Annual Report 2018-2019
Contents
Contents
Officers and Advisors
Chairman’s Statement
Strategic Report
Corporate Governance Statement
Audit Committee Report
Directors’ Remuneration Report
Board of Directors
Directors’ Report
Statements of Directors’ Responsibilities
Independent Auditor’s Report
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Company Statement of Financial Position
Company Statement of Changes in Equity
Notes to the Company Financial Statements
2
4
6
17
24
26
29
30
33
34
40
41
42
43
44
65
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67
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Officers and Advisers
Officers and Advisors
Directors
George Lucan (Managing Director) – appointed 29 January 2019
Patrick Clanwilliam (Non-Executive Chairman) - appointed 6 March 2019
Cameron Buchanan (Non-Executive Director)
Carlos Fernandes (Finance Director) - appointed 6 March 2019
Andrew Hollis (Technical Director) - appointed 6 March 2019
Secretary
Carlos Fernandes
Registered Office
Building 3, 566 Chiswick Park
Chiswick High Road
London
W4 5YA
Nominated Advisor
Beaumont Cornish Limited
10th Floor, 30 Crown Place
London
EC2A 4EB
Brokers
WH Ireland Group plc
24 Martin Lane
London
EC4R 0DR
Auditor
Crowe U.K. LLP
St. Bride’s House
10 Salisbury Square
London
EC4Y 8EH
Solicitor
Fladgate LLP
16 Great Queen Street
London
WC2B 5DG
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Officers and Advisers
Principal Bankers
Metro Bank Plc
One Southampton Row
London
WC1B 5HA
HSBC Holdings Plc
PO Box 10
59 Old Christchurch Road
Bournemouth
Dorset
BH1 1EH
Registrars
Share Registrars Limited
The Courtyard
17 West Street
Farnham
Surrey
GU9 7DR
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Chairman’s Statement
Chairman’s statement
Dear Fellow Shareholders,
It is my pleasure to present you with the Annual Report of Angus Energy plc (the “Company”
or “Angus Energy”) with its subsidiary undertakings (the “Group”) for the year ended 30
September 2019.
When I took the Chairmanship in March 2019 the Company held a portfolio of exploration
and production assets focusing on the Weald basin, namely Balcombe, Brockham and Lidsey.
Our commitment to these three assets remains solid, notwithstanding the disappointing
results from the Kimmeridge BR X4Z well in June, we continue our efforts to develop and/ or
extract value from them and, in the case of Balcombe, bring them to the point of production.
In an effort to diversify our portfolio and create a more optimal balance between exploration
assets and producing ones, our management team have successfully acquired a 51% interest
in a dormant gas asset onshore in Lincolnshire on the edge of the southern North Sea Gas
Basin, named Saltfleetby.
This was formerly the UK’s largest onshore gas field and was shut in solely due to the closure
of the nearby Theddlethorpe Gas Terminal. The technical team are busily engaged in
reconnecting this stranded asset to the UK national gas transmission grid and replicating the
gas processing work, once performed at the Theddlethorpe site, with advanced equipment
on our own site.
The technical, planning and regulatory hurdles are being steadily overcome, and we remain
confident that they can be; we believe we should be able to replace even some of the more
optimistic revenue expectations which shareholders had for the Brockham BR X4Z well with
gas revenues from this field over the next decade.
Financial and Statutory Information
Revenue from oil and gas production during the year was up to £0.2m (2018: £0.066m) on
production of a gross 5,346 barrels (2018: 1,678 barrels). This was the result of steady
production at the Lidsey Oil Field during the year.
The Group recorded a loss of £5.043m (2018: £2.790m). This increase is due to the
impairment of the Group’s carrying value of its interests in the Brockham and Lidsey Oil Fields
and increased corporate and operational activity.
Outlook
I would add that we have reviewed a great number of new opportunities for shareholders this
year and we will continue to explore transactions which can leverage our cost discipline and
technical skills base which has been honed in one of the most regulated jurisdictions for oil
and gas exploration and development in the World.
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Chairman’s Statement
In addition to the expected reconnection of Saltfleetby, the year to September 2020 promises
the inception of a three year extended well test on the Kimmeridge at Balcombe, subject to
outstanding permissions being received, which along with Saltfleetby, should bring the Group
material cashflow for the first time and mark a turnaround in the Group’s fortunes.
Patrick Clanwilliam
Chairman
04 March 2020
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Strategic Report
Operating Review
The year to September 2019 was unquestionably a difficult year for the Angus Energy Group,
which saw first boardroom upheaval, a one year delay to confirmatory works at Balcombe,
followed by the discovery that the Kimmeridge well at Brockham would not commercially
flow oil as part of conventional operations.
As a consequence, in part of this poor operating result, the Group’s financial resources were
strained resulting in a succession of equity placings. Finally, as a backdrop to this, the
regulatory environment has become steadily more challenging and all the while the question
of sustainability bedevils the UK’s onshore oil and gas industry.
Each of these points is dealt with below under the headings Operating Review; Financial
Review; Strategy and Sustainability; Governance, Compliance and Shareholder Relations
before closing with a brief statement of risks and description of events since reporting as at
30 September 2019 and our Outlook for the period ahead.
The Group has emerged at the end of the year under review with a new properly constituted
Board, revised compliance and governance procedures and a fresh commitment to
transparency, community engagement and shareholder communications. The Group has also
improved its financial position by addressing the issue of cash reserving for abandonment
liabilities.
Most importantly, in the acquisition of a 51% interest in the Saltfleetby Gas Field, the Group
is ready to transition from a predominantly exploration led company to one which focuses on
safe operations, measured production and quantifiable cashflow.
I repeat however my statement last year that our first concern as a Group must be for the
safety of our staff, contractors, the public at large and the environment on which we rely on.
It is with pleasure that I report that all operations were performed without any safety
incidents or environmental damage. We will continue to work in close co-operation with all
of our regulators, ensuring a spotless record of compliance – the Oil and Gas Authority
(“OGA”), the Environment Agency (“EA”) the Health and Safety Executive (“HSE”) and our
local councils.
Business Review
The principal activity of the Group during the year continued to be on-shore, conventional
production and development of hydrocarbons in the UK.
Review of activities
Saltfleetby
On 19 June 2019, the Group signed a conditional Farmin Agreement with Wingas Storage (UK)
Limited (now Saltfleetby Energy Limited) to acquire a 51% interest in the Saltfleetby gas field
(“Field”) and its share in the associated blocks of PEDL005 in Lincolnshire. Saltfleetby gas field
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Strategic Report
was formerly the UK’s largest onshore gas field. The acquisition was unusual in that the Group
was paid an initial contribution of £2.5 million to satisfy all abandonment costs at the Field or
to assume 100% of the costs to be incurred during the reconnection of the Field to the
National Gas Grid.
The Field was shut in in 2017 following the closure of the nearby Theddlethorpe Refinery
which effectively stranded the asset. The production profile of the Field is almost perfectly
linear against cumulative production and gives a high level of confidence about resumed
production following successful reconnection. At present, using only last known production
rates, the Field should be able to produce a gross amount of 5 million standard cubic feet a
day which is roughly equivalent to 50,750 therms a day which at 40 pence/therm (estimated
average price over the last 10 years) is worth just over £7 million per annum.
On 29 July 2019, the Group announced that it had submitted to the National Grid a
'Connection Application' for direct entry to the National Transmission System ("NTS") from
the Company's Saltfleetby Gas Field. A detailed feasibility study followed which identified the
most suitable tie-in location to the existing NTS connection point at the Theddlethorpe
terminal. Furthermore, this study included detailing equipment requirements for gas
processing and assessing pipeline routes into the NTS.
On 19 August 2019, the Group disclosed that it had prepared an internal abandonment report
which has been reviewed by an Independent Well Examiner. The report supports the Group’s
third-party quote for decommissioning of all 8 wells on the Field of £1.75 million was
appropriate. This amount, taken together with a site remediation estimate of £0.75 million,
brings the total potential abandonment liability to the £2.5 million estimated at the time of
acquisition.
Balcombe
The year began with the completion of a 7 day well test on the Balcombe 2-Z well. As reported
at the time (see announcement of 2 October 2018), the test utilised Nitrogen and coiled
tubing to clean and prime the well which when removed allowed a brief natural flow at 853
bopd equivalent, not including 22.5% water.
A second flow period was undertaken with the well flowing naturally at 1,587 bopd
equivalent, not including 6.6% water. The Balcombe-2z well produces from a single Micrite
Layer, just one of the Kimmeridge Micrite Layers. During the initial flow period, the well
slugged at up to 3,000 barrels of oil per day which had to be reduced as it exceeded separator
operating capacity. Duration of the test runs were limited. However, significant amounts of
water continued to be produced dominating production.
The presence of this water was unexpected and was initially thought to arise from fractured
communication with other water bearing reservoirs. Subsequent post-test analysis of the
recovered water demonstrated levels of salinity significantly higher than any regional trend,
and corresponding with the salinity of brine used as drilling fluid from the section indicating
a strong probability that brine lost to the formation during drilling rather than formation
water was being produced from the site’s Micrite Layers. Subsequent detailed analysis of
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Strategic Report
drilling records showed evidence of significant brine losses including volumes not recovered
during the testing.
Given the mandated length of the short testing sequence, the Company was not able to
remove what it now believes is a limited amount of unrecovered brine from the drilling of the
well. It had been hoped that the Company might be able to remove the brine drilling fluid
losses, under an extension to the existing planning permission but it transpired that this was
not possible and a new application needed to be sought.
As a consequence, the Group has submitted a further planning application split into two
stages. Stage 1 will be to remove the lost drilling fluids. Should the results of stage one
indicate that we have been successful in recovering the lost drilling brine then, Stage 2 will
commence with the installation of long-term environmental protection measures and a full 3
year well test with production periods interspersed with shut in periods in order to garner a
comprehensive understanding of the extent and pressure dynamics of the reservoir.
The Planning Application was submitted on 3 October 2019 very shortly after the end of the
period under review. We continue to expect this planning application to be heard before the
24 March Planning Committee Meeting.
Lidsey
Production at Lidsey continued at a variable self-restricted flow rate of approximately 5,056
bopd over the period (gross, being 3,401 bopd net to Angus), limited by the relatively high
cost of disposing of associated water following the limitation of water reinjection imposed by
regulatory authorities. Any solution to this would likely require application to the
Environment Agency for permissions similar to those sought at Brockham.
Additionally, the Group began an ongoing detailed study into the potential exploration lead.
The disappointing horizontal well revealed that current structural mapping is incorrect.
Possible improvements to the analysis of the seismic are hoped may give a more reliable
structural interpretations and indicate areas of the field not currently drained. Further work
is required to work up the target and determine risk and viability however indications are it
could be drilled from the existing pad and potentially a sidetrack of one of the existing wells
greatly reducing costs as well as any environmental impact.
In light of this, on 26 February 2019 the Group agreed to purchase Doriemus' 20% interest in
the Lidsey Licence, PL241 (the "Licence") including its 30% direct participating working
interest in the Lidsey-X2 production well, for £467,377 of consideration payable in 8,324,024
shares based on a 20 day volume weighted average price (VWAP) at close of business on
Friday 22 February 2019 of 5.6148 pence. This transaction was completed on 18 April 2019 as
a consequence of which the Company now has an 80% interest in the Licence.
The Group also successfully applied to West Sussex County Council for a variation on its
permission for the site which allows the Group to operate pumping equipment for 24 hours
a day, seven days a week at the Lidsey site. There is no variation to the existing limits on any
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Strategic Report
other operations at the site. Based on the above and as further explained in note 11, the
board have recognized an impairment of £0.6 million against its carrying value.
Brockham
The Group began works on its long-term flow testing programme at Brockham in December
2018 with the perforation of the BR-X4Z well to provide communication between the
reservoir and the well bore. Logging was carried out confirming the perforated intervals.
In January 2019 work resumed following the Christmas break during which process it became
apparent that a part of the perforated interval was producing water. This in turn inhibited
significant oil flow. Small quantities of oil of 40 plus API were returned to surface and sampled
in the returns and were confirmed through analysis as Kimmeridge oil. Attention therefore
turned to isolating the water producing zone.
This involved the return of a workover rig to the site which could not be arranged before April.
The well was successfully re-perforated from 988 - 1044m MD, in order to establish the best
possible communication with the fracture system present in the Kimmeridge Clay Formation.
Following the re-perforation, the tubing-deployed hydraulically-set bridge plug was installed
successfully and in early May the Company set about examining the data recovered in this
phase of operations. At the end of May the Company engaged in one further treatment to
improve communication between reservoir and well.
In late June, having operated the jet pump to recover all treatment fluids, and analysed all
possible paths forward, the Company announced to the market that oil, whilst present was
not is sufficient quantities to produce and that the primary phase was water.
Explanation for this outcome lies in a developing understanding of the geology of the
Kimmeridge in the Weald Basin. The best explanation is that Brockham, at the northern
margin of the Weald Basin is just on the edge of the mature zone in which the Kimmeridge
has generated sufficient oil to flow, as it undoubtedly does at Horse Hill. As this contour is
reached so the maturity of the Kimmeridge declines rapidly and water becomes the primary
phase in the reservoir.
The Group immediately followed up the result with consideration of other options for the site
and the Licence, which extends further south from Brockham and closer to Horse Hill. The
site itself has two other wells both of which connect to the Portland reservoir which is
historically where the bulk of oil production has taken place at Brockham. One of these wells
is a producer, shut in during the works on the Kimmeridge, and the other is a water injector
suspended due to environmental permitting.
The Group is applying for permission to the Environment Agency to resume water injection
to manage the Portland reservoir and increase recoveries from the producing well. A Field
Development Plan has also been submitted to this effect to the Oil & Gas Authority. The
Group believes that, subject to permits being granted, the site would be commercially
profitable without any further significant capital expenditure. Recompletion of the BR X4Z
well as a Portland producer is also under consideration.
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Strategic Report
Also, under consideration is a disposal of the Group’s interest in the site and the Licence to a
third party and discussions have been held with two such parties although these remain
inconclusive. A final option, decommissioning of all three wells and restoration of the site has
been fully costed and provided for with a designated reserve. Based on the above and as
further explained in note 11, the board have recognized an impairment of £0.3 million against
its carrying value.
A24 Prospect, formerly Holmwood Prospect
On 20 August 2019 the Company announced that the Oil & Gas Authority had granted a two-
year extension to the initial term of the PEDL143 Licence in which the Group has a 12.5%
interest. The initial term will now end on 30 September 2022.
The PEDL143 Licence is operated and majority owned by UK Oil & Gas plc which has expressed
its intention to evaluate multiple potential new drilling sites outside the nearby Area of
Outstanding Natural Beauty and prepare a drilling programme within the initial term of the
Licence subject to all regulatory approvals and planning consents.
According to the Operator the Licence “contains the significant “A24” Portland and
Kimmeridge oil prospect, a direct geological look-alike to [its] Horse Hill oil field, situated on-
trend some 8km to the east. Several smaller prospects of similar size to the nearby Brockham
Portland oil field have also been identified.”
Strategy and Sustainability
Generally speaking, the Directors’ objective is to create long term value for shareholders by
building the Group into a profitable onshore oil and gas production company with a
reputation for technical excellence but with great cost discipline. The Director’s will continue
to focus on the UK onshore but do not rule out acquisitions overseas in jurisdictions where
the rule of law is strong. We have closely reviewed over ten such acquisitions and have bid
on three this year and bought one.
From the point of view of sustainability, the Director’s preference is for the acquisition of gas
assets as with carbon capture or thermal cracking methane to hydrogen, methane has the
greater potential to offer a largely carbon-free energy source for traction, power generation
and heating.
In that regard, and now that we are in the methane business, I look forward to familiarising
the Company with developments in thermal cracking in the hydrogen energy chain as well as
exploring alternative carbon-free end of life use for our sites. In short, I’d like Angus Energy
to make a small contribution to the general effort to improve the world and not make it
worse.
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Strategic Report
Global Environment and Stewardship
As a Group we do have duties of stewardship to the wider environment of which we are
acutely aware. Our ethical position is that, whilst we might wish to, we cannot presently
prevent wholly pathological use of our product in favour of more essential uses. If some of
our oil ends up in a private jet plane so equally some ends up producing a heart pump or
heating a care home. Here we need the assistance of government who could, by taxation,
encourage the benign uses of our product and discourage the less socially acceptable ones.
Additionally, we don’t believe that it is desirable to self-limit domestic oil production without
an equivalent limitation on domestic consumption. For so long as the UK generates great
demand, inter alia, for jet fuel for casual aviation travel, without the slightest discouragement
from government, we believe that there is still an environmental and ethical benefit in
producing that fuel locally. The first from avoiding the carbon cost of transporting the fuel to
the UK and the second from the much improved production standards in terms of health and
safety and local environmental impact from production here in the UK as opposed to
overseas.
Local Environment
As a responsible OGA approved and Environment Agency (“EA”) permitted UK operator,
Angus Energy is committed to utilising industry best practices and achieving the highest
standards of environmental management and safety. Our operations:
• Continuously assess and monitor environmental impact
• Promote internally and across our industry best practices for environmental
management and safety
• Constant attention to maintaining our exemplary track record of safe oil and gas
production
There were no reportable health and safety incident during the year.
Community
Angus Energy seeks and maintains positive relationships with its local communities. I am
pleased to say we had opportunity this year to engage closely with the local community at
Balcombe. We have helped organise two Community Liaison Group meetings and opened a
direct emailing system for enquiries, distributed literature addressing resident’s concerns and
posted the same on our website. Further Community Liaison Group meetings are expected
in the near future should our planning application be successful including site visits in which
residents will be able to examine the equipment we use in operation.
In general, we are guided by the following principles:
• Open and honest dialogue
• Engagement with stakeholders at all stages of development
• Proactively address local concerns
• Actively minimise impact on our neighbours
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Strategic Report
• Adherence to a strict health and safety code of conduct
On 4 June 2018, the Group established the Bruce Watt Memorial Scholarship, a yearly
scholarship fund of £10,000 per year to support students from Bognor Regis and the
surrounding community to undertake further academic studies beyond secondary school.
Currently there have been 4 recipients of the Scholarship award.
Financial Review
The Group began the period with the following interests: 65% of Brockham (PL235), 60% of
Lidsey (PL241), 25% of Balcombe field and 12.5% of A24 Prospect (PEDL 143).
The Group had a cash balance of £0.846m as at 30 September 2018.
On 5 November 2018 the Group placed 22,222,222 shares at 9 pence each for £2 million (net
£1.85 million) to support works at Brockham.
On 9 January 2019, the Group entered into an agreement with YA II PN Ltd and Riverfort
Global Opportunities PCC Limited for a 2-year £3 million convertible loan facility of which £1.5
million was drawn down.
On 15 February 2019 the placed 55,000,000 new Ordinary Shares in the Company with
existing, new and institutional shareholders at a price of 4 pence per share to raise gross
proceeds of £2,200,000 (the "Placing"). The Placing monies were used by the Group to pay
down £1,500,000 of the loan facility raised in January 2019 with the balance reserved for the
work programmes at Balcombe and Brockham.
On 30 April 2019, the Group issued a further 70,824,700 new ordinary shares in the Company
which was placed with existing and new and institutional shareholders at a price of 4.24 pence
per share raising gross proceeds of £3,010,050 to be used for working capital, progressing
work on its existing assets and progressing due diligence of a potential acquisition target.
This was followed on 29 May 2019 by a small Open Offer to existing shareholders at the same
price which resulted in the Group raising gross proceeds of £31,240 and a total of 735,076
new ordinary shares of the Company being issued.
At the end of the financial year the Group had no loans outstanding.
As noted in the Operating Review above there were two major acquisitions during the year:
On 18 April 2019 the Group completed the acquisition of Doriemus Plc’s 20% interest in Lidsey
License, PL241as a result the Group now has an interest in the License, including Lidsey-X2
production well, of 80%.
On 19 June 2019 acquired 51% interest in Saltfleetby Gas Field in Lincolnshire. Saltfleetby
Energy is expected to retain 49% in the field. The terms of the agreement provided that
Saltfleetby Energy pay Angus Energy and initial contribution of £2.5 million which funds will
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Strategic Report
then be applied by Angus Energy either to assume 100% of the costs to be incurred during
the reconnection of the Field to the nation Grid or to satisfy all abandonment costs at the
Field.
On 2 December 2019 OGA has given its consent to assignment of a 51% share in Saltfleetby
Energy Limited interest in Saltfleetby Field blocks PEDL005. As at the date of this report the
Directors’ remain confident of being able to reconnect the Field within that budget and that
the ultimate abandonment liabilities do not exceed the Company’s estimate of £2.5 million.
As at 30 September 2019, the Group retained a 65% in Brockham field, 80% interest in Lidsey
field, 25% in the Balcombe field where the Group is the operator of all 3 fields and 51% share
in Saltfleetby Energy Limited. The Group also retained a 12.5% interest in the A24 field. The
Group had cash balance of £3.419m at the end of reporting year.
The Group generated £0.200m revenue from oil and gas production during the year (2018:
£0.066m). This was the result of the sale of 5,346 bbls of oil.
The Group recorded a loss of £5.043m (2018 a loss of £2.790m). For the year under review,
the administrative expenses increased to £3.976m (2018: £2.230m). This increase is due to
the impairment of the Group’s carrying value of its interests in the Brockham and Lidsey Oil
Fields and increased corporate and operational activity.
The Group’s overall financial objectives are to increase revenue, return to profitability and
enhance the asset base supporting the business. In order to monitor its progress towards
achieving these objectives, the Group has set a number of key performance indicators, which
deal predominately with revenue, profitability, margin and cash flow as above.
Governance, Compliance and Shareholder Relations
We now have a properly constituted Board, with Managing, Finance and Technical Directors
supervised by two experience non-executive Directors. The Board which meets regularly
alongside with Aim Rules Committee meeting, Remuneration Committee and Audit
Committee meetings.
In general, the management structure is very flat. In total we have 11 employees, including
management. The Company relies heavily on third party experienced contractors.
It is my expectation to add one compliance officer to deal with all of our regulators and
planning authorities which are presently Surrey, Lincolnshire and West Sussex County Council,
the Oil & Gas Authority, the Environment Agency and the Health & Safety Executive.
Additionally, as a publicly listed company, we are answerable to the AIM Market Division and
to the Financial Conduct Authority.
Compliance is an area which has grown more complicated and expensive in recent years and
we expect it to get more so. Regulators are being more pro-active and pre-emptive and we
have to anticipate their needs and expectations better than we have in the past. We should
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Strategic Report
aim to maintain better dialogue with all regulators and planners and engage in more frequent
use of pre-approval procedures where they are available.
Lastly, most shareholders will agree that communications have improved. It’s regrettable that
we have had this year some disappointing news to communicate. Nonetheless I don’t want
this impetus to wane and am pleased with the take up of our Investor Questions Board on
our website.
Principal risks and uncertainties
Currency risks
The Group sells its produced crude oil; oil is priced in US dollars whilst the bulk of its costs are
in GBP and therefore the Group’s financial position and performance will be affected by
fluctuations in the US dollar, sterling exchange rate along with fluctuations in the oil price.
Accordingly, the value of such transactions may be adversely affected by changes in currency
exchange rates, which may have a material adverse effect on the business, financial condition,
results of operations and prospects of the Group.
Market risk
The demand for, and price of, oil and gas are highly dependent on a variety of factors beyond
the Group’s control. The continued marketing of the Group’s oil will be dependent on market
fluctuations and the availability of processing and refining facilities and transportation
infrastructure, including access to roads, train lines and any other relevant options at
economic tariff rates over which the Group may have limited or no control. Transport links
(including roads and pipelines) may be inadequately maintained and subject to capacity
constraints and economic tariff rates may be increased with little or no notice and without
taking into account producer concerns. Producers of oil negotiate sales contracts directly with
oil purchasers, with the result that the market determines the price of oil. The price depends
in part on oil quality, prices of competing fuels, distance to market, the value of refined
products and the supply/demand balance. The marketability and prices of oil that may be
discovered or acquired by the Group will be affected by numerous factors beyond its control.
Permitting risk
The Group exposed to the planning, environmental, licensing and other permitting risks
associated with its operations particularly with exploration drilling operations.
The Group has to date been successful in obtaining the required permits to operate.
Therefore, the Group considers that such risks are mitigated through compliance with
regulations, proactive engagement with regulators, communities and the expertise and
experience of the management team.
Reserve and resource estimates
No assurance can be given that hydrocarbon reserves and resources reported by the Group
in the future are present as estimated, will be recovered at the rates estimated or that they
can be brought into profitable production. Hydrocarbon reserve and resource estimates may
require revisions and/or changes (either up or down) based on actual production experience
and in light of the prevailing market price of oil and gas. A decline in the market price for oil
and gas could render reserves uneconomic to recover and may ultimately result in a
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Strategic Report
reclassification of reserves as resources. Unless stated otherwise, the hydrocarbon reserve
and resources data contained in the financial statements are taken from the Competent
Person’s Report, at the time of AIM admission on 14 November 2016.
There are uncertainties inherent in estimating the quantity of reserves and resources and in
projecting future rates of production, including factors beyond the Group’s control.
Estimating the amount of hydrocarbon reserves and resources is an interpretive process and,
in addition, results of drilling, testing and production subsequent to the date of an estimate
may result in material revisions to original estimates.
The hydrocarbon resources data extracted from the Competent Person’s Report are
estimates only and should not be construed as representing exact quantities. The nature of
reserve quantification studies means that there can be no guarantee that estimates of
quantities and quality of the resources disclosed will be available for extraction. Therefore,
actual production, revenues, cash flows, royalties and development and operating
expenditures may vary from these estimates. Such variances may be material. Reserves
estimates are based on production data, prices, costs, ownership, geophysical, geological and
engineering data, and other information assembled by the Group (which it may not
necessarily have produced).
The estimates may prove to be incorrect and potential investors should not place reliance on
the forward-looking statements (including data included in the Competent Person’s Report
or taken from the Competent Person’s Report and whether expressed to have been certified
by the Competent Person or otherwise) concerning the Group’s reserves and resources or
production levels. Hydrocarbon reserves and resources estimates are expressions of
judgment based on knowledge, experience and industry practice. They are therefore
imprecise and depend to some extent on interpretations, which may prove to be inaccurate.
Estimates that were reasonable when made may change significantly when new information
from additional analysis and drilling becomes available.
This may result in alterations to development and production plans which may, in turn,
adversely affect operations. If the assumptions upon which the estimates of the Group’s
hydrocarbon resources have been based prove to be incorrect, the Group (or the operator of
an asset in which the Group has an interest) may be unable to recover and produce the
estimated levels or quality of hydrocarbons set out in this document and the Group’s
business, prospects, financial condition or results of operations could be materially and
adversely affected.
Events after the reporting period
The Group had a cash balance of £3.419m as at 30 September 2019 subsequent to the
significant cash movements described during the reporting period.
On 3 October 2019 the Company submitted its Planning Application to West Sussex County
Council for an extended well test at its Balcombe site. An objection raised by the Environment
Agency required the company to produce an additional Hydrogeological Risk Assessment
Report and this was submitted to the County Council on 20 December 2019.
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Strategic Report
On 25 October 2019, in order to meet the additional cash requirement identified by the
Company’s decommissioning review the Company entered into a £1.5 million Convertible
Loan Note facility led by Riverfort Global Opportunities PCC Limited. £1 million of this facility
was drawn down immediately and the net proceeds of £897,500 were applied as to £650,000
directly to the designated abandonment reserves for Brockham and Lidsey.
The Loan Note carries no interest and allows for conversion of amounts drawn down at the
option of the holder at the lower of a 7.5% discount to the average of the 3 lowest daily
Volume Weighted Prices (“VWAP”) (over the previous 10 days) into shares in Angus Energy
or, up to a maximum of 50% of any tranche, at a price equivalent to 130% of the 5 day VWAP
prior to drawdown of any tranche. Absent conversion, amounts must be repaid after 12
months. As at the time of going to press, £200,000 of this Loan Note had been converted
leaving a balance of £800,000 outstanding.
On 2 December 2019 the OGA approved the transfer of the Licence PEDL005 and
Operatorship for the Satlfleetby Gas Field on that Licence.
On 8 January 2020 the Company announced that Jonathan Tidswell, a former director, had
repaid in full his outstanding Director’s Loan of £200,000.
Outlook
Whilst we are constantly looking for new opportunities where our cost discipline, technical
experitse and lean management structure can prevail, our primary focus this year is to get
Balcombe and Saltfleetby into production. The milestones for reconnecting Saltfleetby have
been communicated to shareholders – the endeavour is complex and demanding but well
within our capabilities. Balcombe, too, looks to have great potential as a producing asset,
planning considerations being overcome. The prize for both is production and cash generation
for shareholders.
Approved by the Board of Directors and signed on behalf of the Board.
George Lucan
Managing Director
04 March 2020
Details of all our assets and operations can be found at www.angusenergy.co.uk
16
Corporate Governance Statement
Corporate Governance Statement
The Directors recognise that good corporate governance is a key foundation for the long term
success of the Group. The Company is listed on the AIM market of the London Stock Exchange
and is subject to the continuing requirements of the AIM Rules. The Board has therefore
adopted the principles set out in the Corporate Governance Code for small and mid-sized
companies published by the Quoted Companies Alliance (“QCA Code”). The principles are
listed below with an explanation of how the Company applies each principle, and the reasons
for any aspect of non-compliance.
1. Establish a strategy and business model which promote long- term value for shareholders
Angus Energy Plc provides shareholders with a full discussion of corporate strategy within our
Annual Report. A dedicated section explains how we will establish long term shareholder
value, as set out on page 10.
The Company is focused around 3 key strategic goals:
increase production and recovery from its existing asset portfolio;
•
• grow the asset portfolio through select onshore development and appraisal projects;
• actively manage costs and risks through operational and management control of the
entire process of exploring, appraising and developing its assets.
The Management team actively evaluates projects that simultaneously de-risk the current
portfolio and create long term shareholder value. Projects are evaluated based on many
characteristics to mitigate risk to our current activities they include but are not limited to
alignment with the Company’s core competencies, geography, time horizon and value
creation. Further, a core component of the Company’s activities include an active dialogue
with our legal and legislative advisors to ensure the Company remains up to date on current
legislation, policy and compliance issues.
The key challenges to the business and how they may be mitigated are detailed in the
Strategic Report on pages 6 to 16.
2. Seek to understand and meet shareholder needs and expectations
Angus Energy encourages two-way communication with institutional and private investors.
The Group’s major shareholders maintain an active dialogue to and ensure that their views
are communicated fully to the Board. Where voting decisions are not in line with the
company’s expectations the Board will engage with those shareholders to understand and
address any issues. The Company Secretary is the main point of contact for such matters.
The Company seeks out appropriate platforms to communicate to a broad audience its
current activities, strategic goals and broad view of the sector and other related issues. This
includes but is not limited to media interviews, website videos in -person investor
presentations and written content.
17
Corporate Governance Statement
Communication to all stakeholders is the direct responsibility of the Senior Management
team. Managers work directly with professionals to ensure all inquiries (through established
channels for this specific purpose such as email or phone) are addressed in a timely matter.
And that the Company communicates with clarity on its proprietary internet platforms. Senior
management routinely provides interviews to local media, and business reporters in support
of the company’s activities. The Board routinely reviews the Company communication policy
and programmes to ensure the quality communication with all stakeholders.
3. Take into account wider stakeholder and social responsibilities and their implications
for long term success
In all endeavours, the Company gives due consideration to the impact on its neighbours. The
Company seeks out methodologies, processes and expertise in order to address the concerns
of the non-investment community. As such, it actively identifies the bespoke needs of local
communities and their respective planners.
For example, the company provides for local hotlines and establishes community liaison
groups to address local questions and concerns.
Angus Energy seeks to maintain positive relationships within the communities we operate. As
such, Angus Energy is dedicated to ensuring:
• Open and honest dialogue;
• Engagement with stakeholders at all stages of development;
• Proactively address local concerns;
• Actively minimise impact on our neighbours; and
• Adherence to a strict health and safety code of conduct
As a responsible OGA approved and EA permitted UK operator, Angus Energy is committed
to utilising industry best practices and achieving the highest standards of environmental
management and safety.
Our operations:
• Continuously assess and monitor environmental impact;
• Promote internally and across our industry best practices for environmental
management and safety; and
• Constant attention to maintaining our exemplary track record of safe oil and gas
production.
The Company has also established a scholarship programme for community residents seeking
secondary or further education.
For more information please refer to the page 11 of the Annual Report as well as the
Community section within the Company’s corporate website.
18
Corporate Governance Statement
4. Embed effective risk management, considering both opportunities and threats,
throughout the organization
Risk Management in the Strategic Report details risks to the business, how these are
mitigated and the change in the identified risk over the last reporting period.
The Board considers risk to the business at every Board meeting (at least 8 meetings are held
each year) and the risk register is updated at each meeting. The Company formally reviews
and documents the principal risks to the business at least annually.
Both the Board and senior managers are responsible for reviewing and evaluating risk and
the Executive Directors meet at least monthly to review ongoing trading performance, discuss
budgets and forecasts and new risks associated with ongoing trading.
5. Maintain the Board as a well- functioning, balanced team led by the chair
Oversight of Angus Energy is performed by the Company’s Board of Directors. Patrick
Clanwilliam, the acting Non-Executive Chairman, is responsible for the running of the Board
and George Lucan, the Managing Director, has executive responsibility for running the
Group’s business and implementing Group strategy. All Directors receive regular and timely
information regarding the Group’s operational and financial performance. Relevant
information is circulated to the Directors in advance of meetings. In addition, minutes of the
meetings of the Directors of the main UK subsidiary are circulated to the Group Board of
Directors. All Directors have direct access to the advice and services of the Company Secretary
and are able to take independent professional advice in the furtherance of the duties, if
necessary, at the company’s expense.
The Board comprises of three Executive Directors and two Non-Executive Directors with a mix
of significant industry and business experience within public companies. The Board considers
that all Non- executive Directors bring an independent judgement to bear. All Directors must
commit the required time and attention to thoroughly fulfil their duties.
The Board has a formal schedule of matters reserved to it and is supported by the Audit,
Remuneration, Nomination and AIM Rules compliance committee. The Schedule of Matters
Reserved and Committee Terms of Reference are available on the Company’s website and
can be accessed on the Corporate Governance page of the website.
6. Ensure that between them the directors have the necessary up-to-date experience, skills
and capabilities
The nomination committee will determine the composition of the Board of the Group and
appointment of senior employees. It will develop succession plans as necessary and report to
the Directors. Where new Board appointments are considered the search for candidates is
conducted, and appointments are made, on merit, against objective criteria and with due
regard for the benefits of diversity on the Board, including gender.
19
Corporate Governance Statement
The Company Secretary supports the Chairman in addressing the training and development
needs of Directors.
As a small company, all members of the Board share responsibility for all Board functions. As
such the Board will from time to time engage outside consultants to provide an independent
assessment.
7. Evaluate Board performance based on clear and relevant objectives, seeking
continuous improvement
The Board carries out an evaluation of its performance annually, taking into account the
Financial Reporting Council’s Guidance on Board Effectiveness. All Directors undergo a
performance evaluation before being proposed for re- election to ensure that their
performance is and continues to be effective, that where appropriate they maintain their
independence and that they are demonstrating continued commitment to the role.
Details of the Board performance effectiveness process will be included in the Directors’
Remuneration Report on page 26.
8. Promote a corporate culture that is based on ethical values and behaviours
The Group is committed to maintaining and promoting high standards of business integrity.
Company values, which incorporate the principles of corporate social responsibilities (CSR)
and sustainability, guide the Group's relationships with clients, employees and the
communities and environment in which we operate. The Group's approach to sustainability
addresses both our environmental and social impacts, supporting the Group's vision to
remain an employer of choice, while meeting client demands for socially responsible partners.
Company policy strictly adheres to local laws and customs while complying with international
laws and regulations. These policies have been integral in the way group companies have
done business in the past and will continue to play a central role in influencing the Group's
practice in the future.
The ethical values of Angus Energy including environmental, social and community and
relationships, are set out on pages 10 and 11 of the Annual Report.
9. Maintain governance structures and processes that are fit for purpose and support good
decision- making by the Board
The Company has adopted a model code for directors' dealings and persons discharging
managerial responsibilities appropriate for an AIM company, considering the requirements
of the Market Abuse Regulations ("MAR"), and take reasonable steps to ensure compliance is
also applicable to the Group's employees (AIM Rule 21 in relation to directors' dealings).
The Corporate Governance Statement details the company’s governance structures, the role
and responsibilities of each director. Details and members of the Audit Committee,
20
Corporate Governance Statement
Remuneration Committee, Nomination Committee and AIM Rules compliance committee can
be found on pages 21.
10. Communicate how the company is governed and is performing by maintaining a
dialogue with shareholders and other relevant stakeholders.
The Company encourages two- way communication with both its institutional and private
investors and responds quickly to all queries received. The Managing Director talks regularly
with the Group’s major shareholders and ensures that their views are communicated fully to
the Board.
The Board recognises the AGM as an important opportunity to meet private shareholders.
The Directors are available to listen to the views of shareholders informally immediately
following the AGM.
To the extent that voting decisions are not in line with expectations, the Board will engage
with shareholders to understand and address any issues.
In addition to the investor relations activities carried out by the Company as set out above,
and other relevant disclosures included on this Investor Relations section of the Company’s
website, reports on the activities of each of the Committees during the year will be set out in
the Annual Report on page 21.
The Board and its committees
At the beginning of the reporting year, the Board of the Group consisted of one Executive
Directors and three non-Executive Directors. At the date of approval these financial
statements, this changed to three Executive Directors and two non-Executive Directors.
The Board met on 10 occasions during the year to 30
September 2019. The table below sets out the Board meetings
held by the Company for the financial year ended 30
September 2019 and attendance of each Director:
Executive Directors
George Lucan
Carlos Fernandes
Andrew Hollis
Paul Vonk
Non-Executive Directors
Patrick Clanwilliam
Cameron Buchanan
Board
meetings
[09/10]
[10/10]*
[09/10]
[02/10]
[08/10]
[10/10]
*Prior to Carlos Fernandes’ appointment to the Board, he was the Head of Finance of the Group and
attended every board meeting in the year.
21
Corporate Governance Statement
The Group has established an audit committee, a remuneration committee, a nomination
committee and an AIM Rules compliance committee with formally delegated duties and
responsibilities.
Audit committee
The audit committee comprised of Carlos Fernandes, George Lucan and Patrick Clanwilliam,
with Carlos Fernandes as chairman. On 9 January 2019, Rob Shepherd stepped down from
the group and Paul Vonk was replaced with George Lucan on 29 January 2019. On 6 March
2019, Cameron Buchanan was replaced by Patrick Clanwilliam and Carlos Fernandes was
appointed as chairman. The composition of these committees may change over time as the
composition of the Board changes.
The Audit Committee helps the Board discharge its responsibilities regarding financial
reporting, external and internal audits and controls as well as reviewing the Group’s annual
and half-year financial statements, other financial information and internal Group reporting.
The Auditor Committee Report is presented on page 21 to 22.
Remuneration committee
The remuneration committee comprised of Patrick Clanwilliam and Cameron Buchanan, with
Patrick Clanwilliam as chairman. On 9 January 2019, Rob Shepherd stepped down from the
Group and Cameron Buchanan took over as chairman. On 6 March 2019, Chris De Goey
stepped down and Patrick Clanwilliam was appointed as chairman. The composition of these
committees may change over time as the composition of the Board changes.
The remuneration committee will determine the scale and structure of the executive
directors’ and senior employees’ remuneration and the terms of their respective service or
employment contracts, including share option schemes and other bonus arrangements. The
remuneration and terms and conditions of the non-executive directors of the Group will be
set by the Chairman and executive members of the Board.
The Directors’ Remuneration Report is presented on page 26 to 28.
Nomination committee
The nomination committee comprised of Patrick Clanwilliam, Andrew Hollis and Cameron
Buchanan with Patrick Clanwilliam as chairman. On 9 January 2019 Rob Shepherd was
replaced with Chris De Goey and George Lucan added on 29 January 2019. On 6 March 2019
Chris De Goey was replaced with Andrew Hollis and George Lucan was replaced with Patrick
Clanwilliam. The composition of these committees may change over time as the composition
of the Board changes.
The nomination committee will determine the composition of the Board of the Group and
appointment of senior employees. It will develop succession plans as necessary and report to
the Directors.
22
Corporate Governance Statement
Where new Board appointments are considered the search for candidates is conducted, and
appointments are made, on merit, against objective criteria and with due regard for the
benefits of diversity on the Board, including gender.
The Board carries out an evaluation of its performance annually, taking into account the
Financial Reporting Council’s Guidance on Board Effectiveness.
AIM Rules compliance committee
The AIM Rules compliance committee comprised of George Lucan, Cameron Buchanan and
Patrick Clanwilliam with George Lucan as chairman. On 9 January 2019, Rob Shepherd
stepped down from the group and Cameron Buchanan took over as Chairman. Paul Vonk was
replaced with George Lucan as chairman on 29 January 2019. On 6 March 2019 Patrick
Clanwilliam was appointed.
The AIM Rules compliance committee will ensure that procedures, resources and controls are
in place to ensure that AIM Rules compliance by the Group is operating effectively at all times
and that the executive directors are communicating effectively with the Group’s nominated
adviser regarding the Group’s ongoing compliance with the AIM Rules and in relation to all
announcements and notifications and potential transactions.
The Board will keep the Group’s compliance with the new Market Abuse Regulation (MAR)
regime under review and will adopt such policies and practices as the Board consider
necessary to ensure such compliance from time to time. This includes compliance with
requirements regarding directors’ dealings.
The AIM Rules compliance committee met three times during the period under review to
discuss Jonathan Tidswell-Pretorius and general compliance issues.
Other matters
In 2017, a loan of £200,000 was advanced to former director, Jonathan Tidswell-Pretorius, in
connection with settling certain tax obligations arising from historical company matters,
approved by the non-executive directors in accordance with the Company's corporate
governance guidelines. The loan was repayable on demand and unsecured, and restrictions
were placed on equity or share option dealing by the director during the tenure of the loan.
The loan was subsequently repaid on 7 January 2020.
The Board believes that the Group has a strong governance culture and this has been re-
inforced by the adoption of the QCA Code and recognition of the key principles of corporate
governance set out in the QCA Code, which the Board continually considers in a manner
appropriate for a company of its size.
Patrick Clanwilliam
Chairman
04 March 2020
23
Audit Committee Report
The Audit Committee helps the Board discharge its responsibilities regarding financial
reporting, external and internal audits and controls as well as reviewing the Group’s annual
and half-year financial statements, other financial information and internal Group reporting.
This includes:
• considering whether the Company has followed appropriate accounting standards
and, where necessary, made appropriate estimates and judgments taking into account
the views of the external auditors;
reviewing the clarity of disclosures in the financial statements and considering
whether the disclosures made are set properly in context;
•
• where the audit committee is not satisfied with any aspect of the proposed financial
•
•
reporting of the Company, reporting its view to the Board of directors;
reviewing material information presented with the financial statements and corporate
governance statements relating to the audit and to risk management; and
reviewing the adequacy and effectiveness of the Company’s internal financial controls
and, unless expressly addressed by a separate board risk committee composed of
independent directors, or by the Board itself, review the Company’s internal control
and risk management systems and, except where dealt with by the Board or risk
management committee, review and approve the statements included in the annual
report in relation to internal control and the management of risk.
The Audit Committee assists by reviewing and monitoring the extent of non-audit work
undertaken by external auditors, advising on the appointment of external auditors and
reviewing the effectiveness of the Group’s internal controls and risk management systems.
The ultimate responsibility for reviewing and approving the Annual Report and financial
statements and the half-yearly reports remains with the Board.
During the year, no non-audit services were provided to the group for the year under review.
The audit committee considered the nature, scope of engagement and remuneration paid
were such that the independence and objectivity of the auditors were not impaired. Fees paid
for audit services are disclosed in Note 6.
During the financial year, the Audit Committee met twice with the auditor, Crowe U.K. LLP,
to review audit planning and findings with regard to the Annual Report and review comments
of the interim financial statements.
Significant reporting issues considered during the year included the following:
1. Impairments of oil assets
The Committee has reviewed the carrying values of the Groups oil assets, comprised of
the oil production assets, exploration and evaluation (E&E) assets. Based on the work
performed during the audit, and through discussions with management, the committee
considers that the carrying value of E&E assets are not impaired. The committee have
considerate prudent to impair the oil production assets by £0.9 million based on the
estimated oil reserves and forecast level of future production.
24
Audit Committee Report
2. Going concern
The Committee also considered the Going Concern basis on which the accounts have been
prepared and can refer shareholders to the Group’s accounting policy set out in Note 3.3
and Note 4 (c). The directors are satisfied that the going concern basis is appropriate for
the preparation of the financial statements.
Carlos Fernandes
Chairman – Audit Committee
25
Directors’ Remuneration Report
This report sets out the remuneration policy operated by the Company in respect of the
Executive and Non-Executive Directors. The remuneration policy is the responsibility of the
Remuneration Committee, a sub-committee of the Board. No Director is involved in
discussions relating to their own remuneration.
Remuneration policy
The objective of the proposed remuneration policy is to attract, retain and motivate high
calibre executives to deliver outstanding shareholder returns and at the same time maintain
an appropriate compensation balance with the other employees of the Group.
Directors’ remuneration
The normal remuneration arrangements for Executive Directors consists of base salary,
performance bonuses and other benefits as determined by the Board. Each of the Executive
Directors has a service agreement that can be terminated at any time by either party giving
to the other twelve months’ written notice. Compensation for loss of office is restricted to
base salary and benefits only.
The remuneration packages for the Executive Directors are detailed below:
• Base Salary:
Annual review of the base salaries of the Executive Directors are concluded after
taking into account the Executive Directors’ role, responsibilities and contribution to
the Group performance.
• Performance Bonus:
Bonus arrangements are discretionary and are payable depending on the
performance of the Executive Directors in meeting their key performance indicators
and in the wider context with the performance of the Group.
• Benefits:
Benefits include payments for provident funds that are mandatory and statutory
pension payments as required by laws of the resident countries of the Executive
Directors, health insurance and other benefits.
• Longer term incentives:
In order to further incentivise the Directors and employees, and align their interests
with shareholders, the Company has granted share options in the current and
previous years, as set out on page 28. The share options will vest at various future
dates as described in the note 16 to the financial statements. There are no conditions
attached to vesting other than service conditions.
Non-Executive Directors are remunerated solely in the form of Director Fees determined by
the Board and are not entitled to pensions, annual bonuses or employee benefits.
26
Directors’ Remuneration Report
Performance evaluation
All Directors undergo a performance evaluation before being proposed for re- election to
ensure that their performance is and continues to be effective, that where appropriate they
maintain their independence and that they are demonstrating continued commitment to the
role.
Appraisals are carried out each year with all Executive Directors. All continuing Directors stand
for re-election every 3 years. Succession planning at the current time is limited due to the
current size of the Board.
The tables below set out the respective Directors’ remuneration and fees:
2019
George Lucan
Andrew Hollis
Carlos Fernandes
Cameron Buchanan
Patrick Clanwilliam
Paul Vonk
Chris De Goey
Robert Shepherd
2018
Jonathan Tidswell – Pretorius
Paul Vonk
Cameron Buchanan
Robert Shepherd
Chris De Goey
Salary
£’000
82
60
60
26
68
30
8
6
---------------
340
===========
Termination
payment
-
-
-
-
-
300
-
-
---------------
300
===========
Share based
payment
£’000
10
10
10
10
10
-
-
-
--------------
50
==========
Total
£’000
92
70
70
36
78
330
8
6
-------------
690
=========
Salary
£’000
Share based
payment
£’000
90
120
20
20
20
---------------
270
===========
-
-
-
-
-
--------------
-
==========
Total
£’000
90
120
20
20
20
-------------
270
=========
The Remuneration Committee met twice during the year to review the scale and structure of
the executive directors’ and senior employees’ remuneration.
27
Directors’ Remuneration Report
The Remuneration Committee proposed the grant of 23.9 million share options under the
Company’s existing Employee Incentive Schemes (the “Options”) to Directors and other staff.
A further 10.65 million share options were issued during the period. The share options to be
granted were approved by the Board as part of the Company’s annual share option grants.
The share options are as follows:
George Lucan
Carlos Fernandes
Cameron Buchanan
Andrew Hollis
Patrick Clanwilliam
Other employees
3,100,000
5,100,000
3,750,000
4,100,000
3,100,000
15,400,000
34,550,000
Patrick Clanwilliam
Chairman – Remuneration Committee
28
Board of Directors
George Lucan
Managing Director
Experienced finance professional with over thirty years' behind him in debt and equity
markets. After graduating from Cambridge University, he began his career at Dresdner
Kleinwort Benson where he spent 10 years, mainly within the Structured Finance team, and
continued in alternative fund management, most recently with Rudolf Wolff Limited. He
brings, in addition, private equity experience in the fields of energy and alternative energy.
Andrew Hollis
Technical Director
Andrew has over 40 years’ experience in all technical aspects of oil and gas, exploration and
production. After 25 years in petroleum and reservoir engineering for British Gas he became
an independent consultant specialising in Russia, the FSU and Eastern Europe and also
provided specialist reserves determination skills to Gaffney Cline and Associates.
Carlos Fernandes
Finance Director
Carlos has been part of the Angus team since 2013 and has seen the company’s transition
from private to public. Prior to his appointment as Finance Director he was the Chief Financial
Officer of the group. He has over 11 years commercial experience working in the Mining and
Oil & Gas industry.
Cameron Buchanan
Non-Executive Director
Cameron Buchanan is a former Scottish politician, who served as a Scottish Conservative Party
Member of the Scottish Parliament for the Lothian region from 2013 to 2016. After a career
in the Scottish textile industry he also served as vice-chairman of the Scottish. Conservatives.
Buchanan was educated at St Edward's School & Sorbonne Universit.Cameron is also
Honorary Consul for the Philippines in Scotland and serves on the Boards of many other UK
companies.
Patrick Clanwilliam
Non-Executive Chairman
Paddy’s previous responsibilities include the Chair of Eurasia Drilling Company Limited
(EDCL.LI) the largest drilling and work-over company in Eurasia. He is also a former non-
executive director of SOMA Oil & Gas, a private exploration play in deepwater offshore
Somalia and OJSC Polyus Gold (OPYGY) the largest Russian gold mining company by market
share.
29
Directors’ Report
Directors’ Report
The Directors present their report together with the audited consolidated financial
statements of Angus Energy plc for the year ended 30 September 2019.
Results and Dividends
The Group recorded a loss after tax of £5.043m for the year (2018: £2.790m). The Directors
do not recommend the payment of a dividend.
Directors
The Directors who were in office during the year and up to the date of signing the financial
statements, unless stated, were:
Executive Director
George Lucan – appointed on 29 January 2019
Carlos Fernandes – appointed on 6 March 2019
Andrew Hollis – appointed on 6 March 2019
Paul Vonk- resigned on 29 January 2019
Non-Executive Director
Patrick Clanwilliam – appointed on 6 March 2019
Cameron Buchanan
Robert Shepherd resigned on 29 January 2019
Chris De Gooey resigned on 6 March 2019
The Directors of the Company at the date of this report, and their biographical summaries,
are given on page 29.
The Directors’ remuneration is detailed in the Directors’ Remuneration Report on page 28. All
Directors benefit from the provision of Directors’ and Officers’ indemnity insurance policies.
Premiums payable to third parties were £7,840 (2018 – 8,033).
Research and development
As disclosed in Note 11 and 12, the Group incurred expenditure in development of oil field.
There is no other research and development activity during the year under review.
Share Capital
At the date of this report ordinary shares are issued and fully paid. Detail of movement in
share capital during the year is given in note 15 to the financial statements.
30
Directors’ Report
Substantial Shareholders
As of the date of this report the Group had been notified of the following interests of 3% or
more in the Group’s ordinary share capital:
Knowe Properties Limited
Rupert Labrum
JDA Consulting Ltd
Jonathan Tidswell-Pretorius*
Percentage of
shareholding
7.96%
6.99%
5.25%
4.75%*
* The former Executive Director Jonathan Tidswell-Pretorius holds 3% or more in the Group’s
share capital.
Share options
During the year, the Company has granted the following share options with a weighted
average exercise price of £0.0385.
George Lucan
Carlos Fernandes
Other staff (excluding consultants and non-executive directors)
Andrew Hollis
Cameron Buchanan
Patrick Clanwilliam
Consultants and other service providers
Number of
options
3,100,000
5,100,000
12,850,000
4,100,000
3,750,000
3,100,000
2,550,000
34,550,000
Percentage of
total options
available
9.0%
14.7%
37.0%
12.0%
11.0%
9.0%
7.3%
Financial Instruments
The financial risk management objectives and policies of the Group in relation to the use of
financial instruments and the exposure of the Group and its subsidiary undertakings to its
main risks, credit risk and liquidity risk, are set out in note 22 to the financial statements.
Employees
The Group had 11 employees as at 30 September 2019 (2018: 11). Employees are encouraged
to directly participate in the business through an Enterprise Management Incentive Scheme,
which set out in note 16 to the financial statements.
31
Directors’ Report
Going Concern
As disclosed in Note 3.3 to the financial statements, it refers to the assumptions made by the
Directors when concluding that it remains appropriate to prepare the financial statements on
the going concern basis.
Events after the reporting period
Events after the reporting period have been disclosed in Note 26.
Disclosure of Information to the Auditor
In the case of each person who was a Director at the time this report was approved:
• so far as the Director was aware there was no relevant audit information of which the
•
Company’s auditor was unaware; and
the Director has taken all steps that the he ought to have taken as a Director to make
himself aware of any relevant audit information and to establish that the Company’s
auditor was aware of that information.
Auditor
A resolution to reappoint the auditor, Crowe U.K. LLP, will be proposed at the forthcoming
Annual General Meeting.
Approved by the Board of Directors and signed on behalf of the Board.
George Lucan
Managing Director
32
Statement of Directors’ Responsibilities
Statement of Director’s Responsibilities
The Directors are responsible for preparing the Strategic Report, Directors’ Report and the
financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare Group and Company financial statements for
each financial year. The Directors are required by the AIM Rules of the London Stock Exchange
to prepare Group financial statements in accordance with International Financial Reporting
Standards (‘IFRS’) as adopted by the European Union (‘EU’) and have elected under the
company law to prepare the Company statements in accordance with UK accounting
standards.
The financial statements are required by law and applicable accounting standards to present
fairly the financial position of the Group and the Company and the financial performance of
the Group. The Companies Act 2006 provides in relation to such financial statements that
references in the relevant part of that Act to financial statements giving a true and fair view
are references to their achieving a fair presentation.
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 of the Group and the
Company and of the profit or loss of the Group for that period.
In preparing the Group and Company financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• state whether applicable accounting standards have been followed, subject to any
material departures disclosed and explained in the financial statements;
• prepare the Strategic Report and Directors’ report which comply with the
requirements of the Companies Act 2006;
• prepare financial statements on the going concern basis unless it is inappropriate to
presume that the Group and the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to
show and explain the Group’s and the Company’s transactions and disclose with reasonable
accuracy at any time the financial position of the Group and 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 Group and the Company and hence for taking
reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial
information included on the Angus Energy PLC website www.angusenergy.co.uk.
Legislation in the United Kingdom governing the preparation and dissemination of financial
statement may differ from legislation in other jurisdictions.
33
Independent Auditor’s Report To The Members of Angus Energy Plc
Opinion
We have audited the financial statements of Angus Energy plc (the “Parent Company”) and its
subsidiaries (the “Group”) for the year ended 30 September 2019, which comprise:
•
•
•
•
•
the Group statement of comprehensive income for the year ended 30 September 2019;
the Group and parent company statements of financial position as at 30 September 2019;
the Group statement of cash flows for the year then ended;
the Group and parent company statements of changes in equity for the year then ended; and
the notes to the financial statements, including a summary of significant accounting policies.
The financial reporting framework that has been applied in the preparation of the Group financial
statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the
European Union. The financial reporting framework that has been applied in the preparation of the
Parent Company financial statements is applicable law and United Kingdom Accounting Standards,
including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and
Republic of Ireland’ (United Kingdom Generally Accepted Accounting Practice).
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 30 September 2019 and of the Group’s loss for the year then ended;
the Group financial statements have been properly prepared in accordance with IFRSs as
adopted by the European Union;
the Parent Company financial statements have been properly prepared in accordance with
United Kingdom Generally Accepted Accounting Practice; and
the financial statements 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 and Parent Company 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, 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.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which ISAs (UK) require us
to report to you where:
• The directors’ use of the going concern basis of accounting in the preparation of the financial
statements is not appropriate; or
• The directors have not disclosed in the financial statements any identified material uncertainties
that may cast significant doubt about the Group’s or the parent company’s ability to continue to
adopt the going concern basis of accounting for a period of at least twelve months from the date
when the financial statements are authorised for issue.
34
Independent Auditor’s Report To The Members of Angus Energy Plc
Overview of our audit approach
Materiality
In planning and performing our audit we applied the concept of materiality. An item is considered
material if it could reasonably be expected to change the economic decisions of a user of the financial
statements. We used the concept of materiality to both focus our testing and to evaluate the impact
of misstatements identified.
Based on our professional judgement, we determined overall materiality for the Group financial
statements as a whole to be £330,000 (2018: £200,000), based on 2% of Group total assets.
We use a different level of materiality (‘performance materiality’) to determine the extent of our testing
for the audit of the financial statements. Performance materiality is set based on the audit materiality
as adjusted for the judgements made as to the entity risk and our evaluation of the specific risk of each
audit area having regard to the internal control environment.
Where considered appropriate performance materiality may be reduced to a lower level, such as, for
related party transactions and directors’ remuneration.
We agreed with the Audit Committee to report to it all identified errors in excess of £13,750 (2018:
£6,000). Errors below that threshold would also be reported to it if, in our opinion as auditor, disclosure
was required on qualitative grounds.
Overview of the scope of our audit
Our Group audit scope included a full audit of all three reporting entities which account for 100% of
the Group’s net assets and loss before tax.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, 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) that we identified. These matters included
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.
Key audit matter
How the scope of our audit addressed the key audit
matter
Carrying value of oil & gas
production assets
At 30 September 2019, the carrying value of oil & gas
production assets was £6.416million.
We focused on this area due to the significance of the
carrying value of the assets. The risk of impairment was
considered likely to be highly sensitive to assumptions
and estimates about future oil and gas prices and
discount rate. Other assumption include exchange rates,
future production levels, reserves and operating costs.
35
Independent Auditor’s Report To The Members of Angus Energy Plc
We evaluated management’s assessment of indicators
of impairment and recoverability assessment for the
Group’s oil & gas production assets. We have:
•
tested price and discount rate assumptions by
comparing forecast oil price assumptions to the
latest market evidence available and reviewed the
reasonableness of the discount rate applied;
tested the accuracy of the forecast cash flows and
the assumptions used within the cash flow
projection model.
•
• We assessed the quality of management’s previous
budgets and forecasts by comparing them to actual
performance.
We have considered the adequacy of the disclosure to
the financial statements in respect of the impairment
recognised and the work performed by management
including the key judgement and sensitivity analysis
presented in note 4 and note 11 respectively. The
recoverable value of the Brockham and Lidsey
production assets are based on the net present value of
estimated future net cash flow after the application of
an appropriate discount rate. If the production rate or
reserve quantity are less than anticipated, appropriate
adjustments would be necessary to further impair the
carrying value of these assets.
Carrying value of exploration and
evaluation (E&E) assets
At 30 September 2019, the carrying value of exploration
and evaluation assets was £5.878million.
We obtained and reviewed the contracts of agreement
for the farm-in interest acquired in Saltfeetby. We also
reviewed management’s assessment of the future
decommissioning costs and assessed the
appropriateness of the assumptions concerning the
timing and discounting of the estimated cost of
decommissioning.
We reviewed management’s assessment of indicators of
impairment for the ongoing exploration assets under
IFRS 6 including the review of the validity of the licence
and the progress of the technical work to date. In
addition, we evaluated management’s Net Present Value
(NPV) models for the Balcombe assets. We challenged
the key estimates and assumptions used by
management.
36
Independent Auditor’s Report To The Members of Angus Energy Plc
Going concern
We reviewed the disclosure made concerning this
matter to ensure that it is consistent with our
understanding.
We reviewed management’s financial projections for the
Group for a period of more than 12 months from the
date of approval of the financial statements. We
challenged management on the assumptions underlying
those projections and sensitised them to reduce
anticipated net cash inflows from future trading
activities.
We assessed the completeness and accuracy of the
matters described in the going concern disclosure within
the significant accounting policies and the critical
judgements, as set out in Note 3.3 and 4 respectively.
Our audit procedures in relation to these matters were designed in the context of our audit opinion as
a whole. They were not designed to enable us to express an opinion on these matters individually and
we express no such opinion.
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.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion based on the work undertaken in the course of our 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 directors’ report have been prepared in accordance with applicable
legal requirements.
37
Independent Auditor’s Report To The Members of Angus Energy Plc
Matters on which we are required to report by exception
In light of the knowledge and understanding of the Group and the Parent Company and their
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 where the Companies Act 2006 requires
us to report to you if, in our opinion:
• adequate accounting records have not been kept by the Parent Company, or returns adequate
•
for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records
and returns; or
•
certain disclosures of directors' remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of the directors for the financial statements
As explained more fully in the directors’ responsibilities statement set out on page 33, 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 the parent company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report
that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the
Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description
forms part of our auditor’s report.
38
Independent Auditor’s Report To The Members of Angus Energy Plc
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.
John Glasby
Senior Statutory Auditor
For and on behalf of
Crowe U.K. LLP
Statutory Auditor
St Bride’s House
10 Salisbury Square
London EC4Y 8EH
Date: 04 March 2020
39
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
YEAR ENDED 30 SEPTEMBER 2019
Revenue
Cost of sales
Gross loss
Administrative expenses
Impairment charge
Share option charge
Operating loss
Finance income
Finance cost
Loss before taxation
Taxation
Loss for the year
Note
5
11
16
6
7
7
9
2019
£’000
200
(295)
(95)
(3,976)
(900)
(79)
(5,050)
7
-
(5,043)
-
(5,043)
2018
£’000
66
(167)
(101)
(2,230)
-
(75)
(2,406)
6
(390)
(2,790)
-
(2,790)
Total comprehensive loss for the year
(5,043)
(2,790)
Loss for the year attributable to:
Owners of the parent company
Total comprehensive loss attributable to:
Owners of the parent company
(5,043)
(2,790)
(5,043)
(5,043)
(2,790)
(2,790)
Earnings per share (EPS) attributable to owners of the parent:
18
Basic and diluted EPS (in pence)
(1.08)
(0.94)
The notes on page 44 to 64 form part of these of financial statements
All amounts are derived from continuing operations.
40
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 SEPTEMBER 2019
ASSETS
Non-current assets
Property, plant and equipment
Exploration and evaluation assets
Oil & gas production assets
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
TOTAL ASSETS
EQUITY
Equity attributable to owners of the parent:
Share capital
Share premium
Merger reserve
Accumulated loss
TOTAL EQUITY
Current liabilities
Trade and other payables
Total current liabilities
Non-current Liabilities
Provisions
Total non-current liabilities
TOTAL LIABILITIES
Note
2019
£’000
2018
£’000
10
12
11
14
15
15
17
19
20
14
5,878
6,416
12,308
794
3,419
4,213
20
5,218
5,225
10,463
791
846
1,637
16,521
12,100
1,082
21,117
(200)
(9,561)
763
14,142
(200)
(4,597)
12,438
10,108
1,031
1,031
3,052
3,052
4,083
1,440
1,440
552
552
1,992
TOTAL EQUITY AND LIABILITIES
16,521
12,100
The notes on page 44 to 64 form part of these of financial statements
The financial statements were approved by the Board of Directors and authorized for issue on 04 March 2020 and
were signed on its behalf by:
George Lucan - Director
Company number: 09616076
41
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
YEAR ENDED 30 SEPTEMBER 2019
Share capital
£’000
Share
premium
£’000
Merger
reserve
£’000
Accumulated
loss
£’000
Total equity
£’000
Balance at 30 September 2017
481
5,753
(200)
(1,882)
4,152
Loss for the year
Total comprehensive income for
the year
Transaction with owners
Issue of shares
Less: issuance costs
Grant of share options
Balance at 30 September 2018
Loss for the year
Total comprehensive loss for the
year
Transaction with owners
Issue of shares
Less: issuance costs
Grant of share options
-
-
282
-
-
763
-
-
319
-
-
-
-
8,659
(270)
-
-
-
-
-
-
(2,790)
(2,790)
(2,790)
(2,790)
-
-
75
8,941
(270)
75
14,142
(200)
(4,597)
10,108
-
-
7,450
(475)
-
-
-
-
-
-
(5,043)
(5,043)
(5,043)
(5,043)
-
-
79
7,769
(475)
79
Balance at 30 September 2019
1,082
21,117
(200)
(9,561)
12,438
The notes on page 44 to 64 form part of these of financial statements
42
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED 30 SEPTEMBER 2019
Cash flow from operating activities
Loss for the period before taxation
Adjustment for:
Share option charge
Equity settled in lieu professional fees
Interest receivables
Interest payable
Impairment charge
Depreciation of owned assets
Cash used in operating activities before changes in working
capital
Change in trade and other receivables
Change in other payables and accruals
Cash used in operating activities before tax
Income tax paid
Year ended 30
September
2019
£’000
Year ended 30
September
2018
£’000
(5,043)
(2,790)
79
60
(7)
-
900
36
75
226
(6)
390
-
26
(3,975)
(2,079)
3
(408)
(4,380)
-
(44)
1,115
(1,008)
-
Net cash flow used in operations
(4,380)
(1,008)
Cash flow from investing activities
Proceeds from acquisition exploration and evaluation assets
Acquisition of property, plant and equipment
Acquisition of exploration and evaluation assets
Acquisition of oil production assets
10
12
11
Net cash flow from investing activities
Cash flow from financing activities
Proceeds from issuance of convertible loan notes
Proceeds from issuance of shares
Net cash flow from financing activities
Net increase/(decrease) in cash & cash equivalents
Cash and equivalent at beginning of period
Cash and equivalent at end of period
Details of the non-cash transaction are disclosed in note 16.
The notes on page 44 to 64 form part of these of financial statements
2,500
-
(660)
(1,684)
-
(16)
(5,011)
(2,399)
156
(7,426)
-
6,797
6,797
2,573
846
3,419
3,000
5,056
8,056
(378)
1,224
846
43
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1.
General information
Angus Energy Plc (the “Company”) is incorporated and domiciled in the United Kingdom. The address of the
registered office is Building 3 Chiswick Park, 566 Chiswick High Road, London, W4 5YA.
The principal activity of the Company is that of investment holding. The principal activity of the Group is that
of oil and gas extraction for distribution to third parties. The principal activities of the various operating
subsidiaries are disclosed in note 13.
2.
Presentation of financial statements
The financial statements have been presented in Pounds Sterling (£) as this is the currency of the primary
economic environment that the group operates in. The amount are rounded to the nearest thousand (£’000),
unless otherwise stated.
3.
Accounting policies
The principal accounting policies applied in the preparation of these financial statements are set out below.
3.1
Basis of preparation
These financial statements have been prepared in accordance with International financial Reporting
standards (IFRSs) as adopted by the European Union and the Companies Act 2006. The financial statements
have been prepared on the historical cost basis except for certain assets which are stated at their fair value.
3.2
New standards, amendments to and interpretations to published standards not yet effect
A number of new standards and amendments to standards and interpretations have been issued but are not
yet effective and in some cases have not yet been adopted by the EU. The directors do not expect that the
adoption of these standards will have a material impact on the financial statements of the Group in future
periods, except as mentioned below:
(a) IFRS 9, Financial instruments
IFRS 9 addresses the classification, measurement and recognition of financial assets and financial liabilities.
It simplifies the existing categories of financial instruments, introduces an expected credit loss model and
redefines the criteria required for hedge effectiveness. With the adoption of IFRS 9, the Group has applied
the exemption from the requirement to restate comparative information about classification and
measurement, including impairment. The impact of adopting IFRS 9 on the Group’s statement of financial
position and accumulated loss was deemed to be immaterial and as such no adjustments have been recorded
on transition.
(b) IFRS 15, Revenue from contracts with customer
During the reporting period, the Group also adopted IFRS 15 Revenue from contracts with customer. The
revenue is recognised based on the delivery of performance obligations and an assessment of when control
is transferred to the customer. In determining the amount of revenue and profits to record, and associated
statement of financial position items (such as trade receivables, accrued income and deferred income),
management is required to review performance obligations within individual contracts. The impacts of the
introduction of IFRS 15 have been stated below in note 3.15.
(c) IFRS 16, Leases
The Group will adopt IFRS 16 from the date of initial application of 1 January 2019. IFRS 16 requires the
recognition of most operating lease commitments on the Group’s statement of financial position as assets
and the recognition of a corresponding liability. It is anticipated that the minimum lease payments of
£622,000 (see note 25), will be capitalised as the additional right of use assets, with an initial corresponding
lease liability. The recognition of depreciation charge and implied interest charges replacing lease payments
within consolidated income statements.
44
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3.3
Going concern
The consolidated financial statements have been prepared on a going concern basis. The Group made a loss
for the year of £5.04 million (2018: loss of £2.79 million) and recorded a net cash outflow from operating
activities of £4.38 million (2018: £1.01 million).
The Group meets its day to day working capital requirements through existing cash reserves. At 30 September
2019, the Group had £3.42 million of available cash. Subsequent to the year end, the Group entered into a
£1.5 million loan facility of which £1 million gross proceeds was drawn down.
The Directors have assessed the Group’s working capital forecasts for a minimum of 12 months from the date
of the approval of this financial statements. In undertaking this assessment, the Directors have reviewed the
underlying business risks, and the potential implications these risks would have on the Group’s liquidity and
its business model over the assessment period. This assessment included a detailed cash flow analysis
prepared by the management, and they also considered a number of reasonably plausible downside
scenarios. Based on the current management’s plan, management considered that the working capital from
the expected revenue generation are sufficient for the expenditure to date as well as the planned forecast
expenditure for the forthcoming twelve months from the date of the approval of this financial statements.
As a result of that review the Directors consider that it is appropriate to adopt the going concern basis of
preparation.
These financial statements do not include any adjustment that may result from any significant changes in the
assumption used.
3.4
Basis of consolidation
The consolidated financial statements comprise the financial information of the Company and its subsidiaries
(the “Group”) made up to the end of the reporting period. Control is achieved when the Group is exposed,
or has rights, to variable returns from its involvement with the investee and has the ability to affect those
returns through its power over the investee.
The consolidated financial statements present the results of the Company and its subsidiaries and joint
arrangements as if they formed a single entity. Inter-company transactions and balances between group
companies are therefore eliminated in full. The financial information of subsidiaries is included in the Group’s
financial statements from the date that control commences until the date that control ceases.
Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders
of the parent of the Group. When necessary, adjustments are made to the financial information of
subsidiaries to bring their accounting policies into line with the Group’s accounting policies. All intragroup
assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of
the Group are eliminated in full on consolidation.
The acquisition of Angus Energy Holding Limited by the Company, by way of share exchange, for the year
ended 30 September 2016 was that of a re-organisation of entities which were under common control. As
such, that combination also falls outside the scope of IFRS 3 ‘Business Combinations’ (Revised 2008). The
Directors have, therefore, decided that it is appropriate to reflect the combination using the merger basis of
accounting in order to give a true and fair view. No fair value adjustments were made as a result of that
combination.
3.5
Property, plant and equipment
All fixed assets are initially recorded at cost. Depreciation is calculated so as to write off the cost of an asset,
less its estimated residual value, over the useful economic life of that asset as follows:
Fixtures and fittings
Plant and machinery
Motor vehicles
-
-
-
25% straight line
20% straight line
20% straight line
45
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3.6
Oil and natural gas exploration and evaluation (E&E) expenditure
Oil and natural gas exploration and evaluation expenditure is accounted for using the successful efforts
method of accounting.
(a)
Licence and property acquisition costs
Licence and property leasehold acquisition costs are capitalised within intangible fixed assets and amortised
on a straight-line basis over the estimated period of exploration. Upon determination of economically
recoverable reserves amortisation ceases and the remaining costs are aggregated with exploration
expenditure and held on a field-by-field basis as proved properties awaiting determination within intangible
fixed assets. When development is sanctioned, the relevant expenditure is transferred to tangible production
assets.
(b)
Exploration expenditure
Geological and geophysical exploration costs are charged against income as incurred. Costs directly
associated with an exploration well are capitalised as an intangible asset until drilling of the well is complete
and the results have been evaluated. If hydrocarbons are not found, the exploration expenditure is written
off as a dry hole. If hydrocarbons are found, and, subject to further appraisal activity, are likely to be capable
of commercial development, the costs continue to be carried as an asset. All such carried costs are subject to
regular technical, commercial management review to confirm the continued intent to develop or otherwise
extract value from the discovery. When this is no longer the case, the costs are written off. When proven and
probable reserves of oil and gas are determined and development is sanctioned, the relevant expenditure is
transferred to tangible production assets.
(c)
Development expenditure
Expenditure on the construction, installation and completion of infrastructure facilities such as platforms,
pipelines and the drilling of development wells, including unsuccessful development or delineation wells, is
capitalised within tangible production assets.
(d)
Maintenance expenditure
Expenditure on major maintenance, refits or repairs is capitalised where it enhances the performance of an
asset above its originally assessed standard of performance; replaces an asset or part of an asset which was
separately depreciated and which is then written off; or restores the economic benefits of an asset which has
been fully depreciated. All other maintenance expenditure is charged to income as incurred.
Treatment of E&E assets at conclusion of appraisal activities
Intangible E&E assets related to each exploration licence/prospect are carried forward, until the existence
(or otherwise) of commercial reserves has been determined. If commercial reserves have been discovered,
the related E&E assets are assessed for impairment on a cost pool basis as set out below, and any
impairment loss of the relevant E&E assets is then reclassified as development and production assets.
46
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3.7
Financial instruments
Financial assets and 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.
Loan and receivables
Loans and receivables are recognised initially at fair value plus any directly attributable transaction costs.
Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective
interest method, less any impairment losses.
Trade receivables are recognised initially at the transaction price and subsequently measured at amortised
cost, less any impairment losses.
Trade and other payables
Trade and other payables are initially measured at fair value, net of transaction costs, and are subsequently
measured at amortised cost, where applicable, using the effective interest method, with interest expense
recognised on an effective yield basis.
3.8
Impairment of assets
(a)
Financial assets
Impairment provisions for current and non-current trade receivables are recognised based on the simplified
approach within IFRS 9 using a historical provision matrix in the determination of the lifetime expected credit
losses. During this process the probability of the non-payment of the trade receivables is assessed. This
probability is then multiplied by the amount of the expected loss arising from default to determine the
lifetime expected credit loss for the trade receivables. For trade receivables, which are reported net, such
provisions are recorded in a separate provision account with the loss being recognised within administration
costs in the consolidated statement of comprehensive income. On confirmation that the trade receivable will
not be collectable, the gross carrying value of the asset is written off against the associated provision.
Impairment provisions for receivables from related parties and loans to related parties are recognised based
on a forward looking expected credit loss model. The methodology used to determine the amount of the
provision is based on whether there has been a significant increase in credit risk since initial recognition of
the financial asset. For those for which credit risk has increased significantly, lifetime expected credit losses
are recognised, unless further information becomes available contrary to the increased credit risk. For those
that are determined to be permanently credit impaired, lifetime expected credit losses are recognised.
(b)
Non-financial assets
The carrying amounts of the Group’s non-financial assets, other than deferred tax assets, are reviewed at
each reporting date to determine whether there is any indication of impairment. If any such indication exists,
then the asset’s recoverable amount is estimated. For assets that have indefinite lives, the recoverable
amount is estimated at each reporting date.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value
less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present
value using a pre-tax discount rate that reflects current market assessments of the time value of money and
risk specific to the asset. For the purpose of impairment testing, assets are grouped together into the smallest
group of assets that generates cash inflows from continuing use that are largely independent of the cash
inflows of other assets or groups of assets (the “cash generating unit”).
An impairment loss is recognised if the carrying amount of an asset or its cash generating unit exceeds its
estimated recoverable amount. Impairment losses are recognised in the profit or loss.
47
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3.9
Oil and gas production assets
Expenditures related to the construction, installation or completion of infrastructure facilities, such as
platforms and pipelines, and the drilling of development wells, including delineation wells, is capitalised
within oil and gas production assets. The initial cost of an asset comprises its purchase price or construction
cost, any costs directly attributable to bringing the asset into operation, the initial estimate of the well asset
retirement obligation, for qualifying assets, and borrowing costs.
Oil and gas production assets are depreciated using a unit of production method. The cost of producing wells
is amortised over total proved and undeveloped oil and gas reserves of the field concerned, except in the
case of assets whose useful life is shorter than the lifetime of the field, in which case the straight-line method
is applied. Rights and concessions are depleted on the unit-of-production basis over the total proved
developed and undeveloped reserves of the relevant area. The unit-of-production rate calculation for the
depreciation of field development costs takes into account expenditures incurred to date, together with
sanctioned future development expenditure.
In accounting for a farm-out arrangement outside the exploration and evaluation phase, the Group:
• Derecognises the proportion of the asset that it has sold to the farmee
• Recognises the consideration received or receivable from the farmee, which represents the cash
received and/or the farmee’s obligation to fund the capital expenditure in relation to the interest
retained by the farmor
• Recognises a gain or loss on the transaction for the difference between the net disposal proceeds
and the carrying amount of the asset disposed of. A gain is recognised only when the value of the
consideration can be determined reliably. If not, then the Group accounts for the consideration
received as a reduction in the carrying amount of the underlying assets
Tests the retained interests for impairment if the terms of the arrangement indicate that the
retained interest may be impaired
•
The consideration receivable on disposal of an item of property, plant and equipment or an intangible asset
is recognised initially at its fair value by the Group. However, if payment for the item is deferred, the
consideration received is recognised initially at the cash price equivalent. The difference between the
nominal amount of the consideration and the cash price equivalent is recognised as interest revenue. Any
part of the consideration that is receivable in the form of cash is treated as a financial asset and is accounted
for at amortised cost.
3.10 Contingent liabilities and contingent assets
A contingent liability is a possible obligation that arises from past events and whose existence will only be
confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within
the control of the Group. It can also be a present obligation arising from past events that is not recognised
because it is not probable that outflow of economic resources will be required or the amount of obligation
cannot be measured reliably.
A contingent liability is not recognised but is disclosed in the notes to the accounts. When a change in the
probability of an outflow occurs so that the outflow is probable, it will then be recognised as a provision. A
contingent asset is a possible asset that arises from past events and whose existence will be confirmed only
by the occurrence or non-occurrence of one or more uncertain events not wholly within the control of the
Group. Contingent assets are not recognised but are disclosed in the notes to the accounts when an inflow
of economic benefits is probable. When inflow is virtually certain, an asset is recognised.
3.11
Operating lease agreements
Rentals applicable to operating leases where substantially all of the benefits and risks of ownership remain
with the lessor are charged against profits on a straight line basis over the period of the lease.
48
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3.12
Income tax
Income tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported
comprehensive income statement because it excludes items of income or expense that are taxable or
deductible in other years and it further excludes items that are not taxable or tax deductible. The Group’s
liability for current tax is calculated using tax rates (and tax laws) that have been enacted or substantively
enacted in countries where the Group and its subsidiaries operate by the end of the financial period.
Deferred income taxes are calculated using the balance sheet method. Deferred tax is generally provided on
the temporary difference between the carrying amounts of assets and liabilities and their tax bases. However,
deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an asset or
liability unless the related transaction is a business combination or affects tax or accounting profit. Deferred
tax on temporary differences associated with shares in subsidiaries and joint ventures is not provided if
reversal of these temporary differences can be controlled by the Group and it is probable that reversal will
not occur in the foreseeable future. In addition, tax losses available to be carried forward as well as other
income tax credits to the Group are assessed for recognition as deferred tax assets.
Deferred tax liabilities are provided in full, with no discounting. Deferred tax assets are recognised to the
extent that it is probable that the underlying deductible temporary differences will be able to be offset against
future taxable income. Current and deferred tax assets and liabilities are calculated at tax rates that are
expected to apply to their respective period of realisation, provided they are enacted or substantively
enacted at the reporting date.
Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the Consolidated
Statement of Comprehensive Income, except where they relate to items that are charged or credited directly
to equity in which case the related deferred tax is also charged or credited directly to equity.
3.13
Foreign currencies
Assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the
reporting date. Transactions in foreign currencies are translated into sterling at the rate of exchange ruling
at the date of the transaction. Exchange differences are taken into account in arriving at the operating profit
or loss.
3.14 Decommissioning
Provision for decommissioning is recognised in full on the installation of oil and gas production facilities. The
amount recognised is the present value of the estimated future expenditure determined in accordance with
local conditions and requirements. A corresponding tangible fixed asset of an amount equivalent to the
provision is also created. This is subsequently depreciated as part of the capital costs of the production and
transportation facilities. Any change in the present value of the estimated expenditure is reflected in an
adjustment to the provision and fixed asset.
3.15
Revenue
As described in note 3.2(b), the Group’s revenue is driven by sale of crude oil, the goods are sold on their
own in separate identified contracts with customers. Delivery point of the sale is the point at which Crude oil
passes from the delivery tanker to the customers specified storage terminal, which represents the point at
which the Group fulfils its single performance obligation to its customer under contracts for the sale of crude
oil. Revenue from the production of oil in which the Group has an interest with other producers is recognised
proportionately based on the Group’s working interest and the terms of the relevant production sharing
contracts.
Interest income is accrued on a time basis, by reference to the principal outstanding and at the applicable
effective interest rate.
49
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3.16
Share-based payments
The Group has applied IFRS 2 Share-based Payment for all grants of equity instruments.
The Group issues equity-settled share-based payments to its employees. Equity-settled share-based
payments are measured at fair value at the date of grant. The fair value determined at the grant date of the
equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on
the Group’s estimate of the shares that will eventually vest.
Fair value is measured using the Black Scholes model. The expected life used in the model has been adjusted,
based on management’s best estimate, for the effects of non-transferability, exercise restrictions and
behavioural considerations. The inputs to the model include: the share price at the date of grant, exercise
price expected volatility, risk free rate of interest.
4
Critical accounting estimates and sources of estimation uncertainty
In applying the accounting policies, the directors may at times require to make critical accounting judgements
and estimates about the carrying amount of assets and liabilities. These estimates and assumptions, when
made, are based on historical experience and other factors that the directors consider are relevant.
The key estimates and assumptions concerning the future and other key sources of estimation uncertainty
at the end of the financial year, that have significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year are reviewed are as stated below.
Key accounting judgements
(a)
Impairment of non-current asset
The Group’s non-current assets represent its most significant assets, comprising oil production assets,
exploration and evaluation (E&E) assets on its onshore site.
Management is required to assess exploration and evaluation (E&E) assets for indicators of impairment and
has considered the economic value of individual E&E assets. The carrying amount of the E&E asset are subject
to a separate review for indicators of impairment, by reference to the impairment indicators set out in IFRS
6, which is inherently judgmental.
Processing operations are large, scarce assets requiring significant technical and financial resources to
operate. Their value may be sensitive to a range of characteristics unique to each asset and key sources of
estimation uncertainty include proved reserve estimates, future cash flow expected to arise from the cash-
generating unit and a suitable discount rate.
In performing impairment reviews, the Group assesses the recoverable amount of its operating assets
principally with reference to the Group’s independent competent person’s report, estimates of future oil
prices, operating costs, capital expenditure necessary to extract those reserves and the discount rate to be
applied to such revenues and costs for the purpose of deriving a recoverable value.
As detailed in note 11 and 12, the carrying amount of the Group’s oil production assets and E&E assets at 30
September 2019 were approximately £6.416million (2018: £5.225million) and £5.878million (2018:
£5.218million) respectively. Management have impaired the oil production assets by £0.9 million based on
oil reserves and future production forecasts.
The methods, key assumptions, sensitivity and possible outcomes in relation to the calculation of the
estimates are detailed in note 11.
50
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4
Critical accounting estimates and sources of estimation uncertainty (continued)
(b)
Going concern
While there can be no certainty the local authority will grant the planning permission to the fields as
described in the Strategic Report and note 11. After making the enquiries, the Directors have a reasonable
expectation that the positive outcomes of these decision will be achieved. For this reason, the Group and the
Company continue to adopt the going concern basis in preparing the financial statements.
As disclosed in note 3.3, the directors consider the Group and the Company to be a going concern while the
Group will continues to operate under the management’s plan and the Group expects to be able to continue
to meet all finance obligations as they fall due for at least next twelve months from the date of approval
these financial statements.
Key accounting estimates
(c)
Decommissioning costs
Decommissioning costs will be incurred by the Group at the end of the operating life of some of the Group’s
facilities and properties. The Group assesses its decommissioning provision at each reporting date. The
ultimate decommissioning 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 may 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
decommissioning. As a result, there could be significant adjustments to the provisions established which
would affect future financial results.
External valuers may be used to assist with the assessment of future decommissioning costs. The involvement
of external valuers is determined on a case by case basis, taking into account factors such as the expected
gross cost or timing of abandonment, and is approved by the directors. Selection criteria include market
knowledge, reputation, independence and whether professional standards are maintained.
As detailed in note 20, the provision at reporting date represents management’s best estimate of the present
value of the future decommissioning costs required.
5.
Revenue and segment information
Currently, the Group’s principal revenue is derived from the sale of oil. All revenue arose from continuing
operations within the United Kingdom. Therefore, management considers no detail of operating and
geographical segments information is to be reported. Nonetheless, the Group’s revenue can be classified into
the following streams:
Sale of oil
2019
£’000
2018
£’000
200
=======================================
66
=======================================
All the non-current assets of the Group are located in the United Kingdom. All revenue arising from sale of
oil is derived from a single customer.
51
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6.
Operating loss
Operating loss is stated after charging/(crediting):
Depreciation of owned assets
Net loss on foreign currency translation
Operating lease payments
Employee benefit expense
Auditor’s remuneration
Fees payable to company’s auditor in respect to the audit of the
Parent Company and consolidated financial statements
Non audit fees payable to company’s auditor relating to the tax
advisory services
7.
Finance income and finance cost
Finance income
Interest received on directors’ loan
Finance costs
Interest payable on convertible loan notes
8.
Employee benefit expense
Wages and salaries
Social security costs
2019
£’000
36
3
180
1,309
2018
£’000
26
1
135
699
40
40
-
---------------------------------------
40
---------------------------------------
5
---------------------------------------
45
---------------------------------------
2019
£’000
2018
£’000
7
=======================================
6
=======================================
2019
£’000
2018
£’000
-
=======================================
390
=======================================
2019
£’000
2018
£’000
1,193
116
---------------------------------------
1,309
=======================================
641
58
---------------------------------------
699
=======================================
The directors received salary from the group totaling £690,000 (2018: £270,000) the increase was principally
due to the increase in executive directors to 3 (2018: 2) and the termination of Paul Vonk’s contract, at a cost
of £300,000.
Key managements are considered to be the directors. Details of each director’s emoluments are in the
directors’ remuneration report.
The average number of employees during the year was:
Director
Management
2019
Number
5
6
=======================================
11
=======================================
2018
Number
5
6
=======================================
11
=======================================
52
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9.
Taxation on ordinary activities
No liability to corporation tax arose for the years ended 30 September 2019 and 2018, as a result of
underlying losses brought forward.
Reconciliation of effective tax rate
Loss before tax
Tax at the UK Corporation tax rate of 19% (2018:
19%)
Expenses not deductible for tax purposes
Unrecognised deferred tax
2019
£’000
2018
£’000
(5,043)
(2,790)
(958)
248
710
---------------------------------------
-
=======================================
(530)
42
488
---------------------------------------
-
=======================================
The Group has incurred indefinitely available tax losses of £18,533,000 (2018: £14,796,000) to carry forward
against future taxable income of the subsidiaries in which the losses arose and they cannot be used to offset
taxable profits elsewhere in the Group. In addition, there is approximately £147,000 (2018: £68,000) of
deductible temporary difference in respect of the share-based payment.
No deferred tax asset was recognised in respect to these accumulated tax losses and the decommissioning
provisions as there is insufficient evidence that the amount will be recovered in future years.
10.
Property, plant and equipment
Cost or valuation
At 1 October 2017
Additions
At 30 September 2018
Additions
At 30 September 2019
Depreciation and impairment
At 1 October 2017
Charge for the year
At 30 September 2018
Charge for the year
At 30 September 2019
Net book value
At 30 September 2018
At 30 September 2019
Plant and
machinery
£’000
Motor
vehicles
£’000
Fixtures and
fittings
£’000
5
16
---------------------------------------
21
-
---------------------------------------
21
---------------------------------------
5
3
---------------------------------------
8
3
---------------------------------------
11
---------------------------------------
35
-
---------------------------------------
35
-
---------------------------------------
35
---------------------------------------
22
6
---------------------------------------
28
3
---------------------------------------
31
---------------------------------------
8
-
---------------------------------------
8
-
---------------------------------------
8
---------------------------------------
8
-
---------------------------------------
8
-
---------------------------------------
8
---------------------------------------
Total
£’000
48
16
---------------------------------------
64
-
---------------------------------------
64
---------------------------------------
35
9
---------------------------------------
44
6
---------------------------------------
50
---------------------------------------
13
=======================================
10
=======================================
7
=======================================
4
=======================================
-
=======================================
-
=======================================
20
=======================================
14
=======================================
Depreciation of property, plant and equipment is included in administrative expenses in the consolidated
statement of comprehensive income
53
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11.
Oil and gas production assets
Cost or valuation
At 1 October 2017
Additions
At 30 September 2018
Additions
At 30 September 2019
Depreciation and impairment
At 1 October 2017
Charge for the year
At 30 September 2018
Depreciation charge for the year
Impairment charge for the year
At 30 September 2019
Net book value
At 30 September 2018
At 30 September 2019
Total
£’000
2,853
2,399
---------------------------------------
5,252
2,121
---------------------------------------
7,373
---------------------------------------
10
17
---------------------------------------
27
30
900
---------------------------------------
957
---------------------------------------
5,225
=======================================
6,416
=======================================
Depreciation of oil production assets is included in cost of sales in the consolidated statement of
comprehensive income. During the year, the Group incurred further development costs of approx. £1.65
million (2018: £2.39 million) at both operating fields.
In April 2019, the Group acquired an additional 20% interest in the Lidsey field for a consideration of £467,377
by issuing 8,324,024 new shares at 5.6148p each.
As at 30 September 2019, the Group retained an 80% interest in Lidsey field and 65% in Brockham field and
is still the operator of both fields.
In assessing whether an impairment is required, the carrying value of the asset or cash generating unit
(“CGU”) is compared with its recoverable amount. The recoverable amount is determined from value in use
calculations based on cash flow projections from revenue and expenditure forecasts covering a 5 year period.
Assumptions involved in impairment measurement include estimates of commercial reserves and production
volumes, future crude oil prices, discount rates and the level and timing of expenditures, all of which are
inherently uncertain. The key assumptions used are as follow:
Discount rate
Crude oil price (per barrels)
2019
10%
$63
2018
10%
$60
The growth rate is assumed to be zero and the level of production is constant on the basis the production
plant is assumed to be at the most efficient capacity over the period of extraction.
Commercial reserves are proven and probable (“2P”) oil and gas reserves, calculated on an entitlement basis.
Estimates of commercial reserves underpin the calculation of depletion and amortisation on a Unit of
Production (“UOP”) basis. Estimates of commercial reserves include estimates of the amount of oil and gas
in place, assumptions about reservoir performance over the life of the field and assumptions about
commercial factors which, in turn, will be affected by the future oil and gas price.
54
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11.
Oil and gas production assets (continued)
Annual estimates of oil and gas reserves are generated internally by the Group with external input from
operator profiles and/or a Competent Person. These are reported annually to the Board. The self-certified
estimated future production profiles are used in the life of the fields which in turn are used as a basis in the
value-in-use calculation.
The discount rate is based on the specific circumstances of the Group and its operating segments and is
derived from its Weighted Average Cost of Capital (“WACC”), with appropriate adjustments made to reflect
the risks specific to the CGU and to determine the pre-tax rate. In considering the discount rates applying to
the CGUs, the directors have considered the relative sizes, risks and the inter-dependencies of its CGUs. No
reasonably possible change in a key assumption would produce a significant movement in the carrying value
of the CGUs and therefore no sensitivity analysis is presented.
Following on from the recent well test results at Brockham, the Group has a better understanding of the
production reservoir under the alternative recovery methods. Subject to receipt of Environment Agency
permission, the board have reviewed the Brockham Oil Field oil reserves and projected future production at
the field and recognised an impairment charge of £0.3 million against its carrying value.
An impairment of £0.6 million has been recognised for the Lidsey assets, which has been based on the recent
purchase consideration of the additional 20% interest, as well as reflecting the estimation uncertainty of
future exploration and production in this area. Subsequent to any future drilling or production at Lidsey,
there is a risk that the carrying value may need to be reduced further if the production rate or reserves
quantity are not in the line with the current estimates of management.
Furthermore, a sensitivity analysis has been carried out for Brockham and Lidsey oil fields and the results of
the analysis can be summarised as follow:
•
•
If the estimated crude oil price had been 10 percentage point lower than the basis assumption, total
recoverable amount would be 1% lower.
If the estimated discount rate used for the Group’s discount cash flow had been one percentage
point higher than the starting assumption of 10%, total recoverable amount would be 3% lower.
12.
Exploration and evaluation assets
Cost or valuation
At 1 October 2017
Additions
Decommissioning cost
At 1 October 2018
Additions
At 30 September 2019
Total
£’000
155
5,011
52
---------------------------------------
5,218
660
---------------------------------------
5,878
================================
On 16 February 2018 the Group entered into a new partnership with Cuadrilla Balcombe Limited and Lucas
Bolney Limited. The Group joined the partnership through the acquisition of a 25% interest in licence
PEDL244, which includes the entire Balcombe Field discovery, for a total consideration of £4 million. On
behalf of the partnership, Angus Energy assumed Operatorship of the Balcombe licence.
On 19 June 2019 the Group acquired 51% of the Saltfleetby Gas field for £nil consideration. However, the
Group received a cash contribution of £2.5m from the vendor in relation to the site restoration costs and the
abandonment costs if commercial rates are not available.
In performing impairment review, the Group assessed the economic value of individual exploration and
evaluation (E&E) assets and had considered no indication for impairment to these E&E assets.
55
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13.
Subsidiaries
The details of the subsidiary are as follows:
Name of subsidiary/ place of incorporation
Principal activity
Effective equity interest
held by the Group
2019
2018
Angus Energy Holdings UK Limited
Angus Energy Weald Basin No.1 Limited
Angus Energy Weald Basin No.2 Limited
Angus Energy Weald Basin No.3 Limited*
Angus Energy North America Limited
Investment holding company
Investment holding company
Investment holding company
Oil extraction for distribution to
third parties
Dormant company
100%
100%
100%
100%
80%
100%
100%
100%
100%
80%
*indirect wholly owned by Angus Energy Weald Basin No.2 Limited (AEWB2).
The registered office address of the respective entity as follow:
Registered address
Name of subsidiary
Building 3 Chiswick Park, 566 Chiswick High
Road, London, W4 5YA.
Angus Energy Weald Basin No.2 Limited
Angus Energy North America Limited
Westpoint 4 Redheughs Rigg, South Gyle
Edinburgh, Scotland, EH12 9DQ
Angus Energy Holdings UK Limited
Angus Energy Weald Basin No.1 Limited
Angus Energy Weald Basin No.3 Limited
14.
Trade and other receivables
Amounts due from farmees
Amount owed by a related party
VAT recoverable
Accrued income
Other receivables
2019
£’000
296
216
90
57
135
---------------------------------------
794
=======================================
2018
£’000
171
209
70
34
307
---------------------------------------
791
=======================================
The carrying amount of trade and other receivables approximates to their fair value.
Included within other receivables is the amount recoverable from the UK tax authority (under Section 455
Corporation Tax Act 2010) of £nil (2018: £100,973).
Trade and other receivables
Less: Impairment allowance
2019
£’000
1,196
(402)
---------------------------------------
794
---------------------------------------
2018
£’000
791
-
---------------------------------------
791
---------------------------------------
The Group is in discussions to recover the full amount due from farmees. The Group has made an allowance
for impairment to reflect the potential uncertainty over the recovery of these amounts.
56
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15.
Share capital
Allotted, called up and fully paid:
Ordinary share of £0.002 each
Number of
shares
Ordinary share
capital Share premium
£’000
£’000
As at 30 September 2017
240,458,467
481
5,753
Issue of shares 1 December 2017
Issue of shares 15 February 2018
Issue of shares 25 April 2018
Issue of shares 25 April 2018
Issue of shares 4 July 2018
Issue of shares 13 July 2018
Issue of shares 2 August 2018
Less: Issuance costs
At 30 September 2018
Issue of shares 22 November 2018
Issue of shares 15 February 2019
Issue of shares 18 April 2019
Issue of shares 30 April 2019
Issue of shares 25 May 2019
Issue of shares 17 July 2019
Less: Issuance of costs
At 30 September 2019
23,846,155
33,333,333
2,250,000
6,925,000
9,302,326
9,302,326
56,304,348
-
=======================================
381,721,985
22,222,222
55,000,000
8,324,024
70,824,700
735,076
2,000,000
-
=======================================
540,828,007
47
67
4
13
19
19
113
-
=======================================
763
44
110
17
142
2
4
-
=======================================
1,082
3,053
1,933
122
312
381
381
2,477
(270)
=====================================
14,142
1,956
2,090
450
2,868
30
56
(475)
=====================================
21,117
On 22 November 2018 the company issued 22,222,222 placing shares at 9p each, raising gross proceed of
£1.85 million as working capital, and business development opportunities.
On 15 February 2019, the company issued 55,000,000 placing shares at 4p each, raising gross proceed of £2.2
million to pay down £1.5 million loan facilities and general working capital.
On 18 April 2019, the company issued 8,324,024 shares at a price 5.6148p each for acquisition of 20% interest
in Lidsey license PL241, amounting to approximately £467,000.
On 30 April 2019 the company issued 70,824,700 shares at 4.25p per share, raising gross proceed of
£3,010,050. The funds raised to be applied after provision for general working capital and ongoing works at
the Company’s Brockham asset.
On 25 May 2019 the company issued a further 735,076 at 4.25p per share through an open offer, raising
gross proceeds of £31,240. The funds raised to be applied after provision for general working capital and
ongoing works at the Company’s Brockham asset.
On 17 July 2019, the Company issued 2,000,000 shares at price 3p subject to one year lock up period to
Patrick Clanwilliam for first year remuneration as non-executive Chairman, amounting to £60,000.
As at 30 September 2019 the total issued ordinary shares of the Company were 540,828,007 (2018:
381,721,985)
57
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
16.
Share-based payments
In 2016, the Group implemented an Enterprise Management Incentive Scheme followed by a NED and
Consultant Share Option Scheme (The Scheme).
At 30 September 2019, the following share options and warrants were outstanding in respect of the Ordinary
shares:
Exercise price
Outstanding as at
01 Oct 2018
Granted
during
year
the
£0.06
£0.09
£0.10
£0.068
£0.08
£0.02
17,818,304
1,050,000
5,000,000
-
-
-
-
-
2,469,914
10,650,000
23,900,000
Warrant
Share options
5,000,000
18,868,304
2,469,914
34,550,000
No. of
options
surrendered
or cancelled
during the
year
Exercised
during the
year
Outstanding
and
exercisable as at 30
September 2019
Final expiry
dates
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
17,818,304 13 Nov 2026
1,050,000 13 Nov 2026
5,000,000 23 Apr 2020
2,469,914 15 Feb 2022
10,650,000 24 Aug 2028
23,900,000 15 Jul 2029
7,469,914
53,418,304
The weighted average exercise price of share options and warrants was £0.0519 at 30 September 2019 (2018:
£0.0697). The weighted average remaining contractual life of options outstanding at the end of the year was
8 years. The weighted average fair value of share option was £0.0013 each on the grant date. The vesting
criteria of the share options are subject to share price growth reach to the target level. All the vesting
conditions were met during the year and the options were fully vested.
These fair values were calculated using the Black Scholes warrant pricing model. The inputs into the model
were as follows:
Stock price
Exercise price
Interest rate
Volatility
Time to maturity
Share options
Jul 19
1.2p
2p
0.5%
30%
10 years
Share options
Aug 18
1.13p
8p
0.5%
30%
10 years
Warrants
1.3p
6.8p
0.5%
30%
3 years
The Group recognised a share-based payment charge of approximately £79,000 (2018: £75,000) .
No options on warrants were exercised in both reporting year 2018 and 2019. There remains 53,418,304
options and 7,469,914 warrants are outstanding and exercisable as at 30 September 2019.
17.
Reserves
Merger reserve
Merger reserve
2019
£’000
(200)
2018
£’000
(200)
The merger reserve arose on the acquisition of Angus Energy Holdings Limited by the Company.
58
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
18.
Earnings per share (EPS)
Basic EPS amounts are calculated by dividing the profit or loss for the year attributable to equity holders of
the Group by the weighted average number of ordinary shares outstanding during the period
Diluted EPS amounts are calculated by dividing the profit or loss for the year attributable to equity holders of
the Group by the weighted average number of ordinary shares outstanding during the period plus the
weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential
ordinary shares into ordinary shares.
The earnings per share information based upon the 540,828,007 ordinary shares are as follows:
Net loss attributable to equity holders of the parent
company
Weighted average number of basic ordinary shares
Basic EPS (in pence)
2019
£’000
2018
£’000
(5,043)
=======================================
(2,790)
=======================================
466,441,729
=======================================
297,403,456
=======================================
(1.08)
=======================================
(0.94)
=======================================
The diluted loss per share was not applicable as there were no dilutive potential ordinary shares outstanding
at the end of the reporting period.
19.
Trade and other payables
Trade payables
Other taxation
VAT payable
Accruals
Other payables
2019
£’000
2018
£’000
678
135
185
30
3
---------------------------------------
1,031
=======================================
874
126
-
398
42
---------------------------------------
1,440
=======================================
The carrying amount of trade and other payables approximates to their fair value.
59
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
20.
Provisions for other liabilities and charges
Abandonment costs
Balance b/fwd
Addition
Balance b/cwd
2019
£’000
2018
£’000
552
2,500
---------------------------------------
3,052
---------------------------------------
500
52
---------------------------------------
552
---------------------------------------
The Group makes full provision for the future costs of decommissioning oil production facilities and pipelines
on the installation of those facilities. The amount provision is expected to be incurred up to 2029 when the
producing oil and gas properties are expected to cease operations.
These provisions have been created based on the Group’s internal estimates and expectation of the
decommissioning costs likely to incur in the future. For the period under review, the directors have assessed
that the discount rate and inflation rate to be applied to the current cost of decommissioning to be similar.
On this basis, the current cost is considered to be similar to the discounted net present value.
As described in note 12, the additional provision was relating to the acquisition of Saltfleetby gas field during
the year.
21.
Convertible loan
On 25 April 2018, the Company issued an interest free unsecured convertible loan note for a nominal value
of £3.39million with maturity period of 2 years.
As described in note 15, the loan note was subsequently converted into 74,909,000 shares of the Company
and the loan notes cancelled.
On 9 January 2019, the Company issued an interest free unsecured convertible loan note for a nominal value
of £3 million, with maturity period of 2 years, of which £1.5 million was immediately drawn down.
As described in note 15, the loan note was subsequently repaid on 15 February 2019 and the loan notes
cancelled.
The equity element of the convertible loan note was not recognised as the amount was not considered
material.
60
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
22.
Financial instruments
The Group’s principal financial instruments comprise cash and cash equivalents, trade and other receivables
and trade and other payable. The Group’s accounting policies and method adopted, including the criteria for
recognition, the basis on which income and expenses are recognised in respect of each class of financial
assets, financial liability and equity instrument are set out in Note 3. The Group do not use financial
instruments for speculative purposes.
The principal financial instruments used by the Group, from which financial instrument risk arises, are as
follows:
Financial assets measured at amortised cost
Loans and receivables
Trade and other receivables
Cash and cash equivalents
Total financial assets
Financial liabilities measured at amortised cost
Trade and other payables
Total financial liabilities
Capital management
2019
£’000
2018
£’000
611
3,419
---------------------------------------
4,030
=======================================
791
846
---------------------------------------
1,637
=======================================
1,031
---------------------------------------
1,031
=======================================
1,440
---------------------------------------
1,440
=======================================
The Group manages its capital to ensure that it will be able to continue as a going concern while attempting
to maximise the return to stakeholders through the optimisation of the debt and equity balance. The capital
structure of the group consists of issued capital and external loans.
Credit risk
Credit risk is the risk that a counter-party will cause a financial loss to the Group by failing to discharge its
obligations to the Group. The Group manages its exposure to this risk by applying limits to the amount of
credit exposure to any one counterparty and employs strict minimum credit worthiness criteria as to the
choice of counterparty. The maximum exposure to credit risk for receivables and other financial assets is
represented by their carrying amount. As described in note 14, the Group recognised an impairment
provision of £402,000 against the amount due from farmees that are past due in the year.
Fair values
Management assessed that the fair values of cash and short-term deposits, trade receivables, trade payables
and other current liabilities approximate their carrying amounts largely due to the short-term maturities of
these instruments.
Interest rate risk
The Group and company’s policy is to fund its operations through the use of retained earnings and equity.
The Group exposure to changes in interest rates relates primarily to cash at bank and amount owed by a
related party. Cash is held either on current or short term deposits at a floating rate of interest determined
by the relevant bank’s prevailing base rate.
61
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
22.
Financial instruments (continued)
Foreign currency exchange risks
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because
of the changes in foreign exchange rates. The Group’s exposure to the risk of changes in foreign exchange
rates relates primarily to the Group’s operating activities (when revenue or expense is denominated in a
foreign currency and the Group’s net investments in foreign subsidiaries.
The Group does not hedge its foreign currencies. Transactions with customers are mainly denominated in US
Dollars. The Group has bank accounts in US Dollars to mitigate against the exchange risks. At 30 September
2019, the GBP cash balance held denominated in USD was £36,000 (2018; £5,000).
Liquidity risks
The principal risk to the Group is liquidity, which arises from the Group’s management of working capital. It
is a risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. This aspect
is kept under review by the directors and in this respect management carries out rolling 12 month cash flow
projections on a monthly basis as well as information regarding cash balances. It is the Group’s policy as
regards liquidity to ensure sufficient cash resources are maintained to meet short-term liabilities.
The maturity profile of the Group’s financial liabilities at the reporting dates based on contractual
undiscounted payments are summarised below:
Trade and other payable
Within one month
Commodity price risk
2019
£’000
1,031
---------------------------------------
1,031
=======================================
2018
£’000
1,440
---------------------------------------
1,440
=======================================
The Group is exposed to the risk of fluctuations in prevailing market commodity prices of oil products it
produces. The table below summarises the impact on profit before tax for changes in commodity prices
Commodity price sensitivity
The analysis is based on the assumption that the crude oil price moves 10% resulting in a change of US$-
6.61/bbl in 2019 (2018: US$7.13/bbl), with all other variables held constant. Reasonably possible movements
in commodity prices were determined based on a review of the average spot prices at each reporting periods.
Increase/decrease in crude oil prices
Average spot price increased by 10%
Average spot price decreased by 10%
Increase / (decrease) in profit
before tax for the year ended
30 September
2019
£’000
20
---------------------------------------
(20)
---------------------------------------
2018
£’000
7
---------------------------------------
(7)
---------------------------------------
62
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
23.
Related party transactions
Transaction with related party
The advance loan made to the former director Mr Jonathan Tidswell-Pretorius was unsecured with
repayment on demand. During the year under review, the Group charged approximately 3% interest annually
on the advance loan to the director of £7,000 (2018: £6,000). This can be analysed at below table:
Opening balance
-
-
Amount advanced
Accrued interest on loan
Closing balance
2019
£’000
209
-
7
---------------------------------------
216
=======================================
2018
£’000
203
-
6
---------------------------------------
209
=======================================
On 6 January 2020, Mr Jonathan Tidswell repaid the outstanding amount in full.
24.
Net debts reconciliation
The below table sets out an analysis of net debt and the movement in net debt for the years presented
Cash and cash equivalent
Convertible loan note (note 21)
Net debt
Net debt as at 1 October 2017
Cash flow
Issue of new equity (net proceeds)
Issue of convertible loan note
Other non-cash movement
Conversion of debt to equity
Net debt as at 1 October 2018
Cash flow
Issue of new equity (net proceeds)
Issue of convertible loan note
Repayment of convertible loan note
Net debt
2019
£’000
3,419
-
---------------------------------------
3,419
=======================================
Convertible
loan note
£’000
-
-
-
3,000
390
(3,390)
---------------------------------------
-
-
-
1,500
(1,500)
---------------------------------------
-
=======================================
2018
£’000
846
-
---------------------------------------
846
=======================================
Total
£’000
1,224
(5,672)
5,068
3,000
616
(3,390)
---------------------------------------
846
(4,641)
7,214
1,500
(1,500)
---------------------------------------
3,419
=======================================
Cash and cash
equivalents
£’000
1,224
(5,672)
5,068
-
226
-
---------------------------------------
846
(4,641)
7,214
-
-
---------------------------------------
3,419
=======================================
63
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
25.
Commitments
At 30 September 2019, the Group had contractual capital commitments in the amount of £nil (2018 -
£500,000) in respect to the Group’s oil field development activities.
The Group’s future minimum lease payments under non-cancellable operating leases are as follows:
Leases which expire:
Not later than one year
Later than one year and not later than five years
More than five years
Total
26.
Subsequent events
As at 30 September
2019
£’000
2018
£’000
205
255
48
=======================================
508
=======================================
148
411
263
=======================================
822
=======================================
On 25 October 2019 the Company has entered £1.5 million Convertible Loan note facility led by Riverfort
Global Opportunities PCC. The Loan Note carries no interest and allows for conversion of amounts drawn
down at the option of the holder at the lower of a 7.5% discount to the average of the 3 lowest daily Volume
Weighted Prices (“VWAP”) (over the previous 10 days) into shares in Angus Energy or, up to a maximum of
50% of any tranche, at a price equivalent to 130% of the 5 day VWAP prior to drawdown of any tranche.
Absent conversion, amounts must be repaid after 12 months. Up to 20% of the outstanding principal may be
converted into shares in Angus Energy before 31 December 2019.
On 6 December 2019 Riverfort Global opportunities PCC Limited and YA || PN Ltd converted £100,000 of the
Loan into shares. The Company allotted 13,766,520 shares and the Loan’s outstanding balance has reduced
to £0.9 million. Following admission of the Relevant Shares, the Company's enlarged issued share capital will
comprise 554,594,528 ordinary shares with voting rights.
On 6 January 2020 the loan of £200,000 made to former director Jonathan Tidswell has been repaid in full.
On 18 February 2020 Riverfort Global opportunities PCC Limited and YA || PN Ltd converted £100,000 of the
Loan into shares. The Company allotted 17,319,016 shares and the Loan’s outstanding balance has reduced
to £0.8 million. Following admission of the Relevant Shares, the Company's enlarged issued share capital will
comprise 571,913,544 ordinary shares with voting rights.
64
COMPANY STATEMENT OF FINANCIAL POSITION
ASSETS
Non-current assets
Investment
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
TOTAL ASSETS
EQUITY
Equity attributable to owners of the parent:
Share capital
Share premium
Merger relief reserve
Accumulated loss
TOTAL EQUITY
Current liabilities
Trade and other payables
Total current liabilities
TOTAL LIABILITIES
Note
2019
£’000
2018
£’000
5
6
8
8
8
7
12,440
12,440
13,018
13,018
360
239
599
413
674
1,087
13,039
14,105
1,082
21,117
1,500
(10,876)
763
14,142
1,500
(2,541)
12,823
13,864
216
216
216
241
241
241
TOTAL EQUITY AND LIABILITIES
13,039
14,105
The loss for the Company for the year ended 30 September 2019 was £8,414,000 (2018: £1,850,000)
The note on page 67 to 69 form part of these of financial statements
The financial statements were approved by the Board of Directors and authorized for issue on and were signed on its
behalf by:
George Lucan - Director
Company number: 09616076
65
COMPANY STATEMENT OF CHANGES IN EQUITY
Balance at 1 October 2017
Loss for the year
Total comprehensive income for the year
Transaction with owners
Issue of shares
Less: issuance costs
Granted of share options
Share
capital
£’000
481
Share
premium
£’000
5,735
-
-
-
-
282
-
-
8,659
(270)
-
Merger
relief
reserve
£’000
1,500
Accumulated
loss
£’000
(766)
Total
equity
£’000
6,968
-
-
-
-
-
(1,850)
(1,850)
(1,850)
(1,850)
-
-
75
8,941
(270)
75
Balance at 30 September 2018
763
14,142
1,500
(2,541)
13,864
Loss for the year
Total comprehensive income for the year
Transaction with owners
Issue of shares
Less: issuance costs
Granted of share options
-
-
319
-
-
-
-
7,450
(475)
-
-
-
-
-
-
(8,414)
(8,414)
(8,414)
(8,414)
-
-
79
7,769
(475)
79
Balance at 30 September 2019
1,082
21,117
1,500
(10,876)
12,823
Share capital comprises the ordinary issued share capital of the company.
Share premium comprises of the excess above the nominal value of the new ordinary shares issued during the period.
The merger relief reserve represents the difference between the cost of the investment in Angus Energy Holding UK
Limited (initially measured at fair value) and the nominal value of the shares transferred as consideration.
Retained earnings represent the aggregate retained earnings of the company.
The note on page 67 to 69 form part of these of financial statements.
66
NOTES TO THE COMPANY FINANCIAL STATEMENTS
1.
General information
The company was incorporated in England and Wales on 1 June 2015 as a private limited company. Its
registered office is located at Building 3, Chiswick Park, 566 Chiswick High Street, London, W4, 5YA.
The financial information of the company is presented in British Pounds Sterling (“£”) and rounded into
thousand (£’000).
2.
Accounting policies
Basis of preparation
The financial statements have been prepared in accordance with the historical cost convention as modified
by the revaluation of certain fixed assets. The financial statements have been prepared in accordance with
FRS 102 – The Financial Reporting Standard applicable in the UK and Republic of Ireland and the Companies
Act 2006. The principal accounting policies are described below. They have all been applied consistently
throughout the period.
The company meets the definition of a qualifying entity under FRS 102 and has therefore taken advantage of
the disclosure exemptions available to it in respect of its separate financial statements, which are presented
alongside the consolidated financial statements. Exemptions have been taken in relation to financial
instruments, presentation of a cash flow statement and remuneration of key management personnel.
Investment
Investments in subsidiaries are stated at cost less provision for impairment. Where merger relief is applicable,
the cost of the investment is recorded at the fair value on the date of the transaction. The difference between
the fair value of the investment and the nominal value of the shares (plus the fair value of any other
consideration given) is shown as a merger relief reserve and no share premium is recognized
Cash and cash equivalents
Cash in the statement of financial position is cash held on call with banks.
Financial assets
The directors classify the company’s financial assets held at amortised cost less provisions for impairment.
The directors determine the classification of its financial assets at initial recognition.
Creditors
Short term creditors are measured at the transaction price. Other financial liabilities, including bank loans,
are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised
cost using the effective interest method.
Taxation
Tax is recognised in the Statement of comprehensive income, except that a charge attributable to an item of
income and expense recognised as other comprehensive income or to an item recognised directly in equity
is also recognised in other comprehensive income or directly in equity respectively.
The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or
substantively enacted by the reporting date in the countries where the Company operates and generates
income.
67
NOTES TO THE COMPANY FINANCIAL STATEMENTS
2.
Accounting policies (continued)
Taxation (continued)
Deferred tax balances are recognised in respect of all timing differences that have originated but not
reversed by the Statement of financial position date, except that:
•
The recognition of deferred tax assets is limited to the extent that it is probable that they will
be recovered against the reversal of deferred tax liabilities or other future taxable profits; and
• Any deferred tax balances are reversed if and when all conditions for retaining associated tax
allowances have been met.
Deferred tax balances are not recognised in respect of permanent differences except in respect of
business combinations, when deferred tax is recognised on the differences between the fair values of
assets acquired and the future tax deductions available for them and the differences between the fair
values of liabilities acquired and the amount that will be assessed for tax. Deferred tax is determined
using tax rates and laws that have been enacted or substantively enacted by the reporting date.
3.
Profit for the financial period
The Company has taken advantage of section 408 of the Companies Act 2006 and, consequently, a
profit and loss account for the Company alone has not been presented. The Company's loss for the
financial period was approximately £8,414,000 (2018: £1,850,000).
4.
Staff costs
There are four employees and five directors employed by the company. The directors are regarded as
the key management and their remunerations are disclosed in note 8 to the consolidated financial
statements.
5.
Investment
At 1 October 2017
Movement of the intercompany loan for the year
At 30 September 2018
Movements of the intercompany loan for the year
Allowance for Impairment
At 30 September 2019
Cost of
investment
£’000
2,028
-
---------------------------------------
2,028
-
(1,800)
---------------------------------------
228
=======================================
Loan to group
undertakings
£’000
3,678
7,312
---------------------------------------
10,990
5,722
(4,500)
---------------------------------------
12,212
=======================================
Total
£’000
5,706
7,312
---------------------------------------
13,018
5,722
(6,300)
---------------------------------------
12,440
=======================================
The details of the subsidiary are set out in the note 13 to the consolidated financial statements.
The Company is required to assess the carrying values of each of its investments in subsidiaries and
loans to group undertakings for impairment. To a large extent the oil & gas production assets and
exploration and evaluation assets have been funded by loans from the Company is represented by the
value of the operating segment cash generating units. Recoverability of these loans is therefore
dependent upon the operating segments producing sufficient cash surplus such that the segment
achieves a positive net asset position.
68
NOTES TO THE COMPANY FINANCIAL STATEMENTS
6.
Trade and other receivables
Trade receivables
Directors accounts
Vat recoverable
Other receivables
7.
Trade and other payables
Trade payables
Amounts due to group undertakings
Other taxation
Other payables
8.
Share capital
2019
£’000
24
216
54
66
---------------------------------------
360
=======================================
2019
£’000
60
100
24
32
---------------------------------------
216
=======================================
2018
£’000
48
209
12
144
---------------------------------------
413
=======================================
2018
£’000
86
100
15
40
---------------------------------------
241
=======================================
The movement of share capital are set out in the note 15 to the consolidated financial statements.
As at 30 September 2019 the total issued ordinary shares of the Company were 540,828,007 (2018 -
381,721,985).
9.
Subsequent events
On 25 October 2019 the Company has entered £1.5 million Convertible Loan note facility led by
Riverfort Global Opportunities PCC. The Loan Note carries no interest and allows for conversion of
amounts drawn down at the option of the holder at the lower of a 7.5% discount to the average of the
3 lowest daily Volume Weighted Prices (“VWAP”) (over the previous 10 days) into shares in Angus
Energy or, up to a maximum of 50% of any tranche, at a price equivalent to 130% of the 5 day VWAP
prior to drawdown of any tranche. Absent conversion, amounts must be repaid after 12 months. Up to
20% of the outstanding principal may be converted into shares in Angus Energy before 31 December
2019.
On 6 December 2019 Riverfort Global opportunities PCC Limited and YA || PN Ltd converted £100,000
of the Loan into shares. The Company allotted 13,766,520 shares and the Loan’s outstanding balance
has reduced to £0.9 million. Following admission of the Relevant Shares, the Company's enlarged issued
share capital will comprise 554,594,528 ordinary shares with voting rights.
On 6 January 2020 the loan of £200,000 made to former director Jonathan Tidswell has been repaid in
full.
On 18 February 2020 Riverfort Global opportunities PCC Limited and YA || PN Ltd converted £100,000
of the Loan into shares. The Company allotted 17,319,016 shares and the Loan’s outstanding balance
has reduced to £0.8 million. Following admission of the Relevant Shares, the Company's enlarged issued
share capital will comprise 571,913,544 ordinary shares with voting rights.
69
Contact
Angus Energy Plc
www.angusenergy.co.uk
Managing Director:
George Lucan
T: 0208 899 6380
info@angusenergy.co.uk