TIDMCEG
RNS Number : 9830M
Challenger Energy Group PLC
27 September 2021
27 September 2021
Challenger Energy Group PLC
("Challenger Energy" or the "Company")
Annual Report and Financial Statements for the year ended 31
December 2020
Challenger Energy (AIM: CEG), the Caribbean and Atlantic margin
focused oil and gas company, with production, appraisal,
development, and exploration assets across the region, is pleased
to announce its Final Results for the year ended 31 December
2020.
The Company's Annual Report will be posted to shareholders,
along with the notice of AGM and proxy form, on Thursday 30th
September 2021. The AGM is to be held on 25th October 2021 at
Challenger Energy PLC, IOMA House, Hope Street, Douglas, Isle of
Man, IM1 1AP.
The Financial Statements for the Year Ended 31 December 2020 and
Annual Report, along with notice of AGM and proxy form, are now
available on the Company's website https://www.cegplc.com/ .
For further information, please contact:
Challenger Energy Group PLC Tel: +44 (0) 1624
Eytan Uliel, Chief Executive Officer 647 882
Strand Hanson Limited - Nomad Tel: +44 (0) 20 7409
Rory Murphy / James Spinney / Rob 3494
Patrick
Shore Capital Stockbrokers Limited Tel: +44 (0) 207
- J oint Broker 408 4090
Jerry Keen / Toby Gibbs
Investec Bank Plc - J oint Broker Tel: +4 4 (0) 207
Chris Sim / Jarrett Silver 597 5970
Gneiss Energy - Financial Adviser Tel: +44 (0) 20 3983
Jon Fitzpatrick / Paul Weidman / Doug 9263
Rycroft
CAMARCO Tel: +44 (0) 020 3757
Billy Clegg / James Crothers / Hugo 4980
Liddy
This announcement contains inside information for the purposes
of Article 7 of EU Regulation 596/2014, which forms part of United
Kingdom domestic law by virtue of the European Union (Withdrawal)
Act 2018.
Notes to Editors
Challenger Energy is a Caribbean and Atlantic margin focused oil
and gas company, with a range of exploration, appraisal,
development and production assets and licences, located onshore in
Trinidad and Tobago, and Suriname, and offshore in the waters of
The Bahamas and Uruguay. In Trinidad and Tobago, Challenger Energy
has five (5) producing fields, two (2) appraisal / development
projects and a prospective exploration portfolio in the South West
Peninsula. In Suriname, Challenger Energy has on onshore appraisal
/ development project. Challenger Energy's exploration licence in
each of Uruguay and The Bahamas are highly prospective, and offer
high-impact value exposure within the overall portfolio value.
Challenger Energy is quoted on the AIM market of the London
Stock Exchange.
https://www.cegplc.com
Challenger Energy Group
(formerly Bahamas Petroleum Company)
Annual Report and Financial Statements
For the year ended 31 December 2020
Highlights
Strategic
-- Since early 2020 the Company has pursued a strategy to
broaden its asset base and diversify its risk profile such that the
Company's future was not solely reliant on the outcome of
exploration drilling in The Bahamas, albeit still highly leveraged
to its outcome
-- In 2020, successful execution of that strategy saw the
Company's business transform to become a full-cycle exploration and
production company, centred on the Caribbean and the Atlantic
margin
-- The Company's portfolio now consists of 14 assets in four
countries that span the industry value chain from production to
development, appraisal, and both infrastructure-led and high-impact
frontier basin exploration
Production / Appraisal Operations
-- A focussed work program since August 2020, when the Company
assumed control of its portfolio of mature producing Trinidadian
oilfields, has enabled natural reservoir decline to be mitigated
and increasing revenues achieved
-- The licence for the Goudron field in Trinidad was extended
for 10 years in November 2020; work is underway in respect of
extensions of the Innis-Trinity and South Erin fields (for 2022 and
beyond)
-- The Saffron-2 appraisal well in Trinidad was planned during
2020 and subsequently drilled in July 2021 - the well is currently
producing and has demonstrated the commercial viability of the
Saffron project, with work underway in support of pursuing a
development of the Saffron field in 2022
-- Planning, design and environmental approval of the Weg Naar
Zee appraisal well and Extended Well Test in Suriname has been
completed, with that project targeted to commence as soon as
Covid-19 circumstances in Suriname allow
Exploration Activities
-- The Perseverance-1 exploration well was drilled offshore The
Bahamas between December 2020 and February 2021 - the first
exploration well in The Bahamas since the 1980s. Post well analysis
has indicated the potential for a deeper Jurassic oil source, with
activity now focussed on securing a farm-in partner and renewing
licences for the next phase of activity
-- Following a competitive bid process, the Company was awarded
the OFF-1 o shore block in Uruguay in May 2020, a 15,000 km(2)
licence area with estimated exploration potential in excess of 1
billion barrels of oil recoverable
-- Work has continued throughout the period to better define the
exploration potential of the Southwest Peninsula in Trinidad,
including reprocessing of the regional 3D seismic grid - several
prospects have been identified with an estimated aggregate of more
than 200 million barrels of oil recoverable
HSES
-- In the context of significantly increased operational
activity and the extreme operating challenges presented by the
Covid-19 pandemic, a concerted effort has been made across the
Company's operations to ensure "best in class" policies, procedures
and performance in relation to Health, Safety, Environment and
Security (HSES)
-- After extensive planning and preparation for the drilling
campaign in The Bahamas, Perseverance-1 was drilled without any
safety or environmental incidents
-- Extensive work was undertaken in late 2020 in pursuit of Safe
to Work (STOW) accreditation in Trinidad, which was recommended in
January 2021 and approved in August 2021 for a two-year period
Chairman's Letter to the Shareholders
Dear Shareholders,
Over the last 18 months, the Covid-19 pandemic has dramatically
altered the global operating environment for all businesses. At the
same time, there were a number of significant developments at our
Company. These are discussed in further detail in the Chief
Executive Officer's report and in the balance of this annual report
document. To provide context, however, I wish to offer some
comments in terms of three main themes applicable to Challenger
Energy's business in the period under review: strategy, focus on
HSES, and shareholder value outcomes.
Strategy
At the start of 2020, this Company had a single business focus:
a group of four geographically and commercially co-joined
exploration licences, located in the southern territorial waters of
The Bahamas, with an obligation to drill an initial exploration
well prior to the end of 2020. After more than ten years of
preparatory work, the Company had entered 2020 in an advanced state
of preparation for the drilling of this well, named Perseverance-1.
At that time, drilling was scheduled to commence in April 2020.
Thus, at the start of 2020, all activities in the Company were
focussed in support of this sole objective.
Plans were materially disrupted by the outbreak of the global
Covid-19 pandemic in the beginning of 2020. Seemingly overnight,
many countries became subject to extensive lockdowns, and
international movements of people and resources became difficult,
if not impossible. In our industry, this was compounded by a
dramatic collapse in oil prices, such that many projects were
either delayed or mothballed. Challenger Energy was in a similar
position to its industry peers, and once confronted with the full
scale of the unprecedented Covid-19 crisis it was soon realised
that safe and uninterrupted drilling operations in April 2020 could
not be assured. Reluctantly, management decided the best course of
action was to defer the drilling of Perseverance-1 to the end of
2020, after the domestic hurricane season and allowing additional
time for appropriate planning and preparation once the impacts of
the pandemic would be better known.
In the following months, during what could perhaps be described
as a period of extended industry "inactivity" occasioned by the
pandemic, the Board and management undertook a review of prevailing
conditions in the oil and gas exploration sector. Collectively, it
was concluded that a business model based on a single-project,
high-impact exploration outcome in a frontier location was unlikely
to be sustainable in a world being fundamentally - and rapidly -
reshaped.
It was determined that a shift in strategy was necessary and
eminently possible. Given the prevailing state of the industry,
Challenger Energy could broaden from being a single-asset business
into a full-cycle exploration and production company centred on the
Caribbean and the Atlantic margin. This would complement
high-impact exploration with active oil production and thus
cashflow. The objective the Board set for management was thus to
work toward assembling a diverse portfolio of assets, in multiple
jurisdictions, and with a spread of operational activity across the
industry spectrum - from production and development to appraisal
and exploration.
In terms of execution of this strategy, through the course of
2020 there were two notable developments. In June 2020 the Company
was successful in its application and was awarded a high-impact
exploration licence offshore Uruguay. Also in June 2020 a
transaction whereby the Company would acquire 100% of Columbus
Energy Resources PLC (Columbus) was announced. Columbus owned and
operated a range of complementary oil assets in Trinidad and
Tobago, and Suriname.
That latter transaction completed in August 2020, such that in
the space of approximately six months, the Company had been
transformed. From being a company with one high-impact project in
one country at the start of 2020, the Company exited 2020 with 14
projects in four countries. Detail of this enlarged portfolio of
assets is set out further on page 11 of the annual report.
In the process, the risk profile of the Company was likewise
transformed, from being 100% exposed to the outcome of a single
offshore exploration well in The Bahamas, to having a broad
portfolio of assets, including active oil fields in production. So,
whilst remaining heavily leveraged to the success of the
exploration drill bit, the strategic transformation during 2020
meant that any exploration downside was somewhat mitigated.
HSES
It should go without saying that first and foremost in any oil
industry operation is the objective to ensure that work is carried
out safely, without incident, and without causing any harm to
people or the environment - an objective that in 2020 became all
the more acute given the impacts of the pandemic.
Moreover, the impending drilling of Perseverance-1 coupled with
the integration of an active production business meant that in 2020
the responsibilities of the Board and management transitioned
quickly from being a small team of eight full-time personnel,
focussed entirely on exploration activities in The Bahamas, to
being an international business with an operating staff base of
over 80 and about 40 retained consultants. Operations through 2020
expanded considerably, to encompass not only exploration and
appraisal programs in several jurisdictions, but also managing
active production from multiple producing oil fields, operating the
drilling of a large, complex offshore well in The Bahamas, and
preparing for onshore drilling activities elsewhere in the
portfolio.
With this substantial increase in operational activity came a
commensurately increased assurance process based around an intense
focus on all aspects of HSES. Accordingly, through the course of
2020, everyone at Challenger Energy worked diligently to embed new
HSES processes, protocols and procedures across the expanded group.
The objective was clear: to place HSES outcomes at the centre of
every aspect of Challenger Energy's collective endeavours. I am
thus pleased to be able to report that there has been a consistent
level of performance upgrade across all key HSES metrics.
The Company has also committed to establishing a formal
Environment, Social and Governance (ESG) sustainability framework,
comprising a clear ESG strategy and associated goals along with
regular tracking of performance against those goals. We expect to
begin rolling this out across the Company in 2022.
Shareholder Value Outcomes
Over the course of the last 18 months, our business has been
supported by a carefully executed funding strategy, including
private institutional placings, an open offer to our existing
shareholders, and various convertible debt facilities. I would like
to thank our shareholders and financiers for their continued
support, as well as our directors, management and staff who have
participated materially in these funding initiatives alongside
shareholders, in support of our common goals.
I feel it would be remiss of me if I did not at this point
address "the elephant in the room". That is, since the results of
Perseverance-1 became known in February 2021, the Company's share
price has declined markedly, and despite a lot of hard work by
everyone in the Company there has not yet been the kind of
operating success elsewhere in the portfolio required to offset
that decline. In this regard, I make several observations.
Firstly, the Company had a clear obligation to shareholders and
the Government of The Bahamas to drill Perserverance-1 within a
defined time period. This obligation was met, and drilling was
carried out safely and responsibly, despite the compounding
uncertainties and unprecedented operating disruptions caused by the
global pandemic, a last-minute legal challenge from environmental
activists, mixed public messaging from Government authorities, and
an unprecedented collapse in global oil prices. Individually, each
of these impacts would have severely challenged companies with much
larger resources, and it is thus a testament to the tenacity of the
management team that drilling was nonetheless able to proceed.
Collectively, however, these impacts meant that as we approached
the start of drilling, the Company's access to funding became
materially constrained. This resulted in some last-minute funding
decisions that could not be avoided in the circumstances so as to
ensure continued operations. Whilst necessary, these decisions were
unpopular with some shareholders, and were certainly a divergence
from our longstanding funding strategy to that point.
Secondly, there is nothing that anyone could have done to change
the eventual drilling outcome of Perseverance-1. After ten years in
the making, when the well was finally drilled the rocks encountered
did not yield a commercial discovery at the drill location. Given
this technical outcome, nothing would have prevented a significant
decline in share price following - just as a significant increase
in share price would have inevitably followed had the drilling
result been an unmitigated commercial success. In the end, this is
the risk-reward equation that any investor in an exploration
focussed oil and gas company assumes.
Thirdly, for many years, Board and executive remuneration was
heavily aligned toward the outcome of Perseverance-1. Many of us
have invested substantially in the Company, becoming sizeable
shareholders in our own right and/or by having foregone
remuneration. Board and management have thus all shared very
directly in the poor financial outcome flowing from the result of
the well.
Which brings me to my final observation on this subject: we're
still here. Without the strategic shift to become an expanded
portfolio business initiated in early 2020, and had the Company not
succeeded through the course of 2020 in executing on this strategy,
the result of Perseverance-1 would unequivocally have meant the end
of this Company. Instead, shareholders continue to have a business,
and there remain multiple opportunities to restore shareholder
value. More than that, everyone who works at Challenger Energy is
motivated and incentivised to do so. So, whilst it will of course
take time and effort to rebuild, and whilst there are no guarantees
in any business, your Company has good assets, an experienced and
deeply committed team, and a proven capacity to stick with it and
get things done, even in the most trying of circumstances.
Looking Forward
Overall, the last 18 months has been a time of considerable
activity at Challenger Energy, with many of the Company's
operational objectives achieved, despite some unprecedented
challenges. The financial reward for this effort has not been
realised given the technical outcomes, but our team has worked
diligently and tirelessly throughout the period. I would like to
thank everyone at Challenger Energy for their hard work and
commitment to the tasks at hand.
I would especially like to thank Mr Simon Potter, our CEO for
the last ten years, who in May 2021 stepped back from daily
executive duties. Without Simon's leadership over the past decade,
we would not have accomplished the various milestones of the last
year, and I am delighted he will continue to support the business
as a non-executive director going forward. Mr Eytan Uliel, who has
been our Chief Commercial Officer for many years, has taken over as
the CEO. Eytan brings not only continuity but also fresh
perspective to the Board and I look forward to working with him in
the years ahead. I would also like to thank Adrian Collins and Ross
McDonald, both of whom have retired from the Board in recent
months, for their support over the years.
Looking to the future, your Board remains focussed on delivering
the various opportunities across Challenger Energy's expanded
portfolio. I look forward to reporting further to you on our
progress in the year ahead.
Bill Schrader
Chairman
24 September 2021
Chief Executive Officer's Report to the Shareholders
Dear Shareholders,
This is my first report to you, the owners of the Company, in my
capacity as Chief Executive Officer, having assumed that position
in May 2021.
Strictly speaking, this annual report covers the 2020 financial
year period (that is, from January to December 2020, before I
became CEO). Timing for reporting for the 2020 year has, however,
been delayed longer than usual owing to the Covid-19 pandemic, and
many of the more significant milestone events for our Company,
whilst a direct outcome of work undertaken during 2020, actually
occurred in the first half of 2021 and subsequent. In general,
therefore, I will speak in this report to the period from the start
of 2020 until the middle of 2021.
Perseverance-1 in The Bahamas
Without question, drilling of Perseverance-1 in The Bahamas was
a key event in the history of this Company. Drilling commenced on
20 December 2020, and was subsequently completed in February 2021,
after having been delayed from the targeted start in April 2020
because of the outbreak of the pandemic. Long-standing shareholders
will be well aware, however, that this drilling campaign
represented the culmination of more than a decade of work: from the
initial award of the licences in The Bahamas in 2007, to the
acquisition of 3D seismic in 2011, to an extensive amount of data
acquisition and technical work spanning many years, and finally the
drilling - the first such well to be drilled in The Bahamas since
the 1980s.
We all know the Perseverance-1 well result - drilling did not
result in a commercial discovery at the Perseverance-1 location.
That is part of life in the oil and gas exploration business: no
matter how much high-quality technical work precedes drilling, you
do not know what resource lies beneath until the well is down.
That said, there are many aspects of the drilling campaign which
everyone associated with Challenger Energy should be proud of. In
particular, we did what we said we would do. Despite many
challenges and numerous setbacks along the way, we eventually
drilled the well, thus meeting our core objective of testing the
structures at the chosen drilling location.
To do this, we had to work effectively through several changes
of Government in The Bahamas. We had to secure the finance needed
for the drill, a task most commentators thought was beyond our
grasp. We had to recruit an experienced drilling team, and we had
to operate a complex offshore drilling program more typically the
province of much larger companies. Along the way we built up and
deployed the capacity necessary to execute the well, which included
bringing together a contractor group made up of some of the world's
most respected service companies - familiar names like Stena,
Halliburton and, Schlumberger. And, we saw off a legal challenge
from environmental activists that was launched at the very last
minute in a cynical effort to halt our legitimate business
operations.
More than that: we successfully conducted operations during a
pandemic. The safe drilling of any offshore exploration well is
always a technical challenge, but to do so during a global pandemic
necessitated complex logistical planning, and the fact that we were
able to drill for approximately seven weeks without an outbreak of
infection on the rig is a reflection of the rigorous systems and
procedures employed. In so doing, we fulfilled our commitments to
the Government of The Bahamas and its people, through operating the
drilling program responsibly, and without any incidents.
Looking forward in The Bahamas, it is worth noting that whilst
Perseverance-1 may not have resulted in the commercial discovery we
hoped for, a substantial amount of data and learning has been
obtained from the drill. We are still integrating all of this
information, but it provides encouraging support for the
possibility of a deeper Jurassic oil play.
As I have observed in other forums, we had hoped for 'instant
gratification' with Perseverance-1, which was not the case.
However, it is important to remember that in our industry several
exploration wells are often required before the potential of a
frontier basin is unlocked, and based on what we have learned from
Perseverance-1, we continue to believe that our licences in The
Bahamas are prospective. We have thus shifted our focus to the
future of this project: (i) renewing the licences into a third,
three-year exploration period, and (ii) securing a partner -
ideally a large industry player - to provide expertise and capital
for the next phase of activity. I look forward to updating
shareholders on our progress in this regard.
Production Operations in Trinidad & Tobago
In August 2020 we completed the acquisition of Columbus,
creating a new and enlarged organisation with operations spanning
across the Caribbean and Atlantic Margin region. As is noted by the
Chairman in his letter to shareholders, the logic of this strategic
transformation was simple: to expand the Company from being a
single asset company in The Bahamas to a more diversified business,
with risk and reward potential spread across multiple projects in
various locations and at differing stages of the industry value
chain.
On assuming control of the Columbus assets in August 2020, we
found a business that was showing the effects of being cash-starved
for a very long time under previous management. This was manifest
in terms of low field activity levels, poor morale amongst staff -
many of whom had been suspended or put on half pay at the start of
the Covid-19 pandemic, inadequate policies and procedures, poor
record keeping, local suppliers who had not been paid for some time
and a business reputation in-country that was suffering.
Therefore, through the last quarter of 2020 and into 2021, we
began an intensive program of work designed to "right the ship". At
its core, we were (and still are) guided by a simple objective: to
sustain and increase production, to manage costs tightly, and to
thereby grow cashflow from the Trinidadian operations.
Some successes worth noting: we substantially increased field
activity, with workover frequency rate increasing by 20% under our
management. We also implemented a roster of preventative well
maintenance work to maximise well uptime, initiated an automation
trial, installed new pumps on a number of wells, perforated
additional zones in several wells, and carried out a number of
heavy workovers including perforation washes on high producing
wells, all with the objective of optimising well performance and
sustaining / adding to production.
Alongside this increased level of field activity, we undertook a
comprehensive review of all assets, and restructured the
Trinidadian organisation so as to drive cost efficiencies and allow
for more effective work across the portfolio. We focussed on
restoring morale within our staff base, and we began a process to
restore confidence with local suppliers, regulators and
communities.
It has been hard work, and there have been ups and downs - all
the more so given the ongoing effects of Covid-19 in Trinidad, and
in particular the extreme difficulty of getting into the country.
But we are now beginning to see the fruits of our labour. Notably,
we have stemmed the rate of production decline in the producing
fields, and have been successful in a core objective of maintaining
baseline production in the range of 400 - 450 barrels of oil per
day. A rising oil price environment, coupled with cost savings
measures we have put in place, means that we have now been able to
reach a point where the operations in Trinidad & Tobago are
largely self-funding. In 2022, we expect to be able to continue
along this trajectory, and generate $2 million or more of positive
operating cashflow from our existing production operations. This
would represent a fairly significant "turnaround" in a relatively
short period of time, and is an achievement for which our team in
Trinidad should be rightfully proud.
Beyond this, each and every day we continue to look for ways to
drive further growth in production which, given our largely fixed
cost base in-country, would flow straight to the bottom line.
Indeed, at times during the last 18 months production has gone as
high as 500 barrels of oil per day, but then we have not been able
to be sustain it at that level for the long term: wells go offline,
power supplies get disrupted in inclement weather, and so on.
Our objective for 2022 is thus to crack that particular nut: how
can we add 100 barrels or more per day of production from existing
fields on a sustainable basis and increase cashflow even further?
This will inevitably require some trial and error as we continue in
our work to maintain and optimise field performance alongside
remediation activities, but we are confident we will get there. We
also hope that in 2022 the various Enhanced Oil Recovery (EOR)
initiatives that have been tested and trialled through 2020 and
into 2021 might ultimately provide some incremental production,
too.
Appraisal and Exploration Activities
Apart from Perseverance-1 in The Bahamas and the focus on
production activities in Trinidad and Tobago, during 2020 and then
into 2021 we continued to progress appraisal and exploration
activities across the broader business. Three items are worthy of
particular note.
Saffron-2 appraisal onshore Trinidad: The Saffron-1 discovery
well, drilled by our predecessor in late 2019 at the Bonasse
licence in the Southwest Peninsula of Trinidad, had discovered oil
in the Middle and Lower Cruse reservoir horizons. However, that
well had been beset by various issues during the drilling campaign,
such that no production testing of the Lower Cruse reservoirs had
been possible. On assuming control of the asset, we analysed the
data collected from the Saffron-1 well, and used that analysis to
inform a well design and commence detailed well planning for a
second Saffron well. Following that work and after receiving
approvals from the Ministry, the Saffron-2 appraisal well, our
first operated drilling onshore Trinidad, was successfully drilled
to TD of 4567 ft in June and July 2021. Saffron-2 encountered
multiple oil-bearing horizons in the Upper Cruse, Middle Cruse and
Lower Cruse reservoir zones. Subsequent production tests have
proved the ability to flow high-quality oil from the Lower Cruse
reservoirs, although sustained production from these reservoir
units has not yet been achieved due to technical and mechanical
issues encountered in this zone - we are working on engineering
solutions. On the other hand, the Middle Cruse reservoir sections
are producing, and have thus far demonstrated what we consider
could be an economic level of production, with work being
progressed to see if we can increase production further. The oil
produced at Saffron-2 is already being sold, and the immediate plan
is to maximise production revenues from the well, bring on
additional production from the as yet unperforated Upper Cruse
zone, and revisit our thoughts around a potential development (and
funding for that). We would like to see a Saffron development get
underway in H1 2022.
Weg Naar Zee (WNZ) appraisal onshore Suriname: WNZ is a large
block (approx. 900 km(2)) onshore Suriname, in a proven hydrocarbon
province with 70 historic wells and 2D seismic coverage. Up to 24
MMbbls STOIIP (15deg API) has been identified in eight pools on the
block, and an initial well followed by an Extended Well Test (EWT)
has been designed to appraise the producibility of the resource,
and to assess whether the asset is suitable for application of
enhanced oil recovery techniques used by Challenger Energy in
Trinidad. To date, approval to proceed with the planned drilling
program has been received from Staatsolie (our PSC partner and
Surinamese state-owned oil and gas company and regulator) and NIMOS
(the Surinamese environmental regulator). Various preparatory work
streams have been completed including the well site being
identified, land lease being secured and equipment and service
providers having been engaged. We are thus ready to proceed with
drilling of a first WNZ appraisal well, albeit operational
challenges arising from the Covid-19 situation in Suriname have
resulted in the decision to delay the projected well spud date -
ideally, we would like to see this project get underway in late
2021 or early 2022.
OFF-1 in Uruguay: As noted, in June 2020 we were awarded the
OFF-1 licence block offshore Uruguay. This acreage, which holds an
estimated resource potential of up to 1 billion barrels of oil,
provides an exciting addition to the broader portfolio. The licence
is for an initial 4-year period during which the Company is obliged
to undertake geological and geophysical studies to define prospects
and resource potential. This work will be carried out internally on
a low-cost basis. Formal execution of the licence by the Uruguayan
government has been delayed due to the impacts of Covid-19 in
Uruguay - we will commence work as soon as that process is
complete. Interestingly, two wells are planned by majors in Namibia
toward the end of 2021 on the conjugate margin of our asset in
Uruguay. We will thus be watching the outcome of that drilling with
keen interest.
HSES
Challenger Energy is committed to providing a healthy, safe and
secure workplace for all employees, consultants, contractors,
service providers and visitors, across all facets of our
operations. We believe strongly that pursuit of our commercial
objectives should never be at the expense of harm to people or the
environment. Moreover, the change during 2020 to the Company's
portfolio mix and significant resultant increase in operational
activity, alongside the expanding impacts of the Covid-19 pandemic,
meant that clear focus and leadership in relation to HSES became
mission critical.
In response, over the past 18 months we have made it an
unambiguous priority to embed HSES awareness into every aspect of
our business, to accurately track our performance, and to implement
learnings from that tracking to ensure accountability to the
highest international standards. As an absolute minimum, the
Company seeks to comply with all applicable laws and regulations in
the countries in which it operates but, where the Company has
adopted stricter codes of practice in relation to any aspects of
HSES management, then these higher standards are applied.
Some notable achievements: as already mentioned, drilling
activities - both offshore in The Bahamas and onshore in Trinidad -
were undertaken safely and without incident. Across our active
operations, we have seen improving trends in relation to key HSES
statistics, such as a marked drop in motor vehicle incident
frequency. Over the past 18 months we have also placed an emphasis
on staff training, and we have put in place systems to ensure that
our contractors also meet all necessary standards - the result has
been a heightened awareness of risk evident across the business.
Safe-to-Work (STOW) Accreditation - an essential part of the social
licence to operate in Trinidad and Tobago - has been achieved, and
a substantial body of work has been conducted by our HSES team to
review and then update an extensive range of policies, procedures
and management systems applicable to all aspects of the Company's
operations. These are now being regularly re-examined to ensure
currency, relevance and applicability. Overall, shareholders should
be pleased with the HSES track record the team has established and
is working diligently to maintain. Further details are set out on
page 17 of the annual report.
Corporate and Financial Review
In terms of finances, 2020 was dominated by the need to secure
the funds needed to drill the Perseverance-1 well. With the
expansion of the business to include active operations in Trinidad
and Tobago and Suriname, the need for funding increased
commensurately.
Accordingly, through the course of 2020 and then into 2021, we
implemented a broad funding strategy designed to ensure we would be
able to meet our funding needs as and when they have been required.
This included two open offers with existing shareholders, multiple
institutional placings, drawdown of funds from two independent
convertible note facilities, and the sponsorship of a Bahamian
domiciled mutual fund. In the process, we raised in the order of
$60 million in support of the Company's various project initiatives
- a credit to the efforts of our team and the support of our
investors.
On completion of the transaction with Columbus, we also for the
first time began to receive revenues from oil production and sales.
This was a relatively small amount in 2020, given that we only
accounted for five months of income, production was falling when we
assumed control of the Columbus assets, and oil prices were low.
But in the life of any oil company the time at which you begin to
generate income is a significant milestone. As mentioned, we have
focussed throughout 2021 on maximising that income, reducing costs,
and benefitting from rising oil prices, with a view to 2022 being
the year in which we begin to see surplus cashflows from production
in Trinidad.
In terms of overhead and general operating expenses, these
increased significantly through the course of 2020, a necessary
consequence of gearing up for offshore drilling operations in The
Bahamas plus the addition of active operations in other
jurisdictions. However, following completion of drilling of the
Perseverance-1 well in The Bahamas, we have taken immediate steps
to reverse that trend, by reducing our operating footprint,
reducing our staff base, and reducing our general costs wherever
possible. I can report that as compared to the "peak" in February
2021, overhead costs are now down by approximately 40%, and there
remains work to be done which we expect can reduce overhead even
further.
2022 and beyond
As we turn our eye to the next chapter of this Company's story,
I can assure shareholders of one thing: all of us who work at
Challenger Energy are committed to delivering, and we will give
100% at all times.
Success in 2022 will involve achieving sustainable production
growth from our portfolio, and hence increasing free cashflow. It
will also require us to have success with the drill bit, so as to
grow our reserves and production capacity over time. We will also
need to continue to manage our costs tightly, and be smart in how
we leverage our position in the industry. And in the longer-term,
we remain determined to deliver value from The Bahamas and new
business initiatives, like Uruguay.
I hope that 2022 marks the first steps in restoring value in
this Company, and I look forward to updating shareholders regularly
as to continued progress on that journey.
Eytan Uliel
Chief Executive Officer
24 September 2021
Company Report
Business Overview
Challenger Energy's business comprises a portfolio of oil and
gas assets - 14 licences across four countries, at varying stages
of the industry life cycle from exploration through to appraisal
and production. These include ve producing oil elds onshore
Trinidad and Tobago, an appraisal project onshore Suriname, a
substantial exploration acreage position in the Southwest Peninsula
of Trinidad, and two high impact exploration projects - one each in
The Bahamas and Uruguay.
Trinidad and Tobago
* 7 licences (100%), 1 licence (83.8%) - all onshore,
close to sales infrastructure
* 400 - 450 bopd baseline production from five fields,
with considerable existing well stock (approximately
250 wells of which approximately 80 are in production
at any time)
* 2P Reserves of 1.3MMbbls; 2C Resources of 6.4MMbbls
* Production enhancement opportunities from workovers,
reactivations & new pumps accessing shallow
reservoirs
* Opportunity for enhanced sweep efficiency and
increased recovery factor via enhanced oil recovery
techniques and in-fill wells
* Discovery at Saffron, with Saffron-2 appraisal well
validating commercial potential - current work
focussed on defining a development plan
* Low-cost development options across portfolio
Suriname
* 1 onshore licence - Weg Naar Zee PSC (100%), 900 km
(2)
* 2C Resources of 1.1MMbbls; 3C Resources of 3.5 MMbbls
(24 MMbbls STOIIP)
* Drill ready, with well to be followed by Extended
Well Test (EWT) -realised production can be sold; EWT
success leads to early, low-cost development and
reserves additions
Uruguay
* 1 offshore licence - OFF-1 (100%); 15,000 km (2)
* Work by the state-owned authority ANCAP has
identified one of the prospects on the block
(Lenteja) alone has an estimated resource potential
of 1.4 billion barrels of oil
* Low-cost initial 4-year exploration period,
commencing on formal licence signing
The Bahamas
* 4 licences (100%), all offshore
* Recently drilled Perseverance-1 well evaluated the
potential Albian and Aptian reservoirs of the B North
segment of the B structure - the well did not result
in a commercial discovery at the drilling location;
post well analysis indicates potential for a deeper
Jurassic play
* Licence renewal for a third 3-year exploration period
in process; renewed farmout process commenced in
parallel - 'Drill or Drop' by 2024
People and Assets
* 80 staff globally, majority in Trinidad and Tobago
* 2 owned and operated rigs in Trinidad and Tobago to
support production and maintenance activities
Assets Summary
Trinidad and Tobago
The Company has five producing fields onshore Trinidad
comprising some 250 wells, of which approximately 80 wells are in
production at any given time. In addition, the Company has an
appraisal project in the Southwest Peninsula ("SWP") of Trinidad
(Saffron project) and has identified several other exploration
prospects in the same area.
Goudron Field
The Company owns 100% of the Goudron field by way of an enhanced
production service contract (EPSC) with Heritage Petroleum Company
Limited, the Trinidadian state-owned oil and gas company. The EPSC
was renewed in November 2020 for a 10-year term. The Goudron Field
produces light sweet oil with an average API gravity of 37 degrees.
The Company is progressing enhanced oil recovery programs at
Goudron to support increased production, for example by undertaking
a water injection pilot project focussed on re-pressuring reservoir
units (subject to necessary approvals). Additionally, regular well
workover operations are undertaken on the existing production well
stock, including well stimulation operations, reperforations, and
repairs to shut-in wells, as and when appropriate.
Inniss-Trinity Field
The Company owns 100% of the Inniss-Trinity field by way of an
incremental production service contract (IPSC) with Heritage
Petroleum Company Limited. The IPSC is due for renewal at the end
of December 2021 and the Company is currently undertaking the
process necessary for a renewal of that licence. As part of the
Inniss-Trinity IPSC, a CO(2) enhanced oil recovery pilot project
was undertaken during 2020 and 2021 to establish the potential for
increasing field production and with a view to assessing the
applicability of the technique for other onshore opportunities.
Regular well workover operations are undertaken on the existing
production well stock and repairs to shut-in wells, as and when
appropriate. In addition, the Company has identified a number of
drill-ready compartments on the licence area which will be assessed
in the context of other in-field drilling opportunities across the
portfolio.
South Erin Field
The Company owns 100% of the South Erin field by way of a
farm-out agreement with Heritage Petroleum Company Limited. The
farm-out agreement is due for renewal at the end of December 2021
and the Company is currently undertaking the necessary process for
such a renewal. Regular well workover operations are undertaken on
the existing production well stock and repairs to shut-in wells, as
and when appropriate. The Company has identified a number of
drill-ready compartments on the licence which will be assessed in
the context of other in-field drilling opportunities across the
portfolio.
Southwest Peninsula (SWP)
The SWP contains the Bonasse and Icacos producing oilfields in
which the Company holds a 100% interest via a number of private
petroleum licences covering the Bonasse, Cedros and Icacos licence
areas. Similar to the other fields, regular well workover
operations are undertaken on the existing production well stock and
repairs to shut-in wells, as and when appropriate. The Bonasse
licence also includes Saffron prospect which is discussed further
below.
Saffron Project
During 2021, the Company successfully drilled the Saffron-2
appraisal well to a depth of 4,567ft encountering Upper, Middle and
Lower Cruse reservoirs. During production tests on the Lower Cruse
formation pressures at surface of up to 1,400 psi were observed,
oil was produced naturally to surface, and oil samples were
collected and analysed (48deg API). However, sustained production
could not be achieved due to the continual inflow of mobile
non-reservoir formation materials (clay and shale influx into the
wellbore). Subsequently these zones have been isolated, capable of
being re-entered, remediated and produced in the future, as
appropriate. Production tests of the Middle Cruse formation has
seen sustained oil production (20deg API), with the well continuing
to remain on production and produced oil being gathered and sold.
The Company expects to be able to maintain production by optimising
production parameters as flow rates become better understood, as
well as by producing from a further 11ft of reservoir as yet
unperforated in the Upper Cruse, to add to the production mix in
due course. The Company is working to incorporate the results of
the well into an optimal development plan for the Saffron project,
as well as an update of the prospective and contingent resource
estimates for both the Saffron location and other targets within
the Company's SWP portfolio.
SWP Exploration
The large licence position in the Southwest Peninsula of
Trinidad also represents the Company's main exploration acreage in
Trinidad, with numerous prospects consisting of both stacked
shallow and deeper reservoirs. The area is assessed internally by
the Company as having recoverable resources amounting to
approximately 230 MMbbls. In late 2020 the Company commissioned a
reprocessing of the entire 3D seismic grid over the area, with that
work completed in H1 2021. The results from this reprocessing work,
along with existing data, are being used in support of ongoing work
to select future exploration drill targets.
Cory Moruga Field
The Company owns 83.8% of the Cory Moruga licence and is the
operator, alongside its partner Touchstone Exploration Inc. which
holds a 16.2% non-operated interest. The Cory Moruga licence
includes the Snowcap oil discovery, with oil having previously been
produced on test from the Snowcap-1 and Snowcap-2ST wells. The
Company is presently reviewing its options for the licence in line
with other opportunities across the portfolio.
Suriname
Weg Naar Zee Project
The Company holds a 100% interest in a Production Sharing
Contract (PSC) with Staatsolie Maatschappij Suriname N.V, the
Suriname state-owned petroleum company (Staatsolie), for an onshore
appraisal / development project contained in the Weg Naar Zee Block
(WNZ). WNZ is a large block covering approx. 900 km(2) in a proven
hydrocarbon province with 70 historic wells and 2D seismic
coverage. Up to 24 MMbbls STOIIP (15deg API) has been identified in
eight pools (of which around half is in a single pool) with the CPR
assessing 2C resources of 1.1 MMbbls and 3C resources of 3.5
MMbbls.
An Extended Well Test (EWT) has been designed to appraise the
producibility of the discovered resource in the WNZ block, and to
assess whether the asset is suitable for application of enhanced
oil recovery techniques used by the Company in Trinidad. To date,
approval from Staatsolie to proceed with the planned drilling
program has been received as has approval from NIMOS (the
Surinamese environmental regulator). The proposed well site has
been scouted, various in-country contractors and well equipment has
been sourced, and rig tenders have been received from a number of
suppliers. Commencement of the drilling and subsequent EWT has been
delayed due to operating constraints arising from the Covid-19
situation in Suriname. Drilling is expected to commence as soon as
Covid-19 circumstances in Suriname allow, but ideally prior to the
end of 2021 / early 2022, and will target the largest of the
undrained pools on the block (twinning with a historical production
well).
The Bahamas
The Company is the holder of four cojoined exploration licences
offshore The Bahamas. The Perseverance-1 exploration well was
drilled in the licence area, from 20 December 2020 to 5 February
2021, at a location approximately 20 miles from the Bahamas-Cuba
maritime border, in water depth of approximately 518 metres.
Perseverance-1 represented the first exploration drilling in The
Bahamas since the mid-1980s, and the first test of any prospect
located in deeper waters off the shallower water carbonate banks.
The well reached a depth of 3,905 metres, having intersected five
Albian, Upper Aptian, and Mid-Aptian horizons of interest.
The Perseverance-1 well was drilled safely and without incident,
with stringent Covid-19 management protocols operating effectively
throughout the drilling campaign. Following completion of drilling
operations, the well was plugged and secured in accordance with
international and BSEE (Bureau of Safety and Environmental
Enforcement) standards.
The well did not result in a commercial discovery at the
drilling location, with the source quality and migration
interpreted as being the primary reason for this non-commercial
well outcome. Post-well petrophysical analysis of the well logs
have, however, confirmed high quality reservoirs down to the base
of the well with no significant deterioration in porosity with
depth, indicating the potential for high deliverability reservoirs
in the deeper underlying Jurassic formations.
The technical findings from Perseverance-1 thus support a
forward program to include further biostratigraphic analysis, fluid
inclusion analysis, and selective re-processing of 3D seismic to
further educate sequence stratigraphy and seismo-facies of the
deeper Jurassic horizons. This work will underpin an assessment of
the merits of a further exploration well in the future, both to
continue to assess Aptian horizon potential, whilst at the same
time targeting the deeper Jurassic intervals. The Company has
recommenced a farm-out process to seek a suitable partner for the
next phase of activity in The Bahamas. In parallel, in March 2021
the Company notified the Government of The Bahamas of its intent to
renew the licences into a third 3-year exploration period.
Uruguay
OFF-1 Block
In June 2020, following a competitive bid process, the Company
was notified that it was the successful applicant for the OFF-1
offshore block in Uruguay covering approx. 15,000km(2) . Formal
signing of the licence for the OFF-1 offshore block is presently
awaiting presidential approval, which has been delayed due to the
Covid-19 pandemic situation in Uruguay. The Company expects the
formal licence award to be completed before the end of 2021 and
will thereafter commence initial technical work in 2022.
In the interim, technical work undertaken independent of the
Company by ANCAP, the Uruguayan oil and gas regulator, has sought
to highlight exploration prospectivity across the licence area.
This involves detailed mapping of several play types and prospects,
notably the syn-rift play potential within the Company's OFF-1
block. The prospect and lead screening carried out by ANCAP
includes the specific identification of the syn-rift Lenteja
prospect with a P(50) estimated ultimate recovery volume (EUR) of
1.359 billion barrels and an upside case of several billion barrels
recoverable, potentially accessible in shallow water depths of just
80 metres. This volume estimate aligns well with the earlier
guidance provided by the Company of the potential within its OFF-1
licence area as being in excess of a billion barrels.
Reserves and Resources
In 2020, the Company commissioned an independent Competent
Person's Report (CPR) from ERC Equipoise (ERCE). The scope of the
report was to focus on reserves and resources across the Company's
existing producing assets in Trinidad and Tobago, and the Company's
Weg Naar Zee licence in Suriname. ERCE certi ed net 2P reserves of
1.29 MMbbls and net 2C contingent resources of 7.46 MMbbls across
the portfolio of assets in Trinidad and Suriname, summarised as
follows:
Reserves (MMbbls) 1P 2P 3P
Total 0.7 1.3 1.9
Contingent Resources (MMbbls) 1C 2C 3C
Total 0.7 7.5 24.7
Notes
1. Company Working Interest resources are based on the working
interest share of the field gross resources and are prior to
deduction of royalties. Challenger Energy hold a 100% interest in
all relevant fields, being Goudron, Inniss-Trinity, South Erin,
Icacos and Bonasse in Trinidad, and Weg naar Zee in Suriname.
2. The Contingent Resources are on unrisked basis and have not
been risked for chance of development and are sub-classified as
development unclarified.
3. Totals are added arithmetically which means statistically
there is a greater than 90% chance of exceeding the total 1C and
less than a 10% chance of exceeding the total 3C.
4. ERCE did not audit the SWP, including the Saffron project, as part of its CPR.
2P reserves relate to known oil that is capable of being
produced economically, and thus the 2P reserves as certified by
ERCE relate solely to production capable of being generated from
the Company's existing wells in existing fields. The 2P reserves do
not assume any contribution from infill drilling and enhanced oil
recovery projects. Moreover, apart from routine operating costs
required to keep wells online, accessing this production potential
does not require material amounts of incremental capital
expenditure.
At oil prices ranging from US$50 to US$60 per barrel, it is
estimated this level of 2P reserve represents US$65 million to
US$75 million of gross cashflow potential to the Company, and a
reserve base equivalent to a baseline production of 500 bopd for
approximately 7 years.
The 2020 report commissioned by the Company did not include an
assessment of the Saffron project, pending the drilling of the
Saffron-2 well. With the Saffron-2 well complete, the Company
intends to update its reserve and resource estimates
accordingly.
2020: Significant Activities Review
Significant activities during the specific period January 2020
to December 2020 are summarised as follows (note that all shares
issuance numbers quoted are before the 1 for 10 share consolidation
which took effect on 28 May 2021):
-- On 14 February 2020, the initial offer period closed for a
Bahamian domiciled mutual fund sponsored by the Company. This fund
had been created to allow Bahamian resident investors to acquire an
ownership interest in the Company. The initial offer period closed
with $914,000 in subscriptions, giving rise to 35,337,328 shares
being issued to the fund at 2 pence per share. Due to delays in
securing final approval for the issuance of the shares by the
Central Bank of The Bahamas (arising from the outbreak of the
Covid-19 pandemic) final issuance of the shares to the Fund took
place on 29 June 2020.
-- On 20 February 2020, the Company entered into a zero-coupon
convertible loan facility with a Bahamian family office investor,
for up to GBP8m in funding (gross of fees). An initial GBP2.7m was
drawn down on entering into the facility with a further GBP2m drawn
down on 17 March 2020, at which point the facility was expanded to
up to GBP16 million in total (including amounts already drawn down
at that date). Full settlement of amounts owing was made through
the issuance of shares on 26 February 2020 - 48,000,000 shares, 3
April 2020 - 62,500,000 shares, and 1 May 2020 - 79,059,830. No
amounts remain outstanding under this facility, and the facility
has lapsed.
-- On 27 February 2020, the Company was granted Environmental
Authority (EA) from the Government of The Bahamas for the drilling
of the Perseverance-1 well. The EA consisted primarily of an
Environmental Impact Assessment, Environmental Management Plan and
Emergency Response Plan and formed a prerequisite to the
commencement of the well, which at that time was scheduled to
commence in March / April 2020.
-- On 25 March 2020, the Company announced that it had delayed
the commencement of the Perseverance 1 well, following an
assessment of the likely impact of the Covid-19 pandemic on the
ability to conduct drilling. At the same time, the Company notified
the Government of The Bahamas of force majeure under the terms of
its licences. On 17 November 2020 the Company and Government of The
Bahamas formally agreed the end of the force majeure provisions and
an extension to the licences of 6 months, to 30 June 2021, was
confirmed.
-- On 26 May 2020, the Company entered into a contract with
Stena Drilling for the provision of an offshore drilling rig to
undertake the drilling of Perseverance-1. The contract stipulated a
deployment window of 15 December 2020 to 1 February 2021, with
Stena notifying the Company on 25 September 2020 that the Stena
IceMax rig would be provided on or about 15 December 2020.
-- On 9 June 2020, the Company was awarded the OFF-1 offshore
exploration licence block in Uruguay. The licence covers an area of
approximately 15,000 km(2) and is estimated to contain up to 1
billion barrels of prospective resources. The licence, once
formally issued, will be for an initial term of 4 years with an
initial work obligation during this period comprising of technical
studies and seismic reinterpretation. Formal execution of the
licence has been subject to continued delays due to the impacts of
the Covid-19 pandemic in Uruguay.
-- On 11 June 2020 the Company launched an offer for 100% of the
shares in Columbus Energy Resources PLC, an AIM quoted UK company
holding production, appraisal and exploration assets onshore in
Trinidad and Tobago and Suriname. On 24 July 2020 the Company's
shareholders approved the transaction and on 27 July 2020 the
transaction was approved by the shareholders of Columbus. On 7
August 2020 the transaction became legally effective. Following the
completion of the acquisition of Columbus, shares were issued to a
number of parties in settlement of the transaction and various
supporting services as follows: (i) scheme shareholders of
Columbus- 757,261,511; (ii) termination payments to Columbus
management - 25,562,167; (iii) settlement of cancelled Columbus
management options - 23,684,650; (iv) shares to providers of
capital investment linked to the transaction - 98,424,660; and (v)
advisors to the transaction paid in shares - 34,216,815. In
addition, 21,325,966 options were granted to former management of
Columbus at a strike price of 0.002 pence, being the par value of
the shares of the Company at the time.
-- In the period from June 2020 to December 2020, the Company
undertook extensive activities to prepare for drilling of
Perseverance-1 in The Bahamas. This included reassembling the
drilling team (which had been stood down at the start of the
pandemic), and finalising the contractor group (including leading
service companies such as Halliburton, Weatherford and Baker
Hughes). At the same time, the Company worked closely with all
contractors to finalise the drill plan and develop and implement
Covid-19 mitigation and operating protocols.
-- On 8 August 2020, the Company assumed control of the Columbus
portfolio of assets in Trinidad and Tobago, and Suriname. From that
date, the Company commenced an intensive period of rehabilitative
and improvement work in relation to those assets. This included
restoring all employees to full pay, entering into negotiations
with various suppliers and contractors to restore and ensure
ongoing supply of critical services, ensuring full deployment of
both Company owned rigs and a third contracted rig to increase
workover rate, and a concerted focus on improving HSES
performance.
-- On 1 October 2020, the Company undertook a private placing
with institutional investors to raise GBP9.5m in gross proceeds
through the issuance of 475 million new shares.
-- On 15 October 2020, the Company issued 146,818,765 new
ordinary shares to certain executives and members of the Board in
settlement of amounts owing to those persons as at 1 October 2020.
On the same date the Company issued 7,733,592 shares to advisors in
settlement of fees.
-- On 27 November 2020, the Company provided formal public
notification of the specific drilling rig to be provided by Stena.
On the same date the Company announced the expansion of its
conditional convertible loan note facility (put in place during
2019) from GBP10.25m to GBP15m, with the first GBP3m of this
facility available to the Company on an unconditional basis on
commencement of the Perseverance-1 well.
-- On 30 November 2020, the Company finalised a new Enhanced
Production Sharing Contract (EPSC) for the Goudron licence block
onshore Trinidad. The term of the new EPSC expires on 30 June
2030.
-- On 10 December 2020, a request for a Judicial Review of the
decision by the Government of The Bahamas to award the EA for
Perseverance-1 was brought by a consortium of environmental
activists in The Bahamas, along with a request for a stay to the
commencement of the drilling of Perseverance-1. On 6 January 2021
the Bahamian Courts refused the request for a stay on the well,
which at that time had already been commenced, and granted leave
for the consortium of environmentalists to seek a Judicial Review.
On 25 January 2021, the Company was added as a respondent to that
action and on 2 March 2021 the Court accepted the Company's request
that a security bond be posted by the applicants. The applicants
failed to provide this bond and, in July 2021, appealed the Court's
ruling, although on 8 July 2021, that appeal was withdrawn, and the
applicants have subsequently withdrawn from the action entirely.
Consent Orders to this effect have been agreed between the
applicants, the Company and the Government, and were endorsed by
the Court on 13 August 2021, bringing the matter to a definitive
close.
-- On 14 December 2020, the Company entered into a funding
facility with an institutional investment fund for up to $20
million, with an initial subscription of $10 million resulting in
the issuance of 375 million shares to the investor and 37.5 million
shares to advisors to the transaction in lieu of fees. On 12
January 2021 the Company exercised a put option to issue a further
187.5 million shares under the terms of the facility, raising $5
million in subscription proceeds, with a further 9.375 million fee
shares being issued to advisors at this time.
-- On 20 December 2020, the Company commenced drilling of
Perseverance 1 offshore The Bahamas. The drilling of the well took
49 days to complete to a TD of 3,905 meters and did not encounter
commercial volumes of hydrocarbons in any of the penetrated
horizons. The Company continues to analyse the data extracted from
the well to greater define the remaining prospects within the
licence area, in particular deeper Jurassic plays and remaining
undrilled structures.
Health, Safety, Environment and Security Review
The Company has an HSES Committee which comprises Board members,
senior executives, and representatives from operations which meets
regularly to ensure adequacy of and compliance with standards,
processes, systems and procedures.
Within this context, key HSES highlights for the period under
review include:
-- In November 2020, shortly after assuming control of the
Columbus business, the Company's HSES Management System was
substantially revised. This was done to ensure a functional system
that is tailored to the needs of the Company's operations. Key
themes were selected to place additional emphasis on HSES
awareness, compliance and culture. These themes are: driving
awareness, behavioural safety, and the environment. Throughout 2020
and into 2021, measures against these key themes have been
developed and implemented, coupled with enhanced internal
communications and Company-wide mandatory awareness sessions on
hazard identification, risk management and the importance of safe
behaviour.
-- The Company determined as a matter of priority to achieve
Safe to Work (STOW) Accreditation, a certification programme that
is local to Trinidad and Tobago and is a requirement of all
operators by Heritage Petroleum Company Limited (and which
certification Columbus had not been able to achieve prior to the
Company assuming control of the Columbus assets in Trinidad).
Following an extensive period of preparatory work in 2020, the
Company commenced its audit for STOW Certification in January 2021
and completed same on 11 February 2021. The Company was recommended
for, and subsequently became STOW accredited on 5 August 2021, for
a 2-year period.
-- In 2020 and then continuing into 2021, the Company increased
efforts to ensure a trained and competent workforce, through a
systematic program of internal and external training, and with a
focus on promoting awareness of and compliance with the Company's
HSES Management System. In parallel, all Company policies and
procedures have been reviewed and updated, and a comprehensive
business continuity plan was prepared and adopted.
-- Perseverance-1 was drilled in The Bahamas in the period 20
December 2020 to 5 February 2021, although there was considerable
field and in-country operations in the months leading up to, and
immediately following the completion of, the drilling campaign.
Large numbers of crew were successfully moved internationally and
on and off the drilling rig, and equipment and supplies were able
to likewise be moved on and off the drilling rig responsibly and
without any safety or environmental incidents. Covid-19 was a
significant impost to operations, but careful management and
planning ensured that there were zero infections on the rig for the
entire duration of operations.
-- Similarly, all Trinidad and Tobago's operations have
continued to function within the restrictions outlined by the
Government of Trinidad and Tobago, notwithstanding the significant
effects of Covid-19 in that country (including the declaration of
various states of emergency). Specific Covid-19 Mitigation and
Management Procedures have been implemented across the business,
including the use of remote working where possible, restricted
access to office areas to non-employees, daily temperature checks,
daily sanitization and reinforcement of PPE, hand hygiene and cough
etiquette. The measures implemented, together with an effective
response procedure to manage cases that include the conduct of
contact tracing, PCR testing, quarantine protocols and liaison with
the Ministry of Health has proven to be effective in mitigating
outbreaks amongst the staff.
-- In preparation for the drilling of both Perseverance-1 (in
2020) and Saffron-2 (in 2021) large-scale tabletop exercises were
conducted involving key personnel within the Company as well as
representatives of the drilling contractors, suppliers, and key
Government bodies. In the case of The Bahamas, it was especially
gratifying that this exercise involved joint coordination of
authorities in The Bahamas, the United States, and Cuba. During
these exercises, detailed plans were formulated for response to and
management of various event scenarios, in a step by step and
coordinated manner. Key learnings of the exercises were documented
for future reference. The conduct of such exercises greatly
improved the Company's readiness for possible emergencies during
the drilling operations.
Sustainability Statement
Having a formal Environment, Social and Governance (ESG)
sustainability framework, comprising a clear ESG strategy and
associated goals along with regular tracking of performance against
same, has become an important part of doing business for any
company in the modern world.
Unambiguously, Challenger Energy is a hydrocarbon company,
involved in the business of seeking out, appraising and ultimately
developing and producing hydrocarbons - oil and gas - which are
used to create energy. Challenger Energy acknowledges its role as a
business, which is to create value for its owners from these
activities, whilst at the same time ensuring the impact on
stakeholders, the communities and the countries in which it works
is positive or minimised. In conducting all of our activities it is
our intent to do no harm to the environment, to our people, to the
communities in which we live and operate, or to any other
stakeholders. We will always seek to work in close collaborations
with relevant governments, state owned companies or agencies, and
local communities, and will always seek to demonstrate operational
excellence whilst at the same time abiding by the highest level of
environmental management practices.
The Board of Challenger Energy acknowledges and supports the
global move towards a lower-carbon world, recognising that this
transition will take time. During this period of transition
Challenger Energy's business will continue to be relevant to the
world we live in, although at the same time there will be both a
social and business imperative for Challenger Energy to be more
efficient, to be less wasteful, and to continue to operate safely
and responsibly with minimal harm to its people, communities, and
the environment.
In this context, Challenger Energy is undertaking a formal
process to formulate an ESG sustainability framework, against which
ESG outcomes can be tracked and measured. The Company expects to
have completed this work in time for the ESG sustainability
framework to be advised to shareholders and then implemented across
the Company in respect of the 2022 calendar year.
In formulating its ESG sustainability framework, the Company is
seeking to recognise two primary, globally accepted sets of
standards for ESG, being The United Nations Sustainable Development
Goals (UN SDG) and The Global Reporting Initiative (GRI). Those
elements of the UN SDG most pertinent or most closely aligned to
Challenger Energy's business are being brought into the very core
of how we do business. In parallel, adoption of key GRI principles
will enable a process by which the Company can identify its
environmental, economic, and social impact, and then track and
report publicly its positive or negative contributions toward
sustainable development goals.
Corporate Governance
Challenger Energy's shares are traded on the AIM Market of the
London Stock Exchange PLC. The Board of the Company is committed to
maintaining high standards of corporate governance at all times.
Whilst the Company is not subject to the requirements of the UK
Corporate Governance Code, the Company is required to apply a
recognised corporate governance code, demonstrating how the Company
complies with such corporate governance code and where it departs
from it.
QCA Code
The Directors of the Company have formally taken the decision to
apply the QCA Corporate Governance Code (the QCA Code) as the
standard against which the Company chooses to measure itself. This
QCA Code emphasises the need for well balanced, effective boards,
with a strong emphasis on overseeing risk management aimed at
protecting the Company from unnecessary risk to enable the Company
to secure its long-term future. In addition, the QCA Code
highlights the alignment of remuneration policies with shareholder
interests and sound shareholder relations. Further information on
the Company's application of the QCA Code is available on the
Company website at www.cegplc.com.
The Board and its Committees
The Board of Directors
The Board meets regularly to discuss and consider all aspects of
the Company's activities. A Charter of the Board has been approved
and adopted which sets out the membership, roles and
responsibilities of the Board. The Board is primarily responsible
for formulating, reviewing and approving the Group's strategy,
budgets, major items of capital expenditure and acquisitions. As at
the time of this report, the Board consists of the Chairman, the
Chief Executive Officer, and three Non-executive Directors. All
Directors have access to the Company Secretary and the Company's
professional advisors.
Records of the board meetings
There were ten board meetings of the parent entity of the Group
during the financial year.
Audit Committee
As at the time of this report, the Audit Committee comprises
James Smith (Chairman) and Stephen Bizzell. The Audit Committee is
primarily responsible for ensuring that the financial performance
of the Group is properly reported on and monitored, for reviewing
the scope and results of the audit, its cost effectiveness and the
independence and objectivity of the auditor. The Audit Committee
has oversight responsibility for public reporting and the internal
controls of the Group. A Charter of the Audit Committee has been
approved and adopted which formally sets out the membership, roles
and responsibilities of the Audit Committee.
Remuneration & Nomination Committee
As at the time of this report The Remuneration & Nomination
Committee comprises Simon Potter (Chairman) and William Schrader.
The Remuneration & Nomination Committee is responsible for
making recommendations to the Board of Directors regarding
executive remuneration packages, including bonus awards and share
options. The role of the Committee also extends to assisting the
Board in fulfilling its responsibilities in the search for and
evaluation of potential new Directors and ensuring that the size,
composition and performance of the Board is appropriate for the
scope of the Group's and Company's activities. It is recognised
that shareholders of the Company have the ultimate responsibility
for determining who should represent them on the Board.
Health, Safety, Environmental and Security Committee
The Group has a Health, Safety, Environmental and Security
Committee which as at the date of this report comprises William
Schrader, Simon Potter, Nathan Rayner and Dr. Pardogh Gogna. The
committee's purpose is to assist the Directors in reviewing,
reporting and managing the Group's performance, to assess
compliance with applicable regulations, internal policies and goals
and to contribute to the Group's risk management processes.
Internal Control
The Directors acknowledge their responsibility for the Group's
system of internal control and for reviewing its effectiveness. The
system of internal control is designed to manage the risk of
failure to achieve the Group's strategic objectives. It cannot
totally eliminate the risk of failure but will provide reasonable,
although not absolute, assurance against material misstatement or
loss.
Going Concern
The Directors consider that the Group and Company has or will
have access to adequate financial resources to enable it to meet
its financial obligations for at least 12 months from the date of
this report. For this reason, they continue to adopt the going
concern basis of preparing the financial statements. Further
information regarding the appropriateness of the use of the going
concern assumption in the basis of preparation can be found in note
1 to the consolidated financial statements.
Directors' Report
The Company's Directors present their report and audited
financial statements of the Company and the consolidated group
consisting of Challenger Energy Group PLC ("Challenger Energy" or
"the Company") and the entities it controlled (the "Group") at the
end of, or during, the year ended 31 December 2020.
Directors
The following persons were Directors of the Company during the
financial year under review:
William Schrader
James Smith
Simon Potter
Adrian Collins (retired 25 May 2021)
Ross McDonald (retired 1 June 2021)
Leo Koot (appointed 24 August 2020, resigned 22 January
2021)
Further details of the above Directors can be found on the
Company's website: www.cegplc.com.
Principal Activity
The principal activity of the Group and the Company consists of
oil & gas production, development, appraisal and exploration in
Trinidad and Tobago and Suriname, and high impact exploration in
The Bahamas and Uruguay.
Results and dividends
The results of the Group for the year are set out on page 28 of
the annual report and show a loss for the year ended 31 December
2020 of $13,992,000 (2019: loss of $4,632,000). The total
comprehensive loss for the year of $13,992,000 (2019: loss of
$4,632,000) has been transferred to the retained deficit.
The Directors do not recommend payment of a dividend (2019:
$nil).
Significant Shareholders
The following table represents shareholdings of 3% or more
notified to the Company as at 31 December 2020:
Top 10 shareholders (by parent company)
Shareholder 31-Dec-20 % IC
========================================= ============== ======
Hargreaves Lansdown PLC 828,280,362 18.38
========================================= ============== ======
Interactive Investor 499,128,728 11.08
========================================= ============== ======
Halifax Share Dealing 402,397,871 8.93
========================================= ============== ======
Lombard Odier Asset Management 329,390,732 7.31
========================================= ============== ======
Barclays Wealth 240,539,264 5.34
========================================= ============== ======
TOTAL 2,299,736,957 51.04
----------------------------------------- -------------- ------
Directors' Shareholding and Options
The interests in the Company at the balance sheet date of all
Directors who held office on the Board of the Company at the
year-end are stated below.
Director Number of Shares Number of Options
================== ================= ==================
William Schrader 17,845,667 3,000,000
------------------ ----------------- ------------------
James Smith 11,475,630 1,500,000
------------------ ----------------- ------------------
Simon Potter 81,217,700 72,500,000
------------------ ----------------- ------------------
Adrian Collins 13,528,977 1,500,000
------------------ ----------------- ------------------
Ross McDonald 11,725,630 1,500,000
------------------ ----------------- ------------------
Leo Koot 28,093,156 -
------------------ ----------------- ------------------
Record of Board Meetings
There were ten board meetings of the parent entity of the Group
during the financial year.
Director Number of Board Number of Board Meetings
Meetings Attended Eligible to Attend
================== =================== =========================
William Schrader 10 10
------------------ ------------------- -------------------------
James Smith 10 10
------------------ ------------------- -------------------------
Simon Potter 10 10
------------------ ------------------- -------------------------
Adrian Collins 10 10
------------------ ------------------- -------------------------
Ross McDonald 9 10
------------------ ------------------- -------------------------
Leo Koot 3 3
------------------ ------------------- -------------------------
Statement of Directors' Responsibilities in respect of the
financial statements
The Directors are responsible for preparing the Annual Report
and the Financial Statements in accordance with applicable Isle of
Man law and regulation.
Company law requires the Directors to prepare financial
statements for each financial year. The Directors have elected to
prepare the Group and Company financial statements in accordance
with International Financial Reporting Standards ("IFRSs") as
adopted by the European Union. The financial statements are
required by law to give a true and fair view of the state of
affairs of the Group and the Company and of the profit or loss of
the Group for that period.
In preparing the financial statements, the Directors are
required to:
-- select suitable accounting policies and then apply them consistently;
-- state whether IFRSs as adopted by the European Union have
been followed, subject to any material departures disclosed and
explained in the financial statements;
-- make judgements and accounting estimates that are reasonable and prudent; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and the
Company will continue in business.
The Directors are responsible for keeping proper accounting
records that are sufficient to show and explain the Group and
Company's transactions and disclose with reasonable accuracy at any
time the financial position of the Group and the Company and to
enable them to ensure that the financial statements comply with the
Isle of Man Companies Acts 1931 to 2004. They are also responsible
for safeguarding the assets of the Group and the Company and hence
for taking reasonable steps for the prevention and detection of
fraud and other irregularities. The Directors are responsible for
the maintenance and integrity of the Company's website. Legislation
in the Isle of Man governing the preparation and dissemination of
financial statements may differ from legislation in other
jurisdictions.
On behalf of the Board
Eytan Uliel
Director
24 September 2021
Independent auditor's report to the members of Challenger Energy
Group PLC
Report on the audit of the financial statements
Our opinion
In our opinion:
-- Challenger Energy Group PLC's (formerly Bahamas Petroleum
Company PLC) consolidated financial statements give a true and fair
view of the state of the Group's affairs as at 31 December 2020 and
of its loss and its cash flows for the year then ended in
accordance with International Financial Reporting Standards as
adopted by the European Union;
-- Challenger Energy Group PLC's company financial statements
give a true and fair view of the state of the Company's affairs as
at 31 December 2020 and its cash flows for the year then ended in
accordance with International Financial Reporting Standards as
adopted by the European Union as applied in accordance with the
provisions of the Isle of Man Companies Act 1982; and
-- the financial statements have been properly prepared in
accordance with the Isle of Man Companies Acts 1931 to 2004.
What we have audited
Challenger Energy Group PLC's consolidated and company financial
statements (the "financial statements") comprise:
-- the consolidated and company statements of financial position as at 31 December 2020;
-- the consolidated statement of comprehensive income for the year then ended;
-- the consolidated and company statements of changes in equity for the year then ended;
-- the consolidated and company statements of cash flows for the year then ended; and
-- the notes to the financial statements, which include
significant accounting policies and other explanatory
information.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing ("ISAs"). Our responsibilities under those
standards are further described in the "Auditor's responsibilities
for the audit of the financial statements" section of our
report.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the Group in accordance with the
International Code of Ethics for Professional Accountants
(including International Independence Standards) issued by the
International Ethics Standards Board for Accountants ("IESBA
Code"). We have fulfilled our other ethical responsibilities in
accordance with the IESBA Code.
Material uncertainty related to going concern
In forming our opinion on the financial statements, which is not
modified, we have considered the adequacy of the disclosures made
in note 1.28 (ii) of the financial statements concerning the
Group's and the Company's ability to continue as a going concern.
Management has indicated that the Group and Company require
additional funding to meet their forecast cash flow requirements
during the 12 months following approval of the financial statements
in order to continue as a going concern. Whilst funding options are
being pursued certain of these will require creditor agreement
outside of the Group's control.
These conditions, along with the other matters explained in
those notes to the financial statements, indicate the existence of
a material uncertainty which may cast significant doubt about the
Group's and the Company's ability to continue as a going
concern.
The financial statements do not include the adjustments that
would result if the Group and the Company were unable to continue
as a going concern. In auditing the financial statements, we have
concluded that the directors' use of the going concern basis of
accounting in the preparation of the financial statements is
appropriate.
Our evaluation of the directors' assessment of the Group's and
the Company's ability to continue to adopt the going concern basis
of accounting included:
-- verifying the mathematical accuracy of management's cash flow
forecast and agreeing the opening cash position;
-- assessing management's underlying cash flow projections for
the Group to other external and internal sources, where
appropriate;
-- assessing and validating the impact of post year end cash movements and commitments;
-- assessing management's ability to take mitigating actions, if required; and
-- assessing the completeness and appropriateness of
management's going concern disclosures in the financial
statements.
Our responsibilities and the responsibilities of the directors
with respect to going concern are described in the relevant
sections of this report.
Our audit approach
Overview
As part of designing our audit, we determined materiality and
assessed the risks of material misstatement in the financial
statements. In particular, we considered where the directors made
subjective judgements; for example, in respect of significant
accounting estimates that involved making assumptions and
considering future events that are inherently uncertain. As in all
of our audits, we also addressed the risk of management override of
internal controls, including among other matters, consideration of
whether there was evidence of bias that represented a risk of
material misstatement due to fraud.
Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the financial
statements of the current period. These matters were addressed in
the context of our audit of the financial statements as a whole,
and in forming our opinion thereon, and we do not provide a
separate opinion on these matters. These comprised:
-- Material uncertainty related to going concern (Group and Company) as set out above;
-- Recoverability of the Group's intangible exploration and
evaluation assets and goodwill / Recoverability of Company's
investment in subsidiaries and amount owed by subsidiary
undertakings;
-- Business combination accounting (Group); and
-- Impact of Covid-19 on the financial statements (Group and Company).
The key audit matters below are consistent with last year except
for the addition of Business combination accounting following the
Company's merger with Columbus Energy Group PLC.
Key audit matter How our audit addressed the key
audit matter
---------------------------------------------- --------------------------------------------------------------
Recoverability of the Group's intangible For intangible exploration and
exploration and evaluation assets evaluation assets, we critically
and goodwill / Recoverability of evaluated management's assessment
Company's investment in subsidiaries of each impairment trigger per
and amount owed by subsidiary undertakings 'IFRS 6 - Exploration for and Evaluation
Refer to note 10 of the financial of Mineral Resources', including
statements. but not limited to:
At 31 December 2020 the carrying * Assessing whether the Group had the rights to explore
value of the Group's intangible in the relevant geographical areas by obtaining
exploration and evaluation assets supporting documentation such as licence agreements.
was $75.3 million (2019: $50.6 million)
and goodwill amounted to $4.6 million
(2019: $Nil). As the carrying value * Enquiring to determine whether management had the
of these intangible exploration intention to carry out exploration and evaluation
and evaluation assets and goodwill activity in the relevant exploration areas. We
are significant in the financial reviewed management's cash flow forecast models to
statements of the Group, we consider assess the level of the budgeted expenditure on these
it necessary to assess whether any areas, and obtained details of contracts.
facts or circumstances exist to
suggest that the carrying amount
of these exploration and evaluation * Critically assessing the outcome of drilling
assets and goodwill may exceed their activities as to whether any impairment indicators
recoverable amount. were present to suggest that the carrying value of
The Company's investment in its these exploration and evaluation assets is unlikely
subsidiaries totalled $50.9 million to be recovered through development or a sale.
(2019: $29.6 million) and the amount
owed by its subsidiary undertakings
totalled $83.8 million (2018: $66.7 For goodwill, our procedures in
million) as shown in notes 14 and relation to management's impairment
16 to the financial statements respectively. assessment included assessing the
The recoverability of the Company's valuation methodology, challenging
investment in its subsidiaries and the reasonableness of key assumptions
amount owed by its subsidiary undertakings based on our knowledge of the business
are dependent upon the successful and industry. We found the assumptions
development or sale of the relevant made by management were reasonable.
exploration areas. Having completed our work, we did
not identify any material misstatements
regarding the carrying value of
the intangible exploration and
evaluation assets and as a result,
the recoverability of the Company's
investment in subsidiaries and
amount owed by its subsidiary undertakings.
============================================== ==============================================================
Key audit matter How our audit addressed the key
audit matter
============================================
Business combination accounting We performed the following audit
(Group) procedures:
Refer to notes 1.04, 1.05, 1.28 -- We obtained a detailed understanding
(iv) and 15 of the financial statements. of the merger and associated acquisition
On 7 August 2020, the Company's accounting under IFRS 3;
merger with Columbus Energy Resources -- We assessed, scoped and tested
PLC was completed. the opening balance sheet and the
This transaction falls under the fair value adjustments applied
scope of IFRS 3 "Business combinations" to the acquired business;
which requires significant management -- We obtained evidence to challenge
judgement in determining the fair the directors fair value estimates
value of consideration transferred by verifying market data points;
and assets acquired, including oil -- We tested and challenged the
and gas properties and intangible key inputs used in the valuation
assets which are inherently judgemental. focusing on those involving judgement
Our key audit matter focuses on such as oil and gas properties,
the valuation of assets acquired intangible assets, deferred tax
and the completeness of liabilities and decommissioning provisions;
including abandonment funds. -- We tested the fair value of
the consideration;
-- We reviewed the disclosures
in the financial statements for
accuracy and completeness.
Based on the work performed we
are satisfied the carrying amount
of assets and liabilities recorded
are as permitted under IFRS 3.
=========================================== ============================================
Impact of Covid-19 on the Financial
Statements We performed the following procedures
During the course of the audit both to address the impact that Covid-19
management and the audit team considered has on the financial statements:
the impact the ongoing Covid-19 -- We held discussions with senior
pandemic is having on the Groups' management about the impact on
activities, the financial statements the plans to raise additional funding.
and the oil price environment. We considered the impact of Covid-19
The main impact of the pandemic on management's going concern assessment
on the Group was the movements in noted above. The impact of the
global oil prices, the decision pandemic on the Group and Company's
to delay the commencement of drilling going concern has been appropriately
the Perseverance #1 well until later mitigated by management.
in 2020, the associated force majeure -- We considered the impact on
event extension of the licences management's assessment of the
to 30 June 2021 and additional unforeseen carrying value of assets, conducted
drilling costs relating to Covid-19 in accordance with 'IFRS 6 - Exploration
management protocols. for and Evaluation of Mineral Resources'.
Another potential impact is the Management concluded the Group
ability of the Group to raise additional had the right under their licences
funding required. to declare force majeure as a result
The Group has disclosed the impact of the pandemic. This provided
of Covid-19 in note 1.28 (ii) to additional time for the Group to
the financial statements. commence drilling once operations
Given the significance of the above could resume and hence remain in
matters, we determined the impact compliance with their licence conditions,
of Covid-19 to be a key audit matter despite the delay to the drilling
which relates to both the Group timetable.
and the Company financial statements. We concluded that management's
assessment of Covid-19 on the financial
statements is reasonable and the
disclosure in note 1.28 (ii) of
the financial statements adequate.
=========================================== ============================================
Other information
The other information comprises all of the information in the
Annual Report and Financial Statements other than the financial
statements and our auditor's report thereon. The directors are
responsible for the other information.
Our opinion on the financial statements does not cover the other
information and we do not express any form of assurance conclusion
thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information identified above
and, in doing so, consider whether the other information is
materially inconsistent with the financial statements or our
knowledge obtained in the audit, or otherwise appears to be
materially misstated. If, based on the work we have performed, we
conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing
to report in this regard.
Responsibilities of the directors for the financial
statements
The directors are responsible for the preparation of the
financial statements that give a true and fair view in accordance
with International Financial Reporting Standards as adopted by the
European Union and Isle of Man law, and for such internal control
as the directors determine is necessary to enable the preparation
of financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the Group's and Company's ability to
continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the
Group and Company or to cease operations, or have no realistic
alternative but to do so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs will always detect a material
misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
As part of an audit in accordance with ISAs, we exercise
professional judgement and maintain professional scepticism
throughout the audit. We also:
-- Identify and assess the risks of material misstatement of the
financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a
basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal
control.
-- Obtain an understanding of internal control relevant to the
audit in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Group's and Company's internal
control.
-- Evaluate the appropriateness of accounting policies used and
the reasonableness of accounting estimates and related disclosures
made by the directors.
-- Conclude on the appropriateness of the directors' use of the
going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Group's and
Company's ability to continue as a going concern. If we conclude
that a material uncertainty exists, we are required to draw
attention in our auditor's report to the related disclosures in the
financial statements or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our auditor's report. However,
future
events or conditions may cause the Group and Company to cease to continue as a going concern.
-- Evaluate the overall presentation, structure and content of
the financial statements, including the disclosures, and whether
the financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
-- Obtain sufficient appropriate audit evidence regarding the
financial information of the entities or business activities within
the Group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and
performance of the Group audit. We remain solely responsible for
our audit opinion.
We communicate with the directors regarding, among other
matters, the planned scope and timing of the audit and significant
audit findings, including any significant deficiencies in internal
control that we identify during our audit.
We also provide the directors with a statement that we have
complied with relevant ethical requirements regarding independence,
and to communicate with them all relationships and other matters
that may reasonably be thought to bear on our independence, and
where applicable, actions taken to eliminate threats or safeguards
applied.
From the matters communicated with the directors, we determine
those matters that were of most significance in the audit of the
financial statements of the current period and are therefore the
key audit matters. We describe these matters in our auditor's
report unless law or regulation precludes public disclosure about
the matter or when, in extremely rare circumstances, we determine
that a matter should not be communicated in our report because the
adverse consequences of doing so would reasonably be expected to
outweigh the public interest benefits of such communication.
This report, including the opinion, has been prepared for and
only for the Company's members as a body in accordance with Section
15 of the Isle of Man Companies Act 1982 and for no other purpose.
We do not, in giving this opinion, accept or assume responsibility
for any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
Report on other legal and regulatory requirements
Adequacy of accounting records and information and explanations
received
Under the Isle of Man Companies Acts 1931 to 2004 we are
required to report to you by exception if, in our opinion:
-- we have not received all the information and explanations we require for our audit;
-- proper books of account have not been kept, or proper returns
adequate for our audit have not been received from branches not
visited by us;
-- the company financial statements are not in agreement with
the books of account and returns; and
-- certain disclosures of directors' loans and remuneration
specified by law have not been complied with.
We have no exceptions to report arising from this
responsibility.
Andrew Dunn
for and on behalf of PricewaterhouseCoopers LLC
Chartered Accountants
Douglas
Isle of Man
24 September 2021
Financial Statements
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2020
Year ended Year ended
31 December 2020 31 December 2019
Note $ 000's $ 000's
Net petroleum revenue 2 1,417 -
Cost of sales (2,781) -
Gross loss (1,364) -
Administrative expenses 3 (9,793) (4,622)
Goodwill impairment 10 (2,435) -
Operating foreign exchange gains 32 19
Operating loss (13,560) (4,603)
Other income 3 1
Finance income 9 202 39
Finance costs 9 (628) (69)
Loss before taxation (13,983) (4,632)
Income tax expense 5 (9) -
----------------- -----------------
Loss for the year attributable to equity holders of the parent
company (13,992) (4,632)
----------------- -----------------
Other comprehensive income
Exchange differences on translation of foreign operations 147 -
Other comprehensive income for the year net of taxation 147 -
----------------- -----------------
Total comprehensive expense for the year attributable to equity
holders of the parent company (13,845) (4,632)
----------------- -----------------
Loss per share (cents)
Basic and diluted 8 (0.5) (0.27)
All operations are considered to be continuing (see note 2).
The accompanying accounting policies and notes form an integral
part of these financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2020
As at 31 December As at 31 December
2020 2019
Note $ 000's $ 000's
Assets
Non-current assets
Intangible exploration and evaluation
assets 10 75,259 50,570
Tangible assets 11 25,783 31
Right of use assets 12 97 198
Goodwill 10/15 4,610 -
Investment in associate 13 47 -
Escrow and abandonment funds 16 1,297 -
Deferred tax asset 5 8,975 -
Total non-current assets 116,068 50,799
Current assets
Trade and other receivables 16 5,313 858
Inventories 18 172 -
Restricted cash 17 946 26
Cash and cash equivalents 17,862 11,152
Total current assets 24,293 12,036
------------------ ------------------
Total assets 140,361 62,835
------------------ ------------------
Liabilities
Current liabilities
Trade and other payables 19 (18,620) (1,952)
Lease liabilities 20 (105) (161)
Borrowings 21 (498) -
Total current liabilities (19,223) (2,113)
Non-current liabilities
Borrowings 21 (1,639) -
Provisions 22 (6,314) -
Lease liabilities 20 - (44)
Deferred tax liability 5 (8,974) -
------------------ ------------------
Total non-current liabilities (16,927) (44)
------------------ ------------------
Total liabilities (36,150) (2,157)
------------------ ------------------
Net assets 104,211 60,678
================== ==================
Shareholders' equity
Called-up share capital 23 123 61
Share premium reserve 23 152,717 96,157
Share based payments reserve 24 5,228 4,868
Retained deficit (77,684) (63,692)
Foreign exchange reserve 147 -
Convertible debt option reserve 21 396 -
Other reserves 23 23,284 23,284
------------------
Total equity attributable to equity
holders of the parent company 104,211 60,678
================== ==================
The accompanying accounting policies and notes form an integral part of
these financial statements.
These financial statements were approved and authorised for issue by the
Board of Directors on 24 September 2021 and signed on its behalf by:
Eytan Uliel Bill Schrader
Director Director
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2020
As at 31 December As at 31 December
2020 2019
Note $ 000's $ 000's
Assets
Non-current assets
Property, plant and equipment 11 78 16
Right of use assets 12 12 27
Investment in subsidiaries 14 50,940 29,560
Trade and other receivables 16 83,839 66,721
------------------ ------------------
Total non-current assets 134,869 96,324
Current assets
Trade and other receivables 16 238 224
Restricted cash 17 57 26
Cash and cash equivalents 17,160 11,100
------------------ ------------------
Total current assets 17,455 11,350
------------------ ------------------
Total assets 152,324 107,674
------------------ ------------------
Liabilities
Current liabilities
Trade and other payables 19 (504) (1,946)
Lease liabilities 20 (13) (15)
Total current liabilities (517) (1,961)
Non-current liabilities
Lease liabilities 20 - (13)
Borrowings 21 (1,120) -
------------------ ------------------
Total non-current liabilities (1,120) (13)
------------------ ------------------
Total liabilities (1,637) (1,974)
------------------ ------------------
Net assets 150,687 105,700
================== ==================
Shareholders' equity
Called-up share capital 23 123 61
Share premium reserve 23 152,717 96,157
Share based payments reserve 24 4,858 4,498
Retained deficit (36,942) (24,551)
Convertible debt option reserve 21 396 -
Other reserve 23 29,535 29,535
Total equity attributable to equity
holders of the parent company 150,687 105,700
================== ==================
The accompanying accounting policies and notes form an integral part of
these financial statements.
These financial statements were approved and authorised for issue by the
Board of Directors on 24 September 2021 and signed on its behalf by:
Eytan Uliel Bill Schrader
Director Director
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2020
Year ended Year ended
31 December 2020 31 December 2019
$ 000's $ 000's
Cash flows from operating activities
Loss before taxation (13,983) (4,632)
(Increase) in trade and other receivables (204) (152)
(Decrease)/Increase in trade and other payables (1,164) 515
(Increase) in inventories (18) -
Impairment of goodwill 2,435 -
Depreciation of property, plant and equipment
(note 11) 1,446 20
Depreciation of right of use asset (note
12) 214 219
Loss on disposal of property, plant and
equipment (note 11) 105 1
Amortisation (note 10) 113 -
Share settled payments (note 24) 2,455 -
Other income (3) (1)
Finance income (note 9) (202) (39)
Finance costs (note 9) 628 69
Share based payments (note 24) 360 1,003
Income tax paid (note 5) (9) -
Foreign exchange (gain) on operating activities (32) (20)
-----------------
Net cash outflow from operating activities (7,859) (3,017)
----------------- -----------------
Cash flows from investing activities
Purchase of property, plant and equipment
(note 11) (228) (7)
Proceeds from sale of property, plant and
equipment - 1
Payments for exploration and evaluation
assets (14,566) (985)
(Increase) in restricted cash (9) -
Cash acquired from business combination 1,039 -
(note 15)
Other income received 3 1
Interest received (note 9) 202 39
Net cash outflow from investing activities (13,559) (951)
----------------- -----------------
Cash flows from financing activities
Issue of ordinary share capital 29,536 13,103
Principal elements of lease payments (note
20) (216) (212)
Interest payable on lease liabilities (note
20) (17) (23)
Finance costs (176) -
Repayment of borrowings (2,694) -
Proceeds of borrowings 1,515 -
Net cash inflow from financing activities 27,948 12,868
----------------- -----------------
Net increase in cash and cash equivalents 6,530 8,900
Effects of exchange rate changes on cash
and cash equivalents 180 31
Cash and cash equivalents at beginning of
year 11,152 2,221
----------------- -----------------
Cash and cash equivalents at end of year 17,862 11,152
----------------- -----------------
The accompanying accounting policies and notes form an integral
part of these financial statements.
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2020
Year ended Year ended
31 December 2020 31 December 2019
$ 000's $ 000's
Cash flows from operating activities
Loss before taxation (12,392) (3,165)
(Increase) in trade and other receivables (14) (68)
(Decrease)/increase in trade and other payables (869) 1,668
Depreciation 31 24
Provision for doubtful recovery of intercompany 7,171 -
receivable
Share settled payments 2,455 -
Other income (3) -
Finance income (46) (39)
Finance costs 81 48
Foreign exchange (gain) on operating activities (142) (19)
Share based payments 360 1,003
Net cash outflow from operating activities (3,368) (548)
----------------- -----------------
Cash flows from investing activities
Payments to acquire tangible assets (79) (3)
Interest received 46 39
Other income received 3 -
(Increase) in restricted cash (31) -
Advances to and payments on behalf of group
companies (21,610) (3,686)
Net cash outflow from investing activities (21,671) (3,650)
----------------- -----------------
Cash flows from financing activities
Issue of ordinary share capital 29,536 13,103
Principle elements of lease payments (note
20) (15) (14)
Interest payable on lease liabilities (note
20) (1) (2)
Finance costs (79) -
Repayments of borrowings - -
Proceeds of borrowings 1,515 -
----------------- -----------------
Net cash inflow from financing activities 30,956 13,087
----------------- -----------------
Net increase in cash and cash equivalents 5,917 8,889
Effects of exchange rate changes on cash
and cash equivalents 143 30
Cash and cash equivalents at beginning of
year 11,100 2,181
----------------- -----------------
Cash and cash equivalents at end of year 17,160 11,100
----------------- -----------------
The accompanying accounting policies and notes form an integral
part of these financial statements.
STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2020
Called up Share Share Retained Foreign Convertible Other Total
share premium based deficit exchange debt option reserves Equity
capital reserve payments reserve reserve
reserve
$ 000's $ 000's $ 000's $ 000's $ 000's $ 000's $ 000's $ 000's
Group
As at 1
January 2019 46 83,068 3,820 (59,060) - - 23,284 51,158
Loss for the
year - - - (4,632) - - - (4,632)
Currency
translation
differences - - - - - - - -
---------- ---------- ----------- ----------- -------------- ------------ ----------- ----------
Total
comprehensive
expense - - - (4,632) - - - (4,632)
Share capital
issued 15 13,089 - - - - - 13,104
Share based
payments - - 1,048 - - - - 1,048
Total
contributions
by and
distributions
to owners of
the Company 15 13,089 1,048 - - - - 14,152
As at 31
December 2019 61 96,157 4,868 (63,692) - - 23,284 60,678
---------- ---------- ----------- ----------- -------------- ------------ ----------- ----------
Loss for the
year - - - (13,992) - - - (13,992)
Currency
translation
differences - - - - 147 - - 147
---------- ---------- ----------- ----------- -------------- ------------ ----------- ----------
Total
comprehensive
expense - - - (13,992) 147 - - (13,845)
Share capital
issued 62 56,560 - - - - - 56,622
Recognition of
conversion
feature - - - - - 396 - 396
Share based
payments - - 360 - - - - 360
Total
contributions
by and
distributions
to owners of
the Company 62 56,560 360 - - 396 - 57,378
As at 31
December 2020 123 152,717 5,228 (77,684) 147 396 23,284 104,211
Company Called Share Share Retained Convertible Other Total
up premium based deficit debt option reserve Equity
share reserve payments reserve
capital reserve
$ 000's $ 000's $ 000's $ 000's $ 000's $ 000's $ 000's
As at 1 January
2019 46 83,068 3,450 (21,386) - 29,535 94,713
Loss for the
year - - - (3,165) - - (3,165)
Total
comprehensive
expense - - - (3,165) - - (3,165)
Share capital
issued 15 13,089 - - - - 13,104
Share based
payments - - 1,048 - - - 1,048
---------- ---------- ----------- ----------- -------------- ------------ -----------
Total
contributions
by and
distributions
to owners of
the Company 15 13,089 1,048 - - - 14,152
---------- ---------- ----------- ----------- -------------- ------------ -----------
As at 31
December 2019 61 96,157 4,498 (24,551) - 29,535 105,700
---------- ---------- ----------- ----------- -------------- ------------ -----------
Loss for the
year - - - (12,391) - - (12,391)
Total
comprehensive
expense - - - (12,391) - - (12,391)
Share capital
issued 62 56,560 - - - - 56,622
Recognition of
conversion
feature - - - - 396 - 396
Share based
payments - - 360 - - - 360
---------- ---------- ----------- ----------- -------------- ------------ -----------
Total
contributions
by and
distributions
to owners of
the Company 62 56,560 360 - 396 - 57,378
---------- ---------- ----------- ----------- -------------- ------------ -----------
As at 31
December 2020 123 152,717 4,858 (36,942) 396 29,535 150,687
---------- ---------- ----------- ----------- -------------- ------------ -----------
The accompanying accounting policies and notes form an integral
part of these financial statements
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARED 31 DECEMBER
2020
1 Summary of significant accounting policies
1.01 General information and authorisation of financial statements
Challenger Energy Group PLC ("the Company", formerly known as Bahamas
Petroleum Company PLC) and its subsidiaries (together "the Group")
are the holders of several oil & gas exploration and production licences
located in The Bahamas, Trinidad & Tobago, Suriname and Uruguay.
The Company is a limited liability company incorporated and domiciled
in the Isle of Man. The address of its registered office is IOMA House,
Hope Street, Douglas, Isle of Man. The Company's review of operations
and principal activities is set out in the Directors' Report. See note
14 to the financial statements for details of the Company's principal
subsidiaries.
The accounting reference date of the Company is 31 December.
1.02 Statement of compliance with IFRS
The Group's financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by the
European Union. The Company's financial statements have been prepared
in accordance with IFRS as adopted by the European Union and as applied
in accordance with the provisions of the Isle of Man Companies Acts
1931 to 2004. The principal accounting policies adopted by the Group
and Company are set out below.
New and revised standards and interpretations not applied
Certain new accounting standards and interpretations have been published
that are not mandatory for 31 December 2020 reporting periods and have
not been early adopted by the Group and Company. These standards are
not expected to have a material impact on the Group and Company in
the current or future reporting periods and on foreseeable future transactions.
1.03 Basis of preparation
The financial statements have been prepared on the historical cost
basis, except for the measurement of certain assets and financial instruments
at fair value as described in the accounting policies below.
The financial statements have been prepared on a going concern basis,
refer to note 1.28 for more details.
The financial statements are presented in United States Dollars ($)
and all values are rounded to the nearest thousand dollars ($'000)
unless otherwise stated.
1.04 Basis of consolidation
The financial statements incorporate the results of the Company and
its subsidiaries ("the Group") using the acquisition method. Control
is achieved where the Company is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to
affect those returns through its power over the entity.
Inter-company transactions and balances between Group companies are
eliminated in full.
Where necessary, adjustments are made to the financial statements of
subsidiaries to bring the accounting policies used in line with those
used by the Group.
The investment in associate (an entity over which the Group has significant
influence) has been recorded at cost and has not been adjusted to reflect
the Group's 25% share of the net profits/losses and assets/liabilities
of the associate from the date of acquisition to the balance sheet
date as it was deemed immaterial.
1.05 Business combinations
On the acquisition of a subsidiary, the business combination is accounted
for using the acquisition method. In the consolidated statement of
financial position, the acquiree's identifiable assets, liabilities
are initially recognised at their fair values at the acquisition date.
The cost of an acquisition is measured as the aggregated amount of
the consideration transferred, measured at the date of acquisition.
The consideration paid is allocated to the assets acquired and liabilities
assumed on the basis of fair values at the date of acquisition. Acquisition
costs not directly related to the issuance of shares in consideration
are expensed when incurred and included in administrative expenses.
Acquisition costs which are directly related to the issuance of shares
in consideration are deducted from share premium. The results of acquired
operations are included in the consolidated statement of comprehensive
income from the date on which control is obtained.
If the cost of acquisition exceeds the identifiable net assets attributable
to the Group, the difference is considered as purchased goodwill, which
is not amortised but annually reviewed for impairment. In the case
that the identifiable net assets attributable to the Group exceed the
cost of acquisition, the difference is recognised in profit or loss
as a gain on bargain purchase.
If the initial accounting for a business combination cannot be completed
by the end of the reporting period in which the combination occurs,
only provisional amounts are reported, which can be adjusted during
the measurement period of 12 months after acquisition date.
After initial recognition, goodwill is measured at cost less any accumulated
impairment losses.
1.06 Intangible assets - exploration and evaluation assets
Exploration and evaluation expenditure incurred which relates to more
than one area of interest is allocated across the various areas of
interest to which it relates on a proportionate basis. Exploration
and evaluation expenditure incurred by or on behalf of the Group is
accumulated separately for each area of interest. The area of interest
adopted by the Group is defined as a petroleum title.
Expenditure in the area of interest comprises direct costs and an
appropriate portion of related overhead expenditure but does not include
general overheads or administrative expenditure not linked to a particular
area of interest.
As permitted under IFRS 6, exploration and evaluation expenditure
for each area of interest, other than that acquired from the purchase
of another entity, is carried forward as an asset at cost provided
that one of the following conditions is met:
* the costs are expected to be recouped through
successful development and exploitation of the area
of interest, or alternatively by its sale; or
* exploration and/or evaluation activities in the area
of interest have not, at the reporting date, reached
a stage which permits a reasonable assessment of the
existence or otherwise of economically recoverable
reserves, and active and significant operations in,
or in relation to, the area of interest are
continuing.
Such costs are initially capitalised as intangible assets and include
payments to acquire the legal right to explore, together with the directly
related costs of technical services and studies, seismic acquisition,
exploratory drilling and testing. Exploration and evaluation expenditure
which fails to meet at least one of the conditions outlined above is
taken to the statement of comprehensive income.
Expenditure is not capitalised in respect of any area of interest unless
the Group's right of tenure to that area of interest is current.
Intangible exploration and evaluation assets in relation to each area
of interest are not amortised until the existence (or otherwise) of
commercial reserves in the area of interest has been determined.
Exploration and evaluation assets are assessed for impairment when
facts and circumstances suggest that the carrying amount may exceed
its recoverable amount. In accordance with IFRS 6, the Group reviews
and tests for impairment on an ongoing basis and specifically if the
following occurs:
a) the period for which the Group has a right to explore in the specific
area has expired during the period or will expire in the near future,
and is not expected to be renewed;
b) substantive expenditure on further exploration for and evaluation
of mineral resources in the specific area is neither budgeted nor planned;
c) exploration for and evaluation of mineral resources in the specific
area have not led to the discovery of commercially viable quantities
of mineral resources and the Group has decided to discontinue such
activities in the specific area; and
d) sufficient data exists to indicate that although a development in
the specific area is likely to proceed the carrying amount of the exploration
and evaluation asset is unlikely to be recovered in full from successful
development or by sale.
An impairment loss is recognised for the amount by which the asset's
carrying value exceeds its recoverable amount. The recoverable amount
is the higher of an asset's fair value less costs to sell and value
in use. For the purposes of assessing impairment, assets are grouped
at the lowest levels for which there are separately identifiable cash
inflows which are largely independent of the cash inflows from other
assets or groups of assets (cash-generating units).
Net proceeds from any disposal of an exploration asset are initially
credited against the previously capitalised costs. Any surplus proceeds
are credited to the consolidated statement of comprehensive income.
1.07 Oil and gas development/producing assets and commercial reserves
If the field is determined to be commercially viable, the attributable
costs are transferred to development/production assets within tangible
assets in single field cost centres.
Subsequent expenditure is capitalised only where it either enhances
the economic benefits of the development/producing asset or replaces
part of the existing development/producing asset.
Decreases in the carrying amount are charged to the consolidated statement
of comprehensive income.
Net proceeds from any disposal of development/producing assets are
credited against the previously capitalised cost. A gain or loss on
disposal of a development/producing asset is recognised in the consolidated
statement of comprehensive income to the extent that the net proceeds
exceed or are less than the appropriate portion of the net capitalised
costs of the asset.
Commercial reserves are proven and probable oil and gas reserves, which
are defined as the estimated quantities of crude oil, natural gas and
natural gas liquids which geological, geophysical and engineering data
demonstrate with a specified degree of certainty to be recoverable
in future years from known reservoirs and which are considered commercially
producible. There should be a 50% statistical probability that the
actual quantity of recoverable reserves will be more than the amount
estimated as a proven and probable reserves and a 50% statistical probability
that it will be less.
1.08 Depletion and amortisation
All expenditure carried within each field is amortised from the commencement
of production on a unit of production basis, which is the ratio of
oil and gas production in the period to the estimated quantities of
commercial reserves at the end of the period plus the production in
the period, generally on a field by field basis. In certain circumstances,
fields within a single development area may be combined for depletion
purposes. Costs used in the unit of production calculation comprise
the net book value of capitalised costs plus the estimated future field
development costs necessary to bring the reserves into production.
Changes in the estimates of commercial reserves or future field development
costs are dealt with prospectively.
1.09 Decommissioning
Where a material liability for the removal of production facilities
and site restoration at the end of the productive life of a field exists,
a provision for decommissioning is recognised. The amount recognised
is the present value of estimated future expenditure determined in
accordance with local conditions and requirements. The cost of the
relevant tangible fixed asset is increased with an amount equivalent
to the provision and depreciated on a unit of production basis. Changes
in estimates are recognised prospectively, with corresponding adjustments
to the provision and the associated fixed asset.
1.10 Property, plant and equipment
Property, plant and equipment is stated in the statement of financial
position at cost less accumulated depreciation and any recognised impairment
loss. Depreciation on property, plant and equipment other than exploration
and production assets, is provided at rates calculated to write off
the cost less estimated residual value of each asset on a straight-line
basis over its expected useful economic life. Depreciation rates applied
for each class of assets are detailed as follows:
Furniture, fittings and equipment 1 - 4 years
Motor vehicles 5 years
Leasehold improvements Over the life of the lease
The assets' residual values and useful lives are reviewed, and adjusted
if appropriate, at each balance sheet date.
An asset's carrying amount is written down immediately to its recoverable
amount if the asset's carrying amount is greater than its estimated
recoverable amount with any impairment charge being taken to the statement
of comprehensive income.
Gains and losses on disposals are determined by comparing proceeds
with carrying amount and are recognised in the statement of comprehensive
income.
1.11 Inventories
Inventories are stated at the lower of cost and net realisable value.
Cost is determined by the weighted average cost formula, where cost
is determined from the weighted average of the cost at the beginning
of the period and the cost of purchases during the period. Net realisable
value represents the estimated selling price less all estimated costs
of completion and costs to be incurred in marketing, selling and distribution.
1.12 Revenue recognition
Revenue from sales of oil and natural gas is recognised at the transaction
price to which the group expects to be entitled, exclusive of indirect
taxes and excise duties. Revenue is recognised when performance obligations
have been met, on delivery of product or when control of the product
is transferred to the customer.
1.13 Foreign currencies
Transactions in foreign currencies are translated at the exchange rate
ruling at the date of each transaction. Foreign currency monetary assets
and liabilities are retranslated using the exchange rates at the balance
sheet date. Gains and losses arising from changes in exchange rates
after the date of the transaction are recognised in the Statement of
comprehensive income. Non--monetary assets and liabilities that are
measured in terms of historical cost in a foreign currency are translated
at the exchange rate at the date of the original transaction.
In the financial statements, the net assets of the Group are translated
into its presentation currency at the rate of exchange at the balance
sheet date. Income and expense items are translated at the average
rates for the period. The resulting exchange differences are recognised
in equity and included in the translation reserve. The consolidated
financial statements and company financial statements are
presented in United States Dollars ("$"), which is the functional currency
of the Company. Subsidiaries in the Group have a range of functional
currencies including United States Dollars, UK Pound Sterling, Trinidad
Dollars and Euros.
1.14 Leases
The Group leases various offices, warehouses, equipment and vehicles.
Rental contracts are typically made for fixed periods of 6 months to
3 years, but may have extension options.
Lease terms are negotiated on an individual basis and contain a wide
range of different terms and conditions. The lease agreements do not
impose any covenants other than the security interests in the leased
assets that are held by the lessor. Leased assets may not be used as
security for borrowing purposes.
Leases are recognised as a right-of-use asset and a corresponding liability
at the date at which the leased asset is available for use by the Group.
Assets and liabilities arising from a lease are initially measured
on a present value basis. Lease liabilities include the net present
value of the following lease payments:
* fixed payments (including in-substance fixed
payments), less any lease incentives receivable;
* variable lease payment that are based on an index or
a rate, initially measured using the index or rate as
at the commencement date;
* amounts expected to be payable by the Group under
residual value guarantees;
* the exercise price of a purchase option if the Group
is reasonably certain to exercise that option; and
* payments of penalties for terminating the lease, if
the lease term reflects the Group exercising that
option.
Lease payments to be made under reasonably certain extension options
are also included in the measurement of the liability. The lease payments
are discounted using the interest rate implicit in the lease. If that
rate cannot be readily determined, which is generally the case for
leases in the Group, the lessee's incremental borrowing rate is used,
being the rate that the individual lessee would have to pay to borrow
the funds necessary to obtain an asset of similar value to the right-of-use
asset in a similar economic environment with similar terms, security
and conditions.
To determine the incremental borrowing rate, the Group:
* where possible, uses recent third-party financing
received by the individual lessee as a starting point,
adjusted to reflect changes in financing conditions
since third party financing was received;
* uses a build-up approach that starts with a risk-free
interest rate adjusted for credit risk for leases
held by the Group, which does not have recent third
party financing; and
* makes adjustments specific to the lease, for example
term, country, currency and security.
The Group is exposed to potential future increases in variable lease
payments based on an index or rate, which are not included in the lease
liability until they take effect. When adjustments to lease payments
based on an index or rate take effect, the lease liability is reassessed
and adjusted against the right-of-use asset.
Lease payments are allocated between principal and finance cost. The
finance cost is charged to profit or loss over the lease period so
as to produce a constant periodic rate of interest on the remaining
balance of the liability for each period.
Right-of-use assets are measured at cost comprising the following:
* the amount of the initial measurement of lease
liability;
* any lease payments made at or before the commencement
date less any lease incentives received;
* any initial direct costs; and
* restoration costs.
Right-of-use assets are generally depreciated over the shorter of the
asset's useful life and the lease term on a straight-line basis. If
the Group is reasonably certain to exercise a purchase option, the
right-of-use asset is depreciated over the underlying asset's useful
life.
Payments associated with short-term leases of equipment and vehicles
and all leases of low-value assets are recognised on a straight-line
basis as an expense in profit or loss. Short-term leases are leases
with a lease term of 12 months or less. Low-value assets comprise IT
equipment and small items of office furniture.
1.15 Financial instruments
Financial assets
The Group classifies its financial assets as financial assets held
at amortised cost. Management determines the classification of its
financial assets at initial recognition.
The Group classifies its financial assets as financial assets held
at amortised cost only if both of the following criteria are met:
* the asset is held within a business model whose
objective is to collect the contractual cash flows;
and
* the contractual terms give rise to cash flows that
are solely payments of principal and interest.
Measurement
Financial assets held at amortised cost are initially recognised at
fair value, and are subsequently stated at amortised cost using the
effective interest method. Financial assets at amortised cost comprise
'cash and cash equivalents' at variable interest rates, 'restricted
cash', escrowed and abandonment funds and 'trade and other receivables'
excluding 'prepayments'.
Impairment of financial assets
The Group assesses on a forward looking basis the expected credit losses
associated with its financial assets held at amortised cost. The impairment
methodology applied depends on whether there has been a significant
increase in credit risk.
The Group applies the expected credit loss model to financial assets
at amortised cost. Given the nature of the Group's receivables, expected
credit losses are not material.
Financial liabilities
The Group classifies its financial liabilities as other financial liabilities.
Other financial liabilities are recognised initially at fair value
and are subsequently measured at amortised cost using the effective
interest method. Other financial liabilities consist of 'trade and
other payables' and 'lease liabilities'. Trade and other payables represent
liabilities for goods and services provided to the Group prior to the
end of the financial period which are unpaid. The amounts are unsecured
and are usually paid within 30 days of recognition.
1.16 Cash and cash equivalents
Cash and cash equivalents includes cash on hand and deposits held at
call with financial institutions with original maturities of three
months or less. For the purposes of the statement of cash flow, restricted
cash is not included within cash and cash equivalents.
1.17 Share capital
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of new shares or options are deducted, net
of tax, from the proceeds. Net proceeds are disclosed in the statement
of changes in equity.
1.18 Finance costs
Borrowing costs are recognised as an expense when incurred.
1.19 Borrowings
Borrowings are recognised initially at fair value, net of any applicable
transaction costs incurred. Borrowings are subsequently carried at
amortised cost; any difference between the proceeds (net of transaction
costs) and the redemption value is recognised in the income statement
over the period of the borrowings using the effective interest method
(if applicable).
Interest on borrowings is accrued as applicable to that class of borrowing.
Convertible loans
Loans with certain conversion rights are identified as compound instruments
with the liability and equity components separately recognised. The
fair value of the liability component on initial recognition is calculated
by discounting the contractual stream of future cash flows using the
prevailing market interest rate for similar non-convertible debt. The
difference between the fair value of the liability component and the
fair value of the whole instrument is recorded as equity. Transaction
costs are apportioned between the liability and the equity components
of the instrument based on the amounts initially recognised. The liability
component is subsequently measured at amortised cost using the effective
interest rate method, in line with our other financial liabilities.
The equity component is not remeasured. On conversion of the instrument,
equity is issued and the liability component is derecognised. The original
equity component recognised at inception remains in equity. No gain
or loss is recognised on conversion.
1.20 Provisions
Provisions are recognised when the Group has a present obligation (legal
or constructive) as a result of a past event, it is probable that an
outflow of resources embodying economic benefits will be required to
settle the obligation and a reliable estimate can be made of the amount
of the obligation.
When the Group expects some or all of a provision to be reimbursed,
for example under an insurance contract, the reimbursement is recognised
as a separate asset but only when the reimbursement is virtually certain.
The expense relating to any provision is presented in the statement
of comprehensive income net of any reimbursement.
1.21 Dividends
Dividends are reported as a movement in equity in the period in which
they are approved by the shareholders.
1.22 Taxation
The tax expense represents the sum of the tax currently payable and
deferred tax.
Current tax, including overseas tax, is provided at amounts expected
to be paid (or recovered) using the tax rates and laws that have been
enacted or substantially enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation
of taxable profit, and is accounted for using the balance sheet liability
method. Deferred tax liabilities are generally recognised for all taxable
temporary differences and deferred tax assets are recognised to the
extent that it is probable that taxable profits will be available against
which deductible temporary differences can be utilised. Such assets
and liabilities are not recognised if the temporary difference arises
from goodwill or from the initial recognition (other than in a business
combination) of other assets and liabilities in a transaction that
affects neither the tax profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences
arising on investments in subsidiaries and associates, except where
the Group is able to control the reversal of the temporary difference
and it is probable that the temporary difference will not reverse in
the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance
sheet date and adjusted to the extent that it is probable that sufficient
taxable profits will be available to allow all or part of the asset
to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply
in the period when the liability is settled or the asset is realised.
Deferred tax is charged or credited in the comprehensive statement
of income, except when it relates to items charged or credited directly
to equity, in which case the deferred tax is also dealt with in equity.
1.23 Impairment of assets
At each balance sheet date, the Group assesses whether there is any
indication that its tangible and intangible assets have been impaired.
Evaluation, pursuit and exploration assets are also tested for impairment
when reclassified to oil and natural gas assets. If any such indication
exists, the recoverable amount of the asset is estimated in order to
determine the extent of the impairment, if any. If it is not possible
to estimate the recoverable amount of the individual asset, the recoverable
amount of the cash--generating unit to which the asset belongs is determined.
The recoverable amount of an asset or a cash--generating unit is the
higher of its fair value less costs to sell and its value in use. The
value in use is the present value of the future cash flows expected
to be derived from an asset or cash--generating unit. This present
value is discounted using a pre--tax rate that reflects current market
assessments of the time value of money and of the risks specific to
the asset, for which future cash flow estimates have not been adjusted.
If the recoverable amount of an asset is less than its carrying amount,
the carrying amount of the asset is reduced to its recoverable amount.
That reduction is recognised as an impairment loss.
The Group's impairment policy is to recognise a loss relating to assets
carried at cost less any accumulated depreciation or amortisation immediately
in the statement of comprehensive income.
Goodwill acquired in a business combination is, from the acquisition
date, allocated to each of the cash--generating units, or groups of
cash--generating units, that are expected to benefit from the synergies
of the combination. Goodwill is tested for impairment at least annually,
and whenever there is an indication that the asset may be impaired.
An impairment loss is recognised on cash--generating units, if the
recoverable amount of the unit is less than the carrying amount of
the unit. The impairment loss is allocated to reduce the carrying amount
of the assets of the unit by first reducing the carrying amount of
any goodwill allocated to the cash--generating unit, and then reducing
the other assets of the unit, pro rata on the basis of the carrying
amount of each asset in the unit.
If an impairment loss subsequently reverses, the carrying amount of
the asset is increased to the revised estimate of its recoverable amount
but limited to the carrying amount that would have been determined
had no impairment loss been recognised in prior years. A reversal of
an impairment loss is recognised in the statement of comprehensive
income. Impairment losses on goodwill are not subsequently reversed.
1.24 Employee benefits
Wages and salaries, annual leave and sick leave
Liabilities for wages and salaries, including non--monetary benefits,
expected to be settled within 12 months of the reporting date are recognised
in other payables in respect of employees' services up to the reporting
date and are measured at the amounts expected to be paid when the liabilities
are settled.
Share-based payments
Where equity settled share-based instruments are awarded to employees
or Directors, the fair value of the instruments at the date of grant
is charged to the statement of comprehensive income over the vesting
period. Non-market vesting conditions are taken into account by adjusting
the number of equity instruments expected to vest at each balance sheet
date so that, ultimately, the cumulative amount recognised over the
vesting period is based on the number of instruments that eventually
vest. Market vesting conditions are factored into the fair value of
the instruments granted. As long as all other vesting conditions are
satisfied, a charge is made irrespective of whether the market vesting
conditions are satisfied. The cumulative expense is not adjusted for
failure to achieve a market vesting condition.
Where equity instruments are granted to persons other than employees
or Directors, the statement of comprehensive income is charged with
the fair value of goods and services received.
Bonuses
The Group recognises a liability and an expense for bonuses. Bonuses
are approved by the Board and a number of factors are taken into consideration
when determining the amount of any bonus payable, including the recipient's
existing salary, length of service and merit. The Group recognises
a provision where contractually obliged or where there is a past practice
that has created a constructive obligation.
Pension obligations
For defined contribution plans, the Group pays contributions to privately
administered pension plans. The Group has no further payment obligations
once the contributions have been paid. The contributions are recognised
as an employee benefit expense when they are due.
Termination benefits
Termination benefits are payable when employment is terminated by the
Group before the normal retirement date, or whenever an employee accepts
voluntary redundancy in exchange for these benefits. The Group recognises
termination benefits when it is demonstrably committed to a termination
and when the entity has a detailed formal plan to terminate the employment
of current employees without the possibility of withdrawal. Benefits
falling due more than 12 months after the end of the reporting period
are discounted to their present value.
1.25 Segmental reporting
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision-maker. The chief
operating decision-maker, who is responsible for allocating resources
and assessing performance of the operating segments, has been identified
as the Board of Directors that makes strategic decisions. The performance
of operating segments is assessed on the basis of key metrics applicable,
such as barrels of oil produced per day, "netbacks" per barrel, revenue
and operating profit.
The Board has determined there is a single operating segment: oil and
gas exploration, development and production however, there are four
geographical segments: (Trinidad & Tobago, St Lucia & Suriname), Bahamas,
(Cyprus, Netherlands, Spain & USA) and the (Isle of Man & UK), one
of which is non-operating.
1.26 Share issue expenses and share premium account
Costs of share issues are written off against the premium arising on
the issues of share capital.
1.27 Share based payments reserve
This reserve is used to record the value of equity benefits provided
to employees and Directors as part of their remuneration and provided
to consultants and advisors hired by the Group from time to time as
part of the consideration paid.
1.28 Critical accounting estimates, judgements and assumptions
The Group makes estimates and assumptions concerning the future. The
resulting accounting estimates will, by definition, seldom equal the
related actual results. The estimates and assumptions that have a
risk of causing material adjustment to the carrying amounts of assets
and liabilities within the next financial year are discussed below.
(i) Recoverability of intangible oil and gas costs
Costs capitalised as intangible assets are assessed for impairment
when circumstances suggest that the carrying value may exceed its
recoverable value. This assessment involves judgement as to the likely
commerciality of the asset, the future revenues and costs pertaining
and the discount rate to be applied for the purposes of deriving a
recoverable value.
Expenditure of $76,055,348 relating to the cost of exploration licences,
geological and geophysical consultancy, seismic data acquisition and
interpretation and the drilling of exploration wells has been capitalised
as at 31 December 2020 (2019: $50,569,263), being made up of $72,879,666
in exploration costs in the Bahamian offshore licences and $3,175,682
of costs over exploration licences in Trinidad. The Group's exploration
activities are subject to a number of significant and potential risks
including:
* licence obligations;
* requirement for further funding;
* geological and development risks; and
* political risk.
The recoverability of these intangible assets is dependent on the
discovery and successful development of economic reserves, including
the ability to raise finance to develop future projects or alternatively,
sale of the respective licence areas. The carrying value of the Group's
exploration and evaluation expenditure is reviewed at each balance
sheet date and, if there is any indication that it is impaired, its
recoverable amount is estimated. Estimates of impairment are limited
to an assessment by the Directors of any events or changes in circumstances
that would indicate that the carrying value of the asset may not be
fully recoverable. Any impairment loss arising is charged to the statement
of comprehensive income.
On 21 February 2019, the Group received notification from the Bahamian
Government of the extension of the term of its four southern licences
to 31 December 2020, with the requirement that the Company commence
an exploration well before the end of the extended term. On 23 March
2020 the Group notified the Government of The Bahamas that, due to
the impacts of the global response to the Covid-19 pandemic, a force
majeure event had occurred under the terms of its exploration licences,
such that the term of the licences were extended beyond 31 December
2020 commensurate with the duration of the force majeure event. In
November 2020 the Group received formal notification by the Government
of The Bahamas agreeing to an extension of these licences to 30 June
2021 as a result of the force majeure event.
On 20 December 2020, the Group commenced drilling of the Perseverance
1 exploration well in its Bahamas licence area, with drilling activity
ceasing on 8 February 2021. Whilst the well did encounter hydrocarbons,
commercial volumes of movable hydrocarbons were not present at the
drilling location. The Group has undertaken an extensive review of
the data extracted from the well to determine the extent to which
this data indicates remaining prospectivity in the deeper, untested
horizons, as well as horizons of interest at other locations along
the B and C structures. The results of this review indicate that substantial
prospectivity remains in sufficient potential volumes such that further
exploration activity on these licences is merited. On the basis of
the revised prospect volume inventory for these untested horizons
and structures, the Group has undertaken an exercise to determine
whether the present value of any future economic benefit which may
be derived from hydrocarbon extraction from these licences is sufficient
to support the carrying value of the capitalised costs as at 31 December
2020. Following this review, the Group has determined that the present
value of these future economic benefits exceeds the carrying value
of this asset and that consequently no impairment of this asset is
required.
In March 2021, the Group notified the Government of The Bahamas of
its election to renew the four southern licences into a further three
year exploration period, having discharged the licence obligation
to drill an exploration well before the expiry of the current licence
period on 30 June 2021. The Group remains in discussions with the
Government regarding renewal of these licences and the level of licence
fees which remain to be paid for the current period and which would
be payable for the renewed licence period. On formal renewal of the
licences by the Government, the key licence obligation for the new
three year period will be the drilling of a further exploration well
within the licence area before the expiry of the renewed licence term.
The ability of the Group to discharge its obligation to commence a
well prior to the end of the renewed licence period will be contingent
on securing the funding required to execute a second exploration well.
To this end, the Group has commenced discussions with various industry
operators regarding entering into a joint venture partnership or farm
out to fund ongoing work leading to a second well, such that the Directors
consider that the Group will be able to discharge the licence requirement
of a further exploration well within the renewed term of the licences.
In June 2021 the Group notified the Government of The Bahamas that
it did not intend to further discussions regarding renewal of the
Miami licence area, against which capitalised costs totalling $0.4
million are being held as at 31 December 2020. As this development
represents a non adjusting post balance sheet event, the Group will
impair these costs in full in the financial statements to 31 December
2021.
Capitalised exploration costs in the Group's Trinidad operations consist
primarily of the Bonasse licence area in the South West Peninsula
of Trinidad. The Group has undertaken a review to determine if there
are any indications that the carrying value of these assets may exceed
the present value of any future economic benefit derived from hydrocarbon
production. On 26 May 2021 the Group commenced the drilling of the
Saffron 2 exploration well in this licence area, which was completed
in July 2021, although production testing remains ongoing. Initial
results of this well indicate that commercially available volumes
of hydrocarbons are likely to exist within the prospective structures,
however further exploration activity is required to fully delineate
the potential reserves present in the structures. The Group has therefore
determined that there is no indication that the carrying value of
this asset is impaired as at 31 December 2020.
(ii) Going concern
These financial statements have been prepared on a going concern basis,
which assumes that the Group will continue in operation for the foreseeable
future.
As at the reporting date, the Group had $17.9 million in unrestricted
cash funding, and access to financing facilities, include a share
subscription facility and a convertible loan facility for up to GBP22.5
million (approx. $31.5 million) in additional funding, of which GBP6.75
million (approx. $9.5 million), before costs, was drawn down post
year end.
On 24 March 2021 the Group reported that the final cost of the Perseverance-1
exploration well, following extensive drilling delays due to equipment
failures and additional unforeseen costs relating to Covid-19 management
protocols, was approx. $45 million, representing an additional $10
million than originally anticipated. The Group has entered into a
series of agreements with the suppliers to the well for structured
payment plans over the course of 2021 in order to facilitate the orderly
settlement of these liabilities.
On 27 May 2021, the Group raised approx. $9.75 million in additional
funding by way of an open offer to the Company shareholders and a
placing to certain institutional investors, providing the resources
required to ensure the Group could continue to invest in its exploration
assets, namely through the drilling of the Saffron 2 well in Trinidad
Bonasse licence area, whilst continuing to meet its financial obligations
as they fall due.
The Group's ability to meet all of its anticipated obligations over
the 12 months from the date of this report is dependent on the ability
to secure access to additional funding. The Group currently estimates
that it has a need for approx. $15 million in additional funding in
order to continue to meet its obligations as and when they fall due
over the 12 months from the date of this report. This includes meeting
routine operating costs, undertaking certain planned work program
activities, and also includes settlement of final remaining payments
to suppliers and finance providers from the drilling campaigns for
both the Perseverance-1 well in The Bahamas and the Saffron-2 well
in Trinidad.
In order to meet this funding requirement, the Group has been and
continues to evaluate a number of potential funding options. This
includes a potential $10 million convertible loan note facility with
Arena Investors LP, consideration of Reserve-Based Lending options,
the potential disposal of certain assets for cash, potential farming
out of an interest in certain of the Group's exploration and/or production
licences which would result in some cash inflows and funding of work
program plans in relation to those assets, possible further issuances
of securities and/or debt instruments for cash, agreeing payment plans
for the deferral of outstanding obligations to suppliers and finance
providers, and/or settlement of all or part of outstanding obligations
to suppliers and finance providers via the issuance of Company shares.
As at the date of this report, the Group remains actively engaged
in developing and reviewing all of the above potential sources of
additional funding. At the same time, the Group is undertaking work
necessary to materially reduce overhead and general operating costs,
whilst at the same time maximising production revenues from existing
producing oil fields, in the expectation of being able to generate
surplus operating cashflows in the 12 months from the date of this
report, which surplus cashflows could then be applied towards the
Group's overall funding requirements.
While there can be no certainty as to the availability of funding,
given the range of funding options available, and given the Group's
track record in being able to secure funding as and when required,
the Group is confident that it will be able to successfully conclude
one or any combination of the above-noted funding options, as well
as maximise production cashflows and actively manage the schedule
of cash outflows, such that the Group will be able to continue to
meet its financial obligation as and when they fall due for the 12
months following the date of this report. As a consequence, the directors
are satisfied that the going concern principle remains appropriate
for the preparation of these financial statements. However, as outlined
above, these conditions, which include the need to obtain additional
funding from one or more of a number of potential sources, which is
not entirely within the Group's control, indicates the existence of
a material uncertainty which may cast significant doubt on the Group
and Company's ability to continue as a going concern. The financial
statements do not include the adjustments that would be required if
the Group and Company were unable to continue as a going concern
Following the outbreak of the Covid-19 global pandemic, the Group
has implemented remote working procedures across all of its teams
and operations to ensure the ongoing safety of its staff and consultants.
As a consequence, the Group does not consider the Covid-19 pandemic
to have any material impact on its operations.
(iii) Recoverability of investment in subsidiary and amounts owed by subsidiary
undertakings in the Company statement of financial position
The investment in the Company's direct subsidiaries and amounts owed
by subsidiary undertakings at 31 December 2020 stood at $50,939,743
(2019: $29,560,456) and $83,838,284 (2019: $66,721,08) respectively.
Ultimate recoverability of investments in subsidiaries and amounts
owed by subsidiary undertakings is dependent on successful development
and commercial exploitation, or alternatively, sale of the respective
licence areas. The carrying value of the Company's investments in
subsidiaries is reviewed at each balance sheet date and, if there
is any indication of impairment, the recoverable amount is estimated.
Estimates of impairments are limited to an assessment by the directors
of any events or changes in circumstances that would indicate that
the carrying values of the assets may not be fully recoverable. Similarly,
the expected credit losses on the amounts owed by subsidiary undertakings
are intrinsically linked to the recoverable amount of the underlying
assets. Any impairment losses arising are charged to the statement
of comprehensive income.
At 31 December 2020 a loss allowance for expected credit losses of
$7,171,198 (2019: nil) was held in respect of the recoverability of
amounts due from subsidiary undertakings.
(iv) Fair value of assets and liabilities acquired in business combination
On 7 August 2020, the Company completed a merger with Columbus Energy
Resources PLC ("CERP"), effected by means of a Court sanctioned scheme
of arrangement under Part 26 of the UK Companies Act 2006 (the "Scheme").
Pursuant to the Scheme, a total of 757,261,511 new ordinary shares
in the Company were issued and allotted to holders of CERP shares.
In accounting for this transaction under the acquisition method, the
directors have estimated the fair value of the identified assets and
liabilities acquired by reference to market data points and industry
valuation standard practices.
See note 15 for summary of the fair values of the identifiable assets
and liabilities of the CERP Group as at the date of acquisition.
1.29 Earnings per share
Basic earnings per share is calculated as net profit attributable
to members of the parent company, adjusted to exclude any costs of
servicing equity (other than dividends) and preference share dividends,
divided by the weighted average number of ordinary shares, adjusted
for any bonus element.
Diluted earnings per share is calculated as net profit attributable
to members of the parent company, adjusted for:
(i) Costs of servicing equity (other than dividends) and preference share
dividends;
(ii) The post-tax effect of dividends and interest associated with dilutive
potential ordinary shares that have been recognised as expenses; and
(iii) Other non-discretionary changes in revenues or expenses during the
period that would result from the dilution of potential ordinary shares,
divided by the weighted average number of ordinary shares and dilutive
potential ordinary shares, adjusted for any bonus element.
1.30 Investment in Subsidiary in the Company statement of financial position
Investments in subsidiaries are recognised at initial cost of acquisition,
less any impairment to date.
2 Turnover and segmental analysis
Management has determined the operating segments based on the reports
reviewed by the Board of Directors that are used to make strategic
decisions. The Board has determined there is a single operating segment:
oil and gas exploration, development and production. However, there
are five geographical segments: Trinidad & Tobago & Suriname (operating),
The Bahamas (operating), The Isle of Man and UK (non-operating, corporate),
and Uruguay, Spain, Cyprus, Netherlands & USA (all non-operating).
The segment including Trinidad & Tobago has been reported as the Group's
direct oil and gas producing and revenue generating operating segment.
The Bahamas segment includes The Bahamian exploration licences on which
drilling activities were conducted in 2020. The segment including the
Isle of Man is the Group's parent, and provides management service
to the Group. The entities in Uruguay, St Lucia, Cyprus, Spain, the
Netherlands, and the U.S.A. are non-operating in that they either hold
investments, or are dormant, or in the case of Uruguay has not yet
commenced operations. Their results are consolidated and reported on
together as a single segment.
Year ended 31 Operating Operating Management Non-operating Total
December
2020
Trinidad Bahamas IOM/UK
& Suriname (*)
$'000 $'000 $'000 $'000 $'000
Operating
profit/(loss)
by geographical area
Net petroleum
revenue
(**) 1,417 - - - 1,417
----------------- -------------- --------------- ------------------- ------------
Operating
profit/(loss) (3,081) (2,167) (8,103) (209) (13,560)
Other income - - 3 - 3
Finance (charges) (96) (21) (511) - (628)
Finance income - - 202 - 202
Loss before taxation (3,177) (2,188) (8,409) (209) (13,983)
----------------- -------------- --------------- ------------------- ------------
Other information
Depreciation,
amortisation
and impairment (1,529) (197) (2,466) (16) (4,208)
Capital additions 78 22,441 79 - 22,598
----------------- -------------- --------------- ------------------- ------------
Segment assets
Tangible and
intangible
assets 27,985 73,000 4,703 61 105,749
Investment in
associate 47 - - - 47
Deferred tax asset 8,975 - - - 8,975
Abandonment fund 1,297 - - - 1,297
Trade and other
receivables 3,123 1,882 285 23 5,313
Inventories 172 - - - 172
Restricted cash 889 - 57 - 946
Cash 577 97 17,177 11 17,862
----------------- -------------- --------------- ------------------- ------------
Consolidated total
assets 43,065 74,979 22,222 95 140,361
----------------- -------------- --------------- ------------------- ------------
Segment liabilities
Trade and other
payables (8,979) (8,738) (802) (101) (18,620)
Borrowings (1,017) - (1,120) - (2,137)
Deferred tax
liability (8,974) - - - (8,974)
Lease liabilities (41) (51) (13) - (105)
Provisions (3,562) - - (2,752) (6,314)
----------------- -------------- --------------- ------------------- ------------
Consolidated total
liabilities (22,573) (8,789) (1,935) (2,853) (36,150)
----------------- -------------- --------------- ------------------- ------------
Year ended 31 December Management Operating Total
2019
IOM Bahamas
$'000 $'000 $'000
Operating profit/(loss)
by geographical area
Net petroleum revenue - - -
Operating profit/(loss) (3,157) (1,446) (4,603)
Other income 1 - 1
Finance income 39 - 39
Finance (charges) (48) (21) (69)
----------- ---------- --------
Profit/(loss) before
taxation (3,165) (1,467) (4,632)
----------- ---------- --------
Other information
Depreciation and amortisation (24) (214) (238)
Capital additions 3 2,091 2,094
----------- ---------- --------
Segment assets
Tangible and intangible
assets 43 50,756 50,799
Trade and other receivables 224 634 858
Restricted cash 26 - 26
Cash 11,100 52 11,152
----------- ---------- --------
Consolidated total assets 11,393 51,442 62,835
----------- ---------- --------
Segment liabilities
Trade and other payables (1,947) (5) (1,952)
Lease liabilities (28) (177) (205)
Consolidated total liabilities (1,975) (182) (2,157)
----------- ---------- --------
(*) Intercompany balances and transactions between Group
entities have been eliminated.
(**) Sales revenues were derived from a single customer within
each of these operating countries.
3 Operating loss - Group 2020 2019
------------------------------------------------------- --------- --------
$ 000's $ 000's
Operating loss is arrived at after charging:
Fees payable to the Company's auditors and its
associates for:
-the audit of the Company and Group financial
statements 315 75
-non audit related services 48 1
Directors' emoluments - fees and benefits (*) 1,693 711
Impairment of goodwill(**) 2,435 -
Depreciation (***) 1,660 239
Amortisation 113 -
(*) See note 7 for further details.
(**) See note 10 for further details.
(***) Depreciation of certain oil and gas assets of $863K (2019: $-)
has been recognised within cost of sales.
Administrative expenses 2020 2019
--------------------------------------------- -------- --------
$ 000's $ 000's
Staff costs - cash 1,521 1,237
Staff costs - share settled (note 24) 1,425 -
Travel and accommodation 206 318
Professional fees - cash 3,324 1,576
Professional fees - share settled (note 24) 1,030 -
Depreciation and amortisation 660 239
Share based payments 360 1,048
Other 1,267 204
Total 9,793 4,622
-------- --------
4 Employee information (excluding Directors') 2020 2019
- Group
---------------------------------------------- -------- --------
$ 000's $ 000's
Staff costs:
Wages and salaries - cash 1,182 599
Wages and salaries - share settled (note 24) 433 -
IFRS 2 charges 43 744
Other staff costs 417 125
-------- --------
Total 2,075 1,468
-------- --------
5 Taxation - Group 2020 2019
-------------------------------------------------------------------- --------- ------------
$ 000's $ 000's
Analysis of tax charge in the year
Tax charge on ordinary activities 9 -
--------- ------------
Factors affecting the tax charge for the year:
Loss on ordinary activities before tax 13,983 4,632
Standard rate of corporation tax in the IOM -% -%
Loss on ordinary activities multiplied by the - -
standard rate of corporation tax
Effects of:
Overseas tax on profits 9 -
Current tax charge for the year 9 -
--------- ------------
Deferred tax:
The net deferred tax balances solely relates to the Company's Trinidad
operations. The components of the asset and liability for the years
ended December 31, 2020 and 2019 were as follows:
Columbus acquisition balances: 2020 2019
$ 000's $ 000's
Losses carried forward 9,273 -
Leased property 1 -
Deferred tax asset recognised at acquisition 9,274 -
(note 15)
Adjustment to losses carried forward (299) -
Deferred tax asset 8,975 -
Columbus acquisition balances:
Property and equipment 9,273 -
Deferred tax liability recognised at acquisition 9,273 -
(note 15)
Adjustment to property and equipment (299) -
Deferred tax liability 8,974 -
Deferred tax assets arise on recognition of deferred tax liabilities
which arise on taxable temporary differences. As these temporary differences
unwind, release of the deferred tax liabilities creates a taxable profit
against which deferred tax assets are utilised. As at 31 December 2020,
the Group had an unrecognised deferred tax asset of $47.7m calculated
at 45.7% (weighted average across taxable entities) in respect of $100.5m.
The deferred tax asset was not recognised as there was insufficient
evidence to suggest that it would be recoverable in future periods.
The recognition of movements in deferred tax assets and deferred tax
liabilities in the statement of comprehensive income for the year have
given rise to a net charge of nil (2019: nil).
6 Dividends
---------------------------------------------------------------------------------------------
During the year, no dividends were paid or proposed by the Directors
(2019: nil).
7 Directors' remuneration - Group
-------------------------------------------------
2020 2019
$ 000's $ 000's
Directors' remuneration 1,693 711
-------- --------
Share based *Share-settled
Cash payments Other payments payments Total
-------------------------- --------------- --------------- ------------------- -------------------- ---------
$ 000's $ 000's $ 000's $ 000's $ 000's
2020
Executive Directors
Simon Potter 450 24 40 739 1,253
Non-Executive Directors
William Schrader 27 - 28 80 135
James Smith 18 - 18 52 88
Adrian Collins 21 - 22 61 104
Ross McDonald 18 - 18 52 88
Leo Koot 17 - - 8 25
--------------- --------------- ------------------- -------------------- ---------
551 24 126 992 1,693
--------------- --------------- ------------------- -------------------- ---------
* Represents the fair value of shares issued to directors during the year in settlement of
deferred salary and fees, less the total value of accrued salaries and fees on the date of
settlement. See note 24 for further details.
Deferred
remuneration - Share based
Cash payments cash payments Total
-------------------------- --------------- --------------- ------------------- -------------------- ---------
$ 000's $ 000's $ 000's $ 000's
2019
Executive Directors
Simon Potter 375 - 20 395
Non-Executive Directors
William Schrader 8 37 39 84
James Smith 6 24 25 55
Adrian Collins 6 29 33 68
Ross McDonald 6 24 25 55
Edward Shallcross 6 24 24 54
--------------- ------------------- -------------------- ---------
407 138 166 711
--------------- ------------------- -------------------- ---------
8 Loss per share - Group
----------------------------------------------------------------------------------
The calculation of loss per share is based on the loss after taxation
divided by the weighted average number of shares in issue during the
year:
2020 2019
---------- ---------
Loss for the year attributable to equity holders
of the parent company ($ 000's) (13,992) (4,632)
Weighted average number of ordinary shares used
in calculating basic loss per share (millions) 2,895 1,725
Basic loss per share (expressed in cents) (0.5) (0.27)
Diluted
Diluted loss per share is calculated by adjusting the weighted average
number of ordinary shares outstanding to assume conversion of all dilutive
potential ordinary shares. The Company had one category of dilutive
potential ordinary shares: share options/warrants. For these share
options/warrants, a calculation is performed to determine the number
of shares that could have been acquired at fair value (determined as
the average annual market share price of the Company's shares) based
on the monetary value of the subscription rights attached to outstanding
share options/warrants. The number of shares calculated as above is
compared with the number of shares that would have been issued assuming
the exercise of the share options/warrants. Share options/warrants
outstanding at the reporting date were as follows:
2020 2019
------------ ------------
Total share options and warrants in issue (number)
(see note 24) 486,159,599 200,357,073
As the inclusion of potentially issuable ordinary shares would
result in a decrease in the loss per share, they are considered to
be anti-dilutive and as such, a diluted loss per share is not
included.
9 Finance costs/(income) - Group 2020 2019
$ 000's $ 000's
Finance costs 628 69
Finance income - Interest received (202) (39)
10 Intangible assets - Group 2020
----------------------------------------------------------- --------- ---------------------------------
Goodwill Exploration & evaluation assets
$ 000's $ 000's
Cost
As at 1 January 2020 - 50,570
Acquisition of Columbus Energy Resources PLC (note 15) 7,045 2,492
Additions - 22,310
Foreign exchange difference on translation - -
--------- ---------------------------------
As at 31 December 2020 7,045 75,372
--------- ---------------------------------
Accumulated amortisation and impairment
As at 1 January 2020 - -
Amortisation - 113
Impairment 2,435 -
Foreign exchange difference on translation - -
--------- ---------------------------------
As at 31 December 2020 2,435 113
--------- ---------------------------------
Net book value
As at 31 December 2020 4,610 75,259
--------- ---------------------------------
As at 31 December 2019 - 50,570
--------- ---------------------------------
Impairment review
The Directors carried out an impairment review of the intangible assets, including goodwill,
to determine whether the carrying value of these assets exceeded their fair value. This assessment
was undertaken by reference to various market data points and industry valuation standards,
including, where applicable, estimations of open market disposal values. Following this exercise,
the directors have determined that no impairment of exploration & evaluation assets is required
at the balance sheet date and an impairment of $2,435,000 has been recognised to goodwill
arising on acquisition at the balance sheet date, which has been recognised in the statement
of comprehensive income for the year.
Intangible assets - Group 2019
-------------------------------------------- --------------------------------
Exploration & evaluation assets
$ 000's
Cost
As at 1 January 2019 48,515
Additions 2,055
Foreign exchange difference on translation -
--------------------------------
As at 31 December 2019 50,570
--------------------------------
Net book value
As at 31 December 2019 50,570
--------------------------------
As at 31 December 2018 48,515
--------------------------------
11 Tangible assets 2020
-------------------------------------------- ------------------------------------------------------------
Group Company
Oil and Property, Decommissioning Total Property,
gas assets plant and costs plant and
equipment equipment
(*) (*)
$ 000's $ 000's $ 000's $ 000's $ 000's
Cost or Valuation
As at 1 January 2020 - 450 - 450 100
Acquisition of Columbus
Energy Resources PLC
(note 15) 23,412 1,671 1,994 27,077 -
Additions 59 169 - 228 78
Disposals (72) (33) - (105) (1)
Foreign exchange difference
on translation (1) 1 1 1 -
------------ ----------- ---------------- ------------ ---------------
As at 31 December 2020 23,398 2,258 1,995 27,651 177
------------ ----------- ---------------- ------------ ---------------
Accumulated depreciation
and Impairment
As at 1 January 2020 - 419 - 419 84
Depreciation 1,113 197 136 1,446 16
Disposals - (1) - (1) (1)
Foreign exchange difference
on translation 2 1 1 4 -
------------ ----------- ---------------- ------------ ---------------
As at 31 December 2020 1,115 616 137 1,868 99
------------ ----------- ---------------- ------------ ---------------
Net book value
As at 31 December 2020 22,283 1,642 1,858 25,783 78
------------ ----------- ---------------- ------------ ---------------
As at 31 December 2019 - 31 - 31 16
------------ ----------- ---------------- ------------ ---------------
Tangible assets 2019
-------------------------------------------- ------------------------------------------------------------
Group Company
Oil and Property, Decommissioning Total Property,
gas assets plant and costs plant and
equipment equipment
(*) (*)
$ 000's $ 000's $ 000's $ 000's $ 000's
Cost or Valuation
As at 1 January 2019 - 464 - 464 97
Additions - 7 - 7 3
Disposals - (21) - (21) -
------------ ----------- ---------------- ------------ ---------------
As at 31 December 2019 - 450 - 450 100
------------ ----------- ---------------- ------------ ---------------
Accumulated depreciation
and Impairment
As at 1 January 2019 - 418 - 418 75
Depreciation - 20 - 20 9
Disposals - (19) - (19) -
As at 31 December 2019 - 419 - 419 84
------------ ----------- ---------------- ---------------
Net book value
As at 31 December 2019 - 31 - 31 16
------------ ----------- ---------------- ------------ ---------------
As at 31 December 2018 - 46 - 46 22
------------ ----------- ---------------- ------------ ---------------
(*) Property, plant and equipment includes leasehold improvements.
12 Right of use assets 2020 2020
---------------------------------------------- --------------------- ------------ ---------------------
Group leased Group motor vehicles Total Group Company leased
properties properties
$ 000's $ 000's $ 000's $ 000's
Cost
As at 1 January 2020 355 62 417 42
Acquisition of Columbus
Energy Resources PLC
(note 15) 53 - 53 -
Additions 60 - 60 -
Foreign exchange - - - -
difference on
translation
---------------------- --------------------- ------------ ---------------------
As at 31 December 2020 468 62 530 42
---------------------- --------------------- ------------ ---------------------
Accumulated
depreciation
As at 1 January 2020 206 13 219 15
Depreciation 192 22 214 15
Foreign exchange - - - -
difference on
translation
---------------------- --------------------- ------------ ---------------------
As at 31 December 2020 398 35 433 30
---------------------- --------------------- ------------ ---------------------
Net book value
As at 31 December 2020 70 27 97 12
---------------------- --------------------- ------------ ---------------------
As at 31 December 2019 149 49 198 27
---------------------- --------------------- ------------ ---------------------
Right of use assets 2019 2019
----------------------- ---------------------- --------------------- -----------------------------------
Group leased Group motor vehicles Total Group Company leased
properties properties
$ 000's $ 000's $ 000's $ 000's
Cost
As at 1 January 2019 353 32 385 42
Additions 2 30 32 -
---------------------- --------------------- ------------
As at 31 December 2019 355 62 417 42
---------------------- --------------------- ------------ ---------------------
Accumulated
depreciation
As at 1 January 2019 - - - -
Depreciation 206 13 219 15
---------------------- --------------------- ------------ ---------------------
As at 31 December 2019 206 13 219 15
---------------------- --------------------- ------------ ---------------------
Net book value
As at 31 December 2019 149 49 198 27
---------------------- --------------------- ------------ ---------------------
As at 31 December 2018 353 32 385 42
---------------------- --------------------- ------------ ---------------------
13 Investment in associate - Group 2020 2019
-------------------------------------------------------------- ------------------ -----------------------
$ 000's $ 000's
Cost
As at 1 January - -
Acquisition of Columbus Energy Resources PLC 47 -
(note 15)
As at 31 December 47 -
------------------ -----------------------
Challenger Energy Group PLC, the parent company of the Group, holds
25% of the share capital of the following company:
Company Country of registration Proportion held Nature of business
-------------------------- -------------------------------- ------------------ -------------------------
Indirect
Via Leni Trinidad
Ltd
Beach Oilfield Trinidad & Tobago 25% Oil and Gas Production
Limited and Exploration
Company
14 Investment in subsidiaries 2020 2019
-------------------------------------------------------------- -------------- -------------
Company $ 000's $ 000's
Cost
As at 1 January 29,560 29,560
Acquisition of Columbus Energy Resources PLC 21,380 -
(note 15)
Disposals - -
-------------- -------------
As at 31 December 50,940 29,560
-------------- -------------
Challenger Energy Group PLC, the parent company of the Group, holds
100% of the share capital of the following companies:
Company Country of Proportion Nature of business
registration held
---------------------------- ----------------- ------------ -----------------------------------
Direct
BPC (A) Limited Isle of Man 100% Holding Company
BPC (B) Limited Isle of Man 100% Holding Company
BPC (C) Limited Isle of Man 100% Holding Company
BPC (D) Limited Isle of Man 100% Holding Company
BPC (A) Limited Bahamas 100% Oil and Gas Production and
Exploration Company
Columbus Energy Resources England & Wales 100% Holding Company
Limited
Indirect
BPC Limited Bahamas 100% Investment Company
BPC (B) Limited Bahamas 100% Investment Company
BPC (C) Limited Bahamas 100% Investment Company
BPC (D) Limited Bahamas 100% Investment Company
BPC (E) Limited Bahamas 100% Investment Company
Bahamas Offshore Petroleum Bahamas 100% Investment Company
Ltd
Island Offshore Petroleum Bahamas 100% Investment Company
Ltd
Sargasso Petroleum Bahamas 100% Investment Company
Ltd
Privateer Petroleum Bahamas 100% Investment Company
Ltd
Columbus Oil & Gas Bahamas 100% Investment Company
Limited
Indirect
Columbus Energy Holdings Cyprus 100% Holding Company
Ltd
Columbus Energy Resources Netherlands 100% Holding Company (for Suriname
South America B.V. Branch)
Via Columbus Energy
Holdings Ltd
Columbus Energy CPS Cyprus 100% Investment Company
(Cyprus) Ltd
Columbus Energy Byron Cyprus 100% Investment Company
Ltd
Columbus Energy (Cyprus) Cyprus 100% Investment Company
Ltd
Columbus Energy Investments Cyprus 100% Investment Company
Ltd
Via Columbus Energy
CPS (Cyprus) Ltd
Compañia Petrolifera Spain 100% Oil and Gas Production and
de Sedano S.L.U. Exploration Company
Via Columbus Energy
Byron Ltd
Leni Gas and Oil US United States 100% Dormant Company
Inc.
Via Columbus Energy
(Cyprus) Ltd
Columbus Energy (St St Lucia 100% Investment Company
Lucia) Ltd
Via Columbus Energy
(St Lucia) Ltd
Leni Trinidad Ltd Trinidad & 100% Oil and Gas Production and
Tobago Exploration Company
Columbus Energy Services Trinidad & 100% Oil and Gas Services Company
Ltd Tobago
Goudron E&P Ltd Trinidad & 100% Oil and Gas Production and
Tobago Exploration Company
Columbus Energy Bonasse Trinidad & 100% Oil and Gas Production and
Limited Tobago Exploration Company
Caribbean Rex Ltd St Lucia 100% Investment Company
Steeldrum Oil Company St Lucia 100% Investment Company
Inc
Steeldrum Petroleum Trinidad & 100% Investment Company
Group Ltd Tobago
FRAM Exploration (Trinidad) Trinidad & 100% Oil and Gas Production and
Ltd Tobago Exploration Company
Jasmin Oil & Gas Ltd Trinidad & 100% Oil and Gas Production and
Tobago Exploration Company
Cory Moruga Holdings Trinidad & 100% Oil and Gas Production and
Ltd Tobago Exploration Company
West Indian Energy Trinidad & 100% Oil and Gas Services Company
Group Ltd Tobago
T-REX Resources (Trinidad) Trinidad & 100% Oil and Gas Production and
Ltd Tobago Exploration Company
15 Business combination
---------------------
Acquisition in 2020
On 7 August 2020, the Company completed a merger with Columbus Energy
Resources PLC, effected by means of a Court sanctioned scheme of arrangement
under Part 26 of the UK Companies Act 2006 (the "Scheme"). Pursuant
to the Scheme, a total of 757,261,511 new ordinary shares of the Company
were issued and allotted to holders of CERP shares.
Assets acquired and liabilities assumed
The fair values of the identifiable assets and liabilities of the Columbus
Energy Group as at the date of acquisition were:
Fair value recognised on acquisition
Assets $ 000's
Cash and cash equivalents 1,039
Restricted cash 911
Trade and other receivables 3,086
Inventories 154
Investment in associate (note 13) 47
Right of use assets (note 12) 53
Property, plant and equipment and decommissioning costs (note 11) 3,665
Oil and gas properties (note 11) 23,412
Intangible assets (note 10) 2,492
Abandonment fund 1,257
Deferred Tax Asset (note 5) 9,274
-------------------------------------
45,390
-------------------------------------
Liabilities
Trade and other payables (12,281)
Lease liabilities (note 20) (56)
Provisions (Note 22) (6,169)
Borrowings (3,276)
Deferred tax liability (note 5) (9,273)
-------------------------------------
(31,055)
-------------------------------------
Total identifiable net assets at fair value 14,335
-------------------------------------
Goodwill (note 10) 7,045
Purchase consideration transferred (shares issued at fair value) 21,380
Analysis of cash flows on acquisition
Net cash acquired with the subsidiary (included in cash flows from investing
activities) 1,039
Net cash flow on acquisition 1,039
The fair value of the trade receivables amounts to $251,973. The
gross amount of trade receivables is $251,973 and it is expected
that the full contractual amounts can be collected.
Goodwill arising on acquisition is attributable to the Group's
enhanced strength following the creation of a portfolio of
operations in varying jurisdictions and in various stages of the
hydrocarbon value cycle.
From the date of acquisition, Columbus Energy Resources PLC
contributed $1,417,000 of revenue and $4,149,000 of loss before tax
from continuing operations of the Group. If the combination had
taken place at the beginning of the year, revenue from continuing
operations would have been $3,507,000 and loss before tax from
continuing operations for the Group would have been
$28,251,000.
16 Trade and other receivables 2020 2019
---------------------------------------------------- ------------------ --------------------------
Group Company Group Company
$ 000's $ 000's $ 000's $ 000's
Current trade and other
receivables
Trade and other receivables 291 - - -
VAT receivable (*) 1,468 101 48 48
Other receivables (**) 1,447 92 80 79
Prepayments 2,092 45 729 97
Other deposits 15 - 1 -
Total 5,313 238 858 224
-------- -------- -------- ----------------
Non-current trade and
other receivables
Escrow and Abandonment 1,297 - - -
funds (***)
Loans due from subsidiaries
(****) - 83,839 - 66,721
-------- -------- -------- ----------------
Total 1,297 83,839 - 66,721
-------- -------- -------- ----------------
(*) VAT receivable is stated at fair value, after expected credit loss
allowances totalling $139,000, which have been recognised in the year
(2019: nil).
(**) Other receivables predominantly comprises balances owing from
joint venture partners in Trinidad.
(***) Pursuant to certain production and exploration licences, the
Company is obligated to remit payments into an Escrow Fund and a separate
Abandonment fund based on production, amounts paid vary by licence.
The Company remits US$0.25 per barrel of crude oil sold (Escrow fund),
and between US$0.28 to US$1.00 (varying by licence) to an abandonment
fund and the funds will be used for the future abandonment of wells
in the related licenced area.
(****) The loans due from subsidiaries are interest free and repayable
on demand. At 31 December 2020 a loss allowance for expected credit
losses of $7,171,198, which have been recognised in the year (2019:
nil), was held in respect of the recoverability of amounts due from
subsidiary undertakings.
17 Restricted cash 2020 2019
---------------------------------------------------- ------------------ --------------------------
Group Company Group Company
$ 000's $ 000's $ 000's $ 000's
Credit card security 77 27 26 26
Licence related bonds 469 30 - -
Bank deposits 400 - - -
-------- -------- -------- ----------------
Total 946 57 26 26
-------- -------- -------- ----------------
Bank deposits consist of funds held as security for bank loans
in Trinidad. Funds restricted against licence related bonds consist
of $30,000 relating to the Group Uruguay licence and $439,000
relating to the Group's licences in Trinidad. Amounts held at the
year end have been classified as current as they may be recovered
at any point following cancellation of the associated corporate
credit card facilities, discharge of the relevant licence
obligation or cancellation of the relevant licence and repayment of
the relevant bank loans.
18 Inventories 2020 2019
-------------------------- -------------------------- ----------------------------------
Group Company Group Company
$ 000's $ 000's $ 000's $ 000's
Crude Oil 60 - - -
Consumables 112 - - -
---------- ---------------- ---------------- ----------------
Total 172 - - -
---------- ---------------- ---------------- ----------------
The increase in inventories from the date of acquisition to the balance
sheet date recognised in the statement of comprehensive income for
the year is $18,000 (2019: nil).
19 Trade and other payables 2020 2019
-------------------------- ------------------ ------------------
Group Company Group Company
$ 000's $ 000's $ 000's $ 000's
Current trade and other payables
Trade and other payables 5,353 72 1,161 1,159
Accruals 13,267 432 791 787
-------- -------- -------- --------
Total 18,620 504 1,952 1,946
-------- -------- -------- --------
Included in the above for the Group is $8,094,000 of payables relating
to exploration and evaluation activity in the year (2019: $1,059,000).
20 Lease liabilities 2020 2019
------------------------- ------------------ ------------------
Group Company Group Company
$ 000's $ 000's $ 000's $ 000's
As at 1 January 205 28 - -
Acquisition of Columbus 56 - - -
Energy Resources PLC
(note 15)
Additions 60 - 417 42
Accretion of interest 17 1 23 2
Payments (233) (16) (235) (16)
-------- -------- -------- --------
As at 31 December 105 13 205 28
-------- -------- -------- --------
Current 105 13 161 15
Non-current - - 44 13
Set out above are the carrying amounts of lease liabilities and
the movements during the period.
The following are the amounts recognised in profit or loss:
Lease liabilities 2020 2019
-------------------------------- ------------------ ------------------
Group Company Group Company
$ 000's $ 000's $ 000's $ 000's
Depreciation expense
of right-of-use assets 214 15 219 15
Interest expense on lease
liabilities 17 1 23 2
Expense relating to short-term 13 - - -
leases
As at 31 December 244 16 242 17
-------- -------- -------- --------
The Group has elected not to recognise right of use assets and
lease liabilities for short term leases lease term of 12 months or
less and leases for low value assets. The Group will recognise the
payments associated with these leases as expenses on a
straight-line basis over the lease term.
21 Borrowings 2020 2019
------------------- ------------------ ------------------
Group Company Group Company
$ 000's $ 000's $ 000's $ 000's
Current borrowings
Secured loan 2 27 - - -
Unsecured loan 3 249 - - -
Secured loan 4 17 - - -
Secured loan 5 132 - - -
Secured loan 6 62 - - -
Unsecured loan 7 11 - - -
-------- -------- -------- --------
Total 498 - - -
-------- -------- -------- --------
Borrowings 2020 2019
----------- ------------------ ------------------
Group Company Group Company
$ 000's $ 000's $ 000's $ 000's
Non-current borrowings
Convertible loan 1 1,120 1,120 - -
Secured loan 2 54 - - -
Secured loan 4 6 - - -
Secured loan 5 200 - - -
Secured loan 6 259 - - -
Total 1,639 1,120 - -
------------ ------------ ---- ---
1 Bizzell convertible loan - On 29/30 December 2020, the Company drew
down GBP1.11m of a GBP3m first tranche of a convertible loan previously
agreed with Bizzell Capital Partners Pty Ltd. Tranche 1 has a face
value of GBP3m and total fair value, after deduction of all facility
costs, of GBP2.8m. The term of the loan is 3 years from the date of
draw down of each Tranche. The holder has the right, at any time prior
to maturity, to elect to convert the Notes (principal plus any accrued
interest) into fully paid ordinary shares in the Company. Initially,
the conversion price was set at a 25% premium to the price of the Company's
next capital raising (if any) or at 6p per share, whichever is the
lower. Subsequently, in February 2021 the conversion price was amended
by agreement to 0.8p per share. The fair value of the debt component
amounting to $1,120,000 has been recognised as a non-current financial
liability in non-current liabilities. The equity component to the facility
amounting to $396,000 has been recognised at fair value under equity
reserves. The remainder of the GBP3m Tranche 1 was fully drawn down
in 2021, with GBP2.5m of this amount converted into ordinary shares
in May 2021, leaving a remaining principal outstanding of GBP0.5m as
at the date of this report.
2 The loan was issued by RBC Royal Bank Limited in June 2015. Repayments
are over 7 years and the loan is denominated in Trinidad Dollars.
3 The loan was issued by BNP Paribas in 2015. In December 2016, the
outstanding balance of US$2.6m was refinanced and retired, and all
security was removed, leaving a final unsecured payment of US$0.25m
due on 31 December 2019. In November 2020 this loan balance was refinanced
with the outstanding balance to be repaid over one year commencing
in February 2021. The loan is denominated in US Dollars.
4 The loan was issued by Ansa Merchant Bank Limited in May 2018. Repayments
are over 4 years and the loan is denominated in Trinidad Dollars.
5 In December 2019 the Group drew down on a new working capital loan
facility with Republic Bank Limited. Repayments are over 3 years with
the final payment due in November 2022. The loan is denominated in
Trinidad Dollars.
6 In July 2019 the Group drew down on a new working capital loan facility
(New Sunchit Loan). Repayments are over 5 years with the final payment
due in June 2024. The loan is denominated in Trinidad Dollars.
7 In January 2020 the Group drew down on a new working capital facility
(Solution One). Repayments are over 1 year and the loans are denominated
in Trinidad Dollars.
The carrying amounts of all the borrowings approximate to their fair
value.
Net debt reconciliation Group
------------------------------ -----------------------------------------
Borrowings Leases Cash Total
$ 000's $ 000's $ 000's $ 000's
As at 1 January 2019 - (385) 2,221 1,836
Cashflows - 212 8,900 9,112
Acquisition - leases - (30) - (30)
Foreign exchange adjustments - - 31 31
Other changes - (2) - (2)
----------- -------- -------- --------
Net funds as at 31 December
2019 - (205) 11,152 10,947
----------- -------- -------- --------
As at 1 January 2020 - (205) 11,152 10,947
Acquisition of Columbus
Energy Resources PLC
(note 15) (3,276) (56) 1,039 (2,293)
Cash flows 1,179 216 5,491 6,886
Acquisition - leases - (60) - (60)
Foreign exchange adjustments (40) - 180 140
----------- -------- -------- --------
As at 31 December 2020 (2,137) (105) 17,862 15,620
----------- -------- -------- --------
Net debt reconciliation Company
------------------------------ -----------------------------------------
Borrowings Leases Cash Total
$ 000's $ 000's $ 000's $ 000's
As at 1 January 2019 - (42) 2,181 2,139
Cashflows - 14 8,888 8,902
Foreign exchange adjustments - - 31 31
----------- -------- -------- --------
Net funds as at 31 December
2019 - (28) 11,100 11,072
----------- -------- -------- --------
As at 1 January 2020 - (28) 11,100 11,072
Cash flows (1,120) 15 5,917 4,812
Foreign exchange adjustments - - 143 143
----------- -------- -------- --------
As at 31 December 2020 (1,120) (13) 17,160 16,027
----------- -------- -------- --------
22 Provisions - Group
------------------------------------------- ------------------ ------------------------------
Decommissioning* Other Total
$ 000's $ 000's $ 000's
At 1 January 2020 - - -
Acquisition of Columbus
Energy Resources PLC 5,226 943 6,169
New provisions and allocations 26 4 30
Unwinding of discount 24 - 24
Foreign exchange difference
on translation 91 - 91
At 31 December 2020 5,367 947 6,314
*The provisions relates to the estimated costs of the removal of the
Spanish and Trinidadian production facilities and site restoration
at the end of the production lives of the facilities. Decommissioning
provisions in Trinidad have been subject to a discount rate of 6%,
expected cost inflation of 1.3% and assumes an average expected year
of cessation of production of 2032. Decommissioning provisions relating
to facilities in Spain are undiscounted and uninflated as the field
is no longer operating.
Other provisions
In one of the Group's Trinidadian subsidiaries, there are licence fees
and commitments relating to an exploration and production licence that
the subsidiary is expecting to settle by way of negotiation with the
Ministry of Energy and Energy Industries. These negotiations are continuing
in 2021. A provision has been recognised to reflect management's best
estimate of its obligation at balance sheet date.
23 Share capital - Group & Company
------------------------------------------------------------------------------- ----------------
Called up, allotted, issued and fully Number of Nominal value Share premium
paid ordinary shares of 0.0002p each shares
$ 000's $ 000's
As at 1 January 2019 1,572,719,096 46 83,068
----------------- -------------- ----------------
Shares issued at average price of
2.1p per share 120,000,000 4 2,356
Shares issued at average price of
2.6p per share 442,043,690 11 10,733
As at 31 December 2019 2,134,762,786 61 96,157
Shares issued at average price of
2.4p per share 48,000,000 1 1,454
Shares issued at average price of
2p per share 3,250,000 - 82
Shares issued at average price of
1p per share 62,500,000 2 788
Shares issued at average price of
0.9p per share 79,059,830 2 914
Shares issued at average price of
1p per share 120,866,141 3 1472
Shares issued at average price of
2p per share 35,337,328 1 884
Shares issued at average price of
2.1p per share 868,888,792 23 24,220
Shares issued at average price of
2.6p per share 61,713,763 2 2,087
Shares issued at average price of
2.9p per share 5,429,206 - 205
Shares issued at average price of
2p per share 475,000,000 12 11,417
Shares issued at average price of
2p per share 154,552,357 4 1,190
Shares issued at average price of
2.9p per share 5,429,206 - 211
Shares issued at average price of
2.9p per share 35,759,140 1 1,412
Shares issued at average price of
2p per share 412,500,000 11 10,126
Shares issued at average price of
2p per share 3,624,800 - 98
As at 31 December 2020 4,506,673,349 123 152,717
----------------- -------------- ----------------
Number of Nominal value Share premium
shares
$ 000's $ 000's
As at 31 December 2019 2,134,762,786 61 96,157
----------------- -------------- ----------------
As at 31 December 2020 4,506,673,349 123 152,717
----------------- -------------- ----------------
During the year, 2,372 million shares were issued (2019: 562
million).
At the end of 2020, the number of shares in issue comprised
4,507 million ordinary shares.
During the year, transaction costs for issued share capital
totalled $1,887,859 (2019: $763,166), these amounts were allocated
to share premium.
The total authorised number of ordinary shares at 31 December
2020 and 2019 was 10,000,000,000 shares with a par value of
0.002 pence per share (2019: 5,000,000,000 shares). All issued
shares of 0.002 pence are fully paid.
Share capital - Group & Company - other reserves
---------------------------------------------------------------- ------------
Merger reserve* Reverse acquisition Total other
reserve* reserves
$ 000's $ 000's $ 000's
As at 31 December 2019 77,131 (53,847) 23,284
As at 31 December 2020 77,131 (53,847) 23,284
---------------- -------------------- ------------
In 2008, BPC Jersey Limited acquired Falkland Gold and Minerals
Limited ('FGML') via a reverse acquisition, giving rise to the
reverse acquisition reserve. BPC Jersey Limited was the acquirer of
FGML although FGML became the legal parent of the Group on the
acquisition date. FGML subsequently changed its name to BPC
Limited.
The merger reserve arose in 2010 as a result of the Group
undergoing a Scheme of Arrangement which saw the shares in the then
parent company BPC Limited replaced with shares in Challenger
Energy Group PLC.
In the Company Financial Statements, the Other reserve balance
of $29,535,463 (2019: 29,535,463) arises from the issue of shares
in the Company as part of the Scheme of Arrangement undertaken in
2010, which saw the shares in the then parent company BPC Limited
replaced with shares in Bahamas Petroleum Company PLC (then BPC
PLC), which became the new parent company of the Group.
* In the Group financial statements to 31 December 2019, the
Merger Reserve and Reverse Acquisition Reserve were presented as
separate balances on the face of the consolidated statement of
financial position. In these financial statements to 31 December
2020 the Merger Reserve and Reverse Acquisition reserve have been
aggregated into Other Reserves for presentation on the consolidated
statement of financial position.
24 Share based payments
reserve - Group & Company
--------------------------- ---- ----
A) Options and warrants
Share options have been granted to Directors, selected employees
and consultants to the Company.
The Group had no legal or constructive obligation to repurchase
or settle any options in cash. Movements in the number of share
options and warrants outstanding during the year are as
follows:
2020 2019
----------------------------------------- -----------------------------------------
Average exercise No. Options Average exercise No. Options
price per & Warrants price per & Warrants
share share
$ 000's $ 000's $ 000's $ 000's
At beginning of year 2.34p 200,357,073 2.22p 68,850,000
Cancelled - - 2.22p (68,850,000)
Granted 2.87p 309,706,720 2.34p 200,357,073
Exercised 0.0072p (23,904,194) - -
-------- ------------- ------ -------------
At end of year 2.76p 486,159,599 2.34p 200,357,073
Exercisable at end of
year 1.97p 106,659,599 2.08p 100,357,073
-------- ------------- ------ -------------
On 31 October 2019, all options in issue were cancelled by
mutual consent with the option holders and new options issued as
detailed below.
The weighted average remaining contractual life of the options
and warrants in issue at 31 December 2020 is 2.46 years (31
December 2019: 4.32 years) and the weighted average exercise price
of these instruments is 2.76 pence per share (31 December 2019:
2.34 pence). The range of exercise prices for options outstanding
at 31 December 2020 is 2.0 pence to 4.0 pence (31 December 2019:
2.0 pence to 4.0 pence).
The expected price volatility used in calculating the fair value
of options and warrants granted by the Company is determined based
on the historical volatility of the Company share price (based on
the remaining life of the options), adjusted for any expected
changes to future volatility due to publicly available
information.
The fair value of the warrants and options granted in the year
was estimated using the Black Scholes model. The inputs and
assumptions used in calculating the fair value of options granted
in the year were as follows:
Warrants and options granted in 2020
Name Date Share Vesting Number Exercise Expiry Expected Expected Risk Dividend Fair
granted price date/criteria price date volatility life free yield value
at pence (years) return per
date option
of $
grant
pence
Management
options
(Tranche
3) 14/08/2020 1.899 19/12/2020 8,700,000 2.800 14/08/2025 14% 0.53 (0.2%) - -
------------ ------ -------------- ------------ --------- ----------- ----------- --------- -------- --------- -------
CERP
Management
nil cost
options 14/08/2020 1.899 17/08/2020 17,029,394 0.002 2024-2027 - - - - -
------------ ------ -------------- ------------ --------- ----------- ----------- --------- -------- --------- -------
Gneiss
Energy
options 07/10/2020 1.939 07/10/2020 3,624,800 2.000 07/10/2022 35% 0.73 (0.01%) - $0.26
------------ ------ -------------- ------------ --------- ----------- ----------- --------- -------- --------- -------
Management
options
(Tranche
2) 14/10/2020 2.300 14/10/2020 12,500,000 2.400 14/10/2025 35% 0.71 (0.04%) - $0.29
------------ ------ -------------- ------------ --------- ----------- ----------- --------- -------- --------- -------
Management
options
(Tranche
3) 14/10/2020 2.300 19/12/2020 8,300,000 2.800 14/10/2025 14% 0.52 (0.04%) - -
------------ ------ -------------- ------------ --------- ----------- ----------- --------- -------- --------- -------
Shore
Capital
warrants 15/10/2020 2.255 15/10/2020 17,052,526 2.000 15/10/2022 35% 0.71 (0.05%) - $0.51
------------ ------ -------------- ------------ --------- ----------- ----------- --------- -------- --------- -------
Management
options
(Tranche
2) 30/11/2020 2.525 30/11/2020 12,500,000 2.400 30/11/2025 35% 0.58 (0.02%) - $0.30
------------ ------ -------------- ------------ --------- ----------- ----------- --------- -------- --------- -------
1798
Volantis
Fund Ltd
options 13/12/2020 2.354 13/12/2020 93,750,000 3.000 13/12/2021 14% 0.55 (0.13%) - -
------------ ------ -------------- ------------ --------- ----------- ----------- --------- -------- --------- -------
1798
Volantis
Fund Ltd
options 13/12/2020 2.354 13/12/2020 93,750,000 4.000 13/12/2021 14% 0.55 (0.13%) - -
------------ ------ -------------- ------------ --------- ----------- ----------- --------- -------- --------- -------
Gneiss
Energy
options 21/12/2020 2.128 21/12/2020 37,500,000 2.000 21/12/2023 14% 0.52 (0.10%) - $0.20
------------ ------ -------------- ------------ --------- ----------- ----------- --------- -------- --------- -------
Jordan fund
options 21/12/2020 2.128 21/12/2020 5,000,000 2.000 21/12/2023 14% 0.52 (0.10%) - $0.20
------------ ------ -------------- ------------ --------- ----------- ----------- --------- -------- --------- -------
309,706,720
------------------------- ------ -------------- ------------ --------- ----------- ----------- --------- -------- --------- -------
Warrants and options granted in 2019
Name Date Share Vesting Number Exercise Expiry Expected Expected Risk Dividend Fair
granted price date/criteria price date volatility life free yield value
at pence (years) return per
date option
of $
grant
pence
Management
options
(Tranche
1) 31/10/2019 2.000 31/10/2019 50,000,000 2.220 31/10/2023 21% 0.67 0.51% - $0.08
------------ ------ -------------- ------------- --------- ----------- ----------- --------- ------- --------- -------
Management
options
(Tranche
2) 31/10/2019 2.000 15/02/2020 50,000,000 2.400 31/10/2023 21% 0.67 0.51% - $0.04
------------ ------ -------------- ------------- --------- ----------- ----------- --------- ------- --------- -------
Management
options
(Tranche
3) 31/10/2019 2.000 15/04/2020 50,000,000 2.800 31/10/2023 21% 0.67 0.51% - $0.01
------------ ------ -------------- ------------- --------- ----------- ----------- --------- ------- --------- -------
Shore
Capital
warrants 22/03/2019 1.720 22/03/2019 7,200,000 1.600 22/03/2021 72% 1.27 0.66% - $0.77
------------ ------ -------------- ------------- --------- ----------- ----------- --------- ------- --------- -------
Shore
Capital
warrants 11/11/2019 2.100 11/11/2019 13,157,073 2.100 11/11/2021 17% 0.64 0.57% - $0.22
------------ ------ -------------- ------------- --------- ----------- ----------- --------- ------- --------- -------
Strand
Hanson
warrants 05/11/2019 2.000 05/11/2019 5,000,000 2.000 05/11/2021 18% 0.65 0.59% - $0.15
------------ ------ -------------- ------------- --------- ----------- ----------- --------- ------- --------- -------
Bizzell
Capital
Partners
options 31/10/2019 2.000 31/10/2019 6,250,000 2.000 31/10/2023 21% 0.67 0.51% - $0.18
------------ ------ -------------- ------------- --------- ----------- ----------- --------- ------- --------- -------
MH Carnegie
& Co
options 31/10/2019 2.000 31/10/2019 18,750,000 2.000 31/10/2023 21% 0.67 0.51% - $0.18
------------ ------ -------------- ------------- --------- ----------- ----------- --------- ------- --------- -------
200,357,073
------------------------- ------ -------------- ------------- --------- ----------- ----------- --------- ------- --------- -------
B) Salary and fee deferrals
On 17 December 2014, the Directors entered into an agreement for
the deferral of 20% of their salary and fees on the following
terms:
-- 20% of all directors' fees and the CEO's salary were forgone
until the Board, having consulted with the relevant advisers to the
Company, determines that the cost of an initial exploration well is
fully funded on an unconditional basis (defined as the Company
either securing a farm-in or securing capital via debt or equity or
a combination of both in excess of $25 million, or any combination
thereof) .
-- The value of fees/salary forgone accrued at the end of each
month as an entitlement to ordinary shares in the Company.
-- The number of ordinary shares accrued was calculated as the
value of fees/salary forgone divided by the volume weighted average
closing price of the Company shares over each month.
-- The "accrued shares" shall only be issued to the directors
once the Board, having consulted with the relevant advisers to the
Company, determines that the cost of an initial exploration well is
fully funded on an unconditional basis (defined as the Company
either securing a farm-in or securing capital via debt or equity or
a combination of both in excess of $25 million, or any combination
thereof).
-- The agreement is effective for all parties from 1 October 2014.
On 1 April 2016, the Directors entered into a further agreement
for the deferral of 50% of their fees and the CEO entered into an
agreement for the deferral of 90% of his salary on the following
terms:
-- 50% of all directors' fees and 90% of the CEO's salary are to
be forgone until the Board, having consulted with the relevant
advisers to the Company, determines that the cost of an initial
exploration well is fully funded on an unconditional basis (defined
as the Company either securing a farm-in or securing capital via
debt or equity or a combination of both in excess of $25 million,
or any combination thereof) .
-- The value of Directors fees forgone shall accrue at the end
of each month as an entitlement to ordinary shares in the
Company.
-- 50% of the value of the CEO's salary forgone shall accrue at
the end of each month as an entitlement to ordinary shares in the
Company.
-- 50% of the value of the CEO's salary forgone shall be
repayable in cash once the Board, having consulted with the
relevant advisers to the Company, determines that the cost of an
initial exploration well is fully funded on an unconditional basis
(defined as the Company either securing a farm-in or securing
capital via debt or equity or a combination of both in excess of
$25 million, or any combination thereof) .
-- Receipt of the CEO's forgone salary is conditional on his
continued employment by the Group up to the completion of a
farm-out or other well financing arrangement as detailed above.
-- All of the CEO share entitlements accrued under the agreement
entered into on 1 October 2014 were forgone.
-- The number of ordinary shares accruing shall be calculated as
the value of fees/salary forgone divided by the volume weighted
average closing price of the Company shares over each month.
-- The "accrued shares" shall only be issued to the directors
once the Board, having consulted with the relevant advisers to the
Company, determines that the cost of an initial exploration well is
fully funded on an unconditional basis (defined as the Company
either securing a farm-in or securing capital via debt or equity or
a combination of both in excess of $25 million, or any combination
thereof).
-- The agreement is effective for all parties from 1 April 2016
and, in the case of the CEO, supersedes the agreement entered into
on 17 December 2014.
On 1 January 2018 the Directors (excluding the CEO) entered into
a further agreement for the deferral of 90% of their fees on the
following terms:
-- 90% of all directors' fees are to be forgone until the Board,
having consulted with the relevant advisers to the Company,
determines that the cost of an initial exploration well is fully
funded on an unconditional basis (defined as the Company either
securing a farm-in or securing capital via debt or equity or a
combination of both in excess of $25 million, or any combination
thereof) .
-- 50% of the value of the directors' fees forgone shall accrue
at the end of each month as an entitlement to ordinary shares in
the Company.
-- 50% of the value of the directors' fees forgone shall be
repayable in cash once the Board, having consulted with the
relevant advisers to the Company, determines that the cost of an
initial exploration well is fully funded on an unconditional basis
(defined as the Company either securing a farm-in or securing
capital via debt or equity or a combination of both in excess of
$25 million, or any combination thereof) .
-- The number of ordinary shares accruing shall be calculated as
the value of fees/salary forgone divided by the volume weighted
average closing price of the Company shares over each month.
-- The "accrued shares" shall only be issued to the directors
once the Board, having consulted with the relevant advisers to the
Company, determines that the cost of an initial exploration well is
fully funded on an unconditional basis (defined as the Company
either securing a farm-in or securing capital via debt or equity or
a combination of both in excess of $25 million, or any combination
thereof).
From 1 July 2018 the ongoing deferral of the CEO's salary into
conditional share entitlements ceased, resulting in no further
share-based payment charges arising as regards the CEO salary from
that date. See note 23 for further details.
On 15 October 2020, the Board determined that the criteria for
cessation and settlement of all deferred fees, namely the raising
of at least $25m in funding for the Perseverance 1 well, had been
met. Furthermore, the Board elected to novate all deferred fees
that were to be settled in cash into a shares. Consequently, all
deferred fees and salaries by directors and executive management
were settled through the issuance of 146,818,765 new ordinary
shares in the Company. See note 27 for further details.
Under IFRS 2, entitlements to ordinary shares under the above
agreements constitute the issuance of equity settled share-based
payment instruments with the following terms:
-- Each month of deferred fee entitlements is treated as a
separate grant of options with the date of grant being the first
day of the month.
-- The fair value of the options at grant is estimated as the
share price on the date of grant.
-- Options awarded each month vest at the end of that month.
The value of the instruments has been estimated and is being
charged to the statement of total comprehensive income in monthly
tranches as each month's award of options vest.
Following approval by the Company shareholders at the AGM held
on 17 September 2019, conditional entitlements to 21,300,000 shares
in the Company were granted to consultants in the prior year in
lieu of fees. All conditions associated with these entitlements
were identical to those granted to the Directors in the prior year.
The fair value of these instruments were estimated by reference to
the agreed value of services received by the Group.
The value of the instruments has been estimated and is being
charged to the statement of total comprehensive income in monthly
tranches as each month's award of options vest, up to 30 September
2020, being the effective settlement date of the deferred pay
arrangements.
C) Expense arising from share-based payment transactions
Total expense arising from equity-settled share-based payment
transactions:
2020 2019
---------------------- -------- --------
$ 000's $ 000's
Options and warrants 274 190
Salary deferrals 86 858
Total 360 1,048
-------- --------
The above charges in relation to share-based payments include
$126,614 relating to Directors (2019: $166,393), $43,577 related to
staff and consultants (2019: $744,311), $177,237 relating to
warrants granted to the Company's advisors (2019: $92,016) and
$12,049 (2019: $45,404) relating to options granted to potential
providers of conditional convertible note finance.
Share settled payments 2020 2019
----------------------------------------------- -------- --------
$ 000's $ 000's
Professional advisory fees* 2,245 -
Issuance of shares in satisfaction of deferred 1,425 -
salaries**
-------- --------
Total 3,670 -
-------- --------
* Represents the fair value of shares issued to various advisors
in lieu of cash for their fees in the acquisition of Columbus by
the Company on 7 August 2020. Further shares were issued to
advisors following the share placements on 8 October 2020 and 17
December 2020. The fair value of these shares has been calculated
based on the number of shares issued and the market price of the
Company shares on the date of issuance. These expenses have been
recognised in the Group statement of comprehensive income under
"Professional fees - share settled" within Administrative expenses.
These transactions do not fall within the scope of IFRS 2, Share
based payments.
** Represents the fair value of shares issued to directors and
staff during the year in settlement of deferred salary and fees,
less the total value of accrued salaries and fees on the date of
settlement. The fair value of these shares has been calculated
based on the number of shares issued and the market price of the
Company shares on the date of issuance. Accruals for deferred
salary and fees had been recognised based on the value of
contractual payments forgone. The excess of the fair value of these
shares issued over the total accrued costs for deferred salary and
fees to the date of settlement has been recognised in the Group
statement of comprehensive income under "Staff costs - share
settled" within Administrative expenses. These transactions do not
fall within the scope of IFRS 2, Share based payments.
The table below discloses the total share-based payment charges
for the year included in the statement of comprehensive income by
expense category.
2020 2019
------------------- -------- --------
$ 000's $ 000's
Staff costs 171 195
Professional fees 177 808
Finance costs 12 45
Total 360 1,048
-------- --------
25 Financial instruments and risk management - Group & Company
-----------------------------------------------------------------------------------------------------------
The Group's activities expose it to a variety of financial risks: oil
price, liquidity, interest rate, foreign exchange, credit and capital
risk. The Group's overall risk management programme focuses on minimising
potential adverse effects on the financial performance of the Group.
Risk management is carried out by the CEO under policies approved by
the Board of Directors. The CEO identifies, evaluates and addresses
financial risks in close cooperation with the Group's management. The
Board provides principles for overall risk management, as well as policies
covering specific areas, such as mitigating foreign exchange risk,
interest rate risk, credit risk and investing excess liquidity.
The Group uses financial instruments comprising cash, and debtors/creditors
that arise from its operations. The net fair value of financial assets
and liabilities approximates the carrying values disclosed in the financial
statements. The financial assets comprise cash balances in bank accounts
at call.
Oil Price Risk
Subsequent to the acquisition of the Columbus Energy Resources PLC
in August 2020, the Group has been exposed to commodity price risk
regarding its sales of crude oil which is an internationally traded
commodity. The Group sales prices are based on West Texas Intermediate
(WTI) for sales in Trinidad. The pricing of Group oil sales in Trinidad
is set by the state oil company Heritage. The Group does not take out
hedging instruments for changes in oil prices, with the risks to Group
cashflows associated with changes in the oil price obtained from Heritage
being mitigated by controls over elective costs of well workovers and
other such production enhancing expenditure.
The spot prices per barrel for WTI are shown below:
2020 2019
----------------------------------------------------------------- -------------------------------------
Low Average High Low Average High
US$ US$ US$ US$ US$ US$
WTI 35.79 42.00 49.10 n/a n/a n/a
The below shows the Group's 2020 revenue sensitivity (gross of royalty
deductions) to an average price that is up to 30% lower and up to 30%
higher than the average price for that year:
Decrease Current Increase
----------------------------
30% 20% 10% 10% 20% 30%
$ 000's $ 000's $ 000's $ 000's $ 000's $ 000's $ 000's
Trinidad 1,253 1,432 1,611 1,790 1,969 2,148 2,327
Total 1,253 1,432 1,611 1,790 1,969 2,148 2,327
-------- -------- -------- -------- -------- -------- --------
Liquidity risk
The Group monitors its rolling cash flow forecasts and liquidity requirements
to ensure it has sufficient cash to meet its operational needs. Surplus
cash is invested in interest bearing current accounts and money market
deposits.
Future funding requirements
The Group's ability to meet all of its anticipated obligations over
the 12 months from the date of this report is, however, dependent on
the ability to secure access to additional funding. The Group currently
estimates that it has a need for approx. $15 million in additional
funding in order to continue to meet its obligations as and when they
fall due over the 12 months from the date of this report. This includes
meeting routine operating costs, undertaking certain planned work program
activities, and also includes settlement of final remaining payments
to suppliers and finance providers from the drilling campaigns for
both the Perseverance-1 well in The Bahamas and the Saffron-2 well
in Trinidad.
In order to meet this funding requirement, the Group has been and continues
to evaluate a number of potential funding options. This includes a
potential a $10 million convertible loan note facility with Arena Investors
LP, consideration of Reserve-Based Lending options, the potential disposal
of certain assets for cash, potential farming out of an interest in
certain of the Group's exploration and/or production licences which
would result in some cash inflows and funding of work program plans
in relation to those assets, possible further issuances of securities
and/or debt instruments for cash, agreeing payment plans for the deferral
of outstanding obligations to suppliers and finance providers, and/or
settlement of all or part of outstanding obligations to suppliers and
finance providers in equity shares.
As at the date of this report, the Group remains actively engaged in
developing and reviewing all of the above potential sources of additional
funding. At the same time, the Group is undertaking work necessary
to materially reduce overhead and general operating costs, whilst at
the same time maximising production revenues from existing producing
oil fields, in the expectation of being able to generate surplus operating
cashflows in the 12 months from the date of this report, which surplus
cashflows could then be applied towards the Group's overall funding
requirements.
While there can be no certainty as to the availability of funding,
given the range of funding options available, and given the Group's
track record in being able to secure funding as and when required,
the Group is confident that it will be able to successfully conclude
one or any combination of the above-noted funding options, as well
as maximise production cashflows and actively manage the schedule of
cash outflows, such that the Group will be able to continue to meet
its financial obligation as and when they fall due for the 12 months
following the date of this report. As a consequence, the Directors
are satisfied that the Group will be able to continue to meet its financial
obligation as they fall due for the 12 months following the date of
this report.
Financial liabilities
The Group's financial liabilities comprise its trade and other payables
and lease liabilities. Trade and other payables all fall due within
1 year and it is the Group's payment policy to settle amounts in accordance
with agreed terms which is typically 30 days.
The tables below analyse the Group's financial liabilities into relevant
maturity groupings based on their contractual maturities for all non-derivative
financial liabilities. The amounts disclosed in the table are the contractual
undiscounted cash flows. Balances due within 12 months equal their
carrying balances, because the impact of discounting is not significant.
Contractual Less 6 to 12 Between Between Total Carrying
maturities than months 1 and 2 2 and 5 contractual amount
of financial 6 $ 000's years years cash $ 000's
liabilities months $ 000's $ 000's outflows
at 31 $ 000's $ 000's
December
2020 - Group
Trade and
other
payables 18,620 - - - 18,620 18,620
----------- ----------- ----------- ----------- --------------- ------------
Lease
liabilities 41 52 12 - 121 105
----------- ----------- ----------- ----------- --------------- ------------
Borrowings 1,132 486 198 321 2,280 2,137
----------- ----------- ----------- ----------- --------------- ------------
Total 19,793 538 210 321 21,021 20,862
----------- ----------- ----------- ----------- --------------- ------------
Contractual Less 6 to 12 Between Between Total Carrying
maturities than months 1 and 2 2 and 5 contractual amount
of financial 6 $ 000's years years cash $ 000's
liabilities months $ 000's $ 000's outflows
at 31 $ 000's $ 000's
December
2020 -
Company
Trade and
other
payables 505 - - - 505 505
----------- ----------- ----------- ----------- --------------- ------------
Lease
liabilities 8 5 - - 13 13
----------- ----------- ----------- ----------- --------------- ------------
Borrowings 1,120 - - - 1,120 1,120
----------- ----------- ----------- ----------- --------------- ------------
Total 1,633 5 - - 1,638 1,638
----------- ----------- ----------- ----------- --------------- ------------
Contractual Less 6 to 12 Between Between Total Carrying
maturities than months 1 and 2 2 and 5 contractual amount
of financial 6 $ 000's years years cash $ 000's
liabilities months $ 000's $ 000's outflows
at 31 $ 000's $ 000's
December
2019 - Group
Trade and
other
payables 1,952 - - - 1,952 1,952
----------- ----------- ----------- ----------- --------------- ------------
Lease
liabilities 125 50 27 3 225 205
----------- ----------- ----------- ----------- --------------- ------------
Total 2,077 50 37 13 2,177 2,157
----------- ----------- ----------- ----------- --------------- ------------
Contractual Less 6 to 12 Between Between Total Carrying
maturities than months 1 and 2 2 and 5 contractual amount
of financial 6 $ 000's years years cash $ 000's
liabilities months $ 000's $ 000's outflows
at 31 $ 000's $ 000's
December
2019 -
Company
Trade and
other
payables 1,946 - - - 1,946 1,946
----------- ----------- ----------- ----------- --------------- ------------
Lease
liabilities 8 7 13 - 28 28
----------- ----------- ----------- ----------- --------------- ------------
Total 1,954 7 13 - 1,974 1,974
----------- ----------- ----------- ----------- --------------- ------------
Interest rate risk
The Group's strategy for managing cash is to maximise interest income
whilst ensuring its availability to match the profile of the Group's
expenditure. This is achieved by regular monitoring of interest rates
and monthly review of expenditure forecasts.
The Group's exposure to interest rate risk relates to the Group's cash
deposits which are linked to short term deposit rates and therefore
affected by changes in bank base rates. At 31 December 2020 short term
deposit rates were in the range of 0% to 0.5% (31 December 2019: 0%
to 2.38%) and therefore the interest rate risk is not considered significant
to the Group. An increase in interest rate of 0.25% in the year would
have had an insignificant effect on the Group's loss for the year and
the prior year.
Group borrowings are at fixed interest rates and therefore do not present
an interest rate risk.
Foreign currency risk
The Group operates internationally and therefore is exposed to foreign
exchange risk arising from currency exposures, primarily with regard
to UK Sterling, Trinidad Dollars and Euros (2019: UK Sterling only).
The Company has a policy of not hedging foreign exchange and therefore
takes market rates in respect of currency risk; however it does review
its currency exposures on an ad hoc basis. Currency exposures relating
to monetary assets held by foreign operations are included within the
foreign exchange reserve in the Group statement of financial position.
The following table details the Group's sensitivity to a 10% increase
and decrease in the US Dollar against the relevant foreign currencies
of Pound Sterling, Euro and Trinidadian Dollar. 10% represents management's
assessment of the reasonably possible change in foreign exchange rates.
The sensitivity analysis includes only outstanding foreign currency
denominated investments and other financial assets and liabilities
and adjusts their translation at the year-end for a 10% change in foreign
currency rates. The table below sets out the potential exposure, where
the 10% increase or decrease refers to a strengthening or weakening
of the US Dollar:
Profit or loss sensitivity Equity sensitivity
10% increase 10% decrease 10% increase 10% decrease
$ 000's $ 000's $ 000's $ 000's
Euro 17 (21) 249 (304)
Pounds Sterling 63 (77) 21 (26)
Trinidad Dollar 243 (297) 331 (404)
--------------------- --------------------- -------------------- ---------------------
Total 323 (395) 601 (734)
--------------------- --------------------- -------------------- ---------------------
At 31 December 2019, if the US Dollar currency had weakened/strengthened
by 10% against UK Sterling with all other variables held constant,
post-tax losses for the year and total equity would have been reduced/increased
by approximately $59,000, mainly as a result of foreign exchange gains/losses
on translation of UK Sterling denominated bank balances.
Rates of exchange to $1 used in the financial statements were as follows:
As at 31 December Average for As at 31 December Average for
2020 the relevant 2019 the relevant
consolidated consolidated
year to 31 December year to 31 December
2020 2019
Euro 0.814 0.842 n/a n/a
Pounds Sterling 0.734 0.761 0.762 n/a
Trinidad Dollar 6.762 6.780 n/a n/a
--------------------- --------------------- -------------------- ---------------------
The Group holds cash as a liquid resource to fund the
obligations of the Group. The Group's cash balances are held in
various currencies.
The currency profile of the financial assets is as follows:
Cash and short-term deposits 2020 2019
-------- --------
$ 000's $ 000's
Sterling 723 10,812
Euros 3 -
US Dollars 16,733 340
Trinidad Dollars 403 -
-------- --------
Total 17,862 11,152
-------- --------
The Group also has operations denominated in the Bahamian Dollar. As
the Bahamian Dollar is pegged to the US Dollar on a one for one basis
these operations do not give rise to any currency exchange exposures.
Credit risk
Credit risk is managed on a Group basis. Credit risk arises from prepayments
to suppliers for services, cash and cash equivalents, restricted cash
and funds held in escrow and abandonment funds. For prepayments made
to suppliers, all suppliers are reviewed to assess the credit risk
presented before entering into contractual relationships that give
rise to prepaid balances. For banks and financial institutions, only
independently rated parties with a minimum rating of 'A' are accepted.
In order to mitigate credit risk arising from cash balances the Group
holds cash reserves with more than one counterparty. Funds in escrow
and abandonment funds are held with the Government of Trinidad and
Tobago and so are not considered to be subject to a material level
of credit risk.
For the Company, credit risk also arises on recoverability of loans
due from subsidiary undertakings. Management assesses and manages these
risks through regular budgeting and performance analysis.
The Group applies the IFRS 9 simplified approach to measuring expected
credit losses which uses a lifetime expected loss allowance for all
trade receivables and contract assets.
Capital risk management
Capital is defined by the Group as all equity reserves, including share
capital and share premium. 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 benefits for other
stakeholders and to maintain an optimal capital structure to support
the Group's business operations and maximise shareholder value. The
Group is not subject to any externally imposed capital requirements.
26 Commitments and contingencies - Group & Company
----------------------------------------------------------------------------------
Contingencies
As at 31 December 2020, one of the Group companies, FRAM Exploration
(Trinidad) Ltd, has been named as a defendant in an ongoing matter
in the High Court of Trinidad and Tobago in place since 2019. The Group's
exposure, in the event of an unsuccessful defence of the claim, is
estimated to be in the region of $0.7m to $0.9m, referable to the sums
claimed, interest and legal costs. The Group has filed a counterclaim
which, if successful, will reduce the Group's liability without fully
extinguishing it. The parties to the claims are in the process of settlement
discussions, which are scheduled for a case management conference before
a judge in February 2022. The matter has not been concluded and its
outcome cannot be reliably estimated at this stage. In accordance with
International Accounting Standards (IASs) - 10 and 37, no provision
has been made in these financial statements in relation to this matter.
Other than as set out above, as at 31 December 2020 and 2019, the
Group and Company had no contingent liabilities that require disclosure
in these financial statements.
Expenditure commitments
On 21 February 2019, the Group received notification from the Bahamian
Government of the extension of the term of its four southern licences
to 31 December 2020, with the requirement that the Group commence an
exploration well before the end of the extended term. In November 2020
the term of the licence period was extended to 30 June 2021 following
the outbreak of the global Covid-19 pandemic and the declaration of
the Group of force majeure under the terms of its licences. On 20 December
the Group commenced the drilling of its licence obligation well in
the Bahamas, Perseverance 1, which was completed on 7 February 2021.
In March 2021 the Company formally notified the Government of the Bahamas
that it was renewing the four southern offshore exploration licences
for a further three year period, having discharged its obligations
under the previous licence term. The Group remains in discussions with
the Government over the terms of the renewal of these licences and,
once formally renewed, will have the obligation to commence a further
exploration well in the licence area before the expiry of the next
three year term.
In June 2020, the Group was notified by ANCAP, the Uruguayan state
oil company, of the award of the OFF-1 licence block offshore Uruguay.
Formal issuance of the licence remains outstanding due to the impact
of Covid-19 on the functions of the state in Uruguay, however once
the licence has been formally issued the Group will have a commitment
to undertake various technical investigations over the licence block
before the expiry of the four year licence term. The Group estimates
the total cost of these work obligations to be approx. $0.8 million
over this period.
The Group holds an onshore licence for the exploration for and production
of hydrocarbons in Suriname. Under the terms of this licence, the Group
is obliged to undertake an extended well test in the licence area by
October 2022, the costs of which are estimated to be approx. $0.7 million.
The Group has an obligation under one of its licences in Trinidad to
drill 5 wells in this licence area before the expiry of the current
term on 31 December 2021. The Group is in discussions with the licensor
in relation to the renewal of this licence and expects these obligations
to be commuted and form part of the broader work program requirements
of the renewed licence term. The Group has no other material work obligations
under the terms of its licences in Trinidad.
Annual licence rental commitments
The Group is required under its Bahamian exploration licences to remit
annual rentals in advance to the Government in respect of the licenced
areas.
On 21 February 2019 the Group was notified by the Government of The
Bahamas that the term of its four southern licences had been extended
to 31 December 2020. In November 2020, the term of the licence period
was extended to 30 June 2021 following the outbreak of the global Covid-19
pandemic , being a force majeure event under the terms of its licences.
On 27 February 2020, the Company advised that, consequent on the granting
of Environmental Authorisation for the Perseverance #1 well, the Company
and the Government of The Bahamas had agreed a process seeking a final
agreement on the amount of licence fees payable for the balance of
the second exploration period (including the additional period of time
to which the licence period was extended as a result of force majeure).
At the time, the parties entered into discussions with a view to finalising
this outstanding matter. This discussion has been delayed owing to
the State of Emergency declared and ongoing business disruption caused
by the national response to the Covid-19 outbreak in The Bahamas. However,
subject to said confirmation, the Company expects that an appropriate
side-letter agreement will be finalised in due course.
In March 2021 the Company formally notified the Government of The Bahamas
that it was renewing the four southern offshore exploration licences
for a further three year period, having discharged its obligations
under the previous licence term. The Group remains in discussions with
the Government over the terms of the renewal of these licences, which
will include agreement on the level of annual rental fees payable over
the renewed term.
In June 2021 the Group formally notified the Government of the Bahamas
that it did not intend to renew the Miami licence area and consequently
no further annual rental fees will be payable in regards to this licence.
The Group does not have any material annual rental payments payable
on its licences in Trinidad and Suriname and, once formally issued,
will not have any material annual licence rental fees payable in respect
of its licence in Uruguay.
27 Related party transactions - Group & Company
Transactions between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation. Transactions between
other related parties are outlined below.
Remuneration of Key Management Personnel
The Directors of the Company are considered to be the Key Management
Personnel. Details of the remuneration of the Directors of the Company
are disclosed below, by each of the categories specified in IAS24 Related
Party Disclosures.
2020 2019
------------ -----------
$ 000's $ 000's
Short-term employee benefits 575 407
Short term employee benefits - accrued and
contingent* - 138
Share-settled payments** 992 -
Share-based payments 126 166
Total 1,693 711
------------ -----------
*Short term employee benefits - accrued and contingent consist of the
50% of directors' deferred fees which are repayable in cash, rather
than shares, contingent on the Board, having consulted with the relevant
advisers to the Company, determines that the cost of an initial exploration
well is fully funded on an unconditional basis (defined as the Company
either securing a farm-in or securing capital via debt or equity or
a combination of both in excess of $25 million, or any combination
thereof). Included in this figure in the prior year is the write back
of deferred CEO remuneration which was forgone on 1 July 2018 following
agreed changes to the CEO remuneration arrangements (see below) which
resulted in a negative charge for that year.
**Share-settled payments were made during 2020 to settled the accrued
deferred fees payable in cash.
See note 7 for further details of the Directors' remuneration and note
24 for details of the Directors' share-based payment benefits.
Effective 1 October 2014, the Directors agreed to forgo 20% of their
remuneration which becomes repayable in shares only once the Board,
having consulted with the relevant advisers to the Company, determines
that the cost of an initial exploration well is fully funded on an
unconditional basis (defined as the Company either securing a farm-in
or securing capital via debt or equity or a combination of both in
excess of $25 million, or any combination thereof). Effective 1 April
2016 the Directors agreed to increase this fee deferral to 50% for
Board members and 90% for the CEO. From 1 January 2018, the Directors
agreed to increase their fee deferral terms to match those of the CEO,
being a 90% deferral with 50% of deferred fees recoverable in cash
and 50% in shares, once the Board, having consulted with the relevant
advisers to the Company, determines that the cost of an initial exploration
well is fully funded on an unconditional basis (defined as the company
either securing a farm-in or securing capital via debt or equity or
a combination of both in excess of $25 million, or any combination
thereof). From 1 July 2018, the Company agreed to cease the ongoing
deferral of the CEO salary, with all deferred amounts to be settled
in shares being retained as a receivable once the agreed criteria had
been met and all amounts deferred into a cash receivable, along with
accrued pension entitlements, being foregone. See note 24 for further
details.
On 28 March 2019 the Company and the CEO agreed to extend the term
of the CEO contract for a further 12 months. On expiry of the extended
contract on 31 March 2020 the contract became cancellable by either
party on a rolling 3 month notice period basis.
Effective 1 September 2020, the Company and CEO agreed an increase
to the annual CEO salary from $375,000 to $600,000.
On 15 October 2020, the Board determined that the criteria for cessation
and settlement of all deferred fees, namely the raising of at least
$25m in funding for the Perseverance 1 well, had been met. Furthermore,
the Board elected to novate all deferred fees that were to be settled
in cash into a shares. Consequently, all deferred fees and salaries
by directors were settled through the issuance of 107,413,150 new ordinary
shares in the Company.
On 31 October 2020, share options were granted to key management personnel
as follows.
Tranche 1 Options Tranche 2 Tranche 3 Total
Options Options
Simon Potter - 6,250,000 - 6,250,000
------------------ ----------------- ----------------- ----------
William Schrader - - - -
------------------ ----------------- ----------------- ----------
James Smith - - - -
------------------ ----------------- ----------------- ----------
Adrian Collins - - - -
------------------ ----------------- ----------------- ----------
Ross McDonald - - - -
------------------ ----------------- ----------------- ----------
Total - 6,250,000 - 6,250,000
------------------ ----------------- ----------------- ----------
On 30 November 2020, share options were granted to key management personnel
as follows.
Tranche 1 Options Tranche 2 Tranche 3 Total
Options Options
Simon Potter - 6,250,000 - 6,250,000
------------------ ----------------- ----------------- ----------
William Schrader - - - -
------------------ ----------------- ----------------- ----------
James Smith - - - -
------------------ ----------------- ----------------- ----------
Adrian Collins - - - -
------------------ ----------------- ----------------- ----------
Ross McDonald - - - -
------------------ ----------------- ----------------- ----------
Total - 6,250,000 - 6,250,000
------------------ ----------------- ----------------- ----------
On 31 October 2019, share options were granted to key management personnel
as follows.
Tranche 1 Tranche 2 Tranche 3 Total
Options Options Options
Simon Potter 20,000,000 15,000,000 25,000,000 60,000,000
----------------- ----------------- ----------------- -----------
William Schrader 1,500,000 750,000 750,000 3,000,000
----------------- ----------------- ----------------- -----------
James Smith 750,000 375,000 375,000 1,500,000
----------------- ----------------- ----------------- -----------
Adrian Collins 750,000 375,000 375,000 1,500,000
----------------- ----------------- ----------------- -----------
Ross McDonald 750,000 375,000 375,000 1,500,000
----------------- ----------------- ----------------- -----------
Total 23,750,000 16,875,000 26,875,000 67,500,000
----------------- ----------------- ----------------- -----------
On 31 October 2019, all share options previously granted to key management
personnel were cancelled by mutual consent, see note 24 for further
details.
There is no ultimate controlling party of the Group.
Other related party transactions
During the current and prior year the Group operated banking facilities
with RBC Royal Bank (Bahamas) Limited in Nassau, The Bahamas. Ross
McDonald, a director of the Company during the year, is also a director
of RBC Royal Bank (Bahamas) Limited. As at 31 December 2020, $96,768
was held on deposit with RBC Royal Bank (Bahamas) Limited (31 December
2019: $51,935).
Transactions between the Company and its subsidiaries during the
year are as follows:
2020 2019
-------- --------
$ 000's $ 000's
Loans, goods and services provided to Columbus 6,897 -
Energy Resources Ltd
Loans, goods and services provided to BPC
Ltd 17,117 3,686
Loans, goods and services provided to Columbus 64 -
Energy Resources South America B.V.
Loans, goods and services provided to Columbus 35 -
Energy Bonasse Ltd
Loans, goods and services provided to Goudron 69 -
E&P Ltd
Loans, goods and services provided to Columbus 44 -
Energy Services ltd
Loans, goods and services provided to Leni 2 -
Trinidad Ltd
Loans, goods and services provided to FRAM 40 -
Exploration (Trinidad) Ltd
Loans, goods and services provided to Jasmin 19 -
Oil & Gas Ltd
Loans, goods and services provided to T-REX 2 -
Resources (Trinidad) Ltd
28 Events after the reporting period - Group & Company
-------------------------------------------------------------------------------
On 15 January 2021, the Group raised a further GBP3.75 million (approx.
$5 million) in funding via the issuance of 187.5 million new ordinary
shares, having exercised its put option under a financing facility
entered into in December 2020 with an institutional investment fund
managed by Lombard Odier Asset Management.
On 8 February 2021, the Group announced the completion of the Perseverance
1 exploration well in its offshore licence area in the Bahamas. Whilst
the well did encounter hydrocarbons, commercial volumes of movable
hydrocarbons were not present at the drilling location. The Group has
undertaken an extensive review of the data extracted from the well
to determine the extent to which this data indicates remaining prospectively
in the deeper, untested horizons and the horizons of interest at other
locations along the B and C structures. The results of this review
indicate that substantial prospectivity remains in sufficient potential
volumes such that further exploration activity on these licences is
merited. In March 2021, the Group notified the Government of the Bahamas
of its election to renew the four southern licences into a further
three year exploration period, having discharged the licence obligation
to drill an exploration well before the expiry of the current licence
period on 30 June 2021. The Group remains in discussions with the Government
regarding renewal of these licences and the level of licence fees which
remain to be paid for the current period. On formal renewal of the
licences by the Government, the key licence obligation for the new
three year period will be the drilling of a further exploration well
within the licence area before the expiry of the renewed licence term.
During the course of January to April 2021, the Group completed the
drawing down of GBP3 million in convertible loan notes under the facility
provided by Bizzell Capital Partners Pty Ltd.
On 20 May 2021, Mr Adrian Collins resigned as a director of the Company.
On 21 May 2021, the Company changed its name from Bahamas Petroleum
Company PLC to Challenger Energy Group PLC.
On 26 May 2021, the Group commenced the drilling of the Saffron 2 well
in the Bonasse licences in the South West Peninsula of Trinidad. The
well was completed on 14 July 2021 at a cost of approx. $4.8 million.
Production testing of the well has indicated that commercial volumes
of extractible hydrocarbons are likely to exist, but further exploration
drilling will be required to fully delineate the extent of the resource
and quantify the reserves present.
On 27 May 2021, the Group raised a further GBP6.9 million (approx.
$9.75 million) in additional funding through the completion of an open
offer with the existing shareholders of the Company and a placing with
institutional shareholders. In addition, GBP2.5 million of convertible
loan notes drawn down over the course of 2021 were converted, resulting
in the issuance of a total of 2,904,589,806 new ordinary shares in
the Company.
Following shareholder approval at the Company's EGM on 17 May 2021,
a Share Consolidation of 1 New Ordinary Share of 0.02 pence each for
10 Existing Ordinary Shares of 0.002 pence each took place on 28 May
2021.
On 1 June 2021, Mr Ross McDonald resigned as a director of the Company,
with Mr Eytan Uliel and Mr Stephen Bizzell both being appointed as
directors on this date.
29 Comprehensive loss for the year - Company
The Company's loss for the year was $12,391,709 (2019: $3,164,902).
Glossary and Notes
1P proved reserves
-------------------- ------------------------------------------------------------------
2P proved plus probable reserves
-------------------- ------------------------------------------------------------------
3P proved plus probable plus possible reserves
-------------------- ------------------------------------------------------------------
AIM London Stock Exchange PLC's Alternative Investment Market
-------------------- ------------------------------------------------------------------
barrel or bbl 42 US gallons of oil
-------------------- ------------------------------------------------------------------
bbls barrels of oil
-------------------- ------------------------------------------------------------------
best estimate or the most likely estimate of a parameter based on all available
P50 data, also often termed the P50 (or the value of a probability
distribution of outcomes at the 50% confidence level)
-------------------- ------------------------------------------------------------------
BNPP BNP Paribas
-------------------- ------------------------------------------------------------------
BOLT Beach Oilfield Limited
-------------------- ------------------------------------------------------------------
bopd barrels of oil per day
-------------------- ------------------------------------------------------------------
BPC Bahamas Petroleum Company PLC
-------------------- ------------------------------------------------------------------
bwpd barrels of water per day
-------------------- ------------------------------------------------------------------
contingent resources those quantities of petroleum estimated, as of a given date,
to be potentially recoverable from known accumulations, but
the applied project(s) are not yet considered mature enough
for commercial development due to one or more contingencies.
Contingent Resources may include, for example, projects for
which there are currently no viable markets, or where commercial
recovery is dependent on technology under development, or
where evaluation of the accumulation is insufficient to clearly
assess commerciality
-------------------- ------------------------------------------------------------------
C-sand sandstone reservoirs below the pre-Mayaro unconformity and
above the pre-Lower Cruse unconformity encompassing sandstones
of equivalent age to both the Gros Morne and the Lower Cruse
formations
-------------------- ------------------------------------------------------------------
CESL Columbus Energy Services Ltd
-------------------- ------------------------------------------------------------------
CPR Competent Persons Report
-------------------- ------------------------------------------------------------------
CPS Compañia Petrolifera de Sedano S.L.U.
-------------------- ------------------------------------------------------------------
EOR enhanced oil recovery
-------------------- ------------------------------------------------------------------
EPSC Enhanced production service contract, the form of contract
under which the Goudron field is operated on behalf of Heritage
-------------------- ------------------------------------------------------------------
FRAM FRAM Exploration (Trinidad) Ltd
-------------------- ------------------------------------------------------------------
FTG Full Tensor Gravity Gradiometry. Full tensor gradiometers
measure the rate of change of the gravity vector in all three
perpendicular directions
-------------------- ------------------------------------------------------------------
GEPL Goudron E&P Ltd
-------------------- ------------------------------------------------------------------
Goudron Sandstone reservoir sands above the pre-Mayaro unconformity, also known
as the Mayaro Sandstone
-------------------- ------------------------------------------------------------------
Heritage Heritage Petroleum Company Limited (previously known at Petrotrin)
-------------------- ------------------------------------------------------------------
IPSC incremental production service contract, the form of contract
under which the Inniss-Trinity field is operated on behalf
of Heritage
-------------------- ------------------------------------------------------------------
La Lora La Lora Production Concession in Spain
-------------------- ------------------------------------------------------------------
Lind Lind Global Macro Fund LP
-------------------- ------------------------------------------------------------------
LTL Leni Trinidad Ltd
-------------------- ------------------------------------------------------------------
M&A Mergers and Acquisitions
-------------------- ------------------------------------------------------------------
Mayaro Sandstone reservoir sands above the pre-Mayaro unconformity, also known
as the Goudron Sandstone
-------------------- ------------------------------------------------------------------
MEEI Trinidad and Tobago Ministry of Energy and Energy Industries
(formally the Ministry of Energy and Energy Affairs, MEEA)
-------------------- ------------------------------------------------------------------
m thousand
-------------------- ------------------------------------------------------------------
mm million
-------------------- ------------------------------------------------------------------
mmbbls million barrels of oil
-------------------- ------------------------------------------------------------------
Petrotrin The Petroleum Company of Trinidad and Tobago Limited
-------------------- ------------------------------------------------------------------
PPL private petroleum rights license
Predator Predator Oil & Gas Holdings PLC
pre-Cruse early to mid-Miocene sandstone reservoir below the pre-Cruse
unconformity
-------------------- ------------------------------------------------------------------
proved reserves those quantities of petroleum, which, by analysis of geoscience
and engineering data, can be estimated with reasonable certainty
to be commercially recoverable (1P), from a given date forward,
from known reservoirs and under defined economic conditions,
operating methods, and government regulations
-------------------- ------------------------------------------------------------------
probable reserves those additional reserves which analysis of geoscience and
engineering data indicate are less likely to be recovered
than Proved Reserves but more certain to be recovered than
Possible Reserves. It is equally likely that actual remaining
quantities recovered will be greater than or less than the
sum of the estimated Proved plus Probable Reserves (2P)
-------------------- ------------------------------------------------------------------
possible reserves those additional reserves which analysis of geoscience and
engineering data suggest are less likely to be recoverable
than Probable Reserves. The total quantities ultimately recovered
from the project have a low probability to exceed the sum
of Proved plus Probable plus Possible (3P) Reserves, which
is equivalent to the high estimate scenario
-------------------- ------------------------------------------------------------------
PRMS Petroleum Resources Management System
-------------------- ------------------------------------------------------------------
PSC Production Sharing Contract
-------------------- ------------------------------------------------------------------
reserves those quantities of petroleum anticipated to be commercially
recovered by application of development projects to known
accumulations from a given date forward under defined conditions
-------------------- ------------------------------------------------------------------
Saint-Gobain Saint-Gobain Vicasa SA
-------------------- ------------------------------------------------------------------
Schroders Schroders Investment Management Limited
-------------------- ------------------------------------------------------------------
Staatsolie Staatsolie Maatschappij Suriname N.V, the state oil company
of Suriname
-------------------- ------------------------------------------------------------------
STOIIP or oil in stock tank oil initially in place, those quantities of oil
place that are estimated to be in known reservoirs prior to production
commencing
-------------------- ------------------------------------------------------------------
side-track an additional or replacement well bore created from an existing
well bore at a depth below the surface casing
-------------------- ------------------------------------------------------------------
SWP South West Peninsula of Trinidad
-------------------- ------------------------------------------------------------------
TD Total Depth (the depth where drilling has stopped)
-------------------- ------------------------------------------------------------------
Weg Naar Zee PSC signed with Staatsolie in October 2019 for the Weg Naar
Zee Block, an onshore appraisal and development project in
Suriname
-------------------- ------------------------------------------------------------------
WTI West Texas Intermediate; oil price marker crude
-------------------- ------------------------------------------------------------------
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September 27, 2021 02:00 ET (06:00 GMT)
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