Final Results for the Year Ended 31 December 2022
23/05/2023 07:00
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RNS Number : 2614A Baron Oil PLC 23 May 2023
23 May 2022
Baron Oil Plc
("Baron Oil", "Baron", the "Company", or the "Group")
Final Results for the Year Ended 31 December 2022
Baron Oil (AIM: BOIL), the AIM-quoted oil and gas exploration company, is
pleased to announce its audited financial results for the year ended 31
December 2022.
Operational Highlights (including post period)
• During the year, both the Chuditch PSC and Dunrobin projects, were subject to
intensive technical work aimed at maturing the assets to "drill ready" status.
• Delivery of the reprocessed Chuditch 3D seismic data and its interpretation
significantly improved the subsurface image, enabling for the first time, the
delineation of the Chuditch discovery and its adjacent prospects.
• The key Dunrobin technical work components of the Phase A commitments - those
of seismic reprocessing plus geochemical studies - were delivered during
second half of 2022 on time and budget. Detailed seismic attribute analysis,
designed to investigate candidate direct hydrocarbon indicators, followed in
early 2023.
• In early 2023 two Competent Person's Reports ("CPRs") were published which
validate both projects to the industry standard SPE PRMS Contingent and/or
Prospective Resource estimates.
• Throughout the period the Company kept updated Virtual Datarooms for the
benefit of potentially interested funding partners for the next phase of both
Chuditch and P2478 projects, a process which continues.
Financial Highlights
• Two oversubscribed funding events in 2022, as a result we have a well-funded
balance sheet covering our current activities and commitments.
• Cash Reserves at 31 December 2021 were £5,807,000 (31 December 2021:
£1,650,000).
• Exploration and evaluation expenditure of £213,000 (2021: £218,000).
• Administration expenses for the year were £1,191,000 (2021: £1,321,000), an
overall reduction on the prior year of £130,000.
• Loss after taxation of £1,387,000 (2021: £1,127,000 loss).
Commenting on the results, John Wakefield, Non-executive Chairman, said: "2022
was a year of considerable progress for Baron. Our overriding task was to
progress our two material projects, Chuditch and Dunrobin, to their key
evaluation points which was achieved with the publication of CPRs on both
projects in early 2023. The considerable and potentially transformative value
for shareholders in the Company's assets offshore Timor-Leste and in the UK is
now clearly defined and our efforts are now focused on the drilling decisions
to be made in 2023 for a Chuditch-1 appraisal well and a Dunrobin West
exploration well.
"Both assets continue to attract attention via our active farmout campaigns
and presentations at relevant industry events. In particular, there are a
number of ongoing discussions with third parties regarding participation in
the Chuditch appraisal well and future activities. We are grateful for the
support of our investors through the two funding events which took place
during the year and as a result, we have a well-funded balance sheet covering
our current activities and commitments.
"Baron is highly encouraged by the developments being made and I look forward
to reporting on our further progress in due course."
Posting of Annual Report and Notice of AGM
The Company's Annual Report and Financial Statements, for the year ended 31
December 2022, will be available for download from the Company's website
(https://www.baronoilplc.com/) later today and will be despatched by post
shortly to those shareholders that have requested a hard copy.
The Company will hold its Annual General Meeting at 11 a.m. BST on 29 June
2022 at 38-43 Lincoln's Inn Fields, London WC2A 3PE and the Notice of Annual
General Meeting to that effect will be sent to shareholders shortly and will
be available on the Company's website.
Online Investor Q&A
Baron intends to hold an investor Q&A session for existing and potential
new shareholders around mid-June 2023. Further details of the date and time
will be released in due course.
For further information, please contact:
Baron Oil Plc +44 (0) 20 7117 2849
Andy Yeo, Chief Executive
Allenby Capital Limited +44 (0) 20 3328 5656
Nominated Adviser and Broker
Alex Brearley, Nick Harriss, George Payne (Corporate Finance)
Kelly Gardiner (Sales and Corporate Broking)
IFC Advisory Limited +44 (0) 20 3934 6630
Financial PR and IR baronoil@investor-focus.co.uk
Tim Metcalfe, Florence Chandler
Qualified Person's Statement
Pursuant to the requirements of the AIM Rules - Note for Mining and Oil and
Gas Companies, the technical information and resource reporting contained in
this announcement has been reviewed by Jon Ford BSc, Fellow of the Geological
Society, Technical Director of the Company. Mr Ford has more than 40 years'
experience as a petroleum geoscientist. He has compiled, read and approved the
technical disclosure in this regulatory announcement and indicated where it
does not comply with the Society of Petroleum Engineers' standard.
CHAIRMAN'S STATEMENT & OPERATIONS REPORT
Financial Review
The net result for the year was a loss before taxation of £1,387,000, which
compares to a loss of £1,127,000 for the preceding financial year; the loss
after taxation attributable to Baron Oil shareholders was £1,387,000,
compared to a loss of £1,127,000 in the preceding year, representing a loss
of 0.01p per share (2021: loss of 0.012p). It should be noted that the results
for 2021 included a one-off non-cash gain on the deemed disposal of an
associated undertaking amounting to £302,000.
Turnover for the year was £nil (2021: £nil), there being no sales activity
during the period.
Exploration and evaluation expenditure incurred included in the Income
Statement amounts to £213,000 (2021: £218,000). The Impairment provision in
respect of Peru Block XXI was released and offset against the write off of the
accumulated cost on the project. The Directors judged that no other
exploration assets required impairment.
Administration expenses for the year were £1,191,000 (2021: £1,321,000), an
overall reduction on the preceding year of £130,000. This is made up of a
number of pluses and minuses. As anticipated last year, administration costs
arising in SundaGas (Timor-Leste Sahul) Pte. Ltd. ("TLS") have increased from
£285,000 previously to £441,000 this year as we moved to a full 12 month
reporting period at the Group level and the Dili office in Timor-Leste is now
fully operational. There were also non-recurring support costs of £65,000 in
Peru. Directors and UK staff salaries and related costs are lower than 2021 by
£37,000 with the earlier year including a severance payment to a former
director. Finally, there have been no share-based payment charges this year
(2021: £286,000).
Throughout 2022, the Pound Sterling weakened considerably against the US
Dollar, with an opening rate of $1.35 and a closing rate of $1.21. This has
given rise to a gain on holdings of US Dollar denominated balances of £43,000
(2021: gain of £22,000).
At the end of the financial year, cash reserves of the Group had increased to
£5,807,000 from a level at the preceding year end of £1,650,000. The
proceeds from the issue of new shares in the year amounting to £7,131,000
gross (£6,619,000 net of costs) bolstered the Company's cash reserves. The
Group's investment in exploration and evaluation assets in the UK and
Timor-Leste amounted to £806,000 in the period, and £602,000 was repaid to
SundaGas Pte Ltd to settle the outstanding amount of the remaining share of
the Timor-Leste Bank Guarantee resulting from the Company's acquisition of the
remaining interest in TLS, as announced on 15 November 2022. In the case of
the guarantee bond held in Peru, this was released in full on the
relinquishment of the Block XXI licence resulting in a cash inflow of
£128,000. After taking into account these items, operating cash outflow
amounted to £1,182,000.
The Group continues to take a conservative view of its asset impairment
policy, giving it a Statement of Financial Position that consists of
significant net current assets and what the Board considers to be a realistic
value for its exploration assets. The Board will continue to take a prudent
approach in entering into new capital expenditures beyond those expected to be
committed to existing ventures.
Report On Operations
Introduction
During 2022 both projects were subject to intensive technical work aimed at
maturing the assets to "drill ready" status, which culminated in early 2023
with the publication of two Competent Person's Reports ("CPRs") which validate
the projects to the industry standard SPE PRMS Contingent and/or Prospective
Resource estimates.
Southeast Asia: Timor-Leste TL-SO-19-16 PSC ("Chuditch PSC" or "PSC") (Baron
75% interest)
Background
The Chuditch PSC is located approximately 185 kilometres south of Timor-Leste,
100 kilometres east of the producing Bayu-Undan field, 50 kilometres south of
the potential Greater Sunrise development and covers approximately 3,571 km(2)
in water depths of 50-100 metres. The Chuditch-1 discovery well, drilled by
Shell in 1998 in 64 metres water depth, encountered a 25 metre gas column in
Jurassic Plover Formation sandstone reservoirs at a depth of around 3,000
metres on the flank of a large faulted structure. The discovery and
neighbouring prospects are largely covered by a 3D seismic survey acquired in
2012.
Baron holds a 75% working interest and operates the PSC through its wholly
owned subsidiary company SundaGas Banda Unipessoal Lda. ("Banda"), with the
remaining 25% held by TIMOR GAP Chuditch Unipessoal Lda. ("TIMOR GAP"), a
subsidiary of the state-owned national oil company, whose share of PSC
expenditure is carried until first production.
The technical work programme obligations in the first two years of the initial
three-year term of the PSC include the reprocessing of legacy seismic data,
aimed at addressing reservoir imaging issues caused by sea-bed topography and
shallow geological features, and for which a US$1 million Bank Guarantee is in
place. The commitment within the PSC for contract year 3 is for the drilling
of one appraisal well to the Plover Formation, subject to seismic reprocessing
supporting the presence of a significant structure associated with the
Chuditch discovery.
2022 and subsequent activities
The most significant component of the technical work programme in 2022 was the
delivery of the reprocessed 3D seismic data and its interpretation. The
reprocessing was performed to a high standard using the most modern Pre-Stack
Depth Migration ("PSDM") techniques. We have significantly improved the
subsurface image, enabling for the first time, the delineation of the Chuditch
discovery and its adjacent prospects. This technical evaluation was enhanced
through the completion of a number of further geological and engineering
studies.
In October 2022, Baron announced its preliminary evaluation arising from the
reprocessed data. The resultant mapping indicated a significant increase in
management's aggregate Gas-in-Place and Recoverable Gas Resource estimates for
the Chuditch PSC. In particular, it indicated a greater concentration of
resources into the Chuditch-1 discovery in a simplified and robust structure.
The understanding of the adjacent prospectivity was also matured, with three
low-risk exploration targets confirmed on the Chuditch trend.
Consultancy group ERC Equipoise Ltd ("ERCE") was engaged to prepare a CPR to
provide an independent assessment of the Chuditch resource to a SPE PRMS
compliant standard. The CPR was released on 28 February 2023. For the
Chuditch-1 discovery, ERCE assessed gross Pmean Contingent Resources of
1.16Tcf of gas. The recognition of the resources as being Contingent, rather
than Prospective, is a major milestone and sets the foundation for the next
stage of the project cycle. This phase typically includes pre-development
feasibility studies and preliminary work on gas sales arrangements alongside
the drilling of an appraisal well. Baron believes that the Chuditch-1
Contingent Resources are potentially sufficiently large to be economically
viable to be developed standalone or in parallel with other developments in
the region.
In addition, aggregated gross Pmean Prospective Resources attributable to the
licence according to the CPR amounted to 1,562 Bscf gas across three
prospects, Chuditch SW, Chuditch NE and Quokka. Geological Chances of Success
("GCOS") for these prospects range from 52% to 26%, providing substantial
follow on, low risk exploration potential to any Chuditch-1 development. It is
notable that Baron's in-house probabilistic estimates of aggregated gross
Prospective gas Resources for these prospects, at 2,128 Bscf of gas, are
higher that ERCE's estimates. This arises mainly through the Company's
preferred use of the latest reprocessed seismic data velocity model to define
the extent of the prospects.
Detailed tabulations of the resources assessed within the Chuditch PSC and
further commentary can be accessed via the Company's RNS announcement of 28
February 2023 and the full CPR document which is available on Baron's
corporate website (www.baronoilplc.com).
Also in October 2022, we announced a six-month extension to Contract Year Two
of the Chuditch PSC granted by the relevant Timor-Leste national authority,
Autoridade Nacional do Petróleo e Minerais ("ANPM"). The PSC Contract now has
an expiry date of 18 June 2023.
On entry into Contract Year 3 of the PSC, the commitment will be to drill an
appraisal well within a 12-month period. Such an appraisal well would likely
be drilled to a total depth of around 3,000 metres and would include a
production test. Recent geopolitical events and post-pandemic supply chain
issues have led to considerable disruption in rig availability and drilling
services globally such that a drill deadline of June 2024 could prove
challenging.
There continues to be an excellent working relationship between the Company,
the Government Ministry of Petroleum and Mineral Resources ("MPM"), Autoridade
Nacional do Petróleo e Minerais ("ANPM"), the Government regulatory authority
of petroleum and mining, and TIMOR GAP. We meet regularly with all of these
bodies and provide detailed updates around our activities, plans and timelines
on the PSC. The Company appreciates the support that we receive from these
various state entities and will continue to work on maintaining these close
relationships.
As part of our in-country activities, including the efforts of our local Dili
offices, we are also undertaking various initiatives to develop the
capabilities of the Timorese geological community, through relationships with
local universities, welcoming student interns and sponsoring a new local
chapter of the Society of Petroleum Engineers.
More generally in Timor-Leste, there was increased E&P activity during the
year as Timor Resources Pty Ltd commenced an onshore drilling campaign, the
first in 50 years. In addition, the Greater Sunrise development project
continued to move towards development with negotiations between its many
stakeholders. In April successful bidders of five blocks in the Second
Licencing Round were announced by the Timor-Leste authorities, including Block
P, which sits between the Chuditch PSC and Greater Sunrise, to a subsidiary of
the Italian major ENI.
Throughout the period the Company hosted and kept updated a Virtual Dataroom
for the benefit of potentially interested funding partners for the next phase
of the Chuditch project, a process which continues.
United Kingdom Offshore Licence P2478 ("Dunrobin") (Baron 32% interest)
Background
Innovate Licence P2478, awarded in September 2019, is currently held by a
joint operation comprising Reabold North Sea Limited ("Reabold", Licence
Administrator, interest 36%), Baron (32%), and Upland Resources (UK Onshore)
Limited (32%). The licence covers blocks 12/27c, 17/5, 18/1 and 18/2 in the
Inner Moray Firth area of the North Sea and contains the Dunrobin and Golspie
prospects, in a province where regional and local petroleum systems are
considered by the partners to be proven. Target depths are as shallow as 660
metres subsea and water depths are less than 100 metres.
The work commitments on the Licence are to undertake reprocessing of legacy 3D
and 2D seismic data and perform other studies, in order to better understand
the subsurface risks, reduce the range of volumetric uncertainty, as well as
providing drilling location candidates ahead of making a decision whether to
proceed beyond the end of the Phase A evaluation stage of the licence on 14
July 2023.
2022 and subsequent activities
The key technical work components of the Phase A commitments - those of
seismic reprocessing plus geochemical studies - were delivered during second
half of 2022 on time and budget. Detailed seismic attribute analysis, designed
to investigate candidate direct hydrocarbon indicators, followed in early
2023. A thorough revised evaluation of the prospectivity of P2478 is now
finalised, with the UK's North Sea Transition Authority ("NSTA") recording
that the work programme was fully complete during March 2023. Baron maintained
direct technical involvement during 2022.
Towards the end of 2022, consultancy group RPS was engaged by the joint
operation to prepare a CPR to provide an independent validation of resource
estimates to a SPE PRMS compliant standard. The CPR was announced and
published on Baron's website on 16 February 2023.
The CPR provided independent confirmation of the Company's belief that the
western part of the Dunrobin complex had matured into a drillable prospect
where a relatively low-cost exploration well can target more than 100 MMbbl of
gross Pmean Prospective Resources with low geological risk. The key points
from the CPR can be summarised as follows:
· 201mmboe gross unrisked Pmean Prospective Resources on licence when
aggregated;
· the Dunrobin West prospect ("Dunrobin West") estimated to contain 119mmboe
gross unrisked Pmean Prospective Resources aggregated across the Jurassic and
Triassic stacked targets;
· 34% Geological Probability of Success (GPoS) at the Dunrobin West Jurassic
primary target, with an estimated 71mmbbl (gross) of Pmean Prospective
Resources.
The CPR estimates indicate that Baron's farm-up arrangement of August 2021
increased the Company's share of aggregate net Pmean Prospective Resources on
the Licence from 30mmboe to 64mmboe at a capped cost to Baron of £160,000.
Detailed tabulations of the resources assessed within the P2478 licence, and
further commentary, can be accessed via the Company's RNS announcement of 16
February 2023, along with the full CPR document which is available on Baron's
corporate website (www.baronoilplc.com).
During the first quarter of 2023, the Licence Administrator, on behalf of the
joint operation, hosted a Virtual Dataroom in order to attract funding for an
exploration well on the Dunrobin West prospect, a process which continues.
Current gross cost estimates for an exploration well to be drilled to a total
depth of approximately 700 metres are approximately US$10 million on a dry
hole basis.
Block XXI, Peru
In April 2022, Baron requested the relinquishment of the legacy Licence Block
XXI in Peru. The Licence had been largely under Force Majeure for a variety of
reasons since 2017 and the Company had been frustrated in its attempts to
access the area in order to carry out operations. The Bank Guarantee of
US$160,000 was released in full to Baron in June. We continue to work with the
Peruvian authorities to establish and file an Abandonment Plan. Ongoing costs
are minimal and we hope to complete our withdrawal from Peru by the end of
2023.
New Ventures
In line with our strategy, the Company continued to screen early stage
opportunities. In this context, in January 2023 the Company announced that, as
a joint venture non-operating partner, it had submitted an application in the
UK's 33rd Offshore Licensing Round.
Further potential new ventures remain under consideration in both our existing
areas of activity and elsewhere.
Corporate
In April 2022, the Company completed an oversubscribed Placing and
Subscription of new ordinary shares at 0.06p to raise £1.65 million (gross).
The monies were to be applied to support the Chuditch PSC (Timor-Leste) and
P2478 (UK) projects as they moved towards their key milestones.
In November 2022, the Company completed an oversubscribed Placing and
Subscription and Rex Retail Offer of new ordinary shares at 0.12p, double the
funding price achieved in April, to raise £5.36 million (gross). These monies
were predominantly raised to support workstreams underpinning the ongoing
farm-out discussions and to provide working capital into 2023.
The Company was pleased to announce on 15 November 2022 the appointment of
Keith Bush, the former Chief Executive Officer of Cabot Energy Plc (previously
known as Northern Petroleum Plc), as an independent non-executive Director.
Keith has a petroleum engineering background, with significant experience in
the oil and gas sector. He is a member of the Audit Committee and Chairman of
the Remuneration Committee.
Conclusions
I am pleased to report that Baron's overriding task during 2022 - to progress
our two material projects, Chuditch and Dunrobin, to their key evaluation
points - was achieved, as signaled by the publication of CPRs on both assets
in early 2023. This represents the culmination of large volumes of detailed,
diligent and high quality technical work carried out by Baron's team of global
consultants, employees and joint operation partners.
The considerable and potentially transformative value for shareholders in the
Company's assets offshore Timor-Leste and UK is now clearly defined. We are
now directing our efforts onto the drilling decisions to be made in 2023 for a
Chuditch-1 appraisal well and a Dunrobin West exploration well.
In Timor-Leste, the independent assessment of approximately 1.1Tcf of gross
Pmean Contingent Resources for the Chuditch-1 discovery underpins the
viability of the project. We are updating the development and gas export
option studies and commencing environmental baseline studies in preparation
for a drilling campaign. The Board currently believes that a single appraisal
well may be sufficient to determine commerciality without the need for an
immediate follow-on exploration campaign.
In the UK an exploration well on Dunrobin West will be designed to test gross
Pmean Prospective Resources of 71mmbbl in the primary, regionally proven,
Jurassic target, and 45mmbbl in the vertically underlying secondary Triassic
target. Due to the shallow target depths, gross drilling costs to test such a
substantial volume are likely to be relatively modest. Success at Dunrobin
West would de-risk the potential follow up targets Dunrobin Central & East
plus Golspie, which are directly analogous prospects.
Both assets continue to attract attention via our active farmout campaigns and
presentations at relevant industry events. In particular, there are a number
of ongoing discussions with third parties regarding participation in the
Chuditch appraisal well and future activities. We look forward to updating
shareholders on progress as and when appropriate.
Our search for new venture opportunities to enhance and complement the
existing portfolio resulted in an application as a non-operating partner for a
licence in the offshore UK 33(rd) Round of Licensing and we continue to
actively pursue other material new business opportunities.
We are grateful for the support of our investors through the two funding
events in 2022. As a result we have a well-funded balance sheet covering our
current activities and commitments. As at 31 December 2022 we had cash
reserves of £5.8 million (2021: £1.65 million). The addition of Mr Keith
Bush as an independent non-executive Director in 2022 also strengthens and
broadens the Board's talents as we enter a decisive phase of operations.
John Wakefield
Non-executive Chairman
22 May 2023
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2022
Notes 2022 2021
£'000 £'000
Revenue - -
Cost of sales - -
Gross profit - -
Exploration and evaluation expenditure (213) (218)
Intangible asset impairment 9 - (17)
Property, plant and equipment impairment and depreciation 8 (33) (11)
Receivables and inventory impairment 3 - (7)
Administration expenses (1,191) (1,321)
Gain on exchange 3 43 22
Other operating income 3 - 89
Operating loss 3 (1,394) (1,463)
Income from associated undertaking 11 - 29
Gain on disposal of associated undertaking - 302
Loss before interest and taxation (1,394) (1,132)
Finance cost 5 (5) (2)
Finance income 5 12 7
Loss on ordinary activities
before taxation (1,387) (1,127)
Income tax expense 6 - -
Loss on ordinary activities
after taxation (1,387) (1,127)
Dividends - -
Loss for the year (1,387) (1,127)
Loss on ordinary activities
after taxation is attributable to:
Equity shareholders (1,387) (1,127)
Non-controlling interests - -
(1,387) (1,127)
Earnings per ordinary share - continuing operations 7
Basic (0.010p) (0.012p)
Diluted (0.010p) (0.012p)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER
2022
Restated
2022 2021
£'000 £'000
Loss on ordinary activities after taxation attributable to the parent (1,387) (1,127)
Other comprehensive income: items which may subsequently be reclassified to
profit or loss:
Exchange difference on translating foreign operations 174 33
Total comprehensive loss for the year (1,213) (1,094)
Total comprehensive loss attributable to
Owners of the parent (1,213) (1,094)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2022 Restated
Notes 2022 2021
£'000 £'000
Assets
Non current assets
Property plant and equipment
--- oil and gas assets 8 - -
--- others 8 78 34
Intangible fixed assets 9 3,696 2,736
Goodwill 10 - -
Associated undertaking 11 - -
3,774 2,770
Current assets
Trade and other receivables 13 101 54
Performance bond guarantee deposit 14 827 859
Cash and cash equivalents 15 5,807 1,650
6,735 2,563
Total assets 10,509 5,333
Equity and liabilities
Capital and reserves attributable to owners of the parent
Share capital 18 4,730 2,896
Share premium account 19 38,846 34,061
Share option reserve 19 332 388
Foreign exchange translation reserve 19 1,735 1,561
Retained earnings 19 (35,555) (34,224)
Total equity 10,088 4,682
Current liabilities
Trade and other payables 16 377 620
Taxes payable 16 14 12
391 632
Non-current liabilities
Lease finance 17 30 19
Total equity and liabilities 10,509 5,333
The financial statements were approved and authorised for issue by the Board
of Directors on 22 May 2023 and were signed on its behalf by:
John Wakefield Andrew Yeo
Director Director
Company number: 05098776
COMPANY STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2022
Notes 2022 2021
£'000 £'000
Assets
Non current assets
Property plant and equipment
--- oil and gas assets - -
--- others 8 21 33
Intangible fixed assets 9 159 68
Investments 12 5,002 3,029
5,182 3,130
Current assets
Trade and other receivables 13 61 46
Cash and cash equivalents 15 5,625 1,527
5,686 1,573
Total assets 10,868 4,703
Equity and liabilities
Capital and reserves attributable to owners of the parent
Share capital 18 4,730 2,896
Share premium account 19 38,846 34,061
Share option reserve 19 332 388
Foreign exchange translation reserve 19 (163) (163)
Retained earnings 19 (33,085) (32,586)
Total equity 10,660 4,596
Current liabilities
Trade and other payables 16 185 76
Taxes payable 16 14 12
199 88
Non-current liabilities
Lease finance 17 9 19
Total equity and liabilities 10,868 4,703
As permitted by section 408 of the Companies Act 2006, the Parent Company's
income statement has not been included in these financial statements. The loss
of the Parent Company for the year was £555,000 (2021: loss of £1,096,000).
The financial statements were approved and authorised for issue by the Board
of Directors on 22 May 2023 and were signed on its behalf by:
John Wakefield Andrew Yeo
Director Director
Company number: 05098776
CONSOLIDATED AND COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
Foreign
Share Share Retained Share option exchange Total
capital premium earnings reserve translation equity
Group £'000 £'000 £'000 £'000 £'000 £'000
As at 1 January 2021 1,107 32,156 (33,130) 135 1,528 1,796
Shares issued (net of transaction costs) 1,789 1,905 - - - 3,694
Transactions with owners 1,789 1,905 - - - 3,694
Loss for the year attributable to equity shareholders - - (1,127) - - (1,127)
Share based payments - - - 286 - 286
Share option reserve released - - 33 (33) - -
Foreign exchange translation adjustments - - - - 33 33
Total comprehensive income for the period - - (1,094) 253 33 (808)
As at 1 January 2022 2,896 34,061 (34,224) 388 1,561 4,682
Shares issued (net of transaction costs) 1,834 4,785 - - - 6,619
Transactions with owners 1,834 4,785 - - - 6,619
(Loss) for the year attributable to equity shareholders - - (1,387) - - (1,387)
Share option reserve released - - 56 (56) - -
Foreign exchange translation adjustments - - - - 174 174
Total comprehensive income for the period - - (1,331) (56) 174 (1,213)
As at 31 December 2022 4,730 38,846 (35,555) 332 1,735 10,088
CONSOLIDATED AND COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022 - continued
Share Share Retained Share option Foreign Total
exchange
capital premium earnings reserve translation equity
£'000 £'000 £'000 £'000 £'000 £'000
Company
As at 1 January 2021 1,107 32,156 (31,523) 135 (163) 1,712
Shares issued (net of transaction costs) 1,789 1,905 - - - 3,694
Transactions with owners 1,789 1,905 - - - 3,694
Profit for the year - - (1,096) - - (1,096)
Share based payments - - - 286 - 286
Share option reserve released - - 33 (33) - -
Total comprehensive income for the period - - (1,063) 253 - (810)
As at 1 January 2022 2,896 34,061 (32,586) 388 (163) 4,596
Shares issued (net of transaction costs) 1,834 4,785 - - - 6,619
Transactions with owners 1,834 4,785 - - - 6,619
Loss for the year - - (555) - - (555)
Share option reserve released - - 56 (56) - -
Total comprehensive income for the period - - (499) (56) - (555)
As at 31 December 2022 4,730 38,846 (33,085) 332 (163) 10,660
Share capital is the amount subscribed for shares at nominal value.
Share premium represents the excess of the amount subscribed for share capital
over the nominal value of those shares net of share issue expenses.
Retained earnings represents the cumulative loss of the Group attributable to
equity shareholders.
Foreign exchange translation occurs on consolidation of the translation of the
subsidiaries balance sheets at the closing rate of exchange and their income
statements at the average rate.
CONSOLIDATED AND COMPANY STATEMENT OF CASH FLOWS FOR THE
YEAR ENDED 31 DECEMBER 2022
Restated
Group Company Group Company
2022 2022 2021 2021
£'000 £'000 £'000 £'000
Operating activities (1,750) (582) (1,179) (681)
Investing activities
Return from investment and servicing of finance 12 11 7 7
Advances to subsidiary and associated undertakings - (1,848) 323 (707)
Performance bond guarantee deposit returned 128 - - -
Additions to exploration and evaluation assets (806) (91) (1,356) (50)
Acquisition of tangible assets (17) - (1) (1)
Investment in associated undertaking - - (93) (1,909)
(683) (1,928) (1,120) (2,660)
Financing activities
Net proceeds from issue of share capital 6,619 6,619 2,768 3,694
Lease financing (29) (11) (9) (9)
6,590 6,608 2,759 3,685
Net cash inflow 4,157 4,098 460 344
Cash and cash equivalents at the beginning of the year 1,650 1,527 1,190 1,183
Cash and cash equivalents at the end of the year 5,807 5,625 1,650 1,527
Note to the Consolidated and Company Statement of Cash Flow
Restated
Group Company Group Company
2022 2022 2021 2021
£'000 £'000 £'000 £'000
Operating activities
Loss for the year attributable to controlling interests (1,387) (555) (1,127) (1,096)
Depreciation, amortisation and impairment charges 33 55 28 135
Share based payments - - 286 286
Finance income shown as an investing activity (12) (11) (7) (7)
Interest on lease liability 4 1 - -
Gain on disposal of associated undertaking - - (163) -
Income from associated undertaking - - (29) -
Foreign exchange translation (74) (205) 19 (19)
Operating cash outflows before movements in working capital (1,436) (715) (993) (701)
(Increase)/decrease (47) 22 (743) 6
in receivables
(Decrease)/increase in payables (267) 111 557 14
Net cash outflows from operating activities (1,750) (582) (1,179) (681)
NOTES TO THE FINANCIAL STATEMENTS
General Information
Baron Oil Plc is a company incorporated in England and Wales and quoted on the
AIM market of the London Stock Exchange. The address of the registered office
is disclosed on page 2 of the financial statements. The principal activity of
the Group is described in the Strategic Report in section 4 on page 9.
(1) Significant accounting policies
The principal accounting policies applied in the
preparation of these consolidated financial statements are set out below.
These policies have been consistently applied to all the periods presented,
unless otherwise stated.
Going concern basis
The Directors have prepared a cash flow forecast covering a period extending
beyond 12 months from the date of these financial statements which contains
certain assumptions about the development and strategy of the business. The
Directors are aware of the risks and uncertainties facing the business but the
assumptions used are the Directors' best estimate of its future development.
After considering the forecasts and the risks, the Directors have a reasonable
expectation that the Group has adequate resources to continue in operational
existence for the foreseeable future. For these reasons, they continue to
adopt the going concern basis of accounting in preparing the annual financial
statements.
The financial statements do not include any adjustments that would result if
the Group was unable to continue as a going concern.
Basis of preparation
The financial statements have been prepared in accordance with UK adopted
International Accounting Standards and IFRIC interpretations issued by the
International Accounting Standards Board (IASB) and with those parts of the
Companies Act 2006 applicable to companies reporting under IFRS. The financial
statements have been prepared under the historical cost convention. The
principal accounting policies adopted are set out below.
Changes in accounting policies and disclosures
Adoption of new and revised standards
During the year the Group adopted the following IFRS amendments and standards
for the first time:
- Onerous contracts (Amendments to IAS 37)
- Property, plant and equipment (Amendments to IAS 16)
- Annual Improvements 2018-2020 cycle (IFRS 1, IFRS 9, IFRS 16 and
IAS 41), and
- References to Conceptual Framework (Amendments to IFRS 3)
Details of the impact of these standards on the Group are as follows:
Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37)
IAS 37 defines an onerous contract as a contract in which the unavoidable
costs (costs that the Group has committed to as part of the contract) of
meeting the obligations under the contract exceed the economic benefits
expected to be received under it. The amendments to IAS 37.68A clarify that
the costs relating directly to the contract consist of both:
• The incremental costs of fulfilling that contract- e.g. direct labour and
material; and
• an allocation of other costs that relate directly to fulfilling contracts:
e.g. allocation of depreciation charge on property, plant and equipment used
in fulfilling the contract.
The Board has assessed that under the revised definition the Group held no
onerous contracts in the current or comparative periods.
Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS
16)
The amendment to IAS 16 prohibits an entity from deducting from the cost of an
item of PP&E any proceeds received from selling items produced while the
entity is preparing the asset for its intended use (for example, the proceeds
from selling samples produced during the testing phase of a manufacturing
facility after it is being constructed but before start of commercial
production). The proceeds from selling such samples, together with the costs
of producing them, are now recognised in profit or loss. The Board considers
that there is no material impact of this amendment.
Annual Improvements to IFRS Standards 2018-2020 (Amendments to IFRS 1, IFRS
9, IFRS 16 & IAS 41) .
• IFRS 1: Subsidiary as a First-time Adopter (FTA)
• IFRS 9: Fees in the '10 per cent' Test for Derecognition of Financial
liabilities
• IAS 41: Taxation in Fair Value Measurements
The Board considers that there is no material impact of this amendment.
References to Conceptual Framework (Amendments to IFRS 3)
In May 2020, the IASB issued amendments to IFRS 3, which update a reference to
the Conceptual Framework for Financial Reporting without changing the
accounting requirements for business combinations. The Board considers that
there is no material impact of this amendment.
a) New standards, interpretations and amendments not yet effective
The following IFRSs and amendments have been issued by the IASB but are not
effective until a future period.
- IFRS 17 Insurance Contracts and Initial Application of IFRS 17 and
IFRS 9, Comparative Information (Amendments to IFRS 17)
- Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS
Practice Statement 2)
- Definition of Accounting Estimates (Amendments to IAS 8)
- Deferred Tax Relating to Assets and Liabilities arising from a
Single Transaction (Amendments to IAS 12)
- IFRS 16 Leases (Amendment, Liability in a Sale and Leaseback) (not
yet endorsed by the UK Endorsement Board)
- IAS 1 Presentation of Financial Statements (Amendments to
Classification of Liabilities as Current or Non-current) (not yet endorsed by
the UK Endorsement Board)
- IAS 1 Presentation of Financial Statements (Amendment to
Non-current liabilities with covenants).
The Board is currently assessing the impact of these new amendments on the
Group's financial reporting for future periods. However, the board does not
expect any of the above to have a material impact on future results.
Basis of consolidation
The consolidated financial statements include the financial statements of the
Company and its subsidiaries and associated undertakings.
Subsidiaries
Subsidiaries are all entities over which Baron Oil Plc has the power to govern
the financial and operating policies generally accompanying a shareholding of
more than one half of the voting rights, or where Baron Oil Plc exercises
effective operational control. The existence and effect of potential voting
rights that are currently exercisable or convertible are considered when
assessing whether the Group controls another entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the Company.
They are de-consolidated from the date that control ceases.
Inter-company transactions, balances and unrealised gains on transactions
between Group companies are eliminated. Unrealised losses are also eliminated
but considered an impairment indicator of the asset transferred. Accounting
policies of subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the Group.
Impairment of non-financial assets
At each statement of financial position date, the Group reviews the carrying
amounts of its tangible and intangible assets to determine whether there is
any indication that those assets have suffered an impairment loss. If any such
indication exists, the recoverable amount of the asset is estimated in order
to determine the extent of the impairment loss (if any). Where the asset does
not generate cash flows that are independent from other assets, the Group
estimates the recoverable amount of the cash-generating unit to which the
asset belongs. An intangible asset with an indefinite useful life is tested
for impairment annually and whenever there is an indication that the asset may
be impaired.
Recoverable amount is the higher of fair value less costs to sell and value in
use. In assessing value in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the
asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated
to be less than its carrying amount, the carrying amount of the asset
(cash-generating unit) is reduced to its recoverable amount. An impairment
loss is recognised as an expense immediately, unless the relevant asset is
carried at a re-valued amount, in which case the impairment loss is treated as
a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the
asset (cash-generating unit) is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does not exceed
the carrying amount that would have been determined had no impairment loss
been recognised for the asset (cash-generating unit) in prior periods. A
reversal of an impairment loss is recognised as income immediately, unless the
relevant asset is carried at a revalued amount, in which case the reversal of
the impairment loss is treated as a revaluation increase.
Intangible Assets
Oil and gas assets: exploration and evaluation
The Group has continued to apply the 'successful efforts' method of accounting
for Exploration and Evaluation ("E&E") costs, having regard to the
requirements of IFRS 6 'Exploration for the Evaluation of Mineral Resources'.
The successful efforts method means that only the costs which relate directly
to the discovery and development of specific oil and gas reserves are
capitalised. Such costs may include costs of licence acquisition, technical
services and studies, seismic acquisition; exploration drilling and testing
but do not include costs incurred prior to having obtained the legal rights to
explore the area. Under successful efforts accounting, exploration expenditure
which is general in nature is charged directly to the income statement and
that which relates to unsuccessful drilling operations, though initially
capitalised pending determination, is subsequently written off. Only costs
which relate directly to the discovery and development of specific commercial
oil and gas reserves will remain capitalised and to be depreciated over the
lives of these reserves. The success or failure of each exploration effort
will be judged on a well-by-well basis as each potentially hydrocarbon-bearing
structure is identified and tested. Exploration and evaluation costs are
capitalised within intangible assets. Capital expenditure on producing assets
is accounted for in accordance with SORP 'Accounting for Oil and Gas
Exploration'. Costs incurred prior to obtaining legal rights to explore are
expensed immediately to the income statement.
All lease and licence acquisition costs, geological and geophysical costs and
other direct costs of exploration, evaluation and development are capitalised
as intangible or property, plant and equipment according to their nature.
Intangible assets comprise costs relating to the exploration and evaluation of
properties which the Directors consider to be unevaluated until reserves are
appraised as commercial, at which time they are transferred to tangible assets
as 'Developed oil and gas assets' following an impairment review and
depreciated accordingly. Where properties are appraised to have no commercial
value, the associated costs are treated as an impairment loss in the period in
which the determination is made.
Costs are amortised on a field by field unit of production method based on
commercial proven and probable reserves, or to the expiry of the licence,
whichever is earlier.
The calculation of the 'unit of production' amortisation takes account of the
estimated future development costs and is based on the current period and
un-escalated price levels. Changes in reserves and cost estimates are
recognised prospectively.
E&E costs are not amortised prior to the conclusion of appraisal
activities.
Property, plant and equipment
Non oil and gas assets
Non oil and gas assets are stated at cost of acquisition less accumulated
depreciation and impairment losses. Depreciation is provided on a
straight-line basis at rates calculated to write off the cost less the
estimated residual value of each asset over its expected useful economic life.
The residual value is the estimated amount that would currently be obtained
from disposal of the asset if the asset were already of the age and in the
condition expected at the end of its useful life.
Buildings, plant and equipment unrelated to production are depreciated using
the straight-line method based on estimated useful lives.
The annual rate of depreciation for each class of depreciable asset is:
Equipment and machinery 4-10 years
The carrying value of tangible fixed assets is assessed annually and any
impairment is charged to the income statement.
Investments
Investments are stated at cost less provision for any impairment in value.
Trade and other receivables
Trade receivables are recognised initially at fair
value and subsequently measured at amortised cost using the effective interest
method, less provision for impairment. A provision for impairment is
established when there is objective evidence that the Group will not be able
to collect all amounts due according to the original terms of the receivables.
Significant financial difficulties of the debtor, probability that the debtor
will enter bankruptcy or financial reorganisation, and default or delinquency
in payments are considered indicators that the trade receivable is impaired.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held on call with
banks, other short-term highly liquid investments with original maturities of
three months or less, and bank overdrafts. Bank overdrafts are shown within
borrowings in current liabilities on the statement of financial
position.
Taxation
Income tax
Income tax expense represents the sum of the tax currently payable and
deferred tax.
The tax currently payable is based on taxable profit or loss for the year.
Taxable profit or loss differs from profit or loss as reported in the same
income statement because it excludes items of income or expense that are
taxable or deductible in other periods and it further excludes items that are
never taxable or deductible. The Company's liability for current tax is
calculated using tax rates that have been enacted or substantively enacted by
the statement of financial position date.
Deferred tax
Deferred tax is recognised 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
statement of financial position liability method. Deferred tax liabilities
are generally recognised for all taxable temporary differences and deferred
tax assets are recognised to the extent that it is probable that taxable
profits will be available against which deductible temporary differences can
be utilised. Such assets and liabilities are not recognised if the temporary
difference arises from goodwill or from the initial recognition (other than in
a business combination) of other assets and liabilities in a transaction that
affects neither the taxable profit nor the accounting profit.
The carrying amount of deferred tax is reviewed at each statement of financial
position 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 is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset realised. Deferred tax is
charged or credited to income statement, except when it relates to items
charged or credited directly to equity, in which case the deferred tax is also
dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to set off current tax assets against current tax
liabilities and when they relate to income taxes levied by the same taxation
authority and the Company intends to settle its current tax assets and
liabilities on a net basis.
Trade and other payables
Trade payables are not interest bearing and are stated at their nominal value.
Trade and other payables are initially recognised at fair value. They are
subsequently measured at amortised cost using the effective interest method
unless the effect of discounting would be immaterial, in which case they are
stated at cost.
Fair values
The carrying amounts of the financial assets and liabilities such as cash and
cash equivalents, receivables and payables of the Group at the statement of
financial position date approximated their fair values, due to the relatively
short term nature of these financial instruments.
Share-based compensation
The fair value of the employee and suppliers services received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed over the vesting period is determined by reference to the fair value of the options granted, excluding the impact of any non-market vesting conditions (for example, profitability and sales growth targets). Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. At each statement of financial position date, the entity revises its estimates of the number of options that are expected to vest. It recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity.
The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised.
Share based payments (Note 20)
The fair value of share-based payments recognised in the income statement is
measured by use of the Black Scholes model, which takes into account
conditions attached to the vesting and exercise of the equity instruments. The
expected life used in the model is adjusted based on management's best
estimate, for the effects of non-transferability, exercise restrictions and
behavioural considerations. The share price volatility percentage factor used
in the calculation is based on management's best estimate of future share
price behaviour and is selected based on past experience, future expectations
and benchmarked against peer companies in the industry.
Equity instruments
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options
are shown in equity as a deduction, net of tax, from proceeds.
Loans and receivables
The Group classifies all its financial assets as trade and other receivables.
The classification depends on the purpose for which the financial assets were
acquired.
Trade receivables and other receivables that have fixed or determinable
payments that are not quoted in an active market are classified as loans and
receivables financial assets. Loans and receivables financial assets are
measured at amortised cost using the effective interest method, less any
impairment loss.
The Group's loans and receivables financial assets comprise other receivables
(excluding prepayments) and cash and cash equivalents included in the
Statement of Financial Position.
Lease accounting
At the commencement date, the Group measures the lease liability at the
present value of the lease payments unpaid at that date, discounted using the
interest rate implicit in the lease if that rate is readily available or the
Group's incremental borrowing rate.
Lease payments included in the measurement of the lease liability are made up
of fixed payments (including in substance fixed), variable payments based on
an index or rate, amounts expected to be payable under a residual value
guarantee and payments arising from options reasonably certain to be
exercised.
Subsequent to initial measurement, the liability will be reduced for payments
made and increased for interest. It is remeasured to reflect any reassessment
or modification, or if there are changes in in-substance fixed payments.
When the lease liability is remeasured, the corresponding adjustment is
reflected in the right-of-use asset, or profit and loss if the right-of-use
asset is already reduced to zero.
Interest payable and similar charges include interest payable, finance
charges on shares classified as liabilities and finance leases recognised in
profit or loss using the effective interest method, unwinding of the discount
on provisions, and net foreign exchange losses that are recognised in the
profit and loss account.
On the statement of financial position, lease liabilities have been included
in current and non-current liabilities.
Financial liabilities
Financial liabilities are recognised when, and only when, the Group becomes a
party to the contracts which give rise to them and are classified as financial
liabilities at fair value through the profit and loss or loans and payables as
appropriate. The Group's loans and payables comprise trade and other payables.
When financial liabilities are recognised initially, they are measured at fair
value plus directly attributable transaction costs and subsequently measured
at amortised cost using the effective interest method other than those
categorised as fair value through income statement.
The Group determines the classification of its financial liabilities at
initial recognition and re-evaluates the designation at each financial year
end.
A financial liability is derecognised when the obligation under the liability
is discharged, cancelled or expires.
When an existing financial liability is replaced by another from the same
party on substantially different terms, or the terms of an existing liability
are substantially modified, such an exchange or modification is treated as a
de-recognition of the original liability and the recognition of a new
liability, and the difference in the respective carrying amounts is recognised
in the income statement.
Provisions
Provisions are recognised when the Company has a present obligation as a
result of a past event, and it is probable that the Company will be required
to settle that obligation. Provisions are measured at the Directors' best
estimate of the expenditure required to settle the obligation at the statement
of financial position date and are discounted to present value where the
effect is material.
Financial instruments
Non-derivative financial instruments comprise investments in equity and debt
securities, trade and other receivables, cash and cash equivalents, loans and
borrowings, and trade and other payables.
Non-derivative financial instruments are recognised initially at fair value
plus, for instruments not at fair value through profit or loss, any directly
attributable transactions costs, except as described below. Subsequent to
initial recognition non-derivative financial instruments are measured as
described below.
A financial instrument is recognised when the Group becomes a party to the
contractual provisions of the instrument. Financial assets are derecognised if
the Group's contractual rights to the cash flows from the financial assets
expire or if the Group transfers the financial assets to another party without
retaining control or substantially all risks and rewards of the asset. Regular
purchases and sales of financial assets are accounted for at trade date, i.e.
the date that the Group commits itself to purchase or sell the asset.
Financial liabilities are derecognised if the Group's obligations specified in
the contract expire or are discharged or cancelled.
Foreign currencies
i) Functional and presentation currency
Items included in the financial statements of the Group are measured using the
currency of the primary economic environment in which the entity operates (the
functional currency), which are mainly in Pounds Sterling (£) and US Dollars
(USD). The financial statements are presented in Pounds Sterling (£), which
is the Group's presentation currency.
ii) Transactions and balances
Foreign currency transactions are translated into the presentational currency
using exchange rates prevailing at the dates of the transactions. Foreign
exchange gains and losses resulting from the settlement of such transactions
and from the translation at period-end exchange rates of monetary assets and
liabilities denominated in foreign currencies are recognised in the income
statement.
iii) Group companies
The results and financial position of all Group entities (none of which has
the currency of a hyper-inflationary economy) that have a functional currency
different from the presentation currency are translated into the presentation
currency as follows:
a) assets and liabilities for each statement of financial position presented are
translated at the closing rate at the date of that statement of financial
position;
b) income and expenses for each income statement are translated at average
exchange rates (unless this average is not a reasonable approximation of the
cumulative effect of the rates prevailing on the transaction dates, in which
case income and expenses are translated at the rate on the dates of the
transactions); and
c) all resulting exchange differences are recognised as a separate component of
equity. On consolidation, exchange differences arising from the translation of
the net investment in foreign operations, and of borrowings and other currency
instruments designated as hedges of such investments, are taken to
shareholders' equity. When a foreign operation is partially disposed of or
sold, exchange differences that were recorded in equity are recognised in the
income statement as part of the gain or loss on sale.
Management of capital
The Group's policy is to ensure that it will always have sufficient cash to
allow it to meet its liabilities when they become due. To achieve this aim, it
seeks to raise new equity finance and debt sufficient to meet the next phase
of exploration and where relevant development expenditure.
The Board receives cash flow projections on a regular basis as well as
information on cash balances. The Board will not commit to material
expenditure in respect of its ongoing exploration work prior to being
satisfied that sufficient funding is available to the Group to finance the
planned programmes.
Dividends cannot be issued until there are sufficient reserves available.
Critical accounting judgements and key sources of estimation uncertainty
The preparation of the consolidated financial statements requires management
to make estimates and assumptions concerning the future that affect the
reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the dates of the financial statements and the
reported amounts of revenues and expenses during the reporting periods. The
resulting accounting estimates will, by definition, differ from the related
actual results.
Carrying value of intangible exploration and evaluation assets
Valuation of oil and gas properties: judgements regarding timing of regulatory
approval, the general economic environment, and the ability to finance future
activities has an impact on the impairment analysis of intangible exploration
and evaluation assets. All these factors may impact the viability of future
commercial production from unproved properties, and therefore may be a need to
recognise an impairment. The timing of an impairment review and the judgement
of when there could be a significant change affecting the carrying value of
the intangible exploration and evaluation asset is a critical accounting
judgement in itself.
The Board also assesses potential impairment of the Company's net investment
in subsidiaries by reference to the same judgements around the circumstances
of the Group's oil and gas exploration projects. At year end the Group's
exploration assets which the board reviewed for impairment were carried at
£3.7m and the Company's net investment in subsidiaries was held at £5.0m.
Further details are given in Notes 9 and 12 respectively.
Commercial reserves estimates
Oil and gas reserve estimates: estimation of recoverable reserves include
assumptions regarding commodity prices, exchange rates, discount rates,
production and transportation costs all of which impact future cashflows. It
also requires the interpretation of complex geological and geophysical models
in order to make an assessment of the size, shape, depth and quality of
reservoirs and their anticipated recoveries. The economic, geological and
technical factors used to estimate reserves may change from period to period.
Changes in estimated reserves can impact developed and undeveloped property
carrying values, asset retirement costs and the recognition of income tax
assets, due to changes in expected future cash flows.
2. Segmental information
In the opinion of the Directors the Group has one class of business, being the
exploration for, and development and production of, oil and gas reserves, and
other related activities.
The Group's primary reporting format is determined to be the geographical
segment according to the location of the oil and gas asset. There are
currently three geographic reporting segments: South East Asia where
production, development and exploration activity is being assessed, South
America, which has previously been involved in production, development and
exploration activity but is now being phased out, and the United Kingdom being
the head office and where exploration activity is taking place.
Exploration and production year ended 31 December 2022
United South South East
Kingdom America Asia Total
£'000 £'000 £'000 £'000
Revenue - - - -
Cost of sales - - - -
Gross profit - - - -
Exploration and evaluation expenditure (67) (8) (138) (213)
Property, plant and equipment impairment and depreciation (12) (21) (33)
Administration expenses (686) (64) (441) (1,191)
Gain on exchange 43 - - 43
Loss before interest and taxation (722) (72) (600) (1,394)
Finance cost (1) - (4) (5)
Finance income 11 1 - 12
Loss before taxation (712) (71) (604) (1,387)
Income tax expense - - - -
Loss after taxation (712) (71) (604) (1,387)
Assets and liabilities
Segment assets 298 1 4,403 4,702
Cash and cash equivalents 5,625 5 177 5,807
Total assets 5,923 6 4,580 10,509
Segment liabilities 194 1 212 407
Current tax liabilities 14 - - 14
Total liabilities 208 1 212 421
Other segment items
Capital expenditure 92 - 794 886
Depreciation, amortisation and impairment charges 12 - 21 33
Exploration and production year ended 31 December 2021 (restated)
United South South East
Kingdom America Asia Total
£'000 £'000 £'000 £'000
Revenue - - - -
Cost of sales - - - -
Gross profit - - - -
Exploration and evaluation expenditure (50) (101) (67) (218)
Intangible asset impairment - (17) - (17)
Property, plant and equipment impairment and depreciation (11) - - (11)
Receivables and inventory impairment - (7) - (7)
Administration expenses (1,031) (5) (285) (1,321)
Gain on exchange 22 - - 22
Other operating income - - 89 89
Operating (loss)/profit (1,070) (130) (263) (1,463)
Income from associated undertaking - - 29 29
Gain on disposal of associated undertaking - - 302 302
Loss before interest and taxation (1,070) (130) 68 (1,132)
Finance costs (2) - - (2)
Finance income 7 - - 7
(Loss)/Profit before taxation (1,065) (130) 68 (1,127)
Income tax expense - - - -
Loss/(Profit) before taxation (1,065) (130) 68 (1,127)
Assets and liabilities
Segment assets 2,816 4 863 3,683
Cash and cash equivalents 1,527 5 118 1,650
Total assets 4,343 9 981 5,333
Segment liabilities 94 3 542 639
Current tax liabilities 12 - - 12
Total liabilities 106 3 542 651
Other segment items
Capital expenditure 50 - 1,307 1,357
Depreciation, amortisation and impairment charges 11 24 - 35
3. Operating loss 2022 2021
£'000 £'000
The operating loss is stated after charging:
Auditor' remuneration
Audit of group and company financial statements - current year 29 25
Audit of group and company financial statements - prior year 4 -
Non-audit services: Tax compliance 2 2
Non-audit services: Other assurance services 2 1
Exploration and evaluation expenditure 213 218
Impairment of intangible assets - 17
Depreciation of property, plant and equipment 33 11
Impairment of foreign tax receivables - 7
Gain on exchange (43) (22)
Other operating income - (89)
Other operating income in 2021 arose on the capitalisation into cost of
investment of development costs written off in prior years in respect of
Chuditch, Timor-Leste. This was due to a reconstruction of the balance sheet
of SundaGas (Timor-Leste Sahul) Pty Ltd ("TLS") when the Group took majority
control in TLS.
The analysis of development and administrative expenses in the consolidated
income statement by nature of expense is:
2022 2021
£'000 £'000
Employee benefit expense 632 521
Share based payments - 261
Exploration and evaluation expenditure 213 218
Depreciation, amortisation and impairment charges 33 35
Legal and professional fees 410 454
(Gain) on exchange (43) (22)
Other expenses 149 85
1,394 1,552
4. Staff numbers and cost
The average number of persons employed by the Group (including directors)
during the year, analysed by category, were as follows:
2022 2021
Group Company Group Company
Number Number Number Number
Directors 3 3 3 3
Technical and production 4 - -
Administration 2 1 2 1
Total 9 4 5 4
The aggregate payroll costs of these persons were as follows: £'000 £'000 £'000 £'000
Wages and salaries 206 49 96 80
Directors' fees, salaries and benefits 390 390 349 349
Share based payments - - 286 286
Social security costs 47 47 51 51
643 486 782 766
5. Finance income and expenses 2022 2021
£'000 £'000
Bank and other interest received 12 7
Interest on lease liability (4) (2)
Other finance cost (1) -
Total 7 5
6. Income tax expense 2022 2021
£'000 £'000
The tax charge on the loss on ordinary activities was:-
UK Corporation Tax - current - -
Foreign taxation - -
- -
The total charge for the year can be reconciled to the accounting result as
follows:
2022 2021
£'000 £'000
(Loss) before tax
Continuing operations (1,387) (1,127)
Tax at composite group rate of 18.6% (2021: 22.4%) (258) (253)
Effects of:
Losses not subject to tax 163 123
Movement on capital allowances (76) (97)
Increase in tax losses 171 227
Foreign taxation - -
Tax expense - -
At 31 December 2022, the Group had estimated tax losses of £36,011,000 (2021
- £32,933,000) to carry forward against future profits. The potential
deferred tax asset on these tax losses at a composite group rate of 29.5% of
£10,636,000 (2021: at 18.1%, £5,964,000) has not been recognised due to
uncertainty over the timing and existence of future taxable profits. The
current tax reconciliation has been prepared using a blended rate of 18.6%
(2021: 22.4%) based on prevailing headline taxation rates as applied to the
Group's taxable entities in the year. The rate assessed for the unrecognised
deferred tax asset reflects management's best estimate of the applicable rates
which would apply to oil and gas revenues in the Group's respective countries
of operation.
7. Earnings per share
2022 2021
Loss per ordinary share
- Basic (0.010p) (0.012p)
- Diluted (0.010p) (0.012p)
Earnings per ordinary share is based on the Group's loss attributable to
controlling interests for the year of £1,387,000 (2021: £1,127,000).
The weighted average number of shares used in the calculation is the weighted
average ordinary shares in issue during the year of 13,784,079,264 (2021:
9,460,727,853).
Due to the Group's results, the diluted earnings per share was deemed to be
the same as the basic earnings per share for that year.
8. Property, plant and equipment
Equipment and Right of use
machinery assets Total
£'000 £'000 £'000
Group
Cost
At 1 January 2021 29 - 29
Foreign exchange translation adjustment 1 - 1
Additions 1 45 46
At 1 January 2022 31 45 76
Foreign exchange translation adjustment 4 - 4
Additions 17 62 79
Disposals (34) - (34)
At 31 December 2022 18 107 125
Depreciation
At 1 January 2021 29 2 31
Charge for the period - 11 11
At 1 January 2022 29 13 42
Foreign exchange translation adjustment 5 1 6
Charge for the period 5 28 33
Disposals (34) - (34)
At 31 December 2022 5 42 47
Net book value
At 31 December 2022 13 65 78
At 31 December 2021 2 32 34
Included in the above line items are Right of Use assets of £65,000 (2021:
£32,000) in respect of a motor vehicle and an office lease.
Equipment and Right of use
machinery asset Total
£'000 £'000 £'000
Company
Cost
At 1 January 2021 - 45 45
Additions 1 - 1
At 1 January and 31 December 2022 1 45 46
Depreciation
At 1 January 2021 - 2 2
Charge for the period - 11 11
At 1 January 2022 - 13 13
Charge for the period - 12 12
At 31 December 2022 - 25 25
Net book value
At 31 December 2022 1 20 21
At 31 December 2021 1 32 33
Included in the above line items are Right of Use assets of £20,000 (2021:
£32,000) in respect of a motor vehicle.
9. Intangible fixed assets Exploration
and evaluation
assets Total
£'000 £'000
Group
Cost
At 1 January 2021 2,319 2,319
Foreign exchange translation adjustment 17 17
Additions 1,356 1,356
Consolidation of single asset company 1,362 1,362
At 1 January 2022 5,054 5,054
Foreign exchange translation adjustment 275 275
Additions 806 806
Disposals (2,439) (2,439)
At 31 December 2022 3,696 3,696
Impairment
At 1 January 2021 2,301 2,301
Foreign exchange translation adjustment - -
Charge for the period 17 17
At 1 January 2022 2,318 2,318
Foreign exchange translation adjustment 121 121
Charge for the period - -
Disposals (2,439) (2,439)
At 31 December 2022 - -
Net book value
At 31 December 2022 3,696 3,696
At 31 December 2021 2,736 2,736
Exploration
and evaluation
assets Total
£'000 £'000
Company
Cost
At 1 January 2021 653 653
Additions 50 50
At 1 January 2022 703 703
Additions 91 91
Disposals (635) (635)
At 31 December 2022 159 159
Impairment
At 1 January 2021 and 2022 635 635
Disposals (635) (635)
At 31 December 2022 - -
Net book value
At 31 December 2022 159 159
At 31 December 2021 68 68
Exploration and evaluation assets represent amounts capitalised in progressing
the Group's interest in licences for the exploration of oil and gas in the UK
and Timor-Leste.
The Directors have performed an assessment of impairment as at the balance
sheet date in respect of exploration and evaluation assets, taking account of
the facts and circumstances which existed at that date. Impairment reviews
were performed at the Operating Segment level and therefore separate tests
were performed for the Chuditch and Inner Moray Firth P2478 exploration
assets. The directors concluded that the facts did not give rise to an
impairment and therefore no impairment charge has been reflected in 2022
(2021: £17,000).
During the previous year, the Group increased its holding in SundaGas
(Timor-Leste Sahul) Pty. Ltd ("TLS") from 33.33% to 100%. As a consequence of
the increased holding in TLS, the Company was consolidated into the Group
Income Statement and Statement of Financial Position. As TLS is a single asset
company in pre-production phase, it is included as an oil and gas asset
purchase rather than as a business combination, and its carrying value is
included in intangible assets.
Block XXI Peru: this licence was fully impaired in 2018 and was relinquished
in April 2022.
10. Goodwill Goodwill on
consolidation
of subsidiaries
£'000
Group
Cost
At 1 January 2021 and 1 January 2022 81
Goodwill written off (81)
At 31 December 2022 -
Impairment
At 1 January 2021 and 1 January 2022 81
Adjustment on write off of goodwill (81)
At 31 December 2022 -
Net book value
At 31 December 2022 -
At 31 December 2021 -
The carrying value of goodwill represents the purchase of shares in Gold Oil
Peru SAC. This has been written off during the period as there is no prospect
of recovery.
11. Associated undertaking
Shares in
associated
undertaking Total
£'000 £'000
Group
Gross investment value
At 1 January 2021 151 151
Additions 93 93
Share of post acquisition net result 29 29
Disposal (273) (273)
At 1 January and 31 December 2022 - -
Impairment
At 1 January 2021, 1 January and 31 December 2022 - -
Carrying value
At 31 December 2022 - -
At 31 December 2021 - -
On 27 April 2020, the Group acquired a 33.33% interest in SundaGas
(Timor-Leste Sahul) Pte. Ltd, incorporated in Singapore at a gross cost of
£195,000. In accordance with IAS28, the Group accounted for its investment in
this company using the equity method.
During the preceding period, the Company increased its stake in SundaGas
(Timor-Leste Sahul) Limited ("TLS") from 33.33% to 100%. In accordance with
IFRS3, this is treated as an effective disposal of the interest in the
associated undertaking requiring a remeasurement of its cost to fair value.
This resulted in a gain on disposal of £302,000 in 2021.
12. Investments
Loans to Shares in Shares in
group group associated
undertaking undertaking undertaking Total
£'000 £'000 £'000 £'000
Company
Cost
At 1 January 2021 775 5,444 195 6,414
Exchange rate adjustment 19 - - 19
Additions - 2,104 93 2,197
Net loan movements 1,030 - - 1,030
Disposals - - (288) (288)
At 1 January 2022 1,824 7,548 - 9,372
Exchange rate adjustment 205 - - 205
Net loan movements 1,811 - - 1,811
At 31 December 2022 3,840 7,548 - 11,388
Impairment
At 1 January 2021 775 5,444 - 6,219
Chargefor the year 124 - - 124
At 1 January 2022 899 5,444 - 6,343
Charge for the year 43 - - 43
At 31 December 2022 942 5,444 - 6,386
Carrying value
At 31 December 2022 2,898 2,104 - 5,002
At 31 December 2021 925 2,104 - 3,029
The Company elected to recognise the investment in associate in respect of
SundaGas (Timor-Leste Sahul) Pte. Ltd. under the cost model.
The Company makes loans to its subsidiary operations as part of its longer
term strategy of undertaking exploration activities. Whilst the loans are
made on informal terms, the board considers that such loans form part of the
Company's net investment in its subsidiaries and therefore are presented
within investments and treated as non-current. No interest is charged on
intercompany loans.
The Company has made provision on the investment in Gold Oil Peru S.A.C. of
£6,386,000 (2021: £6,343,000).
The Company's subsidiary undertakings at the year end were as follows:
Subsidiary Place of incorporation and operation Proportion of ownership interest Proportion of voting power held Nature of business
% %
SundaGas (Timor-Leste Sahul) Pte. Ltd. Singapore 100 100 Exploration of oil and gas
8 Chang Charn Road
#02-01
Link (Thim) Building
Singapore 159637
SundaGas Banda Unipessoal, Lda * Timor-Leste 100 100 Exploration of oil and gas
Timor Plaza Pisso 3. #337
Av. President Nicolau Lobato
20 de Setembro, Bebonuk, Dom Aleixo
Dili, Timor-Leste
Gold Oil Peru S.A.C Peru 100 100 Exploration of oil and gas
Jr. General Julian Arias Araguez 250
Miraflores, Lima-18,
Peru
All shareholdings are in ordinary, voting shares.
* A direct subsidiary of SundaGas (Timor-Leste Sahul) Pte. Ltd.
13. Trade and other receivables 2022 2021
Group Company Group Company
£'000 £'000 £'000 £'000
Trade receivables - - - -
Other receivables 24 24 12 12
Prepayments and accrued income 77 37 42 34
101 61 54 46
14. Bank guarantee bond 2022 2021
Group Company Group Company
£'000 £'000 £'000 £'000
Bank guarantee bond at 31 December 2022 827 - 859 -
The Company's wholly-owned subsidiary, SundaGas Banda Unipessoal, Lda
("Banda"), has provided a performance guarantee to Autoridade Nacional do
Petróleo e Minerais ("ANPM") in respect of the offshore Timor-Leste
TL-SO-19-16 Production Sharing Contract ("PSC"). This performance guarantee is
secured by a bank guarantee given by United Overseas Bank Limited of Singapore
("UOB") backed by a cash deposit of US$1 million. This arrangement was
originally put in place in November 2019 at the outset of the PSC, was
extended in November 2022, and now expires on 1 August 2023. It is anticipated
that the bank guarantee will be released following the conclusion of the
current phase of the PSC which is currently 18 June 2023 as the Directors
consider that all work commitments to the end of the current phase will have
been met.
The original bond was set up by SundaGas Pte. Ltd ("SGPL"), the former owners
of Banda, and has remained in their name beyond the acquisition of Banda by
the Company, so as not to disrupt the contractual position of the PSC. As a
result, the bond will be initially released to SGPL which is contractually
bound by the Relationship Agreement that exists between the parties to account
for the funds released to Banda.
As the bond represents a financial asset with contractual cash flows, the
Directors have had regard to the credit risk associated with the recovery of
the asset. In taking account of the Group's close working relationship with
both ANPM and SGPL along with the Group's history of dealings with them, the
Directors consider that any credit risk associated with the bond asset is
immaterial and therefore no provision for credit loss has been made.
Restated
15. Cash and cash equivalents 2022 2021
Group Company Group Company
£'000 £'000 £'000 £'000
Bank current accounts 837 655 238 120
Bank deposit accounts 4,970 4,970 1,412 1,407
5,807 5,625 1,650 1,527
Bank deposit accounts comprise cash held by the Group and short-term bank
deposits with an original maturity of three months or less and earn interest
at respective short-term deposit rates. The carrying amount of these assets
approximates to their fair value.
16. Trade and other payables 2022 2021
Group Company Group Company
£'000 £'000 £'000 £'000
Trade payables 67 66 19 18
Other payables - - 495 -
Accruals 274 109 96 48
Lease finance liabilities due within 12 months 36 10 10 10
Taxation 14 14 12 12
391 199 632 88
Non-current liabilities
Lease finance liabilities due after 12 months 30 9 19 19
17. Lease finance
Lease liabilities are presented in the statement of financial position as
follows:
2022 2021
Group Company Group Company
£'000 £'000 £'000 £'000
Current 36 10 10 10
Non-current 30 9 19 19
66 19 29 29
18. Share capital 2022 2021
£'000 £'000
Allotted, called up and fully paid
Equity:18,920,260,428 (2021: 11,583,612,461) ordinary shares of £0.00025 each 4,730 2,896
4,730 2,896
The Company issued the following new shares for cash during the year.
(i) 2,750,000,000 new ordinary shares of £0.00025 each at £0.0006 per share
on 9 May 2022.
(ii) 117,125,001 new ordinary shares of £0.00025 each at £0.0010 per share
on 4 November 2022.
(iii) 4,469,522,966 new ordinary shares of £0.00025 each at £0.0012 per
share on 29 November 2022.
Ordinary shares entitle the holder to full rights as to voting, dividends and
any distribution upon winding up.
19. Share premium and reserves Foreign
Share Share exchange Profit
premium Option translation and loss
account reserve reserve account
£'000 £'000 £'000 £'000
Group
At beginning of the year 34,061 388 1,561 (34,224)
Loss for the year attributable to controlling interests - - - (1,387)
Issue of new shares 5,296 - - -
Share issue costs (511) - - -
Share option reserve released - (56) - 56
Foreign exchange translation adjustments - - 174 -
38,846 332 1,735 (35,555)
Company
At beginning of the year 34,061 388 (163) (32,586)
Loss for the year - - - (555)
Issue of new shares 5,296 - - -
Share issue costs (511) - - -
Share option reserve released - (56) - 56
38,846 332 (163) (33,085)
Details of options and warrants issued, exercised and lapsed during the year
together with options and warrants outstanding at 31 December 2022 are as
follows:
1 January New Lapsed or 31 December
Exercise 2022 Issue Exercised cancelled 2022
Issue date Final exercise date price Number Number Number Number Number
6 August 2019 6 August 2022 £0.00080 27,500,000 - - (27,500,000) -
26 March 2020 26 March 2023 £0.00100 117,125,001 - (117,125,001) - -
26 May 2020 26 May 2030 £0.00100 290,000,000 - - (165,000,000) 125,000,000
10 November 2020 10 November 2030 £0.00100 75,000,000 - - (75,000,000) -
22 July 2021 22 July 2031 £0.00070 440,000,000 - - - 440,000,000
22 July 2021 31 December 2025 * £0.00070 150,000,000 - - - 150,000,000
17 December 2021 17 December 2031 £0.00060 530,000,000 - - - 530,000,000
14 July 2022 14 July 2025 £0.00070 - 175,000,000 - - 175,000,000
1,629,625,001 175,000,000 (117,125,001) (267,500,000) 1,420,000,000
* These options have been granted to two external contractors who have been
engaged by SundaGas (Timor-Leste Sahul) Pte. Ltd. The final exercise dates of
these options were extended during the year from 22 July 2024 to 31 December
2025.
Details of options and warrants issued, exercised and lapsed during the year
together with options and warrants outstanding at 31 December 2021 are as
follows:
1 January New 31 December
Exercise 2021 Issue Exercised Lapsed 2021
Issue date Final exercise date price Number Number Number Number Number
27 November 2018 27 November 2021 £0.00435 20,000,000 - - (20,000,000) -
3 December 2018 3 December 2021 £0.00440 10,000,000 - - (10,000,000) -
6 August 2019 6 August 2022 £0.00080 27,500,000 - - - 27,500,000
26 March 2020 26 March 2023 £0.00100 117,125,001 - - - 117,125,001
26 May 2020 26 May 2030 £0.00100 290,000,000 - - - 290,000,000
10 November 2020 10 November 2030 £0.00100 75,000,000 - - - 75,000,000
22 July 2021 22 July 2031 £0.00070 - 440,000,000 - - 440,000,000
22 July 2021 22 July 2024 £0.00070 - 150,000,000 - - 150,000,000
17 December 2021 17 December 2031 £0.00060 - 530,000,000 - - 530,000,000
539,625,001 1,120,000,000 - (30,000,000) 1,629,625,001
The number of share options which were exercisable at year end was
1,245,000,000 (2021: 1,099,625,001). The weighted average remaining life of
share options at the year end was 7 years (2021: 8 years). The weighted
average exercise price (in pence) applying to share options during the year
was as follows:
2022 2021
Opening 0.08p 0.12p
Exercised 0.10p -
Lapsed 0.08p 0.44p
Cancelled 0.10p -
Issued 0.07p 0.07p
Closing 0.07p 0.08p
20. Share based payments
The fair values of the options and warrants granted have been calculated using
Black--Scholes model assuming the inputs shown below:
Grant date 14 July 2022 17 December 2021 22 July 2021 22 July 2021 26 May 2020
Number of options or warrants granted 175,000,000 530,000,000 150,000,000 440,000,000 290,000,000
Share price at grant date 0.07p 0.06p 0.07p 0.07p 0.05p
Exercise price at grant date 0.07p 0.06p 0.07p 0.07p 0.1p
Option life 3 years 10 years 3 years 10 years 10 years
Risk free rate 0.86% 0.86% 0.86% 0.86% 0.86%
Expected volatility 80% 80% 80% 80% 80%
Expected dividend yield 0% 0% 0% 0% 0%
Fair value of option 0.017p 0.025p 0.02p 0.03p 0.02p
During the year, as announced on 14 July 2022, the Company awarded 175,000,000
share options to a director of both SundaGas (Timor-Leste Sahul) Pte. Ltd and
SundaGas Banda Unipessoal Lda, the latter being the operator of the 'Chuditch'
Timor-Leste TL-SO-19-16 PSC. The share options are exercisable at 0.07p,
expire three years from grant date and will only vest upon Baron Oil making an
announcement that the first appraisal well on the Chuditch PSC has spudded, or
in certain limited circumstances such as a takeover event. SundaGas
(Timor-Leste Sahul) Pte. Ltd and SundaGas Banda Unipessoal Lda are wholly
owned subsidiaries of Baron Oil Plc.
Given that vesting is contingent on the spudding of a well at the Chuditch
project and that the occurrence of this event is dependent, inter alia, on
events outside the control of the director, the Board considered that the
current degree of certainty over vesting was such that no share-based payment
charges were recorded in respect of these options during 2022. A detailed
summary of the current status and future plans for the Chuditch project are
given in the Chairman's Statement & Operations Report.
Volatility was determined by reference to the Company's historical share price
volatility over a suitable period. During the year, and as announced on 12
January 2022, 240,000,000 share options were cancelled.
21. Directors' emoluments
2022 2021
£'000 £'000
Directors' remuneration 390 349
Compensation for loss of office - 53
Share based payments - 256
390 658
Highest paid director emoluments and other benefits are as listed below.
2022 2021
£'000 £'000
Remuneration 214 216
Post termination benefits 17 -
Share based payments - 145
231 361
Total remuneration in respect of key management personnel amounted to
£432,000 (2021: £698,000).
22. Financial instruments
The Group's activities expose it to a variety of financial risks: credit risk,
cash flow interest rate risk, foreign currency risk, liquidity risk, price
risk and capital risk. The Group's activities also expose it to non-financial
risks: market risk. The Group's overall risk management programme focuses on
unpredictability and seeks to minimise the potential adverse effects on the
Group's financial performance. The Board, on a regular basis, reviews key
risks and, where appropriate, actions are taken to mitigate the key risks
identified.
Financial instruments - Risk Management
The Group is exposed through its operations to the following risks:
Ø Credit risk
Ø Cash flow interest rate risk
Ø Foreign Exchange Risk
Ø Liquidity risk
Ø Price risk
Ø Capital risk
Ø Market risk
In common with all other businesses, the Group is exposed to risks that arise
from its use of financial instruments. This note describes the Group's
objectives, policies and processes for managing those risks and the methods
used to measure them. Further quantitative information in respect of these
risks is presented throughout these financial statements.
There have been no substantive changes in the Group's exposure to financial
instrument risks, its objectives, policies and processes for managing those
risks or the methods used to measure them from previous periods unless
otherwise stated in this note.
Principal financial instruments
The principal financial instruments used by the Group, from which financial
instrument risk arises are as follows:
Ø Loans and receivables
Ø Trade and other receivables
Ø Cash and cash equivalents
Ø Trade and other payables
General objectives, policies and processes
The Board has overall responsibility for the determination of the Group's risk
management objectives and policies and, whilst retaining responsibility for
them, it has delegated the authority for designing and operating processes
that ensure the effective implementation of the objectives and policies to the
Group's finance function. The Board receives regular updates from the
Executive Directors through which it reviews the effectiveness of the
processes put in place and the appropriateness of the objectives and policies
it sets. The overall objective of the Board is to set policies that seek to
reduce risk as far as possible without unduly affecting the Group's
competitiveness and flexibility. Further details regarding these policies
are set out below:
Credit risk
The Group's principal financial assets are bank balances and cash, and other
receivables. The credit risk on liquid funds is limited because the
counterparties are banks with high credit ratings assigned by international
credit-rating agencies. The amounts presented in the statement of financial
position are net of allowance for doubtful receivables. An allowance for
impairment is made where there is an identified loss event which, based on
previous experiences, is evidence of a reduction in the recoverability of the
cash flows.
As at 31 December 2022 and 2021 there were no trade receivables.
Cash flow interest rate risk
The Group is exposed to cash flow interest rate risk from its deposits of cash
and cash equivalents with banks.
The cash balances maintained by the Group are proactively managed in order to
ensure that the maximum level of interest is received for the available funds
but without affecting the working capital flexibility the Group requires.
The Group is not at present exposed to cash flow interest rate risk on
borrowings as it has no significant debt. No subsidiary company of the Group
is permitted to enter into any borrowing facility or lease agreement without
the prior consent of the Company.
Interest rates on financial assets
The Group's financial assets consist of cash and cash equivalents, loans,
trade and other receivables. The interest rate profile at period end of
these assets was as follows:
31 December 2022 Financial assets on which interest earned Financial assets on which interest not earned Total
£'000 £'000 £'000
UK sterling 4,802 397 5,199
US dollar (USD) 168 1,287 1,455
Singapore Dollar (SGD) - 4 4
Peruvian Nuevo Sol (PEN) - - -
4,970 1,688 6,658
31 December 2021 Financial assets on which interest earned Financial assets on which interest not earned Total
£'000 £'000 £'000
UK sterling 780 123 903
US dollar (USD) 1,486 174 1,660
Peruvian Nuevo Sol (PEN) - - -
2,266 297 2,563
The Group earned interest on its interest bearing financial assets at rates
between 1.5% and 4% (2021 0.3% and 1%) during the period.
A change in interest rates on the statement of financial position date would
increase/(decrease) the equity and the anticipated annual income or loss by
the theoretical amounts presented below. The analysis is made on the
assumption that the rest of the variables remain constant. The analysis with
respect to 31 December 2021 was prepared under the same assumptions.
Change of 1.0% in the interest rate as of
31 December 2022 31 December 2021
Increase of 1.0% Decrease of 1.0% Increase of 1.0% Decrease of 1.0%
Instruments bearing variable interest (£'000) 50 (50) 10 (10)
It is considered that there have been no significant changes in cash flow
interest rate risk at the reporting date compared to the previous period end
and that therefore this risk has had no material impact on earnings or
shareholders' equity.
Foreign exchange risk
Foreign exchange risk arises because the Group has operations located in
various parts of the world whose functional currency is not the same as the
functional currency in which other Group companies are operating. Although
its geographical spread reduces the Group's operation risk, the Group's net
assets arising from such overseas operations are exposed to currency risk
resulting in gains and losses on retranslation into Sterling. Only in
exceptional circumstances will the Group consider hedging its net investments
in overseas operations, as generally it does not consider that the reduction
in foreign currency exposure warrants the cash flow risk created from such
hedging techniques. It is the Group's policy to ensure that individual Group
entities enter into local transactions in their functional currency wherever
possible and that only surplus funds over and above working capital
requirements should be transferred to the parent company treasury. The Group
considers this policy minimises any unnecessary foreign exchange exposure.
In order to monitor the continuing effectiveness of this policy the Board,
through its approval of both corporate and capital expenditure budgets and
review of the currency profile of cash balances and management accounts,
considers the effectiveness of the policy on an ongoing basis.
The following table discloses the major exchange rates of those currencies
utilised by the Group:
USD SGD PEN
Average for year ended 31 December 2022 1.24 1.71 4.73
At 31 December 2022 1.21 1.62 4.55
Average for year ended 31 December 2021 1.37 1.84 5.27
At 31 December 2021 1.35 1.82 5.35
A change in exchange rates on the statement of financial position date would
increase/(decrease) the equity and net asset position by the theoretical
amounts presented below. The analysis is made on the assumption that the rest
of the variables remain constant. The analysis with respect to 31 December
2021 was prepared under the same assumptions.
Change of 10.0% in the GBP/USD rate as of
31 December 2022 31 December 2021
Increase of 10.0% Decrease of 10.0% Increase of 10.0% Decrease of 10.0%
Net assets (£'000) (279) 340 (148) 393
It is considered that there have been no significant changes in exchange rate
risk at the reporting date compared to the previous period end and that
therefore this risk has had no material impact on earnings or shareholders'
equity.
Liquidity risk
Liquidity risk arises from the Group's management of working capital and the
finance charges and principal repayments on its debt instruments. It is the
risk that the Group will encounter difficulty in meeting its financial
obligations as they fall due.
The Group's policy is to ensure that it will always have sufficient cash to
allow it to meet its liabilities when they become due. To achieve this aim,
it seeks to maintain readily available cash balances (or agreed facilities) to
meet expected requirements for a period of at least 60 days. The Group
currently has no long term borrowings.
Price risk
Potential oil and gas sales revenue is subject to energy market price risk.
Given that the Company currently does not have production, it is not
considered appropriate for the Group to enter into any hedging activities or
trade in any financial instruments, such as derivatives. This strategy will
continue to be subject to regular review.
It is considered that price risk of the Group at the reporting date has not
increased compared to the previous period end.
Volatility of oil and gas prices
A material part of the Group's revenue will be derived from the sale of oil
and gas that it expects to produce. A future substantial or extended decline
in prices for oil and gas and refined products could adversely affect the
Group's future revenues, cash flows, profitability and ability to finance its
planned capital expenditure. The movement of crude oil and natural gas prices
is shown below:
31 December 2022 Average price 31 December 2021
2022
Crude oil - WTI
Per barrel - US$ $81 $92 $75
Per barrel - £ £67 £74 £56
══════ ══════ ══════
Natural gas LNG Japan/Korea Marker (Platts)
Per Million Btu - US$ $19 $32 $25
Per Million Btu - £ £15 £26 £18
══════ ══════ ══════
Oil and gas prices are dependent on a number of factors impacting world supply
and demand. Due to these factors, prices may be subject to significant
fluctuations from year to year. However, these prices had no effect on the
Group's results for 2022, since it had no production.
Capital risk
The Group's objectives when managing capital are to safeguard the ability to
continue as a going concern in order to provide returns for shareholders and
benefits to other stakeholders and to maintain an optimal capital structure to
reduce the cost of capital.
23. Capital commitments
As of 31 December 2022, there were no capital commitments (2021: none).
24. Contingent Liabilities
The Company considers that there are no potential decommissioning costs in
respect of abandoned fields.
25. Events after the reporting period
On 20 February 2023, the Company issued 62,500,000 new ordinary shares of
0.025p each following the exercise of options by a former director, raising
new capital of £62,000 gross, £50,000 net of costs.
26. Ultimate controlling party
Baron Oil Plc is listed on the AIM market operated by the London Stock
Exchange. At the date of the Annual Report in the Directors' opinion there is
no controlling party.
27. Related party transactions
Company
During the year, the Company advanced loans to its subsidiaries. The details
of the transactions and the amount owed by the subsidiaries at the year end
were.
Year ended 31 December 2022 Year ended 31 December 2021
Balance Loan advance Balance Loan advance
£'000 £'000 £'000 £'000
SundaGas (Timor-Leste Sahul) Pty. Ltd 2898 1,972 926 926
Gold Oil Peru S.A.C * 941 42 899 124
* The Company has provided for an impairment of £941,000 (2021: £899,000) on
the outstanding loans.
Group and company
SundaGas (Timor-Leste Sahul) Pty. Ltd ("TLS"), a wholly-owned subsidiary paid
fees amounting to US$285,000 (2021: US$369,000) to SundaGas Pte. Ltd, a
company in which Dr. Andrew Butler, a director of TLS, held a significant
interest.
The Directors' aggregate remuneration and any associated benefits in respect
of qualifying services are disclosed in note 21.
During the year, key management personnel subscribed for new ordinary shares
of £0.00025 each in the Company as part of placings and subscriptions of new
ordinary shares as follows.
Announced 29 April 2022, at a price of 0.06p per share Announced 16 November 2022, at a price of 0.12p per share
Andrew Yeo 16,150,000 shares 8,000,000 shares
Dr Andrew Butler * - 50,000,000 shares
During the year, key management personnel were awarded options to subscribe to
new ordinary shares of £0.00025 each in the Company as follows.
Number Exercise price Final exercise date
Dr Andrew Butler * 175,000,000 0.07p 14 July 2025
* Director of SundaGas (Timor-Leste Sahul) Pty. Ltd.
On 25 November 2022, the Company assumed 100% of the collateral for a US$1
million amount (the "Deposit") in relation to the performance bank guarantee
arrangements connected to the Chuditch PSC (the "Guarantee"), by providing
approximately US$667,000 to SundaGas Pte. Ltd ("SGPL") to replace the two
thirds contribution (approximately US$667,000) previously made by SGPL, which
was the other indirect shareholder in SundaGas Banda Unipessoal Lda. until 18
June 2021. The relationship agreement between SGPL, its principals and Baron
as originally announced on 18 June 2021 (the "Relationship Agreement") was
also varied so that Baron is entitled to all the benefit of and rights to the
return of the Deposit should it be released or when the Guarantee expires in
due course on 1 August 2023. The changes to the provision of the funds for
the Deposit and the variations to the Relationship Agreement were deemed to be
related party transactions pursuant to the AIM Rules for Companies.
In June 2021, the Company agreed to acquire the remaining 15% of SundaGas
Timor-Leste (Sahul) Pte. Ltd. ("TLS") which the Company did not own in
exchange for the issuance of 1,157,202,885 new ordinary shares in the Company
to SundaGas Pte. Ltd ("SGPL") (the "Share Exchange"). TLS is the parent
company of the Timor-Leste subsidiary SundaGas Banda Unipessoal Lda.
("Banda"), which is the Operator of and 75% interest holder in the offshore
Timor-Leste TL-SO-19-16 PSC (the "Chuditch PSC"). SGPL is the parent company
of SundaGas Resources Pte. Ltd. ("SGR"), which was the holder of the 15%
interest in TLS acquired by Baron pursuant to the Share Exchange.
Through the Share Exchange, the Company became the sole shareholder of TLS,
which provided a 75% effective interest in the Chuditch PSC. The Company's
responsibility to carry SGR's share of financial contributions until the end
of the PSC's Firm Commitment Period in November 2022 was extinguished
following completion of the Share Exchange. Under the terms of an Amended
Services Agreement between SGPL and TLS (which was extended to the end of
December 2022), SGPL will continue to be paid fees for management and
administrative services.
As SGPL through its subsidiary SGR held more than 10% of TLS's ordinary shares
immediately before the Share Exchange, the Share Exchange was deemed to be a
related party transaction pursuant to rule 13 of the AIM Rules for Companies.
28. Restatement of comparative figures
The Directors have reviewed the presentation of the performance bonds
deposited with banks as part of the Group's exploration activities and have
concluded that such deposits should not be considered as cash equivalents.
Therefore the comparative period has been restated to represent this
reallocation. Further details of the terms of the performance bonds held are
given in Note 15.
In addition, the Board have reviewed the allocation of certain non-cash items
within the cash flow statement have restated the comparative consolidated cash
flow statement accordingly.
The comparative figures in the Statement of Other Comprehensive Income have
also been restated so that movements in the share-based payment reserve
following share option exercises or lapses are presented as an adjustment
between reserves within equity and not within Other Comprehensive Income.
None of the restatements impact on the Earnings Per Share as reported in 2021.
Glossary
BSCF Billion standard cubic feet of natural gas.
Geological chance of success or Geological Probability of Success The estimated probability that exploration activities will confirm the
existence of a significant accumulation of potentially recoverable petroleum.
Contingent Resources Those quantities of petroleum estimated, as of a given date, to be potentially
recoverable from known accumulations by application of development projects,
but which are not currently considered to be commercially recoverable owing to
one or more contingencies.
GIIP Volume of natural gas initially in-place in a reservoir.
High or 3U Estimate Denotes the high estimate qualifying as Prospective Resources. Reflects a
volume estimate that there is a 10% probability that the quantities actually
recovered will equal or exceed the estimate.
Licence Operator or Administrator The Company nominated to carry out operational activities. In the context of
the UK jurisdiction, during the initial Phase A of a licence the nominated
Company is termed a licence administrator.
MMBBL Million barrels of oil or condensate.
MMBOE, Oil equivalent Million barrels of oil equivalent. Volume derived by dividing the estimate
of the volume of natural gas in billion cubic feet by six in order to convert
it to an equivalent in million barrels of oil or condensate, and, where
relevant, adding this to an estimate of the volume of oil in millions of
barrels.
Prospective Resources Quantities of petroleum that are estimated to exist originally in naturally
occurring reservoirs, as of a given date. Crude oil in-place, natural gas
in-place, and natural bitumen in-place are defined in the same manner.
SPE PRMS 2018 The Society of Petroleum Engineers' ("SPE") Petroleum Resources Management
System ("PRMS") is a system developed for consistent and reliable definition,
classification, and estimation of hydrocarbon resources prepared by the Oil
and Gas Reserves Committee of SPE and approved by the SPE Board in June 2018
following input from six sponsoring societies: the World Petroleum Council,
the American Association of Petroleum Geologists, the Society of Petroleum
Evaluation Engineers, the Society of Exploration Geophysicists, the European
Association of Geoscientists and Engineers, and the Society of Petrophysicists
and Well Log Analysts.
SPE PRMS Unrisked Prospective Denotes the unrisked estimate qualifying as SPE PRMS 2018 Prospective
Resources.
Resources
Mean Reflects an unrisked median or best-case volume estimate of resource derived
using probabilistic methodology. This is the mean of the probability
distribution for the resource estimates and is often not the same as 2U as the
distribution can be skewed by high resource numbers with relatively low
probabilities.
PSC Production Sharing Contract.
PSDM Pre-Stack Depth Migration version of processed seismic data.
TCF Trillion standard cubic feet of natural gas
TGS-NOPEC TGS-NOPEC Geophysical Company.
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