31 May 2022

Baron Oil Plc

 

("Baron Oil", "Baron", the "Company", or the "Group")

 

Final Results for the Year Ended 31 December 2021

 

Baron Oil (AIM: BOIL), the AIM-quoted oil and gas exploration company, is pleased to announce its audited financial results for the year ended 31 December 2021.

 

Operational Highlights

 

•	Strategy implemented to focus on owning significant equity interests in high impact oil and gas exploration and appraisal activities
•	Significant increases in the stakes in both the Timor-Leste Chuditch PSC (from 25% to 75%) and the UK P2478 licence (from 15% to 32%) during the year
•	Considerable progress made on Chuditch during the year including the results of a review of prospective resources by THREE60 Energy and interim 3D seismic PSDM products which were received from the processing contractor TGS-NOPEC, showing encouraging improvements in subsurface imaging. Iterative processing and interpretation feedback has subsequently continued
•	On UK P2478, Phase A technical work commitments with Baron's direct technical involvement commenced following the Farm-Up agreement signed with the joint venture partners
•	Post period end steps taken to relinquish Block XXI in Peru

 

Financial Highlights

 

•	Loss after taxation attributable to shareholders was £1,127,000 (2020: £920,000 loss)
•	Exploration and evaluation expenditure of £218,000 (2020: £145,000)
•	Consolidation for the first time of TLS gives rise to the creation of an intangible oil and gas asset amounting to £1,362,000. In addition, evaluation and development expenditure on the asset by the Group during the period amounts to a further £1,307,000, with the total carrying value of this asset being £2,669,000 at 31 December 2021
•	Administration expenditure for the year was £1,321,000 (2020: £710,000), largely as a result of the consolidation of TLS for nine months and share-based charges
•	Free cash balance at 31 December 2021 was £1,650,000 (31 December 2020: £1,190,000)

 

Commenting on the results, John Wakefield, Non-executive Chairman, said:

 

"2021 was a year of considerable progress for Baron, implementing our strategy to own significant equity interests in high impact oil and gas exploration and appraisal activities.  We increased our stakes in both the Timor-Leste Chuditch PSC and the UK P2478 licence during the year and, with the oil & gas tailwinds behind us, I believe the Company is now in its best shape for many years."

 

"We have worked hard to pivot the Company towards assets where we have significant interests in meaningful and active opportunities. Our task over the next year or so is to progress our two major projects through the key evaluation points with a view to unlocking value for shareholders. On the back of our recently oversubscribed £1.65 million (gross) fund raise we have funding to get these activities to their next decision points and I look forward to reporting on our further progress in due course." 

 

Posting of Annual Report and Notice of AGM

 

The Company's Annual Report and Financial Statements, for the year ended 31 December 2021, will be available for download from the Company's website (https://www.baronoilplc.com/) later today and will be despatched by post shortly to those shareholders that have requested a hard copy.

 

The Company will hold its Annual General Meeting at 11 a.m. BST on 28 June 2022 at 38-43 Lincoln's Inn Fields, London WC2A 3PE and the Notice of Annual General Meeting to that effect will be sent to shareholders shortly and will be available on the Company's website.

 

For further information, please contact:

 

Baron Oil Plc		+44 (0) 20 7117 2849
Andy Yeo, Chief Executive
Allenby Capital Limited		+44 (0) 20 3328 5656
Nominated Adviser and Broker
Alex Brearley, Nick Harriss, Nick Athanas (Corporate Finance) Kelly Gardiner (Sales and Corporate Broking)
IFC Advisory Limited		+44 (0) 20 3934 6630
Financial PR and IR
Tim Metcalfe, Florence Chandler

 

Qualified Person's Statement

 

Pursuant to the requirements of the AIM Rules - Note for Mining and Oil and Gas Companies, the technical information and resource reporting contained in this announcement has been reviewed by Jon Ford BSc, Fellow of the Geological Society, Technical Director of the Company. Mr Ford has more than 40 years' experience as a petroleum geoscientist. He has compiled, read and approved the technical disclosure in this regulatory announcement and indicated where it does not comply with the Society of Petroleum Engineers' standard.

 

 

 

CHAIRMAN'S STATEMENT & OPERATIONS REPORT

 

Financial and Financial Results

 

The net result for the year was a loss before taxation of £1,127,000, which compares to a loss of £920,000 for the preceding financial year; the loss after taxation attributable to Baron Oil shareholders was £1,127,000, compared to a loss of £920,000 in the preceding year.

 

Turnover for the year was £nil (2020: £nil), there being no sales activity during the period.

 

Exploration and evaluation expenditure written off included in the Income Statement amounts to £218,000. Impairment provisions in respect of Peru Block XXI were increased by £17,000, this being attributable to exchange rate fluctuations on the translation of US Dollar based Peruvian assets, together with a further £7,000 impairment of a related tax receivable. The directors judged that no other exploration assets required impairment.

 

The rise in Administration expenses for the year to £1,321,000 (2020: £710,000) requires explanation. The largest impact of £285,000 is due to the consolidation of SundaGas (Timor-Leste Sahul) Pte. Ltd. ("TLS") for a nine month period having been previously accounted for as an associated undertaking. It also includes a rise of £205,000 for non-cash share-based payments arising on the grant of options and finally we incurred additional non-recurring UK costs of £75,000 relating to consultancy arrangements and thereafter completion of notice of a former director. Overall, there have been no material changes to our budgets. It is worth noting that we anticipate a further rise in TLS expenses in 2022, again budgeted, as we move to a full 12 month reporting period at the Group level and the Dili office in Timor-Leste is now fully operational.   

 

During 2021, the Pound Sterling/US Dollar exchange rate was relatively stable, with an overall exchange gain of £22,000 (loss of £157,000 in 2020) on the Group's holding of US Dollar assets.

 

In April 2021, the Company increased its stake in TLS to a controlling interest of 85% at a cash cost of US$1,243,000; and acquired the remaining 15% on 17 June 2021 in exchange for the issue of 1,157,202,885 ordinary shares in the Company. Baron was not required to make any further contribution to the bank guarantee deposit. The full value of the guarantee deposit of US$1,000,000 is now consolidated, with US$667,000 shown as a payable to SundaGas Pte. Ltd.

 

There is a gain of £302,000 arising on the deemed disposal of the interest in the associated undertaking under IFRS3 that arises on the acquisition of the remaining equity in TLS.

 

TLS is regarded as a single asset company under IFRS3 and its consolidation for the first time gives rise to the creation of an intangible oil and gas asset amounting to £1,362,000. In addition, evaluation and development expenditure on the asset by the Group during the period amounts to a further £1,307,000, with the total carrying value of this asset being £2,669,000 at 31 December 2021.

 

At the end of the financial year, free cash reserves of the Group had increased to £1,650,000 from a level at the preceding year end of £1,190,000. The proceeds of placings and subscription of new shares in the year amounting to £3,000,000 gross (£2,768,000 net of costs) bolstered the Company's cash reserves. The Group's investment in intangible assets in the UK and Timor-Leste amounted to £2,465,000 in the period, including the cost of acquiring TLS, plus a further non-capitalised exploration and evaluation activity of £218,000, and £1,072,000 of operating cash outflow. In April 2022, the Company undertook a further capital raise with a new ordinary share Placing and Subscription of £1,650,000 gross (£1,505,000 net of costs).

 

The Group continues to take a conservative view of its asset impairment policy, giving it a Statement of Financial Position that consists of significant net current assets and what the Board considers to be a realistic value for its exploration assets. Given limited cash resources, the Board will take a prudent approach in entering into new capital expenditures beyond those expected to be committed to existing ventures.

 

Report On Operations

 

Introduction

 

Baron reset its strategy in 2021 to focus on owning significant equity interests in high impact oil and gas exploration and appraisal activities. In pursuit of these goals, we have delivered significant increases in our stakes in both the Timor-Leste Chuditch PSC (from 25% to 75%) and the UK P2478 licence (from 15% to 32%) during the year, whilst subsequent to the year-end taking steps to relinquish Block XXI in Peru.     

 

We currently have two major projects progressing towards key evaluation points, both of which are material in terms of potential value, equity interest and prospective resources, with relatively short timelines to potential drill decisions. It is timely that we are bringing these projects forward when issues of energy security and structural imbalances in Liquified Natural Gas ("LNG"), amongst other factors, has led to a sustained period of high prices for oil and gas.

 

Southeast Asia: Timor-Leste TL-SO-19-16 PSC ("Chuditch PSC" or "PSC");

(Baron 75% interest)

 

Background

 

The Chuditch PSC is located approximately 185 kilometres south of Timor-Leste, 100 kilometres east of the producing Bayu-Undan field, 50 kilometres south of the potential Greater Sunrise development and covers approximately 3,571 km² in water depths of 50-100 metres. The Chuditch-1 discovery well, drilled by Shell in 1998 in 64 metres water depth, encountered a 25 metre gas column in Jurassic Plover Formation sandstone reservoirs on the flank of what is interpreted to be a large faulted structure, at a depth of around 3,000 metres. The Chuditch trend is largely covered by part of a regional 3D seismic survey which was acquired by a previous operator in 2012.

 

Baron holds a 75% working interest and operates the PSC through its wholly owned subsidiary company SundaGas Banda Unipessoal Lda. ("Banda"), with the remaining 25% held by TIMOR GAP Chuditch Unipessoal Lda., a subsidiary of the state-owned national oil company, whose share of PSC expenditure is carried until first production.

 

The work programme obligations in the first two years of the initial three year term of the PSC (to be completed by 18 December 2022) include the reprocessing of legacy seismic data. Subject to satisfactory results from the reprocessing and other technical work, the subsequent commitment is for a well to be drilled in the third year of the initial term. Banda has in place a US$1 million Bank Guarantee against the initial work commitment, of which Baron posted its initial share of US$0.333 million in April 2021, with US$0.667 million remaining in place from SundaGas Pte. Ltd. ("SGPL"), the original parent company prior to the increase in Baron's interest.

 

The initial work programme is designed to address issues with sea-bed topography and shallow geological features that significantly impact the existing seismic image at the reservoir level local to the Chuditch area and create artifacts that seismic processing technologies have hitherto been unable to remove. A pre-stack depth migration ("PSDM") processing routine has been tailored to resolve these issues, utilising new algorithms that address areas of complex seabed and shallow geology. Although computationally intensive and time-consuming, this work is expected to result in a considerably enhanced subsurface image, critical for the definition of the size and shape of the accumulation, which impacts the gas volumes in place and the location of potential future wells.

 

2021 and subsequent activities

 

Significant progress was made on Chuditch during the year, which included the progressive increase in Baron's interest in SundaGas (Timor-Leste Sahul) Pte. Ltd. ("TLS") from 33.33% to 100%. TLS is the parent company of Banda, the Timor-Leste registered subsidiary, which is the operator of and 75% interest holder in the offshore Timor-Leste TL-SO-19-16 PSC.

 

In February, Autoridade Nacional do Petróleo e Minerais ("ANPM"), the Timor-Leste state oil and gas regulatory authority, granted Banda an extension to Contract Year One of the PSC to enable the timely completion of the committed work programme, in particular the seismic reprocessing project. This means that the PSC is currently in Contract Year Two, with Year Three commencing on 19 December 2022.

 

In April, Baron announced the completion of an earn in, supported by a £3 million (gross) fund raise, increasing the Company's interest in TLS from 33.33% to 85%. Baron agreed to fund the remainder of the Chuditch PSC work programme to November 2022, estimated to be US$3.5 million.

 

In June, Baron announced an alignment of interests in relation to the Chuditch PSC, by way of a share exchange, whereby the Company agreed to acquire the remaining 15% of TLS from SGPL in exchange for the issue of 9.99% of Baron's enlarged share capital. Through this share exchange, Baron secured full control of the operating company of the PSC and alignment with the Banda technical and commercial personnel who continue to drive the Chuditch project forward.

 

In July, the Company announced the results of a review of prospective resources by THREE60 Energy Asia Sdn. Bhd. ("THREE60 Energy"), an independent consultancy specialising in petroleum reservoir assessment and asset evaluation, for the Chuditch PSC:

 

•	Independent review of the Chuditch PSC, validated to SPE PRMS 2018 industry standards, indicates aggregate gross Mean Prospective Resources of 3,368 Bscf of gas and 30 MMbbl of condensate, equivalent to a total of 591 MMBOEs;
•	Subsurface risks for prospects and lead are estimated to be low, since they share analogous geological characteristics to the Chuditch-1 and other gas discoveries in adjacent Timor-Leste and Australian waters;
•	The High Estimate of aggregate gross Prospective Resources equivalent to 1,156 MMBOE may reflect the potential for a single, large accumulation.

 

In September, a farmout initiative was launched running in parallel with the seismic reprocessing and other technical and commercial studies. This initiative is ongoing and is expected to accelerate as technical studies near completion and uncertainties around the Chuditch project are reduced.

 

In December, interim 3D seismic PSDM products were received from the processing contractor TGS-NOPEC, showing encouraging improvements in subsurface imaging. Iterative processing and interpretation feedback has subsequently continued, including the delivery of further interim steps. In-house interpretation of the reprocessed 3D seismic data is expected to commence in June 2022 and we look forward to updating shareholders on the results of the final 3D PSDM data thereafter.

 

A decision on whether to enter the drilling phase, with the potential for a high impact drilling programme in 2023, is scheduled to be taken in Q4 2022 following receipt and Interpretation of the final seismic reprocessing data volumes.

 

In parallel with the 3D seismic reprocessing project, additional geological and engineering studies have been completed or are ongoing, including:

 

•	Extensive 2D regional seismic interpretation and mapping and petroleum systems modelling exercises to provide a regional context of the Chuditch trend;
•	A revised petrophysical evaluation of the Chuditch-1 discovery, confirming the quality of Chuditch reservoirs as potentially gas productive;
•	A well engineering study to provide preliminary designs and indicative costs for a Chuditch appraisal well and a step-out exploration well; and
•	A facilities and gas export engineering study, evaluating the layout and costs of infield facilities required for a future Chuditch LNG development, the various pipeline and standalone options for gas export, and the treatment and storage of carbon dioxide.

 

This work culminated in an update announcement and live investor presentation in late January 2022 which was attended by more than 100 participants. The presentation, which is available on the Baron website, covered a wide range of topics including: 

 

•	An updated technical overview;
•	A description of the overall commercial context;
•	Options for potential future gas export strategies via pipeline to LNG facilities, or standalone solutions such as a Floating Liquefied Natural Gas (FLNG) facility;
•	Preliminary concepts for the handling of carbon dioxide and CCS (carbon capture and storage); and
•	A preliminary design for a Chuditch appraisal well, with an indicative dry hole cost estimate in the range of US$15-$20 million.

 

At the regulatory level, Banda continues to enjoy a strong and constructive relationship with ANPM. An operational office was opened in Dili in early 2022 and the recruitment of a fit-for-purpose local management and technical team was completed during Q2 2022.

 

Post the reporting period ANPM announced the results of the Second Timor-Leste Licensing Round. Baron, having studied the available acreage in the round, did not submit a bid, believing that Chuditch represents the current highest value opportunity in offshore Timor-Leste. The Company is encouraged by the award to ENI Australia B.V, a subsidiary of the Italian major oil company, of Block P which neighbours the Chuditch PSC area. Santos NA Timor-Leste Pty Ltd was awarded Block R.

 

United Kingdom Offshore Licence P2478 "Dunrobin";

(Baron 32%)

 

Background

 

Innovate Licence P2478, awarded in September 2019, is currently held by Corallian Energy Limited ("Corallian", Licence Administrator, interest 36%), Baron (32%), and Upland Resources (UK Onshore) Limited (32%). 

 

The work commitments on the Licence are to undertake reprocessing of legacy 2D and 3D seismic data and perform other studies in order to better understand the subsurface risks, reduce the range of volumetric uncertainty, as well as providing drilling location candidates ahead of making a "drill or drop" decision before the end of Phase A of the licence period in July 2023.

 

Covering blocks 12/27c, 17/5, 18/1 and 18/2 in the Inner Moray Firth area of the North Sea, the licence contains the Dunrobin prospect which consists of large shallow rotated fault blocks which are mapped mostly on 3D seismic data including candidate direct hydrocarbon indicators. Regional and local petroleum systems are considered by the Joint Venture Partners to be proven. Well costs are expected to be modest at c.£7 million (gross) as the prospect lies in shallow water of less than 100 metres and the total drilling depth of the well is prognosed to be approximately 660 metres. Dunrobin is evaluated by Baron to contain estimated gross mean prospective resources of the order of 100 MMbbl (a non-SPE PRMS Standard estimate).

 

2021 and subsequent activities

 

In Q1 2021, the Joint Venture Partners received the results of technical studies from a large European E&P company under a work sharing agreement signed in 2020, which enhanced the partners' understanding of the petroleum geology and corroborated their view of Dunrobin as a potentially attractive and substantial target.

 

In August, in order to build on the work already undertaken and to accelerate progress, a Farm-Up Agreement was signed with existing partners Corallian and Upland whereby Baron increased its interest in the Licence from 15% to 32% in exchange for agreeing to pay 100% of the costs of the remaining Phase A work commitments up to a cap of £160,000 (the "Agreement"). Other costs are borne by all partners proportionate to their revised interests. Corallian remains the Licence Administrator with Baron assuming the role of technical overseer of the remaining Phase A work commitments. No consideration was payable to Corallian or Upland under the Agreement. Formal consent for the transfer of interests was received from the UK's Oil and Gas Authority, now renamed the North Sea Transition Authority ("NSTA"), in October 2021.

 

Work on the outstanding Phase A technical work commitments with Baron's direct technical involvement commenced during Q4 2021. The key components, that of 3D and 2D seismic reprocessing plus geochemical studies, are expected to be delivered early in Q3 2022 with the interpretation anticipated to be available in Q4 2022. The Board believes this will provide the partners sufficient time to mature the Dunrobin prospect ahead of the July 2023 "drill or drop" decision and, potentially, to engage with prospective drilling and funding partners.

 

Baron is encouraged by the UK government's recent updated policy paper (British Energy Security Strategy, 7 April 2022) which has the potential to revive the business and regulatory hydrocarbon exploration environment in the UK North Sea and so have a positive impact on the chances of the Dunrobin prospect being drilled.

 

Block XXI, Peru - Request for Relinquishment of Licence;

(Baron 100%)

 

In April 2022, Baron announced that, through its fully owned subsidiary, Gold Oil Peru SAC, it had requested the relinquishment of its legacy Licence Block XXI ("Licence") in Peru. The Licence has been largely under Force Majeure ("FM") for a variety of reasons since 2017 and Baron has been frustrated in its attempts to access the area in order to carry out operations. With no certainty around pathways or timelines to drilling the Company took the decision to relinquish the Licence and will ultimately withdraw from Peru.

 

Under the terms of the Licence Agreement, if the Licence is currently under FM and has remained so for a continuous period of more than 12 months, as is the case, the Licence holder may ask Perupetro SA (the Peruvian national Oil & Gas Agency and Licensing Authority) to release the licensee's Bank Guarantee, which in our case is US$160,000. Thereafter, there will be a requirement to establish and file an Abandonment Plan for approval by the relevant authorities.

 

New Ventures

 

The Company continues to screen early stage opportunities for acquiring significant equity interests in high impact exploration and appraisal activity at low entry costs. In this context, the opportunity to participate in new licence rounds or to make out of round applications fits well with our overall strategy.

 

Conclusions

 

Baron is in its best shape for many years. We have worked hard to pivot the Company towards assets where we have significant interests in meaningful and active opportunities. Our task over the next year or so is to progress our two major projects through the key evaluation points with a view to unlocking value for shareholders. On the back of our recent oversubscribed £1.65 million (gross) fund raise in April 2022, we have funding to get these activities to their next decision points. 

 

Currently, the oil and gas industry tailwinds are highly favourable and seem likely to be sustained across the medium term, whether that be driven by energy security, the unique position of gas as the transition fuel or structural issues over the supply of LNG, especially in Asia. It is worth noting that Shell in its annual LNG Outlook 2022 now predicts that the growing supply-demand gap for LNG will appear by 2025, some five years earlier than originally expected, despite production increases set for an 80% rise by 2040. Chuditch, with the potential for first gas in 2026 and located at the gateway to Asian energy markets, looks to be in an enviable position.

 

We are fortunate to be bringing Chuditch forward at a time when, after two years of COVID induced inactivity, we are beginning to detect recovery in the farmout market. Our plans for Chuditch have advanced throughout 2021 and we are about to take the major step of receiving the final reprocessed 3D seismic data from TGS-NOPEC to allow a comprehensive interpretation of the subsurface. We believe we have a high quality value proposition to offer at Chuditch, where we have a 75% interest in a gas discovery and associated prospectivity considered to be relatively low cost and low risk, with aggregate gross prospective resources currently in the range of up to 1,156 MMBOE (High Estimate).

 

In addition, we have accelerated the maturation and increased our equity in the Dunrobin prospect in UK Licence P2478 as the follow up to Chuditch. Here, the outlook has been transformed since the beginning of 2022, led by rising oil prices and the recent publication of the UK government's updated security strategy which has the potential to revive activity in the UK North Sea. The technical work underway is aimed at providing a potential drilling location candidate ahead of making a "drill or drop" decision by July 2023. Dunrobin is currently evaluated by Baron to contain estimated gross mean prospective resources of the order of 100 MMbbl (a non-SPE PRMS Standard estimate).

 

Baron is highly encouraged by the progress being made with our Chuditch and Dunrobin projects against the backdrop of robust price and demand scenarios for LNG-scale gas in the Asia-Pacific region and oil in the North Sea. Combined, we see considerable potential for shareholder value in these key assets and the Company is focussed on delivering that value through 2022 and beyond.

 

John Wakefield

Non-executive Chairman

30 May 2022

 

 

 

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2021

 

			Notes	2021	2020
				£'000	£'000
Revenue				-	-
Cost of sales				-	-
Gross profit				-	-
Exploration and evaluation expenditure				(218)	(145)
Intangible asset impairment			10	(17)	59
Property, plant and equipment depreciation			9	(11)	(2)
Receivables impairment			3	(7)	74
Administration expenses				(1,321)	(710)
Gain/(loss) on exchange			3	22	(157)
Other operating income			3	89	-
Operating loss			3	(1,463)	(881)
Income from associated undertaking			12	29	(44)
Gain on disposal of associated undertaking			12	302	-
Loss before interest and taxation				(1,132)	(925)
Finance cost			5	(2)	-
Finance income			5	7	5
Loss on ordinary activities
before taxation				(1,127)	(920)
Income tax expense			6	-	-
Loss on ordinary activities
after taxation				(1,127)	(920)
Dividends				-	-
Loss for the year				(1,127)	(920)
Loss on ordinary activities
after taxation is attributable to:
Equity shareholders				(1,127)	(920)
Non-controlling interests				-	-
				(1,127)	(920)
Earnings per ordinary share - continuing			8
Basic				(0.012p)	(0.023p)
Diluted				(0.012p)	(0.023p)

 

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2021

 

			Notes	2021	2020
				£'000	£'000
Loss on ordinary activities after taxation attributable to the parent				(1,127)	(920)
Other comprehensive income:
Release option reserve				33	41
Exchange difference on translating foreign operations				33	(115)
Total comprehensive loss for the year				(1,061)	(994)
Total comprehensive loss attributable to owners of the parent				(1,061)	(994)

 

 

 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AT 31 DECEMBER 2021

 

			Notes	2021	2020
				£'000	£'000
Assets
Non current assets
Property plant and equipment
- oil and gas assets			9	-	-
- others			9	34	43
Intangible fixed assets			10	2,736	18
Goodwill			11	-	-
Associated undertaking			12	-	151
				2,770	212
Current assets
Trade and other receivables			14	54	376
Cash and cash equivalents			15	2,509	1,311
				2,563	1,687
Total assets				5,333	1,899
Equity and liabilities
Capital and reserves attributable to owners of the parent
Share capital			18	2,896	1,107
Share premium account			19	34,061	32,156
Share option reserve			19	388	135
Foreign exchange translation reserve			19	1,561	1,528
Retained earnings			19	(34,224)	(33,130)
Total equity				4,682	1,796
Current liabilities
Trade and other payables			16	620	58
Taxes payable			16	12	16
				632	74
Non-current liabilities
Lease finance			17	19	29
Total equity and liabilities				5,333	1,899
The financial statements were approved and authorised for issue by the Board of Directors on 30 May 2022 and were signed on its behalf by:
John Wakefield			Andrew Yeo
Director			Director

 

 

 

COMPANY STATEMENT OF FINANCIAL POSITION

AT 31 DECEMBER 2021

 

			Notes	2021	2020
				£'000	£'000
Assets
Non current assets
Property plant and equipment
- oil and gas assets				-	-
- others			9	33	43
Intangible fixed assets			10	68	18
Investments			13	3,029	195
				3,130	256
Current assets
Trade and other receivables			14	46	375
Cash and cash equivalents			15	1,527	1,183
				1,573	1,558
Total assets				4,703	1,814
Equity and liabilities
Capital and reserves attributable to owners of the parent
Share capital			18	2,896	1,107
Share premium account			19	34,061	32,156
Share option reserve			19	388	135
Foreign exchange translation reserve			19	(163)	(163)
Retained earnings			19	(32,586)	(31,523)
Total equity				4,596	1,712
Current liabilities
Trade and other payables			16	76	58
Taxes payable			16	12	15
				88	73
Non-current liabilities
Lease finance			17	19	29
Total equity and liabilities				4,703	1,814
The financial statements were approved and authorised for issue by the Board of Directors on 30 May 2022 and were signed on its behalf by:
John Wakefield			Andrew Yeo
Director			Director

 

 

 

 

CONSOLIDATED AND COMPANY STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2021

 

					Foreign
	Share	Share	Retained	Share option	exchange	Total
	capital	premium	earnings	reserve	translation	equity
Group	£'000	£'000	£'000	£'000	£'000	£'000
As at 1 January 2020	482	30,507	(32,251)	74	1,643	455
Shares issued	625	1,670	-	-	-	2,295
Transactions with owners	625	1,670	-	-	-	2,295
Loss for the year attributable to equity shareholders	-	-	(920)	-	-	(920)
Share based payments	-	(21)	-	102	-	81
Share option reserve released	-	-	41	(41)	-	-
Foreign exchange translation adjustments	-	-	-	-	(115)	(115)
Total comprehensive income for the period	-	(21)	(879)	61	(115)	(954)
As at 1 January 2021	1,107	32,156	(33,130)	135	1,528	1,796
Shares issued	1,789	1,905	-	-	-	3,694
Transactions with owners	1,789	1,905	-	-	-	3,694
Loss for the year attributable to equity shareholders	-	-	(1,127)	-	-	(1,127)
Share based payments	-	-	-	286	-	286
Share option reserve released	-	-	33	(33)	-	-
Foreign exchange translation adjustments	-	-	-	-	33	33
Total comprehensive income for the period	-	-	(1,094)	253	33	(808)
As at 31 December 2021	2,896	34,061	(34,224)	388	1,561	4,682

 

	Share	Share	Retained	Share option	Foreign exchange	Total
	capital	premium	earnings	reserve	translation	equity
	£'000	£'000	£'000	£'000	£'000	£'000
Company
As at 1 January 2020	482	30,507	(32,261)	74	(163)	(1,361)
Shares issued	625	1,670	-	-	-	2,295
Transactions with owners	625	1,670	-	-	-	2,295
Profit for the year	-	-	697	-	-	697
Share based payments	-	(21)	-	102	-	81
Share option reserve released	-	-	41	(41)	-	-
Total comprehensive income for the period	-	(21)	738	61	-	778
As at 1 January 2021	1,107	32,156	(31,523)	135	(163)	1,712
Shares issued	1,789	1,905	-	-	-	3,694
Transactions with owners	1,789	1,905	-	-	-	3,694
Loss for the year	-		(1,096)	-	-	(1,096)
Share based payments	-	-	-	286	-	286
Share option reserve released	-	-	33	(33)	-	-
Total comprehensive income  for the period	-	-	(1,063)	253	-	(810)
As at 31 December 2021	2,896	34,061	(32,586)	388	(163)	4,596

 

 

Share capital is the amount subscribed for shares at nominal value.

 

Share premium represents the excess of the amount subscribed for share capital over the nominal value of those shares net of share issue expenses.

 

Retained earnings represents the cumulative loss of the group attributable to equity shareholders.

 

Foreign exchange translation occurs on consolidation of the translation of the subsidiaries balance sheets at the closing rate of exchange and their income statements at the average rate.

 

 

CONSOLIDATED AND COMPANY STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2021

 

		Group	Company	Group	Company
		2021	2021	2020	2,020
		£'000	£'000	£'000	£'000
Operating activities		(576)	(681)	(919)	(797)
Investing activities
Return from investment and servicing of finance		7	7	5	5
Advances to subsidiary and associated undertakings		323	(707)	(323)	(441)
Performance bond guarantee deposit		(742)	-	-	-
Acquisition of intangible assets		(2,415)	(50)	(14)	(14)
Acquisition of tangible assets		(1)	(1)
Investment in associated undertaking		(93)	(1,909)	(195)	(195)
Disposal of associated undertaking		272	-	-	-
		(2,649)	(2,660)	(527)	(645)
Financing activities
Proceeds from issue of share capital		3,694	3,694	2,295	2,295
Lease financing		(9)	(9)	(6)	(6)
Net cash inflow		460	344	843	847
Cash and cash equivalents at the beginning of the year		1,190	1,183	347	336
Cash and cash equivalents at the end of the year		1,650	1,527	1,190	1,183
Reconciliation to Consolidated Statement of Financial Position
Cash not available for use		859	-	121	-
Cash and cash equivalents as shown in the Statement of Financial Position		2,509	1,527	1,311	1,183

 

		Group	Company	Group	Company
		2021	2021	2020	2020
		£'000	£'000	£'000	£'000
Operating activities
(Loss)/profit for the year attributable to controlling interests		(1,127)	(1,096)	(920)	697
Depreciation, amortisation and impairment charges		28	135	(57)	90
Share based payments		286	286	81	81
Finance income shown as an investing activity		(7)	(7)	(5)	(5)
Gain on disposal of subsidiary undertaking		-	-	-	(1,679)
Gain on disposal of associated undertaking		(302)	-	-	-
Income from associated undertaking		(29)	-	44	-
Foreign exchange translation		19	(19)	(52)	30
Operating cash outflows before movements in working capital		(1,132)	(701)	(909)	(786)
(Increase)/decrease in receivables		(1)	6	(4)	(5)
Increase/(decrease) in payables		557	14	(6)	(6)
Net cash outflows from operating activities		(576)	(681)	(919)	(797)

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2021

 

 

3. Operating loss				2021	2020
				£'000	£'000
The operating loss is stated after charging:
Auditors' remuneration
Company - audit				25	28
Other group entities -audit				14	4
Group and Company - other non-audit services				3	2
Exploration and evaluation expenditure				218	145
Impairment of intangible assets				17	(59)
Depreciation of property, plant and equipment				11	2
Impairment of foreign tax receivables				7	(74)
(Gain)/loss on exchange				(22)	157
Other operating income				(89)	-
Other operating income arises on the capitalisation into cost of investment of development costs written off in prior years in respect of Chuditch, Timor-Leste. This is due to a reconstruction of the balance sheet of SundaGas (Timor-Leste Sahul) Pte. Ltd. ("TLS") when the Group took majority control in TLS.
The analysis of development and administrative expenses in the consolidated income statement by nature of expense is:
				2021	2020
				£'000	£'000
Employee benefit expense				521	374
Share based payments				261	81
Exploration and evaluation expenditure				218	145
Depreciation, amortisation and impairment charges				35	(131)
Legal and professional fees				454	198
(Gain)/loss on exchange				(22)	157
Other expenses				85	57
				1,552	881

 

 

5. Finance income				2021	2020
				£'000	£'000
Bank and other interest received				7	5
Finance cost				(2)	-
Total				5	5

 

 

6. Income tax expense				2021	2020
				£'000	£'000
The tax charge on the loss on ordinary activities was:-
UK Corporation Tax - current				-	-
Foreign taxation				-	-
				-	-
The total charge for the year can be reconciled to the accounting result as follows:
				2021	2020
				£'000	£'000
Loss before tax
Continuing operations				(1,127)	(920)
Tax at composite group rate of 22.4% (2020: 19%)				(253)	(174)
Effects of:
Losses not subject to tax				123	340
Movement on capital allowances				(97)	(126)
Increase in tax losses				227	(40)
Foreign taxation				-	-
Tax expense				-	-
At 31 December 2021, the Group has tax losses of £32,933,000 (2020 - £28,990,000) to carry forward against future profits. The deferred tax asset on these tax losses at a composite group rate of 18.1% of £5,964,000 (2020: at 19%, £5,508,000) has not been recognised due to the uncertainty of the recovery.

 

 

8. Earnings per share
				2021	2020
Loss per ordinary share
- Basic				(0.012p)	(0.023p)
- Diluted				(0.012p)	(0.023p)
Earnings per ordinary share is based on the Group's loss attributable to controlling interests for the year of £1,127,000 (2020: £920,000).
The weighted average number of shares used in the calculation is the weighted average ordinary shares in issue during the year.
				2021	2020
				Number	Number
Weighted average ordinary shares in issue during the year				9,460,727,853	3,988,470,466
Weighted average potentially dilutive options and warrants issued				1,986,979,453	373,396,517
Weighted average ordinary shares for diluted earnings per share				11,447,707,306	4,361,866,983
Due to the Group's results, the diluted earnings per share was deemed to be the same as the basic earnings per share for that year.

 

 

9. Property, plant and equipment
		Equipment and machinery	Right for use asset	Total
		£'000	£'000	£'000
Group
Cost
At 1 January 2020		30	-	30
Foreign exchange translation adjustment		(1)	-	(1)
Expenditure		-	45	45
At 1 January 2021		29	45	74
Foreign exchange translation adjustment		1	-	1
Expenditure		1	-	1
At 31 December 2021		31	45	76
Depreciation
At 1 January 2020		30	-	30
Foreign exchange translation adjustment		(1)	-	(1)
Charge for the period		-	2	2
At 1 January 2021		29	2	31
Charge for the period		-	11	11
At 31 December 2021		29	13	42
Net book value
At 31 December 2021		2	32	34
At 31 December 2020		-	43	43
Company
Cost
At 1 January 2020		-	-	-
Expenditure		-	45	45
At 1 January 2021		-	45	45
Expenditure		1	-	1
At 31 December 2021		1	45	46
Depreciation
At 1 January 2020		-	-	-
Charge for the period		-	2	2
At 1 January 2021		-	2	2
Charge for the period		-	11	11
At 31 December 2021		-	13	13
Net book value
At 31 December 2021		1	32	33
At 31 December 2020		-	43	43

 

 

Included in the above line items are right-of-use assets of £32,000 (2020: £43,000) in respect of a motor vehicle.

 

At lease commencement date, the Group recognises a right-of-use asset and a lease liability on the balance sheet. The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the Group, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in advance of the lease commencement date.

 

The Group depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The Group also assesses the right-of-use asset for impairment when such indicators exist.

 

On the statement of financial position, right-of-use assets have been included in property, plant and equipment.

 

 

10. Intangible fixed assets				Exploration
				and evaluation
				costs	Total
				£'000	£'000
Group
Cost
At 1 January 2020				3,472	3,472
Foreign exchange translation adjustment				(59)	(59)
Expenditure				14	14
Disposals				(1,108)	(1,108)
At 1 January 2021				2,319	2,319
Foreign exchange translation adjustment				17	17
Expenditure				1,356	1,356
Consolidation of single asset company				1,362	1,362
At 31 December 2021				5,054	5,054
Impairment
At 1 January 2020				3,467	3,467
Foreign exchange translation adjustment				-	-
Charge for the period				(59)	(59)
Disposals				(1,107)	(1,107)
At 1 January 2021				2,301	2,301
Charge for the period				17	17
At 31 December 2021				2,318	2,318
Net book value
At 31 December 2021				2,736	2,736
At 31 December 2020				18	18

 

 

 

10. Intangible fixed assets (continued)				Exploration
				and evaluation
				costs	Total
				£'000	£'000
Company
Cost
At 1 January 2020				1,748	1,748
Expenditure				14	14
Disposals				(1,109)	(1,109)
At 1 January 2021				653	653
Expenditure				50	50
At 31 December 2021				703	703
Impairment
At 1 January 2020				1,743	1,743
Disposals				(1,108)	(1,108)
At 1 January 2021				635	635
At 31 December 2021				635	635
Net book value
At 31 December 2021				68	68
At 31 December 2020				18	18

The exploration and evaluation costs above represent the cost in acquiring, exploring and evaluating the Company's and Group's assets. 

The impairment of all intangible assets has been reviewed, giving rise to the above impairment charges, or reduction in impairment charges.

 

During the year, the Group increased its holding in SundaGas (Timor-Leste Sahul) Pte. Ltd ("TLS") from 33.33% to 100%. As a consequence of the increased holding in TLS, the company is now consolidated into the Group Income Statement and Statement of Financial Position. As TLS is a single asset company in pre-production phase, it is included as an oil and gas asset purchase rather than as a business combination, and its carrying value is included in intangible assets.

 

Block XXI Peru: this licence was fully impaired in 2018 and the process for its relinquishment commenced in May 2022.

 

UK offshore block P1918 ("Colter"): this licence continued into the second term with effect from 1 February 2020 but the Company has written off this asset against the impairment provision, as the licence, along with related licences PEDL330 and PEDL 345, were relinquished on 31 January 2021.

 

 

12. Associated undertaking
				Shares in
				associated
				undertaking	Total
				£'000	£'000
Group
Gross investment value
At 1 January 2020				-	-
Additions				195	195
Share of post acquisition net result				(44)	(44)
At 1 January 2021				151	151
Additions				93	93
Share of post acquisition net result				29	29
Disposal				(273)	(273)
At 31 December 2021				-	-
Impairment
At 1 January 2020 and 1 January 2021				-	-
Charge for the year				-	-
At 31 December 2021				-	-
Carrying value
At 31 December 2021				-	-
At 31 December 2020				151	151

 

 

On 27 April 2020, the Group acquired a 33.33% interest in SundaGas (Timor-Leste Sahul) Pte. Ltd ("TLS"), incorporated in Singapore at a gross cost of £195,000. In accordance with IAS28, the Group accounted for its investment in this company using the equity method.

 

During the period, the Company increased its stake in TLS from 33.33% to 100%. In accordance with IFRS3, this is treated as an effective disposal of the interest in the associated undertaking requiring a remeasurement of its cost to fair value. This results in a gain on disposal of £302,000.

 

 

Glossary

 

 

BSCF	Billion standard cubic feet of natural gas.
Geological chance of success	The estimated probability that exploration activities will confirm the existence of a significant accumulation of potentially recoverable petroleum.
GIIP	Volume of natural gas initially in-place in a reservoir.
High or 3U Estimate	Denotes the high estimate qualifying as Prospective Resources. Reflects a volume estimate that there is a 10% probability that the quantities actually recovered will equal or exceed the estimate.
Licence Operator or Administrator	The Company nominated to carry out operational activities. In the context of the UK jurisdiction, during the initial Phase A of a licence the nominated Company is termed a licence administrator.
MMBBL   MMBOE, Oil equivalent	Million barrels of oil or condensate.   Million barrels of oil equivalent.  Volume derived by dividing the estimate of the volume of natural gas in billion cubic feet by six in order to convert it to an equivalent in million barrels of oil or condensate, and, where relevant, adding this to an estimate of the volume of oil in millions of barrels.
Prospective Resources	Quantities of petroleum that are estimated to exist originally in naturally occurring reservoirs, as of a given date.  Crude oil in-place, natural gas in-place, and natural bitumen in-place are defined in the same manner.
SPE PRMS 2018	The Society of Petroleum Engineers' ("SPE") Petroleum Resources Management System ("PRMS") is a system developed for consistent and reliable definition, classification, and estimation of hydrocarbon resources prepared by the Oil and Gas Reserves Committee of SPE and approved by the SPE Board in June 2018 following input from six sponsoring societies: the World Petroleum Council, the American Association of Petroleum Geologists, the Society of Petroleum Evaluation Engineers, the Society of Exploration Geophysicists, the European Association of Geoscientists and Engineers, and the Society of Petrophysicists and Well Log Analysts.  Quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects. The total quantity of petroleum that is estimated to exist originally in naturally occurring reservoirs, as of a given date.  Crude oil in-place, natural gas in-place, and natural bitumen in-place are defined in the same manner.
SPE PRMS Unrisked Prospective Resources	Denotes the unrisked estimate qualifying as SPE PRMS 2018 Prospective Resources.
Mean	Reflects an unrisked median or best-case volume estimate of resource derived using probabilistic methodology. This is the mean of the probability distribution for the resource estimates and is often not the same as 2U as the distribution can be skewed by high resource numbers with relatively low probabilities.
PSC	Production Sharing Contract.
PSDM	Pre-Stack Depth Migration version of processed seismic data.
TGS-NOPEC	TGS-NOPEC Geophysical Company.