REG - Scirocco Energy PLC - Interim Results
30/09/2022 07:01
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RNS Number : 2414B Scirocco Energy PLC 30 September 2022
30 September 2022
Scirocco Energy plc
("Scirocco" or the "Company")
Interim Results
Scirocco Energy (AIM: SCIR), the AIM investing company targeting attractive
assets within the European sustainable energy and circular economy markets, is
pleased to announce its unaudited interim results for the six months ended 30
June 2022.
Period Highlights:
· In line with the Investing Policy approved at AGM in July 2021, the
Company continued to support Energy Acquisitions Group Limited ("EAG"), where
Scirocco has a 50% ownership interest, to identify additional investment
opportunities building on the acquisition by EAG of 100% of Greenan Generation
Limited ("GGL") and associated 0.5 MWe Anaerobic Digestion ("AD") plant
located in County Londonderry, Northern Ireland. AD is a process that creates
biogas, a renewable energy source that will help the UK deliver on its
decarbonisation commitments
· During the period, GGL has continued to out-perform original
expectations:
• Revenue supported by higher NIROC payment levels and higher power
sales prices
• EBITDA for H1 2022 was £253k on track for a 2022 full year
estimated EBITDA of c. £600k.
· Following an exhaustive sales process over c. 24 months, the Company
announced on 13(th) June 2022 that it had reached agreement with Wentworth
Resources plc to sell its 25% interest in the Ruvuma asset for a total
consideration of up to $16 million:
• Initial consideration of US$3 million payable on completion of the
Proposed Transaction;
• US$3 million payable upon final investment decision being taken by
the parties to the Ruvuma Asset Production Sharing Agreement or the JOA as the
case may be;
• Deferred consideration of up to US$8 million payable in the form
of a 25% net revenue share from the point when Ruvuma commences delivery of
gas to the gas buyer;
• Contingent consideration of US$2 million payable on gross
production reaching a level equal to or greater than 50Bcf.
· The Ruvuma disposal was approved by Shareholders at a general meeting
held on 29(th) June 2022
· The Prolific Basins financing facility outstanding balance was part
settled through the issuance of Scirocco shares on two occasions and a waiver
fee associated with approval of the Ruvuma divestment with the outstanding
balance at 30 June of $545,000;
· The Company disposed of part of its remaining shareholding in Helium
One realizing c. £160k in proceeds during the period;
· Continued the Company's focus on cost discipline and cash
preservation; and
· Held cash at 30 June 2022 of £1.03 million
Post Period Highlights:
· On 12 July 2022 the Company received formal notice from ARA Petroleum
Tanzania Limited ("APT"), the current 50% interest holder and operator of
Ruvuma, that it was exercising its pre-emption rights with regards to
Scirocco's proposed divestment of the Ruvuma asset ("Ruvuma") to Wentworth
Resources plc ("Wentworth") in addition to a separate letter received from the
Tanzania Petroleum Development Corporation ("TPDC") stating that it is
considering exercising its statutory rights of first refusal in relation to
the Ruvuma pursuant to Section 86(5) of the Petroleum Act 2015. On 19 August
2022, the Company received written confirmation from the Tanzania Petroleum
Development Corporation ("TPDC") that it was not exercising its statutory
right of first refusal with respect to the Company's divestment of its 25%
interest in the Ruvuma asset.
· On 31 August 2022, APT and Scirocco entered into binding agreements
which, inter-alia, provides access to cash call cover through the previously
announced loan facility (with Wentworth Resources plc) and 1st drawdown notice
for $1.614 million. Other than for adjustments with respect to conditions
precedent then fulfilled, APT entered into all of the same agreements (and on
the same terms) as Wentworth Resources plc (as detailed in the Company's
announcement of 13 June 2022).
· On 2 September 2022, the Company received a letter from a group of
shareholders of the Company requesting the Company to convene a general
meeting of the Company's shareholders pursuant to section 303 of the Companies
Act 2006 (the "Act"). Pursuant to this request on 15 September 2022, the
Company published a Circular to Shareholders, along with accompanying Notice
of General Meeting and Form of Proxy.
· On 14 September 2022, the Company noted the announcement by Reabold
Resources plc regarding the conditional sale of its investee company,
Corallian Energy Limited in which Scirocco owns 83,333 shares following a
subscription by Scirocco in 2018 at a price of £1.50 per share. A price of up
to £3.20 per share will be paid to Corallian shareholders as a combination
of initial cash plus contingent payments offering a profitable exit with up
to £267k of proceeds net to Scirocco (based on estimated £3.20 per
share).
· On 27 September 2022, the Company announced that the subscriber (the
"Subscriber") under the share subscription deed governing the investment
facility ("Investment Facility"), the details of which were announced to the
market on 29 June 2020, had issued the Company a settlement notice
for US$100,000. Accordingly, the Company issued and allotted 44,923,630
ordinary shares, with a deemed price of £0.0020 ("Settlement Shares") to
the Subscriber. The Subscriber's investment was made as a prepayment for
ordinary shares in the Company, the number (and price) of which were to be
determined at the time the Subscriber elected to receive such shares,
according to the average of five daily volume-weighted average prices during
the twenty trading days prior to the date of such election.
At the time the Company sent out its Notice of its 2022 AGM held on 3 August,
and continuing through the actual AGM, it was not aware it would be able to
rely on the authority granted at the 2020 AGM, hence why Resolution 5 was
proposed. Following the defeat of Resolution 5, the Company therefore
believed, at that time, and as stated in the Result of AGM RNS on 3 August,
that it was in default of the Prolific Basins facility.
Subsequent to the 2022 AGM, the Company reviewed prior authorities as part of
a discussion with Prolific Basins regarding settlement of the facility. At the
2020 AGM, approval was taken to allot shares on a non-pre-emptive basis in
favour of Prolific and the resolution included the wording as follows: "…
save that the Company may make an offer or agreement before the expiry of the
authority which would or might require shares to be allotted or Rights to be
granted after expiry of the authority and the Directors of the Company may
allot shares and grant Rights in pursuance of that offer or agreement as if
the authority had not expired."
This is a standard formulation in non-pre-emptive authorities (derived from
s.570(4) of the Companies Act 2006) to allot to cover agreements reached prior
to the expiry of that authority to allow allotments to be made after the
expiration of such authority.
Therefore the Company considers that the £1m authority taken at the 2020 AGM
can be used to allot shares to Prolific on a continuing basis given there is
sufficient headroom remaining thereunder. Any subsequent authorities requested
(such as at the 2022 AGM), part of an assessment of risk about potential
headroom, are not necessary given the share price and amount remaining under
the 2020 authority suffices to allot shares to Prolific.
The Company does not have a general authority to allot on a non-pre-emptive
basis given this has expired and that resolution did not pass at the 2022 AGM.
It is only the ability to allot shares to Prolific that continues pursuant to
the authority described above
Commenting on the Interim Results, Alastair Ferguson, Non-Executive Chairman
said:
"The first half of 2022 has continued to see significant change for the
Company as it continued to implement the Investment Policy which targets
assets within the European sustainable energy and circular economy markets.
This policy will see Scirocco allocating capital in assets which support the
energy transition and offer a stable, growing source of cash flow going
forward.
With the pivot to investment in assets within the sustainable energy and
circular economy we made clear that we intend to recycle value delivered from
Scirocco's legacy assets to fund new investment activities.
I was pleased that the Company was able to announce the sale of its legacy
interest in Ruvuma following the agreement with Wentworth Resources plc in
June for up to $16 million, subsequently pre-empted by our joint venture
partner APT. We are now working closely with APT to deliver a timely
completion of the sale, which we expect to be by the year end. The proceeds of
the divestment - both at completion and any future contingent payments - will
be available for reinvestment in assets which comply with the company's
investment policy.
Following the end of the period the Company has also received initial loan
funds from APT which are available for investment and general corporate
purposes.
The Company is now in a strong position: it has an agreed sale for its most
significant legacy asset which is expected to deliver further proceeds in the
future to fund new investment and the cash calls for Ruvuma are being funded
by the loan arrangement with APT. Taken together the Company represents a
solid platform for further investment in its target assets.
We now look forward to growing the portfolio and the team are working hard to
deliver this."
The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulations
(EU) No. 596/2014 ("MAR").
For further information:
Scirocco Energy plc +44 (0) 20 7466 5000
Tom Reynolds, CEO
Doug Rycroft, COO
Strand Hanson Limited, Nominated Adviser +44 (0) 20 7409 3494
Ritchie Balmer / James Spinney / Robert Collins
WH Ireland Limited, Broker +44 (0) 207 220 1666
Harry Ansell / Katy Mitchell
Buchanan, Financial PR +44 (0) 20 7466 5000
Ben Romney / Jon Krinks
Chairman's statement
Introduction
I am pleased to be providing this statement in my capacity as Non-Executive
Chairman of Scirocco. At the end of 2021, the Company had established a new
investment policy which was approved by shareholders and made its first
related investment to support EAG in acquiring GGL. The Company had also seen
positive developments within its legacy asset portfolio which had the
potential to support improved interest by prospective acquirers. The Board's
singular focus has been to turn legacy assets into capital available for
reinvestment in line with the investment policy. The Company has made progress
in this respect through the partial sale of its Helium One holding and the
recent news regarding the sale of Corallian Energy Limited, a private company
where Scirocco holds shares.
With the sale of the Company's legacy 25% interest in Ruvuma clarified, as
announced on 13 June and subsequently approved by shareholders on 29 June, and
initial drawdown received from APT following its pre-emption, we can now focus
our efforts on our core objectives which remain the same as I shared at the
same time last year:
o To Implement the new investment policy to invest in attractive
assets within the sustainable energy and circular economy with a view to
growing a portfolio of cash generative assets over time;
o To Grow the company's access to resources and personnel within the
target space; and
o To Identify new opportunities and progress the EAG investment.
The Board is aware that not all shareholders supported the divestment of
Ruvuma and that a minority continue to actively frustrate our efforts to
make progress. The Board is committed to grow value for all shareholders by
the most appropriate investment of Company resources on a risk adjusted basis.
This principle led to the adoption of the new investment policy, which was
approved by over 99 per cent. of shareholders in 2021, and the decision to
divest legacy assets. While the Board will engage with all shareholders on a
reasonable basis the direction of travel has been set and we look forward to
delivering on the objectives listed above.
Strategy and Business Development
With the progress made in divesting legacy assets the Board restates
Scirocco's objective to build a portfolio of cash generative assets within the
following three core areas:
· Energy - assets which generate energy for sale through sustainable or
renewable means in the form of biogas or electrical power;
· Circular - assets which recover a valuable component of an
industrial, municipal or agricultural waste stream for re-use, generally
reducing the system carbon footprint in parallel; and
· Vector - assets involved in the storage, transmission, or delivery of
energy within a low carbon context.
The Board believes it will offer Shareholders and investors exposure to an
asset portfolio with an attractive risk/reward profile within the sustainable
energy ecosystem. Over time, the Board believes shareholder value can be
delivered through operational improvement, driving improved profitability;
reinvestment of cash flow to fund further acquisition; the periodic
refinancing of the portfolio as it grows, supporting lower cost asset finance;
and ultimately the payment of a regular dividend.
Outlook
The first half of 2022 has been a period of significant progress within
Scirocco towards long term goals defined by the investment policy. The sale of
the Company's Ruvuma interest to APT following its pre-emption of the deal
originally announced with Wentworth Resources plc has removed a significant
call over the Company's cash resources which can now be directed towards
alternative investments.
We look forward to putting these resources to good effect in growing a cash
generative portfolio of assets over the remainder of 2022 and into 2023.
Alastair Ferguson
Non-Executive Chairman
Date: 30 September 2022
Investment Update
Energy Acquisitions Group Limited
The Company invested in EAG in September 2021 to support the acquisition of
Greenan Generation Limited ("GGL").
Financial
In Q1 2022 the revenue received for the quarter by GGL totalled £323k
(unaudited) supported by high power prices through the period. This compares
to the same period in 2021 where revenue was £240k (unaudited) - a 34.5% year
on year increase. EBITDA for Q1 2022 was £158k and at current power prices,
EBITDA for the first 12 months of EAG's ownership of GGL is on target to
exceed £600k.
In Q2 2022, the revenue received for the quarter by GGL totalled £267k
(unaudited) supported by consistently high power prices. This compares to the
same period in 2021 where revenue was £266k (unaudited). Comparable
performance was largely due to significant refurbishment downtime in Q1 2022
and a consequent reduction of £36k in NIROC income which would otherwise have
been received in Q2. EBITDA for Q2 2022 was £95k (unaudited) bringing H1 2022
EBITDA to £253k (unaudited) on track for a 2022 full year estimated EBITDA of
c. £600k.
Operational
During Q1 2022, in order to future proof the plant at its Greenan site, the
EAG team completed the replacement and recommissioning of a number of elements
of critical equipment, at a total cost of c. £230k funded from operational
cash flow:
· All mixers in the premix tank
· All primary digester mixers, and refurbishment of all mixer
infrastructure including winches, winch motors and guide rails
· Full Edina CHP (Combined Heat & Power) engine block change, and
completing major service
· Upgrade and replacement of augers and pumps in feed and recirculation
system including installation of automatic recirculation system
During Q2 2022, following the major upgrade and futureproofing works, the
plant has enjoyed consistent performance with 95% + operational efficiency and
an average power sales price of £163 per mw/hr
Q2 2022 was a period of stable operations and delivery, with operational
efficiency consistently above 95%. Other than preventative maintenance, which
is contracted with long term service providers, there are no further major
upgrade projects planned in the next 24 months. As seen during Q2, the plant
is expected to operate at over 95% efficiency for the foreseeable future, with
no further scheduled downtime.
Business Development
Throughout H1 2022, EAG carried out due diligence on three additional AD
plants. Under the arrangement with SEM (announced by Scirocco in an RNS dated
9 December 2021) the Company and EAG gained exclusive access to a technical
solution for the processing of digestate into a nutrient dense organic
fertiliser. The EAG team engaged in discussions regarding up to seven merchant
installations of the SEM equipment on third party AD plants. This is in
addition to the planned nutrient recovery system at Greenan, which is expected
to increase EBITDA for the entire Greenan complex to c. £1,500k per annum
once operational.
Tom Reynolds
Chief Executive Officer
Date: 30 September 2022
Principal risks and uncertainties
The principal risks facing the Company were set out in the Company's Annual
Report and Accounts to 31 December 2021
As the investment policy is implemented, the Company's risk profile will
continue to evolve due to its exposure to different assets and markets, and a
full statement of risks will be published in subsequent Annual Report and
Accounts.
On behalf of the board
Alastair Ferguson
Non-Executive Chairman
Date: 30 September 2022
Directors' responsibilities
The Directors are responsible for preparing the Interim Report in accordance
with applicable law and regulations.
Company law requires the Directors to prepare Company financial statements for
each financial year. Under AIM Rules for Companies of the London Stock
Exchange they are required to prepare the Company financial statements in
accordance with International Financial Reporting 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 Company and of the
profit or loss of the Company 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.
Company law requires the Directors to prepare Company financial statements for
each financial year. Under AIM Rules for Companies of the London Stock
Exchange they are required to prepare the Company financial statements in
accordance with International Financial Reporting Standards (IFRSs) in
conformity with the Companies Act 2006.
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,
relevant and reliable;
· state whether they have been prepared in accordance with IFRS; 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
requirements of 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.
Website publication
The Directors are responsible for ensuring the annual report and the financial
statements are made available on the Company's 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.
CONDENSED INTERIM STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Six months ended Six months ended
Notes 30 June 2022 30 June 2021
(Unaudited) (Unaudited)
Continuing operations £ 000 £ 000
Administrative expenses (733) (713)
Loss before investment activities (733) (713)
Interest income 5 65 -
Gain on disposal of shares 8 57 (15)
Costs to sell investments (30) (330)
Exchange gain/(loss) 72 (17)
Fair value through profit and loss 27 2,910
(Loss)/profit on ordinary activities before taxation (542) 1,835
Income tax expense
- -
Total comprehensive (loss)/profit for the period from continuing operations (542) 1,835
Discontinued operations
Assets held for sale 9 - 9
Profit/(loss) recognised on classification as held for sale 1,314 (337)
Profit/(loss) for the period from discontinuing operations 1,314 (328)
Profit and total comprehensive income for the period 772 1,507
Total comprehensive income attributable to owners of the parent 772 1,507
Earnings per share (pence) 10
Basic and diluted 0.10 0.20
Earnings per share from continuing operations
Basic and diluted (0.07) 0.25
Earnings per share from discontinued operations
Basic and diluted 0.17 (0.05)
CONDENSED INTERIM STATEMENT OF FINANCIAL POSITION
As at As at
Notes 30 June 2022 31 December 2021
(Unaudited) (Audited)
£ 000 £ 000
Non-current assets
Financial assets at fair value through profit or loss 11 372 437
Total non-current assets 372 437
Current assets
Trade and other receivables 14 334 153
Cash and cash equivalents 1,028 2,059
Loan receivable from related party 1,379 1,244
Assets held for sale 13 13,295 11,600
Total current assets 16,036 15,056
Total assets 16,408 15,493
Current liabilities
Trade and other payables 15 202 178
Liabilities held for sale 13 166 166
Total current liabilities 368 344
Net current assets 15,668 14,712
Total liabilities 368 344
Net assets 16,040 15,149
Equity
Share capital 16 1,518 1,518
Deferred share capital 16 2,729 2,729
Share premium reserve 38,155 38,155
Share-based payments 17 2,060 1,941
Retained earnings (28,422) (29,194)
Total equity 16,040 15,149
CONDENSED INTERIM STATEMENT OF CASH FLOWS
Six months ended Six months ended
30 June 2022 30 June 2021
(Unaudited) (Unaudited)
£ 000 £ 000
Cash flows from operating activities
Cash absorbed by continuing (580) (92)
operations
23
Interest paid - (1)
Net cash outflow from operating activities (580) (93)
Cash flows from investing activities
Cash movements in relation to assets held for sale (381) (237)
Payments to acquire investments - (45)
Proceeds from disposal of investments - 1,500
Loan granted to related party (70) -
(451) 1,218
Net cash (outflow)/inflow from investing activities
Net (decrease)/increase in cash and cash equivalents (1,031) 1,125
Cash and cash equivalents at beginning of period 2,059 1,168
Cash and cash equivalents at end of period 1,028 2,293
CONDENSED STATEMENT OF CHANGES IN EQUITY
Deferred share Share premium Share based Retained earnings Total
Share capital capital payments
£000 £000 £000 £000 £000 £000
Balance at 31 December 2020 1,448 1,831 38,399 1,470 (25,503) 17,645
Profit for the period - - - - 1,507 1,507
Credit to equity for equity-settled share-based payments - - - 298 - 298
Balance at 30 June 2021 1,448 1,831 38,399 1,768 (23,996) 19,450
Loss for the period - - - - (5,198) (5,198)
Issue of share capital 70 (362) 292 - - -
Shares not issued moved to deferred share capital - 536 (536) - - -
Consideration received for shares to be issued - 724 - - - 724
Credit to equity for equity-settled share-based payments - - - 173 - 173
Balance at 31 December 2021 1,518 2,729 38,155 1,941 (29,194) 15,149
Profit for the period - - - - 772 772
Credit to equity for equity-settled share-based payments - - - 119 - 119
Balance at 30 June 2022 1,518 2,729 38,155 2,060 (28,422) 16,040
NOTES TO CONDENSED INTERIM FINANCIAL INFORMATION
1 BASIS OF PREPARATION
The financial information has been prepared under the historical cost
convention and on a going concern basis and in accordance with International
Financial Reporting Standards and as applied in accordance with the provisions
of the Companies Act 2006. The principal accounting policies adopted by the
Company are set out below.
The condensed interim financial information for the period ended 30 June 2022
has not been audited or reviewed in accordance with the International Standard
on Review Engagements 2410 issued by the Auditing Practices Board. The figures
were prepared using applicable accounting policies and practices consistent
with those adopted in the statutory accounts for the year ended 31 December
2021. The figures for the year ended 31 December 2021 have been extracted from
these accounts, which have been delivered to the Registrar of Companies, and
contained an unqualified audit report.
The condensed interim financial information contained in this document does
not constitute statutory accounts. In the opinion of the Directors the
financial information for this period fairly presents the financial position,
result of operations and cash flows for this period.
This Interim Financial Report was approved by the Board of Directors on 30
September 2022.
Statement of compliance
These condensed company interim financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRS) as adopted
by the European Union with the exception of International Accounting Standard
('IAS') 34 - Interim Financial Reporting. Accordingly, the interim financial
statements do not include all of the information or disclosures required in
the annual financial statements and should be read in conjunction with the
Company's 2021 annual financial statements.
2 ADOPTION OF NEW AND REVISED STANDARDS
The accounting policies adopted in the preparation of the interim financial
statements are consistent with those followed in the preparation of the
Company's annual financial statements for the year ended 31 December 2021,
except for the adoption of new standards effective as of 1 January 2022. The
Company has not early adopted any standard, interpretation or amendment that
has been issued but is not yet effective.
Several amendments and interpretations apply for the first time in 2022, but
do not have an impact on the interim financial statements of the Company.
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16: Interest Rate
Benchmark Reform
The amendments in Interest Rate Benchmark Reform - Phase 2, introduce a
practical expedient for modifications required by the reform, clarify that
hedge accounting is not discontinued solely because of the IBOR reform, and
introduces disclosures that allow users to understand the nature and extent of
risks arising from the IBOR reform to which the entity is exposed to and how
the entity manages those risks as well as the entity's progress in
transitioning from IBORs to alternative benchmark rates, and how the entity is
managing this transition.
Amendments to IFRS 16: Covid-19-Related Rent Concessions beyond 30 June 2021
The amendment extends, by one year, the May 2020 amendment that provides
lessees with an exemption from assessing whether a Covid-19-related rent
concession is a lease modification.
These amendments had no impact on the interim financial statements of the
Company.
3 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The Company makes estimates and assumptions regarding the future. Estimates
and judgements are continually evaluated based on historical experience and
other factors, including expectations of future events that are believed to be
reasonable under the circumstances. In the future, actual experience may
differ from these estimates and assumptions. The estimates and assumptions
that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial period are
discussed below.
Useful lives of intangible assets and property, plant, and equipment (note 11)
Intangible assets and property, plant and equipment are amortised or
depreciated over their useful lives. Useful lives are based on the
management's estimates of the period that the assets will generate revenue,
which are based on judgement and experience and periodically reviewed for
continued appropriateness. Changes to estimates can result in significant
variations in the carrying value and amounts charged to the income statement
in specific periods.
3 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
(CONTINUED)
Share-based payments (note 17)
The Company utilised an equity-settled share-based remuneration scheme for
employees. Employee services received, and the corresponding increase in
equity, are measured by reference to the fair value of the equity instruments
at the date of grant, excluding the impact of any non-market vesting
conditions. The fair value of share options is estimated by using
Black-Scholes valuation method as at the date of grant. The assumptions used
in the valuation are described in note 17 and include, among others, the
expected volatility, expected life of the options and number of options
expected to vest.
Recoverability of trade receivables (note 14)
The Company considers the recoverability of trade receivables to be a key area
of judgement. The Company considers trade receivables to be credit impaired
once there is evidence a loss has been incurred. An expected credit loss is
calculated on an annual basis. The Directors believe that the debtor is still
recoverable based on their knowledge of the market in Tanzania and historical
evidence of similar receivables being paid. The Directors have recognised the
asset as they believe they are still legally entitled to receive it. The
Tanzanian Government have a history of building up receivables with other
companies and billing them at a future date.
4 OPERATING SEGMENTS
Based on risks and returns, the Directors consider that the primary reporting
format is by business segment. The Directors consider that there are two
business segments:
· Head office support from the UK
· Segment assets for Canada relate to an investment in Corallian
Energy
· Discontinued operations on its investments in Tanzania
Continuing Discontinuing
Operations Operations
6 months to 30 June 2022 Canada UK Total Tanzania Total
£000 £000 £000 £000 £000
Administrative expenses - (733) (733) - (733)
Interest income - 65 65 - 65
Other gains and losses - 99 99 1,314 1,413
Fair value through profit and loss - 27 27 - 27
Profit/(loss) from operations per reportable segment - (542) (542) 1,314 772
Additions to non-current assets - 27 27 - 27
Reportable segment assets 125 2,953 3,078 13,295 16,373
Reportable segment liabilities - (202) (202) (166) (368)
6 months to 30 June 2021 Continuing Discontinuing Operations Tanzania
Operations
Canada UK Total Total
£000 £000 £000 £000 £000
Administrative expenses - (713) (713) - (713)
Interest income - - - 9 9
Other gains and losses - (362) (362) (337) (699)
Fair value through profit and loss 2,910 2,910 - 2,910
Profit/(loss) from operations per reportable segment - 1,835 1,835 (328) 1,507
Additions to non-current assets - 123 123 237 360
Reportable segment assets 125 5,313 5,438 14,628 20,066
Reportable segment liabilities - (450) (450) (166) (616)
5 REVENUE
6 months to 6 months to
30 June 2022 30 June 2021
£000 £000
Other significant revenue
Interest income 65 -
Contract balances 30 June 2022 30 June 2021
£000 £000
Other receivables - 271
Accrued income and interest - 98
Trade receivables accrue interest for non-payment. Outstanding debtors accrue
interest at a rate in accordance with the joint venture agreement and are
generally on terms of 30 days. In 2022, there is a provision of £nil (June
2021: £54k) for expected credit losses on trade receivables.
Interest income relates to interest charged on outstanding invoices.
6 EXPENSES BY NATURE
6 months to 30 June 2022 6 months to 30 June 2021
£000 £000
Continuing operations
Exchange (gains)/losses 72 (17)
Interest income 65 -
Fees payable to the Company's auditor for the audit of the Company's financial (22) (8)
statements
Professional, legal, and consulting fees (291) (276)
Costs to sell investments (30) (330)
AIM related costs including investor relations (44) (62)
Accounting-related services (73) (55)
Travel and subsidence (7) -
Office and administrative expenses (10) (9)
Other expenses - (12)
Fair value through profit or loss 27 2,910
Gain/(loss) on disposal of investments 57 (15)
Share-based payments (119) (298)
Directors' remuneration (133) (17)
Wages and salaries and other related costs (35) 24
(542) 1,835
7 EMPLOYEES
6 months to 6 months to
30 June 2022 30 June 2021
Average number of employees (excluding executive directors): - -
6 months to 6 months to
30 June 2022 30 June 2021
(unaudited) (unaudited)
£000 £000
Their aggregate remuneration comprised:
Wages and salaries - -
6 months to 6 months to
30 June 2022 30 June 2021
(unaudited) (unaudited)
£000 £000
Directors' remuneration 133 17
Salary and fees Share-based payments Termination payments Total
£000 £000 £000 £000
Period ended 30 June 2022
Alastair Ferguson 37 25 - 62
Tom Reynolds 75 25 - 100
Donald Nicolson 13 37 - 50
Muir Miller 8 20 - 28
Douglas Rycroft - 12 - 12
133 119 - 252
Salary and fees Share-based payments Termination payments Total
£000 £000 £000 £000
Period ended 30 June 2021
Jonathan Fitzpatrick - 37 - 37
Alastair Ferguson (7) 73 - 66
Tom Reynolds 24 112 - 136
Donald Nicolson - 49 - 49
Muir Miller (appointed 18 February 2021) - 15 - 15
Douglas Rycroft - 12 - 12
17 298 - 315
From February 2020, the Directors opted to defer their salaries with payments
resuming from 2022. Shares in lieu of salary will be issued for deferred
amounts (note 17).
No directors received pension contributions in 2022 or 2021.
8 OTHER GAINS AND LOSSES
6 months to 6 months to
30 June 2022 30 June 2021
£000 £000
Gain on disposal of Helium One shares 57 36
Loss on disposal of Helium One shares - (51)
57 (15)
9 DISCONTINUED OPERATIONS
The Company had a 25% interest in a high-quality development project in
Tanzania, Ruvuma. At the date of authorisation of these interim financial
statements, the Ruvuma asset has been sold, following the approval of
shareholders at the general meeting on 29 June 2022. Although sold, , the sale
remains subject to satisfaction of certain conditions and no guarantee can be
made that the sale completes.
The results of the discontinued business, which have been included in the
income statement, balance sheet and cash flow statement, were as follows:
6 months to 6 months to
30 June 2022 30 June 2021
£000 £000
Revenue - 9
Fair value revaluation 1,314 (337)
Profit/(loss) before taxation 1,314 (328)
Net profit/(loss) attributable to discontinuation 1,314 (328)
The profit after tax on disposal of the assets held for sale is made up as
follows:
£000
Fair value less costs to sell 13,129
Assets and liabilities classified as held for sale at 31 December 2021 (note 11,434
13)
Additions in 6 months to 30 June 2022 381
11,815
Movement on fair value revaluation at 30 June 2022 1,314
Loss per share impact from discontinued operations:
6 months to 6 months to
30 June 2022 30 June 2021
£000 £000
Basic and diluted impact (pence) 0.17 (0.05)
Cash flow statement
6 months to 6 months to
30 June 2022 30 June 2021
£000 £000
Net cash flows from investing activities (381) (162)
Total cash flows from discontinued operations (381) (162)
10 EARNINGS PER SHARE
The calculation of earnings per share is based on the loss after taxation
divided by the weighted average number of shares in issue during the period:
Six months to Six months to
30 June 2022 30 June 2021
(Unaudited) (Unaudited)
Weighted average number of ordinary shares used in calculating basic and
diluted earnings per share (millions)
758.79 723.95
£000 £000
Earnings
Continuing operations
(Loss)/profit for the period from continued operations (542) 1,835
Discontinued operations
Profit/(loss) for the period from discontinued operations 1,314 (328)
Basic and diluted earnings per share (pence)
From continuing operations (0.07) 0.25
From discontinuing operations 0.17 (0.05)
0.10 0.20
As the inclusion of the potential ordinary shares would result in a decrease
in the loss per share, they are anti-dilutive and, as such, a diluted loss per
share is not included.
11 INVESTMENTS
Quoted Equity Investments
Cost 30 June 31 December 2021
2022 £000
£000
Quoted equity investments 247 312
Unquoted equity investments 125 125
372 437
The quoted investments in the current year relate to an equity investment held
in Helium One Ltd, a company incorporated in the British Virgin Islands. Their
subsidiaries hold helium mining licenses across Tanzania. The shares held have
been valued at the mark-to-market value of 8.00p per share at 30 June 2022
(7.00p per share at 31 December 2021). During the period to 30 June 2022, the
Company disposed of 1,550,000 shares. On disposal of the shares the investment
was revalued to the mark-to-market value on the various dates of disposal and
a subsequent gain or loss recognised.
Unquoted Equity Investments
Cost £000
At 1 January and 31 December 2021 125
Additions -
At 30 June 2022 125
Impairment
At 31 December and 30 June 2022 -
Carrying amount
At 31 December 2021 and 30 June 2022 125
The unquoted investments in the current period relate to an equity investment
held in Corallian Energy Limited, a company incorporated in England which
holds interests in oil and gas basins in the United Kingdom.
12 SUBSIDIARIES AND ASSOCIATES
The subsidiaries of Scirocco Energy Plc are Scirocco Energy International
Limited a wholly owned, UK incorporated micro-entity, which is dormant, and
has been since incorporation with an issued share capital of £1 and Scirocco
Energy (UK) Limited, a wholly owned, UK incorporated entity which was dormant
until 2021. The registered office of the subsidiaries is 1 Park Row, Leeds,
United Kingdom, LS1 5AB.
The Company has taken advantage of the exemption under the Companies Act 2006
s405 not to consolidate Scirocco Energy International Limited as it has been
dormant from the date of incorporation and is not material for the point of
giving a true and fair view.
The Board announced on 25 August 2021 that the Group had completed an
investment in Energy Acquisitions Group Ltd ("EAG"), a specialist acquisition
and operating vehicle in the sustainable energy sector. On completion of the
investment, Scirocco Energy (UK) Limited owns 50% of the share capital of EAG.
13 ASSETS AND LIABILITIES CLASSIFIED AS HELD FOR SALE
30 June 2022 31 December 2021
£000 £000
Intangible assets 12,941 11,246
Oil and gas properties 354 354
Total assets classified as held for sale 13,295 11,600
Decommissioning provision 166 166
166 166
At the date of authorisation of these interim financial statements, the Ruvuma
asset has been sold, following the approval of shareholders at the general
meeting on 29 June 2022. Although sold, the sale remains subject to
satisfaction of certain conditions and no guarantee can be made that the sale
completes.
14 TRADE AND OTHER RECEIVABLES
30 June 2022 31 December 2021
£000 £000
Other receivables 269 111
Less provision for expected credit losses - -
269 111
VAT recoverable 55 21
Prepayments 10 21
334 153
The Directors consider that the carrying amount of trade and other receivables
approximates to their fair value.
15 TRADE AND OTHER PAYABLES
30 June 2022 31 December 2021
£000 £000
Trade payables 126 142
Accruals 76 36
202 178
The Directors consider that the carrying amount of trade payables approximates
to their fair value.
16 SHARE CAPITAL
Number of shares Nominal value
£000
a) Called up, allotted, issued and fully paid: Ordinary shares of 0.2
pence each
As at 31 December 2020 723,949,575 1,448
20 October 2021 - placing for cash at 0.2 pence 34,838,350 70
At 31 December 2021 and 30 June 2022 758,787,925 1,518
30 June 2022 31 December 2021
£000 £000
b) Deferred shares
At beginning of the period 2,729 1,831
Shares not issued moved to deferred share capital - 536
Issue of new shares - (362)
Consideration received for shares to be issued - 724
2,729 2,729
c) Total share options in issue
During the year no incentive options were granted (2021: nil). As at June 30
2022 there were 51,419,781 incentive options in issue (2021: 51,419,781)
During the year 10,193,284 (2021: 24,997,841) share options in lieu of salary
and/or fees due to the relevant option holders were granted. As at 30 June
2022 there were 54,246,990 share options in lieu of salary and/or fees in
issue (2021: 44,053,706)
d) Total warrants in issue
12,500,000 warrants expired in 2022. No warrants were issued or exercised
during the year (2021: nil)
As at 30 June 2022 no warrants were outstanding (2021: 12,500,000).
17 SHARE BASED PAYMENT
The Company has opted to remunerate the Directors for the period to 30 June
2022 by a grant of an option over the Ordinary Shares of the capital of the
Company as detailed in the deed of option grants. The life of the options is
18 months. There are 3 executive directors and 2 non-executive directors who
are members of the plan. The following table summarises the expense recognised
in the Statement of Comprehensive Income since the options were granted.
30 June 2022 31 December 2021
£000 £000
Directors' options 32 285
Incentive options 87 186
Credit to equity for equity-settled share-based payments 119 471
During June 2020 (and the height of the Covid-19 pandemic) the Company sought
to put in place a strategy that would help to conserve the Company's cash
position in the near term and to maximise alignment between the Board,
Management team and Shareholders.
Accordingly, the Company proposed to grant nominal cost options over new
Ordinary Shares of 0.2p (£0.002) to Directors and select members of the
Management Team ("the Director Options"). The Director Options were granted
over a total of 10,193,284 Ordinary Shares (2021: 24,997,841) and have an
aggregate value equal (on a net basis, after deduction of the nominal exercise
price per Ordinary Share) to the fair value of salary and/or fees due to the
relevant option holders up to 30 June 2022.
In 2021, members of the Management Team were also awarded options over
Ordinary Shares with an exercise price of 1.3p (£0.013) ("the Incentive
Options"), which was approximately a 24% premium to the closing mid-market
price of the Company's Ordinary Shares on 26 June 2020. Each Incentive Option
is ordinarily exercisable on the 3rd anniversary of the grant date (being 30
June 2023), except in the event of specified corporate events or,
exceptionally, if the option holder leaves as a 'good leaver'. No further
Incentive Options were awarded in 2022.
17 SHARE BASED PAYMENT (CONTINUED)
The Company used the Black-Scholes model to determine the value of the
incentive options and the inputs. There were no incentive share options for
the period ended 30 June 2022. The value of the options and the inputs for the
period ended 30 June 2022 were as follows:
Issue 30 June 2020
Incentive options
Share price at grant (pence) 1.09
Exercise price at grant (pence) 1.30
Expected volatility (%) 84.42
Expected life (years) 6
Risk free rate (%) 0.17
Expected dividends (pence) nil
Expected volatility was determined using the Company's share price for the
preceding 3 years.
The total share-based payment expense in the period for the Company was
£86,806 in relation to the issue of incentive options (2021: £186,013) and
£nil finance charges in relation to warrants (2021: £nil).
The Incentive Options granted represent approximately 6.8% of the Company's
issued share capital (excluding warrants issued to Prolific Basins LLC). The
Board has retained additional headroom for additional Incentive Options as it
recognises that the future performance of the Company will be dependent on its
ability to retain the services of key executives.
18 FINANCIAL INSTRUMENTS
Categories of financial instruments
The following table combines information about:
· Classes of financial instruments based on their nature and
characteristics; and
· The carrying amounts of financial instruments
30 June 2022 31 December 2021
£000 £000
Financial assets at amortised cost
Other debtors 269 111
Prepayments 10 21
Cash and cash equivalents 1,028 2,059
Loan receivable from related party 1,379 1,244
2,686 3,435
Book value Fair value Book value Fair value
30 June 2022 30 June 2022 31 Dec 2021 31 Dec 2021
£000 £000 £000 £000
Financial assets at fair value
Non-current investment - Helium One 247 247 312 312
Non-current investment - Corallian Energy Limited 125 125 125 125
372 372 437 437
30 June 2022 31 December 2021
£000 £000
Financial liabilities at amortised cost
Trade payables 126 142
Accruals 76 36
202 178
18 FINANCIAL INSTRUMENTS (CONTINUED)
The table below analyses financial instruments carried at fair value, by
valuation method.
Fair values are categorised into different levels in a fair value hierarchy
based on the inputs used in the valuation techniques as follows:
· Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities.
· Level 2: inputs other than quoted prices included in Level 1 that
are observable for the asset or liability, either directly (i.e., as prices)
or indirectly (i.e., derived from prices).
· Level 3: inputs for the asset or liability that are not based on
observable market data (unobservable inputs).
The fair values for the Company's assets and liabilities are not materially
different from their carrying values in the financial statements.
The following table presents the Company's financial assets that are measured
at fair value:
Level 1 Level 2 Level 3 Total
£000 £000 £000 £000
Non-current investment - Helium One 247 - - 247
Non-current investment - Corallian Energy Limited - - 125 125
247 - 125 372
The Company does not have any liabilities measured at fair value. There have
been no transfers in to or transfers out of fair value hierarchy levels in the
period.
Financial instruments in level 1
The fair value of financial instruments traded in active markets is based on
quoted market prices at the reporting date. A market is regarded as active if
quoted prices are readily and regularly available from an exchange, dealer,
broker, industry group, pricing service, or regulatory agency, and those
prices represent actual and regularly occurring market transactions on an
arm's length basis. The quoted market price used for financial assets held by
the Company is the current bid price.
Financial instruments in level 2
The fair value of financial instruments that are not traded in an active
market is determined by using valuation techniques. These valuation techniques
maximise the use of observable market data where it is available and rely as
little as possible on entity specific estimates. If all significant inputs
required to fair value an instrument are observable, the instrument is
included in level 2. No investments are valued using level 2 inputs in the
period.
Financial instruments in level 3
If one or more of the significant inputs is not based on observable market
data, the instrument is included in level 3. Following the guidance of IFRS 9,
these financial instruments have been assessed to determine the fair value of
the instrument. In their assessment, the Directors have considered both
external and internal indicators to decide whether an impairment charge must
be made or whether there needs to be a fair value uplift on the instrument.
The carrying value of the Company's financial assets and liabilities measured
at amortised cost are approximately equal to their fair value. The Company is
exposed through its operations to one or more of the following financial
risks:
· Fair value or cash flow interest rate risk
· Foreign currency risk
· Liquidity risk
· Credit risk
· Market risk
· Expected credit losses
Policy for managing these risks is set by the Board. The policy for each of
the above risks is described in more detail below.
Fair value and cash flow interest rate risk
Generally, the Company has a policy of holding debt at a floating rate. The
Directors will revisit the appropriateness of this policy should the Company's
operations change in size or nature. Operations are not permitted to borrow
long-term from external sources locally.
18 FINANCIAL INSTRUMENTS (CONTINUED)
Foreign currency risk
Foreign exchange risk arises because the Company has operations located in
various parts of the world whose functional currency is not the same as the
functional currency in which the Company's investments are operating. The
Company's net assets are exposed to currency risk giving rise to gains or
losses on retranslation into sterling. Only in exceptional circumstances will
the Company consider hedging its net investments in overseas operations as
generally it does not consider that the reduction in volatility in net assets
warrants the cash flow risk created from such hedging techniques.
The Company's exposure to foreign currency risk at the end of the reporting
period is summarised below.
30 June 2022 31 December 2021
$000 $000
USD USD
Trade and other receivables 150 150
Cash and cash equivalents 732 1,415
Trade and other payables - (166)
Net exposure 882 1,399
Sensitivity analysis
As shown in the table above, the Company is primarily exposed to changes in
the GBP:USD exchange rate through its cash balance held in USD and trading
balances. The table below shows the impact in GBP on pre-tax profit/loss of a
10% increase/decrease in the GBP:USD exchange rate, holding all other
variables constant.
30 June 2022 31 December 2021
£000 £000
GBP:USD exchange rate increases 10% 66 116
GBP:USD exchange rate decreases 10% (80) (142)
Liquidity risk
The liquidity risk of each entity is managed centrally by the treasury
function. Each operation has a facility with treasury, the amount of the
facility being based on budgets. The budgets are set locally and agreed by the
Board annually in advance, enabling the cash requirements to be anticipated.
Where facilities of the Group need to be increased, approval must be sought
from the finance Director. Where the amount of the facility is above a certain
level, agreement of the Board is needed.
All surplus cash is held centrally to maximise the returns on deposits through
economies of scale. The type of cash instrument used, and its maturity date
will depend on the forecast cash requirements.
The table below analyses the Company's financial liabilities into relevant
maturity groupings based on their contractual maturities. The amounts
presented are the undiscounted cash flows.
Less than 6 months 6 to 12 months Between 1 and 2 years Between 2 and 5 years
£000 £000 £000 £000
30 June 2022
Trade and other payables 202 - - -
Total 202 - - -
31 December 2021
Trade and other payables 178 - - -
Total 178 - - -
Credit risk
The Company is mainly exposed to credit risk from credit sales. It is Company
policy, implemented locally, to assess the credit risk of new customers before
entering contracts. Such credit ratings are taken into account by local
business practices.
The Company does not enter into complex derivatives to manage credit risk,
although in certain isolated cases may take steps to mitigate such risks if it
is sufficiently concentrated.
18 FINANCIAL INSTRUMENTS (CONTINUED)
Market risk
As the Company invests in listed companies, the market risk will be that of
finding suitable investments for the Company to invest in and the returns that
those investments will yield given the markets in which investments are made.
Expected credit losses
Allowances are recognised as required under the IFRS 9 impairment model and
continue to be carried until there are indicators that there is no reasonable
expectation of recovery.
For trade and other receivables which do not contain a significant financing
component, the Company applies the simplified approach. This approach requires
the allowance for expected credit losses to be recognised at an amount equal
to lifetime expected credit losses. For other debt financial assets, the
Company applies the general approach to providing for expected credit losses
as prescribed by IFRS 9, which permits for the recognition of an allowance for
the estimated expected loss resulting from default in the subsequent 12-month
period. Exposure to credit loss is monitored on a continual basis and, where
material, the allowance for expected credit losses is adjusted to reflect the
risk of default during the lifetime of the financial asset should a
significant change in credit risk be identified.
Most the Company's financial assets are expected to have a low risk of
default. A review of the historical occurrence of credit losses indicates that
credit losses are insignificant due to the size of the Company's clients and
the nature of the services provided. The outlook for the oil and gas industry
is not expected to result in a significant change in the Company's exposure to
credit losses. As lifetime expected credit losses are not expected to be
significant the Company has opted not to adopt the practical expedient
available under IFRS 9 to utilise a provision matrix for the recognition of
lifetime expected credit losses on trade receivables. Allowances are
calculated on a case-by-case basis based on the credit risk applicable to
individual counterparties.
Exposure to credit risk is continually monitored to identify financial assets
which experience a significant change in credit risk. In assessing for
significant changes in credit risk the Company makes use of operational
simplifications permitted by IFRS 9. The Company considers a financial asset
to have low credit risk if the asset has a low risk of default; the
counterparty has a strong capacity to meet its contractual cash flow
obligations in the near term; and no adverse changes in economic or business
conditions have been identified which in the longer term may, but will not
necessarily, reduce the ability of the counterparty to fulfil its contractual
cash flow obligations. Where a financial asset becomes more than 30 days past
its due date additional procedures are performed to determine the reasons for
non-payment to identify if a change in the exposure to credit risk has
occurred.
Should a significant change in the exposure to credit risk be identified the
allowance for expected credit losses is increased to reflect the risk of
expected default in the lifetime of the financial asset. The Company
continually monitors for indications that a financial asset has become credit
impaired with an allowance for credit impairment recognised when the loss is
incurred. Where a financial asset becomes more than 90 days past its due date,
additional procedures are performed to determine the reasons for non-payment
to identify if the asset has become credit impaired.
The Company considers an asset to be credit impaired once there is evidence
that a loss has been incurred. In addition to recognising an allowance for
expected credit loss, the Company monitors for the occurrence of events that
have a detrimental impact on the recoverability of financial assets. Evidence
of credit impairment includes, but is not limited to, indications of
significant financial difficulty of the counterparty, a breach of contract or
failure to adhere to payment terms, bankruptcy or financial reorganisation of
a counterparty or the disappearance of an active market for the financial
asset. A financial asset is only written off when there is no reasonable
expectation of recovery.
A provision matrix can be used based on historical data of default rates
adjusted for a forward-looking estimate. The history of default rates needs to
be accessed in conjunction with the aging of the trade receivable balance. The
aging of a balance alone does not require a provision but can be used as a
structure to apply the rates calculated. The historical default rates are used
in accordance with forward looking information.
To determine the amount of ECL to be recognised in the financial statements,
Scirocco is using a provision matrix based on its historical observed default
rates which is adjusted for forward-looking estimates and establishes that ECL
should be calculated as:
None-past due 0.5% of carrying value
30 days past due 2% of carrying value
31-60 days past due 4% of carrying value
61-90 days past due 6% of carrying value
90 days - 3 years past due 10% of carrying value
Over 3 years past due 20% of carrying value
The simplified approach enables Scirocco to make an estimate of ECL as they
are unable to track the credit worthiness of customers.
18 FINANCIAL INSTRUMENTS (CONTINUED)
The total outstanding amount is £123k at 30 June 2022 (30 June 2021: £271k)
with no ECL recognised in the current period (2021: £54k). The Directors
believe that the debtor is still recoverable based on their knowledge of the
market in Tanzania and historical evidence of similar receivables being paid.
The Directors have recognised the asset as they believe they are still legally
entitled to receive it. The Tanzanian Government have a history of building up
receivables with other companies and billing them at a future date.
19 RELATED PARTY TRANSACTIONS
The Company had the following amounts outstanding from its investee companies
at the balance sheet date.
30 June 2022 31 December 2021
£000 £000
Helium One Ltd opening balance - 73
Conversion to share capital in Helium One Limited - (73)
Closing balance - -
The only transactions between the parent and its subsidiaries, which are
related parties, relate to a loan from parent to Scirocco (UK) limited, and
interest charged on this loan. Details of Director's remuneration, being key
personnel, are given in note 7.
The Company entered transactions with the following related parties who have
common directors during the current period:
30 June 2022 31 December 2021
£000 £000
Gneiss Energy Limited - provision of corporate finance advisory - common 135 606
director Jonathan Fitzpatrick. Resigned as director of Scirocco Energy plc
July 2021.
Quixote Advisors Ltd - provision of management services - common director Tom - (19)
Reynolds
During the period, the Company paid related party Gneiss Energy Limited fees
related to corporate financial advice and management services.
20 ULTIMATE CONTROLLING PARTY
In the opinion of the Directors there is no controlling party.
21 COMMITMENTS
As at 30 June 2022, the Company had no material commitments (31 December 2021:
£nil).
22 RETIREMENT BENEFIT SCHEME
The Company operates only the basic pension plan required under UK
legislation, contributions thereto during the period amounted to £nil (31
December 2021: nil).
23 CASH GENERATED BY OPERATIONS
30 June 2022 30 June 2021
£000 £000
Profit/(loss) for the period from continuing operations (542) 1,835
Profit/(loss) for the period for discontinuing operations 1,314 (328)
Adjustments for:
Finance costs - 1
Exchange movement - 6
Loss on disposal of investments - 15
Revaluation of investments to mark-to-market value (81) (2,910)
(Profit)/loss on fair value revaluation of available for sale assets (1,314) 337
Interest accrued on loan to related party (65) -
Equity settled share-based payment expense 119 298
Movements in working capital:
(Increase)/decrease in trade and other receivables (35) 456
Increase in trade and other payables 24 198
Cash absorbed by operations (580) (92)
24 EVENTS AFTER THE REPORTING DATE
Sale of 25% Interest in Ruvuma asset
On 12 July 2022 the Company received formal notice from ARA Petroleum Tanzania
Limited ("APT"), the current 50% interest holder and operator of Ruvuma,
that it was exercising its pre-emption rights with regards to Scirocco's
proposed divestment of the Ruvuma asset ("Ruvuma") to Wentworth Resources plc
("Wentworth") in addition to a separate letter received from the Tanzania
Petroleum Development Corporation ("TPDC") stating that it is considering
exercising its statutory rights of first refusal in relation to the Ruvuma
pursuant to Section 86(5) of the Petroleum Act 2015. On 19 August 2022, the
Company received written confirmation from the Tanzania Petroleum Development
Corporation ("TPDC") that it was not exercising its statutory right of first
refusal with respect to the Company's divestment of its 25% interest in the
Ruvuma asset.
On 31 August 2022, APT and Scirocco entered into binding agreements which,
inter-alia, provides access to cash call cover through the previously
announced loan facility (with Wentworth Resources plc) and 1st drawdown notice
for $1.614 million. Other than for adjustments with respect to conditions
precedent then fulfilled, APT entered into all of the same agreements (and on
the same terms) as Wentworth Resources plc (as detailed in the Company's
announcement of 13 June 2022).
Requisitioned EGM
On 2 September 2022, the Company received a letter from a group of
shareholders of the Company requesting the Company to convene a general
meeting of the Company's shareholders pursuant to section 303 of the Companies
Act 2006 (the "Act"). Pursuant to this request on 15 September 2022, the
Company published a Circular to Shareholders, along with accompanying Notice
of General Meeting and Form of Proxy.
Corallian Sale Announcement
On 14 September 2022, the Company noted the announcement by Reabold Resources
plc regarding the conditional sale of its investee company, Corallian Energy
Limited in which Scirocco owns 83,333 shares following a subscription by
Scirocco in 2018 at a price of £1.50 per share. A price of up to £3.20 per
share will be paid to Corallian shareholders as a combination of initial cash
plus contingent payments offering a profitable exit with up to £267k of
proceeds net to Scirocco (based on estimated £3.20 per share).
Investment Facility Part Settlement
On 27 September 2022, the Company announced that the subscriber (the
"Subscriber") under the share subscription deed governing the investment
facility ("Investment Facility"), the details of which were announced to the
market on 29 June 2020, had issued the Company a settlement notice
for US$100,000. Accordingly, the Company issued and allotted 44,923,630
ordinary shares, with a deemed price of £0.0020 ("Settlement Shares") to
the Subscriber. The Subscriber's investment was made as a prepayment for
ordinary shares in the Company, the number (and price) of which were to be
determined at the time the Subscriber elected to receive such shares,
according to the average of five daily volume-weighted average prices during
the twenty trading days prior to the date of such election.
At the time the Company sent out its Notice of its 2022 AGM held on 3 August,
and continuing through the actual AGM, it was not aware it would be able to
rely on the authority granted at the 2020 AGM, hence why Resolution 5 was
proposed. Following the defeat of Resolution 5, the Company therefore
believed, at that time, and as stated in the Result of AGM RNS on 3 August,
that it was in default of the Prolific Basins facility.
Subsequent to the 2022 AGM, the Company reviewed prior authorities as part of
a discussion with Prolific Basins regarding settlement of the facility. At the
2020 AGM, approval was taken to allot shares on a non-pre-emptive basis in
favour of Prolific and the resolution included the wording as follows: "…
save that the Company may make an offer or agreement before the expiry of the
authority which would or might require shares to be allotted or Rights to be
granted after expiry of the authority and the Directors of the Company may
allot shares and grant Rights in pursuance of that offer or agreement as if
the authority had not expired."
This is a standard formulation in non-pre-emptive authorities (derived from
s.570(4) of the Companies Act 2006) to allot to cover agreements reached prior
to the expiry of that authority to allow allotments to be made after the
expiration of such authority.
Therefore the Company considers that the £1m authority taken at the 2020 AGM
can be used to allot shares to Prolific on a continuing basis given there is
sufficient headroom remaining thereunder. Any subsequent authorities requested
(such as at the 2022 AGM), part of an assessment of risk about potential
headroom, are not necessary given the share price and amount remaining under
the 2020 authority suffices to allot shares to Prolific.
The Company does not have a general authority to allot on a non-pre-emptive
basis given this has expired and that resolution did not pass at the 2022 AGM.
It is only the ability to allot shares to Prolific that continues pursuant to
the authority described above
25 A COPY OF THIS INTERIM STATEMENT IS AVAILABLE ON THE COMPANY'S
WEBSITE: www.sciroccoenergy.com. (http://www.sciroccoenergy.com.)
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