TIDMLBE
RNS Number : 5971T
Longboat Energy PLC
21 March 2023
Longboat Energy PLC
("Longboat Energy", the "Company" or "Longboat")
Audited Full Year Results to 31 December 2022
London, 21 March 2023 - Longboat Energy, the full cycle emerging
E&P business, announces its full-year results for the period
ended 31 December 2022.
Highlights
Operations Summary
-- Five wells drilled over the period with two significant discoveries: Kveikje and Oswig
-- Kveikje (Longboat 10%):
-- Encountered hydrocarbons at all four targets levels.
-- Discovered light oil in excellent quality injectitie
reservoir in the main target reservoir.
-- Estimate of recoverable resources between 35 and 60 mmboe
gross (1) .
-- Operated by Equinor in prolific area to the north of the
giant Troll field with significant infrastructure.
-- Likely to form part of the Ringvei Vest multi-hundred million
barrel cluster development.
-- Oswig (Longboat 20%):
-- Gas-condensate discovery in large fault block with Jurassic
Tarbert formation reservoir.
-- Preliminary estimate of recoverable resources between 10 and
42 mmboe gross (2) based on in-place volumes of 100 to 215 mmboe
and condensate/gas ratio of 110-130 bbl/mmscf.
-- High pressure, high temperature find next to Equinor operated
producing Tune and giant Oseberg fields with oil and gas export
facilities.
-- Drill stem test in sidetrack well flowed approximately 2.1
mmscfd of gas and 280 bpd of condensate (approximately 650 boepd in
aggregate) through a 10/64-inch choke.
-- Focus on identifying optimal well design for delivering
economic flow rates, most likely by fracturing the well, to unlock
the discovery.
-- Awarded three new licences in the 2022 Norwegian Award in
Predefined Areas ('APA') Licensing Round:
-- Lotus (Longboat 30%) is located next to Kveikje and contains
an analogous injectite low risk prospect, which has the potential
to add significant value. The firm well is planned for 2024.
-- The Kveikje extension license (Longboat 10%) covers possible
extensions of the Kveikje discovery to the west and east.
-- Oswig South licence (Longboat 20%) contains the potential
southerly extension of Oswig. The prospect has already been
significantly de-risked by the Oswig discovery and has the
potential to double the size of the existing discovery.
-- A warded the Norwegian non-operator "Explorer of the Year
Award" by GEO365 for the exploration results including Kveikje and
Oswig, which are amongst the five largest discoveries made in
Norway in 2022
-- Entered Malaysia by successfully winning operatorship of a
Production Sharing Agreement for Block 2A (Longboat 36.75%) in the
Malaysian Bid Round 2022:
-- Exploration block offshore Sarawak in deep water covering an
area of more than 12,000 km(2) with material exploration
opportunities.
-- Low initial cost obligation and with three years until a
drill decision.
-- Malaysia entry significantly expands Longboat's opportunity
set.
Financial Summary
-- Cash reserves of GBP12.1 million as at 31 December 2022 (31
December 2021: GBP26.3 milion) with borrowings under the EFF of
GBP36.8 million (31 Dec 2021: GBPnil) and a tax rebate receivable
of GBP40.8 million (31 December 2021: GBP8.1 million) due in
November 2023.
-- Exploration Finance Facility increased to NOK800m
(approximately GBP67.5 million) available for 2023 and 2024.
-- Loss after taxation of GBP(15.5) million (31 December 2021:
GBP(4.7) million) which includes write down of four wells.
Outlook
-- Currently focused on monetisation and conversion of the value
created by the exploration success into reserves, production and
cash.
-- Velocette exploration well (Longboat 20%) expected to spud in
Q3 targeting a large fault block with expected Cretaceous gas
filled reservoir indicated by seismic amplitudes confined to
structure.
-- Acquisition and growth in 2P reserves and production remains a key objective.
-- The strategy remains unchanged to build Longboat into a
full-cycle E&P company with Norway remaining the core area.
Helge Hammer, Chief Executive Officer of Longboat Energy,
commented:
"In 2022, Longboat was one of the most active independent
exploration companies in Norway where we drilled five wells and
made two significant discoveries. Kveikje and Oswig are among the
largest discoveries made in Norway in 2022 and, going forward, we
are focussing on maturing the assets technically, unlocking the
commercial value of our discoveries, and growing reserves and
production.
"While Norway remains of prime importance, we are delighted to
have established a presence in Malaysia and in the coming year we
will seek to build cashflow generating E&P portfolios in both
Norway and Malaysia."
This announcement does not contain inside information
Footnotes:
1) The range represents 2C to 3C resource estimate range from
ERCE Competent Persons Report September 2022
2) Operator's estimate of the size of the discovery
Enquiries:
Longboat Energy via FTI
Helge Hammer, Chief Executive Officer
Jon Cooper, Chief Financial Officer
Stifel (Nomad) Tel: +44 20 7710 7600
Callum Stewart
Jason Grossman
Simon Mensley
Ashton Clanfield
FTI Consulting (PR adviser) Tel: +44 20 3727 1000
Ben Brewerton
Rosie Corbett
Catrin Trudgill longboatenergy@fticonsulting.com
Results
For the period to 31 December 2022, the Group's loss after
taxation was GBP15.5 million.
Dividends
It is the Board's policy that the Company should seek to
generate capital growth for its shareholders but may recommend
distributions at some future date when the investment portfolio
matures, and production revenues are established and when it
becomes commercially prudent to do so.
Statement of going concern
The Directors have completed the going concern assessment,
including considering cash flow forecasts up to the end of 2024,
sensitivities, and stress tests to assess whether the Group is a
going concern. Having undertaken careful enquiry, the Directors are
of the view the Group will need to access additional funds during
2023 in order to fund on-going operations and pursue growth
opportunities. It is anticipated these funds will be sourced
through asset disposals, farm downs, issuing new equity or
combination of these actions. If this is not the case then the
Group is forecast to have limited or no liquidity at the end of
2023, given continued drawing under the EFF during 2023. The
financial statements for the year to 31 December 2022 have been
prepared assuming the Group will continue as a going concern. In
support of this, the directors believe the liquid nature of the
Norwegian asset market combined with historical shareholder
support, adequate funds can be accessed if and when required.
However, the ability to access funds is not guaranteed at the date
of signing these financial statements. As a consequence, this
funding requirement represents a material uncertainty that may cast
significant doubt on the Group's ability to continue as a going
concern. The financial statements do not include any adjustments
that would result from the basis of preparation being
inappropriate.
Outlook
Our plan remains unchanged to build Longboat into a full-cycle
E&P company with Norway remaining the core focus where the
Company is now well established. In the period ahead, Longboat will
be focused on monetisation and conversion of the value created
within the exploration assets into reserves, production and cash.
The acquisition of production remains our objective, although the
difference between buyer and seller's expectations on commodity
prices continues to impact the ability to transact in Norway.
A consequence of the seemingly ever increasing fiscal
instability in the UK has made the Norwegian market even more
appealing and thereby tighter, and after a year of strong oil and
gas prices most companies are in good financial health with no need
to divest production. While our focus remains on Norway, we are
delighted to have established a presence in Malaysia and in the
coming year we will seek to build cashflow generating E&P
portfolios in both Norway and Malaysia.
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2022
Notes 2022 2021
GROUP GBP GBP
Administrative expenses (5,406,990) (4,282,920)
Share based charge (306,439) (255,787)
Depreciation (141,658) (30,057)
Exploration and evaluation impairments 9 (42,877,022) (6,399,134)
------------- -------------
Operating loss 6 (48,732,109) (10,967,898)
Finance income 5 150,869 11,412
Finance costs 8 (1,488,854) (484,527)
Net foreign exchange gain/(loss) 681,746 (151,369)
------------- -------------
Loss before taxation (49,388,348) (11,592,382)
Income tax credit 10 33,915,741 6,911,762
------------- -------------
Loss for the year (15,472,607) (4,680,620)
Other comprehensive (expense)/income
Currency translation (expense)/income (19,754) 580,447
Total items that may be reclassified
to profit or loss (19,754) 580,447
Total other comprehensive income for
the year (19,754) 580,447
Total comprehensive loss for the year (15,492,360) (4,100,173)
Loss per share 11 pence pence
Basic (27.30) (12.97)
Diluted (27.30) (12.97)
Statement of financial position
As at 31 December 2022
Notes 2022 2021
GROUP GBP GBP
Non-current assets
Exploration and evaluation assets 12 34,661,436 23,988,754
Property, plant and equipment 13 66,107 29,600
Trade and other receivables 15 98,368 -
Right of use asset 13 447,396 560,709
------------- ------------
35,273,307 24,579,063
Current assets
Cash and cash equivalents 12,059,561 26,282,067
Inventories 14 123,432 92,798
Trade and other receivables 15 934,918 1,136,081
Current tax recoverable 16 40,755,157 8,149,906
------------- ------------
53,873,068 35,660,852
------------- ------------
Total assets 89,146,375 60,239,915
------------- ------------
Current liabilities
Trade and other payables 17 5,225,497 4,772,167
Lease liabilities 18 122,612 96,172
Exploration Finance Facility bank borrowings 17 36,761,340 -
------------- ------------
42,109,449 4,868,339
------------- ------------
Net current assets 11,763,619 30,792,513
------------- ------------
Non-current liabilities
Leases liabilities 18 366,968 486,630
Deferred tax liabilities 19 25,736,898 18,766,424
------------- ------------
26,103,866 19,253,054
------------- ------------
Total liabilities 68,213,315 24,121,393
------------- ------------
Net assets 20,933,060 36,118,522
============= ============
Equity
Called up share capital 22 5,666,665 5,666,665
Share premium account 23 35,570,411 35,570,411
Other reserves 450,000 450,000
Share option reserve 24 660,449 353,550
Currency translation reserve 25 561,242 580,996
Retained earnings (21,975,707) (6,503,100)
------------- ------------
Total equity 20,933,060 36,118,522
============= ============
The financial statements were approved by the board of directors
and authorised for issue on 20 March 2023 and are signed on its
behalf by:
....................................
Helge Hammer
Chief Executive
Statement of changes in equity
As at 31 December 2022
Share Share Currency
Share Premium option translation Other Retained
Capital Account reserve reserve reserves earnings Total
GBP GBP GBP GBP GBP GBP GBP
GROUP
Balance at 1 January
2021 1,000,000 7,808,660 97,763 549 450,000 (1,822,480) 7,534,492
Year ended 31 December
2021
Loss for the year - - - - - (4,680,620) (4,680,620)
Other comprehensive
income - - - 580,447 - - 580,447
Issue of share capital 4,666,665 30,333,334 - - - - 34,999,999
Credit to equity for
equity settled
Share-based payments - - 255,787 - - - 255,787
Costs of share issue - (2,571,583) - - - - (2,571,583)
----------- ------------ ---------- ------------ ---------- ------------- -------------
Balance at 31 December
2021 5,666,665 35,570,411 353,550 580,996 450,000 (6,503,100) 36,118,522
----------- ------------ ---------- ------------ ---------- ------------- -------------
Year ended 31 December
2022
Loss for the year - - - - - (15,472,607) (15,472,607)
Other comprehensive
expense - - - (19,754) - - (19,754)
Credit to equity for
equity settled
share-based payments - - 306,899 - - - 306,899
Balance at 31 December
2022 5,666,665 35,570,411 660,449 561,242 450,000 (21,975,707) 20,933,060
=========== ============ ========== ============ ========== ============= =============
Consolidated statement
of cash flows
for the Year ended 31
December 2022 2022 2021
Notes GBP GBP GBP GBP
GROUP
Cash flow from operating
activities
Cash (absorbed by operations) 28 (3,562,988) (3,749,247)
Tax refunded/(paid) 1,076,525 1,429,635
------------- ------------
Net cash outflow from
operating
activities (2,486,463) (2,319,612)
Investing activities
Purchase of exploration
and evaluation
assets (54,420,426) (26,961,528)
Decrease in capital expenditure
related payables (657,027)
Tax refund relating to
investing activity 8,280,919 17,173,053
Purchase of property,
plant and
equipment (59,903) (25,769)
Interest received 150,869 11,412
------------- -------------
Net cash (used in)/generated
from
investing activities (47,125,022) (9,802,832)
Financing activities
Issue of ordinary shares - 32,428,416
Loan drawdowns 36,761,340 -
Interest paid (938,519) (484,527)
Lease liabilities (103,812)
Loan facility fees (344,583) (604,085)
------------- -------------
Net cash generated from/(used
in)
financing activities 35,374,426 31,339,804
Net increase/(decrease)
in cash and
cash equivalents (14,237,059) 19,217,360
Cash and cash equivalents
at beginning
of year 26,282,067 7,016,199
Foreign exchange 14,553 48,508
------------- ------------
Cash and cash equivalents
at end of year 12,059,561 26,282,067
============= ============
Relating to:
Bank balances and short
term deposits 12,059,561 26,282,067
============= ============
Notes to the financial statements
1. Accounting policies
Company information
Longboat Energy plc is a public quoted company, limited by
shares, incorporated in England and Wales. The registered office is
5th Floor One New Change, London, EC4M 9AF.
1.1. Accounting convention
The financial statements have been prepared in accordance with
UK adopted international accounting standards and with those parts
of the Companies Act 2006 applicable to companies reporting under
IFRS, except as otherwise stated.
The 2022 Annual Report was approved by the Board of Directors on
20 March 2023. The financial information in this statement is
audited but does not have the status of statutory accounts within
the meaning of Section 434 of the Companies Act 2006. The auditors
report was unqualified and did not contain statements under s498(2)
or (3) Companies Act 2006, but it did contain a material
uncertainty in relation to going concern.
The financial statements of Longboat Energy plc and the Company
have been prepared in accordance with UK adopted international
accounting standards in conformity with the requirements of the
Companies Act 2006.
The financial statements have been prepared on the historical
cost basis.
1.2. Foreign currencies
The functional currency for the UK entity is sterling and the
functional currency for Longboat Energy Norge AS is Norwegian
kroner.
Transactions in foreign currencies during the year are recorded
in the functional currency at the rate of exchange ruling at the
date of the transaction. Monetary assets and liabilities are
translated at the rate ruling on the Balance Sheet date and any
gains and losses on translation are reflected in the Income
Statement.
The assets and liabilities of foreign operations are translated
into sterling at the rate of exchange ruling at the Balance Sheet
date. Income and expenses are translated at the rate of exchange
ruling at the date of the transaction. The resulting exchange
differences on assets and liabilities of such foreign operations
are taken directly to a separate component of equity. On disposal
of a foreign entity, the deferred cumulative amount recognised in
equity relating to that particular foreign operation is recognised
in the Income Statement.
1.3. Joint arrangements
Judgement is required to determine when the Group has joint
control over an arrangement, which requires an assessment of the
relevant activities and when the decisions in relation to those
activities require unanimous consent. The Group has determined that
the relevant activities for its joint arrangements are those
relating to the operating and capital decisions of the arrangement,
including the approval of the annual capital and operating
expenditure work programme and budget for the joint arrangement,
and the approval of chosen service providers for any major capital
expenditure as required by the joint operating agreements
applicable to the entity's joint arrangements. The considerations
made in determining joint control are similar to those necessary to
determine control over subsidiaries, as set out in Note 2.
Judgement is also required to classify a joint arrangement.
Classifying the arrangement requires the Group to assess their
rights and obligations arising from the arrangement. Specifically,
the Group considers:
-- the structure of the joint arrangement; whether it is
structured through a separate vehicle;
-- when the arrangement is structured through a separate
vehicle, the Group also considers the rights and obligations
arising therefrom.
1.3 Joint arrangements (continued)
-- the legal form of the separate vehicle; the terms of the
contractual arrangement, or other facts and circumstances,
considered on a case by case basis.
This assessment often requires significant judgement. A
different conclusion about both joint control and whether the
arrangement is a joint operation or a joint venture, may materially
impact the accounting.
A Joint Operation is a type of joint arrangement whereby the
parties that have joint control of the arrangement have rights to
the assets and obligations for the liabilities, relating to the
arrangements.
In relation to its interests in joint operations, the Group
recognises its:
-- assets, including its share of any assets held jointly;
-- liabilities, including its share of any liabilities incurred jointly;
-- revenue from the sale of its share of the output arising from the joint operation;
-- share of the revenue from the sale of the output by the joint operation; and
-- expenses, including its share of any expenses incurred jointly.
1.4. Going concern
The Directors have completed the going concern assessment,
including considering cash flow forecasts up to the end of 2024,
sensitivities, and stress tests to assess whether the Group is a
going concern. Having undertaken careful enquiry, the Directors are
of the view the Group will need to access additional funds during
2023 in order to fund on-going operations and pursue growth
opportunities. It is anticipated these funds will be sourced
through asset disposals, farm downs, issuing new equity or
combination of these actions. If this is not the case then the
Group is forecast to have limited or no liquidity at the end of
2023, given continued drawing under the EFF during 2023. The
financial statements for the year to 31 December 2022 have been
prepared assuming the Group will continue as a going concern. In
support of this, the directors believe the liquid nature of the
Norwegian asset market combined with historical shareholder
support, adequate funds can be accessed if and when required.
However, the ability to access funds is not guaranteed at the date
of signing these financial statements. As a consequence, this
funding requirement represents a material uncertainty that may cast
significant doubt on the Group's ability to continue as a going
concern. The financial statements do not include any adjustments
that would result from the basis of preparation being
inappropriate.
1.5. Medium term sustainability
In the medium term, new acquisitions and developments resulting
from exploration success will require further equity capital and
new debt facilities. In any of these circumstances the Company will
require additional financing from the equity markets and the bank
or credit markets. Availability of such financing is subject not
only to market conditions but also a continued willingness of
investors to finance oil and gas companies.
1.6. Oil and Gas Assets
Capitalisation
Pre-acquisition costs on oil and gas assets are recognised in
the Income Statement when incurred. Costs incurred after rights to
explore have been obtained, such as geological and geophysical
surveys, drilling and commercial appraisal costs and other directly
attributable costs of exploration and appraisal including technical
and administrative costs are capitalised as intangible exploration
and evaluation ("E&E") assets. The assessment of what
constitutes an individual E&E asset is based on technical
criteria but essentially either a single licence area or contiguous
licence areas with consistent geological features are designated as
individual E&E assets.
E&E costs are not amortised prior to the conclusion of
appraisal activities. Once active exploration is completed the
asset is assessed for impairment. If commercial reserves are
discovered then the carrying value of the E&E asset is
reclassified as a development and production ("D&P") asset,
following development sanction, but only after the carrying value
is assessed for impairment and where appropriate the carrying value
adjusted. If commercial reserves are not discovered the E&E
asset is written off to the Income Statement.
Oil and gas assets include rights in respect of unproved
properties. Property, plant and equipment, including expenditure on
major inspections, and intangible assets are initially recognised
in the Balance Sheet at cost where it is
1.6___ Oil and Gas Assets (continued)
probable that they will generate future economic benefits. This
includes capitalisation of decommissioning and restoration costs
associated with provisions for asset retirement.
Property, plant and equipment and intangible assets are
subsequently carried at cost less accumulated depreciation,
depletion and amortisation (including any impairment). Gains and
losses on disposals are determined by comparing the proceeds with
the carrying amounts of assets sold and are recognised in income,
within interest and other income.
1.7. License and Property Acquisition Costs
Exploration licence costs are capitalised in intangible assets.
Licence and property acquisition costs are reviewed at each
reporting date to confirm that there is no indication that the
carrying amount exceeds the recoverable amount. This review
includes confirming that exploration drilling is still under way or
firmly planned, or that work is under way to determine that the
discovery is economically viable. If no future activity is planned
or the licence has been relinquished or has expired, the carrying
value of the licence and property acquisition costs are written off
through the statement of profit or loss and other comprehensive
income. Upon recognition of proved reserves and internal approval
for development, the relevant expenditure is transferred to oil and
gas properties.
1.8. Development Costs
Expenditure on the construction, installation or completion of
infrastructure facilities such as platforms, pipelines and the
drilling of development wells is capitalised within property, plant
and equipment.
1.9. Property, plant and equipment
Property, plant and equipment are initially measured at cost and
subsequently measured at cost or valuation, net of depreciation and
any impairment losses.
Depreciation is recognised so as to write off the cost or
valuation of assets less their residual values over their useful
lives on the following bases:
Fixtures and fittings 20% straight line
Computers 33.33% straight line
The gain or loss arising on the disposal of an asset is
determined as the difference between the sale proceeds and the
carrying value of the asset, and is recognised in the income
statement.
1.10. Non-current investments
A subsidiary is an entity controlled by the company. Control is
the power to govern the financial and operating policies of the
entity so as to obtain benefits from its activities.
1.11. Impairment of tangible and intangible assets
At each reporting end date, the company reviews the carrying
amounts of its tangible assets to determine whether there is any
indication that those assets have suffered an impairment loss. If
any such indication exists, the recoverable amount of the asset is
estimated in order to determine the extent of the impairment loss
(if any). Where it is not possible to estimate the recoverable
amount of an individual asset, the company estimates the
recoverable amount of the cash-generating unit to which the asset
belongs. Any evidence on the performance of the assets received
following the end of the period, which could not have been
established during the current period will be recognised in a
subsequent period rather than in the current period.
1.11. Impairment of tangible and intangible assets (continued)
Recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset for
which the estimates of future cash flows have not been
adjusted.
If the recoverable amount of an asset (or cash-generating unit)
is estimated to be less than the carrying amount, then the carrying
amount of the asset (or cash-generating unit) is reduced to its
recoverable amount. An impairment loss is recognised immediately in
profit or loss, unless the relevant asset is carried at a revalued
amount, in which case the impairment loss is treated as a
revaluation decrease.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (or cash-generating unit) is increased to the
revised estimate of the recoverable amount, capped such that the
increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised
for the asset (or cash-generating unit) in prior years. A reversal
of an impairment loss is recognised immediately in profit or loss,
unless the relevant asset is carried at a revalued amount, in which
case the reversal of the impairment loss is treated as a
revaluation increase.
Impairment of intangible assets is assessed when facts and
circumstances suggest that the carrying amount of an exploration
and evaluation asset may exceed its recoverable amount. The facts
and circumstances used are in accordance with those dictated by
IFRS 6 and if any of those circumstances are present than and
impairment test is performed in accordance with IAS 36 and any loss
recognised. An exploratory well in progress at period end which is
determined to be unsuccessful subsequent to the balance sheet date
based on substantive evidence obtained during the drilling process
in that subsequent period is treated as a non-adjusting subsequent
event.
1.12. Inventories
Materials and supplies inventories are valued at the lower of
cost or net realisable value. The cost of materials is the purchase
cost, determined on a first-in, first-out basis.
1.13. Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at
call with banks, and other short-term liquid investments with
original maturities of three months or less.
1.14. Financial assets
Financial assets are recognised in the company's statement of
financial position when the company becomes party to the
contractual provisions of the instrument. Financial assets are
classified into specified categories, depending on the nature and
purpose of the financial assets.
At initial recognition, financial assets classified as fair
value through profit and loss are measured at fair value and any
transaction costs are recognised in profit or loss. Financial
assets not classified as fair value through profit and loss are
initially measured at fair value plus transaction costs.
Financial assets at fair value through profit or loss
When any of the above-mentioned conditions for classification of
financial assets is not met, a financial asset is classified as
measured at fair value through profit or loss. Financial assets
measured at fair value through profit or loss are recognised
initially at fair value and any transaction costs are recognised in
profit or loss when incurred. A gain or loss on a financial asset
measured at fair value through profit or loss is recognised in
profit or loss and is included within finance income or finance
costs in the statement of income for the reporting period in which
it arises.
1.14. Financial assets (continued)
Financial assets held at amortised cost
Financial instruments are classified as financial assets
measured at amortised cost where the objective is to hold these
assets in order to collect contractual cash flows, and the
contractual cash flows are solely payments of principal and
interest. They arise principally from the provision of goods and
services to customers (eg trade receivables). They are initially
recognised at fair value plus transaction costs directly
attributable to their acquisition or issue, and are subsequently
carried at amortised cost using the effective interest rate method,
less provision for impairment where necessary.
Financial assets at fair value through other comprehensive
income
The Company has made an irrevocable election to recognise
changes in fair value of investments in equity instruments through
other comprehensive income, not through profit or loss. A gain or
loss from fair value changes will be shown in other comprehensive
income and will not be reclassified subsequently to profit or loss.
Equity instruments measured at fair value through other
comprehensive income are recognised initially at fair value plus
transaction cost directly attributable to the asset. After initial
recognition, each asset is measured at fair value, with changes in
fair value included in other comprehensive income. Accumulated
gains or losses recognised through other comprehensive income are
directly transferred to retained earnings when an equity instrument
is derecognised or its fair value substantially decreased.
Dividends are recognised as finance income in profit or loss.
Impairment of financial assets
Financial assets, other than those measured at fair value
through profit or loss, are assessed for impairment at each
reporting end date.
For trade receivables and intercompany receivables, the Company
applies a simplified approach in calculating ECLs. Therefore, the
Company does not track changes in credit risk, but instead
recognises a loss allowance based on lifetime ECLs at each
reporting date. Due to the nature of the balances the Company has
determined that a provisions matrix is not appropriate and applies
a scenario based approach to estimate lifetime ECL.
Derecognition of financial assets
Financial assets are derecognised only 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 to another entity.
1.15. Financial liabilities
The Company recognises financial debt when the Company becomes a
party to the contractual provisions of the instruments. Financial
liabilities are classified as either 'financial liabilities at fair
value through profit or loss' or 'other financial liabilities'.
Financial liabilities at fair value through profit or loss
Financial liabilities are classified as measured at fair value
through profit or loss when the financial liability is held for
trading. A financial liability is classified as held for trading
if:
-- it has been incurred principally for the purpose of selling
or repurchasing it in the near term, or
-- on initial recognition it is part of a portfolio of
identified financial instruments that the Company manages together
and has a recent actual pattern of short-term profit taking, or
-- it is a derivative that is not a financial guarantee contract
or a designated and effective hedging instrument.
Financial liabilities at fair value through profit or loss are
stated at fair value with any gains or losses arising on
remeasurement recognised in profit or loss.
1.15. Financial liabilities (continued)
Other financial liabilities
Other financial liabilities, including borrowings, trade
payables and other short-term monetary liabilities, are initially
measured at fair value net of transaction costs directly
attributable to the issuance of the financial liability. They are
subsequently measured at amortised cost using the effective
interest method. For the purposes of each financial liability,
interest expense includes initial transaction costs and any premium
payable on redemption, as well as any interest or coupon payable
while the liability is outstanding.
Derecognition of financial liabilities
Financial liabilities are derecognised when, and only when, the
Company's obligations are discharged, cancelled, or they
expire.
1.16. Taxation
The tax expense represents the sum of the tax currently payable
and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from net profit as reported in the
income statement because it excludes items of income or expense
that are taxable or deductible in other years and it further
excludes items that are never taxable or deductible. The Company's
liability for current tax is calculated using tax rates that have
been enacted or substantively enacted by the reporting end
date.
The Group benefits from tax legislation in Norway which allows
tax to be reclaimed on specific exploration activity. This allows
the Group to recognise a tax receivable.
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in
the computation of taxable profit and is accounted for using the
balance sheet liability method. Deferred tax liabilities are
recognised for all taxable temporary differences and deferred tax
assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible
temporary differences can be utilised. Such assets and liabilities
are not recognised if the temporary difference arises from goodwill
or from the initial recognition of other assets and liabilities in
a transaction that affects neither the tax profit nor the
accounting profit.
The carrying amount of deferred tax assets is reviewed at each
reporting end date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow
all or part of the asset to be recovered. Deferred tax is
calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised.
Deferred tax is charged or credited in the income statement, except
when it relates to items charged or credited directly to equity, in
which case the deferred tax is also dealt with in equity. Deferred
tax assets and liabilities are offset when the Company has a
legally enforceable right to offset current tax assets and
liabilities and the deferred tax assets and liabilities relate to
taxes levied by the same tax authority.
1.17. Employee benefits
The costs of short-term employee benefits are recognised as a
liability and an expense, unless those costs are required to be
recognised as part of the cost of inventories or non-current
assets.
The cost of any unused holiday entitlement is recognised in the
period in which the employee's services are received.
Termination benefits are recognised immediately as an expense
when the Company is demonstrably committed to terminate the
employment of an employee or to provide termination benefits.
1.18. Retirement benefits
Payments to defined contribution retirement benefit schemes are
charged as an expense as they fall due.
1.19. Leases
The right-of-use asset is initially measured at cost, which
comprises the initial amount of the lease liability adjusted for
any lease payments made at or before the commencement date plus any
initial direct costs and an estimate of the cost of obligations to
dismantle, remove, refurbish or restore the underlying asset and
the site on which it is located, less any lease incentives
received.
The right-of-use asset is subsequently depreciated using the
straight-line method from the commencement date to the earlier of
the end of the useful life of the right-of-use asset or the end of
the lease term. The estimated useful lives of right-of-use assets
are determined on the same basis as those of other property, plant
and equipment. The right-of-use asset is periodically reduced by
impairment losses, if any, and adjusted for certain remeasurements
of the lease liability.
The lease liability is initially measured at the present value
of the lease payments that are unpaid at the commencement date,
discounted using the interest rate implicit in the lease or, if
that rate cannot be readily determined, the Company's incremental
borrowing rate. Lease payments included in the measurement of the
lease liability comprise fixed payments, variable lease payments
that depend on an index or a rate, amounts expected to be payable
under a residual value guarantee, and the cost of any options that
the Company is reasonably certain to exercise, such as the exercise
price under a purchase option, lease payments in an optional
renewal period, or penalties for early termination of a lease.
The lease liability is measured at amortised cost using the
effective interest method. It is remeasured when there is a change
in: future lease payments arising from a change in an index or
rate; the Company's estimate of the amount expected to be payable
under a residual value guarantee; or the Company's assessment of
whether it will exercise a purchase, extension or termination
option. When the lease liability is remeasured in this way, a
corresponding adjustment is made to the carrying amount of the
right-of-use asset or is recorded in profit or loss if the carrying
amount of the right-of-use asset has been reduced to zero.
All leases are accounted for by recognising a right-of-use asset
and a lease liability except for:
-- Leases of low value assets; and
-- Leases with a duration of 12 months or less.
1.20. Reserves
Share capital
Share capital represents the nominal value of shares issued less
the nominal value of shares repurchased and cancelled.
Share premium
This reserve represents the difference between the issue price
and the nominal value of shares at the date of issue, net of
related issue costs and share premium cancelled.
Share based payment reserve
This reserve represents the potential liability for outstanding
equity settled share options.
Retained earnings
Net revenue profits and losses of the Group which are revenue in
nature are dealt with in this reserve.
Currency translation reserve
This reserve represents foreign exchange differences on the
revaluation of the foreign subsidiary.
1.20. Reserves (continued)
Other reserves
Other reserves relate to the nominal value of share capital
repurchased and cancelled.Share based payments
Employees (including senior executives) of the Group receive
remuneration in the form of share-based payment transactions which
are equity settled. The cost of equity-settled transactions with
employees is measured by reference to the fair value at the date on
which they are granted. The fair value is determined by an external
valuer using an appropriate pricing model.
The cost of equity-settled transactions is recognised, together
with a corresponding increase in equity, over the period in which
the performance and/or service conditions are fulfilled, ending on
the date on which the relevant employees become fully entitled to
the award (the "vesting date"). The cumulative expense recognised
for equity-settled transactions at each reporting date until the
vesting date reflects the extent to which the vesting period has
expired and the Group's best estimate of the number of equity
instruments that will ultimately vest. The Income Statement charge
or credit for a period represents the movement in cumulative
expense recognised as at the beginning and end of that period.
The key areas of estimation regarding share based payments are:
share price volatility; and estimated lapse rates.
No adjustments are made in respect of market conditions not
being met, neither the number of instruments nor the grant-date
fair value is adjusted if the outcome of the market condition
differs from the initial estimate.
Where the terms of an equity-settled award are modified, the
minimum expense recognised is the expense as if the terms had not
been modified. An additional expense is recognised for any
modification, which increases the total fair value of the share
based payment arrangement, or is otherwise beneficial to the
employee as measured at the date of modification.
Where an equity-settled award is cancelled, it is treated as if
it had vested on the date of cancellation, and any expense not yet
recognised for the award is recognised immediately. However, if a
new award is substituted for the cancelled award, and designated as
a replacement award on the date that it is granted, the cancelled
and new awards are treated as if they were a modification of the
original award, as described in the previous paragraph.
The dilutive effect of outstanding options is reflected as
additional share dilution in the computation of earnings per
share.
2. Adoption of new and revised standards and changes in accounting policies
In the current year, the following new and revised Standards and
Interpretations have been adopted by the company. None of these new
and revised Standards and Interpretations had an effect on the
current period or a prior period but may have an effect on future
periods:
Effective from:
IFRS 3 (Amendments) Reference to the conceptual 1 January 2022
framework
IAS 16 (Amendments) Property, plant and equipment 1 January 2022
- proceeds before intended
use
IAS 37 (Amendments) Onerous contracts - cost of 1 January 2022
fulfilling a contract
Annual Improvements Amendments to IFRS 1 (subsidiary 1 January 2022
2018-2020 cycle as a first-time adopter),
IFRS 9 (fees in the '10 percent'
test for derecognition of
financial liabilities), IFRS
16 (lease incentives), IAS
41 (taxation in the fair value
measurements)
Standards which are in issue but not yet effective
At the date of authorisation of these financial statements, the
following Standards and Interpretations, which have not yet been
applied in these financial statements, were in issue but not yet
effective:
Effective from:
IFRS 17 Insurance contracts 1 January 2023
IAS 1 and IFRS Practice Disclosure of accounting 1 January 2023
Statement 2 policies
IAS 8 (Amendments) Definition of accounting 1 January 2023
estimates
IAS 12 (Amendments) Deferred tax related to assets 1 January 2023
and liabilities arising from
a single transaction
IFRS 16 (Amendment) Liability in a Sale and Leaseback 1 January 2024
IAS 1 (Amendments) Classification of liabilities 1 January 2024
as current or non-current
- deferral of effective date
IAS 1 (Amendments) Non-current Liabilities with 1 January 2024
covenants
The Directors do not expect that the adoption of the Standards
listed above will have a material impact on the financial
statements of the Company aside from additional disclosures.
The Company plans to adopt the above standards when from the
effective dates noted in the table above.
3. Critical accounting estimates and judgements
In the application of the Group's accounting policies, the
directors are required to make judgements, estimates and
assumptions about the carrying amount of assets and liabilities
that are not readily apparent from other sources. The estimates and
associated assumptions are based on historical experience and other
factors that are considered to be relevant. Actual results may
differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised, if the revision
affects only that period, or in the period of the revision and
future periods if the revision affects both current and future
periods.
The estimates and assumptions which have a significant risk of
causing a material adjustment to the carrying amount of assets and
liabilities are outlined below.
Exploration and evaluation assets (note 6 and 12)
Judgement is required to determine whether impairment indicators
exist in respect of the Group's exploration assets recognised in
the statement of financial position. The Group has to take into
consideration whether the assets have suffered any impairment,
taking into consideration the results of the drilling to date, and
the likelihood of reserves being found. The Group relies upon
information from third parties to take these decisions, and can be
subject to change, if future information becomes available. As at
31 December 2022 the Group determined that impairment of GBP42.9
million was required in respect of the exploration licences
detailed in note 6 and 12.
Post the period end the Egyptian Vulture licence was
relinquished, with the partners being unable to agree on the way
forward following extensive technical work. As the information that
led to the decision to relinquish was established post year end,
this is a non-adjusting post balance sheet event and is disclosed
in the post balance sheet event note 27. The balance of GBP11.4
million held in Intangibles at 31 December 2022 relating to
Egyptian Vulture will be written off in 2023.
Share-based payments (note 24)
Estimation is required in determining inputs to the share-based
payment calculations, as detailed in note 24.
The fair value of the options were determined by an external
valuation provider using an industry accepted pricing model. For
the July and September 2020 awards, the vest date calculation
required judgment to determine the point at which the Group and
recipients had a shared mutual understanding of the terms of the
awards. The Board consider that IPO Admission Document provided
such a shared mutual understanding given the detailed disclosure of
the terms of the scheme. Accordingly, the estimated fair value of
the awards has been spread over the vesting period which commenced
at IPO. For the awards issued during 2021 and 2022, the vesting
period was seen to commence on date of issue.
Cost Allocation
In 2021 the issue of new shares needs to be treated in
accordance with IAS 32. According to IAS 32, the costs of issuing
new shares and a stock market listing should be accounted for as
follows:
-- Incremental costs that are directly attributable to issuing
new shares should be deducted from equity, share premium, (net of
any income tax benefit) - IAS 32.37; and
-- Costs that relate to the stock market listing or are
otherwise not incremental and directly attributable to issuing new
shares, should be recorded as an expense in the statement of profit
or loss and other comprehensive income.
3. Critical accounting estimates and judgements (continued)
In 2021 the directors exercised judgement in allocation of the
costs that relate to both share issuance and listing. These were
allocated between those functions on a rational and consistent
basis. In the absence of a more specific basis for apportionment,
an allocation of common costs based on the proportion of new shares
issued to the total number of (new and existing) shares listed is
an acceptable approach. The total costs that were deducted from
share premium in 2021 were GBP2.57 million. These are all directly
attributable to the issue with the remainder of the costs (GBP0.45
million) being expensed in 2021 as they were related but not
directly attributable. These are accounted for through
administrative expenses in the 2021 Statement of Profit or Loss and
Other Comprehensive Income.
4. Employees
GROUP
The average monthly number of persons (including directors)
employed by the group and company during the year was:
2022 2021
Number Number
Executive Directors 3 3
Non-executive Directors 5 4
Staff 10 4
------- -------
Total 18 11
======= =======
Their aggregate remuneration comprised:
2022 2021
GBP GBP
Wages and salaries 2,689,361 1,703,062
Social security costs 448,417 245,771
Pension costs 245,776 133,047
Foreign currency gains/(losses) 31,767 (33,844)
Share based payment charge 306,439 255,737
---------- ----------
3,721,760 2,303,773
========== ==========
Foreign currency gains arise on remuneration due to one of the
executive director's salaries being declared in GBP and paid in
NOK.
The remuneration of the highest paid director is shown
below.
Taxable Annual
Salary Benefits Bonus(1) Pension Total
Helge Hammer 294,643 1,749 55,580 23,553 375,525
(1) 2021 performance bonus was not paid in 2021 but was paid in
2022 as it was conditional upon resolution of uncertainty around
EFF facility following the tax changes in Norway
5. Finance income
GROUP 2022 2021
GBP GBP
Interest income
Bank deposits 150,869 11,412
======== =======
Total interest income for financial assets that are not held at
fair value through profit or loss is GBP150,869 (2021:
GBP11,412).
6. Operating loss
GROUP 2022 2021
GBP GBP
Operating loss for the year is stated after
charging/(crediting):
Exchange (gain)/loss (703,935) 151,369
Fees payable to the company's auditors for
the audit of the parent
company and consolidated financial statements 65,000 20,190
Fees payable to the company's auditors for
the audit of the subsidiary 18,304 16,000
Other assurance services 23,000 126,000
Depreciation of property, plant and equipment 141,658 30,057
Costs associated with share issue - 451,000
Share-based payments 306,439 255,787
Executive director's remuneration 831,772 799,860
Non-executive director remuneration 349,580 262,938
Wages and salaries 1,539,776 640,264
Pensions and payroll taxes 694,193 344,924
7. Auditor's remuneration
2022 2021
GROUP GBP GBP
Fees payable to the company's auditor and
associates:
For audit services
Audit of the parent company and consolidated
financial statements 65,000 20,190
Audit of subsidiary financial statements 18,304 16,000
======= =======
During the year the auditor provided no non-audit services in
relation to their work as Reporting Accountant. In 2021 the
auditors provided non-audit services as Reporting Accountant on the
Re-Admission to AIM (2021: GBP110,000). The auditor provided
non-audit services in relation to interim review of GBP23,000
(2021: GBP16,000)
8. Finance costs
2022 2021
GROUP GBP GBP
Interest on bank overdrafts and loans 938,519 160,701
Commitment fee 344,296 224,978
Amortised loan fees 206,039 98,848
---------- --------
1,488,854 484,527
========== ========
In 2021 the Group entered into a rolling exploration funding
facility with 1 SR-Bank ASA and ING Bank N.V. in Norway to allow
funding for exploration activities to take place. The loan interest
charged on drawings under the facility is a margin of 2.50% p.a.
plus NIBOR. For the undrawn loan amount, a commitment fee equal to
40% of the margin is charged.
On 9 January 2023 a new facility agreement was signed, see note
18 for further details.
9. Exploration and evaluation impairments
2022 2021
GROUP GBP GBP
Amounts written off on exploration activity (42,877,022) (6,399,134)
============= ============
During the year, on completion of committed exploration
activity, the Directors have evaluated the potential future
cashflows from each licence. If drilling was completed, no
commercial reserves discovered and no further prospectivity
identified, then the license was deemed to be fully impaired. For
licenses where further appraisal would be required to confirm
possible further prospectivity, a judgement has been made, based on
operator/partnership interest in further appraisal, and on the
likely outcome of possible appraisal/development activity, to
assess whether the license should be written off. On conclusion of
this assessment the Directors have concluded it is appropriate to
write off the value of the wells and associated licence costs for
PL901 Rodhette; PL1060 Ginny/Hermine; PL1049 Cambozola, and PL1017
Copernicus.
Further information in respect of subsequent events in relation
to the carrying value of Egyptian Vulture can be found in note 27
and 12.
10. Income tax (credit)/expense
2022 2021
GROUP GBP GBP
Current tax (credit)
Foreign tax on losses for the current period (41,029,957) (25,971,588)
============= =============
Deferred tax
Origination and reversal of temporary differences 7,114,216 19,059,826
============= =============
Total tax (credit) (33,915,741) (6,911,762)
============= =============
The charge for the year can be reconciled to the loss per the
income statement as follows:
2022 2021
GBP GBP
Loss before taxation (49,388,347) (11,592,382)
============= =============
Expect tax credit based on a corporation tax
rate of 19.00%
(2021: 19.00%) (9,383,786) (2,202,553)
Effect of expenses not deductible in determining
taxable profit 2,577,668 581,294
Effect of overseas tax rates 6,443,339 1,353,298
Deferred tax not recognised 363,064 442,003
Foreign taxes and reliefs (33,915,741) (6,911,762)
Remeasurement of deferred tax for changes
in tax rates - (172,264)
Fixed asset differences (285) (1,778)
------------- -------------
Taxation credit for the year (33,915,741) (6,911,762)
============= =============
Unused tax losses in the UK on which no deferred tax asset has
been recognised as at 31 December 2022 was GBP4,783,533 (2021:
GBP2,871,071) and the potential tax benefit was GBP1,195,884 (2021:
GBP717,768, updated to GBP832,820 to reflect the effect of a change
to the tax rate). Deferred tax assets, including those arising from
temporary differences, are recognised only when it is considered
more likely than not that they will be recovered, which is
dependent on the generation of future assessable income of a nature
and of an amount sufficient to enable the benefits to be utilised.
The current tax (rebate) of GBP40.8 million (NOK 483.4 million)
represents what will be paid out during 2023 according to Norwegian
Tax Legislation. The deferred tax charge represents mainly the tax
portion on capitalised intangibles being deductible for tax
purposes.
11. Earnings per share
2022 2021
GROUP GBP GBP
Number of shares
Weighted average number of ordinary shares
for basic earnings per
share 56,666,665 36,082,191
------------- ------------
Earnings
Earnings for basic and diluted earnings per
share being net loss
attributable to equity shareholders of the
Company for continued
operations (15,472,606) (4,680,620)
============= ============
Basic and diluted earnings per share (expressed
in pence)
From continuing operations (27.30) (12.97)
============= ============
Basic earnings per share is calculated by dividing the earnings
attributable to ordinary shareholders by the weighted average
number of shares outstanding during the period.
Diluted earnings per share is calculated using the weighted
average number of shares adjusted to assume the conversion of all
dilutive potential ordinary shares. 2,510,216 (2021: 2,281,667) of
share options and awards are not included because they are
anti-dilutive.
12. Exploration and evaluation assets
2022 2021
GROUP GBP GBP
Cost
At 1 January 23,988,754 -
Additions - purchased 53,588,635 29,716,850
Foreign currency adjustments (38,932) 671,038
Exploration write-off (42,877,021) (6,399,134)
------------- ------------
At 31 December 34,661,436 23,988,754
------------- ------------
Carrying amount
At 31 December 34,661,436 23,988,754
============= ============
During the year, the Group acquired working interests in two
exploration wells on the Norwegian Continental Shelf, 20% in PL1100
("Oswig") and a 40% in PL1016 ("Velocette"), which completed on 1
July 2022.
On 11 January 2023, the Group were awarded 3 licenses under the
Norwegian APA.
Details of licence write-offs in the year can be found in Note
9.
Post the period end the Egyptian Vulture licence was
relinquished with the partners being unable to agree on the way
forward following extensive technical work. As the information that
led to the decision to relinquish was established post year end,
this is a non-adjusting post balance sheet event and is disclosed
in the post balance sheet event note 27. The balance of GBP11.4
million held in Intangibles at 31 December 2022 relating to
Egyptian Vulture will be written off in 2023.
13. Property, plant and equipment
Right of Fixtures
use and Computers Total
assets fittings
GROUP GBP GBP GBP GBP
Cost
At 1 January 2021 - - 14,605 14,605
Additions 580,044 3,340 37,869 621,253
Disposal - - (15,322) (15,322)
Foreign currency adjustments - - (119) (119)
--------- ---------- ------------ ----------
At 31 December 2021 580,044 3,340 37,033 620,417
Additions - 42,570 17,333 59,903
Foreign currency adjustments 3,516 21 55 3,592
--------- ---------- ------------ ----------
At 31 December 2022 583,560 45,931 54,421 683,912
--------- ---------- ------------ ----------
Accumulated depreciations
and
impairment
At 1 January 2021 - - 2,807 2,807
Charge for the year 20,015 167 9,875 30,057
Eliminated on disposal - - (2,050) (2,050)
Foreign currency adjustments (680) - (26) (706)
At 31 December 2021 19,335 167 10,606 30,108
Charge for the year 117,099 7,772 16,787 141,658
Foreign currency adjustments (270) (343) (744) (1,357)
--------- ---------- ------------ ----------
At 31 December 2022 136,164 7,596 26,649 170,409
--------- ---------- ------------ ----------
Carrying amounts
At 31 December 2022 447,396 38,335 27,772 513,503
========= ========== ============ ==========
At 31 December 2021 560,709 3,173 26,427 590,309
========= ========== ============ ==========
14. Inventories
2022 2021
GROUP GBP GBP
Materials and supplies 123,432 92,798
======== =======
Closing inventories are equal to their net realisable value.
15. Trade and other receivables
2022 2021
GROUP GBP GBP
Non-current
Prepayments 98,368 -
Current
Trade receivables 14,073 22,662
Taxes recoverable 182,160 81,737
Other receivables 23,144 40,462
Prepayments 715,541 991,220
---------- ----------
934,918 1,136,081
---------- ----------
1,033,286 1,136,081
========== ==========
16. Current tax recoverable
2022 2021
GBP GBP
GROUP
Current tax receivables 40,755,157 8,149,906
=========== ==========
17. Trade and other payables and current financial liabilities
2022 2021
GROUP GBP GBP
Trade payables 2,840,806 580,084
Accruals 1,373,032 2,753,202
Social security and other taxation 302,900 239,922
Other payables 708,760 1,198,959
----------- ----------
Trade and other payables 5,225,497 4,772,167
Exploration Financing Facility 36,761,340 -
----------- ----------
Short term bank borrowing 36,761,340 -
=========== ==========
The directors consider that the carrying amount of trade and
other payables approximates to their fair value.
17. Trade and other payables and current financial liabilities (continued)
Exploration Financing Facility (EFF)
During 2022 Longboat Energy Norge AS had access to the
Exploration Financing Facility, with an aggregate commitment of NOK
600 million (approximately GBP50.6 million). On 9 January 2023 an
extension to the facility agreement was signed, with aggregate
commitment of NOK 800 million (approximately GBP67.5 million) and a
margin of 3.5% over NIBOR, drawdowns allowable until December 2024,
repayment of final drawdowns due by November 2025.
Drawdowns can be made under the facility up to a balance equal
to approximately 68% of the total exploration and G&A spend for
the period. On receipt of the 71.8% tax refund on exploration
activity and G&A costs, received in November following the year
of expenditure, the related drawdowns must be repaid in full.
18. Lease liabilities
GROUP
The Group has lease contracts for buildings used in its
operations. The Group has a lease for its Stavanger office which
was signed in September 2021. The Group's obligations under its
leases are secured by the lessor's title to the leased assets.
Set out below are the carrying amounts of right of use assets
recognised and the movements during the period:
2022 2021
GBP GBP
At 1 January 560,709 -
Additions - 585,706
Depreciation charge for the year (117,099) (20,015)
Foreign exchange 3,786 (4,982)
---------- ---------
At 31 December 447,396 560,709
========== =========
Set out below are the carrying value of lease liabilities and
the movements.
2022 2021
GBP GBP
At 1 January 582,802 -
Additions - 585,706
Interest 14,510 2,758
Payments made (103,812) -
Foreign exchange (3,920) (5,662)
---------- --------
At 31 December 489,580 582,802
========== ========
2022 2021
GBP GBP
Within one year 122,612 96,172
In two to five years 366,968 486,630
489,580 582,802
======== ========
18. Lease liabilities (continued)
GBP GBP
Maturity analysis
Within one year 134,971 111,799
In two to five years 382,419 514,273
--------- ---------
Total undiscounted liabilities 517,390 626,072
Future finance charges and other adjustments (27,810) (43,270)
--------- ---------
Lease liabilities in the financial statements 489,580 582,802
========= =========
Amounts recognised in profit or loss include GBP GBP
the following:
Depreciation expense of right of use assets 117,099 19,335
Foreign exchange on depreciation - 680
Interest expense for right of use liabilities (14,510) 2,758
========= =======
19. Deferred taxation
GROUP
The following are the deferred tax liabilities and assets
recognised and movements thereon during the current and prior
reporting period.
ACAs
GBP
Deferred tax balance at 1 January 2021 431
Deferred tax movements in prior year
Differences in tax basis for offset of tax
losses in Norway 19,059,825
Foreign exchange (293,401)
-----------
Deferred tax liability at 31 December 2021 18,766,424
Deferred tax movements in current year
Differences in tax basis for offset of tax
losses in Norway 7,114,216
Foreign exchange (143,742)
-----------
Deferred tax liability at 31 December 2022 25,736,898
===========
Deferred tax assets and liabilities are offset in the financial
statements only where the company has a legally enforceable right
to do so. The group has tax losses that arose within Longboat
Energy Norge AS that are available indefinitely for offsetting
against future taxable profits. These tax losses have not been
recognised as a deferred tax asset on the basis that there are yet
no future taxable profits available within the company which will
allow it to be offset. The value of the tax loss carry forward as
per 31 December 2022 is GBP3.7 million.
The Group has not recognised a deferred tax asset within
Longboat Energy plc, as there is no evidence to support their
recoverability in the near future.
20. Financial risk management
The Group is exposed to financial risks through its various
business activities. In particular, changes in interest rates and
exchange rates can have an effect on the capital and financial
situation of the Group. In addition, the Group is subject to credit
risks.
The Group has adopted internal guidelines, which concern risk
control processes and which regulate the use of financial
instruments and thus provide a clear separation of the roles
relating to operational financial activities, their implementation
and accounting, and the auditing of financial instruments. The
guidelines on which the Group's risk management processes are based
are designed to ensure that the risks are identified and analysed
across the Group. They also aim for a suitable limitation and
control of the risks involved, as well as their monitoring.
The Group controls and monitors these risks primarily through
its operational business and financing activities.
Credit Risks
The credit risk describes the risk from an economic loss that
arises because a contracting party fails to fulfil their
contractual payment obligations. The credit risk includes both the
immediate default risk and the risk of credit deterioration,
connected with the risk of the concentration of individual risks.
For the Group, credit and default risks are concentrated in the
financial institutions in which it places cash deposits.
The Group's policy is to place its cash with banks with an
appropriate credit rating in accordance with the Company's Treasury
Risk Management Policy.
Notwithstanding existing collateral, the amount of financial
assets indicates the maximum default risk in the event that
counterparties are unable to meet their contractual payment
obligations. The maximum credit default risk amounted to
GBP12,096,778 (2021: GBP26,345,191) at the balance sheet date, of
which GBP12,059,561 (2021: GBP26,282,067) was cash on deposit at
banks.
Liquidity Risks
Liquidity risk is defined as the risk that a company may not be
able to fulfil its financial obligations. The Group manages its
liquidity by maintaining cash and cash equivalents sufficient to
meet its expected cash requirements. The Group has highlighted a
material uncertainty around its liquidity in the audit report and
the going concern note.
At 31 December 2022, the Group had cash on deposit of
GBP12,059,561 (2021: GBP26,282,067).
Market Risks
Interest Rate Risks
Interest rate risks exist due to potential changes in market
interest rates and can lead to a change in the fair value of
fixed-interest bearing instruments, and to fluctuations in interest
payment for variable interest rate financial instruments.
The Group is exposed to Interest rate risks through the Groups
Exploration Facility in Norway. The table below shows the impact in
GBP on pre-tax profit and loss of a 10% increase/decrease in the
interest rates, holding all other variables constant.:
2022 2021
Interest rate increase/decrease by 10% 80,740 -
20. Financial risk management (continued)
The Group is exposed to interest rate risks on cash held on
deposit at banks. Interest income for the year to 31 December 2022
was GBP150,869 (2021: GBP11,412). These accounts are maintained for
liquidity rather than investment, and the interest rate risk on
deposits is not considered material to the Group.
Currency risks
The Group operates in the UK and Norway, incurs expenses in
sterling, United States dollars and Norwegian kroner ("NOK"), and
holds cash in sterling, US dollars and NOK. The Group incurs some
expenditure in foreign currency when the investment policy requires
services to be obtained overseas. The foreign exchange risk on
these costs is not considered material to the Group.
The Group's exposure to foreign currency risk at the end of the
reporting period is summarised below. All amounts are presented in
GBP equivalent.
2022 2021
Cash and cash equivalents 9,409,636 11,804,980
Trade and other receivables 41,309,057 1,104,580
Trade and other payables including borrowings (41,129,225) (4,693,250)
Lease liabilities (489,580) (582,803)
Net exposure 9,099,888 7,633,507
============= ============
Sensitivity analysis
As shown in the table above, the Company is exposed to changes
in exchange rates through its balances held in non-GBP. The table
below shows the impact in GBP on pre-tax profit and loss of a 10%
increase/decrease in the exchange rates, holding all other
variables constant.
2022 2021
Exchange rate increases by 10% 1,011,099 848,167
Exchange rate decrease by 10% (827,263) (693,955)
21. Retirement benefit schemes
2022 2021
GROUP GBP GBP
Defined contribution schemes
Charge to profit or loss in respect of defined
contribution schemes 245,613 133,047
======== ========
The Group does not operate any defined benefit contribution
schemes.
22. Share Capital
GROUP 2022 2021 2022 2021
Number Number GBP GBP
Ordinary share capital
Issued and fully paid
Ordinary of 10p each of
10p each 56,666,665 56,666,665 5,666,665 5,666,665
23. Share premium account
2022 2021
GBP GBP
At 1 January 35,570,411 7,808,660
Issues of new shares - 30,333,334
Costs of share issues - (2,571,583)
----------- ------------
At 31 December 35,570,411 35,570,411
=========== ============
24. Share option reserve
2022 2021
GBP GBP
At 1 January 353,550 97,763
Arising in the year 306,899 255,787
-------- --------
At 31 December 660,449 353,550
======== ========
During the year, Longboat Petroleum plc operated three share
incentive schemes: the Founder Incentive Plan (FIP), the Long-Term
Incentive Plan (LTIP) and the Co-investment plan (CIP). Details of
the schemes are summarised below:
Founder Incentive Plan
Under the FIP, the founders are eligible to receive 15% of the
growth in returns of the Company from its Admission to AIM in
November 2019 over a five year period. The awards are expressed as
a percentage of the total maximum potential award, being 10% of the
Company's issued share capital.
Should a hurdle of doubling of the Total Shareholder Return
("TSR") over the five-year period be met, the awards will be
converted into nil cost options over ordinary shares of 10p each in
the share capital Company. The hurdle is adjusted for any capital
raises that occur during the performance period, including the
share placing on 10 June 2021, and for any additional value to
accrue to the founders, those placing shares will need to increase
by the same hurdle but as adjusted for time to reflect the shorter
period between the date of the placing and the original measurement
dates in years three to five.
24. Share option reserve (continued)
For the purpose of determining the fair value of an award, the
following assumptions have been applied and a valuation calculation
run through the Monte Carlo Model:
Grant date - 3 July 2020 and 24 September 2020 GBP
Weighted average share price at grant date 0.78
TSR performance -
Risk free rate -0.08%
Dividend yield -
Volatility of Company share price 50.44%
The risk-free rate assumption has been set as the yield as at
the calculation date on zero coupon government bonds of a term
commensurate with the remaining performance period.
The historical 3 year volatility of the constituents of the FTSE
AIM Oil & Gas supersector, as of the date of grant, was used to
derive the volatility assumption.
The weighted average exercise price of outstanding options is
nil.
The weighted average remaining contractual life as at 31
December 2022 is 15 months.
Co-Investment Plan (CIP) awards
The awards granted under the CIP are nil cost options to acquire
Matching Shares being ordinary shares of 10p each in the share
capital of the Company. The awards are subject to a share price
performance condition, where the share price growth over the
vesting period must be greater than 30%. No options will vest if
this condition is not met.
For the purpose of determining the fair value of an award, the
following assumptions have been applied and a valuation calculation
run through the Monte Carlo Model:
Grant date 10 Feb 22 (Part A) 10 Feb 22 (Part B) 02 Jul 21
Performance period (years) 3 3 3
Share price at grant date GBP0.57 GBP0.57 GBP0.70
Exercise price GBP0.10 GBP0.10 GBP0.10
Risk free rate 1.35% 1.35% 15.00%
Dividend yield 0% 0% 0%
Volatility of Company share price 50% 50% 51.00%
Fair value per award GBP0.19 GBP0.24 GBP0.38
2022 2021 Weighted average fair
No. No. value (GBP per share)
Outstanding at beginning of the period 639,900 - GBP0.38
Granted during the period 154,605 639,900 GBP0.21
Forfeited during the period - - -
Exercised during the period - - -
Expired during the period - - -
Outstanding at the end of the period 794,505 639,900 GBP0.35
Exercisable at the end of the period - - -
The weighted average exercise price of outstanding options is
GBP0.10.
24. Share option reserve (continued)
The weighted average remaining contractual life as at 31
December 2022 is 15 months.
Long Term Incentive Plan
The awards issued under the LTIP are nil-cost options to acquire
ordinary shares in the Company, subject to a performance
condition.
For the purpose of determining whether the condition has been
met, the TSR of the Company is measured over the three year
performance period, commencing at the grant date. The return index
is averaged over the 30 dealing day period prior to the start of
the performance period and over the final 30 days of the
performance period.
The awards have been valued using the Monte Carlo model, which
calculates a fair value based on a large number of randomly
generated simulations of the Company's TSR.
Grant date 7 Jan 22 12 Aug 22 8 Nov 21 1 Oct 21 2 Jul 21 2 Jul 21 24 Sep 20
Weighted average share price at grant date GBP0.624 GBP0.43 GBP0.705 GBP0.78 GBP0.72 GBP0.72 GBP0.885
TSR performance - - - - - - -
Risk free rate 0.85% 1.96% n/a 0.60% 0.09% 0.15% -0.1%
Dividend yield 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Volatility of Company share price 50% 52% n/a 50.00% 51.00% 51.00% 58.00%
Weighted average fair value GBP0.27 GBP0.23 GBP0.33 GBP0.36 GBP0.27 GBP0.33 GBP0.33
The risk-free rate assumption has been set as the yield as at
the calculation date on zero-coupon government bonds of a term
commensurate with the remaining performance period.
The historical three year volatility of the constituents of the
FTSE AIM Oil & Gas supersector, as of the date of grant, was
used to derive the volatility assumption.
2022 2021
Outstanding at 1 January 1,316,500 40,000
Awarded during the year 244,100 1,375,100
Exercised during the year - -
Expired during the year - (98,600)
Outstanding at the 31 December 1,560,600 1,316,500
Exercisable at the 31 December - -
The weighted average exercise price of outstanding options is
GBP0.10.
The weighted average remaining contractual life as at 31
December 2021 is 18 months.
25. Currency translation reserve
2022 2021
GROUP GBP GBP
At the beginning of the year 580,996 549
Currency translation differences (19,754) 580,447
--------- ------------
At the end of the year 561,242 580,996
========= ============
The currency translation reserve relates to the movement in
translating operations denominated in currencies other than
sterling into the presentation currency.
26. Related party transactions
Remuneration of key management personnel
Members of the Board of Directors are deemed to be key
management personnel. Key management personnel compensation for the
financial period is the same as the Director remuneration set out
in the Corporate Governance Statement.
Other information
Directors' interests in the shares of the Company in the current
and prior period, including family interests, were as follows:
Ordinary shares
2022* 2021*
Helge Hammer 837,023 837,023
Jonathan Cooper 333,432 333,432
Graham Stewart 350,000 350,000
Jorunn Saetre 51,667 51,667
Nick Ingrassia 179,023 179,023
Julian Riddick (PDMR) 272,648 272,648
Hilde Salthe (PDMR) 11,805 11,805
*As at the date of publication of the Report and Accounts for
each respective year
Under IAS 24 section 4, all intragroup transactions which have
been eliminated on consolidation are exempt from being disclosed as
the Group has prepared consolidated financial statements.
The Group does not have one controlling party.
27. Subsequent Events
Post the period end the Egyptian Vulture licence was
relinquished with the partners being unable to agree on the way
forward following extensive technical work. As the information that
led to the decision to relinquish was established post year end,
this is a non-adjusting post balance sheet event. The balance of
GBP11.4 million held in Intangibles at 31 December 2022 relating to
Egyptian Vulture will be written off in 2023.
On 9 January 2023 an extension to the Exploration Finance
Facility (EFF) agreement was signed, with aggregate commitment of
NOK 800 million (approximately GBP67.5 million), drawdowns
allowable until December 2024, repayment of final drawdowns due by
November 2025.
The 11 January 2023 Longboat Energy announced the award of 3 new
licences under the Norwegian 2022 APA Licensing Round (Awards in
Predefined Areas): PL1182 S Lotus Block 35/10 (Company 30%);
PL1100C Oswig South Extension (Company 20%) and PL293 CS Kveikje
Discovery Extensions (Company 10%).
Under the Malaysian Bid Round ('MBR') 2022 Longboat, via its
subsidiary Longboat Energy (2A) Limited, has been awarded by
Petroliam Nasional Berhad ('PETRONAS') a Production Sharing
Contract ("PSC") for Block 2A, a large exploration block offshore
Sarawak. Longboat will become operator with a 36.75% interest in
the PSC alongside partners Petronas Carigali Sdn. Bhd (40%),
Petroleum Sarawak Exploration & Production Sdn. Bhd. (7.5%) and
Topaz Number One Limited (15.75%).
28. Cash absorbed by operations
2022 2021
GROUP GBP GBP
Loss for the year after tax before
other comprehensive income (15,472,606) (4,680,620)
Adjustments for
Unrealised Foreign Exchange 202,550 -
Taxation credited (33,915,741) (6,911,763)
Exploration write-off 42,877,022 6,399,134
Release of prepaid bank fees 206,039 103,517
Interest payable 1,283,102 481,769
Interest receivable (150,869) (11,412)
Depreciation 137,872 27,982
Lease interest 14,510 2,758
Equity settled share based payment
expense 306,439 255,736
Movements in working capital:
Increase in inventories (30,634) (92,798)
Decrease in trade and other receivables 71,520 104,906
Increase in trade and other payables 907,808 571,544
------------- ------------
Cash absorbed by operations (3,562,988) (3,749,247)
============= ============
29. Cash flows related to borrowing and debt
Current bank Finance
borrowings lease liabilities Total
At January 2022 - 582,802 582,802
Cash flows -
Cash payments on
lease - (103,812) (103,812)
Loan drawdown 36,761,340 - 36,761,340
Interest and fees
paid (1,283,102)
Non-cash adjustments -
Interest and fees
accrued 1,283,102 10,590 10,590
At 31 December 2022 36,761,340 489,580 37,250,920
=========================== ============= =================== ===========
Current Finance
bank borrowings lease liabilities Total
At January 2021 - - -
Cash flows -
Cash payments on
lease - -
Loan drawdown - - -
Interest and fees
paid (1,088,612) - (1,088,612)
Non-cash adjustments -
Finance lease entered
into - 580,044 580,044
Interest and fees
accrued 1,088,612 2,758 1,091,370
At 31 December 2021 - 582,802 582,802
======================== ================= =================== ============
Standard
Estimates of reserves and resources have been prepared in
accordance with the June 2018 Petroleum Resources Management System
("PRMS") as the standard for classification and reporting with an
effective date of 31 December 2020.
Review by Qualified Person
The technical information in this release has been reviewed by
Hilde Salthe, Managing Director Norge, who is a qualified person
for the purposes of the AIM Guidance Note for Mining, Oil and Gas
Companies. Ms Salthe is a petroleum geologist with more than 20
years' experience in the oil and gas industry. Ms Salthe has a
Masters Degree from Faculty of Applied Earth Sciences at the
Norwegian University of Science and Technology in Trondheim.
Glossary
"boe" Barrels of oil equivalent
"bpd" Barrels per day
"mmboe" Million barrels of oil equivalent
"mmscf" Million standard cubic feet
"mmscfd" Million standard cubic feet per day
"scf" Standard cubic feet
"stb" Stock tank barrels
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