realisation of value from the Corallian sale in
funding capacity of the Group and its investee companies could adversely 2022.
impact the implementation of the Group's strategy and restrict work programmes
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: Most of our projects and operations are conducted in joint · For every project which is conducted via an associate, Reabold
arrangements or with associates. This could reduce our degree of control and seeks to appoint a director to the board of the associate, whose
our ability to identify and manage risks. Varying levels of control over the responsibility is to manage performance and create and protect value for
standards, operations and compliance of our partners could result in legal Reabold. With a director on the board, Reabold seeks to influence operators
liability and reputational damage. and other partners to adapt their practices in order to drive value
appropriately and to mitigate identified risks.
· The Group continually engages with its operating partners and
closely monitors the operation of its assets.
· 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 · We continually monitor geopolitical developments.
changes to the operating and regulatory environment (including events relating
to the Russia-Ukraine conflict) could cause business disruption. · Management maintains regular communication with regulatory
authorities.
· The Company aligns its standards and objectives with government
policies as closely as possible.
· 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. financial performance. To support this work, we seek to develop co-operative
relationships with governmental authorities to allow appropriate focus on
Tax rates, particularly those applied to hydrocarbon activities tend to be areas of potential risk or uncertainty while also protecting Reabold's
high compared with those imposed on similar commercial activities. Governments interests within the law.
may change their fiscal and regulatory frameworks in response to public
pressure on finances resulting in increased amounts payable to them. The UKCS · Management will utilise investment incentives where available
licensing regime under which some of Reabold's operational rights and
obligations are defined may be subject to future change.
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
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.
We support a balanced energy transition where the world maintains a secure and
affordable supply of energy, while building the clean energy system of the
future. 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, and will be heavily influenced by government policy, 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) , and of LNEnergy, operator of the Colle
Santo project in Italy, on its website at https://www.sviluppocollesanto.it/
(https://www.sviluppocollesanto.it/) .
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, 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, more
recently, the war in Ukraine has been a stark reminder that energy security
cannot be taken for granted.
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, and the Colle
Santo gas project in Italy.
Reabold takes its commitment to responsible hydrocarbon production very
seriously. In May 2024, Reabold commissioned GaffneyCline to perform a carbon
intensity study for the West Newton field. The GaffneyCline study highlighted
the following:
· The West Newton project has an AA rating for Carbon Intensity for
its potential upstream gas and condensate production, the lowest possible
carbon intensity rating category on GaffneyCline's scale
· The West Newton field has a Carbon Intensity significantly lower
than the UK average and onshore and offshore analogues. It is also
significantly lower than the average imported LNG, based on the NSTA Natural
Carbon Footprint Analysis published in July 2023
· Based on the study, GaffneyCline estimates that West Newton could
produce the equivalent of just 2.87 grams of CO2 per megajoule of energy
developed (gCO2eq./MJ)
· As the development proceeds and project knowledge increases,
there is potential to improve the Carbon Intensity by further reducing
fugitive, flaring and venting emissions and by gas-to-grid development,
reducing on site gas and condensate processing, and using the shortest
possible route to the National Grid
The AA rating demonstrates the low carbon credentials of the West Newton
project and is an example of the opportunities available in the UK to power
the country through lower carbon, home grown energy, rather than relying on
expensive and more carbon intensive imports.
We believe West Newton is an important strategic asset to the UK as the
country looks to secure domestic energy supply for secure and affordable
energy, at a time when the country is exposed to potentially significant gas
supply disruptions. The study proves that the operator, Rathlin, is a
responsible hydrocarbon producer complying with best environmental practice to
produce much needed UK hydrocarbons in the most efficient and environmentally
friendly way possible.
Reabold is committed to the highest standards of environmental processes and
we incorporate these responsibilities into our operational decision-making and
investments.
Italy
The development plan for Colle Santo involves converting gas to LNG directly
onsite using a small modular LNG processing unit. The LNG will be trucked a
short distance (7 km) to an entry point into the SNAM transmission grid. There
will be no new drilling due to two existing wells already drilled and tested.
There will be on-site CO(2) capture of 1,400 tonnes CO(2) equivalent per year,
and connected hydrogen production facilities.
LNG provides energy security and flexibility because it can be easily
transported to places where it is needed most. LNG is a critical fuel in the
energy transition and plays an important role as a lower-carbon alternative to
coal for industry, and provides grid stability alongside wind and solar power
in electricity generation. It is the lowest-carbon fossil fuel, producing
around 50% less carbon emissions than coal when used to generate electricity.
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, Daybreak's 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 has a diverse energy mix, including coal, natural gas, nuclear,
hydroelectric, and renewable sources. The largest share of electricity
production historically came from coal and natural gas, followed by
hydroelectric and nuclear power. In recent years, there has been a shift
towards increasing the share of renewable energy sources, such as wind and
solar. However, Romania supports natural gas in the long-term in the European
Green Deal because it forecasts that this resource will remain an important
tool in changing the energy sector and transitioning to a more sustainable and
carbon-free economy. By developing and producing gas from the Parta site,
Danube Petroleum Limited will be able to contribute to the country's efforts
to implement this energy strategy. In addition, options to exploit the
geothermal potential of the Romanian part of the Pannonian Basin are under
investigation with the authorities in combination with a subsurface review of
the likely prospectivity.
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 2018 QCA Code. The
Board recognises the principles of the 2018 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 25 to 30 for the Chair's
corporate governance statement and how Reabold has applied the 10 principles
of the 2018 QCA code.
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 2023,
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 Directors understand the business and both the evolving and challenging
environment in which we operate, including the challenges of the global energy
transition. The Board made decisions with regard to acquisitions and
investments with consideration given to key stakeholders and the likely
long-term impact of any decision. During the year, the Board reflected on the
challenges to be faced by Reabold given the shifting macroeconomic and
geopolitical context. Our strategy is intended to transition Reabold to an
energy business focused on developing strategic European gas assets to secure
European gas supply and energy security. 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"
Reabold employees are fundamental and core to our business model and the
delivery of our strategic ambitions. The future success of our business
depends on attracting, retaining, developing and motivating talented
employees.
We ensure that:
• Health, Safety and the Environment are considered paramount throughout the
organisation.
• 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. 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.
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. Meeting
commitments made to investors is critical to building trust and confidence
with our external stakeholders. Back in 2022, management made a commitment to
improve communication with shareholders with stakeholder engagements at least
every two months. This has taken the form of corporate presentations,
interviews with the Co-CEOs and investor events. In 2023, we published 12 new
videos on the media section of our website, including operational updates,
investor presentations and Q&As. 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.
The Co-CEOs provide a comprehensive update to the Board on material business
and external developments at each main Board meeting. This includes
significant operational updates, e.g. partnerships, investments, divestments,
projects, commercial highlights and political or regulatory developments.
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 15, and
within the principal risks and uncertainties section on page 12.
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 ("QCA") Corporate
Governance Code 2018 (the "2018 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 25 to 30.
Reabold aims to contribute to Europe's energy security by unlocking potential
sources of near-term domestic gas supply in economically, environmentally and
socially responsible ways. 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 Directors consider which course of action best enables delivery of our
strategy in the long-term interest 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
shareholders - engaging with both retail and institutional holders during
2023. 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 upgraded website, launched in March 2023, provides details of
the business, investor presentations and details of the Board, changes to
major shareholder information and 2018 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.
Principal decisions
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.
Cash allocation including shareholder distributions
Following the completion of the sale of Corallian in November 2022 along with
the receipt of the first tranche payment from Shell, the board considered cash
flow, the macro environment and business performance in 2023. The Directors
approved a share buyback programme in April 2023 with the aim of delivering
value to shareholders. The Directors considered its ordinary shares to be
undervalued and at a meaningful discount to conservatively estimated per-share
intrinsic value.
A number of considerations underpinned the decision to commence the buyback
programme including feedback from advisors and other stakeholders, the
strength of the Company's balance sheet and the need to continue to invest in
our assets.
Investment in LNEnergy
Over the course of the year, the Board considered and approved new
opportunities and investments. The Board reviewed various proposals and their
alignment with Reabold's strategy. During 2023, the Board approved the
accumulation of a 26.1% interest in LNEnergy, whose primary asset is an
exclusive option over a 90% interest in the Colle Santo gas field onshore
Italy. The Board agreed the investment was in line with Reabold's strategy to
develop high quality strategic European gas assets with near-term production
potential that can generate shareholder value. LNEnergy's primary asset is an
option over a 90% interest in the Colle Santo gas field, onshore Italy in
the Abruzzo region. The Colle Santo gas field is a highly material gas
resource with 65Bcf of 2P reserves, as estimated by RPS as of 30 September
2022, and subject to the necessary approvals and permits, is development ready
with no additional drilling required. LNEnergy believes that the field has the
potential to generate an estimated €11-12m of gross post-tax free cash flow
per annum. On 1 May 2024 a non-binding Heads of Agreement between Gunvor and
LNEnergy for the purchase of LNG by Gunvor from LNEnergy from the Colle Santo
gas field was executed. First production from the LNG project expected in
2025.
Strategic Report signed on behalf of the Board
Chris Connolly
Company Secretary
May 30, 2024
Board of Directors
Corporate Governance
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 21 years of investment experience, including 17 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 19 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 45 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.
Directors' report for the year ended 31 December 2023
Corporate Governance
The Directors submit their report and the audited financial statements of the
Group and Company for the year ended 31 December 2023.
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 18 to 20.
Results and dividends
The loss for the year was £7.2 million (2022: loss of £45,000). The Company
has not declared any dividends during the year (2022: £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 21.
Events since Balance Sheet Date
Details of post reporting date events are disclosed in Note 27 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 2023 At 1 January 2023
Jeremy Edelman * 173,545,454 173,545,454
Sachin Oza 75,750,299 75,750,299
Stephen Williams 47,304,697 47,304,697
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 9.
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 (2022: £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
2023 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.
Going concern
The Directors consider it appropriate to continue to adopt the going concern
basis of accounting in preparing the financial statements. See Note 1 - going
concern, to the financial statements.
Repurchase of shares
Information on share repurchases, including the number and nominal value of
the shares repurchased in 2023, can be found in Note 22 of the financial
statements.
The Directors' report was approved by the Board and signed on its behalf by
Chris Connolly, Company Secretary, on 30 May 2024.
Reabold Resources plc
Registered in England and Wales No. 3542727
Corporate governance report
Corporate governance
Chair's Corporate Governance Statement
Each year seems to bring more challenges for company boards - shareholder
activism; the ongoing complexity of the energy transition; fiscal uncertainty
in the UK for energy companies surrounding the windfall tax and investment
allowances; a challenging macro environment with headwinds from the
cost-of-living crisis, high inflation and large interest rate rises. Reabold's
corporate governance framework needs to be both dynamic and flexible in its
application to a range of different situations.
In 2018 the Company adopted the 2018 QCA Code, which it believes to be the
most appropriate recognised corporate governance code for the Company. The
2018 QCA Code has ten principles which the Company is required to adhere to
and to make certain disclosures both within this report and on its website.
The Company notes the updates made by the 2023 Quoted Companies Alliance
Corporate Governance (the '2023 QCA Code') which will apply to financial years
starting on or after 1 April 2024. For the 2023 financial year, the Company
has continued to adopt the 2018 QCA Code. The Company will be transitioning to
the 2023 QCA code over the next 12 months in order to build capability to
apply its principles and address any gaps in our current corporate governance
framework.
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 2023 the Board
welcomed shareholders in person at the Annual General Meeting. The Company
also held a General Meeting in January 2024. This provided shareholders with
an opportunity to raise questions in connection with the Company's strategy
and to vote in favour of the Board.
I would like to thank the Reabold leadership team for their focus, and I would
like to thank our fellow shareholders for your continued confidence in the
Board.
The 2018 QCA Code has ten principles of corporate governance that the Company
has committed to apply within the foundations of the business. These
principles are:
1) 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) Seek to understand and meet shareholder needs and expectations
The Executives held meetings with major shareholders several times throughout
the year and reported the views of such shareholders to the Board. A variety
of topics were discussed including performance, capital allocation,
shareholder distributions, remuneration policies and board priorities.
Shareholders can contact Reabold directly via the "Contact us" section of the
Reabold website. Investors can also access information via the Investor
Q&A section of the Reabold website.
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. Back in
2022, management made a commitment to improve communication with shareholders
with stakeholder engagements at least every two months. This has taken the
form of corporate presentations, interviews with the Co-CEOs and investor
events. In 2023, we published 12 new videos on the media section of our
website, including operational updates, investor presentations and Q&As.
In Q1 2023 the Company launched a new website so that shareholders and other
stakeholders can more easily navigate Company updates and communications.
General Meetings in 2023
In February 2023, the Company held a general meeting at which shareholders
granted the Company authority to make market purchases of its ordinary shares
and approved the cancellation of the Company's share premium account -
shareholders showed strong endorsement with 99.5% of shareholders who voted
casting votes in favour of our strategy.
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. At the 2023 AGM, shareholders voted in
favour of all resolutions including the reappointment of the Executive
Directors - 78% of shareholders who voted casted votes in favour of our
executive directors.
In January 2024, the Board successfully defended a second attempt, from a
group of 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. The
resolutions were broadly unchanged from their 2022 submission which was also
rejected by shareholders. The requisitioning shareholders received support
from approximately 21% of shareholders who voted.
3) Take into account wider stakeholder and social responsibilities
and their implications for long-term success
The Board continues to value and recognise the importance of engagement and
cooperation with our stakeholders. 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.
The Executive Directors visited the operations at Colle Santo, Italy in 2023.
The objective of the visit was to provide the Directors with local context and
provide insights into asset operations. It was also an opportunity to engage
directly with stakeholders, including business partners and communities and
improve management's oversight of risks.
The Company seeks to be a responsible corporate citizen in all its areas of
operation and is committed to maintaining a high standard of corporate
governance. A description of how the group considers key stakeholders in its
decision-making is included in the section 172 statement on page 18. The
Company's ESG statement is on page 15.
4) 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
12 to 14.
The Executive Directors have regular conference calls with the Company's
Nominated Adviser and, when relevant, the Company's corporate communications
advisers and legal 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) Maintain the Board as a well-functioning, balanced team led by
the chair
As at 31 December 2023 and 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 22 and 23 of this Annual Report.
The Executive Directors are expected to devote substantially the whole of
their time to their duties with the Company. Non-Executive Directors have a
lesser time commitment which is set out in their letter of appointment. It is
anticipated that Non-Executive Directors will spend up to 3 days a month on
work for the Company.
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 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:
· Reviewing the integrity of the financial statements, including annual
reports and half-year reports;
· Overseeing the group's financial reporting disclosure process; this
includes the choice of appropriate accounting policies;
· Advising the Board whether, in the Committee's view, the Annual
Report taken as a whole is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Company's position and
performance, business model and strategy;
· 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 31 to
33.
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) 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 22
and 23. 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) Evaluate Board performance based on clear and relevant
objectives, seeking continuous improvement
Internal evaluation of the Board 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.
There is a strong flow of communication between the Directors, and in
particular between the Co-Chief Executive Officers 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 boardroom 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.
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.
The scheme provided the framework for the performance evaluation of the
Executive Directors during the reporting period. The Executive Directors'
performance evaluation is to be undertaken annually and includes an assessment
of achievement based on a scorecard of measures. Please see the Directors'
Remuneration Report on page 31. 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.
8) Promote a corporate culture that is based on ethical values and
behaviours
We are committed to doing business in an ethical and transparent way. 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, 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. The Company
has a zero-tolerance approach to bribery and corruption and has an
Anti-Bribery Policy in place to protect the Company, its employees and those
third parties with which the business engages.
9) Maintain governance structures and processes that are fit for
purpose and support good decision-making by the Board
The Company has a single-tier Board of Directors headed by a Chair, with
executive management led by the Co-Chief Executive Officers. The names of the
Directors who held office during the year can be found on pages 22 - 23.
There is no fixed number of times that the Board may meet in one year. During
2023, the Board met 16 times (13 times during 2022) and, as detailed
throughout our Strategic Report, including the Section 172 statement, worked
hard to promote the long-term sustainable success of the Company.
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.
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 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.
Details of the Audit Committee and the Remuneration Committee are provided
under principle 5.
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.
The Co-Chief Executive Officers have overall responsibility for the
implementation of the strategy approved by the Board, the operational
management of the Company and the business enterprise connected with it. The
division of the CEO role reflects the collaborative nature of decision making
within Reabold. The Co-CEOs provide complimentary and broad skill sets ranging
across technical understanding of the asset base, business development,
M&A, financial management, strategy and stakeholder engagement, as well as
the day to day running of the business.
The Non-executive Directors bring a wide range and balance of skills and
international business experience. Through their contribution to the Board and
Board committee meetings, respectively, they are expected to challenge and
help develop proposals on strategy and bring independent judgement on issues
of performance and risk. The Non-executive Directors discuss, among other
matters, the performance of individual Executive Directors.
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 processes 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, virtually 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 sixteen Board
meetings during the year. Attendance during 2023 for all committee meetings is
given in the table below.
Board Audit Committee Remuneration Committee
Jeremy Edelman 16/16 2/2 2/2
Sachin Oza 16/16 N/A N/A
Stephen Williams 16/16 N/A N/A
Anthony Samaha 16/16 2/2 N/A
Marcos Mozetic 16/16 N/A 2/2
Michael Felton 16/16 1/2 2/2
10) Communicate how the Company is governed and is performing by
maintaining a dialogue with shareholders and other relevant stakeholders
The work of the Audit Committee is outlined in principle 5. The work of the
Remuneration Committee can be found in the Directors' Remuneration Report on
Page 31.
The Board is committed to maintaining regular communication with its
shareholders. Regular constructive dialogue is important to hear the views of
shareholders and communicate Reabold's strategy. 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 18 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
30 May 2024
Directors' remuneration report
Corporate governance
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 twice during the year. All members attended each meeting.
Key activities in 2023
· 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.
· Designed and implemented directors and senior management
scorecards.
· Agreed a framework for the 2023 bonus plan.
· Considered and agreed a programme for the grant of LTIP awards.
· Agreed the 2023 Executive Director salaries.
Shaping our 2024 remuneration policy
The Remuneration Committee believes the current policy is robust and can
generally be retained as the basis for the 2024 policy. Looking forward to
2024, the Committee will
· Review and agree the 2024 bonus measures for the executives.
· Review the executives' salaries.
· Review employer pension contributions.
Executive Directors' remuneration for the year ended 31 December 2023
Sachin Oza Stephen Williams Sachin Oza Stephen Williams
Co-CEO 2023 Co-CEO Co-CEO 2022 Co-CEO
2023 2022
Salary £242,627 £242,627 £230,875 £230,875
Annual bonus(a) £51,575 £51,575 Nil Nil
Taxable benefits £530 £633 Nil Nil
Pension £12,121 £12,121 £11,419 £11,419
Performance shares(b) Nil Nil Nil Nil
Total remuneration £306,853 £306,956 £242,294 £242,294
(a) The full value of the annual bonus in 2023 comprises 50% delivered in cash
and 50% delivered in shares. The shares element applicable to the 2023 bonus
outcomes will be granted as soon as reasonably practicable following the
publication of this report provided that no award shall be granted at any time
when such grant would be contrary to any dealing restriction. The shares will
be subject to a 3 year restricted period.
(b) The first performance period under the LTIP scheme will be measured in
April 2026. See 2023 LTIP below.
Overview of outcomes
Salary and benefits
Sachin Oza's and Stephen Williams' salaries increased by 5% from 1 January
2023, significantly below the 10.5% inflation experienced in the UK in the
preceding 12 months to 31 December 2022. Both the Executive Directors'
benefits related to remote working costs.
Annual Bonus
For 2023, the annual bonus was based on a scorecard of measures across three
categories: risk and controls (10%), current financial health (45%) and future
financial prosperity (45%). The overall mathematical outcome of the annual
bonus scorecard was 42.6/100. The maximum bonus is 50% of salary, resulting in
a bonus for the Executive Directors of 21.3% of salary. The annual bonus is
paid 50% in cash, with 50% deferred into shares that are subject to a
three-year restricted period. This deferral is an important way of increasing
the executives' personal shareholdings.
Pension
During the year, Sachin Oza and Stephen Williams were eligible for employer
pension contributions at a rate of 5% of salary.
2023 LTIP
Scheme interests awarded to Executive Director in 2023
The Committee considered and agreed a programme for the grant of LTIP awards
in 2023 ensuring a material portion of Sachin and Stephen's remuneration is
tied to longer-term performance under a plan designed to drive strong
alignment to the execution of Reabold's strategy. In 2023, the Executive
Directors were granted 150,000,000 ordinary shares each (equivalent to
£270,000 based on the market price on the date of grant, 27 April 2023, for
ordinary shares of 0.18p). 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.
Executive directors service contracts
The service contracts of executive directors do not have a fixed term. Each
executive director's service contract contains a 12-month notice period.
Director Effective date Notice period
Sachin Oza 19 October 2017 12 months
Stephen Williams 19 October 2017 12 months
Directors' shareholdings
The interests, in shares of the Company, of the Directors in office during
2023, including any interests of their connected persons, are set out in the
table below.
Ordinary shares held at January 1 2023 Ordinary shares held at December 31 2023 Shares (unvested and subject
to performance conditions(a))
Executive Directors
Sachin Oza 75,750,299 75,750,299 150,000,000
Stephen Williams 47,304,697 47,304,697 150,000,000
Non-executive Directors
Jeremy Edelman (b) 173,545,454 173,545,454
Michael Felton 25,240,599 25,240,599
Marcos Mozetic 4,545,454 4,545,454
Anthony Samaha 7,818,182 7,818,182
(a) Relates to unvested long-term incentive awards (see above conditions)
(b) includes 173,545,454 shares held by Saltwind Enterprises Ltd, a company
connected with Jeremy Edelman.
Chair and non-executive directors' remuneration
Fees (£)
2023 2022
Jeremy Edelman (Chair) 84,000 66,000
Michael Felton 47,000 38,000
Macros Mozetic 47,000 38,000
Anthony Samaha 47,000 20,500
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 2023 are shown below.
Appointee company Additional position held at appropriate company Total fees (£)
Stephen Williams Europa Oil & Gas (Holdings) plc(a) Director 33,000
(a) As of 23 November 2023, Stephen stepped down from his role as
non-executive director of Europa Oil & Gas (Holdings) plc
The Directors' Remuneration Report was approved by the Board and signed on its
behalf by Chris Connolly, Company Secretary on 30 May 2024.
Statement of Directors' 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
2023 which comprise the Group Statement of Comprehensive Income, the Group
Statement of Financial Position, the Company Statement of Financial Position,
the Group Statement of Cash Flows, the Company Statement of Cash Flows, the
Group Statement of Changes in Equity, the Company Statement of Changes in
Equity and notes to the financial statements, including material accounting
policy information.
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 2023 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:
· Undertaking an initial assessment at the planning stage of the
audit to identify events or conditions that may cast significant doubt on the
group's ability to continue as a going concern;
· Obtaining management's formal going concern assessment;
· Obtaining an understanding of the relevant controls relating to
the directors' going concern assessment;
· Evaluating the directors' method to assess the group's and the
parent company's ability to continue as a going concern;
· Reviewing the directors' going concern assessment, which
incorporated severe but plausible scenarios;
· Evaluating the key assumptions used and judgements applied by the
directors in forming their conclusions on going concern; and
· Considering the impact of climate change and the current
socio-political environment on the value of the group's assets; and
· Reviewing the appropriateness of the disclosures 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.
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)
• Obtaining and challenging management's assessments as
to whether there were indicators of impairment.
The carrying value of exploration & evaluation and oil & gas assets in • reviewing the accounting policy in place to ensure
the Group accounts total £7,023k (2022: £6,815k). The parent company has a that the point at which exploration and evaluation assets are recognised is
carrying value £6,766k (2022: £6,451k). reasonable and in line with IFRS 6 requirements;
• critically assessing a sample of transactions
throughout the company, subsidiary and associated companies to ensure
The group and parent company's accounting policy in respect of this area is additions have been treated in accordance with the accounting policy;
set out in the accounting policy notes in the accounts.
• Performing a 'stand back' exercise considering any
contradictory internal or market available evidence throughout the year and
post year end to conclude the possible impact on the impairment assessment;
The Group is involved in the extraction of oil
• making enquires of management of the potential impact
and gas. Under IFRS 6, Exploration for and of socio-economic and climate related factors on determining the carrying
values of the assets; and
Evaluation of Mineral Resources, management
• holding discussions with component auditors and
must establish an accounting policy specifying reviewing their work performed on E&E assets to ensure appropriate and
sufficient audit evidence had been obtained around the carrying value of oil
which expenditures are recognised as & gas assets by associated undertaking.
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; £647,000
Parent company; £550,000
How we determined it This has been calculated with reference to total assets, of which it
represents approximately 1.5% for the group company. The parent company was
allocated slightly less in order to gain an effective materiality for the
components.
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 £517,000 for the group and £440,000 for
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 £19,500 for the group and £16,500 for the
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 £80,000 and
£521,000.
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 34, 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 listing
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,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;
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
30 May 2024
Group Income Statement
For the year ended 31 December
Note 2022 £000
2023 £000
Continuing operations
Revenue 5 - 560
Cost of sales 6 - (834)
Gross loss - (274)
Net (loss) in financial assets measured at fair value through profit or loss 16 (2,661) (1,851)
Other income 88 50
Share of losses of associates 15 (611) (1,576)
Other expenses - (89)
Net gains on sale of businesses 3 - 4,997
Exploration expense 7 (1,596) (74)
Administration expenses (2,185) (1,702)
Non-underlying items 26 (190) (191)
Share based payments expense 23 (57) (22)
Foreign exchange gains - 635
Operating loss (7,212) (97)
Finance costs - unwinding of discount on decommissioning provisions (15) (16)
Finance income 33 68
(Loss) before tax for the year (7,194) (45)
Taxation 11 - -
(Loss) for the year (7,194) (45)
Attributable to:
Reabold shareholders (7,194) (45)
(7,194) (45)
Earnings per share
(Loss) for the year attributable to Reabold shareholders
Per ordinary share (pence)
Basic 12 (0.08) (0.0005)
Diluted 12 (0.08) (0.0005)
Group statement of comprehensive income
For the year ended 31 December
_____________________________________________________________________________________
Note 2023 £000 2022 £000
Loss for the year (7,194) (45)
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Currency translation differences - 71
Exchange (gains) on translation of foreign operations reclassified
to loss on sale of business - (80)
Other comprehensive income - (9)
Total comprehensive income (7,194) (54)
Attributable to
Reabold Shareholders (7,194) (54)
Balance sheet as at 31
December
_____________________________________________________________________________________
Group Company
Note 2023 2022 2023 2022
Registered Number: 3542727 £000 £000 £000 £000
Non-current assets
Exploration & evaluation assets 13 7,023 6,815 6,766 6,451
Investments in associates 15 26,083 22,272 26,083 22,272
Investments in subsidiaries 14 - - 13 3,470
Other investments 16 27 3,484 15 15
33,133 32,571 32,877 32,208
Current assets
Prepayments 95 120 81 116
Trade and other receivables 17 126 181 393 629
Other investments 16 4,365 8,728 4,365 8,728
Restricted cash 18 25 25 25 25
Cash and cash equivalents 18 5,413 5,511 5,413 5,511
10,024 14,565 10,277 15,009
Total assets 43,157 47,136 43,154 47,217
Current liabilities
Trade and other payables 19 330 198 326 198
Accruals 271 111 271 111
601 309 597 309
Non-Current liabilities
Provision for decommissioning 20 382 367 382 367
382 367 382 367
Total liabilities 983 676 979 676
Net assets 42,174 46,460 42,175 46,541
EQUITY
Share capital 22 10,589 9,044 10,589 9,044
Share premium account 1,103 29,033 1,103 29,033
Capital redemption reserve 200 200 200 200
Treasury shares (263) - (263) -
Share based payment reserve 23 1,977 1,920 1,977 1,920
Retained 28,568 6,263 28,569 6,344
earnings
Total Equity 42,174 46,460 42,175 46,541
The loss for the Company was £7.3 million for the year ended 31 December 2023
(2022: loss of £0.6 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 30 May 2024
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 Treasury Shares Share based payments reserve Foreign currency translation reserve Retained earnings Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2022 9,044 29,033 200 1,898 9 6,308 46,492
Loss for the year - - - - - - (45) (45)
Other comprehensive income - - - - - (9) - (9)
Total comprehensive income - - - - - (9) (45) (54)
Share-based payments 23 - - - - 22 - - 22
At 31 December 2022 9,044 29,033 200 - 1,920 - 6,263 46,460
Loss for the - - - - - - (7,194) (7,194)
year
Other comprehensive income - - - - - - - -
Total comprehensive income - - - - - - (7,194) (7,194)
Issue of ordinary share capital 22 1,545 1,524 - - - - - 3,069
Repurchase of ordinary share capital 22 - - - (263) - - - (263)
Reduction of share premium account - (29,454) - - - - 29,454 -
Share-based payments 23 - - - - 57 - - 57
Share of equity-accounted entities' changes in equity - - - - - - 45 45
At 31 December 2023 10,589 1,103 200 (263) 1,977 - 28,568 42,174
Company Note Share capital Share premium account Capital redemption reserve Treasury Shares Share based payments reserve Retained earnings Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2022 9,044 29,033 200 - 1,898 6,938 47,113
Loss for the year - - - - - (594) (594)
Total comprehensive income - - - - - (594) (594)
Share-based payments 23 - - - - 22 - 22
At 31 December 2022 9,044 29,033 200 - 1,920 6,344 46,541
Loss for the - - - - - (7,274) (7,274)
year
Total comprehensive income - - - - - (7,274) (7,274)
Issue of ordinary share capital 22 1,545 1,524 - - - 3,069
Repurchase of ordinary share capital 22 - - - (263) - - (263)
Reduction of share premium account - (29,454) - - - 29,454 -
Share-based payments 23 - - - - 57 - 57
Share of equity-accounted entities' changes in equity - - - - - 45 45
At 31 December 2023 10,589 1,103 200 (263) 1,977 28,569 42,175
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.
Treasury shares
Treasury shares represent Reabold shares repurchased and available for
specific and limited purposes.
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 23 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 in 2022, £80,000 was reclassified to the income statement. See Note
3 - 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
2023 2022 2023 2022
Note £000 £000 £000 £000
Operating activities
(Loss) for the period (7,194) (45) (7,274) (594)
Adjustments to reconcile loss for the period to net cash used in operating
activities
Depreciation 6 - 318 - -
Exploration expenditure written off 7 1,400 -
Impairment of investments 14 - - 4,665 5,163
Impairment of receivables 17 391 -
Net loss (gain) on financial assets at fair value through 16 2,661 1,851 (796) (75)
profit or loss
Net gain on sale of businesses 3 - (4,997) - (7,342)
Share of losses from associates 15 611 1,576 611 1,576
Net finance (income) costs (18) (52) (18) (72)
Share-based payments expense 23 57 22 57 22
Other non-cash movements - 89 - -
Unrealised currency translation (gains) 4 (616) 4 -
Net cash used in operating activities before working capital movements (2,479) (1,854) (2,360) (1,322)
(Increase) in inventories - (24) - -
Decrease (increase) in other current assets 32 (149) 36 (426)
Increase in other current liabilities 290 243 288 210
Net cash used in operating activities (2,157) (1,784) (2,036) (1,538)
Investing activities
Expenditure on oil and gas assets - (8) - -
Expenditure on exploration & evaluation assets (398) (366) (315) (276)
Acquisitions (2,468) (343) (2,467) -
Investments in associates - - -
Total cash capital expenditure (2,866) (717) (2,782) (276)
Proceeds from disposal of associate 3 5,159 3,175 5,159 3,175
Interest received 33 6 33 6
Movements in restricted cash - (33) - -
Net cash disposed from sale of business - (16) - -
Loans to subsidiaries - - (205) (479)
Net cash generated by investment activities 2,326 2,415 2,205 2,426
Financing activities
Repurchase of shares 22 (263) - (263) -
Net cash used in financing activities (263) - (263) -
Currency translation differences relating to cash and cash equivalents (4) (3) (4) 1
(Decrease) Increase in cash and cash equivalents (98) 628 (98) 888
Cash and cash equivalents at the beginning of the period 18 5,511 4,883 5,511 4,622
Cash and cash equivalents at the end of the period 18 5,413 5,511 5,413 5,511
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 2023 were approved and signed by the Co-Chief Executive
Officers on 30 May 2024 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 2023. 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 2023, the
group held cash and cash equivalents of £5.4 million and a further £4.4
million was received in January 2024 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,
management have stress-tested Reabold's most recent financial projections to
incorporate a range of potential future outcomes by considering Reabold's
principal risks and cash preservation measures. 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. Therefore, the Directors consider it
appropriate to continue to adopt the going concern basis of accounting in
preparing these consolidated financial statements.
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 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.
In 2023 the estimation of the contingent consideration receivable was not
considered a significant source of estimation uncertainty as the remaining
contingent consideration was received in full in January 2024 (see note 16 for
further information). In 2022, the fair value was determined using an estimate
of discounted future cash flows that were expected to be received based on the
contractual terms and was considered a level 3 valuation under the fair value
hierarchy. The deferred consideration receivable was 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 16 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 discount rate applied to reflect the time
value of money in the carrying amount of provisions requires estimation. The
discount rate used in the calculation of provisions is the pre-tax rate that
reflects current market assessments of the time value of money. Generally, the
market assessments of the time value of money can be reflected in the
risk-free rate. Reabold considers it appropriate to use UK gilt yield returns
as the basis for the risk-free rate. The discount rate applied is reviewed
regularly and adjusted following changes in market rates. 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 20 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 16
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 13.
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. Reabold changed its segmental reporting during 2023, see 'Change
in segmentation' below.
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 and associates are translated into £
sterling are recognised in a separate component of equity and reported in
other comprehensive income. On disposal of a non-£ sterling functional
currency subsidiary or associate, 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 as described below.
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.
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 cash at bank and short-term bank deposits
that generally have a maturity of three months or less at the date of
purchase.
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 level 1 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.
Employee benefits
Wages, salaries, bonuses, social security contributions, paid annual leave and
sick leave are accrued in the period in which the associated services are
rendered by the employees of the Group. The accounting policy for share-based
payments is described below.
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.
Own equity instruments - treasury shares
Own equity instruments that are reacquired (treasury shares) are recognised at
cost and deducted from equity. Treasury shares represent ordinary shares
repurchased and available for specific and limited purposes. No gain or loss
is recognised in profit or loss on the purchase, sale, issue or cancellation
of the Group's own equity instruments. Any difference between the carrying
amount and the consideration, if reissued, is also recognised in equity.
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.
Updates to significant accounting polices
New and amended standards and interpretations
There are no new or amended standards or interpretations adopted from 1
January 2023 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.
Other changes to significant accounting policies
Change in segmentation
During 2023, the Group's reportable segments changed consistent with a change
in the way that resources are allocated and performance is assessed by the
chief operating decision maker, who for Reabold is the Co-Chief Executive
Officers, from that date. From 2023, the Group's reportable segments are
onshore UK, offshore UK, and international. At 31 December 2022, the Group's
reportable segments were UK/Europe and USA.
Onshore UK comprises the Group's investment in Rathlin and the Group's 16.67%
direct interest in PEDL183, which was previously reported as part of the
UK/Europe segment.
Offshore UK comprises the Group's interest in UK North Sea licences, which was
previously reported as part of the UK/Europe segment.
International comprises the Group's investments in Danube Petroleum Ltd,
Daybreak Oil & Gas Inc., and LNEnergy Ltd.
Comparative information for 2022 has been restated in Note 4 to reflect the
changes in reportable segments.
2. Acquisitions and other significant transactions
LNEnergy
Between May and December 2023, Reabold acquired 26.1% of the ordinary share
capital of LNEnergy for a cash consideration of £1.9 million and the issuance
of 1,297,297,298 new ordinary shares, as non-cash consideration. The carrying
amount of the investment in LNEnergy is reported within Investments in
associates.
Simwell Resources Limited
On 3 January 2023, Reabold acquired 100% of the issued share capital of
Simwell Resources. Total cash consideration for the acquisition was £491,000,
including transaction costs of £118,000. In addition to the cash
consideration, 247,775,359 new Ordinary Shares were issued as non-cash
consideration for the acquisition. The acquisition of Simwell Resources
Limited did not constitute a business combination and therefore the
acquisition was accounted for as an asset acquisition at cost.
3. Disposals
Group Company
2023 2022 2023 2022
£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
There were no amounts recognised in the income statement in respect of
disposals in 2023.
Corallian Energy Limited
The net gain in respect of the disposal of the Company's entire 49.99%
interest in Corallian Energy Limited of £7.3 million was recognised in 2022.
Reabold received proceeds from the disposal of £5.2 million in 2023 and £3.2
million in 2022. The contingent consideration relating to the disposal
amounted to £4.4 million at 31 December 2023 and was received in January
2024. The amount of deferred consideration is reported within Other
investments on the group balance sheet - see Note 16 for further information
Reabold California
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.
4. Segmental analysis
The Directors consider the Group to have three segments, being onshore UK,
offshore UK and International.
Onshore UK comprises the Group's investment in Rathlin and the Group's 16.67%
direct interest in PEDL183, which was previously reported as part of the
UK/Europe segment.
Offshore UK comprises the Group's interest in UK North Sea licences, which was
previously reported as part of the UK/Europe segment.
International comprises the Group's investments in Danube Petroleum Ltd,
Daybreak Oil & Gas Inc., and LNEnergy Ltd.
Other business and corporate comprises the Group's treasury functions and
corporate activities.
Year ended 31 December 2023 UK onshore UK offshore International Other business & corporate Total
£000 £000 £000 £000 £000
Net (loss) gain in financial assets measured at fair value through profit or - 796 (3,457) - (2,661)
loss
Other income - 40 - 48 88
Share of losses of associates (506) - (105) - (611)
Exploration expense (43) (1,553) - - (1,596)
Administration expenses - (7) - (2,178) (2,185)
Non-underlying items - - - (190) (190)
Share based payments expense - - - (57) (57)
Profit (loss) on ordinary activities (549) (724) (3,562) (2,377) (7,212)
Finance costs - unwinding of discount on decommissioning provisions (15) - - - (15)
Finance income - - - 33 33
Profit (loss) before tax for the year (564) (724) (3,562) (2,344) (7,194)
Taxation - - - - -
Profit (loss) for the year (564) (724) (3,562) (2,344) (7,194)
Segment assets 23,959 4,651 8,957 5,590 43,157
Segment liabilities (404) (21) - (558) (983)
Additions to non-current assets(a) 315 1,290 4,377 - 5,982
( )
(a) Includes additions to property, plant and equipment; goodwill; intangible
assets; investments in joint ventures; and investments in associates.
UK onshore UK offshore International Other business & corporate Consolidation adjustments and eliminations Total
Year ended 31 December 2022 £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
Share of losses of associates (738) (762) (76) - (1,576)
Other expenses - - (89) - - (89)
Net gain (loss) on sale of businesses - 7,342 (2,345) - - 4,997
Exploration expense - (74) - - - (74)
General and administration expenses - (7) (12) (1,694) 11 (1,702)
Non-underlying items - - - (191) (191)
Share based payments expense - - - (22) (22)
Foreign exchange gains - - - 635 635
Profit (loss) on ordinary activities (738) 6,574 (4,722) (1,211) - (97)
Finance costs (14) - (2) - (16)
Finance income - 63 - 5 68
(Loss) before tax for the year (752) 6,637 (4,724) (1,206) (45)
Taxation - - - - -
(Loss) for the year (752) 6,637 (4,724) (1,206) (45)
Segment assets 24,080 9,160 8,138 5,758 47,136
Segment liabilities (367) (71) - (238) (676)
Additions to non-current assets(b) 482 1,001 247 - 1,730
( )
(a) Cost of sales 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.
(C) Comparative information for 2022 has been restated to reflect the changes
in reportable segments. For more information see Note 1- Change in
segmentation
5. Revenue
2023 2022
£000 £000
Oil sales - 552
Gas Sales - 8
- 560
Of the total oil and gas sales in 2022, 99% were sold to a single customer.
6. Cost of Sales
2023 2022
£000 £000
Production costs - 404
Royalties - 112
Depreciation of oil and gas assets - 318
- 834
7. Exploration expense
The following table represents amounts included within the Group income
statement relating to activity associated with the exploration for and
evaluation of oil and natural gas resources.
2023 2022
£000 £000
Exploration expenditure written off(a) 1,400 -
Other exploration costs 196 74
Exploration expense for the year 1,596 74
(a)Exploration expenditure written off relates to the following North Sea
Licences - part of the UK offshore segment: P2332 - £633,000, P2329 -
£382,000, P2427 - £42,000, P2464 - £94,000, P2493 - £3,000, P2478 -
£90,000, P2486 - £156,000. The write offs were as a result of licences
either relinquished in the year or licences soon to be relinquished.
8. Auditor's Remuneration
2023 2022
£000 £000
Total audit fees 82 83
No fees were paid to Mazars LLP for non-audit services in 2023 or 2022.
9. Remuneration of senior management and non-executive directors
Remuneration of directors
Group and Company 2023 2022
£000 £000
Total for all directors
Emoluments 787 698
Amounts received under incentive schemes - -
Total 787 698
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 31.
Remuneration of directors and senior management
Group and Company 2023 2022
£000 £000
Total for all senior management and non-executive directors
Short-term employee benefits 926 781
Pension costs 32 29
Share-based payments 57 22
Total 1,015 832
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'.
10. Employee costs and numbers
Group and Company 2023 2022
£000 £000
Remuneration 787 649
Social security costs 94 84
Pension costs 34 30
Share-based payments 57 22
972 785
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 (2022:4), with 3 in senior management functions (2022:3) and 1 in
technical functions (2022:1). 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, £90,000 are
borne by other undertakings within the group (2022: £35,000).
11. Taxation
Tax charged in the income statement
2023 2022
£000 £000
Current tax - -
Deferred tax - -
Tax charge in the income statement - -
Reconciliation of the total tax charge
2023 2022
£000 £000
Accounting profit (loss) before taxation (7,194) (45)
Statutory rate of corporation tax in the UK of 19% (2022: 19%) (1,367) (9)
Share of operating loss of associates not taxable 116 299
Expenses not deductible for tax purposes 11 4
Overseas tax impacts - 52
Gain on sale not taxable - (949)
Deferred tax asset not recognised 1,240 603
Tax charge reported in income statement - -
Unrecognised tax losses
The Group has total unused UK tax losses of £25.2 million (2022: £17.3
million) including pre trading capital expenses and capital losses of £9.8
million (2022: £9.4 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.
Company
The Company has £23.8 million (2022: £16.9 million) of UK corporation tax
losses including pre trading capital expenses and capital losses of £9.3
million (2022: £9.0 million) which are not recognised as deferred tax assets.
The unused tax losses have no fixed expiry date.
12. Earnings per share
Basic earnings per share are calculated by dividing the profit (loss)
attributable to Reabold shareholders for the year by the weighted average
number of shares outstanding during the year. The weighted average number of
shares outstanding excludes treasury shares. Diluted earnings per share are
based on the same profit (loss) figures. The weighted average number of shares
outstanding during the year is increased by dilutive shares related to
share-based compensation plans. If the inclusion of potentially issuable
shares could decrease diluted loss per share, the potentially issuable shares
are excluded from the weighted average number of shares outstanding used to
calculate diluted earnings per share.
2023 2022
£000 £000
Profit (loss) for the year attributable to Reabold ordinary shareholders (7,194) (45)
2023 2022
Number 000 Number 000
Basic weighted average number of ordinary shares 9,561,792 8,929,613
Potential dilutive effect of ordinary shares issuable under employee - -
share-based payment plans
Weighted average number of ordinary shares outstanding used to calculate 9,561,792 8,929,613
diluted earnings per share
2023 2022
Pence per share Pence per share
Basic earnings per share (0.08) (0.00)
Diluted earnings per share (0.08) (0.00)
The number of ordinary shares outstanding at 31 December 2023, excluding
treasury shares was 10,272,573,468 (2022: 8,929,612,550. Between 31 December
2023 and 29 May 2024, the latest practicable date before the completion of
these financial statements, there was a decrease of 78,159,978 of ordinary
shares as a result of share buybacks. For additional information on share buy
backs see Note 22.
13. Exploration and evaluation assets
Group Company
2023 2022 2023 2022
£000 £000 £000 £000
At 1 January 6,815 9,123 6,451 5,968
Exchange adjustments - 240 - -
Acquisitions 1,210 343 - -
Additions 398 572 315 483
Exploration expenditure written off (1,400) -
Disposals - (3,463) - -
At 31 December 7,023 6,815 6,766 6,451
Group
Acquisitions in 2023 relate to the acquisition of Simwell Resources - see Note
2. The 2022 acquisition represents the acquisition of North Sea licences from
Corallian.
Exploration expenditure written off relates to the following North Sea
Licences - part of the UK offshore segment: P2332 - £633,000, P2329 -
£382,000, P2427 - £42,000, P2464 - £94,000, P2493 - £3,000, P2478 -
£90,000, P2486 - £156,000. The write offs were as a result of licences
either relinquished in the year or licences soon to be relinquished.
Additions at 31 December 2023 include £398,000 in the UK primarily relating
to the PEDL 183 licence at West Newton (2022: £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).
The disposal of £3.5 million in 2022 represents the derecognition of E&E
assets in California as a result of the equity exchange agreement with
Daybreak.
Company
Additions at 31 December 2023 include £315,000 in the UK relating to the PEDL
183 licence at West Newton (2021: £483,000).
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.
14. Investments in Subsidiaries
Company - Investment in Subsidiaries Total
£000
Cost
At 1 January 2022 3,536
Additions 5,097
At 31 December 2022 8,633
Additions 1,208
At 31 December 2023 9,841
Amounts provided
At 1 January 2022 -
Additions 5,163
At 31 December 2022 5,163
Additions 4,665
At 31 December 2023 9,828
Net book amount:
31 December 2023 13
31 December 2022 3,470
31 December 2021 3,536
An impairment charge of £4.7 million was recognised in 2023 (2022: £5.2
million) following an impairment review, at an individual subsidiary level,
and in line with the requirements of IAS 36 Impairment of Assets. Taking into
account the decrease in the market value of Daybreak and licences relinquished
in the year 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 and Reabold
Southern North Sea Limited. The recoverable amount of Gaelic Resources was
deemed to be £13,000 based on the market value of Daybreak. The recoverable
amount of Reabold Southern North Sea was deemed to be nil, as a result of its
exploration assets being fully written off.
( )
Details of the Company's subsidiaries as at 31 December 2023 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
Reabold Southern North Sea Limited 100 England & Wales Exploration and Evaluation
Reabold Investments UK Limited 100 England & Wales Investment holding
The registered office of the Company's 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.
15. 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. From 9
May 2023 until 10 December 2023, Reabold classified its investment in LNEnergy
as a financial asset measured at fair value. On 11 December 2023, Reabold
gained over 20% of the voting power in LNEnergy and gained the right to
appoint a director to the board of LNEnergy. From 11 December 2023, Reabold
accounts for its investment in LNEnergy as an associate because in
management's judgement Reabold has significant influence over LNEnergy.
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
2022 represent the conversion of loan notes into equity of Corallian. The
disposal of Corallian completed on 1 November 2022. See Note 3 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
2023 2022
Rathlin Danube LNEnergy Total Rathlin Danube Corallian Total
Investment in associate at 1 January 17,604 4,668 22,272 18,342 4,744 4,630 27,716
-
Additions - - 4,377 4,377 - - 636 636
Losses from associates (506) (77) (28) (611) (738) (76) (762) (1,576)
Changes in equity from associates 45 - - 45
Disposals - - - - - - (4,504) (4,504)
Investment in associate at 31 December 17,143 4,591 4,349 26,083 17,604 4,668 - 22,272
The following table provides summarised financial information for the Group's
and Company's associates for 2023 and 2022. The information is presented on a
100% basis. The loss for the year relating to LNENergy represents the period
from 11 December 2023, the date on which Reabold gained significant influence
over LNEnergy.
£000
Gross amount
2023 2022
Rathlin Danube LNEnergy Rathlin Danube
Revenue - - - - -
Profit (loss) for the year (851) (151) (136) (1,034) (149)
Non-current assets 21,233 8,523 916 20,538 8,658
Current assets 2,400 306 312 4,232 340
Total assets 23,633 8,829 1,228 24,770 8,998
Current liabilities 205 106 531 580 112
Non-current liabilities 1,505 487 - 1,493 366
Total liabilities 1,710 593 531 2,073 478
Net assets 21,923 8,236 697 22,697 8,520
Group's share in equity 13,044 4,185 182 13,504 4,328
Goodwill attributable to Reabold's share of associate 4,253 406 4,167 4,253 406
Reabold's share of currency translation differences - - - - (66)
Reabold's share of share-based payments (154) - - (154) -
Group's carrying amount of investment 17,143 4,591 4,349 17,604 4,668
Transactions between the group and its associates are summarised below.
£000
Sales to associates 2023 2022
Sales Amount receivable at 31 December Sales Amount receivable at 31 December
Consultancy services 48 14 50 14
£000
Purchases from associates 2023 2022
Purchases Amount payable at 31 December Purchases Amount payable at 31 December
Exploration and evaluation assets 302 - 275 -
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 24.
Reabold's share of impairment charges taken by associates in 2023 was nil
(2022: £688,000) and forms part of share of losses of associates in the
income statement. The 2022 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 in 2022.
Details of the Company's associates as at 31 December 2023 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
LNEnergy Ltd 26.1 England & Wales Exploration and Evaluation
16. Other investments
£000
2023 2022
current Non-current current Non-current
Contingent consideration 4,365 - 8,728 -
Investment in Connaught Oil and Gas Ltd - 15 - 15
Investment in Daybreak - 12 - 3,469
4,365 27 8,728 3,484
The contingent consideration relates to amounts arising on the prior year
disposal of Corallian which are financial assets classified as measured at
fair value through profit or loss. Reabold received £5.2 million in 2023
taking the accumulated consideration received for the sale of Corallian at the
end of 2023 to £8.3 million. The final tranche payment of £4.4 million was
received in January 2024 following the NSTA's grant of development and
production consent for the Victory gas field.
In 2023 the estimation of the contingent consideration receivable was not
considered a significant source of estimation uncertainty as the remaining
contingent consideration was received in full in January 2024. In 2022, the
fair value was determined using an estimate of discounted future cash flows
that were expected to be received based on the contractual terms and was
considered a level 3 valuation under the fair value hierarchy. The deferred
consideration receivable was modelled using the maximum available external
information. The discount rate used is based on a risk-free rate adjusted for
asset-specific risks.
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
2023 2022
£000 £000
Contingent consideration 796 57
Investment in Connaught Oil and Gas Ltd - -
Investment in Daybreak (3,457) (1,926)
Convertible loan notes - 18
(2,661) (1,851)
17. Trade and other receivables
Group Company
2023 2022 2023 2022
£000 £000 £000 £000
Due within one year
Amounts owed by group undertakings - - 292 479
Trade receivables - - - -
Amounts recoverable from JV partners 17 16 -
Amounts receivable from associates 14 15 14 15
VAT recoverable 95 102 87 87
Other receivables - 48 - 48
126 181 393 629
( )
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.
At the reporting date the amounts owed by group undertakings to the Company
are disclosed net of an impairment of £391,000 (2022: Nil). These amounts
have not been secured, have no maturity and bear no interest.
18. Cash and cash equivalents and Restricted cash
Group Company
2023 2022 2023 2022
£000 £000 £000 £000
Cash and cash equivalents 5,413 5,511 5,413 5,511
Restricted cash 25 25 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
(2022: £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 2023 2022 2023 2022
£000 £000 £000 £000
Barclays Bank plc A-1 5,413 5,511 5,413 5,511
19. Trade and other payables
Group Company
2023 2022 2023 2022
£000 £000 £000 £000
Current:
Trade payables 298 164 294 164
Other payables 32 34 32 34
330 198 326 198
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.
20. Provision for decommissioning
Group Company
£000 £000
At 1 January 2023 367 367
Revisions during the year - -
Unwinding of discount 15 15
Deletions - -
At 31 December 2023 382 382
Classified as:
Current - -
Non-current 382 382
The decommissioning provision at 31 December 2023 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% (2022: 4%) 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 £35,000 (2022: £37,000).
21. 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 2023 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 16 - 4,392 4,392 - 4,380 4,380
Trade and other receivables 17 126 - 126 393 - 393
Cash and cash equivalents 18 5,413 - 5,413 5,413 - 5,413
Restricted cash 18 25 - 25 25 - 25
Financial liabilities
Trade and other payables 19 (330) - (330) (326) - (326)
Accruals (271) - (271) (271) - (271)
4,963 4,392 9,355 5,234 4,380 9,614
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 16 - 12,213 12,213 - 8,743 8,743
Trade and other receivables 17 181 - 181 629 - 629
Cash and cash equivalents 18 5,511 - 5,511 5,511 - 5,511
Restricted cash 18 25 - 25 25 - 25
Financial liabilities
Trade and other payables 19 (198) - (198) (198) - (198)
Accruals (111) - (111) (111) - (111)
5,408 12,213 17,621 5,856 8,743 14,599
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:
· Reabold has exposure to interest rate fluctuations on its cash
deposits. This is managed in the short-term through selecting treasury deposit
periods of one to three months. 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
2023 2022 2023 2022
£000 £000 £000 £000
Other investments 12 3,469 -
Cash and cash equivalents (US Dollar) 5 132 5 132
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 2023 Effect on profit before tax 2022
£000 £000
Increase/decrease in foreign exchange rate
10% strengthening of £ against US$ (2) (360)
10% weakening of £ against US$ 2 360
(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 2023 would have changed by approximately £54,000 (2022: £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. Surplus
cash is invested in short-term bank deposits. 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 £5.4 million at 31 December 2023 (2021: £5.5 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 2023 £000 £000
Trade and other payables 330 330
Accruals 271 271
Within 1 year Total
Year ended 31 December 2022 £000 £000
Trade and other payables 198 198
Accruals 111 111
Company Within 1 year Total
Year ended 31 December 2023 £000 £000
Trade and other payables 326 326
Accruals 271 271
Within 1 year Total
Year ended 31 December 2022 £000 £000
Trade and other payables 198 198
Accruals 111 111
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.
In considering the quantum of share buybacks, the board will take account of
the cumulative level of, and outlook for surplus cash flow. At 31 December
2023, capital employed of the group amounted to £42.2 million (comprised of
£42.2 million of equity shareholders' funds and £nil of borrowings),
compared to £46.5 million at 31 December 2022 (comprised of £46.5 million of
equity shareholders' funds and £nil of borrowings).
At 31 December 2023, capital employed of the Company amounted to £42.2
million (comprised of £42.2 million of equity shareholders' funds and £nil
of borrowings), compared to £46.5 million at 31 December 2022 (comprised of
£46.5 million of equity shareholders' funds and £nil of borrowings).
22. Called-up Share Capital
The allotted, called-up and fully paid share capital at 31 December was as
follows:
2023 2022
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 8,929,613 8,930
Issue of new shares 1,545,072 1,545 - -
At 31 December 10,474,685 10,475 8,929,613 8,930
Total 10,481,601 10,589 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.
At the Company's Annual General Meeting (AGM) on June 29, 2023, the Board was
authorised to allot ordinary shares in the Company, and to grant rights to
subscribe for or to convert any security into ordinary shares in the Company,
up to an aggregate nominal amount of £2.0 million (representing 2 billion
ordinary shares of £0.001 each). This authority expires at the end of the AGM
to be held in 2024, unless previously renewed, revoked or varied by the
Company in a general meeting.
At the June 29, 2023, AGM, shareholders granted the Company the authority to
repurchase up to 2.3 billion ordinary shares.
In the case of purchases of the ordinary shares, the minimum price, exclusive
of expenses, which may be paid for an ordinary share is £0.001 and the
maximum price, exclusive of expenses, which may be paid for an ordinary share
is the higher of: (i) an amount equal to 10% above the average market value
for an ordinary share for the five business days immediately preceding the
date of the purchase; and (ii) the higher of the price of the last independent
trade and the highest current independent bid in relation to ordinary shares
on the London Stock Exchange. The authorities for market purchases of the
ordinary shares will expire at the end of the AGM of the Company to be held in
2024. Ordinary shares purchased by the Company pursuant to these authorities
will either be cancelled or held in treasury. Treasury shares are shares in
the Company which are owned by the Company itself.
During 2023 the Company repurchased 202 million Ordinary Shares for a total
consideration of £263,000 including transaction costs of £2,000. All shares
purchased were retained in treasury. A further 78 million Ordinary Shares were
repurchased between the end of the reporting period and 29 May 2024, the
latest practicable date before the completion of these financial statements,
for a total cost of £75,000. The number of shares in issue is reduced when
shares are repurchased. These treasury shares are not taken into consideration
in relation to the payment of dividends and voting at shareholder meetings.
248 million new Ordinary Shares were issued in 2023 as part of the
consideration for the acquisition of Simwell Resources. 1,297 million new
Ordinary Shares were issued in 2023 as part of the investment into LNEnergy.
Treasury Shares
2023 2022
Shares thousand Nominal value £000 Shares thousand Nominal value £000
At 1 January - - - -
Purchases held in treasury 202,112 202
At 31 December 202,112 202 - -
Treasury shares represent Reabold shares repurchased and available for
specific and limited purposes.
23. Share-Based Payments
The Company operates two share-based employee compensation plans: the Reabold
Resources plc Long Term Incentive Plan (the "LTIP") and the Reabold Resources
plc Deferred Annual Bonus Plan. Both plans were adopted by the Board in April
2023. All previous share option plans in the Company expired on 19 March
2023. The objective of these plans is to develop the interest of Directors and
key employees in the growth and development of the Group by providing them
with the opportunity to acquire an interest in the Company. Information on
these plans for directors is shown in the Directors Remuneration Report on
pages 31 - 33.
LTIP
In April 2023, 390,000,000 share options were granted to members of the
Group's executive team and senior management.
The vesting criteria of the options 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. The awards are structured as nil-cost options and are not
exercisable at 31 December 2023.
LTIP awards 2023 2022
Number Number
Outstanding as at 1 January - -
Granted during the year 390,000,000 -
Outstanding as at 31 December 390,000,000 -
Exercisable as at 31 December - -
The Company calculates the value of share-based compensation using a Monte
Carlo model, taking into account the terms and conditions upon which the
options were granted, to estimate the fair value of share options at the date
of grant. There are no cash settlement alternatives. The fair value of the
LTIP options granted during 2023 was estimated on the date of grant using the
following inputs and assumptions:
Dividend yield 0.0%
Volatility 68%
Risk-free rate (3 years) 3.82%
Risk-free rate (4 years) 3.73%
Risk-free rate (5 years) 3.67%
Share price £0.0018
Exercise price Nil
The fair value of the options at grant date was £0.00109. The estimated fair
value of options is amortised to expense over the options' vesting period. The
LTIP options can be exercised up to 5 years after the 5-year vesting period
and therefore, the contractual term of each option granted is 10 years.
The Company recognised total expenses relating to equity-settled share-based
payment transactions during the year of £57,000 (2022: £22,000). The balance
on the share-based payments reserve at 31 December 2023 is £2.0 million
(2022: £1.9 million).
Deferred Annual Bonus Plan (DABP)
Under the Company's remuneration policy, any annual bonus earned is paid 50%
in cash, with 50% deferred into restricted share units subject to a three-year
restricted period. No shares were granted under the DABP in 2023. Awards
applicable to the 2023 bonus outcomes, will be granted as soon as reasonably
practicable following the publication of this report provided that no award
shall be granted at any time when such grant would be contrary to any dealing
restriction.
Expired share option plans
Prior to the introduction of the LTIP and the DABP, the Company operated share
option plans for directors. All of these options expired in March 2023. The
following table shows the movements in expired share option plans during the
year and the corresponding weighted average exercise price (WAEP).
2023 2023 2022 2022
Number WAEP Number WAEP
pence pence
Outstanding as at 1 January 125,000,000 0.89 325,000,000 0.78
Granted during the year - - - -
Expired during the year (125,000,000) 0.89 (200,000,000) 0.71
Exercised during the year - - - -
Outstanding as at 31 December - - 125,000,000 0.89
Exercisable at 31 December - - 125,000,000 0.89
24. Capital Commitments
Authorised future capital expenditure by group companies for which contracts
had been signed at 31 December 2023 amounted to £nil (2022: £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 joint venture has also committed to recomplete or sidetrack and
test one of the WNA-1, WNA-2 or WNB-1Z wells in that same timeframe. The
Company estimates it's 16.67% share of costs for these commitments to be
c.£2.2 million. Rathlin, the operator of PEDL183, is working with the NSTA to
defer these commitments to allow the time necessary for Rathlin to obtain
sufficient funding for its share of the commitments.
UK North Sea
Reabold estimates its share of firm exploration and appraisal work commitments
on its North Sea portfolio to be c.£50,000 over the course of 2024.
25. Related Party Transactions and Transactions with Directors
Transactions between the Group and its associates is disclosed in Note 15.
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 9 above. The disclosures in note 9
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.
26. 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 2023, Reabold incurred
£190,000 (2022: £191,000) in legal and professional fees in relation to the
successful defence from a second attempt, from a group of 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 January 2024 (2022:
rejected at a general meeting held in November 2022).
27. Events after the reporting period
Requisitioned General Meeting
On 10 January 2024, Reabold announced that all the proposed resolutions put to
shareholders at a general meeting by a group of beneficial shareholders,
including removing the entire Board of Directors and replacing it with four
new directors, were not passed.
Treasury Shares
78 million ordinary shares were repurchased between the end of the reporting
period and 29 May 2024, the latest practicable date before the completion of
these financial statements, for a total cost of £75,000. The number of shares
in issue is reduced when shares are repurchased. These treasury shares are not
taken into consideration in relation to the payment of dividends and voting at
shareholder meetings.
Final tranche of contingent consideration from Shell received
On 19 January 2024, Reabold received the final tranche of the contingent
payment from Shell for the sale of the entire issued share capital
of Corallian Energy Limited, as announced on 1 November 2022, following
receipt of Development and Production Consent for the Victory gas field from
the North Sea Transition Authority on 17 January 2024. Reabold
received £4.4 million for the final tranche, which follows the £8.3
million already received by the Company.
Loan to LNEnergy
On 26 March 2024, Reabold provided LNEnergy with a £0.5 million
interest-bearing loan facility. LNEnergy had drawn down the full facility as
at the date of publication of this report. The interest-bearing loan with
LNEnergy has interest charged at the Bank of England's base rate plus 0.75%
and has a maturity date of 25 September 2024. The loan includes a clause that
allows Reabold to convert the loan into ordinary shares of LNEnergy at
maturity.
Heads of Agreement Signed between Gunvor and LNEnergy
On 2 May 2024, Reabold announced the execution of a non-binding Heads of
Agreement ("HoA") between Gunvor and LNEnergy Limited for the purchase of
LNG by Gunvor from LNEnergy from the Colle Santo gas field, located
onshore Italy. LNEnergy has the exclusive right to acquire a 90% interest
in Colle Santo and Reabold owns a 26.1% equity interest in LNEnergy.
The HoA provides the terms on which Gunvor will purchase LNG from LNEnergy at
its planned small-scale LNG production facility at the Colle Santo gas field.
Gunvor will purchase approximately 44,000 tonnes of LNG per annum. The point
of sale will be the truck loading flange at the small-scale LNG plant, and the
LNG will then be delivered by truck in Italy. The price for the LNG will be
aligned with the Italian PSV price. The contract term will be for an
indefinite period with a minimum term of five years.
The HoA also provides for a potential prepayment by Gunvor for a portion of
the first five years of deliveries, with such amounts subject to prepayment
being a total of approximately 66,000 tonnes of LNG, or 999,000 MWh. The
average forward Italian PSV gas price for the years 2025-2030 is currently
approximately €30 / MWh. The prepayment is conditional on agreeing
definitive transaction documentation and LNEnergy obtaining the required
permits to construct and operate the LNG production facility.
On the basis of the HoA, LNEnergy and Gunvor intend to negotiate a
fully-termed LNG sale and purchase agreement over the next six months. During
such time, LNEnergy will exclusively discuss the sale and purchase of LNG
from Colle Santo with Gunvor.
Company Broker
On 9 May 2024, Reabold announced that Cavendish Capital Markets Limited will
act as the Company's sole broker with immediate effect.
West Newton awarded AA rating for Carbon Intensity
On 24 May 2024, Reabold announced the positive conclusions of a Carbon
Intensity Study on the West Newton gas development, located within PEDL183
onshore UK in East Yorkshire, undertaken by GaffneyCline. Please see the ESG
section - United Kingdom, on page 15 and 16 for more information.
Glossary
AGM
Annual General Meeting
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.
gCO(2)e/MJ
Grams of carbon dioxide equivalent per megajoule of energy
IAS
International Accounting Standards
IFRS
International Financial Reporting Standards.
KPIs
Key performance indicators
LNG
Liquified natural gas
LTIP
Long-term Incentive Plan
Megajoule
A unit of energy equivalent to one million joules
mmboe
million barrels of oil equivalent
mmcf/d
Million cubic feet per day
MW
Megawatt
MWh
Megawatt hours
UKCS
United Kingdom Continental Shelf
Corporate Information
Registered Office Company Secretary
20 Primrose Street Christopher Connolly
London
EC2A 2EW Registrar
Neville Registrars Limited
Nominated Neville House
Adviser
Steelpark Road
Strand Hanson Limited
Halesowen
26 Mount Row
B62 8HD
London
W1K 3SQ
Legal adviser
Hill Dickinson LLP
Broker
20 Primrose Street
Cavendish
London
1 Bartholomew Close
EC2A 2EW
London
England
Public Market Admission
EC1A 7BL
AIM, London
Symbol: RBD
Auditor
Mazars LLP
Website
The Pinnacle
www.reabold.com (http://www.reabold.com)
160 Midsummer Boulevard
Milton Keynes
Company Number
MK9 1FF
3542727
Bankers
Barclays
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