TIDMORCA
RNS Number : 9757J
Orcadian Energy PLC
16 December 2022
16 December 2022
Orcadian Energy plc
("Orcadian Energy", "Orcadian" or the "Company")
Results for the Year ended 30 June 2022
Orcadian Energy (AIM:ORCA), the low-emissions North Sea oil and
gas development company, is pleased to announce its audited results
for the twelve months ended 30 June 2022.
Highlights since last Annual Report:
-- "Letter of no objection" received from North Sea Transition
Authority ("NSTA") in respect of Orcadian's proposed low emission
development concept for Pilot
-- Twelve month extensions to both the Second Term of our P2244
(Pilot) licence (after period end) and Phase A of P2320 (Blakeney)
agreed by NSTA, P2482 (Elke) licence continued into Phase B
-- Significant progress made in defining the sub-surface
opportunity at Pilot with the newly reprocessed TGS owned seismic
dataset noting a 10% uplift to the developed area oil-in-place
-- Multiple geological models built which provide further
confidence to simplify and optimise Pilot development plan
-- Innovative commercial arrangement with TGS to access over
2,000 sq km of newly reprocessed, and to be reprocessed, 3D seismic
- also enabling Orcadian to acquire new seismic over Elke and
Narwhal subject to the Pilot project achieving FDP approval.
-- Since end of the period under review, SLB (formerly
Schlumberger) selected as preferred well service provider with MoU
signed
-- Discussions continue with preferred FPSO provider - also
exploring alternative concepts which could significantly reduce
upfront capital requirements
-- Launch of the Carra farm-out process, in partnership with
Carrick Resources once the 33(rd) Round is closed
-- Plan to participate in the 33rd Seaward Licensing round.
Steve Brown, Orcadian's CEO, said:
"The last year has seen a seismic shift in sentiment surrounding
the oil and gas sector. Energy security is now rightly at the
forefront of the agenda. We believe the Pilot project has the
potential to significantly contribute to this for the UK, whilst
being a flagship project demonstrating how to reduce global
emissions and make a contribution to a secure transition to net
zero.
"We therefore believe the year ahead promises to be a
significant year for the Company as we look to progress Pilot and
deliver the value that we believe is inherent in the project. We
would like to thank all our shareholders for their continued
support and look forward to providing further updates in the coming
year."
Report and Accounts and Annual General Meeting
A copy of the annual report and accounts for the year ended 30
June 2022 is available on the Company's website (
https://orcadian.energy ) with effect from today. The Company will
be posting its annual report and accounts and notice of Annual
General Meeting ("AGM") to its shareholders on 21 December 2022. A
further announcement will be made at that time confirming the
details of the AGM.
For further information on the Company please visit the
Company's website: https://orcadian.energy
Contact:
Orcadian Energy plc + 44 20 7920 3150
Steve Brown, CEO
Alan Hume, CFO
WH Ireland (Nomad and Joint Broker) +44 20 7220 1666
Katy Mitchell / Andrew de Andrade (Nomad)
Harry Ansell / Fraser Marshall (Corporate
Broking)
Shore Capital (Joint Broker) +44 20 7408 4090
Toby Gibbs (Corporate Advisory)
Tavistock (PR) + 44 20 7920 3150
Nick Elwes / Simon Hudson orcadian@tavistock.co.uk
Charlesbye (PR) + 44 7403 050525
Lee Cain / Lucia Hodgson
About Orcadian Energy
Orcadian is a North Sea focused, low emissions, oil and gas
development company . In planning its Pilot development, Orcadian
has selected wind power to transform oil production into a cleaner
and greener process. The Pilot project is moving towards approval
and will be amongst the lowest carbon emitting oil production
facilities in the world, despite being a viscous crude. Orcadian
may be a small operator, but it is also nimble, and the Directors
believe it has grasped opportunities that have eluded some of the
much bigger companies. As we strike a balance between Net Zero and
a sustainable energy supply, Orcadian intends to play its part to
minimise the cost of Net Zero and to deliver reliable organic
energy.
Orcadian Energy (CNS) Ltd ("CNS"), Orcadian's operating
subsidiary, was founded in 2014 and is the sole licensee of P2244,
which contains 78.8 MMbbl of 2P Reserves in the Pilot discovery,
and of P2320 and P2482, which contain a further 77.8 MMbbl of 2C
Contingent Resources in the Elke, Narwhal and Blakeney discoveries
(as audited by Sproule, see the CPR in the Company's Admission
Document for more details). Within these licences there are also
191 MMbbl of unrisked Prospective Resources. These licences are in
blocks 21/27, 21/28, 28/2 and 28/3, and lie 150 kms due East of
Aberdeen. The Company also has a 50% working interest in P2516,
which contains the Fynn discoveries. P2516 is administered by the
Parkmead Group and covers blocks 14/20g and 15/16g, which lie
midway between the Piper and Claymore fields, 180 kms due East of
Wick.
Pilot, which is the largest oilfield in Orcadian's portfolio,
was discovered by Fina in 1989 and has been well appraised. In
total five wells and two sidetracks were drilled on Pilot,
including a relatively short horizontal well which produced over
1,800 bbls/day on test. Orcadian's proposed low emissions, field
development plan for Pilot is based upon a Floating Production
Storage and Offloading vessel (FPSO), with over thirty wells to be
drilled by a Jack-up rig through a pair of well head platforms and
provision of power from a floating wind turbine.
Emissions per barrel produced are expected to be about a tenth
of the 2021 North Sea average, and less than half of the lowest
emitting oil facility currently operating on the UKCS. On a global
basis this places the Pilot field emissions at the low end of the
lowest 5% of global oil production.
Chairman and CEO's Statement
The year ended 30 June 2022 has been remarkable for the shift in
sentiment towards the oil and gas sector. A fortnight into our
financial year on 15 July 2021, we listed the Company amidst
growing concern about the future of the North Sea oil and gas
sector as the UK approached COP26. Our assessment is that the
nation's focus is now energy security and to deliver that, the
country will need as much oil and gas as the UK continental shelf
can produce, so that we have a secure transition to a lower
emissions future.
Orcadian is here to do its part: we have conceived and detailed
a development plan for the Pilot oilfield which we believe can open
the door for the development of very significant volumes of already
discovered viscous oil; we continue to seek a development partner
that shares our vision and who has the financial and operational
capacity to deliver the Pilot project; we have supported the North
Sea Transition Authority's ("NSTA") electrification agenda and
detailed an off-grid approach to electrification; and we have
supported a wind farm developer with a "Letter of Intent" for Crown
Estate Scotland's Innovation and Targeted Oil and Gas wind farm
leasing round. We also intend to participate in the 33(rd) Seaward
Licensing round.
Of all these activities the most critical to deliver value to
shareholders is securing a development partner for the Pilot field.
This has been a tumultuous year with much uncertainty around the
UK's fiscal regime. We consider it has always been the case that
the UK government has adjusted upstream energy taxes in response to
market conditions, a tad quicker to raise rates than lower them,
but responsive nonetheless. We believe such volatility has induced
uncertainty and a degree of caution in making a commitment to spend
large sums of capital on new developments. However, we also believe
the structure of the Energy Profits Levy will massively encourage
investment in new production so with that support confirmed in the
Autumn Statement, we expect 2023 to be a better environment for our
continuing farm-out process.
During 2022 we have made significant progress in defining the
sub-surface opportunity. We have interpreted the newly reprocessed
TGS owned seismic dataset and noted a 10% uplift to the developed
area oil-in-place which could result in a similar uplift to proven,
probable and possible reserves on Pilot when we next update the
independent Competent Person's Report ("CPR"), expected to occur
during 2023. We have also built multiple geological models to
incorporate the range of heterogeneity we see as possible across
the Pilot field, and we have built new full-field reservoir models
which have been calibrated to the results of our polymer core flood
experimental results. These models have been tested with both
exciting upside, and difficult downside, possibilities for multiple
parameters and from that work we have derived a statistical range
of developed area recovery factors which is highly consistent with
the range of recovery factors adopted by Sproule in the CPR. This
convergence gives us great confidence in our latest range of
reserve estimates as they have been arrived at from two entirely
different routes: a stochastic reservoir simulation approach and by
comparison with analogue fields.
We now intend to use these models to simplify and optimise our
development plan. We firmly believe that polymer flooding is by far
the best approach to both maximise recovery and minimise emissions.
But as an example of how we might simplify the project, with the
benefit of our more rigorous modelling approach we have determined
that the economic benefit of incorporating low salinity water is
diminished by the ability of recycled polymer to contribute to our
target water viscosity. The operational simplicity, and capital
cost reduction, available by deleting the low salinity plant may
well outweigh the potential polymer cost savings.
Through the year we have conducted a number of market
engagements and we received an excellent proposal for a Floating
Production Storage and Offloading ("FPSO") redeployment candidate,
which would provide the perfect donor vessel to upgrade to become
the Pilot FPSO. However, we are conscious that the FPSO market is
tightening and in parallel with continuing discussions with our
preferred FPSO contractor, we intend to explore alternative
concepts which we believe could significantly reduce upfront
capital requirements.
As announced after the end of the period under review, we have
also selected SLB (formerly Schlumberger) as our preferred well
service contractor. SLB will provide subsurface petro-technical
expertise, production technology, well and completions engineering
resources to identify, design, and deploy the right subsurface,
surface and wellbore technologies for Pilot. This alliance with SLB
provides Orcadian with access to first class reservoir management
and well construction capabilities, to work alongside Petrofac, our
preferred well operator, and provide certainty to potential farm-in
partners that the supply chain can deliver on the technologies
required to make the best of Pilot.
In SLB, we believe we now have a global technology company
driving energy innovation committed to making the Pilot project a
success and we intend to work with SLB on project optimisation to
explore opportunities to reduce well cost, facilities cost and to
boost recovery as well as to minimise emissions.
We continue to project very low emissions from the Pilot
development: expected Scope 1 emissions from the Pilot development
are just 2.6 kgCO(2e) /bbl, a performance which would place the
Pilot development at the low end of the lowest 5% of global oil
production. We believe refreshing the UK's stock of oil producing
assets is critical to reducing the emissions associated with the
UK's consumption of oil and gas. Absent new, clean production we
are of the view that the UK will either have to keep old high
emissions platforms producing or import oil from overseas, both of
which will result in much higher emissions.
Our engagement with the North Sea Transition Authority has also
been highly productive, in November 2021 we received a "Letter of
No Objection" to our proposed development concept and we submitted
a draft Field Development Plan in June of 2022. We were delighted
that NSTA have agreed a twelve month extension to the Second Term
of our P2244 licence in November 2022 and a one year extension to
Phase A of P2320 in March 2022.
In August 2022, after the period under review, we also struck
what we consider to be a very innovative commercial arrangement
with TGS to access over 2,000 sq km of newly reprocessed, and to be
reprocessed, 3D seismic, this reprocessing work is ongoing and we
are targeting a launch of the Carra farm-out process, in
partnership with Carrick Resources, just as soon as the doors close
on the 33(rd) Round. This arrangement with TGS will also enable us
to acquire new seismic over Elke and Narwhal subject to the Pilot
project achieving FDP approval.
Financial Results
The financial results of the Group largely reflect the
investment in progressing the Pilot field and the costs of
completing the admission to AIM. The Group incurred a loss for the
year to 30 June 2022 of GBP1,586,727 (30 June 2021 - loss of
GBP296,338).
In the year to 30 June 2022 the loss mainly arose from salaries,
consulting and professional fees along with general administration
expenses, and expenses in connection to the transaction, costs
associated with the admission process including Advisory and
Consultancy Fees. These expenses have been met from the proceeds of
the issue of shares.
Cash used in operations totalled GBP1,323,836 (30 June 2021 -
GBP312,189). As at 30 June 2022, the Group had a cash balance of
GBP271,439 (30 June 2021 - GBP179,556). At the date of this
announcement, the Group's cash balance was GBP303,000.
Self-evidently, the Group will need to source further funding in
the near term. A further update will be provided in due course.
Oil Price Outlook
The oil price continues to be volatile, that is the one thing we
can all rely upon. At the time of publication Brent was trading
under $80/bbl, having reached almost $130/bbl just after Russia
invaded Ukraine. The ramifications of this agonizing war are still
unfolding and with the world teetering on the verge of a recession,
we consider that the immediate direction of the oil price is
unclear. However, stepping back from the recent gyrations, it is
clear that Anatole Kaletsky's assertion in 2015 that "$50/bbl
should be viewed as a probable ceiling for a much lower oil price
trading range, which may stretch all the way down toward $20" was
wrong. Of course he was right in that the oil price plumbed deeper
depths than we could have imagined at the height of COVID, but in
the long run we consider that $50/bbl has emerged as more of a
floor than a ceiling.
Where the ceiling lies is anyone's guess: gas prices have been
as high as GBP8.75/therm, which in energy equivalent terms is over
$600/boe. The lesson that we believe one can take from that is that
energy is essential and constraining the supply of energy is
economically dangerous. Indeed it is our contention that, to
achieve a secure transition to a low emissions world, governments
should focus on reducing demand for carbon dioxide emitting fuels
rather than trying to limit supply of new oil and gas. If supply is
somehow constrained then we believe the transition will be painful
indeed. If demand shrinks, prices will be low and the pain will be
confined to oil and gas producers. But it seems politically much
harder to exhort or compel reductions in demand, much easier to
berate oil companies for producing the energy that powers
civilisation. We remain convinced that between a somewhat hamstrung
US shale business and a more cohesive OPEC+ group the supply demand
balance will be maintained so that oil prices will be firm.
Notwithstanding the above, the oil price will be what the oil
price will be. Our focus is on keeping the overall cost of the
Pilot development as low as possible and thereby ensuring that
potential partners are keen to participate in the project.
UK Oil and Gas Sector
On 7 April 2022, the Government published the British Energy
Security Strategy which paved the way for the launch of the 33(rd)
Licensing Round on 7 October 2022. We believe the Government's
commitment to the oil and gas sector is now clear, energy security
is recognised as a vital national interest, and we expect good
support for progressing the key Pilot development project into
production.
At the same time the industry suffered a blow to its cash flow
in the form of the Energy Profits Levy. No one enjoys the prospect
of a higher tax rate, but we consider the EPL has been well
designed and we believe it will encourage producing oil and gas
companies to invest in new projects. We would call on the
government to be even-handed with non-producing companies and to
offer tax credits to these companies. The Norwegians adopted this
model in 2005 to encourage exploration, with great success. We
believe a similar approach could unleash a wave of new developments
on the UKCS.
Business Outlook
The key challenges for the Group remain our financial condition
and the financing of the Pilot project. The value for all
shareholders in achieving FDP approval on Pilot could be immense,
shareholders can remain assured that the Board will leave no stone
unturned in our quest for the right partners for Pilot.
Joseph Darby, Chairman, and Stephen Brown, CEO
15 December 2022
CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS
FOR THE YEARED 30 JUNE 2022
2022 2021
Note GBP GBP
Revenue - -
Administrative expenses 5 (1,694,576) (258,909)
Operating Loss (1,694,576) (258,909)
--------------- -----------
Finance costs 9 (41,869) (44,349)
Other income 7 466,667 3,000
Listing costs (316,949) (76,500)
Loss before tax (1,586,727) (376,758)
--------------- -----------
Taxation 10 - 80,420
Loss for the year (1,586,727) (296,338)
--------------- -----------
Other comprehensive income:
Items that will or may be
reclassified to profit or
loss:
Other comprehensive income - -
----------- -----------
Total comprehensive income (1,586,727) (296,338)
----------- -----------
Earnings per share (basic
and diluted) - pence 11 (2.51) (1.34)
All operations are continuing.
The notes on below form part of these financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2022
2022 2021
Note GBP GBP
Non-current assets
Property, plant and equipment 12 3,414 1,842
Intangible assets 13 3,303,400 1,814,615
3,306,814 1,816,457
----------- -----------
Current assets
Trade and other receivables 14 1,055,829 88,548
Cash and cash equivalents 15 271,439 179,556
1,327,268 268,104
----------- -----------
Total assets 4,634,082 2,084,561
----------- -----------
Non-current liabilities
Borrowings 17 (956,184) (762,686)
(956,184) (762,686)
----------- -----------
Current liabilities
Trade and other payables 18 (553,509) (328,601)
Borrowings 17 - (1,100,000)
(553,509) (1,428,601)
----------- -----------
Total liabilities (1,509,693) (2,191,287)
----------- -----------
Net assets / (liabilities) 3,124,389 (106,726)
----------- -----------
Equity
Ordinary share capital 19 63,755 52,202
Share premium reserve 19 3,890,089 -
Share warrants reserve 19 15,000 -
Shares to be issued 20 901,200 -
Other reserve 4 (38,848) (38,848)
Retained earnings (1,706,807) (120,080)
----------- -----------
Total equity 3,124,389 (106,726)
----------- -----------
The consolidated Financial Statements of Orcadian Energy PLC
were approved by the Board of Directors and authorised for issue on
15 December 2022.
Signed on behalf of the Board of Directors by:
Alan Hume
Director
The notes below form part of these financial statements.
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2022 2022 2021
Note GBP GBP
Non-current assets
Investment in subsidiary 16 3,968,844 52,202
---------
3,968,844 52,202
--------- ------
Current assets
Trade and other receivables 14 1,000,000 -
Cash and cash equivalents 15 - -
---------
- -
--------- ------
Total assets 4,968,844 52,202
--------- ------
Non-current liabilities
Borrowings 17 - -
---------
- -
--------- ------
Current liabilities
Trade and other payables 18 98,800 -
---------
- -
--------- ------
Total liabilities - -
--------- ------
Net assets 4,870,044 52,202
--------- ------
Equity
Ordinary share capital 19 63,755 52,202
Share premium reserve 19 3,890,089 -
Share warrants reserve 19 15,000 -
Shares to be issued 20 901,200 -
Retained earnings - -
--------- ------
Total equity 4,870,044 52,202
--------- ------
Orcadian Energy PLC, company number 13298968, has used the
exemption granted under s408 of the Companies Act 2006 that allows
for the non-disclosure of the Income Statement of the parent
company. The after-tax loss attributable to Orcadian Energy PLC for
the year to 30 June 2022 was GBPnil (2021: GBPnil) as all costs
within the group are borne by the subsidiary.
The Financial Statements were approved by the Board of Directors
and authorised for issue on 15 December 2022.
Signed on behalf of the Board of Directors by:
Alan Hume
Director
The notes below form part of these financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE PERIODED 30 JUNE 2022
Share warrants Other
reserve Shares reserve
Ordinary Share premium to be Retained
Share capital reserve issued earnings Total
Note GBP GBP GBP GBP GBP GBP GBP
Balance as at 1
July
2020 17,401 563,561 - - - (391,350) 189,612
Loss for the year
and total
comprehensive
income - - - - - (296,338) (296,338)
-------------- ------------- -------------- --------- -------- ----------- -----------
Bonus issue of
shares 19 34,801 (34,801) - - - - -
Issue of shares 19 52,202 - - - (52,202) - -
Transfer to other
reserve 4 (52,202) (528,760) - - 13,354 567,608 -
-------------- ------------- -------------- --------- -------- ----------- -----------
Balance as at 30
June 2021 52,202 - - - (38,848) (120,080) (106,726)
-------------- ------------- -------------- --------- -------- ----------- -----------
Loss for the year
and total
comprehensive
income - - - - - (1,586,727) (1,586,727)
-------------- ------------- -------------- --------- -------- ----------- -----------
Issue of shares 19 7,625 3,042,375 - - - - 3,050,000
Conversion of
loans 17 3,928 1,096,072 - 1,100,000
Shares to be
issued
- 30 June 2022
placing 20 - - - 901,200 - - 901,200
Issue of warrants 19 - (15,000) 15,000 - - - -
Share issue costs 19 - (233,358) - - - - (233,358)
-------------- ------------- -------------- --------- -------- ----------- -----------
Balance as at 30
June 2022 63,755 3,890,089 15,000 901,200 (38,848) (1,706,807) 3,124,389
-------------- ------------- -------------- --------- -------- ----------- -----------
Refer to note 19 for a description of the nature and purpose of
each reserve within equity.
The notes below form part of these financial statements.
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE PERIODED 30 JUNE 2022
Share Share Shares
Ordinary premium warrants to be Retained
Share capital reserve reserve issued earnings Total
Note GBP GBP GBP GBP GBP GBP
Balance as at Incorporation
29 March 2021 - - - - - -
Loss for the period and
total comprehensive income - - - - - -
-------------- --------- --------- --------- --------- ---------
Issue of shares upon acquisition
of subsidiary 19 52,202 - - - - 52,202
-------------- --------- --------- --------- --------- ---------
Balance as at 30 June 2021 52,202 - - - - 52,202
Loss for the year and total
comprehensive income - - - - - -
-------------- --------- --------- --------- --------- ---------
Issue of shares 19 7,625 3,042,375 - - - 3,050,000
Conversion of loans 17 3,928 1,096,072 - 1,100,000
Shares to be issued - 30
June 2022 placing 20 - - - 901,200 - 901,200
Issue of warrants 19 - (15,000) 15,000 - - -
Share issue costs 19 - (233,358) - - - (233,358)
-------------- --------- --------- --------- --------- ---------
Balance as at 30 June 2022 63,755 3,890,089 15,000 901,200 - 4,870,044
-------------- --------- --------- --------- --------- ---------
Refer to note 19 for a description of the nature and purpose of
each reserve within equity.
The notes below form part of these financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIODED 30 JUNE 2022
2022 2021
Note GBP GBP
Cash flows from operating activities
Loss before tax for the year (1,586,727) (376,758)
Adjustments for:
Depreciation 12 674 217
Unrealised foreign exchange loss
/ (gain) 5 151,629 (129,511)
Decrease / (increase) trade and other
receivables 14 32,720 (10,409)
(Decrease) / Increase in trade and
other payables 18 36,000 79,504
Finance costs in the year 9 41,869 44,349
----------- ---------
Cash generated from operations (1,323,836) (392,608)
----------- ---------
Income taxes received - 80,420
----------- ---------
Net cash flows from operating activities (1,323,836) (312,188)
----------- ---------
Investing activities
Purchases of property, plant and
equipment 14 (2,246) (1,952)
Purchases of exploration and evaluation
assets 13 (1,348,677) (530,818)
----------- ---------
Net cash used in investing activities (1,350,923) (532,770)
----------- ---------
Financing activities
Proceeds from issue of ordinary share
capital 19 3,000,000 -
Share issue costs paid 19 (233,358) -
Proceeds from issue of convertible
loan notes 17 - 1,100,000
Repayment of convertible loan notes 17 - (100,000)
Interest paid - (6,804)
Net cash provided by financing activities 2,766,642 993,196
----------- ---------
Net increase in cash and cash equivalents 91,883 148,238
Cash and cash equivalents at beginning
of period 15 179,556 31,318
----------- ---------
Cash and cash equivalents and end
of period 15 271,439 179,556
----------- ---------
Significant non-cash transactions in the year to 30 June
2022:
During the year GBP50,000 of third party supplier invoices were
settled through the issue of 125,000 Ordinary shares at 40 pence
each.
During the year convertible loans totalling GBP1,100,000 were
settled in full through the issue of 3,928,572 Ordinary shares
(Refer to note 17).
The notes below form part of these financial statements.
COMPANY STATEMENT OF CASH FLOWS
FOR THE PERIODED 30 JUNE 2022
2022 2021
Note GBP GBP
Cash flows from operating activities
Loss for the year - -
Adjustments for:
Depreciation 12 - -
Decrease in trade and other receivables 4 - -
Increase in trade and other payables 18 - -
Finance costs in the year - -
----------- ----
Cash generated from operations - -
----------- ----
Income taxes paid - -
----------- ----
Net cash flows from operating activities - -
----------- ----
Investing activities
Funds advanced to subsidiary 16 (2,776,642) -
Purchases of exploration and evaluation
assets 13 - -
----------- ----
Net cash used in investing activities (2,776,642) -
----------- ----
Financing activities
Proceeds from issue of ordinary share
capital 19 3,000,000 -
Share issue costs paid 19 (233,358) -
----------- ----
Net cash provided by financing activities 2,776,642 -
----------- ----
Net increase in cash and cash equivalents - -
Cash and cash equivalents at beginning
of period 15 - -
----------- ----
Cash and cash equivalents and end
of period 15 - -
----------- ----
No cash was held by the Company during the year to 30 June
2022
The notes below form part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
1. General Information
Orcadian Energy PLC (the "Company") is a public limited company
which is domiciled and incorporated in England and Wales under the
Companies Act 2006 with the registered number 13298968. The
Company's registered office is 6(th) floor, 60 Gracechurch Street,
London, EC3V 0HR, and it ordinary shares are admitted to trading on
AIM, a market of the London Stock Exchange.
The principal activity of the Group is managing oil and gas
assets and the Group holds a 100% interest in, and is licence
administrator for, UKCS Seaward Licences P2244, which contains the
Pilot and Harbour heavy oil discoveries, P2320, which contains the
Blakeney, Feugh, Dandy & Crinan discoveries and P2482 which
contains the Elke and Narwhal discoveries. The Group also has a 50%
working interest in P2516, which contains the Fynn discoveries.
P2516 is administered by the Parkmead Group and covers blocks
14/20g and 15/16g, which lie midway between the Piper and Claymore
fields.
The financial statements presented for Group are for the year
ended 30 June 2022 and these have are shown alongside figures for
the year ended 30 June 2021 for comparative purposes.
2. Summary of significant accounting policies
The principal accounting principles applied in the preparation
of these financial statements are set out below. These principles
have been consistently applied to all years presented, unless
otherwise stated.
2.1. Basis of preparation
The financial statements have been prepared on a going concern
basis using the historical cost convention and in accordance with
the UK-Adopted International Accounting Standards, and in
accordance with the provisions of the Companies Act 2006.
The financial statements have been prepared under the historical
cost convention unless otherwise stated.
2.2. Consolidation and acquisitions
The financial statements consolidate the financial information
of the Group and companies controlled by the Group (its
subsidiaries) at each reporting date. Control is achieved where the
Company has the power to govern the financial and operating
policies of an investee entity, has the rights to variable returns
from its involvement with the investee and has the ability to use
its power to affect its returns. The results of subsidiaries
acquired or sold are included in the financial information from the
effective date of acquisition or up to the effective date of
disposal, as appropriate. Where necessary, adjustments are made to
the results of acquired subsidiaries to bring their accounting
policies into line with those used by the Group. All intra-Group
transactions, balances, income and expenses are eliminated on
consolidation. The financial statements of all Group companies are
adjusted, where necessary, to ensure the use of consistent
accounting policies.
The Company's shares were admitted to trading on AIM, a market
operated by the London Stock Exchange, on 15 July 2021. In
connection with the admission to AIM, in the financial year to 30
June 2021, the Group undertook a Group reorganisation of its
corporate structure which resulted in the Company becoming the
ultimate holding company of the Group. Prior to the reorganisation
there was no ultimate holding company as Orcadian Energy (CNS) Ltd
("CNS") was a standalone entity. The transaction was accounted for
as a capital reorganisation rather than a reverse acquisition since
it did not meet the definition of a business combination under IFRS
3. In a capital reorganisation, the consolidated financial
statements of the Group reflect the predecessor carrying amounts of
CNS with comparative information of CNS presented for all periods
since no substantive economic changes have occurred. The difference
arising on acquisition has been accounted for with the recognition
of a merger reserve on the balance sheet following the
reorganisation of the share capital of the Group at the point of
completion of the transaction.
2.3. Going concern
The financial statements have been prepared on a going concern
basis. The Group is not yet revenue generating and an operating
loss has been reported. The Group has historically been reliant on
raising finance, both debt and equity, to enable it to meet its
obligations as they fall due.
The Directors have reviewed a detailed forecast based on the
funds expected to be raised and forecasted expenditure, including
all required spend to meet licence requirements. This forecast has
been stress tested by management in reaching their going concern
conclusion. Having made due and careful enquiry, the Directors
acknowledge that funds will need to be raised within the next 12
months to enable the Group to meets its obligations as they fall
due, however, the Directors are confident that the required funds
will successfully be raised through the equity market to funds its
operations over the next 12 months.
The Directors, therefore, have made an informed judgement, at
the time of approving financial statements, that the Group is a
going concern but they acknowledge that the dependence on raising
further funds during the next 12 months represents a material
uncertainty.
2.4. Changes in accounting policies
2.4.1. New standards, amendments to standards and interpretations
i) New and amended standards adopted by the Group
The International Accounting Standards Board (IASB) issued
various amendments and revisions to International Financial
Reporting Standards and IFRIC interpretations. The amendments and
revisions were applicable for the period ended 30 June 2022 but did
not result in any material changes to the financial statements of
the Group.
Of the other IFRS and IFRIC amendments, none are expected to
have a material effect on the future Group Financial
Statements.
ii) New and amended standards not yet adopted by the Group
The Directors do not believe that the implementation of new
standards, amended standards and interpretations issued but not yet
effective and have not been early adopted early will have a
material impact once implemented in future periods
2.5. Foreign currency
2.5.1. Functional and presentation currency
Items in the company's financial statements are measured in the
currency of the primary economic environment in which the entity
operates (functional currency). he functional currency of the
Company is Pounds sterling (GBP).
Monetary amounts in these financial statements are rounded to
the nearest GBP.
2.5.2.Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions or valuation where items are re-measured. Foreign
exchange gains and losses resulting from the settlement of such
transactions and from the translation at year-end exchange rates of
monetary assets and liabilities denominated in foreign currencies
are recognised in the income statement, except when deferred in
other comprehensive income as qualifying cash flow hedges and
qualifying net investment hedges. Foreign exchange gains and losses
that relate to borrowings and cash and cash equivalents are
presented in the income statement within 'finance income or costs.'
All other foreign exchange gains and losses are presented in the
income statement within 'Other (losses)/gains.'
Translation differences on non-monetary financial assets and
liabilities such as equities held at fair value through profit or
loss are recognised in profit or loss as part of the fair value
gain or loss. Translation differences on non-monetary financial
assets measure at fair value are included in other comprehensive
income.
2.6. Other income
Grants are accounted for under the accruals model. Grants of a
revenue nature are recognised in the Consolidated Statement of
Comprehensive Income in the same period as the related expenditure,
in accordance with the attached conditions.
2.7. Taxation
Tax currently payable is based on taxable profit for the period.
Taxable profit differs from profit as reported in the income
statement because it excludes items of income and expense that are
taxable or deductible in other years and it further excludes items
that are never taxable or deductible. The Group's liability for
current tax is calculated using tax rates that have been enacted or
substantively enacted by the balance sheet date.
Deferred tax is recognised on differences between the carrying
amounts of assets and liabilities in the financial statements and
the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the balance sheet liability
method. Deferred tax liabilities are generally recognised for all
taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits
will be available against which deductible temporary differences
can be utilised. Such assets and liabilities are not recognised if
the temporary difference arises from initial recognition of
goodwill or from the initial recognition (other than in a business
combination) of other assets and liabilities in a transaction that
affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary
differences arising on investments in subsidiaries and associates,
and interests in joint ventures, except where the Group is able to
control the reversal of the temporary difference and it is probable
that the temporary difference will not reverse in the foreseeable
future. The carrying amount of deferred tax assets is reviewed at
each balance sheet date and 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 realised.
Deferred tax is charged or credited to profit or loss, 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 there is a legally
enforceable right to set off current tax assets against current tax
liabilities and when they relate to income taxes levied by the same
taxation authority and the Group intends to settle its current tax
assets and liabilities on a net basis.
R&D tax credits are recognised through the Consolidated
Statement of Comprehensive Income upon receipt of funds.
2.8. Leases
The Group assesses whether a contract is or contains a lease at
the inception of the contract. The Group recognises a right-of-use
asset and a corresponding lease liability with respect to all lease
arrangements in which it is the lessee, except for short-term
leases (defined as leases with a lease term of 12 months or less)
and leases of low value assets (such as tablets and personal
computers, small items of office furniture and telephones). For
these leases, the Group recognises the lease payments as an
administrative expense on a straight-line basis over the term of
the lease unless another systematic basis is more representative of
the time pattern in which economic benefits from the leased assets
are consumed.
2.9. Intangible assets
Exploration and evaluation expenditures (E&E)
The Group applies the successful efforts method of accounting
for oil and gas assets, having regard to the requirements of IFRS 6
'Exploration for and Evaluation of Mineral Resources'. Costs
incurred prior to obtaining the legal rights to explore an area are
expensed immediately to the Statement of Comprehensive Income.
All licence acquisitions, exploration and evaluation costs are
capitalised, a share of administration costs is capitalised insofar
as they relate to exploration, evaluation and development
activities. These costs are written off unless commercial reserves
have been established or the determination process has not been
completed and there are no indications of impairment. If a project
is deemed commercial all of the attributable costs are transferred
into Property, Plant and Equipment. These costs are then
depreciated from the commencement of production on a unit of
production basis.
2.10. Impairment of non-financial assets
The Group assesses at each reporting date whether there is an
indication that an asset may be impaired. This includes
consideration of the IFRS 6 impairment indicators for any
intangible exploration and evaluation assets capitalised as
intangible costs. If any such indication exists, or when annual
impairment testing for an asset is required, the Group makes an
estimate of the asset's recoverable amount.
An asset's recoverable amount is the higher of its fair value
less costs to sell and its value in use. This is determined for an
individual asset, unless the asset does not generate cash inflows
that are largely independent of those from other assets or Groups
of assets, and the asset's value in use cannot be estimated to be
close to its fair value. In such cases, the asset is tested for
impairment as part of the cash-generating unit to which it belongs.
When the carrying amount of an asset or cash-generating unit
exceeds its recoverable amount, it is considered impaired and is
written down to its recoverable amount.
In assessing value in use, 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. Impairment losses relating to
continuing operations are recognised in those expense categories
consistent with the function of the impaired asset, unless the
asset is carried at revalued amount (in which case the impairment
loss is treated as a revaluation decrease). An assessment is also
made at each reporting date as to whether there is any indication
that previously recognised impairment losses may no longer exist or
may have decreased. If such indication exists, the recoverable
amount is estimated.
A previously recognised impairment loss is reversed only if
there has been a change in the estimates used to determine the
asset's recoverable amount since the last impairment loss was
recognised. If that is the case, the carrying amount of the asset
is increased to its recoverable amount. That increased amount
cannot exceed the carrying amount that would have been determined,
net of depreciation, had no impairment loss been recognised for the
asset in prior years. Such reversal is recognised in the Statement
of Comprehensive Income unless the asset is carried at revalued
amount, in which case the reversal is treated as a revaluation
increase. After such a reversal, the depreciation charge is
adjusted in future periods to allocate the asset's revised carrying
amount, less any residual value, on a systematic basis over its
remaining useful life.
2.11. Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated
depreciation and any accumulated impairment losses. Depreciation is
provided on all property, plant and equipment to write off the cost
less estimated residual value of each asset over its expected
useful economic life on a straight-line basis at the following
annual rates:
-- Property, plant and equipment - 3 years straight line.
All assets are subject to annual impairment reviews.
2.12. Financial Instruments
2.12.1 Initial recognition
A financial asset or financial liability is recognised in the
statement of financial position of the Group when it arises or when
the Group becomes part of the contractual terms of the financial
instrument.
2.12.2 Classification
Financial assets at amortised cost
The Group measures financial assets at amortised cost if both of
the following conditions are met:
(1) the asset is held within a business model whose objective is
to collect contractual cash flows; and
(2) the contractual terms of the financial asset generating cash
flows at specified dates only pertain to capital and interest
payments on the balance of the initial capital.
Financial assets which are measured at amortised cost, are
measured using the Effective Interest Rate Method (EIR) and are
subject to impairment. Gains and losses are recognised in profit or
loss when the asset is derecognised, modified or impaired.
There were no financial assets measured at fair value as at 30
June 2022, or 30 June 2021.
Financial liabilities at amortised cost
Financial liabilities measured at amortised cost using the
effective interest rate method include current borrowings and trade
and other payables that are short term in nature. Financial
liabilities are derecognised if the Group's obligations specified
in the contract expire or are discharged or cancelled.
Amortised cost is calculated by taking into account any discount
or premium on acquisition and fees or costs that are an integral
part of the effective interest rate ("EIR"). The EIR amortisation
is included as finance costs in profit or loss. Trade payables
other payables are non-interest bearing and are stated at amortised
cost using the effective interest method.
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss
include financial liabilities held for trading and financial
liabilities designated upon initial recognition as at fair value
through profit or loss. Financial liabilities are classified as
held for trading if they are incurred for the purpose of
repurchasing in the near term. Gains or losses on liabilities held
for trading are recognised in the statement of profit or loss and
other comprehensive income.
2.12.3. Derecognition
A financial asset is derecognised when:
(1) the rights to receive cash flows from the asset have
expired, or
(2) the Group has transferred its rights to receive cash flows
from the asset or has undertaken the commitment to fully pay the
cash flows received without significant delay to a third party
under an arrangement and has either (a) transferred substantially
all the risks and the assets of the asset or (b) has neither
transferred nor held substantially all the risks and estimates of
the asset but has transferred the control of the asset.
2.12.4 Impairment
The Group recognises a provision for impairment for expected
credit losses regarding all financial assets. Expected credit
losses are based on the balance between all the payable contractual
cash flows and all discounted cash flows that the Group expects to
receive. Regarding trade receivables, the Group applies the IFRS 9
simplified approach in order to calculate expected credit losses.
Therefore, at every reporting date, provision for losses regarding
a financial instrument is measured at an amount equal to the
expected credit losses over its lifetime without monitoring changes
in credit risk. To measure expected credit losses, trade
receivables and contract assets have been Grouped based on shared
risk characteristics.
2.13. Trade and other receivables
Trade and other receivables are initially recognised at fair
value when related amounts are invoiced then carried at this amount
less any allowances for doubtful debts or provision made for
impairment of these receivables.
2.14. Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand and
are subject to an insignificant risk of changes in value.
2.15. Share capital
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new shares or options are
shown in equity as a deduction, net of tax, from the proceeds.
2.16. Share premium
Share premium account represents the excess of the issue price
over the par value on shares issued. Incremental costs directly
attributable to the issue of new ordinary shares or options are
shown in equity as a deduction, net of tax, from the proceeds.
2.17. Shares to be issued
Shares to be issued qualifies as equity as it satisfies the fix
rule under IAS 32, whereby subscription agreements for Ordinary
shares ("the Obligation") represents a contract that will be
settled by the Company delivering a fixed number of its Ordinary
shares in exchange for a fixed amount of cash. When the Obligation
arises the net value of share subscriptions to be received is
recognised as an equity reserve, net of costs, with a corresponding
receivable being recognised as an asset, and costs recorded as an
accrued expense. Upon issue of the Ordinary shares, the Shares to
be issued reserve is transferred to Share capital and Share
premium. The receivable is discharged upon receipt of cash
subscriptions from shareholders, and the accrued expense discharged
upon payment to third party suppliers.
2.18. Trade payables
These financial liabilities are all non-interest bearing and are
initially recognised at the fair value of the consideration
payable.
2.19. Convertible loan notes and borrowings
Convertible loan notes classified as financial liabilities and
borrowings are recognised initially at fair value, net of
transaction costs incurred. After initial recognition, loans are
measured at the amortised cost using the effective interest rate
method. Any difference between the proceeds (net of transaction
costs) and the redemption value is recognised in the income
statement over the period of the borrowings using the effective
interest rate method.
2.20. Finance income and finance costs
Finance income comprises interest income on bank funds. Interest
income is recognised as it accrues in profit or loss, using the
effective interest method. Finance costs comprise interest expense
on borrowings. Borrowing costs are recognised in profit or loss in
the year in which they are incurred.
2.21. Earnings per share
Basic Earnings per share is calculated as profit attributable to
equity holders of the parent for the period, adjusted to exclude
any costs of servicing equity (other than dividends), divided by
the weighted average number of ordinary shares, adjusted for any
bonus element.
2.22. Operating segments
The Chief Operating Decision Maker (CODM) is considered to be
the Board of Directors. They consider that the Group operates in a
single segment, that of oil and gas exploration, appraisal and
development, in a single geographical location, the North Sea of
the United Kingdom. As a result, the financial information of the
single segment is the same as set out in the statement of
comprehensive income, statement of financial position, statement of
Changes in Equity and Statement of Cashflows.
2.23. Investment in subsidiaries
The consolidated financial statements incorporate the financial
statements of the company and entities controlled by the Group (its
subsidiaries). Control is achieved where the Group has the power to
govern the financial and operating policies of an entity so as to
obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the
year are included in total comprehensive income from the effective
date of acquisition and up to the effective date of disposal, as
appropriate using accounting policies consistent with those of the
parent. All intra-group transactions, balances, income and expenses
are eliminated in full on consolidation.
Investments in subsidiaries are accounted for at cost less
impairment in the individual financial statements. Advances that
are made to the subsidiary that are not expected to be repaid in
the short term are capitalised by the Company. All advances made
for the year have been capitalised.
2.24. Share-based payments
The fair value of services received in exchange for the grant of
share warrants is recognised as an expense in share premium or
profit or loss, in accordance with the nature of the service
provided. A corresponding increase is recognised in equity.
3. Significant accounting estimates and judgements, estimates and assumptions
The preparation of financial statements using accounting
policies consistent with IFRS requires the Directors to make
estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and
liabilities and the reported amounts of income and expenses. The
preparation of financial statements also requires the Directors to
exercise judgement in the process of applying the accounting
policies. Changes in estimates, assumptions and judgements can have
a significant impact on the financial statements.
Recoverable value of intangible assets (refer to note 13)
As at 30 June 2022, the Group held oil and gas exploration and
evaluation intangible assets of GBP3,303,399 (2021: GBP1,814,615).
The carrying values of intangible assets are assessed for
indications of impairment, as set out in IFRS 6, on an annual
basis. As part of this impairment assessment, the recoverable value
of the intangible assets is required to be estimated.
When estimating the recoverable value of the intangibles
Management consider the proved, probably and potential resources
per the latest CPR
(https://orcadian.energy/wp-content/uploads/2021/07/110650.Orcadian.FinalReport.pdf),
likely production costs and the forecasted oil prices.
As a result of the budget exploration costs, the licenses being
valid and the assessed recoverable value of the intangibles being
in excess of the carrying value, Management do not consider that
any intangible assets are impaired as at 30 June 2022.
These estimates and assumptions are subject to risk and
uncertainty and therefore a possibility that changes in
circumstances will impact the assessment of impairment
indicators.
There was only one critical judgement identified, apart from
those involving estimations (which are dealt with separately above)
that the Directors have made in the process of applying the Group's
accounting policies and that have the most significant effect on
the amounts recognised in the financial statements.
Fair value of share based payments
The Company has made awards of broker warrants over its unissued
share capital in connection with the Initial Public Offering
completed on 15 July 2021.
The valuation of these options involves making a number of
critical estimates relating to price volatility, future dividend
yields, expected life of the options and forfeiture rates. The key
judgement involved the determination of an appropriate of
volatility, which has been estimated based on the average historic
volatility of the share prices of a selection of three peer
companies for a period equal to the expected term from the grant
date. Further detail on the assumptions has been described in more
detail in note 19 to these Group Financial Statements.
4. Group reorganisation under common control
The acquisition in the year ended 30 June 2021 met the
definition of a group reorganisation due to the Company and the
subsidiary being under common control at the date of acquisition.
As a result, and since Orcadian Energy Plc did not meet the
definition of a business per IFRS 3, the acquisition fell outside
of the scope of IFRS 3 and the predecessor value method was used to
account for the acquisition.
These consolidated financial statements represent a continuation
of the consolidated financial statements of Orcadian Energy (CNS)
Ltd and include:
a. The assets and liabilities of Orcadian Energy (CNS) Ltd at
their pre-acquisition carrying amounts and the results for both
periods; and
b. The assets and liabilities of the Company as at 11 May 2021
and it's results from 11 May to 30 June 2021.
On 11 May 2021, the Company issued 52,201,601 shares entire
issued share capital of Orcadian Energy (CNS) Ltd.
The net assets of Orcadian Energy (CNS) Ltd at the date of
acquisition was as follows:
GBP
Property Plant & Equipment 1,357
Intangible Assets 1,719,292
Current Assets 447,425
Current Liabilities (284,745)
Non-Current Liabilities (1,869,975)
---------------------------- ------------
Net assets 13,354
---------------------------- ------------
The reserve that arose from the acquisition is made up as
follows:
Year ended
30 June 2021
GBP
------------------------------------------------- --------------
As at start of year -
Cost of the investment in Orcadian Energy (CNS)
Ltd 52,202
Less: net assets of Orcadian Energy (CNS) Ltd
at acquisition (13,354)
As at end of year 38,848
------------------------------------------------- --------------
5. Administrative expenses
2022 2021
GBP GBP
Office costs, rates and services 21,925 18,672
Wages and salaries* 384,750 128,125
Consultants and advisers 783,454 56,113
Audit fees (note 6) 27,500 38,090
Insurance 33,504 44,466
Other expenses 181,402 65,234
National Insurance 105,241 35,594
Foreign Exchange 156,126 (127,603)
Depreciation 674 217
1,694,576 258,909
--------- ---------
*refer to note 13 for details on wages and salaries capitalised
to intangible assets.
6. Auditor's Remuneration
During the year, the Company obtained the following services
from the Company's auditors and its associates:
2022 2021
GBP GBP
Audit of the financial statements 27,500 25,000
Transaction services 15,000 50,000
Informal interim review 1,750 -
------ ------
44,250 75,000
------ ------
7. Other Income
2022 2021
GBP GBP
OGA grant 466,667 -
Consulting fees - 3,000
Other Income 466,667 3,000
------- -----
In December 2021 Orcadian was awarded a grant of GBP466,667 by
the OGA (now NSTA) to evaluate an alternative concept for the
electrification of key producing oil and gas fields in the Central
Graben area of the North Sea. All attached conditions in respect of
the grant were met during the year and therefore this income has
been recognised in full as the underlying costs have been incurred
in the year.
The Company did not record any consultancy revenue during the
year. In the year to 30 June 2021 the Company undertook a minor
consulting role during the year for which it billed GBP3,000.
8. Staff numbers and costs
Group Group
2022 2021
Staff costs (including directors) GBP GBP
------- -------
Wages and salaries 790,000 308,925
Social security costs 105,241 35,594
------- -------
895,241 344,519
------- -------
Refer to the Directors Remuneration Report for further
information on Director wages and salaries.
Wages and salaries includes GBP405,250 that was capitalised to
the value of the intangible asset (2021: GBP180,800) (refer to note
13).
No pension benefits are provided for any Directors (2021:
GBPnil).
The average number of persons (including directors) employed by
the Company during the year was:
Group and Company 2022 2021
Management and Administration 6 5
6 5
---- ----
9. Finance costs
2022 2021
GBP GBP
Interest paid 41,869 44,349
41,869 44,349
10. Taxation
Analysis of charge for the year:
2022 2021
GBP GBP
Current income tax charge - -
R&D tax credits - 80,420
Deferred tax charge - -
---- ------
Total taxation credit/(charge) - 80,420
---- ------
Taxation reconciliation
The below table reconciles the tax charge for the year to the
theoretical charge based on the result for the year and the
corporation tax rate.
2022 2021
GBP GBP
Loss before income tax (1,586,727) (296,338)
Tax at the applicable rate of 19%
(2021: 19%) (301,478) (56,304)
Effects of:
R&D tax credits - 80,420
Expenses not deducted for tax purposes 1,333 -
Unutilised tax losses 300,145 56,304
Total income tax credit / (expense) - 80,420
------------ ----------
As at 30 June 2022, the Group had potential deferred tax assets
not recognised in respect of unused tax losses of GBP439,912 (2021:
GBP139,767) which is due to uncertainty over the availability of
future taxable profits to offset these losses against.
11. Earnings per share
The calculation of the basic and diluted earnings per share is
calculated by dividing the loss for the year for continuing
operations for the Company by the weighted average number of
ordinary shares in issue during the year.
There is no difference between the basic and diluted earnings
per share as the Group recorded a loss for the year, and where a
loss is recorded the basic and diluted loss is the same. Refer to
note 19 for details on details of warrants on issue as at 30 June
2022 that would have a dilutive effect on earnings per share.
2022 2021
GBP GBP
-------------------------------------------- ------------ -----------
Loss for the purposes of basic earnings
per share being net loss attributable
to the owners (1,586,727) (296,338)
Weighted average number of Ordinary Shares 63,278,315 22,167,804
Loss per share - pence (2.51p) (1.34p)
-------------------------------------------- ------------ -----------
The weighted average number of shares is adjusted for the impact
of the acquisition as follows:
- Prior to the acquisition, the number of shares is based on
Orcadian Energy (CNS) Ltd, adjusted using the share exchange ratio
arising on the acquisition; and
- From the date of the acquisition, the number of shares is
based on the Company.
12. Property, plant and equipment
IT hardware
& software Office equipment Total
GBP GBP GBP
Cost
As at 30 June 2020 2,842 202 3,044
----------- ---------------- -----
Additions 1,952 - 1,952
As at 30 June 2021 4,794 202 4,996
----------- ---------------- -----
Additions 2,246 - 2,246
----------- ---------------- -----
As at 30 June 2022 7,040 202 7,242
----------- ---------------- -----
IT hardware
& software Office equipment Total
GBP GBP GBP
Depreciation
As at 30 June 2020 2,735 202 2,937
----------- ---------------- -----
Charged in the year 217 - 217
As at 30 June 2021 2,952 202 3,154
----------- ---------------- -----
Charged in the year 674 - 674
As at 30 June 2022 3,626 202 3,828
----------- ---------------- -----
Net book value as at 30 June 2022 3,414 - 3,414
----------- ---------------- -----
Net book value as at 30 June 2021 1,842 - 1,842
----------- ---------------- -----
The depreciation expense is recognised in administrative
expenses as set out in note 5.
13. Intangible assets
Oil and gas
exploration
assets
GBP
Cost
------------
As at 30 June 2020 1,283,797
------------
Additions 530,818
------------
As at 30 June 2021 1,814,615
------------
Additions 1,488,785
------------
As at 30 June 2022 3,303,400
------------
Wages and salaries totalling GBP405,250 (2021: GBP180,800) were
capitalised during the year (refer to note 8).
The carrying value of the prospecting and exploration rights is
supported by the estimated resource and current market values as
contained in the Competent Person's Report date 1 April 2021 which
was prepared by Sproule B.V.
https://orcadian.energy/wp-content/uploads/2021/07/110650.Orcadian.FinalReport.pdf
14. Trade and other receivables
Group Group Company Company
2022 2021 2022 2021
GBP GBP GBP GBP
VAT receivable 55,829 50,925 - -
Other receivables 1,000,000 - 1,000,000 -
Prepayments relating to the
issue of equity - 13,500 - -
Prepayments other - 24,123 - -
--------- ------ --------- -------
1,055,829 88,548 1,000,000 -
--------- ------ --------- -------
Other receivables of GBP1,000,000 represents the gross value of
share subscriptions receivable as at reporting date pursuant to a
share placement that was announced on 30 June 2022 but for which
shares were not formally issued until post-reporting date, in July
2022. There were GBP98,800 of share issue costs which have been
accrued for as at 30 June 2022 in respect of this placing. (Refer
to notes 2.17, 20 and 26 for further detail).
The fair value of other receivables is the same as their
carrying values as stated above.
The maximum exposure to credit risk at the reporting date is the
carrying value of each class of receivable mentioned above. The
Company does not hold any collateral as security.
15. Cash and cash equivalents
Group 2022 2021
GBP GBP
Cash at bank and in hand 271,439 179,556
271,439 179,556
------- -------
There is no material difference between the fair value of cash
and cash equivalents and their book value.
16. Investment in subsidiary
Name Address of the Nature of business Proportion
registered office of ordinary
shares held
directly by
parent (%)
----------------- -------------------- -------------------- -------------
6(th) floor,
60 Gracechurch
Orcadian Energy Street, London, Managing oil and
(CNS) Ltd EC3V 0HR gas assets 100
The acquisition of Orcadian Energy (CNS) Ltd took place on 11
May 2021. Refer to note 4 for further details.
GBP
As at 30 June 2021 52,202
Additions 3,916,642
As at 30 June 2022 3,968,844
---------
The additions during the year were advances to enable the
subsidiary to continue work on the oil and gas exploration assets
owned directly by the subsidiary. These costs have been capitalised
rather than treated as an intercompany loan as they represent
capital contributions and hence increase in value of the parent's
investment.
17. Borrowings
2022
--------------------------------------------------------
Convertible Convertible
loan note STASCO Loan loan note
2020 GBP 2021 Total
GBP GBP GBP
As at 30 June 2021 380,000 762,686 720,000 1,862,686
Conversion in to ordinary
shares (380,000) - (720,000) (1,100,000)
Interest accrued - 41,869 - 41,869
Effect of foreign exchange - 151,629 - 151,629
---------------------------- ------------ -------------- ------------ ------------
As at 30 June 2022 - 956,184 - 956,184
---------------------------- ------------ -------------- ------------ ------------
The STASCO loan was entered in to on 22 July 2019. The total
loan facility was US$1,000,000 which has been fully drawn down. The
term of the loan facility is 4 years and is subject to interest at
LIBOR plus 5% which is accrued quarterly. The total interest charge
for the year was US$57,118 GBP41,869 (2021: $53,885 (GBP39,045)),
and a GBP151,629 unrealised foreign exchange loss (2021: gain of
GBP129,511) was incurred in the year in respect of this loan.
On 15 July 2021, all Convertible Loan Notes ("CLNs") were
converted in to ordinary shares at a price of 28 pence each, which
was a 30% discount to the fundraise price. In total 3,928,572
ordinary shares were issued in full discharge of the CLNs. No
interest was paid on the CLNs as they were converted in to ordinary
shares.
2021
--------------------------------------------------
Convertible Convertible
loan note STASCO loan note
2020 Loan 2021 Total
GBP GBP GBP GBP
As at 30 June 2020 100,000 853,152 - 953,152
Convertible loan note issues 380,000 - 720,000 1,100,000
Convertible loan note repayments (100,000) - - (100,000)
Interest accrued - 39,045 - 39,045
Effect of foreign exchange - (129,511) - (129,511)
---------------------------------- ------------ ---------- ------------ ----------
As at 30 June 2021 380,000 762,686 720,000 1,862,686
---------------------------------- ------------ ---------- ------------ ----------
Between July and December 2020 the Company issued GBP380,000 of
convertible loan notes. In January 2021 GBP100,000 of convertible
loan notes were repaid in cash and a further CLN for GBP100,000 was
issued to a further lender. The term for these CLNs was three years
with an interest rate of 12% per annum if they were redeemed. If
conversion to Ordinary Shares no interest is applied. (Refer to
note 21 for details of CLNs outstanding from Directors as at 30
June 2021, that were settled for Ordinary shares during the year to
30 June 2022.)
In March 2021 the Company issued GBP705,000 of convertible loan
notes, and in June 2021 the Company issued GBP15,000 of convertible
loan notes. These CLN's had a term of one year and a zero interest
rate.
On 15 July 2021, all CLNs were converted in to ordinary shares
at a price of 28 pence each, which was a 30% discount to the
fundraise price. In total 3,928,572 ordinary shares were issued in
full discharge of the CLNs. No interest was paid on the CLNs as
they were converted in to ordinary shares.
18. Trade and other payables - due within one year
Group Group Company Company
2022 2021 2022 2021
GBP GBP GBP GBP
Trade payables 184,636 35,443 - -
Accruals 334,631 276,133 98,800 -
Other creditor 34,242 17,025 - -
------- ------- ------- -------
553,509 328,601 98,800 -
------- ------- ------- -------
The carrying values of trade and other payables are considered
to be a reasonable approximation of the fair value and are
considered by the Directors as payable within one year.
19. Ordinary share capital and share premium
Group
Number of Ordinary Share
shares share capital premium
Issued GBP GBP
As at 30 June 2020 17,400,534 17,401 563,561
Transfer between reserves - 34,801 (34,801)
Issued capital of Company at acquisition 1 - -
Issue of shares upon acquisition
of subsidiary 52,201,601 52,202 -
Transfer of Orcadian Energy (CNS)
Ltd paid up capital to reverse acquisition
reserve (17,400,534) (52,202) (528,760)
--------------- -------------- ------------
As at 30 June 2021 52,201,601 52,202 -
--------------- -------------- ------------
Issue of shares 7,625,000 7,625 3,042,375
Share issue costs - - (233,358)
Value of warrants issued - - (15,000)
Conversion of loans 3,928,572 3,928 1,096,072
--------------- -------------- ------------
As at 30 June 2022 63,755,174 63,755 3,890,089
--------------- -------------- ------------
The issued capital of the Group for the period 1 July 2020 to 11
May 2021 is that of Orcadian Energy (CNS) Ltd. Upon completion of
the acquisition the share capital of Orcadian Energy (CNS) Ltd was
transferred to the Acquisition reserve (Refer to note 4) and the
share capital of Orcadian Energy PLC was brought to account.
The ordinary shares confer the right to vote at general meetings
of the Company, to a repayment of capital in the event of
liquidation or winding up and certain other rights as set out in
the Company's articles of association.
Company
Number of Share
shares Share capital premium
Issued GBP GBP
Balance as at Incorporation 29 March
2021 1 - -
Issue of shares upon acquisition
of subsidiary 52,201,601 52,202 -
As at 30 June 2021 52,202,602 52,202 -
----------- ------------- ----------
Issue of shares 7,625,000 7,625 3,042,375
Share issue costs - - (233,358)
Value of warrants issued - - (15,000)
Conversion of loans 3,928,572 3,928 1,096,072
----------- ------------- ----------
As at 30 June 2022 63,755,174 63,755 3,890,089
----------- ------------- ----------
On 15 July 2021 the Company placed 7,500,000 New Ordinary Shares
("the Raise") at 40p each to raise gross proceeds of GBP3,000,000,
and also issued 125,000 new shares at 40p each to a supplier in
part payment of an outstanding bill.
On 15 July all Convertible Loan Notes ("CLNs") were converted in
to ordinary shares at a price of 28 pence each. In total 3,928,572
ordinary shares were issued in full discharge of the CLNs (Refer to
Note 17).
On 11 May 2021, the Company issued 52,202,601 new ordinary
shares of GBP0.001 each at nominal value for the acquisition of
100% of the issued capital of Orcadian Energy (CNS) Ltd pursuant to
a share swap arrangement (Refer to Note 4).
On 29 March 2021, the Company issued one new ordinary shares of
GBP0.001 upon incorporation.
Share warrants
On 15 July 2021 the Company issued 75,000 broker warrants in
connection with the Raise. These warrants are fully vested, have an
exercise price of 40p and are exercisable for a period of three
years.
The fair value of warrants is valued using the Black-Scholes
pricing model. A fair value charge of GBP15,000 has been applied as
a direct deduction to the Share Premium Reserve.
The inputs into the Black-Scholes pricing model are as
follows:
Grant date 15 Jul 2022
Exercise price 40.0 pence
Expected life 3 years
Expected volatility 77.32%
Risk free rate
of interest 0.0242%
Dividend yield Nil
Fair value of option 20.0 pence
Volatility has been estimated based on the average historic
volatility of the share prices of a selection of three peer
companies for a period equal to the expected term from the grant
date.
Nature and purpose of equity and reserves
Equity and Reserve Description and purpose
Ordinary share Represents the nominal value of shares issued
capital
Share premium reserve Amount subscribed for share capital in excess
of nominal value
Share warrants Value of warrants issued
reserve
Shares to be issued Value of shares to be issued where share subscription
agreements have been executed and the share
placement completing post-reporting date.
Other reserve Reserve created in accordance with the acquisition
of Orcadian Energy (CNS) Ltd on 11 May, 2021
Retained earnings (Refer to Note 4)
Cumulative net gains and losses recognised
in the Consolidated Statement of Comprehensive
Income
20. Shares to be issued
The Shares to be issued represents the issue of 2,857,143 shares
at 35 pence each that completed post-reporting date, on 6 July
2022. The value of the Shares to be issued reserve reflects the
gross proceeds of the share placement of GBP1,000,000, less
GBP98,800 of share issue costs which have been accrued for at 30
June 2022. Upon completion the value of Shares to be issued will be
re-allocated to Share capital and Share premium (Refer to note 2.17
for the Group's accounting policy for Shares to be issued, and
refer to note 26).
21. Related parties
21.1 Transactions with related parties
The Company had the following related party transactions:
(1) The Company makes use of an office at 70 Claremont Road
which is currently provided to the Company by Mrs Julia
Cane-Honeysett and Mr Stephen Brown at a rental of GBP1,000 per
calendar month. The company pays for the services and business
rates associated with the property.
21.2 Loans to/from related parties
During the year, several Directors and shareholders provided
funds to the Company as a working capital injection.
The following balances are outstanding at the end of the
reporting period in relation to these transactions:
Amount due (to)/from
related parties
GBP
As at 30 June 2021 (135,000)
Conversion in to ordinary shares 135,000
As at 30 June 2022 -
As at 30 June 2021 the Company had issued convertible loan notes
(CLNs") from Company Director Alan Hume totalling GBP135,000. These
CLNs were converted in to 482,142 ordinary shares on 15 July 2021
at 28 pence per share.
21.3. Key management personnel
Directors of the Company are considered to be key management
personnel. The remuneration of the Directors has been set out in
note 8.
22. Ultimate controlling party
The Directors consider Stephen Brown and Julia Cane-Honeysett to
be the ultimate controlling parties given their combined holding of
43.78% of the issued capital of the Company.
23. Financial instruments
The Company holds the following financial instruments:
Financial assets
Group Group Company Company
2022 2021 2022 2021
Financial assets at amortised
cost: GBP GBP GBP GBP
Other receivables 1,000,000 - 1,000,000 -
Other financial assets at - - - -
amortised cost
Cash and cash equivalents 271,439 179,556 - -
--------- ------- --------- -------
1,271,439 179,556 1,000,000 -
--------- ------- --------- -------
The maximum exposure to credit risk at the end of the reporting
period is the carrying amount of each class of financial assets
mentioned above.
Financial liabilities
Group
2022 2021
Financial liabilities at amortised GBP GBP
cost:
Trade payables 184,636 35,443
Borrowings - non-current 956,184 762,686
--------- -------
1,140,820 798,129
--------- -------
Group 2022 2021
Financial liabilities at fair value
through profit and loss GBP GBP
Borrowings - 1,100,000
----- ---------
- 1,100,000
----- ---------
24. Financial risk management
24.1 Financial risk factors
The Group's activities expose it to a variety of financial
risks: market risk, credit risk and liquidity risk. The Group's
overall risk management programme focuses on the unpredictability
of financial markets and seeks to minimise potential adverse
effects on the Group's financial performance.
Risk management is carried out by the executive management
team.
a) Market risk
The Group is exposed to market risk, primarily relating to
interest rate, foreign exchange and commodity prices. The Group
does not hedge against market risks as the exposure is not deemed
sufficient to enter into forward contracts. The Group has not
sensitised the figures for fluctuations in interest rates, foreign
exchange or commodity prices as the Directors are of the opinion
that these fluctuations would not have a significant impact on the
Financial Statements at the present time. The Directors will
continue to assess the effect of movements in market risks on the
Group's financial operations and initiate suitable risk management
measures where necessary.
b) Credit risk
Credit risk arises from cash and cash equivalents as well as
outstanding receivables. To manage this risk, the Group
periodically assesses the financial reliability of customers and
counterparties.
The amount of exposure to any individual counter party is
subject to a limit, which is assessed by the Board.
The Group considers the credit ratings of banks in which it
holds funds in order to reduce exposure to credit risk. The Group
will only keep its holdings of cash with institutions which have a
minimum credit rating of 'A'.
c) Liquidity risk
The Group's continued future operations depend on the ability to
raise sufficient working capital through the issue of equity share
capital or debt. The Directors are reasonably confident that
adequate funding will be forthcoming with which to finance
operations. Controls over expenditure are carefully managed.
The following table summarizes the Group's significant remaining
contractual maturities for financial liabilities at 30 June 2022,
and 30 June 2021.
Contractual maturity analysis as at 30 June 2022
Less than
12 1 - 5 Total
Months Years GBP
GBP GBP
------------------------- -------------- ---------------- -------------
Accounts payable 184,636 - 184,636
Accrued liabilities 334,631 - 334,631
Other creditor 34,242 - 34,242
STASCO Loan - 956,184 956,184
--------------------------- -------------- ---------------- -------------
553,509 956,184 1,509,693
------------------------- -------------- ---------------- -------------
There were no contractual liabilities with maturity of greater
than 5 years as at 30 June 2022.
Contractual maturity analysis as at 30 June 2021
Less than
12 months 1 - 5 years Total
GBP GBP GBP
------------------------- -------------- ---------------- -----------
Accounts payable 35,443 - 35,443
Accrued liabilities 276,133 - 293,158
Other creditor 17,025 - 17,025
STASCO Loan - 762,686 762,686
--------------------------- -------------- ---------------- -----------
328,601 762,686 1,091,287
------------------------- -------------- ---------------- -----------
There were no contractual liabilities with maturity of greater
than 5 years as at 30 June 2021.
d) Foreign exchange risk
Foreign exchange risk arises where the Group has financial
assets and liabilities in a different currency to the functional
currency of the Group. Where this arises the Group will be exposed
to gains and losses that arise on movements in the base currency of
the financial asset/liability and the functional currency of the
Group. For the year ended 30 June 2022, the Group's borrowings were
denominated in US Dollars and thus is exposed to gains and losses
arising on the value of the US Dollar relative to Pound Sterling
(Refer to note 17).
24.2 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
enable the Group to continue its exploration and development of oil
and gas resources. In order to maintain or adjust the capital
structure, the Group may adjust the issue of shares or sell assets
to reduce debts.
The Group defines capital based on the total equity and reserves
of the Group. The Group monitors its level of cash resources
available against future planned operational activities and may
issue new shares in order to raise further funds from time to
time.
25. Commitments
The Group has entered into the following non-cancellable
commitments in respect of exploration licences:
2022 2021
GBP GBP
Due within one year 246,498 197,771
Later than one year but not later
than five years 1,360,821 112,729
--------- -------
Total commitments 1,607,319 310,500
--------- -------
26. Events after the reporting period
On 6 July 2022, the Company completed a share placement raising
GBP1,000,000 before costs through the issue of 2,857,143 Ordinary
shares at 35 pence per share. Total costs of the share issue were
GBP98,800.
On 15 November 2022 the Company announced that it had been
awarded a one year extension to the second term of the P2244
licence. That licence will now expire at the end of November
2023.
On the 28 November 2022, the Company signed a Memorandum Of
Understanding with SLB, formerly known as Schlumberger, for the
provision of core services on the wells of the Company's Pilot
project.
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END
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