TIDMEOG
RNS Number : 8590Q
Europa Oil & Gas (Holdings) PLC
23 October 2023
Europa Oil & Gas (Holdings) plc / Index: AIM / Epic: EOG /
Sector: Oil & Gas
23 October 2023
Europa Oil & Gas (Holdings) plc
("Europa" or the "Company")
Final results for the year to 31 July 2023
Europa Oil & Gas (Holdings) plc, the AIM traded UK and
Ireland focused oil and gas exploration, development and production
company, announces its final audited results for the 12-month
period ended 31 July 2023.
The full Annual Report and Accounts will be available shortly on
the Company's website at www.europaoil.com and will be mailed to
those shareholders who have requested a paper copy.
Financial performance
-- Revenue remained stable at GBP6.7 million despite a lower oil
price and weaker pound (2022: GBP6.6 million)
-- Gross profit increased 53% to GBP3.4 million (2022: GBP2.2 million)
-- Pre-tax loss of GBP0.9 million after non-cash impairment loss
of GBP1.7 million (2022: pre-tax profit GBP1.4 million)
-- Net cash generated in operating activities: GBP2.8 million (2022: GBP2.5 million)
-- Cash balance: GBP5.2 million (2022: GBP8.3 million)
Operational highlights - Building a balanced portfolio of
exploration and production assets
Onshore UK - net production increased 8% to 265 barrels of oil
per day ("bopd") (2022: 245 bopd) following excellent Wressle
performance
-- Wressle continued to exceed expectations
o Gross production averaged 710 bopd throughout the period
(2022: 597 bopd), with Europa's net share equating to 213 bopd
(2022: 179 bopd)
o Three microturbines were connected at the Wressle site during
January and February 2023, resulting in a 10% increase in oil
production
o New seismic interpretation across the Wressle field has
highlighted a potentially significant increase in reserves from the
Ashover Grit
o Gas monetisation project under development with potential for
significant oil production gains as a result
-- Total net production of 265 bopd was produced from Europa's
UK onshore fields during the year with Wressle contributing roughly
81% of this and the remainder coming from the three older
fields
-- Future potential for West Firsby to continue delivering
revenue is being assessed and studies are underway to identify
activities which could utilise the existing connection to the local
power grid so that the site can be repurposed to generate
emission-free renewable energy. This is directly in line with the
Company's ESG strategy
-- A reassessment of the estimated decommissioning liability for
Crosby Warren resulted in a reversal of amounts previously impaired
of GBP177k.
Offshore Ireland - lower risk / very high reward
infrastructure-led exploration in proven gas play in the Slyne
Basin
-- The seismic reprocessing of the FEL 4/19 data has resulted in
a marked improvement in the imaging of both the Inishkea West and
Inishkea prospects, with the Inishkea West structure now being
mapped as a large 4-way closure, with a prospective resource Pmean
of 1,554 BCF
-- The reprocessed seismic has materially improved the
subsurface imaging and provided more confidence in the quality of
the seal and trap at Inishkea West, which in turn has increased the
chance of success of the prospect. In addition, Inishkea West is
prognosed as a shallower structure by some 900 meters which means
that the reservoir quality will be better than at Inishkea
-- Inishkea West is within easy tie-back range of the Corrib gas
field situated some 18 kilometres to the southeast. This proximity
to the Corrib infrastructure, the mapped 4-way closure, the large
prospective resource and the reduced seal risk means that the
Inishkea West prospect has become the primary exploration target on
the FEL 4/19 licence.
-- Given the significant improvement seen in the reprocessed
data, it is expected that the subsurface imaging can be further
enhanced by reprocessing the data at 30Hz.
-- The farm-out process has been paused until the further reprocessing has been completed.
-- In November 2022, DECC gave consent to extend the first phase
of our 100% owned FEL 4/19 licence to 31 January 2024. Given the
nature of the reprocessing it has taken longer than expected to
complete the work programme and as a result we have since applied
for a further extension to allow us to continue with the
reprocessing work and then find a suitable partner to drill an
exploration well.
Offshore UK - 25% interest in the Serenity discovery in the
North Sea
-- Progress continues with the development of the Serenity oil
discovery in the Central North Sea alongside our partner i3 Energy
plc
-- Despite drilling an appraisal well in October 2022 that
failed to encounter hydrocarbons, the partners believe that a
one-well development in the eastern area of the field around the
discovery well is economically viable. However, we believe that the
Serenity field is geologically connected to the neighbouring Tain
field and together with i3 Energy we are assessing the feasibility
for unitisation of the two fields
-- A number of potential development scenarios are available
given local infrastructure, with a future development potentially
resulting in approximately 1,000 bopd net to Europa's 25%
interest
UK offshore licensing round
-- Europa participated in the UK Government's 33rd offshore oil and gas licensing round
Board
-- Simon Oddie retired as CEO in March 2023, but remains on the
Board as a non-executive director
-- William Holland was appointed as CEO in March 2023, having been CFO since April 2022
-- William Ahlefeldt retired as non-executive director in April 2023
-- Alastair Stuart was appointed as COO and executive director
in April 2023, having been a technical consultant to the Company
since 2012
Post reporting period events
-- Operations to install a jet pump for artificial lift on the
Wressle-1 well are underway. The original completion was removed
from the well and a new completion, including the sub-surface pump,
has been successfully run in the well as of early October 2023. All
that remains is for the required surface pump and associated
flowlines and electrics to be installed, which is expected to be
completed before the end of October.
-- PEDL 181 was relinquished during September 2023. The asset
was not deemed to be adequately attractive. It had zero carrying
value on the balance sheet.
-- Applied to DECC to extend licence FEL 4/19 from 31 January
2024 to undertake further reprocessing and secure a farm-in
partner.
William Holland, CEO of Europa, said:
"Europa made significant progress, both operationally and
financially, during the 2022/23 financial year, including continued
development work at our flagship asset, the Wressle oilfield, which
consistently performs above initial expectations. As planned, we
have initiated multiple projects designed to increase oil
production and gas monetisation from the field, and in the first
half of the year, we executed the initial phase of the gas
utilisation project, which has led to a c. 10% increase in oil
production. Even though Wressle is already exceeding expectations,
having produced 710 bopd during the financial year, we remain
focused on realising the full potential of the field, with the
completion of these additional projects and drilling the Penistone
horizon being one of Europa's priority medium-to-long-term
projects.
In the year, we delivered revenue from operating activities of
GBP6.7 million and generated net cash from operating activities of
GBP2.8 million, demonstrating the financial resilience of the
Company and maintaining our strong track record of positive cash
generation. It has been a year of considerable administrative
transition for Europa: we set up a new London office, strengthened
our in-house technical and managerial capabilities with new staff
members and expanded our business development activity levels; all
with the purpose of delivering our strategy faster and more
efficiently.
We have impressed on both the Irish Government and Europa
stakeholders the significant role our offshore Ireland FEL 4/19
licence could play in minimising Ireland's dependence on costly and
carbon-intensive gas imports and enhancing the country's strategic
energy security. FEL 4/19 contains an estimated prospective
resource of 1.55 TCF of gas, and in June 2023, I hand-delivered a
document detailing our licence's potential to senior Irish
Government officials during an exclusive energy summit hosted by
the Taoiseach Leo Varadkar. We have continued to be proactive in
both executing advanced technical reprocessing work and seeking a
suitable farm-in partner for our FEL 4/19 licence and remain
committed to continuing our efforts to work constructively with the
Department of the Environment, Climate and Communications to
progress FEL 4/19 to drilling. In October 2023 we announced the
results of our seismic reprocessing which has materially improved
the subsurface imaging and provided more confidence in the quality
of the seal and trap at Inishkea West, which in turn has increased
the chance of success of the prospect whilst also increasing the
size of the prospect to 1.55 TCF. In addition, Inishkea West is
prognosed as a shallower structure by some 900 meters which means
that the reservoir quality will be better than at Inishkea and as a
result this has become our primary prospect on the licence.
Progress continues with the development of the Serenity oil
discovery in the Central North Sea, and we are collaborating with
our partner i3 Energy to determine the best strategic direction for
the prospect, with a variety of development scenarios being
diligently considered including a development incorporating the
Tain discovery that could be tied back to the Blake field or
potentially developed with low-cost infrastructure as a standalone
field.
In July 2023, we assumed operatorship of our onshore UK licence
PEDL343, which holds the Cloughton gas discovery. Our technical
team has already performed an audit of the existing subsurface data
and established a range of gas in place volumes with a Pmean of 192
bcf gross. Our team is now working on a conceptual development plan
for the field, which we expect will demonstrate the material
potential value of the licence. Concurrently we are engaged with
stakeholders to secure the necessary permits and approvals required
to drill an appraisal well, which we believe will demonstrate the
reservoir can deliver the production rates required for a
commercial development of the field.
We are continually assessing opportunities to further diversify
our asset portfolio. We are encouraged by the reaffirmation of UK
Government support for offshore and onshore hydrocarbon exploration
and production and remain optimistic about our future growth
prospects."
For further information, please visit www.europaoil.com or
contact:
William Holland Europa Oil & Gas (Holdings) mail@europaoil.com
plc
James Dance / James Strand Hanson Limited - +44 (0) 20 7409
Spinney Nominated & Financial Adviser 3494
+44 (0) 20 7186
Peter Krens Tennyson Securities 9033
Patrick d'Ancona
/ Finlay Thomson + 44 (0) 20 7390
/ Kendall Hill Vigo Consulting 0230
Chairman's Statement
The 2022/23 financial year was a productive period for Europa,
underpinned by continued operational progress and financial
stability. Although the period was not without its challenges, we
managed to deliver on a number of our strategic objectives and
further demonstrated our financial resilience by maintaining our
balance sheet strength. Despite well-publicised trading headwinds,
we once again generated impressive levels of revenue from our
onshore UK producing assets, with our total average net production
rate for the period at 265 bopd.
Wressle is our leading production asset and currently the second
most productive onshore UK oilfield and remains central to our
growth strategy. During the year we continued to invest capital in
improving the site and making solid progress with the Field
Development Plan. The war between Russia and Ukraine is showing no
signs of abating and as a result energy security remains a key
priority for countries across the globe. We have continued our
positive dialogue with the Irish Government, communicating the
potential of our offshore licence FEL 4/19 to help reduce the
country's reliance on imported gas and support the energy
transition, and we welcomed its decision to extend the first phase
of our licence to 31 January 2024. The work programme on FEL 4/19
has taken longer than expected to complete, given the cutting-edge
nature of the technology involved in the seismic reprocessing. The
results have also highlighted further enhancements that could be
undertaken to improve the sub-surface imaging. We have therefore
applied for an extension to conduct further reprocessing and
continue with the farm-out discussions, which have been put on hold
until the reprocessing is complete. We are very encouraged by the
results of the reprocessing completed to date, which have reduced
the risk associated with an exploration well whilst increasing the
size of the primary Inishkea West prospect, and we believe that the
licence is now significantly more attractive to a potential
farminee than previously.
Elsewhere, we continue to assess development options for the
offshore UK Serenity oilfield with our partner i3 Energy. Europa
holds a 25% working interest in the Central North Sea licence and
given Serenity's proximity to local infrastructure, management
believes developing the discovered reserve as a joint development
with the adjacent Tain Field could be a cost-effective
solution.
Looking ahead, we remain focused on building on the progress
delivered in the period and continuing to implement our prudent
development plan for Wressle to accelerate long-term production
rates, access additional reserves within the field and cement its
position as a leading UK onshore oilfield.
Onshore UK
Since coming onstream in 2021, Wressle has been our best
performing asset, consistently delivering strong production rates
and exceeding expectations. During the year, Wressle's gross
production rate was 710 bopd, which, taking into account the impact
of development operations at the field, represents yet another
excellent performance.
The first phase of the gas utilisation project was completed in
January 2023, whereby three microturbines were connected to provide
site power which resulted in a circa 10% increase in oil
production. The next phase involves the connection to a gas
pipeline located approximately 600 metres from the existing well
site, which will be constructed as part of the Wressle development
drilling programme scheduled for 2024 .
Planning for the Wressle development drilling programme, which
will access the Penistone reserves and leverage the existing
infrastructure, is progressing well and we continue to work in
collaboration with our partners to optimise the field's performance
and maximise its efficiency, whilst also targeting zero
flaring.
Towards the end of the year, we announced that we had assumed
operatorship of licence PEDL343, which holds the Cloughton gas
discovery. The Cloughton field was discovered in 1986 and
encountered gas throughout the Carboniferous section. The well
tested at rates of up to 28,000 scf/day on natural flow, however
with the right completion and production optimisation techniques
the Company believes that a well could flow up to 6 mmscf/day.
Following an internal review of the existing sub-surface data the
Company concluded that there is a Pmean GIIP of 192 BCF on the
licence. We are therefore committed to progressing the asset to
appraisal drilling operations and capitalising on this opportunity
to potentially monetise the discovery in the long-term.
Offshore UK
We farmed into the Serenity field in the Central North Sea just
over a year ago and re-entered the UK offshore sphere for the first
time since 2017. The appraisal well spudded in Q3 2022 and
unfortunately failed to encounter oil-bearing sands. However we are
continuing to explore a high-potential opportunity to develop the
discovered reserve via the adjacent Tain Field. The Serenity and
Tain discoveries benefit from having existing infrastructure
located in close proximity to our licence. In addition our
investment in Serenity has provided a shelter against the Energy
Profits Levy for the income generated across our asset base.
The UK Government remains supportive of North Sea exploration
and production, as epitomised by its recent commitment to grant
hundreds of new offshore oil and gas licences, and this continued
investment represents a major boost to our efforts to optimise the
development of Serenity with our partner i3 Energy.
Offshore Ireland
During the year, we stepped up our efforts to attract a suitable
farm-in partner for the development of FEL 4/19, our 100%-owned
offshore Ireland licence. Within FEL 4/19 are the Inishkea and
Inishkea West prospects, which represent Europa's key gas
exploration interests. These are located nearby the already
producing Corrib gas field and are, therefore, low-risk prospects
which we are aiming to explore when a farmin partner has been
secured. Inishkea West is our principal prospect which contains an
estimated prospective resource of 1.55 TCF of gas and could provide
sufficient natural gas to significantly extend the operational life
of the Bellanaboy gas processing terminal, potentially making a
strong contribution to Irish energy security, and maintaining the
180 skilled jobs at the gas terminal.
We maintain a strong working relationship with the Irish
Government, in particular the team at the Department of the
Environment, Climate and Communications ("DECC"), and were pleased
that the minister agreed to extend our licence to January 2024. We
have been working diligently to complete the committed seismic
reprocessing work programme which has recently reduced the risks
associated with the Inishkea West prospect and indicated that
reprocessing at a higher frequency could further improve the
sub-surface resolution of the exploration targets. In order to
undertake this work and then continue with the farm-out process we
have requested an extension to the licence and hope to receive this
in the coming months.
Ireland is currently conducting a major review of its energy
security, and we firmly believe our FEL 4/19 licence could play a
key role in the country's energy strategy going forward, especially
given the fact that low carbon-intensive indigenous gas is widely
recognised as a key transition fuel on the pathway to net zero.
Board Changes
After four years as chief executive officer of Europa, Simon
Oddie decided to retire as CEO in March 2023. The board conducted a
formal process for a new CEO, advised by a specialist executive
search firm, which resulted in the appointment of William Holland
as CEO. Simon worked tirelessly to build a strong platform from
which to grow the Company and, on behalf of the board, I would like
to express my sincere thanks for his unwavering commitment to the
business during his tenure as CEO. Simon remains on the board as a
non-executive director and continues to provide strategic insight
to support the development of the business.
Our new CEO William Holland has had a significant impact on the
Company since joining us as Chief Financial Officer in 2022, and he
has continued to deliver considerable operational, organisational
and financial progress in his new role. We remain confident that
Will has the skills required to continue to drive the growth of the
business as we strive to deliver on our strategic priorities.
In April 2023, Alastair Stuart, who has been consulting as a
petroleum engineer for Europa since 2012, joined the Company on a
permanent basis as COO and as an executive director. Alastair's
upstream experience has been instrumental in the development of
Wressle and we will continue to leverage his technical expertise
and extensive knowledge of our assets to enhance our overarching
business strategy and develop our project portfolio.
Following many years of loyal service and an invaluable
contribution to Europa, William Ahlefeldt retired as a director of
Europa in April 2023. We wish William well in his future endeavours
and thank him for his long-standing dedication to the Company.
Conclusion and Outlook
The 2022/23 financial year was another strong period for Europa,
during which we delivered considerable development progress at
Wressle and maintained our robust financial position. Our strong
cash flows and healthy balance sheet will enable us to continue to
advance the production enhancement project at Wressle, whilst
supporting our plans to progress licence PEDL343 to appraisal
drilling.
Alongside our partners, we continue to assess options for
developing the discovered reserve at Serenity via the Tain field,
which could be as a unified development and potentially highly
material to Europa. In addition, we remain confident that we will
be granted an extension for FEL 4/19, which will enable us to
complete the reprocessing work and find the ideal farm-in partner
to drill and develop the Inishkea West prospect. Europa
participated in the UK Government's 33(rd) offshore oil and gas
licensing round and we remain well-positioned to explore
opportunities on and offshore UK.
The development programme being undertaken at Wressle
demonstrates our commitment to generating additional value for
shareholders as we focus on delivering on our long-term growth
strategy and building an enviable portfolio of assets across
production, appraisal and exploration stages of the development
cycle.
Our new-look management team has worked tirelessly throughout
the year to fulfil our strategic aspirations and I would like to
extend my thanks to them for their hard work and perseverance on a
diverse range of projects. The entire board looks ahead with
confidence to what we expect will be another constructive year for
the Company and one where we hope that we will see strong progress
at Wressle, Cloughton and FEL 4/19.
Qualified Person Review
This release has been reviewed by Alastair Stuart, Europa's
Chief Operating Officer, who is a petroleum engineer with over 35
years' experience and a member of the Society of Petroleum
Engineers and has consented to the inclusion of the technical
information in this release in the form and context in which it
appears.
The financial information set out below does not constitute the
company's statutory accounts for 2023 or 2022. The financial
information has been prepared in accordance with UK adopted
international accounting standards on a basis that is consistent
with the accounting policies applied by the group in its audited
consolidated financial statements for the year ended 31 July 2023.
Statutory accounts for the years ended 31 July 2022 and 31 July
2021 have been reported on by the Independent Auditors.
The Independent Auditors' Report on the Annual Report and
Financial Statements for 2023 and 2022 were unqualified and did not
contain a statement under 498(2) or 498(3) of the Companies Act
2006. Statutory accounts for the year ended 31 July 2022 have been
filed with the Registrar of Companies. The statutory accounts for
the year ended 31 July 2023 will be delivered to the Registrar in
due course.
Consolidated statement of comprehensive income
For the year ended 31 July 2023 2022
Note GBP000 GBP000
Continuing operations
Revenue 2 6,653 6,584
------------------------------ ------ -------------------------------------- --------------------------------------
Cost of sales 2 (3,448) (3,806)
Impairment of producing
fields 12 177 (570)
Total cost of sales (3,271) (4,376)
---------------------------------- ----------------------------------
Gross profit 3,382 2,208
Exploration write-off 11 (1,686) -
Administrative expenses (1,872) (821)
Finance income 6 9 239
Finance expense 7 (717) (238)
------------------------------------ ------------------------------------
(Loss) / profit before
taxation 3 (884) 1,388
Taxation expense 8 32 (32)
------------------------------------ ------------------------------------
(Loss) / profit for the year (852) 1,356
==================== ====================
Other comprehensive profit /
(loss)
Items which will not be
reclassified to
profit /(loss)
Profit / (loss) on
investment revaluation 9 5 (18)
------------------------------------ ------------------------------------
Total other comprehensive
profit /(loss) 5 (18)
==================== ====================
Total comprehensive (loss) /
income for
the year attributable to
the equity shareholders
of the parent (847) 1,338
=================== ===================
Earnings per share (EPS) attributable Note Pence Pence per
to the equity shareholders of the parent per share share
from continuing operations
Basic EPS 10 (0.09p) 0.19p
Diluted EPS (0.09p) 0.18p
The accompanying notes form part of these financial
statements.
Consolidated statement of financial position
As at 31 July 2023 2022
Note GBP000 GBP000
Assets
Non-current assets
Intangible assets 11 7,146 3,785
Property, plant and
equipment 12 2,417 3,021
---------------------------------- ----------------------------------
Total non-current assets 9,563 6,806
---------------------------------- ----------------------------------
Current assets
Investments 13 - 24
Inventories 14 19 36
Trade and other receivables 15 893 1,866
Restricted cash 16 - 6,884
Cash and cash equivalents 5,165 1,394
---------------------------------- ----------------------------------
Total current assets 6,077 10,204
---------------------------------- ----------------------------------
Total assets 15,640 17,010
==================== ====================
Liabilities
Current liabilities
Loans 18 - (40)
Trade and other payables 17 (781) (1,573)
------------------------------------ ------------------------------------
Total current liabilities (781) (1,613)
------------------------------------ ------------------------------------
Non-current liabilities
Trade and other payables 17 (12) (4)
Long-term provisions 21 (4,368) (4,164)
---------------------------------- ----------------------------------
Total non-current
liabilities (4,380) (4,168)
---------------------------------- ----------------------------------
Total liabilities (5,161) (5,781)
----------------------------------- -----------------------------------
Net assets 10,479 11,229
==================== ====================
Capital and reserves
attributable to equity
holders
of the parent
Share capital 22 9,592 9,565
Share premium 22 23,682 23,660
Merger reserve 22 2,868 2,868
Retained deficit (25,663) (24,864)
---------------------------------- ----------------------------------
Total equity 10,479 11,229
====================== ======================
These financial statements were approved by the board of
directors and authorised for issue on 20 October 2023 and signed on
its behalf by:
William Holland, CEO
Company registration number 05217946
The accompanying notes form part of these financial
statements.
Consolidated statement of changes in equity
Attributable to the equity holders of the parent
Share Share premium Merger Retained Total
capital reserve deficit equity
GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 1
August
2021 5,665 21,157 2,868 (26,441) 3,249
Comprehensive
loss
for the year
Profit for the
year
attributable
to the
equity
shareholders
of the parent - - - 1,356 1,356
Other
comprehensive
loss
attributable
to the equity
shareholders
of the parent - - - (18) (18)
---------------------------------- ---------------------------------- --------------------------------- ------------------------------ -------------------------------
Total
comprehensive
profit for
the year - - - 1,338 1,338
---------------------------------- ---------------------------------- --------------------------------- ------------------------------ -------------------------------
Contributions
by
and
distributions
to owners
Issue of share
capital
(net of issue
costs) 3,900 2,722 - - 6,622
Issue of share
warrants(note
23) - (219) - 219 -
Share-based
payments
(note 23) - - - 20 20
---------------------------------- ---------------------------------- ---------------------------------- --------------------------------- ------------------------------
Total
contributions
by and
distributions
to owners 3,900 2,503 - 239 6,642
---------------------------------- ---------------------------------- --------------------------------- ------------------------------ -------------------------------
Balance at 31
July
2022 9,565 23,660 2,868 (24,864) 11,229
=================== =================== =================== ===================== ==================
Share Share premium Merger Retained Total
capital reserve deficit equity
GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 1
August
2022 9,565 23,660 2,868 (24,864) 11,229
Comprehensive
loss
for the year
Loss for the
year
attributable
to the
equity
shareholders
of the parent - - - (852) (852)
Other
comprehensive
profit
attributable
to the equity
shareholders
of the parent - - - 5 5
---------------------------------- ---------------------------------- --------------------------------- ------------------------------ -------------------------------
Total
comprehensive
loss for the
year - - - (847) (847)
---------------------------------- ---------------------------------- --------------------------------- ------------------------------ -------------------------------
Contributions
by
and
distributions
to owners
Issue of share
capital
(net of issue
costs) 27 22 - - 49
Share-based
payments
(note 23) - - - 48 48
---------------------------------- ---------------------------------- ---------------------------------- --------------------------------- ------------------------------
Total
contributions
by and
distributions
to owners 27 22 - 48 97
---------------------------------- ---------------------------------- --------------------------------- ------------------------------ -------------------------------
Balance at 31
July
2023 9,592 23,682 2,868 (25,663) 10,479
=================== =================== =================== ===================== ==================
The accompanying notes form part of these financial
statements.
Company statement of financial position
As at 31 July 2023 2022
GBP000 GBP000
Note
Assets
Non-current assets
Property, plant and
equipment 12 49 26
Investments 13 2,343 2,343
Amounts due from Group
companies 15,24 22,143 13,270
------------------------------------ ------------------------------------
Total non-current assets 24,535 15,639
------------------------------------ ------------------------------------
Current assets
Other receivables 15 129 163
Cash and cash
equivalents 121 249
-------------------------------------- --------------------------------------
Total current assets 250 412
--------------------------------------- ---------------------------------------
Total assets 24,785 16,051
====================== =====================
Liabilities
Current liabilities
Loans 18 - (40)
Trade and other payables 17 (250) (546)
------------------------------------ ------------------------------------
Total current liabilities (250) (586)
------------------------------------ ------------------------------------
Trade and other payables 17 (12) (3)
------------------------------------ ------------------------------------
Total non-current
liabilities (12) (3)
---------------------------------- ----------------------------------
Total liabilities (262) (589)
------------------------------------ ------------------------------------
Net assets 24,523 15,462
==================== ====================
Capital and reserves
attributable to equity
holders of the parent
Share capital 22 9,592 9,565
Share premium 22 23,682 23,660
Merger reserve 22 2,868 2,868
Retained deficit (11,619) (20,631)
-------------------------------------- --------------------------------------
Total equity 24,523 15,462
====================== ======================
The Company has taken advantage of the exemption provided under
Section 408 of the Companies Act 2006 not to publish its individual
statement of comprehensive income and related notes. The profit
dealt with in the financial statements of the parent Company is
GBP8,964,000 (2022: GBP6,238,000).
These financial statements were approved by the board of
directors and authorised for issue on 20 October 2023, and signed
on its behalf by:
William Holland
CEO
Company registration number 05217946
The accompanying notes form part of these financial
statements.
Company statement of changes in equity
Share Share premium Merger Retained Total
capital reserve deficit equity
GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 1
August
2021
originally
stated 5,665 21,157 2,868 (27,108) 2,582
Comprehensive
profit
for the year
Profit for the
year
attributable
to the
equity
shareholders
of the parent - - - 6,238 6,238
---------------------------------- ---------------------------------- --------------------------------- ------------------------------ -------------------------------
Total
comprehensive
profit for
the year - - - 6,238 6,238
Contributions
by
and
distributions
to owners
Issue of share
capital
(net of issue
costs) 3,900 2,722 - - 6,622
Issue of share
warrants(note
23) - (219) - 219 -
Share-based
payments
(note 23) - - - 20 20
---------------------------------- ---------------------------------- ---------------------------------- --------------------------------- ------------------------------
Total
contributions
by and
distributions
to owners 3,900 2,503 - 239 6,642
---------------------------------- ---------------------------------- -------------------------------- ------------------------------ ----------------------------
Balance at 31
July
2022 9,565 23,660 2,868 (20,631) 15,462
==================== =================== ================== ======================= =================
Share Share premium Merger Retained Total
capital reserve deficit equity
GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 1
August
2022
originally
stated 9,565 23,660 2,868 (20,631) 15,462
Comprehensive
profit
for the year
Profit for the
year
attributable
to the
equity
shareholders
of the parent - - - 8,964 8,964
---------------------------------- ---------------------------------- --------------------------------- ------------------------------ -------------------------------
Total
comprehensive
profit for
the year - - - 8,964 8,964
Contributions
by
and
distributions
to owners
Issue of share
capital
(net of issue
costs) 27 22 - - 49
Share-based
payments
(note 23) - - - 48 48
---------------------------------- ---------------------------------- ---------------------------------- --------------------------------- ------------------------------
Total
contributions
by and
distributions
to owners 27 22 - 48 97
---------------------------------- ---------------------------------- -------------------------------- ------------------------------ ----------------------------
Balance at 31
July
2023 9,592 23,682 2,868 (11,619) 24,523
==================== =================== ================== ======================= =================
The accompanying notes form part of these financial
statements
Consolidated statement of cash flows
For the year ended 31 July 2023 2022
Note GBP000 GBP000
Cash flows from / (used in)
operating activities
(Loss) / Profit after tax
from continuing
operations (852) 1,356
Adjustments for:
Share-based payments 23 48 20
Depreciation 12 1,133 1,618
(Reversal) /
impairment of
producing field 12 (177) 570
Exploration write-off 11 1,686 -
Finance expense 7 717 238
Taxation expense
recognised in profit
and
loss 8 (32) 32
Decrease / (increase)
in trade and other
receivables 973 (1,344)
Decrease / (increase)
in inventories 17 (13)
(Decrease) / increase
in trade and other
payables (765) 18
------------------------------------ ------------------------------------
Net cash generated by
operations 2,748 2,495
Income taxes paid 32 (32)
------------------------------------ ------------------------------------
Net cash generated by
operating activities 2,780 2,463
======================= =======================
Cash flows from / (used in)
investing activities
Purchase of property, plant
and equipment (564) (403)
Purchase of intangible
assets (5,047) (1,246)
Cash escrow release re
Morocco 263 -
Cash escrow release /
(deposit) re Serenity 16 6,622 (6,621)
----------------------------------- -----------------------------------
Net cash from / (used in)
investing activities 1,274 (8,270)
==================== ====================
Cash flows (used in) / from
financing activities
Gross proceeds from issue of
share capital 22 49 7,020
Costs incurred on issue of
share capital - (398)
Proceeds from borrowings 1,000 -
Repayment of borrowings (1,040) (10)
Lease liability payments (20) (14)
Lease liability interest
payments (2) (2)
Finance costs (35) (3)
Disposal of listed shares 29 -
----------------------------------- -----------------------------------
Net cash (used in) / from
financing activities (19) 6,593
===================== =====================
Net increase in cash and
cash equivalents 4,035 786
Exchange loss on cash and
cash equivalents (264) (33)
Cash and cash equivalents at
beginning
of year 1,394 641
----------------------------------- -----------------------------------
Cash and cash equivalents at
end of year 5,165 1,394
===================== =====================
The accompanying notes form part of these financial
statements.
Company statement of cash flows
For the year ended 31 July 2023 2022
GBP000 GBP000
Cash flows used in operating activities Note
Profit after tax from continuing operations 8,964 6,238
Adjustments for:
Share-based payments 23 48 20
Depreciation 12 38 10
Movement in intercompany loan provision 24 (7,997) (5,720)
Finance income (1,928) (810)
Finance expense 13 2
Decrease/(increase) in trade and other
receivables 36 (93)
Decrease in trade and other payables (273) (106)
----------------------------------- -----------------------------------
Net cash used in operating activities (1,099) (459)
======================= =======================
Cash flows from / (used in) investing activities
Purchase of property, plant and equipment (61) (13)
Movement on loans to Group companies 1,052 (6,152)
----------------------------------- -----------------------------------
Net cash flows from / (used in) investing
activities 991 (6,165)
======================= =======================
Cash flows (used in)/ from financing activities
Gross proceeds from issue of share capital 22 49 7,020
Costs incurred on issue of share capital - (398)
Proceeds from borrowings 1,000 -
Repayment of borrowings (1,040) (10)
Lease liability principal payment (75) - (15) (8)
Lease liability interest payment (1) (1)
Finance costs (13) (2)
----------------------------------- -----------------------------------
Net cash (used in) / from financing activities (20) 6,601
======================= =======================
Net decrease in cash and cash equivalents (128) (23)
Cash and cash equivalents at beginning
of year 249 272
----------------------------------- -----------------------------------
Cash and cash equivalents at end of year 121 249
===================== =====================
The accompanying notes form part of these financial
statements.
Notes to the financial statements
1 Accounting Policies
General information
Europa Oil & Gas (Holdings) plc is a public company
incorporated and domiciled in England and Wales, limited by shares,
with registered number 05217946. The address of the registered
office is 30 Newman Street, London, W1T 1PT. The principal activity
of the company is oil and gas exploration, appraisal, development
and production.
The functional and presentational currency of the Company is
Sterling (UKGBP).
Basis of accounting
The consolidated and individual Company financial statements
have been prepared in accordance with applicable UK adopted
International Accounting Standards.
The accounting policies that have been applied in the opening
statement of financial position have also been applied throughout
all periods presented in these financial statements. These
accounting policies comply with each IFRS that is mandatory for
accounting periods ending on 31 July 2023.
Going concern
The directors have prepared a cash flow forecast for the period
ending 31 December 2024, which considers the continuing and
forecast cash inflow from the Group's producing assets, the cash
held by the Group at October 2023, less administrative expenses and
planned capital expenditure. Oil price estimates for the base case
cash flow forecast are based upon a flat $75 per barrel, whilst
production estimates are sourced from the Group's internal
modelling for Wressle and recent actual production.
The directors have performed sensitivities allowing for
reasonably possible simultaneous falls in oil price and in Wressle
production, and the Group and Company had sufficient cash resources
to meet their obligations.
The directors have also performed sensitivities on the cashflow
allowing for various severe downside scenarios including:
-- a fall in the expected oil price from a base case price of
$75 per barrel to as low as $65 per barrel
-- incurring development spend on two additional Wressle
development wells but with no production until 2025
-- a deterioration of the US$ against the Pound Sterling to 1.50
These sensitivities have been modelled as a reverse stress test,
and the directors consider the likelihood of such movements to be
very low. However, should these scenarios occur, the Group would
have to employ certain predefined mitigations to remain cash
positive.
The directors have concluded, as at the date of approval of
these financial statements, that there is a reasonable expectation
that the Group and Company will still have sufficient cash
resources to be able to continue as a going concern and meet its
obligations as and when they fall due over the going concern
period.
Basis of consolidation
Where the Company has control over an investee, it is classified
as a subsidiary. The Company controls an investee if all three of
the following elements are present: power over the investee,
exposure to variable returns from the investee, and the ability of
the investor to use its power to affect those variable returns.
Control is reassessed whenever facts and circumstances indicate
that there may be a change in any of these elements of control.
Intra Group balances are eliminated on consolidation. Unrealised
gains on transactions between the Group and its subsidiaries are
eliminated. Unrealised losses are also eliminated unless the
transaction provides evidence of an impairment of the asset
transferred. Amounts reported in the financial statements of
subsidiaries have been adjusted where necessary to ensure
consistency with the accounting policies adopted by the Group.
The Group is engaged in oil and gas exploration, development and
production through unincorporated joint operations.
Joint arrangements
Joint arrangements are those arrangements in which the Group
holds an interest on a long-term basis which are jointly controlled
by the Group and one or more venturers under a contractual
arrangement. When these arrangements do not constitute entities in
their own right, the consolidated financial statements reflect the
relevant proportion of costs, revenues, assets and liabilities
applicable to the Group's interests in accordance with IFRS 11. The
Group's exploration, development and production activities are
presently conducted jointly with other companies in this way.
For the licences where the Group does not hold 100% equity
(refer to the licence interests table on page 7) a joint
arrangement exists. The equity and voting interest of the Group is
disclosed in the table, activities are typical for activities in
the oil and gas sector and are strategic to the Group's activities.
The principal place of business for all the joint arrangements is
the UK.
Revenue recognition
The Group follows IFRS 15. The standard provides a single
comprehensive model for revenue recognition. The core principle of
the standard is that an entity shall recognise revenue when control
passes on the transfer of promised goods or services to customers
at an amount that re ects the consideration to which the entity
expects to be entitled in exchange for those goods or services. The
standard introduced a new contract-based revenue recognition model
with a measurement approach that is based on an allocation of the
transaction price. This is described further in the accounting
policies below. Contracts with customers are presented in an
entity's balance sheet as a contract liability, a contract asset,
or a receivable, depending on the relationship between the entity's
performance and the customer's payment. The Group's accounting
policy under IFRS 15 is that revenue is recognised when the Group
satisfies a performance obligation by transferring oil to a
customer. The title to oil and gas typically transfers to a
customer at the same time as the customer takes physical possession
of the oil or gas. Typically, at this point in time, the
performance obligations of the Group are fully satisfied.
Revenue is measured based on the consideration to which the
Group expects to be entitled under the terms of a contract with a
customer. The consideration is determined by the quantity and price
of oil and gas delivered to the customer at the end of each
month.
Non-current assets
Oil and gas interests
The financial statements with regard to oil and gas exploration
and appraisal expenditure have been prepared under the full cost
basis. This accords with IFRS 6 which permits the continued
application of a previously adopted accounting policy. The unit of
account for exploration and evaluation assets is the individual
licence.
Pre-production assets
Pre-production assets are categorised as intangible assets on
the statement of financial position. Pre-licence expenditure is
expensed as directed by IFRS 6. Expenditure on licence acquisition
costs, geological and geophysical costs, costs of drilling
exploration, appraisal and development wells, and an appropriate
share of overheads (including directors' costs) are capitalised and
accumulated on a licence-by-licence basis. These costs which relate
to the exploration, appraisal and development of oil and gas
interests are initially held as intangible non-current assets
pending determination of technical feasibility and commercial
viability. On commencement of production these costs are tested for
impairment prior to transfer to production assets. If licences are
relinquished, or assets are not deemed technically feasible or
commercially viable, accumulated costs are written off to cost of
sales.
Production assets
Production assets are categorised within property, plant and
equipment on the statement of financial position. With the
determination of commercial viability and approval of an oil and
gas project the related pre-production assets are transferred from
intangible non-current assets to tangible non-current assets and
depreciated upon commencement of production within the appropriate
cash generating unit.
Impairment tests
For the purposes of assessing impairment, assets are grouped at
the lowest levels for which there are separately identifiable cash
flows (cash generating units) as disclosed in notes 11 and 12. As a
result, some assets are tested individually for impairment and some
are tested at cash generating unit level.
Impairment tests are performed when indicators as described in
IAS 36 are identified. In addition, indicators such as a lack of
funding or farmout options for a licence which is approaching
termination or the implied value of a farm-out transaction are
considered as indicators of impairment.
An impairment loss is recognised and charged to cost of sales
for the amount by which the asset's or cash generating unit's
carrying amount exceeds its recoverable amount. The recoverable
amount is the higher of fair value, reflecting market conditions
less costs to sell, and value in use based on an internal
discounted cash flow evaluation. All assets are subsequently
reassessed for indications that an impairment loss previously
recognised may no longer exist or have decreased. A previously
recognised impairment loss is reversed only if there has been a
change in the assumptions used to determine the asset's or cash
generating unit's recoverable amount since the last impairment loss
was recognised. The reversal is limited so that the carrying amount
of the asset or cash generating unit does not exceed either its
recoverable amount, or the carrying amount that would have been
determined, net of depreciation/amortisation, had no impairment
loss been recognised for the asset or cash generating unit in prior
years. Such a reversal is credited to cost of sales.
Property, plant and equipment
Items of property, plant and equipment are initially recognised
at cost. As well as the purchase price, cost includes directly
attributable costs and the estimated present value of any future
unavoidable costs of dismantling and removing items. The
corresponding liability is recognised within provisions.
Depreciation
All expenditure within tangible non-current assets is
depreciated from the commencement of production, on a unit of
production basis, which is the ratio of oil and gas production in
the period to the estimated quantities of proven plus probable
commercial reserves at the end of the period, plus the production
in the period. Costs used in the unit of production calculation
comprise the net book value of capitalised costs. Changes in the
estimates of commercial reserves or future field development costs
are dealt with prospectively.
Furniture and computers are depreciated on a 25% per annum
straight line basis.
Reserves
Proven and probable oil and gas reserves are estimated
quantities of commercially producible hydrocarbons which the
existing geological, geophysical and engineering data shows to be
recoverable in future years. The proven reserves included herein
conform to the definition approved by the Society of Petroleum
Engineers (SPE) and the World Petroleum Congress (WPC). The
probable and possible reserves conform to definitions of probable
and possible approved by the SPE/WPC using the deterministic
methodology. Reserves used in accounting estimates for depreciation
are updated periodically to reflect management's view of reserves
in conjunction with third party formal reports. Reserves are
reviewed at the time of formal updates or as a consequence of
operational performance, plans and the business environment at that
time.
Reserves are adjusted in the year that formal updates are
undertaken or as a consequence of operational performance and
plans, and the business environment at that time, with any
resulting changes not applied retrospectively.
Future decommissioning costs
A provision for decommissioning is recognised in full at the
point that the Group has an obligation to decommission an
appraisal, development or producing well. A corresponding
non-current asset (included within producing fields in note 12) of
an amount equivalent to the provision is also created. The amount
recognised is the estimated cost of decommissioning, discounted to
its net present value and is reassessed each year in accordance
with local conditions and requirements. The discount rate used is
the risk-free rate, adjusted for risks that are not already
included in the forecast cash flows. For producing wells, the asset
is subsequently depreciated as part of the capital costs of
production facilities within tangible non-current assets, on a unit
of production basis. Any decommissioning obligation in respect of a
pre-production asset is carried forward as part of its cost and
tested annually for impairment in accordance with the above
policy.
Changes in the estimates of commercial reserves or
decommissioning cost estimates are dealt with prospectively by
recording an adjustment to the provision, and a corresponding
adjustment to the decommissioning asset. The unwinding of the
discount on the decommissioning provision is included within
finance expense.
Acquisitions of exploration licences
Acquisitions of exploration licences through acquisition of
non-operational corporate structures that do not represent a
business, and therefore do not meet the definition of a business
combination, are accounted for as the acquisition of an asset.
Related future consideration that is contingent is not recognised
as an asset or liability until the contingent event has
occurred.
Taxation
Current tax is the tax payable based on taxable profit/(loss)
for the year.
Deferred income taxes are calculated using the balance sheet
liability method on temporary differences. Deferred tax is
generally provided on the difference between the carrying amounts
of assets and liabilities and their tax bases. However, deferred
tax is not provided on the initial recognition of goodwill, nor on
the initial recognition of an asset or liability unless the related
transaction is a business combination or affects tax or accounting
profit. Deferred tax on temporary differences associated with
shares in subsidiaries and joint ventures is not provided if
reversal of these temporary differences can be controlled by the
Group and it is probable that reversal will not occur in the
foreseeable future. Tax losses available to be carried forward as
well as other income tax credits to the Group are assessed for
recognition as deferred tax assets.
Deferred tax liabilities are provided in full, with no
discounting. Deferred tax assets are recognised to the extent that
it is probable that the underlying deductible temporary difference
will be able to be offset against future taxable income. Current
and deferred tax assets and liabilities are calculated at tax rates
that are expected to apply to their respective period of
realisation, provided they are enacted or substantively enacted at
the reporting date.
Changes in deferred tax assets or liabilities are recognised as
a component of tax expense in the statement of comprehensive
income, except where they relate to items that are charged or
credited directly to equity in which case the related deferred tax
is also charged or credited directly to equity.
Foreign currency
The Group and Company prepare their financial statements in
Sterling.
Transactions denominated in foreign currencies are translated at
the rates of exchange ruling at the date of the transaction.
Monetary assets and liabilities in foreign currencies are
translated at the rates of exchange ruling at the reporting date.
Non-monetary items that are measured at historical cost in a
foreign currency are translated at the exchange rate at the date of
transaction. Non-monetary items that are measured at fair value in
a foreign currency are translated using the exchange rates at the
date the fair value was determined.
Any exchange differences arising on the settlement of items or
on translating items at rates different from those at which they
were initially recorded are recognised in the Statement of
comprehensive income in the period in which they arise. Exchange
differences on non-monetary items are recognised in the Statement
of changes in equity to the extent that they relate to a gain or
loss on that non-monetary item taken to the Statement of changes in
equity, otherwise such gains and losses are recognised in the
Statement of comprehensive income.
Europa Oil & Gas (Holdings) plc is domiciled in the UK,
which is its primary economic environment and the Company's
functional currency is Sterling. The Group's current operations are
based in the UK and Ireland and the functional currencies of the
Group's entities are the prevailing local currencies in each
jurisdiction. Given that the functional currency of the Company is
Sterling, management has elected to continue to present the
consolidated financial statements of the Group and Company in
Sterling.
Investments
Investments, which are only investments in subsidiaries, are
carried at cost less any impairment. Additions include the net
value of share options issued to employees of subsidiary companies
less any lapsed, unvested options.
Financial instruments
Financial assets and financial liabilities are recognised in the
statement of financial position when the Group becomes a party to
the contractual provisions of the instrument.
Financial assets
Financial assets are classified as either financial assets at
amortised cost, at fair value through other comprehensive income
('FVTOCI') or at fair value through profit or loss ('FVPL')
depending upon the business model for managing the financial assets
and the nature of the contractual cash flow characteristics of the
financial asset.
A loss allowance for expected credit losses is determined for
all financial assets, other than those at FVPL, at the end of each
reporting period. The Group applies a simplified approach to
measure the credit loss allowance for trade receivables using the
lifetime expected credit loss provision. The lifetime expected
credit loss is evaluated for each trade receivable taking into
account payment history, payments made subsequent to year end and
prior to reporting, past default experience and the impact of any
other relevant and current observable data. The group applies a
general approach on all other receivables classified as financial
assets. The general approach recognises lifetime expected credit
losses when there has been a significant increase in credit risk
since initial recognition.
The Group derecognises a financial asset when the contractual
rights to the cash flows from the asset expire, or when it
transfers the financial asset and substantially all the risks and
rewards of ownership of the asset to another party. The Group
derecognises financial liabilities when the Group's obligations are
discharged, cancelled or have expired.
Fair value through other comprehensive income
The Group has a number of strategic investments in listed and
unlisted entities which are not accounted for as subsidiaries,
associates or jointly controlled entities. For those investments,
the Group has made an irrevocable election to classify the
investments at fair value through other comprehensive income rather
than through profit or loss as the Group considers this measurement
to be the most representative of the business model for these
assets. They are carried at fair value with changes in fair value
recognised in other comprehensive income and accumulated in the
fair value through other comprehensive income reserve. Upon
disposal any balance within fair value through other comprehensive
income reserve is reclassified directly to retained earnings and is
not reclassified to profit or loss.
Dividends are recognised in profit or loss, unless the dividend
clearly represents a recovery of part of the cost of the
investment, in which case the full or partial amount of the
dividend is recorded against the associated investment's carrying
amount.
Purchases and sales of financial assets measured at fair value
through other comprehensive income are recognised on settlement
date with any change in fair value between trade date and
settlement date being recognised in the fair value through other
comprehensive income reserve.
Amortised cost
This category is the most relevant to the Company. Loans and
receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. The
losses arising from impairment are recognised in a separate line in
the income statement. This category generally applies to trade and
other receivables.
Cash and cash equivalents
Cash and cash equivalents are carried at cost and include all
highly liquid investments with a maturity of three months or
less.
Restricted cash are those amounts held by third parties on
behalf of the Group and are not available for the Group's use;
these are recognised separately from cash and cash equivalents on
the balance sheet.
Financial Liabilities
The classification of financial liabilities at initial
recognition depends on the purpose for which the financial
liability was issued and its characteristics. All purchases of
financial liabilities are recorded on the trade date, being the
date on which the Group becomes party to the contractual
requirements of the financial liability. Unless otherwise indicated
the carrying amounts of the Group's financial liabilities
approximate to their fair values. The Group's financial liabilities
consist of financial liabilities measured at amortised cost and
financial liabilities at fair value through profit or loss.
Trade and other payables
Trade and other payables are initially recorded at fair value
and subsequently carried at amortised cost.
Derecognition of financial liabilities
A financial liability (in whole or in part) is derecognised when
the Group has extinguished its contractual obligations, it expires
or is cancelled. Any gain or loss on derecognition is taken to the
statement of comprehensive income.
Treatment of finance costs
All finance costs are expensed through the income statement. The
Group does not incur any finance costs that qualify for
capitalisation.
Defined contribution pension schemes
The pension costs charged against profits are the contributions
payable to the scheme in respect of the accounting period.
Inventories
Inventories comprise oil in tanks stated at the lower of cost
and net realisable value. Cost is determined by reference to the
actual cost of production in the period.
Share-based payments
All goods and services received in exchange for the grant of any
share-based payment are measured at their fair values. Where
employees are rewarded using share-based payments, the fair values
of employees' services are determined indirectly by reference to
the fair value of the instrument granted to the employee. This fair
value is appraised at the grant date and excludes the impact of
non-market vesting conditions (for example, profitability and sales
growth targets).
All equity-settled share-based payments are ultimately
recognised as an expense in the statement of comprehensive income
with a corresponding credit to reserves. Where options over the
parent Company's shares are granted to employees of subsidiaries of
the parent, the charge is recognised in the statement of
comprehensive income of the subsidiary. In the parent Company
accounts there is an increase in the cost of the investment in the
subsidiary receiving the benefit.
If vesting periods or other non-market vesting conditions apply,
the expense is allocated over the vesting period, based on the best
available estimate of the number of share options expected to vest.
Estimates are subsequently revised if there is any indication that
the number of share options expected to vest differs from previous
estimates. Any cumulative adjustment prior to vesting is recognised
in the current period. No adjustment is made to any expense
recognised in prior periods if the number of share options
ultimately exercised is different to that initially estimated.
Upon exercise of share options, the proceeds received, net of
attributable transaction costs, are credited to share capital, and
where appropriate share premium.
Critical accounting judgements and key sources of estimation
uncertainty
Details of the Group's significant accounting judgements and
critical accounting estimates are set out in these financial
statements and include:
Critical accounting judgements
-- Carrying value of intangible assets (note 11) - carrying
values are justified with reference to indicators of impairment as
set out in IFRS 6. Based on judgements at 31 July 2023 there was
GBP1,686k write off (2022: GBPNil). The licence in Morocco expired
in November 2022 and was not renewed. Resultantly the full carrying
value of the intangible asset of GBP1,686k was impaired.
The Serenity appraisal well, drilled in the last quarter of
2022, did not find oil bearing sands and as such the well was
plugged and abandoned during the year. All well costs have been
capitalised within intangible assets. Well data provided valuable
insights into the reservoir structure and active work is now being
performed by the Company and the operator to assess the various
development options for the Serenity field. The directors
considered the unsuccessful appraisal well as a potential indicator
of impairment. In the directors' judgment the potential value of
reserves that were discovered by the discovery well, based on
management's best estimate calculated on a discounted cash flow
basis, exceeds the carrying amount of the related capitalised
Serenity intangible asset as at 31 July 2023. There cannot however
be certainty that at the end of the evaluation period a commercial
development of Serenity volumes can be achieved.
The licence period for FEL 4/19 (Inishkea) expires on 31 January
2024. The Company is presently in the process of applying for an
extension to the license. These financial statements do not include
the adjustments that would result if the licence was not
renewed.
Critical accounting estimates
-- Carrying value of property, plant and equipment (note 12) -
carrying values are justified by reference to future estimates of
cash flows, discounted at appropriate rates. The directors
estimates variables like reserves volumes, future oil prices,
future capital and operating expenditure and discount rates. The
directors rely on third party formal reports and historical
reservoir performance to establish the appropriate reserves volumes
and production profiles to use in estimating future cash flows.
Future costs are based internal or joint venture budgets, and
discount rates are estimated with reference to applicable external
and internal data sources. The directors utilise management's view
on external analyst datasets in relation to oil and gas price
forecasts. At 31 July 2023 there was a reversal of amounts
previously impaired of GBP177k (2022: GBP570k impairment). This
predominantly related to the effect of the reduction in the
estimated decommissioning liability for Crosby Warren.
-- Deferred taxation (note 20) - assumptions regarding the
future profitability of the Group and whether the deferred tax
assets will be recovered.
-- Decommissioning provision (note 21) - inflation and discount
rate estimates (3% and 10% respectively) are used in calculating
the provision, along with third party estimates of remediation
costs.
-- Share-based payments (note 23) - measurement of the fair
value of options granted uses valuation techniques where active
market quotes are not available. This involves developing estimates
and assumptions consistent with how market participants would price
the instrument. Management bases its assumptions on observable data
as far as possible but this is not always available. In that case,
management uses the best information available. Estimated fair
values may vary from the actual prices that would be achieved in an
arm's length transaction at the reporting date.
-- Reserves and resources (note 12) - reserves and resources are
estimated based on management's view and third-party formal reports
and these estimates directly impact the recoverability of asset
carrying values that are reported in the financial statements.
2 Operating segment analysis
In the opinion of the directors the Group has four reportable
segments as reported to the chief executive officer, being the UK,
Ireland, Morocco and new ventures.
The reporting on these segments to management focuses on
revenue, operating costs and capital expenditure. The impact of
such criteria is discussed further in the Chairman's statement and
strategic report of this annual report.
Income statement for the year ended 31 July 2023
UK Ireland Morocco New ventures Total
GBP000 GBP000 GBP'000 GBP000 GBP000
Revenue 6,653 - - - 6,653
----------------- ------------------------------------- ----------------------------------- ----------------------------------- ----------------------------------- -------------------------------------
Cost of sales (3,448) - - - (3,448)
Impairment of
producing
fields 177 - - - 177
Cost of sales (3,271) - - - (3,271)
--------------------------------- --------------------------------- --------------------------------- --------------------------------- ---------------------------------
Gross profit 3,382 - - - 3,382
Exploration
write-off - - (1,686) - (1,686)
Administrative
expenses (2,078) 227 - (21) (1,872)
Finance income (4) 4 9 - 9
Finance costs (717) - - - (717)
----------------------------------- --------------------------------- --------------------------------- --------------------------------- -----------------------------------
Loss before tax 582 232 (1,677) (21) (884)
Taxation 32 - - - 32
----------------------------------- --------------------------------- --------------------------------- --------------------------------- -----------------------------------
Loss for the
year 615 231 (1,677) (21) (852)
Segmental assets and liabilities as at 31 July 2023
UK Ireland Morocco New Ventures Total
GBP000 GBP000 GBP000 GBP'000 GBP000
Non-current
assets 7,380 2,183 - - 9,563
Current
assets 6,077 - - - 6,077
----------------------------------- --------------------------------- ----------------------------------- -------------------------------- -----------------------------------
Total assets 13,457 2,183 - - 15,640
----------------------------------- ----------------------------------- ----------------------------------- -------------------------------- -----------------------------------
Non-current
liabilities (4,380) - - - (4,380)
Current
liabilities (762) (19) - - (781)
----------------------------------- ----------------------------------- ----------------------------------- --------------------------------- -----------------------------------
Total
liabilities (5,142) (19) - - (5,161)
----------------------------------- ----------------------------------- ----------------------------------- -------------------------------- -----------------------------------
Other
segment
items
Capital
expenditure
- cash flow 4,925 387 299 - 5,611
Depreciation 1,133 - - - 1,133
Share-based
payments 48 - - - 48
Income statement for the year ended 31 July 2022
UK Ireland Morocco New ventures Total
GBP000 GBP000 GBP'000 GBP000 GBP000
Revenue 6,584 - - - 6,584
----------------- ------------------------------------- ----------------------------------- ----------------------------------- ----------------------------------- -------------------------------------
Cost of sales (3,806) - - - (3,806)
Impairment of
producing
fields (570) - - - (570)
Cost of sales (4,376) - - - (4,376)
--------------------------------- --------------------------------- --------------------------------- --------------------------------- ---------------------------------
Gross profit 2,208 - - - 2,208
Exploration - - - - -
write-off
Administrative
expenses (1,082) 268 - (7) (821)
Finance income 205 1 33 - 239
Finance costs (238) - - - (238)
----------------------------------- --------------------------------- --------------------------------- --------------------------------- -----------------------------------
Profit before
tax 1,093 269 33 (7) 1,388
Taxation (32) - - - (32)
----------------------------------- --------------------------------- --------------------------------- --------------------------------- -----------------------------------
Profit for the
year 1,061 269 33 (7) 1,356
Segmental assets and liabilities as at 31 July 2022
UK Ireland Morocco New Ventures Total
GBP000 GBP000 GBP000 GBP'000 GBP000
Non-current
assets 3,624 1,796 1,386 - 6,806
Current
assets 9,941 - 263 - 10,204
----------------------------------- --------------------------------- ----------------------------------- -------------------------------- -----------------------------------
Total assets 13,565 1,796 1,649 - 17,010
----------------------------------- ----------------------------------- ----------------------------------- -------------------------------- -----------------------------------
Non-current
liabilities (4,168) - - - (4,168)
Current
liabilities (1,594) (19) - - (1,613)
----------------------------------- ----------------------------------- ----------------------------------- --------------------------------- -----------------------------------
Total
liabilities (5,762) (19) - - (5,781)
----------------------------------- ----------------------------------- ----------------------------------- -------------------------------- -----------------------------------
Other
segment
items
Capital
expenditure 795 129 725 - 1,649
Depreciation 1,618 - - - 1,618
Share-based
payments 20 - - - 20
100% of the total revenue (2022: 100%) relates to UK-based
customers. Of this figure, one end customer (2022: one) commands
more than 99% of the total, including sales made through operators
to the end customer. UK revenue by site was as follows: West Firsby
GBP489,000 (2022: GBP353,000); Crosby Warren GBP447,000 (2022:
GBP651,000); Whisby GBP387,000 (2022: GBP696,000 ); and Wressle
GBP5,330,000 (2022:GBP4,884,000 ).
Positive values for administrative expenditure in the Ireland
segment in both 2023 and 2022 relate to the reversal of certain
accrued licence expenditure which had previously been impaired.
3 Profit / loss before taxation
Profit / loss before taxation is stated after charging/
(crediting):
2023 2022
GBP000 GBP000
Depreciation and amortisation on property,
plant & equipment 12 1,133 1,618
Staff costs including directors 5 1,371 806
Diesel 174 163
Business rates 37 43
Site safety and security 98 89
Exploration write-off 11 1,686 -
Impairment reversal / impairment 12 (177) 570
Fees payable to the auditor for the
audit 78 70
Operating leases - land and buildings 44 43
========== =========
4 Directors' emoluments
Directors' salaries and fees - Company
and
Group 2023 2022
GBP000 GBP000
C Ahlefeldt-Laurvig (resigned 27 April
2023) 18 26
B O'Cathain 44 41
S Oddie 344 258
S Williams 33 31
W Holland 230 27
A Stuart (appointed 3 April 2023) 53 -
----------------------------------- -----------------------------------
722 383
===================== ===================
2023 2022
Directors' pensions GBP000 GBP000
W Holland 18 3
A Stuart (appointed 3 April 2023) 5 -
----------------------------------- -----------------------------------
23 3
===================== =====================
The above charge represents premiums paid to money purchase
pension plans during the year.
Directors' share-based payments 2023 2022
GBP000 GBP000
SG Oddie 4 9
BJ O'Cathain 1 2
S Williams 1 2
W Holland 38 6
----------------------------------- -----------------------------------
44 19
================== ================
The above represents the accounting charge in respect of share
options. No share options were exercised during the period (2022:
none).
Directors' total emoluments
Salaries Social Pensions Share-based Total
and fees security payments 2023
costs
GBP000 GBP000 GBP000 GBP000 GBP000
CW
Ahlefeldt-Laurvig
(resigned 27 April
2023) 18 2 - - 20
BJ O'Cathain 44 5 - 1 50
SG Oddie 344 47 - 4 395
S Williams 33 3 - 1 37
W Holland 230 32 18 38 318
A Stuart (appointed
3
April 2023) 53 7 5 - 65
---------------------------------- ---------------------------------- ---------------------------------- ---------------------------------- ----------------------------------
722 96 23 44 885
================== ================== ================== ================== ==================
Salaries Social Pensions Share-based Total
and fees security payments 2022
costs
GBP000 GBP000 GBP000 GBP000 GBP000
CW
Ahlefeldt-Laurvig
(resigned 27 April
2023) 26 2 - - 28
BJ O'Cathain 41 5 - 2 48
SG Oddie 258 36 - 9 303
S Williams 31 3 - 2 36
W Holland 27 4 3 6 40
---------------------------------- ---------------------------------- ---------------------------------- ---------------------------------- ----------------------------------
383 50 3 19 455
================== ================== ================== ================== ==================
5 Employee information
Average monthly number of employees 2023 2022
including
directors - Group
Number Number
Management and technical 7 6
Field exploration and production 5 4
---------------------------------- ----------------------------------
12 10
=================== ===================
Staff costs - Group 2023 2022
GBP000 GBP000
Wages and salaries (including
directors' emoluments) 1,133 676
Social security 137 83
Pensions 53 27
Share-based payments (note 23) 48 20
----------------------------------- -----------------------------------
1,371 806
=================== ====================
Average monthly number of employees 2023 Number 2022
including Number
directors - Company
Management and technical 7 6
---------------------------------- ----------------------------------
7 6
==================== ==================
Staff costs - Company 2023 2022
GBP000 GBP000
Wages and salaries (including
directors' emoluments) 881 463
Social security 113 60
Pensions 37 12
Share-based payment 48 20
----------------------------------- -----------------------------------
1,079 555
==================== ==================
6 Finance income
2023 2022
GBP000 GBP000
Bank interest received 9 -
Foreign exchange gains - 239
------------------------------ ------------------------------
9 239
================== ===================
7 Finance expense
2023 2022
GBP000 GBP000
Unwinding of discount on
decommissioning provision
(note 21) 416 233
Foreign exchange loss 264 -
Other finance expense 37 5
------------------------------------ ------------------------------------
717 238
=================== ====================
8 Taxation
2023 2022
GBP000 GBP000
Movement in deferred tax asset (note
20) 1,503 318
Movement in deferred tax liability
(note 20) (1,503) (318)
Current tax - UK 32 (32)
------------------------------------ ------------------------------------
Tax credit/(expense) 32 (32)
==================== ==================
UK corporation tax is calculated at 40% (2022: 40%) of the
estimated assessable profit for the year being the applicable rate
for a ring-fence trade including the Supplementary Charge of 10%.
From 24 May 2022 a new UK tax, the Excess Profits Levy ("EPL")
applies to the Group, and it is levied at 25% of assessable EPL
profits for the period from 26 May 2022 to 31 December 2022, and at
35% from 1 January 2023 onwards. The current tax credit for the
year ended 31 July 2023 related exclusively to carry back of
current year EPL losses against the prior year EPL profit.
2023 2022
GBP000 GBP000
(Loss)/profit before tax (884) 1,388
================== ==================
Tax reconciliation
Loss / (profit) multiplied by the standard
rate of corporation tax in the UK
including
Supplementary Charge of 40% (2022: 40%) (354) 555
Expenses not deductible for tax purposes 1,003 430
Deferred tax asset not recognised 192 235
Accelerated capital allowances (1,802) -
Taxed at a different rate (3,995) -
Losses carried forward 5,172 -
Previously unrecognised tax losses
utilised (266) (1,187)
Prior year adjustment 18 -
Other reconciling items - (1)
--------------------------------- ---------------------------------
Total tax (credit)/expense (32) 32
=================== =================
9 Other comprehensive income
2023 2022
GBP000 GBP000
Loss on investment revaluation 5 (18)
=================== ================
On 8 May 2019, the Group disposed of its interest in PEDL143 to
UK Oil & Gas Plc ('UKOG') for consideration of 25,951,557 UKOG
shares. At the time of the sale the shares were worth 1.156p each,
resulting in a total value of GBP300,000. An irrevocable election
has been made to record gains and losses arising on the shares as
Other Comprehensive Income. The investment was revalued at the
year-end 2022 to GBP24,000 (0.09p per share) and was sold during
the year for GBP29,000 (0.11p per share)).
10 Earnings per share
Basic earnings per share ('EPS') has been calculated on the
(loss)/profit after taxation divided by the weighted average number
of shares in issue during the period. Diluted EPS uses an average
number of shares adjusted to allow for the issue of shares on the
assumed conversion of all in-the-money options.
As the Group made a loss from continuing operations in the year,
any potentially dilutive instruments were considered to be
anti-dilutive. Therefore, the diluted EPS is equal to the basic EPS
for the year. As at 31 July 2023 there were 19,724,154 (2022:
GBP37,607,821 ) potentially dilutive instruments in issue.
The calculation of the basic and diluted earnings per share is
based on the following:
2023 2022
GBP000 GBP000
(Loss)/Profit for the year attributable
to the equity shareholders of the parent (852) 1,356
======================= =======================
Weighted average number of shares
For the purposes of basic EPS 958,804,515 700,028,629
For the purpose of diluted EPS 958,804,515 737,636,450
11 Intangible assets
Intangible assets - Group 2023 2022
GBP000 GBP000
At 1 August 3,785 6,438
Additions 5,047 1,246
Transferred to property, plant and
equipment
(note 12) - (3,899)
Exploration write-off (1,686) -
-------------------------------------- -----------------------------------
At 31 July 7,146 3,785
======================= =====================
Intangible assets comprise the Group's pre-production
expenditure on licence interests as follows:
2023 2022
GBP000 GBP000
Ireland FEL 4/19 (Inishkea) 2,166 1,789
UK PEDL181 112 81
UK PEDL182 (Broughton North) 34 34
UK PEDL343 (Cloughton) 108 92
Morocco (Inezgane) - 1,379
Serenity 4,726 410
-------------------------------- --------------------------------
Total 7,146 3,785
======================= ===================
Exploration write-off 2023 2022
GBP000 GBP000
Morocco (Inezgane) 1,686 -
The licence in Morocco expired in November 2022 and was not
renewed. Resultantly the full carrying value of the intangible
asset of GBP1,686k was impaired.
If the Group elects not to continue in any other licence, then
the impact on the financial statements will be the impairment of
some or all of the intangible assets disclosed above. Details of
commitments are included in note 25.
12 Property, plant & equipment
Property, plant & equipment - Group
Furniture Producing Right of Total
& computers fields use assets
GBP000 GBP000 GBP000 GBP000
Cost
At 31 July
2021 5 10,887 67 10,959
Additions 13 928 - 941
Transferred
from
intangible
assets (note
11) - 3,899 - 3,899
------------------------------- ------------------------------- ------------------------------- -------------------------------
At 31 July
2022 18 15,714 67 15,799
Additions 38 290 24 352
------------------------------- ------------------------------- ------------------------------- -------------------------------
At 31 July
2023 56 16,004 91 16,151
==================== ==================== ================= ======================
Depreciation,
depletion and
impairment
At 31 July
2021 3 10,552 35 10,590
Charge for
year 1 1,601 16 1,618
Impairment in
year - 570 - 570
------------------------------- ------------------------------- ------------------------------- -------------------------------
At 31 July
2022 4 12,723 51 12,778
Charge for
year 24 1,090 19 1,133
Impairment
reversal in
year - (177) - (177)
------------------------------- ------------------------------- ------------------------------- -------------------------------
At 31 July
2023 28 13,636 70 13,734
=================== ====================== ================= ====================
Net Book Value
At 31 July
2021 2 335 32 369
=============================== =============================== =============================== ===============================
At 31 July
2022 14 2,991 16 3,021
=============================== =============================== =============================== ===============================
At 31 July
2023 28 2,368 21 2,417
=============================== =============================== =============================== ===============================
The producing fields referred to in the table above are the
production assets of the Group, namely the oilfields at Wressle,
Crosby Warren and West Firsby, and the Group's interest in the
Whisby W4 well.
The carrying value of each producing field was tested for
impairment by comparing the carrying value with the value-in-use.
The value-in-use was calculated using a discounted cash flow model
with production decline rates based on engineering estimates and
recent production experience. Brent crude price was based on a flat
rate of $75 per barrel.
The post-tax discount rate of 10% (pre-tax 16.67%) is high
because of the applicable rates of tax in the UK. Cash flows were
projected over the expected life of the fields which is expected to
be longer than five years.
Based on the assumptions set out above, a net impairment
reversal of GBP177,000 (2022: impairment of GBP570,000) was
required. This was made up of a reversal of amounts previously
impaired in relation to Crosby Warren due to a downward revision of
the decommissioning liability, offset by an additional impairment
in relation to West Firsby due to an upward revision in the
decommissioning liability. The recoverable amount was calculated at
a discount rate of 10% (2022: 10%).
Sensitivity to key assumption changes
Variations to the key assumptions used in the value-in-use
calculation, as outlined above, would cause impairment of the
producing fields as follows:
Impairment of
producing fields
GBP000
Production decline rate
+10% -
-10% -
Brent crude price per barrel
$65 flat -
$55 flat -
Pre-tax discount rate
20% -
25% -
None of the variations result in an impairment individually.
Property, plant & equipment - Company
Furniture Right of Total
& computers use assets
GBP000 GBP000 GBP000
Cost
At 31 July
2021 5 37 42
Disposals (1) (80) (81)
------------------------------- ------------------------------- -------------------------------
At 31 July
2022 18 37 55
Additions 37 24 61
------------------------------- ------------------------------- -------------------------------
At 31 July
2023 55 61 116
==================== ====================== =======================
Depreciation
At 31 July
2021 3 16 19
Charge for
year 1 9 10
------------------------------- ------------------------------- -------------------------------
At 31 July
2022 4 25 29
Charge for
year 24 14 38
------------------------------- ------------------------------- -------------------------------
At 31 July
2023 28 39 67
==================== ================== ===================
Net Book
Value
At 31 July
2021 2 21 23
=============================== =============================== ===============================
At 31 July
2022 14 12 26
=============================== =============================== ===============================
At 31 July
2023 27 22 49
=============================== =============================== ===============================
13 Investments - Group
Investment in shares 2023 2022
GBP000 GBP000
At 1 August 24 42
Write back/(write off) on
revaluation 5 (18)
Disposal (29)
----------------------------------------- -----------------------------------------
At 31 July - 24
=================== ===================
On 8 May 2019, the Group disposed of its interest in PEDL143 to
UK Oil & Gas Plc ('UKOG') for consideration of 25,951,557 UKOG
shares, which it still holds. At the time of the sale the shares
were worth 1.156p each, resulting in a total value of GBP300,000.
The entire investment was disposed of during the current year. The
investment was revalued on the date of the disposal to the realised
value of GBP29,000 (0.11p per share) (2022 year-end value:
GBP24,000 (0.09p per share) with the profit being recorded in Other
Comprehensive Income (note 9).
Investments - Company
Investment in subsidiaries 2023 2022
GBP000 GBP000
At 1 August 2,343 2,343
Current year additions - -
----------------------------------------- -----------------------------------------
At 31 July 2,343 2,343
======================= ===================
The Company's investments at the reporting date include 100% of
the share capital in the following unlisted companies:
-- Europa Oil & Gas Limited, which undertakes oil and gas
exploration, development and production in the UK.
-- Europa Oil & Gas (West Firsby) Limited, which is non-trading.
-- Europa Oil & Gas (Ireland West) Limited, which previously
held the interest in the FEL 2/13 licence.
-- Europa Oil & Gas (Ireland East) Limited, which previously
held the interest in the FEL 3/13 and FEL 1/17 licences.
-- Europa Oil & Gas (Inishkea) Limited, which holds the
interest in the FEL 4/19 and previously held the interest in FEL
3/19 licences.
-- Europa Oil & Gas (New Ventures) Limited, which previously
held the interest in the Moroccan licence.
All six companies are registered in England and Wales, all
having their registered office at 30 Newman Street, London W1T
1PT.
The results of the six companies have been included in the
consolidated accounts.
Europa Oil & Gas Limited owns 100% of the ordinary share
capital of Europa Oil & Gas (UK) Limited (registered in England
and Wales with registered office at 30 Newman Street, London W1T
1PT and is non-trading).
14 Inventories - Group
2023 2022
GBP000 GBP000
Oil in tanks 19 36
====================================== ======================================
15 Trade and other receivables
Group Company
2023 2022 2023 2022
Current trade GBP000 GBP000 GBP000 GBP000
and other
receivables
Trade
receivables 556 1,476 - -
Other
receivables 103 185 30 43
Corporation 50 - -
tax
receivable -
Prepayments 184 205 99 120
-------------------------------- -------------------------------- ----------------------------------- -----------------------------------
893 1,866 129 163
================= ================= ==================== ====================
Non-current
other
receivables
Owed by Group
undertakings
(note 24) - - 22,143 13,270
=================== =================== ================== ===================
16 Restricted cash
Group Company
2023 2022 2023 2022
GBP000 GBP000 GBP000 GBP000
Cash 263
guarantee - - -
Security 6,621
escrow
funds - - -
-------------------------------- -------------------------------- ----------------------------------- -----------------------------------
- 6,884 - -
================= ==================== ==================== ===================
In the prior year, pursuant to the requirements of the farm-in
agreement with i3 Energy plc in relation to UK offshore licence
P.2358, Block 13/23c ("Serenity"), the Group deposited into an
escrow account the full remaining committed funding requirement for
its paying share of the 2023 appraisal well. During the current
year funds were released from the escrow account in relation to
expenditure incurred on the Serenity well. Upon completion of well
operations all remaining escrow funds were released and transferred
to the Group's unrestricted cash accounts, and the escrow account
was closed. The escrow account was treated as restricted cash in
the prior year.
The guarantee that was required by the petroleum agreement with
the National Office of Hydrocarbons and Mines ('ONHYM') in Morocco
for $315,000 (GBP263,000) (2022: $315,000 (GBP263,000)) was
released and transferred to the Group's unrestricted cash accounts
during the year upon expiry of the licence. This account was
treated as restricted cash in the prior year.
17 Trade and other payables
Group Company
Current
trade and
other
payables 2023 2022 2023 2022
GBP000 GBP000 GBP000 GBP000
Trade
payables 454 1,234 175 480
Lease
liabilities 10 13 8 8
Corporation - 32 -
tax payable -
Other
payables 317 294 67 58
-------------------------------------- -------------------------------------- --------------------------------------- ---------------------------------------
781 1,573 250 546
=================== =================== ==================== ====================
Non-current
trade and
other
payables
Lease
liabilities 12 4 12 3
18 Borrowings
Group Company
2023 2022 2023 2022
GBP000 GBP000 GBP000 GBP000
Loans
repayable
in less
than 1 year
Bounce Back
Loan - 40 - 40
-------------------------------------- -------------------------------------- --------------------------------------- ---------------------------------------
Total
short-term
borrowing 40 40 40 40
================== ================== ====================== ======================
In June 2020 the Group drew down on a Bounce Back loan for
GBP50,000 under the Government's Covid 19 policies. The loan is
repayable within 6 years of drawdown but with a 12-month holiday
and repayments started in July 2021. The annual rate of interest is
2.5%. The loan was repaid in full in August 2022.
On 8 September 2022 the Company entered into a loan agreement
with Union Jack Oil plc ("UJO"). The key features of the loan were:
GBP1 million loan amount, 18-month term, interest rate of 11% per
annum, repayable at any point during the term without penalty and
secured against 10% interest in the Wressle field (PEDL180, and
PEDL182). The loan was to provide additional liquidity during the
drilling of the Serenity appraisal well. The loan was repaid in
full on 18 October 2022.
19 Leases
Group Company
2023 2022 2023 2022
GBP000 GBP000 GBP000 GBP000
Amounts recognised in the statement
of comprehensive income:
Interest on right of use liabilities (1) (2) (1) (1)
Amounts recognised in the statement
of cash flows:
Repayment of lease liabilities
- principal (20) (14) (15) (8)
Repayment of lease liabilities
- interest (2) (2) (1) (1)
Maturity analysis (undiscounted):
Amounts due within one year (9) (14) (8) (8)
Amounts due after more than 1 year
& less than 5 years (12) (2) (12) (2)
Amounts due after more than 5 years - - - -
The Group's right of use asset comprises the lease of 4 vehicles
(note 12). The corresponding lease liability for the right to use
leased assets is included within trade and other payables in the
statement of financial position (note 17).
20 Deferred Tax - Group
2023 2022
Recognised deferred tax GBP000 GBP000
asset:
As at 1 August - -
Charged to statement of
comprehensive income - -
------------------------------------------ ------------------------------------------
At 31 July - -
====================== =======================
The Group has a deferred tax liability of GBP2,935,000 (2022:
GBP1,433,000) arising from accelerated capital allowances and a
deferred tax asset of GBP2,935,000 (2022: GBP1,433,000) arising
from trading losses which will be utilised against future taxable
profits. These were offset against each other resulting in a GBPnil
net asset/liability (2022: GBPnil net asset/liability). This
offsetting was required because the Group settles current tax
assets and liabilities on a net basis.
Non-recognised long-term deferred tax asset
The Group has a non-recognised deferred tax asset of GBP7.3
million (2022: GBP5.2 million), which arises in relation to
ring-fenced UK trading losses of GBP13.1 million (2022: GBP8.9
million), non-ring-fenced UK trading losses of GBP11.7 million
(2022: GBP5.2 million), EPL losses of GBP4.1 million (2022: GBPnil)
and subsidiary losses and carried forward capital expenditure of
GBP7.3 million (2022: GBP6.7 million) that have not been recognised
in the accounts as the timing of the utilisation of the losses is
considered uncertain.
No deferred tax assets or liabilities are recognised in the
Company.
21 Provisions - Group
Decommissioning provisions are based on third party estimates of
work which will be required and the judgement of directors. By
their nature, timing and the detailed scope of work required are
uncertain.
Long-term provisions 2023 2022
GBP000 GBP000
As at 1 August 4,164 3,393
Charged to statement of comprehensive income
(note 7) 416 233
Change in estimated phasing of cash flows (212) 538
-------------------------------- --------------------------------
At 31 July 4,368 4,164
=================== ====================
The decrease in the estimated decommissioning provision resulted
mainly from a reassessment of the estimated timings of when such
decommissioning activities are undertaken at the end of their
economic lives.
Sensitivity to key assumption changes
Variations to the key assumptions used in the decommissioning
provision estimates would cause increases / (reductions) to the
provision as follows:
Further decommissioning
provision GBP000
Inflation rate (current assumption 3%)
2% (386)
5% 740
Discount rate (current assumption 10%)
5% 1,489
15% (890)
No provisions have been recognised in the Company.
22 Called up share capital
2023 2022
GBP000 GBP000
Allotted, called up and fully paid ordinary
shares of 1p
At 1 August 2022: 956,466,985 shares (1
August
2021: 566,466,985) 9,565 5,665
Issued in the year: 2,717,193 shares (2022:
390,000,000 shares) 27 3,900
-------------------------------- --------------------------------
At 31 July 2023: 959,184,178 shares (2022:
956,466,985) 9,592 9,565
============ =============
Ordinary shares issued
Date Type of Number Issue Raised Raised Nominal
Issue of shares price gross net value
of costs
GBP000 GBP000 GBP000
20
September
2022 Placing 2,717,193 0.018 49 49 27
--------------------------------------------------------- -------------------------------- -------------------------------- --------------------------------
Total 2,717,193 49 49 27
================= ========= ========= =========
The placing of ordinary shares during the year was to satisfy an
exercise of warrants. All of the allotted shares are ordinary
shares of the same class and rank pari passu. The following
describes the purpose of each reserve within owners' equity:
Reserve Description and purpose
Share premium Amount subscribed for share capital in excess
of nominal value
Merger reserve Reserve created on issue of shares on acquisition
of subsidiaries in prior years
Retained deficit Cumulative net gains and losses recognised in
the consolidated statement of comprehensive income
23 Share-based payments
The Group operates an approved Enterprise Management Incentive
('EMI') share option scheme for employees and an unapproved scheme
for grants in excess of EMI limits and for non-employees. Both
schemes are equity-settled share-based payments as defined in IFRS
2 Share-based payments. A recognised valuation methodology is
employed to determine the fair value of options granted as set out
in the standard. The charge incurred relating to these options is
recognised within operating costs.
Combined information for the two schemes operated by the Group
is set out below.
There are 41,550,628 ordinary 1p share options/warrants
outstanding (2022: 41,207,821 ).
These are held as follows:
Holder 31 July 31 July
2023 2022
BJ O'Cathain 2,950,000 2,950,000
SG Oddie 9,200,000 9,200,000
SA Williams 2,500,000 2,500,000
W Holland 7,721,000 3,721,000
Employees of
the Group 3,800,000 2,740,000
Consultants
and
advisers 15,379,628 20,096,821
--------------------------------------------------- ---------------------------------------------------
Total 41,550,628 41,207,821
==================== ====================
The fair values of options were determined using a Black Scholes
Merton model or, in the case of those issued to advisors as part of
the share issue, the fair value was deemed to be the share issue
price. Volatility is based on the Company's share price volatility
since flotation.
In the year 6,520,000 options/warrants were granted, 2,280,000
expired, 1,180,000 were forfeited, and 2,717,193 were exercised
(2022: 15,863,667 granted, 2,223,458 expired, 685,000 forfeited,
none exercised).
2023 2023 2022 2022
Number Average Number of Average
of options exercise options exercise
price price
Outstanding at the
start
of the year 41,207,821 2.23p 26,029,154 2.37p
Granted -
employees/directors 6,520,000 1.14p 3,721,000 2.31p
Granted - advisors - - 12,142,667 1.80p
Exercised (2,717,193) 1.80p - -
Expired (2,280,000) 2.31p - -
Forfeited (1,180,000) 3.66p (685,000) 7.00p
------------------------------------------------- ----------------------------------- ------------------------------------------------- -----------------------------------
Outstanding at the
end
of the year 41,550,628 2.04p 41,207,821 2.02p
Exercisable at the
end
of the year 23,599,628 1.56p 18,096,821 1.64p
The 6,250,000 options granted in June 2023 vest in three
tranches of 2,083,333, one tranche after each of 12, 24 and 36
months, and are exercisable conditional upon the Europa Oil &
Gas (Holdings) plc closing average mid-market share price being
above 2.836p for 30 consecutive trading days, and expire on the
sixth anniversary of the grant date. The inputs used to determine
their values are detailed in the table:
Grant date 22 March 2023
Number of options 6,250,000
Share price at
grant 1.1p
Exercise price 1.25p
Volatility 70.81%
Dividend yield Nil
Risk free investment
rate 3.326%
Option life in
years 6
Fair value per
option 0.71p
Based on the fair values above, the charge arising from employee
share options was GBP48,000 (2022: GBP20,000) . The charge relating
to non-employee share options was GBP Nil (2022: GBPNil). The
charge allocated directly to equity, relating to the issue of
options on the issue of share capital, was GBP Nil (2022: GBP
219,000 ).
Share options/warrants outstanding at the end of the period have
exercise prices ranging from 1.14p to 8.9p and the weighted average
remaining contractual life at the end of the period was 2.7 years
(2022: 3.4 years).
24 Financial instruments
The Group's and Company's financial instruments comprise cash
and cash equivalents, bank borrowings, loans, and items such as
trade and other receivables and trade and other payables which
arise directly from its operations. Europa's activities are subject
to a range of financial risks, the main ones being credit;
liquidity; interest rates; commodity prices; foreign exchange; and
capital. These risks are managed through ongoing review considering
the operational, business and economic circumstances at that
time.
Financial assets - Group
Amortised Amortised Fair value Fair value
cost cost through other through other
comprehensive comprehensive
income income
2023 2022 2023 2022
GBP000 GBP000 GBP000 GBP000
Investments - - - 24
Trade and
other
receivables 709 1,661 - -
Restricted - 6,884 - -
cash
Cash and
cash
equivalents 5,165 1,394 - -
-------------------- -------------------- ----------------------- -----------------------
Total
financial
assets 5,874 9,939 - 24
================================ ================================ ===================================== =====================================
Financial assets - Company
Amortised Amortised Fair value Fair value
cost cost through other through other
comprehensive comprehensive
income income
2023 2022 2023 2022
GBP000 GBP000 GBP000 GBP000
Investments 2,343 2,343 - 24
Trade and
other
receivables 30 43 - -
Restricted - - - -
cash
Cash and
cash
equivalents 121 249 - -
-------------------- -------------------- ----------------------- -----------------------
Total
financial
assets 2,494 2,635 - 24
================================ ================================ ===================================== =====================================
Financial liabilities - Group
Amortised Amortised Fair value Fair value
cost cost through other through other
comprehensive comprehensive
income income
2023 2022 2023 2022
GBP000 GBP000 GBP000 GBP000
Trade and
other
payables (771) (1,556) - -
Lease
liabilities (22) (17) - -
Loans - (44) - -
-------------------- -------------------- --------------------- -----------------------
Total
financial
liabilities (793) (1,617) - -
================================ ================================ ===================================== =====================================
Financial liabilities - Company
Amortised Amortised Fair value Fair value
cost cost through other through other
comprehensive comprehensive
income income
2023 2022 2023 2022
GBP000 GBP000 GBP000 GBP000
Trade and
other
payables (242) (538) - -
Lease
liabilities (20) (11) - -
Loans - (40) - -
-------------------- -------------------- --------------------- -----------------------
Total
financial
liabilities (262) (589) - -
================================ ================================ ===================================== =====================================
Credit risk
The Group is exposed to credit risk as all crude oil production
is effectively sold to one multinational oil company. The customer
is invoiced monthly for the oil delivered to the refinery in the
previous month and invoices are generally settled in full within
the same month that invoices are issued. At 31 July 2023 trade
receivables were GBP556 ,000 (2022: GBP1,476 ,000 ). The fair value
of trade receivables and payables approximates to their carrying
value because of their short maturity. Any surplus cash is held on
short-term deposit with Royal Bank of Scotland. The maximum credit
exposure in the year was GBP 1,574,000 comprising mainly of two
months of Wressle sales as at the end of February 2023 (2022
maximum exposure: GBP 1,433,000 ). The Company exposure to third
party credit risk is negligible. The intercompany balances with its
subsidiaries have been appropriately provided for to account for
potential impairments .
Liquidity risk
The Company currently has no overdraft or overdraft facility
with its bankers .
The Group and Company monitor their levels of working capital to
ensure they can meet liabilities as they fall due. The following
table shows the contractual maturities (representing the
undiscounted cash flows) of the Group's and Company's financial
liabilities.
Group Company
Trade and other payables Trade and other payables
At 31
July 2023 2022 2023 2022
GBP000 GBP000 GBP000 GBP000
6
months
or
less 781 1,573 250 546
-------------------------------------- -------------------------------------- --------------------------------------- ---------------------------------------
Total 781 1,573 250 546
================================ ================================ ===================================== =====================================
Group Company
Loans Loans
At 31
July 2023 2022 2023 2022
GBP000 GBP000 GBP000 GBP000
6 to 12
months - 40 - 40
1 to 2 - - - -
years
2 to 5 - - - -
years
Over 5 - - - -
years
-------------------------------------- -------------------------------------- -------------------------------------- ---------------------------------------
Total - 40 - 40
===================== ====================== ========================= ========================
Cash and cash equivalents in both Group and Company are all
available at short notice.
Trade and other payables do not normally incur interest charges.
There is no difference between the fair value of the trade and
other payables and their carrying amounts.
Interest rate risk
The Group has no interest-bearing liabilities (note 18) and
immaterial leases (note 19). All loans and leases are at fixed
rates of interest and the Group and Company is not exposed to
changes in interest rates.
Commodity price risk
The selling price of the Group's production of crude oil is set
at a small discount to Brent prices. The table below shows the
range of prices achieved in the year and the sensitivity of the
Group's loss before taxation ('LBT') or profit before tax ('PBT')
to such movements in oil price. There would be a corresponding
increase or decrease to net assets. There is no commodity price
risk in the Company.
2023 2023 2022 2022
Price PBT Price PBT
Oil price Month US$/bbl GBP000 US$/bbl GBP000
Highest August 2022 $98.70 1,227 $122.40 1,723
Average $83.30 (2) $93.90 (208)
Lowest June 2023 $73.40 (791) $69.50 (1,864)
Foreign exchange risk
The Group's production of crude oil is invoiced in US$. Revenue
is translated into Sterling using a monthly exchange rate set by
reference to the market rate. The table below shows the range of
average monthly US$ exchange rates used in the year and the
sensitivity of the Group's PBT / LBT to similar movements in US$
exchange. There would be a corresponding increase or decrease in
net assets.
2023 2023 2022 2022
Rate PBT Rate PBT
US Dollar Month US$/GBP GBP000 US$/GBP GBP000
Highest July 2023 1.286 (410) 1.376 (373)
Average 1.212 (30) 1.313 (76)
Lowest September 2022 1.117 535 1.216 443
The table below shows the Group's currency exposures. Exposures
comprise the net financial assets and liabilities of the Group that
are not denominated in the functional currency.
Group Company
2023 2022 2023 2022
Currency Item GBP000 GBP000 GBP000 GBP000
Cash and
cash
Euro equivalents 18 92 - 3
Trade and other
payables (9) (13) (9) (13)
Cash and
cash
US Dollar equivalents 5,102 1,322 75 3
Trade and other
receivables 556 1,435 - -
Trade and other
payables (47) (5) (47) (5)
---------------------------- ---------------------------- ---------------------------- ----------------------------
Total 5,620 2,831 (19) (12)
==================== =================== ====================== ======================
Capital risk management
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern in order to
provide returns for shareholders and maintain an optimal capital
structure to reduce the cost of capital. The Group defines capital
as being the consolidated shareholder equity (note 22) and third
party borrowings (GBPNil at 31 July 2023). The Board monitors the
level of capital as compared to the Group's long-term debt
commitments and adjusts the ratio of debt to capital as is
determined to be necessary, by issuing new shares, reducing or
increasing debt, paying dividends and returning capital to
shareholders.
Intercompany loans
The loans to the subsidiaries are not classified as repayable on
demand. IFRS 9 requires consideration of the expected credit risk
associated with the loan. As the subsidiary company does not have
any liquid assets to sell to repay the loan, should it be recalled,
the conclusion reached was that the loan should be categorised as
stage 3.
As part of the assessment of expected credit losses of the
intercompany loan receivable, the directors have considered the
published chance of success for Inishkea, and applying the 33%
general wildcat exploration success rate, the loans to Europa Oil
& Gas Inishkea have thus been deemed 67% provided. As a
consequence of the Inezgane licence expiring and not being
extended, the loans to Europa Oil & Gas New Ventures have been
provided for in full (2022: provided 67%).
The loan to Europa Oil & Gas (Ireland West) and Europa Oil
& Gas (Ireland East) have been provided in full due to the
relinquishment of the licence held by the subsidiaries.
During the year to 31 July 2023 there has been a marked increase
in the expected recoverable value of the Group's Crosby Warren
producing asset, mainly as a result of an anticipated new revenue
stream from handling water produced by the Wressle producing field.
This led to a further partial reversal of previous provisions for
impairment that had been made in relation to loans to Europa Oil
Gas Ltd.
The movement in the provision was as follows:
Europa Europa Europa Europa Europa Total
Oil & Oil & Oil & Oil & Oil &
Gas Limited Gas (Ireland Gas (Ireland Gas Gas (New
West) East) (Inishkea) Ventures)
Limited Limited Limited Limited
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
============= ============= ============= ============= ============= =============
Gross loan
balances
Loan balance
at 31 July
2021 20,178 763 1,480 1,024 762 24,207
Movement in
loan 6,357 18 15 144 428 6,962
----------------- --------------- --------------- --------------- --------------- ---------------
Loan balance
at 31 July
2022 26,535 781 1,495 1,168 1,190 31,169
Movement in
loan 1,027 (76) (153) 223 (145) 876
----------------- --------------- --------------- --------------- --------------- ---------------
Loan balance
at 31
July 2023 27,562 705 1,342 1,391 1,045 32,045
----------------- --------------- --------------- --------------- --------------- ---------------
Provisions
Provision at
31 July
2021 (20,178) (763) (1,480) (687) (511) (23,619)
Movement in
provision 6,135 (18) (15) (96) (286) 5,720
----------------- --------------- --------------- --------------- --------------- ---------------
Provision at
31 July
2022 (14,043) (781) (1,495) (783) (797) (17,899)
Movement in
provision 8,165 76 153 (149) (248) 7,947
----------------- --------------- --------------- --------------- --------------- ---------------
Provision at
31 July
2023 (5,878) (705) (1,342) (932) (1,045) (9,952)
----------------- --------------- --------------- --------------- --------------- ---------------
Net loan
balance at
1 August
2021
2012018 - - - 337 251 588
Net loan
balance at
31 July
2022 12,492 - - 385 393 13,270
Net loan
balance at
31 July
2023 21,684 - - 459 - 22,143
25 Capital commitments and guarantees
As part of the licence extension for FEL 4/19 there is an
outstanding commitment totalling EUR0.1 million that relates
primarily to seismic reprocessing.
For PEDL181 the partners have agreed to drill two development
wells and to construct a gas export line. These activities are
contingent upon the budget being approved by the JV partnership,
the timing of environmental permitting and the availability of a
suitable rig. The total net cost to Europa for the work programme
is estimated to be GBP0.5 million in 2023 and GBP3.7 million in
2024.
26 Lease commitments
Europa Oil & Gas Limited pays annual site rentals for the
land upon which the West Firsby and Crosby Warren oil field
facilities are located.
Future minimum lease payments are as follows:
2023 2022
GBP000 GBP000
Less than 1 year - 9
2-5 years - -
--------------------------------- ---------------------------------
Total - 9
============ =============
27 Related party transactions
Key management are those persons having authority and
responsibility for planning, controlling and directing the
activities of the Group. In the opinion of the Board, the Group's
and the Company's key management are the directors of Europa Oil
& Gas (Holdings) plc. Information regarding their compensation
is given in note 4.
During the year, the Company provided services to subsidiary
companies as follows:
2023 2022
GBP000 GBP000
Europa Oil & Gas Limited 336 236
Europa Oil & Gas (Inishkea) Limited 102 42
Europa Oil & Gas (New Ventures)
Limited 26 19
--------------------------------- ---------------------------------
Total 464 297
============ ==========
At the end of the year, after provisions, the Company was owed
the following amounts by subsidiaries:
2023 2022
GBP000 GBP000
Europa Oil & Gas Limited 21,684 12,492
Europa Oil & Gas (Inishkea) Limited 459 385
Europa Oil & Gas (New Ventures)
Limited - 393
--------------------------------- ---------------------------------
Total 22,143 13,270
============ =============
28 Post reporting date events
-- Operations to install a jet pump for artificial lift on the
Wressle-1 well are underway. The original completion was removed
from the well and a new completion, including the sub-surface pump,
has been successfully run in the well as of early October 2023. All
that remains is for the required surface pump and associated
flowlines and electrics to be installed, which is expected to be
completed before the end of October 2023.
-- PEDL 181 was relinquished during September 2023. The asset
was not deemed to be adequately attractive. It had zero carrying
value on the balance sheet.
-- Applied to DECC to extend licence FEL 4/19 from 31 January
2024 to undertake further reprocessing and secure a farm-in
partners.
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END
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