TIDMSCIR
RNS Number : 2414B
Scirocco Energy PLC
30 September 2022
30 September 2022
Scirocco Energy plc
("Scirocco" or the "Company")
Interim Results
Scirocco Energy (AIM: SCIR), the AIM investing company targeting
attractive assets within the European sustainable energy and
circular economy markets, is pleased to announce its unaudited
interim results for the six months ended 30 June 2022.
Period Highlights:
-- In line with the Investing Policy approved at AGM in July
2021, the Company continued to support Energy Acquisitions Group
Limited ("EAG"), where Scirocco has a 50% ownership interest, to
identify additional investment opportunities building on the
acquisition by EAG of 100% of Greenan Generation Limited ("GGL")
and associated 0.5 MWe Anaerobic Digestion ("AD") plant located in
County Londonderry, Northern Ireland. AD is a process that creates
biogas, a renewable energy source that will help the UK deliver on
its decarbonisation commitments
-- During the period, GGL has continued to out-perform original expectations:
-- Revenue supported by higher NIROC payment levels and higher power sales prices
-- EBITDA for H1 2022 was GBP253k on track for a 2022 full year estimated EBITDA of c. GBP600k.
-- Following an exhaustive sales process over c. 24 months, the
Company announced on 13(th) June 2022 that it had reached agreement
with Wentworth Resources plc to sell its 25% interest in the Ruvuma
asset for a total consideration of up to $16 million:
-- Initial consideration of US$3 million payable on completion of the Proposed Transaction;
-- US$3 million payable upon final investment decision being
taken by the parties to the Ruvuma Asset Production Sharing
Agreement or the JOA as the case may be;
-- Deferred consideration of up to US$8 million payable in the
form of a 25% net revenue share from the point when Ruvuma
commences delivery of gas to the gas buyer;
-- Contingent consideration of US$2 million payable on gross
production reaching a level equal to or greater than 50Bcf.
-- The Ruvuma disposal was approved by Shareholders at a general
meeting held on 29(th) June 2022
-- The Prolific Basins financing facility outstanding balance
was part settled through the issuance of Scirocco shares on two
occasions and a waiver fee associated with approval of the Ruvuma
divestment with the outstanding balance at 30 June of $545,000;
-- The Company disposed of part of its remaining shareholding in
Helium One realizing c. GBP160k in proceeds during the period;
-- Continued the Company's focus on cost discipline and cash preservation; and
-- Held cash at 30 June 2022 of GBP1.03 million
Post Period Highlights:
-- On 12 July 2022 the Company received formal notice from ARA
Petroleum Tanzania Limited ("APT"), the current 50% interest holder
and operator of Ruvuma, that it was exercising its pre-emption
rights with regards to Scirocco's proposed divestment of the Ruvuma
asset ("Ruvuma") to Wentworth Resources plc ("Wentworth") in
addition to a separate letter received from the Tanzania Petroleum
Development Corporation ("TPDC") stating that it is considering
exercising its statutory rights of first refusal in relation to the
Ruvuma pursuant to Section 86(5) of the Petroleum Act 2015. On 19
August 2022, the Company received written confirmation from the
Tanzania Petroleum Development Corporation ("TPDC") that it was not
exercising its statutory right of first refusal with respect to the
Company's divestment of its 25% interest in the Ruvuma asset.
-- On 31 August 2022, APT and Scirocco entered into binding
agreements which, inter-alia, provides access to cash call cover
through the previously announced loan facility (with Wentworth
Resources plc) and 1st drawdown notice for $1.614 million. Other
than for adjustments with respect to conditions precedent then
fulfilled, APT entered into all of the same agreements (and on the
same terms) as Wentworth Resources plc (as detailed in the
Company's announcement of 13 June 2022).
-- On 2 September 2022, the Company received a letter from a
group of shareholders of the Company requesting the Company to
convene a general meeting of the Company's shareholders pursuant to
section 303 of the Companies Act 2006 (the "Act"). Pursuant to this
request on 15 September 2022, the Company published a Circular to
Shareholders, along with accompanying Notice of General Meeting and
Form of Proxy.
-- On 14 September 2022, the Company noted the announcement by
Reabold Resources plc regarding the conditional sale of its
investee company, Corallian Energy Limited in which Scirocco owns
83,333 shares following a subscription by Scirocco in 2018 at a
price of GBP1.50 per share. A price of up to GBP3.20 per share will
be paid to Corallian shareholders as a combination of initial cash
plus contingent payments offering a profitable exit with up to
GBP267k of proceeds net to Scirocco (based on estimated GBP3.20 per
share).
-- On 27 September 2022, the Company announced that the
subscriber (the "Subscriber") under the share subscription deed
governing the investment facility ("Investment Facility"), the
details of which were announced to the market on 29 June 2020, had
issued the Company a settlement notice for US$100,000. Accordingly,
the Company issued and allotted 44,923,630 ordinary shares, with a
deemed price of GBP0.0020 ("Settlement Shares") to the Subscriber.
The Subscriber's investment was made as a prepayment for ordinary
shares in the Company, the number (and price) of which were to be
determined at the time the Subscriber elected to receive such
shares, according to the average of five daily volume-weighted
average prices during the twenty trading days prior to the date of
such election.
At the time the Company sent out its Notice of its 2022 AGM held
on 3 August, and continuing through the actual AGM, it was not
aware it would be able to rely on the authority granted at the 2020
AGM, hence why Resolution 5 was proposed. Following the defeat of
Resolution 5, the Company therefore believed, at that time, and as
stated in the Result of AGM RNS on 3 August, that it was in default
of the Prolific Basins facility.
Subsequent to the 2022 AGM, the Company reviewed prior
authorities as part of a discussion with Prolific Basins regarding
settlement of the facility. At the 2020 AGM, approval was taken to
allot shares on a non-pre-emptive basis in favour of Prolific and
the resolution included the wording as follows: "... save that the
Company may make an offer or agreement before the expiry of the
authority which would or might require shares to be allotted or
Rights to be granted after expiry of the authority and the
Directors of the Company may allot shares and grant Rights in
pursuance of that offer or agreement as if the authority had not
expired."
This is a standard formulation in non-pre-emptive authorities
(derived from s.570(4) of the Companies Act 2006) to allot to cover
agreements reached prior to the expiry of that authority to allow
allotments to be made after the expiration of such authority.
Therefore the Company considers that the GBP1m authority taken
at the 2020 AGM can be used to allot shares to Prolific on a
continuing basis given there is sufficient headroom remaining
thereunder. Any subsequent authorities requested (such as at the
2022 AGM), part of an assessment of risk about potential headroom,
are not necessary given the share price and amount remaining under
the 2020 authority suffices to allot shares to Prolific.
The Company does not have a general authority to allot on a
non-pre-emptive basis given this has expired and that resolution
did not pass at the 2022 AGM. It is only the ability to allot
shares to Prolific that continues pursuant to the authority
described above
Commenting on the Interim Results, Alastair Ferguson,
Non-Executive Chairman said:
"The first half of 2022 has continued to see significant change
for the Company as it continued to implement the Investment Policy
which targets assets within the European sustainable energy and
circular economy markets. This policy will see Scirocco allocating
capital in assets which support the energy transition and offer a
stable, growing source of cash flow going forward.
With the pivot to investment in assets within the sustainable
energy and circular economy we made clear that we intend to recycle
value delivered from Scirocco's legacy assets to fund new
investment activities.
I was pleased that the Company was able to announce the sale of
its legacy interest in Ruvuma following the agreement with
Wentworth Resources plc in June for up to $16 million, subsequently
pre-empted by our joint venture partner APT. We are now working
closely with APT to deliver a timely completion of the sale, which
we expect to be by the year end. The proceeds of the divestment -
both at completion and any future contingent payments - will be
available for reinvestment in assets which comply with the
company's investment policy.
Following the end of the period the Company has also received
initial loan funds from APT which are available for investment and
general corporate purposes.
The Company is now in a strong position: it has an agreed sale
for its most significant legacy asset which is expected to deliver
further proceeds in the future to fund new investment and the cash
calls for Ruvuma are being funded by the loan arrangement with APT.
Taken together the Company represents a solid platform for further
investment in its target assets.
We now look forward to growing the portfolio and the team are
working hard to deliver this."
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014 ("MAR").
For further information:
Scirocco Energy plc
Tom Reynolds, CEO +44 (0) 20 7466
Doug Rycroft, COO 5000
Strand Hanson Limited, Nominated Adviser
Ritchie Balmer / James Spinney / Robert +44 (0) 20 7409
Collins 3494
WH Ireland Limited, Broker +44 (0) 207 220
Harry Ansell / Katy Mitchell 1666
Buchanan, Financial PR +44 (0) 20 7466
Ben Romney / Jon Krinks 5000
Chairman's statement
Introduction
I am pleased to be providing this statement in my capacity as
Non-Executive Chairman of Scirocco. At the end of 2021, the Company
had established a new investment policy which was approved by
shareholders and made its first related investment to support EAG
in acquiring GGL. The Company had also seen positive developments
within its legacy asset portfolio which had the potential to
support improved interest by prospective acquirers. The Board's
singular focus has been to turn legacy assets into capital
available for reinvestment in line with the investment policy. The
Company has made progress in this respect through the partial sale
of its Helium One holding and the recent news regarding the sale of
Corallian Energy Limited, a private company where Scirocco holds
shares.
With the sale of the Company's legacy 25% interest in Ruvuma
clarified, as announced on 13 June and subsequently approved by
shareholders on 29 June, and initial drawdown received from APT
following its pre-emption, we can now focus our efforts on our core
objectives which remain the same as I shared at the same time last
year:
o To Implement the new investment policy to invest in attractive
assets within the sustainable energy and circular economy with a
view to growing a portfolio of cash generative assets over
time;
o To Grow the company's access to resources and personnel within the target space; and
o To Identify new opportunities and progress the EAG investment.
The Board is aware that not all shareholders supported the
divestment of Ruvuma and that a minority continue to actively
frustrate our efforts to make progress. The Board is committed to
grow value for all shareholders by the most appropriate investment
of Company resources on a risk adjusted basis. This principle led
to the adoption of the new investment policy, which was approved by
over 99 per cent. of shareholders in 2021, and the decision to
divest legacy assets. While the Board will engage with all
shareholders on a reasonable basis the direction of travel has been
set and we look forward to delivering on the objectives listed
above.
Strategy and Business Development
With the progress made in divesting legacy assets the Board
restates Scirocco's objective to build a portfolio of cash
generative assets within the following three core areas:
-- Energy - assets which generate energy for sale through
sustainable or renewable means in the form of biogas or electrical
power;
-- Circular - assets which recover a valuable component of an
industrial, municipal or agricultural waste stream for re-use,
generally reducing the system carbon footprint in parallel; and
-- Vector - assets involved in the storage, transmission, or
delivery of energy within a low carbon context.
The Board believes it will offer Shareholders and investors
exposure to an asset portfolio with an attractive risk/reward
profile within the sustainable energy ecosystem. Over time, the
Board believes shareholder value can be delivered through
operational improvement, driving improved profitability;
reinvestment of cash flow to fund further acquisition; the periodic
refinancing of the portfolio as it grows, supporting lower cost
asset finance; and ultimately the payment of a regular
dividend.
Outlook
The first half of 2022 has been a period of significant progress
within Scirocco towards long term goals defined by the investment
policy. The sale of the Company's Ruvuma interest to APT following
its pre-emption of the deal originally announced with Wentworth
Resources plc has removed a significant call over the Company's
cash resources which can now be directed towards alternative
investments.
We look forward to putting these resources to good effect in
growing a cash generative portfolio of assets over the remainder of
2022 and into 2023.
Alastair Ferguson
Non-Executive Chairman
Date: 30 September 2022
Investment Update
Energy Acquisitions Group Limited
The Company invested in EAG in September 2021 to support the
acquisition of Greenan Generation Limited ("GGL").
Financial
In Q1 2022 the revenue received for the quarter by GGL totalled
GBP323k (unaudited) supported by high power prices through the
period. This compares to the same period in 2021 where revenue was
GBP240k (unaudited) - a 34.5% year on year increase. EBITDA for Q1
2022 was GBP158k and at current power prices, EBITDA for the first
12 months of EAG's ownership of GGL is on target to exceed
GBP600k.
In Q2 2022, the revenue received for the quarter by GGL totalled
GBP267k (unaudited) supported by consistently high power prices.
This compares to the same period in 2021 where revenue was GBP266k
(unaudited). Comparable performance was largely due to significant
refurbishment downtime in Q1 2022 and a consequent reduction of
GBP36k in NIROC income which would otherwise have been received in
Q2. EBITDA for Q2 2022 was GBP95k (unaudited) bringing H1 2022
EBITDA to GBP253k (unaudited) on track for a 2022 full year
estimated EBITDA of c. GBP600k.
Operational
During Q1 2022, in order to future proof the plant at its
Greenan site, the EAG team completed the replacement and
recommissioning of a number of elements of critical equipment, at a
total cost of c. GBP230k funded from operational cash flow:
-- All mixers in the premix tank
-- All primary digester mixers, and refurbishment of all mixer
infrastructure including winches, winch motors and guide rails
-- Full Edina CHP (Combined Heat & Power) engine block change, and completing major service
-- Upgrade and replacement of augers and pumps in feed and
recirculation system including installation of automatic
recirculation system
During Q2 2022, following the major upgrade and futureproofing
works, the plant has enjoyed consistent performance with 95% +
operational efficiency and an average power sales price of GBP163
per mw/hr
Q2 2022 was a period of stable operations and delivery, with
operational efficiency consistently above 95%. Other than
preventative maintenance, which is contracted with long term
service providers, there are no further major upgrade projects
planned in the next 24 months. As seen during Q2, the plant is
expected to operate at over 95% efficiency for the foreseeable
future, with no further scheduled downtime.
Business Development
Throughout H1 2022, EAG carried out due diligence on three
additional AD plants. Under the arrangement with SEM (announced by
Scirocco in an RNS dated 9 December 2021) the Company and EAG
gained exclusive access to a technical solution for the processing
of digestate into a nutrient dense organic fertiliser. The EAG team
engaged in discussions regarding up to seven merchant installations
of the SEM equipment on third party AD plants. This is in addition
to the planned nutrient recovery system at Greenan, which is
expected to increase EBITDA for the entire Greenan complex to c.
GBP1,500k per annum once operational.
Tom Reynolds
Chief Executive Officer
Date: 30 September 2022
Principal risks and uncertainties
The principal risks facing the Company were set out in the
Company's Annual Report and Accounts to 31 December 2021
As the investment policy is implemented, the Company's risk
profile will continue to evolve due to its exposure to different
assets and markets, and a full statement of risks will be published
in subsequent Annual Report and Accounts.
On behalf of the board
Alastair Ferguson
Non-Executive Chairman
Date: 30 September 2022
Directors' responsibilities
The Directors are responsible for preparing the Interim Report
in accordance with applicable law and regulations.
Company law requires the Directors to prepare Company financial
statements for each financial year. Under AIM Rules for Companies
of the London Stock Exchange they are required to prepare the
Company financial statements in accordance with International
Financial Reporting Standards in conformity with the requirements
of the Companies Act 2006. Under Company law the Directors must not
approve the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of the
Company and of the profit or loss of the Company for that period.
The Directors are also required to prepare financial statements in
accordance with the rules of the London Stock Exchange for
companies trading securities on AIM.
Company law requires the Directors to prepare Company financial
statements for each financial year. Under AIM Rules for Companies
of the London Stock Exchange they are required to prepare the
Company financial statements in accordance with International
Financial Reporting Standards (IFRSs) in conformity with the
Companies Act 2006.
In preparing these financial statements, the Directors are
required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and accounting estimates that are reasonable, relevant and reliable;
-- state whether they have been prepared in accordance with IFRS; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the company will
continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the company's
transactions and disclose with reasonable accuracy at any time the
financial position of the company and enable them to ensure that
the financial statements comply with the requirements of the
Companies Act 2006. They are also responsible for safeguarding the
assets of the company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
Website publication
The Directors are responsible for ensuring the annual report and
the financial statements are made available on the Company's
website. Financial statements are published on the Company's
website in accordance with legislation in the United Kingdom
governing the preparation and dissemination of financial
statements, which may vary from legislation in other jurisdictions.
The maintenance and integrity of the Company's website is the
responsibility of the Directors. The Directors' responsibility also
extends to the ongoing integrity of the financial statements
contained therein.
CONDENSED INTERIM STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
Six months Six months
ended ended
Notes 30 June 2022 30 June 2021
(Unaudited) (Unaudited)
Continuing operations GBP 000 GBP 000
Administrative expenses (733) (713)
Loss before investment activities (733) (713)
Interest income 5 65 -
Gain on disposal of shares 8 57 (15)
Costs to sell investments (30) (330)
Exchange gain/(loss) 72 (17)
Fair value through profit and
loss 27 2,910
------------ ------------
(Loss)/profit on ordinary activities
before taxation (542) 1,835
Income tax expense
- -
------------ ------------
Total comprehensive (loss)/profit
for the period from continuing
operations (542) 1,835
------------ ------------
- 9
Discontinued operations 1,314 (337)
Assets held for sale 9
Profit/(loss) recognised on classification
as held for sale
------------ ------------
Profit/(loss) for the period
from discontinuing operations 1,314 (328)
------------ ------------
Profit and total comprehensive
income for the period 772 1,507
------------ ------------
Total comprehensive income attributable
to owners of the parent 772 1,507
------------ ------------
Earnings per share (pence) 10
Basic and diluted 0.10 0.20
Earnings per share from continuing
operations (0.07) 0.25
Basic and diluted
Earnings per share from discontinued 0.17 (0.05)
operations
Basic and diluted
------------ ------------
CONDENSED INTERIM STATEMENT OF FINANCIAL POSITION
As at As at
Notes 30 June 2022 31 December
2021
(Unaudited) (Audited)
GBP 000 GBP 000
Non-current assets
Financial assets at fair value
through profit or loss 11 372 437
------------ -----------
Total non-current assets 372 437
Current assets
Trade and other receivables 14 334 153
Cash and cash equivalents 1,028 2,059
Loan receivable from related party 1,379 1,244
Assets held for sale 13 13,295 11,600
------------ -----------
Total current assets 16,036 15,056
------------ -----------
Total assets 16,408 15,493
------------ -----------
Current liabilities
Trade and other payables 15 202 178
Liabilities held for sale 13 166 166
Total current liabilities 368 344
------------ -----------
Net current assets 15,668 14,712
------------ -----------
Total liabilities 368 344
------------ -----------
Net assets 16,040 15,149
============ ===========
Equity
Share capital 16 1,518 1,518
Deferred share capital 16 2,729 2,729
Share premium reserve 38,155 38,155
Share-based payments 17 2,060 1,941
Retained earnings (28,422) (29,194)
------------ -----------
Total equity 16,040 15,149
============ ===========
CONDENSED INTERIM STATEMENT OF CASH FLOWS
Six months Six months
ended ended
30 June 2022 30 June 2021
(Unaudited) (Unaudited)
GBP 000 GBP 000
Cash flows from operating activities
Cash absorbed by continuing operations 23 (580) (92)
Interest paid - (1)
Net cash outflow from operating activities (580) (93)
---------------------- ----------------------
Cash flows from investing activities
Cash movements in relation to assets held for sale (381) (237)
Payments to acquire investments - (45)
Proceeds from disposal of investments - 1,500
Loan granted to related party (70) -
Net cash (outflow)/inflow from investing activities (451) 1,218
---------------------- ----------------------
Net (decrease)/increase in cash and cash equivalents (1,031) 1,125
Cash and cash equivalents at beginning of period 2,059 1,168
---------------------- ----------------------
Cash and cash equivalents at end of period 1,028 2,293
====================== ======================
CONDENSED STATEMENT OF CHANGES IN EQUITY
Deferred Share Share Retained Total
Share capital share premium based earnings
capital payments
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------------------- -------------- --------- ------------- ------------ -----------
Balance at 31
December 2020 1,448 1,831 38,399 1,470 (25,503) 17,645
Profit for the
period - - - - 1,507 1,507
Credit to
equity for
equity-settled
share-based
payments - - - 298 - 298
--------------------------- -------------- --------- ------------- ------------ -----------
Balance at 30
June 2021 1,448 1,831 38,399 1,768 (23,996) 19,450
--------------------------- -------------- --------- ------------- ------------ -----------
Loss for the
period - - - - (5,198) (5,198)
Issue of share
capital 70 (362) 292 - - -
Shares not
issued moved
to deferred
share capital - 536 (536) - - -
Consideration
received for
shares
to be issued - 724 - - - 724
Credit to
equity for
equity-settled
share-based
payments - - - 173 - 173
Balance at 31
December 2021 1,518 2,729 38,155 1,941 (29,194) 15,149
--------------------------- -------------- --------- ------------- ------------ -----------
Profit for the
period - - - - 772 772
Credit to equity
for
equity-settled
share-based
payments - - - 119 - 119
Balance at 30
June 2022 1,518 2,729 38,155 2,060 (28,422) 16,040
--------------------------- -------------- --------- ------------- ------------ -----------
NOTES TO CONDENSED INTERIM FINANCIAL INFORMATION
1 BASIS OF PREPARATION
The financial information has been prepared under the historical
cost convention and on a going concern basis and in accordance with
International Financial Reporting Standards and as applied in
accordance with the provisions of the Companies Act 2006. The
principal accounting policies adopted by the Company are set out
below.
The condensed interim financial information for the period ended
30 June 2022 has not been audited or reviewed in accordance with
the International Standard on Review Engagements 2410 issued by the
Auditing Practices Board. The figures were prepared using
applicable accounting policies and practices consistent with those
adopted in the statutory accounts for the year ended 31 December
2021. The figures for the year ended 31 December 2021 have been
extracted from these accounts, which have been delivered to the
Registrar of Companies, and contained an unqualified audit
report.
The condensed interim financial information contained in this
document does not constitute statutory accounts. In the opinion of
the Directors the financial information for this period fairly
presents the financial position, result of operations and cash
flows for this period.
This Interim Financial Report was approved by the Board of
Directors on 30 September 2022.
Statement of compliance
These condensed company interim financial statements have been
prepared in accordance with International Financial Reporting
Standards (IFRS) as adopted by the European Union with the
exception of International Accounting Standard ('IAS') 34 - Interim
Financial Reporting. Accordingly, the interim financial statements
do not include all of the information or disclosures required in
the annual financial statements and should be read in conjunction
with the Company's 2021 annual financial statements.
2 ADOPTION OF NEW AND REVISED STANDARDS
The accounting policies adopted in the preparation of the
interim financial statements are consistent with those followed in
the preparation of the Company's annual financial statements for
the year ended 31 December 2021, except for the adoption of new
standards effective as of 1 January 2022. The Company has not early
adopted any standard, interpretation or amendment that has been
issued but is not yet effective.
Several amendments and interpretations apply for the first time
in 2022, but do not have an impact on the interim financial
statements of the Company.
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16:
Interest Rate Benchmark Reform
The amendments in Interest Rate Benchmark Reform - Phase 2,
introduce a practical expedient for modifications required by the
reform, clarify that hedge accounting is not discontinued solely
because of the IBOR reform, and introduces disclosures that allow
users to understand the nature and extent of risks arising from the
IBOR reform to which the entity is exposed to and how the entity
manages those risks as well as the entity's progress in
transitioning from IBORs to alternative benchmark rates, and how
the entity is managing this transition.
Amendments to IFRS 16: Covid-19-Related Rent Concessions beyond
30 June 2021
The amendment extends, by one year, the May 2020 amendment that
provides lessees with an exemption from assessing whether a
Covid-19-related rent concession is a lease modification.
These amendments had no impact on the interim financial
statements of the Company.
3 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The Company makes estimates and assumptions regarding the
future. Estimates and judgements are continually evaluated based on
historical experience and other factors, including expectations of
future events that are believed to be reasonable under the
circumstances. In the future, actual experience may differ from
these estimates and assumptions. The estimates and assumptions that
have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next
financial period are discussed below.
Useful lives of intangible assets and property, plant, and
equipment (note 11)
Intangible assets and property, plant and equipment are
amortised or depreciated over their useful lives. Useful lives are
based on the management's estimates of the period that the assets
will generate revenue, which are based on judgement and experience
and periodically reviewed for continued appropriateness. Changes to
estimates can result in significant variations in the carrying
value and amounts charged to the income statement in specific
periods.
3 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED)
Share-based payments (note 17)
The Company utilised an equity-settled share-based remuneration
scheme for employees. Employee services received, and the
corresponding increase in equity, are measured by reference to the
fair value of the equity instruments at the date of grant,
excluding the impact of any non-market vesting conditions. The fair
value of share options is estimated by using Black-Scholes
valuation method as at the date of grant. The assumptions used in
the valuation are described in note 17 and include, among others,
the expected volatility, expected life of the options and number of
options expected to vest.
Recoverability of trade receivables (note 14)
The Company considers the recoverability of trade receivables to
be a key area of judgement. The Company considers trade receivables
to be credit impaired once there is evidence a loss has been
incurred. An expected credit loss is calculated on an annual basis.
The Directors believe that the debtor is still recoverable based on
their knowledge of the market in Tanzania and historical evidence
of similar receivables being paid. The Directors have recognised
the asset as they believe they are still legally entitled to
receive it. The Tanzanian Government have a history of building up
receivables with other companies and billing them at a future
date.
4 OPERATING SEGMENTS
Based on risks and returns, the Directors consider that the
primary reporting format is by business segment. The Directors
consider that there are two business segments:
-- Head office support from the UK
-- Segment assets for Canada relate to an investment in Corallian Energy
-- Discontinued operations on its investments in Tanzania
Continuing Discontinuing
Operations Operations
6 months to 30 June 2022 Canada UK Total Tanzania Total
GBP000 GBP000 GBP000 GBP000 GBP000
Administrative expenses - (733) (733) - (733)
Interest income - 65 65 - 65
Other gains and losses - 99 99 1,314 1,413
Fair value through profit
and loss - 27 27 - 27
-------
Profit/(loss) from operations
per reportable segment - (542) (542) 1,314 772
======= ======= ======= ============== =======
Additions to non-current
assets - 27 27 - 27
Reportable segment assets 125 2,953 3,078 13,295 16,373
Reportable segment liabilities - (202) (202) (166) (368)
6 months to 30 June 2021 Continuing Discontinuing
Operations Operations
Canada UK Total Tanzania Total
GBP000 GBP000 GBP000 GBP000 GBP000
Administrative expenses - (713) (713) - (713)
Interest income - - - 9 9
Other gains and losses - (362) (362) (337) (699)
Fair value through profit
and loss 2,910 2,910 - 2,910
Profit/(loss) from operations
per reportable segment - 1,835 1,835 (328) 1,507
========== ============ ======== ============== ========
Additions to non-current
assets - 123 123 237 360
Reportable segment assets 125 5,313 5,438 14,628 20,066
Reportable segment liabilities - (450) (450) (166) (616)
5 REVENUE
6 months 6 months
to to
30 June 30 June
2022 2021
GBP000 GBP000
Other significant revenue
Interest income 65 -
Contract balances 30 June 30 June
2022 2021
GBP000 GBP000
Other receivables - 271
Accrued income and interest - 98
Trade receivables accrue interest for non-payment. Outstanding
debtors accrue interest at a rate in accordance with the joint
venture agreement and are generally on terms of 30 days. In 2022,
there is a provision of GBPnil (June 2021: GBP54k) for expected
credit losses on trade receivables.
Interest income relates to interest charged on outstanding
invoices.
6 EXPENSES BY NATURE
6 months 6 months
to 30 June to 30 June
2022 2021
GBP000 GBP000
Continuing operations
Exchange (gains)/losses 72 (17)
Interest income 65 -
Fees payable to the Company's auditor for the audit
of the Company's financial statements (22) (8)
Professional, legal, and consulting
fees (291) (276)
Costs to sell investments (30) (330)
AIM related costs including
investor relations (44) (62)
Accounting-related services (73) (55)
Travel and subsidence (7) -
Office and administrative
expenses (10) (9)
Other expenses - (12)
Fair value through profit or loss 27 2,910
Gain/(loss) on disposal of investments 57 (15)
Share-based payments (119) (298)
Directors' remuneration (133) (17)
Wages and salaries and other
related costs (35) 24
------------ ------------
(542) 1,835
============ ============
7 EMPLOYEES
6 months 6 months
to to
30 June 30 June
2022 2021
Average number of employees (excluding executive directors): - -
========= =========
6 months 6 months
to to
30 June 30 June
2022 2021
(unaudited) (unaudited)
GBP000 GBP000
Their aggregate remuneration comprised:
Wages and salaries - -
============== ==============
6 months 6 months
to to
30 June 30 June
2022 2021
(unaudited) (unaudited)
GBP000 GBP000
Directors' remuneration 133 17
============== ==============
Salary and Share-based Termination Total
fees payments payments
GBP000 GBP000 GBP000 GBP000
Period ended 30 June 2022
Alastair Ferguson 37 25 - 62
Tom Reynolds 75 25 - 100
Donald Nicolson 13 37 - 50
Muir Miller 8 20 - 28
Douglas Rycroft - 12 - 12
133 119 - 252
=========== ============ ============ =======
Salary and Share-based Termination Total
fees payments payments
GBP000 GBP000 GBP000 GBP000
Period ended 30 June 2021
Jonathan Fitzpatrick - 37 - 37
Alastair Ferguson (7) 73 - 66
Tom Reynolds 24 112 - 136
Donald Nicolson - 49 - 49
Muir Miller (appointed 18 February
2021) - 15 - 15
Douglas Rycroft - 12 - 12
----------- ------------ ------------ -------
17 298 - 315
=========== ============ ============ =======
From February 2020, the Directors opted to defer their salaries
with payments resuming from 2022. Shares in lieu of salary will be
issued for deferred amounts (note 17).
No directors received pension contributions in 2022 or 2021.
8 OTHER GAINS AND LOSSES
6 months 6 months
to to
30 June 30 June
2022 2021
GBP000 GBP000
Gain on disposal of Helium One shares 57 36
Loss on disposal of Helium One shares - (51)
--------- ---------
57 (15)
========= =========
9 DISCONTINUED OPERATIONS
The Company had a 25% interest in a high-quality development
project in Tanzania, Ruvuma. At the date of authorisation of these
interim financial statements, the Ruvuma asset has been sold,
following the approval of shareholders at the general meeting on 29
June 2022. Although sold, , the sale remains subject to
satisfaction of certain conditions and no guarantee can be made
that the sale completes.
The results of the discontinued business, which have been
included in the income statement, balance sheet and cash flow
statement, were as follows:
6 months 6 months
to to
30 June 30 June
2022 2021
GBP000 GBP000
Revenue - 9
Fair value revaluation 1,314 (337)
Profit/(loss) before taxation 1,314 (328)
--------- ---------
Net profit/(loss) attributable to discontinuation 1,314 (328)
========= =========
The profit after tax on disposal of the assets held for sale is
made up as follows:
GBP000
Fair value less costs to sell 13,129
Assets and liabilities classified as held for sale at
31 December 2021 (note 13) 11,434
Additions in 6 months to 30 June 2022 381
11,815
Movement on fair value revaluation at 30 June 2022 1,314
=======
Loss per share impact from discontinued operations:
6 months 6 months
to to
30 June 30 June
2022 2021
GBP000 GBP000
Basic and diluted impact (pence) 0.17 (0.05)
========= =========
Cash flow statement
6 months 6 months
to to
30 June 30 June
2022 2021
GBP000 GBP000
Net cash flows from investing activities (381) (162)
--------- ---------
Total cash flows from discontinued operations (381) (162)
========= =========
10 EARNINGS PER SHARE
The calculation of earnings per share is based on the loss after
taxation divided by the weighted average number of shares in issue
during the period:
Six months Six months
to to
30 June 2022 30 June
2021
(Unaudited) (Unaudited)
Weighted average number of ordinary shares used in calculating
basic and diluted earnings per share (millions) 758.79 723.95
GBP000 GBP000
Earnings
Continuing operations
(Loss)/profit for the period from continued operations (542) 1,835
============ ===========
Discontinued operations
Profit/(loss) for the period from discontinued operations 1,314 (328)
============ ===========
Basic and diluted earnings per share (pence)
From continuing operations (0.07) 0.25
From discontinuing operations 0.17 (0.05)
------------ -----------
0.10 0.20
============ ===========
As the inclusion of the potential ordinary shares would result
in a decrease in the loss per share, they are anti-dilutive and, as
such, a diluted loss per share is not included.
11 INVESTMENTS
Quoted Equity Investments
Cost 30 June 31 December
2022 2021
GBP000 GBP000
Quoted equity investments 247 312
Unquoted equity investments 125 125
------- -------------------
372 437
------- -------------------
The quoted investments in the current year relate to an equity
investment held in Helium One Ltd, a company incorporated in the
British Virgin Islands. Their subsidiaries hold helium mining
licenses across Tanzania. The shares held have been valued at the
mark-to-market value of 8.00p per share at 30 June 2022 (7.00p per
share at 31 December 2021). During the period to 30 June 2022, the
Company disposed of 1,550,000 shares. On disposal of the shares the
investment was revalued to the mark-to-market value on the various
dates of disposal and a subsequent gain or loss recognised.
Unquoted Equity Investments
Cost GBP000
At 1 January and 31 December 2021 125
Additions -
------
At 30 June 2022 125
Impairment
------
At 31 December and 30 June 2022 -
Carrying amount
At 31 December 2021 and 30 June 2022 125
======
The unquoted investments in the current period relate to an
equity investment held in Corallian Energy Limited, a company
incorporated in England which holds interests in oil and gas basins
in the United Kingdom.
12 SUBSIDIARIES AND ASSOCIATES
The subsidiaries of Scirocco Energy Plc are Scirocco Energy
International Limited a wholly owned, UK incorporated micro-entity,
which is dormant, and has been since incorporation with an issued
share capital of GBP1 and Scirocco Energy (UK) Limited, a wholly
owned, UK incorporated entity which was dormant until 2021. The
registered office of the subsidiaries is 1 Park Row, Leeds, United
Kingdom, LS1 5AB.
The Company has taken advantage of the exemption under the
Companies Act 2006 s405 not to consolidate Scirocco Energy
International Limited as it has been dormant from the date of
incorporation and is not material for the point of giving a true
and fair view.
The Board announced on 25 August 2021 that the Group had
completed an investment in Energy Acquisitions Group Ltd ("EAG"), a
specialist acquisition and operating vehicle in the sustainable
energy sector. On completion of the investment, Scirocco Energy
(UK) Limited owns 50% of the share capital of EAG.
13 ASSETS AND LIABILITIES CLASSIFIED AS HELD FOR SALE
30 June 2022 31 December
2021
GBP000 GBP000
Intangible assets 12,941 11,246
Oil and gas properties 354 354
-------------------------- ------------
Total assets classified as held for sale 13,295 11,600
========================== ============
Decommissioning provision 166 166
-------------------------- ------------
166 166
========================== ============
At the date of authorisation of these interim financial
statements, the Ruvuma asset has been sold, following the approval
of shareholders at the general meeting on 29 June 2022. Although
sold, the sale remains subject to satisfaction of certain
conditions and no guarantee can be made that the sale
completes.
14 TRADE AND OTHER RECEIVABLES
30 June 2022 31 December
2021
GBP000 GBP000
Other receivables 269 111
Less provision for expected credit losses - -
-------------------------- ------------
269 111
VAT recoverable 55 21
Prepayments 10 21
334 153
========================== ============
The Directors consider that the carrying amount of trade and
other receivables approximates to their fair value.
15 TRADE AND OTHER PAYABLES
30 June 2022 31 December
2021
GBP000 GBP000
Trade payables 126 142
Accruals 76 36
------------------------- ------------
202 178
========================= ============
The Directors consider that the carrying amount of trade
payables approximates to their fair value.
16 SHARE CAPITAL
Number of Nominal value
shares
GBP000
a) Called up, allotted, issued and fully paid: Ordinary
shares of 0.2 pence each
As at 31 December 2020 723,949,575 1,448
20 October 2021 - placing for cash at 0.2 pence 34,838,350 70
----------------- --------------
At 31 December 2021 and 30 June 2022 758,787,925 1,518
================= ==============
30 June 2022 31 December
GBP000 2021
GBP000
b) Deferred shares
At beginning of the period 2,729 1,831
Shares not issued moved to deferred share capital - 536
Issue of new shares - (362)
Consideration received for shares to be issued - 724
----------------- --------------
2,729 2,729
================= ==============
c) Total share options in issue
During the year no incentive options were granted (2021: nil). As at June
30 2022 there were 51,419,781 incentive options in issue (2021: 51,419,781)
During the year 10,193,284 (2021: 24,997,841) share options in lieu of salary
and/or fees due to the relevant option holders were granted. As at 30 June
2022 there were 54,246,990 share options in lieu of salary and/or fees in
issue (2021: 44,053,706)
d) Total warrants in issue
12,500,000 warrants expired in 2022. No warrants were issued or exercised
during the year (2021: nil)
As at 30 June 2022 no warrants were outstanding (2021: 12,500,000).
17 SHARE BASED PAYMENT
The Company has opted to remunerate the Directors for the period
to 30 June 2022 by a grant of an option over the Ordinary Shares of
the capital of the Company as detailed in the deed of option
grants. The life of the options is 18 months. There are 3 executive
directors and 2 non-executive directors who are members of the
plan. The following table summarises the expense recognised in the
Statement of Comprehensive Income since the options were
granted.
30 June 2022 31 December
2021
GBP000 GBP000
Directors' options 32 285
Incentive options 87 186
Credit to equity for equity-settled share-based payments 119 471
========================= ============
During June 2020 (and the height of the Covid-19 pandemic) the
Company sought to put in place a strategy that would help to
conserve the Company's cash position in the near term and to
maximise alignment between the Board, Management team and
Shareholders.
Accordingly, the Company proposed to grant nominal cost options
over new Ordinary Shares of 0.2p (GBP0.002) to Directors and select
members of the Management Team ("the Director Options"). The
Director Options were granted over a total of 10,193,284 Ordinary
Shares (2021: 24,997,841) and have an aggregate value equal (on a
net basis, after deduction of the nominal exercise price per
Ordinary Share) to the fair value of salary and/or fees due to the
relevant option holders up to 30 June 2022.
In 2021, members of the Management Team were also awarded
options over Ordinary Shares with an exercise price of 1.3p
(GBP0.013) ("the Incentive Options"), which was approximately a 24%
premium to the closing mid-market price of the Company's Ordinary
Shares on 26 June 2020. Each Incentive Option is ordinarily
exercisable on the 3rd anniversary of the grant date (being 30 June
2023), except in the event of specified corporate events or,
exceptionally, if the option holder leaves as a 'good leaver'. No
further Incentive Options were awarded in 2022.
17 SHARE BASED PAYMENT (CONTINUED)
The Company used the Black-Scholes model to determine the value
of the incentive options and the inputs. There were no incentive
share options for the period ended 30 June 2022. The value of the
options and the inputs for the period ended 30 June 2022 were as
follows:
Issue 30 June
2020
Incentive
options
Share price at grant (pence) 1.09
Exercise price at grant (pence) 1.30
Expected volatility (%) 84.42
Expected life (years) 6
Risk free rate (%) 0.17
Expected dividends (pence) nil
Expected volatility was determined using the Company's share
price for the preceding 3 years.
The total share-based payment expense in the period for the
Company was GBP86,806 in relation to the issue of incentive options
(2021: GBP186,013) and GBPnil finance charges in relation to
warrants (2021: GBPnil).
The Incentive Options granted represent approximately 6.8% of
the Company's issued share capital (excluding warrants issued to
Prolific Basins LLC). The Board has retained additional headroom
for additional Incentive Options as it recognises that the future
performance of the Company will be dependent on its ability to
retain the services of key executives.
18 FINANCIAL INSTRUMENTS
Categories of financial instruments
The following table combines information about:
-- Classes of financial instruments based on their nature and characteristics; and
-- The carrying amounts of financial instruments
30 June 2022 31 December
2021
GBP000 GBP000
Financial assets at amortised cost
Other debtors 269 111
Prepayments 10 21
Cash and cash equivalents 1,028 2,059
Loan receivable from related party 1,379 1,244
2,686 3,435
========================= ============
Book value Fair value Book value Fair value
30 June 30 June 2022 31 Dec 2021 31 Dec 2021
2022
GBP000 GBP000 GBP000 GBP000
Financial assets at fair
value
Non-current investment -
Helium One 247 247 312 312
Non-current investment -
Corallian Energy Limited 125 125 125 125
372 372 437 437
=========== ============== ========================= ==============
30 June 2022 31 December
2021
GBP000 GBP000
Financial liabilities at amortised cost
Trade payables 126 142
Accruals 76 36
202 178
========================= ================
18 FINANCIAL INSTRUMENTS (CONTINUED)
The table below analyses financial instruments carried at fair
value, by valuation method.
Fair values are categorised into different levels in a fair
value hierarchy based on the inputs used in the valuation
techniques as follows:
-- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
-- Level 2: inputs other than quoted prices included in Level 1
that are observable for the asset or liability, either directly
(i.e., as prices) or indirectly (i.e., derived from prices).
-- Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
The fair values for the Company's assets and liabilities are not
materially different from their carrying values in the financial
statements.
The following table presents the Company's financial assets that
are measured at fair value:
Level 1 Level 2 Level 3 Total
GBP000 GBP000 GBP000 GBP000
Non-current investment -
Helium One 247 - - 247
Non-current investment -
Corallian Energy Limited - - 125 125
247 - 125 372
======== ======== ======== =======
The Company does not have any liabilities measured at fair
value. There have been no transfers in to or transfers out of fair
value hierarchy levels in the period.
Financial instruments in level 1
The fair value of financial instruments traded in active markets
is based on quoted market prices at the reporting date. A market is
regarded as active if quoted prices are readily and regularly
available from an exchange, dealer, broker, industry group, pricing
service, or regulatory agency, and those prices represent actual
and regularly occurring market transactions on an arm's length
basis. The quoted market price used for financial assets held by
the Company is the current bid price.
Financial instruments in level 2
The fair value of financial instruments that are not traded in
an active market is determined by using valuation techniques. These
valuation techniques maximise the use of observable market data
where it is available and rely as little as possible on entity
specific estimates. If all significant inputs required to fair
value an instrument are observable, the instrument is included in
level 2. No investments are valued using level 2 inputs in the
period.
Financial instruments in level 3
If one or more of the significant inputs is not based on
observable market data, the instrument is included in level 3.
Following the guidance of IFRS 9, these financial instruments have
been assessed to determine the fair value of the instrument. In
their assessment, the Directors have considered both external and
internal indicators to decide whether an impairment charge must be
made or whether there needs to be a fair value uplift on the
instrument.
The carrying value of the Company's financial assets and
liabilities measured at amortised cost are approximately equal to
their fair value. The Company is exposed through its operations to
one or more of the following financial risks:
-- Fair value or cash flow interest rate risk
-- Foreign currency risk
-- Liquidity risk
-- Credit risk
-- Market risk
-- Expected credit losses
Policy for managing these risks is set by the Board. The policy
for each of the above risks is described in more detail below.
Fair value and cash flow interest rate risk
Generally, the Company has a policy of holding debt at a
floating rate. The Directors will revisit the appropriateness of
this policy should the Company's operations change in size or
nature. Operations are not permitted to borrow long-term from
external sources locally.
18 FINANCIAL INSTRUMENTS (CONTINUED)
Foreign currency risk
Foreign exchange risk arises because the Company has operations
located in various parts of the world whose functional currency is
not the same as the functional currency in which the Company's
investments are operating. The Company's net assets are exposed to
currency risk giving rise to gains or losses on retranslation into
sterling. Only in exceptional circumstances will the Company
consider hedging its net investments in overseas operations as
generally it does not consider that the reduction in volatility in
net assets warrants the cash flow risk created from such hedging
techniques.
The Company's exposure to foreign currency risk at the end of
the reporting period is summarised below.
30 June 31 December
2022 2021
$000 $000
USD USD
Trade and other receivables 150 150
Cash and cash equivalents 732 1,415
Trade and other payables - (166)
Net exposure 882 1,399
======== ============
Sensitivity analysis
As shown in the table above, the Company is primarily exposed to
changes in the GBP:USD exchange rate through its cash balance held
in USD and trading balances. The table below shows the impact in
GBP on pre-tax profit/loss of a 10% increase/decrease in the
GBP:USD exchange rate, holding all other variables constant.
30 June 2022 31 December
2021
GBP000 GBP000
GBP:USD exchange rate increases 10% 66 116
GBP:USD exchange rate decreases 10% (80) (142)
Liquidity risk
The liquidity risk of each entity is managed centrally by the
treasury function. Each operation has a facility with treasury, the
amount of the facility being based on budgets. The budgets are set
locally and agreed by the Board annually in advance, enabling the
cash requirements to be anticipated. Where facilities of the Group
need to be increased, approval must be sought from the finance
Director. Where the amount of the facility is above a certain
level, agreement of the Board is needed.
All surplus cash is held centrally to maximise the returns on
deposits through economies of scale. The type of cash instrument
used, and its maturity date will depend on the forecast cash
requirements.
The table below analyses the Company's financial liabilities
into relevant maturity groupings based on their contractual
maturities. The amounts presented are the undiscounted cash
flows.
Less than 6 to 12 months Between 1 Between
6 months and 2 years 2 and 5 years
GBP000 GBP000 GBP000 GBP000
30 June 2022
Trade and other payables 202 - - -
Total 202 - - -
========== =============== ============= ===============
31 December 2021
Trade and other payables 178 - - -
Total 178 - - -
====
Credit risk
The Company is mainly exposed to credit risk from credit sales.
It is Company policy, implemented locally, to assess the credit
risk of new customers before entering contracts. Such credit
ratings are taken into account by local business practices.
The Company does not enter into complex derivatives to manage
credit risk, although in certain isolated cases may take steps to
mitigate such risks if it is sufficiently concentrated.
18 FINANCIAL INSTRUMENTS (CONTINUED)
Market risk
As the Company invests in listed companies, the market risk will
be that of finding suitable investments for the Company to invest
in and the returns that those investments will yield given the
markets in which investments are made.
Expected credit losses
Allowances are recognised as required under the IFRS 9
impairment model and continue to be carried until there are
indicators that there is no reasonable expectation of recovery.
For trade and other receivables which do not contain a
significant financing component, the Company applies the simplified
approach. This approach requires the allowance for expected credit
losses to be recognised at an amount equal to lifetime expected
credit losses. For other debt financial assets, the Company applies
the general approach to providing for expected credit losses as
prescribed by IFRS 9, which permits for the recognition of an
allowance for the estimated expected loss resulting from default in
the subsequent 12-month period. Exposure to credit loss is
monitored on a continual basis and, where material, the allowance
for expected credit losses is adjusted to reflect the risk of
default during the lifetime of the financial asset should a
significant change in credit risk be identified.
Most the Company's financial assets are expected to have a low
risk of default. A review of the historical occurrence of credit
losses indicates that credit losses are insignificant due to the
size of the Company's clients and the nature of the services
provided. The outlook for the oil and gas industry is not expected
to result in a significant change in the Company's exposure to
credit losses. As lifetime expected credit losses are not expected
to be significant the Company has opted not to adopt the practical
expedient available under IFRS 9 to utilise a provision matrix for
the recognition of lifetime expected credit losses on trade
receivables. Allowances are calculated on a case-by-case basis
based on the credit risk applicable to individual
counterparties.
Exposure to credit risk is continually monitored to identify
financial assets which experience a significant change in credit
risk. In assessing for significant changes in credit risk the
Company makes use of operational simplifications permitted by IFRS
9. The Company considers a financial asset to have low credit risk
if the asset has a low risk of default; the counterparty has a
strong capacity to meet its contractual cash flow obligations in
the near term; and no adverse changes in economic or business
conditions have been identified which in the longer term may, but
will not necessarily, reduce the ability of the counterparty to
fulfil its contractual cash flow obligations. Where a financial
asset becomes more than 30 days past its due date additional
procedures are performed to determine the reasons for non-payment
to identify if a change in the exposure to credit risk has
occurred.
Should a significant change in the exposure to credit risk be
identified the allowance for expected credit losses is increased to
reflect the risk of expected default in the lifetime of the
financial asset. The Company continually monitors for indications
that a financial asset has become credit impaired with an allowance
for credit impairment recognised when the loss is incurred. Where a
financial asset becomes more than 90 days past its due date,
additional procedures are performed to determine the reasons for
non-payment to identify if the asset has become credit
impaired.
The Company considers an asset to be credit impaired once there
is evidence that a loss has been incurred. In addition to
recognising an allowance for expected credit loss, the Company
monitors for the occurrence of events that have a detrimental
impact on the recoverability of financial assets. Evidence of
credit impairment includes, but is not limited to, indications of
significant financial difficulty of the counterparty, a breach of
contract or failure to adhere to payment terms, bankruptcy or
financial reorganisation of a counterparty or the disappearance of
an active market for the financial asset. A financial asset is only
written off when there is no reasonable expectation of
recovery.
A provision matrix can be used based on historical data of
default rates adjusted for a forward-looking estimate. The history
of default rates needs to be accessed in conjunction with the aging
of the trade receivable balance. The aging of a balance alone does
not require a provision but can be used as a structure to apply the
rates calculated. The historical default rates are used in
accordance with forward looking information.
To determine the amount of ECL to be recognised in the financial
statements, Scirocco is using a provision matrix based on its
historical observed default rates which is adjusted for
forward-looking estimates and establishes that ECL should be
calculated as:
None-past due 0.5% of carrying value
30 days past due 2% of carrying value
31-60 days past due 4% of carrying value
61-90 days past due 6% of carrying value
90 days - 3 years past due 10% of carrying value
Over 3 years past due 20% of carrying value
The simplified approach enables Scirocco to make an estimate of
ECL as they are unable to track the credit worthiness of
customers.
18 FINANCIAL INSTRUMENTS (CONTINUED)
The total outstanding amount is GBP123k at 30 June 2022 (30 June
2021: GBP271k) with no ECL recognised in the current period (2021:
GBP54k). The Directors believe that the debtor is still recoverable
based on their knowledge of the market in Tanzania and historical
evidence of similar receivables being paid. The Directors have
recognised the asset as they believe they are still legally
entitled to receive it. The Tanzanian Government have a history of
building up receivables with other companies and billing them at a
future date.
19 RELATED PARTY TRANSACTIONS
The Company had the following amounts outstanding from its
investee companies at the balance sheet date.
30 June 2022 31 December
2021
GBP000 GBP000
Helium One Ltd opening balance - 73
Conversion to share capital in Helium One Limited - (73)
------------------------- ------------
Closing balance - -
========================= ============
The only transactions between the parent and its subsidiaries,
which are related parties, relate to a loan from parent to Scirocco
(UK) limited, and interest charged on this loan. Details of
Director's remuneration, being key personnel, are given in note
7.
The Company entered transactions with the following related
parties who have common directors during the current period:
30 June 2022 31 December
2021
GBP000 GBP000
Gneiss Energy Limited - provision of corporate finance
advisory - common director Jonathan Fitzpatrick.
Resigned as director of Scirocco Energy plc July
2021. 135 606
Quixote Advisors Ltd - provision of management services
- common director Tom Reynolds - (19)
During the period, the Company paid related party Gneiss Energy
Limited fees related to corporate financial advice and management
services.
20 ULTIMATE CONTROLLING PARTY
In the opinion of the Directors there is no controlling
party.
21 COMMITMENTS
As at 30 June 2022, the Company had no material commitments (31
December 2021: GBPnil).
22 RETIREMENT BENEFIT SCHEME
The Company operates only the basic pension plan required under
UK legislation, contributions thereto during the period amounted to
GBPnil (31 December 2021: nil).
23 CASH GENERATED BY OPERATIONS
30 June 2022 30 June 2021
GBP000 GBP000
Profit/(loss) for the period from continuing operations (542) 1,835
Profit/(loss) for the period for discontinuing operations 1,314 (328)
Adjustments for:
Finance costs - 1
Exchange movement - 6
Loss on disposal of investments - 15
Revaluation of investments to mark-to-market value (81) (2,910)
(Profit)/loss on fair value revaluation of available
for sale assets (1,314) 337
Interest accrued on loan to related party (65) -
Equity settled share-based payment expense 119 298
Movements in working capital:
(Increase)/decrease in trade and other receivables (35) 456
Increase in trade and other payables 24 198
Cash absorbed by operations (580) (92)
========================= ===================
24 EVENTS AFTER THE REPORTING DATE
Sale of 25% Interest in Ruvuma asset
On 12 July 2022 the Company r eceived formal notice from ARA
Petroleum Tanzania Limited ("APT"), the current 50% interest holder
and operator of Ruvuma, that it was exercising its pre-emption
rights with regards to Scirocco's proposed divestment of the Ruvuma
asset ("Ruvuma") to Wentworth Resources plc ("Wentworth") in
addition to a separate letter received from the Tanzania Petroleum
Development Corporation ("TPDC") stating that it is considering
exercising its statutory rights of first refusal in relation to the
Ruvuma pursuant to Section 86(5) of the Petroleum Act 2015. On 19
August 2022, the Company received written confirmation from the
Tanzania Petroleum Development Corporation ("TPDC") that it was not
exercising its statutory right of first refusal with respect to the
Company's divestment of its 25% interest in the Ruvuma asset.
On 31 August 2022, APT and Scirocco entered into binding
agreements which, inter-alia, provides access to cash call cover
through the previously announced loan facility (with Wentworth
Resources plc) and 1st drawdown notice for $1.614 million. Other
than for adjustments with respect to conditions precedent then
fulfilled, APT entered into all of the same agreements (and on the
same terms) as Wentworth Resources plc (as detailed in the
Company's announcement of 13 June 2022).
Requisitioned EGM
On 2 September 2022, the Company received a letter from a group
of shareholders of the Company requesting the Company to convene a
general meeting of the Company's shareholders pursuant to section
303 of the Companies Act 2006 (the "Act"). Pursuant to this request
on 15 September 2022, the Company published a Circular to
Shareholders, along with accompanying Notice of General Meeting and
Form of Proxy.
Corallian Sale Announcement
On 14 September 2022, the Company noted the announcement by
Reabold Resources plc regarding the conditional sale of its
investee company, Corallian Energy Limited in which Scirocco owns
83,333 shares following a subscription by Scirocco in 2018 at a
price of GBP1.50 per share. A price of up to GBP3.20 per share will
be paid to Corallian shareholders as a combination of initial cash
plus contingent payments offering a profitable exit with up to
GBP267k of proceeds net to Scirocco (based on estimated GBP3.20 per
share).
Investment Facility Part Settlement
On 27 September 2022, the Company announced that the subscriber
(the "Subscriber") under the share subscription deed governing the
investment facility ("Investment Facility"), the details of which
were announced to the market on 29 June 2020, had issued the
Company a settlement notice for US$100,000. Accordingly, the
Company issued and allotted 44,923,630 ordinary shares, with a
deemed price of GBP0.0020 ("Settlement Shares") to the Subscriber.
The Subscriber's investment was made as a prepayment for ordinary
shares in the Company, the number (and price) of which were to be
determined at the time the Subscriber elected to receive such
shares, according to the average of five daily volume-weighted
average prices during the twenty trading days prior to the date of
such election.
At the time the Company sent out its Notice of its 2022 AGM held
on 3 August, and continuing through the actual AGM, it was not
aware it would be able to rely on the authority granted at the 2020
AGM, hence why Resolution 5 was proposed. Following the defeat of
Resolution 5, the Company therefore believed, at that time, and as
stated in the Result of AGM RNS on 3 August, that it was in default
of the Prolific Basins facility.
Subsequent to the 2022 AGM, the Company reviewed prior
authorities as part of a discussion with Prolific Basins regarding
settlement of the facility. At the 2020 AGM, approval was taken to
allot shares on a non-pre-emptive basis in favour of Prolific and
the resolution included the wording as follows: "... save that the
Company may make an offer or agreement before the expiry of the
authority which would or might require shares to be allotted or
Rights to be granted after expiry of the authority and the
Directors of the Company may allot shares and grant Rights in
pursuance of that offer or agreement as if the authority had not
expired."
This is a standard formulation in non-pre-emptive authorities
(derived from s.570(4) of the Companies Act 2006) to allot to cover
agreements reached prior to the expiry of that authority to allow
allotments to be made after the expiration of such authority.
Therefore the Company considers that the GBP1m authority taken
at the 2020 AGM can be used to allot shares to Prolific on a
continuing basis given there is sufficient headroom remaining
thereunder. Any subsequent authorities requested (such as at the
2022 AGM), part of an assessment of risk about potential headroom,
are not necessary given the share price and amount remaining under
the 2020 authority suffices to allot shares to Prolific.
The Company does not have a general authority to allot on a
non-pre-emptive basis given this has expired and that resolution
did not pass at the 2022 AGM. It is only the ability to allot
shares to Prolific that continues pursuant to the authority
described above
25 A COPY OF THIS INTERIM STATEMENT IS AVAILABLE ON THE
COMPANY'S WEBSITE: www.sciroccoenergy.com.
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END
IR FLFVRATIAFIF
(END) Dow Jones Newswires
September 30, 2022 02:00 ET (06:00 GMT)
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