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admenergy plc
CONTENTS
PAGE
Company Information
3
2022 Overview
4
Chairman’s Report
5
Chief Executive Officer's Review and Strategic Report
6
Board of Directors
10
Investment Approach
11
Directors' Report
12
Corporate Governance Report
18
Chairman’s Corporate Governance Statement
21
Report on Directors’ Remuneration
24
Report of the Independent Auditor
25
FINANCIAL STATEMENTS
Group Income Statement
35
Group and Company Statements of Financial Position
36
Group Statement of Changes in Equity
37
Company Statement of Changes in Equity
38
Group and Company Statements of Cash Flows
39
Notes to the Financial Statements
40
WHO WE ARE
ADM Energy is a natural resources investing company with oil and gas assets in West
Africa and the US. We hold a 9.2% profit interest in the Aje Field, part of OML 113 in
Nigeria. We also hold a portfolio of interests in oil and gas projects, the primary focus
of which is a 70.0% working interest participation in an initial three well drilling
programme to target shallow oil production on the Altoona Lease, in the Midway-
Sunset Oilfield, California, the third largest oil field in the US.
We are seeking to build on our existing asset base and target other investment
opportunities in the oil and gas sector. Our strategy is to identify and invest in high-
impact, near-term producing assets that can deliver significant value. These will be
based on attractive risk reward profiles such as proven nature of reserves, level of
historic investment, established infrastructure, route to early cash flow and
exploration upside.
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admenergy plc
COMPANY INFORMATION
DIRECTORS:
Oliver Andrews (Non-executive Chairman)
Stefan Olivier (Chief executive Officer)
Richard Carter (Chief operating Officer)
Lord Bellingham (Non-executive Director)
Dr Stefan Liebing (Non-executive Director)
Claudio Coltellini (Non-executive Director)
REGISTERED OFFICE:
60 Gracechurch Street
London, EC3V 0HR
COMPANY NUMBER:
05311866
SECRETARY:
Ben Harber
NOMINATED ADVISER:
Cairn Financial Advisers LLP
80 Cheapside
London, EC2V 6EE
BROKER:
Hybridan LLP
2 Jardine House
The Harrovian Business Village
Beesborough Road, Harrow
Middlesex HA1 3EX
REGISTRARS:
Computershare Investor Services Plc
The Pavilions
Bridgwater Road
Bristol, BS99 6ZZ
INDEPENDENT AUDITOR:
Kreston Reeves LLP
Chartered Accountants & Statutory Auditor
2nd Floor
168 Shoreditch High Street
London, E1 6RA
FINANCIAL PR:
Gracechurch Group
48 Gracechurch Street
London, EC3V 0EJ
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admenergy plc
2022
OVERVIEW
Investment Highlights
Aje Field, OML 113
• In July 2022, PetroNor E&P Limited's ("PetroNor") completed its acquisition of Panoro Energy ASA's
("Panoro") interest in OML 113
• In August 2022, completed the 17th Lifting at the Aje Field totalling 94,187 barrels with a net share of
8,683 barrels to ADM, which equates to ADM's profit interest of approximately 9.2%
• JV Partners are progressing development plans for the Aje Field, including replacement of the Floating
Production Storage and Offloading ("FPSO"), and as a result there is currently a pause in production
Post period, Investment in Onshore US Oil Leases and Work Programme
• Invested in five oil leases through an acquisition of Blade Oil V, LLC for US$1,614,000 (the "acquisition").
The focus of the acquisition is one lease in the Midway-Sunset Oilfield, one of the largest fields in the
US.
• Primary focus of US portfolio is a 70.0% working interest participation in an initial three well drilling
programme to target shallow oil production on the Altoona Lease
• Concurrent with the acquisition, ADM has entered into subscription agreements to issue secured
convertible loan notes ("SCLN") with an aggregate face value of up to US$1.5 million
Corporate and Financial Highlights
• Made directorate changes with appointments of Stefan Olivier as CEO, previously co-founder of MX Oil
plc (now ADM Energy plc), and Claudio Coltellini as Non-executive Director
• Revenue was £0.7m (2021: £1.8m)
• Operating costs reduced by 81% to £0.4m (2021: £1.9m)
• Loss before and after tax was £2.1m (2021: £2.5m)
• In January 2022, the Company completed an equity fundraising of approximately £561,000 with Optima
Resources Holding Limited
• In October 2022, the Company completed an equity fundraising of approximately £725,000 through a
subscription and loan from OFX Holdings, LLC (formerly TN Black Gold, LLC) (“OFX”)
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admenergy plc
CHAIRMAN’S REPORT
FOR THE YEAR ENDED 31 December 2022
Dear Stakeholders,
2022 and the start of 2023 has been a transitional period
for ADM Energy with changes to the leadership team and
board. Under a new CEO, our focus is to ensure the
Company achieves its vision of developing an investment
portfolio that can deliver growth for the Company and its
stakeholders.
Alongside significant management changes, the recent
acquisition of Blade V provides the Company with an
exciting, near-term portfolio of oil and gas assets situated
in North America, a tier-one jurisdiction. This ties into our
strategy to identify and invest in high-impact, near-term
producing assets that can deliver significant value to the
Company.
New leadership and board changes
The Board was pleased to appoint Stefan Olivier as CEO
in April 2023, replacing former CEO, Osa Okhomina.
Stefan has extensive corporate broking and oil and gas
experience, including as the co-founder of MX Oil plc,
now ADM Energy. He played a pivotal role in securing and
financing the participation of ADM in the Aje field and in
securing the support of OFX prior to its initial investment
in the Company.
Stefan has been on the Boards of several other public and
private companies and brings years of experience of
working in natural resources. He will drive forward our
strategy of building a multi-asset portfolio, as evidenced
in his short time here by the acquisition of Blade V.
The board was also strengthened by the addition of
Claudio Coltellini as Non-executive Director. Claudio has
invested in the U.S. oil and gas sector for approximately
15 years and is CEO of four private US oil and gas
companies focused on investment in the states of Texas,
California, Kansas and Louisiana, and well placed to share
his expertise to help capitalise on the Company’s
acquisition of Blade V.
Investment portfolio
At the Aje Field, there was an important development,
when PetroNor E&P Limited (“PetroNor”) acquired a
significant interest during the year, a strong endorsement
of Aje as a high-quality asset and its potential. As
previously stated, there is currently a suspension of
production while the JV Partners continue to progress
discussions around the next phase of Aje’s development
plans with the goal of maximising the potential scale of
Aje.
ADM’s acquisition of Blade Oil V LLC, the first under the
new leadership team, is a potentially transformational
deal for ADM and is in line with our strategy of investing
in near term producing assets at attractive values that can
bring in capital for the Company.
Blade V owns a portfolio of interests in oil and gas
projects in the Midway Sunset Oil Field, one of the largest
oil fields in the US. The main focus of their operation is a
70% interest in a three well drilling programme targeting
oil production on the Altoona Lease in California,
alongside other exciting interests in Kansas and Texas.
At the Barracuda Field, legal proceedings are ongoing in
respect of our interest in the asset and we will continue
to strongly defend our position as we await the outcome
of the proceedings. With Stefan joining as CEO, he and
the Board will be assessing the position of Barracuda in
our wider portfolio prior to any further work and analysis
being undertaken as well as prior to any investment
decision.
Creating a platform for growth
With Blade V and Aje, we have a solid platform on which
to build from. With Aje production currently on hold, the
Company’s immediate focus will be to advance the Blade
V assets which have potential to generate cash flow for
ADM.
Our goal is to add value through the development of our
investments and by identifying new prospects. Oil majors
are continuing divestment programmes to reduce their
emissions footprint and meet carbon reduction targets,
which we believe can create attractive investment
opportunities to add to our portfolio.
Finally, I would like to extend my gratitude to our
shareholders for their continued support as we look
forward to the next phase of ADM’s development.
OLIVER ANDREWS
Non-Executive
Chairman
26 June 2023
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admenergy plc
CHIEF EXECUTIVE OFFICER’S REVIEW AND STRATEGIC REPORT
FOR THE YEAR ENDED 31 December 2022
Overview
I joined ADM as Chief Executive Officer in April 2023, alongside Claudio Coltellini who was appointed as Non-executive Director.
In May 2023, we made our first investment, acquiring Blade V which owns a portfolio of North American Oil and Gas assets in a
highly prospective region. We are hugely excited to add this asset to our investment portfolio and the opportunity to add
significant value for shareholders.
Since becoming CEO, we have been honing our strategy, which focuses on identifying investment opportunities that are near-
term producing assets in proven oil and gas jurisdictions to enhance our investment portfolio. Though previously we were focussed
primarily in West Africa, we have now diversified toward US assets. I can see a great opportunity to bring value to ADM and my
team is determined to deliver growth for shareholders.
Operating Review
Acquisition of Blade V
In May 2023, ADM invested in a portfolio of interests via the acquisition of Blade V from OFX Holdings LLC (Formerly TN Black
Gold, LLC (“OFX”), a total maximum consideration of US$1,614,000.
Blade V owns a portfolio of interests in oil and gas projects, the primary focus of which is a 70.0% working interest participation
in an initial three well drilling programme to target shallow oil production on the Altoona Lease located in the Midway-Sunset
Oilfield, Kern County, California.
The Midway Sunset Oil Field has produced in excess of 3 billion barrels of oil since production began in 1889. It is the largest known
oilfield in California and the third largest in the United States. Chevron Corporation has been operating in the San Joaquin Valley
for over 100 years and its interests in the area represent its core, onshore USA assets. The Altoona Lease is a highly unique
opportunity for a small company to benefit from substantial investment and de-risking of the target opportunities by a major
company. Surrounded by Chevron on three sides, the project is a direct beneficiary of the infrastructure and pipelines built to
service Chevron’s production in the area.
In addition, the interests held by Blade V comprise:
•
100.0% working interest in the Schweitzer Lease in Graham County, Kansas where a work-over programme to restore
production from two wells is currently in process.
•
50.0% fully funded working interest in a three well workover programme in Texas targeting initiation of production from
three wells.
•
50.0% working interest in the Pearson, Oberlin and Moon Leases, a three well workover programme.
•
Total gross and net leasehold acreage associated with the acquisition is 423 acres and 295.5 acres, respectively.
•
ADM will be a non-operating financial investor in the interests.
Further information regarding the Blade V portfolio can be found in the acquisition announcement of 25 May 2023. Details of
ADM’s interests are as follows:
Lease/Well
County, State
Working Interest
Net Revenue Interest
Operator (1)
Altoona
Kern, CA
70.0%
52.5%
To Be Determined1
Pearson
Grimes, TX
50.0%
37.5%
Guardian2
Oberlin
Upshur, TX
50.0%
37.5%
Guardian2
Moon
Upshur, TX
50.0%
37.5%
Guardian2
Schweitzer
Graham, KS
100.0%
75.0%
Tex Oil, LLC3
Notes:
1.
Altoona: a California licensed and bonded contract operator to be determined by OFX and ADM.
2.
Guardian Energy Operating Co., LLC is a registered Texas operator 75.0% owned by OFX.
3.
Tex Oil, LLC is a registered Kansas operator.
The acquisition of Blade V ties into my vision for ADM to expand our investment portfolio by bringing in quality, near term
production assets with low risk and high upside that can add significant value to the Company.
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admenergy plc
CHIEF EXECUTIVE OFFICER’S REVIEW AND STRATEGIC REPORT
FOR THE YEAR ENDED 31 December 2022
Aje Field
In July 2022, the Joint Venture development of Aje took an important step forwards when PetroNor E&P Limited (“PetroNor”)
announced that it had completed the purchase of 100% of Aje Interests of Panoro Energy ASA (“Panoro”). PetroNor agreed to
acquire Panoro's interest in OML 113 for an upfront consideration of USD 10 million, with a contingent consideration of up to USD
16.67 million based on future gas production volumes. The completion of a purchase of interests in Aje from an established,
heavyweight partner such as PetroNor demonstrates the strong value proposition posed by the asset. With the transaction
completed, the next stage will be for the JV Partners to agree on the long-term field development plans for the Aje Field.
Discussions are continuing with the JV partners regarding plans to replace the current Floating Production Storage and Offloading
(“FPSO") to increase gas handling capacity and support development plans to monetise the field's significant wet gas potential,
which is estimated at potentially 1.2 trillion cubic feet of wet gas resources.
In August 2022, the 17th lifting at the Aje Field was carried out for a total of 94,187 barrels with a net share of 8,683 to ADM. This
lifting was drawn from oil previously stored on the FPSO as there was no oil production from the Aje Field (Aje-4 and Aje-5) in 2022.
As previously announced, the JV partners implemented a suspension of production at Aje to upgrade the FPSO and increase the
capacity and production capability in line with the development plans.
Barracuda
ADM is currently following legal proceedings in respect of its interest in the Barracuda oil field. As announced on 13 December 2021,
the Company and K.O.N.H. (UK) Ltd ("KONH") obtained an interim injunction at the Federal High Court of Nigeria, Lagos ("Court")
restraining Noble Hill-Network Limited ("NHNL"), its officers, agents, privies, or person howsoever connected from selling, disposing,
divesting, or tampering with the 70% shareholding interest of KONH in NHNL to third-party investors or in any other manner
whatsoever. The interim injunction continues to stand.
During the period, the Company announced the result of the CPR on the Barracuda Field with a 2U (P50) case, the NPV10 is +$99mm
with an IRR of 45%, assuming at least 70mmbbls STOIIP is discovered.
Following the appointment of a new CEO (and subsequent investment and focus on developing the Blade V assets) and the
protracted legal proceedings and settlement discussions, the management team and Board have made the decision to write-down
the investment in Barracuda for prudence.
Financial Review
For the year ended 31 December 2022, the Group’s revenue decreased by 62.2% to £0.7 million (2021 £1.8 million), reflecting the
suspension of production at Aje.
Operating costs decreased by 80.5% to £0.4 million (2021 £1.9 million).
Decommissioning provision amounted to £1.6 million (2021 £1.3 million). Depreciation & amortisation expense increased by 38.3%
to £0.07 million (2021: £0.05 million).
Administrative expenses decreased by 26.3% to £1.7 million (2021: £2.3 million). Finance costs increased to £0.12 million (2021
£0.06 million).
Loss after taxation decreased 16.5% to £2.1 million (2021: £2.5 million loss). The Directors do not propose a dividend (2021 £nil).
As of 31 December 2022, the Group had cash and cash equivalents of £0.025 million 31 December (2021 £0.3 million).
Funding
The Company raised a total of £1.29 million through two fundraises in 2022. In January 2022, the Company raised a total of £561,000
through a subscription with Optima Resources Limited, with funds used for general working capital expenditures. In October 2022,
the Company then raised approximately £725,000 through a subscription and a loan from OFX Holdings, LLC (formerly TN Black
Gold, LLC) (“OFX”). The subscription raised a total of £500,000, combined with a $250,000 loan facility.
In May 2023 the Company announced, alongside the acquisition of Blade V, that it has entered into subscription agreements to
issue secured convertible loan notes ("SCLN") with an aggregate face value of up to US$1.5 million, of which US$900,000 has been
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admenergy plc
CHIEF EXECUTIVE OFFICER’S REVIEW AND STRATEGIC REPORT
FOR THE YEAR ENDED 31 December 2022
subscribed for and US$600,000 remaining available for subscription. The SCLNs subscriptions have been received and no SCLNs will
be issued until cash has been received. The SCLN has a three-year term, an interest rate payable-in-kind (which maybe settle with
cash or non-cash payments) of 8.0% per annum and the principal together with any interest due may be converted at any time at a
share price of 1.2p per share.
In addition to the subscriptions, the Company agreed with certain directors and creditors to convert outstanding contractual
liabilities of £683,117 into 56,926,417 new ordinary shares in the Company at the price of 1.2p per new ordinary share.
Outlook
ADM has undergone a period of change, reflected in the recent additions to our management team and the acquisition of Blade V,
that has solidified the Company’s foundations.
Blade V provides ADM with an exciting portfolio of oil and gas assets including acreage in one of the largest oil fields in North
America, a tier-one jurisdiction. The acquisition, and its significant potential upside, can be a gamechanger for ADM and we are
excited by the opportunity ahead of us. The coming year will be an important period as we progress the well drilling programmes
at Blade V and the JV partners progress with plans for Aje.
In addition to our current portfolio, we think the strength and experience of our Board and technical team places us in an ideal
position to capitalise on new opportunities as they arise, particularly as recent global events this past year have underscored the
vital importance of stable global oil and gas supply. The Company and the Board is confident that it can effectively leverage its
knowledge and expertise across its portfolio to generate value for the Company.
Key Performance Indicators (“KPIs”)
The Group’s activity is that of an investing group 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
As at 31 December 2022
As at 31 December 2021
Net asset value
£11,208,000
£10,986,000
Net asset value – fully diluted per share
3.8p
5.2p
Closing share price
0.625p
0.775p
Market capitalisation
£1,857,172
£1,585,000
Key Risks and Uncertainties
Early stage investments in the natural resources sector carry an elevated 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. The Group is currently funded through debt and equity investment and therefore
there is a significant liquidity risk associated with lack of funding. This is discussed further as part of the going concern note in the
relevant section of this report.
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. Details of other financial risks and
their management are given in Note 22 to the financial statements.
Promotion of the Company for the benefit of the members as a whole
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admenergy plc
CHIEF EXECUTIVE OFFICER’S REVIEW AND STRATEGIC REPORT
FOR THE YEAR ENDED 31 December 2022
S172 of the Companies Act 2006 requires the Board to promote the Company for the benefit of the members as a whole. In
particular, the requirements of S172 are for the Directors to:
•
Consider the likely consequences of any decision in the long term
•
Act fairly between the members of the Company
•
Maintain a reputation for high standards of business conduct
•
Consider the interests of the Company’s employees
•
Foster the Company’s relationships with suppliers, customers and others and
•
Consider the impact of the Company’s operations on the community and the environment.
The Directors believe that during the year they have acted in the way most likely to promote the success of the Company for the
benefit of its members as a whole and have adhered to the requirements set out above that are applicable to the Company given
its scope of operations. Through its financing activities, the Board has ensured that the Company is sufficiently capitalised and has
cash resources for its requirements, to ensure that the Company has a viable operating plan for the long term. Given the nature of
the Company’s business, it has very few employees and the majority are themselves directors. The Board recognises that the
Company’s employees are, nevertheless, critical to the success of the Company and takes steps to ensure that the interests of
employees are protected. The Company does not deal directly with customers or suppliers in relation to its oil and gas field interests,
save for its relationship with the operator for the OML 113 licence. The Company acknowledges the importance of maintaining good
relations with its suppliers and aims to settle all invoices in a timely manner. The Company’s approach to its responsibilities in
respect of the impact of its operations on the community and environment is set out in “Our Sustainable Approach” on page 10.
Going Concern
At 31 December 2022, the Group recorded a loss for the year of £2.12m and had net current liabilities of £2.13m, after allowing for
cash balances of £25k. In 2022 the company raised £1.29m through two fund raises. In May 2023 the Company announced,
alongside the acquisition of Blade V, that it has entered into subscription agreements to issue secured convertible loan notes
("SCLN") with an aggregate face value of up to US$1.5 million, of which US$900,000 has been subscribed for and US$600,000
remaining available for subscription. The SCLN has a three-year term, an interest rate payable-in-kind (which maybe settle with cash
or non-cash payments) of 8.0% per annum and the principal together with any interest due may be converted at any time at a share
price of 1.2p per share. In addition to the subscriptions, the Company agreed with certain directors and creditors to convert
outstanding contractual liabilities of £683,117 into 56,926,417 new ordinary shares in the Company at the price of 1.2p per new
ordinary share, helping the company reduce the liabilities on the balance sheet. Also with the change of management the focus of
the company is now on finding near term producing assets so the company can start earning revenue. In May 2023 the company
announced the investment in Blade V which holds an interest across 5 different wells in USA, all with near term revenue potential.
As part of this deal, the company also has circa $251k available under its debt facility with OFX.
The Directors have prepared cashflow forecasts for the period to June 2024 to assess whether the use of the going concern basis
for the preparation of the financial statements is appropriate. In the short term, between the loan facility, potential revenue and
CLN proceeds the Group does not expect to need short term funding to meet its liabilities as they fall due however the group does
expect in the period that more funding might be needed. The Directors have a reasonable expectation based on past performance
and current discussions of support from stakeholders that additional finance would be available should it be needed. Accordingly,
the directors consider it reasonable to prepare the financial statements on the going concern basis.
Future developments
The Group’s development objectives for the year to 31 December 2022 are disclosed in the Chief Executive Officer's Review and
Strategic Report on pages 6 – 9
STEFAN OLIVIER
Chief Executive Officer
26 June 2023
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admenergy plc
BOARD OF DIRECTORS
OLIVER ANDREWS, Non-executive Chairman
Oliver has over 35 years’ experience in infrastructure development, investing, public-private partnerships and
strategic advisory work such as advising and partnering with governments, regional and international corporations
and development finance institutions. During his career, he has overseen the investment of approximately US$10bn
and originated US$100bn of investments in natural resources and infrastructure deals across the African continent
on behalf of investee institutions. Oliver was formerly Executive Director and Chief Investment Officer at the Africa
Finance Corporation, one of the biggest investors in natural resources and infrastructure solutions in Africa, where
he oversaw the growth of assets under management from US$1bn to over US$8.4bn including significant
investments in the oil and gas sector.
STEFAN OLIVIER, Chief Executive Officer
Stefan Olivier has extensive corporate broking and oil and gas experience including as co-founder of MX Oil plc (now
ADM Energy plc). Stefan played a central role in initially securing and financing the participation of the Company in
the Aje Field, OML 113 and in securing the support of OFX prior to its initial investment in the Company. He was a
founder and Chief Executive Officer at North American Petroleum plc from 2012 until 2017. He has been on the
Board of several other public and private companies and brings years of experience of working in natural resources
to the Board of the Company.
RICHARD CARTER, Chief Operating Officer
Richard is a qualified accountant with extensive experience of raising funds for public and private companies. He
has worked and advised across media, telecoms, engineering and energy sectors in various corporate finance and
investor relations roles. As Chief Operating Officer, Richard supports the CEO and management team with its
regulatory functions.
CLAUDIO COLTELLINI, Independent Non-executive Director
Claudio Coltellini is an Italian citizen now residing with his family in the state of Florida. Prior to working in the U.S.
onshore oil and gas sector, having graduated with a degree in economics and business, he joined Deutsche Bank
where he worked for seven years. He has invested in the U.S. oil and gas sector for approximately 15 years and is
CEO of four private U.S. oil and gas companies focused on investment in the states of Texas, California, Kansas and
Louisiana.
DR STEFAN LIEBING, Independent Non-executive Director
Dr Stefan Liebing is the CEO of Conjuncta GmbH, a boutique investment and project development company and
has been active in major infrastructure and energy projects since mor than twenty years. Dr Stefan Liebing is the
Immediate Past Chairman of Afrika-Verein der deutschen Wirtschaft e.V., the prestigious German-African Business
Association, where as part of his role, he advised the German Government on investment in Africa. Previously, Dr
Liebing was a Director of International Gas Business at EnBW Energie Baden-Wuerttemberg AG, one of the largest
energy supply companies in Europe. Previously he held various senior positions at Royal Dutch Shell.
LORD BELLINGHAM, Independent Non-executive Director
Lord Bellingham has enjoyed a distinguished Parliamentary career of almost 40 years and held a number of senior
positions including: Foreign Office Minister for Africa, The UN, Caribbean, Overseas Territories and Conflict Issues;
Chairman of the Westminster Foundation for Democracy; Chairman of the All-Party Group on the Commonwealth;
and the Prime Minister`s Trade Envoy to Libya. In 2016, he was Knighted in the New Year Honours list for
Parliamentary and Political Service. He sits in the House of Lords after being awarded a Life Peerage in 2020.In
addition to his Parliamentary career, Lord Bellingham has held several non-executive roles on AIM companies and,
until recently, was Non-executive Chairman of Pathfinder Minerals plc since 2014. Prior to entering Parliament, Lord
Bellingham practised as a barrister having graduated from Magdalene College, Cambridge with a master’s degree
in Law.
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admenergy plc
INVESTMENT APPROACH
Investing Policy
The Company will seek to invest in opportunities within the natural resources sector, the oil services, power and energy sectors and
in technology opportunities related to these sectors that the Directors believe either are of strategic value or represent a significant
value opportunity. The Company is prepared to take an active role in its investments where it is deemed to be appropriate.
The Directors plan to adopt a flexible approach, both as to the form of the Company’s investments and the subject of its investments.
The investments may be in quoted and unquoted companies. This includes making investments in other quoted investment
companies focused on the natural resources, power and energy sectors or related technologies, including those with no significant
assets other than cash. The Directors believe that investing in these other investing companies will provide the Company with greater
scope to make and support its investment strategy.
The Company’s investments may take the form of equity, debt, convertible instruments, options and licence rights. Possible
investments could include direct or indirect investments in permits and licences, exploration, mining and production operations and
processing and development projects.
The Company may make direct investments in private or quoted companies and indirect investments via quoted companies,
unquoted companies seeking a public quotation and candidates for reverse transactions into quoted investment companies. The
Company may invest in these types of opportunities through acquisitions, partnerships, joint venture arrangements, as finance for
management buy-outs or buy-ins, as finance for pre-IPO, seed and underwriting positions.
Such investments may result in the Company acquiring the whole or part of a company or project. The Company will consider
opportunities anywhere in the world.
The Company expects to be an active investor in situations where the Company can make a clear contribution to the progress and
development of the investment. In respect of other, principally more substantial opportunities, the Company expects to be a passive
investor.
The Company intends to invest for the medium to long-term. However, should an opportunity arise to realise its investments, the
Company will consider these on a case-by-case basis and seek to maximise value for shareholders. The Directors intend to hold all
investments for a minimum of 30 days. Other than set out above, there are no restrictions on the Company’s investment policy.
The Company intends to utilise industry experts in the analysis of proposed investments, and it is intended that the decision-making
process will be a collegiate, team-based approach, driven by intrinsic value or informed opinion.
Our Sustainable Approach
ADM Energy is committed to the highest standards of corporate social responsibility in its investing policy. Working alongside its
partners, the Company strives to ensure the safety of all staff and contractors, while minimising environmental impact, for the
benefit of the communities in which it works and all its stakeholders.
ADM conducts its investment operations in a responsible and transparent manner. Being socially responsible is a key component in
the Company’s business and its achievements. This includes not only adherence to Government legislation and Company policies,
but must extend to acceptance that ADM is, in all the projects in which it holds an investment, a neighbour in established
communities and environments.
The Company is conscious of the impact to the environment and local communities that oil and gas activities may have and aims to
minimise and constantly reduce these effects. The projects in which ADM invests comply with all existing laws, regulations and
permits. By making continuous improvements, the Company’s ambition is to set a good example in the markets where it is active.
ADM’s focus in its projects is environmental protection, pollution prevention and human health. The Company’s actions are
characterised by respect for the cultures of the regions in which it operates. ADM is committed to maintaining an open dialogue over
the environmental aspects of its investments and the operations of the partners in these projects with all stakeholders.
12
admenergy plc
DIRECTORS’ REPORT
FOR THE YEAR ENDED 31 December 2022
The Directors present their annual report on the affairs of the Group, together with the financial statements for the year ended 31
December 2022.
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.
Oliver Andrews
Osamede Okhomina
(Resigned 31 October 2022)
Richard Carter
Manuel Lamboley (Resigned 25 April 2023)
Lord Bellingham
Dr Stefan Liebing
DIRECTORS’ INTERESTS
Set out below are the Directors’ beneficial holdings of ordinary shares in the Company as at 31 December 2022. Their interests in
the Company’s share warrants are included in the Report on Directors’ Remuneration.
Name of director
Ordinary shares of
1p each
Number
Percentage
of capital
%
Oliver Andrews
6,666,667
2.24%
Richard Carter
2,431,496
0.82%
Dr Stefan Liebing
655,972
0.22%
Lord Bellingham
353,031
0.12%
13
admenergy plc
DIRECTORS’ REPORT
FOR THE YEAR ENDED 31 December 2022
SUBSTANTIAL SHAREHOLDINGS
Interests in excess of 3% of the issued share capital of the Company which have been notified to the Company as at 26 June 2023
were as follows:
Name of shareholder
Ordinary shares of
1p each
Number
Percentage
of capital
%
Optima Resources Holding Ltd
51,000,000
17.16%
OFX Holding
41,666,667
14.02%
Hessia Group Limited
36,449,303
12.27%
Align Research Limited & related parties – RS & CA Jennings
9,404,031
3.16%
POST YEAR END EVENTS
On 24 April 2023 the Company announced that Stefan Olivier and Claudio Coltellini had been appointed to the Board of Directors,
and that Manuel Lamboley had resigned as a director.
On 25 May 2023 the Company announced the following:
1.
Investment in US oil leases
The company announced that, through a recently formed, wholly owned U.S. subsidiary company, ADM Energy USA, Inc., it had
invested in five on-shore US oil leases by way of a Membership Interest Purchase Agreement ("the Investment") with OFX Holdings,
LLC (formerly Tennessee Black Gold, LLC), a substantial shareholder of the Company. The Investment has been made by the
acquisition of Blade Va Texas limited liability company established as a vehicle for the purpose of facilitating the Investment, for a
total maximum consideration of US$1,614,000.
Blade V owns a portfolio of interests in oil and gas projects ("the Assets"), the primary focus of which is a 70.0% working interest
participation in an initial three well drilling programme to target shallow oil production on the Altoona Lease located in the Midway-
Sunset Oilfield, Kern County, California. The interests held by Blade V also comprise:
•
100.0% working interest in the Schweitzer Lease in Graham County, Kansas where a work-over programme to restore
production from two wells is currently in process.
•
50.0% fully funded working interest in a three well workover programme in Texas targeting initiation of production from
three wells.
•
Total gross and net leasehold acreage associated with the acquisition is 423 acres and 295.5 acres, respectively.
•
An Area of Mutual Interest allowing ADM to participate, at cost, in any additional drilling, recompletion or workover
opportunities within two miles of any boundary of the leases included in the Investment.
•
In conjunction with the Transaction, ADM Energy USA, Inc. and OFX have entered into a loan facility (the “USA Loan
Facility”) providing for loans of up to US$750,000 to be made available to the Company. The Consideration Loan Notes
(defined below) of US$235,720 will be issued as an advance under the USA Loan Facility.
•
ADM will be a non-operating financial investor in the interests.
Further details of the portfolio of interests comprising the Investment are as follows:
Lease/Well
County, State
Working
Interest
Net Revenue
Interest
Operator (1)
Altoona
Kern, CA
70.0%
52.5%
To Be Determined1
Pearson
Grimes, TX
50.0%
37.5%
Guardian2
Oberlin
Upshur, TX
50.0%
37.5%
Guardian2
Moon
Upshur, TX
50.0%
37.5%
Guardian2
Schweitzer
Graham, KS
100.0%
75.0%
Tex Oil, LLC3
Notes:
(1) Altoona: a California licensed and bonded contract operator to be determined by OFX and ADM.
(2) Guardian Energy Operating Co., LLC is a registered Texas operator 75.0% owned by OFX.
(3) Tex Oil, LLC is a registered Kansas operator.
Midway-Sunset Oilfield, Kern County, California
14
admenergy plc
DIRECTORS’ REPORT
FOR THE YEAR ENDED 31 December 2022
The Midway-Sunset Oil Field is a large oil field in Kern County, San Joaquin Valley, California in the United States. It is the largest
known oilfield in California and the third largest in the United States. The field was discovered in 1894 and it is estimated that the
field has produced close to 3 billion barrels (480,000,000 m3) of oil. At the end of 2008, the California Department of Conservation
estimated reserves amounted to approximately 532 million barrels (84,600,000 m3), 18% of California's estimated total.
The Altoona Lease
The Altoona Lease is a circa 20-acre lease located in a crestal position within the Spellacy Anticline Region of the Midway-Sunset
Oilfield. Discovered in 1915, the Altoona Lease has produced less than 1 million barrels of oil from multiple intervals primarily
between 1,000 and 1,600 feet. Chevron (USA), Inc. is actively developing leases contiguous with and surrounding the Altoona
Lease. In March/April of 2020 Chevron (USA), Inc. drilled and started producing the 3-8R and 3-8AR wells located approximately
250 meters from the Altoona Lease. These wells were drilled to approximately 1,935 feet and, combined, have produced in excess
of 150,000 barrels of oil from spud through the end of December 2022. A work programme, considered exploratory by the
Company, is being planned to drill or deepen up to three wells to approximately 2,000 feet to test deeper potential, previously
untested on the Altoona Lease which may be contributing to the high level of production realised by Chevron in the 3-8R and 3-
8AR wells. ADM expects that the operator of the Altoona work programme will commence before the end of 2023. ADM will have
a non-operated 70% working interest and 52.5% net revenue interest in the Altoona lease.
The Altoona work programme commitments are expected to be costed at approximately US$1,500,000.
The Schweitzer Lease
The Schweitzer Lease is a 160-acre lease located in Graham County, Kansas. Blade V owns a 100% working interest and 75% net
revenue interest in the Schweitzer Lease. The lease includes two wells capable of being returned to production (the Schweitzer
#3 and the Schweitzer #6), a salt-water disposal well and associated production equipment.
The initial work programme will consist of:
•
Schweitzer #3: Already in progress. Pump a chemical scale squeeze into Lansing-KC “J” and “K” intervals to inhibit the
precipitation of Barite/Celestite scale on downhole production equipment. Return well to production via rod-beam
pump.
•
Schweitzer #6: Equip well to produce via rod-beam pump in replacement of electrical submersible pump.
The total cost of the work programme, which will be conducted by Tex Oil LLC, is estimated at US$65,000 and will be funded by
an advance from the USA Loan Facility.
Pearson, Oberlin and Moon Leases: Three Well Workover Programme
The Company will participate with a 50.0% working interest and 37.5% net revenue interest in a three well workover program
with Guardian Energy Operating Co., LLC ("Guardian"), a majority owned subsidiary of OFXH. The programme will target the
initiation of production from the following wells:
Well
County, State
API#
Operator
Work Timing
Pearson 1RE
Grimes, Texas
42-185-30529
Guardian
May 2023
Oberlin 2
Upshur, Texas
42-459-31141
Guardian
May 2023
Moon Well 1
Upshur, Texas
42-459-31438
Guardian
To be determined
The three well work programme is fully funded by OFXH, the Company's share of costs associated with its participation are
included as part of the Investment consideration and will not require any cash investment or borrowings by the Company under
the USA Loan Facility.
Investment Consideration
The total maximum consideration for the Investment of US$1,614,000 comprises US$478,280 to be financed via the issuance of
(1) 15,714,667 new ordinary shares at a price of 1.2p per share ("Consideration Shares"); (2) a US$235,720 loan note issued by
ADM Energy USA, Inc. (non-recourse to ADM Energy PLC) ("Consideration Loan Notes"); (3) the issue of warrants over 7 million
ordinary shares in the Company ("the Warrants") exercisable at 2.5p per warrant with a term of two years from Admission
(defined below); and (4) contingent deferred consideration of up to $900,000.
The contingent deferred consideration will be received on the first 180,000 barrels of oil produced net to the interests of the
Company from the Assets. The production payment will be US$5.00 per barrel if the realised price is greater than US$70.00 per
15
admenergy plc
DIRECTORS’ REPORT
FOR THE YEAR ENDED 31 December 2022
barrel and US$3.50 if the realised price is greater than US$50.00 per barrel and less than US$70.00 per barrel. There will be no
payment in periods when the realised oil price is less than US$50.00 per barrel. The production payment will be paid in arrears on
a monthly basis.
Following issuance of the Consideration Shares, OFX will hold 57,381,334 ordinary shares of ADM Energy plc representing 15.58%
of the Enlarged Issued Share Capital of Company on Admission.
2.
Secured Convertible Loan Note Subscription
Concurrent with the Investment in the US oil leases the Company entered into subscription agreements to issue secured convertible
loan notes ("SCLN") with an aggregate face value of up to US$1.5 million, of which US$900,000 has been subscribed for and
US$600,000 remaining available for subscription. The SCLN has a three-year term, an interest rate payable-in-kind (which maybe
settle with cash or non-cash payments) of 8.0% per annum and the principal together with any interest due may be converted at
any time at a share price of 1.2p per share. The purchasers of the SCLN will also be assigned a proportionate economic interest in a
1.25% undivided over-riding royalty interest in the Altoona Lease (further described below). The SCLN will be secured by a pledge
of and first-lien on the shares of ADM Energy USA, Inc. held by the Company. A condition of the subscription agreement associated
with the SCLN is that the funds raised must fully fund, and be first applied against, the Company's net share of the costs of the
Altoona work programme. Any amount in excess of the funds required to fund the Altoona work programme may be used by the
Company for general working capital purposes.
The following shareholders and directors of the Company have subscribed for the SCLNs as indicated:
Hessia Group Limited, a substantial shareholder of the Company
US$500,000
OFX Holdings, LLC, a substantial shareholder of the Company
US$250,000
Mr. Oliver Andrews, a director of the Company
US$100,000
Mr. Stefan Olivier, a director of the Company
US$50,000
Total
US$900,000
Signed subscription letters have been received and, upon receipt of the cleared funds which are expected shortly, the SCLNs will
be issued.
3.
Share Issue for debt conversion
The Company has agreed with certain directors and creditors to convert outstanding contractual liabilities of £683,117 into
56,926,417 new ordinary shares in the Company ("Conversion Shares") at the same price as the Consideration Shares being 1.2p
per new ordinary share.
Conversion Shares issued to Directors of the Company, and their respective shareholdings on Admission, are as follows:
Director
Conversion
value (£)
Number of
Conversion
Shares to be
issued
Resulting
shareholding
on admission
Shares as
percentage of
Enlarged Issued
Share Capital on
Admission
Oliver Andrews
100,000
8,333,333
15,000,000
4.06%
Stefan Olivier
50,000
4,166,667
4,166,667
1.13%
Richard Carter
50,000
4,166,667
6,598,163
1.79%
Dr Stefan Liebing
19,617
1,634,750
2,290,722
0.62%
Lord Henry Bellingham
16,500
1,375,000
1,728,031
0.47%
Manuel Lamboley (former
director)
15,000
1,250,000
1,250,000
0.34%
Total
251,117
20,926,417
31,033,583
8.67%
4.
Variation of Loan Facilities Agreement with OFX
16
admenergy plc
DIRECTORS’ REPORT
FOR THE YEAR ENDED 31 December 2022
Further to the announcement of 17 October 2022, OFX has provided US$262,500 in loans to the Company (the "Equity Subscription
Loan"). In conjunction with the Investment, OFX and ADM have formalised the "USA Loan Facility" with a total of US$235,720
advanced as part of the purchase price pursuant to the terms of the Investment. By agreement between ADM and OFX, the Equity
Subscription Loan will be refinanced by the USA Loan Facility resulting in a total of US$498,220 outstanding under the USA Loan
Facility with US$251,780 remaining available for use. Following this variation, ADM Energy plc will not directly have any
outstanding loans due to OFX.
Key terms of the USA Loan Facility include:
1.
Loans of up to US$750,000 with additional advances subject to mutual agreement between the Company and OFX.
2.
The USA Loan Facility is not secured nor is the Company a guarantor of borrowings by ADM Energy USA, Inc.
3.
Maturity date of 30 June 2025 ("Maturity Date").
4.
Interest rate of 9.0% per annum with quarterly payments of interest to commence in April 2024.
5.
OFX may offset amounts due to it pursuant to the USA Loan Facility against any amounts that would be due to the
Company should OFX exercise warrants held by it over ordinary shares in the Company prior to the Maturity Date.
5.
Grant of Options
The Company has adopted an unapproved share option scheme ("Scheme") and made a grant of options to certain directors and
employees. The purpose of the Scheme is to incentivise management performance for the benefit of all shareholders by way of
options which are subject to vesting conditions.
The terms of the Scheme provide that the Company can award options over a maximum of 12 per cent. of the Company's issued
share capital, from time to time.
Vesting criteria for options granted under the Scheme are as follows:
Amount Vesting
Price
Vesting Conditions
50 per cent. (“Tranche One”)
1.2p
On the business day following the second
anniversary of the date of grant
50 per cent. (“Tranche Two”)
2.4p
On the business day following the third anniversary
of the date of grant
Vesting conditions may be varied or waived provided that any varied vesting condition shall be a fairer measure of performance,
as judged at the time, and no more difficult to satisfy than the original vesting condition. The Scheme provides good leaver
provisions and other standard terms normally associated with such a scheme.
The Company has granted the following options under the Scheme:
Director
Number of
Options
granted
Options granted as
percentage of
Enlarged Issued Share
Capital on Admission
Shareholding
on Admission
Shareholding on
Admission as a
percentage of
Enlarged issued share
capital on Admission
Stefan Olivier
21,299,823
5.76%
4,166,667
1.13%
Richard Carter
10,649,911
2.88%
6,598,163
1.78%
Oliver Andrews
4,348,714
1.18%
15,000,000
4.06%
Lord Henry Bellingham
4,348,714
1.18%
1,728,031
0.47%
Dr Stefan Liebing
3,194,973
0.86%
2,290,722
0.62%
Total
43,842,135
11.86%
29,783,583
8.05%
In addition to the awards to directors of the Company above, the Company has also issued 532,495 options over ordinary shares,
representing 0.14% of the enlarged issued share capital on Admission to an employee. The total award of options represents
12.0% of the enlarged issued share capital on Admission.
17
admenergy plc
DIRECTORS’ REPORT
FOR THE YEAR ENDED 31 December 2022
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 UK-adopted
international accounting standards ("IFRS"). 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
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 recognize 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 these regulations.
AUDITORS
The auditors,Kreston Reeves LLP have expressed their willingness to continue in office, and a resolution to reappoint them will be
proposed at the forthcoming Annual General Meeting.
DISCLOSURE OF INFORMATION TO AUDITORS
Each of the persons who are directors at the time when this Directors' report is approved has confirmed that:
• so far as the director is aware, there is no relevant audit information of which the Company's auditors are unaware, and
• the director has taken all the steps that ought to have been taken as a director in order to be aware of any relevant audit information
and to establish that the Company's auditors are aware of that information.
On behalf of the Board.
Stefan Olivier
Director
26 June 2023
18
admenergy plc
CORPORATE GOVERNANCE REPORT
FOR THE YEAR ENDED 31 December 2022
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.
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 (“AGM”). Investors also have access to current information on the
Company through 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 hello@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.
19
admenergy plc
CORPORATE GOVERNANCE REPORT
FOR THE YEAR ENDED 31 December 2022
•
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 and COO. 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 6-9, 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 Non-executive Chairman Oliver Andrews, CEO Stefan Olivier, COO Richard Carter, and Non-executive Directors
Claudio Coltellini Lord Henry Bellingham, and Dr Stefan Liebing. 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 10.
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.
20
admenergy plc
CORPORATE GOVERNANCE REPORT
FOR THE YEAR ENDED 31 December 2022
•
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 10.
•
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, 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 Directors are 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.
•
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.
21
admenergy plc
CHAIRMAN’S CORPORATE GOVERNANCE STATEMENT
FOR THE YEAR ENDED 31 December 2022
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 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 five directors, four 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 8 times and all the Directors attended the meetings.
BOARD COMMITTEES
Remuneration Committee
The Remuneration Committee consists of Lord Henry Bellingham (Committee Chairman) and Dr Stefan Liebing. 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
2022. This report sets out the activities of the Remuneration Committee during 2022.
The Committee met twice 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;
•
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.
22
admenergy plc
CHAIRMAN’S CORPORATE GOVERNANCE STATEMENT
FOR THE YEAR ENDED 31 December 2022
There are four elements of the remuneration package for Executive Directors and senior management:
•
basic annual salary;
•
benefits in kind;
•
discretionary annual bonus; and
•
long-term incentive plan.
Audit Committee
The Audit Committee consists of Oliver Andrews (Committee Chairman) and Dr Stefan Liebing. The Audit Committee meets at least
twice 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 2022. This
report sets out the activities of the Audit Committee during 2022.
The Audit Committee is governed by terms of reference which are agreed by the Board and subject to annual review.
Principal 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 2022
The Committee met three times in 2023 to execute its responsibilities. 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 the external auditors 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.
23
admenergy plc
CHAIRMAN’S CORPORATE GOVERNANCE STATEMENT
FOR THE YEAR ENDED 31 December 2022
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.
Oliver Andrews
Non-Executive Chairman
26 June 2023
24
admenergy plc
REPORT ON DIRECTORS’ REMUNERATION
FOR THE PERIOD ENDED 31 December 2022
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. The Company’s
remuneration policy is set out on page 21.
DIRECTORS’ EMOLUMENTS
Details of the remuneration package of each Director for the year are set out below:
2022
2022
2022
2021
Fees and
emoluments
Pension
contributions
Total
remuneration
Total
remuneration
Director
£’000
£’000
£’000
Oliver Andrews
60
−
60
25
Richard Carter
181
20
201
236
Manuel Lamboley
25
−
25
37
Lord Bellingham
29
−
29
30
Dr Stefan Liebing
25
−
25
28
Directors who left during year:
Osamede Okhomina (resigned 31 October 2022)
65
61
126
409
Peter Francis
−
−
−
20
385
81
466
785
PENSIONS
Pension contributions of £81,000 were paid in respect of the directors for the year ended 31 December 2022 (2021: £45,000).
On behalf of the Board.
Oliver Andrews
Non-Executive Chairman
26 June 2023
25
admenergy plc
INDEPENDENT AUDITOR REPORT
TO THE SHAREHOLDERS OF ADM ENERGY PLC
FOR THE YEAR ENDED 31 DECEMBER 2022
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 2022 which comprise the group income statement and statement of comprehensive
income, group and company statements of financial position, group and company statements of changes in equity,
group and company statements of cashflow and notes to the financial statements, including a summary of significant
accounting policies. The financial reporting framework that has been applied in their preparation of the group
financial statements is applicable law and UK adopted international accounting standards.
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 2022
and of the Group’s loss for the year then ended;
•
have been properly prepared in accordance with UK adopted international accounting standards; 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 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
We draw attention to note 2 in the financial statements, which discloses that the Group is considered to be a going
concern by management. We note that the primary source of income generated in recent years, via its partnership in
the OML 113 license, was paused in the year as part of a suspension of production at Aje. This pause is to upgrade
and increase the capacity and production capability of the asset in line with the development plans. Specifically, to
more fully develop a far more significant area of proven oil and gas reserves within the field. While the exact period
of this near-term suspension of operations is not entirely known at this stage, management are confident that newly
expanded operations will be underway in 2024. Therefore, the Group are going to be largely reliant on additional
funding to meet its liabilities as they fall due for the foreseeable future, covering a period of at least 12 months from
the date of the approval of these financial statements. We also note other investment opportunities, including the
acquisition of an interest in 5 oil producing wells in USA, being pursued which management are confident will start
producing revenues from the summer of 2023, with these revenues expected to significantly increase towards the
end of the year as more of the wells at the field become operational. However, there is uncertainty over the timing
and quantum of returns from these assets and therefore the extent to which returns from this source can be relied
26
admenergy plc
INDEPENDENT AUDITOR REPORT
TO THE SHAREHOLDERS OF ADM ENERGY PLC
FOR THE YEAR ENDED 31 DECEMBER 2022
upon to fund liabilities as they fall due. These events or conditions, along with other matters set forth in note 2,
indicate that a material uncertainty exists that may cast significant doubt on the Group’s ability to continue as a going
concern.
Our opinion is not modified in respect of this matter.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of
accounting in the preparation of the financial statements is appropriate. This conclusion is reached based on the
following procedures, we have:
•
Evaluated the design and implementation of key internal controls over management’s assessment of going
concern, considering in detail the rationale provided and whether this was consistent with our understanding as
well as audit evidence obtained;
•
Considered the accuracy of forecasts produced by management by reference to key assumptions made, as well as
identifying specific elements of the forecasts that are critical for demonstrating that the business remains a going
concern, taking into account variances that arose;
•
Considered the key financial data of the group and company at year end and assessed the financial headroom
available by reference to ongoing cash commitments over a period of at least 12 months from the date of the
approval of these financial statements, including review of $200,000 of drawdown facilities for additional loan
funding;
•
Considered the trends of key commodity prices in the financial year and in the period up to the date of the approval
of these financial statements;
•
Considered the funding facilities currently and potentially available to the business as well as reviewing the
associated covenants where applicable;
•
Specifically considered the willingness and ability of shareholders to continue to provide equity finance to the
business based on historic track record of support, capital raises after the balance sheet date and the results of
recent shareholder general meetings. This has included review of convertible loan notes of up to £1.25m, issued
post year end, of which $900k has already been committed;
•
Considered post year end financial information, board minutes and other events in order to further assess the
performance, strength as well as the ability of the business to settle liabilities as they fall due since the balance
sheet date to the date of the approval of the financial statements.
As noted in the ‘Responsibilities of the directors section the directors are responsible for assessing the Group’s and
parent company’s ability to continue as a going concern.
27
admenergy plc
INDEPENDENT AUDITOR REPORT
TO THE SHAREHOLDERS OF ADM ENERGY PLC
FOR THE YEAR ENDED 31 DECEMBER 2022
An overview of the scope of our audit
We tailored the scope of our audit to ensure that we performed sufficient work to be able to give an opinion on the
financial statements as a whole, taking into account the structure of the Group and the parent company, the
accounting processes and controls, and the industry in which they operate.
Our scoping considerations for the Group audit were based both on financial information and risk. The below table
summarises for the parent company, and its subsidiaries, in terms of the level of assurance gained:
Group component
Level of assurance
ADM Energy PLC
Full statutory audit
P R Oil & Gas Nigeria Limited
Substantial audit procedures
ADM Asset Holdings Limited
Limited assurance review
ADM Energy Services Limited
Limited assurance review
ADM 113 Limited
Limited assurance review
Geo Estratos MXOil, SAPI de CV
Limited assurance review
K.O.N.H. (UK) Limited
Limited assurance review
ADM One 113 Limited
Limited assurance review
Coverage overview
Group revenue (£’000s)
Group profit/(loss)
before tax (£’000s)
Group net assets
(£’000s)
Totals at 31 December
2022:
£662
(£2,122)
£11,208
Full statutory audit and
substantial audit
procedures
£662
(£2,122)
£11,208
Limited audit procedures
£Nil
£Nil
£Nil
28
admenergy plc
INDEPENDENT AUDITOR REPORT
TO THE SHAREHOLDERS OF ADM ENERGY PLC
FOR THE YEAR ENDED 31 DECEMBER 2022
Our application of materiality
Group financial statements
Parent company financial
statements
Materiality
£224,200
£198,400
Basis for determining materiality
Capped below 2% of net assets
Capped below group materiality
Rationale for benchmark applied
The group's principal activity of that
of investing in the natural resources
sector. To this end the business is
highly asset focused. Therefore, a
benchmark for materiality of the
Net
Assets
of
the
group
is
considered to be appropriate.
The parent company materiality
has been capped at below group
materiality. This was to address
the aggregation risk in the group
audit.
Performance materiality
£156,900
£138,900
Basis for determining performance
materiality
70% of materiality
Capped below group materiality
Rationale for performance
materiality applied
On
the
basis
of
our
risk
assessments, together with our
assessment of the Group’s overall
control
environment,
our
judgement was that performance
materiality was 70% of our financial
statement materiality. In assessing
the appropriate level, we consider
the nature, the number and impact
of the audit differences identified in
the previous year’s audit.
The
parent
company
performance
materiality
has
been capped at below group
performance materiality. This
was to address the aggregation
risk in the group audit.
Triviality threshold
£11,200
£9,900
Basis for determining triviality
threshold
5% of materiality
Capped below group materiality
We reported all audit differences found in excess of our triviality threshold of £11,200 to the directors and the
management board.
29
admenergy plc
INDEPENDENT AUDITOR REPORT
TO THE SHAREHOLDERS OF ADM ENERGY PLC
FOR THE YEAR ENDED 31 DECEMBER 2022
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the
financial statements. In particular, we looked at where the directors made subjective judgements, for example in
respect of significant accounting estimates that involved making assumptions and considering future events that are
inherently uncertain. As in all of our audits we also addressed the risk of management override of internal controls,
including evaluating whether there was evidence of bias by the directors that represented a risk of material
misstatement due to fraud.
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. This is not a complete list of all risks identified by our
audit.
Revenue recognition
Significance and nature of key risk
The Group had one main source of
revenue during the year, this being the
investment returns from the its share in
the OML 113 License. The underlying asset
being a stake in the Aje oil and gas field in
Nigeria.
We have focused on this income stream
due to
the potential for material
misstatement of revenue whether caused
by fraud or error.
The group’s revenue share is outlined in
the Joint Operating Agreement, the
underlying revenues being generated from
the sale of crude oil within the oil and gas
field.
How our audit addressed the key risk
Given that revenues arise from the OML 113 license under the joint
operating agreement, there is risk of calculation errors which may
result in recorded revenue being material misstated.
We have obtained reconciliations produced by the asset’s operator
directly from this third party and confirmed the group’s stated
share to underlying signed contracts. The independence and
competence of the operator was also assessed along with their
control environment in place for the production of accurate
financial reports for partners in the OML 113 License.
We have specifically considered revenue recognition and cut-off in
line with the requirements of IFRS 15.
We have further assessed the systems and controls in place around
the revenue cycle, implemented by the group themselves, to
ensure that these are functioning as designed.
Key observations communicated to the Audit Committee
We have no concerns over the material accuracy of revenue recognised in the financial statements.
30
admenergy plc
INDEPENDENT AUDITOR REPORT
TO THE SHAREHOLDERS OF ADM ENERGY PLC
FOR THE YEAR ENDED 31 DECEMBER 2022
Valuation/impairment of intangible assets
Significance and nature of key risk
Intangible assets relate to the Group’s
capitalised
development
costs
and
proportionate interest in the production
assets covered under the joint operating
agreement.
Due to the recognition requirements
under
IAS
38
there
is
inherent
management judgement in the treatment
of these as assets of the group rather than
expenses.
How our audit addressed the key risk
We have closely examined the nature of items capitalised to
ensure that these meet the definition of intangible assets under
IAS 38. This included agreement to sale and purchase agreements
as well as other supporting evidence.
We have obtained management’s assessment of the impairment
of intangibles. In analysing this we have considered external
factors, such as the consideration received for transfer of interest
in the license between other partners, in order to gain evidence of
potential impairment in the value of the group’s holding – which is
effectively represented in the financial statements by this
intangible.
We have considered the appropriateness of the valuation model
used and agree this is reasonable given the nature of the
underlying asset that these development costs relate to.
Key observations communicated to the Audit Committee
We have no concerns over the material accuracy of intangible asset values recognised in the financial
statements.
Valuation of liabilities in P R Oil & Gas Nigeria Limited
Significance and nature of key risk
There are cost sharing obligations relating
to the group’s interest in the OML 113
License, as specified in the joint operating
agreement.
These liabilities have increased with the
acquisition of additional interest in the
OML 113 license by the group in recent
years.
There is a risk that the expense share
reported to the group to be accrued for is
materiality understated.
How our audit addressed the key risk
In line with our auditing of revenue recognition we have obtained
reconciliations produced by the asset’s operator directly from this
third party and confirmed the group’s stated share to underlying
signed contracts.
The independence and competence of the operator was also
assessed along with their control environment in place for the
production of accurate financial reports for partners in the OML
113 License.
We have confirmed that the specific audit of the operator’s
accounting for project costs was concluded in the financial year
and that the results of this did not indicate increased risk of
material misstatement of the group’s share of operating liabilities.
31
admenergy plc
INDEPENDENT AUDITOR REPORT
TO THE SHAREHOLDERS OF ADM ENERGY PLC
FOR THE YEAR ENDED 31 DECEMBER 2022
Key observations communicated to the Audit Committee
We have no concerns over the material accuracy of liabilities relating to OML 113 license operations recognised
in the financial statements. The audit of the operator was concluded in the year with no findings made that gave
rise to material uncertainty over the accuracy of information being produced.
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 our knowledge and understanding of the Group and 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
32
admenergy plc
INDEPENDENT AUDITOR REPORT
TO THE SHAREHOLDERS OF ADM ENERGY PLC
FOR THE YEAR ENDED 31 DECEMBER 2022
•
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 17), 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.
In preparing the financial statements, the directors are responsible for assessing the Group’s and 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 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.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in
line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including
fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
Capability of the audit in detecting irregularities, including fraud
Based on our understanding of the group and industry, and through discussion with the directors and other
management (as required by auditing standards), we identified that the principal risks of non-compliance with laws
and regulations related to health and safety, anti-bribery and employment law. We considered the extent to which
non-compliance might have a material effect on the financial statements. We also considered those laws and
regulations that have a direct impact on the preparation of the financial statements such as the Companies Act 2006.
We communicated identified laws and regulations throughout our team and remained alert to any indications of non-
compliance throughout the audit. We evaluated management’s incentives and opportunities for fraudulent
manipulation of the financial statements (including the risk of override of controls), and determined that the principal
risks were related to posting inappropriate journal entries to increase revenue or reduce expenditure, management
33
admenergy plc
INDEPENDENT AUDITOR REPORT
TO THE SHAREHOLDERS OF ADM ENERGY PLC
FOR THE YEAR ENDED 31 DECEMBER 2022
bias in accounting estimates and judgemental areas of the financial statements such as the valuation of intangible
assets. Audit procedures performed by the group engagement team included:
•
Detailed discussions were held with management to identify any known or suspected instances of non- compliance
with laws and regulations.
•
Identifying and assessing the design effectiveness of controls that management has in place to prevent and detect
fraud.
•
Challenging assumptions and judgements made by management in its significant accounting estimates, including
assessing the capabilities of management to consider sufficient impairment criteria in making their assessment
over the value of intangible assets.
•
Performing analytical procedures to identify any unusual or unexpected relationships, including related party
transactions, that may indicate risks of material misstatement due to fraud.
•
Confirmation of related parties with management, and review of transactions throughout the period to identify
any previously undisclosed transactions with related parties outside the normal course of business.
•
Reading minutes of meetings of those charged with governance and reviewing correspondence with relevant tax
and regulatory authorities.
•
Review of significant and unusual transactions and evaluation of the underlying financial rationale supporting the
transactions.
•
The cashbook used to create the initial financial information with respect to ADM Energy PLC and P R Oil & Gas
Nigeria Limited was reviewed to ensure no entries in the cash book indicated fraudulent activity by management.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those
leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases
the more that compliance with a law or regulation is removed from the events and transactions reflected in the
financial statements, as we will be less likely to become aware of instances of non-compliance.
As part of an audit in accordance with ISAs (UK), we exercise professional judgment and maintain professional
scepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and
appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from
fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
34
admenergy plc
INDEPENDENT AUDITOR REPORT
TO THE SHAREHOLDERS OF ADM ENERGY PLC
FOR THE YEAR ENDED 31 DECEMBER 2022
•
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Group’s internal control.
•
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made by the directors.
•
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on
the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast
significant doubt on the Group’s or the parent company’s ability to continue as a going concern. If we conclude
that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related
disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future
events or conditions may cause the Group or the parent company to cease to continue as a going concern.
•
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures,
and whether the financial statements represent the underlying transactions and events in a manner that
achieves fair presentation.
•
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express an opinion on the consolidated financial statements. We are responsible
for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit
opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
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.
Anne Dwyer BSc(Hons) FCA (Senior Statutory Auditor)
For and on behalf of
Kreston Reeves LLP
Chartered Accountants
Statutory Auditor
London
Date: 26 June 2023
35
admenergy plc
GROUP INCOME STATEMENT AND STATEMENT OF COMPREHENSIVE
INCOME
FOR THE YEAR ENDED 31 December 2022
2022
2021
Note
£’000
£’000
Continuing operations
Revenue
3
662
1,751
Operating costs
(369)
(1,895)
Administrative expenses
(1,723)
(2,340)
Impairment of investment
11
(576)
−
Operating loss
4
(2,006)
(2,484)
Movement in fair value of investments
−
−
Finance costs
5
(116)
(56)
Loss on ordinary activities before taxation
(2,122)
(2,540)
Taxation
7
−
−
Loss for the year
(2,122)
(2,540)
Other Comprehensive income:
Exchange translation movement
1,339
141
Total comprehensive income for the year
(783)
(2,399)
Basic and diluted loss per share:
8
From continuing and total operations
(0.8)p
(1.6)p
The notes on pages 40 to 64 form part of these financial statements.
36
admenergy plc (Company Number: 05311866)
GROUP AND COMPANY STATEMENTS OF FINANCIAL POSITION
AS AT 31 December 2022
GROUP
COMPANY
2022
2021
2022
2021
Notes
£’000
£’000
£’000
£’000
NON-CURRENT ASSETS
Intangible assets
9
17,899
16,149
−
−
Investment in subsidiaries
10
−
−
12,343
12,335
Fixed asset investments
11
−
576
−
576
17,899
16,725
12,343
12,911
CURRENT ASSETS
Investments held for trading
12
28
28
28
28
Inventory
13
36
33
−
−
Trade and other receivables
14
22
130
17
130
Cash and cash equivalents
15
25
110
25
109
111
301
70
267
CURRENT LIABILITIES
Trade and other payables
16
2,240
1,534
2,207
1,515
Convertible loans
17
−
212
−
212
2,240
1,746
2,207
1,727
NET CURRENT LIABILITIES
(2,129)
(1,445)
(2,137)
(1,460)
NON-CURRENT LIABILITIES
Other borrowings
17
287
247
287
247
Other payables
16
2,718
2,783
−
−
Decommissioning provision
18
1,557
1,264
−
−
4,562
4,294
287
247
NET ASSETS
11,208
10,986
9,919
11,204
EQUITY
Share capital
19
11,194
10,267
11,194
10,267
Share premium
19
38,090
38,014
38,090
38,014
Other reserves
20
962
960
962
960
Currency translation reserve
630
(709)
−
−
Retained deficit
(39,668)
(37,546)
(40,327)
(38,037)
Equity attributable to owners of the Company and total
equity
11,208
10,986
9,919
11,204
The notes on pages 40 to 64 form part of these financial statements.
The financial statements were approved by the Board and ready for issue on 26 June 2023.
Stefan Olivier
Director
37
admenergy plc
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 December 2022
Share
capital
Share
premium
Exchange
translation
reserve
Other
reserves
Retained
deficit
Total
equity
£’000
£’000
£’000
£’000
£’000
£’000
At 1 January 2021
9,450
36,591
(850)
817
(35,006)
11,002
Loss for the year
−
−
−
−
(2,540)
(2,540)
Exchange translation movement
−
−
141
−
−
141
Total comprehensive income
/(expense) for the year
−
−
141
−
(2,540)
(2,399)
Issue of new shares
817
1,517
−
−
−
2,334
Share issue costs
−
(94)
−
27
−
(67)
Issue of convertible loans
−
−
−
2
−
2
Warrants issued in settlement of
fees
−
−
−
114
−
114
At 31 December 2021
10,267
38,014
(709)
960
(37,546)
10,986
Loss for the year
−
−
−
−
(2,122)
(2,122)
Exchange translation movement
−
−
1,339
−
−
1,339
Total comprehensive income /
(expense) for the year
−
−
1,339
−
(2,122)
(783)
Issue of new shares
927
134
−
−
−
1,061
Share issue costs
−
(56)
−
−
−
(56)
Issue of warrants
−
(2)
−
2
−
−
Settlement of convertible loans
−
−
−
(19)
−
At 31 December 2022
11,194
38,090
630
943
(39,649)
11,208
The notes on pages 40 to 64 form part of these financial statements.
38
admenergy plc
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 December 2022
Share
capital
Share
premium
Other
reserves
Retained
deficit
Total
equity
£’000
£’000
£’000
£’000
£’000
At 1 January 2021
9,450
36,591
817
(35,770)
11,088
Loss for the period and total comprehensive
expense
−
−
−
(2,267)
(2,267)
Issue of new shares
817
1,517
−
−
2,334
Share issue costs
−
(94)
27
−
(67)
Issue of convertible loans
−
−
2
−
2
Warrants issued in settlement of fees
−
−
114
−
114
At 31 December 2021
10,267
38,014
960
(38,037)
11,204
Loss for the period and total comprehensive
expense
−
−
−
(2,290)
(2,290)
Issue of new shares
927
134
−
−
1,061
Share issue costs
−
(56)
−
−
(56)
Issue of warrants
−
(2)
2
−
−
Settlement of convertible loans
−
−
(19)
−
At 31 December 2022
11,194
38,090
943
(40,308)
9,919
The notes on pages 40 to 64 form part of these financial statements.
39
admenergy plc
GROUP AND COMPANY STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED 31 December 2022
GROUP
COMPANY
Note
2022
2021
2022
2021
£’000
£’000
£’000
£’000
OPERATING ACTIVITIES
Loss for the period
(2,122)
(2,540)
(2,290)
(2,267)
Adjustments for:
Warrants issued in settlement of fees
−
114
−
114
Finance costs
5
116
56
116
56
Impairment of investment
11
576
−
576
−
Depreciation and amortisation
9
65
47
−
−
Decommissioning provision
18
138
215
−
−
Operating cashflow before working capital changes
(1,227)
(2,108)
(1,598)
(2,097)
Increase in inventories
−
−
−
−
Decrease/(increase) in receivables
108
(21)
113
(21)
Increase/(decrease) in trade and other payables
138
570
522
545
Net cash outflow from operating activities
(981)
(1,559)
(963)
(1,573)
INVESTMENT ACTIVITIES
Acquisition of subsidiary
−
(180)
−
(180)
Proceeds on disposal of investments
−
850
−
850
Loans to subsidiary operation
8
−
−
(8)
(19)
Net cash outflow from investment activities
−
670
(8)
651
FINANCING ACTIVITIES
Continuing operations:
Issue of ordinary share capital
19
1,061
1,406
1,061
1,406
Share issue costs
19
(56)
(67)
(56)
(67)
Repayment of borrowings
(328)
(338)
(328)
(338)
Proceeds from borrowings
210
−
210
−
Net cash inflow from financing activities
887
1,001
887
1,001
Net (decrease)/increase in cash and cash equivalents
from continuing and total operations
(94)
112
(84)
79
Exchange translation difference
9
(32)
−
−
Cash and cash equivalents at beginning of period
110
30
109
30
Cash and cash equivalents at end of period
15
25
110
25
109
The notes on pages 40 to 64 form part of these financial statements.
40
admenergy plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2022
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 also has secondary listings on the Quotation Board Segment of the Open
Market of the Berlin Stock Exchange ("BER") and Xetra, the electronic trading platform of the Frankfurt Stock Exchange
("FSE").
The Company is an investing company, mainly investing in natural resources and oil and gas projects. The registered office
and principal place of business of the Company is as detailed in the Company Information section of the report and accounts
on page 3.
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 and Parent Company financial statements have been prepared in accordance with
International Financial Reporting Standards, International Accounting Standards and interpretations issued by the
International Accounting Standards Board (IASB) UK-adopted International Financial Reporting Standards (adopted IFRSs).
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 2022. The comparative figures relate
to the year ended 31 December 2021. 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 2022, the Group recorded a loss for the year of £2.13m and had net current liabilities of £2.13m, after
allowing for cash balances of £25k. Production was suspended at Aje in the year as part of the development and expansion
plans being undertaken at the field.
In 2022 the company raised £1.29m through two fund raises. In May 2023 the Company announced, alongside the
acquisition of Blade V, that it has entered into subscription agreements to issue secured convertible loan notes ("SCLN")
with an aggregate face value of up to US$1.5 million, of which US$900,000 has been subscribed for and US$600,000
remaining available for subscription. The SCLN has a three-year term, an interest rate payable-in-kind (which may be settled
with cash or non-cash payments) of 8.0% per annum and the principal together with any interest due may be converted at
any time at a share price of 1.2p per share.
In addition to the subscriptions, the Company agreed with certain directors and creditors to convert outstanding contractual
liabilities of £683,117 into 56,926,417 new ordinary shares in the Company at the price of 1.2p per new ordinary share,
helping the company reduce the liabilities on the balance sheet. Also with the change of management the focus of the
company is now on finding near term producing assets so the company can start earning revenue. In May 2023 the company
announced the purchase of Blade V which holds an interest across 5 different wells in USA, all with near term revenue
potential. As part of this deal , the company also has circa $251k available under its debt facility with OFX.
The Directors have prepared cashflow forecasts for the period to June 2024 to assess whether the use of the going concern
basis for the preparation of the financial statements is appropriate. In the short term, between the loan facility, potential
revenue and CLN proceeds the Group does not expect to need short term funding to meet its liabilities as they fall due
however the group does expect in the period that more funding might be needed. The Directors have a reasonable
expectation based on past performance and current discussions of support from stakeholders that additional finance would
be available should it be needed. Accordingly, the directors consider it reasonable to prepare the financial statements on
the going concern basis.
41
admenergy plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2022
2
PRINCIPAL ACCOUNTING POLICIES (continued)
STATEMENT OF COMPLIANCE
New standards, amendments and interpretations adopted by the Company
The company has applied the following standards and amendments for the first time for its annual reporting period
after 1 January 2022:
•
Amendment to “IFRS 4 “Insurance Contracts – deferral of IFRS 9” supports the companies implementing the new
IFRS 17 standard and it makes it simpler to report their financial performances.
•
The amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 “Interest Rate Benchmark Reform – Phase 2” integrate
the amendments made in 2019. The amendments referred in phase 2, address issues that might affect financial
reporting when an existing interest rate benchmark is replaced with an alternative benchmark interest rate (i.e.
replacement issue) and assist companies in the application of IFRS when changes are made to contractual cash flows
or hedging relationships due to the interest rate reform, and in providing useful information to users of the financial
statements.
•
The Amendment to IFRS 16, “Covid-19-Related Rent Concessions beyond 30 June 2021” extends the period of
application of the 2020 amendment to IFRS 16, relative to the lessees’ accounting of concessions granted as a result
of Covid-19, by one year.
The adoption of the standards and interpretations described above, already in effect at the date of this report, did not
have a material impact on the measurement of the Group’s assets, liabilities, costs and revenues.
New standards and interpretations not yet adopted
A number of new standards and amendments to standards and interpretations are effective for annual periods beginning
after 1 January 2021 and have not been applied in preparing these financial statements. None of these are expected to
have a significant effect on the financial statements of the Company. There are no other IFRSs or IFRIC interpretations that
are not yet effective that would be expected to have a material impact on the Company.
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. Judgement also applies in determining whether costs associated with
contingent liabilities can be reliably estimated or not and the extent to which it is appropriate to make disclosure in this
area.
USEFUL ECONOMIC LIFE OF INTANGIBLE ASSETS
The Group’s intangible assets relate to oil field development expenditure which is considered capital in nature. Intangible
assets are amortised over their useful economic life in accordance with the expected pattern of consumption of the
benefits arising from the Group’s interest in OML 113 license (the Unit of Production method). The timing and pattern of
production represents an estimation made with reference to according research performed by third parties and the
Directors assessment of the timing and level of activity over the life of developed assets.
IMPAIRMENT OF ASSETS
Note 10 summarises the cumulative cost less amortisation of Group’s indirect investment in the Aje Field (OML 113).
During the year, the Directors noted indicators of impairment related to this asset. They have therefore reviewed the
value of the Group’s proportionate share of the Aje fixed assets (which as a cash generating unit is represented by the
intangible asset relating to the cumulative cost of its acquisition and funding of its interest in the Aje Field) and have
determined that it is appropriate to impair the asset down to the fair value as implied by the value of the recent
Petronor/Panoro transaction which as at 31 December 2021 was considered by the Directors to represent the most
relevant and reliable available indicator of value against a backdrop of market and operation uncertainty prevalent at the
time. The Directors have considered other valuation indicators such as value in use calculations and fair value assessments
based on seismic reports, but these are not considered to give the same reliable indication of value as a publicly
announced transaction between two third parties. It should be noted that the referenced Petronor/Panoro transaction
is subject to adjustments to take into account it is a corporate transaction rather than a valuation of a group of assets
identified as a cash generating unit. Such adjustments are subject to judgement and estimation by the directors, as are
adjustments for other implied factors such as contingent consideration associated with the transaction. The carrying
value of the parent company’s investment in subsidiaries is also derived using the same valuation techniques, judgements
and estimations, but modified for the fact it represents the valuation of an investment in a legal entity.
42
admenergy plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2022
2
PRINCIPAL ACCOUNTING POLICIES (continued)
KEY ESTIMATES AND ASSUMPTIONS (continued)
CONTINGENT LIABILITIES
The assessment of contingent liabilities inherently involves the exercise of significant judgment and estimates of the
outcome of future events. This judgement involves the Directors making assessment as to whether an economic outflow
relating to a past event is considered probable, possible or remote, and the extent to which its outcome can be reliably
estimated. In making this judgement, the Directors make reference to correspondence with parties relevant to the
contingent liability and make their own assessment of whether they have sufficient information from such
correspondence to reliably predict an outcome.
INVESTMENTS HELD FOR TRADING
Investments held for trading are held at fair value through profit and loss. At both reporting dates they are considered to
be Level 3 investments whereby their valuation is determined by whole or in part using valuation techniques based on
assumptions that are not supported by observable prices in comparable market transactions in the same instrument or
similar observable data.
The Directors regularly review the valuation of such investments against both ongoing results of the business in which it
has made investments and the price at which any further investment has taken place if such investment is considered to
give sufficient and appropriate indication of fair value.
DECOMMISSIONING PROVISION
Decommissioning costs will be incurred by the Group, in accordance with the terms of the Joint Operating Agreement, at
the end of the operating life of the production facilities associated with the Group’s interest in OML 113. The Group
assesses its retirement obligation at each reporting date. The ultimate asset retirement costs are uncertain and cost
estimates can vary in response to many factors, including changes to relevant legal requirements, the emergence of new
restoration techniques or experience at other production sites. The expected timing, extent and amount of expenditure
can also change, for example in response to changes in reserves or changes in laws and regulations or their interpretation.
Therefore, significant estimates and assumptions are made in determining the provision for asset retirement obligation.
As a result, there could be significant adjustments to the provisions established which would affect future financial
results. The provision at reporting date represents management’s best estimate of the present value of the future asset
retirement costs required using an annual discount rate of 10%.
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 and warrants are determined by reference to the fair value of the options and warrants 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 and warrants, 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 21.
43
admenergy plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2022
2
PRINCIPAL ACCOUNTING POLICIES (continued)
ACCOUNTING POLICIES
REVENUE RECOGNITION
The Group follows IFRS 15. The standard provides a single comprehensive model for revenue recognition in a 5 step
process.
1. Identify all contract(s) with customers and ensure that
these are clearly documented.
The group hold a signed agreement confirming their
interest in the OML 113 license. These details the revenue
and cost sharing arrangements in place.
2. Identify separate performance obligations in a contract.
Will a contract need to be ‘unbundled’ into two or more
components? Alternatively, will two or more contracts
need to be ‘bundled’ into a single overall obligation?
There is no performance obligation as such on ADM’s part.
The contract in place gives them legal rights to their share
of the revenues in the operations relating to the OML 113
license in the financial year as calculated by the 3rd party
operations and management company.
3. Determine the transaction price.
The transaction price is the calculated share of revenues
in the financial period which are to be allocated to ADM.
This calculation is based on ADM’s interest in the OML 113
license in the period.
Therefore, there is no pre-set transaction price as this is a
derived return from the performance of the underlying
asset under the OML 113 license in the year.
4. Is revenue recognised at a single point in time, or over a
period of time?
Revenue theoretically accrues over the course of the
financial period based on the performance of the asset. In
practice this revenue is recognised in the group as a year
end adjustment as the final revenue posting is made
based on the billing statement provided by the 3rd party
operations and management company. This billing
statement covered the entire financial year.
5. If revenue is recognised over time, how should progress
towards completion be measured and recognised?
As above – revenues relate to performance of the asset in
the year. However, in terms of final accounting the
revenue is recognised at a single point in time as part of
the YE adjustments following the receipt of the 3rd party
billing statement.
44
admenergy plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2022
2
PRINCIPAL ACCOUNTING POLICIES (continued)
TAXATION
UK taxes
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.
Most changes in deferred tax assets or liabilities are recognised 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.
Nigerian taxes
The Company’s subsidiary, P R Oil & Gas Nigeria Ltd operates offshore Nigeria and is subject to the tax regulations of that
country
Current income tax assets and liabilities for current period are measured at the amount expected to be recovered from
or paid to the taxation authorities. The tax rates and tax laws are those that are enacted or substantially enacted at the
reporting date. The Company engaged in exploration and production of crude oil (upstream activity). Therefore, its profits
are taxable under the Petroleum Profit Tax Act.
INTANGIBLE ASSETS
Intangible assets relate to the Group’s capitalised E&E costs and proportionate interest in the production assets of joint
operations (development costs).
The share of development costs incurred on specific projects are capitalised when all the following conditions are satisfied:
•
completion of the asset is technically feasible so that it will be available for use or sale
•
the Group intends to complete the asset and use or sell it
•
the Group has the ability to use or sell the asset
•
the 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
asset, and
•
the expenditure attributable to the 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. There were no
development costs recognised as an expense during the year (2021: £Nil).
Intangible assets are amortised as the benefits associated with them are consumed.
45
admenergy plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2022
2
PRINCIPAL ACCOUNTING POLICIES (continued)
IMPAIRMENT OF INTANGIBLE ASSETS
Proven oil and gas properties and intangible assets are reviewed annually for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount
by which the asset’s carrying amount exceeds its recoverable amount. The carrying value is compared against the expected
recoverable amount of the asset, generally by net present value of the future net cash flows, expected to be derived from
production of commercial reserves or consideration expected to be achieved through the sale of its interest in an arms-
length transaction, less any associated costs to sell. The cash generating unit applied for impairment test purposes is
generally the field and the Group’s interest in its underlying assets, except that a number of field interests may be grouped
together where there are common facilities.
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 measured at fair value through
other comprehensive income’, ‘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 MEASURED AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME
Financial assets measured at fair value through other comprehensive income are designated as Fixed Asset Investments and
are recognised on the Balance Sheet when the Group becomes a party to the contractual provisions of a financial instrument
and are initially measured at fair value and carried at fair value.
Fair value gains or losses are recognised and posted to Other Comprehensive Income and held in the Financial Instruments
Revaluation Reserve. Fair value measurements and techniques are set out in the accounting policy on page 39 and referred
to in Financial Assets Measured at Fair Value through Profit and Loss. Financial Assets Revaluation Reserve is included in
Other Reserves in Equity
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 at which shares have been
issued 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 IFRS 9 Financial Instruments. This is either the bid price or the last traded price, depending on the
convention of the exchange on which the investment is quoted.
INVENTORY
Inventory comprises stock of unsold oil in storage and is valued at the lower of cost and net realisable value.
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
46
admenergy plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2022
2
PRINCIPAL ACCOUNTING POLICIES (continued)
BASIS OF CONSOLIDATION (continued)
The company have the following subsidiaries which were effectively dormant in the current and prior period and are
considered to be highly immaterial to the Group's financial statements. As such these subsidiaries have not been included
in the consolidated financial statements:
• Geo Estratos MXOil, SAPI de CV
• ADM Asset Holdings Limited
• ADM Energy Services Limited
• K.O.N.H. (UK) Limited
• ADM 113 One Limited
JOINT OPERATIONS (OML 113 OPERATING AGREEMENT)
The Group has a 9.2% profit share and 12.3% cost share in the OML 113 operating licence. The operating agreement for
OML 113 is a joint arrangement, with the fundamental decisions requiring unanimity between the partners. Other
decisions require a qualified majority decision. As no corporate entity exists the agreement cannot be considered to meet
the definition of a joint venture.
In relation to its interests in the OML 113 operations, the Group recognises:
•
The fair value of the Group’s share of the underlying assets of the joint operation (classified as intangible assets),
measured at historical cost less amortisation and impairment.
•
Amounts owed in respect of the joint operating agreement
•
Revenue from the sale of its share of the output arising from the joint operation
•
Expenses, including its share of any expenses incurred jointly
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.
•
Convertible loan note reserve represents the equity portion of convertible loan notes issued.
•
Currency translation reserve is used to recognise foreign currency exchange differences arising on translation of
functional currency to presentation currency.
Retained earnings include all current and prior period results as disclosed in the statement of comprehensive income.
2
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 recognised initially at their fair value and subsequently measured at amortised cost less settlement
payments.
47
admenergy plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2022
2
PRINCIPAL ACCOUNTING POLICIES (continued)
DECOMMISSIONING LIABILITY
A decommissioning liability is recognised when the Group has a present legal or constructive obligation as a result of past
events, and it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the
amount of obligation can be made. A corresponding amount equivalent to the obligation is also recognised as part of the
cost of the related production plant and equipment. The amount recognised is the estimated cost of decommissioning,
discounted to its present value, using a discount rate of 10%. Changes in the estimated timing of decommissioning cost
estimates are dealt with prospectively by recording an adjustment to the provision, and a corresponding adjustment to
production plant and equipment. The unwinding of the discount on the decommissioning provision will be included in the
income statement.
CONTINGENT LIABILITIES
Contingent liabilities are possible obligations arising from past events whose existence will be confirmed by uncertain
future events that are not wholly within the control of the Group. Contingent liabilities also include obligations that are not
recognised because their amount cannot be measured reliably or because settlement is not probable.
Unless the possibility of an outflow of economic resources is remote a contingent liability is disclosed in the notes.
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, including financing, 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.
48
admenergy plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2022
3
REVENUE
The Group has a share in an oil and gas licence offshore Nigeria and all the Group’s revenue is derived from this source.
2022
2021
£’000
£’000
Revenue from share in offshore oil and gas licence in Nigeria
662
1,751
662
1,751
4
OPERATING LOSS
2022
2021
£’000
£’000
Loss from continuing operations is arrived at after charging:
Directors’ remuneration (see note 6)
492
866
Employee salaries and other benefits
23
−
Amortisation
65
47
Decommissioning costs – Unwinding of provision
138
141
Decommissioning costs – Change in provision estimate
−
155
Impairment of intangible assets
−
−
Auditors’ remuneration:
fees payable to the principal auditor for the audit of the Group’s financial statements
35
30
5
FINANCE COSTS
2022
2021
£’000
£’000
Short term loan finance costs
116
56
116
56
6
EMPLOYEE REMUNERATION
The expense recognised for employee benefits for continuing operations is analysed below:
2022
2021
£’000
£’000
Wages and salaries (including directors and employee benefits)
487
785
Social security costs
28
81
515
866
Directors’ remuneration:
Wages and salaries (including benefits)
466
785
Social security costs
26
81
492
866
Further details of Directors’ remuneration are included in the Report on Directors’ Remuneration on page 23.
Only the directors are deemed to be key management. The average number of employees (including directors) in the Group
was 6 (2021:6).
49
admenergy plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2022
7
INCOME TAX EXPENSE
2022
2021
£’000
£’000
Current tax – ordinary activities
−
−
2022
2021
£’000
£’000
Loss before tax from ordinary activities
(2,122)
(2,540)
Loss before tax multiplied by rate of corporation tax in the UK of 19%
(2021: 19%)
(403)
(483)
Expenses not deductible for tax purposes
23
49
Unrelieved tax losses carried forward
380
434
Total tax charge for the year
−
−
No deferred tax asset has been recognised in respect of the Group’s losses as the timing of their recoverability is
uncertain.
8
EARNINGS AND NET ASSET VALUE PER SHARE
Earnings
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.
2022
2021
£’000
£’000
Loss attributable to owners of the Group
- Continuing operations
(2,122)
(2,540)
Continuing and discontinued operations
(2,122)
(2,540)
2022
2021
Weighted average number of shares for calculating basic and fully
diluted earnings per share
252,369,021
155,014,671
2022
2021
pence
pence
Earnings per share:
Loss per share from continuing and total operations
(0.8)
(1.6)
The weighted average number of shares used for calculating the diluted loss per share for 2022 and 2021 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.
50
admenergy plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2022
8
EARNINGS AND NET ASSET VALUE PER SHARE (continued)
Net asset value per share (“NAV”)
The basic NAV is calculated by dividing the loss total net assets attributable to the owners of the Group by the number of
ordinary shares in issue at the reporting date. The fully diluted NAV is calculated by adding the cost of exercising any extant
warrants and options to the total net assets and dividing the resulting total by the sum of the number of shares in issue and
the number of warrants and options extant at the reporting date.
2022
2021
£’000
£’000
Total net assets of the Group
11,208
10,986
Cost of exercise of warrants
1,159
1,318
Total net assets for calculation of fully diluted NAV
12,367
12,304
2022
2021
Number of shares in issue at the reporting date
297,147,530
204,480,863
Number of extant warrants
26,748,410
31,581,012
Total number of shares for calculation of fully diluted NAV
323,895,940
236,061,875
2022
2021
NAV – Basic (pence per share)
3.8p
5.4p
NAV – Fully diluted (pence per share)
3.8p
5.2p
9
INTANGIBLE ASSETS
GROUP
The intangible asset relates to the Group’s 9.2% revenue interest (12.3% cost share) 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.
Development costs
2022
2021
£’000
£’000
Cost
At 1 January
21,323
21,076
Additions
−
−
Foreign currency exchange translation difference
2,396
247
At 31 December
23,719
21,323
Amortisation
At 1 January
5,174
5,069
Charge for year
65
47
Impairment
−
−
Foreign currency exchange translation difference
581
58
At 31 December
5,820
5,174
Net book value at 31 December
17,899
16,149
Development costs are amortised on a useful economic basis which is aligned with output in a given financial period
compared to total proven and possible production. Production is expected to continue until 2039. The adoption of the
units of production method of amortisation means amortisation will not accrue evenly to this date, rather it will vary
according to production levels which are considered to equate to consumption of the cost of the asset.
51
admenergy plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2022
10
INVESTMENT IN SUBSIDIARIES
On 10 August 2016, the Group completed the agreement for the acquisition of Jacka Resources Nigeria Holdings
Limited, now renamed ADM 113 Limited (“ADM 113”), a BVI registered company, in which Jacka Resources Limited
(“JRL”) held the single issued share. ADM 113’s sole asset is its wholly owned subsidiary, P R Oil & Gas Nigeria Limited
(“PROG”), a Nigerian registered company which holds a 9.2% revenue interest in the OML 113 licence, offshore
Nigeria, which includes the Aje Field ("Aje"), where oil production commenced in May 2016.
In April 2021 the Group acquired 51% of the equity in K.O.N.H. (UK) Limited for a nominal fee.
2022
2021
£’000
£’000
Balance at beginning of period
12,335
12,316
Advances to PROG
8
19
Balance at end of period
12,343
12,335
The Group’s subsidiary companies are as follows:
Name
Principal
activity
Country of incorporation
and principal
place of business
Proportion of ownership
interest and voting rights
held by the Group
ADM 113 Limited
Holding
company
British Virgin Islands
100% of ordinary shares
Maples Corporate Services (BVI) Ltd
Kingston Chambers
P.O. Box 173, Road Town, Tortola
*P R Oil & Gas
Nigeria Limited
Oil exploration
& production
Nigeria
100% of ordinary shares
1, Murtala Muhammed Drive
Ikoyi, Lagos
K.O.N.H. (UK)
Limited
Dormant
60 Gracechurch Street, London,
United Kingdom, EC3V 0HR
51% of ordinary shares
Geo Estratos MXOil,
SAPI de CV
Dormant
Mexico
100% of ordinary shares
Lago Alberto 319, Piso 6
IZA Punto Polanco
Col. Granada, Del. Miguel Hidalgo
CP 11520, Ciudad de Mexico
ADM Asset Holdings
Limited
Dormant
60 Gracechurch Street, London,
United Kingdom, EC3V 0HR
100% of ordinary shares
ADM
113
One
Limited
Dormant
60 Gracechurch Street, London,
United Kingdom, EC3V 0HR
100% of ordinary shares
ADM Energy Services
Limited
Dormant
60 Gracechurch Street, London,
United Kingdom, EC3V 0HR
100% of ordinary shares
*Indirectly held
52
admenergy plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2022
11
FIXED ASSET INVESTMENTS
In April 2021 the Group acquired an indirect interest in Noble Hill–Network Limited, a Nigeria registered company, which
holds a Risk Sharing Agreement for the development of the large-scale Barracuda Field in OML 141, an existing discovery and
near-term production asset in swamp/shallow waters offshore Nigeria. The consideration paid was US$ 0.25m (£180,000) in
cash and US$ 0.55m (£396,000) in shares, issued at 7p per share, a total of US$ 0.8m (£576,000). ADM is currently following
legal proceedings in respect of its interest in the Barracuda oil field. The Company and K.O.N.H. (UK) Ltd ("KONH") obtained
an interim injunction at the Federal High Court of Nigeria, Lagos ("Court") restraining Noble Hill-Network Limited from selling,
disposing, divesting, or tampering with the 70% shareholding interest of KONH in NHNL to third-party investors or in any other
manner whatsoever. The interim injunction continues to stand. A full impairment provision has been made against this
investment.
GROUP AND COMPANY
2022
2021
£’000
£’000
Balance at beginning of period
576
−
Acquisition
−
576
Provision for impairment
(576)
−
Balance at end of period
−
576
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.
The investments held by the Group are designated as at fair value through profit or loss.
GROUP AND COMPANY
2022
2021
£’000
£’000
Fair value of investments brought forward
28
878
Disposal of investments
−
(850)
Fair value of investments held for trading
28
28
Investments held at the year end were categorised as follows
Level 3
28
28
28
28
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, “Financial assets held at fair value
through profit and loss”. There are no Level 1 and Level 2 investments.
53
admenergy plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2022
13
INVENTORY
GROUP
COMPANY
2022
2021
2022
2021
£’000
£’000
£’000
£’000
Inventory
36
33
−
−
Total inventory
36
33
−
−
Inventory represents the Group’s share of the stock of oil lifted but unsold, stated at the lower of cost and market value.
£Nil was recognised as an expense during the year (2021 £Nil)
14
TRADE AND OTHER RECEIVABLES
GROUP
COMPANY
2022
2021
2022
2021
£’000
£’000
£’000
£’000
Other receivables
18
121
13
121
Prepayments and accrued income
4
9
4
9
22
130
17
130
The fair value of Other receivables is considered by the Directors not to be materially different to carrying amounts. At the
date of the Statement of Financial Position in 2021 and 2022 there were no trade receivables.
15
CASH AND CASH EQUIVALENTS
GROUP
COMPANY
2022
2021
2022
2021
£’000
£’000
£’000
£’000
Cash at bank
25
110
25
109
Cash and cash equivalents
25
110
25
109
16
TRADE AND OTHER PAYABLES
GROUP
COMPANY
2022
2021
2022
2021
CURRENT PAYABLES
£’000
£’000
£’000
£’000
Trade payables
883
397
883
397
Tax and social security
414
592
414
592
Other payables
38
22
38
22
Short term loan finance
170
−
170
−
Accruals and deferred income
735
523
702
504
2,240
1,534
2,207
1,515
NON-CURRENT PAYABLES
Amount owed in respect of OML 113 operating agreement
2,718
2,783
−
−
4,958
4,317
2,207
1,515
54
admenergy plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2022
It is expected that the amount owed in relation to the Group’s proportionate share of costs incurred as part of the OML 113
joint operating agreement will be offset against net revenues of the project.
The fair value of trade and other payables is considered by the Directors not to be materially different to carrying amounts
17
BORROWINGS
Convertible loans (“CLNs”)
The net proceeds received from the issue of the CLNs have been split between the liability element and an equity
component, representing the fair value of the embedded option to convert the liability into equity of the Group, as follows:
GROUP AND COMPANY
2022
2021
£’000
£’000
Liability component at 1 January
212
519
Nominal value of convertible Loans
−
−
Equity component
−
(2)
Interest charged
9
30
Loan converted into equity
−
(127)
Repayments
(221)
(208)
Liability component at 31 December
−
212
Current portion of loans
−
212
Non-current portion of loans
−
−
−
212
The interest charged for the year is calculated by applying an effective average interest rate of 12% to the liability component
for the period since the loan notes were issued.
Other borrowings
2022
2021
£’000
£’000
Other loan
287
247
£247,000 of other borrowings is non-interest bearing and its repayment date is 15 May 2023. The loan agreement gives the
Group the right to convert the balance owed into shares at the ruling market rate at any time during the remaining term of
the loan at the discretion of the Group. The loan is treated as a liability because while the value of equity to be issued on
conversion is fixed, the number of shares is variable, meaning it meets the definition of a financial liability as set out by IFRS
9. The balance of other borrowings, £40,000, is a loan that carries interest at 6% p.a and is repayable in full on 28 October
2024.
55
admenergy plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2022
18
DECOMMISSIONING PROVISION
In accordance with the agreements and legislation, the wellheads, production assets, pipelines and other
installations may have to be dismantled and removed from oil and natural gas fields when the production ceases.
The exact timing of the obligations is uncertain and depends on the rate the reserves of the field are depleted.
However, based on the existing production profile of the OML 113 licence area and the size of the reserves, it is
expected that expenditure on retirement is likely to be after more than ten years. The current basis for the
provision is a discount rate of 10%.
The following table presents a reconciliation of the beginning and ending aggregate amounts of the obligations
associated with the decommissioning of oil and natural gas properties
2022
2021
£’000
£’000
Balance brought forward
1,264
1,032
Arising during the year
138
219
Foreign currency exchange translation difference
155
13
As at 31 December
1,557
1,264
19
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 2021 (ordinary shares of
1p)
122,769,073
1,228 8,222,439,370
8,222
9,450
36,591
Shares issued
81,711,790
817
−
−
817
1,517
Share issue costs
−
−
−
−
−
(94)
At 31 December 2021
204,480,863
2,045 8,222,439,370
8,222
10,267
38,014
Shares issued (see notes below)
92,666,667
927
−
−
927
134
Issue of warrants
−
−
−
−
−
(2)
Share issue costs
−
−
−
−
−
(56)
At 31 December 2022
297,147,530
2,972 8,222,439,370
8,222
11,194
38,090
The deferred shares have restricted rights such that they have no economic value.
Share issues in year
On 21 January 2022, 51,000,000 ordinary shares of 1p were issued at 1.11p each as a result of a placing, raising £561,000
before expenses.
On 28 October 2022, 41,666,667 ordinary shares of 1p were issued at 1.2p each as a result of a placing, raising £500,000
before expenses.
56
admenergy plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2022
20
OTHER RESERVES
Shares to be
issued
Reserve for
warrants issued
Convertible loan
note reserve
Other reserves
£’000
£’000
£’000
£’000
Balance at 1 January 2021
−
800
17
817
Warrants issued in settlement of fees
−
141
−
141
Extension of convertible loan terms
−
−
2
2
Balance at 31 December 2021
−
941
19
960
Issue of warrants
−
2
−
2
Settlement of convertible loans
−
−
()
(19)
Balance at 31 December 2022
−
943
−
943
21
SHARE WARRANTS
In the following paragraphs the number of warrants issued prior to 31 December 2022 have been adjusted to reflect the 1 for
100 share consolidation.
On 26 January 2022, the Company issued 15,300,000 share warrants to subscribers in respect of a private placing. The warrants
are exercisable at 4.5p per share for a period of 2 years from the date of issue
The fair value of the share warrants at the date of issue was calculated by reference to the Black-Scholes model. The significant
inputs to the model in respect of the warrants issued in the year were as follows:
Issue date
26 Jan
2022
15 Nov
2021
24 Mar
2021
24 Mar
2021
25 Aug
2020
Issue date share
price
1.11p
1.5p
4.25p
4.25p
5.5p
Exercise price per
share
4.5p
3p
4.25p
4.25p
5.5p
No. of warrants
15,300,000 6,666,667
9,411,764
502,941
120,000
Risk free rate
1%
1%
1%
1%
1%
Expected volatility
50%
50%
50%
50%
50%
Expected life of
warrant
2 years
2 years
2 years
5 years
5 years
Calculated fair
value per share
0.0144p
0.2647p
1.2051p
1.8623p
2.4101p
57
admenergy plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2022
21 SHARE WARRANTS continued
The share warrants outstanding at 31 December 2022 and their weighted average exercise price are as follows:
2022
2021
Weighted average
exercise price
Weighted average
exercise price
Number
(pence)
Number
(pence)
Outstanding at 1 January
31,581,012
5.15
27,726,241
6.71
Issued
15,300,000
4.50
9,914,705
4.25
Issued
−
−
6,666,667
3.00
Lapsed or cancelled
(8,804,640)
−
(12,726,601)
−
Outstanding at 31 December
38,076,372
4.89
31,581,012
5.15
The fair value of the share warrants recognised as part of the premium paid in respect of the share subscriptions in the year
was £2,000. This amount was credited to the share warrant reserve. In 2021, £140,000 was recognised in the financial
statements as the fair value of warrants issued.
22
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 £60,000 (2020: £88,000).
58
admenergy plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2022
22
RISK MANAGEMENT OBJECTIVES AND POLICIES continued
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:
2022
£’000
2021
£’000
Cash and cash equivalents
25
110
Loans and receivables
18
121
43
231
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.
23
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:
2022
2021
£’000
£’000
FINANCIAL ASSETS:
Cash and cash equivalents
25
110
Fixed asset investment
−
576
Investments held for trading (see fair value measurements below)
28
28
FINANCIAL ASSETS BY IFRS 7 FAIR VALUE HIERARCHY
Level 3 - Investments held for trading
28
28
28
28
FAIR VALUE MEASUREMENTS
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”.
59
admenergy plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2022
23
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:
2022
2021
£’000
£’000
Trade and other payables
4,193
3,924
Borrowings
457
459
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
1-3
months
3 months
to 1 year
1-5
years
Over 5
years
£’000
£’000
£’000
£’000
£’000
2022
Interest bearing:
Borrowings
−
−
170
287
−
Non-interest bearing:
Trade and other payables
−
1,475
−
2,718
−
2021
Interest bearing:
Borrowings
−
−
212
247
−
Non-interest bearing:
Trade and other payables
−
1,011
−
2,913
−
As at 31 December 2022 the Group had net debt (defined as cash less borrowings) of £432,000 (2021: net debt of £349,000).
The movement arose from cash flows.
24
CONTINGENT LIABILITIES
OML 113 joint agreement
The Group recognises a liability in respect of its participation in the OML 113 Joint Operating Agreement. The liability
disclosed in these accounts is based on a reconciliation of the amounts owed under the operating agreement entered into by
the Group and other participators in the OML 113 operation. The reconciliation is based on returns and reconciliations
provided by the project’s operator, which references the Group’s share of revenue received and costs incurred. It is
understood that some of the partners disagreed with the amounts shown in the reconciliation and so an audit is currently in
progress to confirm the balances due by the partners in respect of the joint operating agreement. The provisional findings of
the audit indicate that the Group’s liability is materially lower than as shown in the Group’s accounts, but as the audited
figures have not yet been agreed by the partners to the joint agreement it has been considered prudent to show the Group’s
liability in line with the figures produced by the project’s operator. Until the audit is complete, the Directors will not know
the exact balance and there is a chance liability is not complete.
60
admenergy plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2022
25
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.
As announced by the Company on 25 May 2023, entering into the agreements for the Investment and the variation of the
existing loan arrangements with OFX, a substantial shareholder of the Company, constitute related party transactions for
the purposes of AIM Rule 13. It was noted that Stefan Olivier and Claudio Coltellini, whilst nominee directors for OFX, are
not related parties for the purpose of these transactions. The Company's Directors consider, having consulted with the
Company's nominated adviser, Cairn Financial Advisers LLP, that the terms of the transactions are fair and reasonable
insofar as the Company's shareholders are concerned.
Further, the subscriptions for the SCLN by Hessia and OFX, as substantial shareholders, and Oliver Andrews and Stefan
Olivier, as Directors, constitute related party transactions for the purposes of AIM Rule 13. With the exception of Oliver
Andrews and Stefan Olivier, the Company's Directors consider, having consulted with the Company's nominated adviser,
Cairn Financial Advisers LLP, that the terms of the transactions are fair and reasonable insofar as the Company's
shareholders are concerned.
In addition, the agreement between the Company and certain directors (including a former director) to convert outstanding
liabilities into Conversion Shares constitutes a related party transaction pursuant to AIM Rule 13. With the exception of
Oliver Andrews and Stefan Olivier, the Company's Directors consider, having consulted with the Company's nominated
adviser, Cairn Financial Advisers LLP, that the terms of the transaction are fair and reasonable insofar as the Company's
shareholders are concerned.
26
ULTIMATE CONTROLLING PARTY
The Directors do not consider there to be a single ultimate controlling party.
27
POST PERIOD END EVENTS
Post period events are detailed in the Directors’ Report
On 24 April 2023 the Company announced that Stefan Olivier and Claudio Coltellini had been appointed to the Board of
Directors, and that Manuel Lamboley had resigned as a director.
On 25 May 2023 the Company announced the following:
1.Investment in US oil leases
The company announced that, through a recently formed, wholly owned U.S. subsidiary company, ADM Energy USA, Inc.,
it had invested in five on-shore US oil leases by way of a Membership Interest Purchase Agreement ("the Investment")
with OFX Holdings, LLC (formerly Tennessee Black Gold, LLC), a substantial shareholder of the Company. The Investment
has been made by the acquisition of Blade Va Texas limited liability company established as a vehicle for the purpose of
facilitating the Investment, for a total maximum consideration of US$1,614,000.
Blade V owns a portfolio of interests in oil and gas projects ("the Assets"), the primary focus of which is a 70.0% working
interest participation in an initial three well drilling programme to target shallow oil production on the Altoona Lease
located in the Midway-Sunset Oilfield, Kern County, California. The interests held by Blade V also comprise:
•
100.0% working interest in the Schweitzer Lease in Graham County, Kansas where a work-over programme to
restore production from two wells is currently in process.
•
50.0% fully funded working interest in a three well workover programme in Texas targeting initiation of
production from three wells.
•
Total gross and net leasehold acreage associated with the acquisition is 423 acres and 295.5 acres, respectively.
•
An Area of Mutual Interest allowing ADM to participate, at cost, in any additional drilling, recompletion or
workover opportunities within two miles of any boundary of the leases included in the Investment.
61
admenergy plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2022
•
In conjunction with the Transaction, ADM Energy USA, Inc. and OFX have entered into a loan facility (the "USA
Loan Facility") providing for loans of up to US$750,000 to be made available to the Company. The Consideration
Loan Notes (defined below) of US$235,720 will be issued as an advance under the USA Loan Facility.
•
ADM will be a non-operating financial investor in the interests.
Further details of the portfolio of interests comprising the Investment are as follows:
Notes:
(1) Altoona: a California licensed and bonded contract operator to be determined by OFX and ADM.
(2) Guardian Energy Operating Co., LLC is a registered Texas operator 75.0% owned by OFX.
(3) Tex Oil, LLC is a registered Kansas operator.
Midway-Sunset Oilfield, Kern County, California
The Midway-Sunset Oil Field is a large oil field in Kern County, San Joaquin Valley, California in the United States. It is the
largest known oilfield in California and the third largest in the United States. The field was discovered in 1894 and it is
estimated that the field has produced close to 3 billion barrels (480,000,000 m3) of oil. At the end of 2008, the California
Department of Conservation estimated reserves amounted to approximately 532 million barrels (84,600,000 m3), 18%
of California's estimated total.
The Altoona Lease
The Altoona Lease is a circa 20-acre lease located in a crestal position within the Spellacy Anticline Region of the Midway-
Sunset Oilfield. Discovered in 1915, the Altoona Lease has produced less than 1 million barrels of oil from multiple
intervals primarily between 1,000 and 1,600 feet. Chevron (USA), Inc. is actively developing leases contiguous with and
surrounding the Altoona Lease. In March/April of 2020 Chevron (USA), Inc. drilled and started producing the 3-8R and 3-
8AR wells located approximately 250 meters from the Altoona Lease. These wells were drilled to approximately 1,935
feet and, combined, have produced in excess of 150,000 barrels of oil from spud through the end of December 2022. A
work programme, considered exploratory by the Company, is being planned to drill or deepen up to three wells to
approximately 2,000 feet to test deeper potential, previously untested on the Altoona Lease which may be contributing
to the high level of production realised by Chevron in the 3-8R and 3-8AR wells. ADM expects that the operator of the
Altoona work programme will commence before the end of 2023. ADM will have a non-operated 70% working interest
and 52.5% net revenue interest in the Altoona lease.
The Altoona work programme commitments are expected to be costed at approximately US$1,500,000.
The Schweitzer Lease
The Schweitzer Lease is a 160-acre lease located in Graham County, Kansas. Blade V owns a 100% working interest and
75% net revenue interest in the Schweitzer Lease. The lease includes two wells capable of being returned to production
(the Schweitzer #3 and the Schweitzer #6), a salt-water disposal well and associated production equipment.
The initial work programme will consist of:
weitzer #3: Already in progress. Pump a chemical scale squeeze into Lansing-KC “J” and “K” intervals to inhibit the
cipitation of Barite/Celestite scale on downhole production equipment. Return well to production via rod-beam pump.
weitzer #6: Equip well to produce via rod-beam pump in replacement of electrical submersible pump.
The total cost of the work programme, which will be conducted by Tex Oil LLC, is estimated at US$65,000 and will be
funded by an advance from the USA Loan Facility.
Pearson, Oberlin and Moon Leases: Three Well Workover Programme
Lease/Well
County, State
Working Interest
Net Revenue Interest
Operator (1)
Altoona
Kern, CA
70.0%
52.5%
To Be Determined1
Pearson
Grimes, TX
50.0%
37.5%
Guardian2
Oberlin
Upshur, TX
50.0%
37.5%
Guardian2
Moon
Upshur, TX
50.0%
37.5%
Guardian2
Schweitzer
Graham, KS
100.0%
75.0%
Tex Oil, LLC3
62
admenergy plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2022
The Company will participate with a 50.0% working interest and 37.5% net revenue interest in a three well workover
program with Guardian Energy Operating Co., LLC ("Guardian"), a majority owned subsidiary of OFXH. The programme
will target the initiation of production from the following wells:
Well
County, State
API#
Operator
Work Timing
Pearson 1RE
Grimes, Texas
42-185-30529
Guardian
May 2023
Oberlin 2
Upshur, Texas
42-459-31141
Guardian
May 2023
Moon Well 1
Upshur, Texas
42-459-31438
Guardian
To be determined
The three well work programme is fully funded by OFXH, the Company's share of costs associated with its participation
are included as part of the Investment consideration and will not require any cash investment or borrowings by the
Company under the USA Loan Facility.
Investment Consideration
The total maximum consideration for the Investment of US$1,614,000 comprises US$478,280 to be financed via the
issuance of (1) 15,714,667 new ordinary shares at a price of 1.2p per share ("Consideration Shares"); (2) a US$235,720
loan note issued by ADM Energy USA, Inc. (non-recourse to ADM Energy PLC) ("Consideration Loan Notes"); (3) the issue
of warrants over 7 million ordinary shares in the Company ("the Warrants") exercisable at 2.5p per warrant with a term
of two years from Admission (defined below); and (4) contingent deferred consideration of up to $900,000.
The contingent deferred consideration will be received on the first 180,000 barrels of oil produced net to the interests of
the Company from the Assets. The production payment will be US$5.00 per barrel if the realised price is greater than
US$70.00 per barrel and US$3.50 if the realised price is greater than US$50.00 per barrel and less than US$70.00 per
barrel. There will be no payment in periods when the realised oil price is less than US$50.00 per barrel. The production
payment will be paid in arrears on a monthly basis.
Following issuance of the Consideration Shares, OFX will hold 57,381,334 ordinary shares of ADM Energy plc representing
15.58% of the Enlarged Issued Share Capital of Company on Admission.
2.Secured Convertible Loan Note Subscription
Concurrent with the Investment in the US oil leases the Company entered into subscription agreements to issue secured
convertible loan notes ("SCLN") with an aggregate face value of up to US$1.5 million, of which US$900,000 has been
subscribed for and US$600,000 remaining available for subscription. The SCLN has a three-year term, an interest rate
payable-in-kind (which maybe settle with cash or non-cash payments) of 8.0% per annum and the principal together with
any interest due may be converted at any time at a share price of 1.2p per share. The purchasers of the SCLN will also be
assigned a proportionate economic interest in a 1.25% undivided over-riding royalty interest in the Altoona Lease (further
described below). The SCLN will be secured by a pledge of and first-lien on the shares of ADM Energy USA, Inc. held by
the Company. A condition of the subscription agreement associated with the SCLN is that the funds raised must fully
fund, and be first applied against, the Company's net share of the costs of the Altoona work programme. Any amount in
excess of the funds required to fund the Altoona work programme may be used by the Company for general working
capital purposes.
The following shareholders and directors of the Company have subscribed for the SCLNs as indicated:
Hessia Group Limited, a substantial shareholder of the Company
US$500,000
OFX Holdings, LLC, a substantial shareholder of the Company
US$250,000
Mr. Oliver Andrews, a director of the Company
US$100,000
Mr. Stefan Olivier, a director of the Company
US$50,000
Total
US$900,000
Signed subscription letters have been received and, upon receipt of the cleared funds which are expected shortly, the
SCLNs will be issued.
3.Share Issue for debt conversion
The Company has agreed with certain directors and creditors to convert outstanding contractual liabilities of £683,117
into 56,926,417 new ordinary shares in the Company ("Conversion Shares") at the same price as the Consideration Shares
being 1.2p per new ordinary share.
63
admenergy plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2022
Conversion Shares issued to Directors of the Company, and their respective shareholdings on Admission, are as follows:
Director
Conversion
value (£)
Number of
Conversion
Shares to be
issued
Resulting
shareholding
on admission
Shares as
percentage of
Enlarged Issued
Share Capital on
Admission
Oliver Andrews
100,000
8,333,333
15,000,000
4.06%
Stefan Olivier
50,000
4,166,667
4,166,667
1.13%
Richard Carter
50,000
4,166,667
6,598,163
1.79%
Dr Stefan Liebing
19,617
1,634,750
2,290,722
0.62%
Lord Henry Bellingham
16,500
1,375,000
1,728,031
0.47%
Manuel Lamboley
(former director)
15,000
1,250,000
1,250,000
0.34%
Total
251,117
20,926,417
31,033,583
8.67%
4.Variation of Loan Facilities Agreement with OFX
Further to the announcement of 17 October 2022, OFX has provided US$262,500 in loans to the Company (the "Equity
Subscription Loan"). In conjunction with the Investment, OFX and ADM have formalised the "USA Loan Facility" with a
total of US$235,720 advanced as part of the purchase price pursuant to the terms of the Investment. By agreement
between ADM and OFX, the Equity Subscription Loan will be refinanced by the USA Loan Facility resulting in a total of
US$498,220 outstanding under the USA Loan Facility with US$251,780 remaining available for use. Following this
variation, ADM Energy plc will not directly have any outstanding loans due to OFX.
Key terms of the USA Loan Facility include:
1. Loans of up to US$750,000 with additional advances subject to mutual agreement between the Company and OFX.
2. The USA Loan Facility is not secured nor is the Company a guarantor of borrowings by ADM Energy USA, Inc.
3. Maturity date of 30 June 2025 ("Maturity Date").
4. Interest rate of 9.0% per annum with quarterly payments of interest to commence in April 2024.
5. OFX may offset amounts due to it pursuant to the USA Loan Facility against any amounts that would be due to the
Company should OFX exercise warrants held by it over ordinary shares in the Company prior to the Maturity Date.
5. Grant of Options
The Company has adopted an unapproved share option scheme ("Scheme") and made a grant of options to certain
directors and employees. The purpose of the Scheme is to incentivise management performance for the benefit of all
shareholders by way of options which are subject to vesting conditions.
The terms of the Scheme provide that the Company can award options over a maximum of 12 per cent. of the Company's
issued share capital, from time to time.
Vesting criteria for options granted under the Scheme are as follows:
Amount Vesting
Price
Vesting Conditions
50 per cent. (“Tranche One”)
1.2p
On the business day following the second
anniversary of the date of grant
50 per cent. (“Tranche Two”)
2.4p
On the business day following the third
anniversary of the date of grant
Vesting conditions may be varied or waived provided that any varied vesting condition shall be a fairer measure of
performance, as judged at the time, and no more difficult to satisfy than the original vesting condition. The Scheme
provides good leaver provisions and other standard terms normally associated with such a scheme.
64
admenergy plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2022
The Company has granted the following options under the Scheme:
Director
Number of
Options granted
Options
granted as
percentage of
Enlarged
Issued Share
Capital on
Admission
Shareholding
on Admission
Shareholding on
Admission as a
percentage of
Enlarged issued
share capital on
Admission
Stefan Olivier
21,299,823
5.76%
4,166,667
1.13%
Richard Carter
10,649,911
2.88%
6,598,163
1.78%
Oliver Andrews
4,348,714
1.18%
15,000,000
4.06%
Lord Henry
Bellingham
4,348,714
1.18%
1,728,031
0.47%
Dr Stefan Liebing
3,194,973
0.86%
2,290,722
0.62%
Total
43,842,135
11.86%
29,783,583
8.05%
In addition to the awards to directors of the Company above, the Company has also issued 532,495 options over ordinary
shares, representing 0.14% of the enlarged issued share capital on Admission to an employee. The total award of options
represents 12.0% of the enlarged issued share capital on Admission.