the
admenergy plc
(Formerly MX Oil plc)
Annual Report and Accounts 2018
Company number: 05311866
1
ADM Energy plc
CONTENTS
REPORTS
PAGE
Company Information
2018 Summary
Chairman’s Report
Strategic Report
Board of Directors
Directors' Report
Corporate Governance
Report on Directors’ Remuneration
Report of the Independent Auditor
FINANCIAL STATEMENTS
Group Income Statement
Group and Company Statements of Financial Position
Group Statement of Changes in Equity
Company Statement of Changes in Equity
Group and Company Statements of Cash Flows
Notes to the Financial Statements
2
3
4
5
8
9
11
18
19
23
24
25
26
27
28
2
ADM Energy plc
COMPANY INFORMATION
DIRECTORS:
REGISTERED OFFICE:
COMPANY NUMBER:
SECRETARY:
NOMINATED ADVISER:
BROKER:
REGISTRARS:
SOLICITORS:
INDEPENDENT AUDITOR:
FINANCIAL PR
Richard Carter (Non-Executive Chairman)
Stefan Olivier (Chief Executive Officer)
Sergio Lopez (Non-Executive Director)
17th Floor
Dashwood House
69 Old Broad Street
London
EC2M 1QS
05311866
Shakespeare Martineau LLP
Cairn Financial Advisers LLP
Cheyne House, Crown Court
62-63 Cheapside
London
EC2V 6AX
Pello Capital Limited
4th Floor
18 St Swithin’s Lane
London
EC4N 8AD
Computershare Investor Services Plc
The Pavilions
Bridgwater Road
Bristol
BS99 7NH
Keystone Law Ltd
48 Chancery Lane
London
WC2A 1LF
Haysmacintyre LLP
Statutory Auditor
Chartered Accountants
10 Queen Street Place
London
EC4R 1AG
Luther Pendragon
48 Gracechurch Street
London
EC3V 0EJ
3
ADM Energy plc
2018 SUMMARY
HIGHLIGHTS
• Revenue increased 82% to £3.1m (2017: £1.7m)
•
• Aje Field asset, in which ADM Energy holds 5% equity investment, continued to perform well:
Loss after tax reduced to £849,000 (2017: £3.4m loss)
o Oil is being produced at a stable rate from two wells in the Aje Field (Aje-4 and Aje-5), part
of OML 113
o Two wells achieved a total produced volume of approximately 1,200,000 barrels of oil in
2018
o Combined production from the two wells (as of April 2019) approximately 3,100 bopd (155
bopd net to ADM Energy)
o Significant increase in reserves outlined by the Competent Person’s Report (“CPR”)
completed in 2018 and updated in April 2019
o Renewal of the OML 113 licence for another 20 years approved by the Minister of
Petroleum Resources
o Field Development Plan ("FDP") for the Turonian Aje gas project approved by the Nigerian
Government
o Plan for the next phase of the Aje Field expansion is being developed
POST PERIOD
•
In March 2019, Aje completed its 10th lifting, equating to 17,323 barrels sold by the joint
operators at $66.97 per barrel. At the project level, the Company's investment produced $1.16m
revenue and net profit of approximately $600,000
• Aje partnership has fully paid the $9.8m licence renewal fee, thereby securing a 20 year extension
•
of OML 113 (Aje Field) licence
In April 2019, the Private office of His Highness Shaikh Ahmed Bin Dalmook Al Maktoum
subscribed for 1,335,000,000 shares (equating to £534,000) and, as a result, holds 29.86% of the
Company's shares
• The Company changed its name from MX Oil to ADM Energy
• Consolidated the ordinary shares on the basis of 1 share for every 100 shares, thereby reducing
the number of shares in issue, after the issue of 36 shares, from 4,471,349,700 to 44,713,497 (the
"Consolidation")
4
ADM Energy plc
CHAIRMAN’S REPORT
FOR THE YEAR ENDED 31 December 2018
Introduction
During the year, ADM Energy plc continued to pursue its
strategy as an oil and gas investing company and is focused
principally on its investment in Nigeria. At the same time,
we continue to evaluate new opportunities in order to
expand the investment portfolio of ADM Energy.
Review of activities
During the year, the two wells in the Aje Field within block
OML 113 continued to produce at very steady rates with
very limited decline.
In 2018, the first Competent Person’s Report (“CPR”) since
July 2014 was completed on the Aje Field.
This
incorporated all the developments and new data generated
by the project since the drilling of the Aje-5 well and its two
side tracks.
in April 2019
As a result of production levels ahead of expectations at the
Aje-4 and Aje-5 wells during 2018, a revised CPR was
produced
further enhance our
understanding of the field. The level of reserves reported in
the CPR update of 2019 represents a further increase in
particular to the recoverable oil estimates which we
consider to be the best reflection for return on investment
and cash generation.
to
Now that the Company has received the updated 2019 CPR,
work is currently underway to develop the hydrocarbons in
both the Turonian and Cenomanian. At the same time, the
Aje partners were able to renew the production licence for
a further 20 years. Modelling work on the best and most
profitable development scenario is still underway. The
Company expects to see further development drilling in
2020. The partnership has a strategy to develop the
hydrocarbon reserves from Aje with the highest return on
investment. As reported in the update on 15 April 2019, we
anticipate that the Aje investment should start producing
positive cashflow from 2020, a significant milestone for the
Company.
Post-period, on 15 April 2019, we were pleased to
announce that the private office of His Highness Shaikh
Ahmed Bin Dalmook Al Maktoum acquired 29.86% by way
of issue of new shares. His Highness has subsequently, in
June 2019, been appointed to the position of President of
the Company, with the name changing to ADM Energy plc.
This is a significant and very exciting moment for us as His
Highness intends to leverage his network and bring new
opportunities and contacts to ADM Energy. The Company
has offered his strategic
in
anticipation that His Highness may be able to add
considerable value through his knowledge, network,
experience and access to capital.
investor a Board seat
“His Highness intends to leverage his
network and bring new opportunities
and contacts to ADM Energy”
Outlook
In summary, the ongoing development of Aje and the
support of such a high profile strategic investor should
make the next 12 months an exciting and transformative
year for ADM Energy.
Our strategy is to build a larger, balanced portfolio of
projects in line with its investing strategy. ADM Energy will
aim to identify investment opportunities in undervalued
production and near-production assets, primarily in Africa.
The recruitment process for key executive management
positions and
is
underway to provide additional support for what the Board
believes is a significant opportunity to grow the business
and create value for shareholders.
independent non-executive directors
Richard Carter
Non-Executive Chairman
27 June 2019
5
ADM Energy plc
STRATEGIC REPORT
FOR THE YEAR ENDED 31 December 2018
The Directors present their Strategic Report for the Group for the year ended 31 December 2018. The Chairman’s Report on page
4 forms part of this report. The Company is an investing company quoted on AIM. Its principal focus is investing in the natural
resources sector, particularly in oil and gas where it believes that it can make an attractive return for shareholders. The Company
expects to generate returns for shareholders through the development of its investments. Currently, the Company’s principal
investment is in the Nigerian offshore licence OML 113 and to date the Company has been involved with maintaining and
progressing its investment in OML 113 together with the joint operators from the development stage through to production. It is
therefore expected that a return to
shareholders will be delivered principally
through capital growth.
AJE FIELD
Principal activities and review of the
business during the year
Aje Field
In 2018, operations at the OML 113 licence
continued
to make good progress,
underpinned by strong performance of the
Turonian and Cenomanian reservoirs in
line with
partners'
expectations.
operating
the
Combined production from the two wells
in the Aje Field within block OML 113, Aje-
4 and Aje-5, has, as of April 2019,
stabilised at around 3,100 bopd (155 bopd
net to ADM Energy). In total, the two wells
achieved production of approximately
1,200,000 barrels of oil in 2018.
Material Increase in Aje Field Reserves
In 2018, the partners commissioned an
updated CPR - the first since July 2014 - to
re-evaluate the Aje Field and gain a better
understanding of its hydrocarbon reserves.
This CPR deployed new data about the
underlying reservoir and related geology
generated since the drilling of the Aje-5
well and its two side tracks (Aje-5ST1 and
Aje-5ST2).
The CPR was completed by AGR TRACS
International Limited (“AGR TRACS”) in
April 2018 for the period to 31 December
2017.
It revealed that the partners’
operations in the Aje Field since 2016 had
in the
unlocked a material
project’s reserves and resource position.
increase
ADM Energy holds a 5% equity investment in the Aje
Field in OML 113, which covers an area of 835 sq km
offshore Nigeria. Aje has multiple oil, gas and gas
condensate reservoirs in the Turonian, Cenomanian and
Albian sandstones with five wells drilled to date.
As a result of production levels ahead of expectations at the Aje-4 and Aje-5 wells during 2018, a revised CPR was produced in
April 2019 to further enhance the partners’ understanding of the Aje Field using production history up to 31 December 2018.
The reserves reported in this latest CPR and from the 2018 CPR, completed by AGR TRACS, are summarised in the table below:
Reserves
1P Proven Reserves
2P Proven and Probable Reserves
3P Proven, Probable and Possible Reserves
2019
Gross
MMboe
82.4
138.2
220.8
2019
Net entitlement
to MXO
MMboe
5.2
8.9
12.8
2018
Gross
MMboe
78.2
127.1
215.0
2018
Net entitlement
to MXO
MMboe
5.0
8.2
12.7
6
ADM Energy plc
STRATEGIC REPORT
FOR THE YEAR ENDED 31 December 2018
The level of reserves reported in the 2019 CPR update represented a further material increase compared to the previous report
and highlighted the future potential of the Aje Field. Whilst the increase in the overall reserves estimate from the 2018 CPR is
modest, the 2P recoverable oil reserves relating to the two producing wells have risen significantly from 2.96 MMbbls gross in
2018 to 4.73 MMbbls gross in 2019, a 60% increase despite the field having produced over 1m gross barrels over the course of
2018.
These CPR results confirm the commerciality of the Aje gas development, highlighting the need for a revision of the development
plan once the field development scenario studies are completed. This will underpin a final investment decision on the
development of the Aje reserves in the future.
In estimating reserves, contingent and prospective resources AGR TRACS has used the standard petroleum engineering
techniques. These estimates are based on the joint definitions of the Society of Petroleum Engineers, the World Petroleum
Congress, the American Association of Petroleum Geologists and the 2007 PRMS (Petroleum Resources Management System).
The updated CPR announcement released by the Company on 30 April 2019 and 2 May 2019 was reviewed by Wim Burgers, a
qualified production geologist with more than 40 years' experience in the oil and gas industry, who has also reviewed the AGR
TRACS report to which it relates.
Field Development Plan
A Field Development Plan for the Turonian Aje gas project was approved by the Nigerian Government in 2018. The FDP comprises
several production wells in the Turonian, tied back to existing and new infrastructure. Consequently, in October 2018, the
partners in the licence commissioned the preparation of static and dynamic modelling work by RPS Energy Consultants Ltd
(“RPS”), to conduct an assessment of the potential development activity associated with the additional upside oil resources. The
assessment was completed in April 2019.
Licence Renewal
The operator of the offshore licence in Nigeria, OML 113 has received consent from the Minister of Petroleum Resources for its
renewal for another term of 20 years. The renewal is subject to the satisfaction of certain conditions, including a commitment to
develop the gas potential of the licence. In addition, the Aje partners have now paid the $9.8m licence renewal fee in full.
Financial Review
Results and Dividends
For the year ended 31 December 2018, the Group increased revenue by 82% to £3.1m (2017: £1.7m). Loss after taxation reduced
to £849,000 (2017: £3,435,000 loss). The Directors do not propose a dividend (2017: £nil). Cash and cash equivalents as at 31
December 2018 was £216,000 (31 December 2017: £50,000).
Funding
During the period, the Group raised additional equity of £1.5 million in two fundraisings. On 15 April 2019, the Group announced a
placing to raise £680,000 before expenses, through the issue of 1,700,000,000 new ordinary shares at 0.04p per share. In
connection with the placing, 800,000,000 warrants have been issued to the placees with an exercise price of 0.04p per share for a
term of five years. In the short term the Group will require additional funding in order to meet its liabilities as they fall due and
have a reasonable expectation that additional equity finance can be raised in order to continue in operational existence for the
foreseeable future.
Outlook
The updated CPR report in 2019 provided an accurate and in-depth analysis of the Aje Field asset, with an increase in the level of
reserves highlighting the future potential of the Aje Field. Based on the current performance of wells Aje-4 and Aje-5, and
assuming no significant increase in the Company's overheads, ADM Energy expects to become cashflow positive in 2020, a
significant milestone for the Company. In addition to the progress at Aje, the support received from the Private office of His
Highness Shaikh Ahmed Bin Dalmook Al Maktoum, and subsequent appointment as President, will add considerable experience,
enhanced networks, knowledge, and access to capital.
7
ADM Energy plc
STRATEGIC REPORT
FOR THE YEAR ENDED 31 December 2018
Key Performance Indicators (“KPIs”)
The Group’s activity is that of an investing company and the Directors focus principally on the development of the Group’s net
asset value.
The key performance indicators are therefore set out below:
GROUP STATISTICS
Net asset value
Net asset value – fully diluted per share
Closing share price
Market capitalisation
Key Risks and Uncertainties
As at 31 December 2018
As at 31 December 2017
£15,164,000
£14,199,000
0.51p
0.06p
0.86p
0.53p
£1,663,000
£8,775,000
Early stage investments in the natural resources sector carry a high level of risk and uncertainty, although the rewards can be
outstanding. At this stage, there can be no certainty of outcome and, in addition, there is often a lack of liquidity in the Group’s
investments which can be either unquoted or quoted, such that the Group may have difficulty in realising the full value in a forced
sale. Accordingly, a commitment is only made after thorough research into both the management and the business of the target,
both of which are closely monitored thereafter. Details of other financial risks and their management are given in Note 19 to the
financial statements.
Oil prices are subject to international supply and demand and margins can be volatile. Political developments, increased supply
from new oil sources, technological change, global economic conditions and the influence of OPEC can impact supply and demand
and prices for our oil. Decreases in oil prices could have an adverse effect on revenue, margins, profitability and cash flows.
Exchange rate fluctuations can also create currency exposures and impact underlying costs and revenues.
Going Concern
The partners involved in the OML 113 licence were able to renew the licence for 20 years. The Group has raised equity finance
post year end to provide for ongoing working capital and the Directors have prepared cashflow forecasts supporting the use of the
going concern basis of accounting. However, in the short term the Group will require additional funding in order to meet its
liabilities as they fall due. Against this background and, as disclosed in Note 2, the Directors have a reasonable expectation that
the Group has the ability to raise the additional equity finance required in order to continue in operational existence for the
foreseeable future and they therefore continue to adopt the going concern basis of accounting in preparing these Financial
Statements. However, given the uncertainty surrounding the ability and likely timing of securing such finance the Directors are of
the opinion that a material uncertainty exists that may cast doubt on the Group’s ability to continue as a going concern.
Annual General Meeting (“AGM”)
The AGM of ADM Energy plc will be held at 10.00 am on Friday 2 August 2019 at the offices of Keystone Law, 48 Chancery Lane,
London WC2A 1JF. The formal notice of the AGM and resolutions to be proposed are set out in the Notice of Annual General
Meeting on the Company's investor relations website at www.admenergyplc.com.
On behalf of the Board.
Stefan Olivier
Director
27 June 2019
8
ADM Energy plc
BOARD OF DIRECTORS
RICHARD CARTER
Independent Non-Executive Chairman
Richard (ACMA) joined ADM Energy Plc as a Non-Executive Director in July 2016. He
has extensive experience of raising funds for public and private companies and has
worked across media, telecoms, engineering and energy sectors in various senior
roles. In September 2014, Richard joined Gate Ventures plc, an investment company
focused on media and entertainment projects. As Chief Financial Officer, Richard
oversees all investment transactions of Gate Ventures plc and serves on the boards of
its investee companies Infinity House Productions, Ensygnia IP Ltd, and Playjam
technology and
Holding Ltd.
telecommunications start up, Avanti Communications Group plc and was responsible
for setting up the company's financial function, operations and processes and internal
and external reporting procedures. In 2004, Mr. Carter joined International Publishing
Company Limited (now Time Inc. UK Limited), where he worked closely with publishing
editors to help drive revenue and reduce costs.
In 2007, Mr. Carter
joined AIM quoted
STEFAN OLIVIER
Chief Executive Officer
Stefan has been CEO since he founded ADM Energy Plc (previously MX Oil Plc) in early
2014. Stefan has worked on a large number of oil transactions during his thirteen
years in Corporate Broking. Stefan has spent the last eight years focused on financing
natural resources transactions via both equity and debt.
SERGIO LOPEZ
Independent Non-Executive Director
Sergio has been in the oil and gas industry for the last 13 years with experience
ranging from finances to operations. Lewis Energy Group appointed Sergio as its
Mexico Country Manager to coordinate a 15 year E&P contract with Pemex, which
represented the first move by an American independent oil and gas company into
Mexico since 1938. He negotiated a special budget to drill the first exploratory Eagle
Ford Shale well in Mexico, named Emergente-1. This resulted in the first and only
producer in the Eagle Ford Shale in Mexico called Habano. He earned his Bachelor in
Business Administration in Accounting and Finances from the Tecnologico de
Monterrey in Mexico.
9
ADM Energy plc
DIRECTORS’ REPORT
FOR THE YEAR ENDED 31 December 2018
The Directors present their annual report on the affairs of the Group, together with the financial statements for the year ended 31
December 2018.
Certain information required by the Companies Act 2006 relating to the information to be provided in the Directors’ Report is set
out in the Strategic Report and includes principal activity, future developments and principal risks and uncertainties.
DIRECTORS
The Board comprised the following directors who served throughout the year and up to the date of this report unless otherwise
stated.
Stefan Olivier
Nicholas Lee
Sergio Lopez
Nigel Bruce McKim
Richard Carter
Resigned 22 October 2018
With effect from 13 January 2019, Nigel McKim resigned as a director.
DIRECTORS’ INTERESTS
Set out below are the Directors’ beneficial holdings of ordinary shares in the Company as at 31 December 2018. Their interests in
the Company’s share warrants are included in the Report on Directors’ Remuneration. Updated percentage of capital as at 27 June
2019.
Name of director
Stefan Olivier
Richard Carter
Ordinary shares of
0.01p each
Number
630,000
120,000
Percentage
of capital
%
1.35%
0.26%
Shareholdings have been adjusted for the 1 for 100 share consolidation approved by the shareholders on 7 June 2019.
SUBSTANTIAL SHAREHOLDINGS
The only interests in excess of 3% of the issued share capital of the Company which have been notified to the Company as at 27
June 2019 were as follows:
Name of shareholder
Shaikh Ahmed Bin Dalmook Al Maktoum Private Office Single Person
Company LLC
Lesoza Enterprise Limited
Zhang Hao
Winrose International Limited
Ordinary shares of
0.01p each
Number
Percentage
of capital
%
13,350,000
3,225,000
3,098,479
2,225,000
28.70%
6.93%
6.66%
4.78%
Shareholdings have been adjusted for the 1 for 100 share consolidation approved by the shareholders on 7 June 2019.
POST YEAR END EVENTS
On 15 April 2019, the Group announced a placing to raise £680,000 before expenses, through the issue of 1,700,000,000 new
ordinary shares at 0.04p per share. In connection with the placing, 800,000,000 warrants have been issued to the placees with an
exercise price of 0.04p per share for a term of five years.
On 7 June 2019 the shareholders approved a 1 for 100 share consolidation and the change of the Company’s name to ADM Energy
plc.
10
ADM Energy plc
DIRECTORS’ REPORT
FOR THE YEAR ENDED 31 December 2018
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The Directors are responsible for preparing the report of the directors and the financial statements in accordance with applicable
law and regulations.
Company law requires the Directors to prepare Group and Company financial statements for each financial year. The Directors
are required by the AIM Rules of the London Stock Exchange to prepare group financial statements in accordance with
International Financial Reporting Standards (“IFRS”) as adopted by the European Union (“EU”) and have also elected to prepare
the Company financial statements in accordance with IFRS as adopted by the EU. Under company law, the directors must not
approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs and profit or
loss of the company and group for that period. In preparing these financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgments and accounting estimates that are reasonable and prudent;
• state whether applicable IFRSs have been followed, subject to any material departures disclosed and explained in the financial
statements; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue
in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s
transactions and disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that
the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Group
and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
In the case of each person who was a director at the time, this report was approved:
•
•
so far as that director is aware there is no relevant audit information of which the Group’s auditor is unaware; and
that director has taken all steps that the director ought to have taken as a director to make himself aware of any relevant
audit information and to establish that the Group’s auditor is aware of that information.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the
Group's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
CORPORATE GOVERNANCE
With effect from 28 September 2018, new corporate governance regulations apply to all AIM quoted companies and require the
Company to:
• provide details of a recognised corporate governance code that the board of directors has decided to apply; and
• explain how the Company complies with that code, and where it departs from its chosen corporate governance code provide
an explanation of the reasons for doing so.
The Directors recognise the importance of sound corporate governance while taking into account the Group’s size and stage of
development and the following two sections explain the Company’s compliance with the new regulations.
AUDITORS
A resolution to re-appoint Haysmacintyre LLP as auditors will be put to the AGM.
On behalf of the Board.
Stefan Olivier
Director
27 June 2019
11
ADM Energy plc
CORPORATE GOVERNANCE REPORT
FOR THE YEAR ENDED 31 December 2018
INTRODUCTION
All members of the Board believe strongly in the value and importance of good corporate governance and in accountability to all
of ADM Energy’s stakeholders. The statement below, explains the approach to governance, and how the Board and its
Committees operate.
Changes to the AIM Rules on 30 March 2018 required AIM companies to apply a recognised corporate governance code by 28
September 2018.
The corporate governance framework which the Company operates, including board leadership and effectiveness, board
remuneration, and internal control is based upon practices which the Board believes are proportional to the size, risks, complexity
and operations of the business and is reflective of the Group’s values. Of the two widely recognised formal codes, we have
therefore decided to adhere to the Quoted Companies Alliance’s (QCA) Corporate Governance Code for small and mid-size quoted
companies (revised in April 2018 to meet the new requirements of AIM Rule 26).
The QCA Code is constructed around ten broad principles and a set of disclosures. The QCA has stated what it considers to be
appropriate arrangements for growing companies and asks companies to provide an explanation about how they are meeting the
principles through the prescribed disclosures. We have considered how we apply each principle to the extent that the Board
judges these to be appropriate in the circumstances, and below we provide an explanation of the approach taken in relation to
each.
The following paragraphs set out the Company’s compliance with the ten principles of the QCA Code.
• Establish a strategy and business model which promotes long-term value for shareholders
The Company is an investing company quoted on AIM. Its principal focus is investing in the natural resources sector, particularly
in oil and gas where it believes that it can make an attractive return for shareholders. The Company expects to generate returns
for shareholders through the development of its investments. Currently, the Company’s principal investment is in the Nigerian
offshore licence OML 113 and to date the Company has been involved with maintaining and progressing its investment in OML
113 together with the joint operators from the development stage through to production. It is therefore expected that a return to
shareholders will be delivered principally through capital growth.
The Board recognises that a challenge of the natural resource sector is the significant time and financial investment often required
to commercialise a resource or reserve. In respect of OML 113, the Company is a small but important stakeholder and therefore a
key challenge is to continually appraise the OML 113 opportunity from a financial and technical standpoint and to ensure that all
further investment in this asset delivers realistic value opportunities for all shareholders.
• Seek to understand and meet shareholder needs and expectations
The Board is committed to maintaining good communication and having constructive dialogue with its shareholders. Shareholders
have the opportunity to discuss issues and provide feedback at meetings with the Company. In addition, all shareholders are
encouraged to attend the Company’s Annual General Meeting. Investors also have access to current information on the Company
though its website, www.admenergyplc.com and via Stefan Olivier, CEO who is available to answer investor relations enquiries
and can be contacted on stefan@admenergyplc.com or enquiries@admenergyplc.com.
• Take into account wider stakeholder and social responsibilities and their implications for long-term success
The Board recognises that the long-term success of the Company is reliant upon the efforts of its directors and employees, the
efforts and activities of the joint operation partners and upon their contractors, suppliers and regulators. The Board has put in
place a range of processes and systems to ensure that there is close Board oversight and contact with its key resources and
relationships.
As an investing company, the Company recognises that it is likely further investment will be required as it develops the OML 113
asset and its portfolio of other investments. Accordingly, ensuring that the Company continually understands the requirements of
shareholders in the context of the broader developments in its sector of operation is extremely important.
The Company’s CEO is in regular dialogue with a number of the Company’s shareholders, and feedback from this contact is used to
shape subsequent communication with shareholders as a whole and the market more generally.
12
ADM Energy plc
CORPORATE GOVERNANCE REPORT
FOR THE YEAR ENDED 31 December 2018
• Embed effective risk management, considering both opportunities and threats, throughout the organisation
In addition to its other roles and responsibilities, the Audit and Compliance Committee (see composition details in Corporate
Governance section of website, www.admenergyplc.com, is responsible to the Board for ensuring that procedures are in place,
and are being effectively implemented to identify, evaluate and manage the significant risks faced by the Company. Within the
scope of the annual audit, specific financial risks are evaluated in detail, including in relation to foreign currency, interest rates,
liquidity and credit.
In terms of investment appraisal, this process is usually led by the CEO. The opportunities are then presented and discussed by
the Board as a whole. Where necessary, the Company will also involve third party experts in the overall appraisal process.
The Directors have established procedures, as represented by this statement, for the purpose of providing a system of internal
control. In addition, there are a range of Company policies that are reviewed at least annually by the Board. These policies cover
matters such as share dealing and insider legislation. The Board currently takes the view that an internal audit function is not
considered necessary or practical due to the size of the Company and the close day to day control exercised by the
Directors. However, the Board will continue to monitor the need for an internal audit function.
The annual review of internal control and financial reporting procedures did not highlight any issues warranting the introduction
of an internal audit function. It was concluded, given the current size and transparency of the operations of the Company, that an
internal audit function was not required.
As noted in the Strategic Report on pages 5-7, the Board regularly reviews operating and strategic risks and considers in such
reviews financial and non-financial information including:
•
•
•
•
a review of the business at each Board meeting, focusing on any new decisions/risks arising;
the performance of investments;
selection criteria of new investments; and
reports prepared by third parties.
• Maintain the Board as a well-functioning, balanced team led by the Chair
The QCA Code requires that the boards of AIM companies have an appropriate balance between executive and non-executive
directors of which at least two should be independent.
The Board comprises the Non-Executive Chairman Richard Carter, CEO Stefan Olivier and Independent Non-Executive Director
Sergio Lopez. The time commitment formally required by the Company is an overriding principal that each director will devote as
much time as is required to carry out the roles and responsibilities that the director has agreed to take on. Biographical details of
the current directors are set out within Principle Six below and on page 8. Executive and non-executive directors are subject to re-
election intervals as prescribed in the Company’s Articles of Association. At each Annual General Meeting, one-third of the
Directors, who are subject to retirement by rotation shall retire from office. They can then offer themselves for re-election. The
letters of appointment of all directors are available for inspection at the Company’s registered office during normal business
hours.
The Directors’ receive fees for their services as directors which are approved by the Board, being mindful of the time commitment
and responsibilities of their roles and of current market rates for comparable organisations and appointments.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure
that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Board meets as regularly as necessary. It has established an Audit and Compliance Committee and a Remuneration
Committee, particulars of which appear hereafter. Appointments to the Board are made by the Board as a whole and so the
Company has not created a Nominations Committee.
The Board retains full control of the Company with day-to-day operational control delegated to the CEO and other Directors.
13
ADM Energy plc
CORPORATE GOVERNANCE REPORT
FOR THE YEAR ENDED 31 December 2018
• Ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities
All members of the Board bring either relevant sector experience or public market’s experience which the Company considers to
be fundamentally important in its chosen area of operation and investment appraisal process. The Board believes that its blend of
relevant experience, skills and personal qualities and capabilities is sufficient to enable it to successfully execute its strategy.
Please see biographies of the Board of Directors on page 8.
• Evaluate board performance based on clear and relevant objectives, seeking continuous improvement
Internal evaluation of the Board, its Committees and individual directors is important and will develop as the Company grows in
the future. The expectation is that Board reviews will be undertaken on an annual basis to determine the effectiveness and
performance in various areas as well as the directors’ continued independence
• Promote a corporate culture that is based on ethical values and behaviours
The Board recognises that its decisions regarding strategy and risk will impact the corporate culture of the Company as a whole
and that this will impact the performance of the Company. The Board is very aware that the tone and culture set by the Board will
greatly impact all aspects of the Company as a whole. Therefore, the importance of sound ethical values and behaviour is crucial
to the ability of the Company to successfully achieve its corporate objectives. The Board places great importance on this aspect of
corporate life and seeks to ensure that this flows through all that the Company does. The Board assessment of the culture within
the Company at the present time is one where there is respect for all individuals, open dialogue within the Company and a
commitment to best practice.
The Company has also adopted an anti-bribery policy which is clearly set out on the Company’s website.
• Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board
The Board schedule provides for six board meetings per annum and, in addition, meets ad-hoc as required. Notwithstanding the
above, the Board and its Committees receive appropriate and timely information prior to each meeting; a formal agenda is
produced for each meeting, and Board and Committee papers are distributed several days before meetings take place. Any
Director may challenge Company proposals and decisions are taken democratically after discussion. Any Director who feels that
any concern remains unresolved after discussion may ask for that concern to be noted in the minutes of the meeting, which are
then circulated to all Directors. Any specific actions arising from such meetings are agreed by the Board or relevant Committee
and then followed up by the Company’s management.
The Audit and Compliance Committee monitors the integrity of financial statements, oversees risk management and control,
monitors the effectiveness of the internal audit function and reviews external auditor independence. It also ensures that the
Company is compliant with its relevant regulatory requirements.
The Non-Executive Chairman has overall responsibility for corporate governance and in promoting high standards throughout the
group. He leads and chairs the Board, ensuring that committees are properly structured and operate with appropriate terms of
reference, ensures that performance of individual directors, the board and its committees are reviewed on a regular basis, leads in
the development of strategy and setting objectives, and oversees communication between the group and its shareholders.
The Executive Director is responsible for implementing and delivering the strategy and operational decisions agreed by the board,
making operational and financial decisions required in the day-to-day operation of the group, providing executive leadership to
managers, championing the group’s core values and promoting talent management.
The Non-Executive Directors contribute independent thinking and judgement through the application of their external experience
and knowledge, scrutinise the performance of management, provide constructive challenge to the executive directors and ensure
that the group is operating within the governance and risk framework approved by the Board.
The Board has approved the adoption of the QCA Code as its governance framework against which this statement has been
prepared and will monitor the suitability of this code on an annual basis and revise its governance framework as appropriate as
the group evolves.
14
ADM Energy plc
CORPORATE GOVERNANCE REPORT
FOR THE YEAR ENDED 31 December 2018
• Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and other
relevant stakeholders
The Company communicates with shareholders through its period announcement, the Annual Report and Accounts, full-year and
half-year announcements, the AGM and one-to-one meetings with large existing or potential new shareholders. A range of
corporate information (including all Company announcements and presentations) is also available to shareholders, investors and
the public on the Company’s corporate website, www.admenergyplc.com.
15
ADM Energy plc
CHAIRMAN’S CORPORATE GOVERNANCE STATEMENT
FOR THE YEAR ENDED 31 December 2018
The Board is committed, where practicable, to developing and applying high standards of corporate governance appropriate to
the Company’s size and stage of development. The Board seeks to apply where appropriate the QCA Code, revised in April 2018
as devised by the Quoted Companies Alliance.
The QCA Code is constructed around ten broad principles and a set of disclosures. The Code states what is considered to be
appropriate arrangements for growing companies and asks companies to provide an explanation about how they are meeting the
principles through the prescribed disclosures.
BOARD STRUCTURE
The Board has three directors, two of whom are non-executive. The Board is responsible for the management of the business of
the Company, setting its strategic direction and establishing appropriate policies. It is the Directors’ responsibility to oversee the
financial position of the Company and monitor its business and affairs, on behalf of the shareholders, to whom they are
accountable. The primary duty of the Board is to act in the best interests of the Company at all times. The Board also addresses
issues relating to internal controls and risk management. The non-executive directors bring a wide range of skills and experience
to the Company, as well as independent judgment on strategy, risk and performance. The independence of each non-executive
director is assessed at least annually, and all of the non-executive directors are considered to be independent at the date of this
report.
The roles of the Chairman and CEO are separate, with their roles and responsibilities clearly divided and recorded. A summary of
their roles is as follows:
The Chairman is responsible for leadership of the Board, ensuring its effectiveness and setting its agenda. The Chairman facilitates
the effective contribution and performance of all Board members whilst identifying any development needs of the Board. He also
ensures that there is sufficient and effective communication with shareholders to understand their issues and concerns.
The CEO is responsible for executing the strategy agreed by the Board and developing the Group objectives through leadership of
the senior executive team. He will recommend to the Board any investment or new business opportunities which meet this
strategy. He also ensures that the Group’s risks are adequately addressed and appropriate internal controls are in place. The CEO
is responsible for meeting with shareholders and ensuring effective communication.
ATTENDANCE AT MEETINGS
It is expected that all Directors attend Board and relevant Committee meetings, unless they are prevented from doing so by prior
commitments, and that all Directors will attend the AGM.
During the year the Board met 4 times and all the Directors attended the meetings.
BOARD COMMITTEES
Remuneration Committee
The Remuneration Committee consists of Richard Carter (Committee Chairman) and Sergio Lopez. It is responsible for reviewing
the performance of the senior executives and for determining their levels of remuneration. The Committee makes
recommendations to the Board, within agreed terms of reference regarding the levels of remuneration and benefits.
Remuneration Committee Report
On behalf of the Board, I am pleased to present the Remuneration Committee report for the financial period ended 31 December
2018. This report sets out the activities of the Audit Committee during 2018.
The Committee met 1 time during the year to determine the remuneration arrangements of the Directors and senior employees.
Remuneration policy
The Committee aims to ensure that total remuneration is set at an appropriate level for the Group and its operations. The
objectives and core principles of the remuneration policy are to:
• ensure remuneration levels support the Group’s strategy;
• ensure that there is an appropriate link between performance and reward;
• ensure alignment of Directors, senior management and shareholder interests;
16
ADM Energy plc
CHAIRMAN’S CORPORATE GOVERNANCE STATEMENT
FOR THE YEAR ENDED 31 December 2018
• ensure that long-term incentives are linked to shareholder return;
• enable the Group to recruit, retain and motivate individuals with the skills, capabilities and experience to achieve its
objectives; and
•
strengthen teamwork by enabling all employees to share in the success of the business.
There are four elements of the remuneration package for the Executive Director and senior management:
• basic annual salary;
• benefits in kind;
• discretionary annual bonus; and
•
long-term incentive plan.
Audit Committee
The Audit Committee consists of the non-executive Chairman, Richard Carter and another director soon to be appointed. The
Audit Committee meets at least two times a year to consider the annual and interim financial statements and the audit plan. The
Audit Committee is responsible for ensuring that appropriate financial reporting procedures are properly maintained and reported
upon, reviewing accounting policies and for meeting the auditors and reviewing their reports relating to the financial statements
and internal control systems.
Audit Committee Report
On behalf of the Board, I am pleased to present the Audit Committee report for the financial period ended 31 December 2018.
This report sets out the activities of the Audit Committee during 2018.
The Audit Committee is governed by terms of reference which are agreed by the Board and subject to annual review.
Principle responsibilities of the committee:
• Ensuring the financial performance of the Group is properly reviewed, measured and reported;
• Monitoring the quality and adequacy of internal controls and internal control systems implemented across the Group;
• Receive and review reports from the Group’s management and auditors relating to the interim and annual accounts;
• Reviewing risk management policies and systems;
• Advising on the appointment, re-appointment and remuneration of independent external auditors, besides scheduling
meetings with external auditors independent of management for discussions and reviews; and
• Reviewing and monitoring the extent and independence of non-audit services rendered by external auditors.
Areas of focus during 2018
The Committee met three times in 2018 to execute its responsibilities, two of which included the new Chair. Meetings focussed on
audit planning, risk management, internal controls and the approval of the interim and final results including the key judgements
associated with acquisition accounting, asset impairment review assumptions and calculations, creditor completeness reviews and
the going concern requirements and statement.
Internal controls and risk
The Board assigns to the Committee the responsibility of monitoring and improving the Group’s internal controls governing the
finances of the business. The system of internal controls is vital in managing the risks that face the Group and safeguarding
shareholders’ interests.
Audit Process
The Committee reviews the findings of Haysmacintyre and then approves the scope of work to be undertaken for the next
financial reporting year, including the associated audit fees. In addition, a review of the effectiveness of the external audit process
is undertaken and an annual assessment of the external auditor’s independence is made.
17
ADM Energy plc
CHAIRMAN’S CORPORATE GOVERNANCE STATEMENT
FOR THE YEAR ENDED 31 December 2018
COMPANY CULTURE AND ETHICS
The Board of Directors seeks to embody and promote a corporate culture that is based on sound ethical values and behaviours. A
culture of ethics and compliance is at the core of a strong risk management program.
The Board of Directors of ADM Energy plc has adopted this code of ethics, to promote honest and ethical conduct, including the
ethical handling of actual or apparent conflicts of interest; promote the full, fair, accurate, timely and understandable disclosure
of the Company's financial results in accordance with applicable disclosure standards; promote compliance with applicable
governmental laws, rules and regulations; and deter wrongdoing.
Richard Carter
Non-Executive Chairman
27 June 2019
18
ADM Energy plc
REPORT ON DIRECTORS’ REMUNERATION
FOR THE PERIOD ENDED 31 December 2018
REMUNERATION
The remuneration of the Directors has been fixed by the Board as a whole. The Board seeks to provide appropriate reward for the
skill and time commitment required so as to retain the right calibre of director at a cost to the Group, which reflects current
market rates.
The Board is responsible for the overall remuneration package for the Executive and Non-Executive Directors.
DIRECTORS’ EMOLUMENTS
Details of the remuneration package of each Director for the year are set out below:
Director
Stefan Olivier
Nicholas Lee
Sergio Lopez
Nigel Bruce McKim
Richard Carter
2018
£’000
282
79
81
210
74
726
2017
£’000
235
88
69
159
42
593
Shares were issued to Directors in October 2018 at the placing price of 0.1p in settlement of remuneration as follows:
Stefan Olivier
Richard Carter
Nigel Bruce McKim
Nicholas Lee
£53,000
£12,000
£39,000
£49,000
Of the total remuneration paid to Nicholas Lee £19,000 was paid as an ex-gratia payment.
As detailed in note 22, included in the remuneration for Nicholas Lee and Richard Carter are amounts invoiced by companies
which are controlled by them.
WARRANTS
Stefan Olivier
Sergio Lopez
At 31 Dec 2018
Number of
warrants
-
8,368,421
8,368,421
At 31 Dec 2017
Number of
warrants
-
8,368,421
8,368,421
Further details of the warrants that have been issued by the Company are disclosed in note 18. Stefan Olivier is also entitled to
12,552,632 warrants exercisable at 3p per share, subject to certain vesting and exercise conditions as set out in note 18.
The figures above are before the 1 for 100 share consolidation approved by the shareholders on 7 June 2019.
PENSIONS
No pension contributions were paid in respect of the directors for the year ended 31 December 2018 (2017: £nil).
On behalf of the Board.
Richard Carter
Non-Executive Chairman
27 June 2019
19
ADM Energy plc
REPORT OF THE INDEPENDENT AUDITOR TO THE MEMBERS OF ADM ENERGY PLC
FOR THE YEAR ENDED 31 December 2018
OPINION
We have audited the financial statements of ADM Energy Plc (the ‘parent Company’) and its subsidiaries (the ‘Group’) for the
year ended 31 December 2018 which comprise the group income statement, the group and company statements of financial
position, the group and company statement of changes in equity, the group and company statements of cash flows, and notes to
the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been
applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European
Union.
In our opinion, the financial statements:
• give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 December 2018 and of the
group’s loss for the year then ended;
• have been properly prepared in accordance with IFRSs as adopted by the European Union; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
BASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial
statements section of our report. We are independent of the group in accordance with the ethical requirements that are relevant
to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to SME listed entities, and we
have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we
have obtained is sufficient and appropriate to provide a basis for our opinion.
MATERIAL UNCERTAINTY RELATING TO GOING CONCERN
In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosures
made in note 2 of the financial statements concerning the group’s ability to continue as a going concern. The disclosures indicate
that in the short term the group would require additional funding to meet its liabilities as they fall due. These circumstances
indicate the existence of a material uncertainty which may cast significant doubt on the group’s ability to continue as a going
concern. The financial statements do not include any adjustments that would result if the company or group was unable to
continue as a going concern.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in
the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Going concern
Key Audit Matter
As at the year end the Group has net current liabilities of £1,198,000 indicating that the Group has
insufficient cash reserves to meet its current obligations as they fall due.
The Group received a cash advance of £650,000 in the year for future works planned in Grenada
which is not going ahead and is repayable on demand.
20
ADM Energy plc
REPORT OF THE INDEPENDENT AUDITOR TO THE MEMBERS OF ADM ENERGY PLC
FOR THE YEAR ENDED 31 December 2018
The Group’s ability to trade depends on the Nigerian government renewing its Oil Mining License
113 for the Aje oil field, which expired in June 2018.
Audit response
Our audit work included, but not restricted to the following:
We obtained management’s cash flow forecast which supports their use of the going concern basis
of accounting. We tested the integrity of this model, including mathematical accuracy, and
reviewed key assumptions such as forecast sales revenue and operating costs for consistency and
reasonableness. We also considered the historical accuracy of management’s forecasting and the
post year end lifting of oil and oil revenue.
We reviewed the Group’s fundraising activities post year end to provide for ongoing working capital
but with the Grenada advance still outstanding.
We reviewed correspondence and challenged managements assumption of raising additional
equity finance to repay the Grenada advance.
We reviewed the license documentation to satisfy ourselves that the license remains valid and has
been extended for another 20 years.
Valuation of the intangible asset
Key audit matter
The ability of the parent Company to realise the carrying value of the investments held at 31
December 2018 may be adversely affected by various factors such as oil reserves at the Aje oil field
being lower than expected and / or there being a sustained drop in global oil prices.
Audit response
Our audit work included, but was not restricted to the following:
We reviewed the competent person’s report and confirmed its consistency with managements
forecasts and assessed the independence and competence of the expert.
We obtained and reviewed relevant documents for new investments and considered whether any
changes occurred to the existing investments held by the Group. The net present value calculations
for the Group’s share of the Aje oil field were reviewed, as was the letter detailing the current level
of oil reserves within the oil field.
OUR APPLICATION OF MATERIALITY
We apply the concept of materiality both in planning and performing our audit, in evaluating the effect of misstatements. We
consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions
of reasonable users that are taken based on the financial statements. Importantly, misstatements below these levels will not
necessarily be evaluated as immaterial as we also take into account the nature of identified misstatements, and the particular
circumstances of their occurrence, when evaluating their effect on the financial statements as a whole.
We consider gross assets to be the financial metric of most interest to shareholders and other users of the financial statements,
accordingly this consideration influenced our judgement of materiality.
We determined materiality for the Group to be £300,000 which is approximately 2% of gross assets.
Performance materiality is the application of materiality at the individual account or balance level set at an amount to reduce to
an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality
for the financial statements as a whole. Performance materiality for the Group was set at £225,000.
21
ADM Energy plc
REPORT OF THE INDEPENDENT AUDITOR TO THE MEMBERS OF ADM ENERGY PLC
FOR THE YEAR ENDED 31 December 2018
We agreed with the audit committee that we would report to the committee all individual audit differences identified during the
course of our audit in excess of £15,000. We also agreed to report differences below these thresholds that, in our view,
warranted reporting on qualitative grounds.
AN OVERVIEW OF THE SCOPE OF OUR AUDIT
Our audit approach is based on obtaining and maintaining a thorough understanding of the group’s business, structure and scope
in order to undertake a risk based audit approach. This approach requires us to identify relevant and appropriate key and
significant risks of misstatement and determine
the most appropriate tailored responses to this risk assessment. The extent of our work is determined by the level of risk in each
area and our assessment of materiality as discussed above.
OTHER INFORMATION
The directors are responsible for the other information. The other information comprises the information included in the annual
report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not
cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the
audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material
misstatement of the other information. If, based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
OPINIONS ON OTHER MATTERS PRESCRIBED BY THE COMPANIES ACT 2006
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the strategic report and the directors’ report for the financial year for which the financial statements
are prepared is consistent with the financial statements; and
• the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION
In the light of the knowledge and understanding of the Group and the parent Company and its environment obtained in the
course of the audit, we have not identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act
2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by the parent Company, or returns adequate for our audit have not been
received from branches not visited by us; or
• the parent Company financial statements are not in agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
RESPONSIBILITIES OF DIRECTORS
As explained more fully in the directors’ responsibilities statement set out on page 10, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as
the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement,
whether due to fraud or error.
22
ADM Energy plc
REPORT OF THE INDEPENDENT AUDITOR TO THE MEMBERS OF ADM ENERGY PLC
FOR THE YEAR ENDED 31 December 2018
In preparing the financial statements, the directors are responsible for assessing the Group’s and the parent Company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Group or the parent Company or to cease operations, or have no
realistic alternative but to do so.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting
Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
USE OF OUR REPORT
This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to
state to them in an Auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this
report, or for the opinions we have formed.
Ian Cliffe (Senior statutory auditor)
for and on behalf of Haysmacintyre LLP,
Statutory Auditors
10 Queen Street Place
London
EC4R 1AG
Date: 27 June 2019
23
ADM Energy plc
GROUP INCOME STATEMENT AND STATEMENT OF COMPREHENSIVE
INCOME
FOR THE YEAR ENDED 31 December 2018
Continuing operations
Revenue
Operating costs
Administrative expenses
Operating loss
Other gains and losses
Finance costs
Loss on ordinary activities before taxation
Taxation
Loss for the year
Other Comprehensive income:
Exchange translation movement
Total comprehensive income for the year
Basic and diluted loss per share:
From continuing and total operations
Note
2018
£’000
2017
£’000
3
4
5
6
8
9
3,127
(2,356)
(1,620)
(849)
−
−
(849)
−
1,727
(2,565)
(1,495)
(2,333)
27
(1,129)
(3,435)
−
(849)
(3,435)
404
(445)
(746)
(4,181)
(0.04)p
(0.24)p
The accompanying notes form an integral part of these financial statements
24
ADM Energy plc
Company number: 05311866
GROUP AND COMPANY STATEMENTS OF FINANCIAL POSITION
AS AT 31 December 2018
NON-CURRENT ASSETS
Intangible assets
Investment in subsidiaries
CURRENT ASSETS
Investments held for trading
Trade and other receivables
Cash and cash equivalents
CURRENT LIABILITIES
Trade and other payables
NET CURRENT LIABILITIES
NET ASSETS
EQUITY
Share capital
Share premium
Reserve for options granted
Reserve for warrants issued
Currency translation reserve
Retained deficit
Equity attributable to owners of the Company
and total equity
GROUP
2018
£’000
2017
£’000
COMPANY
2018
£’000
2017
£’000
Notes
10
11
12
13
14
15
17
17
16,362
−
16,362
14,984
−
14,984
−
14,738
14,738
−
14,634
14,634
200
29
216
445
179
35
50
264
1,643
1,643
1,049
1,049
(1,198)
(785)
200
29
216
445
1,104
1,104
(659)
179
35
50
264
609
609
(345)
15,164
14,199
14,079
14,289
8,499
32,833
172
783
(342)
(26,781)
8,389
31,533
172
783
(746)
(25,932)
8,389
31,533
172
783
−
(28,208)
8,389
31,533
172
783
−
(26,588)
15,164
14,199
14,079
14,289
The financial statements were approved by the Board and ready for issue on 27 June 2019.
Stefan Olivier
Director
The accompanying notes form an integral part of these financial statements
25
ADM Energy plc
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 December 2018
Share
Share
capital
premium
Loan note
equity
reserve
Reserve for
options
granted
Reserve for
warrants
issued
Exchange
translation
reserve
Retained
deficit
£’000
£’000
£’000
£’000
£’000
£’000
£’000
Total
equity
£’000
At 1 January 2017
8,336
25,460
Loss for the year
Exchange translation
movement
Total comprehensive
expense for the year
Issue of new shares
Share issue costs
−
−
−
53
−
−
−
−
6,522
(449)
At 31 December 2017
8,389
31,533
Loss for the year
Exchange translation
movement
Total comprehensive
expense for the year
Issue of new shares
Share issue costs
−
−
−
110
−
−
−
−
1,390
(90)
At 31 December 2018
8,499
32,833
−
−
−
−
−
−
−
−
−
−
−
−
−
172
783
−
−
−
−
−
−
−
−
−
−
−
−
(22,497)
12,254
(3,435)
(3,435)
(746)
−
(746)
(746)
(3,435)
(4,181)
−
−
−
−
6,575
(449)
172
783
(746)
(25,932)
14,199
−
−
−
−
−
−
−
−
−
−
−
(849)
(849)
404
−
404
404
(849)
(445)
−
−
−
−
1,500
(90)
172
783
(342)
(26,781)
15,164
The accompanying notes form an integral part of these financial statements
26
ADM Energy plc
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 December 2018
Share
Share
capital
premium
£’000
£’000
Loan note
equity
reserve
Reserve for
options
granted
Reserve for
warrants
issued
Retained
deficit
£’000
£’000
£’000
Total
equity
£’000
At 1 January 2017
8,336
25,460
Loss for the period and total
comprehensive expense
Issue of new shares
Share issue costs
−
53
−
−
6,522
(449)
At 31 December 2017
8,389
31,533
Loss for the period and total
comprehensive expense
Issue of new shares
Share issue costs
−
110
−
−
1,390
(90)
At 31 December 2018
8,499
32,833
−
−
−
−
−
−
−
−
−
172
783
(24,055)
10,696
−
−
−
−
−
−
(2,533)
(2,533)
−
−
6,575
(449)
172
783
(26,588)
14,289
−
−
−
−
−
−
(1,620)
(1,620)
−
−
1,500
(90)
172
783
(28,208)
14,079
The accompanying notes form an integral part of these financial statements
27
ADM Energy plc
GROUP AND COMPANY STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED 31 December 2018
Note
GROUP
2018
£’000
2017
£’000
COMPANY
2018
£’000
2017
£’000
(849)
(3,435)
(1,620)
(2,533)
OPERATING ACTIVITIES
Loss for the period
Adjustments for:
Loss/(gain) on disposal of investments
Finance costs
Foreign exchange adjustments
Operating cashflow before working capital changes
Decrease in receivables
Increase/(decrease) in trade and other payables
Net cash outflow from operating activities
INVESTMENT ACTIVITIES
Proceeds from disposal of investments
Purchase of investments held for trading
Development costs
Loans to subsidiary operation
Net cash outflow from investment activities
FINANCING ACTIVITIES
Continuing operations:
Issue of ordinary share capital
Share issue costs
Net proceeds from short term borrowings
Repayment of short term borrowings
Finance costs paid
Net cash inflow from financing activities
Net (decrease)/increase in cash and cash equivalents
from continuing and total operations
Exchange translation difference
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
14
−
−
−
(849)
6
594
(249)
4
(25)
(952)
−
(973)
1,500
(90)
−
−
−
1,410
188
(22)
50
216
(7)
1,129
(35)
(2,348)
164
(1,072)
(3,256)
303
(475)
(1,113)
−
(1,285)
6,575
(449)
1,710
(2,919)
(504)
4,413
(128)
(156)
334
50
−
−
−
(1,620)
6
495
(1,119)
4
(25)
−
(104)
(125)
1,500
(90)
−
−
−
1,410
166
−
50
216
(7)
1,072
(35)
(1,503)
31
(30)
(1,502)
303
(475)
−
(3,080)
(3,252)
6,575
(449)
1,710
(2,919)
(447)
4,470
(284)
−
334
50
The accompanying notes form an integral part of these financial statements
28
ADM Energy plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2018
1
GENERAL INFORMATION
The Company is a public limited company incorporated in the United Kingdom and its shares are listed on the AIM market
of the London Stock Exchange. The Company is an investment company, mainly investing in natural resources, minerals,
metals, and oil and gas projects. The registered office of the Company is as detailed in the Company Information on page 2.
2
PRINCIPAL ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies
have been consistently applied throughout all periods presented in the financial statements.
As in prior periods, the Group financial statements have been prepared in accordance with International Financial Reporting
Standards (IFRS) as adopted by the European Union. The financial statements have been prepared using the measurement
bases specified by IFRS for each type of asset, liability, income and expense. The measurement bases are more fully
described in the accounting policies below.
The current period covered by these financial statements is the year to 31 December 2018. The comparative figures relate
to the year ended 31 December 2017. The financial statements are presented in pounds sterling (£) which is the functional
currency of the Group.
An overview of standards, amendments and interpretations to IFRSs issued but not yet effective, and which have not been
adopted early by the Group are presented below under ‘Statement of Compliance’.
GOING CONCERN
At 31 December 2018, the Group recorded a loss for the year of £849,000 and had net current liabilities of £1,198,000,
after allowing for cash balances of £216,000.
In addition, the Group received an advance of £650,000 in connection with performing appraisal activities of certain oil and
gas licences in Grenada. No appraisal activities have been performed to date and the amount is repayable on demand.
In the short term the Group will require additional funding in order to meet its liabilities as they fall due.
The Directors have a reasonable expectation that the Group has the ability to raise the additional funds required in order
to continue in operational existence for the foreseeable future and they therefore continue to adopt the going concern
basis of accounting in preparing these Financial Statements.
However, given the uncertainty surrounding the ability and likely timing of securing such finance the Directors are of the
opinion that a material uncertainty exists that may cast doubt on the Group’s ability to continue as a going concern. The
financial statements do not include any adjustments that would result if the Group was unable to continue as a going
concern.
STATEMENT OF COMPLIANCE
The following standard is effective for the first time for the financial period beginning 1 January 2018 and is relevant to the
Company’s operations:
• IFRS 9, ‘Financial Instruments’. The standard sets out requirements for recognising and measuring financial assets,
financial liabilities and some contracts to buy or sell non-financial items. This standard replaces IAS 39, ‘Financial
Instruments: Recognition and Measurement.’ The adoption of this standard has not had a significant effect on the
Company’s accounting policies related to financial assets and liabilities as majority are classified at fair value through profit
or loss. The adoption of this standard did not require the restating of comparatives.
The following standards and amendments have been issued and are mandatory for accounting periods beginning on or
after 1 January 2018 but are not relevant or have no material effect on the Company’s operations or financial statements:
• IFRS 15, ‘Revenue from Contracts with Customers’. This standard establishes a comprehensive framework for determining
whether, how much and when revenue is recognised. It replaced IAS 18, ‘Revenue’, IAS 11, ‘Construction Contracts’ and
related interpretations.
• Amendments to IFRS 15 Clarifications to IFRS 15 Revenue from Contracts with Customers
• Classification and Measurement of Share-based Payment Transactions - Amendments to IFRS 2
• Transfers of Investment Property - Amendments to IAS 40
• IFRIC Interpretation 22 Foreign Currency Transactions and Advance Consideration
• Annual Improvements to IFRSs – 2014-2016 Cycle: IFRS 1 First-time Adoption of International Financial Reporting
Standards - Deletion of short-term exemptions for first-time adopters
29
ADM Energy plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2018
2
PRINCIPAL ACCOUNTING POLICIES (continued)
• Annual Improvements to IFRSs – 2014-2016 Cycle: IAS 28 Investments in Associates and Joint Ventures – Clarification that
measuring investees at fair value through profit or loss is an investment - by - investment choice
1.1
• Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts - Amendments to IFRS 4
Other standards in issue, but not yet effective, are not expected to have a material effect on the financial statements of
the Company in future periods and have not been disclosed.
KEY ESTIMATES AND ASSUMPTIONS
Estimates and assumptions used in preparing the financial statements are reviewed on an ongoing basis and are based on
historical experience and various other factors that are believed to be reasonable under the circumstances. The results of
these estimates and assumptions form the basis of making judgements about carrying values of assets and liabilities that
are not readily apparent from other sources.
AVAILABLE FOR SALE INVESTMENTS
Note 10 summarises the Group’s indirect investment in the Aje Field. The Directors have reviewed the value of the
Group’s investment and consider that the fair value of this investment should be stated at the original cost of the
investment plus the value of the cash calls that the Group has paid and is liable for as at the year-end, which the Directors
consider represents the fair value of the Group’s interest.
SHARE BASED PAYMENTS
The Group has made awards of options and warrants over its unissued share capital to certain Directors, employees and
professional advisers as part of their remuneration.
The fair value of options is determined by reference to the fair value of the options granted, excluding the impact of any
non-market vesting conditions. In accordance with IFRS 2 ‘Share Based Payments’, the Group has recognised the fair value
of options, calculated using the Black-Scholes option pricing model. The Directors have made assumptions particularly
regarding the volatility of the share price at the grant date in order to reach a fair value. Further information is disclosed in
Note 18.
SALES REVENUE
Sales of petroleum production are recognised when goods are delivered or the title has passed to the customer.
TAXATION
Current income tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities relating to the
current or prior reporting period, that are unpaid at the statement of financial position date. They are calculated according
to the tax rates and tax laws applicable to the fiscal periods to which they relate, based on the taxable result for the year.
All changes to current tax assets or liabilities are recognised as a component of tax expense in the income statement.
Deferred income taxes are calculated using the liability method on temporary differences. This involves the comparison of
the carrying amounts of assets and liabilities in the consolidated financial statements with their respective 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. In addition, tax losses
available to be carried forward as well as other income tax credits to the Group are assessed for recognition as deferred
tax assets.
Deferred income taxes are calculated using the liability method on temporary differences. This involves the comparison of
the carrying amounts of assets and liabilities in the consolidated financial statements with their respective 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. In addition, tax losses
available to be carried forward as well as other income tax credits to the Group are assessed for recognition as deferred
tax assets.
Deferred tax liabilities are always provided for in full. Deferred tax assets are recognised to the extent that it is probable
that they will be able to be offset against future taxable income. Deferred tax assets and liabilities are calculated, without
discounting, at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or
substantively enacted at the statement of financial position date.
30
ADM Energy plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2018
2
PRINCIPAL ACCOUNTING POLICIES (continued)
Most changes in deferred tax assets or liabilities are recognized as a component of tax expense in the income statement.
Only changes in deferred tax assets or liabilities that relate to a change in value of assets or liabilities that is charged
directly to equity are charged or credited directly to equity.
EXPLORATION, EVALUATION and DEVELOPMENT COSTS
Exploration, evaluation and development costs relate to expenditure incurred on the development and evaluation of
mineral resources. These costs are recorded as intangible assets until the mineral resource reaches the production stage.
Upon completion of development and commencement of production, capitalised development costs as well as evaluation
expenditures are fair valued on a net present value basis.
Development costs incurred on specific projects are capitalised when all the following conditions are satisfied:
•
completion of the intangible asset is technically feasible so that it will be available for use or sale
•
•
•
•
•
the Group intends to complete the intangible asset and use or sell it
the Group has the ability to use or sell the intangible asset
the intangible asset will generate probable future economic benefits
there are adequate technical, financial and other resources to complete the development and to use or sell the
intangible asset, and
the expenditure attributable to the intangible asset during its development can be measured reliably.
Other development expenditure that does not meet these criteria is recognised as an expense as incurred. Development
costs previously recognised as an expense are not recognised as an asset in a subsequent period.
FINANCIAL ASSETS
Financial assets are recognised in the Group’s statement of financial position when the Group becomes a party to the
contractual provisions of the instrument.
The Group’s financial assets are classified into the following specific categories: ‘investments held for trading’, and ‘loans
and receivables’. The classification depends on the nature and purpose of the financial assets and is determined at the
time of initial recognition.
All Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an
active market are classified as ‘loans and receivables’. Loans and receivables are measured at amortised cost using the
effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate,
except for short-term receivables when the recognition of interest would be immaterial.
INVESTMENTS HELD FOR TRADING
All investments determined upon initial recognition as held at fair value through profit or loss were designated as
investments held for trading. Investment transactions are accounted for on a trade date basis. Assets are de-recognised
at the trade date of the disposal. Assets are sold at their fair value, which comprises the proceeds of sale less any
transaction cost. The fair value of the financial instruments in the statement of financial position is based on the quoted
bid price at the statement of financial position date, with no deduction for any estimated future selling cost. Unquoted
investments are valued by the directors using primary valuation techniques such as recent transactions, last price and net
asset value. Changes in the fair value of investments held at fair value through profit or loss and gains and losses on
disposal are recognised in the consolidated statement of comprehensive income as “Net gains on investments”.
Investments are initially measured at fair value plus incidental acquisition costs. Subsequently, they are measured at fair
value in accordance with IAS 39. This is either the bid price or the last traded price, depending on the convention of the
exchange on which the investment is quoted.
31
ADM Energy plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2018
2
PRINCIPAL ACCOUNTING POLICIES (continued)
BASIS OF CONSOLIDATION
The consolidated financial statements present the results of ADM Energy plc and its subsidiaries ("the Group") as if they
formed a single entity. Intercompany transactions and balances between Group companies are therefore eliminated in full.
The consolidated financial statements incorporate the results of business combinations using the purchase method. In the
Statement of Financial Position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised
at their fair values at the acquisition date. The results of acquired operations are included in the Consolidated Income
Statement
CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term, highly liquid
investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of
changes in value.
EQUITY
An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of
its liabilities. Equity instruments issued by the Company are recorded at the proceeds received net of direct issue costs.
Equity comprises the following:
•
•
•
Share capital represents the nominal value of equity shares issued.
The share premium account represents premiums received on the initial issuing of the share capital. Any transaction
costs associated with the issuing of shares are deducted from share premium, net of any related income tax
benefits.
Option reserve represents the cumulative cost of share based payments in respect of options granted.
• Warrant reserve represents the cumulative cost of share based payments in respect of warrants issued.
•
Retained earnings include all current and prior period results as disclosed in the statement of comprehensive
income.
32
ADM Energy plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2018
2
PRINCIPAL ACCOUNTING POLICIES (continued)
FINANCIAL LIABILITIES
Financial liabilities are recognised in the Group’s statement of financial position when the Group becomes a party to the
contractual provisions of the instrument. All interest related charges are recognised as an expense in finance cost in the
income statement using the effective interest rate method.
The Group’s financial liabilities comprise trade and other payables.
Trade payables are r ecognised initially at their fair value and subsequently measured at amortised cost less settlement
payments.
SHARE BASED PAYMENTS
Where share options are awarded, or warrants issued to employees, the fair value of the options/warrants at the date of
grant is charged to the statement of comprehensive income over the vesting period. Non-market vesting conditions are
taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that,
ultimately, the cumulative amount recognized over the vesting period is based on the number of options/warrants that
eventually vest. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market
vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition.
Where warrants or options are issued for services provided to the Group, the fair value of the service is charged to the
statement of comprehensive income or against share premium where the warrants or options were issued in exchange for
services in connection with share issues. Where the fair value of the services cannot be reliably measured, the service is
valued using Black Scholes valuation methodology taking into consideration the market and non-market conditions
described above.
Where the share options are cancelled before they vest, the remaining unvested fair value is immediately charged to the
statement of comprehensive income.
FOREIGN CURRENCIES
The Directors consider Sterling to be the currency that most faithfully represents the economic effects of the underlying
transactions, events and conditions. The financial statements are presented in Sterling, which is the Group’s functional and
presentation currency.
Foreign currency transactions are translated into Sterling using the exchange rates prevailing at the date of the
transactions. Foreign currency exchange gains and losses resulting from the settlement of such transactions and from the
translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are recognised
in the income statement. Non-monetary items that are measured at historical costs 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 into the functional currency using the exchange rates at the date when the fair value was determined.
SEGMENTAL REPORTING
A segment is a distinguishable component of the Group’s activities from which it may earn revenues and incur expenses,
whose operating results are regularly reviewed by the Group’s chief operating decision maker to make decisions about the
allocation of resources and assessment of performance and about which discrete financial information is available.
As the chief operating decision maker reviews financial information for and makes decisions about the Group’s investment
activities as a whole, the directors have identified a single operating segment, that of holding and trading in investments in
natural resources, minerals, metals, and oil and gas projects. The Directors consider that it would not be appropriate to
disclose any geographical analysis of the Group’s investments.
No segmental analysis has been provided in the financial statements as the Directors consider that the Group’s operations
comprise one segment.
33
ADM Energy plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2018
3
REVENUE
All the Group’s revenue is derived from its operations in Nigeria.
4
OPERATING LOSS
Loss from continuing operations is arrived at after charging:
Directors’ remuneration
Employee salaries and other benefits
Auditors’ remuneration:
fees payable to the principal auditor for the audit of the Group’s financial statements
5
OTHER GAINS AND LOSSES
Gain/(loss) on disposal of investments
Refund of FX margin deposit previously written off
6
FINANCE COSTS
Interest on convertible loan stock
Finance costs of other loan facilities
Interest on overdue cash calls
2018
£’000
798
44
24
2018
£’000
−
−
−
2018
£’000
−
−
−
−
2017
£’000
650
36
18
2017
£’000
7
20
27
2017
£’000
−
1,072
57
1,129
34
ADM Energy plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2018
7
EMPLOYEE REMUNERATION
The expense recognised for employee benefits for continuing operations is analysed below:
Wages and salaries (including directors)
Social security costs
Directors’ remuneration:
Wages and salaries (including employee benefits)
Social security costs
2018
£’000
2017
£’000
766
76
842
726
72
798
626
60
686
593
57
650
Further details of Directors’ remuneration are included in the Report on Directors’ Remuneration.
Only the directors are deemed to be key management. The average number of employees in the Group was 5 (2017:4).
8
INCOME TAX EXPENSE
Current tax – continuing operations
Loss before tax from continuing operations
Loss before tax multiplied by rate of corporation tax in the UK of 19% (2017: 19.25%)
Expenses not deductible for tax purposes
Unrelieved tax losses carried forward
Total tax charge for the year
2018
£’000
−
2018
£’000
(849)
(161)
6
155
−
2017
£’000
−
2017
£’000
(3,435)
(661)
21
640
−
There are unrelieved tax losses of approximately £20,400,000 (2017: £16,900,000) which may be available to offset against
future taxable profits. No deferred tax asset has been recognised in respect of the losses as recoverability is uncertain.
35
ADM Energy plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2018
9
EARNINGS PER SHARE
The basic and diluted earnings per share is calculated by dividing the loss attributable to owners of the Group by the
weighted average number of ordinary shares in issue during the year.
Loss attributable to owners of the Group
- Continuing operations
Continuing and discontinued operations
2018
£’000
(849)
(849)
2017
£’000
(3,435)
(3,435)
2018
2017
Weighted average number of shares for calculating basic and fully
diluted earnings per share
1,949,157,883
1,439,477,518
Earnings per share:
Loss per share from continuing and total operations
2018
pence
2017
pence
(0.04)
(0.24)
The weighted average number of shares used for calculating the diluted loss per share for 2018 and 2017 was the same as
that used for calculating the basic loss per share as the effect of exercise of the outstanding share options was anti-dilutive.
10
INTANGIBLE ASSET
GROUP
The intangible asset relates to the acquisition of a 5% revenue interest in the OML 113 licence, which includes the Aje
Field (“Aje”) and the further costs of bringing the Aje 4 and Aje 5 wells into production.
Cost of investment in Jacka Resources Nigeria Holdings Limited
Cash calls in respect of Aje 4 and Aje 5 wells
Foreign currency exchange translation difference
2018
£’000
14,984
952
426
16,362
2017
£’000
14,461
1,113
(590)
14,984
The Directors have reviewed the value of the Group’s investment and consider that the fair value of this investment
should be stated at the original cost of the investment plus the value of the cash calls that the Group has paid and is liable
for as at the year-end, which the Directors consider represents the fair value of the Group’s interest; so no impairment
provision is required. As the joint venture partners have been granted a new 20 year lease in 2018 the directors do not
consider that any provision for decommissioning is required.
36
ADM Energy plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2018
11
INVESTMENT IN SUBSIDIARIES
On 10 August 2016, the Group completed the agreement for the acquisition of Jacka Resources Nigeria Holdings Limited
(“JRNH”), a BVI registered company, in which Jack Resources Limited (“JRL”) held the single issued share. JRNH’s sole
asset is its wholly owned subsidiary, P R Oil & Gas Nigeria Limited (“PROG”), a Nigerian registered company. PROG has a
5% revenue interest in the OML 113 licence, offshore Nigeria, which includes the Aje Field ("Aje"), where oil production
commenced in May 2016.
Balance at beginning of period
Advances to PROG
Balance at end of period
The Group’s subsidiary companies are as follows:
Name
Principal
activity
Country of incorporation
and principal
place of business
2018
£’000
14,634
104
14,738
2017
£’000
11,554
3,080
14,634
Proportion of
ownership interest
and voting rights
held by the Group
British Virgin Islands
100%
Jacka Resources Nigeria Holdings
Limited
Holding
company
*P R Oil & Gas Nigeria Limited
Oil exploration
& production
Maples Corporate Services (BVI) Ltd
Kingston Chambers
P.O. Box 173, Road Town, Tortola
Nigeria
1, Murtala Muhammed Drive
Ikoyi, Lagos
Geo Estratos MXOil, SAPI de CV
Oil exploration
Mexico
Lago Alberto 319, Piso 6
IZA Punto Polanco
Col. Granada, Del. Miguel Hidalgo
CP 11520, Ciudad de Mexico
*Indirectly held
100%
100%
37
ADM Energy plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2018
12
INVESTMENTS HELD FOR TRADING
The table of investments sets out the fair value measurements using the IFRS 7 fair value hierarchy. Categorisation within
the hierarchy has been determined on the basis of the lowest level of input that is significant to the fair value
measurement of the relevant asset as follows (see note 19)
The investments held by the Group are designated as at fair value through profit or loss.
Fair value of investments brought forward
Purchases of investments
Proceeds from the disposal of investments
(Loss)/gain on disposal of investments
Movement in fair value of investments held at year end
Fair value of investments held for trading
Investments held at the year end were categorised as follows
Level 1
Level 3
GROUP AND COMPANY
2017
2018
£’000
£’000
179
25
(4)
−
−
200
−
200
200
-
475
(303)
7
−
179
4
175
179
The table of investments sets out the fair value measurements using the IFRS 7 fair value hierarchy. Categorisation within
the hierarchy has been determined on the basis of the lowest level of input that is significant to the fair value
measurement of the relevant asset as follows:
Level 1 – valued using quoted prices in active markets for identical assets.
Level 2 – valued by reference to valuation techniques using observable inputs other than quoted prices included within
Level 1.
Level 3 – valued by reference to valuation techniques using inputs that are not based on observable market data.
The valuation techniques used by the company are explained in the accounting policy note, “Investments held for
trading”.
There were no transfers between Level 1 and Level 3 investments during the year.
13
TRADE AND OTHER RECEIVABLES
Trade receivables
Other receivables
Prepayments and accrued income
GROUP
COMPANY
2018
£’000
2017
£’000
2018
£’000
2017
£’000
−
13
16
29
−
13
22
35
−
13
16
29
−
13
22
35
The fair value of trade and other receivables is considered by the Directors not to be materially different to carrying
amounts. Trade receivables are due in 30 days. At the date of the Statement of Financial Position in 2018 and 2017 there
were no trade receivables past due.
38
ADM Energy plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2018
14
CASH AND CASH EQUIVALENTS
Cash at bank
Cash and cash equivalents
GROUP AND COMPANY
2018
£’000
216
216
2017
£’000
50
50
The fair value of cash and cash equivalents is considered by the Directors not to be materially different to carrying amounts.
15
TRADE AND OTHER PAYABLES
Trade payables
Tax and social security
Other payables
Accruals and deferred income
GROUP
COMPANY
2018
£’000
52
24
843
724
2017
£’000
91
66
824
68
2018
£’000
52
24
316
712
1,643
1,049
1,104
2017
£’000
91
66
394
58
609
The fair value of trade and other payables is considered by the Directors not to be materially different to carrying
amounts.
Included in accruals and deferred income is £650,000 advance received in connection with performing appraisal activities
of certain oil and gas licences in Grenada. No appraisal activities have been performed to date and the amount is
repayable on demand. The Directors have a reasonable expectation that the Group has the ability to raise additional funds
required to repay this advance.
39
ADM Energy plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2018
16
BORROWINGS
As at 1 January
Net proceeds of loans
Arrangement fees
Other finance charges
Exchange difference
Settled by cash
Settled by the issue of shares
As at 31 December
GROUP AND COMPANY
2017
2018
£’000
£’000
−
−
−
−
−
−
−
−
−
584
1,710
90
982
−
3,366
(1,791)
(1,575)
−
17
CALLED UP SHARE CAPITAL
Number of
ordinary
shares
Value
£’000
Number of
deferred
shares
Value
£’000
Total
value
£’000
Share
Premium
£’000
Issued and fully paid
At 1 January 2017 (ordinary shares of
0.01p)
Shares issued (see note below)
Share issue costs
1,141,141,331
530,208,333
−
114 8,222,439,370
8,222
8,336
25,460
53
−
−
−
−
−
At 31 December 2017
1,671,349,664
167 8,222,439,370
8,222
Shares issued (see note below)
1,100,000,000
110
−
Share issue costs
At 31 December 2018
−
2,771,349,664
−
−
277 8,222,439,370
−
−
8,222
The deferred shares have restricted rights such that they have no economic value.
Share issues in year
On 20 February 2018, 100,000,000 new ordinary shares of 0.01p were issued at 0.5p each as a result of a placing, raising
£500,000 before expenses.
On 22 October 2018, 1,000,000,000 new ordinary shares of 0.01p were issued at 0.1p each as a result of a placing, raising
£1,000,000 before expenses.
53
−
8,389
110
−
8,499
6,522
(449)
31,533
1,390
(90)
32,833
40
ADM Energy plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2018
18
SHARE WARRANTS
As at 31 December 2015, the Company had approved the issue of 162,500,000 warrants, of which 90,000,000 have not yet
vested and it is unlikely that the conditions for vesting will be met in the short to medium term. Of the vested warrants
3,250,000 have been exercised and 49,250,000 have lapsed, so that as at 31 December 2018 there are 20,000,000
warrants outstanding that were capable of being exercised.
In February 2016, the Company issued 4,116,000 warrants to the Company’s broker and certain other parties. The
warrants were exercisable at 1.25p per share for a period of 2 years from the date of issue and therefore lapsed during the
year.
In March 2016, the Company issued 66,666,667 warrants to the Company’s broker and certain other parties. The warrants
were exercisable at 1p per share for a period of 3 years from the date of issue and were still exercisable at 31 December
2018, but lapsed in March 2019.
In total, at 31 December 2018, the Group has issued 143,282,667 warrants of which 3,250,000 have been exercised,
53,366,000 have lapsed, leaving 86,666,667 warrants exercisable at 31 December 2018. In addition there are 90,000,000
warrants which have been authorised for issue but have not been issued as the vesting conditions have yet to be met.
The 90,000,000 warrants that have not yet vested are subject to certain vesting conditions as detailed below.
•
•
60,000,000 warrants to certain directors and other third parties exercisable at 3p per share. Of these, 12,552,632
have been allocated to Stefan Olivier and 47,447,368 have been allocated to third parties. Vesting of these warrants
will be conditional upon the Group securing an interest in a concession or asset in Mexico. The warrants will vest in
three equal tranches as follows: one third vesting upon the Group’s average mid-market closing share price trading at
6p for 60 consecutive days; one third vesting upon the Group’s average mid-market closing share price trading at 12p
for 30 consecutive days; and the final third vesting upon the Group’s average mid-market closing share price trading
at 18p for 60 consecutive days. In addition, the first and second tranches of options will lapse if, in each case, they
have not been exercised within 90 days of the trading price vesting condition being satisfied.
30,000,000 warrants to certain third parties exercisable at 2p per share and vesting once the Group secures a
concession in Mexico. If after the Group secures a concession the average mid-market closing price of shares in the
Group trades at 4p or more for 60 consecutive days, these warrants will lapse if they have not been exercised within
90 days of the trading price vesting condition being satisfied.
Outstanding at 1 January
Issued
Exercised
Lapsed
Outstanding at 31 December
2018
2017
Weighted average
exercise price
Weighted average
exercise price
Number
(pence)
Number
(pence)
90,782,667
−
−
4,116,000
86,666,667
1.23
140,032,667
−
−
−
−
−
(49,250,000)
1.23
90,782,667
1.15
−
−
1.00
1.23
The total share-based payment expense recognised in the income statement for the year ended 31 December 2018 in
respect of the warrants issued during the year was £Nil (2017: £Nil).
The figures above are before the 1 for 100 share consolidation approved by the shareholders on 7 June 2019.
41
ADM Energy plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2018
19
RISK MANAGEMENT OBJECTIVES AND POLICIES
CAPITAL RISK MANAGEMENT
The Group's objectives when managing capital are:
•
•
•
to safeguard the Group's ability to continue as a going concern, so that it continues to provide returns and benefits
for shareholders;
to support the Group's growth; 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.
The Group is exposed to a variety of financial risks which result from both its operating and investing activities. The
Group’s risk management is coordinated by 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.
Management review the Group’s exposure to currency risk, interest rate risk, liquidity risk on a regular basis and consider
that through this review they manage the exposure of the Group on a near term needs basis
There is no material difference between the book value and fair value of the Group’s cash.
MARKET PRICE RISK
The Group’s exposure to market price risk mainly arises from potential movements in the fair value of its investments. The
Group manages this price risk within its long-term investment strategy to manage a diversified exposure to the market. If
each of the Group’s equity investments were to experience a rise or fall of 10% in their fair value, this would result in the
Group’s net asset value and statement of comprehensive income increasing or decreasing by £20,000 (2017: £4,000).
INTEREST RATE RISK
The Group and Company manage the interest rate risk associated with the Group’s cash assets by ensuring that interest
rates are as favourable as possible, whilst managing the access the Group requires to the funds for working capital purposes.
The Group’s cash and cash equivalents are subject to interest rate exposure due to changes in interest rates. Short-term
receivables and payables are not exposed to interest rate risk.
CREDIT RISK
The Group's financial instruments, which are exposed to credit risk, are considered to be mainly loans and receivables, and
cash and cash equivalents. The credit risk for cash and cash equivalents is not considered material since the counterparties
are reputable banks. The maximum exposure to credit risk for loans and receivables is as set out in the table below, and
relates to the financing of the Group’s joint venture interests.
The Group's exposure to credit risk is limited to the carrying amount of the financial assets recognised at the balance sheet
date, as summarised below:
Cash and cash equivalents
Loans and receivables
2018
£’000
216
13
229
2017
£’000
50
13
63
LIQUIDITY RISK
Liquidity risk is managed by means of ensuring sufficient cash and cash equivalents are held to meet the Group’s payment
obligations arising from administrative expenses. The cash and cash equivalents are invested such that the maximum
available interest rate is achieved with minimal risk.
42
ADM Energy plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2018
20
FINANCIAL INSTRUMENTS
The Group uses financial instruments, other than derivatives, comprising cash to provide funding for the Group's
operations.
CATEGORIES OF FINANCIAL INSTRUMENTS
The IFRS 9 categories of financial asset included in the statement of financial position and the headings in which they are
included are as follows:
FINANCIAL ASSETS:
Cash and cash equivalents
Investments held for trading (see fair value measurements below)
Loans and receivables
Investments available for sale
FINANCIAL ASSETS BY IFRS 7 FAIR VALUE HIERARCHY
Level 1 - Investments held for trading
Level 3 - Loans and receivables
Investments held for trading
Investments available for sale
FAIR VALUE MEASUREMENTS
2018
£’000
216
200
13
2017
£’000
50
179
13
14,738
14,634
−
13
200
14,738
14,951
4
13
175
14,634
14,822
The Group holds quoted investments that are measured at fair value at the end of each reporting period using the IFRS 7
fair value hierarchy as set out below.
Level 1 – valued using quoted prices in active markets for identical assets.
Level 2 – valued by reference to valuation techniques using observable inputs other than quoted prices included within
Level 1.
Level 3 – valued by reference to valuation techniques using inputs that are not based on observable market data.
The valuation techniques used by the Group are explained in the accounting policy note, “Investments held for trading”.
43
ADM Energy plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2018
20
FINANCIAL INSTRUMENTS continued
FINANCIAL LIABILITIES AT AMORTISED COST:
The IFRS 9 categories of financial liabilities included in the statement of financial position and the headings in which they
are included are as follows:
Trade and other payables
Borrowings
2018
£’000
919
−
2017
£’000
981
−
The following table details the Group’s remaining contractual maturity for its non-derivative financial liabilities with agreed
repayment periods. The table has been drawn up based on the undiscounted cash flows of financial liabilities based on the
earliest repayment date on which the Group can be required to pay. The table includes both interest and principal cash
flows. To the extent that interest flows are floating rate, the undiscounted amount is derived from the interest rate curves
at the balance sheet date. The contractual maturity is based on the earliest date on which the Group may be required to
pay.
Less than
1 month
£’000
1-3
months
£’000
3 months
to 1 year
£’000
1-5
years
£’000
Over 5
years
£’000
2018
Interest bearing:
Borrowings
Non-interest bearing:
Trade and other payables
2017
Interest bearing:
Borrowings
Non-interest bearing:
Trade and other payables
−
−
−
−
−
919
−
981
−
−
−
−
−
−
−
−
−
−
−
−
21
CONTINGENT LIABILITIES
There were no contingent liabilities as at 31 December 2018 (2017: £Nil)
44
ADM Energy plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2018
22
RELATED PARTY TRANSACTIONS
The remuneration of the Directors, who are key management personnel of the Group, is set out in the report on Directors’
Remuneration.
During the year, £30,000 of Nicholas Lee’s total remuneration was invoiced by ACL Capital Limited, a company controlled
by him. This amount was settled by the issue of shares.
During the year, the remuneration for Richard Carter of £74,000 was invoiced by Bryant Park Consulting Ltd, a company
controlled by him. £12,000 of this amount was settled by the issue of shares.
23
ULTIMATE CONTROLLING PARTY
• The Directors do not consider there to be a single ultimate controlling party.
24
POST PERIOD END EVENTS
• Events since the year end are detailed in the Report of the Directors.
Perivan Financial Print 255116