CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER

			Restated (note 3)
		2022	2021
		$	$
Cash flow from operating activities
Profit for the financial year before tax		7,530,235	5,466,162
Share-based payments		246,707	325,375
Depreciation & Amortisation		3,309,940	4,111,670
Fair value loss on derivatives		1,562,467	1,527,250
Impairment of intangible assets		483,611	624,546
Loss on non-current assets / disposal groups held for sale		-	325,479
Interest expense		128,429	1,395,504
Foreign exchange movements		1,106,614	356,850
Tax paid		(5,238,704)	(1,940,574)
		9,129,299	12,192,262
Changes in working capital
Increase in inventory		(123,289)	(109,841)
Decrease / (increase) in trade and other receivables		732,529	(2,276,303)
Decrease in trade and other payables		(1,032,853)	(697,544)
Cash inflow from operating activities		8,705,686	9,108,574
Cash outflow from investing activities
Proceeds received on disposal of non-current assets		4,887,275	160,404
Purchase of property, plant & equipment		(5,610,924)	(3,607,826)
Spend on exploration activities		(2,972,201)	(2,121,050)
Net cash used in investing activities		(3,695,850)	(5,568,472)
Cash flow from financing activities
Issue of ordinary shares net of expenses		200,305	444,949
Repayments on oil swap financing arrangement		(1,452,118)	(3,518,359)
Payments on oil price derivatives		(1,522,892)	(1,805,086)
Capital payments on lease		(90,096)	(68,914)
Interest paid on lease		(86,669)	(14,421)
Net cash used in financing activities		(2,951,470)	(4,961,831)
Net increase / (decrease) in cash and cash equivalents		2,058,366	(1,421,729)
Cash and cash equivalents at beginning of financial year		397,308	2,188,903
Effects of exchange rate changes		(1,110,211)	(369,866)
Cash and cash equivalents at end of financial year		1,345,463	397,308

 

 

1.    Statutory Accounts

 

The financial information set out above does not constitute the Company's statutory accounts for the year ended 31 December 2022 or 2021, but is derived from those accounts. The Auditor has reported on those accounts, and its reports were unqualified and did not contain statements under sections 498(2) or (3) of the Companies Act 2006.

 

The statutory accounts for 2022 will be delivered to the Registrar of Companies following publication.

 

While the financial information included in this preliminary announcement has been prepared in accordance with UK-adopted International Accounting Standards ("framework"), this announcement does not itself contain sufficient information to comply with the framework. The Company expects to distribute the full financial statements that comply with UK-adopted International Accounting Standards by 30 June 2022.

 

 

2.    Principal Accounting Policies

 

Basis of consolidation

The financial statements for the year ended 31 December 2022 incorporate the results of United Oil & Gas plc ("the Company") and entities controlled by the Company (its subsidiaries).  Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities. 

 

All intra-Group transactions, balances, income and expenses are eliminated in full on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

 

Going Concern

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Director's Report.

 

United regularly monitors its business activities, financial position, cash flows and liquidity through the preparation and review of detailed forecasts. Scenarios and sensitivities are also regularly presented to the Board, including changes in commodity prices and in production levels from the existing assets, plus other factors which could affect the Group's future performance and position. A base case forecast has been considered which uses budgeted commitments and prevailing forward curve assumptions for oil prices.  The key assumptions and related sensitivities include a "Reasonable Worst Case" ("RWC") sensitivity where the Board has considered a scenario with significant aggregated downside, including a delay in the payment of receivables in Egypt, a reduction in forecasted revenue of 12% and an increase in forecast capital expenditure in Egypt by 15%. The RWC incorporates a scenario whereby the sale of  Maria P2519 to Quattro does not complete in the period. Under the combined RWC, the Group forecasts there will be sufficient resources to continue in operational existence for the foreseeable future.

 

The likelihood of all these downside sensitivities taking place simultaneously and lasting for the entire forecast period is considered to be remote. Under such a RWC scenario, we have identified appropriate mitigating actions, including the deferral of additional uncommitted capital expenditure, seeking a restructuring of debt arrangements and adjustment of the Group cost base, which would be available to us and have been demonstrated as effective strategies in previous periods of low oil prices. Our business in Egypt remains robust given cash operating costs of less than $11/boe, flexible drilling contracts and downside price protection on our hedged volumes and gas contracts that are fixed price in nature. There are limited capital commitments in the other assets in our portfolio. The forecasts outlined above show that the Group will have sufficient financial headroom for the 12 months from the date of approval of the 2022 Accounts. Based on this analysis, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Therefore, they continue to use the going concern basis of accounting in preparing the annual Financial Statements.

 

New and amended International Financial Reporting Standards adopted by the Group

 

The Group has adopted the following standards, amendments to standards and interpretations which are effective for the first time this year.  The impact is shown below:

 

New/Revised International Financial Reporting Standards		Effective Date: Annual periods beginning on or after:	UKEB adopted	Impact on the Group
Various	Amendments to • IFRS 3 Business Combinations; • IAS 16 Property, Plant and Equipment; • IAS 37 Provisions, Contingent Liabilities and Contingent Assets • Annual Improvements 2018-2020	1 January 2022	Yes	No material impact

 

 

International Financial Reporting Standards in issue but not yet effective

 

At the date of authorisation of the consolidated financial statements, the IASB and IFRS Interpretations Committee have issued standards, interpretations and amendments which are applicable to the Group. For the next reporting period, applicable International Financial Reporting Standards will be those endorsed by the UK Endorsement Board (UKEB).

 

Whilst these standards and interpretations are not effective for, and have not been applied in the preparation of, these consolidated financial statements, the following could potentially have a material impact on the Group's financial statements going forward:

 

New/Revised International Financial Reporting Standards		Effective Date: Annual periods beginning on or after:	UKEB adopted
IAS 12	Amendments to IAS 12: Deferred Tax relating to Assets and Liabilities arising from a Single Transaction	1 January 2023	No
IAS 1	Amendments to IAS 1: Classification of Liabilities as Current or Non-current and Classification of Liabilities as Current or Non-current	1 January 2023	No

 

New / revised International Financial Reporting Standards which are not considered to potentially have a material impact on the Group's financial statements going forwards have been excluded from the above.

 

New/Revised International Financial Reporting Standards		Effective Date: Annual periods beginning on or after:	UKEB adopted
IFRS 17	Insurance contracts (and subsequent amendments to IFRS 17)	1 January 2023	Yes
IAS 8	Definition of accounting estimate (amendment to IAS 8))	1 January 2023	Yes
IFRS 16	Lease liability in a sale and leaseback (amendment to IFRS 16)	1 January 2024	No
IAS 1	Disclosure of accounting policies (amendments to IAS 1 and IFRS Practice Statement 2)	1 January 2023	Yes
IFRS 10 and IAS 28	Sale or contribution of assets between an investor and its associate or joint venture	No confirmed date	no

 

Management anticipates that all relevant pronouncements will be adopted in the Group's accounting policies for the first period beginning after the effective date of the pronouncement. New standards, interpretations and amendments not listed above are not expected to have a material impact on the Group's financial statements.

 

 

3.    Restatements

 

3(a) Restatement of prior year financial statements: correction of error in accounting for the disposal of UOG Italia

 

The results for the year to 31 December 2021 have been restated to reflect final costs associated with the Italian disposal within the group in the calculation of the loss in disposal of UOG Italia in 2021, and a corresponding error in the amounts reported as non-current assets held for sale at 31 December 2021. In the Balance Sheet the adjustment has been restated and reclassified from non- current to current assets.

 

The error has been corrected by restating each of the affected line items for the previous period as follows:

 

	2021	Decrease	2021 Restated
	$	$	$
Balance sheet (extract)
Assets held for sale	2,561,250	(469,813)	2,091,437
Net assets	24,294,903	(469,813)	23,825,090
Retained earnings	671,356	(469,813)	201,543
Total equity	24,294,903	(469,813)	23,825,090
Income statement (extract)
Profit/(loss) on non-current assets held for sale	118,651	(469,813)	(351,162)
Operating profit	8,858,729	(469,813)	8,388,916
Profit before taxation	5,935,975	(469,813)	5,466,162
Profit for the financial year	4,074,093	(469,813)	3,604,280

 

The restatement affecting profit also affects the statement of changes in equity. Basic and diluted earnings per share, and the note reconciling the tax charge, have also been restated.

 

3(b) Effect of the change in functional currency of the Company on the Group's financial statements

 

On 1 January 2022, the Company's functional currency changed from GBP to USD reflecting the fact that USD mainly influences both sales prices and costs. This has resulted in a restatement of equity items in the consolidated balance sheet at the date of the functional currency change.

 

The quantitative effect on the components of equity in the consolidated financial statements is as follows:

 

 

 

 

 

 

 

 

 

 

	2022
	$
	Increase / (decrease)
Share capital	283,278
Share premium	523,376
Share-based payment reserve	53,517
Retained earnings	(72,272)
Translation reserve	(787,899)
	-

 

4.    Segmental reporting

 

Operating segments

 

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

 

The Group operates in four geographic areas - the UK, Europe and greater Mediterranean, Latin America and Egypt. The Group's revenue from external customers and information about its non-current assets (other than financial instruments, deferred tax assets and post-employment benefit assets) by geographical location are detailed below.

 

2022
$	UK & EU		Latin America	Egypt	Total
Revenue	-		-	15,831,237	15,831,237
Other revenue	-		-	5,181,458	5,181,458
Non-current assets	1,340,605		5,228,625	21,184,395	27,753,625

 

2021
$	UK & EU		Latin America	Egypt	Total
Revenue	-		-	19,228,698	19,228,698
Other revenue	-		-	1,940,574	1,940,574
Non-current assets	579,403		4,460,303	17,921,194	22,960,900

 

 

 

Other Revenue

Under the concession agreements in Egypt, Income Tax due on taxable profit is paid on the Group's behalf by EGPC. To achieve this through the agreements, the Group notionally receives a greater share of hydrocarbon production in excess or Group's entitlement share of the production equal to the amount required to cover the tax payable. The oil is produced and sold on the Group's behalf by EGPC, who discharge the Group's tax liability. This income is shown as other revenue and an equal and opposite tax charge recorded through the current taxation.

 

 

5.    Cost of sales

 

	2022	2021
	$	$
Production costs	4,930,038	4,906,713
Depreciation, depletion & amortisation	3,213,872	4,005,102
	8,143,910	8,911,815

 

 

 

6.    Operating Profit

 

	2022	2021
	$	$
Operating profit is stated after charging:
Depreciation:
-      Owned assets	3,219,080	4,009,427
-      Right of use leased assets	88,382	98,258
Amortisation	2,478	3,985
Share based payments	246,707	325,375
Foreign exchange losses	1,106,614	356,850
Fees payable to the Company's auditors for the audit of the annual financial statements	90,000	70,000

 

 

7.    Finance expense

 

	2022	2021
	$	$
Fair value loss on loan & derivatives	1,562,467	1,527,250
Effective interest on borrowings	41,760	1,381,083
Interest expense on lease liabilities	86,669	14,421
	1,690,896	2,922,754

8.    Taxation

	2022	2021
	$	$
Profit/(Loss) before tax	7,530,235	5,466,162
Loss on ordinary activities multiplied by standard rate of corporation tax in the UK of 19% (2021: 19%)	1,430,744	1,038,571
Tax effects of:
Foreign tax	5,181,458	1,940,574
Utilisation of tax losses	-	(1,038,571)
Adjustments in respect of prior periods	-	(78,692)
Double tax relief	(1,430,744)	-
Corporation tax charge	5,181,458	1,861,882

 

The Group has accumulated tax losses of approximately $6.8m (2021: $5.5m).  No deferred tax asset was recognised in respect of these accumulated tax losses as there is insufficient evidence that the amount will be recovered in future years.

 

9.    Earnings per share

 

The Group has issued share warrants and options over Ordinary shares which could potentially dilute basic earnings per share in the future.

 

Basic earnings per share is calculated by dividing the profit attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year.

There were 69,179,818 (2021: 113,697,454) share warrants and options outstanding at the end of the year that could potentially dilute basic earnings per share in the future.

 

Basic and diluted earnings per share

	2022	2021
	Cents	Cents Restated
Basic earnings per share from continuing operations	0.36	0.57
Diluted earnings per share from continuing operations	0.36	0.54

                     

 

The profit and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows:

	2022	2021
	$	$
Profit used in the calculation of total basic and diluted earnings per share	2,348,777	3,604,280

 

Number of shares	2022	2021
	Number	Number
Weighted average number of ordinary shares for the purposes of basic earnings per share	649,550,544	637,482,325
Dilutive shares	6,803,425	24,871,644
Weighted average number of ordinary shares for the purposes of diluted earnings per share	656,353,969	662,353,969

 

 

 

10.  Intangible assets

		Exploration and Evaluation assets $	Computer software $	Total $
Cost
At 1 January 2021		10,131,978	12,444	10,144,422
Additions		3,013,536	-	3,013,536
Disposals		(2,576,724)	-	(2,576,724)
Transferred to non-current assets held for sale		(2,519,240)	-	(2,519,240)
Foreign exchange differences		(236,009)	(970)	(236,979)
At 31 December 2021		7,813,541	11,474	7,825,015
Additions		2,972,201	-	2,972,201
Foreign exchange differences		(44,093)	(657)	(44,750)
At 31 December 2022		10,741,649	10,817	10,752,466
Amortisation and impairment
At 1 January 2021		2,248,531	4,148	2,252,679
Charge for the year		-	3,985	3,985
Impairment		624,546	-	624,546
Foreign exchange differences		(25,803)	(483)	(26,286)
At 31 December 2021		2,847,274	7,650	2,854,924
Charge for the year		-	2,478	2,478
Impairment		483,611	-	483,611
Foreign exchange differences		26,531	(403)	26,128
At 31 December 2022		3,357,416	9,725	3,367,141
Net book value
At 31 December 2022		7,384,234	1,092	7,385,326
At 31 December 2021		4,966,267	3,824	4,970,091

 

At 31 December 2022 the group's E&E carrying values of $7.4m related to our high impact exploration activity in Jamaica, exploration drilling in the Abu Sennan concession in Egypt, and the UK North Sea and Waddock Cross development and exploration campaigns, respectively.

 

In Egypt United and its partners drilled two of its larger, but higher risk exploration prospects in 2022. ASV-1X was drilled in Q2, and although it did not flow on test there were encouraging signs indicating the presence of hydrocarbons, and the well has a workover planned and approved in the 2023 work programme. As a result, $0.9m spent net to United remains as an Intangible asset at BS date. The second exploration well, ASW-1X well did not encounter hydrocarbons in any of the multiple pre-drill targets and was plugged and abandoned at the beginning of 2023. This resulted in a write off of all costs incurred of $0.5m. On 31 December 2022 the balance of Egypt Intangible assets was $0.9m

 

In Jamaica United continues with a farm-out campaign with the intention of attracting partners to the licence ahead of drilling the Colibri prospect. This farm out campaign has recently seen us add Energy Advisors Group (''EAG'') to our existing advisors, Envoi Ltd, with the aim of accessing capital from the US companies and investment funds. At present there are a number of companies evaluating the opportunity with the intention of seeing final offers by the end of 1H 2023. The current licence phase expires at end of January 2024 and we have until then to make a well drilling commitment. As such all costs incurred to date remain capitalised as Intangibles, and at year end the carrying value of our exploration activity in Jamaica amounted to $5.2m.

 

In the UK North Sea, the Company carries an Intangibles balance of $1.0m at year end, representing amount capitalised to date on the Maria discovery. In January 2023 United announced an asset purchase agreement (''APA'') with Quattro Energy Limited (''Quattro'') to sell the Maria licence, P2519 for a maximum consideration of up to $7m. The APA was signed post year end and as a result we do not account for these assets as held for sale at the BS date. As a result, management believe no impairment indicators exist and we continue to carry the Maria licence at cost of $1.0m at 31 December 2022.

 

In the UK Waddock Cross licence, following a review of the updated operator development plan and in light of the increased importance of energy security in the UK coupled with the sustained high commodity prices, the directors are of the view that all costs incurred on the licence in 2022 are fully recoverable given the commercial viability of the development demonstrated by the operator, Egdon Resources Ltd. As a result, United continue to carry capitalised costs of $0.3m at the 31 December 2022 Balance sheet date, which includes a decommissioning asset recognised of $0.2m.

 

Management reviews the intangible exploration assets for indications of impairment at each balance sheet date based on IFRS 6 criteria such as where commercial reserves have not yet been established and the evaluation, exploration work is ongoing and a development plan has not been approved. As a result of these reviews the Directors believe no impairment indicators exist on the company's exploration portfolio, and as a result carry intangibles at cost value of $7.4m at 31 December 2022.

 

 

11.  Property, plant and equipment

 

		Production assets $	Computer equipment $	Fixtures and fittings $	Right of use asset $	Total $
Cost
At 1 January 2021		15,976,659	13,706	2,971	204,764	16,198,100
Transfer from production assets		2,576,724	-	-	-	2,576,724
Additions		5,900,375	-	-	42,951	5,943,326
Disposals		-	-	-	(43,862)	(43,862)
Foreign exchange differences		-	(1,068)	(231)	(13,820)	(15,119)
At 31 December 2021		24,453,758	12,638	2,740	190,033	24,659,169
Additions		5,600,238	10,686	-	87,012	5,697,936
Foreign exchange differences		-	(724)	(157)	(3,508)	(4,389)
At 31 December 2022		30,053,996	22,600	2,583	273,538	30,352,717
Depreciation
At 1 January 2021		2,563,268	7,316	248	20,101	2,590,933
Charge for the year		4,005,103	3,373	951	98,258	4,107,685
Disposals		-	-	-	(16,625)	(16,625)
Foreign exchange differences		-	(706)	(57)	(12,870)	(13,633)
At 31 December 2021		6,568,371	9,983	1,142	88,864	6,668,360
Charge for the year		3,213,872	4,359	849	88,382	3,307,462
Foreign exchange differences		-	(509)	(54)	9,158	8,595
At 31 December 2022		9,782,242	13,834	1,937	186,404	9,984,417
Net book value
At 31 December 2022		20,271,754	8,766	646	87,133	20,368,300
At 31 December 2021		17,885,387	2,655	1,598	101,169	17,990,809