23 May 2024

Block Energy Plc

("Block" or the "Company")

 

Audited Results for the Year Ended 31^st December 2023

Block Energy plc, the development and production company focused on Georgia, is pleased to announce its audited results for the year ended 31^st December 2023.

Highlights:

Block made good progress in executing its four Project strategy:

·    Delivered 299,824 operational man-hours with one Lost Time Incident ("LTI"); (2022: 382,542 with no LTIs).

·    Significantly increased EBITDA to $1,469,000 from $158,000.

·    Reduced cost of sales and administrative costs (excluding depreciation and depletion) in the year from 2022 by $549,000.

·    Maintained a disciplined approach to capital allocation across the Company's portfolio.

·    Successfully and safely drilled wells WR-B01Za and WR-34Z.

·    Increased oil production to 151,184 bbls (2022: 120,359 bbls) and gas production to 283 MMCF (2022: 267 MMCF), resulting in an average daily production rate of 543 boepd (2022: 452 boepd).

·    Raised $2.0 million via a secured loan to undertake drilling operations on Project I.

·    Completed the Project IV farm-out, achieving a carried work programme valued at over $3 million (gross).

·    Completed the internal evaluation of Project III, covering the Patardzueli-Samgori, Rustavi and Teleti fields at Lower Eocene and Upper Cretaceous level. This work was subsequently (on the Patardzueli-Samgori field) audited to Petroleum Resource Management System ("PRMS") standards by a leading technical consulting firm and forms the basis for the farm-out campaign.

·    Signed a Memorandum of Understanding with the Ministry of Economy and Sustainability covering, amongst other items, the strategic importance of Project III

·    Commenced work on the CCS opportunity with the independent evaluation being published in 2024.

Block Energy plc's Chief Executive Officer, Paul Haywood, said:

 

"2023 stands out as a pivotal year for our Company. Bolstered by solid production, a focus on costs and a supportive oil price environment, we have seen a strong improvement in our financial position. We were also able to focus on advancing our high impact projects, in particular Project III, and the generation and independent verification of a carbon capture storage ("CCS") project.

As we look forward, we're excited about the Company's prospects. The farmout of Project III is already underway and we're seeing continued momentum in developing Projects II and IV, supported by production and cashflows from Project I and disciplined capital management. The Company remains cashflow positive and financially stable at current oil prices and production levels, and I look forward to continuing to deliver on our objectives throughout 2024".

 

For further information, please visit http://www.blockenergy.co.uk/ or contact:

 

**ENDS**

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS STIPULATED UNDER THE UK VERSION OF THE MARKET ABUSE REGULATION NO 596/2014 WHICH IS PART OF ENGLISH LAW BY VIRTUE OF THE EUROPEAN (WITHDRAWAL) ACT 2018, AS AMENDED.  ON PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE, THIS INFORMATION IS CONSIDERED TO BE IN THE PUBLIC DOMAIN.

For further information please visit http://www.blockenergy.co.uk/ or contact:

Paul Haywood (Chief Executive Officer)	Block Energy plc	Tel: +44 (0)20 3468 9891
Neil Baldwin (Nominated Adviser)	Spark Advisory Partners Limited	Tel: +44 (0)20 3368 3554
Peter Krens (Corporate Broker)	Tennyson Securities	Tel: +44 (0)20 7186 9030
Philip Dennis / Mark Antelme / Ali AlQahtani (Financial PR)	Celicourt Communications	Tel: +44 (0)20 7770 6424

 

Notes to editors

Block Energy plc is an AIM quoted independent oil and gas production and development company with a strategic focus on unlocking the energy potential of Georgia. With interests in seven Production Sharing Contracts in central Georgia, covering an area of 4,256 km², including the XIB licence which has over 2.77TCF of 2C contingent gas resources, with an estimated Net Present Value ¹⁰ ("NPV") of USD 1.65 billion, in the Patardzueli-Samgori, Rustavi and Teleti fields. (Source: IER, OPC 2024 & Internal estimates).

The Company has structured its operations around a four-project strategy. These projects, characterized by development stage, hydrocarbon type, and reservoir, are pursued concurrently to achieve multiple objectives. This includes increasing existing production, redeveloping fields, discovering new oil and gas deposits, and capitalizing on the substantial, yet untapped, gas resource across its licences. The goal is to deliver on multi TCF gas assets, strategically well located for the key EU market, supported by partner funding and cash from existing producing assets.

Located near the Georgian capital of Tbilisi, Block Energy is well-positioned to contribute significantly to the region's energy landscape. This proximity facilitates seamless operations and underscores our commitment to the economic and energy development of Georgia.

 

Chairman's Statement

Dear Shareholder,

2023 was a landmark year for our Company. Solid production, a laser focus on costs, and a supportive oil price environment has transformed our financial position, with EBITDA rising to $1,469,000, up from $158,000 in 2022, and income from operating activities (before impairment) moving to a positive $74,000 from a negative $1,822,000 in 2022.

Supported by robust finances we took a major step forward to unlocking the potential of the multi-TCF gas resource across our licences, launching a farm-out process to accelerate the development of an asset declared a strategic resource by the government of Georgia. We reported that our assets may also hold potential for a major CCS opportunity, publishing an independent study indicating the Patardzeuli-Samgori licence has the geological and geographical conditions to support one of the biggest CO₂ storage facilities in Europe. And we have made progress towards realising a third exciting development, Project IV, where a farm-out led to two seismic surveys that formed the basis for an independent prospective resource report that has attracted several interested parties to the data room.

Our focus on these high impact opportunities has been made possible by continued progress with Project I, which has seen the drilling of three successful wells and a well maintenance programme, and the ongoing reduction of the Company's cost base through unrelenting focus on the optimal allocation of capital, and scrupulous attention to operational efficiency.

Our drive for operational efficiency continues to respect our absolute commitment to excellent HSSE and sustainability. HSSE remains the first item on the agenda at both Board and daily operations meetings, entrenching and refining best practice through proven monitoring and training processes.

We continue to maintain and develop excellent relationships both with our business partners in Georgia and the country's regulatory authorities. Georgia maintains conditions for long-term investment through its robust fiscal framework, sympathetic regulatory environment, and established pipeline network proximate to the Company's licence areas connected to domestic and export markets. The country has further strengthened its ties with the international community, in 2023 achieving acceptance as an EU candidate nation and attracting new foreign direct investment, notably through participation in China's Belt and Road initiative.

Block continues to be led by a highly engaged and active Board with deep and wide experience of the Caucasus and the international energy sector, able to offer strong leadership and enforce rigorous corporate governance across the organisation.

I would like to thank all of our team for their professional contribution to our progress through 2023. I have every confidence both in our strategy and our ability to deliver it, and look forward to continuing to represent the Company as we pursue an ever more extensive and prospective range of projects.  

 

Philip Dimmock

Non- Executive Chairman

 

 

Chief Executive Officer's Statement

Dear Shareholder,

Our progress through 2023 demonstrated the promise of our four-project strategy to deliver strong finances and open exciting new opportunities.

The Company is cashflow positive, achieved through solid production from our Project I wells and disciplined capital allocation. The farm-out of the multi-TCF gas opportunity identified by Project III is underway. The full potential of Project II is becoming clear. We have identified and progressed a major CCS opportunity with partners Indorama Corporation Pte Ltd. And we have maintained our excellent HSES record. We have much to look forward to through 2024 as we continue to work to deliver value for all shareholders.

HSES and Sustainability

The Company continued its record of delivering safe operations in 2023. Despite an intensive work programme in which more than 299,824 man hours were worked, only one minor Lost Time Incident ("LTI") was recorded over the 12-month period.

This achievement highlights the strength of our management structures, our uncompromising focus on HSES practices, and the safety culture embedded within the Company: we have a stand-alone HSES department with its own budget; we follow the safety triangle approach; and we operate an observation/stop card system together with permits-to-work. 

We continue to minimise our environmental footprint, designing every operation to mitigate the risk of oil spills, gas flaring or other environmental damage.

In 2023 we demonstrated our ongoing commitment to local communities by offering significant employment and training opportunities, as well as working with local authorities to deliver social programmes to complement our drilling and workover campaigns.

Operations

Project III took a major leap forward in 2023. We continued to define the Project's potential through a comprehensive field development study, amalgamation and interpretation of various 3D seismic surveys, and third-party conceptual development engineering before signing an MoU with the state of Georgia which, declared the Project's strategic importance and supported the concept of a long-term gas offtake. An independent engineering report by leading geoscience consultancy OPC, published in Q1 2024, attributed more than 1 TCF of 2C contingent resources to the Project's Patardzueli-Samgori field, with an NPV exceeding $500 million. An internal 2C resource upgrade for the Rustavi and Teleti fields boosted Project III's resource potential by a further 1.77 TCF, taking the reports' collective estimate for the Patardzueli-Samgori, Rustavi and Teleti fields to 2.77 TCF, with an NPV¹⁰ of $1.65 billion.

We commenced a farmout process for Project III in Q1 2024 facilitated by a leading independent energy consultancy with an international network of contacts encompassing the key Asian and US markets. With its estimated resource, fully costed appraisal programme, and connectivity to Europe's pipeline infrastructure, Project III promises to make a major contribution to the region's growing energy needs. The level of interest we have received so far is encouraging and we look forward to providing further updates as we progress.

The value of Block's assets was further confirmed by the publication of an independent study indicating the presence of a major CCS opportunity. With an estimated reservoir scale storage of 256 million metric tonnes, and basin scale capacity of up to 8.7 gigatonnes, the Middle Eocene reservoir within our Patardzeuli-Samgori licence has the right geology and geography to support one of the biggest CO² storage facilities in Europe. It offers the ideal conditions for mineralisation, a highly efficient and proven form of sequestration already being used for a leading CCS project in Iceland. And the reservoir's location in central Georgia make it ideally placed to serve as a regional net-zero hub.

A Memorandum of Understanding was signed post-period with the Georgian subsidiary of Indorama Corporation, one of Asia's leading chemical companies, with which Block is working to define a pilot CO₂ injection project. With EU Emissions Trading Scheme ("ETS") prices at around $60/ton, and an estimated cost to store of approximately $12 per ton, the agreement is a significant step forward to developing a commercial pathway toward project development. With upstream and downstream synergies critical for any CCS project, brownfield infrastructure available for re-use, and the conditions for low-cost proven technology, we are excited by how quickly this project continues to develop.

Project IV also saw good progress through the completion of the farmout agreement for the Didi Lilo and South Samgori areas of License XIB to Georgia Oil & Gas (GOG). Under the terms of the agreement the Company farmed-out 50% of the licences for a work programme valued at over $3 million. This included the acquisition and processing of 210 km of 2D seismic data and the reprocessing of 1,000 km of existing seismic data. GOG has subsequently met the requirements of this work programme, further enhancing our understanding of the Project's potential. A DeGoyler MacNaughton independent prospective resource report was completed by GOG in the year, attributing 2U unrisked prospective resources of 239.4 MMbbl and 193.3 BCF gas.

While much of the emphasis in 2023 was on Projects III and IV, and the CCS opportunity, we continue to look forward to developing Project II, which will be a key focus for our subsurface team in 2024.

Promotion of our high impact opportunities has been underpinned by the continued progress of Project I. In 2023 average production increased to 543 boepd, up from 452 boepd in 2022, driven by the safe drilling of WR-B01Za and WR-34Z, and a programme of well maintenance encompassing 10 workovers and operational initiatives which significantly reduced non-productive time from key production wells. All this was pursued with an unrelenting focus on the optimal allocation of capital, and focus on driving operational efficiency.

We would like to pay special thanks to Guram Maisuradze, promoted in 2023 to Chief Operating Officer, for leading these efforts. As the year progressed, with our revenues supported by good production performance and commodity prices, we decided to pause Project I drilling to dedicate resources to progressing our high-impact gas resource and CCS projects.

Sales

Over the period the Company sold 106 MMbbls of oil in 2023 (2022: 90 MMbbls), at an average price per barrel of $67.53, and 199 MMCF of gas (2022: 170 MMcf) at an average price of $4.76/MCF.

Despite the increase in production, our revenue was broadly flat at $8,366,000 (2022: $8,262,000) owing to average Brent prices decreasing in the year from $100.93 to $82.49. As at the period end, the Company had 16 Mbbls of oil in storage (2022: 9 Mbbls).

Financials

Block saw its financial position much improve in 2023, with the Company seeing results from operating activities (before impairment) move positive for the first time in the Company's history, a positive $74,000 in 2023 against a negative $1,822,000 in 2022.

We decided to fully impair the carrying value of the Norio and Satskhenisi assets on the balance sheet to reflect these assets' non-core status within the portfolio. Whilst they remain in production, recording a modest positive cash-flow, we currently do not plan to develop them, taking a prudent approach to accounting for them as explained in our Financial Review. We have, therefore, taken an impairment charge of $2,210,000 (2022: nil), which sees the total comprehensive loss for the year increase from $1,160,000 (2022) to $2,139,000 (2023). The underlying accounts, however, reflect the substantial improvement in overall financial and operating performance that was achieved in the year.

EBITDA grew substantially in the year, from $158,000 (2022) to $1,469,000 in 2023. This was achieved on broadly flat revenues; reflecting the very significant amount of work that was undertaken in 2023 to improve netbacks and reduce costs.

Our cash position also improved, with the Company ending the year with $713,000 (2022: $450,000) in cash and $971,000 in trade receivables (2022: $560,000). As well as an increase in cash and receivables, payables significantly decreased to $1,176,000 from $1,693,000 in 2022.

We reduced the cost of sales (before depreciation and depletion of oil and gas assets), administrative costs, and share-based payments, ending the year in a substantially stronger position than we entered it.

We closed a senior secured $2.0 million loan during the year with various existing shareholders and members of the Block management team, which was used to fund Project I development drilling, including WR-B01Za, WR-34Z and the procurement of various long-lead items for the next planned well, KRT-45Z. All interest payments were made on time.

Outlook

Block's focus remains on delivering value from its high-impact assets, supported by cashflows from Project I. Our immediate focus is to progress the Project III farm-out and the CCS project. Work is also underway to secure partners for Project IV and, in due course, Project II.

I would like to thank all of our shareholders for joining us on our exciting journey through 2023, and I look forward to reporting on our progress against plan throughout 2024.

 

Paul Haywood

Chief Executive Officer

 

 

 

Financial Review

Impairment

Following a review of the Company's assets and strategy, we elected to fully impair the carrying value of both Norio and Satskhenisi. The review concluded that it was unlikely that significant capital would be deployed to develop these assets given that significantly higher quality and impact opportunities are available across other assets within the Company's portfolio. Both Norio and Satskhenisi are cashflow positive and contribute to the overall Group positive cashflow, however the carrying value was, to some extent, based upon additional work programmes, such as drilling of new wells and additional workovers, which required capital now being allocated to other higher impact projects.

The Company believes that there is potential remaining within both assets, particularly in the sphere of unconventional oil; however, given the four Project strategy, these assets have been assessed as non-core and will in due course, be subject to farmout or sale. Therefore, for prudent financial reporting reasons, their carrying value has been fully impaired.

Cash Generative Units

The Company currently reports on the basis of Cash Generative Units ("CGUs") associated with West Rustavi, Rustaveli, Norio and Satskhenisi.

In light of the impairment of both Norio and Satskhenisi, as well as the Company's well-communicated multi Project strategy, with the phase one of Project I, development being the West Rustavi/Krtsanisi field straddling licences XIB and  XIF and Project III also incorporating assets within licences XIB and  XIF (and therefore within both the West Rustavi and Rustaveli CGUs), the Company is reviewing its financial reporting process and it is likely that for 2024 the Company will either report on the basis of a singular CGU in Georgia (owing to the proximity of the licences and fields) or alternatively on a Projects basis (owing to the different stage of development between Projects I, II, III, IV and CCS).

Income Statement

The Group's revenue from oil and gas sales increased to $8,366,000 (2022: $8,262,000). The current year revenue from sales of crude oil of $7,413,000 (2022: $7,492,000) comprised the sale of 106,000 barrels (2022: 89,900 barrels), which equated to an average revenue per barrel of $69.93 (2022: $83.34). The lower revenue was associated by a fall in the benchmark Brent price between 2022 and 2023.

During the year, the Group produced 151,185 barrels of crude oil (2022: 120,369 barrels), with the increase in production being primarily due to the WR-B01Za well which was brought onto stabilised production in late March 2023. Performance from existing wellstock was also good during the year.  Gas production stood at 282 MMCF (2022: 267 MMCF). This gross production figure includes the State of Georgia's share of production before cost recovery and profit sharing.

In addition, the Group had 16,611 barrels of crude oil inventory as at 31 December 2023 (31 December 2022: 9,000 barrels).

In the year, the Group sold gas to the value of $953,000 (2022: $770,000).

The total comprehensive loss for the year was $2,139,000 (2022: $1,160,000); the underlying cause of this is the $2,210,000 impairment charge associated with the decision to fully impair Norio and Satskhenisi.

With respect to operating activities before impairment, the Group delivered a profit of $74,000 (2022: loss of $1,822,000). EBITDA significantly improved to $1,469,000 (2022: $158,000) and this was achieved on broadly flat revenues, highlighting the Company's hard work and commitment to cost control and spending discipline during the year. Cost of sales (before depreciation and depletion of oil and gas assets) fell by $166,000. Other administrative costs fell by $383,000 (despite the end of salary sacrifice). Share based payments also fell by $658,000 in the year.

Overall, in 2023 the Company's financial performance strengthened significantly and the Company is well positioned for growth.

Liquidity, Counterparty Risk and Going Concern

The Group monitors its cash position, cash forecasts and liquidity regularly and has a conservative approach to cash management, with surplus cash held on term deposits with major financial institutions.

The directors have prepared cash flow forecasts for a period of 12 months from the date of signing these financial statements. The Group's forecasts are reviewed regularly to assess whether any actions to curtail expenditure or cut costs are required.

The Group's operations presently generate sufficient revenues to cover operating costs and capital expenditures, supporting the continued preparation of the Group's accounts on a going concern basis.

The directors are nevertheless conscious that oil prices have been volatile during the past few years and could rise further but could also fall back in the year ahead, and that future production levels depend on both depletion rates from existing wells and the success of future drilling.

The directors also recognise that the outstanding $2.0 million secured loan is due for full redemption in August 2024 and that there are scenarios in which the Company may not be in a position to settle this liability on time. Nonetheless, the directors remain confident that the loan can either be repaid, or renegotiated, or that new lenders could take a portion, or that other financing options will be available to the Company, and therefore judge that the Company retains sufficient flexibility and optionality around the loan to prepare the accounts on a going concern basis.

As part of their going concern assessment, the directors have examined multiple scenarios in which oil prices and/or future production levels fall substantially and have concluded that it remains possible that future revenues in at least some scenarios might not cover all operating costs and planned capital expenditures, creating a material uncertainty that may cast doubt over the Group's ability to continue as a going concern. Whilst acknowledging this material uncertainty, the directors remain confident of making further cost savings if required and, therefore, the directors consider it appropriate to prepare the financial statements on a going concern basis. The financial statements do not include the adjustments that would result if the Group were unable to continue as a going concern.

Results and Dividends

The results for the year and the financial position of the Group are shown in the following financial statements:

·    The Group has incurred a pre-tax loss of $2,213,000 (2022: loss of $1,608,000).

·    The Group achieved positive EBITDA of $1,469,000 (2022: $158,000).

·    The Group has net assets of $25,706,000 (2022: $27,200,000).

·    The Directors do not recommend the payment of a dividend (2022: $nil).

Financial Statements

Consolidated Statement of Consolidated Income for the Year Ended 31^st December 2023

	Note	Year ended 31 December 2023	Year ended 31 December 2022
Continuing operations		$'000	$'000
Revenue	4	8,366	8,262
Cost of sales	3	(3,826)	(3,992)
Depreciation and depletion of oil and gas assets	5	(1,374)	(1,956)
Total cost of sales		(5,200)	(5,948)
Gross profit		3,166	2,314
Other administrative costs		(2,657)	(3,040)
Share based payments charge	22	(414)	(1,072)
Foreign exchange movement		(21)	(24)
Results from operating activities before impairment		74	(1,822)
Impairment on non-core oil and gas assets	12	(2,210)	-
Total operating loss		(2,136)	(1,822)
Other income	8	26	281
Finance income		7	-
Finance expense	9	(110)	(67)
		(77)	214
Loss for the year before taxation		(2,213)	(1,608)
Taxation	10	-	-
Loss for the year from continuing operations (attributable to the equity holders of the parent)		(2,213)	(1,608)
Items that may be reclassified subsequently to profit and loss:
Exchange differences on translation of foreign operations		74	448
Total comprehensive loss for the year (attributable to the equity holders of the parent)		(2,139)	(1,160)
Loss per share basic and diluted	11	(0.31)c	(0.24)c
Earnings before interest, tax, depreciation and amortisation (EBITDA)	3a	1,469	158

 

All activities relate to continuing operations.

The notes on pages 53 to 78 form part of these consolidated financial statements.

Consolidated Statement of Financial Position for the Year Ended 31^st December 2023

		31 December 2023	31 December 2022
	Note	$'000	$'000
Non-current assets
Intangible assets		50	-
Property, plant and equipment	12	23,851	24,815
Total non-current assets		23,901	24,815
Current assets
Inventory	13	4,377	4,791
Trade and other receivables	14	971	560
Cash and cash equivalents	15	713	450
Total current assets		6,061	5,801
Total assets		29,962	30,616
Equity and liabilities
Capital and reserves attributable to equity holders of the Parent Company:
Share capital	18	3,705	3,565
Share premium	19	34,856	34,765
Other reserves	20	4,766	4,525
Foreign exchange reserve		768	694
Accumulated deficit		(18,389)	(16,349)
Total equity		25,706	27,200
Liabilities
Trade and other payables	16	1,176	1,693
Provisions	17	1,080	1,723
Borrowings	16	2,000	-
Total current liabilities		4,256	3,416
Total equity and liabilities		29,962	30,616

 

The financial statements were approved by the Board of Directors and authorised for issue on 22 May 2024 and were signed on its behalf by:

 

 

 

Paul Haywood
Director

The notes on pages 53 to 78 form part of these consolidated financial statement

Consolidated Statement of Changes in Equity for the Year Ended 31^st December 2023

	Share Capital $'000	Share Premium $'000	Accumulated Deficit $'000	Other Reserves $'000	Foreign Exchange Reserve $'000	Total Equity $'000
Balance at 31 December 2021	3,482	34,625	(21,548)	10,260	246	27,065
Loss for the year	-	-	(1,608)	-	-	(1,608)
Exchange differences on translation of foreign operations	-	-	-	-	448	448
Total comprehensive loss for the year	-	-	(1,608)	-	448	(1,160)
Issue of shares	27	140	-	-	-	167
Share based payments	-	-	-	1,072	-	1,072
Options exercised	56	-	-	-	-	56
Options expired	-	-	418	(418)	-	-
Options relinquished	-	-	6,389	(6,389)	-	-
Total transactions with owners	83	140	6,807	(5,735)	-	1,295
Balance at 31 December 2022	3,565	34,765	(16,349)	4,525	694	27,200
Loss for the year	-	-	(2,213)	-	-	(2,213)
Exchange differences on translation of foreign operations	-	-	-	-	74	74
Total comprehensive loss for the year	-	-	(2,213)	-	74	(2,139)
Issue of shares	133	91	-	-	-	224
Share based payments	-	-	-	414	-	414
Options exercised	7	-	-	-	-	7
Options expired	-	-	173	(173)	-	-
Total transactions with owners	140	91	173	241	-	645
Balance at 31 December 2023	3,705	34,856	(18,389)	4,766	768	25,706

 

 

 

 

 

 

 

 

The notes on pages 53 to 78 form part of these consolidated financial statements.

 

Consolidated Statement of Cashflows for the Year Ended 31^st December 2023

 

	Note	Year ended 31 December 2023 $'000	Year ended 31 December 2022 $'000
Cash flow from operating activities
Loss for the year before tax		(2,213)	(1,608)
Adjustments for:
Depreciation and depletion	5	1,374	1,956
Impairment	12	2,210	-
Decommissioning finance charge and finance expense		110	67
Disposal of PP&E at nil value	12	89	-
Finance income		(7)	-
Other income and finance income	8	(26)	(281)
Creditors paid in shares		108	167
Share based payments expense	7	414	1,072
Foreign exchange movement		22	(29)
Operating cash flows before movements in working capital		2,081	1,344
(Increase)/decrease in trade and other receivables		(411)	192
(Decrease)/increase in trade and other payables		(516)	194
Decrease/(increase) in inventory		414	(206)
Net cash flow from operating activities		1,568	1,524
Cash flow from investing activities
Income received		33	281
Expenditure in respect of Intangible assets		(50)	-
Expenditure in respect of PP&E	12	(3,040)	(2,730)
Net cash used in investing activities		(3,057)	(2,449)
Cash flow from financing activities
Proceeds from Borrowings	16	2,000	-
Interest paid	9	(248)	(1)
Net cash inflow/(outflow) from financing activities		1,752	(1)
Net increase/(decrease) in cash and cash equivalents in the year		263	(926)
Cash and cash equivalents at start of year		450	1,244
Effects of foreign exchange rate changes on cash and cash equivalents		-	132
Cash and cash equivalents at end of year		713	450

 

The notes on pages 53 to 78 form part of these consolidated financial statements.

Significant non-cash transactions

The only significant non-cash transactions were the issue of shares and share options detailed in notes 18 and 22.

Notes Forming Part of the Consolidated Financial Statements

Corporate Information

 

Block Energy Plc ("Block Energy") gained admission to AIM on 11^th June 2018, trading under the symbol of BLOE.

The Consolidated financial statements of the Group, which comprises Block Energy Plc and its subsidiaries, for the year ended 31 December 2023 were authorised for issue in accordance with a resolution of the Directors on 22 May 2024. Block Energy is a Company incorporated in the UK whose shares are publicly traded. The address of the registered office is given in the officers and advisers section of this report. The Company's administrative office is in London, UK.

The nature of the Company's operations and its principal activities are set out in the Strategic Report on pages 3 to 11 and the Report of the Directors on pages 28 to 31.

1.      Significant Accounting Policies

 

IAS 8 requires that management shall use its judgement in developing and applying accounting policies that result in information which is relevant to the economic decision-making needs of users, that are reliable, free from bias, prudent, complete and represent faithfully the financial position, financial performance and cash flows of the entity.

Basis of Preparation

 

The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below. The policies have been consistently applied to all the years presented, unless otherwise stated. All amounts presented are in thousands of US dollars unless otherwise stated. Foreign operations are included in accordance with the policies set out below.

The consolidated financial statements have been prepared in accordance with UK-adopted international accounting standards and as regards the Company financial statements, as applied in accordance with the requirements of the Companies Act 2006. The Financial Statements have also been prepared under the historical cost convention, as modified by the revaluation of financial assets at fair value through profit or loss.

The preparation of financial statements in accordance with UK-adopted international accounting standards requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Changes in accounting estimates may be necessary if there are changes in the circumstances on which the estimate was based, or as a result of new information or more experience. Such changes are recognised in the period in which the estimate is revised.

New and Amended Standards Adopted by the Group

There were no new or amended accounting standards that required the Group to change its accounting policies for the year ended 31 December 2023 and no new standards, amendments or interpretations were adopted by the Group.

New Accounting Standards Issued but not yet Effective

 

The standards and interpretations that are relevant to the Group, issued, but not yet effective, up to the date of the Financial Statements are listed below. The Group intends to adopt these standards, if applicable, when they become effective.

Standard	Effective date	Overview
Amendments to IAS 1     Classification of Liabilities as Current or Non-current	1 January 2024 (early adoption permitted)	The standard has been amended to clarify that the classification of liabilities as current or non-current should be based on rights that exist at the end of the reporting period.     In order to conclude a liability is non-current, the right to defer settlement of a liability for at least 12 months after the reporting date must exist as at the end of the reporting period.     The amendments also clarify that (for the purposes of classification as current or non-current), settlement is the transfer of cash, the entity's own equity instruments (except as described below), other assets or services.
Amendments to IAS 1     Non-current Liabilities with Covenants	1 January 2024 (early adoption permitted)	The standard confirms that only those covenants with which an entity must comply on or before the end of the reporting period affect the classification of a liability as current or non-current.
Amendments to IFRS 16     Lease Liability in a Sale and Leaseback	1 January 2024 (early adoption permitted)	The amendments address the accounting that should be applied by a seller-lessee in a sale and leaseback transaction when the leaseback contains variable lease payments, such as turnover rentals, that do not depend on an index or rate.       Specifically, they confirm that the 'lease payments' or the 'revised lease payments' arising from the leaseback arrangement are measured in such a way that no gain or loss is recognised on the right of use retained by the seller-lessee.
Amendments to IAS 7 and IFRS 7      Supplier Finance Arrangements	1 January 2024 (early adoption permitted)	The amendments require an entity to disclose information about its supplier finance arrangements to enable users of financial statements to assess the effects of those arrangements on the entity's liabilities and cash flows and on the entity's exposure to liquidity risk.
Amendments to IAS 21 - Lack of Exchangeability	1 January 2025 (early adoption permitted)	The amendments have been made to clarify:      - when a currency is exchangeable into another currency; and - how a company estimates a spot rate when a currency lacks exchangeability.

 

The Directors have evaluated the impact of transition to the above standards and do not consider that there will be a material impact of transition on the financial statements.

Basis of Consolidation

Where the Company has control over an investee, it is classified as a subsidiary. The Company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control. De-facto control exists in situations where the Company has the practical ability to direct the relevant activities of the investee without holding the majority of the voting rights. In determining whether de-facto control exists the Company considers all relevant facts and circumstances, including:

·    The size of the Company's voting rights relative to both the size and dispersion of other parties who hold voting rights;

·    Substantive potential voting rights held by the Company and by other parties;

·    Other contractual arrangements; and

·    Historic patterns in voting attendance.

 

Business Combinations

The consolidated financial statements incorporate the results of business combinations using the purchase method. In the consolidated statement of financial position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The difference between the consideration paid and the acquired net assets is recognised as goodwill. The results of acquired operations are included in the consolidated income statement from the date on which control is obtained. Any difference arising between the fair value and the tax base of the acquiree's assets and liabilities that give rise to a deductible difference results in recognition of deferred tax liability. No deferred tax liability is recognised on goodwill.

Acquisitions

The Group and Company measure consideration  at the acquisition date as:

·    The fair value of the consideration transferred; plus

·    The recognised amount of any non-controlling interests in the acquiree

·    Plus, if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree; less the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.

 

When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.

Cost related to the acquisition, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination, are expensed as incurred.

Asset Acquisition

Acquisitions of mineral exploration licences through the acquisition of non-operational corporate structures that do not represent a business, and therefore do not meet the definition of a business combination, are accounted for as the acquisition of an asset. An example of such would be increases in working interests in licences.

The consideration for the asset is allocated to the assets based on their relative fair values at the date of acquisition.

Going Concern

The directors have prepared cash flow forecasts for a period of 12 months from the date of signing these financial statements. The Group's forecasts are reviewed regularly to assess whether any actions to curtail expenditure or cut costs are required.

The Group's operations presently generate sufficient revenues to cover operating costs and capital expenditures, supporting the continued preparation of the Group's accounts on a going concern basis.

The directors are nevertheless conscious that oil prices have been volatile during the past few years and could rise further but could also fall back in the year ahead, and that future production levels depend on both depletion rates from existing wells and the success of future drilling.

The directors also recognise that the outstanding $2.0m secured loan is due for full redemption in August 2024 and that there are scenarios in which the Company may not be in a position to settle this liability on time. Nonetheless, the directors remain confident that the loan can either be repaid, or renegotiated, or that new lenders could take a portion, or that other financing options will be available to the Company, and therefore judge that the Company retains sufficient flexibility and optionality around the loan to prepare the accounts on a going concern basis.

As part of their going concern assessment, the directors have examined multiple scenarios in which oil prices and/or future production levels fall substantially and have concluded that it remains possible that future revenues in at least some scenarios might not cover all operating costs and planned capital expenditures, creating a material uncertainty that may cast doubt over the Group's ability to continue as a going concern. Whilst acknowledging this material uncertainty, the directors remain confident of making further cost savings if required and, therefore, the directors consider it appropriate to prepare the financial statements on a going concern basis. The financial statements do not include the adjustments that would result if the Group were unable to continue as a going concern.

Intangible Assets

Exploration and Evaluation costs

The Group applies the full cost method of accounting for Exploration and Evaluation (E&E) costs, having regard to the requirements of IFRS 6 'Exploration for and Evaluation of Mineral Resources'. Under the full cost method of accounting, costs of exploring and evaluating properties are accumulated and capitalised by reference to appropriate cash generating units ("CGUs"). Such CGU's are based on geographic areas such as a licence area, type or a basin and are not larger than an operating segment - as defined by IFRS 8 'Operating segments.

E&E costs are initially capitalised within 'Intangible assets'. Such E&E costs may include costs of licence acquisition, technical services and studies, seismic acquisition, exploration drilling and testing, but do not include costs incurred prior to having obtained the legal rights to explore an area, which are expensed directly to the statement of comprehensive income as they are incurred. Plant and equipment assets acquired for use in exploration and evaluation activities are classified as property, plant and equipment.

However, to the extent that such an asset is consumed in developing an unproven oil and gas asset, the amount reflecting that consumption is recorded as part of the cost of the unproven oil and gas asset.

Exploration and unproven oil and gas assets related to each exploration license/prospect are not amortised but are carried forward until the technical feasibility and commercial feasibility of extracting a mineral resource are demonstrated.

Impairment of Exploration and Evaluation assets

All capitalised exploration and evaluation assets and property, plant and equipment are monitored for indications of impairment. Where a potential impairment is indicated, assessment is made for the Group of assets representing a cash generating unit.

In accordance with IFRS 6 the Group firstly considers the following facts and circumstances in their assessment of whether the Group's exploration and evaluation assets may be impaired, whether:

·    the period for which the Group has the right to explore in a specific area has expired during the period or will expire in the near future, and is not expected to be renewed;

·    unexpected geological occurrences render the resource uneconomic;

·    a significant fall in realised prices or oil and gas price benchmarks render the project uneconomic; or

·    an increase in operating costs occurs.

If any such facts or circumstances are noted, the Group perform an impairment test in accordance with the provisions of IAS 36.

The aggregate carrying value is compared against the expected recoverable amount of the cash generating unit. The recoverable amount is the higher of value in use and the fair value less costs to sell. An impairment loss is reversed if the asset's or cash-generating unit's recoverable amount exceeds its carrying amount. A reversal of impairment loss is recognised in the profit or loss immediately.

Property, Plant and Equipment - Development and Production (D&P) Assets

Capitalisation

The costs associated with determining the existence of commercial reserves are capitalised in accordance with the preceding policy and transferred to property, plant and equipment as development assets following impairment testing. All costs incurred after the technical feasibility and commercial viability of producing hydrocarbons have been demonstrated are capitalised within development assets on a field-by-field basis. Subsequent expenditure is only capitalised where it either enhances the economic benefits of the development asset or replaces part of the existing development asset (where the remaining cost of the original part is expensed through the income statement). Costs of borrowing related to the ongoing construction of development and production assets and facilities are capitalised during the construction phase. Capitalisation of interest ceases once an asset is ready for production.

Depreciation

Capitalised oil assets are not subject to depreciation until commercial production starts. Depreciation is calculated on a unit-of-production basis in order to write off the cost of an asset as the reserves that it represents are produced and sold. Any periodic reassessment of reserves will affect the depreciation rate on a prospective basis. The unit-of-production depreciation rate is calculated on a field-by-field basis using proved, developed reserves as the denominator and capitalised costs as the numerator. The numerator includes an estimate of the costs expected to be incurred to bring proved, developed, not-producing reserves into production. Infrastructure that is common to a number of fields, such as gathering systems, treatment plants and pipelines are depreciated on a unit-of-production basis using an aggregate measure of reserves or on a straight line basis depending on the expected pattern of use of the underlying asset.

Proven Oil and Gas Properties

Oil and gas properties are stated at cost less accumulated depreciation and impairment losses. The initial cost comprises the purchase price or construction cost including any directly attributable cost of bringing the asset into operation and any estimated decommissioning provision.

Once a project reaches the stage of commercial production and production permits are received, the carrying values of the relevant exploration and evaluation asset are assessed for impairment and transferred to proven oil and gas properties and included within property plant and equipment.

Proven oil and gas properties are accounted for in accordance with provisions of the cost model under IAS 16 "Property Plant and Equipment" and are depleted on unit of production basis based on the estimated proven and probable reserves of the pool to which they relate.

Impairment of Development and Production Assets

A review is performed for any indication that the value of the Group's D&P assets may be impaired such as:

·    significant changes with an adverse effect in the market or economic conditions which will impact the assets; or

·    obsolescence or physical damage of an asset; or

·    an asset becoming idle or plans to dispose of the asset before the previously expected date; or

·    evidence is available from internal reporting that indicates that the economic performance of an asset is or will be worse than expected.

 

For D&P assets when there are such indications, an impairment test is carried out on the CGU. CGUs are identified in accordance with IAS 36 'Impairment of Assets', where cash flows are largely independent of other significant asset Groups and are normally, but not always, single development or production areas. When an impairment is identified, the depletion is charged through the Consolidated Statement of Comprehensive Income if the net book value of capitalised costs relating to the CGU exceeds the associated estimated future discounted cash flows of the related commercial oil reserves.

The CGU's identified by the company are Corporate along with West Rustavi, Rustaveli, Satskhenisi and Norio given they are independent projects under individual Production Sharing Contracts ("PSCs"). An assessment is made at each reporting  date as to whether there is any indication that previously recognised impairment charges may no longer exist or may have decreased. If such an indication exists, the Group estimates the recoverable amount. A previously recognised impairment charge is reversed only if there has been a change in the estimates used to determine the assets recoverable amount since the last impairment charge was recognised. If this is the case the carrying amount of the asset is increased to its recoverable amount, not to exceed the carrying amount that would have been determined, net of depreciation, had no impairment charges been recognised for the asset in prior years.

Property, Plant and Equipment and Depreciation

Property, plant and equipment which are awaiting use in the drilling campaigns, and storage, are recorded at historical cost less accumulated depreciation. Property, plant and equipment are depreciated using the straight line method over their estimated useful lives, as follows:

·      PP&E - 6 years

The carrying value of Property, plant and equipment is assessed annually and any impairment charge is charged to the Consolidated Statement of Comprehensive income.

Leases

The Group assesses whether a contract is or contains a lease, at 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 operating 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.

Inventories

Crude oil inventories are stated at the lower of cost and net realisable value. The cost of crude oil is the cost of production, including direct labour and materials, depreciation and an appropriate portion of fixed overheads. Net realisable value of crude oil is based on the market price of similar crude oil at the balance sheet date and costs to sell, adjusted if the sale of inventories after that date gives additional evidence about its net realisable value at the balance sheet date.

The cost of crude oil is expensed in the period in which the related revenue is recognised.

Inventories of drilling tubulars and drilling chemicals are valued at the lower of cost or net realisable value, where cost represents the weighted average unit cost for inventory lines on a line by line basis. Cost comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

Decommissioning Provision

Provisions for decommissioning are recognised in full when wells have been suspended or facilities have been installed.

A corresponding amount equivalent to the provision is also recognised as part of the cost of either the related oil and gas exploration and evaluation asset or property, plant and equipment as appropriate. The amount recognised is the estimated cost of decommissioning, discounted to its net present value, and is reassessed each year in accordance with local conditions and requirements.

Changes in the estimated timing of decommissioning or decommissioning cost estimates are dealt with prospectively by recording an adjustment to the provision, and a corresponding adjustment to the related asset.

The unwinding of the discount on the decommissioning provision is included as a finance cost.

Borrowing Costs

General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale. Qualifying assets are assets that necessarily take over one accounting period to get ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings, pending their expenditure on qualifying assets, is deducted from the borrowing costs eligible for capitalisation.

Other borrowing costs are expensed in the period in which they are incurred.

Taxation and Deferred Tax

Income tax expense represents the sum of the current tax and deferred tax charge for the period.

The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting date.

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial information and the corresponding tax bases and is accounted for using the balance sheet liability method.

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.

Judgement is applied in making assumptions about future taxable income, including oil and gas prices, production, rehabilitation costs and expenditure to determine the extent to which the Group recognises deferred tax assets, as well as the anticipated timing of the utilisation of the losses.

Deferred tax is calculated at the tax rates that have been enacted or substantively enacted and are expected to apply in the period when the liability is settled, or the asset realised. Deferred tax is charged or credited to the statement of comprehensive income, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Foreign Currencies

Monetary assets and liabilities denominated in foreign currencies are translated into US dollars at the rates of exchange prevailing at the reporting date: $1.27 /£1 (2022: $1.21/£1). Transactions in foreign currencies are translated at the exchange rate ruling at the date of the transaction. Exchange differences are taken to the Statement of Comprehensive Income.

The Company's functional currency is the pound sterling and its presentational currency is the US dollar and accordingly the financial statements have also been prepared in US dollars. The functional currencies of Block Norioskhevi Ltd, Satskhenisi Limited, Georgia New Ventures Inc and Block Rustaveli Limited are the US dollar and the functional currencies of their branches in Georgia are the Georgian Lari.

Foreign Operations

The assets are translated into US dollars at the exchange rate at the reporting date and income and expenses of the foreign operations are translated at the average exchange rates. Exchange differences arising on translation are recognised in other comprehensive income and presented in the other reserves category in equity.

Determination of Functional Currency and Presentational Currency

The determination of an entity's functional currency is assessed on an entity by entity basis. A company's functional currency is defined as the currency of the primary economic environment in which the entity operates. The functional currency of the Parent Company is the pound sterling, because it operates in the UK, where the majority of its transactions are in pounds sterling. The functional currencies of Block Norioskhevi Ltd, Satskhenisi Limited, Georgia New Ventures Inc and Block Rustaveli Limited are the US dollar, because the majority of their transactions by value is in US dollars, and the functional currencies of their branches in Georgia are the Georgian Lari, because the majority of their transactions by value is in Georgian Lari.

The presentational currency of the Group for year ended 31 December 2023 is US dollars. The presentational currency is an accounting policy choice.

Revenue

Revenue from contracts with customers is recognised when the Group satisfies its performance obligation of transferring control of oil or gas to a customer. Transfer of control is usually concurrent with both transfer of title and the customer taking physical possession of the oil or gas, which is determined by reference to the oil or gas sales agreement. This performance obligation is satisfied at that point in time.

The transaction price is agreed between the Group and the customer, with the amount of revenue recognised being determined by considering the terms of the Production Sharing Contract ("PSC") and the oil sales agreement for each oil sale or the gas sales agreement for each gas sale.

Finance Income and Expenses

Finance costs are accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable. Finance expenses comprise interest or finance costs on borrowings.

Financial Instruments

Financial assets and financial liabilities are recognised on the Group's balance sheet when the Group becomes party to the contractual provisions of the instrument.

Fair Value

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. All assets and liabilities, for which fair value is measured or disclosed in the Financial Statements, are categorised within the fair value hierarchy, described as follows, based on the lowest-level input that is significant to the fair value measurement as a whole:

Level 1 - quoted (unadjusted) market prices in active markets for identical assets or liabilities;

Level 2 - valuation techniques for which the lowest-level input that is significant to the fair value measurement is directly or indirectly observable; and

Level 3 - valuation techniques for which the lowest-level input that is significant to the fair value measurement is unobservable.

Financial Assets

Financial assets are initially recognised at fair value, and subsequently measured at amortised cost, less any allowances for losses using the expected credit loss model, being the difference between all contractual cash flows that are due to the Group in accordance with the contract and all the cash flows that the Group expects to receive.

Impairment provisions for receivables from related parties and loans to related parties are recognised based on a forward looking expected credit loss model. The methodology used to determine the amount of the provision is based on whether there has been a significant increase in credit risk since initial recognition of the financial asset.

For those where the credit risk has not increased significantly since initial recognition of the financial asset, twelve month expected credit losses along with gross interest income are recognised. For those for which credit risk has increased significantly, lifetime expected credit losses along with the gross interest income are recognised. For those that are determined to be credit impaired, lifetime expected credit losses along with interest income on a net basis are recognised.

Financial Liabilities

Financial liabilities are classified as either financial liabilities at fair value through profit and loss (FVTPL) or as other financial liabilities. The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged or cancelled, or they expire.

Financial liabilities are classified at FVTPL when the financial liability is either held for trading or it is designated at FVTPL. A financial liability is classified as held for trading if it has been incurred principally for the purpose of repurchasing it in the near term or is a derivative that is not a designated or effective hedging instrument.

Financial liabilities at FVTPL are measured at fair value, with any gains or losses arising on changes in fair value recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability.

Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs and are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis.

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

Share Based Payments

The fair value of options granted to Directors and others in respect of services provided is recognised as an expense in the Statement of Comprehensive Income with a corresponding increase in equity reserves - 'other reserves'.

On exercise of, or expiry of unexercised  share options, the proportion of the share based payment reserve relevant to those options is transferred from other reserves to the accumulated deficit. On exercise, equity is also increased by the amount of the proceeds received.

The fair value is measured at grant date and charged over the accounting periods which the option becomes unconditional.

The fair value of options are calculated using the Black-Scholes model, taking into account the terms and conditions upon which the options were granted. Vesting conditions are non-market and there are no market vesting conditions. These vesting conditions are included in the assumptions about the number of options that are expected to vest. At the end of each reporting period, the Company revises its estimate of the number of options that are expected to vest. The exercise price is fixed at the date of grant and no compensation is due at the date of grant. Where equity instruments are granted to persons other than employees, the statement of comprehensive income is charged with the fair value of the goods and services received.

Warrants issued for services rendered are accounted for in accordance with IFRS 2 recognising either the costs of the service if it can be reliably measured or the fair value of the warrant (using the Black-Scholes model).  The fair value is recognised as an expense in the accounting period that the warrant is granted and there is no revision to this estimate in future accounting periods.

Warrants issued as part of share issues have been determined as equity instruments under IAS 32.  Since the fair value of the shares issued at the same time is equal to the price paid, these warrants, by deduction, are considered to have been issued at nil value.

2.      Critical Accounting Judgments, Estimates and Assumptions

The Group makes estimates and assumptions regarding the future. Estimates and judgements are continuously evaluated based on historical experiences and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may deviate from these estimates and assumptions. The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below.

Recoverable Value of Development & Production assets - Judgement, Estimates and Assumptions

Costs capitalised in respect of the Group's development and production assets are required to be assessed for impairment under the provisions of IAS 36. Such an estimate requires the Group to exercise judgement in respect of the indicators of impairment and also in respect of inputs used in the models which are used to support the carrying value of the assets. Such inputs include estimates of oil and gas reserves, production profiles, oil price, oil quality discount, capital expenditure (including an allocation of salary costs), inflation rates, and pre-tax discount rates that reflect current market assessments of (a) the time value of money; and (b) the risks specific to the asset for which the future cash flow estimates have not been adjusted. The Directors concluded that there was an indication of impairment at Satskhenisi and Norio, as these assets are being held as non-core assets and are considered to be cash flow neutral.  A one-off impairment charge of $2.2m has been charged to the profit and loss account in the year and these oil and gas assets have been written down to nil.

Asset Decommissioning Provisions - Estimates and Assumptions

The Group's activities are subject to various laws and regulations governing the protection of the environment. The Group recognises management's best estimate of the asset decommissioning costs in the period in which they are incurred. Such estimates of costs include pre-tax discount rates that reflect current market assessments of (a) the time value of money; and (b) the risks specific to the asset for which the future cash flow estimates have not been adjusted. Actual costs incurred in future periods could differ materially from the estimates.

Additionally, future changes to environmental laws and regulations, life of development and production assets, estimates and discount rates could affect the carrying amount of this provision. The Board assessed the extent of decommissioning required as at 31 December 2023 and concluded that a provision of $1,080,000 (2021: $1,723,000) should be recognised in respect of future decommissioning obligations at Rustaveli, West Rustavi, Satskhenisi and Norio (see note 17).

Share Options and Warrants - Estimates and Assumptions

Share options issued by the Group relate to the Block Energy Plc Share Option Plan and warrants issued relates to the cost of borrowing. The grant date fair value of such options and warrants is calculated using a Black-Scholes model whose input assumptions are derived from market and other internal estimates.

The key estimates include volatility rates and the expected life of the options, together with the likelihood of non-market performance conditions being achieved (see note 22).

Impairment of Investments and Loans to Subsidiaries - Parent Company only

The Company assesses at each reporting date whether there is any objective evidence that investments/receivables in subsidiaries are impaired.  To determine whether there is objective evidence of impairment, a considerable amount of estimation is required in assessing the ultimate realisation of these investments/receivables, including valuation, creditworthiness and future cashflow. Although no impairment of investments was indicated at year end the Company identified certain intercompany receivables as being impaired.

During the year the Company carried out an assessment of the expected credit loss arising on intercompany receivables. This was calculated as a total loss allowance of $8,097,000 (2022: $3,710,000) therefore an additional amount of $4,387,00 (2022: nil) was provided for in the current year parent company financial statements.

3.      Segmental Disclosures

IFRS 8 requires segmental information for the Group on the basis of information reported to the chief operating decision maker for decision making purposes. The Company considers this role as being performed by the Board of Directors. The Group's operations are focused on oil and gas development and production activities (Oil and Gas Extraction segment) in Georgia and has a corporate head office in the UK (Corporate segment). Based on risks and returns the Directors consider that there are two operating segments that they use to assess the Group's performance and allocate resources being the Oil and Gas Extraction in Georgia, and the corporate segment including unallocated costs.

The Board of Directors primarily uses a measure of adjusted earnings before interest, tax, depreciation and amortisation (EBITDA), see below, to assess the performance of the operating sectors. 

 

3 a)         Adjusted EBITDA

Adjusted EBITDA excludes discontinued operations and the effects of significant items of income and expenditure which might have an impact on the quality of earnings, such as restructuring costs, legal expenses, and impairments where the impairment is the result of an isolated, non-recurring event.

Adjusted EBITDA	31 December 2023 $'000	31 December 2022 $'000
Oil and Gas exploration - Georgia	3,331	3,258
Corporate and other	(1,862)	(3,100)
Total adjusted EBITDA	1,469	158

 

 

 

Adjusted EBITDA reconciles to operating profit before income tax as follows:

	31 December 2023 $'000	31 December 2022 $'000
Total adjusted EBITDA	1,469	158
Depreciation and depletion	(1,374)	(1,956)
Impairment	(2,210)	-
Finance and other income	33	281
Finance costs and foreign exchange	(131)	(91)
Loss before income tax from continuing operations	(2,213)	(1,608)

 

3 b)         Other profit and loss disclosures

	Oil and Gas Extraction	Corporate and other	Group      Total
Year ended 31 December 2023	$'000	$'000	$'000
Revenue	8,366	-	8,366
Cost of sales	(3,826)	-	(3,826)
Depreciation and depletion	(1,373)	(1)	(1,374)
Impairment	(2,210)	-	(2,210)
Administrative costs	(1,209)	(1,862)	(3,071)
Finance and other income	19	14	33
Net Finance costs and Forex	(69)	(62)	(131)
Loss from operating activities	(302)	(1,911)	(2,213)
Total non-current assets	23,901	-	23,901

 

	Oil and Gas Extraction	Corporate and other	Group      Total
Year ended 31 December 2022	$'000	$'000	$'000
Revenue	8,262	-	8,262
Cost of sales	(3,992)	-	(3,992)
Depreciation and depletion	(1,906)	(50)	(1,956)
Administrative costs	(1,012)	(3,100)	(4,112)
Other income	18	263	281
Net Finance costs and Forex	(82)	(9)	(91)
Profit/(loss) from operating activities	1,288	(2,896)	(1,608)
Total non-current assets	24,814	1	24,815

 

3 c)          Segment assets and liabilities

Segmental Assets	31 December 2023 $'000	31 December 2022 $'000
Oil exploration - Georgia	29,452	30,206
Corporate and other	510	410
	29,962	30,616

 

 

Segmental Liabilities	31 December 2023	31 December 2022
	$'000	$'000
Oil exploration - Georgia	1,522	2,591
Corporate and other	2,734	825
	4,256	3,416

 

4.       Revenue

	Year ended 31 December  2023   $'000	Year ended 31 December  2022   $'000
Crude oil revenue	7,413	7,492
Gas revenue	953	770
	8,366	8,262

 

5.      Depreciation and Depletion on Oil and Gas assets

	Year ended 31 December  2023   $'000	Year ended 31 December  2022   $'000
Depreciation of PP&E	307	273
Depletion of oil and gas assets	1,067	1,683
	1,374	1,956

 

6.      Expenses by nature

	Year ended 31 December  2023	Year ended 31 December  2022
	$'000	$'000
Employee benefit expense	1,413	1,705
Share option charge	414	1,072
Security expense	-	15
Fees to Auditor in respect of the Group audit	97	96
Regulatory fees	30	31
Operating lease expense	68	81

 

7.      Directors and employees

	Year ended 31 December  2023   $'000	Year ended 31 December  2022   $'000
Employment costs (inc. Directors' remuneration):
Wages and salaries	1,286	1,563
Pensions	30	49
Social security costs	97	93
	1,413	1,705
Share based payments	414	1,035
	1,827	2,740

 

The share based payments comprised the fair value of options granted to Directors and employees in respect of services provided.

Wages and salaries include amounts that are recharged between subsidiaries. Some of these costs are then capitalised as development and production assets and others are administration expenses (as shown above).

The average monthly number of employees during 2023 was 147 (2022: 168) split as follows:

	Year ended 31 December 2023	Year ended 31 December 2022
Management	8	9
Technical	110	129
Administration	29	30
	147	168

 

	Year ended 31 December 2023   $'000	Year ended 31 December 2022   $'000
Amounts attributable to the highest paid Director:
Director's salary and bonus	466	426
Pension	15	25
Share based payments	67	104
	548	555

 

Key management and personnel are considered to be the Directors.

8.      Other income

	Year ended 31 December 2023   $'000	Year ended 31 December 2022   $'000
Other income Insurance claim	26 -	- 281
	26	281

 

9.       Finance Expense

	Year ended 31 December 2023   $'000	Year ended 31 December 2022   $'000
Interest paid and payable on borrowings (note 16)	248	-
Warrant cost of borrowings (note 21)	125	-
Arrangement fee	55	-
	428	-
Less borrowing costs capitalised (note 12)	(361)	-
	67	-
Unwinding of decommissioning provision (note 17)	43	67
	110	67

 

10.   Taxation

Based on the results for the year, there is no charge to UK or foreign tax. This is reconciled to the accounting loss as follows:

 

UK taxation	Year ended 31 December  2023   $'000	Year ended 31 December  2022   $'000
UK Group loss on ordinary activities	(2,213)	(1,608)
Loss before taxation at the average UK standard rate of 23.5% (2021:19%)	(520)	(306)
Effect of:
Zero tax rate income	(1,966)	(1,570)
Disallowable expenses	125	302
Tax losses for which no deferred income tax asset was recognised	4,304	2,876
Current tax	-	-

 

The Group offsets deferred tax assets and liabilities if, and only if, it has a legally enforceable right to offset current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities related to corporation taxes levied by the same tax authority. Due to the tax rates applicable in the jurisdictions of the Group's subsidiary entities (being 0%) no deferred tax liabilities or assets are considered to arise.

The Group has not recognised deferred income tax assets for tax losses carried forward for entities in which it is not considered probable that there will be sufficient future taxable profits available for offset. Unrecognised deferred income tax assets related to unused tax losses. The Company has UK corporation tax losses available to carry forward against future profits of approximately $16,627,000 (2022: $14,414,000 - estimated).

 

11.  Loss Per Share

The calculation for loss per Ordinary Share (basic and diluted) is based on the consolidated loss attributable to the equity shareholders of the Company is as follows:

 

	Year ended 31 December 2023	Year ended 31 December 2022
Loss attributable to equity Shareholders ($'000)	(2,213)	(1,608)
Weighted average number of Ordinary Shares	702,875,778	660,223,772
Loss per Ordinary share ($/cents)	(0.31)c	(0.24)c

 

Loss and diluted loss per Ordinary Share are calculated using the weighted average number of Ordinary Shares in issue during the year. Diluted share loss per share has not been calculated as the options and warrants have no dilutive effect given the loss arising in the year.

12.  Property, Plant and Equipment

	Development & Production Assets	PPE/Computer / Office Equipment / Motor Vehicles	Total
	$'000	$'000	$'000
Cost
At 1 January 2022	26,962	1,802	28,764
Additions	2,397	333	2,730
Disposals	-	(89)	(89)
Reduction in BLO (see note 17)	(265)	-	(265)
Foreign exchange movements	21	26	47
At 31 December 2022	29,115	2,072	31,187
Additions*	3,286	115	3,401
Disposals	-	(151)	(151)
Change in decommissioning provision	(686)	-	(686)
Foreign exchange movements	4	(4)	-
At 31 December 2023	31,719	2,032	33,751
Accumulated depreciation
At 1 January 2022	4,029	390	4,419
Disposals	-	(2)	(2)
Charge for the year	1,683	273	1,956
Foreign exchange movements	(1)	-	(1)
At 31 December 2022	5,711	661	6,372
Disposals	(3)	(54)	(57)
Charge for the year	1,067	307	1,374
Impairment	2,210	-	2,210
Foreign exchange movements	(1)	-	(1)
At 31 December 2023	8,986	914	9,899
Carrying Amount
At 31 December 2022	23,404	1,411	24,815
At 31 December 2023	22,733	1,118	23,851

*This includes additions of $361,000 which relates to capitalised borrowing costs.

Carrying amount of property plant and equipment by cash generative unit (CGU):

 

	Norio	Satsk henisi	West Rustavi	Rustaveli	Corporate	Total
	$'000	$'000	$'000	$'000	$'000	$'000
Carrying amount
At 31 December 2023	14	28	16,967	6,403	439	23,851
At 31 December 2022	2,126	174	14,625	7,488	402	24,815

 

The impairment charge of $2.2m (2022: £nil) arose on the production and development assets held by Norio and Satskhenisi following a decision to define these assets as non-core to the business operations. This was a result of an extensive review of the cost of operations and decision not to allocate additional capital for the further development of these CGUs. Following this decision, the oil and gas assets at Norio and Satskhenisi were written down to £nil (2022: $2.3m).  The remaining assets within this CGU relate to non-oil and gas assets only.

13.  Inventory

	31 December 2023   $'000	31 December 2022   $'000
Spare parts and consumables	3,286	3,606
Crude oil	1,091	1,185
	4,377	4,791

                                                                                                                                     

14.  Trade and Other Receivables

	31 December 2023   $'000	31 December 2022   $'000
Trade debtors	233	-
Other receivables	420	347
Prepayments	318	213
	971	560

 

The fair value at amortised cost is considered to be equivalent to the book value as none of these receivables are considered to be impaired.

15.  Cash and Cash Equivalents

	31 December  2023   $'000	31 December 2022   $'000
Cash and cash equivalents	713	450

 

Cash and cash equivalents consist of balances in bank accounts used for normal operational activities. The vast majority of the cash was held in an institution with a Standard & Poor's credit rating of A-1.

 

16.  Trade and Other Payables

	31 December 2023   $'000	31 December 2022   $'000
Trade and other payables	1,041	1,182
Accruals	135	511
	1,176	1,693

 

Trade and other payables principally comprise amounts outstanding for corporate services and operational expenditure.

During the year the Company entered into a $2,000,000 (2022: $nil) loan with a simple interest rate of 16% becoming payable every quarter.  This was drawn down in two tranches, with $1,060,000 being drawn down on 1 February 2023 and the remainder of $940,000 being drawn down on 10 May 2023.  The maturity date of this loan is set at 18 months from the date of the drawdowns and has been recognised as a short-term loan.

The loan was advanced for the purpose of the drilling of side tracks and associated works as part of the Company's Project development strategy in relation to the development of the Middle Eocene reservoir within West Rustavi/Krtsanisi.

The Company also granted warrants in consideration for this loan for 50% of the commitment, exercisable for three years from the drawdown at the price of 1.7p and 1.9p for the two respective tranches.  . See note 21 for further details on the number of warrants issued and their valuation.  A portion of these costs were capitalised as part of the borrowing costs (see note 9).

17.  Provisions

	31 December 2023 $'000	31 December 2022 $'000
Decommissioning provision	1,080	1,723
Baseline oil liability	-	-
	1,080	1,723

 

Decommissioning provision	31 December 2023 $'000	31 December 2022 $'000
Brought forward	1,723	2,040
Unwinding of discount on provision	43	66
Change in decommissioning provision in the year	(686)	(383)
Carried forward	1,080	1,723
Baseline oil liability	31 December 2023 $'000	31 December 2022 $'000
Brought forward	-	265
Baseline oil liability reducing from the acquisition	-	(265)
Additional baseline oil liability provided in the year	-	-
Carried forward	-	-

 

Decommissioning provisions are based on management estimates of work and the judgement of the Directors. By its nature, the detailed scope of work required, and timing of such work is uncertain.

The baseline oil liability arose from the acquisition of BRL in 2020. Under the production sharing contract for Block XIB, BRL was obliged to deliver a certain quantity of oil to the State of Georgia in quarterly instalments by May 2022. This was all delivered and there were no further liabilities at year end.

18.  Share Capital

Called up, allotted, issued and fully paid	No. Ordinary  Shares	No. Deferred Shares	Nominal Value $
As at 1 January 2022	652,749,525	2,095,165,355	3,482,148
Issue of equity on 5 January 2022	324,102	-	1,087
Issue of equity on 2 February 2022	1,768,705	-	5,903
Issue of equity on 3 February 2022	233,232	-	778
Issue of equity on 11 February 2022	636,832	-	2,126
Issue of equity on 1 March 2022	400,219	-	1,313
Issue of equity on 2 March 2022	280,117	-	919
Issue of equity on 1 April 2022	404,838	-	1,273
Issue of equity on 3 April 2022	376,773	-	1,184
Issue of equity on 4 May 2022	636,077	-	2,004
Issue of equity on 1 June 2022	273,392	-	793
Issue of equity on 6 June 2022	586,133	-	1,700
Issue of equity on 6 July 2022	902,395	-	2,751
Issue of equity on 2 August 2022	1,378,658	-	4,073
Issue of equity on 2 September 2022	2,551,864	-	7,125
Issue of equity on 4 October 2022	1,632,875	-	4,698
Issue of equity on 14 October 2022	464,457	-	1,336
Issue of equity on 1 November 2022	233,047	-	506
Issue of equity on 2 November 2022	656,382	-	1,889
Issue of equity on 1 December 2022	303,268	-	917
Issue of equity on 2 December 2022	1,569,850	-	4,749
Issue of equity on 13 December 2022	12,000,000	-	36,303
As at 31 December 2022	680,362,741	2,095,165,355	3,565,575

 

Issue of equity on 4 January 2023	764,340	-	2,353
Issue of equity on 6 February 2023	5,622,613	-	16,922
Issue of equity on 7 March 2023	924,997	-	2,855
Issue of equity on 5 April 2023	1,876,413	-	5,896
Issue of equity on 03 August 2023	35,124,708	-	111,798
As at 31 December 2023	724,675,812	2,095,165,355	3,705,399

 

On 4 January 2023, the Company issued 414,879 Ordinary Shares to two service providers in lieu of cash settlement for services provided to the Company with a total value of £5,145 ($6,335).

On 4 January 2023, the Company issued 349,461 Ordinary Shares to three Non-Executive Directors, on exercise of their nil cost options.

On 3 February 2023, the Company issued 296,556 Ordinary Shares to three Non-Executive Directors on exercise of their nil cost options.

On 6 February 2023, the Company issued 5,173,662 Ordinary Shares to the Employee Benefit Trust at par value.

On 6 February 2023, the Company issued 152,395 Ordinary Shares to two service providers in lieu of cash settlement for services provided to the Company with a total value of £2,421 ($2,915).

On 7 March 2023, the Company issued 646,849 Ordinary Shares to two service providers in lieu of cash settlement for services provided to the Company with a total value of £7,783 ($9,608).

On 7 March, the Company issued 278,148 Ordinary Shares to two Non-Executive Directors, on exercise of their nil cost options.

On 5 April 2023, the Company issued 1,400,025 Ordinary Shares to two Non-Executive Directors, on exercise of their nil cost options.

On 5 April 2023, the Company issued 476,388 Ordinary Shares to two service providers in lieu of cash settlement for services provided to the Company with a total value of £4,783 ($6,011).

On 3 August, the Company issued 30,000,000 Ordinary shares to the Employment Benefit Trust at par value.

On 3 August, the Company issued 5,124,708 Ordinary shares to three service providers in lieu of cash settlement for services provided to the Company with a total value of £68,589 ($87,326).

---

On 5 January 2022, the Company issued 324,102 Ordinary Shares to two service providers in lieu of cash settlement for services provided to the Company with a total value of £3,033 ($4,067).

On 2 February 2022, the Company issued 1,768,705 Ordinary Shares to three Non-Executive Directors and a consultant, on exercise of their nil cost options.

On 3 February 2022, the Company issued 233,232 Ordinary Shares to two service providers in lieu of cash settlement for services provided to the Company with a total value of £3,033 ($4,049).

On 11 February 2022, the Company issued 636,832 Ordinary Shares to a consultant on exercise of their nil cost options.

On 1 March 2022, the Company issued 400,219 Ordinary Shares to three Non-Executive Directors on exercise of their nil cost options.

On 2 March 2022, the Company issued 280,117 Ordinary Shares to two service providers in lieu of cash settlement for services provided to the Company with a total value of £3,033 ($3,981).

On 1 April 2022, the Company issued 404,838 Ordinary Shares to three Non-Executive Directors on exercise of their nil cost options.

On 3 April 2022, the Company issued 376,773 Ordinary Shares to three service providers in lieu of cash settlement for services provided to the Company with a total value of £4,033 ($5,071).

On 4 May 2022, the Company issued 329,458 Ordinary Shares to three Non-Executive Directors on exercise of their nil cost options. Additionally on this date, the Company issued 306,619 Ordinary Shares to three service providers in lieu of cash settlement for services provided to the Company with a total value of £4,033 ($5,081).

On 1 June 2022, the Company issued 273,392 Ordinary Shares to three Non-Executive Directors on exercise of their nil cost options.

On 6 June 2022, the Company issued 586,133 Ordinary Shares to three service providers in lieu of cash settlement for services provided to the Company with a total value of £8,183 ($9,494).

On 6 July 2022, the Company issued 243,395 Ordinary Shares to three Non-Executive Directors on exercise of their nil cost options. Additionally on this date, the Company issued 659,000 Ordinary Shares to three service providers in lieu of cash settlement for services provided to the Company with a total value of £10, 641 ($12,976).

On 2 August 2022, the Company issued 309,767 Ordinary Shares to three Non-Executive Directors on exercise of their nil cost options. Additionally on this date, the Company issued 671,722 Ordinary Shares to two service providers in lieu of cash settlement for services provided to the Company with a total value of £11,473 ($13,557) and 397,169 Ordinary Shares to a former consultant following the exercise of their nil cost options.

On 2 September 2022, the Company issued 307,978 Ordinary Shares to three Non-Executive Directors on exercise of their nil cost options. Additionally on this date, the Company issued 2,243,886 Ordinary Shares to three service providers in lieu of cash settlement for services provided to the Company with a total value of £31,400 ($35,070).

On 4 October 2022, the Company issued 233,192 Ordinary Shares to three Non-Executive Directors on exercise of their nil cost options. Additionally on this date, the Company issued 1,399,683 Ordinary Shares to three service providers in lieu of cash settlement for services provided to the Company with a total value of £21,950 ($25,262).

On 14 October 2022, the Company issued 464,457 Ordinary Shares to a consultant on exercise of their nil cost options.

On 1 November 2022, the Company issued 233,047 Ordinary Shares to three Non-Executive Directors on exercise of their nil cost options.

On 2 November 2022, the Company issued 656,382 Ordinary Shares to a service provider in lieu of cash settlement for services provided to the Company with a total value of £12,198 ($14,038).

On 1 December 2022, the Company issued 303,268 Ordinary Shares to three Non-Executive Directors on exercise of their nil cost options.

On 2 December 2022, the Company issued 1,569,850 Ordinary Shares to three service providers in lieu of cash settlement for services provided to the Company with a total value of £28,640 ($34,657).

On 13 December 2022, the Company issued 12,000,000 Ordinary Shares to Jindal Petroleum (Georgia) Limited on exercise of the nil cost options which were granted in 2020 as part of the consideration for the acquisition of Schlumberger Rustaveli Company Limited.

The Ordinary Shares consist of full voting, dividend and capital distribution rights and they do not confer any rights for redemption. The Deferred Shares have no entitlement to receive dividends or to participate in any way in the income or profits of the Company, nor is there entitlement to receive notice of, speak at, or vote at any general meeting or annual general meeting.

19.  Share Premium Account

		$'000
Balance at 1 January 2023		34,765
Premium arising on issue of equity shares		91
Share issue costs		-
Balance at 31 December 2023		34,856
		$'000
Balance at 1 January 2022		34,625
Premium arising on issue of equity shares		140
Share issue costs		-
Balance at 31 December 2022		34,765

 

20.  Reserves

The following describes the nature and purpose of each reserve within owners' equity.

 

Reserves	Description and purpose
Share capital	Amount subscribed for share capital at nominal value.
Share premium account	Amount subscribed for share capital in excess of nominal value, less attributable costs.
Other reserves	The other reserves comprises the fair value of all share options and warrants which have been charged over the vesting period, net of the amount relating to share options which have expired, been cancelled and have vested. It also comprises of the fair value of the share options issued as part of the consideration paid for the acquisition of the subsidiary BRL and subsequently relinquished in the year.  This movement has been shown in the Consolidated Statement of the Changes in Equity and is also set out in the table below
Foreign exchange reserve	Exchange differences on translating the net assets of foreign operations
Accumulated deficit	Cumulative net gains and losses recognised in the income statement and in respect of foreign exchange.

 

Other reserves		$'000
Balance at 1 January 2023		4,525
Share based payments		414
Options movement		(173)
Balance at 31 December 2023		4,766
		$'000
Balance at 1 January 2022		10,260
Share based payments		1,072
Options movement		(6,807)
Balance at 31 December 2022		4,525

 

On 30^th November 2022, the Company announced that the outstanding Consideration due to Schlumberger Production Management ("SLB"); (the seller of XIB) had not been taken up and that the 108,000,000 nil-cost options issued to SLB were to be relinquished. This decision has significantly improved the Company's accumulated deficit, with $6,389,000 of the movement in options being attributable to this relinquishment of options and their subsequent  recycling of this amount through the reserves.

21.  Warrants

	Number of Warrants	31 December 2023 weighted average exercise price	Number of Warrants	31 December 2022 weighted average exercise price
Outstanding at the beginning of the year	10,809,194	4p	16,820,502	6p
Granted in the year	44,682,643	1.8p	-	-
Expired in the year	(1,250,000)	4p	(6,011,308)	11p
Outstanding at the end of the year	54,241,837	2.2p	10,809,194	4p

 

As at 31 December 2023, all warrants were available to exercise and were exercisable at prices between 1.7p and 12.5p (31 December 2022: 3p and 12.5p). The weighted average life of the warrants is 2.1 years (31 December 2022: 2.8 years). 44,682,643 warrants were issued during the year, nil were exercised and 1,250,000 warrants expired.

The warrants granted during the year related to the cost of borrowing and therefore a fair value was calculated using the Black Scholes Model.  This resulted in fair value charge of $125,000 being assigned to the warrants granted to the lenders.  The inputs used for the model are shown below in note 22.

 

22.  Share Based Payments

 

During the year, the Group operated a Block Energy Plc Share Option Plan (Share Option Scheme).

 

Under IFRS 2, an expense is recognised in the statement of comprehensive income for share based payments, to recognise their fair value at the date of grant. The application of IFRS 2 gave rise to a charge of $414,000 for the year ended 31 December 2023. The equivalent charge for the year ended 31 December 2022 was $1,072,000. The Group recognised total expenses (all of which related to equity settled share-based payment transactions) under the current plans of:

 

	Year ended 31 December 2023	Year ended 31 December 2022
	$'000	$'000
Share option scheme	414	1,072
	414	1,072

 

Share Option Scheme

The vesting period varies between 0 days to 3 years. The options expire if they remain unexercised after the exercise period has lapsed and have been valued using the Black Scholes model.

 

The following table sets out details of all outstanding options granted under the Share Option Scheme.

 

	2023	2023	2022	2022
	Options	Weighted average exercise price	Options	Weighted average exercise price
Outstanding at beginning of year	100,106,152	$0.02	47,065,951	$0.05
Granted during the year	26,701,508	$0.01	85,637,597	$0.02
Exercised during the year	8,540,800	$0.00	(15,111,350)	$0.01
Expired during the year	18,481,019	$0.03	(17,486,046)	$0.06
Outstanding at the end of the year	99,785,841	$0.01	100,106,152	$0.02
Exercisable at the end of the year	83,823,460		59,272,819

 

The weighted average exercise price of the share options exercisable at 31 December 2023 is $0.01 (31 December 2022: $0.02). The weighted average contractual life of the share based payments outstanding at 31 December 2023 is 9.16 years (31 December 2022: 7.96 years).

 

The estimated fair values of these share options, and the inputs used in the Black-Scholes model to calculate those fair values are as follows:

 

Date of grant	Number of options	Estimated fair value	Share price	Exercise price	Expected volatility	Expected life	Risk free rate	Expected dividends
30 June 2017	1,200,000	$0.04	$0.01	$0.03	84%	5.5 years	1.16%	0%
6 April 2018	4,400,000	$0.05	$0.04	$0.03	84%	10 years	1.34%	0%
11 June 2018	18,098,332	$0.04	$0.05	$0.05	84%	10 years	1.23%	0%
21 October 2019	6,325,000	$0.05	$0.06	$0.15	109%	9.0 years	0.63%	0%
1 March 2021	10,800,00	$0.04	$0.04	$0.06	192%	9.5 years	0%	0%
8 April 2022	25,200,000	$0.01	$0.02	$0.02	105%	10 years	1.75%	0%
	Warrants
31 December 2020	8,750,167	$0.04	$0.04	$0.04	190%	5 years	0%	0%
1 February 2023	25,330,249	$0.003	$0.012	$0.017	70.5%	3 years	3.76%	0%
10 May 2023	19,352,394	$0.003	$0.013	$0.019	70.5%	3 years	3.57%	0%

All share-based payment charges are calculated using the fair value of options.

For the options and warrants granted in 2023, expected volatility was determined by reviewing benchmark values from comparator companies. For the options granted prior to 2023, expected volatility was determined by reference to the volatility of historic trading prices of the Company's shares.

23.  Financial Instruments

Capital Risk Management

The Company manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders. The overall strategy of the Company and the Group is to minimise costs and liquidity risk.

The capital structure of the Group consists of equity attributable to equity holders of the parent, comprising issued share capital, foreign exchange and other reserves and retained earnings as disclosed in the Consolidated Statement of Changes of Equity.

The Group is exposed to a number of risks through its normal operations, the most significant of which are interest, credit, foreign exchange and liquidity risks. The management of these risks is vested to the Board of Directors.

The sensitivity has been prepared assuming the liability outstanding was outstanding for the whole period. In all cases presented, a negative number in profit and loss represents an increase in finance expense / decrease in interest income.

Credit Risk

Credit risk is the risk that the Group will suffer a financial loss as a result of another party failing to discharge an obligation and arises from cash and other liquid investments deposited with banks and financial institutions and receivables from the sale of crude oil.

For deposits lodged at banks and financial institutions these are all held through a recognised financial institution. The maximum exposure to credit risk is $713,000 (2022: $ 450,000). The Group does not hold any collateral as security.

The carrying value of cash and cash equivalents and financial assets represents the Group's maximum exposure to credit risk at year end. The Group has no material financial assets that are past due.

The Company has made unsecured loans at a simple interest rate of 5% to its subsidiary companies. Although the loans are repayable on demand, they are unlikely to be repaid until the projects become successful and the subsidiaries start to generate revenues. An assessment of the expected credit loss arising on intercompany loans is detailed in note 6 to the parent Company financial statements.

Market Risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices.  Market risk for the Company comprises of currency risk (discussed below) and  interest rate risk.  Since there are no variable interest-bearing loans in the Group (the Group Borrowings are set at a fixed rate of 16%), no risk is therefore identified.

Currency Risk

Foreign currency risk can only arise on financial instruments that are denominated in a currency other than the functional currency in which they are measured. Translation-related risks are therefore not included in the assessment of the entity's exposure to currency risks. Translation exposures arise from financial and non-financial items held by an entity (for example, a subsidiary) with a functional currency different from the Group's presentational currency. However, foreign currency-denominated inter-company receivables and payables which do not form part of a net investment in a foreign operation would be included in the sensitivity analysis for foreign currency risks; this is because, even though the balances eliminate in the consolidated balance sheet, the effect on profit or loss of their revaluation under IAS 21 is not fully eliminated.

A 10% increase in the strength of the pound sterling against the US dollar would cause an estimated increase of $221,000 (2022: $161,000 increase) in the loss after tax of the Group for the year ended 31 December 2022, with a 10% weakening causing an equal and opposite decrease.  The impact on equity is the same as the impact on loss after tax.

The Group's cash and cash equivalents and liquid investments are mainly held in US dollars, pounds sterling and Georgian Lari. At 31 December 2023, 16% of the Group's cash and cash equivalents and liquid investments were held in pounds sterling. 78% in Georgian Lari and the remainder in US dollars (31 December 2022: 12% in pounds sterling, 74% in Georgian Lari and the remainder in US dollars, Euros and Canadian dollars).

Liquidity Risk

Liquidity risk arises from the possibility that the Group and its subsidiaries might encounter difficulty in settling its debts or otherwise meeting its obligations related to financial liabilities. In addition to equity funding, additional borrowings have been secured in the past to finance operations. The Company manages this risk by monitoring its financial resources and carefully plans its expenditure programmes. Financial liabilities of the Group comprise trade payables which mature in less than twelve months.

 

24.  Categories of Financial Instruments

In terms of financial instruments, these solely comprise of those measured at amortised cost and are as follows:

 

	31 December 2023   $'000	31 December 2022   $'000
Liabilities at amortised cost	1,042	1,694
Borrowings at amortised cost	2,000	-
	3,042	1,694
Cash and cash equivalents at amortised cost	713	450
Financial assets at amortised cost	971	347
	1,684	789

 

A fixed and floating charge has been placed over the assets owned by the Group as security for the $2m borrowings taken out in the year. This will be discharged in full on payment of these secured liabilities.

25.  Subsidiaries

At 31 December 2023, the Group consists of the following subsidiaries, which are wholly owned by the Company.

Company	Country of Incorporation	Proportion of voting rights and equity interest	Proportion of voting rights and equity interest
		2023	2022
Block Norioskhevi Ltd	British Virgin Islands	100%	100%
Satskhenisi Ltd	Marshall Islands	100%	100%
Georgia New Ventures Inc.	Bahamas	100%	100%
Block Operating Company LLC	Georgia	100%	100%
Block Rustaveli Limited	British Virgin Islands	100%	100%
Didi Lilo & Nakarala Limited	British Virgin Islands	100%	100%
South Samgori Limited	British Virgin Islands	0%	100%

 

Subsidiaries - Nature of business

The principal activity of Georgia New Ventures Inc, Satskhenisi Ltd, Block Norioskhevi Ltd and Block Rustaveli Limited is oil and gas development and production.

The principal activity of Block Operating Company LLC is to be the operator of the oil and gas licenses held in Georgia.

The principal activity of South Samgori Limited and Didi Lilo & Nakarala Limited is oil and gas exploration.  These companies were both incorporated on 28 October 2022.  South Samgori was disposed of in the first quarter of 2023 for nil consideration, as part of a Farm out Agreement, involving exploration licences being split between Didi Lilo & Nakarala with Georgia Oil & Gas Limited (GOG). These licences will continue to be explored by the Group as part of a Joint Operating Agreement with GOG.

Registered office

The registered office of Georgia New Ventures Inc. is Bolam House, King and George Streets, P.O. Box CB 11.343, Nassau, Bahamas.

 

The registered office of Satskhenisi Ltd is Trust Company Complex, Ajeltake road, Ajeltake Island, Majuro, Marshall Islands MH96960.

 

The registered office of Block Norioskhevi Ltd is Trident Chambers, P.O.Box 146, Road Town, Tortola, British Virgin Islands.

 

The registered office of Block Operating Company LLC is 13A Tamarashvili Street, Tbilisi 0162, Georgia.

 

The registered office of Block Rustaveli Limited is Craigmuir Chambers, Road Town, Tortola, VG1110, British Virgin Islands.

 

The registered office of South Samgori Limited and Didi Lilo & Nakarala Limited is Woodbourne Hall, Road Town, Tortola, British Virgin Islands.

26.  Commitments

Commitments at the reporting date that have not been provided for were as follows:

Operating lease commitment

At year end the total of future minimum lease payments under non-cancellable operating leases for each of the following periods was:

	31 December 2023   $'000	31 December 2022   $'000
Within 1 year	81	269
Between 1 and 5 years	-	-
Total	-	269

 

Short term leases are leases with a lease term of 12 months or less without a purchase option and are recognised on a straight-line basis as an expense in the profit or loss account.

27.  Related Party Transactions

The Directors consider that there is no ultimate controlling party.

Key management personnel comprises of the Directors and details of their remuneration are set out in Note 7 and the Remuneration Report.

The Company secured a $2m loan facility during the year and the  draw down on this loan included the following related parties, who also received warrants as set out below:

 

Paul Haywood - $115,000                        2,665,373 warrants at a fair value cost of $7,569

Ken Seymour - $125,000                          2,904,337 warrants at a fair value cost of $8,241

28. Events Occurring After Year End

On the 16^th January 2024, the Company announced the results of a study into the carbon storage potential of the Patardzueli-Samgori Middle Eocene reservoir.

On the 8^th February 2024, the Company announced an Independent Engineering Report covering Contingent Gas Resources associated with Patardzueli-Samgori Lower Eocene and Upper Cretaceous Reservoirs.

On the 12^th February 2024, the Company announced the formal commencement of the Project III farm out campaign.

On the 4^th March 2024, the Company announced results of an internal study into the Contingent Gas Resources associated with the Teleti and Rustavi fields at Lower Eocene and Upper Cretaceous reservoir.