Results for the Year Ended 31 December 2023
28/05/2024 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240528:nRSb9577Pa&default-theme=true
RNS Number : 9577P Baron Oil PLC 28 May 2024
28 May 2024
Baron Oil Plc
("Baron Oil", "Baron", the "Company", or the "Group")
Final Results for the Year Ended 31 December 2023
Baron Oil Plc (AIM: BOIL) is pleased to announce its audited financial results
for the year ended 31 December 2023. In conjunction with this announcement,
the Company will also release an 'Operational Update'.
Operational Highlights for 2023
· Considerable progress with Chuditch asset in Timor-Leste, moving
from evaluation into the drilling preparation phase.
· Competent Person's Report ("CPR") published assessing gross Pmean
Contingent Resources of Chuditch-1 discovery as 1.16 Tcf of gas with an
additional 1.56 Tcf of gross Pmean Prospective Resources.
· Senior well engineering personnel appointed as detailed drilling
preparations commenced.
· Farm-up agreed with TIMOR GAP (completed post-period), increasing
their working interest from 25% to 40%, resulting in TIMOR GAP being
responsible for 20% of PSC costs.
· Extension granted for UK Offshore Licence P2478, but owing to
ongoing wind farm construction in the area, seismic operations were unable to
be conducted and the licence was relinquished post-period end, with all
commitments having been fulfilled.
Financial Highlights for 2023
· Cash reserves at 31 December 2023 were £3.76m (31 December 2022:
£5.81m).
· Loss after taxation of £1.71m (2022: £1.39m).
· Post-period Placing, Subscription and WRAP Retail Offer (February
2024), raising £3.26m (gross).
Commenting on the results, Gerry Aherne, Non-Executive Chairman, said:
"I am pleased to report that Baron made significant progress in its work on
the Chuditch PSC during 2023, a year when foundations were placed for the
exciting appraisal drilling for which the Company is preparing. Having
recently joined the Board, I've been impressed by both the quality of the
Timor-Leste asset and the capabilities and professionalism of Baron's
personnel. The Company is thus in a strong position for the rest of 2024 and
beyond as reinforces its focus on the energy hungry markets of SE Asia.
"We are grateful for the ongoing support of our shareholders and other
stakeholders, and I would like to particularly thank our team for their hard
work and dedication."
Posting of Annual Report and Notice of AGM
The Company's Annual Report and Financial Statements for the year ended 31
December 2023 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 21 June
2024 at Riverbank House, 2 Swan Lane, London, EC4R 3TT 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.
For further information, please contact:
Baron Oil +44 (0) 20 7117 2849
Plc
Dr Andy Butler, Chief Executive Officer
Allenby Capital +44 (0) 20 3328 5656
Limited
Nominated Adviser and Joint Broker
Nick Athanas, Nick Harriss, George Payne (Corporate Finance)
Kelly Gardiner, Stefano Aquilino (Sales and Corporate Broking)
Cavendish Capital Markets Limited +44 (0) 131 220 6939 / +44 (0) 207 397 8900
Joint Broker
Neil McDonald, Pearl Kellie (Corporate Finance)
Leif Powis (Sales)
IFC Advisory +44 (0) 20 3934 6630
Limited
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 Dr Andrew Butler, Fellow of the
Geological Society of London and member of the Society of Petroleum Engineers.
Dr Butler has more than 27 years' experience as a petroleum geologist. 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 both before and after taxation of
£1,712,000 (2022: loss of £1,387,000), which is wholly attributable to Baron
Oil shareholders, representing a loss of 0.009p per share (2022: loss of
0.01p).
The Group generated no revenue during the period but focused on exploring and
developing assets that the Board believes will generate revenue for the Group
in the future.
Exploration and evaluation expenditure incurred included in the Income
Statement amounted to £121,000 (2022: £213,000). A provision for Impairment
has been made in respect of UK Offshore Licence P2478 amounting to £187,000
as the prospect of the project being taken to a successful conclusion had
significantly diminished by 31 December 2023, and indeed the licence was
relinquished by the joint venture partners in March 2024. The Directors judged
that no other exploration assets required impairment.
Administration expenses for the year were £1,455,000 (2022: £1,191,000), an
overall increase on the preceding year of £264,000. Administration costs
arising in SundaGas (Timor-Leste Sahul) Pte.Ltd. ("TLS") have increased from
£441,000 previously to £568,000 this year as the operation in Dili continues
to gear up for the next phase of the Chuditch development. Directors and UK
staff salaries and related costs increased by £120,000 to £467,000 in the
year, details of which are contained in the Report of the Directors in the
Annual Report. Professional adviser fees increased from £157,000 previously
to £227,000, mainly due to higher broker costs.
At the end of the financial year, cash reserves of the Group had decreased to
£3,760,000 from a level at the preceding year end of £5,807,000 as the Group
absorbed cash in its continuing development operations. The Group's investment
in exploration and evaluation assets in the UK and Timor-Leste amounted to
£381,000 in the period, and there was a general operating cash outflow
amounting to £1,830,000. As a result of higher cash balances and increased
interest rates, the Company achieved interest receivable of £152,000.
There were no share issuances during 2023, other than the exercise by a former
director in February 2023 of 62,500,000 options. Following the end of the
reporting period, in February 2024 the Company raised £2,993,000 net of costs
from the issue of new share capital by way of a placing and subscription.
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
Southeast Asia: Timor-Leste TL-SO-19-16 PSC ("Chuditch PSC" or "PSC") (Baron
60% interest - since February 2024)
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 40-120 metres. The Chuditch-1 discovery well, drilled by
Shell in 1998 in 64 metres water depth, encountered a 25 metre net gas column
in Jurassic Plover Formation sandstone reservoirs at a depth of around 2,900
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 and subsequently reprocessed by Baron.
Throughout 2023, Baron held a 75% working interest and operated the PSC
through its wholly owned subsidiary SundaGas Banda Unipessoal Lda.
("SundaGas"), 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. In February
2024, the Group completed a transaction in which its working interest dropped
to 60%, following a partial transfer of its interest to TIMOR GAP. This
transaction is described in further detail below.
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 the seismic
reprocessing having supported the presence of a significant structure
associated with the Chuditch discovery. The successful conclusion of the 3D
seismic reprocessing project, and subsequent interpretation of those data
along with other studies, has definitively removed this subjectivity through
clear imaging of the Chuditch structure.
2023 and subsequent activities
The reprocessed 3D seismic data was delivered during 2022 and its evaluation,
in tandem with a number of geological and engineering studies, was completed
during 2023.
Consultancy group ERC Equipoise Ltd ("ERCE") was engaged to prepare a
Competent Person's Report ("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 1.16 Tcf of gas. The recognition of the resources as
being Contingent, rather than Prospective, was a major milestone and reflected
the significant improvement in understanding of the discovered resources
through the seismic reprocessing and other studies carried out on Chuditch.
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 Bcf 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
Resources for these prospects, at 2,128 Bcf of gas, are higher than 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 (http://www.baronoilplc.com) ).
There continues to be an excellent working relationship between SundaGas, the
Government Ministry of Petroleum and Mineral Resources ("MPM"), Autoridade
Nacional do Petróleo ("ANP"), the Government regulatory authority for
petroleum, and TIMOR GAP. The Company meets regularly with all of these bodies
and provides detailed updates around our activities, plans and timelines on
the PSC. The Company appreciates the support that it receives from these
various state entities and will continue to work on maintaining these close
relationships.
On 2 June 2023 and again on 5 December 2023, the Company announced two
six-month extensions to Contract Year Two of the Chuditch PSC. These
extensions were granted to provide additional time to complete detailed
further technical studies on the Chuditch field and to have sufficient time to
prepare for appraisal drilling. Contract Year 2 of the PSC now has an expiry
date of 18 June 2024.
On entry into Contract Year 3 of the PSC, the commitment will be to drill an
appraisal well within a 12-month period. Planning for this appraisal drilling
is ongoing, with a well expected to be drilled to a total depth of around
3,000 metres and to include a production test.
In anticipation of the drilling of an appraisal well on the Chuditch field
during Contract Year 3 of the PSC, organisational and technical preparations
for operational activities commenced in the second half of 2023. A highly
experienced Well Operations Manager was hired to lead this effort,
subsequently joined by Well Engineering, HSE (Health Safety &
Environment), Procurement and Well Testing professionals. Detailed and regular
workshops were initiated with ANP and TIMOR GAP, and discussions commenced
with providers of drilling services, including owners of drilling rigs. These
preparations have continued in earnest into 2024, including the completion of
a site survey at the planned drilling location in two phases between February
and April 2024. The Company currently anticipates that drilling operations
will commence in Q1 2025.
On 18 December 2023, the Company announced that it had agreed that TIMOR GAP
would increase its participation in the PSC from a 25% to a 40% working
interest. A Farm-Up Agreement to this effect was entered into on 23 January
2024 and the transaction completed on 7 February 2024 following approval by
ANP. Accordingly, the SundaGas 60% share is now responsible for 80% of the
costs of the Chuditch project and TIMOR GAP pays a 20% share. TIMOR GAP
subsequently paid approximately US$1 million to cover its share of prior costs
since the signing of the PSC.
During 2023, the Company held discussions with a number of other potential
partners in the PSC that expressed interest in participating in the Chuditch
project, including the drilling of the planned appraisal well, a process that
is still ongoing.
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 and giving
presentations to the Timor-Leste Student Chapter of the Society of Petroleum
Engineers.
More generally in Timor-Leste, increased E&P activity was seen both
onshore and offshore. During the year Timor Resources completed its initial
onshore drilling campaign, the first in 50 years, with a number of reported
oil and gas discoveries. In addition, the Greater Sunrise project continued to
move towards development with negotiations between its many stakeholders. In
December 2023, following the Second Licencing Round that closed in 2022, a new
PSC was signed by a subsidiary of the Italian major ENI, in the area known as
Block P, which sits between the Chuditch PSC and the Greater Sunrise gas
fields to the north of Chuditch. It is expected that 3D seismic acquisition
will commence over this new PSC area during late 2024.
United Kingdom Offshore Licence P2478 (relinquished 31 March 2024)
Innovate Licence P2478 was awarded in September 2019 and was held through 2023
by a joint venture comprising Reabold North Sea Limited ("Reabold", Licence
Administrator, interest 36%), Baron (32%), and Upland Resources (UK Onshore)
Limited (32%). The licence covered blocks 12/27c, 17/5, 18/1 and 18/2 in the
Inner Moray Firth area of the North Sea, containing the Dunrobin and Golspie
prospects.
The work commitments on the P2478 Licence were 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.
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 on budget. Detailed seismic attribute analysis
followed in early 2023 and in March 2023, the UK's North Sea Transition
Authority ("NSTA") confirmed that the obligation work programme was fully
complete.
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.
On 12 July 2023, the Company announced that the joint venture for Licence
P2478 had been granted a two-year extension to Phase A of the licence by the
UK North Sea Transition Authority ("NSTA"). A 'Drill or Drop' decision was
required on or before 14 July 2025. The extension further required an
additional commitment to acquire a minimum of 30 square kilometres of 3D
seismic data. However, following unavoidable and significant delays to the
acquisition of 3D seismic data, Licence P2478 was surrendered to the NSTA on
31 March 2024. The delays largely result from the continuous wind farm
construction activities in the area. All Phase A commitments had been
fulfilled and there remain no further obligations beyond the statutory
submission of a relinquishment report, which Reabold is currently preparing.
The Company had a high degree of expectation of this outcome at the end of the
financial period and determined that the carrying value of the asset should be
impaired in full in the 2023 Financial Statements.
Block XXI, Peru
In April 2022, Baron requested the relinquishment of Licence Block XXI in
Peru, a legacy asset dating from an earlier, Latin-America focused strategy.
Licence Block XXI had been largely under Force Majeure for a variety of
reasons since 2017. The Bank Guarantee of US$160,000 was released in full to
Baron in June 2022. Baron continues to work with the Peruvian authorities to
establish and file an Abandonment Plan. Ongoing costs are minimal, and we
expect to complete our withdrawal from Peru during 2024.
New Ventures
In January 2023, the Company announced that, as a joint venture non-operating
partner, it had submitted an application in the UK offshore 33rd Round of
licensing, conducted by the UK North Sea Transition Authority. On 3 May 2024,
the Company was informed that its application, as a joint venture
non-operating partner, had not been successful for a new licence.
Consequently, Baron no longer has any upstream assets in the United Kingdom.
Further potential new ventures are under consideration, with a focus on gas
opportunities in SE Asia, in line with the Company's revised strategy.
Corporate update
Subsequent to the reporting period, in February 2024, the Company completed a
Placing, Subscription and WRAP Retail Offer of new ordinary shares at 0.05p to
raise £3.26 million (gross). The monies are being applied to support the
Chuditch PSC (Timor-Leste) as it moves towards the key appraisal drilling
milestone.
On 1 July 2023, Dr Andy Butler was appointed to the Board as Director
Asia-Pacific, bringing his knowledge and involvement in the Timor-Leste asset
directly to the Board.
Subsequent to the reporting period, on 15 March 2024, Andy Butler took on the
role of Chief Executive replacing Andy Yeo, who left the Company on 1 April
2024. On 22 April 2024, John Wakefield stepped down as Non-Executive Chairman
and I was appointed in his place. In addition, on that date, it was announced
that Dr John Chessher had been appointed as an Independent Non-executive
Director and Rob Collins had been appointed as non-Board Chief Financial
Officer. On 30 April 2024, Jon Ford stepped down from the Board, although he
has been retained by the Company in a part-time consultancy role. Information
on the backgrounds of the new directors are provided in the Report of the
Directors in the Annual Report.
Conclusions
I am pleased to report that Baron made significant progress in its work on the
Chuditch PSC during 2023, moving from completion of the subsurface evaluation
(and publication of a CPR) through to extensive preparations towards the
drilling of an appraisal well. This is an asset that has considerable and
potentially transformative value for the Company and its shareholders.
The recent relinquishment of UK licence P2478, together with the previously
announced results of the UK 33(rd) Licencing Round, means that the Company has
now fully withdrawn from the UK. Baron will now focus all its attentions on
its core business in SE Asia, where the Company has an exciting and valuable
asset in Timor-Leste, a highly experienced operating team and a pipeline of
material new venture opportunities across the region.
The decision by TIMOR GAP to increase their participation in the Chuditch
project was a particular highlight for the year, confirming the Timor-Leste
government's strong support for the Company's efforts and their belief in the
development potential of the field. We look forward to updating shareholders
on progress regarding other potential funding partners for the Chuditch
project as soon as it is appropriate to do so.
The recent refreshment of the Board, including the appointment of Dr Andy
Butler to the Chief Executive role, highlights Baron's strategic pivot towards
SE Asia, and in particular gas projects in that region. The Company enjoys a
an excellent reputation in the region, where many of our team of experts are
located. New independent non-executive director Dr John Chessher further
strengthens Baron's SE Asia capabilities, with his extensive experience and
networks in capital markets in the region.
SE Asia continues to see robust growth in energy demand and the Company
recognises considerable opportunity for value creation in this arena,
commencing with the Chuditch project. Our proposed change of Company name to
Sunda Energy Plc encapsulates the change of emphasis towards the Orient.
I extend my thanks to all stakeholders of the Company, including my fellow
directors, our employees and consultants, joint venture partners and
governments, for their strong support of the Company's efforts. We are
especially grateful for the support of our investors, including through the
funding event in early 2024. As a result, we have a well-funded balance
sheet covering our current activities and commitments. As at 31 December 2023
we had cash reserves of £3.8 million (2022: £5.8 million), and the cash
balance stood at £5.5 million at 22 May 2024.
Gerry Aherne
Non-executive Chairman
24 May 2024
CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2023
Notes 2023 2022
£'000 £'000
Revenue - -
Cost of sales - -
Gross profit - -
Exploration and evaluation expenditure 3 (121) (213)
Intangible asset impairment 10 (187) -
Property, plant and equipment impairment and depreciation 9 (37) (33)
Peru closure costs (26) -
Administration expenses 3 (1,455) (1,191)
(Loss)/gain on exchange 3 (32) 43
Operating loss 3 (1,858) (1,394)
Finance cost 6 (6) (5)
Finance income 6 152 12
Loss on ordinary activities
before taxation (1,712) (1,387)
Income tax expense 7 - -
Loss for the year (1,712) (1,387)
Loss on ordinary activities
after taxation attributable to:
Equity shareholders (1,712) (1,387)
(1,712) (1,387)
Earnings per ordinary share - continuing
Basic 8 (0.009p) (0.010p)
Diluted (0.009p) (0.010p)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE
YEAR ENDED 31 DECEMBER 2023
2023 2022
£'000 £'000
Loss on ordinary activities after taxation attributable to owners of the (1,712) (1,387)
parent
Other comprehensive income: items which may subsequently be reclassified to
profit and loss
(Loss)/gain on translating foreign operations (172) 174
Total comprehensive loss for the year (1,884) (1,213)
Total comprehensive loss attributable to
Owners of the parent (1,884) (1,213)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2023
Restated
Notes 2023 2022
£'000 £'000
Assets
Non-current assets
Property plant and equipment 9 41 78
Intangible fixed assets 10 3,781 3,696
Goodwill 11 - -
3,822 3,774
Current assets
Trade and other receivables 13 91 101
Performance bond guarantee deposit 14 786 827
Cash and cash equivalents 15 3,760 5,807
4,637 6,735
Total assets 8,459 10,509
Equity and liabilities
Capital and reserves attributable to owners of the parent
Share capital 18 4,746 4,730
Share premium account 19 38,881 38,846
Share option reserve 19 319 332
Foreign exchange translation reserve 19 715 887
Retained earnings 19 (36,406) (34,707)
Total equity 8,255 10,088
Current liabilities
Trade and other payables 16 185 377
Taxes payable 16 15 14
200 391
Non-current liabilities
Lease finance 16/17 4 30
Total equity and liabilities 8,459 10,509
The financial statements were approved and authorised for issue by the Board
of Directors on 24 May 2024 and were signed on its behalf by:
G Aherne A Butler
Director Director
Company number: 05098776
COMPANY STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2023
Restated
Notes 2023 2022
£'000 £'000
Assets
Non-current assets
Property plant and equipment 9 9 21
Intangible fixed assets 10 - 159
Investments 12 5,865 5,002
5,874 5,182
Current assets
Trade and other receivables 13 56 61
Cash and cash equivalents 15 3,652 5,625
3,708 5,686
Total assets 9,582 10,868
Equity and liabilities
Capital and reserves attributable to owners of the parent
Share capital 18 4,746 4,730
Share premium account 19 38,881 38,846
Share option reserve 19 319 332
Foreign exchange translation reserve 19 - -
Retained earnings 19 (34,479) (33,248)
Total equity 9,467 10,660
Current liabilities
Trade and other payables 16 100 185
Taxes payable 16 15 14
115 199
Non-current liabilities
Lease finance 16/17 - 9
Total equity and liabilities 9,582 10,868
As permitted by section 408 of the Companies Act 2006, the Company's income
statement has not been included in these financial statements. The loss of the
Company for the year was £1,244,000 (2022: loss of £555,000).
The financial statements were approved and authorised for issue by the Board
of Directors on 24 May 2024 and were signed on its behalf by:
G Aherne A Butler
Director Director
Company number: 05098776
CONSOLIDATED AND COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31
DECEMBER 2023
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 2022 (restated) 2,896 34,061 (33,376) 388 713 4,682
Shares issued 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 1 January 2023 4,730 38,846 (34,707) 332 887 10,088
Shares issued 16 35 - - - 51
Transactions with owners 16 35 - - - 51
Loss for the year attributable to equity shareholders - - (1,712) - - (1,712)
Share option reserve released - - 13 (13) - -
Foreign exchange translation adjustments - - - - (172) (172)
Total comprehensive income for the period - - (1,699) (13) (172) (1,884)
As at 31 December 2023 4,746 38,881 (36,406) 319 715 8,255
CONSOLIDATED AND COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31
DECEMBER 2023 - continued
Foreign
Share Share Retained Share option exchange Total
capital premium earnings reserve translation equity
£'000 £'000 £'000 £'000 £'000 £'000
Company
As at 1 January 2022 (restated) 2,896 34,061 (32,749) 388 - 4,596
Shares issued 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 1 January 2023 4,730 38,846 (33,248) 332 - 10,660
Shares issued 16 35 - - - 51
Transactions with owners 16 35 - - - 51
Loss for the year - - (1,244) - - (1,244)
Share option reserve released - - 13 (13) - -
Total comprehensive income for the period - - (1,231) (13) - (1,244)
As at 31 December 2023 4,746 38,881 (34,479) 319 - 9,467
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.
Share option reserve represents the accumulated value of share-based payments
charged to the Income Statement on outstanding share options (see note 20).
Foreign exchange translation occurs on consolidation of the translation of the
branch or 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 2023
Group Company Group Company
2023 2023 2022 2022
£'000 £'000 £'000 £'000
Operating activities (1,830) (1,084) (1,750) (582)
Investing activities
Interest received 152 149 12 11
Advances to subsidiaries - (1,050) - (1,848)
Performance bond guarantee deposit returned - - 128 -
Additions to exploration and evaluation assets (381) (28) (806) (91)
Acquisition of tangible assets (2) - (17) -
(231) (929) (683) (1,928)
Financing activities
Net proceeds from issue of share capital 51 51 6,619 6,619
Lease financing (37) (11) (29) (11)
14 40 6,590 6,608
Net cash (outflow)/ inflow (2,047) (1,973) 4,157 4,098
Cash and cash equivalents at the beginning of the year 5,807 5,625 1,650 1,527
Cash and cash equivalents at the end of the year 3,760 3,652 5,807 5,625
CONSOLIDATED AND COMPANY STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31
DECEMBER 2023 - continued
Note to the Consolidated and Company Statement of Cash Flow
Group Company Group Company
2023 2023 2022 2022
£'000 £'000 £'000 £'000
Operating activities
Loss for the year attributable to controlling interests (1,712) (1,244) (1,387) (555)
Depreciation, amortisation and impairment charges 224 161 33 55
Finance income shown as an investing activity (152) (149) (12) (11)
Interest on lease liability 6 1 4 1
Foreign exchange translation (20) 225 (74) (205)
Operating cash outflows before movements in working capital (1,654) (1,006) (1,436) (715)
Decrease/(increase) in receivables 10 5 (47) 22
(Decrease)/increase in payables (186) (83) (267) 111
Net cash outflows from operating activities (1,830) (1,084) (1,750) (582)
NOTES TO THE FINANCIAL STATEMENTS
General Information
Baron Oil Plc is a public limited 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.
(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 the period to 30
June 2025 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. The Group is intending to drill the
Chuditch-2 appraisal well as part of the work program for Year 3 of the PSC,
which is scheduled to expire on 18 June 2025. In the event that the entirety
of drill funding is not secured in adequate time to enable this activity to
conclude in the period, then the Directors would seek an extension to Year 3,
as they were granted in Year 1 and Year 2.
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
a) The impact of new IFRSs adopted during the year
During the current year, the Group adopted all new and revised standards and
interpretations issued by the International Accounting Standards Board and the
International Financial Reporting Interpretations Committee and that are
endorsed by the UK that are effective for annual accounting periods beginning
on 1 January 2023. None of them had a material impact on the group financial
statements.
- Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice
Statement 2)
The amendments to IAS 1 require companies to disclose their material
accounting policy information rather than their significant accounting
policies.
- Definition of Accounting Estimates (Amendments to IAS 8)
The amendments clarify how companies should distinguish changes in accounting
policies from changes in accounting estimates. That distinction is important
because changes in accounting estimates are applied prospectively only to
future transactions and other future events, but changes in accounting
policies are generally also applied retrospectively to past transactions and
other past events.
- Deferred Tax Relating to Assets and Liabilities arising from a Single
Transaction (Amendments to IAS 12)
IAS 12 specifies how a company accounts for income tax, including deferred
tax, which represents tax payable or recoverable in the future. In specified
circumstances, companies are exempt from recognising deferred tax when they
recognise assets or liabilities for the first time. The amendments clarify
that the exemption does not apply and that companies are required to recognise
deferred tax on such transactions.
b) 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 16 Leases (Amendments) (Effective from the year ending 31 December 2024)
The amendments affect only the subsequent measurement of lease liabilities
arising from a sale and leaseback transaction with variable lease payments,
which occurred from the date of initial application of IFRS 16 and for which
the seller-lessee's accounting policy differs from the requirements specified
in these amendments.
- IAS 1 Presentation of Financial Statements (Amendments to Classification of
Liabilities as Current or Non-current) (Effective from the year ending 31
December 2024)
The amendments clarify that liabilities are classified as either current or
non-current, depending on the rights that exist at the end of the reporting
period. Classification is unaffected by the expectations of the entity or
events after the reporting date. The amendment also clarifies what IAS 1 means
when it refers to the 'settlement' of a liability.
- IAS 1 Presentation of Financial Statements (Amendment to Non-current
liabilities with covenants). (Effective from the year ending 31 December 2024)
The amendments improved the information an entity provides when its right to
defer settlement of a liability for at least 12 months is subject to
compliance with covenants.
The Board are 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 reported results.
Basis of consolidation
The consolidated financial statements include the financial statements of the
Company and its subsidiaries using the acquisition method of accounting.
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.
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.
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 in the Statement of Cash Flows 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.
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
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 is Pounds Sterling (£). 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 appraisal 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 10 and 13 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 appraisal of, oil and gas resources that can be
commercially developed and produced, 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 was taking place up to and
including the reporting period.
Exploration and appraisal year ended 31 December 2023
United South South East
Kingdom America Asia Total
£'000 £'000 £'000 £'000
Revenue - - - -
Cost of sales - - - -
Gross profit - - - -
Exploration and evaluation expenditure (75) - (46) (121)
Intangible asset impairment (187) - - (187)
Property, plant and equipment impairment and depreciation (12) - (25) (37)
Peru closure costs - (26) - (26)
Administration expenses (878) (9) (568) (1,455)
Loss on exchange (32) - - (32)
Operating loss (1,184) (35) (639) (1,858)
Finance cost (1) - (5) (6)
Finance income 149 3 - 152
Loss before taxation (1,036) (32) (644) (1,712)
Income tax expense - - - -
Loss after taxation (1,036) (32) (644) (1,712)
Assets and liabilities
Segment assets 65 - 4,634 4,699
Cash and cash equivalents 3,652 1 107 3,760
Total assets 3,717 1 4,741 8,459
Segment liabilities 102 - 87 189
Current tax liabilities 15 - - 15
Total liabilities 117 - 87 204
Other segment items
Capital expenditure 28 - 355 383
Depreciation, amortisation and impairment charges 199 - 25 224
Exploration and appraisal 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
Operating loss (722) (72) (600) (1,394)
Finance costs (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 - 213 225
3. Operating loss 2023 2022
£'000 £'000
The operating loss is stated after charging:
Auditor's remuneration
Audit of group and company financial statements - current year 30 29
Audit of group and company financial statements - prior year - 4
Non-audit services: tax compliance 2 2
Non-audit services: other assurance services 2 2
Exploration and evaluation expenditure 121 213
Impairment of intangible assets 187 -
Depreciation of property, plant and equipment 37 33
Loss/(gain) on exchange 32 (43)
The analysis of development and administrative expenses in the consolidated
income statement by nature of expense is:
2023 2022
£'000 £'000
Employee benefit expense 764 632
Exploration and evaluation expenditure 121 213
Depreciation, amortisation and impairment charges 224 33
Legal and professional fees 509 410
Peru closure costs 26 -
Loss/(gain) on exchange 32 (43)
Other expenses 182 149
1,858 1,394
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:
2023 2022
Group Company Group Company
Number Number Number Number
Directors 4 4 3 3
Technical and production 4 - 4 -
Administration 2 1 2 1
Total 10 5 9 4
The aggregate payroll costs of these persons were as follows: £'000 £'000 £'000 £'000
Wages and salaries 221 54 206 49
Directors' fees, salaries and benefits 483 483 390 390
Social security costs 72 62 47 47
776 599 643 486
5. Directors' emoluments
2023 2022
£'000 £'000
Directors' remuneration 483 390
Compensation for loss of office - -
Share based payments - -
483 390
Management fees paid to an entity in which a director is a shareholder are
disclosed in note 25
No directors benefitted from pension contributions in 2023 or 2022.
Highest paid director emoluments and other benefits are as listed below.
2023 2022
£'000 £'000
Remuneration 280 214
Post termination benefits - 17
Share based payments - -
280 231
Total remuneration in respect of key management personnel amounted to
£537,000 (2022: £432,000). Key management personnel remuneration consisted
solely of short-term benefits in 2022 and 2023, other than £17,000 of post
termination benefits recorded in 2022.
6. Finance income and expenses 2023 2022
£'000 £'000
Bank and other interest received 152 12
Interest on right of use asset finance (6) (4)
Other finance cost - (1)
Total 146 7
7. Income tax expense 2023 2022
£'000 £'000
The tax charge on the loss on ordinary activities was:-
UK Corporation Tax - current and deferred - -
Foreign taxation - -
- -
The total charge for the year can be reconciled to the accounting result as
follows:
2023 2022
£'000 £'000
Loss before tax (1,712) (1,387)
Tax at composite group rate of 27.9% (2022: 18.6%) (478) (258)
Effects of:
Losses not subject to tax 127 163
Movement on capital allowances (91) (76)
Increase in tax losses 442 171
Tax expense - -
At 31 December 2023, the Group had estimated tax losses of £38,022,000 (2022
- £36,011,000) to carry forward against future profits. The potential
deferred tax asset on these tax losses at a composite group rate of 29.7% of
£11,279,000 (2022: at 29.5%, 10,636,000) 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 27.9%
(2022: 18.6%) 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
8. Earnings per share
2023 2022
Loss per ordinary share
- Basic (0.009p) (0.010p)
- Diluted (0.009p) (0.010p)
Earnings per ordinary share is based on the Group's loss attributable to
controlling interests for the year of £1,712,000 (2022: £1,387,000).
The weighted average number of shares used in the calculation is the weighted
average ordinary shares in issue during the year of 18,973,685,086 (2022:
13,784,079,264).
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.
9. Property, plant and equipment
Equipment and Right of use
machinery assets Total
£'000 £'000 £'000
Group
Cost
At 1 January 2022 31 45 76
Foreign exchange translation adjustment 4 - 4
Additions 17 62 79
Disposals (34) - (34)
At 1 January 2023 18 107 125
Foreign exchange translation adjustment (1) (3) (4)
Additions 2 - 2
At 31 December 2023 19 104 123
Depreciation
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 1 January 2023 5 42 47
Foreign exchange translation adjustment - (2) (2)
Charge for the period 6 31 37
At 31 December 2023 11 71 82
Net book value
At 31 December 2023 8 33 41
At 31 December 2022 13 65 78
Right of Use assets of £33,000 (2022: £65,000) relate to a motor vehicle and
an office lease.
Equipment and Right of use
machinery assets Total
£'000 £'000 £'000
Company
Cost
At 1 January 2022, 31 January and 31 December 2023 1 45 46
Depreciation
At 1 January 2022 - 13 13
Charge for the period - 12 12
At 1 January 2023 - 25 25
Charge for the period - 12 12
At 31 December 2023 - 37 37
Net book value
At 31 December 2023 1 8 9
At 31 December 2022 1 20 21
Right of Use assets of £8,000 (2022: £20,000) relate to a motor vehicle.
10. Intangible fixed assets Exploration
and evaluation
assets Total
£'000 £'000
Group
Cost
At 1 January 2022 5,054 5,054
Foreign exchange translation adjustment 275 275
Additions 806 806
Consolidation of single asset company (2,439) (2,439)
At 1 January 2023 3,696 3,696
Foreign exchange translation adjustment (109) (109)
Additions 381 381
At 31 December 2023 3,968 3,968
Impairment
At 1 January 2022 2,318 2,318
Foreign exchange translation adjustment 121 121
Disposals (2,439) (2,439)
At 1 January 2023 - -
Charge for the period 187 187
At 1 January and 31 December 2023 187 187
Net book value
At 31 December 2023 3,781 3,781
At 31 December 2022 3,696 3,696
Exploration
and evaluation
assets Total
£'000 £'000
Company
Cost
At 1 January 2022 703 703
Additions 91 91
Disposals (635) (635)
At 1 January 2023 159 159
Expenditure 28 28
At 31 December 2023 187 187
Impairment
At 1 January 2022 635 635
Disposals (635) (635)
At 1 January 2023 - -
Charge for the year 187 187
At 31 December 2023 187 187
Net book value
At 31 December 2023 - -
At 31 December 2022 159 159
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 UK Offshore Licence P2478 exploration
assets.
In relation to Chuditch, the Directors concluded that the facts did not give
rise to an impairment and therefore no impairment charge has been reflected in
2023 (2022: £nil).
In the case of the P2478 licence, the Directors concluded that, as a result of
the increasing difficulty in pursuing the work programme due to factors that
are beyond the Company's control, there was a strong possibility that the
Company will not be able to pursue the development of the licence and judged
that whole carrying value should be impaired. This results in an impairment
charge of £187,000 (2022: nil). In the event, the Company and its joint
venture relinquished its licence on 31 March 2024. The impairment is
separately presented in the income statement and is attributed to the UK
operating segment.
11. Goodwill Goodwill on
consolidation
of subsidiaries
£'000
Group
Cost
At 1 January 2022 81
Goodwill written off (81)
At 1 January and 31 December 2023 -
Impairment
At 1 January 2022 81
Adjustment on write off of goodwill (81)
At 1 January and 31 December 2023 -
Net book value
At 31 December 2023 -
At 31 December 2022 -
The carrying value of goodwill represents the purchase of shares in Gold Oil
Peru SAC. This was written off in the preceding period as there is no prospect
of recovery.
12. Investments
Loans to Shares in
group group
undertakings undertakings Total
£'000 £'000 £'000
Company
Cost
At 1 January 2022 1,824 7,548 9,372
Exchange rate adjustment 205 - 205
Additions - - -
Net loan movements 1,811 - 1,811
At 1 January 2023 3,840 7,548 11,388
Exchange rate adjustment (225) - (225)
Net loan movements 1,050 - 1,050
At 31 December 2023 4,665 7,548 12,213
Impairment
At 1 January 2022 899 5,444 6,343
Charge/(release) for the year 43 - 43
At 1 January 2023 942 5,444 6,386
Charge/(release) for the year (38) - (38)
At 31 December 2023 904 5,444 6,348
Carrying value
At 31 December 2023 3,761 2,104 5,865
At 31 December 2022 2,898 2,104 5,002
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 consider 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
£6,348,000 (2022: £6,386,000).
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 (THM) 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 2023 2022
Group Company Group Company
£'000 £'000 £'000 £'000
Trade receivables - - - -
Other receivables 27 23 24 24
Prepayments 64 33 77 37
91 56 101 61
14. Bank guarantee bond 2023 2022
Group Company Group Company
£'000 £'000 £'000 £'000
Bank guarantee bond at 31 December 2023 786 - 827 -
The Company's wholly-owned subsidiary, SundaGas Banda Unipessoal, Lda
("SundaGas"), had provided a performance guarantee to Autoridade Nacional do
Petróleo ("ANP") in respect of the offshore Timor-Leste TL-SO-19-16
Production Sharing Contract ("PSC"). This performance guarantee was previously
secured by a bank guarantee given by United Overseas Bank Limited of Singapore
("UOB") which required SundaGas to place a bond with UOB of US$1 million. This
arrangement was originally put in place in December 2019 triggering the
effective date at the outset of the PSC, was extended in November 2022, and
expired on 1 August 2023. On expiry, a new bank guarantee given by Australia
and New Zealand Banking Group Limited ("ANZ) was established which required
SundaGas to place a new bond with ANZ for the same amount. ANZ are A-rated by
all the main credit rating agencies and the exposure to credit risk is
considered low. The bank guarantee will remain in place for the current phase
of the PSC.
The original bond was set up by SundaGas Pte. Ltd ("SGPL"), the former owners
of SundaGas, and remained in their name beyond the acquisition of SundaGas by
the Company, so as to not disrupt the contractual position of the PSC until
the expiry of the UOB guarantee on 1 August 2023. At that time, the original
bond was initially released to SGPL who accounted for the funds to SundaGas in
accordance with the Relationship Agreement that exists between the parties.
15. Cash and cash equivalents 2023 2022
Group Company Group Company
£'000 £'000 £'000 £'000
Bank current accounts 131 24 837 655
Bank deposit accounts 3,629 3,628 4,970 4,970
3,760 3,652 5,807 5,625
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 2023 2022
Group Company Group Company
£'000 £'000 £'000 £'000
Trade payables 18 18 67 66
Accruals 136 73 274 109
Lease finance liability due within 12 months 31 9 36 10
Taxation 15 15 14 14
200 115 391 199
Non-current liabilities
Lease finance liabilities due after 12 months 4 - 30 9
17. Lease finance
Lease liabilities are presented in the statement of financial position as
follows:
2023 2022
Group Company Group Company
£'000 £'000 £'000 £'000
Current 31 9 36 10
Non-current 4 - 30 9
35 9 66 19
2023 2022
18. Share capital
£'000 £'000
Allotted, called up and fully paid
18,982,760,428 (2022: 18,920,260,428) ordinary shares of £0.00025 each 4,746 4,730
4,746 4,730
The Company issued 62,500,000 new ordinary shares of £0.00025 each at £0.001
per share on 20 February 2023 for cash resulting from the exercise of share
options.
Ordinary shares entitle the holder to full rights as to voting, dividends and
any distribution upon winding up.
Foreign
19. Share premium and reserves
Share Share exchange Profit
premium option translation and loss
account reserve reserve account
£'000 £'000 £'000 £'000
Group
At beginning of the year 38,846 332 887 (34,707)
Loss for the year attributable to controlling interests - - - (1,712)
Issue of new shares 47 - - -
Share issue costs (12) - - -
Share option reserve released - (13) - 13
Foreign exchange translation adjustments - - (172) -
38,881 319 715 (36,406)
Company
At beginning of the year 38,846 332 - (33,248)
Loss for the year - - - (1,244)
Issue of new shares 47 - - -
Share issue costs (12) - - -
Share option reserve released - (13) - 13
38,881 319 - (34,479)
Details of options and warrants issued, exercised and lapsed during the year
together with options and warrants outstanding at 31 December 2023 are as
follows:
Exercise 1 January 2023 Exercised Lapsed or cancelled 31 December 2023
Issue date Final exercise date price Number Number Number Number Number
26 May 2020 26 May 2030 £0.00100 125,000,000 - (62,500,000) - 62,500,000
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
1,420,000,000 - (62,500,000) - 1,357,500,000
* These options have been granted to two external contractors who have been
engaged by SundaGas (Timor-Leste Sahul) Pte. Ltd.
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 Lapsed or 31 December
Exercise 2022 New 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
The number of share options which were exercisable at year end was
1,182,500,000 (2022: 1,245,000,000). The weighted average remaining life of
share options at the year end was 7 years (2022: 7 years). The weighted
average exercise price (in pence) applying to share options during the year
was as follows:
2023 2022
Opening 0.07p 0.08p
Exercised 0.10p 0.10p
Lapsed - 0.08p
Cancelled - 0.10p
Issued - 0.07p
Closing 0.07p 0.07p
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
The warrants and options will not normally be exercisable during a closed
period, and furthermore can only be exercisable if the performance conditions
are satisfied. Warrants and options, which have vested immediately before
either the death of a participant or his ceasing to be an eligible employee by
reason of injury, disability, redundancy or dismissal (otherwise than for good
cause) shall remain, exercisable (to the extent vested) for 12 months after
such cessation, and all non-vested options shall lapse.
Volatility was determined by reference to the company's historical share price
volatility over a suitable period.
On 14 July 2022, the company awarded 175,000,000 share options to a Dr A
Butler, a director of the Company and also 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 or 2023. A
detailed summary of the current status and future plans for the Chuditch
project are given in the Chairman's Statement & Operations Report.
21. Financial instruments
The Group's and Company's activities expose them 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 and Company's
activities also expose them to non-financial risks: market risk. The Group's
and Company'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 and Company are exposed through their 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 and the Company are exposed to
risks that arise from its use of financial instruments. This note describes
the Group's and the Company'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 or the Company'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 and the Company, 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 and
the Company'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 and the Company's competitiveness and flexibility.
Further details regarding these policies are set out below:
Credit risk
The Group's and the Company's principal financial assets are bank balances and
cash, the bank guarantee bond, 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 statements 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 2023 and 2022 there were no trade receivables.
Cash flow interest rate risk
The Group and the Company are exposed to cash flow interest rate risk from its
deposits of cash and cash equivalents with banks.
The cash balances maintained by the Group and the Company 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 and the Company are not at present exposed to cash flow interest
rate risk on borrowings as neither 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 and the Company'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 2023 Financial assets on which interest earned Financial assets on which interest not earned Total
Group
£'000 £'000 £'000
UK sterling 2,509 33 2,542
US dollar (USD) 1,120 906 2,026
Singapore Dollar (SGD) - 3 3
Peruvian Nuevo Sol (PEN) - - -
3,629 942 4,571
31 December 2022 Financial assets on which interest earned Financial assets on which interest not earned Total
Group
£'000 £'000 £'000
UK sterling 4,802 397 5,199
US dollar (USD) 168 1,287 1,455
Peruvian Nuevo Sol (PEN) - 4 4
4,970 1,688 6,658
31 December 2023 Financial assets on which interest earned Financial assets on which interest not earned Total
Company
£'000 £'000 £'000
UK sterling 2,509 11 2,520
US dollar (USD) 1,120 13 1,133
3,629 24 3,653
31 December 2022 Financial assets on which interest earned Financial assets on which interest not earned Total
Company
£'000 £'000 £'000
UK sterling 4,802 373 5,175
US dollar (USD) 168 282 450
4,970 655 5,625
The Group and the Company earned interest on its interest-bearing financial
assets at rates between 2% and 5.5% (2022 1.5% and 4%) 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 2022 was prepared under the same assumptions.
Group and Company Change of 1.0% in the interest rate as of
31 December 2023 31 December 2022
Increase of 1.0% Decrease of 1.0% Increase of 1.0% Decrease of 1.0%
Instruments bearing variable interest (£'000) 36 (36) 50 (50)
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 and the Company have 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 and the
Company's operation risk, the 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 or the
Company 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:
Group and Company USD SGD PEN
Average for year ended 31 December 2023 1.24 1.67 4.60
At 31 December 2023 1.27 1.68 4.63
Average for year ended 31 December 2022 1.24 1.71 4.73
At 31 December 2022 1.21 1.62 4.55
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
2022 was prepared under the same assumptions.
Change of 10.0% in the GBP/USD rate as of
31 December 2023 31 December 2022
Increase of 10.0% Decrease of 10.0% Increase of 10.0% Decrease of 10.0%
Net assets (£'000) - Group (402) 492 (319) 390
Net assets (£'000) - Company (445) 544 (135) 165
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.
All of the Group's and the Company's financial liabilities are due within one
year other than undiscounted lease liabilities due after one year of £4,000.
Price risk
Potential oil and gas sales revenue is subject to energy market price risk.
Given that the Group and the Company currently do not have production, it is
not considered appropriate for the Group or the Company 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 and the Company 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 2023 Average price 31 December 2022
2023
Crude oil - WTI
Per barrel - US$ $72 $78 $81
Per barrel - £ £57 £63 £67
══════ ══════ ══════
Natural gas LNG Japan/Korea Marker (Platts)
Per Million Btu - US$ $9 $12 $19
Per Million Btu - £ £7 £12 £15
══════ ══════ ══════
Oil and gas prices are dependent on a number of factors impacting world supply
and demand. Due to these factors, prices may be subject to significant
fluctuations from year to year. However, these prices had no effect on the
Group's results for 2023, since it had no production.
Capital risk
The Group's and the Company's objectives when managing capital are to
safeguard the ability to continue as a going concern in order to provide
returns for shareholders and benefits to other stakeholders and to maintain an
optimal capital structure to reduce the cost of capital.
22. Capital commitments
As of 31 December 2023, there were no capital commitments (2022: none).
23. Contingent Liabilities
The Company considers that there are no potential decommissioning costs in
respect of abandoned fields.
24. Events after the reporting period
On 7 February 2024, the Company entered into a Farm-Up Agreement with TIMOR
GAP, whereby TIMOR GAP would increase its participation in the Chuditch PSC
from a 25% to a 40% working interest. The incremental 15% interest assigned
included a share of the obligation to carry the costs of the initial TIMOR GAP
25% interest and accordingly the Group's 60% share is now responsible for 80%
of the costs of the Chuditch project and TIMOR GAP pays a 20% share of the
costs of the Chuditch project. Shortly after completion of the transaction,
TIMOR GAP paid approximately US$ 1 million to cover its share of prior costs
since the signing of the PSC.
On 29 February 2024, the Company issued 6,528,023,360 new ordinary shares of
0.025p each at an issue price of 0.05 pence per share, raising new capital of
£3,264,000 gross, £2,993,000 net of costs.
On 15 March 2024, the Company announced that Dr Andy Butler (formally Director
Asia-Pacific) had taken on the role of Chief Executive Officer of the Company
and the Board's shift of priority to progress and realise the value in the
Chuditch project in Timor-Leste
On 31 March 2024, the joint venture for UK Offshore Licence P2478 relinquished
its licence following unavoidable and significant delays to the acquisition of
3D seismic data outside the control of the Company. All commitments under the
licence have been fulfilled and there are no further financial obligations.
On 7 May 2024, the Company confirmed that its application as a joint venture
non-operating partner, in the UK offshore 33rd Round of licensing, conducted
by the UK North Sea Transition Authority was unsuccessful.
25. 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 2023 Year ended 31 December 2022
Balance Loan advance Balance Loan advance/
(repayment)
£'000 £'000 £'000 £'000
SundaGas (Timor-Leste Sahul ) Pty. Ltd 2,878 1,031 1,977 1,622
SundaGas Banda Unipessoal, Lda 883 8 921 253
Gold Oil Peru S.A.C * 904 10 941 (64)
* The company has provided for an impairment of £904,000 (2022: £941,000) on
the outstanding loans.
Group and company
SundaGas (Timor-Leste Sahul) Pty. Ltd ("TLS"), a wholly-owned subsidiary paid
fees amounting to US$315,000 (2022: US$285,000) to SundaGas Pte. Ltd, a
company in which Dr. Andrew Butler, a director of the Company, held a
significant interest. These fees are in respect of services to the group
including management time and finance and accounting services.
The directors' aggregate remuneration and any associated benefits in respect
of qualifying services are disclosed in note 5.
26. Restatement of comparative figures
The Directors have reviewed the constituent elements of the Foreign Exchange
Translation Reserve and have concluded that such reserves amounting to
£848,000 relating to subsidiaries disposed and branches closed in prior years
should have been transferred to Retained Earnings. Therefore the comparative
period has been restated to represent this reallocation.
None of the restatements impact on the Earnings Per Share as reported in 2022
or 2023. The only affected line items are Retained Earnings and the Foreign
Exchange Translation Reserves.
Glossary of Technical Terms
Bcf Billion standard cubic feet of natural gas.
Geological chance 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 or Pmean 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 gas
TGS-NOPEC TGS-NOPEC Geophysical Company.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR BRGDUDDDDGSR