TIDMEOG
RNS Number : 2091G
Europa Oil & Gas (Holdings) PLC
14 November 2022
Europa Oil & Gas (Holdings) plc / Index: AIM / Epic: EOG /
Sector: Oil & Gas
14 November 2022
Europa Oil & Gas (Holdings) plc
("Europa" or the "Company")
Final results for the year to 31 July 2022
Europa Oil & Gas (Holdings) plc, the AIM traded UK, Ireland
and Morocco focused oil and gas exploration, development, and
production company, announces its audited final results for the 12
month period ended 31 July 2022.
The full Annual Report and Accounts will be available shortly on
the Company's website at www.europaoil.com and will be mailed to
those shareholders who have requested a paper copy today.
Financial performance
-- Revenue more than quadrupled to GBP6.6 million (2021: GBP1.4 million)
-- Pre-tax profit of GBP1.4 million (2021: pre-tax loss GBP0.85 million)
-- Net cash generated in operating activities GBP2.5 million
(2021: used in operations GBP0.5 million)
-- Cash balance (including restricted cash) : GBP8.3 million (2021: GBP0.9 million)
Operational highlights - building a balanced portfolio of
exploration and production assets
Onshore UK - net production increases 163% to 245 bopd following
excellent Wressle performance (2021: 93 bopd)
-- First oil at Wressle achieved in January 2021
o Post proppant squeeze gross production rates of 500 bopd
increased throughout the period to over 750 bopd
o Net share of Wressle production at 597 bopd equates to 179
bopd (Europa 30% interest)
o With an estimated break-even oil price (excluding Europa's
corporate overheads) of US$16.1 per barrel, Wressle production is
highly profitable at current oil prices
o Further resources in the Wingfield Flags and Penistone Flags
reservoirs are being planned for development and have the potential
to materially increase net reserves
o Gas monetisation project under development with potential for
significant oil production gains as a result
-- Total net production of 245 boepd was produced from Europa's
UK onshore fields during the year with Wressle contributing roughly
three quarters of this and the remainder coming from the three
older fields
-- CausewayGT and geothermal project partner Baker Hughes
identified Europa's West Firsby oil field in the East Midlands as a
potential candidate for developing a closed-loop geothermal
system
-- Future potential for West Firsby to continue delivering
revenue and for additional well stock to be repurposed to generate
emission-free geothermal energy, directly in line with the
Company's ESG strategy
Offshore UK - acquisition of a 25% interest in the Serenity
discovery in the North Sea
-- In March 2022, we announced the proposed farm-in to the
Serenity appraisal well from i3 Energy plc which involved acquiring
a 25% interest by paying 46.25% of the cost of the well
-- This was accompanied by a successful equity raise of GBP7
million at a price of 1.8 pence per share
-- This fulfilled the Company's promised goal of adding an
appraisal asset to the Europa portfolio and is in line with our
long-term strategy to create a balanced portfolio of high-quality
assets
Offshore Morocco - farm-out of Inezgane Licence in the Agadir
Basin
-- Europa has a 75% interest in Inezgane and operatorship of the
Licence covering an area of 11,228 km(2)
-- Inezgane represents a high-impact exploration opportunity in
a highly underexplored area of the world - complementing Europa's
strategy of building a balanced portfolio of assets
-- Recent evaluation identified a significant volume of unrisked
recoverable resources, in excess of 1 billion barrels (oil
equivalent), in the top five ranked prospects alone
-- Morocco offers an attractive investment opportunity with
excellent fiscal terms. Several major and mid-cap companies already
hold acreage there, including ENI, Hunt and Genel
-- One year extension to initial phase of the licence to
November 2022 granted to allow for time lost as a result of
Covid-19
-- Farm-out exercise has continued throughout the year
Offshore Ireland - lower risk / very high reward
infrastructure-led exploration in proven gas play in the Slyne
Basin
-- Farm-out initiative is continuing on 100%-owned Licence FEL
4/19 which holds the flagship 1.5 tcf Inishkea prospect adjacent to
existing infrastructure at the producing Corrib gas field
-- Completed all work commitments for the first phase of the licence.
Board
-- Appointment of Will Holland as CFO and Executive Director in June 2022
Post reporting period events
-- The Serenity appraisal well commenced drilling in September
and was completed in early October. The well did not encounter any
oil-bearing sands but has provided valuable technical data and
furthered our understanding of the field. The Company, in
conjunction with Operator i3 Energy plc, is currently assessing
development options for the field
-- The net cost to Europa of the Serenity well is forecast to be
GBP4.8 million (GBP2 million below budget net to Europa), which is
expected to provide tax relief against the Energy Profits Levy
(Windfall Tax) on the Company's profits generated from its ongoing
onshore production
-- Consent granted by the Irish authorities to extend the first
phase of licence FEL 4/19 to 31 January 2024
-- The extension will enable further technical work and allow
more time to secure a partner to advance development of the
licence.
-- On 8 September 2022 the Company entered into a loan agreement
with Union Jack Oil plc ("UJO"). The key features of the loan were:
GBP1 million loan amount, 18-month term, interest rate of 11% per
annum, repayable at any point during the term without penalty and
secured against 10% interest in the Wressle field (PEDL180, and
PEDL182). The loan was to provide additional liquidity during the
drilling of the Serenity appraisal well. The loan was repaid in
full on 18 October 2022.
Simon Oddie, CEO of Europa, said :
"The 2021/2022 period has seen significant change at Europa and
this is clearly demonstrated in our numbers. Revenue from operating
activities has quadrupled and net cash generated for the period is
GBP2.5 million, resulting in a healthy balance sheet on which to
continue to execute on our stated strategy of building a more
balance portfolio of assets.
Wressle continues to perform above expectations and further
development activities to increase production through implementing
a gas solution and drilling the Penistone horizon within the
Wressle field are planned over the next 12-18 months. In addition,
we plan to drill the Broughton North prospect, which is a Wressle
lookalike and can be produced through the existing infrastructure
at Wressle.
We will also continue to seek new appraisal opportunities to add
to our portfolio. The Serenity appraisal well was disappointing,
but the data that we have acquired will help optimise the
development of the field and the funds spent on the appraisal well
will now go to offset our exposure to the Energy Profits Levy.
Our assets all supply (or will supply when in production) local
markets and as such help to satisfy local demand for hydrocarbons
with minimal total emissions. This is epitomised by our Inishkea
exploration prospect offshore Ireland, which could be tied into the
existing infrastructure at Corrib and has the potential to meet
Ireland's domestic retail demand for the next 17 years. This would
displace imported gas and significantly reduce the emissions
associated with Ireland's gas consumption.
These are exciting times for Europa with plenty of operational
activities that can all deliver additional shareholder value whilst
we continue to build on our existing asset base."
For further information, please visit www.europaoil.com or
contact:
Simon Oddie / William Europa mail@europaoil.com
Holland
+44 (0) 20 7409
James Dance / James Spinney Strand Hanson Limited 3494
+44 (0) 20 7186
Peter Krens Tennyson Securities 9033
Patrick d'Ancona / Finlay + 44 (0) 20 7390
Thomson Vigo Consulting 0230
Chairman's Statement
The financial year 2021/22 has been an exceptionally busy period
for Europa and positions the Company very strongly for the future.
Despite the ongoing Covid-19 pandemic, the onset of war between
Russia and Ukraine, and continuing global economic volatility, the
period delivered outstanding operational results for Europa. Our
onshore UK Wressle oilfield came onstream in January 2021 and has
continued to outperform expectations, it has been the backbone of
our production where our total average net rate for the period is
245 bopd, boosting revenues and strengthening our balance
sheet.
As well as our onshore operational success at Wressle, we also
farmed into the Serenity field offshore UK, taking a 25% interest
in the Serenity oil discovery operated by i3 Energy ("i3E"). The
appraisal well was disappointing and did not encounter oil-bearing
sands; however, together with our partner i3E, we are assessing the
various development options to bring the field into production.
Looking forward, we are excited about undertaking further
development on the Wressle field with a planned gas project
unlocking further upside potential for oil production rates and gas
sales from the field. This could add an additional 50% to oil
production rates, further boosting Europa's revenues. We continue
to investigate the potential of the West Firsby field as a
geothermal production site, providing a future role for our mature
oil fields. Within our offshore Ireland acreage, the Inishkea
prospect alone has potential to entirely satisfy the Irish domestic
retail gas requirements for the next 17 years, and I am delighted
that our application to extend the first phase of the licence to 31
January 2024 has been granted. This will enable us to continue with
our technical studies and provide more time to find a project
partner for FEL 4/19.
Onshore UK
The past year has seen Europa's net oil production increase
materially thanks to the proppant squeeze operation at our fourth
onshore field, Wressle, in the West Midlands. Following the
successful execution of the field development plan in 2020/21,
which included the safe completion of operations to recomplete the
Wressle-1 well, followed by the reperforation of the Ashover Grit
reservoir interval and the proppant squeeze, Wressle hit an initial
gross production rate in August 2021 of over 500 bopd, exceeding
the pre-operations target. Following upgrades to the production
facilities, these initial gross flow rates continued to grow,
reaching the current rate of 700-750 bopd, or net 210-225 bopd to
Europa. At current oil prices, this is having a materially positive
impact on our balance sheet.
At the moment, oil production is constrained by the limits
imposed on the incineration of gas from the field of ten tonnes per
day. However, alongside our partners we plan to market the gas
contained within the reservoir, with various monetisation options
being considered including gas to power and a short pipeline
(approximately 600 metres) into the local gas distribution network.
Once a gas monetisation solution is in place, the well will be able
to produce at unrestricted oil rates which will materially impact
the cash flows associated with the field. This will also allow the
field to be further developed by targeting the contingent resources
located in the Penistone Flags reservoir and the Broughton North
prospect which is a Wressle lookalike.
We continue to develop our strategy of contributing to the clean
energy transition in the UK following the Memorandum of
Understanding ("MOU") we signed with Causeway Geothermal in June
2021. The collaboration will explore utilising existing
infrastructure and wells for geothermal applications at West Firsby
to deliver clean, reliable, and cheap sources of heat. Studies will
determine if commercial deployment of geothermal technologies are
viable at the site. We have the potential to convert onshore legacy
oilfields into sources of clean and reliable energy forms as part
of our ESG strategy and Europa's stated desire to participate in
the national energy transition. A successful project would deliver
long term benefits to our shareholders, the UK's national energy
grid and the local community in West Firsby.
Offshore UK
Europa moved into the UK offshore arena by farming into the
Serenity field in the Central North Sea. In March 2022, we
announced that we were acquiring a 25% interest in the Serenity oil
discovery, operated by i3E, which was funded by a highly successful
equity raise of GBP7 million. Unfortunately, the appraisal well
encountered water-wet sands but that data from the well has
significantly improved our understanding of the field as a whole
and we are now working with i3E to optimise the development of the
field, which may include a tie-back to existing infrastructure.
Offshore Morocco
We continue to work on the proposed farm-out of the Inezgane
offshore permit located in the Agadir Basin in Morocco. Europa has
a 75% interest in Inezgane and operatorship of the Licence covering
an area of 11,228 km(2) . Inezgane represents a high-impact
exploration opportunity in an underexplored area of the world and
our recent evaluation identified a significant volume of unrisked
recoverable resources.
Offshore Ireland
Offshore Ireland, the Company's focus remains on its gas
interests in the Irish Atlantic located in close proximity to the
already producing Corrib gas field. The Company has completed all
work commitments for the first phase of its 100%-owned FEL 4/19
licence, and in March 2022 applied to the Department of the
Environment, Climate and Communications ("DECC") for an extension
to the first phase in order to carry out further technical studies
and allow more time to secure a farm-out of the licence. The
application to extend the licence to 31 January 2024 was granted on
2 November 2022.
FEL 4/19 contains the large, low risk, Inishkea gas prospect and
is a strategic asset that can potentially provide a reliable source
of low emission energy for Ireland and play a key role in the
transition to renewable green power. A successful discovery at
Inishkea could satisfy the Irish domestic retail gas demand for the
next 17 years. Gas from the Corrib field, adjacent to the Inishkea
prospect, is one of the lowest carbon-intensity gases in Europe,
much lower than long distance pipeline gas from Norway, the UK or
the Russian gas previously piped to Europe. Given that Ireland will
continue to require gas into the foreseeable future, having
recently agreed plans to build new gas-powered electricity plants,
it makes sense to keep this potentially valuable source of
indigenous gas available. We are therefore delighted that the
requested licence extension was granted, which will allow the
Company to carry out further technical studies and seek a project
partner.
Board Changes
This past year we have seen one major change at senior
management and board level with the appointment of Will Holland as
permanent CFO in June 2022. Will brings a wealth of corporate,
financial and M&A experience in the upstream sector that will
be of crucial importance as we continue to grow the business, and I
look forward to working with him at this very exciting time for the
Company.
Conclusion and Outlook
The Company has been very active during this financial year and
we are starting to reap the rewards of executing on our strategic
vision. We have strong cash flows from our onshore production,
further development opportunities at Wressle and Serenity as well
as material upside potential with our exploration assets. The oil
price has remained strong and traded above $100/bbl for much of the
period resulting in record cash flow for Europa.
Our stated goal to add further appraisal assets to the portfolio
resulted in the Serenity farm-in announced in March. Although the
subsequent appraisal well was disappointing it has provided us with
valuable sub-surface data that will be incorporated into our
reservoir model and we look forward to working with i3E on how best
to develop the existing discovery. The Board continues to believe
that the Company would benefit from further appraisal and early
development assets in our portfolio and supported by our strong
cash flows we will continue to seek opportunities to acquire these
types of assets. Our aim remains to engage in potentially high
reward activity without putting the Company's balance sheet at
risk.
Having come through the Covid-19 restrictions we have opened a
new London office from where we will continue to develop our
existing assets and grow the portfolio. The hydrocarbons that we
produce and new fields that we develop all contribute to supplying
the domestic demand of their local regions and as such displace
imported hydrocarbons and reduce the emissions associated with
hydrocarbon consumption. This strategy to supply local demand will
continue to drive our activities as we focus on growing our
existing portfolio both organically and via acquisitions which may
add to our existing assets to create a more balanced portfolio.
Finally, on behalf of the Board, I would like to thank the
management, employees and consultants for their hard work on behalf
of our shareholders and stakeholders during the past year. We have
achieved a lot and will continue to build on the solid foundations
that we now have in place.
Qualified Person Review
This release has been reviewed by Alastair Stuart, engineering
advisor to Europa, who is a petroleum engineer with over 35 years'
experience and a member of the Society of Petroleum Engineers and
has consented to the inclusion of the technical information in this
release in the form and context in which it appears.
The financial information set out below does not constitute the
company's statutory accounts for 2022 or 2021. The financial
information has been prepared in accordance with UK adopted
international accounting standards on a basis that is consistent
with the accounting policies applied by the group in its audited
consolidated financial statements for the year ended 31 July 2022.
Statutory accounts for the years ended 31 July 2021 and 31 July
2020 have been reported on by the Independent Auditors.
The Independent Auditors' Report on the Annual Report and
Financial Statements for 2022 and 2021 were unqualified and did not
contain a statement under 498(2) or 498(3) of the Companies Act
2006. Statutory accounts for the year ended 31 July 2021 have been
filed with the Registrar of Companies. The statutory accounts for
the year ended 31 July 2022 will be delivered to the Registrar in
due course.
Consolidated statement of comprehensive income
For the year ended 31 July 2022 2021
Note GBP000 GBP000
Revenue 2 6,584 1,372
------------------------------ ------ -------------------------------------- --------------------------------------
Cost of sales 2 (3,806) (1,249)
Impairment of producing
fields 12 (570) -
Total cost of sales (4,376) (1,249)
---------------------------------- ----------------------------------
Gross profit 2,208 123
Exploration write-off 11 - (12)
Administrative expenses (821) (717)
Finance income 6 239 3
Finance expense 7 (238) (242)
------------------------------------ ------------------------------------
Profit/(loss) before
taxation 3 1,388 (845)
Taxation (expense)/credit 8 (32) 127
------------------------------------ ------------------------------------
Profit/(loss) for the year
from continuing
operations 1,356 (718)
==================== ====================
Other comprehensive loss
Items which will not be
reclassified to
profit /(loss)
Loss on investment
revaluation 9 (18) (2)
------------------------------------ ------------------------------------
Total other comprehensive
loss (18) (2)
==================== ====================
Total comprehensive
income/(loss) for
the year attributable to
the equity shareholders
of the parent 1,338 (720)
=================== ===================
Earnings per share (EPS) attributable Note Pence Pence per
to the equity shareholders of the parent per share share
from continuing operations
Basic EPS 10 0.19p (0.15)p
Diluted EPS 0.18p (0.15)p
Consolidated statement of financial position
As at 31 July 2022 2021
Note GBP000 GBP000
Assets
Non-current assets
Intangible assets 11 3,785 6,438
Property, plant and
equipment 12 3,021 369
---------------------------------- ----------------------------------
Total non-current assets 6,806 6,807
---------------------------------- ----------------------------------
Current assets
Investments 13 24 42
Inventories 14 36 23
Trade and other receivables 15 1,866 522
Restricted cash 16 6,884 230
Cash and cash equivalents 1,394 641
---------------------------------- ----------------------------------
Total current assets 10,204 1,458
---------------------------------- ----------------------------------
Total assets 17,010 8,265
==================== ====================
Liabilities
Current liabilities
Loans 18 (40) (10)
Trade and other payables 17 (1,573) (1,556)
------------------------------------ ------------------------------------
Total current liabilities (1,613) (1,566)
------------------------------------ ------------------------------------
Non-current liabilities
Loans 18 - (40)
Trade and other payables 17 (4) (17)
Long-term provisions 21 (4,164) (3,393)
---------------------------------- ----------------------------------
Total non-current
liabilities (4,168) (3,450)
---------------------------------- ----------------------------------
Total liabilities (5,781) (5,016)
----------------------------------- -----------------------------------
Net assets 11,229 3,249
==================== ====================
Capital and reserves
attributable to equity
holders
of the parent
Share capital 22 9,565 5,665
Share premium 22 23,660 21,157
Merger reserve 22 2,868 2,868
Retained deficit (24,864) (26,441)
---------------------------------- ----------------------------------
Total equity 11,229 3,249
====================== ======================
These financial statements were approved by the Board of
Directors and authorised for issue on 9(th) November 2022 and
signed on its behalf by:
William Holland, CFO
Company registration number 05217946
Consolidated statement of changes in equity
Attributable to the equity holders of the parent
Share Share premium Merger Retained Total
capital reserve deficit equity
GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 1
August
2020 4,447 21,010 2,868 (25,838) 2,487
Comprehensive
loss
for the year
Loss for the
year
attributable
to the
equity
shareholders
of the parent - - - (718) (718)
Other
comprehensive
loss
attributable
to the equity
shareholders
of the parent - - - (2) (2)
---------------------------------- ---------------------------------- --------------------------------- ------------------------------ -------------------------------
Total
comprehensive
loss for the
year - - - (720) (720)
---------------------------------- ---------------------------------- --------------------------------- ------------------------------ -------------------------------
Contributions
by
and
distributions
to owners
Issue of share
capital
(net of issue
costs) 1,218 225 - - 1,443
Issue of share
warrants(note
23) - (78) - 78 -
Share-based
payments
(note 23) - - - 39 39
---------------------------------- ---------------------------------- ---------------------------------- --------------------------------- ------------------------------
Total
contributions
by and
distributions
to owners 1,218 147 - 117 1,482
---------------------------------- ---------------------------------- --------------------------------- ------------------------------ -------------------------------
Balance at 31
July
2021 5,665 21,157 2,868 (26,441) 3,249
=================== =================== =================== ===================== ==================
Share Share premium Merger Retained Total
capital reserve deficit equity
GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 1
August
2021 5,665 21,157 2,868 (26,441) 3,249
Comprehensive
profit
for the year
Profit for the
year
attributable
to the
equity
shareholders
of the parent - - - 1,356 1,356
Other
comprehensive
loss
attributable
to the equity
shareholders
of the parent - - - (18) (18)
---------------------------------- ---------------------------------- --------------------------------- ------------------------------ -------------------------------
Total
comprehensive
profit for
the year - - - 1,338 1,338
---------------------------------- ---------------------------------- --------------------------------- ------------------------------ -------------------------------
Contributions
by
and
distributions
to owners
Issue of share
capital
(net of issue
costs) 3,900 2,722 - - 6,622
Issue of share
warrants(note
23) - (219) - 219 -
Share-based
payments
(note 23) - - - 20 20
---------------------------------- ---------------------------------- ---------------------------------- --------------------------------- ------------------------------
Total
contributions
by and
distributions
to owners 3,900 2,503 - 239 6,642
---------------------------------- ---------------------------------- --------------------------------- ------------------------------ -------------------------------
Balance at 31
July
2022 9,565 23,660 2,868 (24,864) 11,229
=================== =================== =================== ===================== ==================
Company statement of financial position
As at 31 July 2022 2021
GBP000 GBP000
Note
Assets
Non-current assets
Property, plant and
equipment 12 26 23
Investments 13 2,343 2,343
Amounts due from Group
companies 15,24 13,270 588
------------------------------------ ------------------------------------
Total non-current assets 15,639 2,954
------------------------------------ ------------------------------------
Current assets
Other receivables 15 163 69
Cash and cash
equivalents 249 272
-------------------------------------- --------------------------------------
Total current assets 412 341
--------------------------------------- ---------------------------------------
Total assets 16,051 3,295
====================== =====================
Liabilities
Current liabilities
Loans 18 (40) (10)
Trade and other payables 17 (546) (652)
------------------------------------ ------------------------------------
Total current liabilities (586) (662)
------------------------------------ ------------------------------------
Loans 18 - (40)
Trade and other payables 17 (3) (11)
------------------------------------ ------------------------------------
Total non-current
liabilities (3) (51)
---------------------------------- ----------------------------------
Total liabilities (589) (713)
------------------------------------ ------------------------------------
Net assets 15,462 2,582
==================== ====================
Capital and reserves
attributable to equity
holders of the parent
Share capital 22 9,565 5,665
Share premium 22 23,660 21,157
Merger reserve 22 2,868 2,868
Retained deficit (20,631) (27,108)
-------------------------------------- --------------------------------------
Total equity 15,462 2,582
====================== ======================
The Company has taken advantage of the exemption provided under
Section 408 of the Companies Act 2006 not to publish its individual
statement of comprehensive income and related notes. The profit
dealt with in the financial statements of the parent Company is
GBP6,238,000 (2021: loss of GBP1,485,000).
These financial statements were approved by the Board of
Directors and authorised for issue on 9(th) November 2022, and
signed on its behalf by:
William Holland
CFO
Company registration number 05217946
Company statement of changes in equity
Share Share premium Merger Retained Total
capital reserve deficit equity
GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 1
August
2020
originally
stated 4,447 21,010 2,868 (25,740) 2,585
Comprehensive
loss
for the year
Loss for the
year
attributable
to the
equity
shareholders
of the parent - - - (1,485) (1,485)
---------------------------------- ---------------------------------- --------------------------------- ------------------------------ -------------------------------
Total
comprehensive
loss for the
year - - - (1,485) (1,485)
Contributions
by
and
distributions
to owners
Issue of share
capital
(net of issue
costs) 1,218 225 - - 1,443
Issue of share
warrants(note
23) - (78) - 78 -
Share-based
payments
(note 23) - - - 39 39
---------------------------------- ---------------------------------- ---------------------------------- --------------------------------- ------------------------------
Total
contributions
by and
distributions
to owners 1,218 147 - 117 1,482
---------------------------------- ---------------------------------- --------------------------------- ------------------------------ -------------------------------
Balance at 31
July
2021 5,665 21,157 2,868 (27,108) 2,582
==================== =================== ================== ======================= =================
Share Share premium Merger Retained Total
capital reserve deficit equity
GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 1
August
2021
originally
stated 5,665 21,157 2,868 (27,108) 2,582
Comprehensive
profit
for the year
Profit for the
year
attributable
to the
equity
shareholders
of the parent - - - 6,238 6,238
---------------------------------- ---------------------------------- --------------------------------- ------------------------------ -------------------------------
Total
comprehensive
profit for
the year - - - 6,238 6,238
Contributions
by
and
distributions
to owners
Issue of share
capital
(net of issue
costs) 3,900 2,722 - - 6,622
Issue of share
warrants(note
23) - (219) - 219 -
Share-based
payments
(note 23) - - - 20 20
---------------------------------- ---------------------------------- ---------------------------------- --------------------------------- ------------------------------
Total
contributions
by and
distributions
to owners 3,900 2,503 - 239 6,642
---------------------------------- ---------------------------------- -------------------------------- ------------------------------ ----------------------------
Balance at 31
July
2022 9,565 23,660 2,868 (20,631) 15,462
==================== =================== ================== ======================= =================
Consolidated statement of cash flows
For the year ended 31 July 2022 2021
Note GBP000 GBP000
Cash flows from / (used in)
operating activities
Profit/(loss) after tax from
continuing
operations 1,356 (718)
Adjustments for:
Share-based payments 23 20 39
Depreciation 12 1,618 107
Impairment of
producing field 12 570 -
Exploration write off 11 - 12
Finance income 6 - (3)
Finance expense 7 238 242
Taxation credit
recognised in profit
and
loss 8 32 (127)
Increase in trade and
other receivables (1,344) (288)
Increase in
inventories (13) (11)
Increase in trade and
other payables 18 85
------------------------------------ ------------------------------------
Net cash generated by/(used)
in operations 2,495 (662)
Income taxes (paid)/
repayment received (32) 127
------------------------------------ ------------------------------------
Net cash generated by/(used)
in operating
activities 2,463 (535)
======================= =======================
Cash flows used in investing
activities
Purchase of property, plant
and equipment (403) -
Purchase of intangible
assets (1,246) (985)
Cash guarantee re Morocco 16 - (4)
Cash escrow deposit re
Serenity 16 (6,621) -
Interest received - 3
----------------------------------- -----------------------------------
Net cash used in investing
activities (8,270) (986)
==================== ====================
Cash flows from financing
activities
Gross proceeds from issue of
share capital 22 7,020 1,583
Costs incurred on issue of
share capital (398) (140)
Proceeds from borrowings - 225
Repayment of borrowings (10) (225)
Lease liability payments (14) (35)
Lease liability interest
payments (2) (2)
Finance costs (3) (7)
----------------------------------- -----------------------------------
Net cash from financing
activities 6,593 1,399
===================== =====================
Net increase/(decrease) in
cash and cash
equivalents 786 (122)
Exchange gain/(loss) on cash
and cash equivalents (33) (5)
Cash and cash equivalents at
beginning
of year 641 768
----------------------------------- -----------------------------------
Cash and cash equivalents at
end of year 1,394 641
===================== =====================
Company statement of cash flows
For the year ended 31 July 2022 2021
GBP000 GBP000
Cash flows from / (used in)
operating activities Note
Profit / (loss) after tax from
continuing
operations 6,238 (1,485)
Adjustments for:
Share-based payments 23 20 39
Depreciation 12 10 32
Movement in intercompany loan
provision 24 (5,720) 1,921
Finance income (810) (654)
Finance expense 2 5
Increase in trade and other
receivables (93) (16)
(Decrease)/increase in trade
and other
payables (106) 36
----------------------------------- -----------------------------------
Net cash used in operating
activities (459) (122)
======================= =======================
Cash flows used in investing
activities
Purchase of property, plant and
equipment (13) -
Movement on loans to Group companies (6,152) (1,306)
----------------------------------- -----------------------------------
Net cash used in investing
activities (6,165) (1,306)
======================= =======================
Cash flows from/(used in) financing
activities
Gross proceeds from issue of share
capital 22 7,020 1,583
Costs incurred on issue of share
capital (398) (140)
Proceeds from borrowings - 225
Repayment of borrowings (10) (225)
Lease liability principal payment (8) (26)
Lease liability interest payment (1) (1)
Finance costs (2) (4)
----------------------------------- -----------------------------------
Net cash from financing activities 6,601 1,412
======================= =======================
Net decrease in cash and cash
equivalents (23) (16)
Cash and cash equivalents at
beginning
of year 272 288
----------------------------------- -----------------------------------
Cash and cash equivalents at end of
year 249 272
===================== =====================
Notes to the financial statements
1 Accounting Policies
General information
Europa Oil & Gas (Holdings) plc is a Company incorporated
and domiciled in England and Wales with registered number 05217946.
The address of the registered office is 30 Newman Street, London,
W1T 1PT.
The functional and presentational currency of the Company is
Sterling (UKGBP).
Basis of accounting
The consolidated and individual Company financial statements
have been prepared in accordance with applicable UK adopted
International Accounting Standards.
The accounting policies that have been applied in the opening
statement of financial position have also been applied throughout
all periods presented in these financial statements. These
accounting policies comply with each IFRS that is mandatory for
accounting periods ending on 31 July 2022.
Going concern
The Directors have prepared a cash flow forecast for the period
ending 31December 2023, which considers the continuing and forecast
cash inflow from the Group's producing assets, the cash held by the
Group at October 2022, less administrative expenses and planned
capital expenditure.
The Directors performed sensitivities on the cashflow allowing
for a 30% fall in the expected oil price from a base case price of
$85 per barrel 5 year average and, separately, a 15% fall in the
expected overall production across all field from a base case of
225 barrels per day during the 2023 fiscal year net to Europa. Oil
price estimates are based upon industry analyst expectations,
whilst production estimates are sourced from the Group's internal
modelling for Wressle and recent actual production.
These sensitivities have been modelled as a reverse stress test,
and the Directors consider the likelihood of such movements to be
very low. The Directors have also run sensitivities allowing for
reasonably possible simultaneous falls in oil price and in Wressle
production, and the Group and Company had sufficient cash resources
to meet their obligations.
The Directors have concluded, as at the date of approval of
these financial statements, that there is a reasonable expectation
that the Group and Company will still have sufficient cash
resources to be able to continue as a going concern and meet its
obligations as and when they fall due over the going concern
period.
Basis of consolidation
Where the Company has control over an investee, it is classified
as a subsidiary. The Company controls an investee if all three of
the following elements are present: power over the investee,
exposure to variable returns from the investee, and the ability of
the investor to use its power to affect those variable returns.
Control is reassessed whenever facts and circumstances indicate
that there may be a change in any of these elements of control.
Intra Group balances are eliminated on consolidation. Unrealised
gains on transactions between the Group and its subsidiaries are
eliminated. Unrealised losses are also eliminated unless the
transaction provides evidence of an impairment of the asset
transferred. Amounts reported in the financial statements of
subsidiaries have been adjusted where necessary to ensure
consistency with the accounting policies adopted by the Group.
The Group is engaged in oil and gas exploration, development and
production through unincorporated joint operations.
Joint arrangements
Joint arrangements are those arrangements in which the Group
holds an interest on a long-term basis which are jointly controlled
by the Group and one or more venturers under a contractual
arrangement. When these arrangements do not constitute entities in
their own right, the consolidated financial statements reflect the
relevant proportion of costs, revenues, assets and liabilities
applicable to the Group's interests in accordance with IFRS 11. The
Group's exploration, development and production activities are
presently conducted jointly with other companies in this way.
For the licences where the Group does not hold 100% equity
(refer to the licence interests table on page 7) a joint
arrangement exists. The equity and voting interest of the Group is
disclosed in the table, activities are typical for activities in
the oil and gas sector and are strategic to the Group's activities.
The principal place of business for all the joint arrangements is
the UK.
Revenue recognition
The Group follows IFRS 15. The standard provides a single
comprehensive model for revenue recognition. The core principle of
the standard is that an entity shall recognise revenue when control
passes on the transfer of promised goods or services to customers
at an amount that re ects the consideration to which the entity
expects to be entitled in exchange for those goods or services. The
standard introduced a new contract-based revenue recognition model
with a measurement approach that is based on an allocation of the
transaction price. This is described further in the accounting
policies below. Contracts with customers are presented in an
entity's balance sheet as a contract liability, a contract asset,
or a receivable, depending on the relationship between the entity's
performance and the customer's payment. The Group's accounting
policy under IFRS 15 is that revenue is recognised when the Group
satisfies a performance obligation by transferring oil to a
customer. The title to oil and gas typically transfers to a
customer at the same time as the customer takes physical possession
of the oil or gas. Typically, at this point in time, the
performance obligations of the Group are fully satisfied.
Revenue is measured based on the consideration to which the
Group expects to be entitled under the terms of a contract with a
customer. The consideration is determined by the quantity and price
of oil and gas delivered to the customer at the end of each
month.
Non-current assets
Oil and gas interests
The financial statements with regard to oil and gas exploration
and appraisal expenditure have been prepared under the full cost
basis. This accords with IFRS 6 which permits the continued
application of a previously adopted accounting policy. The unit of
account for exploration and evaluation assets is the individual
licence.
Pre-production assets
Pre-production assets are categorised as intangible assets on
the statement of financial position. Pre-licence expenditure is
expensed as directed by IFRS 6. Expenditure on licence acquisition
costs, geological and geophysical costs, costs of drilling
exploration, appraisal and development wells, and an appropriate
share of overheads (including Directors' costs) are capitalised and
accumulated on a licence-by-licence basis. These costs which relate
to the exploration, appraisal and development of oil and gas
interests are initially held as intangible non-current assets
pending determination of technical feasibility and commercial
viability. On commencement of production these costs are tested for
impairment prior to transfer to production assets. If licences are
relinquished, or assets are not deemed technically feasible or
commercially viable, accumulated costs are written off to cost of
sales.
Production assets
Production assets are categorised within property, plant and
equipment on the statement of financial position. With the
determination of commercial viability and approval of an oil and
gas project the related pre-production assets are transferred from
intangible non-current assets to tangible non-current assets and
depreciated upon commencement of production within the appropriate
cash generating unit.
Impairment tests
For the purposes of assessing impairment, assets are grouped at
the lowest levels for which there are separately identifiable cash
flows (cash generating units) as disclosed in notes 11 and 12. As a
result, some assets are tested individually for impairment and some
are tested at cash generating unit level.
Impairment tests are performed when indicators as described in
IAS 36 are identified. In addition, indicators such as a lack of
funding or farmout options for a licence which is approaching
termination or the implied value of a farm-out transaction are
considered as indicators of impairment.
An impairment loss is recognised and charged to cost of sales
for the amount by which the asset's or cash generating unit's
carrying amount exceeds its recoverable amount. The recoverable
amount is the higher of fair value, reflecting market conditions
less costs to sell, and value in use based on an internal
discounted cash flow evaluation. All assets are subsequently
reassessed for indications that an impairment loss previously
recognised may no longer exist.
Property, plant and equipment
Items of property, plant and equipment are initially recognised
at cost. As well as the purchase price, cost includes directly
attributable costs and the estimated present value of any future
unavoidable costs of dismantling and removing items. The
corresponding liability is recognised within provisions.
Depreciation
All expenditure within tangible non-current assets is
depreciated 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 proven plus probable
commercial reserves at the end of the period, plus the production
in the period. Costs used in the unit of production calculation
comprise the net book value of capitalised costs. Changes in the
estimates of commercial reserves or future field development costs
are dealt with prospectively.
Furniture and computers are depreciated on a 25% per annum
straight line basis.
Reserves
Proven and probable oil and gas reserves are estimated
quantities of commercially producible hydrocarbons which the
existing geological, geophysical and engineering data shows to be
recoverable in future years. The proven reserves included herein
conform to the definition approved by the Society of Petroleum
Engineers (SPE) and the World Petroleum Congress (WPC). The
probable and possible reserves conform to definitions of probable
and possible approved by the SPE/WPC using the deterministic
methodology. Reserves used in accounting estimates for depreciation
are updated periodically to reflect management's view of reserves
in conjunction with third party formal reports. Reserves are
reviewed at the time of formal updates or as a consequence of
operational performance, plans and the business environment at that
time.
Reserves are adjusted in the year that formal updates are
undertaken or as a consequence of operational performance and
plans, and the business environment at that time, with any
resulting changes not applied retrospectively.
Future decommissioning costs
A provision for decommissioning is recognised in full at the
point that the Group has an obligation to decommission an
appraisal, development or producing well. A corresponding
non-current asset (included within producing fields in note 12) of
an amount equivalent to the provision is also created. The amount
recognised is the estimated cost of decommissioning, discounted to
its net present value and is reassessed each year in accordance
with local conditions and requirements. The discount rate used is
the risk free rate, adjusted for risks that are not already
included in the forecast cash flows. For producing wells, the asset
is subsequently depreciated as part of the capital costs of
production facilities within tangible non-current assets, on a unit
of production basis. Any decommissioning obligation in respect of a
pre-production asset is carried forward as part of its cost and
tested annually for impairment in accordance with the above
policy.
Changes in the estimates of commercial reserves or
decommissioning cost estimates are dealt with prospectively by
recording an adjustment to the provision, and a corresponding
adjustment to the decommissioning asset. The unwinding of the
discount on the decommissioning provision is included within
finance expense.
Acquisitions of exploration licences
Acquisitions of exploration licences through acquisition of
non-operational corporate structures that do not represent a
business, and therefore do not meet the definition of a business
combination, are accounted for as the acquisition of an asset.
Related future consideration that is contingent is not recognised
as an asset or liability until the contingent event has
occurred.
Taxation
Current tax is the tax payable based on taxable profit/(loss)
for the year.
Deferred income taxes are calculated using the balance sheet
liability method on temporary differences. Deferred tax is
generally provided on the difference between the carrying amounts
of assets and liabilities and their tax bases. However, deferred
tax is not provided on the initial recognition of goodwill, nor on
the initial recognition of an asset or liability unless the related
transaction is a business combination or affects tax or accounting
profit. Deferred tax on temporary differences associated with
shares in subsidiaries and joint ventures is not provided if
reversal of these temporary differences can be controlled by the
Group and it is probable that reversal will not occur in the
foreseeable future. Tax losses available to be carried forward as
well as other income tax credits to the Group are assessed for
recognition as deferred tax assets.
Deferred tax liabilities are provided in full, with no
discounting. Deferred tax assets are recognised to the extent that
it is probable that the underlying deductible temporary difference
will be able to be offset against future taxable income. Current
and deferred tax assets and liabilities are calculated at tax rates
that are expected to apply to their respective period of
realisation, provided they are enacted or substantively enacted at
the reporting date.
Changes in deferred tax assets or liabilities are recognised as
a component of tax expense in the statement of comprehensive
income, except where they relate to items that are charged or
credited directly to equity in which case the related deferred tax
is also charged or credited directly to equity.
Foreign currency
The Group and Company prepare their financial statements in
Sterling.
Transactions denominated in foreign currencies are translated at
the rates of exchange ruling at the date of the transaction.
Monetary assets and liabilities in foreign currencies are
translated at the rates of exchange ruling at the reporting date.
Non-monetary items that are measured at historical cost in a
foreign currency are translated at the exchange rate at the date of
transaction. Non-monetary items that are measured at fair value in
a foreign currency are translated using the exchange rates at the
date the fair value was determined.
Any exchange differences arising on the settlement of items or
on translating items at rates different from those at which they
were initially recorded are recognised in the Statement of
comprehensive income in the period in which they arise. Exchange
differences on non-monetary items are recognised in the Statement
of changes in equity to the extent that they relate to a gain or
loss on that non-monetary item taken to the Statement of changes in
equity, otherwise such gains and losses are recognised in the
Statement of comprehensive income.
Europa Oil & Gas (Holdings) plc is domiciled in the UK,
which is its primary economic environment and the Company's
functional currency is Sterling. The Group's current operations are
based in the UK and Ireland and the functional currencies of the
Group's entities are the prevailing local currencies in each
jurisdiction. Given that the functional currency of the Company is
Sterling, management has elected to continue to present the
consolidated financial statements of the Group and Company in
Sterling.
Investments
Investments, which are only investments in subsidiaries, are
carried at cost less any impairment. Additions include the net
value of share options issued to employees of subsidiary companies
less any lapsed, unvested options.
Financial instruments
Financial assets and financial liabilities are recognised in the
statement of financial position when the Group becomes a party to
the contractual provisions of the instrument.
Financial assets
Financial assets are classified as either financial assets at
amortised cost, at fair value through other comprehensive income
('FVTOCI') or at fair value through profit or loss ('FVPL')
depending upon the business model for managing the financial assets
and the nature of the contractual cash flow characteristics of the
financial asset.
A loss allowance for expected credit losses is determined for
all financial assets, other than those at FVPL, at the end of each
reporting period. The Group applies a simplified approach to
measure the credit loss allowance for trade receivables using the
lifetime expected credit loss provision. The lifetime expected
credit loss is evaluated for each trade receivable taking into
account payment history, payments made subsequent to year end and
prior to reporting, past default experience and the impact of any
other relevant and current observable data. The group applies a
general approach on all other receivables classified as financial
assets. The general approach recognises lifetime expected credit
losses when there has been a significant increase in credit risk
since initial recognition.
The Group derecognises a financial asset when the contractual
rights to the cash flows from the asset expire, or when it
transfers the financial asset and substantially all the risks and
rewards of ownership of the asset to another party. The Group
derecognises financial liabilities when the Group's obligations are
discharged, cancelled or have expired.
Fair value through other comprehensive income
The Group has a number of strategic investments in listed and
unlisted entities which are not accounted for as subsidiaries,
associates or jointly controlled entities. For those investments,
the Group has made an irrevocable election to classify the
investments at fair value through other comprehensive income rather
than through profit or loss as the Group considers this measurement
to be the most representative of the business model for these
assets. They are carried at fair value with changes in fair value
recognised in other comprehensive income and accumulated in the
fair value through other comprehensive income reserve. Upon
disposal any balance within fair value through other comprehensive
income reserve is reclassified directly to retained earnings and is
not reclassified to profit or loss.
Dividends are recognised in profit or loss, unless the dividend
clearly represents a recovery of part of the cost of the
investment, in which case the full or partial amount of the
dividend is recorded against the associated investment's carrying
amount.
Purchases and sales of financial assets measured at fair value
through other comprehensive income are recognised on settlement
date with any change in fair value between trade date and
settlement date being recognised in the fair value through other
comprehensive income reserve.
Amortised cost
This category is the most relevant to the Company. Loans and
receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. The
losses arising from impairment are recognised in a separate line in
the income statement. This category generally applies to trade and
other receivables.
Cash and cash equivalents
Cash and cash equivalents are carried at cost and include all
highly liquid investments with a maturity of three months or
less.
Restricted cash are those amounts held by third parties on
behalf of the Group and are not available for the Group's use;
these are recognised separately from cash and cash equivalents on
the balance sheet.
Financial Liabilities
The classification of financial liabilities at initial
recognition depends on the purpose for which the financial
liability was issued and its characteristics. All purchases of
financial liabilities are recorded on trade date, being the date on
which the Group becomes party to the contractual requirements of
the financial liability. Unless otherwise indicated the carrying
amounts of the Group's financial liabilities approximate to their
fair values. The Group's financial liabilities consist of financial
liabilities measured at amortised cost and financial liabilities at
fair value through profit or loss.
Trade and other payables
Trade and other payables are initially recorded at fair value
and subsequently carried at amortised cost.
Derecognition of financial liabilities
A financial liability (in whole or in part) is derecognised when
the Group has extinguished its contractual obligations, it expires
or is cancelled. Any gain or loss on derecognition is taken to the
statement of comprehensive income.
Treatment of finance costs
All finance costs are expensed through the income statement. The
Group does not incur any finance costs that qualify for
capitalisation.
Defined contribution pension schemes
The pension costs charged against profits are the contributions
payable to the scheme in respect of the accounting period.
Inventories
Inventories comprise oil in tanks stated at the lower of cost
and net realisable value. Cost is determined by reference to the
actual cost of production in the period.
Share-based payments
All goods and services received in exchange for the grant of any
share-based payment are measured at their fair values. Where
employees are rewarded using share-based payments, the fair values
of employees' services are determined indirectly by reference to
the fair value of the instrument granted to the employee. This fair
value is appraised at the grant date and excludes the impact of
non-market vesting conditions (for example, profitability and sales
growth targets).
All equity-settled share-based payments are ultimately
recognised as an expense in the statement of comprehensive income
with a corresponding credit to reserves. Where options over the
parent Company's shares are granted to employees of subsidiaries of
the parent, the charge is recognised in the statement of
comprehensive income of the subsidiary. In the parent Company
accounts there is an increase in the cost of the investment in the
subsidiary receiving the benefit.
If vesting periods or other non-market vesting conditions apply,
the expense is allocated over the vesting period, based on the best
available estimate of the number of share options expected to vest.
Estimates are subsequently revised if there is any indication that
the number of share options expected to vest differs from previous
estimates. Any cumulative adjustment prior to vesting is recognised
in the current period. No adjustment is made to any expense
recognised in prior periods if the number of share options
ultimately exercised is different to that initially estimated.
Upon exercise of share options, the proceeds received, net of
attributable transaction costs, are credited to share capital, and
where appropriate share premium.
Critical accounting judgements and key sources of estimation
uncertainty
Details of the Group's significant accounting judgements and
critical accounting estimates are set out in these financial
statements and include:
-- Carrying value of intangible assets (note 11) - carrying
values are justified with reference to indicators of impairment as
set out in IFRS 6. Based on judgements at 31 July 2022 there was
GBPnil write off (2021: GBP12k write off of costs on the PEDL 299
licence). The licence in Morocco expires in November 2022 and its
renewal is dependent on finding a farm-in partner. These financial
statements do not include the adjustments that would result if the
licence was not renewed.
-- Carrying value of property, plant and equipment (note 12) -
carrying values are justified by reference to future estimates of
cash flows, discounted at appropriate rates. At 31 July 2022 there
was GBP570k write off related to West Firsby and Crosby Warren,
which predominantly related to the impairment of the additional
decommissioning assets created by a commensurate increase in the
decommissioning liability for these producing assets.
-- Deferred taxation (note 20) - assumptions regarding the
future profitability of the Group and whether the deferred tax
assets will be recovered.
-- Decommissioning provision (note 21) - inflation and discount
rate estimates (3% and 10% respectively) are used in calculating
the provision, along with third party estimates of remediation
costs.
-- Share based payments (note 23) - measurement of the fair
value of options granted uses valuation techniques where active
market quotes are not available. This involves developing estimates
and assumptions consistent with how market participants would price
the instrument. Management bases its assumptions on observable data
as far as possible but this is not always available. In that case,
management uses the best information available. Estimated fair
values may vary from the actual prices that would be achieved in an
arm's length transaction at the reporting date.
-- Reserves and resources (note 12) - reserves and resources are
estimated based on management's view and third party formal reports
and these estimates directly impact the recoverability of asset
carrying values that are reported in the financial statements.
2 Operating segment analysis
In the opinion of the Directors the Group has four reportable
segments as reported to the Chief Executive Officer, being the UK,
Ireland, Morocco and new ventures.
The reporting on these segments to management focuses on
revenue, operating costs and capital expenditure. The impact of
such criteria is discussed further in the Chairman's statement and
strategic report of this annual report.
Income statement for the year ended 31 July 2022
UK Ireland Morocco New ventures Total
GBP000 GBP000 GBP'000 GBP000 GBP000
Revenue 6,584 - - - 6,584
----------------- ------------------------------------- ----------------------------------- ----------------------------------- ----------------------------------- -------------------------------------
Cost of sales (3,806) - - - (3,806)
Impairment of
producing
fields (570) - - - (570)
Cost of sales (4,376) - - - (4,376)
--------------------------------- --------------------------------- --------------------------------- --------------------------------- ---------------------------------
Gross profit 2,208 - - - 2,208
Exploration - - - - -
write-off
Administrative
expenses (1,082) 268 - (7) (821)
Finance income 205 1 33 - 239
Finance costs (238) - - - (238)
----------------------------------- --------------------------------- --------------------------------- --------------------------------- -----------------------------------
Profit before
tax 1,093 269 33 (7) 1,388
Taxation (32) - - - (32)
----------------------------------- --------------------------------- --------------------------------- --------------------------------- -----------------------------------
Profit for the
year 1,061 269 33 (7) 1,356
Segmental assets and liabilities as at 31 July 2022
UK Ireland Morocco New Ventures Total
GBP000 GBP000 GBP000 GBP'000 GBP000
Non-current
assets 3,624 1,796 1,386 - 6,806
Current
assets 9,941 - 263 - 10,204
----------------------------------- --------------------------------- ----------------------------------- -------------------------------- -----------------------------------
Total assets 13,565 1,796 1,649 - 17,010
----------------------------------- ----------------------------------- ----------------------------------- -------------------------------- -----------------------------------
Non-current
liabilities (4,168) - - - (4,168)
Current
liabilities (1,594) (19) - - (1,613)
----------------------------------- ----------------------------------- ----------------------------------- --------------------------------- -----------------------------------
Total
liabilities (5,762) (19) - - (5,781)
----------------------------------- ----------------------------------- ----------------------------------- -------------------------------- -----------------------------------
Other
segment
items
Capital
expenditure
- cashflow 795 129 725 - 1,649
Depreciation 1,618 - - - 1,618
Share-based
payments 20 - - - 20
Income statement for the year ended 31 July 2021
UK Ireland Morocco New ventures Total
GBP000 GBP000 GBP'000 GBP000 GBP000
Revenue 1,372 - - - 1,372
----------------- ------------------------------------- ----------------------------------- ----------------------------------- ----------------------------------- -------------------------------------
Cost of sales (1,249) - - - (1,249)
Impairment of - - - - -
producing
fields
Cost of sales (1,249) - - - (1,249)
--------------------------------- --------------------------------- --------------------------------- --------------------------------- ---------------------------------
Gross profit 123 - - - 123
Exploration
write-off (12) - - - (12)
Administrative
expenses (545) (109) (1) (62) (717)
Finance income 3 - - - 3
Finance costs (242) - - - (242)
----------------------------------- --------------------------------- --------------------------------- --------------------------------- -----------------------------------
Loss before tax (673) (109) (1) (62) (845)
Taxation - 127 - - 127
----------------------------------- --------------------------------- --------------------------------- --------------------------------- -----------------------------------
Loss for the
year (673) 18 (1) (62) (718)
Segmental assets and liabilities as at 31 July 2021
UK Ireland Morocco New Ventures Total
GBP000 GBP000 GBP000 GBP'000 GBP000
Non-current
assets 4,489 1,661 657 - 6,807
Current
assets 1,228 - 230 - 1,458
----------------------------------- ----------------------------------- ----------------------------------- -------------------------------- -----------------------------------
Total assets 5,717 1,661 887 - 8,265
----------------------------------- ----------------------------------- ----------------------------------- -------------------------------- -----------------------------------
Non-current
liabilities (3,450) - - - (3,450)
Current
liabilities (1,203) (363) - - (1,566)
----------------------------------- ----------------------------------- ----------------------------------- --------------------------------- -----------------------------------
Total
liabilities (4,653) (363) - - (5,016)
----------------------------------- ----------------------------------- ----------------------------------- -------------------------------- -----------------------------------
Other
segment
items
Capital
expenditure 644 105 236 - 985
Depreciation 107 - - - 107
Share-based
payments 117 - - - 117
100% of the total revenue (2021: 100%) relates to UK based
customers. Of this figure, one end customer (2021: one) commands
more than 99% of the total, including sales made through operators
to the end customer. UK revenue by site was as follows: West Firsby
GBP353,000 (2021: GBP321,000); Crosby Warren GBP651,000 (2021:
GBP390,000); Whisby GBP696,000 (2021: GBP487,000); and Wressle
GBP4,884,000 (2021: GBP174,000).
3 Profit / loss before taxation
Profit / loss before taxation is stated after charging/
(crediting):
2022 2021
GBP000 GBP000
Depreciation and amortisation on property,
plant & equipment 12 1,618 107
Staff costs including Directors 5 806 652
Diesel 163 104
Business rates 43 52
Site safety and security 89 68
Exploration write-off 11 - 12
Impairment 12 570 -
Fees payable to the auditor for the
audit 70 55
Operating leases - land and buildings 43 42
Foreign exchange (gain)/loss (239) 3
========== =========
4 Directors' emoluments
Directors' salaries and fees - Company
and
Group 2022 2021
GBP000 GBP000
CW Ahlefeldt-Laurvig 26 18
P Greenhalgh (to 14 October 2020) - 32
BJ O'Cathain 41 28
SG Oddie 258 146
S Williams 31 21
W Holland (appointed 1 June 2022) 27 -
----------------------------------- -----------------------------------
383 245
===================== ===================
2022 2021
Directors' pensions GBP000 GBP000
P Greenhalgh (to 14 October 2020) - 3
W Holland (appointed 1 June 2022) 3 -
----------------------------------- -----------------------------------
3 3
===================== =====================
The above charge represents premiums paid to money purchase
pension plans during the year.
Directors' share-based payments 2022 2021
GBP000 GBP000
SG Oddie 9 20
BJ O'Cathain 2 4
S Williams 2 4
W Holland 6 -
----------------------------------- -----------------------------------
19 28
================== ================
The above represents the accounting charge in respect of share
options. No share options were exercised during the period (2021:
none).
Directors' total emoluments 2022 2021
GBP000 GBP000
Salaries and fees 383 245
Social security costs 50 28
Pensions 3 3
Share-based payments 19 28
---------------------------------- ----------------------------------
455 304
================== ==================
5 Employee information
Average monthly number of employees 2022 2021
including
Directors - Group
Number Number
Management and technical 6 7
Field exploration and production 4 4
---------------------------------- ----------------------------------
10 11
=================== ===================
Staff costs - Group 2022 2021
GBP000 GBP000
Wages and salaries (including
Directors' emoluments) 676 528
Social security 83 62
Pensions 27 27
Share-based payments (note 23) 20 35
----------------------------------- -----------------------------------
806 652
=================== ====================
Average monthly number of employees 2022 Number 2021
including Number
Directors - Company
Management and technical 6 7
---------------------------------- ----------------------------------
6 7
==================== ==================
Staff costs - Company 2022 2021
GBP000 GBP000
Wages and salaries (including
Directors' emoluments) 463 345
Social security 60 39
Pensions 12 12
Share-based payment 20 33
----------------------------------- -----------------------------------
555 429
==================== ==================
6 Finance income
2022 2021
GBP000 GBP000
Bank interest received - 3
Foreign exchange gains 239 -
------------------------------ ------------------------------
239 3
================== ===================
7 Finance expense
2022 2021
GBP000 GBP000
Unwinding of discount on
decommissioning provision
(note 21) 233 230
Other finance expense 5 12
------------------------------------ ------------------------------------
238 242
=================== ====================
8 Taxation
2022 2021
GBP000 GBP000
Movement in deferred tax asset (note
20) 318 (176)
Movement in deferred tax liability
(note 20) (318) 176
Current tax - UK (32) -
R&D tax credits - Ireland - 127
------------------------------------ ------------------------------------
Tax (expense)credit (32) 127
==================== ==================
UK corporation tax is calculated at 40% (2021: 40%) of the
estimated assessable profit for the year being the applicable rate
for a ring-fence trade including the Supplementary Charge of 10%.
From 24 May 2022 a new U.K. tax, the Excess Profits Levy ("EPL")
applies to the Group, and it is levied at 25% of assessable EPL
profits. The current tax expense for the year ending 31 July 2022
related exclusively to EPL.
2022 2021
GBP000 GBP000
Profit/(loss) before tax 1,388 (845)
================== =====================
Tax reconciliation
Profit / (loss) multiplied by the standard
rate of corporation tax in the UK
including
Supplementary Charge of 40% (2021: 40%) 555 (338)
Expenses not deductible for tax purposes 430 94
Deferred tax asset not recognised 235 99
R&D tax credit received re prior years - 127
Previously unrecognised tax losses
utilised (1,187) -
Other reconciling items (1) (109)
--------------------------------- ---------------------------------
Total tax expense/(credit) 32 (127)
=================== =================
Future changes to tax rates
The Finance Act 2021 increased the UK corporation tax rate from
19% to 25% effective 1 April 2023 for companies with profits in
excess of GBP 250,000. The impact of this rate change on the Group
is limited to the increase in the potential value of non-ring-fence
UK trading losses which are currently not recognised (note 20).
9 Other comprehensive income
2022 2021
GBP000 GBP000
Loss on investment revaluation (18) (2)
=================== ================
On 8 May 2019, the Group disposed of its interest in PEDL143 to
UK Oil & Gas Plc ('UKOG') for consideration of 25,951,557 UKOG
shares, which it still holds. At the time of the sale the shares
were worth 1.156p each, resulting in a total value of GBP300,000.
The investment was revalued at the year end to GBP24,000 (0.09p per
share (2021: GBP42,000 (0.163p per share)). An irrevocable election
has been made to record gains and losses arising on the shares as
Other Comprehensive Income.
10 Earnings per share
Basic earnings per share ('EPS') has been calculated on the loss
after taxation divided by the weighted average number of shares in
issue during the period. Diluted EPS uses an average number of
shares adjusted to allow for the issue of shares on the assumed
conversion of all in-the-money options.
As the Group made a loss from continuing operations in the prior
year, any potentially dilutive instruments were considered to be
anti-dilutive for that year. Therefore, the diluted EPS is equal to
the basic EPS for the prior year. As at 31 July 2022 there were
37,607,821(2021: 26,029,154) potentially dilutive instruments in
issue.
The calculation of the basic and diluted earnings per share is
based on the following:
2022 2021
GBP000 GBP000
Profit/(Loss) for the year attributable
to the equity shareholders of the parent 1,356 (718)
======================= ==========================
Weighted average number of shares
For the purposes of basic EPS 700,028,629 494,420,476
For the purpose of diluted EPS 737,636,450 494,420,476
11 Intangible assets
Intangible assets - Group 2022 2021
GBP000 GBP000
At 1 August 6,438 4,965
Additions 1,246 1,485
Transferred to property, plant and
equipment
(note 12) (3,899) -
Exploration write-off - (12)
----------------------------------- -----------------------------------
At 31 July 3,785 6,438
======================= =====================
Intangible assets comprise the Group's pre-production
expenditure on licence interests as follows:
2022 2021
GBP000 GBP000
Ireland FEL 4/19 (Inishkea) 1,789 1,662
UK PEDL180 (Wressle - transferred
to tangible assets) - 3,893
UK PEDL181 81 113
UK PEDL182 (Broughton North) 34 34
UK PEDL343 (Cloughton) 92 79
Morocco (Inezgane) 1,379 657
Serenity 410 -
-------------------------------- --------------------------------
Total 3,785 6,438
======================= ===================
Exploration write-off 2022 2021
GBP000 GBP000
UK PEDL299 (Hardstoft) - 12
----------------------------------- -----------------------------------
Total - 12
================== ===================
In July 2022 the Group completed a farm-in agreement with i3
Energy plc in relation to UK offshore licence P.2358, Block 13/23c
("Serenity"). Under the farm-in agreement the Group will earn a
participating interest of 25% by paying 46.25% of the cost of a
single appraisal well (see note 28).
If the Group elects not to continue in any other licence, then
the impact on the financial statements will be the impairment of
some or all of the intangible assets disclosed above. Details of
commitments are included in note 25.
12 Property, plant & equipment
Property, plant & equipment - Group
Furniture Producing Right of Total
& computers fields use assets
GBP000 GBP000 GBP000 GBP000
Cost
At 31 July
2020 6 10,887 147 11,040
Additions - - - -
Disposals (1) - (80) (81)
------------------------------- ------------------------------- ------------------------------- -------------------------------
At 31 July
2021 5 10,887 67 10,959
Additions 13 928 - 941
Transferred
from
intangible
assets (note
11) - 3,899 - 3,899
------------------------------- ------------------------------- ------------------------------- -------------------------------
At 31 July
2022 18 15,714 67 15,799
==================== ==================== ================= ======================
Depreciation,
depletion and
impairment
At 31 July
2020 3 10,488 73 10,564
Charge for
year 1 64 42 107
Disposal (1) - (80) (81)
------------------------------- ------------------------------- ------------------------------- -------------------------------
At 31 July
2021 3 10,552 35 10,590
Charge for
year 1 1,601 16 1,618
Disposal - - - -
Impairment in
year - 570 - 570
------------------------------- ------------------------------- ------------------------------- -------------------------------
At 31 July
2022 4 12,723 51 12,778
=================== ====================== ================= ====================
Net Book Value
At 31 July
2020 3 399 74 476
=============================== =============================== =============================== ===============================
At 31 July
2021 2 335 32 369
=============================== =============================== =============================== ===============================
At 31 July
2022 14 2,991 16 3,021
=============================== =============================== =============================== ===============================
The producing fields referred to in the table above are the
production assets of the Group, namely the oilfields at Wressle,
Crosby Warren and West Firsby, and the Group's interest in the
Whisby W4 well.
The carrying value of each producing field was tested for
impairment by comparing the carrying value with the value-in-use.
The value-in-use was calculated using a discounted cash flow model
with production decline rates based on engineering estimates and
recent production experience. Brent crude prices was based on the
average of forecasts by 4 international firms of specialist oil and
gas reserves auditors and a Big 4 accounting firm and ranged
from:
2023: US$94 per barrel
2024: US$86 per barrel
2025: US$80 per barrel
2026 onwards: US$82 to $90 per barrel
The post-tax discount rate of 10% is high because of the
applicable rates of tax in the UK. Cash flows were projected over
the expected life of the fields which is expected to be longer than
five years.
Based on the assumptions set out above, an impairment of
GBP570,000 was required in relation to the West Firsby and Crosby
Warren fields (2021: no impairment was required). The recoverable
amount was calculated at a discount rate of 10% (2021: 10%).
Sensitivity to key assumption changes
Variations to the key assumptions used in the value-in-use
calculation, as outlined above, would cause impairment of the
producing fields as follows:
Impairment of
producing fields
GBP000
Production decline rate
+10% -
-10% -
Brent crude price per barrel
$75 flat -
$65 flat -
Pre-tax discount rate
20% -
25% -
Property, plant & equipment - Company
Furniture Right of Total
& computers use assets
GBP000 GBP000 GBP000
Cost
At 31 July 2020 6 117 123
Disposals (1) (80) (81)
------------------------------- ------------------------------- -------------------------------
At 31 July 2021 5 37 42
Additions 13 - 13
------------------------------- ------------------------------- -------------------------------
At 31 July 2022 18 37 55
==================== ====================== =======================
Depreciation
At 31 July 2020 3 65 68
Charge for year 1 31 32
Disposals (1) (80) (81)
------------------------------- ------------------------------- -------------------------------
At 31 July 2021 3 16 19
Charge for year 1 9 10
------------------------------- ------------------------------- -------------------------------
At 31 July 2022 4 25 29
==================== ================== ===================
Net Book Value
At 31 July 2020 3 52 55
=============================== =============================== ===============================
At 31 July 2021 2 21 23
=============================== =============================== ===============================
At 31 July 2022 14 12 26
.
=============================== =============================== ===============================
13 Investments - Group
Investment in shares 2022 2021
GBP000 GBP000
At 1 August 42 44
Current year additions - -
Write off on revaluation (18) (2)
----------------------------------------- -----------------------------------------
At 31 July 24 42
=================== ===================
On 8 May 2019, the Group disposed of its interest in PEDL143 to
UK Oil & Gas Plc ('UKOG') for consideration of 25,951,557 UKOG
shares, which it still holds. At the time of the sale the shares
were worth 1.156p each, resulting in a total value of GBP300,000.
The investment was revalued at the year end to the value of
GBP24,000 (0.09p per share) (2021: GBP42,000 (0.163p per share)
with the loss being recorded in Other Comprehensive Income (note
9).
Investments - Company
Investment in subsidiaries 2022 2021
GBP000 GBP000
At 1 August 2,343 2,341
Current year additions - 2
----------------------------------------- -----------------------------------
At 31 July 2,343 2,343
======================= ===================
The Company's investments at the reporting date include 100% of
the share capital in the following unlisted companies:
-- Europa Oil & Gas Limited, which undertakes oil and gas
exploration, development and production in the UK.
-- Europa Oil & Gas (West Firsby) Limited, which is non-trading.
-- Europa Oil & Gas (Ireland West) Limited, which held the interest in the FEL 2/13 licence.
-- Europa Oil & Gas (Ireland East) Limited, which held the
interest in the FEL 3/13 and FEL 1/17 licences.
-- Europa Oil & Gas (Inishkea) Limited, which holds the
interest in the FEL 4/19 and held the interest in FEL 3/19
licences.
-- Europa Oil & Gas (New Ventures) Limited, which holds the interest in the Moroccan licence.
All six companies are registered in England and Wales, all
having their registered office at 30 Newman Street, London W1T
1PT.
The results of the six companies have been included in the
consolidated accounts.
Europa Oil & Gas Limited owns 100% of the ordinary share
capital of Europa Oil & Gas (UK) Limited (registered in England
and Wales with registered office at 30 Newman Street, London W1T
1PT and is non-trading).
14 Inventories - Group
2022 2021
GBP000 GBP000
Oil in tanks 36 23
====================================== ======================================
15 Trade and other receivables
Group Company
2022 2021 2022 2021
Current trade GBP000 GBP000 GBP000 GBP000
and other
receivables
Trade
receivables 1,476 330 - -
Other
receivables 185 67 43 11
Prepayments 205 125 120 58
-------------------------------- ----------------------------------- ----------------------------------- -----------------------------------
1,866 522 163 69
================= ==================== ==================== ===================
Non-current
other
receivables
Owed by Group
undertakings
(note 24) - - 13,270 588
=================== =================== ================== ===================
16 Restricted cash
Group Company
2022 2021 2022 2021
GBP000 GBP000 GBP000 GBP000
Cash
guarantee 263 230 - -
Security 6,621 -
escrow
funds - -
-------------------------------- ----------------------------------- ----------------------------------- -----------------------------------
6,884 230 - -
================= ==================== ==================== ===================
Pursuant to the requirements of the farm-in agreement with i3
Energy plc in relation to UK offshore licence P.2358, Block 13/23c
("Serenity"), the Group deposited into an escrow account the full
remaining committed funding requirement for its paying share of the
2022 appraisal well. i3 Energy plc is able to draw funds actually
incurred on the Serenity well from the escrow account and the
account cannot be used for any other purpose. The escrow account is
treated as restricted cash.
A requirement of the petroleum agreement with the National
Office of Hydrocarbons and Mines ('ONHYM'), was the setting up of a
guarantee for $315,000 (GBP263,000) (2021: $315,000 (GBP230,000)).
This is treated as restricted cash.
17 Trade and other payables
Group Company
Current
trade and
other
payables 2022 2021 2022 2021
GBP000 GBP000 GBP000 GBP000
Trade
payables 1,234 963 480 503
Lease
liabilities 13 31 8 19
Corporation 32 -
tax payable - -
Other
payables 294 562 58 130
-------------------------------------- -------------------------------------- --------------------------------------- ---------------------------------------
1,573 1,556 546 652
=================== =================== ==================== ====================
Non-current
trade and
other
payables
Lease
liabilities 4 17 3 11
18 Borrowings
Group Company
2022 2021 2022 2021
GBP000 GBP000 GBP000 GBP000
Loans
repayable
in less
than 1 year
Bounce Back
Loan 40 10 40 10
-------------------------------------- -------------------------------------- --------------------------------------- ---------------------------------------
Total
short-term
borrowing 40 10 40 10
================== ================== ====================== ======================
Loans
repayable
in 1 to
2 years
Bounce Back
Loan - 10 - 10
Loans
repayable
in 2 to
5 years
Bounce Back
Loan - 30 - 30
Loans
repayable
in over
5 years
Bounce Back - -
Loan - -
-------------------------------------- -------------------------------------- --------------------------------------- ---------------------------------------
Total
long-term
borrowing - 40 - 40
===================== ==================== ======================== =======================
In June 2020 the Group drew down on a Bounce Back loan for
GBP50,000 under the Government's Covid 19 policies. The loan is
repayable within 6 years of drawdown but with a 12-month holiday
and repayments started in July 2021. The annual rate of interest is
2.5%. The loan was repaid in full in August 2022.
On 19th January 2021 the Group entered into a related party loan
agreement with CW Ahlefeldt-Laurvig (a Group Non-Executive director
and shareholder). Under this agreement, Europa Oil & Gas drew
funds of GBP225,000 on 20th January 2021 for a term of 4 months
(with the option of early repayment). The loan was unsecured and
interest accrued on a daily basis at an effective interest rate of
12.57% per annum. The loan and accrued interest was fully repaid in
March 2021.
19 Leases
Group Company
2022 2021 2022 2021
GBP000 GBP000 GBP000 GBP000
Amounts recognised in the statement
of comprehensive income:
Interest on right of use liabilities (2) (2) (1) (1)
Amounts recognised in the statement
of cash flows:
Repayment of lease liabilities
- principal (14) (35) (8) (8)
Repayment of lease liabilities
- interest (2) (2) (1) (1)
Maturity analysis (undiscounted):
Amounts due within one year (14) (6) (8) (9)
Amounts due after more than 1 year
& less than 5 years (2) (6) (2) (11)
Amounts due after more than 5 years - - - -
The Group's right of use asset comprises the lease of 4 vehicles
(note 12). The corresponding lease liability for the right to use
leased assets are included within trade and other payables in the
statement of financial position (note 17).
20 Deferred Tax - Group
2022 2021
Recognised deferred tax GBP000 GBP000
asset:
As at 1 August - -
(Charged)/credited to
statement of
comprehensive
income - -
------------------------------------------ ------------------------------------------
At 31 July - -
====================== =======================
The Group has a deferred tax liability of GBP1,433,000 (2021:
GBP1,290,000) arising from accelerated capital allowances and a
deferred tax asset of GBP1,433,000 (2021: GBP1,290,000) arising
from trading losses which will be utilised against future taxable
profits. These were offset against each other resulting in a GBPnil
net asset/liability (2021: GBPnil net asset/liability). This
offsetting was required because the Group settles current tax
assets and liabilities on a net basis.
Non-recognised long-term deferred tax asset
The Group has a non-recognised deferred tax asset of
GBP5,222,000 (2021: GBP4,259,000), which arises in relation to
ring-fence UK trading losses of GBP8.9 million (2021: GBP4.8
million), non-ring-fence UK trading losses of GBP12.2 million
(2021: GBP11.7 million) and subsidiary losses and carried forward
capital expenditure of GBP6.7 million (2021: subsidiary losses of
GBP1.8 million) that have not been recognised in the accounts as
the timing of the utilisation of the losses is considered
uncertain.
No deferred tax assets or liabilities are recognised in the
Company.
21 Provisions - Group
Decommissioning provisions are based on third party estimates of
work which will be required and the judgement of Directors. By
their nature, the detailed scope of work required and timing are
uncertain.
Long-term provisions 2022 2021
GBP000 GBP000
As at 1 August 3,393 3,163
Charged to statement of comprehensive income
(note 7) 233 230
Change in estimated phasing of cash flows 538 -
-------------------------------- --------------------------------
At 31 July 4,164 3,393
=================== ====================
The increase in the estimated decommissioning provision resulted
mainly from a reassessment of the estimated timings of when such
decommissioning activities are undertaken at the end of their
economic lives.
Sensitivity to key assumption changes
Variations to the key assumptions used in the decommissioning
provision estimates would cause increases / (reductions) to the
provision as follows:
Further decommissioning
provision GBP000
Inflation rate (current assumption 3%)
2% (134)
5% 215
Discount rate (current assumption 10%)
5% 776
15% (550)
No provisions have been recognised in the Company.
22 Called up share capital
2022 2021
GBP000 GBP000
Allotted, called up and fully paid ordinary
shares of 1p
At 1 August 2021: 566,466,985 shares (1
August
2020: 444,691,599) 5,665 4,447
Issued in the year: 390,000,000 shares
(2021:
121,775,386 shares) 3,900 1,218
-------------------------------- --------------------------------
At 31 July: 956,466,985 shares (2021:
566,466,985) 9,565 5,665
============ =============
Ordinary shares issued
Date Type of Number Issue Raised Raised Nominal
Issue of shares price gross net value
of costs
GBP000 GBP000 GBP000
28
March
2022 Placing 390,000,000 0.018 7,020 6,622 3,900
--------------------------------------------------------- -------------------------------- -------------------------------- --------------------------------
Total 390,000,000 7,020 6,622 3,900
================= ========= ========= =========
The costs of GBP398,000 incurred on the issue of share capital
include GBP219,000 of non-cash expenses. All of the allotted shares
are ordinary shares of the same class and rank pari passu. The
following describes the purpose of each reserve within owners'
equity:
Reserve Description and purpose
Share premium Amount subscribed for share capital in excess
of nominal value
Merger reserve Reserve created on issue of shares on acquisition
of subsidiaries in prior years
Retained deficit Cumulative net gains and losses recognised in
the consolidated statement of comprehensive income
23 Share-based payments
The Group operates an approved Enterprise Management Incentive
('EMI') share option scheme for employees and an unapproved scheme
for grants in excess of EMI limits and for non-employees. Both
schemes are equity-settled share-based payments as defined in IFRS
2 Share-based payments. A recognised valuation methodology is
employed to determine the fair value of options granted as set out
in the standard. The charge incurred relating to these options is
recognised within operating costs.
Combined information for the two schemes operated by the Group
is set out below.
There are 41,207,821 ordinary 1p share options/warrants
outstanding (2021: 26,029,154).
These are held as follows:
Holder 31 July 31 July
2022 2021
BJ O'Cathain 2,950,000 2,950,000
SG Oddie 9,200,000 9,200,000
SA Williams 2,500,000 2,500,000
W Holland 3,721,000 -
Employees of
the Group 2,740,000 3,425,000
Consultants
and
advisers 20,096,821 7,954,154
--------------------------------------------------- ---------------------------------------------------
Total 41,207,821 26,029,154
==================== ====================
The fair values of options were determined using a Black Scholes
Merton model or, in the case of ones issued to advisors as part of
the share issue, the fair value was deemed to be the share issue
price. Volatility is based on the Company's share price volatility
since flotation.
In the year 15,863,667 options/warrants were granted, nil
expired, 685,000 were forfeited, and none were exercised (2021:
21,404,154 granted, 2,223,458 expired, 17,355,000 forfeited, none
exercised).
2022 2022 2021 2021
Number Average Number of Average
of options exercise options exercise
price price
Outstanding at the
start
of the year 26,029,154 2.37p 24,203,458 8.15p
Granted -
employees/directors 3,721,000 2.31p 13,450,000 1.23p
Granted -
consultants - - 2,000,000 1.23p
Granted - advisors 12,142,667 1.80p 5,954,154 1.3p
Expired - - (2,223,458) 2.8p
Forfeited (685,000) 7.00p (17,355,000) 12.85p
------------------------------------------------- ----------------------------------- ------------------------------------------------- -----------------------------------
Outstanding at the
end
of the year 41,207,821 2.02p 26,029,154 2.37p
Exercisable at the
end
of the year 18,096,821 1.64p 9,814,154 2.84p
The 3,721,000 options granted in June 2022 vest 1,240,333 after
each of 12, 24 and 36 months, are exercisable conditional upon the
Europa Oil & Gas (Holdings) plc closing average mid-market
share price being above 4.62p for 30 consecutive trading day and
expire on the 6(th) anniversary of the grant date. The inputs used
to determine their values are detailed in the table:
Grant date 1 June 2022
Number of options 3,721,000
Share price at
grant 2.5p
Exercise price 2.31p
Volatility 62.8%
Dividend yield Nil
Risk free investment
rate 1.791%
Option life in
years 6
Fair value per
option 1.50p
The 12,142,667 warrants issued in March 2022 were issued to
advisors as part of their compensation for services in relation to
the share fund raise. The fair value to the options warrants was
estimated to be 1.8p per warrant.
Based on the fair values above, the charge arising from employee
share options was GBP20,000 (2021: GBP35,000). The charge relating
to non-employee share options was GBPNil (2021: GBP4,000). The
charge allocated direct to equity, relating to the issue of options
on the issue of share capital, was GBP219,000 (2021:
GBP78,000).
Share options/warrants outstanding at the end of the period have
exercise prices ranging from 1.23p to 10.0p and the weighted
average remaining contractual life at the end of the period was 3.4
years (2021: 3.8 years).
24 Financial instruments
The Group's and Company's financial instruments comprise cash
and cash equivalents, bank borrowings, loans, and items such as
trade and other receivables and trade and other payables which
arise directly from its operations. Europa's activities are subject
to a range of financial risks, the main ones being credit;
liquidity; interest rates; commodity prices; foreign exchange; and
capital. These risks are managed through ongoing review considering
the operational, business and economic circumstances at that
time.
Financial assets
Amortised Amortised Fair value Fair value
cost cost through other through other
comprehensive comprehensive
income income
2022 2021 2022 2021
GBP'000 GBP'000 GBP'000 GBP'000
Investments - - 24 42
Trade and
other
receivables 1,661 397 - -
Restricted
cash 6,884 230 - -
Cash and
cash
equivalents 1,394 641 - -
-------------------- -------------------- ----------------------- -----------------------
Total
financial
assets 9,939 1,268 24 42
================================ ================================ ===================================== =====================================
Financial liabilities
Amortised Amortised Fair value Fair value
cost cost through other through other
comprehensive comprehensive
income income
2022 2021 2022 2021
GBP'000 GBP'000 GBP'000 GBP'000
Trade and
other
payables (1,577) (1,573) - -
Loans (40) (50) - -
-------------------- -------------------- --------------------- -----------------------
Total
financial
liabilities (1,617) (1,623) - -
================================ ================================ ===================================== =====================================
Credit risk
The Group is exposed to credit risk as all crude oil production
is effectively sold to one multinational oil company. The customer
is invoiced monthly for the oil delivered to the refinery in the
previous month and invoices are generally settled in full within
the same month that invoices are issued. At 31 July 2022 trade
receivables were GBP1,476,000 (2021: GBP330,000). The fair value of
trade receivables and payables approximates to their carrying value
because of their short maturity. Any surplus cash is held on
short-term deposit with Royal Bank of Scotland. The maximum credit
exposure in the year was GBP1,433,000 comprising of mainly two
months of Wressle sales, due the invoice for June deliveries only
being received on 1 August 2022 (2021: GBP175,000). The Company
exposure to third party credit risk is negligible. The intercompany
balances with its subsidiaries have been appropriately provided for
to account for potential impairments.
Liquidity risk
The Company currently has no overdraft or overdraft facility
with its bankers.
The Group and Company monitor their levels of working capital to
ensure they can meet liabilities as they fall due. The following
table shows the contractual maturities (representing the
undiscounted cash flows) of the Group's and Company's financial
liabilities.
Group Company
Trade and other payables Trade and other payables
At 31
July 2022 2021 2022 2021
GBP000 GBP000 GBP000 GBP000
6
months
or
less 1,573 1,556 546 652
-------------------------------------- -------------------------------------- --------------------------------------- ---------------------------------------
Total 1,573 1,556 546 652
================================ ================================ ===================================== =====================================
Group Company
Loans Loans
At 31
July 2022 2021 2022 2021
GBP000 GBP000 GBP000 GBP000
6 to 12
months 40 5 40 5
1 to 2
years - 5 - 5
2 to 5
years - 10 - 10
Over 5
years - 30 - 30
-------------------------------------- -------------------------------------- --------------------------------------- ---------------------------------------
Total 40 50 40 50
===================== ====================== ========================= ========================
Cash and cash equivalents in both Group and Company are all
available at short notice.
Trade and other payables do not normally incur interest charges.
There is no difference between the fair value of the trade and
other payables and their carrying amounts.
Interest rate risk
The Group has immaterial interest-bearing liabilities (note 18)
and leases (note 19). All loans and leases are at fixed rates of
interest and the Group and Company is not exposed to changes in
interest rates.
Commodity price risk
The selling price of the Group's production of crude oil is set
at a small discount to Brent prices. The table below shows the
range of prices achieved in the year and the sensitivity of the
Group's loss before taxation ('LBT') or profit before tax ('PBT')
to such movements in oil price. There would be a corresponding
increase or decrease to net assets. There is no commodity price
risk in the Company.
2022 2022 2021 2021
Price PBT Price LBT
Oil price Month US$/bbl GBP000 US$/bbl GBP000
Highest June 2022 $122.40 1,723 $73.60 (420)
Average $93.90 (208) $55.80 (845)
Lowest August 2021 $69.50 (1,864) $39.10 (1,262)
Foreign exchange risk
The Group's production of crude oil is invoiced in US$. Revenue
is translated into Sterling using a monthly exchange rate set by
reference to the market rate. The table below shows the range of
average monthly US$ exchange rates used in the year and the
sensitivity of the Group's PBT / LBT to similar movements in US$
exchange. There would be a corresponding increase or decrease in
net assets.
2022 2022 2021 2021
Rate PBT Rate LBT
US Dollar Month US$/GBP GBP000 US$/GBP GBP000
Highest August 2021 1.376 (373) 1.418 (902)
Average 1.313 (76) 1.271 (845)
Lowest July 2022 1.216 443 1.292 (775)
The table below shows the Group's currency exposures. Exposures
comprise the net financial assets and liabilities of the Group that
are not denominated in the functional currency.
Group Company
2022 2021 2022 2021
Currency Item GBP000 GBP000 GBP000 GBP000
Cash and
cash
Euro equivalents 92 2 3 2
Trade and other
payables (13) (458) (13) (397)
Cash and
cash
US Dollar equivalents 1,322 339 3 6
Trade and other
receivables 1,435 290 - -
Trade and other
payables (5) - (5) -
---------------------------- ---------------------------- ---------------------------- ----------------------------
Total 2,831 173 (12) (389)
==================== =================== ====================== ======================
Capital risk management
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern in order to
provide returns for shareholders and maintain an optimal capital
structure to reduce the cost of capital. The Group defines capital
as being the consolidated shareholder equity (note 22) and third
borrowings (GBP40,000 at 31 July 2022). The Board monitors the
level of capital as compared to the Group's long-term debt
commitments and adjusts the ratio of debt to capital as is
determined to be necessary, by issuing new shares, reducing or
increasing debt, paying dividends and returning capital to
shareholders. The Group has a GBP40k loan subject to an annual 2.5%
interest charge and contractually repayable over 6 years with a
1-year holiday and no early repayment penalty. Repayments commenced
in July 2021 and the loan was fully repaid in August 2022.
Intercompany loans
The loans to the subsidiaries are not classified as repayable on
demand. IFRS 9 requires consideration of the expected credit risk
associated with the loan. As the subsidiary company does not have
any liquid assets to sell to repay the loan, should it be recalled,
the conclusion reached was that the loan should be categorised as
stage 3.
As part of the assessment of expected credit losses of the
intercompany loan receivable, the Directors have considered the
published chance of success for Inishkea, and applying the same 33%
general wildcat exploration success rate to Inezgane, the loans to
Europa Oil & Gas Inishkea and Europa Oil & Gas New Ventures
have thus been 67% provided.
The loan to Europa Oil & Gas (Ireland West) and Europa Oil
& Gas (Ireland East) have been provided in full due to the
relinquishment of the licence held by the subsidiaries.
During the year to 31 July 2022 there has been a marked increase
in the expected recoverable reserves of the Group's Wressel
producing asset which led to a partial reversal of previous
provisions for impairment that had been made in relation to loans
to Europa Oil Gas Ltd.
The movement in the provision was as follows:
Europa Europa Europa Europa Europa Total
Oil & Oil & Oil & Oil & Oil &
Gas Limited Gas (Ireland Gas (Ireland Gas Gas (New
West) East) (Inishkea) Ventures)
Limited Limited Limited Limited
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
============= ============= ============= ============= ============= =============
Gross loan
balances
Loan balance
at 31 July
2020 18,585 763 1,480 796 504 22,128
Movement in
loan 1,593 - - 228 258 2,079
----------------- --------------- --------------- --------------- --------------- ---------------
Loan balance
at 31 July
2021 20,178 763 1,480 1,024 762 24,207
Movement in
loan 6,357 18 15 144 428 6,962
----------------- --------------- --------------- --------------- --------------- ---------------
Loan balance
at 31
July 2022 26,535 781 1,495 1,168 1,190 31,169
----------------- --------------- --------------- --------------- --------------- ---------------
Provisions
Provision at
31 July
2020 (18,585) (763) (1,480) (533) (337) (21,698)
Movement in
provision (1,593) - - (154) (174) (1,921)
----------------- --------------- --------------- --------------- --------------- ---------------
Provision at
31 July
2021 (20,178) (763) (1,480) (687) (511) (23,619)
Movement in
provision 6,135 (18) (15) (96) (286) 5,720
----------------- --------------- --------------- --------------- --------------- ---------------
Provision at
31 July
2022 (14,043) (781) (1,495) (783) (797) (17,899)
----------------- --------------- --------------- --------------- --------------- ---------------
Net loan
balance at
1 August
2020
2012018 - - - 263 167 430
Net loan
balance at
31 July
2021 - - - 337 251 588
Net loan
balance at
31 July
2022 12,492 - - 385 393 13,270
25 Capital commitments and guarantees
Following completion of the farm-in to Production Licence
P.2358, Block 13/23c ("Serenity") GBP6.9m was transferred into an
escrow account held under an agreement with Law Debentures to cover
the commitment to pay 46.25% of the appraisal well costs.
As part of the 18-month licence extension for FEL 4/19 there is
an outstanding commitment totalling EUR0.6m that relates primarily
to seismic reprocessing.
To satisfy the terms of the Inezgane licence there is an
outstanding commitment totalling GBP0.4m that relates to the
completion of the initial phase work programme mainly comprising
seismic inversion and basin modelling. In addition, there is a
commitment to provide a $0.1m training contribution to ONHYM.
For PEDL181 there is a contingent commitment to drill two
development wells into the Penistone formation, an exploration well
for Broughton North and a gas to power project. These activities
are contingent upon the budget being approved by the JV
partnership. The total net cost to Europa for the work programme is
estimated to be GBP1.35m in 2023 and GBP3.66m in 2024.
26 Operating lease commitments
Europa Oil & Gas Limited pays annual site rentals for the
land upon which the West Firsby and Crosby Warren oil field
facilities are located.
-- The West Firsby lease runs until September 2022 and can be
terminated on two months' notice. The annual cost is currently
GBP22,000 (2021: GBP22,000) increasing annually in line with the
retail price index.
-- The Crosby Warren lease runs until December 2022 and can be
terminated on three months' notice. The annual cost is currently
GBP20,000 (2021: GBP20,000).
Future minimum lease payments are as follows:
2022 2021
GBP000 GBP000
Less than 1 year 9 9
2-5 years - -
--------------------------------- ---------------------------------
Total 9 9
============ =============
27 Related party transactions
Key management are those persons having authority and
responsibility for planning, controlling and directing the
activities of the Group. In the opinion of the Board, the Group's
and the Company's key management are the Directors of Europa Oil
& Gas (Holdings) plc. Information regarding their compensation
is given in note 4.
During the year, the Company provided services to subsidiary
companies as follows:
2022 2021
GBP000 GBP000
Europa Oil & Gas Limited 236 1,208
Europa Oil & Gas (Inishkea) Limited 42 38
Europa Oil & Gas (New Ventures)
Limited 19 25
--------------------------------- ---------------------------------
Total 297 1,271
============ ==========
At the end of the year, after provisions, the Company was owed
the following amounts by subsidiaries:
2022 2021
GBP000 GBP000
Europa Oil & Gas Limited 12,492 -
Europa Oil & Gas (Inishkea) Limited 385 337
Europa Oil & Gas (New Ventures)
Limited 393 251
--------------------------------- ---------------------------------
Total 13,270 588
============ =============
On 19th January 2021, the Group entered into a related party
loan agreement with CW Ahlefeldt-Laurvig (a Group Non-Executive
director and shareholder). Under this agreement, Europa Oil &
Gas drew funds of GBP225,000 on 20th January 2021 for a term of 4
months (with the option of early repayment). The loan was unsecured
and interest accrued on a daily basis at an effective interest rate
of 12.57% per annum. The loan and accrued interest was fully repaid
in March 2021.
28 Post reporting date events
-- The Serenity appraisal well did not find oil bearing sands
and as such the well was plugged and abandoned for a forecast gross
well cost of GBP10.4m resulting in an estimated total cost to
Europa of GBP4.8m. The remaining GBP2m held in the escrow fund will
be released to Europa and will no longer be restricted. The various
development options of the Serenity field will now be assessed by
the Company and i3E in order to maximise the value of the
field.
-- On 2 November 2022 the Company's application to the
Department of the Environment, Climate and Communications ("DECC")
for an extension to the first phase of its 100%-owned FEL 4/19
licence was granted and as such the licence is now live until 31
January 2024.
-- On 8 September 2022 the Company entered into a loan agreement
with Union Jack Oil plc ("UJO"). The key features of the loan were:
GBP1 million loan amount, 18-month term, interest rate of 11% per
annum, repayable at any point during the term without penalty and
secured against 10% interest in the Wressle field (PEDL180, and
PEDL182). The loan was to provide additional liquidity during the
drilling of the Serenity appraisal well. The loan was repaid in
full on 18 October 2022.
* * ENDS * *
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