TIDMCEG
RNS Number : 2568B
Challenger Energy Group PLC
30 September 2022
30 September 2022
Challenger Energy Group PLC
("Challenger Energy" or the "Company")
Annual Report and Financial Statements for the year ended 31
December 2021
Challenger Energy (AIM: CEG), the Caribbean and Atlantic -margin
focused oil and gas company, with oil production, appraisal,
development and exploration assets across the region, announces its
Annual Report and Financial Statements for the year ended 31
December 2021.
The 2021 Annual Report and Financial Statements will be posted
to shareholders today. The Company's AGM will be held on 29
November 2021 at 34 North Quay, Douglas, Isle of Man IM1 4LB.
Notice of the AGM will also be posted to shareholders in due
course.
The 2021 Annual Report and Financial Statements are set out in
full below and are also available on the Company's website
https://www.cegplc.com/ .
For further information, please contact:
Challenger Energy Group PLC Tel: +44 (0) 1624
Eytan Uliel, Chief Executive Officer 647 882
Strand Hanson Limited - Nomad Tel: +44 (0) 20 7409
Rory Murphy / James Spinney / Rob 3494
Patrick
Arden Partners plc - Broker Tel: +44 (0) 20 7614
Simon Johnson 5900
CAMARCO Tel: +44 (0) 20 3757
Billy Clegg / James Crothers / Hugo 4980
Liddy
Notes to Editors
Challenger Energy is a Caribbean and Atlantic margin focused oil
and gas company, with a range of exploration, appraisal,
development and production assets and licences, located onshore in
Trinidad and Tobago, and Suriname, and offshore in the waters of
Uruguay and The Bahamas. In Trinidad and Tobago, Challenger Energy
has five (5) producing fields, two (2) appraisal / development
projects and a prospective exploration portfolio in the South West
Peninsula. In Suriname, Challenger Energy has on onshore appraisal
/ development project. Challenger Energy's exploration licences in
Uruguay, the South West Peninsula of Trinidad, and The Bahamas
offer high-impact value exposure within the overall portfolio
value.
Challenger Energy is quoted on the AIM market of the London
Stock Exchange.
https://www.cegplc.com
S
Challenger Energy Overview
Challenger Energy is a Caribbean and Atlantic margin focused
energy business with a range of exploration, appraisal, development
and production assets and licences, located onshore in Trinidad and
Tobago and Suriname, and offshore in Uruguay and The Bahamas.
Trinidad and Tobago
-- 7 licences (100%), 1 licence (83.8%) -all onshore
-- Low-risk production operations at five fields; considerable
existing well stock (250 wells of which approximately 80 are in
production at any time); close to sales infrastructure
-- 2P Reserves of 1.3MMbbls; 2C Resources of 6.4MMbbls (per 2020 CPR)
Production and cashflow focused strategy
-- Production enhancement potential from workovers,
recompletions, reactivations, enhanced oil recovery techniques, and
swabbing, and growth potential from new wells / field developments
in 2023 and beyond
-- Consolidation and new licence opportunities offer scope to grow production base further
Suriname
-- 1 onshore licence- Weg naar Zee PSC (100%), 900 km2
-- 2C Resources of 1.1MMbbls; 3C Resources of 3.5 MMbbls (24 MMbbls STOIIP) (per 2020 CPR)
-- Technical work underway to define and implement production
test well design along with enhanced oil recovery techniques,
success would lead to a development
Uruguay
-- 1 offshore licence- OFF-1 (100%) 14,557 km2 with multiple
leads and prospects -resource potential in excess of 1 billion
bbls
-- Low-cost initial 4-year exploration period commenced 25
August 2022, initial 2D seismic licencing and reprocessing work
underway
-- Uruguay is an emerging industry "hot spot" given successful
conjugate margin exploration drilling in Namibia in early 2022, as
well as recent Uruguay entry by majors with substantial forward
work programme commitments
The Bahamas
-- 4 offshore licences (100%), licence renewals currently pending
-- Perseverance-1 well drilled in 2021: encountered hydrocarbons
via logs although commercial volumes were not proven; post well
analysis indicates potential for a deeper Jurassic play and
continued prospectivity of other structures and targets
-- People and Assets
-- 75 staff, with the majority in Trinidad and Tobago
-- 2 workover rigs and 1 swabbing rig, owned and operated in
Trinidad and Tobago to support routine production and maintenance
activities
Chief Executive Officer's Report to the
Shareholders
Dear fellow Shareholders,
This is my second report to you, the owners of the Group, in my
capacity as Chief Executive Officer.
This Annual Report covers the 2021 financial year period (that
is, from January to December 2021). As with last year, however,
timing for 2021 reporting was delayed more than usual, owing to
residual local impacts of the Covid-19 pandemic in some of the
jurisdictions in which we operate. Hopefully, as the world rebounds
from the pandemic and work gets back to normal in all
jurisdictions, this will not be the case next year when it comes to
reporting for 2022.
As a result of the timing delay for this Annual Report, its
release coincides with the timing for release of the half-year
results for the period January-June 2022, and much of the
restructuring activity (which I elaborate on below), although
commenced in the second half of 2021, only saw significant outcomes
for the Group during the first half of 2022. Therefore, even though
strictly speaking this Annual Report relates to the period January
to December 2021, I will refer in my report more generally, to the
period from the start of 2021 until the middle of 2022.
2021 in Context
For the majority of the Group's history its business and asset
base focused exclusively on the frontier basin "wildcat" operations
associated with its Bahamian licences - a preserve usually
associated with International Majors and NOCs. Entry into an
exploration licence in Uruguay in May 2020 broadened the portfolio
for the first time, by adding another early-stage high-impact
exploration asset. Then, through the acquisition in August 2020 of
production, near term production, appraisal and exploration assets
in Trinidad and Tobago and Suriname, we transformed the Group by
extending the asset base across the region and sector value chain,
and diversified the corporate risk profile.
2021 thus marked the Group's first full year of operations with
an expanded asset suite, and we commenced 2021 with a much larger
business and team, and a full slate of planned work before us:
drilling of Perseverance-1 in The Bahamas, which was the
culmination of over a decade's work and efforts; drilling of
Saffron-2 in Trinidad; operating the producing fields in Trinidad;
and undertaking the initial work needed to mature the assets in
Uruguay and Suriname.
The Drilling Campaigns
The Group's 2021 drilling campaigns both occurred in the first
half of the year: the bulk of drilling for the Perseverance-1
exploration well in The Bahamas occurred in January 2021 with the
well completed in early February 2021, and the Saffron-2 appraisal
well in Trinidad was drilled in June - July 2021.
We are proud of the fact that, despite many challenges, we did
what we said we would do: we drilled both wells safely and without
incident and met the objective of testing the relevant structures
at the chosen drilling locations. This was no small feat,
especially for a Group of our size: we had to secure the financing
needed, we had to recruit an experienced operations team, and in
two different geographies we had to operate complex drilling
programmes more typically undertaken by much larger companies. We
did all of this at the peak of the global pandemic, and in the case
of The Bahamas, whilst successfully overcoming a legal challenge
from environmental activists that was frivolously launched at the
very last minute.
This highlights the commitment, professionalism and dedication
of the people who work at Challenger Energy, as well as our robust
business systems and procedures, all of which remain core assets of
the Group as we move forward.
In terms of outcomes, Perseverance-1 did not result in the
commercial discovery we hoped for, but a substantial amount of data
and learning was obtained from the drilling of the well, which was
the first in the region linked to 3D seismic and using modern
techniques. During the balance of 2021 we analysed this data, and
concluded that The Bahamas might yet offer long-term potential. In
simple terms, Perseverance-1 only tested one part of one structure,
but there are at least four other locations and multiple structures
that were upgraded following the Perseverance-1 outcome, and which
therefore in the future could merit further analysis and testing.
Data from Perseverance-1 also provides encouraging support for the
possibility of a deeper, sizeable Jurassic oil play.
As I have observed before, in frontier basins it is not at all
uncommon for several exploration wells to be required before the
potential of that basin is unlocked. Given this, in March 2021 we
submitted documentation for renewal of our Bahamian licences into a
third, three-year exploration period - this remains pending with
The Bahamian Government, but the Group has completed all of its
work obligations and is thus entitled to a renewal. At the same
time, we have been clear on our go-forward strategy in The Bahamas
- any future activity will require a "big brother" partner, ideally
a larger industry player, to provide expertise and the capital that
will be needed for the next phase of activity.
Turning to the Saffron-2 well in Trinidad, it did not provide
the immediate production boost we were seeking from Lower Cruse
reservoir units, although that well, along with Saffron-1 (drilled
prior to Challenger Energy assuming control of the asset) provided
much data on the viability of production from the Upper Cruse and
Middle Cruse sands across the broader licence area. Thus, during
the second half of 2021 and continuing into 2022, technical work
commenced to assess the commercial feasibility of a development
focused only on these upper reservoir horizons. A project of this
nature would not be of the same scale as what we had hoped for
based on a Lower Cruse development, but an Upper and Middle Cruse
focused development, if economic, would still enable us to access
valuable increased production, and derive benefit from our
extensive licence position in the area. Over the coming months we
will complete the work needed to firm up our plans. 3
Production Operations in Trinidad and Tobago
During 2021 we strategically repositioned the Group so as to
prioritise our producing assets in Trinidad and Tobago. We also
established a very clear, simple objective for the operations in
Trinidad: to focus on production, to manage costs tightly, and to
thereby try to generate positive cashflow from these
operations.
There were three reasons for this strategic repositioning. One,
routine production provides a baseline level of cashflow, which we
can use to plan our business around. Two, we believe that by
applying efficient oilfield management practices, production at our
fields can be sustained and thereafter increased, producing surplus
cash that could be reinvested in value-adding work in the fields
themselves, as well as applied towards covering the business' total
operating cost. And three, the oil and gas industry is cyclical,
and in the last few years higher-risk activities - especially those
considered to be "frontier exploration" - have fallen largely out
of favour. By contrast, in the context of the recent industry
environment, investors and capital providers have seemed far more
interested in that part of our business offering a lower-risk,
predictable cashflow profile, even if that does not offer the same
level of upside potential as successful high-impact exploration
activities.
In support of this strategic repositioning, the work undertaken
in Trinidad and Tobago during 2021 broadly fell into two categories
of work, "above ground" and "below ground".
The focus of our "above ground" work essentially related to the
fact that prior to Challenger Energy assuming control of the
Trinidadian production assets in August 2020, they had been starved
of cash, and generally poorly managed. This was evident in low
field activity levels, poor morale amongst staff, inadequate
policies and procedures, poor record keeping, many local suppliers
who had not been paid, and a business reputation in-country that
was suffering, especially with the regulators.
"Below ground", the work focus related to the fact that our
assets in Trinidad are mature - some have been producing oil for
more than 60 years now. The reservoirs are thus depressurised and
the resource depleted, such that there is always going to be a
natural, inevitable level of production decline each year. This has
to be offset through efficient mature oilfield management
practices, targeted production enhancement activities, very tight
cost control, and ultimately the maturation of resources and
drilling of new wells in areas of the fields that have previously
not been tapped.
Insofar as "above ground" work is concerned, all through 2021 we
made operational improvements: well workover rates increased,
preventative maintenance increased, we restructured the staff base,
we worked to restore staff morale and productivity, and we
rescheduled and cleared the Trinidadian business of many old debts
and claims. Policies and procedures were revamped, and new country
management was identified (with key new hires, including a new
Country Manager, taking effect from early 2022 onward).
A good measure of our success in this regard is the restored
business relationship we have seen with various suppliers essential
to ongoing operations (many of whom were previously threatening to
suspend services). Another measure of success is the fact that
toward the end of 2021 and into 2022 we secured extensions of two
key licences in Trinidad, I believe largely because we could
demonstrate to the regulators the extent of the improvements we had
made.
Therefore, in relation to the "above ground", my report is that
2021 and H1 2022 have been periods of solid progress.
We systematically tackled many issues so that, in an operational
sense, the overall business in Trinidad and Tobago today is in
a
far better shape today than it was 18 months ago.
More challenging, however, has been the "below ground" work I
mentioned above - i.e., the work needed to offset natural
production decline, sustain and enhance baseline production, and
generate positive cashflow. This was especially difficult because
during the first half of 2021 attention and capital was focused on
our drilling activities, and access to Trinidad was restricted due
to the pandemic. Then, from the middle of 2021 onwards, available
capital and our ability to do substantive work in this area was
greatly limited until the restructuring process (which I discuss
further below) was completed.
Through 2021 we thus saw a decline in our average production
rate -approximately 450 barrels of oil produced per day toward the
start of the year, and then declining to end the year at below 350
barrels of oil produced per day. Since completing the restructure
and recapitalisation of the Group in March 2022 we have been able
to turn our attention fully to production maintenance and
enhancement activities. This, along with the benefit of greater
access as Covid-19 restrictions have lifted, means we have since
seen steady improvement with production rates improving during the
first half of 2022 and ranging between 375 - 400 barrels of oil
produced per day towards the end of 2H2022. Given current oil
prices, and with the in-country cost structure we now have in
place, this means we have achieved our first goal: a baseline level
of production that can sustain the business in Trinidad (the
average oil price realised in 2021 was approximately US$60 per
barrel, a level considerably below current prices being
realised).
Beyond this, we hope to see further improvements in the coming
months as various production enhancement initiatives are
rolled-out, and we've developed a plan for additional field work,
potential new well drilling, and various Enhanced Oil Recovery
(EOR) initiatives over the coming 12 months. We are also
continuously assessing various opportunities to expand our
producing asset base through adding new licences.
Therefore, in relation to the "below ground" challenge we face
in Trinidad, my report is that 2021 and the first half of 2022 were
periods of laying foundations, but we are still at the early stages
of executing a long-term plan to build a production base of scale
in Trinidad. I hope next year to be able to report on our continued
progress.
Other Activities
Notwithstanding the unambiguous focus placed on the production
business in Trinidad and Tobago since mid-2021, we continued to
progress the broader asset portfolio, albeit in a low-cost, "below
the radar" way. These activities can be summarised as follows:
Weg naar Zee PSC in Suriname
There was no field activity in relation to the WNZ block in
Suriname during 2021. We had initially hoped for drilling of an
initial pilot well in late 2021 or early 2022, but the pandemic
made this impossible - Covid-19 restrictions in Suriname remained
in place until early 2022. Instead, we took the opportunity during
2021 to completely revisit all of our assumptions on this project
and update our thoughts on well design and development pacing. We
have also applied for an extension of the initial period under our
licence, given the delays occasioned by the pandemic - approval is
pending with the regulators. Subject to this approval, we expect to
be able to resume activity in Suriname during 2023, and between now
and then, we are working on developing potential partnering
opportunities for this asset. Further updates will be provided in
due course.
AREA OFF-1 in Uruguay
In June 2020, we were awarded the AREA OFF-1 licence block,
offshore Uruguay. However, through all of 2021 there was minimal
activity on the licence, while we waited for its ratification by
the Uruguayan Ministry and regulatory agency, ANCAP. This had been
delayed due to the impacts of Covid-19 in Uruguay. Subsequently, it
was only on 25 May 2022 that all procedural matters were completed
and the licence formally executed. As a result, our initial
four-year exploration period only commenced on 25 August 2022.
To remind shareholders, our minimum work obligation for this
period is to licence 2,000 kms of 2D seismic from ANCAP, to
reprocess / re-interpret that data, and to complete two geological
studies. There is no obligation to acquire 3D seismic, nor
obligation to drill a well in the first exploration period. We are
well advanced in the process of meeting this minimum work
obligation, having recently licenced the required 2D seismic, with
reprocessing already underway - we expect to have the full results
of this work in early 2023.
We anticipate that this initial activity - low cost as it may be
- will prove to be very timely, because the delay experienced while
waiting for formal licence ratification has been serendipitous.
Specifically, as I noted in the 2020 Annual Report, two "wildcat"
exploration wells had been planned for late 2021 in Namibia by two
different majors (Total Energies and Shell), on the conjugate
margin of AREA OFF-1, and we were thus keenly interested in the
outcomes. As it turns out, in both cases the drill results, which
became known in February 2022, were what have been described as
"mega-discoveries".
This in turn has unleashed a huge amount of industry interest
over the past few months not only offshore Namibia, but also
offshore Uruguay and northern Argentina, because the successful
Namibian wells have de-risked the potential presence of a
high-quality, oil-prone source rock and charge on the western sides
of the South Atlantic margin. The Uruguayan basin has thus become,
almost overnight, an emerging industry "hotspot". For AREA OFF-1 in
particular, the chance of eventual success has increased
significantly, with multiple leads and prospects and a resource
potential in excess of 1 billion barrels.
Of course, it is perfectly understandable that shareholders
might be sceptical, given the recent exploration experiences in The
Bahamas and Trinidad. However, Uruguay is a different asset in both
below and above ground profile, and success or failure in one
location is not indicative of the potential of another entirely
independent play or drill prospect. More than that, the early proof
is that in May 2022 Shell and APA (a division of Apache) both bid
for and were awarded licences in Uruguay - including AREA OFF-2
which is directly adjacent to AREA OFF-1. But whereas our minimum
work obligation, as set in 2020, was modest, Shell and APA have
committed to spending more than US$200 million on their Uruguayan
acreage in the coming years. Clearly, therefore, we are not the
only ones who see great promise in Uruguay.
Finally, it is also worth noting that our early entry,
first-mover strategy for Uruguay is different to previous ventures,
in that we are going to seek a partner very early in the asset life
cycle, so that the Group does not bear all of the financial risk.
We have already seen strong interest in potential partnering
arrangements from multiple parties, and we will update shareholders
as matters develop.
ESG
At Challenger Energy, achieving our commercial objectives will
never be at the expense of harm to people or the environment - this
is a non-negotiable principle of how we do business. Moreover, as a
participant in the international energy industry, everything we do
depends on what is sometimes described as the "social licence to
operate": the way in which our activities and operations impact on
our employees, stakeholders, host Governments, regulators, the
communities in which we live and work, and the environment.
Maintaining consistently excellent performance in relation to what
is nowadays generally referred to as ESG (Environmental, Social and
Governance) has become critical for many businesses in the modern
world, not just because it is a moral duty, but because it makes
good business sense.
The Group thus devotes a considerable amount of focus to this
area, every day. We have full-time staff committed to ensuring
strong ESG performance, overseen at Board level by a Health,
Safety, Environment & Security (HSES) Committee. This Committee
meets regularly to ensure adequacy of and compliance with
standards, processes, systems and procedures. Beyond this, we seek
to embed ESG awareness into every aspect of the business, and every
person who works at Challenger Energy, no matter their seniority,
role or location, is required as a condition of their job to
participate actively in various ESG-related activities - things as
diverse as crisis management simulations, daily safety briefings,
diversity training, and anti-bribery and corruption seminars.
The results of this commitment to ESG as a business priority
have been evident. As already noted, during 2021 the Group operated
two substantial and complex drilling campaigns, in two different
countries, and at the peak of the pandemic. Both drilling campaigns
were completed without any incident - whether personal injury,
property damage or environmental. More generally, the Group's
operations throughout 2021, routine and non-routine, took place
without the occurrence of any Lost Time Incidents, and in the same
period we saw a marked improvement in staff morale and the manner
in which external stakeholders viewed and engaged with the Group.
We were especially pleased, after an extensive audit process, to be
awarded Safe to Work (STOW) accreditation for the first time. This
certification is local to Trinidad and Tobago, and is only given to
companies that are adjudged to possess a world-class, robust and
functional HSES Management System.
There is always room for improvement in the area of ESG, and
over the coming year we will continue to seek out ways to do even
better, as well as formalise a structure for setting ESG goals and
then tracking and reporting against those goals. Overall, however,
I believe that shareholders should be pleased with the Group's ESG
performance and track record in 2021. Further details in relation
to ESG are set out on page 11 of this Annual Report.
Corporate Restructuring
As noted, the two wells drilled during the first half of 2021
were both completed safely and without incident, and advanced our
technical understanding of the relevant reservoirs, thus providing
key inputs for consideration of future activity plans which in the
long-run we hope will yet offer value creation opportunities.
However, I do not wish to sugar-coat the fact that neither of the
wells were the immediate success we had been hoping for.
Perseverance-1 did not prove commercial volumes of hydrocarbons,
Saffron-2 was not able to achieve sustained production from the
deeper Cruse reservoir units that we were targeting and the final
cost of both wells was considerably higher than anticipated
pre-drill.
These were clearly not the outcomes longstanding shareholders
(myself included) had been hoping for. But, as I have commented
before, this is the risk assumed when investing in the oil and gas
exploration business. Companies with significant exposure to
exploration outcomes will inevitably face adverse business and
financial consequences if those outcomes are below expectation.
In our case, the below expectation outcomes of the two
successive drills meant that in my initial few months as CEO (I
assumed the role in June 2021), the priority became to initiate a
difficult but necessary Group restructuring process.
First, we engaged in a dialogue with various contractors and
creditors, reaching common agreement with almost every contractor
and creditor whereby each agreed to accept a discounted payment in
final settlement for work undertaken on the drilling campaigns.
Second, we worked to reshape our operations and reduce the overhead
costs of the business - ultimately by approximately 80%. Third, as
mentioned previously, we refocused the business strategy so as to
prioritise our producing assets in Trinidad and Tobago. And fourth,
we brought in fresh capital.
The overall process took some time to complete, but in March
2022 we successfully closed a fundraising of approximately
US$10 million, which allowed us to complete the restructure,
clean up the balance sheet and put the Group into a position
where
it was largely free of financial debts, and able to fund planned
activities during 2022.
As we wrapped up the restructuring process in March 2022, a
number of members of the Board and executive ceased in various
roles, Iain McKendrick joined as our new Non-Executive Chairman,
and several key hires, especially in support of our operations in
Trinidad and Tobago, took effect. We also changed our corporate
broker and "revamped" many of our longstanding corporate advisory
and services relationships, in pursuit of further operating
efficiencies and cost reductions.
Finally, it is worth mentioning that through the restructuring
process we were able to attract a number of larger shareholders to
our register, such that as at the date of this report approximately
45% of the Group's shares are now held by a relatively small group
of shareholders and management (including myself).
2022, 2023, and Beyond
In summary, 2021 can largely be described as having been a year
of two distinct parts for the Group: the first half of the year
dominated by active exploration and appraisal drills in The Bahamas
and then Trinidad; and directly following on from that, the second
half of the year (and into the first half of 2022), dominated by
the work needed to "reset" the Group based upon the outcomes of
those drilling activities.
We have come through that now, and Challenger Energy's
go-forward business strategy is guided by a simple objective: to
focus on production, to manage costs tightly, and to thereby grow
cashflow from the Trinidadian operations. At the same time, we will
seek to maximise value of the other exploration assets by
introducing strategic partners as early as possible.
In pursuit of this objective, during 2021 we made strong
progress operationally, and the business today is leaner, more
responsive, and unburdened of legacy issues. We have also
undoubtedly benefitted from the rising oil price environment, such
that our operations in Trinidad & Tobago have reached a point
where they are largely self-sustaining.
This improved operational position has also provided the
platform on which we can work towards a broader goal: the Group as
a whole generating positive operating cashflow. Achieving this goal
will require being able to drive an increase in production from
current levels, a task which has been a work-in-progress to-date,
and which work will continue into 2023. As noted in my report
above, this is not a simple technical "nut" to crack, given that
the fields we have are mature, and production is often disrupted
for reasons we cannot always control (wells go offline, power
supplies get disrupted in inclement weather, etc). We have,
however, been seeing good initial results from the work we are
doing to maintain and optimise field performance, and we have
outlined a plan for further field improvements, new well drilling
and various Enhanced Oil Recovery (EOR) initiatives over the coming
12 months, so we remain hopeful we will get there.
We also expect that the next 12 months will be a defining time
for our asset in Uruguay, and which I hope might provide an
unexpected upside surprise for shareholders. As mentioned before,
the industry we operate in is cyclical, and the cycle appears to
once again be turning, with interest in high-quality exploration
prospects on the increase. We should be a prime beneficiary if this
trend continues.
Finally, I would like to take this opportunity to thank all
those Board members, employees and consultants who made a
contribution to Challenger Energy - in some cases over many years -
but who, as a result of the restructuring during 2021, are no
longer with the Group. We are grateful for your past efforts. I
would also like to extend my sincere thanks to all of our
continuing staff, who have given 100% at all times. And
collectively, all of us who work at Challenger Energy wish to
express our deep appreciation for the patience and support we have
received over the past 18 months, from stakeholders, regulators,
suppliers, contractors and especially our shareholders, old and
new.
Eytan Uliel
Chief Executive Officer
29 September 2022
Assets Summary
Trinidad and Tobago
The Group has five producing fields and one dormant field, all
onshore Trinidad and Tobago. Across the fields there are a total of
approximately 250 wells, of which approximately 80 are in
production at any given time. The Group also has a large licence
position in the South-West Peninsula of Trinidad (SWP), with a
potential shallow development project at the Bonasse licence (based
on the outcomes of the Saffron-1 and Saffron-2 wells drilled in
2020 and 2021 respectively), and several exploration prospects
identified in the SWP more broadly.
Goudron Field
The Group owns and operates 100% of the Goudron field by way of
an enhanced production service contract ("EPSC") with Heritage
Petroleum Company Limited ("Heritage"), the Trinidadian state-owned
oil and gas company. The current terms of the EPSC runs until 30
June 2030. Within the field, regular well workover operations are
undertaken on the existing production well stock, including well
stimulation operations, reperforations, and repairs to shut-in
wells, as and when appropriate. The Group has identified certain
well recompletion opportunities (perforating potential oil-bearing
zones previously not produced) and is undertaking a comprehensive
well optimisation and swabbing programme with the objective of
achieving production stability, growth and longevity, as well as
reducing overall field operating costs. The Group is awaiting
approvals for a planned water injection enhanced oil recovery pilot
project focused on repressuring reservoir units.
Inniss-Trinity Field
The Group owns and operates 100% of the Inniss-Trinity field by
way of an incremental production service contract ("IPSC") with
Heritage. The IPSC has been extended to 30 September 2022 on an
interim basis to allow for ministerial consent required for
execution of a fresh EPSC effective 1 January 2022 and expiring on
30 September 2031. Within the field, regular well workover
operations are undertaken on the existing production well stock,
including well stimulation operations, reperforations, and repairs
to shut-in wells, as and when appropriate. As with the Goudron
field, the Group has identified certain well recompletion
opportunities and is undertaking a comprehensive well optimisation
and swabbing programme with the objective of achieving production
stability, growth and longevity, and reduced field operating costs.
During 2020 and 2021, a CO2 enhanced oil recovery pilot project was
undertaken on the field and the Group continues to undertake
technical work to evaluate potential to undertake further CO(2)
projects in other parts of the field.
South Erin Field
The Group owns and operates 100% of the South Erin field by way
of a farm-out agreement with Heritage. The farm-out agreement has
been renewed until 31 December 2023 and is extendable up to 30
September 2031 subject to work programme completion. The Group is
in the process of defining a well drilling programme targeting
additional production from undrained reservoir compartments, and
that would satisfy the work programme requirements necessary for
extension of the farm-out agreement.
Southwest Peninsula (SWP)
The SWP contains the Bonasse and Icacos producing oilfields, in
which the Group holds a 100% operated interest via a number of
private leases covering the Bonasse, Cedros and Icacos licence
areas. Similar to other fields, regular well operations are
undertaken on the existing production well stock and repairs to
shut-in wells, as and when appropriate. The Saffron-1 and Saffron-2
wells were drilled in the Bonasse licence area during 2020 and
2021, respectively. Both wells primarily targeted the Lower Cruse
reservoir horizons and while production could not be sustained from
these Lower Cruse horizons, both wells yielded valuable data on the
commercial viability of production from the shallower Upper Cruse
and Middle Cruse horizons. Accordingly, the Group is presently
evaluating the potential for a shallow field development plan.
Cory Moruga Field
The Group owns 83.8% of the Cory Moruga licence and is the
operator, alongside its partner Touchstone Exploration Inc. which
holds a 16.2% non-operated interest. The Cory Moruga field is
presently not in production. The Cory Moruga licence includes the
Snowcap oil discovery, with oil having previously been produced on
test from the Snowcap-1 and Snowcap-2ST wells (but rapidly declined
when the wells were put on production). The Group has formally
written to the Trinidadian Ministry of Energy and Energy Industries
("MEEI") proposing a programme of further appraisal work
conditional on past dues being waived and annual licence fees being
rebased to an appropriate level. To the extent a suitable
arrangement of this nature cannot be agreed with MEEI, the Group
intends to surrender the licence.
Suriname - Wag naar Zee Project
The Group holds a 100% interest in a Production Sharing Contract
("PSC") with Staatsolie Maatschappij Suriname N.V, the Suriname
state-owned petroleum company ("Staatsolie"), for an onshore
appraisal / development project contained in the Weg naar Zee Block
("WNZ"). The PSC has a 30-year term with the initial exploration
period expiring in October 2022. The Group has applied to extend
the initial exploration term for a period of 18 months given
disruptions occasioned by the Covid-19 pandemic, and confirmation
of such extension is pending.
WNZ is a large block covering approximately 900 km(2) in a
proven hydrocarbon province with 70 historical wells and 2D seismic
coverage. Up to 24 MMbbls STOIIP (15deg API) has been identified in
eight pools with the CPR assessing 2C resources of 1.1 MMbbls and
3C resources of 3.5 MMbbls.
The Group is currently working with Gaffney, Cline &
Associates to review the available technical information pertaining
to the WNZ block and redesign an extended well test accordingly,
which is likely to include a horizontal pilot well along with the
potential use of certain enhanced oil recovery techniques, so as to
maximise production and oil recovery from the reservoir.
Uruguay
The Group holds a 100% working interest in and is the operator
of the AREA OFF-1 block, offshore Uruguay. AREA OFF-1 was awarded
in June 2020, and formally signed on 25 May 2022. The licence has a
30-year tenure with the first four-year exploration period having
commenced on 25 August 2022.
The AREA OFF-1 block covers a total area of 14,557 km(2) and is
situated in water depths ranging from 20 to 1,000 metres,
approximately 100 kms off the Uruguayan coast. The Group's minimum
work obligation during the initial four-year exploration period is
to undertake relatively modest and low-cost reprocessing and
reinterpretation of selected historical 2D seismic. There is no 3D
seismic or drilling obligation in the initial phase. The relatively
modest level of work required in the initial licence phase reflects
the first-mover advantage gained by the Group in applying for its
Uruguay acreage based on perceived technical merit in April 2020,
notwithstanding the then uncertain potential longer-term impacts of
the Covid-19 pandemic.
The prospect and lead screening undertaken by ANCAP, the
Uruguayan oil and gas regulatory body, includes the specific
identification of the syn-rift Lenteja prospect on AREA OFF-1 with
a P50 estimated ultimate recovery volume (EUR) of 1.359 billion
barrels of oil and, located in just 80 metres of water depth. This
volume estimate is consistent with the Group's internal
estimate.
The AREA OFF-1 play system is directly analogous to the recent
prolific, conjugate margin discoveries made offshore Namibia by
TotalEnergies (Venus well) and Shell (Graff well), where reported
multi-billion-barrel Cretaceous turbidite reservoirs have been
encountered. The AREA OFF-1 licence exhibits the same Aptian play
source rock as these Namibia discoveries with similar petroleum
systems present and hence the AREA OFF-1 is thought to be analogous
with these recent discoveries.
More recently, on 23 June 2022, ANCAP announced that three
further offshore blocks had been awarded - two to Shell (including
one block directly adjacent to the Group's AREA OFF-1 block) and
one to APA (a division of Apache). Both awards have been granted
with substantial minimum work obligations, as announced by ANCAP to
be over US$200 million in aggregate between the 3 blocks.
The Group has recently licenced 2,000 kms of legacy 2D seismic
data and commenced reprocessing of this data. This work would allow
for the Group to undertake geological and geophysical studies,
identify specific leads and prospects, update the resource
assessment, and thus complete all of the minimum work obligation
for the entire first four-year exploration term by early 2023. In
parallel, the Group is considering early-stage partnership
possibilities for the AREA OFF-1 licence, with a view to expediting
3D seismic acquisition and processing work.
The Bahamas
The Group is the 100% owner of four conjoined exploration
licences offshore The Bahamas. The Perseverance-1 exploration well
was drilled in the licence area, from 20 December 2020 to 7
February 2021, at a location approximately 20 miles from the
Bahamas-Cuba maritime border, in water depth of approximately 518
metres. Perseverance-1 represented the first exploration drilling
in The Bahamas since the mid-1980s, and the first test of any
prospect located in deeper waters off the shallower water carbonate
banks.
The well reached a depth of 3,905 metres, having intersected
five Albian, Upper Aptian, and Mid-Aptian horizons of interest but
did not result in a commercial discovery at the drilling location.
Notwithstanding the outcome of Perseverance-1, a number of other
structures and drill targets remain prospective across the licence
areas, and the technical findings from Perseverance-1 indicate the
potential of deeper Jurassic horizons - all of which might merit
further exploration activity in the future. As such, the Group is
considering partnering opportunities for any potential next phase
of activity in The Bahamas. In parallel, in March 2021, the Group
notified the then Government of The Bahamas of its intent to renew
the licences into a third 3-year exploration period. A new
Government was elected in The Bahamas in September 2021, and the
Group is engaging with the administration on the renewal
process.
Reserves and Resources
In late 2020, the Group commissioned an independent Competent
Person's Report ("CPR") from ERC Equipoise ("ERCE"). The scope of
the report was to focus on reserves and resources across the
Group's producing assets in Trinidad and Tobago, and the Group's
Weg naar Zee licence in Suriname. ERCE certified net 2P reserves of
1.29 MMbbls and net 2C contingent resources of 7.46 MMbbls across
the portfolio of assets in Trinidad and Suriname, summarised as
follows:
Reserves (MMbbls)(1) 1P 2P 3P
--------------------------------- ---- ---- -----
Total as of 30 September 2020(3) 0.69 1.29 1.92
--------------------------------- ---- ---- -----
Contingent Resources (MMbbls)(2) 1C 2C 3C
--------------------------------- ---- ---- -----
Total as of 30 September 2020(3) 0.71 7.46 24.70
--------------------------------- ---- ---- -----
Remaining Estimated Ultimate Recoverable
The CPR also included the Remaining Estimated Ultimate
Recoverable ("Remaining EUR") volumes, without considering economic
limit and excluding contingent resources, across the Group's five
producing fields as of 30 September 2020 at low, best and high
levels of confidence. An aggregate summary of the Remaining EUR
volumes as of 30 September 2020 as per the ERCE CPR and the Group's
internal estimate of Remaining EUR volumes as of 31 December 2021,
after adjusting for production from October 2020 to December 2021,
are summarised below:
Remaining EUR (MMbbls)(4) High (1P) Best (2P) Low (3P)
----------------------------------------------- --------- --------- --------
Total Remaining EUR as of 30 September 2020(3) 0.97 1.69 2.69
----------------------------------------------- --------- --------- --------
Less: Production for the period from 1 October
2020 to 31 December 2021 (0.17) (0.17) (0.17)
----------------------------------------------- --------- --------- --------
Estimated Remaining EUR as of 31 December
2021(5) 0.80 1.52 2.52
----------------------------------------------- --------- --------- --------
Notes
1. Group Working Interest reserves are based on the working
interest share of the field gross resources and are prior to
deduction of royalties but after applying economic cut-off.
Challenger Energy hold a 100% interest in all relevant fields,
being Goudron, Inniss-Trinity, South Erin, Icacos and Bonasse in
Trinidad, and Weg naar Zee in Suriname.
2. The Contingent Resources are on unrisked basis and have not
been risked for chance of development and are sub-classified as
development unclarified.
3. Totals are added arithmetically which means statistically
there is a greater than 90% chance of exceeding the total IP or 1C
and less than a 10% chance of exceeding the total 3P or 3C.
4. Remaining Estimated Ultimate Recoverable volumes are volumes
estimated to be technically recoverable from the existing wells
across the five producing fields. These estimates do not consider
economic limit and exclude contingent resources. High (1P), Best
(2P) and Low (3P) represent level of confidence.
5. Estimated Remaining EUR as of 31 December 2021 is the Group's
internal estimate of volumes based on volumes estimated in the CPR
as of 30 September 2020 reduced by the volume of production for the
period from 1 October 2020 to 31 December 2021. This estimate is
not certified by ERCE and has not been included in the CPR.
6. ERCE did not audit the Group's prospective exploration
acreage in the South West Peninsula of Trinidad as part of its
CPR.
2P reserves relate to known oil that is capable of being
produced economically, and thus the 2P reserves as certified by
ERCE relate solely to production capable of being generated from
the Group's existing wells in existing fields. The 2P reserves do
not assume any contribution from infill drilling and enhanced oil
recovery projects. Moreover, apart from routine operating costs
required to keep wells online, accessing this production potential
does not require material amounts of incremental capital
expenditure.
At oil prices ranging from US$60 to US$90 per barrel, it is
estimated this level of 2P reserves represent US$75 million to
US$120 million of gross cashflow potential to the Group, and a
reserve base equivalent to a baseline production of 400 bopd for
approximately nine years.
Environmental, Social and Corporate
Governance Report
In recent years, many businesses, including those operating in
the energy industry, have seen an emerging need to develop
strategies relating to, and then monitoring and reporting
performance against, a diverse range of business activities that
collectively are commonly referred to as Environmental, Social and
Corporate Governance, or "ESG". In broad terms:
-- Environment relates to considerations of the impact that a
company's business has on the natural environment, and how to best
minimise / manage that impact. Relevant areas include the energy a
company utilises in conducting its business, the waste it produces,
the resources it needs, and the consequences of its operations in
terms of emissions, waste, water, biodiversity and climate
change.
-- Social relates to the manner in which a company seek to
discharge its broader social obligations, including those owed to
its employees, external stakeholders, and the communities in which
it operates. Relevant areas include employee engagement and
training, diversity and inclusion, labour relations, and community
involvement and development.
-- Governance relates to the controls and procedures a company
adopts to govern itself. Examples of relevant governance areas
include considerations of board composition, how a company's board
functions in practice, and preventing bribery and corruption.
Set out below are details of Challenger Energy's ESG Philosophy
and Management framework, approach to Corporate Governance and
certain other ESG related areas, as well as selected ESG Highlights
from 2021.
ESG Philosophy and Management
At Challenger Energy, we believe that pursuit of commercial
objectives should never be at the expense of harm to people,
community or the environment.
We believe that we have a responsibility for, and owe a duty of
care to, the people who work for us, the contractors and suppliers
that work alongside us in our operations, and the broader
communities in which we live and work. We take all steps possible
to safeguard the health, wellbeing and personal safety of all
involved with us as we deliver our operational projects. Our
objective is for zero lost time injuries or incidents.
At all times Challenger Energy seeks to conduct its business
with integrity and high ethical standards, and foster a working
environment of respect for all employees. We wish to see the
personal and professional development of our people in the roles
that they perform for us. Our objective is to create a working
environment that supports our people while challenging them to
deliver their best and to develop their own skills and
experiences.
We recognise the importance of diversity to our business, which
may relate to gender, nationality, faith, personal background and
other factors. We value how diversity benefits our business and how
the individual experiences of our people contribute to a positive
environment in the Group. We are committed to promoting an
environment where our people learn and develop in a collaborative
manner, regardless of who they are.
Challenger Energy operates in a number of international
locations, and we both depend on and impact the people and
institutions in those places. Our business does not exist in a
vacuum, and we are part of the societies we operate in. We
recognise and respect the dignity of all human beings and seek to
improve the life of the communities in which we function. Our
commitment is to be a responsible business and good corporate
citizen, making a meaningful contribution to the places in which we
live and work.
We are very conscious of the natural environment that we operate
in, and we work hard to minimise our impact on that environment.
The Group is committed to the responsible stewardship of the
environment and at all times we seek to operate safely and
responsibly. During operations we maintain work procedures and
field access infrastructure to minimise encroachment on the
environment, and we remain alert at all times to potential
environmental hazards and incidents that can result from our
operations, as well as having clear and tested response protocols
should any incidents occur. At the conclusion of our operations, we
return our sites to the condition in which we found them. Our
objective is for zero environmental incidents and zero spills or
leaks.
Recognising ESG as a core business priority, the Group maintains
a structured Health, Safety, Environment & Security (HSES)
Management System. This comprises a documented set of policies,
procedures and practices with Company-wide application, designed to
promote and foster excellence in all relevant areas of HSES. The
HSES Management System is reviewed periodically, and was
substantially revised and updated in early 2021, the focus of doing
so being to ensure that a functional system, tailored to the needs
of the Group's operations, is in place and operating effectively at
all times.
A central component of the HSES Management System is the HSES
Working Group, which comprises Board members, senior executives,
and representatives from all levels of operations. The HSES Working
Group functions without hierarchy, and meets weekly to ensure
adequacy of and compliance with HSES standards, processes, systems
and procedures. The HSES Working Group operates independently from,
and reports to, the formal HSES Committee of the Board of Directors
(as described under Corporate Governance, below).
Corporate Governance
Challenger Energy operates in the energy sector, a global
industry that is typically subject to strict laws and rules and
regulations imposed by host Governments and international
regulators, as well as intense public scrutiny given the essential
nature of the product we supply and the risks associated with that
supply. Additionally, the Group's shares are traded on the AIM
Market of the London Stock Exchange, and the Group is thus subject
to various additional rules and regulations associated with being a
publicly traded entity.
Accordingly, the Board is committed to maintaining the highest
standards of corporate governance at all times.
QCA Code
Pursuant to applicable rules of the AIM Market of the London
Stock Exchange, the Group is required to apply a recognised
corporate governance code, and demonstrate how the Group complies
with such corporate governance code and where it departs from it.
Given that the Group is not subject to the requirements of the UK
Corporate Governance Code, the Directors of the Group have decided
to apply the QCA Corporate Governance Code (the "QCA Code") as the
standard against which the Group chooses to measure itself.
The QCA Code emphasises the need for well balanced, effective
boards, with a strong emphasis on overseeing risk management aimed
at protecting the Group from unnecessary risk to enable the Group
to secure its long-term future. In addition, the QCA Code
highlights the alignment of remuneration policies with shareholder
interests and sound shareholder relations. Further information on
the Group's application of the QCA Code is available on the Group
website at www.cegplc.com .
The Board and its Committees
The Board of Directors
The Board meets regularly to discuss and consider all aspects of
the Group's activities. A Charter of the Board has been approved
and adopted which sets out the membership, roles and
responsibilities of the Board. The Board is primarily responsible
for formulating, reviewing and approving the Group's strategy,
budgets, major items of capital expenditure and acquisitions. The
Board currently consists of the Chairman, the Chief Executive
Officer, and two Non-executive Directors. All Directors have access
to the Company Secretary and the Group's professional advisers.
Records of the board meetings
There were 14 board meetings of the parent entity of the Group
during the financial year.
Audit Committee
The Audit Committee of the Board comprises Stephen Bizzell
(Chair) and Iain McKendrick, with input as required from the Chief
Financial Officer. The Audit Committee is primarily responsible for
ensuring that the financial performance of the Group is properly
reported on and monitored, for reviewing the scope and results of
the audit, its cost effectiveness and the independence and
objectivity of the auditor. The Audit Committee has oversight
responsibility for public reporting and the internal controls of
the Group. A Charter of the Audit Committee has been approved and
adopted which formally sets out the membership, roles and
responsibilities of the Audit Committee. All members of the Audit
Committee have access to the Company Secretary and the Group's
professional advisers, including in particular direct access to the
Group's auditor. The Audit Committee meets on a regular basis, and
in 2021 met on four occasions, with all members being present for
all meetings.
Remuneration & Nomination Committee
The Remuneration & Nomination Committee comprises Simon
Potter (Chair), Iain McKendrick and Eytan Uliel. The Remuneration
& Nomination Committee is responsible for making
recommendations to the Board of Directors regarding executive
remuneration packages, including bonus awards and share options,
and assisting the Board in fulfilling its responsibilities in the
search for and evaluation of potential new Directors and ensuring
that the size, composition and performance of the Board is
appropriate for the scope of the Group's and Company's activities.
It is recognised that shareholders of the Group have the ultimate
responsibility for determining who should represent them on the
Board. The Remuneration & Nomination Committee meets on an
as-required basis, and in 2021 met on two occasions, with all
members being present for all meetings.
Health, Safety, Environmental and Security Committee
The Board has a Health, Safety, Environmental and Security
(HSES) Committee which currently comprises Iain McKendrick (Chair),
Simon Potter and Eytan Uliel. The Committee's purpose is to assist
the Directors in establishing ESG strategy and reviewing, reporting
and managing the Group's performance, to assess compliance with
applicable regulations, internal policies and goals and to
contribute to the Group's risk management processes. The HSES
Working Group reports to the HSES Committee, which meets on a
regular basis. In 2021 the HSES Committee met on 11 occasions, with
all members being present for all meetings.
Internal Control
The Directors acknowledge their responsibility for the Group's
system of internal control and for reviewing its effectiveness. The
system of internal control is designed to manage the risk of
failure to achieve the Group's strategic objectives. It cannot
totally eliminate the risk of failure but will provide reasonable,
although not absolute, assurance against material misstatement or
loss.
Going Concern
The Directors have prepared a cash flow forecast which
anticipates the Group and Company being able to continue in
operation for at least the next twelve months from the date of this
report. The forecasts include certain assumptions and underlying
estimates. Certain of these items are outside of the Group and
Company's control and unfavourable actual outcomes may materially
and adversely affect the Group's cash resources and cast
significant doubt about the Group and the Company's ability to
continue as a going concern, as further detailed in the independent
auditor's report. Further information regarding the appropriateness
of the use of the going concern assumption in the basis of
preparation can be found in note 1 to the consolidated financial
statements.
Anti-bribery and corruption ("ABC")
Challenger Energy applies a zero-tolerance policy for bribery,
corruption or unethical conduct in our business. Our policies
require compliance across our businesses with applicable ABC laws,
in particular the UK Bribery Act 2010, and all applicable laws in
other jurisdictions in which we operate. We have a system of
documented ABC policies and procedures in place that provide a
consistent policy framework across the Group to ensure awareness
of potential threats among our employees and help to ensure
appropriate governance of ABC matters. In 2021, all employees
across the Group were required to attend mandatory ABC training,
with a focus on the areas of legislation most relevant to the
Group.
Anti-Money Laundering ("AML")
Challenger is conscious of the risks arising out of money
laundering and terrorist financing. These criminal activities
threaten society, as well as the Group, its partners, shareholders,
and staff. The Group is committed to fighting these threats by
harnessing the strength of the Group and its associates. The Group
exercises the utmost vigilance wherever its operations are taking
place. This vigilance extends to third party associates who are at
any time active in the Group. Annual AML training is compulsory for
Group staff, and during 2021, over 100 anti-money laundering
training courses were taken by various employees and
contractors.
Taxation
Depending on the jurisdiction of operation, the Group is subject
to a range of taxes, including corporate income tax, supplemental
petroleum taxes, royalties, other fiscal deductions, VAT and
payroll taxes, amongst others. We are a responsible operator and
corporate citizen and the Group is committed to adhering to all
relevant tax laws in all jurisdictions of operation: compliance
with tax laws and regulations is fundamental to our licence to
operate, and is an obligation that we take seriously.
2021 ESG Highlights
Challenger Energy intends to adopt a formalised ESG monitoring /
reporting framework in 2023. However, the diverse aspects that
comprise ESG have always been treated as business priorities for
Challenger Energy, and thus ESG awareness, performance culture and
accountability is already embedded across the Group. It is a core
principle of how we do business that the pursuit of ESG excellence
should not just be an aspirational statement, but rather should
manifest daily in tangible actions and activities, with measurable
impact, across every aspect of the Group's business.
During 2021, all Group policies and procedures were reviewed and
updated, and a comprehensive business continuity plan was prepared
and adopted. In addition, key ESG-related themes of specific
relevance to the Group's expanded operations were selected for
emphasis throughout the year. These themes were (i) behavioural
safety, (ii) training, (iii) Covid-19 management, and (iv) the
environment.
Specific ESG-related highlights of note from 2021 are:
-- There were no Lost Time Incidents recorded in 2021 in any of
the Group's operations, both routine and non-routine. This
exemplary track record has continued into 2022 - from the start of
January 2022 to the date of this report, no Lost Time Incidents
have been recorded in any of the Group's operations.
-- Two complex drilling campaigns were carried out during 2021 -
the Perseverance-1 well offshore The Bahamas, and the Saffron-2
well onshore in Trinidad. Both drilling campaigns were executed
safely and responsibly, without any incidents or harm to people or
the environment, and in full compliance with all applicable laws,
regulations and international standards.
-- It is a requirement by Heritage Petroleum Company Limited,
the Trinidadian state-owned oil & gas company, that all
contractors and operators are Safe-To-Work ("STOW") certified.
Challenger Energy underwent the requisite STOW audit process in
February 2021 and attained accreditation for a 2-year period in
August 2021. Being independently accredited was a milestone event
for the Group.
-- In 2021, the Group obtained all relevant approvals from
NIMOS, the Surinamese environmental regulator, for the drilling of
an initial test well in Suriname (albeit the drilling did not
subsequently proceed, owing to the impact of the pandemic).
Similarly, the Group had previously (in 2020) obtained
Environmental Approval ("EA") for the drilling of Perseverance-1 in
The Bahamas. In early 2021 the Group vigorously defended a legal
challenge that had been brought in The Bahamas seeking to halt the
drilling programme on the basis of alleged inadequacies of the EA.
Drilling proceeded and the legal challenge was ultimately dismissed
in May 2021, reflecting the robust, world-class work undertaken by
the Group in preparing the EA over a period of more than 2 years.
3
-- In terms of field operations, three areas of specific
relevance to the Group's operations were selected for focus during
2021. These were:
o water disposal : the Group's activities result in production
of a considerable volume of water, which prior to release into the
environment undergoes treatment to ensure it is free of
contaminants, so as to minimise harm to the environment. A
programme was initiated to evaluate the potential for unused well
within the producing fields to be reassigned as water disposal
wells, which (subject to regulatory approval) would enable produced
and treated water to be injected back into the ground, and thus not
discharged into the natural environment at all. Evaluation is
ongoing, with the expectation is that initial water reinjections
might commence in 2023;
o field energy efficiency : a field-wide programme was
implemented to introduce more sustainable and efficient pumps. The
impact was a measurable impact in well runtimes and uptimes for
relevant wells, and a measured 5% increase in energy efficiency;
and
o roads : a road audit was undertaken, resulting in various road
repairs and improvements initiated across the Group's Trinidad
portfolio. Road repair and improvement allows for greater operating
efficiencies, as well as reducing driver fatigue, wear and tear of
vehicles and carbon emissions, and rig movements.
-- Challenger Energy's goal is to operate with zero
environmental incidents. During 2021 there was one environmental
incident, which was occasioned as a result of illegal dumping of
waste hydrocarbon substances by third parties in one of the Group's
site pits at an operating field in Trinidad. Adverse weather in the
area led to the pit overflowing, and a number of nearby residences
being affected by oil contaminated floodwaters. Notwithstanding
that the incident arose as a result of illegal third-party
activity, because it involved the Group's assets the incident was
managed in accordance with the Group's incident response and
contingency plans. This included the Group arranging for clean-up
of all affected residences, and care packages being distributed to
affected people. Heritage and all relevant regulatory agencies in
Trinidad were informed, a number of post incident site visits were
conducted, and the measures taken by the Group in response to this
incident was found to be satisfactory, with no residual
environmental impact.
-- The Group's HR focus in 2021 was to ensure a competent and
trained workforce, reflecting the increased scope of the Group's
activities in the period. This involved a systematic programme of
internal and external meetings, engagements and formal training
programs, including a number of sizeable incident response
simulations, mandatory attendance at various training events, and
the roll-out of various initiatives specifically targeting
practical areas of concern. This included internal awareness
sessions conducted in the areas of risk assessment and job safety
analysis, oil spill response, permit to work, management of change
and incident reporting and investigation. Additionally, external
training sessions were provided to employees in Defensive Driving,
First Aid and CPR, Fire Warden and Well Control. The Group exceeded
almost all internal-set metrics established in relation to
engagement and training. For example, the Group has an internal
goal to undertake one "toolbox talk" safety briefing per day, or a
target of 365 each full year. During 2021, a total of 665 such
toolbox talks were conducted.
-- In terms of community engagement, the focus in 2021 was to
assist with ameliorating the impacts of the pandemic in local
communities in which we operate. In Trinidad, this took the form of
the Group participating in a programme of computer equipment
donation in the Guayaguayare, Moruga and Southwest Peninsula areas,
to enable online schooling during the pandemic for children whose
families would otherwise have been unable to afford the equipment.
In The Bahamas, the Group provided aid to a number of families
severely impacted as a result of Covid-19 lockdowns, in the form of
emergency food supplies and rental assistance.
-- More broadly, the Group has continued throughout to support
local education and community service, in addition to social and
community cash contributions required as conditions of the Group's
various licences. Tangible support initiatives have included
Christmas Hamper donations to families in need in more remote areas
of Trinidad, a donation to the Mayaro Past Pupils Association
towards their SEA Awards and Back to School Initiative, the
sponsorship of two students pursuing Master of Science and Public
Health degrees in Suriname, the sponsorship of an MBA and LLB
Admission to Bar in The Bahamas, and the support (both in terms of
time and money) of UK-based staff participating in the UK Army
Reserves.
-- In relation to Covid-19, throughout 2021 stringent protocols
were implemented on a Group-wide basis focused on social behaviours
and interaction in the workplace, and covering all field staff and
office-based staff. Working from home was encouraged where possible
and clear protocols were put in place for instances when symptoms
were identified or suspected. Specific Covid-19 protocols enabled
uninterrupted operations throughout 2021, including during the two
drilling campaigns in the first half of the year. A concerted
effort was made to encourage vaccination across the Group, with the
Company-wide vaccination rate as at the end of 2021 approximately
80%, well in excess of national averages in jurisdictions of
operation.
Risk Management
Understanding our principal risks and ensuring that Challenger
Energy has the appropriate controls in place to manage those risks
is critical to our business operations. Managing business risks and
opportunities is a key consideration in determining and then
delivering against the Group's strategy. The Group's approach to
risk management is not intended to eliminate risk entirely, but
provides the means to identify, prioritise and manage risks and
opportunities. This, in turn, enables the Group to effectively
deliver on its strategic objectives in line with its appetite for
risk.
The Board's Responsibility For Risk Management
The board has overall responsibility for ensuring the Group's
risk management and internal control frameworks are appropriate and
are embedded at all levels throughout the organisation. Principal
risks are reviewed by the board and are specifically discussed in
relation to setting the Group strategy, developing the business
plan to deliver that strategy and agreeing annual work programmes
and budgets. See "Principal Risks and Uncertainties" section below
and the mitigation steps taken to minimise these risks.
Principal risks and uncertainties
The principal risks facing the Group together with a description
of the potential impacts, mitigation measures and the appetite for
the risk are presented below. The analysis includes an assessment
of the potential likelihood of the risks occurring and their
potential impact. Identified risks are segregated between those
that we can influence and those which are outside our control.
Where we can influence risks, we have more control over outcomes.
Where risks are external to the business, we focus on how we
control the consequences of those risks materialising.
RISKS THAT WE CAN INFLUENCE
1. Health, safety and environment (HSE)
Oil and gas exploration, development and production activities
can be complex and are physical in nature. HSE risks cover many
areas including major accidents, personal health and safety,
compliance with regulations and potential environmental harm.
Potential impact: High Probability: Low
Risk Appetite
The Group has a very low appetite for risks associated with HSE
and strives to achieve a zero-incident rate.
Mitigation
The Group strives to ensure the safety of its employees,
contractors and visitors. We are very conscious of the natural
environment that we operate in and seek to minimise our
environmental impact and footprint.
2. Exploration, development and production
The ultimate success of the Group is based on its ability to
maintain and grow production from existing assets and to create
value through targeted development activity across the existing
portfolio together with selective acquisition activity to grow the
asset portfolio.
The Group's current production is derived from later-life
production assets that are in the latter portion of the production
decline curve.
Potential impact: High Probability: Moderate
Risk appetite
The continued development of later life assets can be complex
and technically challenging. This can expose the Group to higher
levels of risk, particularly in stimulating existing wells through
workover or enhanced oil recovery techniques which may, due to
their nature, not be successful or may compromise existing
production. Identifying locations for optimal locations new infill
wells that do not interfere with existing production can be
challenging.
The ultimate success of the Group is based on its ability to
maintain and grow production from existing assets and to create
value through targeted development activity across the existing
portfolio together with selective acquisition activity to grow the
asset portfolio.
The Group has some tolerance for this risk and acknowledges the
need to have effective controls in place in this area.
Mitigation
The Group's current production derived from later-life
production assets that are in the latter portion of the production
decline curve. The production team responsible for operating the
Group's assets is very experienced in the industry and in the
management, workover and enhancement of the Group's assets.
In addition, the Group has built a trusted network of service
providers who are similarly familiar with the assets and who
support production enhancing activity including targeted
recompletions and other well interventions to further extend the
productive life of the Group's well stock.
3. Reserves and resources
The estimation of oil and gas reserves and resources involves a
high level of subjective judgment based on available
geological,
technical and economic information.
Potential impact: Medium Probability: Low
Risk appetite
The Group has a strong focus on subsurface analysis. We employ
industry technical specialists and qualified reservoir
engineers
and geologists who work closely with our operational teams who
are responsible for delivering asset performance.
The Group tolerates some risk related to the estimation of
reserves and resources.
Mitigation
Reserve and resource volumes are assessed periodically using the
Petroleum Resource Management System (PRMS) developed by the
Society of Petroleum Engineers. An external assessment of reserve
volumes is undertaken periodically by an independent petroleum
engineering firm.
The recently appointed country manager for Trinidad is a
qualified reservoir engineer with significant Trinidad and other
international experience, having previously worked with a major
international reservoir engineering firm for more than 15
years.
4. Portfolio concentration
The Group's producing assets are concentrated in Trinidad and
are principally characterised as later-life assets. This
concentrates
production risk in a single jurisdiction and in an asset group
with a particular age and production profile
Potential impact: Medium Probability: High
Risk appetite
The principal location of the Group's producing assets and their
age profile places emphasis on the Group's ability to
successfully
maintain existing production in Trinidad. The Group has a
moderate appetite for this risk.
Mitigation
The Group will selectively add new development or production
onshore Trinidad or elsewhere in the Atlantic margin through
specific and M&A activity or partnering arrangements with
drilling contractors related to the existing Trinidad fields.
The Group holds an appraisal / development asset in Suriname
that is related to an existing production area. Development options
for the asset remain under consideration and may involve farm-out
of a portion of the asset as a method of financing. The development
of Suriname, if successful, will mitigate this risk.
In addition, the Group holds an exploration licence in Uruguay
that is on the conjugate margin of recent significant discoveries
by both Shell and TotalEnergies offshore Namibia. Progressing work
in Uruguay will likely include some form of partnering, for
instance through farm-out, to share risk and bring additional
experience and financing to pursue higher capital work programme so
as to de-risk and make the project drill-ready.
Progressing exploration and eventual development of Uruguay, if
successful, will similarly mitigate this risk over time.
5. Financing
Oil and gas exploration, development and production activity are
capital intensive. The Group currently generates modest levels of
cash from operations and relies on investment capital to enhance
the asset base and, in turn, production and consequential cash
generation.
Potential impact: High Probability: Moderate
Risk appetite
The Group has a low appetite for financing risk.
The inability to fund financial commitments, including licence
obligations, could significantly delay the development of the
Group's assets and consequent value creation. Financial or
operational commitments are often a pre-condition to the grant of a
licence. The Group's inability to satisfy these could result in
financial penalty and/or termination of licences.
Mitigation
The Group has a track record over many years of successfully
raising finance to fund its activities as and when required.
Funds raised in March 2022 (the most recent capital raising) are
being deployed in specific, targeted development activity including
lower-risk recompletions to open new productive zoned in existing
production wells. Funds are also being deployed for
the purchase of additional in-field equipment to reduce reliance
on third party contractors and their availability to undertake
straightforward workover activity.
The objective of the planned work is to increase production in
order to move the Trinidad assets from self-sufficiency to cashflow
accretive. Generating surplus cash from operations is expected to
translate to additional funding options including reserve based
lending and other potential alternative financing.
6. Bribery and corruption
There is a risk that third parties or staff could be encouraged
to become involved in corrupt or questionable practices.
Transparency International's rankings (out of 180 countries) and
respective scores (out of a maximum of 100 points) on their 2021
Corruption Perceptions Index for the jurisdictions where the Group
has presence are as below:
2021 2021
(2020) (2020)
Jurisdiction Rank score
--------------------- ----------- --------
The Bahamas 30 (30) 64 (63)
--------------------- ----------- --------
Suriname 87 (94) 39 (38)
--------------------- ----------- --------
Trinidad and Tobago 82 (86) 41 (40)
--------------------- ----------- --------
United Kingdom 11 (11) 78 (77)
--------------------- ----------- --------
Uruguay 18 (21) 73 (71)
--------------------- ----------- --------
Potential impact: High Probability: Moderate
Risk appetite
The Group has a zero-tolerance policy regarding bribery and
corruption.
Mitigation
The Group, its board and management have an established
anti-bribery and corruption (ABC) policy that requires all new
hires to confirm that they have read and understood the contents
and personal requirements of the policy. The Group ensures that our
third-party contractors and advisers follow our procedures and
policies related to ABC.
Annual ABC training and briefings are carried out.
RISKS BEYOND OUR INFLUENCE
7. Commodity prices
The Group is exposed to commodity price risk in relation to
sales of crude oil.
Potential impact: High Probability: Moderate
Risk appetite
The Group has a moderate appetite for commodity price risk.
A material decline in oil prices would adversely affect the
Group's profitability, cash flow, financial position, and ability
to invest.
Oil sales in Trinidad are closely linked to the West Texas
Intermediate (WTI) crude oil benchmark price with the realised oil
price by the Group being typically at approximately 10% discount to
the WTI benchmark.
In addition, the Trinidad supplementary petroleum tax regime has
a regressive effect when realised oil prices are between US$75 and
US$95 per barrel. This is due to SPT applying at a flat rate above
the trigger oil price (presently, US$75).
Mitigation
All the Group's production in Trinidad is sold to Heritage under
the terms of the respective production licences and the Group
is
fully exposed to adverse commodity price fluctuation (and also
benefit from favourable commodity price movement).
The Group does not currently use hedging instruments to mitigate
oil price risk as the volumes are relatively small and significant
volatility observed in crude prices in the recent years coupled
with oil futures curve backwardation make it difficult to assess
effectiveness of a hedge. The Group monitors the oil and gas
benchmark prices, principally WTI and Brent Crude, and may enter
hedging arrangements if market conditions and financial and risk
analysis suggest that price risk is lowered by doing so.
8. Demand/ limited sales routes
All the Group's current production is derived from its Trinidad
assets and sold to a single customer, Heritage Petroleum
Company
Limited, the state-owned oil and gas company.
Potential impact: High Probability: Low
Risk appetite
Demand can be negatively affected by economic conditions in
Trinidad and globally. The Group accepts demand risk related to
its
crude oil production.
Mitigation
All the Group's production is sold to Heritage as required under
the terms of the licence agreements with Heritage. There is no
history of Heritage refusing delivery of crude produced by the
Group.
The Group accepts this potential risk.
9. Impact of Covid-19 virus
The emergence of Covid-19 as a global pandemic has had a
significant effect on economies worldwide and has been disruptive
to
commercial and operating activity.
Potential impact: High Probability: Moderate
Appetite
The Covid-19 virus that was first identified in China in late
2019 spread rapidly in early 2020, becoming prevalent in Europe and
Asia initially, followed by North America, South America, and
Africa. Almost all countries have now been affected by the virus
that is extremely contagious.
The almost universal initial governmental response was one of
social distancing, self-isolation and quarantine. Whilst the global
roll-out of vaccines has largely mitigated the most severe
consequences of contracting Covid-19, not all jurisdictions have
the same level of vaccine uptake or are as advanced in their
roll-out programmes as they might be.
Mitigation
The Group has strict Covid-19 protocols at all locations and
operates an active isolation and test programme where
Covid-like
symptoms are experienced by staff or contractors.
The Group actively encourages the take-up of vaccinations by all
staff. The Group has a low appetite for risk related to Covid-19
and has contingency / business continuity plans in place in the
event of another Covid-19 wave or a similar health emergency.
10. Fiscal and political
The majority of the Group's operations are located in Trinidad
and Tobago and it is therefore exposed to both in-country fiscal
and
political risk. In addition, the Group has operations in The
Bahamas, Suriname and Uruguay with limited activity at present.
Potential impact: High Probability: Moderate
Appetite
The Group accepts a modest amount of fiscal risk. The Group is
exposed to currency risk resulting from fluctuations in Trinidad
and Tobago dollars as majority of the Group's activities are
presently in Trinidad and Tobago, and Pound Sterling as a
significant amount of the Group's cash holdings are denominated in
Pound Sterling. Currency hedging instruments are not currently used
due to the historically stable relationship between the Trinidad
and Tobago dollar and the United States dollar (the functional
currency of the companies comprising the Group) and unexpected
recent volatility in Pound Sterling.
The Group closely monitors fiscal and political situation in the
jurisdictions it operates in with a view to identifying and
minimising the downside risk presented by changes in fiscal and
political circumstances. The Group interacts indirectly with the
Trinidad and Tobago Government through its relationships with both
the state-owned oil and gas company and the Ministry of Energy and
Energy Industries. The Group does not undertake any lobbying
activity with any members of the Trinidad and Tobago Government or
in any other jurisdiction.
Fiscal
The currency used in Trinidad is the Trinidad and Tobago dollar
(TTD) and has been relatively stable, fluctuating between
TTD 6.60 and TTD 6.80 to the US dollar during the reporting
period. Similarly, Pound Sterling has been relatively stable
fluctuating
between USD 1.32 to USD 1.42 to the Pound Sterling during the
reporting period, however, has witnessed sharp depreciation
recently.
Political
The Group considers the jurisdictions of its operations to have
low political risk. World Bank's Worldwide Governance
Indicators
(2020 percentile rankings, 100 being the highest rank) for the
jurisdictions where the Group has presence are set out below:
Jurisdiction Political Stability Government Effectiveness
and Absence of Violence
/ Terrorism
-------------------- ------------------------ ------------------------
The Bahamas 73.58 69.71
-------------------- ------------------------ ------------------------
Suriname 58.96 33.17
-------------------- ------------------------ ------------------------
Trinidad and Tobago 53.3 61.06
-------------------- ------------------------ ------------------------
United Kingdom 61.31 89.42
-------------------- ------------------------ ------------------------
Uruguay 87.74 75.00
-------------------- ------------------------ ------------------------
Mitigation
Fiscal
The relationship of the TTD to the US dollar is subject of a
managed float regime under which the exchange rate is actively
managed by the Government of Trinidad and Tobago through currency
purchases and sales. Pound Sterling on the other hand is largely a
floating currency and exposed to market volatility. While the Group
has not hedged its currency exposure in the past, the Group closely
monitors currency fluctuations with a view to assessing potential
downside risk vis-à-vis foreign currency requirements (and the
timing thereof) so as to determine the efficacy of a potential
hedge.
Political
The Group monitors political risk and political developments of
the countries of its operations and considers the structure and
operation of the respective governments in each of the
jurisdictions of its operations to present low risk to the
Group.
Further, the Group interacts with the state-owned oil and gas
company and the Ministry of Energy and Energy Industries in
relation to its operations in Trinidad and maintains a regular and
open dialogue with each. In addition, the Group interacts with the
Bahamian Government in relation to the renewal of its licences in
The Bahamas.
No Russian Exposure
The Group has no exposure to Russian oil production, and
recently enacted sanctions have had no impact on the Group's
business
or operations.
Directors' Report
The Company's Directors present their report and audited
financial statements of the Company and the consolidated group
consisting of Challenger Energy Group PLC ("Challenger Energy" or
the "Company") and the entities it controlled (the "Group") at the
end of, or during, the financial year ended 31 December 2021.
Directors
The following persons were Directors of the Company during the
financial year under review:
Stephen Bizzell (appointed 1 June 2021)
Adrian Collins (resigned 25 May 2021)
Leo Koot (resigned 22 January 2021)
Ross McDonald (resigned 1 June 2021)
Simon Potter
William Schrader (resigned 5 March 2022)
James Smith (resigned 5 March 2022)
Eytan Uliel (appointed 1 June 2021)
Subsequent to the financial year under review, the following
persons joined the Board of Directors:
Iain McKendrick (appointed 5 March 2022)
Timothy Eastmond (appointed 5 March 2022, resigned 15 July
2022)
Principal Activity
The principal activity of the Group and the Company consists of
oil & gas production, development, appraisal and exploration in
Trinidad and Tobago, Suriname, Uruguay and The Bahamas.
Results and dividends
The results of the Group for the year are set out on page 28 and
show a loss for the year ended 31 December 2021 of $23,697,000
(2020: loss of $13,992,000). The total comprehensive expense for
the year of $23,845,000 (2020: expense of $13,845,000) has been
transferred to the retained deficit.
The Directors do not recommend payment of a dividend (2020:
nil).
Significant Shareholders
The following tables represent shareholdings of 3% or more
notified to the Company at 31 December 2021 and at the date of this
report respectively:
Top shareholders at 31 December 2021 (by parent company)
Shareholder 31-Dec-21 %
------------------------------------- ----------- -----
Hargreaves Lansdown Asset Management 147,595,687 18.53
------------------------------------- ----------- -----
Interactive Investor 95,437,257 11.98
------------------------------------- ----------- -----
Bizzell Capital Partners 87,658,600 11.01
------------------------------------- ----------- -----
Halifax Share Dealing 72,591,395 9.11
------------------------------------- ----------- -----
Barclays Wealth 39,293,238 4.93
------------------------------------- ----------- -----
TOTAL 442,576,177 55.56
------------------------------------- ----------- -----
Top shareholders as of the date of this Report (by parent
company)
Shareholder At the date of this report %
------------------------------------- -------------------------- -----
Bizzell Capital Partners 914,633,600 9.51
------------------------------------- -------------------------- -----
Choice Investments (Dubbo) Pty Ltd 837,000,000 8.70
------------------------------------- -------------------------- -----
Hargreaves Lansdown Asset Management 780,382,175 8.11
------------------------------------- -------------------------- -----
Mr Mark Carnegie 560,000,000 5.82
------------------------------------- -------------------------- -----
Mr Eytan M Uliel 545,373,962 5.67
------------------------------------- -------------------------- -----
Rookharp Capital Pty Ltd 528,000,000 5.49
------------------------------------- -------------------------- -----
Jarvis Investment Management 509,491,516 5.30
------------------------------------- -------------------------- -----
Merseyside Pension Fund 417,350,000 4.34
------------------------------------- -------------------------- -----
G.P. (Jersey) Ltd 390,000,000 4.05
------------------------------------- -------------------------- -----
RAB Capital Holdings Ltd 336,800,000 3.50
------------------------------------- -------------------------- -----
UBS 309,668,912 3.22
------------------------------------- -------------------------- -----
TOTAL 6,128,700,165 63.71
------------------------------------- -------------------------- -----
Directors' Shareholding and Options
The interests in the Company 31 December 2021 and at the date of
this Report respectively of all Directors who hold or held office
on the Board of the Company at the year-end and subsequent to year
end are stated below.
Number of Shares Number of
31-Dec-21 Options
Director 31-Dec-21
------------------------------------ ---------------- ----------
William Schrader (resigned 5 March
2022) 2,713,138 1,800,000
------------------------------------ ---------------- ----------
James Smith (resigned 5 March 2022) 1,451,134 1,650,000
------------------------------------ ---------------- ----------
Simon Potter 12,436,472 8,750,000
------------------------------------ ---------------- ----------
Eytan Uliel (appointed 1 June 2021) 10,373,962 19,500,000
------------------------------------ ---------------- ----------
Stephen Bizzell (appointed 1 June
2021) 4,314,286 -
------------------------------------ ---------------- ----------
Number of Shares date Number of
of this report Options
date of this
Director report
------------------------------------ --------------------------------------------------- -------------
William Schrader (resigned 5 March
2022) 29,796,471 -
------------------------------------ --------------------------------------------------- -------------
James Smith (resigned 5 March 2022) 19,159,467 -
------------------------------------ --------------------------------------------------- -------------
Simon Potter 71,462,807 -
------------------------------------ --------------------------------------------------- -------------
Eytan Uliel (appointed 1 June 2021) 545,373,962 340,000,000
------------------------------------ --------------------------------------------------- -------------
Stephen Bizzell (appointed 1 June
2021) 51,189,286 -
------------------------------------ --------------------------------------------------- -------------
Iain McKendrick (appointed 5 March
2022) 50,000,000 100,000,000
------------------------------------ --------------------------------------------------- -------------
Record of Board Meetings
There were 14 board meetings of the parent entity of the Group
during the financial year.
Number of Board Number of Board
Meetings Meetings Eligible
Director Attended to Attend
-------------------------------------- ------------------------------------------------ ----------------------------
William Schrader (resigned 5 March
2022) 13 14
-------------------------------------- ------------------------------------------------ ----------------------------
James Smith (resigned 5 March 2022) 14 14
-------------------------------------- ------------------------------------------------ ----------------------------
Eytan Uliel (appointed 1 June 2021) 7 7
-------------------------------------- ------------------------------------------------ ----------------------------
Simon Potter 14 14
-------------------------------------- ------------------------------------------------ ----------------------------
Stephen Bizzell (appointed 1 June
2021) 7 7
-------------------------------------- ------------------------------------------------ ----------------------------
Adrian Collins (resigned 25 May 2022) 7 7
-------------------------------------- ------------------------------------------------ ----------------------------
Ross McDonald (resigned 1 June 2021) 7 7
-------------------------------------- ------------------------------------------------ ----------------------------
Leo Koot (resigned 22 January 2021) 2 2
-------------------------------------- ------------------------------------------------ ----------------------------
21
Statement of Directors' responsibilities in
respect of the financial statements
The Directors are responsible for preparing the Annual Report
and the Financial Statements in accordance with applicable Isle of
Man law and regulation.
Company law requires the Directors to prepare financial
statements for each financial year. The Directors have elected to
prepare the Group and Company financial statements in accordance
with International Financial Reporting Standards ("IFRSs") as
adopted by the European Union. The financial statements are
required by law to give a true and fair view of the state of
affairs of the Group and the Company and of the profit or loss of
the Group for that period.
In preparing the financial statements, the Directors are
required to:
-- select suitable accounting policies and then apply them consistently;
-- state whether IFRSs as adopted by the European Union have
been followed, subject to any material departures disclosed and
explained in the financial statements;
-- make judgements and accounting estimates that are reasonable and prudent; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and the
Company will continue in business.
The Directors are responsible for keeping proper accounting
records that are sufficient to show and explain the Group and
Company's transactions and disclose with reasonable accuracy at any
time the financial position of the Group and the Company and to
enable them to ensure that the financial statements comply with the
Isle of Man Companies Acts 1931 to 2004. They are also responsible
for safeguarding the assets of the Group and the Company and hence
for taking reasonable steps for the prevention and detection of
fraud and other irregularities. The Directors are responsible for
the maintenance and integrity of the Company's website. Legislation
in the Isle of Man governing the preparation and dissemination of
financial statements may differ from legislation in other
jurisdictions.
On behalf of the Board
Eytan Uliel
Director
29 September 2022
Independent auditor's report to the members
of Challenger Energy Group PLC
Report on the audit of the financial statements
Our opinion
In our opinion, Challenger Energy Group PLC's consolidated and
company financial statements (the "financial statements"):
-- give a true and fair view of the state of the Group's affairs
as at 31 December 2021 and of its loss and its cash flows for the
year then ended in accordance with International Financial
Reporting Standards as adopted by the European Union;
-- give a true and fair view of the state of the Company's
affairs as at 31 December 2021 and of its cash flows for the year
then ended in accordance with International Financial Reporting
Standards as adopted by the European Union as applied in accordance
with the provisions of the Isle of Man Companies Act 1982; and
-- have been properly prepared in accordance with the Isle of
Man Companies Acts 1931 to 2004. What we have audited
Challenger Energy Group PLC's financial statements comprise:
-- the consolidated and company statements of financial position as at 31 December 2021;
-- the consolidated statement of comprehensive income for the year then ended;
-- the consolidated and company statements of changes in equity for the year then ended;
-- the consolidated and company statements of cash flows for the year then ended; and
-- the notes to the financial statements, which include
significant accounting policies and other explanatory
information.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing ("ISAs"). 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 believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the Group in accordance with the
International Code of Ethics for Professional Accountants
(including International Independence Standards) issued by the
International Ethics Standards Board for Accountants ("IESBA
Code"). We have fulfilled our other ethical responsibilities in
accordance with the IESBA Code.
Material uncertainty related to going concern
In forming our opinion on the financial statements, which is not
modified, we have considered the adequacy of the disclosures made
in note 1.28 (ii) of the financial statements concerning the
Group's and the Company's ability to continue as a going
concern.
As at 31 December 2021, following the difficulties experienced
drilling Perseverance-1, the Group and Company had cash and cash
equivalents of $1.6 million and $0.9 million and trade and other
payables of $23.5 million and GBP10.8 million respectively.
Management were in the process of restructuring the Group, which
required shareholder and creditor agreement and additional fund
raising.
Subsequent to the year end, the restructuring was progressed
with settlement agreements for creditors and an additional $10
million (before expenses) raised through the issue of new shares.
Following the restructuring, the Directors have prepared a cash
flow forecast which anticipates the Group and Company being able to
continue in operation for at least the next twelve months from the
date of this report. However, as explained in note 1.28 (ii) the
cash flow forecast includes a number of underlying assumptions and
estimates. Certain of these items are outside of the Group and
Company's control and unfavourable actual outcomes may lead to the
Group and Company needing to take additional measures such as fund
raising, cost savings or the sale of assets.
These conditions, along with the other matters explained in the
notes to the financial statements, indicate the existence of a
material uncertainty that may cast significant doubt on the Group's
and the Company's ability to continue as a going concern.
The financial statements do not include the adjustments that
would result if the Group and the Company were unable to continue
as a going concern. In auditing the financial statements, we have
concluded that the directors' use of the going concern basis of
accounting in the preparation of the financial statements is
appropriate. 3
Our evaluation of the directors' assessment of the Group's and
the Company's ability to continue to adopt the going concern basis
of accounting included:
-- verifying the mathematical accuracy of management's cash flow
forecast and agreeing the opening cash position;
-- assessing management's underlying cash flow projections for
the Group to other external and internal sources, including the
impairment assessments, where appropriate;
-- assessing and validating the impact of post year end cash movements and commitments;
-- assessing management's ability to take mitigating actions, if required; and
-- assessing the completeness and appropriateness of
management's going concern disclosures in the financial
statements.
Our responsibilities and the responsibilities of the directors
with respect to going concern are described in the relevant
sections of this report.
Our audit approach
Overview
As part of designing our audit, we determined materiality and
assessed the risks of material misstatement in the financial
statements. In particular, we considered where the directors made
subjective judgements; for example, in respect of significant
accounting estimates that involved making assumptions and
considering future events that are inherently uncertain. As in all
of our audits, we also addressed the risk of management override of
internal controls, including among other matters, consideration of
whether there was evidence of bias that represented a risk of
material misstatement due to fraud.
Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the financial
statements of the current period. These matters were addressed in
the context of our audit of the financial statements as a whole,
and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
Key audit matter How our audit addressed the key
audit matter
Recoverability of the Group's intangible We critically evaluated management's
exploration and evaluation assets assessment of each impairment trigger
/ Recoverability of the Company's per 'IFRS 6 - Exploration for and
investment in subsidiaries and amounts Evaluation of Mineral Resources',
owed by subsidiary undertakings including but not limited to:
(Group and Company) * Assessing whether the Group had the rights to explore
in the relevant geographical areas by obtaining
Refer to notes 1.28, 10, 14 and supporting documentation such as licence agreements
16 of the financial statements. and assessed compliance with licence conditions.
At 31 December 2021 the carrying
value of the intangible exploration * Enquiring to determine whether management had the
and evaluation assets was $94.4 intention to carry out exploration and evaluation
million (2020: $75.3 million). As activity in the relevant exploration areas. We
the carrying value of these intangible reviewed management's cash flow forecast models to
exploration and evaluation assets assess the level of the budgeted expenditure on these
are significant to the financial areas, and obtained details of contracts.
statements of the Group, we consider
it necessary to assess whether any
facts or circumstances exist to * Critically assessing the outcome of drilling
suggest that the carrying amount activities as to whether any impairment indicators
of these assets may exceed their were present to suggest that the carrying value of
recoverable amount. these exploration and evaluation assets is unlikely
to be recovered through development or a sale.
The Company's investment in subsidiaries
holding the Group's intangible exploration
and evaluation assets totalled $29.6 * Validating the capitalised costs on a sample basis
million (2020: $29.6 million) and for adherence with the criteria set out in IFRS 6.
the amount owed by subsidiary undertakings
totalled $113.2 million (2020: $83.8
million). The recoverability of
the Company's investments in subsidiaries Having completed our work, we did
and amounts owed by subsidiary undertakings not identify any material misstatements
are dependent on successful development regarding the carrying value of the
or sale of the respective licence intangible exploration and evaluation
areas. assets and, as a result, no material
issues were noted with respect to
the recoverability of the Company's
investment in subsidiaries and amounts
owed by subsidiary undertakings.
------------------------------------------------------------------
Key audit matter How our audit addressed the key
audit matter
Recoverability of the Group's tangible Our audit work included, but was
oil and gas assets / Recoverability not restricted to:
of the Company's investment in subsidiaries
(Group and Company) * Assessing the impairment model prepared by management
Refer to notes 1.28, 11 and 14 and challenging the key assumptions in the discounted
to the financial statements. value in use cash flows, remaining sceptical of
explanations and obtaining supporting evidence as
At 31 December 2021 the carrying necessary.
value of the tangible oil and gas
assets after management's impairment
was $21.0 million (2020: $22.3 million). * Considering whether the model used was appropriate
and checking the related calculations and production
As the carrying value of these tangible assumptions.
oil and gas assets are significant
to the financial statements of the
Group, we consider it necessary * Discussing key assumptions underlying the impairment
to assess whether any facts or circumstances model with management and performing procedures to
exist to suggest that the carrying validate their reasonableness.
amount of these assets may exceed
their recoverable amount.
* Independently determining WACC rates and comparing
The Company's investment in subsidiaries with management's assessment.
holding the Group's tangible oil
and gas assets totalled $21.4 million
(2020: $21.4 million). The recoverability * Reviewing projections and sensitivities including
of these investments in subsidiaries independent stress testing of key WACC, oil price,
is dependent on successful development capex and decline rate assumptions.
and commercial exploitation, increasing
production through optimisation
of existing wells, drilling of new * Issuing instructions to and directing the work of the
infill wells and/or the application component auditor in Trinidad in relation to the
of improved oil recovery methods audit of tangible oil and gas assets.
or alternatively, sale of the respective
licence areas.
* Holding regular meetings with and reviewing the
working papers of the component auditor to ensure
that sufficient appropriate audit evidence was
obtained over the recoverability of the Group's
tangible oil and gas assets.
Having completed our work, we did
not identify any material misstatements
regarding the carrying value or disclosures
of the tangible oil and gas assets
and, as a result, no material issues
were noted with respect to the recoverability
of the Company's investment in subsidiaries.
------------------------------------------------------------------
Other information
The other information comprises all of the information in the
Annual Report and Financial Statements other than the financial
statements and our auditor's report thereon. The directors are
responsible for the other information.
Our opinion on the financial statements does not cover the other
information and 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 identified above
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, based on the work we have performed, we
conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing
to report in this regard.
Responsibilities of the directors for the financial
statements
The directors are responsible for the preparation of the
financial statements that give a true and fair view in accordance
with International Financial Reporting Standards as adopted by the
European Union and Isle of Man law, and for such internal control
as the directors determine is necessary to enable the preparation
of financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the Group's and Company's ability to
continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the
Group and 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 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.
As part of an audit in accordance with ISAs, we exercise
professional judgement and maintain professional scepticism
throughout the audit. We also:
-- Identify and assess the risks of material misstatement of the
financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a
basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal
control.
-- Obtain an understanding of internal control relevant to the
audit in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Group's and Company's internal
control.
-- Evaluate the appropriateness of accounting policies used and
the reasonableness of accounting estimates and related disclosures
made by the directors.
-- Conclude on the appropriateness of the directors' use of the
going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Group's and
Company's ability to continue as a going concern. If we conclude
that a material uncertainty exists, we are required to draw
attention in our auditor's report to the related disclosures in the
financial statements or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our auditor's report. However, future
events or conditions may cause the Group and Company to cease to
continue as a going concern.
-- Evaluate the overall presentation, structure and content of
the financial statements, including the disclosures, and whether
the financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
-- Obtain sufficient appropriate audit evidence regarding the
financial information of the entities or business activities within
the Group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and
performance of the Group audit. We remain solely responsible for
our audit opinion.
We communicate with the directors regarding, among other
matters, the planned scope and timing of the audit and significant
audit findings, including any significant deficiencies in internal
control that we identify during our audit.
We also provide the directors with a statement that we have
complied with relevant ethical requirements regarding independence,
and to communicate with them all relationships and other matters
that may reasonably be thought to bear on our independence, and
where applicable, actions taken to eliminate threats or safeguards
applied.
From the matters communicated with the directors, we determine
those matters that were of most significance in the audit of the
financial statements of the current period and are therefore the
key audit matters. We describe these matters in our auditor's
report unless law or regulation precludes public disclosure about
the matter or when, in extremely rare circumstances, we determine
that a matter should not be communicated in our report because the
adverse consequences of doing so would reasonably be expected to
outweigh the public interest benefits of such communication.
This report, including the opinion, has been prepared for and
only for the Company's members as a body in accordance with Section
15 of the Isle of Man Companies Act 1982 and for no other purpose.
We do not, in giving this opinion, accept or assume responsibility
for any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
Report on other legal and regulatory requirements
Adequacy of accounting records and information and explanations
received
Under the Isle of Man Companies Acts 1931 to 2004 we are
required to report to you by exception if, in our opinion:
-- we have not received all the information and explanations we require for our audit;
-- proper books of account have not been kept, or proper returns
adequate for our audit have not been received from branches not
visited by us;
-- the company financial statements are not in agreement with
the books of account and returns; and
-- certain disclosures of directors' loans and remuneration
specified by law have not been complied with.
We have no exceptions to report arising from this
responsibility.
Andrew Dunn
for and on behalf of PricewaterhouseCoopers LLC
Chartered Accountants
Douglas, Isle of Man
29 September 2022
Consolidated Statement of Comprehensive
Income
For the year ended 31 December 2021
Year ended Year
31 December ended
2021 $ 31 December
000's 2020 $
Note 000's
------------------------------------------------------ ------- --------------- --------------
Net petroleum revenue 2 4,360 1,417
Cost of sales (6,121) (2,781)
------------------------------------------------------ ------- --------------- --------------
Gross loss (1,761) (1,364)
Administrative expenses 3 (9,098) (9,793)
Impairment charges 3/10/11 (7,416) (2,435)
Operating foreign exchange (losses) / gains (17) 32
------------------------------------------------------ ------- --------------- --------------
Operating loss (18,292) (13,560)
Other income 256 3
Finance income 9 7 202
Finance costs 9 (5,630) (628)
------------------------------------------------------ ------- --------------- --------------
Loss before taxation (23,659) (13,983)
Income tax expense 5 (38) (9)
------------------------------------------------------ ------- --------------- --------------
Loss for the year attributable to equity holders
of the parent company (23,697) (13,992)
------------------------------------------------------ ------- --------------- --------------
Other comprehensive income
Exchange differences on translation of foreign
operations (148) 147
------------------------------------------------------ ------- --------------- --------------
Other comprehensive (expense)/income for the
year net of taxation (148) 147
------------------------------------------------------ ------- --------------- --------------
Total comprehensive expense for the year attributable
to equity holders of the parent company (23,845) (13,845)
------------------------------------------------------ ------- --------------- --------------
Loss per share (cents)
Basic and diluted 8 (3.6) (0.5)
------------------------------------------------------ ------- --------------- --------------
All operations are considered to be continuing
(see note 2).
The accompanying accounting policies and notes form an integral
part of these financial statements.
Consolidated Statement of Financial Position
At 31 December 2021
At 31 At 31
December December
2021 $ 2020 $
Note 000's 000's
--------------------------------------------- ----- ------------ -----------
Assets
Non-current assets
Intangible exploration and evaluation assets 10 94,405 75,259
Goodwill 10/15 4,610 4,610
Tangible assets 11 22,748 25,783
Right of use assets 12 14 97
Investment in associate 13 - 47
Escrow and abandonment funds 16 1,564 1,297
Deferred tax asset 5 6,929 8,975
--------------------------------------------- ----- ------------ -----------
Total non-current assets 130,270 116,068
--------------------------------------------- ----- ------------ -----------
Current assets
Trade and other receivables 16 4,274 5,313
Inventories 17 259 172
Restricted cash 18 560 946
Cash and cash equivalents 1,555 17,862
--------------------------------------------- ----- ------------ -----------
Total current assets 6,648 24,293
--------------------------------------------- ----- ------------ -----------
Total assets 136,918 140,361
--------------------------------------------- ----- ------------ -----------
Liabilities
Current liabilities
Trade and other payables 19 (23,537) (18,620)
Lease liabilities 20 (36) (105)
Borrowings 21 (643) (498)
--------------------------------------------- ----- ------------ -----------
Total current liabilities (24,216) (19,223)
Non-current liabilities
Borrowings 21 (187) (1,639)
Provisions 22 (6,294) (6,314)
Deferred tax liability 5 (6,941) (8,974)
--------------------------------------------- ----- ------------ -----------
Total non-current liabilities (13,422) (16,927)
--------------------------------------------- ----- ------------ -----------
Total liabilities (37,638) (36,150)
--------------------------------------------- ----- ------------ -----------
Net assets 99,280 104,211
--------------------------------------------- ----- ------------ -----------
Shareholders' equity
Called-up share capital 23 218 123
Share premium reserve 23 171,734 152,717
Share based payments reserve 24 5,312 5,228
Retained deficit (101,381) (77,684)
Foreign exchange reserve (1) 147
Convertible debt option reserve 21 114 396
Other reserves 23 23,284 23,284
--------------------------------------------- ----- ------------ -----------
Total equity attributable to equity holders
of the parent company 99,280 104,211
--------------------------------------------- ----- ------------ -----------
The accompanying accounting policies and notes form an integral
part of these financial statements.
These financial statements were approved and authorised for
issue by the Board of Directors on 29 September 2022 and signed on
its behalf by:
Eytan Uliel Simon Potter
Director Director
Company Statement of Financial Position
At 31 December 2021
At 31 At 31
December December
2021 $ 2020 $
Note 000's 000's
-------------------------------------------- ---- ------------ -----------
Assets
Non-current assets
Property, plant and equipment 11 59 78
Right of use assets 12 14 12
Investment in subsidiaries 14 50,940 50,940
Trade and other receivables 16 113,187 83,839
-------------------------------------------- ---- ------------ -----------
Total non-current assets 164,200 134,869
Current assets
Trade and other receivables 16 166 238
Restricted cash 18 57 57
Cash and cash equivalents 914 17,160
-------------------------------------------- ---- ------------ -----------
Total current assets 1,137 17,455
-------------------------------------------- ---- ------------ -----------
Total assets 165,337 152,324
-------------------------------------------- ---- ------------ -----------
Liabilities
Current liabilities
Trade and other payables 19 (10,775) (504)
Lease liabilities 20 (14) (13)
Borrowings 21 (462) -
-------------------------------------------- ---- ------------ -----------
Total current liabilities (11,251) (517)
Non-current liabilities
Borrowings 21 - (1,120)
-------------------------------------------- ---- ------------ -----------
Total non-current liabilities - (1,120)
-------------------------------------------- ---- ------------ -----------
Total liabilities (11,251) (1,637)
-------------------------------------------- ---- ------------ -----------
Net assets 154,086 150,687
-------------------------------------------- ---- ------------ -----------
Shareholders' equity
Called-up share capital 23 218 123
Share premium reserve 23 171,734 152,717
Share based payments reserve 24 4,942 4,858
Retained deficit (52,457) (36,942)
Convertible debt option reserve 21 114 396
Other reserve 23 29,535 29,535
-------------------------------------------- ---- ------------ -----------
Total equity attributable to equity holders
of the parent company 154,086 150,687
-------------------------------------------- ---- ------------ -----------
The accompanying accounting policies and notes form an integral
part of these financial statements.
These financial statements were approved and authorised for
issue by the Board of Directors on 29 September 2022 and signed on
its behalf by:
Eytan Uliel Simon Potter
Director Director
Consolidated Statement of Cash Flows
For the year ended 31 December 2021
Year
Year ended ended
31 December 31 December
2021 $ 2020 $
000's 000's
-------------------------------------------------------------- ------------- --------------
Cash flows from operating activities
Loss before taxation (23,659) (13,983)
Decrease/(increase) in trade and other receivables 772 (204)
Decrease in trade and other payables and provisions (5,105) (1,164)
Increase in inventories (87) (18)
Impairment of goodwill - 2,435
Impairment of tangible and intangible assets 7,416 -
Depreciation of property, plant and equipment (note
11) 2,944 1,446
Depreciation of right of use asset (note 12) 86 214
Loss on disposal of investment in associate 47 -
Loss on disposal of property, plant and equipment (note
11) 11 105
Amortisation (note 10) 263 113
Share settled payments (note 24) 644 2,455
Other income (256) (3)
Finance income (note 9) (7) (202)
Finance costs (note 9) 5,630 628
Share based payments (note 24) 84 360
Income tax paid (99) (9)
Foreign exchange loss/(gain) on operating activities 17 (32)
-------------------------------------------------------------- ------------- --------------
Net cash outflow from operating activities (11,299) (7,859)
-------------------------------------------------------------- ------------- --------------
Cash flows from investing activities
Purchase of property, plant and equipment (note 11) (5,385) (228)
Proceeds from sale of property, plant and equipment 36 -
Payments for exploration and evaluation assets (13,745) (14,566)
Decrease/(increase) in restricted cash 386 (9)
Cash acquired from business combination (note 15) - 1,039
Other income received 256 3
Interest received (note 9) 7 202
-------------------------------------------------------------- ------------- --------------
Net cash outflow from investing activities (18,445) (13,559)
-------------------------------------------------------------- ------------- --------------
Cash flows from financing activities
Issue of ordinary share capital 14,456 29,536
Share issue costs (19) -
Principal elements of lease payments (note 20) (86) (216)
Interest payable on lease liabilities (note 20) (7) (17)
Finance costs (2,575) (176)
Repayment of borrowings (648) (2,694)
Proceeds of borrowings 2,259 1,515
-------------------------------------------------------------- ------------- --------------
Net cash inflow from financing activities 13,380 27,948
-------------------------------------------------------------- ------------- --------------
Net (decrease)/increase in cash and cash equivalents (16,364) 6,530
Effects of exchange rate changes on cash and cash equivalents 57 180
Cash and cash equivalents at beginning of year 17,862 11,152
-------------------------------------------------------------- ------------- --------------
Cash and cash equivalents at end of year 1,555 17,862
-------------------------------------------------------------- ------------- --------------
The accompanying accounting policies and notes form
an integral part of these financial statements.
Company Statement of Cash Flows
For the year ended 31 December 2021
Year
Year ended ended
31 December 31 December
2021 $ 2020 $
000's 000's
-------------------------------------------------------------- ------------- --------------
Cash flows from operating activities
Loss before taxation (15,515) (12,392)
Decrease/(increase) in trade and other receivables 72 (14)
Increase/(decrease) in trade and other payables 23 (869)
Depreciation (notes 11 and 12) 37 31
Provision for doubtful recovery of intercompany receivable 5,813 7,171
Share settled payments 638 2,455
Other income - (3)
Finance income - (46)
Finance costs 5,418 81
Foreign exchange loss/(gain) on operating activities 213 (142)
Share based payments (note 24) 84 360
-------------------------------------------------------------- ------------- --------------
Net cash outflow from operating activities (3,217) (3,368)
-------------------------------------------------------------- ------------- --------------
Cash flows from investing activities
Payments to acquire tangible assets (note 11) (3) (79)
Interest received (note 9) - 46
Other income received - 3
Increase in restricted cash - (31)
Advances to and payments on behalf of group companies (27,239) (21,610)
-------------------------------------------------------------- ------------- --------------
Net cash outflow from investing activities (27,242) (21,671)
-------------------------------------------------------------- ------------- --------------
Cash flows from financing activities
Issue of ordinary share capital 14,456 29,536
Share issue costs (19) -
Principle elements of lease payments (note 20) (16) (15)
Interest payable on lease liabilities (note 20) (1) (1)
Finance costs (2,369) (79)
Proceeds of borrowings 2,259 1,515
-------------------------------------------------------------- ------------- --------------
Net cash inflow from financing activities 14,310 30,956
-------------------------------------------------------------- ------------- --------------
Net (decrease)/increase in cash and cash equivalents (16,149) 5,917
Effects of exchange rate changes on cash and cash equivalents (97) 143
Cash and cash equivalents at beginning of year 17,160 11,100
-------------------------------------------------------------- ------------- --------------
Cash and cash equivalents at end of year 914 17,160
-------------------------------------------------------------- ------------- --------------
The accompanying accounting policies and notes form
an integral part of these financial statements.
Statement of Changes in Equity
For the year ended 31 December 2021
Called Share
up Share based Foreign Convertible
share premium payments Retained exchange debt option Other Total
capital reserve reserve deficit reserve reserve reserves Equity
$ 000's $ 000's $ 000's $ 000's $ 000's $ 000's $ 000's $ 000's
----------------------- -------- ----------- ---------- -------------- ----------- ----------- ------------ ------------
Group
----------------------- -------- ----------- ---------- -------------- ----------- ----------- ------------ ------------
At 1 January
2020
Loss for the
year 61 96,157 4,868 (63,692) - - 23,284 60,678
Currency translation - - - (13,992) - - - (13,992)
differences - - - - 147 - - 147
----------------------- -------- ----------- ---------- -------------- ----------- ----------- ------------ ------------
Total comprehensive
(expense)/income - - - (13,992) 147 - - (13,845)
----------------------- -------- ----------- ---------- -------------- ----------- ----------- ------------ ------------
Share capital
issued Recognition
of conversion
feature (note
21) 62 56,560 - - - - - 56,622
- - - - - 396 - 396
Share based payments - - 360 - - - - 360
----------------------- -------- ----------- ---------- -------------- ----------- ----------- ------------ ------------
Total contributions
by and distributions
to owners of
the Company 62 56,560 360 - - 396 - 57,378
----------------------- -------- ----------- ---------- -------------- ----------- ----------- ------------ ------------
At 31 December
2020 123 152,717 5,228 (77,684) 147 396 23,284 104,211
----------------------- -------- ----------- ---------- -------------- ----------- ----------- ------------ ------------
Loss for the
year - - - (23,697) - - - (23,697)
Currency translation - - - - (148) - - (148)
differences
----------------------- -------- ----------- ---------- -------------- ----------- ----------- ------------ ------------
Total comprehensive
expense - - - (23,697) (148) - - (23,845)
----------------------- -------- ----------- ---------- -------------- ----------- ----------- ------------ ------------
Share capital
issued Recognition
of conversion
feature (note
21) Realisation
of conversion
feature (note
21) 95 19,017 - - - - - 19,112
- - - - - 505 - 505
- - - - - (787) - (787)
Share based payments - - 84 - - - - 84
----------------------- -------- ----------- ---------- -------------- ----------- ----------- ------------ ------------
Total contributions
by and distributions
to owners of
the Company 95 19,017 84 - - (282) - 18,914
----------------------- -------- ----------- ---------- -------------- ----------- ----------- ------------ ------------
At 31 December
2021 218 171,734 5,312 (101,381) (1) 114 23,284 99,280
----------------------- -------- ----------- ---------- -------------- ----------- ----------- ------------ ------------
Called up Share Share Convertible
share premium based payments Retained debt option Other Total
capital $ reserve reserve deficit reserve reserve Equity
000's $ 000's $ 000's $ 000's $ 000's $ 000's $ 000's
---------------------------------------------------------------- ------------ ----------------- ------------- ------------ -------- -------------
Company
------------------------------------- ------------------------- ------------ ----------------- ------------- ------------ -------- -------------
At 1 January 2020 61 96,157 4,498 (24,551) - 29,535 105,700
Loss for the year - - - (12,391) - - (12,391)
------------------------------------- ------------------------- ------------ ----------------- ------------- ------------ -------- -------------
Total comprehensive
expense - - - (12,391) - - (12,391)
------------------------------------- ------------------------- ------------ ----------------- ------------- ------------ -------- -------------
Share capital issued 62 56,560 - - - - 56,622
Recognition of conversion
feature (note 21) - - - - 396 - 396
Share based payments - - 360 - - - 360
------------------------------------- ------------------------- ------------ ----------------- ------------- ------------ -------- -------------
Total contributions
by and distributions
to owners of the Company 62 56,560 360 - 396 - 57,378
------------------------------------- ------------------------- ------------ ----------------- ------------- ------------ -------- -------------
At 31 December 2020 123 152,717 4,858 (36,942) 396 29,535 150,687
------------------------------------- ------------------------- ------------ ----------------- ------------- ------------ -------- -------------
Loss for the year - - - (15,515) - - (15,515)
------------------------------------- ------------------------- ------------ ----------------- ------------- ------------ -------- -------------
Total comprehensive
expense - - - (15,515) - - (15,515)
------------------------------------- ------------------------- ------------ ----------------- ------------- ------------ -------- -------------
Share capital issued 95 19,017 - - - - 19,112
Recognition of conversion
feature (note 21) - - - - 505 - 505
Realisation of conversion
feature (note 21) - - - - (787) - (787)
Share based payments - - 84 - - - 84
------------------------------------- ------------------------- ------------ ----------------- ------------- ------------ -------- -------------
Total contributions
by and distributions
to owners of the Company 95 19,017 84 - (282) - 18,914
------------------------------------- ------------------------- ------------ ----------------- ------------- ------------ -------- -------------
At 31 December 2021 218 171,734 4,942 (52,457) 114 29,535 154,086
------------------------------------- ------------------------- ------------ ----------------- ------------- ------------ -------- -------------
The accompanying accounting policies and notes form an integral
part of these financial statements.
Notes to the financial statements for the year ended 31 December
2021
1 Summary of significant accounting policies
1.01 General information and authorisation of financial
statements
Challenger Energy Group PLC (the "Company") and its subsidiaries
(together, the "Group") is the holder of several oil & gas
exploration and production licences located in Trinidad &
Tobago, Suriname, Uruguay and The Bahamas.
The Company is a limited liability company incorporated and
domiciled in the Isle of Man. The address of its registered office
is 34 North Quay, Douglas, Isle of Man IM1 4LB. The Company's
review of operations and principal activities is set out in the
Directors' Report. See note 14 to the financial statements for
details of the Company's principal subsidiaries.
The accounting reference date of the Company is 31 December.
1.02 Statement of compliance with IFRS
The Group's financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRS)
as adopted by the European Union. The Company's financial
statements have been prepared in accordance with IFRS as adopted by
the European Union and as applied in accordance with the provisions
of the Isle of Man Companies Acts 1931 to 2004. As permitted by
part 1 Section 3(5) of the Isle of Man Companies Act 1982, the
Company has elected not to present its own Statement of
Comprehensive Income for the year. The principal accounting
policies adopted by the Group and Company are set out below.
New and revised standards and interpretations not applied
Certain new accounting standards and interpretations have been
published that are not mandatory for 31 December 2021 reporting
periods and have not been early adopted by the Group and the
Company. These standards are not expected to have a material impact
on the Group and the Company in the current or future reporting
periods and on foreseeable future transactions.
1.03 Basis of preparation
The financial statements have been prepared on the historical
cost basis, except for the measurement of certain assets and
financial instruments at fair value as described in the
accounting policies below.
The financial statements have been prepared on a going concern
basis, refer to note 1.28 for more details.
The financial statements are presented in United States dollars
($) and all values are rounded to the nearest thousand dollars
($'000) unless otherwise stated.
1.04 Basis of consolidation
The financial statements incorporate the results of the Company
and its subsidiaries (collectively, the "Group") using the
acquisition method. Control is achieved where the Company is
exposed to, or has rights to, variable returns from its involvement
with the entity and has the ability to affect those returns through
its power over the entity.
Inter-company transactions and balances between Group companies
are eliminated in full.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring the accounting policies used in
line with those used by the Group.
The investment in associate (an entity over which the Group has
significant influence) has been recorded at cost and has not been
adjusted to reflect the Group's 25% share of the net profits/losses
and assets/liabilities of the associate from the date of
acquisition to the balance sheet date as it was deemed
immaterial.
1.05 Business combinations
On the acquisition of a subsidiary, the business combination is
accounted for using the acquisition method. In the consolidated
statement of financial position, the acquiree's identifiable assets
and liabilities are initially recognised at their fair values at
the acquisition date. The cost of an acquisition is measured as the
fair value of aggregated amount of the consideration transferred,
measured at the date of acquisition. The consideration paid is
allocated to the assets acquired and liabilities assumed on the
basis of fair values at the date of acquisition. Acquisition costs
not directly related to the issuance of shares in consideration are
expensed when incurred and included in administrative expenses.
Acquisition costs which are directly related to the issuance of
shares in consideration are deducted from share premium. The
results of acquired operations are included in the consolidated
statement of comprehensive income from the date on which control is
obtained.
If the cost of acquisition exceeds the fair value of the
identifiable net assets attributable to the Group, the difference
is considered as purchased goodwill, which is not amortised but
annually reviewed for impairment. In the case that the identifiable
net assets attributable to the Group exceed the cost of
acquisition, the difference is recognised in profit or loss as a
gain on bargain purchase.
If the initial accounting for a business combination cannot be
completed by the end of the reporting period in which the
combination occurs, only provisional amounts are reported, which
can be adjusted during the measurement period of up to 12 months
after acquisition date.
After initial recognition, goodwill is measured at cost less any
accumulated impairment losses.
1.06 Intangible assets - exploration and evaluation assets
Exploration and evaluation expenditure incurred which relates to
more than one area of interest is allocated across the various
areas of interest to which it relates on a proportionate basis.
Exploration and evaluation expenditure incurred by or on behalf of
the Group is accumulated separately for each area of interest. The
area of interest adopted by the Group is defined as a petroleum
title.
Expenditure in the area of interest comprises direct costs and
an appropriate portion of related overhead expenditure but does not
include general overheads or administrative expenditure not linked
to a particular area of interest.
As permitted under IFRS 6, exploration and evaluation
expenditure for each area of interest, other than that acquired
from the purchase of another entity, is carried forward as an asset
at cost provided that one of the following conditions is met:
-- the costs are expected to be recouped through successful
development and exploitation of the area of interest, or
alternatively by its sale; or
-- exploration and/or evaluation activities in the area of
interest have not, at the reporting date, reached a stage which
permits a reasonable assessment of the existence or otherwise of
economically recoverable reserves, and active and significant
operations in, or in relation to, the area of interest are
continuing.
Such costs are initially capitalised as intangible assets and
include payments to acquire the legal right to explore, together
with the directly related costs of technical services and studies,
seismic acquisition, exploratory drilling and testing. Exploration
and evaluation expenditure which fails to meet at least one of the
conditions outlined above is taken to the statement of
comprehensive income.
Expenditure is not capitalised in respect of any area of
interest unless the Group's right of tenure to that area of
interest is current.
Intangible exploration and evaluation assets in relation to each
area of interest are not amortised until the existence (or
otherwise) of commercial reserves in the area of interest has been
determined.
Exploration and evaluation assets are assessed for impairment
when facts and circumstances suggest that the carrying amount may
exceed its recoverable amount. In accordance with IFRS 6, the Group
reviews and tests for impairment on an ongoing basis and
specifically if the following occurs:
a) the period for which the Group has a right to explore in the
specific area has expired during the period or will expire in the
near future, and is not expected to be renewed;
b) substantive expenditure on further exploration for and
evaluation of hydrocarbon resources in the specific area is neither
budgeted nor planned;
c) exploration for and evaluation of hydrocarbon resources in
the specific area have not led to the discovery of commercially
viable quantities of mineral resources and the Group has decided to
discontinue such activities in the specific area; and
d) sufficient data exists to indicate that although a
development in the specific area is likely to proceed the carrying
amount of the exploration and evaluation asset is unlikely to be
recovered in full from successful development or by sale.
An impairment loss is recognised for the amount by which the
asset's carrying value exceeds its recoverable amount. The
recoverable amount is the higher of an asset's fair value less
costs to sell and value in use. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there
are separately identifiable cash inflows which are largely
independent of the cash inflows from other assets or groups of
assets (cash-generating units).
Net proceeds from any disposal of an exploration asset are
initially credited against the previously capitalised costs. Any
surplus proceeds are credited to the consolidated statement of
comprehensive income.
1.07 Oil and gas development/producing assets and commercial
reserves
If the field is determined to be commercially viable, the
attributable costs are transferred to development/production
assets
within tangible assets in single field cost centres.
Subsequent expenditure is capitalised only where it either
enhances the economic benefits of the development/producing asset
or replaces part of the existing development/producing asset.
Decreases in the carrying amount are charged to the consolidated
statement of comprehensive income.
Net proceeds from any disposal of development/producing assets
are credited against the previously capitalised cost. A gain or
loss on disposal of a development/producing asset is recognised in
the consolidated statement of comprehensive income to the extent
that the net proceeds exceed or are less than the appropriate
portion of the net capitalised costs of the asset.
Commercial reserves are proven and probable oil and gas
reserves, which are defined as the estimated quantities of crude
oil, natural gas and natural gas liquids which geological,
geophysical and engineering data demonstrate with a specified
degree of certainty to be recoverable in future years from known
reservoirs and which are considered commercially producible. There
should be at least a 50% statistical probability that the actual
quantity of recoverable reserves will be more than the amount
estimated as a proven and probable reserves.
1.08 Depletion and amortisation
All expenditure carried within each field is amortised from the
commencement of production on a unit of production basis, which is
the ratio of oil and gas production in the period to the estimated
quantities of commercial reserves at the end of the period plus the
production in the period, generally on a field-by-field basis. In
certain circumstances, fields within a single development area may
be combined for depletion purposes. Costs used in the unit of
production calculation comprise the net book value of capitalised
costs plus the estimated future field development costs necessary
to bring the reserves into production. Changes in the estimates of
commercial reserves or future field development costs are dealt
with prospectively.
1.09 Decommissioning
Where a material liability for the removal of production
facilities and site restoration at the end of the productive life
of a field exists, a provision for decommissioning is recognised.
The amount recognised is the present value of estimated future
expenditure determined in accordance with local conditions and
requirements. The cost of the relevant tangible fixed asset is
increased with an amount equivalent to the provision and
depreciated on a unit of production basis. Changes in estimates are
recognised prospectively, with corresponding adjustments to the
provision and the associated fixed asset.
1.10 Property, plant and equipment
Property, plant and equipment is stated in the statement of
financial position at cost less accumulated depreciation and any
recognised impairment loss. Depreciation on property, plant and
equipment other than exploration and production assets, is provided
at rates calculated to write off the cost less estimated residual
value of each asset on a straight-line basis over its expected
useful economic life. Depreciation rates applied for each class of
assets are detailed as follows:
-- Furniture, fittings 1 - 4 years
and equipment
-- Motor vehicles 5 years
-- Leasehold improvements Over the life of the lease
The assets' residual values and useful lives are reviewed, and
adjusted if appropriate, at each balance sheet date.
An asset's carrying amount is written down immediately to its
recoverable amount if the asset's carrying amount is greater than
its estimated recoverable amount with any impairment charge being
taken to the statement of comprehensive income.
Gains and losses on disposals are determined by comparing
proceeds with carrying amount and are recognised in the statement
of comprehensive income.
1.11 Inventories
Inventories are stated at the lower of cost and net realisable
value. Cost is determined by the weighted average cost formula,
where cost is determined from the weighted average of the cost at
the beginning of the period and the cost of purchases during the
period. Net realisable value represents the estimated selling price
less all estimated costs of completion and costs to be incurred in
marketing, selling and distribution.
1.12 Revenue recognition
Revenue from sales of oil and natural gas is recognised at the
transaction price to which the Group expects to be entitled,
exclusive of indirect taxes and excise duties. Revenue is
recognised when performance obligations have been met, on delivery
of product or when control of the product is transferred to the
customer.
1.13 Foreign currencies
Transactions in foreign currencies are translated at the
exchange rate ruling at the date of each transaction. Foreign
currency monetary assets and liabilities are retranslated using the
exchange rates at the balance sheet date. Gains and losses arising
from changes in exchange rates after the date of the transaction
are recognised in the Statement of comprehensive income.
Non-monetary assets and liabilities that are measured in terms of
historical cost in a foreign currency are translated at the
exchange rate at the date of the original transaction.
In the financial statements, the net assets of the Group are
translated into its presentation currency at the rate of exchange
at the balance sheet date. Income and expense items are translated
at the average rates for the period. The resulting exchange
differences are recognised in equity and included in the
translation reserve. The consolidated financial statements and
company financial statements are presented in United States Dollars
("$"), which is the functional currency of the Company.
Subsidiaries in the Group have a range of functional currencies
including United States Dollars, UK Pound Sterling, Trinidad and
Tobago Dollars and Euros.
1.14 Leases
The Group leases various offices, warehouses, equipment and
vehicles. Rental contracts are typically made for fixed periods
of
6 months to 3 years, but may have extension options.
Lease terms are negotiated on an individual basis and contain a
wide range of different terms and conditions. The lease agreements
do not impose any covenants other than the security interests in
the leased assets that are held by the lessor. Leased assets may
not be used as security for borrowing purposes.
Leases are recognised as a right-of-use asset and a
corresponding liability at the date at which the leased asset is
available for use by the Group.
Assets and liabilities arising from a lease are initially
measured on a present value basis. Lease liabilities include the
net present value of the following lease payments:
-- fixed payments (including in-substance fixed payments), less
any lease incentives receivable;
-- variable lease payment that are based on an index or a rate,
initially measured using the index or rate at the commencement
date;
-- amounts expected to be payable by the Group under residual value guarantees;
-- the exercise price of a purchase option if the Group is
reasonably certain to exercise that option; and
-- payments of penalties for terminating the lease, if the lease
term reflects the Group exercising that option.
Lease payments to be made under reasonably certain extension
options are also included in the measurement of the liability. The
lease payments are discounted using the interest rate implicit in
the lease. If that rate cannot be readily determined, which is
generally the case for leases in the Group, the lessee's
incremental borrowing rate is used, being the rate that the
individual lessee would have to pay to borrow the funds necessary
to obtain an asset of similar value to the right-of-use asset in a
similar economic environment with similar terms, security and
conditions.
To determine the incremental borrowing rate, the Group:
-- where possible, uses recent third-party financing received by
the individual lessee as a starting point, adjusted to reflect
changes in financing conditions since third party financing was
received;
-- uses a build-up approach that starts with a risk-free
interest rate adjusted for credit risk for leases held by the
Group, which does not have recent third-party financing; and
-- makes adjustments specific to the lease, for example term,
country, currency and security.
The Group is exposed to potential future increases in variable
lease payments based on an index or rate, which are not included in
the lease liability until they take effect. When adjustments to
lease payments based on an index or rate take effect, the lease
liability is reassessed and adjusted against the right-of-use
asset.
Lease payments are allocated between principal and finance cost.
The finance cost is charged to profit or loss over the lease period
so as to produce a constant periodic rate of interest on the
remaining balance of the liability for each period.
Right-of-use assets are measured at cost comprising the
following:
-- the amount of the initial measurement of lease liability;
-- any lease payments made at or before the commencement date
less any lease incentives received;
-- any initial direct costs; and
-- restoration costs.
Right-of-use assets are generally depreciated over the shorter
of the asset's useful life and the lease term on a straight-line
basis. If the Group is reasonably certain to exercise a purchase
option, the right-of-use asset is depreciated over the underlying
asset's useful life.
Payments associated with short-term leases of equipment and
vehicles and all leases of low-value assets are recognised on a
straight-line basis as an expense in profit or loss. Short-term
leases are leases with a lease term of 12 months or less. Low-value
assets comprise IT equipment and small items of office
furniture.
1.15 Financial instruments
Financial assets
The Group classifies its financial assets as financial assets
held at amortised cost. Management determines the classification
of
its financial assets at initial recognition.
The Group classifies its financial assets as financial assets
held at amortised cost only if both of the following criteria are
met:
- the asset is held within a business model whose objective is
to collect the contractual cash flows; and
- the contractual terms give rise to cash flows that are solely
payments of principal and interest.
Measurement
Financial assets held at amortised cost are initially recognised
at fair value, and are subsequently stated at amortised cost using
the effective interest method. Financial assets at amortised cost
comprise 'cash and cash equivalents' at variable interest rates,
'restricted cash', 'escrow and abandonment funds' and 'trade and
other receivables' excluding 'prepayments'.
Impairment of financial assets
The Group assesses, on a forward-looking basis, the expected
credit losses associated with its financial assets held at
amortised
cost. The impairment methodology applied depends on whether
there has been a significant increase in credit risk.
The Group applies the expected credit loss model to financial
assets at amortised cost. Given the nature of the Group's
receivables, expected credit losses are not material.
Financial liabilities
The Group classifies its financial liabilities as other
financial liabilities. Other financial liabilities are recognised
initially at fair value and are subsequently measured at amortised
cost using the effective interest method. Other financial
liabilities consist of 'trade and other payables' and 'lease
liabilities'. Trade and other payables represent liabilities for
goods and services provided to the Group prior to the end of the
financial period which are unpaid. The amounts are unsecured and
are usually paid within 30 days of recognition.
1.16 Cash and cash equivalents
Cash and cash equivalents include cash on hand and deposits held
at call with financial institutions with original maturities of
three months or less. For the purposes of the statement of cash
flows, restricted cash is not included within cash and cash
equivalents.
1.17 Share capital
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new shares or options are
deducted, net of tax, from the proceeds. Net proceeds are
disclosed in the statement of changes in equity.
1.18 Finance costs
Borrowing costs are recognised as an expense when incurred.
1.19 Borrowings
Borrowings are initially recognised at fair value, net of any
applicable transaction costs incurred. Borrowings are subsequently
carried at amortised cost; any difference between the proceeds (net
of transaction costs) and the redemption value is recognised in the
income statement over the period of the borrowings using the
effective interest method (if applicable).
Interest on borrowings is accrued as applicable to that class of
borrowing.
Convertible loans
Loans with certain conversion rights are identified as compound
instruments with the liability and equity components separately
recognised. On initial recognition the fair value of the liability
component is calculated by discounting the contractual stream of
future cash flows using the prevailing market interest rate for
similar non-convertible debt. The difference between the fair value
of the liability component and the fair value of the whole
instrument is recorded as equity. Transaction costs are apportioned
between the liability and the equity components of the instrument
based on the amounts initially recognised. The liability component
is subsequently measured at amortised cost using the effective
interest rate method, in line with our other financial liabilities.
The equity component is not remeasured. On conversion of the
instrument, equity is issued and the liability component is
derecognised. The original equity component recognised at inception
remains in equity. No gain or loss is recognised on conversion.
1.20 Provisions
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event, it
is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation.
When the Group expects some or all of a provision to be
reimbursed, for example under an insurance contract, the
reimbursement is recognised as a separate asset but only when the
reimbursement is virtually certain. The expense relating to any
provision is presented in the statement of comprehensive income net
of any reimbursement.
1.21 Dividends
Dividends are reported as a movement in equity in the period in
which they are approved by the shareholders.
1.22 Taxation
The tax expense represents the sum of the tax currently payable
and deferred tax.
Current tax, including overseas tax, is provided at amounts
expected to be paid (or recovered) using the tax rates and laws
that have been enacted or substantially enacted by the balance
sheet date.
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in
the computation of taxable profit, and is accounted for using the
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 (other than in a
business combination) of other assets and liabilities in a
transaction that affects neither the tax profit nor the accounting
profit.
Deferred tax liabilities are recognised for taxable temporary
differences arising on investments in subsidiaries and associates,
except where the Group is able to control the reversal of the
temporary difference and it is probable that the temporary
difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each
balance sheet date and adjusted to the extent that it is 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 statement of
comprehensive income, except when it relates to items charged or
credited directly to equity, in which case the deferred tax is also
dealt with in equity.
1.23 Impairment of assets
At each balance sheet date, the Group assesses whether there is
any indication that its tangible and intangible assets have become
impaired. Evaluation, pursuit and exploration assets are also
tested for impairment when reclassified to oil and natural gas
assets. If any such indication exists, the recoverable amount of
the asset is estimated in order to determine the extent of the
impairment, if any. If it is not possible to estimate the
recoverable amount of the individual asset, the recoverable amount
of the cash-generating unit to which the asset belongs is
determined.
The recoverable amount of an asset or a cash-generating unit is
the higher of its fair value less costs to sell and its value in
use. The value in use is the present value of the future cash flows
expected to be derived from an asset or cash-generating unit. This
present value is discounted using a pre-tax rate that reflects
current market assessments of the time value of money and of the
risks specific to the asset, for which future cash flow estimates
have not been adjusted. If the recoverable amount of an asset is
less than its carrying amount, the carrying amount of the asset is
reduced to its recoverable amount. That reduction is recognised as
an impairment loss.
The Group's impairment policy is to recognise a loss relating to
assets carried at cost less any accumulated depreciation or
amortisation immediately in the statement of comprehensive
income.
Impairment of goodwill
Goodwill acquired in a business combination is, from the
acquisition date, allocated to each of the cash-generating units,
or groups of cash-generating units, that are expected to benefit
from the synergies of the combination. Goodwill is tested for
impairment at least annually, and whenever there is an indication
that the asset may be impaired. An impairment loss is recognised on
cash-generating units, if the recoverable amount of the unit is
less than the carrying amount of the unit. The impairment loss is
allocated to reduce the carrying amount of the assets of the unit
by first reducing the carrying amount of any goodwill allocated to
the cash-generating unit, and then reducing the other assets of the
unit, pro rata on the basis of the carrying amount of each asset in
the unit.
If an impairment loss subsequently reverses, the carrying amount
of the asset is increased to the revised estimate of its
recoverable amount but limited to the carrying amount that would
have been determined had no impairment loss been recognised in
prior years. A reversal of an impairment loss is recognised in the
statement of comprehensive income. Impairment losses on goodwill
are not subsequently reversed.
1.24 Employee benefits
Wages and salaries, annual leave and sick leave
Liabilities for wages and salaries, including non-monetary
benefits, expected to be settled within 12 months of the reporting
date are recognised in other payables in respect of employees'
services up to the reporting date and are measured at the amounts
expected to be paid when the liabilities are settled.
Share-based payments
Where equity settled share-based instruments are awarded to
employees or Directors, the fair value of the instruments at the
date of grant is charged to the statement of comprehensive income
over the vesting period. Non-market vesting conditions are taken
into account by adjusting the number of equity instruments expected
to vest at each balance sheet date so that, ultimately, the
cumulative amount recognised over the vesting period is based on
the number of instruments that eventually vest. Market vesting
conditions are factored into the fair value of the instruments
granted. As long as all other vesting conditions are satisfied, a
charge is made irrespective of whether the market vesting
conditions are satisfied. The cumulative expense is not adjusted
for failure to achieve a market vesting condition.
Where equity instruments are granted to persons other than
employees or Directors, the statement of comprehensive income is
charged with the fair value of goods and services received.
Bonuses
The Group recognises a liability and an expense for bonuses.
Bonuses are approved by the Board and a number of factors are taken
into consideration when determining the amount of any bonus
payable, including the recipient's existing salary, length of
service and merit. The Group recognises a provision where
contractually obliged or where there is a past practice that has
created a constructive obligation.
Pension obligations
For defined contribution plans, the Group pays contributions to
privately administered pension plans. The Group has no further
payment obligations once the contributions have been paid. The
contributions are recognised as an employee benefit expense when
they are due.
Termination benefits
Termination benefits are payable when employment is terminated
by the Group before the normal retirement date, or whenever an
employee accepts voluntary redundancy in exchange for these
benefits. The Group recognises termination benefits when it is
demonstrably committed to a termination and when the entity has a
detailed formal plan to terminate the employment of current
employees without the possibility of withdrawal. Benefits falling
due more than 12 months after the end of the reporting period are
discounted to their present value.
1.25 Segmental reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker, who is responsible for
allocating resources and assessing performance of the operating
segments, has been identified as the Board of Directors that makes
strategic decisions. The performance of operating segments is
assessed on the basis of key metrics applicable, such as barrels of
oil produced per day, "netbacks" per barrel, revenue and operating
profit.
The Board has determined there is a single operating segment:
oil and gas exploration, development and production. However, there
are three geographical segments: Trinidad and Tobago and Suriname,
the Bahamas and the Isle of Man and United Kingdom (including
holding companies in Cyprus, Netherlands, and St Lucia, and dormant
entities in Spain, Uruguay and United States of America). The Isle
of Man and United Kingdom geographic segment is non-operating.
1.26 Share issue expenses and share premium account
Costs of share issues are written off against the premium
arising on the issues of share capital.
1.27 Share based payments reserve
This reserve is used to record the value of equity benefits
provided to employees and Directors as part of their remuneration
and
provided to consultants and advisors hired by the Group from
time to time as part of the consideration paid.
1.28 Critical accounting estimates, judgements and
assumptions
The Group makes estimates and assumptions concerning the future.
The resulting accounting estimates will, by definition, seldom
equal the related actual results. The estimates and assumptions
that have a risk of causing material adjustment to the carrying
amounts of assets and liabilities within the next financial year
are discussed below.
(i) Recoverability of oil and gas exploration costs
Costs capitalised as exploration assets are assessed for
impairment when circumstances suggest that the carrying value may
exceed its recoverable value. This assessment involves judgement as
to the likely commerciality of the asset, the future revenues and
costs pertaining and the discount rate to be applied for the
purposes of deriving a recoverable value.
The carrying value of exploration costs at 31 December 2021 is
$101,405,000 (31 December 2020: $72,885,000) relating to the cost
of exploration licences, geological and geophysical consultancy,
seismic data acquisition and interpretation and the drilling of
exploration wells, being made up of $93,952,000 (2020: $72,880,000)
in exploration costs in the Bahamian offshore licences and
$7,453,000 (2020: $3,176,000) of costs over exploration licences in
Trinidad. The Group's exploration activities are subject to a
number of significant and potential risks including:
- licence obligations;
- requirement for further funding;
- geological and development risks; and
- political risk.
The recoverability of these assets is dependent on the discovery
and successful development of economic reserves, including the
ability to raise finance to develop future projects or
alternatively, sale of the respective licence areas. The carrying
value of the Group's exploration and evaluation expenditure is
reviewed at each balance sheet date and, if there is any indication
that it is impaired, its recoverable amount is estimated. Estimates
of impairment are limited to an assessment by the Directors of any
events or changes in circumstances that would indicate that the
carrying value of the asset may not be fully recoverable. Any
impairment loss arising is charged to the statement of
comprehensive income.
Bahamas oil and gas exploration costs
On 21 February 2019, the Group received notification from the
Bahamian Government of the extension of the term of its four
southern licences to 31 December 2020, with the requirement that
the Company commence an exploration well before the end of the
extended term. On 23 March 2020 the Group notified the Government
of The Bahamas that, due to the impacts of the global response to
the Covid-19 pandemic, a force majeure event had occurred under the
terms of its exploration licences, such that the term of the
licences was extended beyond 31 December 2020 commensurate with the
duration of the force majeure event. In November 2020 the Group
received notification per the Government of The Bahamas agreeing to
an extension of these licences to 30 June 2021 as a result of the
force majeure event.
On 20 December 2020, the Group commenced drilling of the
Perseverance-1 exploration well on its offshore licence area in The
Bahamas, with drilling activity ceasing on 7 February 2021.
Commercial volumes of movable hydrocarbons were not present at this
drilling location. Subsequently the Group has undertaken an
extensive review of the data gathered from the Perseverance-1 well
to determine the extent to which this data indicates remaining
prospectivity in deeper, untested horizons, as well as horizons of
interest at other locations along the B and C structures. The
results of this review indicate that substantial prospectivity
remains in sufficient potential volumes such that further
exploration activity on these licences is merited. On the basis of
the revised prospect volume inventory for these untested horizons
and structures, the Group has undertaken an exercise to determine
whether the present value of any future economic benefit which may
be derived from hydrocarbon extraction from these licences is
sufficient to support the carrying value of the capitalised costs
at 31 December 2021. Following this review, the Group has
determined that the present value of these future economic benefits
exceeds the carrying value of this asset and that consequently no
impairment of this asset is required.
In March 2021, the Group notified the then Government of The
Bahamas of its election to renew the four southern licences into a
further three-year exploration period, having discharged the
licence obligation to drill an exploration well before the expiry
of the current licence period on 30 June 2021. A new Government was
elected in The Bahamas in September 2021, and the Group is engaging
with the new administration regarding the renewal of these licences
and the level of licence fees which remain to be paid for the
period that expired on 30 June 2021 and which would be payable for
the renewed licence period. Once this renewal process is completed,
the key licence obligation for the new three-year period will be
the drilling of a further exploration well within the licence area
before the expiry of the renewed licence term.
The ability of the Group to discharge its obligation to commence
a well prior to the end of a renewed licence period will be
contingent on securing the funding required to execute a second
exploration well. The Group has and will continue to engage in
discussions with various industry operators regarding entering into
a joint venture partnership or farm-out to fund any future well,
and the Directors consider that the Group will be able to discharge
the licence requirement of a further exploration well within a
renewed term of the licence.
In June 2021 the Group notified the Government of The Bahamas
that it did not intend to further discussions regarding renewal of
the Miami licence area, against which capitalised costs totalling
$416,000 were carried. The Group has thus impaired these costs in
full in the financial statements to 31 December 2021.
Trinidad and Tobago oil and gas exploration costs
The exploration oil and gas costs in relation to the Group's
business in Trinidad and Tobago predominantly relate to the Group's
Bonasse field onshore Trinidad. The Bonasse field comprises of
historical wells in production, as well as the two further recent
wells, namely the Saffron-1 well drilled in 2020 and the Saffron-2
well drilled during 2021.
The Saffron-1 well resulted in the discovery of oil in the
deeper Lower Cruse horizon in addition to proving reservoir
continuity and producibility in the shallower Upper Cruse and
Middle Cruse horizons. Following this, the Saffron-2 well was
drilled during 2021 with the Lower Cruse horizons as the primary
target for testing, as well as to confirm reservoir continuity and
producibility in the Upper and Middle Cruse horizons. The Saffron-2
well was successfully drilled to the Lower Cruse horizon and
demonstrated flow of oil to surface from the Lower Cruse horizon,
however, the well could not be put on sustained production due to
technical and mechanical issues encountered during attempted
production tests in the Lower Cruse horizon. Subsequently, the
Lower Cruse horizon was isolated and the well was completed in the
Middle Cruse horizon.
Based on the results of the Saffron-1 and the Saffron-2 wells
and the broadened subsurface understanding, the Company considers
that a shallow well development on the Bonasse licence is
potentially viable, and the Group is in the process of undertaking
detailed evaluation to identify potential well locations that would
allow for a field development plan to be carefully validated and
submitted to the Trinidadian Ministry of Energy and Energy
Resources.
The Group has therefore determined that there is no indication
that the carrying value of this asset is impaired at 31 December
2021.
Impairment of Trinidad and Tobago intangible and tangible oil
and gas assets and property plant and equipment The Directors
carried out an impairment review of the Group's tangible and
intangible assets in Trinidad and Tobago, including goodwill, to
determine whether the carrying value of these assets exceeded their
fair value. This assessment was undertaken by reference to various
market data points and industry valuation standards, including,
where applicable, discounted cashflows. Following this exercise,
the directors determined that one of the cash generating units
(CGU) located in Trinidad and Tobago has not met performance
expectations determined at the time of the Columbus Energy Group
acquisition in August 2020, and again at 31 December 2020.
Consequently, an impairment of related intangible assets of
$1,653,000 (2020: nil) and tangible assets of $5,347,000 (2020:
nil) within this CGU has been recognised at balance sheet date. No
impairment has been recognised to goodwill of $4,610,000 (2020:
$2,435,000) at the balance sheet date. Refer to note 10 (intangible
assets) and note 11 (tangible assets).
(ii) Going concern
These financial statements have been prepared by the Directors
on a going concern basis, which assumes that the Group
and Company will continue in operation for the foreseeable
future.
As at 31 December 2021, the Group and Company had $1,555,000 and
$914,000 in unrestricted cash funding respectively.
Subsequent to the end of the financial year, in March 2022 the
Group and Company completed a comprehensive restructuring and
recapitalisation exercise which resulted in:
i) the Group and Company raising approximately GBP7.3 million
(or approximately $10 million) (before expenses) via the issue of
new shares, to fund certain payments to creditors as part of the
agreed discounted payment plan, as well as to fund a work programme
for 2022;
ii) a substantial reduction in balance sheet payables, debts and
potential liability exposures, that would have reasonably required
settlement in cash, from approximately $23.5 million to
approximately $2.5 million, being the estimated liabilities amount
that would be required for settlement in cash by the Group in the
foreseeable future. The substantial majority of liability
settlements took place subsequent to the year-end, predominantly in
the first quarter of 2022. As a substantial majority of these
settlement agreements were conditional on making settlements post
year end, the liabilities as of the balance sheet date reflect full
amounts that would otherwise have been payable in the absence of
settlement agreements (see Note 19 for further information);
and
iii) the Company reducing its net current liability position
from approximately $10.1 million at balance sheet date to a net
current asset position of approximately $4.1 million as a result of
the settlements and recapitalisation made subsequent to year
end.
Following the restructuring and recapitalisation, the Directors
have prepared a cash flow forecast which anticipates the Group and
Company being able to continue in operation for at least the next
twelve months from the date of this report.
The cash flow forecast includes underlying assumptions and
estimates, including oil price, sustained production from the
Group's producing fields in Trinidad and Tobago along with certain
incremental production from the intended work programme,
reliability of reserves estimates and renewal of licences upon
expiry.
In addition, the projections assume offsetting of certain tax
liabilities and deferral of certain historical liabilities in
Trinidad
and Tobago that the Directors believe are either not likely to
require settlement in cash or are capable of being deferred and
settled on long-dated payment terms so as to not require material
amounts of cash during the forecast period.
Certain of these items are outside of the Group and Company's
control and unfavourable actual outcomes may materially and
adversely affect the Group's cash resources and cast significant
doubt about the Group and the Company's ability to continue as a
going concern. In such an event, the Group and the Company may be
required to implement certain other measures including, but not
limited to,
i) raising additional third-party capital in form of equity,
debt or other instruments of a similar nature, and / or
ii) undertake cost reduction, and / or
iii) sell certain assets of the Group,
and a successful outcome of such measures cannot be
guaranteed.
These financial statements do not include the adjustments that
would result if the Group or the Company were unable to continue as
a going concern.
Following the outbreak of the Covid-19 global pandemic, the
Group had implemented appropriate remote working procedures, where
necessary, across all of its teams and operations to ensure the
ongoing safety of its staff and consultants. As a consequence, the
Group does not consider the Covid-19 pandemic to have any material
impact on its operations.
(iii) Recoverability of investment in subsidiary and amounts
owed by subsidiary undertakings in the Company statement of
financial position
The investment in the Company's direct subsidiaries and amounts
owed by subsidiary undertakings at 31 December 2021 stood at
$50,940,000 (2020: $50,940,000) and $113,187,000 (2020:
$83,839,000) respectively.
Ultimate recoverability of investments in subsidiaries and
amounts owed by subsidiary undertakings is dependent on successful
development and commercial exploitation, increasing production
through optimisation of existing wells, drilling of new infill
wells and/or the application of improved oil recovery methods or
alternatively, sale of the respective licence areas. The carrying
value of the Company's investments in subsidiaries is reviewed at
each balance sheet date and, if there is any indication of
impairment, the recoverable amount is estimated. Estimates of
impairments are limited to an assessment by the directors of any
events or changes in circumstances that would indicate that the
carrying values of the assets may not be fully recoverable.
Similarly, the expected credit losses on the amounts owed by
subsidiary undertakings are intrinsically linked to the recoverable
amount of the underlying assets. Any impairment losses arising are
charged to the statement of comprehensive income.
At 31 December 2021 a loss allowance for expected credit losses
of $12,984,000 (2020: $7,171,000) was held in respect of the
recoverability of amounts due from subsidiary undertakings.
1.29 Earnings per share
Basic earnings per share is calculated as net profit
attributable to members of the parent company, adjusted to exclude
any costs of servicing equity (other than dividends) and preference
share dividends, divided by the weighted average number of ordinary
shares, adjusted for any bonus element.
Diluted earnings per share is calculated as net profit
attributable to members of the parent company, adjusted for:
(i) Costs of servicing equity (other than dividends) and preference share dividends;
(ii) The post-tax effect of dividends and interest associated
with dilutive potential ordinary shares that have been recognised
as expenses; and
(iii) Other non-discretionary changes in revenues or expenses
during the period that would result from the dilution of potential
ordinary shares, divided by the weighted average number of ordinary
shares and dilutive potential ordinary shares, adjusted for any
bonus element.
1.30 Investment in subsidiary in the Company statement of
financial position
Investments in subsidiaries are recognised at initial cost of
acquisition, less any impairment to date.
2 Turnover and segmental analysis
Management has determined the operating segments based on the
reports reviewed by the Board of Directors that are used to make
strategic decisions. The Board has determined there is a single
operating segment: oil and gas exploration, development and
production. However, there are three geographical segments:
Trinidad & Tobago & Suriname (operating), The Bahamas
(operating) and The Isle of Man, UK, Uruguay, Spain, Saint Lucia,
Cyprus, Netherlands & USA (all non-operating).
The segment including Trinidad & Tobago has been reported as
the Group's direct oil and gas producing and revenue generating
operating segment. The Bahamas segment includes the Bahamian
exploration licences on which drilling activities were conducted in
2020 and 2021. The non-operating segment including the Isle of Man
(the Group's parent), which provides management service to the
Group and entities in Uruguay, Saint Lucia, Cyprus, Spain, the
Netherlands, and the U.S.A. all of which are non-operating in that
they either hold investments, or are dormant, or in the case of
Uruguay had not yet commenced operations as of the year-end. Their
results are consolidated and reported on together as a single
segment.
Trinidad & Suriname
Operating $ 000 Bahamas
Non-Operating
Entities
Operating (*) Total
Year ended 31 December 2021 $ 000 $ 000 $ 000
------------------------------ -------------------------------------------- ----------- ----------------- --------
Operating loss by geographical
area
Net petroleum revenue (**) 4,360 - - 4,360
------------------------------ -------------------------------------------- ----------- ----------------- --------
Operating loss (11,638) (2,083) (4,571) (18,292)
Other income 75 16 165 256
Finance costs (209) (3) (5,418) (5,630)
Finance income 7 - - 7
------------------------------ -------------------------------------------- ----------- ----------------- --------
Loss before taxation (11,765) (2,070) (9,824) (23,659)
------------------------------ -------------------------------------------- ----------- ----------------- --------
Other information
Depreciation, amortisation (3,185) (54) (54) (3,293)
Impairment charges (7,000) (416) - (7,416)
Capital additions 5,385 21,486 20 26,891
------------------------------ -------------------------------------------- ----------- ----------------- --------
Segment assets
Tangible and intangible assets 23,061 93,991 4,725 121,777
Deferred tax asset 6,929 - - 6,929
Escrow and abandonment funds 1,564 - - 1,564
Trade and other receivables 3,519 542 213 4,274
Inventories 259 - - 259
Restricted cash 503 - 57 560
Cash 591 4 960 1,555
------------------------------ -------------------------------------------- ----------- ----------------- --------
Consolidated total assets 36,426 94,537 5,955 136,918
------------------------------ -------------------------------------------- ----------- ----------------- --------
Segment liabilities
Trade and other payables (11,615) (1,049) (10,873) (23,537)
Borrowings (368) - (462) (830)
Deferred tax liability (6,941) - - (6,941)
Lease liabilities - (22) (14) (36)
Provisions (3,760) - (2,534) (6,294)
------------------------------ -------------------------------------------- ----------- ----------------- --------
Consolidated total liabilities (22,684) (1,071) (13,883) (37,638)
------------------------------ -------------------------------------------- ----------- ----------------- --------
Trinidad
&
Suriname Bahamas
Non-Operating
Entities
Operating Operating (*) Total
Year ended 31 December 2020 $ 000 $ 000 $ 000 $ 000
------------------------------------ ----------- ----------- ----------------- --------
Operating loss by geographical area
Net petroleum revenue (**) 1,417 - - 1,417
------------------------------------ ----------- ----------- ----------------- --------
Operating loss (3,081) (2,167) (8,312) (13,560)
Other income - - 3 3
Finance costs (96) (21) (511) (628)
Finance income - - 202 202
------------------------------------ ----------- ----------- ----------------- --------
Loss before taxation (3,177) (2,188) (8,618) (13,983)
------------------------------------ ----------- ----------- ----------------- --------
Other information
Depreciation, amortisation (1,529) (197) (47) (1,773)
Impairment charges - - (2,435) (2,435)
Capital additions 78 22,441 79 22,598
------------------------------------ ----------- ----------- ----------------- --------
Segment assets
Tangible and intangible assets 27,985 73,000 4,764 105,749
Investment in associate 47 - - 47
Deferred tax asset 8,975 - - 8,975
Escrow and abandonment funds 1,297 - - 1,297
Trade and other receivables 3,123 1,882 308 5,313
Inventories 172 - - 172
Restricted cash 889 - 57 946
Cash 577 97 17,188 17,862
------------------------------------ ----------- ----------- ----------------- --------
Consolidated total assets 43,065 74,979 22,317 140,361
------------------------------------ ----------- ----------- ----------------- --------
Segment liabilities
Trade and other payables (8,979) (8,738) (903) (18,620)
Borrowings (1,017) - (1,120) (2,137)
Deferred tax liability (8,974) - - (8,974)
Lease liabilities (41) (51) (13) (105)
Provisions (3,562) - (2,752) (6,314)
------------------------------------ ----------- ----------- ----------------- --------
Consolidated total liabilities (22,573) (8,789) (4,788) (36,150)
------------------------------------ ----------- ----------- ----------------- --------
(*) Intercompany balances and transactions between Group entities have been eliminated.
(**) Sales revenues were derived from a single customer within
each of these operating countries.
3 Operating loss - Group 2020
2021 $ 000's $ 000's
----------------------------------------------- ------------- ---------
Operating loss is arrived at after charging:
Fees payable to the Company's auditors and
its associates for:
- the audit of the Company and Group financial
statements 325 315
- non audit related services - 48
Directors' emoluments - fees and benefits (*) 1,311 1,693
Impairment of goodwill (**) - 2,435
Impairment of tangible and intangible assets 7,416 -
Loss on disposal of associate 47 -
Depreciation (***) 3,030 1,660
Amortisation 263 113
----------------------------------------------- ------------- ---------
(*) See note 7 for further details.
(**) See note 10 for further details.
(***) Depreciation of certain oil and gas assets of $2,330,000
(2020: $1,113,000) has been recognised within cost of sales.
2021 $ 000's 2020
$ 000's
---------------------------------------- ------------- ---------
Administrative expenses
Staff costs - cash settled 2,714 1,521
Staff costs - share settled (note 24) 506 1,425
Travel and accommodation 190 206
Professional fees - cash settled 2,896 3,324
Professional fees - share settled (note
24) 482 1,030
Depreciation and amortisation 963 660
Share based payments 84 360
Other 1,263 1,267
---------------------------------------- ------------- ---------
Total 9,098 9,793
---------------------------------------- ------------- ---------
4 Staff costs - Group
2021 2020
$ 000's $ 000's
----------------------------------------------- ------- -------
Wages and salaries - cash 3,230 1,733
Wages and salaries - share settled (note
24) 506 1,425
Share based payments 17 169
Other staff costs 483 441
----------------------------------------------- ------- -------
Total 4,236 3,768
----------------------------------------------- ------- -------
5 Taxation - Group
2021 2020
$ 000's $ 000's
----------------------------------------------- ------- -------
Analysis of tax charge in the year
Tax charge on ordinary activities 38 9
----------------------------------------------- ------- -------
Factors affecting the tax charge for the year:
Loss on ordinary activities before tax 23,659 13,983
Standard rate of income tax in the IOM -% -%
Loss on ordinary activities multiplied by the - -
standard rate of income tax
Effects of:
Overseas tax on profits 38 9
----------------------------------------------- ------- -------
Current tax charge for the year 38 9
----------------------------------------------- ------- -------
Deferred tax:
The net deferred tax balances solely relate to the Company's
Trinidad and Tobago operations. The components of the asset and
liability for the years ended December 31, 2021 and 2020 were as
follows:
2021 $ 000's 2020
$ 000's
----------------------- ------------- ---------
Losses carried forward 6,929 8,974
Leased property - 1
----------------------- ------------- ---------
Deferred tax asset 6,929 8,975
----------------------- ------------- ---------
Property and equipment 6,941 8,974
----------------------- ------------- ---------
Deferred tax liability 6,941 8,974
----------------------- ------------- ---------
Deferred tax assets related to tax losses have been recognised
to the extent to which deferred tax liabilities have been
recognised on taxable temporary differences. As these temporary
differences unwind, release of the deferred tax liabilities creates
a taxable profit against which deferred tax assets are utilised. At
31 December 2021, the Group had an unrecognised deferred tax asset
of $47,000,000 (2020: $47,700,000) calculated at 46.8% (2020:
45.7%) (weighted average across taxable entities) in respect of an
estimated $123,100,000 (2020: $100,500,000) of accumulated tax
losses. The deferred tax asset was not recognised as there was
insufficient evidence to suggest that it would be recoverable in
future periods.
The recognition of movements in deferred tax assets and deferred
tax liabilities in the statement of comprehensive income for the
year have given rise to a net deferred tax charge of nil (2020:
nil).
6 Dividends
During the year, no dividends were paid or proposed by the
Directors (2020: nil).
7 Directors' remuneration - Group 2021 2020
$ 000's $ 000's
----------------------------------- -------- ------- -------- -------------- ---------
Directors' remuneration (details
set out in tables below) 1,311 1,693
----------------------------------- -------- ------- -------- -------------- ---------
Share
Cash based *Share-settled
payments Other payments payments Total
Directors' remuneration - 2021 $ 000's $ 000's $ 000's $ 000's $ 000's
----------------------------------- -------- ------- -------- -------------- ---------
Executive Directors
Simon Potter 253 7 1 213 474
Eytan Uliel (appointed 1 June
2021) 365 - 6 220 591
Non-Executive Directors
William Schrader (resigned 5 March
2022) 44 - 1 46 91
James Smith (resigned 5 March
2022) 44 - 1 15 60
Adrian Collins (resigned 25 May
2021) 19 - - 10 29
Ross McDonald (resigned 1 June
2021) 27 - - 2 29
Stephen Bizzell (appointed 1 June
2021) 33 - - - 33
Leo Koot (resigned 22 January
2021) 4 - - - 4
----------------------------------- -------- ------- -------- -------------- ---------
789 7 9 506 1,311
----------------------------------- -------- ------- -------- -------------- ---------
* Represents the fair value of shares issued to directors during
the year in settlement of deferred salary and fees, less the total
value of accrued salaries and fees on
the date of settlement. See note 24 for further details.
Cash Share *Share-settled
payments $ based payments
Directors' remuneration - 000's Other payments $ 000's Total
2020 $ 000's $ 000's $ 000's
------------------------------ ----------- -------- --------- -------------- --------
Executive Directors
Simon Potter 450 24 40 739 1,253
Non-Executive Directors
William Schrader (resigned
5 March 2022) 27 - 28 80 135
James Smith (resigned 5 March
2022) 18 - 18 52 88
Adrian Collins (resigned 25
May 2021) 21 - 22 61 104
Ross McDonald (resigned 1
June 2021) 18 - 18 52 88
Leo Koot (resigned 22 January
2021) 17 - - 8 25
------------------------------ ----------- -------- --------- -------------- --------
551 24 126 992 1,693
------------------------------ ----------- -------- --------- -------------- --------
* Represents the fair value of shares issued to directors during
the year in settlement of deferred salary and fees, less the total
value of accrued salaries and fees on the date of settlement. See
note 24 for further details.
8 Loss per share - Group
The calculation of loss per share is based on the loss after
taxation divided by the weighted average number of shares in issue
during the year:
2021 2020
---------------------------------------------------- ------ ------
Loss for the year attributable to equity holders of
the parent company ($ 000's) 23,697 13,992
Weighted average number of ordinary shares used in
calculating basic loss per share (millions) 667 2,895
Basic loss per share (expressed in cents) 3.6 0.5
Diluted
Diluted loss per share is calculated by adjusting the weighted
average number of ordinary shares outstanding to assume conversion
of all dilutive potential ordinary shares. The Company had one
category of dilutive potential ordinary shares: share
options/warrants. For these share options/warrants, a calculation
is performed to determine the number of shares that could have been
acquired at fair value (determined as the average annual market
share price of the Company's shares) based on the monetary value of
the subscription rights attached to outstanding share
options/warrants. The number of shares calculated as above is
compared with the number of shares that would have been issued
assuming the exercise of the share options/warrants. Share
options/warrants outstanding at the reporting date were as
follows:
2021 2020
Total share options and warrants in issue (number) (see note
24)
96,797,894 486,159,599
As the inclusion of potentially issuable ordinary shares would
result in a decrease in the loss per share, they are considered to
be anti-dilutive and as such, a diluted loss per share is not
included.
9 Finance costs/(income) - Group
2021 2020
$ 000's $ 000's
Finance costs* (5630) (628)
Finance income - Interest received 7 202
----------------------------------- ------- -------
* Included in this balance is a $5,000,000 finance charge
derived from direct well funding financial instruments which were
utilised by the Group to finance the drilling
of the Perseverance 1 well in Q1 2022. A final reconciliation
"make good" payment of GBP371,000 (US$518,000) was charged in
respect of the sale of shares held by the investor with a downside
protection clause on the subscription value of shares originally
placed in late 2020. An additional make good payment was also
payable to the same investor following their exercise of a
187,500,000 share (GBP3.75 million) put option in early 2021,
resulting in a final reconciliation payment payable in April 2021
of GBP3,300,000 (US$4,482,000) following the sale of these
shares.
10 Intangible assets - Group 2021 Exploration
& evaluation
assets $
Goodwill $ 000's 000's
-------------------------------------------- ---------------- ----------------
Cost
-------------------------------------------- ---------------- ----------------
At 1 January 2021 7,045 75,372
Additions - 21,489
Foreign exchange difference on translation - (29)
-------------------------------------------- ---------------- ----------------
At 31 December 2021 7,045 96,832
-------------------------------------------- ---------------- ----------------
Accumulated amortisation and impairment
--------------------------------------------
At 1 January 2021 2,435 113
Amortisation - 263
Impairment - 2,069
Foreign exchange difference on translation - (18)
-------------------------------------------- ---------------- ----------------
At 31 December 2021 2,435 2,427
-------------------------------------------- ---------------- ----------------
Net book value
--------------------------------------------
At 31 December 2021 4,610 94,405
-------------------------------------------- ---------------- ----------------
At 31 December 2020 4,610 75,259
-------------------------------------------- ---------------- ----------------
Intangible assets - Group
2020
Exploration
&
Goodwill evaluation
assets
$ 000's $ 000's
-------------------------------------------- ---------------- ----------------
Cost
--------------------------------------------
At 1 January 2020 - 50,570
Acquisition of Columbus Energy Resources
PLC (note 15) 7,045 2,492
Additions - 22,310
-------------------------------------------- ---------------- ----------------
At 31 December 2020 7,045 75,372
-------------------------------------------- ---------------- ----------------
Accumulated amortisation and impairment
--------------------------------------------
At 1 January 2020 - -
Amortisation - 113
Impairment 2,435 -
-------------------------------------------- ---------------- ----------------
At 31 December 2020 2,435 113
-------------------------------------------- ---------------- ----------------
Net book value
--------------------------------------------
At 31 December 2020 4,610 75,259
-------------------------------------------- ---------------- ----------------
At 31 December 2019 - 50,570
-------------------------------------------- ---------------- ----------------
11 Tangible assets
Group 2021
Total Company
Property, Decom- $ 000's Property,
Oil and plant and missioning plant and
gas assets equipment costs $ equipment
$ 000's (*) $ 000's 000's (*) $ 000's
----------------------------- ----------- ------------ ----------- -------- ------------
Cost or Valuation
-----------------------------
At 1 January 2021 23,398 2,258 1,995 27,651 177
Additions 5,065 79 241 5,385 3
Disposals - (117) - (117) (2)
Foreign exchange difference
on translation (160) (207) (11) (378) -
----------------------------- ----------- ------------ ----------- -------- ------------
At 31 December 2021 28,303 2,013 2,225 32,541 178
----------------------------- -----------
Accumulated depreciation and
Impairment
At 1 January 2021 1,115 616 137 1,868 99
Depreciation 2,330 346 268 2,944 22
Disposals - (83) - (83) (2)
Impairment 3,933 68 1,346 5,347 -
Foreign exchange difference
on translation (84) (196) (3) (283) -
At 31 December 2021 7,294 751 1,748 9,793 119
Net book value
At 31 December 2021 21,009 1,262 477 22,748 59
At 31 December 2020 22,283 1,642 1,858 25,783 78
(*) Property, plant and equipment includes leasehold improvements.
Tangible assets
Group 2020 Company
Property, Decom- Total Property,
Oil and plant and missioning $ 000's plant and
gas assets equipment costs $ equipment
$ 000's (*) $ 000's 000's (*) $ 000's
Cost or Valuation
At 1 January 2020 450
Acquisition of Columbus Energy
Resources PLC (note 15) 27,077
Additions 228
450 1,671
Disposals - 169 (33) - (105)
23,412
Foreign exchange difference on 59 (72) 1,994 - 100 - 78
translation (1) 1 - 1 1 (1) -
At 31 December 2020 23,398 2,258 1,995 27,651 177
Accumulated depreciation and
Impairment
At 1 January 2020 - 419 - 419 84
Depreciation 1,113 197 136 1,446 16
Disposals - (1) - (1) (1)
Foreign exchange difference on
translation 2 1 1 4
At 31 December 2020 1,115 616 137 1,868 99
Net book value
At 31 December 2020 22,283 1,642 1,858 25,783 78
At 31 December 2019 - 31 - 31 16
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FR DGGDCUBDDGDC
(END) Dow Jones Newswires
September 30, 2022 02:02 ET (06:02 GMT)
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