Notes to the Financial Statements

1. Corporate information

The consolidated financial statements of UK Oil & Gas Plc (the Company) and its subsidiaries (collectively, the Group), for the year ended 30 September 2024 were authorised for issue by the directors on 30 September 2025. UK Oil & Gas Plc (the Company & parent) is a public limited company incorporated in England and Wales under the UK Companies Act and listed on the Alternative Investment Market (AIM). The registered office is located at The Broadgate Tower, 20 Primrose Street, London EC2A 2EW.

The Group is engaged in oil production and oil & gas exploration and evaluation (see Note 4) and salt cavern hydrogen storage projects in South Dorset and East Yorkshire. Information on the Group's structure is provided in Note 13 and information on other related parties is provided in Note 25.

2. Principal accounting policies

a) Basis of preparation

The consolidated financial statements of the UK Oil & Gas Plc (the Company) and subsidiaries (the Group) have been prepared in accordance with UK- Adopted International Accounting Standards in conformity with the requirements of the Companies Act 2006 as they apply to the Group for the year ended 30 September 2024.

The accounting policies have been applied consistently throughout the preparation of these financial statements, the financial report is presented in Pound Sterling (£) and all values are rounded to the nearest thousand pounds (£'000) unless otherwise stated. The consolidated financial statements provide comparative information in respect of the previous period.

(i)            Subsidiary undertakings exempt from audit

UK Oil & Gas Plc has guaranteed the liabilities of the subsidiaries listed below under section 479A of the Companies Act 2006 in respect of the year ended 30 September 2023.

·      UK Energy Storage Ltd - 14108327

·      UKOG (234) Ltd - 07055133

·      UKOG (GB) Limited - 04050227

·      UKOG (137/246) Holdings Ltd - 09010542

·      UKOG (137/246) Ltd - 06807023

·      UK Oil & Gas Investments Ltd - 11252712

·      UKOG (Turkey) Ltd - 10212262

·      UK Geothermal Ltd - 13386906

(ii)           New and amended standards and interpretations

There is no material impact on the financial statements following the adoption of new standards and interpretations.

(iii)          New and amended standards, and interpretations issued and effective for the financial year beginning 1 October 2023

There were no new standards, amendments or interpretations effective for the first time for periods beginning on or after 1 October 2023 that had a material effect on the Group or Company financial statements.

New standards, amendments and interpretations in issue but not yet effective

At the date of approval of these financial statements, the following standards, amendments and interpretations had been issued by the IASB but were not yet effective and have not been early adopted by the Group:

·      Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-current (effective 1 January 2024). These amendments clarify how covenants and other conditions affect the classification of liabilities.

·      Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of Accounting Policies (effective 1 January 2024). These amendments aim to improve the relevance of accounting policy disclosures by requiring entities to focus on material information.

·      Amendments to IFRS 16 Leases: Lease Liability in a Sale and Leaseback (effective 1 January 2024). These amendments clarify the subsequent measurement of lease liabilities arising from sale and leaseback transactions.

·      Amendments to IAS 7 and IFRS 7: Supplier Finance Arrangements (effective 1 January 2024). These amendments introduce additional disclosure requirements about supplier finance (reverse factoring) arrangements.

·      Amendments to IAS 21: Lack of Exchangeability (effective 1 January 2025). These amendments provide guidance on how to determine the spot exchange rate when exchangeability between two currencies is lacking.

·      Amendments to IFRS 9 and IFRS 7: Classification and Measurement of Financial Instruments (effective 1 January 2026). These amendments modify certain requirements for derecognition, presentation and disclosures of financial instruments.

·      IFRS 18 Presentation and Disclosure in Financial Statements (effective 1 January 2027). This new standard will replace IAS 1 and introduce revised presentation and disclosure requirements, including new categories for the statement of profit or loss and enhanced disclosure requirements.

·      IFRS 19 Subsidiaries without Public Accountability: Disclosures (effective 1 January 2027). This new standard permits eligible subsidiaries to apply reduced disclosure requirements while applying full recognition and measurement of IFRS.

The Directors do not expect that the adoption of these new standards and amendments will have a material impact on the Group's consolidated financial statements in future periods, although additional disclosures may be required.

a) Going concern

The accounts have been prepared on a going concern basis.

The Directors note the losses and cash outflows incurred by the Group for the year ended 30 September 2024. In assessing the Group's ability to continue as a going concern, the Directors have prepared detailed cash flow forecasts covering the period to 30 September 2026. These forecasts incorporate assumptions regarding anticipated production levels and operating costs, the forward Brent crude oil price curve, expected revenue streams, and access to external funding. The Board recognises, however, that unforeseen events outside its control could affect these forecasts.

These forecasts indicate that in order to both maintain its ongoing status as a going concern and to further progress its Clean Power and hydrogen storage projects the Group anticipates the  need to enact an already advanced number of financing initiatives during the next 6 months, namely;

·      the Group is advancing the disposal of its subsidiary UKOG (GB) Ltd, with completion anticipated in the middle of October 2025; and

·      the Group has agreed key commercial terms with a finance provider for a new credit facility and plans to execute by the end of October 2025.

The group has already secured sufficient share headroom to conduct an equity placing as a further potential source of funding. In addition, the Company has successfully implemented wide raging cost reductions and  management would, if necessary, seek to implement further cost control measures and negotiate extended payment terms with key suppliers.

At 30 September 2024, the Group reported a net current liability position. This is being managed through a combination of close working capital management and constructive negotiations with certain creditors. Borrowings now consist solely of shareholder loans relating to Horse Hill Development Ltd, which are not expected to be repaid until Horse Hill returns to production. In addition, the Board has implemented reductions in discretionary expenditure and is closely monitoring cash flows.

The Board recognises that certain assumptions in the forecasts are subject to uncertainty, particularly the timing of proceeds from the planned disposal of a subsidiary and the amount of equity financing that may be secured. If these inflows are lower or later than expected, the Group has a number of mitigating options available, including drawing on the credit facility, tighter cost control, and deferral of expenditure.

While these actions are expected to provide the necessary resources, the Directors acknowledge that there can be no absolute assurance that the funding initiatives will complete as planned or that the forecast inflows will materialise when required. These conditions represent a material uncertainty that may cast significant doubt on the Company and the Group's ability to continue as a going concern.

Notwithstanding this material uncertainty, the Directors remain confident in the Group's ability to secure the required funding, given the advanced progress made on the credit facility, the subsidiary disposal, and the Group's established track record of raising capital. Accordingly, the financial statements have been prepared on a going concern basis. The independent auditor's report draws attention to this material uncertainty.

 

 

b) Basis of consolidation

Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. All intercompany transactions and balances between Group companies, including unrealised profits arising from them, are eliminated in full.

At 30 September 2024, the Group comprised the Company and entities controlled by UK Oil & Gas Plc (its subsidiaries) (note 13).

c) Business combinations

The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the:

·      fair values of the assets transferred

·      liabilities incurred to the former owners of the acquired business

·      equity interests issued by the group

·      fair value of any asset or liability resulting from a contingent consideration arrangement, and

·      fair value of any pre-existing equity interest in the subsidiary.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. The group recognises any non-controlling interest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest's proportionate share of the acquired entity's net identifiable assets. Acquisition-related costs are expensed as incurred.

d) Joint arrangements

Some of the Group's licence interests are held jointly with others under arrangements whereby unincorporated and jointly controlled ventures are used to explore, evaluate and ultimately develop and produce from its oil & gas interests. The Group's share of assets, liabilities, income and expenditure of these joint operations, have been classified in the appropriate balance sheet and income statement headings, except where its share of such amounts remain the responsibility of another party in accordance with the terms of carried interests.

When the Group, acting as an operator or manager of a joint arrangement, receives reimbursement of direct costs recharged to the joint arrangement, such recharges represent reimbursements of costs that the operator incurred as an agent for the joint arrangement and therefore have no effect on profit or loss.

e) Revenue

Revenue comprises the invoiced value of goods and services supplied by the Group, excluding value added tax and trade discounts. Revenue is recognised when control passes to the customer and there is no unfulfilled obligation that could affect the customer's acceptance of the goods. In the case of oil and petroleum products, this generally occurs when the product is physically transferred into a vessel, pipe or other delivery mechanism.

Revenue from the production of oil, from fields in which the Group has an interest with other producers, is recognised based on the Group's working interest and the terms of the relevant production sharing contracts. Differences between oil lifted and sold and the Group's share of production are not significant.

f) Non-current assets

(iv)          Intangible exploration and evaluation assets

The Group accounts for exploration and evaluation costs in accordance with the requirements of IFRS 6 Exploration for and Evaluation of Mineral Resources as follows:

·      Pre-licence costs (costs incurred prior to obtaining the legal rights to explore an area) are expensed immediately to the Income Statement.

·      Exploration licence and leasehold land and property acquisition costs are capitalised in intangible assets.

·      Licence costs paid in connection with a right to explore in an existing exploration area are capitalised and amortised over the term of the permit.

·      Costs directly associated with an exploration well are capitalised as exploration and evaluation intangible assets until the drilling of the well is complete and the results have been evaluated. These costs include directly attributable employee remuneration, materials and consumables, drilling (including coring and sampling), evaluation of technical feasibility and commercial viability (including appraisal drilling and production testing).

Exploration and evaluation assets are assessed for impairment at each reporting date, before reclassification and whenever facts and circumstances suggest that they may be impaired. If no future activity is planned, the licence has been relinquished or has expired, or where development is likely to proceed but there are indications that the exploration and evaluation asset costs are unlikely to be recovered in full either by development or through sale, the carrying value of the asset is written off to the Income Statement.

(v)           Property, plant and equipment - oil & gas properties

Oil & gas properties are stated at cost, less accumulated depreciation and accumulated impairment losses.

The initial cost of an asset comprises its purchase price or construction cost, any costs directly attributable to bringing the asset into operation, the initial estimate of the decommissioning obligation and, for qualifying assets (where relevant), borrowing costs. The purchase price or construction cost is the aggregate amount paid and the fair value of any other consideration given to acquire the asset. The capitalised value of any associated finance lease is also included within property, plant and equipment.

Oil & gas properties are depreciated/amortised on a unit-of-production basis over the total proved developed and undeveloped reserves of the field concerned. The unit-of-production rate calculation for the depreciation/amortisation of field development costs takes into account expenditures incurred to date, together with sanctioned future development expenditure.

The Group's interests in oil & gas properties are assessed for indicators of impairment including events or changes in circumstances which indicate that the carrying value of an asset may not be recoverable. Any impairment in value is charged to the Income Statement.

(vi)          Intangible Assets

Intangible assets are recognised at cost, less any accumulated amortisation and impairment losses. Expenditure on research activities is recognised as an expense in the period in which it is incurred. Development expenditure is capitalised only when it meets the recognition criteria under IAS 38, including the demonstration of technical feasibility, intention and ability to complete the asset, and availability of resources to do so.

Intangible assets with finite useful lives are amortised on a straight-line basis over their estimated useful lives and assessed for impairment whenever there is an indication that the carrying amount may not be recoverable.

The Group's Hydrogen Storage project has been classified as an intangible asset with an indefinite useful life. This assessment reflects the following factors:

the project is at a development stage and will not be subject to systematic amortisation until it is available for use;

there is no foreseeable limit to the period over which the project is expected to generate net cash inflows, given the long-term strategic demand for large-scale energy storage;

the Group has no legal, regulatory, contractual, or economic factors that would indicate a finite limit to the project's useful life.

Intangible assets with an indefinite useful life are not amortised but are tested for impairment annually, or more frequently if events or changes in circumstances indicate that they might be impaired.

 

(vii)         Other property, plant and equipment

Other property, plant and equipment is stated at cost to the Group less accumulated depreciation. These assets are generally depreciated on a straight-line basis over their estimated useful lives, depending on the type of asset.

(viii)        Decommissioning assets

A decommissioning asset is recognised in the appropriate category of the Group's non-current assets (intangible exploration and evaluation assets and property, plant and equipment) depending on the underlying accounting treatment for the operations or asset leading to the associated decommissioning provision. The asset is assessed for impairment as necessary and otherwise depleted on a straight-line basis over the estimated period to future removal of production facilities or site restoration.

g) Decommissioning provisions

A provision for decommissioning is recognised where a liability for the removal of production facilities or site restoration exists. Provisions are measured at the present value of the amount expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognised as interest expense.

h) Segmental information

An operating segment is a distinguishable component of the Group that is involved in oil production, oil exploration or related activities, within a particular economic environment, which is subject to risks and rewards that are different from those of other segments.

Operating segments are reported in a manner consistent with internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors of the Company.

i) Financial instruments

(ix)          Financial assets

Financial assets are divided into the following categories: loans and receivables and available-for-sale financial assets. Financial assets are assigned to the different categories by management on initial recognition, depending on the purpose for which they were acquired, and are recognised when the Group becomes party to contractual arrangements. Both loans and receivables and available for sale financial assets are initially recorded at fair value.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Trade receivables, most other receivables and cash and cash equivalents fall into this category of financial assets. Loans and receivables are measured subsequent to initial recognition at amortised cost using the effective interest method, less provision for impairment. Any change in their value through impairment or reversal of impairment is recognised in the income statement.

Cash and cash equivalents comprise cash on hand and short-term deposits. Any interest earned is classified as interest income within finance income.

A financial asset is derecognised only where the contractual rights to the cash flows from the asset expire or the financial asset is transferred, and that transfer qualifies for derecognition. A financial asset is transferred if the contractual rights to receive the cash flows of the asset have been transferred or the Group retains the contractual rights to receive the cash flows of the asset but assumes a contractual obligation to pay the cash flows to one or more recipients.

A financial asset that is transferred qualifies for derecognition if the Group transfers substantially all the risks and rewards of ownership of the asset, or if the Group neither retains nor transfers substantially all the risks and rewards of ownership but does transfer control of that asset.

(x)           Financial liabilities

Financial liabilities are obligations to pay cash or other financial assets and are recognised when the Group becomes a party to the contractual provisions of the instrument.

All financial liabilities initially recognised at fair value less transaction costs and thereafter carried at amortised cost using the effective interest method, with interest-related charges recognised as an expense in finance cost in the income statement. A financial liability is derecognised only when the obligation is extinguished, that is, when the obligation is discharged or cancelled or expires.

(xi)          Impairment of financial assets

At the end of each reporting period, a provision is made if there is sufficient evidence that a financial asset or group of financial assets has been impaired. Provision against trade receivables is made when there is objective evidence that the Group will not be able to collect all amounts due to it in accordance with the original terms of those receivables. The amount of the write-down is determined as the difference between the asset's carrying amount and the present value of estimated future cash flows.

j) Inventories

Inventories are stated at the lower of cost and net realisable value. The cost of materials is the purchase cost, determined on first-in, first-out basis. The cost of crude oil and refined products is the purchase cost, the cost of refining, including the appropriate proportion of depreciation, depletion and amortisation and overheads based on normal operating capacity, determined on a weighted average basis. The net realisable value of crude oil and refined products is based on the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.

k) Taxation

The tax charge includes both current and deferred tax.

Current tax assets and liabilities are measured at the amount expected to be paid to or received from the tax authorities, calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. Taxable profits or losses differ from the reported profit or loss before taxation in the Income Statement as it excludes items that are taxable or deductible in different periods, as well as items that are never deductible or taxable.

Deferred income taxes are calculated using the liability method on temporary differences. Deferred tax is generally provided on the difference between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit.

Deferred tax on temporary differences associated with shares in subsidiaries and joint ventures is not provided if reversal of these temporary differences can be controlled by the Company and it is probable that reversal will not occur in the foreseeable future. In addition, tax losses available to be carried forward as well as other income tax credits to the Company are assessed for recognition as deferred tax assets.

No deferred tax liability was recognised as the Group has substantial brought-forward ring-fence and supplementary charge losses. These  are offsetable against future tax liabilities and offsetable with the same tax authority. PPE are in entities that have the losses and any tax base differences have merely been recognised as unrecognised deferred tax losses .

 

Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the income statement, except where they relate to items that are charged or credited directly to equity in which case the related deferred tax is also charged or credited directly to equity.

l) Share-based payments

The Group operates a number of equity-settled, share-based compensation plans, under which the entity receives services from employees as consideration for equity instruments (options) of the Company. The fair value of the employee services received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed is determined by reference to the fair value of the options granted:

·      Including any market performance conditions;

·      Excluding the impact of any service and non-market performance vesting conditions (for example, profitability or sales growth targets, or remaining an employee of the entity over a specified time period; and,

·      Including the impact of any non-vesting conditions (for example, the requirement for employees to save).

Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied.

In addition, in some circumstances, employees may provide services in advance of the grant date, and therefore the grant-date fair value is estimated for the purposes of recognising the expense during the period between service commencement period and grant date.

At the end of each reporting period, the entity revises its estimates of the number of options that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in profit or loss, with a corresponding adjustment to equity.

When the options are exercised, the Company issues new shares. The proceeds received, net of any directly attributable transaction costs, are credited to share capital (nominal value) and share premium.

m) Equity

Equity comprises the following:

·      "Share capital" representing the nominal value of equity shares.

·      "Share premium" representing the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of the share issue.

·      "Share based payment reserve" represents the value of equity benefits provided to employees and directors as part of their remuneration and provided to consultants and advisors hired by the Group from time to time as part of the consideration paid.

·      "Accumulated losses " represents retained and (losses).

·      "Own shares held in trust" represents shares held by Employee Benefit Trust

n) Employee Benefit Trust (EBT)

The Company has established an Employee Benefit Trust ("EBT") to facilitate the operation of its employee share incentive schemes. In accordance with IFRS 10 Consolidated Financial Statements, the EBT is consolidated as it is considered to be controlled by the Company. The assets, liabilities, income and expenses of the EBT are therefore included in the consolidated financial statements on a line-by-line basis.

Own shares of the Company held by the EBT are presented as a deduction from equity within "Own shares held in trust". No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Company's own equity instruments by the EBT. Transactions of the EBT relating to the Company's own shares are accounted for directly in equity.

o) Foreign currencies

The consolidated financial statements are presented in UK pound sterling, the functional currency of the Group. Transactions in other currencies are translated at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities in foreign currencies are translated at the rates of exchange ruling at the balance sheet date. Non-monetary items that are measured at historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

Any exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were initially recorded are recognised in the profit or loss in the period in which they arise. Exchange differences on non-monetary items are recognised in other comprehensive income to the extent that they relate to a gain or loss on that non-monetary item taken to other comprehensive income, otherwise such gains and losses are recognised in the income statement. The Group and Company's functional currency and presentational currency is Sterling.

3. Significant accounting judgements, estimates and assumptions

The preparation of the Group's consolidated financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses during the reporting period, and reported amounts of assets and liabilities, and the disclosure of contingent liabilities at the date of the consolidated financial statements. Estimates and assumptions are continuously evaluated and are based on management's experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. However, actual outcomes can differ from these estimates.

In particular, the Group has identified the following areas where significant judgements, estimates and assumptions are required, and where if actual results were to differ, this could materially affect the financial position of financial results reported in a future period. Further information on each of these areas and how they impact the various accounting policies are described below and also in the relevant notes to the financial statements.

Judgements

(i) 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. The Group based its assumptions and estimates on parameters available when the consolidated financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market change or circumstances arising beyond the control of the Group. Such changes are reflected in the assumptions when they occur.

(ii) Hydrocarbon reserve and resource estimates

The Group estimates and reports hydrocarbon reserves in line with the principles contained in the SPE Petroleum Resources Management Reporting System (PRMS) framework. As the economic assumptions used may change, and as additional geological information is obtained during the operation of a field, estimates of recoverable reserves may change.

The volume of proved and probable oil & gas reserves is an estimate that affects:

·      the unit of production depreciation of producing oil & gas property, plant and equipment (see Note 11);

·      the measurement of decommissioning provisions (see Note 19);

·      impairment calculations of oil & gas properties (see Note 11).

·      Proved and probable reserves and contingent resources are estimated using standard recognised evaluation techniques. Estimates are reviewed at least annually and are regularly assessed by independent consultants. Future development costs are estimated taking into account the level of development required to produce the reserves, by reference to operators (where applicable) and internal engineers.

(iii) Recoverable value of intangible exploration and evaluation assets

The Group has capitalised intangible exploration and evaluation assets in accordance with IFRS 6. Significant judgement is required to determine whether it continues to be appropriate to carry these costs on the balance sheet and whether the assets have been impaired.

The key areas in which management have applied judgement include the Group's intention to proceed with a future work programme for a prospect or licence, the likelihood of licence and planning permission renewal, plans for relinquishment, assessment of results from wells or geological or geophysical studies, and the assessment of whether the carrying value of the exploration and evaluation assets is unlikely to be recovered in full from successful development or by sale.

In both the above areas, the assessments include estimates and assumptions such as long-term oil prices, foreign exchange rates, discount rates, reserves, production profiles and capital expenditure, all of which are subject to risk and uncertainty. It is possible therefore that changes in these estimates may impact the recoverable values of exploration and evaluation assets.

Details of the Group's intangible exploration and evaluation assets are disclosed in Note 11 to the financial statements.

(iv) Recoverable value of property, plant and equipment

At each reporting date, management reviews the Group's property, plant and equipment to assess whether there is any indication of impairment. If such an indicator exists, the recoverable amount of the asset or cash-generating unit (CGU) is estimated. The recoverable amount is the higher of (i) fair value less costs of disposal and (ii) value in use, which is determined by discounting the expected future cash flows from the asset or CGU.

This assessment requires significant judgement, including assumptions on long-term oil price forecasts, foreign exchange rates, discount rates, reserves, production profiles, and capital expenditure plans, all of which involve risk and uncertainty. Changes in these assumptions could materially affect the recoverable amount and lead to the recognition or reversal of impairment losses.

Impairment losses are recognised in the income statement when the carrying amount of an asset or CGU exceeds its recoverable amount. Where an impairment loss is subsequently reversed, the carrying amount is increased to the revised estimate of the recoverable amount, subject to not exceeding the carrying amount that would have been determined had no impairment been recognised previously.

Further details of the Group's property, plant and equipment are provided in Note 12 to the financial statements.

(v) Decommissioning costs

The estimated cost of decommissioning at the end of the producing lives of fields is periodically reviewed and is based on forecast prices and technology at the balance sheet date which are provided by technical teams. Provision is made for the estimated cost using a discounted cash flow method and a weighted average costs of capital. Details of the Group's decommissioning provisions are disclosed in Note 19 to the financial statements.

4. Segmental reporting

In 2024 and 2023, all the Group's assets and operations were in the United Kingdom and Turkey. For management purposes, the Group is organised into business units based on the main types of activities and has three reportable segments, as follows:

·      Oil production: includes producing business activities

·      Oil exploration and evaluation: includes non-producing activities

·      Head Office, corporate and administrative, including parent company activities.

The Board of Directors monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss and is measured consistently with operating profit or loss in the consolidated financial statements. However, the Group's financing (including finance costs and finance income) and income taxes are managed on a group basis and are not allocated to operating segments.

The accounting policies used by the Group in reporting segments internally are the same as those used in the financial statements.

Revenues of £829,018 are derived from a single external customer. These revenues are attributed to the oil production segment.

Year ended 30 September 2024

Group	Oil production £'000	Oil exploration & evaluation £'000	Corporate & administrative £'000	Consolidated £'000
REVENUE
External Customers	1,110	-	-	1,110
Total revenue	1,110	-	-	1,110
Results
Depreciation, Depletion & Amortisation	(220)	-	(84)	(303)
Exploration write offs & Impairment charges	(959)	(34,812)	-	(35,771)
Finance income/ costs	(916)	-	30	(886)
Loss before taxation	(2,853)	(12,923)	(22,048)	(37,824)
Taxation	-	-	-	-
Loss after taxation	(2,853)	(12,923)	(22,048)	(37,824)
Segment assets	776	777	2,210	3,763
Segment liabilities	(4,310)	(368)	(658)	(5,337)
Other disclosures:
Capital expenditure (1)	-	840	2	842

(1)           Capital expenditure consists of capitalised exploration expenditure, development expenditure, additions to oil & gas properties and to other intangible assets including expenditure on assets from the acquisition of subsidiaries.

 

Year ended 30 September 2023

Group	Oil production £'000	Oil exploration & evaluation £'000	Corporate & administrative £'000	Consolidated £'000
REVENUE
External Customers	1,538	-	-	1,538
Total revenue	1,538	-	-	1,538
Results
Depreciation, Depletion & Amortisation	(98)	(49)	(98)	(244)
Write offs & Impairment	-	(402)	-	(402)
Finance costs	(135)	(92)	(505)	(731)
Loss before taxation	(779)	(630)	(2,881)	(4,069)
Taxation	-	-	-	-
Loss after taxation	(779)	(630)	(2,882)	(4,069)
Segment assets	1,036	4,675	33,846	39,556
Segment liabilities	(3,049)	(2,021)	(1,798)	(6,868)
Other disclosures:
Capital expenditure (1)	225	1,448	-	1,673

(1)           Capital expenditure consists of capitalised exploration expenditure, development expenditure, additions to oil & gas properties and to other intangible assets including expenditure on assets from the acquisition of subsidiaries.

 

5. Operating loss

Group	2024 £'000	2023 £'000
Operating (loss) is stated after charging:
Directors' remuneration - fees & salaries	456	490
Auditors' remuneration
Audit-related assurance services  (PKF)	90	85
Audit-related assurance services (MKS)	75
Non-audit services	-	-
Depletion of oil & gas properties	26	125

 

6. Revenue

The Group has recognised the following amounts relating to revenue in the statement of comprehensive income:

Group	2024 £'000	2023 £'000
Revenue from contracts with customers	1,110	1,538
Total	1,110	1,538

 

All revenue is derived from sales of oil from one geographic location and is recognised at a point in time.

 

7. Directors and employees

The Company employed the services of an average of 12 employees in the year (2023: 14). Remuneration in respect of these employees was:

Group	2024 £'000	2023 £'000
Employment costs, including Directors, during the year:
Wages and salaries	1,613	1,628
Social security costs	210	215
Employee pension costs	13	13
Benefits in kind	18	11
Total	1,854	1,867

 

Employee pension costs payable at the end of the year amounted to £2,000 (2023: £2,000).

Average number of persons, including Executive Directors employed

	2024 No.	2023 No.
Administration	7	8
Operations	6	6
Total	13	14

 

Further details of Directors' remuneration, including share-based payments, pension contributions and other benefits, are provided in the Directors' Remuneration Report (pages 32-33).

 

 

8. Finance costs

	2024 £'000	2023 £'000
Loan interest due to non-controlling interests	169	139
Interest income	-	31
Unwind discount on decommissioning provision (note 19)	62	128
Change in estimate of decommissioning liability	625	(68)
Convertible loan fees	30	502
Total - Finance income/cost	886	589

 

9. Income tax

The Group's oil and gas activities in the UK fall within the ring fence corporation tax regime. Profits from these activities are subject to a combined rate of 40% (2023: 40%), comprising mainstream corporation tax at 30% and a supplementary charge of 10%.

The tax reconciliation below shows how the reported loss before taxation would reconcile to the theoretical tax charge at the applicable ring fence rate. However, no deferred tax asset has been recognised in respect of carried-forward tax losses, reflecting the uncertainty over the timing of their utilisation.

	2024 £'000	2023 £'000
Loss for the year before tax	(37,824)	(4,069)
Tax rate 40% (30% for ring-fenced activities plus 10% ring fence supplement)	40%	40%
Expected tax credit	(15,130)	(1,628)
Impairments and exploration write-offs not deductible for tax	12,550	322
Tax impact of losses carried forward	2,573
Tax impact of capital allowances	(20)	(10)
Temporary differences not recognised	55	699
Utilisation of losses brought forward	(30)	0
Other movements	2	487
Total - Actual tax expense	-	-

 

At 30 September 2024, the Group had accumulated tax losses available for carry forward of £56,376,149 (2023: £20,313,000). No deferred tax asset has been recognised in respect of these losses, impairments or other deductible temporary differences due to the uncertainty over future taxable profits against which they may be utilised.

No deferred tax liability was recognised as the Group has substantial brought-forward ring-fence and supplementary charge losses. These are offsetable against future tax liabilities and offsetable with the same tax authority. PPE are in entities that have the losses and any tax base differences have merely been recognised as unrecognised deferred tax losses .  

Deferred tax assets have not been recognised in respect of the unprovided deferred taxation items because it is not probable that future taxable profit will be available to utilise these deductible temporary differences.

During the year, the Group recognised a credit of £0.9 million from the remeasurement of decommissioning provisions. The associated deferred tax impact of approximately £0.2 million has not been recognised, consistent with the Group's policy of not recognising deferred tax assets where utilisation against future taxable profits is uncertain.

10. Earnings per share

The calculation of the basic loss per share is calculated by dividing the consolidated loss attributable to the equity holders of the Company by the weighted average number of ordinary shares in issue during the year.

Group	2024 £'000	2023 £'000
Loss attributable to ordinary shareholders	(37,168)	(3,777)

 

Group	2024 No.	2023 No.
Weighted average number of ordinary shares for calculating basic loss per share (restated in 2023 due to share consolidation)	4,343,546,436	2,224,191,162

 

Group	2024 Pence	2023 Pence
Basic and diluted loss per share	(0.09)	(0.02*)

*Restated due to share consolidation

As inclusion of the potential ordinary shares would result in a decrease in the earnings per share, they are considered to be anti-dilutive, as such, diluted earnings per share is not included. The potential number of dilutive shares is nil.

11. Intangible assets

	Group
Cost & Net Book Value	Exploration &  evaluation costs £'000	Development asset £'000		Total £'000
As at 30 September 2022	32,155	-		32,155
Additions	1,448	-		1,448
Exploration Write offs & Amortisation	(402)	-		(402)
As at 30 September 2023	33,201	-		33,201
Additions	840	-		840
Reclassification to development asset	(1,497)	1,497		-
Impairment of E&E assets	(32,544)	-		(32,544)
LXR As at 30 September 2024	-	1,497		1,497

 

	Company	Company
Cost & Net Book Value	Exploration &  evaluation costs £'000	Development assets £'000
As at 30 September 2022	841	-
Additions	325	-
Exploration Write offs & Amortisation	-	-
As at 30 September 2023	1,166	-
Additions	261	-
Exploration Write offs & Amortisation	(788)	-
Reclassification to development asset	(639)	639
As at 30 September 2024	-	639

 

Exploration and Evaluation assets

In accordance with IFRS 6 - Exploration for and Evaluation of Mineral Resources, the Group assesses at each reporting date whether there is any indication that an exploration and evaluation ("E&E") asset may be impaired. If such indicators exist, the Group performs an impairment test to determine the recoverable amount of the asset or cash-generating unit ("CGU"). Management has determined that each licence interest held by the Group constitutes a separate CGU, as this represents the lowest level at which largely independent cash inflows are expected to be generated.

Indicators considered include the period for which the Group has the right to explore, the likelihood of licence renewal, availability of funding for continued exploration, the results of technical evaluations, and whether further substantive expenditure is planned. Where such indicators exist, the recoverable amount of the CGU is estimated and compared with its carrying amount.

Impairment Indicators

During the year, the Group reviewed the carrying value of its E&E assets for indications of impairment. The following indicators were considered:

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

·      Further exploration or evaluation is not planned or budgeted;

·      Sufficient data exists to indicate that the carrying amount is unlikely to be recovered in full through successful development or sale;

·      Adverse changes in regulatory or market conditions.

Impairment assessment

The impairments primarily reflect external regulatory and commercial factors beyond the Company's direct control, not adverse geological or operational conditions.

Horse Hill was reviewed in light of the 2024 Supreme Court ruling which found that Surrey County Council's (SCC) decision to grant planning consent was unlawful as it had not assessed end use carbon emissions and that planning consent must be redetermined before production can resume. By agreement with SCC, oil production has been temporarily shut in until planning approval is restored, after which the Company will resume production and reassess the implementation of identified longer-term value opportunities in the field. It should be noted that the Company's positive view of the field's remaining recoverable oil and value remains essentially unchanged from the prior reported values and the impairment is a result of the fact that the field's consent to produce carries a level of uncertainty, being dependent on SCC's redetermination post this audit period.

 

Licence/ Subsidiary	Impairment (£m)	Reason
Horse Hill (E&E)	20.0	Planning consent uncertainty;  economic uncertainty on UK onshore oil and gas, the capital requirement and planning consent
Turkey	3.4	Exit from licence subsequent to 30 September 2024
PEDL234	9.2	Exit from licence subsequent to 30 September 2024

 

 

 

 

 

 

 

 

By recognising the Horse Hill impairment in this audit cycle the Board has adopted a prudent approach that ensures asset values reflect current regulatory realities and is also fully consistent with the Company's goal to transition into clean power via its hydrogen storage and generation activities. The Board also notes that, should Horse Hill planning consent be reinstated in 2026 as envisaged, given that the remaining recoverable oil volumes remain positive and unchanged from the Company's last reporting, there is a likelihood that a portion of current impairment could be reversed in future periods .

The recoverable value was assessed based on discounted cash flow techniques, applying assumptions consistent with market participant expectations.

Exploration costs impaired in the financial year to 30 September 2024 were ￡32.6 million (2023: ￡0.4 million).

Development assets

Expenditure of £1.5m hydrogen storage project previously classified as exploration and evaluation assets has been reclassified to development intangibles.

 

12. Oil & gas properties

 

Group	Oil & gas properties 2024	Decommissioning asset 2024	Property, plant & equipment 2024	Total 2024	Total 2023
Cost
As at 1 October 2023	17,481	385	2,241	20,107	19,956
Transfers	-	-	-	-	-
Additions	61	-	2	63	225
Change in estimate	-	288	-	288	(75)
As at 30 September 2024	17,542	673	2,243	20,458	20,106
Depletion & impairment
As at 1 October 2023	(15,531)	(59)	(801)	(16,391)	(16,195)
Impairment	(1,406)	(493)	(1,328)	(3,227)	-
Depletion charge	(26)	(102)	(101)	(229)	(244)
As at 30 September 2024	(16,963)	(654)	(2,230)	(19,847)	(16,391)
Carrying value
As at 30 September 2024	579	19	13	611	3,715

 

Impairment of Oil and Gas Assets

Year ended 30 September 2024

Cash Generating Units (CGUs) for impairment purposes are defined as individual fields or groups of fields that generate largely independent cash flows. For the year ended 30 September 2024, the Group has identified two main producing CGUs: Horse Hill and Horndean.

Impairment reviews were triggered by increased uncertainty over the Horse Hill site following the Supreme Court ruling.

·      Recoverable amounts have been determined based on value in use (VIU) calculations, using management's forecasts of future cash flows over the remaining economic lives of the assets. Key assumptions applied include:

·      Discount rate: 16.2% pre-tax WACC, benchmarked to industry comparables and reflecting the risks specific to the assets.

·      Oil price: based on the forward Brent crude curve as at 30 September 2024.

·      Production volumes and operating costs: derived from internal forecasts.

(xii)         Outcome of impairment reviews:

·      Horse Hill CGU: The carrying value of the HH CGU well was £2.1 million, included within total oil and gas properties. The recoverable amount was assessed as nil (refer to note 11). As a result, the full impairment was recognised

·      Horndean CGU: The carrying value of the related oil and gas properties was £1.5 million. Based on current production rates and internal forecasts, the recoverable amount was assessed at £0.6m. Impairment of £0.9m was recognised.

 

As the Horse Hill CGU has been fully impaired, any reasonably possible adverse changes in assumptions would not give rise to further impairment.

For Horndean, reasonably possible changes in assumptions could reduce the recoverable amount further, which would result in additional impairment charges.

Sensitivity analysis:
Management has performed sensitivity analyses on the key assumptions used in the VIU model for Horndean CGU. The results indicate that:

·      A 10% reduction in Brent crude oil prices would reduce recoverable amounts by approximately £0.2 million.

·      A 1% increase in the discount rate would reduce recoverable amounts by approximately £0.1 million.

·      A 10% increase in operating costs would reduce recoverable amounts by approximately £0.1 million.

 

Decommissioning asset

The Group reviews annually the estimated costs of decommissioning and restoring its oil and gas sites. These estimates are inherently uncertain and depend on the expected timing of abandonment, the scope of work required, future inflation and the discount rate applied.

During the year ended 30 September 2024, the Group updated its estimates to reflect changes in market-based assumptions. The nominal risk-free discount rate applied increased from 10% to 16.2%, reflecting movements in UK government bond yields and increased risk premium. In addition, the expected timing of abandonment was revised in line with updated production forecasts.

The combined effect of these changes resulted in an increase of £288K in the decommissioning provision, with a corresponding adjustment to the related oil and gas assets. This represents a change in accounting estimate under IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors and has been applied prospectively.

 

Property, plant & equipment (Company)

Company	2024 £'000	2023 £'000
Cost
As at 1 October 2023	1,829	1,824
Additions	2	5
As at 30 September 2024	1,831	1,829
Depletion & impairment
As at 1 October 2023	(416)	(319)
Depletion charge	(83)	(97)
Impairment	(1,328)	-
As at 30 September 2024	(1,827)	(416)
Carrying value
As at 30 September 2024	5	1,412

 

13. Investment in subsidiaries

Company	2024 £'000	2023 £'000
Cost and net book amount
At 1 October	26,242	26,242
Impairment	(26,045)	-
At 30 September	197	26,242

 

The Directors carried out an impairment review of the Company's Investment in its subsidiaries as at 30 September 2024 and determined that impairment in respect of Horse Hill Developments Ltd, UKOG Turkey Ltd, UKOG (234) and UKOG (GB) Ltd is required.  

The Company holds more than 50 per cent of the share capital of the following companies as at 30 September 2024:

Company	Country of Registration	Proportion held	Functional Currency	Nature of business
UKOG (GB) Limited	UK	100%	GB£	Oil production
UKOG (234) Limited	UK	100%	GB£	Oil exploration
Horse Hill Developments Ltd	UK	77.9%	GB£	Oil production
UKOG (137/246) Holdings Ltd	UK	100%	GB£	Holding Company
UKOG (137/246) Ltd	UK	100%	GB£	Oil exploration
UKOG (Turkey) Ltd	UK	100%	GB£	Oil exploration
UK Energy Storage Ltd	UK	100%	GB£	Energy storage
UK Oil & Gas Investments Limited	UK	100%	GB£	Dormant
UK Geothermal Limited	UK	100%	GB£	Dormant
UK Oil & Gas Employee Benefit Trust	UK	Not owned, Consolidation explained below	GB£	Basis disclosed below

The registered address of each of these subsidiaries can be found on the Companies House website.

All subsidiary undertakings are included in the consolidated financial statements. The proportion of the voting rights in the subsidiary undertaking held directly by the parent company do not differ from the proportion of the ordinary shares held. The following companies are taking an exception from the audit of the financial statements as per S479A of the Companies Act; UKOG (GB) Limited (04050227), UKOG (234) Ltd (07055133), UKOG (137/246) Holdings Ltd (09010542), UKOG (Turkey) Ltd (10212262), UK Oil & Gas Investments Limited (11252712), UK Geothermal Limited (13386906), UKOG (137/246) Limited (06807023 ), UK Energy Storage Ltd (14108327).

Employee Benefit Trust (EBT)
The UK Oil & Gas Employee Benefit Trust ("EBT") has been consolidated in these financial statements in accordance with IFRS 10 Consolidated Financial Statements. Although the Company does not hold a direct equity interest in the trust, the Group is deemed to control it because:

·      the trust operates solely for the benefit of the Company's employees and directors in connection with the Group's share incentive plans;

·      the Group, through the Remuneration Committee, has the ability to direct the relevant activities of the trust, including decisions over the distribution of shares; and

·      the Group is exposed to variable returns through the use of the trust to settle share-based payment arrangements.

·      Shares in the Company held by the EBT are presented as a deduction from equity within "own shares held in trust." Transactions between the EBT and the Group relating to the Company's own equity instruments are accounted for directly in equity.

·      At 30 September 2024, the EBT held 864,485,685 ordinary shares (2023: 250,000,000).

 

 

14. Inventory

Group	2024 £'000	2023 £'000
Inventories - Crude Oil	2	18
Total	2	18

 

15. Trade and other receivables

	Group		Company
	2024 £'000	2023 £'000	2024 £'000	2023 £'000
Trade receivables	107	187	1	4
Other debtors	189	208	413	64
Loans to subsidiary companies	-	-	1,018	13,157
Prepayments and accrued income	319	359	204	104
Total	615	754	2,386	13,329

 

The Directors consider that the carrying amount of trade and other receivables approximates to their fair value. Trade receivables are amounts due from customers for goods sold in the ordinary course of business. They are generally due for settlement within 30 days and are therefore all classified as current.

In 2024, the Directors carried out an impairment review of the loans to subsidiary companies and determined that an impairment charge of £12.1m is required in respect of the loan owed by Horse Hill Developments limited, UKOG Turkey and UKOG 234 Ltd. 

 

16. Cash and cash equivalents

	Group				Company
	2024 £'000	2023 £'000			2024 £'000	2023 £'000
Cash at bank and in hand	1,039	1,868			751	497
Total	1,039		1,868	751		497

 

17. Trade and other payables

	Group		Company
	2024 £'000	2023 £'000	2024 £'000	2023 £'000
Trade creditors	965	383	469	74
Other creditors	47	64	47	64
Accruals and deferred income	255	188	142	116
Total	1,268	635	658	254

 

The Directors consider that the carrying amount of trade and other payables approximates to their fair value.

18. Borrowings

	Group		Company
Borrowings	2024 £'000	2023 £'000	2024 £'000	2023 £'000
Convertible Loan notes	-	1,540	-	1,540
Loans payable to Non-Controlling Interests	3,310	3,244	-	-
Total	3,310	4,784	-	1,540

 

On 27 June 2023, the Company secured a £2 million committed funding facility with RiverFort Global Opportunities PCC Ltd and YA II PN Ltd ("Investors").

Facility Summary:

·      £2 million

·      0% interest, repayable 18 months after each advance,

·      Company retains a right to repay any outstanding amount of the Loan prior to the expiry of the term, subject to a repayment fee of 10% of the outstanding balance,

·      Company can raise cash via equity as it may see fit during the Loan's term.

In addition, during 2023,  1,125,895,598 warrants were issued to note holders. On the drawdown date the note holders were granted warrants to subscribe for ordinary shares. Each note holder was granted such number of warrants as is equal to 33% (in aggregate) of the relevant advance divided by the applicable reference price for that advance. In respect of the first tranche the note holders were granted 1,125,895,598 warrants. The warrants were exercisable at a premium of 140% of the 5-day average VWAP prior to the relevant drawdown for a period of 36 months from the relevant date of grant. On 30 September 2024, the loan was fully repaid.

 

Loan discharge terms:

As part of the package the Company issued to the note holders ordinary shares ("Equity Shares"), which represent between approximately 37% and 51% of the value of the First Tranche, or 1.3 billion new ordinary shares, dependent on whether the shares are valued at the Variable Price or Fixed Price, definitions of which are stated below. The Loan may, at the sole discretion of the note holders, be repaid by first applying the Equity Shares or, provided all Equity Shares have been applied, by converting the Loan into new ordinary shares in the Company. The price at which the Loan may be discharged either by applying the Equity Shares or converting the Loan is the lower of:

·      the Variable Price, being equivalent to 100% (i.e., zero discount) of the Company's lowest daily volume weighted average price ("VWAP") in the 15 trading days preceding the conversion date or the date the Equity Shares are applied to discharge the Loan; or

·      the Fixed Price, being the lower of either a 35% premium to a Reference Price being the average of the 5 daily VWAPs prior to the date of the relevant Loan drawdown (i.e., 135% of the Reference Price) or the lowest price at which the Company has issued equity in a fundraising whilst the loan is outstanding.

The Company retains a right to repay any outstanding amount of the Loan prior to the expiry of the term, subject to a repayment fee of 10% of the outstanding balance.

Any Equity Shares unsold at the end of the loan term or on early repayment shall be sold by the Investors and the net proceeds repaid to the Company.

All Investor share transactions are subject to:

·      an orderly market provision that provides that the maximum number of shares which can be traded by the Investors or any of their affiliates in any calendar month shall be such number of shares which is equal to twenty (20) per cent of the number of shares of the Company that have traded during the previous calendar month (as confirmed by the reports available by Bloomberg or their equivalent);

·      neither the Investors nor any of their affiliates shall hold any net short position with respect to the equity of UKOG during the Loan term; and

·      Investors will exercise any share voting rights in support of any resolutions proposed by the Company.

The principal amount of each Advance is deemed to have been established with an accrued premium of 4.5% on the relevant drawdown date (i.e., a fee of 4.5% is incurred on each drawdown which will be added to the principal sum to be repaid).

The loan was fully repaid as at 30 September 2024 (2023: £1.5 million outstanding).

Reconciliation of liabilities arising from financing activities

The table below provides a reconciliation between the opening and closing balances of liabilities arising from financing activities

£'000	Convertible loan
At 1 October 2023	1,500
Cash flows
- Repayment of borrowings	(300)
- Interest paid	(30)
Non-cash changes
- Conversion of loan to equity	(1,170)
At 30 September 2024	-

 

At 30 September 2024, the outstanding loan balances owed to HHDL's shareholders were; Alba Mineral Resources PLC (Alba) £2.6 million (2023: £2.1 million), Doriemus PLC (Doremius) £0.6 million (2023: £0.57 million) and UK Oil & Gas Plc £17.8 million (2023: £17.43million). The loans are payable on determination by the Board of HHDL. The loans currently attract an interest rate equivalent to the Bank of England base rate.

19. Provisions - decommissioning

Group	2024 £'000	2023 £'000
As at 1 October	1,451	1,442
Change of estimate	(754)	(119)
Unwind discount	62	128
As at 30 September	759	1,451

 

The amount provided for at 30 September 2024 represents the Group's share of decommissioning liabilities in respect of the Horndean and Avington fields, the producing site at Horse Hill and the Broadford Bridge drilling site.

The Company makes full provision for the future cost of decommissioning oil production facilities and pipelines on a discounted basis upon the installation of those facilities. The decommissioning provision represents the present value of decommissioning costs relating to oil & gas properties. These provisions have been created based on the Company's internal estimates.

The Group has recognised provisions for the estimated future costs of decommissioning oil and gas production and exploration facilities. These costs are expected to be incurred over the productive lives of the assets, which range from 4 to 10 years.

Key assumptions used in the calculation are:

·      Discount rate: 16.2% pre-tax, reflecting management's assessment of risks not adjusted in the cash flows.

·      Inflation rate: 3%

·      Timing of outflows: based on current licence expiry dates and expected cessation of production.

·      Site-specific provision amounts are as follows:

£'000	Horse Hill	Horndean	Avington	Broadford Bridge	Total
Undiscounted liability	1,043	178	190	214	1,625
Discounted provision at 30 September 2024 (16.2%)	492	37	40	190	759

Sensitivity analysis:

·      A 1% reduction in the discount rate (to 15.2%) would increase the total provision by approximately £29k.

·      A 1% increase in the inflation assumption would increase the provision by approximately £20k.

Assumptions used include an average group-wide discount rate of 16.2% and an annual inflation rate of 3.0% applied to future decommissioning costs. Assumptions based on the current economic environment have been made, which management believes are a reasonable basis upon which to estimate the future liability. These estimates are reviewed regularly to take into account any material changes to the assumptions. However, actual decommissioning costs will ultimately depend upon future market prices for the necessary decommissioning works required which will reflect market conditions at the relevant time. Furthermore, the timing of decommissioning is likely to depend on when the fields cease to produce at economically viable rates. This, in turn, will depend upon future oil & gas prices, which are inherently uncertain.

20. Share capital

Ordinary Shares	Number of ordinary shares	Nominal Value £	Total Value £'000
Issued at 30 September 2022	21,096,376,104	0.0000001	2,109
On 28 June  2023, for conversion	1,145,535,523	0.0000001	115
Issued at 30 September 2023	22,241,911,627	0.0000001	2,224
Share placings	3,750,000,000	0.0000001	375
Loan Conversion	3,543,014,469	0.0000001	354
EBT subscription	3,005,000,000	0.0000001	301
Reclassification to Deferred B			(3,250)
Share capital post share consolidation	3,253,992,610		3
Share issue, July 2024	3,333,333,333	0.000001	3
Share issue, August 2024	2,496,408,000	0.000001	2
EBT subscription	538,985,685	0.000001	1
Loan Conversion	1,518,042,206	0.000001	1.5
Issued at 30 September 2024	11,140,761,833	0.000001	11

 

In March 2024, further to the General Meeting, where all the resolutions successfully passed, the Company completed the share reorganisation to consolidate the 32,539,926,104 ordinary shares of £0.0000001 each in the capital of the Company on a 10:1 ratio into 3,253,992,610 ordinary shares of £0.000001 each.

Deferred shares

At 30 September 2024, the Company had  4,409,123,970,019deferred shares in existence (2023: 1,158,385,352,229). These deferred shares do not carry voting rights.

Total Ordinary and Deferred shares

The issued share capital as at 30 September 2024 is as follows:

	Number of shares	Nominal Value £	Total Value £'000
Ordinary shares	11,140,761,833	0.000001	11
Deferred shares A	1,158,385,352,229	0.00001	11,584
Deferred shares B	3,250,738,617,790	0.000001	3,25
Total			14,846

 

21. Share based payments

Share options

No options were granted during the year (2023: nil).

As at 30 September 2024 options in issue were nil.

Exercise price	Expiry date	Options in issue 30 September 2024
1.13p	26 September 2024	-
Total		-

 

No options were exercised, and no options were cancelled during the year (2023: none exercised, none cancelled). 121,500,000 options lapsed during 2024 (2023:117,000,000).

Warrants

24.2 million warrants were in issue as of 30 September 2024 (2023: 1,505 million).

During the year ended 30 September 2023, a total of 1,125,895,598 warrants were issued to note holders in connection with the Group's convertible loan facility, as disclosed in Note 18. The warrants were granted at the time of drawdown and entitled the holders to subscribe for ordinary shares at a price equal to 140% of the 5-day average VWAP prior to the relevant drawdown. The number of warrants granted represented 33% of the advance amount divided by the reference price.

The fair value of these warrants was determined to be £294,597, which was recognised as a finance cost in 2023.

Employee Benefit Trust

The Company established the UK Oil & Gas Employee Benefit Trust ("EBT") on 29 September 2014 to facilitate the operation of the Company's existing share incentive plan over up to 10% of the Company's issued share capital from time to time, in a tax-efficient manner for the beneficiaries of that plan. The EBT is a discretionary trust for the benefit of directors, employees and consultants of the Company. Shares held in the EBT are intended to be used to satisfy future awards made by the Company's Remuneration Committee under the share incentive scheme.

At 30 September 2024, the EBT held 864,485,685 ordinary shares in the Company (2023: 250,000,000). Awards of ordinary shares to beneficiaries will be subject to vesting and other performance conditions determined by the Remuneration Committee, in line with prevailing market practice.

In accordance with IFRS, the EBT is consolidated into the Group's financial statements as the Company is considered to have control over the trust. As a result, the ordinary shares held by the EBT are presented as a deduction from equity within the consolidated statement of financial position, rather than as an investment. The cost of shares acquired by the EBT is recorded in equity, and no gain or loss is recognised on the purchase, sale, issue or cancellation of the Company's own shares.

Details of share options granted during the year to Directors, consultants & employees over the ordinary shares are as follows:

Share options*	At 1 October 2023 No. Million	Issued during the year No. Million	Lapsed / exercised during the year No. Million	At 30 September 2024 No. Million	Exercise price £	Date from which exercisable	Expiry date
Allen Howard	0.5	-	(0.5)	-	0.0113	27/09/2019	25/09/2024
Kiran Morzaria	0.65	-	(0.65)	-	0.0113	27/09/2019	25/09/2024
Stephen Sanderson	2.5	-	(2.5)	-	0.0113	27/09/2019	25/09/2024
Nicholas Mardon Taylor	0.4	-	(0.4)	-	0.0113	27/09/2019	25/09/2024
	4.05	-	(4.05)	-
Consultants & employees	8.1	-	(8.1)	-	0.0113	27/09/2019	25/09/2024
Total	12.15	-	(12.15)	-

*restated due to share consolidation

Share options*	At 1 October 2022 No. Million	Issued during the year No. Million	Lapsed / exercised during the year No. Million	At 30 September 2023 No. Million	Exercise price £	Date from which exercisable	Expiry date
Allen Howard	0.5	-	-	0.5	0.0113	27/09/2019	25/09/2024
Kiran Morzaria	0.65	-	-	0.65	0.0113	27/09/2019	25/09/2024
Stephen Sanderson	2.5	-	-	2.5	0.0113	27/09/2019	25/09/2024
Nicholas Mardon Taylor	0.4	-	-	0.4	0.0113	27/09/2019	25/09/2024
	4.05	-	-	4.05
Consultants & employees	1.75	-	(1.75)	-	0.0160	13/04/2018	12/04/2023
Consultants & employees	8.1	-	-	8.1	0.0113	27/09/2019	25/09/2024
Total	13.9	-	(1.75)	12.15

*restated due to share consolidation

 

The disclosure of Weighted Average Exercise Prices and a Weighted Average Contractual Life analysis is not viewed as informative because of the minimal variation of options currently in issue, and therefore, it has not been disclosed.

For those options granted where IFRS 2 "Share-Based Payment" is applicable, the fair values were calculated using the Black-Scholes model. The inputs into the model were as follows:

	Risk free rate	Share price volatility	Expected life	Share price at date of grant
13 April 2018 (0.4p)	0.8%	128.9%	1.72 years	£0.015
13 April 2018 (1.6p)	0.9%	128.9%	5 years	£0.015
27 September 2019 (1.13p)	0.4%	63.13%	5 years	£0.011

 

Expected volatility was determined by calculating the historical volatility of the Company's share price for 12 months prior to the date of grant. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. The Company recognised total expenses of £nil (2023: £nil) relating to equity-settled share-based payment transactions during the year, and £1,958,000 (2023: £954,000) was transferred via equity to retained earnings on the exercising or lapse of options during the year.

Details of warrants are as follows:

Warrants	At 1 October 2023 No. Million	Issued during the year No. Million	Lapsed / exercised during the year No. Million	At 30 September 2024 No. Million	Exercise price £	Date from which exercisable	Expiry date
Note holders	1,125		(1,125)--	-	0.0105	28/06/2023	28/06/2024
Consultants	138	-	(138)	-	0.0016	02/07/2021	01/07/2024
Consultants	71	-	-	7.1*	0.0009	01/08/2022	01/08/2025
Consultants	171	-	-	17.1*	0.0009	09/09/2022	09/09/2025
Total	1,505	-	(1,263)	24.2*

*Restated due to share consolidation

 

22. Financial instruments and risk analysis

Financial assets by category

The categories of financial asset, all included initially measured at fair value and subsequently carried at amortised cost in the balance sheet and the headings in which they are included are as follows:

Current assets - Group	2024 £'000	2023 £'000
Inventory	2	18
Trade and other receivables	614	754
Cash and cash equivalents	1,039	1,868
Total	1,655	2,640

 

Current assets - Company	2024 £'000	2023 £'000
Trade and other receivables	617	172
Intercompany balances	1,018	13,157
Cash and cash equivalents	751	497
Total	2,386	13,826

 

Financial liabilities by category

The categories of financial liability all included at fair value and subsequently carried at amortised cost in the balance sheet and the headings in which they are included are as follows:

Current liabilities - Group	2024 £'000	2023 £'000
Trade and other payables	1,268	635
Borrowings	3,310	4,784
Total	4,578	5,419

 

Current liabilities - Company	2024 £'000		2023 £'000
Trade and other payables	657		258
Borrowings		-	1,540
Total	657		1,798

 

The group is exposed to market risk through its use of financial instruments and specifically to credit risk, and liquidity risk which result from both its operating and investing activities. The group's risk management is coordinated at its head office, in close co-operation with the board of Directors, and focuses on actively securing the group's short to medium term cash flows by minimising the exposure to financial markets.

Long term financial investments are managed to generate lasting returns. The group does not actively engage in the trading of financial assets for speculative purposes, nor does it write options. The most significant financial risks to which the group is exposed to are described below.

Interest rate sensitivity

The group is not substantially exposed to interest rate sensitivity, other than in relation to interest bearing bank accounts.

Credit risk analysis

The group's exposure to credit risk is limited to the carrying amount of trade receivables and cash at bank. The group continuously monitors defaults of customers and other counterparties, identified either individually or by Company, and incorporates this information into its credit risk controls. Where available at reasonable cost, external credit ratings and/or reports on customers and other counterparties are obtained and used.

The group's policy is to deal only with creditworthy counterparties. Group management considers that trade receivables that are not impaired for each of the reporting dates under review are of good credit quality, including those that are past due. None of the group's financial assets are secured by collateral or other credit enhancements. The credit risk for liquid funds and other short-term financial assets is considered negligible since the counterparties are reputable banks with high-quality external credit ratings.

Liquidity risk analysis

The majority of the Group's liabilities are contractually due within one year. The loan due from Horse Hill Developments Limited to Alba and Doriemus is payable on determination by the Board of Horse Hill Developments Limited.

The convertible loan at 30 September 2024 was fully repaid (2023: £1.5m) through a conversion mechanism. 

The group's continued future operations depend on its ability to raise sufficient working capital through the issue of equity share capital or debt financing. The Directors are confident that adequate funding will be forthcoming to finance operations. Controls over expenditure are carefully managed.

Capital management policies

The group's capital management objectives are to:

·      Ensure the group's ability to continue as a going concern;

·      Provide a return to shareholders; and

·      To provide capital for the purpose of strengthening the Group's risk management capability.

The Group actively and regularly reviews and manages its capital structure, to ensure an optimal capital structure, and equity holder returns, taking into consideration the future capital requirements of the Group and capital efficiency, prevailing and projected profitability, projected operating cash flows, projected capital expenditures and projected strategic investment opportunities. Management regards total equity as capital and reserves, for capital management purposes.

Commodity price risk

The Group is exposed to the risk of fluctuations in prevailing market commodity prices on the mix of oil & gas products it produces. The Group's policy is to manage these risks through the use of contract-based prices with customers.

Commodity Price Sensitivity

The table below summarises the impact of changes in commodity prices on profit before tax. The analysis assumes that the crude oil price moves 10%, resulting in a change of US$7.18/bbl (2023: US$7.80/bbl), with all other variables held constant. Reasonably possible movements in commodity prices were determined based on a review of the last two years' historical prices and economic forecasters' expectations.

Increase/decrease in crude oil prices	Effect on profit before tax for the year ended 30 September 2024 Increase/(Decrease) £'000	Effect on profit before tax for the year ended 30 September 2024 Increase/(Decrease) £'000
Increase US$ 7.18 /bbl (2023: US$ 7.80/bbl)	78	98
Decrease US$ 7.18 /bbl (2023: US$ 7.80/bbl)	(78)	(98)

 

Currency risk

The Group has no significant monetary assets or liabilities denominated in a foreign currency. However, the group is exposed to currency risk, with the price of Brent Crude Oil being denominated in US$. The current exposure is not seen as material, given the current level of revenue generated from it. The Board will continue to monitor this risk as the operations and/or revenues increase.

23. Commitments & contingent liabilities

Ongoing exploration expenditures are required to maintain title to the Group's exploration permits. No provision has been made in the financial statements for these amounts as the expenditure is expected to be fulfilled in the normal course of the Group's operations. As of 30 September 2024, the Group had no further material commitments (2023: none).

24. Events after the reporting date

On 19 November 2024, the Company successfully raised gross proceeds of £0.5 million by means of a placing at a price of 0.025 pence per share. The Placing's proceeds were employed to enable the acquisition of the Company's first salt cavern hydrogen storage site in the East Yorkshire salt basin.

On 21 February 2025, the Company successfully raised gross proceeds of £0.4million  by means of a private placing to a small number of professional investors at a price of 0.0102 pence per share.

On 1 April 2025, the Company's ordinary shares were suspended from trading on AIM pending publication of the Group's annual report and accounts for the year ended 30 September 2024, in accordance with AIM Rule 19. The suspension remains in place until the audited financial statements are published.

In June 2025, due to the refusal of the Broadford Bridge extension and the absence of a successful farmout amid challenging market conditions for UK onshore oil and gas, UKOG elected to relinquish licence PEDL234.

In July 2025, the Company agreed the sale of its 100%-owned subsidiary UKOG (GB) Limited to Servatec Holdings Limited for a cash consideration of £400,000. Completion is subject to the normal sector regulatory consents. UKOG (GB) holds minority non-operated interests in two UK onshore petroleum licences, a 10% interest in PL211 and a 5% interest in PEDL070, containing the Horndean and Avington oil fields, respectively.

In September 2025, the Group signed a term sheet with Riverfort in respect of a financing facility of up to £1,000,000. The facility, once executed, and should the Company draw down on the facility, is expected to provide additional working capital to support the Group's ongoing activities and to finance projects.

 

25. Related party transactions

Transactions with related parties

UK Oil & Gas Plc paid a subscription fee for membership with United Kingdom Onshore Oil & Gas (UKOOG) during the year. UKOOG represents the onshore oil and gas industry and wider supply chain and provides the Company with general industry advice and representation. Stephen Sanderson, UKOG's Chief Executive, is a Director of UKOOG and, as a result, the subscription fee for membership is considered a related party transaction. During the year, the Company paid £4,500 for its membership with UKOOG (2023: £30,000).

Remuneration of key management personnel

The remuneration of the company's directors and other key management personnel is set out below in aggregate for each of the categories specified in IAS24 Related Party Disclosures. The Directors Remuneration Report provides further details.

	2024 £'000	2023 £'000
Short-term employee benefits	457	508
Total	457	508

 

26. Ultimate controlling party

In the opinion of the Directors there is no controlling party.