TIDMMUST
RNS Number : 6840M
Mustang Energy PLC
13 May 2020
Wednesday 13 May, 2020
Mustang Energy PLC
Annual Report & Financial Statements for the Year to 31
December 2019
Mustang Energy PLC
13 May 2020
Mustang Energy PLC
Annual Report & Financial Statements for the Year to 31
December 2019
Mustang Energy PLC (the "Company" or "Mustang"), a special
purpose acquisition company formed to acquire oil and gas projects
in developed jurisdictions, is pleased to announce its annual
results for the year ended 31 December 2019.
Period Highlights:-
* Due diligence completed & bids placed on a number of
producing US oil and gas assets
* Low administrative overheads maintained
* Cash balance GBP516,557, as at 31 December 2019
Post-Period Highlights:-
* Discussions with a number of companies in Western
Europe to acquire non-operating interests in
producing oil and gas properties
* Acquisition targets expanded post weaker oil price
environment & COVID-19 impact to include the wider
energy industry, & potentially outside the energy &
natural resources industries
Commenting, Dean Gallegos, Managing Director of the Company,
said: "We continue to evaluate potential opportunities both in
producing oil & gas assets as per our original objective.
However, given both the lower oil price & the underlying
environment as a result of COVID-19, we are now also considering
opportunities across the energy & resources space as well as
possibly beyond it "
ABOUT THE COMPANY
Mustang aims to use strong management experience and
relationships to acquire interests in low cost, low risk
development projects that possess significant undeveloped upside
with access to existing infrastructure.
ENQUIRIES
For further information, please visit www.mustangplc.com ,
follow us on Twitter @Mustang_Plc , or contact:
Mustang Energy PLC
Dean Gallegos, Managing Director
dg@mustangplc.com
+61 416 220007
Optiva Securities (Broker)
Jeremy King
Jeremy.king@optivasecurities.com
+44(0)203 137 1904
Company information
Directors
Alan Broome, AM
Dean L Gallegos
Peter Wale
Simon Holden
Company Secretary Simon Holden Registered Office
48 Chancery Lane, London, WC2A 1JF
Registered Number
11155663
Brokers
Optiva Securities Limited
49 Berkeley Square
London W1J 5AZ
Independent Auditor
BDO LLP
55 Baker Street London W1U 7EU
Solicitors
Druces LLP
Salisbury House, London Wall
EC2M 5PS
Principal Bankers
Metro Bank Plc
One Southampton Row London WC1 5HA
Registrars
Share Registrars Limited
The Courtyard, 17 West Street
Farnham, Surrey, GU9 7DR
Chairman's Statement
The Company was formed to undertake an acquisition of a target
business, or asset(s) with operations in the energy or natural
resources sectors.
As you are aware the Company's shares began trading on the
standard list of the London Stock Exchange on the 29 July 2019
after raising GBP750,000. Even though the Company has only been
funded for a very short period of time we have been active in
executing the Company's objectives as outlined in the Company's
Prospectus.
The Directors believe that their network and profile following
Admission mean that the Company will be able to target an
Acquisition where the target company or business or asset(s) has a
transaction value of between GBP2 million and GBP50 million.
The Company's determination in identifying a prospective target
company or business or asset(s) in the energy or natural resources
sectors will not be limited to a specific geographic region, stage
of development from exploration through to production. However, it
is the Company's preference that the target is generating cashflow
or has the capability of generating cash flow within 12-18 months
of acquisition.
Since Admission to the London Stock Exchange the Company has
been actively seeking suitable acquisition opportunities and has
seen good deal flow. The Company completed due diligence on a
number of assets located in the USA, all of these assets are
already in production and have development upside. Bids were placed
on the assets in a competitive bidding process however the Company
was not successful in those instances.
In early 2020 the Company had initiated discussions with a
number of companies in respect to acquiring non-operated, minority
interests in assets located in western Europe.
Since that time the effects of the COVID-19 virus and the oil
price war between Saudi Arabia and Russia has meant that oil prices
have declined by approximately 60%. The current oil price means
that many oil assets are, at best, at close to break even on a cash
flow basis but would be in a loss position when accounting for a
total return on capital that would need to be invested.
The Company believes that the effect of this will mean companies
that were seeking to divest assets will wait until the oil price
recovers to a more attractive level, it is the Company's view that
this level will be a Brent oil price of at least US$50 barrel. It
is unknown how long this recovery will take and therefore the
Company will expand its search for appropriate acquisition targets
to the entire value chain of the energy industry and not just the
upstream sector. It will also consider potential acquisitions
outside of the energy and natural resources industries.
The Directors collectively have an interest of 29.2% in the
Company and therefore have a vested interest to ensure the
Company's first acquisition is the right one. The Company will
remain diligent in minimising its overheads by reducing
administration charges wherever possible. I look forward to
communicating with you further once a suitable acquisition has been
identified and secured by the Company.
Alan Broome, AM Chairman
11 May 2020
Board of Directors and Senior Management
Alan John Broome, AM (Non-Executive Chairman), aged 70
Alan Broome is a metallurgist with over 40 years experience in
mining and metals. A well-known figure in the Australian mining
industry, Alan has extensive board experience, both as a director
and chairman, of a number of listed and unlisted energy, mining and
mining technology companies. Over the last 20 years, Alan has had
in-depth experience in oil exploration and production, coal mining,
equipment, services and research sectors, in the UK, Australia and
abroad. Alan is currently non-executive chairman of Strategic
Minerals, a minerals production and development company
incorporated and registered in England and Wales and listed on the
AIM market of the London Stock Exchange.
Dean Lloyd Gallegos (Managing Director), aged 52
Dean Gallegos has significant experience in financial markets in
both institutional/retail advisory and corporate advisory roles.
This included being a founder and principal of an Australian based
stockbroking and corporate advisory firm between 1995 and 2002.
Since that time he has acted in a executive capacity in numerous
mineral and energy focused public companies in Australia and
Singapore. Since 2006, he has focused on energy-related projects,
principally in the US (including Texas, Louisiana and Alaska) in
both the onshore and offshore environments. Dean specialises in the
identification of projects and the funding of the development of
those projects through equity, debt and mezzanine financing. He has
in-depth experience from both an operational and financial
perspective in respect to the requirements of the exploration,
discovery and subsequent production of oil and gas projects.
Peter Verdun Wale (Non-Executive Director), aged 50
Peter Wale brings a thorough understanding of financial markets
and investment management with over 25 years of diverse
professional investing experience across developed and emerging
markets. He has worked for various American fund managers,
including Fidelity Investments, and was a partner at an
international hedge fund for 12 years. Peter remains an investor,
mainly in the resources sector, and has an extensive network of
contacts. He is an executive director and significant shareholder
of Strategic Minerals and a director of Cornwall Resources Limited,
where he has been actively involved in the development of the
companies' strategy and investor communications.
Simon William Holden (Non-Executive Director), aged 44
Simon Holden is an experienced corporate finance and capital
markets lawyer. He advises issuers in connection with initial
public offerings and secondary fundraisings, start-ups and growth
companies on alternative finance, and public and private companies
in respect of domestic and cross border mergers and acquisitions.
Simon is recommended in The Legal 500 2019 for: Flotations: Small
and Mid-Cap; M&A: Smaller Deals up to GBP50M; Mining and
Minerals; and Oil and Gas. Simon has an in-depth understanding of
the UK quoted company sector, having advised on a significant
number of AIM and Main Market transactions; acting for issuers,
nominated advisers and brokers. He was called to the Bar of England
& Wales (Lincoln's Inn) in 1999 and was subsequently admitted
as a Solicitor in England & Wales in 2002. He is currently
company secretary of Iofina plc (AIM: IOF) and previously served as
company secretary of InfraStrata plc (AIM: INFA) and SolGold plc
(formerly Solomon Gold plc) (LSE: SOLG).
Directors' Report
On 5 September 2019 the Company changed its period end from 31
January to 31 December and therefore these financial statements are
for the 11 month period from 31 January 2019 until 31 December
2019.
The Directors present their report with the audited financial
statements of the Company for the period ended 31 December 2019. A
commentary on the business for the period is included in the
Chairman's Statement on page 4. A review of the business is also
included in the Strategic Report on pages 11 to 15.
The Company's Ordinary Shares were admitted to listing on the
London Stock Exchange, on the Official List pursuant to Chapters 14
of the Listing Rules, which sets out the requirements for Standard
Listings.
Directors
The Directors of the Company during the period and their
beneficial interest in the Ordinary shares of the Company at 31
December 2019 were as follows:
Director Position Appointed Ordinary Options
shares
Alan Broome Non-Executive Chairman 17 January 2018 140,000 90,000
Dean Gallegos Managing Director 17 January 2018 1,630,000 630,000
Peter Wale Non-Executive Director 17 January 2018 340,000 90,000
Simon Holden Non-Executive Director 1 August 2018 340,000 90,000
Qualifying Third Party Indemnity Provision
At the date of this report, the Company has a third-party
indemnity policy in place for all four Directors.
Substantial shareholders
As at 31 December 2019, the total number of issued Ordinary
Shares with voting rights in the Company was 8,400,000. Details of
the Company's capital structure and voting rights are set out in
note 12 to the financial statements.
The Company has been notified of the following interests of 3
per cent or more in its issued share capital as at the date of
approval of this report.
Number of Ordinary % of
Party Name Shares Share Capital
Dean L Gallegos 1,630,000 19.4%
The Australian Special Opportunity
Fund, LP 1,000,000 11.9%
Optiva Securities Investments 645,000 7.7%
Matthew Lumb 500,000 5.9%
Curtis Burton 500,000 5.9%
William Richards 500,000 5.9%
Jonas & Catherine Chow 300,000 3.6%
Helen Mary Leighton 300,000 3.6%
Adrian Whitaker 300,000 3.6%
Financial Instruments
Details of the use of the Company's financial risk management
objectives and policies as well as exposure to financial risk are
contained in the Accounting policies and note 1 of the financial
statements.
Greenhouse Gas (GHG) Emissions
The Company is aware that it needs to measure its operational
carbon footprint in order to limit and control its environmental
impact. However, given the very limited nature of its operations
during the period under review, it has not been practical to
measure its carbon footprint.
In the future, the Company will only measure the impact of its
direct activities, as the full impact of the entire supply chain of
its suppliers cannot be measured practically.
Dividends
The Directors do not propose a dividend in respect of the period
ended 31 December 2019. No dividend was paid in the period to 31
January 2019.
Future developments and events subsequent to the period end
Further details of the Company's future developments and events
subsequent to the period-end are set out in the Strategic Report on
pages 11 to 15.
Corporate Governance
The Governance report forms part of the Director's Report and is
disclosed on pages 16 to 20.
Going Concern
The Company's business activities, together with facts likely to
affect its future operations and financial and liquidity positions
are set out in the Chairman's Statement and also the Strategic
Report. In addition, note 18 to the financial statements disclose
the Company's financial risk management policy.
As noted in the Chairman's report the impact of the current
COVID-19 crisis and significant drop in oil price is likely to
impact upon the timing of the company entering into a transaction
to acquire a business, asset or interest in an asset. Given the
limited overheads in the business the Directors have assessed the
cash flow forecast and do not consider COVID-19 to have an impact
on the ability to manage the costs over the next 12 months.
The Directors, having made-due and careful enquiry, are of the
opinion that the Company has adequate working capital to execute
its operations over 12 months from the date of these financial
statements.
The Directors note that as disclosed in the prospectus dated 17
July 2019, if an acquisition has not been announced by the end of
January 2021, the Board will recommend to Shareholders either that
the Company continue to pursue an acquisition for a further 12
months or that the Company be wound up (in order to return capital
to Shareholders, to the extent assets are available).
The Board's recommendation will then be put to a Shareholder
vote (from which the Directors holding Ordinary Shares will
abstain). In the event that the Company is wound up, any capital
available for distribution will be returned to Shareholders in
accordance with the Articles. An ordinary resolution of
Shareholders is required to voluntarily wind-up the Company unless
the Directors resolve to petition the High Court in England and
Wales to wind-up the Company.
If an acquisition is not successfully completed by January 2021
and the shareholders voted to wind the company up, the remaining
assets and liabilities would be settled in the normal course of
business and any excess funds returned to shareholders. This is
considered to be a material uncertainty as the company would be
wound up and not continue to trade on a going concern basis. These
events may cast significant doubt on the Company's ability to
continue as a going concern. The financial statements do not
include any adjustments that may be necessary if the Group were not
a going concern.
The Directors consider that despite this uncertainty it remains
appropriate to prepare the financial statements on a going concern
basis as they continue to pursue completion of an appropriate
transaction and have widen the search in terms of industry and
geographical location and continue to engage with shareholders such
that if a vote did occur they are confident that the shareholders
would vote to continue to support the Directors in their
search.
Principal Activities
The Company has identified the following criteria that it
believes are important in evaluating a prospective target company
or business or asset(s). It will generally use these criteria in
evaluating acquisition opportunities. However, it may also decide
to enter into an Acquisition with a target company or business or
asset(s) that does not meet the below criteria.
The Directors intend to take an active approach to completing an
acquisition and to adhere to the following criteria, insofar as
reasonably practicable:
-- Geographic focus : The Company intends, but is not required
to, seek to acquire an exploration or production company or
business or asset(s) with operations in energy or natural resources
in any part of the world with: (i) strong underlying fundamentals
and clear broad-based growth drivers; (ii) a meaningful population
and an identifiable market; (iii) established financial regulatory
systems; (iv) stable political structures; and (v) strong or
improving governance and anti-corruption ratings.
-- Sector focus : The Company intends to search initially for
acquisition opportunities in the energy and natural resources
sectors, but the Company shall not be limited to such sectors. The
Directors believe that opportunities exist to create value for
Shareholders through a properly executed, acquisition-led strategy
in the energy or natural resources industry, however the Directors
will consider other industries and sectors where they believe value
may be created for Shareholders.
-- Identifiable routes to value creation : The Company intends,
but is not required to, seek to acquire a company or business or
asset(s) in respect of which the Company can: (i) play an active
role in the optimisation of strategy and execution; (ii) enhance
existing management capabilities through the Directors' proven
management skills and depth of experience; (iii) effect operational
changes to enhance efficiency and profitability; and (iv) provide
capital to support significant, credible, growth initiatives.
-- Management of an Acquisition : An Acquisition may be made by
direct purchase of an interest in a company, partnership or joint
venture, or a direct interest in a project, and can be at any stage
of development. Following the completion of an Acquisition, the
Directors will work in conjunction with incumbent management teams
to develop and deliver a strategy for performance improvement
and/or strategic and operational enhancements.
Auditors
The Board appointed BDO LLP as auditors of the Company on 15
October 2019. They have expressed their willingness to continue in
office and a resolution to reappoint them will be proposed at the
Annual General Meeting.
Statement of Directors' responsibilities
The Directors are responsible for preparing the Annual Report
alongside the financial statements in accordance with applicable
law and regulations.
Company law requires the Directors to prepare financial
statements for each financial period. Under that law the Directors
have prepared the financial statements in accordance with
International Financial Reporting Standards (IFRSs) as adopted by
the European Union.
Under Company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Company and of the profit or
loss of the Company for that period. The Directors are also
required to prepare financial statements in accordance with the
rules of the London Stock Exchange for companies with a Standard
Listing.
In preparing these financial statements, the Directors are
required to:
-- Select suitable accounting policies and then apply them consistently;
-- Make judgments and accounting estimates that are reasonable and prudent;
-- State whether applicable IFRSs as adopted by the European
Union have been followed, subject to any material departures
disclosed and explained in the financial statements; and
-- Prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements and the Remuneration Committee Report
comply with the Companies Act 2006. They are also responsible for
safeguarding the assets of the Company and hence for taking
reasonable steps for the prevention and detection of fraud and
other irregularities. They are also responsible to make a statement
that they consider that the annual report and accounts, taken as a
whole, is fair, balanced, and understandable and provides the
information necessary for the shareholders to assess the Company's
position and performance, business model and strategy.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in the United Kingdom governing the
preparation and dissemination of the financial statements may
differ from legislation in other jurisdictions.
Statement of Directors' responsibilities pursuant to Disclosure
and Transparency Rule
Each of the Directors, whose names and functions are listed on
page 6 confirm that, to the best of their knowledge and belief:
-- the financial statements prepared in accordance with IFRS as
adopted by the European Union, give a true and fair view of the
assets, liabilities, financial position and loss of the Company;
and
-- the Annual Report and financial statements, including the
Strategic Report, includes a fair review of the development and
performance of the business and the position of the Company,
together with a description of the principal risks and
uncertainties that they face.
Post Balance Date Events
-- Since the 31 December 2019 the effects of the COVID-19 virus
and the oil price war between Saudi Arabia and Russia has meant
that oil prices have declined by approximately 60%. The current oil
price means that many oil assets are, at best, at close to break
even on a cash flow basis but would be in a loss position when
accounting for a total return on capital that would need to be
invested.
--
-- The Company believes that the effect of this will mean
companies that were seeking to divest assets will wait until the
oil price recovers to a more attractive level, it is the Company's
view that this level will be a Brent oil price of at least US$50
barrel. It is unknown how long this recovery will take and
therefore the Company will expand its search for appropriate
acquisition targets to the entire value chain of the energy
industry and not just the upstream sector. It will also consider
potential acquisitions outside of the energy and natural resources
industries.
Disclosure of Information to Auditors
-- So far as the Directors are aware, there is no relevant audit
information of which the Company's auditors are unaware, and each
Director has taken all the steps that he ought to have taken as a
Director in order to make himself aware of any relevant audit
information and to establish that the Company's auditors are aware
of that information.
--
-- This directors' report was approved by the Board of Directors
on 11 May 2020 and is signed on its behalf by:
Alan Broome, AM
Strategic Report
The Directors present the Strategic Report of Mustang Energy Plc
for the period ended 31 December 2019.
Section 172(1) Statement - Promotion of the Company for the
benefit of the members as a whole
The Directors believe they have acted in the way most likely to
promote the success of the Company for the benefit of its members
as a whole, as required by s172 of the Companies Act 2006.
Specific commentary has been made below against the relevant
provisions of Section 172(1)(a) to (f) of the Companies Act:
(a) the likely consequences of any decision in the long term
The Company has not made any material decisions over the period
other than its decision to raise new equity capital.
(b) the interests of the company's employees
Aside from the Executive Directors and Company Secretary, the
Company does not have any other employees.
(c) the need to foster the company's business relationships with
suppliers, customers and others
Aside from a small number of service providers, the success of
the Company's investment strategy will be driven in part by the
business relationships that exist between the Directors and the
management of other oil and gas companies and as such the
maintenance of such relationships is given a very high priority by
the Directors. Shareholders have been engaged with extensively as
part of the capital raising and admission to LSE.
(d) the impact of the company's operations on the community and
the environment
During the current investment phase the Company has no
operations. The Directors are nevertheless cognisant of the
potential impact of future investments on affected communities and
the environment and such factors will continue to be considered as
part of investment appraisal and decision making.
(e) the desirability of the company maintaining a reputation for
high standards of business conduct
The Company's standing and reputation with other oil and gas
companies, equity investors, providers of debt, advisers and the
relevant authorities are key in the Company achieving its
investment objectives and the Company's ethics and behaviour, as
summarised in the Company's Business Principle and Ethics, will
continue to be central to the conduct of the Directors. The Company
is advised by blue-chip experienced advisers which also assist in
maintaining high standards of conduct.
(f) the need to act fairly as between members of the company
The Directors will continue to act fairly between the members of
the Company as required under the Companies Act, the AIM Rules and
QCA and UK corporate governance principles.
The Company operates as a cash shell. The Directors are as
transparent about the cash position of the Company and its funding
requirements as is allowed under LSE regulations.
The application of the s172 requirements can be demonstrated in
relation to some of the key decisions made during 2019:
-- Any contracts for services provided have been undertaken with
a clear cap on financial exposure; and
-- Maintain a policy of no rented office space with all directors working virtually.
As a cash shell Company, the Board seriously considers its
ethical responsibilities to the communities and environment.
Review of Business in the Period Operational Review
The Company's principal activity is set out in the Directors'
Report on page 8.
Business Strategy
The Company is currently focused on delivering a material
acquisition in the energy or natural resources sectors. The
Directors note that as disclosed in the prospectus dated 17 July
2019, if an acquisition has not been announced by the end of
January 2021, the Board will recommend to Shareholders either that
the Company continue to pursue an acquisition for a further 12
months or that the Company be wound up (in order to return capital
to Shareholders, to the extent assets are available).
The Board's recommendation will then be put to a Shareholder
vote (from which the Directors holding Ordinary Shares will
abstain). In the event that the Company is wound up, any capital
available for distribution will be returned to Shareholders in
accordance with the Articles. An ordinary resolution of
Shareholders is required to voluntarily wind-up the Company unless
the Directors resolve to petition the High Court in England and
Wales to wind-up the Company.
Event since the period end
Since the 31 December 2019 the effects of the COVID-19 virus and
the oil price war between Saudi Arabia and Russia has meant that
oil prices have declined by approximately 60%. The current oil
price means that many oil assets are, at best, at close to break
even on a cash flow basis but would be in a loss position when
accounting for a total return on capital that would need to be
invested.
The Company believes that the effect of this will mean companies
that were seeking to divest assets will wait until the oil price
recovers to a more attractive level, it is the Company's view that
this level will be a Brent oil price of at least US$50 barrel. It
is unknown how long this recovery will take and therefore the
Company will expand its search for appropriate acquisition targets
to the entire value chain of the energy industry and not just the
upstream sector.
Financial review
Results for the 2019 period
The Company incurred a loss for the period to 31 December 2019
of GBP195,464 (31 December 2018 - loss of GBP74,148 unaudited).
The loss for the period occurred as a result of on-going
administrative expenses required to operate the Company and costs
in relation to undertaking due diligence on potential
acquisitions.
Cash flow
Cash operating outflows for 2019 were GBP97,795 (31 December
2018 - GBP1,160 outflow unaudited). Total inflows were GBP633,771
which represented GBP629,000 from initial public offering and
GBP4,771 from the proceeds of loans and borrowings.
Closing cash
As at 31 December 2019, the Company held GBP516,557 of cash (31
December 2018 - Nil unaudited).
Key Performance Indicators (KPI)
The sole KPI for the Company has been to source a suitable
acquisition target. As at the date of this report this KPI has not
been met.
Position of Company's Business
At the period end the Company's Statement of Financial Position
shows net assets totaling GBP495,859 (31 December 2018 -
(GBP74,148) unaudited). The Company has few working capital
liabilities and is considered to have a strong cash position for a
company operating as a cash shell, at the reporting date.
Environmental matters
The Board contains personnel with a good history of running
businesses that have been compliant with all relevant laws and
regulations and there have been no instances of non- compliance in
respect of environmental matters.
Employee information
At present, there are no female Directors in the Company. The
Company has a Chairman, a Managing Director, two Non-Executive
Directors and no employees. The Company is committed to gender
equality and, if future roles are identified, a wide-ranging search
would be completed with the most appropriate individual being
appointed irrespective of gender.
Social/Community/Human rights matters
The Company ensures that employment practices take into account
the necessary diversity requirements and compliance with all
employment laws. The Board has experience in dealing with such
issues and sufficient training and qualifications to ensure they
meet all requirements.
Anti-corruption and anti-bribery policy
The government of the United Kingdom has issued guidelines
setting out appropriate procedures for companies to follow to
ensure that they are compliant with the UK Bribery Act 2010. The
Company has conducted a review into its operational procedures to
consider the impact of the Bribery Act 2010 and the Board has
adopted an anti-corruption and anti-bribery policy which can be
accessed on the Company's website
Principal Risks and Uncertainties
The Company operates in an uncertain environment and is subject
to a number of risk factors. The Directors consider the following
risk factors are of particular relevance to the Company's
activities although it should be noted that this list is not
exhaustive and that other risk factors not presently known or
currently deemed immaterial may apply.
The Company's business strategy is to identify, evaluate and
complete suitable Acquisition opportunities in the energy or
natural resources sectors. The collapse in oil prices in the first
part of 2020 from the impact of oil demand due to the effects of
the COVID-19 virus and the oil price war between Saudi Arabia and
Russia means that many oil assets are, at best, at close to break
even on a cash flow basis but would be in a loss position when
accounting for a total return on capital that needs to be
invested.
The Company believes that the effect of this will mean companies
that were seeking to divest assets will wait until the oil price
recovers to a more attractive level, it is the Company's view that
this level will be a Brent oil price of at least US$50 barrel, it
is unknown how long this recovery will take. The Director's also
believe that the collapse in the oil price will mean it will be
very difficult to raise either debt or equity funding, even if and
when oil prices recover. The effect on investors confidence as a
result of the oil price collapse cannot be underestimated and will
take some time to recover.
The Directors intend to mitigate the risk of not finding a
suitable acquisition in the energy sector by expanding its search
to the entire value change in the energy sector and not just the
upstream part of that sector. To date the Directors search has been
predominantly in the energy sector however it will expand the
search to natural resources and outside of both energy and natural
resources if an attractive opportunity presents itself.
Letters of Undertaking
The Directors have each signed a letter of undertaking dated 17
July 2019 addressed to the Company that any acquisition
opportunities in the energy or natural resources sector, excluding
acquisition opportunities relating to the exploration and/or
production of magnetite in North America, and/or the exploration
and/or production of nickel sulphide in Western Australia and/or
the Northern Territory of Australia, and/or the exploration and/or
production of tin, tungsten or copper in South West England,
originated by each of them respectively, will be offered to the
Company first (individually the "Undertaking" and together the
"Undertakings").
The specific reason for these exclusions is that Mr Broome and
Mr Wale are directors of Strategic Minerals plc (AIM: SML)
("Strategic Minerals"), which is quoted on AIM and which has
operations in these sectors within the stated linked geographical
areas. To avoid any conflict with any duties owed to Strategic
Minerals by Mr Broome and Mr Wale, these sectors and linked
geographical areas have been excluded from any acquisition
opportunities that Mr Broome and Mr Wale, as well as Mr Gallegos
and Mr Holden will consider for the Company.
If the Company declines a particular acquisition opportunity it
may then be offered to other entities the Directors are affiliated
to. If an Undertaking is breached by a Director, recourse may
potentially be taken by Shareholders for such breach. Furthermore,
in the event of a breach of an Undertaking, it may also be likely
that the Director in question has breached their fiduciary duties
as a Director pursuant to the Companies Act 2006.
Further grounds for recourse may potentially therefore be
available for Shareholders. It would be a commercial decision of
the Shareholders as to whether any recourse should be taken in the
event of a breach of an Undertaking. It should be noted however
that as the Directors are also Shareholders and have been granted
Options in the Company, they each have a financial stake in the
Company which incentivises them to act in the interests of the
Company.
The Board has decided that if the Company decides to proceed
with an acquisition opportunity, the acquisition opportunity will
only be handled by the Director/s whom a potential conflict of
interest does not arise in relation to any other entities such
Director/s may be affiliated with. Only the non-conflicted
Director/s will be involved in the due diligence process and be
able to decide if the acquisition opportunity is fit and proper for
the Company.
Composition of the Board
A full analysis of the Board, its function, composition and
policies, is included in the Governance Report.
Capital structure
The Company's capital consists of ordinary shares which rank
pari passu in all respects which are traded on the Standard segment
of the Main Market of the London Stock Exchange. There are no
restrictions on the transfer of securities in the Company or
restrictions on voting rights and none of the Company's shares are
owned or controlled by employee share schemes.
There are no arrangements in place between shareholders that are
known to the Company that may restrict voting rights, restrict the
transfer of securities, result in the appointment or replacement of
Directors, amend the Company's Articles of Association or restrict
the powers of the Company's Directors, including in relation to the
issuing or buying back by the Company of its shares or any
significant agreements to which the Company is a party that take
effect after or terminate upon, a change of control of the Company
following a takeover bid or arrangements between the Company and
its Directors or employees providing for compensation for loss of
office or employment (whether through resignation, purported
redundancy or otherwise) that may occur because of a takeover
bid.
Approved by the Board on 11 May 2020.
Alan Broome, AM Chairman
Governance Report
Introduction
The Company recognises the importance of, and is committed to,
high standards of Corporate Governance. Whilst the Company is not
formally required to comply with the UK Corporate Governance Code,
the Company has looked to the requirements of the UK Code of
Corporate Governance published in July 2018 (the Code) for best
practice. The following sections explain how the Company has
applied the Code:
Compliance with the UK Code of Corporate Governance
The Company has stated that, to the extent practicable for a
company of its size and nature, it follows the UK Corporate
Governance Code. The Directors are aware that there are currently
certain provisions of the UK Corporate Governance Code that the
Company is not in compliance with, given the size and early stage
nature of the Company. These include:
-- Provision 11 of the Code requires that at least half of the
board should be non-executive directors whom the board considers to
be independent. Non-Executive Directors are interested in ordinary
shares in the Company and cannot therefore be considered fully
independent under the Code. However Alan Broome, Peter Wale and
Simon Holden are considered to be independent in character and
judgement.
-- Provision 17 of the Code requires that the board should
establish a Nomination Committee with at least two independent
non-executive directors.
-- Provision 24 of the Code requires that the board should
establish an Audit Committee with at least two independent
non-executive directors.
-- Provision 25 of the Code requires that the board should
establish a Risk Committee with comprised of independent
non-executive directors.
-- Provision 32 of the Code requires that the board should
establish a Remuneration Committee with at least two independent
non-executive directors.
Until the acquisition is made, the Company will not have
nomination, remuneration, audit or risk committees. The Board as a
whole will instead review its size, structure and composition, the
scale and structure of the Directors' fees (taking into account the
interests of Shareholders and the performance of the Company), take
responsibility for the appointment of auditors, monitor and review
the integrity of the Company's financial statements and take
responsibility for any formal announcements on the Company's
financial performance. Following an Acquisition, the Board intends
to put in place nomination, remuneration, audit and risk
committees.
The Board has a share dealing code that complies with the
requirements of the Market Abuse Regulation. All persons
discharging management responsibilities (comprising only the
Directors at the current time) shall comply with the share dealing
code at all times.
The UK Corporate Governance Code can be found at www.frc.org.uk
.
Set out below are Mustang Energy' corporate governance practices
for the period ended 31 December 2019. After the Company has
completed an acquisition, these corporate governance practices will
be considered and reviewed to ensure they remain appropriate.
Leadership
The Company is headed by an effective Board which is
collectively responsible for the long- term success of the
Company.
The role of the Board - The Board sets the Company's strategy,
ensuring that the necessary resources are in place to achieve the
agreed strategic priorities, and reviews management and financial
performance. It is accountable to shareholders for the creation and
delivery of strong, sustainable financial performance and long-term
shareholder value. To achieve this, the Board directs and monitors
the Company's affairs within a framework of controls which enable
risk to be assessed and managed effectively. The Board also has
responsibility for setting the Company's core values and standards
of business conduct and for ensuring that these, together with the
Company's obligations to its stakeholders, are widely understood
throughout the Company. The Board has a formal schedule of matters
reserved which is provided later in this report.
Board Meetings - The core activities of the Board are carried
out in scheduled meetings of the Board. These meetings are timed to
link to key events in the Company's corporate calendar and regular
reviews of the business are conducted. Additional meetings and
conference calls are arranged to consider matters which require
decisions outside the scheduled meetings. During the period, the
Board met on 2 occasions. Outside the scheduled meetings of the
Board, the Directors maintain frequent contact with each other to
discuss any issues of concern they may have relating to the Company
or their areas of responsibility, and to keep them fully briefed on
the Company's operations. Where Directors have concerns which
cannot be resolved about the running of the company, or a proposed
action, they will ensure that their concerns are recorded in the
Board minutes.
Matters reserved specifically for Board - The Board has a formal
schedule of matters reserved that can only be decided by the Board.
The key matters reserved are the consideration and approval of:
-- The Company's overall strategy;
-- Financial statements and dividend policy;
-- Management structure including succession planning,
appointments and remuneration; material acquisitions and disposals,
material contracts, major capital expenditure projects and
budgets;
-- Capital structure, debt and equity financing and other matters;
-- Risk management and internal controls;
-- The Company's corporate governance and compliance arrangements; and
-- Corporate policies.
Summary of the Board's work in the period - During the period,
the Board considered all relevant matters within its remit, but
focused in particular on the establishment of the Company and the
identification of suitable investment opportunities for the Company
to pursue, the associated due diligence work as required and the
decisions thereon.
Attendance at meetings:
Director Meetings attended
Alan Broome, AM Non-Executive Chairman 2 of 2
Dean Gallegos Managing Director 2 of 2
Peter Wale Non-Executive Director 2 of 2
Simon Holden Non-Executive Director 2 of 2
The Chairman, Alan Broome, AM, proposes and seeks agreement to
the Board Agenda and ensures adequate time for discussion.
The UK Corporate Governance Code also recommends the submission
of all directors for re-election at annual intervals. No Director
will be required to submit for re-election until the first annual
general meeting of the Company following an Acquisition.
The terms and conditions of appointment of Non-Executive
Directors will be made available upon written request.
Other governance matters - All of the Directors are aware that
independent professional advice is available to each Director in
order to properly discharge their duties as a Director.
The Company Secretary - The Company Secretary is Simon Holden
who is responsible for the Board complying with UK procedures.
Effectiveness
For the period under review the Board comprised of a
Non-Executive Chairman and 3 Non-Executive Directors. Biographical
details of the Board members are set out on page 5 of this
report.
The Directors are of the view that the Board consist of
Directors with an appropriate balance of skills, experience,
independence and diverse backgrounds to enable them to discharge
their duties and responsibilities effectively.
Independence - The non-executive Directors bring a broad range
of business and commercial experience to the Company. The Board
considers Alan Broome, Peter Wale and Simon Holden to be
independent in character and judgement; this has been explored in
more detail on page 16.
Appointments - the Board is responsible for reviewing the
structure, size and composition of the Board and making
recommendations to the Board with regards to any required
changes.
Commitments - All Directors have disclosed any significant
commitments to the Board and confirmed that they have sufficient
time to discharge their duties.
Induction - All new Directors received an informal induction as
soon as practical on joining the Board. No formal induction process
exists for new Directors, given the size of the Company, but the
Chairman ensures that each individual is given a tailored
introduction to the Company and fully understands the requirements
of the role.
Board performance and evaluation - The Chairman normally carries
out an annual formal appraisal of the performance of the other
Directors which takes into account the objectives set in the
previous period and the individual's performance in the fulfilment
of these objectives.
Although the Board consisted of four male Directors, the Board
supports diversity in the Boardroom and the Financial Reporting
Council's aims to encourage such diversity. Aside from the
Directors, there are no employees in the Company. The following
table sets out a breakdown by gender at 31 December 2019:
Male Female
Directors 4 -
The Board will pursue an equal opportunity policy and seek to
employ those persons most suitable to delivering value for the
Company.
Accountability
The Board is committed to providing shareholders with a clear
assessment of the Company's position and prospects. This is
achieved through this report and as required other periodic
financial and trading statements. The Board has made appropriate
arrangements for the application of risk management and internal
control principles.
Going concern - The preparation of the financial statements
requires an assessment on the validity of the going concern
assumption.
In making their assessment of going concern, the Directors have
reviewed forecasts, under one which entails continuing to search
for an acquisition, for a period of at least 12 months from the
date of approval of these financial statements. The Directors
recognise the small cost base of the Company and its ability to
conserve cash. As a result the Directors consider that the Company
has sufficient funds for the required timeframe and as such they
consider it appropriate to adopt the going concern basis in the
preparation of the financial statements.
Internal controls - The Board of Directors reviews the
effectiveness of the Company's system of internal controls to align
with the requirements of the Code. The internal control system is
designed to manage the risk of failure to achieve its business
objectives. This covers internal financial and operational
controls, compliance and risk management. The Company had necessary
procedures in place for the period under review and up to the date
of approval of the Annual Report and financial statements. The
Directors acknowledge their responsibility for the Company's system
of internal controls and for reviewing its effectiveness. The Board
confirms the need for an ongoing process for identification,
evaluation and management of significant risks faced by the
Company. The Directors carry out a risk assessment before signing
up to any commitments.
The Directors are responsible for taking such steps as are
reasonably available to them to safeguard the assets of the Company
and to prevent and detect fraud and other irregularities.
At the present, due to the size of the Company, there is no
internal audit function. The requirement for internal audit will be
considered following the completion of an acquisition.
External auditor
The Company's external auditor is BDO LLP. The external auditor
has unrestricted access to the Board. The Board is satisfied that
BDO LLP has adequate policies and safeguards in place to ensure
that auditor objectivity and independence are maintained. The
external auditors report to the Board annually on their
independence from the Company. In accordance with professional
standards, the partner responsible for the audit is changed every
five periods. The current auditor, BDO LLP was first appointed by
the Company in October 2019, and therefore the current partner is
due to rotate off the engagement after completing the audit for the
period ended 31 December 2024. Having assessed the performance
objectivity and independence of the auditors, the Board will be
recommending the reappointment of BDO LLP as auditors to the
Company at the 2020 Annual General Meeting.
BDO LLP were paid GBP25,000 in relation to the audit of the 31
December 2019 financial statements. They were paid an additional
GBP2,500 during 2019 for non-audit services which related to a read
through of the half-period financial statements.
Shareholder relations
Communication and dialogue - Open and transparent communication
with shareholders is given high priority and there is regular
dialogue with institutional investors, as well as general
presentations made at the time of the release of the annual and
interim results. All Directors are kept aware of changes in major
shareholders in the Company and are available to meet with
shareholders who have specific interests or concerns. The Company
issues its results promptly to individual shareholders and also
publishes them on the Company's website. Regular updates to record
news in relation to the Company and the status of its exploration
and development programmes are included on the Company's website.
Shareholders and other interested parties can subscribe to receive
these news updates by email by registering online on the website
free of charge.
The Directors are available to meet with institutional
shareholders to discuss any issues and gain an understanding of the
Company's business, its strategies and governance. Meetings can
also held with the corporate governance representatives of
institutional investors when requested.
Annual General Meeting - At every AGM individual shareholders
will be given the opportunity to put questions to the Chairman and
to other members of the Board that may be present. Notice of the
AGM is sent to shareholders at least 21 working days before the
meeting. Details of proxy votes for and against each resolution,
together with the votes withheld are announced to the London Stock
Exchange and are published on the Company's website as soon as
practical after the meeting.
Approved on behalf of the Board of Directors by:
Alan Broome, AM
Non-Executive Chairman
11 May 2020
Remuneration Report
Remuneration Report Approval
A resolution to approve this report will be proposed at the AGM
of the Company. The vote will have advisory status, will be in
respect of the remuneration policy and overall remuneration
packages and will not be specific to individual levels of
remuneration.
Remuneration policy
In accordance with the commitments made in the Company's IPO
prospectus, the Company did not remunerate any of its Directors in
the relevant period for their ordinary duties prior to an
acquisition and currently has no employees. At this stage of the
Company's growth there is therefore no remuneration policy in
place. If the Company decides to remunerate the Directors or hires
any employees then a policy will be put in place.
Non-executive Directors
The Company policy is that the Non-Executive Directors are
expected to attend scheduled board meetings and attend committee
meetings as required. The Company does not have service contracts
with any of the directors.
Other Employees
At present there are no other employees in the Company other
than the Directors, so this policy only applies to the Board.
Terms of appointment
The services of the Directors are provided in accordance with
their appointment letter. Directors are expected to devote such
time as is necessary for the proper performance of their duties,
but as a minimum they are expected to commit at least one day per
month, which shall include attendance at all meetings of the Board
and any sub-committees of the Board.
Director Period of appointment Number of periods
2018 completed
Alan Broome, AM 2
Dean Gallegos 2018 2
Peter Wale 2018 2
Simon Holden 2018 1
Compensation of key management personnel (audited)
Set out below are the emoluments of the Directors for the period
ended 31 December 2019 (GBP):
Annual bonus
and long Pension Share based
Name of Director Salary and Taxable term benefits related payments Total
fees benefits benefits
GBP GBP GBP GBP GBP GBP
Alan Broome,
AM - - - - 1,697 1,697
Dean Gallegos - - - - 11,880 11,880
Peter Wale - - - - 1,697 1,697
Simon Holden - - - - 1,697 1,697
Set out below are the emoluments of the Directors for the period
ended 31 December 2018 (GBP) (unaudited):
Annual bonus
and long Pension Share based
Name of Director Salary and Taxable term benefits related payments Total
fees benefits benefits
GBP GBP GBP GBP GBP GBP
Alan Broome, - - - - - -
AM
Dean Gallegos - - - - - -
Peter Wale - - - - - -
Simon Holden - - - - - -
Pension contributions (audited)
The Company does not currently have any pension plans for any of
the Directors and does not pay pension amounts in relation to their
remuneration.
The Company has not paid out any excess retirement benefits to
any Directors or past Directors.
Payments to past directors (audited)
The Company has not paid any compensation to past Directors.
Payments for loss of office (audited)
No payments were made for loss of office during the period.
UK Remuneration percentage changes
As the remuneration for the preceding financial period is nil
for all Directors, no percentage changes for remuneration have been
set out in this report.
UK 10-period performance graph
The Directors have considered the requirement for a UK 10-period
performance graph comparing the Company's Total Shareholder Return
with that of a comparable indicator. The Directors do not currently
consider that including the graph will be meaningful because the
Company has only been listed since July 2019, is not paying
dividends, is currently incurring losses as it gains scale and its
focus is to seek an acquisition. In addition and as mentioned
above, the remuneration of Directors is not currently linked to
performance and we therefore do not consider the inclusion of this
graph to be useful to shareholders at the current time. The
Directors will review the inclusion of this table for future
reports.
UK 10-period CEO table and UK percentage change table
The Directors have considered the requirement for a UK 10-period
CEO table. The Directors do not currently consider that including
these tables would be meaningful given that the Company is not yet
trading and the Directors are not yet remunerated for their
services. The Directors will review the inclusion of this table for
future reports.
Relative importance of spend on pay
The Directors have considered the requirement to present
information on the relative importance of spend on pay compared to
shareholder dividends paid. Given that the Company does not
currently pay dividends we have not considered it necessary to
include such information.
UK Directors' shares (audited)
The interests of the Directors who served during the period in
the share capital of the Company at 31 December 2019 and at the
date of this report has been set out in the Directors' Report on
page 6.
Other matters
The Company does not currently have any other annual or
long-term incentive schemes in place for any of the Directors and
as such there are no disclosures in this respect.
Approved on behalf of the Board of Directors by:
Alan Broome, AM
Non-Executive Chairman
11 May 2020
Independent auditor's report to the members of Mustang Energy
Plc
Opinion
We have audited the financial statements of Mustang Energy Plc
("the Company") for the 11 month period ended 31 December 2019
which comprise of the Statement of Comprehensive Income, Statement
of Financial position, Statement of Changes in Equity, Statement of
Cash Flows and notes to the financial statements, including a
summary of significant accounting policies. The financial reporting
framework that has been applied in their preparation is applicable
law and International Financial Reporting Standards (IFRSs) as
adopted by the European Union and, as applied in accordance with
the provisions of the Companies Act 2006.
In our opinion the financial statements:
-- give a true and fair view of the state of the Company's
affairs as at 31 December 2019 and of the Company's loss for the
period then ended;
-- have been properly prepared in accordance with IFRSs as adopted by the European Union; and
-- have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor's responsibilities for the audit of the financial
statements section of our report. We are independent of the Company
in accordance with the ethical requirements that are relevant to
our audit of the financial statements in the UK, including the
FRC's Ethical Standard as applied to listed public interest
entities, and we have fulfilled our other ethical responsibilities
in accordance with these requirements. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Material Uncertainty related to going concern
We draw attention to note 1.2 of the financial statements, which
indicates that both COVID-19 and the suppression in global oil
prices is likely to cause a delay in the Company completing a
transaction to acquire a business, asset or interest in an asset.
As stated in note 1.2, as part of the prospectus issued on Initial
Public Offering (IPO), the directors disclosed the intention that
if a transaction had not been completed by January 2021, the
members would take a vote to either continue the search for a
transaction for a further 12 months or wind up the Company and
return any excess funds. The directors also disclose the need to
potentially raise further funds as and when a transaction
completes. These events or conditions indicate that a material
uncertainty exists that may cast significant doubt on the Company's
ability to continue as a going concern. Our opinion is not modified
in respect of this matter.
Given the conditions and uncertainties noted above, we
considered going concern to be a key audit matter. We have
performed the following work as part of our audit:
-- Verified the disclosure within the IPO prospectus noting the
Director's intention to propose a shareholder vote if a transaction
is not completed by January 2021 and corroborated this to the
disclosure in note 1.2;
-- Reviewed board minutes and RNS announcements to consider
whether there had been any changes made to the disclosure in the
IPO prospectus and to verify that at the date of this report no
committed transaction had occurred;
-- Obtained the Directors' cash flow forecast and sensitised to
consider based on the current run rate for overheads, if the
Company has sufficient funds to continue to trade for a period of
at least 12 months but further funds would be required to complete
a transaction as and when this occurs;
-- Challenged the Directors on the impact that COVID-19 and the
depressed oil price would have on the timing of completing a
transaction; and
-- Considered the adequacy of disclosure within note 1.2 to the
financial statements against the requirements of the accounting
standards.
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) that we identified, including those which had the greatest
effect on: the overall audit strategy, the allocation of resources
in the audit; and directing the efforts of the engagement team.
This matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on this matter.
In addition to the matter described in the material uncertainty
related to going concern section, we have determined the matters
described below to be the key audit matters to be communicated in
our report.
Key Audit Matter How we addressed the Key Audit Matter
in Our Audit
Valuation of share options We performed the following audit procedures:
and warrants * Verified the option and warrant agreements to ensure
key terms had been appropriately included in the
During the year the Company Directors' valuation.
issued share options to Directors
and warrants to advisors in
return for services provided. * Obtained the Directors' assessment of volatility,
Disclosure in the financial used in the Black Scholes valuation model and
statements regarding the share benchmarked this to market information on comparable
options and warrants can be companies. We engaged BDO internal valuation experts
found at note 1.11 and note to assess the reasonableness of the volatility
10. applied and compared it to an acceptable range.
The valuation of share options
and warrants includes a number * Re-performed the Black Scholes, agreeing other inputs
of key estimates and judgements to empirical information, to ensure accuracy.
in particular the volatility
estimate included in the Black
Scholes valuation model. Sensitivity * Evaluated the adequacy of disclosures in respect of
within the volatility could share options and warrants made by the Directors in
have a material impact upon the Annual Report in view of the requirements of
the financial statements. Accounting Standards,
This was consider a significant
risk to our audit and therefore
a key audit matter.
------------------------------------------------------------------
Key Observations
The valuation of share options and warrants has been undertaken
appropriately by the Directors in line with the requirements of
the accounting standards. Key variables, such as volatility, applied
by the Directors are within a reasonable range. The valuation and
the disclosure are considered to be materially correct..
Our application of materiality
Materiality 31 December Basis of materiality
2019
Materiality for the financial GBP3,000 Gross expenditure
statements as a whole
We apply the concept of materiality both in planning and
performing our audit and in evaluation the effect of misstatements.
We consider materiality to be the magnitude by which misstatements,
including omissions, could influence the economic decisions of
reasonable users that are taken on the basis of the financial
statements. Importantly misstatements below these level will not
necessary be evaluated as immaterial as we also take account of the
nature of identified misstatements, and the particular
circumstances of their occurrence, when evaluation their effect on
the financial statements as a whole.
We consider gross expenditure to be the financial metric of the
most interest to shareholders and other users of the financial
statements, given the Company's current situation as a non- trading
company and only incurring expenditure. Gross expenditure is
therefore considered to be the most appropriate basis for
materiality. A benchmark of 1.25% has been applied to total
expenditure and is considered reasonable given the level of
transactions in the period.
Performance materiality is the application of materiality at the
individual account or balance level and is set at an amount which
reduces to an appropriately low level the probability that the
aggregate of uncorrected and undetected misstatements exceeds
materiality for the financial statements as a whole. Performance
materiality was set at 75% of the above materiality levels. We
considered 75% as a reasonable benchmark having given consideration
to the level of transactions occurring in the Company and the
nature of the operations.
We agreed with the Board that we would report to the Board all
individual audit differences identified during the course of our
audit in excess of GBP150. We also agreed to report differences
below that threshold that, in our view, warranted reporting on
qualitative grounds.
An overview of the scope of our audit
Our audit was scoped by obtaining an understanding of the
Company and its environment, as well as assessing the risks of
material misstatement in the financial statements. In approaching
the audit, we considered how the Company is organised and managed.
BDO LLP completed a full statutory audit on the company's financial
information.
The extent to which the audit is capable of detecting
irregularities is affected by the inherent difficulty in detecting
irregularities, the effectiveness of the entity's controls, and the
nature, timing and extent of the audit procedures performed.
Irregularities that result from fraud might be inherently more
difficult to detect than irregularities that result from error.
As part of the audit gained an understanding of the legal and
regulatory framework applicable to the Company and the industry in
which it operates, and considered the risk of acts by the Company
that were contrary to applicable laws and regulations, including
fraud. We designed audit procedures to respond to the risk,
recognising that the risk of not detecting a material misstatement
due to fraud is higher than the risk of not detecting one resulting
from error, as fraud may involve deliberate concealment by, for
example, forgery or intentional misrepresentations, or through
collusion. We focused on laws and regulations where non-compliance
might have a material effect on the financial statements,
including, but not limited to, the Companies Act 2006, the UK
Listing Rules and tax legislation.
Our audit approach included:
-- agreeing the financial statement disclosures to underlying
supporting documentation to assess compliance with relevant laws
and regulations,
-- enquiring with the Directors concerning actual and potential legal claims
-- addressing the risk of fraud through management override of
controls, testing the appropriateness of adjustments posted during
the financial close and agreeing a sample of overhead spend to
Board approval;
-- assessing whether the judgements made in making accounting
estimates are indicative of a potential bias; and evaluating the
business rationale of any significant transactions that are unusual
or outside the normal course of business.
There are inherent limitations in the audit procedures described
above and, the further removed non-compliance with laws and
regulations is from the events and transactions reflected in the
financial statements, the less likely we would become aware of
it.
Other information
The directors are responsible for the other information. The
other information comprises the information included in the annual
report and financial statements, other than the financial
statements and our auditor's report thereon. Our opinion on the
financial statements does not cover the other information and,
except to the extent otherwise explicitly stated in our report, we
do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
audit or otherwise appears to be materially misstated. If we
identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a
material misstatement in the financial statements or a material
misstatement of the other information. If, based on the work we
have performed, we conclude that there is a material misstatement
of the other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act
2006
In our opinion, the part of the directors' remuneration report
to be audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of
the audit:
-- the information given in the strategic report and the
directors' report for the financial year for which the financial
statements are prepared is consistent with the financial
statements; and
-- the strategic report and the directors' report have been
prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Company
and its environment obtained in the course of the audit, we have
not identified material misstatements in the strategic report or
the directors' report.
We have nothing to report in respect of the following matters in
relation to which the Companies Act 2006 requires us to report to
you if, in our opinion:
-- adequate accounting records have not been kept , or returns
adequate for our audit have not been received from branches not
visited by us; or
-- the financial statements and the part of the directors'
remuneration report to be audited are not in agreement with the
accounting records and returns; or
-- certain disclosures of directors' remuneration specified by law are not made; or
-- we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors' responsibilities
statement , the directors are responsible for the preparation of
the financial statements and for being satisfied that they give a
true and fair view, and for such internal control as the directors
determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the Company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the Company or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial Reporting
Council's website at: www.frc.org.uk/auditorsresponsibilities .
This description forms part of our auditor's report.
Other matters which we are required to address
Following the recommendation of the Board, we were appointed by
the Board on 15 October 2019 to audit the financial statements for
the period ending 31 December 2019. The period of total
uninterrupted engagement is 1 year.
The corresponding figures for the period ended 31 January 2019
are unaudited.
The non-audit services prohibited by the FRC's Ethical Standard
were not provided to the company and we remain independent of the
company in conducting our audit.
Our audit opinion is consistent with the additional report to
the audit committee.
Use of our report
This report is made solely to the Company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
Company's members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the Company's members as a body, for our audit
work, for this report, or for the opinions we have formed.
Matt Crane (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London
11 May 2020
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
Statement of Comprehensive Income
Period ended Year ended
11 months ended 12 months ended
31 December 2019 31 January 2019
Note
GBP GBP
Administrative expenses 20 (195,464) (74,148)
Operating loss (195,464) (74,148)
Interest income - -
Loss before taxation (195,464) (74,148)
Taxation - -
Loss for the period (195,464) (74,148)
Other comprehensive income - -
for the period
-------------------------------------
Total comprehensive loss or
the period attributable to
the equity owners 19 (195,464) (74,148)
=====================================
Loss per share from continuing
operations attributable to
the equity owners
Basic loss per share 8 (0.05) (18,357)
Diluted loss per share (0.04) (18,357)
(pence per share)
=====================================
The notes to the financial statements on page 33 to page 42 form
an integral part of these financial statements.
Statement of Financial Position
Note 31 Dec 2019 31 Jan 2019
GBP GBP
Assets
Non-current assets
Total non-current assets 551 902
Current assets
Trade and other receivables 9 31,282 13,260
Cash and cash equivalents 516,557 -
Total current assets 547,839 13,260
Total assets 548,390 14,162
Equity and liabilities
Equity attributable to shareholders
Share capital 12 84,000 -
Share premium 13 654,000 -
Share based payments reserve 27,471 -
Retained deficit 14 (269,612) (74,148)
Total equity 495,859 (74,148)
Liabilities
Current liabilities
Trade and other payables 10 52,531 88,310
----------------------------------------
Total liabilities 52,531 88,310
----------------------------------------
Total equity and liabilities 548,390 (74,148)
----------------------------------------
The notes to the financial statements on page 33 to page 42 form
an integral part of these financial statements
This report was approved by the board and authorised for issue
on 11 May 2020 and signed on its behalf by:
Dean L Gallegos Director
Company Registration Number: 11155663
Statement of Changes in Equity
Share based
Share payments
Share premium reserve Retained Total
capital account deficit equity
-----------------------------
GBP GBP GBP GBP GBP
---------------------------- --------------- -------------- ------------------------ ----------------- ---------------
On 17 January 2018 - - - - -
Period ended 31 January
2019
Total comprehensive loss
for the period - - - (74,148) (74,148)
----------------------------- --------------- -------------- ------------------------ ----------------- ---------------
Balance as at 31 January
2019 - - - (74,148) (74,148)
(unaudited)
----------------------------- --------------- -------------- ------------------------ ----------------- ---------------
Period ended 31 December
2019
Total comprehensive loss
for the period - - - (195,464) (195,464)
Issue of share capital 84,000 654,000 - - 738,000
Share based payment - - 27,471 - 27,471
----------------------------- --------------- -------------- ------------------------ ----------------- ---------------
Balance as at 31 December
2019 84,000 654,000 27,471 (269,612) 495,859
----------------------------- --------------- -------------- ------------------------ ----------------- ---------------
Share capital comprises the ordinary issued share capital of the
Company.
Share premium represents consideration less nominal value of
issued shares and costs directly attributable to the issue of new
shares.
Share based payments represents the value of equity settled
share-based payments provided to employees, including key
management personnel, and third parties for services provided.
Retained deficit represents the cumulative retained losses of
the Company at the reporting date.
The notes to the financial statements on page 33 to page 42 form
an integral part of these financial statements.
Statement of Cash Flows
11 months to 12 months to
31 December 2019 31 January 2019
(unaudited)
Note GBP GBP
Cash (absorbed by) from operations 19 (97,795) 1,160
Cash flow from operating activities
Cash (absorbed by) from operations 19 (97,795) 1,160
Cash flow from operating activities (97,795) 1,160
-------- ----------------
Investing activities
Purchase of property, plant and equipment - (1,160)
Net cash (used) in investing activities - (1,160)
-------- ----------------
Financing activities
Proceeds from issue of shares (net of
share issue costs) 12 629,000 -
Repayment of loans and borrowings (19,419)
Proceeds from loans and borrowings 4,771
Net cash generated from financing activities 614,352 -
-------- ----------------
Net increase in cash and cash equivalents 516,557 -
-------- ----------------
Cash and cash equivalents at beginning - -
of period
-------- ----------------
Cash and cash equivalents at end of 516,557 -
period
-------- ----------------
The notes to the financial statements on page 33 to page 42 form
an integral part of these financial statements.
1 Accounting policies
Company information
Mustang Energy PLC is a public company limited by shares
incorporated and domiciled in England and Wales. The registered
office is 48 Chancery Lane, c/o Keystone Law, London, WC2A 1JF.
1.1 Accounting convention
The financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted for
use in the European Union and with those parts of the Companies Act
2006 applicable to companies reporting under IFRS.
The financial statements are prepared in sterling, which is the
functional currency of the company. Monetary amounts in these
financial statements are rounded to the nearest GBP.
The financial statements have been prepared on the historical
cost basis. The principal accounting policies adopted are set out
below.
1.2 Going concern
During the period the company made losses of GBP195,464 and at
the reporting date had accumulated losses of GBP269,612. However,
it should also be noted the company did have net assets of
GBP548,390 at the reporting date.
The company funds its operations through the issue of share
capital at a premium and at the reporting date had raised total
financing of GBP738,000 with the view of seeking additional equity
capital in the future.
As noted in the Chairman's report the impact of the current
COVID-19 crisis and significant drop in oil price is likely to
impact upon the timing of the company entering into a transaction
to acquire a business, asset or interest in an asset. Given the
limited overheads in the business the Directors have assessed the
cash flow forecast and do not consider COVID-19 to have an impact
on the ability to manage the costs over the next 12 months.
As disclosed in the listing prospectus dated 17 July 2019, if an
acquisition has not been announced by the end of January 2021, the
Board will recommend to Shareholders either that the Company
continue to pursue an acquisition for a further 12 months or that
the Company be wound up (in order to return capital to
Shareholders, to the extent assets are available).
The Board's recommendation will then be put to a Shareholder
vote (from which the Directors holding Ordinary Shares will
abstain). In the event that the Company is wound up, any capital
available for distribution will be returned to Shareholders in
accordance with the Articles.
In the scenario of a successful acquisition, sufficient funds
will need be raised to undertake the identified future plan for the
enlarged Company. If an acquisition does not complete, the
Directors have satisfied themselves that the Company has adequate
existing cash resources to continue operating over the following 12
months. The Directors therefore have made an informed judgement, at
the time of approving the financial statements, that there is
reasonable expectation that the Company has adequate resources to
continue in operational existence for the foreseeable future and
are confident that an acquisition will be successfully completed or
the shareholders will vote to continue to pursue a transaction.
If an acquisition is not successfully completed by January 2021
and the shareholders voted to wind the company up, the remaining
assets and liabilities would be settled in the normal course of
business and any excess funds returned to shareholders. This is
considered to be a material uncertainty as the company would be
wound up and not continue to trade on a going concern basis. These
events may cast significant doubt on the Company's ability to
continue as a going concern. The financial statements do not
include any adjustments that may be necessary if the Group were not
a going concern.
The Directors consider that despite this uncertainty it remains
appropriate to prepare the financial statements on a going concern
basis as they continue to pursue completion of an appropriate
transaction and have widen the search in terms of industry and
geographical location and continue to engage with shareholders such
that if a vote did occur they are confident that the shareholders
would vote to continue to support the Directors in their
search.
1.3 Property, plant and equipment
Property, plant and equipment are initially measured at cost and
subsequently measured at cost or valuation, net of depreciation and
any impairment losses.
Depreciation is recognised so as to write off the cost or
valuation of assets less their residual values over their useful
lives on the following bases:
Plant and equipment 33% straight line
The gain or loss arising on the disposal of an asset is
determined as the difference between the sale proceeds and the
carrying value of the asset, and is recognised in the income
statement.
1.4 Impairment of tangible and intangible assets
At each reporting end date, the company reviews the carrying
amounts of its tangible 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 it is not possible to estimate the recoverable
amount of an individual asset, the company estimates the
recoverable amount of the cash-generating unit to which the asset
belongs.
1.5 Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at
call with banks, other short-term liquid investments with original
maturities of three months or less.
1.6 Financial assets
There are no other categories of financial instrument other than
those listed below:
Trade and other receivables
Trade receivables are recognised and carried at the original
invoice amount less any provision for impairment. Other receivables
are recognised and measured at nominal value less any provision for
impairment.
The Company applies the expected credit loss model in respect of
trade and other receivables. The Company tracks changes in credit
risk, and recognises a loss allowance based on lifetime ECLs at
each reporting date.
1.7 Financial liabilities and equity
Financial liabilities and equity instruments are classified
according to the substance of the contractual arrangements entered
into. An equity instrument is any contract that evidences a
residual interest in the asset of the Company after deducting all
of its liabilities. Equity instruments issued by the Company are
recorded at the proceeds received net of direct issue costs.
Trade payables are stated at their amortised cost.
1.8 Taxation
The tax expense represents the sum of the tax currently payable
and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the
period. Taxable profit differs from net profit as reported in the
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 reporting end
date.
The Company is registered in England and Wales and is taxed at
the company standard rate of 19%.
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in
the computation of taxable profit, and is accounted for using the
balance sheet 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 of other assets and
liabilities in a transaction that affects neither the tax profit
nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each
reporting end 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 is realised.
Deferred tax is charged or credited in the 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 the company has a
legally enforceable right to offset current tax assets and
liabilities and the deferred tax assets and liabilities relate to
taxes levied by the same tax authority.
1.9 Share-based payments
Equity-settled share-based payments are measured at fair value
at the date of grant by reference to the fair value of the equity
instruments granted using the Black-Scholes pricing model. The fair
value determined at the grant date is expensed on a straight-line
basis over the vesting period, based on the estimate of shares that
will eventually vest. A corresponding adjustment is made to
equity.
1.10 Foreign exchange
Transactions in currencies other than pounds sterling are
recorded at the rates of exchange prevailing at the dates of the
transactions. At each reporting end date, monetary assets and
liabilities that are denominated in foreign currencies are
retranslated at the rates prevailing on the reporting end date.
Gains and losses arising on translation are included in the income
statement for the period.
2 Adoption of new and revised standards and changes in
accounting policies Standards which are in issue but not yet
effective
In the current period, the following new and revised Standards
and Interpretations have been adopted by the company for the first
time. These have been considered by the directors and deemed not to
have a material impact on the current, previously reported, or
future financial position and performance of the company.
-- IFRS 16 Leases
-- IFRIC 23 Uncertainty over Income Tax Treatments
At the date of authorisation of these financial statements, the
following Standards and Interpretations, which have not yet been
applied in these financial statements, were in issue but not yet
effective:
-- Amendments to IFRS 3 Definition of a business Amendments to
IAS 1 and IAS 8 Definition of material
-- Conceptual Framework Amendments to References to the Conceptual Framework in IFRS Standards
It is not anticipated that adoption of the standards and
interpretations listed above will have a material impact on the
current financial position and performance of the company.
3 Critical accounting estimates and judgements
In the application of the company's accounting policies, the
directors are required to make judgements, estimates and
assumptions about the carrying amount of assets and liabilities
that are not readily apparent from other sources. The estimates and
associated assumptions are based on historical experience and other
factors that are considered to be relevant. Actual results may
differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised, if the revision
affects only that period, or in the period of the revision and
future periods if the revision affects both current and future
periods.
The valuation of the options and warrants incorporates a
judgmental value. The Directors valued the options and warrants,
using the Black Scholes model where inputs such a volatility,
dividend yield and risk free rate require judgement. Volatility is
a key estimate and therefore share options and warrants is
considered a key judgment. Directors used an average volatility
excluding certain outliers.
There are no other estimates and assumptions that have
significant risk of causing a material adjustment to the carrying
amount of assets and liabilities within the next financial
period.
4 Operating loss
Period ended Year ended
11 months ended 12 months ended
31 December 2019 31 January 2019
GBP GBP
Operating loss for the period is stated
after charging / (crediting):
Exchange gains
Fees payable to the company's auditor for
the audit of the financial statements (479) -
Depreciation of property, plant and equipment
Share-based payments 27,500 -
351 258
27,471 -
-------- -------------
5 Employees
The average monthly number of persons (including directors)
employed by the company during the period was:
Period ended Period ended
31 December 2019 31 January 2019
Directors 4 3
------------------- -----------------------
The Directors were the key management personnel. Their
compensation is disclosed in note 7 to the financial
statements.
6 Compensation of key management personnel
11 months to 12 months to
31 December 2019 31 January 2019
GBP GBP
Share based payments 16,971 -
------
7 Income tax expense
At the reporting date the company had accumulated tax losses of
approximately GBP163,000 (31 January 2019 - GBP75,000) available
for carry forward against future trading profits.
No deferred tax asset has been provided for in relation to these
losses.
8 Loss per share Period ended
Period ended Year ended
11 months ended 12 months ended
31 December 2019 31 January 2019
GBP GBP
Number of shares
Weighted average number of ordinary shares
for basic earnings per share 4,230,541 4
----------- --------------------------
Weighted average number of ordinary shares
for diluted earnings per share 4,230,541 4
----------- --------------------------
Loss
Loss for the period from continued operations (195,464) (74,148)
----------- ---------
Loss for basic and diluted earnings per
share being net profit attributable to equity
shareholders of the company for continued
operations (195,464) (74,148)
----------- ----------
Loss per share for continuing operations
Basic loss per share (0.05) (18,537)
Diluted loss per share (0.04) (18,537)
-------- -----------
The share options and warrants as disclosed in note 11 are
considered to be anti-dilutive.
9 Trade and other receivables
Period ended Period ended
31 December 2019 31 January 2019
GBP GBP
Other receivables 8,000 11,260
VAT recoverable 14,671 2,000
Prepayments 8,611 -
------- ------------------
31,282 13,260
------ -----------------
10 Trade and other payables
Period ended Period ended
31 December 2019 31 January 2019
GBP GBP
Trade Payables 18,245 -
Accruals 34,286 7,528
Other payables - 80,782
------- -------------------------------
52,531 88,310
------ -----------------
11 Share-based payment transactions
Number of Number of
warrants options
options
Outstanding at 1 February 2019 - -
Granted 210,000 900,000
Outstanding at 31 December 2019 210,000 900,000
Exercisable at 31 December 2019 - 900,000
In July 2019 210,000 Warrants and 900,000 options were granted
with an exercise price of 10p each.
Each Warrant entitles the Warrant Holder to subscribe for one
Ordinary Share at the Placing Price per each Ordinary Share. The
Warrants have not been admitted to trading on the Official List but
are freely transferable. The Warrant Holder must exercise the
Warrants within a three period from 29 July 2019. The Warrants can
be transferred by means of an instrument of transfer in any usual
form or any other form approved by the Board.
The Warrants have been granted to Optiva Securities Limited in
consideration for the provision of brokering services to the
Company (and other services ancillary to the Admission of shares
onto the London Stock Exchange).
The fair value of the warrants at their grant date has been
calculated using the Black Scholes Model and a valuation of
GBP10,500 has been adjusted through the Share based payment reverse
in equity during the current period.
On 29 July 2019, the Company granted 900,000 Options to company
directors. Each Option entitles the Option Holder to subscribe for
one Ordinary Share at the Placing Price per each Ordinary Share.
The Options vest when the share price of the Ordinary Shares
reaches 15p. The Option Holders must exercise the Options within a
five-period period from 29 July 2019, subject to the Options having
vested.
The directors are of the opinion the company will achieve a
share price of 15p by 31 December 2020, and therefore the Options
will vest by this date. The successful acquisition of a target
company is anticipated by 31 December 2020 following the expansion
of searches for target companies into increased industries and
areas, and the share price is expected to increase following
acquisition.
The fair value of the options at their grant date has been
calculated using the Black Scholes Model and a valuation of
GBP16,971 has been adjusted through the Share based payment reverse
in equity during the current period.
Black Scholes Model At grant date At grant date
Warrants Options
Share Price GBP0.10 GBP0.10
Exercise Price GBP0.10 GBP0.10
Expected volatility 80% 80%
Risk-free interest rate 0.68% 0.68%
Expected life 3 periods 5 periods
Number of warrants/options granted 210,000 900,000
12 Share Capital
Period ended Period ended
31 December 2019 31 January 2019
GBP GBP
Ordinary Share capital
Issued
84,000,000 Ordinary shares of 1p each 84,000 -
-------- --------------------------
84,000 -
------ ------------------------
On 15 July 2019 899,996 Ordinary shares of 1p each were issued
at par.
On 17 July 2019 7,500,000 Ordinary shares of 1p each were issued
at 10p per share.
Of the 7,500,000 Ordinary shares that were paid for, 7,400,000
shares were settled in cash and 1,000,000 shares were settled
through the capitalization of a director's loan account.
The Ordinary shares have attached to them full voting rights,
dividend and capital distribution rights (including on a winding
up) but they do not confer any rights of redemption.
13 Share premium account
Period ended Period ended
31 December 2019 31 January 2019
GBP GBP
At the beginning of period - -
Issue of new shares 675,000 -
Less directly attributable issue costs (21,000)
---------- ----
At end of period 654,000 -
------- ------------------------
14 Retained Earnings
Period ended Period ended
31 December 2019 31 January 2019
GBP GBP
At the beginning of period (74,148) -
Loss for the period (195,464) (74,148)
----------- -----------
At end of period (269,612) (74,148)
--------- -----------------
The retained earnings reserve represents cumulative profits and
losses, net of dividends paid and other adjustments.
15 Events after reporting date
Since the 31 December 2019 the effects of the COVID-19 virus and
the oil price war between Saudi Arabia and Russia has meant that
oil prices have declined by approximately 60%. The current oil
price means that many oil assets are, at best, at close to break
even on a cash flow basis but would be in a loss position when
accounting for a total return on capital that would need to be
invested.
The Company believes that the effect of this will mean companies
that were seeking to divest assets will wait until the oil price
recovers to a more attractive level, it is the Company's view that
this level will be a Brent oil price of at least US$50 barrel. It
is unknown how long this recovery will take and therefore the
Company will expand its search for appropriate acquisition targets
to the entire value chain of the energy industry and not just the
upstream sector. It will also consider potential acquisitions
outside of the energy and natural resources industries.
16 Related party transactions
Remuneration of key personnel
The remuneration of directors, who are key management personnel,
is set out below in aggregate for each of the categories specified
in IAS 24 Related Party Disclosures.
Period ended Period ended
31 December 2019 31 January 2019
GBP GBP
Share based payments 16,971 -
------ ------------------------
Directors' loans
At the reporting date GBP9,000 (31 January 2019 - GBPnil) was
due from the directors to the company in respect of unsettled share
capital. GBP6,300 was due from D L Gallegos, and GBP900 was each
due from A J Broome, P V Wale and S W Holden. These amounts are
repayable on demand, interest free and are considered fully
recoverable.
In addition, GBP1,000 (31 January 2019 - GBP70,789) was due to D
L Gallegos in respect of expenses paid by the director on behalf of
the company. This amount is repayable on demand and interest
free.
On 15 July 2019 1,000,000 Ordinary shares of 1p each were issued
to D L Gallegos and settled by way of the capitalization of
GBP100,000 due to him from the company.
Notes to the Financial Statements
For the period ended 31 December 2019
17 Controlling party
The company has no immediate or ultimate controlling party.
18 Financial instruments and associated risks
The company has the following categories of financial
instruments at the period end:
Period ended Period ended
31 December 2019 31 January 2019
GBP GBP
Financial assets at amortised cost:
Cash and cash equivalents 516,557 -
Other receivables 8,000 11,260
Prepayments 8,611 -
-------- --------------------------------
533,168 11,260
------- -----------------
Financial liabilities at amortised cost:
Trade Payables 18,245 -
Accruals 34,286 7,528
Other Payables - 80,782
-------- --------------------------------
52,531 88,310
------ -----------------
There are no material differences between the fair value and the
book value of the financial assets and liabilities.
The company has exposure to the following risks from the use of
financial investments:
Liquidity risk
Liquidity risk is the risk that the company will not be able to
meet its financial obligations as they fall due. The company has
sufficient liquid assets to meet the operating needs of the
business. The financial obligations are very minimal therefore the
company is unlikely to be exposed to significant liquidity
risk.
Foreign currency risk
Virtually all transactions are conducted in the company's
functional currency of UK pound. Occasional small value invoices
were paid in US dollars and AUS dollars. It is therefore not
significantly exposed to foreign exchange risk arising from
exchange rate movements between the US dollar, AUS dollar and the
UK pound.
Credit risk
The company does not generate any revenue therefore there is no
exposure to credit risk from revenue. The company's financial
assets as at the date of financial position were minimal and deemed
recoverable.
Market risk
The company was formed to undertake an acquisition of a target
company or business or asset(s) with operations in the energy or
natural resources sectors. Any regulatory or market price changes
in this sector might affect the company's financial position.
Capital risk
The company's objectives when managing capital are to safeguard
the company's ability to continue as a going concern in order to
provide returns for shareholders, to provide benefits for other
stakeholders, and to maintain an optimal capital structure to
reduce the cost of capital. The capital structure of the company
consists of equity attributable to the equity holders of the
company, comprising issued capital and retained earnings. The
capital structure of the company is managed and monitored by the
directors.
19 Cash generated from operations
Period ended Period ended
31 December 2019 31 January 2019
GBP GBP
Loss for the period after tax (195,464) (74,148)
Adjustments for:
Depreciation and impairment of property,
plant and equipment 351 258
Equity settled share-based payment expense 27,471 -
Movements in working capital
Increase in trade and other receivables (10,022) (13,260)
Increase in trade and other payables 79,869 88,310
--------------------- -------------------
(97,795) 1,160 1,160 1,160
----- -----
---------------- ------------------------
20 Schedule of Administrative Expenses for the period ended 31 December 2019
Period ended Year ended
11 months ended 12 months ended
31 December 2019 31 January 2019
GBP GBP
Administrative expenses
Equity settled share based payment costs 27,471 -
Computer running costs 2,231 495
Travelling expenses 14,128 26,448
Professional subscriptions 31,805 17,000
Legal and professional costs 51,673 16,756
Consultancy fees 22,703 -
Accountancy 17,500 12,500
Audit fees 25,000 -
Bank charges 353 -
InsurancAe 1,167 -
Printing and stationary - 36
Entertaining 1,041 541
Sundry expenses 520 114
Depreciation 351 258
(Profit) or loss on foreign exchange (479) -
----------------------------- --------
195,464 74,148
----------------------------- --------
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 or visit www.rns.com.
END
FR KKBBBPBKDCPD
(END) Dow Jones Newswires
May 13, 2020 02:00 ET (06:00 GMT)
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